Executive Summary

PROS delivered a strong Q1 2025: total revenue $86.3M (+7% YoY) and non-GAAP EPS $0.13, beating S&P Global consensus by ~$0.7M on revenue and ~$0.01–$0.02 on EPS; management said results exceeded the high end of guidance across all metrics. These beats were driven by efficiency gains and improved bookings linearity across B2B and Travel .
Gross margin expanded: non-GAAP total gross margin reached 70% (+270 bps YoY), subscription non-GAAP gross margin hit 81% (+160 bps YoY), aided by lower compute requirements and services automation with AI .
Guidance: Q2 2025 revenue $87–$88M, adjusted EBITDA $4–$5M (seasonally lower due to Outperform conference spend), non-GAAP EPS $0.04–$0.06; FY 2025 guidance maintained (revenue $360–$362M, adjusted EBITDA $42–$44M, FCF $40–$44M) .
Strategic updates: accelerating agentic AI features (Sales Assist and Rebate Agents) and wins/expansions across airlines and B2B; CEO transition announced—Jeff Cotten to become CEO June 2, 2025, with Andres Reiner advising for one year .
Near-term catalysts: continued subscription growth acceleration from earlier bookings, travel momentum (wins at two of top-7 U.S. carriers), and investor Q&A at Outperform (May 14) could support sentiment; Q2 EBITDA is lower due to planned event/marketing investments .

What Went Well and What Went Wrong

What Went Well

Subscription revenue $70.8M (+10% YoY) and total revenue $86.3M (+7% YoY) exceeded guidance; adjusted EBITDA $8.7M (+90% YoY) and non-GAAP EPS $0.13 beat internal and external expectations .
Margin expansion from AI-driven efficiency: “deliver real-time response by using less compute… elimination of redundancies,” lifting subscription and services gross margins; overall non-GAAP GM reached 70% .
Travel re-acceleration: wins at 2 of top-7 U.S. carriers; Southwest selected Offer Marketing; another carrier expanded Revenue Management Advantage; “Q1 was very strong performance on the travel side” .

What Went Wrong

Q2 adjusted EBITDA guide ($4–$5M) lower sequentially due to seasonal spend (Outperform conference), causing a near-term margin dip despite revenue growth .
Cash generation seasonal low: Q1 CFO $1.2M and FCF $1.1M; management reiterated H2-weighted cash cadence (though to a lesser degree in 2025) .
Macro complexity persists (tariffs, FX, supply chain); management maintained FY guidance rather than raising it despite strong execution—prudence amid external risk .

Financial Results

Quarterly trend

Metric	Q3 2024	Q4 2024	Q1 2025
Total Revenue ($M)	$82.7	$85.0	$86.3
Subscription Revenue ($M)	$67.1	$69.3	$70.8
Gross Profit - GAAP ($M)	$54.4	$57.6	$58.4
Gross Profit - Non-GAAP ($M)	$56.3	$59.4	$60.0
Non-GAAP Gross Margin (%)	68.0%	69.9%	69.5%
Operating Income (Loss) - GAAP ($M)	$0.0	$(1.6)	$(3.8)
Adjusted EBITDA ($M)	$9.3	$10.9	$8.7
GAAP EPS ($)	$0.00	$(0.04)	$(0.08)
Non-GAAP EPS ($)	$0.14	$0.16	$0.13
Cash from Operations ($M)	$1.6	$24.0	$1.2
Free Cash Flow ($M)	$1.4	$23.5	$1.1

Q1 2025 vs prior year and estimates

Metric	Q1 2024	Q4 2024	Q1 2025 Actual	Q1 2025 Consensus
Total Revenue ($M)	$80.7	$85.0	$86.3	$85.657*
Subscription Revenue ($M)	$64.3	$69.3	$70.8	—
Adjusted EBITDA ($M)	$4.6	$10.9	$8.7	—
GAAP EPS ($)	$(0.24)	$(0.04)	$(0.08)	—
Non-GAAP EPS ($)	$0.04	$0.16	$0.13	$0.116*
Revenue - # of Estimates	—	—	—	8*
EPS - # of Estimates	—	—	—	8*

Values marked with * retrieved from S&P Global.

Interpretation: Q1 revenue and non-GAAP EPS both modestly beat consensus; adjusted EBITDA was well ahead of prior-year but down sequentially versus Q4 .

Segment/geography breakdown

Geography Revenue ($000s)	Q1 2024	Q1 2025
United States	$26,933	$30,880
Europe	$25,671	$25,995
Rest of World	$28,084	$29,447
Total	$80,688	$86,322

KPIs and operating metrics

KPI	Q1 2024	Q4 2024	Q1 2025
Recurring Revenue %	84%	85%	85%
Non-GAAP Subscription GM %	79%	81%	81%
Non-GAAP Total GM %	67%	70%	70%
TTM Recurring Calculated Billings ($000)	$265,998	$291,569	$304,386
Remaining Performance Obligations ($000)	$447,600	$475,700	$488,200
Current RPO ($000)	$227,400	$246,700	$250,200
Total Cash & Equivalents ($000)	$166,423	$171,983	$170,023
Headcount	1,499	1,501	1,482

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Total Revenue ($M)	Q2 2025	N/A	$87.0–$88.0	New
Subscription Revenue ($M)	Q2 2025	N/A	$72.0–$72.5	New
Non-GAAP EPS ($)	Q2 2025	N/A	$0.04–$0.06	New
Adjusted EBITDA ($M)	Q2 2025	N/A	$4–$5	New
Total Revenue ($M)	FY 2025	$360–$362	$360–$362	Maintained
Subscription Revenue ($M)	FY 2025	$294–$296	$294–$296	Maintained
Subscription ARR ($M)	FY 2025	$308–$311	$308–$311	Maintained
Adjusted EBITDA ($M)	FY 2025	$42–$44	$42–$44	Maintained
Free Cash Flow ($M)	FY 2025	$40–$44	$40–$44	Maintained

Management reiterated prudence given macro risks while expressing increased confidence in executing to FY ranges .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q3 2024, Q4 2024)	Current Period (Q1 2025)	Trend
AI/technology initiatives	Embedded AI across platform; SEM AI agent; Smart Rebate Mgmt; record subscription GM; leadership in Gartner and IDC	Launching agentic AI (Sales Assist, Rebate Agent); responsible AI approach; continued AI-led efficiencies	Strengthening
Supply chain/tariffs/macro	Cautious on Boeing/geopolitical risks; FX headwinds; prudent guidance	Volatility (tariffs, FX) makes PROS mission-critical; demand steady; prudence maintained	Volatile but supportive for PROS
Product performance (B2B)	Strong B2B execution; 50/50 new vs expand in Q3	Continued strength; CPQ + POM combo resonating; ASPs stable	Stable growth
Travel momentum	Recovering; Q3 “as expected,” Q4 turning positive with expansions (Lufthansa, Air Canada)	Strong Q1: wins at two top-7 U.S. carriers; Southwest Offer Marketing; pipeline improving	Accelerating
Go-to-market execution	Improved linearity; reduced sales cycles; regional unification	Third straight quarter of better linearity; >10% shorter cycles; higher rep productivity	Improving
R&D/engineering efficiency	Leveraging AI to improve margins and time-to-value	Lower compute for real-time results; services automation with AI	Improving
Cash/FCF cadence	H2-weighted free cash flow; strong Q4 cash generation	Q1 seasonally low CFO/FCF, reaffirm H2 weight	Seasonality persists

Management Commentary

“Delivered a strong start to 2025, exceeding the high-end of our guidance ranges across all metrics… $6.0 million improvement to free cash flow YoY” — CEO Andres Reiner .
“We are increasing investments in selling and marketing in the second quarter, including our upcoming Outperform conference… expect adjusted EBITDA between $4 million and $5 million” — CFO Stefan Schulz .
“Q1 was very strong performance on the travel side… won 2 of the top 7 U.S. carriers… travel will definitely contribute this year” — CEO Andres Reiner .
“Our cloud and engineering teams have… deliver real-time nature of a response by using less compute” — CFO Stefan Schulz .

Q&A Highlights

Travel recovery: management highlighted wins at major U.S. carriers and momentum in offer optimization (continuous pricing, dynamic ancillary pricing), expecting accelerating contribution through 2025 .
Margin drivers: subscription margin improvements from compute efficiency; services margin up via implementation automation and AI .
Q2 EBITDA dip explained: higher marketing/event spend (Outperform) and absence of prior-year incentive comp tailwind; EBITDA expected to expand again in H2 .
Demand/macro: despite complex environment (tariffs, FX), ASPs stable, implementations accelerating, inbound demand increasing; prudence kept for FY guidance .

Estimates Context

Q1 2025 actual vs S&P Global consensus: revenue $86.322M vs $85.657M*; non-GAAP EPS $0.13 vs $0.116*; 8 estimates for both revenue and EPS*.
Note: S&P Global “EBITDA Consensus Mean” refers to EBITDA, not company’s adjusted EBITDA; company reported adjusted EBITDA of $8.7M .
Values retrieved from S&P Global.

Key Takeaways for Investors

Quality beat: Revenue and non-GAAP EPS beat consensus, with YoY margin expansion; operational execution (linearity, sales cycles) continues to improve .
Near-term margin dip is planned: Q2 EBITDA guide lower on event/marketing investments; expect H2 profitability expansion as spend normalizes and bookings convert .
Travel tailwinds: Offer optimization/retailing upgrades are driving wins; expect accelerating travel-driven subscription growth through the year .
AI differentiation: Continued rollout of agentic AI creates monetizable SKUs (Sales Assist, Rebate Agent) and sustains margin gains—supports medium-term thesis on durable pricing power and efficiency .
Strong backlog and visibility: RPO/current RPO and TTM calculated billings growth underpin forward revenue; recurring revenue at 85% stabilizes cash flows .
Leadership transition: New CEO (June 2) with enterprise-scaling track record; orderly handoff with Reiner advising—low execution risk, potential go-to-market acceleration .
Trading implications: Near-term, watch Q2 margins and Outperform announcements (AI agent launches) for narrative momentum; medium-term, margin expansion + travel acceleration vs maintained FY guide point to upside if macro remains benign .

Other Relevant Q1 2025 Press Releases

Agentic AI launch at Outperform: PROS to unveil new AI agents (Sales Assist, Rebate Assist) .
Industry recognition: Winner of 2025 Artificial Intelligence Excellence Award (Software Company category) .
Board strengthening: Katie May appointed to Board, bringing eCommerce and SaaS scaling expertise .

Appendix: Key Reconciliations and Definitions

Non-GAAP measures and reconciliations (gross profit/margin, adjusted EBITDA, free cash flow) provided in Q1 materials .
Balance sheet, income statement, cash flow details included in Q1 8-K exhibits .

PROS Holdings, Inc. (PRO)·Q1 2025 Earnings Summary