[8-K] PEGASYSTEMS INC Reports Material Event

Rhea-AI Filing Summary

Pegasystems Inc. reported strong fourth-quarter and full-year 2025 results and expanded its share repurchase program. Annual contract value reached $1.61 billion, up 17% year over year, while total 2025 revenue grew 17% to $1.75 billion, driven mainly by subscription services.

GAAP net income for 2025 rose to $393 million from $99 million, with free cash flow up 45% to $491 million. The company extended its buyback program by one year to June 30, 2027 and increased authorization by $1 billion. For 2026, management guides to 15% ACV growth, revenue of $2.0 billion, GAAP diluted EPS of $1.87, non-GAAP EPS of $2.75, and operating cash flow of $595 million.

Insights

Equity research analyst

Pegasystems posts strong 2025 growth, robust cash generation, and adds $1B to buybacks.

Pegasystems delivered a solid mix of growth and profitability. 2025 revenue rose 17% to $1.75 billion, while ACV increased 17% to $1.61 billion, supported by Pega Cloud ACV growth of 33%. This indicates healthy demand for its subscription-based model.

Profitability improved sharply, with GAAP net income jumping to $393 million and free cash flow reaching $490.7 million, up 45%. Management highlighted that results exceeded internal guidance and the Rule of 40, underscoring operating discipline alongside growth.

The board extended the share repurchase program to June 30, 2027 and increased authorization by $1 billion, signaling confidence and deploying substantial capital to shareholders. 2026 guidance targets 15% ACV growth, $2.0 billion in revenue, and free cash flow of $575 million, suggesting continued emphasis on recurring revenue and cash generation.

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549 

_________________________________

 FORM 8-K

_________________________________

Current Report

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 10, 2026

____________________

PEGASYSTEMS INC.

(Exact name of Registrant as specified in its charter)

_________________________________

Massachusetts			1-11859			04-2787865
(State or other jurisdiction of incorporation)			(Commission File Number)			(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)

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions:

☐			Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☒			Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐			Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐			Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class			Trading symbol(s)			Name of each exchange on which registered
Common Stock, $.01 par value per share			PEGA			NASDAQ Global Select Market

Indicate by check mark whether the Registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).                         

                                                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. ☐

ITEM 2.02    RESULTS OF OPERATIONS AND FINANCIAL CONDITION

On February 10, 2026, Pegasystems Inc. issued a press release announcing its financial results for the fourth quarter and full-year 2025. A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference in its entirety.

The information in this Item 2.02 and the Exhibits attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such a filing.

ITEM 8.01    OTHER EVENTS

On February 10, 2026, Pegasystems Inc. announced an expansion of its current share repurchase program. Under this expansion, the expiration date of the current repurchase program has been extended from June 30, 2026 to June 30, 2027, and the amount of its common stock that Pegasystems is authorized to repurchase has been increased by $1 billion.

ITEM 9.01    FINANCIAL STATEMENTS AND EXHIBITS

Exhibit No.						Description
99.1						Press release issued by Pegasystems Inc.
104						Cover Page Interactive Data File (formatted as Inline XBRL)

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:			February 10, 2026			By:			/s/ KENNETH STILLWELL
									Kenneth Stillwell
									Chief Operating Officer and Chief Financial Officer
									(Principal Financial Officer)

EXHIBIT 99.1

Innovation Accelerates Pega’s Q4 2025 Growth

•Annual Contract Value (ACV) grows 17% year over year (14% in constant currency)

•Pega Cloud ACV increases 33% year over year (28% in constant currency)

•Cash flow from operations and free cash flow grow 45% year over year

•2026 guidance of 15% ACV growth, $595M in cash flow from operations, and $575M in free cash flow

•Increases share repurchase authorization by $1B

WALTHAM, Mass. — February 10, 2026 — Pegasystems Inc. (NASDAQ: PEGA), the Enterprise Transformation Company™, released its financial results for the fourth quarter and full-year 2025.

“2025 was an extraordinary year of progress and execution,” said Alan Trefler, founder and CEO, Pega. “We’re entering a transformative era with bold ideas and compelling innovation. Our approach positions us to lead the industry, deliver extraordinary value to clients, and enable clients to overcome legacy system limitations.”

“Our 2025 results reflect strong financial discipline, with top and bottom-line beats of our guidance and exceeding the Rule of 40,” Pega COO & CFO, Ken Stillwell, said. “Our recurring business model and our technology leadership position us to continue to accelerate ACV growth, expand margins, and increase free cash flow.”

Financial and performance metrics (1)

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

1

EXHIBIT 99.1

(continued)

Reconciliation of ACV and Constant Currency ACV

(in millions, except percentages)			December 31, 2024						December 31, 2025						1-Year Change
ACV			$	1,372					$	1,608					17		%
Impact of changes in foreign exchange rates			—						(46)
Constant currency ACV			$	1,372					$	1,562					14		%

Note: Constant currency ACV is calculated by applying the December 31, 2024 foreign exchange rates to current period shown.

Cash Flow Growth

(Dollars in thousands, except per share amounts) (1)			Three Months Ended December 31,																		Year Ended December 31,
			2025						2024						Change						2025						2024						Change
Total revenue			$	504,317					$	490,830					3		%				$	1,745,812					$	1,497,180					17		%
Net income - GAAP			$	234,574					$	119,090					97		%				$	393,437					$	99,189					297		%
Net income - non-GAAP			$	139,554					$	147,953					(6)		%				$	385,411					$	270,542					42		%
Diluted earnings per share - GAAP			$	1.27					$	0.63					102		%				$	2.13					$	0.55					287		%
Diluted earnings per share - non-GAAP			$	0.76					$	0.80					(5)		%				$	2.10					$	1.51					39		%

(1) Per share amounts have been recast for all prior periods to reflect the effect of the Company’s two-for-one forward common stock split effected in the form of a stock dividend distributed on June 20, 2025.

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(Dollars in thousands) (2)			Three Months Ended December 31,																		Change									Year Ended December 31,																		Change
			2025									2024																		2025									2024
Pega Cloud			$	193,487		38		%				$	149,638		30		%				$	43,849		29		%				$	695,902		40		%				$	558,734		37		%				$	137,168		25		%
Maintenance			79,305			16		%				81,257			17		%				(1,952)			(2)		%				314,593			18		%				323,304			22		%				(8,711)			(3)		%
Subscription services			272,792			54		%				230,895			47		%				41,897			18		%				1,010,495			58		%				882,038			59		%				128,457			15		%
Subscription license			178,215			35		%				207,113			42		%				(28,898)			(14)		%				507,368			29		%				401,869			27		%				105,499			26		%
Subscription			451,007			89		%				438,008			89		%				12,999			3		%				1,517,863			87		%				1,283,907			86		%				233,956			18		%
Consulting			53,310			11		%				52,822			11		%				488			1		%				227,949			13		%				213,273			14		%				14,676			7		%
Total revenue			$	504,317		100		%				$	490,830		100		%				$	13,487		3		%				$	1,745,812		100		%				$	1,497,180		100		%				$	248,632		17		%

(2) Perpetual license revenue has been combined within Subscription license revenue for all periods presented.

2026 Guidance (1)

As of February 10, 2026, we are providing the following guidance:

			2026
Annual contract value growth			15%

			2026
			GAAP						Non-GAAP (1)
Revenue			$2.0 Billion						$2.0 Billion
Diluted earnings per share			$1.87						$2.75

			2026
Cash provided by operating activities			$595 million
Free cash flow			$575 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 Wednesday, February 11, 2026.

Members of the public and investors are invited to join the call and participate in the question and answer session by dialing 1 (800) 715-9871 (domestic) or 1 (646) 307-1963 (international) and using Conference ID 6226958, or via https://events.q4inc.com/attendee/958808765 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, including our 2026 Guidance and the anticipated growth and development of our business.

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;

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•the successful execution of investments in artificial intelligence;

•the timing of revenue recognition;

•variation in demand for our products and services;

•reliance on key personnel;

•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. and associated legal proceedings;

•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, 2025, 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.

Any forward-looking statements in this press release represent our views as of February 10, 2026.

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About Pegasystems

Pega provides the leading AI-powered platform for enterprise transformation. The world’s most influential organizations trust our technology to reimagine how work gets done by automating workflows, personalizing customer experiences, and modernizing legacy systems. Since 1983, our scalable, flexible architecture has fueled continuous innovation, helping clients accelerate their path to the autonomous enterprise. Ready to Build for Change®? Visit www.pega.com.

Press contact:

Lisa Pintchman

VP, Corporate Communications

lisapintchman.rogers@pega.com

617-866-6022

Investor contact:

Peter Welburn

VP, Corporate Development & Investor Relations

PegaInvestorRelations@pega.com

617-498-8968

All trademarks are the property of their respective owners.

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PEGASYSTEMS INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (1) (2)

(in thousands, except per share amounts)

			Three Months Ended December 31,												Year Ended December 31,
			2025						2024						2025						2024
Revenue
Subscription services			$	272,792					$	230,895					$	1,010,495					$	882,038
Subscription license			178,215						207,113						507,368						401,869
Consulting			53,310						52,822						227,949						213,273
Total revenue			504,317						490,830						1,745,812						1,497,180
Cost of revenue
Subscription services			46,631						40,988						169,247						149,918
Subscription license			316						389						1,382						1,905
Consulting			56,518						60,978						250,753						238,842
Total cost of revenue			103,465						102,355						421,382						390,665
Gross profit			400,852						388,475						1,324,430						1,106,515
Operating expenses
Selling and marketing			153,308						139,655						578,637						534,780
Research and development			80,855						76,379						312,681						298,074
General and administrative			40,998						28,207						148,722						112,848
Litigation settlement, net of recoveries			9,750						—						9,750						32,403
Restructuring			11,578						1,245						11,540						4,528
Total operating expenses			296,489						245,486						1,061,330						982,633
Income from operations			104,363						142,989						263,100						123,882
Foreign currency transaction (loss) gain			(2,711)						6,318						(14,890)						(912)
Interest income			2,398						6,944						13,641						25,779
Interest expense			(113)						(1,788)						(1,285)						(6,835)
(Loss) income on capped call transactions			—						4						(223)						(663)
Other income (loss), net			1,037						(299)						20,284						1,385
Income before (benefit from) provision for income taxes			104,974						154,168						280,627						142,636
(Benefit from) provision for income taxes			(129,600)						35,078						(112,810)						43,447
Net income			$	234,574					$	119,090					$	393,437					$	99,189
Earnings per share
Basic			$	1.38					$	0.69					$	2.30					$	0.58
Diluted			$	1.27					$	0.63					$	2.13					$	0.55
Weighted-average number of common shares outstanding
Basic			170,001						172,000						170,782						170,530
Diluted			184,165						191,272						184,790						179,268

(1) The number of common shares and per share amounts have been recast for all prior periods to reflect the effect of the Company’s two-for-one forward common stock split effected in the form of a stock dividend distributed on June 20, 2025.

(2) Perpetual license revenue and related cost of revenue have been combined within Subscription license revenue and cost of revenue for all periods presented.

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PEGASYSTEMS INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

			December 31, 2025						December 31, 2024
Assets
Current assets:
Cash and cash equivalents			$	212,447					$	337,103
Marketable securities			213,352						402,870
Total cash, cash equivalents, and marketable securities			425,799						739,973
Accounts receivable, net			264,713						305,468
Unbilled receivables, net			166,478						173,085
Other current assets			121,305						115,178
Total current assets			978,295						1,333,704
Long-term unbilled receivables, net			102,544						61,407
Goodwill			81,506						81,113
Other long-term assets			469,499						292,049
Total assets			$	1,631,844					$	1,768,273
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable			$	12,924					$	6,226
Accrued expenses			44,847						31,544
Accrued compensation and related expenses			148,797						138,042
Deferred revenue			509,275						423,910
Convertible senior notes, net			—						467,470
Other current liabilities			21,935						18,866
Total current liabilities			737,778						1,086,058
Long-term operating lease liabilities			60,825						67,647
Other long-term liabilities			45,860						29,088
Total liabilities			844,463						1,182,793
Total stockholders’ equity			787,381						585,480
Total liabilities and stockholders’ equity			$	1,631,844					$	1,768,273

PEGASYSTEMS INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

			Year Ended December 31,
			2025						2024
Net income			$	393,437					$	99,189
Adjustments to reconcile net income to cash provided by operating activities
Non-cash items			72,362						227,582
Change in operating assets and liabilities, net			39,428						19,155
Cash provided by operating activities			505,227						345,926
Cash provided by (used in) investing activities			197,246						(202,576)
Cash (used in) financing activities			(834,630)						(30,214)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash			6,988						(4,434)
Net (decrease) increase in cash, cash equivalents, and restricted cash			(125,169)						108,702
Cash, cash equivalents, and restricted cash, beginning of period			341,529						232,827
Cash, cash equivalents, and restricted cash, end of period			$	216,360					$	341,529

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PEGASYSTEMS INC.

RECONCILIATION OF SELECTED GAAP AND NON-GAAP MEASURES (1)

(in thousands, except percentages and per share amounts)

			Three Months Ended December 31,																		Year Ended December 31,
			2025						2024						Change						2025						2024						Change
Net income - GAAP			$	234,574					$	119,090					97		%				$	393,437					$	99,189					297		%
Stock-based compensation (2)			34,043						34,500												155,239						142,718
Restructuring			11,578						1,245												11,540						4,528
Legal fees			16,174						4,499												39,151						18,713
Litigation settlement, net of recoveries			9,750						—												9,750						32,403
Amortization of intangible assets			627						700												2,630						3,153
Interest on convertible senior notes			—						594												394						2,451
Capped call transactions			—						(4)												223						663
Repurchases of convertible senior notes			—						(459)												—						(459)
Foreign currency transaction loss (gain)			2,711						(6,318)												14,890						912
Other			(941)						759												(20,327)						(869)
Income taxes (3)			(168,962)						(6,653)												(221,516)						(32,860)
Net income - non-GAAP			$	139,554					$	147,953					(6)		%				$	385,411					$	270,542					42		%
Diluted earnings per share - GAAP			$	1.27					$	0.63					102		%				$	2.13					$	0.55					287		%
non-GAAP adjustments			(0.51)						0.17												(0.03)						0.96
Diluted earnings per share - non-GAAP			$	0.76					$	0.80					(5)		%				$	2.10					$	1.51					39		%
Diluted weighted-average number of common shares outstanding - GAAP			184,165						191,272						(4)		%				184,790						179,268						3		%
Capped call transactions			—						(7,106)												(1,196)						(428)
Diluted weighted-average number of common shares outstanding - non-GAAP			184,165						184,166						—		%				183,594						178,840						3		%

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 Item 8 of our Annual Report filed on Form 10-K for the year ended December 31, 2025 and prior filings for further 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.

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•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. 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 were 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 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 the 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 loss (gain): 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. 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 net income, the shares calculated by applying the if-converted method related to the Company’s Notes are included in the diluted weighted-average shares outstanding if they are dilutive. The capped call transactions were 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 Notes. 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) Per share amounts have been recast for all prior periods to reflect the effect of the Company’s two-for-one forward common stock split effected in the form of a stock dividend distributed on June 20, 2025.

(2) Stock-based compensation:

			Three Months Ended December 31,												Year Ended December 31,
(Dollars in thousands)			2025						2024						2025						2024
Cost of revenue			$	4,909					$	6,795					$	26,646					$	27,353
Selling and marketing			15,553						13,463						60,721						55,084
Research and development			7,895						7,059						31,684						29,838
General and administrative			5,686						7,183						36,188						30,443
			$	34,043					$	34,500					$	155,239					$	142,718
Income tax benefit			$	(6,417)					$	(422)					$	(31,043)					$	(1,799)

(3) Effective income tax rates:

			Year Ended December 31,
			2025						2024
GAAP			(40)		%				30		%
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. Under GAAP we recorded a release of our valuation allowance on our net deferred tax assets in the U.S. federal and state and U.K during the fourth quarter of 2025, resulting in a $175 million non‑cash tax benefit. See "Note 18. Income Taxes" in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2025 for additional information. 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.

9

PEGASYSTEMS INC.

RECONCILIATION OF FREE CASH FLOW (1) AND OTHER METRICS

(in thousands, except percentages)

			Year Ended December 31,												Change
			2025						2024
Cash provided by operating activities			$	505,227					345,926						46		%
Investment in property and equipment			(14,504)						(7,712)
Free cash flow (1)			$	490,723					$	338,214					45		%
Supplemental information (2)
Litigation settlement, net of recoveries			$	—					$	32,403
Legal fees			35,484						16,197
Restructuring			2,056						5,252
Interest paid on convertible senior notes			1,754						3,810
Income taxes, net of refunds			21,630						82,317
			$	60,924					$	139,979

(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 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 Item 8 of our Annual Report filed on Form 10-K for the year ended December 31, 2025 and prior filings 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 paid on convertible senior notes: In February 2020, we issued 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.

•Income taxes, net of refunds: Direct income taxes paid net of refunds received.

PEGASYSTEMS INC.

ANNUAL CONTRACT VALUE

(in thousands, except percentages)

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.

			December 31, 2025						December 31, 2024						Change									Constant Currency Change
Pega Cloud			$	866,612					$	652,443					$	214,169		33		%				28		%
Maintenance			288,873						291,807						(2,934)			(1)		%				(4)		%
Subscription services			1,155,485						944,250						211,235			22		%				18		%
Subscription license			452,902						427,268						25,634			6		%				4		%
			$	1,608,387					$	1,371,518					$	236,869		17		%				14		%

10

PEGASYSTEMS INC.

BACKLOG

(in thousands, except percentages)

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

As of December 31, 2025:

			Subscription services												Subscription license						Consulting						Total
			Pega Cloud						Maintenance
1 year or less			$	709,190					$	235,152					$	77,528					$	53,353					$	1,075,223		52		%
1-2 years			400,926						73,895						2,636						854						478,311			23		%
2-3 years			213,259						51,327						2,101						28						266,715			13		%
Greater than 3 years			214,189						32,325						7,331						88						253,933			12		%
			$	1,537,564					$	392,699					$	89,596					$	54,323					$	2,074,182		100		%
% of Total			74		%				19		%				4		%				3		%				100		%
Change since December 31, 2024
			$	410,405					$	51,839					$	(11,886)					$	332					$	450,690
			36		%				15		%				(12)		%				1		%				28		%

As of December 31, 2024:

			Subscription services												Subscription license						Consulting						Total
			Pega Cloud						Maintenance
1 year or less			$	525,133					$	230,866					$	89,197					$	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					$	101,482					$	53,991					$	1,623,492		100		%
% of Total			70		%				21		%				6		%				3		%				100		%

PEGASYSTEMS INC.

RECONCILIATION OF GAAP BACKLOG AND CONSTANT CURRENCY BACKLOG

(in millions, except percentages)

			December 31, 2024						December 31, 2025						1 Year Growth Rate
Backlog - GAAP			$	1,623					$	2,074					28		%
Impact of changes in foreign exchange rates			—						(80)
Constant currency backlog			$	1,623					$	1,994					23		%

Note: Constant currency backlog is calculated by applying the December 31, 2024 foreign exchange rates to current period shown.

11

PEGASYSTEMS INC.

RECONCILIATION OF FORWARD-LOOKING GUIDANCE

(in millions, except percentages and per share amounts)

			2026
Annual contract value growth			15		%
Revenue (GAAP and Non-GAAP)			$	2,000
Net Income - GAAP			$	344
Stock-based compensation			158
Legal fees			30
Incomes taxes			(26)
Net Income - Non-GAAP			$	506
Diluted earnings per share - GAAP			$	1.87
Non-GAAP adjustments			0.88
Diluted earnings per share - non-GAAP			$	2.75
Diluted weighted-average number of common shares outstanding - GAAP			184

			2026
Cash provided by operating activities			$	595
Investment in property and equipment			(20)
Free cash flow			$	575
Supplemental information
Legal fees			$	30
Restructuring			12
Litigation settlement, net of recoveries			10
Income taxes (1)			63
			$	115

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

12

Filing Exhibits & Attachments

4 documents

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• EX-99.1 EX-99.1 431.0 KB

Other Documents

• EX-101 XBRL TAXONOMY EXTENSION SCHEMA DOCUMENT 1.7 KB
• EX-101 XBRL TAXONOMY EXTENSION LABEL LINKBASE DOCUMENT 21.4 KB
• EX-101 XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE DOCUMENT 12.2 KB