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Pega Cloud Continues to Expand in Third Quarter of 2020

Pegasystems Inc. (NASDAQ: PEGA), the software company empowering digital transformation at the world’s leading enterprises, released its financial results for the third quarter of 2020.

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“Our results through Q3 demonstrate our ability to forge through and succeed during a challenging time,” said Alan Trefler, founder and CEO, Pegasystems. “Digital transformation is central to our clients’ continued existence and prosperity, and our software is ideally suited for organizations that continue to face immediate needs today while they transform for tomorrow.”

“Our subscription revenue grew 27 percent year over year in the first nine months of 2020, reflecting the impact of passing the midpoint of our cloud transition,” said Ken Stillwell, CFO, Pegasystems. “This demonstrates the power of achieving ACV growth of more than 20 percent over multiple years. With over $450 million of cash and investments on the balance sheet and an impressive portfolio of enterprise clients, Pega is in a strong position to capture an even greater share of the $50+ billion market for digital transformation solutions.”

Financial and performance metrics (1)

(Dollars in thousands,

except per share amounts)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2020

2019

Change

2020

2019

Change

Total revenue

$

225,951

$

216,703

4

%

$

718,917

$

634,841

13

%

Net (loss) – GAAP

$

(19,267)

$

(30,338)

36

%

$

(65,379)

$

(91,351)

28

%

Net (loss) – Non-GAAP

$

(26,701)

$

(17,961)

(49)

%

$

(44,905)

$

(50,764)

12

%

Diluted (loss) per share – GAAP

$

(0.24)

$

(0.38)

37

%

$

(0.82)

$

(1.16)

29

%

Diluted (loss) per share – Non-GAAP

$

(0.33)

$

(0.23)

(43)

%

$

(0.56)

$

(0.64)

13

%

(1) A reconciliation of our Non-GAAP and GAAP measures is at the end of this release.

(Dollars in thousands)

Three Months Ended
September 30,

Change

Nine Months Ended
September 30,

Change

2020

2019

2020

2019

Pega Cloud

$

54,776

24

%

$

35,153

16

%

$

19,623

56

%

$

147,080

20

%

$

94,610

15

%

$

52,470

55

%

Maintenance

74,670

33

%

70,371

32

%

4,299

6

%

220,587

31

%

207,406

33

%

13,181

6

%

Term license

35,932

16

%

48,989

23

%

(13,057)

(27)

%

170,455

24

%

122,257

19

%

48,198

39

%

Subscription (2)

165,378

73

%

154,513

71

%

10,865

7

%

538,122

75

%

424,273

67

%

113,849

27

%

Perpetual license

3,852

2

%

9,016

4

%

(5,164)

(57)

%

16,568

2

%

43,286

7

%

(26,718)

(62)

%

Consulting

56,721

25

%

53,174

25

%

3,547

7

%

164,227

23

%

167,282

26

%

(3,055)

(2)

%

Total revenue

$

225,951

100

%

$

216,703

100

%

$

9,248

4

%

$

718,917

100

%

$

634,841

100

%

$

84,076

13

%

(2) Reflects client arrangements subject to renewal (Pega Cloud, maintenance, and term license).

Note: See the schedules at the end of this release for additional information.

Quarterly conference call

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We will conduct a conference call and audio-only webcast at 5:00 p.m. EDT on October 28, 2020.

Members of the public and investors may join the call and participate in the question and answer session by dialing 1-800-289-0438 (domestic), 1-323-794-2423 (international), or via webcast (http://public.viavid.com/index.php?id=142049) by logging onto www.pega.com at least five minutes before the event’s broadcast and clicking on the webcast icon in the Investors section.

A replay of the call will also be available on www.pega.com by clicking the Earnings Calls link in the Investors section.

Discussion of Non-GAAP financial measures

To supplement our GAAP financial results presented, we provide Non-GAAP measures, including in this release. We utilize several different financial measures, both GAAP and Non-GAAP, to analyze and assess the business’ overall performance, make operating decisions, and forecast and plan for future periods. We prepare our annual financial plan on both a GAAP and a Non-GAAP basis. We use Non-GAAP measures in the evaluation process to establish management compensation because of the importance of these measures in managing the business.

The Non-GAAP measures exclude the effects of stock-based compensation expense, amortization of intangible assets, foreign currency transaction gains and losses, costs from the issuance of our convertible senior notes and the related capped call transactions, gains and losses arising from our venture investments, gains and losses from our capped call transactions, gains and losses from the change in the format of PegaWorld, and related income tax effects. Non-GAAP measures allow investors and others to better understand and evaluate operating results and prospects in the same manner as management, compare financial results across accounting periods, and better understand our core business’s long-term performance. We also use Non-GAAP measures for purposes of determining company-wide incentive compensation.

Non-GAAP financial measures should not be considered in isolation or as a substitute for comparable GAAP measures. Our Non-GAAP financial measures should only be read in conjunction with our consolidated GAAP financial statements.

A reconciliation of our Non-GAAP and GAAP measures is at the end of this release.

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