Pegasystems Inc.

the PegaSystems Q4 and fiscal year 2023 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the conference over to Peter Welburn, BP Corporate Development and Vestum Relations. You may begin your conference.

Thank you, Jeannie. Good morning, everyone, and welcome to Pegasystem's Q4 and full year 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, forecasts and guidance or variations of such words and 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 2024 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 Q4 2023 and full-year 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, 2023, and other recent filings with the Securities and Exchange Commission. 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 change our views 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 turn the call over to Alan Treffler, founder and CEO of Pegasystems.

Thank you, Peter, and to everyone who's joining today's call. It's terrific to see how well the team performed in 2023. The organization responded to our new go-to-market strategy, and we finished the year with a very strong Q4. We continue to deepen and expand our client relationships. We've been doing a terrific job, I think, of applying GenAI to introduce innovative industry-changing technology, and we generated a good mix of growth and cash flow. which Ken will discuss in more detail in a few minutes. Now, this year continues the important themes we've been talking about, and I'm more convinced than ever there's still amazing opportunity for growth within our client base, and I'm confident in our org-focused deep engagement model. I've continued to engage with our most senior clients, most recently in Davos for the World Economic Forum annual meeting, and I talked to dozens of C-suite clients and partners about how they're responding to change. their business opportunities, the challenges and plans for 2024 and beyond. AI is still central to almost every client conversation as they continue to try to understand and explore where and how to leverage AI effectively and safely in their organizations. And we're showing them how Pega can help. These conversations reinforce for me that what we have is unique and perfectly suited to enterprise needs. I couldn't be more excited about the incredible opportunity to leverage Gen AI and revolutionize the way clients use our technology to drive success in 2024 and beyond. Let me tell you why Pega is perfectly positioned to help clients deliver on the Gen AI opportunity. Since our founding, we've been incorporating the principles of AI, generally statistical as well as now generative, into our offerings and really focused on building products, designed for the needs of the sophisticated enterprise. Our clients come to us because they want to transform their businesses to become more efficient, more profitable, or improve loyalty, creating better experiences for their customers and employees. And our enterprise AI decisioning and workflow automation platform enables clients to unlock business transforming outcomes with real-time optimization and continuous improvement. You can find great case studies on our website that explain how our clients are using the software to, one, improve customer engagement by customizing conversations real-time in its scale. For instance, Wells Fargo describes how they're using our customer decision hub to provide targeted and relevant responses to the billions of interactions they receive monthly from customers. Secondly, to enhance client service. AI-powered guidance that delivers amazing experiences for customers and employees, boosting loyalty, supporting retention, and driving down costs. Aflac describes on the website how we're simplifying and automating the processing of thousands of emails per week from intake to resolution, improving customer and employee satisfaction. And finally, what we've always done, streamlining operations by automating operations with intelligence. This is what Lloyd's talks about. automating their business processes to resolve fraud and dispute cases faster and more effectively, even while on the phone with the client. These results are what matter to our clients. They're looking to transform their businesses, not simply crank out more code. So when we apply GenAI, we're not using it to generate code. We're using it to optimize the business concepts, adhering to best practices. For example, suggesting the most efficient and effective way to process a mortgage or insurance claim, or how to create the best offer and marketing treatment for a client. We have a unique structure built around business concepts, and Enterprise's process, rules, data models, UI, all of those are organized into layers so they can be built on, reused, and specialized to support the needs of different product lines, customer segments, or geographical jurisdictions that an enterprise might need to manage. This layered architecture is the perfect architecture for Gen AI and what I believe gives Pega a unique advantage because we use the Gen AI not to write code but to directly author and control and influence the business concepts themselves. This unique layer cake architecture has enabled us to develop, integrate, and deliver new Gen AI capabilities and services very quickly. It's based on a patented architecture that we've studied and evolved for decades and can't readily be copied or reproduced. I think this gives us a clear competitive advantage. So in terms of our strategy for this year and next, there are four major areas we believe our approach to Gen AI will drive a massive impact for our clients and for Pega. First, we're looking to double developer productivity in Pega with Pega skills always at their fingertips. Second, we're looking to ignite enterprise innovation by being able to bring together industry expertise, Pega technology, the wisdom of the internet, and our clients' insights. Third, we're looking to try to maximize revenue and efficiencies for our clients by giving them real-time optimization and personalization of customer interactions. and making it so that they can continually optimize. And finally, being able to streamline work processes and customer experiences by giving the right people instant access to the right real-time systems and capabilities so they can literally get the work done. Let me tell you how we're delivering on the strategy today and what to expect in the future. Now, we started by introducing 20 GenAI boosters as part of Pega Infinity 23 in the fourth quarter, supporting our goal of improving development productivity and showing our clients how these tools can be used safely and responsibly. We launched an interactive demo on our website that lets clients immediately experience the power of our GenAI capabilities. You enter the description of a business process you want to optimize, and Pega GenAI helps you design The optimal processes, the stages, the steps, the data model, the user personas, all in seconds. It's available to any of you. Since its launch, thousands of visitors have experienced the demo, entering workflows from client onboarding to 5G network rollout, and we're hearing terrific things. Do, get on, try it yourself. And in the last few weeks, we announced two new powerful offerings that I think are going to be game-changing. The Pega GenAI Knowledge Buddy and the Pega GenAI Blueprint. The Knowledge Buddy is an enterprise-grade generative AI-powered knowledge assistant to quickly and easily help customers and employees get specific answers based on a company's own content, but synthesized by generative AI. So employees don't have to search across siloed and scattered knowledge bases. Now, there are lots of Gen-AI-based assistants in the market that ingest content or answer questions. But when we looked at them, we think that they're generally not built for true enterprise needs. So we've designed a product that is fortified with enterprise-grade integration, auditing, and controls. It puts organizational knowledge in employees' and customers' fingertips, allowing them to ask questions through simple conversational interfaces and get specific, accurate, and concise responses with transparent attribution to where the source content is coming from. We're using Knowledge Buddy to embed all the Pega's documentation and support library into our design environment so developers can easily find answers about how Pega can make them more productive and operate faster and with less training. This powerful combination of our innovative AI architecture with security features means that our clients can use this latest technology and feel confident and safe knowing they're adhering to high standards of trust and responsibility. And just a few days ago, we announced something I think is going to be truly remarkable as it develops. It's the Pega GenAI Blueprint. This is a collaborative SaaS application that automates enterprise-grade workflow application designs to catalyze enterprise innovation and significantly increase developer productivity. I'm going to ask Prim Akanol, our Chief Product Officer, to tell you about this groundbreaking project.