Pegasystems (PEGA) Investor Update summary

Strategic vision and technology innovation

• Emphasis on transforming software development through a model-driven architecture and deep AI integration, especially with GenAI Blueprint, which enables rapid, collaborative application design and deployment.

• Blueprint adoption is accelerating, with over 30,000 blueprints created and strong engagement from clients and partners, including marquee partners contributing their own templates.

• GenAI Blueprint streamlines requirements gathering, design, and prototyping, reducing time from weeks or months to hours, and allows non-technical users to participate in application creation.

• AI is positioned not just as a productivity tool but as a core enabler for business process reimagination and automation, with practical use cases across industries.

• Blueprint and GenAI capabilities are being embedded into all aspects of the platform, supporting both new builds and optimization of existing workflows.

Go-to-market and client engagement

• Blueprint is changing sales and consulting motions, enabling faster stakeholder alignment and accelerating sales cycles by providing tangible, visual prototypes early in the process.

• Partners are leveraging Blueprint to create industry-specific templates, driving joint pipeline generation and expanding opportunities for both Pega and its ecosystem.

• Client testimonials highlight Blueprint's ability to democratize application design, allowing business users to quickly build and iterate workflows, fostering collaboration between business and IT.

• Blueprint is opening new frontiers for client engagement, including self-initiated and partner-initiated pipeline, and is expected to materially impact deal closures starting in Q3 2024.

• Use cases span core areas like customer service, onboarding, disputes, and originations, with strong traction in financial services and other large enterprise verticals.

Financial outlook and growth strategy

• The company has completed its subscription transition, with 85% of business now recurring and a strong focus on Pega Cloud, which has grown 5x in five years.

• Targeting $2 billion in ACV within 3–5 years, requiring 10–17% CAGR, driven by expanding existing client spend, targeted new logos, and cloud migrations.

• Cloud migrations are expected to provide significant ACV uplift, with most clients seeing increased contract value upon moving to Pega Cloud.

• Gross margins for Pega Cloud have improved to nearly 80%, with a goal to maintain or slightly increase this level as scale grows.

• Free cash flow is projected to exceed $500 million after tax by 2027, with continued margin expansion and disciplined investment in growth and innovation.