Pegasystems Inc.

Good day, everyone, and welcome to the PegaSystems second quarter 2021 earnings results call. Today's call is being recorded. At this time, I would like to turn the conference over to Ken Stilwell, Chief Operations Officer and CFO. Please go ahead.

Thank you. Good evening, ladies and gentlemen, and welcome to PegaSystems Q2 2021 earnings call. Before we begin, I'd like to read our safe harbor statements. 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, or variations of such words or other similar expressions identify forward-looking statements which speak only as of the date of 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 forward-looking statements are contained in the company's press release announcing its Q2 2021 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 December 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 or 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 that, I will turn the call over to Alan Treffler, founder and CEO of Pegasystems.

Thank you, Ken, and thank you to our shareholders. I'm pleased with our results for the first half of the year, and they reflect the strong demand for our digital transformation technology and our continued progress towards a recurring revenue model. Our total ACV, which we consider to be the best indicator of our performance, increased by 22% year over year, as our backlog continued to grow as well. I'm excited that we're seeing really strong cloud adoption, led by PegaCloud, which is the majority of our new business, complemented by great success in client cloud. Now, as parts of the world begin to emerge from the acute conditions of the pandemic, digital transformation remains at the forefront of our clients' priorities. It's more apparent than ever that there's no straight line back to a pre-pandemic environment. And clients, I think, are understanding the need for agility. and that it's more important than ever if they're going to thrive in an increasingly unpredictable world. We're also benefiting from a renewed interest in workflow, a category we help pioneer and that is being heavily discussed in the market. However, we believe that our low-code platform and our outcome-centric approach to workflow truly differentiates us. and uniquely positions us to help our clients solve their business complexity while maximizing flexibility and delivering excellent value now and in the future. Our strategy is to continue to focus our efforts on building solutions and an ecosystem directed at improving efficiency, usability, accessibility, and time to value. When we last spoke, We were days away from the PegaWorld Inspire user conference and saw several significant announcements. We launched the next major release of Pega Infinity that includes enhanced low-code, intelligent automation, and AI capabilities. This newest version empowers business users to deliver differentiated user experiences with powerful development capabilities that deliver digital transformation at scale for even the largest, and most sophisticated global enterprises. Using a center-out approach, the latest enhancements help improve back-end process efficiencies, streamline front-end customer service processes, and enable real one-to-one customer engagement to drive meaningful and lasting transformation. Employees can work smarter to drive impactful outcomes, while end customers can enjoy faster, easier, and more personalized experiences that truly help our customers deliver satisfaction and loyalty. We also launched our new streamlined Pega Partners program designed to help clients rapidly accelerate their digital transformation initiatives by more easily identifying the partner that best fits their needs through new distinctions. In addition to the implementation role our partners have historically played, the program makes it easier for them to engage with us in joint solution development co-sell, and even an incentive for referring clients. This is the second year we helped PegaWorld inspire virtually. And we were able to incorporate a lot of learning and innovation to make this year's event even more engaging. I hope many of you were able to join live or can still watch the replays. After more than a year of essentially all global events becoming virtual, we had some concerns about digital event burnout. But we had a great response with more than 18,000 attendees from almost 800 unique client organizations. Additionally, since the live event, we've seen more than 16,000 replay views, significantly broadening the impact and effect of the content. As successful as our last two virtual Pegawills have been, we are looking forward to being back in person in Las Vegas in 2022 and hope you'll be able to join us. Now, in terms of new business and some of the client work we've been doing, in Q2, we continue to see a good mix of business globally within our key verticals and across all three major solution areas, while making some inroads in some emerging spaces. We continue to see both net new business and expansion of business within existing clients, indicative of the continued opportunity to extend our footprint within our installed base. I love winning business, but I'm still most excited by seeing the great results we've been able to help our clients achieve, many of whom did share their stories at Pega World in May, like top 10 global bank HSBC is following a highly successful deployment of Pega marketing and real-time decisioning in Australia, by using Pega across the entirety of its retail banking and wealth management customer base. They are maximizing reuse and deploying to a number of markets across multiple sales and service channels. And this results in significant improvements in customer and colleague experience, as well as revenue uploads. Blue Shield of California is lowering cost per customer while growing in the highly competitive California market. They're improving customer service to deliver personalization with every engagement, creating an integrated service model that thrills both customers and staff. Fortune 500 insurer Unum has successfully implemented Pega natural language processing to support one of its largest contact centers, providing business users better insight into the types of requests being made by customers. And UPC Switzerland. the country's largest cable operator and part of the Liberty Global Group, is responding to the challenge of massive changes in the telecoms industry. Pega is helping UPC with a radical digital transformation to create seamless customer experience across channels while keeping costs down and productivity up. You can hear more about these successes directly from our clients by watching Pega World Inspire replays on our website. Just click on the Events tab on the homepage, and I think you'll find it really worthwhile. Now, from an operational perspective, we continue to hire strategically, attracting talent from peers and competitors while we invest in retaining and developing our own high-caliber team. Around the world, I continue to be impressed with the tenacity, commitment, and passion our team has shown to get us through these new challenges and and to show new things to our clients. We're just starting to support travel and allowing people back into offices, as, of course, local conditions and regulations allow, while prioritizing the health and safety of our staff, clients, and partners. Now, look, we all know the pandemic has had a profound effect on how we work, some of it very challenging. But it's also stressed our limits in positive ways. And we found innovative new approaches in working together with our clients to become an even tighter and more connected organization. Many of these changes will persist and continue to bring positive change going forward. And we're seeing with many organizations around the world that we've collectively learned that we can be much more flexible than we thought possible. And this creates new opportunities. from everything from recruiting to retaining the best people to being able to engage differently with our clients. You may have seen that our headquarters building in Cambridge was recently sold, and we are ending our lease there. Rather than simply find another similar space in Cambridge, we took this opportunity to rethink what our workforce would look like in the future based on employee surveys and discussions with peers. As a result, we're leasing a smaller headquarters in Cambridge that will include a state-of-the-art client briefing center and also a second space west of the city in Waltham, which we're building out now and will be custom designed to support our future workforce. We also, in the region, have beautiful offices in Salem, New Hampshire, north of the city. We think, for example, this approach will give current and future staff more options for where to work and support the flexible work environments that we see employees seeking. We believe our offices should be a magnet, not a mandate, and that this approach will benefit our recruitment and retention efforts. So, in summary, I think we're executing well on a strategy, and this is reflected in our results for the first half of 2021. We're making terrific progress on our transition to the recurring revenue model. Our clients are leveraging our software to address both immediate and short-term challenges as well as preparing and building for long-term opportunities. I think we're making the right strategic investments to take advantage of the heightened focus on digital transformation, and we have our unique outcome-driven workflow that will enable this to be possible, all while we are collectively working to judiciously manage margins. And we continue to see significant opportunities among both our existing and new clients. To provide more color on the financial results, let me now turn this over to our COO and CFO, Ken Stilwell. Ken.