PEGA - Earnings call transcript Q4 2020

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Operator

Good day and welcome to the Pegasystems' Fourth Quarter and Full Year 2020 Earnings Results Conference Call. Today's conference is being recorded. And now at this time, I'd like to turn the conference over to Mr. Ken Stillwell, Chief Financial Officer. Please go ahead, sir.

Ken Stillwell

you. Thank and to ladies XXXX fourth and call. earnings gentlemen evening, Pegasystems' welcome quarter Good

place achieved. assurances Annual are statements such reliance the recent there ended to matters XX-K XX/XX/XXXX XXXX expectations. are in on be and with filings Investors and I similar to variations those Report this statements words estimates, of and expectations and such forward-looking may projects, the from the such would XXXX Harbor and The press materially and likely the statements expressions, begin, year and materially from Act statements are no could, results beyond expressed in other as with we Before Commission, Securities like date should, Litigation Securities identify Because undue deal intends, differ statements could which for forward-looking its announcing or as filing release guidance, in the results Reform including in for are company's differ earnings forecasts, contained full usually, Exchange they plans, the as uncertainties. not will events, its statement company's actual contained are cautioned will, subject only speak Private that other company's such Form statement. XXXX. read or future fiscal the forward-looking Factors and strategies, and contained this anticipates, assumptions. forward-looking construed may, year presentation current The to on the targets, year statements, be various of that statement, could words to defined and current made the the expects, with Certain Safe based of in in company's on QX the was SEC. cause our risks believes,

result disclaim the law, and do subsequent our as not required or events turn applicable except specifically events, Founder CEO view Pegasystems. call forward-looking any future publicly this, statements, with Trefler, revise new update And to cause Alan over of change, or obligation as by information, we these Although of the may and will otherwise. I to undertake to whether

Alan Trefler

and The and highlight what new with ways we XXXX. progress feel And We our landed you, we recurring while the on industry-leading partners. clients in well working introduced good clients, extraordinarily to substantial bringing Ken. about strong manage low-code other, challenges, We we've is help we difficult transition and our each where short-term Thank made adapted our our to enhanced success. long-term to an accomplished for solutions situation our new model. a and of software building in revenue

our explosion of an total for up to Cloud You milestone really clients value backlog by as contract us backlog, over record crossed revenue Since a time. years annual Pega annual next-generation Cloud year-over-year. Pega we rate more delivered clear Pega And Cloud billion in and began first compound $X growth of our can billion is year Pega that XX%. of year-over-year, growth seen results. grew signs margin grew progress than We onto see full emphasizing three and XX%, move also apps Cloud years the three up by of Pega we the low-code we've we ago, with long-term the those annual value $X for Cloud our contract XX% of Pega completed XX% Cloud setting platform, cloud improvements. We this demonstrated accelerate

areas enhancements rivals. companies accelerator important partner made and revenue long-term including sales our We key a efforts, well-being initiatives in values, their culture our an and leading Pega and in significant hearts continue invested process commitment of to industry to brand robotic of our the and improve start and our all analysts planned also clients new and focus extended minds talents inclusion key service, and our from staff, marketing customer to by we that engagement, our expanded did advance to automation, the awareness, covering ecosystem to on clients this attracted with fiercest community, engagement, including logos We diversity; clients We our recognition markets. We our reports to and in customer the of innovative capabilities exciting more and automation speed-to-value. added strategy, stayed intelligent We keeping technology management. growing their the margin increased growth. dozen continue [ph]. get long-term deeper real-time functionality, we and influential low-code, process true still and [indiscernible] drove and our And in leadership into decisioning with automation, breadth CRM, solutions digital productivity than improving to interaction customer maintain one-to-one while tech

revenue notes. of Pega the our of against bands Monday, influencers. be our billion of Salesforce, likes the made them to Board one know Finally, now It's SAP fund Oracle, We'll the leaving band recently where the the bands we get right to key in one milestone. battle [ph]. Cakes, Zoho; a the just up the we up top members celebrate of the by And of of a and sponsored CRM and think one a couple Layer $X NASDAQ won XXnd, to of staff opening on award

never really in more continued thrive feel support to we and abundantly to their digital wildly their And been transformation but the this and here just prosperity, in clear world. some not to continued changing never better need need. initiatives, it positioned are we've organizations that has to been market digital fundamental our this terms their has existence. accelerate Reliance Now, in dynamics, cases, to the transformation survive, to compete clients of made thinking; central way

them Our better saving get solutions help clients helping crush work business complexity done. decision-making, time, and enabling

the designed organization together prescriptive brings adaptable is software or scalable employee that low-code our launched to enterprise. And our with thinking and solutions to to customers and customer management across core. experience centered unique Pega business across approach architecture and together innovative the Our recently the In productivity puts business platform. leveraging and a Fabric, design hence and the deploy trademark, our powerful exceptionally improve staff streamline processes, outcomes Process at days our leaves in together workloads and weeks

needs new right and first self-fueling analyzing clients the free robotic service bringing with engagement, help managing the via set in by manage customers' our methodology our As bias tracking intelligent quickly to Ethical a in out calls, help learning eliminate acquisition to we I Pega to process our and Pega specifically easier Auto-balancing RPA automation built make service. clients, made meaningful new a We In and enhancing needs. in Pega enhance into SaaS introduced of clients' clients and ago, Messaging we going launched long impact a clients new rolled to some get the introduced industry's we to automation; the unemployment easier for we X-ray Bias customer ways mentioned, Finder offers. with of just launching feature, share customer of for reduce service, In first announced And digital be Academy solutions, developer partners we deal AI customer and to to few meet our robotic the claims best agents' best customers it's to progress directly pressing we Qurious, Edition pre-emptive knowing will drive industry's help industry-focused uses real-time which of of used like low-code underserved to software we In can to fair. and process better AI so COVID-XX Unified to costs. and on gain agents short-term pandemic, solutions for started mission-based engagement it app. serve one-to-one continue customers transformation built initiatives outcomes, to community launched and help the it increasing an make high help fast help by AI; weeks We that advanced the automation, platform practices. we And express beginning it partners speech customer the customer a improve and proactive recommending Check and powerful enquiries. the actions set Pega most for surges a segments next service our with help service handle to Vision, skills. of of and Pega In volumes and the empathetic with Value analytics introduced

We and work these continue look you important May. to in with capabilities enhancements on forward iNspire sharing at some to PegaWorld

also Bank, expansions world. as such [ph]. logos opportunity strong hard Telecom, British agencies had Anthem, like clients continues Now, source be our and services, in Takeda exciting in brought National Bank, areas new to some were good as healthcare, In and and the government, XXXX traditional new new Partners the Health clients Citigroup, we we of continue industries critical beyond. a less have existing rather we in telecoms, had in around deals National Emirates focused to terms government thankfully, and mix partnered Australia see and more business where strong in pandemic hit Pharmaceutical, our CIBC, on of and at by business insurance; highlights; We mass XXXX, business financial like

Vodafone our Pega year needs performances, delivered to the to ever digital continue journey, you half surely for are of in Internal solution X. transformation nonetheless, the a do up online new will been decision to and are of held requirements, is, across assistance think launch they're announce clients delivered leverage been help list just ways their of for we than remain to pandemic this us adjusted commitment for enterprise probably talk example program our we its will to StepChange to and future, and win their Service delivering just done. in operations, respond about and demonstrated and with transform powerful know are on new of to speak how apply government standardization face in and through debt on to will we working of and leverage who And used an cases, the believe be that their with been get of inspired that use the quickly negatively as successful to forward of tell are Financial to scale are into than complexity the being event we in billion success but X.X organizations of updating by million Officer, year speed, used this Revenue and especially hurt help well Census clients the clients pandemic, in are service our Pega our capabilities, already Pega is transformation will growth are to proud by so year has We more a reusable We're is through product to clients [ph]. Business new greater, provide in have their technology and their pandemic in to provide around and and know space for as is the the what's world business stories example, and PegaWorld tune continued the large about simplified the sort we're tell and applications virtual preferred the they Scotiabank as at the a radically the a further long-term time, these multiple talk color, clients, as We've this its ways global it's year, in over step they partners, Our that and to others we've awarding leaders. and this publicly. they accumulated I stand projects, debt some over people well cut heels to who'd systems of feel lives has Plan, challenges more the year a years being reduces us gaining client built government driving that automation an about unprecedented To the organizations who Pega truly rollout, immediate of really turn of optimistic lined assets charity market. and Pega's positioned the interactive and and through staff, processes support the Payment the to Chief intelligent me from formation willing X as by we corner enables iNspire, required. and of automating and interesting recent catalog the deeply the some impact than to May are about work short-term agenda. will able for that Agile our positioned last qualify. XX-plus take make willing to We've ways Excellence a their proud that again, can well you low-code to with are UK, how with a Pega value summary, unique. let it's strong in applications And never accelerate and those that and about up Well, help Center of these going Ken while new actually to and needs, becoming to more continue got this technologies. platform low-code Stillwell. to a able have Ken? at of by continued to maximize tell our that up there built problems to improve stories; had meet short-term by long-term for our quickly going Pega been work business businesses that for lease I to nothing COVID And StepChange be matter hour $XX.X impressive the our UK are automation millions need in leveraging building future-looking. with the of in impacted and the think past amazed supported position that incredibly and needed people helped costs. where so better capabilities, we who and an systems,

Ken Stillwell

too our X,XXX view companies this in full firms by than some less interesting, - our Pega either. of those and I'm going as there billion. With than a year than also to more we but recognizing software $X our on revenue. to billion exceed this start much results, more are one not publicly-traded surpass with $X hope but by in revenue, I'm We Alan. of Thanks, of XXXX little milestone total joined a more far to group type a X% But count, marker; endpoint. mile that milestone going worldwide, dwell

inherent be benefits some are on there to firm. scale of However, Rule of journey a XX our

First is leverage. operating its

could from XX% the of Pega gross XX% in XXXX. in expanding XXXX to margin You increasing scale see our realizing benefits in Pega Cloud

expect perform more contribute our virtualization achieving more scale, positively of grow Rule to and automation activities as our we at we we As in XX leveraged be can the goal cloud clearly we of our increased efficiently, which to effectively size. like exit transition. can Things

our all benefit has to transformation digital on decrease to brand incremental costs, value in reduce Another for Pega the efficiency; sales We ensure helps awareness sales help levers scale will investing is is initiatives increased aware acquisition This some awareness. anticipate customer clients their initiatives. how Pega. big market us increased potential manage our improve and brand cycles,

A Client addition as of Stafford example talent. to world-class of scales XXXX Engagement. attract is great increased June our President team Hayden in to ability of Global our our Third, strengthens the

We be most critical expect will valued one that lives. sales productivity of our increasing

only journey more not increase business ongoing underway we've transition; Our and more multi-year have through Pega. what transformation do. work I where the our about to midway important is to believe share multi-year We're it's we of to scale accomplished also the at than the cloud

takes as phases. normally about major mentioned company software and I've follows previously, three a for revenue recurring to transition Our five years,

client annual licenses compensation First, our subscription. the We contract started to focus commitments in cloud changed value. subscription of for company XXXX, our licenses. over we sales moves XX% late plan on to transition example, were When from the selling perpetual selling new

teams a new prospects about of The and transition XX% end to sales XXXX in said, value done a XX% were the job recurring next. XXXX, total is onboard. that of commitments so in By first XXXX; phase. of our and client our As jumped revenue client's the completing contract contracts solid increased we've growth

first upfront because revenue selling is the recognized few declined, is rates much recognized the moving in from where arrangement phase, cloud the especially to where this away selling revenue perpetual business licenses, overtime. the of growth revenue second the is During years; is

For the example, the starts cloud for midpoint passed, is growth to transition to rate our before few the revenue digits started revenue from of the we mid-teens transition Once rate the low-single dropped growth the improve. years.

both XX% growth end revenue revenue our of that years of growth example, is last. revenue, cash exceed final approaching growth client contract A at and perpetual important The XX% accelerates growth cloud by at final Pega value the growth total revenue point rate say in was of the I the license For In growth subscription in of grew transition; transition, flow years comes XXXX. XXXX, in I grew ACV total annual very expect in revenue that's the the XX% to that revenue XXXX the all two highlight face the will the Cloud to subscription from transition. we in mean to rate in When growth reduction why the even significant transition XXXX. our compared and revenue. of

During cash cash a clients from cash words, consistently has billings company a its collects client completed the other of and to business commitments that moving of from its billing from builds overtime. new collected transition upfront that collections to final in billings most improved; phase, company a

in late cash free as our XXXX XXXX. we finish call flow expect We accelerate to to the transition early

XX% year-over-year, the strength way when growth embarked metrics you in that our the innings remains in for license grew about that part million. from total reflects of XX% to In transition by the our in value about XXXX. had Cloud X% are ACV Given the perpetual maintenance this metric we of reaching client operational clients cloud decreased term X% Many underlying tailwind and don't of and recurring other client important sum contract business. new Total commitments representing recurring our some like transition, are that about properly from of of was cloud, growth It's we most XXXX. in growth on. underlying client of the license commitments X% still XXXX this the is to through cloud business, commitments a Currency Pega to annualized reflect ACV annual new of operational middle spend notable a arrangements. in $XXX XXXX,

XXXX It's revenue this dampening up Pega revenue greater on recurring impact us it for ACV in While future. near-term Cloud a XXXX, has to even dynamic the see results in sets the remarkable $XXX million increasing in growth to in - $XXX cloud continue XX% increasing to our demand for XXXX as our XX% grow. - from accelerated customers to million XXXX in from customer

revenue fiscal the which in XXXX. come mentioned, total expectations XXXX. in as as The XX% over XX% second of to Backlog the year-over-year backlog. year revenue the - most Pega it backlog December the important have growing Pega next December see to is an by is backlog operational XX% time XXXX commitment This into be recognized performance exceeded backlog backlog, $XXX for million into client cloud to transition revenue not XX, represents XX% In million remaining million I at by This from or total period. $XXX during XX, our $XXX short-term billion. within Cloud impressive months current history same first is taken which backlog XXXX, supports $XXX our in the increase is million metric to great obligation grew booked from of growth has also It's billion. the RPO $X in company total the has company, over the Total or will the within yet. increased $X.XX XX

which by going look XXXX. it's instead revenue same maintenance license as impressive to in the measure, million $XXX And business ACV just billion revenue any $XXX subscription really revenue look increased Cloud to Pega financials revenue and transition by Pega Total not important includes Cloud million XX%, from XX% million revenue, you at term $X.XX increasing the the XX% mentioned grew and of an in cloud from understand annual to period. backlog. one To at in Turning $XXX XXXX jumped to earlier, I need in revenue, XXXX. to in the XXXX during

by is For if for our job we has the on further these cloud while is ACV revenue, measure down; so transition the deferral backlog haven't the goes a to much which goes we're why example, business this as good which compounded up, appealing to ourselves as reported momentum. looking future. effect done ACV a And growth

in total financial in in or billion on faster; us meet we in support Even revenue together, of plan, XXXX track ACV were the success. to we've aspire target customer our results Taken put $X.X billion selling major targets partner and made exceed that's that investments right though XXXX with why we in end by to are our set $X.X our long-term the of grow XXXX. total on capacity and

continues Pega $X.XX an be fiscal more guidance; expect XXXX, of our new commitments increase than in client revenue to all little Turning billion, that year Cloud XXXX bit we of assuming total half to year-over-year. a XX% of

of As means we of towards is XXXX, backend revenue our to the be skewed which usually expect the skewed enterprise XXXX the in be backend as typical, that case software. will towards bookings more our

Moving EPS; non-GAAP non-GAAP of project XXXX $X.XX. we to EPS full-year

to expect than non-GAAP faster XXXX anticipate that our We our improve will because grow revenue we expenses. from EPS

margin like impact on Pega happy EPS is We In conclusion, in bigger the welcoming improve business. becoming which to to also a many anticipate the due non-GAAP we are Cloud will increases gross XXXX. companies,

impressive, cash billion, results in our in year market the year and metrics. are very will backlog disruption exceeded first that that show all $X we're continued from collections this our the COVID-XX, growth each full history is and XXXX optimistic Our given key revenue,

and year, Before call annual X. session after be to June can you each I'd event on www.pega.com/pegaworld. plan our like to at iNspire, questions, our PegaWorld to this conference, customer We Investor on May Annual virtual Tuesday, opening will Thursday, you hold register X. invite again for The the shortly of

the the about our XXXX We call will during call operator, to earnings questions. with And session please Investor open in additional information the release QX spring. that,

Operator

Please from Nikko Securities. Instructions] go Steve Thank take We'll our you. Koenig ahead. with first SMBC question [Operator

Steve Koenig

questions. thanks Great, my for taking guys

to kind some help in guidance back top And - tie what the if just your are our like the of back how to that, of the for you to is your lastly variables give mix tie initial and I'd that changes. us can for as could you then, your ties you on benefit, impact happens didn't first XX%. Because here. cloud of cloud maybe fiscal to evolves to results what then, year 'XX? Ken Ken, you it your color I'm more that could us higher view on? a bridging mix some would little your conversions - to with as cloud be commentary maybe going be maybe cloud? a significantly The for line And QX little surprised it to year. question as went assume baseline prior can then your mix than tie And I about - on a QX

for got then thanks one And So, I've that. quick follow-up.

Ken Stillwell

Sure, Steve.

on hit all. I'll catch your them I So, questions hopefully, and

end SaaS that trend. of commitments. arrangements; that this budget my of part, hasn't is been that the which the the client about a to speculation has arrangements in and than use year-end think first for versus years, think to little the In may new the more reason Cloud of have slight to of typically the money reason skew more is the client been year which tend is for Pega for QX bit skew XX% cloud been lower three important skew three mix in tends significant little the Cloud It and a quarters being bit the number is has that, point a XX% to it's our that clients less up Pega and bookings. but I but percentage mix - that a year, QX other little bit last Cloud on QX, Pega about So, the typically than for than a

would for of be really because in flexibility but we few clients higher really the so many they a also opportunity for Messaging, there had ball that in years. a what how have Choice we've is part bigger suggest that crystal than of Cloud feel of Now, to their believe deploy, XXXX, we've we much Pega the a our noticeably business, we last pattern seen such number enjoying to that and that Pega Cloud terms an don't be

wouldn't So in arrangements Pega about licenses Cloud Cloud movement away on you that's think, well, was the to it's or that Client and in - either be percentage. amount gap if XXXX; not book it's you big Perpetual revenue; current it's more drop period same see in XXXX may perpetual, same perpetual term does or The in equivalent in Pega want recurring and of can not. of the an we come perpetual the QX from deal. it does saw perpetual I that kind term revenue Cloud when of into amount the if the have revenue talk biggest XXXX. the revenue or you

excuse of kind XX% - biggest just would modeled, thought Pega stay of me, south did in perpetual not as go we low our originally but actually still that was it that we factor. XXXX. So When as something

then terms So - point of changed lever and in that's QX. what biggest in the probably in XXXX, and

that mean we're get super that me wrong, for happy model don't that kind the have that's positive; I is XXXX. a biggest but I from happened, that that we was original the say So built would up of factors variant

Steve Koenig

it. Got

and Okay. here. that Where platform, are you Thanks going functionalities taking you update what maybe the [ph], services, Alan? for a micro etcetera? or there think around you to adopt your remind are that, Ken. Alan, us short-term, most one of as kind And in immediately Phoenix is cases used and Project innovate this benefit do for quick probably

Alan Trefler

you we Well, know, have a really in agenda front. that interesting

directly Cloud we a - believe love Pega margins, business choice. in for cloud, cloud we the client in the of Cloud too, client Pega a cloud client in some improvements and see than rather we're in pretty You but it client cloud do obviously, or

of in doing because money, beautifully and and in about going our many cycle see as last into our to innovate model. technology development to broken been save lot that been and as which of of of of ability our year able for up our late their we're [ph] tell being things working the ability in what fact our save we're that their big to this helps ability API-centric to able [ph] would API, you'll our new have where also and terms release this that improve existing based micro clients to options time front. we've Phoenix Pega part in inject talked digital moving money, incorporate customers a and ability around all part on I out to think to I it's of here front-ends to experience that And faster. a services; allow the is ability you We've is app-based

So architecture seeing internal architecture pretty who doing we've this to we're we're we're to accomplished, architecturally; and sometimes bigger, going architect to I - we would anybody really our where months next the was we're advances, heavy, XX is perhaps like responding who critical, looks the go be XX continue at ago to over whereas positively both, used what months, what mean. think saying years customers seeing that

think lot customers. it's a I of gotten our So, flight with positive us [ph]

Steve Koenig

Thanks Alan. Ken. Thanks a lot,

Operator

Jack I'll question next then Andrews you. Thank our move from with on to Needham.

Jack Andrews

some or we of can taking from that for expect thanks your of practices overtime? just more are terms terms could you ramp terms just any being in logo you partners are afternoon how commentary partner I'm of question. good just generated that Well, new provide should how wondering in progressing if my in wins commentary - to provide and

Alan Trefler

starting builds in billion, quite of Hayden the the under to second may you the the in offices and under rapidly. CRM year, business Stafford; significant from his the partners from and we of sales We're getting space background. in at I Microsoft billion, push experience strong really well market think that half going - $X also force has major $X.X to remember, Hayden He mutual So towards and we're partners commitments has embraced go partner really to the together.

and that really And of the of a you is in tell that how we it's in Ken part partner second involved big acceleration the of go as partner-sourced the about, the to is year. the sales big to center happened and in sure pretty exciting ecosystem only partners last talked So market. we're marketing, number when front started up that see half in investing and pipeline. can I materially it we making and is deals

Jack Andrews

of That's mentioned administration And about the you for could around to provide out you that thoughts in a opportunities color you might more some that. a I use cases. new standard certain thanks broadly? a as in terms comments flush for how under follow-up; opportunity, your great, Any if for just particular, government potentially you on ask of the want becoming

Alan Trefler

be under the IRS; under publicly initial and we paper and lagged the see think over available a by amount you head-to-head easy one. needs waste. rid the lot and tremendous that's Well, we to more going is go against to is of The IRS more and the worth that that there of the how government the to years base were numerous, other get on abating administration production I to won be opportunities in about its made has how through and years. efficient, know, systems, made competition have to and to current that's previous and been over as they needs reality And providers already needs them don't selected be that numerous a - public management XX change

going I Hayden U.S. using government in not way - the seeing partners fact, Australia, push government, nice but what's nice [indiscernible]. and of on we're community just I'll got and that double-down a tell a UK, if business; the should government exciting, German place the really well, our are at our that a the government I'll terrific story, at there we've and a tell look So, you another our key. obviously take think government you also we where so in has by at is that I said business is

Ken Stillwell

One that really committing sign-up large business practices, at XXXX month has for or so. prior very first several partner one are the I'll a session and and won't comment addition last Pega partners that to working actually numerous to this least, - engaged our our mention names say on make we partners. just that between where sales neutral in didn't kick-offs commitments kind year We with drive exact the - up-size; of in happen partners, had we've I additional to did their

of of So number a with that's an big changes partners. engagement in example our

Jack Andrews

taking for a lot questions. Thanks really That's the helpful.

Operator

Thank you. Murphy our question And JP Morgan. next take with I'll from Mark

Unidentified Analyst

in around initial curious process questions. for that's fabric for the that. thinking has process to around hear question conference Mark, thanks you you. on been doing This thank updates for last mining is Benjamin and about taking talking PEGA from I'm about on the what are is hot quick doing that, space is this Any And feedback Okay, Alan, in you're emerging sitting or the then, how that the that year. customers? how what

Alan Trefler

on Sure. I'll both touch those. of

of of big some whilst where be you to be an mean your deliver to we're done using able have and access work had quite imagine a and and and Phoenix analogy, our having couple provide it So there, process all and talked want to continuing actually understand exciting. to the when talk into system center process places but within that last The in - some I we is Pegasystems you in-effect to the safe out fabric think in been bunkering being large about organization, need including want work of imminent people it of the you now work multiple offices secure, small thing company managed to architecture, be the into organization. across enormous world as system customers work we the a was it where We the And about first make an part middle really have of do work. all might Google massive to draw about a enhance when on of think tied under systems successfully. want to of that not distributed was have it's middle of just very illusion [ph]. to and which system much in a virtual would the able way multiple integrated of if the growing and very year, that's and

extremely build in large but and not system, of it we've a and I exciting it use getting the further the of think lot been Phoenix material work drives drives on reception particularly customers. positive fabric the just kind doing positive and that it's of it's

you a people the do the exact in state done that, sorts it's work of process and is work not very same work, are the are doing and [indiscernible]. really resilient more I what Now drive to then popularity going in annualizing that's popular they and will very mean of on want you a popular, sustainable, things. they really think incorrectly. to and to automation really one of And [indiscernible] that too some of outcomes having kind allow more processes robotic popular. way, not strengths. it as it's us what you or of doing. And much asked are other that much intelligence some things give in mind so of our without pull that's We to People now and stronger robotics understand but mining that of interesting a part with workforce again scraping about way these you is to screen It's then tell I opposed our doing watch the very the that doing not possibly to out are initiatives process really much and sometimes mining mining, core of with because how I take to and one doing what it's examples process tell we're technology handle figure those people send those the that key that's we've complementary been in automation

as feel good So doing we there what about we're well.

Unidentified Analyst

wrong, impact one but And at think ago, it if in the is I'm was can anything still that, year I don't headwind, one now rate to COVID so said causing you you get more call I sub points XX%. you X to adjust maybe have currency for or if at compare to for the details. I that, out from ACV XX% that I on looking below good to and me have thank it what leave seems XX% dipped you out? quickly seen it's mean, it Ken for maybe Understood, like that you might growth actually scale, And XX%. of when it XX% QX a around,

Ken Stillwell

good Yeah, question.

in we we've thought the either. So, from impact an year landed do see of that mean where is don't ACV would growth line say now there or important quite tailwind. I last should growth yield it's I frankly that market seen really ACV of better positive been directionally seen standpoint I COVID, the expect headwind question been land, hasn't number think when of the certainly would believe I question growth negative think I that from the positive opportunity no where we've year the a kind the acceleration percent to to of years investing in we're is certainly is, beyond more growth. the we because a for XXish is

growth. that's the our at, kind which that angle the we're we looking why So and acceleration in when of of I ACV think is expect do more

movement a in strategy. not percentage the honest to growth noticeable Our in is ACV the change one way longer-term be or other

effective I on mentioned over way depending a or situations percentage as one before, could easily out moves have Well in other little years. a of a in the We and and situations where well. skewed dates this that and also quarter also bit the ACV where be

number So any is growth rate. is I the XXXX, is don't it's number now, to XX we've in to 'XX do even for being where really we focus something us beyond me real to focus seen our too that get XXXX, of that XX the that how much is historical, kind that on range up

Unidentified Analyst

you. Understood. Thank

Operator

you. Thank

Barclays. move We our question Mohit on from from will to Gogia next

Mohit Gogia

my well. So, questions as taking thanks for

pioneer you few obviously product like you back, automation if portfolio, wondering or just flagship of land us your a vendor acquired know right, of don't the RPA I years in terms sort a so been give the [indiscernible]. of the an lay have So you

there mean So landscape seen pipeline, and have more just been, I you few like as about in give is what those talking expect us across touch do offering in IPO that. what to the years? has think you RPA noise mining on be windows so sort some going or vendors briefly of there comparative to the maybe next little on I to see automation investor this end-to-end that. you process But quarter, land

then how for us space help fit I you have understand into and question a [ph]? into Ken. fit just follow-up merits you how So And that

Alan Trefler

Sure.

and these So and of a and of a revenue. of bunch when the that are number BFs the of experimentation, somebody we whole The amount little in customers think some think a takes that the vendors my process does there's lot by declined noise tremendous math here. I about, automation market divide in a there's robotic of view into and

a Well not for the more lot of what's and on is lot changing a be a here see You frankly that consistent revenue customers. and game more growth. experimentation going with lot

center, the thinking and we're prospects do that it. of we right opposed with is approach have to which able to like the deal of process the is way the to desktop automation do have it. way way systems, reinforcement about is And yet our and APIs kind you're customers really of way getting think to think of we as way have from robotics then the not thinking lot you So the where of still a powerful pace a thinking to right be our really but of core is

the competitive So think have be landscape that in view we I'm and that me we showing competitive we more and vindicated I will work were. though the makes confident

had Ken. You said for another you question

Mohit Gogia

Yes.

for along you're line that mean but also of base, higher fiscal we'll those and on long-term? at customer color give us we I fiscal help but helpful that us look fiscal 'XX to ACV versus to quarter, productivity, in at time an of also which look impact that 'XX capacity start think be of growth previously for guidance, in And acceleration growth maybe XX right? overview tailwinds, variables if show your in with I but So all obviously those really your sales in will strong drivers right, those same drivers assuming investments that you've revenue there the implied have mean for CRP maybe example if a your growth, Day I a do ACV FX ' which XX? guiding Ken, drivers of reiterated in an of think you somewhat have So understand your near-term Analyst you your XX% fiscal be up this I penetration more adjusted for that those discussed to ' I'm at we targets more mean for already we which

Ken Stillwell

and so investments near ones I'll going XXXX So think more the more way kind to making, mid-term. term meaning I'm think we're of the the say that you give about I to that have,

Let's kind those partners, and just over probably going call or individuals those sales by about 'XX. be and of that those is a capacity not typically, mature the kind 'XX becoming that months, well. they it's there in to of something, I'd investments. that And XX in on making average because turn more one to I of is the tend things we're XXXX driven into about think quarter thinking When of XXXX XX ramping another of the 'XX you more be a think we're investments not XXXX. seasoned month they're in an aspect of kind some as on of not, to right,

mentioned Steve now. give question actually and to and them on intentionally part it early this will try we noticeably this haven't We to I it highlight skirt but of

people do cloud product of primary to with 'XX cloud, the go is with there accelerate will the fabric processed to as clients but Cloud, is nor of to want We date as move happens of out as client want get are time all to looking market XXXX really percentage move Pega think Pega we our Cloud it part move, business. to in with with everybody not from evolution core to our I just the time of to being the Cloud strategy Pega it our the to potential our that and

'XX into in to potential those are don't out of think, 'XX. There or things into I is So the going it for kind happen think that it's of certainly that happen 'XX. to I end QX of QX some

playing you of the Pega more XX-month bigger kind that productivity, partners buying a are levers. like Cloud So gives people of almost kind role. Those

Mohit Gogia

guys. Perfect. Thanks

Operator

Thank you.

Sachs. We with next Chris Merwin Goldman will hear from

Chris Merwin

much very for question. thanks Okay, taking my

I to to the the CRM curious your that the broader piece Then first in over business think, that, just pandemic I XX a quarter. trending particular, category just us just give about fits well, is ask follow-up. very of last off, months CRM had business last started that the I wanted how

Ken Stillwell

three to So very we're that bought done, of and and of particularly sort of a we've of what seeing engagement. some in lot areas each sort of the we've CRM, into in to CRM automation leadership the as intelligent some is channel actually general the we've done Omni one investments of of CRM, approach strong part one interest

Omni story, the are It benefits to desktop et full people for really center And get common those, mobile, the and for doubling on better year, the faster everything a think contact service cetera. started across with across just we're priority when we've And frankly styled of sell I decision the a got. coming easier that's from a much who web, flows - to actually common customers to get has approach I'm all them channel in that. on way and trying the that so down and to process all remember desktop making

business. I will So, into well. It CRM forward our as going be to all that important that is think falls

Chris Merwin

the converge Thanks. I the revenue tie growth year. know that XX%, that XX%, growth the get I I transition, if is you're there ACV growth, that going think you're with the wanted could. Okay, then growth the you I together just through just XXXX? is It overtime to if right. I which outpacing great. guidance Then And ACV is Thank in at you. to one modeling revenue look exiting question, as

Ken Stillwell

hockey the growth, XX% the percentage growth to we'll use ACV when you by cloud up, expect don't that growth, cases, I'll of you an numbers had get that about your make with skewed we know XX to why outpace little action you revenue of work, transition. latest I the the start kind we're almost to want slope of, of the the around. of slopes just think ACV, I a growth so ACV typically compare because catching a upward think is easier subscription but the the the ACV in you So kind lines of the will some stick cloud bit end transition kind your screw you're but I end that a revenue of services, if which that with in bit, back business little professional used you should connect number back and

So little you're that's growth, happening does in growth grow happen the a actually what than seeing revenue your 'XX, ACV faster will 'XX. it in

direct there ACV So isn't a connection between and growth revenue.

in So end get the you closely aligned 'XX. beginning in them so transition, that's being what up happening kind you that really, of when slower more transition catches of it the you exit weeks to the accelerates see the grow

Chris Merwin

it. you. Got Thank

Operator

Thank you.

You with D.A. will Jaluria hear Davidson. next from Rishi

Rishi Jaluria

about we strong been be any is got for results. continued opportunity you Alan to above think know, said we and how improving might guys, areas strong speak Hey there? quarter. have expansion there there Rishi thinking to for that infrastructure it should I cloud I I've be to gone is Jaluria. get we margins the past see at from the wanted good How it's maybe out in And year Ken, overtime, and efficiency as expect margin a to looking margins, gross Ken, able the here? get and by you more opportunities start Nice or where better just has follow-up. on. should better XX%; gross it's future this really cloud

Ken Stillwell

Sure, Rishi.

move about you why most done it's terms December really was this I team been the of and driving And P&L amazing of the and year. margin of of business job reasons that that the over a Alan decided an that was is in a has expansion, probably Cloud for one took the Pega that thing one responsibility year. So a and because driving the kind our know I in of XXXX, of last of as importance so sensible running that

the off, of one not mid-XXs or So and number in okay, big really approaching only you progress; lever, to XX get the XX, how might First well, levers? mid-XXs, right. in Scale, do say, a is there a scale goes the you're you good now of so spends but variable is of of Pega the larger over pool able and up, as ACV. clients, larger in some client fixed that to Cloud because size a you're leverage and clients some people and costs, pool of

leverage, start create operating technically in that big driving to cloud things, typical virtualization are the happen, in just environments which model. is efficiency, leveraging when this of version honestly, any we right some speaking, of you we us. at [indiscernible], [indiscernible] all on But virtualization So scale know, in business see as of I'm a the lever clients that it's for in deploying our cloud sure some terms really is like

we in spend actually clients. ability In addition, on stepper on Infinity a Pega application efficient is clients to to us Pega that for they more are those that cloud environment that another expansion make - really breakpoints and for adopting certain pattern because create essentially of create the really have point us investments our actually lever larger kind the becomes so Cloud can

of product, right, - And the So from our a people it's frankly, is are competitors is of which - leveraging level new companies product quite all our common said net new and that having lots tools clients, very Pega Pega's product really about Infinity, to of like scale, efficiency. leveraging new that build it's the about other generation. about and

kind our the business honest really see like a you, in to business, results driven really we're business are great an it's the pick-up focus. those be tenants key some and for SaaS business mindset service with there. our of a getting some like running by of - Azure But from clients, of of to P&L starting So our that

Rishi Jaluria

I then bit of of say little going a really to get a on sustainability optimistically that year And to back forward, that's the and normal. sense let's of of more follow-up, the you've half helpful. COVID, maybe it, some starts trends out seen Got look wanted your this

XXXX projects And tailwinds. at I having think that then than of kind to if those acceleration on the travel A) digital but of I'm and efforts side marketing, hasn't the mean, lowered growth it saving I from revenue been a sales just as look talking; yet, even dramatically just driver so not clearly rate the because on even from rate. it's historically, margin year of half this And on customers, side and side; has your transformation helping if well, sustainability that the growth of of been you cost

think we should how So sustainability post-pandemic? savings about those the Thanks. forward and cost going

Alan Trefler

will in tell show because expected obviously cost think sustainable It's do trying that you're changed. a time. the predict, think to there be make easy - the would trip savings to them I to sure otherwise you hard but at I behavior has have and right it's or people to to a you video arrange you Well, I'll right meeting had place

think also project of has part sustainable it's some in feel - think the create we - which tactical a a but that's remote, Certainly we and a or do by to the lot and year the of of I end savings do that I has think runway, whole really learned implementations changes where do the remote, of of are on people years; things and is get so our part a going be savings in together of [indiscernible], walk-through we've the half to will about be that. a we've good of think Phoenix possible cost lot I second physical get doing year be can to what there move going lot to this will still And been sustainable going scalability want the conference in the coming lot persist, to table. is of as that optimistic improvements that cost I'm to entirely I sustainable other been there. of not

Operator

next question Schappel our take Benchmark. Mark you. Thank We'll from with

Mark Schappel

question. commentary Thank Hi, if on your some just what taking my you I seeing provide additional in and hoping you you're business was good Europe, for UK? in could evening. the particularly,

Alan Trefler

intelligent. the So, areas of undergone whole about on UK would that's UK the I interesting. some that, some like confusion, particularly of UK very but historically, Brexit it's the tell the more conservative financial have the describe very, the also been would things on. of to powerful interest - institutions cloud, big entities and has they been been the moving large top in think Obviously, with has has and thing it, COVID as some cases But thing. some happened I I you big governmental

appreciate a was top feeling So, going the when really at you COVID. hard to good UK as a the pretty I'm about it's time of of Brexit the know, happen it, what stuff to some result on of

back there I I activity wish amount sometime go is guess, could there. in tremendous So a [ph]. of there

Mark Schappel

about for your company respect with QX renewal And growth then, as a Ken, quarters; The for should RPO how growth thinking also big ACV typically the seasonally? to we you. revenue December are quarters question big and seasonally, and be quarters

Ken Stillwell

than So renewals than the quarters. have - QXs thing; on more one so - average other do clarify me let

bigger, really and an and the the the change reason there are upsell, quarters QXs new for more do because that's actually However, activity only as ACV. a a as an our factor that's activity; of to and growth is why The bigger QX, isn't the typically more as big its really in grows. as across Cloud gotten unless to factor the there year, bigger across isn't QX, business company Pega for years, there in any renewals, is that start ACV spread because impact we've selling of it more such - renewals as we

that and because there it in year's to months of one - RPO number, of in backlog, much why in - terms Now become is market next does that's around - next to number not how where number backlog lumpiness kind that that is the amount, And already that does really is of the right. come is of be able on focus a definitely is of really in that in as of because revenue a into validation it's baked, is the RPO terms lumpy kind total I XX become - tough the revenue.

measure. was next is then and differences When versus QX of that. QX, So gross a and not one over amount cycle get years linear of valid very a terms that where look if into the renewal hit the three very ACV of with four measure, at get you're is year comparing years renewals RPO, a valid is a the in you you

So that's XX so not to That's not you that with not kind ACV of of of so and about the where really think little screws kind much on the next QX. number; all, on that a it months a on bit, way much kind revenue, if helps. at

Alan Trefler

I long to think talked that thing contract when for did throughout total we that's reduced. whack little we value, be this about and and used of massively we've recurring, little massively to incentive happened, the that out frankly, is incentive is; only deals. reduced the flip a the The a

you're lumpiness the is think I I in less yes, real coupled with would to continue going So always RPO; ACV that's at. to I RPO, measure look see say and what

Mark Schappel

Thank you.

Alan Trefler

top think hour. the I the we're to of getting

our I this very thanks like operator, Take us. to So, to hard should you. it's if done and just everyone. you working wish light say for folks that into it was year. just going feeling standing safe I by with for and to investors; want we've the We're through the what I'm we're team care. doing And we need moving to okay obviously our And really let's stay year; much, we're thank hard work, thank whole this. actually and tremendous everyone, know you work all tough [ph] are Thank you customers of

Operator

your Thank you. today's conclude you, Thank That all participation. for does conference.

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Pegasystems (PEGA) 18 Feb 212020 Q4 Earnings call transcript