Pegasystems at JPMorgan Conference: Strategic AI Focus

On Tuesday, 13 May 2025, Pegasystems (NASDAQ:PEGA) presented at the 53rd Annual JPMorgan Global Technology, Media and Communications Conference. The company highlighted its strategic focus on AI-driven decisioning and workflow automation through its Blueprint offering. While Pegasystems showcased optimism for growth and innovation, it also acknowledged the challenges of transitioning to a subscription-based model and adapting to macroeconomic conditions.

Key Takeaways

• Pegasystems is focusing on AI-driven decisioning and workflow automation with its Blueprint offering.
• The company is transitioning to a subscription-based model and emphasizing cloud services.
• Pegasystems reported strong Q1 ACV growth, exceeding expectations.
• Blueprint aims to accelerate application development and legacy transformation.
• Pega Cloud is central to the company’s go-to-market strategy, with adaptive subscriptions offering flexibility.

Financial Results

Pegasystems reported a strong Q1 ACV of 61 million dollars, surpassing initial expectations of 35 million to 40 million dollars. The company maintains its annual ACV growth guidance of 12%. Revenue recognition typically lags ACV by two to three quarters, approximately 180 days. Despite macroeconomic uncertainties, Pegasystems is not experiencing negative impacts, and customer interest in cost-saving aligns with its value proposition.

Operational Updates

The conference call emphasized Pegasystems’ commitment to AI-driven solutions through its Blueprint offering. Blueprint compresses the lifecycle of application development, transforming weeks of work into mere hours. It enables engagement with users unfamiliar with Pega or workflow systems and is used in legacy transformation projects. Blueprint is integrated with the PEG engine, powering 1.5 billion dollars worth of customer operations annually. Currently, a single-digit number of Blueprints are live, with many more in development.

Future Outlook

Pegasystems is optimistic about its growth prospects, focusing on expanding selling capacity and increasing growth rates while expanding margins. The company is leveraging Pega Cloud as its primary solution, offering cloud choice when necessary. Adaptive subscriptions provide clients with flexible, usage-based contracting options, similar to AWS and Azure’s pricing models.

Q&A Highlights

• Adaptive Subscription is akin to AWS and Azure’s usage-based pricing.
• Free cash flow level is approximately 30% when normalized.
• Pegasystems stopped selling user-based licenses years ago.

For more details, please refer to the full transcript below.

Full transcript - 53rd Annual JPMorgan Global Technology, Media and Communications Conference:

Pajjal: Alright, I think that’s my queue. Hey everyone, thank you for joining. Delighted to have here Alan Troughler, founder and CEO and Ken Stilwell, CEO and CFO here on the stage. Guys, you for joining us.

Alan Troughler, founder and CEO, Pegasystems: Thank you, Pajjal. Thanks, Pajjal.

Pajjal: Why don’t we start with maybe a brief introduction about yourself and maybe a little bit about Pegasystems for the people in the audience that might not know about the company?

Alan Troughler, founder and CEO, Pegasystems: Sure. So I describe myself as a founder and still CEO, but it’s been since 1983, so I’m feeling pretty pretty secure in in all of that. Pegasus is a company that delivers software to do AI driven decisioning and workflow automation, And we’ve been around a long time, been through a lot of technology transitions, and are very excited about the ones that we’re in and what we’re gonna be able

Pajjal: to do for our clients.

Ken Stilwell, CEO and CFO, Pegasystems: And I’m Ken Stilwell. I’ve been with Pega for been here for coming up on ten years. We’ve made some really big shifts in the last few years starting with the movement into a subscription business, followed shortly thereafter by really doubling down on cloud and committing ourselves to be a rule 40 company. And I think of late with the introduction of Blueprint, which I know you’ll ask us about at some point, I think we’ve really given ourselves or positioned ourselves with the opportunity to further expand the addressable market that we can attack at Pega. Great.

So maybe,

Pajjal: Alan, I’ll start with you. Forty plus years Pega systems has been around, right? And the architecture you designed quite a bit ago, it has evolved over this time, but it’s still relevant today. So talk about kind of that journey, that evolution of the foundation of Pega Systems, and does it kind of help you differentiate your AI versus other AI solutions in the market?

Alan Troughler, founder and CEO, Pegasystems: Well, conceptually, we started the business with a goal of bringing business people and IT people together to empower them to use their technology more effectively. And I think that’s ever more relevant, and this world of AI gives us tremendous latitude in which to do it. Obviously, the generations of software and the you know, we’re on our sixth conceptual rewrite of the platform over all of these years is enormous on a technical basis. But from a functional basis, what we’re really trying to do is capture business intent, and from that business intent simplify the ability of business people to take control of their businesses. And now with generative AI and statistical AI and the other things we’ve been able to put in, we can see that really accelerating, we can see ourselves doing that better than we’ve ever done before.

Pajjal: Yeah. So so I guess the talk of the town whenever we talk about Pegasystems is is Blueprint. Right? And that’s kind of the topic du jour. To my understanding, Blueprint kind of compresses the life cycle of application development, know, from I don’t know I don’t know how you wanna characterize it, but So I would I would say

Alan Troughler, founder and CEO, Pegasystems: it’s more even than just that. You know, when we would go work when we would go work with a client who maybe wanted to, renovate the way they onboarded customers or they wanted to handle either a back office process or a front office process, it wouldn’t be uncommon for us to have something we call the catalyst exercise. We’d send a bright team of people in for one to two weeks. They’d spend time at a whiteboard. They would draw things.

We had funny shaped stickies that they would paste up on the wall, and they would conceive of what it is that they wanted to create. Today, with Blueprint, you can actually put the the goals, the input of what you want, pieces about your business. You can actually take documents that you use in the day to day execution of your business, and you can feed that into Blueprint. And what used to take weeks literally now takes a morning and is staggeringly better. And so I think that that really starts much earlier in helping people conceptualize how they can use technology in a whole new way as opposed to just the noble work of trying to make it easier.

Ken Stilwell, CEO and CFO, Pegasystems: I think to add to that, I also think that what Blueprint allows us to do is it allows us to engage with the users in a way that they don’t have to already know what Pega does. They don’t have to already understand what workflow systems are. You can really so that means new logos. It might mean new divisions within our existing logos that may not be super users or really experience around what Pega does. And that’s really part of that compressing the time frame because much of the time that we spent were the three to five meetings that happened before we actually showed the client Pega.

And now that’s in the first five minutes. And that’s transformational.

Pajjal: Maybe before I go into customer conversations, maybe talk about that differentiation. AI is kind of the topic everywhere right nowadays. So maybe talk about the differentiation of Blueprint, what Pega brings to the table versus your next agent force, and there are so many other application platforms, AI application platforms on these.

Alan Troughler, founder and CEO, Pegasystems: Yeah. So I’ll try to be pretty specific and explicit because I think there are some very important elements to this. And there’s so much buzz and so much hype and so much noise. I think it’s easy for things to get lost. There are some people who believe that the way you should create agents to automate portions of your work is to go to some prompt studio and author some textual prompt that in conjunction with some data will go off and do something.

And that you might have not just one of these, but if I listen to some of the companies you mentioned, you might have 6,000 of them doing specific elements of digital work. Now when when we think about that, we say, well, boy, it’s creative to use the language model to help you reason and help you think about what to do. But that just seems to us to be the completely wrong way to do it. What our view is is that you should use, and Blueprint is our tool for this, you should use Blueprint to harness the power of LLMs, to harness our experience, which we’ve captured, to harness actually going out to the Internet and asking the Internet, hey, what’s the best practices for this particular business problem or thing we’re doing? But to not do that at run time, not do that when you’re engaged with a customer handling an answer, but to do that in advance, to do that at design time.

And then having taken that step to understand and do the reasoning, to be able to map that out, to be able to show somebody in advance how you’re gonna handle certain types of requests, how you’re going to make certain types of decisions, so that a person or an auditor can say, yeah, I like that. That makes sense. And with the power of AI, you can suddenly become extremely prolific in making all the different workflows to handle all the different situations. So you can really anticipate, but have it all laid out in advance. Then at runtime, we think, no, no, you don’t want to reason at runtime because you don’t want to have the risk of a hallucination or something that was unpredictable.

You want to, at runtime, just use the language model for semantics, for language, to be able to interpret what somebody is saying, what they’re asking, and hook that up to the right workflow, and then feed the workflow what the person says, and feed the person what the workflow says using the language model for that, which is absolutely safe. There’s there’s no risk of hallucinations in that. And in addition, it’s it’s really super powerful because it’s predictable. It’s reliable. It’s gonna actually treat the two customers who should be treated the same way, the exact same way.

And you don’t have to write a single prompt. So that’s what we see the difference between a blueprint architected solution and something that just uses the language models to try to candidly cut corners, from my opinion, and avoid the advanced preparation. The advanced preparation is important if you want a predictable business, which the customers we deal with generally want a level of predictability, I’d say.

Pajjal: So best practices in the design time, and and you have an advantage to do that because of the history that you have.

Alan Troughler, founder and CEO, Pegasystems: Well, that’s where the forty years and all the gyrations around understanding workflows and rules, which is the heritage of this business, we’ve been able to put that into blueprint. So it’s not just using the language model and saying reason it out. It’s saying, hey, this is the way to think about a workflow. This is the way you think of stages and steps and how you think about the personas who might be involved and what they’re allowed to do and what they’re not allowed to do. And all of those elements Blueprint makes visible and allows you to curate, all of those come from our history and our IP and our agents, which represent what Blueprint is using to actually do this at design time.

Pajjal: Maybe help us understand it through an example of a customer that might be using either agentic or non agentic kind of an AI based on Blueprint.

Alan Troughler, founder and CEO, Pegasystems: Yeah. So Blueprint is So the trouble with the word agent and agentic and whatever is they’re getting used all over the place in so, so many ways. Blueprint itself is an agent in that it uses language models. It can run-in a variety of ways. You can just email it something and it, you know, been able to figure out what to do with it.

But I’ll give you a real life use case of somebody who’s actually gonna talk at PegaWorld. One of our customers, great customers, is a big SAP customer, Mondelez. And they wanted to create a master data management system. And that master data management system sits in front of SAP and it makes it so you can record changes to your suppliers and to your products and all the different things that they need to put into SAP. It’s not very attractive to put into SAP and it certainly doesn’t have the right sorts of, well, controls and ability to let lots of different channels do it.

By being able to create models and blueprints of this stuff, customers are able to build, to design, build, and then continue to optimize their workflows, but still the comfort of workflows even as they speed it up. So it takes the things a customer wants to do, makes it reliable, makes it predictable, stimulates them to think differently, and then makes it highly efficient.

Pajjal: I see. So that was an MDM use case, you said?

Alan Troughler, founder and CEO, Pegasystems: Yeah, that’s a master data management. MDM is a fine use case. But other use cases that customers Remember, blueprint is not a whole new product. Blueprint is just an addition to the PEG null engine, the engine that powers all of the, you know, $1,500,000,000 worth a year of customers that we have. So this is not something that people have to worry about being new.

The new part is how easy and how powerful it is at stimulating thought.

Pajjal: Would you say, in your customer conversation and the live projects that you have today, would you say Blueprint is kind starting to accelerate workload development on Pega at this point? Are you seeing that kind of flywheel, people creating Blueprint, putting it into Pega, a live application goes into production and people start using it. That kind of flywheel starting to accelerate?

Alan Troughler, founder and CEO, Pegasystems: Well, you know, Blueprint is pretty new. And what we, you know, first introduced it a year ago, actually, in June at PegaWorld, we showed Blueprint and we made it available. Blueprint’s available on pega.com, so everybody can go use it and try it and see what it is. And we’ve been enhancing it. Every one to two weeks, significant additions are made to Blueprint because it’s a SaaS product sitting on pega.com attached to a Pega system there.

And it doesn’t require a license or anything to go ahead and do this. So we’re getting an enormous uptake of people experimenting with this, trying it, and then starting to really, really use it. In terms of a flywheel, I think the flywheel is coming and we can see evidence, but it’s still early in the grand scheme of things. We didn’t really push this into our sales force until January as part of this year’s kickoff.

Pajjal: Yeah. So the example that MDM use case that you gave is good, but you have also been talking about legacy transformation as a potential use case. Talk about is that resonating with customers? Are customers kind of starting to use Blueprint for legacy transformation?

Alan Troughler, founder and CEO, Pegasystems: Yeah, so we’ve had the first several clients who have begun legacy transformation projects with us on the back of Blueprint. And it’s super exciting because what Blueprint lets you do, and you can see this, is it lets you upload, say, documentation about an existing legacy system. So you can take the user manual, you can take the test examples, you can take screenshots, you can take the schema definition of it. You can just upload all of this information. We’re also working with companies like Accenture and AWS to take their code analysis tools and we’ll feed in the output from those also into Blueprint.

And then from all of this, you get the user input as to, hey, what do you want to be different? And then Blueprint grinds and grinds and grinds and creates the workflows, creates the schema for a cloud native database to be created to hold the data for that application, and creates all the other elements, whether it’s a conversational interface, if you want a conversational interface, or if you want a screen interface. It will actually generate all of those artifacts using the standard you know, Pega capabilities that are, I think, very well respected. And I think legacy transformation is gonna be a very, very important way for our customers to use Blueprint and also for our partners to come in and use Blueprint with their customers.

Ken Stilwell, CEO and CFO, Pegasystems: One of the biggest opportunities as I kind of alluded to it earlier is the pace at which legacy transformation or digital transformation is happening is quite frankly very slow. I mean we are fifteen years plus into this and if you ask AWS they’d say 10% to 12% of it is up and maybe 80 being the target. So you’re one eighth of the way there or something like that. So I think one of the challenges is the amount of investment that is needed to get started on projects in the traditional model. You have to go out, you have to get a client to pick an app, you have to go through a lot of heavy, typically professional services with your teams, white boarding, documents, mapping.

You’ve got to go find a solution, put together a prototype. And after that whole process, there’s somewhat of a cost or energy fatigue that could happen because you could be years into a prototype and things change. Then AI comes out. You go, well, scrap that. Let’s start with the next way of doing it.

And I think what Blueprint is really targeted to do is to say cut that all out as much as possible and you turn that into I mean hopefully it’s a one hour discussion, a one day, a one week, not a one year. And that helps to get the juices flowing on innovation to be able to pick those projects and get working. By the way, if you go through an ideation process with 20 projects and you end up with 18 of them not really being worth it, great. That’s a few hours of investment, a day of investment. Versus in the traditional way, that would have been hundreds of people for months to try to build the consensus to get.

So that to us is a really big opportunity that helps our clients move faster on digital transformation. Most of the applications that need to be digitally transformed are workflow based applications. They’re processing some level of activity through a series of steps and stages. And I think that because of that it’s very relevant for Blueprint and Pega to help our clients pick the ones that are most important to move. And they likely are going to move to the cloud, which then gets the advantages of AI, getting off legacy technology, and really reimagining the experience.

All that kind of bundled into Blueprint.

Pajjal: Yeah. I want to ask you about the last mile. Blueprint gets you to certain part of the process. It helps you with the schema, the personas, the steps, and all that stuff. It spits out a file, and then you kind of put it into infinity, right?

So from that point onward, what does that last mile effort look like from that point to go live application?

Alan Troughler, founder and CEO, Pegasystems: Well, look, I spoke to my users about it at PegaWorld and I told them with what we had created, I believe we had reduced that last mile, the total effort here by more than 50%. And I haven’t had any come back to me and tell me I was wrong. I think we can do more and we’re actively working on doing more. But what’s exciting is not just that you can do the legacy transformation, it’s how good the AI and our experience is at making that a better system. You know, lots of these are old.

We were just working with an old 3270 mainframe system, God forbid. These do critical things for companies. And they’re not just ugly and hard to use and impossible to maintain. They’re really confusing. And when you’re able to turn that in to, hey, know, what are the data structures here and what are the workflows that update these data structures and control them?

You can put security on that. You can open it up to different channels like the Internet. You suddenly get whole different ways that this transformed application is not just replatformed, but it’s really rethought. And that’s how we are describing it. We want you to rethink and replace the legacy systems at a pace that you would not have believed possible.

Ken Stilwell, CEO and CFO, Pegasystems: I was just going to add one thing. I also think that something that is subtle, a subtle difference that Blueprint enforces is this level of prescription structure that happens early in the process that can be leveraged later in the process. So the last mile, as you talked about, we really want to try to take the art out of actually redesigning applications. Because there’s best practice way to approach things. And the more that it is unique and bespoke, the less likely that you can leverage new technologies, that you can keep those applications current, that you’re doing it in a way that you know they’ll scale.

And so that’s one of the real challenges with enterprise scale applications over the decades is there was too much art put into those applications that made them difficult to keep current.

Alan Troughler, founder and CEO, Pegasystems: And we were frankly guilty and complicit in perhaps encouraging people to be a little too creative at times in places where we now actually, particularly with the power of AI and the best practices being able to be built into the blueprint agent, Being able to have it, like, tell you the right way to do most things gets rid of a lot of degrees of freedom that historically have been candidly when problems occur. They’re very often where somebody’s gone off the path And it’s much better to keep them on them. So it’s, I think, has long term ramifications for

Pajjal: our long term engagement with our clients also. So tremendous kind of uptake of blueprint. I think you had said 1,000 blueprints a week or something like that in the earnings call, I believe, right? But at this point, how many are live? How many have gone through that last mile at this point, would you say?

Alan Troughler, founder and CEO, Pegasystems: I still say we’re in single digits.

Pajjal: Okay.

Alan Troughler, founder and CEO, Pegasystems: But the number that are in process is many times that. So you’re see more and more and more and more. But let’s face it, it’s quite new. And as with all AI things, are lot of people who like to poke at it, getting people to really adopt it and take it live. That, for me also is really what the test of this is.

Ken Stilwell, CEO and CFO, Pegasystems: And I think another measure of of momentum or progress is when you think about how evident is the value in Blueprint and how adopted is Blueprint and how many that we start with, what does every sales discussion for a new solution start with at Pega? It starts with Blueprint. And so that started in January, kind of toward the January. So we believe that everything that will actually happen with Pega will be driven or influenced by Blueprint. It’s just a matter of the gestation period to maturity.

Pajjal: So let me go to Q1 results now, right? And I’d heard something like 25 to 50% of the deals you closed in Q1 were Blueprint, was involved in some ways. Is that right?

Ken Stilwell, CEO and CFO, Pegasystems: Yeah, but what we meant was in the deals that were closed in Q1, Blueprint was used in some way in the selling process.

Alan Troughler, founder and CEO, Pegasystems: In a genuine way. Every customer who buys these days has seen Blueprint because that’s what represents the future of what they’ll be doing. So I would say a % of the deals had people who had seen Blueprint. What we’re talking about, where was Blueprint a central element of how we work with the customer during selling.

Pajjal: Why would you say, let’s say 50%? Why would you say the rest 50%? Why is Blueprint it’s part of the discussion but it’s not driving them?

Alan Troughler, founder and CEO, Pegasystems: It it would have been because the conversation started in October when Blueprint was not as mature or the salesperson was not as comfortable.

Ken Stilwell, CEO and CFO, Pegasystems: Or, and another scenario is a scenario where the client may have expanded their commitment on an existing application that was built. That necessarily wouldn’t be a design process happening there. Those are in that, in the other 100%, yeah.

Pajjal: Yeah, obviously Pega Cloud accelerated in Q1 ARR on constant currency. Talk about what is the driver? I mean Blueprint, how much of, seems like it’s a major driver, but how much of that acceleration was also driven by kind of the go to market changes that you have put in place earlier or several quarters ago now? Talk about the drivers of that. Well I think

Ken Stilwell, CEO and CFO, Pegasystems: one of the best things that we did in the last few quarters was to really lead around Pega Cloud. Pega Cloud is our solution that we go to market with. It’s not to say that we don’t have cloud choice when clients need it and that will happen from time to time, but our sales teams, our price list, everything is Pega Cloud. So you start with Pega Cloud, blueprint or not. Take blueprint out, act like blueprint never happened and just talk about the sales transformation for a second.

We went through a very significant sales transformation about a year and a half ago where we focused on sales cadence, the muscle around the sales process, the way that we engage, focusing on the right organizations with a very structured and consistent way of managing. We’re using the med pick process in our selling process which is an enterprise kind of approach. That tied with Pega Cloud being our lead obviously is going to help lead us to higher Pega Cloud in terms of new bookings. And there’s a massive focus now with Blueprint on our solution consultants and our sales teams looking for new work, new workloads. Not just expanding the existing applications that our clients have invested in with Pega but new transformation opportunities.

Whether that be a new use case that they’ve never done before, whether that be a transformation of a use case that they may have existed on one or more legacy systems. So there’s been this confluence pendulum around the operating model really anchoring, introducing Blueprint, Pega Cloud being our lead, and us focusing tremendously on new ways that we can expand our relationships with our clients which tie to the contracting mechanism that we deployed which is we call adaptive subscription which is a way of flexible for clients to start and scale. Think about it as more of a usage based approach so that clients can get started and scale without having a lot of the contractual hurdles might exist in the traditional way of selling licenses.

Pajjal: I have not heard adaptive subscription before from Pega. Can you double click on that? Is that more of a flexible ex licensing term?

Ken Stilwell, CEO and CFO, Pegasystems: That Yes. A cases are a very common measurement in Pega, usage based measure. It’s a way for our clients to have the flexibility to adapt their relationship with Pega, get started without necessarily knowing what their volumes are going to be and not going through a legal and contracting process because they have that agreement in place already. So it is very much and other enterprise software companies use something similar. I mean AWS and GCP and Azure have essentially an adaptive subscription model with their usage on as hyperscalers.

So it’s analogous to that.

Pajjal: So on that point then, maybe it’s because of go live timing, but there is a delay between ACV growth on cloud and then revenue kind of at this point at least, right? Yeah. Is that mainly because of the go live timing or what is that?

Ken Stilwell, CEO and CFO, Pegasystems: It’s a combination of a few things. Sometimes it relates to go live. Sometimes it relates to when, you know, if a client is actually doing a transformation and time that it might take to actually go live, get the system. It could also be some of the redundancy that happens if they’re running an on premise application as they migrate to Pega Cloud. There’s a lot of components.

The simplest way to think about it is when we book ACV, the revenue typically happens two to three quarters after that. So if you’re and that’s important to understand because many times the models that we put together in the investment community is you look at the ACV and you kind of multiply that or divide that by four for the quarter and you say that’s my revenue for the quarter. And our model typically that delays by about one hundred and eighty days or so. So that’s just something that’s we’re not the only company that that’s the case. But I think an easy way to think about it is just in that two to three quarter range.

Pajjal: Let’s pivot quickly to macro. It seems like you’re not really seeing any negative macro impacts at this point. You said something like you’re seeing high level, extremely high level of engagement with your customers. Maybe talk about those customer conversations, Alan, you have seen many cycles. What is your kind of gut feeling in this cycle in the second half?

Alan Troughler, founder and CEO, Pegasystems: I think that the uncertainty period we went through was among the greatest that I have seen. Hopefully, it’s quiescing a bit. We’ve got some good tools to work with clients and make them a bit reassured. Know, Cloud Choice, for example, is for some of our European customers who occasionally have been having, I think, you know, not rational but not entirely justified panics about working with US software companies. We, for example, have dealing with them, we since say, look, you know, you’re running on Pega Cloud, you can run on Pega Cloud anytime you want.

You can pick it up and you can run it yourself with Cloud Choice. All of your data is encrypted with your encryption key, so we can’t even see it. You don’t have to worry about us being ordered to turn your data over. Not only won’t we do it, it’s impossible. There would all be gibberish.

And so having these answers given our architecture, I think, has enabled us to quiesce some of the macro conversations. You know, the other thing is that people are very interested in saving money, and that’s good for us. So, yeah, we’ve always done well in recessions.

Ken Stilwell, CEO and CFO, Pegasystems: I think the thing that is, the one thing that’s happening, you know, whether we enter a recession or we don’t, there’s always going to be a push for efficiency, for trying to do more work with less people. Right? And the entire push on Doge was largely around trying to figure out how to do less with more, trying to get efficiency. That is our value proposition. That is the value proposition of actually automating work using workflow system to be able to streamline and save the human steps.

By the way, that’s the Gen AI value proposition too as well. So the confluence of or the convergence of Gen AI on a platform like Pega with a tool like Blueprint to be able to streamline and automate both the design and the actual running of the application, I think there is never going to be a shortage of companies that want to try to get that value. It’s just a matter of their capacity at different points in the economic cycle.

Alan Troughler, founder and CEO, Pegasystems: Yep. The other thing I’ll say is that relative to some of the Doge and other sorts of things, we stopped many years ago selling user based licenses. We sell licenses based on a quantity of work. Right? And the reason we were doing that is we routinely automate a customer, reduce their staff by 30 or 40%, and then suddenly they had excess users.

And that really didn’t sound very good. And so we didn’t have the problem that a lot of companies had where they looked and saw that there were a lot more licenses than people at certain government organizations. So I’m quite happy that that was a good decision made a number of years ago.

Ken Stilwell, CEO and CFO, Pegasystems: And it’s very logical for our clients to say that the more that the system automates work, the more value they get, the more value we should share in that. I mean, it’s a very it’s not a stretch to say if the system’s doing more work, we should receive more value as the vendor.

Pajjal: Yep. Let me see if, anybody in the audience has questions. No. What, I completely understand your point, but federal exposure, have you disclosed that publicly?

Ken Stilwell, CEO and CFO, Pegasystems: We’ve, we are, our US federal is both civilian and public is kind of high single digits.

Pajjal: Yeah, high single digits. I want to ask you, Ken, Q1 performance on ACV has been tremendous. And if we look at the guidance, and you don’t change guidance once you give it, I understand that, it’s somewhere around $165,000,000 that you have to add to kind of hit that 12% number, right? And you’ve already, I think Q1 was like a $74,000,000 addition or something like that. So it does seem like there’s a chance for you to exceed that number.

At the same time when I look at the kind of the model, I think Q2 and Q3 looks like a little bit of a tougher comps for you. So maybe talk about that dynamic. How do you feel about the rest of the quarters? And should we expect growth to dip a bit and then maybe take up towards the end of the year?

Ken Stilwell, CEO and CFO, Pegasystems: Sure. So full disclosure, our Q1 was more like 61,000,000 currency. And so your 165 or approximately was fair. So just in full disclosure, 74 was, but we had some currency tailwind. So 61,000,000 was a great start.

So we were kind of originally thinking we were going to do 35 to 40, so 61 is a great start. Last year the shape of our bookings curve was unusual compared to any other year. Q2 and Q3, it was almost Q1 through Q4 were all almost about the same. Q4 was slightly more. That is unusual for enterprise software in general.

I think all of you that know enterprise software would know that Q4s typically tend to be larger because they’re buying, they’re the end of the buying cycle. Sales people have accelerators. There’s lots of pressures. You have a lot of renewals in that time period. Last year that just was not the case.

This year we guided that Q4 was going to be a more normal like higher quarter and that Q2 and Q3 were going to be more like the traditional seasonality cycle. And that Q1 we felt like we would start off kind of a little better than we did last year. So we’re one quarter in and only thing that’s happened is we started off Q1 better than we thought. But we still there’s nothing that’s changed in our business. And we do have visibility of our pipe in terms of the timing and the shape.

So that typically that doesn’t change dramatically. So the visibility, so this year looks more like a traditional year with Q4 being a little higher and Q2 and Q3 being more subdued.

Pajjal: We have twenty seconds. Just want to ask you, cash flow has been tremendous for Pega. You made a $200,000,000 quarter I believe. Talk about is there more juice left on free cash flow? How should we think about kind of the room left in that metric?

Ken Stilwell, CEO and CFO, Pegasystems: Our focus, now that we’ve completed the subscription transition, optimized our sales team, we have blueprint in front of us, and we’ve got our free cash flow levels, let’s just call it at the 30 ish percent range if you kind of normalize the business. There is not a better time for us to be thoughtful around how we expand our selling capacity, to increase our growth rate and still expand margins. So I think our business is really built now to be able to expand margins and grow. We were not in that situation ever in our history before, so this is maybe the first time that we feel like we can really swing at both.

Pajjal: That’s a great position. Thank you so much for taking the time.

Alan Troughler, founder and CEO, Pegasystems: Thank you.

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