Good day, ladies and gentlemen, and welcome to the Pegasystems Inc. First Quarter Earnings Conference Call. [Operator Instructions] Today's conference is being recorded. I would now like to turn the call over to Max Mayer, Senior VP, Corporate Development. Please go ahead, sir.

Good evening and welcome to Pegasystems' 2013 Q1 earnings conference call. Before I provide my commentary and then turn the program over to Pegasystems' Founder and CEO, Alan Trefler, I will start with our Safe Harbor statement. Certain statements contained in this presentation may be construed as forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. The words anticipate, projects, expects, plans, intends, believes, estimates, targets, forecasting, could, and other similar expressions, identify forward-looking statements, which speak only as of the date the statement was made. Because such statements deal with future events, they are subject to various risks and uncertainties. Actual results for the fiscal year 2013 and beyond could differ materially from the company's current expectation. 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 2013 earnings and in the company's filings with the Securities and Exchange Commission, including its report on Form 10-K for the year ended December 31, 2012, and other recent filings with the SEC. The company undertakes no obligation to revise or update forward-looking statements as a result of new information, since these statements may no longer be accurate or timely. Q1 represented a solid start for the year. Our $116 million revenue marks the second highest quarterly revenue attainment in our history. And this was achieved in a Q1 which has traditionally been a weak quarter, given the back-end loaded pattern of our year. License signings were solid, when compared to Q1 of 2012, the number of deals were higher, but the average deal size was lower. We had a somewhat difficult compare against Q1 2012 as a year-ago we had 2 extremely large pieces of add-on business from existing clients. As…

Thanks, Max. We appreciate you and your finance team stepping up and doing a tremendous job. We're being very selective in our CFO search, and it's gratifying to know that the confidence of our team gives us the time to be selective in filling this key role. Regarding the business results and environment, Q1 was a good quarter for Pegasystems, and I'm very excited about how I see the year beginning. It was gratifying to see the strong earnings performance, despite over a $1 million negative FX impact primarily due to issues in European currencies. We're quite -- also quite pleased that we've complemented the 18% rise in license revenue we showed in 2012, with Q1 2013 where license revenue grew by 20% compared to a year ago. Our business in Q1 was particularly strong in financial services, communication and manufacturing, with commitments to Pega by customers and other verticals also being encouraging. Bookings in North America was strong as with those in Asia-Pacific. And while Europe continues to be problematic, we're seeing some signs of strengthening there. While the dollar value of our overall signings was a little lighter than we wanted, the number of sales was up considerably, and we've had an influx of important new names who we expect will be successful in the initial roll outs and be in a position to buy more as the year progresses. We've also been implementing improvements to our sales processes that are intended to help us ameliorate some of our traditional quarter-to-quarter lumpiness. And the increased numbers of sales and results in breaking into new accounts are consistent with our goals in this area. We've also taken steps to specifically link sales activity to the opportunities in the pipeline, giving us unprecedented ability to prune the pipe and optimize…

[Operator Instructions] The first question comes from Richard Davis from Canaccord.

So when we run the numbers, we're trying on a kind of rolling 4-quarter basis if you add up, kind of, all your software licenses change and license backlog and changed in deferred, it's probably down 10%, which is -- in a tough economy is not horrific. Do you think, Alan, about any kind of modulation on that? Or is there a point, in which you would say, hey look, we're going to -- not pull back but just not hire as aggressively, in other words. And those kind of things, or is it just like, look, you look at the business there's so much opportunity, let's run with this thing and exploit while we can.

Well we're a little more modest in Q1, and I think that contributed a bit to earnings. But I look at it a little bit differently, which is, I haven't run the 4 quarters, but if I look year-over-year, which I would think would be consistent with what the 4 quarters would get you, our count of deals was up by about 33% or more. And the average deals side was a little lower, but part of it was we had actually have 2 whales in Q1 of 2012, compared to 0 whales this quarter. And there's nothing wrong with getting a higher volume of transactions and not being as whale dependent, though we're not there yet. So I feel pretty good about the business and I'm really happy about a lot of the, sort of, starter names we've developed, which are top-notch customers, folks like Cisco, for example, which I think if we do a good job we should see a lot of follow on business later in the year and years to come. So we're not pulling back. We're still being conservative about overhead, but we do expect to accelerate the hiring, if we are happy with what we see, particularly through a strong PegaWORLD.

[Operator Instructions] The next question comes from Steve Koenig from Wedbush Securities.

I was curious to get your thoughts on, kind of, when we look at who's been doing better in Q1, which companies categorized have not been doing as well, it seems as if there is a bit of a shift towards the business buyer, away from IT, there's certainly a continuing shift to SaaS, it also seems as if applications may be doing a little better than infrastructure. Other people may be seeing different things in their coverage, but that's what I'm seeing. I'm just wondering if you could elaborate a little bit on how those trends could impact you or are impacting you.

So we've got a selling model that is geared towards the business buyer. And the way we think about it is to be geared to the business buyer, you need to invest in, as we have, what is a pretty expensive vertically oriented business. So folks may not know this, but our global sales force is suited to get into the regions, is organized every price we have any scale into financial services, which is separate for banking and insurance, telecommunications, health care. We've verticalized this quickly and as much as we can because, well, we think that, that's how the business buyers are engaged. And from that, we feel very connected with the business. And that actually is the primary way that we enter organizations. So while we still see IT having an influence and we think we've got a story that can work reasonably well with IT, we've been business buyer oriented, I'd say, for the last 5 or 7 years and that's true globally. So I would agree with your assessment and I think we're well-positioned to do that. We've also had some good uptake on our platform-as-a-service, or our SaaS offering, we call Pega Cloud. And I think that's very positive, though to be frank, the types of things people were using us for are tending to be what I would describe as sort of pretty serious applications that require often a lot of integration and where there's still some anxiety, even in the most forward-looking companies, about putting it all out on the cloud. So the ability to actually offer cloud, particularly for development but also in some cases, for production, but to be able to say, "Hey we understand that you want to run this inside your firewall. You want to connect this up to a couple dozen systems." We think that's one of the things we do extremely well. And some of the offerings, some of the things we released press releases on in Q1, represented partnerships, in particularly a partnership with SAP and a partnership with salesforce.com. Where in both of those cases, we're bringing a sort of traditional Pega mission capable facilities into the cloud environment via [indiscernible] and to complement the big SAP customers, which represent probably about 60%, 65% of our install base and are pretty important. So I think that those trends are there. I think the cloud trend is mitigated based on just the folks we happen to be selling to, but it's also there. And I think we're well positioned with our vertically oriented sales force to talk to the business. That's what we do, and that's what we've invested in. Does that makes sense?

[Operator Instructions] The next question comes from Raghavan Sarathy from Dougherty & Company. Raghavan Sarathy - Dougherty & Company LLC, Research Division: I wanted to ask you about the U.K. and Europe. I guess, if I did my math right, was down some into 30% in those 2 regions. Just wondering, Alan, if you could comment on what you're seeing in those 2. And I know you talked about a couple of whale deals from a bookings perspective, can you talk a bit from a revenue perspective?

Sure. Because I didn't think they were down quite that much year-over-year. On a percentage basis, it's 'cause the number was bigger, they went down a little bit. But the U.K. and Europe have been disappointing and there's no question about that. But I'm just looking at Page 14 in the document, the U.K. went down from about $18 million to $15.5 million, but Europe went up from $17.2 million to basically $20 million. So I look at them as being kind of mediocrely flattish year-on-year, and we're seeing some signs of life, which I view as encouraging, though we're not getting -- I'm not getting carried away. Yes, check those numbers and I'm glad to take a follow-up question later if I've got it wrong.

The next question comes from Brian Murphy from Sidoti & Company. Brian Murphy - Sidoti & Company, LLC: Alan, with the lower ASPs in the quarter and sort of the trend toward tranche buying, I was wondering if you were surprised by the swing toward perpetual revenue in the quarter.

I can't say that I'm surprised. Customer preferences vary a lot, and we end up -- one of the things I've said, and I think is true, is on a year-on-year basis, the company performance is actually really quite stable. When you look at any individual quarter, there's just enough going on that you've got some variations there. So I would tell you that it's not really a surprise. And I wouldn't actually say that I would view it as a long-term trend. We actually prefer the term ratable deals, I just find it easier to manage and it's actually the way when the company started, God forbid, close to 3 decades ago, we were doing ratable. That was the way that we did our selling. But in this environment where one of the things that, frankly, scares clients is the thought that a company like ours might end up selling out to IBM or Oracle. Some of these guys want perpetual licenses largely for self-defense, and I think some of it depends on whether they've been burned recently. It can be a little emotional. But I don't think there's any secular trend there that you can point to, it wouldn't shock me at all if it swung back the other way next quarter. Brian Murphy - Sidoti & Company, LLC: Okay. And I think you threw out a couple of metrics there. I'm not sure if you said the deal count was up 33%. But could you just give a little bit more color in terms of sort of how many new logos you guys are signing now?

Yes. It was actually great in terms of new deals. The actual aggregate deal count was up north of 33%, which tells me that we're really doing a good job of your penetrating and percolating in more accounts. And I think that's pretty consistent with what our strategy is. It's a terrific thing. Relative to the new names, they were a series of just awesome independent names, which in some cases, I'm not allowed to mention them, but if you show up at PegaWORLD, you can check out the badges and it's going to be very impressive and that is a terrific opportunity for people to actually see what's going on. We're expecting well over 2,000 people there and it's going to be the largest BPM conference by far. And I can tell you, based on the registrations, and based on the speakers, I think it's going to be a terrific relationship and selling event for us, so we're pretty excited.

[Operator Instructions] And I'm showing no further questions. I would now like to turn the call back over to Alan Trefler.

Well I'd like to thank everybody. And I think as a lot of you know, I'm presenting at the Jefferies conference tomorrow and we have a pretty full dance card of one-on-ones, so it's pretty deep. I look forward to talking to a number of the folks who I see on this call, then. And I'd like to thank everybody for their support and let you guys know we're working hard. I think we're going to have a great PegaWORLD with a terrific new release to talk about. Thank you very much, everyone.

Ladies and gentlemen, that does conclude the conference for today. Again, thank you for your participation, you may all disconnect. Have a good day.