Pegasystems Inc at Barclays Global Technology Conference Transcript

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

Question: Sheldon McMeans - Barclays Bank - Analyst : Great. So Pegasystems has been around for many years, but has gone through a bit of a transformation, going through a subscription transition, coming out with a cloud product and through that, attracting new investors. So for those who are new to the Pega story, can you introduce them to the company, what solutions does Pega offer?

Question: Sheldon McMeans - Barclays Bank - Analyst : Great. And could you speak to some of the factors that differentiate Pega? And I would love to hear maybe how those factors have changed in a new world where you have AI and generative AI, which creates new requirements and perhaps demand on the underlying architecture.

Question: Sheldon McMeans - Barclays Bank - Analyst : Yeah. Interesting. Yes, I feel like that deterministic versus undeterministic aspect is something that's a little underappreciated. So great. Moving a little bit more to financials here in the short term. So in Q3, ACV accelerated nicely for the second consecutive quarter. And you talked about broad-based execution being primary driver. And I would love to hear some color on the sustainability of that acceleration. And then maybe one thing we are hearing some pockets of macro improving. So if you can just help contextualize whether or not the macro improved? Or is it more execution on Pega side?

Question: Sheldon McMeans - Barclays Bank - Analyst : Right, right. And Pega Cloud ACV reached 30% reported, 26% on a constant currency basis. Can you talk about the drivers of Pega Cloud ACV growth? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 12, 2024 / 4:40PM, PEGA.OQ - Pegasystems Inc at Barclays Global Technology Conference

Question: Sheldon McMeans - Barclays Bank - Analyst : Great. And so one thing you did note the tougher compare in Q4. And one of the other things that we've seen is a strengthening of the US dollar since the election. So thinking about those two factors, I know you don't give quarterly guidance, but when you think about your 11% ACV growth guide for the full year, do those factors put the reported level at risk? How should we think about those impacts there?

Question: Sheldon McMeans - Barclays Bank - Analyst : Understood. During your Investor Day, you laid out a few scenarios to reach $2 billion in ACV in the next three to five years. So that implies about 10% to 17% growth. And how are you thinking about this? Is there any reason that you shouldn't be in the middle to the top end of that range? And how sustainable is that?

Question: Sheldon McMeans - Barclays Bank - Analyst : Okay. And on Blueprint, you recently issued a press release with some new capabilities of Pega GenAI Blueprint. So first, for some in the audience that may not understand what Blueprint is, could you just provide a quick overview of what that is and then talk about some of those recent enhancements?

Question: Sheldon McMeans - Barclays Bank - Analyst : Yeah. It makes sense to add those features to make the migration easier. And I would love to hear --

Question: Sheldon McMeans - Barclays Bank - Analyst : Okay. And yes, so making the migration and modernization of legacy apps easier. That makes sense. What opportunity do you see there? And you also added a new Chief Cloud Officer position, which was something you didn't have before? And what does that add to your motion around cloud migration?

Question: Sheldon McMeans - Barclays Bank - Analyst : Got it. And is it right that while a significant amount of Pega Cloud growth that's come from existing customers. This is more new applications or new workloads as opposed to those legacy migrations. And how should we think about the uplift here when you take -- when you go from a legacy to Pega Cloud?

Question: Sheldon McMeans - Barclays Bank - Analyst : Yes. And it seemed like -- we talked about the 10% to 17% range. You mentioned 20%, which would be a great scenario, but not necessarily surprising. So it does sound like Pega Blueprint success is what's going to help you get to that 17% and potentially 20%. Is that fair?

Question: Sheldon McMeans - Barclays Bank - Analyst : Right. And you brought up a new logos, and you have been pursuing new logos more aggressively. So I mean, you've been around for many years and really leaned into your installed base, selling more solutions. So I guess, why now? Why is this the right time to pursue new logos? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 12, 2024 / 4:40PM, PEGA.OQ - Pegasystems Inc at Barclays Global Technology Conference

Question: Sheldon McMeans - Barclays Bank - Analyst : Understood. And I want to make sure we get to some free cash flow questions. So that's something that's picked up significantly quite quickly. And so what has been some of the key drivers of that momentum on the free cash flow side?

Question: Sheldon McMeans - Barclays Bank - Analyst : Okay. And you -- we're close to wrapping up 2024. You guided to $350 million in free cash flow for -- a touch over $400 million on an adjusted basis. So how should -- for 2025, how should we think about that $50 million in adjustment? Is $400 million on the table for next year?

Question: Sheldon McMeans - Barclays Bank - Analyst : Great. And if I could slip one more in. So you talked about the -- or the Board recently authorized $250 million in share repurchases. You talked about free cash flow per share. How are you thinking about the intrinsic value? Is that a framework you use, free cash flow per share that you'll be more aggressive or less aggressive?

Question: Sheldon McMeans - Barclays Bank - Analyst : Great. Thank you very much, Ken (multiple speakers)