10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________________

FORM 10-Q

_____________________________________

☒	Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the quarterly period ended March 31, 2023

OR

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

Commission File Number: 1-11859 

____________________________

PEGASYSTEMS INC.

(Exact name of Registrant as specified in its charter) 

____________________________

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

One Main Street, Cambridge, MA 02142

(Address of principal executive offices, including zip code)

(617) 374-9600

(Registrant’s telephone number, including area code)

____________________________

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

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

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

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

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

Large accelerated filer x Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐

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

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

There were 82,961,204 shares of the Registrant’s common stock, $0.01 par value per share, outstanding on April 19, 2023.

PEGASYSTEMS INC.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

	Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Condensed Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022	3
Unaudited Condensed Consolidated Statements of Operations for the three months ended March 31, 2023 and 2022	4
Unaudited Condensed Consolidated Statements of Comprehensive (Loss) for the three months ended March 31, 2023 and 2022	5
Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2023 and 2022	6
Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 2022	7
Notes to Unaudited Condensed Consolidated Financial Statements	8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3. Quantitative and Qualitative Disclosures About Market Risk	28
Item 4. Controls and Procedures	28
PART II - OTHER INFORMATION
Item 1. Legal Proceedings	29
Item 1A. Risk Factors	29
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	29
Item 5. Other Information	29
Item 6. Exhibits	30
Signature	31

2

PART I - FINANCIAL INFORMATION

ITEM 1.     FINANCIAL STATEMENTS

PEGASYSTEMS INC. UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands)
	March 31, 2023		December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	168,318	$	145,054
Marketable securities	155,564		152,167
Total cash, cash equivalents, and marketable securities	323,882		297,221
Accounts receivable	201,585		255,150
Unbilled receivables	196,279		213,719
Other current assets	73,982		80,388
Total current assets	795,728		846,478
Unbilled receivables	79,704		95,806
Goodwill	81,434		81,399
Other long-term assets	324,975		333,989
Total assets	$	1,281,841	$	1,357,672
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	12,565	$	18,195
Accrued expenses	45,432		50,355
Accrued compensation and related expenses	56,574		127,728
Deferred revenue	342,591		325,212
Other current liabilities	17,802		17,450
Total current liabilities	474,964		538,940
Convertible senior notes, net	561,655		593,609
Operating lease liabilities	76,082		79,152
Other long-term liabilities	14,644		15,128
Total liabilities	1,127,345		1,226,829
Commitments and contingencies (Note 15)
Stockholders’ equity:
Preferred stock, 1,000 shares authorized; none issued	—		—
Common stock, 200,000 shares authorized; 82,940 and 82,436 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively	829		824
Additional paid-in capital	272,481		229,602
Accumulated deficit	(97,287)		(76,513)
Accumulated other comprehensive (loss)	(21,527)		(23,070)
Total stockholders’ equity	154,496		130,843
Total liabilities and stockholders’ equity	$	1,281,841	$	1,357,672

See notes to unaudited condensed consolidated financial statements.

3

PEGASYSTEMS INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts)
	Three Months Ended March 31,
	2023		2022
Revenue
Subscription services	$	187,509	$	170,033
Subscription license	84,527		137,533
Consulting	53,033		61,301
Perpetual license	403		7,440
Total revenue	325,472		376,307
Cost of revenue
Subscription services	36,864		32,030
Subscription license	719		622
Consulting	60,348		55,511
Perpetual license	3		34
Total cost of revenue	97,934		88,197
Gross profit	227,538		288,110
Operating expenses
Selling and marketing	149,797		162,236
Research and development	75,376		71,490
General and administrative	23,110		35,764
Restructuring	1,461		—
Total operating expenses	249,744		269,490
(Loss) income from operations	(22,206)		18,620
Foreign currency transaction (loss) gain	(2,675)		2,876
Interest income	1,485		207
Interest expense	(1,918)		(1,946)
Gain (loss) on capped call transactions	3,206		(30,560)
Other income, net	6,583		2,741
(Loss) before provision for (benefit from) income taxes	(15,525)		(8,062)
Provision for (benefit from) income taxes	5,249		(7,683)
Net (loss)	$	(20,774)	$	(379)
(Loss) per share
Basic	$	(0.25)	$	—
Diluted	$	(0.25)	$	—
Weighted-average number of common shares outstanding
Basic	82,604		81,680
Diluted	82,604		81,680

See notes to unaudited condensed consolidated financial statements.

4

PEGASYSTEMS INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) (in thousands)
	Three Months Ended March 31,
	2023		2022
Net (loss)	$	(20,774)	$	(379)
Other comprehensive income (loss), net of tax
Unrealized (loss) gain on available-for-sale securities	(46)		222
Foreign currency translation adjustments	1,589		(2,770)
Total other comprehensive income (loss), net of tax	1,543		(2,548)
Comprehensive (loss)	$	(19,231)	$	(2,927)

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 Stock			Additional Paid-In Capital		Retained Earnings (Accumulated Deficit)		Accumulated Other Comprehensive (Loss)		Total Stockholders’ Equity
	Number of Shares	Amount
December 31, 2021	81,712	$	817	$	145,810	$	276,449	$	(6,988)	$	416,088
Repurchase of common stock	(242)	(2)		(22,581)		—		—		(22,583)
Issuance of common stock for stock compensation plans	297	3		(12,131)		—		—		(12,128)
Issuance of common stock under the employee stock purchase plan	35	—		2,446		—		—		2,446
Stock-based compensation	—	—		28,227		—		—		28,227
Cash dividends declared ($0.03 per share)	—	—		—		(2,455)		—		(2,455)
Other comprehensive (loss)	—	—		—		—		(2,548)		(2,548)
Net (loss)	—	—		—		(379)		—		(379)
March 31, 2022	81,802	$	818	$	141,771	$	273,615	$	(9,536)	$	406,668
December 31, 2022	82,436	$	824	$	229,602	$	(76,513)	$	(23,070)	$	130,843
Issuance of common stock for stock compensation plans	452	4		668		—		—		672
Issuance of common stock under the employee stock purchase plan	52	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, 2023	82,940	$	829	$	272,481	$	(97,287)	$	(21,527)	$	154,496

See notes to unaudited condensed consolidated financial statements.

6

PEGASYSTEMS INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
	Three Months Ended March 31,
	2023		2022
Operating activities
Net (loss)	$	(20,774)	$	(379)
Adjustments to reconcile net (loss) to cash provided by operating activities
Stock-based compensation	42,557		28,227
Deferred income taxes	(126)		(9,295)
(Gain) loss on capped call transactions	(3,206)		30,560
Amortization of deferred commissions	14,277		17,221
Lease expense	4,594		3,919
Amortization of intangible assets and depreciation	4,724		4,171
Foreign currency transaction loss (gain)	2,675		(2,876)
Other non-cash	(5,729)		(1,100)
Change in operating assets and liabilities, net	29,115		(55,332)
Cash provided by operating activities	68,107		15,116
Investing activities
Purchases of investments	(39,401)		(33,690)
Proceeds from maturities and called investments	36,475		20,915
Sales of investments	—		13,350
Investment in property and equipment	(11,487)		(6,657)
Cash (used in) investing activities	(14,413)		(6,082)
Financing activities
Repurchases of convertible senior notes	(29,901)		—
Proceeds from settlement of capped calls transactions	188		—
Dividend payments to stockholders	(2,474)		(2,454)
Proceeds from employee stock purchase plan	2,143		2,446
Proceeds from stock option exercises	1,779		—
Common stock repurchases	(1,107)		(35,910)
Cash (used in) financing activities	(29,372)		(35,918)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	782		(310)
Net increase (decrease) in cash, cash equivalents, and restricted cash	25,104		(27,194)
Cash, cash equivalents, and restricted cash, beginning of period	145,054		159,965
Cash, cash equivalents, and restricted cash, end of period	$	170,158	$	132,771
Cash and cash equivalents	$	168,318	$	132,771
Restricted cash included in other long-term assets	1,840		—
Total cash, cash equivalents and restricted cash	$	170,158	$	132,771

See notes to unaudited condensed consolidated financial statements.

7

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, 2022.

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 the full year 2023.

NOTE 2. MARKETABLE SECURITIES

	March 31, 2023								December 31, 2022
(in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value		Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Government debt	$	2,970	$	—	$	(33)	$	2,937	$	2,960	$	—	$	(52)	$	2,908
Corporate debt	154,299		8		(1,680)		152,627		151,906		—		(2,647)		149,259
	$	157,269	$	8	$	(1,713)	$	155,564	$	154,866	$	—	$	(2,699)	$	152,167

As of March 31, 2023, marketable securities’ maturities ranged from April 2023 to January 2026, with a weighted-average remaining maturity of 0.5 years.

NOTE 3. RECEIVABLES, CONTRACT ASSETS, AND DEFERRED REVENUE

Receivables

(in thousands)	March 31, 2023		December 31, 2022
Accounts receivable	$	201,585	$	255,150
Unbilled receivables	196,279		213,719
Long-term unbilled receivables	79,704		95,806
	$	477,568	$	564,675

Unbilled receivables

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

Unbilled receivables by expected billing date:

(Dollars in thousands)	March 31, 2023
1 year or less	$	196,279	71	%
1-2 years	64,812		24	%
2-5 years	14,892		5	%
	$	275,983	100	%

Unbilled receivables by contract effective date:

(Dollars in thousands)	March 31, 2023
2023	$	51,895	19	%
2022	96,349		34	%
2021	87,278		32	%
2020	27,755		10	%
2019 and prior	12,706		5	%
	$	275,983	100	%

8

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)	March 31, 2023		December 31, 2022
Contract assets (1)	$	14,463	$	17,546
Long-term contract assets (2)	11,323		16,470
	$	25,786	$	34,016

(1) Included in other current assets. (2) Included in other long-term assets.

Deferred revenue

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

(in thousands)	March 31, 2023		December 31, 2022
Deferred revenue	$	342,591	$	325,212
Long-term deferred revenue (1)	3,323		3,552
	$	345,914	$	328,764

(1) Included in other long-term liabilities.

The increase in deferred revenue in the three months ended March 31, 2023 was primarily due to new billings in advance of revenue recognition exceeding the $139.7 million of revenue recognized during the period that was included in deferred revenue as of December 31, 2022.

NOTE 4. DEFERRED COMMISSIONS

(in thousands)	March 31, 2023		December 31, 2022
Deferred commissions (1)	$	124,069	$	130,195

(1) Included in other long-term assets.

	Three Months Ended March 31,
(in thousands)	2023		2022
Amortization of deferred commissions (1)	$	14,277	$	17,221

(1) Included in selling and marketing expense.

NOTE 5. GOODWILL AND OTHER INTANGIBLES

Goodwill

	Three Months Ended March 31,
(in thousands)	2023		2022
January 1,	$	81,399	$	81,923
Currency translation adjustments	35		108
March 31,	$	81,434	$	82,031

Intangibles

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

		March 31, 2023
(in thousands)	Useful Lives	Cost		Accumulated Amortization		Net Book Value (1)
Client-related	4-10 years	$	63,094	$	(58,983)	$	4,111
Technology	2-10 years	68,085		(62,335)		5,750
Other	1-5 years	5,361		(5,361)		—
		$	136,540	$	(126,679)	$	9,861

(1) Included in other long-term assets.

9

PEGASYSTEMS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

		December 31, 2022
(in thousands)	Useful Lives	Cost		Accumulated Amortization		Net Book Value (1)
Client-related	4-10 years	$	63,076	$	(58,623)	$	4,453
Technology	2-10 years	68,056		(61,621)		6,435
Other	1-5 years	5,361		(5,361)		—
		$	136,493	$	(125,605)	$	10,888

(1) Included in other long-term assets.

Future estimated intangibles assets amortization:

(in thousands)	March 31, 2023
Remainder of 2023	$	2,884
2024	3,163
2025	2,613
2026	874
2027	327
	$	9,861

Amortization of intangible assets:

	Three Months Ended March 31,
(in thousands)	2023		2022
Cost of revenue	$	706	$	629
Selling and marketing	343		343
	$	1,049	$	972

NOTE 6. OTHER ASSETS AND LIABILITIES

Other current assets

(in thousands)	March 31, 2023		December 31, 2022
Income tax receivables	$	22,344	$	25,354
Contract assets	14,463		17,546
Other	37,175		37,488
	$	73,982	$	80,388

Other long-term assets

(in thousands)	March 31, 2023		December 31, 2022
Deferred commissions	$	124,069	$	130,195
Right of use assets	72,549		76,114
Property and equipment	55,775		55,056
Venture investments	16,265		13,069
Contract assets	11,323		16,470
Intangible assets	9,861		10,888
Capped call transactions	5,600		2,582
Deferred income taxes	4,827		4,795
Restricted cash	1,840		—
Other	22,866		24,820
	$	324,975	$	333,989

Other current liabilities

(in thousands)	March 31, 2023		December 31, 2022
Operating lease liabilities	$	15,314	$	14,976
Dividends payable	2,488		2,474
	$	17,802	$	17,450

10

PEGASYSTEMS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Other long-term liabilities

(in thousands)	March 31, 2023		December 31, 2022
Deferred revenue	$	3,323	$	3,552
Income taxes payable	3,578		3,207
Other	7,743		8,369
	$	14,644	$	15,128

NOTE 7. LEASES

Expense

	Three Months Ended March 31,
(in thousands)	2023		2022
Fixed lease costs	$	5,766	$	5,093
Short-term lease costs	781		806
Variable lease costs	1,975		764
	$	8,522	$	6,663

Right of use assets and lease liabilities

(in thousands)	March 31, 2023		December 31, 2022
Right of use assets (1)	$	72,549	$	76,114
Operating lease liabilities (2)	$	15,314	$	14,976
Long-term operating lease liabilities	$	76,082	$	79,152

(1) Included in other long-term assets.

(2) Included in other current liabilities.

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

	March 31, 2023		December 31, 2022
Weighted-average remaining lease term	7.3 years		7.5 years
Weighted-average discount rate (1)	4.1	%	4.1	%

(1) The rates implicit in most of 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.

Maturities of lease liabilities:

(in thousands)	March 31, 2023
Remainder of 2023	$	14,003
2024	17,642
2025	14,562
2026	10,917
2027	9,863
2028	9,290
Thereafter	30,090
Total lease payments	106,367
Less: imputed interest (1)	(14,971)
	$	91,396

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

Cash flow information

	Three Months Ended March 31,
(in thousands)	2023		2022
Cash paid for operating leases, net of tenant improvement allowances	$	5,038	$	3,650
Right of use assets recognized for new leases and amendments (non-cash)	$	721	$	3,854

11

PEGASYSTEMS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

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 on September 1, 2020.

In the three months ended March 31, 2023, the Company recorded a gain of $2.8 million in other income, net from the repurchase of Notes representing $33 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 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. The conversion rate will be adjusted upon certain events, including spin-offs, tender offers, exchange offers, and certain stockholder distributions.

Beginning on September 1, 2024, noteholders may convert their Notes at any time at their election.

Before September 1, 2024, noteholders may 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).

As of March 31, 2023, the Notes were not eligible for conversion.

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.

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)	March 31, 2023		December 31, 2022
Principal	$	567,000	$	600,000
Unamortized issuance costs	(5,345)		(6,391)
Convertible senior notes, net	$	561,655	$	593,609

Interest expense related to the Notes:

	Three Months Ended March 31,
(in thousands)	2023		2022
Contractual interest expense (0.75% coupon)	$	1,125	$	1,125
Amortization of issuance costs	728		719
	$	1,853	$	1,844

12

PEGASYSTEMS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The average interest rate on the Notes in the three months ended March 31, 2023 and 2022 was 1.2%.

Future payments of principal and contractual interest:

	March 31, 2023
(in thousands)	Principal		Interest		Total
Remainder of 2023	$	—	$	1,772	$	1,772
2024	—		4,253		4,253
2025	567,000		2,126		569,126
	$	567,000	$	8,151	$	575,151

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 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 three months ended March 31, 2023, Capped Call Transactions covering approximately 0.2 million shares were settled for proceeds of $0.2 million.

As of March 31, 2023, Capped Call Transactions representing approximately 4.2 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 of the Capped Call Transactions, calculated following the governing documents, may not represent a fair value measurement. The Capped Call Transactions are classified as other long-term assets and remeasured to fair value each reporting period, resulting in a non-operating gain or loss.

Change in capped call transactions:

	Three Months Ended March 31,
(in thousands)	2023		2022
January 1,	$	2,582	$	59,964
Settlements	(188)		—
Fair value adjustment	3,206		(30,560)
March 31,	$	5,600	$	29,404

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 expire on November 4, 2024, and any outstanding loans will be payable on such date. The Credit Facility, as amended, contains customary covenants, including, but not limited to, those relating to additional indebtedness, liens, asset divestitures, and affiliate transactions.

The Company is required to comply with financial covenants, including:

•Beginning with the fiscal quarter ended March 31, 2022 and ending with the fiscal quarter ended December 31, 2023, Pegasystems Inc. must maintain at least $200 million in cash, investments, and availability under the Revolving Credit Loan.

•Beginning with the fiscal quarter ended March 31, 2023 and ending with the fiscal year ended December 31, 2023, maintain

	Year to Date
(in thousands)	March 31, 2023		June 30, 2023		September 30, 2023		December 31, 2023
Minimum Consolidated EBITDA (as defined in the Credit Facility)	$	38,862	$	59,894	$	95,597	$	214,590

•Beginning with the fiscal quarter ended March 31, 2024, a maximum net consolidated leverage ratio of 3.5 to 1.0 (with a step-up for certain acquisitions) and a minimum consolidated interest coverage ratio of 3.5 to 1.0.

As of March 31, 2023 and December 31, 2022, the Company had no outstanding cash borrowings under the Credit Facility.

As of March 31, 2023, the Company had $27.3 million in outstanding letters of credit, which reduce the Company’s available borrowing capacity under the Credit Facility.

13

PEGASYSTEMS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 9. RESTRUCTURING

Go-to-market plan and Salem office

During the fourth quarter of 2022, management committed to a restructuring plan aligned with the Company’s target organization go-to-market strategy. The plan resulted in a restructuring expense of $21.7 million, primarily associated with severance and benefits for impacted employees and expenses incurred as a result of the closure of the Company’s Salem, New Hampshire office.

Accrued employee severance and related benefits:

(in thousands)	2023
January 1,	$	18,573
Costs incurred	220
Cash disbursements	(14,458)
Currency translation adjustments	181
March 31,	$	4,516

2023 office space closure

In the three months ended March 31, 2023, the Company recognized an impairment of $1.2 million on its operating lease right of use assets primarily due to the closure of leased office space in Poland.

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;

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

•Level 3 - significant unobservable inputs on which there is 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:

	March 31, 2023								December 31, 2022
(in thousands)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Cash equivalents	$	41,088	$	—	$	—	$	41,088	$	2,526	$	—	$	—	$	2,526
Marketable securities	$	—	$	155,564	$	—	$	155,564	$	—	$	152,167	$	—	$	152,167
Capped Call Transactions (1)	$	—	$	5,600	$	—	$	5,600	$	—	$	2,582	$	—	$	2,582
Venture investments (1) (2)	$	—	$	—	$	16,265	$	16,265	$	—	$	—	$	13,069	$	13,069

(1) Included in other long-term assets. (2) Investments in privately-held companies.

14

PEGASYSTEMS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Changes in venture investments:

	Three Months Ended March 31,
(in thousands)	2023		2022
January 1,	$	13,069	$	7,648
New investments	400		—
Changes in foreign exchange rates	58		(61)
Changes in fair value:
included in other income, net	3,802		2,741
included in other comprehensive (loss)	(1,064)		2,502
March 31,	$	16,265	$	12,830

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

Fair value of the Notes

The fair value of the Notes outstanding (including the embedded conversion feature) was $507.8 million as of March 31, 2023 and $521.1 million as of December 31, 2022. In the three months ended March 31, 2023 the Company repurchased Notes representing $33 million in aggregate principal amount.

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 March 31,
(Dollars in thousands)	2023				2022
U.S.	$	184,519	56	%	$	217,272	58	%
Other Americas	15,011		5	%	45,751		12	%
United Kingdom (“U.K.”)	42,237		13	%	30,932		8	%
Europe (excluding U.K.), Middle East, and Africa	51,318		16	%	49,136		13	%
Asia-Pacific	32,387		10	%	33,216		9	%
	$	325,472	100	%	$	376,307	100	%

Revenue streams

	Three Months Ended March 31,
(in thousands)	2023		2022
Perpetual license	$	403	$	7,440
Subscription license	84,527		137,533
Revenue recognized at a point in time	84,930		144,973
Maintenance	79,630		79,716
Pega Cloud	107,879		90,317
Consulting	53,033		61,301
Revenue recognized over time	240,542		231,334
Total revenue	$	325,472	$	376,307

15

PEGASYSTEMS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

	Three Months Ended March 31,
(in thousands)	2023		2022
Pega Cloud	$	107,879	$	90,317
Maintenance	79,630		79,716
Subscription services	187,509		170,033
Subscription license	84,527		137,533
Subscription	272,036		307,566
Perpetual license	403		7,440
Consulting	53,033		61,301
	$	325,472	$	376,307

Remaining performance obligations ("Backlog")

Expected future revenue from existing non-cancellable contracts:

As of March 31, 2023:

(Dollars in thousands)	Subscription services				Subscription license		Perpetual license		Consulting		Total
	Maintenance		Pega Cloud
1 year or less	$	235,315	$	389,632	$	35,346	$	5,262	$	41,203	$	706,758	54	%
1-2 years	66,272		239,228		3,215		2,252		6,653		317,620		24	%
2-3 years	29,295		131,085		6,777		—		2,292		169,449		13	%
Greater than 3 years	7,479		106,778		—		—		—		114,257		9	%
	$	338,361	$	866,723	$	45,338	$	7,514	$	50,148	$	1,308,084	100	%

As of March 31, 2022:

(Dollars in thousands)	Subscription services				Subscription license		Perpetual license		Consulting		Total
	Maintenance		Pega Cloud
1 year or less	$	228,984	$	329,857	$	47,428	$	7,281	$	40,661	$	654,211	55	%
1-2 years	63,870		208,875		16,111		4,505		10,955		304,316		26	%
2-3 years	33,617		106,156		2,422		2,252		3,876		148,323		13	%
Greater than 3 years	22,611		44,596		1,758		—		522		69,487		6	%
	$	349,082	$	689,484	$	67,719	$	14,038	$	56,014	$	1,176,337	100	%

NOTE 12. STOCK-BASED COMPENSATION

Expense

	Three Months Ended March 31,
(in thousands)	2023		2022
Cost of revenue	$	8,912	$	6,378
Selling and marketing	17,661		10,958
Research and development	9,060		7,346
General and administrative	6,924		3,545
	$	42,557	$	28,227
Income tax benefit	$	(672)	$	(5,311)

As of March 31, 2023, the Company had $178.6 million of unrecognized stock-based compensation expense, net of estimated forfeitures, which is expected to be recognized over a weighted-average period of 2 years.

Grants

	Three Months Ended March 31, 2023
(in thousands)	Shares	Total Fair Value
Restricted stock units	1,460	$	68,352
Non-qualified stock options	43	$	615

16

PEGASYSTEMS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 13. INCOME TAXES

Effective income tax rate

	Three Months Ended March 31,
(Dollars in thousands)	2023			2022
Provision for (benefit from) income taxes	$	5,249		$	(7,683)
Effective income tax rate	(34)		%	95		%

The effective income tax rate in the three months ended March 31, 2023 was impacted by the valuation allowance on the Company’s U.S. and U.K. deferred tax assets and current taxes payable in the U.S. as a result of projecting taxable income that cannot be fully offset by net operating losses and available tax credits.

The Company recognizes deferred tax assets to the extent that it believes that these assets are more likely than not to be realized. Future realization of deferred tax assets ultimately depends on sufficient taxable income within the available carryback or carryforward periods. The Company’s deferred tax valuation allowance requires significant judgment and uncertainties, including assumptions about future taxable income based on historical and projected information. On a quarterly basis, the Company reassesses the need for a valuation allowance on its existing net deferred tax assets by tax-paying jurisdiction, weighing positive and negative evidence to assess its recoverability. In making such a determination, the Company considers all available and objectively verifiable negative and positive evidence, including future reversals of existing taxable temporary differences, committed contractual backlog (“Backlog”), projected future taxable income inclusive of the impact of enacted legislation, tax-planning strategies, and results of recent operations. The weight given to the potential effect of negative and positive evidence is commensurate with the extent to which it can be objectively verified.

The Company intends to continue maintaining a full valuation allowance on the Company’s U.S and U.K. deferred tax assets until there is sufficient evidence to support the realization of these deferred tax assets.

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 March 31,
(in thousands, except per share amounts)	2023		2022
Net (loss)	$	(20,774)	$	(379)
Weighted-average common shares outstanding	82,604		81,680
(Loss) per share, basic	$	(0.25)	$	—
Net (loss)	$	(20,774)	$	(379)
Weighted-average common shares outstanding, assuming dilution (1) (2) (3)	82,604		81,680
(Loss) per share, diluted	$	(0.25)	$	—
Outstanding anti-dilutive stock options and RSUs (4)	1,348		4,178

(1) In periods of loss, all dilutive securities are excluded as 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 4.2 million shares as of March 31, 2023.

(3) The Company’s Capped Call Transactions represent the equivalent of approximately 4.2 million shares of the Company’s common stock (representing the number of shares for which the Notes are initially convertible) as of March 31, 2023. 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.

17

PEGASYSTEMS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

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 as of March 31, 2023 and December 31, 2022.

Appian Corp. v. Pegasystems Inc. & Youyong Zou

As previously reported, 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. Appellate briefing is currently in process. Although it is not possible to predict timing, this 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 motion to dismiss is scheduled for May 17, 2023. The Company believes the claims brought against the defendants are without merit and intends to defend against these claims vigorously. The Company is unable to reasonably estimate possible damages or a range of possible damages in this matter given the stage of the lawsuit, the Company’s belief that the claims are without merit, and there being no specified quantum of damages sought in the complaint.

18

PEGASYSTEMS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

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 January 10, 2023, the Court entered an order staying the matter until after a final judgment dismissing the City of Fort Lauderdale matter referenced above, the denial of a motion to dismiss in the City of Fort Lauderdale action, or if any related derivative complaint is filed and not stayed for the same or longer duration. The Company believes the claims brought against the defendants are without merit and intends to defend against these claims vigorously. The Company is unable to reasonably estimate possible damages or a range of possible damages in this matter given the stage of the lawsuit, the Company’s belief that the claims are without merit, and there being no specified quantum of damages sought in the complaint.

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. The Company is fully cooperating with the SEC’s requests.

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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, projects, forecasts, guidance, likely, and usually, or variations of such words and other similar expressions identify forward-looking statements, which 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;

•management of our transition to a more subscription-based business model;

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

•reliance on key personnel;

•global economic and political conditions and uncertainty, including impacts from public health emergencies and the war in Ukraine;

•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;

•the potential legal and financial liabilities and 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, 2022, Part II of this Quarterly Report on Form 10-Q, and other filings we make with the U.S. Securities and Exchange Commission (“SEC”).

Except as required by applicable law, we do not undertake and expressly disclaim any obligation to update or revise these forward-looking statements publicly, whether due to new information, future events, or otherwise.

The forward-looking statements in this Quarterly Report represent our views as of April 26, 2023.

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 intelligent 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.

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 the specific industry needs of our clients.

Subscription transition

We are transitioning our business to sell software primarily through subscription arrangements. Until we fully complete our subscription transition, which we expect will occur in 2023, our operating results may be impacted. Operating performance, revenue mix, and new arrangements in each period can fluctuate based on client preferences for our perpetual and subscription offerings. See the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2022 for additional information.

20

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.

In 2023, we changed our ACV calculation methodology for maintenance and all contracts less than 12 months to align with other contract types. Previously disclosed ACV amounts have been updated to allow for comparability.

Constant currency ACV is calculated by applying the Q1 2022 foreign exchange rates to all periods shown.

21

Remaining performance obligations (“Backlog”)

Reconciliation of GAAP Backlog and Constant Currency Backlog

(in millions, except percentages)	Q1 2023		1 Year Growth Rate
Backlog	$	1,308	11	%
Impact of changes in foreign exchange rates	28		3	%
Backlog - Constant Currency	$	1,336	14	%

Constant currency Backlog is calculated by applying the Q1 2022 foreign exchange rates to all periods shown.

We believe that non-GAAP financial measures help investors understand our core operating results and prospects, consistent with how management measures and forecasts our performance without the effect of often one-time charges and other items outside our normal operations. The supplementary non-GAAP financial measures are not meant to be superior to or a substitute for financial measures prepared under U.S. GAAP.

22

Free cash flow (1)

(in thousands, except percentages)	Three Months Ended March 31,
	2023			2022			Change
Cash provided by operating activities	$	68,107		$	15,116		351	%
Investment in property and equipment	(11,487)			(6,657)
Legal fees	1,515			6,887
Restructuring	14,458			—
Interest on convertible senior notes	2,250			2,250
Free cash flow	$	74,843		$	17,596		325	%
Total revenue	$	325,472		$	376,307
Free cash flow margin	23		%	5		%

(1) We believe that non-GAAP financial measures help investors understand our core operating results and prospects, consistent with how management measures and forecasts our performance without the effect of often one-time charges and other items outside our normal operations. The supplementary non-GAAP financial measures are not meant to be superior to or a substitute for financial measures prepared under U.S. GAAP. Our non-GAAP free cash flow measures reflect the following adjustments:

•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 believe excluding these amounts provides a useful comparison of our operational performance in different periods.

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

•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 the impact 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.

•Interest on convertible senior notes: In February 2020, we issued convertible senior notes, due March 1, 2025, in a private placement. We believe excluding the interest payments provides a useful comparison of our operational performance in different periods.

23

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 given 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, 2022:

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

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

There have been no other significant changes to our critical accounting policies as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022.

RESULTS OF OPERATIONS

Revenue

Subscription transition

We are transitioning our business to sell software primarily through subscription arrangements.

This transition has impacted revenue growth as revenue from subscription service arrangements, which includes Pega Cloud and maintenance, is typically recognized over the contract term, while revenue from license sales is recognized when the license rights become effective, typically upfront.

(Dollars in thousands)	Three Months Ended March 31,								Change
	2023				2022
Pega Cloud	$	107,879	33	%	$	90,317	24	%	$	17,562	19	%
Maintenance	79,630		25	%	79,716		21	%	(86)		—	%
Subscription services	187,509		58	%	170,033		45	%	17,476		10	%
Subscription license	84,527		26	%	137,533		37	%	(53,006)		(39)	%
Subscription	272,036		84	%	307,566		82	%	(35,530)		(12)	%
Perpetual license	403		—	%	7,440		2	%	(7,037)		(95)	%
Consulting	53,033		16	%	61,301		16	%	(8,268)		(13)	%
	$	325,472	100	%	$	376,307	100	%	$	(50,835)	(14)	%

The revenue changes in the three months ended March 31, 2023 generally reflect the impact of our subscription transition. Other factors impacting our revenue include:

•The decrease in subscription license revenue in the three months ended March 31, 2023 was primarily due to several large software license contracts recognized in revenue in the three months ended March 31, 2022.

•The decrease in consulting revenue in the three months ended March 31, 2023 was primarily due to a decrease in billable hours and realization rates.

Gross profit

(Dollars in thousands)	Three Months Ended March 31,								Change
	2023				2022
Pega Cloud	$	77,629	72	%	$	63,418	70	%	$	14,211	22	%
Maintenance	73,016		92	%	74,585		94	%	(1,569)		(2)	%
Subscription services	150,645		80	%	138,003		81	%	12,642		9	%
Subscription license	83,808		99	%	136,911		100	%	(53,103)		(39)	%
Subscription	234,453		86	%	274,914		89	%	(40,461)		(15)	%
Perpetual license	400		99	%	7,406		100	%	(7,006)		(95)	%
Consulting	(7,315)		(14)	%	5,790		9	%	(13,105)		*
	$	227,538	70	%	$	288,110	77	%	$	(60,572)	(21)	%

* not meaningful

The gross profit percent changes in the three months ended March 31, 2023 were primarily due to a shift in the revenue mix.

24

•The increase in Pega Cloud gross profit percent in the three months ended March 31, 2023 was primarily due to cost-efficiency gains as Pega Cloud continues to grow and scale.

•The decrease in maintenance gross profit percent in the three months ended March 31, 2023 was primarily due to an increase in compensation and benefits due to increased headcount.

•The decrease in consulting gross profit percent in the three months ended March 31, 2023 was due to a decrease in realization rates and consultant utilization.

Operating expenses

(Dollars in thousands)	Three Months Ended March 31,								Change
	2023				2022
			% of Revenue				% of Revenue
Selling and marketing	$	149,797	46	%	$	162,236	43	%	$	(12,439)	(8)	%
Research and development	$	75,376	23	%	$	71,490	19	%	$	3,886	5	%
General and administrative	$	23,110	7	%	$	35,764	10	%	$	(12,654)	(35)	%
Restructuring	$	1,461	—		$	—	—		$	1,461	100	%

•The decrease in selling and marketing in the three months ended March 31, 2023 was primarily due to a decrease in compensation and benefits of $12.2 million.

•The increase in research and development in the three months ended March 31, 2023 was primarily due to an increase in compensation and benefits of $2.5 million, attributable to increases in headcount and incentive compensation. The increase in headcount reflects additional investments in developing our solutions.

•The decrease in general and administrative in the three months ended March 31, 2023 was primarily due to a decrease in legal fees and related expenses arising from litigation proceedings outside the ordinary course of business of $15.9 million. We expect to continue to incur additional costs for these proceedings. 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, 2022.

•The increase in restructuring in the three months ended March 31, 2023 was primarily due to an impairment of $1.2 million on our operating lease right of use assets primarily due to the closure of leased office space in Poland.

Other income and expenses

(Dollars in thousands)	Three Months Ended March 31,				Change
	2023		2022
Foreign currency transaction (loss) gain	$	(2,675)	$	2,876	$	(5,551)	*
Interest income	1,485		207		1,278		617	%
Interest expense	(1,918)		(1,946)		28		1	%
Gain (loss) on capped call transactions	3,206		(30,560)		33,766		*
Other income, net	6,583		2,741		3,842		140	%
	$	6,681	$	(26,682)	$	33,363	*

* not meaningful

•The decrease in foreign currency transaction (loss) gain in the three months ended March 31, 2023 was primarily due to the impact of fluctuations in foreign currency exchange rates associated with foreign currency-denominated cash and receivables held by our subsidiary in the United Kingdom.

•The increase in interest income in the three months ended March 31, 2023 was primarily due to an increase in market interest rates.

•The change in gain (loss) on capped call transactions in the three months ended March 31, 2023 was due to fair value adjustments for our capped call transactions.

•The increase in other income, net in the three months ended March 31, 2023 was due to a gain from the repurchase of convertible senior notes and from our venture investments portfolio.

25

Provision for (benefit from) income taxes

	Three Months Ended March 31,
(Dollars in thousands)	2023			2022
Provision for (benefit from) income taxes	$	5,249		$	(7,683)
Effective income tax rate	(34)		%	95		%

The effective income tax rate in the three months ended March 31, 2023 was impacted by the valuation allowance on our U.S. and U.K. deferred tax assets and current taxes payable in the U.S. as a result of projecting taxable income that cannot be fully offset by net operating losses and available tax credits.

LIQUIDITY AND CAPITAL RESOURCES

	Three Months Ended March 31,
(in thousands)	2023		2022
Cash provided by (used in):
Operating activities	$	68,107	$	15,116
Investing activities	(14,413)		(6,082)
Financing activities	(29,372)		(35,918)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	782		(310)
Net increase (decrease) in cash, cash equivalents, and restricted cash	$	25,104	$	(27,194)

(in thousands)	March 31, 2023		December 31, 2022
Held by U.S. entities	$	229,214	$	248,389
Held by foreign entities	94,668		48,832
Total cash, cash equivalents, and marketable securities	$	323,882	$	297,221

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

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

Operating activities

We are transitioning our business to sell software primarily through subscription arrangements. This transition has impacted and is expected to continue impacting our billings and cash collections. Subscription licenses and services are typically billed and collected over the contract term, while perpetual license arrangements are generally billed and collected upfront when the license rights become effective.

The change in cash provided by operating activities in the three months ended March 31, 2023 was primarily due to our subscription transition and improved client collections. In addition, in the three months ended March 31, 2023 and 2022, we paid $1.5 million and $6.9 million in legal fees and related expenses arising from proceedings that originated outside of the ordinary course of business. We expect to continue to incur additional costs for these proceedings. See "Note 15. Commitments and Contingencies" in Part I, Item 1 of this Quarterly Report for additional information.

Investing activities

The change in cash (used in) investing activities in the three months ended March 31, 2023 was primarily driven by an increase in office space-related capital expenditures.

26

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. In the three months ended March 31, 2023, we paid $29.9 million to repurchase $33 million in aggregate principal amount of convertible senior notes. As of March 31, 2023, we had $567 million in aggregate principal amount of convertible senior notes outstanding.

See "Note 8. Debt" in Part I, Item 1 of this Quarterly Report for additional information.

In November 2019, and as since amended, we entered into a five-year $100 million senior secured revolving credit agreement (the “Credit Facility”) with PNC Bank, National Association. As of March 31, 2023, we had no outstanding cash borrowings under the Credit Facility but had $27.3 million in outstanding letters of credit which reduces our available borrowing capacity. See "Note 8. Debt" in Part I, Item 1 of this Quarterly Report for additional information.

Stock repurchase program

Changes in the remaining stock repurchase authority:

(in thousands)	Three Months Ended March 31, 2023
December 31, 2022	$	58,075
Authorizations (1)	—
March 31, 2023	$	58,075

(1) On April 25, 2023, our Board of Directors extended the expiration date of our current share repurchase program to June 30, 2024, and the amount of stock we are authorized to repurchase has been increased to $60 million.

Common stock repurchases

	Three Months Ended March 31,
	2023			2022
(in thousands)	Shares	Amount		Shares	Amount
Repurchases paid	—	$	—	242	$	22,583
Stock repurchase program	—	—		242	22,583
Tax withholdings for net settlement of equity awards	27	1,107		141	12,128
	27	$	1,107	383	$	34,711

In the three months ended March 31, 2023 and 2022, instead of receiving cash from the equity holders, we withheld shares with a value of $0.6 million and $6.1 million, respectively, for the exercise price of options. These amounts are not included in the table above.

Dividends

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

	Three Months Ended March 31,
(in thousands)	2023		2022
Dividend payments to stockholders	$	2,474	$	2,454

Contractual obligations

As of March 31, 2023, our contractual obligations were:

	Payments due by period
(in thousands)	Remainder of 2023		2024		2025		2026		2027		2028 and after		Other		Total
Convertible senior notes (1)	$	1,772	$	4,253	$	569,126	$	—	$	—	$	—	$	—	$	575,151
Purchase obligations (2)	98,303		117,729		127,367		131,146		133,500		14		—		608,059
Operating lease obligations	14,003		17,642		14,562		10,917		9,863		39,380		—		106,367
Investment commitments	1,000		—		—		—		—		—		—		1,000
Liability for uncertain tax positions (3)	—		—		—		—		—		—		3,578		3,578
	$	115,078	$	139,624	$	711,055	$	142,063	$	143,363	$	39,394	$	3,578	$	1,294,155

(1) Includes principal and interest.

(2) Represents the fixed or minimum amounts due under purchase obligations for hosting services and sales and marketing programs.

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

27

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, which partially offsets our foreign currency exposure.

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

	Three Months Ended March 31,
	2023		2022
(Decrease) increase in revenue	(4)	%	(3)	%
Increase (decrease) in net income	1	%	186	%

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:

	Three Months Ended March 31,
(in thousands)	2023		2022
Foreign currency gain (loss)	$	(9,251)	$	(7,937)

ITEM 4.     CONTROLS AND PROCEDURES

(a) Evaluation of disclosure controls and procedures

Our management, with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”)) as of March 31, 2023. In designing and evaluating our disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and our management necessarily applied its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on this evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of March 31, 2023.

(b) Changes in internal control over financial reporting

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended March 31, 2023 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

28

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, 2022, filed with the U.S. Securities and Exchange Commission. These risk factors could materially affect our business, financial condition, and future results, and may cause our actual business and financial results to differ materially from those contained in forward-looking statements made in this Quarterly Report on Form 10-Q or elsewhere by management.

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

Issuer purchases of equity securities (1)

Common stock repurchased in the three months ended March 31, 2023:

(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
January 1, 2023 - January 31, 2023	23	$	36.52	—	$	58,075
February 1, 2023 - February 28, 2023	11	39.60		—	$	58,075
March 1, 2023 - March 31, 2023	9	46.49		—	$	58,075
	43	$	39.40	—

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

(2) Shares withheld to cover the option exercise price and tax withholding obligations under the net settlement provisions of our stock compensation awards have been included in these amounts.

ITEM 5. OTHER INFORMATION

Credit Facility

On April 21, 2023 and effective on March 31, 2023, we entered into an amendment (the “Amendment”) to our $100 million senior secured revolving credit agreement (the “Credit Agreement”) with PNC Bank, National Association (“PNC”), among other changes. The Amendment modifies the financial covenants as reflected in “Note 8. Debt” of Part I, Item 1 of this Quarterly Report on Form 10-Q.

The description contained herein is qualified in its entirety by reference to the Amendment, a copy of which is filed as Exhibit 10.1 to this Quarterly Report on Form 10-Q.

Share Repurchase Program

On April 25, 2023, our Board of Directors extended the expiration date of our current share repurchase program from June 30, 2023 to June 30, 2024, and the amount of stock we are authorized to repurchase has been increased to $60 million. 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 June 30, 2023 and December 31, 2024.

29

ITEM 6.     EXHIBITS

Exhibit No.	Description	Incorporation by Reference			Filed Herewith
		Form	Exhibit	Filing Date
3.1	Restated Articles of Organization of the Registrant and Amendments thereto	10-Q	3.1	November 4, 2014
3.2	Amended and Restated Bylaws of Pegasystems Inc.	8-K	3.2	June 15, 2020
10.1	Sixth Amendment to Loan Documents, between Pegasystems Inc. and PNC Bank, National Association				X
10.2	Fee Letter for Senior Secured Credit Facility, dated March 31, 2023				X
10.3	Offer Letter between the Registrant and John Higgins executed December 13, 2020++**				X
31.1	Certification pursuant to Exchange Act Rules 13a-14 and 15d-14 of the Chief Executive Officer.				X
31.2	Certification pursuant to Exchange Act Rules 13a-14 and 15d-14 of the Chief Financial Officer.				X
32	Certification pursuant to 18 U.S.C. Section 1350 of the Chief Executive Officer and the Chief Financial Officer.				+
101.INS	Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.				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.

++ Management contracts and compensatory plans or arrangements required to be filed pursuant to Item 15(b) of Form 10-K.

** Certain portions of this exhibit are considered confidential and have been omitted as allowed under SEC rules and regulations

30

SIGNATURE

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

		Pegasystems Inc.
Dated:	April 26, 2023	By:	/s/ KENNETH STILLWELL
			Kenneth Stillwell
			Chief Operating Officer and Chief Financial Officer
			(Principal Financial Officer)

EX-10.1

EXHIBIT 10.1

Sixth Amendment to Loan Documents

    THIS SIXTH AMENDMENT TO LOAN DOCUMENTS (this “Amendment”) is made as of March 31, 2023, by and among PEGASYSTEMS INC. (the “Borrower”), the Guarantors (as such term is defined in the Credit Agreement defined in Exhibit A attached hereto and made a part hereof (the “Loan Agreement”)) party hereto (the “Guarantors” and each, individually, a “Guarantor”; the Borrower and the Guarantors are collectively referred to herein as the “Loan Parties” and each, individually, a “Loan Party”), the Lenders (as such term is defined in the Loan Agreement) party hereto (the “Lenders”) and PNC BANK, NATIONAL ASSOCIATION (the “Agent”), in its capacity as “Agent” (as such term is defined in the Loan Agreement) for the Lenders.

BACKGROUND

    A.    The Loan Parties have executed and delivered to the Agent and/or the Lenders one or more promissory notes, letter agreements, loan agreements, security agreements, pledge agreements, collateral assignments, and other agreements, instruments, certificates and documents, some or all of which are more fully described on Exhibit A attached hereto, which is made a part of this Amendment (collectively, as amended from time to time, the “Loan Documents”) which evidence or secure some or all of the Borrower’s Obligations.

    B.    The Loan Parties, the Lenders and the Agent desire to amend the Loan Documents as provided for in this Amendment.

NOW, THEREFORE, in consideration of the mutual covenants herein contained and intending to be legally bound hereby, the parties hereto agree as follows:

    1.    Certain of the Loan Documents are amended as set forth in Exhibit A attached hereto and made a part hereof. Any and all references to any Loan Document which is amended hereby in any other Loan Document shall be deemed to refer to such Loan Document as amended by this Amendment. This Amendment is deemed incorporated into each of the Loan Documents being amended hereby. Any initially capitalized terms used in this Amendment without definition shall have the meanings assigned to those terms in the Loan Agreement. To the extent that any term or provision of this Amendment is or may be inconsistent with any term or provision in any Loan Document, the terms and provisions of this Amendment shall control.

    2.    The Borrower hereby certifies that (a) all of its representations and warranties in the Loan Documents, as amended by this Amendment, are, except as may otherwise be stated in this Amendment, (i) true and correct in all material respects (except for any representation or warranty which expressly relates to an earlier date, in which case such representation and warranty was true and correct as of such earlier date) as of the date of this Amendment, (ii) ratified and confirmed without condition as if made anew (except for any representation or warranty which expressly relates to an earlier date, in which case such representation and warranty shall be ratified and confirmed as of such earlier date), and (iii) incorporated into this Amendment by reference; (b) no Event of Default or event which, with the passage of time or the giving of notice or both, would constitute an Event of Default, exists under any Loan Document which will not be cured by the execution and effectiveness of this Amendment; (c) no consent, approval, order or authorization of, or registration or filing with, any third party is required in connection with the execution, delivery and carrying out of this Amendment or, if required, has been obtained; and (d) this Amendment has been duly authorized, executed and delivered so that it constitutes the legal, valid and binding obligation of the Borrower, enforceable in accordance with its terms. The Borrower confirms that the Obligations remain outstanding without defense, set off, counterclaim, discount or charge of any kind as of the date of this Amendment.

    3.    The Borrower hereby confirms that any collateral for the Obligations, including liens, security interests, mortgages, and pledges granted by the Borrower or third parties (if applicable), shall continue unimpaired and in full force and effect, and shall cover and secure all of the Borrower’s existing and future Obligations to the Lenders, as modified by this Amendment.

    4.    As a condition precedent to the effectiveness of this Amendment, the Borrower shall comply with the terms and conditions specified in Exhibit A attached hereto and made a part hereof.

    5.    To induce the Agent and the Lenders to enter into this Amendment, each Loan Party reaffirms all of its indemnification obligations contained in the Loan Documents, including, without limitation, pursuant to Section 11.3.2 of the Loan Agreement.

    6.    This Amendment may be signed in any number of counterpart copies and by the parties to this Amendment on separate counterparts, but all such copies shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page to this Amendment by electronic or facsimile transmission shall be effective as delivery of a manually executed counterpart. Any party so executing this Amendment by electronic or facsimile transmission shall promptly deliver a manually executed counterpart, provided that any failure to do so shall not affect the validity of the counterpart executed by electronic or facsimile transmission, as applicable.

EXHIBIT 10.1

(continued)

    7.    Notwithstanding any other provision herein or in the other Loan Documents, each Loan Party agrees that this Amendment, the Note, the other Loan Documents, any other amendments thereto and any other information, notice, signature card, agreement or authorization related thereto (each, a “Communication”) may, at the Agent’s option, be in the form of an electronic record. Any Communication may, at the Agent’s option, be signed or executed using electronic signatures. For the avoidance of doubt, the authorization under this paragraph may include, without limitation, use or acceptance by the Agent of a manually signed paper Communication which has been converted into electronic form (such as scanned into PDF format) for transmission, delivery and/or retention. Each Loan Party, each Lender and the Agent acknowledge and agree that the methods for delivering Communications, including notices, under the Loan Documents include electronic transmittal to any electronic address provided by either party to the other party from time to time.

    8.    This Amendment will be binding upon and inure to the benefit of each Loan Party, the Agent, and the Lenders and their respective heirs, executors, administrators, successors and assigns.

    9.    This Amendment has been delivered to and accepted by the Agent and the Lenders and will be deemed to be made in the State of New York. This Amendment will be interpreted and the rights and liabilities of the parties hereto determined in accordance with the laws of the State of New York, excluding its conflict of laws rules, including without limitation the Electronic Signatures and Records Act (or equivalent) in such State (or, to the extent controlling, the laws of the United States of America, including without limitation the Electronic Signatures in Global and National Commerce Act).

    10.    Except as amended hereby, the terms and provisions of the Loan Documents remain unchanged, are and shall remain in full force and effect unless and until modified or amended in writing in accordance with their terms, and are hereby ratified, reaffirmed and confirmed. Except as expressly provided herein, this Amendment shall not constitute an amendment, waiver, consent or release with respect to any provision of any Loan Document, a waiver of any default or Event of Default under any Loan Document, or a waiver or release of any of the Agent’s or Lenders’ rights and remedies (all of which are hereby reserved). Each Loan Party, the Agent and the Lenders mutually expressly ratify and confirm the waiver of jury trial or arbitration provisions contained in the Loan Documents, all of which are incorporated herein by reference.

[signatures appear on following page]

2

EXHIBIT 10.1

(continued)

WITNESS the due execution of this Amendment as of the date first written above, with the intent to be legally bound hereby.

WITNESS: By:     /s/ John Schiebel                 Name: John Schiebel Title:Compliance & Legal Admin Program Manager	BORROWER: PEGASYSTEMS INC. By: /s/ Kenneth Stillwell         Name:    Kenneth Stillwell     Title:    Chief Operating Officer and Chief         Financial Officer
By:     /s/ John Schiebel                 Name: John Schiebel Title: Compliance & Legal Admin Program Manager	GUARANTORS: PEGASYSTEMS WORLDWIDE INC. By: /s/ Kenneth Stillwell         Name:    Efstathios Kouninis,     Title    Director
By:     /s/ John Schiebel                 Name: John Schiebel Title: Compliance & Legal Admin Program Manager	ANTENNA SOFTWARE, LLC By: PEGASYSTEMS INC., its sole member By: /s/ Kenneth Stillwell         Name:    Kenneth Stillwell     Title:    Chief Operating Officer and Chief         Financial Officer
By:     /s/ John Schiebel                 Name: John Schiebel Title: Compliance & Legal Admin Program Manager	PEGA GOVERNMENT LLC By: /s/ Efstathios Kouninis         Name:    Efstathios Kouninis,     Title:    Manager

Signature Page – Loan Parties – Sixth Amendment to Loan Documents

EXHIBIT 10.1

(continued)

PNC BANK, NATIONAL ASSOCIATION,

Individually and as Agent

By: /s/ Terence J. O’Malley_____________________

    Name:     Terence J. O’Malley

                            Title:     Senior Vice President

Signature Page – PNC Bank – Sixth Amendment to Loan Documents

EXHIBIT 10.1

(continued)

EXHIBIT A

TO SIXTH AMENDMENT TO LOAN DOCUMENTS

DATED AS OF MARCH 31, 2023

A.    The “Loan Documents” that are the subject of this Amendment include the following (as any of the foregoing have previously been amended, modified or otherwise supplemented):

1.Credit Agreement dated as of November 5, 2019 made by and among Pegasystems Inc., (the “Borrower”), each of the Guarantors, and the Agent (the “Loan Agreement”).

2.Amendment to Loan Documents dated as of February 18, 2020 made by and among the Borrower, each of the Guarantors, and the Agent (the “FirstAmendment”).

3.Second Amendment to Loan Documents dated as of July 22, 2020 made by and among the Borrower, each of the Guarantors, and the Agent (the “Second Amendment”).

4.Third Amendment to Loan Documents dated as of September 20, 2020 made by and among the Borrower, each of the Guarantors, and the Agent (the “Third Amendment”).

5.Fourth Amendment to Loan Documents dated as of March 31, 2022 made by and among the Borrower, each of the Guarantors, and the Agent (the “Fourth Amendment”).

6.Fifth Amendment to Loan Documents dated as of July 25, 2022 made by and among the Borrower, each of the Guarantors, and the Agent (the “Fifth Amendment”).

7.Guarantor Joinder and Assumption Agreement made as of August 24, 2020, by Pega Government LLC in favor of Agent and Lenders (the "Guarantor Joinder").

8.Revolving Credit Note in the principal amount of $100,000,000.00 dated as of November 5, 2019 executed by the Borrower in favor of the Agent (the “Note”).

9.Security Agreement dated as of November 5, 2019, by and between Borrower and Agent (the “Borrower Security Agreement”).

10.Security Agreement dated as of November 5, 2019, by and among Pegasystems Worldwide, Inc., Antenna Software, LLC and Agent (the “Guarantor Security Agreement”).

11.Continuing Agreement of Guaranty and Suretyship dated as of November 5, 2019, by and among Pegasystems Worldwide, Inc., Antenna Software, LLC and Agent (the “Guaranty Agreement”).

12.Pledge Agreement dated as of November 5, 2019, by and between Borrower and Agent (the “Borrower Pledge Agreement”).

13.First Amendment to Pledge Agreement dated as of August 24, 2020, by and between Borrower and Agent (the “First Amendment to Pledge Agreement”)

14.Pledge Agreement (Bank Deposits) dated as of November 5, 2019, by and among Borrower and Agent (the “Deposit Account Pledge Agreement”).

15.Deposit Account Control Agreement dated as of December 23, 2019, by and among Borrower, Agent and Bank of America, N.A. (as amended and in effect from time to time, the “Deposit Account Control Agreement”).

16.Patent, Trademark and Copyright Security Agreement dated as of November 5, 2019, by and between Borrower and Agent (the “Borrower PTC Agreement”).

17.Patent, Trademark and Copyright Security Agreement dated as of November 5, 2019, by and between Antenna Software, LLC and Agent (the “Guarantor PTC Agreement”).

18.All other documents, instruments, agreements, and certificates executed and delivered in connection with the Loan Documents listed in this Exhibit A.

Exhibit A - 1

EXHIBIT 10.1

(continued)

B.    Amendments to Loan Documents. The Loan Documents are hereby amended and modified as follows:

1.Amendments to Loan Agreement.

1.01Reference is hereby made to the chart in the definition of “Applicable Margin” in Section 1.1 of the Loan Agreement. Said chart in the definition of “Applicable Margin” in Section 1.1 of the Loan Agreement is hereby amended and restated as follows:

Level	Net Leverage Ratio	Commitment Fee	Letter of Credit Fee	Revolving Credit Base Rate Spread	Revolving Credit Term SOFR Rate Spread
I	Less than 1.00 to 1.00	0.225%	1.50%	1.00%	1.50%
II	Greater than or equal to 1.00 to 1.00 but less than 2.00 to 1.00	0.250%	1.75%	1.25%	1.75%
III	Greater than or equal to 2.00 to 1.00 but less than 3.00 to 1.00	0.275%	2.00%	1.50%	2.00%
IV	Greater than or equal to 3.00 to 1.00	0.300%	2.25%	1.75%	2.25%

”

1.02    Reference is hereby made to Section 8.1 of the Loan Agreement. The following new Section 8.1.12 is hereby inserted as follows:

    “8.1.12 Minimum Consolidated EBITDA. The Borrower and its Subsidiaries shall maintain a minimum Consolidated EBITDA as set forth in more detail in that certain Fee Letter dated as of March 31, 2023 (“Fee Letter”).”

1.03    Reference is hereby made to Section 8.2.15 of the Loan Agreement. Said Section 8.2.15 is hereby amended and restated as follows:

“8.2.15 Minimum Liquidity. To and including December 31, 2023, the Loan Parties shall not, at any time, permit the aggregate amount of cash and Permitted Investments plus the availability under the Revolving Credit Loan held by the Borrower to be less than Two Hundred Million Dollars ($200,000,000).”

1.04    Reference is hereby made to Section 8.2.16 of the Loan Agreement. Said Section 8.2.16 is hereby amended and restated as follows:

        “8.2.16 Maximum Net Leverage Ratio. Commencing with the calculation date of March 31, 2024, the Loan Parties shall not permit the Net Leverage Ratio, calculated as of the end of each fiscal quarter for the four (4) fiscal quarters then ended, to be more than 3.50 to 1.00; provided, that at the Borrower’s option, the maximum Net Leverage Ratio may increase to 4.00:1.00 for four (4) consecutive fiscal quarters immediately following the consummation by the Borrower, any other Loan Party or any Subsidiary thereof, of a Permitted Acquisition with a purchase price in excess of $50,000,000 (a “Material Acquisition”); provided, furtherthat (i) the Borrower’s ability to increase the Net Leverage Ratio as described in this Section 8.2.16 shall be limited to two (2) requests during the term of this Agreement, (ii) no more than one such increase shall be in effect at any time and (iii) the Net Leverage Ratio shall revert to the then permitted ratio (without giving effect to such increase) for at least two fiscal quarters before another increase may be invoked.”

1.05    Reference is hereby made to Section 8.2.17 of the Loan Agreement. Said Section 8.2.17 is hereby amended and restated as follows:

    “8.2.17 Minimum Interest Coverage Ratio. Commencing with the calculation date of March 31, 2024, the Loan Parties shall not permit the ratio of Consolidated EBITDA to Consolidated Cash Interest Expense, calculated as of the end of each fiscal quarter for the four (4) fiscal quarters then ended, to be less than 3.50 to 1.00.”

C.    Conditions to Effectiveness of Amendment: The Agent’s willingness to agree to the amendments set forth in this Amendment is subject to the prior satisfaction of the following conditions:

Exhibit A - 2

EXHIBIT 10.1

(continued)

1.Execution by all applicable parties and delivery to the Agent of this Amendment (including the attached Consent and Fee Letter).

2.Reimbursement by the Borrower to the Agent of the fees and expenses of the Agent and the Agent's outside counsel in connection with this Amendment.

3.Reimbursement by the Borrower to the Agent of the fees and expenses of the Agent provided for in that certain Fee Letter dated as of the date hereof in connection with this Amendment.

4.All representations and warranties contained in the Loan Documents are true and correct in all material respects on the date hereof (except for any representation or warranty which expressly relates to an earlier date, in which case such representation and warranty was true and correct as of such earlier date).

5.Immediately after giving effect to this Amendment, no default or Event of Default shall have occurred and be continuing under the Loan Agreement or any of the other Loan Documents.

Exhibit A - 3

EXHIBIT 10.1

(continued)

CONSENT OF GUARANTOR

    Each of the undersigned guarantors (jointly and severally if more than one, the “Guarantors”) consent to the provisions of the foregoing Amendment, any and all documents executed in connection therewith, and all prior amendments (if any) and confirms and agrees that (a) the Guarantors’ obligations under the Guaranty shall be unimpaired by the Amendment; (b) as of the date hereof, the Guarantors have no defenses, set offs, counterclaims, discounts or charges of any kind against the Agent and/or the Lenders, their respective officers, directors, employees, agents or attorneys with respect to the Guaranty; (c) except as expressly modified by the foregoing Amendment, all of the terms, conditions and covenants in the Guaranty remain unaltered and in full force and effect and are hereby ratified and confirmed and apply to the Obligations, as modified by the Amendment; and (d) the Guarantors are bound by the terms and provisions of paragraph 5 of the Amendment. The Guarantors certify that all representations and warranties made in the Guaranty are true and correct in all material respects (except for any representation or warranty which expressly relates to an earlier date, in which case such representation and warranty was true and correct as of such earlier date).

    By signing below, the Guarantors agree that this Consent, the Guaranty, the other Loan Documents, any amendments thereto and any other information, notice, signature card, agreement or authorization related thereto (each, a “Communication”) may, at the Agent’s option, be in the form of an electronic record. Any Communication may, at the Agent’s option, be signed or executed using electronic signatures. For the avoidance of doubt, the authorization under this paragraph may include, without limitation, use or acceptance by the Agent of a manually signed paper Communication which has been converted into electronic form (such as scanned into PDF format) for transmission, delivery and/or retention. The Guarantor acknowledges and agrees that the methods for delivering Communications, including notices, under the Guaranty and the other Loan Documents include electronic transmittal to any electronic address provided by any party to the other party from time to time.

    The Guarantors hereby confirm that any collateral for the Obligations, including liens, security interests, mortgages, and pledges granted by the Guarantors, shall continue unimpaired and in full force and effect, shall cover and secure all of the Guarantors’ existing and future Obligations to the Lenders, as modified by this Amendment.

    The Guarantor ratifies and confirms the indemnification (if any) and waiver of jury trial provisions contained in the Guaranty.

[signatures appear on following page]

EXHIBIT 10.1

(continued)

    WITNESS the due execution of this Consent as of the date of the Amendment, intending to be legally bound hereby.

WITNESS: By:     /s/ John Schiebel                 Name: John Schiebel Title: Compliance & Legal Admin Program Manager	GUARANTORS: PEGASYSTEMS WORLDWIDE INC. By: /s/ Efstathios Kouninis         Name:    Efstathios Kouninis,     Title    Director
By:     /s/ John Schiebel                 Name: John Schiebel Title: Compliance & Legal Admin Program Manager	ANTENNA SOFTWARE, LLC By: PEGASYSTEMS INC., its sole member By: /s/ Kenneth Stillwell         Name:    Kenneth Stillwell     Title:    Chief Operating Officer and Chief         Financial Officer
By:     /s/ John Schiebel                 Name: John Schiebel Title: Compliance & Legal Admin Program Manager	PEGA GOVERNMENT LLC By: /s/ Efstathios Kouninis         Name:    Efstathios Kouninis,     Title:    Manager

Signature Page – Guarantors – Sixth Amendment to Loan Documents

EX-10.2

EXHIBIT 10.2

March 31, 2023

PEGASYSTEMS INC.

One Main Street Cambridge, Massachusetts 02142

Attention: Stathi Kouninis

Re:Fee Letter for Senior Secured Credit Facility on Behalf of

PEGASYSTEMS INC.:

Dear Mr. Kouninis:

Reference is made to the Credit Agreement dated November 5, 2019, as amended and supplemented from time to time including by the Sixth Amendment to Loan Documents (the “Sixth Amendment”), dated the date hereof (collectively, the “Loan Agreement”) by and among Pegasystems Inc., as the “Borrower”, the lending institutions party thereto (including us) as "Lenders", the "Guarantors" (as such term is defined therein) and PNC Bank, National Association, as administrative agent for the Lenders (in such capacity, the "Administrative Agent"). Capitalized terms used but not defined herein are used with the meanings assigned to them in the Loan Agreement.

1.Minimum Consolidated EBITDA

    In Section 1.02 of the Sixth Amendment, the parties established a minimum Consolidated EBITDA covenant, which Section 1.02 also refers to this letter.

    The Borrower and its Subsidiaries shall maintain a minimum Consolidated EBITDA, calculated as of the end of each fiscal quarter in 2023 in the amounts set forth below for the applicable periods set forth below. The Borrower and its Subsidiaries shall provide written confirmation to the Administrative Agent of their minimum Consolidated EBITDA compliance within forty-five (45) days as of the end of each fiscal quarter set forth below.

Fiscal Quarter Ending	Minimum Consolidated EBITDA for the applicable period
Fiscal quarter ended March 31, 2023 for the period of January 1, 2023 through March 31, 2023	$38,862,000
Fiscal quarter ended June 30, 2023 for the period of January 1, 2023 through June 30, 2023	$59,894,000
Fiscal quarter ended September 30, 2023 for the period of January 1, 2023 through September 30, 2023	$95,597,000
Fiscal quarter ended December 31, 2023 for the period of January 1, 2023 through December 31, 2023	$214,590,000

2.Fees

As consideration for Sixth Amendment, you agree to pay or cause to be paid to the Administrative Agent the following amendment fee earned in an amount equal to $100,000 (subject to forgiveness as set forth below) (the “Amendment Fee”), which Amendment Fee shall be nonrefundable once paid and shall be due and payable as follows:

1    

EXHIBIT 10.2

(continued)

(i) $50,000 on the date hereof;

(ii) $25,000 (the “September 2023 Portion”), if the Borrower and its Subsidiaries fail to maintain (i) a Net Leverage Ratio to be less than the applicable Net Leverage Ratio required under the Credit Agreement and (ii) a ratio of Consolidated EBITDA to Consolidated Cash Interest Expense to be more than 3.50 to 1.00 for the fiscal quarter ending September 30, 2023, which September 2023 Portion shall be due and payable in full within forty-five (45) days as of the end of such fiscal quarter if such ratios are not met for such period (provided, to the extent the Borrower and its Subsidiaries maintain such ratios for the fiscal quarter ending September 30, 2023, the September 2023 Portion of the Amendment Fee shall be automatically forgiven and no longer due and payable on such date); and

(iii) $25,000 (the “December 2023 Portion”), if the Borrower and its Subsidiaries fail to maintain (i) a Net Leverage Ratio to be less than the applicable Net Leverage Ratio required under the Credit Agreement and (ii) a ratio of Consolidated EBITDA to Consolidated Cash Interest Expense to be more than 3.50 to 1.00 for the fiscal quarter ending December 31, 2023, which December 2023 Portion shall be due and payable in full within forty-five (45) days as of the end of such fiscal quarter if such ratios are not met for such period (provided, to the extent the Borrower and its Subsidiaries maintain such ratios for the fiscal quarter ending December 31, 2023, the December 2023 Portion of the Amendment Fee shall be automatically forgiven and no longer due and payable on such date).

3.Miscellaneous

This Fee Letter may not be amended or waived except by an instrument in writing signed by Administrative Agent and you. This Fee Letter shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York. This Fee Letter may be executed in any number of counterparts, each of which shall be an original, and all of which, when taken together, shall constitute one agreement. Delivery of an executed signature page of this letter agreement by facsimile transmission or electronic transmission (e.g., “pdf” or “tif”) shall be effective as delivery of a manually executed counterpart hereof.

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

2    

EXHIBIT 10.2

(continued)

[SIGNATURE PAGE TO FEE LETTER]

Please confirm that the foregoing is our mutual understanding by signing and returning to us an executed counterpart of this Fee Letter.

Very truly yours,

PNC BANK, NATIONAL ASSOCIATION

By: /s/ Terence J. O’Malley    

Name: Terence J. O’Malley
Title: Senior Vice President

3    

EXHIBIT 10.2

(continued)

[SIGNATURE PAGE TO FEE LETTER]

Accepted and agreed to as of the date
first above written:

PEGASYSTEMS INC.

By:_ /Kenneth Stillwell    

Name: Kenneth Stillwell

Title: Chief Operating Officer and

     Chief Financial Officer

4    

EX-10.3

EXHIBIT 10.3

Pegasystems Ltd

3rd Floor

23 Forbury Road, Reading

Berkshire, RG1 3JH

United Kingdom

STRICTLY PRIVATE & CONFIDENTIAL

John Higgins

[***]

11 December 2020

Dear John,

Further to recent conversations, we are delighted to offer you the role outlined below.

This letter gives you a summary of the key terms of your employment ("Letter"), while the enclosed Statement of Terms and Conditions ("Statement") includes additional terms. Together, the Letter and the Statement form your contract of employment with the Company (the "Agreement"). Defined terms used in the Letter will have the same meaning as in the Statement and vice versa.

Summary of Key Terms:

Employer: Pegasystems Limited (the "Company").

Position Your role will be Senior Vice President of Global Professional Services & Client Success

Place of work: You will be based at home or elsewhere within the United Kingdom as the Company requires.

Start Date: Your employment with the Company will start on 8 February 2021, (the "Start Date"). This is the date on which your Agreement becomes effective.

No employment with a previous employer counts towards your continuous employment with us.

Normal Working Hours: Your normal working hours may vary from the usual Monday to Friday, from 9am to 5.30pm as are necessary for the performance of your role.

Holiday: 25 days each year in addition to public holidays.

Probationary Period: Your employment is subject to a probationary period of three months (the "Probationary Period"). During the Probationary Period either you or the Company can terminate your employment by giving the other party at least two week’s written notice. In the event Pegasystems terminates your employment without cause in your first year of employment, you will be entitled to a severance amount equal to six months base salary.

Notice Period: Following the successful completion of your Probationary Period, either you or the Company may terminate your employment by giving the other party at least three month’s written notice, subject to the minimum statutory notice requirements.

Salary: Your basic gross salary will be £350,000 per year (subject to tax and statutory deductions) (the "Salary").

Corporate Incentive Compensation Plan (“CICP”): You are eligible for a bonus for 2021 of up to 40% of your salary, on the successful achievement of company and personal objectives and subject to the CICP plan rules. Any bonus payment will be subject to tax and statutory deductions, will not be pensionable and will be prorated in the first year according to your start date of February 2021.

Individual Commission Plan (“ICP”)/Management Business Objectives (“MBOs”): In addition to your Salary, you may be eligible to earn commission/MBOs dependent on your performance against financial targets set by the Company and subject to the ICP plan rules. Your target for 2021 will be £70,000. Any commission payment will be subject to tax and statutory deductions and will not be pensionable.

Certain identified information contained in this document, identified by [***], has been excluded because it is both not material and is the type that Pegasystems treats as private or confidential.

EXHIBIT 10.3

(continued)

Pegasystems Ltd

3rd Floor

23 Forbury Road, Reading

Berkshire, RG1 3JH

United Kingdom

Sign on Bonus: You will be eligible to receive a sign-on bonus of £75,000 gross, which will be payable in two equal instalments. The first instalment will be executed 30 days after your start date, and the second instalment will be executed on your 90th day of employment provided you are an employee “in good standing.” If you voluntarily terminate your employment or Pegasystems terminates you with cause within 6 months of your start date, you agree to repay 100% of the Sign-on Bonus to the extent that it is not recouped by Pegasystems by withholding salary, variable remuneration, vacation pay, expense reimbursement or any other payments due to you upon such termination. If you voluntarily terminate your employment or Pegasystems terminates you with cause within 6-12 months of your start date, you agree to repay 50% of the Sign-on Bonus to the extent that it is not recouped by Pegasystems by withholding salary, variable remuneration, vacation pay, expense reimbursement or any other payments due to you upon such termination.

Retention Bonus: You will be eligible to receive a retention bonus of £75,000 gross, which will be payable in two equal instalments. The first instalment will be executed and payable in January 2022 and the second instalment in July 2022. These amounts are fully refundable to the Company if your employment terminates for any reason whatsoever within a twelve month period after each payment is made and the Company will be entitled to recover such amounts from you by offsetting against any wages, commissions, vacation, expenses or other payments due to you.

Pension: You can participate in the Pegasystems Limited Group Personal Pension Scheme made available to the Company's employees and subject to the rules of such scheme in place at the relevant time (the "Scheme").

Equity: As part of the Agreement with the Company, you will receive an equity grant of $2,500,000USD, subject to the approval of the Compensation Committee. The value of this grant will be comprised of 50% stock options and 50% Restricted Stock Units (RSUs) pursuant to our Long- Term Incentive Plan and is contingent on Compensation Committee approval at the meeting following your date of hire. The number of RSUs and Options granted will be determined based on the closing price of our common stock on the first business day of the month following Compensation Committee approval. The full terms of this grant will be conveyed to you in a separate document after you become a Pegasystems employee. As a special consideration, this equity grant will begin vesting on a quarterly basis following the approval of the grant date by the Compensation Committee. Additionally, in the event of a change of control resulting in termination of your employment – known as a double trigger - the remaining unvested value of this grant (and this grant only) will immediately vest.

Furthermore, in lieu of eligibility for an annual grant award in 2022, Pega will provide you with three separate equity grants for which Pega’s future financial statements will incur $1,500,000 of total expense to be awarded by the Compensation Committee at the meeting following your date of hire. The value of this grant will be comprised of 50% stock options and 50% Restricted Stock Units (RSUs). Each of these $500,000 grants will be awarded as separate acceleration opportunities based on the company achieving 100%+ ACV target as established by the Board and will be awarded in March of 2022 for the 2021 ACV target, March of 2023 for the 2022 ACV target, and March of 2024 for the 2023 target. The performance base vesting of these three grants will be governed as follows:

(A) immediately on grant date if ACV target which was set by the Board for previous year is achieved or (B) if ACV target not achieved, pursuant to our Long-Term Incentive Plan, 20% vest after first year and then evenly quarterly for the next four years (5% a quarter). Any and all subsequent grant awards will be governed by standard company vesting policies pursuant to our Long-Term Incentive Plan.

Benefits: Please refer to the UK benefit summary.

Confidential Information: Please refer to the Statement.

Restrictions after Employment: To protect the interests of the Company and/or each Group Company, you must comply with the post termination obligations set out in the Statement.

EXHIBIT 10.3

(continued)

Pegasystems Ltd

3rd Floor

23 Forbury Road, Reading

Berkshire, RG1 3JH

United Kingdom

Acceptance

Please sign and return a copy of this Letter to confirm your acceptance of the Agreement. The Agreement will become binding between you and the Company on signature.

In accepting the Agreement, you confirm that all the information you have provided to the Company in connection with this offer is true and not misleading, and you agree to notify the Company promptly of any change in that information.

We look forward to welcoming you to the Company shortly. In the meantime, if you have any queries, please do not hesitate to contact me.

Yours sincerely,

/s/ Lesley Law

Lesley Law

Senior People Business Leader, EMEA

Encl:

Statement of Terms and Conditions

Benefit Summary

I accept the terms of the Agreement with Pegasystems Limited and confirm receipt of the enclosed documents.

Signed: /s/ John Higgins Dated 13 December 2020

John Higgins

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Alan Trefler, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Pegasystems Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: April 26, 2023    

/s/ ALAN TREFLER

Alan Trefler

Chairman and Chief Executive Officer

(Principal Executive Officer)

1

EX-31.3

EXHIBIT 31.2

CERTIFICATION

I, Kenneth Stillwell, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Pegasystems Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: April 26, 2023    

/s/ KENNETH STILLWELL

Kenneth Stillwell

Chief Operating Officer and Chief Financial Officer

(Principal Financial Officer)

1

EX-32

EXHIBIT 32

CERTIFICATION PURSUANT TO SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Pegasystems Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Alan Trefler, Chairman and Chief Executive Officer of Pegasystems Inc., and Kenneth Stillwell, Chief Operating Officer and Chief Financial Officer of Pegasystems Inc., each certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: April 26, 2023

/s/ ALAN TREFLER

Alan Trefler

Chairman and Chief Executive Officer

(Principal Executive Officer)

/s/ KENNETH STILLWELL

Kenneth Stillwell

Chief Operating Officer and Chief Financial Officer

(Principal Financial Officer)

1

XML

COVER PAGE - shares	3 Months Ended
	Mar. 31, 2023	Apr. 19, 2023
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2023
Document Transition Report	false
Entity File Number	1-11859
Entity Registrant Name	PEGASYSTEMS INC.
Entity Incorporation, State or Country Code	MA
Entity Tax Identification Number	04-2787865
Entity Address, Address Line One	One Main Street
Entity Address, City or Town	Cambridge
Entity Address, State or Province	MA
Entity Address, Postal Zip Code	02142
City Area Code	617
Local Phone Number	374-9600
Title of 12(b) Security	Common Stock, $.01 par value per share
Trading Symbol	PEGA
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		82,961,204
Amendment Flag	false
Entity Central Index Key	0001013857
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q1
Current Fiscal Year End Date	--12-31

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UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Current assets:
Cash and cash equivalents	$ 168,318	$ 145,054
Marketable securities	155,564	152,167
Total cash, cash equivalents, and marketable securities	323,882	297,221
Accounts receivable	201,585	255,150
Unbilled receivables	196,279	213,719
Other current assets	73,982	80,388
Total current assets	795,728	846,478
Unbilled receivables	79,704	95,806
Goodwill	81,434	81,399
Other long-term assets	324,975	333,989
Total assets	1,281,841	1,357,672
Current liabilities:
Accounts payable	12,565	18,195
Accrued expenses	45,432	50,355
Accrued compensation and related expenses	56,574	127,728
Deferred revenue	342,591	325,212
Other current liabilities	17,802	17,450
Total current liabilities	474,964	538,940
Convertible senior notes, net	561,655	593,609
Operating lease liabilities	76,082	79,152
Other long-term liabilities	14,644	15,128
Total liabilities	1,127,345	1,226,829
Commitments and contingencies (Note 15)
Stockholders’ equity:
Preferred stock, 1,000 shares authorized; none issued	0	0
Common stock, 200,000 shares authorized; 82,940 and 82,436 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively	829	824
Additional paid-in capital	272,481	229,602
Accumulated deficit	(97,287)	(76,513)
Accumulated other comprehensive (loss)	(21,527)	(23,070)
Total stockholders’ equity	154,496	130,843
Total liabilities and stockholders’ equity	$ 1,281,841	$ 1,357,672

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UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - shares shares in Thousands	Mar. 31, 2023	Dec. 31, 2022
Stockholders’ equity:
Preferred stock, shares authorized	1,000	1,000
Preferred stock, shares issued	0	0
Common stock, shares authorized	200,000	200,000
Common stock, shares issued	82,940	82,436
Common stock, shares outstanding	82,940	82,436

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UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Revenue
Total revenue	$ 325,472	$ 376,307
Cost of revenue
Total cost of revenue	97,934	88,197
Gross profit	227,538	288,110
Operating expenses
Selling and marketing	149,797	162,236
Research and development	75,376	71,490
General and administrative	23,110	35,764
Restructuring	1,461	0
Total operating expenses	249,744	269,490
(Loss) income from operations	(22,206)	18,620
Foreign currency transaction (loss) gain	(2,675)	2,876
Interest income	1,485	207
Interest expense	(1,918)	(1,946)
Gain (loss) on capped call transactions	3,206	(30,560)
Other income, net	6,583	2,741
(Loss) before provision for (benefit from) income taxes	(15,525)	(8,062)
Provision for (benefit from) income taxes	5,249	(7,683)
Net (loss)	$ (20,774)	$ (379)
(Loss) per share
Basic (in dollars per share)	$ (0.25)	$ 0
Diluted (in dollars per share)	$ (0.25)	$ 0
Weighted-average number of common shares outstanding
Basic (in shares)	82,604	81,680
Diluted (in shares)	82,604	81,680
Subscription services
Revenue
Total revenue	$ 187,509	$ 170,033
Cost of revenue
Total cost of revenue	36,864	32,030
Subscription license
Revenue
Total revenue	84,527	137,533
Cost of revenue
Total cost of revenue	719	622
Consulting
Revenue
Total revenue	53,033	61,301
Cost of revenue
Total cost of revenue	60,348	55,511
Perpetual license
Revenue
Total revenue	403	7,440
Cost of revenue
Total cost of revenue	$ 3	$ 34

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UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Statement of Comprehensive Income [Abstract]
Net (loss)	$ (20,774)	$ (379)
Other comprehensive income (loss), net of tax
Unrealized (loss) gain on available-for-sale securities	(46)	222
Foreign currency translation adjustments	1,589	(2,770)
Total other comprehensive income (loss), net of tax	1,543	(2,548)
Comprehensive (loss)	$ (19,231)	$ (2,927)

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UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) shares in Thousands, $ in Thousands	Total	Common Stock	Additional Paid-In Capital	Retained Earnings (Accumulated Deficit)	Accumulated Other Comprehensive (Loss)
Balance, beginning of period (in shares) at Dec. 31, 2021		81,712
Balance, beginning of period at Dec. 31, 2021	$ 416,088	$ 817	$ 145,810	$ 276,449	$ (6,988)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Repurchase of common stock (in shares)		(242)
Repurchase of common stock	(22,583)	$ (2)	(22,581)
Issuance of common stock for stock compensation plans (in shares)		297
Issuance of common stock for stock compensation plans	(12,128)	$ 3	(12,131)
Issuance of common stock under the employee stock purchase plan (in shares)		35
Issuance of common stock under the employee stock purchase plan	2,446		2,446
Stock-based compensation	28,227		28,227
Cash dividends declared ($0.03 per share)	(2,455)			(2,455)
Other comprehensive (loss) income	(2,548)				(2,548)
Net (loss)	(379)			(379)
Balance, end of period (in shares) at Mar. 31, 2022		81,802
Balance, end of period at Mar. 31, 2022	$ 406,668	$ 818	141,771	273,615	(9,536)
Balance, beginning of period (in shares) at Dec. 31, 2022	82,436	82,436
Balance, beginning of period at Dec. 31, 2022	$ 130,843	$ 824	229,602	(76,513)	(23,070)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock for stock compensation plans (in shares)		452
Issuance of common stock for stock compensation plans	672	$ 4	668
Issuance of common stock under the employee stock purchase plan (in shares)		52
Issuance of common stock under the employee stock purchase plan	2,143	$ 1	2,142
Stock-based compensation	42,557		42,557
Cash dividends declared ($0.03 per share)	(2,488)		(2,488)
Other comprehensive (loss) income	1,543				1,543
Net (loss)	$ (20,774)			(20,774)
Balance, end of period (in shares) at Mar. 31, 2023	82,940	82,940
Balance, end of period at Mar. 31, 2023	$ 154,496	$ 829	$ 272,481	$ (97,287)	$ (21,527)

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UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Parenthetical) - $ / shares	3 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Statement of Stockholders' Equity [Abstract]
Cash dividend declared (in dollars per share)	$ 0.03	$ 0.03

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UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Operating activities
Net (loss)	$ (20,774)	$ (379)
Adjustments to reconcile net (loss) to cash provided by operating activities
Stock-based compensation	42,557	28,227
Deferred income taxes	(126)	(9,295)
(Gain) loss on capped call transactions	(3,206)	30,560
Amortization of deferred commissions	14,277	17,221
Lease expense	4,594	3,919
Amortization of intangible assets and depreciation	4,724	4,171
Foreign currency transaction loss (gain)	2,675	(2,876)
Other non-cash	(5,729)	(1,100)
Change in operating assets and liabilities, net	29,115	(55,332)
Cash provided by operating activities	68,107	15,116
Investing activities
Purchases of investments	(39,401)	(33,690)
Proceeds from maturities and called investments	36,475	20,915
Sales of investments	0	13,350
Investment in property and equipment	(11,487)	(6,657)
Cash (used in) investing activities	(14,413)	(6,082)
Financing activities
Repurchases of convertible senior notes	(29,901)	0
Proceeds from settlement of capped calls transactions	188	0
Dividend payments to stockholders	(2,474)	(2,454)
Proceeds from employee stock purchase plan	2,143	2,446
Proceeds from stock option exercises	1,779	0
Common stock repurchases	(1,107)	(35,910)
Cash (used in) financing activities	(29,372)	(35,918)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	782	(310)
Net increase (decrease) in cash, cash equivalents, and restricted cash	25,104	(27,194)
Cash, cash equivalents, and restricted cash, beginning of period	145,054	159,965
Cash, cash equivalents, and restricted cash, end of period	170,158	132,771
Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents [Abstract]
Cash and cash equivalents	168,318	132,771
Restricted cash included in other long-term assets	1,840	0
Total cash, cash equivalents and restricted cash	$ 170,158	$ 132,771

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BASIS OF PRESENTATION

3 Months Ended

Mar. 31, 2023

Accounting Policies [Abstract]

BASIS OF PRESENTATION

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, 2022.

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 the full year 2023.

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MARKETABLE SECURITIES

3 Months Ended

Mar. 31, 2023

Investments, Debt and Equity Securities [Abstract]

MARKETABLE SECURITIES

NOTE 2. MARKETABLE SECURITIES

	March 31, 2023								December 31, 2022
(in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value		Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Government debt	$	2,970	$	—	$	(33)	$	2,937	$	2,960	$	—	$	(52)	$	2,908
Corporate debt	154,299		8		(1,680)		152,627		151,906		—		(2,647)		149,259
	$	157,269	$	8	$	(1,713)	$	155,564	$	154,866	$	—	$	(2,699)	$	152,167

As of March 31, 2023, marketable securities’ maturities ranged from April 2023 to January 2026, with a weighted-average remaining maturity of 0.5 years.

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RECEIVABLES, CONTRACT ASSETS, AND DEFERRED REVENUE

3 Months Ended

Mar. 31, 2023

Receivables [Abstract]

RECEIVABLES, CONTRACT ASSETS, AND DEFERRED REVENUE

NOTE 3. RECEIVABLES, CONTRACT ASSETS, AND DEFERRED REVENUE

Receivables

(in thousands)	March 31, 2023		December 31, 2022
Accounts receivable	$	201,585	$	255,150
Unbilled receivables	196,279		213,719
Long-term unbilled receivables	79,704		95,806
	$	477,568	$	564,675

Unbilled receivables

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

Unbilled receivables by expected billing date:

(Dollars in thousands)	March 31, 2023
1 year or less	$	196,279	71	%
1-2 years	64,812		24	%
2-5 years	14,892		5	%
	$	275,983	100	%

Unbilled receivables by contract effective date:

(Dollars in thousands)	March 31, 2023
2023	$	51,895	19	%
2022	96,349		34	%
2021	87,278		32	%
2020	27,755		10	%
2019 and prior	12,706		5	%
	$	275,983	100	%

Contract assets

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

(in thousands)	March 31, 2023		December 31, 2022
Contract assets (1)	$	14,463	$	17,546
Long-term contract assets (2)	11,323		16,470
	$	25,786	$	34,016

(1) Included in other current assets. (2) Included in other long-term assets.

Deferred revenue

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

(in thousands)	March 31, 2023		December 31, 2022
Deferred revenue	$	342,591	$	325,212
Long-term deferred revenue (1)	3,323		3,552
	$	345,914	$	328,764

(1) Included in other long-term liabilities.

The increase in deferred revenue in the three months ended March 31, 2023 was primarily due to new billings in advance of revenue recognition exceeding the $139.7 million of revenue recognized during the period that was included in deferred revenue as of December 31, 2022.

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DEFERRED COMMISSIONS

3 Months Ended

Mar. 31, 2023

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

DEFERRED COMMISSIONS

NOTE 4. DEFERRED COMMISSIONS

(in thousands)	March 31, 2023		December 31, 2022
Deferred commissions (1)	$	124,069	$	130,195

(1) Included in other long-term assets.

	Three Months Ended March 31,
(in thousands)	2023		2022
Amortization of deferred commissions (1)	$	14,277	$	17,221

(1) Included in selling and marketing expense.

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GOODWILL AND OTHER INTANGIBLES

3 Months Ended

Mar. 31, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL AND OTHER INTANGIBLES

NOTE 5. GOODWILL AND OTHER INTANGIBLES

Goodwill

	Three Months Ended March 31,
(in thousands)	2023		2022
January 1,	$	81,399	$	81,923
Currency translation adjustments	35		108
March 31,	$	81,434	$	82,031

Intangibles

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

		March 31, 2023
(in thousands)	Useful Lives	Cost		Accumulated Amortization		Net Book Value (1)
Client-related	4-10 years	$	63,094	$	(58,983)	$	4,111
Technology	2-10 years	68,085		(62,335)		5,750
Other	1-5 years	5,361		(5,361)		—
		$	136,540	$	(126,679)	$	9,861

(1) Included in other long-term assets.

		December 31, 2022
(in thousands)	Useful Lives	Cost		Accumulated Amortization		Net Book Value (1)
Client-related	4-10 years	$	63,076	$	(58,623)	$	4,453
Technology	2-10 years	68,056		(61,621)		6,435
Other	1-5 years	5,361		(5,361)		—
		$	136,493	$	(125,605)	$	10,888

(1) Included in other long-term assets.

Future estimated intangibles assets amortization:

(in thousands)	March 31, 2023
Remainder of 2023	$	2,884
2024	3,163
2025	2,613
2026	874
2027	327
	$	9,861

Amortization of intangible assets:

	Three Months Ended March 31,
(in thousands)	2023		2022
Cost of revenue	$	706	$	629
Selling and marketing	343		343
	$	1,049	$	972

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OTHER ASSETS AND LIABILITIES

3 Months Ended

Mar. 31, 2023

Other Assets and Liabilities [Abstract]

OTHER ASSETS AND LIABILITIES

NOTE 6. OTHER ASSETS AND LIABILITIES

Other current assets

(in thousands)	March 31, 2023		December 31, 2022
Income tax receivables	$	22,344	$	25,354
Contract assets	14,463		17,546
Other	37,175		37,488
	$	73,982	$	80,388

Other long-term assets

(in thousands)	March 31, 2023		December 31, 2022
Deferred commissions	$	124,069	$	130,195
Right of use assets	72,549		76,114
Property and equipment	55,775		55,056
Venture investments	16,265		13,069
Contract assets	11,323		16,470
Intangible assets	9,861		10,888
Capped call transactions	5,600		2,582
Deferred income taxes	4,827		4,795
Restricted cash	1,840		—
Other	22,866		24,820
	$	324,975	$	333,989

Other current liabilities

(in thousands)	March 31, 2023		December 31, 2022
Operating lease liabilities	$	15,314	$	14,976
Dividends payable	2,488		2,474
	$	17,802	$	17,450

Other long-term liabilities

(in thousands)	March 31, 2023		December 31, 2022
Deferred revenue	$	3,323	$	3,552
Income taxes payable	3,578		3,207
Other	7,743		8,369
	$	14,644	$	15,128

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LEASES

3 Months Ended

Mar. 31, 2023

Leases [Abstract]

LEASES

NOTE 7. LEASES

Expense

	Three Months Ended March 31,
(in thousands)	2023		2022
Fixed lease costs	$	5,766	$	5,093
Short-term lease costs	781		806
Variable lease costs	1,975		764
	$	8,522	$	6,663

Right of use assets and lease liabilities

(in thousands)	March 31, 2023		December 31, 2022
Right of use assets (1)	$	72,549	$	76,114
Operating lease liabilities (2)	$	15,314	$	14,976
Long-term operating lease liabilities	$	76,082	$	79,152

(1) Included in other long-term assets.

(2) Included in other current liabilities.

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

	March 31, 2023		December 31, 2022
Weighted-average remaining lease term	7.3 years		7.5 years
Weighted-average discount rate (1)	4.1	%	4.1	%

(1) The rates implicit in most of 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.

Maturities of lease liabilities:

(in thousands)	March 31, 2023
Remainder of 2023	$	14,003
2024	17,642
2025	14,562
2026	10,917
2027	9,863
2028	9,290
Thereafter	30,090
Total lease payments	106,367
Less: imputed interest (1)	(14,971)
	$	91,396

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

Cash flow information

	Three Months Ended March 31,
(in thousands)	2023		2022
Cash paid for operating leases, net of tenant improvement allowances	$	5,038	$	3,650
Right of use assets recognized for new leases and amendments (non-cash)	$	721	$	3,854

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DEBT

3 Months Ended

Mar. 31, 2023

Debt Disclosure [Abstract]

DEBT

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 on September 1, 2020.

In the three months ended March 31, 2023, the Company recorded a gain of $2.8 million in other income, net from the repurchase of Notes representing $33 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 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. The conversion rate will be adjusted upon certain events, including spin-offs, tender offers, exchange offers, and certain stockholder distributions.

Beginning on September 1, 2024, noteholders may convert their Notes at any time at their election.

Before September 1, 2024, noteholders may 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).

As of March 31, 2023, the Notes were not eligible for conversion.

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.

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)	March 31, 2023		December 31, 2022
Principal	$	567,000	$	600,000
Unamortized issuance costs	(5,345)		(6,391)
Convertible senior notes, net	$	561,655	$	593,609

Interest expense related to the Notes:

	Three Months Ended March 31,
(in thousands)	2023		2022
Contractual interest expense (0.75% coupon)	$	1,125	$	1,125
Amortization of issuance costs	728		719
	$	1,853	$	1,844

The average interest rate on the Notes in the three months ended March 31, 2023 and 2022 was 1.2%.

Future payments of principal and contractual interest:

	March 31, 2023
(in thousands)	Principal		Interest		Total
Remainder of 2023	$	—	$	1,772	$	1,772
2024	—		4,253		4,253
2025	567,000		2,126		569,126
	$	567,000	$	8,151	$	575,151

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 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 three months ended March 31, 2023, Capped Call Transactions covering approximately 0.2 million shares were settled for proceeds of $0.2 million.

As of March 31, 2023, Capped Call Transactions representing approximately 4.2 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 of the Capped Call Transactions, calculated following the governing documents, may not represent a fair value measurement. The Capped Call Transactions are classified as other long-term assets and remeasured to fair value each reporting period, resulting in a non-operating gain or loss.

Change in capped call transactions:

	Three Months Ended March 31,
(in thousands)	2023		2022
January 1,	$	2,582	$	59,964
Settlements	(188)		—
Fair value adjustment	3,206		(30,560)
March 31,	$	5,600	$	29,404

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 expire on November 4, 2024, and any outstanding loans will be payable on such date. The Credit Facility, as amended, contains customary covenants, including, but not limited to, those relating to additional indebtedness, liens, asset divestitures, and affiliate transactions.

The Company is required to comply with financial covenants, including:

•Beginning with the fiscal quarter ended March 31, 2022 and ending with the fiscal quarter ended December 31, 2023, Pegasystems Inc. must maintain at least $200 million in cash, investments, and availability under the Revolving Credit Loan.

•Beginning with the fiscal quarter ended March 31, 2023 and ending with the fiscal year ended December 31, 2023, maintain

	Year to Date
(in thousands)	March 31, 2023		June 30, 2023		September 30, 2023		December 31, 2023
Minimum Consolidated EBITDA (as defined in the Credit Facility)	$	38,862	$	59,894	$	95,597	$	214,590

•Beginning with the fiscal quarter ended March 31, 2024, a maximum net consolidated leverage ratio of 3.5 to 1.0 (with a step-up for certain acquisitions) and a minimum consolidated interest coverage ratio of 3.5 to 1.0.

As of March 31, 2023 and December 31, 2022, the Company had no outstanding cash borrowings under the Credit Facility.

As of March 31, 2023, the Company had $27.3 million in outstanding letters of credit, which reduce the Company’s available borrowing capacity under the Credit Facility.

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RESTRUCTURING

3 Months Ended

Mar. 31, 2023

Restructuring and Related Activities [Abstract]

RESTRUCTURING

NOTE 9. RESTRUCTURING

Go-to-market plan and Salem office

During the fourth quarter of 2022, management committed to a restructuring plan aligned with the Company’s target organization go-to-market strategy. The plan resulted in a restructuring expense of $21.7 million, primarily associated with severance and benefits for impacted employees and expenses incurred as a result of the closure of the Company’s Salem, New Hampshire office.

Accrued employee severance and related benefits:

(in thousands)	2023
January 1,	$	18,573
Costs incurred	220
Cash disbursements	(14,458)
Currency translation adjustments	181
March 31,	$	4,516

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FAIR VALUE MEASUREMENTS

3 Months Ended

Mar. 31, 2023

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENTS

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;

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

•Level 3 - significant unobservable inputs on which there is 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:

	March 31, 2023								December 31, 2022
(in thousands)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Cash equivalents	$	41,088	$	—	$	—	$	41,088	$	2,526	$	—	$	—	$	2,526
Marketable securities	$	—	$	155,564	$	—	$	155,564	$	—	$	152,167	$	—	$	152,167
Capped Call Transactions (1)	$	—	$	5,600	$	—	$	5,600	$	—	$	2,582	$	—	$	2,582
Venture investments (1) (2)	$	—	$	—	$	16,265	$	16,265	$	—	$	—	$	13,069	$	13,069

(1) Included in other long-term assets. (2) Investments in privately-held companies.

Changes in venture investments:

	Three Months Ended March 31,
(in thousands)	2023		2022
January 1,	$	13,069	$	7,648
New investments	400		—
Changes in foreign exchange rates	58		(61)
Changes in fair value:
included in other income, net	3,802		2,741
included in other comprehensive (loss)	(1,064)		2,502
March 31,	$	16,265	$	12,830

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

Fair value of the Notes

The fair value of the Notes outstanding (including the embedded conversion feature) was $507.8 million as of March 31, 2023 and $521.1 million as of December 31, 2022. In the three months ended March 31, 2023 the Company repurchased Notes representing $33 million in aggregate principal amount.

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.

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REVENUE

3 Months Ended

Mar. 31, 2023

Revenue from Contract with Customer [Abstract]

REVENUE

NOTE 11. REVENUE

Geographic revenue

	Three Months Ended March 31,
(Dollars in thousands)	2023				2022
U.S.	$	184,519	56	%	$	217,272	58	%
Other Americas	15,011		5	%	45,751		12	%
United Kingdom (“U.K.”)	42,237		13	%	30,932		8	%
Europe (excluding U.K.), Middle East, and Africa	51,318		16	%	49,136		13	%
Asia-Pacific	32,387		10	%	33,216		9	%
	$	325,472	100	%	$	376,307	100	%

Revenue streams

	Three Months Ended March 31,
(in thousands)	2023		2022
Perpetual license	$	403	$	7,440
Subscription license	84,527		137,533
Revenue recognized at a point in time	84,930		144,973
Maintenance	79,630		79,716
Pega Cloud	107,879		90,317
Consulting	53,033		61,301
Revenue recognized over time	240,542		231,334
Total revenue	$	325,472	$	376,307

	Three Months Ended March 31,
(in thousands)	2023		2022
Pega Cloud	$	107,879	$	90,317
Maintenance	79,630		79,716
Subscription services	187,509		170,033
Subscription license	84,527		137,533
Subscription	272,036		307,566
Perpetual license	403		7,440
Consulting	53,033		61,301
	$	325,472	$	376,307

Remaining performance obligations ("Backlog")

Expected future revenue from existing non-cancellable contracts:

As of March 31, 2023:

(Dollars in thousands)	Subscription services				Subscription license		Perpetual license		Consulting		Total
	Maintenance		Pega Cloud
1 year or less	$	235,315	$	389,632	$	35,346	$	5,262	$	41,203	$	706,758	54	%
1-2 years	66,272		239,228		3,215		2,252		6,653		317,620		24	%
2-3 years	29,295		131,085		6,777		—		2,292		169,449		13	%
Greater than 3 years	7,479		106,778		—		—		—		114,257		9	%
	$	338,361	$	866,723	$	45,338	$	7,514	$	50,148	$	1,308,084	100	%

As of March 31, 2022:

(Dollars in thousands)	Subscription services				Subscription license		Perpetual license		Consulting		Total
	Maintenance		Pega Cloud
1 year or less	$	228,984	$	329,857	$	47,428	$	7,281	$	40,661	$	654,211	55	%
1-2 years	63,870		208,875		16,111		4,505		10,955		304,316		26	%
2-3 years	33,617		106,156		2,422		2,252		3,876		148,323		13	%
Greater than 3 years	22,611		44,596		1,758		—		522		69,487		6	%
	$	349,082	$	689,484	$	67,719	$	14,038	$	56,014	$	1,176,337	100	%

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STOCK-BASED COMPENSATION

3 Months Ended

Mar. 31, 2023

Share-Based Payment Arrangement [Abstract]

STOCK-BASED COMPENSATION

NOTE 12. STOCK-BASED COMPENSATION

Expense

	Three Months Ended March 31,
(in thousands)	2023		2022
Cost of revenue	$	8,912	$	6,378
Selling and marketing	17,661		10,958
Research and development	9,060		7,346
General and administrative	6,924		3,545
	$	42,557	$	28,227
Income tax benefit	$	(672)	$	(5,311)

As of March 31, 2023, the Company had $178.6 million of unrecognized stock-based compensation expense, net of estimated forfeitures, which is expected to be recognized over a weighted-average period of 2 years.

Grants

	Three Months Ended March 31, 2023
(in thousands)	Shares	Total Fair Value
Restricted stock units	1,460	$	68,352
Non-qualified stock options	43	$	615

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INCOME TAXES

3 Months Ended

Mar. 31, 2023

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 13. INCOME TAXES

Effective income tax rate

	Three Months Ended March 31,
(Dollars in thousands)	2023			2022
Provision for (benefit from) income taxes	$	5,249		$	(7,683)
Effective income tax rate	(34)		%	95		%

The effective income tax rate in the three months ended March 31, 2023 was impacted by the valuation allowance on the Company’s U.S. and U.K. deferred tax assets and current taxes payable in the U.S. as a result of projecting taxable income that cannot be fully offset by net operating losses and available tax credits.

The Company recognizes deferred tax assets to the extent that it believes that these assets are more likely than not to be realized. Future realization of deferred tax assets ultimately depends on sufficient taxable income within the available carryback or carryforward periods. The Company’s deferred tax valuation allowance requires significant judgment and uncertainties, including assumptions about future taxable income based on historical and projected information. On a quarterly basis, the Company reassesses the need for a valuation allowance on its existing net deferred tax assets by tax-paying jurisdiction, weighing positive and negative evidence to assess its recoverability. In making such a determination, the Company considers all available and objectively verifiable negative and positive evidence, including future reversals of existing taxable temporary differences, committed contractual backlog (“Backlog”), projected future taxable income inclusive of the impact of enacted legislation, tax-planning strategies, and results of recent operations. The weight given to the potential effect of negative and positive evidence is commensurate with the extent to which it can be objectively verified.

The Company intends to continue maintaining a full valuation allowance on the Company’s U.S and U.K. deferred tax assets until there is sufficient evidence to support the realization of these deferred tax assets.

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(LOSS) PER SHARE

3 Months Ended

Mar. 31, 2023

Earnings Per Share [Abstract]

(LOSS) PER SHARE

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 March 31,
(in thousands, except per share amounts)	2023		2022
Net (loss)	$	(20,774)	$	(379)
Weighted-average common shares outstanding	82,604		81,680
(Loss) per share, basic	$	(0.25)	$	—
Net (loss)	$	(20,774)	$	(379)
Weighted-average common shares outstanding, assuming dilution (1) (2) (3)	82,604		81,680
(Loss) per share, diluted	$	(0.25)	$	—
Outstanding anti-dilutive stock options and RSUs (4)	1,348		4,178

(1) In periods of loss, all dilutive securities are excluded as 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 4.2 million shares as of March 31, 2023.

(3) The Company’s Capped Call Transactions represent the equivalent of approximately 4.2 million shares of the Company’s common stock (representing the number of shares for which the Notes are initially convertible) as of March 31, 2023. 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.

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COMMITMENTS AND CONTINGENCIES

3 Months Ended

Mar. 31, 2023

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

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 as of March 31, 2023 and December 31, 2022.

Appian Corp. v. Pegasystems Inc. & Youyong Zou

As previously reported, 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. Appellate briefing is currently in process. Although it is not possible to predict timing, this 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 motion to dismiss is scheduled for May 17, 2023. The Company believes the claims brought against the defendants are without merit and intends to defend against these claims vigorously. The Company is unable to reasonably estimate possible damages or a range of possible damages in this matter given the stage of the lawsuit, the Company’s belief that the claims are without merit, and there being no specified quantum of damages sought in the complaint.

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

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 January 10, 2023, the Court entered an order staying the matter until after a final judgment dismissing the City of Fort Lauderdale matter referenced above, the denial of a motion to dismiss in the City of Fort Lauderdale action, or if any related derivative complaint is filed and not stayed for the same or longer duration. The Company believes the claims brought against the defendants are without merit and intends to defend against these claims vigorously. The Company is unable to reasonably estimate possible damages or a range of possible damages in this matter given the stage of the lawsuit, the Company’s belief that the claims are without merit, and there being no specified quantum of damages sought in the complaint.

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. The Company is fully cooperating with the SEC’s requests.

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BASIS OF PRESENTATION (Policies)

3 Months Ended

Mar. 31, 2023

Accounting Policies [Abstract]

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, 2022.

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 the full year 2023.

Assets and liabilities measured at fair value on a recurring basis

Assets and liabilities measured at fair value on a recurring basis

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

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

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

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

•Level 3 - significant unobservable inputs on which there is 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.

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MARKETABLE SECURITIES (Tables)

3 Months Ended

Mar. 31, 2023

Investments, Debt and Equity Securities [Abstract]

Schedule of Marketable Securities

	March 31, 2023								December 31, 2022
(in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value		Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Government debt	$	2,970	$	—	$	(33)	$	2,937	$	2,960	$	—	$	(52)	$	2,908
Corporate debt	154,299		8		(1,680)		152,627		151,906		—		(2,647)		149,259
	$	157,269	$	8	$	(1,713)	$	155,564	$	154,866	$	—	$	(2,699)	$	152,167

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RECEIVABLES, CONTRACT ASSETS, AND DEFERRED REVENUE (Tables)

3 Months Ended

Mar. 31, 2023

Receivables [Abstract]

Summary of Receivables

Receivables

(in thousands)	March 31, 2023		December 31, 2022
Accounts receivable	$	201,585	$	255,150
Unbilled receivables	196,279		213,719
Long-term unbilled receivables	79,704		95,806
	$	477,568	$	564,675

Summary of Unbilled Receivables

Unbilled receivables by expected billing date:

(Dollars in thousands)	March 31, 2023
1 year or less	$	196,279	71	%
1-2 years	64,812		24	%
2-5 years	14,892		5	%
	$	275,983	100	%

Summary of Unbilled Receivables by Contract Effective Date

Unbilled receivables by contract effective date:

(Dollars in thousands)	March 31, 2023
2023	$	51,895	19	%
2022	96,349		34	%
2021	87,278		32	%
2020	27,755		10	%
2019 and prior	12,706		5	%
	$	275,983	100	%

Summary of Contract Assets and Deferred Revenue

Contract assets

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

(in thousands)	March 31, 2023		December 31, 2022
Contract assets (1)	$	14,463	$	17,546
Long-term contract assets (2)	11,323		16,470
	$	25,786	$	34,016

(1) Included in other current assets. (2) Included in other long-term assets.

Deferred revenue

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

(in thousands)	March 31, 2023		December 31, 2022
Deferred revenue	$	342,591	$	325,212
Long-term deferred revenue (1)	3,323		3,552
	$	345,914	$	328,764

(1) Included in other long-term liabilities.

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DEFERRED COMMISSIONS (Tables)

3 Months Ended

Mar. 31, 2023

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Schedule of Impairment of Deferred Contract Costs

(in thousands)	March 31, 2023		December 31, 2022
Deferred commissions (1)	$	124,069	$	130,195

(1) Included in other long-term assets.

Schedule of Amortization of Deferred Contract Costs

	Three Months Ended March 31,
(in thousands)	2023		2022
Amortization of deferred commissions (1)	$	14,277	$	17,221

(1) Included in selling and marketing expense

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GOODWILL AND OTHER INTANGIBLES (Tables)

3 Months Ended

Mar. 31, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Changes in Carrying Amount of Goodwill

	Three Months Ended March 31,
(in thousands)	2023		2022
January 1,	$	81,399	$	81,923
Currency translation adjustments	35		108
March 31,	$	81,434	$	82,031

Schedule of Amortizable Intangible Assets

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

		March 31, 2023
(in thousands)	Useful Lives	Cost		Accumulated Amortization		Net Book Value (1)
Client-related	4-10 years	$	63,094	$	(58,983)	$	4,111
Technology	2-10 years	68,085		(62,335)		5,750
Other	1-5 years	5,361		(5,361)		—
		$	136,540	$	(126,679)	$	9,861

(1) Included in other long-term assets.

		December 31, 2022
(in thousands)	Useful Lives	Cost		Accumulated Amortization		Net Book Value (1)
Client-related	4-10 years	$	63,076	$	(58,623)	$	4,453
Technology	2-10 years	68,056		(61,621)		6,435
Other	1-5 years	5,361		(5,361)		—
		$	136,493	$	(125,605)	$	10,888

(1) Included in other long-term assets.

Schedule of Estimated Future Amortization Expense Related to Intangible Assets

Future estimated intangibles assets amortization:

(in thousands)	March 31, 2023
Remainder of 2023	$	2,884
2024	3,163
2025	2,613
2026	874
2027	327
	$	9,861

Schedule of Amortization Expense of Acquired Intangibles

Amortization of intangible assets:

	Three Months Ended March 31,
(in thousands)	2023		2022
Cost of revenue	$	706	$	629
Selling and marketing	343		343
	$	1,049	$	972

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OTHER ASSETS AND LIABILITIES (Tables)

3 Months Ended

Mar. 31, 2023

Other Assets and Liabilities [Abstract]

Schedule of Other Assets and Other Liabilities

Other current assets

(in thousands)	March 31, 2023		December 31, 2022
Income tax receivables	$	22,344	$	25,354
Contract assets	14,463		17,546
Other	37,175		37,488
	$	73,982	$	80,388

Other long-term assets

(in thousands)	March 31, 2023		December 31, 2022
Deferred commissions	$	124,069	$	130,195
Right of use assets	72,549		76,114
Property and equipment	55,775		55,056
Venture investments	16,265		13,069
Contract assets	11,323		16,470
Intangible assets	9,861		10,888
Capped call transactions	5,600		2,582
Deferred income taxes	4,827		4,795
Restricted cash	1,840		—
Other	22,866		24,820
	$	324,975	$	333,989

Other current liabilities

(in thousands)	March 31, 2023		December 31, 2022
Operating lease liabilities	$	15,314	$	14,976
Dividends payable	2,488		2,474
	$	17,802	$	17,450

Other long-term liabilities

(in thousands)	March 31, 2023		December 31, 2022
Deferred revenue	$	3,323	$	3,552
Income taxes payable	3,578		3,207
Other	7,743		8,369
	$	14,644	$	15,128

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LEASES (Tables)

3 Months Ended

Mar. 31, 2023

Leases [Abstract]

Schedule of Lease Expense

	Three Months Ended March 31,
(in thousands)	2023		2022
Fixed lease costs	$	5,766	$	5,093
Short-term lease costs	781		806
Variable lease costs	1,975		764
	$	8,522	$	6,663

Schedule of Right of Use Asset and Lease Liabilities

(in thousands)	March 31, 2023		December 31, 2022
Right of use assets (1)	$	72,549	$	76,114
Operating lease liabilities (2)	$	15,314	$	14,976
Long-term operating lease liabilities	$	76,082	$	79,152

(1) Included in other long-term assets.

(2) Included in other current liabilities.

Schedule of Weighted Average and Discount Rate

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

	March 31, 2023		December 31, 2022
Weighted-average remaining lease term	7.3 years		7.5 years
Weighted-average discount rate (1)	4.1	%	4.1	%

(1) The rates implicit in most of 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.

Schedule of Lease Maturities

Maturities of lease liabilities:

(in thousands)	March 31, 2023
Remainder of 2023	$	14,003
2024	17,642
2025	14,562
2026	10,917
2027	9,863
2028	9,290
Thereafter	30,090
Total lease payments	106,367
Less: imputed interest (1)	(14,971)
	$	91,396

(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.

Schedule of Supplemental Cash Flow Lease Information

	Three Months Ended March 31,
(in thousands)	2023		2022
Cash paid for operating leases, net of tenant improvement allowances	$	5,038	$	3,650
Right of use assets recognized for new leases and amendments (non-cash)	$	721	$	3,854

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DEBT (Tables)

3 Months Ended

Mar. 31, 2023

Debt Disclosure [Abstract]

Schedule of Carrying Value, Interest Expense, and Effective Interest Rate for the Notes

Carrying value of the Notes:

(in thousands)	March 31, 2023		December 31, 2022
Principal	$	567,000	$	600,000
Unamortized issuance costs	(5,345)		(6,391)
Convertible senior notes, net	$	561,655	$	593,609

Interest expense related to the Notes:

	Three Months Ended March 31,
(in thousands)	2023		2022
Contractual interest expense (0.75% coupon)	$	1,125	$	1,125
Amortization of issuance costs	728		719
	$	1,853	$	1,844

Schedule of Future Payments of Principal and Contractual Interest

Future payments of principal and contractual interest:

	March 31, 2023
(in thousands)	Principal		Interest		Total
Remainder of 2023	$	—	$	1,772	$	1,772
2024	—		4,253		4,253
2025	567,000		2,126		569,126
	$	567,000	$	8,151	$	575,151

Schedule of Change in Capped Call Transactions

Change in capped call transactions:

	Three Months Ended March 31,
(in thousands)	2023		2022
January 1,	$	2,582	$	59,964
Settlements	(188)		—
Fair value adjustment	3,206		(30,560)
March 31,	$	5,600	$	29,404

Schedule of Minimum Consolidated EBITDA

Beginning with the fiscal quarter ended March 31, 2023 and ending with the fiscal year ended December 31, 2023, maintain

	Year to Date
(in thousands)	March 31, 2023		June 30, 2023		September 30, 2023		December 31, 2023
Minimum Consolidated EBITDA (as defined in the Credit Facility)	$	38,862	$	59,894	$	95,597	$	214,590

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RESTRUCTURING (Tables)

3 Months Ended

Mar. 31, 2023

Restructuring and Related Activities [Abstract]

Schedule of Accrued Employee Severance and Related Benefit

Accrued employee severance and related benefits:

(in thousands)	2023
January 1,	$	18,573
Costs incurred	220
Cash disbursements	(14,458)
Currency translation adjustments	181
March 31,	$	4,516

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FAIR VALUE MEASUREMENTS (Tables)

3 Months Ended

Mar. 31, 2023

Fair Value Disclosures [Abstract]

Schedule of Assets and Liabilities Measured at Fair Value

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

	March 31, 2023								December 31, 2022
(in thousands)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Cash equivalents	$	41,088	$	—	$	—	$	41,088	$	2,526	$	—	$	—	$	2,526
Marketable securities	$	—	$	155,564	$	—	$	155,564	$	—	$	152,167	$	—	$	152,167
Capped Call Transactions (1)	$	—	$	5,600	$	—	$	5,600	$	—	$	2,582	$	—	$	2,582
Venture investments (1) (2)	$	—	$	—	$	16,265	$	16,265	$	—	$	—	$	13,069	$	13,069

(1) Included in other long-term assets. (2) Investments in privately-held companies.

Schedule of Changes in Venture Investments

Changes in venture investments:

	Three Months Ended March 31,
(in thousands)	2023		2022
January 1,	$	13,069	$	7,648
New investments	400		—
Changes in foreign exchange rates	58		(61)
Changes in fair value:
included in other income, net	3,802		2,741
included in other comprehensive (loss)	(1,064)		2,502
March 31,	$	16,265	$	12,830

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REVENUE (Tables)

3 Months Ended

Mar. 31, 2023

Revenue from Contract with Customer [Abstract]

Schedule of Revenue by Geographic Location

Geographic revenue

	Three Months Ended March 31,
(Dollars in thousands)	2023				2022
U.S.	$	184,519	56	%	$	217,272	58	%
Other Americas	15,011		5	%	45,751		12	%
United Kingdom (“U.K.”)	42,237		13	%	30,932		8	%
Europe (excluding U.K.), Middle East, and Africa	51,318		16	%	49,136		13	%
Asia-Pacific	32,387		10	%	33,216		9	%
	$	325,472	100	%	$	376,307	100	%

Schedule of Revenue Streams

Revenue streams

	Three Months Ended March 31,
(in thousands)	2023		2022
Perpetual license	$	403	$	7,440
Subscription license	84,527		137,533
Revenue recognized at a point in time	84,930		144,973
Maintenance	79,630		79,716
Pega Cloud	107,879		90,317
Consulting	53,033		61,301
Revenue recognized over time	240,542		231,334
Total revenue	$	325,472	$	376,307

	Three Months Ended March 31,
(in thousands)	2023		2022
Pega Cloud	$	107,879	$	90,317
Maintenance	79,630		79,716
Subscription services	187,509		170,033
Subscription license	84,527		137,533
Subscription	272,036		307,566
Perpetual license	403		7,440
Consulting	53,033		61,301
	$	325,472	$	376,307

Schedule of Revenue for Remaining Performance Obligations Expected to Be Recognized

Expected future revenue from existing non-cancellable contracts:

As of March 31, 2023:

(Dollars in thousands)	Subscription services				Subscription license		Perpetual license		Consulting		Total
	Maintenance		Pega Cloud
1 year or less	$	235,315	$	389,632	$	35,346	$	5,262	$	41,203	$	706,758	54	%
1-2 years	66,272		239,228		3,215		2,252		6,653		317,620		24	%
2-3 years	29,295		131,085		6,777		—		2,292		169,449		13	%
Greater than 3 years	7,479		106,778		—		—		—		114,257		9	%
	$	338,361	$	866,723	$	45,338	$	7,514	$	50,148	$	1,308,084	100	%

As of March 31, 2022:

(Dollars in thousands)	Subscription services				Subscription license		Perpetual license		Consulting		Total
	Maintenance		Pega Cloud
1 year or less	$	228,984	$	329,857	$	47,428	$	7,281	$	40,661	$	654,211	55	%
1-2 years	63,870		208,875		16,111		4,505		10,955		304,316		26	%
2-3 years	33,617		106,156		2,422		2,252		3,876		148,323		13	%
Greater than 3 years	22,611		44,596		1,758		—		522		69,487		6	%
	$	349,082	$	689,484	$	67,719	$	14,038	$	56,014	$	1,176,337	100	%

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STOCK-BASED COMPENSATION (Tables)

3 Months Ended

Mar. 31, 2023

Share-Based Payment Arrangement [Abstract]

Summary of Stock Based Compensation Expense

Expense

	Three Months Ended March 31,
(in thousands)	2023		2022
Cost of revenue	$	8,912	$	6,378
Selling and marketing	17,661		10,958
Research and development	9,060		7,346
General and administrative	6,924		3,545
	$	42,557	$	28,227
Income tax benefit	$	(672)	$	(5,311)

Summary of Stock Based Compensation Award Granted

Grants

	Three Months Ended March 31, 2023
(in thousands)	Shares	Total Fair Value
Restricted stock units	1,460	$	68,352
Non-qualified stock options	43	$	615

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INCOME TAXES (Tables)

3 Months Ended

Mar. 31, 2023

Income Tax Disclosure [Abstract]

Summary of Effective Income Tax Rate

Effective income tax rate

	Three Months Ended March 31,
(Dollars in thousands)	2023			2022
Provision for (benefit from) income taxes	$	5,249		$	(7,683)
Effective income tax rate	(34)		%	95		%

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(LOSS) PER SHARE (Tables)

3 Months Ended

Mar. 31, 2023

Earnings Per Share [Abstract]

Summary of Calculation of (Loss) Per Share

Calculation of (loss) per share:

	Three Months Ended March 31,
(in thousands, except per share amounts)	2023		2022
Net (loss)	$	(20,774)	$	(379)
Weighted-average common shares outstanding	82,604		81,680
(Loss) per share, basic	$	(0.25)	$	—
Net (loss)	$	(20,774)	$	(379)
Weighted-average common shares outstanding, assuming dilution (1) (2) (3)	82,604		81,680
(Loss) per share, diluted	$	(0.25)	$	—
Outstanding anti-dilutive stock options and RSUs (4)	1,348		4,178

(1) In periods of loss, all dilutive securities are excluded as 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 4.2 million shares as of March 31, 2023.

(3) The Company’s Capped Call Transactions represent the equivalent of approximately 4.2 million shares of the Company’s common stock (representing the number of shares for which the Notes are initially convertible) as of March 31, 2023. 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.

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MARKETABLE SECURITIES - Schedule of Marketable Securities (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Marketable Securities [Line Items]
Amortized Cost	$ 157,269	$ 154,866
Unrealized Gains	8	0
Unrealized Losses	(1,713)	(2,699)
Fair Value	155,564	152,167
Government debt
Marketable Securities [Line Items]
Amortized Cost	2,970	2,960
Unrealized Gains	0	0
Unrealized Losses	(33)	(52)
Fair Value	2,937	2,908
Corporate debt
Marketable Securities [Line Items]
Amortized Cost	154,299	151,906
Unrealized Gains	8	0
Unrealized Losses	(1,680)	(2,647)
Fair Value	$ 152,627	$ 149,259

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MARKETABLE SECURITIES - Narrative (Details)	Mar. 31, 2023
Investments, Debt and Equity Securities [Abstract]
Marketable debt security weighted-average remaining maturity	6 months

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RECEIVABLES, CONTRACT ASSETS, AND DEFERRED REVENUE - Summary of Receivable (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Receivables [Abstract]
Accounts receivable	$ 201,585	$ 255,150
Unbilled receivables	196,279	213,719
Long-term unbilled receivables	79,704	95,806
Total receivables	$ 477,568	$ 564,675

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RECEIVABLES, CONTRACT ASSETS, AND DEFERRED REVENUE - Summary of Unbilled Receivables (Details) $ in Thousands	Mar. 31, 2023 USD ($)
Receivables [Abstract]
1 year or less	$ 196,279
1-2 years	64,812
2-5 years	14,892
Total	$ 275,983
Percentage of unbilled receivables, 1 year or less	71.00%
Percentage of unbilled receivables, 1-2 years	24.00%
Percentage of unbilled receivables, 2-5 years	5.00%
Total percentage of unbilled receivables	100.00%

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RECEIVABLES, CONTRACT ASSETS, AND DEFERRED REVENUE- Contract Effective (Details) $ in Thousands	Mar. 31, 2023 USD ($)
Receivables [Abstract]
2023	$ 51,895
2022	96,349
2021	87,278
2020	27,755
2019 and prior	12,706
Unbilled revenue total	$ 275,983
2023	19.00%
2022	34.00%
2021	32.00%
2020	10.00%
2019 and prior	5.00%
Total percentage of unbilled revenue	100.00%

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RECEIVABLES, CONTRACT ASSETS, AND DEFERRED REVENUE - Summary of Contract Assets and Deferred Revenue (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Dec. 31, 2022
Receivables [Abstract]
Contract assets	$ 14,463	$ 17,546
Contract assets	11,323	16,470
Total contract assets	25,786	34,016
Deferred revenue	342,591	325,212
Long-term deferred revenue	3,323	3,552
Total deferred revenue	345,914	$ 328,764
Revenue recognized during the period that was included in deferred revenue	$ 139,700

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DEFERRED COMMISSIONS - Schedule of Impairment of Deferred Commissions (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
Deferred commissions	$ 124,069	$ 130,195

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DEFERRED COMMISSIONS - Schedule of Amortization of Deferred Commissions (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
Amortization of deferred commissions	$ 14,277	$ 17,221

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GOODWILL AND OTHER INTANGIBLES - Changes in Carrying Amount of Goodwill (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Goodwill [Roll Forward]
Beginning balance	$ 81,399	$ 81,923
Currency translation adjustments	35	108
Ending balance	$ 81,434	$ 82,031

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GOODWILL AND OTHER INTANGIBLES - Schedule of Amortizable Intangible Assets (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2023	Dec. 31, 2022
Goodwill and Other Intangible Assets [Line Items]
Cost	$ 136,540	$ 136,493
Accumulated Amortization	(126,679)	(125,605)
Net Book Value	9,861	10,888
Client-related
Goodwill and Other Intangible Assets [Line Items]
Cost	63,094	63,076
Accumulated Amortization	(58,983)	(58,623)
Net Book Value	4,111	4,453
Technology
Goodwill and Other Intangible Assets [Line Items]
Cost	68,085	68,056
Accumulated Amortization	(62,335)	(61,621)
Net Book Value	5,750	6,435
Other
Goodwill and Other Intangible Assets [Line Items]
Cost	5,361	5,361
Accumulated Amortization	(5,361)	(5,361)
Net Book Value	$ 0	$ 0
Minimum | Client-related
Goodwill and Other Intangible Assets [Line Items]
Useful Lives	4 years	4 years
Minimum | Technology
Goodwill and Other Intangible Assets [Line Items]
Useful Lives	2 years	2 years
Minimum | Other
Goodwill and Other Intangible Assets [Line Items]
Useful Lives	1 year	1 year
Maximum | Client-related
Goodwill and Other Intangible Assets [Line Items]
Useful Lives	10 years	10 years
Maximum | Technology
Goodwill and Other Intangible Assets [Line Items]
Useful Lives	10 years	10 years
Maximum | Other
Goodwill and Other Intangible Assets [Line Items]
Useful Lives	5 years	5 years

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GOODWILL AND OTHER INTANGIBLES - Estimated Future Amortization Expense Related to Intangible Assets (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Goodwill and Intangible Assets Disclosure [Abstract]
Remainder of 2023	$ 2,884
2024	3,163
2025	2,613
2026	874
2027	327
Net Book Value	$ 9,861	$ 10,888

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GOODWILL AND OTHER INTANGIBLES - Amortization Expense of Acquired Intangibles (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Acquired Finite-Lived Intangible Assets [Line Items]
Amortization of intangible assets	$ 1,049	$ 972
Cost of revenue
Acquired Finite-Lived Intangible Assets [Line Items]
Amortization of intangible assets	706	629
Selling and marketing
Acquired Finite-Lived Intangible Assets [Line Items]
Amortization of intangible assets	$ 343	$ 343

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OTHER ASSETS AND LIABILITIES (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Other Assets and Liabilities [Abstract]
Income tax receivables	$ 22,344	$ 25,354
Contract assets	14,463	17,546
Other	37,175	37,488
Other current assets	73,982	80,388
Deferred commissions	124,069	130,195
Right of use assets	72,549	76,114
Property and equipment	55,775	55,056
Venture investments	16,265	13,069
Contract assets	11,323	16,470
Intangible assets	9,861	10,888
Capped call transactions	5,600	2,582
Deferred income taxes	4,827	4,795
Restricted cash	1,840	0
Other	22,866	24,820
Other long-term assets	324,975	333,989
Operating lease liabilities	15,314	14,976
Dividends payable	2,488	2,474
Other current liabilities	17,802	17,450
Deferred revenue	3,323	3,552
Income taxes payable	3,578	3,207
Other	7,743	8,369
Other long-term liabilities	$ 14,644	$ 15,128

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LEASES - Operating Lease Expenses (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Leases [Abstract]
Fixed lease costs	$ 5,766	$ 5,093
Short-term lease costs	781	806
Variable lease costs	1,975	764
Operating lease expenses	$ 8,522	$ 6,663

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LEASES - Right of Use Assets (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Leases [Abstract]
Operating lease, right-of-use asset, statement of financial position	Other long-term assets	Other long-term assets
Right of use assets	$ 72,549	$ 76,114
Operating lease, liability, current, statement of financial position	Other current liabilities	Other current liabilities
Operating lease liabilities	$ 15,314	$ 14,976
Long-term operating lease liabilities	$ 76,082	$ 79,152

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LEASES - Remaining Lease Term (Details)	Mar. 31, 2023	Dec. 31, 2022
Leases [Abstract]
Weighted-average remaining lease term	7 years 3 months 18 days	7 years 6 months
Weighted-average discount rate	4.10%	4.10%

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LEASES - Lease Liability Maturity (Details) $ in Thousands	Mar. 31, 2023 USD ($)
Leases [Abstract]
Remainder of 2023	$ 14,003
2024	17,642
2025	14,562
2026	10,917
2027	9,863
2028	9,290
Thereafter	30,090
Total lease payments	106,367
Less: imputed interest	(14,971)
Total lease liability	$ 91,396

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LEASES - Cash Flow Information (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Leases [Abstract]
Cash paid for operating leases, net of tenant improvement allowances	$ 5,038	$ 3,650
Right of use assets recognized for new leases and amendments (non-cash)	$ 721	$ 3,854

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DEBT - Convertible Senior Notes Narrative (Details)	1 Months Ended	3 Months Ended
	Feb. 29, 2020 USD ($) day $ / shares	Mar. 31, 2023 USD ($)	Mar. 31, 2022
Debt Instrument [Line Items]
Gain (loss) on repurchase of convertible debt | $		$ 2,800,000
Principal amount repurchased | $		$ 33,000,000
Redemption percentage	100.00%
On or After March 1, 2023
Debt Instrument [Line Items]
Redemption threshold trading days	40
Redemption percentage	100.00%
Convertible debt
Debt Instrument [Line Items]
Face amount | $	$ 600,000,000
Interest rate	0.75%	0.75%	0.75%
Initial conversion rate	0.0074045
Initial conversion price (in dollars per share) | $ / shares	$ 135.05
Average interest rate		1.20%	1.20%
Convertible debt | After the Calendar Quarter Ending on June 30, 2020
Debt Instrument [Line Items]
Threshold percentage of stock price trigger	130.00%
Threshold trading days	20
Threshold consecutive trading days	30
Convertible debt | Measurement Period
Debt Instrument [Line Items]
Threshold percentage of stock price trigger	98.00%
Threshold consecutive trading days	5
Threshold consecutive business days	5
Convertible debt | On or After March 1, 2023
Debt Instrument [Line Items]
Threshold percentage of stock price trigger	130.00%
Threshold trading days	20
Threshold consecutive trading days	30

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DEBT - Net Carrying Amount (Details) - Convertible debt - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Debt Instrument [Line Items]
Principal	$ 567,000	$ 600,000
Unamortized issuance costs	(5,345)	(6,391)
Convertible senior notes, net	$ 561,655	$ 593,609

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DEBT - Interest Expense (Details) - Convertible debt - USD ($) $ in Thousands	1 Months Ended	3 Months Ended
	Feb. 29, 2020	Mar. 31, 2023	Mar. 31, 2022
Debt Instrument [Line Items]
Interest rate	0.75%	0.75%	0.75%
Contractual interest expense (0.75% coupon)		$ 1,125	$ 1,125
Amortization of issuance costs		728	719
Interest expense		$ 1,853	$ 1,844

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DEBT - Future Payments of Principal and Contractual Interest (Details) - Convertible debt - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Principal
2023	$ 0
2024	0
2025	567,000
Principal, total due	567,000	$ 600,000
Interest
2023	1,772
2024	4,253
2025	2,126
Interest expense, total due	8,151
Total
2023	1,772
2024	4,253
2025	569,126
Principal and interest, total due	$ 575,151

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DEBT - Capped Call Transactions (Details) $ in Thousands, shares in Millions	1 Months Ended	3 Months Ended
	Feb. 29, 2020 $ / derivative shares	Mar. 31, 2023 USD ($) $ / derivative shares	Mar. 31, 2022 USD ($)
Debt Instrument [Line Items]
Number of shares issuable upon conversion (in shares) | shares	4.4	0.2
Proceeds from settlement of capped calls transactions		$ 188	$ 0
Number of shares outstanding (in shares) | shares		4.2
Cap price (in dollars per share) | $ / derivative	196.44	196.44
Capped Call Transactions
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Beginning balance		$ 2,582	59,964
Settlements		(188)	0
Fair value adjustment		3,206	(30,560)
Ending balance		$ 5,600	$ 29,404

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DEBT - Credit Facility (Details)		12 Months Ended
	Nov. 30, 2019 USD ($)	Dec. 31, 2022 USD ($)	Mar. 31, 2024	Mar. 31, 2023 USD ($)
Debt Instrument [Line Items]
Remaining borrowing capacity		$ 0		$ 0
Outstanding letters of credit				$ 27,300,000
PNC Bank, National Association | Forecast
Debt Instrument [Line Items]
Minimum consolidated coverage ratio			3.5
Credit Agreement | PNC Bank, National Association
Debt Instrument [Line Items]
Minimum required cash and investments held		$ 200,000,000
Credit Agreement | PNC Bank, National Association | Forecast
Debt Instrument [Line Items]
Maximum consolidated net leverage ratio			3.5
Line of Credit | PNC Bank, National Association | Revolving Credit Facility
Debt Instrument [Line Items]
Revolving credit agreement term	5 years
Senior notes	$ 100,000,000
Increase in aggregate commitment amount	$ 200,000,000

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Debt - Schedule of Minimum Consolidated EBITDA (Details) - Revolving Credit Facility - Credit Agreement - PNC Bank, National Association - Line of Credit - USD ($) $ in Thousands	3 Months Ended	6 Months Ended	9 Months Ended	12 Months Ended
	Mar. 31, 2023	Jun. 30, 2023	Sep. 30, 2023	Dec. 31, 2023
Debt Instrument [Line Items]
Minimum Consolidated EBITDA (as defined in the Credit Facility)	$ 38,862
Forecast
Debt Instrument [Line Items]
Minimum Consolidated EBITDA (as defined in the Credit Facility)		$ 59,894	$ 95,597	$ 214,590

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RESTRUCTURING - Narratives (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Dec. 31, 2022	Mar. 31, 2022
Restructuring and Related Activities [Abstract]
Restructuring	$ 1,461	$ 21,700	$ 0
Impairment operating lease right-of-use assets	$ 1,200

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RESTRUCTURING - Schedule of Accrued Employee Severance and Related Benefit (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2023 USD ($)
Restructuring Reserve [Roll Forward]
January 1,	$ 18,573
Costs incurred	220
Cash disbursements	(14,458)
Currency translation adjustments	181
March 31,	$ 4,516

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FAIR VALUE MEASUREMENTS - Assets and Liabilities Measured at Fair Value (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Fair Value Assets
Marketable securities	$ 155,564	$ 152,167
Capped call transactions	5,600	2,582
Cash equivalents
Fair Value Assets
Cash equivalents	41,088	2,526
Venture investments
Fair Value Assets
Venture investments	16,265	13,069
Level 1
Fair Value Assets
Marketable securities	0	0
Capped call transactions	0	0
Level 1 | Cash equivalents
Fair Value Assets
Cash equivalents	41,088	2,526
Level 1 | Venture investments
Fair Value Assets
Venture investments	0	0
Level 2
Fair Value Assets
Marketable securities	155,564	152,167
Capped call transactions	5,600	2,582
Level 2 | Cash equivalents
Fair Value Assets
Cash equivalents	0	0
Level 2 | Venture investments
Fair Value Assets
Venture investments	0	0
Level 3
Fair Value Assets
Marketable securities	0	0
Capped call transactions	0	0
Level 3 | Cash equivalents
Fair Value Assets
Cash equivalents	0	0
Level 3 | Venture investments
Fair Value Assets
Venture investments	$ 16,265	$ 13,069

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FAIR VALUE MEASUREMENTS - Change in Investment in Privately Held Companies (Details) - Privately Held Investment - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Beginning balance	$ 13,069	$ 7,648
New investments	400	0
Changes in foreign exchange rates	58	(61)
Changes in fair value included in other income, net	3,802	2,741
Changes in fair value included in other comprehensive (loss)	(1,064)	2,502
Ending balance	$ 16,265	$ 12,830

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FAIR VALUE MEASUREMENTS - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022
Fair Value Disclosures [Abstract]
Convertible debt fair value	$ 507,800		$ 521,100
Repurchases of convertible senior notes	$ 29,901	$ 0

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REVENUE - Geographic Revenue (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Disaggregation of Revenue [Line Items]
Revenue	$ 325,472	$ 376,307
Percent of total revenue	100.00%	100.00%
U.S.
Disaggregation of Revenue [Line Items]
Revenue	$ 184,519	$ 217,272
Other Americas
Disaggregation of Revenue [Line Items]
Revenue	15,011	45,751
United Kingdom (“U.K.”)
Disaggregation of Revenue [Line Items]
Revenue	42,237	30,932
Europe (excluding U.K.), Middle East, and Africa
Disaggregation of Revenue [Line Items]
Revenue	51,318	49,136
Asia-Pacific
Disaggregation of Revenue [Line Items]
Revenue	$ 32,387	$ 33,216
Total Revenue | U.S. | Geographic Concentration Risk
Disaggregation of Revenue [Line Items]
Percent of total revenue	56.00%	58.00%
Total Revenue | Other Americas | Geographic Concentration Risk
Disaggregation of Revenue [Line Items]
Percent of total revenue	5.00%	12.00%
Total Revenue | United Kingdom (“U.K.”) | Geographic Concentration Risk
Disaggregation of Revenue [Line Items]
Percent of total revenue	13.00%	8.00%
Total Revenue | Europe (excluding U.K.), Middle East, and Africa | Geographic Concentration Risk
Disaggregation of Revenue [Line Items]
Percent of total revenue	16.00%	13.00%
Total Revenue | Asia-Pacific | Geographic Concentration Risk
Disaggregation of Revenue [Line Items]
Percent of total revenue	10.00%	9.00%

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REVENUE - Revenue Stream (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Disaggregation of Revenue [Line Items]
Revenue	$ 325,472	$ 376,307
Perpetual license
Disaggregation of Revenue [Line Items]
Revenue	403	7,440
Subscription license
Disaggregation of Revenue [Line Items]
Revenue	84,527	137,533
Subscription services
Disaggregation of Revenue [Line Items]
Revenue	187,509	170,033
Subscription
Disaggregation of Revenue [Line Items]
Revenue	272,036	307,566
Consulting
Disaggregation of Revenue [Line Items]
Revenue	53,033	61,301
Revenue recognized at a point in time
Disaggregation of Revenue [Line Items]
Revenue	84,930	144,973
Revenue recognized at a point in time | Perpetual license
Disaggregation of Revenue [Line Items]
Revenue	403	7,440
Revenue recognized at a point in time | Subscription license
Disaggregation of Revenue [Line Items]
Revenue	84,527	137,533
Revenue recognized over time
Disaggregation of Revenue [Line Items]
Revenue	240,542	231,334
Revenue recognized over time | Maintenance
Disaggregation of Revenue [Line Items]
Revenue	79,630	79,716
Revenue recognized over time | Pega Cloud
Disaggregation of Revenue [Line Items]
Revenue	107,879	90,317
Revenue recognized over time | Consulting
Disaggregation of Revenue [Line Items]
Revenue	$ 53,033	$ 61,301

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REVENUE - Performance Obligations (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Mar. 31, 2022
Disaggregation of Revenue [Line Items]
Revenue remaining performance obligation	$ 1,308,084	$ 1,176,337
Revenue remaining performance obligation (in percent)	100.00%	100.00%
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-04-01
Disaggregation of Revenue [Line Items]
Revenue remaining performance obligation		$ 654,211
Revenue remaining performance obligation (in percent)		55.00%
Expected timing of satisfaction		1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-04-01
Disaggregation of Revenue [Line Items]
Revenue remaining performance obligation	$ 706,758	$ 304,316
Revenue remaining performance obligation (in percent)	54.00%	26.00%
Expected timing of satisfaction	1 year	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-04-01
Disaggregation of Revenue [Line Items]
Revenue remaining performance obligation	$ 317,620	$ 148,323
Revenue remaining performance obligation (in percent)	24.00%	13.00%
Expected timing of satisfaction	1 year	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2025-04-01
Disaggregation of Revenue [Line Items]
Revenue remaining performance obligation	$ 169,449	$ 69,487
Revenue remaining performance obligation (in percent)	13.00%	6.00%
Expected timing of satisfaction	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2026-04-01
Disaggregation of Revenue [Line Items]
Revenue remaining performance obligation	$ 114,257
Revenue remaining performance obligation (in percent)	9.00%
Expected timing of satisfaction
Maintenance
Disaggregation of Revenue [Line Items]
Revenue remaining performance obligation	$ 338,361	$ 349,082
Maintenance | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-04-01
Disaggregation of Revenue [Line Items]
Revenue remaining performance obligation		228,984
Maintenance | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-04-01
Disaggregation of Revenue [Line Items]
Revenue remaining performance obligation	235,315	63,870
Maintenance | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-04-01
Disaggregation of Revenue [Line Items]
Revenue remaining performance obligation	66,272	33,617
Maintenance | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2025-04-01
Disaggregation of Revenue [Line Items]
Revenue remaining performance obligation	29,295	22,611
Maintenance | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2026-04-01
Disaggregation of Revenue [Line Items]
Revenue remaining performance obligation	7,479
Pega Cloud
Disaggregation of Revenue [Line Items]
Revenue remaining performance obligation	866,723	689,484
Pega Cloud | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-04-01
Disaggregation of Revenue [Line Items]
Revenue remaining performance obligation		329,857
Pega Cloud | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-04-01
Disaggregation of Revenue [Line Items]
Revenue remaining performance obligation	389,632	208,875
Pega Cloud | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-04-01
Disaggregation of Revenue [Line Items]
Revenue remaining performance obligation	239,228	106,156
Pega Cloud | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2025-04-01
Disaggregation of Revenue [Line Items]
Revenue remaining performance obligation	131,085	44,596
Pega Cloud | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2026-04-01
Disaggregation of Revenue [Line Items]
Revenue remaining performance obligation	106,778
Subscription license
Disaggregation of Revenue [Line Items]
Revenue remaining performance obligation	45,338	67,719
Subscription license | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-04-01
Disaggregation of Revenue [Line Items]
Revenue remaining performance obligation		47,428
Subscription license | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-04-01
Disaggregation of Revenue [Line Items]
Revenue remaining performance obligation	35,346	16,111
Subscription license | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-04-01
Disaggregation of Revenue [Line Items]
Revenue remaining performance obligation	3,215	2,422
Subscription license | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2025-04-01
Disaggregation of Revenue [Line Items]
Revenue remaining performance obligation	6,777	1,758
Subscription license | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2026-04-01
Disaggregation of Revenue [Line Items]
Revenue remaining performance obligation	0
Perpetual license
Disaggregation of Revenue [Line Items]
Revenue remaining performance obligation	7,514	14,038
Perpetual license | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-04-01
Disaggregation of Revenue [Line Items]
Revenue remaining performance obligation		7,281
Perpetual license | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-04-01
Disaggregation of Revenue [Line Items]
Revenue remaining performance obligation	5,262	4,505
Perpetual license | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-04-01
Disaggregation of Revenue [Line Items]
Revenue remaining performance obligation	2,252	2,252
Perpetual license | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2025-04-01
Disaggregation of Revenue [Line Items]
Revenue remaining performance obligation	0	0
Perpetual license | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2026-04-01
Disaggregation of Revenue [Line Items]
Revenue remaining performance obligation	0
Consulting
Disaggregation of Revenue [Line Items]
Revenue remaining performance obligation	50,148	56,014
Consulting | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-04-01
Disaggregation of Revenue [Line Items]
Revenue remaining performance obligation		40,661
Consulting | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-04-01
Disaggregation of Revenue [Line Items]
Revenue remaining performance obligation	41,203	10,955
Consulting | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-04-01
Disaggregation of Revenue [Line Items]
Revenue remaining performance obligation	6,653	3,876
Consulting | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2025-04-01
Disaggregation of Revenue [Line Items]
Revenue remaining performance obligation	2,292	$ 522
Consulting | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2026-04-01
Disaggregation of Revenue [Line Items]
Revenue remaining performance obligation	$ 0

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STOCK-BASED COMPENSATION - Summary of Stock-Based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation before tax	$ 42,557	$ 28,227
Income tax benefit	(672)	(5,311)
Cost of revenue
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation before tax	8,912	6,378
Selling and marketing
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation before tax	17,661	10,958
Research and development
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation before tax	9,060	7,346
General and administrative
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation before tax	$ 6,924	$ 3,545

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STOCK-BASED COMPENSATION - Narrative (Details) $ in Millions	3 Months Ended
	Mar. 31, 2023 USD ($)
Share-Based Payment Arrangement [Abstract]
Unrecognized stock-based compensation expense	$ 178.6
Weighted-average period of recognition of unrecognized stock-based compensation expense (in years)	2 years

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STOCK-BASED COMPENSATION - Summary of Stock-Based Compensation Awards Granted (Details) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2023 USD ($) shares
Restricted stock units
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Restricted stock units (in shares) | shares	1,460
Total Fair Value | $	$ 68,352
Non-qualified stock options
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Non-qualified stock options (in shares) | shares	43
Total Fair Value | $	$ 615

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INCOME TAXES - Summary of benefit from income taxes and discrete tax items (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Income Tax Disclosure [Abstract]
Provision for (benefit from) income taxes	$ 5,249	$ (7,683)
Effective income tax rate	(34.00%)	95.00%

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(LOSS) PER SHARE (Details) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2023 USD ($) $ / shares $ / derivative shares	Mar. 31, 2022 USD ($) $ / shares shares	Feb. 29, 2020 $ / derivative
Earnings Per Share [Abstract]
Net (loss) | $	$ (20,774)	$ (379)
Weighted-average common shares outstanding (in shares)	82,604	81,680
(Loss) per share, basic (in dollars per share) | $ / shares	$ (0.25)	$ 0
Weighted-average common shares outstanding, assuming dilution (in shares)	82,604	81,680
(Loss) per share, diluted (in dollars per share) | $ / shares	$ (0.25)	$ 0
Outstanding anti-dilutive stock options and RSUs (in shares)	1,348	4,178
Convertible debt (in shares)	4,200
Number of shares outstanding (in shares)	4,200
Cap price (in dollars per share) | $ / derivative	196.44		196.44

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COMMITMENTS AND CONTINGENCIES (Details) - USD ($)	Sep. 15, 2022	May 09, 2022	Mar. 31, 2023	Sep. 29, 2022
Loss Contingencies [Line Items]
Outstanding letters of credit			$ 27,300,000
Appian Corp. v. Pegasystems Inc. & Youyong Zou
Loss Contingencies [Line Items]
Outstanding letters of credit				$ 25,000,000
Appian Corp. v. Pegasystems Inc. & Youyong Zou | Judicial Ruling
Loss Contingencies [Line Items]
Loss contingency, damages awarded, value	$ 2,060,479,287
Trade Secret Misappropriation | Appian Corp. v. Pegasystems Inc. & Youyong Zou
Loss Contingencies [Line Items]
Legal fees, post-judgement interest rate, percentage	6.00%
Trade Secret Misappropriation | Appian Corp. v. Pegasystems Inc. & Youyong Zou | Judicial Ruling
Loss Contingencies [Line Items]
Loss contingency, damages awarded, value		$ 2,036,860,045
Violation of the Virginia Computer Crimes Act | Appian Corp. v. Pegasystems Inc. & Youyong Zou | Judicial Ruling
Loss Contingencies [Line Items]
Loss contingency, damages awarded, value		$ 1.00