Companies: 11,391     total market cap: $149.655 T
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Pegasystems
PEGA
#2785
Rank
$6.02 B
Marketcap
๐Ÿ‡บ๐Ÿ‡ธ United States
Country
$36.65
Share price
4.18%
Change (1 day)
-44.12%
Change (1 year)
๐Ÿ‘จโ€๐Ÿ’ป Software๐Ÿ‘ฉโ€๐Ÿ’ป Tech
Categories
Pegasystems Inc. is an American software company that develops software for customer relationship management (CRM), digital process automation and business process management (BPM).
  1. Pegasystems
  2. Quarterly Reports (10-Q)
  3. Financial Year FY2026 Q3

Pegasystems - 10-Q quarterly report FY2026 Q3


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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________
FORM 10-Q
_____________________________________
☒Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 2026
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) 
____________________________
Massachusetts04-2787865
(State or other jurisdiction of incorporation or organization)(IRS Employer Identification No.)
225 Wyman Street, Waltham, MA 02451
(Address of principal executive offices, including zip code)
(617) 374-9600
(Registrant’s telephone number, including area code)
____________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of each exchange on which registered
Common Stock, $.01 par value per sharePEGANASDAQ Global Select Market
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 ☒
There were 163,663,545 shares of the Registrant’s common stock, $0.01 par value per share, outstanding on October 12, 2026.

Table of Contents

PEGASYSTEMS INC.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS
Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Condensed Consolidated Balance Sheets as of September 30, 2026 and December 31, 2025
3
Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2026 and 2025
4
Unaudited Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2026 and 2025
5
Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2026 and 2025
6
Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2026 and 2025
8
Notes to Unaudited Condensed Consolidated Financial Statements
9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
21
Item 3. Quantitative and Qualitative Disclosures About Market Risk
28
Item 4. Controls and Procedures
29
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
30
Item 1A. Risk Factors
30
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
30
Item 5. Other Information
30
Item 6. Exhibits
31
Signatures
32

2
Table of Contents
PART I - FINANCIAL INFORMATION
ITEM 1.     FINANCIAL STATEMENTS
PEGASYSTEMS INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
September 30, 2026December 31, 2025
Assets
Current assets:
Cash and cash equivalents$202,190 $212,447 
Marketable securities107,521 213,352 
Total cash, cash equivalents, and marketable securities309,711 425,799 
Accounts receivable, net
130,121 264,713 
Unbilled receivables, net
151,240 166,478 
Other current assets112,807 121,305 
Total current assets703,879 978,295 
Long-term unbilled receivables, net
79,355 102,544 
Goodwill81,270 81,506 
Long-term deferred income taxes
172,493 175,472 
Other long-term assets293,296 294,027 
Total assets$1,330,293 $1,631,844 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable$57,619 $12,924 
Accrued expenses77,067 44,847 
Accrued compensation and related expenses91,609 148,797 
Deferred revenue429,469 509,275 
Other current liabilities23,231 21,935 
Total current liabilities678,995 737,778 
Long-term operating lease liabilities
54,643 60,825 
Other long-term liabilities47,594 45,860 
Total liabilities781,232 844,463 
Commitments and contingencies (Note 16)
Stockholders’ equity:
Preferred stock, 1,000 shares authorized; none issued
— — 
Common stock, 400,000 shares authorized; 163,580 and 170,347 shares issued and outstanding at
September 30, 2026 and December 31, 2025, respectively
1,636 1,703 
Additional paid-in capital52,667 330,926 
Retained earnings508,679 463,389 
Accumulated other comprehensive (loss)(13,921)(8,637)
Total stockholders’ equity549,061 787,381 
Total liabilities and stockholders’ equity$1,330,293 $1,631,844 

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
September 30,		Nine Months Ended
September 30,
2026202520262025
Revenue
Subscription services$291,578 $264,198 $860,388 $737,703 
Subscription license55,578 60,758 232,458 329,153 
Consulting46,203 56,394 151,202 174,639 
Total revenue393,359 381,350 1,244,048 1,241,495 
Cost of revenue
Subscription services54,490 42,978 157,880 122,616 
Subscription license268 314 1,006 1,066 
Consulting49,088 62,601 159,743 194,235 
Total cost of revenue103,846 105,893 318,629 317,917 
Gross profit289,513 275,457 925,419 923,578 
Operating expenses
Selling and marketing143,754 140,129 464,765 425,329 
Research and development74,311 78,756 240,526 231,826 
General and administrative38,612 42,108 130,925 107,724 
Litigation settlement16,000 — 16,000 — 
Restructuring1,975 (5)4,557 (38)
Total operating expenses274,652 260,988 856,773 764,841 
Income from operations14,861 14,469 68,646 158,737 
Foreign currency transaction gain (loss)589 7,154 1,075 (12,179)
Interest income1,814 2,660 7,268 11,243 
Interest expense(64)(144)(153)(1,172)
(Loss) on capped call transactions— — — (223)
Other income (loss), net578 (43)(840)19,247 
Income before provision for (benefit from) income taxes17,778 24,096 75,996 175,653 
Provision for (benefit from) income taxes3,686 (19,268)15,806 16,790 
Net income$14,092 $43,364 $60,190 $158,863 
Earnings per share
Basic$0.09 $0.25 $0.36 $0.93 
Diluted$0.08 $0.24 $0.35 $0.86 
Weighted-average number of common shares outstanding
Basic163,757170,567166,043171,045
Diluted168,642184,095173,064185,005

See notes to unaudited condensed consolidated financial statements.
4

PEGASYSTEMS INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
Three Months Ended
September 30,		Nine Months Ended
September 30,
2026202520262025
Net income$14,092 $43,364 $60,190 $158,863 
Other comprehensive (loss) income, net of tax
Unrealized (loss) gain on available-for-sale securities(503)89 (1,321)11 
Foreign currency translation adjustments(365)(4,595)(3,963)21,416 
Total other comprehensive (loss) income, net of tax(868)(4,506)(5,284)21,427 
Comprehensive income$13,224 $38,858 $54,906 $180,290 

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 StockAdditional paid-in capitalRetained earningsAccumulated other comprehensive (loss)Total stockholders’ equity
Number
of shares		Amount
December 31, 2024172,224$1,722 $526,102 $87,901 $(30,245)$585,480 
Repurchase of common stock(2,920)(30)(118,674)— — (118,704)
Issuance of common stock for stock compensation plans1,756189,736 — — 9,754 
Issuance of common stock under the employee stock purchase plan6421,909 — — 1,911 
Stock-based compensation——41,425 — — 41,425 
Cash dividends declared ($0.015 per share)
——— (2,567)— (2,567)
Other comprehensive income——— — 8,548 8,548 
Net income——— 85,422 — 85,422 
March 31, 2025171,124$1,712 $460,498 $170,756 $(21,697)$611,269 
Repurchase of common stock(3,147)(31)(132,454)— — (132,485)
Issuance of common stock for stock compensation plans3,0863064,876 — — 64,906 
Issuance of common stock under the employee stock purchase plan39—1,816 — — 1,816 
Stock-based compensation——36,730 — — 36,730 
Cash dividends declared ($0.03 per share)
——— (5,156)— (5,156)
Other comprehensive income——— — 17,385 17,385 
Net income——— 30,077 — 30,077 
June 30, 2025171,102$1,711 $431,466 $195,677 $(4,312)$624,542 
Repurchase of common stock(2,675)(27)(142,549)— — (142,576)
Issuance of common stock for stock compensation plans2,0782136,082 — — 36,103 
Issuance of common stock under the employee stock purchase plan40—1,978 — — 1,978 
Stock-based compensation——43,041 — — 43,041 
Cash dividends declared ($0.03 per share)
——— (5,116)— (5,116)
Other comprehensive (loss)——— — (4,506)(4,506)
Net income——— 43,364 — 43,364 
September 30, 2025170,545$1,705 $370,018 $233,925 $(8,818)$596,830 
6

PEGASYSTEMS INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except per share amounts)
Common StockAdditional paid-in capitalRetained earningsAccumulated other comprehensive (loss)Total stockholders’ equity
Number
of shares		Amount
December 31, 2025170,347$1,703 $330,926 $463,389 $(8,637)$787,381 
Repurchase of common stock(3,523)(35)(167,917)— — (167,952)
Issuance of common stock for stock compensation plans1,8871916,114 — — 16,133 
Issuance of common stock under the employee stock purchase plan5712,067 — — 2,068 
Stock-based compensation——45,815 — — 45,815 
Cash dividends declared ($0.03 per share)
——— (5,063)— (5,063)
Other comprehensive (loss)——— — (5,231)(5,231)
Net income——— 32,764 — 32,764 
March 31, 2026168,768$1,688 $227,005 $491,090 $(13,868)$705,915 
Repurchase of common stock(5,335)(53)(201,565)— — (201,618)
Issuance of common stock for stock compensation plans85588,856 — — 8,864 
Issuance of common stock under the employee stock purchase plan7011,778 — — 1,779 
Stock-based compensation——36,226 — — 36,226 
Cash dividends declared ($0.03 per share)
——— (4,931)— (4,931)
Other comprehensive income——— — 815 815 
Net income——— 13,334 — 13,334 
June 30, 2026164,358$1,644 $72,300 $499,493 $(13,053)$560,384 
Repurchase of common stock(2,020)(20)(65,190)— — (65,210)
Issuance of common stock for stock compensation plans1,181 11 15,144 — — 15,155 
Issuance of common stock under the employee stock purchase plan61 1 1,734 — — 1,735 
Stock-based compensation— — 28,679 — — 28,679 
Cash dividends declared ($0.03 per share)
— — — (4,906)— (4,906)
Other comprehensive (loss)— — — — (868)(868)
Net income— — — 14,092 — 14,092 
September 30, 2026163,580 $1,636 $52,667 $508,679 $(13,921)$549,061 

See notes to unaudited condensed consolidated financial statements.
7

PEGASYSTEMS INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Nine Months Ended
September 30,
20262025
Operating activities
Net income$60,190 $158,863 
Adjustments to reconcile net income to cash provided by operating activities
Stock-based compensation110,720 121,196 
Amortization of deferred commissions46,552 50,494 
Amortization of intangible assets and depreciation9,303 9,414 
Amortization of right-of-use lease assets10,359 8,988 
Foreign currency transaction (gain) loss(1,075)12,179 
Deferred income taxes2,286 235 
(Accretion) of investments (712)(2,574)
Loss (gain) on investments1,595 (19,438)
Other non-cash168 1,749 
Change in operating assets and liabilities, net64,913 5,690 
Cash provided by operating activities304,299 346,796 
Investing activities
Purchases of investments(76,543)(238,956)
Proceeds from maturities and called investments65,595 362,436 
Sales of investments114,460 99,902 
Investment in property and equipment(14,474)(8,485)
Cash provided by investing activities89,038 214,897 
Financing activities
Repurchases of convertible senior notes— (467,864)
Dividend payments to stockholders(15,104)(10,306)
Proceeds from employee stock plans49,460 129,112 
Common stock repurchases for tax withholdings for net settlement of equity awards(3,726)(12,644)
Common stock repurchases under stock repurchase program(432,700)(394,689)
Cash (used in) financing activities(402,070)(756,391)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash(2,590)6,971 
Net (decrease) in cash, cash equivalents, and restricted cash(11,323)(187,727)
Cash, cash equivalents, and restricted cash, beginning of period216,360 341,529 
Cash, cash equivalents, and restricted cash, end of period$205,037 $153,802 
Cash and cash equivalents$202,190 $148,699 
Restricted cash included in other current assets957 — 
Restricted cash included in other long-term assets1,890 5,103 
Total cash, cash equivalents, and restricted cash$205,037 $153,802 
Supplemental disclosures
Non-cash investing and financing activity:
Investment in property and equipment included in accounts payable and accrued liabilities$1,635 $1,840 
Dividends payable$4,906 $5,116 
Right of use assets obtained in exchange for operating lease obligations$4,322 $4,765 
U.S. excise tax payable on net stock repurchase$2,671 $576 

See notes to unaudited condensed consolidated financial statements.
8
PEGASYSTEMS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 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 required by the generally accepted accounting principles (“GAAP”) 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, 2025.
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.
All intercompany transactions and balances were eliminated in consolidation. The operating results for the interim periods presented do not necessarily indicate the expected results for fiscal year 2026.
NOTE 2. NEW ACCOUNTING PRONOUNCEMENTS
Disaggregation of Income Statement Expenses
In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (ASU “2024-03”). Among other items, the requirements include expanded disclosures around employee compensation and selling expenses. ASU 2024-03 will be effective for the Company for the year ending December 31, 2027. The Company is still evaluating the impact of this new guidance on its consolidated financial statements but expects the adoption to result in disclosure changes only.
Targeted Improvements to the Accounting for Internal-Use Software
In September 2025, the FASB issued ASU 2025-06, Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software (“ASU 2025-06”). ASU 2025-06 introduces a more principles-based framework to the capitalization of software intended for internal use focused on management’s authorization and commitment to fund a development project and the probability of whether the project will be completed and used for its intended function. ASU 2025-06 will be effective for the Company beginning January 1, 2028. The Company is currently evaluating the impact ASU 2025-06 will have on its consolidated financial statements.
NOTE 3. MARKETABLE SECURITIES
September 30, 2026December 31, 2025
(in thousands)Amortized CostUnrealized GainsUnrealized LossesFair ValueAmortized CostUnrealized GainsUnrealized LossesFair Value
Government debt$— $— $— $— $5,755 $3 $(4)$5,754 
Corporate debt108,699 3 (1,181)107,521 207,278 428 (108)207,598 
$108,699 $3 $(1,181)$107,521 $213,033 $431 $(112)$213,352 
As of September 30, 2026, marketable securities’ maturities ranged from October 2026 to September 2029, with a weighted-average remaining maturity of 2.0 years.
NOTE 4. RECEIVABLES, CONTRACT ASSETS, AND DEFERRED REVENUE
Receivables
(in thousands)
September 30, 2026December 31, 2025
Accounts receivable, net$130,121 $264,713 
Unbilled receivables, net151,240 166,478 
Long-term unbilled receivables, net
79,355 102,544 
$360,716 $533,735 
9
PEGASYSTEMS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)



Unbilled receivables
Unbilled receivables are client-committed amounts for which revenue recognition precedes billing. Billing is solely subject to the passage of time.
Unbilled receivables by expected collection date:
(Dollars in thousands)
September 30, 2026
1 year or less$151,240 66 %
1-2 years65,071 28 %
2-5 years14,284 6 %
$230,595 100 %
Unbilled receivables by contract effective date:
(Dollars in thousands)
September 30, 2026
2026$74,641 32 %
2025109,856 48 %
202429,542 13 %
202314,765 6 %
2022 and prior1,791 1 %
$230,595 100 %
Contract assets
Contract assets are client-committed amounts for which revenue recognized exceeds the amount billed to the client, and billing is subject to conditions other than the passage of time, such as the completion of a related performance obligation.
(in thousands)
September 30, 2026December 31, 2025
Contract assets (1)
$20,302 $17,678 
Long-term contract assets (2)
36,556 17,421 
$56,858 $35,099 
(1) Included in other current assets.
(2) Included in other long-term assets.
Deferred revenue
Deferred revenue consists of billings made and payments received in advance of revenue recognition.
(in thousands)
September 30, 2026December 31, 2025
Deferred revenue$429,469 $509,275 
Long-term deferred revenue (1)
4,536 9,568 
$434,005 $518,843 
(1) Included in other long-term liabilities.
The change in deferred revenue during the nine months ended September 30, 2026 was primarily due to new billings in advance of revenue recognition and $457.4 million of revenue recognized during the period included in deferred revenue as of December 31, 2025.
NOTE 5. DEFERRED COMMISSIONS
(in thousands)
September 30, 2026December 31, 2025
Deferred commissions (1)
$88,967 $104,574 
(1) Included in other long-term assets.
Three Months Ended
September 30,		Nine Months Ended
September 30,
(in thousands)2026202520262025
Amortization of deferred commissions (1)
$14,605 $16,916 $46,552 $50,494 
(1) Included in selling and marketing expenses.
10
PEGASYSTEMS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)



NOTE 6. GOODWILL
Nine Months Ended
September 30,
(in thousands)
20262025
January 1,$81,506 $81,113 
Currency translation adjustments(236)289 
September 30,$81,270 $81,402 
NOTE 7. OTHER ASSETS AND LIABILITIES
Other current assets
(in thousands)September 30, 2026December 31, 2025
Income tax receivables$47,124 $31,535 
Prepaid expenses39,934 65,293 
Contract assets20,302 17,678 
Indirect tax receivable2,381 2,172 
Restricted cash957 1,577 
Other2,109 3,050 
$112,807 $121,305 
Other long-term assets
(in thousands)September 30, 2026December 31, 2025
Deferred commissions$88,967 $104,574 
Right of use assets54,412 60,574 
Property and equipment52,511 45,240 
Contract assets36,556 17,421 
Venture investments21,313 22,021 
Income taxes receivable16,069 15,459 
Restricted cash1,890 2,336 
Intangible assets1,175 1,202 
Other20,403 25,200 
$293,296 $294,027 
Accrued expenses
(in thousands)September 30, 2026December 31, 2025
Outside professional services$19,784 $15,233 
Cloud hosting18,375 1,064 
Litigation settlements16,000 9,750 
Income and other taxes8,445 7,273 
Employee related6,017 5,464 
Marketing and sales program2,050 1,519 
Other6,396 4,544 
$77,067 $44,847 
Other current liabilities
(in thousands)September 30, 2026December 31, 2025
Operating lease liabilities$14,382 $15,142 
Dividends payable4,906 5,110 
Other3,943 1,683 
$23,231 $21,935 
11
PEGASYSTEMS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)



Other long-term liabilities
(in thousands)September 30, 2026December 31, 2025
Income taxes payable$26,053 $23,331 
Deferred revenue4,536 9,568 
Other17,005 12,961 
$47,594 $45,860 

NOTE 8. SEGMENT INFORMATION
Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision-maker (“CODM”) in deciding how to allocate resources and assess performance.
The Company derives substantially all of its revenue from the sale and support of one group of similar products and services – software that provides case management, business process management, and real-time decisioning solutions to improve customer engagement and operational excellence in the enterprise applications market. To assess performance, the Company’s CODM, the Chief Executive Officer, reviews financial information on a consolidated basis. Therefore, the Company determined it has one operating segment and one reportable segment. The accounting policies of the Company’s operating segment are the same as those described in "Note 2. Significant Accounting Policies" included in the Annual Report on Form 10-K for the year ended December 31, 2025. The CODM uses consolidated net income to set financial performance targets, assess performance, and make expense allocation decisions.
Three Months Ended
September 30,		Nine Months Ended
September 30,
(in thousands)2026202520262025
Total revenue$393,359 $381,350 $1,244,048 $1,241,495 
Total cost of revenue103,846 105,893 318,629 317,917 
Selling
120,470 119,764 385,768 354,932 
Marketing
23,284 20,365 78,997 70,397 
Research and development74,311 78,756 240,526 231,826 
General and administrative38,612 42,108 130,925 107,724 
Other segment items, net (1)
15,058 (9,632)13,207 (16,954)
Provision for (benefit from) income taxes3,686 (19,268)15,806 16,790 
Net income$14,092 $43,364 $60,190 $158,863 
(1) Includes Restructuring, Foreign currency transaction gain (loss), Interest income, Interest expense, (Loss) on capped call transactions, and Other income (loss), net.

Long-lived assets related to the Company’s U.S. and international operations consist of property and equipment, which are included in Other long-term assets in the Company’s consolidated balance sheet:
(in thousands)
September 30, 2026December 31, 2025
U.S.$41,145 78 %$40,060 89 %
International11,366 22 %5,180 11 %
$52,511 100 %$45,240 100 %
NOTE 9. DEBT
Credit facility
In November 2019, and as since amended, the Company entered into a $100 million senior secured revolving credit agreement (the “Credit Facility”) with PNC Bank, National Association. On October 16, 2026, the Credit Facility was amended to, among other changes, increase the borrowing capacity to $200 million and extend the expiration date to October 16, 2031. The Company may use borrowings for general corporate purposes and to finance working capital needs. Subject to specific conditions and the agreement of the financial institutions lending the additional amount, the aggregate commitment may be increased to $300 million.
The Credit Facility, as amended, contains customary covenants, including, but not limited to, those relating to additional indebtedness, liens, asset divestitures, and affiliate transactions. The Credit Facility is secured by substantially all assets of the Company. Beginning with the fiscal quarter ended March 31, 2024, the Company must maintain a maximum net consolidated leverage ratio of 3.5 to 1.0 (with a step-up for certain acquisitions) and a minimum consolidated interest coverage ratio of 3.5 to 1.0. As of September 30, 2026, the Company is compliant with all Credit Facility covenants.
As of September 30, 2026 and December 31, 2025, the Company had letters of credit of $1.7 million and $26.7 million, respectively, under the Credit Facility, however we had no cash borrowings.
12
PEGASYSTEMS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)





NOTE 10. RESTRUCTURING
The Company has undertaken the following restructuring activities intended to better align roles and capacity to an AI-first delivery model:
Three Months Ended
September 30,		Nine Months Ended
September 30,
(in thousands)2026202520262025
Employee severance and related costs
$1,975 $(11)$4,557 $(68)
Office space reductions (1)
— 6 — 30 
      Restructuring
$1,975 $(5)$4,557 $(38)
(1) These primarily relate to non-cash operating lease adjustments.
Restructuring activity:
Accrued employee severance and related costs:
Nine Months Ended
September 30,
(in thousands)20262025
January 1,$12,858 $2,000 
Costs incurred4,557 (68)
Cash disbursements(15,442)(1,681)
Currency translation adjustments(12)115 
September 30, (1)
$1,961 $366 
(1) Included in accrued compensation and related expenses.
NOTE 11. FAIR VALUE MEASUREMENTS
Assets and liabilities measured at fair value on a recurring basis
The Company records its cash equivalents, marketable securities, and venture investments 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 with 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 minimize unobservable inputs when determining fair value.
The Company’s venture investments are recorded at fair value based on multiple valuation methods, including observable public companies and transaction prices and unobservable inputs, including the volatility, rights, and obligations of the securities the Company holds.
13
PEGASYSTEMS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)



Assets and liabilities measured at fair value on a recurring basis:
September 30, 2026December 31, 2025
(in thousands)Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total
Cash equivalents$8,631 $5,419 $— $14,050 $33,043 $8,463 $— $41,506 
Marketable securities $— $107,521 $— $107,521 $— $213,352 $— $213,352 
Venture investments$— $— $21,313 $21,313 $— $— $22,021 $22,021 
Changes in venture investments:
Nine Months Ended
September 30,
(in thousands)20262025
January 1,$22,021 $21,234 
New investments900 13,129 
Sales of investments— (33,223)
Changes in foreign exchange rates(34)129 
Changes in fair value:
included in other income (loss), net
(1,309)19,480 
included in other comprehensive income
(265)(535)
September 30,$21,313 $20,214 
The carrying value of certain financial instruments, including receivables and accounts payable, approximates fair value due to their short maturities.
NOTE 12. REVENUE
Geographic revenue
Revenues by geography are determined based on client location:
Three Months Ended
September 30,		Nine Months Ended
September 30,
(Dollars in thousands)
2026202520262025
U.S.$175,734 44 %$185,132 49 %$591,281 48 %$662,440 54 %
Other Americas30,043 8 %23,511 6 %96,450 8 %76,884 6 %
United Kingdom (“U.K.”)45,255 11 %53,099 14 %162,165 13 %134,475 11 %
Europe (excluding U.K.), Middle East, and Africa 69,299 18 %64,410 17 %216,430 17 %202,886 16 %
Asia-Pacific73,028 19 %55,198 14 %177,722 14 %164,810 13 %
$393,359 100 %$381,350 100 %$1,244,048 100 %$1,241,495 100 %
Revenue streams
Three Months Ended
September 30,		Nine Months Ended
September 30,
(in thousands)
2026202520262025
Pega Cloud$218,925 $184,549 $637,890 $502,415 
Maintenance72,653 79,649 222,498 235,288 
Consulting46,203 56,394 151,202 174,639 
Revenue recognized over time337,781 320,592 1,011,590 912,342 
Subscription license55,578 60,758 232,458 329,153 
Revenue recognized at a point in time55,578 60,758 232,458 329,153 
Total revenue$393,359 $381,350 $1,244,048 $1,241,495 
14
PEGASYSTEMS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)



Three Months Ended
September 30,		Nine Months Ended
September 30,
(in thousands)2026202520262025
Pega Cloud$218,925 $184,549 $637,890 $502,415 
Maintenance72,653 79,649 222,498 235,288 
Subscription services291,578 264,198 860,388 737,703 
Subscription license55,578 60,758 232,458 329,153 
Subscription347,156 324,956 1,092,846 1,066,856 
Consulting46,203 56,394 151,202 174,639 
Total revenue$393,359 $381,350 $1,244,048 $1,241,495 
Remaining performance obligations ("Backlog")
Expected future revenue from existing non-cancellable contracts:
As of September 30, 2026:
(Dollars in thousands)Subscription servicesSubscription licenseConsultingTotal
Pega CloudMaintenance
1 year or less
$730,041 $180,906 $32,317 $42,205 $985,469 49 %
1-2 years
416,308 85,371 1,476 1,463 504,618 25 %
2-3 years
233,510 46,416 7,348 574 287,848 14 %
Greater than 3 years
216,977 12,544 945 963 231,429 12 %
$1,596,836 $325,237 $42,086 $45,205 $2,009,364 100 %
As of September 30, 2025:
(Dollars in thousands)Subscription servicesSubscription licenseConsultingTotal
Pega CloudMaintenance
1 year or less
$609,511 $199,651 $46,386 $43,979 $899,527 51 %
1-2 years
319,940 71,730 4,404 2,478 398,552 23 %
2-3 years
164,125 48,668 746 114 213,653 12 %
Greater than 3 years
195,133 40,385 7,220 56 242,794 14 %
$1,288,709 $360,434 $58,756 $46,627 $1,754,526 100 %
NOTE 13. STOCKHOLDERS' EQUITY
Stock-based Compensation Expense
Three Months Ended
September 30,		Nine Months Ended
September 30,
(in thousands)2026202520262025
Cost of revenue
$6,124 $6,626 $20,751 $21,737 
Selling and marketing
9,499 15,009 42,509 45,168 
Research and development
6,010 7,914 23,972 23,789 
General and administrative
7,046 13,492 23,488 30,502 
$28,679 $43,041 $110,720 $121,196 
Income tax benefit
$(5,466)$(547)$(21,720)$(1,700)
As of September 30, 2026, the Company had $116.1 million of unrecognized stock-based compensation expense, net of estimated forfeitures, which is expected to be recognized over a weighted-average period of 1.7 years.
15
PEGASYSTEMS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)



Grants
Nine Months Ended
September 30, 2026
(in thousands)
Quantity
Total Fair Value
Restricted stock units (1)
2,222 $97,287 
Non-qualified stock options
3,423 $58,826 
Performance stock options (2)
1,497 $25,804 
Common stock27 $875 
(1) Includes units issued when employees elect to receive 50% of the employee’s target incentive compensation under the Company’s Corporate Incentive Compensation Plan (the “CICP”) in the form of RSUs instead of cash.
(2) Performance stock options allow the holder to purchase a specified number of Common Stock shares at an exercise price equal to or greater than the shares' fair market value at the grant date. Performance stock options granted in the nine months ended September 30, 2026 vest on the second anniversary of the grant date, up to 200%, subject to the achievement of specified performance metrics over fiscal years 2026 and 2027. The options expire ten years from the grant date.
Stock repurchase program
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, of which $810.1 million remains available as of September 30, 2026.
During the nine months ended September 30, 2026, the Company repurchased 10.9 million shares of its common stock for $432.2 million at an average price per share of $39.73. The share repurchase and authorization amounts disclosed within this Form 10-Q exclude the U.S. excise tax on share repurchases. All purchases under this program have been made on the open market.
NOTE 14. INCOME TAXES
Effective income tax rate
Nine Months Ended
September 30,
(Dollars in thousands)20262025
Provision for (benefit from) income taxes$15,806 $16,790 
Effective income tax rate21 %10 %
The Company’s effective income tax rate increased in the nine months ended September 30, 2026 as compared to the prior period, primarily due to a decrease in excess tax benefits from stock-based compensation recognized in the current period and the absence of a benefit related to the valuation allowance associated with substantially all of the Company’s U.S. and U.K. deferred tax assets in the prior period.
16
PEGASYSTEMS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)



NOTE 15. EARNINGS PER SHARE
Basic earnings per share is calculated using the weighted-average number of common shares outstanding during the period. Diluted earnings per share is calculated using the weighted-average number of common shares outstanding during the period, plus the dilutive effect of outstanding stock options, RSUs, and Convertible Senior Notes (the “Notes”), which were repaid in its entirety at maturity during the three months ended March 31, 2025.
Calculation of earnings per share:
Three Months Ended
September 30,		Nine Months Ended
September 30,
(in thousands, except per share amounts)2026202520262025
Net income$14,092 $43,364 $60,190 $158,863 
Weighted-average common shares outstanding163,757 170,567 166,043 171,045 
Earnings per share, basic$0.09 $0.25 $0.36 $0.93 
Net income$14,092 $43,364 $60,190 $158,863 
Notes - interest expense, net of tax
— — — 742 
Numerator for diluted EPS $14,092 $43,364 $60,190 $159,605 
Weighted-average effect of dilutive securities:
Notes
———1,599
Stock options3,17010,1134,7788,971
RSUs1,7153,4152,2433,390
Effect of dilutive securities4,88513,5287,02113,960
Weighted-average common shares outstanding, assuming dilution (1) (2) (3)
168,642184,095173,064185,005
Earnings per share, diluted$0.08 $0.24 $0.35 $0.86 
Outstanding anti-dilutive stock options and RSUs (4)
8454217267
(1) All securities are excluded when their inclusion would be anti-dilutive.
(2) The weighted-average shares underlying the conversion options in the Company’s Notes are included using the if-converted method, if dilutive in the period.
(3) In February 2020, the Company entered into privately negotiated capped call transactions (the “Capped Call Transactions”) with certain financial institutions. The Capped Call Transactions expired upon maturity of the Notes during the three months ended March 31, 2025. The Company’s Capped Call Transactions represented the equivalent number of shares of the Company’s common stock (representing the number of shares for which the Notes are convertible). The Capped Call Transactions are excluded from weighted-average common shares outstanding, assuming dilution, in all periods as their effect would be anti-dilutive.
(4) Outstanding stock options and RSUs that were anti-dilutive under the treasury stock method in the period were excluded from the computation of diluted earnings per share. These awards may be dilutive in the future.
NOTE 16. COMMITMENTS AND CONTINGENCIES
Legal proceedings
In addition to the matters below, the Company is or may become involved in a variety of claims, demands, suits, investigations, and proceedings that arise from time to time relating to matters incidental to the ordinary course of the Company’s business, including actions concerning contracts, intellectual property, employment, benefits, and securities matters. Regardless of the outcome, legal disputes can have a material effect on the Company because of defense and settlement costs, diversion of management resources, and other factors.
In addition, as the Company is a party to ongoing litigation, it is at least reasonably possible that the Company’s estimates will change in the near term, and the effect may be material. As of September 30, 2026, the Company recorded an estimated $16 million accrued loss related to litigation settlements. As of December 31, 2025, the Company recorded an estimated $9.75 million accrued loss related to the settlement of the In re Pegasystems Inc. Derivative Litigation matter, see additional discussion below.
Appian Corp. v. Pegasystems Inc. & Youyong Zou
The Company is a defendant in litigation brought by Appian in the Circuit Court of Fairfax County, Virginia titled Appian Corp. v. Pegasystems Inc. & Youyong Zou, No. 2020-07216 (Fairfax Cty. Ct.). On May 9, 2022, the jury rendered its verdict finding that the Company had misappropriated one or more of Appian’s trade secrets, that the Company had violated the Virginia Computer Crimes Act, and that the trade secret misappropriation was willful and malicious. The jury awarded damages of $2,036,860,045 for trade secret misappropriation and $1.00 for violating the Virginia Computer Crimes Act. On September 15, 2022, the circuit court of Fairfax County entered judgment of $2,060,479,287, consisting of the damages previously awarded by the jury plus attorneys’ fees and costs, and stating that the judgment is subject to post-judgment interest at a rate of 6.0% per annum, from the date of the jury verdict (May 9, 2022) as to the amount of the jury verdict and from September 15, 2022 as to the amount of the award of attorneys’ fees and costs.
17
PEGASYSTEMS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)



On September 15, 2022, the Company appealed the Virginia Uniform Trade Secrets Act judgment. A panel of the Court of Appeals of Virginia heard oral arguments on November 15, 2023, and issued a unanimous written opinion on July 30, 2024. The Court of Appeals reversed the judgment and ordered a new trade secrets claim trial. Appian filed a petition for appeal with the Supreme Court of Virginia on August 29, 2024, which was granted on March 7, 2025 for appeal and the Company’s assignments of cross-error.
On January 8, 2026, the Supreme Court of Virginia issued a unanimous written opinion affirming the ruling of the Court of Appeals of Virginia. On January 13, 2026, the Circuit Court of Fairfax County, Virginia notified the parties that this case has been reassigned to Judge David A. Oblon for further proceedings. On January 29, 2026, the Supreme Court of Virginia remanded Appian’s trade secret case to the Court of Appeals with direction to remand to the Circuit Court of Fairfax County for further proceedings in accordance with its written opinion. On February 27, 2026, the Court of Appeals of Virginia issued a mandate stating that the judgment is affirmed in part, reversed in part, and remanded to the Circuit Court of Fairfax County for further proceedings consistent with the views expressed in the written opinion of the Court of Appeals of Virginia. On May 7, 2026, Judge Oblon held a first status conference for the remanded trial proceedings and set the retrial to commence on January 11, 2027.
On September 24, 2026, Judge Oblon entered a Scheduling Order which he amended on October 1, 2026. In those orders, Appian was granted the opportunity to have pretrial motions heard on October 16 and November 13, 2026; the Company was granted the opportunity to have pretrial motions heard on November 6 and December 18, 2026. On October 16, 2026, the Court granted Appian’s motion to present a reasonable royalty damages theory it was barred from presenting at the original trial. In that reasonable royalty claim, Appian seeks $284.6 million in damages for accused marketing and sales activities and $1.36 billion in damages for accused Pega Platform revisions. If the jury finds there was trade secret misappropriation, it could award either unjust enrichment or reasonable royalty damages.
The Company continues to believe that it did not misappropriate any alleged trade secrets and that its sales of the Company’s products at issue were not caused by, or the result of, any alleged misappropriation of trade secrets. The Company is unable to reasonably estimate possible damages because of, among other things, uncertainty as to the outcome of a new trial resulting from the appellate proceedings.
PS Lit Recovery, LLC v. Pegasystems Inc., Alan Trefler, and Kenneth Stillwell and Eminence Fund Long Master, Ltd., Eminence Fund Master, Ltd., Eminence Fund II Master, LP, Eminence Partners Long II, LP, Eminence Fund Leveraged Master, Ltd., Eminence Partners, L.P., Eminence Partners II, L.P. v. Pegasystems Inc., Alan Trefler, and Kenneth Stillwell
Federal court cases
On December 4, 2024, the shareholders representing approximately 3% of the settlement class that opted out of the court approved settlement in the class action matter captioned City of Fort Lauderdale Police and Firefighters’ Retirement System, Individually and on Behalf of All Others Similarly Situated v. Pegasystems Inc., Alan Trefler, and Kenneth Stillwell (Case 1:22-cv-00578-LMB-IDD) (the “Class Action”) filed two lawsuits against the Company, the Company’s chief executive officer, and the Company’s chief operating and financial officer in the United States District Court for the District of Massachusetts. The first was captioned Eminence Fund Long Master, Ltd., Eminence Fund Master, Ltd., Eminence Fund II Master, LP, Eminence Partners Long II, LP, Eminence Fund Leveraged Master, Ltd., Eminence Partners, L.P., and Eminence Partners II, L.P. v. Pegasystems Inc., Alan Trefler, and Kenneth Stillwell (Case 1:24-cv-12999-WGY); the second was captioned PS Lit Recovery, LLC v. Pegasystems Inc., Alan Trefler, and Kenneth Stillwell (Case 1:24-cv-11220-WGY).
The complaints, which are substantially similar, generally allege, among other things, that the defendants violated Section 10(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Rule 10b-5 promulgated thereunder, and that the individual defendants violated Section 20(a) of the Exchange Act, in each case by allegedly making materially false and/or misleading statements, as well as allegedly failing to disclose material adverse facts about the Company’s business, operations, and prospects, which caused the Company’s securities to trade at artificially inflated prices. The complaints also assert claims for common law fraud and negligent misrepresentation and seek unspecified damages.
The defendants moved to dismiss the complaints on March 13, 2025 and on May 21, 2025, the Court held a hearing on the motion to dismiss. The Court (i) granted the motion to dismiss as to the plaintiffs’ scheme liability claims; (ii) granted the motion to dismiss as to certain claims against Ken Stillwell; and (iii) took the motion to dismiss under advisement as to all other claims. On January 8, 2026, the Court issued a written order granting the motion to dismiss as to the Section 10(b) and common law fraud claims against Ken Stillwell and denying the motion to dismiss as to the remaining claims.
On September 18, 2026, the parties to the federal and state court opt out securities cases agreed to a final settlement of these suits. Under the terms of the final settlement, the plaintiffs in the federal and state court opt out securities cases agreed to the dismissal of all claims with prejudice. On October 5, 2026, stipulations of dismissal with prejudice were filed with the Court.
18
PEGASYSTEMS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)



State court cases
On February 26, 2025, the same shareholders filed two lawsuits against the Company, the Company’s chief executive officer, and the Company’s chief operating and financial officer in Massachusetts Superior Court. The first is captioned Eminence Fund Long Master, Ltd., Eminence Fund Master, Ltd., Eminence Fund II Master, LP, Eminence Partners Long II, LP, Eminence Fund Leveraged Master, Ltd., Eminence Partners, L.P., and Eminence Partners II, L.P. v. Pegasystems Inc., Alan Trefler, and Kenneth Stillwell (Case No. 2584CV00541-BLS1); the second is captioned PS Lit Recovery, LLC v. Pegasystems, Inc., Alan Trefler, and Kenneth Stillwell (Case No. 2584CV00539-BLS1). The complaints, which are substantially similar, allege the same state law claims raised in the two federal lawsuits brought by the same plaintiffs in the United States District Court for the District of Massachusetts. On April 14, 2025, the court granted the parties’ joint stipulations to stay both cases pending the resolution of the parallel federal actions and ordered the plaintiffs to file periodic status reports regarding the federal cases showing cause why the state cases should remain open.
On September 18, 2026, the parties to the federal and state court cases agreed to a final settlement of the litigation and on October 6, 2026, a notice of voluntary dismissal was prejudice was filed with the Court. See discussion above within the “Federal court cases” subsection.
In re Pegasystems Inc. Derivative Litigation
As previously disclosed, the Company entered into a settlement of derivative lawsuits captioned Mary Larkin and Dag Sagfors, Derivatively on Behalf of Nominal Defendant Pegasystems Inc. v. Alan Trefler, Peter Gyenes, Richard Jones, Christopher Lafond, Dianne Ledingham, Sharon Rowlands, Leon Trefler, Larry Weber, Kenneth Stillwell, Don Schuerman, Kerim Akgonul, and Benjamin Baril, and Pegasystems Inc., nominal defendant (Case 1:25-cv-10303), filed in the United States District Court for the District of Massachusetts, and John Dwyer and Ray Gerber, Plaintiffs, v. Alan Trefler, Peter Gyenes, Richard Jones, Christopher Lafond, Dianne Ledingham, Sharon Rowlands, Larry Weber, Leon Trefler, Don Schuerman, Kerim Akgonul, and Benjamin Baril, and Pegasystems Inc., Nominal Defendant (Case 2484CV01734), and Jayne Birch and Robert Garfield, Plaintiffs, v. Alan Trefler, Peter Gyenes, Richard Jones, Christopher Lafond, Dianne Ledingham, Sharon Rowlands, Larry Weber, Kerim Akgonul, Don Schuerman, Leon Trefler, Douglas Kim, John Petronio, Benjamin Baril, and Kenneth Stillwell, and Pegasystems Inc., Nominal Defendant (Case 2484CV03076-BLS-1), filed in the Business Litigation Section of the Superior Court in Suffolk County, Massachusetts. On June 30, 2026, the Massachusetts Superior Court entered an order for final approval of the settlement, including a $7 million special dividend to shareholders (excluding defendants) and payment by the Company of $2.75 million in plaintiffs’ attorney fees. On July 2, 2026, in light of the settlement, the parties to the federal court action filed a stipulation and proposed order of dismissal with prejudice as to all claims. On July 16, 2026, the Court signed the order dismissing the federal court action with prejudice. Also on July 2, 2026, the state court entered a final judgment and order of dismissal dismissing the consolidated state cases with prejudice. On September 16, 2026, the special dividend was paid, concluding the matter.
Pegasystems v. Appian Defamation Litigation
On August 2, 2023, the Company filed a complaint against Appian in the U.S. District Court for the District of Massachusetts, captioned Pegasystems Inc. v. Appian Corporation, 1:23-cv-11776-LTS (D. Mass.). The complaint asserts claims for defamation, trade libel, and violations of the Lanham Act, 15 U.S.C. § 1125(a) based on statements Appian made following the verdict in the litigation brought by Appian in the Circuit Court of Fairfax County, Virginia, described above. In response to a motion to dismiss filed by Appian on August 18, 2023, the Company amended the complaint to add additional factual allegations in support of the same claims. On September 22, 2023, Appian moved to dismiss the amended complaint, which the Court denied on January 5, 2024. On February 20, 2024, Appian answered the complaint, asserted counterclaims against the Company for defamation, trade libel, violations of the Lanham Act, 15 U.S.C. § 1125(a), and violations of Mass. Gen. Laws ch. 93A §§ 2 and 11, and sought a declaratory judgment that the Company was not entitled to the recovery sought in the amended complaint. On August 15, 2024, the Company moved to dismiss the counterclaims, which the Court allowed in part and denied in part on October 8, 2024; specifically, the Court allowed the Company’s motion to dismiss the trade libel counterclaim with respect to Appian’s allegations regarding the Company’s Code of Conduct. On November 26, 2024, Appian moved for judgment on the pleadings. On March 11, 2025, the Court allowed the motion for judgment on the pleadings in part and entered judgment for Appian on the basis of a statement made by Appian’s chief executive officer, but otherwise denied the motion.
The parties exchanged opening expert reports in March 2026. The Company claims $41.9 million in damages from Appian’s conduct. Appian seeks $31.8 million in lost profits damages and further requests that the Company be required to disgorge $109.5 million in profits as unjust enrichment arising from business contracts Appian contends it competed with Pegasystems on from 2022-2025. Apart from Company revenues in which Appian contends it competed with Pegasystems for business, Appian further sought that the Company be forced to disgorge the entirety of its profits ($2.33 billion) from 2022-2025. Oral argument on summary judgment motions was held on July 24, 2026. On August 21, 2026, the Court issued an opinion granting in part and denying in part the parties’ cross-motions for summary judgment. Among other things, the Court dismissed Appian’s $2.33 billion disgorgement claim. The Court allowed the Company’s defamation, trade libel, and Lanham Act claims to proceed to trial on certain challenged statements, and it allowed Appian’s Lanham Act and Chapter 93A counterclaims to proceed to trial on certain challenged statements. The parties’ Daubert motions challenging expert witnesses were fully briefed as of October 9, 2026 and are pending with the Court. On October 8, 2026, Appian filed a motion for “realignment” of the parties to put Appian in the position of plaintiff and the Company in the position of defendant for the trial in this matter.
19
PEGASYSTEMS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)



A jury trial is currently scheduled to begin on November 30, 2026. The Company vehemently disagrees with Appian’s entitlement to any recovery, and remains confident in the merits of its claims against Appian and the damages claimed. The Company is unable to reasonably estimate likelihood of success for either party or a range of possible gain or loss given the uncertainty as to the likelihood, amount, and timing of any potential gain or loss related to its claims or Appian’s counterclaims.
20

ITEM 2.     MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
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.
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.
Forward-looking statements deal with future events and are subject to risks and uncertainties that are difficult to predict, including, but not limited to:
•our future financial performance and business plans;
•the adequacy of our liquidity and capital resources;
•the successful execution of investments in artificial intelligence;
•our ability to protect our intellectual property rights, costs associated with defending such rights, intellectual property rights claims, and other related claims by third parties against us, including related costs, damages, and other relief that may be granted against us;
•our ongoing litigation with Appian Corp. and associated legal proceedings; and
•management of our growth.
These risks and others that may cause actual results to differ materially from those expressed in such forward-looking statements are described further in Part I of our Annual Report on Form 10-K for the year ended December 31, 2025, Part II of this Quarterly Report on Form 10-Q, and other filings we make with the SEC.
Investors are cautioned not to place undue reliance on such forward-looking statements, and there are no assurances that the results included in such statements will be achieved. Although subsequent events may cause our view to change, except as required by applicable law, we do not undertake and expressly disclaim any obligation to publicly update or revise these forward-looking statements, whether as the result of new information, future events, or otherwise.
The forward-looking statements in this Quarterly Report represent our views as of October 20, 2026.
NON-GAAP MEASURES
Our non-GAAP financial measures should only be read in conjunction with our consolidated financial statements prepared in accordance with GAAP. We believe that these measures help investors understand our core operating results and prospects, which is consistent with how management measures and forecasts our performance without the effect of often one-time charges and other items outside our normal operations. Management uses these measures to assess the performance of the company's operations and establish operational goals and incentives. They are not a substitute for financial measures prepared under U.S. GAAP. A reconciliation of GAAP and non-GAAP measures is located with each non-GAAP measure.
BUSINESS OVERVIEW
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 BlueprintTM (“Blueprint”) to rapidly prototype and accelerate the development and deployment of applications quickly and collaboratively.
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.
Performance metrics
We use performance metrics to analyze and assess our overall performance, make operating decisions, and forecast and plan for future periods, including:
21

Annual contract value (“ACV”)
ACV represents the annualized value of our active contracts as of the measurement date. The contract's total value is divided by its duration in years to calculate ACV. ACV is a performance measure that we believe provides useful information to our management and investors.
310
(Dollars in thousands)
September 30, 2025September 30, 2026Change
Constant Currency Change
Pega Cloud$815,370 $975,991 $160,621 20 %20 %
Maintenance
296,955 261,321 (35,634)(12)%(12)%
Subscription services
1,112,325 1,237,312 124,987 11 %12 %
Subscription license
444,601 415,997 (28,604)(6)%(6)%
$1,556,926 $1,653,309 $96,383 6 %7 %
Purchasing behaviors continue to evolve as clients subject large technology investments to greater scrutiny as AI disrupts the industry. As a result, our ACV growth rate significantly slowed during the nine months ended September 30, 2026, as compared to the same period last year. These factors may continue to adversely affect the ACV growth rate for the rest of the year.
Reconciliation of ACV and constant currency ACV
(in millions, except percentages)September 30, 2025September 30, 2026
1-Year Change
ACV$1,557$1,6536 %
Impact of changes in foreign exchange rates— 5 
Constant currency ACV
$1,557$1,6587 %
Note: Constant currency ACV is calculated by applying the September 30, 2025 foreign exchange rates to current period shown.

22

Cash Flow
1415
(Dollars in thousands)
Nine Months Ended
September 30,
Change
20252026
Cash provided by operating activities$346,796 $304,299 (12)%
Investment in property and equipment(8,485)(14,474)
Free cash flow (1)
$338,311 $289,825 (14)%
Supplemental information (2)
Litigation settlement$— $9,750 
Legal fees
15,022 32,864 
Restructuring1,681 15,442 
Interest paid on convertible senior notes1,754 — 
Other— (689)
Income taxes, net of refunds7,993 22,609 
$26,450 $79,976 
As a result of the factors discussed under ACV above, our cash flow generation may continue to be adversely affected for the rest of the year.
(1) Our non-GAAP free cash flow is defined as cash provided by operating activities less investment in property and equipment. Investment in property and equipment fluctuates in amount and frequency and is significantly affected by the timing and size of investments in our facilities and equipment. We provide information on free cash flow to enable investors to assess our ability to generate cash without incurring additional external financings. This information is not a substitute for financial measures prepared under U.S. GAAP.
(2) The supplemental information below identifies certain items included in operating cash flow that may affect comparability between periods.
•Litigation settlement: Cost to settle litigation arising from proceedings outside the ordinary course of business. See "Note 16. Commitments and Contingencies" in Item 1 of this Quarterly Report for further information.
•Legal fees: Legal and related fees arising from proceedings outside the ordinary course of business.
•Restructuring: Restructuring fluctuates in amount and frequency and is significantly affected by the timing and size of our restructuring activities.
•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.
•Other: One-time cash flow items not part of our ongoing operations.
•Income taxes, net of refunds: Direct income taxes paid net of refunds received.
23

Remaining performance obligations (“Backlog”)
50
Reconciliation of Backlog and Constant Currency Backlog (Non-GAAP)
(in millions, except percentages)September 30, 2025September 30, 2026
1-Year Growth Rate
Backlog - GAAP$1,755 $2,009 15 %
Impact of changes in foreign exchange rates— 10 
Constant currency backlog$1,755 $2,019 15 %
Note: Constant currency Backlog is calculated by applying the September 30, 2025 foreign exchange rates to current period shown.
CRITICAL ACCOUNTING POLICIES
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 following accounting principles generally accepted in the U.S. and the rules and regulations of the SEC for interim financial reporting. Preparing these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, 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 based on the available information.
For more information about our critical accounting policies, we encourage you to read the discussion in the following locations in our Annual Report on Form 10-K for the year ended December 31, 2025:
•“Critical Accounting Estimates and Significant Judgments” in Item 7; and
•“Note 2. Significant Accounting Policies” in Item 8.
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, 2025.
24

RESULTS OF OPERATIONS
Revenue
(Dollars in thousands)Three Months Ended
September 30,		ChangeNine Months Ended
September 30,		Change
2026202520262025
Pega Cloud$218,925 56 %$184,549 48 %$34,376 19 %$637,890 51 %$502,415 40 %$135,475 27 %
Maintenance72,653 18 %79,649 21 %(6,996)(9)%222,498 18 %235,288 19 %(12,790)(5)%
Subscription services291,578 74 %264,198 69 %27,380 10 %860,388 69 %737,703 59 %122,685 17 %
Subscription license55,578 14 %60,758 16 %(5,180)(9)%232,458 19 %329,153 27 %(96,695)(29)%
Subscription347,156 88 %324,956 85 %22,200 7 %1,092,846 88 %1,066,856 86 %25,990 2 %
Consulting46,203 12 %56,394 15 %(10,191)(18)%151,202 12 %174,639 14 %(23,437)(13)%
$393,359 100 %$381,350 100 %$12,009 3 %$1,244,048 100 %$1,241,495 100 %$2,553 — %
•The increases in Pega Cloud revenue in the three and nine months ended September 30, 2026 were primarily due to expanded adoption of Pega Cloud by our clients.
•The decreases in maintenance revenue in the three and nine months ended September 30, 2026 were primarily due to our clients’ shift to Pega Cloud-based offerings, which do not result in maintenance revenue.
•The decrease in subscription license revenue in the three months ended September 30, 2026 was primarily due to the timing of client contract renewals. The decrease in subscription license revenue in the nine months ended September 30, 2026 was primarily due to several large multi-year contracts recognized in revenue in the nine months ended September 30, 2025.
•The decreases in consulting revenue in the three and nine months ended September 30, 2026 were primarily due to a decrease in consultant billable hours in our Americas region.
Gross profit
(Dollars in thousands)Three Months Ended
September 30,		ChangeNine Months Ended
September 30,		Change
2026202520262025
Pega Cloud$170,061 78 %$146,811 80 %$23,250 16 %$497,192 78 %$396,450 79 %$100,742 25 %
Maintenance67,027 92 %74,409 93 %(7,382)(10)%205,316 92 %218,637 93 %(13,321)(6)%
Subscription services237,088 81 %221,220 84 %15,868 7 %702,508 82 %615,087 83 %87,421 14 %
Subscription license55,310 100 %60,444 99 %(5,134)(8)%231,452 100 %328,087 100 %(96,635)(29)%
Subscription292,398 84 %281,664 87 %10,734 4 %933,960 85 %943,174 88 %(9,214)(1)%
Consulting(2,885)(6)%(6,207)(11)%3,322 54 %(8,541)(6)%(19,596)(11)%11,055 56 %
$289,513 74 %$275,457 72 %$14,056 5 %$925,419 74 %$923,578 74 %$1,841 — %
•The decreases in Pega Cloud gross profit percent in the three and nine months ended September 30, 2026 were primarily due to increases in personnel-related costs associated with investments made to support the expansion of our cloud operations.
•The decreases in maintenance gross profit percent in the three and nine months ended September 30, 2026 were primarily due to higher compensation and benefits from increased headcount.
•The increases in consulting gross profit percent in the three and nine months ended September 30, 2026 were primarily due to decreases in compensation and benefits of $11.1 million and $29.6 million, respectively, which were 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.
25

Operating expenses
(Dollars in thousands)Three Months Ended
September 30,		ChangeNine Months Ended
September 30,		Change
2026202520262025
Selling and marketing$143,754 $140,129 $3,625 3 %$464,765 $425,329 $39,436 9 %
% of Revenue37 %37 %37 %34 %
Research and development$74,311 $78,756 $(4,445)(6)%$240,526 $231,826 $8,700 4 %
% of Revenue19 %21 %19 %19 %
General and administrative$38,612 $42,108 $(3,496)(8)%$130,925 $107,724 $23,201 22 %
% of Revenue10 %11 %11 %9 %
Litigation settlement$16,000 $— $16,000 *$16,000 $— $16,000 *
% of Revenue4 %— %1 %— %
Restructuring$1,975 $(5)$1,980 *$4,557 $(38)$4,595 *
% of Revenue1 %— %— %— %
* Not meaningful
•The increase in selling and marketing in the three months ended September 30, 2026 was primarily due to marketing program spend of $2.9 million to support future growth. The increase in selling and marketing in the nine months ended September 30, 2026 was primarily due to an increase in compensation and benefits of $20.4 million attributable to higher headcount as we continue to expand our prospective and current client engagement.
•The decrease in research and development in the three months ended September 30, 2026 was primarily due to a decrease in compensation and benefits of $7.1 million attributable to incentive compensation. The increase in research and development in the nine months ended September 30, 2026 was primarily due to an increase in cloud hosting expenses of $3.7 million and outside professional services of $2.1 million.
•The decrease in general and administrative in the three months ended September 30, 2026 was primarily due to a decrease in compensation and benefits of $7.9 million attributable to equity compensation. The increase in general and administrative in the nine months ended September 30, 2026 was primarily due to $28 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 16. Commitments and Contingencies" in Part I, Item 1 of this Quarterly Report.
•The increases in litigation settlement in the three and nine months ended September 30, 2026 were primarily due to the estimated cost to settle ongoing litigation arising from proceedings outside the ordinary course of business. For additional information, see "Note 16. Commitments and Contingencies" in Part I, Item 1 of this Quarterly Report.
•The increases in restructuring in the three and nine months ended September 30, 2026 were primarily due to cash severance and related costs incurred in connection with workforce reductions intended to better align roles to an AI-first delivery model. For additional information, see "Note 10. Restructuring" in Part I, Item 1 of this Quarterly Report.
Other income and expenses
(Dollars in thousands)Three Months Ended
September 30,		ChangeNine Months Ended
September 30,		Change
2026202520262025
Foreign currency transaction gain (loss)$589 $7,154 $(6,565)(92)%$1,075 $(12,179)$13,254 *
Interest income1,814 2,660 (846)(32)%7,268 11,243 (3,975)(35)%
Interest expense(64)(144)80 *(153)(1,172)1,019 87 %
(Loss) on capped call transactions— — — *— (223)223 100 %
Other income (loss), net578 (43)621 *(840)19,247 (20,087)*

$2,917 $9,627 $(6,710)(70)%$7,350 $16,916 $(9,566)(57)%
* Not meaningful

•The changes in foreign currency transaction gain (loss) in the three and nine months ended September 30, 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.
•The decreases in interest income in the three and nine months ended September 30, 2026 were primarily due to lower investment balances.
•The decrease in interest expense in the nine months ended September 30, 2026 was primarily due to the repayment of the Notes at maturity on March 3, 2025.
26

•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.
•The decrease in other income (loss), net in the nine months ended September 30, 2026 was primarily due to the gain from the partial sale of a venture investment in 2025. For additional information, see "Note 11. Fair Value Measurements" in Part I, Item 1 of this Quarterly Report.
Provision for (benefit from) income taxes
Nine Months Ended
September 30,
(Dollars in thousands)20262025
Provision for (benefit from) income taxes$15,806 $16,790 
Effective income tax rate21 %10 %
Our effective income tax rate increased in the nine months ended September 30, 2026 as compared to the prior period, primarily due to a decrease in excess tax benefits from stock-based compensation recognized in the current period and the absence of a benefit related to the valuation allowance associated with substantially all of our U.S. and U.K. deferred tax assets in the prior period.
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.
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.
LIQUIDITY AND CAPITAL RESOURCES
Nine Months Ended
September 30,
 (in thousands)20262025
Cash provided by (used in):
Operating activities$304,299 $346,796 
Investing activities89,038 214,897 
Financing activities(402,070)(756,391)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash(2,590)6,971 
Net (decrease) in cash, cash equivalents, and restricted cash$(11,323)$(187,727)

(in thousands)
September 30, 2026December 31, 2025
Held in U.S. entities$101,700 $157,449 
Held in foreign entities208,011 268,350 
Total cash, cash equivalents, and marketable securities309,711 425,799 
Restricted cash included in other current assets957 1,577 
Restricted cash included in other long-term assets1,890 2,336 
Total cash, cash equivalents, marketable securities, and restricted cash
$312,558 $429,712 
We believe that our current cash, marketable securities, cash flow provided by operations, borrowing capacity, and ability to engage in capital market transactions will be sufficient to fund our operations, stock repurchases, and quarterly cash dividends for at least the next 12 months and to meet our known long-term cash requirements. Whether these resources are adequate to meet our liquidity needs beyond that period will depend on our future growth, operating results, and the investments needed to support our operations. We may utilize available funds or seek external financing if we require additional capital resources.
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.
Operating activities
The change in cash provided by operating activities in the nine months ended September 30, 2026 was primarily due to the timing of cash disbursements related to legal fees and related expenses arising from proceedings that originated outside of the ordinary course of business, restructuring activities, and a litigation settlement. For additional information, see “Note 16. Commitments and Contingencies” and “Note 10. Restructuring” in Part I, Item 1 of this Quarterly Report.
27

Investing activities
The change in cash provided by investing activities in the nine months ended September 30, 2026 was primarily due to scheduled maturities of our investments in financial instruments in anticipation of the repayment of the maturing Notes in 2025.
Financing activities
Debt financing
In November 2019, and as since amended, we entered into a $100 million senior secured revolving credit agreement (the “Credit Facility”) with PNC Bank, National Association. On October 16, 2026, the Credit Facility was amended to, among other changes, increase the borrowing capacity to $200 million and extend the expiration date to October 16, 2031.
As of September 30, 2026 and December 31, 2025, we had letters of credit of $1.7 million and $26.7 million, respectively, under the Credit Facility; however we had no cash borrowings. For additional information, see "Note 9. Debt" in Part I, Item 1 of this Quarterly Report.
Stock repurchase program
Changes in the remaining stock repurchase authority:
(in thousands) (1)
Nine Months Ended
September 30, 2026
December 31, 2025$242,254 
Authorizations (2)
1,000,000 
Repurchases (3)
(432,199)
September 30, 2026$810,055 
(1) Amounts presented are exclusive of the U.S. excise tax on share repurchases.
(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.
(3) All purchases under this program have been made on the open market.
Common stock repurchases
Nine Months Ended
September 30,
20262025
(in thousands)SharesAmountSharesAmount
Repurchases paid
10,878$432,199 8,743$393,189 
Stock repurchase program (1)
10,878432,199 8,743393,189 
Tax withholdings for net settlement of equity awards923,726 25012,644 
10,970$435,925 8,993$405,833 
(1) Amounts presented are exclusive of the U.S. excise tax on share repurchases.
During the nine months ended September 30, 2026 and 2025, instead of receiving cash from the equity holders, we withheld shares with a value of $2.8 million and $16.2 million, respectively, for the exercise price of options. These amounts are not included in the table above.
Dividends
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.
Nine Months Ended
September 30,
(in thousands)20262025
Dividend payments to stockholders$15,104 $10,306 
Contractual obligations
There have been no material changes in our contractual obligations from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025.
ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk is the risk of loss from adverse changes in financial market prices and rates.
Foreign currency exposure
Translation risk
Our international operations’ operating expenses are primarily denominated in foreign currencies. However, our international sales are also primarily denominated in foreign currencies, partially offsetting our foreign currency exposure.
28

A hypothetical 10% strengthening in the U.S. dollar against other currencies would have resulted in the following:
Nine Months Ended
September 30,
20262025
(Decrease) in revenue(5)%(4)%
(Decrease) in net income(17)%(4)%
Remeasurement risk
We incur transaction gains and losses from the remeasurement of monetary assets and liabilities denominated in currencies other than the functional currency of the entities in which they are recorded.
We are primarily exposed to changes in foreign currency exchange rates associated with the Australian dollar, Euro, and U.S. dollar-denominated cash, cash equivalents, marketable securities, receivables, and intercompany balances held by our U.K. subsidiary, a British pound functional entity.
A hypothetical 10% strengthening in the British pound exchange rate in comparison to the Australian dollar, Euro, and U.S. dollar would have resulted in the following impact:
Nine Months Ended
September 30,
(in thousands)20262025
Foreign currency (loss)$(21,369)$(30,790)
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 September 30, 2026. 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 September 30, 2026.
(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 September 30, 2026 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
29

PART II - OTHER INFORMATION
ITEM 1.     LEGAL PROCEEDINGS
The information set forth in “Note 16. Commitments and Contingencies”, in Part I, Item 1 of this Quarterly Report is incorporated herein by reference.
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, 2025, filed with the U.S. Securities and Exchange Commission. These risk factors could materially affect our business, financial condition, and future results and may 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.
ITEM 2.     UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer purchases of equity securities (1)
Common stock repurchased in the three months ended September 30, 2026:
(in thousands, except per share amounts)
Total Number
of Shares
Purchased (2)
Average Price
Paid per
Share (2)
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 (3)(4)
July 1, 2026 - July 31, 2026870$28.74 870$850,054 
August 1, 2026 - August 31, 2026628$32.89 608$830,054 
September 1, 2026 - September 30, 2026560$36.92 542$810,055 
2,058$32.23 2,020
(1) For additional information, see "Liquidity and Capital Resources" in Part I, Item 2 of this Quarterly Report.
(2) Includes shares withheld to cover the option exercise price and tax withholding obligations for stock compensation awards subject to net settlement provisions.
(3) 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.
(4) Amounts presented are exclusive of the U.S. excise tax on share repurchases.
ITEM 5.     OTHER INFORMATION
Rule 10b5-1 and non-rule 10b5-1 trading arrangements
On September 9, 2026, Leon Trefler, our Chief of Clients and Markets, modified the Rule 10b5-1 trading arrangement that he previously entered into on March 16, 2026. As modified, the Rule 10b5-1 trading arrangement provides for the sale of 26,000 shares of our common stock and will terminate on December 31, 2027, subject to early termination for certain specified events set forth in the arrangement.
Other than as disclosed above, during the three months ended September 30, 2026, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
Credit Facility
On October 16, 2026, we entered into an amendment to our $100 million senior secured revolving credit agreement with PNC Bank, National Association to, among other changes, increase the borrowing capacity to $200 million and extend the expiration date to October 16, 2031. For additional information, see "Note 9. Debt" in Part I, Item 1 of this Quarterly Report. The description contained herein is qualified in its entirety by reference to the amendment, a copy of which is filed as Exhibit 10.1 to this Quarterly Report on Form 10-Q.
30

ITEM 6.     EXHIBITS
Exhibit No.DescriptionIncorporation by ReferenceFiled Herewith
FormLocationFiling Date
3.1
8-K
3.16/18/25
3.2
8-K
3.26/15/20
10.1X
31.1X
31.2X
32+
101.INS
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
X
101.SCH
Inline XBRL Taxonomy Extension Schema Document.
X
101.CAL
Inline XBRL Taxonomy Calculation Linkbase Document.
X
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document.
X
101.LAB
Inline XBRL Taxonomy Label Linkbase Document.
X
101.PRE
Inline XBRL Taxonomy Presentation Linkbase Document.
X
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
X
+ Indicates that the exhibit is being furnished with this report and is not filed as a part of it.
31

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:October 20, 2026By:/s/ KENNETH STILLWELL
Kenneth Stillwell
Chief Operating Officer and Chief Financial Officer
(Principal Financial Officer)


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