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美國
證券交易委員會
華盛頓特區20549
____________________________
表格 10-Q
_____________________________________
☒根據1934年證券交易法第13或15(d)條提交的季度報告
截至季度結束日期的財務報告2024年9月30日
或者
☐根據1934年證券交易法第13或15(d)條款的過渡報告

委託文件編號：001-398661-11859 
____________________________
PEGASYSTEMS INC.
（根據其章程規定的準確名稱）
____________________________
馬薩諸塞州04-2787865
（設立或組織的其他管轄區域）（內部稅務服務僱主識別號碼）
One Main Street, 劍橋, 馬薩諸塞州 02142
（總部地址，包括郵政編碼）
(617) 374-9600
(註冊人電話號碼，包括區號)
____________________________
在法案第12(b)條的規定下注冊的證券：
每一類的名稱交易標的在其上註冊的交易所的名稱
每股普通股，面值0.01美元PEGA納斯達克全球精選市場
請通過勾選表示，註冊申報人（1）在過去12個月（或者註冊申報人需要申報這些文件的較短期間內）已經提交了1934年證券交易法第13或第15（d）條規定需要提交的所有報告，以及（2）在過去的90天裏一直受到這些申報要求的約束。 是 x 沒有¨
請勾選以下內容：在過去12個月（或更短申報週期）內，註冊人是否已電子提交根據S-t規則405條款要求提交的所有互動數據文件。是 x 沒有¨            
​
大型加速報告人
x
加速文件提交人
☐非加速文件提交人☐較小的報告公司☐新興成長公司☐
如果新興成長型企業，檢查標記是否該註冊機構已選擇不使用交易所法第13(a)條規定的任何新的或修訂的財務會計準則的過渡期。 ☐
請用複選標記表示，是否申報人爲殼公司（如《交易所法》第120億.2條所定義）。是 ☐ 沒有☒
截至2023年7月31日，續借貸款協議下未償還的借款額爲85,753,808 2024年10月16日，註冊公司普通股每股面值爲0.01美元，股份。

目錄

PEGASYSTEMS INC.

10-Q表上的季度報告

目錄
第一部分 - 財務信息
項目1：基本報表
2024年9月30日和2023年12月31日的未經審計的簡明綜合資產負債表
2024年9月30日和2023年的三個和九個月未經審計的簡明綜合利潤表
2024年9月30日和2023年的三個和九個月未經審計的簡明全面收益表
2024年9月30日和2023年的九個月未經審計的簡明股東權益表
2024年9月30日和2023年的九個月未經審計的簡明現金流量表
簡明聯合財務報表附註(未經審計)
項目2.財務狀況與經營結果的管理討論與分析
項目 3. 關於市場風險的定量和定性披露
項目4. 控制與程序
第二部分-其他信息
項目1. 法律訴訟
項目1A ：風險因素
項目 2. 未註冊的股權銷售及資金用途
項目5.其他信息
項目 6. 陳列品和契約款項(第6頁)
簽名

2
目錄
第一部分 - 財務信息
基本報表1
PEGASYSTEMS INC.
未經審計的簡明合併資產負債表
（以千爲單位）
2024年9月30日2023年12月31日
資產
流動資產：
現金及現金等價物$287,649 $229,902 
有價證券415,341 193,436 
總現金，現金等價物和市場證券702,990 423,338 
2,687,823 
173,623 300,173 
未開票應收款淨額
157,281 237,379 
其他資產85,186 68,137 
總流動資產1,119,080 1,029,027 
長期未開票應收賬款淨額
77,576 85,402 
商譽81,568 81,611 
其他長期資產301,008 314,696 
總資產$1,579,232 $1,510,736 
負債和股東權益
流動負債:
應付賬款$20,103 $11,290 
應計費用41,236 39,941 
應計的報酬和相關費用98,033 126,640 
遞延收入345,574 377,845 
可轉換的優先票據，淨額501,225 — 
其他流動負債18,372 21,343 
流動負債合計1,024,543 577,059 
可轉換的長期可轉債，淨額
— 499,368 
長期經營租賃負債
66,750 66,901 
其他長期負債14,916 13,570 
負債合計1,106,209 1,156,898 
承諾和 contingencies（注意 15）
股東權益:
優先股，1,000 無已發行股數
— — 
普通股，200,000 85,808和頁面。83,840截至2024年3月31日和2023年12月31日，已發行並流通股份
分別爲2024年9月30日和2023年12月31日
858 838 
額外實收資本514,173 379,584 
(2,697)(28,606)(8,705)
累計其他全面損失(13,402)(17,879)
股東權益總額473,023 353,838 
負債和股東權益總額$1,579,232 $1,510,736 

請參閱未經審計的合併基本財務報表註釋。
3

PEGASYSTEMS INC.
未經審計的基本財務報表綜合損益表
（以千爲單位，每股金額除外）
三個月之內結束
2020年9月30日		九個月結束
2020年9月30日
2024202320242023
營業收入
訂閱服務$224,810 $201,578 $651,143 $586,192 
訂閱許可證45,420 74,342 193,405 200,066 
諮詢54,364 55,976 160,451 167,396 
永久許可證456 2,747 1,351 4,729 
總收入325,050 334,643 1,006,350 958,383 
營業收入成本
訂閱服務36,868 35,906 108,930 109,553 
訂閱許可證384 629 1,504 1,971 
諮詢59,451 57,204 177,864 176,262 
永久許可證3 24 12 51 
營業成本總額96,706 93,763 288,310 287,837 
毛利潤228,344 240,880 718,040 670,546 
營業費用
銷售和營銷127,669 131,598 395,125 425,253 
研發74,157 74,955 221,695 224,262 
ZSCALER, INC.35,694 27,321 84,641 73,893 
訴訟結算，扣除收回款項淨額
— — 32,403 — 
重組2,485 17,822 3,283 21,450 
營業費用總計240,005 251,696 737,147 744,858 
經營虧損(11,661)(10,816)(19,107)(74,312)
外幣交易（損失）盈利(4,405)1,994 (7,230)(3,971)
利息收入6,769 2,532 18,835 5,831 
利息支出(1,639)(1,533)(5,047)(5,229)
（看漲）交易盈虧(689)(2,294)(667)(449)
其他收入，淨額— 6,383 1,684 18,668 
納稅前虧損(11,625)(3,734)(11,532)(59,462)
所得稅費用2,765 3,545 8,369 15,395 
淨虧損$(14,390)$(7,279)$(19,901)$(74,857)
每股（虧損）
基本$(0.17)$(0.09)$(0.23)$(0.90)
稀釋的$(0.17)$(0.09)$(0.23)$(0.90)
流通普通股加權平均數
基本85,625 83,336 85,018 82,996 
稀釋的85,625 83,336 85,018 82,996 

See notes to unaudited condensed consolidated financial statements.
4

PEGASYSTEMS INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS)
(in thousands)
Three Months Ended
September 30,		Nine Months Ended
September 30,
2024202320242023
Net (loss)$(14,390)$(7,279)$(19,901)$(74,857)
Other comprehensive income (loss), net of tax
Unrealized gain (loss) on available-for-sale securities660 (40)(158)(281)
Foreign currency translation adjustments10,204 (3,687)4,635 (1,737)
Total other comprehensive income (loss), net of tax10,864 (3,727)4,477 (2,018)
Comprehensive (loss)$(3,526)$(11,006)$(15,424)$(76,875)

See notes to unaudited condensed consolidated financial statements.
5

PEGASYSTEMS INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except per share amounts)
Common StockAdditional paid-in capital(Accumulated deficit)Accumulated other comprehensive (loss)Total stockholders’ equity
Number
of shares
Amount
December 31, 202282,436 $824 $229,602 $(76,513)$(23,070)$130,843 
Issuance of common stock for stock compensation plans452 4 668 — — 672 
Issuance of common stock under the employee stock purchase plan52 1 2,142 — — 2,143 
Stock-based compensation— — 42,557 — — 42,557 
Cash dividends declared ($0.03 per share)
— — (2,488)— — (2,488)
Other comprehensive income— — — — 1,543 1,543 
Net (loss)— — — (20,774)— (20,774)
March 31, 202382,940 $829 $272,481 $(97,287)$(21,527)$154,496 
Issuance of common stock for stock compensation plans225 2 1,824 — — 1,826 
Issuance of common stock under the employee stock purchase plan47 1 1,980 — — 1,981 
Stock-based compensation— — 36,227 — — 36,227 
Cash dividends declared ($0.03 per share)
— — (2,496)— — (2,496)
Other comprehensive income— — — — 166 166 
Net (loss)— — — (46,804)— (46,804)
June 30, 202383,212 $832 $310,016 $(144,091)$(21,361)$145,396 
Issuance of common stock for stock compensation plans257 3 2,447 — — 2,450 
Issuance of common stock under the employee stock purchase plan54 — 2,003 — — 2,003 
Stock-based compensation— — 31,299 — — 31,299 
Cash dividends declared ($0.03 per share)
— — (2,506)— — (2,506)
Other comprehensive (loss)— — — — (3,727)(3,727)
Net (loss)— — — (7,279)— (7,279)
September 30, 202383,523 $835 $343,259 $(151,370)$(25,088)$167,636 
6

PEGASYSTEMS INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except per share amounts)
Common StockAdditional paid-in capital(Accumulated deficit)Accumulated other comprehensive (loss)Total stockholders’ equity
Number
of shares
Amount
December 31, 202383,840 $838 $379,584 $(8,705)$(17,879)$353,838 
Issuance of common stock for stock compensation plans1,139 12 18,644 — — 18,656 
Issuance of common stock under the employee stock purchase plan32 — 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, 202485,011 $850 $432,217 $(20,829)$(22,052)$390,186 
Issuance of common stock for stock compensation plans326 4 5,481 — — 5,485 
Issuance of common stock under the employee stock purchase plan32 — 1,669 — — 1,669 
Stock-based compensation— — 36,224 — — 36,224 
Cash dividends declared ($0.03 per share)
— — (2,561)— — (2,561)
Other comprehensive (loss)— — — — (2,214)(2,214)
Net income— — — 6,613 — 6,613 
June 30, 202485,369 $854 $473,030 $(14,216)$(24,266)$435,402 
Repurchase of common stock(171)(2)(11,747)— — (11,749)
Issuance of common stock for stock compensation plans581 6 16,461 — — 16,467 
Issuance of common stock under the employee stock purchase plan29 — 1,789 — — 1,789 
Stock-based compensation— — 37,213 — — 37,213 
Cash dividends declared ($0.03 per share)
— — (2,573)— — (2,573)
Other comprehensive income— — — — 10,864 10,864 
Net (loss)— — — (14,390)— (14,390)
September 30, 202485,808 $858 $514,173 $(28,606)$(13,402)$473,023 

See notes to unaudited condensed consolidated financial statements.
7

PEGASYSTEMS INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Nine Months Ended
September 30,
20242023
Operating activities
Net (loss)$(19,901)$(74,857)
Adjustments to reconcile net (loss) to cash provided by operating activities
Stock-based compensation108,218 110,083 
Amortization of deferred commissions47,143 43,974 
Amortization of intangible assets and depreciation13,289 14,181 
Lease expense13,748 12,018 
Foreign currency transaction loss7,230 3,971 
Loss on capped call transactions667 449 
Deferred income taxes(67)(188)
(Gain) on investments(1,628)(10,841)
(Gain) on repurchases of convertible senior notes— (7,855)
Other non-cash(8,564)2,209 
Change in operating assets and liabilities, net90,562 44,776 
Cash provided by operating activities250,697 137,920 
Investing activities
Purchases of investments(417,310)(190,466)
Proceeds from maturities and called investments206,232 169,836 
Sales of investments— 10,725 
Investment in property and equipment(4,921)(14,271)
Cash (used in) investing activities(215,999)(24,176)
Financing activities
Repurchases of convertible senior notes— (88,989)
Dividend payments to stockholders(7,626)(7,458)
Proceeds from employee stock plans48,811 12,729 
Common stock repurchases for tax withholdings for net settlement of equity awards(2,987)(1,654)
Common stock repurchases under stock repurchase program(11,249)— 
Other— 341 
Cash provided by (used in) financing activities26,949 (85,031)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash4,591 (1,621)
Net increase in cash, cash equivalents, and restricted cash66,238 27,092 
Cash, cash equivalents, and restricted cash, beginning of period232,827 145,054 
Cash, cash equivalents, and restricted cash, end of period$299,065 $172,146 
Cash and cash equivalents$287,649 $169,023 
Restricted cash included in other current assets184 — 
Restricted cash included in other long-term assets11,232 3,123 
Total cash, cash equivalents, and restricted cash$299,065 $172,146 

See notes to unaudited condensed consolidated financial statements.
8
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, 2023.
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 2024.
NOTE 2. MARKETABLE SECURITIES
September 30, 2024December 31, 2023
(in thousands)Amortized CostUnrealized GainsUnrealized LossesFair ValueAmortized CostUnrealized GainsUnrealized LossesFair Value
Government debt$11,659 $8 $(1)$11,666 $11,471 $33 $(1)$11,503 
Corporate debt403,427 271 (23)403,675 181,960 200 (227)181,933 
$415,086 $279 $(24)$415,341 $193,431 $233 $(228)$193,436 
As of September 30, 2024, marketable securities’ maturities ranged from October 2024 to January 2026, with a weighted-average remaining maturity of 0.3 years.
NOTE 3. RECEIVABLES, CONTRACT ASSETS, AND DEFERRED REVENUE
Receivables
(in thousands)
September 30, 2024December 31, 2023
Accounts receivable, net$173,623 $300,173 
Unbilled receivables, net157,281 237,379 
Long-term unbilled receivables, net
77,576 85,402 
$408,480 $622,954 
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)
September 30, 2024
1 year or less$157,281 67 %
1-2 years60,501 26 %
2-5 years17,075 7 %
$234,857 100 %
Unbilled receivables by contract effective date:
(Dollars in thousands)
September 30, 2024
2024$78,970 34 %
2023118,866 50 %
202219,775 8 %
202113,546 6 %
2020 and prior3,700 2 %
$234,857 100 %
9
PEGASYSTEMS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)



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)
September 30, 2024December 31, 2023
Contract assets
$15,719 $16,238 
Long-term contract assets
25,224 20,635 
$40,943 $36,873 

Deferred revenue
Deferred revenue consists of billings made and payments received in advance of revenue recognition.
(in thousands)
September 30, 2024December 31, 2023
Deferred revenue$345,574 $377,845 
Long-term deferred revenue
2,183 2,478 
$347,757 $380,323 
Deferred revenue decreased in the nine months ended September 30, 2024, primarily due to $340.4 million of revenue recognized during the period included in deferred revenue as of December 31, 2023 exceeding new billings in advance of revenue recognition.
NOTE 4. DEFERRED COMMISSIONS
(in thousands)
September 30, 2024December 31, 2023
Deferred commissions
$98,415 $114,119 
Three Months Ended
September 30,		Nine Months Ended
September 30,
(in thousands)2024202320242023
Amortization of deferred commissions (1)
$14,867 $14,947 $47,143 $43,974 
(1) Included in selling and marketing.
NOTE 5. GOODWILL AND OTHER INTANGIBLES
Goodwill
Nine Months Ended
September 30,
(in thousands)
20242023
January 1,$81,611 $81,399 
Currency translation adjustments(43)38 
September 30,$81,568 $81,437 
Intangibles
Intangible assets are recorded at cost and amortized using the straight-line method over their estimated useful lives.
September 30, 2024
(in thousands)Useful LivesCostAccumulated Amortization
Net Book Value
Client-related
4-10 years
$63,157 $(61,101)$2,056 
Technology
2-10 years
68,115 (65,638)2,477 
Other
1-5 years
5,361 (5,361)— 
$136,633 $(132,100)$4,533 
December 31, 2023
(in thousands)Useful LivesCostAccumulated Amortization
Net Book Value
Client-related
4-10 years
$63,117 $(60,035)$3,082 
Technology
2-10 years
68,138 (64,218)3,920 
Other
1-5 years
5,361 (5,361)— 
$136,616 $(129,614)$7,002 
10
PEGASYSTEMS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)



Future estimated amortization of intangible assets:
(in thousands)
September 30, 2024
Remainder of 2024$823 
20252,509 
2026874 
2027327 
$4,533 
Amortization of intangible assets:
Three Months Ended
September 30,		Nine Months Ended
September 30,
(in thousands)2024202320242023
Cost of revenue
$357 $622 $1,425 $1,949 
Selling and marketing
343 343 1,028 1,028 
$700 $965 $2,453 $2,977 

NOTE 6. OTHER ASSETS AND LIABILITIES
Other current assets
(in thousands)September 30, 2024December 31, 2023
Income tax receivables$29,264 $4,804 
Contract assets15,719 16,238 
Insurance receivable— 1,954 
Indirect tax receivable2,647 1,924 
Capped call transactions226 — 
Restricted cash184 — 
Other37,146 43,217 
$85,186 $68,137 
Other long-term assets
(in thousands)September 30, 2024December 31, 2023
Deferred commissions$98,415 $114,119 
Right of use assets63,124 64,198 
Property and equipment42,871 47,279 
Venture investments21,172 19,450 
Contract assets25,224 20,635 
Intangible assets4,533 7,002 
Capped call transactions— 893 
Deferred income taxes3,651 3,678 
Restricted cash11,232 2,925 
Other30,786 34,517 
$301,008 $314,696 
11
PEGASYSTEMS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)



Accrued expenses
(in thousands)September 30, 2024December 31, 2023
Cloud hosting$12,840 $1,358 
Outside professional services12,684 10,419 
Marketing and sales program2,319 2,557 
Income and other taxes3,384 15,428 
Employee related4,607 4,486 
Other5,402 5,693 
$41,236 $39,941 
Other current liabilities
(in thousands)September 30, 2024December 31, 2023
Operating lease liabilities$14,982 $15,000 
Dividends payable2,573 2,515 
Other817 3,828 
$18,372 $21,343 
Other long-term liabilities
(in thousands)September 30, 2024December 31, 2023
Deferred revenue$2,183 $2,478 
Income taxes payable867 859 
Other11,866 10,233 
$14,916 $13,570 
NOTE 7. LEASES
Expense
Three Months Ended
September 30,		Nine Months Ended
September 30,
(in thousands)2024202320242023
Fixed lease costs$6,848 $4,718 $16,381 $14,979 
Short-term lease costs381 660 1,334 2,137 
Variable lease costs1,863 2,254 5,235 6,414 
$9,092 $7,632 $22,950 $23,530 
Right of use assets and lease liabilities
(in thousands)September 30, 2024December 31, 2023
Right of use assets
$63,124 $64,198 
Operating lease liabilities
$14,982 $15,000 
Long-term operating lease liabilities$66,750 $66,901 
Weighted-average remaining lease term and discount rate for the Company’s leases were:
September 30, 2024December 31, 2023
Weighted-average remaining lease term6.3 years6.8 years
Weighted-average discount rate (1)
4.6 %4.0 %
(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.
12
PEGASYSTEMS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)



Maturities of lease liabilities:
(in thousands)September 30, 2024
Remainder of 2024$4,094 
202518,276 
202613,754 
202713,503 
202812,939 
202910,177 
Thereafter21,755 
Total lease payments94,498 
Less: imputed interest (1)
(12,766)
$81,732 
(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
Nine Months Ended
September 30,
(in thousands)20242023
Cash paid for operating leases, net of tenant improvement allowances$13,249 $14,378 
Right of use assets recognized for new leases and amendments (non-cash)$12,290 $1,782 
NOTE 8. 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 are due before maturity. The Notes accrue interest at an annual rate of 0.75%, payable semi-annually in arrears on March 1 and September 1, beginning September 1, 2020.
In the nine months ended September 30, 2023, the Company recognized a gain of $7.9 million, in other income, net from repurchases of Notes representing $97.7 million in aggregate principal amount.
Conversion rights
The conversion rate is 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. The conversion rate will be adjusted upon certain events, including spin-offs, tender offers, exchange offers, and certain stockholder distributions. The Company will settle conversions by paying or delivering cash, shares of its common stock, or a combination of cash and shares of its common stock, at the Company’s election, based on the applicable conversion rate.
Beginning on September 1, 2024, noteholders may convert their Notes at any time at their election.
Before September 1, 2024, noteholders could convert their Notes in the following circumstances:
•During any calendar quarter beginning after June 30, 2020 (and only during such calendar quarter), if the last reported sale price per share of the Company’s common stock exceeds 130% of the conversion price for each of at least 20 trading days (whether or not consecutive) during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter.
•During the five consecutive business days immediately after any five consecutive trading day period (the “Measurement Period”), if the trading price per $1,000 principal amount of Notes for each trading day of the Measurement Period was less than 98% of the product of the last reported sale price per share of common stock on such trading day and the conversion rate on such trading day.
•Upon certain corporate events or distributions or if the Company calls any Notes for redemption, noteholders may convert before the close of business on the business day immediately before the related redemption date (or, if the Company fails to pay the redemption price in full on the redemption date until the Company pays the redemption price).
Repurchase rights
On or after March 1, 2023 and on or before the 40th scheduled trading day immediately before the maturity date, the Company may redeem for cash all or part of the Notes at a repurchase price equal to 100% of the principal amount, plus accrued and unpaid interest, if the last reported sale price of the Company’s common stock exceeded 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides a redemption notice.
13
PEGASYSTEMS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)



If certain corporate events that constitute a “Fundamental Change” occur, each noteholder will have the right to require the Company to repurchase for cash all of such noteholder’s Notes, or any portion of the principal thereof that is equal to $1,000 or a multiple of $1,000, at a repurchase price equal to 100% of the principal amount thereof, plus accrued and unpaid interest. A Fundamental Change relates to mergers, changes in control of the Company, liquidation/dissolution of the Company, or the delisting of the Company’s common stock.
Carrying value of the Notes:
(in thousands)September 30, 2024December 31, 2023
Principal$502,270 $502,270 
Unamortized issuance costs(1,045)(2,902)
Convertible senior notes, net$501,225 $499,368 

Interest expense related to the Notes:
Three Months Ended
September 30,		Nine Months Ended
September 30,
(in thousands)2024202320242023
Contractual interest expense (0.75% coupon)
$941 $827 $2,825 $2,949 
Amortization of issuance costs
621 613 1,857 1,988 
$1,562 $1,440 $4,682 $4,937 
The average interest rate on the Notes in the nine months ended September 30, 2024 and 2023 was 1.2%.
Future payments:
September 30, 2024
(in thousands)PrincipalInterestTotal
2025$502,270 $1,884 $504,154 
$502,270 $1,884 $504,154 
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. In the nine months ended September 30, 2023, Capped Call Transactions covering approximately 0.7 million shares were settled for proceeds of $0.3 million. As of September 30, 2024, Capped Call Transactions covering approximately 3.7 million shares were outstanding.
The Capped Call Transactions are 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 is subject to adjustment upon specified extraordinary events affecting the Company, including mergers and tender offers.
The Capped Call Transactions are accounted for as derivative instruments and do 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 are remeasured to fair value each reporting period, resulting in a non-operating gain or loss.
14
PEGASYSTEMS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)



Change in capped call transactions:
Nine Months Ended
September 30,
(in thousands)20242023
January 1,$893 $2,582 
Settlements— (341)
Fair value adjustment(667)(449)
September 30,$226 $1,792 
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 commitments were originally scheduled to expire on November 4, 2024, and any outstanding loans would have been payable on such date. However on April 23, 2024, the Credit Facility was amended to extend the expiration date to February 4, 2025. 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.
As of September 30, 2024 and December 31, 2023, 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 9. RESTRUCTURING
The Company has undertaken the following restructuring activities as it optimizes its go-to-market strategy and reassesses its office space needs:
(in thousands)Three months endedExpense
Office space reduction March 31, 2023$1,241 
Employee severance and related benefitsJune 30, 2023$1,581 
Employee severance and related benefits and office space reduction
September 30, 2023$17,236 
Office space reductionDecember 31, 2023$1,497 
Office space reductionJune 30, 2024$1,257 
Office space reduction
September 30, 2024$2,882 
Accrued employee severance and related benefits:
Change for all restructuring actions:
Nine Months Ended
September 30,
(in thousands)20242023
January 1,$8,095 $18,573 
Costs incurred(634)19,921 
Cash disbursements(4,214)(21,576)
Currency translation adjustments(93)(203)
September 30,$3,154 $16,715 
Note: Accrued employee severance and related benefits is included in accrued compensation and related expenses.
NOTE 10. 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;
15
PEGASYSTEMS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)



•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 applies judgment when determining expected volatility. The Company considers the underlying equity security’s historical and implied volatility levels. 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:
September 30, 2024December 31, 2023
(in thousands)Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total
Cash equivalents$16,760 $— $— $16,760 $54,357 $— $— $54,357 
Marketable securities $— $415,341 $— $415,341 $— $193,436 $— $193,436 
Capped Call Transactions
$— $226 $— $226 $— $893 $— $893 
Venture investments (1)
$— $— $21,172 $21,172 $— $— $19,450 $19,450 
(1) Investments in privately-held companies
Changes in venture investments:
Nine Months Ended
September 30,
(in thousands)20242023
January 1,$19,450 $13,069 
New investments350 400 
Sales of investments— (2,773)
Changes in foreign exchange rates106 27 
Changes in fair value:
included in other income, net
1,628 10,886 
included in other comprehensive (loss)
(362)(2,261)
September 30,$21,172 $19,348 
The carrying value of certain financial instruments, including receivables and accounts payable, approximates fair value due to their short maturities.
Fair value of the Convertible Senior Notes
The fair value of the Notes outstanding (including the embedded conversion feature) was $492.5 million as of September 30, 2024, and $466.5 million as of December 31, 2023.
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 11. REVENUE
Geographic revenue
Three Months Ended
September 30,		Nine Months Ended
September 30,
(Dollars in thousands)
2024202320242023
U.S.$156,135 48 %$154,741 47 %$526,332 53 %$489,645 51 %
Other Americas28,836 9 %23,497 7 %71,936 7 %58,013 6 %
United Kingdom (“U.K.”)37,593 12 %41,622 12 %108,338 11 %112,751 12 %
Europe (excluding U.K.), Middle East, and Africa 60,048 18 %67,880 20 %175,255 17 %173,551 18 %
Asia-Pacific42,438 13 %46,903 14 %124,489 12 %124,423 13 %
$325,050 100 %$334,643 100 %$1,006,350 100 %$958,383 100 %
16
PEGASYSTEMS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)



Revenue streams
Three Months Ended
September 30,		Nine Months Ended
September 30,
(in thousands)
2024202320242023
Subscription license$45,420 $74,342 $193,405 $200,066 
Perpetual license456 2,747 1,351 4,729 
Revenue recognized at a point in time45,876 77,089 194,756 204,795 
Maintenance80,702 83,538 242,047 245,210 
Pega Cloud144,108 118,040 409,096 340,982 
Consulting54,364 55,976 160,451 167,396 
Revenue recognized over time279,174 257,554 811,594 753,588 
Total revenue$325,050 $334,643 $1,006,350 $958,383 
Three Months Ended
September 30,		Nine Months Ended
September 30,
(in thousands)2024202320242023
Pega Cloud$144,108 $118,040 $409,096 $340,982 
Maintenance80,702 83,538 242,047 245,210 
Subscription services224,810 201,578 651,143 586,192 
Subscription license45,420 74,342 193,405 200,066 
Subscription270,230 275,920 844,548 786,258 
Consulting54,364 55,976 160,451 167,396 
Perpetual license456 2,747 1,351 4,729 
$325,050 $334,643 $1,006,350 $958,383 
Remaining performance obligations ("Backlog")
Expected future revenue from existing non-cancellable contracts:
As of September 30, 2024:
(Dollars in thousands)Subscription servicesSubscription licensePerpetual licenseConsultingTotal
Pega CloudMaintenance
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 %
As of September 30, 2023:
(Dollars in thousands)Subscription servicesSubscription licensePerpetual licenseConsultingTotal
Pega CloudMaintenance
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 %
17
PEGASYSTEMS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)



NOTE 12. STOCKHOLDERS' EQUITY
Stock-based compensation
Expense
Three Months Ended
September 30,		Nine Months Ended
September 30,
(in thousands)2024202320242023
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)
As of September 30, 2024, the Company had $119.6 million of unrecognized stock-based compensation expense, net of estimated forfeitures, which is expected to be recognized over a weighted-average period of 1.6 years.
Grants
Nine Months Ended
September 30, 2024
(in thousands)
Quantity
Total Fair Value
Restricted stock units (1)
1,306 $80,642 
Non-qualified stock options
1,789 $46,365 
Performance stock options (2)
566 $13,921 
Common stock
11 $750 
(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.
(2) Performance stock options allow the holder to purchase a specified number of common stock shares at an exercise price equal to or greater than the shares' fair market value at the grant date. For the performance stock options granted in the nine months ended September 30, 2024, 25% can vest on the first anniversary of the grant date, and 75% can vest on the second anniversary of the grant date, based on the achievement of specific performance conditions. The options expire ten years from the grant date.
Stock repurchase program
On April 23, 2024, the Company’s Board of Directors extended the expiration date of the share repurchase program from June 30, 2024 to June 30, 2025. 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 nine months ended September 30, 2024, the Company repurchased 0.2 million of its common stock for $11.7 million at an average price per share of $68.84. All purchases under this program have been made on the open market. As of September 30, 2024, the Company was authorized to purchase an additional $48.3 million of its common stock under the share repurchase program.
NOTE 13. INCOME TAXES
Effective income tax rate
Nine Months Ended
September 30,
(Dollars in thousands)20242023
Provision for income taxes$8,369 $15,395 
Effective income tax rate(73)%(26)%
The Company’s effective income tax rate for the nine months ended September 30, 2024, is impacted by the jurisdictional mix and timing of the actual compared to projected earnings (losses). It is also impacted by the valuation allowance on its deferred tax assets in the U.S. and U.K. and a near break-even year-to-date pretax loss resulting in a not meaningful effective income tax rate.
The Company recognizes deferred tax assets to the extent that it believes that these assets are more likely than not to be realized. A deferred tax valuation allowance requires significant judgment and uncertainties, including assumptions about future taxable income. Quarterly, the Company reassesses the need for a valuation allowance on its net deferred tax assets by weighting all available and objectively verifiable negative and positive evidence, including projected future reversals of existing taxable temporary differences, committed contractual backlog (“Backlog”), projected future taxable income, including the impact of enacted legislation, tax-planning strategies, and recent operating results.
18
PEGASYSTEMS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)



The Company intends to maintain a valuation allowance on its U.S. and U.K. net deferred tax assets until sufficient evidence exists to support their realization.
NOTE 14. (LOSS) PER SHARE
Basic (loss) per share is calculated using the weighted-average number of common shares outstanding during the period. Diluted (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 convertible senior notes.
Calculation of (loss) per share:
Three Months Ended
September 30,		Nine Months Ended
September 30,
(in thousands, except per share amounts)2024202320242023
Net (loss)$(14,390)$(7,279)$(19,901)$(74,857)
Weighted-average common shares outstanding85,625 83,336 85,018 82,996 
(Loss) per share, basic$(0.17)$(0.09)$(0.23)$(0.90)
Net (loss)$(14,390)$(7,279)$(19,901)$(74,857)
Weighted-average common shares outstanding, assuming dilution (1) (2) (3)
85,625 83,336 85,018 82,996 
(Loss) per share, diluted$(0.17)$(0.09)$(0.23)$(0.90)
Outstanding anti-dilutive stock options and RSUs (4)
4,528 2,255 3,682 1,652 
(1) All dilutive securities are excluded when their inclusion would be anti-dilutive.
(2) The shares underlying the conversion options in the Company’s Notes are included using the if-converted method, if dilutive in the period. If the outstanding conversion options were fully exercised, the Company would issue approximately 3.7 million shares as of September 30, 2024.
(3) The Company’s Capped Call Transactions represent the equivalent of approximately 3.7 million shares of the Company’s common stock (representing the number of shares for which the Notes are convertible) as of September 30, 2024. The Capped Call Transactions are 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 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 (loss) per share. These awards may be dilutive in the future.
NOTE 15. COMMITMENTS AND CONTINGENCIES
Commitments
See "Note 7. 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 September 30, 2024 and December 31, 2023.
19
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. 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.
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
On May 19, 2022, a lawsuit was filed 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 Eastern District of Virginia Alexandria Division, 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 complaint generally alleges, 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 complaint seeks unspecified damages on behalf of a class of purchasers of the Company’s securities between May 29, 2020 and May 9, 2022. The litigation has since been transferred to the United States District Court for the District of Massachusetts (Case 1:22-cv-11220-WGY), and lead plaintiff class representatives - Central Pennsylvania Teamsters Pension Fund - Defined Benefit Plan, Central Pennsylvania Teamsters Pension Fund - Retirement Income Plan 1987, and Construction Industry Laborers Pension Fund - have been appointed. On October 18, 2022, a consolidated amended complaint was filed that does not add any new parties or legal claims, is based upon the same general factual allegations as the original complaint, and now seeks unspecified damages on behalf of a class of purchasers of the Company’s securities between June 16, 2020 and May 9, 2022. The Company moved to dismiss the consolidated amended complaint on December 19, 2022. The hearing on the Company’s motion to dismiss took place on May 17, 2023. After hearing argument from both sides, the Court denied the Company’s motion from the bench and stated that a written opinion would follow. On June 30, 2023, the Company filed its Answer to the complaint. On July 24, 2023, the Court issued its written opinion denying the motion to dismiss as to the Company and Defendant Trefler but granting the motion without prejudice as to Mr. Stillwell.
On March 4, 2024, the parties agreed in principle to a proposed settlement of the litigation for an aggregate sum of $35 million. On April 23, 2024, the parties executed a stipulation of settlement. On April 23, 2024, the plaintiffs filed a motion seeking preliminary approval of the settlement. On May 15, 2024, the Court granted plaintiffs’ motion for preliminary approval of the settlement. On September 6, 2024, the Company received notice that certain shareholders, representing approximately 3% of the settlement class, would be excluded from the settlement. On September 19, 2024, the Court approved the settlement, including an award of attorneys’ fees and the plan of allocation, and thereafter, on September 25, 2024, entered Final Judgment.
20
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. 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 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, Pegasystems Inc., Nominal Defendant (Case 2484CV01734). 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 recent class action settlement, and litigation costs from various proceedings. On October 18, 2024 the defendants served a motion to dismiss the complaint. 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.
SEC Inquiry
Beginning in March 2023, the U.S. Securities and Exchange Commission (“SEC”) has requested certain information relating to, among other things, the accounting treatment of the Company’s above-described litigation with Appian Corporation.
By letter dated September 9, 2024, the Staff of the Division of Enforcement of the SEC (“Staff”) notified the Company that the Staff had concluded its investigation of the Company commenced March 2023 and that, based on the information that it had as of September 9, 2024, the Staff did not intend to recommend any enforcement action against the Company.

21

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 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, 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 October 23, 2024.
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 build agility into their business so they can adapt to change. Our powerful, low-code platform for workflow automation and artificial intelligence-powered decisioning enables the world’s leading brands and government agencies to hyper-personalize customer experiences, streamline customer service, and automate mission-critical business processes and workflows. With Pega, our clients can leverage our artificial intelligence (“AI”) technology and scalable architecture to accelerate their digital transformation. In addition, our client success teams, world-class partners, and clients leverage our Pega Express™ methodology to design and deploy mission-critical applications quickly and collaboratively.
22

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 to our clients’ specific 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.
549755814275
September 30, 2024September 30, 2023Change
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 %
Reconciliation of ACV and constant currency ACV
(in millions, except percentages)September 30, 2023September 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.

23

Cash flow (1)
1819
(Dollars in thousands)
Nine Months Ended
September 30,
Change
20242023
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 
Restructuring4,214 21,576 
Interest on convertible senior notes3,767 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.
24

Remaining performance obligations (“Backlog”)
50
Reconciliation of Backlog and Constant Currency Backlog (Non-GAAP)
(in millions, except percentages)September 30, 2023September 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.
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, 2023:
•“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, 2023.
25

RESULTS OF OPERATIONS
Revenue
(Dollars in thousands)Three Months Ended
September 30,		ChangeNine Months Ended
September 30,		Change
2024202320242023
Pega Cloud$144,108 44 %$118,040 35 %$26,068 22 %$409,096 41 %$340,982 36 %$68,114 20 %
Maintenance80,702 25 %83,538 25 %(2,836)(3)%242,047 24 %245,210 25 %(3,163)(1)%
Subscription services224,810 69 %201,578 60 %23,232 12 %651,143 65 %586,192 61 %64,951 11 %
Subscription license45,420 14 %74,342 22 %(28,922)(39)%193,405 19 %200,066 21 %(6,661)(3)%
Subscription270,230 83 %275,920 82 %(5,690)(2)%844,548 84 %786,258 82 %58,290 7 %
Consulting54,364 17 %55,976 17 %(1,612)(3)%160,451 16 %167,396 18 %(6,945)(4)%
Perpetual license456 — %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 %
•The increases in Pega Cloud revenue for the three and nine months ended September 30, 2024 were primarily due to additional investments made by our existing clients as they continued to expand their use of Pega Cloud.
•The decreases in maintenance revenue in the three and nine months ended September 30, 2024 were primarily due to our clients’ shift to Pega Cloud-based offerings, which do not generally result in maintenance revenue.
•The decreases in subscription license revenue in the three and nine months ended September 30, 2024 were primarily due to several large multi-year contracts recognized in revenue in the three and nine months ended September 30, 2023.
•The decreases in consulting revenue in the three and nine months ended September 30, 2024 were primarily due to decreases in consultant billable hours and utilization.
Gross profit
(Dollars in thousands)Three Months Ended
September 30,		ChangeNine Months Ended
September 30,		Change
2024202320242023
Pega Cloud$113,625 79 %$88,553 75 %$25,072 28 %$319,261 78 %$250,943 74 %$68,318 27 %
Maintenance74,317 92 %77,119 92 %(2,802)(4)%222,952 92 %225,696 92 %(2,744)(1)%
Subscription services187,942 84 %165,672 82 %22,270 13 %542,213 83 %476,639 81 %65,574 14 %
Subscription license45,036 99 %73,713 99 %(28,677)(39)%191,901 99 %198,095 99 %(6,194)(3)%
Subscription232,978 86 %239,385 87 %(6,407)(3)%734,114 87 %674,734 86 %59,380 9 %
Consulting(5,087)(9)%(1,228)(2)%(3,859)(314)%(17,413)(11)%(8,866)(5)%(8,547)(96)%
Perpetual license453 99 %2,723 99 %(2,270)(83)%1,339 99 %4,678 99 %(3,339)(71)%
$228,344 70 %$240,880 72 %$(12,536)(5)%$718,040 71 %$670,546 70 %$47,494 7 %
•The increases in Pega Cloud gross profit percent in the three and nine months ended September 30, 2024 were primarily due to increased cost efficiency, primarily for hosting services and employee compensation and benefits, as Pega Cloud continues to grow and scale.
•The decreases in consulting gross profit percent in the three and nine months ended September 30, 2024 were primarily due to decreases in consultant utilization rates.
Operating expenses
(Dollars in thousands)Three Months Ended
September 30,		ChangeNine Months Ended
September 30,		Change
2024202320242023
Selling and marketing$127,669 $131,598 $(3,929)(3)%$395,125 $425,253 $(30,128)(7)%
% of Revenue39 %39 %39 %44 %
Research and development$74,157 $74,955 $(798)(1)%$221,695 $224,262 $(2,567)(1)%
% of Revenue23 %22 %22 %23 %
General and administrative$35,694 $27,321 $8,373 31 %$84,641 $73,893 $10,748 15 %
% of Revenue11 %8 %8 %8 %
Litigation settlement, net of recoveries$— $— $— *$32,403 $— $32,403 *
% of Revenue— %— %3 %— %
Restructuring$2,485 $17,822 $(15,337)(86)%$3,283 $21,450 $(18,167)(85)%
% of Revenue1 %5 %— %2 %
* not meaningful
26

•The decreases in selling and marketing during the three and nine months ended September 30, 2024 were primarily due to decreases in compensation and benefits of $2.4 million and $27.5 million, respectively, from reduced headcount as a result of our effort to optimize our go-to-market strategy. For additional information, see "Note 9. Restructuring" in Part I, Item 1 of this Quarterly Report.
•The decrease in research and development for the three months ended September 30, 2024 was primarily due to a decrease in compensation and benefits of $1.1 million. The decrease in research and development for the nine months ended September 30, 2024 was primarily due to a decrease in cloud hosting expenses of $1.8 million and a decrease in compensation and benefits of $1.5 million.
•The increases in general and administrative during the three and nine months ended September 30, 2024 were primarily due to increases in compensation and benefits of $3.1 million and $7.2 million, respectively, due to increases in incentive-based compensation.
•The increase in litigation settlement, net of recoveries in the nine months ended September 30, 2024 was primarily due to the cost to settle litigation arising from proceedings outside the ordinary course of business. See "Note 15. Commitments and Contingencies" in Part I, Item 1 of this Quarterly Report and “Risk Factors” in Part I, Item 1A of our Annual Report for the year ended December 31, 2023 for additional information.
•The decreases in restructuring expenses during the three and nine months ended September 30, 2024 were primarily due to efforts to optimize our go-to-market organization and office space. For additional information, see "Note 9. Restructuring" in Part I, Item 1 of this Quarterly Report.
Other income and expenses
(Dollars in thousands)Three Months Ended
September 30,		ChangeNine Months Ended
September 30,		Change
2024202320242023
Foreign currency transaction (loss) gain$(4,405)$1,994 $(6,399)*$(7,230)$(3,971)$(3,259)(82)%
Interest income6,769 2,532 4,237 167 %18,835 5,831 13,004 223 %
Interest expense(1,639)(1,533)(106)(7)%(5,047)(5,229)182 3 %
(Loss) on capped call transactions(689)(2,294)1,605 70 %(667)(449)(218)(49)%
Other income, net— 6,383 (6,383)(100)%1,684 18,668 (16,984)(91)%

$36 $7,082 $(7,046)(99)%$7,575 $14,850 $(7,275)(49)%
* not meaningful
•The changes in foreign currency transaction (loss) gain in the three and nine months ended September 30, 2024 was primarily due to fluctuations in foreign currency exchange rates associated with foreign currency-denominated cash and receivables held by our subsidiary in the United Kingdom.
•The increases in interest income in the three and nine months ended September 30, 2024 were primarily due to higher investment balances and higher interest rate yields.
•The changes in (loss) on capped call transactions in the three and nine months ended September 30, 2024 were due to fair value adjustments for our capped call transactions.
•The decrease in other income, net in the three months ended September 30, 2024 was due to a gain of $6.4 million on our venture investments in the three months ended September 30, 2023. The decrease in other income, net in the nine months ended September 30, 2024 was due to a gain of $7.9 million from repurchases of our convertible senior notes and a decrease of $9.3 million in the gain from our venture investments in the nine months ended September 30, 2024. For additional information, see “Note 8. Debt” and "Note 10. Fair Value Measurements" in Part I, Item 1 of this Quarterly Report.
Provision for income taxes
Nine Months Ended
September 30,
(Dollars in thousands)20242023
Provision for income taxes$8,369 $15,395 
Effective income tax rate(73)%(26)%
Our effective income tax rate for the nine months ended September 30, 2024, is impacted by the jurisdictional mix and timing of the actual compared to projected earnings (losses). It is also impacted by the valuation allowance on our deferred tax assets in the U.S. and U.K. and a near break-even year-to-date pretax loss resulting in a not meaningful effective income tax rate.
The Organization for Economic Cooperation and Development (“OECD”) has introduced new global minimum tax regulations, known as Pillar Two, that began to come into effect on January 1, 2024. We are monitoring this development and evaluating its potential impact on our tax rate and eligibility to qualify for the safe harbor provisions. For 2024, we currently anticipate meeting the transitional safe harbors in most jurisdictions, with any remaining top-up tax being immaterial.
27

LIQUIDITY AND CAPITAL RESOURCES
Nine Months Ended
September 30,
 (in thousands)20242023
Cash provided by (used in):
Operating activities$250,697 $137,920 
Investing activities(215,999)(24,176)
Financing activities26,949 (85,031)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash4,591 (1,621)
Net increase in cash, cash equivalents, and restricted cash$66,238 $27,092 

(in thousands)
September 30, 2024December 31, 2023
Held in U.S. entities$464,232 $263,453 
Held in foreign entities238,758 159,885 
Total cash, cash equivalents, and marketable securities702,990 423,338 
Restricted cash included in other current assets184 — 
Restricted cash included in other long-term assets11,232 2,925 
Total cash, cash equivalents, marketable securities, and restricted cash
$714,406 $426,263 
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, settlement of our convertible senior notes due on March 1, 2025, 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 nine months ended September 30, 2024 was primarily due to growth in client collections and the impact of our cost-efficiency initiatives. For additional information, see “Note 9. Restructuring” and "Note 15. Commitments and Contingencies" in Part I, Item 1 of this Quarterly Report.
Investing activities
The change in cash (used in) investing activities in the nine months ended September 30, 2024 was primarily due to our investments in financial instruments and reduced investment in property and equipment as we optimized our office space.
Financing activities
Debt financing
In February 2020, we issued $600 million in aggregate principal amount of convertible senior notes, which mature on March 1, 2025. As of September 30, 2024, we had $502.3 million in aggregate principal amount of convertible senior notes outstanding. For additional information, see "Note 8. Debt" in Part I, Item 1 of this Quarterly Report.
In November 2019, and as since amended, we entered into a $100 million senior secured revolving credit agreement (the “Credit Facility”) with PNC Bank, National Association. On April 23, 2024, the Credit Facility was amended to extend the expiration date to February 4, 2025. As of September 30, 2024 and December 31, 2023, we had $27.3 million in outstanding letters of credit under the Credit Facility, reducing available borrowing capacity, but no outstanding cash borrowings. For additional information, see "Note 8. Debt" in Part I, Item 1 of this Quarterly Report.
28

Stock repurchase program
Changes in the remaining stock repurchase authority:
(in thousands)Nine Months Ended
September 30, 2024
December 31, 2023$60,000 
Authorizations (1)
— 
Repurchases (2)
(11,749)
September 30, 2024$48,251 
(1) On April 23, 2024, our Board of Directors extended the expiration date of our share repurchase program from June 30, 2024 to June 30, 2025. On October 22, 2024, our Board of Directors extended the expiration date of our 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.
(2) All purchases under this program have been made on the open market.
Common stock repurchases
Nine Months Ended
September 30,
20242023
(in thousands)SharesAmountSharesAmount
Repurchases paid
164 $11,249 — $— 
Repurchases unpaid at period end
7 500 — — 
Stock repurchase program
171 11,749 — — 
Tax withholdings for net settlement of equity awards48 2,987 39 1,654 
219 14,736 39 1,654 
In the nine months ended September 30, 2024 and 2023, instead of receiving cash from the equity holders, we withheld shares with a value of $3.3 million and $1.0 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.
Nine Months Ended
September 30,
(in thousands)20242023
Dividend payments to stockholders$7,626 $7,458 
Contractual obligations
As of September 30, 2024, our contractual obligations were:
Payments due by period
(in thousands)Remainder of 202420252026202720282029 and afterOtherTotal
Convertible senior notes (1)
$— $504,154 $— $— $— $— $— $504,154 
Purchase obligations (2)
51,146 142,370 127,548 135,488 990 — — 457,542 
Operating lease obligations
4,094 18,276 13,754 13,503 12,939 31,932 — 94,498 
Venture investment commitments (3)
— 500 500 — — — — 1,000 
Liability for uncertain tax positions (4)
— — — — — — 867 867 
$55,240 $665,300 $141,802 $148,991 $13,929 $31,932 $867 $1,058,061 
(1) Includes principal and interest.
(2) Represents the fixed amount owed for purchase obligations including for software licenses, hosting services, and sales and marketing programs.
(3) Represents the maximum funding under existing venture investment agreements. Our venture investment agreements generally allow us to withhold unpaid funds at our discretion.
(4) 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.
29

A hypothetical 10% strengthening in the U.S. dollar against other currencies would have resulted in the following:
Nine Months Ended
September 30,
20242023
(Decrease) in revenue(4)%(4)%
(Decrease) increase in net income(23)%(5)%
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, 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:
Nine Months Ended
September 30,
(in thousands)20242023
Foreign currency (loss)$(12,771)$(11,351)
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 September 30, 2024. 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 September 30, 2024.
(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 September 30, 2024 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
30

PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The information set forth in “Note 15. 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, 2023, 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 September 30, 2024:
(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
July 1, 2024 - July 31, 20241 $65.27 — $60,000 
August 1, 2024 - August 31, 202434 68.95 25 $58,250 
September 1, 2024 - September 30, 2024152 68.82 146 $48,251 
187 $68.82 171 
(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.
ITEM 5.     OTHER INFORMATION
Rule 10b5-1 and non-rule 10b5-1 trading arrangements
On August 29, 2024, Kenneth Stillwell, our Chief Financial Officer and Chief Operating Officer, entered into a trading plan that provides for the sale of 18,000 shares of our common stock. The plan will terminate on August 31, 2025, subject to early termination for certain specified events set forth in the plan.
Other than as disclosed above, during the three months ended September 30, 2024, 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.
Share Repurchase Program
On October 22, 2024, our Board of Directors extended the expiration date of our 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. Any actual repurchases under the current repurchase program will be disclosed in the Company’s annual reports on Form 10-K and quarterly reports on Form 10-Q filed with the Securities and Exchange Commission for the annual and applicable quarterly periods ending between December 31, 2024 and 2025.
31

ITEM 6.     EXHIBITS
Exhibit No.DescriptionIncorporation by ReferenceFiled Herewith
FormExhibitFiling Date
3.110-Q3.1November 4, 2014
3.28-K3.2June 15, 2020
31.1X
31.2X
32+
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.
X
101.SCH
Inline XBRL Taxonomy Extension Schema Document.
X
101.CAL
Inline XBRL Taxonomy Calculation Linkbase Document.
X
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document.
X
101.LAB
Inline XBRL Taxonomy Label Linkbase Document.
X
101.PRE
Inline XBRL Taxonomy Presentation Linkbase Document.
X
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
X
+ Indicates that the exhibit is being furnished with this report and is not filed as a part of it.
32

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:October 23, 2024By:/s/ KENNETH STILLWELL
Kenneth Stillwell
Chief Operating Officer and Chief Financial Officer
(Principal Financial Officer)