Pegasystems Inc Q3 2024 Earnings Call Summary

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

Question: Steve Enders - Citi - Analyst : I guess maybe just to start, I want to ask on the momentum that you're seeing with Blueprint and maybe what impact is that beginning to have on either ACV, the acceleration we saw in ACV in the quarter or on the pipeline and what that looks like for Q4 and into '25.

Question: Steve Enders - Citi - Analyst : Okay. Got you. That's helpful. And then I guess maybe just on the ACV acceleration that you are seeing here for three quarters in a row now. But can you just maybe help us think about maybe what is helping to drive that acceleration? Like are there certain use cases or industries or geographies that are helping to support that? And I guess, secondarily, does this maybe change how you view that, I guess, initial 11% annual guide that you've had for ACV growth for the year?

Question: Jake Roberge - William Blair & Company - Analyst : And great to see ACV growth continue to accelerate. You all made the comment that GenAI Blueprint is expanding your TAM by bringing new applications into the scope of what you can address. Can you provide examples of that? And is there any thought of

Question: Jake Roberge - William Blair & Company - Analyst : Yes, that's great to hear. And then, Alan, it sounds like you've been on the road meeting with a lot of clients recently. Can you maybe just give us a pulse on the market. Is that excitement all around Blueprint? Are you starting to see potentially more budget dollars actually flow into AI and automation as we get into potentially a more normalized budget environment?

Question: Jake Roberge - William Blair & Company - Analyst : Yes. That's helpful. Well, congrats again on the great results.

Question: Rishi Jaluria - RBC Capital Markets - Analyst : And great to see continued momentum in the business. Maybe, Alan, I want to start with you. You talked about what you're doing on the agentic automation [objective] AI side. Can you help us understand maybe what separates Pega and what you're doing that is truly agentic AI, whether that's tech or use cases and maybe have it separated from some other large players that have been messaging around agentic AI themselves, including Salesforce with the recent launch of [Asian force]? Any color to help us really understand the differentiation there would be helpful. And then I've got a quick follow-up.

Question: Rishi Jaluria - RBC Capital Markets - Analyst : Wonderful. That's really helpful. And then maybe for both Alan and Ken. If we think about maybe the Q4 outlook, now that we're a little bit over through recent to the quarter, how should we be thinking about the potential for budget flush? Ken, I know you outlined it as a tough comp from a strong Q4 last year. I think there are rumblings that Q4 budget could be even stronger, especially as some of those kind of earmarked AI dollars are put to work before the year-end. Can you maybe walk us through how we should be thinking about the patent for Q4 budget flush from here?

Question: Pinjalim Bora - JPMorgan - Analyst : Congrats on the quarter. Alan, earlier in the year, I think there was an assumption that we might see a material uptick in the Blueprints created so far in the year kind of going live in Q3. What have you seen in terms of some of the Blueprints going live? And are those go lives starting to impact some of the cloud numbers at this point?

Question: Pinjalim Bora - JPMorgan - Analyst : Got it. Okay. One for Ken. Maintenance ACV has declined all three quarters this year, which makes sense given the cloud trend. But I'm trying to understand how much of that is just because of mix shift to new bookings being cloud versus kind of on-premise customers making a concerted effort to migrate to cloud. Is that migration piece starting to take hold? Is that going to be even bigger piece in 2025?

Question: Austin Cole - JMP Securities - Analyst : This is Austin Cole on for Pat Walravens. My question is about the reversal of the $2 billion verdict by the Virginia Corp appeals last July. I just wanted to understand -- like to the extent that you can comment, does that have any effect on unlocking sales cycles that might have been tied up with some of your larger clients? And are you seeing any impact from that?

Question: Daniel Ives - Wedbush Securities Inc, - Analyst : So are you seeing now from a partner perspective, just even changes were more coming to you in terms of looking to partner, especially as you kind of go into this next phase of cloud?

Question: Daniel Ives - Wedbush Securities Inc, - Analyst : And thanks because that's exactly what I was getting to, like does this feel like with the hyperscalers with Blueprint now? And just with the overall strategy relative to even -- when I think where you guys were a year ago? Is it just so much more strategic discussions now when you think even from a hyperscaler in terms of those discussions?

Question: Mark Schappel - Loop Capital Markets - Analyst : And nice job on the quarter. Ken, a question for you. In terms of momentum in the business this year, how much of that would you attribute to changes in the overall demand environment versus, say, the go-to-market changes that were made about a year or so ago? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 24, 2024 / 12:00PM, PEGA.OQ - Q3 2024 Pegasystems Inc Earnings Call

Question: Mark Schappel - Loop Capital Markets - Analyst : Great. And then as a follow-up, the September quarter is typically a strong federal period for the company. I was wondering if you could just talk about how the federal business performed this quarter. And maybe just a little bit on the impact of the new FedRAMP High what the impact that's having on your business?

Question: Blair Abernethy - Rosenblatt Securities - Analyst : Just a question on the product side for Blueprint. Alan, I'm just wondering, where do you see some of the features going for this -- for the Blueprint? What's the road map here? And is there a role or your -- the ever flow acquisition you made back in 2022, the process mining side of things? Just kind of wondering where you're going to take the product? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 24, 2024 / 12:00PM, PEGA.OQ - Q3 2024 Pegasystems Inc Earnings Call

Question: Blair Abernethy - Rosenblatt Securities - Analyst : Okay. Great. And just, Ken, just following on your question about vertical, a couple of responses about the verticals. Any verticals in the third quarter if you'd call out as saying, hey, these were particularly stronger versus others that might have lagged your expectations?

Question: Patrick Walravens - JMP Securities - Analyst : I was just wondering, Alan, how has the competitive environment shifted for you guys over the last year or two with now that you have Blueprint and with everything that's going on in AI? And maybe in particular, when you compete against Salesforce, when do you win? And when do they win?