Greetings, and welcome to the Pegasystems Third Quarter Fiscal 2014 Earnings Conference Call. (Operator Instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Rafe Brown. Please go ahead, sir.

Good evening, ladies and gentlemen. Certain statements contained in this presentation, including but not limited to, statements related to future earnings, bookings, revenue and mix of license revenue, may be construed as forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. The words anticipates, projects, expects, plans, intends, believes, estimates, targets, forecasts and 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 fiscal year 2014 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 Q3 2014 earnings, and in the company's filings with the Securities and Exchange Commission, including its quarterly report on Form 10-Q for the quarter ended September 30, 2014, its annual report on Form 10-K for the year ended December 31, 2013, and other recent filings with the SEC. Although subsequent events may cause the company's view to change, the company undertakes no obligations to revise or update forward-looking statements, whether as a result of new information, future events or otherwise, since these statements may no longer be accurate or timely. And with that, I'll turn the call over to Alan Trefler, Founder and CEO of Pegasystems Inc.

Thank you, Rafe. I'm going to talk a little bit about what we've seen going on in the quarter, as well as how we're thinking as we enter our planning process for 2015 relative to where we're thinking of investing and what we think is going to be important going forward. Relative to Q3, it was a solid quarter, continuing what has been a strong performance year for Pega. I'd note that Q3 is often a challenge because business can slow down in the summer leaving a tremendous amount to get done in September. In this year, the mood across Greater Europe was rather sour, though we've seen some lightning event mood in October. And I'll talk about that a bit more in a second. Overall, we continue to be very optimistic about how our software is being adopted on our long-term growth opportunities. As discussed on previous calls, we continue to position our business beyond the traditional tech categories like BPM and other alphabet soup into instead being a basis for strategic digital transformation. We see digital transformation initiatives as being increasingly important to our customers and absolutely central to the growth for our business. This quarter we've seen new wins and meaningful increases in our relationship with companies, including those from our original banking and insurance markets like AIG, which continued its broad advertisement in Pega as part of their enterprise strategy for global -- clients, putting a single backbone sort of architecture across 40 countries around the globe. This initiative is strategic to their business, but they regularly talk about it in their investor presentations, and a perfect example of the meaningful work we do with clients, or Charles Schwab, which is going to be using us to provide case workers the user experience they need to…

Thank you, Alan. So this third quarter of 2014, please note we are reporting both GAAP and non-GAAP results. A full reconciliation of our GAAP to non-GAAP measures is provided in the financial tables of the press release issued earlier today, and is available on the Investor Section of our Web site. As we've discussed in the past, quarter-to-quarter comparison do not necessarily reflect the underlying momentum of our business, as the timing of a small number of large transactions can significantly impact our results. To provide the best look at how our business is performing, let me run through the results on a year-to-date basis. Year-to-date non-GAAP total revenue was $424 million up 19% year-over-year. Year-to-date non-GAAP license revenue was a $157 million, up 22% year-over-year, and year-to-date non-GAAP cloud revenue stood at $13 million up 135% over the prior year, still approximately a third of that revenue growth is from Antenna, which we acquired in the fourth quarter of 2013. As a percentage of year-to-date non-GAAP revenue, license cloud and maintenance revenue stood at 72% of total revenue, up from 69% for the same period of 2013. This is a direct result of our stated strategy of growing our higher margin revenue items faster than growth of professional services and training. Looking at our results on a geographic basis, non-GAAP revenue in North America grew 25% to $255 million on a year-to-date basis and stands at 60% of total revenue. Revenue from EMEA was approximately $139 million on a non-GAAP basis, up 11% year-over-year, and year-to-date Asia Pacific business was up 16% year-over-year. It should be noted that our European sales were below our third quarter targets. We believe that this is attributable to a combination of factors, including timing of a number of larger transactions which we…

Thank you. (Operator Instructions) Our first question today is coming from Steve Koenig from Wedbush Securities. Please proceed with our question. Steve Koenig – Wedbush Securities: Hi, guys, thanks for taking my question. I'd like to – if I may, just decompose our data thought with little more granularity on this quarter, how much that you think was – it sounded like there were some slip deals, how much of that was on from those deals, and did any of them close, were there any execution issues or anything that can be tweaked on execution, and what's the likeness in specific industries?

Sure, a couple of things. There was couple of things that rushed down the quarter, sort of bounce out that could have just has easily balanced in, some which have already. And in terms of a miss, it wasn't a disastrous miss, obviously we are not sounding enormously enthused up in quarter one. I think the weakness was really very much concentrated in some of the key areas. And we have made some changes there though I think that some of it was just – it was a tough September, frankly, in some of the European – in U.K. and Europe in general. The mood was just pretty shower is the way that I would describe it. I think what sort of really happened with the unduly with the quarter is there has been a lot of business in the pipeline in Q4 and we are out there pushing to make sure that we do every little bit of them that we can. Steve Koenig – Wedbush Securities: Yes, okay. And If I could just follow-up, Alan, on that particular traffic, you provided a little color last quarter that given the strength in the first half, your guidance was unchanged per your mutual policy, but you thought probably you'd – it was likely you'd come in ahead of this for the year, which seems very plausible. Is that still your feeling now? Can you comment on your thoughts last quarter?

Well, I think that from a revenue point of view, I think we are likely to modestly exceed what we had talked about at the beginning of the year. The reality is that we had a lumpy business. We were extremely enthused that we were good at pulling a lot of revenue on the first half. Q3, yes, I think if I look at this compared to where we are historically compared to guidance, at the start of year, if you go back the last several years, I think historically compared to guidance we are further ahead than we've been in any of the recent years. Once again, still a lot of business to close, because Q4s are always big for us. Steve Koenig – Wedbush Securities: Yes. Okay, great. I'll leave at that guys, and thanks a lot for your help.

Okay. Thank you, Steve.

Thank you. (Operator Instructions) Our next question today is coming from Mark Schappel from Benchmark. Please proceed with your question. Mark Schappel – The Benchmark Company LLC: Hi, good evening, thanks for taking my call. Rafe starting with you, your revenue in the quarter, I think you gave year-to-date, what was the specific internal revenue for the quarter?

Yes, thank you for that. One of the things that is going on with Antennas, we are rapidly working to integrate Antenna into the rest of the company. And due to that integration of both the products and the sales force, other than really maintenance and hosting revenue, which are discreet and easily be tracked, it's really not feasible for us to identify the revenue from new arrangement fully attributable for Antenna. And you'll see some discussion of that in the 10-Q. Now, I'll say, I didn't breakout quite a bit of detail of this in the second quarter. So you can extrapolate from that and it would be very, very close. And at that time we are on track to have the Antenna total revenue at around $22 million for the year. So if you use that figure you're going to be terribly close, so it's just that we can't get that discreet detail at this point. Mark Schappel – The Benchmark Company LLC: Okay, great, thanks. And then with respect to operating cash, I'm -- remote at the moment, just wondering if you could just give us the other quarterly operating cash flow and free cash flow for the quarter?

Sure. So for the operating cash flow on year-to-date basis was $98 million and then the free cash flow was $93 million. Mark Schappel – The Benchmark Company LLC: How about for the quarter though, I don't know …

Let me just flip to the right page here. So operating cash flow for the quarter was $24 million, free cash flow for the quarter was $21 million. Mark Schappel – The Benchmark Company LLC: Great, thank you. And then, with respect to the foreign exchange, I mean, obviously there was a big head total earnings. But what about the role play in the top line?

We've looked at that closely. It's relatively small, largely because we takes a good chunk of our revenue off the deferred revenue, which is captured as deferred revenue and it's added to historical rate and then amortizes in at that historical rate. So it tends to provide a delayed effect whenever there is any sharp FX movement. It's less than a 1% impact on overall growth. Mark Schappel – The Benchmark Company LLC: Okay, great.

The bottom line impact is more significant.

Right, and the …

Negative.

Yes. Mark Schappel – The Benchmark Company LLC: Okay, great. Alan, turning to you here with respect to Europe, did you – maybe just go into little more detail where you're seeing the particular weakness in Europe, I mean, was it in big deals in particular, was it in certain verticals and certain industries?

So I think it was sorted in general. I think it builds just an anxiety that's settled over Europe if you can remember, there has been a lot of debate about what's going to be happening in terms of – slowness in interest rates et cetera, and it was a bit of a pause. Having said that, we've seen some energy return in October. So we are not calling out the alarm bells, but I think that we are not the only company that's seeing Europe as being weak with this quarter, I think. It's actually fairly – I'd expect you'll see that and will continue to see that for lots of fronts. Having said that, we know what to do; we slip a back to cost savings. We stressed the ability to simplify operations, and I think to pay for itself. And Joe, you can still get even pretty meaningful deals. You don't get generally whaled to pay for themselves, but you can get some of the marlet and tuna, which can be in sub 10 million category, but it still can be somewhat meaningful. You can still do things in the $3 million, $5 million, $7 million category. When times are tough you're just not going to do the super big deals in that environment. I'm not sure we are really counting on it– Europe anyway though; to tell you the truth. Mark Schappel – The Benchmark Company LLC: And with respect to that slowdown, I mean did you see evenly in the quarter or it was in the last week or two?

Well in Q3, the visibility of the slowdown is always in September. I mean basically things are pretty slow, especially in Europe, in July-August. And so, it's all about when people coming back from their vacations, getting back engaged et cetera. So what we should – I think also we had a couple of customers where they had some management changes and other things, but I think ultimately they're going to be very, very good for us. But anytime you get some of those changes, the bunch of big announcements for executive changes at some of the U.K. banks was hit over in the summer. And I think ultimately that's going to be very positive, and we have every reason for it to be positive. But inevitably anytime we have those changes, it's always a little positive. Mark Schappel – The Benchmark Company LLC: Great, thank you. That's all for me.

Thanks. Our next question today is coming from Brian Murphy from Merriman Capital. Please proceed with your question. Brian Murphy – Merriman Capital, Inc: Hi, thanks for taking my question. Alan, so with some of these transformational projects that you're going after, obviously, messaging is important and it's certainly require a large complex communications effort, and there has been focusing on that pretty acutely this year. When I look at your web site now, I see a big difference from the past, just in terms of the volume of the resources that you have up there. And the way that they're organized I think it's really well done. And my question is I'm wondering if you're seeing any impact in the pipeline yet in terms of regeneration, and closed rates sales side, are there any early indication that those initiatives are working?

Well, so I'll tell you that we've made some changes, and I'm glad likely you've seen. There is a very, very substantial pipeline changes that the new marketing team has brought in. We've actually made very, very significant introductions of new talent into the marketing team and they have been working extremely hard, but you should expect that wave to hit at the beginning of January and that's really where we've been planning when we dealt with the marketing team, I think we decided we were open to really stepping back and thinking what would take to get our game up to the whole next level. So I think what you have seen so far, my CMO actually describes as "lipstick on a pig," to quote call him. So you should have very high expectations for what is expected to do in January. Brian Murphy – Merriman Capital, Inc: Okay. It sounds good, thank you.

Thank you. We have reached the end of our quarter-and-answer session. I'd like to turn the floor back over to management for any further closing comments.

So I'll just say that our folks here are working hard, the opportunity is actually tremendous, and we get very strong reinforcement of that. And as we think about the things we are looking to do next year in terms of both the meaningful improvements and broadening of our marketing presence, what we've talked about the past is opening the aperture of being able to go after many more accounts than we've historically gone, which has traditionally been the Fortune 400. And as we see the client successes and customers willing to come to these transformation summits or do case studies for us. I'm very excited that we have a highly differentiated products and technology. We have the capability to deliver it. We have an increasing part of the ecosystem, that's helping us get good visibility. We're very, very excited, little bit hard to close the year and look forward to telling you about our 2015 plans on our next call. Thank you.

Thank you. That does conclude today's teleconference. You may disconnect your lines at this time, and have a wonderful day. We thank for your participation today.