Pegasystems Inc.

Thank you for standing by. My name is Celine and I will be the conference operator today. At this time, I would like to welcome everyone to the PegaSystems 2Q24 earnings call and webcast. All lines have been placed on mute to prevent any background noise. After the speaker 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 call over to Vice President, Corporate Development and Investor Relations of Pegasystems, Peter Welberg. Please go ahead.

Good morning, everyone, and welcome to Pegasystems Q2 24 earnings calls. Before we begin, I would like to read our State Barber 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, 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 Q2 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. And 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 obligation to publicly update or revise these forward-looking statements, whether it's 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 joined today's call. I'm very pleased with our performance in the first half of 2024. We continue to improve execution, and I'm happy to see that our focus on profitable growth is working well. We're accomplishing our financial goals while continuing to deliver breakthrough technology innovation. Our center of architecture and approach to statistical AI and generative AI continue to be significant differentiators that we think our competitors can't easily replicate. Our newest offerings, especially PegaGenAI Blueprint, have captured the imagination of clients, prospects, and partners, allowing them to identify new possibilities and help us drive deeper engagement. Client discussions I've had since launching Blueprint are some of the most positive I've had in the Pega 40-year history. In fact, when our clients see what we've delivered, they quickly recognize the power and the opportunities. I believe that the energy and confidence in our vision is increasing and is helping to drive the kinds of results we're talking about today. With tens of thousands of Pega Blueprints created over the last few months, we're identifying opportunities to accelerate growth and creating additional momentum for Pega Cloud, which will contribute to monetization. And we've barely scratched the surface of what we, our clients, and our partners can do with this game-changing technology. And we're really energized by this. I do believe that Blueprint is fundamentally changing how we engage, sell, and deliver with our clients. Now, I want to take a few minutes to remind you about what makes our approach to AI unique and powerful. Because a lot of the language we see in the industry is very buzzy and sounds very similar. But at the core, if you strip away all the tech speak, we're moving our clients way beyond the ability to write more faster code, which is what many of our competitors are doing. This is 100% wrong focus. No client has ever told us they want more code. They are drowning in code and legacy systems. They want to drive innovation, ensure their employees are satisfied and productive, and ultimately serve their customers better so the customers are satisfied, loyal, and profitable. As we've always done, we're using AI to help clients solve business challenges by giving them the ability to completely reimagine their workflows and then execute quickly and effectively. Gen AI allows us to take this to the whole new level. And for decades, we've been investing in an application development approach centered around business outcomes, not code. Things like enterprise processes, rules, data models, and user interface. And this marries up perfectly with our approach to Gen AI. Now, this allows business and IT to come together with a common visual language. focused on business concepts and the customer journey, not on any particular technology or channel. Infusing GenAI into our approach lets users unlock new ideas and implement them efficiently and effectively. And because so much of our architecture is patented, we believe it can't be easily copied or reproduced, and we don't see anyone going at this problem the way we are. Our last few calls have talked about the four major areas we believe our GenAI approach will have a massive impact for us and our clients by delivering solutions that first, double developer productivity by putting Pega skills at their fingertips. Secondly, ignite enterprise innovation through a powerful blend of industry expertise, Pega technology, and incorporating client insights all driven by generative AI. Third, maximize revenue and efficiency with real-time optimization and personalization of customer interactions and workflows. And finally, streamlining their work processes and customer experiences by giving the right people the right access to enterprise knowledge and putting processes in their hands to execute based on that knowledge. We continue to deliver on that strategy, which we showcased at Pega World last month. We've added GenAI capabilities that help all who use Pega do more. Business and IT teams who design and plan their applications, well, Pega GenAI Blueprint is helping them collaborate, dramatically accelerate the design phase, inject new ideas and best practices, and use the power of AI and the internet to stimulate best practice thinking in their applications. And developers where Pega GenAI Autopilot helps them turn Blueprints into live applications, providing the ability to move from Blueprint to an application, and providing contextual guidance and assistance in every step of the development journey. And, you know, I also love Pega Gen AI Socrates, a first-of-its-kind Gen AI tutor that revolutionizes learning by creating an interactive, tailored dialogue with each individual student to help them learn Pega skills. Now, users of PEG applications across operations, service, and customer engagement, where we have a powerful integrated suite of more than 20 productivity boosters aimed at different use cases, are all seeing enormous benefits. Customers are leveraging self-service to get answers using GenAI KnowledgeBuddy. Employees get their work done faster with expert guidance and direction from the AI through the GenAI coach. Service agents can serve their customers better using Pega GenAI Analyze to summarize conversations and do more relevant follow-up, and marketers who can effectively create, action, and manage holistic customer engagement with GenAI CDH Assistant. As you can see, we've percolated GenAI through our entire product suite. This is the basis of how we want our clients to advance in the future. Now, a moment on PegaWorld, it was really inspiring and as exciting as any that I've seen in more than 30 years. The attendees were super eager to explore the new innovations, especially Pega Blueprint, where we had multiple Pega Blueprint kiosks around the event. And there were lines of people up to 5D waiting to get their hands on it. More than 1,000 new Blueprints were created in just the two days of PegaWorld. And in client meetings I've had this quarter, including some of those at Pegaworld, clients are excited about our vision for Gen AI and the potential impact it can have on their business. And those early days, several clients spoke about their Blueprint experience. And I find what Aflac said particularly inspiring. For the second year, they ran what we call a Pegathon. which brought together about 70 of their teammates across the company for two half days to develop application prototypes for key business units, all using Pega. The team included business stakeholders with no software experience, developers with no Pega experience, representatives from their partner, CoForge, as well as VPs from the business units involved. This year, they used Blueprint to create the workflows for apps they had defined that really fundamentally have the prospect of changing their business and driving a digital transformation strategy. Terry Henry, the digital service delivery lead at Affleck, who delivered a presentation at PegaWorld, said what I'm hoping that all clients will say. Well, we've been quite impressed with the speed, agility, and intelligence of Pega Gen AI Blueprint. It helped us optimize workflow designs, across an array of business scenarios, and for a number of different business departments. By drawing on Pega's best practices via generative AI, we can quickly create apps and processes that meet our requirements in record time. This is truly a differentiated use of generative AI that will help propel our digital transformation project forward for the ultimate benefit of our employees and customers. Just terrific when customers stand up and say that sort of thing. We're also very excited to see that our partners have embraced Blueprint's value and have themselves created over 10,000 Blueprints. With the latest release, we can upload their proprietary Blueprints to Pega's best practice library for them to use in their client engagements and to help them create new services. About a dozen partners have already taken advantage of this new capability and have created about 70 best practice blueprints to use with their clients. Now, it was a terrific opportunity, I think, for us to broaden the way we go to market by empowering our partners to take advantage of this new capability. And one thing I love is that the Pega team, in the first quarter of this year, engaged with our partners to make sure that they were really up to speed and able to get on their front foot with this new facility, even as it continues to evolve. Now, I know many of you attended Pega World and came to our investor conference, and it was great to see you there. For those who didn't or missed day two, I encourage you to check out our website and watch the keynotes. And if you want to hear the rest of what Aflac was saying, that is the dozens and dozens of videos is there as well. Now, in addition to the incredible client stories, we also make several important product announcements to move our vision forward, including enhancements to Packaging AI Blueprint that accelerate transformational design, including an improved, more intuitive user interface, the ability for clients to import existing assets, content, and knowledge that jumpstart their development designs, the ability to have multiple people collaborate directly on Blueprints, and the ability to upload and save partner workflow templates into our best practices library. You know, Blueprint is getting better every week as a SaaS app that runs on Pega.com. It's really empowered us to operate at an incredibly rapid pace with our clients. In fact, just last night, we added facilities to it to allow the import of VPN and business process management notation diagrams to be able to turn them into the key workflows of a blueprint. BPMN is, from my point of view, an ancient and derelict standard from the early 2000s that Pega has long passed by, but many people still use. We're going to make it much easier for people to do a legacy transformation of these old sort of difficult update systems into the extremely modern model-driven design that underlies Pega. Now, we also announced Pega Gen AI Socrates, which completely transforms the process for learning Pega skills. This dynamic learning environment fosters an interactive dialogue. And it's very new, but I think it's incredibly exciting. And we've actually had clients who have begun to put their assets and their information into some Socrates classes so that they can do a better job of teaching their staff things that don't even apply to Pega. And we think this represents a really interesting opportunity to look at going forward. And we expanded our GenAI framework with new connectors to Google Cloud and AWS that give our clients more options to use a different LLM if there's a good reason to. Our clients now have a broader set of capabilities to build generative AI applications. And we've really focused on trying to bring the security privacy, and key aspects of responsible AI into what our technology does. I also mentioned that this morning we announced that we have received FedRAMP high ready compliance and in-process status for Pega Cloud for government. We've been FedRAMP moderate for a long time. Now being raised to FedRAMP's most rigorous standard is something that we're very excited about and we'll be working on completing in coming months. As you know, the government business is quite important to us. So we think this just helps give us another vote of confidence in the US and even around the world as people look at it. So in summary, we continue to improve execution to drive profitable growth while delivering, I think, revolutionary innovation. We have a vision for leveraging AI and Gen AI that is driving deeper engagement and absolutely inspiring increased confidence, with our stakeholders. Now, while we have a lot of competitors talking, we're delivering tangible, groundbreaking solutions. And they're in an architectural approach that we don't think competitors can match. And this approach and architecture are unique. It's been the basis of Pega and developed by Pega over our decades. And what I love about the way we put statistical AI, generative AI to work is how perfectly it fits in with this heritage. Now, to provide more color on our financial results, I'll now turn it over to Head of COO and CFO, Ken Stillo. Take it away, Ken. Thanks, Alan.