Pegasystems Inc.

Good afternoon, and welcome to the PegaSystems first quarter 2022 earnings results conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Ken Stilwell, Chief Operating Officer and Chief Financial Officer. Please go ahead.

Thank you. Good evening, ladies and gentlemen, and welcome to Pegasystem's Q1 2022 earnings call. Before we begin, I would 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, 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 the fiscal year 2022 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 and forward-looking statements are contained in the company's press release announcing its Q1 2022 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, 2021, 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 that, I'll turn the call over to Alan Treffler, founder and CEO of Pegasystems.

Thank you, Ken. And thank you to everyone who's joined today's call. I'm pleased to kick off the year with solid results as we continue to stay focused and leverage our strengths. We grew ACV, annual contract value, which is our most important metric, by 21% year-over-year while improving margins. Our low-code software platform for AI-powered decisioning and workflow automation is unmatched in the industry. and continues to be the choice of many of the world's leading organizations. And we help the most demanding enterprises work smarter, unify experiences, and adapt instantly so they can always be ready for whatever's next. Now, today, this is more important than ever. This is one of the most volatile environments I've seen in decades. Clients continue to face challenges related to the pandemic, and certainly no one expected war to break out in Europe, which is affecting both the world's economy and business requirements generally in ways we just didn't anticipate a few short months ago. Our clients and their customers are grappling with labor shortages, rising inflation, increased oil prices, supply chain interruptions, and economic insecurity. But Pega is built to help enterprises manage through uncertainty. Our solutions are as effective for clients whose businesses are under pressure as they are for those focused on growth and expansion. We understand, as a company, how to adjust our go-to-market approach to support clients equally well. regardless of which dynamic is driving their decision making. Before we move on, I'd like to take a minute to address what's happening in Ukraine. We, as I think is most of the world, are horrified by Putin's brutal actions and what's happening to the Ukrainian people and others being affected by the violence. In 2021, before Russia's invasion of Ukraine, we had already taken the action to wind down our Russian operation, which was an insignificant part of the company's business. As such, we stopped pursuing new Russian business, closed the regional office, and we have no remaining employees there. We do have a large team in EMEA, and specifically in Poland, who are being most directly affected given their physical proximity to the war. We also have staff around the world who are Ukrainian and are Russian and have families and loved ones in harm's way. Our focus has been to support those most in need with financial and other needed resources. Our staff in Poland have helped those fleeing the violence with transportation from the border, temporary housing, food, care packages, and teams around the world have raised additional money through a variety of other regional initiatives. I am proud of our employees who have demonstrated compassion and generosity by donating financially as well as through action to complement our corporate donations. And we are hoping for peace and an end to this horrific situation. And our hearts go out to the Ukrainian people. Regarding the business, let me hit some highlights regarding what we are seeing. With the level of volatility in the world today, our clients are looking for solutions that can help them be more resilient while they prepare for whatever else may be coming. Efficiency is becoming an increasing focus right now. And our solutions are ideally suited to support organizations focused on productivity gains because it makes it possible for for them to adjust readily as circumstances change. And many of our clients have their own customers who are experiencing financial hardship, where solutions that support compassionate collections can be very helpful. Our client, StepChange, the UK's largest debt charity, is a great example of the type of solution needed today. They leverage Pega to build a single, unified system that's faster and easier to use, and it allows the organization to improve their customers' experience and streamline their operations. More generally, we continue to enhance our software to help our clients deploy apps faster, create smarter workflows, and create better total experiences for their customers and their staff. Towards that end, in Q1, we released the latest edition of our Pega Infinity software suite, which features new intelligent low-code capabilities for AI-powered decisioning and workflow automation. One of the coolest enhancements is new voice AI and messaging solutions for customer service agents that kind of act as a co-pilot, providing hands-free capabilities, during their live, real-time interactions. The software listens and analyzes conversations as they happen, making suggestions to agents, and helping them with time-consuming and error-prone manual data entry. There are also enhancements to Pega's customer decision app to improve engagement with customers through a better understanding of omnichannel interaction histories, and by being able to create better insights, on the success of next best action recommendations. We're excited to bring these capabilities to our clients. We're also very excited about Pegaworld, scheduled for a little less than a month from now, on May 24th at 9 a.m. Eastern Daylight Time, and for those in Asia, on May 25th, 10 a.m. AEST. We have some exciting news lined up for the morning of the show related to enhancements to our process mining capabilities and new enhancements to the customer decision hub, as well as our cloud choice offerings. Last quarter, I mentioned a few of the clients will be sharing their success stories during Pegaworld. Since then, we've announced our keynotes, and they include some incredible brands with inspiring stories. And these include Lloyd's Banking Group, their CTO will share their digital transformation journey. They are leveraging Pega to become a champion of adaptability and driving intelligent automation to ensure their business is ready for anything that's coming. T-Mobile, their vice president of customer strategy and planning will reveal how they are achieving true relevance and excellent personalization. by putting customers at the center of everything. They're leveraging Pega's decisioning capabilities to enable hyper-personalized customer experiences, to deepen relationships with their customers, and looking to create a mission-critical application for the organization's team of experts. And Booking.com, their global innovation lead, will talk about their mission create simplified and connected experiences. They are leveraging Pega to enable their frontline teams with a new system to make it easier for employees to support every customer and partner with any query a first time around. Be sure to check out the Pega World website to register and join us live to hear the latest news and inspirational client stories. Just go to Pega.com and click on the link featured on the homepage. Personally, by the way, I'm also delighted to being able to do more travel recently, to see clients, and it's great to see that we're actually booking clients into our new briefing center in our Cambridge headquarters. I hope also our investors will join us there for our in-person investor meeting scheduled for June. Finally, I'm excited to say we launched our inaugural impact report, which provides a consolidated view of our current efforts in ESG, environment, social, and governance, and corporate social responsibility. Talking about that across our business. I'm very proud of this report, which showcases terrific work that Pega team members are accomplishing. We are focused on more efficient and sustainable business operations, building and supporting diverse teams who challenge each other to think differently and helping our communities with needed support and resources and supporting the strong governance we have in place to keep our business focused on what matters. Our commitment to making a positive impact has never been stronger. And we're looking forward to keeping the momentum going. So in summary, we've gotten off to a good start in 2022. Our business and our people continue to demonstrate resilience in an increasingly volatile environment. The need for enterprise software that can help our clients navigate these challenging times has been a significant driver of our success. And our transition to a software business, which is now nearly 100% subscription, is paying off and enables us to shift our focus to balancing growth with profitability. And we continue to be excited about the significant opportunity in front of us. And I have a lot of confidence in our team's ability to deliver on this opportunity. To provide more color on the financial results, I will turn it over to Pega's COO and CFO, Ken Stilwell.