Pegasystems Inc (PEGA) 2014 Q4 法說會逐字稿

Greetings and welcome to the Pegasystems fourth quarter 2014 earnings teleconference call. (Operator Instructions) As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Rafe Brown, CFO of Pegasystems. Please proceed.

Good evening, ladies and gentlemen. Certain statements contained in this presentation, including but not limited to, statements related to future earnings, bookings, revenue and mix of license revenue, 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, could, estimates, may, targets, strategies, intends to, projects, forecasts and guidance, and other similar expressions, identify forward-looking statements, which speak only as of the date the statement was made. Because such statements deal with future events, they are subject to various risks and uncertainties. Actual results for fiscal year 2015 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 fourth quarter and fiscal year 2014 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, 2014, and other recent filings with the SEC.

Although, subsequent events may cause the Company's views to change, the Company undertakes no obligation to revise or update forward-looking statements, whether as a result of new information, future events or otherwise, since statements may no longer be accurate or timely.

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

Q4 was a solid quarter, capping off what was a strong year for Pega. We exceeded our original full year non-GAAP revenue guidance of $580 million, coming in at $593 million, a 16% increase over 2013, while also achieving our goal to increase our backlog.

For the full year, our non-GAAP license and cloud revenue was up 25% from the previous year. Our business in Europe improved in the past quarter and North America continues to be strong. Our strength in sales and onboarding, marketing, customer service and platforms is driving business growth across the Group and the ability of our software to unify operations in the customer lifecycle management area is particularly powerful in those markets, where cost reduction and customer engagement are both important priorities. And we think we can do more. As we look at 2014, particularly the second half of 2015, we think back to some of the discussions we've had on these calls, where we've talked about how we want to evolve our business going forward.

Now in 2014, we made a lot of investments and I think made a lot of the right initial steps to fundamentally change the way we go to market and make important changes in our business. We made significant progress in 2014, and we'll continue to focus in these areas in 2015. And we expect to see returns in the future.

The initiatives that we've been working on are going to focus the business around accelerating growth and capturing more of the very large potential market we think we have the ability to address. Now, we've discussed with you a number of times that our software addresses a much larger opportunity than the one articulated traditionally as, quote, BPM, unquote.

And in 2014, we developed and rolled out new messaging for the Company and our products, that positions us squarely in the area of what we refer to as strategic applications. Now you can see this description on our website, which we launched just after the new year, which highlights this new positioning; applications engineered for evolution and I think really brings it to life.

The site better reflects who we are as a Company, what we sell and the value we bring to our clients. We've made it easier for clients to understand what we deliver and how we can meet their needs through specific applications, and we have better content, enhanced navigation and a look and feel that matches our Company positioning and I hope you'll take a look and let me know what you think.

Now we've talked about the transition we're making and how we want to begin to expand our market coverage, beyond the traditional -- what we call say Global 400 -- large, large accounts and continue an expansion in 2015 to what we referred to as the Global 2000. Now doing this we think markedly increases the market that we can go after, and obviously in making changes of this type, we're going to have to do a number of key and critical strategic things to achieve it.

We've identified five areas in which we intend to work and deliver this year the types of changes to our business that we think will really set us up terrifically for the future. The first is we're going to enhance our marketing, similar to what you've seen started on the website, but with much, much more to drive awareness and develop a Pega digital community.

Our traditional target account approach to marketing really did not have much marketing awareness (inaudible). We really were very much focused on direct, almost hand to hand engagement with our clients. You are going to see us work to become much, much more visible, as we've just started and I'll talk about what we're going to be doing as soon as next month in just a little bit.

We're going to do this to expand our target market to the Global 2000 and we're going to accelerate the development of strategic applications that are richer and more capable of allowing those organizations of the Global 2000 to not be sold to as much as to be able to buy. And you're going to see this transition of moving from a Company that does 100% what I would describe target account selling to a Company that empowers buying continue quite markedly during 2015.

We're going to continue our investment in our core platform technology, because it is that core platform that gives our technology the power to revolutionize businesses and let them adopt, well, sort of strategic advantage compared to the competitors and a key part of this, our fifth initiative, is going to be around further development and rolling out of our Pega Cloud offerings, which we think are going to be a very important way for this next [cheer] of potential customers to buy. So these are the areas in which we are going to be working and we're very excited.

To start going into a little more detail about how this is going to look in coming quarters, let me talk a bit about the marketing awareness work we're going to be doing to really be able to expand our target market. You're going to see several significant marketing campaigns throughout this year and this is really going to be aimed both at getting more visibility with this Global 2000, but we think it's also going to be helpful with our larger traditional top 400 account market as well.

Next week or two, you're going to be seeing our first-ever paid corporate visibility campaign, which we believe will significantly [wear our] awareness over the next several months and perhaps even cause a bit of stir in the industry. And we expect to continue to invest in marketing in 2015, because we know that our awareness has traditionally been very, very low and we think there's a huge opportunity to improve the way we sell frankly to the entire base.

Now, we're also going to be building out our ecosystem, both raising awareness there and using our key partners to be able to help us, well, solve for the bigger market that we're going to be going after. We've really done a lot of work on building out this ecosystem and I'm really thrilled with the extended relationships we've formed with companies such as Accenture, [Mackenzie], Capgemini, Atos, and Cognizant. These are going to be important organizations as we look to expand the amount of license we are selling while we're keeping our revenue growth and our staff growth and our services business at a very modest level.

Now we've added new partners in Europe in particular to bolster our presence there, because we find that smaller partners can sometimes be easier and more appropriate to work in the local language and we now have more than 70 partners around the world, that we think really extends our reach geographically and vertically and we think these are going to become increasingly strategic as we expand our prospect base from the Global 400 to the Global 2000.

Now we continue to see our messaging around this idea of strategic applications resonate with the customers that we've been rolling it out with. As a reminder, we define this concept of conforming business applications, as well as it support things that could be really important to a company, but are not central to the way a firm differentiates itself. Examples could include accounting, payroll, contact management; these are things that, well, a company might buy, but is unlikely to think of as needing to make their own, needing to evolve, needing to change rapidly.

By contrast, strategic business applications are those that organizations use to differentiate and they must evolve as markets, products, customers, regulation and competition all change. Now while out-of-the-box features are important for these [apps], the ability for an organization to tailor the application to its needs and rapidly adjust to changing requirements will be what distinguishes strategic applications from conforming applications and will distinguish the companies that are able to empower themselves to be strategic from the firms that will go by the wayside.

We continue to see opportunities where our competitive differentiators are winning this business, including especially in our intelligent customer relationship management capabilities that can actually not just respond to, but even predict and address customer needs. The ability to connect backend operations with front-end customer-facing systems and really allow customers to go end-to-end doing, well -- going immediately from request all the way to fulfillment and going from one channel to another. This helps our customers get more value out of their existing systems and helps them manage complexity and achieve end-to-end simplification.

Now, this quarter, we've seen new wins and meaningful increases in our relationship with a great number of companies. There's great firms like Allianz, [StockTalk], Schwab, CVS, Cox Enterprises and Barclays, and the ultimate test of our software, though, is not just customers who choose to buy; it's the customers who are achieving important go-lives and really helping their business.

And we had wonderful wins and successes going live at companies like Pfizer working in the area of pharmacovigilance, an important area for process, case management and customer engagement; WellPoint, where we delivered a new claims workstation; Capital One, handling disputes for cards; the Study Group, perhaps an organization representative of the new direction of smaller organizations, are operating out of Asia using us on the cloud to streamline admissions to educational institutions; Rabobank, a new commercial lending app; U.S. Bank and web-based contact center for billing and fraud disputes, and commercial firms like General Electric in the supply chain area.

So, we are finding that we can deliver improved applications. We can help our companies -- the customers we have -- strategically differentiate and we're very excited with what we've added to the product in 2014 and what we're going to be able to show in 2015.

In 2014, we made a number of what I would describe as strategic technology acquisitions, very small companies, but companies that enabled us to really bolster the technology; in particular a company called MeshLabs, which is text analytics and social engagement technology, and Firefly for co-browsing. And we've now completely unified these into our Pega technology, so that our customer relationship management, our customer service, all aspects of our platform now are enabled with these state-of-the-art features.

We've launched a new version of our sales automation with improved omnichannel capabilities that leverage this and also do a brilliant job of supporting mobile, which is also an example of where we think our model-driven approach, our unique platform, is really going to facilitate organizations that have to run on multiple types of devices and that want processes that work seamlessly from the mobile device all the way through their front and back offices. Once again, we think, the way the world is going, fits what our technology does and will do perfectly.

And on the vertical front, we launched new and enhanced applications in a numerous number of industries you can see on the website and continue to invest in our Pega 7 platform finding ways to build things into that platform that help all of our industries, but also help organizations that may want to do something on more of a platform basis. This includes enhancing our decision management capability with new business user tools that make it easier for people to directly manage and change how they market to their customers, what the offers are, and how we can help them always know what the next best action is for an individual client.

So, we're going to continue to push in these areas. We have launched significant product releases; I'm very excited about the things we're going to be doing over the next couple of quarters including what we will show at PegaWORLD in June, which is always a high point of the year for us.

And one of the things that we know, we're continuing to emphasize is the cloud. Now the cloud I think is central to our new strategy, because frankly in this tier of customers that are smaller than the Global 400, they really benefit from some of the costs, scale and operational advantages more than some of the larger companies do, which frankly have economies of scale themselves, but we do think the cloud will become increasingly important in all aspects and sectors in the market.

Now, it's true, it's off of a small number, but I was pleased that our non-GAAP cloud revenue grew 86% in 2014 and we anticipate strong additional growth as we go forward. In 2014, we recruited one of the industry's foremost leaders in cloud computing to run our cloud operation and we have been making great progress with our partner, Amazon Web Services, to be able to provide what I think is a state of the art cloud environment and this is something we're continuing to dig in. We were pleased to be able to present at Amazon's -- they call the Big Think partner -- re:Invent conference in November and are excited about that evolving relationship and what we think we're going to be able to do on that platform.

So in summary, 2014 was a strong year for Pega. We know we have a lot more we can do. We think 2015 is going to be important building year for us. But the opportunity we see in front of us is very significant and I'm quite encouraged that this transition has the potential to be as potent as the one that we made years ago when we actually decided we were going to go in and pretty much lead the business process management market. This gives us a chance to broaden our opportunity that we're going after to broaden what we're going to be focusing on and we see a lot of customers in that space already starting to respond positively to what we're going to be able to do there.

We think that this need for digital transformation, which our technology (inaudible) supports, is one that's going to be a continuing and increasing need, and as a result, we are excited that we are well positioned to be able to take the steps to be a true leader in this strategic application market, really driving applications that are engineered for evolution.

And with that, let me turn it over to Rafe to talk about some of the numbers.

Thank you, Alan. For the fourth quarter and full year results of our fiscal year ended December 31, 2014, we are reporting both GAAP and non-GAAP results. The full reconciliation of all GAAP to non-GAAP measures is provided in the financial tables of the press release issued earlier today and is available on the Investor section of our website.

As we have discussed in the past, quarter-to-quarter comparisons do not necessarily reflect the underlying momentum of our business as the timing of a small number of large transactions can significantly impact our results. To provide the best look at how our business is performing, let me run through the results on a full year basis.

Full year 2014 non-GAAP total revenue was $593 million, up 16% year-over-year. Full year 2014 non-GAAP license revenue was $234 million, up 22% year-over-year and non-GAAP cloud revenue stood at $17 million for the year, up 86% over the prior year. Thus, total non-GAAP license and cloud revenue stood at $251 million, an increase of 25% over the prior year.

As a percentage of full year non-GAAP revenue, license, cloud and maintenance revenue stood at 74% of total revenue, up from 70% for the same period in 2013. This is a direct result of our higher margin revenue items growing faster than the growth of professional services and training.

Looking at our results on a geographic basis, non-GAAP revenue in North America grew 21% to $363 million for the year and stands at 61% of total revenue. Revenue from EMEA was approximately $181 million on a non-GAAP basis, up 9% year-over-year. 2014 Asia-Pacific revenue was up 9% to a total of $49 million.

While there remains room for improvement, we were pleased to see European software sales improve in the fourth quarter compared to the challenges we experienced in Q3. As we have discussed in the past, we offer our customers a number of options when purchasing our software, including perpetual and term license arrangements as well as the choice of installing the software on premise or using our cloud offering. With respect to license revenue, we reiterate our preference for deals that drive ratable revenue recognition.

With this in mind, we are pleased that the contribution of non-GAAP license revenue recognized from term and license subscription arrangements for 2014 increased to 41% of total license revenue, up from 36% in 2013. We anticipate this trend continuing, though we do remind you that many of our customers have established buying patterns and/or strong preferences as to deal structure and, as such, the portion of our license revenue derived from either perpetual or ratable arrangement can be highly variable.

For the full year 2014, non-GAAP professional services revenues were $150 million, up approximately $4 million from the same period last year. While professional service margin challenges persisted through Q4, particularly in Europe, we finished the year with essentially flat gross margins for our business as a whole, 70.7% on a non-GAAP basis compared to 71.3% for 2013.

Turning to the rest of the income statement, we posted a non-GAAP operating margin of 14.9%. Year-to-date, non-GAAP operating expenses were approximately $331 million, up 20% from 2013. As we've discussed in prior quarterly earnings call, the Company is making significant investments in the next generation of our technology. R&D costs for 2014 rose 25% over the prior year after adjusting for the reclassification of cost from marketing to engineering that we discussed in Q1 of this year.

In analyzing our full year R&D expenses, it is important to recall that year-over-year R&D run rate jumped as a result of the Antenna acquisition, which occurred in Q4 of 2013, which was principally a technology and a technologist acquisition. In addition, full year sales and marketing costs were up 17% on a non-GAAP basis after adjusting for the re-class of costs mentioned a moment ago. We believe our investment in both building the sales team and revamping our marketing efforts will continue to drive long-term growth in our business. For the year, G&A costs remained at approximately 5% of revenue.

Turning then to earnings. For the full year 2014, we posted non-GAAP earnings totaling $58 million after applying a non-GAAP tax rate of 31.7%. On a non-GAAP fully diluted EPS basis, this provided $0.74 per share. It should be noted that our full year 2014 earnings were reduced by an FX charge of approximately $4 million or approximately $0.03 of diluted earnings per share.

Now to discuss license and cloud backlog. We compute license and cloud backlog by totaling two elements; deferred license and cloud revenue as posted on our balance sheet and off-balance-sheet license and cloud commitments that are signed, but as yet unbilled. As a reminder, you can find detail of both elements in our 10-K and a summary table in our press release, both of which were filed earlier today.

We finished the year with $365 million of total license and cloud backlog. For year-over-year comparison purposes, total backlog as of December 31, 2013, was $347 million. Thus, as of the end of the year, backlog has increased $18 million or 5% over the prior year. It is also helpful to look at the current portion of license and cloud backlog, which is the current portion of license and cloud deferred revenue plus the 2015 portion of signed off balance sheet license and cloud commitments.

At year-end, the current portion of backlog stood at $152 million, an increase of 15% over the prior year. By effectively excluding the impact of multi-year ratable license arrangements, we believe current backlog is a helpful data point in assessing the underlying momentum of our business.

Turning to cash. For the year, the Company produced $100 million of operating cash flow, an increase of 24% over the prior year. Free cash flow, which we define as operating cash flow less CapEx, was $88 million, up 18% over the prior year. We finished the quarter with total cash and marketable securities of $211 million, an increase of 35% over the prior year. For the year, the Company repurchased approximately 770,000 shares for $15.6 million and as of year-end we had a balance of $13.3 million available for repurchases for the coming year. And on headcount, we finished the year with approximately 3,000 employees, up 15% from last year.

Now to discuss guidance for 2015. As disclosed in the press release issued earlier today, we are initiating revenue and EPS guidance for fiscal year 2015. We expect both GAAP and non-GAAP revenue for the full year 2015 to be approximately $653 million. This is net of approximately $10 million in currency-related headwind. Consistent with prior years, we expect our revenue will be somewhat backend loaded and are best-estimating first half revenue to be approximately $295 million.

Consistent with the past few years, we do expect license and cloud revenue will grow faster than total revenue in 2015. As a result, our professional service revenue is growing, but at a modest pace. For the full year 2015, we expect to earn approximately $0.78 per diluted share on a non-GAAP basis. GAAP earnings per diluted share for the full year 2015 are expected to be approximately $0.49 (corrected by company after the call) per fully diluted share.

As Alan mentioned, we are making every effort to position the Company to accelerate growth and achieve our longer-term objectives. In 2015, we are shifting resources and making new investments to support each of the following core corporate initiatives, enhancing our marketing, expanding our target market to the Global 2000, accelerating development of strategic applications, continuing to invest in our platform technology and further developing Pega Cloud. We believe this investment will yield accelerated revenue growth over the years to come.

In summary, we delivered strong license and cloud revenue growth in 2014 and achieved significant advancement in key product areas while investing for future growth. 2015 will be an exciting year as we introduce a number of our product offerings to new customers. But before I conclude, I would like to remind our analysts and investors to save the date for PegaWORLD June 7 through June 9 in Orlando, Florida, with an investor focus session on June 8.

Now, with that operator, we will open the call to questions.

(Operator Instructions) Steve Koenig, Wedbush Securities.

This is actually Jae Cho, dialing in for Steve. We have few questions on Pega. First question is Pega has historically maintained a license CAGR in the high teens. What's your thinking around being able to maintain this rate of license growth? Is it reflected in your guidance and the overall revenue growth is about 10% due to services being shifted rapidly to partners or how should we be able to see this?

So I think -- to answer the services question -- as has happened in the past, I think services growth will be very modest sort of single digits type of growth, because partners are central to the strategy that we're pursuing. And we're also working hard to try to drive services out of the applications -- that's I think an important part of our strategy.

When we think about revenue growth here, there's a lot of things that I'm very excited about but it is a year of transition for the Firm. And we're kind of expecting that, for example, a lot of these new customers we're pursuing and moving our efforts and energies towards, are going to be very, very likely cloud-based customers. We're seeing the evidence of that type of interest and of course a cloud deal hits revenue very, very differently than a perpetual deal.

Having said that, we think that we can be very successful in this part of the market and that's why we're going to be making this investment, et cetera. If we can't figure out how to boost our growth rate over the next two or three years, our view is that we have not been successful as a management team.

So we're not looking for decelerating growth; we're doing this very, very significant advertising and other type of work and I think very meaningful pivot increasingly to the cloud to, frankly, increase and significantly accelerate our growth if you look out a couple years.

Okay, that's helpful. And just to sort of clarify, is the cloud revenue that you've broken out part of the license find under income statement?

No, cloud revenue is in the services section and you can find details of that in the K; we break that out, but the accounting rules treat cloud as a service and so for those of you who have the fresh 10-K on hand, go to page 24 and you can see the detail of the cloud revenue and its growth.

Okay, thank you.

Mark Schappel, Benchmark.

Rafe, starting with you, I was wondering if you could just talk about the foreign exchange impact to the top line that you had. You may have mentioned that on the call and I missed it.

Yes, so -- and to be clear the -- for 2014, the FX I mentioned there was not a top line FX number, but that was a -- down in other income and expense; that's actual losses that were derived from transactions and inter-company imbalances, things of that nature. For the year on FX out in the top line, we actually ended up relatively flat as a result of FX. We benefited during the majority of the early part of the years just a tiny bit.

In the fourth quarter, obviously, FX rates moved the other way and there was some headwind on Q4 and -- or really in the second half -- but the other thing to understand in that is that a number of our transactions even outside the US are billed in US dollars, so that mutes it a little bit. So, long story short, for 2014, we didn't see a whole lot of impact on the top line. However, when we look to 2015, there's definitely some headwind using current rates that we baked into the guidance we gave -- approximately $10 million of headwind.

How about for the quarter; do you have the quarter number? I imagine you got hit in the quarter.

Yes, we did.

Yes, we did. And so for the quarter, there was about $2 million of headwind that impacted revenue.

Okay, great. And then moving on -- cash flow from operations came in a lot less than expected. Could you talk a little about some of the accounting around that and --?

Sure, and I think the biggest reason for the cash flow -- as you know, the bookings in Q3 weren't really where we wanted them to be and particularly in Europe; we talked about that on the last call. So, that did delay cash that we normally would have gotten in Q4. And so I think that's probably what impacted your model.

Okay. And then for 2015, what can we expect on the tax rate for modeling purposes?

On the tax rate, so it is going to jump up a little bit, just because the R&D credit has once again expired. So, we built our model out on a 34% non-GAAP tax rate.

Okay, great. And then, Alan, moving over to you. I think on prior calls, you discussed how your technology is extending into or maybe moving outside of financial services, insurance, the core traditional markets and moving into different areas like supply chain and the Internet of Things. Any news report on that front this quarter?

Yes, I mean it's very clear to us that now the greatest growth in the future, I think frankly it's likely to come from these new verticals that we've entered. The telecommunications business I think is extremely strong one where we've had great successes with some of the largest telcos in the world and are continuing to get lots of good and repeat and follow-on business. That's, for example, in things ranging from the front office, customer service, and next-best-action marketing to order management, helping complicated, sophisticated business-to-business orders get processed and I think that's a tremendous business.

And the healthcare business continues to be strong and is going to, I believe, very materially continue to be a good business for us -- being able to do what's called care management, which is where you use a combination of rules and process and other sorts of facilities built very much into our core technology to be able to take care of people with chronic diseases or diabetes, et cetera, is one huge area and then there's a whole additional population of people needing healthcare that are entering the system, and we think that's going to continue to drive the demands on the healthcare insurers as well as the providers. The reality is I think those markets are going to be very strong; having said that, we are growing in our historical financial services market even though we have only really sold to the very, very biggest ones of them.

As part of this opening the aperture, there are lots of banks that would have, frankly, $30 billion in revenue that wouldn't used to make the cut; we just wouldn't talk to them -- where we have tremendous experience, tremendous references, and I think that that business is going to be very positive as well as we make this transition, and we're seeing increasingly that those organizations were also open to the cloud. So, I'm very happy that we're well positioned for the next couple of years.

Okay. And then finally, on the prior call, there is a lot of concern -- notable concern of slowdown in Europe, it seems like obviously this quarter Europe -- that lifted a little bit. If you just talk a little bit about your longer term outlook there?

Yes. We're feeling better about Europe, but I think declaring victory is premature. There's a lot of activity, which is good, but there's also a lot of anxiety and nervousness in the buyers, which will tend to make the activity be somewhat smaller than it would otherwise. But having said that -- I've been to Europe already once this quarter and going again in March and I am seeing a lot of interest particularly in the UK, Germany I believe is going to continue to be strong, Switzerland is also very strong as well. And interestingly enough, we're seeing a lot of activity even in Italy.

So, we think it's going to be a selective recovery. We think it's going to be better. And the reality is a lot of these companies are now having to face -- in the case of some of the organizations -- really, really tough agendas around cost reduction, which our technology is really good at.

And for the traditional banking customers, we've been making a lot of hay with this thing that's called client life cycle management. You can think of it as sort of how do you onboard corporate customers in particular, although it's retail customers too, but how do you onboard corporate customers in a way that's not going to get you in trouble with the regulators. How do you do the know your customer, how do you [select] processes, how do you check them year after year to make sure that they're not on some sanction list, et cetera? And our technology is very well regarded in that area and that was frankly some of the nice selling we did in Europe in the fourth quarter as well.

Brian Murphy, Merriman Capital.

Hi. Thanks for taking my question. Alan, as part of your attempts to broaden the addressable market here, will there be any major modifications to the sales coverage model? I mean are you guys still going to mainly have a named account model? And also, how should we think about the growth in the sales headcount in 2015, sort of similar to what we saw in 2014 or maybe more consistent with prior years when you were more aggressive?

Well, I'd like to -- I think we're going to see other model unfolds in the first couple of quarters. And on a backend loaded basis, I'd like to be more aggressive towards the end. We're just exercising it; we've just named the management team that's responsible for it. We are not going to -- we're going to work hard to not screw up. Our big account, high-end business will involve some of those folks in the new model but we have set up a separate structure in the Americas to start, so that we're not rolling this out contemporaneously as quickly in Europe and the first half of the year is going to be really about getting this model to work in the way that we want to, and then we'll roll it out Asia and Europe, so that it's global.

But the key is to maintain as we see it. For the very large accounts, the target model, we are going to make some adjustments to that for accounts that need more account management than active selling and we think that will also allow us to reutilize some of our sales resources more effectively. So I think we'd like to see the growth in the second half, especially to really prepare for 2016, but you will see growth throughout the year. This is one area we're continuing to invest.

Thank you. There are no other questions in queue at this time. I would now like to turn the floor back over to management for any closing comments.

So let me say on behalf of Rafe and myself, that we are excited about the pivot we're engaged with. I feel a lot about where we are sort of as a interesting comparison to where we were in 2005/2006 when we made the pivot that caused us to go from a Company that was sort of in the $100 million range to a Company who's now grown many times that.

I think that the market definitely has the need for what we're doing. We have product that is still highly, highly differentiated and the needs of organizations to apply good technology strategically is one that I think is going to persist and increase especially as they find some of the quick fixes that they've sort of tried to do are going to need some bolstering, which is a really important part of what we're seeing.

So we look forward to what's going to be, I think, a very, very important year in the Company and a year where we can do well. And I think that Rafe's offer for folks to come to PegaWORLD in June -- think in particular June 8, which is a Monday -- is one that a lot of you should look into. Go to our website, check out PegaWORLD 2015; it's under Events and it's going to be a spectacular conference with great customer stories and traditionally a lot of good product offering showing up. Thank you very much everyone.

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time and we thank all of you for your participation.