The following is excerpted from the question-and-answer section of the transcript.
(Questions from industry analysts are provided in full, but answers are omitted - download the transcript to see the full question-and-answer session)
Question: Pinjalim Bora - JPMorgan Chase & Co, Research Division - Analyst
: Can I ask you about the term out performance? What drove that was federal part of it or anything else to kind of call out? Secondly,
on cloud ACV growth, that seems to continue to decelerate. And I hear your point on overall ACV growth being more important. But
as you launch Infinity '23, which adds kind of a lot of GenAI capabilities on the cloud side, I believe, should we expect cloud ACV
growth to kind of trough at some point going forward?
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OCTOBER 26, 2023 / 12:00PM, PEGA.OQ - Q3 2023 Pegasystems Inc Earnings Call
Question: Pinjalim Bora - JPMorgan Chase & Co, Research Division - Analyst
: Yes, understood. Just to be clear, for this quarter in term, were there any very large deals that swung kind of the number towards
the positivity 1 or 2 large deals or just...
Question: Jacob Roberge - William Blair & Company L.L.C., Research Division - Analyst
: Alan, when you're talking to customers, where the dollars per AI spend coming from? Are they coming from existing IT budgets and
maybe crowding out other areas of spend? Are you seeing customers create net new budget dollars and potentially actually expand
their overall IT spend to account for those investments?
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OCTOBER 26, 2023 / 12:00PM, PEGA.OQ - Q3 2023 Pegasystems Inc Earnings Call
Question: Jacob Roberge - William Blair & Company L.L.C., Research Division - Analyst
: Very helpful. Then Ken, do you still feel Pega is on track to complete the subscription transition this year? And then I know you put
out those targets of being a Rule of 40 business as you exit 2024. Given constant currency ACV growth ticked down to 10% this
quarter, how should we think about the balance between growth and margin as you look to reach those targets?
Question: Rishi Nitya Jaluria - RBC Capital Markets, Research Division - Analyst
: Maybe I want to go back to better understanding the macro impact. And more specifically, think about what are customers and
partners saying about large-scale digital transformations because as we've been hearing from partners that those are things that a
lot of customers might be dragging their feet on given the uncertain macro. But simultaneously, I'd have to imagine as companies
are contemplating their generative AI strategy, digital transformation to enable that and integrate workflows becomes more and
more important. So maybe can you help us understand what you're seeing in terms of those and kind of weighing the puts and
takes about both the near-term macro as well as how customers are kind of trying to position themselves long term to embrace
generative AI and your role in enabling that? And then I've got a quick follow-up.
Question: Rishi Nitya Jaluria - RBC Capital Markets, Research Division - Analyst
: Yes, absolutely. Very helpful. And then, Ken, just a follow-up for you on the gross margin side. So you continue to show a pretty
impressive cloud gross margin expansion. How should we be thinking about terminal gross margins on the cloud side, especially
as you do have a little bit of multi-tenancy around the core, you are embracing Kubernetes. Is this something that over time could
become an 80% cloud gross margin business? Or is there anything structure that might be holding you back from that?
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