Pros Holdings Inc

NYSE:PRO

Earnings Call Transcript 2022-Q4

[Operator]

Greetings and welcome to the PROS Holdings Fourth Quarter and Full Year 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. [Operator Instructions] As a reminder, this call is being recorded.

I would now like to turn the conference over to Belinda Overdeput, Director of Investor Relations. You may now begin.

[Belinda Overdeput, Director-Investor Relations]

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.

Before I hand the call over, I'd like to notify our investors and analysts about our upcoming Analyst Day which will take place the afternoon of Tuesday, May 23rd during the 2023 PROS Outperform user conference at the Hyatt Regency in Denver, Colorado. The event will be webcasted live for those unable to attend in person. Investors and analysts who wish to attend the full conference will receive a discount on the conference registration. For more details on Outperform 2023 or to register, visit pros.com/outperform.

With that, I'll turn the call over to you, Andres.

[Andres Reiner, President and Chief Executive Officer]

Thank you, Belinda. Good afternoon, everyone, and thank you for joining us on today's call. As I reflect on 2022, I'm proud of how our team executed to deliver a strong year. We grew subscription revenue by 15% and total revenue by 10% year-over-year. The increased momentum we saw in 2022 is supported by the fact that we more than doubled our deal count for the full year compared to 2021. Our value proposition has never been more relevant, which is fueling demand for our platform.

Businesses today are leaning into automation and AI to drive greater efficiency and fuel profitable revenue growth. In times of economic uncertainty, the question management teams are trying to answer is simple: how can we drive organic growth, efficiently? The PROS Platform helps answer that question. In today's rapidly evolving markets, speed is a competitive advantage. Businesses that get quotes out faster win. However, operating at speed is becoming increasingly challenging because of the number of product configurations, distinct sales channels, and negotiated customer prices.

For businesses today, the only solution is to digitize sales and support an omnichannel sales model. Industry analysts predict that by 2026, 85% of B2B sales interactions between suppliers and buyers will occur in digital channels, up from 55% in 2021. The PROS Platform is uniquely able to automate and digitally connect omnichannel sales experiences, driving higher productivity in sales and a better customer experience. We continue to be recognized for innovation leadership with 15 awards and accolades received in 2022.

In Q4, PROS was recognized again as a leader in Gartner's 2022 Magic Quadrant for CPQ solutions, with Gartner citing that PROS Smart CPQ is ranked number one overall for our ability to support channel sales. Additionally, it was noted that PROS delivers more AI-driven guided selling capabilities than any other product evaluated. Together with our leadership position in the IDC MarketScape, PROS continues to be the only platform with a leadership position in both Price Optimization and Management and CPQ.

Our leadership in the market continues to drive new customers to PROS. In Q4, we welcomed Unlimited Technology and Vector Security, both leading providers of security solutions. With PROS, Unlimited Technology and Vector Security can accelerate sales productivity with guided selling workflows and reduce quote turn-around time, fueling profitable growth. Industry analysts predict that by 2028, 85% of all companies with B2B go-to-market will employ AI to augment at least one of their primary sales processes, up from nearly 40% in 2021. AI is going to be core to the way companies execute, and they will be looking for technology that drives the best outcomes.

In Q4, we announced the availability of our next generation of Price Optimization powered by PROS Gen IV AI, the first pricing solution in the market to use neural network technology. Neural network algorithms adapt in real-time to ever-changing market factors and drive robust results even with imperfect data, which drives higher ROI results for our customers. Signature Aviation, a B2B aviation services company, selected PROS in Q4 to take advantage of our latest Gen IV AI advancements to fuel their profitable growth strategy.

In travel, the disruption airlines have experienced over the last couple of years has increased their focus on extreme automation and full digitization of the customer experience. Our digital offer marketing and dynamic offers solutions are helping airlines entice customers with relevant offers and pull them into direct and digital channels, driving higher conversion rates through channels with lower cost of sales. Aegean Airlines, Greece's largest carrier, selected PROS in Q4 and will use our dynamic offers solution to distribute offers to online channels. Philippine Airlines and Oman Air, among others, expanded their partnerships with PROS with the adoption of our digital offer marketing solutions.

We are focused, as always, on value creation for our customers and you, our shareholders. We made organizational changes in early 2023 and are now projecting to generate free cash flow and positive adjusted EBITDA this year. We're also accelerating our timeline for our long-term growth and profitability targets. Further fueling our profitable growth will be our focus on three key pillars of our strategy. The first is driving market adoption of the PROS Platform with our land and expand sales motion. We are laser focused on landing customers with solutions that drive immediate value, and then expanding quickly to drive more value over time. A great example of this is our expansion within the General Electric family in Q4.

In Q3, we announced our win with GE Healthcare and in Q4 we expanded into GE Power. The second pillar of our strategy is to establish a new software category of profit and revenue optimization software. Our innovation leadership is recognized by industry analysts across the software categories that we exist in today, whether it be revenue management, price optimization and management, or configure-price-quote. However, we bring so much more value to the market with the extensive capabilities in our platform and our AI. We believe the value we deliver is reflected in a new category of software, profit and revenue optimization. This year, we’re focused on elevating our messaging and leading the market in innovation that drives profitable growth for businesses.

The third pillar of our strategy is to focus on customer experience and rapid time-to-value. I'm confident that no one else in our market can deliver the measurable ROI we deliver to our customers, as fast as we deliver it. We'll continue to build implementation assets and drive platform innovation that allows our customers to activate even more use cases with rapid time-to-value. We enter this year well positioned to fuel our profitable growth. We have the right people, strategy, and platform to capture the market opportunity in front of us.

Before I close, I'd like to talk a little bit about our incredible team and culture. Our people-first culture is what makes PROS such a special place, and I’m so proud of the environment we’ve built that prioritizes personal growth and ensures every employee can reach their full potential. We continue to receive recognition of our culture, including recently by PEOPLE magazine in the 2022 Companies that Care, a list of the top 100 U.S. companies that demonstrate outstanding care, respect, and concern for their employees. While we've had to make difficult decisions over the past several months, we know that the culture that we built is one that encourages current and past employees to care for and lean on each other. I am thankful to all our team members over the years for their contributions to PROS, and we're committed to supporting both current and former employees of PROS throughout their careers. I’d also like to thank our shareholders, partners, and customers for their 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, Chief Financial Officer]

Thank you, Andres and good afternoon, everyone. Our team delivered a strong fourth quarter and full year. Despite a challenging economic environment, our solutions have proven to be mission critical to businesses as they look to drive profitable revenue growth. Our platform and our package offerings launched in the second half of 2021, really set us up to drive a strong 2022, where we consistently outperformed our revenue guidance. With our platform launch, we were also able to drive our revenue performance with greater efficiency. This resulted in improved subscription gross margins. We even generated positive services gross margins as well as positive adjusted EBITDA in the second half of 2022.

Now, I’ll cover our results in a little more detail. Subscription revenue in the fourth quarter was $53.1 million, increasing 13% year-over-year and exceeding guidance. For the full year, subscription revenue was $204 million, increasing 15% year-over-year. Our strong subscription revenue performance along with a stronger-than-expected services revenue result led to total revenue in the fourth quarter of $70.9 million, increasing 9% year-over-year, and $276.1 million for the full year, increasing 10% year-over-year.

Recurring revenue for the fourth quarter and the full year was 84% of total revenue, and our trailing twelve-month gross revenue retention rate continued to be better than 93%. Our Subscription ARR was $229 million, increasing 17% year-over-year on a constant currency basis, and exceeding guidance. Total ARR was $247.5 million, increasing 9% year-over-year on a constant currency basis and was within our guidance range. Going forward, we will focus on subscription ARR because ARR from maintenance customers now represents well under 10% of our total ARR, and will continue to decline during 2023 as we approach the end of life of our perpetual license agreements. This is a significant milestone for us as it marks the end of our transition to SaaS.

Our fourth quarter recurring calculated billings increased 6% year-over-year and 13% for the trailing twelve months. Our non-GAAP subscription gross margins were 77% for the fourth quarter and the full year, which increased over 500 basis points from 71% in 2021. Additionally, we delivered another quarter of a positive 4% services gross margin, getting us to a year-end services gross margin that was just short of breakeven. Our professional services team drove significant improvement from a loss of 6% in 2021. As I mentioned in last quarter, we expect services margins to be slightly positive on an annual basis in 2023 and beyond, with some quarterly fluctuations due to seasonality. Total gross margins were 65% in the fourth quarter and 64% for the year, which is more than a 350 basis point improvement over 2021. The path to profitability starts with improving gross margins and our team delivered in 2022 reflecting continued focus on driving efficiencies in how we provide and deliver our solutions.

We generated an adjusted EBITDA profit of $2.4 million in the fourth quarter, significantly outperforming our guidance. Our adjusted EBITDA loss for the full year was $14.9 million, a 40% improvement year-over-year. Our adjusted EBITDA outperformance was driven by the better than expected revenue and cost savings in the fourth quarter.

Our fourth quarter earnings per share was $0.02 per share beating guidance and we generated just over $1 million in free cash flow in the fourth quarter. And our free cash flow burn for the year was $21.7 million and in line with our expectations.

We exited the year with $203.6 million of cash and investments.

We ended the year with 71 quota-carrying personnel, which was slightly better than our expectations. Starting in 2023 we are adding quota-carrying personnel to drive expansions. The quota for these reps will be lower than the quotas for our new business reps and will create a larger pool of quota-carrying personnel with varying levels of quota. Because of this change, we will not be providing quarterly updates on quarterly carrying personnel as the comparisons to past quarters will be inconsistent. Now we are comfortable with our sales coverage at this time and we’ll continue to manage this coverage to achieve our growth goals going forward. We will also continue to focus on driving higher sales rep productivity, building on the success we had in 2022, where we doubled our deal count every quarter of 2022 with only a few more sales reps than we had in 2021.

And, before I cover guidance, I want to mention a couple of things. First, we are confident in our ability to capture the incredible market opportunity in front of us, but we are considering the current economic environment as we set expectations for the year. Second, and to echo Andres’ comments, we continue to scale our business and have recently made changes to our cost structure, allowing us to accelerate our near-term and long-term profitability goals. We expect to report positive adjusted EBITDA and generate free cash flow in 2023. I'll provide more insights into our long-term model at our upcoming Analyst Day during the Outperform Conference in May.

With that, here is our guidance for the full year of 2023 with the stated growth rates reflecting the midpoint of the ranges. We expect subscription ARR of $250 million to $253 million, representing 11% growth year-over-year. We expect full year subscription revenue to be in the range of $230.7 million to $232.7 million, representing 14% growth year-over-year and total revenue to be in the range of $293 million to $296 million, representing 7% growth year-over-year.

We are expecting full year adjusted EBITDA profit of between $3 million and $6 million, representing an improvement of over $19 million year-over-year.

We expect to generate free cash flow in the range of $2 million to $6 million an improvement of over $25 million year-over-year.

Turning now to guidance for the first quarter of 2023, we expect subscription revenue to be in the range of $54 million to $54.5 million, representing an 11% increase year-over-year. And total revenue to be in the range of $70.4 million to $71.4 million, representing a 7% increase year-over-year.

We expect first quarter adjusted EBITDA loss of between $3 million and $4 million, which is a $5.6 million improvement over the first quarter last year. And as a reminder, it is typical for our business to have higher expenses in the first quarter.

Using an estimated non-GAAP tax rate of 22%, we anticipate Q1 non-GAAP loss per share of between $0.09 and $0.12 per share based on an estimated 46 million shares outstanding.

Now related to the cost structure changes, I mentioned earlier, we expect to incur severance charges in the first quarter of approximately $2.8 million to $3.2 million, which we will exclude from our non-GAAP results.

In closing, I would like to thank all of our employees around the world for their continued hard work and dedication to PROS. I would also like to thank you, our shareholders, 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?

[Operator]

Thank you. Ladies and gentlemen at this time we will be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Scott Berg with Needham. Please proceed with your question.

[Scott Berg, Needham]

Hi everyone. Congrats on the nice bookings this quarter and thanks for taking my questions here. I've got a couple Andres. So I wanted to start off with the reopening of China and the impact of your business. I know on the travel side it's heavily dependent on international travel and when we think of Asia PAC, China is a large chunk of that. One of the data points we recently heard is air travel, or at least bookings for Asia PAC-based air travel in January, it was looking very close to 2019 levels.

I guess two questions in there. One, have you seen that as well? And then two, if that area or region is trending towards kind of more normal levels all of a sudden, how does that impact your business or potentially impact your business this year? Thanks.

[Andres Reiner, President and Chief Executive Officer]

Yes, Scott, great question. Yes, we are seeing that region continue to improve and are really pleased that it's opening up because that impacts frankly not just that region but all regions. We think that this year definitely that will help us and it’s something that, I think, is still early, but throughout the year, I think, that's going to be an area where we'll continue to see investment. So, overall, we're pleased with that recovery.

[Scott Berg, Needham]

Got it helpful. And if we look at the B2B side of the business, which I believe in yours and I's, prior conversations was trending towards pre-pandemic levels. Should we think of the bookings in 2022 as it's kind of maybe in line with what you saw in 2019, or is that business dropped a little bit to go before it's deemed to be completely healthy again?

[Andres Reiner, President and Chief Executive Officer]

Yes, I would say look, B2B has continued to improve and performed very well last year and we continue to see that business continue to improve as we get into 2023. Overall, I would say last year we set pretty aggressive goals from a sales perspective to get back to 2019 and I'm very pleased of how we executed throughout the year. And overall, I would say look, travel performed well last year as well. It's still not back, but definitely travel contributed as well in 2022.

[Scott Berg, Needham]

Got it. And I'm sorry, I'm going to slide one more in here really quick.

[Andres Reiner, President and Chief Executive Officer]

Yes.

[Scott Berg, Needham]

You are carrying a bunch of additional reps for expand motions this year and I get why you are not going to give that metric going forward because it's a different metric at least. But how do we think about your expand cadence in 2022 with regards to your bookings and expectations there? Are you seeing customers expand like they did also pre-pandemic or is this really just a chance to maybe fuel those plans going forward?

[Andres Reiner, President and Chief Executive Officer]

No. So, that's a great question. So overall, we saw about a fifty-fifty split between new and existing, which is a very healthy level. In last year we really focused on deal velocity and continuing to start small and drive expansions. We see a lot more opportunities with our platform to drive even more expansions within our customer base of more capability that we can sell to our customer base. And we're setting up a sales organization that can help drive faster expansions within the customer base. And we see that as an opportunity long-term, smaller quotas a different approach. We're trying in some segments of our business first, but it's a model that we see a lot of opportunity in the future. But overall, very pleased with both the new and the existing and the approximate fifty-fifty split between both.

[Scott Berg, Needham]

Great. That's all I have. Thanks for taking my questions and congrats again.

[Andres Reiner, President and Chief Executive Officer]

Thank you.

[Operator]

Our next question comes from the line of Chad Bennett with Craig-Hallum. Please proceed with your question.

[Chad Bennett, Craig-Hallum]

Great. Thanks for taking my questions. Further kudos on not only the strong finish of the year, but achieving EBITDA positive and non-GAAP profitability. It's been a long time coming. So it's good to see that in the pivot towards a pretty significant free cash flow and adjusted EBITDA growth this year. So nice job.

[Andres Reiner, President and Chief Executive Officer]

Thank you.

[Chad Bennett, Craig-Hallum]

Yes. I guess just in terms of the guide and Stefan, I know you cited, you are obviously factoring in kind of what everybody is talking about macro wise. But just if I look at subscription growth, and I understand we're starting the year here and obviously we hope to do better. But the growth rate of 14%, at the midpoint relative to your kind of 14% or maybe even a little bit higher closer to 15 this year in subscription growth, just considering the momentum throughout the year and obviously travel, you at least sound like you are more confident that it's going to be better this year. I guess maybe, I don't know how you quantify the macro kind of impact on the guide, but just how do you think about B2B versus travel growth in that subscription growth rate?

[Stefan Schulz, Chief Financial Officer]

Yes, so Chad, that’s to your point, when we set the guidance and we do this every year when we first set it for the first part of the year, it's always – it's a long period of time to set the guidance and so we typically look early on and we don't factor in as much for the latter part of the year. So, that does leave us an opportunity to reassess as we get to the mid-year point to see if things have – as we built better visibility into the second half of the year if that's something we can adjust for. So, that's very similar to what we do every year and that's no different this year.

The other thing that we have to factor in is we are going to have a little bit of a currency headwind. We talked last quarter about that being about a two percentage point delta on total, and it also is applicable to subscription. Actually I don't think it's going to be that much. I think it's going to be somewhere between 1% and 2%, so hopefully it's around 1%. We've seen the euro strengthen that's helped things as well.

In terms of looking at our B2B and our travel businesses, would say that because we have – we're coming from such a recovery stage on the travel side, you're actually going to see a really nice growth rate on travel. Andres commented that our travel business did very well in 2022 versus where we were in 2021, but we still see more of an opportunity to recover from what was lost in the 2020 and 2021 timeframes.

So I would tell you the travel is going to have an outsized growth rate primarily because of the recovery, because of Asia opening, et cetera. But that doesn't take anything away from our B2B business. Our B2B business is going to continue to do well. It's just not having the same level of recovery that travel did. So I would say just between the two travel is going to be a bit higher of a growth rate because of that phenomenon.

[Chad Bennett, Craig-Hallum]

Got it. And then just, is there anything that you saw in the fourth quarter, whether it's towards the end of the quarter, from a billings booking standpoint, that really kind of impacted your thought process or is it just conservatism just because of everything you are hearing out there? I mean, I don't know if billings growth rate kind of came in where you thought it was, or how you think about that. Thanks.

[Andres Reiner, President and Chief Executive Officer]

I would say no, Chad. I would say, look, we have to be cognizant. The way we approach guidance is the same way every year. If you look at last year, we took the same approach. We want to be very confident with the guidance that we provide and we go about it the exact same way. I will say we hear every day companies talking about the macro and the effect and we have to take that into account. We can't assume it is a difficult selling environment and we have to assume it's going to be a difficult selling environment. We are actually pretty pleased with our guidance where it is starting the year and we're very focused on executing. And I would say we have pretty aggressive goals to do, but overall our approach hasn't changed.

[Stefan Schulz, Chief Financial Officer]

Yes. And I think on the calculated billings, sorry, to your point on calculated billings to add to that. Our calculated billings in the fourth quarter were pretty much in line with what we were thinking in terms of where it landed. Because in the short-term, calculated billings is really a function of what was already lined up and a little lesser to do with what you earn in new in the quarter. So we have a pretty good idea of what that's going to be where it gets more difficult is when you're forecasting it over a longer period of time.

But our calculated billings were pretty much in line with what we were thinking. And keep in mind, too, that there is – there are some timing effects that occur there that kind of drive that up or down. And we certainly benefited from a timing benefit in Q4 of 2021, and that did have a reflection on how we showed calculated billings in Q4 of 2022.

[Chad Bennett, Craig-Hallum]

Got it. And maybe one last housekeeping one, if I could. Stefan, how should we think about the maintenance kind of decline this year? And then I'll hop off. Thanks.

[Stefan Schulz, Chief Financial Officer]

Yes. No, maintenance will decline at an accelerated rate from what it has in the past. We had a good migrations year in 2022. Real happy to say that. I mean it really has changed the dynamic of what our ARR looks like. And maintenance is a very small component, as I commented in my prepared remarks. So Chad, we've always talked about, think about maintenance declining in the, call it the 20% to 30% range. I think as we go into 2023, I think 30% to 40% decline is probably more in line with how to think about maintenance.

[Chad Bennett, Craig-Hallum]

Got it. Thanks so much. Nice job.

[Stefan Schulz, Chief Financial Officer]

Thank you.

[Operator]

Our next question comes from the line of Parker Lane with Stifel. Please proceed with your question.

[Parker Lane, Stifel]

Yes. Hi. Thanks for taking my question. Stefan, I was wondering if you look at gross revenue retention, I think it was above 93% again, really solid number. But if I go back to pre-COVID, I believe you talked about 95% in the past. As we look to 2023 and beyond, do you anticipate getting back to those levels? And how much does that factor into the growth outlook this year? Thanks.

[Stefan Schulz, Chief Financial Officer]

Yes. So Parker, I would say looking back, you're right. I mean, but the year right before COVID, so 2019, our retention rate was around 93%. But you're right, prior to 2019, we did have higher retention rates. And as we've gotten bigger and as we've gotten and done more or executed more transactions that are more of the land and expand variety, we knew that was going to have some pressure on our retention rates, and that has been the case. And so we're very happy with doing 93% or better, and that is certainly something we factor in.

And is there an opportunity to do better? Absolutely. There's an opportunity to do better. And I think the work that we're going to be doing around these expansion reps and spending more time to sell the value of what we currently have in those accounts and what we can do to add more value, I think we'll go a long way towards helping that gross retention. I will say this, it's a little short of me to call out improving it off the 93% because we feel like 93% is actually a pretty strong number. But yes, we've done it before to your point. So I feel like it's something we can do again.

[Parker Lane, Stifel]

Understood. And then shifting gears over to the cost structure changes and the opportunity for leverage here on the path of profitability in 2030. How should we think about the impact across different areas of the business? Is there any one segment sales and marketing, R&D that maybe had an outsized impact from the cost structure changes?

[Stefan Schulz, Chief Financial Officer]

I wouldn't say there was an outsized impact. You'll see as the expense numbers come in 2023, I think you'll see an impact in the sales and marketing area, you'll see some impact in R&D and G&A as well. I think from a cost of sales perspective; you're going to continue to see the scale that we've been talking about over the last couple of years come into play. But no, I wouldn't say there's an outsized change one way or the other. Now within each one of those line items, we have changed our priorities.

So for example, we are going to be investing in more of the expansion reps that we talked about. We're also going to be investing in new business logo reps as well. We're going to spend more money investing in our demand gen and our marketing brand awareness initiatives. So there's going to be areas where we do make some investments, and that's going to be factored in. And then similarly, on the product side, we have looked at some of our lesser priorities, deprioritize those so we can put more kind of wood behind the arrow on some of our bigger priorities, especially around what we want to do with our platform that Andres mentioned earlier.

So that's really what's happening. Think of it as yes, there were some reductions made and they were made in many different areas, but it was really emphasizing how do we make sure that we stay and continue to invest in those bigger priority items?

[Parker Lane, Stifel]

Got it. Appreciate the color. Thanks again.

[Operator]

Our next question comes from the line of Nehal Chokshi with Northland Capital Markets. Please proceed with your questions.

[Nehal Chokshi, Northland Capital Markets]

Yes. Thanks. And congratulations on the good results and the adjusted possibility in fiscal year 2023 is a big positive surprise. So that's great to see as well. Starting with the revenue guidance, can you just – why only 7% year-over-year growth in fiscal year 2023, given that or fiscal year 2022, you had 13% billings growth. I mean, does this imply that you're expecting flash films [ph] growth in fiscal 2023?

[Stefan Schulz, Chief Financial Officer]

No, it doesn't mean that. What we've done, Nehal is in order for us to drive growth rate for the full-year, we've got not only leverage the billings that you talked about that we ended 2022 with, but we've got to also see that executed all the way through 2023. And as we typically do when we set guidance at the beginning of the year, we're really only factoring in what we have near-term visibility to think next six months, and we don't factor in as much around what we see around the second half.

So as is typically the case, I would tell you that we've factored that in so that we have more of a chance to have upside than say, downside, but we are being cautious because of what we see in the marketplace. We do also have a little bit of a currency impact. I mentioned earlier about a 1 to 2 percentage point – somewhere between 1 and 2 percentage points of an impact on currency, which is impacting us a little bit. And so those are some of the things that are driving that. But let me put it this way, we're executing to a plan and an idea that could do better than that.

[Nehal Chokshi, Northland Capital Markets]

Okay. And then you have the Q1 guide for subscription revenue growth of 11%, but full-year, 14%. So doesn't that imply accelerating subscription revenue growth as we go through calendar 2023?

[Stefan Schulz, Chief Financial Officer]

It does. Yes, it does. But that's a different factor because what we're really talking about there is timing of when those bookings come online. So from a revenue recognition standpoint. So as you probably know, there is a good portion of our business that – where we get the bookings, but we don't immediately get the revenue recognition. That revenue recognition has delayed starts. So we have lined up revenue that's already been booked to your point, that's coming online from a growth rate perspective, and that's why you're seeing that factor in.

[Nehal Chokshi, Northland Capital Markets]

Got it. Okay. And then I always, I mean, it's always great to see the significantly improved profitability that you're projecting, but I always get concerned that, that is going to come at the expense of future revenue growth, yet you're talking about accelerating your growth targets. So can you help me reconcile what you presented here?

[Stefan Schulz, Chief Financial Officer]

Well, from a growth rate perspective, we feel like we are continuing to invest in the areas that are going to help us drive growth. Now, when we looked at some cost-cutting areas and where we cut some costs, we did cut areas in what I would call lower priority areas. And so yes, that can have an impact on the overall growth rate. I don't want to mislead you that area, but it's not going to have a huge impact because the areas that we are really locked in on what we want to accomplish, both in the travel and B2B areas are areas that we're still continuing to invest in.

As a matter of fact, I would tell you that we've actually allocated a few more dollars in some of those areas as we went through these exercises to ensure that the things that we really want to focus on are those areas that are going to drive the revenue growth. So yes, there is a phenomenal effect because of some of the things that we've stopped doing but our plan is to more than offset that or at least offset a good chunk of that with the focus and execution in those higher priority areas.

[Nehal Chokshi, Northland Capital Markets]

Okay. And then as far as the OpEx invoice [ph] we should be thinking about, the $45 million for the December quarter, is that the go-forward rate that we should be expecting in the March quarter and going forward from there?

[Stefan Schulz, Chief Financial Officer]

I'm sorry, Nehal, I didn't understand your question, sorry?

[Nehal Chokshi, Northland Capital Markets]

I calculate that you had a $45 million OpEx for the December quarter. So is that the baseline level that we should be looking for going forward?

[Stefan Schulz, Chief Financial Officer]

Yes. That's in the zip code of what we should be thinking about somewhere in that neighborhood. Now keep in mind, we do have seasonality. So while it will average out that way, it may be a little – it will be a little higher than that in Q1, then it will dip down as we go into later quarters. But yes, that's a pretty good estimate of what OpEx would look like. Yes.

[Nehal Chokshi, Northland Capital Markets]

Perfect. Great. Thanks.

[Andres Reiner, President and Chief Executive Officer]

Thank you.

[Operator]

Our next question comes from the line of Devin Au with KeyBanc. Please proceed with your question.

[Devin Au, KeyBanc]

Great. Thanks for taking our questions. Yes, nice to hear the win with GE or expansion from GE Health to Power in just one quarter. I – just curious to hear what GE Power and PROS particularly useful initially? And maybe a bit more detail you could share on just around the expansion process to GE Power just within one quarter?

[Andres Reiner, President and Chief Executive Officer]

Yes. No, great question. Real focus area is on or price optimization and management solutions and how we're driving price guidance to drive more profitability for their business. And I think there's been a very focused area on how we prove leveraging our next-generation AI to drive better win rates as well as better margin uplift for their business. We've experienced in many of these like industry, IT, many customers that seen a pretty significant both revenue and margin uplift, and we were able to prove in a very short amount of time, significant impact and we were working across our focus in many of these global accounts is to work across the business units to prove out the value.

I would say big kudos to our team and to our product organization. I think our platform launch and our ability to get started small, prove out the value helps to drive this time and expand motion. So I think a lot of what we saw last year in our success is really about our platform launch at the end of 2021, and this is just one of the examples of that.

[Devin Au, KeyBanc]

Got it. Got it. No, that's great to hear. Maybe just one more question, if I may. Nice to see that APAC is on its way to a more meaningful recovery. But I want to kind of dive into maybe Europe a little bit. It seems like performance there kind of slowed a little bit in the quarter. Any meaningful changes around like sales cycle or close rates in that region during the quarter?

[Andres Reiner, President and Chief Executive Officer]

Yes. I would say no meaningful change. We actually had – we talked about in travel, Iberia with the migration in the region. We saw good business momentum, I would say, look, in general across, it is a harder selling environment. I've talked about it the last quarter, but in this type of market, where we're trying to be very intentional with is making sure we can land with small investment, rapid time to value and very measurable results. And I think that's the strategy across. But I would say Europe, not a big difference to any other market. Actually, we had across good business in Europe. No big difference from any other market.

[Devin Au, KeyBanc]

Okay. Yes, appreciate the color, Andres. Thank you.

[Andres Reiner, President and Chief Executive Officer]

Thank you.

[Operator]

There are no further questions in the call. I'd like to hand the call back over to Belinda Overdeput for closing remarks.

[Belinda Overdeput, Director-Investor Relations]

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 Wolfe Research Software Conference on February 28th in New York City. If you have any questions following today's call, please contact us at [e-mail]. Thank you and goodbye.

[Operator]

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.