Pegasystems Inc (PEGA) Increases Pega Cloud's Order Backlog to over $1 Billion for the First Time. The Market Potential in the Platform and CRM Area is Expected to Increase From $90 Billion to $130 Billion Over the Next Three Years.

IBM competitor Pegasystems Inc (PEGA) also delivered its latest figures on Wednesday (July 24) after the close of trading. The company offers AI-supported software solutions for Business Process Management (BPM), Customer Relationship Management (CRM) and Digital Process Automation (DPA). The company helps organizations automate business processes and improve customer interactions by providing scalable and flexible software platforms. Pega's solutions enable organizations to streamline complex processes and increase efficiency through automation and artificial intelligence (AI). Pegasystems serves a wide range of industries, including financial services, healthcare, telecommunications, government and insurance. Its largest customers include well-known companies such as JPMorgan Chase, HSBC, BNY Mellon, American Express and Anthem.

Pegasystems sees enormous market potential in the platform and CRM sector, which is expected to grow from $90 billion in 2024 to $130 billion in 2027. The company had successfully transitioned to a recurring subscription model in recent years, increasing the share from 56% in 2017 to 84% in 2023. Annual Contract Value (ACV) is a key performance indicator driven by existing and new customers. Pega is focusing on increasing the number of customer contracts with an ACV of over $1 million and acquiring new customers through targeted account models. Pega is aiming to increase ACV to $2 billion over the next 3 to 5 years. For comparison: between 2018 and 2023, this had climbed from $570 million to $1.255 billion. Pegasystems aims to achieve a free cash flow of $500 million by 2027. This is to be achieved by scaling the Pega Cloud and using Kubernetes/microservices for automation. The transition to the cloud had already led to a significant increase in revenue in recent years, with cloud revenue increasing from $51 million in 2017 to $484 million in 2023.

Pegasystems recorded strong growth in Q2. Annual Contract Value (ACV) increased by 13% year-on-year. Pega Cloud's order backlog exceeded $1 billion for the first time. In the earnings call, management emphasized the importance of generative AI in the product range. In particular, the Pega GenAI Blueprint tool has generated considerable interest among customers, prospects and partners. This tool enables users to identify new opportunities and create deeper engagements. Tens of thousands of Blueprints were created in Q2, leading to new growth opportunities and additional momentum for Pega Cloud. Both revenue (+17.7%) and EPS ($0.52 vs. $0.29) beat analysts' estimates.

Pegasystems (ISIN US7055731035): As a provider of AI-powered decision and workflow automation platforms, the company is now hitting the mark. EPS is expected to increase by over 14% in the coming year after 12%. The forward P/E 2024 ratio is 22 and the share can now end the consolidation.

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