PROS Holdings, Inc. Q2 FY2025 earnings call

• Jeff Cotten joined as CEO and highlighted PROS's momentum, with strong Q2 results exceeding guidance ranges. - New customer wins in CPQ, POM, and airline sectors, including Lennox, Louis Dreyfus, Air Greenland, etc. - Launched PROS AI agents in pilot phases, set to launch for customers in Q3. - Priorities include innovation in commercial platform, strengthening go-to-market function, and expanding platform to power end-to-end commercial excellence. - Announced partnership with Commerce to combine PROS's pricing and CPQ capabilities with Commerce's e-commerce solutions.

In Q2, PROS grew subscription revenue by 12% to $73.3 million, total revenue by 8% to $88.7 million, and improved adjusted EBITDA by 42% year-over-year. Recurring revenue was 86% of total revenue, with trailing 12-month gross revenue retention better than 93%. Non-GAAP subscription gross margin was 80%, non-GAAP service gross margin was 11%, and overall non-GAAP gross margin was 69%. Adjusted EBITDA in Q2 was $7.4 million, free cash flow was $3.2 million, and $4.3 million in the first half of 2025.

• Third quarter: Subscription revenue expected $74.8M - $75.3M (12% growth), total revenue $90.5M - $91.5M (10% growth), adjusted EBITDA $11M - $12M. Non-GAAP earnings per share $0.15 - $0.17. - Full year: Subscription ARR raised to $310M - $313M (11% growth), subscription revenue $295.5M - $297.5M (11% growth), total revenue $360M - $362M (9% growth), adjusted EBITDA $42M - $44M, free cash flow $40M - $44M.

• Macro environment uncertainty affecting customer spending. - Competitive landscape in the commercial platform space. - Potential impact of partner initiatives on services revenue. - Execution risks related to AI agent rollout and go-to-market strategy execution.

Q: Could you go deeper on initiatives to build tighter alignment between marketing and sales for top of funnel?

A: Marketing is dialing in campaigns to specific ideal customer profiles, sales activity will align to these, with timelines of a few quarters to see bookings momentum.

Q: How to address opportunity in travel segment?

A: Airline industry is facing complex change, demand for PROS's offer management strengths, with long sales cycles but strong demand for offer capabilities.

Q: What needs to happen for subscription growth to accelerate in 2026?

A: Optimization of top of funnel, leveraging partner initiatives, being more efficient in selling process, faster time to value, and better planning processes.

Q: Philosophy to go-to-market and posture strategically?

A: Focus on demand flow, defining demand channels, detailed plans for leads, conversion rates, and campaigns across direct sales and partners.

Q: Details on Commerce partnership and services moderation?

A: Partnership starts as referral, may move to reseller model, services growth is relatively flat, with expectation services may moderate as partners are leaned on.

Q: Macro environment impact and airline platform shift?

A: Macro uncertainty with some regional impacts, airlines in planning phase for next-gen platforms, leaning towards best-of-breed approach with PROS's offer management strengths.

Q: Balance between AI agent use/adoption and monetization, and maintaining competitive advantage?

A: Focus on usage and adoption now, collaborating with early adopters on pricing models, expecting outcome-based monetization, with PROS's rich AI history creating competitive advantage.