COVER PAGE
COVER PAGE - shares | 9 Months Ended | |
Sep. 30, 2020 | Oct. 19, 2020 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Sep. 30, 2020 | |
Document Transition Report | false | |
Entity File Number | 1-11859 | |
Entity Registrant Name | PEGASYSTEMS INC. | |
Amendment Flag | false | |
Entity Central Index Key | 0001013857 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q3 | |
Current Fiscal Year End Date | --12-31 | |
Entity Incorporation, State or Country Code | MA | |
Entity Tax Identification Number | 04-2787865 | |
Entity Address, Address Line One | One Rogers Street | |
Entity Address, City or Town | Cambridge | |
Entity Address, State or Province | MA | |
Entity Address, Postal Zip Code | 02142-1209 | |
City Area Code | 617 | |
Local Phone Number | 374-9600 | |
Title of 12(b) Security | Common Stock, $.01 par value per share | |
Trading Symbol | PEGA | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 80,697,696 |
UNAUDITED CONDENSED CONSOLIDATE
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Current assets: | ||
Cash and cash equivalents | $ 281,218 | $ 68,363 |
Marketable securities | 186,810 | 0 |
Total cash, cash equivalents, and marketable securities | 468,028 | 68,363 |
Accounts receivable | 137,953 | 199,720 |
Unbilled receivables | 208,823 | 180,219 |
Other current assets | 89,406 | 57,308 |
Total current assets | 904,210 | 505,610 |
Unbilled receivables | 108,456 | 121,736 |
Goodwill | 78,864 | 79,039 |
Other long-term assets | 395,797 | 278,427 |
Total assets | 1,487,327 | 984,812 |
Current liabilities: | ||
Accounts payable | 20,443 | 17,475 |
Accrued expenses | 43,447 | 48,001 |
Accrued compensation and related expenses | 90,836 | 104,126 |
Deferred revenue | 181,680 | 190,080 |
Other current liabilities | 19,916 | 18,273 |
Total current liabilities | 356,322 | 377,955 |
Convertible senior notes, net | 513,794 | 0 |
Operating lease liabilities | 62,544 | 52,610 |
Other long-term liabilities | 25,345 | 15,237 |
Total liabilities | 958,005 | 445,802 |
Stockholders’ equity: | ||
Preferred stock, 1,000 shares authorized; none issued | 0 | 0 |
Common stock, 200,000 shares authorized; 80,697 and 79,599 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively | 807 | 796 |
Additional paid-in capital | 201,882 | 140,523 |
Retained earnings | 338,300 | 410,919 |
Accumulated other comprehensive (loss) | (11,667) | (13,228) |
Total stockholders’ equity | 529,322 | 539,010 |
Total liabilities and stockholders’ equity | $ 1,487,327 | $ 984,812 |
UNAUDITED CONDENSED CONSOLIDA_2
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - shares | Sep. 30, 2020 | Dec. 31, 2019 |
Stockholders’ equity: | ||
Preferred stock, shares authorized (in shares) | 1,000,000 | 1,000,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Common stock, shares authorized (in shares) | 200,000,000 | 200,000,000 |
Common stock, shares issued (in shares) | 80,697,000 | 79,599,000 |
Common stock, shares outstanding (in shares) | 80,697,000 | 79,599,000 |
UNAUDITED CONDENSED CONSOLIDA_3
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Revenue | ||||
Total revenue | $ 225,951 | $ 216,703 | $ 718,917 | $ 634,841 |
Cost of revenue | ||||
Total cost of revenue | 77,799 | 80,898 | 234,018 | 232,415 |
Gross profit | 148,152 | 135,805 | 484,899 | 402,426 |
Operating expenses | ||||
Selling and marketing | 132,053 | 115,237 | 395,684 | 341,064 |
Research and development | 60,024 | 52,492 | 177,620 | 152,802 |
General and administrative | 17,907 | 14,843 | 49,192 | 41,693 |
Total operating expenses | 209,984 | 182,572 | 622,496 | 535,559 |
(Loss) from operations | (61,832) | (46,767) | (137,597) | (133,133) |
Foreign currency transaction gain (loss) | 4,236 | (1,970) | 2,545 | (3,577) |
Interest income | 243 | 598 | 1,092 | 1,865 |
Interest expense | (5,956) | (42) | (13,791) | (42) |
Gain on capped call transactions | 18,989 | 0 | 19,816 | 0 |
Other income, net | 0 | 323 | 1,374 | 378 |
(Loss) before (benefit from) income taxes | (44,320) | (47,858) | (126,561) | (134,509) |
(Benefit from) income taxes | (25,053) | (17,520) | (61,182) | (43,158) |
Net (loss) | $ (19,267) | $ (30,338) | $ (65,379) | $ (91,351) |
(Loss) per share | ||||
Basic (in dollars per share) | $ (0.24) | $ (0.38) | $ (0.82) | $ (1.16) |
Diluted (in dollars per share) | $ (0.24) | $ (0.38) | $ (0.82) | $ (1.16) |
Weighted-average number of common shares outstanding | ||||
Basic (in shares) | 80,537 | 79,200 | 80,191 | 78,928 |
Diluted (in shares) | 80,537 | 79,200 | 80,191 | 78,928 |
Software license | ||||
Revenue | ||||
Total revenue | $ 39,784 | $ 58,005 | $ 187,023 | $ 165,543 |
Cost of revenue | ||||
Total cost of revenue | 691 | 676 | 2,354 | 2,982 |
Maintenance | ||||
Revenue | ||||
Total revenue | 74,670 | 70,371 | 220,587 | 207,406 |
Cost of revenue | ||||
Total cost of revenue | 5,478 | 6,688 | 16,645 | 19,315 |
Pega Cloud | ||||
Revenue | ||||
Total revenue | 54,776 | 35,153 | 147,080 | 94,610 |
Cost of revenue | ||||
Total cost of revenue | 19,717 | 17,824 | 56,238 | 47,769 |
Consulting | ||||
Revenue | ||||
Total revenue | 56,721 | 53,174 | 164,227 | 167,282 |
Cost of revenue | ||||
Total cost of revenue | $ 51,913 | $ 55,710 | $ 158,781 | $ 162,349 |
UNAUDITED CONDENSED CONSOLIDA_4
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Statement of Comprehensive Income [Abstract] | ||||
Net (loss) | $ (19,267) | $ (30,338) | $ (65,379) | $ (91,351) |
Other comprehensive (loss) income, net of tax | ||||
Unrealized (loss) gain on available-for-sale securities | (166) | (216) | (66) | 396 |
Foreign currency translation adjustments | 113 | (2,201) | 1,627 | (983) |
Total other comprehensive (loss) income, net of tax | (53) | (2,417) | 1,561 | (587) |
Comprehensive (loss) | $ (19,320) | $ (32,755) | $ (63,818) | $ (91,938) |
UNAUDITED CONDENSED CONSOLIDA_5
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) shares in Thousands, $ in Thousands | Total | Common Stock | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive (Loss) |
Balance, beginning of period (in shares) at Dec. 31, 2018 | 78,526 | ||||
Balance, beginning of period at Dec. 31, 2018 | $ 621,531 | $ 785 | $ 123,205 | $ 510,863 | $ (13,322) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Repurchase of common stock (in shares) | (144) | ||||
Repurchase of common stock | (7,587) | $ (1) | (7,586) | ||
Issuance of common stock for share-based compensation plans (in shares) | 514 | ||||
Issuance of common stock for share-based compensation plans | (14,838) | $ 5 | (14,843) | ||
Stock-based compensation | 18,406 | 18,406 | |||
Cash dividends declared ($0.03 per share) | (2,367) | (2,367) | |||
Other comprehensive income (loss) | 2,001 | 2,001 | |||
Net (loss) | (28,717) | (28,717) | |||
Balance, end of period (in shares) at Mar. 31, 2019 | 78,896 | ||||
Balance, end of period at Mar. 31, 2019 | $ 588,429 | $ 789 | 119,182 | 479,779 | (11,321) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Cash dividend declared (in dollars per share) | $ 0.03 | ||||
Balance, beginning of period (in shares) at Dec. 31, 2018 | 78,526 | ||||
Balance, beginning of period at Dec. 31, 2018 | $ 621,531 | $ 785 | 123,205 | 510,863 | (13,322) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Other comprehensive income (loss) | (587) | ||||
Net (loss) | (91,351) | ||||
Balance, end of period (in shares) at Sep. 30, 2019 | 79,324 | ||||
Balance, end of period at Sep. 30, 2019 | 528,832 | $ 793 | 129,559 | 412,389 | (13,909) |
Balance, beginning of period (in shares) at Mar. 31, 2019 | 78,896 | ||||
Balance, beginning of period at Mar. 31, 2019 | 588,429 | $ 789 | 119,182 | 479,779 | (11,321) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Repurchase of common stock (in shares) | (88) | ||||
Repurchase of common stock | (6,302) | $ (1) | (6,301) | ||
Issuance of common stock for share-based compensation plans (in shares) | 320 | ||||
Issuance of common stock for share-based compensation plans | (11,214) | $ 3 | (11,217) | ||
Issuance of common stock under the employee stock purchase plan (in shares) | 16 | ||||
Issuance of common stock under the employee stock purchase plan | 1,103 | 1,103 | |||
Stock-based compensation | 20,113 | 20,113 | |||
Cash dividends declared ($0.03 per share) | (2,375) | (2,375) | |||
Other comprehensive income (loss) | (171) | (171) | |||
Net (loss) | (32,296) | (32,296) | |||
Balance, end of period (in shares) at Jun. 30, 2019 | 79,144 | ||||
Balance, end of period at Jun. 30, 2019 | $ 557,287 | $ 791 | 122,880 | 445,108 | (11,492) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Cash dividend declared (in dollars per share) | $ 0.03 | ||||
Repurchase of common stock (in shares) | (88) | ||||
Repurchase of common stock | $ (6,397) | $ (1) | (6,396) | ||
Issuance of common stock for share-based compensation plans (in shares) | 268 | ||||
Issuance of common stock for share-based compensation plans | (8,801) | $ 3 | (8,804) | ||
Stock-based compensation | 21,879 | 21,879 | |||
Cash dividends declared ($0.03 per share) | (2,381) | (2,381) | |||
Other comprehensive income (loss) | (2,417) | (2,417) | |||
Net (loss) | (30,338) | (30,338) | |||
Balance, end of period (in shares) at Sep. 30, 2019 | 79,324 | ||||
Balance, end of period at Sep. 30, 2019 | $ 528,832 | $ 793 | 129,559 | 412,389 | (13,909) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Cash dividend declared (in dollars per share) | $ 0.03 | ||||
Balance, beginning of period (in shares) at Dec. 31, 2019 | 79,599 | 79,599 | |||
Balance, beginning of period at Dec. 31, 2019 | $ 539,010 | $ 796 | 140,523 | 410,919 | (13,228) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Equity component of convertible senior notes, net | 61,604 | 61,604 | |||
Repurchase of common stock (in shares) | (87) | ||||
Repurchase of common stock | (6,000) | $ (1) | (5,999) | ||
Issuance of common stock for share-based compensation plans (in shares) | 564 | ||||
Issuance of common stock for share-based compensation plans | (23,011) | $ 6 | (23,017) | ||
Stock-based compensation | 23,199 | 23,199 | |||
Cash dividends declared ($0.03 per share) | (2,405) | (2,405) | |||
Other comprehensive income (loss) | (414) | (414) | |||
Net (loss) | (25,372) | (25,372) | |||
Balance, end of period (in shares) at Mar. 31, 2020 | 80,076 | ||||
Balance, end of period at Mar. 31, 2020 | $ 566,611 | $ 801 | 196,310 | 383,142 | (13,642) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Cash dividend declared (in dollars per share) | $ 0.03 | ||||
Balance, beginning of period (in shares) at Dec. 31, 2019 | 79,599 | 79,599 | |||
Balance, beginning of period at Dec. 31, 2019 | $ 539,010 | $ 796 | 140,523 | 410,919 | (13,228) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Other comprehensive income (loss) | 1,561 | ||||
Net (loss) | $ (65,379) | ||||
Balance, end of period (in shares) at Sep. 30, 2020 | 80,697 | 80,697 | |||
Balance, end of period at Sep. 30, 2020 | $ 529,322 | $ 807 | 201,882 | 338,300 | (11,667) |
Balance, beginning of period (in shares) at Mar. 31, 2020 | 80,076 | ||||
Balance, beginning of period at Mar. 31, 2020 | 566,611 | $ 801 | 196,310 | 383,142 | (13,642) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Repurchase of common stock (in shares) | (23) | ||||
Repurchase of common stock | (2,199) | $ 0 | (2,199) | ||
Issuance of common stock for share-based compensation plans (in shares) | 349 | ||||
Issuance of common stock for share-based compensation plans | (14,082) | $ 3 | (14,085) | ||
Issuance of common stock under the employee stock purchase plan (in shares) | 18 | ||||
Issuance of common stock under the employee stock purchase plan | 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 (loss) | 2,028 | 2,028 | |||
Net (loss) | (20,740) | (20,740) | |||
Balance, end of period (in shares) at Jun. 30, 2020 | 80,420 | ||||
Balance, end of period at Jun. 30, 2020 | $ 556,282 | $ 804 | 207,103 | 359,989 | (11,614) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Cash dividend declared (in dollars per share) | $ 0.03 | ||||
Repurchase of common stock (in shares) | (94) | ||||
Repurchase of common stock | $ (10,629) | $ (1) | (10,628) | ||
Issuance of common stock for share-based compensation plans (in shares) | 371 | ||||
Issuance of common stock for share-based compensation plans | (22,520) | $ 4 | (22,524) | ||
Stock-based compensation | 27,931 | 27,931 | |||
Cash dividends declared ($0.03 per share) | (2,422) | (2,422) | |||
Other comprehensive income (loss) | (53) | (53) | |||
Net (loss) | $ (19,267) | (19,267) | |||
Balance, end of period (in shares) at Sep. 30, 2020 | 80,697 | 80,697 | |||
Balance, end of period at Sep. 30, 2020 | $ 529,322 | $ 807 | $ 201,882 | $ 338,300 | $ (11,667) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Cash dividend declared (in dollars per share) | $ 0.03 |
UNAUDITED CONDENSED CONSOLIDA_6
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Parenthetical) - $ / shares | 3 Months Ended | |||||
Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | |
Statement of Stockholders' Equity [Abstract] | ||||||
Cash dividend declared (in dollars per share) | $ 0.03 | $ 0.03 | $ 0.03 | $ 0.03 | $ 0.03 | $ 0.03 |
UNAUDITED CONDENSED CONSOLIDA_7
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Operating activities | ||
Net (loss) | $ (65,379) | $ (91,351) |
Adjustments to reconcile net (loss) to cash (used in) operating activities | ||
Stock-based compensation | 76,755 | 60,242 |
(Gain) on capped call transactions | (19,816) | 0 |
Deferred income taxes | (43,476) | (40,531) |
Amortization of deferred commissions | 24,922 | 22,372 |
Lease expense | 11,997 | 10,454 |
Amortization of debt discount and issuance costs | 10,405 | 0 |
Amortization of intangible assets and depreciation | 15,677 | 16,998 |
Amortization of investments | 252 | 798 |
Foreign currency transaction (gain) loss | (2,545) | 3,577 |
Other non-cash | (1,374) | (363) |
Change in operating assets and liabilities, net | (33,675) | 4,342 |
Cash (used in) operating activities | (26,257) | (13,462) |
Investing activities | ||
Purchases of investments | (190,319) | (11,182) |
Proceeds from maturities and called investments | 0 | 13,066 |
Sales of investments | 1,424 | 68,937 |
Payments for acquisitions, net of cash acquired | 0 | (10,934) |
Investment in property and equipment | (21,806) | (6,439) |
Cash (used in) provided by investing activities | (210,701) | 53,448 |
Financing activities | ||
Proceeds from issuance of convertible senior notes | 600,000 | 0 |
Purchase of capped calls related to convertible senior notes | (51,900) | 0 |
Payment of debt issuance costs | (14,527) | 0 |
Dividend payments to shareholders | (7,206) | (7,105) |
Common stock repurchases | (76,737) | (54,836) |
Cash provided by (used in) financing activities | 449,630 | (61,941) |
Effect of exchange rate changes on cash and cash equivalents | 183 | (363) |
Net increase (decrease) in cash and cash equivalents | 212,855 | (22,318) |
Cash and cash equivalents, beginning of period | 68,363 | 114,422 |
Cash and cash equivalents, end of period | $ 281,218 | $ 92,104 |
BASIS OF PRESENTATION
BASIS OF PRESENTATION | 9 Months Ended |
Sep. 30, 2020 | |
Accounting Policies [Abstract] | |
BASIS OF PRESENTATION | 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. |
NEW ACCOUNTING PRONOUNCEMENTS
NEW ACCOUNTING PRONOUNCEMENTS | 9 Months Ended |
Sep. 30, 2020 | |
Accounting Policies [Abstract] | |
NEW ACCOUNTING PRONOUNCEMENTS | 2. NEW ACCOUNTING PRONOUNCEMENTS Convertible debt In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-06, “Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (ASU 2020-06), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity. The standard eliminates the liability and equity separation model for convertible instruments with a cash conversion feature. As a result, after adoption, entities will no longer separately present in equity an embedded conversion feature for such debt. Additionally, the embedded conversion feature will no longer be amortized into income as interest expense over the instrument’s life. Instead, entities will account for a convertible debt instrument wholly as debt unless (1) a convertible instrument contains features that require bifurcation as a derivative under ASC Topic 815, Derivatives and Hedging, or (2) a convertible debt instrument was issued at a substantial premium. Additionally, the standard requires applying the if-converted method to calculate convertible instruments’ impact on diluted earnings per share (“EPS”). The standard is effective for fiscal years beginning after December 15, 2021, with early adoption permitted for fiscal years beginning after December 15, 2020. It can be adopted on either a full retrospective or modified retrospective basis. The Company is currently evaluating the effect this ASU will have on its consolidated financial statements and related disclosures. The Company expects to early adopt the new standard on January 1, 2021. Financial instruments In June 2016, the FASB issued 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 asset’s amortized cost, 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. |
MARKETABLE SECURITIES
MARKETABLE SECURITIES | 9 Months Ended |
Sep. 30, 2020 | |
Investments, Debt and Equity Securities [Abstract] | |
MARKETABLE SECURITIES | 3. MARKETABLE SECURITIES September 30, 2020 (in thousands) Amortized Cost Unrealized Gains Unrealized Losses Fair Value Government debt $ 50,987 $ — $ (11) $ 50,976 Corporate debt 136,045 1 (212) 135,834 $ 187,032 $ 1 $ (223) $ 186,810 As of September 30, 2020, maturities of marketable securities ranged from October 2020 to September 2023, with a weighted-average remaining maturity of approximately 1.3 years. As of December 31, 2019, the Company did not hold any marketable securities. |
RECEIVABLES, CONTRACT ASSETS, A
RECEIVABLES, CONTRACT ASSETS, AND DEFERRED REVENUE | 9 Months Ended |
Sep. 30, 2020 | |
Receivables [Abstract] | |
RECEIVABLES, CONTRACT ASSETS, AND DEFERRED REVENUE | 4. RECEIVABLES, CONTRACT ASSETS, AND DEFERRED REVENUE Receivables (in thousands) September 30, 2020 December 31, 2019 Accounts receivable $ 137,953 $ 199,720 Unbilled receivables 208,823 180,219 Long-term unbilled receivables 108,456 121,736 $ 455,232 $ 501,675 Unbilled receivables are client committed amounts for which revenue recognition precedes billing, and billing is solely subject to the passage of time. Unbilled receivables are expected to be billed in the future as follows: (Dollars in thousands) September 30, 2020 1 year or less $ 208,823 66 % 1-2 years 91,325 29 % 2-5 years 17,131 5 % $ 317,279 100 % Unbilled receivables based upon contract effective date: (Dollars in thousands) September 30, 2020 2020 $ 105,380 33 % 2019 99,875 32 % 2018 39,281 12 % 2017 37,824 12 % 2016 and prior 34,919 11 % $ 317,279 100 % Major clients Clients accounting for 10% or more of the Company’s receivables: September 30, 2020 December 31, 2019 Client A 11 % * * Client accounted for less than 10% of total receivables. Contract assets and deferred revenue (in thousands) September 30, 2020 December 31, 2019 Contract assets (1) $ 8,104 $ 5,558 Long-term contract assets (2) 5,579 5,420 13,683 10,978 Deferred revenue 181,680 190,080 Long-term deferred revenue (3) 6,673 5,407 $ 188,353 $ 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 nine months ended September 30, 2020 was primarily due to new billings in advance of revenue recognition, and $170.5 million of revenue recognized during the period that was included in deferred revenue at December 31, 2019. |
DEFERRED COMMISSIONS
DEFERRED COMMISSIONS | 9 Months Ended |
Sep. 30, 2020 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
DEFERRED COMMISSIONS | 5. DEFERRED COMMISSIONS (in thousands) September 30, 2020 December 31, 2019 Deferred commissions (1) $ 87,992 $ 85,314 (1) Included in other long-term assets. Three Months Ended Nine Months Ended (in thousands) 2020 2019 2020 2019 Amortization of deferred commissions (1) $ 8,861 $ 8,193 $ 24,922 $ 22,372 (1) Included in selling and marketing expense. |
DEBT
DEBT | 9 Months Ended |
Sep. 30, 2020 | |
Debt Disclosure [Abstract] | |
DEBT | 6. DEBT Convertible senior notes and capped calls Convertible senior notes In February 2020, the Company issued Convertible Senior Notes (the "Notes") with an aggregate principal amount of $600 million, due March 1, 2025, in a private placement. The proceeds from the Notes were used or are anticipated to be used for the Capped Call Transactions (described below), working capital, and other general corporate purposes. There are no required principal payments prior to the maturity of the Notes. The Notes accrue interest at an annual rate of 0.75%, payable semi-annually in arrears on March 1 and September 1, beginning on September 1, 2020. Proceeds from the Notes and Capped Call Transactions: (in thousands) Amount Principal $ 600,000 Less: issuance costs (14,527) Less: Capped Call Transactions (51,900) $ 533,573 Conversion rights The conversion rate is 7.4045 shares of common stock per $1,000 principal amount of the Notes, representing an initial conversion price of approximately $135.05 per share of common stock. The Company will settle conversions by paying or delivering, as applicable, cash, shares of its common stock, or a combination of cash and shares of its common stock, at the Company’s election, based on the applicable conversion rate. The conversion rate will be adjusted upon the occurrence of certain events, including spin-offs, tender offers, exchange offers, and certain stockholder distributions. Beginning on September 1, 2024, noteholders may convert their Notes at any time at their election. Before September 1, 2024, noteholders may convert their Notes in the following circumstances: • During any calendar quarter commencing after the calendar quarter ending on June 30, 2020 (and only during such calendar quarter), if the last reported sale price per share of the Company’s common stock exceeds one hundred and thirty percent (130%) of the conversion price for each of at least twenty (20) trading days (whether or not consecutive) during the thirty (30) consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter. • During the five consecutive business days immediately after any five consecutive trading day period (the “Measurement Period”), if the trading price per $1,000 principal amount of Notes for each trading day of the Measurement Period was less than 98% of the product of the last reported sale price per share of common stock on such trading day and the conversion rate on such trading day. • Upon the occurrence of certain corporate events or distributions, or if the Company calls all or any Notes for redemption, then the noteholder of any Note may convert such Note at any time before the close of business on the business day immediately before the related redemption date (or if the Company fails to pay the redemption price due on such redemption date in full, at any time until the Company pays such redemption price in full). As of September 30, 2020, no Notes were eligible for conversion at the noteholders’ election. Repurchase rights On or after March 1, 2023 and on or before the 40th scheduled trading day immediately before the maturity date, the Company may redeem for cash all or part of the Notes, at a repurchase price equal to 100% of the principal amount, plus accrued and unpaid interest, if the last reported sale price of the Company’s common stock exceeded 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides a redemption notice. If certain corporate events that constitute a “Fundamental Change” (as described below) occur at any time, each noteholder will have the right, at such noteholder’s option, to require the Company to repurchase for cash all of such noteholder’s Notes, or any portion of the principal thereof that is equal to $1,000 or an integral multiple of $1,000, at a repurchase price equal to 100% of the principal amount thereof, plus accrued and unpaid interest. A fundamental change relates to events such as mergers, changes in control of the Company, liquidation/dissolution of the Company, or the delisting of the Company’s common stock. Impact of the Notes In accounting for the transaction, the Notes have been separated into liability and equity components. • The initial carrying amount of the liability component was calculated by measuring a similar debt instrument’s fair value that does not have an associated conversion feature. The excess of the Notes’ principal amount over the initial carrying amount of the liability component, the debt discount, is amortized as interest expense over the Notes’ contractual term. • The equity component was recorded as an increase to additional paid-in capital and is not remeasured as long as it continues to meet the conditions for equity classification. The Company incurred issuance costs of $14.5 million related to the Notes, allocated between the Notes’ liability and equity components proportionate to the initial carrying amount of the liability and equity components. • Issuance costs attributable to the liability component are recorded as an offset to the Notes’ principal balance. They are amortized as interest expense using the effective interest method over the contractual term of the Notes. • Issuance costs attributable to the equity component are recorded as an offset to the equity component in additional paid-in capital and are not amortized. Net carrying amount of the liability component: (in thousands) September 30, 2020 Principal $ 600,000 Unamortized debt discount (75,061) Unamortized issuance costs (11,145) $ 513,794 Net carrying amount of the equity component, included in additional paid-in capital: (in thousands) September 30, 2020 Conversion options (1) $ 61,604 (1) Net of issuance costs and taxes. Interest expense related to the Notes: Three Months Ended Nine Months Ended (in thousands) 2020 2019 2020 2019 Contractual interest expense (0.75% coupon) $ 1,125 $ — $ 2,700 $ — Amortization of debt discount (1) 3,807 — 9,060 — Amortization of issuance costs (1) 565 — 1,345 — $ 5,497 $ — $ 13,105 $ — (1) Amortized based upon an effective interest rate of 4.31%. Future payments of principal and contractual interest: September 30, 2020 (in thousands) Principal Interest Total 2020 $ — $ — $ — 2021 — 4,500 4,500 2022 — 4,500 4,500 2023 — 4,500 4,500 2024 — 4,500 4,500 2025 600,000 1,488 601,488 $ 600,000 $ 19,488 $ 619,488 Capped call transactions In February 2020, the Company entered into privately negotiated capped call transactions (“Capped Call Transactions”) with certain financial institutions. The Capped Call Transactions cover approximately 4.4 million shares (representing the number of shares for which the Notes are initially convertible) of the Company’s common stock. They are generally expected to reduce potential dilution to the common stock upon any conversion of Notes and/or offset any potential cash payments the Company is required to make in excess of the principal amount of converted Notes, as the case may be, with such reduction and/or offset subject to a cap. The cap price of the Capped Call Transactions is $196.44, subject to adjustment upon the occurrence of specified extraordinary events affecting the Company, including merger events and tender offers. The Capped Call Transactions are accounted for as derivative instruments. The Capped Call Transactions do not qualify for the Company’s own equity scope exception in ASC 815 since, in some cases of early settlement, the settlement value of the Capped Call Transactions, calculated in accordance with the governing documents, may not represent a fair value measurement. The Capped Call Transactions are classified as “other long term assets” and remeasured to fair value at the end of each reporting period, resulting in a non-operating gain or loss. Change in value of Capped Call Transactions: (in thousands) Nine Months Ended Value at issuance $ 51,900 Fair value adjustment 19,816 Balance as of September 30, $ 71,716 Credit facility In November 2019, and as amended in February 2020, July 2020, and October 2020, the Company entered into a five-year $100 million senior secured revolving credit agreement (the “Credit Facility”) with PNC Bank, National Association (“PNC”). The Company may use borrowings to finance working capital needs and for general corporate purposes. Subject to specific conditions, the Credit Facility allows the Company to increase the aggregate commitment to $200 million. The commitments expire on November 4, 2024, and any outstanding loans will be payable on such date. The Credit Facility, as amended, contains customary covenants, including, but not limited to, those relating to additional indebtedness, liens, asset divestitures, and affiliate transactions. The Company is also required to comply with financial covenants, including: • Beginning with the fiscal quarter ended on September 30, 2020 and ending with the fiscal quarter ended December 31, 2021 at least $200 million in cash and investments held by Pegasystems Inc. • Beginning with the quarter ended on March 31, 2022 a maximum net consolidated leverage ratio of 3.5 to 1.0 (with a step-up in the event of certain acquisitions) and a minimum consolidated interest coverage ratio of 3.5 to 1.0. |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 9 Months Ended |
Sep. 30, 2020 | |
Fair Value Disclosures [Abstract] | |
FAIR VALUE MEASUREMENTS | 7. FAIR VALUE MEASUREMENTS Assets and liabilities measured at fair value on a recurring basis The Company records its cash equivalents, Capped Call Transactions, and venture investments at fair value on a recurring basis. Fair value is an exit price, representing the amount that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants based on assumptions that market participants would use in pricing an asset or liability. As a basis for classifying the fair value measurements, a three-tier fair value hierarchy, which classifies the fair value measurements based on the inputs used in measuring fair value, was established as follows: • Level 1 - observable inputs such as quoted prices in active markets for identical assets or liabilities; • Level 2 - significant other inputs that are observable either directly or indirectly; and • Level 3 - significant unobservable inputs on which there is little or no market data, which require the Company to develop its own assumptions. This hierarchy requires the Company to use observable market data, when available, and minimize unobservable inputs when determining fair value. The fair value of the Capped Call Transactions at the end of each reporting period is determined using a Black-Scholes option-pricing model. The valuation models use various market-based inputs, including stock price, remaining contractual term, expected volatility, risk-free interest rate, and expected dividend yield, as applicable. The Company applies judgment in its determination of expected volatility. The Company considers both historical and implied volatility levels of the underlying equity security and, to a lesser extent, historical peer group volatility levels. The Company’s venture investments are recorded at fair value based on valuation methods using the observable transaction price and other unobservable inputs, including the volatility, rights, and obligations of the securities the Company holds. The Company’s assets and liabilities measured at fair value on a recurring basis: September 30, 2020 December 31, 2019 (in thousands) Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Cash equivalents (1) $ 212,917 $ — $ — $ 212,917 $ — $ — $ — $ — Marketable securities $ — $ 186,810 $ — $ 186,810 $ — $ — $ — $ — Capped Call Transactions (2) (3) $ — $ 71,716 $ — $ 71,716 $ — $ — $ — $ — Venture investments (2) (4) $ — $ — $ 7,927 $ 7,927 $ — $ — $ 4,871 $ 4,871 (1) Investments in money market funds. (2) Included in other long-term assets. (3) See "6. Debt" for additional information. (4) Investments in privately-held companies. Change in venture investments: (in thousands) Nine Months Ended December 31, 2019 $ 4,871 New investments 3,006 Sales of investments (1,424) Fair value adjustment 1,474 September 30, 2020 $ 7,927 The carrying value of certain other financial instruments, including receivables and accounts payable, approximates fair value due to the relatively short maturity of these items. Fair value of the Notes The fair value of the Company’s Notes was recorded at $515.9 million upon issuance, which reflected the principal amount of the Notes less the fair value of the conversion feature. The fair value of the debt component was determined based on a discounted cash flow model. The discount rate used reflected both the time value of money and credit risk inherent in the Notes. The carrying value of the Notes will be accreted, over the remaining term to maturity, to their principal value of $600 million. The Notes’ fair value (inclusive of the conversion feature, which is embedded in the Notes) was $680 million as of September 30, 2020. The fair value was determined based on the Notes’ quoted price in an over-the-counter market on the last trading day of the reporting period and classified within Level 2 in the fair value hierarchy. See "6. Debt" for additional information. |
REVENUE
REVENUE | 9 Months Ended |
Sep. 30, 2020 | |
Revenue from Contract with Customer [Abstract] | |
REVENUE | 8. REVENUE Geographic revenue Three Months Ended Nine Months Ended (Dollars in thousands) 2020 2019 2020 2019 U.S. $ 120,971 53 % $ 123,447 57 % $ 436,199 61 % $ 347,120 55 % Other Americas 10,737 5 % 11,748 5 % 35,009 5 % 49,450 8 % United Kingdom (“U.K.”) 25,150 11 % 23,034 11 % 68,246 9 % 64,269 10 % Europe (excluding U.K.), Middle East, and Africa 39,656 18 % 34,761 16 % 106,472 15 % 102,342 16 % Asia-Pacific 29,437 13 % 23,713 11 % 72,991 10 % 71,660 11 % $ 225,951 100 % $ 216,703 100 % $ 718,917 100 % $ 634,841 100 % Revenue streams Three Months Ended Nine Months Ended (in thousands) 2020 2019 2020 2019 Perpetual license $ 3,852 $ 9,016 $ 16,568 $ 43,286 Term license 35,932 48,989 170,455 122,257 Revenue recognized at a point in time 39,784 58,005 187,023 165,543 Maintenance 74,670 70,371 220,587 207,406 Pega Cloud 54,776 35,153 147,080 94,610 Consulting 56,721 53,174 164,227 167,282 Revenue recognized over time 186,167 158,698 531,894 469,298 $ 225,951 $ 216,703 $ 718,917 $ 634,841 (in thousands) Three Months Ended Nine Months Ended 2020 2019 2020 2019 Pega Cloud $ 54,776 $ 35,153 $ 147,080 $ 94,610 Maintenance 74,670 70,371 220,587 207,406 Term license 35,932 48,989 170,455 122,257 Subscription (1) 165,378 154,513 538,122 424,273 Perpetual license 3,852 9,016 16,568 43,286 Consulting 56,721 53,174 164,227 167,282 $ 225,951 $ 216,703 $ 718,917 $ 634,841 (1) Reflects client arrangements subject to renewal (Pega Cloud, maintenance, and term license). Remaining performance obligations ("Backlog") Expected future revenue on existing contracts: September 30, 2020 (Dollars in thousands) Perpetual license Term license Maintenance Pega Cloud Consulting Total 1 year or less $ 8,708 $ 50,788 $ 170,643 $ 211,661 $ 14,977 $ 456,777 54 % 1-2 years 1,700 5,341 40,631 157,500 2,042 207,214 25 % 2-3 years — 7,052 18,277 93,283 770 119,382 14 % Greater than 3 years — 4 9,597 44,363 653 54,617 7 % $ 10,408 $ 63,185 $ 239,148 $ 506,807 $ 18,442 $ 837,990 100 % September 30, 2019 (Dollars in thousands) Perpetual license Term license Maintenance Pega Cloud Consulting Total 1 year or less $ 7,689 $ 25,948 $ 158,220 $ 133,785 $ 13,145 $ 338,787 56 % 1-2 years 853 3,798 18,590 105,081 863 129,185 21 % 2-3 years 1,306 591 8,323 72,915 841 83,976 14 % Greater than 3 years — 85 4,959 51,591 — 56,635 9 % $ 9,848 $ 30,422 $ 190,092 $ 363,372 $ 14,849 $ 608,583 100 % |
STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION | 9 Months Ended |
Sep. 30, 2020 | |
Share-based Payment Arrangement [Abstract] | |
STOCK-BASED COMPENSATION | 9. STOCK-BASED COMPENSATION Expense Three Months Ended Nine Months Ended (in thousands) 2020 2019 2020 2019 Cost of revenue $ 5,100 $ 4,787 $ 15,636 $ 14,216 Selling and marketing 12,658 8,317 33,968 24,055 Research and development 5,765 4,858 17,066 13,990 General and administrative 4,402 3,884 10,085 7,981 $ 27,925 $ 21,846 $ 76,755 $ 60,242 Income tax benefit $ (5,604) $ (4,430) $ (15,293) $ (12,226) As of September 30, 2020, the Company had $115.0 million of unrecognized stock-based compensation expense, net of estimated forfeitures, which is expected to be recognized over a weighted-average period of 2.2 years. Grants The Company granted the following stock-based compensation awards: Nine Months Ended (in thousands) Shares Total Fair Value RSUs 1,026 $ 92,456 Non-qualified stock options 1,886 $ 44,505 Common stock 6 $ 701 |
INCOME TAXES
INCOME TAXES | 9 Months Ended |
Sep. 30, 2020 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | 10. INCOME TAXES Effective income tax rate Three Months Ended Nine Months Ended (Dollars in thousands) 2020 2019 2020 2019 (Benefit from) income taxes $ (25,053) $ (17,520) $ (61,182) $ (43,158) Effective income tax rate 48 % 32 % |
(LOSS) PER SHARE
(LOSS) PER SHARE | 9 Months Ended |
Sep. 30, 2020 | |
Earnings Per Share [Abstract] | |
(LOSS) PER SHARE | 11. (LOSS) PER SHARE Basic (loss) per share is calculated using the weighted-average number of common shares outstanding during the period. Diluted (loss) per share is calculated using the weighted-average number of common shares outstanding during the period, plus the dilutive effect of outstanding stock options, RSUs, and the conversion spread of the Company’s convertible senior notes. Calculation of the basic and diluted earnings per share: Three Months Ended Nine Months Ended (in thousands, except per share amounts) 2020 2019 2020 2019 Net (loss) $ (19,267) $ (30,338) $ (65,379) $ (91,351) Weighted-average common shares outstanding 80,537 79,200 80,191 78,928 (Loss) per share, basic $ (0.24) $ (0.38) $ (0.82) $ (1.16) Net (loss) $ (19,267) $ (30,338) $ (65,379) $ (91,351) Weighted-average common shares outstanding, assuming dilution (1) (2) 80,537 79,200 80,191 78,928 (Loss) per share, diluted $ (0.24) $ (0.38) $ (0.82) $ (1.16) Outstanding anti-dilutive stock options and RSUs (3) 6,622 5,953 6,166 5,923 (1) The Company expects to settle the principal amount of the Notes in cash. As a result, only the amount by which the conversion value exceeds the aggregated principal amount of the Notes is included in the diluted earnings per share computation under the treasury stock method. The conversion spread has a dilutive impact on diluted net income per share when the average market price of the Company’s common stock for a given period exceeds the initial conversion price of $135.05 per share for the Notes. In connection with the Notes’ issuance, the Company entered into Capped Call Transactions, which were not included in calculating the number of diluted shares outstanding, as their effect would have been anti-dilutive. (2) In periods of loss, all dilutive securities are excluded as their inclusion would be anti-dilutive. (3) Certain outstanding stock options and RSUs were excluded from the computation of diluted earnings per share because they were anti-dilutive in the period presented. These awards may be dilutive in the future. |
NEW ACCOUNTING PRONOUNCEMENTS (
NEW ACCOUNTING PRONOUNCEMENTS (Policies) | 9 Months Ended |
Sep. 30, 2020 | |
Accounting Policies [Abstract] | |
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. |
Convertible debt | Convertible debt In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-06, “Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (ASU 2020-06), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity. The standard eliminates the liability and equity separation model for convertible instruments with a cash conversion feature. As a result, after adoption, entities will no longer separately present in equity an embedded conversion feature for such debt. Additionally, the embedded conversion feature will no longer be amortized into income as interest expense over the instrument’s life. Instead, entities will account for a convertible debt instrument wholly as debt unless (1) a convertible instrument contains features that require bifurcation as a derivative under ASC Topic 815, Derivatives and Hedging, or (2) a convertible debt instrument was issued at a substantial premium. Additionally, the standard requires applying the if-converted method to calculate convertible instruments’ impact on diluted earnings per share (“EPS”). The standard is effective for fiscal years beginning after December 15, 2021, with early adoption permitted for fiscal years beginning after December 15, 2020. It can be adopted on either a full retrospective or modified retrospective basis. The Company is currently evaluating the effect this ASU will have on its consolidated financial statements and related disclosures. The Company expects to early adopt the new standard on January 1, 2021. |
Financial instruments | Financial instruments In June 2016, the FASB issued 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 asset’s amortized cost, 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. |
Assets and liabilities measured at fair value on a recurring basis | Assets and liabilities measured at fair value on a recurring basis The Company records its cash equivalents, Capped Call Transactions, and venture investments at fair value on a recurring basis. Fair value is an exit price, representing the amount that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants based on assumptions that market participants would use in pricing an asset or liability. As a basis for classifying the fair value measurements, a three-tier fair value hierarchy, which classifies the fair value measurements based on the inputs used in measuring fair value, was established as follows: • Level 1 - observable inputs such as quoted prices in active markets for identical assets or liabilities; • Level 2 - significant other inputs that are observable either directly or indirectly; and • Level 3 - significant unobservable inputs on which there is little or no market data, which require the Company to develop its own assumptions. This hierarchy requires the Company to use observable market data, when available, and minimize unobservable inputs when determining fair value. The fair value of the Capped Call Transactions at the end of each reporting period is determined using a Black-Scholes option-pricing model. The valuation models use various market-based inputs, including stock price, remaining contractual term, expected volatility, risk-free interest rate, and expected dividend yield, as applicable. The Company applies judgment in its determination of expected volatility. The Company considers both historical and implied volatility levels of the underlying equity security and, to a lesser extent, historical peer group volatility levels. The Company’s venture investments are recorded at fair value based on valuation methods using the observable transaction price and other unobservable inputs, including the volatility, rights, and obligations of the securities the Company holds. |
MARKETABLE SECURITIES (Tables)
MARKETABLE SECURITIES (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Investments, Debt and Equity Securities [Abstract] | |
Schedule of Marketable Securities | September 30, 2020 (in thousands) Amortized Cost Unrealized Gains Unrealized Losses Fair Value Government debt $ 50,987 $ — $ (11) $ 50,976 Corporate debt 136,045 1 (212) 135,834 $ 187,032 $ 1 $ (223) $ 186,810 |
RECEIVABLES, CONTRACT ASSETS,_2
RECEIVABLES, CONTRACT ASSETS, AND DEFERRED REVENUE (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Receivables [Abstract] | |
Summary of receivable | Receivables (in thousands) September 30, 2020 December 31, 2019 Accounts receivable $ 137,953 $ 199,720 Unbilled receivables 208,823 180,219 Long-term unbilled receivables 108,456 121,736 $ 455,232 $ 501,675 |
Summary of unbilled receivables | Unbilled receivables are expected to be billed in the future as follows: (Dollars in thousands) September 30, 2020 1 year or less $ 208,823 66 % 1-2 years 91,325 29 % 2-5 years 17,131 5 % $ 317,279 100 % |
Summary of unbilled receivables based upon contract effective date | Unbilled receivables based upon contract effective date: (Dollars in thousands) September 30, 2020 2020 $ 105,380 33 % 2019 99,875 32 % 2018 39,281 12 % 2017 37,824 12 % 2016 and prior 34,919 11 % $ 317,279 100 % |
Schedules of concentration of risk, by risk factor | Major clients Clients accounting for 10% or more of the Company’s receivables: September 30, 2020 December 31, 2019 Client A 11 % * * Client accounted for less than 10% of total receivables. |
Summary of contract assets and deferred revenue | Contract assets and deferred revenue (in thousands) September 30, 2020 December 31, 2019 Contract assets (1) $ 8,104 $ 5,558 Long-term contract assets (2) 5,579 5,420 13,683 10,978 Deferred revenue 181,680 190,080 Long-term deferred revenue (3) 6,673 5,407 $ 188,353 $ 195,487 (1) Included in other current assets. (2) Included in other long-term assets. (3) Included in other long-term liabilities. |
DEFERRED COMMISSIONS (Tables)
DEFERRED COMMISSIONS (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Schedule of impairment of deferred contract costs | (in thousands) September 30, 2020 December 31, 2019 Deferred commissions (1) $ 87,992 $ 85,314 (1) Included in other long-term assets. |
Schedule of amortization of deferred contract costs | Three Months Ended Nine Months Ended (in thousands) 2020 2019 2020 2019 Amortization of deferred commissions (1) $ 8,861 $ 8,193 $ 24,922 $ 22,372 |
DEBT (Tables)
DEBT (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Debt Disclosure [Abstract] | |
Schedule of debt | Proceeds from the Notes and Capped Call Transactions: (in thousands) Amount Principal $ 600,000 Less: issuance costs (14,527) Less: Capped Call Transactions (51,900) $ 533,573 |
Contractual obligation, fiscal year maturity schedule | Net carrying amount of the liability component: (in thousands) September 30, 2020 Principal $ 600,000 Unamortized debt discount (75,061) Unamortized issuance costs (11,145) $ 513,794 Net carrying amount of the equity component, included in additional paid-in capital: (in thousands) September 30, 2020 Conversion options (1) $ 61,604 (1) Net of issuance costs and taxes. Interest expense related to the Notes: Three Months Ended Nine Months Ended (in thousands) 2020 2019 2020 2019 Contractual interest expense (0.75% coupon) $ 1,125 $ — $ 2,700 $ — Amortization of debt discount (1) 3,807 — 9,060 — Amortization of issuance costs (1) 565 — 1,345 — $ 5,497 $ — $ 13,105 $ — (1) Amortized based upon an effective interest rate of 4.31%. Future payments of principal and contractual interest: September 30, 2020 (in thousands) Principal Interest Total 2020 $ — $ — $ — 2021 — 4,500 4,500 2022 — 4,500 4,500 2023 — 4,500 4,500 2024 — 4,500 4,500 2025 600,000 1,488 601,488 $ 600,000 $ 19,488 $ 619,488 |
Schedule of derivative instruments | Change in value of Capped Call Transactions: (in thousands) Nine Months Ended Value at issuance $ 51,900 Fair value adjustment 19,816 Balance as of September 30, $ 71,716 |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Fair Value Disclosures [Abstract] | |
Assets and liabilities measured at fair value | The Company’s assets and liabilities measured at fair value on a recurring basis: September 30, 2020 December 31, 2019 (in thousands) Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Cash equivalents (1) $ 212,917 $ — $ — $ 212,917 $ — $ — $ — $ — Marketable securities $ — $ 186,810 $ — $ 186,810 $ — $ — $ — $ — Capped Call Transactions (2) (3) $ — $ 71,716 $ — $ 71,716 $ — $ — $ — $ — Venture investments (2) (4) $ — $ — $ 7,927 $ 7,927 $ — $ — $ 4,871 $ 4,871 (1) Investments in money market funds. (2) Included in other long-term assets. (3) See "6. Debt" for additional information. (4) Investments in privately-held companies. |
Fair value, assets measured on recurring basis, unobservable input reconciliation | Change in venture investments: (in thousands) Nine Months Ended December 31, 2019 $ 4,871 New investments 3,006 Sales of investments (1,424) Fair value adjustment 1,474 September 30, 2020 $ 7,927 |
REVENUE (Tables)
REVENUE (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Revenue from Contract with Customer [Abstract] | |
Schedule of revenue by geographic location | Geographic revenue Three Months Ended Nine Months Ended (Dollars in thousands) 2020 2019 2020 2019 U.S. $ 120,971 53 % $ 123,447 57 % $ 436,199 61 % $ 347,120 55 % Other Americas 10,737 5 % 11,748 5 % 35,009 5 % 49,450 8 % United Kingdom (“U.K.”) 25,150 11 % 23,034 11 % 68,246 9 % 64,269 10 % Europe (excluding U.K.), Middle East, and Africa 39,656 18 % 34,761 16 % 106,472 15 % 102,342 16 % Asia-Pacific 29,437 13 % 23,713 11 % 72,991 10 % 71,660 11 % $ 225,951 100 % $ 216,703 100 % $ 718,917 100 % $ 634,841 100 % |
Schedule of revenue streams | Revenue streams Three Months Ended Nine Months Ended (in thousands) 2020 2019 2020 2019 Perpetual license $ 3,852 $ 9,016 $ 16,568 $ 43,286 Term license 35,932 48,989 170,455 122,257 Revenue recognized at a point in time 39,784 58,005 187,023 165,543 Maintenance 74,670 70,371 220,587 207,406 Pega Cloud 54,776 35,153 147,080 94,610 Consulting 56,721 53,174 164,227 167,282 Revenue recognized over time 186,167 158,698 531,894 469,298 $ 225,951 $ 216,703 $ 718,917 $ 634,841 (in thousands) Three Months Ended Nine Months Ended 2020 2019 2020 2019 Pega Cloud $ 54,776 $ 35,153 $ 147,080 $ 94,610 Maintenance 74,670 70,371 220,587 207,406 Term license 35,932 48,989 170,455 122,257 Subscription (1) 165,378 154,513 538,122 424,273 Perpetual license 3,852 9,016 16,568 43,286 Consulting 56,721 53,174 164,227 167,282 $ 225,951 $ 216,703 $ 718,917 $ 634,841 (1) Reflects client arrangements subject to renewal (Pega Cloud, maintenance, and term license). |
Revenue for remaining performance obligations expected to be recognized | September 30, 2020 (Dollars in thousands) Perpetual license Term license Maintenance Pega Cloud Consulting Total 1 year or less $ 8,708 $ 50,788 $ 170,643 $ 211,661 $ 14,977 $ 456,777 54 % 1-2 years 1,700 5,341 40,631 157,500 2,042 207,214 25 % 2-3 years — 7,052 18,277 93,283 770 119,382 14 % Greater than 3 years — 4 9,597 44,363 653 54,617 7 % $ 10,408 $ 63,185 $ 239,148 $ 506,807 $ 18,442 $ 837,990 100 % September 30, 2019 (Dollars in thousands) Perpetual license Term license Maintenance Pega Cloud Consulting Total 1 year or less $ 7,689 $ 25,948 $ 158,220 $ 133,785 $ 13,145 $ 338,787 56 % 1-2 years 853 3,798 18,590 105,081 863 129,185 21 % 2-3 years 1,306 591 8,323 72,915 841 83,976 14 % Greater than 3 years — 85 4,959 51,591 — 56,635 9 % $ 9,848 $ 30,422 $ 190,092 $ 363,372 $ 14,849 $ 608,583 100 % |
STOCK-BASED COMPENSATION (Table
STOCK-BASED COMPENSATION (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Share-based Payment Arrangement [Abstract] | |
Summary of stock based compensation expense | Expense Three Months Ended Nine Months Ended (in thousands) 2020 2019 2020 2019 Cost of revenue $ 5,100 $ 4,787 $ 15,636 $ 14,216 Selling and marketing 12,658 8,317 33,968 24,055 Research and development 5,765 4,858 17,066 13,990 General and administrative 4,402 3,884 10,085 7,981 $ 27,925 $ 21,846 $ 76,755 $ 60,242 Income tax benefit $ (5,604) $ (4,430) $ (15,293) $ (12,226) |
Summary of stock based compensation award granted | Grants The Company granted the following stock-based compensation awards: Nine Months Ended (in thousands) Shares Total Fair Value RSUs 1,026 $ 92,456 Non-qualified stock options 1,886 $ 44,505 Common stock 6 $ 701 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Income Tax Disclosure [Abstract] | |
Summary of benefit from income taxes and discrete tax items | Effective income tax rate Three Months Ended Nine Months Ended (Dollars in thousands) 2020 2019 2020 2019 (Benefit from) income taxes $ (25,053) $ (17,520) $ (61,182) $ (43,158) Effective income tax rate 48 % 32 % |
(LOSS) PER SHARE (Tables)
(LOSS) PER SHARE (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Earnings Per Share [Abstract] | |
Summary of basic and diluted earnings per share | Calculation of the basic and diluted earnings per share: Three Months Ended Nine Months Ended (in thousands, except per share amounts) 2020 2019 2020 2019 Net (loss) $ (19,267) $ (30,338) $ (65,379) $ (91,351) Weighted-average common shares outstanding 80,537 79,200 80,191 78,928 (Loss) per share, basic $ (0.24) $ (0.38) $ (0.82) $ (1.16) Net (loss) $ (19,267) $ (30,338) $ (65,379) $ (91,351) Weighted-average common shares outstanding, assuming dilution (1) (2) 80,537 79,200 80,191 78,928 (Loss) per share, diluted $ (0.24) $ (0.38) $ (0.82) $ (1.16) Outstanding anti-dilutive stock options and RSUs (3) 6,622 5,953 6,166 5,923 (1) The Company expects to settle the principal amount of the Notes in cash. As a result, only the amount by which the conversion value exceeds the aggregated principal amount of the Notes is included in the diluted earnings per share computation under the treasury stock method. The conversion spread has a dilutive impact on diluted net income per share when the average market price of the Company’s common stock for a given period exceeds the initial conversion price of $135.05 per share for the Notes. In connection with the Notes’ issuance, the Company entered into Capped Call Transactions, which were not included in calculating the number of diluted shares outstanding, as their effect would have been anti-dilutive. (2) In periods of loss, all dilutive securities are excluded as their inclusion would be anti-dilutive. (3) Certain outstanding stock options and RSUs were excluded from the computation of diluted earnings per share because they were anti-dilutive in the period presented. These awards may be dilutive in the future. |
MARKETABLE SECURITIES - Schedul
MARKETABLE SECURITIES - Schedule of Marketable Securities (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Marketable Securities [Line Items] | ||
Amortized Cost | $ 187,032 | |
Unrealized Gains | 1 | |
Unrealized Losses | (223) | |
Fair Value | 186,810 | $ 0 |
Government debt | ||
Marketable Securities [Line Items] | ||
Amortized Cost | 50,987 | |
Unrealized Gains | 0 | |
Unrealized Losses | (11) | |
Fair Value | 50,976 | |
Corporate debt | ||
Marketable Securities [Line Items] | ||
Amortized Cost | 136,045 | |
Unrealized Gains | 1 | |
Unrealized Losses | (212) | |
Fair Value | $ 135,834 |
MARKETABLE SECURITIES - Additio
MARKETABLE SECURITIES - Additional Information (Details) | Sep. 30, 2020 |
Investments, Debt and Equity Securities [Abstract] | |
Marketable debt security weighted-average remaining maturity | 1 year 3 months 18 days |
RECEIVABLES, CONTRACT ASSETS,_3
RECEIVABLES, CONTRACT ASSETS, AND DEFERRED REVENUE - Summary of Receivable (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Receivables [Abstract] | ||
Accounts receivable | $ 137,953 | $ 199,720 |
Unbilled receivables | 208,823 | 180,219 |
Long-term unbilled receivables | 108,456 | 121,736 |
Total receivables | $ 455,232 | $ 501,675 |
RECEIVABLES, CONTRACT ASSETS,_4
RECEIVABLES, CONTRACT ASSETS, AND DEFERRED REVENUE - Summary of Unbilled Receivables (Details) $ in Thousands | Sep. 30, 2020USD ($) |
Receivables [Abstract] | |
1 year or less | $ 208,823 |
1-2 years | 91,325 |
2-5 years | 17,131 |
Total | $ 317,279 |
Percentage of unbilled receivables, 1 year or less | 66.00% |
Percentage of unbilled receivables, 1-2 years | 29.00% |
Percentage of unbilled receivables, 2-5 years | 5.00% |
Total percentage of unbilled receivables | 100.00% |
RECEIVABLES, CONTRACT ASSETS,_5
RECEIVABLES, CONTRACT ASSETS, AND DEFERRED REVENUE- Contract Effective (Details) $ in Thousands | 9 Months Ended |
Sep. 30, 2020USD ($) | |
Receivables [Abstract] | |
2020 | $ 105,380 |
2019 | 99,875 |
2018 | 39,281 |
2017 | 37,824 |
2016 and prior | 34,919 |
Unbilled revenue total | $ 317,279 |
2020 | 33.00% |
2019 | 32.00% |
2018 | 12.00% |
2017 | 12.00% |
2016 and prior | 11.00% |
Total percentage of unbilled revenue | 100.00% |
Revenue recognized during the period that was included in deferred revenue | $ 170,500 |
RECEIVABLES, CONTRACT ASSETS,_6
RECEIVABLES, CONTRACT ASSETS, AND DEFERRED REVENUE - Summary of Major Clients (Details) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Concentration Risk [Line Items] | ||||
Percent of total revenue | 100.00% | 100.00% | 100.00% | 100.00% |
Client A | Credit concentration risk | Accounts receivable | ||||
Concentration Risk [Line Items] | ||||
Percent of total revenue | 11.00% |
RECEIVABLES, CONTRACT ASSETS,_7
RECEIVABLES, CONTRACT ASSETS, AND DEFERRED REVENUE - Summary of Contract Assets and Deferred Revenue (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Receivables [Abstract] | ||
Contract assets | $ 8,104 | $ 5,558 |
Long-term contract assets | 5,579 | 5,420 |
Total contract assets | 13,683 | 10,978 |
Deferred revenue | 181,680 | 190,080 |
Long-term deferred revenue | 6,673 | 5,407 |
Total deferred revenue | $ 188,353 | $ 195,487 |
DEFERRED COMMISSIONS - Schedule
DEFERRED COMMISSIONS - Schedule of Impairment of Deferred Commissions (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
Deferred commissions | $ 87,992 | $ 85,314 |
DEFERRED COMMISSIONS - Schedu_2
DEFERRED COMMISSIONS - Schedule of Amortization of Deferred Commissions (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||||
Amortization of deferred commissions | $ 8,861 | $ 8,193 | $ 24,922 | $ 22,372 |
DEBT - Convertible Senior Notes
DEBT - Convertible Senior Notes Narrative (Details) | Mar. 01, 2020 | Feb. 29, 2020USD ($)$ / shares | Sep. 30, 2020tradingDay |
Debt Instrument [Line Items] | |||
Redemption percentage | 100.00% | ||
On or after March 1, 2023 | |||
Debt Instrument [Line Items] | |||
Redemption percentage | 100.00% | ||
Convertible debt | |||
Debt Instrument [Line Items] | |||
Face amount | $ | $ 600,000,000 | ||
Interest rate | 0.75% | ||
Initial conversion rate | 7.4045 | ||
Debt conversion amount | $ | $ 1,000 | ||
Initial conversion price (in dollars per share) | $ / shares | $ 135.05 | ||
Debt issuance costs | $ | $ (14,527,000) | ||
Convertible debt | After the calendar quarter ending on June 30, 2020 | |||
Debt Instrument [Line Items] | |||
Threshold percentage of stock price trigger | 130.00% | ||
Threshold trading days | 20 | ||
Threshold consecutive trading days | 30 | ||
Convertible debt | Measurement period | |||
Debt Instrument [Line Items] | |||
Threshold percentage of stock price trigger | 98.00% | ||
Threshold consecutive trading days | 5 | ||
Threshold consecutive business days | 5 | ||
Convertible debt | On or after March 1, 2023 | |||
Debt Instrument [Line Items] | |||
Threshold percentage of stock price trigger | 130.00% | ||
Threshold trading days | 20 | ||
Threshold consecutive trading days | 30 |
DEBT - Net Proceeds Amount (Det
DEBT - Net Proceeds Amount (Details) - USD ($) $ in Thousands | 1 Months Ended | ||
Feb. 29, 2020 | Sep. 30, 2020 | Dec. 31, 2019 | |
Debt Instrument [Line Items] | |||
Less: Capped Call Transactions | $ (71,716) | $ 0 | |
Convertible debt | |||
Debt Instrument [Line Items] | |||
Principal | $ 600,000 | $ 600,000 | |
Less: issuance costs | (14,527) | ||
Less: Capped Call Transactions | (51,900) | ||
Net proceeds | $ 533,573 |
DEBT - Net Carrying Amount (Det
DEBT - Net Carrying Amount (Details) - Convertible debt - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2020 | Feb. 29, 2020 | |
Debt Instrument [Line Items] | ||
Principal | $ 600,000 | $ 600,000 |
Unamortized debt discount | (75,061) | |
Unamortized issuance costs | (11,145) | |
Principal, net | 513,794 | |
Conversion options | $ 61,604 |
DEBT - Interest Expense (Detail
DEBT - Interest Expense (Details) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | 9 Months Ended | ||
Feb. 29, 2020 | Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Debt Instrument [Line Items] | |||||
Effective interest rate | 4.31% | 4.31% | 4.31% | 4.31% | |
Convertible debt | |||||
Debt Instrument [Line Items] | |||||
Interest rate | 0.75% | ||||
Contractual interest expense (0.75% coupon) | $ 1,125 | $ 0 | $ 2,700 | $ 0 | |
Amortization of debt discount | 3,807 | 0 | 9,060 | 0 | |
Amortization of issuance costs | 565 | 0 | 1,345 | 0 | |
Interest expense | $ 5,497 | $ 0 | $ 13,105 | $ 0 |
DEBT - Future Payments of Princ
DEBT - Future Payments of Principal and Contractual Interest (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Feb. 29, 2020 |
Interest | ||
Interest expense, total due | $ 19,488 | |
Convertible debt | ||
Principal | ||
2020 | 0 | |
2021 | 0 | |
2022 | 0 | |
2023 | 0 | |
2024 | 0 | |
2025 | 600,000 | |
Principal, total due | 600,000 | $ 600,000 |
Interest | ||
2020 | 0 | |
2021 | 4,500 | |
2022 | 4,500 | |
2023 | 4,500 | |
2024 | 4,500 | |
2025 | 1,488 | |
Total | ||
2020 | 0 | |
2021 | 4,500 | |
2022 | 4,500 | |
2023 | 4,500 | |
2024 | 4,500 | |
2025 | 601,488 | |
Principal and interest, total due | $ 619,488 |
DEBT - Capped Call Transactions
DEBT - Capped Call Transactions (Details) $ in Thousands, shares in Millions | 1 Months Ended | 7 Months Ended |
Feb. 29, 2020USD ($)$ / derivativeshares | Sep. 30, 2020USD ($) | |
Debt Disclosure [Abstract] | ||
Number of shares issuable upon conversion | shares | 4.4 | |
Cap price | $ / derivative | 196.44 | |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||
Value at issuance | $ 51,900 | |
Fair value adjustment | 19,816 | |
Ending balance | $ 51,900 | $ 71,716 |
DEBT - Credit Facility (Details
DEBT - Credit Facility (Details) | 1 Months Ended | |
Oct. 31, 2020USD ($) | Dec. 31, 2019USD ($) | |
Debt Instrument [Line Items] | ||
Remaining borrowing capacity | $ 0 | |
PNC bank, national association | Subsequent Event | ||
Debt Instrument [Line Items] | ||
Minimum consolidated coverage ratio | 3.5 | |
Credit agreement | PNC bank, national association | Subsequent Event | ||
Debt Instrument [Line Items] | ||
Minimum required cash and investments held | $ 200,000,000 | |
Maximum consolidated net leverage ratio | 3.5 | |
Line of Credit | PNC bank, national association | Revolving credit facility | Subsequent Event | ||
Debt Instrument [Line Items] | ||
Revolving credit agreement term | 5 years | |
Senior notes | $ 100,000,000 | |
Increase in aggregate commitment amount | $ 200,000,000 |
FAIR VALUE MEASUREMENTS (Detail
FAIR VALUE MEASUREMENTS (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Fair Value Assets | ||
Marketable securities | $ 186,810 | $ 0 |
Capped call transactions | 71,716 | 0 |
Cash equivalents | ||
Fair Value Assets | ||
Cash equivalents | 212,917 | 0 |
Venture investments | ||
Fair Value Assets | ||
Venture investments | 7,927 | 4,871 |
Level 1 | ||
Fair Value Assets | ||
Marketable securities | 0 | 0 |
Capped call transactions | 0 | 0 |
Level 1 | Cash equivalents | ||
Fair Value Assets | ||
Cash equivalents | 212,917 | 0 |
Level 1 | Venture investments | ||
Fair Value Assets | ||
Venture investments | 0 | 0 |
Level 2 | ||
Fair Value Assets | ||
Marketable securities | 186,810 | 0 |
Capped call transactions | 71,716 | 0 |
Level 2 | Cash equivalents | ||
Fair Value Assets | ||
Cash equivalents | 0 | 0 |
Level 2 | Venture investments | ||
Fair Value Assets | ||
Venture investments | 0 | 0 |
Level 3 | ||
Fair Value Assets | ||
Marketable securities | 0 | 0 |
Capped call transactions | 0 | 0 |
Level 3 | Cash equivalents | ||
Fair Value Assets | ||
Cash equivalents | 0 | 0 |
Level 3 | Venture investments | ||
Fair Value Assets | ||
Venture investments | $ 7,927 | $ 4,871 |
FAIR VALUE MEASUREMENTS - Chang
FAIR VALUE MEASUREMENTS - Change in Investment in Privately Held Companies (Details) - USD ($) | 9 Months Ended | |
Sep. 30, 2020 | Feb. 29, 2020 | |
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||
Convertible debt fair value | $ 680,000,000 | $ 515,900,000 |
Convertible debt | ||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||
Face amount | $ 600,000,000 | |
Privately held investment | ||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||
Beginning balance | 4,871,000 | |
New investments | 3,006,000 | |
Sales of investments | (1,424,000) | |
Fair value adjustment | 1,474,000 | |
Ending balance | $ 7,927,000 |
REVENUE - Geographic Revenue (D
REVENUE - Geographic Revenue (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Disaggregation of Revenue [Line Items] | ||||
Revenue | $ 225,951 | $ 216,703 | $ 718,917 | $ 634,841 |
Percent of total revenue | 100.00% | 100.00% | 100.00% | 100.00% |
U.S. | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | $ 120,971 | $ 123,447 | $ 436,199 | $ 347,120 |
Other Americas | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 10,737 | 11,748 | 35,009 | 49,450 |
United Kingdom (“U.K.”) | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 25,150 | 23,034 | 68,246 | 64,269 |
Europe (excluding U.K.), Middle East, and Africa | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 39,656 | 34,761 | 106,472 | 102,342 |
Asia-Pacific | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | $ 29,437 | $ 23,713 | $ 72,991 | $ 71,660 |
Total revenue | U.S. | ||||
Disaggregation of Revenue [Line Items] | ||||
Percent of total revenue | 53.00% | 57.00% | 61.00% | 55.00% |
Total revenue | Other Americas | ||||
Disaggregation of Revenue [Line Items] | ||||
Percent of total revenue | 5.00% | 5.00% | 5.00% | 8.00% |
Total revenue | United Kingdom (“U.K.”) | ||||
Disaggregation of Revenue [Line Items] | ||||
Percent of total revenue | 11.00% | 11.00% | 9.00% | 10.00% |
Total revenue | Europe (excluding U.K.), Middle East, and Africa | ||||
Disaggregation of Revenue [Line Items] | ||||
Percent of total revenue | 18.00% | 16.00% | 15.00% | 16.00% |
Total revenue | Asia-Pacific | ||||
Disaggregation of Revenue [Line Items] | ||||
Percent of total revenue | 13.00% | 11.00% | 10.00% | 11.00% |
REVENUE - Revenue Stream (Detai
REVENUE - Revenue Stream (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Disaggregation of Revenue [Line Items] | ||||
Revenue | $ 225,951 | $ 216,703 | $ 718,917 | $ 634,841 |
Revenue recognized at a point in time | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 39,784 | 58,005 | 187,023 | 165,543 |
Revenue recognized over time | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 186,167 | 158,698 | 531,894 | 469,298 |
Perpetual license | Revenue recognized at a point in time | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 3,852 | 9,016 | 16,568 | 43,286 |
Term license | Revenue recognized at a point in time | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 35,932 | 48,989 | 170,455 | 122,257 |
Maintenance | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 74,670 | 70,371 | 220,587 | 207,406 |
Maintenance | Revenue recognized over time | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 74,670 | 70,371 | 220,587 | 207,406 |
Pega Cloud | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 54,776 | 35,153 | 147,080 | 94,610 |
Pega Cloud | Revenue recognized over time | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 54,776 | 35,153 | 147,080 | 94,610 |
Subscription | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 165,378 | 154,513 | 538,122 | 424,273 |
Consulting | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 56,721 | 53,174 | 164,227 | 167,282 |
Consulting | Revenue recognized over time | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | $ 56,721 | $ 53,174 | $ 164,227 | $ 167,282 |
REVENUE - Performance Obligatio
REVENUE - Performance Obligations (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Sep. 30, 2019 |
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | $ 837,990 | $ 608,583 |
Revenue remaining performance obligation, percentage | 100.00% | 100.00% |
1 year or less | ||
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | $ 456,777 | $ 338,787 |
Revenue remaining performance obligation, percentage | 54.00% | 56.00% |
1-2 years | ||
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | $ 207,214 | $ 129,185 |
Revenue remaining performance obligation, percentage | 25.00% | 21.00% |
2-3 years | ||
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | $ 119,382 | $ 83,976 |
Revenue remaining performance obligation, percentage | 14.00% | 14.00% |
Greater than 3 years | ||
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | $ 54,617 | $ 56,635 |
Revenue remaining performance obligation, percentage | 7.00% | 9.00% |
Perpetual license | ||
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | $ 10,408 | $ 9,848 |
Perpetual license | 1 year or less | ||
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | 8,708 | 7,689 |
Perpetual license | 1-2 years | ||
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | 1,700 | 853 |
Perpetual license | 2-3 years | ||
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | 0 | 1,306 |
Perpetual license | Greater than 3 years | ||
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | 0 | 0 |
Term license | ||
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | 63,185 | 30,422 |
Term license | 1 year or less | ||
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | 50,788 | 25,948 |
Term license | 1-2 years | ||
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | 5,341 | 3,798 |
Term license | 2-3 years | ||
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | 7,052 | 591 |
Term license | Greater than 3 years | ||
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | 4 | 85 |
Maintenance | ||
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | 239,148 | 190,092 |
Maintenance | 1 year or less | ||
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | 170,643 | 158,220 |
Maintenance | 1-2 years | ||
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | 40,631 | 18,590 |
Maintenance | 2-3 years | ||
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | 18,277 | 8,323 |
Maintenance | Greater than 3 years | ||
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | 9,597 | 4,959 |
Pega Cloud | ||
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | 506,807 | 363,372 |
Pega Cloud | 1 year or less | ||
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | 211,661 | 133,785 |
Pega Cloud | 1-2 years | ||
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | 157,500 | 105,081 |
Pega Cloud | 2-3 years | ||
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | 93,283 | 72,915 |
Pega Cloud | Greater than 3 years | ||
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | 44,363 | 51,591 |
Consulting | ||
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | 18,442 | 14,849 |
Consulting | 1 year or less | ||
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | 14,977 | 13,145 |
Consulting | 1-2 years | ||
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | 2,042 | 863 |
Consulting | 2-3 years | ||
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | 770 | 841 |
Consulting | Greater than 3 years | ||
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | $ 653 | $ 0 |
REVENUE - Performance Obligat_2
REVENUE - Performance Obligations - Expected Timing (Details) | Sep. 30, 2020 | Sep. 30, 2019 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-10-01 | ||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | ||
Expected timing of satisfaction | 3 months | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-01-01 | ||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | ||
Expected timing of satisfaction | 1 year | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-10-01 | ||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | ||
Expected timing of satisfaction | 3 months | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-01-01 | ||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | ||
Expected timing of satisfaction | 1 year | 2 years |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-01-01 | ||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | ||
Expected timing of satisfaction |
STOCK-BASED COMPENSATION - Summ
STOCK-BASED COMPENSATION - Summary of Stock-Based Compensation Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||||
Total stock-based compensation before tax | $ 27,925 | $ 21,846 | $ 76,755 | $ 60,242 |
Income tax benefit | (5,604) | (4,430) | (15,293) | (12,226) |
Cost of revenue | ||||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||||
Total stock-based compensation before tax | 5,100 | 4,787 | 15,636 | 14,216 |
Selling and marketing | ||||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||||
Total stock-based compensation before tax | 12,658 | 8,317 | 33,968 | 24,055 |
Research and development | ||||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||||
Total stock-based compensation before tax | 5,765 | 4,858 | 17,066 | 13,990 |
General and administrative | ||||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||||
Total stock-based compensation before tax | $ 4,402 | $ 3,884 | $ 10,085 | $ 7,981 |
STOCK-BASED COMPENSATION - Addi
STOCK-BASED COMPENSATION - Additional Information (Details) $ in Millions | 9 Months Ended |
Sep. 30, 2020USD ($) | |
Share-based Payment Arrangement [Abstract] | |
Unrecognized stock-based compensation expense | $ 115 |
Weighted-average period of recognition of unrecognized stock-based compensation expense (in years) | 2 years 2 months 12 days |
STOCK-BASED COMPENSATION - Su_2
STOCK-BASED COMPENSATION - Summary of Stock-Based Compensation Awards Granted (Details) - Employees $ in Thousands | 9 Months Ended |
Sep. 30, 2020USD ($)shares | |
RSUs | |
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | |
RSUs (in shares) | shares | 1,026,000 |
Total Fair Value | $ | $ 92,456 |
Non-qualified stock options | |
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | |
Options granted (in shares) | shares | 1,886,000 |
Total Fair Value | $ | $ 44,505 |
Common Stock | |
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | |
RSUs (in shares) | shares | 6,000 |
Total Fair Value | $ | $ 701 |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Income Tax Disclosure [Abstract] | ||||
(Benefit from) income taxes | $ (25,053) | $ (17,520) | $ (61,182) | $ (43,158) |
Effective income tax rate | 48.00% | 32.00% |
(LOSS) PER SHARE (Details)
(LOSS) PER SHARE (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | |||||||
Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Feb. 29, 2020 | |
Earning per share reconciliation | |||||||||
Net (loss) | $ (19,267) | $ (20,740) | $ (25,372) | $ (30,338) | $ (32,296) | $ (28,717) | $ (65,379) | $ (91,351) | |
Weighted-average common shares outstanding (in shares) | 80,537 | 79,200 | 80,191 | 78,928 | |||||
(Loss) per share, basic (in dollars per share) | $ (0.24) | $ (0.38) | $ (0.82) | $ (1.16) | |||||
Weighted-average common shares outstanding, assuming dilution (in shares) | 80,537 | 79,200 | 80,191 | 78,928 | |||||
(Loss) per share, diluted (in dollars per share) | $ (0.24) | $ (0.38) | $ (0.82) | $ (1.16) | |||||
Outstanding anti-dilutive stock options and RSUs (in shares) | 6,622 | 5,953 | 6,166 | 5,923 | |||||
Convertible debt | |||||||||
Earning per share reconciliation | |||||||||
Initial conversion price (in dollars per share) | $ 135.05 |