PEGASYSTEMS INC
For the period ended Sep 30, 2024. Filed Oct 23, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Oct 23, 2024
PEGA$32.40-3.5%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-07-24.
0001013857-24-000155
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-10-23.
0001013857-24-000226
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 99 previous paragraphs and 101 current paragraphs.
77 unchanged; 21 reworded; 3 added; 1 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 14 previous and 15 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (3)
Current report
not meaningful
Current report
not meaningful
Current report
(2) All purchases under this program have been made on the open market.
Removed paragraphs (1)
Previous report
•The increase in subscription license gross profit percent in the three months ended June 30, 2024 was primarily due to increased cost efficiency as subscription license revenue grew.
Reworded paragraphs (21)
Previous wording
No significant changes have been made to our critical accounting policies disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023.
Current wording
No significant changes have been made to our critical accounting policies as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023.
Previous wording
•The increases in Pega Cloud revenue for the three and six months ended June 30, 2024 were primarily due to additional investments made by our existing clients as they continued to deepen and expand their use of Pega Cloud.
Current wording
•The increases in Pega Cloud revenue for the three and nine months ended September 30, 2024 were primarily due to additional investments made by our existing clients as they continued to expand their use of Pega Cloud.
Previous wording
•The decreases in maintenance revenue in the three and six months ended June 30, 2024 were primarily due to the shift to Pega Cloud-based offerings, which do not generally result in maintenance revenue.
Current wording
•The decreases in maintenance revenue in the three and nine months ended September 30, 2024 were primarily due to our clients’ shift to Pega Cloud-based offerings, which do not generally result in maintenance revenue.
Previous wording
•The increases in subscription license revenue in the three and six months ended June 30, 2024 were primarily due to several large multi-year contracts recognized in revenue in the three and six months ended June 30, 2024.
Current wording
•The decreases in subscription license revenue in the three and nine months ended September 30, 2024 were primarily due to several large multi-year contracts recognized in revenue in the three and nine months ended September 30, 2023.
Previous wording
•The decreases in consulting revenue in the three and six months ended June 30, 2024 were primarily due to decreases in consultant billable hours.
Current wording
•The decreases in consulting revenue in the three and nine months ended September 30, 2024 were primarily due to decreases in consultant billable hours and utilization.
Previous wording
•The increases in Pega Cloud gross profit percent in the three and six months ended June 30, 2024 were primarily due to increased cost efficiency, particularly for hosting services and employee compensation and benefits, as Pega Cloud continues to grow and scale.
Current wording
•The increases in Pega Cloud gross profit percent in the three and nine months ended September 30, 2024 were primarily due to increased cost efficiency, primarily for hosting services and employee compensation and benefits, as Pega Cloud continues to grow and scale.
Previous wording
•The decreases in consulting gross profit percent in the three and six months ended June 30, 2024 were primarily due to decreases in consultant utilization rates.
Current wording
•The decreases in consulting gross profit percent in the three and nine months ended September 30, 2024 were primarily due to decreases in consultant utilization rates.
Previous wording
•The decreases in selling and marketing during the three and six months ended June 30, 2024 were primarily due to decreases in compensation and benefits of $7.6 million and $25.1 million from reduced headcount as we optimized our go-to-market strategy. For additional information, see "Note 9. Restructuring" in Part I, Item 1 of this Quarterly Report.
Current wording
•The decreases in selling and marketing during the three and nine months ended September 30, 2024 were primarily due to decreases in compensation and benefits of $2.4 million and $27.5 million, respectively, from reduced headcount as a result of our effort to optimize our go-to-market strategy. For additional information, see "Note 9. Restructuring" in Part I, Item 1 of this Quarterly Report.
Previous wording
•The increase in research and development for the three months ended June 30, 2024 was primarily due to an increase in compensation and benefits of $1.1 million due to an increase in incentive-based compensation. The decrease in research and development for the six months ended June 30, 2024 was primarily due to a decrease in cloud hosting expenses of $1.4 million.
Current wording
•The decrease in research and development for the three months ended September 30, 2024 was primarily due to a decrease in compensation and benefits of $1.1 million. The decrease in research and development for the nine months ended September 30, 2024 was primarily due to a decrease in cloud hosting expenses of $1.8 million and a decrease in compensation and benefits of $1.5 million.
Previous wording
•The increases in general and administrative during the three and six months ended June 30, 2024 were primarily due to increases in compensation and benefits of $3.3 million and $4.1 million due to increases in incentive-based compensation.
Current wording
•The increases in general and administrative during the three and nine months ended September 30, 2024 were primarily due to increases in compensation and benefits of $3.1 million and $7.2 million, respectively, due to increases in incentive-based compensation.
Previous wording
•The increase in litigation settlement, net of recoveries in the six months ended June 30, 2024 was primarily due to the cost to settle litigation arising from proceedings outside the ordinary course of business. See "Note 15. Commitments and Contingencies" in Part I, Item 1 of this Quarterly Report and “Risk Factors” in Part I, Item 1A of our Annual Report for the year ended December 31, 2023 for additional information.
Current wording
•The increase in litigation settlement, net of recoveries in the nine months ended September 30, 2024 was primarily due to the cost to settle litigation arising from proceedings outside the ordinary course of business. See "Note 15. Commitments and Contingencies" in Part I, Item 1 of this Quarterly Report and “Risk Factors” in Part I, Item 1A of our Annual Report for the year ended December 31, 2023 for additional information.
Previous wording
•The decreases in restructuring expenses during the three and six months ended June 30, 2024 were primarily due to efforts to optimize our go-to-market organization and office space. For additional information, see "Note 9. Restructuring" in Part I, Item 1 of this Quarterly Report.
Current wording
•The decreases in restructuring expenses during the three and nine months ended September 30, 2024 were primarily due to efforts to optimize our go-to-market organization and office space. For additional information, see "Note 9. Restructuring" in Part I, Item 1 of this Quarterly Report.
Previous wording
•The changes in foreign currency transaction gain (loss) in the three and six months ended June 30, 2024 was primarily due to fluctuations in foreign currency exchange rates associated with foreign currency-denominated cash and receivables held by our subsidiary in the United Kingdom.
Current wording
•The changes in foreign currency transaction (loss) gain in the three and nine months ended September 30, 2024 was primarily due to fluctuations in foreign currency exchange rates associated with foreign currency-denominated cash and receivables held by our subsidiary in the United Kingdom.
Previous wording
•The increases in interest income in the three and six months ended June 30, 2024 were primarily due to higher investment balances and market interest rates.
Current wording
•The increases in interest income in the three and nine months ended September 30, 2024 were primarily due to higher investment balances and higher interest rate yields.
Previous wording
•The changes in (loss) income on capped call transactions in the three and six months ended June 30, 2024 were due to fair value adjustments for our capped call transactions.
Current wording
•The changes in (loss) on capped call transactions in the three and nine months ended September 30, 2024 were due to fair value adjustments for our capped call transactions.
Previous wording
•The decrease in other income, net in the three months ended June 30, 2024 was due to a gain of $0.7 million on our venture investments and a gain of $5.1 million from repurchases of our convertible senior notes in the three months ended June 30, 2023. The decrease in other income, net in the six months ended June 30, 2024 was due to a gain of $7.9 million from repurchases of our convertible senior notes in the six months ended June 30, 2023 and a decrease of $2.8 million in the gain from our venture investments in the six months ended June 30, 2024. For additional information, see “Note 8. Debt” and "Note 10. Fair Value Measurements" in Part I, Item 1 of this Quarterly Report.
Current wording
•The decrease in other income, net in the three months ended September 30, 2024 was due to a gain of $6.4 million on our venture investments in the three months ended September 30, 2023. The decrease in other income, net in the nine months ended September 30, 2024 was due to a gain of $7.9 million from repurchases of our convertible senior notes and a decrease of $9.3 million in the gain from our venture investments in the nine months ended September 30, 2024. For additional information, see “Note 8. Debt” and "Note 10. Fair Value Measurements" in Part I, Item 1 of this Quarterly Report.
Previous wording
Our effective income tax rate for the six months ended June 30, 2024, is impacted by the jurisdictional mix and timing of the actual compared to projected earnings (losses). It is also impacted by the valuation allowance on our deferred tax assets in the U.S. and U.K. and a near break-even pretax income resulting in a not meaningful high effective income tax rate.
Current wording
Our effective income tax rate for the nine months ended September 30, 2024, is impacted by the jurisdictional mix and timing of the actual compared to projected earnings (losses). It is also impacted by the valuation allowance on our deferred tax assets in the U.S. and U.K. and a near break-even year-to-date pretax loss resulting in a not meaningful effective income tax rate.
Previous wording
The change in cash provided by operating activities in the six months ended June 30, 2024 was primarily due to growth in client collections and the impact of our cost-efficiency initiatives. For additional information, see “Note 9. Restructuring” and "Note 15. Commitments and Contingencies" in Part I, Item 1 of this Quarterly Report.
Current wording
The change in cash provided by operating activities in the nine months ended September 30, 2024 was primarily due to growth in client collections and the impact of our cost-efficiency initiatives. For additional information, see “Note 9. Restructuring” and "Note 15. Commitments and Contingencies" in Part I, Item 1 of this Quarterly Report.
Previous wording
The change in cash (used in) provided by investing activities in the six months ended June 30, 2024 was primarily due to our investments in financial instruments and reduced investment in property and equipment as we optimized our office space.
Current wording
The change in cash (used in) investing activities in the nine months ended September 30, 2024 was primarily due to our investments in financial instruments and reduced investment in property and equipment as we optimized our office space.
Previous wording
(1) On April 23, 2024, our Board of Directors extended the expiration date of our current share repurchase program from June 30, 2024 to June 30, 2025.
Current wording
(1) On April 23, 2024, our Board of Directors extended the expiration date of our share repurchase program from June 30, 2024 to June 30, 2025. On October 22, 2024, our Board of Directors extended the expiration date of our share repurchase program from June 30, 2025 to December 31, 2025 and increased the authorized repurchase by $250 million to $310 million as of that date.
Previous wording
In the six months ended June 30, 2024 and 2023, instead of receiving cash from the equity holders, we withheld shares with a value of $2.8 million and $0.9 million, respectively, for the exercise price of options. These amounts are not included in the table above.
Current wording
In the nine months ended September 30, 2024 and 2023, instead of receiving cash from the equity holders, we withheld shares with a value of $3.3 million and $1.0 million, respectively, for the exercise price of options. These amounts are not included in the table above.