Pega’s AI Innovation Drives Strong ACV Growth and Record Cash Flow in Q4 2024

• Operating cash flow grows to $346 million and free cash flow grows to $338 million in 2024
• Annual Contract Value (ACV) grows 9% year over year (11% in constant currency)
• Pega Cloud ACV grows 18% year over year (21% in constant currency)
• 2025 guidance of 12% ACV growth, $455 million in cash flow from operations, and $440 million in free cash flow

Pegasystems Inc. (NASDAQ: PEGA), the Enterprise Transformation Company™, released its financial results for the fourth quarter and full-year 2024.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20250212298048/en/

Total ACV Growth and Pega Cloud ACV Growth (Graphic: Business Wire)

“2024 was a transformative year for Pega, the industry, and our clients,” said Alan Trefler, Pega founder and CEO. “Our team’s impressive performance drove the introduction of the most innovative solutions in our history. The reaction from our clients and partners has been remarkable, leading to deeper engagement and new opportunities.

“We met or exceeded our financial objectives for 2024 including becoming a Rule of 40 company,” said Ken Stillwell, Pega COO and CFO. “We’re committed to accelerating growth and free cash flow in 2025 and beyond.”

Financial and performance metrics (1)

Reconciliation of ACV and Constant Currency ACV

(in millions, except percentages)

December 31, 2023

 

December 31, 2024

 

1-Year Change

ACV

$

1,255

 

$

1,372

 

9

%

Impact of changes in foreign exchange rates

 

—

 

 

23

 

 

Constant currency ACV

$

1,255

 

$

1,395

 

11

%

Note: Constant currency ACV is calculated by applying the December 31, 2023 foreign exchange rates to all periods shown.

_____________________________

1 Refer to the schedules at the end of this release for additional information, including a reconciliation of GAAP and non-GAAP measures.

(Dollars in thousands,

except per share amounts)

Three Months Ended

December 31,

 

 

 

Year Ended

December 31,

 

 

 

2024

 

 

2023

 

Change

 

 

2024

 

 

2023

 

Change

Total revenue

$

490,830

 

$

474,233

 

3

%

 

$

1,497,180

 

$

1,432,616

 

5

%

Net income - GAAP

$

119,090

 

$

142,665

 

(17

)%

 

$

99,189

 

$

67,808

 

46

%

Net income - non-GAAP

$

147,953

 

$

152,141

 

(3

)%

 

$

270,542

 

$

210,159

 

29

%

Diluted earnings per share - GAAP

$

1.25

 

$

1.61

 

(22

)%

 

$

1.11

 

$

0.73

 

52

%

Diluted earnings per share - non-GAAP

$

1.61

 

$

1.77

 

(9

)%

 

$

3.03

 

$

2.48

 

22

%

(Dollars in thousands)

Three Months Ended

December 31,

 

Change

 

Year Ended

December 31,

 

Change

2024

 

2023

 

 

2024

 

2023

 

Pega Cloud

$

149,638

30

%

 

$

120,346

25

%

 

$

29,292

 

24

%

 

$

558,734

37

%

 

$

461,328

32

%

 

$

97,406

 

21

%

Maintenance

 

81,257

17

%

 

 

86,646

18

%

 

 

(5,389

)

(6

)%

 

 

323,304

22

%

 

 

331,856

24

%

 

 

(8,552

)

(3

)%

Subscription services

 

230,895

47

%

 

 

206,992

43

%

 

 

23,903

 

12

%

 

 

882,038

59

%

 

 

793,184

56

%

 

 

88,854

 

11

%

Subscription license

 

204,697

42

%

 

 

207,559

44

%

 

 

(2,862

)

(1

)%

 

 

398,102

27

%

 

 

407,625

28

%

 

 

(9,523

)

(2

)%

Subscription

 

435,592

89

%

 

 

414,551

87

%

 

 

21,041

 

5

%

 

 

1,280,140

86

%

 

 

1,200,809

84

%

 

 

79,331

 

7

%

Consulting

 

52,822

11

%

 

 

54,310

12

%

 

 

(1,488

)

(3

)%

 

 

213,273

14

%

 

 

221,706

15

%

 

 

(8,433

)

(4

)%

Perpetual license

 

2,416

—

%

 

 

5,372

1

%

 

 

(2,956

)

(55

)%

 

 

3,767

—

%

 

 

10,101

1

%

 

 

(6,334

)

(63

)%

Total revenue

$

490,830

100

%

 

$

474,233

100

%

 

$

16,597

 

3

%

 

$

1,497,180

100

%

 

$

1,432,616

100

%

 

$

64,564

 

5

%

2025 Guidance (1)

As of February 12, 2025, we are providing the following guidance:

 

2025

Annual contract value growth

12%

 

2025

 

GAAP

 

Non-GAAP (1)

Revenue

$1.6 Billion

 

$1.6 Billion

Diluted earnings per share

$1.60

 

$3.10

 

2025

Cash provided by operating activities

$455 million

Free cash flow

$440 million

(1) A reconciliation of our GAAP and Non-GAAP guidance is contained in the financial schedules at the end of this release.

Quarterly conference call

A conference call and audio-only webcast will be conducted at 8:00 a.m. EST on Thursday, February 13, 2025.

Members of the public and investors are invited to join the call and participate in the question and answer session by dialing 1 [phone] (domestic) or 1 [phone] (international) and using Conference ID 3830305, or via https://events.q4inc.com/attendee/343473625 by logging onto www.pega.com at least five minutes prior to the event's broadcast and clicking on the webcast icon in the Investors section.

Discussion of non-GAAP financial 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. Refer to the schedules at the end of this release for additional information, including a reconciliation of GAAP and non-GAAP measures.

Forward-looking statements

Certain statements in this press release may be "forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995.

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.

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;
• the continued payment of our quarterly dividends;
• the timing of revenue recognition;
• variation in demand for our products and services, including among clients in the public sector;
• reliance on key personnel;
• reliance on third-party service providers, including hosting providers;
• compliance with our debt obligations and covenants;
• foreign currency exchange rates;
• potential legal and financial liabilities, as well as damage to our reputation, due to cyber-attacks;
• security breaches and security flaws;
• 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.;
• our client retention rate; 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, 2024, and other filings we make with the U.S. Securities and Exchange Commission (“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.

Any forward-looking statements in this press release represent our views as of February 12, 2025.

About Pegasystems

Pega is The Enterprise Transformation Company that helps organizations Build for Change® with enterprise AI decisioning and workflow automation. Many of the world’s most influential businesses rely on our platform to solve their most pressing challenges, from personalizing engagement to automating service to streamlining operations. Since 1983, we’ve built our scalable and flexible architecture to help enterprises meet today’s customer demands while continuously transforming for tomorrow. For more information on Pega (NASDAQ: PEGA), visit www.pega.com.

All trademarks are the property of their respective owners.

PEGASYSTEMS INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

 

Three Months Ended

December 31,

 

Year Ended

December 31,

 

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

 

Revenue

 

 

 

 

 

 

 

Subscription services

$

230,895

 

 

$

206,992

 

 

$

882,038

 

 

$

793,184

 

Subscription license

 

204,697

 

 

 

207,559

 

 

 

398,102

 

 

 

407,625

 

Consulting

 

52,822

 

 

 

54,310

 

 

 

213,273

 

 

 

221,706

 

Perpetual license

 

2,416

 

 

 

5,372

 

 

 

3,767

 

 

 

10,101

 

Total revenue

 

490,830

 

 

 

474,233

 

 

 

1,497,180

 

 

 

1,432,616

 

Cost of revenue

 

 

 

 

 

 

 

Subscription services

 

40,988

 

 

 

34,697

 

 

 

149,918

 

 

 

144,250

 

Subscription license

 

384

 

 

 

635

 

 

 

1,888

 

 

 

2,606

 

Consulting

 

60,978

 

 

 

55,298

 

 

 

238,842

 

 

 

231,560

 

Perpetual license

 

5

 

 

 

16

 

 

 

17

 

 

 

67

 

Total cost of revenue

 

102,355

 

 

 

90,646

 

 

 

390,665

 

 

 

378,483

 

Gross profit

 

388,475

 

 

 

383,587

 

 

 

1,106,515

 

 

 

1,054,133

 

Operating expenses

 

 

 

 

 

 

 

Selling and marketing

 

139,655

 

 

 

133,924

 

 

 

534,780

 

 

 

559,177

 

Research and development

 

76,379

 

 

 

71,250

 

 

 

298,074

 

 

 

295,512

 

General and administrative

 

28,207

 

 

 

22,850

 

 

 

112,848

 

 

 

96,743

 

Litigation settlement, net of recoveries

 

—

 

 

 

—

 

 

 

32,403

 

 

 

—

 

Restructuring

 

1,245

 

 

 

297

 

 

 

4,528

 

 

 

21,747

 

Total operating expenses

 

245,486

 

 

 

228,321

 

 

 

982,633

 

 

 

973,179

 

Income from operations

 

142,989

 

 

 

155,266

 

 

 

123,882

 

 

 

80,954

 

Foreign currency transaction gain (loss)

 

6,318

 

 

 

(1,271

)

 

 

(912

)

 

 

(5,242

)

Interest income

 

6,944

 

 

 

3,428

 

 

 

25,779

 

 

 

9,259

 

Interest expense

 

(1,788

)

 

 

(1,647

)

 

 

(6,835

)

 

 

(6,876

)

Gain (loss) on capped call transactions

 

4

 

 

 

(899

)

 

 

(663

)

 

 

(1,348

)

Other (loss) income, net

 

(299

)

 

 

25

 

 

 

1,385

 

 

 

18,693

 

Income before provision for income taxes

 

154,168

 

 

 

154,902

 

 

 

142,636

 

 

 

95,440

 

Provision for income taxes

 

35,078

 

 

 

12,237

 

 

 

43,447

 

 

 

27,632

 

Net income

$

119,090

 

 

$

142,665

 

 

$

99,189

 

 

$

67,808

 

Earnings per share

 

 

 

 

 

 

 

Basic

$

1.38

 

 

$

1.71

 

 

$

1.16

 

 

$

0.82

 

Diluted

$

1.25

 

 

$

1.61

 

 

$

1.11

 

 

$

0.73

 

Weighted-average number of common shares outstanding

 

 

 

 

 

 

 

Basic

 

86,000

 

 

 

83,654

 

 

 

85,265

 

 

 

83,162

 

Diluted

 

95,636

 

 

 

89,447

 

 

 

89,634

 

 

 

84,914

 

PEGASYSTEMS INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

 

December 31, 2024

 

December 31, 2023

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

337,103

 

$

229,902

Marketable securities

 

402,870

 

 

193,436

Total cash, cash equivalents, and marketable securities

 

739,973

 

 

423,338

Accounts receivable, net

 

305,468

 

 

300,173

Unbilled receivables, net

 

173,085

 

 

237,379

Other current assets

 

115,178

 

 

68,137

Total current assets

 

1,333,704

 

 

1,029,027

Long-term unbilled receivables, net

 

61,407

 

 

85,402

Goodwill

 

81,113

 

 

81,611

Other long-term assets

 

292,049

 

 

314,696

Total assets

$

1,768,273

 

$

1,510,736

Liabilities and stockholders’ equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

6,226

 

$

11,290

Accrued expenses

 

31,544

 

 

39,941

Accrued compensation and related expenses

 

138,042

 

 

126,640

Deferred revenue

 

423,910

 

 

377,845

Convertible senior notes, net

 

467,470

 

 

—

Other current liabilities

 

18,866

 

 

21,343

Total current liabilities

 

1,086,058

 

 

577,059

Long-term convertible senior notes, net

 

—

 

 

499,368

Long-term operating lease liabilities

 

67,647

 

 

66,901

Other long-term liabilities

 

29,088

 

 

13,570

Total liabilities

 

1,182,793

 

 

1,156,898

Total stockholders’ equity

 

585,480

 

 

353,838

Total liabilities and stockholders’ equity

$

1,768,273

 

$

1,510,736

PEGASYSTEMS INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

Year Ended

December 31,

 

 

2024

 

 

 

2023

 

Net income

$

99,189

 

 

$

67,808

 

Adjustments to reconcile net income to cash provided by operating activities

 

 

 

Non-cash items

 

227,582

 

 

 

227,983

 

Change in operating assets and liabilities, net

 

19,155

 

 

 

(78,006

)

Cash provided by operating activities

 

345,926

 

 

 

217,785

 

Cash (used in) investing activities

 

(202,576

)

 

 

(50,750

)

Cash (used in) financing activities

 

(30,214

)

 

 

(81,963

)

Effect of exchange rate changes on cash, cash equivalents, and restricted cash

 

(4,434

)

 

 

2,701

 

Net increase in cash, cash equivalents, and restricted cash

 

108,702

 

 

 

87,773

 

Cash, cash equivalents, and restricted cash, beginning of period

 

232,827

 

 

 

145,054

 

Cash, cash equivalents, and restricted cash, end of period

$

341,529

 

 

$

232,827

 

PEGASYSTEMS INC.

RECONCILIATION OF SELECTED GAAP AND NON-GAAP MEASURES

(in thousands, except percentages and per share amounts)

 

Three Months Ended

December 31,

 

Year Ended

December 31,

 

2024

 

 

 

2023

 

 

Change

 

 

2024

 

 

 

2023

 

 

Change

Net income - GAAP

$

119,090

 

 

$

142,665

 

 

(17

)%

 

$

99,189

 

 

$

67,808

 

 

46

%

Stock-based compensation (1)

 

34,500

 

 

 

33,269

 

 

 

 

 

142,718

 

 

 

143,352

 

 

 

Restructuring

 

1,245

 

 

 

297

 

 

 

 

 

4,528

 

 

 

21,747

 

 

 

Legal fees

 

4,499

 

 

 

2,817

 

 

 

 

 

18,713

 

 

 

13,883

 

 

 

Litigation settlement, net of recoveries

 

—

 

 

 

—

 

 

 

 

 

32,403

 

 

 

—

 

 

 

Amortization of intangible assets

 

700

 

 

 

963

 

 

 

 

 

3,153

 

 

 

3,940

 

 

 

Interest on convertible senior notes

 

594

 

 

 

615

 

 

 

 

 

2,451

 

 

 

2,603

 

 

 

Capped call transactions

 

(4

)

 

 

899

 

 

 

 

 

663

 

 

 

1,348

 

 

 

Repurchases of convertible senior notes

 

(459

)

 

 

—

 

 

 

 

 

(459

)

 

 

(7,855

)

 

 

Foreign currency transaction (gain) loss

 

(6,318

)

 

 

1,271

 

 

 

 

 

912

 

 

 

5,242

 

 

 

Other

 

759

 

 

 

19

 

 

 

 

 

(869

)

 

 

(10,266

)

 

 

Income taxes (2)

 

(6,653

)

 

 

(30,674

)

 

 

 

 

(32,860

)

 

 

(31,643

)

 

 

Net income - non-GAAP

$

147,953

 

 

$

152,141

 

 

(3

)%

 

$

270,542

 

 

$

210,159

 

 

29

%

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share - GAAP

$

1.25

 

 

$

1.61

 

 

(22

)%

 

$

1.11

 

 

$

0.73

 

 

52

%

non-GAAP adjustments

 

0.36

 

 

 

0.16

 

 

 

 

 

1.92

 

 

 

1.75

 

 

 

Diluted earnings per share - non-GAAP

$

1.61

 

 

$

1.77

 

 

(9

)%

 

$

3.03

 

 

$

2.48

 

 

22

%

 

 

 

 

 

 

 

 

 

 

 

 

Diluted weighted-average number of common shares outstanding - GAAP

 

95,636

 

 

 

89,447

 

 

7

%

 

 

89,634

 

 

 

84,914

 

 

6

%

Capped call transactions

 

(3,553

)

 

 

(3,719

)

 

 

 

 

(214

)

 

 

(235

)

 

 

Diluted weighted-average number of common shares outstanding - non-GAAP

 

92,083

 

 

 

85,728

 

 

7

%

 

 

89,420

 

 

 

84,679

 

 

6

%

Our non-GAAP financial measures reflect the following adjustments:

• Stock-based compensation: We have excluded stock-based compensation from our non-GAAP operating expenses and profitability measures. Although stock-based compensation is a key incentive offered to our employees, and we believe such compensation contributed to our revenues recognized during the periods presented and is expected to contribute to our future revenues, we continue to evaluate our business performance, excluding stock-based compensation.
• Restructuring: We have excluded restructuring from our non-GAAP financial measures. Restructuring fluctuates in amount and frequency and is significantly affected by the timing and size of our restructuring activities. We believe excluding these amounts from our non-GAAP financial measures is useful to investors as these amounts are not representative of our core business operations and ongoing operational performance.
• Legal fees: Legal and related fees arising from proceedings outside the ordinary course of business. We believe excluding these amounts from our non-GAAP financial measures is useful to investors as the types of events giving rise to them are not representative of our core business operations and ongoing operational performance.
• 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 our Annual Report on Form 10-K for the year ended December 31, 2024 for additional information. We believe excluding these amounts from our non-GAAP financial measures is useful to investors as the types of events giving rise to them are not representative of our core business operations and ongoing operational performance.
• Amortization of intangible assets: We have excluded the amortization of intangible assets from our non-GAAP operating expenses and profitability measures. Amortization of intangible assets fluctuates in amount and frequency and is significantly affected by the timing and size of acquisitions. Investors should note that intangible assets contributed to our revenues recognized during the periods presented and are expected to contribute to future revenues. Amortization of intangible assets is likely to recur in future periods. We believe excluding these amounts provides a useful comparison of our operational performance in different periods.
• Interest on convertible senior notes: In February 2020, we issued convertible senior notes, due March 1, 2025, in a private placement. We believe that excluding the amortization of issuance costs provides a useful comparison of our operational performance in different periods.
• Capped call transactions: We have excluded gains and losses related to our capped call transactions held at fair value under U.S. GAAP. The capped call transactions are expected to reduce common stock dilution and/or offset any potential cash payments we must make, other than for principal and interest, upon conversion of the convertible senior notes. We believe excluding these amounts from our non-GAAP financial measures is useful to investors as the types of events giving rise to them are not representative of our core business operations and ongoing operational performance.
• Repurchases of convertible senior notes: We have excluded gains from the repurchases of Convertible Senior Notes. We believe excluding these amounts from our non-GAAP financial measures is useful to investors as the types of events giving rise to them are not representative of our core business operations and ongoing operational performance.
• Foreign currency transaction (gain) loss: We have excluded foreign currency transaction gains and losses from our non-GAAP profitability measures. Foreign currency transaction gains and losses fluctuate in amount and frequency and are significantly affected by foreign exchange market rates. Foreign currency transaction gains and losses are likely to recur in future periods. We believe excluding these amounts provides a useful comparison of our operational performance in different periods.
• Other: We have excluded gains and losses from our venture investments and expenses incurred due to the cancellation of in-person sales and marketing events. We believe excluding these amounts from our non-GAAP financial measures is useful to investors as the types of events giving rise to them are not representative of our core business operations and ongoing operational performance.
• Diluted weighted-average number of common shares outstanding:
  • Capped call transactions: In periods of GAAP income, the shares that would be issued if the Company’s Convertible Senior Notes were fully converted to common shares are included in the diluted weighted-average shares outstanding. The capped call transactions are expected to reduce common stock dilution and/or offset any potential cash payments the Company must make, other than for principal and interest, upon conversion of the convertible senior notes, with such reduction and/or offset subject to a cap of $196.44. We believe that including the expected impact of the capped call transactions in our non-GAAP financial measures provides a useful comparison of our operational performance in different periods.

(1) Stock-based compensation:

 

Three Months Ended

December 31,

 

Year Ended

December 31,

(Dollars in thousands)

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

 

Cost of revenue

$

6,795

 

 

$

6,497

 

 

$

27,353

 

 

$

28,994

 

Selling and marketing

 

13,463

 

 

 

14,265

 

 

 

55,084

 

 

 

57,675

 

Research and development

 

7,059

 

 

 

6,753

 

 

 

29,838

 

 

 

31,039

 

General and administrative

 

7,183

 

 

 

5,754

 

 

 

30,443

 

 

 

25,644

 

 

$

34,500

 

 

$

33,269

 

 

$

142,718

 

 

$

143,352

 

Income tax benefit

$

(422

)

 

$

(618

)

 

$

(1,799

)

 

$

(2,187

)

(2) Effective income tax rates:

 

Year Ended

December 31,

 

2024

 

 

2023

 

GAAP

30

%

 

29

%

non-GAAP

22

%

 

22

%

Our GAAP effective income tax rate is subject to significant fluctuations due to several factors, including our stock-based compensation plans, research and development tax credits, and the valuation allowance on our deferred tax assets in the U.S. and U.K. We determine our non-GAAP income tax rate using applicable rates in taxing jurisdictions and assessing certain factors, including historical and forecasted earnings by jurisdiction, discrete items, and ability to realize tax assets. We believe it is beneficial for our management to review our non-GAAP results consistent with our annual plan's effective income tax rate as established at the beginning of each year, given tax rate volatility. See "Note 18. Income Taxes" in our Annual Report on Form 10-K for the year ended December 31, 2024 for additional information.

PEGASYSTEMS INC.

RECONCILIATION OF FREE CASH FLOW (1) AND OTHER METRICS

(in thousands, except percentages)

 

Year Ended

December 31,

 

Change

 

2024

 

 

 

2023

 

 

Cash provided by operating activities

$

345,926

 

 

$

217,785

 

 

59

%

Investment in property and equipment

 

(7,712

)

 

 

(16,781

)

 

 

Free cash flow (1)

$

338,214

 

 

$

201,004

 

 

68

%

 

 

 

 

 

 

Supplemental information (2)

 

 

 

 

 

Litigation settlement, net of recoveries

$

32,403

 

 

$

—

 

 

 

Legal fees

 

16,197

 

 

 

14,645

 

 

 

Restructuring

 

5,252

 

 

 

29,401

 

 

 

Interest on convertible senior notes

 

3,810

 

 

 

4,134

 

 

 

Other

 

—

 

 

 

601

 

 

 

Income taxes

 

82,317

 

 

 

11,664

 

 

 

 

$

139,979

 

 

$

60,445

 

 

 

(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. 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 discloses items that affect our cash flows and are considered by management not to be representative of our core business operations and ongoing operational performance.

• 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 our Annual Report on Form 10-K for the year ended December 31, 2024 for additional 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, due March 1, 2025, in a private placement. The convertible senior notes accrue interest at an annual rate of 0.75%, payable semi-annually in arrears on March 1 and September 1.
• Other: Fees related to canceled in-person sales and marketing events.
• Income taxes: Direct income taxes paid net of refunds received.

PEGASYSTEMS INC.

ANNUAL CONTRACT VALUE

(in thousands, except percentages)

Annual contract value (“ACV”) - Annual Contract Value (“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.

 

December 31, 2024

 

December 31, 2023

 

Change

 

Constant Currency Change

Pega Cloud

$

652,443

 

$

552,998

 

$

99,445

 

18

%

 

21

%

Maintenance

 

291,807

 

 

324,091

 

 

(32,284

)

(10

)%

 

(8

)%

Subscription services

 

944,250

 

 

877,089

 

 

67,161

 

8

%

 

10

%

Subscription license

 

427,268

 

 

377,794

 

 

49,474

 

13

%

 

14

%

 

$

1,371,518

 

$

1,254,883

 

$

116,635

 

9

%

 

11

%

PEGASYSTEMS INC.

BACKLOG

(in thousands, except percentages)

Remaining performance obligations (“Backlog”) - Expected future revenue from existing non-cancellable contracts:

As of December 31, 2024:

 

Subscription services

 

Subscription license

 

Perpetual license

 

Consulting

 

Total

Pega Cloud

 

Maintenance

 

 

 

 

1 year or less

$

525,133

 

 

$

230,866

 

 

$

88,880

 

 

$

317

 

 

$

50,519

 

 

$

895,715

 

56

%

1-2 years

 

328,234

 

 

 

65,461

 

 

 

10,874

 

 

 

—

 

 

 

3,297

 

 

 

407,866

 

25

%

2-3 years

 

159,536

 

 

 

24,598

 

 

 

733

 

 

 

—

 

 

 

125

 

 

 

184,992

 

11

%

Greater than 3 years

 

114,256

 

 

 

19,935

 

 

 

678

 

 

 

—

 

 

 

50

 

 

 

134,919

 

8

%

 

$

1,127,159

 

 

$

340,860

 

 

$

101,165

 

 

$

317

 

 

$

53,991

 

 

$

1,623,492

 

100

%

% of Total

 

70

%

 

 

21

%

 

 

6

%

 

 

—

%

 

 

3

%

 

 

100

%

 

Change since December 31, 2023

 

 

 

 

 

 

 

 

 

 

 

 

$

166,895

 

 

$

(33,694

)

 

$

20,068

 

 

$

(2,410

)

 

$

9,265

 

 

$

160,124

 

 

 

 

17

%

 

 

(9

)%

 

 

25

%

 

 

(88

)%

 

 

21

%

 

 

11

%

 

As of December 31, 2023:

 

Subscription services

 

Subscription license

 

Perpetual license

 

Consulting

 

Total

Pega Cloud

 

Maintenance

 

 

 

 

1 year or less

$

446,160

 

 

$

245,271

 

 

$

62,070

 

 

$

2,284

 

 

$

39,810

 

 

$

795,595

 

54

%

1-2 years

 

279,474

 

 

 

67,720

 

 

 

9,138

 

 

 

443

 

 

 

2,020

 

 

 

358,795

 

25

%

2-3 years

 

144,453

 

 

 

37,142

 

 

 

9,789

 

 

 

—

 

 

 

2,896

 

 

 

194,280

 

13

%

Greater than 3 years

 

90,177

 

 

 

24,421

 

 

 

100

 

 

 

—

 

 

 

—

 

 

 

114,698

 

8

%

 

$

960,264

 

 

$

374,554

 

 

$

81,097

 

 

$

2,727

 

 

$

44,726

 

 

$

1,463,368

 

100

%

% of Total

 

66

%

 

 

25

%

 

 

6

%

 

 

—

%

 

 

3

%

 

 

100

%

 

PEGASYSTEMS INC.

RECONCILIATION OF GAAP BACKLOG AND CONSTANT CURRENCY BACKLOG

(in millions, except percentages)

 

December 31, 2023

 

December 31, 2024

 

1 Year Growth Rate

Backlog - GAAP

$

1,463

 

$

1,623

 

11

%

Impact of changes in foreign exchange rates

 

—

 

 

39

 

 

Constant currency backlog

$

1,463

 

$

1,662

 

14

%

Note: Constant currency Backlog is calculated by applying the December 31, 2023 foreign exchange rates to all periods shown.

PEGASYSTEMS INC.

RECONCILIATION OF FORWARD-LOOKING GUIDANCE

(in millions, except percentages and per share amounts)

 

 

2025

 

Annual contract value growth

 

12

%

 

 

Revenue (GAAP and Non-GAAP)

$

1,600

 

 

 

Net Income - GAAP

$

149

 

Stock-based compensation

 

147

 

Legal fees

 

25

 

Incomes taxes

 

(32

)

Net Income - Non-GAAP

$

289

 

 

 

Diluted earnings per share - GAAP

$

1.60

 

Non-GAAP adjustments

 

1.50

 

Diluted earnings per share - non-GAAP

$

3.10

 

 

 

Diluted weighted-average number of common shares outstanding (GAAP and Non-GAAP)

 

93.1

 

 

 

2025

 

 

 

Cash provided by operating activities

$

455

 

Investment in property and equipment

 

(15

)

Free cash flow

$

440

 

 

 

Supplemental information

 

Legal fees

$

25

 

Income taxes (1)

 

50

 

 

$

75

 

(1) Evolving U.S. tax legislation may impact the amount of tax payments.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20250212298048/en/

Press contact: Lisa Pintchman VP, Corporate Communications [e-mail] 617-866-6022 Twitter: @pega

Investor contact: Peter Welburn VP, Corporate Development & Investor Relations [e-mail] 617-498-8968