Slide 1: Pegasystems Investor Presentation Q3 2023
Pegasystems Investor Presentation Q3 2023 NASDAQ: PEGA pegainvestorrelations@pega.com October 25, 2023 © Pegasystems Inc.
Slide 2: Safe Harbor Statement
Safe Harbor Statement Certain statements in this presentation may be “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Words such as expects, anticipates, intends, plans, believes, will, could, should, estimates, may, targets, strategies, intends to, pr
Slide 3: Pega Overview
Pega Overview © Pegasystems Inc. 3
Slide 4: Our Vision and Mission
OUR VISION To change the way the world builds software. OUR MISSION To deliver innovative software that crushes business complexity so our clients can solve problems today and transform for tomorrow. © Pegasystems Inc. 4
Slide 5: Pega Crushes Business Complexity
What we do PEGA CRUSHES BUSINESS COMPLEXITY How we do it with a powerful LOW-CODE PLATFORM FOR WORKFLOW AUTOMATION AND AI-POWERED DECISIONING 1:1 Customer Customer Intelligent Our Solutions Engagement Service Automation are organized AUTOMATE & SAVE TIME MAXIMIZE VALUE ADAPT WITH EASE into 3 Resolve
Slide 6: Leading Digital Transformation
Leading Digital Transformation Founded: 1983 HQ: Cambridge, MA Employees: 5,000+ Q3 2023 10% 14% ACV Pega Cloud ACV Growth (1) Growth (1) 13% $335M Free Cash Flow Margin (2) Revenue (1) Constant currency change since September 30, 2022. (2) For the Nine Months Ended September 30, 2023. Starting in t
Slide 7: Corporate Social Responsibility at Pega
Corporate Social Responsibility at Pega E S G ENVIRONMENTAL SOCIAL GOVERNANCE We are committed to reducing We strive to be a responsible We believe that corporate the environmental impact of corporate citizen and active governance is important to our operations on air, land, and contributor in commu
Slide 8: Key Investment Highlights
Key Investment Highlights • Rapidly growing enterprise software company, with a view towards a $78B+ market opportunity • Large enterprise client base in key verticals: financial services, insurance, telecommunications, health care, manufacturing, and public sector • A proven technology leader in cu
Slide 9: Solution Overview
Solution Overview © Pegasystems Inc. 9
Slide 10: What are the Business Problems We Solve?
What are the Business Problems We Solve? Pega drives better business outcomes by… Making Decisions Delivering 1:1 customer engagement powered by real-time, omni-channel AI …and very often we do both Getting work done For example, in the context of Making customer and employee- Customer Service or KY
Slide 11: Pega Infinity
Pega Infinity™ 1:1 Customer Engagement Customer Service Intelligent Automation MAKE GET WORK DECISIONS DONE REAL-TIME, OMNI- END-TO-END MICROJOURNEY- SITUATIONAL SOFTWARE THAT CLOUD CHANNEL AI AUTOMATION & CENTRIC RAPID LAYER CAKE™ WRITES YOUR CHOICE ROBOTICS DELIVERY SOFTWARE Industry-leading techn
Slide 12: Crushing business complexity
Crushing business complexity Solving the problems no one else can. Delivering value, fast. One-to-one 489% ROI customer Maximize customer lifetime value < 6 months payback engagement Customer 298% ROI service Simplify service and reduce costs < 6 months payback Intelligent 186% – 598% ROI automation
Slide 13: So how do we do it?
So how do we do it? Our software can handle quick fixes, lasting transformation, and everything in between. Intelligent Scalable Rapid technology architecture innovation © Pegasystems Inc. 13
Slide 14: Together, we're redefining the technology industry
Customer engagement Digital process automation Together, we’re redefining the technology Q2 2019 industry Unified, market-leading technology Real-time decisions & AI End-to-end work management Changing the way organizations work and engage We’ve built the #1 real-time interaction management #1 digit
Slide 15: Business Overview
Business Overview © Pegasystems Inc. 15
Slide 16: Why Pega Wins
WHY PEGA WINS Differentiated Ease of Depth of Platform Architecture Integration Functionality Strong Deep Vertical Robust Team Expertise ROI © Pegasystems Inc. 16
Slide 17: Selling High-Value Use Cases to Some of the World's Largest Companies
Selling High-Value Use Cases to Some of the World’s Largest Companies BUYER OFFERING VALUE PROPOSITION Robert 1:1 Customer Maximize top-line growth with a centralized, real-time Chief Customer Engagement AI-powered customer decision hub that delivers next- Officer best-actions at every customer inte
Slide 18: How Do Our Clients Drive Value Using Pega?
How Do Our Clients Drive Value Using Pega? ILLUSTRATIVE CLIENT USE CASE IMPACT AND RESULT • 50 million next best action conversations delivered 1:1 Customer Retain across 18 channels Engagement customers • +12 lead in NPS over the competition Read more |https://www.pega.com/customers/cba-marketing •
Slide 19: Financial Details
Financial Details © Pegasystems Inc. 19
Slide 20: Financial Outlook
Financial Outlook Massive Market Opportunity Subscription Journey Recurring Model Margin Expansion Opportunities © Pegasystems Inc. 20
Slide 21: Pursuing a Massive Market Opportunity in Platform & CRM
Pursuing a Massive Market Opportunity in Platform & CRM FY 26 $119B+ FY 23 $78B+ Source: IDC Worldwide ICT Spending Guide (Feb. 2023) © Pegasystems Inc. 21
Slide 22: Subscription Journey
Subscription Journey From… To… Perpetual Recurring Less Predictable More Predictable Lagging Growth & Margins Rule of 40 Driven SUBSCRIPTION TRANSITION 2017 2023 TIMELINE © Pegasystems Inc. 22
Slide 23: Recurring Subscription Model
Recurring Subscription Model ACV Growth since Q3 2022 ACV Reported: 12% ACV Constant Currency: 10% ACV represents the annualized value of our active contracts as of the measurement date. The contract's total value is divided by its duration in years to calculate ACV. ACV is a performance measure tha
Slide 24: Cash Flow Growth
Cash Flow Growth Note: Starting in the third quarter of 2023, the Company has calculated free cash flow as cash provided by (used in) operating activities less investments in property and equipment. To ensure comparability, previously disclosed amounts have been updated. For additional information r
Slide 25: Backlog
Backlog Total Backlog Up 10% as Reported (7% Constant Currency) © Pegasystems Inc. 25 25
Slide 26: What Does this All Mean?
What Does this All Mean? Strive to build a growing, recurring business to drive increased value With a view towards: • Continuing our technology • Driving ACV growth • Balancing growth & margin leadership • Leveraging Cloud Choice • “Rule of 40” • Improving sales productivity differentiation • Execu
Slide 27: Trademark notice
Pegasystems, Pega, and other Pega products and services mentioned herein are trademarks of Pegasystems Inc. All other company, product, or service names are trademarks or service marks of their respective owners.
Slide 28: Reported ACV
Reported ACV Pega Cloud and Client Cloud Growth since Q3 2022 Total ACV: 12% Pega Cloud ACV: 17% Client Cloud ACV: 9% ACV represents the annualized value of our active contracts as of the measurement date. The contract's total value is divided by its duration in years to calculate ACV. ACV is a perf
Slide 29: Reported ACV
Reported ACV Pega Cloud, Maintenance, and Subscription License (Term) Growth since Q3 2022 Total ACV: 12% Pega Cloud ACV: 17% Client Cloud ACV: 9% ACV represents the annualized value of our active contracts as of the measurement date. The contract's total value is divided by its duration in years to
Slide 30: Pega Cloud Revenue
Pega Cloud Revenue Trailing 12 Months Cloud Transition Begins © Pegasystems Inc. 30 30
Slide 31: Pega Cloud Gross Margin
Pega Cloud Gross Margin At or above a 75% gross margin, Pega Cloud generates higher gross profit dollars than Client Cloud in a timeless illustrative model 75% = Gross Profit Dollars Breakeven Between Pega Cloud and Client Cloud *Trailing 12 Months © Pegasystems Inc. 31
Slide 32: Operating and Free Cash Flow Reconciliation
Operating and Free Cash Flow Reconciliation (1) Nine Months Ended September 30, 2023, 2022, and 2021 Nine Months Ended September 30, 2023 2022 2021 (Dollars in thousands) Margin (2) Margin (2) Margin (2) Cash provided by (used in) operating activities $ 137,920 14 % $ (13,446) (1) % $ (5,321) (1)% I
Slide 33: Operating and Free Cash Flow Reconciliation
Operating and Free Cash Flow Reconciliation Nine Months Ended September 30, 2023 Three Months Ended Nine Months Ended (in thousands) March 31, 2023 June 30, 2023 September 30, 2023 September 30, 2023 Cash provided by operating activities $ 68,107 $ 45,645 $ 24,168 $ 137,920 Investment in property an
Slide 34: GAAP to Non-GAAP Reconciliation
GAAP to Non-GAAP Reconciliation Trailing 12 Months Twelve Months Ended September 30, 2023 September 30, 2022 Gross Margin - GAAP 72 % 71 % Stock-Based Compensation 2 % 2 % Gross Margin - Non-GAAP 74 % 73 % Pega Cloud Gross Margin - GAAP 73 % 69 % Pega Cloud Gross Margin - Non-GAAP 73 % 69 % Sales an