Pegasystems Inc.

Ladies and gentlemen, thank you for your patience. The teleconference will begin momentarily. Thank you for your patience. The teleconference will begin momentarily. Thank you. Greetings and welcome to the PegaSystems first quarter 2023 earnings results. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ken Stilwell. Please go ahead.

Thank you. Good evening, ladies and gentlemen, and welcome to Pegasystem's Q1 2023 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 that 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 2023 and beyond may 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 Q1 2023 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, 2022, 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 to everyone who is joining today's call, we had a terrific start in 2023. Our team executed our strategy well, leveraging our strengths and remaining resilient in an environment that we expect will remain uncertain for some time. In Q1, we achieved ACD growth of 15%, driven primarily by increasing our footprint in our existing clients and through strength in Pega Cloud. This is exactly what we said we had tremendous opportunity and where we would focus our sales and marketing efforts. We also saw select new logos, though that's not our focus for this year. Clients are responding positively to our architecture, our model, our focus on deep engagement. PegaCloud is driving growth, and cloud margins continue to scale. It's great to see us continuing to make solid progress towards becoming a Rule of 40 company, balancing growth with fiscal discipline and generating significant cash flows. Overall, our results reinforce the effectiveness of our strategy, and we see tremendous opportunity for growth. Ken will discuss our financial results in more detail in a moment. Now, I'm spending a lot of time with our clients, both at our Cambridge-based executive briefing center, which continues to be solidly blocked, and on the road, including a trip to Europe I've just returned from. I continue to hear the same things. Last week I was in Germany, Italy, and Sweden visiting clients, and despite the anxieties in Europe, the conversations I had were optimistic, and clients continue to be deeply interested in building relationships with Pega. Digital transformation remains a driving force as organizations are looking for solutions to better deliver personalized engagement and optimize business processes. Yacine just published a spending survey that noted that digital transformation was one of the top investment priorities for CIOs in 2023. Pega has a long history of helping clients improve efficiency and effectiveness, as well as to improve their customers' experience. Clients are also very interested in, and in some ways concerned about, the use of AI, especially with the newest generative technologies. They want to know how to leverage AI in responsible ways to drive automation without compromising enterprise governance or losing control of outcomes. Our approach to digital transformation and to AI is perfectly aligned to both address these concerns and meet these needs. Now, to talk about our approach, our viewpoint in developing software has always been about building technology that serves business people. We provide the most powerful and scalable low-code platform for AI-powered decisioning and workflow automation. We make it simpler for enterprises to work smarter, unify experiences, and adapt quickly. And we ensure that organizations can empower their employees without compromising enterprise IT integrity. We're combining AI and automation to enable organizations to become autonomous enterprises that self-optimize towards business goals without sacrificing control. Now, as you've no doubt seen, there's an elevated interest in AI and lots of excitement and hype. And just as a reminder, since our founding four decades ago, Pega has helped enterprise clients use our AI-powered solutions to automate complex business processes, improve customer experience, and drive operational efficiencies. We've been evolving our capabilities as the technology and our clients' needs have evolved. And we're in a unique position to lean on this heritage of harnessing, understanding, and leveraging AI to be able to provide unique capabilities to our clients. When we announced our generative AI plans last month, we stayed true to our approach with an offering that will allow clients to use the generative AI technology of their choice with enterprise governance to make generative AI truly enterprise-ready. We focus on building out use cases that maximize value and minimize risk. For example, we use generative AI to create better-performing marketing copy or to generate prototype applications from just the simple sentence. Our approach incorporates auditing and human approval that are the hallmarks of Pega's platforms. This managed architectural foundation provides organizations with safety, security, and reliability suitable for the enterprise. IT managers will be able to integrate their own specific generative AI APIs into Pega Infinity and centrally manage licenses and controls to give clients flexibility to add existing or emerging generative AI APIs. A great example of our generative AI strategy coming to life is our recent inclusion in Amazon's announcement of Bedrock, a new AWS cloud service that allows developers to build and scale generative AI applications in the cloud. Because of our approach, we can easily integrate Bedrock into our platform and have use cases that can make it available to clients. At the same time, we can continue to support other cloud providers and other generative AI solutions based on our clients' preferences. Now, we've been at the forefront of providing responsible AI for years and are committed to putting the controls straight into our software to make sure that the fairness and transparency and robustness all exist. We believe the rapid generation, generative AI developments will make lower-end, low-code providers a commodity. But on the other hand, the higher-end, enterprise-grade solutions like Pega are going to benefit. So we're excited about the opportunity to create additional value by augmenting our solutions for organizations. Now, we've also rolled out new Pega Cloud enhancements, supported by an enhanced global operations center that improves speed, scalability, agility, reliability, and security. These improvements help organizations maximize their technology investments and deliver better experiences for staff and clients. And we're continuing to make progress with Pega Launchpad, which we announced last year as our new cloud-based, low-code application development platform that empowers software providers to build and commercialize WordPress-centric business-to-business SaaS apps. We're excited to be working with a select group of amazing early adopters whose Pega launchpad-powered apps are being built to address the needs of new markets that they will be pursuing. Now, we're coming up on Pega World Inspire, our annual trade show, and it's going to be fabulous. We'll be showcasing our new AI capabilities, announcing several new offerings, and demonstrating solutions at more than 40 partner booths and featuring over 200 demos in 100,000 square feet of pure ingenuity. We'll also be highlighting the success stories from more than 40 clients, including outstanding keynote presentations from Aflac. We'll talk about how they are using Pega to reduce roadblocks and bottlenecks and manage staffing fluctuations and market pressures to continually deliver transformational outcomes. Citibank. One of our very first Pega clients, who went live originally, obviously on a very different technology, in 1984, is using Pega to deliver on its mission of being a trusted financial services partner, levering decision science to drive omnichannel customer-centric experiences. Rabobank, from the Netherlands, who will demonstrate how they are revolutionizing customer experiences using our low-code and AI capabilities, and Virgin Media, who will describe their journey to become a fully digital business, leveraging Pega's customer service, case management, and AI-based decisioning. If you haven't yet, please check out the Pega World website, register, and join us to hear and see all of this in person, and especially feel free to join us for the investor session on Monday, June 12th. So in summary, I'm pleased with our strong start to 2023 and our ongoing progress to be a Rule of 40 based company. Our results continue to be driven by ongoing demand from large global enterprises and for digital transformation solutions that drive automation and leverage AI. Our strategy to focus our effort on meaningful clients is proving effective and candidly is making us feel really good about how we're doing in the market, as well as obviously winning business. We expect to face macroeconomic challenges in 2023, but think we are well prepared and experienced with executing in challenging times. I feel confident that we are in the right space, with the right capabilities, and the right team. And our strategy is absolutely the right one to leverage the significant opportunity in front of us. To provide more color on our financial results, Let me now turn it over to our COO and CFO, Ken Stilwell.