Pegasystems Inc.

operator today. At this time, I would like to welcome everyone to Pegasystem's fourth quarter fiscal year 24 earnings conference call and webcast. 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. And if you would like to withdraw that question, again, press star one. Thank you. And I would now like to turn the conference over to Peter Welburn, Vice President, Corporate Development and Investor Relations. Peter, you may begin.

Thank you, Krista. Good morning, everyone, and welcome to PegaSystems Q4 and Fiscal Year 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 in NFI 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 that are subject to various risks and uncertainties, actual results for fiscal year 2025 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 2024 and fiscal year 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, 2024, 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 view to change except as required by 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. Our non-GAAP financial measures discussed in this call should only be considered in conjunction with our consolidated financial statements prepared in accordance with GAAP. They are not a substitute for financial measures prepared under U.S. GAAP. Constant currency measures are calculated by applying the December 31st, 2023 foreign exchange rates to all periods shown. Reconciliations of GAAP and non-GAAP measures can be found in the company's press release, announcing its Q4 2024 and fiscal year 2024 results. And with that, I turn the call over to Alan Tressler, founder and CEO of Pegasystems.

Thank you, Peter, and thank you to everyone on today's call. In 2024, we demonstrated our commitment to delivering on our plans, and I'm thrilled about the changes we've made to our business and how well the team executed to deliver strong results. It's great to see that we continue to drive profitable and balanced growth across industries and across geographies while delivering the most innovative products in our history. Ken will walk you through the financial highlights in a few minutes. Our team has never been more energized to drive transformative change for our clients, and we have great momentum coming into 2025. Pega Gen AI Blueprint is changing every client and prospect conversation, providing hands-on experiences and showcasing the power of Pega technology in an easy-to-understand and practical way. And we're thrilled to see new business like the recently announced UK Armed Forces Recruiting Service engagement included in their press release their use of Blueprint. The pace of Blueprint's innovation is unprecedented and accelerating. With every week, we are adding new capabilities. And if you haven't used Blueprint at least twice in the last month, you haven't seen what it can do. And it is worth seeing. There are two sets of capabilities we're particularly excited about. First, Blueprint now empowers every workflow to be agentic. We'll talk more about that in a few minutes. And second, there are capabilities that create, I believe, what will be a massive new market opportunity for Pega and our partners by helping our clients rethink and replace legacy systems. Now, many of our clients have recognized Blueprint's power to accelerate legacy transformation, getting their business logic out of dated applications and onto a modern cloud architecture. And in the past months, we've been adding new legacy transformation capabilities. For example, Blueprint can now import BPMN, what's called business process modeling notation, an outdated but common approach to defining business process maps. Many clients have hundreds or thousands of these documents, which can now be enhanced by Blueprint to create cloud native modern workflows in just minutes. We're not just re-platforming these processes. We're actually using the AI and Pega's experience and Pega's ability to improve the model to make them superior. Additionally, Blueprint can now import a client's APIs, the interfaces to their systems, and to their database structures to automatically create data models and the way that the interfaces will have to work to connect these workflows up to their existing backend systems. And this provides a terrific foundation for moving on-premises systems of record to the cloud and having them interact with the other key systems that the customer has. Now, we are going to continue to enhance Blueprint with additional capabilities. You'll shortly see the ability to upload client documentation. So we can take things such as user manuals and other facts and bring them in and have the AI continue to use them to improve and apply the best of technology to what our customers want to be able to do. This isn't a simple lift and shift. Blueprint helps our clients rethink and transform for the future. Now, when we talk to customers, We find that every large client has hundreds, if not thousands, of applications that are targets for legacy transformation. And we're actively working with our partners and product teams to make Blueprint a center point of a legacy transformation strategy. I've been sharing this vision with leaders at our cloud and global systems integrator partners, and there's huge interest in integrating Blueprint into their legacy transformation tools and into their legacy transformation practices. I said it before that Blueprint is central to every client interaction. You know, it really supports the expansion of our business into exciting new opportunities. And this legacy transformation opportunity, I think, is a perfect example. Now, there still is so much talk about AI, a lot of talk about agents. We'll get to that in a moment. But I just want to remind people about how we will get AI, which I think is standing up well in terms of the marketplace. There are three types of AI as we think about it. The first is statistical AI. This powers Pega's customer decision hub, which we've been shipping now for well over a decade. The AI drives real-time contextual customer experiences for global brands, like you can see on our website, Citibank, Ford, Verizon, and Wells Fargo, as they describe what they are doing. It remains a significant part of our business And we feel we have unmatched capabilities and a high barrier to entry for competitors, and that it's key to really supporting what our customers need to do to do a great job for their customers. Now, a lot of people have forgotten statistical AI, or sometimes I refer to it as mathematical AI, because generative AI has been so hot. But in reality, generative AI is a complementary capability, really based on very, very different underlying technology. and they work well together. Now, generative AI itself should be broken into two categories. The first is what I describe as productivity features. This is AI that helps customers and employees save time and effort. It does things like summarizing conversations or providing self-service for customers or, for instance, generating correspondence. Now, productivity features are great, and we have creating more. But ultimately, we believe that you're going to see lots of them from lots of vendors, and they're not going to be the things that really distinguish the companies that are extremely successful going forward from those that aren't. Now, I think our competitors are so focused on productivity features that most, if not all of them, are missing the true transformative power of generative AI. And this is the third type of AI, transformative generative AI, which has the power to profoundly change how organizations engage their customers and run their operations. And this is exactly what Blueprint was developed to do and is already achieving. It's up-leveling our conversations with our clients to focus on their desired business outcomes. And Pega is uniquely able to deliver this type of transformation because we've spent decades perfecting the structures needed to automate workflows and make decisions at scale. Blueprint is a breakthrough AI model that has learned from that structure, learned from that experience, that incorporates things we've learned from industries and best practices. And it's really enabled us to bring the wisdom of the internet in a safe way to all the experience we've worked on for these decades. And that lets our client experience a modern, agentic approach to workflow in minutes. Best of all, it fits perfectly into our existing architecture. So Blueprint has allowed us to quickly and effectively integrate all these types of AI into our products, and I think it's having an extraordinary effect on our clients. Yet, we believe we've just scratched the surface of what we can do. Yesterday, we announced our newest transformative Gen AI offering, focused on the world of agents called Pega Agent Experience or Pega Agent X for short. The Pega Agent Experience is Pega's approach to agentic AI. Now, you've likely seen the deluge of new agent announcements, literally thousands and thousands of agents flooding the market, along with new ways to manage them. And despite all the headlines and the hype, or maybe as a result, Many organizations, I think, are a bit confused and some are overwhelmed by this. Now, some of the agents we've seen are pretty underwhelming, often little more than the same chatbots that have frustrated customers for years. Our clients want predictable, audible, auditable, governable, repeatable agents that do real work. And we know that deploying agents doesn't have to be chaotic or risky. We believe that the orchestration of agents is absolutely critical and best done through workflow. And workflow is what we do. That's why I believe that Pega is made for this moment. Our new agent experience capabilities makes any workflow agentic. Let me repeat that. It makes their existing workflows agentic. So you can chat with it or talk to it. And it still brings the power of the way they want to run their business together with the latest ways to interface and interact. And with Pega Agent X, any agent, Pegas or somebody else's that the organization chooses to deploy can find the right process or workflow and then follow that workflow to complete the work in a way that is predictable and auditable. Pega Agent X instantly turns Pega's proven and trusted workloads into smart supervisors that guide AI agents step-by-step through their tasks, just like a manager guides a new employee through their job with established procedures, not throwing them away and asking them to do whatever their experience tells them they should do. This is very different from competitors whose agents are black boxes and can't be counted on to follow the processes needed to govern a large or regulated company. Competitors are proposing that enterprises deploy thousands of these ungoverned black boxes. Now, we aren't building agents by pasting textual prompts into a communication channel or a copilot. Remember, prompts may not be interpreted the same way every time, and candidly, that is unacceptable for the enterprise. Instead, we've made workflows the core of our agent architecture. And we can do this because Pega's workflows have always been able to do the most sophisticated and most important work, unlike the simple sort of physio diagrams that our competitors who talk about workflows do. And since Blueprint allows our clients to design and deploy new workflows rapidly, we've got an approach that is both industrial strength and fast. Pega Agent X enables our clients to leverage the power of their workflows to deliver the agents they need to better serve customers and operate efficiently. And Pega Agent X ensures any agent, whether from Pega or another vendor, follows established rules and security protocols. With Pega Agent X, Pega workflows can invoke other agents, such as calling an agent to automatically extract data from a set of documents. And this allows clients to automate more complex tasks orchestrating multiple agents together seamlessly and making Pega a central part of their center-out architecture. We can do this because of the center-out architecture, which lets our clients build their systems around outcomes of workflows and the decisions that drive those outcomes instead of the traditional way that you see everyone else doing it, where they're building their engagement around channels, around the website, around a contact center, around a chatbot, or around their backend data sources. The centerline architecture is perfect for orchestrating agents, and with AgentX built right into the heart of our centerline architecture, it has entirely become agentic. In fact, we've started referring to it as our center out agent architecture. Anyone, everyone on this call can experience Pega AgentX by logging into Pega GenAI Blueprint Designing a new workflow and then previewing how Agent X delivers agentic conversations across channels by clicking on the conversational agent button in the preview my app experience within Blueprint. We've showed this capability to several hundred of our partners at a recent sales kickoff and they were blown away. I think you will be too. And you can expect us to announce new agentic power and capabilities in coming months. You know, this is all a continuation of a vision you've heard me talk about now for handily two years. I've spoken about the autonomous enterprise, the vision of a self-optimizing enterprise that leverages AI and automation to enhance decision-making, make operations more effective, and make customer service great across an organization. To achieve this vision, clients must clear out the technical data of their legacy systems which is why we're enhancing Blueprint to accelerate legacy transformation. And they must be able to deploy AI agents that are orchestrated by a trusted workflow platform. And that's what we've enabled with Pega Agent X. We're focusing on deploying AI in ways that empower our clients with technology handling routine tasks while people can focus on innovation, strategy, and care. With our advanced technology, our engaged partner community, and eager clients, we feel that we couldn't be better positioned to lead this transformation. So in summary, we executed well and delivered strong results in 2024. More from Ken in a moment. I think we've entered 2025 with great momentum. We have competitive advantages and an approach to leveraging AI that is unique, and I don't believe this Gen AI revolution, and have truly, truly embraced it right into the heart of the company. And it's going to help our customers become autonomous enterprises and achieve their visions. And I'm incredibly excited about the opportunity ahead of us. To provide more Colorado financial results, let's take it away, Kev.