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Risks

• If we fail to manage our transition to a more subscription-based business model successfully, our results of operations and/or cash flows could be negatively impacted.
• We may not achieve the key elements of our strategy and grow our business as anticipated.
• We depend on key personnel, including our Chief Executive Officer, and must be able to attract and retain qualified personnel in the future.
• The timing of our license and Pega Cloud revenue is difficult to predict accurately, which may cause our operating results to vary considerably.
• We may not be able to maintain our retention rate for Pega Cloud clients.
• We are investing heavily in sales and marketing, research and development, and support resources in anticipation of continued growth in license and Pega Cloud arrangements, and we may experience decreased profitability or losses and reduced or negative cash flow if we do not continue to increase the value of our license and Pega Cloud arrangements to balance our growth in expenses.
• We face risks from operations and clients based outside of the U.S.
• We rely on third-party relationships.
• We are exposed to fluctuations in currency exchange rates that could negatively impact our financial results and cash flows.
• Our consulting revenue is significantly dependent upon our consulting personnel implementing new license and Pega Cloud arrangements.
• We frequently enter into a series of license or Pega Cloud arrangements that are each focused on a specific purpose or area of operations. If we are not successful in obtaining follow-on business from these clients, our financial performance could be materially adversely affected.
• We will need to acquire or develop new products, evolve existing ones, address any defects or errors, and adapt to technology changes.
• The market for our offerings is intensely and increasingly competitive, rapidly changing, and fragmented.
• Our Chief Executive Officer is our largest stockholder and can exert significant influence over matters submitted to our stockholders, which could materially adversely affect our other stockholders.
• We face risks related to outages, data losses, and disruptions of our online services if we fail to maintain an adequate operations infrastructure.
• Security of our systems and global client data is a growing challenge on many fronts. Cyber-attacks and security breaches may expose us to significant legal and financial liabilities.
• We may experience significant errors or security flaws in our products and services and could face privacy, product liability, and warranty claims as a result.
• We have a significant amount of debt that may decrease our business flexibility, access to capital, and/or increase our borrowing costs, and we may still incur additional debt in the future, which may adversely affect our operations and financial results.
• The conditional conversion feature of the Notes, if triggered, may adversely affect our financial condition and operating results.
• The Capped Call Transactions may affect the value of the Notes and our common stock.
• We are exposed to counterparty risk for the Capped Call Transactions.
• Provisions in the Notes’ Indenture may deter or prevent a business combination that may be favorable to our stockholders.
• Conversion of the Notes may dilute the ownership interest of existing stockholders.
• We are required to comply with certain financial and operating covenants under our revolving credit facility. Failure to comply with these covenants could cause amounts borrowed to become immediately due and payable and/or prevent us from borrowing under the credit facility.
• Our success depends in part on maintaining and increasing our sales to clients in the public sector.
• We are subject to increasingly complex U.S. and foreign laws and regulations, requiring costly compliance measures. Any failure to comply with these laws and regulations could subject us to, among other things, penalties and legal expenses that could harm our reputation or have a material adverse effect on our business, financial condition, and results of operations.
• We may have exposure to greater than anticipated tax liabilities.
• If it becomes necessary or desirable to repatriate any of our foreign cash balances to the United States, we may be subject to increased taxes, other restrictions, and limitations.
• We face risks related to intellectual property claims or appropriation of our intellectual property rights.
• We may be subject to intellectual property rights claims by third parties, which are extremely costly to defend, could require us to pay significant damages, and could limit our ability to use certain technologies.
• Epidemic diseases, such as the recent global COVID-19 outbreak, could harm our business and results of operations.
• The provision in our amended and restated bylaws, requiring exclusive forum in certain courts in The Commonwealth of Massachusetts or the federal district court for the District of Massachusetts for certain types of lawsuits, may have the effect of discouraging lawsuits against us and our directors, officers, and employees.
• The continued uncertainties in the global economy may negatively impact our sales to, and the collection of receivables, from our clients.
• The U.K.’s withdrawal from the European Union (commonly referred to as “Brexit”) on January 31, 2020 could have a material impact on our business, including our relationships with existing and future clients, suppliers, and employees, which could harm our financial results and operations.
• We may fail to meet our publicly announced guidance or other expectations about our business and future operating results, which could cause our stock price to decline.