Slide 1: Pegasystems Investor Presentation Q2 2023
Pegasystems Investor Presentation Q2 2023 NASDAQ: PEGA pegainvestorrelations@pega.com July 26, 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+ Q2 2023 13% 21% ACV Pega Cloud ACV (1) (1) Growth Growth $298M 80% Subscription Revenue Revenue as % of Total (1) Since June 30, 2022. © Pegasystems Inc. 6
Slide 7: Trusted by the world's leading brands
And trusted by the world’s leading brands 10 of the top 10 healthcare payers 7 of the top 10 insurance companies 18 of the top 25 global banks 9 of the top 10 telecommunications companies © Pegasystems Inc. 7
Slide 8: 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 9: 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 10: Solution Overview
Solution Overview © Pegasystems Inc. 10
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 Making customer and employee- Customer Service or KY
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 ™ CHANNEL AI AUTOMATION & CENTRIC RAPID LAYER CAKE WRITES YOUR CHOICE ROBOTICS DELIVERY SOFTWARE Industry-leading tech
Slide 13: 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 engagement < 6 months payback Customer 298% ROI service Simplify service and reduce costs < 6 months payback Intelligent 186% – 598% ROI automation
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: 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 16: Business Overview
Business Overview © Pegasystems Inc. 16
Slide 17: Why Pega Wins
WHY PEGA WINS Differentiated Ease of Depth of Platform Architecture Integration Functionality Strong Deep Vertical Robust Team Expertise ROI © Pegasystems Inc. 17
Slide 18: 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 19: 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 20: Financial Details
Financial Details © Pegasystems Inc. 20
Slide 21: Financial Outlook
Financial Outlook Massive Market Opportunity Subscription Journey High Growth, Recurring Model Margin Expansion Opportunities © Pegasystems Inc. 21
Slide 22: 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. 22
Slide 23: 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. 23
Slide 24: High Growth, Recurring Subscription Model
High Growth, Recurring Subscription Model ACV Growth is the Best Indicator of Growth During the Cloud Transition Q2 2023 vs Q2 2022 Growth ACV Reported: 13% $1,200M ACV Constant Currency: 13% $1,169 $1,159 $1,150M $1,125 $1,100M $1,064 $1,050M $1,026 Constant Currency ACV $1,000M $950M $900M Q2 22 Q
Slide 25: Improving Cash Flow
Improving Cash Flow Record Cash Flow in First Half of 2023 $150M $125M $123M $100M $75M Free cash flow $50M $25M $12M $0M June 30, 2022 June 30, 2023 Year to date © Pegasystems Inc. 25 25
Slide 26: Backlog
Backlog Total Backlog Up 12% as Reported (12% Constant Currency) $1,300M $1,266M $1,200M $1,126M $1,100M $1,258 $1,000M $1,126 $900M $800M Q2 2022 Q2 2023 Backlog (Constant Currency) Backlog © Pegasystems Inc. 26 26
Slide 27: 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 28: 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 29: High Growth, Recurring Subscription Model
High Growth, Recurring Subscription Model ACV Growth is the Best Indicator of Growth During the Cloud Transition Q2 2023 vs Q2 2022 Growth $1,174M $1,164M Total ACV: 13% $1,126M $1,026M $1,040M $491 $499 $459 Pega Cloud ACV: 22% $408 $422 $667 $683 $665 Client Cloud ACV: 8% $618 $618 Q2 22 Q3 22 Q4
Slide 30: High Growth, Recurring Subscription Model
High Growth, Recurring Subscription Model ACV Growth is the Best Indicator of Growth During the Cloud Transition Q2 2023 vs Q2 2022 Growth $1,174M $1,164M Total ACV: 13% $1,126M $1,026M $1,040M $491M $499M $459M Pega Cloud ACV: 22% $408M $422M $318M $324M $315M $307M $303M Client Cloud ACV: 8% $315M
Slide 31: Fastest Growing Revenue Stream is Pega Cloud
Fastest Growing Revenue Stream is Pega Cloud Trailing 12 Months Pega Cloud Revenue $423M $402M $384M $363M $344M $323M $301M $281M $257M $233M $208M $186M $167M Cloud $149M Transition $134M Begins $119M $106M $95M $83M $73M $56M $64M $51M Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q
Slide 32: Gross Profit Dollars: Client Cloud vs Pega Cloud
Gross Profit Dollars: Client Cloud vs Pega Cloud Client Cloud and Pega Cloud deals generate similar gross profit dollars in a timeless illustrative model Client Cloud Pega Cloud 3-Year Deal; ACV = $1M 3-Year Deal; ACV = $1.25M $3.75M $3.00M $2.85M $2.81M 1 2 Revenue Gross Profit Revenue Gross Profit
Slide 33: Free Cash Flow Reconciliation
Free Cash Flow Reconciliation Six Months Ended June 30, (in thousands) 2023 2022 Change Cash provided by (used in) operating activities $ 113,752 $ (5,069) * Investment in property and equipment (13,933) (11,863) Legal fees 2,950 26,437 Restructuring 17,521 — Interest on convertible senior notes 2,2