Core Insights - Pegasystems Inc. (PEGA) exceeded expectations in its fiscal second-quarter 2025 results, showcasing strong momentum driven by its cloud strategy [1][3] - The company reported total revenue of $384.5 million, a 9% year-over-year increase, surpassing analyst estimates [3][4] - Cloud revenue surged by 24% year-over-year, reaching $166.7 million, which constitutes 43% of total revenue [4][5] Financial Performance - Annual Contract Value (ACV) rose 16% year-over-year to $1.514 billion, exceeding the estimated $1.476 billion [4][6] - Pega Cloud ACV increased by 28% year-over-year, reaching $761.1 million, indicating a shift from on-premise to cloud-based deployments [5][6] - Recurring maintenance revenue was $79.3 million, slightly above the projection of $76.5 million, while term license revenue was $74.6 million, down 6% year-over-year but beating estimates [6] Guidance and Future Outlook - The company reaffirmed its fiscal 2025 guidance, projecting 12% ACV growth, total revenue of $1.7 billion (up 7% year-over-year), and $440 million in free cash flow [7][8] - Analysts expect Pegasystems to generate $452.2 million in free cash flow for fiscal 2025, translating to a 27% free cash flow margin [8] - The company is well-positioned for long-term growth, with strong momentum in its cloud business and reduced legal risks [9]

Core Insights - GitLab (GTLB) and Pegasystems (PEGA) are significant players in the enterprise automation sector, each providing unique platforms for enhancing software development and business operations [1][2] Market Overview - The global autonomous enterprise market was valued at $49.25 billion in 2024 and is projected to grow at a CAGR of 16.2% from 2025 to 2030, presenting substantial growth opportunities for both GitLab and Pegasystems [2] GitLab (GTLB) Analysis - GitLab is experiencing strong demand for its DevSecOps platform, with solutions like GitLab Ultimate and GitLab Duo driving customer adoption [3] - In Q1 of fiscal 2026, GitLab reported a 13% year-over-year increase in customers with over $5K in Annual Recurring Revenue (ARR), totaling 10,104, and a 26% increase in customers with over $100K in ARR, reaching 1,288 [4] - GitLab's recent product launch, GitLab 18, includes significant innovations in DevOps workflows, security, compliance, and AI capabilities, which are expected to enhance its market presence [5] Pegasystems (PEGA) Analysis - Pegasystems is benefiting from the rising demand for its GenAI Blueprint solution, which integrates AI to create enterprise workflow applications, with over 1,000 new Blueprints being developed weekly [6] - In Q2 of 2025, Pegasystems reported a 16% year-over-year increase in Annual Contract Value (ACV) to $1.51 billion, driven by the popularity of its GenAI Blueprint [7] - The introduction of the Powered by Pega Blueprint solution allows system integrators to incorporate their expertise into Pega's AI-driven workflow designer, enhancing client success [8] Stock Performance and Valuation - Year-to-date, GitLab shares have decreased by 16.4%, while Pegasystems shares have increased by 23.5%, attributed to macroeconomic challenges for GitLab and strong demand for PEGA's products [9][10] - Valuation metrics indicate that both GTLB and PEGA shares are currently overvalued, with GitLab trading at a forward Price/Sales ratio of 7.55X compared to PEGA's 5.68X [13] - The Zacks Consensus Estimate for GTLB's 2025 earnings is $0.75 per share, reflecting a 1.35% year-over-year increase, while PEGA's estimate is $1.84 per share, indicating a 21.85% year-over-year increase [15] Earnings Performance - GitLab has consistently beaten earnings estimates over the past four quarters, with an average surprise of 37.64%, while Pegasystems has also exceeded estimates with a higher average surprise of 66.66% [16] Conclusion - Both GitLab and Pegasystems are well-positioned to capitalize on the growth in enterprise automation, but Pegasystems currently shows stronger momentum, higher earnings growth, and broader adoption of its GenAI solutions [17]

Financial Performance - Pegasystems Inc. reported quarterly earnings of 28 cents per share, exceeding the analyst consensus estimate of 23 cents per share [1] - The company achieved quarterly sales of $384.512 million, surpassing the analyst consensus estimate of $362.588 million [1] AI Strategy - The company's unique approach to AI was highlighted as a key driver of strong first-half results, focusing on workflow design with Pega Blueprint and operational consistency through the Pega Infinity workflow engine [2] - Pega's Predictable AI approach aims to provide enterprises with both innovation and operational consistency [2] Stock Performance and Analyst Ratings - Following the earnings announcement, Pegasystems shares fell by 1.1% to trade at $57.40 [2] - Analysts have adjusted their price targets for Pegasystems, with Rosenblatt raising it from $59 to $61, Wedbush from $68 to $70, Citigroup from $66 to $70, and DA Davidson from $50 to $60 [8]

Core Insights - Pegasystems (PEGA) reported strong second-quarter 2025 results with non-GAAP earnings of 28 cents per share, exceeding the Zacks Consensus Estimate by 16.67% and reflecting a year-over-year increase of 7.7% [1][8] - Revenues reached $384.5 million, surpassing the Zacks Consensus Estimate by 4.27% and showing a year-over-year growth of 9.5% [1][8] Performance Highlights - The company's performance was driven by its AI strategy, particularly the Pega Blueprint platform, which enhanced AI-integrated workflows and cloud subscriptions, leading to higher Annual Contract Value (ACV), backlog, and margin gains [2] - Subscription services revenues, including Pega Cloud and Maintenance, totaled $246 million, accounting for 64% of total revenues and increasing by 14.7% year over year [4] - Total Subscription revenues rose 9% year over year to $326 million, contributing 84.8% to total revenues [4] Revenue Breakdown - Subscription license revenues were $80 million, representing 20.8% of total revenues, but declined by 5.5% year over year [4] - Consulting revenues increased by 11.1% year over year to $57.8 million, making up 15% of total revenues [5] - Perpetual license revenues surged 1,875% year over year to $0.7 million, although this segment remains a minor contributor [5] Growth Metrics - Pega Cloud's ACV increased by 28% year over year to $761 million, while Client Cloud ACV rose 6% year over year to $753 million [5] - Total ACV grew 16% year over year, reaching $1.514 billion, with backlog increasing by 31% year over year, indicating strong demand for services [6][8] Operating Results - Gross margin contracted by 90 basis points year over year to 71.5%, while total operating expenses rose by 6.8% year over year to $257.7 million [7] - Operating income increased by 33.3% year over year to $17.3 million, with the operating margin expanding by 80 basis points to 4.5% [9] Financial Position - As of June 30, 2025, cash and cash equivalents and marketable securities stood at $411.6 million, up from $371.7 million as of March 31, 2025 [10] - Year-to-date operating cash flow rose over 32% year over year to $290 million, while free cash flow grew by 31% to approximately $286 million [10] Market Position - Pegasystems currently holds a Zacks Rank 1 (Strong Buy), indicating strong market confidence [11]

Financial Data and Key Metrics Changes - Annual contract value (ACV) grew 16% year over year, with a 14% increase in constant currency [29] - Net new ACV added increased by 60% year over year in constant currency, indicating significant acceleration [29] - Total ACV exceeded $1.5 billion for the first time in company history, driven by Pega Cloud ACV growth of 28% as reported and 25% in constant currency [30] - Free cash flow growth reached $286 million in the first half of 2025, supported by accelerated ACV growth and margin expansion [31][34] Business Line Data and Key Metrics Changes - Pega's GenAI Blueprint is transforming the go-to-market strategy, resonating well with clients and expanding the company's footprint in key verticals [30] - The majority of Pega Cloud bookings contribute to backlog, creating a more predictable future revenue stream [34] Market Data and Key Metrics Changes - The company is experiencing increased engagement and interest in its offerings, particularly in the context of legacy transformation and AI adoption [53][60] - More than a thousand organizations are currently building Blueprints, driving increased awareness and engagement [22] Company Strategy and Development Direction - The company is focusing on leveraging its unique AI-driven architecture and the Pega Infinity platform to enhance application development and deployment [10][18] - Pega is expanding its partner ecosystem, including a strategic collaboration with AWS to accelerate legacy transformation projects [21] - The introduction of partner-branded Blueprints is expected to enhance visibility and collaboration with partners' customers [20][68] Management's Comments on Operating Environment and Future Outlook - Management noted a level of anxiety among customers due to global unpredictability but emphasized that there are no significant headwinds affecting business [52] - The company is optimistic about the ongoing demand for AI and legacy transformation solutions, which are expected to drive growth in the coming years [53][60] - Management highlighted the importance of maintaining momentum in ACV growth and free cash flow generation throughout the year [54][39] Other Important Information - The company has repurchased approximately $251 million of its shares, representing over 85% of total free cash flow generated during the period [35] - The company is committed to investing in its core business while evaluating capital allocation options for long-term value creation [36] Q&A Session Summary Question: On Pega Cloud and ACV growth - Management indicated that Pega Cloud ACV is significantly driven by the Blueprint, which is central to sales campaigns [44] Question: Deal renewals and quarterly performance - Management noted that Q1 had a higher renewal cycle, but Q2 was consistent with expectations [46] Question: Customer focus and deal environment - Management observed that customers are increasingly focused on AI adoption and legacy transformation, driving accelerated discussions [53] Question: ACV strength and FX impact - Management confirmed that the strong ACV growth is not a substitute for future performance and noted a consistent currency headwind of about two percentage points [55] Question: Public sector engagement - Management acknowledged some project delays but expressed optimism about opportunities in the public sector for efficiency improvements [75] Question: Booking momentum post-conference - Management reported increased customer engagement and a growing pipeline following the Pega Cloud conference [96] Question: Margin expansion outlook - Management emphasized that margin expansion is dependent on growth and that they are executing well on cost management [100]

Financial Data and Key Metrics Changes - Annual contract value (ACV) grew 16% year over year, with a 14% increase in constant currency [28] - Net new ACV added increased by 60% year over year in constant currency [28] - Total ACV exceeded $1.5 billion for the first time in company history, with Pega Cloud ACV growth of 28% reported and 25% in constant currency [29] - Free cash flow growth reached $286 million in the first half of 2025, driven by accelerated ACV growth and margin expansion [30][31] - Total remaining performance obligation increased by 31% reported and 27% in constant currency year over year [31] Business Line Data and Key Metrics Changes - Pega's GenAI Blueprint is transforming the go-to-market strategy, leading to significant business activity in Q2 [28][29] - Pega Cloud bookings primarily contribute to backlog, creating a predictable future revenue stream [32] Market Data and Key Metrics Changes - The company is experiencing increased engagement and interest in its offerings, particularly in the context of AI and legacy transformation [50][72] - The public sector is showing strong demand for cloud and digital transformation solutions, with significant projects ongoing [71][72] Company Strategy and Development Direction - The company emphasizes a unique AI-driven approach that combines creativity during the design phase with predictability during production [12][15] - Pega Blueprint is positioned as a key differentiator, allowing users to design applications quickly and effectively [10][19] - The company is focusing on expanding its partner ecosystem and enhancing collaboration with global systems integrators [20] Management's Comments on Operating Environment and Future Outlook - Management acknowledges a level of unpredictability in the market but does not see significant headwinds affecting business [49] - The focus on AI and legacy transformation is expected to drive growth in the coming years [50][59] - The company aims to maintain momentum in ACV growth and free cash flow generation throughout the year [52][39] Other Important Information - The company has launched partner-branded Blueprints, attracting interest from major systems integrators [19] - A five-year strategic collaboration agreement with AWS was announced, enhancing the accessibility of Pega's software [20] Q&A Session Summary Question: Inquiry about Pega Cloud's ACV growth - Management indicated that Blueprint is a significant driver of business activity and is engaged in every sales campaign [43] Question: Discussion on renewal cycles - Management noted that Q1 had a higher renewal cycle compared to Q2, but Q2 was not unusual [45] Question: Deal environment and customer focus - Management observed a trend of increased interest in legacy transformation and AI adoption among clients [50] Question: Impact of ACV strength on future expectations - Management aims to maintain momentum and not view strong first-half performance as a substitute for second-half results [52] Question: Public sector deal elongation - Management noted some projects may have been reshuffled but sees potential tailwinds from government efficiency initiatives [70][72] Question: Competition for Blueprint - Management stated that Blueprint does not have direct competitors but faces competition from other software vendors like Salesforce and ServiceNow [99]

Financial Performance - ACV (Annual Contract Value) grew by 16%, or 14% in constant currency, reaching $1.514 billion as of June 30, 2025[60, 62] - Pega Cloud ACV experienced significant growth of 28%, or 25% in constant currency[21, 71, 75] - Free cash flow year-to-date (YTD) reached $286 million[21] - Total backlog increased by 31% to $1.835 billion[84] - Net ACV add for the first half of 2025 was $99 million, a 60% increase compared to the first half of 2024[78, 79] Market and Business Strategy - Pega is targeting a large market opportunity, estimated at over $90 billion in FY25 and projected to exceed $150 billion by FY29[26, 56] - The company is focused on a recurring subscription model and aims to drive ACV growth and leverage Pega Cloud[54, 66] - Pega emphasizes its technology leadership in customer engagement and intelligent automation[26] Technology and Solutions - Pega's platform offers enterprise AI decisioning and workflow automation[11] - Key solutions include 1:1 Customer Engagement, Customer Service, and Workflow Automation[12, 30] - Pega's architecture is designed for scalability and rapid innovation, featuring the Situational Layer Cake and Pega Express[13, 14]

Core Insights - Pegasystems reported revenue of $384.51 million for the quarter ended June 2025, reflecting a year-over-year increase of 9.5% and surpassing the Zacks Consensus Estimate by 4.27% [1] - The company's EPS for the quarter was $0.28, up from $0.26 in the same quarter last year, exceeding the consensus estimate of $0.24 by 16.67% [1] Revenue Breakdown - Subscription services revenue was $246.01 million, below the average estimate of $251.35 million, but showed a year-over-year increase of 14.7% [4] - Subscription license revenue reached $79.96 million, exceeding the average estimate of $53.75 million, but represented a decline of 5.5% compared to the previous year [4] - Total subscription revenue was $325.98 million, surpassing the average estimate of $305.08 million, with a year-over-year growth of 9% [4] - Perpetual license revenue was reported at $0.71 million, significantly higher than the average estimate of $0.07 million, marking a year-over-year increase of 1875% [4] - Maintenance revenue was $79.27 million, falling short of the average estimate of $106.67 million [4] - Consulting revenue was $57.82 million, slightly above the average estimate of $54.62 million, with an 11.1% increase year-over-year [4] - Pega Cloud revenue was $166.74 million, below the average estimate of $172.96 million [4] Stock Performance - Pegasystems' shares have returned +2.8% over the past month, compared to a +5.9% change in the Zacks S&P 500 composite [3] - The stock currently holds a Zacks Rank 1 (Strong Buy), indicating potential for outperformance in the near term [3]

Core Insights - Pegasystems (PEGA) reported quarterly earnings of $0.28 per share, exceeding the Zacks Consensus Estimate of $0.24 per share, and showing an increase from $0.26 per share a year ago, resulting in an earnings surprise of +16.67% [1] - The company achieved revenues of $384.51 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 4.27% and up from $351.15 million year-over-year [2] - Pegasystems has consistently outperformed consensus EPS estimates over the last four quarters, achieving this four times [2] Financial Performance - The earnings surprise of +230.43% in the previous quarter, where actual earnings were $0.76 compared to an expected $0.23, indicates strong performance [1] - The current consensus EPS estimate for the upcoming quarter is $0.20, with expected revenues of $358.58 million, and for the current fiscal year, the EPS estimate is $1.88 on revenues of $1.67 billion [7] Market Position - Pegasystems shares have increased by approximately 10.2% since the beginning of the year, outperforming the S&P 500's gain of 7.2% [3] - The company holds a Zacks Rank 1 (Strong Buy), indicating expectations for the stock to outperform the market in the near future [6] Industry Outlook - The Computer - Software industry, to which Pegasystems belongs, is currently ranked in the top 20% of over 250 Zacks industries, suggesting a favorable environment for performance [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ____________________________ FORM 10-Q _____________________________________ ☒ Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended June 30, 2025 (Registrant's telephone number, including area code) ____________________________ OR ☐ Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission File Number: 1-11859 ____________________ ...