Greetings, and welcome to the PROS Holdings Second Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn this conference over to Belinda Overdeput, Director of Investor Relations. Thank you, ma'am. You may begin your presentation at this time. 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 will also be available on our website immediately following the call and will be replaced by the official transcript, which includes participant questions, once available. With me on today's call is Andres Reiner, 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 and 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 to which available without unreasonable effort, are available in our earnings press release. With that, I'll turn the call over to you, Andres. Thank you, Belinda. Good afternoon, everyone, and thank you for joining us on today's call. We delivered a strong second quarter, building on the momentum we had in Q1. We exceeded the high end of our guidance range across all metrics, grew subscription revenue by 14% year-over-year, and grew total revenue by 10% year-over-year. As we have previously said, the current macroeconomic dynamics are creating momentum for our business. In the first half of 2022, we more than doubled our deal count growth, booking more deals so far this year than we did in all of 2021. Our solutions are resonating in the market as businesses look to offset cost pressures by implementing profit optimization strategies and driving efficiency through digitization. The geopolitical and economic climate of the world today has put extreme pressure on supply chains. Businesses are facing labor shortages, supply shortages, and rising material costs. For businesses to thrive, they need visibility into all factors impacting their bottom line and actionable insights that drive business forward quickly. Our library of market-leading AI algorithms powering the PROS platform can forecast demand, optimize cost, price, revenue, and product mix based on real-time data feeds. Our platform automates decision-making processes and delivers market-relevant offers across sales channels, driving efficiency and fueling profitable revenue growth. Based on the value assessment we've completed with our solutions, PROS customers reported an average 67% efficiency gain, 200 basis point to 500 basis point margin improvement, and more than 6% revenue uplift. In the automotive space, we're helping companies of all sizes and at all parts of the supply chain fuel profitable revenue growth. In Q2, we welcomed BORG Automotive, one of Europe's leading automotive remanufacturers, and Aurora Parts, a leading distributor of heavy-duty equipment, to PROS as new customers. Both facing greater complexity in pricing amidst supply chain fluidity and inflationary pressure, these companies adopted PROS so they can drive profitable growth in real time with our price optimization and management solutions. In the B2B services space, Securitas, a leading provider of security services, selected the PROS Platform to power agreement management with our pricing and CPQ solutions. With PROS, Securitas will arm their sales team with optimized pricing and a streamlined quote-to-agreement process to drive higher win rates and greater efficiencies in contract negotiations. In the air cargo space, we're empowering carriers to better serve their customers through digital shopping and selling experiences while driving profitable revenue growth. Digitization has made buyers increasingly more educated with the ability to compare shipping rates online. This, coupled with increased volatility, has driven carriers to embrace dynamic pricing and engage with customers directly through superior digital buying experiences. I'm pleased to share that in Q2, Qatar Airways, the world's largest international air cargo carrier, expanded their partnership with PROS by choosing to adopt our CPQ and price optimization solutions. With Qatar, PROS now has three of the top six international air cargo carriers on our platform. In travel, we're helping airlines of any size and at any phase of their journey drive profitable revenue growth. Whether it's a new airline coming to market, like our latest customer, Céleste Airlines, or a carrier that serves more countries than any airline in the world, like Turkish Airlines, who chose to migrate to the PROS cloud, PROS solutions empower airlines to capitalize on the revenue acceleration opportunity in front of them. International travel recovery continues to improve and drive the overall industry recovery, with several international routes outperforming 2019 levels, and many others reaching pre-pandemic levels. Despite inflation and high jet fuel prices, industry data demonstrates a high willingness to travel abroad. While in the past, fears of a recession have negatively impacted the travel industry, IATA is now projecting the industry will reach 93% of 2019 revenues by the end of 2022, a significant upgrade from their previous December 2021 projection of 79%. Additionally, the fast pace of the recovery has cut industry losses. IATA now expects the industry-wide profitability to be within reach in 2023. Giving us further confidence is the willingness to invest we're seeing from airlines as they look to deliver new innovative buying experiences to their customers and accelerate revenue recovery. One example is All Nippon Airways, the largest airline in Japan, who expanded their partnership with PROS in Q2 when they chose to adopt our latest cloud solution for group sales optimization. With PROS Group Sales Optimizer, ANA will centralize the management of group bookings, pricing, contracts, and policies to streamline the complexity of the group selling process, empower self-serve e-commerce for travel agents and end customers. Another example is our most recent go live with Emirates. Emirates is now using PROS to power shopping and pricing through all its channels. Emirates is a perfect example of an airline innovating with PROS to build more direct engagement with their customers while reducing costs. We're proud to have partnered with Emirates on their launch of their new premium economy service offering as part of this go live, and look forward to continuing to help them drive revenue growth. Before I close, I want to share some amazing stories that demonstrate how our solutions are fueling profitable revenue growth for our customers. One of PROS' customers, a Fortune 500 high-tech distributor, has reported 15-year record-level margins with approximately 100 basis points of improvement generated in the last year. Their words to us were, "This is the first time in our company's recorded history that we've had inflationary pressures and actually been able to increase our margins, and that's because of PROS." This customer is using our expanded AI-powered scenario testing capabilities to optimize margins, revenue, and costs in parallel, a feature I discussed in my prepared remarks last quarter. We're so proud to see our innovations drive record success for this customer and many more. Additionally, Qatar Airways, who I mentioned chose to adopt our air cargo solution in Q2, has been a PROS customer for over 22 years. In June, Qatar announced they achieved record-level profits for their 25 years of operations, citing growth in passenger and cargo networks, as well as accurate forecasting of global recovery that enabled strong cost control as key drivers for these results. We're extremely proud of our partnership with Qatar and look forward to helping them drive even more success in their, this phase of their journey. It's no coincidence that PROS customers are outperforming the market, because we're their best-kept secret for profitable growth. I want to thank our team for their strong execution and their passion for supporting each other and our customers to drive success. Our team embodies our core values of ownership, innovation, and care, and I'm so proud of the environment we've created at PROS together. A core focus of ours is creating an environment where every employee can grow and reach their full potential. Last quarter, we received another incredible recognition of our culture by being certified as a Most Loved Workplace, backed by Best Practice Institute. Finally, I want to also thank our customers. Partners and shareholders for their continued support of PROS. With that, I'd like to turn the call over to Stefan to cover financial performance and outlook. Thank you, Andres, and good afternoon, everyone. Our team delivered another strong quarter, which exceeded the high end of our guidance range across all metrics. For the first time in over 40 years, businesses across many industries are facing massive challenges with supply chain disruptions and increasing costs. As Andres mentioned in his comments, we are providing our customers with the tools to not only deal with these obstacles, but to deliver unprecedented results in their respective businesses. We are the only provider in the market with native platform capabilities, and not custom code, to optimize both revenue and cost simultaneously. An absolute game changer for businesses in today's environment and the CFO's best friend. Today, the PROS platform is more important than ever as businesses look to drive profitable revenue growth, and we're seeing that materialize in opportunities for PROS. Highlighting our second quarter results, subscription revenue in the second quarter was $50.4 million, up 14% year-over-year, and total revenue was $68.4 million, up 10% year-over-year. Our second quarter recurring revenue was 84% of total revenue. non-GAAP subscription gross margins were 76% for the quarter, improving from 71% a year ago. Improving subscription gross margin has been a primary focus for our team, and the progress we have realized is a testament to our focus and innovation in this area. Our gross revenue retention rates in the second quarter remained above 93%. Our best-in-class revenue retention rate continues to demonstrate the value our customers drive with our solutions. Our Adjusted EBITDA loss in the second quarter was $6 million, exceeding our guidance and keeping us on track to achieve our annual guidance. Similarly, our free cash flow burn in the second quarter was $2.2 million. As usual, we anticipate a slight improvement to the free cash flow burn in the second half of the year. We exited the second quarter with cash of $215.2 million. Our non-GAAP loss per share was $0.14 per share. Our second quarter calculated billings increased 8% year-over-year and 12% for the trailing twelve months, exceeding our expectations and demonstrating the strength we saw in the quarter. We ended the quarter with 58 quota-carrying personnel, and we expect to be at approximately 70 by the end of the year. This count, which is mainly a goal for 2023, is slightly lower than the number we communicated earlier in the year. We are increasing our focus on rep productivity and are confident in the strong team we are building to execute our goals for 2022 and beyond. Now turning to guidance. We expect third quarter subscription revenue to be in the range of $50.5 million to $51 million, representing 15% year-over-year growth at the midpoint. We expect third quarter total revenue to be in the range of $68 million to $69 million, and we expect third quarter Adjusted EBITDA loss to be between $6.5 million and $7.5 million. Using an estimated non-GAAP tax rate of 22%, we anticipate third quarter non-GAAP loss per share of between $0.15 and $0.18 per share based on an estimated 45.3 million shares outstanding. For the full year, we are raising our revenue guidance and expect subscription revenue to be in the range of $201.5 million to $202.5 million, and total revenue to be in the range of $270.5 million to $272.5 million. More than 80% of our revenues are contracted in U.S. dollars. Accordingly, we have not experienced a significant impact to revenues due to the strengthening of the U.S. dollar. For the full year, we anticipate a negative currency impact to our total revenue of less than $1 million, and this is factored into our updated guidance that we just provided. We are maintaining our annual guidance for ARR, Adjusted EBITDA, and free cash flow. In closing, I would like to thank our employees and customers for their continued passion and support. We also thank you for your continued 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? At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two to remove your question from the queue. For participants using speaker equipment, it may be necessary for you to pick up your handset before pressing the star keys. One moment while we poll for questions. Our first question comes from the line of Chad Bennett with Craig-Hallum Capital Group. You may proceed with your question. Great. Thanks for taking my question. Nice job on the quarter. Looks very good and clean and upping the guide is pretty unique in this environment, so kudos. So a couple questions just maybe first for Andres. Just relative to the travel comeback here and more from a booking standpoint, I guess, than what hit in revenue, kinda how has that progressed since the last time, you know, you talked to us in kinda, you know, in terms of, you know, recoveries of revenue, you know, previously modified or just brand-new bookings in travel that might be ahead of plan that could help us in the future. Can you give us an update there? Yeah, Chad. I would tell you, look, we're very pleased with the overall performance, both on the B2B side and travel. From a sales execution, we continue to improve. I'm very pleased that we doubled deal growth year to date, and we've booked more deals than we did all last year. Now we tell you that of that deal growth, about 50 is new customers and 50 is expansions within existing accounts. The overall mix is really where we like to be. We're very, very pleased with those results. In terms of in the travel, in terms of revenue off of concessions, as we said, much of that we won't see this year. We'll see a little bit. We're on track with what we expected. More of that we will actually see into next year. Yeah, Chad, just to follow up on that. You know, we had said, probably about six months ago or so that we felt like $2 million was gonna come into 2022, as it related to that. We're definitely on track to see that happen. I think though, to your question, are we seeing leading indicators that that might, you know, be on track for next year and maybe even above track for next year? I'd say at this point, yes, we feel like we're on track to, you know, get to that next tranche of revenue. To Andres' point, that'll be more than likely next year. Got it. Then maybe one for you. I appreciate the candor or the color for Stefan. Subscription gross margins look really strong, especially sequentially and year over year. Was there anything unique in there? I mean, it was a pretty big sequential improvement for you guys. Do you believe this is kind of sustainable for the rest of the year? Thanks. Thanks for noticing, Chad. It's something we've been working on quite a bit. There's several things that are happening, but most notably, you know, our engineering teams and our cloud operations teams have really been working hard over the last couple of years to make our deployments more efficient, to make our use of the compute less stringent on, you know, on the calculations and algorithms that we're running, and they've done a tremendous job of that. You're seeing the benefits of that. We do think this is something that's sustainable. You know, and to be honest with you know, I kind of view this as a step level. In other words, getting to this 76%, you know, is one tier, and I think it'll be a while before we take that next step. We do intend to take a next step. Ideally, that would be, you know, next year where we can take it beyond 76%, because as we model out what it's gonna take to be, you know, break even and into profitability, it really starts with our subscription gross margins. Those need to go beyond 76%, and we have plans and a process in place to do that. Got it. Maybe one last one. Sorry, I apologize. for Stefan. All right. You know, with that step up in subscription gross margins and EBITDA was better, and it seems like free cash flow, you know, will actually improve in the second half. You know, in terms of line of sight or kind of a marker for when the company or the business turns to free cash flow and maybe even, you know, operating margin, EBITDA margin positive, you know, can you give us a timeline for that? Yeah, you know, we've targeted next year, i.e., 2023 is the point where we make significant improvement and get to what I call approaching a break even from a free cash flow perspective. Think in the mid- to higher-single-digit burn is what we're thinking at this point. I don't think there's gonna be a year where we are, quote, break even. I think what will happen is next year we'll get to, you know, approaching that level, and then say 2024, we actually will cross that point. I would say, you know, getting to break even is somewhere between 2023 and 2024, but 2024 being the year that we actually break into plus territory, with 2023 being the point where we get very, very close. Got it. Thanks much. Nice work. Thank you. Thank you. Our next question comes from the line of Parker Lane with Stifel Financial. You may proceed with your question. Yeah, hi. Thanks for taking the question. You guys alluded to the fact that, you know, supply chain disruption is really catalyzing a lot of new business momentum. Curious, when you talk to your customers, when they expect some of that supply chain disruption to dissipate, is that in the 2023 timeframe, maybe earlier on in the year, later on in the year? Just curious to hear what they're sharing with you and what their expectations are, and maybe how that informs their investment decisions. Yeah, no, Parker, that's a great question. I would tell you, look, what our customers are seeing is the number of changes. Supply chain disruption is one of the factors affecting. If you think about inflation, if you think about currency fluctuation, they're seeing just extreme volatility. I think they realize that this volatility is here to stay. I think that's one of the themes. The other theme is digitization. This movement to drive more business through digital channels. I would say those two factors is really what's driving our business and what customers are seeing the need to better understand in real time what is happening to their business and how proactively, through prescriptive guidance, make actions that will allow them to continuously drive profitable revenue growth. What I would tell you is in terms of your question of when do they see that stopping, I don't think any of our customers are predicting that yet. They still expect to see supply chain disruption, volatility in general. I think they feel that this is here to stay, and they need to be better equipped to manage and thrive in a volatile environment. Got it. Understood. Stefan, I appreciate the commentary around, you know, sales quota carrying reps by the end of the year. I think you said 70. Can you provide some color in the context of those comments you offered on the sequential decline in that number? Yeah. We have, you know, as I commented, as well for the second half of the year, you know, we feel like there's some opportunities to be more efficient. I think that's kind of the theme of a lot of tech companies these days. One of the things that we've done is we've placed higher scrutiny on productivity. We've looked at, you know, what we're looking for in our reps to deliver the results that we're looking for. You know, we're very happy to report, you know, a very strong first half of the year. We've actually seen an increase in the amount of participation of number of reps that are actually contributing to the bookings that we saw in the first half of the year. Quite frankly, it drove a starker contrast of those that are providing the bookings and those that weren't. As a result, you know, we've made some decisions that we're going to, you know, place higher scrutiny on those and remove some of those reps. We're looking to hire more productive reps in the back half of the year. As I said in my prepared remarks, you know, getting to that 70 number is really about being ready for 2023. Even with the 58, we feel more than adequate covers what we're looking to do in the second half of the year. Makes sense. Appreciate you taking the questions and congrats on the quarter. Yeah. Thank you. Thank you. Our next question comes to the line of Rob Oliver with Baird. You may proceed with your question. Great. Good evening, guys. Thanks for taking my questions. Andres, one for you to start. You know, you guys had suggested last quarter that, you know, that you were starting to see some of this, that this environment, you know, albeit not great for many companies could actually, you know, sort of benefit you guys, and it looks like that is indeed playing out. Just wondering if you could talk a little bit about a couple things around the activity, one, deal sizes, any change you're seeing there, any changes to deal timing, you know, maybe deals that were moving a bit more slowly, you know, emerging from the pandemic. Are you seeing those sales cycles speed up? I'd also, you know, love to hear about, you know, the contribution from partners. You guys, you know, obviously have some really meaningful partners, you know, in this area. I'm just wondering in an environment where they're probably looking to move towards what's really working right now, is this serving as a catalyst for them? I realize that's a bunch. I had a quick follow-up for Stefan as well. Yeah. No, no. Thank you. Great question. I would tell you, look, overall, we're seeing very strong activity. Obviously, the results show it. In terms of deal speed, no major changes. In terms of deal size, no major changes. We've seen that fairly stable. What I would tell you is there's definitely more scrutiny on the deals in terms of the value. I think what's helped us is one, the compelling need to adopt our technology now and the pain points that our customers are having, and the fast time to value and ways to get started and ramp quickly, and true measurable ROI. I think those three components, I give kudos to our sales team. They executed very well in a very challenging environment. I would tell you, also kudos to our European team. Europe, I know has been top of mind for a lot of companies. It's done very well for us year to date, including in Q2. It's kudos to the team on how well they're executing across those three vectors. There's definitely a lot more scrutiny, and we're seeing 'cause even when contracts get to signature ready, we're seeing the level of scrutiny to get to final signature, but have not seen that impact so far on our business. It's definitely top of mind. In terms of the partners, we're very pleased to continue to see good progress and support from many of our partners like EY and Accenture, the global SIs and ISVs like Microsoft. I will say we signed a deal this quarter with Accenture that was on their paper. We have a reseller agreement now with Accenture, and there was a deal that closed, actually on their paper, sold by them, which is great to see. Overall, the momentum on the partner side is continuing to improve as well. Okay. That's great color. Appreciate that, Andres. Then Stefan, just one quick one for you on, you know. I appreciate your commentary relative to free cash flow and profitability looking out into the next, you know, year or two. Just specifically on the kind of the EBITDA beat for this quarter, the $1.5 million at the midpoint, you guys, you know, sort of reiterated full year guidance. I'm just wondering whether that implies conservatism or whether the profitability profile on the back half of the year is expected to be a bit lower, and if so, what would be the reason for that? Thank you very much. Yeah, Rob, it's gonna be a continued focus on being as efficient as we can. You know, as I commented on the quota carrying reps earlier, we're doing the same kind of thing across the board with all of our employees and, you know, in terms of looking at adds, and we're placing higher scrutiny on the additions that we're bringing into the company. There has to be a very good justification for it. There's a higher level of approval that's needed. You know, as we put that kind of thing in place, we also put higher scrutiny on discretionary spend, travel, other programs. You know, we're gonna be looking to make sure that we're as frugal as we can be to make sure that we are driving as much profitability and EBITDA improvement as we possibly can. All at the same time, making sure that we're still investing for the opportunities that we've been laying out. You know, I think Andres' comments in his prepared remarks really speak to the opportunity that exists in this market. As challenging as the market is, in a way it's good for us because there's a lot of capability that we can provide for our customers to help them get through it. We're really walking that fine line of making sure that we're as efficient and doing the things as efficiently a s we possibly can. At the same time, making sure we're not losing out on any opportunities for growth. That's helpful. Thanks. Appreciate the opportunity to speak with you guys. Thank you. Thank you. Thank you. Our next question comes to the line of Scott Berg with Needham & Company. You may proceed with your question. Hey, guys. This is Josh on for Scott. Nice job on the quarter here. How should we think about the air travel recovery in APAC versus the rest of the world at this point? How important is that region relative to the rest of the world for subscription recovery, both this year and into next year? Yeah. Josh, great question. I would tell you know, a great sign is we're seeing customers, you know, like ANA this last quarter, buy in the quarter. We had signaled that we had seen activity and interest, and I would say it was proven in Q2. Overall, the sentiment I talked about, IATA's number, their new prediction is the airline industry will get to 93% recovery by the end of 2022, and that improved from 79% projection they had at the end of 2021. Overall, what I would tell you is just in general, when I see the sentiment across airline execs in various geographies, overall, they see the light at the end of the tunnel. They see the demand that people want to travel. Overall, I think it's trended positive as we expected. Okay, great. You already gave a little bit of commentary on this, but specifically on the sales cycles, are you seeing any difference domestically versus international at this point? We're not. We're seeing the consistent theme is definitely scrutiny on the deals. I think in this type of environment, I think you need to be able to get time to value quickly. I think you need to be able to demonstrate true ROI to be able, and I think we've executed well in that front. Definitely there's been scrutiny, but we have not seen lengthening of the sales cycles. All right. Thank you very much. Thank you. As a reminder, if you would like to ask a question, please press star one on your telephone keypad. Our next question comes from the line of Jason Celino with KeyBanc Capital Markets. You may proceed with your question. Hey, Andres. Hey, Stefan. Thanks for fitting me in. Hi, Jason. Hi, Jason. The deal momentum, you know, that's, you know, pretty encouraging. As the environment continues to improve, what are you seeing in terms of win rates, you know, both in your travel business, and B2B? Yeah, in general, continues to be strong. It has not changed. Overall, I would tell you, like I said, from a deal timeline, ASP or win rate, no major changes, just more volume. Perfect. Stefan, just a quick one on the guidance. The second half, you know, what are you assuming in terms of macro? Any changes to the forecasting process different than prior periods? I think no. Generally speaking, no. I think though, you know, as we think more specifically, you know, I think we're a little wiser today than we were 90 days ago. I think we're realizing that the, you know, that we are in a difficult macro environment for all the reasons that we're all aware of, and that has been factored into our guidance. We haven't assumed any sort of improvement, if you will, beyond what we already are seeing, for example, in the travel space. We're not assuming there's any improvement in terms of, you know, the threats of recession or inflation or quite frankly, any sort of change in currency. We've essentially assumed that what we're in today is gonna continue throughout the rest of this year. Perfect. Thanks for clarifying that. Thank you. Ladies and gentlemen, we have reached the end of today's question and answer session. I would like to turn this call back over to Belinda Overdeput for closing remarks. Thank you for listening to today's call. We look forward to speaking with you at conferences and events this quarter. We'll be attending the KeyBanc Technology Leadership Forum on August 8th, and the Oppenheimer Virtual Technology Internet and Communications Conference on August 10th. If you have any questions following today's call, please contact us at ir@pros.com. Thank you and goodbye. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation. Enjoy the rest of your day.