Thank you, operator. Good afternoon, everyone, and thank you for joining us today for the PROS Holdings financial results conference call for the third quarter 2012.

As mentioned, my name is Charlie Murphy. I'm the Chief Financial Officer and Executive Vice President of PROS.

Joining me on today's call is Andres Reiner, President and Chief Executive Officer.

In today's conference call, Andres will provide commentary on the third quarter 2012 and then I will provide a review of the financial results and 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 can cause actual results to differ materially from those projected in the forward-looking statements.

Additional information concerning risks and other factors that may cause actual results to differ can be found in 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 prospricing.com.

Finally, PROS has provided in its earnings release, and will 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 were made.

I'd also like to point out that in addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, those reports, 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 website in the investor relations section.

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

Thank you, Charlie, and thank you all for joining us on today's call. I'm excited to report another strong performance from PROS in the third quarter with record revenue exceeding the high end of guidance of $29.9 million, a growth rate of 19% over the third quarter of 2011.

We generated a non-GAAP operating income of $4.3 million for the third quarter and non-GAAP EPS came in above the high-end of guidance at $0.11 per share. I'm proud of our team for delivering such outstanding results despite the challenging global economy.

We're privileged to have such incredible people, customers and partners who recognize the outstanding value we deliver.

The market is recognizing our ability to improve sales effectiveness through our big data applications. As Gartner group says, big data is about dealing with volume, velocity, variety and complexity of data and we have more than 25 years of experience in driving value from big data.

An article in Forbes reported that big data applications delivered at the heart of transactions are how companies can truly monetize their data. They even cited airlines as an example where big data has been leveraged to optimize sales for decades.

We're proud of our heritage in this industry and we're pleased that our business from the travel industry continues to grow through continuous innovation and proven customer success.

We're also proud to have successfully extended our big data science experience from the airline industry to more than 30 subindustries. In fact, revenue from our B2B industries, which are manufacturing, distribution and services, continues to eclipse our B2C industries, which is travel.

Our B2B business is growing at a faster pace than the overall business driven by an uptick in customer demand. In the third quarter, we were selected as the big data solution of choice by Hewlitt Packard, Ecolab, Nexidia and Zimmer, among others.

These companies have joined the growing community of PROS customers who are using their big data to improve sales effectiveness and outperforming their markets. PROS helps companies sell more effectively by applying big data science to their operational data to help predict which opportunities are most likely to close, which offers are most likely to be accepted and which prices are most likely to win.

Our solutions helped drive real hard dollar sales results. For example, one customer realized $200 million of incremental sales over 2 years by better aligning their offers to the needs of each unique customer based on data science.

PROS has been turning data into competitive advantage for many years and we're confident we are in a strong position to capitalize on what IDC predicts will be a $17 billion market for big data by 2015.

We continue to see a bright and promising future for PROS as demand for big data solutions continues to grow. Since the beginning of the year, we have more than doubled the number of companies actively engaged in our early stage demand generation programs as compared to 2011.

The market is responding to our value proposition. This momentum has been fueled by our investments to accelerate awareness and adoption, extend our product leadership position and increase our global reach and scale.

These remain the 3 pillars of our growth strategy and I'd like to share a few highlights of each area from the third quarter. Awareness for PROS pricing big data solution continues to increase through the investments we're making and through the overall media and analyst coverage on how big data helps transform businesses.

Our position is strengthened by a recent report from Gartner stating that companies who invest more fully in big data technologies than their competitors have the potential to outperform their competition by 20% in every available financial metric.

A recent article in Harvard Business Review stated that companies in the top third of their industry in the use of data driven decision making were on average 5% more productive and 6% more profitable than their competitors.

PROS in, particular, has been spotlighted in numerous mainstream big data articles since our last call, twice on CNBC online. This year we have nearly doubled our media hits over last year.

We believe this indicates growing interest in our mission of helping companies and the people who work for them to prosper by leveraging big data to outperform.

We also continue to raise awareness by maintaining a strong presence at marketing events. Since our last call, we participated in numerous conferences centered on sales effectiveness, including Dreamforce, Cloudforce and Sales & Marketing 2.0.

These events continue to play an important role in driving demand. Overall, we are pleased with the results we are seeing from our investments in accelerating awareness and adoptions of our big data solutions and we will continue to invest in this strategy.

On the product innovation side, we have made great progress in extending our market leadership position with innovations that help our customers outperform. We believe the best way to monetize big data is to use it to improve sales performance and affect sales outcomes.

For example, by applying data science to historical transaction data, our intelligent quoting capability gives sales reps far more confidence when negotiating deals because they have new insights into their customers' buying preferences allowing them to tailor offers and quotes that are more likely to be accepted.

This is also a good example on how we embed 2 decades of big data science experience right into our products, allowing customers to benefit from cutting edge big data science without the burden of investing in hard-to-find data scientists.

A recent report from McKinsey & Company suggests there will be a shortage of talent needed to take advantage of big data opportunities that exist in every business. We will continue to invest in big data science and technology innovations to help our customers bridge the data science gap in outperforming their markets.

In the third quarter, we also made progress in expanding our global reach and scale through direct sales coverage in our partner ecosystem. We finished the quarter with 34 quota carrying personnel keeping us on track for a 40% increase for the year.

We continue to invest in our direct sales to meet the rising demand for big data solutions. Our partner ecosystem also continues to contribute to our global reach and scale.

Our system integration partners are actively participating in our B2B implementations and we continue to train additional third party consultants to provide further scale.

From a technology partner standpoint, we continue to benefit from our Microsoft partnership. Microsoft recently spotlighted PROS in 2 of their field sales events in Europe and will soon do the same with their largest customer event in Asia.

We leveraged Microsoft's enhancing memory database technology in our big data solutions to drive even more value to our customers. We also continue to invest in our SAP partnership, having recently achieved another product certification that sets the standard for the most complete and seamless integration experience with SAP.

With more than half of our B2B customers running SAP, we're pleased to be the provider of choice among SAP customers looking to improve sales effectiveness through big data science and technology.

Looking ahead, we see strong, ongoing momentum in our business and believe that the market is increasingly recognizing our ability to improve sales effectiveness through our big data applications.

The market opportunity is large and we expect to continue investing to capture more than our fair share. Now let me turn the call over to Charlie to provide you with a review of our financial results and outlook for the fourth 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.

We are pleased with our performance in the third quarter with total revenue of $29.9 million, exceeding the high end of our guidance and up 19% from a year ago. License and implementation revenue was $19.5 million, up 18% from a year ago.

For the majority of our contracts, license and implementation fees are bundled together and revenues recognize on a percentage completion basis over the implementation period.

Maintenance and support revenue of $10.4 million was up 20% year-over-year and represents the largest component of revenue from recurring sources. Total recurring revenue, which includes maintenance and support revenue, a number of term licenses and cloud service contracts, was approximately 43% of revenue in the third quarter.

Our revenue recognition model gives us good revenue visibility. As we have been discussing with you, we have been investing in our quota carrying sales people, primarily in the US to drive our B2B business, which is the key growth driver for our company.

Our legacy B2C business remains predominantly outside the U.S. This was evident in our results this quarter with U.S.

revenue increasing significantly and making up 44% of revenue compared to 31% last year.

Europe remains healthy for us. Revenue from Europe was 25% of total revenue in the third quarter of 2012 as compared to 29% of total revenue last year.

Year to date, revenue from Europe was 28% of total revenue as compared to 27% last year and showed double digit growth over the same period.

Non-GAAP gross margins were approximately 72% for the third quarter, as compared to 76% for the third quarter of 2011. Margins can vary from period to period primarily due to the level of implementation services required relative to the total contract value.

Margins also have been impacted by increases in personnel, particularly across our professional services teams in anticipation of future revenue growth. Year to date gross margins were 73% in 2012 as compared to 74% in 2011.

Total non-GAAP operating expenses for the quarter were $17.2 million compared with $14.8 million a year ago with the increase of 16% from planned investments consistent with our growth strategies.

Non-GAAP operating income was $4.3 million for the third quarter of both 2012 and 2011 and non-GAAP operating margins were 14.4% compared to 17.2% last year. Year to date, non-GAAP operating margins were 15.1% compared to 15.6% last year.

During 2012, we have increased our investments relative to 2011 to support the increase in demand for our big data solutions and our anticipated revenue growth. For example, at the end of the third quarter 2012, headcount, including outsourcing, was 665, which increased 28% from the year-ago period.

Year to date, headcount has increased 23%.

We see significant opportunity and will continue to increase our sales, marketing, professional services, engineering and administrative personnel to drive growth, reflecting confidence in our big data opportunity across both B2B and B2C.

The overall non-GAAP effective tax rate was 26.4%. It was below our estimated annual effective tax rate of 35%.

This was due to a discrete favorable tax provision adjustment attributable to higher than expected research and development tax credits in 2011.

Based on a non-GAAP effective tax rate of 26.4%, non-GAAP net income was $3.2 million for the quarter, an increase of 4.2% over the prior year. Non-GAAP earnings per share were $0.11 including a $0.01 benefit versus guidance from the lower-than-expected tax rate just discussed.

This compares to $0.11 per share a year ago, which included a $0.01 benefit from the research and experimentation tax credit in effect at that time. GAAP earnings per share were $0.05 compared to $0.07 last year reflecting an increase in non-cash stock-based compensation expense in 2012.

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

Now moving to the balance sheet, we ended the third quarter with cash and cash equivalents of $72.6 million, an increase of $4.2 million from the beginning of the year. Year to date capital spending is $6.3 million and we expect capital spending for the year to be approximately $8 million as a result of increased infrastructure investments and facility expansion costs.

Gross trade accounts receivable at the end of the quarter were $47.8 million. Day sales outstanding was approximately 127 days, which is higher than our historical performance.

That said, we do not see any negative trend with our accounts receivable and we expect significant collections in the fourth quarter and for our DSOs to return to more historical levels.

We generated operating cash flow of $3.9 million in the third quarter, yielding a cash flow margin of 13%. Year to date operating cash flow is $10.9 million, also yielding cash flow margins of 13% year to date.

For the year, we continue to expect our annual operating cash flow to approximate our annual non-GAAP operating income of 15%.

Now turning to our outlook, we continue to be optimistic while mindful of the economic environment. For the fourth quarter, we anticipate revenue in the range of $31.4 million to $32 million, approximately 21% growth.

We expect total expenses to be approximately $27.3 million, up from $21.6 million in the fourth 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 midpoint of our revenue guidance. With a tax rate of 35% in the fourth quarter, we anticipate non-GAAP earnings per share of $0.09 to $0.10 based on an estimated 28.8 million shares outstanding.

On a GAAP basis, we expect operating income of $1.5 million to $2 million and GAAP earnings per share in the range of $0.02 to $0.03. On a full-year basis, this translates to anticipated revenue in the range of $116.5 million to $117.1 million, an increase over prior guidance, which is a 21% increase in revenue over full year 2011.

We expect annual non-GAAP operating margins of approximately 15% and non-GAAP EPS in a range of $0.40 to $0.41. We are continuing with our strategy of investing in supportive growth.

The market opportunity is large and we are taking share. As you can see from our Q3 results and our raised full-year revenue guidance, we are seeing payback from our investments and will stay the course because it is working.

The research and experimentation tax credit has not been renewed for 2012. If the tax credit is reinstated during 2012 and if it is retroactive to the beginning of the year, as has been the case in the past, then we will make a cumulative adjustment in the quarter in which the tax credit is reinstated as we did during 2010.

Should the credit be reinstated, the estimated non-GAAP tax rate for the year would be approximately 28% compared to 32.9% without reinstatement.

In summary, we are pleased with our performance. We are confident that our growth strategies are working and that we are well positioned to capture the growing opportunity for real-time big data solutions.

With that, let me turn the call back to the operator for questions. Operator?

Charlie, guidance implies an acceleration of growth into the fourth quarter. Is this a reflection of accelerating business momentum quarter to quarter or is this more a reflection of the timing around how you recognize license and implementation with the percentage completion method?

I know you can book a deal and then you’ll recognize that license and implementation over time. Was there something in this quarter that -- or is there something coming next quarter that's going to accelerate that growth or is it more just about new business that you expect to be signing or is it a little bit of both I guess?

Actually, it's a little bit of both. But to start, we're very pleased with the business that we've been able to achieve in the first 9 months of the year.

And the B2B side of our business is clearly the growth driver for the company.

We talked about this last year during the call at the end of the second quarter. We had said this is now the transition.

In a short period of time, perhaps 6 or 7 years, our B2B business was now transitioning, so it's becoming larger than our B2C business.

John, that's just continued as we've come forward from the second quarter last year to today and, again, we're very pleased with the business for the first 9 months of this year and it's really that business that’s giving us the opportunity to get to a possibly 22% quarter-over-quarter revenue growth in Q4 compared to last year. So we are very pleased to be leaving this year with that kind of an opportunity for revenue growth.

And the growth in the Americas this quarter was tremendous. Was there any just outsized large deals?

I know your deals tend to be a little bit on the larger side anyway but are there any deals that were 10%, 5% of total revenue in the quarter?

John, I don't believe we had any that were 10% of total revenue in the quarter, possibly not even 5% because the model tends to smooth out even the large deals. Typically for us a larger deal means more products and perhaps a little longer implementation period.

It really is just the -- I think the fabulous business we had in the second quarter that we talked about and in the third quarter we're talking about today and in the transition.

We have said before that the B2B business is predominantly a US business followed by Europe. The B2C business is predominantly outside the United States, so as the driver becomes B2B, which we've said it would be, it's showing its growth by the growth in the Americas versus the overall revenue growth outside the Americas.

Does that make sense?

If I might, a follow-up for Andres. Andres, can you just talk a little bit more about -- you mentioned the term big data several times in this call and talked about big data innovation and big data science and I just want to make sure I understand what you're talking about.

Are you just talking about dealing with huge volumes of data which you've always dealt with? Or are you talking about dealing with varieties of data?

And what I'm thinking about is unstructured or semi-structured data.

And are you analyzing that data in a unique way today that you didn't do in the past or maybe you did do it in the past and just were not really getting the recognition from it and today you just want to make sure people know you're doing that, if you can just help out a little bit there?

Yes, so we've been really for -- as we talked about in the call, for over 2.5 decades dealing with a large volume of data but in addition to that, we're also dealing with variety of data and velocity.

We talked about the 3 v’s, volume, velocity and variety. If you look at the velocity from a transactional perspective, every different transaction in real time, being able to make decisions and guide the sales organization into what offers they should be making at what price points they can win.

It’s to bring the competitive advantage of mining all of this data.

Over the years, we've been enhancing our architecture to be able to link other data sources back to transactional and back to the master data. So think about linking currency, cost data, index data, all of this data, being able to correlate it to have better, smarter decisions and all in real time.

So over the years our focus has been on building a very scalable architecture that's focused on dealing with large data volumes that have very dynamic variety of data, so being able to then connect unstructured data together with structured data.

But to get value, you have to be able to link it back to your transactional. Also in our product strategy, we have set the clear goal of extending beyond just pricing.

It’s basically bringing pricing rebate quoting. The technologies that help drive sales effectiveness and helps drive the sales organization to outperform in their market.

So it's really been part of our strategy for the past several years is to invest in this big data platform and we're seeing the market. It's been more of the fact that the market really didn’t understand all the capabilities that we provide and it's now more the market understanding how our solutions help drive better sales effectiveness and help drive value to bring a competitive advantage.

But I just wanted to be clear and you’ve always dealt with large volumes and velocity of data. But and then when you're dealing with -- and when you say variety, and you mention the term unstructured, are you actually manipulating or managing that or are you taking unstructured data that might have some structured descriptors or metadata associated with it and actually -- and are you creating that metadata?

I’m just trying to get a sense on this because this is …

That’s a great question. The linking of unstructured data is not so simple because you have to map it and you have to decide how to disaggregate it or aggregate it because data does not come in at a logical one to one mapping with either transaction, customer or product.

So part of a lot of the investment in our technology has been how do we allow to bring data sources and be able to correlate how those data sources fit into the operational data and how do you actually bring that data to be able to link it, at what levels? How do you disaggregate or aggregate and also being able to deal with the quality of the data?

So in perspective, it allows you to deal with linking unstructured variety of data, so from CRM, ERP and other systems outside of your core operational systems, as well as with unstructured data, which if you think about whether it be cost or whether it be customer survey data, to be able to understand how your survey scores. How is that affecting the risk that you have in the business at a particular customer level?

Those are just some examples.

John, I'd like to add just one more, maybe one more point to that is that we're very pleased after really not having much discussion around big data over the last several years to have companies like Gartner and IBM coming out and essentially helping to define big data around volume, velocity and variety. To have more and more publications out there talking about big data and the effectiveness of big data and the impact it's having on companies.

As you know, this is what we've been doing and to have a business review to come out with a front page piece on big data and to have multiple articles in Harvard Business Review this past month, it's all good for us. It's all about creating awareness.

Which we believe is going to drive increased opportunities for us as we go forward.

Americas was great. Europe was a little bit weaker.

Is that just purely due to the mix shift away from B2C and if so, do you plan on more aggressively building out your B2B business in Europe over the next 12 months or so?

We're actually very pleased with our performance in Europe and we do expect a double digit growth out of Europe this year predominantly driven by B2B growth. In fact, this year we've actually increased headcount in Europe by more than 60% and it's primarily in sales, marketing and professional services.

We still see strong demand in Europe and we're continuing to invest in Europe, looking ahead into next year and beyond. The real story around this is more around our growth in North America.

Two years ago, we started to make a strategic investment in sales and marketing and that was far greater around North America than any other market and we're starting to -- we have seen the results but now we're starting to see even greater results of those investments in the B2B North America market.

And Andres, when you look at that strength in North America, is that more proportionately in your installed base or is that new customers? How does that mix look of push versus pull type of business?

Yes, so this year it's been significantly stronger with net new customers than with existing. We've always had incredible customer references and customers continue to adopt our technology, but this year the uptick has been in net new.

Which we see as a very positive trend because we will always have the opportunity to sell back in.

Charlie, deferred items has ticked up sequentially. Is there anything out of the ordinary there or did you just have a solid third quarter?

Yes, it's really a solid billings quarter. As you know, most of our billings are based on milestone billings, signing contracts, achieving certain milestones, joining implementations, an excellent quarter in on all those fronts, so very [indiscernible].

First of all, Andres, can you qualify the bookings for us in the quarter? It looks like your name deals were likely solid larger deals.

Could you compare it on a sequential basis, maybe from year over year basis?

I think the question was, Andres, it looks like bookings were good for the quarter. Can you quantify the bookings this year compared to the third quarter of last year?

We don't do that, really, we do not provide booking guidance on a -- comparisons on a quarterly basis. But we feel very, very good about the strength we've had in bookings for the first 9 months of this year.

And, in fact, we started the year with a 20% revenue growth expectation and we're pleased that we're able to now move that up to a 21% revenue growth expectation for the year, so I think on that front it certainly says that bookings were up year over year but we really don't provide any specifics on that.

Andres did mention the B2B side of the business is the driver and we've been expecting this. As I mentioned, it started in the last half of last year.

We saw the turning point. B2B is clearly the big driver for our business and B2B North America is the biggest piece of that.

Then on the sales investments that you've been making now for the past couple, 3 quarters. Are you beginning to see any productivity from those individuals or is this something that we should see likely more in the first half of next year?

So we are seeing productivity from the sales quota and personnel that we hired last year and over the last say 2 years. But obviously, the ones that we've hired this year we wouldn't see the productivity results in those.

But definitely, I am very proud of our sales organization and sales and marketing and how they have executed year to date and we are performing better than ever.

And I guess the last question I have for you is in terms of sales across your MD&S verticals, is there one in particular that you think is driving your sales in the overall opportunities or are you getting a nice blend across the opportunities in all 3?

It is a nice blend. It's predominantly, like we said, on the B2B industries in manufacturing, distribution and services.

We have talked in the past around industries like high-tech, chemicals, parts.

These are industries that we're seeing a lot of demand but it's really blending across these industries and the key relation is a lot of companies are looking at how are they going to monetize the data that they have and how do they drive revenue growth and profitability to the business and how do they leverage the data that they have to really create a competitive advantage?

And we're seeing that's resonating very well in the market. I think also our investments around our solution and innovation around rebate pricing quoting is resonating very well in the market and it's all been pain points that the market has always had.

So it's really been fairly broad across the 30 subindustries but there are some like high-tech parts that we're seeing significant interest.

Just a quick question on the DSO that spiked up this quarter, Charlie, you don't seem particularly concerned about it but could you just help us understand what are the dynamics that would drive such a big increase in the DSO in a particular quarter?

Yes, it really does come down to the timing of billings on all of our projects and we've got multiple projects going on at any particular time. And it's that and it's also the bookings in the quarter.

As you book business, you have an opportunity to do some billing.

As you know, we historically do not get the full contract value at the time we book, so we cannot look at deferred revenues reflecting contract value. But we are pleased that it's up but I wouldn't read much into it.

I always give the example, you go back a few years ago, deferred revenue was flat across the balance sheet and the company's revenue grew 30%. So I really don’t want to emphasize it too much.

It's nice that it's up. We're pleased as far as the deferred revenue.

On the DSOs side of it, again, I don't see anything in the DSOs other than just a good opportunity to have a strong cash flow quarter in Q4.

I guess I was curious as to whether -- if there's any correlation between the mix in the L&I line between L and I. I.E.

services versus that DSO line or is there no real correlation?

I don't think we've seen a correlation between the 2. We haven't looked at it that way but it doesn't strike me as there would be a correlation.

And then Andres, you made an interesting comment about -- I think you said over half your MD&S customers are SAP customers. Obviously SAP has a reseller relationship with another price optimization vendor.

Could you just talk a little bit about 2 things?

One is how you compete with them in an SAP account and then, secondarily, it sounds like your partnership with SAP is getting a little deeper. Could you talk to that and the direction you're going there?

Yes, so as you know, our heritage has been a lot around SAP customers adopting our technology. And for the past 7 years we've invested in having the most complete integration capabilities to really make a very robust integration between our technology and SAP and not just on the ERP front but also on the CRM, so bringing the experience of the lead opportunity to “all integrate” it with one user experience.

Our customers expect to have this seamless integration and we've invested to have them have the most complete solution. I believe that our investments in innovation around bringing rebate pricing and quoting integrated uniquely differentiate us.

Even though our competition is resold through SAP, they cannot provide the full breadth of capabilities, specifically around rebate and, more importantly, around data science and big data capabilities that we can provide and we're seeing customers expect to have those capabilities and those solutions today.

I would say we continue to be a partner edge and an equal help partner and continue to invest -- to have the best in class solution.

Charlie, I think historically you've helped us with the metric around the number of implementations in the quarter. Do you have that?

Yes, I guess the implementations, I know what we’re calling year to date is like 112 implementations year to date and I believe at the end of the quarter it's around 85 active implementations going forward.

Thank you for your participation in today's call. We are excited about our performance this quarter and year to date.

Our efforts to help our customers improve sales effectiveness through big data applications is resonating in the marketplace.

Driven by investments in awareness, go to market initiatives and innovation, we are capturing an increased share of our market opportunity and believe we are in a position to deliver sustainable long-term growth.

I would like to thank our PROS team worldwide for their incredible efforts and passion. Thank you to our customers, partners and shareholders as well for your support of PROS.

We look forward to speaking with you on our next call. Thank you and good-bye.