Pegasystems Inc. · NASDAQ:PEGA

Pegasystems — Investor Day (June 2021)

23 slides from Pegasystems's investor day presentation, Jun 3, 2021

  1. Slide 1: 2021 Investor Briefing

    © 2021 Pegasystems Inc. 2021 Investor Briefing Alan Trefler | Founder & CEO Peter Welburn | VP, Investor Relations Stephanie Louis | Sr. Director, Product Hayden Stafford | President, Global Client Engagement Ken Stillwell | COO & CFO June 3, 2021

  2. Slide 2: Financial Discussion

    © 2021 Pegasystems Inc. Financial Discussion Ken Stillwell | COO & CFO

  3. Slide 3: Safe Harbor Statement

    3 Safe Harbor Statement Certain statements contained in this presentation may be construed as “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. The words expects, anticipates, intends, plans, believes, will, could, should, estimates, may, targets, strat

  4. Slide 4: Financial Outlook

    Financial Outlook 4 Margin Expansion Opportunities Massive Market Opportunity High Growth, Recurring Model Transition to Cloud Underway

  5. Slide 5: Pursuing a Massive Market Opportunity in Platform & CRM

    Pursuing a Massive Market Opportunity in Platform & CRM Source: IDC Software Tracker Forecast 2020H2 5 FY 21 $65B+ FY 25 $110B+

  6. Slide 6: Digital Transformation: Worldwide DX Software Spending vs Other

    Digital Transformation (DX): Worldwide DX Software Spending vs Other 62021 2024 $100 $50 2022 $150 $200 2023 $0 $250 $300 $350 $400 $450 $500 $550 $600 $650 Non-DX Software DX Software Source: IDC, 2021 ($B)

  7. Slide 7: Transition to Cloud Well Underway While Underlying Growth is Increasing

    Transition to Cloud Well Underway While Underlying Growth is Increasing 7 CLOUD TRANSITION TIMELINE TODAY 2017 2023 To… Recurring More Predictable Rule of 40 From… Perpetual Less Predictable Lower Growth & Margins

  8. Slide 8: Transition to Cloud Underway: Key Growth Metrics

    Transition to Cloud Underway: Key Growth Metrics 8 1. Annual Contract Value (ACV) Growth 2. Pega Cloud Bookings as a Percentage of New Business 3. Remaining Performance Obligation (RPO) – also known as Backlog

  9. Slide 9: Focus on Total ACV Growth as Leading Indicator

    Transition to Cloud Underway: Focus on Total ACV Growth as Leading Indicator (in millions) 9 $400$100 $800$600$300$0 $750$700$200 $500 $850 $900 Pega Cloud (55% Growth) 31-Mar-21 $282$571 $182$52931-Mar-20 Client Cloud (8% Growth) $853 $711 20% ACV, as reported, represents the annualized value of ou

  10. Slide 10: Growing Pega Cloud as a Percentage of New Business

    10 11% Pega Cloud Bookings Other Bookings* ~55% ~60%-75% FY23 TargetFY16 FY21 Year to Date *Other bookings equals the sum of perpetual and term new license bookings. Transition to Cloud Underway: Growing Pega Cloud as a Percentage of New Business

  11. Slide 11: Remaining Performance Obligation (RPO)/Backlog is Growing

    11 $252 $312 $240 $174 3/31/2020 3/31/2021 $564M $414M 36% Pega Cloud RPO/Backlog Remaining Performance Obligation (RPO) /Backlog is Growing Pega Cloud RPO/Backlog up 36%, Total RPO/Backlog Up 30% ($ in millions) $544 $321 $433 3/31/2020 $436 3/31/2021 $754M $980M+30% Total RPO/Backlog >1 Year ≤1 Ye

  12. Slide 12: ACV is the Best Indicator of Growth During the Cloud Transition

    20% ACV Growth ACV is the Best Indicator of Growth During the Cloud Transition 12 $73 Q1 18 Q2 20 $529 $421 $82 $98 $439 $634M $433 $211 Q2 18 $571 Q3 18 $460 Q4 18 $129 $477$462 Q1 19 $232 Q1 20 $136 $146 Q2 19 $488 Q3 19 $169 $524 Q4 19 $182 $515M Q1 21 $527 $738M $545 Q3 20 $568 $267 $110 $282 $8

  13. Slide 13: Pega Cloud ACV Growth: Fastest Growing ACV Segment

    Pega Cloud ACV Growth: Fastest Growing ACV Segment 13 $249M $270M $293M $304M $151M $190M $231M $264M $64M $110M $169M $267M $0M $50M $100M $150M $200M $250M $300M $350M 20192017 20202018 Client Cloud 12% CAGR Maintenance – 7% CAGR Term License – 20% CAGR Pega Cloud – 60% CAGR

  14. Slide 14: Pega Cloud Revenue Growth: 60% CAGR Exceeded Our Expectations

    Pega Cloud Revenue Growth: 60% CAGR Exceeded Our Expectations 14 $120 2017 $180 $300 2018 20202019 $60 $0 $240 $69M $51M $83M $93M $134M $125M $208M 2017 Expected 35% CAGR 2020 Actual 60% CAGR

  15. Slide 15: Margin Expansion Opportunities: Cloud Margin

    Margin Expansion Opportunities: Cloud Margin Pega Cloud Margins Improve with Scale 15 $0 $50 $100 $150 $200 $250 20182017 2019 2020 $51M $83M $134M $208M +60% Three-Year Pega Cloud Revenue % Change 55% 2020 53% 20192017 2018 51% 63% 67% Q121 75% Target Pega Cloud Gross Margins

  16. Slide 16: Competitor's Journey: Revenue Growth During a Cloud Transition

    16 -10% -5% 0% 5% 10% 15% 20% 25% 4% 11% Year 0 Year 3 -8% 2% Year 4Year 1 Year 2 16% 22% Year 5 Competitor’s Growth Example Competitor’s Journey: Revenue Growth During a Cloud Transition

  17. Slide 17: Competitor's Journey vs Pega: Growth During Cloud Transition

    17 -10% -5% 0% 5% 10% 15% 20% 25% -8% 4% Year 1 11% 17% 0% Competitor’s Growth Year 0 2% Year 2 2% 12% Year 3 16% Year 4 22% Year 5 Pega’s Revenue Growth Example Competitor’s Journey vs Pega: Pega’s Growth During Its Cloud Transition vs Competitor

  18. Slide 18: Competitor's Journey: EV/Rev Multiple Expansion During Cloud Transition

    18 3.7 3.0 4.9 6.5 7.0 7.2 9.2 12.5 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0 11.0 12.0 13.0 Year 3Year 0 Year 5Year 1 Year 4Year 2 Year 6 Year 7 EV/Rev Example Competitor’s Journey: EV*/Rev Multiple Expansion During a Cloud Transition *Enterprise Value = Market Capitalization + Total Debt – Tota

  19. Slide 19: Financial Outlook & Model

    Financial Outlook & Model 19 What does this mean? • Near-term: − Continued complicated & awkward revenue optics − Focus on Total ACV growth as leading indicator − Pega Cloud backlog growth as a confirming metric • Longer-term: − Increasingly predictable revenue and cash flows

  20. Slide 20: Revenue and Margin Growth: Key Growth Metrics

    Revenue and Margin Growth Key Growth Metrics: Longer-Term 20 ACV Growth Free Cash Flow (FCF) Margin* Rule of 40 * Free Cash Flow Margin (FCF) = Cash Flow from Operations Less Investments in Property, Plant, and Equipment Divided by Total Revenue

  21. Slide 21: 2018 Investor Day Presentation – Rule of 40 Slide

    21 2018 Investor Day Presentation – “Rule of 40” Slide

  22. Slide 22: Path to Rule of 40

    22 Path to “Rule of 40” ~21%-23% ~15% ~45% ~72%-75% 2023 Update Free Cash Flow Margin Old

  23. Slide 23: What Does this All Mean?

    What Does this All Mean? Strive to build a growing, recurring business to drive increased value 23 • Capitalizing on high-growth markets • Continuing our technology leadership • Increasing sales capacity • Driving ACV growth • Leveraging Cloud Choice differentiation • Balancing growth & margin • “Ru

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