PEGA(PEGA) - 2019 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total Annual Contract Value (ACV) reached $634 million, an increase of $106 million or 20% year-over-year [27] - Pega Cloud ACV grew by 51% during the same period [27] - Revenue for the first three quarters of 2019 totaled $635 million, effectively flat compared to the same period in 2018 [32] - Pega Cloud revenue increased by 63% to $95 million, while maintenance revenue grew by 6% to $207 million [34] Business Line Data and Key Metrics Changes - Consulting revenue decreased by approximately 15% to $167 million, attributed to a strategic shift towards partners for implementation efforts [35] - Pega Cloud backlog increased by $100 million to $363 million, a 38% increase year-over-year [29] - Total Remaining Performance Obligation (RPO) rose by $86 million to $609 million, a 17% increase compared to the previous year [29] Market Data and Key Metrics Changes - The government sector is experiencing significant growth, with Pega winning new business in various government departments [15][18] - There is a notable increase in demand for digital transformation solutions, particularly in the public sector [39] Company Strategy and Development Direction - The company is focused on transitioning to a recurring revenue model, with 57% of bookings coming from Pega Cloud [28] - The strategy includes increasing sales capacity to better penetrate target accounts, with early returns showing healthy pipeline growth [25] - The company aims to establish a repeatable approach to address focused micro journeys for clients [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the market opportunity and the company's capabilities to help clients succeed [23] - The company is navigating disruptions such as Brexit and trade tariffs, with clients seeking adaptable solutions [6] - Management anticipates that the fourth quarter will be the largest quarter, consistent with historical trends [39] Other Important Information - The company returned approximately $62 million to shareholders, including $7 million in dividends and $55 million in share buybacks [38] - Employee count increased by approximately 13% year-over-year, with more than half of the growth in the go-to-market organization [38] Q&A Session Summary Question: Spending growth and targets - Management indicated that go-to-market investment is on pace with initial targets, with increased investment in Pega Cloud due to higher-than-expected growth [43] Question: Project Phoenix update - Management expressed enthusiasm about Project Phoenix, highlighting positive feedback from clients and the integration of multi-tenancy capabilities [49][50] Question: Changes in customer buying behavior - Management noted a resurgence in interest in the MIA region and emphasized ongoing recruitment efforts to enhance sales coverage [58][60] Question: Sales strategy in the public sector - Management highlighted the importance of partnerships in the public sector and noted an acceleration in growth within this sector [65]