Pegasystems Inc at JPMorgan Global Technology, Media and Communications Conference Transcript

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

Question: Pinjalim Bora - JPMorgan Chase & Co, Research Division - Analyst : Yes. It's quite an evolution. I guess as we think through this, right, you started in -- as you were saying, in the, let's call it, like a digital process automation platform. But over time, you have kind of productized a few things, like the customer decisioning hub, the customer engagement, I think you call it, the customer support side of the things as well. So you have productized some applications. So help us understand kind of the mix between that platform and the applications. And is there a part which is kind of strongest in the portfolio that is resonating well with customers versus some of the things that might be coming up the curve?

Question: Pinjalim Bora - JPMorgan Chase & Co, Research Division - Analyst : Yes. So it's pretty broad overall, right? So when investors think about Pega, they struggled a little bit about who does Pega compete with? Is that the BPM players, the digital process automation players? Or is it Microsoft CRM, Salesforce CRM, those kind of guys? How would you kind of characterize the competitive landscape?

Question: Pinjalim Bora - JPMorgan Chase & Co, Research Division - Analyst : Yes. The low code, no code, respectively, is definitely interesting. But before I go there, generative AI is a big topic nowadays. And I know Pega is one of the companies who actually outlined a few things that are, I guess, coming down the pike. I think I read Q3 -- Q2, Q3 in one of the press release that you're releasing a few things that might be coming out. Talk about how are you thinking about generative AI across kind of the product set, how -- what is it going to enable Pega customers?

Question: Pinjalim Bora - JPMorgan Chase & Co, Research Division - Analyst : Yes. Interesting. So how much of those newer capabilities, I guess, the customer decisioning hub was already there in your client cloud as well, right? But some of these generative features that you're adding, would that be in the client cloud as well? Or would that be mainly in the Pega Cloud?

Question: Pinjalim Bora - JPMorgan Chase & Co, Research Division - Analyst : Yes. Where I was going with that question was, I was thinking if you are offering more of these generative capabilities on the managed SaaS offering, would that be kind of a forcing function to go more cloud, or Pega Cloud versus Client Cloud, but it seems like it might be in both the places.

Question: Pinjalim Bora - JPMorgan Chase & Co, Research Division - Analyst : Yes. I want to go back to one statement that Alan made in the earnings call, I think, around generative AI. He said something like, he thinks low-end low-code, no-code platforms would be commoditized. But he said higher-end enterprise-grade solutions like Pega will benefit. Can you make that distinction why would that be?

Question: Pinjalim Bora - JPMorgan Chase & Co, Research Division - Analyst : Yes. Yes. Understood. Okay. One last on AI. I guess another thing that's kind of a little bit surprising in the earnings call last time, I think you said vast majority of your licenses or contracts today are outcome-based or value-based versus seat-based because there is this debate around as productivity increases because of -- as companies kind of drive AI usage within their products, that might put pressure on the number of seats if you -- it's a seat-based model. But it seems like for you guys, it's -- you have already kind of made the jump with the vast majority of your license contracts not being seat-based. Is there a way to understand what does that mix look like? Is that 75% value-based, more or less?

Question: Pinjalim Bora - JPMorgan Chase & Co, Research Division - Analyst : Can I double-click on the consumption part that you talked about recently? Can you elaborate on that a little bit?

Question: Pinjalim Bora - JPMorgan Chase & Co, Research Division - Analyst : Yes. I mean how that model has changed prior to previous. Is there a change in rev rec?

Question: Pinjalim Bora - JPMorgan Chase & Co, Research Division - Analyst : Interesting. Okay. One question on macro, which is obviously topical nowadays. I'm sure you have spoken to a lot of customers since you reported earnings. But what is your sense of the kind of the macro environment at this point? How would you characterize kind of the demand environment or the business confidence today?

Question: Pinjalim Bora - JPMorgan Chase & Co, Research Division - Analyst : Okay. I'd conclude that with consistent versus Q1 at this point.

Question: Pinjalim Bora - JPMorgan Chase & Co, Research Division - Analyst : Okay. I guess if you have questions, please raise your hands. And I think we have mics -- can we get some mics here? I think there's someone right here. Unidentified Analyst Ken, a couple of questions. One is how big is your international business? And in particular, how is -- how are the large markets like Germany or Japan?

Question: Pinjalim Bora - JPMorgan Chase & Co, Research Division - Analyst : Last 30 seconds, it seems like you're outperforming in free cash flow. How should we think about free cash flow for this company going forward? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 22, 2023 / 12:00PM, PEGA.OQ - Pegasystems Inc at JPMorgan Global Technology, Media and Communications Conference

Question: Pinjalim Bora - JPMorgan Chase & Co, Research Division - Analyst : Okay. With that, thank you so much, Ken.