Q1 2025 PROS Holdings Inc Earnings Call
Greetings and welcome to the Pros Holdings first quarter 2025 earnings conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.
Operator: Greetings. Welcome to the PROS Holdings first quarter 2025 earnings conference call.
Operator: At this time, all participants are in a listen-only mode.
Operator: A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
Operator: As a reminder, this conference is being recorded.
Linda: As a reminder, this conference is being recorded I would now like to turn the conference call over to Linda over to put senior director of Investor Relations.
Belinda Overdeput: I would now like to turn the conference call over to Belinda Overdeput, Senior Director of Investment Relations. Thank you, Operator. Good afternoon, everyone, and thank you for joining us.
Speaker Change: Thank you operator, good afternoon, everyone and thank you for joining US our earnings press release, SEC filings and a replay of today's call can be found on the Investor Relations section of our website at <unk> Dot Com. Our prepared remarks are also available on our website and will be replaced by the official transcript, which includes participant questions once available.
Belinda Overdeput: Our earnings press release, SEC filings, and a replay of today's call can be found on the Investor Relations section of our website at PROS.com. Our prepared remarks are also available on our website and will be replaced by the official transcript, which includes participant questions once available.
Andras Reiner: With me on today's call is Andras, Reiner, President and Chief Executive Officer, and Stefan Schulz Chief Financial Officer. Please note that some of the commentary today will include forward looking statements, including without limitation, those about our strategy future business prospects and market opportunities and our financial projections and guidance actually.
Belinda Overdeput: With me on today's call is Andres Reiner, President and Chief Executive Officer, and Stefan Schulz, Chief Financial Officer. Please note that some of the commentary today will include forward-looking statements, including, without limitation, those about our strategy, future business prospects and market opportunities, and our financial projections and guidance. Actual results could differ materially from such statements in our forecast.
Andras Reiner: Results could differ materially from such statements and our forecast for more information. Please refer to the risk factors described in our SEC filings pros assumes no obligation to update any forward looking statements to reflect future events or circumstances. As a reminder, during the call we will discuss non-GAAP metrics reconciliations between each non.
Belinda Overdeput: For more information, please refer to the risk factors described in our SEC filings. PROS assumes no obligation to update any forward-looking statements to reflect future events or circumstances.
Belinda Overdeput: As a reminder, during the call, we will discuss non-GAAP metrics. Reconciliations between each non-GAAP measure and the most directly comparable GAAP measure, to the extent available without unreasonable effort, are available in our earnings press release.
Speaker Change: GAAP measure and the most directly comparable GAAP measure to the extent available without unreasonable effort are available in our earnings press release with that I'll turn the call over to you Andres.
Andres Reiner: With that, I'll turn the call over to you, Andres. Thank you, Belinda. Good afternoon, everyone. And thank you for joining us on today's call. I'm proud to share that our team delivered a strong start to 2025. The broader macroeconomic uncertainty has contributed to a complex selling environment, and our team has executed well through this. We exceeded the high end of our guidance ranges across all metrics, with sales performing ahead of our expectation across B2B and travel. Our trailing 12-month recurring calculated billings grew 14% year-over-year, our strongest performance on this metric in 10 quarters. At the same time, our team continued to focus on driving greater efficiency resulting in an impressive 123% improvement in free cash flow year over year.
Andres: Thank you Bill and good afternoon, everyone and thank you for joining us on today's call I'm proud to share that our team delivered a strong start to 2025.
Andres: The broader macroeconomic uncertainty has contributed to a complex selling environment and our team has executed well through this we exceeded the high end of our guidance ranges across all metrics with sales performing ahead of our expectation across b to b and travel well.
Andres: Trailing 12 month recurring calculated billings grew 14% year over year, our strongest performance on this metric in 10 quarters.
Andres: At the same time, our team continued to focus on driving greater efficiency, resulting in an impressive 123% improvement in free cash flow year over year.
Andres Reiner: Three key factors are fueling our momentum. First, the ongoing recognition of process and market leaders. Second, the proven value of PROS solutions made even more critical by the need for disability and adaptability in volatile markets. And third, accelerating adoption of AI-powered pricing and selling solutions. First, ongoing industry recognition continues to reinforce PROS' leadership position in the market. In Q1, we were named the leader in the Forrester Wave for Configure Price Quote Solutions, earning the highest possible scores across most of the evaluation's criteria. This designation came on the heels of PROS receiving leader rankings in the Gartner Magic Quadrant in the IDC Marketscape for CPQ.
Andres: Three key factors are fueling our momentum first the ongoing recognition of process and market leader.
Andres: The proven value of pro solutions made even more critical by the need for visibility and adaptability in volatile markets and third accelerating adoption of AI powered pricing and selling solutions.
Andres: First ongoing industry recognition continues to reinforce pro's leadership position in the market in Q1, we were named the leader in the Forrester wave for configure price quote solutions.
Andres: Turning the highest possible scores across most of the evaluation criteria there.
Andres: This designation came on the heels of froze receiving leader rankings in the Gartner Magic quadrant in the IDC market scape for C. P Q.
Andres Reiner: Recognition from all three major analyst firms underscores a relentless passion for innovation that drives profitable growth for our customers. This continued industry recognition is reflected in the trust global enterprises are placing in PROS.
Andres: Recognition from all three major analyst firms underscores our relentless passion for innovation that drives profitable growth for our customers.
Andres: This continued industry recognition is reflected in the trust global enterprise they start placing them pros.
Andres Reiner: I highlight three examples of new customer wins from Q1, among many others. A Fortune 500 chemicals company selected ProSmart CPQ to fuel AI-driven sales transformation, streamlining pricing and sales across global operations to enhance the omni-channel customer experience. Softcat, a leading IT services provider, selected ProSmart CPQ with agreements to increase sales efficiency and support their growth strategy. and Grunfoss selected ProSmart Price Optimization and Management to transform global pricing and future-proof their commercial strategy.
Andres: I'll highlight three examples of new customer wins from Q1, among many others.
Andres: If fortune 500 chemicals company selected pro Smart C. P Q2 fuel AI driven sales transformation.
Andres: Streamlining pricing and C. L said cross global operations to enhance the Omnichannel customer experience soft cat in leading IP services provider selected pro Smart C. P. Q with agreements to increase C L sufficiency and support their growth strategy.
Andres: In Green for selected pros smart price optimization and management to transform global pricing and future proof their commercial strategy.
Andres Reiner: The second driver of our momentum is continued market volatility. Volatility has been amplified by tariff announcements and evolving trade policies, which are on top of supply chain disruptions, changing customer demand patterns and currency fluctuation. More and more businesses are realizing market volatility is here to stay and that PROS AI powered pricing and selling solutions are mission critical to mitigate risk and outperform the market. or expansions in Q1 with Digi-Key in ADI Global Distribution are great examples of how companies are taking action. Digikey is expanding their use of PROS by adopting smart price optimization. Digikey's VP of Strategic Pricing, Stefan Bratu, said, and I quote, PROS has been a strategic partner to us for many years.
Andres: The second driver of our momentum is continued market volatility volatility has been amplified by tariff announcements and evolving trade policies, which are on top of supply chain disruptions changing customer demand patterns in currency fluctuation more and more.
Andres: Business is a real I seen market volatility is here to stay in that process AI powered pricing and selling solutions are mission critical to mitigate risk and outperformed the market.
Andres: We're expansion seen Q1 with Digi key and Adi Global distribution are great. Examples of how companies are taking action.
Andres: <unk> is expanding their use of pros by adopting smart price optimization.
Stefan Schulz: P. J keys V P of strategic pricing Stefan brought to said and I quote process than a strategic partner to us for many years now we adopt proceeds I powered price optimization, it's clear that real time data driven decisions or no.
Andres Reiner: Now, as we adopt PROS AI-powered price optimization, it's clear that real-time data-driven decisions are no longer a nice-to-have. They're business critical. In a market defined by volatility, PROS helps us move faster, adapt with confidence, and lead with precision, end quote. ADI Global Distribution is enhancing its omni-channel pricing strategy by leveraging advanced capabilities including our Gen 4 price optimization to deliver accurate real-time pricing as well as increased self-service conversion.
Stefan Schulz: Longer a nice to have their business critical in a market defined by volatility pros helps us move faster adapt with confidence and lead with precision and quote.
Stefan Schulz: Adi Global distribution is enhancing its omni channel pricing strategy by leveraging advanced capabilities, including our Gen. Four price optimization to deliver accurate real time pricing as well as increased self service conversion.
Stefan Schulz: In the airline industry pros empowers carriers to move from reactive to predictive bi.
Andres Reiner: In the airline industry, PROS empowers carriers to move from reactive to predictive. By identifying demand pattern changes a year in advance, PROS enables airlines to respond proactively and capture new revenue opportunities, which is critical in today's volatile market. As airlines prioritize software optimization and customer experience, the PROS platform delivers the comprehensive capabilities needed to create tailored offers and win in ever-changing market dynamics. We saw strong demand in Q1 in travel, including wins at two of the top seven U.S. carriers by domestic market share, among many others. Southwest Airlines selected PROS Offer Marketing to Amplify Brand Visibility and Capture More Demand Through Enriched Web Experience.
Stefan Schulz: By then to find demand pattern changes a year in advance proscenium, both airlines to respond proactively and capture new revenue opportunities, which is critical in today's volatile market is Sarah ninth prioritize sulfur optimization and customer experience.
Stefan Schulz: The pros platform delivers the comprehensive capabilities needed to create tailored offers in win in ever changing market dynamics.
Stefan Schulz: We saw strong demand in Q1 in travel including wins at two of the top seven U S carriers by domestic market share among many others.
Stefan Schulz: Southwest Airlines selected pros offer marketing to amplify brand visibility and capture more demand through enrich web experiences.
Andres Reiner: Another domestic carrier expanded its partnership with PROS by selecting PROS Revenue Management Advantage, powered by our market-leading AI. PROS will enable this airline to improve demand forecast accuracy and drive a dynamic commercial strategy, positioning them to outperform in this market.
Stefan Schulz: And now they're domestic carrier expanded its partnership with pros by selecting pros revenue management advantage powered by our market leading AI for.
Stefan Schulz: <unk> will enable this airline to improve demand forecast accuracy and drive it dynamic commercial strategy positioning them to outperforming this market.
Andres Reiner: The final key momentum driver I'll discuss is the market-accelerating adoption of AI-powered solutions. As a pioneer and leader in AI, we're not just keeping pace with the market. We're extending our leadership position by advancing autonomous AI to help organizations execute faster, smarter, and with greater precision. True to our longstanding principles, PROS takes a responsible approach to AI innovation, prioritizing transparency, ethics, compliance, and trust. By combining agentic AI with our predictive and prescriptive capabilities, we're enabling intelligent, self-directed systems that augment employee productivity and improve customer experience. This unified approach positions PROS at the forefront of a market rapidly shifting towards AI-driven outcomes and towards a future where AI and people work in seamless synergy.
Stefan Schulz: The final key momentum driver I'll discuss is the market accelerating adoption of AI powered solutions.
Stefan Schulz: As a pioneer and leader in me I, we're not just keeping pace with the market, we're extending our leadership position by advancing autonomy AI to help organizations execute faster smarter and with greater precision.
Stefan Schulz: <unk> tore long standing principles Pro Stakes, a responsible approach to AI innovation prioritizing transparency ethics compliance in trust.
Stefan Schulz: By combining it gen take AI with our predictive and prescriptive capabilities, we're enabling intelligent self directed systems that augment employee productivity and improve customer experience.
Stefan Schulz: This unified approach precision pros at the forefront of the market rapidly shifting towards AI driven outcomes in towards a future where AI in people working seamless synergy.
Stefan Schulz: We'll be bringing our vision to life at our upcoming outperform conference.
Andres Reiner: We'll be bringing OrgVision to life at our upcoming Outperform conference. where we'll showcase our latest AI innovations and demonstrate how the combination of agentic, predictive, and prescriptive AI can drive measurable business outcomes. Two of many examples are PROS Sales Agent and PROS Rebate Agent. The PROS sales agent assists sales reps in finding the right products for the right customers by serving up tailored product recommendations based on conversational input, while also keeping deals moving forward with real-time actions to overcome stalled moments in the sales process. PROS Rebate Agent uses AI to autonomously create powerful incentives that drive optimized product mix and volumes while improving customer experience.
Stefan Schulz: Where we will showcase our latest innovations in demonstrate how the combination of the gen take predictive and prescriptive V. I can drive measurable business outcomes.
Stefan Schulz: Two of many examples of pro sales agent in prose rebate agent the pro Cl's agent assist sales reps in finding the right products for the right customers by serving up tailored product recommendations based on conversational input well also.
So keeping deals moving forward with real time actions to overcome the all moments in the sales process.
Stefan Schulz: Gross rebate agent, you say see eye to autonomous Lee create powerful incentives they drive optimized product mix and volumes, while improving customer experience.
Andres Reiner: Before I close, I'd like to share an update on my planned retirement.
Speaker Change: Before I close I'd like to sharing an update on my planned retirement on behalf of the board I'm excited to announce that Jeff Cotton will join pros on June 2nd as our next president and CEO.
Andres Reiner: On behalf of the board, I'm excited to announce that Jeff Cotton will join PROS on June 2nd as our next president and CEO. Jeff is a high-impact leader with a proven track record of driving growth and operational excellence at scale. in fostering strong customer centric culture. His people-first mindset, passion for innovation, and deep commitment to customer value align seamlessly with our strategy and the culture we built at PROS. I've enjoyed getting to know Jeff and I'm confident the future of PROS under his leadership. We have an amazing experienced leadership team, the best people in technology, and our value proposition has never been more relevant.
Speaker Change: Jeff a say high impact leader with a proven track record of driving growth and operational excellence at scale.
Speaker Change: In fostering strong customer centric cultures his.
Speaker Change: His people first mindset passion for innovation in deep commitment to customer value aligns seamlessly with our strategy in the culture, we've built at pros.
Speaker Change: I've enjoyed getting to know, Jeff and I'm confident the future approach under his leadership.
Speaker Change: We have an amazing experience leadership team the best people and technology in our value proposition has never been more relevant.
Andres Reiner: We're well positioned to capitalize on our large market opportunity and I look forward to supporting Jeff on a successful transition.
We are well positioned to capitalize on our large market opportunity and I look forward to supporting Jeff on a successful transition.
Andres Reiner: Finally, I would like to thank our global team for their passion and dedication to PROS, our customers, and our community. I'd also like to thank our customers, partners, and shareholders for their continued support of PROS.
Speaker Change: Finally, I would like to thank our global team for their passion and dedication to pros or customers and our communities.
Stefan Schulz: I'd also like to thank our customers partners and shareholders for their continued support of pros with that I will now turn the call over to Stefan to cover our financial performance and outlook.
Stefan Schulz: With that, I will now turn the call over to Stefan to cover our financial performance in Outlook. Thank you, Andres, and good afternoon, everyone. I'm also very proud of how well our team is executing, and this is reflected in our first quarter results. We saw continued momentum in our go-to-market functions, including improved bookings linearity for the third consecutive quarter and a year-over-year reduction in sales cycle times of over 10 percent. Also, as Andres mentioned, our product teams continue to deliver new innovations while also improving our overall efficiency. We delivered positive free cash flow of 1.1 million dollars in the quarter, a 6 million dollar improvement, despite Q1 typically being our seasonally high cash use quarter.
Stefan Schulz: Thank you Anders and good afternoon, everyone.
Stefan Schulz: I'm also very proud of how well our team is executing and this is reflected in our first quarter results.
Stefan Schulz: We saw continued momentum in our go to market functions, including improved bookings linearity for the third consecutive quarter and a year over year reduction in sales cycle times of over 10%.
Andres Reiner: Also as Andres mentioned, our product teams continue to deliver new innovations, while also improving our overall efficiency.
Andres Reiner: We delivered positive free cash flow of $1 $1 million in the quarter, a 6 million dollar improvement. Despite Q1, typically being our seasonally high cash use quarter.
Andres Reiner: So we're continuing to make progress towards our long term goals.
Stefan Schulz: So we are continuing to make progress towards our long-term goal.
Stefan Schulz: And with that, I will provide more detail on our results for the first Subscription revenue was $70.8 million, up 10% year-over-year, and total revenue was $86.3 million, up 7% year-over-year, both exceeding the guidance. Our first quarter recurring revenue was 85% of total revenue, an increase from 84% reported in Q1 of last year. Our trailing 12-month gross revenue retention continues to be better than 93%. Recurring calculated billings in the first quarter increased 17% year-over-year and 14% for the trailing 12 months. We focus primarily on our trailing 12-month quarterly calculated billings metric, as the quarterly metric can vary due to the timing of billing.
Andres Reiner: And with that I will provide more detail on our results for the first quarter.
Andres Reiner: Subscription revenue was $78 million up 10% year over year, and total revenue was $86 $3 million up 7% year over year, both exceeding the guidance ranges.
Andres Reiner: Our first quarter recurring revenue was 85% of total revenue an increase from 84% reported in Q1 of last year.
Andres Reiner: Our trailing 12 month gross revenue retention continues to be better than 93%.
Andres Reiner: Recurring calculated billings in the first quarter increased 17% year over year and 14% for the trailing 12 months exceeding our expectations. We focused primarily on our trailing 12 month quarterly calculated billings metric as the quarterly metric can vary due to the timing of billings.
Stefan Schulz: For the year, we expect Q1 and Q3 to be our stronger billings Our non-GAAP subscription gross margin was 81% in the first quarter, an improvement of over 160 basis points year-over-year. We also delivered 13% non-GAAP services gross margin in the first quarter, an improvement of over 460 basis points year-over-year. With these improvements, our overall non-gap gross margin increased to 70%, an improvement of over 270 basis points. Our teams continue to find ways to optimize our costs, and this increased efficiency is reflected in the progress we have made to our gross margins over the last several quarters.
Andres Reiner: For the year, we expect Q1 and Q3 to be our stronger billings quarters.
Andres Reiner: Our non-GAAP subscription gross margin was 81% in the first quarter, an improvement of over 160 basis points year over year.
Andres Reiner: We also delivered 13% non-GAAP services gross margin in the first quarter, an improvement of over 460 basis points year over year.
Andres Reiner: With these improvements our overall non-GAAP gross margin increased to 70% an improvement of over 270 basis points.
Andres Reiner: Our teams continue to find ways to optimize our costs and this increased efficiency is reflected in the progress we've made to our gross margins over the last several quarters.
Andres Reiner: Our adjusted EBITDA was $8 $7 million in the first quarter exceeding guidance and a 90% improvement over last year.
Stefan Schulz: Our adjusted EBITDA was $8.7 million in the first quarter, exceeding guidance and a 90% improvement over last year. Our free cash flow was $1.1 million, an improvement of $6 million over last year. And from a balance sheet perspective, we exited the first quarter with $170 million of cash and investment. Our first quarter non-GAAP earnings per share was $0.13 per share, also exceeding guidance.
Andres Reiner: Our free cash flow was $1 $1 million, an improvement of $6 million over last year.
Andres Reiner: And from a balance sheet perspective, we exited the first quarter with $170 million of cash and investments.
Andres Reiner: Our first quarter non-GAAP earnings per share was <unk> 13 cents per share also exceeding guidance.
Andres Reiner: Now turning to our forward looking guidance for the second quarter, we expect subscription revenue to be in the range of $72 million to $72.5 million, representing 10% growth year over year at the midpoint.
Stefan Schulz: Now turning to our forward-looking guide. For the second quarter, we expect subscription revenue to be in the range of $72 to $72.5 million, representing 10% growth year-over-year at the mid-budget. We expect total revenue to be in the range of $87 to $88 million, representing 7% growth year over year. We expect adjusted EBITDA of between $4 and $5 million. And as planned, we are increasing investments in selling and marketing in the second quarter, including our upcoming Outperform Conference. Using our non-GAAP estimated tax rate of 22%, we anticipate non-GAAP earnings per share to be in the range of $0.04 to $0.06 per share, based on an estimated 48.2 million diluted weighted average shares outstated.
Andres Reiner: We expect total revenue to be in the range of $87 million to $88 million, representing 7% growth year over year at the midpoint.
Andres Reiner: We expect adjusted EBITDA of between four and $5 million and as planned we are increasing investments in selling and marketing in the second quarter, including our upcoming outperform conference.
Andres Reiner: Using our non-GAAP estimated tax rate of 22%, we anticipate non-GAAP earnings per share to be in the range of four to six cents per share based on an estimated $48 2 million diluted weighted average shares outstanding.
Andres Reiner: For the full year, we are maintaining all of our existing guidance ranges.
Stefan Schulz: For the full year, we are maintaining all of our existing guidance. We expect subscription ARR of between 308 to 311 million dollars, representing 10% growth year over year. We anticipate subscription revenue to be in the range of $294 to $296 million, representing 11% growth year-over-year. And we expect total revenue to be in the range of $360 to $362 million, representing 9% growth year over year. We expect adjusted EBITDA to be in the range of $42 and $44 million, representing an improvement of $13 million year-over-year, and free cash flow in the range of $40 to $44 million, an improvement of $15.8 million year-over-year.
Andres Reiner: We expect subscription a R R of between $308 million to $311 million, representing 10% growth year over year.
Andres Reiner: We anticipate subscription revenue to be in the range of $294 million to $296 million, representing 11% growth year over year.
Andres Reiner: And we expect total revenue to be in the range of $360 million to $362 million, representing 9% growth year over year.
Andres Reiner: We expect adjusted EBITDA to be in the range of 42, and $44 million, representing an improvement of $13 million year over year and free cash flow in the range of $40 million to $44 million, an improvement of $15 $8 million year over year.
Stefan Schulz: As I noted last quarter, we continue to see accelerating growth in subscription revenue for the rest of the year from deals that were previously booked. In addition, we see a similar trend for services revenue in the second half of 2025.
Andres Reiner: As I noted last quarter, we continue to see accelerating growth in subscription revenue for the rest of the year from deals that were previously booked.
Andres Reiner: In addition, we see a similar trend for services revenue in the second half of 2025.
Andres Reiner: So in closing I would like to thank our global team and our customers for their continued support of pros and we also thank you our shareholders for your support and we look forward to speaking with you at our upcoming events I will now turn the call back over to the operator for questions operator.
Stefan Schulz: So in closing, I would like to thank our global team and our customers for their continued support of PROS. We also thank you, our shareholders, for your support. And we look forward to speaking with you at our upcoming events.
Operator: I will now turn the call back over to the operator for questions. Operator. Thank you.
Speaker Change: Thank you at this time, we will be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if he would like to remove your question from the queue.
Operator: At this time we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start button. One moment, please, while we poll for questions.
Speaker Change: Participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker Change: One moment, please while we poll for questions.
Speaker Change: Okay.
Scott Berg: Our first question comes from the line of Scott Berg with Needham and Company. Please proceed with your question. Hi, everyone. Nice quarter.
Speaker Change: Our first question comes from the line of Scott Berg with Needham <unk> Company. Please proceed with your questions.
Speaker Change: Yeah.
Speaker Change: Hi, everyone nice quarter and Andres Congrats on.
Andres Reiner: And Andres, congrats on, I guess, what's your last full quarter as a public company CEO of PROS. Nice results here. Thank you, Scott. Yeah, Scott, great, great question. I would say, look, we've continued to see improvements in travel, you know, Q3, Q4, and Q1. Again, we're seeing that the areas that we've been innovating around the future of offer optimization is truly resonating. I think airlines, as you know, are moving more to ensuring they're marketing the right offers and driving demand through their digital channels and improving those digital experiences. And we've been very laser focused on those innovations, and we're seeing them resonate.
Speaker Change: I guess, what's your last full quarter as a public company CEO approach nice results here.
Speaker Change: Thank you Scott.
Speaker Change: Both yourself and Stephane, you know certainly kind of smoke and alluded to a better bookings environment here. The last couple of quarters, it seems like increasing or at least improving on a couple of different levels. I guess, if you. If you break that down <unk> been reasonably strong any ways over the last couple of years, but what do you all seen in the travel side here is.
Speaker Change: You kind of a claim that was back last quarter help us understand where that momentum is and how far away are you from that kind of normal bookings environment.
Speaker Change: Yeah, Scott Great Great question, I would say, Nick we've continued to see improvements in travel.
Speaker Change: Q3, Q4, and Q1 again.
Speaker Change: Seeing that the areas that we've been innovating around the future of offer optimization is truly resonating I think airlines as you know are moving more to ensuring their marketing the right offers and driving demand.
Speaker Change: Channels and improving those.
Speaker Change: <unk> says and we've been very laser focus on those innovations and we're seeing them resonate I would say Q1 was very strong performance on the travel side.
Andres Reiner: I would say, Q1 was very strong performance on the travel side. I mentioned that we won two of the top seven US carriers, you know, and we're seeing overall continued momentum. So we feel travel will definitely contribute this year. And it was good to see increasingly improvement, you know, Q3 to Q4. Now to Q1. And overall, B2B continues to perform very well. I would say from a sales execution, we're executing very, very well, or bookings linearity, you know, and how we're driving better reproductivity and continued, you know, improvements or sales cycle times. You know, I'm, you know, very excited to see how we're doing.
Speaker Change: Mentioned that we won two of the top seven U S carriers.
Speaker Change: And we're seeing overall continued <unk>.
Speaker Change: Momentum so we feel travel will definitely contribute this year and it was good to see increasingly improvement.
Speaker Change: Q3 to Q4 now to Q1.
Speaker Change: And in <unk>.
Overall <unk> continues to perform very well I would say from my sales execution, we are executing very very well or bookings linearity.
Speaker Change: And how we're driving better rep productivity.
Speaker Change: And continued.
Speaker Change: Improvements to our sales cycle times.
Speaker Change: I'm very.
Speaker Change: Very excited to see how we're doing.
Speaker Change: Yeah.
Andres Reiner: Understood, helpful. And then, you know, as you think of the macro today, it's changed a lot since last time. I think you and I spoke, Andres, in late February, is how is the current macro helping or hindering your business? Historically, dynamic change has been, you know, helpful, especially at least on your B2B side.
Speaker Change: Understood helpful. And then as you think of the macro today, it's changed a lot since last time, I think you and I spoke Andreas.
Speaker Change: February is how's the current macro helping or hindering yield business historically dynamic changes have been helpful, especially at least on your <unk> side, but are you seeing similar traction or are customers actually kind of maybe stopping and reevaluating that.
Andres Reiner: But are you seeing similar traction or are customers actually kind of maybe stopping and reevaluating in the Yeah, so that's a great question. I would tell you, look, there is no doubt this is a complex selling environment. I will say that that our solutions are really mission critical for these type of environment. And what we're seeing is a lot of companies really accelerating initiatives, both on the B2B and on the travel and in a lot is the dynamics of the market. As I talked about in my prepared remarks, you know, the level of volatility has increased probably to the highest level we've seen it.
Speaker Change: Yeah. So that's a great question I would tell you look there is no doubt. This is a complex selling environment I will say that our solutions are really mission critical for these type of environment and where we're seeing is a lot of companies really accelerating initiatives.
Speaker Change: Both on <unk> and on the travel and in and a lot is the dynamics of the market.
Speaker Change: Talking about in my prepared remarks, you know the level of volatility has increased to the highest level, we've seen it and I've talked about this a lot that in my view volatility is here to stay and a lot of companies are realizing that in the nature of having a real time AI powered platform to better understand how demand.
Andres Reiner: And I've talked about this a lot that in my view, volatility is here to stay. And a lot of companies are realizing that in the nature of having a real time AI power platform to better understand how demand patterns are changing, and how you're driving a more self serve, you know, buying motion and selling motion is really critical. So I would say overall, we're very pleased with the demand. So far, we haven't seen any impact, I would say I spoke in the call, you know, we felt Q1, we exceeded our expectation, both in travel and B2B, but are cognizant, you know, of the environment and making sure that customers understand the value and why now, the risk that we help support and how we help them drive better efficiency, and better precision in execution, I will tell you that from a demand perspective, we saw an increase in inbound demand, and definitely a significant increase in SDR based meeting book, which actually yielded to some of our results in Q1.
Speaker Change: Patterns are changing and how you're driving a more self serve.
Speaker Change: Buying motion in selling motion, it's really critical so I would say overall, we're very pleased with.
Speaker Change: With the demand.
Speaker Change: So far we haven't seen any impact.
Speaker Change: I would say I spoke in the call. We felt Q1, we exceeded our expectations both in travel and beta V but are cognizant.
Speaker Change: You know of the environment, and making sure that customers understand the value of them why now the rest that we help support and how we help them drive better efficiency and better precision in execution.
Speaker Change: I will tell you that from a demand perspective, we saw an increase in inbound demand.
Speaker Change: And definitely a significant increase in SCR based meetings booked.
Speaker Change: Which actually yielded to some of our results in Q1.
Speaker Change: Yeah.
Scott Berg: Excellent, congrats on the good quarter and looking forward to seeing you at the conference. Look forward to it, Scott. Thank you.
Speaker Change: Excellent congrats on the good quarter and looking forward to seeing it capex.
Speaker Change: Therefore, Scott Thank you.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Thank you.
Zane Meehan: Our next question comes from the line of Zane Meehan with KeyBank Capital Markets. Please proceed with your question. Great, thank you for taking my question. I'm on for Jason Celino today.
Speaker Change: Our next question comes from the line of Zain men with Keybanc capital markets. Please proceed with your question.
Speaker Change: Great. Thanks for taking my question I'm on for Jason Celaeno today.
Speaker Change:
Stefan Schulz: Stefan, you talked about the improvement that you've seen in gross margins and pointed to, you know, efficiencies that you, you all have been able to obtain, maybe you can talk about What those efficiencies are and, you know, how that's driving the better gross margin. Yeah, sure. So Zane, I think I'll start with subscription, because that's obviously the biggest driver. You know, our our cloud team and our engineering teams have really worked over the last couple of three years, actually, on how our our solutions can be more efficient at providing the outcomes that our customers are looking for.
Speaker Change: Stefan you talked about the improvement that you've seen in gross margins and appointed.
Speaker Change: Pointed to efficiencies that you you all have been able to.
Speaker Change: Obtain maybe you can talk about.
Speaker Change: What what those efficiencies are in.
Speaker Change: Oh, that's driving the better gross margin.
Speaker Change: Yes, sure so zane.
Speaker Change: I'll start with subscription because thats, obviously the biggest driver.
Speaker Change: Our cloud team and our engineering teams have really worked over the last couple of three years actually on how our solutions can be more efficient at providing the outcomes that our customers are looking for and they have been very successful at doing that and one of the things that we offer is real time result.
Stefan Schulz: And they've been very successful at doing that. And, you know, one of the things that that we offer is real time results. And historically, that has been a big consumer of compute. And they've been able to work on ways to deliver that real-time nature of a response by using less compute. And so historically, we would have, you know, redundancies that we've now been able to eliminate and therefore save the cost. And that's what's helped a significant amount among a number of other initiatives that the cloud team has undertaken.
Speaker Change: And historically that has been a big consumer of compute.
Speaker Change: And they've been able to work on ways to deliver that real time nature of a response by using less compute and so historically we would have.
Speaker Change: Dundon sees that we've now been able to eliminate and therefore save the cost and that's what's helped a significant amount among a number of other initiatives that the cloud team has undertaken.
Stefan Schulz: And then, similarly, on the services side... You know, one of the areas that that we've been focusing on is, you know, a lot of automation, you know, Andres talks a lot about AI, and, you know, how AI is one of our three strategic pillars. And our services team has really been on the forefront of using AI to help with the implementation to help with data gathering and data sorting. And that's been a big driver for, you know, our efficiency and our benefits on the service Okay, awesome. Makes sense.
Speaker Change: And then similarly on the services side.
Speaker Change: One of the areas that we.
Speaker Change: We've been focusing on is a lot of automation understood a lot about AI and how AI is one of our three strategic pillars and our services team has really been on the forefront of using AI to help with the implementation to help with.
Speaker Change: Data gathering and data sorting and Thats been a big driver or you know our efficiency and our benefits on the services.
Speaker Change: Okay Awesome makes sense and then.
Andres Reiner: And then following up on Scott's question on macro, you know, I mean, we're obviously seeing that volatility in real time. And just curious if, you know, you're seeing, you're seeing any customers that are maybe delaying implementations as a result, or maybe Not landing as big as you would have expected just kind of anything you can speak to on on demand and customer behavior. And if you could break out between B2B and travel. Yeah, so great question. I would say in general, we haven't seen any demand pattern changes. You know, whether it be on the ASB, we haven't seen any change whereas ASB have been fairly consistent.
Speaker Change: Following up on Scott's question on macro.
Speaker Change: We're obviously seeing that volatility in real time, and just curious if.
Speaker Change: Youre seeing youre.
Speaker Change: Are you seeing any customers that are maybe delaying implementations as a result or maybe.
Speaker Change: Yeah, not landing as big as you would have expected just kind of anything you can speak to on.
Speaker Change: On demand and customer behavior, and if you could breakout between <unk> and travel.
Yeah. So great question I would say in general we haven't seen any demand pattern changes.
Speaker Change: Whether it be on the ASB, we haven't seen any.
Speaker Change: Change to our at ASB has that been fairly consistent.
Zane Meehan: And overall, I would say, look, if anything, we're seeing companies that want to drive acceleration of implementations. We have seen very strong demand on the CPQ side as well. I think a lot of companies are leaning in to automating and self serve of commerce, and having real precision to market changes in real time where before they didn't have that visibility. So, so far, I would tell you, having seen any changes, we're continuing to see, you know, strong market demand. Great. Thanks for taking my question.
Speaker Change: And overall I would say look.
Speaker Change: If anything we're seeing companies that want to drive acceleration of implementations.
Speaker Change: We have seen very strong demand on the CPU side as well I think a lot of companies are leaning in to automating and self serve of commerce and.
Speaker Change: And having real precision to market changes in real time, where before they didn't have that visibility. So so so far I would tell you you haven't seen any changes where we're continuing to see.
Speaker Change: You know strong market demand.
Speaker Change: Great. Thanks for taking my question and Andreas Congrats on retirement.
Zane Meehan: And Andres, congrats on retirement. Thank you.
Speaker Change: Thank you.
Speaker Change: Yeah.
Speaker Change: Thank you.
Matthew Kicker: Our next question comes from the line of Parker Lane with Stifel. Please proceed with your question. Hi, this is Matthew Kicker for Parker.
Speaker Change: Our next question comes from the line of Parker Lane with Stifel. Please proceed with your question.
Speaker Change: Hi, This is Matthew kicker for Parker. Thank you for taking my questions and congrats again to Andreas on the retirement and the new successor.
Matthew Kicker: Thank you for taking my questions and congrats again to Andres on the retirement and the new successor. Thank you, Matthew. You're welcome. I want to talk a little bit about the revenue guidance and if you could break down the split between the net new customers and expansion between current customers for the 25 guidance and then also more broadly what that looks like on your path to the Rule of 40. Yeah, so I'll take that, Matthew, though. You know, if you look at the last, call it 12 months or so we're, we're averaging about a 40 60 split of 40 new to 60 existing And we really don't feel like that's going to change materially going forward.
Speaker Change: So I want to talk to as well.
Speaker Change: You're welcome.
Speaker Change: I'll talk a little bit about the revenue guidance and if you could break down the.
Speaker Change: Split between net new customers and expansion between current customers. So for the 25 guidance and then also more broadly what that looks like on your path to the rule for you.
Speaker Change: Yes, so I'll I'll.
Matthew Kicker: I'll take that Matthew though.
Matthew Kicker: If you look at the last call it 12 months or so where we're averaging about a 40 60 split of 40, new to 60 existing.
Matthew Kicker: And we really don't feel like that's going to change materially going forward. So we feel like thats going to be a fairly consistent mix somewhere between 50 50 40 60 here lately, it's been more of a 40 60.
Andres Reiner: So we feel like that's going to be a fairly consistent mix of somewhere between 50-50, 40-60. Here lately, it's been more 40-60, and we expect that to continue. I think having a healthy balance is very important. Being able to go out and, you know, earn new customers is an important muscle to keep and retain, as is learning how to, and doing a good job of staying with your customers and expanding that relationship is also very important. So we really work hard to make sure we're able to do both. I think where you're seeing it to a little bit of a degree of having, you know, a little bit of an impact is, you know, our services, you know, at least in the first half of this year, has been a little lower than, you know, what we would have seen in the past.
Matthew Kicker: We expect that to continue.
Speaker Change: I think having a healthy balance is very important.
Speaker Change: Being able to go out and earn new customers is an important muscle to keep and retain as is learning how to and doing a good job of staying with your customers and expanding that relationship is also very important. So we really work hard to make sure. We're able to do both I think where youre seeing it up to a little bit of a degree of evidence.
Speaker Change: A little bit of an impact as our services.
Speaker Change: At least in the first half of this year has been a little lower than what we would've seen in the past, we think thats a good thing because.
Andres Reiner: We think that's a good thing because that's, you know, that's indicative of the efficiencies that our services team have driven, as I mentioned on the previous question. And secondly, it's a big driver for time to value for our customers.
Speaker Change: <unk>.
Speaker Change: That's indicative of the efficiencies that our services team.
Speaker Change: Driven as I mentioned on the previous <unk>.
<unk> and secondly, it is a big driver for time to value for our customers. So.
Andres Reiner: So that's kind of how we're seeing the rest of the year play out as we look forward to 2025. Okay, thank you. And then, secondly, the bookings number continues to trend in the right direction. And this comes on the heels of making go to market changes over the past 12 months. Are there any specific changes to the go to market do you think are maybe contributing to that? Or what have you learned so far after making those go to market changes? Yeah, so so overall, we've continued to see, as I talked about, a real focus is on sales execution, and ensuring that we have more reps, you know, executing every quarter.
Speaker Change: That's kind of how we're seeing the rest of the year play out as we look forward to 2025.
Speaker Change: Yeah.
Speaker Change: Okay. Thank you and then secondly, the bookings number continues to trend in the right direction.
Speaker Change: On the heels of making a go to market changes over the past 12 months are there any specific changes. So you go to market and do you think are maybe contributing to that or what have you learned so far after making those go to market changes.
Speaker Change: Yes.
Speaker Change: We're all we've continued to see as I talk to my real focus is on execution and ensuring that we have more reps.
Speaker Change: Executing every quarter and I would tell you every metric that you look at whether it's sales cycle time has improved if you look at number of reps driving productivity in a quarter. It's improved if you look at linearity monthly linearity within a quarter.
Andres Reiner: And I would say every metric that you look at, whether it's sales cycle time has improved. If you look at number of reps driving productivity in a quarter, it's improved. If you look at linearity, monthly linearity within a quarter, those areas have improved. I'll also say there's been a lot of focus on driving improvements in our marketing function and demand gen. And we're also seeing improvements in those areas. So I think all of the programs that have been put in place, they're continuing to drive improvement. We're also driving our tenure within our sales team, which we expect that will continue to drive improvement.
Speaker Change: And those areas have improved I'll also say, they're spending a lot of focus on driving improvements in our marketing function and demand Gen and we're also seeing improvements in those areas. So I think all of the programs that have been put in place. They are continuing to drive improvement. We're also driving higher tenure within our.
Speaker Change: Sales team, which we expect that will continue to drive improvements so really proud of the team how they are executing.
Andres Reiner: So really proud of the team, how they're executing. And we expect the programs that we put in place, you know, mid last year, they're definitely paying dividends, and we expect those to continue to drive success this year.
Speaker Change: And we expect the programs that we've put in place.
Speaker Change: Made last year, there are definitely paying dividends and we expect those to continue.
Speaker Change: To drive success this year.
Speaker Change: Yeah.
Andres Reiner: Terrific, thank you. Great.
Speaker Change: Terrific. Thank you.
Speaker Change: Great.
Speaker Change: Yes.
Speaker Change: Thank you.
Nehal Chokshi: Our next question comes from the line of Nehal Chokshi with Northland Capital Markets. Please proceed with your question. Thank you.
Speaker Change: Our next question comes from the line of Neil I'll talk to you with Northland Capital markets. Please proceed with your question.
Speaker Change: Alright. Thank you congratulations on those on your planned retirement.
Andres Reiner: Congratulations, Andres, on your planned retirement, as well as a—you're welcome—as well as a—sounds like a good quarter here relative to expectations, so that's great as well. A couple of questions here to try to bridge between the— Positive commentary regarding demand and guidance, one on a quarterly basis and one on a full year basis. So let's start with the full year basis given the highlighted demand drivers of industry recognition and market volatility being positive drivers for pro. Why is You know, and what sounds like, you know, third quarter in a row, improved linearity, improved Sales cycle times, all these are positive vectors, but it's just leading to a reiteration of full year of guidance.
Speaker Change: As well as well.
Speaker Change: Welcome as well as the stuff that's a good quarter here relative to expectations. So that's great as well.
Speaker Change: Couple of questions here to try to bridge between the <unk>.
Speaker Change: Positive commentary regarding demand and guidance, one on a quarterly basis or one on a full year basis. So.
Speaker Change: Let's start with a full year basis, given the highlighted demand drivers of industry recognition of market volatility being positive.
Speaker Change: Drivers for probe.
Speaker Change: Why as you know.
Speaker Change: And what sounds like.
Speaker Change: Third quarter in a row improved.
Speaker Change: Linearity improved.
Speaker Change: Improved.
Speaker Change: <unk>.
Speaker Change: Sales cycle times all of these are positive vectors, but it's just leading to a reiteration of our full year guidance can you help bridge why that is here.
Andres Reiner: Can you help bridge why that is? Yeah, go ahead. Yeah, just in general, I would tell you, look, we, we have to the way that we approach guidance hasn't changed. But we have to understand what everyone else is seeing in the market. And we don't want to get ahead of ourselves. What I would tell you is we have more confidence in the full year guidance through Q1. And we have confidence how we're executing. But given the overall, you know, macro risk, we have to take that into consideration with our guidance. So we feel very good about the guidance that we provided and the confidence that we have in executing to it.
Speaker Change: Yeah go ahead, Yeah, just St. Joe I would tell you look.
Speaker Change: We have to the way that we approach guidance hasn't changed.
Speaker Change: But we have to understand what everyone else is seeing in the market and we don't want to get ahead of ourselves, but I would tell you is we have more confidence in.
Speaker Change: In the full year guidance through Q1.
Speaker Change: And we have confidence how we're executing.
Speaker Change: Given the overall.
Speaker Change: Macro risk.
Speaker Change: We have to take that into consideration with our guidance. So we feel very good about the guidance that we provided and the confidence that we have in executing to it but we felt it was prudent.
Andres Reiner: But we felt it was prudent to drive guidance the way we approach it.
Speaker Change: To drive guidance the way we approached it.
Speaker Change: Okay great.
Andres Reiner: Okay, great.
Stefan Schulz: And then zooming in on the quarter here, Stefan, why are you guiding to a 4 million Q3Q adjusted EBITDA decline on a 2.5 million Q3Q revenue increase and typically adjusted EBITDA improves Q3Q going into June quarter, so? Your insight here would be helpful. Yeah, sure. So, you know, first of all, the second quarter is a is a typically high spin quarter for us, you know, we do have our outperform conference. And so that does represent a bit of a, you know, a drag on the second quarter. We don't see those types of expenses as we go throughout the rest of the year.
Andras Reiner: And then zooming in on the quarter here Stefan.
Andras Reiner: Why are you guiding to a formula and share with you in just a bit the decline on a two and a half million Q over Q revenue increase and typically.
Andras Reiner: Just a bit improves <unk> going into the June quarter. So.
Andras Reiner: Your insight here would be helpful.
Andras Reiner: Yes sure.
Andras Reiner: No.
Speaker Change: First of all the second quarter is typically high spend quarter for us we do have our outperform conference and so that does represent a bit of.
Speaker Change: A drag on the second quarter, we don't see those types of expenses as we go throughout the rest of the year. So we do see a bit of relief on expenses in Q3 and Q4.
Stefan Schulz: So we do see a bit of relief on expenses in Q3 and Q4. Now, we did see a sequential improvement a year ago, to your point, from Q1 to Q2, from an EBITDA perspective. But we had some some benefits from some incentive comp that that actually drove some of that a year ago. You may recall, you know, our first half of last year wasn't as strong because of some of the challenges and travel that Andres talked about earlier. And, you know, we're seeing the exact opposite of that now. So, you know, we're not seeing some of the relief in our expense structure this year that we did last year.
Speaker Change: Now we did see a sequential improvement a year ago to your point from Q1 to Q2 from an EBITDA perspective.
Speaker Change: But we had some some benefits from some incentive comp that actually drove some of that a year ago you may recall.
Speaker Change: Our first half of last year wasn't as strong because of.
Speaker Change: Some of the challenges in travel that Andre talked about earlier.
We're seeing the exact opposite of that now so we're not seeing some of the relief in our expense structure. This year that we did last year, but I would say that's a very good thing.
Stefan Schulz: But I would say that's a very good thing. And that's a bit unique to what what happened last year. This year is more reflective of what we would typically see from an EBITDA perspective. And then as the high spin from the second quarter, you know, dissipates and we get into the second half of the year, you'll see that EBITDA expand again, you know, like you did last year.
Speaker Change: That's a bit unique to what would happen last year. This year is more reflective of what we would typically see from an EBITDA perspective, and then as the high spend from the second quarter.
Speaker Change: Dissipates and we get into the second half of the year, you'll see that EBITDA expand again.
Speaker Change: Like you did last year.
Speaker Change: Okay, great. Thank you very much Stefan congrats everybody.
Stefan Schulz: Great.
Stefan Schulz: Thank you very much, Stefan.
Stefan Schulz: Congrats, everybody.
Speaker Change: Thank you.
Stefan Schulz: Thank you.
Speaker Change: Thank you.
Speaker Change: And ladies and gentlemen, we have reached the end of the question and answer session I would like to turn the call back to bill in the overdue for closing remarks.
Operator: And ladies and gentlemen, we have reached the end of the question and answer session.
Belinda Overdeput: I would like to turn the call back to Belinda Overdeput for a closing remark. Thank you for listening to today's call. We look forward to speaking with you at conferences and events this quarter. We will be attending the virtual Needham Technology Media and Consumer Conference on May 8, the Craig Hallam Institutional Investor Conference on May 28 in Minneapolis, the Stiefel Cross-Sector 101 Conference on June 3 in Boston, and the Baird Consumer Tech and Services Conference on June 4 in New York City.
Speaker Change: Thank you for listening to today's call. We look forward to speaking with you at conferences and events. This quarter, we will be attending the virtual Needham technology media and consumer conference on May eight the Craig Hallum Institutional Investor Conference on May 28 in Minneapolis, The Stifel Cross sector. One on one conference on June three.
Speaker Change: In Boston and the Baird Consumer Tech and services Conference on June 4th in New York City I'd also like to remind investors that we are hosting an investor Q&A session on may 14th at our upcoming outperform with Pros 2025 conference at the Cosmopolitan in Las Vegas in person registration for the entire conference is available.
Belinda Overdeput: I'd also like to remind investors that we are hosting an investor Q&A session on May 14 at our upcoming Outperform with PROS 2025 conference at the Cosmopolitan in Las Vegas. In-person registration for the entire conference is available at pros.com slash outperform. A live webcast of the investor session will be available for virtual attendees via the investor relations section of our website at pros.com. If you have any questions following today's call, please contact us at ir at pros.com. Thank you and goodbye.
Speaker Change: Eligible at pros Dot com slash outperform a live webcast of the investor session will be available for virtual and attendees via the Investor Relations section of our website at <unk> Dot Com. If you have any questions. Following today's call. Please contact us at IR at <unk> Dot com, Thank you and goodbye.
Speaker Change: Ladies and gentlemen, this concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.
Operator: Ladies and gentlemen, this concludes today's conference and you may disconnect your lines at this time. Thank you for your participation. Goodbye!
Speaker Change: [music] Goodbye.
Speaker Change: Okay.
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Speaker Change: Yes.
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Speaker Change: [music].