Pegasystems Inc.

Good day and welcome to Pegasystem's fourth quarter and four-year 2020 earnings results conference call. Today's conference has been recorded. And now at this time, I'd like to turn the conference over to Mr. Ken Stilwell, Chief Financial Officer. Please go ahead, sir.

Thank you. Good evening, ladies and gentlemen, and welcome to Pegasystem's fourth quarter 2020 earnings call. Before we begin, I'd like to read our safe harbor statement. Certain statements contained in this presentation may be construed as forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. The words expects, anticipates, intends, plans, believes, will, could, should, estimates, may, targets, strategies, projects, forecasts, guidance, likely, and usually are or variations of such words or other similar expressions identify forward-looking statements, which speak only as of the date the statement was made and are based on current expectations and assumptions. Because such statements deal with future events, they are subject to various risks and uncertainties. Actual results for fiscal year 2021 and beyond could differ materially from the company's current expectations. Factors that could cause the company's results to differ materially from those expressed in the forward-looking statements are contained in the company's press release announcing its two-fourth and full-year 2020 earnings and in the company's filings with the Securities and Exchange Commission, including its annual report on Form 10-K for the year ended 12-31-2020 and other recent filings with the SEC. Investors are cautioned not to place undue reliance on such forward-looking statements, and there are no assurances that the matters contained in such statements will be achieved. Although subsequent events may cause our view to change, except as required by applicable law, we do not undertake and specifically disclaim any obligation to publicly update or revise these forward-looking statements, whether as the result of new information, future events, or otherwise. And with this, I will turn the call over to Alan Treffler, founder and CEO of Pegasystems.

Thank you, Ken. You know, the highlights are that we feel good about what we accomplished and where we landed in 2020. We adapted well to an extraordinarily difficult situation, bringing on new ways of working with each other, our clients, and our partners. We introduced new solutions and enhanced our industry-leading low-code software to help our clients manage their short-term challenges while building for long-term success. And we made substantial progress in our transition to a recurring revenue model. You can see clear signs of this progress in our full-year results. we completed the move of our Pegacloud clients onto our next-generation cloud platform, setting us up for long-term margin improvements. The accelerated Pegacloud growth is demonstrated by Pegacloud annual contract value of 57% year-over-year and Pegacloud backlog of 40% year-over-year. Since we really began emphasizing Pegacloud three years ago, we've seen an explosion of Pegacloud low-code apps, with a compound annual growth rate over those three years of 85%. And we also grew total annual contract value by 21%. We delivered record revenue that crossed the $1 billion milestone and grew backlog to more than $1 billion for the first time. We also invested in key sales and marketing initiatives to start to improve our brand awareness. and attracted new talent from leading tech companies, including our pre-assist rivals. We made significant enhancements to our partner ecosystem strategy, an important long-term accelerator of revenue and margin growth. And we continue to enhance our solutions in one-to-one customer engagement, customer service, and intelligent automation with innovative capabilities, improving functionality, productivity, and speed to value. We drove deeper into long-term clients and added exciting logos to our growing list. We maintained technology leadership in key areas that our clients care about and continue to get recognition by influential industry analysts in more than a dozen reports covering CRM, robotic process automation, low code, customer engagement, digital process automation, decisioning, and real-time interaction management. We stayed true to our values, culture, and commitment to keeping the well-being of our staff, our clients, and the extended public community in our hearts and minds through expanded philanthropy efforts and increased focus on inclusion and diversity. And we did all of this while improving markets. Finally, just a couple of fun notes. We'll be ringing the NASDAQ opening bell on Monday the 22nd to celebrate our 1 billion revenue milestone. And the Layer Kicks, a band made up of Kega staff, recently won the top award in a battle of the bands sponsored by one of our key CRM influencers. It's nice to know we can win in the boardroom against the likes of Salesforce, Oracle, SAP, and Zoho. and winning the bandwagon against them, too. Now, in terms of the market dynamics, digital transformation has never been more central to the way our clients are thinking. Fundamentally, their continued prosperity, and in some cases, their continued existence. The last year has made it abundantly clear that organizations need to accelerate their digital transformation initiatives, not just to survive, but to really compete and thrive in this wildly changing world. And we feel we've never been better positioned to support this need. Our solutions help clients crush business complexity, enabling better decision-making, saving time, and helping them get work done. Our software is exceptionally powerful and adaptable, with a scalable and unique center-out business architecture that puts outcomes and customers at the core. And our prescriptive approach to design thinking brings staff across the organization together to together design and deploy innovative solutions in weeks or days, leveraging our low-cost platform. And our recently launched trademark PEGA process fabric leaves together business processes, case management, and workflows to streamline the customer experience, and improve employee productivity across the enterprise. As I mentioned, we continue to enhance our solutions to meet our clients' long and short-term needs. In the beginning of the pandemic, we quickly rolled out a set of industry-focused solutions, specifically built to help manage some of our customers' most pressing needs, like managing surges in unemployment claims or our free COVID-19 tracking app. In one-to-one customer engagement, we introduced the ethical bias check to help eliminate biases in AI so we can drive customer engagement knowing it's going to be shared. And launching the value finder to help customers deal with and serve underserved segments with meaningful and empathetic offers. In customer service, we launched the SAS Unified Messaging Edition to help agents better handle increasing volumes of service inquiries. And just a few weeks ago, we announced the acquisition of Curious, a developer of powerful AI speech analytics that will help customer service agents in real time by analyzing service calls and recommending next best actions and the right proactive and preemptive customer service. In intelligent automation, we launched X-Ray Vision, the industry's first self-healing robotic process automation. And we introduced the industry's first RPA auto-balancing feature, which uses AI to help clients reduce robotic process automation costs. We made it easier for clients to make progress on high-impact digital transformation initiatives. by bringing a new low-code Pega Express methodology and built it directly into the platform with a new set of ways for customers to get started fast and prove outcomes. And to help clients and partners gain an advanced Pega software skill faster, we introduced our new Pega Academy with mission-based learning and enhancing the Pega community to make it easier for clients, partners, and Pega to share best practices. We continue to work on these enhancements and look forward to sharing some important capabilities with you at PegaWorld Inspire in May. Now, in terms of client and business highlights, our new business continues to be strongest in our traditional areas such as financial services, government, telecoms, healthcare, insurance, industries, less hard hit by the pandemic, where thankfully we have had strong critical mass. In 2020, we had a good mix of new business extensions in existing clients like Anthem, British Telecom, CIBC, Citigroup, National Australia Bank, and at government agencies around the world. We also brought in some exciting new logos like Emirates National Bank, Partners Health, and Cicada Pharmaceuticals. and continue to see more partner-sourced deals, an opportunity we were focused on in 2021 and beyond. Our clients continue to leverage Pega to cut through the complexity of their business systems so they can actually make better decisions and get work done. And, you know, what's interesting in the government space is on the heels of our successful census project, we are quickly becoming a preferred low-code solution for government, as demonstrated by our recent Internal Revenue Service win and continued success in this market. We've been able to stand up new systems quickly to meet immediate needs and help organizations think deeply about their future. And there's nothing more rewarding for us than clients who are willing to tell their stories publicly. Pegaworld Inspire. will again this year be held as a two-and-a-half-hour interactive virtual event. And it's just around the corner on May 4th. We already have an impressive list of clients lined up to tell their stories. For example, five years and 70-plus applications into their regular journey Scotiabank has built a large catalog of reusable tech capabilities. They're going to talk about how they're gaining leverage from these assets to accelerate the global rollout and the formation of an enterprise business center of excellence to maximize value through standardization and reuse. Vodafone UK will talk about driving transformation by automating business processes, delivering powerful intelligent automation at scale across its businesses. Leveraging Pegas, Agile, low-code delivery capabilities, they are building and updating applications with unprecedented speed and have a new automation platform that enables multiple use cases, radically simplifies operations, and reduces costs. And as an example of work so incredibly needed this past year is in the program we supported for StepChange debt charity in the UK, where more than 5.6 million people who've been negatively impacted by the pandemic with an accumulated 10.3 billion in debt have been helped by being able to apply the Pega technology. StepChange will announce how they use Pega who launched their COVID payment plan, a new online service built in a matter of weeks to provide short-term assistance for up to a year for those who qualify. We're really proud that our technology is being used to help transform and improve the lives of millions of people who've been hurt by the pandemic, and especially proud that these organizations and others are willing to step forward and speak publicly. So in summary, We know the challenges of the pandemic will be with us for some time, and it's going to take a while for the world to sort to its impact. But we've adjusted well over the last year to new ways of working and client requirements and feel that we delivered strong performances nonetheless and feel we are well positioned to continue to adapt as required. I will tell you that the need for digital transformation has never been greater than And we're in a better position than ever to respond to that need in ways that are truly future-looking. And I think we're in a terrific position to help our clients respond to both the short-term and the long-term problems that they face in ways that we believe that you do. We remain inspired and are just amazed at the continued support and commitment of our staff, our clients, and our partners, and are optimistic about this year in our long-term growth agenda. To provide some more color, let me turn this over to Appendix Chief Financial Officer, Ken Stillow. Ken?