Pegasystems Inc Q4 2021 Earnings Call Summary

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

Question: Rishi Nitya Jaluria - RBC Capital Markets, Research Division - Analyst : Nice to see a little bit of acceleration in the business, and I appreciate the shout out for our recent sales survey. I wanted to maybe drill down a little bit more into the guidance. So great that you're guiding for accelerating revenue growth and margin expansion, which is obviously a rare combination in software land. So really great to see that on the table. But 2 things I wanted to drill into that. First is you're guiding to about 300 to 400 basis points of operating margin expansion. We -- there's obviously puts and takes with the cloud transition and the margin expansion side. But can you maybe let us know how should we be thinking about the prior targets you laid on the table for hitting the Rule of 40, let's call it, in 2023. Is that still on the table? Because that would be assuming, I think, some pretty dramatic margin expansion then in 2023. And then the ACV guidance really appreciate that. That will definitely help us all build our model. Just anything that you can tell us in terms of what sort of FX assumptions are baked into that? And then I've got a follow-up.

Question: Rishi Nitya Jaluria - RBC Capital Markets, Research Division - Analyst : Got it. That's helpful. I appreciate that. And then just on the Pega Cloud side specifically, look, we all understand the Cloud Choice, and that's obviously a major competitive advantage for you. But it does look like there's a bit of a slog on, especially on the cloud revenue side or even cloud CRPO. Can you maybe just let us know what's going on? Any kind of factors that make that number a little wonky in terms of rev rec? And how should we be thinking about the potential for Pega Cloud growth to accelerate, maybe, let's call it, next year 2023?

Question: Rishi Nitya Jaluria - RBC Capital Markets, Research Division - Analyst : Got it. I totally understand. And last one for me, and I'll jump back into the queue. Cloud gross margins, obviously, they've improved dramatically since you started on this cloud transition. I know in the past, you've talked about getting a more SaaS-like gross margins, call it, 70% plus. And understandably, the single-tenant architecture is always going to be a little bit of a drag there. But it's been relatively flat throughout the course of 2021. How should we be thinking about the potential for cloud gross margin expansion from here?

Question: Steven Richard Koenig - SMBC Nikko Securities America, Inc., Research Division - Analyst : Great. So just building on Steve's question on the organization of Hayden's departure. And then I've got one follow-up. It's a little bit more on the financial side. Are you all looking to replace his function that brought together a lot of the geo-focused activities with a single role or to go back to more of a geography-focused organization and functionally-focused organizations within the

Question: Steven Richard Koenig - SMBC Nikko Securities America, Inc., Research Division - Analyst : Great. And then if I have a chance to give Ken a follow-up here. Ken, can you explain your commentary on how the heavy term activity negatively impacted rev rec? And give us any color you can on the cloud mix of bookings. And then I'll just throw this out there, total cloud bookings as we compute from the change in backlog in cloud revenue, it grew a whopping like 67%. It was actually really big. So where there's some big cloud longer-term cloud contracts out there. So -- and that's it.

Question: Pinjalim Bora - JPMorgan Chase & Co, Research Division - Analyst : I wanted to ask about the sales organization as well. I mean as you head into the new year now with the leadership change, is the plan already in motion? Have you made any kind of tweaks into the sales organization to drive rep focus at this point? And then given the tight labor market, I mean, we're you're able to end the year where you wanted to be in terms of sales capacity? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 16, 2022 / 10:00PM, PEGA.OQ - Q4 2021 Pegasystems Inc Earnings Call

Question: Pinjalim Bora - JPMorgan Chase & Co, Research Division - Analyst : Got it. One follow-up on the ACV guidance and thank you for providing that. I was -- it's more of a quantification, I guess, but ACV growth of 20% to 22%, obviously, it's kind of a continuation of what you're doing, but it seems like it's tapped below the IDC number that you highlighted of 25%, right? So what -- my question is what takes you there, right? What are the levels that takes you to that 25% number or higher? And can we get there in the next couple of years?