Company Quick10K Filing
Pegasystems
Price67.48 EPS-1
Shares79 P/E-71
MCap5,353 P/FCF-398
Net Debt-113 EBIT-118
TEV5,240 TEV/EBIT-44
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-06-30 Filed 2020-07-28
10-Q 2020-03-31 Filed 2020-04-29
10-K 2019-12-31 Filed 2020-02-12
10-Q 2019-09-30 Filed 2019-11-07
10-Q 2019-06-30 Filed 2019-08-07
10-Q 2019-03-31 Filed 2019-05-07
10-K 2018-12-31 Filed 2019-02-20
10-Q 2018-09-30 Filed 2018-11-07
10-Q 2018-06-30 Filed 2018-08-08
10-Q 2018-03-31 Filed 2018-05-10
10-K 2017-12-31 Filed 2018-02-26
10-Q 2017-09-30 Filed 2017-11-08
10-Q 2017-06-30 Filed 2017-08-09
10-Q 2017-03-31 Filed 2017-05-10
10-K 2016-12-31 Filed 2017-02-24
10-Q 2016-09-30 Filed 2016-11-02
10-Q 2016-06-30 Filed 2016-08-03
10-Q 2016-03-31 Filed 2016-05-05
10-K 2015-12-31 Filed 2016-02-25
10-Q 2015-09-30 Filed 2015-10-27
10-Q 2015-06-30 Filed 2015-07-29
10-Q 2015-03-31 Filed 2015-05-06
10-K 2014-12-31 Filed 2015-02-26
10-Q 2014-09-30 Filed 2014-11-04
10-Q 2014-06-30 Filed 2014-08-05
10-Q 2014-03-31 Filed 2014-05-06
10-K 2013-12-31 Filed 2014-02-25
10-Q 2013-09-30 Filed 2013-11-12
10-Q 2013-06-30 Filed 2013-08-08
10-Q 2013-03-31 Filed 2013-05-06
10-K 2012-12-31 Filed 2013-02-20
10-Q 2012-09-30 Filed 2012-11-08
10-Q 2012-06-30 Filed 2012-08-09
10-Q 2012-03-31 Filed 2012-05-03
10-K 2011-12-31 Filed 2012-02-29
10-Q 2011-09-30 Filed 2011-11-09
10-Q 2011-06-30 Filed 2011-08-09
10-Q 2011-03-31 Filed 2011-05-10
10-K 2010-12-31 Filed 2011-03-16
10-Q 2010-09-30 Filed 2010-11-09
10-Q 2010-06-30 Filed 2010-08-09
10-Q 2010-03-31 Filed 2010-04-22
10-K 2009-12-31 Filed 2010-02-22
8-K 2020-07-28 Earnings, Exhibits
8-K 2020-06-23
8-K 2020-06-12
8-K 2020-04-29
8-K 2020-04-29
8-K 2020-03-03
8-K 2020-02-19
8-K 2020-02-18
8-K 2020-02-18
8-K 2020-02-12
8-K 2020-02-04
8-K 2019-11-07
8-K 2019-08-07
8-K 2019-08-05
8-K 2019-06-25
8-K 2019-05-07
8-K 2019-04-18
8-K 2019-03-15
8-K 2019-03-06
8-K 2019-02-20
8-K 2019-02-06
8-K 2018-12-19
8-K 2018-11-07
8-K 2018-11-07
8-K 2018-08-08
8-K 2018-06-28
8-K 2018-06-15
8-K 2018-06-04
8-K 2018-05-10
8-K 2018-04-23
8-K 2018-03-05
8-K 2018-02-26
8-K 2018-02-26

PEGA 10Q Quarterly Report

Part I - Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
EX-10.2 q22020ex-102.htm
EX-10.3 q22020-exx103.htm
EX-31.1 q22020ex-311.htm
EX-31.2 q22020ex-312.htm
EX-32 q22020ex-32.htm

Pegasystems Earnings 2020-06-30

Balance SheetIncome StatementCash Flow
1.10.90.70.40.20.02012201420172020
Assets, Equity
0.30.20.10.1-0.0-0.12012201420172020
Rev, G Profit, Net Income
0.10.10.0-0.0-0.1-0.12012201420172020
Ops, Inv, Fin

pega-20200630
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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 June 30, 2020
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.)
One Rogers Street, Cambridge, MA 02142-1209
(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 filerSmaller reporting companyEmerging 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 80,415,254 shares of the Registrant’s common stock, $0.01 par value per share, outstanding on July 14, 2020.


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 June 30, 2020 and December 31, 2019
Unaudited Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2020 and 2019
Unaudited Condensed Consolidated Statements of Comprehensive (Loss) for the three and six months ended June 30, 2020 and 2019
Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the six months ended June 30, 2020 and 2019
Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2020 and 2019
Notes to Unaudited Condensed Consolidated Financial Statements
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
PART II - OTHER INFORMATION
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
Signature
 
2

Table of Contents
PART I - FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS
PEGASYSTEMS INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)

June 30, 2020December 31, 2019
Assets
Current assets:
Cash and cash equivalents$512,111  $68,363  
Accounts receivable181,686  199,720  
Unbilled receivables198,253  180,219  
Other current assets77,889  57,308  
Total current assets969,939  505,610  
Unbilled receivables
109,308  121,736  
Goodwill78,675  79,039  
Other long-term assets338,363  278,427  
Total assets$1,496,285  $984,812  
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable$18,426  $17,475  
Accrued expenses44,228  48,001  
Accrued compensation and related expenses78,834  104,126  
Deferred revenue195,996  190,080  
Other current liabilities18,613  18,273  
Total current liabilities356,097  377,955  
Convertible senior notes, net509,423    
Operating lease liabilities53,057  52,610  
Other long-term liabilities21,426  15,237  
Total liabilities940,003  445,802  
Stockholders’ equity:
Preferred stock, 1,000 shares authorized; none issued
    
Common stock, 200,000 shares authorized; 80,420 and 79,599 shares issued and outstanding at
June 30, 2020 and December 31, 2019, respectively
804  796  
Additional paid-in capital207,103  140,523  
Retained earnings359,989  410,919  
Accumulated other comprehensive (loss)(11,614) (13,228) 
Total stockholders’ equity556,282  539,010  
Total liabilities and stockholders’ equity$1,496,285  $984,812  

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
June 30,
Six Months Ended
June 30,
2020201920202019
Revenue
Software license$53,323  $44,274  $147,239  $107,538  
Maintenance72,222  69,329  145,917  137,035  
Pega Cloud48,838  31,699  92,304  59,457  
Consulting52,992  60,290  107,506  114,108  
Total revenue227,375  205,592  492,966  418,138  
Cost of revenue
Software license979  928  1,663  2,306  
Maintenance5,591  6,292  11,167  12,627  
Pega Cloud18,988  16,647  36,521  29,945  
Consulting51,133  53,213  106,868  106,639  
Total cost of revenue76,691  77,080  156,219  151,517  
Gross profit150,684  128,512  336,747  266,621  
Operating expenses
Selling and marketing127,607  116,962  263,631  225,827  
Research and development58,869  49,714  117,596  100,310  
General and administrative15,655  14,174  31,285  26,850  
Total operating expenses202,131  180,850  412,512  352,987  
(Loss) from operations(51,447) (52,338) (75,765) (86,366) 
Foreign currency transaction gain (loss)4,256  2,105  (1,691) (1,607) 
Interest income242  544  849  1,267  
Interest expense(5,529)   (7,835)   
Gain on capped call transactions19,419    827    
Other income, net  55  1,374  55  
(Loss) before (benefit from) income taxes(33,059) (49,634) (82,241) (86,651) 
(Benefit from) income taxes(12,319) (17,338) (36,129) (25,638) 
Net (loss)$(20,740) $(32,296) $(46,112) $(61,013) 
(Loss) per share
Basic$(0.26) $(0.41) $(0.58) $(0.77) 
Diluted$(0.26) $(0.41) $(0.58) $(0.77) 
Weighted-average number of common shares outstanding
Basic80,224  78,987  80,016  78,787  
Diluted80,224  78,987  80,016  78,787  

See notes to unaudited condensed consolidated financial statements.
4


PEGASYSTEMS INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS)
(in thousands)

Three Months Ended
June 30,
Six Months Ended
June 30,
2020201920202019
Net (loss)$(20,740) $(32,296) $(46,112) $(61,013) 
Other comprehensive income (loss), net of tax
Unrealized gain on available-for-sale securities  238  100  612  
Foreign currency translation adjustments2,028  (409) 1,514  1,218  
Total other comprehensive income (loss), net of tax2,028  (171) 1,614  1,830  
Comprehensive (loss)$(18,712) $(32,467) $(44,498) $(59,183) 

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 Stock
Additional
Paid-In Capital
Retained Earnings
Accumulated Other Comprehensive (Loss)
Total
Stockholders’ Equity
Number
of Shares
Amount
December 31, 201878,526  $785  $123,205  $510,863  $(13,322) $621,531  
Repurchase of common stock(144) (1) (7,586) —  —  (7,587) 
Issuance of common stock for share-based compensation plans514  5  (14,843) —  —  (14,838) 
Stock-based compensation—  —  18,406  —  —  18,406  
Cash dividends declared ($0.03 per share)
—  —  —  (2,367) —  (2,367) 
Other comprehensive income—  —  —  —  2,001  2,001  
Net (loss)—  —  —  (28,717) —  (28,717) 
March 31, 201978,896  789  119,182  479,779  (11,321) 588,429  
Repurchase of common stock(88) (1) (6,301) —  —  (6,302) 
Issuance of common stock for share-based compensation plans320  3  (11,217) —  —  (11,214) 
Issuance of common stock under the employee stock purchase plan16  —  1,103  —  —  1,103  
Stock-based compensation—  —  20,113  —  —  20,113  
Cash dividends declared ($0.03 per share)
—  —  —  (2,375) —  (2,375) 
Other comprehensive (loss)—  —  —  —  (171) (171) 
Net (loss)—  —  —  (32,296) —  (32,296) 
June 30, 201979,144  $791  $122,880  $445,108  $(11,492) $557,287  
December 31, 201979,599  $796  $140,523  $410,919  $(13,228) $539,010  
Equity component of convertible senior notes, net—  —  61,604  —  —  61,604  
Repurchase of common stock(87) (1) (5,999) —  —  (6,000) 
Issuance of common stock for share-based compensation plans564  6  (23,017) —  —  (23,011) 
Stock-based compensation—  —  23,199  —  —  23,199  
Cash dividends declared ($0.03 per share)
—  —  —  (2,405) —  (2,405) 
Other comprehensive (loss)—  —  —  —  (414) (414) 
Net (loss)—  —  —  (25,372) —  (25,372) 
March 31, 202080,076  801  196,310  383,142  (13,642) 566,611  
Repurchase of common stock(23)   (2,199) —  —  (2,199) 
Issuance of common stock for share-based compensation plans349  3  (14,085) —  —  (14,082) 
Issuance of common stock under the employee stock purchase plan18  —  1,403  —  —  1,403  
Stock-based compensation—  —  25,674  —  —  25,674  
Cash dividends declared ($0.03 per share)
—  —  —  (2,413) —  (2,413) 
Other comprehensive income—  —  —  —  2,028  2,028  
Net (loss)—  —  —  (20,740) —  (20,740) 
June 30, 202080,420  $804  $207,103  $359,989  $(11,614) $556,282  

See notes to unaudited condensed consolidated financial statements.
6


PEGASYSTEMS INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

Six Months Ended
June 30,
20202019
Operating activities
Net (loss)$(46,112) $(61,013) 
Adjustments to reconcile net (loss) to cash (used in) provided by operating activities
Stock-based compensation48,831  38,397  
(Gain) on capped call transactions(827)   
Deferred income taxes(18,399) (190) 
Amortization of deferred commissions16,061  14,179  
Lease expense7,819  6,718  
Amortization of debt discount and issuance costs6,033    
Amortization of intangible assets and depreciation10,134  12,268  
Amortization of investments   623  
Foreign currency transaction loss1,691  1,607  
Other non-cash(1,374) (40) 
Change in operating assets and liabilities, net(45,056) (4,829) 
Cash (used in) provided by operating activities(21,199) 7,720  
Investing activities
Purchases of investments(1,769) (10,497) 
Proceeds from maturities and called investments  13,545  
Sales of investments1,424  29,965  
Payments for acquisitions, net of cash acquired  (10,921) 
Investment in property and equipment(19,059) (4,882) 
Cash (used in) provided by investing activities(19,404) 17,210  
Financing activities
Proceeds from issuance of convertible senior notes600,000    
Purchase of capped calls related to convertible senior notes(51,900)   
Payment of debt issuance costs(14,527)   
Dividend payments to shareholders(4,793) (4,730) 
Common stock repurchases(43,487) (39,637) 
Cash provided by (used in) financing activities485,293  (44,367) 
Effect of exchange rate changes on cash and cash equivalents(942) 515  
Net increase (decrease) in cash and cash equivalents443,748  (18,922) 
Cash and cash equivalents, beginning of period68,363  114,422  
Cash and cash equivalents, end of period$512,111  $95,500  

See notes to unaudited condensed consolidated financial statements.
7

PEGASYSTEMS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 accounting principles generally accepted 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, 2019.
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 have been eliminated in consolidation. The operating results for the interim periods presented are not necessarily indicative of the results expected for the full year 2020.
2. NEW ACCOUNTING PRONOUNCEMENTS
Financial instruments
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which requires measurement and recognition of expected credit losses for financial assets measured at amortized cost, including accounts receivable, upon initial recognition of that financial asset using a forward-looking expected loss model, rather than an incurred loss model. Credit losses relating to available-for-sale debt securities should be recorded through an allowance for credit losses when the fair value is below the amortized cost of the asset, removing the concept of “other-than-temporary” impairments. The Company adopted this standard effective January 1, 2020. The adoption of this standard did not have a material effect on the Company’s financial position or results of operations.
3. RECEIVABLES, CONTRACT ASSETS, AND DEFERRED REVENUE
Receivables
(in thousands)
June 30, 2020December 31, 2019
Accounts receivable$181,686  $199,720  
Unbilled receivables198,253  180,219  
Long-term unbilled receivables109,308  121,736  
$489,247  $501,675  
Unbilled receivables are client committed amounts for which revenue recognition precedes billing, and billing is solely subject to the passage of time. They are expected to be billed in the future as follows:
(Dollars in thousands)
June 30, 2020
1 year or less$198,253  64 %
1-2 years91,929  30 %
2-5 years17,379  6 %
$307,561  100 %
Unbilled receivables based upon contract effective date:
(Dollars in thousands)
June 30, 2020
2020$75,893  25 %
2019100,671  32 %
201846,700  15 %
201738,899  13 %
2016 and prior45,398  15 %
$307,561  100 %
Major clients
Clients accounting for 10% or more of the Company’s receivables:
June 30, 2020December 31, 2019
Client A11 %*
* Client accounted for less than 10% of total receivables.
8

PEGASYSTEMS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)



Contract assets and deferred revenue
(in thousands)
June 30, 2020December 31, 2019
Contract assets (1)
$5,323  $5,558  
Long-term contract assets (2)
4,903  5,420  
$10,226  $10,978  
Deferred revenue$195,996  $190,080  
Long-term deferred revenue (3)
6,587  5,407  
$202,583  $195,487  
(1) Included in other current assets. (2) Included in other long-term assets. (3) Included in other long-term liabilities.
Contract assets are client committed amounts for which revenue recognized exceeds the amount billed to the client and the right to payment is subject to conditions other than the passage of time, such as the completion of a related performance obligation. Deferred revenue consists of billings and payments received in advance of revenue recognition. Contract assets and deferred revenue are netted at the contract level for each reporting period.
The change in deferred revenue in the six months ended June 30, 2020 was primarily due to new billings in advance of revenue recognition, partially offset by $136.8 million of revenue recognized during the period that was included in deferred revenue at December 31, 2019.
4. DEFERRED COMMISSIONS