PROS Holdings, Inc. (PRO) Earnings Call Transcript & Summary

Thank you.

Thank you.

All right. So the man that needs no introduction, but I will introduce him anyway. I'd like to invite our CEO and President, Andres Reiner.

You really want to give me your mic. Good afternoon. First of all, I wanted to thank you all for being here. Again, it means a lot to us that you make time to come to our event. I always say that I'm most proud of our people and our customers and this is the perfect event for you to get exposure to both. So I wanted to start a little bit with our vision. From the very beginning, our vision was to optimize every shopping and selling experience. Now I wanted to click a little bit on that. We saw a world that sales will move to digital. And from the very beginning, we were first to create a real-time AI platform that would allow any company, B2B or B2C to optimize every shopping and selling experience. And that guides us with our continued vision. Want to talk a little bit about the business challenges we face today. And you heard some of our customers, some of you that attended my keynote heard some of these areas. The first one, business uncertainty, and we talk about it being here to stay. The volatility wasn't just COVID oriented. We're seeing the market move much faster. So we're seeing volatility, whether it'd be currency, whether it'd be cost, whether it'd be supply chain disruption. What you're also seeing is there's new competitive threats that a lot of our customers have. And that means, they're having to reprice, create new types of packages, new type of pricing. And in this market, you have to move at the speed of business and more in real time. The other area that we're seeing is the customer experience angle. We -- I talked about in my keynote as well, but we're seeing that customers, whether you're B2C or B2B, what then to end experience is really important. And getting to consumer-like buying experience is what every buyer wants. This notion that you have a long protected sales process, and it takes you 2 weeks to respond to a quote and you have a paper quote in a deal desk approval, you can't win business in this type of environment, you have to strive to expand what your end to end is and make it real time and more self-serve personalize. And then the other business challenge that everyone faces the way we work. And the way we work for us is not about being in the office or hybrid, it's about the tools needed for the employees to be successful, much like we say for the end customer buying experience has to be digital. For the employee, the buying -- the employee experience has to be digital. So we talk about the concept of digitization, automation and AI being key. You have to remove manual process. You need off-line tools, one-off applications to be successful. So as you look at our solution, we have the only end-to-end platform that really connects all of your selling channels with your back office systems. And what's really unique about PROS, we have a CPQ solution. People talk about CPQ. Our CPQ is very different than most CPQ. Our CPQ wasn't designed to be an extension of CRM for direct sales quoting or CPQ was designed to power every digital channel. So direct sales, e-commerce, marketplaces. And from the very beginning, it was architected as a real-time technology to power any sales channel, whether it'd be B2B or B2B2C, as we have some B2B customers moving direct-to-consumer. Likewise, at core foundation is our AI in real-time capabilities. You hear today a lot of companies talking about AI. We've been in the AI business from the very beginning. And what differentiates us is we're creating predictive algorithms. That actually tell our customers what demand is going to be like and what's the right price to win the market. And we're going to have Dr. Michael Wu come up and give a little bit of explanation on our AI algorithm, so you understand a little bit about the depth. But the key with us is foundational to have the AI algorithms to be able to process in real time, okay? I want Michael Wu come up. Thank you, Michael.

Thank you, Andres. So I see quite a few familiar faces from my workshop yesterday. So this will be some material that they might have seen yesterday. So you know how we define AI is basically a machine mimiceries of a human behavior with 2 important characteristics. And they only have to be able to automate human decisions and actions and also learn, okay? And so that's our definition. And lots and lots of solutions underneath are doing that right now. And we talk about there's 4 major categories of AI applications out there today. That's actually going to be very important probably in the next half decade or so. And these are Perceptual AI also known as Cognitive AI. They try to mimic the higher cognitive perceptual function of a human being. And Internet AI, also known as Personalization AI because their main kind of use cases are in personalization and recommender systems. And Autonomous AI, which is also, obviously, the biggest use case now is the self-driving car and in Business AI. Okay? And we are using these AI to solve real-world practical business problem, okay? So what kind of problem are we using this AI to solve? So we are using that to solve a profit optimization problem, right, because we are a profit optimization company, right? So obviously, that require us to not only to have the profit, I would say that the revenue side of the story, right, they have seen this algorithm to optimize revenue, but you also need a cost side of the story as well. You think that you've been managing costs. And a lot of our algorithms are very good at actually estimating the opportunity cost, which is actually a very good indicator of the true cost, and that's the market cost, not necessarily the material that goes into making a seed or whatever is actually what the market is going to pay for, okay? So that's the revenue side and the cost side. And then we also have lots of, I would say, algorithm that focuses on what we call sales and production guidance, for example, what to produce, what to sell in order to optimize your revenue even further, okay? So if you look at these 4 classes of AI, PROS is actually heavily represented in the Business AI category, okay? So we have things such as the predictive algorithm that Andres talked about, right, that uses the cutting-edge new network, new NMF, new network matrix factorization. And also, I would say these online learning. These are kind of the more traditional bayesian learning and real-time online updating mechanism as well as these entries-based algorithm does, for example, random forest and GBM, gradient-boosting machines. And also many, many, I would say, semi-parametric and parametric estimation algorithm. So beyond the predictive aspects of it, there's also, I would say, the prescriptive aspect of it that prescribe actions to take, right? So we have -- that actually -- that category actually include the more traditional operations research approach, right? There's different kinds of linear programming, nonlinear programming, integer programming, all that stuff, right? But you also include really the cutting edge in innovation in reinforcement learning, okay? And finally, we also include a lot of these algorithms that extend the capability of AI, for example, makes our AI more extensible, makes our AI explainable, right, interpretable, right? So all these are our capabilities. So we are -- as you've seen this morning, we're actually expanding that into the perceptual and cognitive side as well, right, with ChatGPT being incorporated into our stack. And also, we do some Internet AI, which is personalization through collaborative filtering, right? So sometimes very often, some people would ask, like, so what algorithm do PROS product use? I mean -- and that's I would say, difficult question to answer because we use a lot of different algorithm just in 1 product, right? Let me just give you an example. If you just take a look at this negotiated pricing problem, okay? So we basically built -- we have 4 generations of this product of this -- we call it -- used to be called guidance product right now. It's -- call it Gen 4 price optimization. So if we build that, address this problem. But this 1 product already have many, many different -- this algorithm in there, right? For example, we -- it has 2 stages. The first stage is a neural network that predicts people's willingness to pay, okay? So you have neural network, [ fee for ] neural network, neural matrix factorization. And then the second stage is a win rate modeling that's using the logistics model. So it is a logistic model, you know the parametric form of that model, right? So it is a parameter estimation. After you do that modeling, you actually have to optimize the revenue from that. So there's a nonlinear programming, right? And because we use a neural network, that's a black box, people don't -- cannot really interpret it, right? So we also need to have these advanced kind of analytics capability to explain what's going on. So these are sharply value and these are our ability to give our -- essentially explain the contribution of each one of the variable to the final pricing. So you can understand what this black box is actually doing, right? And you can actually create comparable transactions through the K-Nearest Neighbors algorithm. So as you can see, just 1 simple product, right? I mean, not simple product, there's 1 product, it already have so many different algorithms going to it, right? So that's actually the -- I would say, the norm for all of our product portfolio. So hopefully, this gives you a little idea into the depth of our AI capabilities. Thank you.

Thank you, Michael. This gives you an idea of the level of sophistication for us or Predictive AI has to produce accurate values. I mean, we cannot hallucinate. You can imagine CFO implementing and pricing real-time commerce solution and you have a bad result. So one of the things that our AI has been trained for is massive amounts of data and making sure that it can make very accurate predictions even when data is imperfect. And you heard some of our customers talk about that. And I think that's what -- has allowed us the success in the leadership position that we've had. So wanted to talk briefly about our TAM. We've always had a very large TAM. It's now $38 billion. If you see our TAM expansion, you'll see a couple of areas where TAM has expanded. We've moved now into the digital marketing area with our digital fair marketing and digital offer marketing solutions on the travel space. We're also moving into the offer optimization space in the digital experience phase. We see travel has a great opportunity to drive transformation in the travel retail space. And the other area within travel is that with our solutions, as we launch our new generation packages, we can go to any airline of any size. So we have very easy ways to start, whether it be a very small, low-cost carrier to the largest, multinational airline in different sets of capability to allow them to move in levels of sophistication across our suite. And then on the B2B suite now, we can go to $100 million in revenue and up. We have some of the largest companies in the world. We're also now with our new packages, we can get in at any size company or subset of a division in making it very easy to activate, get to value and drive expansions. I'll go a little bit into our strategic focus areas. We talked about the first pillar on the land, realize and expand. For us, we've been very focused on how we make it easy to activate a capability within our suite, realized value, which is something we are being very intentional on, it's making sure every customer is measuring value. You heard some of our customers in the panel on a monthly basis. We're giving them the tools built into the product to capture the revenue and margin uplift, because if we want to live to our commitment and our mission of helping people and companies outperform, we have to measure that. And that leads to making it easy to expand within an account in many expansion paths across each of our product suites in depth of capability. And if you've seen with our new packaging now, we made it a lot easier to start consuming and then many paths for expansions. And Martin will cover some of that in strain as well. We're also leveraging our partnerships, both from a technology perspective, partners like Microsoft as well as from the global SIs like EY in helping us not just from a scaling globally, but in a co-selling motion. And then finally, we've always said we made an incredible improvements on time to value. You'll see when we launched Gen 4 now, we can get time to value in less than 2 weeks. This has been something we've been very focused intentionally is how do we make it easier and easier to adopt their technology. We know we have incredible retention rates. We know our customers drive immense value. If we can make it easier and easier to activate that helps us scale even better. And we're going to continue to focus as much as we've gotten, we still see room for improvement, and we're going to continue to focus on getting customers to value as fast as possible in as minimal configuration, okay? Now with that, I wanted to hand it over to Martin Simoncic, who leads our B2B -- President of B2B go-to-market. Thank you, Martin.

Thank you, Andres. And I appreciate the opportunity to talk to you guys today and really happy to take your questions here in a little bit. But before we get there, I wanted to just talk about our business, the market opportunity we have and how we are going after it. First one is, Andres mentioned an update on our TAM, and it's huge. But when you think about the opportunity for B2B, just when you look at our target industries and target geographies that we are going after, automotive and industrial chemicals, energy, food, health care, it's $11 billion plus. It's an immense opportunity for us that remains largely unpenetrated at this point. And the good news is when we think about market opportunity, we're not talking about going after new industries, new things. We have significant experience in each of these verticals, and we are very happy and lucky to have some of the best logos in each of these. When you think about companies like Cisco, Exxon Mobil, Nestle, HP, real leaders in the industry. One of the new things that we've added and Andres referenced here in a second ago is when we launched our platform in 2021, we made our solution and our platform more accessible to companies in the $100 million to $500 million range, which expanded our TAM a little bit and also make it more accessible to small business units or divisions of companies where we are now able to apply all the lessons learned and all the experiences that we've learned in these industries over a period of time. So it's been really helpful. We've been able to land a lot of these smaller companies. You will see them on the slide there, Nature's Touch, Vector Security. These are smaller companies that were more difficult for us to land just due to the way we are going to market. So a lot of great progress and the opportunity remains really large. The reason we are about to actually scale across the companies from $100 million to $100 billion company and across multiple different industries is the strength of our platform. Andres highlighted a few of the differentiators and key points of the platform. I'll just highlight 3 that are really key for us and for our growth. One is modular and composable. What that means is that our platform, you're able to consume it in different pieces and stitch different kinds of journeys for our customers on how they can generate the value and allows us to solve the different challenges that customers may run into or try to solve in their particular industries. So, for example, when you think about AI, Michael did a great job talking through the models. And there is a plethora of solutions and algorithms that we have trained over the years to solve different problems. We have a whole library of these models. So when you think about a customer that's a dairy manufacturer, all they have is milk, they get to decide what are you going to do with it? Are you going to create powder milk or 2% or make some more breaches to make some nice profitability. We have an AI model to help them make those decisions to maximize profitability. When you're oil and gas, you are a fuels marketer, you're trying to figure out how to optimize your price the next day, you need to know what the competitors are going to price at tomorrow. So we help them forecast where the competition is going to be so they can set their price in an optimal way to achieve the objective, whether it's to drive volume, maximize margin, maximize revenue. We talked about distributors that are trying to maximize profitability, and you heard Jim talking about it, both sides of the equation, right? I want to make sure I optimize -- I have the right price that optimizes my revenue, but also need to optimize the cost at the same time in real time as we are making a quote. So all companies do that with both price optimization and cost optimization. And that's the power of the platform because we build all these models. We had them now. Now it's just a matter of applying them. The second key point over the platform is real time, and I think this one gets underappreciated sometimes because it's -- some people think of it as performance or system performs better. But a real key to real time is that it enables self-service digital experiences. So when you think about e-commerce, when you think about your partner and reseller as they all want the pricing in real time, even your own employees, your own sales teams. They don't want to go through approvals and spreadsheets and a lot of manual process. And in real-time and e-commerce, it's impossible. And we are the only vendor that can provide real-time responses. We have -- every company has an SLA on [ OPTiM ]. Of course, we have done, but we also offer our customers SLA on the response time, which is under 700 milliseconds, which is crucial. And the last piece of this is delivering the omnichannel experience in any digital ecosystem. So when you think about our platform, the way we are architected is we can apply anywhere so when you think about -- regardless of the ERP solution that our customer everyday have SAP or Oracle or something [indiscernible] regardless of the CRM, Salesforce, Microsoft, of course, we have prebuilt integrations with many of these partners but we can operate even absence of a CRM solution. We just launched a new innovation in Q1, where we can operate our CPQ on top of Power Apps, for example, there's many different ways for us to establish the platform in the market, which is really important. And so what is -- of this one is -- we are the leading platform, and it's not just because I said, of course, I'm going to say that, and I truly believe that. But if you look at the other industry analysts in the space, if you think about Gartner, IDC, Shortlist, we have recognized as a leader in CPQ market, in the smart price management optimization market. And in fact, we are the only company that's recognized as a leader in both. And that's become important as those markets are converging, pricing in CPQ to be able to address both. As a result, we drive incredible value for our customers. I think you heard from some of the customers here, you will be able to hear from them in the conference. And it's a bit of a unique thing in this space. When you think about software, and software providers, there are a lot of soft benefits when we talk about efficiency, implementing processes, et cetera. But we are actually able to quantify the value in real dollars, which really matters to the CFOs and based on the question earlier, where does -- where do these software projects sit in priority given the macro environment, they say that at the very top because they drive their -- they are the Advil, they are the pain pill for the problem that companies have in order to drive more profitability and profitable growth. A couple of examples on the studies that we've seen is one, we released a study last year where we took a sample of 131 customers and showed 8% revenue improvement, 200 basis margin point improvement across the board. And this is not some PROS analyst running spreadsheets in the background. These are -- this is a collection of customer self-reported results, which is quite incredible. But we also have another data point. Forrester just released their 2 economic impact study that they did based on talking with PROS customers. And amongst other benefits, they were not quantifiable or not quantified either. They shared that our customers can expect 400% ROI over 3 years and pay back in 9 months which is just incredible results, and we are very proud of. So you might think of, okay, so we have the huge market. We had the best-in-class platform and a solution for it, we prune value case. So the last piece that we need to talk about is how do we actually attack this market and accelerated growth. And that's our land realizing expand strategy that Andres really touched upon. This really started with our platform launch in 2021 in a different way because it allowed us to take advantage of our modular and composable platform and attack the market in a different way than we have done in the past, making it easier for smaller companies or small divisions or business units of our companies to get into the platform. And the idea is very simple. We find now the most compelling use case to the company is looking to get value from that we can deliver very quickly in a 3- to 6-month period, and they can realize value in a time frame so they can expand quicker. So we made a lot of investments on our presell side, when you think about enablement, training, compensation models to make that all work. On the realize side, from the time-to-value perspective, it's all about implementing and getting to value quickly. We invested significantly to reusable assets, packaged offerings that we can get to our customers to get us started really quickly. We also have this great side benefit and also help us become a little bit more scalable. So as you've seen our gross margins on the service side improved, that's the reason we expect that trend to continue. And finally, we get to expand. When you think about expand, we are no newbies to this. So we've talked about land and expand for a long time even prior to the platform launch, right? And we have a history of expanding our customers very successfully. When you think about the 4 examples I came up here, we have demonstrated we can expand -- land a customer and expand 6, 7x of the value where we landed at over a period of time. So what's different? What we are doing right now? What's different is the velocity. We think about it in the past, land -- expand was more in [indiscernible] motion. We land a platform historically, 3- to 4-year contract takes you a bit of time to get to value through the realized step and you get to the expansion. What's different now is the velocity of it. And what that means is that when -- as soon as we land at a customer, we started to realize and expand motions right away, because we are laying smaller delevering value quicker. We don't have to wait to get to expansions. And then though this flywheel that just accelerates as you go, and we saw that effect working really well last year, and we talked about doubling our deals in last year report as a result of the platform and changed the go-to-market approach. And the beautiful part of that is our sales team really loves is that when you don't sell the whole enchilada to begin with, you are not taking stuff away from your pipeline when you close the land deal, you are actually expanding your pipeline. So they are more crucial to their destiny, we're able to generate the momentum as we go. And so our goal now is to generate expense within 1 or 2 quarters of the actual land versus in the past that it should take us longer. And we have great examples of becoming [indiscernible] in the earnings call. Vector Security is a company that we landed in Q4 last year to help their sales teams optimize their quoting process with our CPQ. Already in Q1, they expanded to allow their partner and reseller channel to give them access. We have an industrial distributor that we landed with price management for them in Q1. Already in Q2, they have expanded to price optimization. That's the velocity that we are trying to drive. And that's how we're going to continue to drive the growth and drive more predictable and faster growth as we go. I'll close it, we will have ample time for playing your questions at the end of this. Now I would like to welcome Surain, the President of our travel go-to-market team. I'll take the B2B for now and he will share his strategy for go-to-market.

Thank you, Martin. It's a pleasure to talk to all of you today. So Amit touched upon this earlier, but the airline industry truly is going through a transformative moment. It's evolving from selling seats to selling offers. And this is a massive implication to the entire technology stack that drives airlines around the world. What used to be finding the right price for the right seat at the right time is now creating the right offer at the right time to the right individual. And that offer consists of far more than just the seat. So seat plus flight-related ancillaries, plus third-party ancillaries, plus a lot more that the airline can bundle together. And the airlines are first to revenue. In any travel situation, the first thing a traveler does is they organize their air travel. So the airlines had that first crack at the revenue of the traveler and this is expanding their opportunity to drive revenue as a company. We saw the beginning of this pre-COVID with NDC, new distribution capabilities, direct sales, et cetera but COVID truly accelerated this entire process. During COVID, airlines realized they need to have transparency for the travel or to -- as markets open and close to know what they -- where they could travel and where they couldn't. They needed automated changeability, refundability, all these customer experience capabilities that were always on the to-do list, but not a priority for airlines. So this transition, the entire mentality of the airline industry to think about offer management and order management, which really plays to many of the strengths of PROS, where we've really played for many years. So what is offer management? Offer management is bringing together the customer DNA, which is the information the airline has about the traveler, the product DNA, which are the unique features of the products that the airline has to sell and the context of the selling experience in real time. And when we say real time in the airline industry, it's within usually 50 milliseconds or less. So we're taking customer data. We're taking product data and context data in creating 1 unified data platform and running real-time AI algorithms to create request-specific offers, and this is truly transformative. And Amit alluded to some of that. And if you are able to sit in on the keynote of the travel segment, you've heard the Lufthansa Group talk about it as well as a key part of their strategy and how they've already seen revenue from it. Now once an offer is made, the customers purchase the offer, you have to fulfill it. That's where order management comes to play. Order management is actually taking that offer and being able to fulfill it in a very consistent, reliable way and not only fulfilling the various segments of a creative offer, but capturing the customer data along the way. Because many times mistakenly we think the traveler journey is one point of exploration of travel options and purchase. It's actually a lot more than that. The journey goes from preboarding, on flight, post departure. There are many opportunities an airline has to engage with its customer to create increased customer satisfaction and engagement and also drive revenue. So we've built a platform for offer an order that allows airlines to really meet all of these needs for the entire traveler journey. We're very excited to what these capabilities mean to the airline industry. So many of us think that airline is an airline, it's an airline. It takes us from point A to point B. There's a seat on a plane and they all operate the same. But actually, airlines can be very unique. Every airline has a unique network topology, a unique business model and go-to-market strategy. And they have different points in this offer order capability maturity journey that they are in today. So what we have done is built a unified platform for offer and order that suits the need of every airline that we have encountered around the world, be it a small, midsize or large carrier. And this involves all of these vertical elements that you see in the platform. We have various capabilities for revenue management, offer optimization and parts of the order, such as distribution and the digital experience. So we can fit our platform to every airline that wants to embark on this journey for offer and order, which we believe will be every airline in the world. It's a matter of time. Now on the far left, you see other areas where we play as well. Digital offer marketing, this came to play with our acquisition of EveryMundo, a leader in digital offer marketing. It's a perfect fit to what we do at PROS because we are the experts who are creating this special offer in real time that maximizes customer satisfaction, drives revenue, and they're on the front end of presenting the offer to the airline world. So we have a virtuous loop where we can create an offer and we have feedback of what people purchase and what they do not purchase. And that makes all of our AI algorithm smarter and learning algorithms as Michael pointed out. Now on the lower left-hand side, you'll see some other areas where we play, the group travel business, incredibly important for the airline space. Some airlines 10% plus of their revenue are driven by groups, the corporate travel business, which is also very important. And in the past, lived in a silo detached from true revenue management of passengers. Now we have a solution that makes it harmonized with the entire revenue management strategy. And finally, we have cargo with cargo pricing and sales. And what we have is a connection between cargo and the passenger side of the business because now the airline has levers to decide how to balance their revenue opportunities between what's in the belly and who's flying on top. And this became very important during COVID, where cargo was the lifeblood, the sustained airlines. They've now redoubled their investment in cargo as they saw the importance of that business for each and individual airline. So moving on, Andres mentioned our TAM, which is now $3.3 billion, and we wanted to share with you several of the drivers for this TAM. Basically, land, realize, expand, which Martin and Andres spoke about, applies very much to the airline space. There are 3 drivers we've listed. One is our expanded portfolio. We now bring to bear digital offer marketing as well as offer optimization, digital experience and the corporate travel solutions, all products that apply to every airline in the world. Beyond that, we've created new packages, which we call the essentials packages that allow us to enter a market in which we did not play before, which is the lower, midsized and smaller airline world. Historically, PROS did not play in that area because our products were beyond the price point that they could afford, but now we can land light and service the needs of these airlines as well. And finally, you'll see that this land, realize, expand strategy is already driving new market penetration, which we did not achieve before. So we're very excited about this. Similar to Martin's slide, you'll see some of the results of our land, realize, expand. A couple of things I'd like to point out. Number one, many of these land and expand happened during COVID. We had a number of airline customers actually double down on their investment with us and expand their offer and order portfolios. And if you attended the keynote Benedick Zimmerman of Lufthansa Group spoke to this, he spoke to how Lufthansa doubled down during COVID on continuous pricing with PROS and how now that's substantially paying off as demand has returned. As you know, 87% of global airline demand is back. So there's still more room to run, but we see this as a key driver of revenue for many airlines going forward. And I'd also like to point out on the upper left, one of the realizations from our land light with the essentials product with an airline that landed very light was 38,000 and then rapidly move forward to a 282,000 commitment to PROS. And finally, I just wanted to do some PROS travel by the numbers for you. We have customers on 6 continents, very global business, 55 of the world's top 100 airlines use some PROS product and 93 of the top 200 airlines use PROS products. So this really gives us a seat at the table as a strategic partner with many of the great leading airlines of the world. Why is this important? Number one, we have our finger on the pulse of where the airline industry is and where it's going. Number two, at PROS, we rarely innovate in a silo. We work very closely with our partners, with our new innovations to solve important use cases with them. So as you can see, we have many new airlines who can utilize and benefit from our technology. But you also see that we have an opportunity to expand our footprint at each of these airlines as we solve bigger problems for them, especially as they move to offer management and order management. Finally, and I think the most exciting number for us, over 50% of the world's air travelers were processed through some part of the PROS platform, a staggering number. And this was in -- you'll see in the bottom left, these were 2022 T2RL passenger data. One of our biggest areas, our footprint is in China and Chinese demand is just returning. So we believe and we fully believe and know that this number will be far higher than 50% by the end of the year. So we're very excited about these opportunities. We feel like offer and order is a new horizon that opens up many potential possibilities for the airline world and for PROS to help solve some big problems. Thank you. And with that, I'll hand it off to Stefan.

Thank you, Surain. I love the stat that we are -- have, airline customers on 6 continents. And I think as soon as an article comes up with an airline, maybe we'll call it Shackleton Airlines, maybe, right? We'll have them all 7 continents. And sorry, for those of you online that referenced to a keynote this morning. I really have just really 1 topic I want to cover with you today, and that's really our long-term model. I'm -- I could have actually distilled this into one slide. But in keeping with the spirit of explainability just like we want to have explainability on our AI. I want to tell you a little bit about what makes us, how we feel about our business and how we feel about our business today and extrapolating that for the next, call it, 3 years. First thing is that we have a track record, and I'm going to get into this in a minute of growing this business north of 20%. And I'm going to talk to you a little bit about that in -- and how we've learned that lesson and what we know about our business that gives us confidence that we can return to that level of growth. Second, you've heard Andres and Martin and Surain talk about, we have a platform that really provides us with access -- greater access to industry-best solutions. And if I had to pick one thing that I feel like it gives me the greatest amount of optimism going forward in our business, it's really this one. Because while on my third point, I talk about us having really the best products, which we do. We've always really had the best products. That's not anything really new. What's different is the accessibility of those products to more companies and also expanding the attractiveness to companies that may have been interested and have been in our target profile, but not had the approvals, not had the budget, what have you not able to execute to it. This really has changed everything, and I'm sure a lot of you didn't realize this when we announced it back in July of 2021, when we said we're going to -- we're putting on our new platform strategy, and we've got some product bundles that go with that, probably didn't think we were going to be hammering on it so much as we are today. It is such a central part of our business and what we're going to be doing over the course of the next several years to expand our reach as a company. I've already commented a little bit about the most -- the complete and comprehensive AI. I would not do anywhere justice to what Dr. Wu can do or even Andres or Martin or Surain. So I'm just going to say we have the most complete AI, and I think that, that stands on its own. And then as Surain just talked about, the industry is starting to recover. So everything that you've seen from us over the last 3 years has really been kind of with one arm tied behind our back, if you think about it because while, yes, we've had some good successes, that industry has not really been firing on all cylinders like it was pre-pandemic and like we know it will be over the course of the next several years. So that's kind of the backdrop and how we're thinking about the business because any time you do a long-term model, it's largely a spreadsheet exercise. Let's be real. It's a largely spreadsheet exercise. So what really matters is what goes into the assumptions, what do you know about your business and what can you have confidence that you want to predict and put into those cells to drive an outcome? So as I was saying, we have a track record for generating 20% growth. Before we made the decision to go cloud-first and become a SaaS company, we were growing at 27% CAGR. We were already doing that. We decided to reset things for ourselves because at that point in time, we wanted to make our product more accessible. And we knew that the only way we were going to be able to accomplish that was becoming a SaaS company. We could not stay on-prem and make our product more accessible in terms of the market. So in 2015, we decided to go cloud and you could see what we were able to do then. And then obviously, just as we were getting through the tail end of that transformation, COVID hit, and that obviously had an impact on our business. But what I want to tell you is you look at this orange section and you think about this go-to-market transformation that I've been talking about, what I will tell you is a lot of the same signs that we saw in '15 and '16 about our business, we're seeing today. So we're at the very front end of what we see as a nice upward trajectory in our business, and it's largely because of the things that we've done to set ourselves up by further expanding our capabilities with our product but also making it easier to access. Buried within that slide, you probably saw, we kind of highlighted what our subscription growth was doing. And there's 2 things I want to share with you on this slide. Number one, our subscription business is constantly growing even during those tough times during COVID. Our growth driver of our business was continuing to grow. The second is, I want to point you to the pie charts that are at the very beginning and the very end of this time line. If you look at the makeup of our business back in 2015, you'll see just how little of subscription we had, but you also noticed how much services we had. Services was a much bigger part of our business and subscription was a much smaller part of our business. Translate that all the way to today or I should say, in this case, 2022, and you'll note that our subscription business represents almost 3/4 of our total business and services down to 16% of our total business. All the things that we're talking about have already started manifesting themselves in the product, and we expect to see that continue as we go forward over the course of the next 3 years. And I can't go too long without talking about our gross retention rates and I emphasize gross retention rates, as all of you know, we measure ourselves on true retention. We don't cloud it with new business bookings that go into existing accounts. We really talk about what we had at the beginning of the year and what we have at the end of the year in terms of business from our customers. And our retention rates have been consistently at the 93-plus percent level. And we feel like that's a metric that actually can get a little better because when we dig into it and look at our subscription retention rates, they're actually a little better than that. And so as subscription becomes the more dominant part of our business as maintenance starts to roll off, we'll start to see more of that stronger retention rate actually apply and manifest itself in this number. So as we think about the bookings side of our business and how that manifests itself in revenue, we actually feel very good about how we're positioned and how we're going to be able to hang on to those customers going forward. So it's a good building block, it's good foundation upon which to build our model. But we also focus on profitability. And as I've said this many, many times, our profitability story starts with our gross margins. And more specifically, it starts with our subscription gross margins. And I have to be honest, when I sat in front of a lot of you back in 2015 and 2016 when we had these Investor Days, we were targeting a 75% profitability -- our margin on our subscription business. And I have to be honest, we were looking at 50 -- upper 50s as you can see on this chart. There was a lot of work that we needed to do. I knew it was achievable, but I also knew there was a lot of things that were outside of our control that we're going to drive that, and we needed to execute as a business, both as an engineering team, and we also needed to execute as a sales team and take advantage of our infrastructure. Not only did we do that and deliver that, we've actually exceeded it. And as you're going to see here in a few minutes, we're actually going to set a new target that goes beyond even where we are today. So there's the explainability. There's a lot that went into us building our model. And so now, without further ado, I'll talk about where we see ourselves in the next 3 years. First thing is we buy into the Rule of 40. We get it. We understand why that's a metric, why that's something that people talk about. We understand that maximizing growth at the same time delivering a good, reasonable return to shareholders is an important combination and something that we strive and feel like we can achieve over the course of the next 3 years. The revenue growth, that's something that we've actually spent time with Martin and Surain and their teams talking about what that's going to look like, what that's going to take to generate that kind of revenue number. That was basically on the basis of a lot of the things they were talking about in terms of the land, realize and expand strategy. That's what's built into the 16% to 21% growth rate. On the margin side and on the free cash flow margin side, getting to 19% to 24%, that's a little bit further of a climb to make, obviously, because as you look at today, we're looking at this year being -- turning into profitability. And so being in the single-digit margin range and moving all the way up to the 19% to 24%, that's a bigger jump. But we're already making a lot of those changes that need to happen. And what I would tell you on this next chart, I'm going to tell you a little bit about how we're going to achieve it from an OpEx perspective. Well, first, I'll hit the margins first, actually. So starting on the left-hand side, you'll note that we have about a breakeven services business, and it shows at minus 1% and darn it, we were very close to making that breakeven, about $200,000 off from being -- making that a breakeven number. So we're right at breakeven on professional services. As Martin was talking about, a lot of the changes, a lot of the things we're doing, we feel like they're going to get us to that 10% to 12% range on professional services. Also, as I mentioned, on the subscription gross margin side, we feel like an 80% to 82% gross margin on subscription is an achievable number. Again, not going to be easy. There's a lot of work that needs to happen. There's a lot of efficiencies that we need to build in because we provide a lot of capability as Michael was talking about earlier, there's algorithms inside of algorithms inside of algorithms to go into our science and that doesn't come cheaply because it takes compute to drive those types of answers. So as a result, there's always a cost component that we have to work with, but our engineers have done an amazing job of doing that as efficiently as possible. They have some more tricks up their sleeve at least that's what they've told me, that's going to get us to a margin number that gets us over 80%. So that's what we're thinking about for the next 3 years. And then that -- all of that results in a gross margin that gets us to between 69% and 71%. So let's just call it 70%. So at 70%, we feel very confident we can get to those overall free cash flow margins of 19% to 21%. So underlying all of that is a subscription growth rate that's going to drive the total growth rate. It's going to be the primary reason why we get to where we want to go. But it's also going to come with a little bit of services, obviously, not as much, but to some degree, services is going to grow a little bit with that. But here's the thing I really wanted to focus on, and that is our expense to revenue ratios. And if you look at this chart from where we are today, the biggest gap appears to be R&D. And you might think, gosh, that's -- what does that mean to your innovation? What does that mean to your overall business? And the answer is, well, we've already made a lot of these moves. So if you look at our R&D spend as a percentage of revenue in Q4 of last year and Q1 of this year, it's 25% and 26%. We've already moved the needle quite a bit on that. And the reason that we've been able to move the needle is because we've actually finished a lot of the work that we were doing as a part of our SaaS transition. I want to remind you, when we set up in front of you back in 2015 and said, we're going to become a SaaS company, we were emphatic in saying it was not a model shift. It was a fundamental shift in how we were going to go to market and run our business. And that's true, including architecting and rearchitecting and rebuilding our products. So we've largely completed that work. And so we do not need that additional cost that we had inclusive in our R&D spend over these last several years, that's not something we need to carry going forward. So really, when you look at that change of going from the 29% towards the 19% to 21%, we've already made a significant move in that direction in the last 2 quarters. So it's not as big of a lift. It's still a big lift. It's still going to be an area that we need to continue to drive efficiencies and scalability, but that's true in our selling and marketing and it's true in our G&A. And I think that's something we can achieve because we've built infrastructure around the world. As I joked at the beginning, we've got customers in 6 continents around the world, which means we have infrastructure in many places that our competitors do not. And we can leverage that infrastructure as we grow our business and not have to make investments in our overall costs. So that's what I had for you. So just to wrap up, we know what it takes to grow at this level. We've done it before. We know what it takes, and I'll tell you this, I think our situation and our position is much better than it was if you go back and looked at 2014 or went back and looked at 2019. Where we sit today, we're in a much better shape because of what we've done with our platform. We've also made significant strides towards our profitability. We're on that track. We need to continue with that trajectory and there is buy-in amongst our management team to continue to drive more efficiency. I don't -- I mean, I'll say it, but I think you've been able to see it with our customers and with what Martin was talking about from an industry perspective, the gap between our competitors' technology and our technology has only widened. We have a further lead today. Our Gen 4 guidance is something the market has never seen. Our willingness to pay capabilities that we've done with [indiscernible], the market's never seen. Our gap has only widened. So our competitive moat, if you will, has only gotten bigger. And the fact that we can now do it in a much more consumer-friendly or a customer-friendly way, I think, just really enhances our ability going forward. And then finally, adoption of AI is literally increasing by the day. So it's easier for us to sell our solutions in what we do than it was before, primarily because people are used to having AI. So that's what I had for you. I really wanted to talk primarily about the long-term model. That's really the new news that we had for you today. And with that, I'd like to invite our team together and Belinda, and we'll take some questions from you. Already have one from Chad. That was quick.

I figured all the hands would go up right away. I did prep questions, which is because just in case nobody wanted to ask any, but -- all right. All right. Chad was rapid fire with the hand, so Chad.

Good. So with all due respect to everybody else, that was the kind of cleanup hitting part of the presentation. So thank you with all due respect to everybody else. But -- so just in terms of that long-term target on total revenue and subscription revenue growth, how should we think about the 2 businesses, travel and B2B within that framework of the growth guidance?

Yes. Here we go. So yes, the travel business, we feel like has a tremendous opportunity to grow. I think if you were to ask Surain directly, he will give you a better number than I will because I obviously did the CFO thing, and I put a few things on top of the numbers to see something that we felt like we could commit to and put out there. But we feel like our travel business is going to be in those numbers, say, call it in the middle teens growth range and think about the B2B business being on the 20s, low 20s. So if you think about the extreme of what I shared, the 16% to 21%, think of travel being on that the lower end of that and B2B being on the higher end of that.

Right. And then maybe one quick follow-up. So it's a 2026 target, but it seems like the level of confidence in the leading indicators on both sides of your business, are just accelerating in general. So is that fair to say we kind of say incremental revenue acceleration and maybe more incremental margin acceleration just kind of annually from here to then? Is that a fair characterization?

Yes, yes. So the good news is you're not going to have to wait until 2026 to just see it happen. So the good news is, as we've modeled this out, we feel like there's going to be a pretty even feel to that as we go -- as we execute in 2023 and we get into '24 and '25, you'll see not a complete even stream of production there, but pretty close. You'll definitely see we're on the right track and getting to achieving those numbers that we put out there for 2026.

Got it.

Jason?

I'll use the microphone, too. The margin guidance pretty impressive. But you're right, it's a gap. And it looks like a lot of that's going to be kind of made up from on the services side. Can you talk about some of the levers there to get that margin higher? And then also maybe on the subscription side?

Yes. So I'll start with subscription. There's been -- like I said, we've rearchitected the product to a large degree. And one of the things that we've seen going forward is there's still a few products that we have where we have good strong SLAs in place. And we put redundancies in place. We've actually put additional compute in place to ensure that we deliver to those SLAs. Our engineering team has identified ways in which we can eliminate putting those types of redundancies in place and still generate those SLAs and do it at a lower cost. So as I think about the subscription side of the house, that's primarily where it's going to come from, is delivering high availability and real-time answers in a more efficient way. And I just kind of gave you an example of how we intend to do that. On the professional services side, I can let Martin or Surain talk as well. But on the professional services side, there's so much work that's going into the product itself and the prepackaged solutions that we're putting together with our platform strategy. So one of the things that oftentimes gets overlooked is when we announced our platform strategy, we also put together services packages that went with it. And so we continuously work to improve those packages, so we can deliver them with more consistency, we can deliver them with newer resources, not necessarily experienced resources that cost more money and that kind of thing. So there's been a number of things that happened as a result of that platform strategy. I don't know, Martin or Surain, if there's anything you want to add to that?

Yes. I think just expand on the part you're talking about the standardization and the packages. We've taken the best and brightest that we had in our organization [indiscernible] we're going to use them to invest in standardization packages, reasonable assets, which we are now applying and creating new packages almost every month as we go, we launched our rapid package, for example, that allows customers to get to value 30 days recently. And we already have customers that have used it, and they are actually getting live -- getting value and expanding, which was the whole point of -- so that's helping us improving profitability. The other part is that as we look forward and as we standardize the sort of the technical part of the implementation, we are also going to focus on more high-value added services that we already are providing to our customers in forms of more advanced guidance, leadership on modeling on the signs on optimization, on change management and other pieces. So we'll see more of those services come into our portfolio over time and they are higher-margin services than the technical side.

So I did see Parker's hand [indiscernible] and then I'll try to get around everybody.

All right. Can you hear me?

Yes.

It's for Dr. Wu, actually. We've heard a lot about AI today and PROS capabilities there. But I'm curious if you could talk a little bit more about what you're seeing on your customers' side. How much of a priority is the development of their own algorithms? What are you guys doing to make it easier to implement those? And what are the implications for customer success?

Yes. So I think the -- okay. So there's a few questions there, right? So -- so first of all, I think that we are definitely seeing that the adoption of AI is increasing by the day, Stefan has said it. So customers are also investing in building their, I would say, data science capabilities and algorithm and they have, obviously, collect their proprietary data. But one of the things that we invest a lot in one of those categories that we say the other events algorithms is extensibility of our AI, right? So our AI is, it's called extensible AI. So extensible AI, I would say, it's a little bit of a misnomer because it's not AI [indiscernible] but it's a set of tool that makes your AI more extensible, right? So it's like explainable AI, it's a bunch of tools that makes sure AI more explainable. Same thing is extensible AI. So we have this tool that enables our AI to easily ingest proprietary customer data if they have it, if they -- I don't know where they get them, they could get them from buying them [indiscernible] them, whatever, right? I mean to have those data, we could ingest them [indiscernible] for example, the Gen 4 using the neural network approach, we could easily ingest additional covariants and predictors. And moreover, we could also combine it with our solution, augment our solution with the algorithm as well. If they have not just data, but they have to develop their algorithm, we can actually using this type of learning algorithm learning, we actually combine them together so that it functions even more optimally.

Martin and Surain, do you want to comment -- sorry, just on the customer success impacts and maybe what you're seeing in real-world examples as well.

Yes, for sure. I just wanted to say, every customer executive meeting we've had in the last 6 months has involved what are we doing in AI and the customer telling us what they are doing in AI to see how the 2 fit together. It is universal. And our customers definitely see this as -- in the airline industry as a huge driver of future profitability and customer retention and connection. They realize that the airline world is behind compared to retailers such as Amazon or like Netflix, et cetera, and they see what value AI is driving all these other industries. And it's a very easy connection to make that airlines have all this data and should be driving similar value for airlines. So we see it across the board.

Yes, I think it's similar on B2B, it's a question of the maturity of the customer. So when you think about extensible AI, it's not something [indiscernible]. It's something that we explain our customers into as they mature on their road to pricing excellence. But when you think about what in addition to just the accessible models, the really capability that I think is really driving this is our ability that we released last year to run multiple models at the same time. And so when you think about a customer, and I actually mentioned them earlier, one of the leading PC manufacturers in the world, they use the PROS AI models to optimize the majority of their business, but they found like, you know what, for one segment of the business, call it, large contracts or specific target market with some unique characteristics, we want to run a Monte Carlo simulation that set up a little bit in slightly different ways. And so we, of course, they can run the model on top of the PROS platform. We hosted. We run it. We deliver in real time to their quoting solutions. But not only that we now also route the request based on how -- based on what the requirement is, whether it's going to hit customer specific model or the PROS model, and allowed to do some A/B testing, et cetera. So it's really creating even for more advanced customers now kind of with the next step to get to in terms of maturity.

Okay. Let's go to Brian. We do have questions on the phone, to which we'll get to and some of the other hands that went up.

It's Brian Schwartz from Oppenheimer. I wanted to continue the discussion on AI. You kind of touched upon the use cases. I wanted to touch upon how to think about the evolution of the pricing model and the monetization with that. And so I don't know if it's a question for Andres or for Martin or Surain. Surain, you're talking about how your airline customers are seeing AI as a way of increasing profitability. Well, there's certainly a belief here that AI is going to replace workers and replace the number of users that probably are going to need to be an organization to run the PROS system. So how do you overcome that with your pricing model on your monetization? Do you come out with more pricing tiers, do you raise prices? Is there a potential success-based pricing model to capture the value that you'll deliver but maybe with less workers needed?

I can take [indiscernible] when you think about how we go to market and how we price our AI when we go to market, it's not based on users, et cetera, it's based on the value that we provide. So the metric that we use most commonly is revenue under management. And so we price based on that for some companies where revenue is a very volatile number that are tied to commodities, we may use volume, but it really tied to the value that we drive because that's directly tied to the major output that we are optimizing. So we're certainly talking and thinking about how we best monetize the AI and there will be things that will release to the market over time, but we don't have an immediate issue where we see action to react really quickly to kind of get back to our revenue [indiscernible] based on the model that we have.

Yes. In addition to that, we also have a transaction or volume, so the more volume you process with revenue, you get x amount of volume on platform if you exceed those volume metrics, think of that the consumption-oriented component. We have opportunities to uplift and that's very common in travel. The way that we did our volume is, don't think each unit of transaction costs extra, it's blocks of units, because we don't want to be that dynamic that every one transaction costs x amount, we find that's very difficult for customers. What they like is having, say, in travel and maybe we process 10 million transactions, and they get if they want to go above 10 million, they buy another 1 million transactions, that level of bucketing so that we give them a way to grow and stay on average within that threshold. We also allow the transactional volume is not measured on unique peaks and valleys, but usually, let's say, a period of time moving average of what that volume miss because you do see some spikes in volumes coming down. And again, we want to be going to create a model that we can benefit financially, but we also want to create a model that's easy for our customers in friendly to consume. But I think that's going to be a really important area as our customers evolve and start leveraging more and more models on the platform.

And I would just add one more thing. In the airline scenario, with the emergence of our AI-driven offer management, we're handling a much larger piece of the revenue pie for the airline. It's not just the seat, it's the ancillary, the bundle, we're bringing into play groups, corporate, cargo. So it's a very -- it's the end-to-end revenue spectrum for an airline, which is going to allow us to drive our subscription growth.

Yes. I will add one more to the job displacement comment that you mentioned because I do believe that -- in the long run, any technology will actually create more job in the long run. There may be some, I would say, short-term displacement or I would say, shifting of people's job. I think people are using -- it's like I've used maybe a dumb example, but I mean before there were cars, people had to get from A to B, they used horse trolley, right? But then so once you have a car, it's a new technology, you still need to get people from A to B, but you're just using a different technology to get people from A to B, right? So before AI, people still need to do pricing. They need -- now they have to just using a different technology to do it. So I would say, in the short term, there may be some job displacement, but I think largely, I think there will be just a shift of how people do their work. And the longer term, these technology typically create a lot more opportunity for jobs.

Okay. I'm going to go to [indiscernible] because I know we have some questions coming in on the webcast. I don't want to forget our virtual attendees.

This -- this is probably a question for Surainn. So how should we think about where PROS is going with offer and order management capabilities relative to the current generation of PSS providers? And then do you see a path for PROS to ultimately displace those providers in the future?

Offer and orders definitely a tremendous change in the technology stack of the airline world. The PSS providers have provided a very valuable service for many years now for decades. But they do not provide a platform for airlines to achieve their goals of offer and order because they're just not designed for creating special offers with the seat plus ancillaries, et cetera, and then to fulfill these offers. Now as we know, the PSS are very infrastructural to airlines around the world. But as orders emerge, airlines are aggressively looking at what's the transitional world where they go from the P&R to the order centric, order first fulfillment system of the future. So it's going to be a very interesting time. It's -- we believe strongly it's going to be an open platform. There's not one solution that drives this future state. It will be an open platform with APIs with many companies contributing to it. But we believe that our PROS AI capabilities are central to it. We can really drive this change.

And I think -- did you have a question at the front?

Yes. [indiscernible] so I'm assuming, Stefan, you used your own tools to do that. You can use Excel for those models -- long-term models. Not a question, but I'm just going to assume that. I heard a lot from some customers that are relatively new. They seem to be B2B, what I'd call, old-line industrial companies. It seems like they complain a lot about change management and how do we get our employees to embrace this. So question one is really about how do you guys help with that? Two is you talk about this long-term plan, but -- maybe talk about what you need infrastructure-wise to get you to these levels? Do you need more customer success people? Do you need more sales? Do you have to invest in people relative to your growth? I think that's most of my questions.

Yes, I can take that one on change management. It's a great point. And when you think about it, you are taking in many of these cases, there's a lot of [indiscernible] companies. You have reps that have been there for 20 years. They know the customers, they know the business. And now they've got this AI recommendation on their screen. And so there is some change management that you have to do. And we've done that very successfully. That's how we are able to drive the results that you see in terms of the returns. But we've changed the approach and how we've actually gone to it. When we first started, we hired a lot of really smart consultants -- strategic consultants, high-dollar services to go to these customers and work with them and do workshops and do the change management sessions and set up reporting and tracking to see how they were doing. That was really good and effective, but it's very expensive, it didn't help our services margins. And so the thing that we really switched to is we built these [indiscernible] into the platform itself. So we provide our customers every month with all of the change management information data that they need and then we drive best practices to actually help them adapt. And so when you think about what it looks like right now is you have a company, we roll out AI, you're going to have varied levels of adoption. You're going to have the high adopters that get it right away. You got people in the middle and you got people that just -- I don't need this to do my job. And very clearly in our data now highlight who those slow adopters are, compare their performance in terms of revenue and margin growth compared to the high adopters. And what you will find is the second, you showed the 20 year, 10 year salesperson, the guy that just started 3 months ago and does know any better and pulls better performance, it changes the game really quick, but it's not instant. You still have to track the metrics. You have to show the case. You have to do lots of things, incentives, some of the things that go around it whether we have captured in our best practices, and we are able to get through it and drive significant value for our customers that way.

And then to answer your question on will we need to invest in people and resources. And the answer is yes. We do have that built into the plan. Although I will say how we invest will be a little differently going forward than how we've invested in the past. So it starts with the amount of investment we're going to have in R&D is going to be less. But you probably also noticed that we didn't have as much efficiency on the selling and marketing line item because we are going to need more frontline salespeople selling. We're going to need more customer success, people managing the enhanced number of customers that we have. So yes, we are planning to make investments in those areas. But to Martin's point, we also feel like we -- there's efficiency gains to be had there as well. So that is modeled in there as well, which is why that ratio comes down slightly.

And you didn't talk about stock-based comp. Obviously, that doesn't go into the Rule of 40. How do you see that going forward? I think there are some investors that care.

Yes. So that has become an increasingly bigger and bigger topic to your point. It's something that we look at as well, our comp committee, who governs how we issue stock is keen on that as well. And so we've looked at it more to a greater degree this past year and we're just below the median of our peer group. So I think the median was, if I remember correctly, was around 16% of revenue. It was in stock-based comp expense around 15%. As we look at this number going forward, we do see that percentage coming down. And the reason we see that is there are a few -- there were a few unique grants that happened over the course of the last couple of years that one we see going away, and we also don't see repeating. One was as a result of the acquisition we did with EveryMundo. And then also we did a grant to nonexecutives for employee retention purposes back in The Great Resignation era. And that has had a little bit of an impact on our stock-based comp expense that will go away, and you'll see that number start to coming down. So expect to see that number trending down over the course of the next 3 years as well.

Scott Berg.

Two go-to-market questions probably for Martin and Surain. First of all, on the travel side, if you look at your bookings historically, it's been heavy with your O&D products, all the talk at the conference here today and over the last year is around, obviously, the offer and management and some of the new technologies, but I guess the question there is, what does that balance kind of look like going forward? Is it more kind of this historical core solution set of PROS? Or is it more balanced mix? And then the other question for Martin is kind of embedded in your bookings and maybe assumptions for the next couple of years. The one thing that struck me at this conference that's been different than my, I don't know, 10 or 11 years that I've been coming here is your SI partner involvement is not as I don't know out there, as big as this one as it has in the past. How do partners continue to influence your sales cycles, especially the larger SI partners because it almost seems like the smaller pricing and packaging actually don't play into a partner strategy as well because they like the big boom transformational projects.

I'll start with the airline part of your question. We still see a lot of room for our core revenue management, O&D RM, for example, products to grow within a -- the client base and across the airline world. As you've seen, we have a substantial footprint, but there are a number of other airlines that can truly benefit from our revenue management capabilities. But beyond that, we've dramatically [indiscernible] with our new technology. We've released willingness to pay, which is a new generation of AI demand-driven forecasting. And we're now rolling it out in production across some of our core partners, and we believe that this will be transformational in the airline world. And then we are also working towards something called request specific pricing where we're targeting through the core revenue management product offers. So there's more room to grow for sure in the core RM products. But that being said, DPA, dynamic pricing ancillaries, the AI-driven bundling. All of these are new capabilities that we're just now bringing to market that we believe have widespread utility and will drive revenue across all the world's airlines will be a core part of their offer management transition as they transition the technology stack. We actually see growth across the board in both those areas.

The only thing I would add on travel is we've already seen a lot more business across even in the digital fare marketing side. So I would say where before RM was the core selling module now, we're seeing a lot more from our groups, from corporate sales from. So definitely, we're seeing more solutions in a better mix across the product suite.

Yes, I think it's a great question. And I think the answer is nothing has changed in that direction. As you heard Andres mentioned, you talked about our 3 pillars that are core to our strategy. One of those is go to market with our partners. And so when we think about partners, we think about them as going to market together, right? We also think about them influencing deals. We also thinking about them helping us deliver the deals. You mentioned the big bang projects that are -- that they may be particularly like. We still have services opportunities. As Stefan mentioned, in our long-term model, we still plan to have our services be 15%, 16% of our business. And as we apply it to our growth rates, it's a pretty significant business. What we are changing is how we are going after it. So yes, we are not necessarily landing with a huge use case that will require a large investment [indiscernible] resources and large partner involvement. But we do have the expansions, and there is plenty of opportunity to expand. We are part of many digital transformations with our partners together when we jointly go and it's not just a PROS price optimization or CPQ or power larger transformation. And there are a lot of opportunities there for partners, and I spoke with many of them here that are at a conference, some with boost, some without boost that are here, work to work together with our prospects and customers. And talk about our go-to-market partnership. So it continues to be an important part of our go to market. The only other thing I would add though is what you will see is different is in addition to kind of the big global GSIs, we are also partnering with smaller, more boutique partners that are focused either very strong in a certain industry or they are very strong in a certain geography, and we are establishing those partnerships as well, and that's helping us attack that market in the $100 million to $500 million to $750 million market. They're really effective in that space with us as well.

One other thing. We spent a lot of time talking about how we've -- our platform strategy has allowed us to go and do the land, realize and expand strategy. But just to make the obvious known, we still like big deals. That's -- and we still see those as a part of our future because there are customers who are 100% bought in, ready to make the deployment across the board and we still expect to see those. However, we're not going to be as dependent upon those as we would have been, say, 5, 6 years ago because we'll have a much stronger base of smaller transactions.

So I think we're right at time unfortunately. And I do want to keep to time because 2 hours is long -- but hey, I want to thank all of you for -- again, for joining in person, making the investment in the trip to come out. It means a lot to us. I'm always here to answer questions. You know where to find me, all of you. So please reach out if there's anything else that you want clarified, and thank you very much to everyone who attended virtually. We appreciate it.

Thank you. .

Thank you.

Thank you.