Good day, and welcome to the Pega Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Kenneth Stillwell, CFO. Please go ahead, sir.

Thank you. Good evening, ladies and gentlemen, and welcome to Pegasystems Q2 2022 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, 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 2022 and beyond could differ materially from the company's current expectations. Factors that could cause the company's results to differ materially from those expressed in forward-looking statements are contained in the company's press release announcing its Q2 2022 earnings 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, 2021, 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 a 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, and thank you to everyone who has joined today's call. This year has turned out to be an extremely volatile business environment. Our clients faced challenges related to the pandemic, labor shortages, the war in Europe, everything is causing global disruptions as well as, of course, rising inflation, high oil prices, supply chain challenges, economic and security and most recently, currency exchange headwinds. Some of these trends actually make the need for our software even more pronounced. In fact, we believe Pega is uniquely suited to help enterprises manage through such uncertainty. However, it does impact the market. And with the threat of recession looming, we've pivoted to lean more heavily on our Build for Change messaging. We've been updating our marketing and sales positioning, which you can see on pega.com. In an environment where efficiency and productivity of paramount our low-code software platform for AI power decisioning and workflow automation helps demanding enterprises work smarter, unify experiences and adapt instantly. So they can tackle what's next. At Pega, we're taking the volatility in macroeconomic environment seriously. We're making cost management as much of a priority for us as it is for our clients with us having a focus on operational efficiency and limiting increases to our cost structure. We've paid and staffs to make sure we're staying close to our clients by removing some of the layers that have crept in over the last few years. And by ensuring our talent is directly connected to clients, we believe will both improve outcomes and our long-term relationships. At the same time, we continue to focus on innovation to ensure we're able to provide the most advanced technology platform for our clients' needs today and into tomorrow. Ken will talk about some of the financial impacts on our…

Thanks, Alan. To begin a few reflections on our first half results and our outlook for the rest of the year. Pega Cloud mix and the strengthening of the U.S. dollar are negatively impacted our reported revenue and earnings per share. As a result, I'll speak a little more about currency this call than usual. As the U.S. dollar gets stronger, our recurring annual contract value, ACV and our back balance denominated in other currencies, decreases in value and translated into U.S. dollars and revenue from other countries become smaller as well. A very big highlight for the quarter is Pega Cloud. Pega Cloud continues to be extremely popular. As a result, the Pega Cloud mix was much higher than planned, impacting our reported revenue and our earnings per share. Pega Cloud mix in the first half of 2022 was the highest it's ever been. For the first half of the year, Pega Cloud was 70% of new client commitments. We're focusing on operating leverage with an even greater amount of discipline to ensure our rule of 40 target is achieved in 2024. As you review our financial results, you'll see that we've clearly been making progress on operating leverage primarily by slowing overall headcount growth in 2022. Although our constant currency ACV growth was 19% in Q2, we expect economic headwinds and crosswinds to negatively impact ACV growth for the full year. During our subscription transition, the most important metric to measure our success continues to be growth in ACV. ACV grew 19% in constant currency and 14% as reported year-over-year to $1.028 billion. The strength of the U.S. dollar significantly impacted year-over-year ACV growth as reported from Q2 2021 to Q2 2022. The currency impact of that year-over-year strengthening of the dollar on our ACV was approximately $40…

[Operator Instructions] We'll now take our first question from Rishi Jaluria from RBC. Your line is open. Please go ahead.

Well, wonderful. I'm here again, thanks very much for taking my question. Maybe a few here to clarify and then you know, appreciate all the details, especially around and what you're seeing. Maybe I want to start by talking about macro and a two-parter here. Number one, we would love to know what are you assuming Ken, when you're talking about getting to 16% ACV growth exiting the year you know, are you assuming macro stable with what you're seeing right now? Or are you assuming some level of deterioration further from what things you're seeing? And then maybe the second part of that, there's obviously a macro impact numbers already of constant currency from Q1 to Q2 on the ACV side. Some of your large cap peers that have already kind of reported and talked about –

Could you repeat your last like 10 seconds because you --

Because you broke up a little bit, Rishi.

I apologize. Let me get off that. Okay. So yes, I was just -- maybe just starting with the macro side, right? What do you see -- what are you assuming in terms of further macro deterioration or is it going to be stable? And the second part, given the detail we've seen on the ACV side in constant currency as a result of macro that you've seen so far. Can you maybe be a little bit more specific about how it's manifested itself be that in longer sales cycles, smaller ACV lands, pushed out deals, anything like that? And then I've got a follow-up.

Sure. I'll take the first part of that, and then Alan, you can add some color to that. So, we are not assuming that the market will stay exactly as we've seen in the first half. We are assuming that sales cycles will elongate from where they are, that the buying cycles will be tighter. We are assuming that as you get closer to the end of the year that companies will be responding to cost management initiatives, some of which will help us because we can be a solution, some of which may put pressure on just general buying patterns. So, I wouldn't suggest that we think everything is going to stay as it is now. We do see that there's some further decline and the economic landscape between now and the end of the year. We're also not seeing this as an elongated process, but we don't know what to expect through the end of the year as people start budgeting for next year. So that's why we thought about providing a little bit more clarity around what we think is a risk, which is our ACV growth for the full year. ACV growth dropping from one last point that ACV growth declining from 21% to 16%. Just to kind of give you directionally what that means. It kind of means that our AC -- our incremental ACV growth year-over-year in dollars would be somewhat flat year-over-year, meaning the growth in incremental ACV dollars would be relatively consistent with what we grew in 2021. Still growth, but as you can imagine, growth on a bigger number is a slightly smaller percentage. So that's kind of how we see it manifesting itself through the year. Alan thoughts on some of the discussions that you mentioned about customer buying.

Yes. So, I think Ken's right, there is some elongation of sales cycle. But also, I think a lot of this -- the impact, I believe, is and will continue to be significantly related to the companies you're dealing with and the types of companies you're dealing with. The large sophisticated traditional buyers that for many years, were our only buyers and let us grow at a 20% ACV growth rate. I think that those are much less susceptible to the many pressures and a willingness to go forward than companies you think of as midsized or certainly smaller. And so, we have an opportunity and we are recalibrating our energies to really focus on those deep and really important relationships with organizations who based on everything I've seen are going to be looking to themselves save money, improve their workflows, continue to invest. And I think that focus makes it easier for us to operate within some of the spend envelopes that Ken is talking about, which we're taking very, very seriously then frankly, when we were trying to really jump up our growth rate to some degree, regardless of cost. We're not in that business with the second half of this year and going forward because frankly, I think the market will respond exactly what we're doing. We have a big chance to influence what happens. We're not just subject to what's going on in the back growth market.

All right. Great. That's really helpful. And then on the business. Maybe, I wanted to drill specifically into cloud CRPO. So, we saw that decelerate from 31% growth in Q1 to 14% into and even if we add back in six points of FX, that still gets us from a decel of 31% to 20%. Maybe can you walk us through what's going typically on cloud CRPO and maybe why we shouldn't be worried about that too much as a leading indicator of future cloud growth slowing down? And then one more follow-up, and I promise that's it.

Sure. So, the one thing that we are seeing and we've seen it probably for a couple of quarters, but I think it's -- we're starting to realize that clients really are transitioning into more leaning more towards consumption-based buying patterns, right, which means that they're looking at like kind of almost we like a minimum commit with variable usage as they drive additional usage. And what that does lead to is it does lead to -- the net effect of that is a slight decline in the duration of our cloud RPO. Just a slight, not like going from say, three years to maybe 2.75. Some of the optics of RPO is driven by that. You can kind of see that if you look over the last few quarters. Also, to add to that, we -- in 2022, the first half of the year was not a big renewal year, right, in terms of Pega Cloud contract renewals, it tends to be towards the back end of the year in general. Every once in a while, you'll have a quarter where you may have a few clients. So, those two factors, I think, make the optics look a little bit confusing to your question. Some of it is just buying patterns. People clients are not committing necessarily a three or five year contracts all the time they might be committing to a three year contract with a with a slightly lower minimum and then having consumption buying patterns above that. And that results in less going into RPO in some of those contracts, if you follow me.

Got it. Helpful. And then last one, just on cloud gross margins. obviously been on a nice upward trajectory for the past really two years. But this is the first time we've seen a decline like this sequential in a meaningful way into Q2, right, going from 70% to a little bit up 7%. I guess, was that FX? Or were there other factors that led to cloud gross margin declining sequentially? And how should we think about that going forward? Thank you.

Yes, that's a great question. That's because the majority of our costs for Pega Cloud are in the U.S. in U.S. dollars. And so there is -- so you do have currency -- more currency impact on the top line than you do on the bottom line. In a lot of the other aspects of our business, we have natural hedges because we have the cost in the currency where the dollars are. We are more -- we are -- our costs are more skewed to the U.S. because our AWS contract is in U.S. dollars.

We'll take our next question from Steve Koenig from SMBC Nikko. Your line is open. Please go ahead.

Thanks for taking my questions. I'll stick to one question and one follow-up here. I wanted to -- by the way, congratulate you on the Forrester evaluation. It sounds like a great validation of the technology leadership. So first question is on the financial side. A couple of moving parts here. And maybe it relates to your prior answer. But on Pega Cloud revenue, the sequential revenue growth in cloud was very light. And so I'm wondering if you can square that with the higher cloud mix. And then maybe also related to that, more broadly, RPO bookings were down pretty hard year-on-year. And I'm wondering like how much of that was a surprise in terms of weakness in new client commitments relative to your internal expectations? And how much of that was a lighter renewal schedule if you could just parse that out? And then just one follow-up for Alan. Thanks.

Yes, Q2 was a very light renewal schedule and Pega Cloud -- the mix of Pega Cloud was impacted by currency by approximately the same as our overall revenue. So the mix of revenue by geography isn't exact, but directionally close to our overall revenue in terms of the currency impact. The RPO -- currency impact for a lower renewal quarter in Q2 in the first half, but also our net ACV growth in Q2 was not as strong as well. So the combination of our ACV growth in Q2 was not as strong as Q1, not a big renewal quarter plus currency. That's kind of what's happening in RPO.

Okay. Sounds good. Maybe we'll follow up a little bit more on the call back. Alan, Pega launch pad. So that's really interesting. I know you've been you've been working on a lot of the stuff for some time as part of the Phoenix initiative. I'm wondering if you could give us some color on -- what are kind of the milestones, both maybe technically and business-wise on establishing a vibrant third-party marketplace. Any thoughts on monetization, does Pega pricing need to become more transparent? Are there any early alpha customers or partners you can talk about? Thanks very much and that concludes my questions.

Sure. So, we have been working on a lot of these pieces for some time as part of the Phoenix initiative, which obviously feeds a lot of the technology that we bring forward and bring to market here. The launch pad concept is that we know that there are organizations that themselves want to develop IP, bring it to market that have sort of a workflow flavor to them. And to be candid, the platforms that we saw out there were not remotely well suited to being able to do that we thought. And we've talked to a number of people and companies about that. We wanted to begin having discussions on this. And thought the best way to do that was to just publicly say, yes, we got this. We're going to begin talking with early adopters, but I'll be able to answer those questions with much greater clarity and specificity after we're another 90 or 120 days into this. So I'm going to put -- take up a little pass on that, but it's not the lack of enthusiasm. I think this is a very exciting place to be.

We will now take the next question from Pinjalim Bora from JPMorgan.

This is Noah on for Pinjalim. Thank you for taking the question. Can you explain what you're seeing in terms of demand from public sector customers? And just any color on the rate of new IT engagements within public sector would be helpful. Thanks.

Yes, I can talk to that. I think that public sector has been pretty shaken by the pandemic. And a lot of the solutions that have gone into public sector to just make them work, particularly at some of the large organizations, governmental organizations we do business with. We are widely seeing to be scotch tape and bailing wire. So there is a, I think, a healthy appetite in large agencies to continue and even accelerate the workflow automation that we already do for a number of them going forward. So I think the demand in public sector will continue to be strong. Having said that, as we all know, public sector is not a place that tends to buy rapidly, and they tend to want to buy very much on a consumption cell basis. So you don't get the big multiyear deals with lots of things sort of on the come based on expectations. It really is a line of business that I described it as sort of building an engine of success that as you go when you -- as you develop greater confidence and a greater footprint, it builds on itself. But the market opportunity there is huge, we are very much going to focus on what I would describe as federal and large states here. I think that plays to our strength and that also plays to the people will be buying.

We will now take the next question from Vinod Srinivasaraghavan from Barclays. Your line is open. Please go ahead.

Thanks for taking my questions. I just want to -- maybe look to the past a little bit, talk about buying patterns going into the COVID period and the second quarter 2020. I just want to get a sense of are things kind of similar than right now or back then? And kind of at what point did you see sales cycles improve and customers reengage more meaningfully then? And are you seeing any early signals of that where maybe a similar pattern might play out? Thanks.

So I can start on that one. So because unfortunately remember those days well. I think the difference between Q2 2020 and Q2 2022 is noticeable because of the following. When we were in Q2 of 2020, we didn't know what future look like. I think there was a question about was this going to be like the shutdown of world economies. We're going to -- people couldn't get food and paper towel with tiller. I mean, it was we were scrambling. We didn't know how long it was going to be. And it was -- I think there was a lot of angst about just what was this thing we were dealing with. So I think the level of uncertainty and confusion and stress was high. I remember looking at the unemployment drop of -- or increased, excuse me, I don't know, whatever it was, like x million people that went into that filed claims in one week. In today's environment, what I see is people more going through a typical economic reset, right? They're saying we know what's coming. We've got to manage our budgets. We need to slow hiring. We need to think about projects that will help us optimize our business. This happens every whatever, five to 10 years, whatever the recession cycle happens to be I don't view it as being comparative to Q2 because of the level of just general mass confusion in the market that happened for a few months in the middle of 2020. That's my perspective. I think this is much more -- I do feel like people know what's coming. They may not know how bad it's going to be or how long it's going to last, but we've been through recessions before. So I kind of -- that's my perspective. Alan?

Yes, I would agree that the atmosphere back then was much more of confusion, who knows what's going to be, how long it's going to be for, we'll be able to get the right staff to support the business at all. There were a little burst of, Oh, my God, we've got to automate something, but there was an incentive to it that people said, I've got to do it in 10 days. or a week. And by the way, we've delivered some pretty amazing systems in that time to support things like the paycheck, the Paycheck Protection Act. I was just talking to one of our very large banking customers who said that they'll never forget what they were able to do in a week with our system when they were just trying to hold on there. The time now is just a lot more rational, right? People expect dimensions are going to fall into just how long is it going to be tight. People are extremely interested in the low-code piece is Eric very valuable because people are extremely interested in being able to continue to run their systems without necessarily the same, frankly, depth of engineering talent that some of those end companies have been able to depend on or in some cases, not even, depending on what's happening with the cost. So I would describe this as a much more, frankly, reassuring time than if you go back to the point where every week was a new terror.

Got it. I appreciate some of the color on that. And then just one follow-up for me. Can you maybe speak to just kind of the sales execution during the quarter, how you kind of feel about that? And also, are you seeing any customers ask for like more pricing concessions or more flexible payment terms given kind of the macro environment? Thank you.

So I'll answer the second one first. Our bread and butter customers are the ones that we're particularly focused on going forward are not the ones who need payment concessions, candidly. Now people always like to ask for things, but they're just not. That's not the part of the market that we are going to focus on go through. From a sales execution point of view, as I think a lot of you know, we've undergone a lot of change from a go-to-market management perspective. And a lot of that change happened during Q2. We're right in the middle of it all. And I'm sure that didn't help us getting things together. I believe we're now largely through the -- what I describe as Phase 1 of change management, which is understanding what we want to do from a structure and a positioning point of view, et cetera, we still have a lot of work to do. as we go through the next couple of quarters. But the reset, I would say, of our business to being a cost-effective grower, really worrying about cost, et cetera, that is, I think, taken whole of the psyche of the organization as a whole and in the go-to-market organization. And now I believe we have a plan that we can execute on a strategy that makes enormous sense having done this for a long time. And we know that there is the demand there in our customers. There's no doubt that customers appreciate, particularly the ones we're talking about, the way our software can really uniquely help them deal with their own pressures and their own confusion. So I'm feeling good about that. Obviously, the first half of this year was pretty volatile. I mean we know that there were some management changes that were quite significant that happened -- all of that happened in the last five months. So unquestionably, that would have some impact on Q2. And by the way, we're not happy with what the outcomes were. We're committed to changing it, and we're not happy that 16% is a good number going forward. It just might be the realistic one to think in terms of from where we are this year.

I'll add one piece of color. Clients, I have not seen -- I see a lot of the client interactions, as you might imagine. I don't see clients deciding to try to get the same amount of value out of Pega for a lower amount. I do see clients trying to manage cost increases as a result of inflation. Right? Like naturally, CPI is a much higher number. And there's an expectation in the market that technology companies will receive some increase in the annual clients are more focusing on trying to manage that as we are trying to manage that as well because we expect to get increases to help offset our cost increases of our team members, et cetera. That, I think, is a focus area, but not general spend reduction. That's not something we've seen.

We will now take the next questions from Kevin Kumar from Goldman Sachs. Your line is open. Please go ahead.

Hi, thanks for taking my questions. Alan, given the macro environment, are there any changes in the types of use cases across the customer base whether that's customer engagement or customer service, other areas of automation, curious where you're seeing the most appetite.

Yes. So in the real-time interaction management space, which is -- think about as AI-powered decisioning. There is -- when the economy goes to the sort of change we've seen in the last 90 days, we shift our emphasis from cross-sell upsell to retention. And we have and we do a lot of very, I think, effective work in the areas of retention. Certain use cases, sometimes referred to as compassionate, hopefully, collections, which is where you try to figure out how to be the smartest about if you're a business getting paid. Those are examples of use cases that accompany the sort of recessionary push that, once again, we've seen before, we see the same thing happening now. Those discussions get a lot of a lot of attention as well. On the workflow space, automation and transparency, being able to handle a workforce that's distributed and not likely to ever come together again, but you want to be able to manage them. those once again are the apps what we sometimes refer to, and you'll hear us talking more and more about what we call the process fabric as a way to leave an organization together. Those are the types of use cases that go with these times. And the other thing I'll say about all of those is those systems tend to be pretty big systems, not all at once necessarily, but over time, those become very, very meaningful.

That's helpful. Thank you. And then as you integrate the Everflow acquisition, how has customer traction been there? And how should we think about ACV uplift on deals where process mining is used?

I think process mining is primarily a vehicle to be able to make the customer more effective at deploying your software. I think that more than a very significant increase in ACV on the deal, I think you will see an acceleration of consumption and use. And that leads to, in effect, larger parts of the business being in a position to cost justify and rationalize the purchase. So I view it as contributing to ACV, more by helping promote volume than by kicking the prices up 20%, right? It's discovering the opportunity and optimizing the opportunity, which lets you go bigger, particularly these big companies.

And just to clarify, just to make sure that's crystal clear, we are not in the business of selling user-based licenses as our exclusive go-to-market where you keep price up ticking every single feature function. What Alan is talking about is clients put get more value by putting more automated transactions through our system, and that's the way the ACV goes up because they're paying on kind of a consumption type model. That's kind of the connection there just to make sure that's clear.

Yes. Per user pricing, we think, in this world is sort of an anachronism because everybody wants to move from one form or another of nonuser activity right, whether it's customers doing work themselves, whether it's parts of the system landscape actually doing fully autonomous work, that's a hyper automation. So our standard approaches tend to talk about how many units of work get done by the customer. And that's where process mining can accelerate as opposed to like a more user model. So I know some other people do that. I don't think that's a very forward-looking model for companies that do automation.

We will now take the next question from Joseph Meares from Truist. Your line is open. Please go ahead.

Thanks for taking my question. The first question, I was if you had already said this in the prepared remarks, but could you just give us some clarity on the cost initiatives that you're talking about? I think you said it would be more than half of the decline caused by the Pega Cloud. But could you just clarify that?

Yes, sure. So I know, Mike, the wording is tough sometimes to get through clearly. So we're -- we anticipate that the combination of the three factors, Pega Cloud mix currency, which is the smallest of the three. And the impact of our ACV target will reduce revenue from where we kind of initially thought it would be by about $120 million to $130 million. We might say, Oh, well, that means there's an impact to EPS by that same amount? No. To the contrary, we're actually maintaining, we believe we have the staff that we need to get through 2022 and quite frankly, to hit our 2023 objectives well. And that efficiency that we would get by maintaining our cost structure consistent with where we are now, will get us over $100 million of that $120 million to $130 million revenue decline. So we won't get all the way there. We might, but we're signaling that we think we can get all the way there, but we will get almost all the way there. When I was saying, Joe, as I was saying, we'll make up the ACV, drop or make up the currency and we'll get more than half of the way there on the cloud mix. And that's the -- all of those three add up to over the $100 million of mitigation.

That's perfect. Super helpful, Ken. I appreciate it. And then just as a follow-up. Last quarter, you spoke about several new products, including enhancements to the Pega Customer Decision Hub and voice AI and messaging solutions for customer service. Just curious if you have any early customer feedback on those? Any positive stuff you can point to there? Thanks so much for taking the questions.

Yes. So we continue to get excellent feedback on the Customer Decision Hub, that's the real-time interaction management piece that I was talking about that Forrester just landed. And that continues, I would say, to be by far the industry-leading product in that segment. And the new capabilities are used in being I think being widely enjoyed. The voice AI is rolling out slowly. We've got some pilot work that we've been doing. I think it's enormously exciting. But to be candid, I think that a lot of organizations are just trying to stabilize that part of their business. And they're -- if things get a little more normal, I think that's going to pick up. But right now, there's just an enormous amount of what I described as contact center exhaustion, where people have just -- who are running those things are just trying to deal with making sure they've got the staff and that they're able to just keep them running. So it's probably going a little slower than I'd like, but that was never going to be a big part of a number of ours for this year.

We will now do the next question from Mark Schappel from Loop Capital. Your line is open. Please go ahead.

Hi, thanks for taking my question. Ken, starting with you, with respect to the macro, just to be clear here, are you saying you're seeing lengthening sales cycles and project delays in your business today? Or are you just trying to get ahead of the curve with your comments?

question. I would say I am a little bit of lengthening sales cycles, but nothing I would say material to lead me to a an absolute conclusion. I am more trying to get ahead of where I think the market will be for the rest of the year.

Okay, great. And then, you know, with respect to the sales cycles, are you seeing that in any particular geography more so than others?

Europe, I can get out and speak to but certainly Europe is much closer to the frontlines of the conflict. And in Ukraine, Russia, Ukraine, and that they are seeing things like energy or resources, food, they are much more disrupted than certainly the United States is and even a bit even APJ. So I personally I think Europe is in a tough place right now.

I just going to say customer mood and some of those countries just hard to get their attention.

I understand. And then Alan final question here. It's around the launch pad. I believe in your prepared remarks, you mentioned that the product would be run as a separate commercialization effort. I was wondering if you just go into a little bit more details of what exactly that means?

Well, it means that we were able to take a couple of very entrepreneurial people who we already had on staff. And we're going to create a largely virtual team, but we're not going to commingle that at all, with the kind of go-to-market and the current messaging, you know, we see that as a separate product, using experience, obviously, that we've had for many, many years to inform it, that will go to market through a separate channel as a partner sold channel -- sold by actual organizations that have the IP that they want to sell. So I'm really, really looking to insulate the core business from any sort of disruption. So we can really focus on doing as well as we collectively can do this here on.

We will take the next question from Joey Marincek from JMP Securities. Your line is open. Please go ahead.

Thanks so much for the question. Alan, would love to hear more about Google Cloud? I know it's early. But how is that partnership progressing thus far? And maybe what are your early learning? And then one for Ken? Can you give us an update on net retention. How is that metric trended? And maybe how would you think about it on a go forward basis? Thank you so much.

Sure. So the Google relationship, I would say is terrific. You know, we work with them. And we've been able to work with them to stand up this capability, I think, and just being able to offer customers the ability to use Amazon credits or Google credits, up that they may have committed to also I think, at certain customers, get customers excited. So that relationship is deep and very, very positive. And, you know, I'm also pleased to say that Google is a client, which is wonderful when a company like that decides that they want to use your stuff and internally, so now, I believe it's going to work out very, very well. You know, Amazon has been a terrific partner, and we love working with them also. But the reality is, as they move into, say, the medical field as they recently have done in a greater quantity, and as they move into, or they obviously deep in retail, that means that certain of the very large clients that we want to sell to have, well, less attraction to using them as a platform, it doesn't actually impact visible to a customer, whether they're running the Pega Cloud on Amazon, or on Google, but some companies have their own standards and their objectives in that regard. And now we're just in a position to give that extra dimension of client choice, which is always good. Ken want to talk about --

So our net retention so, that's a really good finish to the questions, because it's one that we haven't really touched on. Directionally, I've always talked about, if we have 20% ACV growth that 15% of that 20% would be with existing clients and the other 5% would be net new logos, that is a directional number. But that is not far off. When you think about us, our ACV growth declining by some percentage, the majority of that decline would be our expectation of getting ACV from net new logos, right? Because so I think our net retention number is not going to decline much of our overall ACV declines, because that is our bread and butter. That is actually where we're going to put our capacity. That's where we've always got the majority of our bookings. And so our focus is going to be really heavy there, especially in any type of less than certain economic environment, you should always stay close to your clients, because they're going to deepen their relationship with existing vendors, that is just the trend. So I think our net retention rate will hold pretty steady to what it's historically been maybe like dropped by a percent or so. But not much. And what will happen is we will probably, you know, just being pragmatic, we will chase new logos less.

And with that, I think we're at time, I'd like to thank all the folks who participated or listened to the call. You should know that we're working very hard. We're taking the needs of our shareholders very seriously. And I'm hopeful that we'll be able to report some good things in a quarter. Thank you very much.

This concludes today's call. Thank you for your participation. You may now disconnect.