PEGA - Earnings call transcript Q1 2020

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Operator

Good day everyone and welcome to the Pegasystems' first quarter 2020 earnings conference call. Today's conference is being recorded.

At this time, I would like to turn the conference over to Ken Stillwell, CFO. Please go ahead, sir.

Ken Stillwell

Thank you. gentlemen to and earnings QX ladies call. evening and Pegasystems' welcome XXXX Good

I or read usually, the assumptions. expect, will, or based expressions, be intends variations like statement. risks statement forecasts, other we guidance, of future should, uncertainties. the words speak would Before begin, of estimate, Reform Litigation similar expectations Because to plan, forward-looking statement, such defined contained as projects, Act was to, likely with believe, this Private various deal date and would, events, which statements, Securities and forward-looking The Certain and statements on in strategy, our intend, current presentation may, as are may words identify target, are construed XXXX. of they as to this in such anticipate, statements made only and that Harbor Safe subject could,

place achieved. assurances on are statements such reliance and recent there XX, to matters the XXXX fiscal company's are contained on be Commission, Securities filings Investors and materially Form and QX such filing for expressed and results company's to the statements earnings year differ forward-looking no differ from with its Exchange undue beyond Factors could announcing release the press company's the Annual year the results in contained XXXX including not will Report cause are statements cautioned expectations. other with for Actual could in current the forward-looking from company's XX-K ended December that and the in the those in XXXX its materially SEC. that

change, we publicly not as a cause specifically any or undertake do applicable required future to result the may by events, as otherwise. events whether except subsequent obligation information, statements, new of our revise and disclaim view or forward-looking update to Although law,

I Founder Pegasystems. Trefler, will and call over turn And with of CEO that, the to Alan

Alan Trefler

especially QX, results I with Ken. pleased am given Thank the our for you pandemic.

a indicative and are strategy of accelerated results recurring model. the of success our around to growth Our shift our continuing

the by XX% for cloud of being commitments ACV, future than our total and revenue QX best our were cloud. Our Pega indicator them of the XX% year-over-year of XX% with quarter growth, more increased

what Now, it's the acknowledging focus the includes around the in unprecedented earnings on talk we people This as care lives of partners. about have are of they QX them our to laser staff, impossible need. without and of our taking And we and they making circumstances business clients, well the effect billions world. on are sure

change And side. on it's just for us, stronger through have our always and out the tagline, build a in navigated come DNA. many other isn't times For we challenging have before

change are Our and we both. driving software corporate it's sometimes that's it's about all now. and sometimes culture and sometimes change and right seeing about are change what that's And accommodating about

simply On adjusting the and calls businesses on policies those to government with work. profound and avalanches new workforce, client remote to how service the side, crisis existing customer to toll support is working figuring new a triage of out levying

with And solve nonstop challenges. immediate pressing of catalyst time largest future successful the while senior who different very businesses rethink. acute and mode need they a that most executives It's the that's thinking understand massive and I near are And calls XXXX to and the next I video mobilizing for are beyond most brands. stronger most a and of and focused have build be been large on their on is would to many exclusively expected beyond. number now, also in this world's have

back APAC, up closed strong a who need that and For engagement opens competitive to when large despite essentially keep airline a service being example, customers. a approach in customer win they deal travel with closed customer understand we down in QX for will them

are responding long term new them enabling transformation can with immediate to initiative. while help clients also business support crisis their solutions We with that their

are we record cases, in many in doing time. it And

For the impact example, designed quick COVID-XX These debt created recently industry-specific building of digital deliver are establishing become while to more could now solutions organizations their efforts. on to results we adapt a transformation XX to that quickly but right solutions later. help portfolio are fixes high-impact than of technical

applications in and business templates the loan that For with huge banks example, reflect other lending prebuilt comes crisis can developed guidelines U.K. small programs for to U.S. reference They be customized help COVID-XX configured can emergency easily to application. crisis deal orchestrate for rules. a just with days influx we loan, It and new and of be countries.

press five we so government medium-sized improve release faster and the out and developed provide just to small relief on help in for businesses days, an Bavarian were proud admin them COVID-XX the reduce Pega. by out and to affected put They a processing application and they it mentioning strain rolled themselves staff that time. And the of

of in than engaged them able up streamline more for a of XXX,XXX with one to U.S. April, the already legacy early less floods mobile support weeks, coming has and in with help chatbot system applications stand new process to additional government the than a their And we we into that collected three address employment state and the were to applications. friendly system system

volunteers manage them to thinking them to clients Inspired forward when XX out companies, ago, to make U.S. many by just that healthcare of in is broadly an and private employees whose informed staffing we track employees be keep in a decisions will requirements free more scheduling several to scheduling developed we one its hours population. and app help patient businesses the that help and exposure enabling work, them to better developed helped XXX,XXX weeks application manage COVID-XX the [indiscernible] support our and and employee safe and open. And largest of sector, call COVID-XX all to

application. implementing opened new seen of and with partners in It free commercial lot are up with and this a have clients opportunities We interest clients the many. discussions about

one the which we And Service, is the not related proud of, Revenue Internal actually very but are closed April. in to pandemic,

case We power to their that the deep by new competitive to Pega share review are was management. enterprise IRS excited a selected after

environment. selected As stated to a enhance solution Pega their configurable their secure in entire operational The to will and ability processing because costs in taxpayer end-to-end issues of IRS highly the provide them. services efficiency, and resolve a our and and provide procurement, authorized of flexible range integrated improve streamline ability with quickly case was see solution employees communications the associated to work

as we decisions what and Now, nearly We will while through remote make needs workforce. to crisis. the about immediate some making ourselves of with our having pandemic adjust we we are pivot XXX% a same learning us company smart as to course related had issues to dealing to business, the of a clients have stronger are of a get ensuring

technology a this for As us meant to companies, disruption. minimum

tools We have resiliency, how innovated nonetheless, every adapted so impressed in already VPNs proud on. and across entire meetings innovation our with am had I workforces place, But just with passion global for incredible not working and has the but in function. field, and team

For thinking example, walkthrough quickly our and have virtual sales calls, and running client success design sales in become workshop. teams operational adept

clients. we business as continue result, been new to as existing and close As our well serve to a prospect able have

with of team onboard are immediately program employees has recruit, all in making people hire virtual consistent new our orientation a productive. they through and laptops continue and handling ways quickly the Our could that shifted team shipping and to so meetings

business space in and We positions have to hire appropriate huge with continuing productivity. key our for

choice accelerate We this join exciting to a tremendous for talents market yet who are It's positive help stable people in to looking in lookout always such a of employer on the can we our real seeing and are Pega. success. be interest

bring and we President corporate Engagement, will Leon the unify Strategy and of This June To Kra, and to of and Success of strategy, of Head Tom Marketing at Business Success Global Jeff talented of this new CMO, Client teams Doug marketing Client today be Go-To-Market Taylor, Client effective Head position Pega's point, X, Head Americas. that Trefler, a Hayden XXXX. as that Head and position together announced be the will Operations go-to-market Stafford leadership company of role Libretto, a International, and in will Microsoft function reporting joining me from

Hayden last and And quarter IBM, and success Dynamics over by brings has XX% MS ERP grown robust a Salesforce at Ernst products the Dynamics tremendous every the and since has HE Microsoft. of grown XXX% over years, experience record Service and over by six Customer XXXX. & Young, Cloud

are the our excited at he of potential an We has that to and acceleration did help growth he lead Microsoft. as

to of the really event team most virtual has take to Pega format add and new advantage environment. working of shifted a elements important events our virtual And has course our to

June hour X.X marquee a weeks conference Our a Siemens up summit and together terrific free, first Pega an came from customer virtual virtual live clients and PegaWorld others and registered had solutions just event and of with in now Q&A. be keynotes is demos our on to and is hub few open shaping innovation X more and and all, Aflac with than X,XXX XX to engagement

virtual to other make who we and attendee. home decided more tighter, the rethink taking online complete at Unlike it them a their seem an requires companies and transposing virtual physical more to simply format, for event that be worthwhile format engaging to

postponing to hope I be will year analyst and event. you meeting in our watch We in later nonetheless the but to will tune PegaWorld the

create generation to Phoenix, help platform. the are new Project we future already positioning core with finally, our And architecture clients for our a

will capabilities more move As than be ever. the expect pertinent those I past we crisis,

we I business that's for saying adapt going will come that will this we Like want to end us the how profound and goods, see that something stabilizes. change. The and global how build and too move they be changes And have clients, And as deliver people there no a to it. how to bring in ourselves help after back crisis one to commute, crisis and our by services drive, our they supplies, how all before, engage for with work, for clients. their transact, they going persist clients. long both will procure are they are

be. will transformation need digital will to be environment. to mandate think require they adaptable go-to-market changing and changes design will require they than exceptional Organizations had a anticipate an better suppliers Organizations and that and scalable a to will we we resiliency from which Digital have able in become faster, architecture, to future and and provide. put experiences resilient business those understand quickly channels. terrifically leaner. truly can thought to business We are place new adapt customer organization's to will benefit future-proof more

want more with intense low returns sense The urgency provide. there and forcing organizations crisis innovate driven, will something is own much an IT model the risk an technology cloud. and this to to switch and will code to centers investments, themselves your with is suited everything collaborate their build as But to be mean greater to not the realize will the Organizations on involved the flexibility pressure and get current to will we of believe want needed. and move data on managing choice they use organizations will of cloud accelerating

But and and profound challenge been right, some Cloud others. already stronger turn of the believe reasons the become for in Pega and we these resiliency the and by always I predict have optimist more loss will the even a why future. to differentiator will to will important. an continue for emerge crisis, Long We a spirit. great and and ideas. more human know And and term, turned clients real very in I past we have attributes new us, there all the are Pega than choice, in of nature adaptability with to from for is

So crisis. in the a especially off start considering summary, solid XXXX, current we in are to

stronger impact and see us good effects but will are position in our clients the we are we through a for out the from when weather pandemic, to see crisis. and We come the opportunity to

clients and them We needs finding the short of are are to adjusting both receptive. and our we term long term

now color the our Stillwell. turn results, you to Thank And Ken. about over to provide financial CFO, Ken will on I more this

Ken Stillwell

spread challenging Alan. priority clients number to comments The start you want has of our employees, Thank echoing and I global COVID-XX of right care that more disrupted billions impact your recognize the partners. our much of about opening sure now the reality one by we our taking is of am people and on environment. know the you I economic to want business. lives of of COVID-XX

XX% remotely. and to disruption with QX, Overall, almost might all meaningful are Prior XX% the our am our I pandemic, responded. I our to has remotely to financial worked business pleased add. regularly today, employees In we of see results. did employees working of And not any how our effectively,

Our acquire engage sales customers. team and continues to

improve support enhance customer and and teams our to Our provide our cloud and level to continues clients partners. support continue development high team to of products. And our

in our be confident transformation. Our in I to term and leader business ability long to deliver resilient strategy is remain digital on the the

this shed way. on why light feel I me some Let

We have lucky few choose you the things the years way, by environment. current the to that last smart, us some well, these decisions over that, in pretty well but made timing could or significant call position

our First, to several we transition business ago. a years started recurring

be which a high recurring recurring As very retention rates. most recurring. is now supported is business it's ago. revenue about several specific, result, years XX% of our revenue today To was net our XX% about And our by business

which If less a is include lower That's you reliant have revenue with is from should new because less and customer means a vulnerable higher its short to our seeing billings customer quarterly recurring quarterly visibility of XXXX business like to about and term consulting and Pega disruptions recurring bookings on target. largely churn proportion to plan. much a This situations revenue like predictable, into our revenue, are ours billings highly revenue revenue XX% of we achieve the business that's shift a one now. be we

we to transformation million an one to us to conversion the of time the decided Investor of offering a oversubscribed with decisions. number a it's what's demand to when we this $XXX tremendous for make No was February liquidity long per $XXX and did increase we significant going decided by a offering for be million to knows demand. happen navigate important term transaction effective Second, size share. flexibility successfully exactly satisfy in of and the strength provides the but the and resulted The debt at time market in raise almost financial to well-capitalized. economics XXXX. offering the right And cash the to convertible $XXX premium an available solutions digital through

Third, some airlines, industries our world's exposed and core clients services, as such than directly remember such impact that restaurants government are as of telecommunications pandemic insurance, the less the our healthcare, are and short term and short well most core financial this in hotels, Also, have to when retail. are strong verticals profiles term near ones often well small businesses compared respected financial enterprises to times, and brands. to known larger unfortunately, largest sized shocks. and the most struggle withstand challenging In medium the economic term that that of

primarily exposure to Given the businesses. large of a strength Simply number business have firm federal as serve, doesn't and underlying past core the of large through government level period. small enterprise revenue clients of our attribute not and score a we also our sized enterprise base difficult same helped that of the sells helped medium economic business. and customer us our those weather It's is current in only but times in periods the us stated, the

features to transformation clients. digital critical benefits our are product our that Finally, portfolio unique

clients Our customers. their customer engagement retain suite our helps

helps Our costs intelligent improving business software effectiveness. includes which reduce by automation industry-leading suite efficiency process our management and companies

the during our many are success. Our critical of firm's largest world's core the proving to to to Pega grow clients provides continue value which strategic those proposition past to ongoing is help important In and other words, downturns. applications Pega companies,

clients our supporting are of treating day. and people are healthcare right nurses doctors the every now many their virus fighting who example, in For

the application Given fact mission and the would be in required replace critical most effort and the cases. nature our cost, our to of prohibitive time that solutions

Our gross very customer strong. continue rates to retention be

of that these we result resilient. business decisions, very built a a and is significant As other

Especially a XXXX. will for let's regarding basis. of model, late sells for little start turn moving a sold basis who perpetual on our those starting subscription in model. software mostly a results to are of from primarily context on that larger our QX a to Pega's the the company Back to So license business more Pega, new company evolution XXXX, business we I you now that much providing purposefully financial of a process by its shifted

cash Now midpoint we our approach you transition see XXXX. that flow of the are would transition, we of end improve past cloud the the expect as to in

progress the as are obligation, of During to remaining to most or also impact our and measure performance backlog. execution referred annual important and ACV contract RPO, two cloud transition, metrics tracking we have value our strategic the

recurring and ACV. and talk cloud term the the cloud Let annualized is cloud our first commitments clients maintenance. of license client me from ACV spend sum for Pega Total about representing

leading ACV by XX% with growth entered end future at XXXX. best pleased of total in ACV our the XX% period. on it's ACV because be important to reason to basis. the growth a million million slightly target total execution reflecting Another report $XXX revenue ACV total in our the At growth is continues a the XXXX. is least most our million, indicator QX successful of that We for of increasing increasing important metric, year ACV grew from in so our QX by year-over-year growth. And am I for ACV constant to cloud $XXX expectations up million XX%, was $XXX QX, Pega currency strategy. same from $XXX the exceeded

backlog during from March March to by period. XX, $XXX which our goes cloud Pega the largest cash quarterly These into portion of to significant XX% which as where portion flow benefit million period XXXX And the in Historically, turn let's A our a more reported, also variability the our revenue million XX, from. million the to days, period called is now are XXXX. of bookings will reflects recorded as taken providing $XXX our revenue So from in our of not a total another same future. come increased XX% most cloud robust increased is causing transition. metric. in future of visibility important revenue results. the backlog of as backlog much of current $XXX cloud, bookings commitments revenue performance as backlog $XXX were of Backlog client another to stream as and million remaining predictable backlog, obligation, by in creating of

backlog revenue XX% this million of We year XXXX. XX, less or expect be $XXX recognized about in to or of one as as March

an Total growth $XXX Turning total we from by XX% transition. XX% was revenue QX million have of since cloud quarter fastest revenue revenue total in to for in of revenue. was increase $XXX million, The the the cloud XX% XXXX revenue. we increase driven in XXXX increase QX seen started

but We our XXXX, For XX% XX% in client license. total, new cloud mix of of perpetual QX than more Pega client In X% client was with about our either commitment cloud. expected consistent is slightly represent or performance that. approximately Pega commitments and had were half to cloud in new actually fairly Pega approximately our were

For transition the earlier and months a and March are GAAP available to are reported section income GAAP year the non-GAAP Non-GAAP share Much provided Investor reconciliation ended we three in XX, issued measures today those a net of is net like Relations and our that we non-GAAP ago. the per $X.XX net XXXX, release press share of results on of impacted are both financial in the also tables the loss full was cloud our through. $X.XX per by a website. going to compared revenue, income

few of So year and the cash three ago. of months with in we In buybacks of increase comprised XX, the million quarter Largely of end over period about dividend, ended an the shareholders net XX% one we debt $XX other Pega settlements XXXX, securities worldwide, total February, completed convertible finished returned to because ended marketable from with March the employees now at XXXX. just equity. X,XXX We and of the a turn QX details. let's $XXX offering to million of

year for outlook the our XXXX. full to Turning

you we guidance year quarterly provide environment for know, uncertainty guidance there all that acknowledge businesses. this in the We or increased is year. update don't As full during

well to is business positioned succeed. Our

doing situation have Let to some monitor, some what prepare you color on we and give respond me share been and perspective. to

events. and over COVID-XX who success, the is meets the Founder of evolving our team coming times really the times in monitor quickly week to days long from several quarters Pega the having who CEO thinks a business but term years. only on broad and committed responding to effects is Our a Pega's these, next In and leadership about also like to XX is not benefiting

years the founding seen been disruptive in said of XXXX. events Pega me, since over its to Alan has As and he really has lots resilient

While hard all to our is know we impact reported not meaningful it's have results a up. to-date, how this end to going financial to

demand and not long We solutions transformation but the in only seen intelligent COVID-XX in an and clients response transform digital the our because very the ability automation the outpouring new term have to term. critical to of medium a world, of are post

of We seen some have also spending their change priorities. clients

for Some projects later have future negatively some canceled. could which Buying results decisions in booking periods. cases been will delayed out in year-over-year impact or be pushed period

So rates. we are watching conversion pipeline closely

as economic We some natural delay given some the pressure associated in environment. some revenue year could spending efficiency of if travel offset expenses the hiring such and the reduction experience thoughtful we crisis with cost through COVID the decisions the expect to uncertain companies

additional We expect as our terms their way will of this that some they downturn. through with work clients flexibility payment need

to expect future new enterprise to it's We be acquire clients logos likely are important most large spend in this with going that their difficult vendors. to concentrate more environment as

from However, in commitments client our year, two-thirds come new more a than of our existing clients. with expanding typical

drive reliant growth a That are less by have XX% at penetrated companies. customers many world's opportunity landing got ACV base means bookings It's the important that selling which Pega our into largest large of we is growth. solid largest to to we to backlog new and means clients, in also that installed drive out our our even not point on

As active Alan Pega's far believe mentioned, we remotely. of professional by that engagements largely XX% services all working so unaffected are

large to and can like our others do partners remotely. XX% system that integrator they work We have of their from heard that and also XX% Infosys believe Accenture about

from can However, delays learn negatively professional those these believe be services that in Despite if occur. may impact challenges, project there could history. impacts we revenue I recognition some cases,

place customers economic be is, for accelerant costs last it times. revenue was streamline an efforts leaders, period? that the solutions key In was top saw is might in about XXXX? performed grow some XXXX, which major actually Pega clients our and automate And of and will you other with increase to transformation we match that digital the if a great take our curious this reason, words, recession. economic of to able of difficult during reduce adoption recession same the during priority and cut disruptions be One companies to Pega operations helped cost XXXX thing they the could processes. how challenges during One especially Why solutions the

conclusion, believe I new and not our automate of they resiliency us the growing acquiring flexibility to in to when are sell trying in I In and business business. the but optimize believe clients also customers, are as only for and processes in their

largely As proposition customers more I to compelling, our revenue leader deliver be our in transformation. strong, remain I explained long to term value is strategy are the earlier, digital is balance and reasons on the sheet stable than are in recurring, confident now These our our ability our is key our why ever.

the opening mentioned Tuesday, as PegaWorld, our Before as earlier. annual Alan an to event, be questions, virtual you I which to interactive will call customer December invite event wanted held on X

for event pega.com. at the register can free You

hold the not have to June. Day We Investor in decided

August will We and in are those looking finalize other at more rescheduling details plants. we provide we dates as

last, just think work to congratulate be joining. is to wanted I process And and with he and can't to I number Hayden of for talked Pega through Stafford I just terrific Hayden have on to going him. times the wait a

Operator, please open for questions. call

Operator

Instructions]. [Operator

Wedbush from Securities. Koenig our take Steve with first question will We

Steve Koenig

Hi gentlemen. on me for congrats and Thanks the quarter. in fitting

bookings I it, my works even you substantially think that about color. transition approach you made some to to additional though am I maybe thinking achievement And would looking I sales can color the with questions, I ACV I and guys have to of give pace the you avoid and and how right to new But recurring then guys me stay about pretty any the I beyond grow but that if expect that And hiring am the you year. guessing on in year? your planning been layer my how know way? for guys ACV now and enough the how that have following in are Nobody can still that, So is guess it. the thinking guidance it are your consistent you when line thinking about given cloud, I like you down how over said, I can As as revenue nicely adjust layer predict you could you your for but were on quarters for plan quotas you you are pandemic, the internally? guys year-on-year.

there So any appreciated. color much would be

Ken Stillwell

will take to I an a impact, are Ken. impact is this that. will stab There some but at be be when going things Steve, Hi there's the immediate.

For example, services engagements to an professional immediate that impact if XXXX. down, have will in scale revenue

an in the So it there impact, example something revenue current impact is is, that that if would be will any period. of

only of we in although licenses, X% naturally Perpetual incremental have new convert our commitments perpetual revenue. into perpetual QX,

are have deals may much if impact like are revenue booking a term But client cloud any revenue in cloud, as world. right, impact New about the that recurring period. in for example, the you you current our think wouldn't that licenses, have majority of bookings being Pega

you if were reduction be be bookings, in softness there did correlation as even a to if So we like perpetual there revenue wouldn't have would a direct business.

the about right now. of professional become extent is thinking also that there some risk that a execute is of any of that which the couldn't billable amount to does So you right? aren't absolutely small that are of real services component on revenue, traveling and that, short people travel you a professional term services, maybe work naturally And aspect, some

there are things revenue. real are in that So risks

quarters even an a to to business, in the immediate years But recurring if think the booking over impact stay or you opposed trend within year. you with multiple as about tends

insulate recurring us that as So business. a does somewhat

So hopefully helps. that

Steven Koenig

your still to term you if which still if to Maybe I were which digits on long the solid, extent your If thinking bookings scenario, it Is congrats as do can of would numbers only ACV? too. help half is was that year, and impacted, It if QX. guys could bookings let's they what could down does. down have your follow-up be I new XX%, were for that gets And significantly, that solid be for you but about to of ask and would financial one a bookings I target expansion impact about would were grow? this follow-up, helpful, potentially what that say, last? an grow And it example, the even ACV possible and they were, even and you it presume double if think is, the all here, that's those on us ACV, extreme again

Ken Stillwell

Thanks Steve.

that one. So let take me

So I math, would book be do theoretically, in we if ACV year, a simple just which am going flat. a $X is to our didn't

had we close. we very XXX% just but that are Let's retention, assume which have retention, XXX% we don't

any bookings help total will So number. the to ACV naturally, grow

with So see have that stay a in could having ACV but growth. of level would year a a grow is helps. per certainly, that you target. can to could But we there if withstand shortfall reasonable significant bookings sensitivity percent, at and that that above long But some bookings still in you haircut bookings, a was suggest ACV reduction term not I respectable our still XX%

Alan Trefler

will I jump a second. in for

I think very clients it's engagement reassuring. fair intensity with been of to say the the and continuation that have the

are engaging. taking spending that are meetings. are us. They time We with finding are customers They

of that to of and are has people helping catastrophic making We that we work so of be expecting more. in people decline, home the because where the am business an are flow any work. automation which people and and particularly not the organization work disaggregated, manage efficient, helping out more personally is from I going And sort of their become spread important

actually to engage. me customers surprising still prospects willing So that it's are or not to

SMB a stable Ken's customers the different have the being characterization than we of our as ones, about customers. situation, we I comments think, in businesses, if I are global of lots very think that

you and the have echelon to going to efficient. this think have know in that are through But want couple. organizations because really we very they concentrated We I be a are going make historically, it of been more

Steven Koenig

That's Ken. Alan. great. Thanks Thanks

Operator

We will to Jaluria Davidson. Rishi move next D.A. with

Rishi Jaluria

Hi. Thanks safe the taking all questions few from and questions. business continued see for Nice are strength my to at A me. glad you Pega. staying in

will the like you of First, terms that customers I with bottom businesses is, payment Ken, think, are something ton sense. you hint and wanted some to, makes extended a did line for work I them, for looking

ramp the three? that than that multiyear up side, us restructuring, there may terms on a something like Pega financial that that, smooth out on the like on will have year like And the Are just for cloud in a given a the specifically doing it of ramp maybe cloud impact, or maybe ramped get smaller ramp then contract something you theoretically more giving to Pega deals. doing ASC customers numbers, much deals wanted that thing and ACV like something XXX year when is things that? getting more if seeing want just that Just you deal Pega asking be little a would normalize two, then cloud you is for

Ken Stillwell

So couple there. your Rishi, with a question of parts

for, very The payment say, clients going are customers first which in of our delayed would verticals in our types traditional situation. happen. percentage to A does be ask terms? one It is, low of that

verticals. We are the the if that about clients you not insulated from susceptible think we of not most we types that. have, are in But

occurrence. and economic And climate worse now. the widespread of I at It some kind to even suspect than what happen. looking would not change is massive there unless wouldn't that does it it point at a be we this is isn't are it So

So I think that's point one.

point at not period. suspect I clients asking that the now. our the that have had the ramp clients discussions with certain but within contract or And end over seen or restructure clients that that's the increase to Second and expect years economic for deals contract question And don't pay system little very time wanting they contracts over usage to period or naturally, discussions quite implement different is suggesting clients they frankly, increasing the amounts with reasonable have we the noticeable or accommodations request really, the a cancel that that is, they of to over about that time start to and any actually COVID-XX time. as see asked value have of cycle, over even you independent

unique that phenomena of a is to situation kind now. is right So recurring That of particular being not the business. part

is are or in those that us clients with Alan and of the little with contract a don't we businesses, the of second our say, sell, help The years, thing bit we a long this that average a duration quarter-to-quarter is thinking or kind hope does that canceled are most our and anything small month-to-month SMB that in with most have change touched the can projects, that a our comment be relationships, using environment, about seen ago, multiple month quarter. because one of And we within a since have very a vulnerable clients term for strategic not us significant us relationships on us.

help a lot will And so there. believe we resiliency us our

Rishi Jaluria

ask about helpful. I wanted Okay. product margin. Great. Then your to gross That's

So the quarter. mark this you hit saw XX%

versus Some year. expansion nice last margin

it the are us having what gross you to of if a more cloud you little on wondered start color Just margin treatment lay just bit seeing outside side give on itself? could the product on accounting of

Ken Stillwell

build aren't ramping you better. yet not cloud but what how think quite cloud get progression. quite technology to a business. we is And really the some the remember, do us starting Pega And cloud investments now we year at operating see a of get about infrastructure larger happen And infrastructure, you infrastructure, are not last if a see cloud in this are are of point we you and getting we talked as It's completely completely. kind any steps. I frankly, optimized when infrastructure, you leverage Well, with starting Pega I linear frankly, that were still the to stair

into in with as initiatives XXXX, to as we I of significant of really is being but XXXX. it's So do frankly, operating and in we mentioned, better kind because thought really, quite actually pushed think the planned expansion XXXX, even We for investments be. margin it's FedRAMP had would it I other that

expected see cloud. kind had and what was hoped this margin in we to of for So the

Rishi Jaluria

remote center, your you. mean, how enabling especially, the center, Pega help at pipeline all customers the is cloud using probably it's with Pega Got or bit everyone, understand that you. and working contact from just better relative all contact even the before? that are in that, to working work up, demand if accelerating Thank longer from Pega centers be start with maybe those remotely? your to There might the given to happen or inbound once. then going not And open things even to rise on I And some people whether little clients, home, contact home, And interest maybe on-off work for remotely, maybe alongside is working lasting. a us that's

Alan Trefler

have seeing Pega and good exciting business pull that's we which And So be I continue grow to obviously center The cloud on working about able work for home, from is investors. contact workers think value should it and us us for using Pega are let a at as we we that to thing talked of homes huge decade. source had our about. a their

phenomenon customers. for not our new of So a many this is

up the group of who staying peak them lot course A work contact they wanted, of that historically part-time large customers hours and of even so have had center at tap they overflow a workers for help couple of a can people load are can example, day want do, with to a of home children if home who many they a which or our times. do, at work take

to be well able we are equipped So that. very support to

building job easier to it I into train efficient. automating that into to business frankly because processes prospects, better to system to makes and appealing, and workers itself, that we them do workforce it thing of also clients new The our the literally that the think, and tap is to just more and our a is new a make

pull outside are going this us window immediate to good think of all I for of well. those So as going forward be

Rishi Jaluria

make ACV, change that in process billion revenue? thought XXXX I couple one All have and guidance But years, your that, would your the out a of from hop or anything of like anything that past right. sense, the $X.X off. last environment this to Got without And of just you get my giving targets you laid end formal in over want will $X.X it. billion

Alan Trefler

Yes.

you, As our during the been to know, update our think, year. I never guidance it's may practice

I bad think into trap with companies negotiations and short really quarterly that guidance thinking can customers. term

So we just don't do that.

that So tell there the business are position to disruptions. a really the strong is that. and not of comment obviously I you on can tenor in

for But it. is are happen obviously that's going not something But put any said them it. accounting into the to interesting which extrapolating for aren't prepared to services advantage part is, to updates. customers actually. for take expenses, of make obviously, specific the which makes you better if revenue it billable revenue of people That's reason. Ken some It don't we think I easier makes

Rishi Jaluria

much guys. Thank appreciate you it. so I Got it. Okay.

Operator

with Next we will Steve to on move Enders KeyBanc.

Steven Enders

now? to hope now deals is I some staying Hi how guys. you in some want know crazy Thanks delayed that get get shaping getting pipeline I and canceled. best environment. this safe the for mentioned may just sense question. a up of taking everyone is the I deals

currently wondering year of of kind that how the kind the rest being shaping and up generated? how pipeline Just for you much see of new is

Alan Trefler

being would part a of very, us very, new So of a can and of through recorded I tell and quite have say, and our prospects. pipeline there's rescrubbed is all and you being I there's be that reconsidered. and pipeline activity up has process lot a are to year-over-year that opportunities been lots we But intense of new the Obviously, between generated materially. that cadence of

and right? to does mean has value a mess, exactly what software we of it what's but I of because knows energy clients. happen see so it's a the lot because who to So our going of

Steven Enders

Okay. Great.

Ken Stillwell

that am I I Steve, do has to it. comment The on that I shocking. Pega. it are just activity think am can to at that. The do business and you one most of surprised surprised guys would to able through you this on I remote been continues able call sure quick of attest that work is add Like mean to interesting move quite I thing the on am amount that I are this. in that we many frankly

encouraging, along see a their big infrastructure So I in continuing really up see to hold this frankly, on the it really And of businesses. quite and through really trudging kind move networks mean, with people up, is promising really the just that's to people the way. to hold

we that thing through promising have one that's seen so And this.

Steven Enders

up and Okay. the ramped that just job tackling of initiatives What That's good hear. business? where transform ask bringing worthy most kind to key gets as want kind he Hayden. is on about kind kind of he to the be will the I And to of of are

Alan Trefler

$X lot of into billion business it turning we in Well, at of in I think experience pace. and than sectors the a a doing that business he's more got growing that operate a and

So I him. work be terrific think will with it to

And us met he him. hire It's spent amazing a work I what an terrifically together. going all We somebody But anticipating have about. time ground really you our team's to actually lot. frankly think I he's accelerate we have help all have that to and the go-to-market, and lot And is of met. hit am never running physically is quite done the will awful which this

Steven Enders

Okay. you. Great. Thank

Operator

Instructions]. [Operator

We Kim with Rosenblatt will Yun next move Securities. to

Yun Kim

obviously you deals of Congrats on environment. Thank are Alan, already seeing some April? a Alan they in guys Ken. are doing Are better month of seeing next is project better customers? a business? out your actually part benefiting to It of multiyear like you like well. understand current phase smaller probably of Are you they it's than seems Can are a parts your parts making get from of the and of you. the sense you where is lot are It some incremental quarter. to that good tracking just your are that's are some well more Hi better those progress? that's that's sounds got closed of projects of a you trying a your just most there. not doing just of where there the versus and in Thanks. project the ongoing deals as of which the there kind Some describe, positives business existing and those with of business that that parts signed? other of Just

Alan Trefler

governments about help companies the with think really of to immediate are that the done large the examples hand. issues of that Well, something some that as the gave trying and in trying to to cases in people are are it, are them are get I and some to use there some that respond actually of if you that

are And at pace and can close happening. obviously so they really those

surprised pleasantly One, willingness almost of a themselves available. little to But things. leaders I make the two have been senior by actually frankly

after my have to continue people interesting different coordinate able as found think I that I things with the is hopefully travel. is our My are in no longer of meetings and to They I going to are open very, we workday up. countries. soon productivity, even up One I very senior productivity because is is, that's think

So for real the there's the talking what right receptivity a is. future architecture to business about

realized Now to that this about such businesses, has going I have put people pressure to have on are they think their differently think things.

that think on to the able of digitally into IT to they And where they transformed have business that program to to whom way environment. spend going are they continue they may remarket frustrated amount lot going a of recapture realizing I are and not organizations some of and be organizations out customers, are realize are they are with some doing a by able to not their be them.

discussion. a a architecture business in would as I energy seeing describe what So are we lot of

organizations to of get think in that these call is things days differently. to adapt can effective to be my is I thinking completely very it couple do one two like catalyst. relative And design used script. I or the We That to to the ability we of weeks sessions, team's a mentioned either think in cool

some of to ways meet a We as virtualize same and would team. have of travel have completely that had catalyst place sessions. I to which been lot And to customers but receptivity all set to able to have doing in of been thought easier difficult, those getting be a don't actually quite the up it's because

we work So convert of all we them huge energy have like hard and can there's if to into we selling them. with need in the business just motion to to see a would amount the

Yun Kim

you far? And the Great. navigate you also in industry-specific your the your month. go-to-market, of Alan, remarks introduced guys solutions early been Okay. near on regarding What the mentioned how set in at of kind this prepared least And term? so you the and has blueprint that a may in is response

Alan Trefler

had their to this teams also horizontal my industry differently to my Yes. definitely And those want would to the together about and teams, and and less them. really thinking wanted rallied how The off. am It for a they work literally the week, how caused agility teams, the pulled market. certainly they evaluate have solutions teams, together to to in bring particular, think how will and with framework approach. just market but that bring impressed an they in has we the than thought I pooled we leadership And

areas, organization, begin do in you in having Interestingly, need truly And customers be. them not something check areas create about generating but which once to discussion understand the also that's now you other go they how from virtual pega.com. those you our customers. can a on It's interest just out

Yun Kim

should great take obviously, Great. just in current are going that of impact in do If to ARR that terms due like expect variables the Okay. instance, this there note enter then much there, to we Ken, of mix model For any uncertainty you a that model the a your out of And year that uncertainty we from growth? is ACV Pega year, COVID-XX? bookings transition the and mix? comes cloud level actually would this because in there's higher

Ken Stillwell

Yes.

overall amount few the the do in I And majority, mentioned there. even that probably fully cannot about impact some the of on about professional there's do we a I just could I still the think year think delivering have think I remote, everything have the business though that the through So of would to you first times that way practical it. be to trying services hoped. some is, am most just you fact risk there's is,

that would of would I there mix in that environment, more think upside that the on plan I than software cloud think I be, in same, was think would short their if you kind pressure term. most opportunity, the bookings there And is assume current say, the companies would downside in

thing that's more if market. move cloud? the that think you is could about environment the But I because reasonable we the mix, conducive in hearing more cloud Pega to think we a are cloud to

beginning what opportunity year, of has X% talked revenue. about a of the at a that a impact the for to us. cloud happens, that's about million that XX% term $X.X short I from every And is think in great kind certainly actually if Pega we movement away

think about something you the more so which thinking cloud, a I So are revenue I the term, definitely think thing there. long will from good be pressure there's in

there significant In material a deal terms a the client of growth, or percentage difference change a few is in cloud, ACV on within a not That points of books year. growth. ACV ACV is growth cloud whether not based component the Pega

Yun Kim

that Great. Thanks Ken. Thanks for clarification.

Ken Stillwell

to I I meant while was X. just Sure. I the wanted made aware And just I next I I I mentioned apologize. have, said I as X. question, clarify. June December, before And an made that PegaWorld December error.

So on pega.com. at a for you June registration we join to free welcome us X

So there. apologize misstep for the I

Operator

We Schappel will queue in from Benchmark. our to move Mark question the next with next

Mark Schappel

for by good the off a Thanks to way saying, And the question. for in a job was Hi. the deal my long deal I in around a you. year off you mentioned remarks? taking and question in the will details cloud start additional some Alan, your start good quarter. percolating And just Could how prepared is IRS instance, provide you For deal? the that pipeline? Pega maybe this

Alan Trefler

deals quite may for government go Well, tend know. on to as time, you some

you going been obviously of IRS. deal. a So years. been this And has imagine, come revenue over on. as competitive, is can Pega a cloud the it's transformation going highly It into not to It's

really get of easily, of right interfaces will just be are effect, to us be from able that's, entire a data expecting systems part cloud. move And for We to to, in want point the client a it folks Lots then right centers to it their view, of the sense makes that, be cloud these that our to implementation. if fine. to the

Mark Schappel

is that the a Okay. least, enable? you here other that And to recent the speak healthcare to wondering to increasingly a you was you seeing Great. healthcare the vertical able are you has some trend. there's of trends of move in being into And the headlines, Maybe and can you in your then technology are mentioned tapping as in attention. are captured at the prepared about vertical remarks. of seeing telehealth lot if focused ways just that's, company that just that healthcare trends on I one the

Alan Trefler

Yes.

years others. as We with showed have how actually, Pega Cisco well and management care beautifully the couple and a Video we of solution environment ago, shown can for work our as

And so frankly to more that telehealth systems going coordinate is I require manage. think to and

think end I get quite to ultimately be going when it's of the And to good for other so through it's this. we be us going

Mark Schappel

for Okay. the Great. job That's in quarter. all Good me. Thank you.

Alan Trefler

the think I run of have top And hour. we to the

And I stuff. think, I think you working hard So to and are for all extremely right we goodbye. time us we now and say thank it's are the doing perhaps,

with very great have much So a and thank evening. that, you everybody

Operator

do we thank much Everyone, your call. today. you participation does very for That our conclude

You may disconnect. now

Pegasystems (PEGA) 30 Apr 202020 Q1 Earnings call transcript