Earnings call transcript: PROS Holdings’ Q2 2025 earnings beat forecasts

PROS Holdings Inc. (PRO) reported a strong performance for the second quarter of 2025, surpassing earnings expectations with an EPS of $0.13 against a forecast of $0.06, marking a surprise of 116.67%. Revenue reached $88.7 million, slightly above the anticipated $87.67 million, resulting in a 1.17% surprise. Following the announcement, PROS’ stock price increased by 1.96% in aftermarket trading, rising to $16.15. According to InvestingPro data, the stock remains undervalued despite a challenging six-month period that saw a 33.6% decline.

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Key Takeaways

• EPS significantly exceeded expectations with a 116.67% surprise.
• Revenue increased by 8% year-over-year, reaching $88.7 million.
• Stock price rose by 1.96% in aftermarket trading.
• Strong performance in subscription revenue, up 12% year-over-year.
• Strategic partnership with BigCommerce enhances enterprise solutions.

Company Performance

PROS Holdings demonstrated robust growth in the second quarter, driven by a 12% year-over-year increase in subscription revenue to $73.3 million. The company’s focus on recurring revenue, which accounted for 86% of total revenue, contributed to a stable financial foundation. With a solid gross profit margin of 66.5% and a Piotroski score of 7, the company shows strong financial fundamentals. The company’s strategic initiatives, including the launch of AI agents and a partnership with BigCommerce, are expected to further strengthen its market position.

Financial Highlights

• Revenue: $88.7 million, up 8% year-over-year.
• Earnings per share: $0.13, significantly above the forecast of $0.06.
• Adjusted EBITDA: $7.4 million, a 42% year-over-year increase.
• Free Cash Flow: $3.2 million in Q2, $4.3 million year-to-date.

Earnings vs. Forecast

PROS Holdings reported an EPS of $0.13, surpassing the forecast of $0.06 by 116.67%. The revenue of $88.7 million also exceeded expectations, with a 1.17% surprise. This performance underscores the company’s ability to deliver strong results despite a challenging macroeconomic environment.

Market Reaction

Following the earnings announcement, PROS Holdings’ stock price rose by 1.96% in aftermarket trading, reaching $16.15. The stock’s movement reflects investor confidence in the company’s growth prospects, supported by its performance in subscription revenue and strategic partnerships. Analyst targets range from $18 to $36, suggesting significant upside potential. The stock remains within its 52-week range, with a high of $29.84 and a low of $13.61.

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Outlook & Guidance

Looking ahead, PROS Holdings projects full-year subscription annual recurring revenue (ARR) of $310 million to $313 million, reflecting an 11% year-over-year increase. The company also anticipates total revenue of $360 million to $362 million, representing a 9% growth, aligning with its five-year revenue CAGR of 6%. With an overall Financial Health Score of 2.28 (Fair) from InvestingPro, and analysts predicting profitability this year, the company shows promise. Adjusted EBITDA is expected to rise by 43% year-over-year, reaching $42 million to $44 million.

Executive Commentary

CEO Jeff Cotton emphasized the transformative impact of AI on the future of work, stating, "We are at a generational inflection point as AI transforms the future of work." He highlighted the role of AI agents, adding, "Our agents are not just conversational... they are designed to act as the most experienced members of your team." CFO Stefan Schultz expressed confidence in the company’s guidance, stating, "We want to provide something we have a high degree of confidence we can achieve."

Risks and Challenges

• Macro Environment: Continued economic challenges may impact enterprise spending.
• International Markets: Complexity in global markets could affect product demand.
• Technological Transformation: Rapid changes in the travel industry require adaptive strategies.
• Competition: Maintaining a competitive edge in the B2B and airline markets.
• Strategic Execution: Successful adoption and monetization of AI agents are crucial.

Q&A

During the earnings call, analysts focused on the company’s marketing and sales alignment strategies, as well as the challenging macroeconomic environment. There was significant interest in the adoption and monetization of AI agents, particularly in the context of the airline industry’s transition to offer-based platforms.

Full transcript - PROS Holdings Inc (PRO) Q2 2025:

Conference Operator: Greetings. Welcome to the PROS Holdings Second Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded.

I would now like to turn the call over to Belinda Oberdepput, Senior Director of Investor Relations. Thank you, Belinda. You may begin.

Belinda Oberdepput, Senior Director of Investor Relations, PROS Holdings: 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 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. With me on today’s call is Jeff Cotton, President and Chief Executive Officer and Stefan Schultz, 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 and our forecasts. 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 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 hand the call over to Jeff.

Jeff Cotton, President and Chief Executive Officer, PROS Holdings: Thank you, Belinda, and good afternoon, everyone. Thank you for joining us today. I’d like to start by expressing my gratitude to Andres and the entire PROS team for enabling a smooth leadership transition as I came on board as CEO. After digging into our business over the past couple of months, my excitement has only increased about the future of PROS. Having spent over two decades in enterprise IT services and software, I’ve seen firsthand how AI is transforming the future of work, and I believe that PROS is at the forefront of this evolution with AI powered solutions that enable businesses to outperform through intelligent commerce.

There is momentum in our business and palpable opportunity to build on it. We delivered a strong second quarter exceeding the high end of our guidance ranges across all metrics and putting us in a position to raise our full year outlook for both subscription revenue and subscription ARR. In Q2, we grew subscription revenue by 12%, total revenue by 8% and improved adjusted EBITDA by 42% year over year. In a dynamic and complex macro environment where businesses are selective and strategic with every dollar spent, we are proud of our results in the quarter and our ability to help our customers navigate these uncertain times. Our impact continues to be recognized by the market.

In Q2, we were named a leader by ISG in the 2025 CPQ Buyer’s Guide, our fourth consecutive leadership designation from an industry analyst in just three quarters. This recognition from ISG, along with previous acknowledgments from Gartner, Forrester, and IDC, demonstrates our continued leadership in the CPQ space. Our strong value proposition is translating into continued momentum across B2B industries, where businesses are turning to pros to help them win. Winning in today’s market means offering the right products and solutions together with the right pricing and incentives at the right time. The Pros platform gives businesses what they need to optimize their winning formula.

In Q2, new customers such as Lennox, Louis Dreyfus and RHI Magnesita, among others, selected Smart CPQ to bring winning offers to market. Additionally, new customers including a global life sciences leader and a top U. S. Auto parts distributor plus expanded partnerships with Wholesome and Unidos demonstrate how Smart Palm is empowering enterprises to take control of their commercial strategies and deliver superior buying experiences to their customers. In the airline industry, we’re helping carriers build stronger customer loyalty and drive sustainable growth through intelligent offer optimization and marketing.

Momentum in our airline business continued in Q2 with new customer wins such as Air Greenland and ValueJet and expanding partnerships with carriers across the globe and domestically, including American Airlines. By adopting our digital offer marketing solutions, these carriers are empowered to transform inspiration into action, converting more business through compelling offers. Another example is SKOOT, the low cost subsidiary of Singapore Airlines, who expanded its partnership with PROS by upgrading to our RM advantage and adding RTDP, which enables dynamic availability adjustments based on demand to support their growth strategy. This investment highlights their trust in Pro’s industry leading forecasting and optimization capabilities to unlock new revenue opportunities and deliver winning offers across their network. Now I want to talk a bit about our priorities as an organization and where we are focused.

We’re continuing to lead with innovation, building the most complete and intelligent commercial platform to help businesses win. With the introduction of Pro’s AI agents unveiled at our recent Outperform Conference, we’re uniquely combining language models with our proprietary numerical models that we’ve perfected over decades, bringing specialized intelligence to AgenTic AI. Our agents are designed to drive goal oriented execution across a wide range of use cases using deep domain expertise from sales to pricing to rebates and revenue management. Said in a simpler way, our agents are not just conversational or built to enhance user experience, they are designed to act as the most experienced members of your team with decades of knowledge on how to define commercial strategies and win. Right now, our efforts with our new agents are in pilot phases and will be launching for customers to test them in Q3.

They are a key to our long term growth strategy by bringing the value of PROS to life even faster. PROS’ rich history and continued innovation in AI create a sustainable and expanding competitive advantage for us. Looking ahead, we’ll expand our platform to power end to end commercial excellence, further strengthening our capabilities in areas such as rebates and incentives. We’ll also enhance platform extensibility to further enable partner innovation as well as go deeper and wider on AI agents. Over the past several quarters, the team has done great work strengthening our go to market function, which is evident in our improving sales cycle times, competitive win rates and bookings linearity.

With this solid foundation, we’re now focused on amplifying these efforts in three key areas. First, we need to apply the same level of rigor that we’ve successfully used in late stage pipeline management and now apply that rigor to the top of the funnel. Through more effective early stage nurturing, we can further improve lead quality and conversion rates. Second, we’re expanding our market reach through targeted campaigns focused on customer expansion and new logo acquisition in key verticals and product specific opportunities like rebate management, building on early success from our analyst recognition campaigns. These focus areas are why organizationally, we’ve elevated our leadership team to drive tighter alignment between marketing and sales.

Finally, we must double down on true strategic platform partnerships, specifically where these partners can broaden the distribution of PROS. This is an area where I see a huge opportunity and where I’ve had a lot of experience in the past. In fact, we’re already making progress in this area as earlier today, we announced partnership with Commerce, formerly known as BigCommerce, to combine our enterprise grade pricing and CPQ capabilities with their portfolio of e commerce solutions. Together, we will equip B2B merchants with real time dynamic pricing and streamline product and service configuration so they can win more business with offers that build buyer confidence. Commerce and PROS create the perfect complements to solve the evolving needs of enterprise sellers looking to drive superior buying experiences.

We’re at a generational inflection point as AI transforms the future of work. For companies like ours, this creates a rare and compelling opportunity. With a strong foundation, clear focus areas and a differentiated platform, PROS is well positioned to capture long term value and lead in this next era of enterprise transformation. Before I close, I’d like to thank our global team for everything they do to deliver amazing value to our customers and make PROS a truly unique company. I’d also like to thank our customers, partners and shareholders for their ongoing support of PROS.

Now I’ll hand the call to Stefan to cover our financial performance and outlook.

Stefan Schultz, Chief Financial Officer, PROS Holdings: Thank you, Jeff, and good afternoon, everyone. As Jeff just shared, we have a great opportunity to continue expanding our growth and profitability. And I’m very excited to support Jeff on the strategy that he just outlined. Our team delivered another strong quarter, highlighted by acceleration in both subscription revenue and total revenue, while also expanding profitability. Our results reflect our continued commitment to driving profitable growth and position us well for the second half of the year.

And as Jeff mentioned, the momentum we’re seeing in our business supports increasing our subscription ARR and subscription revenue annual guidance ranges. Now I’ll dive into our Q2 results in more detail. We grew subscription revenue 12% year over year to $73,300,000 and total revenue 8% year over year to $88,700,000 both exceeding the guidance ranges. Our second quarter recurring revenue was 86% of total revenue, an increase from 84% reported in Q2 of last year. Our trailing twelve month gross revenue retention continued to be better than 93%.

We grew recurring calculated billings in the second quarter by 5% year over year and 13% for the trailing twelve months, exceeding our expectations. Our non GAAP subscription gross margin was 80% in the second quarter, an improvement of over 50 basis points year over year. We also delivered 11% non GAAP service gross margins in the second quarter, increasing from 10% reported last year. With these improvements, our overall non GAAP gross margin was 69% in the second quarter, increasing from 67% last year. We delivered adjusted EBITDA of $7,400,000 in the second quarter exceeding guidance and a 42% improvement over last year.

Our free cash flow was $3,200,000 in the second quarter bringing us to $4,300,000 in free cash flow generated in the 2025. Compared to the first half of last year, we delivered an improvement of over $3,000,000 And I’m pleased to see us start the year with two positive cash generation quarters despite the first half of the year being our seasonally high period for cash use. From a balance sheet perspective, we exited the second quarter with $189,000,000 of cash and investments. Additionally, in the second quarter, we announced an exchange of $186,900,000 of our 2027 notes for $185,000,000 of new notes due in 02/1930, taking advantage of our favorable bond prices to reduce our debt by approximately $2,000,000 As a result, the outstanding amount due in September 2027 has been reduced to $79,900,000 Also, once the 2027 notes are fully retired, our total debt will be 12% lower than it was prior to the exchange. While we weren’t satisfied with our capital structure before the exchange transaction, we now have a greater degree of financial flexibility.

Our second quarter non GAAP earnings per share was $0.13 per share, also exceeding our guidance. Now turning to our forward looking guidance. For the third quarter, we expect subscription revenue to be in the range of $74,800,000 to $75,300,000 representing 12% growth year over year at the midpoint. We expect total revenue to be in the range of $90,500,000 to $91,500,000 representing 10% year over year growth at the midpoint. We expect adjusted EBITDA between 11,000,000 and $12,000,000 representing 24% growth year over year at the midpoint.

And using our non GAAP estimated tax rate of 22%, we anticipate non GAAP earnings per share to be in the range of $0.15 to $0.17 per share based on an estimated 48,300,000.0 diluted weighted average shares outstanding. For the full year, we are raising our subscription ARR to a range of $310,000,000 to $313,000,000 representing 11% growth year over year at the midpoint. We are raising our subscription revenue to a range of $295,500,000 to $297,500,000 representing 11% growth year over year at the midpoint. We expect total revenue to be in the range of $360,000,000 to $362,000,000 representing 9% growth year over year at the midpoint. And we expect adjusted EBITDA to be in the range of 42,000,000 to $44,000,000 representing an improvement of 43% year over year at the midpoint and free cash flow in the range of $40,000,000 to $44,000,000 a 61% improvement year over year at the midpoint.

In closing, we delivered strong results with continued progress to our key financial and strategic priorities. We are focused on driving rigor and disciplined execution across all aspects of the customer journey, and we’re continuing to expand our competitive moat through innovation. We are well positioned to drive long term value for our shareholders. 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 of PROS, 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?

Conference Operator: Thank you. And at this time, we will be conducting a question and answer session. And our first question comes from the line of Parker Lane with Stifel. Please proceed with your question.

Parker Lane, Analyst, Stifel: Hey, good afternoon, everyone, and thanks for taking the question here. Jeff, you emphasized one of the key priorities is building top of funnel, and I think you mentioned driving tighter alignment between marketing and sales was one of the ways you’re going to do that. Could you go a little bit deeper on exactly what initiatives you have in place to build that tighter alignment? And what sort of timeline should we expect to see some of those changes in the structure here and approach really benefiting that subscription revenue line?

Jeff Cotton, President and Chief Executive Officer, PROS Holdings: Yeah. Parker, thank you for the question. A couple of things. First and foremost, look, our marketing organization’s already got a lot of activity going right now on campaigns that we’re really dialing in to very specific ideal customer profiles. I’ll give you an example.

Manufacturing is one that as I’ve gotten out to our customer base, there’s just so much, messaging that we can really tailor to that specific industry that we’re gonna continue to dial in and then even get into subsegments within manufacturing. And so then as you get those campaigns defined and launched in market, you’ve gotta align your sales activity to that to make sure that then we have salespeople that have targets aligned against, those specific subsegments of industry groups. And so that’s the type of alignment here, that we’re talking about as we continue to evolve our campaigns. You know, look, timelines, you know, you’re gonna be looking at a a few quarters out before you start to really see bookings momentum there. Right?

We’ve gotta get these campaigns out. We’ve gotta then, get top of funnel activity going. But that’s the type of alignment that we’re starting to define here for our 2026 planning efforts.

Parker Lane, Analyst, Stifel: Got it. That’s good feedback. And then maybe on the other side of the house in travel and airlines, a nice mix of some net new airlines there as well as some expansion activity. Stepping into this role, when you look at the TAM you have there, how would you address that opportunity? How do you see it?

What are the things that excites you most about the the opportunity in front of you in the travel segment?

Jeff Cotton, President and Chief Executive Officer, PROS Holdings: Yeah. I’m really glad you asked that one. Look. I’ll tell you. This has probably been one of my, bigger pleasant surprises in stepping into the role.

I’ve actually spent a lot of time with a lot of our airline customers, actually, since before I joined and now that I’ve had a chance to get in and and and meet with many of them. And I will tell you, the airline industry, as you well know, I’m sure you cover a lot of, their respective businesses, is going through more complex change than probably any industry. Right? They’ve got massive shifts in their buying patterns in terms of premium products being more in demand, than lower fare class products. They’re shoving a lot more complexity into ancillary products, etcetera.

And all of that creates demand for us. Our towering strengths are in offer management specifically, and the conversations that we’re having now is they’re looking at redefining their tech stack as they shift more into an offer and order management type of a a tech stack. An offer is where they’re putting a premium. That’s what’s gonna help them solve a lot of the complexity that they’re now facing as they look at, you know, trying to seek new revenue sources, as they try to shift into this more holistic travel experience. And so I have to tell you, I’ve been really surprised, pleasantly at the demand that we’re starting to see and the conversations we’re now engaging now.

Obviously, these are long sales cycles. Right? You’re at the very beginning of helping them define, in many cases, how these new buying patterns are gonna operate, and then standing up the platforms, that we offer today for them and getting those vetted in and implemented. But I’ll tell you, there is a lot of demand that we’re hearing directly for our offer, capabilities.

Parker Lane, Analyst, Stifel: Got it. Thanks again and congrats on the quarter, Jeff.

Nehal Chokshi, Analyst, Northland Capital Markets: Yes. Thank you.

Conference Operator: Thank you. And our next question comes from the line of Nehal Chokshi with Northland Capital Markets. Please proceed with your question.

Nehal Chokshi, Analyst, Northland Capital Markets: Thank you. And congrats on a good quarter, including billings above expectations. It sounds like that’s what’s driving the forward subscription raise, which is great. What needs to happen for the remainder of the year in order for subscription growth to further accelerate going into calendar 2026?

Stefan Schultz, Chief Financial Officer, PROS Holdings: Yes, Nehal. Thanks for the question. This is Stefan. I’ll take that. So first of all, I mean, we’re very happy with where we sit at the midyear point.

Obviously, through that, we were able to raise not only our revenue, but also our Our teams continue to do well in the marketplace. Our products continue to be in demand. But at this point, we’ve put together a guidance range that we feel represents what we feel like is achievable. Our methodology from a guidance perspective is still the same. We want to provide something we have a high degree of confidence we can achieve and we feel like we’ve done that.

Certainly, there’s opportunity to leverage other products, other things that are happening, our agent technology that Jeff highlighted in his prepared remarks. But right now, we’re comfortable with where we are. We do see momentum in our business. And know, there is a possibility that there could be more. But at this point in time, given all the things that are in play, we feel comfortable with where we sit, you know, at the at the $3.10 to $3.13 on the subscription ARR side.

Nehal Chokshi, Analyst, Northland Capital Markets: Okay. Any thoughts to share on whether or not growth can accelerate in calendar twenty six? What needs to happen in order for that to for growth to accelerate in calendar twenty twenty six, subscription growth?

Stefan Schultz, Chief Financial Officer, PROS Holdings: Yeah. I think, you know, the question that was just asked of Jeff just a few minutes ago, things that we can do around, becoming more, optimized in the top end of our funnel and progressing opportunities farther along in a quicker and faster fashion. Certainly something that we can do. You know, we made an announcement also today with our partnership with Commerce and and what that means. I think, you know, Jeff has been very clear in terms of of what he wants to prioritize, both at outperform and and I think even today that we wanna leverage more partners as well, have more people, more feet on the street, not just direct sales reps, but also, folks that that are advocating on our behalf.

So those are several initiatives that are underway now that we, we feel like will help accelerate the the growth rate. You know, not to mention things that we already had in play, around being more efficient in the selling process, you know, having faster time to value, making sure our products can be deployed faster. All those initiatives that were in play before, continue to be in play, and we feel like the combination of the things that were already in flight plus the things that Jeff is bringing in to focus on give us an opportunity to do that. I’ll be prepared to talk more about that in the coming quarters as we, you know, get through our planning process. As you can imagine, we’re going through a little bit of a different planning process now.

And, but once we have some better ideas around that, we’ll certainly share those with you.

Nehal Chokshi, Analyst, Northland Capital Markets: That’s great. Thank you.

Conference Operator: Thank you. And our next question comes from the line of Jeff Van Rhee with Craig Hallum Capital Group. Please proceed with your question.

Jeff Van Rhee, Analyst, Craig Hallum Capital Group: Hey, this is Daniel Hedgeschmann on for Jeff Van Rhee. Thanks for taking my questions, Jeff and Stephane. Jeff, just as you’re coming on board here, maybe you could share with us, as you’re taking a very significant role in sales, some more about your background in go to market, your philosophy to go to market and just generally how you’re wanting to posture Pro strategically from from a go to market perspective?

Jeff Cotton, President and Chief Executive Officer, PROS Holdings: Yeah. Great question. You know, first of all, I would tell you I’ve spent probably at least the last, let’s call it, you know, twenty years of my career focusing pretty heavily in specifically go to market. And what I would tell you, I spent a lot of time on is not necessarily running the day to day sales. Obviously, we have a great sales team and a great sales leader who’s doing that.

It’s really about how do we build what I call the conveyor belt. Right? When you think about the demand flow that has to be coming into a business to achieve, you know, revenue growth and and acceleration, which is obviously what we’re all going for here, you’ve gotta really understand what are the different demand channels. Right? And when I say channel, don’t mean necessarily just partnerships.

And so, that’s what we’re spending a lot of time doing here. I brought a framework that I have used now at at multiple organizations that seems to work really well. Well, we’ll start to really pull apart the top of the funnel, and you’ll look at, you know, what do we expect from, partners, over the coming months and quarters. And then you build a detailed plan that says, okay. How many leads do I need to be getting access to via those partners?

How many ops do we wanna be creating? What are the conversion rates? And then measuring those. We do the same thing with marketing and looking at very specific campaigns and being able to flow a campaign from the leads and and the the contacts literally that we’re out marketing to all the way down to bookings. And then you do the same thing on the direct sales side.

Right? We’ve got lots of opportunity in both our travel and our b to b business to market products that customers don’t have. Great example in the travel space is for our revenue management customers going and offering our digital marketing offer capabilities. We’ve just launched a new agent there that is really exciting. And so we’ve gotta have very specific campaigns to go do that.

So once again, you’ll define the amount of customers we have in our base that do not have digital offer marketing and, you know, the campaigns you’ll activate against those targets and then flow it down to bookings. And so that’s the type of rigor here that I’ve done at other, organizations that we’re bringing here. And as Stephan said, we’re in the very middle of building that plan, from, you know, literally top, very top of the contacts that we’re marketing to or targeting in our existing customer base all the way down to bookings.

Jeff Van Rhee, Analyst, Craig Hallum Capital Group: Thanks, Jeff. And and then just on travel versus b two b performance, you know, incrementally over the past ninety days. Didn’t hear too much commentary about that on the prepared remarks. Maybe just for either of you from either of you, just a little bit more commentary on how travel and how B2B did incrementally over the past ninety days? Thanks.

Stefan Schultz, Chief Financial Officer, PROS Holdings: Yes. So we’re pleased with both actually. We continue to see B2B performing well and our airline business really just continues to get stronger. And especially, when you think a year ago where we were from an airline perspective, we were talking about some of the challenges. And then the fourth quarter since, we’ve been able to see strong and steady progress in that airline business, that continues through this past quarter as well.

Jeff Van Rhee, Analyst, Craig Hallum Capital Group: Okay. That’s it for me. Thanks, Jeff. Thanks, Stephane.

Conference Operator: Thank you. And our next question comes from the line of Zane Meehan with KeyBanc Capital Markets. Please proceed with your question.

Zane Meehan, Analyst, KeyBanc Capital Markets: Great. Thank you guys for taking my question. I’m on for Jason Celino today. Jeff, to start with you, the commerce partnership announcement is super exciting. Just hoping you could give a bit more detail on, you know, how that partnership works, both from a go to market and monetization standpoint.

You know, is there a cosell or rev share agreement in place? And then, you know, is this something we should, you know, expect going forward, more more announcements like this?

Jeff Cotton, President and Chief Executive Officer, PROS Holdings: Yeah. Great question. So so the the way that the partnership works, first of all, you know, what what you should expect to see going forward is that when we announce these types of relationships, first of all, they’re gonna be ones that start at the top of the partner organization. I believe very much you’ve got to align strategically on the customer profile. You’re going after the use cases, and we we’ve gotta have real strategic alignment how the product is gonna come together to solve that ideal customer profile, and use case.

And then after that alignment, and how we commercially want the relationship to work, then we start to do the go to market structures and activate those campaigns. So all of that work has now been done, with what is now known as commerce. Travis and I, have spent a lot of time together outlining what we want this future relationship to look like. And so it’s starting as a referral, relationship where they’re activating their customer base. In fact, we already have our first handful of customers who are actively having, conversations currently.

And so we will jointly cosell, and and that is what the agreement is to do to start. However, the vision here is eventually to get to a reseller model where, literally, it is their sales, organization that is out there marketing and selling the joint solution. And in fact, the same, with us being able to to cosell and and market, the joint product as well. And, yes, when I talk about platform partnerships, this is the first example of what you should expect more of to come. We are working on a handful of others right now in the pipeline, but this is where you can really change the demand flow and the distribution.

Right? This is where you’re gonna get in someone else’s demand flow and why we’re excited about it because it certainly increased our distribution. If I can say one more thing here that I think is important. What I love about this story already is that we’re actively working a customer that Pros had a look at a couple of years ago, and the customer decided to make no decision. And this has already given us the right to get back into that customer conversation that I’m not sure we would have without this relationship.

So it’s it’s very much a tangible example of things to come.

Zane Meehan, Analyst, KeyBanc Capital Markets: Great. Yeah. Very, very good color. Appreciate it. And then, Stefan, relatedly to that, you know, as as PROS leans in on the the partnership angle, should should we expect services to, you know, to start to moderate a little bit as you lean in?

Or, you know, should that stay insulated from that from that objective? Thanks.

Stefan Schultz, Chief Financial Officer, PROS Holdings: That’s a great follow on question. So, yes, I think so. I mean, you’re already seeing some evidence of that. If you look at the year to year growth on services, it’s already relatively flat, maybe even slightly down through the first half of this year. And I think if you look at the guidance, it would imply roughly a 6% to 8% growth rate for the year in services, which is below what we’re doing from a subscription standpoint.

So, yeah, I think you’ll continue to see that. You know, I think some of the the the partner models and some of the channels that that we’re looking at would imply, you know, services being performed by, other parties. And we’re perfectly good with that. Again, just getting as many, folks out there that are, you know, experts in the pro solution, we feel like it’s to our advantage. And so while it may take away some of the services revenue, our bet is that it’s gonna yield more subscription revenue, and we feel like that’s a that’s a pretty good trade.

Jeff Cotton, President and Chief Executive Officer, PROS Holdings: And I wanna add on to this as well because I also want you thinking about services revenue a little differently and and not just from a partner perspective. Look. This guy the the this company is obsessed and focused right now on driving subscription recurring revenue. And and as we think about services, look. I wanna make our products even easier to deploy.

If we look at AI and agents, we’re actively working today on how we simplify the deployment of our products, number one, for our customers’ benefit. But that will also help start to shift the mix over time of services. And and right now, you know, services are in service of driving subscription revenue.

Zane Meehan, Analyst, KeyBanc Capital Markets: Very clear. Thank you both.

Conference Operator: Thank you. And our next question comes from the line of Victor Chiang with Bank of America. Please proceed with your question.

Victor Chiang, Analyst, Bank of America: Hi, thanks for taking my questions. Maybe first of all on the just if you can provide us some more color on the macro environment. I think in the prepared remarks, said you’d see improving sales cycle. Just wondering specifically for this quarter as well whether that is still improving? And maybe by region as well, do you see a bit more hesitation maybe in The U.

S.

Nehal Chokshi, Analyst, Northland Capital Markets: Compared to other regions as well?

Jeff Cotton, President and Chief Executive Officer, PROS Holdings: Yeah. So in terms of macro, the first thing I’m gonna tell you is, look, it absolutely remains to be a challenging sales environment. I think, you know, we’ve been talking about that for a number of quarters now, and and that really hasn’t changed. You know, it’s certainly challenging. What I’d tell you is that, you know, look.

We have a number of deals that we work, you know, day in, day out that really have no impact at all from any macroeconomic or tariff related things. Right? They sell right through our our our sales process. And then you’ll have other deals, most notably in international. So to your point on on regional impact, you know, we we most notably see this with, companies, operating outside of The United States that have, in some cases, either delayed projects or, in some cases, just flat out, put projects on pause.

And so that certainly, you know, has some level of impact from a from a from a, you know, individual customer perspective. But I would say that that trend really hasn’t changed from what I know and and and the operating environment that we’ve been in over the last few quarters. The flip side of that though, which I think is also a really interesting point for Pro specifically, is that, look, we do have customers that actually our product’s even more valuable for and customers that are now seeking us out because they’re now dealing with a much more complex environment because of tariffs. In fact, we have a large European aircraft manufacturing customer who has used us to really improve the speed at which they can do quoting, with, you know, a complex, you know, situation like an aircraft configuration. And they could not have handled dealing with tariffs and all of their raw material components and all the cost fluctuating the way they have without our products.

So, you know, they’re they’re sort of a a double edged sword here for us. Certainly, you know, there are individual customers that you see day in, day out that may have some impacts, most notably outside The US. But then we also have a demand driver here for our products for customers who are operating in these environments where they’re seeing volatility.

Victor Chiang, Analyst, Bank of America: Got it. Very clear. And then the other the second question, maybe, Jeff, I think you mentioned you, sat down and spoke with a lot of the airline customers. What you’re seeing in terms of obviously, as we know, airlines are moving to from the current TSS architecture to offer order. Think some initial early adopters maintain their best of breed versus best in class option.

And obviously, with Lufthansa, you you know, they remain best of breed and and continue to pick pros and and to collaborate and to develop new solutions, whereas some others continue to be in best in class. Think at this stage, where do you see or where do you expect airlines to be going forward? Will they kind of be aligning to what they used to be? Or do you see this as an opportunity for you to gain more share in that space? Or you see actually more competition as well given the shift?

Jeff Cotton, President and Chief Executive Officer, PROS Holdings: Yes. So first of all, look, it’s a very competitive environment, obviously, in the airline technology platform, space. But what I would tell you is a couple of trends that we’re seeing. First of all, as I mentioned little bit ago, air most airlines right now that we’re, interacting with are very much in a planning and a and a strategy mode of trying to figure out what does their next gen platform. And and when we’re having conversations with them, look.

They’re actually really interested in coinvesting with us, in in in a lot of these, areas as they’re looking across the platform. And very specifically, as I mentioned as well a few minutes ago, offer management is where we’re spending the majority of the time. That’s obviously where our roots are in revenue management and and the digital offering capabilities that we have. And so what that tells you is that they’re all mostly considering a sort of best of breed approach. You know, I think in the industry, there have been, you know, big, all encompassing platform players.

And, certainly, you’re gonna have airlines where that’s gonna be fine, and they’re and they’re gonna wanna continue to go that route. But what you see is as they’re all trying to get to this sort of broad encompassing travel experience, offer management is really where the the the strategic differentiation is gonna come in and really helping them identify what part of the experience do I wanna own, what do I actually what can I offer within my company versus third party services that we wanna bring in and offer? And that’s where our product is really gonna shine. So I would tell you we’re having extensive conversations specifically on offer management. And with those airlines, and I would tell you it’s a significant amount of them, they’re very comfortable with the best best of breed approach.

Victor Chiang, Analyst, Bank of America: Okay. Thank you.

Conference Operator: Thank you. And our final question comes from the line of Patrick Schulz with Baird. Please proceed with your question.

Patrick Schulz, Analyst, Baird: Hey, good afternoon everyone. Thanks for taking my questions. Maybe starting off first, it seems like the pace of AI innovation keeps accelerating with pricing models also evolving along the way. When it comes to rolling out the PROS AI agent and other agentic features, I guess, can you talk about how we should be thinking about the balance between driving use and adoption relative to any monetization efforts? And maybe broadly speaking, how is Pro’s able to maintain its competitive advantage around AI?

Jeff Cotton, President and Chief Executive Officer, PROS Holdings: Yeah. So on, use and adoption versus monetization, I will tell you right now, we are squarely focused on usage and adoption. We launched 12 agents at our recent outperform customer event, and we have active adoption across our four b to b agents that we launched. And we have active adoption as well as a healthy pipeline with our travel based AI agents as well. And so we’re actually collaborating with those customers right now that are are early adopters of the agents that we’ve launched around what is the right pricing model.

You know, right now, obviously, a lot of organizations have launched the consumption based model. We’re obviously evaluating that. But the bottom line is, you know, we wanna really help, build the right model that our customers are gonna respond well to to ultimately drive usage, because I think that’s gonna be the name of the game. Right? If you just think about yourself, everybody’s playing with all of these different models right now.

And whoever gets, the one that is gonna become sort of the ubiquitous, agent out there that’s used in a various industry is the one that’s gonna win. So to me, it’s it’s really all about driving adoption, and we’ll zero in on the right, monetization model. But, ultimately, we expect that monetization model to be an outcome based one, where it’s, you know, based on the the usage of the actual agent itself.

Patrick Schulz, Analyst, Baird: Okay. Very helpful. Appreciate the color. Maybe just a quick follow-up for Stephane just on profitability. Adjusted EBITDA is coming above guidance for both quarters so far this year.

What’s holding you back from raising the full year guidance? Are there any incremental investments that are needing to be made in the second half of the year? Thanks guys.

Stefan Schultz, Chief Financial Officer, PROS Holdings: Yeah, yeah, Patrick. Good question. Yeah, so your answer is spot on. I mean, you kind of answered the question for me. We’re very thrilled with how we’ve been able to drive more efficiency in our business for the first half of the year.

And we do want to take some of that savings, if you will, and apply that to some of the things that we’re wanting to execute on from a selling and marketing perspective. I think it’s safe to say you’ll continue to see us drive greater and greater efficiencies on this on the R and D and G and A line items and put more, not just what we save in the R and D and G and A, but actually take some of you know, the the extras that that we generated in the first half of the year and put that more towards sales and marketing as well. So, yeah, your your your assumption is spot on.

Conference Operator: Thank you. And with that, ladies and gentlemen, we have reached the end of our question and answer session. I would like to turn the call back to Belinda Oberdekut for closing remarks.

Belinda Oberdepput, Senior Director of Investor Relations, PROS Holdings: 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 KeyBanc Technology Leadership Forum Conference on August 11 in Park City, the Virtual Oppenheimer Annual Technology, Internet, and Communications Conference on August 12, and the Stifel Tech Executive Summit on August in Park City. If you have any questions following today’s call, please contact us at irpros dot com. Thank you and goodbye.

Conference Operator: And with that, this does conclude today’s teleconference. We thank you for your participation. You may disconnect your lines at this time.

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