Pegasystems Inc.

everyone to Pegasystem's first quarter 2025 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 this time, simply press star followed by the number one on your telephone keypad. And if you'd like to withdraw your question, simply 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. Peter, you may begin.

Thank you, Krista. Good morning, everyone, and welcome to Pegasystem's Q1 2025 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 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 Q1 2025 results and in the company's filings with the Securities and Exchange Commission, including its annual report on Form 10-K for the year ending 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 a result of new information, future results, 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 March 31st, 2024 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 Q1 2025 results. And with that, I turn the call over to Alan Treffler, founder and CEO, Pegasystems.

Thank you, Peter, and thank you to everyone on today's call. It's great to be off to such a strong start in 2025. and to see how the changes we made continue to drive profitable growth around the world and across industries. Ken will walk you through the financial highlights in a few minutes, but let me talk a little bit about having been on the road in Q1 and having met with clients and partners in Europe, Asia, and the US. Now, more than ever, we're seeing that organizations want to accelerate digital and legacy transformation to be more efficient and effective in serving their staff and customers. And they also, I think, are really looking for help cutting through the hype that exists and keeps getting deeper, frankly, about how to go about implementing the newest AI technologies without additional risk. We're finding that they're really interested in solutions that give them practical approaches and proven capabilities with predictability and governance, but that can help them achieve critical objectives that they have. And I believe PEG is perfectly positioned to be the strategic software partner for clients who are serious about driving the transformation they need to compete with. Our team has never been more confident or capable or more prepared to meet the needs and seize this opportunity to help our clients achieve their digital and legacy transformation goals. Now, over the past year, PEG GenAI Blueprint has been front and center in pretty much every client conversation we have, providing a differentiating hands-on experience that quickly and dramatically demonstrates the power of Pega. Blueprint is, in fact, an agent that uses the power of AI to take Pega's proven best practices and our clients' and partners' knowledge to make it easy for business and IT to collaboratively design enterprise workflow applications in minutes. It supersedes the slow, failure-prone traditional app design process. And it's not just faster, it's better. It uses the AI to stimulate design thinking and to trigger a whole better way to go ad building and rebuilding systems. It creates a shared understanding of the application design, a faster path to value, and apps that are built for change, not just for launch. Pega Blueprint gives our clients a differentiated approach. It doesn't generate code. It generates clarity. It's not just faster. It's sustainable. And that is a game changer. This powerful tool enables our teams to rapidly demonstrate real use cases and showcase Pega's full capabilities. It makes the case for transformation clearer than ever. And we're seeing our partners really become really interested in engaging around Blueprint. And I think we're going to be seeing them adopting Blueprint as a powerful tool that they can use to showcase more and more of their own IP and to leverage with clients. Now, remember, you can experience the magic of Blueprint yourself by going to pega.com slash Blueprint. We continue to add new functionality and deliver increased value to our clients, partners, and our field. For example, Users can now upload documents directly into Blueprint, such as specifications, requirements docs, or even application documentation for legacy systems if the customer wants to retire. And this new feature makes it easier than ever for clients to tackle technical debt, rethink their legacy systems, and begin the process of replacing them to transform the future. We've also made it so workflows designed in Blueprint are inherently agentic. Now, authentic is a term we're hearing a lot. It's kind of a new term. Let me explain what it means because I think we've got a really, really interesting approach to this. Users can interact through Blueprint workflows or even chat with them in phone calls. You can literally make a phone call to either workflows and ask them to do things for you, like create a new account or fix a bad charge on your statement. Workflows built in Blueprint can use agents at any step to automate document processing or perform additional research, all under the governance that workflows provide. And the response to these innovations has been overwhelmingly positive, and it's exciting to see the momentum build, reflected in the increasing number of Blueprints that get created. We're now seeing over 1,000 new Blueprints created every week more than double what we saw just months ago. In response to this interest, this past quarter, we introduced two new versions or flavors of Blueprint. For government clients, we've introduced Blueprint for Government Efficiency Toolkit, a Gen AI offering that helps public sector agencies accelerate digital transformation and increase efficiency while remaining compliant with standards. And as a reminder, for over a decade, we've also offered a really important product, called Customer Decision Hub, or CDH for short, which is a significant part of our business that Forrester says, quote, sets the gold standard for enterprise real-time interaction management implementations. CDH is our always-on centralized brain that uses statistical AI and predictive analytics to enable personalized interactions. And we still believe statistical AI is very important. those in our bag gives our clients and us some huge advantages. And now that we're beginning to roll out a blueprint aimed at CDH, it's going to really help our customer visualize their customer journeys and quickly design engagement programs with speed and clarity. So let's go back to Now, the promise of agents is potentially enormously transformative. The notion that these concepts of agent and agentic, where the system is doing things for you is, well, it sounds and looks magical. And they become ubiquitous buzzwords. And vendors are flooding the market with thousands of undifferentiated solutions. Now, our designs are really quite different and I think reflect a unique understanding and leverage of unique capability that we've developed over years. And we've taken this starkly different approach because we think it's going to give us and our clients a competitive advantage. The fundamental flaw in most agentic thought solutions lies in their dependence on prompts. Free text instructions given to AI models that can require extensive five-duty, sometimes by armies of specialized bronze engineers. But the problem with this is not the effort. The problem is that this approach creates inherent unpredictability, making it impossible to guarantee consistent results, especially at enterprise scale. For mission critical processes like insurance claims or business critical decision, the And it's a fundamental challenge for the many enterprises trying to manage thousands of mission critical agents as they map their future out. Now, enterprises want the promise and power of automation that agents could offer, but we don't think they want thousands of agents running unchecked, producing unreliable, undesirable results. They need an agent to, wherever possible, follow a consistent process with full transparency on how it got its work done. And this is where our unique approach comes in, combining the power of language model driven agents with the predictability of workflows. With our latest enhancements to Blueprint and Pega Infinity, all of the enterprise workflows are intrinsically agentic, both in their creation and their execution. This means the workflows are designed by AI agents who challenge the users to optimize them, who use that reasoning power to figure out the best way to do something. And this can suggest new and better ways of getting work done, which is powerful and profound. They work collaboratively with business people and IT to perfect the best way for an organization to work. But incorporating this reasoning at design time provides this advantage without this exposure by spontaneously doing reasoning at runtime when the end users are actually using the application. And this is precisely what we built with Pega Gen AI. Once the workflow is designed and importantly approved by humans, it is cataloged and prepared for use at the right time. And when an agent is invoked at runtime, Pega leverages language models to directly find and send requests to the right workflow, leveraging the designed and approved workflows, but providing the flexibility and fluidity of a conversational approach and having the system be able to kick off multiple workflows as well. The workflows become the knowledge base, helping the system gather the right information and take the right action. You can now experience this right in Blueprint, and as I said, It's literally getting better every two weeks. You can design an application with many specific workflows. And in preview, use a conversational agent to chat with that whole application. Have the application find the right workflow for what you're trying to do. And it's beautifully interactive. This means enterprises can harness the power of agents while maintaining the predictability of workflows. The best of both worlds. And it's in stark contrast to what our competitors are offering, which are agents that are black boxes of text, and we don't think can be relied on to follow processes that govern large or regulated businesses. Now, this capability is unique to Pega because of our extensive workflow evidence. And we don't think it can be easily replicated. That's why I believe we're perfectly positioned to take advantage of agentic AI but do it in a way that is going to have a higher level of quality and reliability. You can see more about these exciting innovations leading up to and at PegaWorld. So as we enter this era of agendic workflows, think of Pega as positioned to lead this transformation with our clients and our partners. Let me say a few things about PegaWorld as well. At PegaWorld, starting on June 1st, You can experience all of these innovations firsthand and explore over 200 live product demos in our 100,000 square foot intervention house. This will really show you what the possibilities are, as well as what people are really, really doing. And we have great clients talking. Just to mention a few, Robobank will be describing how they're empowering employees to serve customers and society while keeping criminals outside of the financial system. Unilever will be discussing how they transformed distributor onboarding and unlocked vast efficiency gains. And Verizon will explain how they're financing the combined power of generative AI, intelligent case management, and hyper-personalization. I hope you'll join us for this unmissable event, including our Investor Day. Ken will provide information about how to register. So to wrap up, we're off to a great start in 2025. The changes we make to our business are delivering for us financially and organizationally. Our unique architecture and approach to AI gives us what we see as a major competitive advantage. And across the board, the team is excited and more confident than ever to deliver for the company, our clients, our partners, and our investors. To provide more Colorado financial results, I will now turn it over to Ted.