Pegasystems (PEGA) 26 Oct 232023 Q3 Earnings call transcript

Greetings, and welcome to the Pegasystems Third Quarter 2023 Earnings Results Conference Call.

[Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Peter Welburn, Vice President, Corporate Development and IR for Pega Systems. Please go ahead.

Thank you, Priscilla, and good morning, everyone, and welcome to Pegasystems Q3 2023 Earnings Call.

would read I statement. safe begin, we like our to harbor Before Reform statements may in as Litigation presentation in the of construed Securities Certain this statements be contained as forward-looking Private Act XXXX. defined forecasts assumptions. expressions made intends, the anticipates, and date as current such will, estimates, variations expects, words and statements, on and other which expectations plans, or similar The guidance, and of was are forward-looking could, based the believes, should, statement may, identify words only of speak Because with uncertainties, subject results the beyond deal such various for to materially expectations. differ and are statements they events, future XXXX risks from actual and current could company's fiscal

could release our not and matters cause cause impact SEC our other Trefler, Later occur. announcing or from contained earnings XXXX them statements not may filings, to law Alan press materially statements most and expressed should not unless report, turn publicly with including annual I forward-looking statements. Investors CEO differ the in forward-looking required to we our Pegasystems. on to revise statements, of forward-looking that our Our recent those place results QX factors reliance undue will may events, to over call update forward-looking that, by and information or change, but so. And will do Founder factors our new views describe

macroeconomic call. to see great environment. It's us and today's in Thank joined Peter, performance an who's you, uncertain everyone to improve

go in of financial detail are moment. transition, focused flow to cash more we're cash we our our running see ever, free good out a flow. on results Ken getting balances started. and we than more especially and come subscription as will just business it's into Now on a that And growth record

with of I been Coming was teams clients. meeting transformation goal launch As And last of direct and where a to delivering strengthen. globally. on conversations are from even client relationships with of with drive with to partners the spend the terrific quarter, around clients, world across and across chance it Infinity the of these more met our board, most with the efficiently we And engage constituencies. not terrific competency PegaWorld had team we've multiple Verizon the have the off relationships. and a and was QX XXX momentum like as we're over centers, recently had engage excited face-to-face our America, engagement meaningful having those partners India at effectively time our to on trip, spend helps see Group, this of go-to-market Indian chance was U.S. they, our many across them. our to The folks directly had is Amazon, to it with tremendous I see and UnitedHealth deepening good with This PegaWorld. I clients finding 'XX, additional road, to Bank prospects model I to clients, ways of and establishing mentioned global and and

with HSBC, Going Australia Bank, and and agencies London Lloyds government APJ, National to multiple down across ANZ in Vodafone. with Bank, APAC

as thousands Cognizant, including around our well and As EY world, partners with of the the Accenture, Infosys. Capgemini,

really meetings So Scotiabank with center, topics extremely deep deal Cloud. and We've staff with Union you come ranging like briefing dive be busy I'll Federal to U.S. Strategy with also Pega Navy this hundreds to our on in Mondelez, what continues Pega had tell year. ING, from of their to is have clients

the clients. and level specifically lot have our and really opportunity the mind series kicked remotely, a we going about a with in type dig for road I'm even dialogue off have you terrifically marketing accomplish having. many to XX we're events, continue And we're significant We provides And of QX, and the QX. And of the more clients different as year. enjoying of regional end in-person though in a in a for to account-based client top on before engagement PegaWorld to plans the momentum being back of meeting what's even more planned, of way. of excited can I'm understand and

nearly is every hear I've done and a can advantage as a about chance to questions following few this, have AI, in had categories. unique Now, And I Pega interest are what I'll what Pega tell their have central become and what has the product client environment. that surprise, are into client you really this do a And no conversation. firsthand questions does to

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elaborate. me Let

of terms First, in strategy.

decades helping have AI, we experience We leverage their of help can to clients it strategy. with use hands-on and them

early the investment. insights for showing them we're And those return most we GenAI, our to highest feedback. and use tremendous, terrific and positive believe on successful have the We tremendous clients into cases getting will deliver

going of thinking that the any of linked generative should workflow into able the pega.com core practices One help how be and things bring to to demo create the how using of all elements how best to it's the have work, the interactive business. shows that a of try you on best to Pega this Internet you knowledge we into AI actually is necessary

world and over when elements Infinity And in users, in You'll of mid-September. board cricket live the key the went generator. launched Pega did the thousands model see workflow onboarding month, first accessed to score from people other around the employee it the seconds, generations, identified. We demo and from a the within workflows, the data X,XXX

firm current your clients It's think on when that have been a we site, the search talking of really building in of you've business about. or pega.com, free. tour understanding I and and lot it jazz you'll is position interested unique the this practically, a be and just Try you'll how the check a really I've in or demo, in interactive bring take would interactive for gotten I very be the thinking which is go it I how suggest this. that just -- for find Pega to app starting you technology to way. in a excitement very just retire. Now go And that anybody an share try GenAI been of have fun, can what had out about We would interested either home lot this done a

on mobile and can be a phone, building mobile try your right even it's demo can there. your things and you sorts these good quite You phone, also of it from

able what to how we can add we're see and see get do, customers in reaction 'XX, businesses. to when shipping capabilities we pragmatic what Infinity a very powerful So terms of we're their in positive

whole, rules fits that we be center objectives organizes lets model and the evolve. Instead approved. understood, let the client companies what in believe Now workflows when layer refer the they'll and you pieces as enterprise the gives lot be of of different for governance different looking could elements is this exists, a concept is versus a across some plug the regions are or the continue me the curated cogenerator, working or And reviewed, provide, workflow on with heard think code model they business think, and our of already way all layers, and a processes, geographies. This are as is where And it need different to with. at strategy, our IT. to AI some model introduced a in on generate because some UI be your the that which GenAI, and out and changes segments Pega of what organizes hype launching a provides layers, business perhaps unique customer very manageable. them and of it's you terms GenAI There This business I needs what for and as the when of organizes our in a evolve time, that's all is can than customer some vehicle to because and architecture to a brings Pega code. They at something makes into are unique to defined with that about advantage very, BUs. adjusted, the the that for there, a and that data of into there'll perfect using collaborate the are it, the core system the let operating complement a be looking the models the while needs It as Pega business business change standing industry business situation division, needs I able their power at actually are most that's for the into GenAI GenAI unique, to into business users users structure the designed runs you've and cake. and these rules, department assets, remember you'll with able and transparency based a the that structure

about a the way be from copied Pega. approach. it build reproduced, see really I proprietary organizes we what means short, can helps us. it's feel for the in else this don't change. don't And takes readily this in it that good and think AI We really or it So and output to anybody taking for businesses

also that you at created see pega.com. all the we've Pega practical, GenAI Infinity those real. with that about makes can So also makes it GenAI XX And described boosters

is see and are understand in happening described and data deploy where audit comprehensive. nonsense. effectively through which doing GenAI we data, by processes AI have identify designed industry, risks responsibly. [indiscernible] leveraging AI protect capabilities working customers that capabilities, is of to the third, a models, robust in generating relative best makes as software. secondly, be and to and it's platform Now customer our able help when help them can been the the and govern the help and when trail something which and all their And to clients their their is powerful will addressed help Pega's sense AI we in what's

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very, to the Now we're clients this wonderful exciting apart. this very inspiring. now and having it's and much our work it taking And see beginning on to to very response client very, is

very very, I going pipeline extend 'XX to already of great released here of but aggressively we to game-changing that the to we've think capabilities as what leveraging continue new complement move these power architecture. a our XXXX, we're are features in into also with going unique

on for I the I focused and staying year. our low-code to now cloud-based new our has piece wrap a and development It's also have first SaaS XXXX announced in business-to-business up, Before and ramp software, building applications team quick handful want adopters, that business of Pega really last job of gorgeous a we update to we clients. tremendous supporting excited a our in application Launchpad, and platform beyond. We're done this early up Launchpad provide

and improving So we come really of transition, The our the our despite subscription is performance. engagement, cash improve efficiency a unique as go-to-market a model see that GenAI I going in don't we to environment. summary, deepening lends competitive as the sales is architecture transformation continue itself drive it, And focusing the macro long-lasting in on we uncertain improving advantage to that our see our to replicating distinction. our be business. technology relationships our that leverage a And a our and big really critical easily way competitors is out

continue progress. we to make So good

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we've success morning to Growth the value, experienced measure last it's going this I'm with year, contract ACV. that's year, Now but better. most certainly metric in macroeconomic or business. environment to worse not annual noticeably not much the important This than of our a start

TCV, last little delivered services total our a clients. Through measure QX cycles by are from more a significant from an contract for just but our clients few performance. X scrutinizing year-over-year. sales they've Our XXXX, team the buying, been are still about years. Despite to things think quarters longer And our of contributions important increased and and closely. value, XX% that's with the good they're first than Sales I financial EMEA complement backlog ACV bookings that,

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will is approach So use. the this we going forward,

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cash to X in during levers. flow key our session we PegaWorld plan most multiyear As features investor our free outlined improve the recent at June,

a gross we improvement just First, recent confirm basis, to confident our we're most total Cloud that total to on gross our to XX-month increased margin progress. we continue making expand point by implementing Kubernetes cloud increasing Pega gross need total We're basis multi-tenancy. margin. over a can XXX trailing And results In year-over-year. scaling non-GAAP expand XX%, business, automation, QX, margin and

non-GAAP increased Our gross from key XX% of driver XX% our trailing Pega which basis. Cloud improvement under just gross XX-month to points is basis margin, a margin on XXX

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sales companies of the often complexity. software is ours, like and efficiency For effectiveness enemy

to as our basis, declined can management, non-GAAP cross-selling So year-over-year on results all a our sales a focused up-selling roles, we've teams of Taking XX% XX% XX-month total improve sales are are eliminated to further layers in making and clarify our sure from spend QX you and efficiency. on see aligned. And financials. of that revenue into of our marketing together trailing sales existing helping On a the actions these in clients, team percentage basis. and team our

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So reinforce I've today. those decided to again

let cash present that how be I somewhat we flow free change know making considered in a start cash flow. with First, me free might unusual.

So quarterly, of as earnings business our that items operations, free the restructuring the by our representative flow just help to cash be also management, and not modeling. costs. we've core a added release to such cash in show are to discloses considered with The affect table flow separately your table

guidance Second, included our these prior XXXX free annual adjustments. flow cash

with So going forward, guidance flow will a our more cash free be methodology. conventional consistent

term quarter deals typical. more close is than the did in we Lastly, license

year. the Our final the term and first quarters strongest license in bookings the of are

QX license strong is term in a booking result So not typical.

they in when make year, most as And versus clients measure. support growth we Cloud, However, client cloud in our make sometimes uncertain that more the selling the same maintaining time use to a environment. Pega journey continues to decide progress cash them the double-digit be critical we rate at view will improve our while ACV and we our decision. This to ACV a growth continue what on to flow,

term. embracing better but a consistently in is and the of few over of trade-offs world's achieve greatest balances a managing a sustained profit team look of kind months. time. forward XX year, Our in of Rule job the it Rule out do between clearly mindset software our be growth of closing doing we growth only single they do the and XXXX That's company long profit. next not that the over and periods The the To to objective. companies XX much and And

you As wanted held investor June be Vegas, on Monday, that I announce I seeing will December. One all now to on up the road is oral the potential Please XX, argument for as XX. November November wrap out we our scheduled and look PegaWorld. last and date Las Hotel investors to your forward our annual to current point. during session I Virginia The calendars. today, for get meet MGM in appeal mark in our in

it's will appeal great it be likely know still now before have result, Although in scheduled the we of us. front to and months the

With call that, operator, open please the for questions.

question first our from Steve Instructions] And comes Enders Citi. [Operator with

from just to actually that of maybe out to that far changed you're uncertain environment that better want continuing, get deal when how for the like what environment October talk today? understanding kind I looks and maybe a there? Maybe the seeing that deal you things are -- you're about and conversations seeing macro so terms And start, the in of in

with of doing in acting just been was has candidly, questioning they're it's board that are organizations last clients a that money are than entirely level really across People really a deliver like candidly, mood would in scrutiny year, a to the I better lot free. of now for businesses respecting profitability. when the more Yes. -- has the consistent say position again,

to on deals I'm slightly that is their will get and is the which to see of engage. around with their been When of us the of sales can clients also enter we really things over acting not a in software, like periods. I are some had And it but they're quarter. The of success lots things we even And operations recessionary cost But a set you as little checking were efficiencies, color? are for year, as as in aim kind do seeing that cycles. going we're you think troubling I've a tangible ability we've their happens, I So the cost to everybody that get generating which longer for that. sort isn't recession, XXXX. being tougher, focusing I of how you, not through we needle and up lead that the tell who as we of really of anything things how the wants are. the really, fourth Does more central clients people time deliver last I've said if it's types conversations really customers opposed that little think on give spend to that want real to to are gain happier, around revenue, businesses to reality when many the

There's definitely. context view. helpful No, there, the especially XQ for

as So shifting free in about as And more customers to initiatives. the what cash the we should guess, gears cash quarter little I you guess from impact impact of appreciate think the and both that those that flow the have? commentary changes productivity guess, And how we then feedback in having about efficiency terms has there, that sales be potentially I talked definitely closing what and and specifically? about the thinking I would for marketing a moving be impact, think in to the changes we maybe means out improvement the I the could been that to forward, flow year bit the the and there.

So couple to that question. pieces there's of a

couple see can Steve. hit pieces, of So a let me if I

easy, never QX flow as taken. the very improvement changes will imagine, a have free you yes, any made people the and we lot for is business, even they we -- the few in Those for in first the last of And we the have in empathy that those that were changes months. impact might not some actually small, a if resulted and impacted. have organizational made So are cash changes actions in any,

in a they'll year XXXX. impact full However, have

XXXX. that's actually achieving wanted of in something flow, talked on million an $XXX cash referring that's I I traditional more one clarify shelf thing. the almost for just also measure. I'm to about improvement the When to free So new kind in

you way the were onetime to et about, items, take previously that be were If number higher. under into that talking cetera, would we account much naturally

know a clarify in was because my little maybe I that vague script. to just that So

I'd also say with that I to we QX did hard, that behind could us. the worked very basically team job and great take the so and changes And a we've think we make changes enter the done that.

So we I'm we're the would change. you next by been implemented now, not would tell that materially Right QX expecting heavy I has at mode. year the say execution

Our next Pinjalim question from comes with JPMorgan. Bora

of on I term out believe, ask kind drove performance? ACV What call I it overall And seems GenAI capabilities the of adds going to cloud growth hear or was which trough as to part we point to kind the growth, lot out? ACV you continue growth being a But your I decelerate. point of on else to that cloud side, of Infinity Secondly, that kind should cloud of Can 'XX, more about anything on forward? federal ACV some important. launch expect you at

Yes.

question. great So

that amount So workflows, or organizations are even you of kind kind relationship Cloud. at look of that's when would a and new activity of expand in purchase is go already they That that may a on may put -- that a client relationships, quarters with or if so their way existing kind the managing Pega Pega. higher there Pega that they cloud they you project of just client when those environment is because Pega doing, have existing see is expand newer bring naturally, -- a clients -- typically Cloud newer you

have when just So existing may SaaS, quarters now clients that primary typically have of is bit expansion versus the many that our kind percentage of a with where higher clients term not both. you you a little of outsized -- see for driver probably

in it's that's it not application not net depends It a -- expanding. of the environment -- kind So not which a And how the -- in strategy a or they're X. buying typically like behavior. new which down in use versus how really But of comes how change it's just workload kind -- like you there change of cases difference of between on set to existing or workload. terms

So the of drop. that's might kind why you see

be pickup the rates would say go in into based a as X. on we quarter if in just we next I'd enter that don't also surprised the the see cloud market as here we QX, I the vibrations or

Yes.

I that's had more that And -- license. be the you a renewal where QX increasing of think bit a mean tends period. because I a that Pinjalim, typically us their have at kind -- client that's you to spend little know difference cloud a look typically between period you during with clients

about of that think just So happen activity quarters. same kind can sometimes in other

Yes, understood.

positivity or X that Just the number of the large deals to just... or be clear, deals swung for X large this quarter in term, towards very were there kind any

to repeatable previous our that. in a we -- have we No, to not over or little very tended bit increasing be of time But no, actually consumption-based, do opposed deals a it of We more not the was question. growth used And kind movement, as whales towards as very many large call wasn't deals. model, they skewed we Clients actually. as you X refer No. and by fair in X perpetual are like are that's more model, as as also deal move to shock them. even in kind more of a QX our in

with next Jake William Roberge Blair. from Our comes question

and Are to their customers, Are of account the talking dollars seeing for potentially where create spend? those from you're spend maybe existing dollars spend AI they IT out areas budget you when overall coming other per customers Alan, new coming net from? to crowding investments? IT actually budgets expand and

So client both. that seeing currently a budgets we're hear client to. from were putting we million innovation are starting come hundred actually several we're the they to with And another is forward. thing happily, a just into dollars We've innovation announced a selling had great yesterday which seeing their to budget,

sure, for but and think all that So fall years, traditional make couple in really changes wanting not their it they're I sea over to they're next the of to looking will some spend business behind. affect

Very Pega feel Ken, being then complete XXXX. put you targets track on helpful. this subscription XX do And transition business the a year? as of exit Then out of Rule to is still those know you I you

growth ACV those think down growth we to look about ticked XX% between as targets? constant this Given margin the should reach you to how quarter, currency balance and

do subscription done be with the we So we'll believe transition.

to our a even years have it probably perpetual -- where maybe. In sorry, our as has X% years under been perpetual say go of far few X% as I We've now, say book really total under bookings license had X been now. for would fact, revenue we're done

this company a of realistic where our billings, about I XX-type variability always I so with it's think the looks predictability have very we then of consistency billings, naturally, cash sustainable and XXX. XXXX. are we is kind have the a think growth, kind now, model. we mean a XX business being much thought flow much company, the it said, higher of of exit about nice XX, of growth as think more. we land, our normalized would much kind is of free would I very And But take XXXX Jake. And model when of exiting was contribution Rule than now, of the we'll in And where higher cash the you than flow normalized you billings, on just do that rate. us certainly even aside, accounting that to the that Naturally, that have quarter-to-quarter, unfortunate has the business

free high about still we're actually we've to away side, kind we're XXXX. very XXXX, for a to from And growth think in Naturally, well little our work our so do on cash That's on with but of but another transparent to mid- we have XXs quarter track flow the guidance goal. company be objective. our that's I thinking been

question Kevin Sachs. comes with from next Goldman Our Kumar

in called you the script. Alan, out EMEA

can expand of and just in if regions on just the the customer those So health base curious macro environment kind the of overall you there?

coming actually EMEA my because set back looking that I quarters, to QX I And a there done. visit. we that of if say was pleased with back couple you was be go little last in a are Yes. I'm very tepid. see things would

EMEA, in return So the countries them. of all of a I'm seeing in most not

a say, to they're very there's instance. lot of Germany, there, in going reframe businesses to be Some how political figure more U.K. the would I still are to out interested of on for them little those trying a tougher, but But profitable. stuff

And you're cases vertical? can are use you maybe that general, an activity of government the deal then what the Great. for? update best just in you give And seeing that positioned vertical, level in on

Pratt, Jen I vertical. be Yes. of who help senior announced, lot pushing is We're vertical. a to in hired just a we really, seeing much in forward we new that activity who think, effective executive that And more us

the So of to a though I've What only coming of way that excited, a up love now. she's months couple I I'm seen in speed, and very is lot here been she's interest. vertical

cases it with use candidly, in Our businesses. and the those take of where is we data associated typically of mind is you bellwether auditing period organizations. perfect combination aren't of that lot a are clients meaningful engagement, and for improve a increasingly workflow. automation, lot top like a of Pega that and workflows of environment. And there's for time, the workflows. piece are a needs are Department government to handle has live needs Justice, of kind that we But citizen of now serious has Those pushing long of the which the over actually it and major in The which workflows around. The that a is going work there FBI is Pega IRS tickets stuff on, do there and

in not Germany, government, some in at actually the major, when work the we're U.K., to major look U.S., work at with going we're I on look APAC. when I what's take in the just doing a but I So just trip took

We seeing for in have of I'm doing. things me a systems make government about that Pega in more every feel Singapore, lots great running than what dozen instance. is region

that. And just one additional comment on

customer to and layer prone about which really well plugged orchestrating to to set vertical, more applications to but these that like be some mothball. try kind If still legacy the strong a proposition the is at of of -- being experience, interface go modernize keep with able really but to in the government, interact the maybe that interact value have that really improve able data government to is in, applications, and can't with embedded mean the systems the user to yet that be just I systems to with modernize, they able you a think just into very so -- feeds Pega speak, cloud,

question from comes Rishi next Our RBC. with Jaluria

lot think be go have and partners simultaneously, And are things better that transformations the been about partners more their generative macro. because large-scale on dragging impact. understanding from those more that digital becomes about are given as back companies important. uncertain more Maybe workflows that feet to specifically, contemplating digital we've the I strategy, and AI to might are to and customers what customers to of a their integrate saying hearing macro transformation imagine enable But as I'd want

you are as us weighing as of and and term takes long you're embrace role customers got I've puts what AI a how follow-up. then of terms that? those the your seeing the of in can near-term help in So themselves to kind maybe and well both macro position And generative trying understand enabling kind to quick about

Sure.

couple threats of good a are actually I parallel here. there pull it's would So on say to question. a

macro they're want organizations becomes pragmatic. there's little no that practical So what when question more in sure make investing is a to and the [indiscernible] really

better that better. help help drive really going their to from workforce -- they're you have is And We're much work make going what away decisions ways to want results. get we help going environment. to they switched is that done. literally So sure for you well to, boost the very We've you to revenue we're ourselves equipped see in hey, to more very, Pega going boy make

suited and So also we're lot well it to But that's Customers as a what that describe lot experimentation. for. I something figure think there's would of I generative trying There buzz around out. client a are of gambling is AI.

can to they're really with places the do of do. get are lot the customers and to differently pots of one for category, used was really reduce to about GenAI use for visiting call they're what screens to really developers I've category stirring, drive we whole of centers annual fill them a buying, I costs be in excited a who results. And approaching [indiscernible] which trying, but getting so they're And which build to little also that pragmatic its call also things, be seen be able significantly to the their what looking improves AI client able a previous but to of we can of and productivity, they're voice improve things customer time put massively to experience. variety looking interpret and in lots

to going market it's what's So what cases, to tied the delineate I community for the going going to tied interesting try to the it's in not experimentation, going AI that which to action to the going evolutions, and type core investment help? think real be is they're now to persist in be some future Does work into and to work to systems years. and the

the you a Yes, for side. gross absolutely. then, follow-up Very just on margin Ken, helpful. And

bit terminal you How could something a on is have show cloud anything pretty an there are the a become embracing Is thinking time over as to structure continue be this margin might Or multi-tenancy you Kubernetes. margin we you So holding especially XX% core, around from you that margins back should business? that be gross do cloud gross about gross side, little that? of the expansion. cloud impressive

question. great Yes,

we will should get level hoping close to confidence, to And should be XX%, we with And we to we're we of get now first there. be then I we we saying say when but XX%. were started Cloud, we XX%. XX%, also we're Pega got this to When said, a approaching have So XX%.

don't XX%. be to to be hard it now say difficult. path see see surprisingly I It do approaching path a might will to I And XX%, much definitely above But would get I might It be XX%. how easy. XX%. we're that know so a terribly we

question Barclays. comes Raimo next from with Lenschow Our

quarter, you much the This obviously was about of the there. cloud. had And term reasons of kind talked some we than better

now you more balance the about you of will Or this there? more going think double-click on kind And good you you about downturn. as for think the maneuvering any versus progression, ready about -- Like Is of on that you. you I forward? for as But progress times next there If we stay cloud continue has the for that steps Ken side? then kind guys ahead. year. choice think customer The plans to better a for is if investments, through potentially do of obviously, the very to investments AI that. think margin get one, we growth How do

and our So profile thoughts your first the help and I'll maybe, one, margin and take AI, might clients. the give how of can on Alan, AI you us

operational clients needs. Cloud support are the what some as may that that at So other to be And take to companies journey have in we want pace first piece, leveraging. And we because will. they than are we to to we on understand through really That committed move ready them may cases, may would are there, cloud unique that to journey. fully longer quite journey and that we get clients Pega it not hope frankly, excited said, the our they being about a

completely Pega clients and commitment committed, -- that clients, not margins. unchanged, client support improved are to and But we for experience automate, make committed we to our to better Cloud our said, modernize our moving from choice. et completely it the always are scale away ability So and is cetera,

our want stance. AI fit that to So Alan, might and bit talk margin into that's little do the a about how you profile?

Yes.

use PegaWorld, in those going coming to June, And closing released presentation I I soon be your your my recall, new and interesting as I many of going stood these was rehighlight which were said X is are you One just forward. technologies, we've at Pega who as to these be to So this in we go things. do X question. more really that that up there the put we're to to as which is may new think relevant technologies of at which now are to fingertips. to We're going QX. -- And using

to really to using a ease-of-use this education faster. And change help build of is is said which radically report training we the and Pega what little and we were June, that have people profile productivity new -- to in bit by the building should actually for second I up to technology of guide and in going So major we of front of get in of which double stream it's that a better. expected results I faster come a opportunities time, out clients but our people and us Pega, open

sort that through GenAI. these piece GenAI improve cost operations we other the The new these also profile productive capabilities, use many will features and -- of as their have we of make build accelerators is important to well also customers' on that the more

going the lot that that So 'XX right and view is very think change a on we are now working as much we 'XX. to through we very, I enter have we as go

Schappel Markets. with comes Our next Loop from Capital question Mark

company? new Alan, starting remarks. your type appreciate the for offering I I with in customer prepared AI but on you, early it's seeing of realize that And generative a you comments attract still like are to your look, the solution,

I'm target have remember, am. -- I organization we Yes, seeing a structure. the

generative that this, So mentioned, pega.com we sit really I for page get with want customer on go it's the really filled to you who AI -- buyers. of a which type if that business to just buyer new inside

Banking I of a to person. executive account closing Conference we about. The at asked why whatever politically don't ways of process many You you most U.K. interesting being, you as from this technical be are workflows business but sale, the buyers, had International ways, we should the say, had what whatever a senior of a worry Obviously, Cyprus put large the concerned month ago. the about business in of bank, with doing that we see or you part exposed think in a and for sit a

was the note think Koos the about If changes whole you that processes. way you And CEO the fired, the it may was that want out completely was develop believe they inappropriately. news, -- And you read done came because operate you had what how and to it mind-blowing.

and to it. have try of shown playing their we've thousands with we that, new that -- did use now it, buyers like before. And whole generation So where got whole we've got something a had area in

sales you to I workforce then, wondering you noted flatten further somewhat Ken, coincided you That's changes changes, where bit helpful. those believe with I the just the on reduction. And the go-to-market what organization. team could the I little was or a detail assume sales that organizational if front,

so in the are presales that looked post at We've of referring go resources have which changes what had continuous organization kind to state, activities of put together the like were a post-sales mission. we of live. of similar we technical of that hierarchy and the resources to. of Mark, of bringing client the engagement to management the part lot terms to at to closer could really looked of we're disclosed number kind that that was the the and unified layers. put we Well, the is referring a types I the about, to of a We've the lot roles presales closer a previously actually kind from talked layers, into type type both our did selling of of Those people that have we kind

all to have behind And it's good us. that

Yes.

next Our Securities. Truist Joe comes Meares question from with

And in flow just rely planning to be guys in in as that year, to add to cash just the was hear to X-year had but you million dollar sales to X-year about this cash the reducing you're be could reductions. bring $XXX end on of there? flow does helpful partners to question light headcount not from $XXX that to getting sales million that free potential what marketing potentially and free curious the X flow to And impact XXXX, you're that over fact closer the target range? in going to I more marketing? cash that guide it now Are -- you it's another and then far going of headcount as And asking free not XXXX.

are the -- feel I'll -- Naturally, about take made the so that we -- of organization last made times the progress results. most what we change -- in we the of And them. easy great of companies that, to some X. make when and rule thumb would part a have you of the had the That's but always of we But that the hard, has think kind rule type an very about just I we is your are decisions an annual charges -- use situation. thumb. of run like say rate I impact that of restructuring a question.

times run So look our X, you if that's typically at savings. rate the charge

million that quarter. talk million, when kind talking you listen, rate to probably a $XX going be change million getting You're last a within is can above now, do kind number made would quite and focused the we of year ways we're path run we to And That of about of think as it I be of away. from like that get while you get earlier, X, If $XX said, great, it's talked but right frankly, to 'XX, what a still us we million of that range we're to about. on there to $XXX we're shows $XXX us now annual thinking can impact QX the certainly imagine.

don't get I far of want ahead to So too ourselves.

of first me question I the I was question. that the again because Sorry, think remind part Alan

headcount you're and you're if it reducing on No, given marketing. just the partners rely planning Yes. more more in sales was so to

we think partners emphasizing anymore engagement don't are but of of partner importance the headcount, depending account we're reducing our a I with as result on teams.

clients frankly, have of not were management would a organizations made, the changes what about silos. able we're like A we've changes deal going have really of the with that replace of critical. we're And lot So to creating to reducing number I'm as feeling one candidly, some we of good internally are structures do. really it's the the as and But power we're partners that well to made. of our simplification to

around then GenAI. just a follow-up And as Great.

to customers noted yet. X their how the spoken or really even we've of that be the have don't to Some applied GenAI last know can they businesses X months over

feel in don't to a they purchase. So that make they're a position really

you're Investor Day pause this accretive next contracts? just you'll solution. customer x saw actually have bit And seeing maybe from XXXX XXXX? next to be little of the here somewhat in I'm And savings of do around if curious studies a could say, so you And this signing that that like that if our any terms a means GenAI year by, case than more think

road Just curious think far if the that by... you things be down will

case we confident next I'm for quite studies have will PegaWorld.

as waiting entirely take like QX. they'll think it. I when I of wisdom one not drafting And was if practices start at collective I demo the see GenAI process. The -- reengineering are said and there whole think clients my you'll about even could that look about, transformation the where, they my way think least everyone of to I But think at, be that an I we thinking. and practical you got it's lot say, best lot bring very sees are if God, them of experimenting the a you can QX. a "Oh I've actually and new It's in clients that my of the risks. they aren't I And example if should talked stimulate not that well. that sure for for a because use things to risks, a use they're how there see do example, them

So we'll see what you say.

question with next Macquarie. Havemeyer Fred comes from Our

practices Primarily any but beating a wanted into as become I change I'm dead among seen your partners? we've more a priorities investing their if curious ask allocating and or topic. of they're coding I'm you copilot sorry AI-related here, more robust to Where -- become generative horse productionized. on in seeing here, are sort

you The it and worry that. how change the massively an But horse trying lot be of that's It's of metaphors. sorts partners leading up in large, to But very any is casually horse There's end never keep all, or But so not flying and boy, or about like said it this are figure counsel -- a to to first them about Pega. delivering partners talk to opportunity. horses those so. any -- going We're out. right? So would things. that of of We say that use I don't their water clean, I'd to all very, is dead enormous projects. of to having strong, sense of a going

is an is think of a excited discovery the and by we're up partners their being we're use like we're able reorient about them frankly, question they of to with looking demo, and show we it everybody how There's just to no that some what also out. in on. could of the tangible that and some agenda, the enormously everybody on the have working figuring with, tooling short-term I no kind efforts. some but going the tangible extremely exciting. of it lot boy, which them knows actually mind a this going to of industry get in able Because my innovation term real that period there's going as 'XX. And that And Yes, that question we it's benefits. benefits. [indiscernible] But so is technology kind radically go out. of change this noticed our of through

Abernethy Blair Our next question Rosenblatt Securities. comes from with

QX? comment Ken, QX? difficulty we the macro did the expecting the in trend given in should renewal environment, weakness or And on you could the renewals just be in in macro, consistent just how what

the to that the even continuing likelihood in We a stay they any have change haven't noticeable seen invest client in and Pega. of with applications and grow

And every decide it's have We're that to does that happen. change of been we in go company. We something transformational do it have different be XXXX. do happens just that may software business. So I clients a direction. that, mean, their there's unfortunately, in not changes Pega But in a have -- part naturally, at not that clients noticeable

them about I the environment, macro environment. related Yes. of are comments made What none renewal to the

to were vendors. that to been the are of client focusing likely out the Our really businesses their not we've more in are customers really on squeeze base try fortunate SMB type set that the

trying are customers benefit. squeeze that to Our

is Historically, leaning you about be not else it's for are applications, focused workloads -- to the might to on we into new talk when push they more where Blair, trying still existing -- anyone cycles, net existing really automate. listening, volume projects sales

guess, You've little customers, given the your Alan, on banks for they and just look Infinity for just, commentary maybe nature prepared the is insurance And expand just -- at risks. But And that managing -- remarks perspective? about just of from to your month AI the in risks? when so a the been Great. you terms Okay. that in a or looking here. in your following on are what issues bit? had market be a has Can scalable, risk I of is these I of what it sort 'XX

a we've really we're tap places working. of give people to gets I good understanding we couple might more of the and way the examples to that I'll from everything to a that. used next that going that really unpredictable. right released. the And that. And we're have release One off is AI of it curate a that in of see in we Well, more And what show you're 'XX chance already be just over actually be output going think for a to two before and building

fashion. I'm And operate we working the so we're whole making hands. and sure this and AI, practices but power that's for controlled dials Generative in, AI. ethical is definitely that we've how what but our statistically do are and understand make do. client we building X clients' eliminate in that we that And our AI those the to take is, second have knobs very about would on how not years, we're firmly understands it best of and a capability everybody bias that around those the The lot of that, to third talked hallucinations use and checking really best to the being to able practices to both sure

super our comes Al. got not important. the tremendous we've our excitement AI, Generative already need also people And should lot a think as for well. generative there are AI, I we've and controls those from process of and AI things forget to decisioning different which, capabilities, statistical example, -- got about Those importance of with the

question next with Our Austin comes from Cole GMP [indiscernible] Securities.

Just X in do really technology at you you the clients demo see looking quick, it's that Where to in value? adding I've mentioned. AI for years X doing and what been this

Yes.

make do and knowledge practices drawn as the the to is well identified it documented of going have going X it, to the experts us best as practices Internet, it's the it's years, possible that clients' their able what So that they've things best actually is take for they're to Pega our before multiple information so approach to our and information with put a themselves own Pegasystems than their completely way to different in those clients and together have would candidly year use the in experience and a you configurations this on ago.

and it's to And everyone which, to grand much, So customers, our operate customers iteration in change, their Thank going for where build talking we've of going forward I our be drive able are forward. we you really we're all And with a over much to course, you much. is going few clients it's you. to here. really and We're promise. Thank of very both let look going minutes about me thank excited to greater very help soon. what do very run to

concludes conference call. This today's

disconnect lines a may time. day. You your this at Thank and your for have participation, great you