PROS Holdings, Inc. (NYSE:PRO) Q2 2025 Earnings Call Transcript

PROS Holdings, Inc. (NYSE:PRO) Q2 2025 Earnings Call Transcript August 1, 2025

Operator: Greetings. Welcome to the PROS Holdings Second Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the call over to Belinda Overdeput, Senior Director of Investor Relations. Thank you, Belinda. You may begin.

Belinda Overdeput: Thank you, operator. Good afternoon, everyone, and thank you for joining us. Our earnings press release, SEC filings and a replay of today’s call can be found on the Investor Relations section of our website at pros.com. Our prepared remarks are also available on our website and will be replaced by the official transcript, which includes participant questions once available. With me on today’s call is Jeff Cotten, President and Chief Executive Officer; and Stefan Schulz, Chief Financial Officer. Please note that some of the commentary today will include forward-looking statements, including, without limitation, those about our strategy, future business prospects and market opportunities and our financial projections and guidance.

Actual results could differ materially from such statements in our forecast. For more information, please refer to the risk factors described in our SEC filings. PROS assumes no obligation to update any forward-looking statements to reflect future events or circumstances. As a reminder, during the call, we will discuss non-GAAP metrics. Reconciliations between each non-GAAP measure and the most directly comparable GAAP measure to the extent available without unreasonable effort are available in our earnings press release. With that, I’ll hand the call over to Jeff.

Jeffrey B. Cotten: Thank you, Belinda, and good afternoon, everyone. Thank you for joining us today. I’d like to start by expressing my gratitude to Andres and the entire PROS team for enabling a smooth leadership transition as I came on board as CEO. After digging into our business over the past couple of months, my excitement has only increased about the future of PROS. Having spent over 2 decades in enterprise IT services and software, I’ve seen firsthand how AI is transforming the future of work, and I believe that PROS is at the forefront of this evolution with AI-powered solutions that enable businesses to outperform through intelligent commerce. There is momentum in our business and palpable opportunity to build on it.

We delivered a strong second quarter, exceeding the high end of our guidance ranges across all metrics and putting us in a position to raise our full year outlook for both subscription revenue and subscription ARR. In Q2, we grew subscription revenue by 12%, total revenue by 8% and improved adjusted EBITDA by 42% year-over-year. In a dynamic and complex macro environment where businesses are selective and strategic with every dollar spent, we are proud of our results in the quarter and our ability to help our customers navigate these uncertain times. Our impact continues to be recognized by the market. In Q2, we were named a leader by ISG in the 2025 CPQ Buyers Guide, our fourth consecutive leadership designation from an industry analyst in just 3 quarters.

This recognition from ISG, along with previous acknowledgments from Gartner, Forrester and IDC demonstrates our continued leadership in the CPQ space. Our strong value proposition is translating into continued momentum across B2B industries, where businesses are turning to PROS to help them win. Winning in today’s market means offering the right products and solutions together with the right pricing and incentives at the right time. The PROS platform gives businesses what they need to optimize their winning formula. In Q2, new customers such as Lennox, Louis Dreyfus, and RHI Magnesita, among others, selected Smart CPQ to bring winning offers to market. Additionally, new customers, including a global life sciences leader and a top U.S. auto parts distributor, plus expanded partnerships with Holcim and Unidas demonstrate how Smart POM is empowering enterprises to take control of their commercial strategies and deliver superior buying experiences to their customers.

In the airline industry, we’re helping carriers build stronger customer loyalty and drive sustainable growth through intelligent offer optimization and marketing. Momentum in our airline business continued in Q2 with new customer wins such as Air Greenland and ValueJet and expanding partnerships with carriers across the globe and domestically, including American Airlines. By adopting our digital offer marketing solutions, these carriers are empowered to transform inspiration into action, converting more business through compelling offers. Another example is Scoot, the low-cost subsidiary of Singapore Airlines, who expanded its partnership with PROS by upgrading to our RM Advantage and adding RTDP, which enables dynamic availability adjustments based on demand to support their growth strategy.

This investment highlights their trust in PROS industry-leading forecasting and optimization capabilities to unlock new revenue opportunities and deliver winning offers across their network. Now I want to talk a bit about our priorities as an organization and where we are focused. We’re continuing to lead with innovation, building the most complete and intelligent commercial platform to help businesses win. With the introduction of PROS AI agents unveiled at our recent Outperform conference, we’re uniquely combining language models with our proprietary numerical models that we’ve perfected over decades, bringing specialized intelligence to Agentic AI. Our agents are designed to drive goal-oriented execution across a wide range of use cases using deep domain expertise from sales to pricing to rebates and revenue management.

Said in a simpler way, our agents are not just conversational or built to enhance user experience, they are designed to act as the most experienced members of your team with decades of knowledge on how to define commercial strategies and win. Right now, our efforts with our new agents are in pilot phases, and we’ll be launching for customers to test them in Q3. They are a key to our long-term growth strategy by bringing the value of PROS to life even faster. PROS rich history and continued innovation in AI create a sustainable and expanding competitive advantage for us. Looking ahead, we’ll expand our platform to power end-to-end commercial excellence, further strengthening our capabilities in areas such as rebates and incentives. We’ll also enhance platform extensibility to further enable partner innovation as well as go deeper and wider on AI agents.

Over the past several quarters, the team has done great work strengthening our go-to-market function, which is evident in our improving sales cycle times, competitive win rates and bookings linearity. With this solid foundation, we’re now focused on amplifying these efforts in 3 key areas. First, we need to apply the same level of rigor that we’ve successfully used in late-stage pipeline management and now apply that rigor to the top of the funnel. Through more effective early-stage nurturing, we can further improve lead quality and conversion rates. Second, we’re expanding our market reach through targeted campaigns focused on customer expansion and new logo acquisition in key verticals and product-specific opportunities like rebate management, building on early success from our analyst recognition campaigns.

These focus areas are why organizationally we’ve elevated our leadership team to drive tighter alignment between marketing and sales. Finally, we must double down on true strategic platform partnerships, specifically where these partners can broaden the distribution of PROS. This is an area where I see a huge opportunity and where I’ve had a lot of experience in the past. In fact, we’re already making progress in this area as earlier today, we announced a new partnership with Commerce, formerly known as BigCommerce, to combine our enterprise-grade pricing and CPQ capabilities with their portfolio of e-commerce solutions. Together, we will equip B2B merchants with real-time dynamic pricing and streamlined product and service configuration so they can win more business with offers that build buyer confidence.

Commerce and PROS create the perfect complements to solve the evolving needs of enterprise sellers looking to drive superior buying experiences. We’re at a generational inflection point as AI transforms the future of work. For companies like ours, this creates a rare and compelling opportunity. With a strong foundation, clear focus areas and a differentiated platform, PROS is well positioned to capture long-term value and lead in this next era of enterprise transformation. Before I close, I’d like to thank our global team for everything they do to deliver amazing value to our customers and make PROS a truly unique company. I’d also like to thank our customers, partners and shareholders for their ongoing support of PROS. Now I’ll hand the call to Stefan to cover our financial performance and outlook.

Stefan B. Schulz: Thank you, Jeff, and good afternoon, everyone. As Jeff just shared, we have a great opportunity to continue expanding our growth and profitability. And I’m very excited to support Jeff on the strategy that he just outlined. Our team delivered another strong quarter, highlighted by acceleration in both subscription revenue and total revenue while also expanding profitability. Our results reflect our continued commitment to driving profitable growth and position us well for the second half of the year. And as Jeff mentioned, the momentum we’re seeing in our business supports increasing our subscription ARR and subscription revenue annual guidance ranges. Now I’ll dive into our Q2 results in more detail. We grew subscription revenue 12% year-over-year to $73.3 million and total revenue 8% year-over-year to $88.7 million, both exceeding the guidance ranges.

Our second quarter recurring revenue was 86% of total revenue, an increase from 84% reported in Q2 of last year. Our trailing 12-month gross revenue retention continued to be better than 93%. We grew recurring calculated billings in the second quarter by 5% year-over-year and 13% for the trailing 12 months, exceeding our expectations. Our non-GAAP subscription gross margin was 80% in the second quarter, an improvement of over 50 basis points year-over-year. We also delivered 11% non-GAAP service gross margins in the second quarter, increasing from 10% reported last year. With these improvements, our overall non-GAAP gross margin was 69% in the second quarter, increasing from 67% last year. We delivered adjusted EBITDA of $7.4 million in the second quarter, exceeding guidance and a 42% improvement over last year.

Our free cash flow was $3.2 million in the second quarter, bringing us to $4.3 million in free cash flow generated in the first half of 2025. Compared to the first half of last year, we delivered an improvement of over $3 million. And I am pleased to see us start the year with 2 positive cash generation quarters despite the first half of the year being our seasonally high period for cash use. From a balance sheet perspective, we exited the second quarter with $189 million of cash and investments. Additionally, in the second quarter, we announced an exchange of $186.9 million of our 2027 notes for $185 million of new notes due in 2030, taking advantage of our favorable bond prices to reduce our debt by approximately $2 million. As a result, the outstanding amount due in September 2027 has been reduced to $79.9 million.

Also, once the 2027 notes are fully retired, our total debt will be 12% lower than it was prior to the exchange. While we weren’t satisfied with our capital structure before the exchange transaction, we now have a greater degree of financial flexibility. Our second quarter non-GAAP earnings per share was $0.13 per share, also exceeding our guidance. Now turning to our forward-looking guidance. For the third quarter, we expect subscription revenue to be in the range of $74.8 million to $75.3 million, representing 12% growth year-over-year at the midpoint. We expect total revenue to be in the range of $90.5 million to $91.5 million, representing 10% year-over-year growth at the midpoint. We expect adjusted EBITDA between $11 million and $12 million, representing 24% growth year-over-year at the midpoint.

And using our non-GAAP estimated tax rate of 22%, we anticipate non-GAAP earnings per share to be in the range of $0.15 to $0.17 per share based on an estimated 48.3 million diluted weighted average shares outstanding. For the full year, we are raising our subscription ARR to a range of $310 million to $313 million, representing 11% growth year- over-year at the midpoint. We are raising our subscription revenue to a range of $295.5 million to $297.5 million, representing 11% growth year-over-year at the midpoint. We expect total revenue to be in the range of $360 million to $362 million, representing 9% growth year-over-year at the midpoint. And we expect adjusted EBITDA to be in the range of $42 million to $44 million, representing an improvement of 43% year-over-year at the midpoint.

And free cash flow in the range of $40 million to $44 million, a 61% improvement year-over-year at the midpoint. In closing, we delivered strong results with continued progress to our key financial and strategic priorities. We are focused on driving rigor and disciplined execution across all aspects of the customer journey, and we’re continuing to expand our competitive moat through innovation. We are well positioned to drive long-term value for our shareholders. I would like to thank our global team and our customers for their continued support of PROS. We also thank you, our shareholders, for your support of PROS, and we look forward to speaking with you at our upcoming events. I will now turn the call back over to the operator for questions.

Operator?

Operator: [Operator Instructions] And our first question comes from the line of Parker Lane with Stifel.

Q&A Session

Jeffrey Parker Lane: Jeff, you emphasized one of the key priorities is building top of funnel. And I think you mentioned driving tighter alignment between marketing and sales was one of the ways you’re going to do that. Could you go a little bit deeper on exactly what initiatives you have in place to build that tighter alignment? And what sort of time line should we expect to see some of those changes in the structure here and approach really benefiting that subscription revenue line?

Jeffrey B. Cotten: Yes, Parker, thank you for the question. A couple of things. First and foremost, look, our marketing organization has already got a lot of activity going right now on campaigns that we’re really dialing in to very specific ideal customer profiles. I’ll give you an example. Manufacturing is one that, as I’ve gotten out to our customer base, there’s just so much messaging that we can really tailor to that specific industry that we’re going to continue to dial in and then even get into subsegments within manufacturing. And so then as you get those campaigns defined and launched in market, you’ve got to align your sales activity to that to make sure that then we have salespeople that have targets aligned against those specific subsegments of industry groups.

And so that’s the type of alignment here that we’re talking about as we continue to evolve our campaigns. Look, time lines, you’re going to be looking at a few quarters out before you start to really see bookings momentum there, right? We’ve got to get these campaigns out. We’ve got to then get top-of-funnel activity going. But that’s the type of alignment that we’re starting to define here for our 2026 planning efforts.

Jeffrey Parker Lane: Got it. That’s good feedback. And then maybe on the other side of the house in travel and airlines, a nice mix of some net new airlines there as well as some expansion activity. Stepping into this role, and you look at the TAM you have there, how would you address that opportunity? How do you see it? What are the things that excites you most about the opportunity in front of you in the travel segment?

Jeffrey B. Cotten: Yes. I’m really glad you asked that one. Look, I’ll tell you, this has probably been one of my bigger pleasant surprises in stepping into the role. I’ve actually spent a lot of time with a lot of our airline customers actually since before I joined and now that I’ve had a chance to get in and meet with many of them. And I will tell you, the airline industry, as you well know, I’m sure you cover a lot of their respective businesses, is going through more complex change than probably any industry, right? They’ve got massive shifts in their buying patterns in terms of premium products being more in demand than lower fare class products. They’re shoving a lot more complexity into ancillary products, et cetera.

And all of that creates demand for us. Our towering strengths are in offer management specifically. And the conversations that we’re having now is they’re looking at redefining their tech stack as they shift more into an offer and order management type of a tech stack and offer is where they’re putting a premium. That’s what’s going to help them solve a lot of the complexity that they’re now facing as they look at trying to seek new revenue sources as they try to shift into this more holistic travel experience. And so I have to tell you, I’ve been really surprised pleasantly at the demand that we’re starting to see in the conversations we’re now engaging. Now obviously, these are long sales cycles, right? You’re at the very beginning of helping them define in many cases, how these new buying patterns are going to operate and then standing up the platforms that we offer today for them and getting those bedded in and implemented.

But I’ll tell you, there is a lot of demand that we’re hearing directly for our offer capabilities.

Operator: And our next question comes from the line of Nehal Chokshi with Northland Capital Markets.

Nehal Sushil Chokshi: Congrats on a good quarter, including billings above expectations. It sounds like that’s what’s driving the forward subscription raise, which is great. What needs to happen for the remainder of the year in order for subscription growth to further accelerate going into calendar ’26?

Stefan B. Schulz: Yes, Nehal, thanks for the question. This is Stefan. I’ll take that. So first of all, I mean, we’re very happy with where we sit at the midyear point. Obviously, through that, we were able to raise not only our revenue but also our ARR. Our teams continue to do well in the marketplace. Our products continue to be in demand. But at this point, we put together a guidance range that we feel represents what we feel like is achievable. Our methodology from a guidance perspective is still the same. We want to provide something we have a high degree of confidence we can achieve, and we feel like we’ve done that. Certainly, there’s opportunity to leverage other products, other things that are happening, our agent technology that Jeff highlighted in his prepared remarks.

But right now, we’re comfortable with where we are. We do see momentum in our business, and there is a possibility that there could be more. But at this point in time, given all the things that are in play, we feel comfortable with where we sit at the $310 million to $313 million on the subscription ARR side.

Nehal Sushil Chokshi: Any thoughts to share on whether or not growth can accelerate in calendar ’26, what needs to happen in order for that — for growth to accelerate in calendar ’26 subscription growth?

Stefan B. Schulz: Yes. I think the question that was just asked of Jeff just a few minutes ago, things that we can do around becoming more optimized in the top end of our funnel and progressing opportunities further along in a quicker and faster fashion, certainly something that we can do. We made an announcement also today with our partnership with Commerce and what that means. I think Jeff has been very clear in terms of what he wants to prioritize both at outperform and I think even today that we want to leverage more partners as well, have more people — more feet on the street, not just direct sales reps, but also folks that are advocating on our behalf. So those are several initiatives that are underway now that we feel like will help accelerate the growth rate.

Not to mention things that we already had in play around being more efficient in the selling process, having faster time to value, making sure our products can be deployed faster. All those initiatives that were in play before continue to be in play. And we feel like the combination of the things that were already in flight plus the things that Jeff is bringing in to focus on, give us an opportunity to do that. I’ll be prepared to talk more about that in the coming quarters as we get through our planning process. As you can imagine, we’re going through a little bit of a different planning process now. And — but once we have some better ideas around that, we’ll certainly share those with you.

Operator: And our next question comes from the line of Jeff Van Rhee with Craig-Hallum Capital Group.

Daniel Uriah Hibshman: This is Daniel Hibshman on for Jeff Van Rhee. Jeff, just as you’re coming on board here, maybe you could share with us as you’re taking a very significant role in sales, some more about your background in go-to-market, your philosophy to go-to-market and just generally how you’re wanting to posture PROS strategically from a go-to-market perspective?

Jeffrey B. Cotten: Yes. Great question. First of all, I would tell you, I spent probably at least the last, let’s call it, 20 years of my career focusing pretty heavily in specifically go-to-market. And what I would tell you, I spend a lot of time on is not necessarily running the day-to-day sales. Obviously, we have a great sales team and a great sales leader who’s doing that. It’s really about how do we build what I call the conveyor belt, right? When you think about the demand flow that has to be coming into a business to achieve revenue growth and acceleration, which is obviously what we’re all going for here, you’ve got to really understand what are the different demand channels, right? And when I say channel, I don’t mean necessarily just partnerships.

And so that’s what we’re spending a lot of time doing here. I’ve brought a framework that I have used now at multiple organizations that seems to work really well, where we’ll start to really pull apart the top of the funnel and you look at what do we expect from partners over the coming months and quarters. And then you build a detailed plan that says, okay, how many leads do I need to be getting access to via those partners? How many ops do we want to be creating? What are the conversion rates and then measuring those. We do the same thing with marketing and looking at very specific campaigns and being able to flow a campaign from the leads and the contacts literally that we’re out marketing to all the way down to bookings. And then you do the same thing on the direct sales side, right?

We’ve got lots of opportunity in both our travel and our B2B business to market products that customers don’t have. Great example in the travel space is for our revenue management customers going and offering our digital marketing offer capabilities. We’ve just launched a new agent there that is really exciting. And so we’ve got to have very specific campaigns to go do that. So once again, you’ll define the amount of customers we have in our base that do not have digital offer marketing and the campaigns you’ll activate against those targets and then flow it down to bookings. And so that’s the type of rigor here that I’ve done at other organizations that we’re bringing here. And as Stefan said, we’re in the very middle of building that plan from literally top — very top of the contacts they were marketing to or targeting in our existing customer base, all the way down to bookings.

Daniel Uriah Hibshman: And then just on travel versus B2B performance incrementally over the past 90 days. I didn’t hear too much commentary about that in the prepared remarks. So maybe just for either of you — from either of you, just a little bit more commentary on how travel and how B2B did incrementally over the past 90 days.

Stefan B. Schulz: So we’re pleased with both actually. We continue to see B2B performing well, and our airline business really just continues to get stronger. And especially when you think of a year ago, where we were from an airline perspective, we were talking about some of the challenges. And in the 4 quarter since, we’ve been able to see strong and steady progress in that airline business, and that continues through this past quarter as well.

Operator: And our next question comes from the line of Zane Meehan with KeyBanc Capital Markets.

Zane Meehan: I’m on for Jason Celino today. Jeff, to start with you, the Commerce partnership announcement is super exciting. Just hoping you could give a bit more detail on how that partnership works, both from a go-to-market and monetization standpoint. Is there a co-sell or rev share agreement in place? And then is this something we should expect going forward, more announcements like this?

Jeffrey B. Cotten: Yes, great question. So the way that the partnership works, first of all, what you should expect to see going forward is that when we announce these types of relationships, first of all, they’re going to be ones that start at the top of the partner organization. I believe very much you’ve got to align strategically on the customer profile you’re going after the use cases, and we’ve got to have real strategic alignment, how the product is going to come together to solve that ideal customer profile and use case. And then after that alignment and how we commercially want the relationship to work, then we start to do the go-to-market structures and activate those campaigns. So all of that work has now been done with what is now known as commerce.

Travis and I have spent a lot of time together outlining what we want this future relationship to look like. And so it’s starting as a referral relationship where they’re activating their customer base. In fact, we already have our first handful of customers where we’re actively having conversations currently. And so we will jointly co-sell, and that is what the agreement is to do to start. However, the vision here is eventually to get to a reseller model where literally it is their sales organization that is out there marketing and selling the joint solution. And in fact, the same with us being able to co-sell and market the joint product as well. And yes, when I talk about platform partnerships, this is the first example of what you should expect more of to come.

We are working on a handful of others right now in the pipeline. But this is where you can really change the demand flow and the distribution, right? This is where you’re going to get in someone else’s demand flow and why we’re excited about it because it certainly increased our distribution. If I can say one more thing here that I think is important. What I love about this story already is that we’re actively working a customer that PROS had a look at a couple of years ago, and the customer decided to make no decision. And this has already given us the right to get back into that customer conversation that I’m not sure we would have without this relationship. So it’s very much a tangible example of things to come.

Zane Meehan: Great. Yes, very good color. Appreciate it. And then Stefan, relatedly to that, as PROS leans in on the partnership angle, should we expect services to start to moderate a little bit as you lean in? Or should that stay insulated from that objective?

Stefan B. Schulz: That’s a great follow-on question. So yes, I think so. I mean you’re already seeing some evidence of that. If you look at the year-to- year growth on services, it’s already relatively flat, maybe even slightly down through the first half of this year. And I think if you look at the guidance, it would imply roughly a 6% to 8% growth rate for the year in services, which is below what we’re doing from a subscription standpoint. So yes, I think you’ll continue to see that. I think some of the partner models and some of the channels that we’re looking at would imply services being performed by other parties. And we’re perfectly good with that. Again, just getting as many folks out there that are experts in the PROS solution, we feel like it’s to our advantage. And so while it may take away some of the services revenue, our bet is that it’s going to yield more subscription revenue, and we feel like that’s a pretty good trade.

Jeffrey B. Cotten: And I want to add on to this as well because I also want you thinking about services revenue a little differently and not just from a partner perspective. Look, this company is obsessed and focused right now on driving subscription recurring revenue. And as we think about services, look, I want to make our products even easier to deploy. As we look at AI and agents, we’re actively working today on how we simplify the deployment of our products, number one, for our customers’ benefit. But that will also help start to shift the mix over time of services. And right now, services are in service of driving subscription revenue.

Operator: And our next question comes from the line of Victor Cheng with Bank of America.

Victor Cheng: Maybe first of all, on the — just if you can provide us some more color on the macro environment. I think in the prepared remarks, you said you’d see improving sales cycle. Just wondering specifically for this quarter as well, whether that is still improving? And maybe by region as well, do you see a bit more hesitation maybe in the U.S. compared to other regions as well?

Jeffrey B. Cotten: Yes. So in terms of macro, the first thing I’m going to tell you is, look, it absolutely remains to be a challenging sales environment. I think we’ve been talking about that for a number of quarters now, and that really hasn’t changed. It’s certainly challenging. What I’d tell you is that, look, we have a number of deals that we work day in, day out that really have no impact at all from any macroeconomic or tariff-related things, right? They sell right through our sales process. And then you’ll have other deals, most notably in international. So to your point on regional impact, we most notably see this with companies operating outside of the United States that have, in some cases, either delayed projects or in some cases, just flat out, put projects on pause.

And so that certainly has some level of impact from an individual customer perspective. But I would say that, that trend really hasn’t changed from what I know and the operating environment that we’ve been in over the last few quarters. The flip side of that, though, which I think is also a really interesting point for PROS specifically is that, look, we do have customers that actually our product is even more valuable for and customers that are now seeking us out because they’re now dealing with a much more complex environment because of tariffs. In fact, we have a large European aircraft manufacturing customer who has used us to really improve the speed at which they can do quoting with a complex situation like an aircraft configuration. And they could not have handled dealing with tariffs and all of their raw material components and all the costs fluctuating the way they have without our products.

So there’s sort of a double-edged sword here for us. Certainly, there are individual customers that you see day in, day out that may have some impacts, most notably outside the U.S. But then we also have a demand driver here for our products for customers who are operating in these environments where they’re seeing volatility.

Victor Cheng: Got it. Very clear. And then the other — the second question, maybe, Jeff, I think you mentioned you sat down and spoke with a lot of the airline customers. What you’re seeing in terms of, obviously, as we know, airlines are moving to — from the current PSS architecture to Offer and Order. I think some initial early adopters maintain their best-of-breed versus best-in-class option. And obviously, with Lufthansa, they remain best-of-breed and continue to pick PROS and to collaborate and codevelop new solutions, whereas some others continue to be best-in-class. I think at this stage, where do you see or where do you expect airlines to be going forward? Will they kind of be aligning to what they used to be? Or do you see this as an opportunity for you to gain more share in that space? Or do you see actually more competition as well given the shift?

Jeffrey B. Cotten: Yes. So first of all, look, it’s a very competitive environment, obviously, in the airline technology platform space. But what I would tell you is a couple of trends that we’re seeing. First of all, as I mentioned a little bit ago, most airlines right now that we’re interacting with are very much in a planning and a strategy mode of trying to figure out what does their next-gen platform. And when we’re having conversations with them, look, they’re actually really interested in co-investing with us in a lot of these areas as they’re looking across the platform. And very specifically, as I mentioned as well a few minutes ago, offer management is where we’re spending the majority of the time. That’s obviously where our roots are in revenue management and the digital offering capabilities that we have.

And so what that tells you is that they’re all mostly considering a sort of best-of-breed approach. I think in the industry, there have been big all-encompassing platform players. And certainly, you’re going to have airlines where that’s going to be fine and they’re going to want to continue to go that route. But what you see is as they’re all trying to get to this sort of broad encompassing travel experience, offer management is really where the strategic differentiation is going to come in and really helping them identify what part of the experience do I want to own? What do I actually — what can I offer within my company versus third-party services that we want to bring in and offer. And that’s where our product is really going to shine.

So I would tell you, we’re having extensive conversations specifically on offer management. And with those airlines, and I would tell you, it’s a significant amount of them, they’re very comfortable with the best-of- breed approach.

Operator: And our final question comes from the line of Patrick Schulz with Baird.

Patrick A. Schulz: Maybe starting off first, it seems like the pace of AI innovation keeps accelerating with pricing models also evolving along the way. When it comes to rolling out the PROS AI agent and other [ adjacent ] features, I guess, can you talk about how we should be thinking about the balance between driving use and adoption relative to any monetization efforts? And maybe broadly speaking, how is PROS able to maintain its competitive advantage around AI?

Jeffrey B. Cotten: Yes. So on use and adoption versus monetization, I would say right now, we are squarely focused on usage and adoption. We launched 12 agents at our recent Outperform customer event, and we have active adoption across our 4 B2B agents that we launched, and we have active adoption as well as a healthy pipeline with our travel-based AI agents as well. And so we’re actually collaborating with those customers right now that are early adopters of the agents that we’ve launched around what is the right pricing model. Right now, obviously, a lot of organizations have launched a consumption-based model. We’re obviously evaluating that. But the bottom line is we want to really help build the right model that our customers are going to respond well to ultimately drive usage because I think that’s going to be the name of the game, right?

If you just think about yourself, everybody is playing with all of these different models right now. And whoever gets the one that is going to become sort of the ubiquitous agent out there that’s used in a various industry is the one that’s going to win. So to me, it’s really all about driving adoption, and we’ll zero in on the right monetization model. But ultimately, we expect that monetization model to be an outcome-based one, where it’s based on the usage of the actual agent itself.

Patrick A. Schulz: Okay. Very helpful. Appreciate the color. Maybe just a quick follow-up for Stefan, just on profitability. Adjusted EBITDA is coming above guidance for both quarters so far this year. What’s holding you back from raising the full year guidance? Are there any incremental investments that are needing to be made in the second half of the year?

Stefan B. Schulz: Yes, Patrick, good question. Yes, your answer is spot on. I mean you kind of answered the question for me. We’re very thrilled with how we’ve been able to drive more efficiency in our business for the first half of the year. And we do want to take some of that and some of that savings, if you will, and apply that to some of the things that we’re wanting to execute on from a selling and marketing perspective. I think it’s safe to say you’ll continue to see us drive greater and greater efficiencies on the R&D and G&A line items and put more, not just what we save in the R&D and G&A, but actually take some of the extras that we generated in the first half of the year and put that more towards sales and marketing as well. So yes, your assumption is spot on.

Operator: And with that, ladies and gentlemen, we have reached the end of our question-and-answer session. I would like to turn the call back to Belinda Overdeput for closing remarks.

Belinda Overdeput: Thank you for listening to today’s call. We look forward to speaking with you at conferences and events this quarter. We will be attending the KeyBanc Technology Leadership Forum Conference on August 11 in Park City, the Virtual Oppenheimer Annual Technology, Internet and Communications Conference on August 12, and the Stifel Tech Executive Summit on August 25 and 26 in Park City. If you have any questions following today’s call, please contact us at ir@pros.com. Thank you, and goodbye.

Operator: And with that, this does conclude today’s teleconference. We thank you for your participation. You may disconnect your lines at this time.