PROS Holdings, Inc. Q1 FY2025 earnings call

• Andres Reiner noted the team delivered a strong start to 2025, exceeding guidance ranges across all metrics with sales performing ahead of expectation in B2B and travel. Trailing 12-month recurring calculated billings grew 14% YOY, and free cash flow improved 123% YOY.
• Key factors fueling momentum: ongoing industry recognition (named a leader in Forrester Wave, Gartner Magic Quadrant, IDC MarketScape), market volatility driving need for PROS' AI-powered solutions, and accelerating adoption of AI-powered pricing and selling solutions.
• New customer wins in Q1 included a Fortune 500 chemicals company, Softcat, and Grundfos. In travel, wins at top US carriers like Southwest Airlines were highlighted.
• Andres announced his planned retirement, with Jeff Cotten joining as President and CEO on June 2.

Subscription revenue was $70.8 million, up 10% year-over-year. Total revenue was $86.3 million, up 7% year-over-year. Recurring revenue was 85% of total revenue, an increase from 84% in Q1 of the previous year. Trailing 12-month gross revenue retention was better than 93%. Trailing 12-month recurring calculated billings grew 14% year-over-year. Non-GAAP subscription gross margin was 81% in Q1, an improvement of over 160 basis points year-over-year. Non-GAAP services gross margin was 13% in Q1, an improvement of over 460 basis points year-over-year. Overall non-GAAP gross margin increased to 70%, an improvement of over 270 basis points.

• Second quarter guidance: Subscription revenue expected to be in the range of $72 million to $72.5 million (10% growth YOY at midpoint), total revenue $87 million to $88 million (7% growth YOY at midpoint), adjusted EBITDA between $4 million and $5 million. Non-GAAP earnings per share expected to be in the range of $0.04 to $0.06 per share.
• Full year guidance: Subscription ARR between $308 million to $311 million (10% growth YOY), subscription revenue $294 million to $296 million (11% growth YOY), total revenue $360 million to $362 million (9% growth YOY), adjusted EBITDA $42 million to $44 million (improvement of $13 million YOY), free cash flow $40 million to $44 million (improvement of $15.8 million YOY).

Q: Scott Berg asked about momentum in the travel segment and how the current macro is affecting the business.

A: Andres Reiner said travel showed strong performance in Q1 with wins at top US carriers, and while the macro is complex, demand remains strong with increased inbound demand and SBR-based meetings booked.

Q: Zane Meehan inquired about efficiencies driving better gross margins.

A: Stefan Schulz explained that in subscription, cloud and engineering teams have made improvements to use less compute for real-time results, and in services, automation using AI has improved efficiency.

Q: Matthew Kikkert asked about revenue guidance split between net new and existing customers and the path to the Rule of 40.

A: Stefan Schulz said the split is typically 40-60 for net new to existing, and they expect this mix to continue. Matthew also asked about go-to-market changes contributing to bookings, and Andres Reiner noted improvements in sales execution, marketing, and sales team tenure.

Q: Nehal Chokshi questioned why full year guidance was reiterated despite positive drivers.

A: Andres Reiner said they consider macro risks, but have confidence in executing the guidance. Stefan Schulz explained the Q2 adjusted EBITDA decline is due to higher spending on the Outperform conference, with relief expected in Q3 and Q4.