Pegasystems Inc. (PEGA) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Welcome to the Pegasystems 2021 Annual Meeting of Shareholders. I will now turn the call -- line over to Mr. Cushing.

Good morning, fellow shareholders. On behalf of Pegasystems, I'd like to thank you for attending our 2021 Annual Meeting of Stockholders. I'm Matt Cushing, Vice President, Chief Commercial Officer, General Counsel and Secretary of Pegasystems. I will now call the 2021 Annual Meeting to order. I'd like to start by introducing the members of our Board of Directors who joined this meeting either in person or via telephone conference call. Alan Trefler, Chairman of the Board; Peter Gyenes; Richard Jones; Christopher Lafond; Dianne Ledingham; Sharon Rowlands; and Larry Weber. We're also joined today by members of Pegasystems functional leadership team and representatives from our outside legal counsel, Choate, Hall & Stewart as well as by our auditors, Deloitte & Touche and a representative from our -- from Computershare. Before acting on the matters listed in the notice of meeting, let me cover some procedural points. First, this meeting has been called in accordance with the company's amended and restated bylaws, and the required notice has been given. Second, if you have previously voted your shares for this meeting, your vote will be counted automatically without any further action on your part. Third, all Pegasystems shareholders entitled to vote at this meeting have the ability to do so online or in person if the shareholder is present at today's meeting and is a record holder of shares, meaning that the shareholder owns shares in the shareholders' own name and not through a bank or brokerage firm. If you are a shareholder entitled to vote and have not voted or if you want to change your previously cast vote, please do so through the link on the meeting website under Vote Your Shares. Please remember that if you have already voted by proxy, it is not necessary to vote again. After voting has been completed on all the matters on the agenda, we will close the polls and I, as the Inspector of Elections, will provide the preliminary report. I will now accomplish for the record that the meeting has been properly convened and that a quorum is present for the transaction of business. According to the list of shareholders of record, as of the close of business on the record date, which was April 21, 2021, 81,267,183 shares of common stock were issued and outstanding. According to this meeting requires the presence, in person or by proxy, of holders of a majority of the shares outstanding on the record date, which is 40,633,592 shares. The preliminary report indicates that a total of at least 76,872,908 shares or at least 94% of the issued and outstanding shares were represented in person or by proxy at the opening of this meeting. This represents a majority of the shares outstanding on the record date, giving us a quorum. Having now established a quorum for the conduct of business, the polls will remain open until we declare them closed after the time all proposals are presented, and shareholders wishing to vote have had the opportunity to cast their vote on the meeting link or in person if present here today. Our shareholders are requested to act on the following matters: first, to elect the 7 nominees named in the proxy statement to our Board of Directors to hold office until our 2022 Annual Meeting of Shareholders and until their successors are duly elected and qualified; second, to approve, by a nonbinding advisory vote, the compensation of our named executive officers; third, to consider, if properly presented at the meeting, a shareholder proposal regarding shareholder proxy access; and fourth, to ratify the selection of Deloitte & Touche LLP as the company's independent registered public accounting firm for the year ending December 31, 2021. The first order of business is to elect the nominees of the Board of Directors. With respect to each nominee, the number of votes cast in favor of such nominee must represent a majority of the issued and outstanding shares. At this time, I will entertain a motion to elect Peter Gyenes, Richard Jones, Christopher Lafond, Dianne Ledingham, Sharon Rowlands, Alan Trefler and Larry Weber to the Board of Directors of the company. May I have a motion to elect the nominees?

I so move.

May I have a second?

I second the motion.

If any shareholder wishes to ask questions on the proposals, questions may be submitted via the virtual meeting website or if present in person by raising your hand and being recognized by the Chairman of the meeting. Are there any questions on this motion?

No questions.

Having received none, we'll move on to the second proposal. The second order of business is to approve, by a nonbinding advisory vote, the compensation of our named executive officers. This matter will be determined by the vote of the majority of the votes cast at this meeting. May I have a motion to approve this proposal?

I so move.

May I have a second?

I second the motion.

Are there any questions on this motion?

There are no questions.

Having received none, we'll move on to the third proposal. The third item of business is a shareholder proposal submitted by James McRitchie. The shareholder proposal is set out in Proposal 3, beginning on Page 38 of our proxy statement, along with the statement from the Board of Directors explaining the reasons for recommending that the shareholders vote against the proposal. At this time, I will ask shareholder McRitchie to present the shareholder proposal and make a motion that it would be put to a vote. Shareholder McRitchie, you now have up to 3 minutes to make the proposal.

Mr. McRitchie, your line is now unmuted.

Thank you. I move Proposal #3 proxy access for a vote. Since the majority of Pegasystems is owned by insiders, our votes may be less consequential, but they still give the Board a sense of what unaffiliated shareholders want, and that's important. 77% of S&P 500 companies have adopted proxy access. Those rights are now spreading to smaller companies. Pegasystems could signal to the market that it's open to input from shareholders beyond insiders and 13F filers if it is open to a wider shareholder base. The best way to do that is by adopting proxy access. Proxy access in the United States, cost benefit analysis by CFA Institute found that proxy access would benefit both the markets and corporate boardrooms with little cost or disruption. They estimate it would raise U.S. market capitalization by up to $140 billion. Public versus private provision of corporate governance case of proxy access found an average of 0.5% increase in shareholder value for companies where proxy access is targeted. Proxy access creates a more competitive environment for directors. They know if they fail, shareholders can replace them. I want to be clear. I don't expect that need to arrive at Pegasystems, especially in the near future. But having proxy access in the toolbox is a good idea that let shareholders know directors are confident in their electability. Please vote for proposal #3 and do it now before voting is closed. I'm not sure what the practice is at Pegasystems, but many companies cut off loading a few seconds after proposals have been presented. Of course, that makes a mockery of the whole system of presentation, which is to provide arguments that shareholders can weigh before voting. Obviously, it takes more than a second or 2 to weigh the evidence and moving through the mechanics of voting. Since Pegasystems has made it impossible for retail shareholders to vote at the meeting, this point may be moot. So vote now on proposal #3, proxy access increases the value of your shares by keeping directors focused on shareholder value. Thank you.

Mr. McRitchie's line is now muted.

Thank you, Mr. McRitchie. The Board's response to this proposal begins on Page 39 of our proxy statement. We'll now move on to the fourth proposal. The fourth matter to come before the meeting is the ratification of the selection of Deloitte & Touche LLP as the company's independent registered public accounting firm for the year ending December 31, 2021. This matter will be determined by the vote of a majority of the votes cast at this meeting. May I have a motion to approve this proposal?

I so move.

May I have a second?

I second the motion.

Are there any questions on this motion?

There are no questions.

Having received none, I remind you that the polls are about to close. So if you have not yet voted, please do so. [Voting]

Because everyone has now had the opportunity to vote, it is now 10 -- past 10 a.m., and the polls are closed. As the inspector of elections, I am delivering this preliminary report, and I will now announce the preliminary results. Based on the preliminary report, each of the nominees for director received more than 90% of the votes cast in favor of his or her election and has been elected as a Director of the company for a 1-year term to expire at the 2022 Annual Meeting of Shareholders and until properly replaced. The resolution on an advisory basis for the compensation of our named executive officers received more than 94% of the votes cast in favor of the proposal and has been approved. The shareholder proposal regarding shareholder proxy access did not receive more than a majority of the votes cast and is therefore not passed. And the ratification of the appointment of Deloitte & Touche LLP as Pegasystems' registered independent public accounting firm received more than 98% of the votes cast in favor of the appointment, and the appointment has been ratified. The final vote results will be included in a Form 8-K that will be filed within 4 business days from today. This concludes the business to be brought before the meeting. Because there is no other business, I will entertain a motion to adjourn.

I move to adjourn the meeting.

May I have a second?

I second the motion.

The meeting is adjourned. Thank you again for your time today and your continued support of Pegasystems. I'd now invite you to submit questions you may have regarding Pegasystems and its business. As you can understand, we will not answer questions that are irrelevant to the business of Pegasystems or that request information or comment with respect to the financial performance of Pegasystems as Pegasystems is currently in a quiet period. [Operator Instructions] While we pause to give -- we give time to post your questions, let me turn the microphone over to our VP of Corporate Development and Investor Relations, Peter Welburn, who will read our safe harbor with respect to questions.

We have not received any questions from our shareholders.

Okay. Excellent. Well, with no questions, this concludes our 2021 Annual Meeting of Shareholders. And I'll turn the meeting back over to our operator.

The 2021 Annual Meeting of Shareholders is now concluded, and you may now disconnect. Thank you.