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 - Analyst : Why don't we start with maybe a brief introduction by yourself and maybe a little bit about Pegasystems so that people in the audience that may not know about the company.

Question: Pinjalim Bora - JPMorgan - Analyst : Great. So maybe, Alan, I'll start with you, 40-plus years Pegasystems has been around, right? And the architecture you designed quite a bit ago, it has evolved over this time, but it's still relevant today. So talk about kind of that journey, that evolution of the foundation of Pegasystems. And how does it kind of help you differentiate your AI versus other AI solutions in the market?

Question: Pinjalim Bora - JPMorgan - Analyst : Yes. So I guess, the talk of the town whenever we talk about Pegasystems is Blueprint, right? And that's kind of the topic du jure. To my understanding, Blueprint kind of compresses the life cycle of application development from, I don't know how you want to characterize it, but --.

Question: Pinjalim Bora - JPMorgan - Analyst : Maybe before I go into customer conditions, maybe talk about that differentiation. AI is kind of the topic everywhere, right, nowadays. So maybe talk about the differentiation of Blueprint, what Pega brings to the table versus your next agent force and there are so many other application platforms, AI application platforms, that is. 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 13, 2025 / 8:30PM, PEGA.OQ - Pegasystems Inc at JPMorgan Global Technology, Media and Communications Conference

Question: Pinjalim Bora - JPMorgan - Analyst : So best practices in the design time and you have an advantage to do that because of the history that you have.

Question: Pinjalim Bora - JPMorgan - Analyst : Maybe help us understand it through an example of a customer that might be using either agentic or non-agentic kind of an AI based on Blueprint.

Question: Pinjalim Bora - JPMorgan - Analyst : I see. So that was an MDM use case you say.

Question: Pinjalim Bora - JPMorgan - Analyst : Would you say, in your customer conversation and the live projects that you have today, would you say Blueprint is kind of starting to accelerate work development on Pega at this point? Are you seeing that kind of flywheel? People creating Blueprint, putting into Pega, a live application goes into production and people start using it, that kind of flywheel starting to accelerate?

Question: Pinjalim Bora - JPMorgan - Analyst : Yes. So the example, that MDM use case that you gave is good, but you have also been talking about legacy transformation as a potential use case, right? Talk about is that resonating with customers? Are customers kind of starting to use Blueprint for legacy transformation?

Question: Pinjalim Bora - JPMorgan - Analyst : Yes. I want to ask you about the last mile, right? Blueprint gets you to certain part of the process, right? It helps you with the schema, the personas, the steps and all that stuff. It spits out a file, and then you kind of put it into Infinity, right? So from that point onward, what does that like last-mile effort look like from that point to like go-live application?

Question: Pinjalim Bora - JPMorgan - Analyst : So tremendous kind of uptake of Blueprint. I think you had said 1,000 blueprints a week or something like that in the earnings call, I believe, right? But at this point, how many are live? How many have gone through that last mile at this point, would you say? 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 13, 2025 / 8:30PM, PEGA.OQ - Pegasystems Inc at JPMorgan Global Technology, Media and Communications Conference

Question: Pinjalim Bora - JPMorgan - Analyst : So let me go to Q1 results now, right? And I'd heard something like 25% to 50% of the deals you closed in Q1 where Blueprint was involved in some ways. Is that right?

Question: Pinjalim Bora - JPMorgan - Analyst : Why would you say, let's say, 50%? Where would you say the rest 50%? Why is Blueprint -- it's part of the discussion, but it's not driving --?

Question: Pinjalim Bora - JPMorgan - Analyst : Yes. So obviously, Pega Cloud accelerated in Q1 ARR on constant currency. Talk about what is the driver. I mean Blueprint, how much of -- it seems like it's a major driver. But how much of that acceleration was also driven by kind of the go-to-market changes that you have put in place earlier or several quarters ago now? Talk about the drivers of that? 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 13, 2025 / 8:30PM, PEGA.OQ - Pegasystems Inc at JPMorgan Global Technology, Media and Communications Conference

Question: Pinjalim Bora - JPMorgan - Analyst : I have not heard adaptive subscription before from Pega. Can you double-click on that? Is that more of a flexible like licensing term? Is that --

Question: Pinjalim Bora - JPMorgan - Analyst : So on that point then, maybe it's because of go-to -- go-live timing. But there is a delay between ACV growth on cloud and then revenue kind of at this point at least, right? Is that mainly because of the go-live timing? Or what does that --

Question: Pinjalim Bora - JPMorgan - Analyst : Let's pivot quickly to macro. It seems like you're not really seeing any negative macro impacts at this point. You said something like you're seeing high level, extremely high level of engagement with your customers. Maybe talk about those customer conversations. And, Alan, you have seen many cycles. What is your kind of gut feeling in this cycle in the second half?

Question: Pinjalim Bora - JPMorgan - Analyst : Yes. Let me see if anybody in the audience has questions. No. I completely understand your point, but federal exposure, have you disclosed that publicly?

Question: Pinjalim Bora - JPMorgan - Analyst : Yes, high-single digits. I want to ask you, Ken, Q1 performance on ACV has been tremendous. And if we look at the guidance, and you don't change guidance once you give it, I understand that. But it's somewhere around $165 million that you have to add to kind of hit that 12% number, right? And you have already, I think, Q1 was like a $74 million addition or something like that. So it does seem like there's a chance for you to exceed that number. But at the same time, when I look at the kind of the model, I think Q2 and Q3 looks like a little bit of a tougher comps for you. So maybe talk about that dynamic. How do you feel about the rest of the quarter? And should we expect growth to dip a bit and then maybe take up towards the end of the year?

Question: Pinjalim Bora - JPMorgan - Analyst : We have 20 seconds left. I would just want to ask you, cash flow has been tremendous for Pega. You've made a $200 million a quarter, I believe. Talk about is there more juice left on free cash flow? How should we think about kind of the room left in that metric? 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 13, 2025 / 8:30PM, PEGA.OQ - Pegasystems Inc at JPMorgan Global Technology, Media and Communications Conference

Question: Pinjalim Bora - JPMorgan - Analyst : That's a great position. Thank you so much for taking the time.