Pegasystems Inc Q3 FY2024 Earnings Call

Ladies and gentlemen, thank you for standing by. My name is Krista and I'll be your conference operator today. At this time, I would like to welcome everyone to Pegasystems Inc. Third Quarter 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question and answer session. Thank you. I will now turn the conference over to Peter Welburn, Vice President of Corporate Development, Investor Relations.

Thank you so much, Krista. Good morning everyone and welcome to Pegasystems Q3 2024 earnings call. Before we begin, I would like to read our safe harbor statement. Certain statements contained in this presentation may be construed as forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. The words expects, anticipates, intends, plans, believes, will, could, should, estimates, may, forecast guidance or variations of such words and other similar expressions identified 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’re subject to various risks and uncertainties, actual results for fiscal year 2024 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 2024 results, 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, 2023, and in other recent filings with the Securities and Exchange Commission. Investors are cautioned not to place undue reliance on such forward-looking statements, and there are no assurances that the matters contained in such statements will be achieved. Although subsequent events may cause our views 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 turn the call over to Alan Trefler, Founder and CEO of Pegasystems.

Thank you, Peter, and thanks to all who are joining today's call. I'm really pleased with our performance for the first nine months of 2024. The team is executing extraordinarily well, and I'm optimistic about the momentum that's evident in our results. The energy is palpable across the company and our sales teams are fired up. It's great to see that we're driving profitable and balanced growth across industries and geographies, while delivering transformational innovation. The enormous excitement we're seeing from our AI offerings, especially Pega GenAI Blueprint, is fundamentally changing the way that we engage with prospects and clients. Our distinctive AI approach is showing clients how they can accelerate their digital transformation and move to become autonomous enterprises. Blueprint is now part of virtually every client and prospect discussion. It continues to inspire our prospects, clients, and partners with possibilities, and they're continuing to evolve. It has profoundly changed how we engage, sell, deliver and is helping us work to get in with clients more deeply and across bigger pieces of their business. The number of new blueprints continues to grow dramatically. It's helping us identify opportunities to accelerate growth and creating additional momentum for Pega Cloud, which is growing at a faster rate than even we predicted, and Ken will discuss in more detail. The tremendous engagement from clients and partners is also accelerating innovation as together we're continuously discovering new ways to leverage and improve Blueprint. For example, we've recently added support for many additional languages and added a new collaboration feature that summarizes modifications to the blueprints to help our clients collaborate among themselves. As a reminder, you can experience Blueprint for free by going to pega.com and searching for Blueprint. But I think perhaps most importantly, this is unique to Pega. I don't think it can be easily, if ever, replicated by competitors without a major rework of what they do. And this is just our opinion. We're getting that feedback from clients, partners, and industry experts, who are also saying that Blueprint is one of the most compelling examples of actually putting AI to work that they see, something I heard last week when I was in EMEA and met with some of our largest clients. This changes how we operate and gives us a distinct competitive advantage and approach to monetization of AI that is not dependent on product SKUs but rather reflective of building and growing strategic long-term client relationships. For example, recently one of our large multinational financial services clients asked us to help improve their team's digital savviness. So we organized more than 40 Blueprint exploration sessions over four days, giving about 800 employees an informative experience with Blueprint. The team was so impressed they've asked us to help programmatically implement Blueprint and include citizen developer training to broaden the people who can access this AI. Our European client that provides healthcare services has given Blueprint to nurses, caregivers, and others from across 11 hospital networks, giving them the ability to directly design and rethink their workloads to better serve their citizens. To date, they've created more than 150 Blueprints. Recently, our team used Blueprint to identify and accelerate potential pipeline in new areas of business with a long-term insurance client. This level of excitement about Blueprint and the client engagement is driving unprecedented enthusiasm in Pega's history and across the company and our partners too. I want to talk for a few minutes about what we're hearing from clients and how we responded. Our clients are focused more than ever on digital transformation. It's increasingly recognized as critical to their competitive survival. In talking with them and considering what we're doing now and into the new year, we believe we're uniquely positioned to help our clients with this journey in three ways. First, support through rethinking and replacing legacy applications. It's common for our clients to have lists of the applications they dislike, the ones they want to replace. There's an increased urgency to modernize these applications so they can leverage AI and move to the cloud, which many of these are not able to do. We see a huge opportunity to help them rethink and replace this ever-growing technical debt. Blueprint deploys AI to eliminate the drag of legacy applications. It connects the whole process of rethinking the application with the Internet and AI in a way that helps drive both the right solutions and faster outcomes. Clients can import information about applications and then use Blueprint to update, enhance, or completely reimagine their workloads and then execute quickly and effectively. We'll continue to enhance our offerings to support clients in these efforts, and we will be introducing new capabilities this year and next. I've been speaking with partners and clients about this over the past few weeks and the response to this legacy transformation vision has been universally positive. The power of this approach is that clients aren't just lifting and shifting applications. Blueprint allows them to rethink their workflows while moving them onto a modern cloud platform, which brings me to the second advantage we believe we have. We believe we are an ideal modern application platform for businesses that involve workflows and getting work done. Recently, Gartner noted that 'overlapping automation capabilities are driving market consolidation' and 'promising enterprise application leaders to search for platforms that can cater to the end-to-end needs of a wide range of automation use cases'. They introduced a new concept to address this, referring to it as business orchestration and automation technologies. This describes what we also see in the market and it's really the convergence of robotic process automation (RPA), business process automation (BPA), and low-code application platforms. Gartner describes these as a class of software technologies that allow enterprises to automate and orchestrate end-to-end business processes, while connecting multiple enterprise systems of record through any applicable integration. For much of our history, Pega has been saying almost the exact same thing. This is exactly how we think about our center-out business architecture, bringing together process automation, orchestration, and using AI for decisioning to help make the right decisions at every moment, and effectively working across front-end channels and data sources. We believe we're perfectly positioned to be the business orchestration and automation technologies platform for our clients. This platform sets our clients up for the third advantage Pega delivers: a path to what we refer to as the autonomous enterprise. Our mission is to change how the world builds software, starting with creating software around the outcomes that clients want to deliver, maximizing the potential for automation and AI. This approach to building outcomes and workflows in a center-out manner is radically different from others who still build their software around user screens or database structures. I believe those approaches are unsuited for a world that expects ubiquitous self-service and generic automation. Our architecture is the ideal base for AI agents because it is built around outcomes rather than screens or databases. It allows us to define things in ways that drive optimized outcomes across channels and the backend. This approach not only allows for automation, it also helps ensure governance, with agents following defined best practices predictably, and integrating human assistance when appropriate, without assuming it's human-driven. We've already witnessed the fruits of this approach in our email and messaging agents, which have automatically processed hundreds of millions of emails and messages for our clients while adhering to best practices and regulations and ensuring reliable outcomes. Pega GenAI knowledge body and agent can retrieve and synthesize information from an enterprise knowledge base, delivering trustworthy answers with attributions. The Pega GenAI Coach, an agent that structures data within a Pega case, gives real-time guidance for users to ensure effectiveness, even when the system cannot handle everything automatically. Our upcoming release, Pega Infinity 24.2, includes enhancements for coach knowledge body, data virtualization architecture, and more. You'll see that news next week. I cherish spending time with clients. While in Europe last week, I met with dozens of senior contacts, partners, and some of our most strategic customers. Those meetings were incredibly positive, and in every interaction, we discussed how Blueprint and our AI approach could accelerate their digital transformation initiatives. It's exciting to see our customers and partners recognizing the positive impacts of our software on their organizations. In summary, I'm delighted with our performance for the first nine months of the year. Our strong, profitable growth is complemented by the levels of innovation in how we deliver both intelligent automation and intelligent decisioning to market, positioning us with an innovation agenda that's top shelf. Pega GenAI Blueprint continues to generate excitement and has fundamentally transformed how we engage with prospects, clients, and partners in a very positive way. Our AI approach, which emphasizes changing the core of our clients' businesses by focusing on outcomes instead of merely coding faster, marks a significant differentiation in the market. We believe we can support our clients and prospects in understanding this approach, providing them with a competitive advantage and fostering long-term client relationships. We will continue to deliver tangible, groundbreaking solutions focused on offering real value in a strategic and architectural manner. Given that our approach and architecture are unique, I think we have a tremendous long-term opportunity and engine for growth. With that, let me turn it over to Ken.

Thanks, Alan. It's fantastic to see our team consistently deliver solid quarters of profitable growth for the third time this year. Clearly, we have momentum, and we're executing very well. Annual contract value grew 14% in constant currency and 16% as reported year-over-year. Our ACV growth acceleration was powered by Pega Cloud, which grew 26% year-over-year in constant currency. Pega Cloud represents the vast majority of our net new ACV in the quarter and for the year. Our team is selling Pega Cloud as our primary offering, which is a pretty significant change from our approach several years ago. Overall, our ACV growth acceleration in Q3 was powered by the successful execution of our strategy. As you may recall, in 2023, we shifted our go-to-market strategy to focus on our target organization model. By minimizing distractions and having our sales teams laser-focused on the right organizations, we have greatly improved sales efficiency and effectiveness. This change coupled with our latest GenAI innovation has enabled us to significantly increase client engagement. Pega GenAI Blueprint is profoundly impacting how our sellers and partners engage with clients and prospects around the world. It also enables us to expand our addressable market with existing and new clients by helping them modernize legacy systems that were not in scope before but are now. Last week, for example, I attended Pega’s 7th Annual Government Empowered Conference in Washington D.C. It was great to see government agencies at the event, such as the Social Security Administration, the Department of Justice, the IRS, and Veterans Affairs, each using Pega to build modern platforms that will allow them to deliver more effectively on their missions. With Pega GenAI Blueprint and our new FedRAMP high certification, Pega has never been in a better position to help government organizations transform employee and constituent experience. We get asked all the time, what's the significance of AI? I’ll tell you that our conversations with clients have massively changed. Now we lead with AI. We talk with potential new logos and clients about our GenAI Blueprint innovation. It's going to help them rethink their digital transformation and accelerate that thinking. We also discuss how we bring our best practices together with the best practices from the Internet in a way that creates productivity. We're starting to see early signs that our unique GenAI approach positively impacts deal closure rates, reduces time to value, increases expansion rates, and improves our partner relationships. It’s clear to me that Blueprint activity is translating into ACV growth acceleration and provides us with a fantastic opportunity to accelerate Pega Cloud migrations as well. Moving on to cash flow, through the first three quarters of 2024, we nearly doubled cash flow from operations and free cash flow. We generated $250 million of cash flow from operations and $246 million of free cash flow, both record amounts for the first nine months of the year. Q3 2024 was our eighth consecutive quarter of positive free cash flow after completing our subscription transition. My view is that free cash flow is the most important metric in terms of creating shareholder value: the amount of free cash flow, the consistency of free cash flow, and, more importantly, the growth of free cash flow. So if you start with that premise and then ask what's the most important metric that is a leading indicator to drive expanded cash flow, it’s the amount of billings you have with your clients and how fast those billings grow. That is annual contract value. ACV represents subscription billings, which ties to cash collections, which in turn ties to free cash flow generation. Now that we've completed our subscription transition, our free cash flow trajectory is well-anchored. We have ample liquidity to pay off our convertible notes due in March. You'll likely notice that we started buying back shares in Q3 and continued that activity through the end of the quarter, spending about $12 million on share buybacks. The Board also increased the authorized repurchase amount by an additional $250 million. We're evolving our Rule of 40 mindset to deliver profitable growth and increase free cash flow per share, which is the right strategic balance of capital allocation and is key to enhancing shareholder value over time. As I look forward, we are in a fantastic position and have an amazing opportunity to help our clients digitally transform their businesses and migrate to Pega Cloud. You’ve heard us recently mention our commitment to dedicated leadership around Pega Cloud adoption, which is why we named Frank Guerrera as our Chief Cloud Officer in the third quarter. As I explained during our investor session in June, we aspire to exceed $2 billion in ACV in the next few years. Today, Pega Cloud ACV is less than 50% of our total ACV, meaning there’s a significant opportunity for us to accelerate Pega Cloud. I've received feedback from many of you that it’s helpful when I share thoughts about modeling. So I will continue doing that. First, Q4 2023 was a very strong net new ACV quarter for us, so we face a tougher comparison in the final quarter of the year. That said, we're confident we will finish the year strong. As we previously targeted, we aim to be a Rule of 40 company by the end of 2024. To clarify, we define the Rule of 40 as the combination of our ACV growth and our free cash flow margin, adjusted for items such as restructuring charges. Second, we continue to experience success in moving clients to Pega Cloud; as that momentum grows, we expect term license revenue and maintenance revenue to decline over time as that revenue shifts to Pega Cloud. Currently, we anticipate declines in maintenance and subscription revenue for the full year 2024 compared to 2023. However, I want to remind everyone that the accounting for term licenses is less predictable than the accounting for a SaaS business, so there can be variability in those numbers. Lastly, when modeling Pega Cloud revenue, note that there is typically a delay of a few quarters between when net new Pega Cloud ACV is added and when it translates into Pega Cloud revenue. In conclusion, we're focused on closing the year strongly. We've managed the business very well in 2024 with accelerating ACV growth and record free cash flow and cash flow from operations. I'm really happy with our team's performance. I also want to congratulate our sales team for a fantastic first nine months of 2024 and wish them the best in finishing strong in the fourth quarter. Our client-facing teams around the world have done an amazing job with our go-to-market transformation. We are clearly executing very well. The energy as we enter Q4 is as high as it's been in many years. With that, operator, please open the call for questions.

Thank you. Your first question comes from Steve Enders with Citi. Please go ahead.

Hi. Great. Thanks for taking my questions this morning. I want to ask about the momentum that you're seeing with Blueprint and what impact that is beginning to have on either ACV acceleration we saw in the quarter or on the pipeline and what that looks like for Q4 and into 2025.

Yes. I think Blueprint has uplifted all boats. Clients seeing Blueprint internalizing it allows them to think differently about their business. Even if we were already talking to them, it helps convince them that Pega is an organization they can rely on and grow with. We are also planning to showcase another Blueprint related to decisioning capabilities, bringing AI-powered analytics to assist our customers with next best action, which is crucial to our business. Blueprint is changing the overall attitude and engagement across the board.

Okay. Got you. That's helpful. Regarding the ACV acceleration you are observing for three consecutive quarters: Can you help us understand what is driving that acceleration? Are there specific use cases, industries, or geographies supporting that growth? Additionally, does this change how you view your initial guidance of 11% annual ACV growth for the year?

So Steve, this is Ken. A couple of things: One, we are seeing accelerated ACV growth across every region—US, EMEA, and APJ. Not every vertical is accelerating at the same level, so within verticals and geographies, sample sizes vary. Nevertheless, I would say that all geographies are growing and accelerating. We're achieving this growth through new logos, new workflows, existing clients increasing the volume, and the early stages of Pega Cloud migration. It’s a holistic drive from various sources, making Blueprint and our client interactions universally stimulating growth. Looking at potential changes to our growth model over the next two to five years, it's indeed a transformational opportunity for Pega, inviting growth we haven't seen in the last several years. We're excited, but of course, we must execute.

And Q4 is by far the toughest of the year.

Yes, Q4 is always a challenging quarter. Any growth scenario where we exceed our model for 2024 won't likely alter our cash flow modeling because billings tend to be made toward the end of the year. However, it could provide upside for free cash flow in 2025.

Okay. Perfect. That makes sense. Thanks for the questions.

Thanks, Steve.

Your next question comes from the line of Jake Roberge with William Blair. Please go ahead.

Thanks for taking the question, and it’s great to see ACV growth continuing to accelerate. You mentioned that GenAI Blueprint is expanding your total addressable market by introducing new applications into the scope of what you can address. Can you provide examples of that? Is there any thought of allocating more go-to-market resources behind those initiatives?

A concrete example is helping organizations replace legacy systems differently. Historically, we would help rejuvenate existing systems through Pega workflows and decisioning. Now, we've realized our new capabilities, especially with AI, allow us to target the applications our customers want to eliminate. Organizations aiming to move to the cloud often find that up to two-thirds of their applications cannot be migrated in their current state. They want to rethink their systems without starting from scratch, which can be intimidating. We can use Blueprint and new capabilities to help them effectively transition those systems onto a cloud-native platform, aligning with modern architecture while allowing more efficient operation and access to previously untapped data.

That’s great to hear. I know you’ve been meeting with clients recently. Can you provide some insight into overall market sentiment? Is excitement primarily around Blueprint, or are you witnessing a shift in budget allocations towards AI and automation as we enter a more normalized budgeting phase?

Clients are eager for automation, yet there is considerable confusion in the market. The press releases from various players highlight the noise surrounding the space. At Pega, we talk about three forms of AI that we see transforming organizations. Clients want clarity, but market noise continues to complicate matters. We delineate statistical AI, AI features, and AI transformations. Our clients recognize the most promise in AI transformation—using AI to understand their applications better and challenge assumptions about app development, ultimately leveraging that to execute improvements. We believe Blueprint is crucial to this strategy. However, there remains confusion regarding AI overall; clients find our offerings exciting when they engage with them and see results firsthand.

Jake, I'd like to add a broader market assessment. Global conflicts persist, and economic uncertainties remain. Such factors might induce anxiety in the market. Nevertheless, I believe clients are committed to pursuing digital transformation, albeit with some hesitance due to varying market events that might delay larger decisions.

That’s helpful. Thanks for the insights and congrats again on the excellent results.

Thanks, Jake.

Your next question comes from the line of Rishi Jaluria with RBC. Please go ahead.

Thanks for the questions, and it's great to see ongoing momentum in the business. Alan, can you help us understand what differentiates Pega’s approach to agenetic AI from some of the larger competitors' messaging, including Salesforce’s recent launch of Agentforce? I'd love any color to clarify the differentiation.

Pega believes it's essential to define how a business operates, ensuring we map processes and understand where data is coming from and where it goes. Some in the agenetic space suggest relying entirely on language models for insight, which, while intriguing, raises questions about dependability. Regulated businesses likely won't be able to approach operations that way. Clients prefer using AI to define processes, a capability that Blueprint offers. This delivers significant reliability as we transition significant workloads to automated systems. Our architecture supports this model and is designed to help companies optimize operations while utilizing AI to fill in gaps. Customers recognize this, adding clarity to what differentiates our platform.

That’s very helpful. To follow up, as we look towards Q4, how should we be viewing potential budget flush? There are discussions that Q4 budgets could be stronger, which might lead to increased AI spending before year-end. How do you foresee this on your end?

Rishi, a clarification: Last year's robust Q4 performance hinged on delayed business activity, which is not the case this year. We remain cautious regarding assumed budget flushes; our strong pipeline and client engagement will naturally yield results without depending on potential surplus budget use. While anecdotal signs of stronger budgets exist, we won't base our business assumptions on that.

I remain skeptical about a significant flush. Many CEOs have instructed procurement and IT teams to conserve funds, a sentiment that is quite prevalent.

That’s great. Thank you.

Your next question comes from the line of Pinjalim Bora with JPMorgan. Please go ahead.

Thank you for taking my question, and congratulations on the quarter. Alan, you mentioned earlier in the year that there were assumptions we might see a material uptick in the Blueprints created come to fruition in Q3. What have you observed regarding the go-lives of those Blueprints? Are those executions impacting cloud numbers at this juncture?

We've seen a few Blueprints go live with a number more in progress. Blueprint has arguably influenced every sale recently, especially in the last six to eight weeks. Our sales team has shifted from waiting to engage sellers in demos until multiple meetings down the line; now they can quite effectively demo Blueprints during the first meeting, creating a client-specific engagement. This has had a notable impact on business; while some projects underway may only see limited Blueprint assistance now, we expect many more to come live in Q4 and the first half of next year.

Got it. One for Ken: Maintenance ACV has declined over the three quarters this year, as anticipated with the cloud transition. Can you clarify how much of that is a product of the shift to cloud bookings versus legacy customers actively migrating to the cloud? Are the migrations gaining traction, and will they play a larger role in 2025?

Sure, Pinjalim. We have seen some migrations, but they haven't been material yet. We expect that to ramp up in 2025 and 2026. Maintenance trends will continue to decline, likely at a steeper rate this year compared to years past. The decline can occur through two scenarios: moving from perpetual licenses to term licenses, which reduces maintenance portions, or migrating entirely to the cloud. We have witnessed some momentum regarding migrations this year, and while not substantial in our incremental ACV growth, they will increase in impact moving forward.

Understood. Thank you.

Your next question comes from the line of Patrick Walravens with Citizens JMP. Please go ahead.

Hello. This is Austin Cole standing in for Pat Walravens. I'd like to inquire about the reversal of the $2 billion verdict by the Virginia appellate court last July. Does this reversal have any potential effect on sales cycles previously tied up with larger clients, and are you observing any changes because of it?

Yes, clients were pleased to see that erroneous verdict reversed. However, larger buying organizations had already anticipated this outcome, which is reflected in the $2 billion market cap change. It hints that many had discounted the verdict's impact. Nonetheless, the reversal should help restore a traditional sales cycle, as potential questions around the verdict may have slowed some decisions down. Overall, we’re relieved to have this phase behind us.

2022 was indeed a distracting year for us, with many clients keen to understand the implications of the verdict. As the appellate court shared their reasoning publicly, many prospects could finally understand that significant errors led to this outcome. The overall narrative is improving, resulting in smoother conversations that allow our teams to focus on selling more than defending, which is a notable win for us.

That’s very helpful. Thank you.

Your next question comes from the line of Dan Ives with Wedbush Securities. Please go ahead.

Thank you, and congrats on a great quarter. Are you observing any shifts from partners looking to collaborate with you, specifically as we enter this next phase of cloud?

There's a growing enthusiasm among partners. We've recently held discussions where partners expressed keen interest in utilizing Blueprint. Some have even created over 70 Blueprints tailored for their use, enhancing their engagement with their customers.

Moreover, our engagement with AWS and Google Cloud is accelerating. We see them as critical partners as we progress with Pega Cloud and seek to enhance growth. Their involvement represents more than just a technical alliance; we are mutually targeting customers to create shared value.

Absolutely. So with the hyperscalers and Blueprint, does it feel that now, more than before, you're engaging in strategic discussions?

Yes, indeed. Our significant engagement with clients who are not yet on Pega Cloud is essential to hyperscalers. Attractive opportunities arise as we raise awareness with them about migrating workloads to our partners.

The efforts to help clients transition from legacy applications are immensely relevant to our partners, given the many legacy systems still hindering cloud moves.

Great. Thank you!

Your next question comes from the line of Mark Schappel with Loop Capital Markets. Please go ahead.

Thank you for taking my questions. Ken, regarding momentum this year, how do you attribute it to changes in overall demand now versus the adjustments made to the go-to-market strategy about a year ago?

I attribute it largely to our selling transformation and the realization that scarcity is an essential element for focus. By driving our teams toward targeted work and maintaining the right level of engagement, we’ve made significant strides. The reversal of the appeal also helped foster a more positive sentiment overall. However, the demand environment remains relatively stable compared to last year.

Our product portfolio has also evolved in ways that amplify our appeal and effectiveness.

Thank you. Lastly, the September quarter is typically strong for federal business. Can you discuss how that segment performed this quarter, particularly regarding the FedRAMP High impact on your business?

FedRAMP High certification didn't materially impact Q3 results, as it requires time for pipeline development. The US public sector wasn't a disproportionate contributor to our growth. Our growth didn't stem primarily from one strong quarter in public sector.

Thank you.

Your next question comes from the line of Blair Abernethy with Rosenblatt. Please go ahead.

Thanks. Good quarter. Alan, I’d like to ask about the product roadmap for Blueprint. Where do you see it going? And is there any connection to the Everflow acquisition you made back in 2022?

Blueprint involves aggregating information based on the clients' activities. Using AI, we can derive valuable insights from their documentation or other available data. We already allow importing BPMN. Our process mining capability from the Everflow acquisition can contribute by generating the BPMN, integrated into Blueprint. Moving forward, we aim to enhance compatibility with clients' open architecture databases, something that hyperscalers appreciate. Ongoing developments will bolster that theme leading up to our PegaWorld event.

Got it. Thank you. Lastly, Ken, could you highlight any verticals that surged beyond expectations in Q3 versus any that lagged?

No significant variances to note. It was a balanced quarter, yielding consistent growth across various sectors.

I would describe it as an unremarkable quarter in terms of specific sectors leading growth; it felt evenly distributed.

That concludes our question-and-answer session. I will now turn the call back over to Alan Trefler for closing comments.

Thank you everybody for joining. We're very excited about where we are and what we anticipate. Strong efforts will set us up for an exciting 2025. Thank you, everyone.

This concludes today's conference call. Thank you for your participation, and you may now disconnect.