PEGASYSTEMS INC
For the period ended Mar 31, 2026. Filed Apr 21, 2026.
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.
Mar 31, 2026 · Filed Apr 21, 2026
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 2025-09-30; filed 2025-10-21.
0001013857-25-000218
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-Q
Period ended 2026-03-31; filed 2026-04-21.
0001013857-26-000026
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 104 previous paragraphs and 91 current paragraphs.
61 unchanged; 26 reworded; 4 added; 17 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 (4)
Current report
•The decrease in Pega Cloud gross profit percent in the three months ended March 31, 2026 was primarily due to an increase in personnel-related costs associated with investments made to support our cloud operations.
Current report
•The increase in consulting gross profit percent in the three months ended March 31, 2026 was primarily due to a decrease in compensation and benefits of $6.4 million, which was attributable to our restructuring initiatives in 2025. As our technology strategy continues to evolve, we may periodically evaluate our organizational structure to align resources with business priorities.
Current report
Our effective income tax rate decreased in the three months ended March 31, 2026 as compared to the prior period, primarily due to excess tax benefits from stock-based compensation recognized in the current period and the absence of a valuation allowance on substantially all of our U.S. and U.K. deferred tax assets.
Current report
On January 5, 2026, the OECD issued administrative guidance introducing a side‑by‑side system that would exempt U.S.‑parented multinational groups from certain Pillar Two rules beginning in fiscal years starting on or after January 1, 2026. We will continue to monitor developments in countries’ domestic laws as they relate to the OECD model rules and the Pillar Two global minimum tax. Based on information currently available, we do not expect Pillar Two to have a material impact on our consolidated financial statements.
Removed paragraphs (17)
Previous report
•the continued payment of our quarterly dividends;
Previous report
•the timing of revenue recognition;
Previous report
•variation in demand for our products and services, including among clients in the public sector;
Previous report
•reliance on key personnel;
Previous report
•reliance on third-party service providers, including hosting providers;
Previous report
•compliance with our debt obligations and covenants;
Previous report
•foreign currency exchange rates;
Previous report
•potential legal and financial liabilities, as well as damage to our reputation, due to cyber-attacks;
Previous report
•security breaches and security flaws;
Previous report
•our client retention rate; and
Previous report
•Litigation settlement, net of recoveries: Cost to settle litigation, net of insurance recoveries, arising from proceedings outside the ordinary course of business. See "Note 20. Commitments And Contingencies" in Item 8 of our Annual Report filed on Form 10-K for the year ended December 31, 2024 and prior filings for further information.
Previous report
•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 report
•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 report
•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 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.
Previous report
In February 2020, we issued $600 million in aggregate principal amount of Notes, which matured on March 1, 2025. As of December 31, 2024, we had $468 million in aggregate principal amount of Notes outstanding, which were repaid in their entirety at maturity. For additional information, see "Note 10. Debt" in Part I, Item 1 of this Quarterly Report.
Previous report
On June 20, 2025, the Company effected the Stock Split of the Company’s Common Stock described above in “Note 1. Basis of Presentation”. All share and per share amounts in the Company’s unaudited condensed consolidated financial statements and in the accompanying notes for all prior periods presented have been recast to reflect the effect of the Stock Split.
Reworded paragraphs (26)
Previous wording
This Quarterly Report on Form 10-Q (“Quarterly Report”) contains or incorporates forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
Current wording
This Quarterly Report on Form 10-Q (“Quarterly Report”) contains or incorporates forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including the sufficiency of our capital, our position and estimates relating to tax, and legal proceedings.
Previous wording
Words such as expects, anticipates, intends, plans, believes, will, could, should, estimates, may, targets, strategies, intends to, projects, forecasts, guidance, likely, and usually or variations of such words and other similar expressions identify forward-looking statements. These statements represent our views only as of the date the statement was made and are based on current expectations and assumptions.
Current wording
Words such as expects, anticipates, intends, plans, believes, will, could, should, estimates, may, targets, strategies, intends to, projects, positions, forecasts, guidance, likely, and usually or variations of such words and other similar expressions identify forward-looking statements. These statements represent our views only as of the date the statement was made and are based on current expectations and assumptions.
Previous wording
•our ongoing litigation with Appian Corp. and associated legal proceedings;
Current wording
•our ongoing litigation with Appian Corp. and associated legal proceedings; and
Previous wording
We develop, market, license, host, and support enterprise software that helps organizations optimize decisions and processes in real-time so they can deliver outcomes that transform their business. Our powerful platform for enterprise AI decisioning and workflow automation enables the world’s leading brands and government agencies to hyper-personalize customer experiences, automate customer service, and streamline operations, mission-critical business processes, and workflows. With Pega, our clients can leverage our AI technology and scalable architecture to accelerate their digital transformation. In addition, our sales and client success teams, world-class partners, and clients are able to leverage Pega GenAI Blueprint TM (“Blueprint”) to rapidly prototype and accelerate the development and deployment of applications quickly and collaboratively.
Current wording
We develop, market, license, host, and support enterprise software that helps organizations optimize decisions and processes in real-time so they can deliver outcomes that transform their business. Our powerful platform for enterprise AI decisioning and workflow automation enables the world’s leading brands and government agencies to hyper-personalize customer experiences, automate customer service, and streamline operations, mission-critical business processes, and workflows, and transform legacy systems. Clients can leverage our AI technology and scalable architecture to accelerate their digital transformation. In addition, our sales and client success teams, world-class partners, and clients are able to leverage Pega Blueprint TM (“Blueprint”) to rapidly prototype and accelerate the development and deployment of applications quickly and collaboratively.
Previous wording
Our target clients are Global 2000 organizations and government agencies that require solutions to distinguish themselves in the markets they serve. Our solutions achieve and facilitate differentiation by increasing business agility, driving growth, improving productivity, attracting and retaining customers, and reducing risk. Along with our partners, we deliver solutions tailored by industry.
Current wording
We focus on enterprise-scale businesses and government agencies that require advanced solutions to distinguish themselves in the competitive markets they serve. Our solutions achieve and facilitate differentiation by increasing business agility, driving growth and modernization, improving productivity, attracting and retaining customers, and reducing risk. Along with our partners, we deliver solutions tailored by industry.
Previous wording
•Interest paid on convertible senior notes: In February 2020, we issued convertible senior notes (the “Notes”), due March 1, 2025, in a private placement. The Notes accrued interest at an annual rate of 0.75%, paid semi-annually in arrears on March 1 and September 1. The outstanding Notes were repaid in their entirety at maturity.
Current wording
•Interest on convertible senior notes: In February 2020, we issued convertible senior notes (the “Notes”), due March 1, 2025, in a private placement. The Notes accrued interest at an annual rate of 0.75%, paid semi-annually in arrears on March 1 and September 1. The outstanding Notes were repaid in their entirety at maturity.
Previous 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.
Current wording
•The increase in Pega Cloud revenue in the three months ended March 31, 2026 was primarily due to expanded adoption of Pega Cloud by our clients.
Previous 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.
Current wording
•The decrease in maintenance revenue in the three months ended March 31, 2026 was primarily due to our clients’ shift to Pega Cloud-based offerings, which do not result in maintenance revenue.
Previous 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.
Current wording
•The decrease in subscription license revenue in the three months ended March 31, 2026 was primarily due to several large multi-year contracts recognized in revenue in the three months ended March 31, 2025.
Previous 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.
Current wording
•The decrease in consulting revenue in the three months ended March 31, 2026 was primarily due to a decrease in consultant billable hours in our Americas region.
Previous 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.
Current wording
•The increase in selling and marketing in the three months ended March 31, 2026 was primarily due to increase in compensation and benefits of $10.7 million attributable to increases in headcount and equity compensation.
Previous 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.
Current wording
•The increase in research and development in the three months ended March 31, 2026 was primarily due to increase in compensation and benefits of $5.6 million attributable to increases in headcount and equity compensation.
Previous 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.
Current wording
•The increase in general and administrative in the three months ended March 31, 2026 was primarily due to an increase of $13.4 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 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.
Current wording
•The changes in foreign currency transaction gain (loss) in the three months ended March 31, 2026 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 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.
Current wording
•The decrease in interest income in the three months ended March 31, 2026 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 nine months ended September 30, 2025 were primarily due to the repayment of the Notes at maturity on March 3, 2025.
Current wording
•The decrease in interest expense in the three months ended March 31, 2026 were primarily due to the repayment of the Notes at maturity on March 3, 2025.
Previous 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.
Current wording
•The decrease in other (loss) income, net in the three months ended March 31, 2026 was primarily due to valuation losses from our venture investments portfolio. For additional information, see "Note 12. Fair Value Measurements" in Part I, Item 1 of this Quarterly Report.
Previous wording
(Benefit from) provision for income taxes
Current wording
Provision for income taxes
Previous wording
The Organization for Economic Cooperation and Development (“OECD”) has introduced new global minimum tax regulations, known as Pillar Two, that was supported by over 130 countries worldwide. Certain aspects of Pillar Two are effective for tax years beginning on or after January 1, 2024. Although the U.S. has not enacted legislation to adopt Pillar Two, certain countries in which we operate have already adopted, or are in the process of adopting, legislation to implement Pillar Two. We do not expect this legislation to have a material impact on our consolidated financial statements. We will continue to monitor and evaluate new legislation and guidance, which could change our current assessment.
Current wording
The Organization for Economic Cooperation and Development (“OECD”) has introduced Pillar Two, a global minimum tax framework supported by more than 130 countries, with certain provisions effective for tax years beginning on or after January 1, 2024.
Previous wording
If it becomes necessary or desirable to repatriate foreign funds, we may have to pay federal, state, and local income taxes as well as foreign withholding taxes upon repatriation. However, estimating the taxes we would have to pay is impracticable due to the complexity of income tax laws and regulations.
Current wording
If it becomes necessary or desirable to repatriate foreign funds, we may have to pay federal, state, and local income taxes as well as foreign withholding taxes upon repatriation. However, estimating the taxes we would have to pay on the amounts we consider indefinitely reinvested is impracticable due to the complexity of income tax laws and regulations. We have provided a deferred tax liability associated with the tax cost of repatriating unremitted earnings which we do not consider indefinitely reinvested.
Previous 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.
Current wording
The change in cash provided by operating activities in the three months ended March 31, 2026 was primarily due to increase in client collections.
Previous 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.
Current wording
The change in cash provided by investing activities in the three months ended March 31, 2026 was primarily due to scheduled maturities of our investments in financial instruments in anticipation of the repayment of the maturing Notes in the three months ended March 31, 2025.
Previous wording
As of September 30, 2025 and December 31, 2024, we had letters of credit of $26.7 million and $27.3 million, respectively, under the Credit Facility, however had no cash borrowings. For additional information, see "Note 10. Debt" in Part I, Item 1 of this Quarterly Report.
Current wording
As of March 31, 2026 and December 31, 2025, we had letters of credit of $26.7 million under the Credit Facility; however we had no cash borrowings. For additional information, see "Note 10. Debt" in Part I, Item 1 of this Quarterly Report.
Previous wording
(2) On April 22, 2025, the Company’s Board of Directors extended the expiration date of the share repurchase program from December 31, 2025 to June 30, 2026 and increased the authorized repurchase amount by $500 million.
Current wording
(2) On February 10, 2026, the Company’s Board of Directors extended the expiration date of the share repurchase program from June 30, 2026 to June 30, 2027 and increased the authorized repurchase amount by $1 billion.
Previous 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.
Current wording
During the three months ended March 31, 2026 and 2025, instead of receiving cash from the equity holders, we withheld shares with a value of $1.9 million and $1.5 million, respectively, for the exercise price of options. These amounts are not included in the table above.
Previous wording
Following the Stock Split and commencing with the third quarter of 2025, we intend to pay a quarterly cash dividend of $0.03 per share, or the equivalent of $0.06 per share prior to the Stock Split. However, the Board of Directors may terminate or modify the dividend program without prior notice.
Current wording
We paid and intend to continue to pay a quarterly cash dividend of $0.03 per share; however, the Board of Directors may terminate or modify the dividend program without prior notice.