pega-20250331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________________

FORM 10-Q

_____________________________________


☒			Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 2025


☐			Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number: 1-11859

____________________________

PEGASYSTEMS INC.

(Exact name of Registrant as specified in its charter)

____________________________


Massachusetts			04-2787865
(State or other jurisdiction of incorporation or organization)			(IRS Employer Identification No.)

225 Wyman Street, Waltham, MA 02451

(Address of principal executive offices, including zip code)

(617) 374-9600

(Registrant’s telephone number, including area code)

____________________________

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, $.01 par value per share	PEGA	NASDAQ Global Select Market

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes x No ¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

There were 85,118,570 shares of the Registrant’s common stock, $0.01 par value per share, outstanding on April 14, 2025.

Table of Contents

PEGASYSTEMS INC.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS


			Page
PART I - FINANCIAL INFORMATION

Item 1. Financial Statements
Unaudited Condensed Consolidated Balance Sheets as of March 31, 2025 and December 31, 2024			3
Unaudited Condensed Consolidated Statements of Operations for the three months ended March 31, 2025 and 2024			4
Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2025 and 2024			5
Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2025 and 2024			6
Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2025 and 2024			7
Notes to Unaudited Condensed Consolidated Financial Statements			8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			23
Item 3. Quantitative and Qualitative Disclosures About Market Risk			30
Item 4. Controls and Procedures			31

PART II - OTHER INFORMATION

Item 1. Legal Proceedings			32
Item 1A. Risk Factors			32
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			32
Item 5. Other Information			32
Item 6. Exhibits			32

Signatures			33

Table of Contents

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS


PEGASYSTEMS INC. UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (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
Commitments and contingencies (Note 17)
Stockholders’ equity:
Preferred stock, 1,000 shares authorized; none issued	—		—
Common stock, 200,000 shares authorized; 85,562 and 86,112 shares issued and outstanding at March 31, 2025 and December 31, 2024, respectively	856		861
Additional paid-in capital	461,354		526,963
Retained earnings	170,756		87,901
Accumulated other comprehensive (loss)	(21,697)		(30,245)
Total stockholders’ equity	611,269		585,480
Total liabilities and stockholders’ equity	$	1,321,950	$	1,768,273

See notes to unaudited condensed consolidated financial statements.


PEGASYSTEMS INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (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

See notes to unaudited condensed consolidated financial statements.


PEGASYSTEMS INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (in thousands)
	Three Months Ended March 31,
	2025		2024
Net income (loss)	$	85,422	$	(12,124)
Other comprehensive income (loss), net of tax
Unrealized (loss) on available-for-sale securities	(262)		(746)
Foreign currency translation adjustments	8,810		(3,427)
Total other comprehensive income (loss), net of tax	8,548		(4,173)
Comprehensive income (loss)	$	93,970	$	(16,297)

See notes to unaudited condensed consolidated financial statements.


PEGASYSTEMS INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (in thousands, except per share amounts)

	Common Stock			Additional paid-in capital		Retained earnings		Accumulated other comprehensive (loss)		Total stockholders’ equity
	Number of shares	Amount
December 31, 2023	83,840	$	838	$	379,584	$	(8,705)	$	(17,879)	$	353,838

Issuance of common stock for stock compensation plans	1,139	12		18,644		—		—		18,656
Issuance of common stock under the employee stock purchase plan	32	—		1,758		—		—		1,758
Stock-based compensation	—	—		34,781		—		—		34,781
Cash dividends declared ($0.03 per share)	—	—		(2,550)		—		—		(2,550)
Other comprehensive (loss)	—	—		—		—		(4,173)		(4,173)
Net (loss)	—	—		—		(12,124)		—		(12,124)
March 31, 2024	85,011	$	850	$	432,217	$	(20,829)	$	(22,052)	$	390,186

















December 31, 2024	86,112	$	861	$	526,963	$	87,901	$	(30,245)	$	585,480
Repurchase of common stock	(1,460)	(15)		(118,689)		—		—		(118,704)
Issuance of common stock for stock compensation plans	878	9		9,745		—		—		9,754
Issuance of common stock under the employee stock purchase plan	32	1		1,910		—		—		1,911
Stock-based compensation	—	—		41,425		—		—		41,425
Cash dividends declared ($0.03 per share)	—	—		—		(2,567)		—		(2,567)
Other comprehensive income	—	—		—		—		8,548		8,548
Net income	—	—		—		85,422		—		85,422
March 31, 2025	85,562	$	856	$	461,354	$	170,756	$	(21,697)	$	611,269

See notes to unaudited condensed consolidated financial statements.


PEGASYSTEMS INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
	Three Months Ended March 31,
	2025		2024
Operating activities
Net income (loss)	$	85,422	$	(12,124)
Adjustments to reconcile net income (loss) to cash provided by operating activities
Stock-based compensation	41,425		34,781
Amortization of deferred commissions	18,504		17,282
Amortization of intangible assets and depreciation	3,137		4,254
Amortization of right-of-use lease assets	2,826		3,472
Foreign currency transaction loss	5,325		3,262
Loss (gain) on capped call transactions	223		(3,299)
Deferred income taxes	179		(646)
(Accretion) of investments	(1,526)		(2,612)
(Gain) on investments	(751)		(1,628)

Other non-cash	1,067		726
Change in operating assets and liabilities, net	48,397		136,678
Cash provided by operating activities	204,228		180,146
Investing activities
Purchases of investments	(69,318)		(161,438)
Proceeds from maturities and called investments	324,596		29,643
Sales of investments	8,497		—

Investment in property and equipment	(1,880)		(604)
Cash provided by (used in) investing activities	261,895		(132,399)
Financing activities
Repurchases of convertible senior notes	(467,864)		—
Dividend payments to stockholders	(2,583)		(2,515)


Proceeds from employee stock plans	13,969		22,419
Common stock repurchases for tax withholdings for net settlement of equity awards	(2,304)		(2,005)
Common stock repurchases under stock repurchase program	(117,204)		—


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

Cash and cash equivalents	$	231,129	$	291,905
Restricted cash included in other current assets	49		775
Restricted cash included in other long-term assets	4,058		2,990
Total cash, cash equivalents, and restricted cash	$	235,236	$	295,670

See notes to unaudited condensed consolidated financial statements.

PEGASYSTEMS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. BASIS OF PRESENTATION

Pegasystems Inc. (together with its subsidiaries, “the Company”) has prepared the accompanying unaudited condensed consolidated financial statements pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, they do not include all the information required by accounting principles generally accepted in the United States of America (“U.S.”) for complete financial statements and should be read in conjunction with the Company’s audited financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2024.

In the opinion of management, the Company has prepared the accompanying unaudited condensed consolidated financial statements on the same basis as its audited financial statements, and these financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results of the interim periods presented.

All intercompany transactions and balances were eliminated in consolidation. The operating results for the interim periods presented do not necessarily indicate the expected results for fiscal year 2025.

NOTE 2. NEW ACCOUNTING PRONOUNCEMENTS

Improvements to Income Tax Disclosures

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 includes expanded income tax rate reconciliation disclosures, a disaggregation of income taxes paid, and other expanded disclosures. ASU 2023-09 will be effective for the Company for the year ending December 31, 2025. The Company expects the adoption to result in disclosure changes only.

Disaggregation of Income Statement Expenses

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (ASU “2024-03”). Among other items, the requirements include expanded disclosures around employee compensation and selling expenses. ASU 2024-03 will be effective for the Company for the year ending December 31, 2027. The Company is still evaluating the impact of this new guidance on its consolidated financial statements but expects the adoption to result in disclosure changes only.

NOTE 3. MARKETABLE SECURITIES


	March 31, 2025								December 31, 2024
(in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value		Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Government debt	$	12,317	$	2	$	(10)	$	12,309	$	11,851	$	1	$	(19)	$	11,833
Corporate debt	128,184		146		(32)		128,298		391,097		63		(123)		391,037
	$	140,501	$	148	$	(42)	$	140,607	$	402,948	$	64	$	(142)	$	402,870

As of March 31, 2025, marketable securities’ maturities ranged from April 2025 to March 2028, with a weighted-average remaining maturity of 1.4 years.

NOTE 4. RECEIVABLES, CONTRACT ASSETS, AND DEFERRED REVENUE

Receivables


(in thousands)	March 31, 2025		December 31, 2024
Accounts receivable, net	$	202,869	$	305,468
Unbilled receivables, net	179,093		173,085
Long-term unbilled receivables, net	98,251		61,407
	$	480,213	$	539,960

Unbilled receivables

Unbilled receivables are client-committed amounts for which revenue recognition precedes billing. Billing is solely subject to the passage of time.

Unbilled receivables by expected collection date:


(Dollars in thousands)	March 31, 2025
1 year or less	$	179,093	65	%
1-2 years	59,265		21	%
2-5 years	38,986		14	%
	$	277,344	100	%

PEGASYSTEMS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Unbilled receivables by contract effective date:


(Dollars in thousands)	March 31, 2025
2025	$	87,964	32	%
2024	109,309		39	%
2023	64,889		23	%
2022	8,227		3	%
2021 and prior	6,955		3	%
	$	277,344	100	%

Major clients

Clients that represented 10% or more of the Company’s total accounts receivable and unbilled receivables:


	March 31, 2025		December 31, 2024
Client A
Accounts receivable	*		20	%
Unbilled receivables	*		—	%
Total receivables	*		11	%
Client B
Accounts receivable	—	%	*
Unbilled receivables	18	%	*
Total receivables	11	%	*

*Client accounted for less than 10% of total accounts receivable and unbilled receivables.

Contract assets

Contract assets are client-committed amounts for which revenue recognized exceeds the amount billed to the client, and billing is subject to conditions other than the passage of time, such as the completion of a related performance obligation.


(in thousands)	March 31, 2025		December 31, 2024
Contract assets (1)	$	14,620	$	13,498
Long-term contract assets (2)	23,009		18,321
	$	37,629	$	31,819

(1) Included in other current assets.

(2) Included in other long-term assets.

Deferred revenue

Deferred revenue consists of billings made and payments received in advance of revenue recognition.


(in thousands)	March 31, 2025		December 31, 2024
Deferred revenue	$	469,298	$	423,910
Long-term deferred revenue (1)	4,096		2,121
	$	473,394	$	426,031

(1) Included in other long-term liabilities.

The change in deferred revenue during the three months ended March 31, 2025 was primarily due to new billings in advance of revenue recognition and $190.2 million of revenue recognized during the period included in deferred revenue as of December 31, 2024.

NOTE 5. DEFERRED COMMISSIONS


(in thousands)	March 31, 2025		December 31, 2024
Deferred commissions (1)	$	106,674	$	105,405

(1) Included in other long-term assets.


	Three Months Ended March 31,
(in thousands)		2025		2024
Amortization of deferred commissions (1)		$	18,504	$	17,282

(1) Included in selling and marketing expenses.

PEGASYSTEMS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 6. GOODWILL AND OTHER INTANGIBLES

Goodwill


	Three Months Ended March 31,
(in thousands)	2025		2024
January 1,	$	81,113	$	81,611

Currency translation adjustments	73		(144)
March 31,	$	81,186	$	81,467

Intangibles

Intangible assets are recorded at cost and amortized using the straight-line method over their estimated useful lives.


		March 31, 2025
(in thousands)	Useful Lives	Cost		Accumulated Amortization		Net Book Value (1)
Client-related	4-10 years	$	63,130	$	(61,760)	$	1,370
Technology	2-10 years	68,115		(66,353)		1,762
Other	1-5 years	5,361		(5,361)		—
		$	136,606	$	(133,474)	$	3,132

(1) Included in other long-term assets.


		December 31, 2024
(in thousands)	Useful Lives	Cost		Accumulated Amortization		Net Book Value (1)
Client-related	4-10 years	$	63,107	$	(61,395)	$	1,712
Technology	2-10 years	68,115		(65,995)		2,120
Other	1-5 years	5,361		(5,361)		—
		$	136,583	$	(132,751)	$	3,832

(1) Included in other long-term assets.

Future estimated amortization of intangible assets:


(in thousands)	March 31, 2025
Remainder of 2025	$	1,930
2026	874
2027	328



	$	3,132

Amortization of intangible assets:


	Three Months Ended March 31,
(in thousands)		2025		2024
Cost of revenue		$	358	$	621
Selling and marketing		343		343

		$	701	$	964

NOTE 7. OTHER ASSETS AND LIABILITIES

Other current assets


(in thousands)	March 31, 2025		December 31, 2024
Prepaid expenses	$	47,388	$	38,155
Income tax receivables	26,435		58,359
Contract assets	14,620		13,498
Indirect tax receivable	1,919		2,488
Capped call transactions	—		223
Restricted cash	49		98
Other	2,383		2,357
	$	92,794	$	115,178

PEGASYSTEMS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Other long-term assets


(in thousands)	March 31, 2025		December 31, 2024
Deferred commissions	$	106,674	$	105,405
Right of use assets	60,014		62,429
Property and equipment	40,784		41,806
Venture investments	21,715		21,234
Contract assets	23,009		18,321
Income taxes receivable	14,663		13,299
Intangible assets	3,132		3,832

Deferred income taxes	4,236		4,268
Restricted cash	4,058		4,328
Other	17,736		17,127
	$	296,021	$	292,049

Accrued expenses


(in thousands)	March 31, 2025		December 31, 2024

Cloud hosting	$	14,008	$	1,802
Outside professional services	14,446		10,639
Marketing and sales program	3,551		2,150
Income and other taxes	5,480		5,055
Employee related	4,618		4,833
Repurchases of common stock unsettled	3,000		1,500
Other	4,772		5,565
	$	49,875	$	31,544

Other current liabilities


(in thousands)	March 31, 2025		December 31, 2024
Operating lease liabilities	$	14,149	$	14,551
Dividends payable	2,567		2,583
Other	679		1,732
	$	17,395	$	18,866

Other long-term liabilities


(in thousands)	March 31, 2025		December 31, 2024
Deferred revenue	$	4,096	$	2,121
Income taxes payable	20,785		15,956
Other	11,547		11,011
	$	36,428	$	29,088

NOTE 8. SEGMENT INFORMATION

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision-maker (“CODM”) in deciding how to allocate resources and assess performance.

The Company derives substantially all of its revenue from the sale and support of one group of similar products and services – software that provides case management, business process management, and real-time decisioning solutions to improve customer engagement and operational excellence in the enterprise applications market. To assess performance, the Company’s CODM, the Chief Executive Officer, reviews financial information on a consolidated basis. Therefore, the Company determined it has one operating segment and one reportable segment. The accounting policies of the Company’s operating segment are the same as those described in "Note 2. Significant Accounting Policies" included in the Annual Report on Form 10-K for the year ended December 31, 2024. The CODM uses consolidated net income (loss) to set financial performance targets, assess performance, and make expense allocation decisions.

PEGASYSTEMS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)


	Three Months Ended March 31,
(in thousands)	2025		2024
Total revenue	$	475,633	$	330,147
Total cost of revenue	102,450		94,658
Selling	119,118		110,089
Marketing	18,951		17,606
Research and development	74,286		72,113
General and administrative	33,828		23,527







Other segment items, net (1)	690		27,316
Provision for (benefit from) income taxes	40,888		(3,038)
Net income (loss)	$	85,422	$	(12,124)

(1) Includes Litigation settlement, net of recoveries, Restructuring, Foreign currency transaction (loss) gain, Interest income, Interest expense, (Loss) income on capped call transactions, and Other income, net.

Long-lived assets related to the Company’s U.S. and international operations consist of property and equipment, which are included in Other long-term assets in the Company’s consolidated balance sheet:


(in thousands)	March 31, 2025				December 31, 2024
U.S.	$	36,854	90	%	$	37,405	89	%
International	3,930		10	%	4,401		11	%
	$	40,784	100	%	$	41,806	100	%

NOTE 9. LEASES

On January 1, 2025, the Company relocated its corporate headquarters to 225 Wyman Street, Waltham, Massachusetts. A copy of the lease is filed as Exhibit 10.30 to our Annual Report on Form 10-K for the year ended December 31, 2024.

Expense


	Three Months Ended March 31,
(in thousands)	2025		2024
Fixed lease costs	$	3,776	$	4,262
Short-term lease costs	487		543
Variable lease costs	1,750		1,609
	$	6,013	$	6,414

Right of use assets and lease liabilities


(in thousands)	March 31, 2025		December 31, 2024
Right of use assets (1)	$	60,014	$	62,429
Operating lease liabilities (2)	$	14,149	$	14,551
Long-term operating lease liabilities	$	65,117	$	67,647

(1) Included in other long-term assets.

(2) Included in other current liabilities.

Weighted-average remaining lease term and discount rate for the Company’s leases were:


	March 31, 2025		December 31, 2024
Weighted-average remaining lease term	6.1 years		6.2 years
Weighted-average discount rate (1)	4.8	%	4.8	%

(1) The rates implicit in the Company’s leases are not readily determinable. Therefore, the Company uses its incremental borrowing rate as the discount rate when measuring operating lease liabilities. The incremental borrowing rate represents an estimate of the interest rate the Company would incur to borrow an amount equal to the lease payments on a collateralized basis over the lease term in a similar economic environment.

PEGASYSTEMS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Maturities of lease liabilities:


(in thousands)	March 31, 2025
Remainder of 2025	$	13,689
2026	15,589
2027	14,104
2028	13,479
2029	10,813
2030	9,216
Thereafter	14,450
Total lease payments	91,340
Less: imputed interest (1)	(12,074)
	$	79,266

(1) Lease liabilities are measured at the present value of the remaining lease payments using a discount rate determined at lease commencement unless the discount rate is updated due to a lease reassessment event.

Cash flow information


	Three Months Ended March 31,
(in thousands)	2025		2024
Cash paid for operating leases, net of tenant improvement allowances	$	4,581	$	5,069
Right of use assets recognized for new leases and amendments (non-cash)	$	—	$	1,095

NOTE 10. DEBT

Convertible senior notes and capped calls

Convertible senior notes

In February 2020, the Company issued Convertible Senior Notes (the "Notes") with an aggregate principal of $600 million, due March 1, 2025, in a private placement. No principal payments were due before maturity. The Notes accrued interest at an annual rate of 0.75%, paid semi-annually in arrears on March 1 and September 1, beginning September 1, 2020. The remaining outstanding principal balance on the Notes and accrued interest totaling $469.6 million was repaid in its entirety at maturity during the three months ended March 31, 2025.

Conversion rights

The conversion rate was 7.4045 shares of common stock per $1,000 principal amount of the Notes, representing an initial conversion price of $135.05 per share of common stock.

Carrying value of the Notes:


(in thousands)	March 31, 2025		December 31, 2024
Principal	$	—	$	467,864
Unamortized issuance costs	—		(394)
Convertible senior notes, net	$	—	$	467,470

Interest expense related to the Notes:


	Three Months Ended March 31,
(in thousands)	2025		2024
Contractual interest expense (0.75% coupon)	$	595	$	942
Amortization of issuance costs	394		617
	$	989	$	1,559

PEGASYSTEMS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The average interest rate on the Notes in the three months ended March 31, 2025 and 2024 was 1.2%.

Capped call transactions

In February 2020, the Company entered into privately negotiated capped call transactions (the “Capped Call Transactions”) with certain financial institutions. The Capped Call Transactions initially covered approximately 4.4 million shares (representing the number of shares for which the Notes were initially convertible) of the Company’s common stock. As of December 31, 2024, Capped Call Transactions covering approximately 3.5 million shares were outstanding, and expired upon maturity of the Notes during the three months ended March 31, 2025.

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, with such reduction and/or offset subject to a cap of $196.44. The cap price of the Capped Call Transactions was subject to adjustment upon specified extraordinary events affecting the Company, including mergers and tender offers.

The Capped Call Transactions were accounted for as derivative instruments and did not qualify for the Company’s own equity scope exception in ASC 815 since, in some cases of early settlement, the settlement value calculated following the governing documents may not represent a fair value measurement. The Capped Call Transactions were remeasured to fair value each reporting period, resulting in a non-operating gain or loss.

Change in capped call transactions:


	Three Months Ended March 31,
(in thousands)	2025		2024
January 1,	$	223	$	893

Fair value adjustment	(223)		3,299
March 31,	$	—	$	4,192

Credit facility

In November 2019, and as since amended, the Company entered into a five-year $100 million senior secured revolving credit agreement (the “Credit Facility”) with PNC Bank, National Association. The Company may use borrowings for general corporate purposes and to finance working capital needs. Subject to specific conditions and the agreement of the financial institutions lending the additional amount, the aggregate commitment may be increased to $200 million. The Credit Facility, as amended, contains customary covenants, including, but not limited to, those relating to additional indebtedness, liens, asset divestitures, and affiliate transactions. Beginning with the fiscal quarter ended March 31, 2024, the Company must maintain a maximum net consolidated leverage ratio of 3.5 to 1.0 (with a step-up for certain acquisitions) and a minimum consolidated interest coverage ratio of 3.5 to 1.0. Effective as of February 4, 2025, the Credit Facility was amended to extend the expiration date to February 4, 2027.

As of March 31, 2025 and December 31, 2024, the Company had $27.3 million in outstanding letters of credit under the Credit Facility, reducing available borrowing capacity, but no outstanding cash borrowings.

NOTE 11. RESTRUCTURING

The Company has undertaken the following restructuring activities as it optimizes its go-to-market strategy and reassesses its office space needs:


	Three Months Ended March 31,
(in thousands)	2025		2024
Employee severance and related benefits	$	(3)	$	384
Office space reductions (1)	14		(221)
Restructuring expense	$	11	$	163

(1) These primarily relate to non-cash operating lease adjustments.

Restructuring activity:

Accrued employee severance and related benefits:

PEGASYSTEMS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)


	Three Months Ended March 31,
(in thousands)	2025		2024
January 1,	$	2,000	$	8,095
(Benefit) costs incurred	(3)		384
Cash disbursements	(1,184)		(3,347)
Currency translation adjustments	53		(131)
March 31, (1)	$	866	$	5,001

(1) Included in accrued compensation and related expenses.

NOTE 12. FAIR VALUE MEASUREMENTS

Assets and liabilities measured at fair value on a recurring basis

The Company records its cash equivalents, marketable securities, capped call transactions, and venture investments at fair value on a recurring basis. Fair value is an exit price, representing the amount that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants based on assumptions that market participants would use in pricing an asset or liability.

As a basis for classifying the fair value measurements, a three-tier fair value hierarchy, which classifies the fair value measurements based on the inputs used in measuring fair value, was established as follows:

•Level 1 - observable inputs, such as quoted prices in active markets for identical assets or liabilities;

•Level 2 - significant other inputs that are observable either directly or indirectly; and

•Level 3 - significant unobservable inputs with little or no market data, which require the Company to develop its own assumptions.

This hierarchy requires the Company to use observable market data when available and minimize unobservable inputs when determining fair value.

The fair value of the Capped Call Transactions at the end of each reporting period is determined using a Black-Scholes option-pricing model. The valuation model uses various market-based inputs, including stock price, remaining contractual term, expected volatility, risk-free interest rate, and expected dividend yield. The Company applied judgment when determining expected volatility. The Company considered the underlying equity security’s historical and implied volatility levels. The Capped Call Transactions expired upon maturity of the Notes during the three months ended March 31, 2025. The Company’s venture investments are recorded at fair value based on multiple valuation methods, including observable public companies and transaction prices and unobservable inputs, including the volatility, rights, and obligations of the securities the Company holds.

Assets and liabilities measured at fair value on a recurring basis:


	March 31, 2025								December 31, 2024
(in thousands)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Cash equivalents	$	6,606	$	7,482	$	—	$	14,088	$	5,318	$	148,926	$	—	$	154,244
Marketable securities	$	—	$	140,607	$	—	$	140,607	$	—	$	402,870	$	—	$	402,870
Capped Call Transactions	$	—	$	—	$	—	$	—	$	—	$	223	$	—	$	223
Venture investments	$	—	$	—	$	21,715	$	21,715	$	—	$	—	$	21,234	$	21,234

Changes in venture investments:


	Three Months Ended March 31,
(in thousands)	2025		2024
January 1,	$	21,234	$	19,450
New investments	200		250

Changes in foreign exchange rates	65		(20)
Changes in fair value:
included in other income, net	751		1,628
included in other comprehensive income (loss)	(535)		(362)
March 31,	$	21,715	$	20,946

The carrying value of certain financial instruments, including receivables and accounts payable, approximates fair value due to their short maturities.

PEGASYSTEMS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Fair value of the Convertible Senior Notes

The fair value of the Notes outstanding (including the embedded conversion feature) was $463.9 million as of December 31, 2024. The Notes were repaid in full at maturity during the three months ended March 31, 2025.

The fair value was determined based on the Notes’ quoted price in an over-the-counter market on the last trading day of the reporting period and classified within Level 2 in the fair value hierarchy.

NOTE 13. REVENUE

Geographic revenue

Revenues by geography are determined based on client location:


	Three Months Ended March 31,
(Dollars in thousands)	2025				2024
U.S.	$	269,192	56	%	$	180,983	54	%
Other Americas	33,741		7	%	21,786		7	%
United Kingdom (“U.K.”)	40,742		9	%	32,117		10	%
Europe (excluding U.K.), Middle East, and Africa	74,056		16	%	61,847		19	%
Asia-Pacific	57,902		12	%	33,414		10	%
	$	475,633	100	%	$	330,147	100	%

Revenue streams


	Three Months Ended March 31,
(in thousands)	2025		2024
Pega Cloud	$	151,123	$	130,902
Maintenance	76,368		81,001
Consulting	60,421		54,047
Revenue recognized over time	287,912		265,950
Subscription license	186,555		63,338
Perpetual license	1,166		859
Revenue recognized at a point in time	187,721		64,197
Total revenue	$	475,633	$	330,147


	Three Months Ended March 31,
(in thousands)	2025		2024
Pega Cloud	$	151,123	$	130,902
Maintenance	76,368		81,001
Subscription services	227,491		211,903
Subscription license	186,555		63,338
Subscription	414,046		275,241
Consulting	60,421		54,047
Perpetual license	1,166		859
Total revenue	$	475,633	$	330,147

PEGASYSTEMS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Remaining performance obligations ("Backlog")

Expected future revenue from existing non-cancellable contracts:

As of March 31, 2025:


(Dollars in thousands)	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	%

As of March 31, 2024:


(Dollars in thousands)	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	%

Major Clients

Clients accounting for 10% or more of the Company’s revenue:


	Three Months Ended March 31,
(Dollars in thousands)	2025			2024
Total revenue	$	475,633		$	330,147
Client B	15		%	*

*Client accounted for less than 10% of total revenues.

NOTE 14. STOCKHOLDERS' EQUITY

Stock-based Compensation Expense


	Three Months Ended March 31,
(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)

As of March 31, 2025, the Company had $161.9 million of unrecognized stock-based compensation expense, net of estimated forfeitures, which is expected to be recognized over a weighted-average period of 1.8 years.

Grants


	Three Months Ended March 31, 2025
(in thousands)	Quantity	Total Fair Value
Restricted stock units (1)	938	$	73,191
Non-qualified stock options	1,507	$	47,157

Common stock	1	$	52

(1) Includes units issued when employees elect to receive 50% of the employee’s target incentive compensation under the Company’s Corporate Incentive Compensation Plan (the “CICP”) in the form of RSUs instead of cash.

PEGASYSTEMS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Stock repurchase program

On October 22, 2024, the Company’s Board of Directors extended the expiration date of the share repurchase program from June 30, 2025 to December 31, 2025 and increased the authorized repurchase by $250 million to $310 million as of that date.

During the three months ended March 31, 2025, the Company repurchased 1.5 million of its common stock for $118.7 million at an average price per share of $81.28. All purchases under this program have been made on the open market.

On April 22, 2025, the Company’s Board of Directors further extended the expiration date of the share repurchase program from December 31, 2025 to June 30, 2026 and increased the authorized repurchase by $500 million.

Proposed Stock Split

On February 12, 2025, the Company’s Board of Directors approved a two-for-one forward stock split of the Company’s common stock, to be effected as a stock dividend. Effectiveness of the stock split is subject to approval by the Company’s stockholders at the June 17, 2025 annual meeting of stockholders of a proportionate increase in the Company’s authorized shares of common stock. The Company’s financial results in this Quarterly Report do not include any impact of the stock split.

NOTE 15. INCOME TAXES

Effective income tax rate


	Three Months Ended March 31,
(Dollars in thousands)		2025			2024
Provision for (benefit from) income taxes		$	40,888		$	(3,038)
Effective income tax rate		32		%	20		%

The Company’s effective income tax rate for the three months ended March 31, 2025, is impacted by the valuation allowance on its deferred tax assets in the U.S. and U.K. as well as the jurisdictional mix and timing of the actual compared to projected earnings.

The Company recognizes deferred tax assets to the extent that it believes that these assets are more likely than not to be realized. Future realization of deferred tax assets ultimately depends on sufficient taxable income within the available carryback or carryforward periods. The Company’s deferred tax valuation allowance requires significant judgment and has uncertainties, including assumptions about future taxable income based on historical and projected information. In assessing the Company’s ability to realize its net deferred tax assets, the Company considered various factors including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial results to determine whether it is more likely than not that some portion or all of its net deferred tax assets will not be realized.

The Company intends to maintain a valuation allowance on its U.S. and U.K. net deferred tax assets until positive sufficient evidence exists to support their realization.

Given the Company’s recent earnings, the Company believes that there is a reasonable possibility that in a future period sufficient positive evidence may become available to allow the Company to reach a conclusion that a substantial portion of the valuation allowance will no longer be needed. However, the exact timing and amount of the valuation allowance release are subject to significant judgement. Release of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax expense for the period the release is recorded.

PEGASYSTEMS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 16. EARNINGS (LOSS) PER SHARE

Basic earnings (loss) per share is calculated using the weighted-average number of common shares outstanding during the period. Diluted earnings (loss) per share is calculated using the weighted-average number of common shares outstanding during the period, plus the dilutive effect of outstanding stock options, RSUs, and Notes.

Calculation of earnings (loss) per share:


	Three Months Ended March 31,
(in thousands, except per share amounts)	2025		2024
Net income (loss)	$	85,422	$	(12,124)
Weighted-average common shares outstanding	85,902		84,266
Earnings (loss) per share, basic	$	0.99	$	(0.14)

Net income (loss)	$	85,422	$	(12,124)
Notes - interest expense, net of tax	742		—
Numerator for diluted EPS	$	86,164	$	(12,124)
Weighted-average effect of dilutive securities:
Notes	2,425		—
Stock options	4,305		—
RSUs	1,781		—
Effect of dilutive securities	8,511		—
Weighted-average common shares outstanding, assuming dilution (1) (2) (3)	94,413		84,266
Earnings (loss) per share, diluted	$	0.91	$	(0.14)

Outstanding anti-dilutive stock options and RSUs (4)	122		3,171

(1) All dilutive securities are excluded when their inclusion would be anti-dilutive.

(2) The weighted-average shares underlying the conversion options in the Company’s Notes are included using the if-converted method, if dilutive in the period.

(3) The Company’s Capped Call Transactions represented the equivalent number of shares of the Company’s common stock (representing the number of shares for which the Notes are convertible). The Capped Call Transactions are excluded from weighted-average common shares outstanding, assuming dilution, in all periods as their effect would be anti-dilutive.

(4) Outstanding stock options and RSUs that were anti-dilutive under the treasury stock method in the period were excluded from the computation of diluted earnings (loss) per share. These awards may be dilutive in the future.

NOTE 17. COMMITMENTS AND CONTINGENCIES

Commitments

See "Note 9. Leases" for additional information.

Legal proceedings

In addition to the matters below, the Company is or may become involved in a variety of claims, demands, suits, investigations, and proceedings that arise from time to time relating to matters incidental to the ordinary course of the Company’s business, including actions concerning contracts, intellectual property, employment, benefits, and securities matters. Regardless of the outcome, legal disputes can have a material effect on the Company because of defense and settlement costs, diversion of management resources, and other factors.

In addition, as the Company is a party to ongoing litigation, it is at least reasonably possible that the Company’s estimates will change in the near term, and the effect may be material. The Company had no accrued losses for litigation for the below matters as of March 31, 2025 and December 31, 2024.

PEGASYSTEMS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Appian Corp. v. Pegasystems Inc. & Youyong Zou

The Company is a defendant in litigation brought by Appian in the Circuit Court of Fairfax County, Virginia (the “Court”) titled Appian Corp. v. Pegasystems Inc. & Youyong Zou, No. 2020-07216 (Fairfax Cty. Ct.). On May 9, 2022, the jury rendered its verdict finding that the Company had misappropriated one or more of Appian’s trade secrets, that the Company had violated the Virginia Computer Crimes Act, and that the trade secret misappropriation was willful and malicious. The jury awarded damages of $2,036,860,045 for trade secret misappropriation and $1.00 for violating the Virginia Computer Crimes Act. On September 15, 2022, the circuit court of Fairfax County entered judgment of $2,060,479,287, consisting of the damages previously awarded by the jury plus attorneys’ fees and costs, and stating that the judgment is subject to post-judgment interest at a rate of 6.0% per annum, from the date of the jury verdict (May 9, 2022) as to the amount of the jury verdict and from September 15, 2022 as to the amount of the award of attorneys’ fees and costs. On September 15, 2022, the Company filed a notice of appeal from the judgment. On September 29, 2022, the circuit court of Fairfax County approved a $25,000,000 letter of credit obtained by the Company to secure the judgment and entered an order suspending the judgment during the pendency of the Company’s appeal. A panel of the Court of Appeals of Virginia heard oral arguments on November 15, 2023, and issued a written opinion on July 30, 2024. The Court of Appeals reversed the judgment on Appian’s Virginia Uniform Trade Secrets Act claim and ordered a new trial on that claim. Appian filed a petition for appeal with the Supreme Court of Virginia on August 29, 2024, and the Company filed a response to the petition on October 21, 2024. The Supreme Court of Virginia heard oral argument on February 11, 2025, and, on March 7, 2025, the Supreme Court of Virginia granted Appian’s petition for appeal and Pega’s assignments of cross-error. In the coming months, the parties will be filing briefs with the Supreme Court. There is no date for oral argument. Although it is not possible to predict timing, the entirety of the appeals process could potentially take years to complete. The Company continues to believe that it did not misappropriate any alleged trade secrets and that its sales of the Company’s products at issue were not caused by, or the result of, any alleged misappropriation of trade secrets. The Company is unable to reasonably estimate possible damages because of, among other things, uncertainty as to the outcome of appellate proceedings and/or any potential new trial resulting from the appellate proceedings.

PS Lit Recovery, LLC v. Pegasystems Inc., Alan Trefler, and Kenneth Stillwell and Eminence Fund Long Master, Ltd., Eminence Fund Master, Ltd., Eminence Fund II Master, LP, Eminence Partners Long II, LP, Eminence Fund Leveraged Master, Ltd., Eminence Partners, L.P., Eminence Partners II, L.P. v. Pegasystems Inc., Alan Trefler, and Kenneth Stillwell

On December 4, 2024, the shareholders representing approximately 3% of the settlement class that opted out of the court approved settlement in the class action matter captioned City of Fort Lauderdale Police and Firefighters’ Retirement System, Individually and on Behalf of All Others Similarly Situated v. Pegasystems Inc., Alan Trefler, and Kenneth Stillwell (Case 1:22-cv-00578-LMB-IDD) (the “Class Action”) filed two lawsuits against the Company, the Company’s chief executive officer, and the Company’s chief operating and financial officer in the United States District Court for the District of Massachusetts. The first is captioned Eminence Fund Long Master, Ltd., Eminence Fund Master, Ltd., Eminence Fund II Master, LP, Eminence Partners Long II, LP, Eminence Fund Leveraged Master, Ltd., Eminence Partners, L.P., and Eminence Partners II, L.P. v. Pegasystems Inc., Alan Trefler, and Kenneth Stillwell (Case 1:24-cv-12999-WGY); the second is captioned PS Lit Recovery, LLC v. Pegasystems Inc., Alan Trefler, and Kenneth Stillwell (Case 1:24-cv-11220-WGY). The complaints, which are substantially similar, generally allege, among other things, that the defendants violated Section 10(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Rule 10b-5 promulgated thereunder, and that the individual defendants violated Section 20(a) of the Exchange Act, in each case by allegedly making materially false and/or misleading statements, as well as allegedly failing to disclose material adverse facts about the Company’s business, operations, and prospects, which caused the Company’s securities to trade at artificially inflated prices. The complaints also assert claims for common law fraud and negligent misrepresentation, and seek unspecified damages. The defendants moved to dismiss the complaints on March 13, 2025. The plaintiffs filed a brief in opposition to the motion to dismiss on April 10, 2025. The defendants’ reply brief in support of the motion to dismiss is due on April 24, 2025. The Court has scheduled a hearing on the motion to dismiss for April 28, 2025.

On February 26, 2025, the same shareholders filed two lawsuits against the Company, the Company’s chief executive officer, and the Company’s chief operating and financial officer in Massachusetts Superior Court. The first is captioned Eminence Fund Long Master, Ltd., Eminence Fund Master, Ltd., Eminence Fund II Master, LP, Eminence Partners Long II, LP, Eminence Fund Leveraged Master, Ltd., Eminence Partners, L.P., and Eminence Partners II, L.P. v. Pegasystems Inc., Alan Trefler, and Kenneth Stillwell (Case No. 2584CV00541-BLS1); the second is captioned PS Lit Recovery, LLC v. Pegasystems, Inc., Alan Trefler, and Kenneth Stillwell (Case No. 2584CV00539-BLS1). The complaints, which are substantially similar, allege the same state law claims raised in the two federal lawsuits brought by the same plaintiffs in the United States District Court for the District of Massachusetts. On April 14, 2025, the court granted the parties’ joint stipulations to stay both cases pending the resolution of the parallel federal actions and ordered the plaintiffs to file periodic status reports regarding the federal cases showing cause why the state cases should remain open.

The Company is unable to reasonably estimate possible damages or a range of possible damages in these matters given the stage of the lawsuits and there being no specified quantum of damages sought in the complaints.

PEGASYSTEMS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

In re Pegasystems Inc., Derivative Litigation

On November 21, 2022, a lawsuit was filed against the members of the Company’s board of directors, the Company’s chief operating and financial officer and the Company in the United States District Court for the District of Massachusetts, captioned Mary Larkin, derivatively on behalf of nominal defendant Pegasystems Inc. v. Peter Gyenes, Richard Jones, Christopher Lafond, Dianne Ledingham, Sharon Rowlands, Alan Trefler, Larry Weber, and Kenneth Stillwell, defendants, and Pegasystems Inc., nominal defendant (Case 1:22-cv-11985). The complaint generally alleges the defendants sold shares of the Company while in possession of material nonpublic information relating to (i) the litigation brought by Appian in the Circuit Court of Fairfax County, Virginia, described above, and (ii) alleged misconduct by Company employees alleged in that litigation. On April 28, 2023, a lawsuit was filed in the United States District Court for the District of Massachusetts by Dag Sagfors, derivatively on behalf of nominal defendant Pegasystems Inc., asserting breach of fiduciary duty and related claims relating to the Virginia Appian litigation against the same defendants as the Larkin lawsuit. On May 17, 2023, the Larkin and Sagfors cases were consolidated and a joint motion to stay the consolidated case is pending before the Court (“Consolidated Action”). The Company also has received confidential demand letters raising substantially the same allegations set forth in the foregoing derivative complaints. On April 12, 2023, the Company’s board of directors (other than Mr. Trefler, who recused himself), formed a committee consisting solely of independent directors, to review, analyze, and investigate the matters raised in the demands and to determine in good faith what actions (if any) are reasonably believed to be appropriate under similar circumstances and reasonably believed to be in the best interests of the Company in response to the demand letters. On December 4, 2024, the defendants moved to dismiss the complaint in the Consolidated Action. On December 17, 2024, the plaintiffs moved to voluntarily dismiss the Consolidated Action, and the Court granted the motion on December 18, 2024.

On February 7, 2025, the plaintiffs in the Consolidated Action filed a new complaint against the members of the Company’s board of directors, certain employees of the Company, and the Company in the United States District Court for the District of Massachusetts, captioned Mary Larkin and Dag Sagfors, derivatively on behalf of nominal defendant Pegasystems Inc. v. Alan Trefler, Peter Gyenes, Richard Jones, Christopher Lafond, Dianne Ledingham, Sharon Rowlands, Leon Trefler, Larry Weber, Kenneth Stillwell, Don Schuerman, Kerim Akgonul, and Benjamin Baril, defendants, and Pegasystems Inc., nominal defendant (Case 1:25-cv-10303). The complaint asserts against Defendants claims for breach of fiduciary duty, unjust enrichment, and violations of the Exchange Act relating to (i) the litigation brought by Appian in the Circuit Court of Fairfax County, Virginia, described above; (ii) alleged misconduct by Company employees alleged in that litigation; and the Class Action, described above. The defendants’ motion to dismiss is due on April 28, 2025.

On June 28, 2024, a lawsuit was filed against members of the Company’s board of directors, certain employees of the Company and the Company in the Business Litigation Section of the Superior Court in Suffolk County, Massachusetts, captioned John Dwyer and Ray Gerber, Plaintiffs, v. Alan Trefler, Peter Gyenes, Richard Jones, Christopher Lafond, Dianne Ledingham, Sharon Rowlands, Larry Weber, Leon Trefler, Don Schuerman, Kerim Akgonul, and Benjamin Baril, Defendants, and Pegasystems Inc., Nominal Defendant (Case 2484CV01734) (“Dwyer Action”). The complaint generally alleges the defendants breached their fiduciary duties in connection with alleged misconduct by Company employees alleged in the litigation brought by Appian in the Circuit Court of Fairfax County, Virginia, described above, and alleges damages from the approximately $2 billion verdict in the litigation brought by Appian in the Circuit Court of Fairfax County, Virginia, described above, the settlement of the Class Action, and litigation costs from various proceedings. On October 18, 2024, the defendants served a motion to dismiss the complaint, which the defendants then withdrew on November 26, 2024 pending resolution of whether this complaint and the other derivative actions would be consolidated in Superior Court in Suffolk County, Massachusetts.

On November 22, 2024, a lawsuit was filed against members of the Company’s board of directors, certain employees of the Company and the Company in the Business Litigation Section of the Superior Court in Suffolk County, Massachusetts, captioned Jayne Birch and Robert Garfield, Plaintiffs, v. Alan Trefler, Peter Gyenes, Richard Jones, Christopher Lafond, Dianne Ledingham, Sharon Rowlands, Larry Weber, Leon Trefler, Kerim Akgonul, Don Schuerman, Leon Trefler, Douglas Kim, John Petronio, Benjamin Baril, and Kenneth Stillwell, Defendants, and Pegasystems Inc., Nominal Defendant (Case 2484CV03076-BLS-1) (“Birch Action”). The complaint generally alleges the defendants breached their fiduciary duties in connection with alleged misconduct by Company employees alleged in the litigation brought by Appian in the Circuit Court of Fairfax County, Virginia, described above, and alleges damages from the approximately $2 billion verdict in the litigation brought by Appian in the Circuit Court of Fairfax County, Virginia, described above, the settlement of the Class Action, and litigation costs from various proceedings. The parties agreed on November 26, 2024 to suspend indefinitely the deadlines for any response to the complaint pending resolution of whether this complaint and the other derivative actions would be consolidated in the Superior Court in Suffolk County, Massachusetts.

On February 4, 2025, the parties to the Dwyer and Birch Actions filed a stipulation and proposed order in the Business Litigation Section of the Superior Court in Suffolk County, Massachusetts consolidating the two actions and setting a schedule for the filing of a consolidated complaint and any motion to dismiss. On February 12, 2025, an order was entered consolidating the Dwyer and Birch Actions and approving the schedule for the filing of a consolidated complaint and a motion to dismiss. On March 14, 2025, the plaintiffs filed a consolidated complaint in Case No. 2484CV01734. The consolidated complaint generally alleges the defendants breached their fiduciary duties in connection with alleged misconduct by Company employees alleged in the litigation brought by Appian in the Circuit Court of Fairfax County, Virginia, described above, and in connection with the investigation conducted and the report issued by the Demand Review Committee of the Company’s board regarding the same. The defendants’ motion to dismiss is due on May 15, 2025. The court scheduled a hearing on the motion to dismiss for September 4, 2025.

PEGASYSTEMS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (“Quarterly Report”) contains or incorporates forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

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.

Forward-looking statements deal with future events and are subject to risks and uncertainties that are difficult to predict, including, but not limited to:

•our future financial performance and business plans;

•the adequacy of our liquidity and capital resources;

•the successful execution of investments in artificial intelligence;

•the continued payment of our quarterly dividends;

•the timing of revenue recognition;

•variation in demand for our products and services, including among clients in the public sector;

•reliance on key personnel;

•reliance on third-party service providers, including hosting providers;

•compliance with our debt obligations and covenants;

•foreign currency exchange rates;

•potential legal and financial liabilities, as well as damage to our reputation, due to cyber-attacks;

•security breaches and security flaws;

•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;

•our ongoing litigation with Appian Corp.;

•our client retention rate; and

•management of our growth.

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, Part II of this Quarterly Report on Form 10-Q, 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.

The forward-looking statements in this Quarterly Report represent our views as of April 22, 2025.

NON-GAAP MEASURES

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. A reconciliation of GAAP and non-GAAP measures is located with each non-GAAP measure.

BUSINESS OVERVIEW

We develop, market, license, host, and support enterprise software that helps organizations optimize decisions and processes in real-time so they can deliver outcomes that transform their business. Our powerful platform for enterprise AI decisioning and workflow automation enables the world’s leading brands and government agencies to hyper-personalize customer experiences, automate customer service, and streamline operations, mission-critical business processes, and workflows. With Pega, our clients can leverage our AI technology and scalable architecture to accelerate their digital transformation. In addition, our sales and client success teams, world-class partners, and clients are able to leverage Pega GenAI BlueprintTM (“Blueprint”) to rapidly prototype and accelerate the development and deployment of applications quickly and collaboratively.

Our target clients are Global 2000 organizations and government agencies that require solutions to distinguish themselves in the markets they serve. Our solutions achieve and facilitate differentiation by increasing business agility, driving growth, improving productivity, attracting and retaining customers, and reducing risk. Along with our partners, we deliver solutions tailored by industry.

Performance metrics

We use performance metrics to analyze and assess our overall performance, make operating decisions, and forecast and plan for future periods, including:

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.


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

Reconciliation of ACV and constant currency ACV


(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	%

Note: Constant currency ACV is calculated by applying the March 31, 2024 foreign exchange rates to current period shown.

Cash Flow (1)


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

Supplemental information (2)

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

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

(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.

(2) The supplemental information discloses items that affect our cash flows and are considered by management not to be 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.

◦Restructuring: Restructuring fluctuates in amount and frequency and is significantly affected by the timing and size of our restructuring activities.

◦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.

◦Income taxes: Direct income taxes paid net of refunds received.

Remaining performance obligations (“Backlog”)

Reconciliation of Backlog and Constant Currency Backlog (Non-GAAP)


(in millions, except percentages)	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	%

Note: Constant currency Backlog is calculated by applying the March 31, 2024 foreign exchange rates to current period shown.

CRITICAL ACCOUNTING POLICIES

Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon our unaudited condensed consolidated financial statements, which have been prepared following accounting principles generally accepted in the United States of America (“U.S.”) and the rules and regulations of the SEC for interim financial reporting. Preparing these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses, and the related disclosure of contingent assets and liabilities. We base our estimates and judgments on historical experience, knowledge of current conditions, and expectations of what could occur in the future based on the available information.

For more information about our critical accounting policies, we encourage you to read the discussion in the following locations in our Annual Report on Form 10-K for the year ended December 31, 2024:

•“Critical Accounting Estimates and Significant Judgments” in Item 7; and

•“Note 2. Significant Accounting Policies” in Item 8.

No significant changes have been made to our critical accounting policies as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024.

RESULTS OF OPERATIONS

Revenue


(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	%
	$	475,633	100	%	$	330,147	100	%	$	145,486	44	%

•The increase in Pega Cloud revenue in the three months ended March 31, 2025 was primarily due to expanded adoption of Pega Cloud by our existing clients.

•The decrease in maintenance revenue in the three months ended March 31, 2025 was primarily due to our clients’ shift to Pega Cloud-based offerings, which do not generally result in maintenance revenue.

•The increase in subscription license revenue in the three months ended March 31, 2025 was primarily due to several large multi-year contracts recognized in revenue in the three months ended March 31, 2025.

•The increase in consulting revenue in the three months ended March 31, 2025 was primarily due to increases in consultant billable hours.

Gross profit


(Dollars in thousands)	Three Months Ended March 31,								Change
	2025				2024
Pega Cloud	$	118,654	79	%	$	101,305	77	%	$	17,349	17	%
Maintenance	70,709		93	%	74,774		92	%	(4,065)		(5)	%
Subscription services	189,363		83	%	176,079		83	%	13,284		8	%
Subscription license	186,169		100	%	62,695		99	%	123,474		197	%
Subscription	375,532		91	%	238,774		87	%	136,758		57	%
Consulting	(3,513)		(6)	%	(4,135)		(8)	%	622		15	%
Perpetual license	1,164		100	%	850		99	%	314		37	%
	$	373,183	78	%	$	235,489	71	%	$	137,694	58	%

•The increase in Pega Cloud gross profit percent in the three months ended March 31, 2025 was primarily due to increased cost efficiency, primarily for hosting services and employee compensation and benefits, as Pega Cloud continues to grow and scale.

•The increase in consulting gross profit percent in the three months ended March 31, 2025 was primarily due to increases in consultant utilization rates.

Operating expenses


(Dollars in thousands)	Three Months Ended March 31,						Change
	2025			2024
Selling and marketing	$	138,069		$	127,695		$	10,374	8	%
% of Revenue	29		%	39		%
Research and development	$	74,286		$	72,113		$	2,173	3	%
% of Revenue	16		%	22		%
General and administrative	$	33,828		$	23,527		$	10,301	44	%
% of Revenue	7		%	7		%
Litigation settlement, net of recoveries	$	—		$	32,403		$	(32,403)	*
% of Revenue	—		%	10		%
Restructuring	$	11		$	163		$	(152)	(93)	%
% of Revenue	—		%	—		%

* Not meaningful

•The increase in selling and marketing in the three months ended March 31, 2025 was primarily due to an increase in compensation and benefits of $6.7 million attributable to increases in commissions and equity compensation.

•The increase in research and development in the three months ended March 31, 2025 was primarily due to an increase in computer hardware and software costs of $1 million and an increase in compensation and benefits of $0.5 million.

•The increase in general and administrative in the three months ended March 31, 2025 was primarily due to an increase in compensation and benefits of $4.2 million attributable to an increase in equity compensation and an increase of $4.6 million in legal fees and related expenses arising from legal proceedings outside the ordinary course of business. We expect to continue to incur additional costs for these proceedings. For additional information, see "Note 17. Commitments and Contingencies" in Part I, Item 1 of this Quarterly Report.

•The decrease in litigation settlement, net of recoveries in the three months ended March 31, 2025 was primarily due to the cost to settle litigation arising from proceedings outside the ordinary course of business in the three months ended March 31, 2024. See “Note 20. Commitments and Contingencies” in Item 8 of our Annual Report filed on Form-10K for the year ended December 31, 2024 and prior filings for further information.

Other income and expenses


(Dollars in thousands)	Three Months Ended March 31,				Change
	2025		2024
Foreign currency transaction (loss)	$	(5,325)	$	(3,262)	$	(2,063)	(63)	%
Interest income	5,335		5,281		54		1	%
Interest expense	(1,027)		(1,752)		725		41	%
(Loss) income on capped call transactions	(223)		3,299		(3,522)		*
Other income, net	561		1,684		(1,123)		(67)	%
	$	(679)	$	5,250	$	(5,929)	*

* Not meaningful

•The increase in foreign currency transaction (loss) in the three months ended March 31, 2025 was primarily due to fluctuations in foreign currency exchange rates associated with foreign currency-denominated cash, receivables, and intercompany balances held by our subsidiary in the United Kingdom.

•The decrease in interest expense in the three months ended March 31, 2025 was primarily due to the repayment of the Notes at maturity on March 3, 2025.

•The change in (loss) income on capped call transactions was due to the termination of the capped call transactions in the three months ended March 31, 2025.

•The decrease in other income, net was primarily due to lower recorded valuation gains from our venture investments portfolio. For additional information, see "Note 12. Fair Value Measurements" in Part I, Item 1 of this Quarterly Report.

Provision for (benefit from) income taxes


	Three Months Ended March 31,
(Dollars in thousands)		2025			2024
Provision for (benefit from) income taxes		$	40,888		$	(3,038)
Effective income tax rate		32		%	20		%

Our effective income tax rate for the three months ended March 31, 2025, is impacted by the valuation allowance on our deferred tax assets in the U.S. and U.K. as well as the jurisdictional mix and timing of the actual compared to projected earnings.

The Organization for Economic Cooperation and Development (“OECD”) has introduced new global minimum tax regulations, known as Pillar Two, that was supported by over 130 countries worldwide. Parts of the minimum tax rules were applicable in 2024, with the remaining provisions becoming fully effective for 2025. We do not expect this legislation to have a material impact on our consolidated financial statements. We will continue to monitor and evaluate new legislation and guidance, which could change our current assessment.

LIQUIDITY AND CAPITAL RESOURCES


	Three Months Ended March 31,
(in thousands)	2025		2024
Cash provided by (used in):
Operating activities	$	204,228	$	180,146
Investing activities	261,895		(132,399)
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


(in thousands)	March 31, 2025		December 31, 2024
Held in U.S. entities	$	118,576	$	474,509
Held in foreign entities	253,160		265,464
Total cash, cash equivalents, and marketable securities	371,736		739,973
Restricted cash included in other current assets	49		98
Restricted cash included in other long-term assets	4,058		4,328
Total cash, cash equivalents, marketable securities, and restricted cash	$	375,843	$	744,399

We believe that our current cash, marketable securities, cash flow provided by operations, borrowing capacity, and ability to engage in capital market transactions will be sufficient to fund our operations, stock repurchases, and quarterly cash dividends for at least the next 12 months and to meet our known long-term cash requirements. Whether these resources are adequate to meet our liquidity needs beyond that period will depend on our future growth, operating results, and the investments needed to support our operations. We may utilize available funds or seek external financing if we require additional capital resources.

If it becomes necessary or desirable to repatriate foreign funds, we may have to pay federal, state, and local income taxes as well as foreign withholding taxes upon repatriation. However, estimating the taxes we would have to pay is impracticable due to the complexity of income tax laws and regulations.

Operating activities

The change in cash provided by operating activities in the three months ended March 31, 2025 was primarily due to increase in client collections.

Investing activities

The change in cash provided by (used in) investing activities in the three months ended March 31, 2025 was primarily due to scheduled maturities of our investments in financial instruments in anticipation of the repayment of the maturing Notes.

Financing activities

Debt financing

In February 2020, we issued $600 million in aggregate principal amount of Notes, which matured on March 1, 2025. As of December 31, 2024, we had $468 million in aggregate principal amount of Notes outstanding, which were repaid in their entirety at maturity. For additional information, see "Note 10. Debt" in Part I, Item 1 of this Quarterly Report.

In November 2019, and as since amended, we entered into a five-year $100 million senior secured revolving credit agreement (the “Credit Facility”) with PNC Bank, National Association. Effective as of February 4, 2025, the Credit Facility was amended to extend the expiration date to February 4, 2027. As of March 31, 2025 and December 31, 2024, we had $27.3 million in outstanding letters of credit under the Credit Facility, reducing available borrowing capacity, but we had no outstanding cash borrowings. For additional information, see "Note 10. Debt" in Part I, Item 1 of this Quarterly Report.

Stock repurchase program

Changes in the remaining stock repurchase authority:


(in thousands)	Three Months Ended March 31, 2025
December 31, 2024	$	240,443

Repurchases (1)	(118,704)
March 31, 2025 (2)	$	121,739

(1) All purchases under this program have been made on the open market.

(2) On April 22, 2025, the Company’s Board of Directors further extended the expiration date of the share repurchase program from December 31, 2025 to June 30, 2026 and increased the authorized repurchase by $500 million.

Common stock repurchases


	Three Months Ended March 31,
	2025			2024
(in thousands)	Shares	Amount		Shares	Amount
Repurchases paid	1,416	$	115,704	—	—
Repurchases unpaid at period end	44	3,000		—	—
Stock repurchase program	1,460	118,704		—	—
Tax withholdings for net settlement of equity awards	29	2,304		32	2,005
	1,489	$	121,008	32	$	2,005

During the three months ended March 31, 2025 and 2024, instead of receiving cash from the equity holders, we withheld shares with a value of $1.5 million and $2.8 million, respectively, for the exercise price of options. These amounts are not included in the table above.

Dividends

We intend to pay a quarterly cash dividend of $0.03 per share. However, the Board of Directors may terminate or modify the dividend program without prior notice.


	Three Months Ended March 31,
(in thousands)	2025		2024
Dividend payments to stockholders	$	2,583	$	2,515

Contractual obligations

As of March 31, 2025, our contractual obligations were:


	Payments due by period
(in thousands)	Remainder of 2025		2026		2027		2028		2029		2030 and after		Other		Total
Purchase obligations (1)	$	96,642	$	154,275	$	171,132	$	34,242	$	493	$	510	$	—	$	457,294
Operating lease obligations	13,689		15,589		14,104		13,479		10,813		23,666		—		91,340
Venture investment commitments (2)	500		500		—		—		—		—		—		1,000
Liability for uncertain tax positions (3)	—		—		—		—		—		—		20,785		20,785
	$	110,831	$	170,364	$	185,236	$	47,721	$	11,306	$	24,176	$	20,785	$	570,419

(1) Represents the fixed amount owed for purchase obligations including software licenses, hosting services, and sales and marketing programs.

(2) Represents the maximum funding under existing venture investment agreements. Our venture investment agreements generally allow us to withhold unpaid funds at our discretion.

(3) We cannot reasonably estimate the timing of this cash outflow due to uncertainties in the timing of the effective settlement of tax positions.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the risk of loss from adverse changes in financial market prices and rates.

Foreign currency exposure

Translation risk

Our international operations’ operating expenses are primarily denominated in foreign currencies. However, our international sales are also primarily denominated in foreign currencies, partially offsetting our foreign currency exposure.

A hypothetical 10% strengthening in the U.S. dollar against other currencies would have resulted in the following:


	Three Months Ended March 31,
	2025		2024
(Decrease) in revenue	(4)	%	(4)	%
(Decrease) in net income	(3)	%	(4)	%

Remeasurement risk

We incur transaction gains and losses from the remeasurement of monetary assets and liabilities denominated in currencies other than the functional currency of the entities in which they are recorded.

We are primarily exposed to changes in foreign currency exchange rates associated with the Australian dollar, Euro, and U.S. dollar-denominated cash, cash equivalents, marketable securities, receivables, and intercompany balances held by our U.K. subsidiary, a British pound functional entity.

A hypothetical 10% strengthening in the British pound exchange rate in comparison to the Australian dollar, Euro, and U.S. dollar would have resulted in the following impact:


	Three Months Ended March 31,
(in thousands)	2025		2024
Foreign currency (loss)	$	(25,453)	$	(14,618)

ITEM 4. CONTROLS AND PROCEDURES

(a) Evaluation of disclosure controls and procedures

Our management, with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”)) as of March 31, 2025. In designing and evaluating our disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and our management necessarily applied its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on this evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of March 31, 2025.

(b) Changes in internal control over financial reporting

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended March 31, 2025 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The information set forth in “Note 17. Commitments and Contingencies”, in Part I, Item 1 of this Quarterly Report is incorporated herein by reference.

ITEM 1A. RISK FACTORS

We encourage you to carefully consider the risk factors identified in Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the U.S. Securities and Exchange Commission. These risk factors could materially affect our business, financial condition, and future results and may cause our actual business and financial results to differ materially from those contained in forward-looking statements made in this Quarterly Report on Form 10-Q or elsewhere by management.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer purchases of equity securities (1)

Common stock repurchased in the three months ended March 31, 2025:


(in thousands, except per share amounts)	Total Number of Shares Purchased (2)	Average Price Paid per Share (2)		Total Number of Shares Purchased as Part of Publicly Announced Share Repurchase Program	Approximate Dollar Value of Shares That May Yet Be Purchased at Period End Under Publicly Announced Share Repurchased Programs (3)
January 1, 2025 - January 31, 2025	261	$	99.44	261	$	214,478
February 1, 2025 - February 28, 2025	374	87.50		345	$	184,179
March 1, 2025 - March 31, 2025	872	73.22		854	$	121,739
	1,507	$	81.30	1,460

(1) For additional information, see "Liquidity and Capital Resources" in Part I, Item 2 of this Quarterly Report.

(2) Includes shares withheld to cover the option exercise price and tax withholding obligations for stock compensation awards subject to net settlement provisions.

(3) On April 22, 2025, the Company’s Board of Directors further extended the expiration date of the share repurchase program from December 31, 2025 to June 30, 2026 and increased the authorized repurchase by $500.0 million. The number disclosed above does not include the effect of this increased authorization, as it occurred subsequent to March 31, 2025.

ITEM 5. OTHER INFORMATION

Rule 10b5-1 and non-rule 10b5-1 trading arrangements

On March 14, 2025, Leon Trefler, our Chief of Clients and Markets, terminated his “Rule 10b5-1 trading arrangement.”

Other than as disclosed above, during the three months ended March 31, 2025, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

ITEM 6. EXHIBITS

Exhibit No.

Description

Incorporation by Reference

Filed Herewith

Form

Location

Filing Date

3.1

Restated Articles of Organization of the Registrant and Amendments thereto

10-Q

3.1

November 4, 2014

3.2

Amended and Restated Bylaws of Pegasystems Inc.

8-K

3.2

June 15, 2020

31.1

Certification pursuant to Exchange Act Rules 13a-14 and 15d-14 of the Chief Executive Officer.

31.2

Certification pursuant to Exchange Act Rules 13a-14 and 15d-14 of the Chief Financial Officer.

Certification pursuant to 18 U.S.C. Section 1350 of the Chief Executive Officer and the Chief Financial Officer.

101.INS

Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH

Inline XBRL Taxonomy Extension Schema Document.

101.CAL

Inline XBRL Taxonomy Calculation Linkbase Document.

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB

Inline XBRL Taxonomy Label Linkbase Document.

101.PRE

Inline XBRL Taxonomy Presentation Linkbase Document.

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

+ Indicates that the exhibit is being furnished with this report and is not filed as a part of it.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		Pegasystems Inc.

Dated:	April 22, 2025	By:	/s/ KENNETH STILLWELL
			Kenneth Stillwell
			Chief Operating Officer and Chief Financial Officer
			(Principal Financial Officer)