Slide 1: Pegasystems Investor Presentation Q4 and FY23
Pegasystems Investor Presentation Q4 and FY23 NASDAQ: PEGA pegainvestorrelations@pega.com February 14, 2024 © 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, software and what we do
OUR VISION To change the way the world builds software to unleash enterprise potential OUR SOFTWARE Enterprise AI decisioning and workflow automation platform WHAT WE DO Unlock business-transforming outcomes © Pegasystems Inc. 4
Slide 5: Unlock business-transforming outcomes
What we do UNLOCK BUSINESS-TRANSFORMING OUTCOMES How we do it with a powerful LOW-CODE PLATFORM FOR WORKFLOW AUTOMATION AND AI-POWERED DECISIONING 1:1 Customer Customer Intelligent Our Solutions are Engagement Service Automation organized into 3 AUTOMATE & SAVE TIME MAXIMIZE VALUE ADAPT WITH EASE En
Slide 6: Leading enterprises use Pega across the customer lifecycle
Personalize Automate Streamline Engagement Customer Service Operations The world’s leading enterprise-scale organizations are using Pega to connect workflows and interactions across the customer lifecycle: Communications Financial Government Healthcare Insurance Manufacturing service providers servi
Slide 7: Driving Growth and Free Cash Flow
Driving Growth and Free Cash Flow Founded: 1983 HQ: Cambridge, MA Employees: 5,000+ 2023 11% 21% ACV Pega Cloud ACV Growth Growth $201M Free Cash Flow (1) (1) For the Year Ended December 31, 2023. Starting in the third quarter of 2023, the Company calculated free cash flow as cash provided by operat
Slide 8: Corporate Social Responsibility at Pega
Corporate Social Responsibility at Pega E S G ENVIRONMENTAL SOCIAL GOVERNANCE We are committed to reducing the We strive to be a responsible We believe that corporate environmental impact of our corporate citizen and active governance is important to ensure operations on air, land, and water contrib
Slide 9: Key Investment Highlights
Key Investment Highlights • Growing enterprise software company, with a view towards a $89B+ market opportunity • Large enterprise client base in key verticals: financial services, insurance, telecommunications, health care, manufacturing, and public sector • A proven technology leader in customer e
Slide 10: Solution Overview
Solution Overview 10 © Pegasystems Inc.
Slide 11: 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 Customer Making customer and employee-facing Service
Slide 12: 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 CHOICE CHANNEL AI AUTOMATION & CENTRIC RAPID LAYER CAKE™ WRITES YOUR ROBOTICS DELIVERY SOFTWARE Industry-leading techn
Slide 13: Unlock Business-Transforming Outcomes
Unlock Business-Transforming Outcomes 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 a
Slide 14: 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. 14
Slide 15: Pega's Technology Difference
Pega’s Technology Difference Architected differently to maximize revenue and efficiency at enterprise scale Put decisions and Build layers of reuse Personalize experiences workflow at the center and variation and optimize workflows With Pega’s Center-out With Pega’s patented With Pega’s real-time AI
Slide 16: Analysts recognize Pega as a leader
Analysts recognize #1 Real-Time Forrester Interaction Management Pega as a leader #1 CRM Gartner Customer Engagement Center for our enterprise AI decisioning and workflow #1 Robotic Process Automation automation platform Forrester #1 Core CRM Solutions Forrester © Pegasystems Inc. 16 16
Slide 17: Together, we're redefining the technology industry
Customer engagement Digital process automation Together, we’re redefining the technology industry Q2 2019 Unified, market-leading technology Changing the way organizations work and engage Real-time decisions & AI End-to-end work management We’ve built the #1 real-time interaction management #1 digit
Slide 18: Business Overview
Business Overview © Pegasystems Inc. 18
Slide 19: Why Pega Wins
WHY PEGA WINS Differentiated Ease of Depth of Platform Architecture Integration Functionality Strong Deep Vertical Robust Team Expertise ROI © Pegasystems Inc. 19
Slide 20: 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 21: 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 22: Financial Details
Financial Details © Pegasystems Inc. 22
Slide 23: Financial Outlook
Financial Outlook Massive Market Opportunity Subscription Journey Recurring Model Margin Expansion Opportunities © Pegasystems Inc. 23
Slide 24: Pursuing a Massive Market Opportunity in Platform & CRM
Pursuing a Massive Market Opportunity in Platform & CRM FY 26 $119B+ FY 24 $89B+ Source: IDC Worldwide ICT Spending Guide (Feb. 2023) © Pegasystems Inc. 24
Slide 25: 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. 25
Slide 26: Recurring Subscription Model
Recurring Subscription Model Annual Contract Value (ACV) Growth since Q4 2022 ACV Reported: 11% ACV Constant Currency: 11% 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
Slide 27: Cash Flow Growth
Cash Flow Growth Note: Starting in the third quarter of 2023, the Company calculated free cash flow as cash provided by operating activities less investments in property and equipment. To ensure comparability, previously disclosed amounts have been updated. For additional information refer to explan
Slide 28: Backlog
Backlog Total Backlog Up 8% as Reported (7% Constant Currency) 10% Growth (1) 5% Growth (1) (1) Growth from December 31, 2022 to December 31, 2023 28 © Pegasystems Inc. 28
Slide 29: 2024 Guidance
2024 Guidance As of February 14, 2024, we are providing the following guidance: Year Ended December 31, 2024 Annual contract value growth 11% Year Ended December 31, 2024 GAAP Non-GAAP Revenue $1.5 Billion $1.5 Billion Diluted earnings per share $1.18 $2.75 Year Ended December 31, 2024 Cash provided
Slide 30: 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 driven • Improving sales productivity differentiation •
Slide 31: Trademarks 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 32: Reported ACV
Reported ACV Pega Cloud and Client Cloud Growth since Q4 2022 Total ACV: 11% Pega Cloud ACV: 21% Client Cloud ACV: 5% 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 33: Reported ACV
Reported ACV Pega Cloud, Maintenance, and Subscription License (Term) Growth since Q4 2022 Total ACV: 11% Pega Cloud ACV: 21% Client Cloud ACV: 5% 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 34: Pega Cloud Revenue
Pega Cloud Revenue Trailing 12 Months Cloud Transition Begins © Pegasystems Inc. 34 34
Slide 35: 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 © Pegasystems Inc. 35
Slide 36: Net Income and EPS Guidance Reconciliation (1 of 2)
Net Income and EPS Guidance Reconciliation (A) (1 of 2) (in millions) 2024 Net Income - GAAP $ 107 Stock-based compensation 143 Legal fees 15 Amortization of intangible assets 3 Interest on convertible senior notes 3 Incomes taxes (32) Net Income - Non-GAAP $ 239 Diluted earnings per share - GAAP $
Slide 37: Net Income and EPS Guidance Reconciliation (2 of 2)
Net Income and EPS Guidance Reconciliation (2 of 2) Our non-GAAP financial measures reflect the following adjustments: • Stock-based compensation: We have excluded stock-based compensation from our non-GAAP operating expenses and profitability measures. Although stock-based compensation is a key inc
Slide 38: Gross Margin and % of Revenue Reconciliation
Gross Margin and % of Revenue Reconciliation Trailing 12 Months Twelve Months Ended December 31, 2023 December 31, 2022 Gross Margin - GAAP 74 % 72 % Stock-Based Compensation 2 % 2 % Gross Margin - Non-GAAP 76 % 74 % Pega Cloud Gross Margin - GAAP 74 % 70 % Stock-Based Compensation 1 % — % Pega Clou
Slide 39: Operating and Free Cash Flow Reconciliation
Operating and Free Cash Flow Reconciliation (1) Guidance (in thousands, except percentages) 2024 2023 2022 Margin (2) Margin (2) Margin (2) Cash provided by operating activities $ 365,000 24 % $ 217,785 15 % $ 22,336 2 % Investment in property and equipment (15,000) (16,781) (35,379) Free cash flow