Pegasystems Inc Q4 2024 Earnings Call Summary

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

Question: Rishi Jaluria - RBC - Analyst : Oh wonderful, thanks so much for taking my questions. Nice to see continued momentum in the business. I want to maybe drill a little bit into the investments you're making in increasing sales coverage. Can you maybe talk about some of the near-term and longer-term priorities? And maybe related to that, I know in the past, you had a couple of full starts that you really wanted to go down the net new logo acquisition game. Given the success that you're having with Blueprint and how that can reduce friction to creating workflows, creative cases, how should we be thinking about using Blueprint now as a front door for some of these net new opportunities that you haven't been able to penetrate in the past? And then I've got a quick follow-up.

Question: Rishi Jaluria - RBC - Analyst : Yes. No, that's super helpful. Really appreciate the color, (multiple speakers). 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 13, 2025 / 1:00PM, PEGA.OQ - Q4 2024 Pegasystems Inc Earnings Call

Question: Rishi Jaluria - RBC - Analyst : Yes. No, got it. That's really helpful. And then maybe I just want to kind of think about the Rule of 40 mindste that you've had over the past several years. You talked about hitting that now in 2024. Your guide for 2025 implies you'll be at or around Rule of 40. Just how should we be thinking about, I guess, number one, the durability of kind of maintaining this balance Rule of 40? And number two, is that kind of the end state? Or is there potential to further optimize the model and maybe even potentially accelerate growth from here and actually exceed that as kind of a North Star? Thanks.

Question: Rishi Jaluria - RBC - Analyst : Fantastic. Thank you so much, guys.

Question: Steve Enders - Citi - Analyst : Okay, great, thanks for taking the the questions this morning. I guess maybe just to start, I do want to ask on just linearity of ACV and what's going on there. I mean, I just if I'm looking at the 4Q number, I think it's the lightest 4Q since like 2018 or something like that, if I'm adjusting for FX in the right way here. But yes, I guess, can we just give a little bit more, I guess, clarity on kind of what you're seeing in deal environment? And maybe like did deals push into Q1? Or just how we should think about what that looks like or the implications of that?

Question: Steve Enders - Citi - Analyst : Okay. Great. That's helpful context. And then I guess I wanted to ask on some of the legacy replacement opportunity. And I think highlighting some of the BPM stuff and I think the past couple of quarters talking about some of the legacy replacement opportunities here with Blueprint. Can you just help us think about like what that looks like or the use cases that you can maybe go after that would be different or would be accelerated from this? And maybe how you kind of see that playing out here over the next couple of years? 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 13, 2025 / 1:00PM, PEGA.OQ - Q4 2024 Pegasystems Inc Earnings Call

Question: Steve Enders - Citi - Analyst : Okay, great. No that's great context. So I appreciate you taking the questions this morning.

Question: Pinjalim Bora - JPMorgan - Analyst : Oh great, thanks for taking the questions guys. Alan, I want to ask you, what are you hearing from customers in terms of applications created through Blueprint going live? Trying to understand if the pace of application go-lives has picked up and if it's driving up kind of the aggregate consumption of the Pega platform in any material with? 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 13, 2025 / 1:00PM, PEGA.OQ - Q4 2024 Pegasystems Inc Earnings Call

Question: Pinjalim Bora - JPMorgan - Analyst : Yes. Understood. Definitely, the excitement is probably here. One question for you, Ken, the 12% ACV growth guide. I think you said something like material contribution from cloud. I'm trying to think how should we think about maintenance and term in that kind of mix? Like obviously, maintenance seems like the decline has kind of picked up a little bit. I think last time you said you might see a steeper decline in 2025 for maintenance. And then [Tom], should we expect that to start to decline at some point?

Question: Pinjalim Bora - JPMorgan - Analyst : Understood, thank you.

Question: Jake Roberge - William Blair - Analyst : Yeah, thanks for taking the questions. Really helpful color on the hundreds of millions of pipeline that you have right now for Blueprint, but is there any way to think about the financial impact of Blueprint thus far? Like is there a way to quantify the tailwind that's caused for ACV growth or how many Blueprint deals you've closed already? Just trying to understand how it impacted 2024 thus far.

Question: Jake Roberge - William Blair - Analyst : Okay. Really helpful. And then as you're starting to see more and more of these customers migrate to Pega Cloud, can you help us understand what type of price uplift you've been able to see over the past year or so?

Question: Marc Schappel - Loop Capital Markets - Analyst : Hi, thank you for taking my question. Ken, a question for you. In your prepared remarks, I believe you mentioned that Pega Cloud gross margins are expected to be relatively flat in the coming year. And I was wondering if you could just walk through some of the puts and takes around gross, Pega Cloud gross margins? I would have expected maybe some leverage as Pega Cloud scales here.

Question: Marc Schappel - Loop Capital Markets - Analyst : That's helpful. Thanks. And then as a follow-up, one for you, Alan. I realize it's still early days for Blueprint here. But are you seeing any patterns emerge with, say, the types of Blueprints that customers are actually putting into production like in certain industries or use cases?

Question: Marc Schappel - Loop Capital Markets - Analyst : Thank you.

Question: Devin Au - KeyBanc Capital Markets - Analyst : Thank you. Good morning. Thanks for squeezing me in here. I wanted to, first off, just want to get some more color on the fourth quarter performance. I know you kind of mentioned that (inaudible) ACV has kind of come in as expected. But curious if you've seen any sort of deals closed in the quarter as a result of maybe year-end budget flush or as a result of budget kind of flow through post election in the US here? Just any color you can provide?

Question: Devin Au - KeyBanc Capital Markets - Analyst : Got it. No, that's great context. And then just one more for me. I know you kind of talked about, you're really well positioned globally and the federal public sector business. Maybe if you could just kind of like kind of size it and kind of look at just the US federal business, kind of how that has been trending? And just given some of the headlines that we've seen from the administration looking to drive efficiencies across different multiple agencies. Have you seen any sort of uptick in top of funnel activity or pipeline generation there? Any color you can provide would be appreciated. Thank you.

Question: Devin Au - KeyBanc Capital Markets - Analyst : Thank you, that's very helpful cplor.