Good afternoon everyone, and thank you for joining us today for the PROS Holdings financial results conference call for the first quarter of 2012. As mentioned my name is Damian Olthoff, I'm the General Counsel of PROS.

Joining me today is Andres Reiner, President and Chief Executive Officer; and Charlie Murphy, Executive Vice President and Chief Financial Officer.

In today's conference call, Andres will provide commentary on the first quarter of 2012 and then Charlie will provide with the review of financial results and our outlook before we open up the call to questions.

Before we begin, we must caution you that some of today's remarks including our guidance for the year, our competitive position, future business prospects, revenue growth, market opportunities, as well as statements made during the question-and-answer session contain forward-looking statements. These statements are subject to numerous and important factors, risks and uncertainties, which could cause actual results to differ from the results implied by these or other forward-looking statements.

Also, these statements are based solely on the present information and are subject to risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. Additional information concerning risks and other factors that may cause the actual results to differ can be found on the company's filings with the SEC.

Also, please note that a replay of today's webcast will be available in the Investor Relations section of our website at www.prospricing.com.

Finally, PROS has provided in its earnings release and we'll provide in this conference call, forward-looking guidance. We will not provide any further guidance or updates on our performance during the year, unless we do so in a public forum.

PROS does not assume any obligation to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they are made.

I'd also like to point out that in addition to reporting financial results in accordance with generally accepted accounting principles or GAAP, the PROS' results report certain non-GAAP financial results. Investors are encouraged to review the reconciliation of each non-GAAP measure to the most directly comparable GAAP measure in the tables accompanying the press release distributed earlier today and can also be found on the web site, in the Investor Relation section.

With that, I'd like to turn the call over to Anders.

Thank you, Damian. And thank you to all, who are joining us on today's call.

We're pleased to see our market position strengthen in the first quarter. As news of our customer success is reaching more and more companies, we are searching for the strategic advantage our technology offers.

During the first quarter, we continued to execute on the 3 pillars of our growth strategy, accelerating awareness and adoption of PROS, further expanding our product leadership and increasing our global reach and scale. We are confident that our growth strategies are working.

Let me share with you a few of the highlights from the first quarter.

We reported revenue of $27 million, a 26% increase over the first quarter of 2011. Non-GAAP operating income was $4.2 million for the first quarter, up 40% from a year ago.

And non-GAAP EPS for the first quarter was $0.10 per share, up from $0.07 a year ago.

We continued to focus an accelerating awareness and adoption of PROS solutions. Earlier this year, we commissioned a third party to help benchmark our brand position.

I am pleased to report that this blind survey validated our leadership position within our target industries. We are encouraged that the PROS brand had solid traction in the market and our efforts to reach our target audiences with our compelling value proposition are clearly working.

I'm also pleased to report the overwhelming success of our recent summits in New York and Munich. We had a record number of attendees at both events.

The majority of which were prospects interested in hearing PROS' customers sharing their incredible success stories about monetizing big data and optimizing sales performance with PROS.

We believe one of our key strategic differentiators is our high level of customer referenceability, which was on display with executive presentations from Celanese, Coates Hire, DePuy, McKesson, Merck, Navistar, S.P. Richards and Virgin Atlantic.

We heard time and again about the significant ROI PROS delivers.

Further validating that, our investments in product innovation and service quality are enabling our customers to reach their business goals. We view the increasing willingness of our customers to share their success stories in record level of attendance, a signs that the market is maturing.

Since our last call we extended our product leadership by introducing our latest innovation, Rebate Optimizer. This solution was designed in collaboration with several of our key customers to improve profitability of rebate programs by linking pricing and rebates in a single solution.

Rebate Optimizer increases transparency of rebate performance and provides sales teams with the rebate insights during negotiations. The release of Rebate Optimizer enables the collaborative enterprise, bringing together sales, marketing and pricing to enable our customers to make better business decisions and win more business profitably.

We have always been committed to helping our customers compete and win in their markets. And this new innovation, it's a natural extension of that commitment.

I am pleased to report that we've already licensed this new product. Product innovation has always been at the center of our value proposition and we will continue to invest in extending our product leadership.

Finally, we continue to expand our global reach and scale through direct sales coverage and our partner ecosystem. In the first quarter, we added additional new quota-carrying sales personnel, bringing us to a total of 30 on track for our goal of approximately 40% increase for 2012.

There is strong demand for our solutions and we are particularly pleased to see an increased rate of new account opportunities in our B2B industries. In addition, we are scaling up to serve the mid-market with the recent addition of a Vice President of Sales focused exclusively on that segment.

Kevin Fitzgerald joined PROS in April from iContact where he led the growth of their mid-market business.

Our global partner ecosystem continues to strengthen. We are seeing the signs of pipeline growth among our resellers who continue to invest in building the market awareness and demand.

Our technology partnerships are also getting stronger. We continue to invest in our SAP partnership.

With more than 50% of our B2B customers running SAP, we're committed to providing the most complete and seamless integration capabilities in the market. We have been investing in our SAP partnership for the last past 7 years, and we recently achieved the most current product certifications.

We will continue to invest in this strategic partnership.

Our partnership with Microsoft is stronger than ever. From a go-to-market standpoint, Microsoft was our primary sponsor at our Summits in New York and Munich.

Microsoft also featured PROS in 2 additions of their customer magazine, targeting our key industries. On the product side, PROS was elected as the launch partner for Microsoft recently released SQL Server 2012 with enhanced in-memory database technology now leveraging our pricing solution.

Performance advances like these are critical to support the growing demand for big data solutions. And our partnership with Microsoft decisions PROS to capitalize on this opportunity.

We're pleased with our continued progress to increase our global reach and scale through our partner ecosystem.

Looking ahead, we will continue to invest in initiatives to accelerate awareness and adoption, extend our product leadership decision and increase our global reach and scale. As we have stated in the past, we can experience variability in the timing of deal closures on a quarter-to-quarter basis.

During the first quarter, we did experience extended sales cycles, which are expected to have a slight impact on near-term revenue. Based on current sales activity, we don't believe this is a trend.

Deals slated to close throughout the year are moving through the pipeline and we continue to believe we can achieve a full-year revenue growth of approximately 20%.

We are confident because demand for our solutions has never been stronger. Our customers are realizing high value.

Our partner ecosystem is strengthening and our product innovations continue to set the pace in the market. We're also confident because our customers continue to turn to PROS for additional solutions and services that have helped them outperform in their markets, resulting in maintenance renewal rates over 95%.

Our partnership approach with customers distinguishes PROS in the market and we will continue to invest in solutions and explore potential M&A opportunities that further extend our value proposition. We believe that a combination of our highly referenceable customers with the growing demand for technology that optimizes sales performance and monetizes big data positions PROS for continued success in 2012 and beyond.

Now let me turn the call over to Charlie so he can provide you with a review of our financial results and our outlook for the second quarter of 2012.

Thanks, Andres. I will be discussing our financial results on a non-GAAP basis.

A full GAAP to non-GAAP reconciliation is included in our earnings release which can be found on our website in the Investor Relations section.

Revenue for the first quarter was $27 million, which was up 26% from a year ago. License and implementation revenue was $17.8 million, up 29% from a year ago.

License and implementation fees are bundled together and revenue is generally recognized on a percentage completion basis over the implementation period.

Maintenance and support revenue was $9.2 million and was up 21% year-over-year and represents the largest component of revenue from recurring sources. Total recurring revenue, which includes maintenance and support revenue and a number of term license contracts, was consistent with prior quarters at 42% of revenue.

In the first quarter 60% of our revenue came from outside of the United States which is unchanged from year ago. 32% of our revenue in the first quarter came from Europe compared to 25% a year ago.

We continue to diversify our revenue around the globe and we are pleased with the strong growth we had achieved both in the U.S. and across our international markets.

Gross margins in the first quarter were approximately 72% on non-GAAP basis, unchanged from the year ago period. Margins can vary from period-to-period primarily due to the level of implementation services required relative to the total contract item.

Looking at operating expenses, total non-GAAP operating expenses for the quarter were $15.2 million compared with $12.4 million a year ago with the increase of 23% representing planned investments in our future growth. We will continue to invest as we look ahead to capitalize on what we believe is a very large market opportunity.

Non-GAAP operating income in the first quarter increased approximately 40% to $4.2 million or a non-GAAP operating margin of 15.5%.

Based on a non-GAAP effective tax rate of 35%, non-GAAP net income was $2.7 million for the quarter, an increase of 34% over the prior year. Non-GAAP earnings per share was $0.10 compared to $0.07 per share a year ago.

On a GAAP basis earnings per share was $0.04 and was lower than our guidance as a result of higher stock based compensation expense. A portion of compensation expenses is not deductible resulting in a higher GAAP effective tax rate.

A reconciliation of GAAP to non-GAAP is provided in our press release.

Now moving to the balance sheet. We ended the first quarter with cash and cash equivalents of $70.9 million, an increase of $2.5 million from the end of the fourth quarter.

Gross accounts receivables at the end of the quarter, were $27.9 million.

Day sales outstanding were approximately 104 days, slightly above our historical average which considers normal variations in accounts receivable and the timing of collections and invoicing of milestone billings under our contracts.

We continue to generate operating cash flow, with approximately $3.4 million of operating cash flow generated in the quarter, yielding a cash flow margin of 12.7%. For the year, we expect our annual operating cash flow to approximate our annual non-GAAP operating income.

We expect capital spending for the year to be approximately $6.5 million, as a result of increased infrastructure investments and facility costs.

On the headcount including outsourcing, at the end of the quarter it was 580, up from 540 at the end of 2011, an increase of 40 or approximately 7%. We continue to increase our sales, marketing, engineering, professional services and administrative resources, which reflects confidence in our long-term opportunity.

Before I turn to our guidance from second quarter in the year, let me provide you with some additional information. As for past quarters, we believe our history of variability and sales from quarter-to-quarter, has and likely will continue.

We did experienced extended sales cycle at the first quarter, which we expect will slightly impact the near term revenue growth. However, we remain confident in our ability to grow full year revenue of approximately 20%.

Our pipeline activity remains good and we believe the remainder of the year will have solid deal activity. We also planned to continue on our state of path of investing and the growth of the business in order to capitalize on the opportunity we see in front of us.

Notably, customer interest in our pricing and revenue management solutions remains high and we believe our product introductions, our diversification across industries and geographies and our prime economic system contributed to a solid foundation for growth.

Now turning to our outlook for the second quarter. We anticipate revenue in the range of $27.2 million to $27.8 million, approximately 16% growth at the mid-point from the second quarter of 2011.

We expect total expenses to be approximately $23.7% million, up from $20.1 million in the second quarter of 2011 as we continue to make strategic investments in our business.

We expect non-GAAP operating income margins of approximately 14% at the mid-point of revenue guidance. With a tax rate of 35% in the second quarter, we anticipate non-GAAP earnings per share of $0.08 to $0.09 based on estimated $28.3 million shares outstanding.

On a GAAP basis, we expect operating income of $1.1 million to $1.7 million, and GAAP earnings per share in the range of $0.02 to $0.03.

We expect at 2012, the non-GAAP operating margins now will be approximately 15%. We continue to believe that long term, we will see increase in operating margin leverage as our business scales and we realize the benefits of our investments.

One more note, before I turn the call over to Q&A. As mentioned previously, the research and experimentation tax credit has not been renewed for 2012.

The credit has expired a number of times since it was originally enacted in 1981 and each time except for a brief period in 1995, it has been retroactively reinstated. If the tax credit is reinstated during 2012 and if it is retroactive to beginning of the year, as has been the case in the past, then we will make accumulative adjustments in the quarter and once the tax credit is reinstated as we did during 2010.

Should the research and experimentation tax credit be reinstated, the estimated non-GAAP tax rate for the year will be 31%.

In summary, we believe the market readiness for our pricing solutions and PROS specifically is progressing and we are well-positioned to capture this growing opportunity. With that, let me turn the call back to the operator for questions.

You guys have been very helpful in the past and giving guidance, and what you think you can do, given the macro backdrop and we appreciate that. And we appreciate sharing with us what you said today about some deals, some deal slippiture, but I guess if you could expand on that a little bit more.

I know your percentage of completion model is great, it gives you great visibility. But at the same time, it’s not always really reflective of what's happening right now in the market.

You guys sound pretty optimistic about the future, but it does sounds like there is something that happened this quarter. So if you can talk a little bit more about was it geographically focused and why are you feel so confident that it will be fine going forward?

John, this is Charlie. Let me make some comments then I’m sure Andres will want to elaborate.

Your point is well taken. We believe in transparency.

That's why we're very specific in our comments and talk about some deals slipping. And we did that in the interest, again, of transparency and recognizing the percentage of completion.

Accounting, it does take time to evidence itself. So we want to be very clear about this.

We want to be very clear about the near-term impact we've had on the company's revenue. And we believe the guidance we provided for Q2 is very achievable guidance.

And we believe the guidance that we've provided for the full year, which has not changed from the guidance we provided on the last call, our revenue growth of approximately 20% is very achievable for us as well.

Now, this color around as to why, but we think some deals slipped, the deals weren't lost, the deals didn't go away. And the confidence is very high that those deals are closing and will close in the very, very near term.

In terms of the deals we've made great progress in closing those deals and the remaining we have, we feel they are continuing on the right pace. Overall, we don't believe this is a trend.

And we don't feel there is anything structurally in the market or the business has changed.

So overall, it was a matter of timing. Demand for solutions have never been stronger.

We continue to see very strong demand. And the momentum that we're seeing now is on pace to where we expect.

If I may, just a quick follow-up, it does seems that things are on track, but can you talk about these deals that did slip even though it sounds like there is progress there, were they geographically focused or vertically focused at all?

No. I would say no.

You couldn't spoke, point to a specific thing, it's not like that. I know you've been concerned about Europe, we all have got some concerns about the economy, not Europe, not any specific industry, in fact, I would characterize to somewhat anomalous.

It's very unusual for deals to be slipping like this.

And we consider it to be anomalous. Again, there is variability, because of the size the deals that we do from quarter-to-quarter.

And it's just that there was variability in Q1, but we really can't point anything specific, John, that we would say, here it as other than it’s anomalous.

You said near term impact on those deals that slipped, is that primarily just Q2 or do you expect that to impact Q3 as well?

I would say, primarily the impact is expected to be in Q2. And what we are commutating is, as we still believe our revenue growth of approximately 20%.

So Jesse, with that, when you do the math, what that says that we fully expect to have a stronger back half at the year in the first half of the year. And we've talked about the impact on the Q2 guidance by giving the guidance we've given.

And switching gears, you guys added a mid-market sales exec, is that reflective of the traction you're seeing in the mid-market or is this more of a forward-looking and kind of a foundation building move?

Yes. Part of our strategy was always to build both, a direct and indirect channel for the mid-market.

We're pleased with the demand we're seeing and this was the larger goal step. We have been searching for a key leader to own this market both the strategy, from sales, from the marketing and from a channel perspective and we found the right leader to lead this organization.

So it is reflective of the confidence that we have in that market opportunity.

And would you say, of the attendance at your user conferences, was there a representation from the mid-market their or was it primarily your usual customer base?

So our pricing events that we did both in Munich and New York were focused on the enterprise markets. So it was predominately enterprise customers.

This is Chris Koh in for Tom Roderick. I was just wondering if you could maybe elaborate a little bit in terms of the 20% guidance that you provided.

So when you guys say it's still approximately 20%, is it meant to be a reflection that for the year your outlook is pretty much the same as you exited last quarter and it's just a matter of shiftiness, or would you say approximately 20% might have gone from, say, 21% to 19% for example?

I would say it's more just shift between Q1 to the later quarters of the year.

When you look at what's giving you the confidence of if you could maybe provide some color on is it the pipeline is growing faster, is there an acceleration we're seeing there? Because clearly something anomalous happened here.

So if you could just maybe provide investors' comfort as to why you feel so comfortable that you can still have that 20%?

The pipeline, as we said, is at record levels. We feel very confident with our pipeline and the movement in tracking of our pipeline.

Demand for our solutions, as we said, hasn't been stronger and we're continuing to invest in those areas around demand and awareness. But we're seeing a strong demand in the market and strong activity.

We are seeing in areas, in the B2B side, we're seeing a stronger demand.

We believe it's anomalous. We came off of a very good Q4.

So it's like we had a great Q4. Q1 is likely to have been absolutely confident with our 20%.

So it's really not a trend here. This isn't a situation we believe that Q1 was going to get repeated again.

We just don't think that, that's likely at all. But I do want to reiterate that we did have a good Q4 and we made good progress in closing the deals we expect to close.

In terms of the sales hiring, I think you ended last quarter at 28, if I remember correctly. So you're at 30 right now.

So it looks like you might need to pick it up a little bit in terms of getting to that 40% year-over-year increase. Can you give us a sense of where is that going to be concentrated in terms of both geographically and timing?

We are adding both in the enterprise and in the mid-market, predominantly North America and Europe. And obviously, the hiring ramps ups through the remaining 3 quarters, Q2, Q3 and Q4.

You should see continued increase.

Our goal, as we stated, the growth in sales quota-carrying personnel is focused towards growth beyond 2012. So as we said, with our long deal cycle times, 11 months on average, sales reps that we hire now have minimal impact to this year.

Chris, I would say that from our internal plan, we are on track. We're pleased with the progress we've made.

We are on track. And as Andres has mentioned, we will be ramping up both our enterprise and mid-market sales.

Andres or Charlie, just to go back on the comments regarding deal closures, I just wanted to be clear that these are net new deals that didn't close as opposed to any change in the pace of existing deployment speeds or the pace at which customers want to move forward on already signed contracts?

That’s a good question, Ross. No impact at all on existing implementations.

They progressed during the quarter on plan and intend to progress on plan today.

And Charlie, maybe, or either of you, just reflecting back on the last 2, 3 years, can you recall when you last saw scenario like this where you had deals that were in your pipelines slated to close within a 90-day period and a number of them slipped out? Can you recall when you sort of last saw something like this?

Yes, we did. The last time we had something like this would have been in the third quarter of 2010.

It’s been a while. As you know, we ended 2010 with a terrific backlog position, backlog revenue.

But that's the last time.

And obviously we're talking about relatively small numbers -- absolute small numbers of deals because of the deal sizes you have are still I presume in that sort of high $1.8 million, $1.9 million, $2 million range?

That's correct, yes.

And then, any color, I think it was asked before, maybe John asked before. There wasn't any concentration and I guess specifically I'm thinking your traditional airline business versus service, manufacturing, distribution, no real delineation there in terms of the deals that did slip?

That's correct.

I guess just the final question I would have is, as you think forward, let me phrase it this way, to hit your 20% for the full year, I'm assuming that you couldn't afford to have another quarter where you would see deals slip. In other words, you'd have to have a relatively consistent sort of close rate relative to plan, because if we didn't do that then 3Q would obviously be lower and by that point it would probably be hard to make it out.

Is that a fair statement?

Yes, it is I think that's reflective of our model.

Most of my questions have actually already been asked, but a couple of things I just want to make sure I'm square on. What percentage did you say of your revenues came from Europe this quarter?

I think it was 32%, is that correct?

Yes, that's correct, Joe.

And then as far as your system integrator traction goes, I guess typically you've kind of been in that 30% to 35% range. I think last quarter it came in a little higher than that at 40%.

What was that for first quarter here, do you have that number?

Yes. It's consistent with the passage remain consistent.

In the other area that we've also been focused is certifying consultants from our SI partner community and we're now up to 149 certified consultant, which is up 34% year-over-year. So that's been another area that we've been working very closely with them around scaling globally as to ensure that we're certifying enough consultants for growth.

And then just a couple more here, on the guidance for Q2. Can you give us any idea into the breakdown of what you're looking at as far as mix between like license versus service and how you're viewing that?

I mean are the growth rates -- do you see any changes there or any change in the mix or differences in the growth rates there?

Actually, we don't comment on the mix between L&I. We don't really comment on L&I versus maintenance.

We have said, I believe we said on last call, is we do expect to see maintenance growth in the year to be up a bit over the last year, I think we said mid-teens, I think we said last year it was 15% for maintenance, and so we do expect maintenance growth to continue this year. And then the balance will come from L&I over the course of year.

And then one last one from me, I guess any color you can give on what opportunities -- how much opportunity you see with your ability to like generate additional growth from add-on deals with your existing customer base. I mean selling more products into your customer or into different operating segments of your existing customer base.

I know you've apparently being seeing some of that benefit over last few quarters. How much room do you think there still is in that one going out throughout, say the next 2 to 3 quarters?

Historically the company has had a very good sell into our existing customer base. Historically about 50% of our business from the last several years has come from our existing customers.

And they come back either to expand for their geography perhaps, they license for a specific geographical region. Initially, they want to expand geographically.

They may license for division, if they want to expand outside the divisions or they may license for certain products, if they want to expand across products.

So we've always been in a very nice position to sale back in. And we've been with very, very high maintenance renewal rates.

We've got incredibly great customer reference ability. I think Andres has mentioned, 8 of our customers presented on our conferences in New York and Munich.

On that extent, we're in great shape and we've really got terrific long-term partnerships. It's something that company has always fostered and created over years of being in business.

We're very focused on being customer centric. So the selling will continue and having said that we also of course see new customer acquisition as a real growth opportunity for us.

So one of the areas, with the launch of our Rebate Optimizer, that's another area that we're seeing quite a bit of interest from our customer base in these solutions. We've collaborated with some of our customers on building out this new solution and have seen quite a bit of interest in the solution in the market.

So definitely we feel very confident around selling back into our customer base and continuing to deliver value to our customers.

Thank you for your participation in today's call and for your support of PROS. We're confident that our growth strategies are working.

More and more companies look to PROS to create a competitive advantage in their markets. We continue to invest in innovations and our go-to-market strategies in order to drive long-term sustainable growth.

I would also like to take a moment to thank our PROS team worldwide. I'm proud of their relentless passion and commitment to innovation and customer success.

Thank you to our customers, partners and shareholders for your support of PROS. We look forward to a strong 2012 and to speaking with you on our next call.

Thank you and good bye.