PEGA Pegasystems Inc

• Annual Contract Value (ACV) grows 16% year over year (14% in constant currency)
• Pega Cloud ACV grows 30% year over year (26% in constant currency)
• Cash flow from operations reaches $251 million and free cash flow hits $246 million in the first nine months of 2024

Pegasystems Inc. (NASDAQ: PEGA), the leading enterprise AI decisioning and workflow automation platform provider, released its financial results for the third quarter of 2024.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20241023411869/en/

Total ACV Growth and Pega Cloud Growth (Graphic: Business Wire)

“Pega GenAI Blueprint is creating enormous excitement and fundamentally changing how we engage with our clients,” said Alan Trefler, founder and CEO. "Pega's distinctive AI approach is showing clients how they can accelerate their digital transformation to become true autonomous enterprises."

"It's awesome to see accelerating ACV growth and continued strong free cash flow,” said Ken Stillwell, COO and CFO. “The steep acceleration in Pega Cloud growth demonstrates our clients’ commitment to digitally transform.”

Financial and performance metrics (1)

Reconciliation of ACV and Constant Currency ACV

(in millions, except percentages)

September 30, 2023

 

September 30, 2024

 

1-Year Change

ACV

$

1,169

 

$

1,360

 

16 %

Impact of changes in foreign exchange rates

 

—

 

 

(28)

 

 

Constant currency ACV

$

1,169

 

$

1,332

 

14 %

Note: Constant currency ACV is calculated by applying the September 30, 2023 foreign exchange rates to all periods shown.

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

(Dollars in thousands,

except per share amounts)

Three Months Ended

September 30,

 

 

 

Nine Months Ended

September 30,

 

 

2024

 

2023

 

Change

 

2024

 

2023

 

Change

Total revenue

$

325,050

 

$

334,643

 

(3) %

 

$

1,006,350

 

$

958,383

 

5 %

Net (loss) - GAAP

$

(14,390)

 

$

(7,279)

 

(98) %

 

$

(19,901)

 

$

(74,857)

 

73 %

Net income - non-GAAP

$

34,594

 

$

37,595

 

(8) %

 

$

122,589

 

$

58,018

 

111 %

Diluted (loss) per share - GAAP

$

(0.17)

 

$

(0.09)

 

(89) %

 

$

(0.23)

 

$

(0.90)

 

74 %

Diluted earnings per share - non-GAAP

$

0.39

 

$

0.44

 

(11) %

 

$

1.38

 

$

0.69

 

100 %

(Dollars in thousands)

Three Months Ended

September 30,

 

Change

 

Nine Months Ended

September 30,

 

Change

2024

 

2023

 

 

2024

 

2023

 

Pega Cloud

$

144,108

 

44 %

 

$

118,040

 

35 %

 

$

26,068

 

22 %

 

$

409,096

 

41 %

 

$

340,982

 

36 %

 

$

68,114

 

20 %

Maintenance

 

80,702

 

25 %

 

 

83,538

 

25 %

 

 

(2,836)

 

(3) %

 

 

242,047

 

24 %

 

 

245,210

 

25 %

 

 

(3,163)

 

(1) %

Subscription services

 

224,810

 

69 %

 

 

201,578

 

60 %

 

 

23,232

 

12 %

 

 

651,143

 

65 %

 

 

586,192

 

61 %

 

 

64,951

 

11 %

Subscription license

 

45,420

 

14 %

 

 

74,342

 

22 %

 

 

(28,922)

 

(39) %

 

 

193,405

 

19 %

 

 

200,066

 

21 %

 

 

(6,661)

 

(3) %

Subscription

 

270,230

 

83 %

 

 

275,920

 

82 %

 

 

(5,690)

 

(2) %

 

 

844,548

 

84 %

 

 

786,258

 

82 %

 

 

58,290

 

7 %

Consulting

 

54,364

 

17 %

 

 

55,976

 

17 %

 

 

(1,612)

 

(3) %

 

 

160,451

 

16 %

 

 

167,396

 

18 %

 

 

(6,945)

 

(4) %

Perpetual license

 

456

 

— %

 

 

2,747

 

1 %

 

 

(2,291)

 

(83) %

 

 

1,351

 

— %

 

 

4,729

 

— %

 

 

(3,378)

 

(71) %

 

$

325,050

 

100 %

 

$

334,643

 

100 %

 

$

(9,593)

 

(3) %

 

$

1,006,350

 

100 %

 

$

958,383

 

100 %

 

$

47,967

 

5 %

Quarterly conference call

A conference call and audio-only webcast will be conducted at 8:00 a.m. EDT on Thursday, October 24, 2024.

Members of the public and investors are invited to join the call and participate in the question and answer session by dialing 1 (800) 715-9871 (domestic) or 1 (646) 307-1963 (international) and using Conference ID 2282955, or via https://events.q4inc.com/attendee/813806779 by logging onto www.pega.com at least five minutes prior to the event's broadcast and clicking on the webcast icon in the Investors section.

Discussion of non-GAAP financial measures

Our non-GAAP financial measures should only be read in conjunction with our consolidated financial statements prepared in accordance with GAAP. We believe that these measures help investors understand our core operating results and prospects, which is consistent with how management measures and forecasts our performance without the effect of often one-time charges and other items outside our normal operations. Management uses these measures to assess the performance of the company's operations and establish operational goals and incentives. They are not a substitute for financial measures prepared under U.S. GAAP. Refer to the schedules at the end of this release for additional information, including a reconciliation of GAAP and non-GAAP measures.

Forward-looking statements

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

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

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

• our future financial performance and business plans;
• the adequacy of our liquidity and capital resources;
• the continued payment of our quarterly dividends;
• the timing of revenue recognition;
• variation in demand for our products and services, including among clients in the public sector;
• reliance on key personnel;
• reliance on third-party service providers, including hosting providers;
• compliance with our debt obligations and covenants;
• the potential impact of our convertible senior notes and Capped Call Transactions;
• foreign currency exchange rates;
• potential legal and financial liabilities, as well as damage to our reputation, due to cyber-attacks;
• security breaches and security flaws;
• our ability to protect our intellectual property rights, costs associated with defending such rights, intellectual property rights claims, and other related claims by third parties against us, including related costs, damages, and other relief that may be granted against us;
• our ongoing litigation with Appian Corp.;
• our client retention rate; and
• management of our growth.

These risks and others that may cause actual results to differ materially from those expressed in such forward-looking statements are described further in Part I of our Annual Report on Form 10-K for the year ended December 31, 2023, and other filings we make with the U.S. Securities and Exchange Commission (“SEC”).

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

Any forward-looking statements in this press release represent our views as of October 23, 2024.

About Pegasystems

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

All trademarks are the property of their respective owners.

PEGASYSTEMS INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts)

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

 

2024

 

2023

 

2024

 

2023

Revenue

 

 

 

 

 

 

 

Subscription services

$

224,810

 

 

$

201,578

 

 

$

651,143

 

 

$

586,192

 

Subscription license

 

45,420

 

 

 

74,342

 

 

 

193,405

 

 

 

200,066

 

Consulting

 

54,364

 

 

 

55,976

 

 

 

160,451

 

 

 

167,396

 

Perpetual license

 

456

 

 

 

2,747

 

 

 

1,351

 

 

 

4,729

 

Total revenue

 

325,050

 

 

 

334,643

 

 

 

1,006,350

 

 

 

958,383

 

Cost of revenue

 

 

 

 

 

 

 

Subscription services

 

36,868

 

 

 

35,906

 

 

 

108,930

 

 

 

109,553

 

Subscription license

 

384

 

 

 

629

 

 

 

1,504

 

 

 

1,971

 

Consulting

 

59,451

 

 

 

57,204

 

 

 

177,864

 

 

 

176,262

 

Perpetual license

 

3

 

 

 

24

 

 

 

12

 

 

 

51

 

Total cost of revenue

 

96,706

 

 

 

93,763

 

 

 

288,310

 

 

 

287,837

 

Gross profit

 

228,344

 

 

 

240,880

 

 

 

718,040

 

 

 

670,546

 

Operating expenses

 

 

 

 

 

 

 

Selling and marketing

 

127,669

 

 

 

131,598

 

 

 

395,125

 

 

 

425,253

 

Research and development

 

74,157

 

 

 

74,955

 

 

 

221,695

 

 

 

224,262

 

General and administrative

 

35,694

 

 

 

27,321

 

 

 

84,641

 

 

 

73,893

 

Litigation settlement, net of recoveries

 

—

 

 

 

—

 

 

 

32,403

 

 

 

—

 

Restructuring

 

2,485

 

 

 

17,822

 

 

 

3,283

 

 

 

21,450

 

Total operating expenses

 

240,005

 

 

 

251,696

 

 

 

737,147

 

 

 

744,858

 

(Loss) from operations

 

(11,661

)

 

 

(10,816

)

 

 

(19,107

)

 

 

(74,312

)

Foreign currency transaction (loss) gain

 

(4,405

)

 

 

1,994

 

 

 

(7,230

)

 

 

(3,971

)

Interest income

 

6,769

 

 

 

2,532

 

 

 

18,835

 

 

 

5,831

 

Interest expense

 

(1,639

)

 

 

(1,533

)

 

 

(5,047

)

 

 

(5,229

)

(Loss) on capped call transactions

 

(689

)

 

 

(2,294

)

 

 

(667

)

 

 

(449

)

Other income, net

 

—

 

 

 

6,383

 

 

 

1,684

 

 

 

18,668

 

(Loss) before provision for income taxes

 

(11,625

)

 

 

(3,734

)

 

 

(11,532

)

 

 

(59,462

)

Provision for income taxes

 

2,765

 

 

 

3,545

 

 

 

8,369

 

 

 

15,395

 

Net (loss)

$

(14,390

)

 

$

(7,279

)

 

$

(19,901

)

 

$

(74,857

)

(Loss) per share

 

 

 

 

 

 

 

Basic

$

(0.17

)

 

$

(0.09

)

 

$

(0.23

)

 

$

(0.90

)

Diluted

$

(0.17

)

 

$

(0.09

)

 

$

(0.23

)

 

$

(0.90

)

Weighted-average number of common shares outstanding

 

 

 

 

 

 

 

Basic

 

85,625

 

 

 

83,336

 

 

 

85,018

 

 

 

82,996

 

Diluted

 

85,625

 

 

 

83,336

 

 

 

85,018

 

 

 

82,996

 

PEGASYSTEMS INC. UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands)

 

September 30, 2024

 

December 31, 2023

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

287,649

 

$

229,902

Marketable securities

 

415,341

 

 

193,436

Total cash, cash equivalents, and marketable securities

 

702,990

 

 

423,338

Accounts receivable, net

 

173,623

 

 

300,173

Unbilled receivables, net

 

157,281

 

 

237,379

Other current assets

 

85,186

 

 

68,137

Total current assets

 

1,119,080

 

 

1,029,027

Long-term unbilled receivables, net

 

77,576

 

 

85,402

Goodwill

 

81,568

 

 

81,611

Other long-term assets

 

301,008

 

 

314,696

Total assets

$

1,579,232

 

$

1,510,736

Liabilities and stockholders’ equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

20,103

 

$

11,290

Accrued expenses

 

41,236

 

 

39,941

Accrued compensation and related expenses

 

98,033

 

 

126,640

Deferred revenue

 

345,574

 

 

377,845

Convertible senior notes, net

 

501,225

 

 

—

Other current liabilities

 

18,372

 

 

21,343

Total current liabilities

 

1,024,543

 

 

577,059

Long-term convertible senior notes, net

 

—

 

 

499,368

Long-term operating lease liabilities

 

66,750

 

 

66,901

Other long-term liabilities

 

14,916

 

 

13,570

Total liabilities

 

1,106,209

 

 

1,156,898

Total stockholders’ equity

 

473,023

 

 

353,838

Total liabilities and stockholders’ equity

$

1,579,232

 

$

1,510,736

PEGASYSTEMS INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)

 

Nine Months Ended

September 30,

 

2024

 

2023

Net (loss)

$

(19,901

)

 

$

(74,857

)

Adjustments to reconcile net (loss) to cash provided by operating activities

 

 

 

Non-cash items

 

180,036

 

 

 

168,001

 

Change in operating assets and liabilities, net

 

90,562

 

 

 

44,776

 

Cash provided by operating activities

 

250,697

 

 

 

137,920

 

Cash (used in) investing activities

 

(215,999

)

 

 

(24,176

)

Cash provided by (used in) financing activities

 

26,949

 

 

 

(85,031

)

Effect of exchange rate changes on cash, cash equivalents, and restricted cash

 

4,591

 

 

 

(1,621

)

Net increase in cash, cash equivalents, and restricted cash

 

66,238

 

 

 

27,092

 

Cash, cash equivalents, and restricted cash, beginning of period

 

232,827

 

 

 

145,054

 

Cash, cash equivalents, and restricted cash, end of period

$

299,065

 

 

$

172,146

 

PEGASYSTEMS INC. RECONCILIATION OF SELECTED GAAP AND NON-GAAP MEASURES (in thousands, except percentages and per share amounts)

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

2024

 

2023

 

Change

 

2024

 

2023

 

Change

Net (loss) - GAAP

$

(14,390

)

 

$

(7,279

)

 

(98

)%

 

$

(19,901

)

 

$

(74,857

)

 

73

%

Stock-based compensation (1)

 

37,213

 

 

 

31,299

 

 

 

 

 

108,218

 

 

 

110,083

 

 

 

Restructuring

 

2,485

 

 

 

17,822

 

 

 

 

 

3,283

 

 

 

21,450

 

 

 

Legal fees

 

9,863

 

 

 

6,748

 

 

 

 

 

14,214

 

 

 

11,066

 

 

 

Litigation settlement, net of recoveries

 

—

 

 

 

—

 

 

 

 

 

32,403

 

 

 

—

 

 

 

Amortization of intangible assets

 

700

 

 

 

965

 

 

 

 

 

2,453

 

 

 

2,977

 

 

 

Interest on convertible senior notes

 

621

 

 

 

613

 

 

 

 

 

1,857

 

 

 

1,988

 

 

 

Capped call transactions

 

689

 

 

 

2,294

 

 

 

 

 

667

 

 

 

449

 

 

 

Repurchases of convertible senior notes

 

—

 

 

 

—

 

 

 

 

 

—

 

 

 

(7,855

)

 

 

Foreign currency transaction loss (gain)

 

4,405

 

 

 

(1,994

)

 

 

 

 

7,230

 

 

 

3,971

 

 

 

Other

 

—

 

 

 

(5,814

)

 

 

 

 

(1,628

)

 

 

(10,285

)

 

 

Income taxes (2)

 

(6,992

)

 

 

(7,059

)

 

 

 

 

(26,207

)

 

 

(969

)

 

 

Net income - non-GAAP

$

34,594

 

 

$

37,595

 

 

(8

)%

 

$

122,589

 

 

$

58,018

 

 

111

%

 

 

 

 

 

 

 

 

 

 

 

 

Diluted (loss) per share - GAAP

$

(0.17

)

 

$

(0.09

)

 

(89

)%

 

$

(0.23

)

 

$

(0.90

)

 

74

%

non-GAAP adjustments

 

0.56

 

 

 

0.53

 

 

 

 

 

1.61

 

 

 

1.59

 

 

 

Diluted earnings per share - non-GAAP

$

0.39

 

 

$

0.44

 

 

(11

)%

 

$

1.38

 

 

$

0.69

 

 

100

%

 

 

 

 

 

 

 

 

 

 

 

 

Diluted weighted-average number of common shares outstanding - GAAP

 

85,625

 

 

 

83,336

 

 

3

%

 

 

85,018

 

 

 

82,996

 

 

2

%

Stock-based compensation

 

4,097

 

 

 

1,945

 

 

 

 

 

3,512

 

 

 

1,332

 

 

 

Diluted weighted-average number of common shares outstanding - non-GAAP

 

89,722

 

 

 

85,281

 

 

5

%

 

 

88,530

 

 

 

84,328

 

 

5

%

Our non-GAAP financial measures reflect the following adjustments:

• Stock-based compensation: We have excluded stock-based compensation from our non-GAAP operating expenses and profitability measures. Although stock-based compensation is a key incentive offered to our employees, and we believe such compensation contributed to our revenues recognized during the periods presented and is expected to contribute to our future revenues, we continue to evaluate our business performance, excluding stock-based compensation.
• Restructuring: We have excluded restructuring from our non-GAAP financial measures. Restructuring fluctuates in amount and frequency and is significantly affected by the timing and size of our restructuring activities. We believe excluding these amounts from our non-GAAP financial measures is useful to investors as these amounts are not representative of our core business operations and ongoing operational performance.
• Legal fees: Legal and related fees arising from proceedings outside the ordinary course of business. We believe excluding these amounts from our non-GAAP financial measures is useful to investors as the types of events giving rise to them are not representative of our core business operations and ongoing operational performance.
• Litigation settlement, net of recoveries: Cost to settle litigation, net of insurance recoveries, arising from proceedings outside the ordinary course of business. See Note 15. Commitments and Contingencies in our Quarterly Report for the three months ended September 30, 2024 for additional information. We believe excluding these amounts from our non-GAAP financial measures is useful to investors as the types of events giving rise to them are not representative of our core business operations and ongoing operational performance.
• Amortization of intangible assets: We have excluded the amortization of intangible assets from our non-GAAP operating expenses and profitability measures. Amortization of intangible assets fluctuates in amount and frequency and is significantly affected by the timing and size of acquisitions. Investors should note that intangible assets contributed to our revenues recognized during the periods presented and are expected to contribute to future revenues. Amortization of intangible assets is likely to recur in future periods. We believe excluding these amounts provides a useful comparison of our operational performance in different periods.
• Interest on convertible senior notes: In February 2020, we issued convertible senior notes, due March 1, 2025, in a private placement. We believe that excluding the amortization of issuance costs provides a useful comparison of our operational performance in different periods.
• Capped call transactions: We have excluded gains and losses related to our capped call transactions held at fair value under U.S. GAAP. The capped call transactions are expected to reduce common stock dilution and/or offset any potential cash payments we must make, other than for principal and interest, upon conversion of the convertible senior notes. We believe excluding these amounts from our non-GAAP financial measures is useful to investors as the types of events giving rise to them are not representative of our core business operations and ongoing operational performance.
• Repurchases of convertible senior notes: We have excluded gains from the repurchases of Convertible Senior Notes. We believe excluding these amounts from our non-GAAP financial measures is useful to investors as the types of events giving rise to them are not representative of our core business operations and ongoing operational performance.
• Foreign currency transaction loss (gain): We have excluded foreign currency transaction gains and losses from our non-GAAP profitability measures. Foreign currency transaction gains and losses fluctuate in amount and frequency and are significantly affected by foreign exchange market rates. Foreign currency transaction gains and losses are likely to recur in future periods. We believe excluding these amounts provides a useful comparison of our operational performance in different periods.
• Other: We have excluded gains and losses from our venture investments and expenses incurred due to the cancellation of in-person sales and marketing events. We believe excluding these amounts from our non-GAAP financial measures is useful to investors as the types of events giving rise to them are not representative of our core business operations and ongoing operational performance.
• Diluted weighted-average number of common shares outstanding:
  • Stock-based compensation: In periods of non-GAAP income, we have included the dilutive impact of stock-based compensation in our non-GAAP weighted-average shares. In periods of GAAP loss, these shares would have been excluded from our GAAP results as they would be anti-dilutive for GAAP. We believe including the dilutive effect of stock-based compensation in our non-GAAP financial measures in periods of income is helpful to investors as this provides a useful comparison of our operational performance in different periods.

(1) Stock-based compensation:

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

 

2024

 

2023

 

2024

 

2023

Cost of revenue

$

6,894

 

 

$

6,410

 

 

$

20,558

 

 

$

22,497

 

Selling and marketing

 

14,169

 

 

 

10,401

 

 

 

41,621

 

 

 

43,410

 

Research and development

 

7,308

 

 

 

7,375

 

 

 

22,779

 

 

 

24,286

 

General and administrative

 

8,842

 

 

 

7,113

 

 

 

23,260

 

 

 

19,890

 

 

$

37,213

 

 

$

31,299

 

 

$

108,218

 

 

$

110,083

 

Income tax benefit

$

(512

)

 

$

(316

)

 

$

(1,377

)

 

$

(1,569

)

(2) Effective income tax rates:

 

Nine Months Ended

September 30,

 

2024

 

2023

GAAP

(73

)%

 

(26

)%

non-GAAP

22

%

 

22

%

Our GAAP effective income tax rate is subject to significant fluctuations due to several factors, including our stock-based compensation plans, research and development tax credits, gains and losses on our capped call transactions, and the valuation allowance on our deferred tax assets in the U.S. and U.K. We determine our non-GAAP income tax rate using applicable rates in taxing jurisdictions and assessing certain factors, including historical and forecasted earnings by jurisdiction, discrete items, and ability to realize tax assets. We believe it is beneficial for our management to review our non-GAAP results consistent with our annual plan's effective income tax rate as established at the beginning of each year, given tax rate volatility. See Note 13. Income Taxes in our Quarterly Report for the three months ended September 30, 2024 for additional information.

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

 

Nine Months Ended

September 30,

 

Change

2024

 

2023

 

Cash provided by operating activities

$

250,697

 

 

$

137,920

 

 

82

%

Investment in property and equipment

 

(4,921

)

 

 

(14,271

)

 

 

Free cash flow (1)

$

245,776

 

 

$

123,649

 

 

99

%

 

 

 

 

 

 

Supplemental information (2)

 

 

 

 

 

Litigation settlement, net of recoveries

$

32,403

 

 

$

—

 

 

 

Legal fees

 

9,232

 

 

 

5,867

 

 

 

Restructuring

 

4,214

 

 

 

21,576

 

 

 

Interest on convertible senior notes

 

3,767

 

 

 

4,134

 

 

 

Income taxes

 

32,246

 

 

 

7,913

 

 

 

 

$

81,862

 

 

$

39,490

 

 

 

(1) Our non-GAAP free cash flow is defined as cash provided by operating activities less investment in property and equipment. Investment in property and equipment fluctuates in amount and frequency and is significantly affected by the timing and size of investments in our facilities. We provide information on free cash flow to enable investors to assess our ability to generate cash without incurring additional external financings. This information is not a substitute for financial measures prepared under U.S. GAAP.

(2) The supplemental information discloses items that affect our cash flows and are considered by management not to be representative of our core business operations and ongoing operational performance.

• Litigation settlement, net of recoveries: Cost to settle litigation, net of insurance recoveries, arising from proceedings outside the ordinary course of business. See Note 15. Commitments and Contingencies in our Quarterly Report for the three months ended September 30, 2024 for additional information.
• Legal fees: Legal and related fees arising from proceedings outside the ordinary course of business.
• Restructuring: Restructuring fluctuates in amount and frequency and is significantly affected by the timing and size of our restructuring activities.
• Interest on convertible senior notes: In February 2020, we issued convertible senior notes, due March 1, 2025, in a private placement. The convertible senior notes accrue interest at an annual rate of 0.75%, payable semi-annually in arrears on March 1 and September 1.
• Income taxes: Direct income taxes paid net of refunds received.

PEGASYSTEMS INC. ANNUAL CONTRACT VALUE (in thousands, except percentages)

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

 

September 30, 2024

 

September 30, 2023

 

Change

 

Constant Currency Change

Pega Cloud

$

640,574

 

$

494,571

 

$

146,003

 

30

%

 

26

%

Maintenance

 

306,753

 

 

319,250

 

 

(12,497

)

(4

)%

 

(6

)%

Subscription services

 

947,327

 

 

813,821

 

 

133,506

 

16

%

 

14

%

Subscription license

 

412,678

 

 

355,055

 

 

57,623

 

16

%

 

15

%

 

$

1,360,005

 

$

1,168,876

 

$

191,129

 

16

%

 

14

%

PEGASYSTEMS INC. BACKLOG (in thousands, except percentages)

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

As of September 30, 2024:

 

Subscription services

 

Subscription license

 

Perpetual license

 

Consulting

 

Total

Pega Cloud

 

Maintenance

 

 

 

 

1 year or less

$

495,637

 

 

$

188,905

 

 

$

38,175

 

 

$

2,252

 

 

$

54,203

 

 

$

779,172

 

53

%

1-2 years

 

310,020

 

 

 

63,701

 

 

 

9,686

 

 

 

317

 

 

 

3,062

 

 

 

386,786

 

26

%

2-3 years

 

146,877

 

 

 

26,436

 

 

 

3,046

 

 

 

—

 

 

 

2,008

 

 

 

178,367

 

12

%

Greater than 3 years

 

112,002

 

 

 

18,854

 

 

 

102

 

 

 

—

 

 

 

—

 

 

 

130,958

 

9

%

 

$

1,064,536

 

 

$

297,896

 

 

$

51,009

 

 

$

2,569

 

 

$

59,273

 

 

$

1,475,283

 

100

%

% of Total

 

73

%

 

 

20

%

 

 

3

%

 

 

—

%

 

 

4

%

 

 

100

%

 

Change since September 30, 2023

 

 

 

 

 

 

 

 

 

 

 

 

$

221,777

 

 

$

(9,387

)

 

$

(12,956

)

 

$

(4,694

)

 

$

15,176

 

 

$

209,916

 

 

 

 

26

%

 

 

(3

)%

 

 

(20

)%

 

 

(65

)%

 

 

34

%

 

 

17

%

 

As of September 30, 2023:

 

Subscription services

 

Subscription license

 

Perpetual license

 

Consulting

 

Total

Pega Cloud

 

Maintenance

 

 

 

 

1 year or less

$

391,324

 

 

$

202,610

 

 

$

48,427

 

 

$

4,567

 

 

$

39,335

 

 

$

686,263

 

54

%

1-2 years

 

239,787

 

 

 

58,610

 

 

 

4,356

 

 

 

2,696

 

 

 

3,662

 

 

 

309,111

 

24

%

2-3 years

 

121,778

 

 

 

28,585

 

 

 

8,518

 

 

 

—

 

 

 

1,100

 

 

 

159,981

 

13

%

Greater than 3 years

 

89,870

 

 

 

17,478

 

 

 

2,664

 

 

 

—

 

 

 

—

 

 

 

110,012

 

9

%

 

$

842,759

 

 

$

307,283

 

 

$

63,965

 

 

$

7,263

 

 

$

44,097

 

 

$

1,265,367

 

100

%

% of Total

 

67

%

 

 

24

%

 

 

5

%

 

 

1

%

 

 

3

%

 

 

100

%

 

PEGASYSTEMS INC. RECONCILIATION OF GAAP BACKLOG AND CONSTANT CURRENCY BACKLOG (in millions, except percentages)

 

September 30, 2023

 

September 30, 2024

 

1 Year Growth Rate

Backlog - GAAP

$

1,265

 

$

1,475

 

 

17

%

Impact of changes in foreign exchange rates

 

—

 

 

(43

)

 

 

Constant currency backlog

$

1,265

 

$

1,432

 

 

13

%

Note: Constant currency Backlog is calculated by applying the September 30, 2023 foreign exchange rates to all periods shown.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20241023411869/en/

Press contact: Lisa Pintchman VP, Corporate Communications lisapintchman.rogers@pega.com 617-866-6022 Twitter: @pega

Investor contact: Peter Welburn VP, Corporate Development & Investor Relations PegaInvestorRelations@pega.com 617-498-8968