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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 September 30, 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) 
____________________________
Massachusetts04-2787865
(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 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 (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 83,555,919 shares of the Registrant’s common stock, $0.01 par value per share, outstanding on October 17, 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 September 30, 2023 and December 31, 2022
Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2023 and 2022
Unaudited Condensed Consolidated Statements of Comprehensive (Loss) for the three and nine months ended September 30, 2023 and 2022
Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the nine months ended September 30, 2023 and 2022
Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022
Notes to Unaudited Condensed Consolidated Financial Statements
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 5. Other Information
Item 6. Exhibits
Signature

2
PART I - FINANCIAL INFORMATION
ITEM 1.     FINANCIAL STATEMENTS
PEGASYSTEMS INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
September 30, 2023December 31, 2022
Assets
Current assets:
Cash and cash equivalents$169,023 $145,054 
Marketable securities167,286 152,167 
Total cash, cash equivalents, and marketable securities336,309 297,221 
Accounts receivable, net
168,795 255,150 
Unbilled receivables, net
199,948 213,719 
Other current assets71,438 80,388 
Total current assets776,490 846,478 
Unbilled receivables, net
73,795 95,806 
Goodwill81,437 81,399 
Other long-term assets290,807 333,989 
Total assets$1,222,529 $1,357,672 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable$20,541 $18,195 
Accrued expenses43,624 50,355 
Accrued compensation and related expenses93,511 127,728 
Deferred revenue297,067 325,212 
Other current liabilities18,038 17,450 
Total current liabilities472,781 538,940 
Convertible senior notes, net498,753 593,609 
Operating lease liabilities68,874 79,152 
Other long-term liabilities14,485 15,128 
Total liabilities1,054,893 1,226,829 
Commitments and contingencies (Note 15)
Stockholders’ equity:
Preferred stock, 1,000 shares authorized; none issued
— — 
Common stock, 200,000 shares authorized; 83,523 and 82,436 shares issued and outstanding at
September 30, 2023 and December 31, 2022, respectively
835 824 
Additional paid-in capital343,259 229,602 
Accumulated deficit
(151,370)(76,513)
Accumulated other comprehensive (loss)(25,088)(23,070)
Total stockholders’ equity167,636 130,843 
Total liabilities and stockholders’ equity$1,222,529 $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
September 30,		Nine Months Ended
September 30,
2023202220232022
Revenue
Subscription services$201,578 $174,885 $586,192 $516,750 
Subscription license74,342 31,112 200,066 210,245 
Consulting55,976 55,511 167,396 175,451 
Perpetual license2,747 9,223 4,729 18,929 
Total revenue334,643 270,731 958,383 921,375 
Cost of revenue
Subscription services35,906 34,541 109,553 103,104 
Subscription license629 628 1,971 1,923 
Consulting57,204 57,778 176,262 171,162 
Perpetual license24 103 51 173 
Total cost of revenue93,763 93,050 287,837 276,362 
Gross profit240,880 177,681 670,546 645,013 
Operating expenses
Selling and marketing131,598 153,517 425,253 472,951 
Research and development74,955 75,342 224,262 221,173 
General and administrative27,321 26,043 73,893 94,530 
Restructuring17,822 — 21,450 — 
Total operating expenses251,696 254,902 744,858 788,654 
(Loss) from operations(10,816)(77,221)(74,312)(143,641)
Foreign currency transaction gain (loss)1,994 3,826 (3,971)8,415 
Interest income2,532 520 5,831 1,036 
Interest expense(1,533)(1,992)(5,229)(5,882)
(Loss) on capped call transactions(2,294)(6,876)(449)(56,381)
Other income (loss), net6,383 (29)18,668 6,497 
(Loss) before provision for income taxes(3,734)(81,772)(59,462)(189,956)
Provision for income taxes3,545 11,748 15,395 190,239 
Net (loss)$(7,279)$(93,520)$(74,857)$(380,195)
(Loss) per share
Basic$(0.09)$(1.14)$(0.90)$(4.65)
Diluted$(0.09)$(1.14)$(0.90)$(4.65)
Weighted-average number of common shares outstanding
Basic83,336 81,996 82,996 81,842 
Diluted83,336 81,996 82,996 81,842 

See notes to unaudited condensed consolidated financial statements.
4

PEGASYSTEMS INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS)
(in thousands)
Three Months Ended
September 30,		Nine Months Ended
September 30,
2023202220232022
Net (loss)$(7,279)$(93,520)$(74,857)$(380,195)
Other comprehensive (loss), net of tax
Unrealized (loss) on available-for-sale securities(40)(73)(281)(1,000)
Foreign currency translation adjustments(3,687)(6,700)(1,737)(20,936)
Total other comprehensive (loss), net of tax(3,727)(6,773)(2,018)(21,936)
Comprehensive (loss)$(11,006)$(100,293)$(76,875)$(402,131)

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, 202181,712 $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 plans297 3 (12,131)— — (12,128)
Issuance of common stock under the employee stock purchase plan35 — 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, 202281,802 $818 $141,771 $273,615 $(9,536)$406,668 
Repurchase of common stock(38)— (1,925)— — (1,925)
Issuance of common stock for stock compensation plans117 1 (3,252)— — (3,251)
Issuance of common stock under the employee stock purchase plan59 — 2,357 — — 2,357 
Stock-based compensation— — 31,300 — — 31,300 
Cash dividends declared ($0.03 per share)
— — — (2,459)— (2,459)
Other comprehensive (loss)— — — — (12,615)(12,615)
Net (loss)— — — (286,296)— (286,296)
June 30, 202281,940 $819 $170,251 $(15,140)$(22,151)$133,779 
Issuance of common stock for stock compensation plans138 2 (2,198)— — (2,196)
Issuance of common stock under the employee stock purchase plan86 1 2,362 — — 2,363 
Stock-based compensation— — 33,774 — — 33,774 
Cash dividends declared ($0.03 per share)
— — — (2,466)— (2,466)
Other comprehensive (loss)— — — — (6,773)(6,773)
Net (loss)— — — (93,520)— (93,520)
September 30, 202282,164 $822 $204,189 $(111,126)$(28,924)$64,961 
6

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, 202282,436 $824 $229,602 $(76,513)$(23,070)$130,843 
Issuance of common stock for stock compensation plans452 4 668 — — 672 
Issuance of common stock under the employee stock purchase plan52 1 2,142 — — 2,143 
Stock-based compensation— — 42,557 — — 42,557 
Cash dividends declared ($0.03 per share)
— — (2,488)— — (2,488)
Other comprehensive income— — — — 1,543 1,543 
Net (loss)— — — (20,774)— (20,774)
March 31, 202382,940 $829 $272,481 $(97,287)$(21,527)$154,496 
Issuance of common stock for stock compensation plans225 2 1,824 — — 1,826 
Issuance of common stock under the employee stock purchase plan47 1 1,980 — — 1,981 
Stock-based compensation— — 36,227 — — 36,227 
Cash dividends declared ($0.03 per share)
— — (2,496)— — (2,496)
Other comprehensive income— — — — 166 166 
Net (loss)— — — (46,804)— (46,804)
June 30, 202383,212 $832 $310,016 $(144,091)$(21,361)$145,396 
Issuance of common stock for stock compensation plans257 3 2,447 — — 2,450 
Issuance of common stock under the employee stock purchase plan54 — 2,003 — — 2,003 
Stock-based compensation— — 31,299 — — 31,299 
Cash dividends declared ($0.03 per share)
— — (2,506)— — (2,506)
Other comprehensive (loss)— — — — (3,727)(3,727)
Net (loss)— — — (7,279)— (7,279)
September 30, 202383,523 $835 $343,259 $(151,370)$(25,088)$167,636 

See notes to unaudited condensed consolidated financial statements.
7

PEGASYSTEMS INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Nine Months Ended
September 30,
20232022
Operating activities
Net (loss)$(74,857)$(380,195)
Adjustments to reconcile net (loss) to cash provided by (used in) operating activities
Stock-based compensation110,083 93,301 
Deferred income taxes(188)169,489 
Loss on capped call transactions449 56,381 
Amortization of deferred commissions43,974 39,752 
Lease expense12,018 11,500 
Amortization of intangible assets and depreciation14,181 12,381 
Foreign currency transaction loss (gain)3,971 (8,415)
Other non-cash(16,487)(1,705)
Change in operating assets and liabilities, net44,776 (5,935)
Cash provided by (used in) operating activities137,920 (13,446)
Investing activities
Purchases of investments(190,466)(39,056)
Proceeds from maturities and called investments169,836 53,952 
Sales of investments10,725 18,415 
Payments for acquisitions, net of cash acquired— (922)
Investment in property and equipment(14,271)(22,285)
Cash (used in) provided by investing activities(24,176)10,104 
Financing activities
Repurchases of convertible senior notes(88,989)— 
Dividend payments to stockholders(7,458)(7,368)
Proceeds from employee stock purchase plan6,127 7,166 
Proceeds from stock option exercises6,602 — 
Common stock repurchases(1,654)(43,282)
Other
341 — 
Cash (used in) financing activities(85,031)(43,484)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash(1,621)(5,513)
Net increase (decrease) in cash, cash equivalents, and restricted cash27,092 (52,339)
Cash, cash equivalents, and restricted cash, beginning of period145,054 159,965 
Cash, cash equivalents, and restricted cash, end of period$172,146 $107,626 
Cash and cash equivalents$169,023 $107,626 
Restricted cash included in other long-term assets3,123 — 
Total cash, cash equivalents, and restricted cash$172,146 $107,626 

See notes to unaudited condensed consolidated financial statements.
8
PEGASYSTEMS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. BASIS OF PRESENTATION
Pegasystems Inc. (together with its subsidiaries, “the Company”) has prepared the accompanying unaudited condensed consolidated financial statements pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, they do not include all the information required by accounting principles generally accepted in the United States of America (“U.S.”) for complete financial statements and should be read in conjunction with the Company’s audited financial statements included in the Annual Report on Form 10-K for the year ended December 31, 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 2023.
NOTE 2. MARKETABLE SECURITIES
September 30, 2023December 31, 2022
(in thousands)Amortized CostUnrealized GainsUnrealized LossesFair ValueAmortized CostUnrealized GainsUnrealized LossesFair Value
Government debt$17,931 $— $(18)$17,913 $2,960 $— $(52)$2,908 
Corporate debt149,927 — (554)149,373 151,906 — (2,647)149,259 
$167,858 $— $(572)$167,286 $154,866 $— $(2,699)$152,167 
As of September 30, 2023, marketable securities’ maturities ranged from October 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)
September 30, 2023December 31, 2022
Accounts receivable, net$168,795 $255,150 
Unbilled receivables, net199,948 213,719 
Long-term unbilled receivables, net
73,795 95,806 
$442,538 $564,675 
Unbilled receivables
Unbilled receivables are client-committed amounts for which revenue recognition precedes billing. Billing is solely subject to the passage of time.
Unbilled receivables by expected collection date:
(Dollars in thousands)
September 30, 2023
1 year or less$199,948 73 %
1-2 years58,604 21 %
2-5 years15,191 6 %
$273,743 100 %
Unbilled receivables by contract effective date:
(Dollars in thousands)
September 30, 2023
2023$90,227 33 %
202292,065 34 %
202162,729 23 %
202019,820 7 %
2019 and prior8,902 3 %
$273,743 100 %
9
PEGASYSTEMS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)





Contract assets
Contract assets are client-committed amounts for which revenue recognized exceeds the amount billed to the client, and billing is subject to conditions other than the passage of time, such as the completion of a related performance obligation.
(in thousands)
September 30, 2023December 31, 2022
Contract assets (1)
$13,263 $17,546 
Long-term contract assets (2)
10,732 16,470 
$23,995 $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)
September 30, 2023December 31, 2022
Deferred revenue$297,067 $325,212 
Long-term deferred revenue (1)
2,605 3,552 
$299,672 $328,764 
(1) Included in other long-term liabilities.
Deferred revenue decreased in the nine months ended September 30, 2023, primarily due to $292.3 million of revenue recognized during the period included in deferred revenue as of December 31, 2022 exceeded new billings in advance of revenue recognition.
NOTE 4. DEFERRED COMMISSIONS
(in thousands)
September 30, 2023December 31, 2022
Deferred commissions (1)
$107,399 $130,195 
(1) Included in other long-term assets.
Three Months Ended
September 30,		Nine Months Ended
September 30,
(in thousands)2023202220232022
Amortization of deferred commissions (1)
$14,947 $11,597 $43,974 $39,752 
(1) Included in selling and marketing.
NOTE 5. GOODWILL AND OTHER INTANGIBLES
Goodwill
Nine Months Ended
September 30,
(in thousands)
20232022
January 1,$81,399 $81,923 
Currency translation adjustments38 (722)
September 30,$81,437 $81,201 
Intangibles
Intangible assets are recorded at cost and amortized using the straight-line method over their estimated useful lives.
September 30, 2023
(in thousands)Useful LivesCostAccumulated Amortization
Net Book Value (1)
Client-related
4-10 years
$63,086 $(59,661)$3,425 
Technology
2-10 years
68,103 (63,579)4,524 
Other
1-5 years
5,361 (5,361)— 
$136,550 $(128,601)$7,949 
(1) Included in other long-term assets.
10
PEGASYSTEMS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)



December 31, 2022
(in thousands)Useful LivesCostAccumulated 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)
September 30, 2023
Remainder of 2023$964 
20243,169 
20252,615 
2026874 
2027327 
$7,949 
Amortization of intangible assets:
Three Months Ended
September 30,		Nine Months Ended
September 30,
(in thousands)2023202220232022
Cost of revenue
$622 $705 $1,949 $2,017 
Selling and marketing
343 343 1,028 1,028 
$965 $1,048 $2,977 $3,045 

NOTE 6. OTHER ASSETS AND LIABILITIES
Other current assets
(in thousands)September 30, 2023December 31, 2022
Income tax receivables$19,663 $25,354 
Contract assets13,263 17,546 
Other38,512 37,488 
$71,438 $80,388 
Other long-term assets
(in thousands)September 30, 2023December 31, 2022
Deferred commissions$107,399 $130,195 
Right of use assets65,871 76,114 
Property and equipment49,481 55,056 
Venture investments19,348 13,069 
Contract assets10,732 16,470 
Intangible assets7,949 10,888 
Capped call transactions1,792 2,582 
Deferred income taxes5,046 4,795 
Restricted cash3,123 — 
Other20,066 24,820 
$290,807 $333,989 
Other current liabilities
(in thousands)September 30, 2023December 31, 2022
Operating lease liabilities$15,532 $14,976 
Dividends payable2,506 2,474 
$18,038 $17,450 
11
PEGASYSTEMS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)



Other long-term liabilities
(in thousands)September 30, 2023December 31, 2022
Deferred revenue$2,605 $3,552 
Income taxes payable2,017 3,207 
Other9,863 8,369 
$14,485 $15,128 
NOTE 7. LEASES
Expense
Three Months Ended
September 30,		Nine Months Ended
September 30,
(in thousands)2023202220232022
Fixed lease costs$4,718 $4,688 $14,979 $14,747 
Short-term lease costs660 916 2,137 2,510 
Variable lease costs2,254 905 6,414 2,395 
$7,632 $6,509 $23,530 $19,652 
Right of use assets and lease liabilities
(in thousands)September 30, 2023December 31, 2022
Right of use assets (1)
$65,871 $76,114 
Operating lease liabilities (2)
$15,532 $14,976 
Long-term operating lease liabilities$68,874 $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:
September 30, 2023December 31, 2022
Weighted-average remaining lease term7.0 years7.5 years
Weighted-average discount rate (1)
4.0 %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)September 30, 2023
Remainder of 2023$4,775 
202417,976 
202514,870 
202610,853 
20279,808 
20289,245 
Thereafter30,054 
Total lease payments97,581 
Less: imputed interest (1)
(13,175)
$84,406 
(1) Lease liabilities are measured at the present value of the remaining lease payments using a discount rate determined at lease commencement unless the discount rate is updated due to a lease reassessment event.
Cash flow information
Nine Months Ended
September 30,
(in thousands)20232022
Cash paid for operating leases, net of tenant improvement allowances$14,378 $11,628 
Right of use assets recognized for new leases and amendments (non-cash)$1,782 $6,618 
12
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 September 1, 2020.
In the nine months ended September 30, 2023, the Company recognized a gain of $7.9 million in other income (loss), net from repurchases of Notes representing $97.7 million in aggregate principal amount.
Conversion rights
The conversion rate is 7.4045 shares of common stock per $1,000 principal amount of the Notes, representing an initial conversion price of $135.05 per share of common stock. The conversion rate will be adjusted upon certain events, including spin-offs, tender offers, exchange offers, and certain stockholder distributions. The Company will settle conversions by paying or delivering cash, shares of its common stock, or a combination of cash and shares of its common stock, at the Company’s election, based on the applicable conversion rate.
Beginning on September 1, 2024, noteholders may convert their Notes at any time at their election.
Before September 1, 2024, noteholders 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 September 30, 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)September 30, 2023December 31, 2022
Principal$502,270 $600,000 
Unamortized issuance costs(3,517)(6,391)
Convertible senior notes, net$498,753 $593,609 

Interest expense related to the Notes:
Three Months Ended
September 30,		Nine Months Ended
September 30,
(in thousands)2023202220232022
Contractual interest expense (0.75% coupon)
$827 $1,125 $2,949 $3,375 
Amortization of issuance costs
613 724 1,988 2,163 
$1,440 $1,849 $4,937 $5,538 
13
PEGASYSTEMS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)



The average interest rate on the Notes in the nine months ended September 30, 2023 and 2022 was 1.2%.
Future payments:
September 30, 2023
(in thousands)PrincipalInterestTotal
2024$— $3,767 $3,767 
2025502,270 1,884 504,154 
$502,270 $5,651 $507,921 
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 nine months ended September 30, 2023, Capped Call Transactions covering approximately 0.7 million shares were settled for proceeds of $0.3 million. As of September 30, 2023, Capped Call Transactions covering approximately 3.7 million shares were outstanding.
The Capped Call Transactions are expected to reduce common stock dilution and/or offset any potential cash payments the Company must make, other than for principal and interest, upon conversion of the Notes, with such reduction and/or offset subject to a cap of $196.44. The cap price of the Capped Call Transactions is subject to adjustment upon specified extraordinary events affecting the Company, including mergers and tender offers.
The Capped Call Transactions are accounted for as derivative instruments and do not qualify for the Company’s own equity scope exception in ASC 815 since, in some cases of early settlement, the settlement value calculated following the governing documents may not represent a fair value measurement. The Capped Call Transactions are 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:
Nine Months Ended
September 30,
(in thousands)20232022
January 1,$2,582 $59,964 
Settlements(341)— 
Fair value adjustment(449)(56,381)
September 30,$1,792 $3,583 
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:
•Through December 31, 2023, the parent company must maintain at least $200 million in cash, investments, and availability under the Credit Facility and the Company must maintain:
Year to Date
(in thousands)March 31, 2023June 30, 2023September 30, 2023December 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 September 30, 2023 and December 31, 2022, the Company had $27.3 million in outstanding letters of credit, which reduced the Company’s available borrowing capacity under the Credit Facility and no outstanding cash borrowings under the Credit Facility.
14
PEGASYSTEMS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)



NOTE 9. RESTRUCTURING
The Company has undertaken the following restructuring activities as it optimizes its go-to-market strategy and reassesses its office space needs:
Three months endedExpense
Employee severance and related benefits and closure of a US officeDecember 31, 2022$21,743 
Office space reduction March 31, 2023$1,241 
Employee severance and related benefitsJune 30, 2023$1,581 
Employee severance and related benefits and closure of a foreign officeSeptember 30, 2023$17,236 
Accrued employee severance and related benefits:
Change for all restructuring actions:
Nine Months Ended
September 30,
(in thousands)2023
January 1,$18,573 
Costs incurred19,921 
Cash disbursements(21,576)
Currency translation adjustments(203)
September 30,$16,715 
Note: Accrued employee severance and related benefits is included in accrued compensation and related expenses.
NOTE 10. FAIR VALUE MEASUREMENTS
Assets and liabilities measured at fair value on a recurring basis
The Company records its cash equivalents, marketable securities, Capped Call Transactions, and venture investments at fair value on a recurring basis. Fair value is an exit price, representing the amount that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants based on assumptions that market participants would use in pricing an asset or liability.
As a basis for classifying the fair value measurements, a three-tier fair value hierarchy, which classifies the fair value measurements based on the inputs used in measuring fair value, was established as follows:
•Level 1 - observable inputs, such as quoted prices in active markets for identical assets or liabilities;
•Level 2 - significant other inputs that are observable either directly or indirectly; and
•Level 3 - significant unobservable inputs with little or no market data, which require the Company to develop its own assumptions.
This hierarchy requires the Company to use observable market data when available and minimize unobservable inputs when determining fair value.
The fair value of the Capped Call Transactions at the end of each reporting period is determined using a Black-Scholes option-pricing model. The valuation model uses various market-based inputs, including stock price, remaining contractual term, expected volatility, risk-free interest rate, and expected dividend yield. The Company applies judgment when determining expected volatility. The Company considers the underlying equity security’s historical and implied volatility levels. The Company’s venture investments are recorded at fair value based on multiple valuation methods, including observable public companies and transaction prices and unobservable inputs, including the volatility, rights, and obligations of the securities the Company holds.
Assets and liabilities measured at fair value on a recurring basis:
September 30, 2023December 31, 2022
(in thousands)Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total
Cash equivalents$22,686 $— $— $22,686 $2,526 $— $— $2,526 
Marketable securities $— $167,286 $— $167,286 $— $152,167 $— $152,167 
Capped Call Transactions (1)
$— $1,792 $— $1,792 $— $2,582 $— $2,582 
Venture investments (1) (2)
$— $— $19,348 $19,348 $— $— $13,069 $13,069 
(1) Included in other long-term assets.
(2) Investments in privately-held companies.
15
PEGASYSTEMS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)



Changes in venture investments:
Nine Months Ended
September 30,
(in thousands)20232022
January 1,$13,069 $7,648 
New investments400 400 
Sales of investments(2,773)(3,954)
Changes in foreign exchange rates27 (675)
Changes in fair value:
included in other income (loss), net
10,886 5,989 
included in other comprehensive (loss)
(2,261)2,502 
September 30,$19,348 $11,910 
The carrying value of certain financial instruments, including receivables and accounts payable, approximates fair value due to their short maturities.
Fair value of the Notes
The fair value of the Notes outstanding (including the embedded conversion feature) was $460.3 million as of September 30, 2023 and $521.1 million as of December 31, 2022. In the nine months ended September 30, 2023 the Company repurchased Notes representing $97.7 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
September 30,		Nine Months Ended
September 30,
(Dollars in thousands)
2023202220232022
U.S.$154,741 47 %$148,200 55 %$489,645 51 %$513,197 56 %
Other Americas23,497 7 %18,546 7 %58,013 6 %80,558 9 %
United Kingdom (“U.K.”)41,622 12 %24,074 9 %112,751 12 %83,837 9 %
Europe (excluding U.K.), Middle East, and Africa 67,880 20 %46,212 17 %173,551 18 %140,586 15 %
Asia-Pacific46,903 14 %33,699 12 %124,423 13 %103,197 11 %
$334,643 100 %$270,731 100 %$958,383 100 %$921,375 100 %
Revenue streams
Three Months Ended
September 30,		Nine Months Ended
September 30,
(in thousands)
2023202220232022
Perpetual license$2,747 $9,223 $4,729 $18,929 
Subscription license74,342 31,112 200,066 210,245 
Revenue recognized at a point in time77,089 40,335 204,795 229,174 
Maintenance83,538 77,526 245,210 235,568 
Pega Cloud118,040 97,359 340,982 281,182 
Consulting55,976 55,511 167,396 175,451 
Revenue recognized over time257,554 230,396 753,588 692,201 
Total revenue$334,643 $270,731 $958,383 $921,375 
16
PEGASYSTEMS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)



Three Months Ended
September 30,		Nine Months Ended
September 30,
(in thousands)2023202220232022
Pega Cloud$118,040 $97,359 $340,982 $281,182 
Maintenance83,538 77,526 245,210 235,568 
Subscription services201,578 174,885 586,192 516,750 
Subscription license74,342 31,112 200,066 210,245 
Subscription275,920 205,997 786,258 726,995 
Consulting55,976 55,511 167,396 175,451 
Perpetual license2,747 9,223 4,729 18,929 
$334,643 $270,731 $958,383 $921,375 
Remaining performance obligations ("Backlog")
Expected future revenue from existing non-cancellable contracts:
As of September 30, 2023:
(Dollars in thousands)Subscription servicesSubscription licensePerpetual licenseConsultingTotal
MaintenancePega Cloud
1 year or less
$202,610 $391,324 $48,427 $4,567 $39,335 $686,263 54 %
1-2 years
58,610 239,787 4,356 2,696 3,662 309,111 24 %
2-3 years
28,585 121,778 8,518 — 1,100 159,981 13 %
Greater than 3 years
17,478 89,870 2,664 — — 110,012 9 %
$307,283 $842,759 $63,965 $7,263 $44,097 $1,265,367 100 %
As of September 30, 2022:
(Dollars in thousands)Subscription servicesSubscription licensePerpetual licenseConsultingTotal
MaintenancePega Cloud
1 year or less
$191,045 $328,111 $69,753 $814 $27,968 $617,691 53 %
1-2 years
55,141 213,304 4,113 4,505 6,699 283,762 25 %
2-3 years
24,496 115,416 1,420 2,252 1,648 145,232 13 %
Greater than 3 years
16,198 82,807 1,734 — 508 101,247 9 %
$286,880 $739,638 $77,020 $7,571 $36,823 $1,147,932 100 %
NOTE 12. STOCK-BASED COMPENSATION
Expense
Three Months Ended
September 30,		Nine Months Ended
September 30,
(in thousands)2023202220232022
Cost of revenue
$6,410 $6,797 $22,497 $19,754 
Selling and marketing
10,401 12,933 43,410 36,524 
Research and development
7,375 7,724 24,286 22,425 
General and administrative
7,113 6,320 19,890 14,598 
$31,299 $33,774 $110,083 $93,301 
Income tax benefit
$(316)$(600)$(1,569)$(1,505)
As of September 30, 2023, the Company had $137.5 million of unrecognized stock-based compensation expense, net of estimated forfeitures, which is expected to be recognized over a weighted-average period of 1.8 years.
17
PEGASYSTEMS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)



Grants
Nine Months Ended
September 30, 2023
(in thousands)SharesTotal Fair Value
Restricted stock units
1,514 $70,962 
Non-qualified stock options
911 $19,142 
Performance stock options (1)
906 $18,265 
Common stock
13 $600 
(1) Performance stock options allow the holder to purchase a specified number of common stock shares at an exercise price equal to or greater than the shares' fair market value at the grant date. The options usually vest over two years and expire ten years from the grant date, subject to specific performance conditions.
NOTE 13. INCOME TAXES
Effective income tax rate
Three Months Ended
September 30,		Nine Months Ended
September 30,
(Dollars in thousands)2023202220232022
Provision for income taxes$3,545 $11,748 $15,395 $190,239 
Effective income tax rate(26)%(100)%
The Company’s effective income tax rate in the nine months ended September 30, 2023 was primarily driven by the valuation allowance on the Company’s deferred tax assets in the U.S. and U.K. and projected taxable income in the U.S., partially offset by available tax credits and losses in the U.S.
The Company recognizes deferred tax assets to the extent that it believes that these assets are more likely than not to be realized. A deferred tax valuation allowance requires significant judgment and uncertainties, including assumptions about future taxable income. Quarterly, the Company reassesses the need for a valuation allowance on its net deferred tax assets by weighting all available and objectively verifiable negative and positive evidence, including projected future reversals of existing taxable temporary differences, committed contractual backlog (“Backlog”), projected future taxable income, including the impact of enacted legislation, tax-planning strategies, and recent operating results.
The Company intends to maintain a valuation allowance on the Company’s U.S. and U.K. net deferred tax assets until sufficient evidence exists to support the realization of these deferred tax assets.
NOTE 14. (LOSS) PER SHARE
Basic (loss) per share is calculated using the weighted-average number of common shares outstanding during the period. Diluted (loss) per share is calculated using the weighted-average number of common shares outstanding during the period, plus the dilutive effect of outstanding stock options, RSUs, and convertible senior notes.
Calculation of (loss) per share:
Three Months Ended
September 30,		Nine Months Ended
September 30,
(in thousands, except per share amounts)2023202220232022
Net (loss)$(7,279)$(93,520)$(74,857)$(380,195)
Weighted-average common shares outstanding83,336 81,996 82,996 81,842 
(Loss) per share, basic$(0.09)$(1.14)$(0.90)$(4.65)
Net (loss)$(7,279)$(93,520)$(74,857)$(380,195)
Weighted-average common shares outstanding, assuming dilution (1) (2) (3)
83,336 81,996 82,996 81,842 
(Loss) per share, diluted$(0.09)$(1.14)$(0.90)$(4.65)
Outstanding anti-dilutive stock options and RSUs (4)
2,255 3,019 1,652 3,589 
(1) All dilutive securities are excluded in periods of loss 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 3.7 million shares as of September 30, 2023.
(3) The Company’s Capped Call Transactions represent the equivalent of approximately 3.7 million shares of the Company’s common stock (representing the number of shares for which the Notes are convertible) as of September 30, 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.
18
PEGASYSTEMS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)



(4) Outstanding stock options and RSUs that were anti-dilutive under the treasury stock method in the period were excluded from the computation of diluted (loss) per share. These awards may be dilutive in the future.
NOTE 15. COMMITMENTS AND CONTINGENCIES
Commitments
See "Note 7. Leases" for additional information.
Legal proceedings
In addition to the matters below, the Company is or may become involved in a variety of claims, demands, suits, investigations, and proceedings that arise from time to time relating to matters incidental to the ordinary course of the Company’s business, including actions concerning contracts, intellectual property, employment, benefits, and securities matters. Regardless of the outcome, legal disputes can have a material effect on the Company because of defense and settlement costs, diversion of management resources, and other factors.
In addition, as the Company is a party to ongoing litigation, it is at least reasonably possible that the Company’s estimates will change in the near term, and the effect may be material.
The Company had no accrued losses for litigation as of September 30, 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 in the Court of Appeals of Virginia is completed. The Court of Appeals of Virginia has set November 15, 2023 as the date for oral arguments in the appeal. 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 Company’s motion to dismiss took place on May 17, 2023. After hearing argument from both sides, the Court denied the Company’s motion from the bench and stated that a written opinion would follow. On June 30, 2023, the Company filed its Answer to the complaint. On July 24, 2023, the Court issued its written opinion denying the motion to dismiss as to the Company and Defendant Trefler but granting the motion without prejudice as to Mr. Stillwell. The Company believes it has strong defenses to the claims brought against the defendants 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 it has strong defenses to the claims asserted, its intent to defend against these claims, and there being no specified quantum of damages sought in the complaint.
19
PEGASYSTEMS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)



In re Pegasystems Inc., Derivative Litigation
On November 21, 2022, a lawsuit was filed against the members of the Company’s board of directors, the Company’s chief operating and financial officer and the Company in the United States District Court for the District of Massachusetts, captioned Mary Larkin, derivatively on behalf of nominal defendant Pegasystems Inc. v. Peter Gyenes, Richard Jones, Christopher Lafond, Dianne Ledingham, Sharon Rowlands, Alan Trefler, Larry Weber, and Kenneth Stillwell, defendants, and Pegasystems Inc., nominal defendant (Case 1:22-cv-11985). The complaint generally alleges the defendants sold shares of the Company while in possession of material nonpublic information relating to (i) the litigation brought by Appian in the Circuit Court of Fairfax County, Virginia, described above, and (ii) alleged misconduct by Company employees alleged in that litigation. On April 28, 2023, a lawsuit was filed in the United States District Court for the District of Massachusetts by Dag Sagfors, derivatively on behalf of nominal defendant Pegasystems Inc. asserting breach of fiduciary duty and related claims relating to the Virginia Appian litigation against the same defendants as the Larkin lawsuit. On May 17, 2023, the Larkin and Sagfors cases were consolidated and a joint motion to stay the consolidated case is pending before the Court. The Company also has received confidential demand letters raising substantially the same allegations set forth in the foregoing derivative complaints. On April 12, 2023, the Company’s board of directors (other than Mr. Trefler, who recused himself), formed a committee consisting solely of independent directors, to review, analyze, and investigate the matters raised in the demands and to determine in good faith what actions (if any) are reasonably believed to be appropriate under similar circumstances and reasonably believed to be in the best interests of the Company in response to the demand letters. The Company is unable to reasonably estimate possible damages or a range of possible damages in this matter given the stage of the lawsuit 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.
20

ITEM 2.     MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (“Quarterly Report”) contains or incorporates forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
Words such as expects, anticipates, intends, plans, believes, will, could, should, estimates, may, targets, strategies, intends to, projects, forecasts, guidance, likely, and usually or variations of such words and other similar expressions identify forward-looking statements, 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, Part II of this Quarterly Report on Form 10-Q, and other filings we make with the U.S. Securities and Exchange Commission (“SEC”).
Investors are cautioned not to place undue reliance on such forward-looking statements, and there are no assurances that the results included in such statements will be achieved. Although subsequent events may cause our view to change, except as required by applicable law, we do not undertake and expressly disclaim any obligation to publicly update or revise these forward-looking statements whether as the result of new information, future events, or otherwise.
The forward-looking statements in this Quarterly Report represent our views as of October 25, 2023.
NON-GAAP MEASURES
Our non-GAAP financial measures should only be read in conjunction with our consolidated financial statements prepared in accordance with GAAP. We believe that these measures help investors understand our core operating results and prospects, consistent with how management measures and forecasts our performance without the effect of often one-time charges and other items outside our normal operations. They are not a substitute for financial measures prepared under U.S. GAAP. A reconciliation of GAAP and non-GAAP measures is located with each non-GAAP measure.
BUSINESS OVERVIEW
We develop, market, license, host, and support enterprise software that helps organizations build agility into their business so they can adapt to change. Our powerful low-code platform for workflow automation and artificial intelligence-powered decisioning enables the world’s leading brands and government agencies to hyper-personalize customer experiences, streamline customer service, and automate mission-critical business processes and workflows. With Pega, our clients can leverage our 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.
21

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.
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, the Company revised its ACV methodology for maintenance and all contracts less than 12 months as its overall client renewal rate exceeds 90%. The impact of the change was $3 million and 0.3% of Total ACV or less for all quarters in 2022. Previously disclosed ACV amounts have been updated to allow for comparability. This simplification, made possible by improvements to the Company’s financial systems, ensures that ACV for all contract types and lengths is consistently calculated as the total contract value divided by the duration in years. Previously, ACV for maintenance was calculated as the maintenance revenue for the quarter then ended, multiplied by four, and ACV for contracts less than 12 months was equal to the contract’s total value. The Company believes the simplified methodology better represents the current value of its contracts and better aligns its definition with comparable companies.
531
Reconciliation of ACV and Constant Currency ACV
(in millions, except percentages)Q3 22Q3 23
1-Year Change
ACV$1,040 $1,169 12 %
Impact of changes in foreign exchange rates— (22)
Constant Currency ACV$1,040 $1,147 10 %
Note: Constant currency ACV is calculated by applying the Q3 2022 foreign exchange rates to all periods shown.
22

Cash flow (1)
549755823883549755823884
Note: Starting in the third quarter of 2023, the Company has calculated free cash flow as cash provided by (used in) operating activities less investments in property and equipment. To ensure comparability, previously disclosed amounts have been updated.
(Dollars in thousands)
Nine Months Ended
September 30,
20232022
Margin (2)
Margin (2)
Cash provided by (used in) operating activities$137,920 14 %$(13,446)(1)%
Investment in property and equipment(14,271)(22,285)
Free cash flow$123,649 13 %$(35,731)(4)%
Additional information (3)
Legal fees$5,867 $37,944 
Restructuring21,576 — 
Interest on convertible senior notes4,134 4,500 
Other— 3,266 
$31,577 $45,710 

(1) Our non-GAAP free cash flow is defined as cash provided by (used in) operating activities less investment in property and equipment. Investment in property and equipment fluctuates in amount and frequency and are 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) Operating and Free Cash Flow Margin are calculated by comparing the respective cash flow to Total Revenue.
(3) The additional 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.
•Legal fees: Includes 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 Notes accrue interest at an annual rate of 0.75%, payable semi-annually in arrears on March 1 and September 1, beginning September 1, 2020.
•Other: Includes fees related to capital advisory services, canceled in-person sales and marketing events, and incremental costs incurred integrating acquisitions.
23

Remaining performance obligations (“Backlog”)
549755814123
Reconciliation of Backlog and Constant Currency Backlog (Non-GAAP)
(in millions, except percentages)Q3 22Q3 2023
1-Year Growth Rate
Backlog - GAAP$1,148 $1,265 10 %
Impact of changes in foreign exchange rates— (33)
Constant currency backlog$1,148 $1,232 7 %
Note: Constant currency Backlog is calculated by applying the Q3 2022 foreign exchange rates to all periods shown.
CRITICAL ACCOUNTING POLICIES
Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon our unaudited condensed consolidated financial statements, which have been prepared following accounting principles generally accepted in the United States of America (“U.S.”) and the rules and regulations of the SEC for interim financial reporting. Preparing these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses, and the related disclosure of contingent assets and liabilities. We base our estimates and judgments on historical experience, knowledge of current conditions, and expectations of what could occur in the future, 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.
24

RESULTS OF OPERATIONS
Revenue
(Dollars in thousands)Three Months Ended
September 30,		ChangeNine Months Ended
September 30,		Change
2023202220232022
Pega Cloud$118,040 35 %$97,359 36 %$20,681 21 %$340,982 36 %$281,182 31 %$59,800 21 %
Maintenance83,538 25 %77,526 29 %6,012 8 %245,210 25 %235,568 25 %9,642 4 %
Subscription services201,578 60 %174,885 65 %26,693 15 %586,192 61 %516,750 56 %69,442 13 %
Subscription license74,342 22 %31,112 11 %43,230 139 %200,066 21 %210,245 23 %(10,179)(5)%
Subscription275,920 82 %205,997 76 %69,923 34 %786,258 82 %726,995 79 %59,263 8 %
Consulting55,976 17 %55,511 21 %465 1 %167,396 18 %175,451 19 %(8,055)(5)%
Perpetual license2,747 1 %9,223 3 %(6,476)(70)%4,729 — %18,929 2 %(14,200)(75)%
$334,643 100 %$270,731 100 %$63,912 24 %$958,383 100 %$921,375 100 %$37,008 4 %
•The increases in Pega Cloud revenue for the three and nine months ended September 30, 2023 were primarily due to the growth of the hosted client base as our clients continued to expand their use of Pega Cloud.
•The increases in maintenance revenue in the three and nine months ended September 30, 2023 were primarily due to continued demand for our subscription license offerings which are generally bundled with maintenance.
•The increase in subscription license revenue in the three months ended September 30, 2023 was primarily due to increased license deliveries in the three months ended September 30, 2023. The decrease in subscription license revenue in the nine months ended September 30, 2023 was primarily due to several large multi-year contracts recognized in revenue in the nine months ended September 30, 2022.
•The decrease in consulting revenue in the nine months ended September 30, 2023 was primarily due to lower consultant realization rates in the Americas.
•The decreases in perpetual license revenue in the three and nine months ended September 30, 2023 reflects our strategy of promoting subscription-based arrangements.
Gross profit
(Dollars in thousands)Three Months Ended
September 30,		ChangeNine Months Ended
September 30,		Change
2023202220232022
Pega Cloud$88,553 75 %$68,673 71 %$19,880 29 %$250,943 74 %$194,350 69 %$56,593 29 %
Maintenance77,119 92 %71,671 92 %5,448 8 %225,696 92 %219,296 93 %6,400 3 %
Subscription services165,672 82 %140,344 80 %25,328 18 %476,639 81 %413,646 80 %62,993 15 %
Subscription license73,713 99 %30,484 98 %43,229 142 %198,095 99 %208,322 99 %(10,227)(5)%
Subscription239,385 87 %170,828 83 %68,557 40 %674,734 86 %621,968 86 %52,766 8 %
Consulting(1,228)(2)%(2,267)(4)%1,039 46 %(8,866)(5)%4,289 2 %(13,155)*
Perpetual license2,723 99 %9,120 99 %(6,397)(70)%4,678 99 %18,756 99 %(14,078)(75)%
$240,880 72 %$177,681 66 %$63,199 36 %$670,546 70 %$645,013 70 %$25,533 4 %
* not meaningful
•The increases in Pega Cloud gross profit percent in the three and nine months ended September 30, 2023 were primarily due to increased cost efficiency, particularly for hosting services, as Pega Cloud continues to grow and scale.
•The decrease in maintenance gross profit percent in the nine months ended September 30, 2023 was primarily due to an increase in compensation and benefits as a result of increased headcount.
•The increase in consulting gross profit percent in the three months ended September 30, 2023 was primarily due to higher consultant utilization in the Americas. The decrease in consulting profit percent in the nine months ended September 30, 2023, was primarily due to lower consultant realization rates in the Americas.
25

Operating expenses
(Dollars in thousands)Three Months Ended
September 30,		ChangeNine Months Ended
September 30,		Change
2023202220232022
Selling and marketing$131,598 $153,517 $(21,919)(14)%$425,253 $472,951 $(47,698)(10)%
% of Revenue39 %57 %44 %51 %
Research and development$74,955 $75,342 $(387)(1)%$224,262 $221,173 $3,089 1 %
% of Revenue22 %28 %23 %24 %
General and administrative$27,321 $26,043 $1,278 5 %$73,893 $94,530 $(20,637)(22)%
% of Revenue8 %10 %8 %10 %
Restructuring$17,822 $— $17,822 100 %$21,450 $— $21,450 100 %
% of Revenue5 %— %2 %— %
•The decreases in selling and marketing during the three and nine months ended September 30, 2023 were primarily due to decreases in compensation and benefits of $18.6 million and $45.0 million, respectively. The decreases were due to reduced headcount as we optimize our go-to-market strategy. For additional information, see "Note 9. Restructuring" in Part I, Item 1 of this Quarterly Report.
•The increase in research and development for the nine months ended September 30, 2023 was primarily due to additional investments in our products and services.
•The changes in general and administrative in the three and nine months ended September 30, 2023 were primarily due to an increase of $2.3 million in the three months ended September 30, 2023 and a decrease of $21.4 million in the nine months ended September 30, 2023 in legal fees and related expenses arising from proceedings outside 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 and “Risk Factors” in Part I, Item 1A of our Annual Report for the year ended December 31, 2022 for additional information.
•The increases in restructuring expenses during the three and nine months ended September 30, 2023 were primarily due to our efforts to optimize our go-to-market organization. For additional information, see "Note 9. Restructuring" in Part I, Item 1 of this Quarterly Report.
Other income and expenses
(Dollars in thousands)Three Months Ended
September 30,		ChangeNine Months Ended
September 30,		Change
2023202220232022
Foreign currency transaction gain (loss)$1,994 $3,826 $(1,832)(48)%$(3,971)$8,415 $(12,386)*
Interest income2,532 520 2,012 387 %5,831 1,036 4,795 463 %
Interest expense(1,533)(1,992)459 23 %(5,229)(5,882)653 11 %
(Loss) on capped call transactions(2,294)(6,876)4,582 67 %(449)(56,381)55,932 99 %
Other income (loss), net6,383 (29)6,412 *18,668 6,497 12,171 187 %

$7,082 $(4,551)$11,633 *$14,850 $(46,315)$61,165 *
* not meaningful
•The changes in foreign currency transaction gain (loss) in the three and nine months ended September 30, 2023 were 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 increases in interest income in the three and nine months ended September 30, 2023 were primarily due to increases in market interest rates.
•The decreases in interest expense in the three and nine months ended September 30, 2023 were due to our repurchases of Convertible Senior Notes in the nine months ended September 30, 2023. For additional information, see "Note 8. Debt" in Part I, Item 1 of this Quarterly Report.
•The changes in (loss) on capped call transactions in the three and nine months ended September 30, 2023 were due to fair value adjustments for our capped call transactions.
•The increase in other income (loss), net in the three months ended September 30, 2023 was due to a $6.4 million increase in the value of equity securities held in our venture investments portfolio. The increase in other income (loss), net in the nine months ended September 30, 2023, was due to a $7.9 million gain from repurchases of our convertible senior notes and a $10.9 million increase in the value of equity securities held in our venture investments portfolio. For additional information, see “Note 8. Debt” and "Note 10. Fair Value Measurements" in Part I, Item 1 of this Quarterly Report.
26

Provision for income taxes
Nine Months Ended
September 30,
(Dollars in thousands)20232022
Provision for income taxes$15,395 $190,239 
Effective income tax rate(26)%(100)%
The effective income tax rate in the nine months ended September 30, 2023 was primarily driven by the valuation allowance on our deferred tax assets in the U.S. and U.K. and projected taxable income in the U.S., partially offset by available tax credits and losses in the U.S.
LIQUIDITY AND CAPITAL RESOURCES
Nine Months Ended
September 30,
 (in thousands)20232022
Cash provided by (used in):
Operating activities$137,920 $(13,446)
Investing activities(24,176)10,104 
Financing activities(85,031)(43,484)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash(1,621)(5,513)
Net increase (decrease) in cash, cash equivalents, and restricted cash$27,092 $(52,339)
(in thousands)
September 30, 2023December 31, 2022
Held by U.S. entities
$217,735 $248,389 
Held by foreign entities
118,574 48,832 
Total cash, cash equivalents, and marketable securities
$336,309 $297,221 
We believe that our current cash, cash flow provided by 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 have to pay federal, state, and local income taxes as well as foreign withholding taxes upon repatriation. However, estimating the taxes we would have to pay is impracticable due to the complexity of income tax laws and regulations.
Operating activities
The change in cash provided by (used in) operating activities in the nine months ended September 30, 2023 was primarily due to growth in client collections, the impact of our cost-efficiency initiatives, and lower legal fees and related costs arising from proceedings outside the ordinary course of business. We expect to continue to incur additional costs for these proceedings. For additional information, see “Note 9. Restructuring” and "Note 15. Commitments and Contingencies" in Part I, Item 1 of this Quarterly Report.
Investing activities
The change in cash (used in) provided by investing activities in the nine months ended September 30, 2023 was primarily due to our investments in financial instruments and reduced investment in property and equipment as we optimize our office space.
Financing activities
Debt financing
In February 2020, we issued $600 million in aggregate principal amount of convertible senior notes, which mature on March 1, 2025. In the nine months ended September 30, 2023, we paid $89 million to repurchase $97.7 million in aggregate principal amount of convertible senior notes. As of September 30, 2023, we had $502 million in aggregate principal amount of convertible senior notes outstanding due on March 1, 2025. For additional information, see "Note 8. Debt" in Part I, Item 1 of this Quarterly Report.
In November 2019, and as since amended, we entered into a five-year $100 million senior secured revolving credit agreement (the “Credit Facility”) with PNC Bank, National Association. As of September 30, 2023 and December 31, 2022, we had $27.3 million in outstanding letters of credit, which reduced the Company’s available borrowing capacity under the Credit Facility and no outstanding cash borrowings under the Credit Facility. For additional information, see "Note 8. Debt" in Part I, Item 1 of this Quarterly Report.
27

Stock repurchase program
Changes in the remaining stock repurchase authority:
(in thousands)Nine Months Ended
September 30, 2023
December 31, 2022$58,075 
Authorizations (1)
1,925 
September 30, 2023$60,000 
(1) 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 was increased to $60 million.
Common stock repurchases
Nine Months Ended
September 30,
20232022
(in thousands)SharesAmountSharesAmount
Stock repurchase program— — 279 24,508 
Tax withholdings for net settlement of equity awards39 1,654 253 17,575 
39 $1,654 532 $42,083 
In the nine months ended September 30, 2023 and 2022, instead of receiving cash from the equity holders, we withheld shares with a value of $1.0 million and $11.5 million, respectively, for the exercise price of options. These amounts are not included in the table above.
Dividends
We intend to pay a quarterly cash dividend of $0.03 per share. However, the Board of Directors may terminate or modify the dividend program without prior notice.
Nine Months Ended
September 30,
(in thousands)20232022
Dividend payments to stockholders$7,458 $7,368 
Contractual obligations
As of September 30, 2023, our contractual obligations were:
Payments due by period
(in thousands)Remainder of 202320242025202620272028 and afterOtherTotal
Convertible senior notes (1)
$— $3,767 $504,154 $— $— $— $— $507,921 
Purchase obligations (2)
43,491 134,122 126,065 120,745 134,060 177 — 558,660 
Operating lease obligations 4,775 17,976 14,870 10,853 9,808 39,299 — 97,581 
Venture investment commitments (3)
500 500 — — — — — 1,000 
Liability for uncertain tax positions (4)
— — — — — — 2,017 2,017 
$48,766 $156,365 $645,089 $131,598 $143,868 $39,476 $2,017 $1,167,179 
(1) Includes principal and interest.
(2) Represents the fixed amount owed for purchase obligations of software licenses, hosting services, and sales and marketing programs.
(3) Represents the maximum funding under existing venture investment agreements. Our venture investment agreements generally allow us to withhold unpaid funds at our discretion.
(4) We cannot reasonably estimate the timing of this cash outflow due to uncertainties in the timing of the effective settlement of tax positions.
ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk is the risk of loss from adverse changes in financial market prices and rates.
Foreign currency exposure
Translation risk
Our international operations’ operating expenses are primarily denominated in foreign currencies. However, our international sales are also primarily denominated in foreign currencies, partially offsetting our foreign currency exposure.
28

A hypothetical 10% strengthening in the U.S. dollar against other currencies would have resulted in the following:
Nine Months Ended
September 30,
20232022
(Decrease) in revenue(4)%(4)%
(Decrease) increase in net income(5)%2 %
Remeasurement risk
We incur transaction gains and losses from the remeasurement of monetary assets and liabilities denominated in currencies other than the functional currency of the entities in which they are recorded.
We are primarily exposed to changes in foreign currency exchange rates associated with the Australian dollar, Euro, and U.S. dollar-denominated cash, cash equivalents, receivables, and intercompany balances held by our U.K. subsidiary, a British pound functional entity.
A hypothetical 10% strengthening in the British pound exchange rate in comparison to the Australian dollar, Euro, and U.S. dollar would have resulted in the following impact:
Nine Months Ended
September 30,
(in thousands)20232022
Foreign currency (loss)$(11,351)$(6,335)
ITEM 4.     CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures
Our management, with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”)) as of September 30, 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 September 30, 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 September 30, 2023 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
29

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 September 30, 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
July 1, 2023 - July 31, 20233 $55.81 — $60,000 
August 1, 2023 - August 31, 2023— — — $60,000 
September 1, 2023 - September 30, 20234 48.92 — $60,000 
7 $51.65 — 
(1) For additional information, see "Liquidity and Capital Resources" in Part I, Item 2 of this Quarterly Report.
(2) Includes shares withheld to cover the option exercise price and tax withholding obligations for stock compensation awards subject to net settlement provisions.
ITEM 5.     OTHER INFORMATION
Rule 10b5-1 and non-rule 10b5-1 trading arrangements
During the three months ended September 30, 2023, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
ITEM 6.     EXHIBITS
Exhibit No.DescriptionIncorporation by ReferenceFiled Herewith
FormExhibitFiling Date
3.110-Q3.1November 4, 2014
3.28-K3.2June 15, 2020
31.1X
31.2X
32+
101.INS
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
X
101.SCH
Inline XBRL Taxonomy Extension Schema Document.
X
101.CAL
Inline XBRL Taxonomy Calculation Linkbase Document.
X
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document.
X
101.LAB
Inline XBRL Taxonomy Label Linkbase Document.
X
101.PRE
Inline XBRL Taxonomy Presentation Linkbase Document.
X
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
X
+ Indicates that the exhibit is being furnished with this report and is not filed as a part of it.
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:October 25, 2023By:/s/ KENNETH STILLWELL
Kenneth Stillwell
Chief Operating Officer and Chief Financial Officer
(Principal Financial Officer)


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: October 25, 2023    
/s/ ALAN TREFLER
Alan Trefler
Chairman and Chief Executive Officer
(Principal Executive Officer)



1
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: October 25, 2023    
/s/ KENNETH STILLWELL
Kenneth Stillwell
Chief Operating Officer and Chief Financial Officer
(Principal Financial Officer)

1
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 September 30, 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: October 25, 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
v3.23.3
Cover - shares
 9 Months Ended
Sep. 30, 2023
Oct. 17, 2023
Cover [Abstract]    
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Sep. 30, 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, $.01 par value per share  
Trading Symbol PEGA  
Security Exchange Name NASDAQ  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Large Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   83,555,919
Amendment Flag false  
Entity Central Index Key 0001013857  
Document Fiscal Year Focus 2023  
Document Fiscal Period Focus Q3  
Current Fiscal Year End Date --12-31  
v3.23.3
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($)
$ in Thousands
Sep. 30, 2023
Dec. 31, 2022
Current assets:    
Cash and cash equivalents $ 169,023 $ 145,054
Marketable securities 167,286 152,167
Total cash, cash equivalents, and marketable securities 336,309 297,221
Accounts receivable, net 168,795 255,150
Unbilled receivables, net 199,948 213,719
Other current assets 71,438 80,388
Total current assets 776,490 846,478
Unbilled receivables, net 73,795 95,806
Goodwill 81,437 81,399
Other long-term assets 290,807 333,989
Total assets 1,222,529 1,357,672
Current liabilities:    
Accounts payable 20,541 18,195
Accrued expenses 43,624 50,355
Accrued compensation and related expenses 93,511 127,728
Deferred revenue 297,067 325,212
Other current liabilities 18,038 17,450
Total current liabilities 472,781 538,940
Convertible senior notes, net 498,753 593,609
Operating lease liabilities 68,874 79,152
Other long-term liabilities 14,485 15,128
Total liabilities 1,054,893 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; 83,523 and 82,436 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively 835 824
Additional paid-in capital 343,259 229,602
Accumulated deficit (151,370) (76,513)
Accumulated other comprehensive (loss) (25,088) (23,070)
Total stockholders’ equity 167,636 130,843
Total liabilities and stockholders’ equity $ 1,222,529 $ 1,357,672
v3.23.3
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - shares
shares in Thousands
Sep. 30, 2023
Dec. 31, 2022
Stockholders’ equity:    
Preferred stock, shares authorized (in shares) 1,000 1,000
Preferred stock, shares issued (in shares) 0 0
Common stock, shares authorized (in shares) 200,000 200,000
Common stock, shares issued (in shares) 83,523 82,436
Common stock, shares outstanding (in shares) 83,523 82,436
v3.23.3
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($)
shares in Thousands, $ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Revenue        
Total revenue $ 334,643 $ 270,731 $ 958,383 $ 921,375
Cost of revenue        
Total cost of revenue 93,763 93,050 287,837 276,362
Gross profit 240,880 177,681 670,546 645,013
Operating expenses        
Selling and marketing 131,598 153,517 425,253 472,951
Research and development 74,955 75,342 224,262 221,173
General and administrative 27,321 26,043 73,893 94,530
Restructuring 17,822 0 21,450 0
Total operating expenses 251,696 254,902 744,858 788,654
(Loss) from operations (10,816) (77,221) (74,312) (143,641)
Foreign currency transaction gain (loss) 1,994 3,826 (3,971) 8,415
Interest income 2,532 520 5,831 1,036
Interest expense (1,533) (1,992) (5,229) (5,882)
(Loss) on capped call transactions (2,294) (6,876) (449) (56,381)
Other income (loss), net 6,383 (29) 18,668 6,497
(Loss) before provision for income taxes (3,734) (81,772) (59,462) (189,956)
Provision for income taxes 3,545 11,748 15,395 190,239
Net (loss) $ (7,279) $ (93,520) $ (74,857) $ (380,195)
(Loss) per share        
Basic (in dollars per share) $ (0.09) $ (1.14) $ (0.90) $ (4.65)
Diluted (in dollars per share) $ (0.09) $ (1.14) $ (0.90) $ (4.65)
Weighted-average number of common shares outstanding        
Basic (in shares) 83,336 81,996 82,996 81,842
Diluted (in shares) 83,336 81,996 82,996 81,842
Subscription services        
Revenue        
Total revenue $ 201,578 $ 174,885 $ 586,192 $ 516,750
Cost of revenue        
Total cost of revenue 35,906 34,541 109,553 103,104
Subscription license        
Revenue        
Total revenue 74,342 31,112 200,066 210,245
Cost of revenue        
Total cost of revenue 629 628 1,971 1,923
Consulting        
Revenue        
Total revenue 55,976 55,511 167,396 175,451
Cost of revenue        
Total cost of revenue 57,204 57,778 176,262 171,162
Perpetual license        
Revenue        
Total revenue 2,747 9,223 4,729 18,929
Cost of revenue        
Total cost of revenue $ 24 $ 103 $ 51 $ 173
v3.23.3
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Statement of Comprehensive Income [Abstract]        
Net (loss) $ (7,279) $ (93,520) $ (74,857) $ (380,195)
Other comprehensive (loss), net of tax        
Unrealized (loss) on available-for-sale securities (40) (73) (281) (1,000)
Foreign currency translation adjustments (3,687) (6,700) (1,737) (20,936)
Total other comprehensive (loss), net of tax (3,727) (6,773) (2,018) (21,936)
Comprehensive (loss) $ (11,006) $ (100,293) $ (76,875) $ (402,131)
v3.23.3
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 (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, 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]          
Other comprehensive (loss) income (21,936)        
Net (loss) (380,195)        
Balance, end of period (in shares) at Sep. 30, 2022   82,164      
Balance, end of period at Sep. 30, 2022 64,961 $ 822 204,189 (111,126) (28,924)
Balance, beginning of period (in shares) at Mar. 31, 2022   81,802      
Balance, beginning of period at Mar. 31, 2022 406,668 $ 818 141,771 273,615 (9,536)
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Repurchase of common stock (in shares)   (38)      
Repurchase of common stock (1,925)   (1,925)    
Issuance of common stock for stock compensation plans (in shares)   117      
Issuance of common stock for stock compensation plans (3,251) $ 1 (3,252)    
Issuance of common stock under the employee stock purchase plan (in shares)   59      
Issuance of common stock under the employee stock purchase plan 2,357   2,357    
Stock-based compensation 31,300   31,300    
Cash dividends declared (2,459)     (2,459)  
Other comprehensive (loss) income (12,615)       (12,615)
Net (loss) (286,296)     (286,296)  
Balance, end of period (in shares) at Jun. 30, 2022   81,940      
Balance, end of period at Jun. 30, 2022 133,779 $ 819 170,251 (15,140) (22,151)
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Issuance of common stock for stock compensation plans (in shares)   138      
Issuance of common stock for stock compensation plans (2,196) $ 2 (2,198)    
Issuance of common stock under the employee stock purchase plan (in shares)   86      
Issuance of common stock under the employee stock purchase plan 2,363 $ 1 2,362    
Stock-based compensation 33,774   33,774    
Cash dividends declared (2,466)     (2,466)  
Other comprehensive (loss) income (6,773)       (6,773)
Net (loss) (93,520)     (93,520)  
Balance, end of period (in shares) at Sep. 30, 2022   82,164      
Balance, end of period at Sep. 30, 2022 $ 64,961 $ 822 204,189 (111,126) (28,924)
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 (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      
Balance, end of period at Mar. 31, 2023 $ 154,496 $ 829 272,481 (97,287) (21,527)
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]          
Other comprehensive (loss) income (2,018)        
Net (loss) $ (74,857)        
Balance, end of period (in shares) at Sep. 30, 2023 83,523 83,523      
Balance, end of period at Sep. 30, 2023 $ 167,636 $ 835 343,259 (151,370) (25,088)
Balance, beginning of period (in shares) at Mar. 31, 2023   82,940      
Balance, beginning of period at Mar. 31, 2023 154,496 $ 829 272,481 (97,287) (21,527)
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Issuance of common stock for stock compensation plans (in shares)   225      
Issuance of common stock for stock compensation plans 1,826 $ 2 1,824    
Issuance of common stock under the employee stock purchase plan (in shares)   47      
Issuance of common stock under the employee stock purchase plan 1,981 $ 1 1,980    
Stock-based compensation 36,227   36,227    
Cash dividends declared (2,496)   (2,496)    
Other comprehensive (loss) income 166       166
Net (loss) (46,804)     (46,804)  
Balance, end of period (in shares) at Jun. 30, 2023   83,212      
Balance, end of period at Jun. 30, 2023 145,396 $ 832 310,016 (144,091) (21,361)
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Issuance of common stock for stock compensation plans (in shares)   257      
Issuance of common stock for stock compensation plans 2,450 $ 3 2,447    
Issuance of common stock under the employee stock purchase plan (in shares)   54      
Issuance of common stock under the employee stock purchase plan 2,003   2,003    
Stock-based compensation 31,299   31,299    
Cash dividends declared (2,506)   (2,506)    
Other comprehensive (loss) income (3,727)       (3,727)
Net (loss) $ (7,279)     (7,279)  
Balance, end of period (in shares) at Sep. 30, 2023 83,523 83,523      
Balance, end of period at Sep. 30, 2023 $ 167,636 $ 835 $ 343,259 $ (151,370) $ (25,088)
v3.23.3
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Parenthetical) - $ / shares
 3 Months Ended
Sep. 30, 2023
Jun. 30, 2023
Mar. 31, 2023
Sep. 30, 2022
Jun. 30, 2022
Mar. 31, 2022
Statement of Stockholders' Equity [Abstract]            
Cash dividend declared $ 0.03 $ 0.03 $ 0.03 $ 0.03 $ 0.03 $ 0.03
v3.23.3
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Operating activities        
Net (loss) $ (7,279) $ (93,520) $ (74,857) $ (380,195)
Adjustments to reconcile net (loss) to cash provided by (used in) operating activities        
Stock-based compensation 31,299 33,774 110,083 93,301
Deferred income taxes     (188) 169,489
Loss on capped call transactions 2,294 6,876 449 56,381
Amortization of deferred commissions 14,947 11,597 43,974 39,752
Lease expense     12,018 11,500
Amortization of intangible assets and depreciation     14,181 12,381
Foreign currency transaction loss (gain) (1,994) (3,826) 3,971 (8,415)
Other non-cash     (16,487) (1,705)
Change in operating assets and liabilities, net     44,776 (5,935)
Cash provided by (used in) operating activities     137,920 (13,446)
Investing activities        
Purchases of investments     (190,466) (39,056)
Proceeds from maturities and called investments     169,836 53,952
Sales of investments     10,725 18,415
Payments for acquisitions, net of cash acquired     0 (922)
Investment in property and equipment     (14,271) (22,285)
Cash (used in) provided by investing activities     (24,176) 10,104
Financing activities        
Repurchases of convertible senior notes     (88,989) 0
Dividend payments to stockholders     (7,458) (7,368)
Proceeds from employee stock purchase plan     6,127 7,166
Proceeds from stock option exercises     6,602 0
Common stock repurchases     (1,654) (43,282)
Other     341 0
Cash (used in) financing activities     (85,031) (43,484)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash     (1,621) (5,513)
Net increase (decrease) in cash, cash equivalents, and restricted cash     27,092 (52,339)
Cash, cash equivalents, and restricted cash, beginning of period     145,054 159,965
Cash, cash equivalents, and restricted cash, end of period 172,146 107,626 172,146 107,626
Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents [Abstract]        
Cash and cash equivalents 169,023 107,626 169,023 107,626
Restricted cash included in other long-term assets 3,123 0 3,123 0
Total cash, cash equivalents, and restricted cash $ 172,146 $ 107,626 $ 172,146 $ 107,626
v3.23.3
BASIS OF PRESENTATION
 9 Months Ended
Sep. 30, 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 2023.
v3.23.3
MARKETABLE SECURITIES
 9 Months Ended
Sep. 30, 2023
Investments, Debt and Equity Securities [Abstract]  
MARKETABLE SECURITIES
NOTE 2. MARKETABLE SECURITIES
September 30, 2023December 31, 2022
(in thousands)Amortized CostUnrealized GainsUnrealized LossesFair ValueAmortized CostUnrealized GainsUnrealized LossesFair Value
Government debt$17,931 $— $(18)$17,913 $2,960 $— $(52)$2,908 
Corporate debt149,927 — (554)149,373 151,906 — (2,647)149,259 
$167,858 $— $(572)$167,286 $154,866 $— $(2,699)$152,167 
As of September 30, 2023, marketable securities’ maturities ranged from October 2023 to January 2026, with a weighted average remaining maturity of 0.5 years.
v3.23.3
RECEIVABLES, CONTRACT ASSETS, AND DEFERRED REVENUE
 9 Months Ended
Sep. 30, 2023
Receivables [Abstract]  
RECEIVABLES, CONTRACT ASSETS, AND DEFERRED REVENUE
NOTE 3. RECEIVABLES, CONTRACT ASSETS, AND DEFERRED REVENUE
Receivables
(in thousands)
September 30, 2023December 31, 2022
Accounts receivable, net$168,795 $255,150 
Unbilled receivables, net199,948 213,719 
Long-term unbilled receivables, net
73,795 95,806 
$442,538 $564,675 
Unbilled receivables
Unbilled receivables are client-committed amounts for which revenue recognition precedes billing. Billing is solely subject to the passage of time.
Unbilled receivables by expected collection date:
(Dollars in thousands)
September 30, 2023
1 year or less$199,948 73 %
1-2 years58,604 21 %
2-5 years15,191 6 %
$273,743 100 %
Unbilled receivables by contract effective date:
(Dollars in thousands)
September 30, 2023
2023$90,227 33 %
202292,065 34 %
202162,729 23 %
202019,820 7 %
2019 and prior8,902 3 %
$273,743 100 %
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)
September 30, 2023December 31, 2022
Contract assets (1)
$13,263 $17,546 
Long-term contract assets (2)
10,732 16,470 
$23,995 $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)
September 30, 2023December 31, 2022
Deferred revenue$297,067 $325,212 
Long-term deferred revenue (1)
2,605 3,552 
$299,672 $328,764 
(1) Included in other long-term liabilities.
Deferred revenue decreased in the nine months ended September 30, 2023, primarily due to $292.3 million of revenue recognized during the period included in deferred revenue as of December 31, 2022 exceeded new billings in advance of revenue recognition.
v3.23.3
DEFERRED COMMISSIONS
 9 Months Ended
Sep. 30, 2023
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]  
DEFERRED COMMISSIONS
NOTE 4. DEFERRED COMMISSIONS
(in thousands)
September 30, 2023December 31, 2022
Deferred commissions (1)
$107,399 $130,195 
(1) Included in other long-term assets.
Three Months Ended
September 30,		Nine Months Ended
September 30,
(in thousands)2023202220232022
Amortization of deferred commissions (1)
$14,947 $11,597 $43,974 $39,752 
(1) Included in selling and marketing.
v3.23.3
GOODWILL AND OTHER INTANGIBLES
 9 Months Ended
Sep. 30, 2023
Goodwill and Intangible Assets Disclosure [Abstract]  
GOODWILL AND OTHER INTANGIBLES
NOTE 5. GOODWILL AND OTHER INTANGIBLES
Goodwill
Nine Months Ended
September 30,
(in thousands)
20232022
January 1,$81,399 $81,923 
Currency translation adjustments38 (722)
September 30,$81,437 $81,201 
Intangibles
Intangible assets are recorded at cost and amortized using the straight-line method over their estimated useful lives.
September 30, 2023
(in thousands)Useful LivesCostAccumulated Amortization
Net Book Value (1)
Client-related
4-10 years
$63,086 $(59,661)$3,425 
Technology
2-10 years
68,103 (63,579)4,524 
Other
1-5 years
5,361 (5,361)— 
$136,550 $(128,601)$7,949 
(1) Included in other long-term assets.
December 31, 2022
(in thousands)Useful LivesCostAccumulated 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)
September 30, 2023
Remainder of 2023$964 
20243,169 
20252,615 
2026874 
2027327 
$7,949 
Amortization of intangible assets:
Three Months Ended
September 30,		Nine Months Ended
September 30,
(in thousands)2023202220232022
Cost of revenue
$622 $705 $1,949 $2,017 
Selling and marketing
343 343 1,028 1,028 
$965 $1,048 $2,977 $3,045 
v3.23.3
OTHER ASSETS AND LIABILITIES
 9 Months Ended
Sep. 30, 2023
Other Assets and Liabilities [Abstract]  
OTHER ASSETS AND LIABILITIES
NOTE 6. OTHER ASSETS AND LIABILITIES
Other current assets
(in thousands)September 30, 2023December 31, 2022
Income tax receivables$19,663 $25,354 
Contract assets13,263 17,546 
Other38,512 37,488 
$71,438 $80,388 
Other long-term assets
(in thousands)September 30, 2023December 31, 2022
Deferred commissions$107,399 $130,195 
Right of use assets65,871 76,114 
Property and equipment49,481 55,056 
Venture investments19,348 13,069 
Contract assets10,732 16,470 
Intangible assets7,949 10,888 
Capped call transactions1,792 2,582 
Deferred income taxes5,046 4,795 
Restricted cash3,123 — 
Other20,066 24,820 
$290,807 $333,989 
Other current liabilities
(in thousands)September 30, 2023December 31, 2022
Operating lease liabilities$15,532 $14,976 
Dividends payable2,506 2,474 
$18,038 $17,450 
Other long-term liabilities
(in thousands)September 30, 2023December 31, 2022
Deferred revenue$2,605 $3,552 
Income taxes payable2,017 3,207 
Other9,863 8,369 
$14,485 $15,128 
v3.23.3
LEASES
 9 Months Ended
Sep. 30, 2023
Leases [Abstract]  
LEASES
NOTE 7. LEASES
Expense
Three Months Ended
September 30,		Nine Months Ended
September 30,
(in thousands)2023202220232022
Fixed lease costs$4,718 $4,688 $14,979 $14,747 
Short-term lease costs660 916 2,137 2,510 
Variable lease costs2,254 905 6,414 2,395 
$7,632 $6,509 $23,530 $19,652 
Right of use assets and lease liabilities
(in thousands)September 30, 2023December 31, 2022
Right of use assets (1)
$65,871 $76,114 
Operating lease liabilities (2)
$15,532 $14,976 
Long-term operating lease liabilities$68,874 $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:
September 30, 2023December 31, 2022
Weighted-average remaining lease term7.0 years7.5 years
Weighted-average discount rate (1)
4.0 %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)September 30, 2023
Remainder of 2023$4,775 
202417,976 
202514,870 
202610,853 
20279,808 
20289,245 
Thereafter30,054 
Total lease payments97,581 
Less: imputed interest (1)
(13,175)
$84,406 
(1) Lease liabilities are measured at the present value of the remaining lease payments using a discount rate determined at lease commencement unless the discount rate is updated due to a lease reassessment event.
Cash flow information
Nine Months Ended
September 30,
(in thousands)20232022
Cash paid for operating leases, net of tenant improvement allowances$14,378 $11,628 
Right of use assets recognized for new leases and amendments (non-cash)$1,782 $6,618 
v3.23.3
DEBT
 9 Months Ended
Sep. 30, 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 September 1, 2020.
In the nine months ended September 30, 2023, the Company recognized a gain of $7.9 million in other income (loss), net from repurchases of Notes representing $97.7 million in aggregate principal amount.
Conversion rights
The conversion rate is 7.4045 shares of common stock per $1,000 principal amount of the Notes, representing an initial conversion price of $135.05 per share of common stock. The conversion rate will be adjusted upon certain events, including spin-offs, tender offers, exchange offers, and certain stockholder distributions. The Company will settle conversions by paying or delivering cash, shares of its common stock, or a combination of cash and shares of its common stock, at the Company’s election, based on the applicable conversion rate.
Beginning on September 1, 2024, noteholders may convert their Notes at any time at their election.
Before September 1, 2024, noteholders 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 September 30, 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)September 30, 2023December 31, 2022
Principal$502,270 $600,000 
Unamortized issuance costs(3,517)(6,391)
Convertible senior notes, net$498,753 $593,609 

Interest expense related to the Notes:
Three Months Ended
September 30,		Nine Months Ended
September 30,
(in thousands)2023202220232022
Contractual interest expense (0.75% coupon)
$827 $1,125 $2,949 $3,375 
Amortization of issuance costs
613 724 1,988 2,163 
$1,440 $1,849 $4,937 $5,538 
The average interest rate on the Notes in the nine months ended September 30, 2023 and 2022 was 1.2%.
Future payments:
September 30, 2023
(in thousands)PrincipalInterestTotal
2024$— $3,767 $3,767 
2025502,270 1,884 504,154 
$502,270 $5,651 $507,921 
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 nine months ended September 30, 2023, Capped Call Transactions covering approximately 0.7 million shares were settled for proceeds of $0.3 million. As of September 30, 2023, Capped Call Transactions covering approximately 3.7 million shares were outstanding.
The Capped Call Transactions are expected to reduce common stock dilution and/or offset any potential cash payments the Company must make, other than for principal and interest, upon conversion of the Notes, with such reduction and/or offset subject to a cap of $196.44. The cap price of the Capped Call Transactions is subject to adjustment upon specified extraordinary events affecting the Company, including mergers and tender offers.
The Capped Call Transactions are accounted for as derivative instruments and do not qualify for the Company’s own equity scope exception in ASC 815 since, in some cases of early settlement, the settlement value calculated following the governing documents may not represent a fair value measurement. The Capped Call Transactions are 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:
Nine Months Ended
September 30,
(in thousands)20232022
January 1,$2,582 $59,964 
Settlements(341)— 
Fair value adjustment(449)(56,381)
September 30,$1,792 $3,583 
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:
•Through December 31, 2023, the parent company must maintain at least $200 million in cash, investments, and availability under the Credit Facility and the Company must maintain:
Year to Date
(in thousands)March 31, 2023June 30, 2023September 30, 2023December 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 September 30, 2023 and December 31, 2022, the Company had $27.3 million in outstanding letters of credit, which reduced the Company’s available borrowing capacity under the Credit Facility and no outstanding cash borrowings under the Credit Facility.
v3.23.3
RESTRUCTURING
 9 Months Ended
Sep. 30, 2023
Restructuring and Related Activities [Abstract]  
RESTRUCTURING
NOTE 9. RESTRUCTURING
The Company has undertaken the following restructuring activities as it optimizes its go-to-market strategy and reassesses its office space needs:
Three months endedExpense
Employee severance and related benefits and closure of a US officeDecember 31, 2022$21,743 
Office space reduction March 31, 2023$1,241 
Employee severance and related benefitsJune 30, 2023$1,581 
Employee severance and related benefits and closure of a foreign officeSeptember 30, 2023$17,236 
Accrued employee severance and related benefits:
Change for all restructuring actions:
Nine Months Ended
September 30,
(in thousands)2023
January 1,$18,573 
Costs incurred19,921 
Cash disbursements(21,576)
Currency translation adjustments(203)
September 30,$16,715 
Note: Accrued employee severance and related benefits is included in accrued compensation and related expenses.
v3.23.3
FAIR VALUE MEASUREMENTS
 9 Months Ended
Sep. 30, 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 with little or no market data, which require the Company to develop its own assumptions.
This hierarchy requires the Company to use observable market data when available and minimize unobservable inputs when determining fair value.
The fair value of the Capped Call Transactions at the end of each reporting period is determined using a Black-Scholes option-pricing model. The valuation model uses various market-based inputs, including stock price, remaining contractual term, expected volatility, risk-free interest rate, and expected dividend yield. The Company applies judgment when determining expected volatility. The Company considers the underlying equity security’s historical and implied volatility levels. The Company’s venture investments are recorded at fair value based on multiple valuation methods, including observable public companies and transaction prices and unobservable inputs, including the volatility, rights, and obligations of the securities the Company holds.
Assets and liabilities measured at fair value on a recurring basis:
September 30, 2023December 31, 2022
(in thousands)Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total
Cash equivalents$22,686 $— $— $22,686 $2,526 $— $— $2,526 
Marketable securities $— $167,286 $— $167,286 $— $152,167 $— $152,167 
Capped Call Transactions (1)
$— $1,792 $— $1,792 $— $2,582 $— $2,582 
Venture investments (1) (2)
$— $— $19,348 $19,348 $— $— $13,069 $13,069 
(1) Included in other long-term assets.
(2) Investments in privately-held companies.
Changes in venture investments:
Nine Months Ended
September 30,
(in thousands)20232022
January 1,$13,069 $7,648 
New investments400 400 
Sales of investments(2,773)(3,954)
Changes in foreign exchange rates27 (675)
Changes in fair value:
included in other income (loss), net
10,886 5,989 
included in other comprehensive (loss)
(2,261)2,502 
September 30,$19,348 $11,910 
The carrying value of certain financial instruments, including receivables and accounts payable, approximates fair value due to their short maturities.
Fair value of the Notes
The fair value of the Notes outstanding (including the embedded conversion feature) was $460.3 million as of September 30, 2023 and $521.1 million as of December 31, 2022. In the nine months ended September 30, 2023 the Company repurchased Notes representing $97.7 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.
v3.23.3
REVENUE
 9 Months Ended
Sep. 30, 2023
Revenue from Contract with Customer [Abstract]  
REVENUE
NOTE 11. REVENUE
Geographic revenue
Three Months Ended
September 30,		Nine Months Ended
September 30,
(Dollars in thousands)
2023202220232022
U.S.$154,741 47 %$148,200 55 %$489,645 51 %$513,197 56 %
Other Americas23,497 7 %18,546 7 %58,013 6 %80,558 9 %
United Kingdom (“U.K.”)41,622 12 %24,074 9 %112,751 12 %83,837 9 %
Europe (excluding U.K.), Middle East, and Africa 67,880 20 %46,212 17 %173,551 18 %140,586 15 %
Asia-Pacific46,903 14 %33,699 12 %124,423 13 %103,197 11 %
$334,643 100 %$270,731 100 %$958,383 100 %$921,375 100 %
Revenue streams
Three Months Ended
September 30,		Nine Months Ended
September 30,
(in thousands)
2023202220232022
Perpetual license$2,747 $9,223 $4,729 $18,929 
Subscription license74,342 31,112 200,066 210,245 
Revenue recognized at a point in time77,089 40,335 204,795 229,174 
Maintenance83,538 77,526 245,210 235,568 
Pega Cloud118,040 97,359 340,982 281,182 
Consulting55,976 55,511 167,396 175,451 
Revenue recognized over time257,554 230,396 753,588 692,201 
Total revenue$334,643 $270,731 $958,383 $921,375 
Three Months Ended
September 30,		Nine Months Ended
September 30,
(in thousands)2023202220232022
Pega Cloud$118,040 $97,359 $340,982 $281,182 
Maintenance83,538 77,526 245,210 235,568 
Subscription services201,578 174,885 586,192 516,750 
Subscription license74,342 31,112 200,066 210,245 
Subscription275,920 205,997 786,258 726,995 
Consulting55,976 55,511 167,396 175,451 
Perpetual license2,747 9,223 4,729 18,929 
$334,643 $270,731 $958,383 $921,375 
Remaining performance obligations ("Backlog")
Expected future revenue from existing non-cancellable contracts:
As of September 30, 2023:
(Dollars in thousands)Subscription servicesSubscription licensePerpetual licenseConsultingTotal
MaintenancePega Cloud
1 year or less
$202,610 $391,324 $48,427 $4,567 $39,335 $686,263 54 %
1-2 years
58,610 239,787 4,356 2,696 3,662 309,111 24 %
2-3 years
28,585 121,778 8,518 — 1,100 159,981 13 %
Greater than 3 years
17,478 89,870 2,664 — — 110,012 9 %
$307,283 $842,759 $63,965 $7,263 $44,097 $1,265,367 100 %
As of September 30, 2022:
(Dollars in thousands)Subscription servicesSubscription licensePerpetual licenseConsultingTotal
MaintenancePega Cloud
1 year or less
$191,045 $328,111 $69,753 $814 $27,968 $617,691 53 %
1-2 years
55,141 213,304 4,113 4,505 6,699 283,762 25 %
2-3 years
24,496 115,416 1,420 2,252 1,648 145,232 13 %
Greater than 3 years
16,198 82,807 1,734 — 508 101,247 9 %
$286,880 $739,638 $77,020 $7,571 $36,823 $1,147,932 100 %
v3.23.3
STOCK-BASED COMPENSATION
 9 Months Ended
Sep. 30, 2023
Share-Based Payment Arrangement [Abstract]  
STOCK-BASED COMPENSATION
NOTE 12. STOCK-BASED COMPENSATION
Expense
Three Months Ended
September 30,		Nine Months Ended
September 30,
(in thousands)2023202220232022
Cost of revenue
$6,410 $6,797 $22,497 $19,754 
Selling and marketing
10,401 12,933 43,410 36,524 
Research and development
7,375 7,724 24,286 22,425 
General and administrative
7,113 6,320 19,890 14,598 
$31,299 $33,774 $110,083 $93,301 
Income tax benefit
$(316)$(600)$(1,569)$(1,505)
As of September 30, 2023, the Company had $137.5 million of unrecognized stock-based compensation expense, net of estimated forfeitures, which is expected to be recognized over a weighted-average period of 1.8 years.
Grants
Nine Months Ended
September 30, 2023
(in thousands)SharesTotal Fair Value
Restricted stock units
1,514 $70,962 
Non-qualified stock options
911 $19,142 
Performance stock options (1)
906 $18,265 
Common stock
13 $600 
(1) Performance stock options allow the holder to purchase a specified number of common stock shares at an exercise price equal to or greater than the shares' fair market value at the grant date. The options usually vest over two years and expire ten years from the grant date, subject to specific performance conditions.
v3.23.3
INCOME TAXES
 9 Months Ended
Sep. 30, 2023
Income Tax Disclosure [Abstract]  
INCOME TAXES
NOTE 13. INCOME TAXES
Effective income tax rate
Three Months Ended
September 30,		Nine Months Ended
September 30,
(Dollars in thousands)2023202220232022
Provision for income taxes$3,545 $11,748 $15,395 $190,239 
Effective income tax rate(26)%(100)%
The Company’s effective income tax rate in the nine months ended September 30, 2023 was primarily driven by the valuation allowance on the Company’s deferred tax assets in the U.S. and U.K. and projected taxable income in the U.S., partially offset by available tax credits and losses in the U.S.
The Company recognizes deferred tax assets to the extent that it believes that these assets are more likely than not to be realized. A deferred tax valuation allowance requires significant judgment and uncertainties, including assumptions about future taxable income. Quarterly, the Company reassesses the need for a valuation allowance on its net deferred tax assets by weighting all available and objectively verifiable negative and positive evidence, including projected future reversals of existing taxable temporary differences, committed contractual backlog (“Backlog”), projected future taxable income, including the impact of enacted legislation, tax-planning strategies, and recent operating results.
The Company intends to maintain a valuation allowance on the Company’s U.S. and U.K. net deferred tax assets until sufficient evidence exists to support the realization of these deferred tax assets.
v3.23.3
(LOSS) PER SHARE
 9 Months Ended
Sep. 30, 2023
Earnings Per Share [Abstract]  
(LOSS) PER SHARE
NOTE 14. (LOSS) PER SHARE
Basic (loss) per share is calculated using the weighted-average number of common shares outstanding during the period. Diluted (loss) per share is calculated using the weighted-average number of common shares outstanding during the period, plus the dilutive effect of outstanding stock options, RSUs, and convertible senior notes.
Calculation of (loss) per share:
Three Months Ended
September 30,		Nine Months Ended
September 30,
(in thousands, except per share amounts)2023202220232022
Net (loss)$(7,279)$(93,520)$(74,857)$(380,195)
Weighted-average common shares outstanding83,336 81,996 82,996 81,842 
(Loss) per share, basic$(0.09)$(1.14)$(0.90)$(4.65)
Net (loss)$(7,279)$(93,520)$(74,857)$(380,195)
Weighted-average common shares outstanding, assuming dilution (1) (2) (3)
83,336 81,996 82,996 81,842 
(Loss) per share, diluted$(0.09)$(1.14)$(0.90)$(4.65)
Outstanding anti-dilutive stock options and RSUs (4)
2,255 3,019 1,652 3,589 
(1) All dilutive securities are excluded in periods of loss 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 3.7 million shares as of September 30, 2023.
(3) The Company’s Capped Call Transactions represent the equivalent of approximately 3.7 million shares of the Company’s common stock (representing the number of shares for which the Notes are convertible) as of September 30, 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.
v3.23.3
COMMITMENTS AND CONTINGENCIES
 9 Months Ended
Sep. 30, 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 September 30, 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 in the Court of Appeals of Virginia is completed. The Court of Appeals of Virginia has set November 15, 2023 as the date for oral arguments in the appeal. 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 Company’s motion to dismiss took place on May 17, 2023. After hearing argument from both sides, the Court denied the Company’s motion from the bench and stated that a written opinion would follow. On June 30, 2023, the Company filed its Answer to the complaint. On July 24, 2023, the Court issued its written opinion denying the motion to dismiss as to the Company and Defendant Trefler but granting the motion without prejudice as to Mr. Stillwell. The Company believes it has strong defenses to the claims brought against the defendants 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 it has strong defenses to the claims asserted, its intent to defend against these claims, and there being no specified quantum of damages sought in the complaint.
In re Pegasystems Inc., Derivative Litigation
On November 21, 2022, a lawsuit was filed against the members of the Company’s board of directors, the Company’s chief operating and financial officer and the Company in the United States District Court for the District of Massachusetts, captioned Mary Larkin, derivatively on behalf of nominal defendant Pegasystems Inc. v. Peter Gyenes, Richard Jones, Christopher Lafond, Dianne Ledingham, Sharon Rowlands, Alan Trefler, Larry Weber, and Kenneth Stillwell, defendants, and Pegasystems Inc., nominal defendant (Case 1:22-cv-11985). The complaint generally alleges the defendants sold shares of the Company while in possession of material nonpublic information relating to (i) the litigation brought by Appian in the Circuit Court of Fairfax County, Virginia, described above, and (ii) alleged misconduct by Company employees alleged in that litigation. On April 28, 2023, a lawsuit was filed in the United States District Court for the District of Massachusetts by Dag Sagfors, derivatively on behalf of nominal defendant Pegasystems Inc. asserting breach of fiduciary duty and related claims relating to the Virginia Appian litigation against the same defendants as the Larkin lawsuit. On May 17, 2023, the Larkin and Sagfors cases were consolidated and a joint motion to stay the consolidated case is pending before the Court. The Company also has received confidential demand letters raising substantially the same allegations set forth in the foregoing derivative complaints. On April 12, 2023, the Company’s board of directors (other than Mr. Trefler, who recused himself), formed a committee consisting solely of independent directors, to review, analyze, and investigate the matters raised in the demands and to determine in good faith what actions (if any) are reasonably believed to be appropriate under similar circumstances and reasonably believed to be in the best interests of the Company in response to the demand letters. The Company is unable to reasonably estimate possible damages or a range of possible damages in this matter given the stage of the lawsuit 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.
v3.23.3
Pay vs Performance Disclosure - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2023
Jun. 30, 2023
Mar. 31, 2023
Sep. 30, 2022
Jun. 30, 2022
Mar. 31, 2022
Sep. 30, 2023
Sep. 30, 2022
Pay vs Performance Disclosure                
Net (loss) $ (7,279) $ (46,804) $ (20,774) $ (93,520) $ (286,296) $ (379) $ (74,857) $ (380,195)
v3.23.3
Insider Trading Arrangements
 3 Months Ended
Sep. 30, 2023
Trading Arrangements, by Individual  
Rule 10b5-1 Arrangement Adopted false
Non-Rule 10b5-1 Arrangement Adopted false
Rule 10b5-1 Arrangement Terminated false
Non-Rule 10b5-1 Arrangement Terminated false
v3.23.3
BASIS OF PRESENTATION (Policies)
 9 Months Ended
Sep. 30, 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 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 with little or no market data, which require the Company to develop its own assumptions.
This hierarchy requires the Company to use observable market data when available and minimize unobservable inputs when determining fair value.
The fair value of the Capped Call Transactions at the end of each reporting period is determined using a Black-Scholes option-pricing model. The valuation model uses various market-based inputs, including stock price, remaining contractual term, expected volatility, risk-free interest rate, and expected dividend yield. The Company applies judgment when determining expected volatility. The Company considers the underlying equity security’s historical and implied volatility levels. The Company’s venture investments are recorded at fair value based on multiple valuation methods, including observable public companies and transaction prices and unobservable inputs, including the volatility, rights, and obligations of the securities the Company holds.
v3.23.3
MARKETABLE SECURITIES (Tables)
 9 Months Ended
Sep. 30, 2023
Investments, Debt and Equity Securities [Abstract]  
Schedule of Marketable Securities
September 30, 2023December 31, 2022
(in thousands)Amortized CostUnrealized GainsUnrealized LossesFair ValueAmortized CostUnrealized GainsUnrealized LossesFair Value
Government debt$17,931 $— $(18)$17,913 $2,960 $— $(52)$2,908 
Corporate debt149,927 — (554)149,373 151,906 — (2,647)149,259 
$167,858 $— $(572)$167,286 $154,866 $— $(2,699)$152,167 
v3.23.3
RECEIVABLES, CONTRACT ASSETS, AND DEFERRED REVENUE (Tables)
 9 Months Ended
Sep. 30, 2023
Receivables [Abstract]  
Schedule of Receivables Receivables
(in thousands)
September 30, 2023December 31, 2022
Accounts receivable, net$168,795 $255,150 
Unbilled receivables, net199,948 213,719 
Long-term unbilled receivables, net
73,795 95,806 
$442,538 $564,675 
Schedule of Unbilled Receivables Unbilled receivables by expected collection date:
(Dollars in thousands)
September 30, 2023
1 year or less$199,948 73 %
1-2 years58,604 21 %
2-5 years15,191 6 %
$273,743 100 %
Schedule of Unbilled Receivables by Contract Effective Date Unbilled receivables by contract effective date:
(Dollars in thousands)
September 30, 2023
2023$90,227 33 %
202292,065 34 %
202162,729 23 %
202019,820 7 %
2019 and prior8,902 3 %
$273,743 100 %
Schedule 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)
September 30, 2023December 31, 2022
Contract assets (1)
$13,263 $17,546 
Long-term contract assets (2)
10,732 16,470 
$23,995 $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)
September 30, 2023December 31, 2022
Deferred revenue$297,067 $325,212 
Long-term deferred revenue (1)
2,605 3,552 
$299,672 $328,764 
(1) Included in other long-term liabilities.
v3.23.3
DEFERRED COMMISSIONS (Tables)
 9 Months Ended
Sep. 30, 2023
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]  
Schedule of Impairment of Deferred Contract Costs
(in thousands)
September 30, 2023December 31, 2022
Deferred commissions (1)
$107,399 $130,195 
(1) Included in other long-term assets.
Schedule of Amortization of Deferred Contract Costs
Three Months Ended
September 30,		Nine Months Ended
September 30,
(in thousands)2023202220232022
Amortization of deferred commissions (1)
$14,947 $11,597 $43,974 $39,752 
(1) Included in selling and marketing.
v3.23.3
GOODWILL AND OTHER INTANGIBLES (Tables)
 9 Months Ended
Sep. 30, 2023
Goodwill and Intangible Assets Disclosure [Abstract]  
Schedule of Goodwill
Nine Months Ended
September 30,
(in thousands)
20232022
January 1,$81,399 $81,923 
Currency translation adjustments38 (722)
September 30,$81,437 $81,201 
Schedule of Intangibles
Intangible assets are recorded at cost and amortized using the straight-line method over their estimated useful lives.
September 30, 2023
(in thousands)Useful LivesCostAccumulated Amortization
Net Book Value (1)
Client-related
4-10 years
$63,086 $(59,661)$3,425 
Technology
2-10 years
68,103 (63,579)4,524 
Other
1-5 years
5,361 (5,361)— 
$136,550 $(128,601)$7,949 
(1) Included in other long-term assets.
December 31, 2022
(in thousands)Useful LivesCostAccumulated 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 Future Estimated Intangibles Assets Amortization Future estimated intangibles assets amortization:
(in thousands)
September 30, 2023
Remainder of 2023$964 
20243,169 
20252,615 
2026874 
2027327 
$7,949 
Schedule of Amortization of Intangible Assets Amortization of intangible assets:
Three Months Ended
September 30,		Nine Months Ended
September 30,
(in thousands)2023202220232022
Cost of revenue
$622 $705 $1,949 $2,017 
Selling and marketing
343 343 1,028 1,028 
$965 $1,048 $2,977 $3,045 
v3.23.3
OTHER ASSETS AND LIABILITIES (Tables)
 9 Months Ended
Sep. 30, 2023
Other Assets and Liabilities [Abstract]  
Schedule of Other Assets and Other Liabilities
Other current assets
(in thousands)September 30, 2023December 31, 2022
Income tax receivables$19,663 $25,354 
Contract assets13,263 17,546 
Other38,512 37,488 
$71,438 $80,388 
Other long-term assets
(in thousands)September 30, 2023December 31, 2022
Deferred commissions$107,399 $130,195 
Right of use assets65,871 76,114 
Property and equipment49,481 55,056 
Venture investments19,348 13,069 
Contract assets10,732 16,470 
Intangible assets7,949 10,888 
Capped call transactions1,792 2,582 
Deferred income taxes5,046 4,795 
Restricted cash3,123 — 
Other20,066 24,820 
$290,807 $333,989 
Other current liabilities
(in thousands)September 30, 2023December 31, 2022
Operating lease liabilities$15,532 $14,976 
Dividends payable2,506 2,474 
$18,038 $17,450 
Other long-term liabilities
(in thousands)September 30, 2023December 31, 2022
Deferred revenue$2,605 $3,552 
Income taxes payable2,017 3,207 
Other9,863 8,369 
$14,485 $15,128 
v3.23.3
LEASES (Tables)
 9 Months Ended
Sep. 30, 2023
Leases [Abstract]  
Schedule of Expense
Three Months Ended
September 30,		Nine Months Ended
September 30,
(in thousands)2023202220232022
Fixed lease costs$4,718 $4,688 $14,979 $14,747 
Short-term lease costs660 916 2,137 2,510 
Variable lease costs2,254 905 6,414 2,395 
$7,632 $6,509 $23,530 $19,652 
Schedule of Right of Use Asset and Lease Liabilities
(in thousands)September 30, 2023December 31, 2022
Right of use assets (1)
$65,871 $76,114 
Operating lease liabilities (2)
$15,532 $14,976 
Long-term operating lease liabilities$68,874 $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:
September 30, 2023December 31, 2022
Weighted-average remaining lease term7.0 years7.5 years
Weighted-average discount rate (1)
4.0 %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 Maturities of Lease Liabilities
Maturities of lease liabilities:
(in thousands)September 30, 2023
Remainder of 2023$4,775 
202417,976 
202514,870 
202610,853 
20279,808 
20289,245 
Thereafter30,054 
Total lease payments97,581 
Less: imputed interest (1)
(13,175)
$84,406 
(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 Cash Flow Lease Information
Nine Months Ended
September 30,
(in thousands)20232022
Cash paid for operating leases, net of tenant improvement allowances$14,378 $11,628 
Right of use assets recognized for new leases and amendments (non-cash)$1,782 $6,618 
v3.23.3
DEBT (Tables)
 9 Months Ended
Sep. 30, 2023
Debt Disclosure [Abstract]  
Schedule of Carrying Value and Interest Expense Related to the Notes
Carrying value of the Notes:
(in thousands)September 30, 2023December 31, 2022
Principal$502,270 $600,000 
Unamortized issuance costs(3,517)(6,391)
Convertible senior notes, net$498,753 $593,609 

Interest expense related to the Notes:
Three Months Ended
September 30,		Nine Months Ended
September 30,
(in thousands)2023202220232022
Contractual interest expense (0.75% coupon)
$827 $1,125 $2,949 $3,375 
Amortization of issuance costs
613 724 1,988 2,163 
$1,440 $1,849 $4,937 $5,538 
Schedule of Future Payments Future payments:
September 30, 2023
(in thousands)PrincipalInterestTotal
2024$— $3,767 $3,767 
2025502,270 1,884 504,154 
$502,270 $5,651 $507,921 
Schedule of Change in Capped Call Transactions Change in capped call transactions:
Nine Months Ended
September 30,
(in thousands)20232022
January 1,$2,582 $59,964 
Settlements(341)— 
Fair value adjustment(449)(56,381)
September 30,$1,792 $3,583 
Schedule of Minimum Consolidated EBITDA
Year to Date
(in thousands)March 31, 2023June 30, 2023September 30, 2023December 31, 2023
Minimum Consolidated EBITDA (as defined in the Credit Facility)$38,862 $59,894 $95,597 $214,590 
v3.23.3
RESTRUCTURING (Tables)
 9 Months Ended
Sep. 30, 2023
Restructuring and Related Activities [Abstract]  
Schedule of Restructuring Activities and Accrued Employee Severance and Related Benefit
The Company has undertaken the following restructuring activities as it optimizes its go-to-market strategy and reassesses its office space needs:
Three months endedExpense
Employee severance and related benefits and closure of a US officeDecember 31, 2022$21,743 
Office space reduction March 31, 2023$1,241 
Employee severance and related benefitsJune 30, 2023$1,581 
Employee severance and related benefits and closure of a foreign officeSeptember 30, 2023$17,236 
Accrued employee severance and related benefits:
Change for all restructuring actions:
Nine Months Ended
September 30,
(in thousands)2023
January 1,$18,573 
Costs incurred19,921 
Cash disbursements(21,576)
Currency translation adjustments(203)
September 30,$16,715 
Note: Accrued employee severance and related benefits is included in accrued compensation and related expenses.
v3.23.3
FAIR VALUE MEASUREMENTS (Tables)
 9 Months Ended
Sep. 30, 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:
September 30, 2023December 31, 2022
(in thousands)Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total
Cash equivalents$22,686 $— $— $22,686 $2,526 $— $— $2,526 
Marketable securities $— $167,286 $— $167,286 $— $152,167 $— $152,167 
Capped Call Transactions (1)
$— $1,792 $— $1,792 $— $2,582 $— $2,582 
Venture investments (1) (2)
$— $— $19,348 $19,348 $— $— $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:
Nine Months Ended
September 30,
(in thousands)20232022
January 1,$13,069 $7,648 
New investments400 400 
Sales of investments(2,773)(3,954)
Changes in foreign exchange rates27 (675)
Changes in fair value:
included in other income (loss), net
10,886 5,989 
included in other comprehensive (loss)
(2,261)2,502 
September 30,$19,348 $11,910 
v3.23.3
REVENUE (Tables)
 9 Months Ended
Sep. 30, 2023
Revenue from Contract with Customer [Abstract]  
Schedule of Geographic Revenue Geographic revenue
Three Months Ended
September 30,		Nine Months Ended
September 30,
(Dollars in thousands)
2023202220232022
U.S.$154,741 47 %$148,200 55 %$489,645 51 %$513,197 56 %
Other Americas23,497 7 %18,546 7 %58,013 6 %80,558 9 %
United Kingdom (“U.K.”)41,622 12 %24,074 9 %112,751 12 %83,837 9 %
Europe (excluding U.K.), Middle East, and Africa 67,880 20 %46,212 17 %173,551 18 %140,586 15 %
Asia-Pacific46,903 14 %33,699 12 %124,423 13 %103,197 11 %
$334,643 100 %$270,731 100 %$958,383 100 %$921,375 100 %
Schedule of Revenue Streams
Revenue streams
Three Months Ended
September 30,		Nine Months Ended
September 30,
(in thousands)
2023202220232022
Perpetual license$2,747 $9,223 $4,729 $18,929 
Subscription license74,342 31,112 200,066 210,245 
Revenue recognized at a point in time77,089 40,335 204,795 229,174 
Maintenance83,538 77,526 245,210 235,568 
Pega Cloud118,040 97,359 340,982 281,182 
Consulting55,976 55,511 167,396 175,451 
Revenue recognized over time257,554 230,396 753,588 692,201 
Total revenue$334,643 $270,731 $958,383 $921,375 
Three Months Ended
September 30,		Nine Months Ended
September 30,
(in thousands)2023202220232022
Pega Cloud$118,040 $97,359 $340,982 $281,182 
Maintenance83,538 77,526 245,210 235,568 
Subscription services201,578 174,885 586,192 516,750 
Subscription license74,342 31,112 200,066 210,245 
Subscription275,920 205,997 786,258 726,995 
Consulting55,976 55,511 167,396 175,451 
Perpetual license2,747 9,223 4,729 18,929 
$334,643 $270,731 $958,383 $921,375 
Schedule of Remaining Performance Obligations
Expected future revenue from existing non-cancellable contracts:
As of September 30, 2023:
(Dollars in thousands)Subscription servicesSubscription licensePerpetual licenseConsultingTotal
MaintenancePega Cloud
1 year or less
$202,610 $391,324 $48,427 $4,567 $39,335 $686,263 54 %
1-2 years
58,610 239,787 4,356 2,696 3,662 309,111 24 %
2-3 years
28,585 121,778 8,518 — 1,100 159,981 13 %
Greater than 3 years
17,478 89,870 2,664 — — 110,012 9 %
$307,283 $842,759 $63,965 $7,263 $44,097 $1,265,367 100 %
As of September 30, 2022:
(Dollars in thousands)Subscription servicesSubscription licensePerpetual licenseConsultingTotal
MaintenancePega Cloud
1 year or less
$191,045 $328,111 $69,753 $814 $27,968 $617,691 53 %
1-2 years
55,141 213,304 4,113 4,505 6,699 283,762 25 %
2-3 years
24,496 115,416 1,420 2,252 1,648 145,232 13 %
Greater than 3 years
16,198 82,807 1,734 — 508 101,247 9 %
$286,880 $739,638 $77,020 $7,571 $36,823 $1,147,932 100 %
v3.23.3
STOCK-BASED COMPENSATION (Tables)
 9 Months Ended
Sep. 30, 2023
Share-Based Payment Arrangement [Abstract]  
Schedule of Stock Based Compensation Expense
Expense
Three Months Ended
September 30,		Nine Months Ended
September 30,
(in thousands)2023202220232022
Cost of revenue
$6,410 $6,797 $22,497 $19,754 
Selling and marketing
10,401 12,933 43,410 36,524 
Research and development
7,375 7,724 24,286 22,425 
General and administrative
7,113 6,320 19,890 14,598 
$31,299 $33,774 $110,083 $93,301 
Income tax benefit
$(316)$(600)$(1,569)$(1,505)
Schedule of Stock Based Compensation Award Granted
Grants
Nine Months Ended
September 30, 2023
(in thousands)SharesTotal Fair Value
Restricted stock units
1,514 $70,962 
Non-qualified stock options
911 $19,142 
Performance stock options (1)
906 $18,265 
Common stock
13 $600 
(1) Performance stock options allow the holder to purchase a specified number of common stock shares at an exercise price equal to or greater than the shares' fair market value at the grant date. The options usually vest over two years and expire ten years from the grant date, subject to specific performance conditions.
v3.23.3
INCOME TAXES (Tables)
 9 Months Ended
Sep. 30, 2023
Income Tax Disclosure [Abstract]  
Schedule of Effective Income Tax Rate
Effective income tax rate
Three Months Ended
September 30,		Nine Months Ended
September 30,
(Dollars in thousands)2023202220232022
Provision for income taxes$3,545 $11,748 $15,395 $190,239 
Effective income tax rate(26)%(100)%
v3.23.3
(LOSS) PER SHARE (Tables)
 9 Months Ended
Sep. 30, 2023
Earnings Per Share [Abstract]  
Schedule of Calculation of (Loss) Per Share
Calculation of (loss) per share:
Three Months Ended
September 30,		Nine Months Ended
September 30,
(in thousands, except per share amounts)2023202220232022
Net (loss)$(7,279)$(93,520)$(74,857)$(380,195)
Weighted-average common shares outstanding83,336 81,996 82,996 81,842 
(Loss) per share, basic$(0.09)$(1.14)$(0.90)$(4.65)
Net (loss)$(7,279)$(93,520)$(74,857)$(380,195)
Weighted-average common shares outstanding, assuming dilution (1) (2) (3)
83,336 81,996 82,996 81,842 
(Loss) per share, diluted$(0.09)$(1.14)$(0.90)$(4.65)
Outstanding anti-dilutive stock options and RSUs (4)
2,255 3,019 1,652 3,589 
(1) All dilutive securities are excluded in periods of loss 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 3.7 million shares as of September 30, 2023.
(3) The Company’s Capped Call Transactions represent the equivalent of approximately 3.7 million shares of the Company’s common stock (representing the number of shares for which the Notes are convertible) as of September 30, 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 $196.44. The Capped Call Transactions are excluded from weighted-average common shares outstanding, assuming dilution, in all periods as their effect would be anti-dilutive.
(4) Outstanding stock options and RSUs that were anti-dilutive under the treasury stock method in the period were excluded from the computation of diluted (loss) per share. These awards may be dilutive in the future.
v3.23.3
MARKETABLE SECURITIES - Schedule of Marketable Securities (Details) - USD ($)
$ in Thousands
Sep. 30, 2023
Dec. 31, 2022
Marketable Securities [Line Items]    
Amortized Cost $ 167,858 $ 154,866
Unrealized Gains 0 0
Unrealized Losses (572) (2,699)
Fair Value 167,286 152,167
Government debt    
Marketable Securities [Line Items]    
Amortized Cost 17,931 2,960
Unrealized Gains 0 0
Unrealized Losses (18) (52)
Fair Value 17,913 2,908
Corporate debt    
Marketable Securities [Line Items]    
Amortized Cost 149,927 151,906
Unrealized Gains 0 0
Unrealized Losses (554) (2,647)
Fair Value $ 149,373 $ 149,259
v3.23.3
MARKETABLE SECURITIES - Narrative (Details)
Sep. 30, 2023
Investments, Debt and Equity Securities [Abstract]  
Marketable debt security weighted-average remaining maturity 6 months
v3.23.3
RECEIVABLES, CONTRACT ASSETS, AND DEFERRED REVENUE - Schedule of Receivables (Details) - USD ($)
$ in Thousands
Sep. 30, 2023
Dec. 31, 2022
Receivables [Abstract]    
Accounts receivable, net $ 168,795 $ 255,150
Unbilled receivables, net 199,948 213,719
Long-term unbilled receivables, net 73,795 95,806
Total receivables $ 442,538 $ 564,675
v3.23.3
RECEIVABLES, CONTRACT ASSETS, AND DEFERRED REVENUE - Schedule of Unbilled Receivables (Details)
$ in Thousands
Sep. 30, 2023
USD ($)
Receivables [Abstract]  
1 year or less $ 199,948
1-2 years 58,604
2-5 years 15,191
Total $ 273,743
Percentage of unbilled receivables, 1 year or less 73.00%
Percentage of unbilled receivables, 1-2 years 21.00%
Percentage of unbilled receivables, 2-5 years 6.00%
Total percentage of unbilled receivables 100.00%
v3.23.3
RECEIVABLES, CONTRACT ASSETS, AND DEFERRED REVENUE- Schedule of Unbilled Receivables by Contract Effective Date (Details)
$ in Thousands
Sep. 30, 2023
USD ($)
Receivables [Abstract]  
2023 $ 90,227
2022 92,065
2021 62,729
2020 19,820
2019 and prior 8,902
Unbilled revenue total $ 273,743
2023 33.00%
2022 34.00%
2021 23.00%
2020 7.00%
2019 and prior 3.00%
Total percentage of unbilled revenue 100.00%
v3.23.3
RECEIVABLES, CONTRACT ASSETS, AND DEFERRED REVENUE - Schedule of Contract Assets and Deferred Revenue (Details) - USD ($)
$ in Thousands
 9 Months Ended
Sep. 30, 2023
Dec. 31, 2022
Receivables [Abstract]    
Contract assets $ 13,263 $ 17,546
Long-term contract assets 10,732 16,470
Total contract assets 23,995 34,016
Deferred revenue 297,067 325,212
Long-term deferred revenue 2,605 3,552
Total deferred revenue 299,672 $ 328,764
Revenue recognized during the period that was included in deferred revenue $ 292,300  
v3.23.3
DEFERRED COMMISSIONS - Schedule of Impairment of Deferred Commissions (Details) - USD ($)
$ in Thousands
Sep. 30, 2023
Dec. 31, 2022
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]    
Deferred commissions $ 107,399 $ 130,195
v3.23.3
DEFERRED COMMISSIONS - Schedule of Amortization of Deferred Commissions (Details) - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]        
Amortization of deferred commissions $ 14,947 $ 11,597 $ 43,974 $ 39,752
v3.23.3
GOODWILL AND OTHER INTANGIBLES - Schedule of Goodwill (Details) - USD ($)
$ in Thousands
 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Goodwill [Roll Forward]    
Beginning balance $ 81,399 $ 81,923
Currency translation adjustments 38 (722)
Ending balance $ 81,437 $ 81,201
v3.23.3
GOODWILL AND OTHER INTANGIBLES - Schedule of Intangibles (Details) - USD ($)
$ in Thousands
Sep. 30, 2023
Dec. 31, 2022
Goodwill and Other Intangible Assets [Line Items]    
Cost $ 136,550 $ 136,493
Accumulated Amortization (128,601) (125,605)
Net Book Value 7,949 10,888
Client-related    
Goodwill and Other Intangible Assets [Line Items]    
Cost 63,086 63,076
Accumulated Amortization (59,661) (58,623)
Net Book Value 3,425 4,453
Technology    
Goodwill and Other Intangible Assets [Line Items]    
Cost 68,103 68,056
Accumulated Amortization (63,579) (61,621)
Net Book Value 4,524 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
v3.23.3
GOODWILL AND OTHER INTANGIBLES - Schedule of Future Estimated Intangibles Assets Amortization (Details) - USD ($)
$ in Thousands
Sep. 30, 2023
Dec. 31, 2022
Goodwill and Intangible Assets Disclosure [Abstract]    
Remainder of 2023 $ 964  
2024 3,169  
2025 2,615  
2026 874  
2027 327  
Net Book Value $ 7,949 $ 10,888
v3.23.3
GOODWILL AND OTHER INTANGIBLES - Schedule of Amortization of Intangible Assets (Details) - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Acquired Finite-Lived Intangible Assets [Line Items]        
Amortization of intangible assets $ 965 $ 1,048 $ 2,977 $ 3,045
Cost of revenue        
Acquired Finite-Lived Intangible Assets [Line Items]        
Amortization of intangible assets 622 705 1,949 2,017
Selling and marketing        
Acquired Finite-Lived Intangible Assets [Line Items]        
Amortization of intangible assets $ 343 $ 343 $ 1,028 $ 1,028
v3.23.3
OTHER ASSETS AND LIABILITIES (Details) - USD ($)
$ in Thousands
Sep. 30, 2023
Dec. 31, 2022
Other Assets and Liabilities [Abstract]    
Income tax receivables $ 19,663 $ 25,354
Contract assets 13,263 17,546
Other 38,512 37,488
Other current assets 71,438 80,388
Deferred commissions 107,399 130,195
Right of use assets 65,871 76,114
Property and equipment 49,481 55,056
Venture investments 19,348 13,069
Contract assets 10,732 16,470
Intangible assets 7,949 10,888
Capped call transactions 1,792 2,582
Deferred income taxes 5,046 4,795
Restricted cash 3,123 0
Other 20,066 24,820
Other long-term assets 290,807 333,989
Operating lease liabilities 15,532 14,976
Dividends payable 2,506 2,474
Other current liabilities 18,038 17,450
Deferred revenue 2,605 3,552
Income taxes payable 2,017 3,207
Other 9,863 8,369
Other long-term liabilities $ 14,485 $ 15,128
v3.23.3
LEASES - Schedule of Expense (Details) - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Leases [Abstract]        
Fixed lease costs $ 4,718 $ 4,688 $ 14,979 $ 14,747
Short-term lease costs 660 916 2,137 2,510
Variable lease costs 2,254 905 6,414 2,395
Operating lease expenses $ 7,632 $ 6,509 $ 23,530 $ 19,652
v3.23.3
LEASES - Schedule of Right of Use Asset and Lease Liabilities (Details) - USD ($)
$ in Thousands
Sep. 30, 2023
Dec. 31, 2022
Leases [Abstract]    
Operating Lease, Right-of-Use Asset, Statement of Financial Position [Extensible Enumeration] Other long-term assets Other long-term assets
Right of use assets $ 65,871 $ 76,114
Operating Lease, Liability, Current, Statement of Financial Position [Extensible Enumeration] Other current liabilities Other current liabilities
Operating lease liabilities $ 15,532 $ 14,976
Long-term operating lease liabilities $ 68,874 $ 79,152
v3.23.3
LEASES - Schedule of Weighted Average and Discount Rate (Details)
Sep. 30, 2023
Dec. 31, 2022
Leases [Abstract]    
Weighted-average remaining lease term 7 years 7 years 6 months
Weighted-average discount rate 4.00% 4.10%
v3.23.3
LEASES - Schedule of Maturities of Lease Liabilities (Details)
$ in Thousands
Sep. 30, 2023
USD ($)
Leases [Abstract]  
Remainder of 2023 $ 4,775
2024 17,976
2025 14,870
2026 10,853
2027 9,808
2028 9,245
Thereafter 30,054
Total lease payments 97,581
Less: imputed interest (13,175)
Total lease liability $ 84,406
v3.23.3
LEASES - Schedule of Cash Flow Lease Information (Details) - USD ($)
$ in Thousands
 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Leases [Abstract]    
Cash paid for operating leases, net of tenant improvement allowances $ 14,378 $ 11,628
Right of use assets recognized for new leases and amendments (non-cash) $ 1,782 $ 6,618
v3.23.3
DEBT - Convertible senior notes and capped calls (Details)
 1 Months Ended 3 Months Ended 9 Months Ended
Feb. 29, 2020
USD ($)
day
$ / shares
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
USD ($)
Sep. 30, 2022
Debt Instrument [Line Items]          
Gain (loss) on repurchase of convertible debt | $       $ 7,900,000  
Principal amount repurchased | $       $ 97,700,000  
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% 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        
v3.23.3
DEBT - Schedule of Carrying value of the Notes (Details) - Convertible debt - USD ($)
$ in Thousands
Sep. 30, 2023
Dec. 31, 2022
Debt Instrument [Line Items]    
Principal $ 502,270 $ 600,000
Unamortized issuance costs (3,517) (6,391)
Convertible senior notes, net $ 498,753 $ 593,609
v3.23.3
DEBT - Schedule of Interest Expense Related to the Notes (Details) - Convertible debt - USD ($)
$ in Thousands
 1 Months Ended 3 Months Ended 9 Months Ended
Feb. 29, 2020
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Debt Instrument [Line Items]          
Interest rate 0.75% 0.75% 0.75% 0.75% 0.75%
Contractual interest expense (0.75% coupon)   $ 827 $ 1,125 $ 2,949 $ 3,375
Amortization of issuance costs   613 724 1,988 2,163
Interest expense   $ 1,440 $ 1,849 $ 4,937 $ 5,538
v3.23.3
DEBT - Schedule of Future Payments (Details) - Convertible debt - USD ($)
$ in Thousands
Sep. 30, 2023
Dec. 31, 2022
Principal    
2024 $ 0  
2025 502,270  
Principal, total due 502,270 $ 600,000
Interest    
2024 3,767  
2025 1,884  
Interest expense, total due 5,651  
Total    
2024 3,767  
2025 504,154  
Principal and interest, total due $ 507,921  
v3.23.3
DEBT - Capped call transactions (Details)
shares in Millions, $ in Millions
 1 Months Ended 9 Months Ended
Feb. 29, 2020
$ / derivative
shares
Sep. 30, 2023
USD ($)
$ / derivative
shares
Debt Disclosure [Abstract]    
Number of shares issuable upon conversion (in shares) 4.4 0.7
Proceeds from settlement of capped calls transactions | $   $ 0.3
Number of shares issuable upon conversion (in shares)   3.7
Cap price (in dollars per share) | $ / derivative 196.44 196.44
v3.23.3
DEBT - Schedule of Change in Capped Call Transactions (Details) - Capped Call Transactions - USD ($)
$ in Thousands
 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]    
Beginning balance $ 2,582 $ 59,964
Settlements (341) 0
Fair value adjustment (449) (56,381)
Ending balance $ 1,792 $ 3,583
v3.23.3
DEBT - Credit Facility (Details)
 9 Months Ended
Nov. 30, 2019
USD ($)
Sep. 30, 2023
USD ($)
Dec. 31, 2022
USD ($)
Debt Instrument [Line Items]      
Outstanding letters of credit   $ 27,300,000 $ 27,300,000
Remaining borrowing capacity   $ 0 $ 0
PNC Bank, National Association | Next Fiscal Year      
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 | Next Fiscal Year      
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    
v3.23.3
DEBT - Schedule of Minimum Consolidated EBITDA (Details) - Revolving Credit Facility - Credit Agreement - PNC Bank, National Association - Line of Credit
$ in Thousands
 9 Months Ended
Sep. 30, 2023
USD ($)
First Fiscal Quarter  
Debt Instrument [Line Items]  
Minimum Consolidated EBITDA (as defined in the Credit Facility) $ 38,862
Second Fiscal Quarter  
Debt Instrument [Line Items]  
Minimum Consolidated EBITDA (as defined in the Credit Facility) 59,894
Third Fiscal Quarter  
Debt Instrument [Line Items]  
Minimum Consolidated EBITDA (as defined in the Credit Facility) 95,597
Fourth Fiscal Quarter  
Debt Instrument [Line Items]  
Minimum Consolidated EBITDA (as defined in the Credit Facility) $ 214,590
v3.23.3
RESTRUCTURING - Schedule of Restructuring Activities (Details) - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2023
Jun. 30, 2023
Mar. 31, 2023
Dec. 31, 2022
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Restructuring Cost and Reserve [Line Items]              
Expense $ 17,822       $ 0 $ 21,450 $ 0
Employee Severance              
Restructuring Cost and Reserve [Line Items]              
Expense $ 17,236 $ 1,581   $ 21,743      
Office space reduction              
Restructuring Cost and Reserve [Line Items]              
Expense     $ 1,241        
v3.23.3
RESTRUCTURING - Schedule of Accrued Employee Severance and Related Benefit (Details)
$ in Thousands
 9 Months Ended
Sep. 30, 2023
USD ($)
Restructuring Reserve [Roll Forward]  
Restructuring Reserve, Beginning Balance $ 18,573
Costs incurred 19,921
Cash disbursements (21,576)
Currency translation adjustments (203)
Restructuring Reserve, Ending Balance $ 16,715
v3.23.3
FAIR VALUE MEASUREMENTS - Schedule of Assets and Liabilities Measured at Fair Value (Details) - USD ($)
$ in Thousands
Sep. 30, 2023
Dec. 31, 2022
Fair Value Assets    
Marketable securities $ 167,286 $ 152,167
Capped call transactions 1,792 2,582
Cash equivalents    
Fair Value Assets    
Cash equivalents 22,686 2,526
Venture investments    
Fair Value Assets    
Venture investments 19,348 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 22,686 2,526
Level 1 | Venture investments    
Fair Value Assets    
Venture investments 0 0
Level 2    
Fair Value Assets    
Marketable securities 167,286 152,167
Capped call transactions 1,792 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 $ 19,348 $ 13,069
v3.23.3
FAIR VALUE MEASUREMENTS - Schedule of Changes in Venture Investments (Details) - Privately Held Investment - USD ($)
$ in Thousands
 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]    
Beginning balance $ 13,069 $ 7,648
New investments 400 400
Sales of investments (2,773) (3,954)
Changes in foreign exchange rates 27 (675)
Changes in fair value:    
Changes in fair value included in other income (loss), net 10,886 5,989
Changes in fair value included in other comprehensive (loss) (2,261) 2,502
Ending balance $ 19,348 $ 11,910
v3.23.3
FAIR VALUE MEASUREMENTS - Narrative (Details) - USD ($)
$ in Millions
 9 Months Ended
Sep. 30, 2023
Dec. 31, 2022
Fair Value Disclosures [Abstract]    
Convertible debt fair value $ 460.3 $ 521.1
Principal amount repurchased $ 97.7  
v3.23.3
REVENUE - Schedule of Geographic Revenue (Details) - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Disaggregation of Revenue [Line Items]        
Revenue $ 334,643 $ 270,731 $ 958,383 $ 921,375
Percent of total revenue 100.00% 100.00% 100.00% 100.00%
U.S.        
Disaggregation of Revenue [Line Items]        
Revenue $ 154,741 $ 148,200 $ 489,645 $ 513,197
Other Americas        
Disaggregation of Revenue [Line Items]        
Revenue 23,497 18,546 58,013 80,558
United Kingdom (“U.K.”)        
Disaggregation of Revenue [Line Items]        
Revenue 41,622 24,074 112,751 83,837
Europe (excluding U.K.), Middle East, and Africa        
Disaggregation of Revenue [Line Items]        
Revenue 67,880 46,212 173,551 140,586
Asia-Pacific        
Disaggregation of Revenue [Line Items]        
Revenue $ 46,903 $ 33,699 $ 124,423 $ 103,197
Total Revenue | U.S. | Geographic Concentration Risk        
Disaggregation of Revenue [Line Items]        
Percent of total revenue 47.00% 55.00% 51.00% 56.00%
Total Revenue | Other Americas | Geographic Concentration Risk        
Disaggregation of Revenue [Line Items]        
Percent of total revenue 7.00% 7.00% 6.00% 9.00%
Total Revenue | United Kingdom (“U.K.”) | Geographic Concentration Risk        
Disaggregation of Revenue [Line Items]        
Percent of total revenue 12.00% 9.00% 12.00% 9.00%
Total Revenue | Europe (excluding U.K.), Middle East, and Africa | Geographic Concentration Risk        
Disaggregation of Revenue [Line Items]        
Percent of total revenue 20.00% 17.00% 18.00% 15.00%
Total Revenue | Asia-Pacific | Geographic Concentration Risk        
Disaggregation of Revenue [Line Items]        
Percent of total revenue 14.00% 12.00% 13.00% 11.00%
v3.23.3
REVENUE - Schedule of Revenue Streams (Details) - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Disaggregation of Revenue [Line Items]        
Revenue $ 334,643 $ 270,731 $ 958,383 $ 921,375
Perpetual license        
Disaggregation of Revenue [Line Items]        
Revenue 2,747 9,223 4,729 18,929
Subscription license        
Disaggregation of Revenue [Line Items]        
Revenue 74,342 31,112 200,066 210,245
Consulting        
Disaggregation of Revenue [Line Items]        
Revenue 55,976 55,511 167,396 175,451
Subscription services        
Disaggregation of Revenue [Line Items]        
Revenue 201,578 174,885 586,192 516,750
Subscription        
Disaggregation of Revenue [Line Items]        
Revenue 275,920 205,997 786,258 726,995
Revenue recognized at a point in time        
Disaggregation of Revenue [Line Items]        
Revenue 77,089 40,335 204,795 229,174
Revenue recognized at a point in time | Perpetual license        
Disaggregation of Revenue [Line Items]        
Revenue 2,747 9,223 4,729 18,929
Revenue recognized at a point in time | Subscription license        
Disaggregation of Revenue [Line Items]        
Revenue 74,342 31,112 200,066 210,245
Revenue recognized over time        
Disaggregation of Revenue [Line Items]        
Revenue 257,554 230,396 753,588 692,201
Revenue recognized over time | Maintenance        
Disaggregation of Revenue [Line Items]        
Revenue 83,538 77,526 245,210 235,568
Revenue recognized over time | Pega Cloud        
Disaggregation of Revenue [Line Items]        
Revenue 118,040 97,359 340,982 281,182
Revenue recognized over time | Consulting        
Disaggregation of Revenue [Line Items]        
Revenue $ 55,976 $ 55,511 $ 167,396 $ 175,451
v3.23.3
REVENUE - Schedule of Remaining Performance Obligations (Details) - USD ($)
$ in Thousands
Sep. 30, 2023
Sep. 30, 2022
Disaggregation of Revenue [Line Items]    
Revenue remaining performance obligation $ 1,265,367 $ 1,147,932
Revenue remaining performance obligation (in percent) 100.00% 100.00%
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-10-01    
Disaggregation of Revenue [Line Items]    
Revenue remaining performance obligation   $ 617,691
Revenue remaining performance obligation (in percent)   53.00%
Expected timing of satisfaction   1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-10-01    
Disaggregation of Revenue [Line Items]    
Revenue remaining performance obligation $ 686,263 $ 283,762
Revenue remaining performance obligation (in percent) 54.00% 25.00%
Expected timing of satisfaction 1 year 1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-10-01    
Disaggregation of Revenue [Line Items]    
Revenue remaining performance obligation $ 309,111 $ 145,232
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]: 2025-10-01    
Disaggregation of Revenue [Line Items]    
Revenue remaining performance obligation $ 159,981 $ 101,247
Revenue remaining performance obligation (in percent) 13.00% 9.00%
Expected timing of satisfaction 1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2026-10-01    
Disaggregation of Revenue [Line Items]    
Revenue remaining performance obligation $ 110,012  
Revenue remaining performance obligation (in percent) 9.00%  
Expected timing of satisfaction  
Maintenance    
Disaggregation of Revenue [Line Items]    
Revenue remaining performance obligation $ 307,283 $ 286,880
Maintenance | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-10-01    
Disaggregation of Revenue [Line Items]    
Revenue remaining performance obligation   191,045
Maintenance | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-10-01    
Disaggregation of Revenue [Line Items]    
Revenue remaining performance obligation 202,610 55,141
Maintenance | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-10-01    
Disaggregation of Revenue [Line Items]    
Revenue remaining performance obligation 58,610 24,496
Maintenance | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2025-10-01    
Disaggregation of Revenue [Line Items]    
Revenue remaining performance obligation 28,585 16,198
Maintenance | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2026-10-01    
Disaggregation of Revenue [Line Items]    
Revenue remaining performance obligation 17,478  
Pega Cloud    
Disaggregation of Revenue [Line Items]    
Revenue remaining performance obligation 842,759 739,638
Pega Cloud | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-10-01    
Disaggregation of Revenue [Line Items]    
Revenue remaining performance obligation   328,111
Pega Cloud | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-10-01    
Disaggregation of Revenue [Line Items]    
Revenue remaining performance obligation 391,324 213,304
Pega Cloud | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-10-01    
Disaggregation of Revenue [Line Items]    
Revenue remaining performance obligation 239,787 115,416
Pega Cloud | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2025-10-01    
Disaggregation of Revenue [Line Items]    
Revenue remaining performance obligation 121,778 82,807
Pega Cloud | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2026-10-01    
Disaggregation of Revenue [Line Items]    
Revenue remaining performance obligation 89,870  
Subscription license    
Disaggregation of Revenue [Line Items]    
Revenue remaining performance obligation 63,965 77,020
Subscription license | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-10-01    
Disaggregation of Revenue [Line Items]    
Revenue remaining performance obligation   69,753
Subscription license | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-10-01    
Disaggregation of Revenue [Line Items]    
Revenue remaining performance obligation 48,427 4,113
Subscription license | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-10-01    
Disaggregation of Revenue [Line Items]    
Revenue remaining performance obligation 4,356 1,420
Subscription license | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2025-10-01    
Disaggregation of Revenue [Line Items]    
Revenue remaining performance obligation 8,518 1,734
Subscription license | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2026-10-01    
Disaggregation of Revenue [Line Items]    
Revenue remaining performance obligation 2,664  
Perpetual license    
Disaggregation of Revenue [Line Items]    
Revenue remaining performance obligation 7,263 7,571
Perpetual license | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-10-01    
Disaggregation of Revenue [Line Items]    
Revenue remaining performance obligation   814
Perpetual license | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-10-01    
Disaggregation of Revenue [Line Items]    
Revenue remaining performance obligation 4,567 4,505
Perpetual license | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-10-01    
Disaggregation of Revenue [Line Items]    
Revenue remaining performance obligation 2,696 2,252
Perpetual license | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2025-10-01    
Disaggregation of Revenue [Line Items]    
Revenue remaining performance obligation 0 0
Perpetual license | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2026-10-01    
Disaggregation of Revenue [Line Items]    
Revenue remaining performance obligation 0  
Consulting    
Disaggregation of Revenue [Line Items]    
Revenue remaining performance obligation 44,097 36,823
Consulting | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-10-01    
Disaggregation of Revenue [Line Items]    
Revenue remaining performance obligation   27,968
Consulting | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-10-01    
Disaggregation of Revenue [Line Items]    
Revenue remaining performance obligation 39,335 6,699
Consulting | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-10-01    
Disaggregation of Revenue [Line Items]    
Revenue remaining performance obligation 3,662 1,648
Consulting | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2025-10-01    
Disaggregation of Revenue [Line Items]    
Revenue remaining performance obligation 1,100 $ 508
Consulting | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2026-10-01    
Disaggregation of Revenue [Line Items]    
Revenue remaining performance obligation $ 0  
v3.23.3
STOCK-BASED COMPENSATION - Schedule of Stock Based Compensation Expense (Details) - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]        
Total stock-based compensation before tax $ 31,299 $ 33,774 $ 110,083 $ 93,301
Income tax benefit (316) (600) (1,569) (1,505)
Cost of revenue        
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]        
Total stock-based compensation before tax 6,410 6,797 22,497 19,754
Selling and marketing        
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]        
Total stock-based compensation before tax 10,401 12,933 43,410 36,524
Research and development        
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]        
Total stock-based compensation before tax 7,375 7,724 24,286 22,425
General and administrative        
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]        
Total stock-based compensation before tax $ 7,113 $ 6,320 $ 19,890 $ 14,598
v3.23.3
STOCK-BASED COMPENSATION - Narrative (Details)
$ in Millions
 9 Months Ended
Sep. 30, 2023
USD ($)
Share-Based Payment Arrangement [Abstract]  
Unrecognized stock-based compensation expense $ 137.5
Weighted-average period of recognition of unrecognized stock-based compensation expense 1 year 9 months 18 days
v3.23.3
STOCK-BASED COMPENSATION - Schedule of Stock Based Compensation Award Granted (Details)
shares in Thousands, $ in Thousands
 9 Months Ended
Sep. 30, 2023
USD ($)
shares
Restricted stock units  
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]  
Restricted stock units (in shares) | shares 1,514
Total Fair Value | $ $ 70,962
Non-qualified stock options  
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]  
Non-qualified stock options (in shares) | shares 911
Total Fair Value | $ $ 19,142
Performance stock options  
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]  
Restricted stock units (in shares) | shares 906
Total Fair Value | $ $ 18,265
Vesting period 2 years
Expiration period 10 years
Common Stock  
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]  
Restricted stock units (in shares) | shares 13
Total Fair Value | $ $ 600
v3.23.3
INCOME TAXES (Details) - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2023
Sep. 30, 2022
Sep. 30, 2023
Sep. 30, 2022
Income Tax Disclosure [Abstract]        
Provision for income taxes $ 3,545 $ 11,748 $ 15,395 $ 190,239
Effective income tax rate (26.00%) (100.00%)
v3.23.3
(LOSS) PER SHARE (Details)
$ / shares in Units, shares in Thousands, $ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2023
USD ($)
$ / shares
$ / derivative
shares
Jun. 30, 2023
USD ($)
Mar. 31, 2023
USD ($)
Sep. 30, 2022
USD ($)
$ / shares
shares
Jun. 30, 2022
USD ($)
Mar. 31, 2022
USD ($)
Sep. 30, 2023
USD ($)
$ / shares
$ / derivative
shares
Sep. 30, 2022
USD ($)
$ / shares
shares
Feb. 29, 2020
$ / derivative
Earnings Per Share [Abstract]                  
Net (loss) | $ $ (7,279) $ (46,804) $ (20,774) $ (93,520) $ (286,296) $ (379) $ (74,857) $ (380,195)  
Weighted-average common shares outstanding 83,336     81,996     82,996 81,842  
(Loss) per share, basic (in dollars per share) | $ / shares $ (0.09)     $ (1.14)     $ (0.90) $ (4.65)  
Weighted-average common shares outstanding, assuming dilution 83,336     81,996     82,996 81,842  
(Loss) per share, diluted (in dollars per share) | $ / shares $ (0.09)     $ (1.14)     $ (0.90) $ (4.65)  
Outstanding anti-dilutive stock options and RSUs 2,255     3,019     1,652 3,589  
Dilutive effect of conversion of debt securities             3,700    
Number of shares issuable upon conversion 3,700           3,700    
Cap price (in dollars per share) | $ / derivative 196.44           196.44   196.44
v3.23.3
COMMITMENTS AND CONTINGENCIES (Details) - USD ($)
Sep. 15, 2022
May 09, 2022
Sep. 30, 2023
Dec. 31, 2022
Sep. 29, 2022
Loss Contingencies [Line Items]          
Outstanding letters of credit     $ 27,300,000 $ 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      
Pegasystems (NASDAQ:PEGA)
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