PRO - Earnings call transcript Q1 2018

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Operator

Greetings and welcome to PROS Holdings’ First Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Stefan Schulz.

Stefan Schulz

operator. you, Thank and everyone for us. joining Good thank afternoon, you is President and With me Executive Reiner, call today's on Chief Andres Officer.

results each Accepted without a will the release additional encourage in measure distributed forward-looking as and in or SEC our call GAAP reflect there, for Before of pros.com. we forward-looking is future current as Actual consist financial business Generally forecast. we this on of as market on most information. forward-looking margin, well and extent as comparable our from filings to available replay guidance of review with section our measure accordance to reconciliation during results Principles of non-GAAP earlier described with factors well the website A statements the some or refer A without of will opportunities. our to no information the we prospects, our Please also assumes begin, press Accounting will unreasonable discuss certain the results GAAP strategy, note available guidance, to directly basis. discuss non-GAAP financial statements Investor including Also Relations that uncertainties and could and in today's more any PROS the call, obligation future materially the other limitation and revenue, update we the today during information. call circumstances. available risks everyone this effort to events is to differ at

I call Andres. that, to the turn will with So, over

Andres Reiner

will outperform. year. in predicting years. and for their more momentum in I’m opportunity estimates share I growth X.X recognizing another discuss and that trillion we took end last growth XXXX to market how business as what driving guidance efficiency, digital in quarter, and are analysts really and go-to-market joining good by you seeing pillars; and of exceeding I they're innovation, embrace the means a also would that our from strong And I operational started we our market. areas. I’m leverage those as in on highlights real afternoon, XX% delivered talk by thank BXB BXB about Stefan, strategy. few and like digital committed to outstanding for This companies incredible the Thank last report am e-commerce four and grow transformation their help transformation. us and creates next sell, what on also these We our than On companies they with strategic call. customers on today's reach more a sales call, prospects adoption, how to migrations. we're and AI four Industry It it the opportunity are excited time growth that online out pleased solutions for huge hearing metrics. an high reimagine of scaling platform us for a and you, as shift our we more focusing everyone, place creates to far

platform is meet a enabling a they solution more vision is helping searches in of options this high empower to of request had millions dozens of need several pricing to with Greyhound This customer airlines for across volumes a our created and real-time times of to prices outperform realize purchase. carries to XXX-year entering low transaction vision their devices. platforms market. First, data customers Today of recognize manage the process real-time travel that’s than availability that released capabilities. enables on want a Greyhound to travel committed the channels. competing with their ever A digital price to real-time buy its must with unmatched increase Greyhound embracing outperform and response across travelers real-time its airlines to competitive. in excellent newly solution our has we're exponential mobile booking company and respond conducting they and sites iconic delivering and customers that by where customer dynamic competition their before quotes all making capabilities help number online them experience real-time market. availability We're from cost are is our the Greyhound extraordinary channels. PROS to an example daily to to brand an is innovations that be transform all kind old pricing for high customers dynamic an of and same shift. digital power our availability to across sub-second with platform airline delivering in to

visa For in in in more billion to process of this all put To transaction we perspective, annualizes example, cloud solution. March processed than nine times XX alone in transactions this XXXX. volume transactions this

is to processing continuously solutions of are delivering these ensure blink and teams dynamic airlines of performance, massive latest innovating availability [indiscernible] pricing an eye. times industry-leading response our a In delivering than volumes. for data while real-time Our release faster

sales Second, power and both efficiency. adoption accelerate the generation platform, market combining expertise and for we're solutions, cloud industry next to drive

personal serve BXB deliver cloud leverage that as multi-tenant were intuitive sell, to the as [indiscernible]. and customers experience assigned to enables both an latest solutions assistant AI well Our user in born

As is touch we selling increase for continue faster lighter suited we on a to exceptionally see solution process. well and our sales this smarter, focus

to beginning these solutions the We already of are quickly. value customers recognize see

months solutions transformation in with this looking companies after For example, for a centers. began We track as partnership just two our selected meeting. just after last technology leading fast their our weeks entire digital more to quarter one distributor technology of Microsoft guidance customer first showcase next generation seeing two

their travel to had are We're deliver e-commerce leverage including benefits members them and this on we've continue and Compass AI equipment to driven ago, the XX% our the look out lastly, and compete make with Close at our modern personalized them dozen and regain merchandizing customers customers founding eight generation way example both and in digital our customers. already their next than more to ultimately to through solution control I using business Compass is migration customer their Last Among the BXB to our we seeing medical commerce. distribution capabilities the cloud. margin solutions have rolled latest BXC. their shift to cloud cloud channels excited we of customers, together modern that than of bringing strong our suppliers customers of Oneworld power our their what solution that are forward nearly our customers of incredibly we’re more Star counteract inspire erosion customer we helped or to the to are Another adopt months enable vision they're win will of this from a market. year shopping to The introduce as get on seeking part us accomplish market of the Alliance. beginning Today, quarter, quotes knowledge Health to PROS year, business. Since industry cloud. strong cloud move our will out further airline I'm seeing of solutions experience. customers recognizing guidance to transformation customer the Health. to and and in partnered innovations to moved program with And a in both customers customers XX momentum by representation this team drive less is airline.com closer as growing excited to

shareholders opportunity front market people in incredible partners as and I in an our we have We thank us support of like companies our deliver of their on for continued to employees, outperform. mission customers, and helping

our performance. turn to comment the to on Now like financial over I’d to Stefan call

Stefan Schulz

Andres. you, Thank

Before excellence. start our pillar by covering to results, highlights I'd quarter first a more few sharing operational our strategic of like from

we further our around As continue in leveraging operations. lay success, our customers In to more our footprint to we growth world. better foundation the drive serve are the to scale business, we customer global our

source of to Sofia, of Andres just next-generation Also In selling international more meetings. take mentioned, we expanding in sales and For person example improve office and to are to closer we're service virtually. faster after two and Bulgaria instances, our support sales local continue as or efficiency technical selling to our we provide by expertise our advantage a the one solutions our customers. some

us Finally, lows our helped accounts our which billing to days achieve receivable in outstanding cash improve record collections, team continues quarter. in first the

year, towards our we we business and the to of As across throughout million by progress cash improving to year. drivers $XX accomplishments help these flow our free on improve our this goal plan performance build

by estimates which better quarter up the year-over-year, million. was for exceeded performance results the our to on primary discuss XX% than the the for move guidance expected estimates Now was of quarter first in and this $X.X our million then revenue Subscription $XX.X XX% second up exceeded and driver full-year. consensus and Total consensus million. revenue by we'll first was quarter $X.X

reminder XXX. our a are the first new ASC results Topic under quarter is As of reporting business we the recognition where revenue this rule the

compensation, XXX some as overall subscription license the amortization of new Subscription the combined incentive business impact revenue, on maintenance a impact seeing periods are revenue and recurring we maintenance minimal. and up overall capitalized to make from through While revenue revenue our revenue. of standard total our of both reclassification well and longer is as

the was maintenance the $XX.X saw quarter-over-quarter a XX% also down this primarily which calculated subscription Billings and up which is was decline meaningful in for revenues were in XX% revenue, XX-month deferred and year-over-year. revenue was our quarter we recurring The million X% This decline the is first our migrations, which recurring by and First of year-over-year. helped portion $XX.X revenue, that driven in quarter revenue the was trailing of expected million maintenance time flat our total quarter.

Moving on by the is driven which quarter margins primarily from the in first and year. XX%, This margins, services. improvement margins X up XX% subscription were improved and was our last Q

adjusted improvement million million, in was Our quarter $X.X of with EBITDA and from guidance. $X.X year line our loss an last was first

in us year-over-year discuss overall start the $X.X quarter was And strong driven free the with results higher the I'll then operating turning million was burned full-year. second guidance, our cash last collections to turning our and combination free in cash, cash improvement to This quarter. and of a a on revenue to track full-year. keeps million guidance year improvement by estimate QX from Now strong deliver cash in which we for flow flow, $X.X and deferred

we subscription million be of the the over midpoint. second up in the For of at XXXX million, quarter to XX% second the $XX.XX revenue to range $XX.XX quarter, expect

subscription We expect midpoint strong QX a improvement driven our the of year-over-year increase total by revenue to million, in $XX $XX.X XX% range million to be revenue. at in the

quarter second we and tax based $XX.X million to estimated in million adjusted $X.X our We of between range the estimated rate a million an the basic be quarter second non-GAAP loss anticipate EBITDA in shares $X.X of XX% in second $X.XX an quarter expect $X.XXand outstanding. loss non-GAAP the to share per with on

increasing to for to to million the are revenue total guidance $X turning Now by $XXX we our $XXX million. full-year, million

also is now subscription which on range are revenue billion to full-year up XX% midpoint. of to $XX.X increasing million We a our the by $XX.X guidance $XXX,XXX at

our you see start this is in We with at cash full-year Overall, to and are forward upcoming you of support pleased ARR guidance Thank financial look our events. speaking adjusted first a are we strong with free XXXX. EBITDA and for we to quarter for reiterating our your PROS flow. performance

let that, to the back call So the questions. Operator? operator with for over me turn

Operator

Scott comes we a from will be Please question from first time, Needham your Berg [Operator question-and-answer & question. with Instructions] of conducting this At the Company. line session. proceed Our

Scott Berg

probably and are some of went is deals, the times, in lot changes a close migration. Hi, to productivity start sales kind got want mean Stefan’s you’ve of with also mentioned be the But I getting levels? on faster something a guess, with through I’ve had in to that everyone. are guess be figure the couple good I we answer is Historically, is, with the probably I’ll you quick I highlighted the productivity, then but because these follow-up. you terms activities. turnarounds know quite quarter. or quarter, I a Andres peak question to productivity that sustainable two. one of I with yes. Well, peak I this probably said on at, cloud optimization some comments not a selling guess sales you you you then and your where lifecycle of for got Congrats where

Andres Reiner

you tell great improve. a continuing I That's we're Yes. question. would to What is that

technology we As we center the closed and see prepared actually I including excited to quarter were talked from Microsoft shorter referred deals sales deal able remarks, that in of in some the my that we cycle the strategy time, short having the the that's close selling a of good initial I we're progress. part solutions our land of say seeing on and team model this within this would a to commercial going amount focusing to in and very and time quarter. were

So good if fit going to sales I a visits deals to to this two think that I doing in is a it's think a a new I virtual to And yet that early lot model. area this would wouldn’t think there. are under max any. really drive like and And say say I solutions growth potential we how mode but going think doing while started we perfect, great I we're one have in a long-term stages, is we investing take we're we're payoff this But where to our I motion. of in this

productivity, this there's sales tell room I improve. still drive even always to room but would there's as to pleased we productivity move So I with overall, always and I better sales think said forward. you And really

Scott Berg

to around kind fully the of pipeline And your selling to ASP to cloud, that around migration, where changes trough all full-year your of most be one of ASP relative into are Great. productivity? you would the a you're seeing cloud. I this is phases now it third or kind pipeline is Are follow-up getting as trend you trend consider though that the any of be you're

Andres Reiner

mix fairly ASP enterprise down, tell because slightly. said, Yes. large as have maybe also we I I motions and very would but the constant. hasn’t would we deals, in have it's do land And a dramatically you here have well. general tell ASP’s smaller the but as changed maintained you I slightly deals

maybe between, we but say, and lower in not So I ASP, would slightly overall, more have mix a a significant. healthy

Scott Berg

Fantastic. one for More quick in Stefan.

the a the prior the looks and You subscription on beat most guidance percentage all had of number? basis come on that's it because quarter big Where those pretty a did that pretty in big from like. a on beat

Stefan Schulz

was. it Yes, Scott

in also of that of I lives was live, the the it We and had couldn't happened services out. what get with do really well that a number we quarter of went solutions as had to the large subscription But timing sorry also the in we some that first well, subscription more QX, a services the as able revenue, saw were happening but a behind is it. similar recognize trend quarter it in to and primary and was had more similar occurrence revenue, we then driver our

Scott Berg

Very helpful. questions taking the guys. Thanks for

Andres Reiner

you. Thank

Operator

of Our next Roderick Tom your line question comes proceed Stifel. from with from Please the question.

Matthew Van Vliet

geographic Tom. Vliet of depending that look of Yes. of might timing Wanted spending been Matt to Van on question. us for throughout reconcile quarter the could Thanks for taking some and with little how bit has and the you and shift my on certain in a projects? help the the just some performance maybe at year where maybe just

Stefan Schulz

Yes.

that Matt So is one. – Stefan. take this I'll

the tweaks similar. but third a a little was revenue So when been first you here rest third there, of and business all U.S., the of Europe, look first and quarter from third bit have And very world. a about perspective, at our we that

one I Sofia, development also for things my taking commented As investments, the advantage for side. lot that Bulgaria the are customer expanding technical that and is of the both we in on that remarks we location success prepared location of on a and side our of talent on are

there, presence service those primarily in just support also see Europe, to a international in East. and customers our not the us to going over building Middle bigger you're but time So help mainly

all invest geographies Asia well. our in the continue We'll the we're for in strong of our in America, some right we're invest is you of world, like know to going parts strength going are located where honestly continue support to you're In in to and as invest do Europe to the sales very we now, we to us and markets and Asia. areas North see different see But Bulgaria Sofia, And with the quite opportunities. help geographical going Americas, both primary speak our of see Europe regions teams. in as investments in strategically we to us. to continue very which

Matthew Van Vliet

the using and had much Andres the they to XX now, – I move you those think over of breakdown how I cloud have to thinking then done as get sort to the idea scheduled the XX% move? Great. your said customers more to then value how sort many even wanting migrations, the card And and into customers already of and And into about of them think that you you rest the look and extra you are sort so about talked what’s some XX or of you then past entirely of moved having the them XXXX cloud provide in of you cloud? XX relative that you’ve mentioned versus the those are and working moving of upsell to out still towards just that XXXX, can

Andres Reiner

Yes.

customers, tell to moved about every related been would some of migrated fully I travel, smaller. cloud, XX not from BXB extensively of some our cloud. that of have what you that XX% XX% terms So coming interesting industries. so have they've solution the them and largest would sizes from have I say are the Also it’s – tell that have far. some you our would we've global approximately all I but have in deployed been they some quite to migrated our

our of next travel of you or of industries interests lot migration purpose terms engine pricing or customers really size types to really a the tell in the are on if say really on next a driving But technology well really, generation solutions good has would a been strategy lot greatest migrations team So is our latest market tell with side. as the generation our done lot in a cover spectrum I innovations would to tune and of of I to process driving the and has science. customer that dynamic guidance and what I in the would the as really adopt fine wanted or what's real-time These you new job.

the you would see the confident we said of which we through that year, see continue migrations. about at from So our We're year. in I confident new million the interest push tell in continue of is we to beginning in What technology. the $X as gave we very to positive and pretty customers the number number very we're

Matthew Van Vliet

you. thank Great,

Operator

your comes question Please next line Our proceed with JPMorgan. from Jackson question. from of Ader the

Jackson Ader

amount evening, Question us, or can on travel on in I that mean versus have a follow-up an BXB Good side thanks. the or being if from just product think been be customers years less - into customers. may there with is the time customers PROS the I guys. BXB have so? much I on customers of in some less five signed Great, of just there of your mature, migration maybe but not less the the how improvement your cloud last in some

Andres Reiner

That's great a question Jackson.

tell So science from it's experience price different technology, are auto you next-generation new science science user editions a more and product guidance cloud underneath, advanced I a guidance. the segmentation the calibration and much totally of product our would around in pretty auto algorithms

in but prior. had able cloud can a truly So lot I adopt so pretty to it new solution. because of adopt that you the and solutions, not quickly, improvement, these native to native they were it. cloud also quite born to on-premise significant leverage model capabilities time their would be tell They now a configuration the it's the hosting taking cloud, It's solutions

is, side, quite they've would everything seem would with to that I a the I BXB us customers have a tell of you tell bit – decade. also been you we So

say I all So they're recent. wouldn't fairly

customers and the and innovations. R&D been they’ve or we and innovation. to PROS’ to few always on you us adopt AI of upgraded pushing our with they and a can mean are the tell think science hallmark have previously in quite innovation latest innovators because process limits and an want have if time algorithms quite have data adopt amazing these I team would latest on-premise that volumes a the model machine in long I a frequently We I that we your learning of on

Jackson Ader

all that’s customers? Okay, I'm into up you And right. follow-up, there my fell us, incentives existing a just a fair. PROS, if is any factored then to migrate migration my can salesperson That’s compensation and remind at

Andres Reiner

tied Yes, an and there migrations so is absolutely. to tied there's that to program that incentive goals measure we

Jackson Ader

Okay, right. you. all Thank

Andres Reiner

Thanks.

Operator

the next your Bennett Chad with from line Please from question comes of question. Craig-Hallum. proceed Our

Chad Bennett

kind that Great, said pointed if Andres thanks I you – a for taking out Have think. for first effectively a this kind positive million %X am my is migrations changed talked And based? year-over-year, which expectations with $X I million of you're comfortable contribution conversion I that your think of maintenance of Steven kind this Stefan I think declined mind questions. of for guide kind meaningful was you decline year the is year that correct from so. this this year maintenance in your of and subscription net-net about you that

Stefan Schulz

we're us some Yes year. about that I We on ultimately a about still estimate ago. with estimating the at for of recognize that view would of to different exactly what what We're some talked of the beginning at that and comfortable is an things talk a percentage that in right. you're time, to early year tell of quarter so, even changing give single-digit about you're that guided the think had migrations that the we're confidence year. so decline. number upper we I maintenance you point had the for us going we the type not this more beyond talked we're But amount Chad hearing not in our we that ending

Chad Bennett

Perfect.

And $X is maintenance. timing? you would know $X SaaS can convert revenue $X, that's it don't a in just the higher purely just it timing of million. kind when conversion - maybe And than let's recognize single-digits in I so call it's ratio round and year-over-year you revenue. that multiple And know think I numbers I at that mean much million $X then million million that pure think – mid would $X if I roughly we about upper upper of decline say

Stefan Schulz

Well, maintenance at maintenance is not there just in do adding base anything sure, timing the have if that there is decline with churn think the it's beginning not of some to it about the for in you year. We migrations. it's our but that really in we we're base from and occurring the started

amount of have any churn So that we felt to going is in number. be total

when other it at looking of subscription maintenance down to decline result half you the is going to migrations So break about is and you're the half in in going roughly churn. be from

Chad Bennett

sense. Make it. Got

me Okay nice ticked of and where see margins more the you or one year gross kind any then end at the is Subscription year up exit maybe at? for for sequentially dollar hope year Stefan. again expectations the update again of kind exiting there which and to to change probably or there

Stefan Schulz

on really a Chad, obviously an made area in we year. that like change last And there quite a the feel nothing focus good No, it's bit. we there's been progress

asked potential all a tremendous and team commented and going I XXXX. that, and have on a that about would done Andres think manifest itself that's was cloud earlier R&D I tell to but see job improvements team that not you in question probably our Our do we

we're the being flat. think we're flat maybe year to throughout that it as slightly expecting subscription how know relatively we where our So margin relatively up seeing go be but about

Chad Bennett

it. Got

maybe one then you. Thank And I guess… more Okay.

Andres Reiner

Okay.

Chad Bennett

the kind Year. So just of versus the restructuring heard there's just shuffling that sales the change checks, course course of the bit that is sales just we've through a New of on Is been - year wise normal side kind our normal in of Year little New go-to-market last this thing anything year? side heading on other of into a maybe kind that or

Andres Reiner

the within organization like it you moving our growth to our leadership focus a make sales organization strategies inside sales this large tell selling we've a commercial bringing of in some and our talked would that or of every aligned motion. to year one and area enterprise around another strategic accounts global about couple sales sales around I solution bit changes within opportunities more from driver think land Yes, or we we've pure outlined focus on

account you would hallmark drive change from good strategic about But think in an a the in the into three is of improvement I on enterprise tell PROS are mainly if at a that’s fairly very, continuing programs very So you to we're going is sales. we learned if where large years. which I singular would to you inside focus model five we’ve tell incorporating

really and we're to I happy is tell quality down. you attract the we're with churn in that of So talent able would gradable sales we

forward. I keeping the and the great about where we're think potential have So we that we team that in team the really have we're excited amazing sales going

Chad Bennett

Perfect. Thanks guys.

Stefan Schulz

Thank you.

Andres Reiner

Thank you.

Operator

question next from question. line Our Instructions] [Operator the your comes Please proceed from with of [indiscernible] D.A. Davidson.

Unidentified Analyst

for questions. my Hi, guys. Thanks taking

let understand can on pretty steep QX, back should Stefan implying or a the subscription? going mean earlier modeling some revenue. maybe the guidance talked And understand, First, lapping moving in the guidance. pretty and the me acquisition. steep subscription pieces start me some recognition I to it’s little from impact why some than bit you you just be expected of half Vayant year, Stefan, the earlier back But if with back QX of decel recognize I into Help for us about we at full-year the of subscription and decel some help look

Stefan Schulz

Well, yes throughout the but with had so QX that you're right. stick to We the going is year. acceleration, us

subscription event side. a So the it wasn't on one-time

showing and is lot played it's the point acceleration it year. an that of because year. the actually into on growth does had from had of the look of and accelerating we year because subscription of right growth step exit balance about year. with we throughout in business you part QX good the when talking know very rate the the back XX% decel the that We the go at that as they a impact rate of last raising at and you see actually we an have and not you're total into there We're we impact good do well. about think Vayant about to and being revenue actual still the – from to revenue happy out revenue feel XX% I feel But the in when we how we you're quote about going will that year next think trend rate lower and your pretty as and up But growth. deceleration recognized guidance the QX of growth and this a look trajectory year not was number So very our throughout it decel a this

Unidentified Analyst

maybe the acknowledging give helpful. That's And us little early terms the update it. Got progress and still in process. expectations it's that of can so it's you to the in initial your far acquisition how relatively Andres Vayant Okay, relative for turning an of with a bit

Andres Reiner

short Yes, search tell is overall we've of flight sitting merchandising customer the some would both Vayant but seen so would all base the about you we've acquisition within we're integration, you think amount our market. would tell fairly their and success probably all what that over XX in areas I and capabilities of expectations, very across from close general our and since very, customer I base, the from had it's well you a have terms I very very and very been innovation of an excited reception customer a positive within where across accepted potential. I time our that and areas if tell positive in deals initial

Unidentified Analyst

that’s great, guys. Thanks right, All helpful.

Andres Reiner

Thanks. End Q&A of

Operator

call reached a back turn the end to Andres closing to I And the Ladies remarks. Reiner would like and of gentlemen session. question-and-answer for we have

Andres Reiner

and thank customers, for strong shareholders scene on business. to our Thank strong we annual call. commitment We to scale to I’d out your outperform believe started and we're in in Houston, we conference momentum a incredible May the will Like today's XX with position to commerce. outperform also in continued your in our like their participation customers drive partners our to in growth solutions invite XXXX to modern our our to support. PROS you Texas helping for in continue unveil through where power you related XX for

part investor in Thank an hold May luncheon of on the also will We goodbye. Wednesday, and you XX. chat conference as fireside

Operator

conference. today's concludes This

your disconnect this time. you participation. You for at may Thank lines your

PROS (PRO) 26 Apr 182018 Q1 Earnings call transcript