Pegasystems Inc. (PEGA)

Investor Briefing

← View all transcripts

Jun 3, 2021

Hello, everyone. My name is Peter Welber, I'm Vice President of Investor Relations for Pega and I'm excited to introduce you today to our 2021 investor briefing. Very excited to be with you. I'm excited for two reasons. This is the first time we've actually been here altogether Pega headquarters in a long time. I haven't seen Allen face to face for over a year, just met him yesterday, so it's great for us to all be together today. In addition to that, I'm really excited about the agenda that we have today for moving forward to the agenda, Katie. Over the last several months, we've actually been working closely with several of our investors to talk to you about what you'd be really interested in hearing about today. So we're really passing the agenda business topics here in the industry. So certainly everyone said they want to hear from Alan today, so Alan is going to be taking us off. We wanted to hear about our low code platform and that was all about. So Stephanie is going to be talking about low code and showing you the product line, which is very exciting. In addition to that, we have Hayden Stafford here. Campaign, which is definitely the number one requested executive that investors wanted to hear from. This will be a second time talking to investors for us. We're really excited about that. And then guiding cleanup for us today is Celeste Sander from Pittsburgh and Stillwell. He's going to be covering a financial update for us. Very excited to hear from him. And then we'll wrap up today with a Q and A session. So, Stephen, let's go to the last Q and A. So for those of you who are on the Zoom today and want to ask questions. We really encourage you to do that. If you scroll down to the bottom of your screen, you can press Q and A and submit your questions. Alan to take a few questions, he'll be with us for about 15 minutes today and then Dave and Ken will take questions at the end of the session. So please feel free to submit questions during the session today. And we're very excited to have Alan come on up. So Pedro can hand it over to Alan's side. Thank you. Chipotle. And that's the good thing if you all have the sensibility that before we vaccinate we'll be in a position where we could common place, most domestically. We're trying to do an analysis. So I want to just spend a moment with you and talk a little bit about what some of the tender ways were from PegaWorld, which was really exciting about a month ago and talked a lot about our Infinity 8.6 platform that we're releasing. As you know Pega has such a long lasting history and sound understanding of what really low code and no code and model work is about. We see that frankly things that we've come to understand deeply and we think are ultimately really important for the innovations as we scale up ones where we have a profound advantage. And I will tell you the extent of that because I think that's really team. Our team is to not think of this as just kind of the next generation of Lotus Notes more visual, basic or other kind of slack together this. We're really thinking about how no code and low code aerial architecture to help us enterprise run really fast, empower those business users and at the same time creative rights to standards that particularly in the security conscious times are so absolutely critical clients that are being absorbed by a lot of the products, a lot of the trade offs. So we'll give you a flavor to that. I think one of the things that we really kind of build on is how do we use this new heritage to our advantage. Not to say that we're doing things like we were coming 2 decades ago, but to say that we've learned from those experiences and that we can share with our customers and our partners and our prospects how we can do this better, more pervasively and more powerful. Second major theme from Head of World, Head of New Horizons. And we really are envisioning a very, very partner friendly, partner centered, partner leverage set of models to go to market. That's not just about listening it. Just about how we are moving on our products, moving on our ecosystem, moving on our support systems. So we're going to get partners to grow support our customers as we implement. We're also as we go forward to really think about them being able to capture assets. Unified architecture in a way that we essentially have not a different conflict when we started, but now understand deeply blog we need to do over the coming years. And it's always terrific and I always get great excitement. I would see our customers stand up and volunteer to talk about what we're doing. We often are not allowed to talk about what we're doing. Because some of these are customers frankly, we've just acknowledged that we're good against each other. But when you get companies like Wells Fargo and Pfizer willing to talk about how they are changing the way they go to market, how are they changing the way that they complex internal to external processes that's hugely exciting. And I was also really pleased with the reception, which is an example of how organizations were able to use Pega during the pandemic. In this case, to really provide forbearance to 100 of 1000 of people in the UK who are being crushed by positive response about the lending and legal and other requirements, how they make sense of it and really being able to do very prismatic teams to help and get on driving record. So those are the best in the stores. You haven't seen them. They're all available at pegameworld.com and I strongly recommend that you go listen, everything is short. Management team, Chris. She'll be in just a couple of minutes. I also partly believe that anything on hector.com should speed up cotton. For the same reason we're not going quite as fast as we want, we're bumping up 25% to 50%. I will tell you that the view that I get the time spent on these sites is very valuable, both from a prospect point of view, it all becomes an investment to really understand Q4's differentiation. And with that, I think we've got a 2 100 and a couple of hours planned. Under some customer matters, I will be moving out for attention. I know all the investors are very happy to update you guys. In the meantime, I'm happy to take a question to team. Yes, we've got a few. So the first one is, can you give us an update on projects Phoenix and prospects one sort of monolithic approach to process. We're in a fabric where different applications, different needs, different customer segments Cannopoulos with our level of independence, but also an interdependence, so that you can see all the work you're doing for a customer, individual who can get the most important things delivered to them at just the right time. And that is the process of having vision which we introduced a year ago at PegaWorld. And we're really excited about our early adopters now showing really the potential and power Public Process Fabric vision. Now upon the Phoenix, which we actually announced about what we did as well, is the way that we have been using our model driven low code architecture, majorly changing key elements of our technology, book, putting our customers along on that journey, making it possible for us to move to a true microservices oriented absolute state of the art environment without having customers go through, oh my God, I've got all this technical debt, I've got to go change everything. Clients of ours and operate in our guardrails who use our products in the way they can are very, very much insulated from well tactical change. And that's a good model of having a highly sophisticated low credit metrics. With all the changes to go to market, Alan, what are you spending your time on now? Well, I know, this is Steve. This is really the goal for me. I still have time on 2 major things. 1, I'm launching in 1 on 1 point and I've been able to actually dial that up and spend more time on 1 on 1, maybe a little bit of time on some of the administration. I'm going to talk about how you're doing your job on that. And the other is I continue to be and have actually deepened my involvement with what the next generations of our technology should look like. But the intersection of the brain and the muscle, AI and the process need to look like as we think about not just the current and immediate generations of No Code, Low Code, as we think about where this will go, which we'll give you a lot on our side. Okay, excellent. The next question is about the citizen developer. So so we're hearing a lot about the citizen developer in the Roku and automation markets. Do you think that there will be time when platforms become accessible enough for knowledge workers to deliver on the citizen developer promise. And do you think that the citizen developer model needs to work in order for you to sustain revenue growth? I think that citizen developers already we already have people who call business architects who are central to the way that our systems are evolved and developed. So so I think this is an example where there's a major member of stake in a lot of the people who play in the market new safety idea of citizen development with folks who just like these other itself. The reality is we're here to help businesses create omnichannel internet processes fast, effectively and in ways that the citizen developers cannot get influence Progyny tuned Adjusting for Fact. That's what applies as an architecture, a dimensional architecture. And a lot of these RPA tools and a lot of these sort of point, I guess, I'll call them a sub point solutions just don't have a prayer of being able to deliver. So I don't think what you're going to see is a bifurcation between the false positive citizen developers, our the ones who actually can't deliver what they're signing up for and what customers like our customers are able to achieve, which is to really bring citizen developers. And I think that's increasingly important because businesses need to be able to own their outcomes, but they need to own it in a way good health maturity as it will. Next question is on RPA. So can you give us a refresher on your view on the overall RPA market M and A in the RPA market. So Pega has acquired and has beautifully integrated our robotic process automation, RPA, set of capabilities. But our philosophy is quite different. The math of the firms you say we're going to block robots raw Henry desktop and somehow that's going to make the organizations operate correctly. We think that's pretty rigorous proprietary approach. Many of us think of robots as being participants in processes, but not themselves driver of the process. That belongs in a system that has a right. That belongs in a system that has a level of maturity and audit trail industrial life controls. And I think you're going to see increasing shaking out of that market in the next couple of years. But we will start with what we'll continue, which is a little point stock, which is okay. And the more important reason, which is where Veolia becomes part of end to end solution. We have one more question for you, Alan, which is on the topic that you said you're spending most of your time on with your customers. So how have your customer conversations changed as a result of the pandemic? Well, it's pretty remarkable. In the last 48 hours, I've been in Singapore and Southeast Asia as well as being in Germany last year and how does U. S. Show. There has been a real, I think, sort of positive developments out of the pandemic around accessibility and visibility. And I think a lot of that will not go away. We will go back to the host of meetings. We will go back to working to organized schedule so we can be in a physical room. The voice is nice to be able to do things know we're working really hard over that. Thanks, Al. So our next speaker today is going to be Stephanie Lewis. Stephanie, you may recognize from past title oral. She's awesome on the meeting stage with Karim. So while we heard you already, you can confirm an update on local, if that's the perfect person to do that. Is that the smile? Thank you, Peter. Hello, everyone. I'm excited to see your beautiful faces, but I'm very happy to be here. As Peter mentioned, well, first of all, I'm Senior Director of the Product Organization, and I have been in the software industry for 20 years and intend to build my extensive items very much of Pega fans. And as we mentioned, I've been on Pega on stage in 2014. I've spoken back and posted multiple CES events all the way from Australia to my own living room. So I'm really looking forward to getting back in person. What I'm here today is to talk about our low code solution. And I say solution very intentionally because innovative technology and we couple that with both methodology and a strategic approach, which results in a truly differentiated solutions unlike anything else in the market. So first, Pega. So who is Pega? Well, we are a leader in digital transformation. And what does that mean? Well, let's actually go from right to left. Intelligent automation. So what we've done is we've coupled the intelligence of robotic process automation and business process automation with our low cost platform so that our clients can automate all of their business processes and achieve their business outcomes. But what is automated business process without a great customer experience. And that's where the customer engagement solutions come in and really work together with that platform. Customer engagement solutions allow our clients to deliver the best experience at the right time in the right place for their customers in their personal effort. Extremely powerful. But what we're going to concentrate on today is the low code capability of Fintech. So white global network. So, Gartner has done quite a bit of research in this area. And what we're going to be finding is that the backlog of digital transformation projects are extremely large and IT just can't keep up. So a great way to solve for that problem is what Alan was just talking about citizen development, also we call local applications. What this does is it puts the power of billing applications in the business at hand. So they can take their business, business project member expertise And so it's directly in the application. It reduces the friction between business and IT. It increases the speed to market. It increases the number of applications though. And really as Colin mentioned, clearly the ownership of the welcome in the business. So why do I say low code is finally here? Because Pega has been model driven since our inception in the days. We have taken a model and always put it on top of the code of the day. It started way back in the day, and we continue to evolve with the technology, always taking that model and putting that in developer team to make things work about technology changing underneath them. They don't need to go learn the next Java or the next React or whatever happens to me So that really increases the number of people that can develop the application. Again thinking about the business problem that we're trying to solve, not necessarily with the technology that's evolving or changing under email. And as I mentioned, Project Phoenix is just the next generation of us, taking advantage of the leading technology and extending it even further to embrace more, Which is extremely exciting. So another thing that Alan mentioned and a huge differentiator of ours is our ability to scale. A lot of vendors in this space play on that lower left. They create simple applications like requesting the laptop, request time off. We are transformational and aren't going to change the business. ABECOM silo departmental apps that are governed, aren't maintained and don't really have a big impact. Business where our extremely powerful global capabilities stated in the next call, so that our customers can develop mission critical and transformational efforts. For example, Deutsche Bahn, Service Insurance, basically automated one of their processes and got 50% reduction in the annual quarter organization. So, data science is only 1,000 of business. So, that was so meaningful for us. Then we have seen who automated 80% of their economies of profit, which resulted in 65% reduction in the ongoing events of our customers. Now that really transformed business and we did it utilizing our WellCo capabilities. Now you can see in the sub bullets and this is also mentioned by Ali, he comes to my thunder, so you can hear me, which he always does, is co development between business and IT, the governance and the process and the approach. And we don't just talk about it, We've built it into everything that we do. And the approach starts with what we like to call the center out business architecture. And as I mentioned at the beginning, it's not just about the capabilities, but it's using them in the right way where you're putting the customer first, taking all that customer experience. And that's what he's talking about. You start with the customer and what objectives are they trying to achieve in that moment and then the outcome that they're trying to get to, which really results not only in that customer experience, but really breathtaking agility for the applications to change as customers need to change. And again, as I said, we don't just talk about it, we build it into the product. And what we call the TAE expressing biology It's just that. What this does is this is a guided experience for the low cost absorber, right? As you know, There is a new suite, but yes, they're able to do in their career, which is awesome. Let's help them. Let's give them those best practices INGOD. Not only does this increase the speed in which development can be done, but it really ensures maintainability, scalability and governance so that all of the applications are going to be effective. And so how it starts is first, as I mentioned, we find the outcome. What is the customer trying to achieve in that moment. We call it the Micro Journey or a case, which you'll see when you do that on. And then design, who are all of the different types of personas, those customers that are going to be interacting with you and where are they going to be interacting with you, those are the performance of channels. And then the data interface, data and interfaces. What data do you need access to, what innovations do you need to hook up to and all of this is through the data experience built into products. And with that, I'm sure you're all here and I'm here to show you the product. All right. Let's set the stage. So a lot of demos that you see, there's We actually do the final screenings and they're all pretty. I'm not going to end up. I'm actually going to start from scratch. So if you don't have anything to buy and you're going into the first time, they say, I know my customers want to do an outside first To where you start. I'm going to show you how we do this. So this is what we call App Studio. This is our low code environment that local developers work in to build our application. So we are going to create a balance transfer. So again, as I mentioned, pretty much, this is how easy you ask the point. All right. So let's do balance transfer. Go ahead and go in. The first thing that I saw was a create fee. So obviously, when you start out, Catherine, we want to create some of these things, as I mentioned, we provide very much a guided experience for these developers. So they can focus on the problem that they are trying to solve. So great, that's the first thing that has to be done in the balance transfer. This is how easy it is to define the steps in which the customer needs to go through to create that balance transfer. These are the bars, these are the steps, these are the icons, you can easily see what they're creating has to go. And obviously once we've created it, it needs to be routed to someone in the back office or Google. Here what I want to point out is that team templates. And I'll run-in a second if you can see what I mean. But how can these templates baked into what you get out of the box ability to extend ensure again that creates the key ability to maintain ability so that everything is created in the same way. So if that helps us change it behind the scenes, it changes our awareness. That really provides that governance and central ownership and really the ability to build the business. So for example, here I'm going to choose approved reject. You can notice what happened in the bottom right there, the rejection was automatically created because obviously, you have to pick out the option to approve, you need the option to do that. So we have built in the things that have to happen and the best practices that as a local developer can focus on those business problems and just fill out that template as a robot. Frank, yes, very easy to remain. So we can call this whatever we want, but we're still utilizing that template. Next I want to go to the fulfillment stage to show you what we call smart chase. And that's just a smart data frame, integrated intelligence that we have taken to the next level so that you can create those mission critical and transformational applications. This is where you can help in that robotic process automation because it's not just about that robot offering its own thing. We want to make sure that that's integrated into the end customer strategy. So for example, I'm going to show in this case is an email, SmartShade or integrated automation. And if you didn't have this smart shading, as a local developer, you have to think about all of these words that you don't need to know about, Because all you need to do is hook into that AI, that's basically the automation that's baked in and fill in the parameters such as email address, main objective and that's it. When this gets run, it will just work. Extremely, extremely powerful. Okay. So now that we have it in mind, there's other things we can do. But what I'm going to do is jump ahead because I have a little bit of time and I don't team and Pega's talk today. So I'm going to use that same app to you and in a very graphical interface that I just showed you in the private field. So it's critical for all of us to perform, they understand the field that you need to connect. I'm also going to define those personalizing channels that we talked about list of the product methodology and then find the data and interfaces here. Being able to hook up to that single source of truth for company and it's still critical and that's available right in our local platform. Okay, ready to roll. So what I'm going to do next will show you how real time our application is. So once you have that definition done, Great. When I hit Save and Run, what's been happening behind the scenes is TEGNA generates the technology, the code Here we go. And then I'm brought into the interface, that was the box interface that I created, call this a portal, the basic way. It's a web page that you can use to create. So the first thing I'm going to need is ability to create a new doc transfer. And do you recognize create for a software identified transfers and new transfers? Hope so. That's what we've just defined. That's 2 minutes ago to talk a lot. Here are the fields that I did create, even though I didn't show it. And the first name being the account number. That's the first name being the account number. And most critical here as I mentioned with the data integration one time team that account number because we're pulling from that target truth, I'm pulling back all of that account information. So as soon as I go out that account, I feel the information for you. And you'll see that as we go along in these other fields, some of them Are they still in the next one with the offer? The offer has metadata. So we'll be with it. That's always the platform. So again, it is taking advantage of the architecture behind the local platform, but delivering it in a local way business community to create this is a simple process, but I really wanted to show you how easy it is to build from scratch. No, now that that's created, I think you could give us a call to create an application. And then editorial page. So that's on the audio business topics that I mentioned in the beginning. Okay. All right. So now I'm going to transition a little bit into what I call Vignette. So this is going to be a And the first thing I want to show you ability to change the layout of the moving field, right? In the field, you did the outline, but you don't realize how they look on the screen. Of course, you can change that. So I'm going to downsize this section that I'm going to change. I'm going to change how these are laid out on the screen. So first thing I'm going to point out is TEMSA. TEMSA is TEMSA. So we are so important for that maintainability to governance. Again, one change is behind the scenes. All applications using that are changed. That really increases agility. We don't need to iterate. And sure, honestly, Okay. In this case, I'm going to choose to go from 1 call to 3, we'll make that change and immediately both use change earlier. And then when I'm done in my editing mode real time that takes the best. You know there's 1 and 1 call it the 3 and it actually works by people at the traffic signal and then it takes All right. Next and next. And there is a case, but everything that we just created is ready to go for mobile. And you have the ability to see it within the local platform. So if you build this is the desktop, you can see it here on the top, These are the different types of devices that we call preview that we can utilize. We can go from desktop to tablet mobile and immediately everything that you just built automatically gets on the brakes on the mobile device. You can change the mobile device, you can change the orientation, all of those right there and then you can go through my blog today. Last, okay, you need all of that. All of that also is readily available for you to extend to all of the different channels that you are customers expecting in the next few months. And that is really how you take simple application for like business transfer and make it truly transformational and improve your customer experience. I hope you'll learn something from me today. I hope you'll be here and I'll leave you with me again. Thank you very much, Stephanie. Great job. Amazing to see a great and low code have during our investor presentation. Amazing. Excellent. So I'm super excited about our next speaker, Katie Stafford. His energy and enthusiasm is infectious and the work that he's pleased with you already with our partner programs has been phenomenal to see him in action. I don't feel as thunder because he's going to go through his amazing background experience, David Stafford. Welcome to the investor session. Thank you, Peter. Thanks. Thanks a lot. And Stephanie, thank you. I completed a really good job showcasing in 5 minutes what our clients are actually going through. She's really just tip of the iceberg and give you an example of the power of Pega and what we can do. We have so many clients, be it the largest banks in the United States funding with COVID-nineteen PDP programs or as healthcare providers responding to vaccination governments in Europe building applications due to the pandemic. It's just amazing what our clients are doing in days weeks, not months years. So I think that's a good showcase. So I want to start with a little bit about my background before I speak to this actual chart. I think if you probably did a little bit of research on me or did any background checks, there are a couple of things that I think that you might find. First of all, I am extremely passionate about clients and spending a tremendous amount of time to clients. I am not a Sydney office, office I have empowered managed by spreadsheet, new ventures with the team, building relationships with clients and staying committed after the sale. You can get sale, you can sell after the 1st sale. So new client relationships are critical. Nothing gets me more excited than building robust successful partners. Relationships with partners for me are the everyday. So whether it's small, regional or mobile systems and areas and ISVs to the largest global systems integrators. Relationships that we have there is absolutely critical. You also probably have heard I'm now a micromanager. Though I like to be in the field and I like to be in the trenches with the team, I believe in 3 very important characteristics of leadership principles: clarity, empowerment and accountability. If you are very clear on what you want to do and you empower your teams to do what they need to do in their own form, in their own region, operator against the very clear directive. You hope them accountable. Those individuals are extremely accountable. With those three principles, I believe in micromanagement, empower great leaders to go do great things. And then finally, it is about structure design and sticking to the details. You might my very first career out of college was Canadian Navy. I was a U. S. Naval Aviator. And that was all about structure, that was all about discipline, came in command I'm really respecting the rules and I think that has really been a great grounding for me as I grew through my professional career. So I'd like to actually talk about that professional career. I'm going to work backwards from my most recent job. Give you a sample of kind of what I did by experience and how it's germane what we're doing here at Pega. So you'll see on the left hand side is my experience. And then as I look at my 1st 45 to 60 days, we're deploying those experiences to what I call levels of growth. Taking the goodness and the not so good news from each one of those companies and I'm calling them here kind of a greenfield white slide of what we can do here to drive significant growth. So if you think about Microsoft and what happened in the time that I was there, I joined shortly after starting up. While I would like to claim growth and success that Microsoft with Mindy and I have started doing at Microsoft, just over as CEO. It's an amazing transformation how that it goes back to the leadership principle that I talked about and that's clarity. He was also clear on what was important. 1 Microsoft culture vision set back and reinforce it in everything we do. And then there was a lot about partners. He just in a quote in an article a couple of weeks ago talked about 95 percent of the revenue that Microsoft drives, we touched by a partner in one way or another. So very part of Centrica. We build an AtScale ecosystem partners that are developing products with you, building and go to market models, selling together with you and delivering together with you with a very powerful message partners, to your clients, and frankly new employees. So it's not just about delivery at Alta, it's about growing to market together. The another thing that I talked about was the vision, kind of unified mission, vision and execution framework. If you're all on the same page, if you're all rolling to the same deal, if you're also in the same, you know, where the case may be, quickening pattern and it also links standard deviations. Standard deviations drive variability, variability drives up costs and lower productivity. So getting very, very focused on what we want to do as a business, translate into the development of things we need to do for that. Before that 11 box 6 years. Before that I was at Salesforce and Salesforce leases from 2011, 2012 going through 2014. This is a hyper sale period for Saddlehurst. I can say probably about 10 years with a hyper sale period for that. But prior to rejoicing, it was a very democratic business model where it was non industry aligned democratized software for every industry. It was a period of time where I helped to build the industry driven market model, both the industry data models and industry products industry better market teams. It is very, very important to not come in with a generic or democratized piece software, point of view about how I can help you impact and change your business, whether it's banking, airlines, telco, having that point of view of expertise product that matches absolutely critical. But another thing that Salesforce did very, very well is they have depth and breadth motion. So Pega is a very enterprise and direct sales model. I think there is an opportunity for Pega as well as many companies especially in post pandemic move into the digital, a velocity sales model to expand beyond just direct engagement, direct 1 to 1 and move more to digital marketing, digital engagement, inside of sales, etcetera. So very powerful scale motion along with depth motion. In my days at IBM, that was all about discipline. That was all about management structure. That was all about teams. That was all about forecasting. This was some period of time where I shaped my management acumen. I think much like you might have team that companies like GE and IBM really churned out a lot of credit management back in. That's what I would say hallmark that period of time, but also Chief Executive Global Head of Sales, had a lot of experience in senior business at the end of the management style. Now the high potential program, so A lot of access and spent a lot of time on Wall Street working directly with Jimmy and Sam Balmazzano and all the other leaders and seeing what work and work disciplined sales effectiveness, which is really needed to run an upscale business. We're growing significantly. You want to have solid conditions you want to have management that is really dialed into what's happening. And that's something that we're hearing here as well. And if I may, I hear that RMBM that is about delivering and consulting and delivering the sale after the sale as well as international experience having lived overseas. Teams. Stepping now to the American, the Eurocentric point of view and understanding your role of clients, consultative selling, learning by listening and focusing on delivery excellence. So this you can come back, have a happy customer and expand your base. So this background for me provided a wonderful opportunity to take the best and learnings of each one of those and bring them into Pega. And for me, which I worked with the Board in my first 25 days was 5 members of growth. If you can drive management discipline and you can drive sales effectiveness, I'm going to sound the same patient sheet music. Digitalized drive delivery excellence. Quick delivery means quick time value, impacting customer opportunity to grow. New partner Centric, brings you an opportunity to sell and have a force multiplier, etcetera, etcetera. So bringing that into the business here, Those are all foundational elements of what we're doing. I want to give you a sense for kind of the halfway to growth that we're applying these 5 levers thinking about our global market model. First of all, a modernized approach. We're not just about an 80 enough superhero or Superman that does everything, right. Our model typically was an AE and an SE for all of our products, which Stephanie talked about with Loco. We also have 1 on engagement contact center specialists, who are very important to go in and speak the language of the contact center. Business values, business value client innovation, building the business cases, the ROI, all ready documentation beyond just the sale, So bringing in client innovation specialists, bringing in our customer service, our customer success team, integrating that with your consulting team so that you've got a maniacal focus on the tail after the tail. So modernizing our sales approach, expanded routes to market, right? The post multiplier of sales and SaaS role is a vibrant ecosystem. Typically in a world of direct sales of an AE, you can only handle so many opportunities that won't buy. And I think the graphic on this chart really growth, the idea of us embracing global systems integrators, global systems integrators, partnering with co sell with ISVs and ultimately developing our platform teams as a chance to force multiply our revenue in our market. And then finally, I think one of the most important things here is drive sales efficiently through repeatability, sales motions. We were a company that was very dependent on large deals. Our pipeline was made up of very large deals and we do do very large deals. By getting that run rate business where you can get wedge plates, entry plates that are repeatable, not necessarily package solutions, that's not really who we are, patterns that resonate, patterns that we can replicate with our clients and our partners can do that as well. That means we can get any quicker, we can have to a certain degree more run rate revenue and then work on the wells to really put us above and beyond our targets and our goals. When you bring a modernized approach, you expand your reps to revenue and you drive sales efficiency through repeatable programs, repeatable offerings and bring that sales to Zillowind. You've got a real opportunity to drive growth beyond what we're seeing today. So if we go to the next page, I want to share with you kind of so what is our journey for our go to market teams. I'll talk a little bit about our organization structure, what we had to do in order to implement what I talked about was 5 levers growth as well as that kind of give the high level rough synergies growth that we just talked about. Talk about parts. Of course, clarity on what our objectives are. We have to all be aligned with it in consulting and partner organization and sales, aligning around common set parts and then where we're going after 2023 and beyond. So let's focus on the organizational structure first, speaker one more time. There's a lot of things that we need on here, but I really want you to anchor on is we are very sensitive to the culture of this business and building on the foundation of this business. And a good portion of our management team that was from the foundation and historical background here at TEGNA. It still remains. But we've also brought a lot of scale leadership, a lot of diversity. And I don't mean diversity just in gender, geographic diversity and diversity from an experience standpoint. So if you look at these names and faces here, every one of these names you see including myself our new within the last year by the way. But this week, it's my way of hearing works for the company and everyone on this chart is a year or less. And this represents our go to market field organization. Again, backed by a lot of prudent leadership that we have within the business. But over each one of these leaders, I want to answer you and this isn't a wholesale change of the business. The bold remains below each one of these leaders some of our new leaders as well. We have Beautestone cleaning with the house in terms of the oil performance in some of our regions, we did that quickly. I want to anchor on the amount of time we took to select the leaders. Culture, experience And discipline was so important to me and identifying that they also understood that clarity and empowerment and accountability is the way to run business at scale. And the interview processes, buzzing on this chart here is new this week. We spent a lot of time in the case of John Higgins, 23rd 4 interviews, we'll be making sure the fit was right, strike the scale that we need. And I'm delighted to say we are in a very good position winning leadership team. I have as of this week, no more team leadership roles still within this business. We took the 1st 4 to 6 months thought learning and listening about the company, taking the values and understanding the core of Pega and then the last 6 months really behind bringing on board scale leadership. So that will be why it's clearly empowerment and accountability. The other thing that's really important here philosophy back where Boston based corporate culture company. Only 2 leaders in the region with their team. So how about the AVEA having leader leading Asia, leading in Asia, leader leading in EMEA, living in Europe. And John Higgins, we brought together our consulting and our customer success teams. 1, who lives in the UK. So it's really important to me to be able to represent the main geographic and employment diversity of the state. One other thing that's very important, as I said earlier, standard deviation ability to be the bane of growth. So we globalized a lot of these functions. We had a lot of kind of bifurcated, you know, deepening leadership out around the world regionally, which created some overlap and rolls, some lack of productivity. Decentralized and worldwide philosophy function to create functional excellence. That way, we have the proverbial one part to joke or one back to Pat standpoint of excellence in consulting, excellence in partners, excellence in sales. So a major shift, but the onboarding has been robust. I know I just went through it. We applied my onboarding to the best ones to each one of these leaders and already the folks who've been here for 4 to 6 months, Judy, Joaquin, Carolla and John are already ramping and having a huge impact on the business. If you look at our priorities and focus, to this is kind of the outline of what we laid for this year and everything we do now is around what I call the big five hurdles. Big five hurdles are on the left hand side. So let's start with one, Pega. What does that mean? That means we operate as one team. That being, you are a leader of our consulting business being aligned with the strategy as a company and our sales teams and our consulting teams work together, for example, as well as expanding with our partner teams. This is all about having leadership that is aligned, that are set to finish each other's sentences and understand what success looks like and what failure looks like. Business systems driving businesses over the way on long mega, I feel we've made great progress here aligned with legacy leaders like Ken and Alan and Adrianne and our people team and Karim and our product team. Together with all these new faces. It is important that we're all acting well, not just with new market organization. I think we're making huge progress, which you can see. I think we're 3 quarters away there now. We have moved from forming and storing and growing, now moving into performing together. And of course, for me, it's father of 3 daughters and a brother of 5 sisters. I understand that our clients also buy with global perspective. We're making a disciplined and conservative effort to reflect our 5 days. The business is about working together across functions an alignment dealer market around 3 main solution areas, 3 main players. So instead of just about one offs, go do what you should do with your clients and see what comes back, very disciplined about building market around 3 solution areas and everything you need to support that whether you're in marketing, you're enabling it through your partners or your sales enablement. We are a line together of 1 business around 3 solution areas. This really drives productivity. You're not really getting the wheel every time. We're going in together, knowing exactly what we need to go about. I think we're making great progress here, a long way to go, top right progress, physical execution. This is our sales management phase. Variability is the vein of growth as said that before, we're speaking the same language in our weekly forecast, our monthly forecast, our quarterly business reviews going up management team and back down the management team. We're all very clear on what needs to be done. I will say we've had a high degree of variability in the past. We don't have that now. I think if you were to do any apps with Pega, you would quickly find out that our SMC, our sales management agency is catching to everyone's brain And we are now very much operating towards a predictable, reliable process, whether you're an individual contributor right up to myself. Partners' venture. I don't need to speak too much more about that. What I can tell you is we have globalized that function. We've brought the partner team office to the senior leadership table to be in the strategy and to be invested in our partner enablement, partner development as well as our go to partner activities, partner selling, partner development, mainly bringing roles. But our partners need to understand where they are with them from the idea of the deal delivery of the deal, not just the delivery of the deal. So we're looking at partner source bookings, total partner impact, etcetera. And I just want to say about Partner Centric. I've got out there at half. I will tell you across the company perhaps move over a little bit on what partner centric means. So we get the message has gotten across. But these things take time. Shifting from a pure direct sales mindset Oxford and Virgo co selling partner in that business. It's been back. This is an 18 to 24 month process. So I know there will be some changes and there will be some variability. But when we get the point across Gene about what our strategy is for partners, not only do we get it, but they get and doing real things like bringing partners into their own SKL sales kickoff and having a sales kickoff with partners that's never happened before, that's happening now. We launched our partner program in a single world, very significant progress in how we think about partners. And as we move forward, we're starting to bring these teams together, right, our SKL sales kickoff, bringing together where our partners are integrated with Barcelas. I refer to our partners as P sales, which is an extension of our teams. So I need other teams to be thinking like that. Thirdly, the last piece, it may seem manual and simple, but make the number. It's not about an annual number. This is not about a quarterly number. This is not an monthly number. Commit to the business, and we commit to you to give you that empowerment to go execute. And this is not just a licensing standpoint. We're bringing this disciplined consulting and our bookings that obviously leads to revenue. We're bringing the A and E partner team around what we need to make their number, what it means for our marketing teams to make their number. This is going to take a little bit of time, but I do see green shoots that are starting to appear quite good in terms of accountability margins AlarmNet Consistent thought maybe the number. Finally, I want to close on future and growth. If you know the business around repeatability and you know what we're going to sell, what we sell with our 3 solution areas doing it with scale function with force multipliers, like the repeatability being able to be able to help us do that heavy lifting. Partners are that force multiplier for us. They are selling beyond we are selling beyond the Pega practice. That was an immediately important thing, not just dealing with partner practice, but working with the industry leaders, the global leaders, the practice leaders, in the client account in the Accenture and wider, even the power teams. Getting that going is very, very important. Now I understand the deviations and having world class leader and discipline, that is for me that goes back 15 years in my experience and that really builds high performance teams. And finally, when we do all of this new cabinet of eyes towards hiring global thought leaders, lending companies and diverse candidates. I want to give you the employer of choice, destination location, both top talent, top 25 talent, 25% talent around the world. So I'll just conclude by saying we've made tremendous progress. There are parts of the business that may be unrecognizable from a year ago. But I can assure all of you, we are all aligned around the values and the culture of Pega and the teams are extremely excited by the transformation that's happening. And I look forward to being back with you a year from now and talking about some of those successes. So, back to you, back over to you. Thank you, Brian. Thank you very much, Hayden. As I mentioned earlier, we are going to be accepting questions today, so at the bottom of your screen, if you click the Q and A button, you can submit questions. Team who will be staying for the Q and A session at the end. Ken Stowell will be participating in that as well. So I'm going to bring Ken Stowell up next. He's our Chief Financial Officer and now he's also our Chief Operating Officer, which is truly amazing to get promoted when we work on the engagement software. Thanks, Peter. Welcome, everyone. Hopefully, this is the last time that we have to do an Investor Day virtually. I've seen very few of you live. I look forward to seeing everyone in the very near future. I will tell you on my drive into Boston, I can assure you that lots of people are going to the office because I think traffic was worse than what I remember pre pandemic. But I am very happy to be able to come to the office on semi regulations. Now we're not fully open yet in terms of welcoming everyone back at Pega, but we're starting to have people sprinkle in. I imagine as the summer hits and as we get through the summer, we'll probably be kind of back to some sense of repeatability, at least here in North America. We are still although we're kind of benefiting from maybe being ahead on vaccinations and then quite frankly the national immunity rates in North America. We've got a lot of our offices that are really struggling specifically in dealing with about third party voice in India. And I think we're starting to hopefully see the light at the end of the tunnel for them, but we've been doing everything we can to support them. And quite frankly, they've done an amazing job minimizing any dysfunction in the business even during these crazy times that they're dealing with. So our high cost comparison with all of our employees around the world. One interesting thing I'm going to touch on this real quick. This is State Partner statement. We've actually filed an 8 K this morning for those of you that aren't aware, State lead as well. So if you can read that, you'll see the standard disclosures. I want to touch on one thing very quickly around Hayden. So I work for so by the way, I'm actually coming up on my 5 year anniversary. I chance to lead and maybe call me legacy. That's some legacy now. But so 5 years of that. I think even after like, maybe like next year, I could be a pain longer than anywhere else that works in my career, which is kind of scary things about that side of the book. But one of the biggest thing is when you have a sales leader, they tend to skew on one side or the other style, right? And that to me, that's always been a problem. Sales leaders that are hyper focused on growth, largest, they are growth machines. They're growing at 50%, 100%. The challenge with some of those go to market leaders is that they're not necessarily operationally focused because they're just thinking about the growth and they're kind of assuming that someone else will figure out the kind of making sure that the bolts are tightened and then they end up with this car going really fast but kind of like shaking, guidance. So what does that mean? It means some optimal scalability for go to market. It means you're actually taking a hand down with others and fixing an operational problem. The other extreme of credit market leaders are the deep operational leaders that don't take the necessary calculated risks in growing the business. And so and that would be like say, I would say I would probably be skews more towards the operational side of that just because of my background. So the challenge with either one of those is either get a deeply operational person that doesn't really growth equation, where you get someone that's focused on growth, really goes to how to scale the business profitable. And when we went through this process of thinking about bringing someone in like team. Alan and I and the Board talked about we really do need someone that's into both. We need someone that's seen both at another company. We need someone to appreciate the balance of the trade off of scarcity, of being able to make investment decisions across different options and not just think that there's none limited amount of funding or I think that they're only focused on productivity and they risk growth capturing new markets. I think that's kind of just an interesting summary of why we thought of Hayden as being a really good fit for us, which customer that has experienced and you heard him talk, he kind of probably fit in the growth machine, he's also highly operationally focused. So what are we going to talk about today? What am I going to talk about today? I'm going to get a bunch of things here. And some of this is kind of updates from what I've talked about core and some of it is a little bit kind of a more angle and view on how we look at our performance. So we've talked about the market opportunities that we see in front of us. Going to talk a little bit about the transition to cloud, which I've been talking to all of you about since I started. And we're kind of getting to the point power. We're finally kind of at the end of this and we're starting to see our numbers kind of normalize. We're going to talk a little bit about why. Just to reinforce the anchor of why this model makes sense, not just from a valuation standpoint, but just from an overall health of the business and the addressable market. And then I want to update my views on our longer term model that I first populated with everyone back in 2017. Next parties. So the market that we're in is massive and maybe we'll I don't know that I need to go a lot further on this slide, right? We are in a market that is so materially bigger business size of our company that I kind of sometimes dismiss this when some of the companies are just the market kind of bigger than we can tackle. There's so many opportunities here. But I do think it's important to kind of directionally connect. We believe our market size and what we're showing in this slide is about 50% to 60% of the overall market size for platform as a journey. You might think, well, why is that? Well, we're not in every vertical and we're not in every organization. So we and if you look at a pyramid of top companies, top in terms of size, down to mid market and small organizations, the overwhelming amount of spend tends to concentrate towards the top third of that pyramid, which is largely where we're focused. So big market, massive market, you might see these numbers and think, well, your competitors show $200,000,000 is in the market. That's true. We don't actually play in all of the verticals and all the regions and all of the customers that some of our competitors do. But it's still a massive market. Here's an interesting realization that came up on me just a few weeks ago, which is I looked at the IDC report that was published. And they predict that all of the new spend in technology, all of it, in fact, actually this chart is probably not even fully true because the actually non digital transformation liquidity decline slightly. I show it here as a kind of a flat line. Legacy software, non digital transformation software, there's no investment board. There's no incremental investment board. All of this spend to clients of AV and enterprise with digital transformation. So we're well positioned. Huge market where everybody is shifting their spend and growing at double digits. So I think that we couldn't be in a better position in terms of the market that we're in solutions where we sit with kind of statements with the darkers and the foresters in terms of how they rank our solution and then where clients would spend their money. Just to kind of hit that high level, why did we do this transition? Isn't it been obvious to all of you? We went from a potential business where you are much less predictable, much more sensitive to fluctuations of big deal, not big deal, 2 big deals, now one big deal. But the quarter over quarter, the year over year, really difficult to predict business, very difficult to predict productivity, very sensitive to economic cycles. And what that means is that and he actually touched on this. It means you're less efficient. It means that you'll have more costs to deliver the same amount of revenue. What we're moving forward, business that is, I would say, exclusively recurring, but I would say, other than professional services, we're pretty much there. We're all recurring ACV, which makes you predictable. And our retention rates, and quite frankly, a better price software retention rates are 90% plus our retention rates are well over 95%. So we're very predictable. And we aim to now manage using that predictable model to be able to drive a balance of efficiency. My goodness, it shows the time line here and what it shows is that if we started this in 2017 and we ended as we enter 2023, we're a little bit further than halfway through this whole transition. Next slide please. So what are some of the key metrics? Now these are key metrics that I specifically talked about at the beginning of the transition, the key metrics that survive the transition. Annual contract value growth, ATV growth. Many companies refer to that as ARR. I think that ARR and ACV is being interchangeable. They are the same because the annual recurring spend that our clients Connect to solutions with payer. The growth in that number, because our retention rates are so high, the growth in that number is really all net new spend with our clients. Sometimes that's a new application, sometimes that's an expansion of an existing application to us, both important. Sometimes it's new logos, sometimes it's an increased spend with our existing clients, very critical to have balance of that. We probably didn't see it a little bit high over the last few years on the amount of bookings that come from our existing clients. I think the Parker initiative, and actually quite frankly, some of the expansion of the organizations that we cover will help the balance, our focus on kind of that land and expand while making sure we do have enough new logo growth to create further ground for continued expansion. Paying in Cloud bookings is a percentage of our overall new business. When we started this transition, I thought maybe Pega Cloud might be 30%, 35% of our new bookings. That number has been over 50% pretty much for every quarter for the last 3 years or so. So clearly Pega Cloud is desired by our clients. Our sales teams, our incentive to sell it. Our product teams are focused on enabling it. I think we're really at a point now where peg in the cloud really has this momentum and this growth trajectory that could continue and should continue for years into the future. And the remaining performance obligation, commonly called backlog, info it's a confirmatory metric, right? What it shows you is that the nature of ACV, the nature of the business is healthy and the duration of commitments clients. So that's kind of these are 3 primary metrics for growth. You've seen this, our total ATV growth is around 20%, it's been about 20% or approximately maybe slightly more than 20% for the last 3, 4 years. We do aspire to have this Grow Faster. He talked about this push for trying to accelerate APD growth. And I think all the things that we're doing to try to make that happen. What's really interesting about this slide is the dark blue. Hopefully, it's dark blue on your monitor. But the dark blue, which is the Pega Cloud growth. And that I'm going to talk a little bit about that in the future, but that number is really becoming significant as a percentage of our business and it is the presentation for us. That's our SaaS product. Pega Cloud is our fully managed SaaS product. This shows where Pega Cloud bookings were as a percentage of our business and where we think they will grow for. I think the only thing holding us back from Pega Cloud being a bigger percentage of our business is that we are flexible with our clients. We allow them to choose whether they deploy on Pega Cloud or what we call client cloud, which is where they manage the Pega solution on their cloud of choice. Pega Cloud where we manage that solution on Pega Cloud. We've made a strategic decision to not force our clients to only buy Pega on Pega Cloud. If we did that, Pega Cloud could be 100% of our bookings. But we do believe at this point in time, we would give up market wins if we actually force our clients to only buy under that model. I think naturally clients are moving in the direction you want to buy Pega Cloud and increasing pace. I don't think we have to force that. I think it will happen naturally. Next slide. I talked about our name performance obligation or backlog. It is growing and it's growing faster than our ACV. But frankly, you would expect that because more of our remaining performance obligation is growing. The Pega Cloud percentage continues to become an increasing relevant piece of RPO. And because it is, and even it's growing at 50% plus is actually RPO is kind of growing in between total ACV and our Pega Cloud next slide. I think what this slide highlights to me is kind of a this is a great slide, most frustrating slide at the same time, right? The great part of this slide is we are consistently growing every quarter, quarter over quarter, year over year in the 20% range. That's respectable. We're growing Pega Cloud 50% or so, actually a little bit north of that, but just to see 50%, pretty impressive. They can be higher. Macro frustrating part, right? The frustrating part is why can't take a cloud be growing 100%? Why can't total ACDC growing 30% plus? It certainly can be. It's eluded us. We're trying to do the activities to help to unleash some of that acceleration in growth. It does take some time as we invest in go to market, we invest in the resources, we invest in partner and ecosystem to be able to help accelerate that. So I would view this slide as like I'm proud of some things because we're consistently producing, but I will tell you that we can be better than this. That's not a guarantee, if I told all of you, I mean, we do need to execute, right? And we do sometimes give you even a little bit of luck as you execute and try to accelerate its growth at growth levels like this. But we are completely focused on increasing the capture rate of the drug level market that we have. It is the opportunity is right in front of us. And so we will continue to push accelerated ACV growth number. Here's the interesting slide that I don't think I've ever visualized in this way. The numbers are all there, but this is our ACV components. Maintenance term, which collectively are client cloud and Pega Cloud. And what you're seeing is that Pega Cloud ACV is now favor than our term license ACV for the first time. And if you go back even 2017, look at the relationship with Pega Cloud to our solar ACV. We're going to be our Pega product is going to be bigger than maintenance scale within certainly within 20 21. Next quarter or 2, we might have that number. And that to me is really kind of that next inflection point of where Pega Cloud is bigger than any ATV channel that we have. Remember that our maintenance ATV still has a significant amount of legacy perpetual maintenance in that number. So that's a lot of business that was sold to perpetual channels years ago. Just to think about PegaSoft becoming that big of a component of RAC. And by the way, one of the questions that I sometimes get asked is, if PegaSoft continues to growth becomes a bigger percentage of ACV. Isn't that a lever to accelerate your total ACV growth? It absolutely is. That is the trick. The trick is that TEGNA cloud continue to grow and outpace the overall growth rate of other items and has become a bigger part of the pie. Therefore our overall ACV growth will accelerate. Next slide please. Another thing to reinforce, when we first started talking about this, or I should say, when I first started talking about this 4 years ago or so, I didn't think payment cloud was going to be growing at the pace of this growth. If if you go back and look at the data that I have actually said I thought it would grow 35%. It's been growing about 60%. So it's really kind of difficult to think about the ramifications of that unless you're as close to as I am. But there are certain implications that first off, it's great long term. But there are some short term optics of having more of your business goes fast. Faster, less revenue recognized upfront, more revenue over time, your backlog will grow a little faster. I think there's more of your commitments for actually going into backlog. You may actually because you're growing faster, you may have comps that are actually a little bit mismatched with your revenue growth, with the revenue your recorded revenue and the revenue growth. But overall, this is a tremendous positive for the business. We're back to take a comment, growing it almost twice the rate of what we thought it would be. I mean that's far exceeds our expectations. But we do need the practicality of how that impacts the results and the more time frame we see the benefit of that. Next one? Pega Cloud margin expansion. So one of the things that I would say I was a little nervous about. I will fully admit that in the 2018 2019 timeframe was what are the levers and how much operating leverage are we going to get as we grow in the comps to be able to get our margins up closer to that 70% number, which is originally kind of that target that I accept. Well, now we think the target should be entire well now. We actually think our Pega Cloud margin should be closer to 75% in the future. So that's a so let's see. The way to think about this is Pega Cloud is growing faster, revenues delay somewhat because Pega Cloud is higher, Pega Cloud's a better chance to get more operating leverage around Pega Cloud. It should drive our gross margin up for Pega Cloud. And because this is such a big component of our business. In Pega's raw margin drive naturally will be materially impactful to our overall gross margin. The other interesting thing that's happening because at the same time, more of our partners are supporting our clients on top of the cloud, which means our professional services revenue doesn't even grow as fast as maybe it did under the perpetual model. So we have a bunch of things kind of moving generally in positive directions for us. Have a lower service mix, higher Pega Cloud, higher Pega Cloud gross margin, potentially helping to accelerate our growth rate above thought review over the last few years. Now naturally the optics of how that plays out for 20222023 will be slightly different than what we originally model when we thought TEGNA is probably a smaller proportion of our business, then it's all good. It's exactly what we had hoped would happen. So I think more than one just talk in the next few slides about how that will play out. Next slide. So this is competitors' journey. I'm not going to tell you who this was. You can probably guess this is a large software company that went through a perpetual to file transition starting at about 2010 or 2011. They did an excellent job of moving through this transition. They're almost a poster child for how you would want the transition to happen. And if you go to the next slide, this is our transition. So we actually didn't quite have the steep decline of the transition and we're kind of tracking in a very similar fashion. And so I show this not to say that I'm guaranteeing that we will continue on that path of the way that the competitors grow. I'm just showing business how cloud transitions work, right? It's just accounting. The numbers don't play out differently depending on the company. You will actually have a drop growth rate as you go from perpetual revenue to SaaS revenue and that will take a few years to get through. What you're seeing now year 4 across 2021. And you'll see our growth rate is already starting to accelerate even above that 16%, certainly for Q1. So I'm really excited about just the latest model is playing out and how close it is to what I originally anticipated kind of that half would be. Next slide. I think this is maybe this is an obvious thing. It's something that I wanted to reinforce though. Valuations 4 companies that are cloud versus perpetual are dramatically different, right? 3x to 4x higher in terms of our applied value revenue at the same price rate. Why is that? It's for exactly the reasons that I talked about earlier, but predictability. Tobacco decision. And our perpetual model is impossible to have consistent predictability quarter in and quarter out. When you actually have a SaaS model, your bookings get kind of averaged more. You have the ability to actually build business in a more kind of fluid way that doesn't actually show significant volatility in revenue, EPS and costs and backlog ACV growth. And even though our business does have linearity built into it and we don't have all of our business, the staff. Some of it is still client cloud, which is subject to ASC 606 in terms of the revenue being a little bit lumpier. It's not nearly as dramatic as it was 5, 6, 10 years ago for Pega where we would have one deal. When I started one deal to completely change a year, maybe even a quarter, maybe even a year. That's not the case now. Our results are much performance over multiple years. And that's where the valuation comes in because there's this predictability, certainly in growth companies, which we consider ourselves to be in that category of a growth software company. Next slide. So what does this mean? Well, near term, we still have a little bit awkward revenue optics. A little bit of the tighter the accounting isn't quite there yet, but we're in way better shape than we were a couple of years ago where I would put up 22% APD growth and our revenue client. I'm going to get you with what's going on. If you've seen this movie, you know the way this plays out. Our focus is still going to be on total ACV growth. We believe looking at only one element of it is misleading. And we believe now that kind of the mix of our business and the potential proponent of our proportion of our new growth is very, very small, almost approaching 0. We believe our total EBITDA growth is really kind of an apples to apples compare as you compare quarter over quarter year over year. Pega Cloud backlog growth once again will be a confirming metric. Longer term, cash flows, revenue, billings, ACV bookings. They will all closely correlate. We're not very far away from that. Even in 2021, you'll some of that correlation. Certainly, when you get to 2022 and 2023, you're going to see this normalization. You'll see us kind of really starting to be much more predictable than we were in the past in terms of connecting ACV to revenue growth. Just to confirm, nice talk about Lower 40. What I'm referring to is free cash flow margin, which is our operating margin minus capital expenditure and our ACV growth. The combination of those 2 and thinking about that being a measure for Rule of 40. Rule of 40 is the consumer. I use it as simply a guidepost of what a best in class company would operate as a rule of 4, meaning the combination of these two factors would be 40 or above. Historically Pega has been around 30, 31, 32 in terms of that rule of 40. Some of our competitors companies in technology operated a Rule of 50, Rule of 55. We have really that significant performance for companies that are able to do that. The average for technology is around 32% to 33%. So before we make this transition, we were slightly worse than average. We aspire to be much better than average. And that's kind of where we're moving towards this rule of belief process, right? Business side from 2018, where I kind of gave up maybe a guess, so to speak, of our long term targets, how I thought this would play out. I thought our growth rate would be in that 15% to 17% range. I thought our non GAAP operating margin would get us to where we added the 2 together and we were kind of directionally close to that role for you. And I thought it would be 35% cloud revenue growth and our cloud margin is going to be 70%. These were this was the best information that I had terms of long term targets back in that time period. If you fast forward to today, I think our growth rate is going to be higher. Growth rate as we approach 2023 and in 2023, our growth rate is still going to be in the low free cash flow margin. You'll see I've been serving free cash flow margin there because non GAAP operating margin is a challenging thing to measure and it's sometime for me anyway, EBITDA non GAAP operating margin was more of a proxy a bit close to free cash flow margin. So I think from now on, let's just think about free cash call margin as being a more representative connection point. I think we'll be in around the 15% range. That's lower Adding those up, we won't get to full force, you'll get to 36% to 38%. The main thing that is driving that the delay in the revenue recognition from the higher percentage of our SaaS business, which is payment cloud. There's a little bit of a lag there. Given the revenue lag first half of about 6 months or so, right, in terms of that timing. Our cloud revenue growth, we're growing at better than 50%. I'm projecting that we will be somewhere in that 45% range for the next few years. We might stay above 50. I hope we do. I'm just kind of the way the model works, the law of bigger numbers, that average growth rate will kind of normalize a little bit down to kind of that 45 ish percent range. So much faster than what we were showing originally. And now I think our cloud margin will be about 70%. 75% is achievable, certainly 72% is right in line of sight. So I'm thinking we're somewhere in that kind of low to mid-seventy range gross margin. Remember, if you look at our business as an approaching $500,000,000 ACV business, which is if you do see the math, this is where we'll be in a couple of years or even in a year and a half or so. Node software company saw the kind of gross margins that we are showing at only $500,000,000 in our growth rates. If you go back and look at some of our competitors and I won't name them, but you can do the math. We have competitors of ours that were $1,000,000 $2,000,000 in revenue growth 30% to 40% of their business and their margins were 70%. So I think we're getting into respectable margin. That's not to say that that's the best we can do. We can actually when we actually when the project Phoenix we have more multitasking when we're using ISV, I certainly think that margin number can go higher. And this is kind of our view of where we're striving to get to over the next few years. What does this all mean? Key process to sustain higher growth. The way to do that is the recurring SaaS business. What does that allow us to do. It allows us to build efficiency into our model to drive higher margins. And if we drive higher growth with a exclusively recurring business that's going to give us the ability to get operating leverage and shareholder value will be the outcome. The way that we measure that shareholder value calibration is, can we get to a point where our growth rate and our free cash flow margin equals 40 or above. We're going to get pretty close when we enter 2023 into 2023. It's just a matter of letting that SaaS business normalize in terms of the revenue production and we'll be there. And so I'm really excited about the journey we started. Despite frankly, I think many of you we're supportive, but certainly watching to see how it's played out now when you fast forward a few years, played out pretty close to the way that we thought it was. And so we really appreciate all of your support. I look forward we'll have some time where we have some questions here in a second. I look forward to seeing everyone live and thank you for the great questions, the great feedback, the great support over the years. It's actually been really helpful for us to calibrate our discussion to everyone. So we're not here on the hand box here. Okay, super. Thank you very much, Ken. So as I said at the outset, we are going to be taking questions next. Team. We have gotten a bunch of questions for you guys. So actually, I know the first question, the first question is actually for Hayden. Hayden, could you give us an update on the partner program those announced at last PegaWorld. How's it going? Yes. We're really excited about this partner program. In my opinion, it's a mature it's obviously early days and we just announced it, but it's a sign of maturity of our thinking. 3 highlights I'd like to highlight about it. First of all is we now have a single one stop shop location with our partner program portal, Pega partner program portal, a lot of PEs there. And it's a one stop for our partners to come for information for us to track delivery help for them to understand incentives, our enablement, complete transparency for our partners and our clients To be able to see what they need to see to make decisions. That's number 1. Number 2 is the tiering, much more logical. I've never been a big fan Some gold silver bond. One of those things really mean it's related to, right? It's authorized and specialized. And within specialized, we have a list, but it's authorized specialized. Authorized means you've got a heavy practice. You are take full, you've got a certain amount of headcount and licensed practitioners. As you get into specialized, you are very good in one of our 3 solutionaries. Remember I talked about our 3 solutionaries being delivered around going to market around three areas. We want to be able to showcase partners that have a great practice and not just deliver sales, these are our best selling capacity, selling excellence and delivery excellence. So when someone is specialized And they have newly demonstrated excellence. They are elite specialized. That's number 2 is the tiering. Number 3 is the incentives. We've rolled out new incentives that are not just oriented around delivery, but now around co selling. So we have the MDF that is focused around reselling, sourced revenue, co selling and of course, our standard recognition for delivery. So I think it's those three examples that really showcase the program. Again, it's a month old, but we're putting a lot behind it and continue to make investments in this program. I'll add one point to that. So many of you have given me feedback from discussions that you've had through channel checks with partners. And one of the things one of the common things I've heard, so I'll repeat it not because I've heard it from our partners or from Aiden because I've actually heard it from all of you, that our partners viewed us as somewhat of a combination of partnering and also competition. And the reason why that happened was historically we had kind of moused the beat, so to speak, in our professional services organization and we would worry about billing and as you have people intended on that as pipeline backlog and utilization rates. And we actually like to do certain work for certain clients. Our partners view that as a little bit contradictory to actually a true partner relationship. Now we still do have all of those restrictions. We do need to have our service team to utilize. We do need to make sure that those are not that's not a kind of an orphanage cost center within the company, but we have to balance that with the fact that our partners have a business being in the services business. Services is not our business. It is simply something that we have to have to be successful software. Software is the business that we're in. Services is an enabler for us helping our clients. We need to be respectful of our partners. I think our partners are seeing and hearing from the new engagement really optimism and they're willing to make investments in Pega where in the past there have been a little bit more commitment to make those investments. If I could just add one more thing, it's a really good point. I know a lot of our partners have said, so what's different? And we've seen this before. We've heard this before. First of all, the role that I'm in is accountable across all the different parts of go to market, cross sales, solution consulting, consulting partners, etcetera, unification of a strategy that is not bifurcated across multiple leaders. That's one point. Number 2 is a very important point you said. We hired John Higgins from Salesforce. He ran international consulting for Salesforce. We are building a business in our consulting along enabling our partners, not necessarily competing, more advisory services, more expert services, more embedded technical architects. Yes, we will do consulting and I mean, implementations end to end of more of the higher end advisory services and packaged solutions. All right, great. The next question is for Ken. Ken, it's on RPA, which you and I have seen a lot of quite a bit over the last several years since we acquired OpenSpan back in April 20 16th. But the question around RPA is as follows. There's a lot going on in the RPA market today. Does Pega think of itself as a contender in the core RPA market core as more of an integration and orchestration layer that sits over the top of other automation point solutions. So I think with Pega, what we are, this is an aspirational. What we do is we allow clients to do both, right? We have an RPA solution, a traditional robotic process automation solution where clients can actually do this to patch together systems that don't talk to each other, files, Excel files, databases, places where you even scraping information off of an email, right, being able to kind of use that as a way to scrape information and populate it in another place in application or solution environment. When clients need to do that, we have a solution. About 10% or so of our business that Pega is directly or indirectly tied to that robotic aspect of what our clients do. When you actually think now jump over to orchestration, which is where we think the real enterprise value is, which is clients trying to robotically automate inside of a workflow or inside integration between applications. Because even though 2 applications talk to each other, there's still a lot of robotic automation that can be done to enable those systems. So we think the trick is to do both. Clients are going to have those orphaned use cases where they have to do They're moving data between Excel files and it's terribly inefficient and they have data center capacity issues because they do a data processing and they need to be able to handle in a faster way. That won't go away. But what we're really viewing as an opportunity is this orchestration and making it automated when you're actually dealing with enterprise applications. Important maybe like another kind of nail in this discussion is we don't believe that enterprise clients are looking at the traditional scraping of data and populating between Excel files and orphan databases as a strategic way that they want to move forward. That is a reality of their environment and how they're trying to patch things together. So we also know that you can't snap your fingers and everybody is digitally transformed. But we also know that people are consciously going out saying, what's not so simple, let's continue to keep things fractured. So we think it's important, but really it's not the way people would like to do business. And that's why we think we need to have both. Next one. Okay, next question is for Hayden. It's on large global systems integrators. So the question is, any update on go to market with large global systems large Global System Integrated channel. Yes. I put a tremendous amount of time into building relations. We've already had a lot of great relationships with these large GSIs, but really getting our teams to extend beyond the Pega practice. We have robust we already had robust Pega practices within the likes of Capgemini, Accenture and others. But it was largely limited to upselling and then handing the opportunity over delivered with those bigger practices. We are spending a tremendous amount of time at Vice Chair levels, practice leader levels And driving enablement and training with these SIs in order to build skill, capability and knowledge within their account teams and their practice leads. So not only my meeting with, for instance, the Vice Chair of a large SI on a monthly basis and we're running regular quarterly business reviews, monthly business reviews. We are doing the engagement and leg work with those client account teams and making them aware of who sell. So we have a number of new roles of these partner broad market executives that are building the relationships with the accounts execs that matter in those accounts. The other thing that I would add to that Peter is we are doing a lot more marketing to and with these partners. So for the first time ever, we've invested in the Vidal Marketing Tom Loboto runs our marketing team. We have a partner marketing team that markets to, through and with these partners To build awareness not just in the market for our clients that we're in it to win with our partners, but also marketing to our partners. We met with the head of sales for all of Europe about 6 months ago and said, you need to get our team to where who Pega is. They don't know that they use Pega every day Pega's in these large accounts. You need to market to them. So it's a selling go to market effort as well as a marketing effort to them as well. Great. So the next question is for Ken. Ken, can you elaborate on how Pega Financial would be impacted as term customers started converting existing deployment Pega Cloud in greater numbers. Sure. And I will lump that between term and legacy perpetual together because I think it's kind of implied in the question. So we're not this is a little bit customer specific because we don't know why people would want to pick 1 or the other. We know what they tell us we know we hear in the marketplace. It's kind of some of it's obvious around use cases, etcetera. But I'll just talk about the numbers. If we took if all of our business right now, all of our client cloud business immediately said click to play Pega Cloud, Right. So we had I'm using rough numbers. We have something like $575,000,000 I believe of client cloud ACD. If you just immediately flipped all of that to Pega Cloud, you'd have probably at least a 50% uplift over that number. It would be naturally if it's maintenance, it would be 2 to 3 times. If it's classic permit was just purchased in the last few years. It might be closer to 25% to 30%. So let's just say it was 50%. That's about $300,000,000 incremental ACV that we could get just by becoming a 100% SaaS business. That is not a prediction that we'll be 100% GAAP. That's not a that's not guidance. But that just gives you kind of the order of magnitude. If we got a 2x small supplier, That will be $500,000,000 $600,000,000 actually of uplift. So certainly there's some number that's greater than 0 and less than $1,000,000 of us around moving our clients there. I would say realistically it's probably a couple of $100,000,000 range. If we're able to and successfully convince our clients that their best interest would be the move to Pega Cloud. And I think you think clients will move more and more as time goes on. So there's a pretty big number that we could achieve over the coming years. Okay, great. Katie, you talked about this a little bit already today, but I think it's a question that investors are really interested in. Could you provide a little bit more color on what you're doing differently with channel partners now that you look here versus what Pega has done in the past? Investors who are just looking for a little bit more color on that. Yes. I'm going to first talk about ISVs And then briefly into the ESIs. So we have a lot of complementary products and relationships with a number of ISVs out there. Product right now. We talked a bit about Phoenix and where we're going with our future platform. We are beginning to build the platform, but capability for when the platform is ready to have a full ISV build their business on Pega and build business and go to market with business on Pega Down the road, 6, 12, 18 months down the road, at some point down the road. But right now, what we're doing is we're building relationships with partners That we're classically competitive. They're in our competitive database. We have worksheets on them about working together, right? Our clients are asking for us to work together. They're stitching their products, these 2 products together. I'll use an example of Adobe. We get a lot of competition and but great examples of the products working together. So we're working with a lot of the diet fees to build product true within our engineering teams, our product teams and then co selling together, 1 plus 1 truly does equal 3 or 4 with some of these ISPs. Again, with the goal towards ultimately recruiting and developing ISVs to build on our platforms and the route to revenue. Secondarily, we are being incredibly mindful of onboarding, recruiting and developing these SIs, getting them to develop repeatable solutions with Accenture as an example, building solutions in the life sciences space that we can go and take to the next life sciences account and the next. And we've done that in several accounts with Accenture. We refer we started getting it delivered as well around our segmentation, instead of just the big accounts and small accounts being delivered on different segments Having a different profile of coverage. And we have a part of our segment that we refer to as partner power. And there is a segment that is Pega power. In these partner powered segments, we are building more capacity to cover partners, partner development events, enabling training, onboarding, partner sales events to sell with them and saving our AEs for the Pega powered segments. So we're getting really clear about where we want to compete where we want to win together and where we want to win alone from the standpoint of working with partners. And I think it's really big for them because they're getting clear on specifically how we want to go to market with that. So one thing I'll touch on is not a partner question, but it kind of hangs off the ISV point that Ava was making. Our 3 biggest competitors in this CRM space are Microsoft, NetBeat, Salesforce. Just use those 3. We have integrations with all 3, right? We have actually we have clients running on Azure. We actually don't have to run on ads ourselves. We actually have tons and tons of customers integrating with Salesforce, moving data between the 2, the integrations with Adobe. We've actually seen situations where one of us and one of those will compete with the other wedding campaign, unless it's topic. So I just do think that there's a very open environment between all of those companies knowing that it doesn't do any good to close yourself off actually integrating with the rest of the market, because naturally you can't own all of the market. So I think that process we really view ourselves as landing at least one of our solutionary lands is like being that orchestration with the applications that are very open to connecting to other best degree. And certainly, we want to integrate with everybody. So I think that that's just an important kind of similar to ISV in that we want to make sure that we are Pega to be there's no restrictions or no artificial barriers to us being able to help our clients because everybody has Salesforce and everybody has Microsoft and everybody has Adobe and everybody has other solutions, right? So we know that. So it's really beneficial for us to try to work even though we team fiercely with all of them. And it's important for us to operate with them. Our clients are asking us to be better together with partners or with these competitors. In the case of Microsoft in Europe, we're working together with Microsoft and some banks, working with the highest levels of executives at Adobe on integrating our 1 to 1 customer decision hub with our ADP platform. Salesforce, their Head of Service and Sales Cloud, Working together with us about how they just go better together in contact centers. Now we're not saying we necessarily want to partner with all of them, but we're working better together and making more seamless for our clients. Yes, our client is expected of us, it's an important point, Shrede. All right. Next question is for Ken and it's on the topic of digital transformation. So Ken, there's been a lot of discussions around the digital transformation tailwinds from the pandemic, how long lasting do you see these tailwinds, especially as we enter a high risk workforce? So I'll touch on a couple of pieces. I showed you an IDC chart earlier. So this isn't a PegaChart or KenChart, right? IEC for Gibson through 2024 to 2025, all of the growth spend will be in digital transformation. I would suspect it will be much longer than that. I think that companies are going to spend the next 12 to 18 months at least trying to figure out where the workforce is and how this will be. None of us know, right? We have a policy at Pega where we're trying to be as flex employees and we're trying to figure out how to make sure that we support our clients. Our clients don't know at this point nor do we at Pega nor do any of you, right? I I mean, we're all just trying to figure this out. So I think the reality is what we know is that things will be different. And one thing we do know is that the digital engagement aspect of this mobile devices, through digital channels like computers and other are absolutely going to be accelerated because of the pandemic. Some percentage of the population will not feel comfortable going back into the normal behavior that they did or I should say it's not even normal, the pre pandemic behavior that they get going to malls, going into crowded spaces, they're just not going to be comfortable. Many of us will go back to normal, but we will still take the leverage that we've learned from the pandemic around different ways of working. I would suspect that many of you will work remotely or at home or wherever that may be more frequently than you did before the pandemic. I certainly will, all of us will. That doesn't it's not all bad, right? I mean, I think we've learned a lot. So I think digital transformation to me becomes the theme companies we think about over the next 5 to 10 years because this isn't going to be done in 2 years. This is going to take a long time to get us through. Now thankfully, The economic environment that's out there through pandemic, our clients have weathered the store really well. Thankfully, our employees and our client employees who've done an amazing job of stepping up and figuring out ways to manage through this. So as we get to the kind of the new hybrid environment, I think that we'll be that much more dependent on digital, right? We're going to we've already at TEGNA, we have 6,000 employees in 20 some countries. So we already had to get used to the meetings where you have to take pictures of how I mentioned about some people in a room, some people weren't. In fact, yesterday, we had a meeting in one of Hayden's sort of our execution meetings where we actually had 7 people in a conference room and people all around the world in different spots. That will be the normal. Guess what? Unique telecommunication tools like the Zoom, the WebEx and the Microsoft Teams and all those products, but that just scratches the service. How you can interact digitally and at different times than you're used to, right? You might have people interacting at 3 in the morning from a different country. So I definitely think the world is it's like it's fighting to think about that ability for you to interact with any company at any point in time digitally. And I also think the interesting thing is just this onset of the digital transaction, digital commerce, digital digital currency, the ability to actually transact across borders kind of almost like dark borders. So I think all of these things kind of will play into importance of digital transformation. I'll add one thing. And we too are addressing our go to market motions around this new normal of digital engagement. We've made significant investments in our digital demand generation, digital marketing. We've done a lot more on our branding. The days of being able to walk into your clients in downtown Manhattan and test them in a coffee shop or go to dinner. Those are challenged. Those are it's not necessarily going to be the same as Ken said. So we're we are a company very much on face to face direct engagement. We are building that digital marketing as well as digital demand response and engagement within our go to market sales models as well to address these changing times. That said, for all the cell siders watching, please go back to live events. Everybody in person. Call. All right. Stephanie gave a great demonstration earlier about the low code app and she actually did that during the investor session, which I thought was really exciting. So the next questions around low code, and I think this is a good one for you. We've seen references to low code and no code platforms from tech companies increase almost 1,000 percent year over year during pandemic. As you're meeting with customers and talking with customers, how do you view the adoption of low code and no code platforms evolving? So From my prior employer, I was there from the beginning on Power Platform and Power Apps and saw kind of the build of where they're going with that. I'm sure you're aware of the growth there. It's a very real opportunity for us, given that as Stephanie said, there is so much backlog, particularly digital transformation is putting pressure on IT teams to innovate and modernize. There was so much pressure to create end update and then create it again. And putting some of the power and some of the capability into the hands outside of IT To accelerate that transformation is absolutely critical. Now, it goes well beyond that. It's not just about building, as she said, Simple ask for onboarding or enablement of people or at the cafeteria for ordering. It goes into stitching your new applications, your new services through the back end driving intelligence into those applications. So that's what the professional, low, low, no go citizen application development platform. It truly differentiates here at Pega versus some of the other companies that exist. It's not point in time, SimplePoint solutions integrated into the larger macro digital transformation initiative. So what we're doing is not only just saying, Okay. Go ahead and Bill with anything. But we see very clear patterns, loan origination as an example, of use cases That we are then arming our teams with, our partners with and going to clients' patterns that we're seeing elsewhere with accelerated templates for this loyalty application that makes sense for you in loan originations. So I think being very specific on the use cases makes it a lot easier to develop, deploy and manage and governance, which is typically the large challenge for a lot of our CIOs, the governance of those sits in apps. So I'll give just an interesting kind of parallel for the low code. If you have any question of whether the low code is going to have traction Continue on. I can go back and give specific examples that I worked with going back, my gosh, over 20 years where there were locum. I remember the days, all of you who are all probably most of you Power Excel experts, where they used to sell Power Toolbar and basically plug ins for sell because there were so many common formulas and so many things that you did. And everybody didn't want to do an average math Trying to get CAGR calculations looked up. What happens? They actually build a plug in for itself. What is that? Essentially low code, right? They want you to click a button and be able to pull a formula Or a string of code. What were macros in Excel, if not a way to streamline the processing of information. What about things like websites, Right. When I first actually started dealing with websites, the only way you can build a website was to go use Publisher and be able to actually save a file on the website. They didn't have any tool. Now you're my 10 year old son can go build his own website, right? He actually did. So the concept of low code is not new, right. It's not something like nobody wants to write code unless you're a coder. Like the rest of us don't want to be dependent on a continuing like lack of supply of the people that have to write the strings of really complicated code, which by the way Are just expanding in terms of the languages. So if you think about what Stephanie showed on one slide, it showed all the languages in our history. Like when this all started, I remember Alan saying to me when he was in 1980s, he's like, I think there's only going to be 2 code languages. Well, how long would it be, right? Like, I mean, not many code languages are there. And whatever you're coding in now isn't going to be the code language for years from now. That problem makes it hard for the quote citizen developer when the person is trying to do something. So for me, the whole flow code thing is like Anyway, we've been doing it for years, right? I mean, so it's just a matter of now we're doing it for powerful applications. We're doing it for things that can actually be built in that way, maintained in that way. That's so cool to see that actually hit enterprise application as opposed to where early on it was more kind of small business application. So I think it's I think the key with that though is to be able to go from simple to enterprise. Because if you just can build simple and you have to start over in another platform, that's what we aspire to be is the entire continuum of that development through simple all the way to enterprise. Some of the best conversations I've had with clients have been around Their gratitude for the simplicity, scale governance of the low code apps that they built. I mentioned a few of them upfront, but those have been the most fulfilling conversations What our clients are doing with our platform for deployment, particularly in the macroeconomic and geopolitical things like the pandemic being Being able to respond to that. And we've done that last February and being able to build out quickly for that April. Excellent our next question is for Ken. Ken, this is actually a question we get asked fairly commonly. Can you talk a little bit about where your new client commitments are coming from, whether they're coming from net new customers or from existing customers expanding. And how has that mix changed sort of pre pandemic to today's period. Can you talk a little bit about that? Sure. So this once again is probably maybe a comment that's going to sounds great in one way, but it's also we have to care for. So before the pandemic, we typically did about 70% -ish of our bookings came from existing logos. So someone has spent at least $100,000 a year with us. Definitely considered existing logo. And our 30% were new logos. We typically have a land and expand model. So we win a logo. The first deal we do is rarely the biggest deal. It's typically like the 3rd deal or the 4th deal that we do becomes bigger. And that normally takes 3 to 5 years to able to build out that relationship. So it's important to get new logos to be able to have that fertile ground, as I mentioned earlier, to expand. During the pandemic, that number led above 80%, meaning that slightly more than 80% of our new business, our growth CAME from existing logos. Now you might say, well, that's really promising if you can sell that much to existing clients. Our net retention rate being slightly above 100 and 15% in some quarters. Yes, that's great. But we have to make sure we have new logos as well. We can't only be selling to only get 10% or 20% of our new business from new logos because that will create is a deep, deep concentration in our ARR 50 logos, which is great. But it doesn't create enough fertile ground of having kind of people that do business with Pega, but not at the same scale as the Bank of America, the JPMorgan Chase's, the Ansettles and the Verizons and the Sprint's and all the other logos that we show you. That we actually have really great relationships over many, many decades. So I think it's important to have a balance there. So pandemic has shifted up higher. I do believe that will settle back a little bit, probably not until 2022 though, because people really are selling face to face right now. And it probably won't be selling face to face in the same way in the back half of 'twenty one. But I do think 'twenty two, I do sense, will start to get back to kind of a more balanced of new versus existing. I'll add one thing to that, Ken. We obviously have a high concentration of our direct sellers on those premier top accounts, but we're also starting to find balance with our partner teams as well as our marketing coverage of those new logos. We know that in order to grow, we need those next the next premier and key accounts for us. So we're spending probably seen it in the market. We're spending more brand awareness. We just launched a brand new brand campaign go yesterday. We're in the business. We've moved in some sports sponsorship with brand ambassadors and golf, target demographic. A lot of buyers are there and made an exciting announcement around our sponsorship of the Ryder Cup this past Tuesday. So getting our brand out there, people need to know that they're using Pega every day and need to understand what we can do for them, not only on the low code side, but also On the other on the Smart business as well. By the way, one of the points that one of the questions earlier just to connect the dots here, the Partner Power segments, the partner powered segments, what Hayden talked about, those are in many ways new logo opportunities. So some of the impact of partners coming on in the back half of the year in 2022 will give us almost coverage, almost like we have sales coverage on those markets. And this is an interesting dynamic is I don't know that I've been in software a lot, a long time, but I'm not sure that I really processed this until the last 5 years, maybe 10 years, which is our partners are everywhere. They're in all of our clients. They have better relationships than we do with those clients. They are there almost sometimes working there as an employee, as a employees in their part. They know, they're respected, they're advisors to those clients. So us to not leverage that inside of Sony, right, because they're right there. So I think that that's another way to get out of new logos. Great. Next question is for Hayden. It's on the topic of ESG, so environmental social governance. So you've talked today and maybe you've talked in the past about the importance of diversity and inclusion. Can you talk a little bit more about why that's important, what your perspective is and how you think that could benefit TEGNA and other companies? Service and how you think that could benefit TEGNA and other companies. I think, first of all, it represents what our clients are doing, Our partners are doing and if we look and act a lot more like our clients and partners, we'll align better with them and we'll have a greater growth opportunity. My team. When we first met, I've been in this office twice since I've been in the company. And we met earlier last year, And we talked quite a bit about we did our off-site for full day on diversity and inclusiveness. We all agree and we are building plans for growth through our diversity inclusive initiatives. Our only path to growth, not our only, but our key path to growth is to reflect what's existing in the market. So we are putting a tremendous amount of focus. We're building out ERGs, employee resource groups around diversity. In fact, today, We have one of our brand ambassadors, Mel Reed, who is an LGBTQ LGGA golfer, do a fireside chat our team on the importance of diversity inclusiveness. We're doing we have members self selected. They opted in Into these groups to drive change for us in a number of different categories, employee driven executive sponsor to improve the way we drive business. So for me, it's very important because as I mentioned earlier, because that's where I came from. I came from a family that from day 1, I was it teams very much ingrained in our business. But I mean, it's our employees are expecting it. Our clients are expecting it. And I think it's better for our business. It gives us a far better world view of what's happening in the market. Yes. And I would say one final or one additional point on that is an huge fit is often made in technology is that, well, there's just more there's less talent available in some of diverse groups. That can't be an acceptable answer, right? I mean, we need to make sure that Pega is the kind of employer debt diversity wants to come to Pega. And the only way to do that is to basically make sure that those that are already here are ambassadors To actually bring in and attract and recruit other talent. And I do think that we want to represent the communities that we're in, communities that we're interdiverse, the clients that we're interdiverse, the countries I mentioned, we're in over 20 countries. We're diverse types of geographic. We just need to make sure that we're helping people inside of Pega from all walks of life and all different types of individuals to make sure they're comfortable and they're engaged and they feel safe and they feel supportive with Pega. That's the mission, Well, now it's not something you can just say we're done, right? Because that's the problem that we should be trying to work out. There are several questions, Ken, about long term targets that you laid out in 2018. Can you give us some color on your perspective on those? You mean the change kind of the evolution? Evolution. So, yes, I think that there's I would summarize the long term target view I have now versus where I had in 2017 2018 as we're growing faster. I do believe there's an opportunity to accelerate that. And certainly, that's our goal. I think more than Pega Cloud, significantly more than is Pega Cloud. Our margins are actually better now than what I thought they would be on the trajectory in terms of gross margin for Mega Cloud. But some of that does actually just help because Pega Cloud is bigger. So that's just the kind of the curve is just pulling a little bit on the gross margin. And I would say that our sales and marketing expense investment compared to the revenue because of It will get kind of mismatched as we exit 'twenty two and go to 'twenty three. So a lot of That rule 40 kind of delaying a little bit is really just a matter of that timing of the accounting. So I think all of that higher growth, more of a Pega Cloud, getting operating leverage faster. The trade off for maybe an elongated revenue transition a little bit, not like we're talking about years, but few quarters, to me is a very reasonable, quite frankly desired trade off. So I would say that's kind of my summary of where we are. Directionally pretty much on pace to where we said you're going to be, which is kind of it's kind of amazing that the market has in that close. I mean even people investors, many of you have said to me like, it's kind of scary that you keep growing like about 20% like every quarter, quarter in and quarter out for many years. That's not what we wanted to do. We actually want to grow faster. But I do think there's you can see the stabilization and normalization, unpredictability that's being built into the business. And there's not a I have a woman on my team that does not understand that growth above 20% priority mandate for us. So we're very much aligned with your statements there, Ken. And we want to be respectful of people's time. So our expectation was today we run about 2 hours. So I think you have any time for one more question, Ken, and then maybe you want to offer a few closing comments. So you did have it 5 minutes earlier, but it also comes up quite a bit. This topic is on Pega Cloud gross margin. So Pega Cloud has shown consistent and improved 67 gross margins during the past 2 quarters and is approaching the 70% to 75% target. What do you think longer term? Could Pega Cloud have the leverage to expand gross margins in the 80% to 90% range that we see for many cloud based vendors, what you're expecting on that. So I'll frame that in what I have seen in terms of other companies. When you hit $500,000,000 to $1,000,000,000 as a SaaS company, If you can get your gross margins close to 80%, I would consider you to be best in class. We will not 500,000,000 to $1,000,000 we will not likely be 80% gross margin. Why is that? Because we're not multi tenant, we're single tenant. With single tenant, there is a level of overhead because of the enterprise aspects of the data isolation and the way the applications are not delivered to mass markets with the exact same product like any multi tenant applications are. That said, At $500,000,000 to $1,000,000,000 will be 75%, maybe even higher than that at that scale. I think that's very respectable, quite frankly better than any of our peers or most of our peers that are single tenant. The real way we get to 80% or above, which I think sales force is like 83% or 84%. They're at scale. They're $20 plus 1,000,000,000 low 80s. They're multi tenant. Their system is complete multi tenant, yes, absent Tableau and some of their other acquisitions. So can we get to 80%? Yes. If we leverage, there's a thing called Kubernetes, right, which many of you heard, which is a way of virtualizing inside of a cloud environment. That can help single tenant. You can get a few points of gross margin just on leveraging Kubernetes because you're virtualizing and you're essentially leveraging unused capacity in the way that we virtualize servers, as many of you know Kubernetes. So that is one angle on the single tenant, but really with Project Phoenix and more of our micro services being leveraged multi tenancy, whether the clients are on within their client cloud or it's in mega cloud. The combination of those 2 is how we get 80% above. And is it possible? Absolutely, yes. Right now, though, as most of you know, I'm focused on the next year, which is let's get above 70. Once we're above 70, let's get to 75. Let's get our growth rate up, let's get the productivity, let's get our cash flow target. So that's what we're focused on right now. But as far as we can get to 80% foremost in Tennessee? Absolutely. Great sales pitches for a few hours kind of give us when we should wrap up. So maybe you and A and I want to do closing comments today and you can call us back. I'll let you go first. I think a lot of people have said to me that I met in the market, so what's different? Pega has been talking about growth and growing the business, what's different now. Therazate mindset on some of the new talent that we brought in, the organization, the structure, the discipline, the clarity. And the single point of accountability, really you have limited standard deviation and variability within the business. When you have an influx of great diverse talent, as I said, geographic employment and gender that and race as well, the talent that is really bringing new insights. Nobody that is coming in is thinking about 20% growth, nobody. And whether you're contributing sales operations or direct frontline, AE sales, our specialist sales. Everybody is thinking north of 20%. So it's It's a new day, the new sense of accountability, single point contacts drive this business. I think the leadership team is as close as you can get from Engineering Finance. Our people functions were very aligned. We get along with Brendan as well as professional colleagues and we're all aligned on one thing or aligned on growth. So I mean, I think Hayden is touching on a really important piece of what Ping has been really good over the years at being a culture that really cared about our clients and we're committed to each other and to the company goal. I think what we've done in the last, call it, 2 years or so, certainly in the last year, is that we brought in people that have seen growth in other companies, that have seen best practice, best in class in other companies. And I think that the merging of a passionate founder led company, Al has been the CEO here since he founded the company, he's the longest tenured technology CEO and it's a public company. And that doesn't happen without him having him and the team that he built have a passionate connection with the outcomes. And I think that you need that and what I now you've actually kind of built the muscle around what's the best way to get to that next level. And I think that we have that balance and I think that's going to be our that's going to be our trick. Our trick is going to be technology, the foundation, the passion, the connection to our clients, connection to verticals and the best practice of people that have been there and done that and have seen the scale of growth and how you really put that recipe together. I think that's going to be our trick. So listen, I appreciate everyone's time and focus. I hopefully, I think you may have gone a little long and lost some of you, but hopefully there's still a lot of you out there. I Really appreciate your support. Appreciate your questions. We couldn't get to all of them. We tried our best. We still have a few more few more weeks in the open window, which we'll still be taking calls. We'll be back on the circuit hopefully in the fall as events starting to come more live and we are planning on a live PegaWorld next year. I would hope we were able to And if so, we'll have an Investor Day live there. It will be in Las Vegas assuming that everything works out for us with the pandemic. I wish all of you the best. I hope everyone is in good health and enjoy the rest of your week. Thanks, everyone. Thank you.

• Slides