Document

EX-99.1 2 q22025_ex-991.htm EX-99.1 Document

EXHIBIT 99.1

Pega’s AI Strategy Powers Continued Acceleration in Q2 2025

•Annual Contract Value (ACV) grows 16% year over year as reported and 14% in constant currency

•Pega Cloud ACV increases 28% year over year as reported and 25% in constant currency

•Pega Cloud backlog increases 30% year over year as reported and 26% in constant currency

•Cash flow from operations and free cash flow grow over 30% year over year

WALTHAM, Mass. — July 22, 2025 — Pegasystems Inc. (NASDAQ: PEGA), the Enterprise Transformation Company™, released its financial results for the second quarter of 2025.

“Our unique approach to AI was a key driver of our strong first half results,” said Alan Trefler, Pega founder and CEO. “Pega harnesses AI's creative potential where it can best drive transformation—during workflow design with Pega Blueprint. This drives consistent execution through our state-of-the-art Pega Infinity workflow engine, rather than through inherently unpredictable prompts. Pega’s Predictable AI approach gives enterprises both the innovation they crave and the operational consistency they require.”

“Our first half of 2025 results show what happens when strategy, innovation, and execution come together,” said Pega COO & CFO Ken Stillwell. “Pega Blueprint is a game-changer for AI-driven enterprise transformation. Our disciplined focus on Rule of 40 principles is fueling both accelerated growth and margin expansion. We are more aligned, more energized, and more effective than ever.”

Financial and performance metrics (1)

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

EXHIBIT 99.1

(continued)

Reconciliation of ACV and Constant Currency ACV


(in millions, except percentages)	June 30, 2024		June 30, 2025		1-Year Change
ACV	$	1,305	$	1,514	16	%
Impact of changes in foreign exchange rates	—		(32)
Constant currency ACV	$	1,305	$	1,482	14	%

Note: Constant currency ACV is calculated by applying the June 30, 2024 foreign exchange rates to current period shown.

Cash Flow Growth


(Dollars in thousands, except per share amounts) (1)	Three Months Ended June 30,						Six Months Ended June 30,
	2025		2024		Change		2025		2024		Change
Total revenue	$	384,512	$	351,153	9	%	$	860,145	$	681,300	26	%
Net income (loss) - GAAP	$	30,077	$	6,613	355	%	$	115,499	$	(5,511)	*
Net income - non-GAAP	$	50,151	$	45,841	9	%	$	190,693	$	87,995	117	%
Diluted earnings (loss) per share - GAAP	$	0.17	$	0.04	325	%	$	0.63	$	(0.03)	*
Diluted earnings per share - non-GAAP	$	0.28	$	0.26	8	%	$	1.04	$	0.50	108	%

* Not meaningful

(1) Per share amounts have been recast for all prior periods to reflect the effect of the Company’s two-for-one forward common stock split effected in the form of a stock dividend distributed on June 20, 2025.


(Dollars in thousands)	Three Months Ended June 30,								Change				Six Months Ended June 30,								Change
	2025				2024								2025				2024
Pega Cloud	$	166,743	43	%	$	134,086	38	%	$	32,657	24	%	$	317,866	37	%	$	264,988	39	%	$	52,878	20	%
Maintenance	79,271		21	%	80,344		23	%	(1,073)		(1)	%	155,639		18	%	161,345		23	%	(5,706)		(4)	%
Subscription services	246,014		64	%	214,430		61	%	31,584		15	%	473,505		55	%	426,333		62	%	47,172		11	%
Subscription license	79,963		21	%	84,647		24	%	(4,684)		(6)	%	266,518		31	%	147,985		22	%	118,533		80	%
Subscription	325,977		85	%	299,077		85	%	26,900		9	%	740,023		86	%	574,318		84	%	165,705		29	%
Consulting	57,824		15	%	52,040		15	%	5,784		11	%	118,245		14	%	106,087		16	%	12,158		11	%
Perpetual license	711		—	%	36		—	%	675		1875	%	1,877		—	%	895		—	%	982		110	%
Total revenue	$	384,512	100	%	$	351,153	100	%	$	33,359	9	%	$	860,145	100	%	$	681,300	100	%	$	178,845	26	%

Quarterly conference call

A conference call and audio-only webcast will be conducted at 8:00 a.m. EDT on Wednesday, July 23, 2025.

Members of the public and investors are invited to join the call and participate in the question and answer session by dialing 1 (800) 715-9871 (domestic) or 1 (646) 307-1963 (international) and using Conference ID 7346894, or via https://events.q4inc.com/attendee/586505740 by logging onto www.pega.com at least five minutes prior to the event's broadcast and clicking on the webcast icon in the Investors section.

Discussion of non-GAAP financial measures

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

Forward-looking statements

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

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

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

•our future financial performance and business plans;

•the adequacy of our liquidity and capital resources;

•the successful execution of investments in artificial intelligence;

•the continued payment of our quarterly dividends;

•the timing of revenue recognition;

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

•reliance on key personnel;

•reliance on third-party service providers, including hosting providers;

•compliance with our debt obligations and covenants;

•foreign currency exchange rates;

•potential legal and financial liabilities, as well as damage to our reputation, due to cyber-attacks;

•security breaches and security flaws;

•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. and associated legal proceedings;

•our client retention rate; and

•management of our growth.

These risks and others that may cause actual results to differ materially from those expressed in such forward-looking statements are described further in Part I of our Annual Report on Form 10-K for the year ended December 31, 2024, and other filings we make with the 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 July 22, 2025.

About Pegasystems

Pega is The Enterprise Transformation CompanyTM that helps organizations Build for Change® with enterprise AI decisioning and workflow automation. Many of the world’s most influential businesses rely on our platform to solve their most pressing challenges, from personalizing engagement to automating service to streamlining operations. Since 1983, we’ve built our scalable and flexible architecture to help enterprises meet today’s customer demands while continuously transforming for tomorrow. For more information on Pega (NASDAQ: PEGA), visit www.pega.com.

Press contact:

Lisa Pintchman

VP, Corporate Communications

lisapintchman.rogers@pega.com

617-866-6022

Twitter: @pega

Investor contact:

Peter Welburn

VP, Corporate Development & Investor Relations

PegaInvestorRelations@pega.com

617-498-8968

All trademarks are the property of their respective owners.

PEGASYSTEMS INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (1)

(in thousands, except per share amounts)


	Three Months Ended June 30,				Six Months Ended June 30,
	2025		2024		2025		2024
Revenue
Subscription services	$	246,014	$	214,430	$	473,505	$	426,333
Subscription license	79,963		84,647		266,518		147,985
Consulting	57,824		52,040		118,245		106,087
Perpetual license	711		36		1,877		895
Total revenue	384,512		351,153		860,145		681,300
Cost of revenue
Subscription services	41,510		36,238		79,638		72,062
Subscription license	360		477		746		1,120
Consulting	67,700		60,231		131,634		118,413
Perpetual license	4		—		6		9
Total cost of revenue	109,574		96,946		212,024		191,604
Gross profit	274,938		254,207		648,121		489,696
Operating expenses
Selling and marketing	147,131		139,761		285,200		267,456
Research and development	78,784		75,425		153,070		147,538
General and administrative	31,788		25,420		65,616		48,947
Litigation settlement, net of recoveries	—		—		—		32,403
Restructuring	(44)		635		(33)		798
Total operating expenses	257,659		241,241		503,853		497,142
Income (loss) from operations	17,279		12,966		144,268		(7,446)
Foreign currency transaction (loss) gain	(14,008)		437		(19,333)		(2,825)
Interest income	3,248		6,785		8,583		12,066
Interest expense	(1)		(1,656)		(1,028)		(3,408)
Gain (loss) on capped call transactions	—		(3,277)		(223)		22
Other income, net	18,729		—		19,290		1,684
Income before (benefit from) provision for income taxes	25,247		15,255		151,557		93
(Benefit from) provision for income taxes	(4,830)		8,642		36,058		5,604
Net income (loss)	$	30,077	$	6,613	$	115,499	$	(5,511)
Earnings (loss) per share
Basic	$	0.18	$	0.04	$	0.67	$	(0.03)
Diluted	$	0.17	$	0.04	$	0.63	$	(0.03)
Weighted-average number of common shares outstanding
Basic	170,776		170,314		171,287		169,424
Diluted	182,160		177,000		185,477		169,424

(1) The number of common shares and per share amounts have been recast for all prior periods to reflect the effect of the Company’s two-for-one forward common stock split effected in the form of a stock dividend distributed on June 20, 2025.

PEGASYSTEMS INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)


	June 30, 2025		December 31, 2024
Assets
Current assets:
Cash and cash equivalents	$	201,565	$	337,103
Marketable securities	210,002		402,870
Total cash, cash equivalents, and marketable securities	411,567		739,973
Accounts receivable, net	156,470		305,468
Unbilled receivables, net	184,184		173,085
Other current assets	93,403		115,178
Total current assets	845,624		1,333,704
Long-term unbilled receivables, net	104,298		61,407
Goodwill	81,538		81,113
Other long-term assets	292,957		292,049
Total assets	$	1,324,417	$	1,768,273
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	17,101	$	6,226
Accrued expenses	51,430		31,544
Accrued compensation and related expenses	91,769		138,042
Deferred revenue	418,931		423,910
Convertible senior notes, net	—		467,470
Other current liabilities	20,387		18,866
Total current liabilities	599,618		1,086,058

Long-term operating lease liabilities	65,191		67,647
Other long-term liabilities	35,066		29,088
Total liabilities	699,875		1,182,793






Total stockholders’ equity	624,542		585,480
Total liabilities and stockholders’ equity	$	1,324,417	$	1,768,273

PEGASYSTEMS INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)


	Six Months Ended June 30,
	2025		2024
Net income (loss)	$	115,499	$	(5,511)
Adjustments to reconcile net income (loss) to cash provided by operating activities
Non-cash items	123,170		116,288
Change in operating assets and liabilities, net	51,827		109,466
Cash provided by operating activities	290,496		220,243
Cash provided by (used in) investing activities	212,995		(209,700)
Cash (used in) provided by financing activities	(646,316)		22,503
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	7,407		(2,842)
Net (decrease) increase in cash, cash equivalents, and restricted cash	(135,418)		30,204
Cash, cash equivalents, and restricted cash, beginning of period	341,529		232,827
Cash, cash equivalents, and restricted cash, end of period	$	206,111	$	263,031

PEGASYSTEMS INC.

RECONCILIATION OF SELECTED GAAP AND NON-GAAP MEASURES (1)

(in thousands, except percentages and per share amounts)


	Three Months Ended June 30,						Six Months Ended June 30,
	2025		2024		Change		2025		2024		Change
Net income (loss) - GAAP	$	30,077	$	6,613	355	%	$	115,499	$	(5,511)	*
Stock-based compensation (2)	36,730		36,224				78,155		71,005
Restructuring	(44)		635				(33)		798
Legal fees	6,409		2,409				12,953		4,351
Litigation settlement, net of recoveries	—		—				—		32,403
Amortization of intangible assets	675		789				1,376		1,753
Interest on convertible senior notes	—		619				394		1,236
Capped call transactions	—		3,277				223		(22)

Foreign currency transaction loss (gain)	14,008		(437)				19,333		2,825
Other	(18,729)		—				(19,480)		(1,628)
Income taxes (3)	(18,975)		(4,288)				(17,727)		(19,215)
Net income - non-GAAP	$	50,151	$	45,841	9	%	$	190,693	$	87,995	117	%

Diluted earnings (loss) per share - GAAP	$	0.17	$	0.04	325	%	$	0.63	$	(0.03)	*
non-GAAP adjustments	0.11		0.22				0.41		0.53
Diluted earnings per share - non-GAAP	$	0.28	$	0.26	8	%	$	1.04	$	0.50	108	%

Diluted weighted-average number of common shares outstanding - GAAP	182,160		177,000		3	%	185,477		169,424		9	%
Capped call transactions	—		—				(2,412)		—
Stock-based compensation	—		—				—		6,436
Diluted weighted-average number of common shares outstanding - non-GAAP	182,160		177,000		3	%	183,065		175,860		4	%

* Not meaningful

Our non-GAAP financial measures reflect the following adjustments:

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

•Restructuring: We have excluded restructuring from our non-GAAP financial measures. Restructuring fluctuates in amount and frequency and is significantly affected by the timing and size of our restructuring activities. We believe excluding these amounts from our non-GAAP financial measures is useful to investors as these amounts are not representative of our core business operations and ongoing operational performance.

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

•Litigation settlement, net of recoveries: Cost to settle litigation, net of insurance recoveries, arising from proceedings outside the ordinary course of business. See "Note 20. Commitments And Contingencies" in Item 8 of our Annual Report filed on Form 10-K for the year ended December 31, 2024 and prior filings for further 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 (the “Notes”), due March 1, 2025, in a private placement. The Notes accrued interest at an annual rate of 0.75%, paid semi-annually in arrears on March 1 and September 1. The outstanding Notes were repaid in their entirety at maturity. 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 were expected to reduce common stock dilution and/or offset any potential cash payments we must make, other than for principal and interest, upon conversion of the Notes. We believe excluding these amounts from our non-GAAP financial measures is useful to investors as the types of events giving rise to them are not representative of our core business operations and ongoing operational performance.

•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. We believe excluding these amounts from our non-GAAP financial measures is useful to investors as the types of events giving rise to them are not representative of our core business operations and ongoing operational performance.

•Diluted weighted-average number of common shares outstanding:

•Capped call transactions: In periods of GAAP net income, the shares calculated by applying the if-converted method related to the Company’s Notes are included in the diluted weighted-average shares outstanding. The capped call transactions were 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. We believe that including the expected impact of the capped call transactions in our non-GAAP financial measures provides a useful comparison of our operational performance in different periods.

•Stock-based compensation: In periods of non-GAAP net income, we have included the dilutive impact of stock-based compensation in our non-GAAP weighted-average shares. In periods of GAAP net 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 net income is helpful to investors as this provides a useful comparison of our operational performance in different periods

(2) Stock-based compensation:


	Three Months Ended June 30,				Six Months Ended June 30,
(Dollars in thousands)	2025		2024		2025		2024
Cost of revenue	$	7,288	$	7,092	$	15,111	$	13,664
Selling and marketing	14,378		13,564		30,159		27,452
Research and development	7,490		7,825		15,875		15,471
General and administrative	7,574		7,743		17,010		14,418
	$	36,730	$	36,224	$	78,155	$	71,005
Income tax benefit	$	(566)	$	(554)	$	(1,153)	$	(865)

(3) Effective income tax rates:


	Six Months Ended June 30,
	2025		2024
GAAP	24	%	*
non-GAAP	22	%	22	%

* Not meaningful

Our GAAP effective income tax rate is subject to significant fluctuations due to several factors, including our stock-based compensation plans, research and development tax credits, and the valuation allowance on our deferred tax assets in the U.S. and U.K. We determine our non-GAAP income tax rate using applicable rates in taxing jurisdictions and assessing certain factors, including historical and forecasted earnings by jurisdiction, discrete items, and ability to realize tax assets. We believe it is beneficial for our management to review our non-GAAP results consistent with our annual plan’s effective income tax rate as established at the beginning of each year, given tax rate volatility.

PEGASYSTEMS INC.

RECONCILIATION OF FREE CASH FLOW (1) AND OTHER METRICS

(in thousands, except percentages)


	Six Months Ended June 30,				Change
	2025		2024
Cash provided by operating activities	$	290,496	220,243		32	%
Investment in property and equipment	(4,015)		(1,857)
Free cash flow (1)	$	286,481	$	218,386	31	%

Supplemental information (2)
Litigation settlement, net of recoveries	$	—	$	32,403
Legal fees	10,020		2,701
Restructuring	1,354		3,852
Interest paid on convertible senior notes	1,754		1,884

Income taxes, net of refunds	(702)		25,560
	$	12,426	$	66,400

(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 and equipment. 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.

•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 paid on convertible senior notes: In February 2020, we issued convertible senior notes (the “Notes”), due March 1, 2025, in a private placement. The Notes accrued interest at an annual rate of 0.75%, payable semi-annually in arrears on March 1 and September 1. The outstanding Notes were repaid in their entirety at maturity.

•Income taxes, net of refunds: 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.


	June 30, 2025		June 30, 2024		Change				Constant Currency Change
Pega Cloud	$	761,051	$	593,752	$	167,299	28	%	25	%
Maintenance	301,375		310,608		(9,233)		(3)	%	(5)	%
Subscription services	1,062,426		904,360		158,066		17	%	15	%
Subscription license	451,591		400,949		50,642		13	%	11	%
	$	1,514,017	$	1,305,309	$	208,708	16	%	14	%

PEGASYSTEMS INC.

BACKLOG

(in thousands, except percentages)

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

As of June 30, 2025:


	Subscription services						Subscription license			Perpetual license			Consulting			Total
	Pega Cloud			Maintenance
1 year or less	$	603,683		$	220,954		$	61,905		$	317		$	39,798		$	926,657		51	%
1-2 years	334,586			79,345			4,262			—			2,846			421,039			23	%
2-3 years	172,513			49,587			746			—			252			223,098			12	%
Greater than 3 years	210,416			46,843			7,220			—			56			264,535			14	%
	$	1,321,198		$	396,729		$	74,133		$	317		$	42,952		$	1,835,329		100	%
% of Total	72		%	22		%	4		%	—		%	2		%	100		%
Change since June 30, 2024
	$	306,436		$	75,823		$	37,143		$	(2,379)		$	12,057		$	429,080
	30		%	24		%	100		%	(88)		%	39		%	31		%

As of June 30, 2024:


	Subscription services						Subscription license			Perpetual license			Consulting			Total
	Pega Cloud			Maintenance
1 year or less	$	470,379		$	209,655		$	23,931		$	2,696		$	25,953		$	732,614		52	%
1-2 years	301,070			63,266			10,078			—			2,469			376,883			27	%
2-3 years	152,839			30,032			2,884			—			2,473			188,228			13	%
Greater than 3 years	90,474			17,953			97			—			—			108,524			8	%
	$	1,014,762		$	320,906		$	36,990		$	2,696		$	30,895		$	1,406,249		100	%
% of Total	72		%	23		%	3		%	—		%	2		%	100		%

PEGASYSTEMS INC.

RECONCILIATION OF GAAP BACKLOG AND CONSTANT CURRENCY BACKLOG

(in millions, except percentages)


	June 30, 2024		June 30, 2025		1 Year Growth Rate
Backlog - GAAP	$	1,406	$	1,835	31	%
Impact of changes in foreign exchange rates	—		(55)
Constant currency backlog	$	1,406	$	1,780	27	%

Note: Constant currency backlog is calculated by applying the June 30, 2024 foreign exchange rates to current period shown.