Q2 2025 Pegasystems Inc Earnings Call
All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. And if you would like to withdraw your question, press star one again. Thank you.
Peter Welburn: And I would now like to turn the conference over to Peter Welburn, Vice President of Corporate Development and Investor Relations for Pegasystems. Peter, you may begin. Thank you, Krista.
Ladies and gentlemen, thank you for standing by. My name is Krista and I will be your conference operator. Today at this time, I would like to welcome everyone to Pega systems, second quarter 2025 earnings conference call all lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. And if you would like to withdraw your question, press star 1 again, thank you. And I would now like to turn the conference over to Peter, Wellborn vice president of corporate development and investor relations for pick a systems. Peter. You may begin.
Peter Welburn: Good morning, everyone, and welcome to Pegasystems Q2 2025 earnings call.
Peter Welburn: Before we begin, I would like to read our safe harbor statement. Certain statements contained in this presentation may be construed as forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, including statements about the long-term opportunity for PEGA and trends we expect to see in our Q3 financial results and other statements that use words like intends, believes, and other similar words. These forward-looking statements speak only as of the date the statement was made and are based on current expectations and assumptions. Because these statements deal with future events, they are subject to various risks and uncertainties.
Peter Wellborn: Thank you, Krista. Good morning, everyone. And welcome to Pega systems. Q2 2025 earnings call. Before we begin, I would like to read our Safe Harbor statement. Certain statements can turn in this contained. In this presentation, may be construed as forward-looking statements as defined in the private Securities. Litigation Reform Act of 1995 including statements about the long term opportunity for Pega and Trends. We expect to see in our Q3 Financial results and other statements that use words like expects and tens beliefs and other similar words, these
Peter Welburn: Actual results for fiscal year 2025 and beyond could differ materially from the company's current expectations. Factors that could cause the company's results to differ materially from those expressed in forward-looking statements are contained in the company's press release, announcing its Q2 2025 results, and in the company's filings with the Securities and Exchange Commission, including its annual report on Form 10-K for the year ending December 31, 2024, and in other recent filings with the Securities and Exchange Commission. Investors are cautioned not to place undue reliance on such forward-looking statements, and there are no assurances that the matters contained in such statements will be achieved.
Peter Welburn: Although subsequent events may cause our views to change, except as required by law, we do not undertake and specifically disclaim any obligation to publicly update or revise these forward-looking statements, whether as the result of new information, future events, or otherwise.
Peter Wellborn: Forward-looking statements speak only as of the date. The statement was made and are based on current expectations and assumptions. Because these statements deal with future events, they are subject to various risks and uncertainties actual results for fiscal year, 2025 and Beyond could defer materially from the company's current expectations factors that could cause the company's results to differ materially from those expressed in. Forward-looking statements are contained in the company's press release announcing its Q2 2025 results and in the company's filings with the Securities and Exchange Commission, including its annual report on form. 10K for the year, ending December 31st 2024, and in other recent filings with the Securities and Exchange Commission, investors are cautioned not to place undue Reliance on such for looking statements and there are no assurances. That the matters contained in such statements will be achieved. Although subsequent events May cause our views to change except as required by law, we do not Undertake and specifically disclaim any obligation to publicly update or revise, these forward-looking statements. Whether as the result of new information future,
Peter Welburn: Our non-GAAP financial measures discussed in this call should only be considered in conjunction with our consolidated financial statements prepared in accordance with GAAP. They are not a substitute for financial measures prepared under U.S. GAAP. constant currency measures are calculated by applying the June 30 2024 foreign exchange rates to all periods shown.
Events or otherwise, our non-gaap financial measures discussed in this call should only be considered in conjunction with our Consolidated financial statements prepared in accordance with gaap, they are not a sub. A substitute for financial measures prepared under us. Gaap
Peter Welburn: Reconciliations of gap and non gap measures can be found in the company's press release announcing its Q2 2025 results.
Alan Trefler: And with that, I turn the call over to Alan Trefler, founder and CEO of Pegasystems. Thank you, Peter. And to all who are joining today's call, it's great to see such a terrific first half of 2025. I believe it's driven by our team's excellent focus, execution, and our smart and differentiated AI strategy that I see resonating with clients, prospects and Now, since we last spoke, I've continued to spend a lot of time with senior executives around the world, including at Pegaworld last month. And our value proposition and competitive differentiation have resonated clearly with them, and are really getting their attention.
Peter Wellborn: Thoughts and cards and measures are calculated by applying the June 30th 2024 for an exchange rates to all periods shown reconciliations of gaap and non-gaap measures can be found in the company's press release announcing its Q2 2025 results. And with that, I turn the call over to Alan trefler founder and CEO of Pega systems.
Alan Trefler: Thank you, Peter and, uh, to all who are joining today's call, it's great to see such a terrific first half of 2025. I believe it's driven by our teams, excellent, Focus execution. And uh, our smart and differentiated AI strategy that I see resonating with clients prospects and partners.
Ken: Ken will walk you through the first half Financial. I I live in a few minutes, but I'm going to spend a little time explaining a little more about our Ai and why we think our AI transformation approach is much faster easier and safer than alternatives.
Ken: Now, since we last spoke, I've continued to spend a lot of time with senior Executives around the world, I'm concluding at Pega World last month.
Alan Trefler: We're addressing one of the most challenging and voiced questions clients have, how to effectively develop and deploy AI and agents with the proper controls to create mission critical applications with speed and accuracy at scale. We believe this requires a dramatically different approach than other companies are advocating. Our competitive advantage is based on our long standing structural difference, which we've been building and improving for more than four decades. The architecture is unique to us, and our platform is inherently model-based, which means that applications are defined through models rather than alternative hand-coded approaches. We put business logic and process logic at the heart of each application.
Ken: And our value proposition and competitive differentiation have resonated clearly with them and and are really getting their attention. We are addressing 1 of the most challenging and voiced questions. Clients have how do effectively develop and deploy Ai and agents with the proper controls to create Mission critical applications with speed and accuracy at scale.
Ken: We believe this requires a dramatically different approach than other companies or advocate.
Ken: On a competitive Advantage is based on our longstanding, structural difference, which we've been building and improving for more than 4 decades, the architecture is unique to us. And our platform is inherently model based which means that applications are defined through models rather than alternative hand-coded approaches
Alan Trefler: So applications are designed and built once to work in any channel and across any data source or backend. The PegaInfinity platform, our low-code, cloud-native decisioning and process automation platform, Translates those application designs or models into production-ready enterprise-grade applications without any coding. This architecture allows for a more intuitive and streamlined development process. where business logic workflows, user interfaces, data structures are all configured to reusable design. We believe that this is the right architecture for a world where change is constant. and one that expects ubiquitous self-service and engentic automation. It also maximizes the potential for automation and the AI driven optimization allows us and our clients to more easily and quickly leverage AI.
Ken: To work in any channel and across any data source or back end.
Ken: The Pega. Infiniti platform are low code Cloud, native decisioning and process automation platform.
Ken: Translates those application designs or models into production ready, Enterprise grade applications without any coding.
Ken: This architecture allows for a more intuitive and streamlined development process, where business logic, workflows user interfaces data structures are all configured through reusable design components. We believe that this is the right architecture for a world where change is constant and 1 that expects, ubiquitous self-service and agentic automation.
Alan Trefler: Now let's talk a little more about Blueprint. It is a unique solution. It's a unique architecture, actually, that provides the foundation for everything we do. With PegaBlueprint, our users simply describe their business in plain language. Within minutes, Blueprint uses generative AI agents to transform and put that design into Pega's best practices and industry standards. We do this by giving Blueprint access to Pega knowledge gained over our 40-year history, as well as the ability to access the vast resources of the Internet to supplement anything we don't have. From there, users can easily refine key elements of the application design and then deploy it to run directly on the Pega platform.
Ken: It also maximizes the potential for Automation and the AI driven optimization allows us and our clients to more easily and quickly leverage AI.
Alan Trefler: Now, let's talk a little more about blueprint. It is a unique solution. It's our unique architecture actually that provides the foundation for everything. We do with Pega blueprint, our users simply describe their business in plain language. And within minutes, blueprint uses generative, AI agents to transform and put that design into pega's best practices and Industry standards.
Alan Trefler: We do this by giving blueprint access to Pagan knowledge gained over our 40 year history, as well as the ability to access the vast resources of the internet to supplement anything. We don't have
Alan Trefler: But I want to be clear that speed alone is not close to the most important benefit of Blueprint. Blueprint brings the power of AI easily and quickly into the design process. to enable collaboration, to help generate new insights and innovation, and to help businesses improve their It massively reduces the upfront work of trying to design a system. This combination of power plus speed helps reduce time to value and accelerates meaningful enterprise transformation.
Alan Trefler: From their users can easily refine key elements of the application design and then deploy it to run directly on the Pega platform.
Alan Trefler: But I want to be clear that speed alone is not close to the most important benefit of blueprint.
Alan Trefler: Blueprint brings the power of AI easily and quickly into the design process.
Alan Trefler: This is just part of why we think our approach to Gen AI is a game-changer. Now, what I was talking about at Pegaworld, if you've joined us there, is how we combine the power of AI and the predictability of work. give enterprises what we call predictable AI and that we've trademarked that We don't believe that any other company can really offer this because it's only possible because of our architectural differences. The same characteristics that makes generative AI exciting for creative applications, for example that it will generate different responses to identical inputs, becomes a fundamental problem for enterprise operations that require predictable, consistent outcomes.
Alan Trefler: To enable collaboration to help generate new insights and Innovation and to help businesses improve their businesses. It massively reduces The Upfront work of trying to design a system. This combination of power plus, speed helps reduce time to value and accelerates meaningful, Enterprise transformation.
Alan Trefler: This is just part of why we think our approach to gen AI is a game changer.
Alan Trefler: Now.
Alan Trefler: What what I was talking about at Pega world, if you joined us, there is how we combine the power of AI and the predictability of workflows.
Alan Trefler: To give Enterprises what we call predictable Ai and then we've trademarked that term. We don't believe that any other company can really offer this because it's only possible because of our architectural differences.
Alan Trefler: However, this variability is perfect for design thinking and innovation. It's precisely what makes the prompt-based AI agents our competitors are offering unsuitable for processing mission-critical transactions, where consistency isn't just preferred, it's mandatory. In contrast, Pega's approach acknowledges this duality by strategically deploying AI's creativity during the design phase. When you're figuring out what you want your application to do, how you want your business to work with different perspectives and innovative solutions add tremendous value. But then we ensure production operations run through the structured workflows that eliminate unpredictability. And so rather than fighting AI's inherent variability, or trying to engineer it away through complex prompt management or prompt studios, we embrace that where it helps at design time.
Alan Trefler: The same characteristics that makes generative, AI exciting for Creative applications, for example, that it will generate different responses to identical. Inputs becomes a fundamental problem for Enterprise operations, that require predictable, consistent outcomes.
Alan Trefler: However, this variability is perfect for design thinking and Innovation. It's precisely. What makes the prompt based AI agents are competitors are offering unsuitable for processing. Mission critical transactions where consistency isn't just preferred, it's mandatory.
Alan Trefler: In contrast Pegasus approach acknowledges this Duality by strategically a perfect deploying ai's creativity during the design phase when you're figuring out what you want your application to do, or how you want your business, to work with different perspectives and innovative solutions, add tremendous value.
Alan Trefler: But then we ensure production operations, run through the structured workflows that eliminate unpredictability.
Alan Trefler: And then we control where consistency matters at run time. Application designs generated by Blueprint are not just conceptual, they are fully executable in PegaInfinity. This tight alignment between design and execution leads to faster development cycles and gives greater agility in responding to change and creates a more collaborative relationship between business and IT stakeholders. The result is AI that accelerates innovation during development, while delivering the reliable, auditable results enterprises need in production.
Alan Trefler: And so, rather than fighting AIS, inherent variability, or, or trying to engineer it a way to complex prompt management, or Trump Studios, we Embrace that where it helps at design time. And then we control what consistency matters at runtime.
Alan Trefler: Applications designs generated by blueprint are not just conceptual. They are fully executable in Pega, Infiniti.
This tight alignment between design and execution leads to faster development cycles and it's greater agility in responding to change and creates a more collaborative relationship between business and it stakeholders.
Alan Trefler: Now, other companies are flooding the market with thousands of agents and proposing control towers to manage them. Our competitors, they're creating prompt studios and suggesting that clients are trying to manage these agents with free text prompts that will be interpreted differently every time they run. We think that's a little mad. We believe that our clients and partners are recognizing the advantages of our predictable AI approach, where you get the creativity when you want it, and you get reliability when it really matters to run your business, hour to hour, and day to day. And when we demonstrate how we bring structure and governance to AI deployment, and how we uniquely combine the power of AI agents to do the design with the predictability of workflows, we get real moments of understanding that are really exciting and that serve to validate our vision.
Alan Trefler: The results is AI that accelerates Innovation during development while delivering the reliable auditable. Results Enterprises need in production.
Alan Trefler: Are flooding, the market with thousands of agents in proposing control Towers to manage them.
Speaker Change: Our competitors, they're creating prompt Studios and suggesting the clients are trying to manage these agents with free text prompts that will be interpreted differently. Every time they run,
Alan Trefler: We think that's a little mad.
Alan Trefler: We believe that our clients and partners are are recognizing the advantages of our predictable, AI approach, where you get the creativity when you want it and you get reliability. When it really matters to run your business? How would our end day today? And when we demonstrate, how we bring structure and governance to AI deployment and and how we uniquely combine the power of AI agents to do the design with the predictability of workflows,
Alan Trefler: Now, the impact of Blueprint is significant. It makes it incredibly fast and easy for a user to leverage all the power of Pega to participate in transformational initiatives, in speeding time to value, and helping organizations get rid of a lot of the legacy that is slowing them down. In fact, we have lots of stories about people with little or no technical Pega knowledge, creating amazing Frontline Employees to Business Line Leaders. During a keynote last month at Pegaworld, Vodafone spoke about how they're using Blueprint to start every new development project, and were able to take their budget process from ideation to a delivered production app in under 40 hours, just hours.
Alan Trefler: we get real moments of understanding that are really exciting and that Sarah to validate our vision.
Alan Trefler: Now, the impact of blueprint is significant it, it makes it incredibly fast and easy for a user to leverage, all the power of paragraph to participate in transformational initiatives, in, in speeding time to value. And, and helping organizations get rid of a lot of the Legacy that is slowing them down.
Alan Trefler: In fact, we have lots of stories about people with little or no technical Peg of knowledge. Creating amazing blueprints from Frontline employees, to business, line leaders,
Alan Trefler: But it's not just the speed, it's the power and creativity and thoughtfulness of the app, driven by AI, powered by, well, extremely capable workflow. Execution.
During a keynote last night, last month at Pega World, Vodafone spoke about how they're using blueprint to start every new development project, and we're able to take their budget process from ideation to a delivered production app in under, 40 hours is ours. But it's, it's not just the speed. It's the power and creativity, and thoughtfulness of the app.
Alan Trefler: And last month, we launched partner-branded blueprints. And blueprint has captured the imagination of a number of our key partners. They want to infuse their own intellectual property and knowledge repositories directly into a branded version of blueprint that has their name on the cover so they can feel good about it and they can get the credit for their thinking and how we've been able to add that into our font of knowledge from our history here. This allows them to showcase their unique IP and domain knowledge. And I think it extends our reach further into our partner's customer base and sellers.
Alan Trefler: Driven by AI powered by well, extremely capable workflow execution in the back.
Alan Trefler: In the 40 days or so since we announced this concept, we've had many of the world's largest systems integrators sign up to develop their own branded blueprints to use directly with their clients, including Accenture, Capgemini, Cognizant. EY. In TCS, and Vertusa, with more in the works. We believe this speaks volumes about their interest and commitment into leveraging Blueprint in their own practices. And Blueprint gives them a powerful tool that they can use to collaborate and ideate with their clients around their IP, while providing a much bigger potential customer base with visibility into the power bagger.
Alan Trefler: And last month we launched partner branded Blueprints and blueprint is captured the imagination of the number of our key Partners. They want to infuse their own intellectual property and knowledge. Repositories directly into a branded version of blueprint that has their name on the cover so they can feel good about it and they can get the credit for their thinking and how we've been able to add that into our font of Knowledge from our history here. This allows them to Showcase their unique IP and domain knowledge. And uh I think it extends our reach further into our partners', customer base and sellers in the 40 days or so since we announced this concept, we've had many of the world's largest systems integrated
Alan Trefler: Now, you may have seen that we recently hired Dan Kaysen from AWS as our head of global partner ecosystem to lead the strategic evolution of Pega's partner ecosystem. This includes strengthening alliances with global systems integrators and hyperscalers, accelerating the adoption of Pegagen AI and Pegablueprint, and we think this will really expand partner-influenced revenue. Just last week, we announced a five-year strategic collaboration agreement with AWS, and the agreement combines the power of Pegablueprint with AWS's Transform product, which is designed to accelerate legacy transformation projects without disrupting critical business models. We think having Pegasystems software available on the AWS Marketplace also makes it easier and faster for clients to access our software and benefit from the associated capabilities.
Alan Trefler: Sign up to develop their own branded blueprints to use directly with their clients including Accenture Cap. Gemini cognizant ey, emphasis TCS, and vatusa with more in the works. We believe this speaks volumes about their interest and commitment into leveraging blueprint in their own practices and blueprint gives them a powerful tool that they can use to collaborate and ideate with their clients around their IP while providing a much bigger potential customer base with visibility into the power backup.
Alan Trefler: Now, you may have seen that we recently hired Dan case information from AWS as our head of global partner, ecosystem to lead, the Strategic evolution of the biggest partner ecosystem. This includes strengthening alliances with Global Systems integrators and hyperscalers accelerating the adoption of pegagan, AI, and Peg of blueprint. And we think this will really expand our partner influenced Revenue. Just last week, we announced a 5 year strategic collaboration agreement with AWS and the agreement combines the power of Pega blueprint with aws's, transform product, which uh, is designed to accelerate Legacy transformation projects without disrupting critical business functions.
Alan Trefler: Now, a moment on how Blueprint is evolving, you know, the interest and use of Blueprint continues to rise. And today, more than a thousand organizations around the world are building Blueprint. And this is driving increased awareness, engagement, and we think it's a long-term opportunity for Pega to get its familiarity increased and for the values of our offerings to be better understood. Now, we continue to enhance its functionality to support enterprise transformation, whether you're building a new app or reimagining a legacy application. For example, in June, we announced new features that help clients address their most pressing legacy transformation initiatives with ease and speed.
Alan Trefler: We think having paragraph software available on the AWS Market. Space Marketplace also makes it easier and faster for clients to access our software and benefit from the associated capabilities.
Alan Trefler: To enhance its functionality to support Enterprise transformation. Whether
You're building a new app or reimagining, a legacy application.
Alan Trefler: for example, in June
Alan Trefler: You know, because business transformation is often held back by legacy technology that eats resources, budget, and time, and hampers innovation. Now, I'm sure you've seen the same reports I have about the costs associated with technical debt. Forrester estimates that legacy systems will account for two-thirds of global tech spending in 2025. And this isn't an easy problem to solve.
Alan Trefler: But we believe Hager Blueprint creates a new approach to legacy transformation, one that is important, powerful, and an enormous opportunity. We've added powerful agentic AI that ingests, analyzes, and converts a wide array of legacy system assets into new, modern application models. And you can feed in everything from requirements documents, to user manuals, to screenshots, to video, pretty much anything that describes an application. If you were at Pegaworld, you would have seen an incredibly powerful demo from Karim Akhenol, and I highly recommend you go and watch the replay at pega.com, pegaworld, if you weren't there. In real time, Karim showed how Blueprint was able to ingest a video of a user walking through an old, ugly COBOL application, and an AWS transform analysis of that application.
Alan Trefler: We announced new features that help clients address their most pressing Legacy transformation initiatives with ease and speed, you know, because business transformation is often held back by Legacy technology that each resources budget and time and hampers Innovation. Now, I sure you've seen the same reports. I have about the costs associated with technical debt Forrester estimates that Legacy systems will account for 2/3 of Global Tech spending in 2025. And this isn't an easy problem to solve but we believe Pega blueprint creates a new approach to Legacy transformation and the 1 that is important and powerful and and an enormous opportunity. We've added powerful agentic AI, that ingests, analyzes, and converts a wide array of Legacy system assets into new modern application models. And you can feed in everything from requirements, documents stuff, user manuals, to screenshots to to video.
Alan Trefler: Featuring a review of its thousands of lines of code. And in minutes, Blueprint provided a recommended application design, showed how it could be modernized at Pega, showed with the press of a button, a preview of what the application would look like, and how it would work on multiple channels.
Alan Trefler: Please see the complete disclaimer at https://sites.google.com or at https://sites.google.com Talk to you at pretty much any length. Keep in mind this was demonstrated live on stage in just minutes after the video and document were imported. As with any blueprint, you usually can iterate and improve the initial design to ensure it will support current and future needs. And what's final, and they import it into Infinity with the actual app, they gain real productivity gains. And they're able to put our more advanced AI capabilities that are throughout Infinity to work as well. We see no other company doing this.
Pretty much anything that describes an application. If you're a Peggle World, you would have seen an incredibly powerful demo from Kano. And I highly recommend you go and watch the replay at pega.com. Pega world if you want there in real time. Kim, showed how blueprint was able to adjust a video of a user walking through an old ugly Cobalt application and uh, an AWS transform analysis of that application featuring. Um, it's, you know, review of its thousands of lines of code. And in minutes blueprint provided a recommended application design, showed how it could be modernized with Pega show, uh, with the Press of a button, a preview of what the application would look like and how it would work on multiple channels complete with a conversational agent that users could talk to and pretty much any language.
Alan Trefler: Keep in mind, this was demonstrated live on stage in just minutes after the video and document were imported
Alan Trefler: And we think it's a massive opportunity for us. And we think it's going to be an area of focus for our partners.
Alan Trefler: As with any blueprint, usually can iterate and improve the initial design to ensure it will support current and future needs. And what final and they imported into Infinity with the actual app. They gave real productivity gains and they're able to put our more advanced AI capabilities that are throughout Infinity to work as well. We see. No other company doing this and we think it's a massive opportunity.
Alan Trefler: So, we believe we are building the future of enterprise transaction. How it will be designed. how it will be sold, how it will be delivered. and where ideas are able to move seamlessly from minds to models to market. You can tell I'm excited about this and what Blueprint is doing for our client, our partners, and our business. And, you know, it's interesting because Blueprint put a new release of its capabilities out about every two weeks. So if you haven't seen it in a month, you are behind. And that also, I think, gives us an avenue to really increase the pace of innovation with our customers and with our partners.
Alan Trefler: Opportunity for us and uh we think it's going to be an area of focus for our partners.
Alan Trefler: So we believe we are building the future of Enterprise transformation.
Alan Trefler: How it will be designed.
Alan Trefler: How it will be sold how it will be delivered.
Alan Trefler: And where ideas are able to move seamlessly from Minds to models to Market. You can tell I'm excited about this and what blueprint is doing for our client, our partners and our business. And, you know, it was interesting because blueprint it was put a new release of its capabilities out about every 2 weeks.
Alan Trefler: so, if you haven't seen it in a month,
Alan Trefler: So I would recommend that each of you try it out for yourself. I have 15 minutes. And go to pega.com blueprint, sign in, and imagine any type of business you'd like to build. I particularly like showing demos of the Llama replica. which is something that actually is a lot more sophisticated than you might imagine but any business and of course you can always do the serious stuff like like customer onboarding and collections.
Ken: I think you'll have some fun but I guarantee you'll see why it's so powerful and why it plays to Pegas' unique We're working hard on it and we think it's going to lead to good results and to provide some more color on the financial results for the first half, let me turn it over to Ken. Thank you, Alan.
Alan Trefler: You are behind and that also I think gives us, uh, an Avenue to really increase the pace of innovation with our customers and with our partners. So I would recommend that each of you. Try it out for yourself. I'm 15 minutes and go to pega.com, blueprint, sign in, and imagine any type of business, you'd like to build. Um, I particularly like, showing demos of the Llama rental business, uh, which is something that actually is a lot more sophisticated than you might imagine. But any business, and, of course, you can always do the serious stuff like, uh, like your customer onboarding and collections. I think you'll have some fun, but I guarantee you'll see why it's so powerful and why it plays to Pegasus unique strengths.
Alan Trefler: We're working hard on it and uh, we think it's going to lead to good results and to provide some more color on the financial results for the first half. Let me turn it over to Ken, okay,
Ken: I am so excited for the businesses at the midpoint of 2025. We're seeing the outcomes we had hoped to see as our team delivered spectacular results in the first half of 2025, demonstrating the power of our aligned strategy, innovation, and execution. Annual contract value, our key business performance metric, grew 16% year over year, as reported 14% in constant currency. To bring our business momentum into focus, our net new ACV ad increased by 60% year over year in constant currency in the first half of 2025 versus the first half of 2024, a significant acceleration that reflects multiple strategic wins.
Ken: Thank you, Alan.
Speaker Change: I am so excited for the businesses at the mid 20025.
Ken: This growth reflects that Pega Gen AI Blueprint is transforming our go-to-market motion, our value proposition is resonating with our clients, and we're expanding our footprint in key verticals. It's also a clear indicator that we're not only winning more deals, but also higher quality long-term client commitments, which ultimately fuels durable growth. It's awesome to see total ACV exceed $1.5 billion, as reported for the first time in Pega's history, powered by PegaCloud ACV growth of 28%, as reported, and 25% in constant currency. I'm especially excited to see our team deliver such robust ACV growth in a market that continues to be uncertain.
Speaker Change: Moment. I'm in the focus, our net new ACV, add increased by 60% year-over-year in constant currency in the first half of 2025 versus the first half of 2024. A significant acceleration that reflects multiple strategic wins.
Speaker Change: This growth reflects.
Speaker Change: That Pega Genai blueprint is Transforming Our go to market motion. Our value proposition is resonating with our clients and we're expanding our footprint in key verticals.
It's also a clear indicator that we're not only winning more deals but also higher quality long-term client commitments, which ultimately fuels durable growth.
Ken: Our Rule 40 mindset is not only delivering strong ACV growth, but also strong free cash flow growth. Free cash flow growth reached $286 million in the first half of 2025. Our free cash flow performance is no accident. It's the outcome of two powerful Rule 40 forces coming together. First, our accelerated growth in ACV. It's important to remember that our financial model ACV is a proxy for subscription billings. As a result, each incremental dollar of ACV roughly translates to an incremental dollar of subscription billings, which in turn drives cash flow. The second powerful force is margin expansion.
Speaker Change: It's awesome to see total ACB exceed, 1.5 billion as reported for the first time in Pegasus history. Powered by Pega Cloud. ACV, growth of 28% as reported and 25% in constant currency. Now, I'm especially excited to see our team deliver such robust ACB growth in a market that continues to be uncertain. Our rule of 40 mindset is not only delivering strong ACB growth, but also strong through cash flow growth.
Speaker Change: Free cash flow. Growth reached 286 million in the first half of 2025. Our free. Cash flow performance is no accident. It's the outcome of 2, powerful role 44s, this coming together. First, our accelerated growth in ACB and it's a report important to remember that our financial model, ATV is a proxy for a subscription Billings. As a result, each incremental dollar of AC
Speaker Change: Roughly translates to an incremental dollar of subscription Billings which in turn drives cash flow.
Ken: We continue to grow cash expenses at a slower rate than ACV, expanding margins, driving free cash flow growth and supporting increased profitability. Total remaining performance obligation, or backlog, increased by 31% as reported and 27% in constant currency year-over-year. As a reminder, backlog represents client commitments not yet recognized as revenue, but provides good visibility into our future performance. Pegacloud current backlog, which is backlog that's expected to come into revenue within 12 months, increased by 28% as reported and 25% in constant currency in the same period. The majority of Pegacloud bookings go into backlog, creating a more predictable future revenue stream, the benefit of our subscription transition.
The second powerful force is margin expansion. We continue to grow cash expenses at a slower rate than ACV expanding margins. Driving free, cash flow growth and supporting increased profitability.
Ken: Last month, I outlined our capital allocation strategy and emphasized that our strong free cash flow generation provides us with significant financial flexibility. That financial strength opens up a number of options for us as we evaluate how to best deploy capital to create long-term shareholder value. One of the options we discussed in our annual investor session at PegaWorld last month was the potential to allocate, from time to time, a greater portion of our free cash flow toward share repurchase. To be clear, it's great to have this flexibility available for us to do so under the right circumstances.
Total remaining performance obligation or backlog increased by 31% as reported and 27% in constant currency year-over-year as a reminder, backlog represents client commitments. Not yet recognized as Revenue, but provides good visibility into our future performance Pega, Cloud, current backlog which is backlog that's expected to come into Revenue within 12 months, increased by 28% as reported, and 25% in constant currency in the same period, the majority of Pega Cloud bookings go into backlog, creating a more predictable, future Revenue stream, the benefit of our subscription transition.
Speaker Change: Last month, I outlined our Capital allocation strategy and emphasized that our strong free cash flow. Generation provides us with significant financial flexibility, that Financial strength opens up a number of options for us as we evaluate how to best deploy Capital to create long-term shareholder value 1 of the options. We discussed at our annual investor session at Pega World. Last month was the potential to allocate from time to time a greater portion of our free cash flow towards share repurchases to be clear. It's great to have this flexibility available for us to do so under the
Ken: Now that Pegasys is a significant cash flow generator with no debt, returning cash to shareholders via buyback could make sense for several reasons. First, periodic share repurchases when done responsibly can help mitigate the diluted impact of stock-based compensation. Second, buying back shares that attract evaluations can lead to improved per-share valuation over time. And third, we view share buybacks as a strategic lever that reinforces our confidence in Pega's long-term vision and our belief in the firm's durable cash flow generation capabilities, and is also significantly accretive to shareholders as we execute on our strategy. So in the first half of 2025, we repurchased about 6 million of our shares for 251 million, representing over 85% of our total free cash flow generated during the period.
Ken: While we've not made firm commitments regarding the scale or timing of the future repurchases, we plan to continue to take a disciplined and balanced approach to buybacks going forward.
Speaker Change: The right circumstances now that Pegasus significant cash flow generator with no debt returning cash to shareholders via buyback, could make sense for several reasons. For a periodic share repurchases. Went on responsibly can help mitigate the diluted impact of the stock based compensation second buying back Shares are attractive valuations can lead to improved per share evaluation over time. Then third we view share BuyBacks as a strategic lever that reinforces our confidence in paying us long-term vision and our belief in the firm's durable, cash flow, generation capabilities, and is also significantly accretive to shareholders as we execute on our strategy. So, in the first half of the 2025, we repurchased 6, about 6 million of our shares for 251 million representing over 85% of our total free cash flow generated During the period.
Ken: Our first priority, of course, is to invest in the core business to drive sustainable growth and innovation. Beyond that, we will continue to evaluate our capital allocation options through the lens of long-term value creation. Given our significant cash flow generation, repurchases of our shares is a great investment opportunity.
Ken: I've heard from several of you that it's valuable when I provide a few thoughts to help frame how we model our business. And I want to take a moment to share two important points as we head into Q3. First, it's important to recognize that the third quarter has historically been our softest in terms of net new ACV, add, and free cash flow. This is a fairly consistent seasonal pattern that reflects the timing around contract renewal dates. Contract renewals are more than just administrative milestones. They're key drivers of business activity. Fewer renewals in a quarter typically means fewer opportunities to engage and drive expansion and generate near-term billings.
Speaker Change: While we've not made firm commitments, regarding the scale or timing of the future repurchases, we plan to continue to take a disciplined and balanced approach to buy backs going forward. Our first priority, of course, is to invest in the core business to drive sustainable growth and Innovation beyond that. We will continue to evaluate our Capital allocation options through the lens of long-term value creation. Given our significant cash flow generation. Repurchases of our shares is a great investment opportunity. I've heard from several several of you that is valuable when I provide a few thoughts to help frame how we model our business. And I want to take a moment to share 2 important points as we head into Q3
Ken: It's also worth remembering that we typically bill our clients one year in advance tied to the contract renewal date. That's why in quarters with fewer scheduled renewals, we typically see a corresponding slowdown in free cash flow. Second, as you refine your Q3 revenue expectations, please keep in mind that our term license revenue trends tends to be at the lowest point also in Q3. This is another predictable seasonal trend driven by the timing of term license renewals. Understanding these dynamics are important when modeling third quarter term license revenue and also free cash flow, especially to avoid over-projecting in what's typically a lighter quarter.
Speaker Change: Expansion and generate near-term buildings, it's also worth remembering.
Ken: In conclusion, it's great to see our continued business momentum. We're doing what we said we were going to do. We're capitalizing on major market trends such as artificial intelligence, legacy transformation, and the move to cloud. And by leveraging Pegage NAI Blueprint, it's fantastic to see such solid ACB growth, continued momentum around trailing 12 months free cash flow. We're on an amazing trajectory and consistent execution over the long term sets us up well to significantly accelerate growth in free cash flow per share over time.
Speaker Change: That we typically build our clients 1 year in advance tied to the contract renewal date. That's why in quarters with fewer schedule. Renewals we typically see a corresponding slowdown in free cash flow second as you refine your Q3 Revenue expectations. Please keep in mind that our term license Revenue Trends to be a tends to be at the lowest point. Also in Q3, this is another predictable, seasonal Trend driven by the timing of term. License rules understanding, these Dynamics are important, when modeling third quarter term, license revenue, and also free cash flow, especially to avoid over projecting and what's typically a lighter quarter in conclusion. It's great to see our continued business momentum. We're doing what we said we were going to do or capitalizing on major market trends, such as artificial intelligence, Legacy transformation, and the move to cloud. And by leveraging Pega Genai blueprint this fantastic to see such solid ACV, growth continued, momentum around trailing 12 months, free, cash flow. We're on an amazing trajectory.
Ken: I'm looking forward to seeing many of you on the road as we meet investors in the coming weeks at a number of the investment banking conferences around the United States.
Operator: And with that, operator, please open the line for questions. Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. And if you'd like to withdraw your question, simply press star one again.
Speaker Change: And consistent execution over the long term sets us up well at a significantly accelerate growth in free cash flow per share over time. I'm looking forward to seeing many of you on the road as we meet investors in the coming weeks and a number of the investment banking conferences around the United States. And with that operator, please open the line for questions.
Speaker Change: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue.
Operator: We also ask that you limit yourself to one question in one follow up.
Raimo Lenschow: Your first question comes from Raimo Lenschow with Barclays, please go ahead.
Speaker Change: And if you'd like to withdraw your question, simply press star 1 again, we also ask that you limit yourself to 1 question in 1, follow up.
Raimo Lenschow: Congratulations for being on an amazing quarter. Just a quick question. On Tegra Cloud, if I'm looking at my math, you just basically had like a record ad on ACV. Is that already blueprint? Or is that just kind of the normal, you know, momentum in terms of, you know, more customers coming from, from the client cloud over to you, like overall general market? Can you speak to that number? Because it's very strong, obviously, and good indication. Yeah. So I think you will see some incremental Pegacloud ACV when clients decide to move to Pegacloud. But I would comment that Blueprint is engaged in every one of our sales campaigns now and has been a significant driver for business activity in Q2.
Speaker Change: Your first question comes from Ramo. Lenschow with barklay. Please go ahead.
Ramo Lenschow: The, uh, congratulations for being on an amazing quarter. Um, just a quick question, um, on Pega Cloud. Um, if I'm looking at my math, you just basically had like a record, a ad on on ACV. Um, is that already blueprint or is that just kind of the normal, you know, momentum in terms of, you know, more customers coming from from the client Cloud over to you? Like, overall General market, can you speak to that number? Because it's very strong obviously and it's good indicator.
Ken: If you just look at the total ACV growth that we have, you know, it's really quite an amazing quarter, the strongest Q2 we've ever had. And I think Pegacloud is the skew that tends to be where that business goes when it comes off of Pegablueprint. So although there always will be some migrations here and there, the majority of our business is coming from expansion with clients and Blueprint is central to that.
Ramo Lenschow: I I so I think you will see um some incremental uh Pega Cloud ACV. When clients decide to move to Pega Cloud um but I would I would um comment that blueprint is engaged in every 1 of our sales campaigns now. And has been a significant driver for business activity in Q2. If you just look at the total ACB growth that we have, you know, it's a, it's really quite an amazing quarter, the strongest Q2 we've ever had. Um, and uh, and I think Pega cloud is
Ramo Lenschow: The skew that that tends to be where that business goes when it comes off a peg of blueprint. So although they're all there, always will be
Raimo Lenschow: Okay, perfect. That's really helpful.
Ramo Lenschow: some migrations here and there the the majority of our business is coming from, you know, expansion with clients and blueprint to Central to that
Raimo Lenschow: And then on term, obviously, you had good renewals, Q1, looks like Q2 looks good as well. Can you, is that like, kind of, was that like, if you think about the shape of the year, was that like, like, this year, the core renewals were kind of more first half focused? Or how do I think about the rest of the year there? Thank you.
Ken: Congrats from Hynes. I think that Q1 definitely had a higher renewal cycle in the first quarter. I think that Q2 was not anything unusual, and I don't think that you're going to see a lot of anomalies through Q3 and Q4. Q1 just happened to be a bigger quarter.
Speaker Change: Okay, perfect, that's really helpful. And then on on term obviously, you had good renewals q1 looks like Q2 looks good as well. Can you, is that like, kind of was that? Like, if you think about the shape of the year, was that like, uh, like this year, the court renewals were kind of more of a first half, uh, focused or how do I think about the rest of the year there? Thank you, congrats, for me.
Raimo Lenschow: Okay, perfect. Thank you.
Speaker Change: Um, no, I don't, I don't I think that q1 definitely had, um, a, uh, a higher renewal cycle in the first quarter. Um, I I think that you, you Q2 was not anything unusual, and I don't think that, uh, you know, you're going to see a lot of uh, anomalies through Q3 and Q4 q1, just happened to be a bigger quarter.
Steve Enders: Yep. Your next question comes from the line of Steve Enders with Citigroup. Please go ahead. Okay, great. Thanks for taking the questions this morning. I guess I just want to start asking this on is what you are seeing in the deal environment. I mean, I guess the numbers kind of speak for themselves. But yeah, I guess what do you what are customers focused on? I think we keep hearing questions on like doge impact and tariffs. And it doesn't look like you're seeing anything there. But just yeah, what What impact have you seen or how does that kind of discussion play out with the customers that you're having right now from those those factors?
Speaker Change: Okay, perfect. Thank you.
Speaker Change: Yep.
Speaker Change: You're next question comes from the line of Steve Enders with Citigroup. Please go ahead.
Steve Enders: Uh, okay, great. Thanks for, um, thanks for taking the questions this morning. Um,
Steve Enders: I guess I just want to start asking just on because what you are seeing in the deal environment I mean it I guess the numbers kind of speak for themselves but um yeah I guess what do you what are customers focused on? I think we keep hearing questions on like Doge impact and tariffs and it it I guess doesn't look like you're seeing anything there but just yeah. What.
What impact have you seen or? Or how does that kind of discussion play out with the customers that you're um, you're having right now from those those factors.
Alan Trefler: So look, there is a level of anxiety in some customers because let's face it, the World has a little bit of unpredictability to it and we have all that same visibility. We don't have anything specific around tariffs that, to this point, have have affected us or have unreasonably affected our, our clients. And happily, we're not in the parts of the government where DOJ has really Targeted in terms of closing down. So we feel that we need to be alert to what's going to change, and things are changing all the time. But we're not seeing anything that I would describe as a real headwind.
Steve Enders: So if there is a level of anxiety in some customers because let's face it. Um, the the
Steve Enders: world has a little bit of unpredictability into it, and we have all
Reasonably affected are are, are, are clients and, uh, happily. We're not in the, uh, parts of the government with Doge has really
Steve Enders: targeted in terms of, uh, like
Alan Trefler: We are seeing, I think one, one trend we are seeing, Steve, is that with Gen AI being central to every company strategy to figure out how you can, how you can adopt it and where the value is, it is driving the legacy transformation discussion at a very accelerated pace, more than we've seen in years in terms of clients really looking at not just leveraging Gen AI, but how do I modernize my applications? How do I get to the cloud so I can leverage all of this new technology? That definitely is a trend that has accelerated.
Steve Enders: Okay, gotcha. That's helpful. Um, and then just on I guess the ACB strength here. I guess, does that change maybe how you would think about the pace of ACV through the year or maybe, you know, how you think about the numbers exiting the year? And I guess, what was the impact of FX quarter over quarter on the, on the ACV number in the N2Q? So, um, the The first part of your question was, how do we view the ACV trend through the year, given the very, very strong start in the first half of the year?
Steve Enders: Closing down. So we we we feel that we need to be alert to what's going to change and things are changing all the time, but we're not seeing anything that I would describe as a real Network. We, we are seeing I, I think 1 1 Trend. We are seeing Steve is that, um, with Gen AI, being Central to, every company strategy, to figure out how you can, how you can, you know, adopt it. And where the value is, it is driving the Legacy transformation discussion at a very accelerated Pace more than we've seen in years in terms of clients really looking at, not just leveraging Jai but how do I modernize my applications? How do I get to the Cloud? So I can leverage all of this new technology that definitely is a a a trend that has accelerated
Speaker Change: Okay, gotcha. That's uh, that's helpful. Um,
Speaker Change: and then just on, I guess the ACV strand here.
Speaker Change: I guess. Does that change maybe how you would think about the the pace of of ACV through the year? Or maybe you know how you think about the, the numbers exiting the year. And I guess what was the impact of of FX quarter of a quarter on the uh, on the ACV number in the coin and and uh, into Q
Speaker Change: so, um, the
Ken: I think, look, when you have a start like we have, you want to keep that momentum going. We're not viewing the fact that we did really well in the first half as being a substitute for how we perform in the second half. We want to take this momentum and continue to drive accelerated growth and achieve what we can achieve for the year. We're certainly not viewing it as like, oh, great, we're further along, so we can take our foot off the pedal in the tech half of the year. In terms of currency, the dollar has weakened, and we have a currency headwind, so to speak, on growth.
Steve Enders: And it's been about 2 percentage points in each of the quarters. So it's kind of been about a consistent currency tailwind for the first two quarters. Okay. All right. Thanks. That's helpful. Thanks for taking the questions. Thanks, Steve.
Speaker Change: the the question, the first part of your question was, how do we view the ACV Trend through the year? Given the very, very strong start in the first half of the year. I I think look when we when you have a start like we have you want to keep that momentum going and you know we're not viewing. You know, the fact that we did really well in the first half as being a substitute for how we perform in the second half. We want to take this momentum and continue to drive accelerated growth and and uh, you know, and Achieve what we can achieve for the year. Um, you know, kind of we're not we're not certainly not like viewing it as like uh, oh oh great, we're further along. So we can take you know, our foot off the pedal and the pack out of the year. Um, in terms of currency there is the dollar, um, is, uh, has weekend. Uh, and we have a, we have a currency, um, you know, uh headwind. So, to speak on growth and it's been about 2 percentage points in each of the quarters. So it's, it's kind of been about a consistent, uh, currency Tailwind for the first 2 quarters.
Speaker Change: Okay. All right, thanks. Uh, that's helpful. Thanks for taking a good questions.
Jacob Roberge: Your next question comes from the line of Jacob Roberge with William Blair. Please go ahead. Yeah, thanks for taking the questions. Really impressed with growth and You had to parse. Blueprint Opening Up New Deals I know you talked about rides Thanks for watching. Peace.
Steve Enders: Thanks Steve.
Speaker Change: Your next question comes up, comes from the line of Jake Rogers with William Blair. Please go ahead.
Alan Trefler: Cloud Migrations, or maybe just broader AI tailwinds, what would you point us to as maybe the one or two largest factors driving that acceleration? Well, first of all, the, uh, the... The idea of legacy transformation is really mostly starting with Pega as the system you're transforming. I mean, you're typically transforming, you know, somebody's got, it's not uncommon for somebody to have like three or four or five like onboarding systems or systems that do some business function. And first, they really don't like any of them. And two, they'd like to fold them all together. And with Blueprint, which is really cool, you can put the documentation of all of them in and the AI will propose how to do it right and how to do it better.
Speaker Change: Yeah. Thanks for taking my questions, uh, really impressive growth in that new. ATV? If, if you had to parse out the growth acceleration between blueprint opening up New Deals. Um, I know you talked about Rising interest in digital transformation, so obviously that that bumps up Pegasus Cloud migrations or maybe just broader AI Tailwind. What would you point us to is maybe the the 1 or 2 largest factors driving that acceleration?
Speaker Change: well, first of all the, uh, the
Speaker Change: idea of Legacy transformation is really mostly, it's not starting with Pegasus the system you're transforming. I mean, you're typically transforming, you know, some of these guys got, it's not uncommon.
Alan Trefler: And then give you a canvas on which to collaborate. The collaboration part of this is super important and if you try it out, I think it will become clear. So I think legacy transformation is really, 98% of it is things that didn't start on Pega being transformed, but things that were there existing, COBOL or your God forbid Lotus Notes or AdaBase or there's a lot of old stuff out there that just can't move to the cloud and organizations know about anchors and being able to clean that up. There's a lot of interest in that. And Blueprint feathers into that perfectly because Blueprint isn't limited to legacy transformation, but the fact that it feeds on it and that it can incorporate things like AWS Transform, which does code analysis, but it doesn't just depend on code analysis.
Speaker Change: For somebody to have like 3 or 4 or 5 like onboarding systems or systems that do some business function. And first they they really don't like any of them and 2, they'd like to fold them all together and with blueprint which is really cool. You can you can put the documentation of all of them in and the AI will propose how to do it right? And how to do it better and then give you a a canvas on which to collaborate the collaboration part of this is super important. If you try it out, I think it will become clear. So um I I think Legacy transformation is is really, you know, 98% of it is things that didn't start on Peg, up being transformed, but things that were their existing Cobalt Ore or your God from Midland.
Speaker Change: Notes or Ada base, or there's a lot of old stuff out there, that just can't move to the cloud and organizations know about actors, and, and being able to clean that up.
Alan Trefler: I think code analysis is inherently limited in terms of what it does for transformation because all you're doing is replicating the sins of the past. What it lets you do is take that analysis and use it for data structures and other types of things, but then really augment it with, hey, how do we want to do this? If I put in the best practices, how do I actually get the system to recommend and to do it in a way that will be conversational and agentic as well as through traditional ways?
Alan Trefler: So I think transformation writ large is going to be a really important avenue for our growth in the next two or three years, and Blueprint is right at the heart of it.
Ken: Jake, one one additional piece of information that kind of goes kind of maybe under under the under the covers of one of your one of your questions. We are we are seeing momentum around engaging with both existing and new clients on new workflows. When I say new workflows, remember what Alan said, new to Pega, they could be something that the client has done for decades on another provider, but they're new to Pega. And that is where Blueprint really helps us break in. And you can see the momentum in the new, the new activity. And that's very exciting, because that's, that's not just increasing, you know, the volume of an existing solution that Pega has are migrating the PegaCloud, we're seeing opportunities to put new solutions for both our existing clients, and new divisions of existing clients and new logos.
Speaker Change: If I put in the best practices, how do I actually get the system to recommend and to to do it in a way that will be conversational and agentic as well as through traditional ways. So, I, I think transformation at large is going to be a really important, um, Avenue for our growth in the next 2 or 3 years and blueprint is right at the heart of it.
Jacob Roberge: So that there's a there's a, you know, a noticeable change in that happening through the first half of the year. Okay, that's helpful.
Speaker Change: Jake 1 1 Edition. Uh piece of information that kind of goes kind of maybe under under the under the covers of 1 of your what? Yeah 1 of your questions. Um we are we are seeing um momentum around engaging with both existing and new clients on new workflows. When I say new workflows, remember what Allan said new to Pega, they could be something that the client has done for decades on another provider but they're new to Pega and that is where blueprint really helps us break in. And you can see the momentum in the new, the new activity. And that's very exciting because that's uh, you know, that's not just increasing, you know, the volume of an existing solution that Pega has or migrating them to pick a cloud. We're seeing opportunities to put new solutions, for both our existing clients and new divisions of existing clients and new logos. So, uh, that there's a, there's a, you know, a noticeable change in that um, happening through the first half of the year,
Jacob Roberge: And then just on that new logo topic, I know you've been investing more in that motion over the past few quarters, just given the success with Blueprint. Can you talk about how that push has gone thus far? And if there have been any, any learnings for that motion as you've started to invest more in it? Now let me clarify one thing and then I'll kick to Alan on the learnings. I think that we have to think about new logos, but we have to think about new work, new workflows because our clients have massive divisions and locations around the world of their business that are not clients of ours right now.
Speaker Change: Okay, that's helpful. And then just on that new logo topic. I, I know you've been investing more in that motion over the the past few quarters. Just given the success with blueprint. Um, can you talk about how that pushes gun thus far? And if there have been any, any learnings for that motion as, as you as you started to invest more in it.
Ken: So to us, that is a new logo as well. We don't characterize them as new logos in how we talk to investors, but it is a brand new opportunity, a new engagement. So I just want to be clear that that is a really important opportunity for us as well as brand new companies. So Alan, kind of observations or learnings around as we try to go deeper into our existing and new logos with them. Yeah, I think the interesting development there, which is a little hard to predict exactly how it's going to go, but I think it's going to go quite well, is what this movement to create these partner branded blueprints is going to do in terms of opening up Pega to be way more visible to our partners' customers.
Alan Trefler: Because what we're really seeking to do between now and the end of the year, as we continue to enhance this and work with our partners on it, is to have Pega become a tool not just for a partner to sell Pega, but for a partner to basically sell what they themselves are doing. You know, there are a lot of consulting firms who are under a lot of pressure these days and need to be able to make better pitches to customers. And if you've seen a pitch made on the back of Blueprint, it's pretty amazing. I mean, the customer can see a touch and feel something that otherwise they can't.
Speaker Change: New logos, but we have to think about new work, new workflows because our clients have massive divisions and locations around the world of their business. They're not clients of ours right now. So to us, that is a new logo as well. We don't characterize them as new logos in our in how we talk to investors. But it is a brand new opportunity, a new engagement. So I just want to be clear that that that is a really important opportunity for us as well as well as brand new companies. So Allan, you know, uh, the kind of observations or learnings around us, we try to go deeper into our existing and new logos was the. Yeah. I think uh I I think the interesting development there which is a little hard to predict exactly how it's going to go. But I think it's going to go like well is what this movement to create these partner branded blueprints is going to do in terms of opening up Pega to be way more visible to our partners customers because what what, we're really
Alan Trefler: If we can be successful at getting our partners to really understand how this can help their business outside of Pega and how we can continue to enhance it to make that possible, I think that just opens up. The amazing, large stream of prospects that are customers of our partners but are not customers of ours.
Speaker Change: Really seeking to do between now and the end of the year. As we continue to enhance this and work with our partners on it is to have Pega become a tool. Not just for a partner to sell Pega but for partnered, basically sell what they themselves are doing, you know, there are a lot of consulting firms who are under blood pressure, these days and need to be able to make better pictures to customers. And if you've seen a pitch made on the back of blueprint, um, it's pretty amazing. I mean, the customer can see and touch and feel something that otherwise they can't. If we can be successful at getting our partners to really understand how this can help their business outside of Pega, um, and how we can continue to enhance it to make that possible. I I think that that just opens up
Alan Trefler: So that's, that's going to be the trick from our point of view for the upcoming six to 12 months.
The the amazingly large stream of prospects that are customers of our partners but are not customers are lost so that's that's candidly is going to be the trick.
Speaker Change: From our point of view for the upcoming 6 to 12 months.
Jacob Roberge: Very helpful. Congrats again on the great results. Thanks, Jacob.
Speaker Change: Very helpful. Congrats again on the great results.
Devin Au: Your next question comes from the line of Devin Au with KeyBank Capital Markets. Please go ahead. Hey, good morning. Thanks for taking my questions. I know you've kind of responded to this question. Steve's question on macro seems like there's nothing, you know, too material to point out.
Speaker Change: Question comes.
Speaker Change: From the line of Devon. Oh, with keybanc capital markets, please go ahead.
Devin Au: But I want to drill down on public sector, just given how topical of a subject that is, and especially after I think SAP kind of calling out deal elongation in the US public sector. Have you seen any similar elongation within public sector business? I'm just curious how the conversation has been with your customers in that specific market.
Alan Trefler: Interestingly, I'm going down to D.C. tomorrow and Friday, so we are engaged. I think that some projects got reshuffled and put on hold, so I think there's some services implications, you know, and services is obviously not... The most critical part of our business here as well. As I said, I think it's going to vary a lot by company. here. But as businesses are looking to become more efficient, and as the government wants to become more efficient, that's got to be good. I mean, my view is that. Being able to engage with the government around streamlining workloads, being able to make things more efficient, those are all things that play to our strength in our history.
Devon: Hey, good morning, thanks for taking my questions. Um, I I know you've kind of responded to this question. Um Steve's question on macro seems like there's nothing you know, too material to point out but I I I want to drill down on public sector just given how topical of a subject that is and especially after I think sap kind of calling out deal elongation in the US public sector. Have you seen any similar elongation within public sector business? Uh just curious how our conversation has been uh with your customers in that specific Market.
Devon: Is uh implications you know, and services is obviously not the the most critical part of our business here as well. Um as I as I said I I think it's going to vary a lot by company.
Devon: Here. But as businesses are looking to become more efficient and as the government wants to become more efficient, that's got to be good for us. I mean, it's my, my view is that, um, being being able to engage with the government around, streamlining, workflows, uh, being able to make things more efficient. Those are all things that
Alan Trefler: Unquestionably, there's going to be disruptions in that space, but this is something that I think, directionally, should be a tailwind, not a headwind. has been very vocal around get to the cloud digitally transform and ingest and ingest AI into into their infrastructure and leverage it. And we just you know, you may have seen our announcement of, you know, having FedRAMP high, we're perfectly positioned. I mean, that is our value proposition.
Devon: Play to our strengths and our history. So it's it's
Devon: unquestionably. There's going to be disruptions in that space but this is something that I think directionally uh, should be a, a Tailwind on ahead work. I mean, the the public sector certainly in the in the US.
Ken: Yeah, I think you should take these comments as being primarily about the US just to clarify on what can Pointed out, I mean, our work with governments globally has been strong and continues to be strong. And year to date has been incredibly strong. We announced that the major win in the in the UK, where we were selected to do the recruitment system. for its services. As well, as some of these governments spend more on defense, I expect we'll see more things like that that could be up. Got it. Super helpful context.
Devon: Has been very vocal around, get to the Cloud, digitally transform and inject and and just AI into um, into their infrastructure and leverage it. And we just, you know, you may have seen our announcement of uh you know having fed ramp. Hi. We're we're perfectly positioned. I mean that is our value proposition.
Speaker Change: Yeah, I think you should take these comments as being primarily about the the us just to clarify on on, on on what Ken.
Speaker Change: Pointed out. I mean our work with governments globally has been strong and continues to be strong and year to date has been incredibly strong. We announced the the major win in the, in the UK, where we were selected to do the um, recruitment system.
Speaker Change: For the military, the the UK Army and we already do the Air Force and the Navy. So, you know, this is a revolutionary system for them which is going to do all of their recruitment in, in a set of integrated, very sophisticated workflows. And so we're seeing those types of interests in other governments.
Speaker Change: As well. And as, as some of these companies, some of these governments spend more on defense, um I I expect we'll see more things like that, that that could be opportunities.
Devin Au: Just a quick follow up. I just want to ask about the ACV strength in the quarter, I'm curious if any deals might have shifted one way or the other, and the multiple strategic wins that you have won in the quarter, have you seen, you know, sell cycle shorten, and your ability to push the deals to close, to finish meaningfully earlier as a result of blueprint, versus, you know, your initial plan? ? I think Blueprint does a couple of things for us. One, when customers see it, we get often unspoken feedback, but the clear feedback, oh, I now understand how I can apply AI in my business in a safe and predictable way.
Speaker Change: Got it. Uh, super helpful contacts. I just a quick follow-up and just want to ask about the ACB strength and encoder. Um, curious if any deals might have shifted 1 way or the other, um, and, and the multiple strategic wins that you have won in the quarter. Have you seen, you know, cell cycle, shortened and your ability to push the deals to close uh, the finish meaningfully earlier as a result of blueprint, um, versus you know, your plan.
Speaker Change: I think blueprint does too. Does a couple of things for US 1, when when customers say it,
Alan Trefler: And that's something I haven't really seen before this way. We get a lot of people saying, oh, this is new and interesting. I think that helps us as a brand. That just helps the company in terms of being more of a sort of player that they know they can rely on in this AI world. I think that the part of the sales cycle that Blueprint will help the most with is the front-end part of the sales cycle, even more than the back-end. And we are seeing evidence of that. We are seeing it to be way easier to get in front of a customer and show them something.
Alan Trefler: And, you know, what happens now is that routinely happens, you know, in a first meeting with a customer, where you can show them something customer specific, we never, ever, or very rarely, would you do that, you sometimes have to wait to a fourth meeting or a fifth meeting, to be able to put together a custom demo for a customer to get them to really kind of understand what Pega does. Now, I think it's really helping customers understand Pega way sooner. And there were no there were no pull ins from from future quarters of I mean, that always happens in any in any business.
Speaker Change: They when the customer see it, we get. We get the often unspoken feedback with the clear feedback. Oh, I Now, understand how I can apply AI in my business, in a safe and predictable way, and that's something I I haven't really seen before this way, we get a lot of people saying. Huh. This is this is new and interesting. I think that helps us as a brand that just helps the company in terms of being more of the sort of player that they know they can rely on in this, in this AI world. Uh, I I think that the part of the sales cycle that blueprint will help the most with is the front end part of the sales cycle, even more than the back end, and we are seeing evidence of that. We are seeing it to be way easier to get in front of a customer and show them something. And, you know, what happens now is that routinely happens, you know, in a first meeting with a customer where you can show them something, customer specific, we never ever. We're very
Speaker Change: rarely, would you do that? And sometimes I have to wait till a fourth meeting or a fifth meeting to be able to put together a custom demo for a customer to get them to really kind of understand what Pega does. Now I, I think it's really helped the customers understand Pegasus,
Ken: But there was nothing unusual in the first half of the year that would say, Oh, that's the reason why the quarter was strong, because we pulled some deal in from the future.
Speaker Change: And and there were no, there were no pull-ins from from future quarters of. I mean, that that always happens in in any in any business, but there was nothing unusual in the first half of the year that would say, oh that's the reason why the quarter was strong because we pulled some deal in from the future.
Devin Au: Great, thanks for taking my question.
Speaker Change: Great. Thanks for taking my questions.
Patrick Walravens: Your next question comes from the line of Patrick Walravens from Citizens Bank. Please go ahead. Oh, great. Yeah. And congratulations, you guys on the on the quarter.
Speaker Change: Your next question.
Speaker Change: Metric while Ravens from Citizens Bank. Please go ahead.
Patrick Walravens: So Alan, I want to go big picture with you, if that's okay. So I hosted a fireside chat last week with the former head of AI for Salesforce. And he made this comment, which I think probably also applies to Pegna, but I'd love to hear your thoughts on it. Here's what he said. He said, I do think in general, a lot of the big SaaS players do have a massive advantage. They have the data. What are your thoughts on that?
Oh, great. Thank you. And, um, congratulations you guys on the, um, on the quarter so Allan, I I want to go big picture with you, if that's okay. So I hosted a fireside chat last week, with the former head of AI for sales force.
Speaker Change: I'd love to hear your thoughts on it. Here's what he said. He said, I do think in general, a lot of the big SAS players do have a massive advantage.
Speaker Change: They have the data.
Alan Trefler: Well, look, Salesforce wants to become the owner of all the customer's data. I think that there's going to be a lot of resistance to that in many organizations. I think customers think they should own their own data. And I think the emergence of cloud native databases, you know, you look at things like the Databricks and the Snowflakes and others, you know, they want all the data, there's a lot of hunger for data. In reality, I think what really makes a difference is process. I mean, you know, the data is helpful. But we, when we do our boot practice...
What are your thoughts on that?
Speaker Change: Well, look, it sounds for us wants to become the owner of all the customers data. I, I think that uh, there's going to be a lot of resistance to that, in many organizations, I think customers think they should own their own data. And I think the emergence of cloud, native databases, you know, you, you, you look at things like the data bricks and the snowflakes and others, you know, they want all the data. There's a lot of hunger for data in reality. I think what really makes a difference.
Speaker Change: Is process.
Speaker Change: I mean, you you you the the data is helpful.
Alan Trefler: You may have seen, I believe you've done one, Patrick. We actually grind through our best practices, now a partner's best practices, we go out to the internet, and we pull in all the data on the internet on how to do those types of processes. We reconcile them, we don't trust any of them, we grind it together, and we show it to say, hey, is this really what we want to do? That is a process, that is a process that will operate on the transactional data that you want to do when you're actually trying to do something.
Alan Trefler: And that is enormously sensitive. to the whole way that businesses run and the whole idea of legacy transformation.
Speaker Change: But we, when we do our blueprint, this this you may have seen. I believe you've done 1 Patrick. Um, you we we actually grind through our best practices now. A partner is best practices. We go out to the internet and we pull in all the you know the data on the internet on how to do those types of processes. We reconcile them, we don't trust any of them, we grind it together and we show it to say hey is this really what we want to do? That's that is a process that is a process that will operate on the transactional data that you want to do when you're actually trying to do something and that is enormously Central.
Alan Trefler: I think there are a lot of companies, Salesforce is one of them, that have really moved a lot into what I would describe the analytical space. And to be honest, that's a space where we expect to partner with organizations. We expect our customers, you know, we don't provide the analytical framework that you might get from some of the other companies out there, and we don't want them. We want to be the process engine and the workflow engine that revolutionizes the way these businesses operate. And it goes out in real time, which is what Blueprint does, and gets the data or gets additional information, which is what the system does.
Speaker Change: To the whole way that, you know, businesses run, and the whole idea of Legacy transformation. I I think there are a lot of company sales force is, 1 of them that have really moved a lot into what I would describe in the analytical space.
And to be honest, that's a space where we expect a partner with organizations that we expect our customers. You know, we don't, we don't provide the, you know, analytical framework that you might get from some of the other companies out there and and we don't want them.
Alan Trefler: So I think there are a lot of people who talk a lot about data. I'm happy to say we've got a different bet, and it's the bet we've done for 40 years. So I'm pretty sure it's gonna work.
Speaker Change: We want to be the process engine and the workflow engine that revolutionizes the way these businesses operate and that goes out in real time, which is what blueprint does and gets the data. It gets additional information which is is is what the system does. So I I think there are a lot of people who talk a lot about data. Um, I'm happy to say, we've got a different bet and it's the BET we've got for 40 years, so I'm pretty sure it's going to work.
Unknown Executive: Yeah, that's where we're hoping to have that out around Labor Day. Okay, perfect. Thank you.
Speaker Change: I love it a quick follow-up. So I was at at Pega world as in the audience when you, uh, when you did process agentic, uh, process of fabric, pegging a, a genic process Fabric and I, you guys said, I think there's going to be generally available in Q3 255.
Speaker Change: Yeah. And that's uh, we're we're hoping to have that out around Labor Day.
Speaker Change: Okay, perfect. Thank you.
Alexei Gogolev: Your next question comes from the line of Alexei Gogolev with a JP Morgan. Please go ahead. Hello, everyone. I appreciate you letting me ask a question.
Speaker Change: Your next question comes from the line of Alexey goles with a JP Morgan. Please go ahead.
Alan Trefler: This is my first earnings call with Pega. Great to speak to Alan and Ken and Peter. Alan, could I follow up on the previous question? Can you talk about the booking momentum and demand trends after Pega Cloud Conference? Yeah, so welcome, Alexi. The, uh, the, uh, panel of conference. was really really exciting. The customers were tremendously engaged and enthused. There was a huge amount of interest and there has been great a follow up across the board. And you know, what that means is that our pipeline is is nicely increasing, you know, you would expect coming off of a conference like that, it would be good.
Alexey Goles: Hello everyone. Uh I appreciate you letting me ask a question. This is my first earnings call with Pega a great to speak to Alan and Ken and Peter
Alexey Goles: Allen, uh, could I follow up on? Uh, the previous question. Uh can you talk about the booking momentum and demand Trends after Pega Cloud conference
Yeah.
Alexey Goles: Really, really exciting. The, the customers were, um, tremendously engaged and enthused. There was a, a huge amount of interest and there has been great.
Alan Trefler: We have a lot of stuff to show. You can check out a video and you can see. And some of which is in market, like the blueprint changes we've been putting in. Some of which is imminent, but you can see what's coming like a genetic process fabric. that I just mentioned. So we have a lot of interest from clients coming off of that.
Uh, follow-up across the board. And you know what that means is that our, our our, our our, our our, our pipeline is is nicely increasing. You know, you would expect coming off of a conference like that, it would be good. We had a lot of stuff to show, which you can check out on video and you can see. And some of which is in Market, uh, like the blueprint changes we've been putting in
Alexey Goles: Um, some of which is imminent, but you can, you can see what's coming, like the aent process fabric.
Ken: And that doesn't turn really into business so much necessarily this year as in future years, but it's great to be able to see that sort of swell. Thank you, Alan. And Ken, if I could ask about your guidance, it feels that the margin expansion outlook is somewhat conservative. Are there any factors we should keep in mind that could limit margin expansion this year? Um, that's a great question. And certainly I don't want to lean in too much to our guidance. We don't re-guide. And welcome, Alexi, by the way. We don't re-guide. We don't, you know, we did adjust something in the, in PangoWorld, but it's very rare.
Alexey Goles: That, uh, I I, I, I just mentioned, so we, we, we have a lot of interest from clients coming off of that, and, you know, that doesn't turn really into business so much necessarily this year, um, as in future years. But it's great to be able to see that sort of swell, I would say,
Speaker Change: Thank you. Ellen and can, if I could ask about the, your guidance, it feels that the margin expansion Outlook is somewhat, conservative, are there any factors? We should keep in mind? That could limit margin expansion this year.
We just, you know, we try to execute it naturally. We aim to beat any of the numbers that we talk about every year. What the margin expansion on the cost management side, I think there's zero risk. We execute, we're executing incredibly well with a level of discipline that we've honestly never had in the history of the firm, but we are very dependent on growth naturally. So we want to keep the growth trajectory. If we grow faster, that will yield increased cashflow. So, so there is a naturally an obvious connection there between us generating ACV growth to be able to achieve free cashflow growth.
Speaker Change: And and and welcome Alexi, by the way, uh, we don't re guide, we don't, you know, we did adjust something in the, in, in Pagan world, but it's very rare, we just, you know, we try to execute and naturally we aim to beat any of the numbers that we talk about every year. Um, what the margin expansion on the cost management side? I think there's zero risk, we execute we're executing incredibly well with a level of discipline that we've honestly never had in the history of the firm, but we are very dependent on growth naturally. So we want to keep the growth trajectory if we grow faster that will yield increased cash flow. Um, so so there is a naturally, an obvious connection there between us, generating ACB growth to be able to achieve free cash flow growth. So that's, that's the, I mean, maybe an obvious statement but there's nothing in the execution of the kind of business other than our, you know, booking and billing that um that I'm worried about.
Speaker Change: Thank you, Ken, appreciate it. It's great to speak to you both. All the best.
Speaker Change: See, you Lexi?
Your next question comes from the line of Mark Chappelle with loop capital markets. Please go ahead.
Mark Chappelle: Hey guys thanks for uh taking my question here and uh nice job on the quarter. Um Alan question for you, I appreciate your your commentary around. Blueprint your your prepared remarks. I was wondering if you could just talk about. Um who blueprint is often competing with? Is it?
Mark Chappelle: For instance, internal development initiatives at customer sites, or are you running up against other software vendors and if it's other software companies, which ones would they be?
Mark Chappelle: yeah, you know, so like really doesn't have a direct
Mark Chappelle: Have your in, in, in, in the market, as we see it. So, the competition is always competition. The competition is other ways of doing things. And so, you know, the types of competition, you'd see would be companies like Salesforce or service. Now that come in more with say, hey, we've got this great app. We've got this great platform. Um, blueprint basically says, hey look, we're going to, we're going to take this platform, we have but it's going to be yours. And that to my mind is a really
Different message. So of course this competition out there and it's the usual, you know, just I would say you know Salesforce and service now would be competitors. You know we work with both of them as customers do so. You know, it's a it's it's it's not a All or Nothing world out there but I would say those would be meaningful significant, you know, people going into Microsoft and
Mark Chappelle: Their writing code and power apps and other types of things. But once again, the systems that we really, I think are uniquely do on something. You could easily write in a, in a, in a power app. Uh, certainly not in this agentic world, you know, I think, I think this will move towards agents and if you really understand
Mark Chappelle: what we're doing with the agent architecture and how that fits with our Center, our architecture, the fact,
Mark Chappelle: That if you want an agent you don't create some big fat prompts for 2 pages of of text. You just create the workflow and we figure out blueprint figures out. We figure out how to turn that workflow into an agent, that executes what that workflow does. I I think that's a pretty exciting thing for some customers.
Speaker Change: Great. Thank you. And then as a follow-up um, regarding the the recent strategic agreement with with AWS is it fair to assume that we could see similar Partnerships in the future with some of the other hyperscalers
Yes.
Speaker Change: Yes I don't I think it's I think it's more than fair to assume I would say, look look forward to sharing those with you.
Thank you.
Speaker Change: Your next question comes from the line of Maximilian Pro with RPC. Please go ahead.
Great. Good morning, everybody. And thanks for taking the question, um, on the partner branded blueprint that seems like it could be a, a really meaningful opportunity. So the question is,
do you disclose roughly the mix of the business that currently goes to the Channel versus directs and then
Speaker Change: Um, 2 parts. How is that treated recently? And how do you expect that mix to Trend over time with some of the newer Channel Investments that you've made?
Speaker Change: Yeah. And and at this point, um a a partner doing a partner branded blueprint, um, is is not reselling Pega?
My partner gets to charge for their own IP and for their own work and that's how they have a business interests, uh, in in doing it, in terms of the way we do. So we don't really have a meaningful, you know, Channel business in the way that I think you're
Speaker Change: You're you're asking that's pretty consistent. Joe, we've been really so historically focused on the high end.
Speaker Change: It's really been consistent with the way those customers want to buy those customers find questionably launched a direct relationship with us, you know, so that they could really engage who knows what might happen in future years. But, you know, this is still all emerging though, it's really, really exciting. Yeah we uh, we we sometimes paper transactions through Partners. They might be the prime, we might be the sub, we might partner that happens, but to Alan's point we don't have a channel. Like, we don't actually have a channel in the traditional sense that you're asking, which is we hand someone product, and they go sell it on their own. This is the really the first entry point for us using blueprint into that Arena. So it, so any, any opportunity we have here is is all new is all incremental.
Speaker Change: Okay, very helpful and and then just 1 follow-up. Um, just to double click on, the macro has has anything changed versus 90 days ago. I know like generally seems pretty stable, it doesn't seem like anything's, um, being reflected in the numbers, like the second quarter was pretty solid. Have you seen any change in the sentiment versus like, say in April or May?
Speaker Change: I, I think there's a a slightly lower level of anxiety.
Speaker Change: I I think people are feeling, um,
Speaker Change: common a little more, uh, uh,
Speaker Change: sanguine about the
Speaker Change: you know, the world inflation is not racing because
Speaker Change: You know, the world, the world is continuing in a way that is, uh, I I think reassuring to some customers. So, uh, nothing nothing nothing negative from the sentiment point of view, you know, there's still uncertainty about things like tariffs, but I, I think part of it is, we're growing accustomed to living with a level of concern.
Speaker Change: Yeah, I I would I I pay close attention to this and talk to my peers and I would say generally speaking the environment I would say is slightly better now than it was a quarter ago, just because of what Alan said with, uh, you know, at like people realize like we're not the consumer is is reasonably strong. Inflation is not been, you know, it's not reared. Its ugly head tariffs have taken probably a path of more rationality than I think people worry back in on, on Liberation day. So I think in general Things Are
Speaker Change: Much more settled than they were 90 days ago.
Speaker Change: Thank you. Thanks guys.
Speaker Change: You are a next question. Comes from the line of Blair Abernathy with rosenblat Securities. Please go ahead.
Speaker Change: uh, thanks for your squeezing, me in guys, and congrats on the very strong first half, um, Allan just, just a quick question around some of your, uh, Genai
Uh, technology that you fielded outside of blueprint. So, uh, can you just talk a little bit about, uh, Genai coach and knowledge, buddy? And you know, the customer engagement blueprint, what what, what sort of the take up? What are you seeing out there? And and kind of where, where can these uh these Genai capabilities go to
Speaker Change: Yeah, we we're seeing, uh, customers really liking the way that we've been applying AI things like coach coaches, something that will kind of step in and help you finish a piece of work or tell you the right way to do things knowledge. Buddy is a is a way to be able to create a repository that uh, you can get processes and procedures. But us, by the way, knowledge body is a tremendous asset because we're using knowledge bodies to hold both our and our partners' IP. So it's a vehicle to be able to get IP and make it make an operational. So we've got dozens of these AI features, you know, those types of things summarization features, uh, you know, the way I
Subscribe to the Pega world is.
Speaker Change: Generative AI will be used through sets of features and our customers will buy some of those from us, some of them, they'll build themselves. Some of them they'll buy from other companies, um, but blueprint and the whole idea of design is the thing or I think our generative AI approach
Speaker Change: Is extremely meaningful. And uh, what I think what else is actually able to come close
Okay, great. Thanks very much.
Speaker Change: Uh thank you Krista. I uh, really appreciate uh everyone paying attention and we we're we're really excited about where we are and how uh we're doing and the potential I think uh, for this is
Speaker Change: Well really plays well to our long history, it really Builds on what we've been doing for a long time. So we look at the Advent of AI as as really, almost a wondrous thing. So with that, thank you. And look forward to talking to you all on next quarter before.
Speaker Change: and this concludes today's conference call, thank you for your participation and you may now disconnect