Pegasystems Inc Investor Day Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Rishi Nitya Jaluria - RBC Capital Markets, Research Division - Analyst : Alan, Rishi Jaluria, RBC. I really appreciate the time and hope you feel better and get back on the road and in front of people again. I guess two questions for you. First, maybe can you drill a little bit more into the Google partnership and what we can expect to see maybe longer term there? I know you talked about customers can use their Google credits, which is great. Do you think that there's any more potential for actual strategic partnerships, maybe getting Google salespeople involved? Just how should we think about that? And then I have a follow-up. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 02, 2022 / 2:00PM, PEGA.OQ - Pegasystems Inc Investor Day

Question: Rishi Nitya Jaluria - RBC Capital Markets, Research Division - Analyst : Right. And then maybe a macro question. I think you called this the most volatile environment you've seen in decades. Obviously, you've been doing this business for almost 40 years now. Maybe how is that manifesting itself when you talk about the volatility? Do you see longer sales cycles, tightening of IT budgets? Or is it just kind of a -- there's a lot of uncertainty out there and maybe that's what's causing it? And maybe alongside that, if we are to head into a recession, hopefully a softer than a harder one, just how do you think about your sensitivity to a recessionary environment and how you can be coming out of that and then maybe why you might be more well positioned?

Question: Rishi Nitya Jaluria - RBC Capital Markets, Research Division - Analyst : Rishi Jaluria, RBC, again. Maybe just one question I did want to ask. So you recently acquired Everflow. Maybe can you walk us through the process of integrating some of these acquisitions? You've obviously done that well with OpenSpan RPAs now barely integrated. And just kind of avoiding having that Frankenstein stack that we see all the time with Oracle and Salesforce for their buy companies, but don't really integrate them and I think the way that you tried it.

Question: Rishi Nitya Jaluria - RBC Capital Markets, Research Division - Analyst : Rishi, RBC. I want to go to the Rule of 40 and the target models. Maybe, I guess, piece number one, just to confirm, you're not backing off what you said on the last earnings call, which is by Q4 of 2024, you should be able to hit the rule of 40, right?

Question: Rishi Nitya Jaluria - RBC Capital Markets, Research Division - Analyst : Just wanted to confirm that. And then maybe alongside that, two follow-ups there. First, when we think about your ACV growth targets, you're actually talking in your base case sub-20%. And I know obviously, the aspiration is to be above 20%. And -- but I think the tone has always been, hey, we're going to be 20% growth for several years. Is this a change? Or is this more conservatism or what?

Question: Rishi Nitya Jaluria - RBC Capital Markets, Research Division - Analyst : Okay. Fair enough. And then you talked about Pega Cloud ACV larger than Client Cloud ACV at that target. How should we be thinking -- and I know the metrics, obviously, change quarter-to-quarter. But like long term, especially given the incentives you're giving your sales force, some of these partnerships, obviously, the way the industry is going, how should you aspirationally be thinking about that mix between Client Cloud and Pega Cloud?

Question: Rishi Nitya Jaluria - RBC Capital Markets, Research Division - Analyst : Okay. Last one, I promise, I'll give up the mic now. But going away from the target model, it seems throughout the course of the presentation today. There seems to be this kind of doubling down on enterprise customers and really the largest organizations in the world. It seems like the solutions do have very broad applicability going beyond just the G2K or Fortune 500 or whatever you want to measure. Why not maybe target a little bit more down market, especially customers that might be down market now, but that can grow up to become G2K companies over time?