Pegasystems Inc at Citi Global TMT Conference Transcript

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

Question: Steven Enders - Citi - Analyst : Yeah. Maybe just to just start off, I mean, I think Pega has been around for 40 years at this point. Maybe you can just like walk us through high-level takeaways from the recent quarter and kind of what you've been seeing out there?

Question: Steven Enders - Citi - Analyst : Sure. No, that's great to hear. And I do want to touch on the AI stuff in a bit. But I guess just for people in the room, we want to keep it interactive. So if there are any questions out there, we'll make sure to get to those. But maybe we -- before doing that, can we just talk about the deal environment and the macro situation and what you're seeing today? How is it kind of translating over the past couple of quarters? And how do you feel like the macro setting up for the second half?

Question: Steven Enders - Citi - Analyst : You did mention that you're not necessarily seeing an acceleration deal environment, but ACV did accelerate this past quarter. I think came in 13% constant currency, which is up a few points quarter over quarter. I guess what was better than expected because it did feel like it came in well above your expectations here. And maybe how does this change about how you think about the growth outlook for the year? I think you're originally targeting about 11% ACV growth. So can you just kind of talk about what -- kind of what that means?

Question: Steven Enders - Citi - Analyst : Okay. Maybe this is a good time to transition to talk about the AI strategy and what you're doing there now. So you already talked about Blueprint, but maybe you can just give a little more detail around what that AI portfolio looks like today and how does GenAI Blueprint fit into that?

Question: Steven Enders - Citi - Analyst : Okay. And so maybe as we think about the monetization potential with Blueprint. And is there any way to maybe articulate kind of the timeline you're expecting there? Or how you're expecting this kind of impact deal cycles or anything like that?

Question: Steven Enders - Citi - Analyst : Okay. All right, no, that's good context there. Maybe just talking about -- I think you talked about a little bit around like your expected adoption curve, but maybe we can talk about some of the use cases that are coming out of Blueprint so far? And maybe how are those different than the traditional use case that you tend to see coming from customers using Pega?

Question: Steven Enders - Citi - Analyst : Okay. Maybe standing on AI topic, but I want to talk a little bit about maybe the risk or where we hear skepticism sometimes from investors, So maybe we can just start on the competitive dynamics in the market and what you're seeing there. I think it feels like every company has an AI strategy. Everyone is talking about it and increasing the spend to value for developers. I guess with Microsoft out there with Power Platform and what they're doing with GenAI, what ServiceNow is trying to do and what they're focusing on the AI landscape. How does that maybe change -- I guess, where do you see the risk? Or how does it maybe change where Pega fits within this ecosystem?

Question: Steven Enders - Citi - Analyst : Okay. All right. That makes sense. I think the other thing we've heard is that maybe people are a little skeptical of Blueprint or think maybe it's just fancy templating or something like that. And there wasn't that big of a change there. How would you maybe push back against that view? Or maybe asked differently, what does Blueprint enables for Pega that's different than before? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 05, 2024 / 3:40PM, PEGA.OQ - Pegasystems Inc at Citi Global TMT Conference

Question: Steven Enders - Citi - Analyst : We'll pause. We have a mic coming. We'll get it to you. Unidentified Participant Perhaps you could discuss through an actual use case for a long-time customer that's adopted it and is relatively early in a cohort, so to speak, of usage and really proving it out and seeing the ROI?

Question: Steven Enders - Citi - Analyst : Maybe to follow up on that line of questioning. I guess from a -- I think we kind of already talked a little bit around custom development and some of those initiatives out there that GenAI is impacting. But does it maybe change how customers would be thinking about putting something custom code versus going to somebody like Pega or another kind of low-code vendor?

Question: Steven Enders - Citi - Analyst : Would Blueprint and the ability to accelerate that, would that maybe change how customers think about writing custom code versus using a low-code vendor?

Question: Steven Enders - Citi - Analyst : Okay. That makes sense. Maybe shifting gears away from the AI discussion unless there's any more questions in the room here. I want to ask about go-to-market and the changes that have kind of gone on there. I think you've made some changes in '22, '23 a little bit. Can you maybe walk us through what's changed and maybe how productivity rates trended since you've made those changes?

Question: Steven Enders - Citi - Analyst : Okay. And so I guess, maybe what are the learnings that you had from -- I think you kind of put your foot in accelerator three or four years ago to try to build out that new logo motion. What are kind of the learnings from then that you're kind of applying now for maybe where it makes sense

Question: Steven Enders - Citi - Analyst : Okay. You have a $2 billion ACV goal in three to five years, you're at $1.3 billion today. Can you maybe -- what does the road map look like to get from here to there? What contribution is new logos? What's coming from the expansion? And how do you think about how much more room there is to run within the current accounts that you have?

Question: Steven Enders - Citi - Analyst : Makes sense. We have about five minutes left here. So just going to see if there's any questions in the room. I'm going to ask about free cash flow I think you've seen a pretty impressive ramp up here in the past couple of years. I think it's about 25 points in two years or so. So pretty impressive and rapid growth there. What's been the biggest area of leverage for you so far? And where do you see kind of the most incremental opportunity?

Question: Steven Enders - Citi - Analyst : So you've had a lot of focus on Rule of 40. It seems like there's a bit of a shift towards how you're thinking about free cash flow and free cash flow per share. Can you maybe kind of walk through some of the shift that's going on right now? And maybe now why is the right time to start focusing on free cash flow per share?

Question: Steven Enders - Citi - Analyst : So does this kind of maybe suggest a shift in how you're thinking about capital allocation plans then?

Question: Steven Enders - Citi - Analyst : Well, I think we're out of time here. So I think we'll leave it there. But Ken, thank you so much for being here and the rest of the Pega team.