8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549 

_________________________________

 FORM 8-K

_________________________________

Current Report

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): July 26, 2023

____________________

PEGASYSTEMS INC.

(Exact name of Registrant as specified in its charter)

_________________________________

Massachusetts	1-11859	04-2787865
(State or other jurisdiction of incorporation)	(Commission File Number)	(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)

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions:

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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 is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).                         

                                                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. ☐

ITEM 2.02    RESULTS OF OPERATIONS AND FINANCIAL CONDITION

On July 26, 2023, Pegasystems Inc. issued a press release announcing its financial results for the second quarter of 2023. A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference in its entirety.

The information in this Item 2.02 and the Exhibits attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such a filing.

ITEM 9.01    FINANCIAL STATEMENTS AND EXHIBITS

Exhibit No.	Description
99.1	Press release issued by Pegasystems Inc.
104	Cover Page Interactive Data File (formatted as Inline XBRL)

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:	July 26, 2023	By:	/s/ KENNETH STILLWELL
			Kenneth Stillwell
			Chief Operating Officer and Chief Financial Officer
			(Principal Financial Officer)

EX-99.1

EXHIBIT 99.1

Pega Delivers Record Cash Flow in the First Half of 2023

•Operating cash flow exceeds $110 million (Free Cash Flow exceeds $120 million)

•Annual contract value (ACV) grows 13% year over year

•Pega Cloud gross margin expands to 73%

CAMBRIDGE, Mass. — July 26, 2023 — Pegasystems Inc., the low-code platform provider empowering the world’s leading enterprises to Build for Change®, released its financial results for the second quarter of 2023.

“In this uncertain and changing environment, focusing on client success is more important than ever,” said Alan Trefler, founder and CEO. “Our low-code platform for AI-powered decisioning and workflow automation uniquely empowers clients to embrace emerging trends like generative AI and, at the same time, reduce costs and improve customer engagement.“

“Achieving record cash flow in the first half of 2023 reflects solid execution by our team to better balance growth and free cash flow,” said Ken Stillwell, COO & CFO. “This significant shift in cash flow generation is a benefit of our successful move to a subscription model. In the second half of 2023, we will be looking to further increase operating effectiveness with additional improvements in our go-to-market alignment.”

Financial and performance metrics (1)

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

1

EXHIBIT 99.1

(continued)

Reconciliation of ACV and Constant Currency ACV

(in millions, except percentages)	Q2 22		Q3 22		Q4 22		Q1 23		Q2 23		1 Year Change
ACV	$	1,026	$	1,040	$	1,126	$	1,174	$	1,164	13	%
Impact of changes in foreign exchange rates	$	—	$	24	$	(1)	$	(5)	$	(5)
Constant Currency ACV	$	1,026	$	1,064	$	1,125	$	1,169	$	1,159	13	%

2

EXHIBIT 99.1

(continued)

Note: Constant currency ACV and Backlog are calculated by applying the Q2 2022 foreign exchange rates to all periods shown.

(Dollars in thousands, except per share amounts)	Three Months Ended June 30,						Six Months Ended June 30,
	2023		2022		Change		2023		2022		Change
Total revenue	$	298,268	$	274,337	9	%	$	623,740	$	650,644	(4)	%
Net (loss) - GAAP	$	(46,804)	$	(286,296)	84	%	$	(67,578)	$	(286,675)	76	%
Net income (loss) - non-GAAP	$	1,203	$	(31,406)	*		$	20,423	$	18,768	9	%
Diluted (loss) per share - GAAP	$	(0.56)	$	(3.50)	84	%	$	(0.82)	$	(3.51)	77	%
Diluted earnings (loss) per share - non-GAAP	$	0.01	$	(0.38)	*		$	0.24	$	0.22	9	%

* not meaningful

(Dollars in thousands)	Three Months Ended June 30,								Change				Six Months Ended June 30,								Change
	2023				2022								2023				2022
Pega Cloud	$	115,063	39	%	$	93,506	34	%	$	21,557	23	%	$	222,942	36	%	$	183,823	28	%	$	39,119	21	%
Maintenance	82,042		27	%	78,326		29	%	3,716		5	%	161,672		26	%	158,042		24	%	3,630		2	%
Subscription services	197,105		66	%	171,832		63	%	25,273		15	%	384,614		62	%	341,865		52	%	42,749		13	%
Subscription license	41,197		14	%	41,600		15	%	(403)		(1)	%	125,724		20	%	179,133		28	%	(53,409)		(30)	%
Subscription	238,302		80	%	213,432		78	%	24,870		12	%	510,338		82	%	520,998		80	%	(10,660)		(2)	%
Perpetual license	1,579		1	%	2,266		1	%	(687)		(30)	%	1,982		—	%	9,706		1	%	(7,724)		(80)	%
Consulting	58,387		19	%	58,639		21	%	(252)		—	%	111,420		18	%	119,940		19	%	(8,520)		(7)	%
	$	298,268	100	%	$	274,337	100	%	$	23,931	9	%	$	623,740	100	%	$	650,644	100	%	$	(26,904)	(4)	%

Quarterly conference call

A conference call and audio-only webcast will be conducted the following day at 8:00 a.m. EDT on Thursday, July 27, 2023.

Members of the public and investors are invited to join the call and participate in the question and answer session by dialing 1-877-407-9039 (domestic), 1-201-689-8470 (international), or via webcast (https://viavid.webcasts.com/starthere.jsp?ei=1622243&tp_key=962bdef8e2) by logging onto www.pega.com at least five minutes prior to the event's broadcast and clicking on the webcast icon in the Investors section.

3

Discussion of non-GAAP financial measures

Our non-GAAP financial measures should only be read in conjunction with our consolidated financial statements prepared in accordance with GAAP. We believe these measures help investors understand our core operating results without the effect of often one-time charges and other items outside normal operations. They are not a substitute for financial measures prepared under U.S. GAAP.

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

Forward-looking statements

Certain statements in this press release may be "forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995.

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

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

•our future financial performance and business plans;

•the adequacy of our liquidity and capital resources;

•the continued payment of our quarterly dividends;

•the timing of revenue recognition;

•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, and other filings we make with the U.S. Securities and Exchange Commission (“SEC”).

Investors are cautioned not to place undue reliance on such forward-looking statements, and there are no assurances that the results included in such statements will be achieved. Although subsequent events may cause our view to change, except as required by applicable law, we do not undertake and expressly disclaim any obligation to publicly update or revise these forward-looking statements whether as the result of new information, future events, or otherwise.

Any forward-looking statements in this presentation represent our views as of July 26, 2023.

4

About Pegasystems

Pega provides a powerful low-code platform that empowers the world's leading enterprises to Build for Change®. Clients use our AI-powered decisioning and workflow automation to solve their most pressing business challenges - from personalizing engagement to automating service to streamlining operations. Since 1983, we've built our scalable and flexible architecture to help enterprises meet today's customer demands while continuously transforming for tomorrow. For more information on Pegasystems (NASDAQ: PEGA), visit www.pega.com.

Press contact:

Lisa Pintchman

VP, Corporate Communications

lisapintchman.rogers@pega.com

617-866-6022

Twitter: @pega

Investor contact:

Peter Welburn

VP, Corporate Development & Investor Relations

PegaInvestorRelations@pega.com

617-498-8968

All trademarks are the property of their respective owners.

5

PEGASYSTEMS INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Revenue
Subscription services	$	197,105	$	171,832	$	384,614	$	341,865
Subscription license	41,197		41,600		125,724		179,133
Consulting	58,387		58,639		111,420		119,940
Perpetual license	1,579		2,266		1,982		9,706
Total revenue	298,268		274,337		623,740		650,644
Cost of revenue
Subscription services	36,783		36,533		73,647		68,563
Subscription license	623		673		1,342		1,295
Consulting	58,710		57,873		119,058		113,384
Perpetual license	24		36		27		70
Total cost of revenue	96,140		95,115		194,074		183,312
Gross profit	202,128		179,222		429,666		467,332
Operating expenses
Selling and marketing	143,858		157,198		293,655		319,434
Research and development	73,931		74,341		149,307		145,831
General and administrative	23,462		32,723		46,572		68,487
Restructuring	2,167		—		3,628		—
Total operating expenses	243,418		264,262		493,162		533,752
(Loss) from operations	(41,290)		(85,040)		(63,496)		(66,420)
Foreign currency transaction (loss) gain	(3,290)		1,713		(5,965)		4,589
Interest income	1,814		309		3,299		516
Interest expense	(1,778)		(1,944)		(3,696)		(3,890)
(Loss) income on capped call transactions	(1,361)		(18,945)		1,845		(49,505)
Other income, net	5,702		3,785		12,285		6,526
(Loss) before provision for income taxes	(40,203)		(100,122)		(55,728)		(108,184)
Provision for income taxes	6,601		186,174		11,850		178,491
Net (loss)	$	(46,804)	$	(286,296)	$	(67,578)	$	(286,675)
(Loss) per share
Basic	$	(0.56)	$	(3.50)	$	(0.82)	$	(3.51)
Diluted	$	(0.56)	$	(3.50)	$	(0.82)	$	(3.51)
Weighted-average number of common shares outstanding
Basic	83,039		81,847		82,823		81,764
Diluted	83,039		81,847		82,823		81,764

6

PEGASYSTEMS INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

	June 30, 2023		December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	186,874	$	145,054
Marketable securities	125,939		152,167
Total cash, cash equivalents, and marketable securities	312,813		297,221
Accounts receivable	163,915		255,150
Unbilled receivables	182,257		213,719
Other current assets	78,526		80,388
Total current assets	737,511		846,478
Unbilled receivables	70,486		95,806
Goodwill	81,593		81,399
Other long-term assets	302,848		333,989
Total assets	$	1,192,438	$	1,357,672
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	8,438	$	18,195
Accrued expenses	53,110		50,355
Accrued compensation and related expenses	70,965		127,728
Deferred revenue	311,330		325,212
Other current liabilities	17,269		17,450
Total current liabilities	461,112		538,940
Convertible senior notes, net	498,140		593,609
Operating lease liabilities	72,886		79,152
Other long-term liabilities	14,904		15,128
Total liabilities	1,047,042		1,226,829
Total stockholders’ equity	145,396		130,843
Total liabilities and stockholders’ equity	$	1,192,438	$	1,357,672

PEGASYSTEMS INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Six Months Ended June 30,
	2023		2022
Net (loss)	$	(67,578)	$	(286,675)
Adjustments to reconcile net (loss) to cash provided by (used in) operating activities
Non-cash items	119,371		314,231
Change in operating assets and liabilities, net	61,959		(32,625)
Cash provided by (used in) operating activities	113,752		(5,069)
Cash provided by (used in) investing activities	15,979		(1,523)
Cash (used in) financing activities	(86,988)		(41,191)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	1,010		(2,907)
Net increase (decrease) in cash, cash equivalents, and restricted cash	43,753		(50,690)
Cash, cash equivalents, and restricted cash, beginning of period	145,054		159,965
Cash, cash equivalents, and restricted cash, end of period	$	188,807	$	109,275

7

PEGASYSTEMS INC.

RECONCILIATION OF SELECTED GAAP AND NON-GAAP MEASURES

(in thousands, except percentages and per share amounts)

	Three Months Ended June 30,						Six Months Ended June 30,
	2023		2022		Change		2023		2022		Change
Net (loss) - GAAP	$	(46,804)	$	(286,296)	84	%	$	(67,578)	$	(286,675)	76	%
Stock-based compensation (1)	36,227		31,300				78,784		59,527
Capped call transactions	1,361		18,945				(1,845)		49,505
Legal fees	2,842		10,582				4,318		27,950
Repurchases of convertible senior notes	(5,074)		—				(7,855)		—
Restructuring	2,167		—				3,628		—
Interest on convertible senior notes	647		720				1,375		1,439
Amortization of intangible assets	963		1,025				2,012		1,997
Foreign currency transaction loss (gain)	3,290		(1,713)				5,965		(4,589)
Other	(678)		(1,001)				(4,471)		(3,583)
Income tax effects (2)	6,262		195,032				6,090		173,197
Net income (loss) - non-GAAP	$	1,203	$	(31,406)	*		$	20,423	$	18,768	9	%
Diluted (loss) per share - GAAP	$	(0.56)	$	(3.50)	84	%	$	(0.82)	$	(3.51)	77	%
non-GAAP adjustments	0.57		3.12				1.06		3.73
Diluted earnings (loss) per share - non-GAAP	$	0.01	$	(0.38)	*		$	0.24	$	0.22	9	%
Diluted weighted-average number of common shares outstanding - GAAP	83,039		81,847		1	%	82,823		81,764		1	%
Stock-based compensation	1,289		—				1,026		2,063
Diluted weighted-average number of common shares outstanding - non-GAAP	84,328		81,847		3	%	83,849		83,827		—	%

* not meaningful

Our non-GAAP financial measures reflect the following adjustments:

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

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

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

•Repurchases of convertible senior notes: We have excluded gains from the repurchases of Convertible Senior Notes. We believe excluding these amounts from our non-GAAP financial measures is useful to investors as the types of events giving rise to them are not representative of our core business operations and ongoing operational performance.

•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 that excluding the amortization of issuance costs provides a useful comparison of our operational performance in different periods.

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

8

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

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

•Diluted weighted-average number of common shares outstanding:

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

(1) Stock-based compensation:

	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Cost of revenue	$	7,174	$	6,579	$	16,087	$	12,957
Selling and marketing	15,349		12,633		33,009		23,591
Research and development	7,851		7,355		16,911		14,701
General and administrative	5,853		4,733		12,777		8,278
	$	36,227	$	31,300	$	78,784	$	59,527
Income tax benefit	$	(581)	$	(543)	$	(1,253)	$	(905)

(2) Effective income tax rates:

	Six Months Ended June 30,
	2023		2022
GAAP	(21)	%	(165)	%
non-GAAP	22	%	22	%

Our GAAP effective income tax rate is subject to significant fluctuations due to several factors, including excess tax benefits generated by our stock-based compensation plans, gains and losses on our capped call transactions, tax credits for stock-based compensation awards to research and development employees, and unfavorable foreign stock-based compensation adjustments. We determine our non-GAAP income tax rate using applicable rates in taxing jurisdictions and assessing certain factors, including historical and forecasted earnings by jurisdiction, discrete items, and ability to realize tax assets. We believe it is beneficial for our management to review our non-GAAP results consistent with our annual plan's effective income tax rate as established at the beginning of each year, given tax rate volatility.

9

PEGASYSTEMS INC.

RECONCILIATION OF FREE CASH FLOW

(in thousands, except percentages)

	Six Months Ended June 30,
	2023			2022			Change
Cash provided by (used in) operating activities	$	113,752		$	(5,069)		*
Investment in property and equipment	(13,933)			(11,863)
Legal fees	2,950			26,437
Restructuring	17,521			—
Interest on convertible senior notes	2,250			2,250
Other	—			167
Free cash flow	$	122,540		$	11,922		928	%
Total revenue	$	623,740		$	650,644
Free cash flow margin	20		%	2		%

* not meaningful

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 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.

•Other: We have excluded fees incurred due to the cancellation of in-person sales and marketing events, and incremental expenses incurred from the integration of acquisitions. We believe excluding these amounts from our non-GAAP financial measures is useful to investors as the types of events giving rise to them are not representative of our core business operations and ongoing operating performance.

PEGASYSTEMS INC.

ANNUAL CONTRACT VALUE

(in thousands, except percentages)

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

	June 30, 2023		June 30, 2022		Change
Pega Cloud	$	498,860	$	408,331	$	90,529	22	%
Maintenance	315,232		307,223		8,009		3	%
Subscription services	814,092		715,554		98,538		14	%
Subscription license	349,713		310,431		39,282		13	%
	$	1,163,805	$	1,025,985	$	137,820	13	%

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Reconciliation of ACV and Constant Currency ACV

(in millions, except percentages)	Q2 22		Q3 22		Q4 22		Q1 23		Q2 23		1 Year Change
ACV	$	1,026	$	1,040	$	1,126	$	1,174	$	1,164	13	%
Impact of changes in foreign exchange rates	$	—	$	24	$	(1)	$	(5)	$	(5)
Constant Currency ACV	$	1,026	$	1,064	$	1,125	$	1,169	$	1,159	13	%

PEGASYSTEMS INC.

BACKLOG

(in thousands, except percentages)

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

As of June 30, 2023:

	Subscription services						Subscription license			Perpetual license			Consulting			Total
	Maintenance			Pega Cloud
1 year or less	$	214,579		$	397,183		$	35,616		$	4,979		$	37,355		$	689,712		55	%
1-2 years	58,551			238,691			3,026			2,252			6,772			309,292			24	%
2-3 years	25,103			124,616			6,764			—			1,523			158,006			12	%
Greater than 3 years	7,592			101,494			—			—			—			109,086			9	%
	$	305,825		$	861,984		$	45,406		$	7,231		$	45,650		$	1,266,096		100	%
% of Total	23		%	68		%	4		%	1		%	4		%	100		%
Change since June 30, 2022
	$	(3,861)		$	163,817		$	(15,921)		$	(6,207)		$	2,574		$	140,402
	(1)		%	23		%	(26)		%	(46)		%	6		%	12		%

As of June 30, 2022:

	Subscription services						Subscription license			Perpetual license			Consulting			Total
	Maintenance			Pega Cloud
1 year or less	$	204,974		$	320,102		$	46,810		$	6,681		$	32,159		$	610,726		54	%
1-2 years	57,862			200,135			10,711			4,505			7,919			281,132			25	%
2-3 years	28,403			96,861			2,126			2,252			2,574			132,216			12	%
Greater than 3 years	18,447			81,069			1,680			—			424			101,620			9	%
	$	309,686		$	698,167		$	61,327		$	13,438		$	43,076		$	1,125,694		100	%
% of Total	28		%	62		%	5		%	1		%	4		%	100		%

PEGASYSTEMS INC.

RECONCILIATION OF GAAP BACKLOG AND CONSTANT CURRENCY BACKLOG

(in millions, except percentages)

	Q2 2023		1 Year Growth Rate
Backlog - GAAP	$	1,266	12	%
Impact of changes in foreign exchange rates	(8)		—	%
Backlog - Constant Currency	$	1,258	12	%

Note: Constant currency Backlog is calculated by applying the Q2 2022 foreign exchange rates to all periods shown.

11

XML

COVER PAGE	Jul. 26, 2023
Cover [Abstract]
Document Type	8-K
Document Period End Date	Jul. 26, 2023
Entity Registrant Name	PEGASYSTEMS INC.
Entity Incorporation, State or Country Code	MA
Entity File Number	1-11859
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
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Stock, $.01 par value per share
Trading Symbol	PEGA
Security Exchange Name	NASDAQ
Entity Emerging Growth Company	false
Amendment Flag	false
Entity Central Index Key	0001013857