Pros Holdings Inc

NYSE:PRO

Earnings Call Transcript 2021-Q2

[Operator]

Greetings. Welcome to the Pros Holdings Second Quarter 2021 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to Belinda Overdeput, Senior Manager of Investor Relations.

[Belinda Overdeput, executive]

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. Actual results could differ materially from such statements in our forecast. In particular, there remains significant uncertainty around the duration and impact of COVID-19, given the increase in cases of the Delta variant. This means that results could change at any time and the contemplated impact of COVID-19 on the company's business results and outlook is the best estimate based on the information available as of today. 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.

[Andres Reiner, executive]

Thank you, Belinda, and thank you, everyone, for joining us on today's call. I'm pleased to share that we executed strongly across all of our metrics last quarter. Our performance is a testament to our incredible team and the value our solutions provide. We achieved a major milestone with the recent launch of our next-generation B2B SaaS additions on the PROS platform. This launch demonstrates our continuous innovation leadership. I want to start by taking us back to when we launch our cloud-first initiative in 2015. Our cloud transition was not just about changing our financial model. It's about creating the next generation of our solutions or processes in how we deliver to accelerate market adoption. As a result, our subscription revenue grew over 40% annually between 2016 and 2019. Now with our platform and the launch of our B2B SaaS additions, we're making our solutions accessible to businesses of all sizes. Our new SaaS additions are available as composable pricing, selling in e-commerce paths, spanning basic to very advanced use cases.

Our prescriptive implementation packages ensure quick adoption of digital selling capabilities in a matter of weeks, enabling our customers to continually evolve their strategy to win in their markets. This launch is part of the company-wide initiative to deliver an incredible customer experience at every step of their journey by fully embracing a digital self-serve mindset. We've made it easier than ever for customers to discover the capabilities of our platform, compare packages by capabilities in price and get rapid time to value from our solutions.

The PROS platform enables businesses to drive a harmonized and interconnected sales experience that meets buyers' expectation of speed, transparency, personalization, and consistency across every channel. Our omnichannel selling capabilities are resonating in the market. Last quarter, we welcomed Eneco as a new customer and are proud to share that they are already live. Eneco is a Netherlands-based producer and supplier of sustainable energy, serving millions of customers across Europe.

Eneco's embarked on a digital transformation journey to improve customer experience across all touchpoints and segments of their business. They selected our platform to enable their vision. Eneco is already using our Smart CPQ solutions to power B2C selling and have plans to expand with price optimization across B2C and B2B digital and traditional channels.

We also welcome LafargeHolcim as a new PROS customer, one of the largest suppliers of construction materials globally. LafargeHolcim selected our platform to put AI at the center of their go-to-market strategy. It will leverage our AI-powered price guidance and real-time capabilities to optimize their pricing strategy, in an increasingly dynamic and competitive market, allowing them to drive profitable revenue growth.

Now I'll talk a little bit about what we're seeing in the airline space. North America continues to see positive momentum in the travel recovery with several U.S. carriers reporting domestic leisure air travel has reached or even exceeded 2019 levels. While we're seeing travel and other geographies start to improve, the recent spread of the Delta variant is slowing down progress in regions like Asia-Pacific and Europe.

While uncertainty in the timing of global recovery remains, where travels recovering airlines are reinvesting in digital transformation in PROS platform for travel is top of mind. Pleased to share that last quarter, we welcome another North American carrier to the PROS family. Hawaiian Airlines selected PROS RM Advantage to leverage our advanced demand forecasting and fair optimization capabilities to provide their customers a superior buying experience while fueling revenue growth and recovery.

Our win at Hawaiian Airlines is proof that even in times of unprecedented change, revenue management is more important than ever as the distribution landscape evolves and airlines look to power more digital self-serve experiences. Where advanced AI adapts to new data patterns quickly, even if they're dramatically different from historical data patterns to produce winning offers in a constantly changing environment, even where no historical data is present, like in the case of startup airlines Breeze Airways, where AI generates incredible value by using self-learning algorithms that auto-calibrate based on real-time data.

I'm proud to share that last quarter, Breeze Airways went live with RM Essentials in less than 5 months. Breeze is already leveraging our solution to execute on their growth strategy. Huge congratulations to Breeze on this incredible milestone. We're proud to have them as a customer. I'm also thrilled to welcome Eneco, LafargeHolcim, and Hawaiian Airlines, among others, as new customers. We look forward to partnering with them on their digital selling journeys.

At PROS, the innovation is at the core of our DNA. And before I close, I'd like to share an update on how we're innovating on the future of work. Our strategy is to leverage a hybrid model, where we take the best of both in-person and virtual work to create a new environment that prioritizes productivity over location. Additionally, instead of an unloaded amount of personal time off, we've empowered our U.S. employees to take time, they need away from work at their discretion while delivering to our customers and business goals with our Trusted Time Off program.

We believe that trust and transparency are key to fostering employee engagement in driving our culture of innovation forward. Our continued focus on creating an environment where every employee can grow and reach their full potential is what we'll continue to attract the best talent in the world to PROS.

In closing, thank you to our global team for continuing to make PROS an incredible company. Thank you to our customers, partners, and shareholders for your ongoing support of PROS.

With that, I'd like to turn the call over to Stefan to cover our financial performance and outlook.

[Stefan Schulz, executive]

Thanks, Andres, and good afternoon, everyone. As Andres mentioned, the launch of the PROS platform with our next-generation SaaS additions marks a huge milestone for PROS. Our market-leading SaaS additions and prescriptive services package further facilitate a land and expand selling motion by enabling customers to choose where they want to start and then getting them value from our solutions faster. Our commercial offerings for our latest SaaS additions have been designed for speed with simplified commercial terms and pricing. However, this is so much more than a commercial approach. This is the first step towards our strategic objective of being the easiest software company to do business with. Every department at PROS came together in preparation for this launch, all with the goal of delivering the best experience possible throughout the customer journey. I'm proud of what our team has accomplished so far, and we will continue to build upon this announcement.

Now moving to our results. We delivered a strong Q2, driven by subscription revenue growth as well as improved adjusted EBITDA and free cash flow. Subscription revenue in the second quarter was a record $44.2 million, up 4% year-over-year, and exceeded the high end of our guidance. Our second quarter recurring revenue was 85% of our total revenue. Our gross revenue retention rate for the trailing 12 months was approximately 88%. As a reminder, we disclosed gross revenue retention rate, not net revenue retention rate. Gross revenue retention does not include bookings from expansions, which can mask real churn. Our gross revenue retention of 88% is lower than our historical rate due mostly to concessions stemming from COVID that affected our travel-related customers. Adjusting for the unique COVID-related impacts that occurred in the second half of 2020, our trailing 12-month revenue retention rate would have been approximately 92% over the last 12 months. Our retention rates are improving in 2021, and we anticipate ending the year at approximately 93%.

Our non-GAAP subscription gross margins were 71%, which are up sequentially from 69% last quarter and down year-over-year. The year-over-year decline in subscription margins is primarily due to the revenue impact from some of our travel customers who are significantly impacted by COVID. While we were able to reduce some of our costs, the impact on revenue did affect our subscription margins.

We do not expect this revenue impact to improve over the next 2 quarters and therefore, expect subscription margins to remain relatively constant in the second half of 2021. Our expense lowering initiatives from 2020 did carry forward into 2021, where total expenses declined by 3% in the quarter and 6% in the first half of the year. Because of these savings, our overall profitability improved compared to last year.

Adjusted EBITDA loss was $4.7 million as compared to $5.7 million last year. For the trailing 12 months, our calculated billings decreased 4% year-over-year as expected, but the quarterly calculated billings in the first 2 quarters of this year have improved year-over-year. As we look to the remainder of this year, we anticipate calculated billings to be relatively flat year-over-year in the third quarter, but strong year-over-year calculated billings growth in the fourth quarter and full year.

Free cash flow burn in Q2 was $5.7 million, an improvement of 76% over last year, and was driven by a combination of operating expense efficiencies and strong customer collections. We exited the second quarter with $318.3 million of cash and investments and continue to have access to an additional $50 million through our unused line of credit. We ended the quarter with 56 quota-carrying personnel, which is in line with our expectations. As previously discussed, we expect to exit the year with 60 or more quota-carrying personnel.

Before turning to guidance, I would like to discuss the impact of COVID on our reported financial results. During 2020, we experienced headwinds to new bookings, customer contract restructurings, customer bankruptcies, and project delays as a result of COVID-19. These headwinds had implications to our business for the first half of this year and will likely continue to impact us for the rest of this year. The recent spike in cases due to the Delta variant has led to delays in the expected business recovery of many airlines around the world. Despite these headwinds, we continue to expect our subscription revenue to grow in the third quarter and the full year, but the growth rate will be a little lower than our subscription bookings as the revenue recognition lags the subscription bookings.

Turning now to guidance. Based on our performance during the first half, we are raising our annual ARR, adjusted EBITDA, and free cash flow outlook and providing Q3 guidance as follows. We expect Q3 subscription revenue to be in the range of $44 million to $44.5 million, and total revenue to be in the range of $61.7 million to $62.7 million. We expect third quarter adjusted EBITDA loss between 9 and $10 million. And lastly, with an estimated non-GAAP tax rate of 22%, we anticipate third quarter non-GAAP loss per share of between $0.21 and $0.23 per share based on an estimated 44.4 million shares outstanding. For the year, we expect subscription revenue to be in the range of $176.5 million to $179.5 million and total revenue to be in the range of $250.5 million to $253.5 million. Adjusted EBITDA loss of between 32 and $35 million and free cash flow burn of between 34 and $38 million. We are also expecting an ending ARR range between $212 million to $217 million.

We have enjoyed a significant improvement to our free cash flow results in the first half of 2021, which gives us confidence to raise our guidance for the full year. As we look to the second half of 2021, we anticipate an overall free cash flow burn, where the third quarter reflects a larger burn than we experienced during the first half of 2021 and a fourth quarter that is a little below breakeven.

In closing, I would like to thank our amazing employees and customers for their continued passion and support. We are looking forward to the second half of 2021. And we also thank you 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] Our first question comes from Rob Oliver with Baird.

[Robert Oliver, analyst]

Great. Appreciated. Two questions for me. One for you, Andres, and then one, Stefan for you. Andres, just -- it sounds like the U.S. is definitely better, and the flight data is definitely showing that. You also mentioned the Delta variant introducing some uncertainty and some delays. So I was just wondering if you could maybe talk a little bit more about the conversations you're having with customers around kind of those 2 variables? And then Stefan, I know you talked about how that played out in the guidance, but specifically to the subscription revenue growth, which was better than expected this quarter. Just curious what the driver was there? I assume it was a little early to maybe see an impact from the new platform? Was it more conversions? Or was it straight up B2B strength? Any color there would be great.

[Andres Reiner, executive]

Perfect. So I'll start overall with business momentum. So we saw pretty strong on the B2B side. Obviously, we talked about North America in travel. And I would say travel is what we expected to this point. And I would say the Diggintravel is we're really happy to have Hawaiian Airlines joined our family of airlines. And what we see is that the airlines that are rebounding, they're investing and they're investing in our technology, and that's great to see. So overall, I would tell you, as we look at the back half from travel, we think it's going to continue to be impacted as we expected. So we're not expecting a big rebound in travel in the back half. I would say that's more likely to happen next year, given the Delta variant. But overall, we feel from the B2B side, the overall momentum continues to improve.

[Stefan Schulz, executive]

Yes. And Rob, this is Stefan. As it relates to the second quarter subscription revenue, we pretty much -- we ended where we thought we would maybe slightly better. There are 2 reasons for that. One, as Andres pointed out, it's the B2B bookings that showed strength in the first half. But we also benefited, and we knew this going into the quarter. We benefited from the recognition of some term licenses that were renewed in the quarter. I think as you look at the second quarter and then compare that to the third quarter, when you look at our guidance, you'll see that, that growth rate kind of flattens out a little bit from what you saw from Q1 to Q2. And the reason for that really is that timing of the term license recognition that we saw in the second quarter.

[Operator]

Our next question comes from Scott Berg with Needham.

[Joshua Reilly, analyst]

This is Josh on for Scott. Congrats on a strong quarter. Curious, what are you seeing in the sales pipeline from travel customers today? Are deals more like the United deal, which was for the ancillary products and travel services? Or is it more like expanding the core origination and destination modules?

[Andres Reiner, executive]

Yes, Josh, that's a great question. I would say we see a lot of demand and a lot of interest, both in our next-generation RM solutions, which Hawaiian actually was -- or RM solutions. But we also are seeing a lot of demand around digital retail dynamic offers, the full digital retail platform, are areas of interest. So I would say a lot of airlines, as we see them coming back, I think they're going to continue to innovate around the full digitization of their sales motion. So everything from, obviously, the passenger bookings, group bookings, their contracts, and those cargo is another area that we're seeing interest. But I would say it's including next-generation RM solution. And we've continued to innovate significantly around our RM suite. And those innovations are really critical in this market, especially with the volatility of the market.

[Joshua Reilly, analyst]

Okay. Great. And then just as a follow-up, if you look at the Q3 subscription revenue guidance with which you just mentioned, is flat quarter-over-quarter. What's the thought process there? And is there any impact from the $18 -- I think it's the $18 million in lost travel subscription revenue over the last year. Is that ticking up here because of the Delta variant? Or is that assumed to be flatter? Or how should we think about that?

[Stefan Schulz, executive]

Yes. So the $18 million that we talked about last year having impacted us from the result from COVID. That's still out there, and that really hasn't changed. So that amount of money is still about the same. And as Andres said a little earlier, I think because of the Delta variant, any recovery of that is probably in the next year, not so much this year. And I think as you look at the Q3 number from a subscription guide perspective, if you normalize for that term license impact that we saw in the second quarter, you'd see a nice growth trend from Q1 to Q2 to Q3. But I'll also say this, I think because of some of the things that we're seeing in the marketplace from a macro perspective, we are assuming some of the migrations that we had originally assumed would take place in Q3 are likely now to be more of a Q4 type of an event. And so you'll see some of that maintenance transition that you would have normally seen in Q3 now probably take place in Q4, where maintenance dips a little more and subscription comes up as we do those migrations. So that's another part of the equation that's driving the Q3 guidance.

[Operator]

Our next question comes from Nehal Chokshi with Northland Capital.

[Nehal Chokshi, analyst]

And nice performance on the subscription. Looking at billings, it looks like it's a big sequential downtick, albeit was up about 18% year-over-year. And it doesn't seem like it's typically down 30-plus percent Q-over-Q. So why was that kind of performance around the billings on a Q-over-Q basis?

[Stefan Schulz, executive]

Yes. So Nehal, we actually were pretty much in line with what we were thinking, actually, maybe even slightly ahead of where we were thinking as we -- as we set course for the year. As you can probably imagine, most of the billing data is pretty much determined from renewals. And so we have a pretty good idea of how the calculated billings are going to play out for the full year. And we really thought we were going to be fairly consistent with what we saw in growth from Q1 to Q2.

Actually, to your point, we actually outperformed it a little bit. As we look at Q3 we're thinking that that's going to be relatively flat to what we saw last year. And in Q4, we're expecting to see it significantly increase over last year. And that's how we're seeing it play itself out. I will say that while we have good visibility to how it's generally going to play out, there are some things that occur quarter-to-quarter that do affect timing.

So a billing that may have gone out last year at the end of Q2, may go up this year at the beginning of Q3. Those things do happen. But overall, when we step back and look at the calculated billings performance year-to-date this year, we're very happy and pretty much on track with where we wanted to be, and we feel that, that way is going to be the same is going to be true as we exit this year as well.

[Nehal Chokshi, analyst]

Okay. Great. And last quarter, you guys talked about how pipeline was improving pretty significantly. Are you still seeing that trend? What's going on with the pipeline?

[Andres Reiner, executive]

Yes. Yes. We're still continuing to see even sequential pipeline growth. And overall, I would tell you that from a pipeline coverage, we're continuing to have very strong pipeline coverage. So overall, top end of the funnel, we feel very good. And obviously, very focused on the B2B industry, but absolutely.

[Nehal Chokshi, analyst]

Okay. And then finally, why are you predicting a higher retention rate at the end of calendar '21 than historical levels?

[Stefan Schulz, executive]

I didn't quite get the question. Would you mind repeating it again?

[Nehal Chokshi, analyst]

I believe you said in your prepared remarks that you're expecting to be around 93% plus retention rate by the end of calendar '21. And it sounded like that was about 100 basis points higher than historical levels. So why that projected improvement?

[Stefan Schulz, executive]

Yes. So when we go back to 2019, our renewal rate was right at 93%, and where we felt -- and we felt like this throughout 2020 as well, that once we got through the depths of what COVID was doing to the airline industry that our retention rates would recover to where they had been prior to COVID. And just prior to COVID, we were right at 93%. And so we're pretty much right on track with what we were hoping to do.

And I think as I sit here today and talk to you about what we're projecting, I can give you a fairly confident answer to it because we have very good visibility, not just to what happened in the first half, but we also have good visibility to what would be likely to renew in Q3 because most of those events have either occurred or they're nearing occurrence.

So we have a real good visibility to that through 3 quarters of the year. And feel very good about our 93% rate. I'll say this just as a plug to the team that manages that. Our customer success team has done an amazing job, both through the COVID time when customers were dealing with some unique circumstances to today as we get through a lot of that from a renewal standpoint, they're executing quite well.

[Operator]

Our next question comes from Tom Roderick with Stifel.

[Maxwell Osnowitz, analyst]

It's Max Osnowitz on for Tom. I just want to start thinking about the new launch of the B2B SaaS additions in the platform, combined with the new chief marketing officer. Has there been any major changes to the go-to-market with all of that? And if there's going to be like a transition of current customers over to that new platform? Or if it's mostly just for new customers?

[Andres Reiner, executive]

Max, great question. I would tell you that from an organization, Katrina Klier's doing a great job. She has joined the organization. She helped with the launch. But I would tell you the platform launch is something that we began working on in 2015. So for customers, they all leverage this next-generation platform, and they want required to migrate. So they get to leverage a lot of the depth of these capabilities that we built into the platform. What we're excited about the platform is now because it's composable and allows customers to start smaller and be able to expand capabilities across their maturity. So we're really excited about the capabilities, but I would tell you, this is an evolution of the last 4 years as we migrated to the cloud to continue to embed more and more capability in our cloud platform. So I think we're very excited about the capabilities and how now any company of any size in leverage the power of the best-in-class AI platform in the planet, so.

[Maxwell Osnowitz, analyst]

Got it. That's helpful. And then thinking about -- I think you said you're already at 56 quota-carrying reps with a target -- the loose target of 60 at the end of the year. And last quarter, you mentioned increasing spending, maybe a little sooner than expected. Are those plans still in line even with maybe a little more uncertainty than before with the Delta variant and some hesitancy around economies opening back up? Or is there going to be more of a tailored approach to the spending as we look into the rest of the year and the beginning of next year?

[Andres Reiner, executive]

That's a great question, Max. What I would tell you is, now, we're very bullish about the opportunity in B2B. And as you would imagine, most of the investment we're making from a go-to-market perspective is on the B2B side. And I think as we talked about continuing to see strength in our pipeline, top end of the funnel. So as we're seeing that demand coming the top end of the funnel, it gives us confidence to continue to expand our product care and personnel really to set up 2022. So I would say we're -- you should expect us to get to the 60-plus and not hold back. And I would tell you, look, from the Delta variant on the travel side, we see caution there. We were not expecting a big upside in the back half. I would say the big pressure in the back half would be more from the transactions that are based on volume that we're not going to see, but not from a sales bookings. We were expecting very little in travel and that would impact very little this year.

[Operator]

Our next question comes from Stan Zlotsky with Morgan Stanley.

[Stan Zlotsky, analyst]

Maybe first one from my end. So if you think about customers, right, and customers and prospects, right, they typically buy well ahead of potential demand spikes. And when you kind of put them in context of usually an implementation approach, it can take a couple of months for a smaller company for a smaller organization and a fairly extensive implementation, if it's a longer one. I mean, if it's a bigger customer. So if we think that, hey, vaccination rates starts to improve, the world starts to normalize a little bit more in the back half of this year. When do you think that the time for these customers decide to transact is now for those prospects?

[Andres Reiner, executive]

So that's a great question, Stan. I think, look, we've seen it in North America. And I would tell you, it's a good example how we saw with United, with Breeze, with Hawaiian now more recently. To me, in the airline industry, once they see light and they start to see at least leisure travel open up, they start to see their demand pick up, say, to at least 40%, 50% of 2019. I think that's when they start to invest, and that's what we saw in North America. So is there that potential in the back half? Absolutely, there is. I would tell you, from a -- in terms of -- from a sales perspective, there's a lot of activity in travel. So I don't want anybody to think that airlines are not active. They are active. They're looking at opportunities, to me is when they decide to move forward. And a lot of that has been seeing the more stability in the market. And I would tell you that, obviously, Asia has been, right now, mostly impacted Asia and Europe, but we expect that to start opening up in the back half.

[Stan Zlotsky, analyst]

Got it. And then on the expectation for Q4 billings to uptick, is there something mechanical in there that's driving that? Or is it just more of a return to kind of pre-COVID seasonality where you have just bigger Q4s like you used to have?

[Stefan Schulz, executive]

Yes. So yes, Stan, you're exactly right. I mean, seasonally, Q4 is typically a strong billing quarter for us. And so we expect to see that occur. We did have some anomalies that took place in the last, call it, a year or 2 where we had some timing things. But I think more importantly, COVID had an impact on what those billings might look like. We see far less of that. And so to your point, we do see more of a return to normalcy as we exit this year.

[Operator]

Our next question comes from Chad Bennett with Craig-Hallum.

[Chad Bennett, analyst]

So either Stefan or Andres, could you just give us a sense as we're halfway through the year and you're giving the full year outlook. Whether it's from a subscription or recurring revenue standpoint, kind of roughly how much of the business do you expect from travel versus B2B when we get to year-end here on a look back basis?

[Stefan Schulz, executive]

Yes. I mean, I think, as Andres has said, we're seeing most of our growth that's being driven this year coming from the B2B side. I mean, we've talked about some of the wins we've had on the travel side. And obviously, a lot of that has been in the United States where we've seen relative strength compared to other regions in the world.

Chad, we haven't really broken out the exact split. I mean, the last we talked about, it was the 55-45 B2B to travel. I would say, clearly, that has shifted more to B2B since COVID has occurred. But what I will say is, as I step back and look at the first half, to your point, and I look at all the different metrics, I mean, we're pretty much right where we thought we would be. When I looked at how we set ourselves up for the first half versus the second half, pretty much across all metrics.

We're right where we wanted to be. The only metric we're off on happens to be free cash flow where we're way ahead of that metric. But we feel very well positioned as we go to the second half of this year, knowing that we had this launch of our platform, knowing that we're going to put some more wood behind that arrow from a sales and marketing perspective. We feel very good about how we've executed so far and how we're going to be executing towards the back half of this year. And I will tell you to further what Andres said, most of that's going to be on the heels of B2B.

[Chad Bennett, analyst]

Right. And then as much as we have a crystal ball these days, just from an RPO standpoint, Stefan, from where CRPO ended in the June quarter and maybe even overall RPO, should we expect RPO to improve sequentially September quarter to December quarter from where we ended the June quarter?

[Stefan Schulz, executive]

Yes. I would say -- I will give you probably a little more of a general metric. I would definitely say by the end of this year, you should see that. So yes, I mean, we've been seeing a nice trend on RPO from both on the short-term and in the total. We saw it starting to grow again in the first quarter and grew a little stronger in the second quarter. We expect that trend to continue throughout the rest of the year. Q3 maybe -- maybe a little flattish, but by the end of the year, we expect it to be up.

[Operator]

Our next question comes from Jackson Ader with JPMorgan.

[Jackson Ader, analyst]

Great. Stefan, just following up on the split. I appreciate that the vast majority of growth is expected to come from B2B rather than travel. But I'm just curious, to things, whether it's on a subscription basis or an ARR basis? Are you expecting travel revenue to be -- to grow at all in 2021?

[Stefan Schulz, executive]

No, no. I would say if we were to look at it that way, I would not expect it to grow.

[Jackson Ader, analyst]

Okay. All right. Perfect. And then how were migrations in the quarter? And our -- does the Delta variant have any kind of impact on migrations at all? Or is that kind of separate?

[Stefan Schulz, executive]

Yes. I would say that's an area that we may be a little behind as it relates to what we were thinking about for the full year. We see a number of opportunities for those. And actually, we have some in-flight that we expect to occur in the fourth quarter of this year, actually towards the end of the third quarter, beginning of the fourth quarter. So I would say we're slightly behind in that metric, primarily for the reasons you just outlined. But we see those absolutely coming to fruition. And I would also say this, the recent platform announcement that we just did has been, I think, very much an attention grabber for a lot of our customers on the on-prem version of our solutions. And I do expect to see more customers look to migrate as they take advantage of the platform now we just made.

[Jackson Ader, analyst]

Right. Okay. So that should be an accelerator, the platform should be?

[Stefan Schulz, executive]

Absolutely. Yes, absolutely.

[Operator]

Our final question comes from Jason Celino with KeyBanc Capital Markets.

[Devin Au, analyst]

This is actually Devin on for Jason. I just wanted to double-click on the B2B strength that you're seeing in second quarter. Any color you can provide on what verticals you're seeing that particular strength? And can you share any sort of details on the profile and size of these 2 customers that you've added?

[Andres Reiner, executive]

Yes. So we're continuing to see a lot of strength in manufacturing, high tech, energy, these software markets. I would say, traditional or B2B markets in terms of size, I think it spreads from larger organizations. And we talked about some of those examples in the script like LafargeHolcim, and we talked about Eneco as another example. But overall, I would say, vary in size from under $1 billion in revenue to well multibillion in revenue.

[Devin Au, analyst]

Great. That's helpful. And then just a quick follow-up. I just want to ask if you could share any sort of, I guess, incremental details on your partnership with United last quarter? Any sort of progress you can share on that?

[Andres Reiner, executive]

Yes. I would say it's progressing very well. I think we're very much on track. And I think the relationship has continued to strengthen. So overall, very pleased, I would say, it's a really incredible partnership on both sides. And I think they're doing a phenomenal job. And I think our team is well on the implementation. And I think things are progressing very well.

[Operator]

Thank you. Ladies and gentlemen, we have reached the end of the question-and-answer session. I would like to turn the call back to Overdeput for closing remarks.

[Belinda Overdeput, executive]

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 Oppenheimer Annual Technology, Internet, and Communications conference on August 10, the KeyBanc Technology Leadership Forum on August 11, and the Jefferies Virtual Software conference on September 15. If you have any questions following today's call, please contact us at [e-mail]. Thank you, and goodbye.

[Operator]

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation, and have a wonderful evening.