Pegasystems Inc Q2 2022 Earnings Call Transcript

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

Question: Rishi Nitya Jaluria - RBC Capital Markets, Research Division - Analyst : Maybe a few here to clarify and appreciate all the details, especially around FX and what you're seeing. Maybe I want to start by talking about macro and a 2-parter here. Number one, I would love to know what are you assuming, Ken, when you're talking about getting to 16% ACV growth exiting the year. Are you assuming macro stable with what you're seeing right now? Or are you assuming some level of deterioration further from what things you're seeing? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 27, 2022 / 9:00PM, PEGA.OQ - Q2 2022 Pegasystems Inc Earnings Call And then maybe the second part of that. There's obviously a macro impact numbers already of constant currency from Q1 to Q2 on the ACV side. Some of your large cap peers that have already kind of reported and talked about a...

Question: Rishi Nitya Jaluria - RBC Capital Markets, Research Division - Analyst : I apologize. Let me get off the headset. Okay. So yes, I was just -- maybe just starting with the macro side, right, what do you see -- what are you assuming in terms of further macro deterioration or is it going to be stable? And the second part, given the decel we've seen on the ACV side in constant currency as a result of macro that you've seen so far, can you maybe be a little bit more specific about how it's manifested itself be that in longer sales cycles, smaller ACV lens, pushed out deals, anything like that? And then I've got a follow-up.

Question: Rishi Nitya Jaluria - RBC Capital Markets, Research Division - Analyst : All right. Great. That's really helpful. And then on the cloud business. Maybe I wanted to drill specifically into cloud CRPO. So we saw that decelerate from 31% growth in Q1 to 14% in Q2 and even if we add back in 6 points of FX, that still gets us from a decel of 31% to 20%. Maybe can you walk us through what's going typically on cloud CRPO and maybe why we shouldn't be worried about that too much as a leading indicator of future cloud growth slowing down? And then one more follow-up, and I promise that's it.

Question: Rishi Nitya Jaluria - RBC Capital Markets, Research Division - Analyst : Got it. Got it. Helpful. And then last one, just on cloud gross margins. obviously been on a nice upward trajectory for the past really 2 years. But this is the first time we've seen a decline like this sequential in a meaningful way into Q2, right, going from 70% to a little bit up 7%. I guess, was that FX? Or were there other factors that led to cloud gross margin declining sequentially? And how should we think about that going forward?

Question: Steven Richard Koenig - SMBC Nikko Securities America, Inc., Research Division - Analyst : I'll stick to one question one follow-up here. I wanted to -- by the way, congratulate you on the Forrester evaluation. It sounds like a great validation of the technology leadership. So first question is on the financial side, a couple of moving parts here. And maybe it relates to your prior answer, but on Pega Cloud revenue, the sequential revenue growth in cloud was very light. And so I'm wondering if you can square that with the higher cloud mix. And then maybe also related to that, more broadly, RPO bookings were down pretty hard year-on-year. And I'm wondering like how much of that was a surprise in terms of weakness in new client commitments relative to your internal expectations? And how much of that was a lighter renewal schedule if you could just parse that out? And then just one follow-up for Alan.

Question: Steven Richard Koenig - SMBC Nikko Securities America, Inc., Research Division - Analyst : Okay. Okay. Sounds good. Maybe we'll follow up a little bit more on the call back. Alan, Pega Launchpad. So that's really interesting. I know you've been you've been working on a lot of the stuff for some time as part of the Phoenix initiative. I'm wondering if you could give us some color on -- what are kind of the milestones, both maybe technically and business-wise on establishing a vibrant third-party marketplace. Any thoughts on monetization, does Pega pricing need to become more transparent? Are there any early alpha customers or partners you can talk about? That concludes my questions.