- Subscription Revenue: $67.1 million in Q3, up 12% year-over-year.
- Total Revenue: $82.7 million in Q3, up 7% year-over-year.
- Recurring Revenue: 85% of total revenue in Q3.
- Gross Revenue Retention Rate: 93% or better on a trailing 12-month basis.
- Calculated Billings: Increased 3% year-over-year in Q3 and 9% for the trailing 12 months.
- Non-GAAP Subscription Margin: 80% in Q3, improved by over 190 basis points year-over-year.
- Non-GAAP Gross Margin: 68% in Q3, improved by approximately 220 basis points year-over-year.
- Adjusted EBITDA: $9.3 million in Q3, improved by 65% year-over-year.
- Free Cash Flow: $1.4 million in Q3, $2.6 million year-to-date, improved by 217% year-over-year.
- Cash and Investments: $150.6 million at the end of Q3.
- Non-GAAP Earnings Per Share: $0.14 in Q3.
- Annual Subscription Revenue Guidance: $265.5 million to $266 million, 14% growth at the midpoint.
- Annual Adjusted EBITDA Guidance: $27.5 million to $28.5 million, 367% improvement year-over-year at the midpoint.
- Annual Free Cash Flow Guidance: $21 million to $24 million, 98% improvement year-over-year at the midpoint.
- Annual Total Revenue Guidance: $329.5 million to $330.5 million, 9% growth at the midpoint.
- Q4 Subscription Revenue Guidance: $68.5 million to $69 million, 13% growth at the midpoint.
- Q4 Total Revenue Guidance: $84.1 million to $85.1 million, 9% growth at the midpoint.
- Q4 Adjusted EBITDA Guidance: $8.4 million to $9.4 million, 254% improvement year-over-year at the midpoint.
- Q4 Non-GAAP Earnings Per Share Guidance: $0.12 to $0.14 per share.
Release Date: October 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Pros Holdings Inc (PRO, Financial) exceeded the high-end of their guidance ranges across all metrics for the third quarter.
- Subscription revenue grew by 12% year-over-year, with total revenue up 7%, both surpassing expectations.
- The company achieved a 448% improvement in adjusted EBITDA and a 217% improvement in free cash flow year-to-date.
- The PROS Platform continues to innovate with AI, launching new solutions like the embedded AI agent in their Search Engine Marketing solution.
- Approximately 50% of bookings in Q3 came from new logos, indicating strong market penetration and customer acquisition.
Negative Points
- CEO Andres Reiner announced his retirement, which may lead to uncertainty during the transition period.
- The travel industry, a significant market for PROS, is experiencing slower investment pace, impacting potential growth.
- Despite strong performance, geopolitical risks and macroeconomic uncertainties could impact future results.
- Professional services growth has lagged behind subscription growth, indicating potential challenges in service delivery or demand.
- The company maintained its subscription ARR guidance, reflecting caution due to external market conditions.
Q & A Highlights
Q: Andres, why is now the right time to step down as CEO, and what qualities are you looking for in your successor?
A: Andres Reiner, President and CEO, explained that he is proud of the team and the company's strong market position. His decision to retire is personal, focusing on family and helping others. The Board will take time to find a successor who can build on the company's strong foundation and capitalize on market opportunities.
Q: How did the travel sector perform in Q3, and what are your expectations moving forward?
A: Andres Reiner noted that Q3 met expectations for the travel sector, with new deals and expansions like Lufthansa. The B2B sector outperformed, and the company anticipates continued strong performance in B2B while expecting travel investments to pick up in the coming quarters.
Q: Can you discuss the operational efficiencies and leverage seen in Q3?
A: Stefan Schulz, CFO, highlighted that efficiencies were achieved across the board, driven by AI integration in operations. A one-time benefit in professional fees also contributed, but the focus remains on sustainable efficiency improvements.
Q: How is AI impacting your business and sales process?
A: Andres Reiner emphasized that AI is core to PROS' products, not just an add-on. AI is crucial for digital transformation and efficiency, resonating well with B2B companies seeking profitable growth. The company continues to innovate with AI to enhance its offerings.
Q: What is the current mix of new versus expansion deals in the B2B sector?
A: Andres Reiner stated that in Q3, the mix was 50-50 between new and existing customers, which aligns with the company's strategic goals. Year-to-date, the mix is 40% new and 60% existing, reflecting a balanced approach to growth.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
