Ladies and gentlemen, thank you for standing by. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome you to the Pegasystems fourth quarter and full- year 2025 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 at that time, simply press star followed by the number one on your telephone keypad. And if you'd like to withdraw your question again, press star one. Thank you. I would now like to turn the conference over to Peter Welburn, Vice President, Corporate Development and Investor Relations of Pegasystems. Peter, please go ahead. Thanks so much, Krista. Good morning, everyone, and welcome to Pegasystems Q4 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, forecast, and guidance, or various instances 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 2026 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 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 ended December 31st, 2025, 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, 2025, 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 2025 results. And with that, I turn the call over to Ken Stillwell, Chief Operating Officer and CFO of Pegasystems. Thank you, Peter. I'm thrilled to share the financial highlights of what's been an outstanding year for Pega. Execution by our global sales team, powered by our Blueprint experiential sales approach, drove top-line outperformance in 2025. Our company-wide commitment to Rule of 40, supported by robust internal adoption of AI built natively in our platform, delivered bottom-line outperformance as well. Let's start with the top line. Total ACV grew 17% year-over-year, as reported, and 14% in constant currency, beating our guidance. Pega Cloud ACV once again drove that growth, increasing 33% year-over-year as reported, and 28% in constant currency. That was a pretty significant acceleration from last year's 18% growth rate as reported, and 21% in constant currency. Pega Cloud ACV growth accelerated sequentially in all four quarters in 2025 in constant currency, demonstrating the power of both our cloud-first strategy and Blueprint, our AI design agent. Three factors drove our ACV growth acceleration in 2025. First, the Blueprint revolution has been key to our growth. Blueprint moved from a promising experiment in 2024 to a fundamental change in how we sold in 2025, enabling a completely new experiential sales process. Our Blueprint agent is now core to how we operate, shaping everything from how we sell to how we deliver and drive client success. Second, we have the strongest global sales execution that we've ever had. We drove a highly effective, disciplined, and scalable sales cadence worldwide with an unwavering focus on customer outcomes. Our account executives executed exceptionally well against our target account model, reinforcing the importance of focus and discipline. And third, we've been increasing demand from our clients and partners for Pega's differentiated Predictable AI agents integrated into proven enterprise workflows. As a result of these factors, our net new ACV increased by 37% year-over-year in constant currency. Looking ahead, we're confident in the durability of our ACV growth because of the strength of our moat. Pega is deeply embedded in our clients' core operations through vertical-specific workflows, and it's integrated at enterprise scale, supporting hundreds of millions of users globally. Pega has become a trusted compliance backbone for our clients and for regulators worldwide. And you may have noticed that we just achieved ISO 42001. A certification across Pega Cloud services, our GenAI solutions, and our predictive and adaptive analytics capabilities. Pega's financial performance achieved several key milestones in 2025. Among them, free cash flow increased 45% year-over-year to $491 million, exceeding our guidance by $51 million. This outstanding improvement in free cash flow was driven by our ACV growth and reflects the full strength of Pega's subscription model and the benefits of our subscription transition. Our strong free cash flow generation provides us with the flexibility to invest for growth, while also returning significant capital to shareholders. In 2025, our capital allocation strategy stayed firmly focused on driving long-term shareholder value. Our top priority continued to be investing in organic growth, including product innovation and go-to-market capacity, where we generated consistent, strong returns on invested capital. We also maintained a strong balance sheet. We ended 2025 with $426 million in cash and investments. During 2025, we repaid $468 million of debt, repurchased $498 million of shares, and distributed $15 million in dividends. This reflects the strength and durability of our business model. Looking ahead, we are confident in our ability to sustain this balanced and disciplined approach to capital allocation. Our contractually committed backlog grew 28% as reported year- over- year, and 23% in constant currency, and now exceeds $2 billion as reported for the first time in Pega's history. The biggest driver of our backlog increase was the increase in Pega Cloud backlog, which grew 36% as reported year- over- year. Pega Cloud backlog now represents 74% of total backlog, which is amazing. We're also really pleased that the Supreme Court of Virginia unanimously affirmed what the Virginia Appellate Court also unanimously recognized, that the trade secret trial and resulting verdict were fundamentally flawed. What this means is that the $2 billion verdict is gone. For more details, please see the email I sent to our employees on January 8, which we filed as an 8-K. Moving to 2026 guidance. As a reminder, we provide only annual guidance, not quarterly guidance, and we typically do not update guidance during the year unless we have a material acquisition. Here are our key guidance metrics for 2026. Total ACV growth of 15%. Total revenue of $2 billion, an increase of approximately 15% and a very significant milestone for the firm. Free cash flow of $575 million, a 17% increase over 2025. With our rapidly increasing free cash flows, our board also authorized an additional $1 billion in buyback capacity. This authorization reflects our confidence in the durability of our cash flows and our commitment to disciplined capital allocation. Since we don't provide quarterly guidance, I've received feedback that it's helpful when I provide a few thoughts on modeling our business for 2026. First, with our subscription transition complete, you'll notice in our 2025 results and in our 2026 guidance, that revenue growth and ACV growth are more closely aligned. Going forward, we expect this trend to continue, a dynamic some of your models may not have fully reflected yet. Now that Pega Cloud ACV is greater than 50% of total ACV, our annual revenue becomes more predictable. Second, in 2026, we expect the progression of our net new ACV to follow a more historically seasonal pattern, with a significant amount of our net new ACV occurring in the second half of 2026. This timing reflects the nature of our contract renewals, which are more concentrated into Q3 and Q4 of 2026. As a result, we expect subscription license revenue to be back-end loaded as well. Third, as AI reshapes how Pega and its partners deliver solutions with Blueprint, we intentionally reduced our professional services billable headcount and increased our reliance on partners for delivery. So we expect full- year professional services revenue to represent roughly 10% of our $2 billion revenue guide in 2026. Finally, but also the most impactful factor is our rate of Pega Cloud ACV growth. Pega Cloud ACV has accelerated for four consecutive quarters, fueled by the strength of Blueprint and strong execution. We expect this growth acceleration will continue to be driven by AI-powered automation initiatives, by CIOs and executives prioritizing productivity and efficiency gains. Given these dynamics, we expect Pega Cloud revenue to continue to accelerate above 30% in 2026, and you can see that acceleration signal in our current Pega Cloud backlog growth. In conclusion, we've made tremendous progress in transforming our business model over the last several years. Looking back, 2025 was a year where we positioned Pega exceptionally well for continued growth acceleration. Thanks to all of our employees for running the business with a Rule of 40 mindset. We look forward to seeing investors in the next few weeks at upcoming investor banking conferences. And also, please mark your calendars. Our annual investor session will be held on Monday, June 8, at the MGM Grand in Las Vegas, Nevada, in conjunction with PegaWorld, our annual client conference. We'd love to have you join us there in person. And with that, I'd like to hand it over to Alan Trefler, our Founder and CEO. Thank you, Ken, and it's a pleasure hearing you kick off those numbers. This really was a terrific 2025, and though it actually feels like a long time ago, we should take a brief moment and enjoy it. Now that that moment has passed, let me tell you about what's going to be happening in 2026. I'm really proud of our team coming into this year because what we have is the basis of some things that can be really, really exciting. You know, in 2025, we launched the Infinity platform as the first real agentic enterprise transformation platform, and we really extended our leadership position in the industry reports that matter the most to our customers and prospects. You know, I love, if you go to our website, to have people see how Gartner and Forrester reflect on what we do and what we are doing. And being in this position where as a Rule of 40-plus company, where we have the resources, we have the balance, I think we have the maturity to go after this opportunity as we, you know, look to break the $2 billion a year threshold. Once again, it's really an exciting time. But it all comes down to what clients need. And, you know, I recently returned from Davos, where I had dozens of conversations with senior leaders in global organizations, and they, they really mirror a lot of the discussions that we have all the time. Now, there's lots of presentations and lots of noise, and even the occasional Super Bowl ad about AGI, you know, artificial general intelligence and how that's going to change the world in speculative and perhaps dramatic ways. But in more normal settings, leaders are focused on the urgent, practical questions. How do we leverage AI to reimagine our business, and simplify, and modernize operations, and improve the customer experience? And you know, the issue here isn't the AI models. We made some great decisions about being able to be pretty fungible in how we chose one model versus another for different settings, and boy, that has turned out to be the absolutely right way to go about it. But the real question is not just the model, it's how and when do you use it. And I spoke about this at our last call, but it's so important. I think it's worth taking a few minutes and really going through it again. Our competition broadly is taking generative AI models and using them at runtime. Let me explain what that means. It means that when a customer or a staff member engages with whatever system is involved here, that model is reasoning there in the moment, from scratch, trying to figure out what to do. And, you know, there are times when that's just fine, to tell you the truth. I mean, you know, when we use our blueprint technology to rethink and reengineer and reenvision a set of complex business processes, we do exactly that. We're using our real-time capabilities to engage with the designers. But if we're actually looking to do the work, we think it's a mistake, a serious mistake, to, at runtime, routinely go and call the model as if it's discovering what you're trying to do for the first time. Structurally, our competition, whether it's, you know, Microsoft or Salesforce or ServiceNow, our competition rethinks the problem from scratch over and over again. And the slightly frightening thing is the models don't always come up with the same answers, even in situations and regulated industries, where coming up with the same answer is not just important, it is imperative. And people who have fallen or are falling into these traps, some of them, I think, are starting to realize there's a problem here, a problem that Pega does not have, but a problem that is structural and endemic to the alternatives. And so you can hear the noise and you can hear the wild claims. You can hear that LLMs can, you know, "do it all." But the reality is the LLM will work best when used the right way. Now, we've seen of late, I think it's referred to as the, SaaSpocalypse, where, you know, software companies have been really brutalized, and obviously, that's, struck us as well as other firms. I think there's a lot of, guilt by association here in this space. Let me share my views on that. First of all, there are definitely some software companies that are going to die. The reality is, every time there's a big technical shift, you, you see that sort of thing happen. I think, you know, software companies that are basically glorified spreadsheets with limited functionality, yeah, you can do all sorts of magical things in Claude or even Copilot that enable you to go after those types of apps, applications. But the applications we do for our clients, the very, very large ones that we've historically worked with and the, the more mid-market ones, we've never gone down market, but the more mid-market ones that we've talked about wanting to open up, as we look to scale up this business. Companies really have processes that run them, and they want those processes to be respected. They, they want architectures that will be able to do, reliable, repeatable, and our favorite word, predictable things. And authoring prompts is not a way to achieve that, whereas building workflows that are intrinsically agentic. What we've done is made it so that every workflow is able to run as an agent, is able to call other agents from other companies, and is able to be part of a fabric that orchestrates processes across the enterprise and lets people interact conversationally, lets people interact in, in ways that leverage their whole collection of workflows in, in ways that are at once innovative and predictable. When we can explain this difference to organizations, we see lights go on, and it's very, very, very exciting. The thing about these set of differentiators is this is a structural advantage. This is not one of those things where one LLM is six weeks ahead of another. This is a difference in philosophy that goes to the very core and powerfully allows us to leverage our long, long history as a workflow model system, to be able to do what you need to do for customers, to be able to build a workflow that can run at scale, that can be used through the power of AI, and can incorporate and orchestrate AI in a way that is turning it over to a model, is frankly a little bit freaky and unpredictable in my view here as well. Now, having been able to do this for such a long time, I think the conjunction of this brand-new spiffy technology, putting a real powerful sheen on Pega's traditional business, is the sort of thing that I think a lot of customers are realizing can give them what they need and give them in a way that they can predict and that they can understand. Now, I do have people ask: "Well, in this world in which you can generate vast amounts of code, right, where you can go to a Claude or a Codex, or you can, like, write programs, and who knows, maybe that will be used to take out applications, why is this still relevant?" I'm going to tell you exactly why it's relevant, more relevant than ever, and it goes back to something that we've been saying literally for 30 years. The problem is not generating the first bit of code. Easy to do. The machines do it well, and for some problems, maybe that's all you need. But for the problems we solve for our clients, it's not just about day one. It's also about being able to go back on day 30, know what you have, be able to navigate it, and figure out how I'm going to change it, how I'm going to evolve it. To use our trademarked term, how are we going to build for change? We have the Build for Change system. Period. We have the trademark, which is nice, but we have the system, which I think is actually more important. What people generating code have are, you know, instant legacies. Yes, you can create some really interesting things, and by the way, we use it too when we're writing our systems. You want to use the code generation because the world has changed in that way, but you want a structure. This is why I say a structural advantage, and that structure are libraries of workflows that enable the business to scale, enable the business to operate agentically with reliability and predictability, able to make the software able to orchestrate between different agents, systems, and environments. And these are, we believe, the fundamentals of what makes Pega special and quite, quite different. Now, I couldn't be fair without going back to something I've talked about a lot, which is, I think, the starting point for all of this, which is Blueprint. You know, Blueprint is the AI design engine for the enterprise. It takes, and it continues to get better by the way, every two weeks, there's something new. So if you haven't been on blueprint.com and tried it, it's worth doing. It gets more and more exciting and amazing every two weeks. Blueprint, the design agent, unleashes innovation. It really lets you describe what you want your business to be. It can go out to your website and see what you say about your market. It can go out to all of the interfaces that you can upload into it. So it can actually see how to hook this in to the actual systems that you have in your back office. And it allows you to have these instant and productive conversations with team members to be able to collaborate and to build out what you want the system to work with. As I mentioned before, this has completely changed our go-to-market. We're having similar productive conversations with clients about how they want to see an application and know with certainty that they're going to be able to get something that doesn't rely on PowerPoints. It allows them an experience that they can literally touch, they can literally converse with, they can engage gently with it, and they can do it in the first 10 minutes that we sit down with them. We're so excited about what this does, but I, I will tell you that my excitement is increased because this year we've added features to enable not just our intellectual property to be put into something called a vector database and incorporated in Blueprint, but to enable 10 of our best partners to be able to put their intellectual property, their proprietary intellectual property, available only to them into Blueprint. So when those partners are with one of their clients, they can use Blueprint as a vehicle to sell their projects with their IP. And, you know, this is very new, but I think this is going to be a tremendous opportunity for us to change the way we go to market by really leveraging the partners. And I'll tell you that still early stages, but these partners are enormously excited. You can see an interview with me and Ravi Kumar, the CEO of Cognizant, in which he directs his teams, not just the Pega teams, but the company in general, to go and understand and use this technology. I think Blueprint offers this chance that I have not seen before in my history at Pega, and we've seen it turn into real results. For example, Proximus, which is the leading telecom provider in Belgium, recently used Blueprint to redesign a critical application in one day and actually get it into full production on Pega Cloud in four months. This is so much more than they would have ever been able to do before. So excited here as well. So look, we love the term vibe coding. I don't know if it's going to stick or not, but we're adding vibe features to Blueprint to make it work. But all of this is much more than just vibe coding, sort of a personal app to do something for you. This is about building enterprise systems to enterprise standards, with enterprise interfaces and reliability and the capabilities that you need to be able to run your business on it, and of course, run your business reliably and predictably. Now, in addition to the apps that customers want to have, we think that this is also a great chance to get rid of apps that customers wish they didn't have. And this is where we made a recent acquisition, and this is where we built technology, and we have key partnerships with companies like Accenture and Wipro to be able to analyze existing legacy systems, rethink them with AI, put them into Blueprint, allow collaboration, and then put them on this fast track to legacy modernization. The thing I will tell you is it's not just faster, it's better. So I think being able to do this in conjunction with our partners is going to allow us to accelerate our transformation and going to allow us to achieve a whole new level of scale. And I'm really excited with the senior executives who I met at Davos, who love this stuff, actually. And they love it, because if you go onto Blueprint and you are signed on as one of these partners, we actually put their logo. We give them full credit for their IP contributing to this picture, and it's something that they can use in their selling motion as well. So I think that the opportunity here out of Blueprint and where Blueprint is and will be going, just continues to open new doors for us. So look, 2025 proved that disciplined innovation can win. And, you know, the market forces that are there, there's a lot of confusion, but the truth's the truth. Enterprises really want to transform. They really want to save money. They want to do a better job for their customers. And workflows are at the heart of how enterprises work. Our Pega Infinity platform was built for this moment, and Predictable AI gives customers the advantages of the AI, but also really gives them the predictability and reliability so that we don't have to worry about a lot of things that I see other people agonizing about. You know, in 2026, our focus remains clear. Helping customers move from experimentation to execution and move to outcomes from talk. And I am super excited by what I'm seeing. Pega is built for this era. We are built for change, and we are excited for what's next. Krista, you can open up the line for questions. Thank you. If you would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. And if you'd like to withdraw that question, again, press star one. We also ask that you limit yourself to one question and one follow-up. For any additional questions, please re queue. And your first question comes from Steve Enders with Citigroup. Please go ahead. Okay, great. Thanks. Thanks for taking the questions this morning. I guess I just want to start on just the deal environment and what you're seeing out there in terms of the macro. You know, understand that it seems like things are resonating on Blueprint and AI messaging, but just I guess, what are you seeing in terms of deals getting across the finish line? Just how would you kind of characterize the current environment, and how you're thinking about that into 2026? So, you know, I think the interesting thing about the Blueprint approach and the whole way we've gone about using it, pitching it, is it so reduces friction around engaging the client. Because it's a very low-cost, low-risk transaction for the customer to take a meeting and see what one of his systems could have been. Just need a little information about what the systems are and what they do, and actually get to touch it and feel it in the first hour. I think that's not the same as, you know, getting the check, but it does put the whole mindset at ease. So I would describe the early stages of the pipeline as really excitingly advanced. We've also used Blueprint internally to create the workflows in our sales automation technology that enable us to evaluate a customer, see what we know about them, see what's available on the web, see what other systems, you know, these people who still have Lotus Notes and TIBCO and other sorts of things, see, see what other systems they have. And actually be in a position to propose how they could do legacy transformation. And this is all very fresh. It's a great use of AI, and it matches our, what we call, customer product matrix, with an actual customer and the information we have about that actual customer. And I think that also lets us open up a whole new set of conversations, which from my point of view, is pretty, pretty exciting. I think, Steve, I'll add just a maybe a more tactical point on this. I don't know that in my, you know, 10 years at Pega, that I've seen more discussion with our clients around getting off of old legacy environments. Like, the pace at which that conversation is happening, and how much people are engaging with Blueprint and how, you know, how many people or how many clients are coming, you know, to visit us, that we're doing. Like, we're actually doing workshops on trying to identify which systems, et cetera, is like the pace of that is, I've not seen that speed. So that's really exciting for us, you know, just in terms of really the pace of digital transformation. Okay, that's, that, that's great to hear. Then I guess to follow up, just in terms of, you know, I guess the, the, you know, confidence on, on the ACV guide, you know, I, I guess, what is it that you're seeing out there that, that gives you, you know, that, that feeling that you're gonna be able to hit that, that 15%? And I, I guess the, the question we're getting from, from investors is, I think the, the, you know, Q4 ACV number, I think people were maybe hoping for a little bit of, of a better number there and seen a bit of a continued acceleration. And so I think, did anything like maybe slip into 2026 or just, yeah, what is it that you're seeing that maybe provides that perspective that you're gonna get 15% for 2026? Well, I think, you know, our growth rate pretty much, our constant currency growth rate stayed pretty consistent across the year. It was kind of right around that 14% number all through the year. So I don't, I don't, you know, and it was, you know, well above our guide. So I think it was a fantastic year and a strong finish. In terms of the future, I, I think it really comes down to, you know, our net retention rate is expanding at the same time that we're actually targeting new logos. And Blueprint is much more prominent, which really builds the bridge for us to grab new logos at a pace that we haven't been able to. That's really what there's a combination of NRR increasing and us going, you know, having the opportunity to go after new logos and really starting to see some early success of that. Okay, that's great to hear. Thanks for taking the questions. You got it. Your next question comes from the line of Rishi Jaluria with RBC Capital Markets. Please go ahead. Oh, wonderful. Hey, hey, hi, Ken. Thanks so much for taking my question. Maybe I want to start by, by thinking about, you know, the, the role that, that you can play now as enterprises actually start to live deploy agents. Obviously, technology has a lot of promise. We've seen a, a lot of great demonstration, but just given how nascent protocols like MCP and A2A have been, you know, maybe it's been, maybe these multi-agentic systems have maybe been a little bit more limited. The question I want to ask is: as enterprises, you know, start to get a little bit more serious about deploying, you know, hundreds or thousands of agents, can you maybe help us understand how that can serve as a tailwind for Pega, both in terms of being able to bring together, Alan, as you talked about in the prepared remarks, you know, agents from disparate systems and get them to work together, but also thinking about, you know, helping agents trigger workflows across systems from different technological spans? 'Cause I can imagine they're not embedded to build to work with mainframe systems or on-premises data stores. Maybe just help us understand how introducing this complexity can be a tailwind for Pega, what role you can play there, and then I've got a quick follow-up. Yeah. I think this is where we have some of our, I think, structural advantages. With Pega, I don't expect that customers will end up having to install tens of thousands of agents. I think the people who want to install tens of thousands of agents are delusional. And, you know, we went through a parallel environment years ago around interfaces. People talked about microservices, and the question was: how many of these microservices should connect your enterprise? You know, the reality is the people who put too many of them found that they went out of control. I think having an agent control tower to control your agents tells you something about the architecture, which is not a good thing. In Pega, if you have an application that has, say, 40 or 60 workflows in it, and we have applications that have even much more than that, the Pega super agent is able to run all 40. And if any of those agents, and any of those steps need to learn something from another agent that's not a Pega agent, or need to, you know, go to a third party, it can fire off an MCP A2A request that's already built into the system to be able to incorporate or orchestrate what that agent does with the work of another agent here. But the idea that the competitors have, where you go and you use a prompt studio to create literally thousands of agents that are defined in English, and that are gonna do the right thing reliably, that is so much weaker than saying, "Hey, I've got workflows that I know can run my business. I can do it at scale. I can do it in high volume and do it predictably." And the Pega agent is able to run any of them. Does that make sense to you? Yeah. No, absolutely. That's very helpful color. You know, and then maybe I wanted to follow up and think about Blueprint. Obviously, great to see this turn from kind of idea into reality show up in numbers, which is great to see, especially with the accelerating ACV. What I want to maybe understand is, you know, one of the theories when you first launched Blueprint is that this could help meaningfully shorten sales cycles and get customers from, you know, ideation to live deployment and value sooner. And you've directly talked about that, but, you know, in kind of the time since you've launched Blueprint, is there any way to quantify, you know, how that has impacted, whether it's, you know, on sales cycles, whether it's on, you know, just elapsed time from first conversation to live deployment? Ken, you did talk about NRR improving. Maybe any metrics you can share to kind of quantify the impact that Blueprint has had on that would be helpful. Thank you. So, yeah, we'll be basically about one year into the Blueprint data when we get closer to our Investor Day, Rishi, but I will give you, I will give you some of the early signs that we're seeing. We are seeing faster pipe build, faster progression, and faster close times across the board with Blueprint. And so the key with that is to get into those new workflows, even with existing clients or with new logos. So we are seeing those early signs. We'll be a little bit more precise with how some of that data, because we'll kind of have about a year of that data when we get closer to Investor Day. But we are seeing the signs of it, it impacting all the important factors, pipe build, pipe progression, win rates, you know, so we're seeing the early signs of that. That's what gives us, you know, a key part of giving us confidence of accelerating our growth. Okay. Awesome. Thank you. We've seen a massive acceleration or improvement in the training time for new staff. I, I would say, you know, we used to, we hire somebody, we'd often take five or six months before we'd let them loose on a client. Everybody's in the field in a month, less. And a lot of that is that Blueprint just makes it so easy for them to get it and for them to explain it to their clients. Very helpful. Thank you so much, guys. Thanks, Rishi. Your next question comes from the line of Raimo Lenschow with Barclays. Please go ahead. Perfect. Thank you. On Blueprint, guys, where are we on that app modernization journey? You know, that, that was always the dream. In theory, you would think Blueprint and AI can really help there. But how, how close are we for that dream to kind of come through? Because that would obviously unlock a lot of opportunities with so much legacy codes still out there. So, the capabilities are very rich. We have out-of-the-box interfaces with Accenture and other partners, AWS, that will enable their tooling, which like reads COBOL code and does other sorts of things, to feed into Blueprint to complement what... I actually prefer using things like user manuals and outcome-oriented documents. And it's, I see an enormous amount of interest from our clients in terms of doing that app modernization. I think this will be a good year for that. We've also made it so that Blueprint can modernize... You know, we have a couple of pretty old Pega systems that are out there with some of our clients, and we've added facilities so that Blueprint can also modernize an old Pega system, and I think, that's also a positive. So the feedback we get from clients is quite a bit of interest, and I expect that we will have several success stories, customer standing up, I should say, success stories at PegaWorld in June. Yeah. Okay, perfect. And then one for you, Ken. Thank you. If you look at the Pega account, it can be really strong. Can you talk a little bit about where we are on the Client Cloud? Getting clientele people to migrate over versus new opportunities, and how do you think that's going to play out in 2026? Thank you, and congrats from me as well. Thanks. Thank you. Yeah, so we touched on a couple of things, I'll maybe be a little bit more explicit. Professional services, ballpark, around 10% of our revenue. Pega Cloud ACV is going to continue to accelerate. Pega Cloud ACV is gonna be 30%+ in 2026. That's translating into the revenue. Our term license will, it will still have slight growth because clients, when they migrate, you tend to keep some level of concurrent rights as they go through that migration. Those migrations don't typically happen in, like, a weekend. They typically happen, you know, application by application as they're migrating. So even though clients are moving to Pega Cloud, you do still have, like, a little bit of a, of a slower growth deceleration on the term license. So you'll see Pega Cloud growing 30%+, you'll see kind of maintenance, you know, flats is slightly declining. You'll see, Client Cloud kind of being a slower grower just because of those concurrent rights as people migrate. The majority of our Pega Cloud, growth is coming from new activity, new volume, whether that be expansion of existing apps or new apps. But the pace of it, migration has been pretty consistent in 2025 to 2024, and we think 2026 will be kind of same level of, migrations. It's kind of happening, you know, consistently, across our client base. Okay, perfect. Thank you. Yep. Your next question comes from the line of Devin Au with KeyBanc Capital Markets. Please go ahead. All right. Good morning, Alan. Thanks for taking my questions here. I got a couple just quick follow-ups to start. The 15% ACV growth guide, is that a constant currency basis or a reported basis? And then just quickly following on the NRR expansion comment. Historically, you guys have kind of talked about at the 110% level. Is that correct? And how much of an expansion have you guys been seeing, from that? So on the... It is constant currency because our ACV is a balance sheet measure, so we, we are just, you know, we're only a month away from 12/31, so we're not assuming much movement on the currency. That is a constant currency number. On the NRR, we're, we're somewhere in the ballpark of 150 basis points higher on our NRR for 2025 over 2024, and, and that number will probably, that, that level of NRR will probably stay consistent into 2026. We'll see a little bit more growth from new logos and expansion through our autonomous partner selling motion, but so we're up about 150 basis points or so on NRR. Got it. Super helpful context. And then maybe just switching gear a little bit. I know you guys had a pretty meaningful presence at AWS re:Invent in December. Just would love to hear some of the feedback from customers on some of the product releases and pipeline build coming out of that event, and would love to get an update on kind of partnership with AWS and how that partnership is evolving in the near term. Thank you. Maybe I'll start and then let Alan jump in. So I think the most critical alignment between AWS and Pega is that both of us are aligned with looking at legacy workflows and using our tools, i.e., Blueprint, to transform, you know, using the AWS transform tool to actually ingest into Blueprint to essentially redesign and reimplement those, that work that's actually living in those legacy systems. And that gets onto Pega Cloud, which is aligned with AWS, because that gets onto the AWS cloud. So that's just a tremendous alignment there with basically inspecting and digesting the actual activity that's happening, leveraging Blueprint to build out those workflows, and then those running on AWS. So very good alignment between our selling teams, the AWS selling team, and the Pega selling team, to execute on that. So that's kind of what's happening on around that relationship. Thank you. I'll just add, I think it's really going in a good direction, and I think you'll see a lot of AWS at PegaWorld. Your next question comes from the line of Patrick Walravens with Citizens. Please go ahead. Oh, fantastic. Thank you. Congratulations, you guys. Alan, can you help us figure something out here? So, you know, 20 years ago, you were there when on-premise died and SaaS took over, and now it feels like we're in a similar transition. What are the characteristics that we should look for in software companies to figure out who's gonna make it through that transition? And then, and then you can overlay how Pega fits into that. But if you start with just a general framework for us, I think that would be incredibly helpful to everyone. Well, sure. I obviously have some views in the same space. I would say that I think the death of SaaS may be somewhat exaggerated, but there are aspects that put certain companies under more pressure or less pressure. I think the things that we find give us a lot of encouragement in this current environment is, you know, first and foremost, businesses have lots of stuff to orchestrate. You know, the whole Gartner Quadrant, which came out last year called BOAT, Business Orchestration and Automation Technologies, where, by the way, if you look at the picture, Pega's the clear number one in both. I think it is a very, very strong area sector, and that's going to be strong in an agentic world, especially because being able to do the orchestration and being able to do the automation is gonna be absolutely key. And, and that is what we do. Now, I think the SaaS companies that, or the non-SaaS companies that are gonna struggle are ones that are kind of little small things where, you know, candidly, you could just get some code written and take care of it. You could run it in a spreadsheet, you know, with Copilot. There's, there's lots of places where the, the barriers to entry of somebody writing some computer programming have just massively been reduced. But building a major system that does orchestration across a business, and then has to worry about things, and I'll just drop in a couple of the words of art that we use. Worry about things like, you know, two-phase commit. How do you make sure that when you commit records to the database, that they're there when they're reliable, because you're doing something that is important? Having things that have a lot of industry IP, also, I think can create a bit of a moat for companies. But some of that can be under attack because the AI can actually use that IP, too. It can incorporate it. But the thing that I would say is most important is the system built for change? Because the problem with these code-based systems that are attacking the SaaS world is they don't have a particularly visible architecture. They're just kind of written. And, you know, going after somebody else's 3,000 modules of code is incredibly daunting and very, very difficult to do correctly. In our world, because, you know, you can see it in Blueprint, we have so much scaffolding and infrastructure. We have the idea of a case, we have the idea of stages, we have the idea of steps, we have the idea of service levels, of personas. Our systems are built around the business entities of an organization, and because they're built that way, it's, you know, possible to navigate, and as a result, possible to change it. Businesses that require change, I think, are gonna be the ones that are gonna be most interested in a technology like ours. The businesses where you can just write something that's gonna sit on the shelf for two, three years or months, those are the ones that I think are gonna be most vulnerable. Does that make sense? Thanks, Alan. Yeah, yeah, that's great. That's great. Your next question comes from the line of Blair Abernethy with Rosenblatt Securities. Please go ahead. Thanks, and nice quarter, guys. Just two quick ones for me. First on duration, on contract duration. I wonder if you just sort of talk us through how that's was trending in Q4, particularly, you know, Pega Cloud versus, you know, on-premise renewals. And then secondly, just looking forward to 2026 and the mid-market. What sort of changes or how, what sort of learnings have you pulled in the last year or so, and what do you, you know, what's your, I guess, how much emphasis are you really putting into in the mid-market next year? So duration, Blair, has been pretty consistent. No big, no big changes there. I mean, there's always, like, quarter- to- quarter little anomalies just because of the way things go into backlog, but there's no fundamental change in the duration that clients are looking for. We're not seeing you know, any, any, any big shift there. I, I think Alan's point on the, on the going after, I'll just generalize it and say new logos, as opposed to any particular segment of. I think what Alan's point about Blueprint and how important Blueprint is to the ability for an account executive to ramp quickly, the ability for us to target, and the ability for us to get into a really engaged pipeline-building activity in a very short period of time, is what gives us a lot of confidence around scaling the engagement aspect, whether that be through the autonomous partner selling, through our partners, or through our direct target org model. We've never really had that confidence in the past because there was a long lead time to monetization of those account executives, so we're much safer in terms of trying to push for acceleration and growth. Blueprint changes that completely. That's the big focus area for us in 2026, like really really running that play out to make that really help us to scale our growth. Great. Thank you. You got it. We have time for one more question, and that question comes from the line of Mark Schappel with Loop Capital Markets. Please go ahead. Hi, thank you for taking my question. Ken, I was wondering if you could just talk about the, the firm's investment priorities, for the coming year. Investment in, in terms of areas of growth of spend, is that what you meant, Mark? Yes. That's right, yes. Well, I think. So we're gonna get, we're gonna get optimization across a lot of our P&L lines. Our gross margin is pretty, pretty respectable now, but it'll, you know, it's not likely to go backwards. You know, we'll get leverage out of our R&D group as we move, as we use more, you know, kind of vibe coding and AI in our actual processes, including our operational processes. So we will see some gross margin kind of optimization around aspects of our business. Our sales and marketing teams, I think a lot of that is really around kind of the digital engagement and what we're doing, like in our ability to engage with our clients in a really leveraging kind of agentic processes and how we engage. In the target org model, there will still be an investment in relationship selling because there are still people on the other side of those enterprise relationships there. That is not a, you know, that's... We're not talking to bots, right? When we're doing enterprise selling. So I think there's probably an area around some of our selling capacity, some of our investment in our partnership, you know, in our innovation. I think will quite frankly get some operating leverage as well as our operations. And we're, you know, gonna see our free cash flow continue to expand as we grow because, you know, we really are starting to get to that, you know. We're hitting the efficiency stages that are-- you're seeing that come through in our, you know, acceleration of margin. I think one of the things that I think is really probably one of the biggest disconnects that we're seeing is there is such a disconnect between the narrative that people are talking about around what's happening in enterprise and what we're seeing with our clients. Our clients have massive amounts of transformation that they need to do. They need the agents to be guided, to be structured, to follow the rules, to execute at scale. And the concept of a digital twin-type agent disrupting and changing that momentum, I think is really the disconnect that we're quite puzzled by in terms of what we're seeing with our clients and what some of the narrative is. So we're gonna continue to invest in engaging with our clients and helping them on that journey. There's not one client that's not focused on trying to optimize their legacy, you know, systems, and this is like the perfect moment for us. Thanks. Then, as a follow-up here, regarding the recent headcount reduction restructuring, there's a couple of articles out there mentioning that the company was transitioning to an AI-first delivery model. I was wondering if you could just kind of elaborate on what that means in practical terms. Well, I think that Blueprint is an example of an AI-first delivery model. I mean, Blueprint has completely changed. You know, Blueprint lets you go from ideation and things that used to happen on whiteboards and Post-its over weeks, to something where you're right on the system collaborating it, and it can load into an honest-to-God runnable Infinity system. So the ability to operate at not just better speed, but I think better quality, is very much built into what we are working on with Blueprint, and we've already achieved a chunk of that. More to come this year. Thank you. Thanks, Mark. That concludes our question-and-answer session. I will now turn it back over to Alan Trefler, Founder and CEO, Pegasystems. Please go ahead. Thank you to all who joined. We appreciate it. I just want to mention PegaWorld again. June 8th is Investor Day, so investors are free to attend from the 7th to 9th. I think you would find it to be insightful because in this world of insane noise, and the noise out there is, is crazy, there are real substantive differences, and you can see and touch and understand them in conjunction with our customers and partners. So please come, come join us there. That will be terrific. And I will just tell you that I feel that we, as a company, were built for times like this. So, may we live in interesting times collectively. Thank you very much, everyone. This concludes today's conference call. Thank you for your participation, and you may now disconnect.