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    Pega Cloud Growth Highlights Strong Q3 2024

    10/23/24 4:05:00 PM ET
    $PEGA
    EDP Services
    Technology
    Get the next $PEGA alert in real time by email
    • Annual Contract Value (ACV) grows 16% year over year (14% in constant currency)
    • Pega Cloud ACV grows 30% year over year (26% in constant currency)
    • Cash flow from operations reaches $251 million and free cash flow hits $246 million in the first nine months of 2024

    Pegasystems Inc. (NASDAQ:PEGA), the leading enterprise AI decisioning and workflow automation platform provider, released its financial results for the third quarter of 2024.

    This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20241023411869/en/

    Total ACV Growth and Pega Cloud Growth (Graphic: Business Wire)

    Total ACV Growth and Pega Cloud Growth (Graphic: Business Wire)

    "Pega GenAI Blueprint is creating enormous excitement and fundamentally changing how we engage with our clients," said Alan Trefler, founder and CEO. "Pega's distinctive AI approach is showing clients how they can accelerate their digital transformation to become true autonomous enterprises."

    "It's awesome to see accelerating ACV growth and continued strong free cash flow," said Ken Stillwell, COO and CFO. "The steep acceleration in Pega Cloud growth demonstrates our clients' commitment to digitally transform."

    Financial and performance metrics (1)

    Reconciliation of ACV and Constant Currency ACV

    (in millions, except percentages)

    September 30, 2023

     

    September 30, 2024

     

    1-Year Change

    ACV

    $

    1,169

     

    $

    1,360

     

    16 %

    Impact of changes in foreign exchange rates

     

    —

     

     

    (28)

     

     

    Constant currency ACV

    $

    1,169

     

    $

    1,332

     

    14 %

    Note: Constant currency ACV is calculated by applying the September 30, 2023 foreign exchange rates to all periods shown.

    ______________________________

    1 Refer to the schedules at the end of this release for additional information, including a reconciliation of GAAP and non-GAAP measures.

    (Dollars in thousands,

    except per share amounts)

    Three Months Ended

    September 30,

     

     

     

    Nine Months Ended

    September 30,

     

     

    2024

     

    2023

     

    Change

     

    2024

     

    2023

     

    Change

    Total revenue

    $

    325,050

     

    $

    334,643

     

    (3) %

     

    $

    1,006,350

     

    $

    958,383

     

    5 %

    Net (loss) - GAAP

    $

    (14,390)

     

    $

    (7,279)

     

    (98) %

     

    $

    (19,901)

     

    $

    (74,857)

     

    73 %

    Net income - non-GAAP

    $

    34,594

     

    $

    37,595

     

    (8) %

     

    $

    122,589

     

    $

    58,018

     

    111 %

    Diluted (loss) per share - GAAP

    $

    (0.17)

     

    $

    (0.09)

     

    (89) %

     

    $

    (0.23)

     

    $

    (0.90)

     

    74 %

    Diluted earnings per share - non-GAAP

    $

    0.39

     

    $

    0.44

     

    (11) %

     

    $

    1.38

     

    $

    0.69

     

    100 %

    (Dollars in thousands)

    Three Months Ended

    September 30,

     

    Change

     

    Nine Months Ended

    September 30,

     

    Change

    2024

     

    2023

     

     

    2024

     

    2023

     

    Pega Cloud

    $

    144,108

     

    44 %

     

    $

    118,040

     

    35 %

     

    $

    26,068

     

    22 %

     

    $

    409,096

     

    41 %

     

    $

    340,982

     

    36 %

     

    $

    68,114

     

    20 %

    Maintenance

     

    80,702

     

    25 %

     

     

    83,538

     

    25 %

     

     

    (2,836)

     

    (3) %

     

     

    242,047

     

    24 %

     

     

    245,210

     

    25 %

     

     

    (3,163)

     

    (1) %

    Subscription services

     

    224,810

     

    69 %

     

     

    201,578

     

    60 %

     

     

    23,232

     

    12 %

     

     

    651,143

     

    65 %

     

     

    586,192

     

    61 %

     

     

    64,951

     

    11 %

    Subscription license

     

    45,420

     

    14 %

     

     

    74,342

     

    22 %

     

     

    (28,922)

     

    (39) %

     

     

    193,405

     

    19 %

     

     

    200,066

     

    21 %

     

     

    (6,661)

     

    (3) %

    Subscription

     

    270,230

     

    83 %

     

     

    275,920

     

    82 %

     

     

    (5,690)

     

    (2) %

     

     

    844,548

     

    84 %

     

     

    786,258

     

    82 %

     

     

    58,290

     

    7 %

    Consulting

     

    54,364

     

    17 %

     

     

    55,976

     

    17 %

     

     

    (1,612)

     

    (3) %

     

     

    160,451

     

    16 %

     

     

    167,396

     

    18 %

     

     

    (6,945)

     

    (4) %

    Perpetual license

     

    456

     

    — %

     

     

    2,747

     

    1 %

     

     

    (2,291)

     

    (83) %

     

     

    1,351

     

    — %

     

     

    4,729

     

    — %

     

     

    (3,378)

     

    (71) %

     

    $

    325,050

     

    100 %

     

    $

    334,643

     

    100 %

     

    $

    (9,593)

     

    (3) %

     

    $

    1,006,350

     

    100 %

     

    $

    958,383

     

    100 %

     

    $

    47,967

     

    5 %

    Quarterly conference call

    A conference call and audio-only webcast will be conducted at 8:00 a.m. EDT on Thursday, October 24, 2024.

    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 2282955, or via https://events.q4inc.com/attendee/813806779 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.

    Discussion of non-GAAP financial 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. Refer to the schedules at the end of this release for additional information, including a reconciliation of GAAP and non-GAAP measures.

    Forward-looking statements

    Certain statements in this press release may be "forward-looking statements" as defined in 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 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;
    • the potential impact of our convertible senior notes and Capped Call Transactions;
    • 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, 2023, 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.

    Any forward-looking statements in this press release represent our views as of October 23, 2024.

    About Pegasystems

    Pega provides a powerful platform that empowers the world's leading organizations to unlock business-transforming outcomes with real-time optimization. Clients use our enterprise AI decisioning and workflow automation to solve their most pressing business 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 how Pega (NASDAQ:PEGA) empowers its clients to Build for Change®, visit www.pega.com.

    All trademarks are the property of their respective owners.

    PEGASYSTEMS INC.

    UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

    (in thousands, except per share amounts)

     

    Three Months Ended

    September 30,

     

    Nine Months Ended

    September 30,

     

    2024

     

    2023

     

    2024

     

    2023

    Revenue

     

     

     

     

     

     

     

    Subscription services

    $

    224,810

     

     

    $

    201,578

     

     

    $

    651,143

     

     

    $

    586,192

     

    Subscription license

     

    45,420

     

     

     

    74,342

     

     

     

    193,405

     

     

     

    200,066

     

    Consulting

     

    54,364

     

     

     

    55,976

     

     

     

    160,451

     

     

     

    167,396

     

    Perpetual license

     

    456

     

     

     

    2,747

     

     

     

    1,351

     

     

     

    4,729

     

    Total revenue

     

    325,050

     

     

     

    334,643

     

     

     

    1,006,350

     

     

     

    958,383

     

    Cost of revenue

     

     

     

     

     

     

     

    Subscription services

     

    36,868

     

     

     

    35,906

     

     

     

    108,930

     

     

     

    109,553

     

    Subscription license

     

    384

     

     

     

    629

     

     

     

    1,504

     

     

     

    1,971

     

    Consulting

     

    59,451

     

     

     

    57,204

     

     

     

    177,864

     

     

     

    176,262

     

    Perpetual license

     

    3

     

     

     

    24

     

     

     

    12

     

     

     

    51

     

    Total cost of revenue

     

    96,706

     

     

     

    93,763

     

     

     

    288,310

     

     

     

    287,837

     

    Gross profit

     

    228,344

     

     

     

    240,880

     

     

     

    718,040

     

     

     

    670,546

     

    Operating expenses

     

     

     

     

     

     

     

    Selling and marketing

     

    127,669

     

     

     

    131,598

     

     

     

    395,125

     

     

     

    425,253

     

    Research and development

     

    74,157

     

     

     

    74,955

     

     

     

    221,695

     

     

     

    224,262

     

    General and administrative

     

    35,694

     

     

     

    27,321

     

     

     

    84,641

     

     

     

    73,893

     

    Litigation settlement, net of recoveries

     

    —

     

     

     

    —

     

     

     

    32,403

     

     

     

    —

     

    Restructuring

     

    2,485

     

     

     

    17,822

     

     

     

    3,283

     

     

     

    21,450

     

    Total operating expenses

     

    240,005

     

     

     

    251,696

     

     

     

    737,147

     

     

     

    744,858

     

    (Loss) from operations

     

    (11,661

    )

     

     

    (10,816

    )

     

     

    (19,107

    )

     

     

    (74,312

    )

    Foreign currency transaction (loss) gain

     

    (4,405

    )

     

     

    1,994

     

     

     

    (7,230

    )

     

     

    (3,971

    )

    Interest income

     

    6,769

     

     

     

    2,532

     

     

     

    18,835

     

     

     

    5,831

     

    Interest expense

     

    (1,639

    )

     

     

    (1,533

    )

     

     

    (5,047

    )

     

     

    (5,229

    )

    (Loss) on capped call transactions

     

    (689

    )

     

     

    (2,294

    )

     

     

    (667

    )

     

     

    (449

    )

    Other income, net

     

    —

     

     

     

    6,383

     

     

     

    1,684

     

     

     

    18,668

     

    (Loss) before provision for income taxes

     

    (11,625

    )

     

     

    (3,734

    )

     

     

    (11,532

    )

     

     

    (59,462

    )

    Provision for income taxes

     

    2,765

     

     

     

    3,545

     

     

     

    8,369

     

     

     

    15,395

     

    Net (loss)

    $

    (14,390

    )

     

    $

    (7,279

    )

     

    $

    (19,901

    )

     

    $

    (74,857

    )

    (Loss) per share

     

     

     

     

     

     

     

    Basic

    $

    (0.17

    )

     

    $

    (0.09

    )

     

    $

    (0.23

    )

     

    $

    (0.90

    )

    Diluted

    $

    (0.17

    )

     

    $

    (0.09

    )

     

    $

    (0.23

    )

     

    $

    (0.90

    )

    Weighted-average number of common shares outstanding

     

     

     

     

     

     

     

    Basic

     

    85,625

     

     

     

    83,336

     

     

     

    85,018

     

     

     

    82,996

     

    Diluted

     

    85,625

     

     

     

    83,336

     

     

     

    85,018

     

     

     

    82,996

     

    PEGASYSTEMS INC.

    UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

    (in thousands)

     

    September 30, 2024

     

    December 31, 2023

    Assets

     

     

     

    Current assets:

     

     

     

    Cash and cash equivalents

    $

    287,649

     

    $

    229,902

    Marketable securities

     

    415,341

     

     

    193,436

    Total cash, cash equivalents, and marketable securities

     

    702,990

     

     

    423,338

    Accounts receivable, net

     

    173,623

     

     

    300,173

    Unbilled receivables, net

     

    157,281

     

     

    237,379

    Other current assets

     

    85,186

     

     

    68,137

    Total current assets

     

    1,119,080

     

     

    1,029,027

    Long-term unbilled receivables, net

     

    77,576

     

     

    85,402

    Goodwill

     

    81,568

     

     

    81,611

    Other long-term assets

     

    301,008

     

     

    314,696

    Total assets

    $

    1,579,232

     

    $

    1,510,736

    Liabilities and stockholders' equity

     

     

     

    Current liabilities:

     

     

     

    Accounts payable

    $

    20,103

     

    $

    11,290

    Accrued expenses

     

    41,236

     

     

    39,941

    Accrued compensation and related expenses

     

    98,033

     

     

    126,640

    Deferred revenue

     

    345,574

     

     

    377,845

    Convertible senior notes, net

     

    501,225

     

     

    —

    Other current liabilities

     

    18,372

     

     

    21,343

    Total current liabilities

     

    1,024,543

     

     

    577,059

    Long-term convertible senior notes, net

     

    —

     

     

    499,368

    Long-term operating lease liabilities

     

    66,750

     

     

    66,901

    Other long-term liabilities

     

    14,916

     

     

    13,570

    Total liabilities

     

    1,106,209

     

     

    1,156,898

    Total stockholders' equity

     

    473,023

     

     

    353,838

    Total liabilities and stockholders' equity

    $

    1,579,232

     

    $

    1,510,736

    PEGASYSTEMS INC.

    UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

    (in thousands)

     

    Nine Months Ended

    September 30,

     

    2024

     

    2023

    Net (loss)

    $

    (19,901

    )

     

    $

    (74,857

    )

    Adjustments to reconcile net (loss) to cash provided by operating activities

     

     

     

    Non-cash items

     

    180,036

     

     

     

    168,001

     

    Change in operating assets and liabilities, net

     

    90,562

     

     

     

    44,776

     

    Cash provided by operating activities

     

    250,697

     

     

     

    137,920

     

    Cash (used in) investing activities

     

    (215,999

    )

     

     

    (24,176

    )

    Cash provided by (used in) financing activities

     

    26,949

     

     

     

    (85,031

    )

    Effect of exchange rate changes on cash, cash equivalents, and restricted cash

     

    4,591

     

     

     

    (1,621

    )

    Net increase in cash, cash equivalents, and restricted cash

     

    66,238

     

     

     

    27,092

     

    Cash, cash equivalents, and restricted cash, beginning of period

     

    232,827

     

     

     

    145,054

     

    Cash, cash equivalents, and restricted cash, end of period

    $

    299,065

     

     

    $

    172,146

     

    PEGASYSTEMS INC.

    RECONCILIATION OF SELECTED GAAP AND NON-GAAP MEASURES

    (in thousands, except percentages and per share amounts)

     

    Three Months Ended

    September 30,

     

    Nine Months Ended

    September 30,

    2024

     

    2023

     

    Change

     

    2024

     

    2023

     

    Change

    Net (loss) - GAAP

    $

    (14,390

    )

     

    $

    (7,279

    )

     

    (98

    )%

     

    $

    (19,901

    )

     

    $

    (74,857

    )

     

    73

    %

    Stock-based compensation (1)

     

    37,213

     

     

     

    31,299

     

     

     

     

     

    108,218

     

     

     

    110,083

     

     

     

    Restructuring

     

    2,485

     

     

     

    17,822

     

     

     

     

     

    3,283

     

     

     

    21,450

     

     

     

    Legal fees

     

    9,863

     

     

     

    6,748

     

     

     

     

     

    14,214

     

     

     

    11,066

     

     

     

    Litigation settlement, net of recoveries

     

    —

     

     

     

    —

     

     

     

     

     

    32,403

     

     

     

    —

     

     

     

    Amortization of intangible assets

     

    700

     

     

     

    965

     

     

     

     

     

    2,453

     

     

     

    2,977

     

     

     

    Interest on convertible senior notes

     

    621

     

     

     

    613

     

     

     

     

     

    1,857

     

     

     

    1,988

     

     

     

    Capped call transactions

     

    689

     

     

     

    2,294

     

     

     

     

     

    667

     

     

     

    449

     

     

     

    Repurchases of convertible senior notes

     

    —

     

     

     

    —

     

     

     

     

     

    —

     

     

     

    (7,855

    )

     

     

    Foreign currency transaction loss (gain)

     

    4,405

     

     

     

    (1,994

    )

     

     

     

     

    7,230

     

     

     

    3,971

     

     

     

    Other

     

    —

     

     

     

    (5,814

    )

     

     

     

     

    (1,628

    )

     

     

    (10,285

    )

     

     

    Income taxes (2)

     

    (6,992

    )

     

     

    (7,059

    )

     

     

     

     

    (26,207

    )

     

     

    (969

    )

     

     

    Net income - non-GAAP

    $

    34,594

     

     

    $

    37,595

     

     

    (8

    )%

     

    $

    122,589

     

     

    $

    58,018

     

     

    111

    %

     

     

     

     

     

     

     

     

     

     

     

     

    Diluted (loss) per share - GAAP

    $

    (0.17

    )

     

    $

    (0.09

    )

     

    (89

    )%

     

    $

    (0.23

    )

     

    $

    (0.90

    )

     

    74

    %

    non-GAAP adjustments

     

    0.56

     

     

     

    0.53

     

     

     

     

     

    1.61

     

     

     

    1.59

     

     

     

    Diluted earnings per share - non-GAAP

    $

    0.39

     

     

    $

    0.44

     

     

    (11

    )%

     

    $

    1.38

     

     

    $

    0.69

     

     

    100

    %

     

     

     

     

     

     

     

     

     

     

     

     

    Diluted weighted-average number of common shares outstanding - GAAP

     

    85,625

     

     

     

    83,336

     

     

    3

    %

     

     

    85,018

     

     

     

    82,996

     

     

    2

    %

    Stock-based compensation

     

    4,097

     

     

     

    1,945

     

     

     

     

     

    3,512

     

     

     

    1,332

     

     

     

    Diluted weighted-average number of common shares outstanding - non-GAAP

     

    89,722

     

     

     

    85,281

     

     

    5

    %

     

     

    88,530

     

     

     

    84,328

     

     

    5

    %

    Our non-GAAP financial measures reflect the following adjustments:

    • 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 15. Commitments and Contingencies in our Quarterly Report for the three months ended September 30, 2024 for additional 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, due March 1, 2025, in a private placement. 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 are 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 convertible senior 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.
    • Repurchases of convertible senior notes: We have excluded gains from the repurchases of Convertible Senior 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 (gain): 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 and expenses incurred due to the cancellation of in-person sales and marketing events. 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.
    • Diluted weighted-average number of common shares outstanding:
      • 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.

    (1) Stock-based compensation:

     

    Three Months Ended

    September 30,

     

    Nine Months Ended

    September 30,

     

    2024

     

    2023

     

    2024

     

    2023

    Cost of revenue

    $

    6,894

     

     

    $

    6,410

     

     

    $

    20,558

     

     

    $

    22,497

     

    Selling and marketing

     

    14,169

     

     

     

    10,401

     

     

     

    41,621

     

     

     

    43,410

     

    Research and development

     

    7,308

     

     

     

    7,375

     

     

     

    22,779

     

     

     

    24,286

     

    General and administrative

     

    8,842

     

     

     

    7,113

     

     

     

    23,260

     

     

     

    19,890

     

     

    $

    37,213

     

     

    $

    31,299

     

     

    $

    108,218

     

     

    $

    110,083

     

    Income tax benefit

    $

    (512

    )

     

    $

    (316

    )

     

    $

    (1,377

    )

     

    $

    (1,569

    )

    (2) Effective income tax rates:

     

    Nine Months Ended

    September 30,

     

    2024

     

    2023

    GAAP

    (73

    )%

     

    (26

    )%

    non-GAAP

    22

    %

     

    22

    %

    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, gains and losses on our capped call transactions, 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. See Note 13. Income Taxes in our Quarterly Report for the three months ended September 30, 2024 for additional information.

    PEGASYSTEMS INC.

    RECONCILIATION OF FREE CASH FLOW (1) AND OTHER METRICS

    (in thousands, except percentages)

     

    Nine Months Ended

    September 30,

     

    Change

    2024

     

    2023

     

    Cash provided by operating activities

    $

    250,697

     

     

    $

    137,920

     

     

    82

    %

    Investment in property and equipment

     

    (4,921

    )

     

     

    (14,271

    )

     

     

    Free cash flow (1)

    $

    245,776

     

     

    $

    123,649

     

     

    99

    %

     

     

     

     

     

     

    Supplemental information (2)

     

     

     

     

     

    Litigation settlement, net of recoveries

    $

    32,403

     

     

    $

    —

     

     

     

    Legal fees

     

    9,232

     

     

     

    5,867

     

     

     

    Restructuring

     

    4,214

     

     

     

    21,576

     

     

     

    Interest on convertible senior notes

     

    3,767

     

     

     

    4,134

     

     

     

    Income taxes

     

    32,246

     

     

     

    7,913

     

     

     

     

    $

    81,862

     

     

    $

    39,490

     

     

     

    (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.

    • Litigation settlement, net of recoveries: Cost to settle litigation, net of insurance recoveries, arising from proceedings outside the ordinary course of business. See Note 15. Commitments and Contingencies in our Quarterly Report for the three months ended September 30, 2024 for additional information.
    • 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, due March 1, 2025, in a private placement. The convertible senior notes accrue interest at an annual rate of 0.75%, payable semi-annually in arrears on March 1 and September 1.
    • Income taxes: Direct income taxes paid net of refunds received.

    PEGASYSTEMS INC.

    ANNUAL CONTRACT VALUE

    (in thousands, except percentages)

    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.

     

    September 30, 2024

     

    September 30, 2023

     

    Change

     

    Constant Currency Change

    Pega Cloud

    $

    640,574

     

    $

    494,571

     

    $

    146,003

     

    30

    %

     

    26

    %

    Maintenance

     

    306,753

     

     

    319,250

     

     

    (12,497

    )

    (4

    )%

     

    (6

    )%

    Subscription services

     

    947,327

     

     

    813,821

     

     

    133,506

     

    16

    %

     

    14

    %

    Subscription license

     

    412,678

     

     

    355,055

     

     

    57,623

     

    16

    %

     

    15

    %

     

    $

    1,360,005

     

    $

    1,168,876

     

    $

    191,129

     

    16

    %

     

    14

    %

    PEGASYSTEMS INC.

    BACKLOG

    (in thousands, except percentages)

    Remaining performance obligations ("Backlog") - Expected future revenue from existing non-cancellable contracts:

    As of September 30, 2024:

     

    Subscription services

     

    Subscription license

     

    Perpetual license

     

    Consulting

     

    Total

    Pega Cloud

     

    Maintenance

     

     

     

     

    1 year or less

    $

    495,637

     

     

    $

    188,905

     

     

    $

    38,175

     

     

    $

    2,252

     

     

    $

    54,203

     

     

    $

    779,172

     

    53

    %

    1-2 years

     

    310,020

     

     

     

    63,701

     

     

     

    9,686

     

     

     

    317

     

     

     

    3,062

     

     

     

    386,786

     

    26

    %

    2-3 years

     

    146,877

     

     

     

    26,436

     

     

     

    3,046

     

     

     

    —

     

     

     

    2,008

     

     

     

    178,367

     

    12

    %

    Greater than 3 years

     

    112,002

     

     

     

    18,854

     

     

     

    102

     

     

     

    —

     

     

     

    —

     

     

     

    130,958

     

    9

    %

     

    $

    1,064,536

     

     

    $

    297,896

     

     

    $

    51,009

     

     

    $

    2,569

     

     

    $

    59,273

     

     

    $

    1,475,283

     

    100

    %

    % of Total

     

    73

    %

     

     

    20

    %

     

     

    3

    %

     

     

    —

    %

     

     

    4

    %

     

     

    100

    %

     

    Change since September 30, 2023

     

     

     

     

     

     

     

     

     

     

     

     

    $

    221,777

     

     

    $

    (9,387

    )

     

    $

    (12,956

    )

     

    $

    (4,694

    )

     

    $

    15,176

     

     

    $

    209,916

     

     

     

     

    26

    %

     

     

    (3

    )%

     

     

    (20

    )%

     

     

    (65

    )%

     

     

    34

    %

     

     

    17

    %

     

    As of September 30, 2023:

     

    Subscription services

     

    Subscription license

     

    Perpetual license

     

    Consulting

     

    Total

    Pega Cloud

     

    Maintenance

     

     

     

     

    1 year or less

    $

    391,324

     

     

    $

    202,610

     

     

    $

    48,427

     

     

    $

    4,567

     

     

    $

    39,335

     

     

    $

    686,263

     

    54

    %

    1-2 years

     

    239,787

     

     

     

    58,610

     

     

     

    4,356

     

     

     

    2,696

     

     

     

    3,662

     

     

     

    309,111

     

    24

    %

    2-3 years

     

    121,778

     

     

     

    28,585

     

     

     

    8,518

     

     

     

    —

     

     

     

    1,100

     

     

     

    159,981

     

    13

    %

    Greater than 3 years

     

    89,870

     

     

     

    17,478

     

     

     

    2,664

     

     

     

    —

     

     

     

    —

     

     

     

    110,012

     

    9

    %

     

    $

    842,759

     

     

    $

    307,283

     

     

    $

    63,965

     

     

    $

    7,263

     

     

    $

    44,097

     

     

    $

    1,265,367

     

    100

    %

    % of Total

     

    67

    %

     

     

    24

    %

     

     

    5

    %

     

     

    1

    %

     

     

    3

    %

     

     

    100

    %

     

    PEGASYSTEMS INC.

    RECONCILIATION OF GAAP BACKLOG AND CONSTANT CURRENCY BACKLOG

    (in millions, except percentages)

     

    September 30, 2023

     

    September 30, 2024

     

    1 Year Growth Rate

    Backlog - GAAP

    $

    1,265

     

    $

    1,475

     

     

    17

    %

    Impact of changes in foreign exchange rates

     

    —

     

     

    (43

    )

     

     

    Constant currency backlog

    $

    1,265

     

    $

    1,432

     

     

    13

    %

    Note: Constant currency Backlog is calculated by applying the September 30, 2023 foreign exchange rates to all periods shown.

     

    View source version on businesswire.com: https://www.businesswire.com/news/home/20241023411869/en/

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      5/5/25 5:10:55 PM ET
      $PEGA
      EDP Services
      Technology
    • SVP of Finance & CAO Kouninis Efstathios A sold $46,750 worth of shares (500 units at $93.50), decreasing direct ownership by 50% to 500 units (SEC Form 4)

      4 - PEGASYSTEMS INC (0001013857) (Issuer)

      5/5/25 5:05:18 PM ET
      $PEGA
      EDP Services
      Technology
    • Pega GenAI Powers Accelerated Q1 2025 Results

      Operating cash flow grows to $204 million and free cash flow grows to $202 million in Q1 2025 Annual Contract Value (ACV) growth exceeds 13% year over year Pega Cloud ACV grows 23% year over year Backlog grows 21% year over year Pegasystems Inc. (NASDAQ:PEGA), the Enterprise Transformation Company ™, released its financial results for the first quarter of 2025. This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20250422973379/en/Total ACV Growth and Pega Cloud ACV Growth "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 enab

      4/22/25 4:05:00 PM ET
      $PEGA
      EDP Services
      Technology
    • Pega to Announce Financial Results for the First Quarter of 2025 and Host Conference Call and Webcast

      Pegasystems Inc. (NASDAQ:PEGA), The Enterprise Transformation Company™, today announced it will report financial results for the first quarter of 2025 on Tuesday, April 22, 2025, after market close. A conference call and audio-only webcast will be conducted at 8:00 a.m. EDT on Wednesday, April 23, 2025. 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

      4/8/25 4:05:00 PM ET
      $PEGA
      EDP Services
      Technology
    • Pega Announces Quarterly Cash Dividend for Second Quarter of 2025

      Pegasystems Inc. (NASDAQ:PEGA), The Enterprise Transformation Company™, today announced a quarterly cash dividend of $0.03 per share, maintaining the company's current dividend program. The Q2 2025 dividend will be paid on April 15, 2025, to shareholders of record as of April 1, 2025. About Pega 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 t

      3/21/25 8:00:00 AM ET
      $PEGA
      EDP Services
      Technology
    • KeyBanc Capital Markets resumed coverage on Pegasystems with a new price target

      KeyBanc Capital Markets resumed coverage of Pegasystems with a rating of Overweight and set a new price target of $118.00

      1/14/25 8:06:36 AM ET
      $PEGA
      EDP Services
      Technology
    • Pegasystems upgraded by Loop Capital with a new price target

      Loop Capital upgraded Pegasystems from Hold to Buy and set a new price target of $84.00 from $68.00 previously

      8/1/24 6:29:11 AM ET
      $PEGA
      EDP Services
      Technology
    • Pegasystems upgraded by JMP Securities with a new price target

      JMP Securities upgraded Pegasystems from Mkt Perform to Mkt Outperform and set a new price target of $85.00

      7/31/24 6:32:53 AM ET
      $PEGA
      EDP Services
      Technology