PEGASYSTEMS INC
For the period ended Sep 30, 2025. Filed Oct 21, 2025.
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, 2025 · Filed Oct 21, 2025
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 2025-06-30; filed 2025-07-22.
0001013857-25-000210
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-Q
Period ended 2025-09-30; filed 2025-10-21.
0001013857-25-000218
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 101 previous paragraphs and 104 current paragraphs.
81 unchanged; 18 reworded; 5 added; 2 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 15 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 (5)
Current report
Not meaningful
Current report
Not meaningful
Current report
Our effective income tax rate for the nine months ended September 30, 2025, was impacted by excess tax benefits from stock-based compensation, and by the enactment of the One Big Beautiful Bill Act (“OBBBA”) on July 4, 2025. The OBBBA introduced several U.S. tax law changes, including the ability to immediately expense domestic research and experimental (“R&E”) expenditures starting in 2025, and an election to accelerate any unamortized domestic R&E expenditures over a one or two year period beginning with the 2025 tax year. In accordance with ASC 740, Accounting for Income Taxes, the impacts of the OBBBA are reflected in our results for the quarter ended September 30, 2025. The enactment of the OBBBA reduced our forecasted U.S. income tax expense for 2025. However, the changes did not affect our U.S. deferred tax assets or liabilities, as we continue to maintain a full valuation allowance against those balances.
Current report
(1)Amounts presented are exclusive of the U.S. excise tax on share repurchases.
Current report
(1)Amounts presented are exclusive of the U.S. excise tax on share repurchases.
Removed paragraphs (2)
Previous report
Our effective income tax rate for the six months ended June 30, 2025, is mainly attributable to the jurisdictional mix of earnings and is also impacted by excess tax benefits from stock-based compensation and the valuation allowance on its deferred tax assets in the U.S. and U.K.
Previous report
On July 4, 2025, the OBBBA was enacted into law. The OBBBA provides for significant U.S. tax law changes. ASC 740, Accounting for Income Taxes, provides that changes in tax rates and laws are recognized in the period of enactment. As a result, the Company is assessing the impact of this new legislation and will record any impacts in the period of enactment.
Reworded paragraphs (18)
Previous wording
•The increases in Pega Cloud revenue in the three and six months ended June 30, 2025 were primarily due to expanded adoption of Pega Cloud by our clients.
Current wording
•The increases in Pega Cloud revenue in the three and nine months ended September 30, 2025 were primarily due to expanded adoption of Pega Cloud by our clients.
Previous wording
•The decreases in maintenance revenue in the three and six months ended June 30, 2025 were primarily due to our clients’ shift to Pega Cloud-based offerings, which do not result in maintenance revenue.
Current wording
•The decreases in maintenance revenue in the three and nine months ended September 30, 2025 were primarily due to our clients’ shift to Pega Cloud-based offerings, which do not result in maintenance revenue.
Previous wording
•The decrease in subscription license revenue in the three months ended June 30, 2025 was primarily due to several large multi-year contracts recognized in revenue in the three months ended June 30, 2024. The increase in subscription revenue in the six months ended June 30, 2025 was primarily due to several large multi-year contracts recognized in revenue in the six months ended June 30, 2025.
Current wording
•The increases in subscription license revenue in the three and nine months ended September 30, 2025 were primarily due to several large multi-year contracts recognized in revenue in the three and nine months ended September 30, 2025.
Previous wording
•The increases in consulting revenue in the three and six months ended June 30, 2025 were primarily due to increases in consultant billable hours.
Current wording
•The increases in consulting revenue in the three and nine months ended September 30, 2025 were primarily due to increases in consultant billable hours in our International regions.
Previous wording
•The increases in Pega Cloud gross profit percent in the three and six months ended June 30, 2025 were primarily due to increased hosting cost efficiencies as Pega Cloud continues to grow and scale and a reallocation of certain headcount from Pega Cloud to Maintenance to align with the change in the nature of their responsibilities.
Current wording
•The increases in Pega Cloud gross profit percent in the three and nine months ended September 30, 2025 were primarily due to increased hosting cost efficiencies as Pega Cloud continues to grow and scale and a reallocation of certain headcount from Pega Cloud to Maintenance to align with the change in the nature of their responsibilities.
Previous wording
•The decrease in consulting gross profit percent in the three months ended June 30, 2025 was primarily due to an increase in compensation and benefits of $4.6 million, attributable to incentive compensation, and contracted services of $2.3 million. The increase in consulting gross profit percent in six months ended June 30, 2025 was primarily due to an increase in consultant utilization rates.
Current wording
•The decrease in consulting gross profit percent in the three months ended September 30, 2025 was primarily due to an increase in compensation and benefits of $2 million, and contracted services of $1.3 million. Consulting gross profit percent remained flat in the nine months ended September 30, 2025 as an increase in consultant utilization rates were offset by an increase in compensation and benefits of $9.4 million, and contracted services of $5.5 million.
Previous wording
•The increases in selling and marketing in the three and six months ended June 30, 2025 were primarily due to increases in compensation and benefits of $4.9 million and $11.6 million, respectively, attributable to increases in headcount and incentive compensation.
Current wording
•The increases in selling and marketing in the three and nine months ended September 30, 2025 were primarily due to increases in compensation and benefits of $10.4 million and $22 million, respectively, attributable to increases in headcount and incentive compensation.
Previous wording
•The increases in research and development in the three and six months ended June 30, 2025 were primarily due to increases in compensation and benefits of $3.5 million and $3.9 million, respectively, attributable to incentive compensation.
Current wording
•The increases in research and development in the three and nine months ended September 30, 2025 were primarily due to increases in compensation and benefits of $3.7 million and $7.6 million, respectively, attributable to increases in headcount and incentive compensation.
Previous wording
•The increases in general and administrative in the three and six months ended June 30, 2025 were primarily due to increases in compensation and benefits of $1.5 million and $5.8 million, respectively, attributable to a reallocation of certain headcount from research and development to general and administrative to align with the change in the nature of their responsibilities, and increases of $4.0 million and $8.6 million, respectively, in legal fees and related expenses arising from legal proceedings outside the ordinary course of business. We expect to continue to incur additional costs for these proceedings. For additional information, see "Note 17. Commitments and Contingencies" in Part I, Item 1 of this Quarterly Report.
Current wording
•The increases in general and administrative in the three and nine months ended September 30, 2025 were primarily due to increases in compensation and benefits of $6.5 million and $12.4 million, respectively, attributable to equity compensation and a reallocation of certain headcount from research and development to general and administrative to align with the change in the nature of their responsibilities. In the nine months ended September 30, 2025, we experienced an increase of $8.8 million in legal fees and related expenses arising from legal proceedings outside the ordinary course of business. We expect to continue to incur additional costs for these proceedings. For additional information, see "Note 17. Commitments and Contingencies" in Part I, Item 1 of this Quarterly Report.
Previous wording
•The decrease in litigation settlement, net of recoveries in the six months ended June 30, 2025 was primarily due to the cost to settle litigation arising from proceedings outside the ordinary course of business in the six months ended June 30, 2024. See “Note 20. Commitments and Contingencies” in Item 8 of our Annual Report filed on Form-10K for the year ended December 31, 2024 and prior filings for further information.
Current wording
•The decrease in litigation settlement, net of recoveries in the nine months ended September 30, 2025 was primarily due to the cost to settle litigation arising from proceedings outside the ordinary course of business in the nine months ended September 30, 2024. See “Note 20. Commitments and Contingencies” in Item 8 of our Annual Report filed on Form-10K for the year ended December 31, 2024 and prior filings for further information.
Previous wording
•The changes in foreign currency transaction (loss) gain in the three and six months ended June 30, 2025 were primarily due to fluctuations in foreign currency exchange rates associated with foreign currency-denominated receivables and intercompany balances held by our subsidiary in the United Kingdom.
Current wording
•The changes in foreign currency transaction gain (loss) in the three and nine months ended September 30, 2025 were primarily due to fluctuations in foreign currency exchange rates associated with foreign currency-denominated receivables and intercompany balances held by our subsidiary in the United Kingdom.
Previous wording
•The decreases in interest income in the three and six months ended June 30, 2025 were primarily due to lower investment balances as a result of the repayment of the Notes at maturity on March 3, 2025.
Current wording
•The decreases in interest income in the three and nine months ended September 30, 2025 were primarily due to lower investment balances as a result of the repayment of the Notes at maturity on March 3, 2025.
Previous wording
•The decreases in interest expense in the three and six months ended June 30, 2025 were primarily due to the repayment of the Notes at maturity on March 3, 2025.
Current wording
•The decreases in interest expense in the three and nine months ended September 30, 2025 were primarily due to the repayment of the Notes at maturity on March 3, 2025.
Previous wording
•The changes in gain (loss) on capped call transactions was due to the expiration of the capped call in the three months ended March 31, 2025.
Current wording
•The changes in (loss) on capped call transactions were due to the expiration of the capped call transactions in the three months ended March 31, 2025.
Previous wording
•The increases in other income, net in the three and six months ended June 30, 2025 were primarily due to the gain from the partial sale of a venture investment. For additional information, see "Note 12. Fair Value Measurements" in Part I, Item 1 of this Quarterly Report.
Current wording
•The increase in other (loss) income, net in the nine months ended September 30, 2025 was primarily due to the gain from the partial sale of a venture investment. For additional information, see "Note 12. Fair Value Measurements" in Part I, Item 1 of this Quarterly Report.
Previous wording
The change in cash provided by operating activities in the six months ended June 30, 2025 was primarily due to increase in client collections.
Current wording
The change in cash provided by operating activities in the nine months ended September 30, 2025 was primarily due to increase in client collections.
Previous wording
The change in cash provided by (used in) investing activities in the six months ended June 30, 2025 was primarily due to scheduled maturities of our investments in financial instruments in anticipation of the repayment of the maturing Notes and the consideration received from the sale of a venture investment.
Current wording
The change in cash provided by (used in) investing activities in the nine months ended September 30, 2025 was primarily due to scheduled maturities of our investments in financial instruments in anticipation of the repayment of the maturing Notes and the consideration received from the sale of a venture investment.
Previous wording
During the six months ended June 30, 2025 and 2024, instead of receiving cash from the equity holders, we withheld shares with a value of $7.3 million and $2.8 million, respectively, for the exercise price of options. These amounts are not included in the table above.
Current wording
During the nine months ended September 30, 2025 and 2024, instead of receiving cash from the equity holders, we withheld shares with a value of $16.2 million and $3.3 million, respectively, for the exercise price of options. These amounts are not included in the table above.