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PROS Holdings, Inc. (PRO)·Q2 2025 Earnings Summary

Executive Summary

  • PROS delivered a solid quarter: total revenue $88.7M (+8% YoY), subscription revenue $73.3M (+12% YoY), non-GAAP EPS $0.13, and Adjusted EBITDA $7.4M, exceeding guidance ranges across all metrics; recurring revenue was 86% of total, and non-GAAP gross margin was 69% .
  • The company raised full-year guidance for subscription revenue ($295.5–$297.5M) and subscription ARR ($310–$313M); total revenue ($360–$362M), Adjusted EBITDA ($42–$44M), and free cash flow ($40–$44M) were maintained; Q3 guidance calls for total revenue $90.5–$91.5M and non-GAAP EPS $0.15–$0.17 .
  • Strategic catalysts: launch of PROS AI Agents (pilot in Q3) to drive faster value realization; a new strategic partnership with Commerce (formerly BigCommerce) to co-sell and eventually resell integrated pricing/CPQ and ecommerce, aimed at expanding distribution and top-of-funnel demand .
  • Balance sheet flexibility improved via exchange of 2027 notes into 2030 notes, reducing 2027 due to $79.9M and ultimately total debt by ~12% post retirement, supporting execution of go-to-market investments .

What Went Well and What Went Wrong

What Went Well

  • Subscription momentum and margin expansion: subscription revenue +12% YoY to $73.3M; non-GAAP subscription gross margin 80% (+>50 bps YoY), supporting mix-shift to higher-quality recurring streams .
  • Guidance confidence: Raised FY subscription revenue and subscription ARR ranges, reflecting improving billings and pipeline, with Q3 guidance implying double-digit growth in subscription and total revenue .
  • Strategic execution: Launch of AI Agents and Commerce partnership to broaden distribution; management emphasized co-sell with a path to reseller and early customer conversations underway (“first handful of customers”) .

What Went Wrong

  • Free cash flow down YoY in Q2: $3.2M vs $6.2M prior-year quarter; management highlighted higher seasonal spending (e.g., Outperform conference) and plans to reinvest efficiency gains in S&M .
  • Services revenue growth muted: services revenue relatively flat in 1H25 and expected below subscription growth; shift of services to partners and simpler deployments may moderate services revenue near term .
  • Macro/International friction: management cited challenging selling environment and more hesitation outside the U.S., including deal pauses; conversely, volatility and tariffs can increase PROS’ value proposition for complex quoting and pricing .

Financial Results

Key Financials by Quarter (oldest → newest)

MetricQ4 2024Q1 2025Q2 2025
Total Revenue ($M)$85.0 $86.322$88.715
Subscription Revenue ($M)$69.255$70.830$73.333
Non-GAAP EPS ($)$0.16 $0.13 $0.13
GAAP Diluted EPS ($)n/an/a$(0.10)
Adjusted EBITDA ($M)$10.900$8.702$7.429
Non-GAAP Gross Margin (%)70%70%69%

Q2 2025 Actuals vs Wall Street Consensus and Guidance

MetricQ2 2025 ActualWall St Consensus*Beat/MissCompany Guidance RangeOutcome vs Guidance
Total Revenue ($M)$88.715 $87.664*Bold beat$87–$88 (implied) Exceeded high end
Non-GAAP EPS ($)$0.13 $0.062*Bold beat$0.04–$0.06 Exceeded high end
Adjusted EBITDA ($M)$7.429$4.992*Bold beat$4–$5 Exceeded high end

Values retrieved from S&P Global.*

Segment and Geography Breakdown

Revenue Mix ($000s)Q2 2024Q1 2025Q2 2025
Subscription65,60070,83073,333
Maintenance & Support3,3852,7302,567
Recurring Revenue68,98573,56075,900
Services13,02812,76212,815
Total Revenue82,01386,32288,715
Recurring % of Total84%85%86%
Geography ($000s)Q2 2024Q1 2025Q2 2025
United States27,99030,88031,435
Europe25,83525,99526,900
Rest of World28,18829,44730,380

KPIs and Operating Metrics

KPIQ4 2024Q1 2025Q2 2025
Non-GAAP Gross Margin (%)70%70%69%
Non-GAAP Subscription GM (%)81%81%80%
Non-GAAP Services GM (%)16%13%11%
Adjusted EBITDA ($000)10,9008,7027,429
Free Cash Flow ($000)23,5161,1123,174
Cash & Cash Equivalents ($000)171,983170,023188,958
RPO Total ($000)475,700488,200494,700
Total Deferred Revenue ($000)136,415151,146139,696
Headcount (incl. contractors)1,5011,4821,480

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Revenue ($M)FY 2025$360–$362 $360–$362 Maintained
Subscription Revenue ($M)FY 2025$294–$296 $295.5–$297.5 Bold raised
Subscription ARR ($M)FY 2025$308–$311 $310–$313 Bold raised
Adjusted EBITDA ($M)FY 2025$42–$44 $42–$44 Maintained
Free Cash Flow ($M)FY 2025$40–$44 $40–$44 Maintained
Non-GAAP EPS ($)Q3 2025n/a$0.15–$0.17 New
Total Revenue ($M)Q3 2025n/a$90.5–$91.5 New
Subscription Revenue ($M)Q3 2025n/a$74.8–$75.3 New
Adjusted EBITDA ($M)Q3 2025n/a$11–$12 New
Non-GAAP Tax Rate (%)FY/Q3 202522% 22% Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’24, Q1’25)Current Period (Q2’25)Trend
AI/Technology initiativesEmbedded generative AI; Fare Finder Genie; AI as a pillar; subscription GM expansion via cloud efficiency Launch of PROS AI Agents, pilots starting Q3; focus on usage/adoption before monetization Strengthening; moving from concept to pilots
Partnerships/DistributionFocus on partner ecosystem and brand-to-demand strategy Strategic partnership with Commerce to co-sell, path to reseller; early customer motions Expanding distribution channels
Macro/TariffsVolatility viewed as persistent; mission-critical pricing/CPQ in volatile markets Challenging sales environment, more hesitation ex-U.S.; volatility creates demand for complex quoting/pricing (e.g., European aircraft OEM) Mixed; headwinds with offsetting demand drivers
Travel segment momentumRecovery and bookings strength; wins at top U.S. carriers; offer optimization emphasis Continued momentum, expansions (e.g., American Airlines, Scoot); best-of-breed trend for offer management Improving, broader opportunity set
Go-to-market rigorImproved linearity and cycle times; increased S&M investment Tighter marketing-sales alignment; subsegment campaigns; conveyor-belt demand framework Operationalizing GTM discipline
Services mix & deploymentServices margin improvements via automation/AI Services growth moderating; partners performing services; aim to simplify deployments Shift to partner-led and productized deployments

Management Commentary

  • “We exceeded the high end of our guidance ranges across all metrics… well positioned to capture long-term value and lead in this next era of AI-powered enterprise transformation.” — Jeff Cotten, CEO .
  • “We grew subscription revenue 12% YoY to $73.3M and total revenue 8% YoY to $88.7M… Adjusted EBITDA of $7.4M, exceeding guidance.” — Stefan Schulz, CFO .
  • “With the introduction of PROS AI Agents… uniquely combining language models with our proprietary numerical models… pilots launching for customers to test in Q3.” — Jeff Cotten .
  • “Commerce partnership… starting as a referral with co-sell; vision to reach reseller model… already have first handful of customers in active conversations.” — Jeff Cotten .

Q&A Highlights

  • Top-of-funnel and GTM alignment: CEO detailed subsegment-focused campaigns (e.g., manufacturing), aligning sales targets and rigorous pipeline frameworks; benefits expected over “a few quarters” .
  • Travel momentum and strategy: Airlines are prioritizing offer management; PROS engaged in planning for next-gen stacks; best-of-breed approach prevalent; expansions with American Airlines and Scoot highlighted .
  • Partnerships monetization: Commerce partnership begins with referrals/co-sell, aiming for reseller; designed to increase distribution and re-open previously stalled opportunities .
  • Services moderation: CFO expects services growth below subscription, with partners performing implementations and products made easier to deploy; trade-off favored to drive subscription growth .
  • Macro and regional dynamics: Sales environment remains challenging, with more delays outside U.S.; volatility and tariff complexity can increase the need for PROS solutions .

Estimates Context

  • Q2 2025 vs consensus: Revenue $88.715M vs $87.664M*, non-GAAP EPS $0.13 vs $0.062*, Adjusted EBITDA $7.429M vs $4.992M* — broad beats. Management also exceeded the high end of internal Q2 guidance across metrics .
  • Q3 setup: Company guides revenue $90.5–$91.5M and non-GAAP EPS $0.15–$0.17; S&P Global consensus for Q3 shows revenue ~$91.08M and EPS ~$0.163, broadly aligned with guidance midpoint* .

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Subscription-led growth and margin expansion continue; recurring mix at 86% and non-GAAP subscription GM at 80% underpin durable cash generation .
  • Raised FY guidance for subscription revenue and ARR signals confidence in billings and pipeline conversion; watch Q3 pilots of AI Agents as a narrative catalyst .
  • Partnership strategy should expand distribution and lower customer acquisition friction; early traction with Commerce and a pipeline of additional platform partnerships .
  • Travel narrative is improving with offer management as the strategic battleground; best-of-breed stance favors PROS across airlines re-architecting retail tech stacks .
  • Services revenue likely moderates near term as partners implement and deployments simplify; positive for margins and subscription focus .
  • Macro risk remains, especially ex-U.S., but volatility and tariff complexity are tailwinds for PROS’ mission-critical pricing/CPQ capabilities .
  • Near-term trading implications: focus on execution vs raised subscription metrics, Q3 pilot outcomes for AI Agents, and incremental partnership announcements; medium-term thesis centers on scaling intelligent commerce platform and achieving “Rule of 40” progress via revenue growth and FCF margin expansion .