Pegasystems Inc.

Thank you for standing by. My name is Jeannie and I will be your conference operator today. At this time, I would like to welcome everyone to the Pegasystems 1Q 2024 Earnings Call and Webcast Conference. 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 this 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, Vice President of Corporate Development and Investor Relations. You may begin.

Thanks, Jeannie. Good morning, everyone, and welcome to Pegasystem's Q1 2024 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 forecast 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 Q1 2024 results 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 in 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 cause our views to change, except as required by applicable law, we do not undertake and specifically disclaim any obligations 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, Peter, and thank you to all who have joined today's call. We're off to a strong start in 2024. Our results reinforce the soundness of our greater market strategy, and we continue to improve execution, resulting in strong cash flow and significant expansion of Pega Cloud gross margins. This quarter, we continue to grow by deepening and expanding client engagement throughout our target account model and to drive our Gen AI strategy forward with significant new and enhanced technology. The reactions we're seeing from clients as they begin to experience and fully understand the potential impact of Pega Gen AI is tremendous. It's opened up whole new avenues for collaboration between us, our clients, and our partners, as well as inside our client organizations across their teams and functions. I'm even more excited than when we last talked about the incredible opportunity to leverage GenAI to drive success in 2024 and beyond, for Pega and for our clients. Now, to talk about the strategy, as a reminder, when we apply GenAI, we're not using it to generate code. We're using it to optimize the business outcomes and best practices that our customers are able to follow. Our unique technical structure is built around business concepts And enterprises' processes, their rules, data models, UI, all organized into layers that can be built on and reused. It's turned out that this is a perfect architecture for Gen AI. And I think it gives Pega a unique advantage because we directly author, enhance, and optimize the business concepts themselves in a way that both business and IT can understand and collaborate on. patented architecture underneath it all that I don't think can be readily copied or reproduced. Now, you may remember on our last call, I talked about the major areas where we believe our unique approach to Gen AI will drive massive impacts for our clients and for us. Delivering solutions that will first double developer productivity and bring PEGA skills to the fingertips of our customers. that will ignite enterprise innovation through a blend of industry expertise, Pega expertise, Pega technology, and client insights that will maximize revenue and efficiency with real-time optimization and personalization of customer interactions, and will streamline work processes and customer experiences by giving the right people instant access, not just to real-time enterprise knowledge, but to the processes that are necessary to get the results they want. We've continued to deliver on that strategy to help our clients unlock business-transforming outcomes. This amazing technology will be showcased at PegaWorld in our 10,000-square-foot Innovation Hub, featuring more than 200 interactive demos that will be showing off the latest in AI advances and how it will drive the future. It's an experience you can only have if you're there in person. Now, here are just a few highlights of the newest technology you'll see and hear at PegaWorld. First, we announced Pega GenAI Blueprint in mid-February and began immediately testing it with partners and clients, and we've now made it available to anyone who wants to use it since late March, whether you're a Pega client or not. All you have to do is go search on Pega for Pega Blueprint, And you'll find our website really just has everything you need to get started. You can be up and running in minutes. I think that no other competitor has anything that can do what we do. And we think it's a major competitive advantage. In the last month, hundreds of clients have generated thousands of blueprints. Together, we, our clients, and our partners are finding new ways to leverage this technology every day. and stretching the boundaries of what's possible. Based on user feedback, we're enhancing it continuously. And because it's a SaaS application, we're releasing new versions every one to two weeks. In just the last few weeks, for example, we added new capabilities that allow you to import blueprints directly into a Pega application to allow you to really do game-changing work in seconds that otherwise would have taken And this enables people to iterate on application requirements and regenerate blueprints as they have new ideas and experience what's going on in their collaborative efforts. Now, more enhancements are planned in the coming weeks and months. And as more clients and partners use it, we're getting a stream of additional ideas that are both being met with great excitement by the partners and customers and great excitement by us. For example, We think that we're seeing many customers looking to use Blueprint to be able to rethink and to modernize their legacy estate. These are large collections of often ancient applications that all customers want to try to drive down in terms of complexity and quantity. And Blueprint makes envisioning and designing for the replacement of legacy apps completely different. It incorporates design thinking and best practices from both Pega and the Internet, integrates them, and uses Gen AI to synthesize the information and make recommendations on how they can improve. This is where our use of Gen AI, I believe, is truly groundbreaking, as we allow enterprises to explore entirely new ways of envisioning their business processes, building on what is known on the Internet and what we have done over our decades of experience. making it dramatically easier to align business and IT. We think it's a great opportunity for us, and we'll be talking much more about it at PegaWorld. Now, in addition to Blueprint, we continue to introduce and enhance our Infinity suite of solutions. Last week, we launched Infinity 24.1 with transformative capabilities to help our clients become self-optimizing enterprises. Incorporating enterprise-grade AI and automation, this newest release empowers organizations to optimize service, sales, marketing, and their business operations with new capabilities, including the Pega GenAI Knowledge Buddy, which helps users synthesize knowledge scattered across content libraries to quickly answer employees and customer questions. There are hundreds of thousands chatbots out there these days. Everybody has a couple of chatbots, but they don't include the kind of robust enterprise-based capabilities organizations need to audit what's going on, provide the right security, the right control, and be able to have confidence in the answers. That's what we focus our knowledge buddy on. We're also introducing the Pega Gen AI Coach, which serves as a real-time mentor, analyzing employee workflows, and providing actionable insights to optimize productivity. And we have new accelerated bundles, what we call PegaGenAI Automate and PegaGenAI Analyze, which surface and summarize insights about cases, data, meetings, conversations, to make it easier and faster for salespeople and service agents to follow up and engage with prospects and customers, as well as many, many other enhancements. We see a terrific long-term growth opportunity as these capabilities are the ones that are coming. Help clients adopt our software more quickly and find new use cases for Pega. Now, I've talked about Pega World a bit and I want you to really consider strongly coming to Las Vegas and joining us because it is going to be terrific. As exciting as the new product announcements we'll be showing are, what really separates Pega World from many other tech conferences are the incredible real-world, very, very deep examples of how our clients are using the software that they themselves bring to the PegaRule and talk about them in ways that, well, candidly, we couldn't talk about them because we have to maintain our clients' confidentiality. But when they get up and speak about it, we think it's wonderful. And we are honored that they're willing to discuss some of the amazing things that they're doing. Some of the customers who are coming will be, for example, T-Mobile who will talk about their focus on customer centricity, the customer service overhaul that not just led to improved efficiency, but massively improved customer satisfaction, and how AI-driven insights are empowering their frontline staff to build stronger relationships. They'll also talk about the key success metrics that they've achieved and provide insights into their ambitious AI plans. Booking.com. will describe how they're leveraging Pega capabilities to meet evolving traveler needs while also maintaining their super high customer satisfaction levels. Pega supports their customer-centric approach, ensuring that thousands of agents around the globe can deliver unparalleled experiences to travelers worldwide. National Australia Bank will explain how they're bringing together the left brain of analytics and the right brain of creative thinking to build real relationship-led personal experiences relevant in the moment at any channel. They've a fascinating story about how the blend of data, creative experimentation, and Pega technology are disrupting conventional approaches to communications and how they've used it to deliver 91 million customer engagements and a 40% increase in customer successful engagements in just over a year. And finally, just to pick another one, the Department of Veterans Affairs will discuss how they're modernizing their benefits program for veterans, spouses, children, and caregivers to improve responsiveness in this essential program. As a reminder, we've scheduled our investor session for Monday, June 10th. Local time is noon, and we are hoping to see you there. You should have received an invite by now. If you haven't, let us know and be sure to register. It's going to be a fabulous event. So in summary, our go-to-market strategy and focused model are deepening relationships and driving good results, including a healthy balance of growth and profitability. We continue to focus on leveraging the latest GenAI capabilities to deliver advantages to our clients You know, Pega has been through massive technology transitions through our 40-year history. You know, we've done five completely architectures of what we've done, and I believe we are perfectly positioned to incorporate Gen AI into the architecture we have and the way that we're going to deliver for our clients. This experience of being able to manage through and well in extreme changes in technical environments is I think one of the reasons that GenAI is gonna be especially advantageous to us. Our newest offerings are truly enhancing the relationships with our customers and our clients' relationships with their customers. I think we have a huge opportunity to drive success in 2024 and beyond, and it's going to be very transformative. Now, to provide color on our financial results, let me turn it over to our COO and CFO, Ken Stillo.