Document

“Pega GenAI has dramatically transformed how we engage with our clients,” said Alan Trefler, Pega founder and CEO. “Pega solutions and our approach to AI enables clients to accelerate progress in reaching their digital and legacy transformation goals.”

“We accelerated ACV growth and delivered record free cash flow in Q1 2025, reflecting the benefits of the subscription model,” said Pega COO & CFO Ken Stillwell. “Operating as a Rule of 40 company allows us to focus on accelerating profitable growth while thoughtfully returning capital to shareholders.”


(Dollars in thousands, except per share amounts)	Three Months Ended March 31,
	2025		2024		Change
Total revenue	$	475,633	$	330,147	44	%
Net income (loss) - GAAP	$	85,422	$	(12,124)	*
Net income - non-GAAP	$	140,542	$	42,154	233	%
Diluted earnings (loss) per share - GAAP	$	0.91	$	(0.14)	*
Diluted earnings per share - non-GAAP	$	1.53	$	0.48	219	%


(Dollars in thousands)	Three Months Ended March 31,								Change
	2025				2024
Pega Cloud	$	151,123	32	%	$	130,902	40	%	$	20,221	15	%
Maintenance	76,368		16	%	81,001		24	%	(4,633)		(6)	%
Subscription services	227,491		48	%	211,903		64	%	15,588		7	%
Subscription license	186,555		39	%	63,338		19	%	123,217		195	%
Subscription	414,046		87	%	275,241		83	%	138,805		50	%
Consulting	60,421		13	%	54,047		17	%	6,374		12	%
Perpetual license	1,166		—	%	859		—	%	307		36	%
Total revenue	$	475,633	100	%	$	330,147	100	%	$	145,486	44	%

Members of the public and investors are invited to join the call and participate in the question and answer session by dialing 1 (800) 715-9871 (domestic) or 1 (646) 307-1963 (international) and using Conference ID 5846616, or via https://events.q4inc.com/attendee/866591284 by logging onto www.pega.com at least five minutes prior to the event's broadcast and clicking on the webcast icon in the Investors section.

Our non-GAAP financial measures should only be read in conjunction with our consolidated financial statements prepared in accordance with GAAP. We believe that these measures help investors understand our core operating results and prospects, which is consistent with how management measures and forecasts our performance without the effect of often one-time charges and other items outside our normal operations. Management uses these measures to assess the performance of the company's operations and establish operational goals and incentives. They are not a substitute for financial measures prepared under U.S. GAAP. Refer to the schedules at the end of this release for additional information, including a reconciliation of GAAP and non-GAAP measures.

Words such as expects, anticipates, intends, plans, believes, will, could, should, estimates, may, targets, strategies, intends to, projects, forecasts, guidance, likely, and usually or variations of such words and other similar expressions identify forward-looking statements. These statements represent our views only as of the date the statement was made and are based on current expectations and assumptions.

•our ability to protect our intellectual property rights, costs associated with defending such rights, intellectual property rights claims, and other related claims by third parties against us, including related costs, damages, and other relief that may be granted against us;

These risks and others that may cause actual results to differ materially from those expressed in such forward-looking statements are described further in Part I of our Annual Report on Form 10-K for the year ended December 31, 2024, and other filings we make with the U.S. Securities and Exchange Commission (“SEC”).

Investors are cautioned not to place undue reliance on such forward-looking statements, and there are no assurances that the results included 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 expressly disclaim any obligation to publicly update or revise these forward-looking statements, whether as the result of new information, future events, or otherwise.

Pega is The Enterprise Transformation CompanyTM that helps organizations Build for Change® with enterprise AI decisioning and workflow automation. Many of the world’s most influential businesses rely on our platform to solve their most pressing challenges, from personalizing engagement to automating service to streamlining operations. Since 1983, we’ve built our scalable and flexible architecture to help enterprises meet today’s customer demands while continuously transforming for tomorrow. For more information on Pega (NASDAQ: PEGA), visit www.pega.com.

(in thousands, except per share amounts)


	Three Months Ended March 31,
	2025		2024
Revenue
Subscription services	$	227,491	$	211,903
Subscription license	186,555		63,338
Consulting	60,421		54,047
Perpetual license	1,166		859
Total revenue	475,633		330,147
Cost of revenue
Subscription services	38,128		35,824
Subscription license	386		643
Consulting	63,934		58,182
Perpetual license	2		9
Total cost of revenue	102,450		94,658
Gross profit	373,183		235,489
Operating expenses
Selling and marketing	138,069		127,695
Research and development	74,286		72,113
General and administrative	33,828		23,527
Litigation settlement, net of recoveries	—		32,403
Restructuring	11		163
Total operating expenses	246,194		255,901
Income (loss) from operations	126,989		(20,412)
Foreign currency transaction (loss)	(5,325)		(3,262)
Interest income	5,335		5,281
Interest expense	(1,027)		(1,752)
(Loss) income on capped call transactions	(223)		3,299
Other income, net	561		1,684
Income (loss) before provision for (benefit from) income taxes	126,310		(15,162)
Provision for (benefit from) income taxes	40,888		(3,038)
Net income (loss)	$	85,422	$	(12,124)
Earnings (loss) per share
Basic	$	0.99	$	(0.14)
Diluted	$	0.91	$	(0.14)
Weighted-average number of common shares outstanding
Basic	85,902		84,266
Diluted	94,413		84,266

(in thousands)


	March 31, 2025		December 31, 2024
Assets
Current assets:
Cash and cash equivalents	$	231,129	$	337,103
Marketable securities	140,607		402,870
Total cash, cash equivalents, and marketable securities	371,736		739,973
Accounts receivable, net	202,869		305,468
Unbilled receivables, net	179,093		173,085
Other current assets	92,794		115,178
Total current assets	846,492		1,333,704
Long-term unbilled receivables, net	98,251		61,407
Goodwill	81,186		81,113
Other long-term assets	296,021		292,049
Total assets	$	1,321,950	$	1,768,273
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	16,649	$	6,226
Accrued expenses	49,875		31,544
Accrued compensation and related expenses	55,919		138,042
Deferred revenue	469,298		423,910
Convertible senior notes, net	—		467,470
Other current liabilities	17,395		18,866
Total current liabilities	609,136		1,086,058

Long-term operating lease liabilities	65,117		67,647
Other long-term liabilities	36,428		29,088
Total liabilities	710,681		1,182,793






Total stockholders’ equity	611,269		585,480
Total liabilities and stockholders’ equity	$	1,321,950	$	1,768,273

(in thousands)


	Three Months Ended March 31,
	2025		2024
Net income (loss)	$	85,422	$	(12,124)
Adjustments to reconcile net income (loss) to cash provided by operating activities
Non-cash items	70,409		55,592
Change in operating assets and liabilities, net	48,397		136,678
Cash provided by operating activities	204,228		180,146
Cash provided by (used in) investing activities	261,895		(132,399)
Cash (used in) provided by financing activities	(575,986)		17,899
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	3,570		(2,803)
Net (decrease) increase in cash, cash equivalents, and restricted cash	(106,293)		62,843
Cash, cash equivalents, and restricted cash, beginning of period	341,529		232,827
Cash, cash equivalents, and restricted cash, end of period	$	235,236	$	295,670


	Three Months Ended March 31,
	2025		2024		Change
Net income (loss) - GAAP	$	85,422	$	(12,124)	*
Stock-based compensation (1)	41,425		34,781
Restructuring	11		163
Legal fees	6,544		1,942
Litigation settlement, net of recoveries	—		32,403
Amortization of intangible assets	701		964
Interest on convertible senior notes	394		617
Capped call transactions	223		(3,299)

Foreign currency transaction loss	5,325		3,262
Other	(751)		(1,628)
Income taxes (2)	1,248		(14,927)
Net income - non-GAAP	$	140,542	$	42,154	233	%

Diluted earnings (loss) per share - GAAP	$	0.91	$	(0.14)	*
non-GAAP adjustments	0.62		0.62
Diluted earnings per share - non-GAAP	$	1.53	$	0.48	219	%

Diluted weighted-average number of common shares outstanding - GAAP	94,413		84,266		12	%
Capped call transactions	(2,425)		—
Stock-based compensation	—		3,094
Diluted weighted-average number of common shares outstanding - non-GAAP	91,988		87,360		5	%

•Stock-based compensation: We have excluded stock-based compensation from our non-GAAP operating expenses and profitability measures. Although stock-based compensation is a key incentive offered to our employees, and we believe such compensation contributed to our revenues recognized during the periods presented and is expected to contribute to our future revenues, we continue to evaluate our business performance, excluding stock-based compensation.

•Restructuring: We have excluded restructuring from our non-GAAP financial measures. Restructuring fluctuates in amount and frequency and is significantly affected by the timing and size of our restructuring activities. We believe excluding these amounts from our non-GAAP financial measures is useful to investors as these amounts are not representative of our core business operations and ongoing operational performance.

•Legal fees: Legal and related fees arising from proceedings outside the ordinary course of business. We believe excluding these amounts from our non-GAAP financial measures is useful to investors as the types of events giving rise to them are not representative of our core business operations and ongoing operational performance.

•Litigation settlement, net of recoveries: Cost to settle litigation, net of insurance recoveries, arising from proceedings outside the ordinary course of business. See "Note 20. Commitments And Contingencies" in Item 8 of our Annual Report filed on Form 10-K for the year ended December 31, 2024 and prior filings for further information. We believe excluding these amounts from our non-GAAP financial measures is useful to investors as the types of events giving rise to them are not representative of our core business operations and ongoing operational performance.

•Amortization of intangible assets: We have excluded the amortization of intangible assets from our non-GAAP operating expenses and profitability measures. Amortization of intangible assets fluctuates in amount and frequency and is significantly affected by the timing and size of acquisitions. Investors should note that intangible assets contributed to our revenues recognized during the periods presented and are expected to contribute to future revenues. Amortization of intangible assets is likely to recur in future periods. We believe excluding these amounts provides a useful comparison of our operational performance in different periods.

•Interest on convertible senior notes: In February 2020, we issued convertible senior notes (the “Notes”), due March 1, 2025, in a private placement. The Notes accrued interest at an annual rate of 0.75%, paid semi-annually in arrears on March 1 and September 1. The outstanding Notes were repaid in their entirety at maturity. We believe that excluding the amortization of issuance costs provides a useful comparison of our operational performance in different periods.

•Capped call transactions: We have excluded gains and losses related to our capped call transactions held at fair value under U.S. GAAP. The capped call transactions were expected to reduce common stock dilution and/or offset any potential cash payments we must make, other than for principal and interest, upon conversion of the Notes. We believe excluding these amounts from our non-GAAP financial measures is useful to investors as the types of events giving rise to them are not representative of our core business operations and ongoing operational performance.

•Foreign currency transaction loss: We have excluded foreign currency transaction gains and losses from our non-GAAP profitability measures. Foreign currency transaction gains and losses fluctuate in amount and frequency and are significantly affected by foreign exchange market rates. Foreign currency transaction gains and losses are likely to recur in future periods. We believe excluding these amounts provides a useful comparison of our operational performance in different periods.

•Other: We have excluded gains and losses from our venture investments. We believe excluding these amounts from our non-GAAP financial measures is useful to investors as the types of events giving rise to them are not representative of our core business operations and ongoing operational performance.

•Capped call transactions: In periods of GAAP income, the shares calculated by applying the if-converted method related to the Company’s Notes are included in the diluted weighted-average shares outstanding. The capped call transactions were expected to reduce common stock dilution and/or offset any potential cash payments the Company must make, other than for principal and interest, upon conversion of the Notes. We believe that including the expected impact of the capped call transactions in our non-GAAP financial measures provides a useful comparison of our operational performance in different periods.

•Stock-based compensation: In periods of non-GAAP income, we have included the dilutive impact of stock-based compensation in our non-GAAP weighted-average shares. In periods of GAAP loss, these shares would have been excluded from our GAAP results as they would be anti-dilutive for GAAP. We believe including the dilutive effect of stock-based compensation in our non-GAAP financial measures in periods of income is helpful to investors as this provides a useful comparison of our operational performance in different periods


	Three Months Ended March 31,
(Dollars in thousands)	2025		2024
Cost of revenue	$	7,823	$	6,572
Selling and marketing	15,781		13,888
Research and development	8,385		7,646
General and administrative	9,436		6,675
	$	41,425	$	34,781
Income tax benefit	$	(587)	$	(311)

Our GAAP effective income tax rate is subject to significant fluctuations due to several factors, including our stock-based compensation plans, research and development tax credits, and the valuation allowance on our deferred tax assets in the U.S. and U.K. We determine our non-GAAP income tax rate using applicable rates in taxing jurisdictions and assessing certain factors, including historical and forecasted earnings by jurisdiction, discrete items, and ability to realize tax assets. We believe it is beneficial for our management to review our non-GAAP results consistent with our annual plan’s effective income tax rate as established at the beginning of each year, given tax rate volatility.


	Three Months Ended March 31,				Change
	2025		2024
Cash provided by operating activities	$	204,228	180,146		13	%
Investment in property and equipment	(1,880)		(604)
Free cash flow (1)	$	202,348	$	179,542	13	%

Supplemental information (2)

Legal fees	$	2,413	$	2,739
Restructuring	1,184		3,347
Interest on convertible senior notes	1,754		1,884

Income taxes	4,102		8,163
	$	9,453	$	16,133

(1) Our non-GAAP free cash flow is defined as cash provided by operating activities less investment in property and equipment. Investment in property and equipment fluctuates in amount and frequency and is significantly affected by the timing and size of investments in our facilities. We provide information on free cash flow to enable investors to assess our ability to generate cash without incurring additional external financings. This information is not a substitute for financial measures prepared under U.S. GAAP.

•Interest on convertible senior notes: In February 2020, we issued convertible senior notes (the “Notes”), due March 1, 2025, in a private placement. The Notes accrued interest at an annual rate of 0.75%, payable semi-annually in arrears on March 1 and September 1. The outstanding Notes were repaid in their entirety at maturity.

Annual contract value (“ACV”) - ACV represents the annualized value of our active contracts as of the measurement date. The contract's total value is divided by its duration in years to calculate ACV. ACV is a performance measure that we believe provides useful information to our management and investors.


	March 31, 2025		March 31, 2024		Change				Constant Currency Change
Pega Cloud	$	701,311	$	570,356	$	130,955	23	%	23	%
Maintenance	298,422		313,550		(15,128)		(5)	%	(5)	%
Subscription services	999,733		883,906		115,827		13	%	13	%
Subscription license	445,677		389,431		56,246		14	%	14	%
	$	1,445,410	$	1,273,337	$	172,073	13	%	13	%

As of March 31, 2025:


	Subscription services						Subscription license			Perpetual license			Consulting			Total
	Pega Cloud			Maintenance
1 year or less	$	572,341		$	229,180		$	33,202		$	317		$	45,320		$	880,360		50	%
1-2 years	331,572			73,500			3,718			—			2,291			411,081			24	%
2-3 years	161,259			37,779			731			—			144			199,913			12	%
Greater than 3 years	185,939			43,939			7,215			—			52			237,145			14	%
	$	1,251,111		$	384,398		$	44,866		$	317		$	47,807		$	1,728,499		100	%
% of Total	72		%	22		%	3		%	—		%	3		%	100		%
Change since March 31, 2024
	$	259,998		$	39,238		$	(2,128)		$	(2,410)		$	9,059		$	303,757
	26		%	11		%	(5)		%	(88)		%	23		%	21		%


	Subscription services						Subscription license			Perpetual license			Consulting			Total
	Pega Cloud			Maintenance
1 year or less	$	461,928		$	225,598		$	33,985		$	2,727		$	34,716		$	758,954		53	%
1-2 years	292,787			65,605			10,008			—			1,604			370,004			26	%
2-3 years	149,797			32,307			2,903			—			2,428			187,435			13	%
Greater than 3 years	86,601			21,650			98			—			—			108,349			8	%
	$	991,113		$	345,160		$	46,994		$	2,727		$	38,748		$	1,424,742		100	%
% of Total	70		%	24		%	3		%	—		%	3		%	100		%


(in millions, except percentages)	March 31, 2024		March 31, 2025		1-Year Change
ACV	$	1,273	$	1,445	13	%
Impact of changes in foreign exchange rates	—		(0.7)
Constant currency ACV	$	1,273	$	1,445	13	%


	March 31, 2024		March 31, 2025		1 Year Growth Rate
Backlog - GAAP	$	1,425	$	1,728	21	%
Impact of changes in foreign exchange rates	—		(5)
Constant currency backlog	$	1,425	$	1,723	21	%