Stefan Schulz - CFO Andres Reiner - President and CEO.

David Griffin - William Blair & Company Nandan Amladi - Deutsche Bank Research Scott Berg - Needham & Company Chad Bennett - Craig-Hallum Capital Group.

Good day, and welcome to the PROS Holdings, Incorporated Second Quarter 2015 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the call over to Mr. Stefan Schulz, Chief Financial Officer. Please go ahead, Sir..

Well, thank you, operator, and good afternoon, everyone. And thank you for joining us today for the PROS Holdings financial results conference call for the second quarter of 2015. As the operator just stated, my name is Stefan Schulz, and I'm the Executive Vice President and Chief Financial Officer of PROS.

Joining me on today's call is Andres Reiner, President and Chief Executive Officer. In today's conference call, Andres will provide a commentary on the second quarter, and then I will review the 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, our strategy, our competitive position, future business prospects, revenue growth, bookings growth, market opportunities, as well as statements made during the question-and-answer session, contain forward-looking statements.

These statements are based on present information and are subject to numerous and important factors, risks and uncertainties, which could cause actual results to differ materially from the results implied by these or other forward-looking statements.

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. 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 PROS.com. We encourage everyone to review this additional information.

Finally, I would like to point out that in addition to reporting financial results in accordance with Generally Accepted Accounting Principles, or GAAP, PROS reports certain financial results, as well as forward-looking guidance, on a non-GAAP basis.

A reconciliation of each non-GAAP measure to the most directly comparable GAAP measure, to the extent available without unreasonable effort, is available in the press release distributed earlier today, and in the Investor Relations section of our website. So with that, I'd like to turn the call over to Andres..

Thank you, Stefan, and thanks to all who are joining us on today's call. I would like to thank our PROS team worldwide for a great second quarter. Across the business, we're making tremendous progress on our cloud-first strategy to accelerate market adoption and deliver even more value to customers.

We have momentum in the market with new customer wins and strong demand. We're expanding our global reach and scale with our partner ecosystem. And we continue to set the standard of innovation. Turning to our financial results, we had a strong second quarter with $89.6 million of ARR, exceeding the high end of guidance, and up 15% year over year.

ACV came in at $6.5 million, slightly exceeding our expectations. We also exceed the high end of guidance on TCV, which was $41.1 million, up 24% year over year. We're particularly excited about our subscription bookings in the quarter, which drove the growth of ACV and TCV, and was the fastest growing portion of ARR.

This reflects our great progress on our cloud-first strategy, and that we're aligned with the market's preference for cloud. In fact, in the second quarter, more than 70% of our deals were cloud deals; even more than we anticipated this early in our transition. I couldn't be more proud of our team.

Based on the strength of the first half performance and the momentum in our cloud-first strategy, we're raising outlook for the year on ARR, ACV, and TCV. Stefan will provide details in his remarks. We're excited that our cloud-first strategy is working. We believe the cloud is great for customers, for PROS, and for shareholders.

In the cloud, our smart applications are even more accessible to customers and can drive even greater value. Let me share an example. In the second quarter, we were selected by companies to help improve their customer experience. New competitive forces had been disrupting buying behavior in their market.

So they're working with us to leap ahead with an innovative new pricing strategy. I took the opportunity to visit with their team, including their CIO. That's when I could see their entire team had clearly and deeply connected with the vision for using smart applications in the cloud to drive better performance and better customer experience.

This is a strategic imperative for their business. Together, we're going to create a dramatic transformation. Another example of an exciting moment for PROS team is our deepening relationship with Etihad Airways. As an innovation leader, Etihad has leveraged our on-premise smart application for a decade.

In the second quarter, they made a strategic decision to migrate our revenue management solution to the cloud. When I met with them, they excitedly talked about driving even more value across their partner airlines, and about innovating even faster with our cloud solution.

I was thrilled to hear their passion for our partnership, and how well aligned we are on our cloud strategies. What's common to both of these companies is that our cloud solutions are strategic to them, and that we share a vision for how the cloud can drive even greater value to their business.

This is why we believe the time for cloud-first is now; creating a great opportunity to accelerate adoption of our solutions and further differentiate PROS. We are well-positioned to capitalize on this opportunity based on a strong fundamental of serving cloud customers over the past decade.

To help us scale going forward, we're working closely with Microsoft to expand our use of Azure. We because the hyperscale and flexibility of Azure will enable us to rapidly scale our smart applications across more than 100 globally distributed data centers.

This is a natural next step in our long-term relationship, and we will continue to co-sell, co-market, and co-innovate together. We have made great progress on our cloud-first strategy in our first full quarter of transition. This is one reason we are confident and excited about our long-term outlook.

Another reason is the significant uptick we've seen in net new customers through the first half of the year, which outpaced booking growth. We are pleased to have added Citgo, ERT, Food Services of America, and McCain, among others, in the second quarter. Our smart applications continue to drive new customer wins across the business.

In addition, more companies are recognizing the exceptional value of a smart CPQ solution that comes with embedded analytics and price guidance. This is driving accelerating momentum in the CPQ market for PROS. One new CPQ customer valued the end-to-end solution for three key reasons.

First, they expect it to align their teams across the business on a common strategy and process. Second, they believe it will drive higher adoption of their CRM tool. And finally, they believe our solution will drive more consistent performance and better results. This is what makes PROS unique in the market.

Overall, we are pleased with our strong performance in the second quarter. We're confident and excited about our long-term outlook based on the strength of our pipeline, our continued momentum with new customer wins, and the overall market trend towards smart applications in the cloud.

We are at the center of a major change in how companies are using their data to better serve their customers to disrupt their markets into drive growth. And we're among the very few software companies that add real, tangible value to our customers that can be measured in tens and hundreds of millions of dollars.

And now with our cloud-first strategy, we can more rapidly deliver this kind of value to even more companies. This is why we're confident and excited about our long-term outlook. In my 16 years here at PROS, I've never seem more energy and excitement from the market about how our innovations can help them drive better business performance.

No longer do we have to explain why data science is key to unlocking potential in unleashing growth. Now companies are asking how to best use data science to outperform; not why. This is why I believe the time for PROS is now.

Before I turn the call over to Stefan, I would like to take a moment to recognize our co-founder, Ron Woestemeyer, who recently retired from PROS and will continue to serve on our Board of Directors. Ron's influence on our business will be everlasting.

His commitment to customer success and passion for innovation remains a cornerstone of our culture today. Customers, partners, and employees have all been impacted by Ron's bold and fearless vision from three decades ago. And now the idea of using data science to help people and companies outperform is taking shape in today's world all around us.

We congratulate Ron on making a difference to thousands of people throughout his incredible career, and we wish him the best in retirement. I will now turn the call over to Stefan so he can provide you with a review of our financial results and our outlook for the third quarter and full year of 2015..

Thank you, Andres. I would also like to congratulate Ron on his retirement, and I look forward to his continued counsel and support as a member of our Board. I want to remind everyone that I'll be discussing non-GAAP results, unless otherwise noted.

Also, as I mentioned earlier in this call, 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're pleased with our performance in the second quarter, and our key metrics show that we are on track in the first quarter of our cloud-first plan.

We remain focused on driving more value to our customers, to our shareholders, and over time to us with our cloud-first strategy. We're particularly pleased with our subscription bookings in the second quarter, where the dollar growth in the subscription component was greater than the total dollar growth in both our TCV and ACV metrics.

We believe this strategy is resonating with our customers. We expect this to translate into higher customer lifetime value and a steady stream of recurring revenue in the future. While it is still very early, we are pleased with the progress we are making so far.

Before I get into the specific financial details, I would like to remind you of the key bookings metric we were reporting to measure our progress during our cloud-first transition.

As is customary for companies making this transition, we are placing a larger emphasis on our recurring revenue and cloud-related bookings, which are most apparent in our ARR metric and in the ACV booking metric. As we shared with you during our cloud-first update, ARR will be the best leading indicator of future recurring revenue.

Throughout the remainder of this year, we will also continue to disclose the TCV booking metric. These metrics were discussed in detail at our cloud-first update on June 17th, which is available for everyone to view on our website.

We've also provided a key metrics page in the Investor Relations portion of our website, which includes these and other metrics for 2014 and year-to-date 2015. Now turning to our results for the second quarter of 2015, we're pleased that we exceeded the high end of our guidance for annual recurring revenue at $89.6 million.

ARR is composed of maintenance and subscription revenue, and in the second quarter, subscription ARR was up 25% year over year. We believe our strong ARR performance indicates the progress we're making on our cloud-first strategy, and provides a view into our long-term growth potential as we build our stream of recurring revenue.

Another key metric that aligns with our cloud-first strategy is ACV bookings, which is composed of the annual subscription and maintenance values, as well as one-seventh of the total license value of contracts signed during a given period of time. ACV excludes services and renewals.

Our goal in establishing the ACV definition was to normalize the impact of license and subscription contract values, and to normalize contract term length. ACV bookings in the second quarter slightly exceeded our expectations at $6.5 million, which is up slightly over the previous year.

Since our ACV metric includes a license component, comparability in some quarters will be affected by the mix shift to subscription bookings. Subscription bookings grew rapidly at better than 75%, and were the largest component of our total ACV bookings in the second quarter, further illustrating traction within our cloud business.

We also expect our ACV bookings growth will be very strong in the third quarter and for the full year, which I will discuss further in guidance. Now turning to total contract value bookings, or TCV. Our TCV has been an internal metric that we use to measure performance of the business as it encompasses all products and offering deploy.

TCV is composed of license, service, maintenance, and subscription bookings. And as we previously discussed, we will only provide TCV through the remainder of this year as it becomes less meaningful in a cloud business.

We're pleased that in the second quarter, TCV exceeded the high end of our guidance at $41.1 million, or a 24% growth over the prior year. Subscription bookings were the highest growth portion of TCV. Now turning to the P&L, non-GAAP revenue in the second quarter exceeded the high end of guidance at $42.7 million.

License revenue was $9.4 million, modestly ahead of our expectations. And we're continuing to recognize license revenue from percentage of completion contracts signed in previous quarters. We are also continuing to close perpetual license contracts that drive revenue in the period, but at a much lower rate than in previous quarters.

We expect the relative proportion of license bookings in a quarter to decline over time. Services revenue was $11.1 million, which represents a 22% decline from last year, and was in line with our expectations as we continue to sell more packaged offerings and leverage our partners.

Our recurring revenue was $22.2 million, representing 52% of total revenue in the second quarter, and an increase of 11% versus the prior year. Recurring revenue is comprised of subscription and maintenance revenue. Maintenance grew 14% over last year, and was in line with our expectations at $15.3 million.

Our maintenance revenue was slightly down sequentially from Q1 due to collection timing from a small number of customers. We expect those collections to occur in the second half of 2015. Subscription revenue was $6.9 million, or a 5% increase over last year, which was also in line with our expectations.

Now as I mentioned during our call last quarter, our subscription revenues in Q2 and Q3 will not fully reflect the strength in subscription bookings during the first half of 2015. There are two primary reasons for this. The first reason relates to several contracts acquired in our SignalDemand acquisition.

As is the case with many small acquisitions, some of the legacy contracts were not renewed. And in some of the inherited contracts were not fully implemented at the time of acquisition. As these implementations were completed over the subsequent quarters, revenue was recognized, but only over the remaining contractual term.

This had the effect of concentrating the revenue from the full contract value over a shorter period of time. As we renew many of these contracts, the contract value is being recognized over the full contract term, which has the effect of lowering revenue in subsequent periods.

The second reason has to do with the timing of revenue recognition from subscription bookings in the first half of 2015. Many of the subscription bookings will begin late in the third quarter, and in most cases during the fourth quarter.

Given the small base of subscription revenue at this time in our transition, these two factors are having a noticeable impact on our subscription revenue growth rates. Our non-GAAP operating loss in the second quarter was $4.4 million, which was better than the high end of our guidance of $600,000, and driven by higher than expected revenue.

Adjusted EBITDA for the second quarter was a loss of $3.2 million, in line with our expectations. Non-GAAP EPS in the second quarter was a loss of $0.11, which was $0.02 better than the high end of our guidance, again, driven by the beat in revenue. So now turning to cash flow.

Free cash flow in the second quarter was a strong $2.6 million, and was approximately breakeven for the first half of 2015. This was driven by more positively by strong collections and by some delays and some capital expenditures that we expect to be incurred in the second half of 2015.

Now I'll discuss guidance for the third quarter and the full year. As a reminder, historically, our bookings have been lumpy quarter to quarter due to the timing and size of deals. In most quarters, we book a relatively low volume of deals but with relatively high ASPs.

With ASPs of approximately $2 million, the closing of one deal in one quarter versus another quarter could have a significant impact on our booking growth rates in the two quarters that are affected. Because of this, our bookings guidance ranges in the short term will be fairly wide, and we recommend you look at our bookings over several quarters.

So for the third quarter, we expect our TCV bookings to be in the range of $29 million to $33 million, or 27% growth at the midpoint over last year's TCV bookings, up $24.5 million. We expect ACV bookings in the range of $5.6 million to $6.6 million, or 62% growth at the midpoint over last year's ACV bookings of $3.8 million.

We anticipate our non-GAAP revenue in the third quarter to be in the range of $40 million to $42 million. As I've previously discussed, subscription revenue in the early periods of our cloud-first transition is impacted by some of the acquired contracts from SignalDemand, and by the timing of revenue recognition from new subscription bookings.

In the third quarter, our subscription revenue is expected to be in the range of $6.6 million to $7.0 million. As we stated previously in the fourth quarter, we expect the subscription line item will begin to reflect the success we are seeing today with the subscription bookings. And this growth will continue to accelerate in 2016.

We expect total third quarter and non-GAAP expenses in the range of $49 million to $50 million, an increase of approximately 16% from the third quarter of 2014, as we continue to make strategic investments in order to capture the growth opportunities.

With an estimated non-GAAP tax rate of approximately 36% in the third quarter, we anticipate a non-GAAP loss per share of $0.20 to $0.22 per share, based on an estimated 29.6 million basic shares outstanding.

As we continue to execute on our cloud-first strategy, and on the heels of our strong performance in the first half of the year, we're pleased to be in a position to raise our full-year ARR, ACV, and TCV guidance.

We now expect 2015 ending ARR to be in the range of $95 million to $99 million, which is up from the $92 million to $97 million we had given you earlier. ACV bookings of $29.5 million, or 26% growth over 2014, up from our prior guidance of $29 million.

And TCV bookings are now expected to be in the range of $157 million to $161 million, or a 20% to 23% growth over 2014, which is also up from our prior guidance of an 18% increase.

Because of the early strength in our subscription bookings, we now expect non-GAAP revenue to be in the range of $174 million to $178 million, which is a slight reduction to the $178 million to $183 million guidance range we had provided earlier.

As a result of the revised revenue range, we anticipate an adjusted EBITDA margin of approximately a negative 8%, which is lower than our previous range of negative 2% -- negative 5%. However, the strength and quality of the bookings and strong collections are resulting in better free cash flow.

And we are now narrowing our free cash flow range, margin range to be a negative 3% to a negative 5% from our previous range of a negative 3% to a negative 7%. On a non-GAAP basis, we expect the tax rate to be approximately 36%, and the non-GAAP loss per share to be between $0.47 and $0.54 per share.

Overall, we are pleased with the progress we are making across the business as we execute on our long-term growth strategy to capitalize on a large and attractive market opportunity. We will continue investing in initiatives to accelerate awareness and adoption, further extend our product leadership position, and increase our global reach and scale.

Our mission of helping people and companies outperform continues to fuel our cloud-first strategy. With more than 70% of our deals in the second quarter being cloud deals, we believe the market is responding favorably to our promise of even greater value through our cloud solutions.

This is one of the many reasons why we are confident and excited about the long-term outlook for PROS. So with that, let me turn the call back to the operator for questions. Operator..

[Operator Instructions] Our first question is from Bhavan Suri with William Blair..

Hey, guys. This is David Griffin in for Bhavan. Nice quarter, and thanks for taking our questions. So first of all, obviously you posted some pretty solid results with the TCV metrics, et cetera.

But you also brought down the full-year guidance a little bit on the top line, which makes sense, given that some of that was obviously pushed to the off balance sheet backlog, et cetera.

Can you just give us some sense of how confident you are in your revised full-year range? Do you think that has to come -- there's a potential for that to come down maybe next quarter?.

David, this is Stefan. What I'll tell you is that that is -- that question about the guidance range on total revenue is one of the things that we have debated quite a bit as a management team.

And basically, as we looked at the business and then the strength of our pipeline and the success that we've had in the first half of the year, one of the things we realized was we didn't necessarily have to take our guidance down from the previous range we had given.

However, given what we saw in Q2, and the responses that we had from a cloud-first offering, we decided that it made sense that we could continue that kind of momentum in Q3 and Q4, and therefore take our guidance range down to reflect that.

And to your point, we think it's actually a good sign, and it actually will help subsequent years because of the increase to the backlog.

One thing I will also say is that the revenue guide change is primarily related to the license upfront business that we were initially forecasting that is now going to be, more than likely, in subscription revenue, and -- or subscription bookings, I should say.

And so if you recall, we had been talking about a $13.5 million upfront license revenue, which was down about 50% from what we did last year. We're now thinking that $13.5 million of upfront license will be somewhere south of $10 million. And that represents the biggest component of the delta in the guidances that we gave last time and this time..

Very helpful color, thank you. Just one more, if I could.

Can you talk a little bit about your performance from a geographical perspective? Were there any pockets of strength or weakness to call out? And secondly, were there any pockets of strength or weaknesses to call out in terms of new cloud deal activity across either travel, or the CPQ is obviously mostly cloud.

Or the core price optimization business? Or was it more just kind of a broad based shift to cloud?.

Hi, this is Andres. I think that's a great question. We did see strengths across geographies -- rest of world, India, North America. And that's actually what drives our confidence as we look at the back half of the year. We also saw strength in cloud deals across all aspects.

Travel, which I talked about Etihad, which we are very pleased with them moving their family to our cloud solutions, but also on the pricing and CPQ side. So, we're very pleased with the results. And frankly, on the CPQ side, for the first half, we've closed more deals than all of last year.

So, had a very strong performance on the CPQ business as well..

Great. Thanks for taking our questions..

Great..

Our next question is from Nandan Amladi with Deutsche Bank..

Hi thank you for taking my question. So Stefan, a question on this Etihad price on the press release that you issued, and Andres's talked about a little bit as well.

How does the business model change when you take an existing product and sort of convert it over into a subscription model?.

So that's a very good question. And as Andres's mentioned, we are very happy to have gone through that migration with Etihad this past quarter.

So essentially what's going to happen with transactions such as this is a customer will, such as Etihad, comes to us and acknowledges the benefits that we've been talking about from a cloud perspective and wants to make that transition. So we're beginning that transition with them now for their family of airlines.

And so you will start to see our subscription line item starting to benefit from that. And our license revenue that we would have seen from them actually start to decline because we will be doing most of our transactions in the cloud.

And as you might expect, the long-term value associated with this business now is going to go up because we're providing a greater service and greater value to Etihad than we had before..

Right.

So, does the old maintenance line sort of convert over to subscription and license goes away? Is that a simplified response to that question?.

Yes. So, you know, it actually varies in practice, and it depends on the migration plan in terms of how many implementations actually convert. With Etihad, you're not going to see an upfront and immediate impact on the maintenance line because we will be transitioning that over time..

Okay. Thank you..

We'll hear next from Scott Berg with Needham and Company..

Hi, Andres and Stefan. Congrats on a good quarter here..

Hi, Scott. Thank you..

Just a couple quick ones for me. First of all, Andres, on the deals in the quarter, you had more than 70% of the deals in cloud, which was above your expectations.

Can you give a little bit color to maybe what's the initial drivers of those particular deals were to have them move to the cloud, because that's a pretty quick transition, given that you just kind of announced the model change..

Yes. So obviously, from a company, we set up a strategy around the cloud migration, and made sure that we aligned the way we comp our sales and our teams around success in cloud-first.

What I would say is that as we made that change, we were able to move deals that were initially expected to be perpetual, to be cloud deals faster than what we expected.

And we weren't modeling this much change -- especially the first quarter out of the gate -- but we do have an incredible team and very dedicated focus on executing, and the response from customers was very positive. And what I would say is that many customers were very open in wanting. I shared two examples in my remarks, prepared remarks.

And we saw many examples of that where companies are actually were in the verge of thinking about migrating their most strategic applications to the cloud, and us announcing triggered their want to move. So I think it ended up working better than we expected. Now we're still setting the right expectations for Q3 and Q4.

But we do believe that in general, as I talk to CIOs across our customer base, they are thinking about moving their applications to the cloud. And this wasn't something that surprised our customers. I think it helped that we are all in and that we're making significant investments.

And in many cases, it opened our eyes on our sophistication in our cloud, frankly, that some of them may not have realized..

Okay, great. I guess as a follow up on that, then Andres, you talk about strength in the CPQ business. You did more deals in the first half than all of last year.

What's the right way to view that in relation to the strong ACV numbers in particular? Was that performance in the quarter driven by additional CPQ deals, or was it a broader blend of the three business segments?.

Yes, I would say that still the driving growth is still coming predominately from the core business and not from CPQ, just because of the volume base on the core business is much higher. But we're very pleased with the CPQ results and the momentum. We're also seeing the combination of the end-to-end offering of smart CPQ and smart pricing resonating.

I shared one of those examples in my prepared remarks. So we also did end-to-end solutions for customers in the quarter as well..

Okay. Good. And then last question for me, Stefan, is actual guidance, even with these numbers, is a little bit better than the prior guidance. At least the range was narrowed.

Is there any pushback on customers, given the upfront payments on the annual contract terms, or has that been pretty universally accepted so far from the early deals that you've seen?.

Yes, so nothing out of the ordinary there, Scott, in terms of what we've seen from our customers. And our cash flow is really benefitting from the growth that we talked about in our bookings metrics, and our ability to collect on those is being reflected in our free cash flow. So, yes, nothing out of the ordinary there..

Great. That's all I had. Thanks for the questions..

Thank you..

Thanks..

[Operator Instructions] We'll take our next question from Chad Bennett with Craig-Hallum..

Yes, thanks for taking my questions. So, less than two months ago at your cloud-first presentation, you reiterated the guide for the year, and talked about, highlighted pretty much, your visibility into that guide. I think you said 90%, 91% or something like that.

And then I think in the quarter you said your license revenue was actually better -- I hope I got that right -- better than what you expected. So I'm trying to connect the dots of what changed in less than two months on a highly visible guide that resulted in the guide today.

And then you also stuck your neck out and talked about where you thought revenue would be next year, and targeted $500 million five years out, or whatever the timeframe was.

So, should we have confidence in your revenue guide that you have visibility into 2016 and what that revenue number will be?.

Yes. So completely understand the question, Chad. And I would tell you that as a result of what we're seeing this year, yes, we're -- our confidence is increasing in terms of what we think the future holds for us. But to get more to specifically your question.

Like I said, the strength that we've seen so far this year in all of our metrics is very strong in terms of our ACV, TCV, and ARR. And so like I said earlier, we could -- we actually debated whether or not we kept with the guidance range that we had, which was the $178 million to $183 million, or whether we went ahead and took it down.

And we decided that it was in our best interest to take it down because of the mix that we saw and the momentum we saw from our cloud offerings in the second quarter. So, as Andres just talked about, 70% of our bookings in the second quarter were cloud bookings. And we didn't really want to disrupt that momentum.

We didn't want to do anything that would deflect from that, because we do believe that there is, again, higher lifetime value ascribed to these types of transactions. And we just felt like it was in our better interest as a company for the long term to make that call.

So, completely understand the question and why you might ask that question, but our confidence is -- in our business is, I would tell you, we're more confident today than we were on June 17th when we talked to you..

Yes, the last thing that I would add is that in the last two months, we've been firming up our pipeline for the remaining of the year.

And as you would have expected, before all of the comp was announced and changed, and as we're communicating with customers over time, we're seeing which ones were able to shift without doing anything unnatural or causing any concerns for our customers.

And we've been able, as we said, over time get more comfortable that more customers are selecting the choice of deploying in subscription, therefore we expect less upfront revenue to the tune of $4 million in the back half. So frankly, we're confident, customers' voice, and knowing that the long term value is much greater.

That's what really triggered this strategy..

Okay. One last question for me. Can you help me understand why subscription revenue was down sequentially from the March quarter? And then a follow on to that.

Considering the bookings momentum you're talking about on the SaaS side, why would Q3 SaaS ACV estimates be flat to down sequentially, considering the bookings momentum you have on a dollar basis? Thanks..

No problem. That is a timing answer. The bookings test we have will actually start to take shape in the fourth quarter.

That's something that we mentioned on the last call as well, that Q2 and Q3, and I said in my prepared remarks, does have some headwinds against it because of some of the accounting that we're going through with one of our acquired companies.

And given that we're talking about a small base of subscription revenue, any move of, call it, $200,000 to $250,000 is 100 basis points in our growth rate. So we're talking about some very minor details that we think will completely be irrelevant by the fourth quarter.

And then once we get into 2016, I think you're going to see that subscription line continue to accelerate in growth rates..

Anything further, Mr.

Bennett?.

Nope, that's it. Thank you..

Thank you..

Thanks, Chad..

It appears there are no further questions at this time. Andres, I'd like to turn the conference back to you for any additional or closing remarks..

Great. Thank you for your participation in today's call and for your support of PROS. We are pleased with our strong performance in the quarter, and with the progress we're making on our cloud-first strategy. We're confident and excited about our long-term outlook, and believe we're in a strong position to capitalize on our large market opportunity.

I would like to thank our PROS team worldwide for their continued passion and commitment to innovation and customer success. Thank you also to our customers, partners, and shareholders. We look forward to speaking with you on our next call. Thank you, and goodbye..

This concludes today's conference. Thank you for your participation..