Executive Summary

Q4 delivered 10% total revenue growth to $85.0M and 14% subscription revenue growth to $69.3M, with non-GAAP EPS of $0.16 and adjusted EBITDA of $10.9M; non-GAAP subscription gross margin reached a record 80.7% and total non-GAAP gross margin ~70% .
Free cash flow surged to $23.5M in Q4 (+73% YoY), and FY24 adjusted EBITDA hit $30.0M (+400% YoY); management guided FY25 total revenue $360–$362M (+9%), subscription revenue $294–$296M (+11%), ARR $308–$311M (+10%), and FCF $40–$44M .
Travel momentum improved with Lufthansa adopting Dynamic Ancillary Pricing and Air Canada expanding dynamic offers; management expects subscription growth to accelerate through 2025 as travel bookings ramp, with FX a ~1pt headwind near term .
Catalyst: continued margin expansion (subscription margin potentially to 82–83%), improved travel bookings, and double-digit FY25 subscription growth guidance; execution on AI-embedded products and partner ecosystem could sustain estimate revisions and sentiment despite leadership transition process underway .

What Went Well and What Went Wrong

What Went Well

Record non-GAAP subscription gross margin at 81% in Q4; total non-GAAP gross margin 70% in Q4 and 68% for FY24, reflecting operational efficiency and AI-driven initiatives .
Strong cash generation and profitability: Q4 adjusted EBITDA $10.9M and FCF $23.5M; FY24 adjusted EBITDA $30.0M and FCF $26.2M, significantly outperforming guidance .
Strategic wins/expansions: Lufthansa adopted Dynamic Ancillary Pricing and expanded shopping/pricing; Air Canada implemented dynamic offers across metasearch; Holcim adopted Smart Rebate Management; management emphasized “land, realize, expand” and partner focus to accelerate growth .

What Went Wrong

Q1 2025 subscription revenue guide implies deceleration vs Q4 growth due to revenue recognition timing of late-2024 bookings and FX (~1pt impact), with acceleration expected as 2025 progresses .
Travel demand normalization still measured in quarters, not years; while improving, airlines’ cautious IT spend and prior operational disruptions constrained near-term ASPs and sales cycles .
Services revenue growth structurally slower given product/implementation efficiency focus; mix shift toward expansions reduces attached services, lowering services contribution relative to subscription gains .

Financial Results

Revenue and EPS vs prior quarters and prior year

Metric	Q2 2024	Q3 2024	Q4 2023	Q4 2024
Total Revenue ($USD Millions)	$82.0	$82.7	$77.5	$85.0
Subscription Revenue ($USD Millions)	$65.6	$67.1	$60.8	$69.3
GAAP EPS ($USD)	$(0.16)	— (GAAP EPS table not explicit)	$(0.22)	$(0.04)
Non-GAAP EPS ($USD)	$0.07	$0.14	$0.02	$0.16

Margins, EBITDA, and Cash Flow

Metric	Q2 2024	Q3 2024	Q4 2024
Non-GAAP Gross Margin %	67.4%	68.1%	69.9% (press release) / ~70% (CFO)
Non-GAAP Subscription Gross Margin %	79.6%	79.9%	80.7%
Adjusted EBITDA ($USD Millions)	$5.2	$9.3	$10.9
Free Cash Flow ($USD Millions)	$6.2	$1.4	$23.5

Revenue Mix (Category)

Revenue Category ($USD Millions)	Q2 2024	Q3 2024	Q4 2024
Subscription	$65.600	$67.068	$69.255
Maintenance & Support	$3.385	$3.361	$3.153
Services	$13.028	$12.273	$12.561
Total Revenue	$82.013	$82.702	$84.969

KPIs

KPI	Q4 2024	FY 2024
Subscription ARR ($USD Millions)	$281.5 (reported)	$281.5 (reported)
Subscription ARR (constant currency) ($USD Millions)	$283.7	$283.7
Recurring Revenue (% of total)	85% (TTM)	85%
Gross Revenue Retention (TTM)	>93%	>93%
Calculated Billings Growth (Q4 YoY / TTM)	+25% YoY (Q4); +11% TTM	+11% TTM
Transactions processed (platform)	4.4 trillion in 2024 (+29% YoY)	4.4 trillion (+29% YoY)

Non-GAAP adjustments and reconciliations are detailed in press release tables, including add-backs for share-based compensation, amortization of acquisition-related intangibles, and depreciation contributing to non-GAAP income and adjusted EBITDA .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Total Revenue ($USD Millions)	Q1 2025	N/A	$85.0–$86.0	New
Subscription Revenue ($USD Millions)	Q1 2025	N/A	$70.25–$70.75	New
Non-GAAP EPS ($USD)	Q1 2025	N/A	$0.10–$0.12; 22% non-GAAP tax rate; 47.9M diluted shares	New
Adjusted EBITDA ($USD Millions)	Q1 2025	N/A	$7.5–$8.5	New
Total Revenue ($USD Millions)	FY 2025	N/A	$360.0–$362.0	New
Subscription Revenue ($USD Millions)	FY 2025	N/A	$294.0–$296.0	New
Subscription ARR ($USD Millions)	FY 2025	N/A	$308.0–$311.0	New
Adjusted EBITDA ($USD Millions)	FY 2025	N/A	$42.0–$44.0	New
Free Cash Flow ($USD Millions)	FY 2025	N/A	$40.0–$44.0	New
Non-GAAP Tax Rate	FY 2025	N/A	22% (also applied to Q1)	New
Guidance components (GAAP Loss from Ops; add-backs)	Q1/FY 2025	N/A	Q1 GAAP Loss from Ops: $(5.4)–$(4.4); FY GAAP Loss from Ops: $(13.3)–$(11.3); amortization of intangibles, SBC, and depreciation as detailed	New

Note: Prior FY24 guidance was provided in Q3 materials and is not repeated in Q4 press release; Q4 results significantly exceeded prior guidance ranges per management commentary .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q2 2024 / Q3 2024)	Current Period (Q4 2024)	Trend
AI/technology initiatives	Achieved 80% non-GAAP subscription margin; launched AI agent in SEM; Smart Rebate Management; deep Microsoft partnership; goal to embed AI across platform	Agentic AI emphasized; Fare Finder Genie launched; DAP and request-specific pricing scaling; aim to monetize AI as sellable SKUs	Strengthening; expanding AI-embedded monetization
Travel business recovery	H2 caution; airlines prioritizing operations; bookings down YoY with ASP pressure; external factors (e.g., CrowdStrike impact)	Travel bookings improved in Q4; expected to accelerate 2025 subscription growth; Air Canada and Lufthansa expansions	Improving; measured acceleration through 2025
Operational efficiency/margins	Company-wide efficiency; margin expansion; Rule of 40 timeline likely pushed by ~1 year; services mix lower due to expansions	Margins at record; could see subscription margin 82–83%; strong EBITDA conversion per revenue	Sustained margin gains; upside potential
Go-to-market and partners	Unified B2B/Travel GTM; Outperform drove pipeline; partner channel highlighted	Increase S&M investment; CSMs to own expansion quota; selective partner acceleration	GTM rigor; expansion-led growth focus
Regulatory/legal / data use	FTC study on market data usage—no material impact expected due to data segregation and non-use of PII in pricing algorithms	No new developments specific to Q4; continued compliance posture	Stable; monitoring
Tariffs/macro	Difficult selling environment; B2B cycles improving; macro caution	Tariff volatility increases need for AI-powered dynamic pricing; FX ~1pt headwind in Q1	Macro still mixed; PROS value proposition amplified

Management Commentary

CEO: “We achieved a record high non-GAAP subscription gross margin of 81% in Q4, while processing 4.4 trillion transactions in our platform in 2024; a 29% increase in volume year-over-year… Our innovation leadership continues to be recognized by major industry analysts.” .
CFO: “We delivered adjusted EBITDA of $10.9 million in the fourth quarter… We exited the year with $172 million in cash and investments… For 2025, we anticipate subscription revenue $294–$296 million and total revenue $360–$362 million, with adjusted EBITDA $42–$44 million.” .
CEO on GTM: “CSM teams… are going to own quota around expansion… continuing to focus on our partner channel… key partners that are going to help us accelerate our growth.” .
CFO on margins: “I think we can see 82%, maybe even 83% [subscription margin] at some point… I’m not going to put a cap on them anymore.” .

Q&A Highlights

Travel growth trajectory: Management expects travel-driven subscription growth to accelerate through 2025; bookings improved in Q4, with offer optimization (dynamic offers/ancillary pricing) as strategic priorities; FX impact ~1pt near term .
AI commercialization: Focus on embedding AI at the core of solutions and monetizing as distinct SKUs (e.g., Dynamic Ancillary Pricing), driving measurable revenue uplift .
Margin outlook: Subscription gross margin could reach 82–83% supported by engineering efficiency and AI-enhanced operations; continued leverage anticipated .
Sales motion: Expansion-led GTM with CSM quotas; partner ecosystem acceleration; unified B2B/Travel organization to improve linearity and pipeline conversion .
Leadership transition: CEO succession process “progressing as expected,” intentional and orderly; no change in strategic pillars .

Estimates Context

Wall Street consensus (S&P Global) estimates for Q4 2024, FY 2024/2025, and Q1 2025 were unavailable due to S&P Global daily request limits at the time of retrieval; therefore, explicit comparisons to consensus are not provided in this recap. Values would normally be retrieved from S&P Global for EPS, revenue, EBITDA, target price, and recommendation metrics.

Key Takeaways for Investors

PROS delivered a clean Q4 with double-digit revenue growth, strong profitability, and record subscription margins—operational efficiency and AI-embedded products are driving durable leverage .
FY25 guide frames another year of double-digit subscription growth and strong cash generation ($40–$44M FCF), with travel bookings supporting acceleration as the year progresses .
Travel narrative is turning: marquee expansions (Lufthansa, Air Canada) and broader offer optimization adoption position PROS to capture high-value airline revenues across seats and ancillaries .
Margin upside: Management sees a path to 82–83% subscription margins, with continued non-GAAP gross margin strength—an important pillar for multiple expansion and Rule-of-40 ambitions .
GTM execution evolving: CSMs owning expansion quotas and increased S&M investment should support expansion-led growth, improved linearity, and pipeline velocity .
Services contribution will remain structurally lower as implementations get simpler/faster, reinforcing subscription-led model and mix; investors should focus on ARR and subscription revenue trajectory .
Leadership transition appears orderly; strategic pillars intact (land-realize-expand, partner ecosystem, AI-native platform), limiting execution risk near term .

Appendix: Additional Business Highlights (Q4 window)

Malaysia Airlines renewed PROS RMA, citing AI-powered revenue management as core to two consecutive years of profitability .
Averitt expanded Smart Price Optimization and Management, highlighting dynamic pricing and sales agility as competitive differentiators .
Lufthansa Group adopted Dynamic Ancillary Pricing and expanded request-specific pricing, advancing AI-driven dynamic pricing across the Group’s brands .

PROS Holdings, Inc. (PRO)·Q4 2024 Earnings Summary