PROS(US:PRO)2024-07-31 04:06Financial Data and Key Metrics Changes - In Q2, subscription revenue increased by 14% year-over-year to $65.6 million, while total revenue grew by 8% to $82 million, both exceeding guidance [8][98] - The company achieved a non-GAAP subscription gross margin of 80%, marking a 160 basis point improvement year-over-year [3][128] - Free cash flow reached $6.2 million in Q2, representing a nearly 200% year-over-year improvement [101] - Adjusted EBITDA improved by 554% year-over-year, with a significant increase of over $5 million compared to last year [93][130] Business Line Data and Key Metrics Changes - Services revenue was $13 million, down 3% year-over-year, attributed to a higher portion of subscription bookings related to expansions requiring less services [12] - Calculated billings in Q2 increased by 10% year-over-year, with expectations for Q3 growth to be at the lowest point of the year [99][128] Market Data and Key Metrics Changes - The company noted a shift in the split between new and existing customers, expecting a 40-60 split favoring existing customers in the back half of the year [36] - The travel segment is facing operational cost and supply chain challenges, impacting deal approval processes and sales cycles [88][147] Company Strategy and Development Direction - The company is focused on becoming a Rule of 40 Company, aiming for sustainable growth rates of 16% to 21% on revenue and 19% to 24% on free cash flow [9][116] - The PROS platform is being expanded globally, with significant partnerships, including with VFS, to drive pricing and sales excellence [5][10] - The company is investing in innovation, including a new generative AI data transformation solution, to enhance customer value and accelerate time to market [10][16] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding the travel business, anticipating a lower growth rate in subscription revenue for Q3 due to prior accelerated recognitions [15][27] - The company remains optimistic about achieving its long-term goals despite current challenges in the airline industry [80][137] Other Important Information - The company exited Q2 with $149.1 million in cash and investments, net of the settlement of convertible notes [131] - The company is revising its full-year guidance, anticipating total revenue of $329 million to $331 million, representing 9% growth at the midpoint [132] Q&A Session Summary Question: What challenges are travel customers facing? - Management noted that airline customers are focused on getting their operations back in line and are seeking support to drive value with minimal investment [136][137] Question: How has the macro environment affected customer willingness to sign deals? - The selling environment remains difficult, with companies being cautious in their investments [147] Question: What is the expected split between new and existing customers? - The company expects a shift towards a 40-60 split favoring existing customers in the second half of the year [36] Question: How has the Microsoft partnership progressed? - The partnership has generated significant customer interest and is expected to translate into pipeline growth [118][123] Question: Were there any early renewals impacting expansion activity? - Most expansions were on time, with only a small number of early renewals, which is typical [125]