false000101385700010138572025-02-122025-02-12

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): February 12, 2025
____________________
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.)
225 Wyman Street, Waltham, MA 02451
(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 classTrading symbol(s)Name of each exchange on which registered
Common Stock, $.01 par value per sharePEGANASDAQ 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 February 12, 2025, Pegasystems Inc. issued a press release announcing its financial results for the fourth quarter and full-year 2024. 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 8.01    OTHER EVENTS
Board Approval of Stock Split and Authorized Share Increase
On February 12, 2025, the board of directors (the “Board”) of Pegasystems Inc. (the “Company”) approved a two-for-one forward stock split (the “Stock Split”) of the Company’s common stock, par value $0.01 (“Common Stock”), to be effected as a stock dividend. The Board also approved a proportionate increase in the number of authorized shares of Common Stock from 200,000,000 to 400,000,000 (the “Authorized Share Increase”). The Stock Split and the Authorized Share Increase are subject to stockholder approval of an amendment to the Company’s Restated Articles of Organization (the "Charter Amendment”) and the filing of the Charter Amendment with the Secretary of State of the Commonwealth of Massachusetts.
The Company intends to include a proposal seeking stockholder approval of the Charter Amendment at the Company’s upcoming annual meeting of stockholders, to be held on June 17, 2025 (the “2025 Annual Meeting”). If the Company’s stockholders approve the Charter Amendment, the Company expects to file the Charter Amendment, and to implement the Stock Split and the Authorized Share Increase, promptly following the 2025 Annual Meeting.
Following stockholder approval and the filing and effectiveness of the Charter Amendment, every one share of Common Stock outstanding on June 10, 2025, the record date for the Stock Split, will receive one additional share of Common Stock for each share of Common Stock held on the record date, with the distribution expected to occur on June 20, 2025. The Company expects that its Common Stock will begin trading on a post-split basis on June 23, 2025.
As a result of the Stock Split, proportionate adjustments will be made to the number of shares of Common Stock issuable under the Company’s equity incentive plans and the number of shares underlying outstanding equity awards, as well as to the exercise price of any outstanding stock options.
The Board reserves the right to abandon the Stock Split and the Authorized Share Increase at any time prior to effectiveness of the Certificate of Amendment, even if approved by the stockholders.
Additional Information and Where to Find It
This communication may be deemed to be solicitation material in connection with the proposal to approve the Charter Amendment (the “Charter Amendment Proposal”) to be submitted to the Company’s stockholders at the 2025 Annual Meeting. This Current Report on Form 8-K (this “Current Report”) does not contain all the information that should be considered by Company stockholders concerning the Charter Amendment Proposal and is not intended to form the basis of any voting decision in respect of the Charter Amendment Proposal. In connection with the Charter Amendment Proposal and the other matters to be considered at the 2025 Annual Meeting, the Company plans to file a definitive proxy statement on Schedule 14A with the Securities and Exchange Commission (the "SEC"). Once available, stockholders and other interested persons are encouraged to read the definitive proxy statement and other relevant documents filed with the SEC. Investors and other interested parties will be able to obtain the proxy materials free of charge on the Company’s investor relations website, www.pega.com/about/investors, or on the SEC’s website, www.sec.gov.
Participants in the Solicitation
The Company and its directors and executive officers may be deemed participants in the solicitation of proxies from the Company’s stockholders with respect to the Charter Amendment Proposal. Information regarding the directors and executive officers, including a description of their interests in the Company, can be found in the Company’s proxy materials to be filed in connection with the 2025 Annual Meeting, which will be available free of charge on the websites indicated above.
Cautionary Note Regarding Forward-Looking Statements
Certain statements in this Current Report may be "forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995.
Words such as expects, anticipates, intends, plans, believes, will, could, should, estimates, may, targets, strategies, intends to, projects, forecasts, guidance, likely, and usually or variations of such words and other similar expressions identify forward-looking statements. These statements represent our views only as of the date the statement was made and are based on current expectations and assumptions.
Forward-looking statements deal with future events and are subject to risks and uncertainties that are difficult to predict, including, but not limited to:
•our future financial performance and business plans;
•the adequacy of our liquidity and capital resources;


•the successful execution of investments in artificial intelligence;
•the continued payment of our quarterly dividends;
•the timing of revenue recognition;
•variation in demand for our products and services, including among clients in the public sector;
•reliance on key personnel;
•reliance on third-party service providers, including hosting providers;
•compliance with our debt obligations and covenants;
•foreign currency exchange rates;
•potential legal and financial liabilities, as well as damage to our reputation, due to cyber-attacks;
•security breaches and security flaws;
•our ability to protect our intellectual property rights, costs associated with defending such rights, intellectual property rights claims, and other related claims by third parties against us, including related costs, damages, and other relief that may be granted against us;
•our ongoing litigation with Appian Corp.;
•our client retention rate; and
•management of our growth.
These risks and others that may cause actual results to differ materially from those expressed in such forward-looking statements are described further in Part I of our Annual Report on Form 10-K for the year ended December 31, 2024, and other filings we make with the U.S. Securities and Exchange Commission (“SEC”).
Investors are cautioned not to place undue reliance on such forward-looking statements, and there are no assurances that the results included in such statements will be achieved. Although subsequent events may cause our view to change, except as required by applicable law, we do not undertake and expressly disclaim any obligation to publicly update or revise these forward-looking statements, whether as the result of new information, future events, or otherwise.
Any forward-looking statements in this press release represent our views as of February 12, 2025.
ITEM 9.01    FINANCIAL STATEMENTS AND EXHIBITS
Exhibit No.Description
99.1
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:February 12, 2025By:/s/ KENNETH STILLWELL
Kenneth Stillwell
Chief Operating Officer and Chief Financial Officer
(Principal Financial Officer)


EXHIBIT 99.1
q42019pegalogo.jpg
Pega’s AI Innovation Drives Strong ACV Growth and Record Cash Flow in Q4 2024
•Operating cash flow grows to $346 million and free cash flow grows to $338 million in 2024
•Annual Contract Value (ACV) grows 9% year over year (11% in constant currency)
•Pega Cloud ACV grows 18% year over year (21% in constant currency)
•2025 guidance of 12% ACV growth, $455 million in cash flow from operations, and $440 million in free cash flow
WALTHAM, Mass. — February 12, 2025 — Pegasystems Inc. (NASDAQ: PEGA), the Enterprise Transformation Company™, released its financial results for the fourth quarter and full-year 2024.
“2024 was a transformative year for Pega, the industry, and our clients,” said Alan Trefler, Pega founder and CEO. “Our team’s impressive performance drove the introduction of the most innovative solutions in our history. The reaction from our clients and partners has been remarkable, leading to deeper engagement and new opportunities.
“We met or exceeded our financial objectives for 2024 including becoming a Rule of 40 company,” said Ken Stillwell, Pega COO and CFO. “We’re committed to accelerating growth and free cash flow in 2025 and beyond.”
Financial and performance metrics (1)
chart-e411f059aa2b41f5bec.jpg
Reconciliation of ACV and Constant Currency ACV
(in millions, except percentages)December 31, 2023December 31, 2024
1-Year Change
ACV$1,255 $1,372 9 %
Impact of changes in foreign exchange rates— 23 
Constant currency ACV
$1,255 $1,395 11 %
Note: Constant currency ACV is calculated by applying the December 31, 2023 foreign exchange rates to all periods shown.

1 Refer to the schedules at the end of this release for additional information, including a reconciliation of GAAP and non-GAAP measures.
1
EXHIBIT 99.1
(continued)
Cash Flow Growth
chart-8610d5b7820046be8a8.jpgchart-e7ae2d991363477eb1c.jpg
(Dollars in thousands,
except per share amounts)
Three Months Ended
December 31,		Year Ended
December 31,
20242023Change20242023Change
Total revenue$490,830 $474,233 3 %$1,497,180 $1,432,616 5 %
Net income - GAAP$119,090 $142,665 (17)%$99,189 $67,808 46 %
Net income - non-GAAP$147,953 $152,141 (3)%$270,542 $210,159 29 %
Diluted earnings per share - GAAP$1.25 $1.61 (22)%$1.11 $0.73 52 %
Diluted earnings per share - non-GAAP$1.61 $1.77 (9)%$3.03 $2.48 22 %
(Dollars in thousands)Three Months Ended
December 31,		ChangeYear Ended
December 31,		Change
2024202320242023
Pega Cloud$149,638 30 %$120,346 25 %$29,292 24 %$558,734 37 %$461,328 32 %$97,406 21 %
Maintenance81,257 17 %86,646 18 %(5,389)(6)%323,304 22 %331,856 24 %(8,552)(3)%
Subscription services230,895 47 %206,992 43 %23,903 12 %882,038 59 %793,184 56 %88,854 11 %
Subscription license204,697 42 %207,559 44 %(2,862)(1)%398,102 27 %407,625 28 %(9,523)(2)%
Subscription435,592 89 %414,551 87 %21,041 5 %1,280,140 86 %1,200,809 84 %79,331 7 %
Consulting52,822 11 %54,310 12 %(1,488)(3)%213,273 14 %221,706 15 %(8,433)(4)%
Perpetual license2,416 — %5,372 1 %(2,956)(55)%3,767 — %10,101 1 %(6,334)(63)%
Total revenue
$490,830 100 %$474,233 100 %$16,597 3 %$1,497,180 100 %$1,432,616 100 %$64,564 5 %
2

2025 Guidance (1)
As of February 12, 2025, we are providing the following guidance:
2025
Annual contract value growth12%
2025
GAAP
Non-GAAP (1)
Revenue$1.6 Billion$1.6 Billion
Diluted earnings per share$1.60$3.10
2025
Cash provided by operating activities$455 million
Free cash flow$440 million
(1) A reconciliation of our GAAP and Non-GAAP guidance is contained in the financial schedules at the end of this release.
Quarterly conference call
A conference call and audio-only webcast will be conducted at 8:00 a.m. EST on Thursday, February 13, 2025.
Members of the public and investors are invited to join the call and participate in the question and answer session by dialing 1 (800) 715-9871 (domestic) or 1 (646) 307-1963 (international) and using Conference ID 3830305, or via https://events.q4inc.com/attendee/343473625 by logging onto www.pega.com at least five minutes prior to the event's broadcast and clicking on the webcast icon in the Investors section.
Discussion of non-GAAP financial measures
Our non-GAAP financial measures should only be read in conjunction with our consolidated financial statements prepared in accordance with GAAP. We believe that these measures help investors understand our core operating results and prospects, which is consistent with how management measures and forecasts our performance without the effect of often one-time charges and other items outside our normal operations. Management uses these measures to assess the performance of the company's operations and establish operational goals and incentives. They are not a substitute for financial measures prepared under U.S. GAAP. Refer to the schedules at the end of this release for additional information, including a reconciliation of GAAP and non-GAAP measures.
Forward-looking statements
Certain statements in this press release may be "forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995.
Words such as expects, anticipates, intends, plans, believes, will, could, should, estimates, may, targets, strategies, intends to, projects, forecasts, guidance, likely, and usually or variations of such words and other similar expressions identify forward-looking statements. These statements represent our views only as of the date the statement was made and are based on current expectations and assumptions.
Forward-looking statements deal with future events and are subject to risks and uncertainties that are difficult to predict, including, but not limited to:
•our future financial performance and business plans;
•the adequacy of our liquidity and capital resources;
•the successful execution of investments in artificial intelligence;
•the continued payment of our quarterly dividends;
•the timing of revenue recognition;
•variation in demand for our products and services, including among clients in the public sector;
•reliance on key personnel;
•reliance on third-party service providers, including hosting providers;
•compliance with our debt obligations and covenants;
•foreign currency exchange rates;
•potential legal and financial liabilities, as well as damage to our reputation, due to cyber-attacks;
•security breaches and security flaws;
3

•our ability to protect our intellectual property rights, costs associated with defending such rights, intellectual property rights claims, and other related claims by third parties against us, including related costs, damages, and other relief that may be granted against us;
•our ongoing litigation with Appian Corp.;
•our client retention rate; and
•management of our growth.
These risks and others that may cause actual results to differ materially from those expressed in such forward-looking statements are described further in Part I of our Annual Report on Form 10-K for the year ended December 31, 2024, and other filings we make with the U.S. Securities and Exchange Commission (“SEC”).
Investors are cautioned not to place undue reliance on such forward-looking statements, and there are no assurances that the results included in such statements will be achieved. Although subsequent events may cause our view to change, except as required by applicable law, we do not undertake and expressly disclaim any obligation to publicly update or revise these forward-looking statements, whether as the result of new information, future events, or otherwise.
Any forward-looking statements in this press release represent our views as of February 12, 2025.
4

About Pegasystems
Pega is The Enterprise Transformation Company that helps organizations Build for Change® with enterprise AI decisioning and workflow automation. Many of the world’s most influential businesses rely on our platform to solve their most pressing challenges, from personalizing engagement to automating service to streamlining operations. Since 1983, we’ve built our scalable and flexible architecture to help enterprises meet today’s customer demands while continuously transforming for tomorrow. For more information on Pega (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
December 31,		Year Ended
December 31,
2024202320242023
Revenue
Subscription services$230,895 $206,992 $882,038 $793,184 
Subscription license204,697 207,559 398,102 407,625 
Consulting52,822 54,310 213,273 221,706 
Perpetual license2,416 5,372 3,767 10,101 
Total revenue490,830 474,233 1,497,180 1,432,616 
Cost of revenue
Subscription services40,988 34,697 149,918 144,250 
Subscription license384 635 1,888 2,606 
Consulting60,978 55,298 238,842 231,560 
Perpetual license5 16 17 67 
Total cost of revenue102,355 90,646 390,665 378,483 
Gross profit388,475 383,587 1,106,515 1,054,133 
Operating expenses
Selling and marketing139,655 133,924 534,780 559,177 
Research and development76,379 71,250 298,074 295,512 
General and administrative28,207 22,850 112,848 96,743 
Litigation settlement, net of recoveries— — 32,403 — 
Restructuring1,245 297 4,528 21,747 
Total operating expenses245,486 228,321 982,633 973,179 
Income from operations142,989 155,266 123,882 80,954 
Foreign currency transaction gain (loss)6,318 (1,271)(912)(5,242)
Interest income6,944 3,428 25,779 9,259 
Interest expense(1,788)(1,647)(6,835)(6,876)
Gain (loss) on capped call transactions4 (899)(663)(1,348)
Other (loss) income, net(299)25 1,385 18,693 
Income before provision for income taxes154,168 154,902 142,636 95,440 
Provision for income taxes35,078 12,237 43,447 27,632 
Net income$119,090 $142,665 $99,189 $67,808 
Earnings per share
Basic$1.38 $1.71 $1.16 $0.82 
Diluted$1.25 $1.61 $1.11 $0.73 
Weighted-average number of common shares outstanding
Basic86,000 83,654 85,265 83,162 
Diluted95,636 89,447 89,634 84,914 
6

PEGASYSTEMS INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
December 31, 2024December 31, 2023
Assets
Current assets:
Cash and cash equivalents$337,103 $229,902 
Marketable securities402,870 193,436 
Total cash, cash equivalents, and marketable securities739,973 423,338 
Accounts receivable, net305,468 300,173 
Unbilled receivables, net173,085 237,379 
Other current assets115,178 68,137 
Total current assets1,333,704 1,029,027 
Long-term unbilled receivables, net61,407 85,402 
Goodwill81,113 81,611 
Other long-term assets292,049 314,696 
Total assets$1,768,273 $1,510,736 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable$6,226 $11,290 
Accrued expenses31,544 39,941 
Accrued compensation and related expenses138,042 126,640 
Deferred revenue423,910 377,845 
Convertible senior notes, net467,470 — 
Other current liabilities18,866 21,343 
Total current liabilities1,086,058 577,059 
Long-term convertible senior notes, net— 499,368 
Long-term operating lease liabilities67,647 66,901 
Other long-term liabilities29,088 13,570 
Total liabilities1,182,793 1,156,898 
Total stockholders’ equity585,480 353,838 
Total liabilities and stockholders’ equity$1,768,273 $1,510,736 

PEGASYSTEMS INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year Ended
December 31,
20242023
Net income$99,189 $67,808 
Adjustments to reconcile net income to cash provided by operating activities
Non-cash items227,582 227,983 
Change in operating assets and liabilities, net19,155 (78,006)
Cash provided by operating activities345,926 217,785 
Cash (used in) investing activities(202,576)(50,750)
Cash (used in) financing activities(30,214)(81,963)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash(4,434)2,701 
Net increase in cash, cash equivalents, and restricted cash108,702 87,773 
Cash, cash equivalents, and restricted cash, beginning of period232,827 145,054 
Cash, cash equivalents, and restricted cash, end of period$341,529 $232,827 
7

PEGASYSTEMS INC.
RECONCILIATION OF SELECTED GAAP AND NON-GAAP MEASURES
(in thousands, except percentages and per share amounts)
Three Months Ended
December 31,		Year Ended
December 31,
20242023Change20242023Change
Net income - GAAP$119,090 $142,665 (17)%$99,189 $67,808 46 %
Stock-based compensation (1)
34,500 33,269 142,718 143,352 
Restructuring1,245 297 4,528 21,747 
Legal fees4,499 2,817 18,713 13,883 
Litigation settlement, net of recoveries— — 32,403 — 
Amortization of intangible assets700 963 3,153 3,940 
Interest on convertible senior notes594 615 2,451 2,603 
Capped call transactions(4)899 663 1,348 
Repurchases of convertible senior notes(459)— (459)(7,855)
Foreign currency transaction (gain) loss(6,318)1,271 912 5,242 
Other
759 19 (869)(10,266)
Income taxes (2)
(6,653)(30,674)(32,860)(31,643)
Net income - non-GAAP$147,953 $152,141 (3)%$270,542 $210,159 29 %
Diluted earnings per share - GAAP$1.25 $1.61 (22)%$1.11 $0.73 52 %
non-GAAP adjustments0.36 0.16 1.92 1.75 
Diluted earnings per share - non-GAAP$1.61 $1.77 (9)%$3.03 $2.48 22 %
Diluted weighted-average number of common shares outstanding - GAAP95,636 89,447 7 %89,634 84,914 6 %
Capped call transactions(3,553)(3,719)(214)(235)
Diluted weighted-average number of common shares outstanding - non-GAAP92,083 85,728 7 %89,420 84,679 6 %
Our non-GAAP financial measures reflect the following adjustments:
•Stock-based compensation: We have excluded stock-based compensation from our non-GAAP operating expenses and profitability measures. Although stock-based compensation is a key incentive offered to our employees, and we believe such compensation contributed to our revenues recognized during the periods presented and is expected to contribute to our future revenues, we continue to evaluate our business performance, excluding stock-based compensation.
•Restructuring: We have excluded restructuring from our non-GAAP financial measures. Restructuring fluctuates in amount and frequency and is significantly affected by the timing and size of our restructuring activities. We believe excluding these amounts from our non-GAAP financial measures is useful to investors as these amounts are not representative of our core business operations and ongoing operational performance.
•Legal fees: Legal and related fees arising from proceedings outside the ordinary course of business. We believe excluding these amounts from our non-GAAP financial measures is useful to investors as the types of events giving rise to them are not representative of our core business operations and ongoing operational performance.
•Litigation settlement, net of recoveries: Cost to settle litigation, net of insurance recoveries, arising from proceedings outside the ordinary course of business. See "Note 20. Commitments And Contingencies" in our Annual Report on Form 10-K for the year ended December 31, 2024 for additional information. We believe excluding these amounts from our non-GAAP financial measures is useful to investors as the types of events giving rise to them are not representative of our core business operations and ongoing operational performance.
•Amortization of intangible assets: We have excluded the amortization of intangible assets from our non-GAAP operating expenses and profitability measures. Amortization of intangible assets fluctuates in amount and frequency and is significantly affected by the timing and size of acquisitions. Investors should note that intangible assets contributed to our revenues recognized during the periods presented and are expected to contribute to future revenues. Amortization of intangible assets is likely to recur in future periods. We believe excluding these amounts provides a useful comparison of our operational performance in different periods.
8

•Interest on convertible senior notes: In February 2020, we issued convertible senior notes, due March 1, 2025, in a private placement. We believe that excluding the amortization of issuance costs provides a useful comparison of our operational performance in different periods.
•Capped call transactions: We have excluded gains and losses related to our capped call transactions held at fair value under U.S. GAAP. The capped call transactions are expected to reduce common stock dilution and/or offset any potential cash payments we must make, other than for principal and interest, upon conversion of the convertible senior notes. We believe excluding these amounts from our non-GAAP financial measures is useful to investors as the types of events giving rise to them are not representative of our core business operations and ongoing operational performance.
•Repurchases of convertible senior notes: We have excluded gains from the repurchases of Convertible Senior Notes. We believe excluding these amounts from our non-GAAP financial measures is useful to investors as the types of events giving rise to them are not representative of our core business operations and ongoing operational performance.
•Foreign currency transaction (gain) loss: We have excluded foreign currency transaction gains and losses from our non-GAAP profitability measures. Foreign currency transaction gains and losses fluctuate in amount and frequency and are significantly affected by foreign exchange market rates. Foreign currency transaction gains and losses are likely to recur in future periods. We believe excluding these amounts provides a useful comparison of our operational performance in different periods.
•Other: We have excluded gains and losses from our venture investments and expenses incurred due to the cancellation of in-person sales and marketing events. We believe excluding these amounts from our non-GAAP financial measures is useful to investors as the types of events giving rise to them are not representative of our core business operations and ongoing operational performance.
•Diluted weighted-average number of common shares outstanding:
•Capped call transactions: In periods of GAAP income, the shares that would be issued if the Company’s Convertible Senior Notes were fully converted to common shares are included in the diluted weighted-average shares 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 convertible senior notes, with such reduction and/or offset subject to a cap of $196.44. We believe that including the expected impact of the capped call transactions in our non-GAAP financial measures provides a useful comparison of our operational performance in different periods.
(1) Stock-based compensation:
Three Months Ended
December 31,		Year Ended
December 31,
(Dollars in thousands)
2024202320242023
Cost of revenue$6,795 $6,497 $27,353 $28,994 
Selling and marketing13,463 14,265 55,084 57,675 
Research and development7,059 6,753 29,838 31,039 
General and administrative7,183 5,754 30,443 25,644 
$34,500 $33,269 $142,718 $143,352 
Income tax benefit$(422)$(618)$(1,799)$(2,187)
(2) Effective income tax rates:
Year Ended
December 31,
20242023
GAAP30 %29 %
non-GAAP22 %22 %
Our GAAP effective income tax rate is subject to significant fluctuations due to several factors, including our stock-based compensation plans, research and development tax credits, and the valuation allowance on our deferred tax assets in the U.S. and U.K. We determine our non-GAAP income tax rate using applicable rates in taxing jurisdictions and assessing certain factors, including historical and forecasted earnings by jurisdiction, discrete items, and ability to realize tax assets. We believe it is beneficial for our management to review our non-GAAP results consistent with our annual plan's effective income tax rate as established at the beginning of each year, given tax rate volatility. See "Note 18. Income Taxes" in our Annual Report on Form 10-K for the year ended December 31, 2024 for additional information.
9

PEGASYSTEMS INC.
RECONCILIATION OF FREE CASH FLOW (1) AND OTHER METRICS
(in thousands, except percentages)

Year Ended
December 31,
Change
20242023
Cash provided by operating activities$345,926 $217,785 59 %
Investment in property and equipment(7,712)(16,781)
Free cash flow (1)
$338,214 $201,004 68 %
Supplemental information (2)
Litigation settlement, net of recoveries$32,403 $— 
Legal fees
16,197 14,645 
Restructuring5,252 29,401 
Interest on convertible senior notes3,810 4,134 
Other— 601 
Income taxes
82,317 11,664 
$139,979 $60,445 
(1) Our non-GAAP free cash flow is defined as cash provided by operating activities less investment in property and equipment. Investment in property and equipment fluctuates in amount and frequency and is significantly affected by the timing and size of investments in our facilities. We provide information on free cash flow to enable investors to assess our ability to generate cash without incurring additional external financings. This information is not a substitute for financial measures prepared under U.S. GAAP.
(2) The supplemental information discloses items that affect our cash flows and are considered by management not to be representative of our core business operations and ongoing operational performance.
•Litigation settlement, net of recoveries: Cost to settle litigation, net of insurance recoveries, arising from proceedings outside the ordinary course of business. See "Note 20. Commitments And Contingencies" in our Annual Report on Form 10-K for the year ended December 31, 2024 for additional information.
•Legal fees: Legal and related fees arising from proceedings outside the ordinary course of business.
•Restructuring: Restructuring fluctuates in amount and frequency and is significantly affected by the timing and size of our restructuring activities.
•Interest on convertible senior notes: In February 2020, we issued convertible senior notes, due March 1, 2025, in a private placement. The convertible senior notes accrue interest at an annual rate of 0.75%, payable semi-annually in arrears on March 1 and September 1.
•Other: Fees related to canceled in-person sales and marketing events.
•Income taxes: Direct income taxes paid net of refunds received.
PEGASYSTEMS INC.
ANNUAL CONTRACT VALUE
(in thousands, except percentages)

Annual contract value (“ACV”) - Annual Contract Value (“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.
December 31, 2024December 31, 2023Change
Constant Currency Change
Pega Cloud$652,443 $552,998 $99,445 18 %21 %
Maintenance
291,807 324,091 (32,284)(10)%(8)%
Subscription services
944,250 877,089 67,161 8 %10 %
Subscription license
427,268 377,794 49,474 13 %14 %
$1,371,518 $1,254,883 $116,635 9 %11 %
10

PEGASYSTEMS INC.
BACKLOG
(in thousands, except percentages)

Remaining performance obligations (“Backlog”) - Expected future revenue from existing non-cancellable contracts:
As of December 31, 2024:
Subscription servicesSubscription licensePerpetual licenseConsultingTotal
Pega CloudMaintenance
1 year or less
$525,133 $230,866 $88,880 $317 $50,519 $895,715 56 %
1-2 years
328,234 65,461 10,874 — 3,297 407,866 25 %
2-3 years
159,536 24,598 733 — 125 184,992 11 %
Greater than 3 years
114,256 19,935 678 — 50 134,919 8 %
$1,127,159 $340,860 $101,165 $317 $53,991 $1,623,492 100 %
% of Total70 %21 %6 %— %3 %100 %
Change since December 31, 2023
$166,895 $(33,694)$20,068 $(2,410)$9,265 $160,124 
17 %(9)%25 %(88)%21 %11 %
As of December 31, 2023:
Subscription servicesSubscription licensePerpetual licenseConsultingTotal
Pega CloudMaintenance
1 year or less
$446,160 $245,271 $62,070 $2,284 $39,810 $795,595 54 %
1-2 years
279,474 67,720 9,138 443 2,020 358,795 25 %
2-3 years
144,453 37,142 9,789 — 2,896 194,280 13 %
Greater than 3 years
90,177 24,421 100 — — 114,698 8 %
$960,264 $374,554 $81,097 $2,727 $44,726 $1,463,368 100 %
% of Total66 %25 %6 %— %3 %100 %

PEGASYSTEMS INC.
RECONCILIATION OF GAAP BACKLOG AND CONSTANT CURRENCY BACKLOG
(in millions, except percentages)
December 31, 2023December 31, 20241 Year Growth Rate
Backlog - GAAP$1,463 $1,623 11 %
Impact of changes in foreign exchange rates— 39 
Constant currency backlog
$1,463 $1,662 14 %
Note: Constant currency Backlog is calculated by applying the December 31, 2023 foreign exchange rates to all periods shown.
11

PEGASYSTEMS INC.
RECONCILIATION OF FORWARD-LOOKING GUIDANCE
(in millions, except percentages and per share amounts)
2025
Annual contract value growth12 %
Revenue (GAAP and Non-GAAP)$1,600 
Net Income - GAAP$149 
Stock-based compensation147 
Legal fees25 
Incomes taxes
(32)
Net Income - Non-GAAP$289 
Diluted earnings per share - GAAP$1.60 
Non-GAAP adjustments1.50 
Diluted earnings per share - non-GAAP$3.10 
Diluted weighted-average number of common shares outstanding (GAAP and Non-GAAP)93.1 

2025
Cash provided by operating activities$455 
Investment in property and equipment(15)
Free cash flow$440 
Supplemental information
Legal fees$25 
Income taxes (1)
50 
$75 
(1) Evolving U.S. tax legislation may impact the amount of tax payments.
12
v3.25.0.1
COVER PAGE
Feb. 12, 2025
Cover [Abstract]  
Document Type 8-K
Document Period End Date Feb. 12, 2025
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 225 Wyman Street
Entity Address, City or Town Waltham
Entity Address, State or Province MA
Entity Address, Postal Zip Code 02451
City Area Code 617
Local Phone Number 374-9600
Written Communications false
Soliciting Material true
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
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