In This Article:
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Annual Contract Value (ACV): Increased by $74 million, with a growth rate of over 13% year over year.
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Pega Cloud ACV: Grew by 23% to $700 million.
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Free Cash Flow: Generated $202 million in the first quarter.
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Share Repurchases: Approximately $1.5 million shares repurchased for $120 million, reducing outstanding shares by nearly 550,000.
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Debt Status: Fully repaid remaining convertible note balances of $468 million, achieving debt-free status.
Release Date: April 23, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
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Pegasystems Inc (NASDAQ:PEGA) reported a strong start to 2025 with an impressive increase in annual contract value (ACV) by $74 million, marking a 13% year-over-year growth.
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The Pega GenAI Blueprint has significantly enhanced sales processes, allowing for faster and more effective client engagement, which has contributed to the company's strong performance.
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Pega Cloud ACV grew by 23% to $700 million, indicating successful cross-selling and upselling strategies and a strong focus on cloud transformation.
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The company achieved $202 million in free cash flow in Q1, surpassing the total free cash flow generated in the entire year of 2023, demonstrating efficient cash management.
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Pegasystems Inc (NASDAQ:PEGA) has become debt-free after fully repaying its convertible note balances, strengthening its balance sheet and financial position.
Negative Points
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Currency fluctuations have impacted Pega Cloud revenue, creating discrepancies between ACV growth and revenue realization.
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There is a noted lag in converting ACV and backlog into revenue, which may affect short-term financial performance visibility.
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The macroeconomic environment remains uncertain, particularly in Europe, which could influence customer buying behavior and sales cycles.
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Despite strong ACV growth, there is concern about the variability of term license revenue due to accounting practices, which may lead to inconsistent revenue recognition.
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The competitive landscape is crowded with numerous vendors offering similar AI-driven solutions, making it challenging for Pegasystems Inc (NASDAQ:PEGA) to differentiate its offerings in the market.
Q & A Highlights
Q: Can you explain the factors behind the strong performance in term licenses and the discrepancy between Pega Cloud ACV bookings and revenue? A: Kenneth Stillwell, CFO and COO, explained that term license revenue can fluctuate due to the nature of ASC 606 accounting, which causes variability in revenue recognition. Regarding Pega Cloud, the difference between ACV bookings and revenue is due to the time it takes for ACV and backlog to convert into revenue, typically a few quarters, along with currency impacts from the previous year.