Pegasystems Inc. (NASDAQ:PEGA) Q3 2020 Earnings Conference Call - Final Transcript

Good day, and welcome to the Pegasystems Third Quarter 2020 Earnings Conference Call. [Operator Instructions]

At this time, I'd like to turn the conference over to Ken Stillwell. Please go ahead.

Thank you. Good evening, ladies and gentlemen, and welcome to Pegasystems Q3 2020 Earnings Call. Before we begin, I'd like to read our safe harbor statement. Certain statements contained in this presentation may be construed as forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995.

The words expects, anticipates, intends, plans, believes, will, could, should, estimates, may, targets, strategies, intends to, projects, forecasts, guidance, likely and usually or variations of such words and other similar expressions identify forward-looking statements, which speak only as of the date the statement was made and are based on current expectations and assumptions. Because such statements deal with future events, they are subject to various risks and uncertainties.

Actual results for fiscal year 2020 and beyond could differ materially from the company's current expectations. Factors that could cause the company's results to differ materially from those expressed in forward-looking statements are contained in the company's press release announcing its Q3 2020 earnings and in the company's filings with the Securities and Exchange Commission, including its annual report on Form 10-K for the year ended December 31, 2019, and other recent filings with the SEC.

Investors are cautioned not to place undue reliance on such forward-looking statements, and there are no assurances that the matters contained in such statements will be achieved. Although subsequent events may cause our view to change, except as required by applicable law, we do not undertake and specifically disclaim any obligation to publicly update or revise these forward-looking statements, whether as the result of new information, future events or otherwise.

And with that, I'll turn the call over to Alan Trefler, Founder and CEO of Pegasystems.

Thank you, Ken. Here, the highlights were strong. Our results in Q3 demonstrate our ability to forge through and succeed during this challenging time. Our business continued to perform well due to several major factors. Digital transformation is existential for our clients. It is central to their continued existence and prosperity, and an increasing percentage of our revenue is predictable and recurring.

Through Q3, our total ACV, which we consider the best indicator of our improving cash flows and underlying business growth, increased by 21% year-over-year in constant currency, with 2/3 of our new business coming from Pega Cloud in this quarter. We continue to extend our leadership in key markets that are less adversely affected by the pandemic, markets such as financial services, government, health care and insurance and telecom. And by working with large global organizations, we're able to work with organizations that can withstand the short-term effects of today's market and in fact, find their needs increased.

As noted previously, we have a strong cash position to help us through this period of uncertainty, so we can continue to invest for long-term growth. Now we are now more