PROS (PRO) 31 Oct 232023 Q3 Earnings call transcript

Greetings. Welcome to the PROS Holdings Third Quarter 2023 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference call over to Belinda Overdeput, Director of Investor Relations.

Thank you, operator. thank joining and everyone, afternoon, you us. for Good

filings replay on of earnings at Investor press call a SEC release, pros.com. website our found Our today's and can section of Relations the be

available be will participant and by questions will remarks available. replaced prepared on website the be which immediately transcript, official our the once call following includes Our

of will Financial Reiner, guidance. materially from Officer; differ and Executive forward-looking me With such Officer. note without about and Please President forecast. limitation, on today projections market could today's business our call Chief and the that including, in statements, strategy, and statements some Schulz, our results financial include prospects is Chief commentary opportunities Andres those Actual Stefan and future our

the statements to future For described assumes refer factors PROS filings. circumstances. information, in reflect forward-looking obligation SEC please to any no to risk events or update our more

we each measure the non-GAAP during are reminder, discuss I'll metrics. earnings will available a extent in the over to directly between Reconciliations without most With call you, which our to to the unreasonable As turn that, release. available Andres. effort, and measure comparable call, press non-GAAP the GAAP

and afternoon, by today's XX% Belinda. quarter, year-over-year, total share revenue everyone, $X.X you you, improvement by us guidance in thank delivered ranges year-over-year of on million EBITDA, our million exceeding an Good year-over-year. Thank delivered a joining We $X.X metrics. call. subscription grew for to proud positive third I'm and we strong across adjusted XX% all revenue

to achieve a of our team's by relentless are on Rule XXXX. to profitable company being focus Results goal a growth driving our of XX testament

clear are revenue AI continues long-term embraces increasingly PROS is profitable across C-suite PROS' is choice operations and to into growth. infuse given As our a AI teams fuel proven leaders their enterprise the trajectory to to encouraging strengthen. their market AI, industries

We this together. trust PROS is approach When combine speed algorithms trust by using and an critical, ensemble accuracy, are apart. what ensure it comes accuracy to sets to and AI enterprise and multiple AI,

our AI algorithms to algorithms For outlier results we optimal prediction possible. detection ensemble with example, price deliver most transparent and the and explainable

adaptive. provide data up-to-date for offer accuracy, Our PROS that with milliseconds most self-learn trust response based greater predictions. and to unparalleled promise AI signals of are They are on and guaranteed real-time speed, the solution interaction Through We user real-time models performance recalibrate and delivers the times today. solutions. within

to is Our help outperform. mission companies people and

margin AI generates efficiency improvement and for Our significant enterprise revenue, our customers.

end shareholder the see Recently, XX Dow shown the this of QX percentage XXX we As business how study. traded publicly to outcomes points, and more by beginning We S&P and analysis ran that translate our our published XXXX customers. outperformed in an customers the XXXX. ROI found into returns PROS between than for of

that customers proud this such QX to incredible amazing our you we're I'm investor check out drive chart helping these presentation. encourage returns. I in

their expand our which and profitability Our expand of growth. to demonstrated pace land at working, to platform. revenue strategy improvements Significant our continuing new use land by accelerating and we're and subscription is the customers

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of Real-Time PROS generation since during to And the expanded countries airline been digital more their their world. revenue the their destinations to of breakthrough a their be doubled of in marketing latest of flies our today, time. than XXXX, Turkish our of amazing any with been for Pricing it's adoption Airlines partnership. Group go-live and customer other of of than recent our flies since more the number has offer Airlines use Sales. and has Dynamic stunning Airlines it beginning part Turkish management, this it to solutions and Turkish solution platform our

of Dynamic revenue massive Our offer. a key Real-Time is each and for retailing scale. modern availability intelligently platform controlling innovations growth, generation the Airlines to Turkish enabled next global the Pricing on fueling managing

global business. Driving increase traffic can strategy. of offers, growth online Airlines and passengers drive Turkish across group rates conversion Platform, PROS the and higher their With our optimized

I people Also, helping ongoing turn performance to to closing, support and our company for partners delivering making outlook. would customers, over like outperform. like our like With thank in incredible global shareholders PROS. of their In mission thank would to to I and call the financial that, PROS for companies to of would team on and our an I cover Stefan

EBITDA Thank you, $XX delivering outlook million have revenue Year-to-date, quarter, total our Andres, strong We by year. and in good delivered our grown to the adjusted free raise improvements flow. cash to and in another a again we subscription over XX%, puts afternoon, position for everyone. while XX% us once by revenue and which both

adjusted improvements and basis full free to fourth positive generated executing flow been positive while also have on expected growth EBITDA These profitability cash year, We an year-to-date a our revenue quarter. made have strong now after seasonally expect the for plan.

of XX are towards We our by am I XXXX, Rule objectives. goal good these progress of off our and pleased to reaching achieving start towards a with

Now million, of and for revenue quarter XX% XX% was million, total was revenue our year-over-year, third $XX the up our third quarter in results. guidance year-over-year. $XX.X up Subscription end high ranges. exceeding the Both

XX% of revenue quarter revenue. recurring third was total Our

calculated the flat trailing quarter third for our year-over-year months. X% increased expected, XX relatively and were billings As

rate. of our As growth size billings quarterly have on and the timing a an our impact reminder,

ago. for remained rate in XX% subscription revenue the a Our improving year Non-GAAP trailing XX%. from quarter the was gross quarter, gross third XX-month retention XX% above margin

improving X% services year third Our X% the margin non-GAAP was from a ago. quarter, in

margins profitability for Driving our improvement to to overall year. we teams. last basis have start our greater been in And in And compared services to of points professional and product their improvements has achievements improvement efficiencies to I over them solutions margins. gross want Our area how with area. XXX focus we delivered gross margins services congratulate deliver points this an for year-to-date, of and gross over of basis subscription XXX

Adjusted million in was EBITDA quarter, the third exceeding $X.X guidance.

million generated access We also revolving of sheet and third From third improvement cash balance million the our quarter, in cash have of compared we last credit. to a million flow $XX perspective, the of free year. equivalents quarter with line cash and $XX.X to $X.X $XXX.X exited million a

notes May due for in million Additionally, we notes approximately XXXX, approximately $XXX our under XXXX exchanged of million $XXX of additional our indenture. convertible

recorded trading The were balance new XXXX to par. are our fair XXXX because indenture value premium the on a notes notes our at at under sheet

though a balance reflect even noncash X at par premium be will of down par years. will value, debt's higher next value level exchange the sheet our debt lower amortized debt. the This resulted to So of in a the over amount

debt million. As a in result of to of have exchange, $XX May approximately reduced we XXXX this our due

share. per earnings $X.XX share non-GAAP per was Our

Now turning guidance. to

For the and subscription full our raising total revenue year, guidance. are we

be $XXX.X of revenue range subscription to $XXX.X to $XXX.X be expect to And revenue to We million million. of $XXX.X million. the in the range total million in

guidance. the free We of midpoint and raising flow our cash EBITDA are also

And guidance $XXX $XX of for million. $X.X profit year the the in And to be million subscription of subscription million million million. and $X.X between range EBITDA $X.X $XXX million adjusted cash free we expect to million. We fourth to $XX full at expect maintaining $X.X ARR of revenue for between to million be flow quarter, the of our and total to million. and range in revenue the for million $XX.X $XX We're

revenue a in We decline holidays. to services anticipating due sequential the are

per between estimated of $X.XX using We share And expect share anticipate and million XX.X fourth diluted and XX%, estimated EBITDA on rate per fourth an $X.XX $X between quarter shares we non-GAAP of average million earnings tax non-GAAP profit adjusted million. outstanding. based an $X of weighted quarter

customers passion closing, In thank our I employees their like and continued for support. would to and

you the continued to call our thank of for to questions. also support with Operator? operator now upcoming speaking back our We will we shareholders I for and events. PROS, over turn look the their forward at

of Craig-Hallum comes Our Instructions] from question with first line Capital Bennett Group. Chad the [Operator

seeing also and in of a beat. pretty have and down, subscription logos I Andres, the kind again And very material, nice flowing is in all I It's year-to-date. earnings to I the that guess, XX%, Great. the marked EBITDA expansions quarter. every great about quarter. talk Nice question on then great job reacceleration revenue down you growth execution to

but are give I we about that recovery and there? here I are travel quarter. maybe we amount think the and where travel-related a should us in sense business transactions a fourth bookings into fair how there of the And and be of could think quarter this Can you wrong,

Offers, GOL would the JetSMART, as Yes, SKS a Chad, quarter, had for with question. Airlines, examples. the us side also expansion with digital we're both and say and marketing. continue Airways pleased our Air broaden very quarter, within offer on on And to as land very expanding travel Zealand win Yes, Turkish Air strong great huge good I also to a continuing now and reach New Zealand to our New well, expand Dynamic in a Airlines

definitely, And tell knew they the that solutions. areas started would and would is improving, is into they're the pandemic we to market in we QX. expected I during we resonating investing airlines, as innovated is they you adopt What QX want that where when these

Okay.

So here? we are seeing half demand recovery second the into

good Yes. to it. would with tell expected we're year a we the you, in I for we that consistent it's way. expect said We back what demand half pretty and of the up, pick seeing in

Okay. or -- side maybe on the side business. And the other the BXB then just of

of talked Just in last how a in reduction I to sales think cycles. significant about you characterize, pretty terms quarter

activity, that I logo you I to it's new much a and think forward? decent the reacceleration said of you that assume business, is there last it. about any how XX% think of that has driving year-to-date and amount going But, saw quarter, how is accelerated improvement or in an business characterization that

the new the same Genesis We're We're logo And last Energy always sales deal growth seeing there. question. in a in improvement Packaging. drive to Yes. BXB XX% proud velocity, those that improvement land about We're to about quarter. we're we times. the cycle continuing Chad, seeing site, about talked Trivium and talk great

significant would perfect well into well. a our X strategy very Ingredion of land, the the year, and each They the example. seeing working. believe And realize motion, we're to beginning executing value I tell as potential, at QX As new seeing we I They're we're you, in not we're that fully expanded regions. quarters, last QX. expand and while the it started of that is

line of Baird. Rob next comes from question Oliver Our the with

then Azure, just I and recent it's -- I some in with question My solutions. was the but AI of would early, Andres seeing to Microsoft you constitutes that around it's I early guys, had that the around know hear And success be interest for follow-up still partnership. and around I sort well. how a Microsoft what for a curious Obviously, report quick characterize And excitement but as you first, X. progress and recognize the some had partnership? early

in strengthen look, continues to Yes. I would you, Microsoft tell all partnership the areas.

our innovation platform drive strong a the capabilities you there PROS. from around But continuing we're tell Sales go-to-market, collaboration I some across working marketplace, is generative front phases, on it's all Still between I think of in you an PROS. of solutions can very innovation, to partnership and I in would on their Microsoft We strong next-generation early well. as and would AI their OpenAI resell Viva very ever as our the now geographies but tell we're and is been.

Great.

BXB strength? the side? for then deals, modular Excellent it just new more any in you wanted strong was sort guys looks just that -- Okay. and hear. it quarter then And driving a those the for model, on partner-led curious I to on side, more color travel be And air to of and more the a what's that little bit understand, sales really or Europe, parse like around

look, are expand seeing in on we're land, this Yes. you, No, general, focused realize would question. and tell we great -- I strategy.

say, to deals drive land trying and smaller would these acceleration. I we're general, in So

As and because drive and quick a we in that where expansion we uplift value invest. in very more And I are than BXB. think complex knew a time coming that on companies and this it to travel well we've we is they be able know, strategy ever on focused land both measure market, to year was executed fast important into that

saw on also front, the front. respect to we demand the talked and of EMEA, about those with good BXB some expansions, With we on and travel

the on best I So we an that how across those very existing customers expansions. But is rapid offer And can sides. both account. for offer very, what say both teams next to drive land we would focused are

Our comes Markets Celino Capital of line next Jason the question from with KeyBanc Inc.

I heading any comfortable year. coverage, this year feel update you capacity, point. get thoughts at on your One next on an sales capacity to into next sales around is corner just you're thinking wanted how the with Do there? about,

Jason. that continued to add tell year. you to I question, good reps next a from we're productive a would Great them Yes. the place in for need, onboard get and capacity. We've sales we

We'll through we're like feel to really with good place. I good this continue in So to but I the we're reps preparation, add feel continue in team. place a in quarter, a we'll execute

to an we continuing would on We're made rep focus is And higher to we ratios and also feel that driving I we CAC This area you, tell we've started. improvement productivity. into we're and as capacity, productivity, continue also a can we in to good on next feel focus higher But year. get place. to a we're from best-in-class, to going driving we look our

the a nice And Perfect. then, beat, we aware EBITDA just raising that you're should investments only expenses quick by like It one for QX? Stefan looks full any a on there. of, or for be year the bit, leverage little

QX slightly there assuming come QX. that in potential to That's variable incentive and No, plan on reason only in play variable number anticipation how our Jason. did, sequentially forecast, see that's it. fourth is We the from into seeing in, some that come quarter. you deliver compensation we the we're be component, down come components will that the based And

with comes question Berg next the of line Needham. from Our Scott

Congrats any good the rumor are the the a point last of would guess you I bank criteria potentially, at that I now with couple it's I company here on investment go hired this activity you a really think that as end that you've But rebound probably interest the the acquisition and is strong a to a scenario X, quarter potentially, expect I some incoming the on and guess on public evaluate for probably me. maybe what inquiries I company. with the fantastic just -- quarter. another while. a would on of publicly. There at sort through maintaining comment some the I right guess, you any the sale in to company? Not of looks AI, thoughts in entity future be actually maybe have think travel. or with Because things guys

a rumors being We what we proven and well or we but look, strategy. position, of executing you our leader executing very by comment that XX believe And expand billion of we don't and a on we're our speculation, is Rule strong our are in can laser-focused space, on Yes, market question. really a realize $XX Scott, obviously, we've XXXX. that on tell in TAM, we're great market company land, goal

great pretty So we drive feel significant we have to shareholder opportunity a returns.

So I great think focused in we a feel we're we're on place executing. just and

particular? and the Great. beat expense And handily looks pretty a then guess be in starting in sales I and that, probably a profitability QX at marketing nature. like thinking than quarter. metrics is driving kind your sales rate in of follow-up should seasonal from the you perspective, down Stefan, is of historical we And here forward? guess quarter-over-quarter, going more my all anything marketing It higher being

one. it from I had Yes, the with really assumption think again up is QX going our The a QX, for decline Scott, about event. your Outperform reason good sequential to do to

lot a just associated resources event. direct to a of fees that go and the it, third-party of that the lot event, but only go with fees not fees that towards So support there's indirect

plus quarter. And have couple other and in so that didn't that you a as of occurred we saw quarter, the events second third the much in

seeing So type that's real a that big behind movement. of the reason

to a number that forward, start rebound you'll think again, see bit. your point, to So going I

Stifel. Our from the next question line with Parker comes of Lane

substantial more being greatest First really there you're I'd there. to different AI curious you, concerned the a of than that the actually or a are about, is subject one's prioritization verticals really for seeing with budgets the the to and of hear Andres, lot average? little where you're be prioritization everyone particular exposed out of industries bit AI any being

industries deprioritization seeing impacted, that of maybe their would tell while question. is, Yes, well, performance our we're we're Parker, that What this being initiatives. not not seeing you are great I

strong it seeing at able measure think was AI small, and to be that to to beginning, And the of interest we're demonstrated. think guidance to all driving and to resonate. the of I important along this sales volatility quickly right is the has us high uplift environment digitization ROI, very And land across. I said us be able to I broadly, very clearly So the continuing for I price in it executing -- get value industry in importance in think

and of pricing we're more solutions. I AI visibility only dynamic or our increased. the pricing of would Gen experience and AI dynamic say adopting I the customer X for think management of generation the travel that of interest algorithms or next those importance and has areas. revenue seeing of and And -- The in digitization travel more

about overall, good environment would I tell you feel now. right pretty the So we market

I Yes, wanted declined know Stefan, when could, Understood. should to in the us for ARR And RPO, you've little here of that and appreciate normalization you expect of couple a quarters? investors And metric. sort that. core a saw sell-side I then as the we oriented metric? But if touch I around, you, you on bit. a on it's

is to things land, a smaller realize the the Parker, and -- bit of been we've point strategy. Andres' that talking about contracts We're than a that expand been to function are have going Yes. quite about, historically. they our be typical

in you're unwinds run which the so business seeing it's RPO. how as showing itself RPO inconsistent business in And used and that we today, throughout versus the the to running disclosure, we're way, an

that out. part anniversaried towards as we So get next should we point, have of think the I I year, to middle think your

more should starting RPO reflective to the we in of our the metrics. be impact momentum our And of in be to real -- start those see of business so

that's that next that the a there an just from speaking, are we that and there that, anomalies to see occurs regenerate metric that contractual starting into with should more middle of -- obligation. said go of still having Now, year. generally are I of renewal think, timing in a momentum when billings calculated more But business in the the representative outcome part like

with the Oppenheimer. comes question line Camden of next Levy Our from

Brian Camden Schwartz. Levy in for sitting is This

guys in the about strength Middle guys' any EMEA seen just just of here. to sequential softening that from of have your and like you thinking it this as demand into first consumer you one ongoing in industry East in saw moving the QX travel given October, this quarter? the just specifically to relates Just exposure the that some conflict QX, and month market

watching Camden, that question. tell Yes, we're very I great carefully. would you,

to So far, we or impact demand big to haven't seen any customers. impact our

not our are and any have impact, actively the by customers seeing we currently. but monitoring we But we're -- far, situation. so So seen that be not impacted

I or maybe Okay. And elongated East, EMEA or conversations I partners guess, [indiscernible] just that like like result a then maybe like stalled travel any it. of the perhaps you suppliers those by know and ongoing in, se? on of as had following per up or just have with customer pipeline Middle you conversations October

tell continuing. see focus Yes. I actively no And I Middle both And those importance of EMEA engaging on Great and think seen continuing regions, say, of the we can would the question. would It's I are innovating East. to it you we're that drive. in no, And they've and stalls. the value strategy. their

haven't seen we instances of so them down. slowing far, So, any

line Our the Bank Victor comes with from of Cheng next question America. of

solid on Congrats quarter the again.

QX. you of there's and the from bit the color give the my you maybe side. continue it the on geography appears by a at faster top. on U.S. seeing funnel. us well at a X softer sales a mentioned you're maybe could in happening QX color And But what as the more split top -- as Whether you as be you cycle. maybe in to if it can more pipeline bit see to some more Just Obviously, well,

Yes, question. Great Victor.

in a the And didn't in of U.S. -- in to we growth. funnel continue position top overall, It we good puts to drive QX. in see grow continues to So softness any a well. feel us the

not end QX. seeing would within, area at I or look say, geographies, across. top decline, we're or at an we're it that whether There's good whether demand industries tell you, we the overall, the So of seeing be funnel

regions. the we good saw pretty So other Europe U.S., and across demand

will and note is between other continues that the as mix thing be I in to XX-XX As well existing industries. new well. as across One mix

is demand is back. wanted IT 'XX on just one And other it. below we level. think airline coming then Got about the the with a I you travel. that lot Obviously, going and volumes once-in-a-generation appetite when I think the on we about orders of a 'XX, side, change, industry we distribution, that through software much they're with on broadly 'XX, prepandemic coming And of both see mentioned still is should in airline But in? normalized, kind general, management. maybe in spend that to as expect bigger check, Should when offer

Victor. QX Yes. volumes. I you of for would I that big travel as we progress see Great towards question, more tell to good continuing. QX that us think was very into quarter look And next feel a year trend about XXXX and we

So in I Airlines premature little the and are but invest, areas as are a there. to all to that I we call starting feel 'XX, ingredients talked innovated the investing about. they're think it's we

recently, and resonating an we think So areas continuous they've the benefits. they an the PROS they portfolio as this was Lufthansa well. really the success article reaping continuing now significant where I and attribute expanded mean, position I those to investments, are just year, pandemic example, during think that had to did our strengthen. our And is and pricing with all very really, there I market our about

management revenue and into all their management from are innovations believe way digital to full we continue do solution paying our marketing, generations proof points that revenue of the that did to off, drive will that those are I customers fare the great business. follow latest better for returns and the Those to

travel, I a overall, good we So as very it's next look premature 'XX, but call feel little into year. to about

like for closing back I Overdeput have session. gentlemen, of question-and-answer remarks. At end the this time, and ladies Belinda call turn reached to the the would to we

you with listening conferences speaking for and quarter. forward events look to Thank today's We call. this to you at

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If any goodbye. you Thank and contact following us have ir@pros.com. call, at today's questions please you,

today's concludes This conference.

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