10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549 

____________________

FORM 10-Q

____________________

x	Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the quarterly period ended March 31, 2019

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) 

____________________

Massachusetts	04-2787865
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)
One Rogers Street, Cambridge, MA	02142-1209
(Address of principal executive offices)	(Zip Code)

(617) 374-9600

(Registrant’s telephone number, including area code)

____________________

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 x

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $.01 par value per share	PEGA	NASDAQ Global Select Market

There were 78,908,093 shares of the Registrant’s common stock, $0.01 par value per share, outstanding on May 1, 2019.  

PEGASYSTEMS INC.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

	Page
PART I - FINANCIAL INFORMATION
Item 1. Unaudited Condensed Consolidated Financial Statements
Unaudited Condensed Consolidated Balance Sheets as of March 31, 2019 and December 31, 2018	3
Unaudited Condensed Consolidated Statements of Operations for the three months ended March 31, 2019 and 2018	4
Unaudited Condensed Consolidated Statements of Comprehensive (Loss) Income for the three months ended March 31, 2019 and 2018	5
Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2019 and 2018	6
Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2019 and 2018	7
Notes to Unaudited Condensed Consolidated Financial Statements	8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3. Quantitative and Qualitative Disclosures About Market Risk	22
Item 4. Controls and Procedures	22
PART II - OTHER INFORMATION
Item 1A. Risk Factors	23
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	23
Item 6. Exhibits	23
Signature	24

2

PART I - FINANCIAL INFORMATION

ITEM 1.     UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

PEGASYSTEMS INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

	March 31, 2019			December 31, 2018
Assets
Current assets:
Cash and cash equivalents	$	110,367		$	114,422
Marketable securities	91,804			93,001
Total cash, cash equivalents, and marketable securities	202,171			207,423
Accounts receivable	135,352			180,872
Unbilled receivables	161,480			172,656
Other current assets	63,731			49,684
Total current assets	562,734			610,635
Long-term unbilled receivables	130,494			151,237
Goodwill	72,898			72,858
Other long-term assets	190,433			147,823
Total assets	$	956,559		$	982,553
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	11,559		$	16,487
Accrued expenses	40,947			45,506
Accrued compensation and related expenses	56,349			84,671
Deferred revenue	180,845			185,145
Other current liabilities	12,447			—
Total current liabilities	302,147			331,809
Operating lease liabilities	45,325			—
Deferred income tax liabilities	8,319			6,939
Other long-term liabilities	12,339			22,274
Total liabilities	368,130			361,022
Stockholders’ equity:
Preferred stock, 1,000 shares authorized; none issued	—			—
Common stock, 200,000 shares authorized; 78,896 and 78,526 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively	789			785
Additional paid-in capital	119,182			123,205
Retained earnings	479,779			510,863
Accumulated other comprehensive loss	(11,321		)	(13,322		)
Total stockholders’ equity	588,429			621,531
Total liabilities and stockholders’ equity	$	956,559		$	982,553

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   March 31,
	2019			2018
Revenue
Software license	$	63,264		$	87,773
Maintenance	67,706			64,525
Services	81,576			82,884
Total revenue	212,546			235,182
Cost of revenue
Software license	1,378			1,255
Maintenance	6,335			6,082
Services	66,724			68,277
Total cost of revenue	74,437			75,614
Gross profit	138,109			159,568
Operating expenses
Selling and marketing	108,865			88,383
Research and development	50,596			46,785
General and administrative	12,676			16,464
Total operating expenses	172,137			151,632
(Loss) income from operations	(34,028		)	7,936
Foreign currency transaction loss	(3,712		)	(1,085		)
Interest income, net	723			764
Other income, net	—			363
(Loss) income before benefit from income taxes	(37,017		)	7,978
Benefit from income taxes	(8,300		)	(4,222		)
Net (loss) income	$	(28,717	)	$	12,200
(Loss) earnings per share
Basic	$	(0.37	)	$	0.16
Diluted	$	(0.37	)	$	0.15
Weighted-average number of common shares outstanding
Basic	78,584			78,236
Diluted	78,584			83,102

See notes to unaudited condensed consolidated financial statements.

4

PEGASYSTEMS INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(in thousands)

	Three Months Ended   March 31,
	2019			2018
Net (loss) income	$	(28,717	)	$	12,200
Other comprehensive income, net of tax
Unrealized gain (loss) on available-for-sale marketable securities, net of tax	374			(188		)
Foreign currency translation adjustments	1,627			4,450
Total other comprehensive income, net of tax	2,001			4,262
Comprehensive (loss) income	$	(26,716	)	$	16,462

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 Other Comprehensive (Loss) Income			Total Stockholders’ Equity
	Number of Shares		Amount
December 31, 2017	78,081		$	781		$	152,097		$	509,697		$	(6,705	)	$	655,870
Repurchase of common stock	(101	)	(1		)	(5,688		)	—			—			(5,689		)
Issuance of common stock for share-based compensation plans	566		5			(15,556		)	—			—			(15,551		)
Stock-based compensation	—		—			15,109			—			—			15,109
Cash dividends declared ($0.12 per share)	—		—			—			(2,355		)	—			(2,355		)
Other comprehensive income	—		—			—			—			4,262			4,262
Net income	—		—			—			12,200			—			12,200
March 31, 2018	78,546		$	785		$	145,962		$	519,542		$	(2,443	)	$	663,846
December 31, 2018	78,526		785			123,205			510,863			(13,322		)	621,531
Repurchase of common stock	(144	)	(1		)	(7,586		)	—			—			(7,587		)
Issuance of common stock for share-based compensation plans	514		5			(14,843		)	—			—			(14,838		)
Stock-based compensation	—		—			18,406			—			—			18,406
Cash dividends declared ($0.12 per share)	—		—			—			(2,367		)	—			(2,367		)
Other comprehensive income	—		—			—			—			2,001			2,001
Net loss	—		—			—			(28,717		)				(28,717		)
March 31, 2019	78,896		$	789		$	119,182		$	479,779		$	(11,321	)	$	588,429

See notes to unaudited condensed consolidated financial statements.

6

PEGASYSTEMS INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Three Months Ended March 31,
	2019			2018
Operating activities:
Net (loss) income	$	(28,717	)	$	12,200
Adjustments to reconcile net (loss) income to cash provided by operating activities:
Stock-based compensation	18,350			15,109
Amortization and depreciation	18,774			10,322
Foreign currency transaction loss	3,712			1,085
Other non-cash	1,471			1,137
Change in operating assets and liabilities, net	9,113			15,802
Cash provided by operating activities	22,703			55,655
Investing activities:
Purchases of investments	(7,224		)	(35,204		)
Proceeds from maturities and called investments	8,548			5,995
Other	(2,790		)	(2,069		)
Cash used in investing activities	(1,466		)	(31,278		)
Financing activities:
Dividend payments to shareholders	(2,363		)	(2,344		)
Common stock repurchases	(23,224		)	(20,708		)
Cash used in financing activities	(25,587		)	(23,052		)
Effect of exchange rate changes on cash and cash equivalents	295			2,186
Net (decrease) increase in cash and cash equivalents	(4,055		)	3,511
Cash and cash equivalents, beginning of period	114,422			162,279
Cash and cash equivalents, end of period	$	110,367		$	165,790

See notes to unaudited condensed consolidated financial statements.

7

PEGASYSTEMS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 and footnotes 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, 2018.

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.

The operating results for the interim periods presented are not necessarily indicative of the results expected for the full year 2019.

2. NEW ACCOUNTING PRONOUNCEMENTS

Financial instruments

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which requires measurement and recognition of expected credit losses for financial assets measured at amortized cost, including accounts receivable, upon initial recognition of that financial asset using a forward-looking expected loss model, rather than an incurred loss model. Credit losses relating to available-for-sale debt securities should be recorded through an allowance for credit losses when the fair value is below the amortized cost of the asset, removing the concept of “other-than-temporary” impairments. The effective date for the Company will be January 1, 2020, with early adoption permitted. The Company is currently evaluating the effect this ASU will have on its consolidated financial statements and related disclosures.

Leases

On January 1, 2019, the Company adopted Accounting Standards Codifications 842 “Leases” (“ASC 842”) using the modified retrospective method, reflecting any cumulative effect as an adjustment to equity. Results for reporting periods beginning on or after January 1, 2019 are presented under ASC 842, while prior period amounts were not adjusted and continue to be reported in accordance with the Company’s historic accounting under ASC 840 “Leases”.

The Company elected the permitted practical expedients to not reassess the following related to leases that commenced before the effective date of ASC 842: (i) whether any expired or existing contracts contain leases; (ii) the lease classification for any expired or existing leases; and (iii) initial direct costs for any existing leases. Upon adoption, the Company recorded right of use assets of $41.8 million and lease liabilities of $54.2 million. The difference between the value of the right of use assets and lease liabilities is due to the reclassification of existing deferred rent, prepaid rent, and unamortized lease incentives as of January 1, 2019.

See Note 9. “Leases” for additional information.

3. MARKETABLE SECURITIES

	March 31, 2019
(in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Municipal bonds	$	42,693	$	86	$	(20	)	$	42,759
Corporate bonds	48,966		142		(63		)	49,045
	$	91,659	$	228	$	(83	)	$	91,804

	December 31, 2018
(in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Municipal bonds	$	44,802	$	13	$	(110	)	$	44,705
Corporate bonds	48,499		23		(226		)	48,296
	$	93,301	$	36	$	(336	)	$	93,001

As of March 31, 2019, the Company did not hold any investments with unrealized losses that are considered to be other-than-temporary.

As of March 31, 2019, maturities of marketable securities ranged from April 2019 to August 2022, with a weighted-average remaining maturity of approximately 1.4 years.

8

PEGASYSTEMS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

4. RECEIVABLES, CONTRACT ASSETS, AND DEFERRED REVENUE

Receivables

(in thousands)	March 31, 2019		December 31, 2018
Accounts receivable	$	135,352	$	180,872
Unbilled receivables	161,480		172,656
Long-term unbilled receivables	130,494		151,237
	$	427,326	$	504,765

Unbilled receivables are client committed amounts for which revenue recognition precedes billing, and billing is solely subject to the passage of time.

As of March 31, 2019 and December 31, 2018, the allowance for doubtful accounts was not material.

Unbilled receivables are expected to be billed in the future as follows:

(Dollars in thousands)	March 31, 2019
1 year or less	$	161,480	55	%
1-2 years	86,496		30	%
2-5 years	43,998		15	%
	$	291,974	100	%

Contract assets and deferred revenue

(in thousands)	March 31, 2019		December 31, 2018
Contract assets (1)	$	3,380	$	3,711
Long-term contract assets (2)	1,818		2,543
	$	5,198	$	6,254
Deferred revenue	$	180,845	$	185,145
Long-term deferred revenue (3)	5,866		5,344
	$	186,711	$	190,489

⁽¹⁾ Included in other current assets. ⁽²⁾ Included in other long-term assets. ⁽³⁾ Included in other long-term liabilities.

Contract assets are amounts under client contracts where revenue recognized exceeds the amount billed to the client and the right to payment is subject to conditions other than the passage of time, such as the completion of a related performance obligation. Deferred revenue consists of billings and payments received in advance of revenue recognition. Contract assets and deferred revenue are netted at the contract level for each reporting period.

The change in deferred revenue in the three months ended March 31, 2019 was primarily due to $89.4 million of revenue recognized, excluding the impact of netting contract assets and deferred revenue at the contract level, during the period that was included in deferred revenue at December 31, 2018, partially offset by new billings in advance of revenue recognition.

5. DEFERRED CONTRACT COSTS

The Company recognizes an asset for the incremental costs of obtaining a client contract, which primarily relate to sales commissions, if the Company expects to benefit from those costs for more than one year. Deferred costs are amortized on a straight-line basis over the benefit period, which is on average 5 years.

(in thousands)	March 31, 2019		December 31, 2018
Deferred contract costs (1)	$	64,869	$	64,367

⁽¹⁾ Included in other long-term assets.

	Three Months Ended   March 31,
(in thousands)	2019		2018
Amortization of deferred contract costs (1)	$	8,301	$	3,789

⁽¹⁾Included in selling and marketing expenses.

9

PEGASYSTEMS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

6. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

The change in the carrying amount of goodwill was:

(in thousands)	Three Months Ended March 31,
	2019
Balance as of January 1,	$	72,858
Currency translation adjustments	40
Balance as of March 31,	$	72,898

Intangibles

Intangible assets are recorded at cost and amortized using the straight-line method over their estimated useful lives as follows:

		March 31, 2019
(in thousands)	Useful Lives	Cost		Accumulated Amortization			Net Book Value (1)
Client-related intangibles	4-10 years	$	63,136	$	(52,839	)	$	10,297
Technology	2-10 years	59,742		(51,730		)	8,012
Other	1 - 5 years	5,361		(5,361		)	—
		$	128,239	$	(109,930	)	$	18,309

⁽¹⁾ Included in other long-term assets.

		December 31, 2018
(in thousands)	Useful Lives	Cost		Accumulated Amortization			Net Book Value (1)
Client-related intangibles	4-10 years	$	63,115	$	(51,224	)	$	11,891
Technology	2-10 years	59,742		(50,398		)	9,344
Other	1 - 5 years	5,361		(5,361		)	—
		$	128,218	$	(106,983	)	$	21,235

⁽¹⁾ Included in other long-term assets.

Amortization of intangible assets was:

(in thousands)	Three Months Ended   March 31,
	2019		2018
Cost of revenue	$	1,332	$	1,232
Selling and marketing	1,603		1,605
	$	2,935	$	2,837

7. ACCRUED EXPENSES

(in thousands)	March 31, 2019		December 31, 2018
Outside professional services expenses	$	8,815	$	10,367
Income and other taxes	7,954		10,387
Marketing and sales program expenses	8,318		5,860
Dividends payable	2,367		2,363
Employee-related expenses	5,432		3,536
Other	8,061		12,993
	$	40,947	$	45,506

8. FAIR VALUE MEASUREMENTS

Assets and liabilities measured at fair value on a recurring basis

The Company records its cash equivalents, marketable securities, and investments in privately-held companies 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.

10

PEGASYSTEMS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

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 on which there is 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 to minimize the use of unobservable inputs when determining fair value.

The Company’s cash equivalents are composed of money market funds and time deposits, which are classified within Level 1 and Level 2, respectively, in the fair value hierarchy. The Company’s marketable securities, which are classified within Level 2 of the fair value hierarchy are valued based on a market approach using quoted prices, when available, or matrix pricing compiled by third party pricing vendors, using observable market inputs such as interest rates, yield curves, and credit risk. The Company’s investments in privately-held companies are classified within Level 3 of the fair value hierarchy.

If applicable, the Company will recognize transfers into and out of levels within the fair value hierarchy at the end of the reporting period in which the actual event or change in circumstance occurs. There were no transfers between levels during the three months ended March 31, 2019.

The Company’s assets and liabilities measured at fair value on a recurring basis were:

	March 31, 2019
(in thousands)	Level 1		Level 2		Level 3		Total
Cash equivalents	$	12,401	$	10,062	$	—	$	22,463
Marketable securities:
Municipal bonds	$	—	$	42,759	$	—	$	42,759
Corporate bonds	—		49,045		—		49,045
Total marketable securities	$	—	$	91,804	$	—	$	91,804
Investments in privately-held companies (1)	$	—	$	—	$	3,390	$	3,390

⁽¹⁾ Included in other long-term assets.

	December 31, 2018
(in thousands)	Level 1		Level 2		Level 3		Total
Cash equivalents	$	10,155	$	10,000	$	—	$	20,155
Marketable securities:
Municipal bonds	$	—	$	44,705	$	—	$	44,705
Corporate bonds	—		48,296		—		48,296
Total marketable securities	$	—	$	93,001	$	—	$	93,001
Investments in privately-held companies (1)	$	—	$	—	$	3,390	$	3,390

⁽¹⁾ Included in other long-term assets.

For certain other financial instruments, including accounts receivable and accounts payable, the carrying value approximates fair value due to the relatively short maturity of these items.

9. LEASES

The Company’s leases are primarily for office space used in the ordinary course of business.

Accounting policy

All the Company’s leases are operating leases. The Company accounts for a contract as a lease when it has the right to control the asset for a period of time while obtaining substantially all of the asset’s economic benefits. The Company determines the initial classification and measurement of its operating right of use assets and lease liabilities at the lease commencement date and thereafter if modified. Fixed lease costs are recognized on a straight-line basis over the term of the lease. Variable lease costs are recognized in the period in which the obligation for those payments is incurred. The Company combines lease and non-lease components in the determination of lease costs for its office space leases. The lease liability includes lease payments related to options to extend or renew the lease term, if the Company is reasonably certain it will exercise those options. The Company’s leases do not contain any material residual value guarantees or restrictive covenants.

11

PEGASYSTEMS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Expense

	Three Months Ended March 31,
(in thousands)	2019
Operating lease costs	$	4,300
Variable lease costs (1)	1,321
	$	5,621

⁽¹⁾ Lease costs that are not fixed at lease commencement.

Right of use assets and lease liabilities

(in thousands)	March 31, 2019
Right of use assets (1)	$	46,464
Lease liabilities (2)	$	12,447
Long-term lease liabilities	$	45,325

⁽¹⁾ An asset that represents the Company’s right to use the leased asset during the lease term. Included in other long-term assets. ⁽²⁾ Included in other current liabilities.

The weighted-average remaining lease term and discount rate for the Company’s leases were:

	March 31, 2019
Weighted-average remaining lease term	4.3 years
Weighted-average discount rate (1)	5.7	%

⁽¹⁾ The rate implicit in the lease is not readily determinable in most of the Company’s leases, and 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 at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of the lease.

Maturities of lease liabilities were:

(in thousands)	March 31, 2019
Remainder of 2019	$	11,324
2020	15,784
2021	13,764
2022	12,761
2023	11,604
Total lease payments	65,237
Less: imputed interest (1)	(7,465		)
	$	57,772

⁽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 as a result of a lease reassessment event.

As of December 31, 2018, the Company’s future minimum rental payments required under operating leases with noncancellable terms in excess of one year as determined prior to the adoption of ASC 842 were:

(in thousands)	Operating Leases (1)
2019	$	15,993
2020	14,807
2021	13,262
2022	12,279
2023	11,084
	$	67,425

⁽¹⁾ Operating leases include future minimum rent payments, net of estimated sublease income for facilities that the Company has vacated pursuant to its restructuring activities.

12

PEGASYSTEMS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Cash flow information

	Three Months Ended March 31,
(in thousands)	2019
Cash paid for leases	5,197
Right of use assets recognized for new leases (non-cash)	8,034

10. REVENUE

Geographic revenue

	Three Months Ended   March 31,
(Dollars in thousands)	2019				2018
U.S.	$	103,991	48	%	$	113,985	48	%
Other Americas	28,829		14	%	17,715		8	%
United Kingdom (“U.K.”)	24,549		12	%	26,094		11	%
Europe (excluding U.K.), Middle East, and Africa	34,186		16	%	31,826		14	%
Asia-Pacific	20,991		10	%	45,562		19	%
	$	212,546	100	%	$	235,182	100	%

Revenue streams

	Three Months Ended   March 31,
(in thousands)	2019		2018
Perpetual license	$	14,950	$	23,078
Term license	48,314		64,695
Revenue recognized at a point in time	63,264		87,773
Maintenance	67,706		64,525
Cloud	27,758		15,582
Consulting	53,818		67,302
Revenue recognized over time	149,282		147,409
	$	212,546	$	235,182

(in thousands)	Three Months Ended   March 31,
	2019		2018
Term license	$	48,314	$	64,695
Cloud	27,758		15,582
Maintenance	67,706		64,525
Subscription (1)	143,778		144,802
Perpetual license	14,950		23,078
Consulting	53,818		67,302
	$	212,546	$	235,182

⁽¹⁾ Reflects client arrangements (term license, cloud, and maintenance) that are subject to renewal.

13

PEGASYSTEMS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Remaining performance obligations

Revenue recognition timing on existing contracts:

	March 31, 2019
(Dollars in thousands)	Perpetual license		Term License		Maintenance		Cloud		Consulting		Total
1 year or less	$	10,263	$	44,404	$	187,324	$	115,548	$	13,251	$	370,790	58	%
1-2 years	998		4,274		9,350		91,539		1,363		107,524		17	%
2-3 years	2,180		756		4,438		71,509		473		79,356		13	%
Greater than 3 years	—		135		2,008		72,742		27		74,912		12	%
	$	13,441	$	49,569	$	203,120	$	351,338	$	15,114	$	632,582	100	%

	March 31, 2018
(Dollars in thousands)	Perpetual license		Term License		Maintenance		Cloud		Consulting		Total
1 year or less	$	33,859	$	21,087	$	156,702	$	47,764	$	9,403	$	268,815	59	%
1-2 years	14,106		7,877		21,381		52,849		1,098		97,311		21	%
2-3 years	1,204		5,634		4,924		37,844		—		49,606		11	%
Greater than 3 years	382		853		1,825		40,478		—		43,538		9	%
	$	49,551	$	35,451	$	184,832	$	178,935	$	10,501	$	459,270	100	%

The above amounts include contracts that have an original expected duration of one year or less.

11. STOCK-BASED COMPENSATION

Expense

	Three Months Ended   March 31,
(in thousands)	2019			2018
Cost of revenues	$	4,519		$	3,701
Selling and marketing	7,374			4,658
Research and development	4,560			3,637
General and administrative	1,897			3,113
	$	18,350		$	15,109
Income tax benefit	$	(3,740	)	$	(3,141	)

The Company recognizes stock-based compensation using the accelerated recognition method, treating each vesting tranche as if it were an individual grant. As of March 31, 2019, the Company had $114.1 million of unrecognized stock-based compensation expense, net of estimated forfeitures, related to all unvested restricted stock units (“RSUs”) and stock options. These amounts are expected to be recognized over a weighted-average period of 2.3 years.

Grants

The Company granted the following stock-based compensation awards:

	Three Months Ended March 31,
	2019
(in thousands)	Shares	Total Fair Value
RSUs	839	$	53,184
Non-qualified stock options	1,770	$	33,344

RSU vestings and stock option exercises

During the three months ended March 31, 2019, 0.5 million shares of common stock were issued due to stock option exercises and RSU vestings under the Company’s stock-based compensation plans.

14

PEGASYSTEMS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

12. INCOME TAXES

Effective income tax rate

	Three Months Ended March 31,
(Dollars in thousands)	2019			2018
Benefit from income taxes	$	(8,300	)	$	(4,222	)
Effective income tax rate	22		%	(53		)%

During the three months ended March 31, 2019, the Company’s effective income tax rate changed primarily due to the Global Intangible Low-Taxed Income (“GILTI”) and Base Erosion and Anti-Abuse Tax (“BEAT”) provisions of the Tax Reform Act. The Company’s effective income tax rate was also affected by excess tax benefits from stock-based compensation, an increase in U.S. research and development tax credits, and a decrease in uncertain tax positions as a result of the lapse of the statute of limitations on certain foreign reserves.

13. EARNINGS PER SHARE

Basic earnings per share is computed using the weighted-average number of common shares outstanding during the applicable period. Diluted earnings per share is computed using the weighted-average number of common shares outstanding during the applicable period, plus the dilutive effect of outstanding stock options and RSUs, using the treasury stock method. In periods of loss, all stock options and RSUs are excluded, as their inclusion would be anti-dilutive.

The calculation of the basic and diluted earnings per share was:

	Three Months Ended   March 31,
(in thousands, except per share amounts)	2019			2018
Basic
Net (loss) income	$	(28,717	)	$	12,200
Weighted-average common shares outstanding	78,584			78,236
(Loss) earnings per share, basic	$	(0.37	)	$	0.16
Diluted
Net (loss) income	$	(28,717	)	$	12,200
Weighted-average effect of dilutive securities:
Stock options	—			3,119
RSUs	—			1,747
Effect of dilutive securities	—			4,866
Weighted-average common shares outstanding, assuming dilution	78,584			83,102
(Loss) earnings per share, diluted	$	(0.37	)	$	0.15
Outstanding anti-dilutive stock options and RSUs (1)	5,563			397

⁽¹⁾ Certain outstanding stock options and RSUs were excluded from the computation of diluted earnings per share because they were anti-dilutive in the period presented. These awards may be dilutive in the future.

15

ITEM 2.     MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains or incorporates forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, statements about our future financial performance and business plans, the adequacy of our liquidity and capital resources, the continued payment of quarterly dividends, the timing of revenue recognition, and are described more completely in Part I of our Annual Report on Form 10-K for the year ended December 31, 2018.

These forward-looking statements are based on current expectations, estimates, forecasts, and projections about the industry and markets in which we operate, and management’s beliefs and assumptions. In addition, other written or oral statements that constitute forward-looking statements may be made by us or on our behalf. Words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “could,” “estimate,” “may,” “target,” “strategy,” “is intended to,” “project,” “guidance,” “likely,” “usually,” or variations of such words and similar expressions are intended to identify such forward-looking statements.

Important factors that could cause actual future activities and results to differ materially from those expressed in such forward-looking statements include, among others, variation in demand for our products and services, reliance on third party relationships, reliance on key personnel, the inherent risks associated with international operations and the continued uncertainties in the global economy, our continued effort to market and sell both domestically and internationally, foreign currency exchange rates, the potential legal and financial liabilities and reputation damage due to cyber-attacks and security breaches, and management of our growth. These risks and other factors that could cause actual results to differ materially from those expressed in such forward-looking statements are described more completely in Part I of our Annual Report on Form 10-K for the year ended December 31, 2018as well as 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 contained in such statements will be achieved. Although new information, future events, or risks may cause actual results to differ materially from future results expressed or implied by such forward-looking statements, except as required by applicable law, we do not undertake and specifically disclaim any obligation to publicly update or revise these forward-looking statements whether as the result of new information, future events, or otherwise.

BUSINESS OVERVIEW

We develop, market, license, and support enterprise software applications that help organizations transform the way they engage with their customers and process and complete work across their enterprise. We license our no-code Pega Platform™ for rapid application development to clients that wish to build and extend their own business applications. Our cloud-architected portfolio of customer engagement and digital process automation applications leverages artificial intelligence (“AI”), case management, and robotic automation technology, built on our unified no-code Pega Platform, empowering businesses to quickly design, extend, and scale their enterprise applications to meet strategic business needs.

Our target clients are Global 3000 organizations and government agencies that require applications to differentiate themselves in the markets they serve. Our applications achieve and facilitate differentiation by increasing business agility, driving growth, improving productivity, attracting and retaining customers, and reducing risk. We deliver applications tailored to our clients’ specific industry needs.

Performance metrics

We utilize a number of different performance measures in analyzing and assessing our overall performance, making operating decisions, and forecasting and planning for future periods.

(Dollars in thousands, except per share amounts)	Three Months Ended   March 31,					Change
	2019			2018
Total revenue	$	212,546		$	235,182	$	(22,636	)	(10	)%
Subscription revenue (1)	$	143,778		$	144,802	$	(1,024	)	(1	)%
Net (loss) income	$	(28,717	)	$	12,200	$	(40,917	)	*
(Loss) earnings per share, diluted	$	(0.37	)	$	0.15	$	(0.52	)	*

* not meaningful

⁽¹⁾Reflects client arrangements (term license, cloud, and maintenance) that are subject to renewal.

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Annual Contract Value (“ACV”) ⁽¹⁾ 

The change in ACV measures the growth and predictability of future cash flows from Pega cloud and client cloud committed arrangements as of the end of the particular reporting period.

	March 31,				Change
(Dollars in thousands)	2019		2018
Pega Cloud ACV	$	128,636	$	72,966	$	55,670	76	%
Client Cloud ACV	462,130		421,159		40,971		10	%
Total ACV	$	590,766	$	494,125	$	96,641	20	%

⁽¹⁾ ACV, as of a given date, is the sum of the following two components:

• Client Cloud: the sum of (1) the annual value of each term license contract in effect on such date, which is equal to its total value divided by the total number of years and (2) maintenance revenue reported for the quarter ended on such date, multiplied by four. We do not provide hosting for Client Cloud arrangements

• Pega Cloud: the total of the annual value of each cloud contract in effect on such date, which is equal to its total value divided by the total number of years.

Remaining performance obligations

Revenue recognition timing on existing contracts:

	March 31, 2019
(Dollars in thousands)	Perpetual license		Term license		Maintenance		Cloud		Consulting		Total
1 year or less	$	10,263	$	44,404	$	187,324	$	115,548	$	13,251	$	370,790	58	%
1-2 years	998		4,274		9,350		91,539		1,363		107,524		17	%
2-3 years	2,180		756		4,438		71,509		473		79,356		13	%
Greater than 3 years	—		135		2,008		72,742		27		74,912		12	%
	$	13,441	$	49,569	$	203,120	$	351,338	$	15,114	$	632,582	100	%

	March 31, 2018
(Dollars in thousands)	Perpetual license		Term license		Maintenance		Cloud		Consulting		Total
1 year or less	$	33,859	$	21,087	$	156,702	$	47,764	$	9,403	$	268,815	59	%
1-2 years	14,106		7,877		21,381		52,849		1,098		97,311		21	%
2-3 years	1,204		5,634		4,924		37,844		—		49,606		11	%
Greater than 3 years	382		853		1,825		40,478		—		43,538		9	%
	$	49,551	$	35,451	$	184,832	$	178,935	$	10,501	$	459,270	100	%

The above amounts include contracts that have an original expected duration of one year or less.

CRITICAL ACCOUNTING POLICES

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 in accordance with accounting principles generally accepted in the United States

17

(“U.S.”) and the rules and regulations of the SEC for interim financial reporting. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and 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 available information.

For more information regarding our critical accounting policies, we encourage you to read the discussion contained in the following locations in our Annual Report on Form 10-K for the year ended December 31, 2018:

• “Critical Accounting Estimates and Significant Judgments” in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations”; and

• Note 2. “Significant Accounting Policies” in Item 8. “Financial Statements and Supplementary Data”.

There have been no significant changes to our critical accounting policies as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2018.

RESULTS OF OPERATIONS

Revenue

(Dollars in thousands)	Three Months Ended   March 31,								Change
	2019				2018
Term license	$	48,314	23	%	$	64,695	28	%	$	(16,381	)	(25	)%
Cloud	27,758		13	%	15,582		7	%	12,176			78	%
Maintenance	67,706		32	%	64,525		27	%	3,181			5	%
Subscription revenue (1)	143,778		68	%	144,802		62	%	(1,024		)	(1	)%
Perpetual license	14,950		7	%	23,078		10	%	(8,128		)	(35	)%
Consulting	53,818		25	%	67,302		28	%	(13,484		)	(20	)%
	$	212,546	100	%	$	235,182	100	%	$	(22,636	)	(10	)%

⁽¹⁾Reflects client arrangements (term license, cloud, and maintenance) that are subject to renewal.

Our license revenue is derived from sales of our applications and Pega Platform. Our cloud revenue is derived from our hosted Pega Platform and software applications.

We expect our revenue mix to continue to shift in favor of our subscription offerings, particularly cloud arrangements, which could result in slower total revenue growth in the near term. Revenue from cloud arrangements is generally recognized over the service period, while revenue from term and perpetual license arrangements is generally recognized upfront when the license rights become effective.

Subscription revenue

The decrease in term license revenue in the three months ended March 31, 2019 was primarily due to lower average revenue per arrangement. The increase in cloud revenue in the three months ended March 31, 2019 reflects the shift in client preferences to cloud arrangements from other types of arrangements.

The increase in maintenance revenue was primarily due to the continued growth in the aggregate value of the installed base of our software and strong renewal rates in excess of 90%.

Perpetual license

The decrease in perpetual license revenue in the three months ended March 31, 2019 reflects the shift in client preferences in favor of our cloud offerings and away from perpetual license arrangements.

Consulting

Our consulting revenue fluctuates depending upon the mix of new implementation projects we perform as compared to those performed by our enabled clients or led by our partners. The decrease in consulting revenue in the three months ended March 31, 2019 was primarily due to a decrease in billable hours.

18

Gross profit

	Three Months Ended   March 31,								Change
(Dollars in thousands)	2019				2018
Software license	$	61,886	98	%	$	86,518	99	%	$	(24,632	)	(28	)%
Maintenance	61,371		91	%	58,443		91	%	2,928			5	%
Cloud	14,460		52	%	7,861		50	%	6,599			84	%
Consulting	392		1	%	6,746		10	%	(6,354		)	(94	)%
	$	138,109	65	%	$	159,568	68	%	$	(21,459	)	(13	)%

The recent shift in our revenue mix toward cloud arrangements has resulted in slower total gross profit growth as our cloud business continues to grow and scale. Revenue from cloud arrangements is generally recognized over the service period, while revenue from term and perpetual license arrangements is generally recognized upfront when the license rights become effective.

The decrease in total gross profit in the three months ended March 31, 2019 was primarily due to the decrease in term and perpetual license revenue reflecting the shift in client preferences toward our cloud offerings.

The decrease in total gross profit percent in the three months ended March 31, 2019 was driven by a shift in favor of cloud arrangements, which are lower margin than our term and perpetual license revenue streams. The increase in cloud gross profit percent was driven by cost efficiency gains as our cloud business continues to grow and scale. The decrease in consulting gross profit percent was driven by a decrease in billable hours as consulting resources were transitioning to new projects after completing a large project which began in the second half of 2016 and an increase in consulting resource availability in Europe as we continue growing and leveraging our partner network.

Operating expenses

Selling and marketing

	Three Months Ended March 31,						Change
(Dollars in thousands)	2019			2018
Selling and marketing (1)	$	108,865		$	88,383		$	20,482	23	%
As a percent of total revenue	51		%	38		%
Selling and marketing headcount, end of period	1,282			1,082			200		18	%

⁽¹⁾ Includes compensation, benefits, and other headcount-related expenses as well as advertising, promotions, trade shows, seminars, and the amortization of client-related intangibles.

The increase in the three months ended March 31, 2019 was primarily due to an increase in compensation and benefits of $17.7 million, attributable to increased headcount, and an increase of $4.5 million in deferred contract commission amortization. The increase in headcount reflects our efforts to increase our sales capacity to deepen relationships with existing clients and target new accounts.

Research and development

	Three Months Ended March 31,						Change
(Dollars in thousands)	2019			2018
Research and development (1)	$	50,596		$	46,785		$	3,811	8	%
As a percent of total revenue	24		%	20		%
Research and development headcount, end of period	1,638			1,602			36		2	%

⁽¹⁾ Includes compensation, benefits, contracted services, and other headcount-related expenses associated with the development of our products, as well as enhancements and design changes to existing products and the integration of acquired technologies.

The increase in the three months ended March 31, 2019 was primarily due to an increase in compensation and benefits of $2.1 million, attributable to an increase in headcount, and an increase of $1.6 million in cloud hosting expenses as we expand our cloud-focused research and development activities.

19

General and administrative

	Three Months Ended March 31,						Change
(Dollars in thousands)	2019			2018
General and administrative (1)	$	12,676		$	16,464		$	(3,788	)	(23	)%
As a percent of total revenue	6		%	7		%
General and administrative headcount, end of period (2)	373			299			74			25	%

⁽¹⁾ Includes compensation, benefits, and other headcount-related expenses associated with finance, legal, corporate governance, and other administrative headcount. Also includes accounting, legal, and other professional consulting and administrative fees. ⁽²⁾ The headcount includes employees in information technology and corporate services departments, whose costs are partially allocated to other operating expense areas.

The decrease in the three months ended March 31, 2019 was primarily due to a decrease in compensation and benefits of $1.2 million, due to a decrease in equity compensation, and a decrease of $1.9 million in legal and other professional services fees. Despite the headcount increase, associated compensation and benefits did not increase because these costs are primarily allocated to other operating expense areas.

Stock-based compensation

	Three Months Ended March 31,						Change
(Dollars in thousands)	2019			2018
Cost of revenues	$	4,519		$	3,701		$	818		22	%
Selling and marketing	7,374			4,658			2,716			58	%
Research and development	4,560			3,637			923			25	%
General and administrative	1,897			3,113			(1,216		)	(39	)%
	$	18,350		$	15,109		$	3,241		21	%
Income tax benefit	$	(3,740	)	$	(3,141	)	$	(599	)	19	%

The increase in the three months ended March 31, 2019 was primarily due to the increased value of our annual periodic equity awards granted in March 2019 and 2018. These awards generally have a five-year vesting schedule.

Non-operating (expense) income, net

	Three Months Ended March 31,						Change
(Dollars in thousands)	2019			2018
Foreign currency transaction loss	$	(3,712	)	$	(1,085	)	$	(2,627	)	242	%
Interest income, net	723			764			(41		)	(5	)%
Other income, net	—			363			(363		)	(100	)%
	$	(2,989	)	$	42		$	(3,031	)	*

* not meaningful

The change in foreign currency transaction loss was primarily due to unrealized losses on foreign currency denominated cash and receivables of our U.K subsidiary due to fluctuations in foreign currency exchange rates as the British Pound strengthened against the Euro and U.S. dollar.

Benefit from income taxes

	Three Months Ended March 31,						Change
(Dollars in thousands)	2019			2018
Benefit from income taxes	$	(8,300	)	$	(4,222	)	$	(4,078	)	97	%
Effective income tax rate	22		%	(53		)%

The inclusion of excess tax benefits from stock-based compensation in the provision for income taxes has increased the variability of the effective tax rates in recent periods. This fluctuation may continue in future periods, as the amount of excess tax benefits from stock-based compensation awards varies depending on our future stock price in relation to the fair value of awards, the timing of RSU vestings, the exercise behavior of our stock option holders, and the total value of future grants of stock-based compensation awards.

During the three months ended March 31, 2019, the Company’s effective income tax rate changed primarily due to the Global Intangible Low-Taxed Income (“GILTI”) and Base Erosion and Anti-Abuse Tax (“BEAT”) provisions of the Tax Reform Act. The Company’s effective income tax rate was also affected by excess tax benefits from stock-based compensation, an increase in U.S. research and development tax credits, and a decrease in uncertain tax positions as a result of the lapse of the statute of limitations on certain foreign reserves.

20

LIQUIDITY AND CAPITAL RESOURCES

	Three Months Ended March 31,
(in thousands)	2019			2018
Cash provided by (used in):
Operating activities	$	22,703		$	55,655
Investing activities	(1,466		)	(31,278		)
Financing activities	(25,587		)	(23,052		)
Effect of exchange rates on cash and cash equivalents	295			2,186
Net (decrease) increase in cash and cash equivalents	$	(4,055	)	$	3,511

(in thousands)	March 31, 2019		December 31, 2018
Held by U.S. entities	$	141,051	$	143,533
Held by foreign entities	61,120		63,890
Total cash, cash equivalents, and marketable securities	$	202,171	$	207,423

We believe that our current cash, cash equivalents, marketable securities, and cash flow from operations will be sufficient to fund our operations, quarterly cash dividends, and stock repurchases for at least the next 12 months.

If it became necessary to repatriate foreign funds, we may be required to pay U.S. state and local taxes, as well as foreign taxes, upon repatriation. Due to the complexity of income tax laws and regulations, and the effects of the Tax Reform Act, it is impracticable to estimate the amount of taxes we would have to pay.

Cash provided by operating activities

As client preferences continue to shift in favor of cloud arrangements, we could continue to experience slower operating cash flow growth in the near term. Cash from cloud arrangements is generally collected throughout the service period of three to five years, while cash from perpetual license arrangements is generally collected upfront, shortly after the license rights become effective.

The primary driver during the three months ended March 31, 2019 was $78.1 million in cash generated from client receivables, largely due to cash collections and the timing of billings.

Cash used in investing activities

Cash used in investing activities is primarily driven by the timing of investment maturities and purchases of new investments.

Cash used in financing activities

We used cash primarily for repurchases of our common stock under our publicly announced stock repurchase programs, stock repurchases for tax withholdings for the net settlement of our equity awards, and the payment of our quarterly dividend.

Stock repurchase program ⁽¹⁾ 

The changes in the remaining stock repurchase authority was:

	Three Months Ended March 31,
(in thousands)	2019
January 1	$	6,620
Authorizations (2)	60,000
Repurchases	(7,586		)
March 31,	$	59,034

⁽¹⁾ Purchases under these programs have been made on the open market. ⁽²⁾On March 15, 2019, we announced that our Board of Directors extended the expiration date of the current stock repurchase program to June 30, 2020 and increased the amount of common stock we are authorized to repurchase by $60 million between March 15, 2019 and June 30, 2020.

21

Common stock repurchases

	Three Months Ended March 31,
	2019			2018
(in thousands)	Shares	Amount		Shares	Amount
Tax withholdings for net settlement of equity awards	232	$	14,838	270	$	15,575
Stock repurchase program (1)
Repurchases paid	141	7,387		89	4,998
Repurchases unsettled at period end	3	199		12	690
Activity in period (2)	376	$	22,424	371	$	21,263

⁽¹⁾ Represents activity under our publicly announced stock repurchase programs. ⁽²⁾ During the three months ended March 31, 2019 and 2018, instead of receiving cash from the equity holders, we withheld shares with a value of $12.2 million and $11.2 million, respectively, for the exercise price of options. These amounts have been excluded from the table above.

Dividends

	Three Months Ended March 31,
(in thousands)	2019		2018
Dividend payments to shareholders	$	2,363	$	2,344

It is our current intention to pay a quarterly cash dividend of $0.03 per share, however, the Board of Directors may terminate or modify the dividend program at any time without prior notice.

ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes during the three months ended March 31, 2019 to the market risk exposure disclosed in our Annual Report on Form 10-K for the year ended December 31, 2018.

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 March 31, 2019. 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 March 31, 2019.

(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 March 31, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

22

PART II - OTHER INFORMATION

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, 2018. These risk factors could materially affect our business, financial condition, and future results and could 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 from time to time.

There have been no material changes during the three months ended March 31, 2019 to the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2018.

ITEM 2.     UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table sets forth information regarding our repurchases of our common stock during the three months ended March 31, 2019.

(in thousands, except per share amounts)	Total Number of Shares Purchased (1)	Average  Price Paid per Share (1)		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 Repurchase Programs (2)
January 1, 2019 - January 31, 2019	153	$	51.30	129	$	18
February 1, 2019 - February 28, 2019	129	$	63.81	—	$	18
March 1, 2019 - March 31, 2019	285	$	64.97	15	$	59,034
	567	$	61.03

⁽¹⁾ Shares withheld to cover the option exercise price and tax withholding obligations under the net settlement provisions of our stock compensation awards have been included in these amounts.

⁽²⁾On March 15, 2019, we announced that our Board of Directors extended the expiration date of the current stock repurchase program to June 30, 2020 and increased the amount of common stock we are authorized to repurchase by $60 million between March 15, 2019 and June 30, 2020 (the “Current Program”). Under the Current Program, purchases may be made from time to time on the open market or in privately negotiated transactions. Shares may be repurchased in such amounts as market conditions warrant, subject to regulatory and other considerations. We have established a pre-arranged stock repurchase plan, intended to comply with the requirements of Rule 10b5-1 under the Exchange Act, and Rule 10b-18 under the Exchange Act (the “10b5-1 Plan”). All stock repurchases under the Current Program during closed trading window periods will be made pursuant to the 10b5-1 Plan.

ITEM 6.     EXHIBITS

Exhibit No.	Description
31.1	Certification pursuant to Exchange Act Rules 13a-14 and 15d-14 of the Chief Executive Officer.
31.2	Certification pursuant to Exchange Act Rules 13a-14 and 15d-14 of the Chief Financial Officer.
32+	Certification pursuant to 18 U.S.C. Section 1350 of the Chief Executive Officer and the Chief Financial Officer.
101.INS	XBRL Instance document.
101.SCH	XBRL Taxonomy Extension Schema Document.
101.CAL	XBRL Taxonomy Calculation Linkbase Document.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB	XBRL Taxonomy Label Linkbase Document.
101.PRE	XBRL Taxonomy Presentation Linkbase Document.

+ Indicates that the exhibit is being furnished with this report and is not filed as a part of it.

23

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:	May 7, 2019	By:	/s/ KENNETH STILLWELL
			Kenneth Stillwell
			Chief Financial Officer and Chief Administrative Officer
			(Principal Financial Officer)

24

EX-31.1

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: May 7, 2019

/s/ ALAN TREFLER

Alan Trefler

Chairman and Chief Executive Officer

(Principal Executive Officer)

EX-31.2

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: May 7, 2019

/s/ KENNETH STILLWELL

Kenneth Stillwell

Chief Financial Officer and Chief Administrative Officer

(Principal Financial Officer)

EX-32

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 endedMarch 31, 2019 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 Financial Officer and Chief Administrative 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: May 7, 2019

/s/ ALAN TREFLER

Alan Trefler

Chairman and Chief Executive Officer

(Principal Executive Officer)

/s/ KENNETH STILLWELL

Kenneth Stillwell

Chief Financial Officer and Chief Administrative Officer

(Principal Financial Officer)

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2019	May 01, 2019
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q1
Trading Symbol	PEGA
Entity Registrant Name	PEGASYSTEMS INC.
Entity Central Index Key	0001013857
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		78,908,093
Entity Emerging Growth Company	false
Entity Small Business	false

XML

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Current assets:
Cash and cash equivalents	$ 110,367	$ 114,422
Marketable securities	91,804	93,001
Total cash, cash equivalents, and marketable securities	202,171	207,423
Accounts receivable	135,352	180,872
Unbilled receivables	161,480	172,656
Other current assets	63,731	49,684
Total current assets	562,734	610,635
Long-term unbilled receivables	130,494	151,237
Goodwill	72,898	72,858
Other long-term assets	190,433	147,823
Total assets	956,559	982,553
Current liabilities:
Accounts payable	11,559	16,487
Accrued expenses	40,947	45,506
Accrued compensation and related expenses	56,349	84,671
Deferred revenue	180,845	185,145
Other current liabilities	12,447	0
Total current liabilities	302,147	331,809
Operating lease liabilities	45,325	0
Deferred income tax liabilities	8,319	6,939
Other long-term liabilities	12,339	22,274
Total liabilities	368,130	361,022
Stockholders’ equity:
Preferred stock, 1,000 shares authorized; none issued	0	0
Common stock, 200,000 shares authorized; 78,896 and 78,526 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively	789	785
Additional paid-in capital	119,182	123,205
Retained earnings	479,779	510,863
Accumulated other comprehensive loss	(11,321)	(13,322)
Total stockholders’ equity	588,429	621,531
Total liabilities and stockholders’ equity	$ 956,559	$ 982,553

XML

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - shares	Mar. 31, 2019	Dec. 31, 2018
Statement of Financial Position [Abstract]
Preferred stock, shares authorized (in shares)	1,000,000	1,000,000
Preferred stock, shares issued (in shares)	0	0
Common stock, shares authorized (in shares)	200,000,000	200,000,000
Common stock, shares issued (in shares)	78,896,000	78,526,000
Common stock, shares outstanding (in shares)	78,896,000	78,526,000

XML

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Revenue
Total revenue	$ 212,546	$ 235,182
Cost of revenue
Total cost of revenue	74,437	75,614
Gross profit	138,109	159,568
Operating expenses
Selling and marketing	108,865	88,383
Research and development	50,596	46,785
General and administrative	12,676	16,464
Total operating expenses	172,137	151,632
(Loss) income from operations	(34,028)	7,936
Foreign currency transaction loss	(3,712)	(1,085)
Interest income, net	723	764
Other income, net	0	363
(Loss) income before benefit from income taxes	(37,017)	7,978
Benefit from income taxes	(8,300)	(4,222)
Net (loss) income	$ (28,717)	$ 12,200
(Loss) earnings per share
Basic (in dollars per share)	$ (0.37)	$ 0.16
Diluted (in dollars per share)	$ (0.37)	$ 0.15
Weighted-average number of common shares outstanding
Basic (in shares)	78,584	78,236
Diluted (in shares)	78,584	83,102
Software license
Revenue
Total revenue	$ 63,264	$ 87,773
Cost of revenue
Total cost of revenue	1,378	1,255
Maintenance
Revenue
Total revenue	67,706	64,525
Cost of revenue
Total cost of revenue	6,335	6,082
Services
Revenue
Total revenue	81,576	82,884
Cost of revenue
Total cost of revenue	$ 66,724	$ 68,277

XML

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Statement of Comprehensive Income [Abstract]
Net (loss) income	$ (28,717)	$ 12,200
Other comprehensive income, net of tax
Unrealized gain (loss) on available-for-sale marketable securities, net of tax	374	(188)
Foreign currency translation adjustments	1,627	4,450
Total other comprehensive income, net of tax	2,001	4,262
Comprehensive (loss) income	$ (26,716)	$ 16,462

XML

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) shares in Thousands, $ in Thousands	Total	Common Stock	Additional Paid-In Capital	Retained Earnings	Accumulated Other Comprehensive (Loss) Income
Balance, beginning of period (in shares) at Dec. 31, 2017		78,081
Balance, beginning of period at Dec. 31, 2017	$ 655,870	$ 781	$ 152,097	$ 509,697	$ (6,705)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Repurchase of common stock (in shares)		(101)
Repurchase of common stock	(5,689)	$ (1)	(5,688)
Issuance of common stock for share-based compensation plans (in shares)		566
Issuance of common stock for share-based compensation plans	(15,551)	$ 5	(15,556)
Stock-based compensation	15,109		15,109
Cash dividends declared ($0.12 per share)	(2,355)			(2,355)
Other comprehensive income	4,262				4,262
Net (loss) income	12,200			12,200
Balance, end of period (in shares) at Mar. 31, 2018		78,546
Balance, end of period at Mar. 31, 2018	$ 663,846	$ 785	145,962	519,542	(2,443)
Balance, beginning of period (in shares) at Dec. 31, 2018	78,526	78,526
Balance, beginning of period at Dec. 31, 2018	$ 621,531	$ 785	123,205	510,863	(13,322)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Repurchase of common stock (in shares)		(144)
Repurchase of common stock	(7,587)	$ (1)	(7,586)
Issuance of common stock for share-based compensation plans (in shares)		514
Issuance of common stock for share-based compensation plans	(14,838)	$ 5	(14,843)
Stock-based compensation	18,406		18,406
Cash dividends declared ($0.12 per share)	(2,367)			(2,367)
Other comprehensive income	2,001				2,001
Net (loss) income	$ (28,717)			(28,717)
Balance, end of period (in shares) at Mar. 31, 2019	78,896	78,896
Balance, end of period at Mar. 31, 2019	$ 588,429	$ 789	$ 119,182	$ 479,779	$ (11,321)

XML

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Parenthetical) - $ / shares	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Statement of Stockholders' Equity [Abstract]
Dividend declared (in dollars per share)	$ 0.12	$ 0.12

XML

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Operating activities:
Net (loss) income	$ (28,717)	$ 12,200
Adjustments to reconcile net (loss) income to cash provided by operating activities:
Stock-based compensation	18,350	15,109
Amortization and depreciation	18,774	10,322
Foreign currency transaction loss	3,712	1,085
Other non-cash	1,471	1,137
Change in operating assets and liabilities, net	9,113	15,802
Cash provided by operating activities	22,703	55,655
Investing activities:
Purchases of investments	(7,224)	(35,204)
Proceeds from maturities and called investments	8,548	5,995
Other	(2,790)	(2,069)
Cash used in investing activities	(1,466)	(31,278)
Financing activities:
Dividend payments to shareholders	(2,363)	(2,344)
Common stock repurchases	(23,224)	(20,708)
Cash used in financing activities	(25,587)	(23,052)
Effect of exchange rate changes on cash and cash equivalents	295	2,186
Net (decrease) increase in cash and cash equivalents	(4,055)	3,511
Cash and cash equivalents, beginning of period	114,422	162,279
Cash and cash equivalents, end of period	$ 110,367	$ 165,790

XML

BASIS OF PRESENTATION

3 Months Ended

Mar. 31, 2019

Accounting Policies [Abstract]

BASIS OF PRESENTATION

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 and footnotes 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, 2018.

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.

The operating results for the interim periods presented are not necessarily indicative of the results expected for the full year 2019.

XML

NEW ACCOUNTING PRONOUNCEMENTS

3 Months Ended

Mar. 31, 2019

Accounting Policies [Abstract]

NEW ACCOUNTING PRONOUNCEMENTS

NEW ACCOUNTING PRONOUNCEMENTS

Financial instruments

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which requires measurement and recognition of expected credit losses for financial assets measured at amortized cost, including accounts receivable, upon initial recognition of that financial asset using a forward-looking expected loss model, rather than an incurred loss model. Credit losses relating to available-for-sale debt securities should be recorded through an allowance for credit losses when the fair value is below the amortized cost of the asset, removing the concept of “other-than-temporary” impairments. The effective date for the Company will be January 1, 2020, with early adoption permitted. The Company is currently evaluating the effect this ASU will have on its consolidated financial statements and related disclosures.

Leases

On January 1, 2019, the Company adopted Accounting Standards Codifications 842 “Leases” (“ASC 842”) using the modified retrospective method, reflecting any cumulative effect as an adjustment to equity. Results for reporting periods beginning on or after January 1, 2019 are presented under ASC 842, while prior period amounts were not adjusted and continue to be reported in accordance with the Company’s historic accounting under ASC 840 “Leases”.

The Company elected the permitted practical expedients to not reassess the following related to leases that commenced before the effective date of ASC 842: (i) whether any expired or existing contracts contain leases; (ii) the lease classification for any expired or existing leases; and (iii) initial direct costs for any existing leases. Upon adoption, the Company recorded right of use assets of $41.8 million and lease liabilities of $54.2 million. The difference between the value of the right of use assets and lease liabilities is due to the reclassification of existing deferred rent, prepaid rent, and unamortized lease incentives as of January 1, 2019.

See Note 9. “Leases” for additional information.

XML

MARKETABLE SECURITIES

3 Months Ended

Mar. 31, 2019

Investments, Debt and Equity Securities [Abstract]

MARKETABLE SECURITIES

MARKETABLE SECURITIES

	March 31, 2019
(in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Municipal bonds	$	42,693	$	86	$	(20	)	$	42,759
Corporate bonds	48,966		142		(63		)	49,045
	$	91,659	$	228	$	(83	)	$	91,804

	December 31, 2018
(in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Municipal bonds	$	44,802	$	13	$	(110	)	$	44,705
Corporate bonds	48,499		23		(226		)	48,296
	$	93,301	$	36	$	(336	)	$	93,001

As of March 31, 2019, the Company did not hold any investments with unrealized losses that are considered to be other-than-temporary.

As of March 31, 2019, maturities of marketable securities ranged from April 2019 to August 2022, with a weighted-average remaining maturity of approximately 1.4 years.

XML

RECEIVABLES, CONTRACT ASSETS, AND DEFERRED REVENUE

3 Months Ended

Mar. 31, 2019

Receivables [Abstract]

RECEIVABLES, CONTRACT ASSETS, AND DEFERRED REVENUE

RECEIVABLES, CONTRACT ASSETS, AND DEFERRED REVENUE

Receivables

(in thousands)	March 31, 2019		December 31, 2018
Accounts receivable	$	135,352	$	180,872
Unbilled receivables	161,480		172,656
Long-term unbilled receivables	130,494		151,237
	$	427,326	$	504,765

Unbilled receivables are client committed amounts for which revenue recognition precedes billing, and billing is solely subject to the passage of time.

As of March 31, 2019 and December 31, 2018, the allowance for doubtful accounts was not material.

Unbilled receivables are expected to be billed in the future as follows:

(Dollars in thousands)	March 31, 2019
1 year or less	$	161,480	55	%
1-2 years	86,496		30	%
2-5 years	43,998		15	%
	$	291,974	100	%

Contract assets and deferred revenue

(in thousands)	March 31, 2019		December 31, 2018
Contract assets (1)	$	3,380	$	3,711
Long-term contract assets (2)	1,818		2,543
	$	5,198	$	6,254
Deferred revenue	$	180,845	$	185,145
Long-term deferred revenue (3)	5,866		5,344
	$	186,711	$	190,489

⁽¹⁾ Included in other current assets. ⁽²⁾ Included in other long-term assets. ⁽³⁾ Included in other long-term liabilities.

Contract assets are amounts under client contracts where revenue recognized exceeds the amount billed to the client and the right to payment is subject to conditions other than the passage of time, such as the completion of a related performance obligation. Deferred revenue consists of billings and payments received in advance of revenue recognition. Contract assets and deferred revenue are netted at the contract level for each reporting period.

The change in deferred revenue in the three months ended March 31, 2019 was primarily due to $89.4 million of revenue recognized, excluding the impact of netting contract assets and deferred revenue at the contract level, during the period that was included in deferred revenue at December 31, 2018, partially offset by new billings in advance of revenue recognition.

XML

DEFERRED CONTRACT COSTS

3 Months Ended

Mar. 31, 2019

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

DEFERRED CONTRACT COSTS

DEFERRED CONTRACT COSTS

The Company recognizes an asset for the incremental costs of obtaining a client contract, which primarily relate to sales commissions, if the Company expects to benefit from those costs for more than one year. Deferred costs are amortized on a straight-line basis over the benefit period, which is on average 5 years.

(in thousands)	March 31, 2019		December 31, 2018
Deferred contract costs (1)	$	64,869	$	64,367

⁽¹⁾ Included in other long-term assets.

	Three Months Ended   March 31,
(in thousands)	2019		2018
Amortization of deferred contract costs (1)	$	8,301	$	3,789

⁽¹⁾Included in selling and marketing expenses.

XML

GOODWILL AND OTHER INTANGIBLE ASSETS

3 Months Ended

Mar. 31, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL AND OTHER INTANGIBLE ASSETS

GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

The change in the carrying amount of goodwill was:

(in thousands)	Three Months Ended March 31,
	2019
Balance as of January 1,	$	72,858
Currency translation adjustments	40
Balance as of March 31,	$	72,898

Intangibles

Intangible assets are recorded at cost and amortized using the straight-line method over their estimated useful lives as follows:

		March 31, 2019
(in thousands)	Useful Lives	Cost		Accumulated Amortization			Net Book Value (1)
Client-related intangibles	4-10 years	$	63,136	$	(52,839	)	$	10,297
Technology	2-10 years	59,742		(51,730		)	8,012
Other	1 - 5 years	5,361		(5,361		)	—
		$	128,239	$	(109,930	)	$	18,309

⁽¹⁾ Included in other long-term assets.

		December 31, 2018
(in thousands)	Useful Lives	Cost		Accumulated Amortization			Net Book Value (1)
Client-related intangibles	4-10 years	$	63,115	$	(51,224	)	$	11,891
Technology	2-10 years	59,742		(50,398		)	9,344
Other	1 - 5 years	5,361		(5,361		)	—
		$	128,218	$	(106,983	)	$	21,235

⁽¹⁾ Included in other long-term assets.

Amortization of intangible assets was:

(in thousands)	Three Months Ended   March 31,
	2019		2018
Cost of revenue	$	1,332	$	1,232
Selling and marketing	1,603		1,605
	$	2,935	$	2,837

XML

ACCRUED EXPENSES

3 Months Ended

Mar. 31, 2019

Payables and Accruals [Abstract]

ACCRUED EXPENSES

ACCRUED EXPENSES

(in thousands)	March 31, 2019		December 31, 2018
Outside professional services expenses	$	8,815	$	10,367
Income and other taxes	7,954		10,387
Marketing and sales program expenses	8,318		5,860
Dividends payable	2,367		2,363
Employee-related expenses	5,432		3,536
Other	8,061		12,993
	$	40,947	$	45,506

XML

FAIR VALUE MEASUREMENTS

3 Months Ended

Mar. 31, 2019

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

Assets and liabilities measured at fair value on a recurring basis

The Company records its cash equivalents, marketable securities, and investments in privately-held companies 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 on which there is 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 to minimize the use of unobservable inputs when determining fair value.

The Company’s cash equivalents are composed of money market funds and time deposits, which are classified within Level 1 and Level 2, respectively, in the fair value hierarchy. The Company’s marketable securities, which are classified within Level 2 of the fair value hierarchy are valued based on a market approach using quoted prices, when available, or matrix pricing compiled by third party pricing vendors, using observable market inputs such as interest rates, yield curves, and credit risk. The Company’s investments in privately-held companies are classified within Level 3 of the fair value hierarchy.

If applicable, the Company will recognize transfers into and out of levels within the fair value hierarchy at the end of the reporting period in which the actual event or change in circumstance occurs. There were no transfers between levels during the three months ended March 31, 2019.

The Company’s assets and liabilities measured at fair value on a recurring basis were:

	March 31, 2019
(in thousands)	Level 1		Level 2		Level 3		Total
Cash equivalents	$	12,401	$	10,062	$	—	$	22,463
Marketable securities:
Municipal bonds	$	—	$	42,759	$	—	$	42,759
Corporate bonds	—		49,045		—		49,045
Total marketable securities	$	—	$	91,804	$	—	$	91,804
Investments in privately-held companies (1)	$	—	$	—	$	3,390	$	3,390

⁽¹⁾ Included in other long-term assets.

	December 31, 2018
(in thousands)	Level 1		Level 2		Level 3		Total
Cash equivalents	$	10,155	$	10,000	$	—	$	20,155
Marketable securities:
Municipal bonds	$	—	$	44,705	$	—	$	44,705
Corporate bonds	—		48,296		—		48,296
Total marketable securities	$	—	$	93,001	$	—	$	93,001
Investments in privately-held companies (1)	$	—	$	—	$	3,390	$	3,390

⁽¹⁾ Included in other long-term assets.

For certain other financial instruments, including accounts receivable and accounts payable, the carrying value approximates fair value due to the relatively short maturity of these items.

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LEASES

3 Months Ended

Mar. 31, 2019

Leases [Abstract]

LEASES

LEASES

The Company’s leases are primarily for office space used in the ordinary course of business.

Accounting policy

All the Company’s leases are operating leases. The Company accounts for a contract as a lease when it has the right to control the asset for a period of time while obtaining substantially all of the asset’s economic benefits. The Company determines the initial classification and measurement of its operating right of use assets and lease liabilities at the lease commencement date and thereafter if modified. Fixed lease costs are recognized on a straight-line basis over the term of the lease. Variable lease costs are recognized in the period in which the obligation for those payments is incurred. The Company combines lease and non-lease components in the determination of lease costs for its office space leases. The lease liability includes lease payments related to options to extend or renew the lease term, if the Company is reasonably certain it will exercise those options. The Company’s leases do not contain any material residual value guarantees or restrictive covenants.

Expense

	Three Months Ended March 31,
(in thousands)	2019
Operating lease costs	$	4,300
Variable lease costs (1)	1,321
	$	5,621

⁽¹⁾ Lease costs that are not fixed at lease commencement.

Right of use assets and lease liabilities

(in thousands)	March 31, 2019
Right of use assets (1)	$	46,464
Lease liabilities (2)	$	12,447
Long-term lease liabilities	$	45,325

⁽¹⁾ An asset that represents the Company’s right to use the leased asset during the lease term. Included in other long-term assets. ⁽²⁾ Included in other current liabilities.

The weighted-average remaining lease term and discount rate for the Company’s leases were:

	March 31, 2019
Weighted-average remaining lease term	4.3 years
Weighted-average discount rate (1)	5.7	%

⁽¹⁾ The rate implicit in the lease is not readily determinable in most of the Company’s leases, and 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 at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of the lease.

Maturities of lease liabilities were:

(in thousands)	March 31, 2019
Remainder of 2019	$	11,324
2020	15,784
2021	13,764
2022	12,761
2023	11,604
Total lease payments	65,237
Less: imputed interest (1)	(7,465		)
	$	57,772

⁽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 as a result of a lease reassessment event.

As of December 31, 2018, the Company’s future minimum rental payments required under operating leases with noncancellable terms in excess of one year as determined prior to the adoption of ASC 842 were:

(in thousands)	Operating Leases (1)
2019	$	15,993
2020	14,807
2021	13,262
2022	12,279
2023	11,084
	$	67,425

⁽¹⁾ Operating leases include future minimum rent payments, net of estimated sublease income for facilities that the Company has vacated pursuant to its restructuring activities.

Cash flow information

	Three Months Ended March 31,
(in thousands)	2019
Cash paid for leases	5,197
Right of use assets recognized for new leases (non-cash)	8,034

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REVENUE

3 Months Ended

Mar. 31, 2019

Revenue from Contract with Customer [Abstract]

REVENUE

REVENUE

Geographic revenue

	Three Months Ended   March 31,
(Dollars in thousands)	2019				2018
U.S.	$	103,991	48	%	$	113,985	48	%
Other Americas	28,829		14	%	17,715		8	%
United Kingdom (“U.K.”)	24,549		12	%	26,094		11	%
Europe (excluding U.K.), Middle East, and Africa	34,186		16	%	31,826		14	%
Asia-Pacific	20,991		10	%	45,562		19	%
	$	212,546	100	%	$	235,182	100	%

Revenue streams

	Three Months Ended   March 31,
(in thousands)	2019		2018
Perpetual license	$	14,950	$	23,078
Term license	48,314		64,695
Revenue recognized at a point in time	63,264		87,773
Maintenance	67,706		64,525
Cloud	27,758		15,582
Consulting	53,818		67,302
Revenue recognized over time	149,282		147,409
	$	212,546	$	235,182

(in thousands)	Three Months Ended   March 31,
	2019		2018
Term license	$	48,314	$	64,695
Cloud	27,758		15,582
Maintenance	67,706		64,525
Subscription (1)	143,778		144,802
Perpetual license	14,950		23,078
Consulting	53,818		67,302
	$	212,546	$	235,182

⁽¹⁾ Reflects client arrangements (term license, cloud, and maintenance) that are subject to renewal.

Remaining performance obligations

Revenue recognition timing on existing contracts:

	March 31, 2019
(Dollars in thousands)	Perpetual license		Term License		Maintenance		Cloud		Consulting		Total
1 year or less	$	10,263	$	44,404	$	187,324	$	115,548	$	13,251	$	370,790	58	%
1-2 years	998		4,274		9,350		91,539		1,363		107,524		17	%
2-3 years	2,180		756		4,438		71,509		473		79,356		13	%
Greater than 3 years	—		135		2,008		72,742		27		74,912		12	%
	$	13,441	$	49,569	$	203,120	$	351,338	$	15,114	$	632,582	100	%

	March 31, 2018
(Dollars in thousands)	Perpetual license		Term License		Maintenance		Cloud		Consulting		Total
1 year or less	$	33,859	$	21,087	$	156,702	$	47,764	$	9,403	$	268,815	59	%
1-2 years	14,106		7,877		21,381		52,849		1,098		97,311		21	%
2-3 years	1,204		5,634		4,924		37,844		—		49,606		11	%
Greater than 3 years	382		853		1,825		40,478		—		43,538		9	%
	$	49,551	$	35,451	$	184,832	$	178,935	$	10,501	$	459,270	100	%

The above amounts include contracts that have an original expected duration of one year or less.

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STOCK-BASED COMPENSATION

3 Months Ended

Mar. 31, 2019

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

Expense

	Three Months Ended   March 31,
(in thousands)	2019			2018
Cost of revenues	$	4,519		$	3,701
Selling and marketing	7,374			4,658
Research and development	4,560			3,637
General and administrative	1,897			3,113
	$	18,350		$	15,109
Income tax benefit	$	(3,740	)	$	(3,141	)

The Company recognizes stock-based compensation using the accelerated recognition method, treating each vesting tranche as if it were an individual grant. As of March 31, 2019, the Company had $114.1 million of unrecognized stock-based compensation expense, net of estimated forfeitures, related to all unvested restricted stock units (“RSUs”) and stock options. These amounts are expected to be recognized over a weighted-average period of 2.3 years.

Grants

The Company granted the following stock-based compensation awards:

	Three Months Ended March 31,
	2019
(in thousands)	Shares	Total Fair Value
RSUs	839	$	53,184
Non-qualified stock options	1,770	$	33,344

RSU vestings and stock option exercises

During the three months ended March 31, 2019, 0.5 million shares of common stock were issued due to stock option exercises and RSU vestings under the Company’s stock-based compensation plans.

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INCOME TAXES

3 Months Ended

Mar. 31, 2019

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

Effective income tax rate

	Three Months Ended March 31,
(Dollars in thousands)	2019			2018
Benefit from income taxes	$	(8,300	)	$	(4,222	)
Effective income tax rate	22		%	(53		)%

During the three months ended March 31, 2019, the Company’s effective income tax rate changed primarily due to the Global Intangible Low-Taxed Income (“GILTI”) and Base Erosion and Anti-Abuse Tax (“BEAT”) provisions of the Tax Reform Act. The Company’s effective income tax rate was also affected by excess tax benefits from stock-based compensation, an increase in U.S. research and development tax credits, and a decrease in uncertain tax positions as a result of the lapse of the statute of limitations on certain foreign reserves.

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EARNINGS PER SHARE

3 Months Ended

Mar. 31, 2019

Earnings Per Share [Abstract]

EARNINGS PER SHARE

EARNINGS PER SHARE

Basic earnings per share is computed using the weighted-average number of common shares outstanding during the applicable period. Diluted earnings per share is computed using the weighted-average number of common shares outstanding during the applicable period, plus the dilutive effect of outstanding stock options and RSUs, using the treasury stock method. In periods of loss, all stock options and RSUs are excluded, as their inclusion would be anti-dilutive.

The calculation of the basic and diluted earnings per share was:

	Three Months Ended   March 31,
(in thousands, except per share amounts)	2019			2018
Basic
Net (loss) income	$	(28,717	)	$	12,200
Weighted-average common shares outstanding	78,584			78,236
(Loss) earnings per share, basic	$	(0.37	)	$	0.16
Diluted
Net (loss) income	$	(28,717	)	$	12,200
Weighted-average effect of dilutive securities:
Stock options	—			3,119
RSUs	—			1,747
Effect of dilutive securities	—			4,866
Weighted-average common shares outstanding, assuming dilution	78,584			83,102
(Loss) earnings per share, diluted	$	(0.37	)	$	0.15
Outstanding anti-dilutive stock options and RSUs (1)	5,563			397

⁽¹⁾ Certain outstanding stock options and RSUs were excluded from the computation of diluted earnings per share because they were anti-dilutive in the period presented. These awards may be dilutive in the future.

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NEW ACCOUNTING PRONOUNCEMENTS (Policies)

3 Months Ended

Mar. 31, 2019

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 and footnotes 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, 2018.

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.

New Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which requires measurement and recognition of expected credit losses for financial assets measured at amortized cost, including accounts receivable, upon initial recognition of that financial asset using a forward-looking expected loss model, rather than an incurred loss model. Credit losses relating to available-for-sale debt securities should be recorded through an allowance for credit losses when the fair value is below the amortized cost of the asset, removing the concept of “other-than-temporary” impairments. The effective date for the Company will be January 1, 2020, with early adoption permitted. The Company is currently evaluating the effect this ASU will have on its consolidated financial statements and related disclosures.

Leases

On January 1, 2019, the Company adopted Accounting Standards Codifications 842 “Leases” (“ASC 842”) using the modified retrospective method, reflecting any cumulative effect as an adjustment to equity. Results for reporting periods beginning on or after January 1, 2019 are presented under ASC 842, while prior period amounts were not adjusted and continue to be reported in accordance with the Company’s historic accounting under ASC 840 “Leases”.

The Company elected the permitted practical expedients to not reassess the following related to leases that commenced before the effective date of ASC 842: (i) whether any expired or existing contracts contain leases; (ii) the lease classification for any expired or existing leases; and (iii) initial direct costs for any existing leases. Upon adoption, the Company recorded right of use assets of $41.8 million and lease liabilities of $54.2 million. The difference between the value of the right of use assets and lease liabilities is due to the reclassification of existing deferred rent, prepaid rent, and unamortized lease incentives as of January 1, 2019.

See Note 9. “Leases” for additional information.

Deferred Contract Cost

Deferred costs are amortized on a straight-line basis over the benefit period, which is on average 5 years.

Leases

All the Company’s leases are operating leases. The Company accounts for a contract as a lease when it has the right to control the asset for a period of time while obtaining substantially all of the asset’s economic benefits. The Company determines the initial classification and measurement of its operating right of use assets and lease liabilities at the lease commencement date and thereafter if modified. Fixed lease costs are recognized on a straight-line basis over the term of the lease. Variable lease costs are recognized in the period in which the obligation for those payments is incurred. The Company combines lease and non-lease components in the determination of lease costs for its office space leases. The lease liability includes lease payments related to options to extend or renew the lease term, if the Company is reasonably certain it will exercise those options. The Company’s leases do not contain any material residual value guarantees or restrictive covenants.

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MARKETABLE SECURITIES (Tables)

3 Months Ended

Mar. 31, 2019

Investments, Debt and Equity Securities [Abstract]

Schedule of Marketable Securities

	March 31, 2019
(in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Municipal bonds	$	42,693	$	86	$	(20	)	$	42,759
Corporate bonds	48,966		142		(63		)	49,045
	$	91,659	$	228	$	(83	)	$	91,804

	December 31, 2018
(in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Municipal bonds	$	44,802	$	13	$	(110	)	$	44,705
Corporate bonds	48,499		23		(226		)	48,296
	$	93,301	$	36	$	(336	)	$	93,001

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RECEIVABLES, CONTRACT ASSETS, AND DEFERRED REVENUE (Tables)

3 Months Ended

Mar. 31, 2019

Receivables [Abstract]

Summary of Receivable

Receivables

(in thousands)	March 31, 2019		December 31, 2018
Accounts receivable	$	135,352	$	180,872
Unbilled receivables	161,480		172,656
Long-term unbilled receivables	130,494		151,237
	$	427,326	$	504,765

Summary of Unbilled Receivables

Unbilled receivables are expected to be billed in the future as follows:

(Dollars in thousands)	March 31, 2019
1 year or less	$	161,480	55	%
1-2 years	86,496		30	%
2-5 years	43,998		15	%
	$	291,974	100	%

Summary of Contract Assets and Deferred Revenue

Contract assets and deferred revenue

(in thousands)	March 31, 2019		December 31, 2018
Contract assets (1)	$	3,380	$	3,711
Long-term contract assets (2)	1,818		2,543
	$	5,198	$	6,254
Deferred revenue	$	180,845	$	185,145
Long-term deferred revenue (3)	5,866		5,344
	$	186,711	$	190,489

⁽¹⁾ Included in other current assets. ⁽²⁾ Included in other long-term assets. ⁽³⁾ Included in other long-term liabilities.

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DEFERRED CONTRACT COSTS (Tables)

3 Months Ended

Mar. 31, 2019

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Schedule of Impairment of Deferred Contract Costs

(in thousands)	March 31, 2019		December 31, 2018
Deferred contract costs (1)	$	64,869	$	64,367

⁽¹⁾ Included in other long-term assets.

Schedule of amortization of deferred contract costs

	Three Months Ended   March 31,
(in thousands)	2019		2018
Amortization of deferred contract costs (1)	$	8,301	$	3,789

⁽¹⁾Included in selling and marketing expenses.

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GOODWILL AND OTHER INTANGIBLE ASSETS (Tables)

3 Months Ended

Mar. 31, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Change in Carrying Amount of Goodwill

The change in the carrying amount of goodwill was:

(in thousands)	Three Months Ended March 31,
	2019
Balance as of January 1,	$	72,858
Currency translation adjustments	40
Balance as of March 31,	$	72,898

Schedule of Amortizable Intangible Assets

Intangible assets are recorded at cost and amortized using the straight-line method over their estimated useful lives as follows:

		March 31, 2019
(in thousands)	Useful Lives	Cost		Accumulated Amortization			Net Book Value (1)
Client-related intangibles	4-10 years	$	63,136	$	(52,839	)	$	10,297
Technology	2-10 years	59,742		(51,730		)	8,012
Other	1 - 5 years	5,361		(5,361		)	—
		$	128,239	$	(109,930	)	$	18,309

⁽¹⁾ Included in other long-term assets.

		December 31, 2018
(in thousands)	Useful Lives	Cost		Accumulated Amortization			Net Book Value (1)
Client-related intangibles	4-10 years	$	63,115	$	(51,224	)	$	11,891
Technology	2-10 years	59,742		(50,398		)	9,344
Other	1 - 5 years	5,361		(5,361		)	—
		$	128,218	$	(106,983	)	$	21,235

⁽¹⁾ Included in other long-term assets.

Amortization of Intangible Assets

Amortization of intangible assets was:

(in thousands)	Three Months Ended   March 31,
	2019		2018
Cost of revenue	$	1,332	$	1,232
Selling and marketing	1,603		1,605
	$	2,935	$	2,837

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ACCRUED EXPENSES (Tables)

3 Months Ended

Mar. 31, 2019

Payables and Accruals [Abstract]

Schedule of Accrued Expenses

(in thousands)	March 31, 2019		December 31, 2018
Outside professional services expenses	$	8,815	$	10,367
Income and other taxes	7,954		10,387
Marketing and sales program expenses	8,318		5,860
Dividends payable	2,367		2,363
Employee-related expenses	5,432		3,536
Other	8,061		12,993
	$	40,947	$	45,506

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FAIR VALUE MEASUREMENTS (Tables)

3 Months Ended

Mar. 31, 2019

Fair Value Disclosures [Abstract]

Assets and Liabilities Measured at Fair Value

The Company’s assets and liabilities measured at fair value on a recurring basis were:

	March 31, 2019
(in thousands)	Level 1		Level 2		Level 3		Total
Cash equivalents	$	12,401	$	10,062	$	—	$	22,463
Marketable securities:
Municipal bonds	$	—	$	42,759	$	—	$	42,759
Corporate bonds	—		49,045		—		49,045
Total marketable securities	$	—	$	91,804	$	—	$	91,804
Investments in privately-held companies (1)	$	—	$	—	$	3,390	$	3,390

⁽¹⁾ Included in other long-term assets.

	December 31, 2018
(in thousands)	Level 1		Level 2		Level 3		Total
Cash equivalents	$	10,155	$	10,000	$	—	$	20,155
Marketable securities:
Municipal bonds	$	—	$	44,705	$	—	$	44,705
Corporate bonds	—		48,296		—		48,296
Total marketable securities	$	—	$	93,001	$	—	$	93,001
Investments in privately-held companies (1)	$	—	$	—	$	3,390	$	3,390

⁽¹⁾ Included in other long-term assets.

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LEASES (Tables)

3 Months Ended

Mar. 31, 2019

Leases [Abstract]

Schedule of Lease Expense

The weighted-average remaining lease term and discount rate for the Company’s leases were:

	March 31, 2019
Weighted-average remaining lease term	4.3 years
Weighted-average discount rate (1)	5.7	%

⁽¹⁾ The rate implicit in the lease is not readily determinable in most of the Company’s leases, and 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 at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of the lease.

Expense

	Three Months Ended March 31,
(in thousands)	2019
Operating lease costs	$	4,300
Variable lease costs (1)	1,321
	$	5,621

⁽¹⁾ Lease costs that are not fixed at lease commencement.

Schedule of Right of Use Asset and Lease Liabilities

Right of use assets and lease liabilities

(in thousands)	March 31, 2019
Right of use assets (1)	$	46,464
Lease liabilities (2)	$	12,447
Long-term lease liabilities	$	45,325

⁽¹⁾ An asset that represents the Company’s right to use the leased asset during the lease term. Included in other long-term assets. ⁽²⁾ Included in other current liabilities.

Schedule of Lease Maturities after Adoption of 842

Maturities of lease liabilities were:

(in thousands)	March 31, 2019
Remainder of 2019	$	11,324
2020	15,784
2021	13,764
2022	12,761
2023	11,604
Total lease payments	65,237
Less: imputed interest (1)	(7,465		)
	$	57,772

⁽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 as a result of a lease reassessment event.

Schedule of Lease Maturities before Adoption of 842

As of December 31, 2018, the Company’s future minimum rental payments required under operating leases with noncancellable terms in excess of one year as determined prior to the adoption of ASC 842 were:

(in thousands)	Operating Leases (1)
2019	$	15,993
2020	14,807
2021	13,262
2022	12,279
2023	11,084
	$	67,425

⁽¹⁾ Operating leases include future minimum rent payments, net of estimated sublease income for facilities that the Company has vacated pursuant to its restructuring activities.

Schedule of Supplemental Cash Flow Lease Information

Cash flow information

	Three Months Ended March 31,
(in thousands)	2019
Cash paid for leases	5,197
Right of use assets recognized for new leases (non-cash)	8,034

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REVENUE (Tables)

3 Months Ended

Mar. 31, 2019

Revenue from Contract with Customer [Abstract]

Disaggregation of Revenue

Geographic revenue

	Three Months Ended   March 31,
(Dollars in thousands)	2019				2018
U.S.	$	103,991	48	%	$	113,985	48	%
Other Americas	28,829		14	%	17,715		8	%
United Kingdom (“U.K.”)	24,549		12	%	26,094		11	%
Europe (excluding U.K.), Middle East, and Africa	34,186		16	%	31,826		14	%
Asia-Pacific	20,991		10	%	45,562		19	%
	$	212,546	100	%	$	235,182	100	%

Revenue streams

	Three Months Ended   March 31,
(in thousands)	2019		2018
Perpetual license	$	14,950	$	23,078
Term license	48,314		64,695
Revenue recognized at a point in time	63,264		87,773
Maintenance	67,706		64,525
Cloud	27,758		15,582
Consulting	53,818		67,302
Revenue recognized over time	149,282		147,409
	$	212,546	$	235,182

(in thousands)	Three Months Ended   March 31,
	2019		2018
Term license	$	48,314	$	64,695
Cloud	27,758		15,582
Maintenance	67,706		64,525
Subscription (1)	143,778		144,802
Perpetual license	14,950		23,078
Consulting	53,818		67,302
	$	212,546	$	235,182

⁽¹⁾ Reflects client arrangements (term license, cloud, and maintenance) that are subject to renewal.

Revenue for Remaining Performance Obligations Expected to be Recognized

Remaining performance obligations

Revenue recognition timing on existing contracts:

	March 31, 2019
(Dollars in thousands)	Perpetual license		Term License		Maintenance		Cloud		Consulting		Total
1 year or less	$	10,263	$	44,404	$	187,324	$	115,548	$	13,251	$	370,790	58	%
1-2 years	998		4,274		9,350		91,539		1,363		107,524		17	%
2-3 years	2,180		756		4,438		71,509		473		79,356		13	%
Greater than 3 years	—		135		2,008		72,742		27		74,912		12	%
	$	13,441	$	49,569	$	203,120	$	351,338	$	15,114	$	632,582	100	%

	March 31, 2018
(Dollars in thousands)	Perpetual license		Term License		Maintenance		Cloud		Consulting		Total
1 year or less	$	33,859	$	21,087	$	156,702	$	47,764	$	9,403	$	268,815	59	%
1-2 years	14,106		7,877		21,381		52,849		1,098		97,311		21	%
2-3 years	1,204		5,634		4,924		37,844		—		49,606		11	%
Greater than 3 years	382		853		1,825		40,478		—		43,538		9	%
	$	49,551	$	35,451	$	184,832	$	178,935	$	10,501	$	459,270	100	%

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STOCK-BASED COMPENSATION (Tables)

3 Months Ended

Mar. 31, 2019

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Summary of Stock Based Compensation Expense

Expense

	Three Months Ended   March 31,
(in thousands)	2019			2018
Cost of revenues	$	4,519		$	3,701
Selling and marketing	7,374			4,658
Research and development	4,560			3,637
General and administrative	1,897			3,113
	$	18,350		$	15,109
Income tax benefit	$	(3,740	)	$	(3,141	)

Summary of stock based compensation award granted

Grants

The Company granted the following stock-based compensation awards:

	Three Months Ended March 31,
	2019
(in thousands)	Shares	Total Fair Value
RSUs	839	$	53,184
Non-qualified stock options	1,770	$	33,344

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INCOME TAXES (Tables)

3 Months Ended

Mar. 31, 2019

Income Tax Disclosure [Abstract]

Summary of Benefit from Income Taxes and Discrete Tax Items

Effective income tax rate

	Three Months Ended March 31,
(Dollars in thousands)	2019			2018
Benefit from income taxes	$	(8,300	)	$	(4,222	)
Effective income tax rate	22		%	(53		)%

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EARNINGS PER SHARE (Tables)

3 Months Ended

Mar. 31, 2019

Earnings Per Share [Abstract]

Summary of Basic and Diluted Earnings Per Share

The calculation of the basic and diluted earnings per share was:

	Three Months Ended   March 31,
(in thousands, except per share amounts)	2019			2018
Basic
Net (loss) income	$	(28,717	)	$	12,200
Weighted-average common shares outstanding	78,584			78,236
(Loss) earnings per share, basic	$	(0.37	)	$	0.16
Diluted
Net (loss) income	$	(28,717	)	$	12,200
Weighted-average effect of dilutive securities:
Stock options	—			3,119
RSUs	—			1,747
Effect of dilutive securities	—			4,866
Weighted-average common shares outstanding, assuming dilution	78,584			83,102
(Loss) earnings per share, diluted	$	(0.37	)	$	0.15
Outstanding anti-dilutive stock options and RSUs (1)	5,563			397

⁽¹⁾ Certain outstanding stock options and RSUs were excluded from the computation of diluted earnings per share because they were anti-dilutive in the period presented. These awards may be dilutive in the future.

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NEW ACCOUNTING PRONOUNCEMENTS (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Jan. 01, 2019
Accounting Policies [Abstract]
Right-of-use assets	$ 46,464	$ 41,800
Lease liabilities	$ 57,772	$ 54,200

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MARKETABLE SECURITIES (Detail) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	$ 91,659	$ 93,301
Unrealized Gains	228	36
Unrealized Losses	(83)	(336)
Fair Value	$ 91,804	93,001
Weighted average remaining maturity of marketable securities	1 year 4 months 24 days
Municipal bonds
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	$ 42,693	44,802
Unrealized Gains	86	13
Unrealized Losses	(20)	(110)
Fair Value	42,759	44,705
Corporate bonds
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	48,966	48,499
Unrealized Gains	142	23
Unrealized Losses	(63)	(226)
Fair Value	$ 49,045	$ 48,296

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RECEIVABLES, CONTRACT ASSETS, AND DEFERRED REVENUE - Summary of Receivable (Detail) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Receivables [Abstract]
Accounts receivable	$ 135,352	$ 180,872
Unbilled receivables	161,480	172,656
Long-term unbilled receivables	130,494	151,237
Total receivables	$ 427,326	$ 504,765

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RECEIVABLES, CONTRACT ASSETS, AND DEFERRED REVENUE - Summary of Unbilled Receivables (Detail) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Receivables [Abstract]
1 year or less	$ 161,480	$ 172,656
1-2 years	86,496
2-5 years	43,998
Total	$ 291,974
Percentage of unbilled receivables, 1 Year or Less	55.00%
Percentage of unbilled receivables, 1-2 Years	30.00%
Percentage of unbilled receivables, 2-5 Years	15.00%
Total percentage of unbilled receivables	100.00%

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RECEIVABLES, CONTRACT ASSETS, AND DEFERRED REVENUE - Summary of Contract Assets and Deferred Revenue (Detail) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Receivables [Abstract]
Contract assets	$ 3,380	$ 3,711
Long-term contract assets	1,818	2,543
Total contract assets	5,198	6,254
Deferred revenue	180,845	185,145
Long-term deferred revenue	5,866	5,344
Total deferred revenue	$ 186,711	$ 190,489

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RECEIVABLES, CONTRACT ASSETS, AND DEFERRED REVENUE - Additional Information (Detail) $ in Millions	3 Months Ended
	Mar. 31, 2019 USD ($)
Receivables [Abstract]
Contract with customer, liability, revenue recognized	$ 89.4

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Deferred Contract Costs - Additional Information (Detail)	3 Months Ended
	Mar. 31, 2019
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
Amortized period	5 years

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DEFERRED CONTRACT COSTS - Schedule of Impairment of Deferred Contract Costs (Detail) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
Deferred contract costs	$ 64,869	$ 64,367

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DEFERRED CONTRACT COSTS - Schedule of Amortization of Deferred Contract Costs (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
Amortization of deferred contract costs	$ 8,301	$ 3,789

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GOODWILL AND OTHER INTANGIBLE ASSETS - Change in Carrying Amount of Goodwill (Detail) $ in Thousands	3 Months Ended
	Mar. 31, 2019 USD ($)
Goodwill [Roll Forward]
Balance as of January 1,	$ 72,858
Currency translation adjustments	40
Balance as of March 31,	$ 72,898

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GOODWILL AND OTHER INTANGIBLE ASSETS - Schedule of Amortizable Intangible Assets (Detail) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2019	Dec. 31, 2018
Goodwill and Other Intangible Assets [Line Items]
Cost	$ 128,239	$ 128,218
Accumulated Amortization	(109,930)	(106,983)
Net Book Value	18,309	21,235
Client-related intangibles
Goodwill and Other Intangible Assets [Line Items]
Cost	63,136	63,115
Accumulated Amortization	(52,839)	(51,224)
Net Book Value	$ 10,297	$ 11,891
Client-related intangibles | Minimum
Goodwill and Other Intangible Assets [Line Items]
Useful Lives	4 years	4 years
Client-related intangibles | Maximum
Goodwill and Other Intangible Assets [Line Items]
Useful Lives	10 years	10 years
Technology
Goodwill and Other Intangible Assets [Line Items]
Cost	$ 59,742	$ 59,742
Accumulated Amortization	(51,730)	(50,398)
Net Book Value	$ 8,012	$ 9,344
Technology | Minimum
Goodwill and Other Intangible Assets [Line Items]
Useful Lives	2 years	2 years
Technology | Maximum
Goodwill and Other Intangible Assets [Line Items]
Useful Lives	10 years	10 years
Other
Goodwill and Other Intangible Assets [Line Items]
Cost	$ 5,361	$ 5,361
Accumulated Amortization	$ (5,361)	$ (5,361)
Other | Minimum
Goodwill and Other Intangible Assets [Line Items]
Useful Lives	1 year	1 year
Other | Maximum
Goodwill and Other Intangible Assets [Line Items]
Useful Lives	5 years	5 years

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GOODWILL AND OTHER INTANGIBLE ASSETS - Amortization of Intangible Assets (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Acquired Finite-Lived Intangible Assets [Line Items]
Total amortization expense	$ 2,935	$ 2,837
Cost of revenue
Acquired Finite-Lived Intangible Assets [Line Items]
Total amortization expense	1,332	1,232
Selling and marketing
Acquired Finite-Lived Intangible Assets [Line Items]
Total amortization expense	$ 1,603	$ 1,605

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ACCRUED EXPENSES - Schedule of Accrued Expenses (Detail) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Payables and Accruals [Abstract]
Outside professional services expenses	$ 8,815	$ 10,367
Income and other taxes	7,954	10,387
Marketing and sales program expenses	8,318	5,860
Dividends payable	2,367	2,363
Employee-related expenses	5,432	3,536
Other	8,061	12,993
Total accrued expenses	$ 40,947	$ 45,506

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FAIR VALUE MEASUREMENTS (Detail) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Fair Value Assets
Total marketable securities	$ 91,804	$ 93,001
Level 1
Fair Value Assets
Total marketable securities	0	0
Level 2
Fair Value Assets
Total marketable securities	91,804	93,001
Level 3
Fair Value Assets
Total marketable securities	0	0
Cash equivalents
Fair Value Assets
Cash equivalents	22,463	20,155
Cash equivalents | Level 1
Fair Value Assets
Cash equivalents	12,401	10,155
Cash equivalents | Level 2
Fair Value Assets
Cash equivalents	10,062	10,000
Cash equivalents | Level 3
Fair Value Assets
Cash equivalents	0	0
Municipal bonds
Fair Value Assets
Total marketable securities	42,759	44,705
Municipal bonds | Level 1
Fair Value Assets
Total marketable securities	0	0
Municipal bonds | Level 2
Fair Value Assets
Total marketable securities	42,759	44,705
Municipal bonds | Level 3
Fair Value Assets
Total marketable securities	0	0
Corporate bonds
Fair Value Assets
Total marketable securities	49,045	48,296
Corporate bonds | Level 1
Fair Value Assets
Total marketable securities	0	0
Corporate bonds | Level 2
Fair Value Assets
Total marketable securities	49,045	48,296
Corporate bonds | Level 3
Fair Value Assets
Total marketable securities	0	0
Investments in privately-held companies
Fair Value Assets
Investments in privately-held companies	3,390	3,390
Investments in privately-held companies | Level 1
Fair Value Assets
Investments in privately-held companies	0	0
Investments in privately-held companies | Level 2
Fair Value Assets
Investments in privately-held companies	0	0
Investments in privately-held companies | Level 3
Fair Value Assets
Investments in privately-held companies	$ 3,390	$ 3,390

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LEASES - Operating Lease Expenses (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2019 USD ($)
Leases [Abstract]
Operating lease costs	$ 4,300
Variable lease costs	1,321
Operating lease expenses	$ 5,621

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LEASES - Right of Use Assets (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Jan. 01, 2019	Dec. 31, 2018
Leases [Abstract]
Right of use assets	$ 46,464	$ 41,800
Lease liabilities	12,447
Long-term lease liabilities	$ 45,325		$ 0

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LEASES - Remaining Lease Term (Details)	Mar. 31, 2019
Leases [Abstract]
Weighted-average remaining lease term	4 years 3 months 11 days
Weighted-average discount rate	5.70%

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LEASES - Maturities after Adoption of 842 (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Jan. 01, 2019
Leases [Abstract]
Remainder of 2019	$ 11,324
2020	15,784
2021	13,764
2022	12,761
2023	11,604
Total lease payments	65,237
Less: imputed interest	(7,465)
Lease liabilities	$ 57,772	$ 54,200

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LEASES - Maturities before Adoption of 842 (Details) $ in Thousands	Mar. 31, 2019 USD ($)
Leases [Abstract]
2019	$ 15,993
2020	14,807
2021	13,262
2022	12,279
2023	11,084
Lease liabilities before adoption of 842	$ 67,425

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LEASES - Cash Flow Information (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2019 USD ($)
Leases [Abstract]
Cash paid for leases	$ 5,197
Right of use assets recognized for new leases (non-cash)	$ 8,034

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Disaggregation of Revenue (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Disaggregation of Revenue [Line Items]
Total revenue	$ 212,546	$ 235,182
Percentage of sale revenue net	100.00%	100.00%
Revenue recognized at a point in time
Disaggregation of Revenue [Line Items]
Total revenue	$ 63,264	$ 87,773
Revenue recognized over time
Disaggregation of Revenue [Line Items]
Total revenue	149,282	147,409
Perpetual license | Revenue recognized at a point in time
Disaggregation of Revenue [Line Items]
Total revenue	14,950	23,078
Term license | Revenue recognized at a point in time
Disaggregation of Revenue [Line Items]
Total revenue	48,314	64,695
Maintenance
Disaggregation of Revenue [Line Items]
Total revenue	67,706	64,525
Cloud | Revenue recognized over time
Disaggregation of Revenue [Line Items]
Total revenue	27,758	15,582
Consulting | Revenue recognized over time
Disaggregation of Revenue [Line Items]
Total revenue	53,818	67,302
Subscription
Disaggregation of Revenue [Line Items]
Total revenue	143,778	144,802
U.S.
Disaggregation of Revenue [Line Items]
Total revenue	103,991	113,985
Other Americas
Disaggregation of Revenue [Line Items]
Total revenue	28,829	17,715
United Kingdom (“U.K.”)
Disaggregation of Revenue [Line Items]
Total revenue	24,549	26,094
Europe (excluding U.K.), Middle East, and Africa
Disaggregation of Revenue [Line Items]
Total revenue	34,186	31,826
Asia-Pacific
Disaggregation of Revenue [Line Items]
Total revenue	$ 20,991	$ 45,562
Total Revenue | U.S.
Disaggregation of Revenue [Line Items]
Percentage of sale revenue net	48.00%	48.00%
Total Revenue | Other Americas
Disaggregation of Revenue [Line Items]
Percentage of sale revenue net	14.00%	8.00%
Total Revenue | United Kingdom (“U.K.”)
Disaggregation of Revenue [Line Items]
Percentage of sale revenue net	12.00%	11.00%
Total Revenue | Europe (excluding U.K.), Middle East, and Africa
Disaggregation of Revenue [Line Items]
Percentage of sale revenue net	16.00%	14.00%
Total Revenue | Asia-Pacific
Disaggregation of Revenue [Line Items]
Percentage of sale revenue net	10.00%	19.00%

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Revenue for Remaining Performance Obligations Expected to be Recognized (Detail) - USD ($) $ in Thousands	Mar. 31, 2019	Mar. 31, 2018
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
1 year or less	$ 370,790	$ 268,815
1-2 years	107,524	97,311
2-3 years	79,356	49,606
Greater than 3 years	74,912	43,538
Total	$ 632,582	$ 459,270
Percentage of remaining performance obligations,1 year or less	58.00%	59.00%
Percentage of remaining performance obligations, 1-2 years	17.00%	21.00%
Percentage of remaining performance obligations, 2-3 years	13.00%	11.00%
Percentage of remaining performance obligations, Greater than 3 years	12.00%	9.00%
Total percentage of remaining performance obligations	100.00%	100.00%
Perpetual license
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
1 year or less	$ 10,263	$ 33,859
1-2 years	998	14,106
2-3 years	2,180	1,204
Greater than 3 years	0	382
Total	13,441	49,551
Term license
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
1 year or less	44,404	21,087
1-2 years	4,274	7,877
2-3 years	756	5,634
Greater than 3 years	135	853
Total	49,569	35,451
Maintenance
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
1 year or less	187,324	156,702
1-2 years	9,350	21,381
2-3 years	4,438	4,924
Greater than 3 years	2,008	1,825
Total	203,120	184,832
Cloud
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
1 year or less	115,548	47,764
1-2 years	91,539	52,849
2-3 years	71,509	37,844
Greater than 3 years	72,742	40,478
Total	351,338	178,935
Consulting
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
1 year or less	13,251	9,403
1-2 years	1,363	1,098
2-3 years	473	0
Greater than 3 years	27	0
Total	$ 15,114	$ 10,501

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Summary of Stock Based Compensation Expense (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation before tax	$ 18,350	$ 15,109
Income tax benefit	(3,740)	(3,141)
Cost of revenues
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation before tax	4,519	3,701
Selling and marketing
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation before tax	7,374	4,658
Research and development
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation before tax	4,560	3,637
General and administrative
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock-based compensation before tax	$ 1,897	$ 3,113

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Stock-based compensation - Summary of stock based compensation award granted (Detail) - Employees $ in Thousands	3 Months Ended
	Mar. 31, 2019 USD ($) shares
RSUs
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Number of shares granted, RSUs (in shares) | shares	839,000
Fair value of shares granted | $	$ 53,184
Non-qualified stock options
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Number of shares granted, options (in shares) | shares	1,770,000
Fair value of shares granted | $	$ 33,344

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Stock-Based Compensation - Additional Information (Detail) shares in Millions, $ in Millions	3 Months Ended
	Mar. 31, 2019 USD ($) shares
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Unrecognized stock-based compensation expense | $	$ 114.1
Weighted-average period of recognition of unrecognized stock-based compensation expense (in years)	2 years 4 months
Shares issued (in shares) | shares	0.5

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Summary of Benefit from Income Taxes and Discrete Tax Items (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Income Tax Disclosure [Abstract]
Benefit from income taxes	$ (8,300)	$ (4,222)
Effective income tax rate	22.00%	(53.00%)

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Summary of Basic and Diluted Earnings Per Share (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Earning per share reconciliation
Net (loss) income	$ (28,717)	$ 12,200
Weighted-average common shares outstanding (in shares)	78,584	78,236
(Loss) earnings per share, basic (in dollars per share)	$ (0.37)	$ 0.16
Net (loss) income	$ (28,717)	$ 12,200
Effect of dilutive securities (in shares)	0	4,866
Weighted-average common shares outstanding, assuming dilution (in shares)	78,584	83,102
(Loss) earnings per share, diluted (in dollars per share)	$ (0.37)	$ 0.15
Outstanding anti-dilutive stock options and RSUs (in shares)	5,563	397
Stock Options
Earning per share reconciliation
Weighted-average effect of dilutive securities (in shares)	0	3,119
RSUs
Earning per share reconciliation
Weighted-average effect of dilutive securities (in shares)	0	1,747