COVER PAGE
COVER PAGE - USD ($) $ in Billions | 12 Months Ended | ||
Dec. 31, 2022 | Feb. 06, 2023 | Jun. 30, 2022 | |
Cover [Abstract] | |||
Document Type | 10-K | ||
Document Annual Report | true | ||
Document Period End Date | Dec. 31, 2022 | ||
Current Fiscal Year End Date | --12-31 | ||
Document Transition Report | false | ||
Entity File Number | 1-11859 | ||
Entity Registrant Name | PEGASYSTEMS INC. | ||
Entity Incorporation, State or Country Code | MA | ||
Entity Tax Identification Number | 04-2787865 | ||
Entity Address, Address Line One | One Main Street | ||
Entity Address, City or Town | Cambridge | ||
Entity Address, State or Province | MA | ||
Entity Address, Postal Zip Code | 02142 | ||
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 Well-known Seasoned Issuer | Yes | ||
Entity Voluntary Filers | No | ||
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 | ||
ICFR Auditor Attestation Flag | true | ||
Entity Shell Company | false | ||
Entity Public Float | $ 2 | ||
Entity Common Stock, Shares Outstanding | 82,469,714 | ||
Documents Incorporated by Reference | Portions of the Registrant’s definitive proxy statement related to its 2023 annual meeting of stockholders to be filed subsequently are incorporated by reference into Part III of this report. | ||
Amendment Flag | false | ||
Document Fiscal Year Focus | 2022 | ||
Document Fiscal Period Focus | FY | ||
Entity Central Index Key | 0001013857 |
AUDIT INFORMATION
AUDIT INFORMATION | 12 Months Ended |
Dec. 31, 2022 | |
Audit Information [Abstract] | |
Auditor name | Deloitte & Touche LLP |
Auditor location | Boston, Massachusetts |
Auditor firm ID | 34 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
Current assets: | ||
Cash and cash equivalents | $ 145,054 | $ 159,965 |
Marketable securities | 152,167 | 202,814 |
Total cash, cash equivalents, and marketable securities | 297,221 | 362,779 |
Accounts receivable | 255,150 | 182,717 |
Unbilled receivables | 213,719 | 226,714 |
Other current assets | 80,388 | 68,008 |
Total current assets | 846,478 | 840,218 |
Unbilled receivables | 95,806 | 129,789 |
Goodwill | 81,399 | 81,923 |
Other long-term assets | 333,989 | 541,601 |
Total assets | 1,357,672 | 1,593,531 |
Current liabilities: | ||
Accounts payable | 18,195 | 15,281 |
Accrued expenses | 50,355 | 63,890 |
Accrued compensation and related expenses | 127,728 | 120,946 |
Deferred revenue | 325,212 | 275,844 |
Other current liabilities | 17,450 | 9,443 |
Total current liabilities | 538,940 | 485,404 |
Convertible senior notes, net | 593,609 | 590,722 |
Operating lease liabilities | 79,152 | 87,818 |
Other long-term liabilities | 15,128 | 13,499 |
Total liabilities | 1,226,829 | 1,177,443 |
Commitments and contingencies (Note 20) | ||
Stockholders’ equity: | ||
Preferred stock, $0.01 par value, 1,000 shares authorized; none issued | 0 | 0 |
Common stock, $0.01 par value, 200,000 shares authorized; 82,436 and 81,712 shares issued and outstanding as of December 31, 2022 and 2021, respectively | 824 | 817 |
Additional paid-in capital | 229,602 | 145,810 |
(Accumulated deficit) retained earnings | (76,513) | 276,449 |
Accumulated other comprehensive (loss) | ||
Net unrealized gain on available-for-sale securities, net of tax | 517 | 686 |
Foreign currency translation adjustments | (23,587) | (7,674) |
Total stockholders’ equity | 130,843 | 416,088 |
Total liabilities and stockholders’ equity | $ 1,357,672 | $ 1,593,531 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Dec. 31, 2022 | Dec. 31, 2021 |
Statement of Financial Position [Abstract] | ||
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized (in shares) | 1,000,000 | 1,000,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 200,000,000 | 200,000,000 |
Common stock, shares issued (in shares) | 82,436,000 | 81,712,000 |
Common stock, shares outstanding (in shares) | 82,436,000 | 81,712,000 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
Revenue | |||
Total revenue | $ 1,317,845 | $ 1,211,653 | $ 1,017,517 |
Cost of revenue | |||
Total cost of revenue | 368,635 | 336,363 | 310,913 |
Gross profit | 949,210 | 875,290 | 706,604 |
Operating expenses | |||
Selling and marketing | 624,789 | 625,886 | 545,693 |
Research and development | 294,349 | 260,630 | 236,986 |
General and administrative | 117,734 | 83,506 | 67,452 |
Restructuring | 21,743 | 0 | 0 |
Total operating expenses | 1,058,615 | 970,022 | 850,131 |
(Loss) from operations | (109,405) | (94,732) | (143,527) |
Foreign currency transaction gain (loss) | 4,560 | (6,459) | 3,704 |
Interest income | 1,643 | 704 | 1,223 |
Interest expense | (7,792) | (7,956) | (19,356) |
(Loss) gain on capped call transactions | (57,382) | (23,633) | 31,697 |
Other income, net | 6,579 | 89 | 1,370 |
(Loss) before provision for (benefit from) income taxes | (161,797) | (131,987) | (124,889) |
Provision for (benefit from) income taxes | 183,785 | (68,947) | (63,516) |
Net (loss) | $ (345,582) | $ (63,040) | $ (61,373) |
(Loss) per share | |||
Basic (in dollars per share) | $ (4.22) | $ (0.77) | $ (0.76) |
Diluted (in dollars per share) | $ (4.22) | $ (0.77) | $ (0.76) |
Weighted-average number of common shares outstanding | |||
Basic (in shares) | 81,947 | 81,387 | 80,336 |
Diluted (in shares) | 81,947 | 81,387 | 80,336 |
Subscription services | |||
Revenue | |||
Total revenue | $ 701,835 | $ 621,223 | $ 504,977 |
Cost of revenue | |||
Total cost of revenue | 138,736 | 120,446 | 98,886 |
Subscription license | |||
Revenue | |||
Total revenue | 366,063 | 336,248 | 266,352 |
Cost of revenue | |||
Total cost of revenue | 2,642 | 2,389 | 2,644 |
Perpetual license | |||
Revenue | |||
Total revenue | 19,293 | 32,172 | 28,558 |
Cost of revenue | |||
Total cost of revenue | 175 | 229 | 284 |
Consulting | |||
Revenue | |||
Total revenue | 230,654 | 222,010 | 217,630 |
Cost of revenue | |||
Total cost of revenue | $ 227,082 | $ 213,299 | $ 209,099 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
Statement of Comprehensive Income [Abstract] | |||
Net (loss) | $ (345,582) | $ (63,040) | $ (61,373) |
Other comprehensive (loss) income, net of tax | |||
Unrealized (loss) gain on available-for-sale securities | (169) | 640 | 46 |
Foreign currency translation adjustments | (15,913) | (4,680) | 10,234 |
Total other comprehensive (loss) income, net of tax | (16,082) | (4,040) | 10,280 |
Comprehensive (loss) | $ (361,664) | $ (67,080) | $ (51,093) |
CONSOLIDATED STATEMENTS OF STOC
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) shares in Thousands, $ in Thousands | Total | Cumulative Effect, Period of Adoption, Adjustment | Common Stock | Additional paid-in capital | Additional paid-in capital Cumulative Effect, Period of Adoption, Adjustment | Retained earnings (accumulated deficit) | Retained earnings (accumulated deficit) Cumulative Effect, Period of Adoption, Adjustment | Accumulated other comprehensive (loss) |
Balance, beginning of period (in shares) at Dec. 31, 2019 | 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] | ||||||||
Cumulative-effect adjustment from adoption of ASU 2020-06, net | Accounting Standards Update 2020-06 [Member] | |||||||
Equity component of convertible senior notes, net | $ 61,604 | 61,604 | ||||||
Repurchase of common stock (in shares) | (278) | |||||||
Repurchase of common stock | (28,274) | $ (3) | (28,271) | |||||
Issuance of common stock for stock compensation plans (in shares) | 1,536 | |||||||
Issuance of common stock for stock compensation plans | (75,562) | $ 16 | (75,578) | |||||
Issuance of common stock under the employee stock purchase plan (in shares) | 33 | |||||||
Issuance of common stock under the employee stock purchase plan | 3,039 | 3,039 | ||||||
Stock-based compensation | 103,115 | 103,115 | ||||||
Cash dividends declared | (9,667) | (9,667) | ||||||
Other comprehensive (loss) income | 10,280 | 10,280 | ||||||
Net (loss) | (61,373) | (61,373) | ||||||
Balance, end of period (in shares) at Dec. 31, 2020 | 80,890 | |||||||
Balance, end of period at Dec. 31, 2020 | 542,172 | $ (52,205) | $ 809 | 204,432 | $ (61,604) | 339,879 | $ 9,399 | (2,948) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Repurchase of common stock (in shares) | (432) | |||||||
Repurchase of common stock | (53,610) | $ (5) | (53,605) | |||||
Issuance of common stock for stock compensation plans (in shares) | 1,153 | |||||||
Issuance of common stock for stock compensation plans | (69,925) | $ 12 | (69,937) | |||||
Issuance of common stock under the employee stock purchase plan (in shares) | 101 | |||||||
Issuance of common stock under the employee stock purchase plan | 10,554 | $ 1 | 10,553 | |||||
Stock-based compensation | 115,971 | 115,971 | ||||||
Cash dividends declared | (9,789) | (9,789) | ||||||
Other comprehensive (loss) income | (4,040) | (4,040) | ||||||
Net (loss) | $ (63,040) | (63,040) | ||||||
Balance, end of period (in shares) at Dec. 31, 2021 | 81,712 | 81,712 | ||||||
Balance, end of period at Dec. 31, 2021 | $ 416,088 | $ 817 | 145,810 | 276,449 | (6,988) | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Repurchase of common stock (in shares) | (280) | |||||||
Repurchase of common stock | (24,508) | $ (2) | (24,506) | |||||
Issuance of common stock for stock compensation plans (in shares) | 754 | |||||||
Issuance of common stock for stock compensation plans | (20,620) | $ 7 | (20,627) | |||||
Issuance of common stock under the employee stock purchase plan (in shares) | 250 | |||||||
Issuance of common stock under the employee stock purchase plan | 9,172 | $ 2 | 9,170 | |||||
Stock-based compensation | 122,229 | 122,229 | ||||||
Cash dividends declared | (9,854) | (2,474) | (7,380) | |||||
Other comprehensive (loss) income | (16,082) | (16,082) | ||||||
Net (loss) | $ (345,582) | (345,582) | ||||||
Balance, end of period (in shares) at Dec. 31, 2022 | 82,436 | 82,436 | ||||||
Balance, end of period at Dec. 31, 2022 | $ 130,843 | $ 824 | $ 229,602 | $ (76,513) | $ (23,070) |
CONSOLIDATED STATEMENTS OF ST_2
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Parenthetical) - $ / shares | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
Statement of Stockholders' Equity [Abstract] | |||
Cash dividend declared (in dollars per share) | $ 0.12 | $ 0.12 | $ 0.12 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
Operating activities | |||
Net (loss) | $ (345,582) | $ (63,040) | $ (61,373) |
Adjustments to reconcile net (loss) to cash provided by (used in) operating activities | |||
Stock-based compensation | 122,210 | 115,947 | 103,068 |
Deferred income taxes | 168,890 | (75,336) | (59,777) |
Loss (gain) on capped call transactions | 57,382 | 23,633 | (31,697) |
Amortization of deferred commissions | 53,471 | 41,387 | 33,302 |
Lease expense | 15,940 | 13,277 | 16,248 |
Amortization of intangible assets and depreciation | 18,780 | 28,593 | 21,348 |
Foreign currency transaction (gain) loss | (4,560) | 6,459 | (3,704) |
Other | 157 | 7,730 | 15,007 |
Change in operating assets and liabilities: | |||
Accounts receivable, unbilled receivables, and contract assets | (51,157) | (11,957) | (32,321) |
Other current assets | (9,133) | 17,209 | (12,959) |
Other current liabilities | 529 | (18,726) | 37,945 |
Deferred revenue | 62,578 | 41,279 | 43,661 |
Deferred commissions | (53,857) | (71,451) | (55,175) |
Other long-term assets and liabilities | (13,312) | (15,886) | (14,136) |
Cash provided by (used in) operating activities | 22,336 | 39,118 | (563) |
Investing activities | |||
Purchases of investments | (41,015) | (79,121) | (326,549) |
Proceeds from maturities and called investments | 66,583 | 105,977 | 28,811 |
Sales of investments | 23,808 | 61,096 | 1,424 |
Payments for acquisitions, net of cash acquired | (922) | (4,993) | 0 |
Investment in property and equipment | (35,379) | (10,456) | (25,369) |
Cash provided by (used in) investing activities | 13,075 | 72,503 | (321,683) |
Financing activities | |||
Proceeds from issuance of convertible senior notes | 0 | 0 | 600,000 |
Purchase of capped calls related to convertible senior notes | 0 | 0 | (51,900) |
Payment of debt issuance costs | 0 | 0 | (14,527) |
Proceeds from employee stock purchase plan | 9,172 | 10,554 | 3,039 |
Dividend payments to stockholders | (9,834) | (9,761) | (9,628) |
Common stock repurchases for tax withholdings for net settlement of equity awards | (20,620) | (69,925) | (75,562) |
Common stock repurchases under stock repurchase program | (25,707) | (52,711) | (27,974) |
Cash (used in) provided by financing activities | (46,989) | (121,843) | 423,448 |
Effect of exchange rate changes on cash and cash equivalents | (3,333) | (1,712) | 2,334 |
Net (decrease) increase in cash and cash equivalents | (14,911) | (11,934) | 103,536 |
Cash and cash equivalents | 145,054 | 159,965 | |
Cash and cash equivalents, beginning of period | 159,965 | 171,899 | 68,363 |
Cash and cash equivalents, end of period | 145,054 | 159,965 | 171,899 |
Supplemental disclosures | |||
Interest paid on convertible notes | 4,500 | 4,500 | 2,338 |
Income taxes paid (refunded) | 7,645 | (4,552) | 3,377 |
Non-cash investing and financing activity: | |||
Investment in property and equipment included in accounts payable and accrued liabilities | 9,914 | 2,143 | 825 |
Dividends payable | $ 2,474 | $ 2,454 | $ 2,428 |
BASIS OF PRESENTATION
BASIS OF PRESENTATION | 12 Months Ended |
Dec. 31, 2022 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
BASIS OF PRESENTATION | 1. BASIS OF PRESENTATION Business The Company develops, markets, licenses, hosts, and supports enterprise software that helps organizations build agility into their business. The Company’s low-code platform for workflow automation and artificial intelligence-powered decisioning enables clients to personalize customer experiences, streamline customer service, and automate business processes and workflows. The Company provides consulting, training, support, and hosting services to facilitate the use of its software. Management estimates and reporting The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S.”) requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. Actual results could differ from those estimates. Accounts with reported amounts based on significant estimates and judgments include, but are not limited to, revenue, unbilled receivables, deferred revenue, deferred income taxes, deferred commissions, income taxes payable, convertible senior notes, capped call transactions, intangible assets, and goodwill. Principles of consolidation The Company’s consolidated financial statements reflect Pegasystems Inc. and subsidiaries in which the Company holds a controlling financial interest. All intercompany accounts and transactions were eliminated in consolidation. Reclassifications Certain prior period amounts reported in our consolidated financial statements and notes thereto have been reclassified to conform to the current year presentation. Such reclassifications did not affect total revenues, (loss) from operations, or net (loss). |
SIGNIFICANT ACCOUNTING POLICIES
SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2022 | |
Accounting Policies [Abstract] | |
SIGNIFICANT ACCOUNTING POLICIES | 2. SIGNIFICANT ACCOUNTING POLICIES Revenue The Company’s revenue is primarily derived from: • Subscription services, composed of revenue from Pega Cloud and maintenance. Pega Cloud is the Company’s hosted Pega Platform and software applications. Maintenance revenue is earned from providing client support, software upgrades, and bug fixes or patches. • Subscription license, composed of revenue from term license arrangements for the Company’s Pega Platform and software applications. Term licenses represent functional intellectual property and are delivered separately from maintenance and services. • Perpetual license, composed of revenue from perpetual license arrangements for the Company’s Pega Platform and software applications. Perpetual licenses represent functional intellectual property and are delivered separately from maintenance and services. • Consulting, primarily related to new software license implementations, training, and reimbursable costs. Performance obligations The Company’s software license and Pega Cloud arrangements often contain multiple performance obligations. If a contract contains multiple performance obligations, the Company accounts for each distinct performance obligation separately. The transaction price is allocated to the separate performance obligations on a relative stand-alone selling price basis. Any discounts or expected potential future price concessions are considered when determining the total transaction price. The Company’s policy is to exclude sales and similar taxes collected from clients from the determination of transaction price. The Company’s typical performance obligations are: Performance obligation How stand-alone selling price is typically determined When performance obligation is typically satisfied When payment is typically due Income statement line item Perpetual license Residual approach Upon transfer of control to the client, defined as when the client can use and benefit from the license (point in time) Effective date of the license Perpetual license Term license Residual approach Upon transfer of control to the client, defined as when the client can use and benefit from the license (point in time) Annually, or more frequently, over the term of the license Subscription license Maintenance Consistent pricing relationship as a percentage of the related license and observable in stand-alone renewal transactions (1) Ratably over the term of the maintenance (over time) Annually, or more frequently, over the term of the maintenance Subscription services Pega Cloud Residual approach Ratably over the term of the service (over time) Annually, or more frequently, over the term of the service Subscription services Consulting Observable hourly rate for time and materials-based services in similar geographies Based on hours incurred to date (over time) Monthly Consulting Consulting Observable hourly rate for time and materials-based services in similar geographies multiplied by estimated hours for the project Based on hours incurred as a percentage of total estimated hours (over time) As contract milestones are achieved Consulting (1) Technical support and software updates are considered distinct services but accounted for as a single performance obligation, as they have the same pattern of transfer to the client. The Company utilizes the residual approach for software license and Pega Cloud performance obligations since the selling price is highly variable and the stand-alone selling price is not discernible from past transactions or other observable evidence. Periodically, the Company reevaluates whether the residual approach remains appropriate. As required, the Company evaluates its residual approach estimate compared to all available observable data before concluding the estimate represents its stand-alone selling price. If the contract grants the client the option to acquire additional products or services, the Company assesses whether the option represents a material right to the client that the client would not receive without entering into that contract. Discounts on options to purchase additional products and services greater than discounts available to similar clients are accounted for as an additional performance obligation. During most of each client contract term, the amount invoiced is generally less than the amount of revenue recognized to date, primarily because we transfer control of the performance obligation related to the software license at the inception of the contract term. A significant portion of the total contract consideration is typically allocated to the license performance obligation. Therefore, the Company’s contracts often result in the recording of unbilled receivables and contract assets throughout most of the contract term. The Company records an unbilled receivable or contract asset when revenue recognized on a contract exceeds the billings. The Company recognizes an impairment on receivables and contract assets if, after contract inception, it becomes probable that payment is not collectible. The Company reviews receivables and contract assets on an individual basis for impairment. Variable consideration The Company’s arrangements can include variable fees, such as the option to purchase additional usage of a previously delivered software license. The Company may also provide pricing concessions to clients, a business practice that gives rise to variable fees. For variable fees arising from the client’s acquisition of additional usage of a previously delivered software license, the Company applies the sales and usage-based royalties guidance related to a license of intellectual property and recognizes the revenue in the period the underlying sale or usage occurs. The Company includes variable fees in the determination of total transaction price if it is not probable that a significant future reversal of revenue will occur. The Company uses the expected value or most likely value amount, whichever is more appropriate for specific circumstances, to estimate variable consideration, and the estimates are based on the level of historical price concessions offered to clients. The variable consideration related to pricing concessions and other forms of variable consideration, including usage-based fees, have not been material to the Company’s consolidated financial statements. Significant financing components The Company generally does not intend to provide financing to its clients, as financing arrangements are not contemplated as part of the negotiated terms of contracts between the Company and its clients. Although there may be an intervening period between the delivery of the license and the payment, typically in term license arrangements, the purpose of that timing difference is to align the client’s payment with the timing of the use of the software license or service. In certain circumstances, however, there are instances where revenue recognition timing differs from the timing of payment due to extended payment terms or fees that are non-proportional to the associated usage of software licenses. In these instances, the Company evaluates whether a significant financing component exists. This evaluation includes determining the difference between the consideration the client would have paid when the performance obligation was satisfied and the amount of consideration paid. Contracts that include a significant financing component are adjusted for the time value of money at the rate inherent in the contract, the client’s borrowing rate, or the Company’s incremental borrowing rate, depending upon the recipient of the financing. During 2022, 2021, and 2020, significant financing components were not material. Contract modifications The Company assesses contract modifications to determine: • if the additional products and services are distinct from the products and services in the original arrangement; and • if the amount of consideration expected for the added products and services reflects the stand-alone selling price of those products and services. A contract modification meeting both criteria is accounted for as a separate contract. If a contract modification does not meet both criteria, it is accounted for as either: • a prospective basis as a termination of the existing contract and the creation of a new contract; or • a cumulative catch-up basis. Deferred commissions The Company recognizes an asset for the incremental costs of obtaining a client contract, primarily related to sales commissions. The Company expects to benefit from those costs for more than one year, as the Company primarily pays sales commissions on the initial contract. As a result, there are no commensurate commissions paid on contract renewals. Deferred commissions are allocated to each performance obligation within the contract and amortized according to the transfer of underlying goods and services within those contracts and expected renewals. The expected benefit period is determined based on the length of the client contracts, client attrition rates, the underlying technology lifecycle, and the competitive marketplace’s influence on the products and services sold. Deferred costs allocated to maintenance and deferred costs for Pega Cloud arrangements are amortized over an average expected benefit period of 4.5 years. Deferred costs allocated to software licenses, and any expected renewals of term software licenses within the 4.5 years expected benefit period, are amortized at the point in time control of the software license is transferred. Deferred costs allocated to consulting are amortized over a period consistent with the pattern of transfer of control for the related services. Financial instruments The principal financial instruments held by the Company consist of cash equivalents, marketable securities, receivables, capped call transactions, and accounts payable. The Company considers debt securities readily convertible to known amounts of cash with maturities of three months or less from the purchase date to be cash equivalents. Interest is recorded when earned. The Company’s investments are classified as available-for-sale and are carried at fair value. Unrealized gains and losses considered temporary are recorded as a component of accumulated other comprehensive (loss), net of related income taxes. The Company reviews all investments for reductions in fair value that are other-than-temporary. When such reductions occur, the investment cost is adjusted to fair value by recording a loss on investments in the consolidated statements of operations. Gains and losses on investments are calculated based on the specific investment. See "Note 4. Receivables, Contract Assets, And Deferred Revenue", "Note 12. Debt", and "Note 14. Fair Value Measurements" for additional information. Property and equipment Property and equipment are recorded at cost. Depreciation and amortization are computed using the straight-line method over the estimated useful life of each asset, which are three years for computer equipment and five years for furniture and fixtures. Leasehold improvements are amortized over the lesser of the lease’s term or the useful life of the asset. Repairs and maintenance costs are expensed as incurred. Leases All of the Company’s leases are operating leases, primarily composed of office space leases. The Company accounts for a contract as a lease when it has the right to control the asset for a period of time while obtaining substantially all of the asset’s economic benefits. The Company determines the initial classification and measurement of its operating right of use assets and lease liabilities at the lease commencement date and thereafter if modified. Fixed lease costs are recognized on a straight-line basis over the lease term. Variable lease costs are recognized in the period in which the obligation for those payments is incurred. The Company combines lease and non-lease components when determining lease costs for its office space leases. The lease liability includes lease payments related to options to extend or renew the lease term if the Company is reasonably certain it will exercise those options. The Company’s leases do not contain material residual value guarantees or restrictive covenants. Loss contingencies and legal costs The Company accrues loss contingencies when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Significant judgments are required to determine the probability and the range of the outcomes, and the estimates are based only on the information available to us at the time. Due to the inherent uncertainties involved in claims, legal proceedings, and in estimating the losses that may arise, actual outcomes may differ from the Company’s estimates. Contingencies deemed not probable or for which losses were not estimable in one period may become probable, or losses may become estimable in later periods which may have a material impact on the Company’s results of operations and financial position. As additional information becomes available, the Company reassesses the potential liability from pending claims and litigation and may revise its estimates. Regardless of the outcome, legal disputes can have a material effect on the Company because of defense and settlement costs, diversion of management resources and other factors. Legal costs are expensed as incurred. Internal-use software The Company capitalizes and amortizes certain direct costs associated with computer software developed or purchased for internal use incurred during the application development stage. Costs related to preliminary project activities and post-implementation activities are expensed as incurred. The Company amortizes capitalized software costs generally over three Goodwill Goodwill represents the residual purchase price paid in a business combination after the fair value of all identified assets and liabilities have been recorded. Goodwill is not amortized. The Company has a single reporting unit. The Company performed a qualitative assessment as of November 30, 2022, 2021, and 2020, and concluded that there was no impairment since it was not more-likely-than-not that the fair value of its reporting unit was less than its carrying value. Intangible and long-lived assets The Company’s intangible assets are amortized using the straight-line method over their estimated useful life. The Company evaluates its long-lived tangible and intangible assets for impairment whenever events or changes in circumstances indicate that such assets’ carrying amount may not be recoverable. Impairment is assessed by comparing the undiscounted cash flows expected to be generated by the long-lived tangible or intangible assets to their carrying value. If impairment exists, the Company calculates the impairment by comparing the carrying value to its fair value as determined by discounted expected cash flows. Cash equivalents Cash equivalents include money market funds and other investments with original maturities of three months or less. Business combinations The Company uses its estimates and assumptions to assign a fair value to the tangible and intangible assets acquired and liabilities assumed at the acquisition date. The Company’s estimates are inherently uncertain and subject to refinement. During the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the fair value of these tangible and intangible assets acquired and liabilities assumed, with the corresponding offset to goodwill. In addition, uncertain tax positions and tax-related valuation allowances are initially established in connection with a business combination as of the acquisition date. The Company reevaluates these estimates and assumptions quarterly as new information arises and records any adjustments to the Company’s preliminary estimates to goodwill provided that the Company is within the measurement period. Upon the conclusion of the measurement period or final determination of the fair value of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the Company’s consolidated statements of operations. Research and development and software development costs Research and development costs are expensed as incurred. Capitalization of computer software developed for resale begins upon the establishment of technological feasibility, generally demonstrated by a working model or an operative version of the computer software product. Such costs have not been material to date, as technological feasibility is established within a short time frame from the software’s general availability. As a result, no costs were capitalized in 2022, 2021, or 2020. Stock-based compensation The Company recognizes stock-based compensation expense associated with equity awards based on the award’s fair value at the grant date. Stock-based compensation is recognized over the requisite service period, which is generally the vesting period of the equity award and is adjusted each period for anticipated forfeitures. See "Note 16. Stock-Based Compensation" for a discussion of the Company’s key assumptions when determining the fair value of its equity awards at the grant date. Foreign currency translation and remeasurement The translation of assets and liabilities for the Company’s subsidiaries with functional currencies other than the U.S. dollar are made at period-end exchange rates. Revenue and expense accounts are translated at the average exchange rates during the period transactions occur. The resulting translation adjustments are reflected in accumulated other comprehensive (loss). Realized and unrealized exchange gains or losses from transactions and remeasurement adjustments are reflected in foreign currency transaction gain (loss) in the accompanying consolidated statements of operations. Accounting for income taxes The Company uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on temporary differences between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The Company regularly assesses the need for a valuation allowance against its deferred tax assets. Future realization of the Company’s deferred tax assets ultimately depends on sufficient taxable income within the available carryback or carryforward periods. Taxable income sources include taxable income in prior carryback years, future reversals of existing taxable temporary differences, the Company’s firm contractual backlog, tax planning strategies, and projected future taxable income. The Company records a valuation allowance to reduce its deferred tax assets to an amount it believes is more-likely-than-not to be realized. Changes in the valuation allowance impact income tax expense in the period of adjustment. The Company recognizes excess tax benefits when realized, as a reduction of the provision for income taxes. The Company assesses its income tax positions and records tax benefits based on management’s evaluation of the facts, circumstances, and information available at the reporting date. For those tax positions where it is more-likely-than-not that a tax benefit will be sustained, the Company records the largest amount of tax benefit with a greater than 50 percent likelihood of being realized upon ultimate settlement with a taxing authority having full knowledge of all relevant information. For those income tax positions where it is not more-likely-than-not that a tax benefit will be sustained, no tax benefit is recognized in the financial statements. The Company classifies liabilities for uncertain tax positions as non-current liabilities unless the uncertainty is expected to be resolved within one year. The Company classifies interest and penalties on uncertain tax positions as income tax expense. As a global company, significant judgment must be used to calculate and provide for income taxes in each of the tax jurisdictions in which it operates. In the ordinary course of the Company’s business, there are transactions and calculations undertaken whose ultimate tax outcome cannot be certain. Some of these uncertainties arise because of transfer pricing for transactions with the Company’s subsidiaries and nexus and tax credit estimates. In addition, the calculation of acquired tax attributes and the associated limitations are complex. For additional information, see "Note 18. Income Taxes". Advertising expense Advertising costs are expensed as incurred. Advertising expenses were $6.6 million, $11.8 million, and $8.7 million during 2022, 2021, and 2020, respectively. |
MARKETABLE SECURITIES
MARKETABLE SECURITIES | 12 Months Ended |
Dec. 31, 2022 | |
Investments, Debt and Equity Securities [Abstract] | |
MARKETABLE SECURITIES | 3. MARKETABLE SECURITIES December 31, 2022 December 31, 2021 (in thousands) Amortized Cost Unrealized Gains Unrealized Losses Fair Value Amortized Cost Unrealized Gains Unrealized Losses Fair Value Government debt $ 2,960 $ — $ (52) $ 2,908 $ 2,000 $ — $ (10) $ 1,990 Corporate debt 151,906 — (2,647) 149,259 201,659 2 (837) 200,824 $ 154,866 $ — $ (2,699) $ 152,167 $ 203,659 $ 2 $ (847) $ 202,814 As of December 31, 2022, marketable securities’ maturities ranged from January 2023 to November 2024, with a weighted-average remaining maturity of 0.5 years. |
RECEIVABLES, CONTRACT ASSETS, A
RECEIVABLES, CONTRACT ASSETS, AND DEFERRED REVENUE | 12 Months Ended |
Dec. 31, 2022 | |
Receivables [Abstract] | |
RECEIVABLES, CONTRACT ASSETS, AND DEFERRED REVENUE | 4. RECEIVABLES, CONTRACT ASSETS, AND DEFERRED REVENUE Receivables (in thousands) December 31, 2022 December 31, 2021 Accounts receivable $ 255,150 $ 182,717 Unbilled receivables 213,719 226,714 Long-term unbilled receivables 95,806 129,789 $ 564,675 $ 539,220 Unbilled receivables Unbilled receivables are client-committed amounts for which revenue recognition precedes billing, and billing is solely subject to the passage of time. Unbilled receivables by expected billing date: (Dollars in thousands) December 31, 2022 1 year or less $ 213,719 69 % 1-2 years 81,280 26 % 2-5 years 14,526 5 % $ 309,525 100 % Unbilled receivables by contract effective date: (Dollars in thousands) December 31, 2022 2022 $ 150,597 49 % 2021 109,024 35 % 2020 30,763 10 % 2019 11,621 4 % 2018 and prior 7,520 2 % $ 309,525 100 % Major clients Clients that represented 10% or more of the Company’s total accounts receivable and unbilled receivables: December 31, 2022 December 31, 2021 Client A Accounts receivable * 1 % Unbilled receivables * 15 % Total receivables * 10 % * Client accounted for less than 10% of receivables. Contract assets Contract assets are client-committed amounts for which revenue recognized exceeds the amount billed to the client, and billing is subject to conditions other than the passage of time, such as the completion of a related performance obligation. (in thousands) December 31, 2022 December 31, 2021 Contract assets (1) $ 17,546 $ 12,530 Long-term contract assets (2) 16,470 10,643 $ 34,016 $ 23,173 (1) Included in other current assets. (2) Included in other long-term assets. Deferred revenue Deferred revenue consists of billings and payments received in advance of revenue recognition. (in thousands) December 31, 2022 December 31, 2021 Deferred revenue $ 325,212 $ 275,844 Long-term deferred revenue (1) 3,552 5,655 $ 328,764 $ 281,499 (1) Included in other long-term liabilities. The change in deferred revenue in 2022 was primarily due to new billings in advance of revenue recognition and $276.7 million of revenue recognized during the period included in deferred revenue as of December 31, 2021. |
DEFERRED COMMISSIONS
DEFERRED COMMISSIONS | 12 Months Ended |
Dec. 31, 2022 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
DEFERRED COMMISSIONS | 5. DEFERRED COMMISSIONS December 31, (in thousands) 2022 2021 Deferred commissions (1) $ 130,195 $ 135,911 (1) Included in other long-term assets. (in thousands) 2022 2021 2020 Amortization of deferred commissions (1) $ 53,471 $ 41,387 $ 33,302 (1) Included in selling and marketing expenses. |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 12 Months Ended |
Dec. 31, 2022 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY AND EQUIPMENT | 6. PROPERTY AND EQUIPMENT (1) (in thousands) December 31, 2022 2021 Leasehold improvements $ 35,049 $ 31,203 Computer equipment 27,292 26,115 Furniture and fixtures 5,993 5,565 Computer software purchased 9,724 8,566 Computer software developed for internal use 19,869 19,463 Fixed assets in progress 37,342 4,262 135,269 95,174 Less: accumulated depreciation (80,213) (68,337) $ 55,056 $ 26,837 (1) Included in other long-term assets. (in thousands) 2022 2021 2020 Depreciation expense $ 14,687 $ 24,606 $ 17,378 |
GOODWILL AND OTHER INTANGIBLE A
GOODWILL AND OTHER INTANGIBLE ASSETS | 12 Months Ended |
Dec. 31, 2022 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
GOODWILL AND OTHER INTANGIBLE ASSETS | 7. GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill (in thousands) 2022 2021 January 1, $ 81,923 $ 79,231 Acquisition — 2,701 Currency translation adjustments (524) (9) December 31, $ 81,399 $ 81,923 Intangibles Intangible assets are recorded at cost and amortized using the straight-line method over their estimated useful lives: December 31, 2022 (in thousands) Useful Lives Cost Accumulated Amortization Net Book Value (1) Client-related 4-10 years $ 63,076 $ (58,623) $ 4,453 Technology 2-10 years 68,056 (61,621) 6,435 Other 1-5 years 5,361 (5,361) — $ 136,493 $ (125,605) $ 10,888 (1) Included in other long-term assets. December 31, 2021 (in thousands) Useful Lives Cost Accumulated Amortization Net Book Value (1) Client-related 4-10 years $ 63,165 $ (57,342) $ 5,823 Technology 2-10 years 67,142 (58,902) 8,240 Other 1-5 years 5,361 (5,361) — $ 135,668 $ (121,605) $ 14,063 (1) Included in other long-term assets. Amortization of intangible assets was: (in thousands) 2022 2021 2020 Cost of revenue $ 2,723 $ 2,516 $ 2,487 Selling and marketing 1,370 1,471 1,483 $ 4,093 $ 3,987 $ 3,970 Future estimated intangible assets amortization: (in thousands) December 31, 2022 2023 $ 3,924 2024 3,153 2025 2,610 2026 874 2027 327 $ 10,888 |
SEGMENT INFORMATION
SEGMENT INFORMATION | 12 Months Ended |
Dec. 31, 2022 | |
Segment Reporting [Abstract] | |
SEGMENT INFORMATION | 8. SEGMENT INFORMATION Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision-maker (“CODM”) in deciding how to allocate resources and assess performance. The Company derives substantially all of its revenue from the sale and support of one group of similar products and services – software that provides case management, business process management, and real-time decisioning solutions to improve customer engagement and operational excellence in the enterprise applications market. To assess performance, the Company’s CODM, the Chief Executive Officer, reviews financial information on a consolidated basis. Therefore, the Company determined it has one operating segment and one reporting unit. Long-lived assets related to the Company’s U.S. and international operations were: (Dollars in thousands) December 31, 2022 December 31, 2021 U.S. $ 50,445 92 % $ 20,548 77 % International 4,611 8 % 6,289 23 % $ 55,056 100 % $ 26,837 100 % |
OTHER ASSETS AND LIABILITIES
OTHER ASSETS AND LIABILITIES | 12 Months Ended |
Dec. 31, 2022 | |
Other Assets and Liabilities [Abstract] | |
OTHER ASSETS AND LIABILITIES | 9. OTHER ASSETS AND LIABILITIES Other current assets (in thousands) December 31, 2022 December 31, 2021 Income tax receivables $ 25,354 $ 25,691 Contract assets 17,546 12,530 Other 37,488 29,787 $ 80,388 $ 68,008 Other long-term assets (in thousands) December 31, 2022 December 31, 2021 Deferred income taxes $ 4,795 $ 180,656 Deferred commissions 130,195 135,911 Right of use assets 76,114 87,521 Capped call transactions 2,582 59,964 Property and equipment 55,056 26,837 Intangible assets 10,888 14,063 Contract assets 16,470 10,643 Other 37,889 26,006 $ 333,989 $ 541,601 Other current liabilities (in thousands) December 31, 2022 December 31, 2021 Operating lease liabilities $ 14,976 $ 6,989 Dividends payable 2,474 2,454 $ 17,450 $ 9,443 Other long-term liabilities (in thousands) December 31, 2022 December 31, 2021 Deferred revenue $ 3,552 $ 5,655 Other 11,576 7,844 $ 15,128 $ 13,499 |
RESTRUCTURING
RESTRUCTURING | 12 Months Ended |
Dec. 31, 2022 | |
Restructuring and Related Activities [Abstract] | |
RESTRUCTURING | 10. RESTRUCTURING During the fourth quarter of 2022, management committed to a restructuring plan aligned with the Company’s target organization go-to-market strategy and commitment to be a Rule of 40 managed company. The plan resulted in a restructuring expense of $21.7 million in 2022, primarily associated with severance and benefits for impacted employees and expenses incurred as a result of the closure of the Company’s Salem, New Hampshire office. As of December 31, 2022, the Company’s employee severance and related benefits restructuring accrual was $18.6 million and is included in accrued compensation and related expenses. |
LEASES
LEASES | 12 Months Ended |
Dec. 31, 2022 | |
Leases [Abstract] | |
LEASES | 11. LEASES Corporate headquarters In February 2021, the Company agreed to accelerate its exit from its previous corporate headquarters to October 1, 2021, in exchange for a one-time payment from its landlord of $18 million, which was amortized over the remaining lease term. The exit accelerated depreciation on the related leasehold improvements and reduced the Company’s future lease liabilities by $21.1 million and right of use assets by $20.3 million. On March 31, 2021, the Company leased office space at One Main Street, Cambridge, Massachusetts, to serve as its corporate headquarters. The 4.5 year lease includes a base rent of $2 million per year. Waltham office On July 6, 2021, the Company entered into an office space lease for 131 thousand square feet in Waltham, Massachusetts. The lease term of 11 years began on August 1, 2021. The annual rent equals the base rent plus a portion of building operating costs and real estate taxes. Rent first became payable on August 1, 2022. Base rent for the first year is approximately $6 million and will increase by 3% annually. In addition, the Company received an improvement allowance from the landlord of $11.8 million. This lease increased the Company’s lease liabilities and lease-related right of use assets by $42.1 million on August 1, 2021. Expense (in thousands) 2022 2021 2020 Fixed lease costs (1) $ 20,186 $ (1,694) $ 20,235 Short-term lease costs 3,356 2,244 1,669 Variable lease costs 3,894 4,480 4,470 $ 27,436 $ 5,030 $ 26,374 (1) The lower fixed lease costs in 2021 was due to the modification of the corporate headquarters lease. Right of use assets and lease liabilities (in thousands) December 31, 2022 December 31, 2021 Right of use assets (1) $ 76,114 $ 87,521 Operating lease liabilities (2) $ 14,976 $ 6,989 Long-term operating lease liabilities $ 79,152 $ 87,818 (1) Represents the Company’s right to use the leased asset during the lease term. Included in other long-term assets. (2) Included in other current liabilities. The weighted-average remaining lease term and discount rate for the Company’s leases were: December 31, 2022 December 31, 2021 Weighted-average remaining lease term 7.5 years 7.7 years Weighted-average discount rate (1) 4.1 % 4.4 % (1) The rates implicit in most of the Company’s leases are not readily determinable. Therefore, the Company uses its incremental borrowing rate as the discount rate when measuring operating lease liabilities. The incremental borrowing rate represents an estimate of the interest rate the Company would incur to borrow an amount equal to the lease payments on a collateralized basis over the lease term in a similar economic environment. Maturities of lease liabilities: (in thousands) December 31, 2022 2023 $ 18,476 2024 17,101 2025 14,444 2026 10,860 2027 9,814 Thereafter 39,265 Total lease payments 109,960 Less: imputed interest (1) (15,832) $ 94,128 (1) Lease liabilities are measured at the present value of the remaining lease payments using a discount rate determined at lease commencement unless the discount rate is updated due to a lease reassessment event. Cash flow information (1) (2) (in thousands) 2022 2021 Cash paid for operating leases, net of tenant improvement allowances $ 7,690 $ 18,428 Right of use assets recognized for new leases and amendments (non-cash) $ 4,733 $ 55,068 (1) In 2022 and 2021, the Company received tenant improvement allowances of $8.8 million and $3.0 million, respectively, as part of the lease of the Company’s new corporate headquarters in Waltham, Massachusetts. (2) In 2021, the Company received $18 million as a one-time payment for the Company’s accelerated exit from its then corporate headquarters in Cambridge, Massachusetts. This payment has been excluded from the above table. |
DEBT
DEBT | 12 Months Ended |
Dec. 31, 2022 | |
Debt Disclosure [Abstract] | |
DEBT | 12. 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 of $600 million, due March 1, 2025, in a private placement. No principal payments are due before maturity. 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. 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 $135.05 per share of common stock. The Company will settle conversions by paying or delivering 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 certain events, including spin-offs, tender offers, exchange offers, and certain stockholder distributions. Before September 1, 2024, noteholders may convert their Notes in the following circumstances: • During any calendar quarter beginning after June 30, 2020 (and only during such calendar quarter), if the last reported sale price per share of the Company’s common stock exceeds 130% of the conversion price for each of at least 20 trading days (whether or not consecutive) during the 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 certain corporate events or distributions or if the Company calls any Notes for redemption, noteholders may convert 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 in full on the redemption date, until the Company pays the redemption price). Beginning on September 1, 2024, noteholders may convert their Notes at any time at their election. As of December 31, 2022, the Notes were not eligible for conversion. 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” occur, each noteholder will have the right 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 a 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 mergers, changes in control of the Company, liquidation/dissolution of the Company, or the delisting of the Company’s common stock. Carrying value of the Notes: (in thousands) December 31, 2022 December 31, 2021 Principal $ 600,000 $ 600,000 Unamortized issuance costs (6,391) (9,278) Convertible senior notes, net $ 593,609 $ 590,722 Interest expense related to the Notes: (in thousands) 2022 2021 Contractual interest expense (0.75% coupon) $ 4,500 $ 4,500 Amortization of issuance costs 2,888 2,977 $ 7,388 $ 7,477 The effective interest rate for the Notes: 2022 2021 Weighted-average effective interest rate 1.2 % 1.3 % Future payments of principal and contractual interest: December 31, 2022 (in thousands) Principal Interest Total 2023 $ — $ 4,500 $ 4,500 2024 — 4,500 4,500 2025 600,000 2,250 602,250 $ 600,000 $ 11,250 $ 611,250 Capped call transactions In February 2020, the Company entered into privately negotiated capped call transactions (the “Capped Call Transactions”) with certain financial institutions. The Capped Call Transactions cover 4.4 million shares (representing the number of shares for which the Notes are initially convertible) of the Company’s common stock. The Capped Call Transactions are expected to reduce common stock dilution and/or offset any potential cash payments the Company must make, other than for principal and interest, upon conversion of the Notes, with such reduction and/or offset subject to a cap of $196.44. The cap price of the Capped Call Transactions is subject to adjustment upon specified extraordinary events affecting the Company, including mergers and tender offers. The Capped Call Transactions are accounted for as derivative instruments and 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 following 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 capped call transactions: (in thousands) 2022 2021 January 1, $ 59,964 $ 83,597 Fair value adjustment (57,382) (23,633) December 31, $ 2,582 $ 59,964 Credit facility In November 2019, and as since amended, the Company entered into a five-year $100 million senior secured revolving credit agreement (the “Credit Facility”) with PNC Bank, National Association. The Company may use borrowings for general corporate purposes and to finance working capital needs. 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 required to comply with financial covenants, including: • Beginning with the fiscal quarter that ended March 31, 2022 and ending with the fiscal quarter ended December 31, 2022, Pegasystems Inc. must maintain at least $200 million in cash, investments, and availability under the Revolving Credit Loan. • Beginning with the fiscal quarter ending March 31, 2023, a maximum net consolidated leverage ratio of 3.5 to 1.0 (with a step-up for certain acquisitions) and a minimum consolidated interest coverage ratio of 3.5 to 1.0. As of December 31, 2022 and December 31, 2021, the Company had no outstanding cash borrowings under the Credit Facility. As of December 31, 2022, the Company had $27.3 million in outstanding letters of credit which reduce the available borrowing capacity under the Credit Facility. |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 12 Months Ended |
Dec. 31, 2022 | |
Equity [Abstract] | |
STOCKHOLDERS' EQUITY | 13. STOCKHOLDERS’ EQUITY Preferred stock The Company has 1 million authorized shares of preferred stock, $0.01 par value per share, of which none were issued and outstanding as of December 31, 2022. The Board of Directors has the authority to issue the shares of preferred stock in one or more series, to establish the number of shares to be included in each series, and to determine the designation, powers, preferences, and rights of the shares of each series and the qualifications, limitations, or restrictions thereof, without any further vote or action by the stockholders. The issuance of preferred stock could decrease the earnings and assets available for distribution to holders of common stock and may have the effect of delaying, deferring, or defeating a change in control of the Company. The Company had not issued any shares of preferred stock through December 31, 2022. Common stock The Company has 200 million authorized shares of common stock, $0.01 par value per share, of which 82.4 million were issued and outstanding as of December 31, 2022. Dividends declared 2022 2021 2020 Dividends declared (per share) $ 0.12 $ 0.12 $ 0.12 Dividend payments to stockholders (in thousands) $ 9,834 $ 9,761 $ 9,628 The Company paid a quarterly cash dividend of $0.03 per share in 2022, 2021, and 2020. In the future, the Board of Directors may terminate or modify the dividend program without prior notice. Stock repurchases (in thousands) 2022 2021 2020 Shares Amount Shares Amount Shares Amount January 1, $ 22,583 $ 37,726 $ 45,484 Authorizations (1) 60,000 38,467 20,516 Repurchases (2) (280) (24,508) (432) (53,610) (278) (28,274) December 31, $ 58,075 $ 22,583 $ 37,726 (1) On June 2, 2022, the Company announced that the Board of Directors extended the current stock repurchase program’s expiration date to June 30, 2023 and increased the remaining stock repurchase authority to $60 million. (2) Purchases under this program have been made on the open market. |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 12 Months Ended |
Dec. 31, 2022 | |
Fair Value Disclosures [Abstract] | |
FAIR VALUE MEASUREMENTS | 14. FAIR VALUE MEASUREMENTS Assets and liabilities measured at fair value on a recurring basis The Company records its cash equivalents, marketable securities, 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 model uses various market-based inputs, including stock price, remaining contractual term, expected volatility, risk-free interest rate, and expected dividend yield. The Company applies judgment when determining expected volatility. The Company considers the underlying equity security’s historical and implied volatility levels. The Company’s venture investments are recorded at fair value based on multiple valuation methods, including observable public companies and transaction prices and 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: December 31, 2022 December 31, 2021 (in thousands) Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Cash equivalents $ 2,526 $ — $ — $ 2,526 $ 3,216 $ — $ — $ 3,216 Marketable securities $ — $ 152,167 $ — $ 152,167 $ — $ 202,814 $ — $ 202,814 Capped Call Transactions (1) (2) $ — $ 2,582 $ — $ 2,582 $ — $ 59,964 $ — $ 59,964 Venture investments (1) (3) $ — $ — $ 13,069 $ 13,069 $ — $ — $ 7,648 $ 7,648 (1) Included in other long-term assets (2) For additional information, see "Note 12. Debt". (3) Investments in privately held companies. Change in venture investments: (in thousands) 2022 2021 January 1, $ 7,648 $ 8,345 New investments 1,400 500 Sales of investments (4,020) (2,449) Changes in foreign exchange rates (450) (68) Changes in fair value: included in other income 5,989 100 included in other comprehensive income 2,502 1,220 December 31, $ 13,069 $ 7,648 The carrying value of certain other financial instruments, including receivables and accounts payable, approximates fair value due to these items’ relatively short maturity. Fair value of the Notes The Notes’ fair value (including the conversion feature embedded in the Notes) was $521.1 million as of December 31, 2022 and $642.0 million as of December 31, 2021. 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. For additional information, see "Note 12. Debt". Credit risk In addition to receivables, the Company is potentially subject to concentrations of credit risk from the Company’s cash, cash equivalents, and marketable securities. The Company’s cash and cash equivalents are generally held with large, diverse financial institutions worldwide to reduce the Company’s credit risk exposure. Investment policies have been implemented that limit purchases of marketable debt securities to investment-grade securities. |
REVENUE
REVENUE | 12 Months Ended |
Dec. 31, 2022 | |
Revenue from Contract with Customer [Abstract] | |
REVENUE | 15. REVENUE Geographic revenue (Dollars in thousands) 2022 2021 2020 U.S. $ 763,558 57 % $ 690,133 57 % $ 613,844 61 % Other Americas 102,980 8 % 61,339 5 % 49,441 5 % United Kingdom (“U.K.”) 115,793 9 % 117,580 10 % 91,517 9 % Europe (excluding U.K.), Middle East, and Africa 194,563 15 % 198,080 16 % 156,056 15 % Asia-Pacific 140,951 11 % 144,521 12 % 106,659 10 % $ 1,317,845 100 % $ 1,211,653 100 % $ 1,017,517 100 % Revenue streams (in thousands) 2022 2021 2020 Perpetual license $ 19,293 $ 32,172 $ 28,558 Subscription license 366,063 336,248 266,352 Revenue recognized at a point in time 385,356 368,420 294,910 Maintenance 317,564 320,257 296,709 Pega Cloud 384,271 300,966 208,268 Consulting 230,654 222,010 217,630 Revenue recognized over time 932,489 843,233 722,607 $ 1,317,845 $ 1,211,653 $ 1,017,517 (in thousands) 2022 2021 2020 Pega Cloud $ 384,271 $ 300,966 $ 208,268 Maintenance 317,564 320,257 296,709 Subscription services 701,835 621,223 504,977 Subscription license 366,063 336,248 266,352 Subscription 1,067,898 957,471 771,329 Perpetual license 19,293 32,172 28,558 Consulting 230,654 222,010 217,630 $ 1,317,845 $ 1,211,653 $ 1,017,517 Remaining performance obligations ("Backlog") Expected future revenue from existing non-cancellable contracts: As of December 31, 2022: (Dollars in thousands) Subscription services Subscription license Perpetual license Consulting Total Maintenance Pega Cloud 1 year or less $ 242,073 $ 379,648 $ 60,668 $ 5,310 $ 32,374 $ 720,073 53 % 1-2 years 66,207 246,195 3,803 2,253 6,371 324,829 24 % 2-3 years 26,746 143,901 1,707 — 1,647 174,001 13 % Greater than 3 years 15,602 115,944 5,283 — — 136,829 10 % $ 350,628 $ 885,688 $ 71,461 $ 7,563 $ 40,392 $ 1,355,732 100 % As of December 31, 2021: (Dollars in thousands) Subscription services Subscription license Perpetual license Consulting Total Maintenance Pega Cloud 1 year or less $ 234,917 $ 330,426 $ 153,467 $ 10,952 $ 41,411 $ 771,173 58 % 1-2 years 65,502 220,231 14,968 4,505 8,917 314,123 23 % 2-3 years 38,432 124,969 1,955 2,252 5,512 173,120 13 % Greater than 3 years 28,157 55,937 1,765 — 619 86,478 6 % $ 367,008 $ 731,563 $ 172,155 $ 17,709 $ 56,459 $ 1,344,894 100 % |
STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION | 12 Months Ended |
Dec. 31, 2022 | |
Share-Based Payment Arrangement [Abstract] | |
STOCK-BASED COMPENSATION | 16. STOCK-BASED COMPENSATION (in thousands) 2022 2021 2020 Cost of revenue $ 26,400 $ 21,822 $ 20,796 Selling and marketing 46,769 54,182 46,283 Research and development 29,266 25,413 22,885 General and administrative 19,775 14,530 13,104 $ 122,210 $ 115,947 $ 103,068 Income tax benefit $ (1,881) $ (23,410) $ (20,464) The Company periodically grants employees stock options and restricted stock units (“RSUs”) and non-employee Directors common stock and stock options. Most of the Company’s stock-based compensation arrangements vest over five years, with 20% vesting after one year and 80% vesting in equal quarterly installments over the remaining four years. The Company’s stock options have a term of ten years. The Company recognizes stock-based compensation using the accelerated attribution method, treating each vesting tranche as an individual grant. The stock-based compensation expense recognized during a period is based on the value of the awards that are expected to vest. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Ultimately, the Company recognizes the actual expense over the vesting period only for the shares that vest. Employees may elect to receive 50% of the employee’s target incentive compensation under the Company’s Corporate Incentive Compensation Plan (the “CICP”) in the form of RSUs instead of cash. If elected by an employee, the equity amount is equal in value on the grant date to 50% of the employee’s target incentive opportunity, based on the employee’s base salary. The number of RSUs granted is determined by dividing 50% of the employee’s target incentive opportunity by 85% of the closing price of the Company’s common stock on the grant date, less the present value of expected dividends during the vesting period. If elected, the award vests 100% on the following year’s CICP payout date. Vesting is conditioned upon the performance conditions of the CICP and on continued employment; if threshold funding does not occur, the RSUs will not vest. The Company considers vesting probable on the grant date and recognizes the associated stock-based compensation expense over the requisite service period beginning on the grant date and ending on the vesting date. The Company grants awards that allow for the settlement of vested stock options and RSUs on a net share basis (“net settled awards”). With net settled awards, the employee does not surrender any cash or shares upon exercise. Instead, the Company withholds the number of shares to cover the exercise price (in the case of stock options) and the minimum statutory tax withholding obligations (in the case of stock options and RSUs) from the shares that would otherwise be issued upon exercise or settlement. The exercise of stock options and settlement of RSUs on a net share basis results in fewer shares being issued by the Company. Stock-based compensation plans 2004 Long-Term Incentive Plan (as amended and restated) In 2004, the Company adopted the 2004 Long-Term Incentive Plan (as amended and restated, the “2004 Plan”) to provide employees, non-employee Directors, and consultants with opportunities to purchase stock through incentive and non-qualified stock options. Subsequent amendments to the plan increased the number of shares authorized for issuance under the plan to 36 million, extended the term of the plan to 2030, and limited annual compensation to any non-employee Director to $0.5 million. As of December 31, 2022, 17.3 million shares were subject to outstanding options and stock-based awards under the 2004 Plan. 2006 Employee Stock Purchase Plan In 2006, the Company adopted the 2006 Employee Stock Purchase Plan (the “2006 ESPP”) under which employees may purchase up to an aggregate of one million shares of common stock, at a price equal to at least 85% of the fair market value of the Company’s common stock on the lesser of the commencement date or completion date for offerings under the plan, or such higher price as the Company’s Board of Directors may establish from time to time. In October 2012, the Company’s Board of Directors amended the 2006 ESPP to continue until no shares remain. Before January 1, 2021, the 2006 ESPP was non-compensatory as the Company’s Board of Directors set the purchase price at 95% of the fair market value on the completion date of the offering period. Commencing on January 1, 2021, the Company’s Board of Directors set the purchase price at 85% of the fair market value on the completion date of the offering period. (in thousands) 2022 Compensation expense from 2006 ESPP $ 1,614 As of December 31, 2022, 0.8 million shares had been issued under the plan. Shares issued and available for issuance In 2022, the Company issued 1.0 million shares to its employees and directors under the Company’s stock-based compensation plans. As of December 31, 2022, there were 1.4 million shares available for issuance for future equity grants under the Company’s stock plans, consisting of 1.2 million shares under the 2004 Plan and 0.2 million shares under the 2006 ESPP. Grant activity Stock options The Company estimates the fair value of stock options using a Black-Scholes option-pricing model. Key inputs used to estimate the fair value of stock options include the exercise price of the award, expected term of the option, expected volatility of the Company’s common stock over the option’s expected term, risk-free interest rate over the option’s expected term, and the Company’s expected annual dividend yield. The exercise price for stock options is greater than or equal to the shares’ fair market value at the grant date. The following table summarizes the Company’s fair value assumptions for stock options: 2022 2021 2020 Weighted-average grant-date fair value $ 17.49 $ 37.74 $ 24.16 Assumptions used in the Black-Scholes option-pricing model: Expected annual volatility (1) 42 % 35 % 31 % Expected term in years (2) 3.9 4.4 4.5 Risk-free interest rate (3) 3.4 % 0.6 % 0.7 % Expected annual dividend yield (4) 0.1 % 0.2 % 0.2 % (1) The expected annual volatility for each grant is determined based on the average of historic daily price changes of the Company’s common stock over a period, which approximates the expected option term. (2) The expected option term for each grant is determined based on the historical exercise behavior of employees and post-vesting employment termination behavior. (3) The risk-free interest rate is based on the yield of U.S. Treasury securities with a commensurate maturity with the expected option term at the time of grant. (4) The expected annual dividend yield is based on the weighted-average dividend yield assumptions used for options granted during the applicable period. The following table summarizes the combined stock option activity under the Company’s stock option plans for 2022: Shares Weighted-average Exercise Price Weighted-average Remaining Contractual Term (in years) Aggregate Intrinsic Value Options outstanding as of January 1, 2022 7,189 $ 74.94 Granted 9,725 50.35 Exercised (572) 25.17 Forfeited (1,153) 87.71 Expired (278) $ 82.83 Options outstanding as of December 31, 2022 14,911 $ 59.67 Vested and expected to vest as of December 31, 2022 12,449 $ 59.06 8.1 $ 9,476 Exercisable as of December 31, 2022 3,901 $ 64.76 5.3 $ 8,056 The aggregate intrinsic value of stock options exercised (i.e., the difference between the market price at exercise and the price paid by the employee at exercise) in 2022, 2021, and 2020 was $15.6 million, $94.3 million, and $126.8 million, respectively. The aggregate intrinsic value of stock options outstanding and exercisable as of December 31, 2022 is based on the difference between the closing price of the Company’s stock of $34.24 and the exercise price of the applicable stock options. As of December 31, 2022, the Company had unrecognized stock-based compensation expense related to the unvested portion of stock options of $101.6 million that is expected to be recognized as expense over a weighted-average period of 2.0 years. RSUs RSUs provide the recipient a right to receive a specified number of shares of the Company’s common stock upon vesting. The Company values its RSUs at the fair value of its common stock on the grant date, which is the closing price of its common stock on the grant date less the present value of expected dividends during the vesting period, as the recipient is not entitled to dividends during the requisite service period. The weighted-average grant-date fair value for RSUs granted in 2022, 2021, and 2020 was $74.50, $129.03, and $93.68, respectively. The following table summarizes the combined RSU activity for all grants, including the CICP, under the 2004 Plan for 2022: Shares Weighted- Average Grant-Date Aggregate Intrinsic Value Nonvested as of January 1, 2022 2,054 $ 99.36 Granted 1,571 74.50 Vested (795) 93.72 Forfeited (479) 95.13 Nonvested as of December 31, 2022 2,351 $ 85.52 $ 80,497 Expected to vest as of December 31, 2022 1,716 $ 85.17 $ 58,772 The fair value of RSUs vested in 2022, 2021, and 2020 was $50.3 million, $122.5 million, and $108.4 million, respectively. The aggregate intrinsic value of RSUs outstanding and expected to vest as of December 31, 2022 is based on the closing price of the Company’s stock of $34.24 as of December 31, 2022. As of December 31, 2022, the Company had $65.5 million of unrecognized stock-based compensation expense related to all unvested RSUs that is expected to be recognized as expense over a weighted-average period of 2.0 years. Common stock In 2022, the Company granted 0.01 million shares of common stock to Directors with a weighted-average grant-date fair value of $42.41 per share. |
EMPLOYEE BENEFIT PLANS
EMPLOYEE BENEFIT PLANS | 12 Months Ended |
Dec. 31, 2022 | |
Postemployment Benefits [Abstract] | |
EMPLOYEE BENEFIT PLANS | 17. EMPLOYEE BENEFIT PLANS The Company sponsors defined contribution plans for qualifying employees, including a 401(k) plan in the United States to which the Company makes discretionary matching contributions. Employee benefit plan expenses: (in thousands) 2022 2021 2020 U.S. 401(k) Plan $ 8,994 $ 8,879 $ 8,109 International plans 21,141 20,780 16,132 $ 30,135 $ 29,659 $ 24,241 |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Dec. 31, 2022 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | 18. INCOME TAXES The components of (loss) before provision for (benefit from) income taxes are: (in thousands) 2022 2021 2020 Domestic $ (185,820) $ (125,947) $ (59,281) Foreign 24,023 (6,040) (65,608) $ (161,797) $ (131,987) $ (124,889) The components of provision for (benefit from) income taxes are: (in thousands) 2022 2021 2020 Current: Federal $ 3,920 $ 1,921 $ (11,251) State 775 363 399 Foreign 10,200 4,105 7,113 Total current provision for (benefit from) 14,895 6,389 (3,739) Deferred: Federal 149,028 (42,214) (34,573) State 20,704 (9,413) (8,119) Foreign (842) (23,709) (17,085) Total deferred provision (benefit) 168,890 (75,336) (59,777) $ 183,785 $ (68,947) $ (63,516) A reconciliation of the U.S federal statutory tax rate and the Company’s effective tax rate: (in thousands) 2022 2021 2020 U.S. federal income taxes at statutory rates $ (33,977) $ (27,717) $ (26,227) Valuation allowance 188,258 (469) (5,881) State income taxes, net of federal benefit and tax credits (2,433) (7,217) (6,994) Permanent differences 11,561 541 1,773 Federal research and experimentation credits (5,012) (6,380) (5,716) Tax effects of foreign activities 3,770 3,599 3,050 GILTI, FDII, and BEAT 16,390 — — Provision to return adjustments (6,317) (2,016) 3,416 Non-deductible compensation 4,769 5,464 1,806 Expiration of statutes and changes in estimates 5,673 (2,250) 55 Excess tax benefits related to stock-based compensation 1,563 (20,697) (25,797) CARES Act — — (10,576) Impact of change in tax law (793) (11,811) 7,489 Other 333 6 86 $ 183,785 $ (68,947) $ (63,516) Deferred income taxes Significant components of net deferred tax assets and liabilities are: December 31, (in thousands) 2022 2021 Deferred tax assets: Net operating loss carryforwards $ 109,286 $ 133,164 Accruals and reserves 32,467 38,526 Interest expense carryforward 208 7,759 Software revenue 1,828 336 Convertible senior notes 5,794 8,362 Depreciation 3,698 3,764 Tax credit carryforwards 39,122 40,590 Research and development capitalization 38,425 — Other 622 1,015 Total deferred tax assets 231,450 233,516 Valuation allowances (212,808) (25,855) Total net deferred tax assets 18,642 207,661 Deferred tax liabilities: Capped call transactions (644) (14,961) Convertible senior notes — — Software revenue — — Intangibles (14,280) (12,044) Total deferred tax liabilities (14,924) (27,005) $ 3,718 $ 180,656 The Company recognizes deferred tax assets to the extent that it believes that these assets are more likely than not to be realized. Future realization of deferred tax assets ultimately depends on sufficient taxable income within the available carryback or carryforward periods. The Company’s deferred tax valuation allowance requires significant judgment and has uncertainties, including assumptions about future taxable income based on historical and projected information. On a quarterly basis, the Company reassesses the need for a valuation allowance on its existing net deferred tax assets by tax-paying jurisdiction, weighing positive and negative evidence to assess its recoverability. In making such a determination, the Company considers all available and objectively verifiable negative and positive evidence, including future reversals of existing taxable temporary differences, committed contractual backlog (“Backlog”), projected future taxable income inclusive of the impact of enacted legislation, tax-planning strategies, and results of recent operations. The weight given to the potential effect of negative and positive evidence is commensurate with the extent to which it can be objectively verified. As of June 30, 2022, the Company’s Backlog balance was not sufficient to recover the Company’s net deferred tax assets. The Backlog balance and other unsettled circumstances, impacting the Company’s operations, reduced the Backlog’s weight as objectively verifiable positive evidence to generate sufficient taxable income to recover its net deferred tax assets. These unsettled circumstances include growing and extended geopolitical turmoil, increasing inflation, and an uncertain global economic outlook. As of June 30, 2022, the combination of the above factors caused the Company to conclude there is not sufficient objectively verifiable positive evidence to support that it is more likely than not the Company will generate sufficient future taxable income to recover the Company’s U.S. and U.K. net deferred tax assets. The Company intends to maintain a full valuation allowance on its U.S and U.K deferred tax assets until there is sufficient evidence to support the realization of these deferred tax assets. Accordingly, the Company recorded a valuation allowance of $188.3 million in income tax expense in 2022. As of December 31, 2022, the Company’s net operating losses and credit carryforwards are: (in thousands) Federal State Net operating losses (1) $ 147,294 $ 10,807 Net operating losses due to acquisitions (1) $ 27,442 $ 2,849 Credit carryforwards (2) $ 29,080 $ 1,686 Credit carryforwards due to acquisitions $ 640 $ 60 (1) Excludes federal and state net operating losses of $19.8 million and $0.8 million, respectively, from prior acquisitions that the Company expects will expire unutilized. (2) Excludes federal and state tax credits of $0.1 million and $9.2 million, respectively, that the Company expects will expire unutilized. Carryforward losses and credits expire between 2023 and 2040, except for the 2020 and 2021 federal net operating loss of $119.9 million and $1.2 million of state credits, which both have unlimited carryforward periods. The Company’s India subsidiary is primarily located in Special Economic Zones (“SEZs”) and is entitled to a tax holiday in India. The tax holiday reduces or eliminates income tax in India. The tax holiday in the Hyderabad SEZ is expected to expire in 2023. The tax holiday in the Bengaluru SEZ is expected to expire in 2027. Uncertain tax benefits A rollforward of the Company’s gross unrecognized tax benefits is: (in thousands) 2022 2021 2020 Balance as of January 1, $ 17,584 $ 23,801 $ 23,271 Additions for tax positions related to the current year 1,706 653 653 Additions for tax positions of prior years 728 — 962 Reductions for tax positions of prior years (272) (6,870) (1,085) Balance as of December 31, $ 19,746 $ 17,584 $ 23,801 As of December 31, 2022, the Company had $19.7 million of total unrecognized tax benefits, which would decrease the Company’s effective tax rate if recognized. Tax examinations The Company files federal and state income tax returns in the U.S. and various foreign jurisdictions. In the ordinary course of business, the Company and its subsidiaries are examined by various tax authorities, including the Internal Revenue Service in the U.S. As of December 31, 2022, the Company’s U.S. federal tax returns for the years 2015 through 2018 were under examination by the Internal Revenue Service. In addition, certain foreign jurisdictions are auditing the Company’s income tax returns for periods ranging from 2013 through 2020. The Company does not expect the results of these audits to have a material effect on the Company’s financial condition, results of operations, or cash flows. With few exceptions, the statute of limitations remains open in all jurisdictions for all tax years since 2016 to the present. |
(LOSS) PER SHARE
(LOSS) PER SHARE | 12 Months Ended |
Dec. 31, 2022 | |
Earnings Per Share [Abstract] | |
(LOSS) PER SHARE | 19. (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 convertible senior notes. Calculation of (loss) per share: (in thousands, except per share amounts) 2022 2021 2020 Net (loss) $ (345,582) $ (63,040) $ (61,373) Weighted-average common shares outstanding 81,947 81,387 80,336 (Loss) per share, basic $ (4.22) $ (0.77) $ (0.76) Net (loss) $ (345,582) $ (63,040) $ (61,373) Weighted-average common shares outstanding, assuming dilution (1) (2) (3) 81,947 81,387 80,336 (Loss) per share, diluted $ (4.22) $ (0.77) $ (0.76) Outstanding anti-dilutive stock options and RSUs (4) 3,367 5,862 6,278 |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2022 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | 20. COMMITMENTS AND CONTINGENCIES Commitments For additional information, see "Note 11. Leases". Legal Proceedings In addition to the matters below, the Company is or may become involved in a variety of claims, demands, suits, investigations, and proceedings that arise from time to time relating to matters incidental to the ordinary course of the Company’s business, including actions concerning contracts, intellectual property, employment, benefits, and securities matters. Regardless of the outcome, legal disputes can have a material effect on the Company because of defense and settlement costs, diversion of management resources, and other factors. In addition, as the Company is a party to ongoing litigation, it is at least reasonably possible that the Company’s estimates will change in the near term, and the effect may be material. The Company had no accrued losses for litigation as of December 31, 2022 and December 31, 2021. Pegasystems Inc. v. Appian Corp. & Business Process Management Inc. On July 3, 2019, the Company filed suit in Massachusetts federal court against Appian Corp. (“Appian”) and Business Process Management, Inc. (“BPM”) relating to a BPM “Market Report” that Appian had used to promote itself against the Company. Pegasystems Inc. v. Appian Corp. & Business Process Management Inc., No. 1:19-cv-11461 (D. Mass). As previously indicated in the Company’s Current Report on Form 8-K filed on November 10, 2022 with the SEC, on November 9, 2022, the Company entered into a confidential settlement agreement with Appian resolving the litigation, and the parties filed a Stipulation of Dismissal with Prejudice dismissing all claims and counterclaims in this litigation. The Company will not contain disclosure regarding this litigation in future filings it makes with the SEC. Appian Corp. v. Pegasystems Inc. & Youyong Zou As previously reported, the Company is a defendant in litigation brought by Appian in the Circuit Court of Fairfax County, Virginia (the “Court”) titled Appian Corp. v. Pegasystems Inc. & Youyong Zou, No. 2020-07216 (Fairfax Cty. Ct.). On May 9, 2022, the jury rendered its verdict finding that the Company had misappropriated one or more of Appian’s trade secrets, that the Company had violated the Virginia Computer Crimes Act, and that the trade secret misappropriation was willful and malicious. The jury awarded damages of $2,036,860,045 for trade secret misappropriation and $1.00 for violating the Virginia Computer Crimes Act. On September 15, 2022, the circuit court of Fairfax County entered judgment of $2,060,479,287, consisting of the damages previously awarded by the jury plus attorneys’ fees and costs, and stating that the judgment is subject to post-judgment interest at a rate of 6.0% per annum, from the date of the jury verdict (May 9, 2022) as to the amount of the jury verdict and from September 15, 2022 as to the amount of the award of attorneys’ fees and costs. On September 15, 2022, the Company filed a notice of appeal from the judgment. On September 29, 2022, the circuit court of Fairfax County approved a $25,000,000 letter of credit obtained by the Company to secure the judgment and entered an order suspending the judgment during the pendency of the Company’s appeal. Appellate briefing is currently in process. Although it is not possible to predict timing, this appeals process could potentially take years to complete. The Company continues to believe that it did not misappropriate any alleged trade secrets and that its sales of the Company’s products at issue were not caused by, or the result of, any alleged misappropriation of trade secrets. The Company is unable to reasonably estimate possible damages because of, among other things, uncertainty as to the outcome of appellate proceedings and/or any potential new trial resulting from the appellate proceedings. City of Fort Lauderdale Police and Firefighters’ Retirement System, Individually and on Behalf of All Others Similarly Situated v. Pegasystems Inc., Alan Trefler, and Kenneth Stillwell On May 19, 2022, a lawsuit was filed against the Company, the Company’s chief executive officer and the Company’s chief operating and financial officer in the United States District Court for the Eastern District of Virginia Alexandria Division, captioned City of Fort Lauderdale Police and Firefighters’ Retirement System, Individually and on Behalf of All Others Similarly Situated v. Pegasystems Inc., Alan Trefler, and Kenneth Stillwell (Case 1:22-cv-00578-LMB-IDD). The complaint generally alleges, among other things, that the defendants violated Section 10(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Rule 10b-5 promulgated thereunder and that the individual defendants violated Section 20(a) of the Exchange Act, in each case by allegedly making materially false and/or misleading statements, as well as allegedly failing to disclose material adverse facts about the Company’s business, operations, and prospects, which caused the Company’s securities to trade at artificially inflated prices. The complaint seeks unspecified damages on behalf of a class of purchasers of the Company’s securities between May 29, 2020 and May 9, 2022. The litigation has since been transferred to the United States District Court for the District of Massachusetts (Case 1:22-cv-11220-WGY), and lead plaintiff class representatives—Central Pennsylvania Teamsters Pension Fund - Defined Benefit Plan, Central Pennsylvania Teamsters Pension Fund - Retirement Income Plan 1987, and Construction Industry Laborers Pension Fund—have been appointed. On October 18, 2022, a consolidated amended complaint was filed that does not add any new parties or legal claims, is based upon the same general factual allegations as the original complaint, and now seeks unspecified damages on behalf of a class of purchasers of the Company’s securities between June 16, 2020 and May 9, 2022. The Company believes the claims brought against the defendants are without merit and intends to defend against these claims vigorously. The Company is unable to reasonably estimate possible damages or a range of possible damages in this matter given the stage of the lawsuit, the Company’s belief that the claims are without merit, and there being no specified quantum of damages sought in the complaint. |
SIGNIFICANT ACCOUNTING POLICI_2
SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2022 | |
Accounting Policies [Abstract] | |
Management estimates and reporting | Management estimates and reporting The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S.”) requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. Actual results could differ from those estimates. Accounts with reported amounts based on significant estimates and judgments include, but are not limited to, revenue, unbilled receivables, deferred revenue, deferred income taxes, deferred commissions, income taxes payable, convertible senior notes, capped call transactions, intangible assets, and goodwill. |
Principles of consolidation | Principles of consolidation The Company’s consolidated financial statements reflect Pegasystems Inc. and subsidiaries in which the Company holds a controlling financial interest. All intercompany accounts and transactions were eliminated in consolidation. |
Reclassifications | Reclassifications Certain prior period amounts reported in our consolidated financial statements and notes thereto have been reclassified to conform to the current year presentation. Such reclassifications did not affect total revenues, (loss) from operations, or net (loss). |
Revenue and deferred commissions | Revenue The Company’s revenue is primarily derived from: • Subscription services, composed of revenue from Pega Cloud and maintenance. Pega Cloud is the Company’s hosted Pega Platform and software applications. Maintenance revenue is earned from providing client support, software upgrades, and bug fixes or patches. • Subscription license, composed of revenue from term license arrangements for the Company’s Pega Platform and software applications. Term licenses represent functional intellectual property and are delivered separately from maintenance and services. • Perpetual license, composed of revenue from perpetual license arrangements for the Company’s Pega Platform and software applications. Perpetual licenses represent functional intellectual property and are delivered separately from maintenance and services. • Consulting, primarily related to new software license implementations, training, and reimbursable costs. Performance obligations The Company’s software license and Pega Cloud arrangements often contain multiple performance obligations. If a contract contains multiple performance obligations, the Company accounts for each distinct performance obligation separately. The transaction price is allocated to the separate performance obligations on a relative stand-alone selling price basis. Any discounts or expected potential future price concessions are considered when determining the total transaction price. The Company’s policy is to exclude sales and similar taxes collected from clients from the determination of transaction price. The Company’s typical performance obligations are: Performance obligation How stand-alone selling price is typically determined When performance obligation is typically satisfied When payment is typically due Income statement line item Perpetual license Residual approach Upon transfer of control to the client, defined as when the client can use and benefit from the license (point in time) Effective date of the license Perpetual license Term license Residual approach Upon transfer of control to the client, defined as when the client can use and benefit from the license (point in time) Annually, or more frequently, over the term of the license Subscription license Maintenance Consistent pricing relationship as a percentage of the related license and observable in stand-alone renewal transactions (1) Ratably over the term of the maintenance (over time) Annually, or more frequently, over the term of the maintenance Subscription services Pega Cloud Residual approach Ratably over the term of the service (over time) Annually, or more frequently, over the term of the service Subscription services Consulting Observable hourly rate for time and materials-based services in similar geographies Based on hours incurred to date (over time) Monthly Consulting Consulting Observable hourly rate for time and materials-based services in similar geographies multiplied by estimated hours for the project Based on hours incurred as a percentage of total estimated hours (over time) As contract milestones are achieved Consulting (1) Technical support and software updates are considered distinct services but accounted for as a single performance obligation, as they have the same pattern of transfer to the client. The Company utilizes the residual approach for software license and Pega Cloud performance obligations since the selling price is highly variable and the stand-alone selling price is not discernible from past transactions or other observable evidence. Periodically, the Company reevaluates whether the residual approach remains appropriate. As required, the Company evaluates its residual approach estimate compared to all available observable data before concluding the estimate represents its stand-alone selling price. If the contract grants the client the option to acquire additional products or services, the Company assesses whether the option represents a material right to the client that the client would not receive without entering into that contract. Discounts on options to purchase additional products and services greater than discounts available to similar clients are accounted for as an additional performance obligation. During most of each client contract term, the amount invoiced is generally less than the amount of revenue recognized to date, primarily because we transfer control of the performance obligation related to the software license at the inception of the contract term. A significant portion of the total contract consideration is typically allocated to the license performance obligation. Therefore, the Company’s contracts often result in the recording of unbilled receivables and contract assets throughout most of the contract term. The Company records an unbilled receivable or contract asset when revenue recognized on a contract exceeds the billings. The Company recognizes an impairment on receivables and contract assets if, after contract inception, it becomes probable that payment is not collectible. The Company reviews receivables and contract assets on an individual basis for impairment. Variable consideration The Company’s arrangements can include variable fees, such as the option to purchase additional usage of a previously delivered software license. The Company may also provide pricing concessions to clients, a business practice that gives rise to variable fees. For variable fees arising from the client’s acquisition of additional usage of a previously delivered software license, the Company applies the sales and usage-based royalties guidance related to a license of intellectual property and recognizes the revenue in the period the underlying sale or usage occurs. The Company includes variable fees in the determination of total transaction price if it is not probable that a significant future reversal of revenue will occur. The Company uses the expected value or most likely value amount, whichever is more appropriate for specific circumstances, to estimate variable consideration, and the estimates are based on the level of historical price concessions offered to clients. The variable consideration related to pricing concessions and other forms of variable consideration, including usage-based fees, have not been material to the Company’s consolidated financial statements. Significant financing components The Company generally does not intend to provide financing to its clients, as financing arrangements are not contemplated as part of the negotiated terms of contracts between the Company and its clients. Although there may be an intervening period between the delivery of the license and the payment, typically in term license arrangements, the purpose of that timing difference is to align the client’s payment with the timing of the use of the software license or service. In certain circumstances, however, there are instances where revenue recognition timing differs from the timing of payment due to extended payment terms or fees that are non-proportional to the associated usage of software licenses. In these instances, the Company evaluates whether a significant financing component exists. This evaluation includes determining the difference between the consideration the client would have paid when the performance obligation was satisfied and the amount of consideration paid. Contracts that include a significant financing component are adjusted for the time value of money at the rate inherent in the contract, the client’s borrowing rate, or the Company’s incremental borrowing rate, depending upon the recipient of the financing. During 2022, 2021, and 2020, significant financing components were not material. Contract modifications The Company assesses contract modifications to determine: • if the additional products and services are distinct from the products and services in the original arrangement; and • if the amount of consideration expected for the added products and services reflects the stand-alone selling price of those products and services. A contract modification meeting both criteria is accounted for as a separate contract. If a contract modification does not meet both criteria, it is accounted for as either: • a prospective basis as a termination of the existing contract and the creation of a new contract; or • a cumulative catch-up basis. Deferred commissions The Company recognizes an asset for the incremental costs of obtaining a client contract, primarily related to sales commissions. The Company expects to benefit from those costs for more than one year, as the Company primarily pays sales commissions on the initial contract. As a result, there are no commensurate commissions paid on contract renewals. Deferred commissions are allocated to each performance obligation within the contract and amortized according to the transfer of underlying goods and services within those contracts and expected renewals. The expected benefit period is determined based on the length of the client contracts, client attrition rates, the underlying technology lifecycle, and the competitive marketplace’s influence on the products and services sold. Deferred costs allocated to maintenance and deferred costs for Pega Cloud arrangements are amortized over an average expected benefit period of 4.5 years. Deferred costs allocated to software licenses, and any expected renewals of term software licenses within the 4.5 years expected benefit period, are amortized at the point in time control of the software license is transferred. Deferred costs allocated to consulting are amortized over a period consistent with the pattern of transfer of control for the related services. |
Financial instruments | Financial instruments The principal financial instruments held by the Company consist of cash equivalents, marketable securities, receivables, capped call transactions, and accounts payable. The Company considers debt securities readily convertible to known amounts of cash with maturities of three months or less from the purchase date to be cash equivalents. Interest is recorded when earned. The Company’s investments are classified as available-for-sale and are carried at fair value. Unrealized gains and losses considered temporary are recorded as a component of accumulated other comprehensive (loss), net of related income taxes. The Company reviews all investments for reductions in fair value that are other-than-temporary. When such reductions occur, the investment cost is adjusted to fair value by recording a loss on investments in the consolidated statements of operations. Gains and losses on investments are calculated based on the specific investment. |
Property and equipment | Property and equipment Property and equipment are recorded at cost. Depreciation and amortization are computed using the straight-line method over the estimated useful life of each asset, which are three years for computer equipment and five years for furniture and fixtures. Leasehold improvements are amortized over the lesser of the lease’s term or the useful life of the asset. Repairs and maintenance costs are expensed as incurred. |
Leases | Leases All of the Company’s leases are operating leases, primarily composed of office space leases. The Company accounts for a contract as a lease when it has the right to control the asset for a period of time while obtaining substantially all of the asset’s economic benefits. The Company determines the initial classification and measurement of its operating right of use assets and lease liabilities at the lease commencement date and thereafter if modified. Fixed lease costs are recognized on a straight-line basis over the lease term. Variable lease costs are recognized in the period in which the obligation for those payments is incurred. The Company combines lease and non-lease components when determining lease costs for its office space leases. The lease liability includes lease payments related to options to extend or renew the lease term if the Company is reasonably certain it will exercise those options. The Company’s leases do not contain material residual value guarantees or restrictive covenants. |
Loss contingencies and legal costs | Loss contingencies and legal costs The Company accrues loss contingencies when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. |
Internal-use software | Internal-use software The Company capitalizes and amortizes certain direct costs associated with computer software developed or purchased for internal use incurred during the application development stage. Costs related to preliminary project activities and post-implementation activities are expensed as incurred. The Company amortizes capitalized software costs generally over three |
Goodwill | GoodwillGoodwill represents the residual purchase price paid in a business combination after the fair value of all identified assets and liabilities have been recorded. Goodwill is not amortized. The Company has a single reporting unit. |
Intangible and long-lived assets | Intangible and long-lived assets The Company’s intangible assets are amortized using the straight-line method over their estimated useful life. The Company evaluates its long-lived tangible and intangible assets for impairment whenever events or changes in circumstances indicate that such assets’ carrying amount may not be recoverable. Impairment is assessed by comparing the undiscounted cash flows expected to be generated by the long-lived tangible or intangible assets to their carrying value. If impairment exists, the Company calculates the impairment by comparing the carrying value to its fair value as determined by discounted expected cash flows. |
Cash equivalents | Cash equivalents Cash equivalents include money market funds and other investments with original maturities of three months or less. |
Business combinations | Business combinations The Company uses its estimates and assumptions to assign a fair value to the tangible and intangible assets acquired and liabilities assumed at the acquisition date. The Company’s estimates are inherently uncertain and subject to refinement. During the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the fair value of these tangible and intangible assets acquired and liabilities assumed, with the corresponding offset to goodwill. In addition, uncertain tax positions and tax-related valuation allowances are initially established in connection with a business combination as of the acquisition date. The Company reevaluates these estimates and assumptions quarterly as new information arises and records any adjustments to the Company’s preliminary estimates to goodwill provided that the Company is within the measurement period. Upon the conclusion of the measurement period or final determination of the fair value of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the Company’s consolidated statements of operations. |
Research and development and software development costs | Research and development and software development costsResearch and development costs are expensed as incurred. Capitalization of computer software developed for resale begins upon the establishment of technological feasibility, generally demonstrated by a working model or an operative version of the computer software product. Such costs have not been material to date, as technological feasibility is established within a short time frame from the software’s general availability. |
Stock-based compensation | Stock-based compensationThe Company recognizes stock-based compensation expense associated with equity awards based on the award’s fair value at the grant date. Stock-based compensation is recognized over the requisite service period, which is generally the vesting period of the equity award and is adjusted each period for anticipated forfeitures. |
Foreign currency translation and remeasurement | Foreign currency translation and remeasurement The translation of assets and liabilities for the Company’s subsidiaries with functional currencies other than the U.S. dollar are made at period-end exchange rates. Revenue and expense accounts are translated at the average exchange rates during the period transactions occur. The resulting translation adjustments are reflected in accumulated other comprehensive (loss). Realized and unrealized exchange gains or losses from transactions and remeasurement adjustments are reflected in foreign currency transaction gain (loss) in the accompanying consolidated statements of operations. |
Accounting for income taxes | Accounting for income taxes The Company uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on temporary differences between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The Company regularly assesses the need for a valuation allowance against its deferred tax assets. Future realization of the Company’s deferred tax assets ultimately depends on sufficient taxable income within the available carryback or carryforward periods. Taxable income sources include taxable income in prior carryback years, future reversals of existing taxable temporary differences, the Company’s firm contractual backlog, tax planning strategies, and projected future taxable income. The Company records a valuation allowance to reduce its deferred tax assets to an amount it believes is more-likely-than-not to be realized. Changes in the valuation allowance impact income tax expense in the period of adjustment. The Company recognizes excess tax benefits when realized, as a reduction of the provision for income taxes. The Company assesses its income tax positions and records tax benefits based on management’s evaluation of the facts, circumstances, and information available at the reporting date. For those tax positions where it is more-likely-than-not that a tax benefit will be sustained, the Company records the largest amount of tax benefit with a greater than 50 percent likelihood of being realized upon ultimate settlement with a taxing authority having full knowledge of all relevant information. For those income tax positions where it is not more-likely-than-not that a tax benefit will be sustained, no tax benefit is recognized in the financial statements. The Company classifies liabilities for uncertain tax positions as non-current liabilities unless the uncertainty is expected to be resolved within one year. The Company classifies interest and penalties on uncertain tax positions as income tax expense. As a global company, significant judgment must be used to calculate and provide for income taxes in each of the tax jurisdictions in which it operates. In the ordinary course of the Company’s business, there are transactions and calculations undertaken whose ultimate tax outcome cannot be certain. Some of these uncertainties arise because of transfer pricing for transactions with the Company’s subsidiaries and nexus and tax credit estimates. In addition, the calculation of acquired tax attributes and the associated limitations are complex. |
Advertising expense | Advertising expenseAdvertising costs are expensed as incurred. |
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, marketable securities, 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. |
SIGNIFICANT ACCOUNTING POLICI_3
SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Accounting Policies [Abstract] | |
Schedule of Performance Obligations | The Company’s typical performance obligations are: Performance obligation How stand-alone selling price is typically determined When performance obligation is typically satisfied When payment is typically due Income statement line item Perpetual license Residual approach Upon transfer of control to the client, defined as when the client can use and benefit from the license (point in time) Effective date of the license Perpetual license Term license Residual approach Upon transfer of control to the client, defined as when the client can use and benefit from the license (point in time) Annually, or more frequently, over the term of the license Subscription license Maintenance Consistent pricing relationship as a percentage of the related license and observable in stand-alone renewal transactions (1) Ratably over the term of the maintenance (over time) Annually, or more frequently, over the term of the maintenance Subscription services Pega Cloud Residual approach Ratably over the term of the service (over time) Annually, or more frequently, over the term of the service Subscription services Consulting Observable hourly rate for time and materials-based services in similar geographies Based on hours incurred to date (over time) Monthly Consulting Consulting Observable hourly rate for time and materials-based services in similar geographies multiplied by estimated hours for the project Based on hours incurred as a percentage of total estimated hours (over time) As contract milestones are achieved Consulting (1) Technical support and software updates are considered distinct services but accounted for as a single performance obligation, as they have the same pattern of transfer to the client. Expected future revenue from existing non-cancellable contracts: As of December 31, 2022: (Dollars in thousands) Subscription services Subscription license Perpetual license Consulting Total Maintenance Pega Cloud 1 year or less $ 242,073 $ 379,648 $ 60,668 $ 5,310 $ 32,374 $ 720,073 53 % 1-2 years 66,207 246,195 3,803 2,253 6,371 324,829 24 % 2-3 years 26,746 143,901 1,707 — 1,647 174,001 13 % Greater than 3 years 15,602 115,944 5,283 — — 136,829 10 % $ 350,628 $ 885,688 $ 71,461 $ 7,563 $ 40,392 $ 1,355,732 100 % As of December 31, 2021: (Dollars in thousands) Subscription services Subscription license Perpetual license Consulting Total Maintenance Pega Cloud 1 year or less $ 234,917 $ 330,426 $ 153,467 $ 10,952 $ 41,411 $ 771,173 58 % 1-2 years 65,502 220,231 14,968 4,505 8,917 314,123 23 % 2-3 years 38,432 124,969 1,955 2,252 5,512 173,120 13 % Greater than 3 years 28,157 55,937 1,765 — 619 86,478 6 % $ 367,008 $ 731,563 $ 172,155 $ 17,709 $ 56,459 $ 1,344,894 100 % |
MARKETABLE SECURITIES (Tables)
MARKETABLE SECURITIES (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Investments, Debt and Equity Securities [Abstract] | |
Schedule of Marketable Securities | December 31, 2022 December 31, 2021 (in thousands) Amortized Cost Unrealized Gains Unrealized Losses Fair Value Amortized Cost Unrealized Gains Unrealized Losses Fair Value Government debt $ 2,960 $ — $ (52) $ 2,908 $ 2,000 $ — $ (10) $ 1,990 Corporate debt 151,906 — (2,647) 149,259 201,659 2 (837) 200,824 $ 154,866 $ — $ (2,699) $ 152,167 $ 203,659 $ 2 $ (847) $ 202,814 |
RECEIVABLES, CONTRACT ASSETS,_2
RECEIVABLES, CONTRACT ASSETS, AND DEFERRED REVENUE (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Receivables [Abstract] | |
Summary of Accounts Receivable and Unbilled Receivable | Receivables (in thousands) December 31, 2022 December 31, 2021 Accounts receivable $ 255,150 $ 182,717 Unbilled receivables 213,719 226,714 Long-term unbilled receivables 95,806 129,789 $ 564,675 $ 539,220 |
Summary of Unbilled Receivables | Unbilled receivables Unbilled receivables are client-committed amounts for which revenue recognition precedes billing, and billing is solely subject to the passage of time. Unbilled receivables by expected billing date: (Dollars in thousands) December 31, 2022 1 year or less $ 213,719 69 % 1-2 years 81,280 26 % 2-5 years 14,526 5 % $ 309,525 100 % |
Summary of Unbilled Receivables Based Upon Contract Effective Date | Unbilled receivables by contract effective date: (Dollars in thousands) December 31, 2022 2022 $ 150,597 49 % 2021 109,024 35 % 2020 30,763 10 % 2019 11,621 4 % 2018 and prior 7,520 2 % $ 309,525 100 % |
Summary of Major Clients | Major clients Clients that represented 10% or more of the Company’s total accounts receivable and unbilled receivables: December 31, 2022 December 31, 2021 Client A Accounts receivable * 1 % Unbilled receivables * 15 % Total receivables * 10 % * Client accounted for less than 10% of receivables. |
Summary of Contract Assets and Deferred Revenue | Contract assets Contract assets are client-committed amounts for which revenue recognized exceeds the amount billed to the client, and billing is subject to conditions other than the passage of time, such as the completion of a related performance obligation. (in thousands) December 31, 2022 December 31, 2021 Contract assets (1) $ 17,546 $ 12,530 Long-term contract assets (2) 16,470 10,643 $ 34,016 $ 23,173 (1) Included in other current assets. (2) Included in other long-term assets. Deferred revenue Deferred revenue consists of billings and payments received in advance of revenue recognition. (in thousands) December 31, 2022 December 31, 2021 Deferred revenue $ 325,212 $ 275,844 Long-term deferred revenue (1) 3,552 5,655 $ 328,764 $ 281,499 (1) Included in other long-term liabilities. |
DEFERRED COMMISSIONS (Tables)
DEFERRED COMMISSIONS (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Schedule of Impairment of Deferred Contract Costs | December 31, (in thousands) 2022 2021 Deferred commissions (1) $ 130,195 $ 135,911 |
Schedule of Amortization of Deferred Contract Costs | (in thousands) 2022 2021 2020 Amortization of deferred commissions (1) $ 53,471 $ 41,387 $ 33,302 (1) Included in selling and marketing expenses. |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Property, Plant and Equipment [Abstract] | |
Schedule of Property and Equipment | (in thousands) December 31, 2022 2021 Leasehold improvements $ 35,049 $ 31,203 Computer equipment 27,292 26,115 Furniture and fixtures 5,993 5,565 Computer software purchased 9,724 8,566 Computer software developed for internal use 19,869 19,463 Fixed assets in progress 37,342 4,262 135,269 95,174 Less: accumulated depreciation (80,213) (68,337) $ 55,056 $ 26,837 |
Schedule of Depreciation Expense | (in thousands) 2022 2021 2020 Depreciation expense $ 14,687 $ 24,606 $ 17,378 |
GOODWILL AND OTHER INTANGIBLE_2
GOODWILL AND OTHER INTANGIBLE ASSETS (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Changes in Carrying Amount of Goodwill | (in thousands) 2022 2021 January 1, $ 81,923 $ 79,231 Acquisition — 2,701 Currency translation adjustments (524) (9) December 31, $ 81,399 $ 81,923 |
Schedule of Amortizable Intangible Assets | Intangible assets are recorded at cost and amortized using the straight-line method over their estimated useful lives: December 31, 2022 (in thousands) Useful Lives Cost Accumulated Amortization Net Book Value (1) Client-related 4-10 years $ 63,076 $ (58,623) $ 4,453 Technology 2-10 years 68,056 (61,621) 6,435 Other 1-5 years 5,361 (5,361) — $ 136,493 $ (125,605) $ 10,888 (1) Included in other long-term assets. December 31, 2021 (in thousands) Useful Lives Cost Accumulated Amortization Net Book Value (1) Client-related 4-10 years $ 63,165 $ (57,342) $ 5,823 Technology 2-10 years 67,142 (58,902) 8,240 Other 1-5 years 5,361 (5,361) — $ 135,668 $ (121,605) $ 14,063 (1) Included in other long-term assets. |
Schedule of Amortization Expense of Acquired Intangibles | Amortization of intangible assets was: (in thousands) 2022 2021 2020 Cost of revenue $ 2,723 $ 2,516 $ 2,487 Selling and marketing 1,370 1,471 1,483 $ 4,093 $ 3,987 $ 3,970 |
Schedule of Estimated Future Amortization Expense Related to Intangible Assets | Future estimated intangible assets amortization: (in thousands) December 31, 2022 2023 $ 3,924 2024 3,153 2025 2,610 2026 874 2027 327 $ 10,888 |
SEGMENT INFORMATION (Tables)
SEGMENT INFORMATION (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Segment Reporting [Abstract] | |
Schedule of Long-Lived Assets by Geographic Area | Long-lived assets related to the Company’s U.S. and international operations were: (Dollars in thousands) December 31, 2022 December 31, 2021 U.S. $ 50,445 92 % $ 20,548 77 % International 4,611 8 % 6,289 23 % $ 55,056 100 % $ 26,837 100 % |
OTHER ASSETS AND LIABILITIES (T
OTHER ASSETS AND LIABILITIES (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Other Assets and Liabilities [Abstract] | |
Schedule of Other Assets and Other Liabilities | Other current assets (in thousands) December 31, 2022 December 31, 2021 Income tax receivables $ 25,354 $ 25,691 Contract assets 17,546 12,530 Other 37,488 29,787 $ 80,388 $ 68,008 Other long-term assets (in thousands) December 31, 2022 December 31, 2021 Deferred income taxes $ 4,795 $ 180,656 Deferred commissions 130,195 135,911 Right of use assets 76,114 87,521 Capped call transactions 2,582 59,964 Property and equipment 55,056 26,837 Intangible assets 10,888 14,063 Contract assets 16,470 10,643 Other 37,889 26,006 $ 333,989 $ 541,601 Other current liabilities (in thousands) December 31, 2022 December 31, 2021 Operating lease liabilities $ 14,976 $ 6,989 Dividends payable 2,474 2,454 $ 17,450 $ 9,443 Other long-term liabilities (in thousands) December 31, 2022 December 31, 2021 Deferred revenue $ 3,552 $ 5,655 Other 11,576 7,844 $ 15,128 $ 13,499 |
LEASES (Tables)
LEASES (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Leases [Abstract] | |
Schedule of Lease Expense | Expense (in thousands) 2022 2021 2020 Fixed lease costs (1) $ 20,186 $ (1,694) $ 20,235 Short-term lease costs 3,356 2,244 1,669 Variable lease costs 3,894 4,480 4,470 $ 27,436 $ 5,030 $ 26,374 (1) The lower fixed lease costs in 2021 was due to the modification of the corporate headquarters lease. |
Schedule of Right of Use Asset and Lease Liabilities | Right of use assets and lease liabilities (in thousands) December 31, 2022 December 31, 2021 Right of use assets (1) $ 76,114 $ 87,521 Operating lease liabilities (2) $ 14,976 $ 6,989 Long-term operating lease liabilities $ 79,152 $ 87,818 (1) Represents the Company’s right to use the leased asset during the lease term. Included in other long-term assets. (2) Included in other current liabilities. |
Schedule of Weighted Average and Discount Rate | The weighted-average remaining lease term and discount rate for the Company’s leases were: December 31, 2022 December 31, 2021 Weighted-average remaining lease term 7.5 years 7.7 years Weighted-average discount rate (1) 4.1 % 4.4 % (1) The rates implicit in most of the Company’s leases are not readily determinable. Therefore, the Company uses its incremental borrowing rate as the discount rate when measuring operating lease liabilities. The incremental borrowing rate represents an estimate of the interest rate the Company would incur to borrow an amount equal to the lease payments on a collateralized basis over the lease term in a similar economic environment. |
Schedule of Lease Maturities after Adoption of 842 | Maturities of lease liabilities: (in thousands) December 31, 2022 2023 $ 18,476 2024 17,101 2025 14,444 2026 10,860 2027 9,814 Thereafter 39,265 Total lease payments 109,960 Less: imputed interest (1) (15,832) $ 94,128 (1) Lease liabilities are measured at the present value of the remaining lease payments using a discount rate determined at lease commencement unless the discount rate is updated due to a lease reassessment event. |
Schedule of Supplemental Cash Flow Lease Information | Cash flow information (1) (2) (in thousands) 2022 2021 Cash paid for operating leases, net of tenant improvement allowances $ 7,690 $ 18,428 Right of use assets recognized for new leases and amendments (non-cash) $ 4,733 $ 55,068 (1) In 2022 and 2021, the Company received tenant improvement allowances of $8.8 million and $3.0 million, respectively, as part of the lease of the Company’s new corporate headquarters in Waltham, Massachusetts. (2) In 2021, the Company received $18 million as a one-time payment for the Company’s accelerated exit from its then corporate headquarters in Cambridge, Massachusetts. This payment has been excluded from the above table. |
DEBT (Tables)
DEBT (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Debt Disclosure [Abstract] | |
Schedule of Contractual Obligation, Fiscal Year Maturity Schedule | Carrying value of the Notes: (in thousands) December 31, 2022 December 31, 2021 Principal $ 600,000 $ 600,000 Unamortized issuance costs (6,391) (9,278) Convertible senior notes, net $ 593,609 $ 590,722 Interest expense related to the Notes: (in thousands) 2022 2021 Contractual interest expense (0.75% coupon) $ 4,500 $ 4,500 Amortization of issuance costs 2,888 2,977 $ 7,388 $ 7,477 The effective interest rate for the Notes: 2022 2021 Weighted-average effective interest rate 1.2 % 1.3 % Future payments of principal and contractual interest: December 31, 2022 (in thousands) Principal Interest Total 2023 $ — $ 4,500 $ 4,500 2024 — 4,500 4,500 2025 600,000 2,250 602,250 $ 600,000 $ 11,250 $ 611,250 |
Schedule of Derivative Instruments | Change in capped call transactions: (in thousands) 2022 2021 January 1, $ 59,964 $ 83,597 Fair value adjustment (57,382) (23,633) December 31, $ 2,582 $ 59,964 |
STOCKHOLDERS' EQUITY (Tables)
STOCKHOLDERS' EQUITY (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Equity [Abstract] | |
Schedule of Dividends Declared and Dividend Payments | Dividends declared 2022 2021 2020 Dividends declared (per share) $ 0.12 $ 0.12 $ 0.12 Dividend payments to stockholders (in thousands) $ 9,834 $ 9,761 $ 9,628 |
Schedule of Treasury Stock | Stock repurchases (in thousands) 2022 2021 2020 Shares Amount Shares Amount Shares Amount January 1, $ 22,583 $ 37,726 $ 45,484 Authorizations (1) 60,000 38,467 20,516 Repurchases (2) (280) (24,508) (432) (53,610) (278) (28,274) December 31, $ 58,075 $ 22,583 $ 37,726 (1) On June 2, 2022, the Company announced that the Board of Directors extended the current stock repurchase program’s expiration date to June 30, 2023 and increased the remaining stock repurchase authority to $60 million. (2) Purchases under this program have been made on the open market. |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Fair Value Disclosures [Abstract] | |
Schedule of Assets and Liabilities Measured at Fair Value | The Company’s assets and liabilities measured at fair value on a recurring basis: December 31, 2022 December 31, 2021 (in thousands) Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Cash equivalents $ 2,526 $ — $ — $ 2,526 $ 3,216 $ — $ — $ 3,216 Marketable securities $ — $ 152,167 $ — $ 152,167 $ — $ 202,814 $ — $ 202,814 Capped Call Transactions (1) (2) $ — $ 2,582 $ — $ 2,582 $ — $ 59,964 $ — $ 59,964 Venture investments (1) (3) $ — $ — $ 13,069 $ 13,069 $ — $ — $ 7,648 $ 7,648 (1) Included in other long-term assets (2) For additional information, see "Note 12. Debt". (3) Investments in privately held companies. |
Schedule of Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation | Change in venture investments: (in thousands) 2022 2021 January 1, $ 7,648 $ 8,345 New investments 1,400 500 Sales of investments (4,020) (2,449) Changes in foreign exchange rates (450) (68) Changes in fair value: included in other income 5,989 100 included in other comprehensive income 2,502 1,220 December 31, $ 13,069 $ 7,648 |
REVENUE (Tables)
REVENUE (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Revenue from Contract with Customer [Abstract] | |
Schedule of Revenue by Geographic Area | Geographic revenue (Dollars in thousands) 2022 2021 2020 U.S. $ 763,558 57 % $ 690,133 57 % $ 613,844 61 % Other Americas 102,980 8 % 61,339 5 % 49,441 5 % United Kingdom (“U.K.”) 115,793 9 % 117,580 10 % 91,517 9 % Europe (excluding U.K.), Middle East, and Africa 194,563 15 % 198,080 16 % 156,056 15 % Asia-Pacific 140,951 11 % 144,521 12 % 106,659 10 % $ 1,317,845 100 % $ 1,211,653 100 % $ 1,017,517 100 % |
Schedule of Disaggregation of Revenue | Revenue streams (in thousands) 2022 2021 2020 Perpetual license $ 19,293 $ 32,172 $ 28,558 Subscription license 366,063 336,248 266,352 Revenue recognized at a point in time 385,356 368,420 294,910 Maintenance 317,564 320,257 296,709 Pega Cloud 384,271 300,966 208,268 Consulting 230,654 222,010 217,630 Revenue recognized over time 932,489 843,233 722,607 $ 1,317,845 $ 1,211,653 $ 1,017,517 (in thousands) 2022 2021 2020 Pega Cloud $ 384,271 $ 300,966 $ 208,268 Maintenance 317,564 320,257 296,709 Subscription services 701,835 621,223 504,977 Subscription license 366,063 336,248 266,352 Subscription 1,067,898 957,471 771,329 Perpetual license 19,293 32,172 28,558 Consulting 230,654 222,010 217,630 $ 1,317,845 $ 1,211,653 $ 1,017,517 |
Schedule of Remaining Performance Obligations on Existing Contracts | The Company’s typical performance obligations are: Performance obligation How stand-alone selling price is typically determined When performance obligation is typically satisfied When payment is typically due Income statement line item Perpetual license Residual approach Upon transfer of control to the client, defined as when the client can use and benefit from the license (point in time) Effective date of the license Perpetual license Term license Residual approach Upon transfer of control to the client, defined as when the client can use and benefit from the license (point in time) Annually, or more frequently, over the term of the license Subscription license Maintenance Consistent pricing relationship as a percentage of the related license and observable in stand-alone renewal transactions (1) Ratably over the term of the maintenance (over time) Annually, or more frequently, over the term of the maintenance Subscription services Pega Cloud Residual approach Ratably over the term of the service (over time) Annually, or more frequently, over the term of the service Subscription services Consulting Observable hourly rate for time and materials-based services in similar geographies Based on hours incurred to date (over time) Monthly Consulting Consulting Observable hourly rate for time and materials-based services in similar geographies multiplied by estimated hours for the project Based on hours incurred as a percentage of total estimated hours (over time) As contract milestones are achieved Consulting (1) Technical support and software updates are considered distinct services but accounted for as a single performance obligation, as they have the same pattern of transfer to the client. Expected future revenue from existing non-cancellable contracts: As of December 31, 2022: (Dollars in thousands) Subscription services Subscription license Perpetual license Consulting Total Maintenance Pega Cloud 1 year or less $ 242,073 $ 379,648 $ 60,668 $ 5,310 $ 32,374 $ 720,073 53 % 1-2 years 66,207 246,195 3,803 2,253 6,371 324,829 24 % 2-3 years 26,746 143,901 1,707 — 1,647 174,001 13 % Greater than 3 years 15,602 115,944 5,283 — — 136,829 10 % $ 350,628 $ 885,688 $ 71,461 $ 7,563 $ 40,392 $ 1,355,732 100 % As of December 31, 2021: (Dollars in thousands) Subscription services Subscription license Perpetual license Consulting Total Maintenance Pega Cloud 1 year or less $ 234,917 $ 330,426 $ 153,467 $ 10,952 $ 41,411 $ 771,173 58 % 1-2 years 65,502 220,231 14,968 4,505 8,917 314,123 23 % 2-3 years 38,432 124,969 1,955 2,252 5,512 173,120 13 % Greater than 3 years 28,157 55,937 1,765 — 619 86,478 6 % $ 367,008 $ 731,563 $ 172,155 $ 17,709 $ 56,459 $ 1,344,894 100 % |
STOCK-BASED COMPENSATION (Table
STOCK-BASED COMPENSATION (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Share-Based Payment Arrangement [Abstract] | |
Schedule of Stock-Based Compensation Expense Included in Consolidated Statements of Operations | (in thousands) 2022 2021 2020 Cost of revenue $ 26,400 $ 21,822 $ 20,796 Selling and marketing 46,769 54,182 46,283 Research and development 29,266 25,413 22,885 General and administrative 19,775 14,530 13,104 $ 122,210 $ 115,947 $ 103,068 Income tax benefit $ (1,881) $ (23,410) $ (20,464) |
Schedule of Compensating Balances | (in thousands) 2022 Compensation expense from 2006 ESPP $ 1,614 |
Schedule of Weighted-Average Assumptions Used in Black-Scholes Option Valuation Model | The following table summarizes the Company’s fair value assumptions for stock options: 2022 2021 2020 Weighted-average grant-date fair value $ 17.49 $ 37.74 $ 24.16 Assumptions used in the Black-Scholes option-pricing model: Expected annual volatility (1) 42 % 35 % 31 % Expected term in years (2) 3.9 4.4 4.5 Risk-free interest rate (3) 3.4 % 0.6 % 0.7 % Expected annual dividend yield (4) 0.1 % 0.2 % 0.2 % (1) The expected annual volatility for each grant is determined based on the average of historic daily price changes of the Company’s common stock over a period, which approximates the expected option term. (2) The expected option term for each grant is determined based on the historical exercise behavior of employees and post-vesting employment termination behavior. (3) The risk-free interest rate is based on the yield of U.S. Treasury securities with a commensurate maturity with the expected option term at the time of grant. (4) The expected annual dividend yield is based on the weighted-average dividend yield assumptions used for options granted during the applicable period. |
Schedule of Combined Stock Option Activity | The following table summarizes the combined stock option activity under the Company’s stock option plans for 2022: Shares Weighted-average Exercise Price Weighted-average Remaining Contractual Term (in years) Aggregate Intrinsic Value Options outstanding as of January 1, 2022 7,189 $ 74.94 Granted 9,725 50.35 Exercised (572) 25.17 Forfeited (1,153) 87.71 Expired (278) $ 82.83 Options outstanding as of December 31, 2022 14,911 $ 59.67 Vested and expected to vest as of December 31, 2022 12,449 $ 59.06 8.1 $ 9,476 Exercisable as of December 31, 2022 3,901 $ 64.76 5.3 $ 8,056 |
Schedule of Combined Restricted Stock Units Activity | The following table summarizes the combined RSU activity for all grants, including the CICP, under the 2004 Plan for 2022: Shares Weighted- Average Grant-Date Aggregate Intrinsic Value Nonvested as of January 1, 2022 2,054 $ 99.36 Granted 1,571 74.50 Vested (795) 93.72 Forfeited (479) 95.13 Nonvested as of December 31, 2022 2,351 $ 85.52 $ 80,497 Expected to vest as of December 31, 2022 1,716 $ 85.17 $ 58,772 |
EMPLOYEE BENEFIT PLANS (Tables)
EMPLOYEE BENEFIT PLANS (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Postemployment Benefits [Abstract] | |
Schedule of Defined Contribution Plans Expenses | Employee benefit plan expenses: (in thousands) 2022 2021 2020 U.S. 401(k) Plan $ 8,994 $ 8,879 $ 8,109 International plans 21,141 20,780 16,132 $ 30,135 $ 29,659 $ 24,241 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Income Tax Disclosure [Abstract] | |
Schedule of Components of (loss) before Provision for (benefit from) Income Taxes | The components of (loss) before provision for (benefit from) income taxes are: (in thousands) 2022 2021 2020 Domestic $ (185,820) $ (125,947) $ (59,281) Foreign 24,023 (6,040) (65,608) $ (161,797) $ (131,987) $ (124,889) |
Schedule of Components of Provision for (benefit from) Income Taxes | The components of provision for (benefit from) income taxes are: (in thousands) 2022 2021 2020 Current: Federal $ 3,920 $ 1,921 $ (11,251) State 775 363 399 Foreign 10,200 4,105 7,113 Total current provision for (benefit from) 14,895 6,389 (3,739) Deferred: Federal 149,028 (42,214) (34,573) State 20,704 (9,413) (8,119) Foreign (842) (23,709) (17,085) Total deferred provision (benefit) 168,890 (75,336) (59,777) $ 183,785 $ (68,947) $ (63,516) |
Schedule of Reconciliation of Effective Income Tax Rate from Statutory Federal Income Tax Rate | A reconciliation of the U.S federal statutory tax rate and the Company’s effective tax rate: (in thousands) 2022 2021 2020 U.S. federal income taxes at statutory rates $ (33,977) $ (27,717) $ (26,227) Valuation allowance 188,258 (469) (5,881) State income taxes, net of federal benefit and tax credits (2,433) (7,217) (6,994) Permanent differences 11,561 541 1,773 Federal research and experimentation credits (5,012) (6,380) (5,716) Tax effects of foreign activities 3,770 3,599 3,050 GILTI, FDII, and BEAT 16,390 — — Provision to return adjustments (6,317) (2,016) 3,416 Non-deductible compensation 4,769 5,464 1,806 Expiration of statutes and changes in estimates 5,673 (2,250) 55 Excess tax benefits related to stock-based compensation 1,563 (20,697) (25,797) CARES Act — — (10,576) Impact of change in tax law (793) (11,811) 7,489 Other 333 6 86 $ 183,785 $ (68,947) $ (63,516) |
Schedule of Components of Net Deferred Tax Assets and Liabilities | Significant components of net deferred tax assets and liabilities are: December 31, (in thousands) 2022 2021 Deferred tax assets: Net operating loss carryforwards $ 109,286 $ 133,164 Accruals and reserves 32,467 38,526 Interest expense carryforward 208 7,759 Software revenue 1,828 336 Convertible senior notes 5,794 8,362 Depreciation 3,698 3,764 Tax credit carryforwards 39,122 40,590 Research and development capitalization 38,425 — Other 622 1,015 Total deferred tax assets 231,450 233,516 Valuation allowances (212,808) (25,855) Total net deferred tax assets 18,642 207,661 Deferred tax liabilities: Capped call transactions (644) (14,961) Convertible senior notes — — Software revenue — — Intangibles (14,280) (12,044) Total deferred tax liabilities (14,924) (27,005) $ 3,718 $ 180,656 |
Schedule of Operating Loss Carryforwards | As of December 31, 2022, the Company’s net operating losses and credit carryforwards are: (in thousands) Federal State Net operating losses (1) $ 147,294 $ 10,807 Net operating losses due to acquisitions (1) $ 27,442 $ 2,849 Credit carryforwards (2) $ 29,080 $ 1,686 Credit carryforwards due to acquisitions $ 640 $ 60 (1) Excludes federal and state net operating losses of $19.8 million and $0.8 million, respectively, from prior acquisitions that the Company expects will expire unutilized. |
Schedule of Credit Carryforwards | As of December 31, 2022, the Company’s net operating losses and credit carryforwards are: (in thousands) Federal State Net operating losses (1) $ 147,294 $ 10,807 Net operating losses due to acquisitions (1) $ 27,442 $ 2,849 Credit carryforwards (2) $ 29,080 $ 1,686 Credit carryforwards due to acquisitions $ 640 $ 60 (1) Excludes federal and state net operating losses of $19.8 million and $0.8 million, respectively, from prior acquisitions that the Company expects will expire unutilized. |
Schedule of Reconciliation of Beginning and Ending Balances of Gross Unrecognized Tax Benefits | A rollforward of the Company’s gross unrecognized tax benefits is: (in thousands) 2022 2021 2020 Balance as of January 1, $ 17,584 $ 23,801 $ 23,271 Additions for tax positions related to the current year 1,706 653 653 Additions for tax positions of prior years 728 — 962 Reductions for tax positions of prior years (272) (6,870) (1,085) Balance as of December 31, $ 19,746 $ 17,584 $ 23,801 |
(LOSS) PER SHARE (Tables)
(LOSS) PER SHARE (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
Earnings Per Share [Abstract] | |
Schedule of Basic and Diluted Loss Per Share | Calculation of (loss) per share: (in thousands, except per share amounts) 2022 2021 2020 Net (loss) $ (345,582) $ (63,040) $ (61,373) Weighted-average common shares outstanding 81,947 81,387 80,336 (Loss) per share, basic $ (4.22) $ (0.77) $ (0.76) Net (loss) $ (345,582) $ (63,040) $ (61,373) Weighted-average common shares outstanding, assuming dilution (1) (2) (3) 81,947 81,387 80,336 (Loss) per share, diluted $ (4.22) $ (0.77) $ (0.76) Outstanding anti-dilutive stock options and RSUs (4) 3,367 5,862 6,278 (2) The shares underlying the conversion options in the Company’s Notes are included using the if-converted method, if dilutive in the period. If the outstanding conversion options were fully exercised, the Company would issue an additional approximately 4.4 million shares. (3) The Company’s Capped Call Transactions represent the equivalent of approximately 4.4 million shares of the Company’s common stock (representing the number of shares for which the Notes are initially convertible). The Capped Call Transactions are expected to reduce common stock dilution and/or offset any potential cash payments the Company must make, other than for principal and interest, upon conversion of the Notes, with such reduction and/or offset subject to a cap of $196.44. The Capped Call Transactions are excluded from weighted-average common shares outstanding, assuming dilution, in all periods as their effect would be anti-dilutive. (4) Outstanding stock options and RSUs that were anti-dilutive under the treasury stock method in the period were excluded from the computation of diluted (loss) per share. These awards may be dilutive in the future. |
SIGNIFICANT ACCOUNTING POLICI_4
SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) | 12 Months Ended | |||||
Nov. 30, 2021 | Nov. 30, 2020 | Nov. 30, 2019 | Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
Property, Plant and Equipment [Line Items] | ||||||
Amortization period for deferred contract costs | 4 years 6 months | |||||
Goodwill impairment | $ 0 | $ 0 | $ 0 | |||
Capitalized computer software cost | $ 0 | $ 0 | $ 0 | |||
More-likely-than-not benefit likelihood percentage being realized upon ultimate settlement with taxing authority resulting from sustainability of tax examination | 50% | |||||
Advertising costs | $ 6,600,000 | $ 11,800,000 | $ 8,700,000 | |||
Computer Equipment | ||||||
Property, Plant and Equipment [Line Items] | ||||||
Property and equipment estimated useful lives | 3 years | |||||
Furniture and Fixtures | ||||||
Property, Plant and Equipment [Line Items] | ||||||
Property and equipment estimated useful lives | 5 years | |||||
Minimum | Internal Use Software | ||||||
Property, Plant and Equipment [Line Items] | ||||||
Useful life of capitalized software | 3 years | |||||
Maximum | Internal Use Software | ||||||
Property, Plant and Equipment [Line Items] | ||||||
Useful life of capitalized software | 5 years |
MARKETABLE SECURITIES (Details)
MARKETABLE SECURITIES (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
Debt Securities, Available-for-sale [Line Items] | ||
Amortized Cost | $ 154,866 | $ 203,659 |
Unrealized Gains | 0 | 2 |
Unrealized Losses | (2,699) | (847) |
Fair Value | 152,167 | 202,814 |
Government debt | ||
Debt Securities, Available-for-sale [Line Items] | ||
Amortized Cost | 2,960 | 2,000 |
Unrealized Gains | 0 | 0 |
Unrealized Losses | (52) | (10) |
Fair Value | 2,908 | 1,990 |
Corporate debt | ||
Debt Securities, Available-for-sale [Line Items] | ||
Amortized Cost | 151,906 | 201,659 |
Unrealized Gains | 0 | 2 |
Unrealized Losses | (2,647) | (837) |
Fair Value | $ 149,259 | $ 200,824 |
MARKETABLE SECURITIES - Additio
MARKETABLE SECURITIES - Additional Information (Details) | Dec. 31, 2022 |
Investments, Debt and Equity Securities [Abstract] | |
Weighted-average remaining maturity | 6 months |
RECEIVABLES, CONTRACT ASSETS,_3
RECEIVABLES, CONTRACT ASSETS, AND DEFERRED REVENUE - Summary of Receivable (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
Receivables [Abstract] | ||
Accounts receivable | $ 255,150 | $ 182,717 |
Unbilled receivables | 213,719 | 226,714 |
Long-term unbilled receivables | 95,806 | 129,789 |
Total receivables | $ 564,675 | $ 539,220 |
RECEIVABLES, CONTRACT ASSETS,_4
RECEIVABLES, CONTRACT ASSETS, AND DEFERRED REVENUE - Summary of Unbilled Receivables (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
Receivables [Abstract] | ||
1 year or less | $ 213,719 | $ 226,714 |
1-2 years | 81,280 | |
2-5 years | 14,526 | |
Total | $ 309,525 | |
Percentage of unbilled receivables, 1 Year or Less | 69% | |
Percentage of unbilled receivables, 1-2 Years | 26% | |
Percentage of unbilled receivables, 2-5 Years | 5% | |
Total percentage of unbilled receivables | 100% |
RECEIVABLES, CONTRACT ASSETS,_5
RECEIVABLES, CONTRACT ASSETS, AND DEFERRED REVENUE- Contract Effective (Details) $ in Thousands | Dec. 31, 2022 USD ($) |
Receivables [Abstract] | |
2022 | $ 150,597 |
2021 | 109,024 |
2020 | 30,763 |
2019 | 11,621 |
2018 | 7,520 |
Unbilled revenue total | $ 309,525 |
2022 | 49% |
2021 | 35% |
2020 | 10% |
2019 | 4% |
2018 | 2% |
Total percentage of unbilled revenue | 100% |
RECEIVABLES, CONTRACT ASSETS,_6
RECEIVABLES, CONTRACT ASSETS, AND DEFERRED REVENUE - Summary of Major Clients (Details) | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2022 | Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
Concentration Risk [Line Items] | ||||
Concentration risk percentage | 100% | 100% | 100% | |
Client A | Credit concentration risk | Accounts receivable | ||||
Concentration Risk [Line Items] | ||||
Concentration risk percentage | 1% | |||
Client A | Credit concentration risk | Unbilled receivables | ||||
Concentration Risk [Line Items] | ||||
Concentration risk percentage | 15% | |||
Client A | Credit concentration risk | Total receivables | ||||
Concentration Risk [Line Items] | ||||
Concentration risk percentage | 10% |
RECEIVABLES, CONTRACT ASSETS,_7
RECEIVABLES, CONTRACT ASSETS, AND DEFERRED REVENUE RECEIVABLES, CONTRACT ASSETS, AND DEFERRED REVENUE - Summary of Contract Assets and Deferred Revenue (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
Receivables [Abstract] | ||
Contract assets | $ 17,546 | $ 12,530 |
Contract assets | 16,470 | 10,643 |
Total contract assets | 34,016 | 23,173 |
Deferred revenue | 325,212 | 275,844 |
Long-term deferred revenue | 3,552 | 5,655 |
Total deferred revenue | $ 328,764 | $ 281,499 |
RECEIVABLES, CONTRACT ASSETS,_8
RECEIVABLES, CONTRACT ASSETS, AND DEFERRED REVENUE RECEIVABLES, CONTRACT ASSETS, AND DEFERRED REVENUE - Additional Information (Details) $ in Millions | 12 Months Ended |
Dec. 31, 2022 USD ($) | |
Receivables [Abstract] | |
Revenue recognized during the period that was included in deferred revenue | $ 276.7 |
DEFERRED COMMISSIONS - Schedule
DEFERRED COMMISSIONS - Schedule of Impairment of Deferred Commissions (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
Deferred commissions | $ 130,195 | $ 135,911 |
DEFERRED COMMISSIONS - Schedu_2
DEFERRED COMMISSIONS - Schedule of Amortization of Deferred Commissions (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |||
Amortization of deferred commissions | $ 53,471 | $ 41,387 | $ 33,302 |
PROPERTY AND EQUIPMENT - Compon
PROPERTY AND EQUIPMENT - Components of Property and Equipment, net (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 135,269 | $ 95,174 |
Less: accumulated depreciation | (80,213) | (68,337) |
Property and equipment, net | 55,056 | 26,837 |
Leasehold improvements | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 35,049 | 31,203 |
Computer equipment | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 27,292 | 26,115 |
Furniture and fixtures | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 5,993 | 5,565 |
Computer software purchased | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 9,724 | 8,566 |
Computer software developed for internal use | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 19,869 | 19,463 |
Fixed assets in progress | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 37,342 | $ 4,262 |
PROPERTY AND EQUIPMENT - Additi
PROPERTY AND EQUIPMENT - Additional Information (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
Property, Plant and Equipment [Abstract] | |||
Depreciation expense | $ 14,687 | $ 24,606 | $ 17,378 |
GOODWILL AND OTHER INTANGIBLE_3
GOODWILL AND OTHER INTANGIBLE ASSETS - Changes in Carrying Amount of Goodwill (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Goodwill [Roll Forward] | ||
Beginning balance | $ 81,923 | $ 79,231 |
Acquisition | 0 | 2,701 |
Currency translation adjustments | (524) | (9) |
Ending balance | $ 81,399 | $ 81,923 |
GOODWILL AND OTHER INTANGIBLE_4
GOODWILL AND OTHER INTANGIBLE ASSETS - Schedule of Amortizable Intangible Assets (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Goodwill and Other Intangible Assets [Line Items] | ||
Cost | $ 136,493 | $ 135,668 |
Accumulated Amortization | (125,605) | (121,605) |
Net book value | 10,888 | 14,063 |
Client-related | ||
Goodwill and Other Intangible Assets [Line Items] | ||
Cost | 63,076 | 63,165 |
Accumulated Amortization | (58,623) | (57,342) |
Net book value | 4,453 | 5,823 |
Technology | ||
Goodwill and Other Intangible Assets [Line Items] | ||
Cost | 68,056 | 67,142 |
Accumulated Amortization | (61,621) | (58,902) |
Net book value | 6,435 | 8,240 |
Other | ||
Goodwill and Other Intangible Assets [Line Items] | ||
Cost | 5,361 | 5,361 |
Accumulated Amortization | (5,361) | (5,361) |
Net book value | $ 0 | $ 0 |
Minimum | Client-related | ||
Goodwill and Other Intangible Assets [Line Items] | ||
Useful Lives | 4 years | 4 years |
Minimum | Technology | ||
Goodwill and Other Intangible Assets [Line Items] | ||
Useful Lives | 2 years | 2 years |
Minimum | Other | ||
Goodwill and Other Intangible Assets [Line Items] | ||
Useful Lives | 1 year | 1 year |
Maximum | Client-related | ||
Goodwill and Other Intangible Assets [Line Items] | ||
Useful Lives | 10 years | 10 years |
Maximum | Technology | ||
Goodwill and Other Intangible Assets [Line Items] | ||
Useful Lives | 10 years | 10 years |
Maximum | Other | ||
Goodwill and Other Intangible Assets [Line Items] | ||
Useful Lives | 5 years | 5 years |
GOODWILL AND OTHER INTANGIBLE_5
GOODWILL AND OTHER INTANGIBLE ASSETS - Amortization Expense of Acquired Intangibles (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
Acquired Finite-Lived Intangible Assets [Line Items] | |||
Amortization of intangible assets | $ 4,093 | $ 3,987 | $ 3,970 |
Cost of revenue | |||
Acquired Finite-Lived Intangible Assets [Line Items] | |||
Amortization of intangible assets | 2,723 | 2,516 | 2,487 |
Selling and marketing | |||
Acquired Finite-Lived Intangible Assets [Line Items] | |||
Amortization of intangible assets | $ 1,370 | $ 1,471 | $ 1,483 |
GOODWILL AND OTHER INTANGIBLE_6
GOODWILL AND OTHER INTANGIBLE ASSETS - Estimated Future Amortization Expense Related to Intangible Assets (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
2023 | $ 3,924 | |
2024 | 3,153 | |
2025 | 2,610 | |
2026 | 874 | |
2027 | 327 | |
Net book value | $ 10,888 | $ 14,063 |
SEGMENT INFORMATION - Additiona
SEGMENT INFORMATION - Additional Information (Details) | 12 Months Ended |
Dec. 31, 2022 segment unit | |
Segment Reporting [Abstract] | |
Number of operating segments | segment | 1 |
Number of reporting units | unit | 1 |
SEGMENT INFORMATION - Long Live
SEGMENT INFORMATION - Long Lived Assets by Geographic Area (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
Geographic Areas, Long-Lived Assets [Abstract] | ||
Property and equipment | $ 55,056 | $ 26,837 |
Long-lived assets percentage | 100% | 100% |
U.S. | ||
Geographic Areas, Long-Lived Assets [Abstract] | ||
Property and equipment | $ 50,445 | $ 20,548 |
Long-lived assets percentage | 92% | 77% |
International | ||
Geographic Areas, Long-Lived Assets [Abstract] | ||
Property and equipment | $ 4,611 | $ 6,289 |
Long-lived assets percentage | 8% | 23% |
OTHER ASSETS AND LIABILITIES (D
OTHER ASSETS AND LIABILITIES (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 |
Other Assets and Liabilities [Abstract] | |||
Income tax receivables | $ 25,354 | $ 25,691 | |
Contract assets | 17,546 | 12,530 | |
Other | 37,488 | 29,787 | |
Other current assets | 80,388 | 68,008 | |
Deferred income taxes | 4,795 | 180,656 | |
Deferred commissions | 130,195 | 135,911 | |
Right of use assets | 76,114 | 87,521 | |
Capped call transactions | 2,582 | 59,964 | |
Property and equipment | 55,056 | 26,837 | |
Intangible assets | 10,888 | 14,063 | |
Contract assets | 16,470 | 10,643 | |
Other | 37,889 | 26,006 | |
Other long-term assets | 333,989 | 541,601 | |
Operating lease liabilities | 14,976 | 6,989 | |
Dividends payable | 2,474 | 2,454 | $ 2,428 |
Other current liabilities | 17,450 | 9,443 | |
Deferred revenue | 3,552 | 5,655 | |
Other | 11,576 | 7,844 | |
Other long-term liabilities | $ 15,128 | $ 13,499 |
RESTRUCTURING (Details)
RESTRUCTURING (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
Restructuring and Related Activities [Abstract] | ||||
Restructuring | $ 21,700 | $ 21,743 | $ 0 | $ 0 |
Restructuring | $ 18,600 | $ 18,600 |
LEASES - Narrative (Details)
LEASES - Narrative (Details) ft² in Thousands, $ in Thousands | 1 Months Ended | 12 Months Ended | ||||
Jul. 06, 2021 USD ($) ft² | Mar. 31, 2021 USD ($) | Feb. 28, 2021 USD ($) | Dec. 31, 2021 USD ($) | Dec. 31, 2022 USD ($) | Aug. 01, 2021 USD ($) | |
Lessee, Lease, Description [Line Items] | ||||||
Gain on lease termination | $ 18,000 | $ 18,000 | ||||
Decrease in lease liabilities | 21,100 | |||||
Decrease in operating assets | $ 20,300 | |||||
Base rent to paid, year one | $ 18,476 | |||||
Tenant improvement allowance | $ 11,800 | 3,000 | 8,800 | |||
Lease liability | 94,128 | |||||
Right of use assets | $ 87,521 | $ 76,114 | ||||
Building | ||||||
Lessee, Lease, Description [Line Items] | ||||||
Term of contract | 11 years | 4 years 6 months | ||||
Based rent to paid (annually per year) | $ 2,000 | |||||
Area of office space lease (in square feet) | ft² | 131 | |||||
Base rent to paid, year one | $ 6,000 | |||||
Base rent increase percentage | 0.03 | |||||
Lease liability | $ 42,100 | |||||
Right of use assets | $ 42,100 |
LEASES - Operating Lease Expens
LEASES - Operating Lease Expense (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
Leases [Abstract] | |||
Fixed lease costs | $ 20,186 | $ (1,694) | $ 20,235 |
Short-term lease costs | 3,356 | 2,244 | 1,669 |
Variable lease costs | 3,894 | 4,480 | 4,470 |
Operating lease expenses | $ 27,436 | $ 5,030 | $ 26,374 |
LEASES Right of Use Assets (Det
LEASES Right of Use Assets (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
Leases [Abstract] | ||
Right of use assets | $ 76,114 | $ 87,521 |
Operating lease liabilities | 14,976 | 6,989 |
Long-term operating lease liabilities | $ 79,152 | $ 87,818 |
Operating lease, right-of-use asset, statement of financial position | Other long-term assets | Other long-term assets |
Operating lease, liability, current, statement of financial position | Other current liabilities | Other current liabilities |
LEASES - Remaining Lease Term (
LEASES - Remaining Lease Term (Details) | Dec. 31, 2022 | Dec. 31, 2021 |
Leases [Abstract] | ||
Weighted-average remaining lease term | 7 years 6 months | 7 years 8 months 12 days |
Weighted-average discount rate | 4.10% | 4.40% |
LEASES - Lease Liability Maturi
LEASES - Lease Liability Maturity (Details) $ in Thousands | Dec. 31, 2022 USD ($) |
Leases [Abstract] | |
2023 | $ 18,476 |
2024 | 17,101 |
2025 | 14,444 |
2026 | 10,860 |
2027 | 9,814 |
Thereafter | 39,265 |
Total lease payments | 109,960 |
Less: imputed interest | (15,832) |
Total lease liability | $ 94,128 |
LEASES - Cash Flow information
LEASES - Cash Flow information (Details) - USD ($) $ in Thousands | 1 Months Ended | 12 Months Ended | ||
Feb. 28, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | Jul. 06, 2021 | |
Leases [Abstract] | ||||
Cash paid for operating leases, net of tenant improvement allowances | $ 7,690 | $ 18,428 | ||
Right of use assets recognized for new leases and amendments (non-cash) | 4,733 | 55,068 | ||
Tenant improvement allowance | $ 8,800 | 3,000 | $ 11,800 | |
Gain on lease termination | $ 18,000 | $ 18,000 |
DEBT - Convertible Senior Notes
DEBT - Convertible Senior Notes Narrative (Details) | 1 Months Ended | 12 Months Ended | |
Feb. 29, 2020 USD ($) day $ / shares | Dec. 31, 2022 | Dec. 31, 2021 | |
Debt Instrument [Line Items] | |||
Redemption percentage | 100% | ||
On or after March 1, 2023 | |||
Debt Instrument [Line Items] | |||
Redemption threshold trading days | 40 | ||
Redemption percentage | 100% | ||
Convertible debt | |||
Debt Instrument [Line Items] | |||
Face amount | $ | $ 600,000,000 | ||
Interest rate | 0.75% | 0.75% | 0.75% |
Initial conversion rate | 7.4045 | ||
Debt conversion amount | $ | $ 1,000 | ||
Initial conversion price (in dollars per share) | $ / shares | $ 135.05 | ||
Convertible debt | After the calendar quarter ending on June 30, 2020 | |||
Debt Instrument [Line Items] | |||
Threshold percentage of stock price trigger | 130% | ||
Threshold trading days | 20 | ||
Threshold consecutive trading days | 30 | ||
Convertible debt | Measurement period | |||
Debt Instrument [Line Items] | |||
Threshold percentage of stock price trigger | 98% | ||
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% | ||
Threshold trading days | 20 | ||
Threshold consecutive trading days | 30 |
DEBT - Net Carrying Amount (Det
DEBT - Net Carrying Amount (Details) - Convertible debt - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
Debt Instrument [Line Items] | ||
Principal | $ 600,000 | $ 600,000 |
Unamortized issuance costs | (6,391) | (9,278) |
Convertible senior notes, net | $ 593,609 | $ 590,722 |
DEBT - Interest Expense (Detail
DEBT - Interest Expense (Details) - Convertible debt - USD ($) $ in Thousands | 1 Months Ended | 12 Months Ended | |
Feb. 29, 2020 | Dec. 31, 2022 | Dec. 31, 2021 | |
Debt Instrument [Line Items] | |||
Interest rate | 0.75% | 0.75% | 0.75% |
Contractual interest expense (0.75% coupon) | $ 4,500 | $ 4,500 | |
Amortization of issuance costs | 2,888 | 2,977 | |
Interest expense | $ 7,388 | $ 7,477 | |
Weighted-average effective interest rate | 1.20% | 1.30% |
DEBT - Future Payments of Princ
DEBT - Future Payments of Principal and Contractual Interest (Details) - Convertible debt - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
Principal | ||
2023 | $ 0 | |
2024 | 0 | |
2025 | 600,000 | |
Principal, total due | 600,000 | $ 600,000 |
Interest | ||
2023 | 4,500 | |
2024 | 4,500 | |
2025 | 2,250 | |
Interest expense, total due | 11,250 | |
Total | ||
2023 | 4,500 | |
2024 | 4,500 | |
2025 | 602,250 | |
Principal and interest, total due | $ 611,250 |
DEBT - Capped Call Transactions
DEBT - Capped Call Transactions (Details) $ in Thousands, shares in Millions | 1 Months Ended | 12 Months Ended | ||
Feb. 29, 2020 $ / derivative shares | Dec. 31, 2022 USD ($) $ / derivative shares | Dec. 31, 2021 USD ($) $ / derivative shares | Dec. 31, 2020 USD ($) $ / derivative shares | |
Debt Instrument [Line Items] | ||||
Number of shares issuable upon conversion | shares | 4.4 | 4.4 | 4.4 | 4.4 |
Cap price (in dollars per share) | $ / derivative | 196.44 | 196.44 | 196.44 | 196.44 |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||||
January 1, | $ 59,964 | |||
December 31, | $ 2,582 | $ 59,964 | ||
Capped Call Transactions | ||||
Debt Instrument [Line Items] | ||||
Fair Value, Asset, Recurring Basis, Unobservable Input Reconciliation, Gain (Loss), Statement of Income or Comprehensive Income [Extensible Enumeration] | Gain (Loss) on Derivative Instruments, Net, Pretax | Gain (Loss) on Derivative Instruments, Net, Pretax | ||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||||
January 1, | $ 59,964 | $ 83,597 | ||
Fair value adjustment | (57,382) | (23,633) | ||
December 31, | $ 2,582 | $ 59,964 | $ 83,597 |
DEBT - Credit Facility (Details
DEBT - Credit Facility (Details) | 12 Months Ended | |||
Nov. 30, 2019 USD ($) | Dec. 31, 2022 USD ($) | Mar. 31, 2023 | Dec. 31, 2021 USD ($) | |
Debt Instrument [Line Items] | ||||
Remaining borrowing capacity | $ 0 | $ 0 | ||
Letters of credit outstanding, amount | 27,300,000 | |||
PNC Bank, National Association | Forecast | ||||
Debt Instrument [Line Items] | ||||
Interest coverage ratio, minimum | 3.5 | |||
Credit Agreement | PNC Bank, National Association | ||||
Debt Instrument [Line Items] | ||||
Minimum required cash and investments held | $ 200,000,000 | |||
Credit Agreement | PNC Bank, National Association | Forecast | ||||
Debt Instrument [Line Items] | ||||
Consolidated leverage ratio, maximum | 3.5 | |||
Line of credit | PNC Bank, National Association | Revolving credit facility | ||||
Debt Instrument [Line Items] | ||||
Debt instrument term | 5 years | |||
Senior notes | $ 100,000,000 | |||
Aggregate commitment | $ 200,000,000 |
STOCKHOLDERS' EQUITY - Addition
STOCKHOLDERS' EQUITY - Additional Information (Details) - $ / shares | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Equity [Abstract] | ||
Preferred stock, shares authorized (in shares) | 1,000,000 | 1,000,000 |
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (shares) | 0 | |
Common stock, shares authorized (in shares) | 200,000,000 | 200,000,000 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares issued (in shares) | 82,436,000 | 81,712,000 |
Common stock, shares outstanding (in shares) | 82,436,000 | 81,712,000 |
Quarterly cash dividend intended to pay (in dollars per share) | $ 0.03 |
STOCKHOLDERS' EQUITY - Summary
STOCKHOLDERS' EQUITY - Summary of Dividends Declared and Paid (Details) - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
Equity [Abstract] | |||
Dividends declared (in dollars per share) | $ 0.12 | $ 0.12 | $ 0.12 |
Dividend payments to stockholders | $ 9,834 | $ 9,761 | $ 9,628 |
STOCKHOLDERS' EQUITY - Stock Re
STOCKHOLDERS' EQUITY - Stock Repurchases (Details) - USD ($) shares in Thousands | 12 Months Ended | |||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | Jun. 02, 2022 | |
Equity [Abstract] | ||||
Repurchases unsettled (in shares) | (280) | (432) | (278) | |
Stock Repurchase Program, Remaining Authorized Repurchase Amount [Roll Forward] | ||||
Authorization remaining, beginning of period | $ 22,583,000 | $ 37,726,000 | $ 45,484,000 | |
Authorizations | 60,000,000 | 38,467,000 | 20,516,000 | |
Repurchases | (24,508,000) | (53,610,000) | (28,274,000) | |
Authorization remaining, end of period | $ 58,075,000 | $ 22,583,000 | $ 37,726,000 | |
Stock repurchase program, authorized amount | $ 60,000,000 |
FAIR VALUE MEASUREMENTS - Asset
FAIR VALUE MEASUREMENTS - Assets and Liabilities at Fair Value (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
Fair Value Assets: | ||
Marketable securities | $ 152,167 | $ 202,814 |
Capped Call Transactions | $ 2,582 | $ 59,964 |
Derivative Asset, Statement of Financial Position [Extensible Enumeration] | Other long-term assets | Other long-term assets |
Level 1 | ||
Fair Value Assets: | ||
Marketable securities | $ 0 | $ 0 |
Capped Call Transactions | 0 | 0 |
Level 2 | ||
Fair Value Assets: | ||
Marketable securities | 152,167 | 202,814 |
Capped Call Transactions | 2,582 | 59,964 |
Level 3 | ||
Fair Value Assets: | ||
Marketable securities | 0 | 0 |
Capped Call Transactions | 0 | 0 |
Cash equivalents | ||
Fair Value Assets: | ||
Cash equivalents | 2,526 | 3,216 |
Cash equivalents | Level 1 | ||
Fair Value Assets: | ||
Cash equivalents | 2,526 | 3,216 |
Cash equivalents | Level 2 | ||
Fair Value Assets: | ||
Cash equivalents | 0 | 0 |
Cash equivalents | Level 3 | ||
Fair Value Assets: | ||
Cash equivalents | 0 | 0 |
Venture investments | ||
Fair Value Assets: | ||
Venture investments | 13,069 | 7,648 |
Venture investments | Level 1 | ||
Fair Value Assets: | ||
Venture investments | 0 | 0 |
Venture investments | Level 2 | ||
Fair Value Assets: | ||
Venture investments | 0 | 0 |
Venture investments | Level 3 | ||
Fair Value Assets: | ||
Venture investments | $ 13,069 | $ 7,648 |
FAIR VALUE MEASUREMENTS - Chang
FAIR VALUE MEASUREMENTS - Change in Investment in Privately Held Companies (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||
January 1, | $ 59,964 | |
December 31, | 2,582 | $ 59,964 |
Convertible debt fair value | 521,100 | 642,000 |
Privately held investment | ||
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||
January 1, | 7,648 | 8,345 |
New investments | 1,400 | 500 |
Sales of investments | (4,020) | (2,449) |
Changes in foreign exchange rates | $ (450) | $ (68) |
Fair Value, Asset, Recurring Basis, Unobservable Input Reconciliation, Gain (Loss), Statement of Income or Comprehensive Income [Extensible Enumeration] | Other income, net | Other income, net |
Changes in fair value included in other income | $ 5,989 | $ 100 |
Changes in fair value included in other comprehensive income | 2,502 | 1,220 |
December 31, | $ 13,069 | $ 7,648 |
REVENUE - Revenue by Geographic
REVENUE - Revenue by Geographic Areas (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
Revenues from External Customers and Long-Lived Assets [Line Items] | |||
Total revenue | $ 1,317,845 | $ 1,211,653 | $ 1,017,517 |
Concentration risk percentage | 100% | 100% | 100% |
U.S. | |||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||
Total revenue | $ 763,558 | $ 690,133 | $ 613,844 |
Other Americas | |||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||
Total revenue | 102,980 | 61,339 | 49,441 |
United Kingdom (“U.K.”) | |||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||
Total revenue | 115,793 | 117,580 | 91,517 |
Europe (excluding U.K.), Middle East, and Africa | |||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||
Total revenue | 194,563 | 198,080 | 156,056 |
Asia-Pacific | |||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||
Total revenue | $ 140,951 | $ 144,521 | $ 106,659 |
Sales Revenue, Net | U.S. | Geographic Concentration Risk | |||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||
Concentration risk percentage | 57% | 57% | 61% |
Sales Revenue, Net | Other Americas | Geographic Concentration Risk | |||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||
Concentration risk percentage | 8% | 5% | 5% |
Sales Revenue, Net | United Kingdom (“U.K.”) | Geographic Concentration Risk | |||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||
Concentration risk percentage | 9% | 10% | 9% |
Sales Revenue, Net | Europe (excluding U.K.), Middle East, and Africa | Geographic Concentration Risk | |||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||
Concentration risk percentage | 15% | 16% | 15% |
Sales Revenue, Net | Asia-Pacific | Geographic Concentration Risk | |||
Revenues from External Customers and Long-Lived Assets [Line Items] | |||
Concentration risk percentage | 11% | 12% | 10% |
REVENUE - Disaggregation of Rev
REVENUE - Disaggregation of Revenue (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
Disaggregation of Revenue [Line Items] | |||
Total revenue | $ 1,317,845 | $ 1,211,653 | $ 1,017,517 |
Perpetual license | |||
Disaggregation of Revenue [Line Items] | |||
Total revenue | 19,293 | 32,172 | 28,558 |
Subscription license | |||
Disaggregation of Revenue [Line Items] | |||
Total revenue | 366,063 | 336,248 | 266,352 |
Maintenance | |||
Disaggregation of Revenue [Line Items] | |||
Total revenue | 317,564 | 320,257 | 296,709 |
Pega Cloud | |||
Disaggregation of Revenue [Line Items] | |||
Total revenue | 384,271 | 300,966 | 208,268 |
Subscription services | |||
Disaggregation of Revenue [Line Items] | |||
Total revenue | 701,835 | 621,223 | 504,977 |
Subscription | |||
Disaggregation of Revenue [Line Items] | |||
Total revenue | 1,067,898 | 957,471 | 771,329 |
Consulting | |||
Disaggregation of Revenue [Line Items] | |||
Total revenue | 230,654 | 222,010 | 217,630 |
Transferred at Point in Time | |||
Disaggregation of Revenue [Line Items] | |||
Total revenue | 385,356 | 368,420 | 294,910 |
Transferred at Point in Time | Perpetual license | |||
Disaggregation of Revenue [Line Items] | |||
Total revenue | 19,293 | 32,172 | 28,558 |
Transferred at Point in Time | Subscription license | |||
Disaggregation of Revenue [Line Items] | |||
Total revenue | 366,063 | 336,248 | 266,352 |
Transferred over Time | |||
Disaggregation of Revenue [Line Items] | |||
Total revenue | 932,489 | 843,233 | 722,607 |
Transferred over Time | Maintenance | |||
Disaggregation of Revenue [Line Items] | |||
Total revenue | 317,564 | 320,257 | 296,709 |
Transferred over Time | Pega Cloud | |||
Disaggregation of Revenue [Line Items] | |||
Total revenue | 384,271 | 300,966 | 208,268 |
Transferred over Time | Consulting | |||
Disaggregation of Revenue [Line Items] | |||
Total revenue | $ 230,654 | $ 222,010 | $ 217,630 |
REVENUE - Revenue for Remaining
REVENUE - Revenue for Remaining Performance Obligations Expected to be Recognized (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | $ 1,355,732 | $ 1,344,894 |
Revenue remaining performance obligation (in percent) | 100% | 100% |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-01-01 | ||
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | $ 771,173 | |
Revenue remaining performance obligation (in percent) | 58% | |
Expected timing of satisfaction | 1 year | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-01-01 | ||
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | $ 720,073 | $ 314,123 |
Revenue remaining performance obligation (in percent) | 53% | 23% |
Expected timing of satisfaction | 1 year | 1 year |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-01-01 | ||
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | $ 324,829 | $ 173,120 |
Revenue remaining performance obligation (in percent) | 24% | 13% |
Expected timing of satisfaction | 1 year | 1 year |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2025-01-01 | ||
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | $ 174,001 | $ 86,478 |
Revenue remaining performance obligation (in percent) | 13% | 6% |
Expected timing of satisfaction | 1 year | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2026-01-01 | ||
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | $ 136,829 | |
Revenue remaining performance obligation (in percent) | 10% | |
Expected timing of satisfaction | ||
Maintenance | ||
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | $ 350,628 | $ 367,008 |
Maintenance | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-01-01 | ||
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | $ 234,917 | |
Expected timing of satisfaction | 1 year | |
Maintenance | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-01-01 | ||
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | $ 242,073 | $ 65,502 |
Expected timing of satisfaction | 1 year | 1 year |
Maintenance | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-01-01 | ||
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | $ 66,207 | $ 38,432 |
Expected timing of satisfaction | 1 year | 1 year |
Maintenance | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2025-01-01 | ||
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | $ 26,746 | $ 28,157 |
Expected timing of satisfaction | 1 year | |
Maintenance | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2026-01-01 | ||
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | $ 15,602 | |
Expected timing of satisfaction | ||
Pega Cloud | ||
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | $ 885,688 | $ 731,563 |
Pega Cloud | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-01-01 | ||
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | $ 330,426 | |
Expected timing of satisfaction | 1 year | |
Pega Cloud | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-01-01 | ||
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | $ 379,648 | $ 220,231 |
Expected timing of satisfaction | 1 year | 1 year |
Pega Cloud | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-01-01 | ||
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | $ 246,195 | $ 124,969 |
Expected timing of satisfaction | 1 year | 1 year |
Pega Cloud | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2025-01-01 | ||
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | $ 143,901 | $ 55,937 |
Expected timing of satisfaction | 1 year | |
Pega Cloud | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2026-01-01 | ||
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | $ 115,944 | |
Expected timing of satisfaction | ||
Subscription license | ||
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | $ 71,461 | $ 172,155 |
Subscription license | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-01-01 | ||
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | $ 153,467 | |
Expected timing of satisfaction | 1 year | |
Subscription license | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-01-01 | ||
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | $ 60,668 | $ 14,968 |
Expected timing of satisfaction | 1 year | 1 year |
Subscription license | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-01-01 | ||
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | $ 3,803 | $ 1,955 |
Expected timing of satisfaction | 1 year | 1 year |
Subscription license | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2025-01-01 | ||
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | $ 1,707 | $ 1,765 |
Expected timing of satisfaction | 1 year | |
Subscription license | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2026-01-01 | ||
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | $ 5,283 | |
Expected timing of satisfaction | ||
License, Perpetual | ||
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | $ 7,563 | $ 17,709 |
License, Perpetual | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-01-01 | ||
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | $ 10,952 | |
Expected timing of satisfaction | 1 year | |
License, Perpetual | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-01-01 | ||
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | $ 5,310 | $ 4,505 |
Expected timing of satisfaction | 1 year | 1 year |
License, Perpetual | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-01-01 | ||
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | $ 2,253 | $ 2,252 |
Expected timing of satisfaction | 1 year | 1 year |
License, Perpetual | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2025-01-01 | ||
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | $ 0 | $ 0 |
Expected timing of satisfaction | 1 year | |
License, Perpetual | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2026-01-01 | ||
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | $ 0 | |
Expected timing of satisfaction | ||
Consulting | ||
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | $ 40,392 | $ 56,459 |
Consulting | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-01-01 | ||
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | $ 41,411 | |
Expected timing of satisfaction | 1 year | |
Consulting | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-01-01 | ||
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | $ 32,374 | $ 8,917 |
Expected timing of satisfaction | 1 year | 1 year |
Consulting | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-01-01 | ||
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | $ 6,371 | $ 5,512 |
Expected timing of satisfaction | 1 year | 1 year |
Consulting | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2025-01-01 | ||
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | $ 1,647 | $ 619 |
Expected timing of satisfaction | 1 year | |
Consulting | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2026-01-01 | ||
Disaggregation of Revenue [Line Items] | ||
Revenue remaining performance obligation | $ 0 | |
Expected timing of satisfaction |
STOCK-BASED COMPENSATION - Expe
STOCK-BASED COMPENSATION - Expense Included in Consolidated Statements of Operations (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | |||
Total stock-based compensation before tax | $ 122,210 | $ 115,947 | $ 103,068 |
Income tax benefit | (1,881) | (23,410) | (20,464) |
Cost of revenue | |||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | |||
Total stock-based compensation before tax | 26,400 | 21,822 | 20,796 |
Selling and marketing | |||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | |||
Total stock-based compensation before tax | 46,769 | 54,182 | 46,283 |
Research and development | |||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | |||
Total stock-based compensation before tax | 29,266 | 25,413 | 22,885 |
General and administrative | |||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | |||
Total stock-based compensation before tax | $ 19,775 | $ 14,530 | $ 13,104 |
STOCK-BASED COMPENSATION - Addi
STOCK-BASED COMPENSATION - Additional Information (Details) - USD ($) | 12 Months Ended | 180 Months Ended | ||||
Jan. 01, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2006 | Dec. 31, 2020 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Award vesting period | 5 years | |||||
Shares available for issuance (in shares) | 1,400,000 | |||||
Closing price of company stock (in dollars per share) | $ 34.24 | |||||
Shares exercised (in shares) | 572,000 | |||||
Vesting one year from the grant date | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Award vesting period | 1 year | |||||
Vesting rights percentage | 20% | |||||
Vesting in quarterly installments over the remaining four years | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Award vesting period | 4 years | |||||
Vesting rights percentage | 80% | |||||
Common Stock | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Shares exercised (in shares) | 10,000 | |||||
Weighted-average grant-date fair value (in dollars per share) | $ 42.41 | |||||
Stock options | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Award vesting period | 10 years | |||||
Grants issued (in shares) | 1,000,000 | |||||
Intrinsic value of stock options exercised | $ 15,600,000 | $ 94,300,000 | $ 126,800,000 | |||
Unrecognized stock-based compensation expense, unvested stock options | $ 101,600,000 | |||||
Weighted-average period of expense recognition | 2 years | |||||
Weighted-average grant-date fair value (in dollars per share) | $ 17.49 | $ 37.74 | $ 24.16 | |||
RSUs | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Unrecognized stock-based compensation expense, unvested stock options | $ 65,500,000 | |||||
Weighted-average period of expense recognition | 2 years | |||||
Weighted-average grant date fair value of shares granted (in dollars per share) | $ 74.50 | $ 129.03 | $ 93.68 | |||
Fair value of shares vested | $ 50,300,000 | $ 122,500,000 | $ 108,400,000 | |||
Corporate Incentive Compensation Plan | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Vesting rights percentage | 100% | |||||
Percentage of closing price of common stock | 85% | |||||
Corporate Incentive Compensation Plan | RSUs | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Compensation percentage of target incentive compensation eligible to be elected and received by employees | 50% | |||||
2004 Long-Term Incentive Plan | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Number of shares authorized (in shares) | 36,000,000 | |||||
Number of shares subject to outstanding options and awards (in shares) | 17,300,000 | |||||
Shares available for issuance (in shares) | 1,200,000 | |||||
2004 Long-Term Incentive Plan | RSUs | Non-employee directors | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Annual limited compensation | $ 500,000 | |||||
2006 Employee Stock Purchase Plan | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Number of shares authorized (in shares) | 1,000,000 | |||||
Percentage of fair market value of company stock | 85% | |||||
Purchase price percentage of fair market value | 85% | 95% | ||||
Shares issued (in shares) | 800,000 | |||||
Shares available for issuance (in shares) | 200,000 |
STOCK-BASED COMPENSATION - Sche
STOCK-BASED COMPENSATION - Schedule of Compensating Balances (Details) $ in Thousands | 12 Months Ended |
Dec. 31, 2022 USD ($) | |
Employee Stock | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Compensation expense from 2006 ESPP | $ 1,614 |
STOCK-BASED COMPENSATION - Weig
STOCK-BASED COMPENSATION - Weighted Average Assumptions used in Black Scholes Option Pricing Model (Details) - $ / shares | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Expected annual volatility | 42% | 35% | 31% |
Expected term in years | 3 years 10 months 24 days | 4 years 4 months 24 days | 4 years 6 months |
Risk-free interest rate | 3.40% | 0.60% | 0.70% |
Expected annual dividend yield | 0.10% | 0.20% | 0.20% |
Stock options | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Weighted-average grant-date fair value (in dollars per share) | $ 17.49 | $ 37.74 | $ 24.16 |
STOCK-BASED COMPENSATION - Comb
STOCK-BASED COMPENSATION - Combined Stock Option Activity (Details) $ / shares in Units, shares in Thousands, $ in Thousands | 12 Months Ended |
Dec. 31, 2022 USD ($) $ / shares shares | |
Shares | |
Options outstanding, beginning of period (in shares) | shares | 7,189 |
Granted (in shares) | shares | 9,725 |
Exercised (in shares) | shares | (572) |
Forfeited (in shares) | shares | (1,153) |
Expired (in shares) | shares | (278) |
Options outstanding, end of period (in shares) | shares | 14,911 |
Vested and expected to vest (in shares) | shares | 12,449 |
Exercisable (in shares) | shares | 3,901 |
Weighted-average Exercise Price | |
Options outstanding, beginning of period (in dollars per share) | $ / shares | $ 74.94 |
Granted (in dollars per share) | $ / shares | 50.35 |
Exercised (in dollars per share) | $ / shares | 25.17 |
Forfeited (in dollars per share) | $ / shares | 87.71 |
Expired (in dollars per share) | $ / shares | 82.83 |
Options outstanding, end of period (in dollars per share) | $ / shares | 59.67 |
Vested and expected to vest (in dollars per share) | $ / shares | 59.06 |
Exercisable (in dollars per share) | $ / shares | $ 64.76 |
Weighted-average remaining contractual term | |
Vested and expected to vest | 8 years 1 month 6 days |
Exercisable | 5 years 3 months 18 days |
Aggregate intrinsic value | |
Vested and expected to vest | $ | $ 9,476 |
Exercisable | $ | $ 8,056 |
STOCK-BASED COMPENSATION - Co_2
STOCK-BASED COMPENSATION - Combined Restricted Stock Units Activity (Details) - RSUs - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
Shares | |||
Nonvested, beginning of period (in shares) | 2,054 | ||
Granted (in shares) | 1,571 | ||
Vested (in shares) | (795) | ||
Forfeited (in shares) | (479) | ||
Nonvested, end of period (in shares) | 2,351 | 2,054 | |
Expected to vest (shares) | 1,716 | ||
Weighted- Average Grant-Date Fair Value | |||
Nonvested, beginning of period (in dollars per share) | $ 99.36 | ||
Granted (in dollars per share) | 74.50 | $ 129.03 | $ 93.68 |
Vested (in dollars per share) | 93.72 | ||
Forfeited (in dollars per share) | 95.13 | ||
Nonvested, end of period (in dollars per share) | 85.52 | $ 99.36 | |
Expected to vest (in dollars per share) | $ 85.17 | ||
Aggregate Intrinsic Value | |||
Nonvested | $ 80,497 | ||
Expected to vest | $ 58,772 |
EMPLOYEE BENEFIT PLANS (Details
EMPLOYEE BENEFIT PLANS (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
Defined Contribution Plan Disclosure [Line Items] | |||
Defined contribution plan, expense | $ 30,135 | $ 29,659 | $ 24,241 |
U.S. 401(k) Plan | |||
Defined Contribution Plan Disclosure [Line Items] | |||
Defined contribution plan, expense | 8,994 | 8,879 | 8,109 |
International plans | |||
Defined Contribution Plan Disclosure [Line Items] | |||
Defined contribution plan, expense | $ 21,141 | $ 20,780 | $ 16,132 |
INCOME TAXES - Schedule of Comp
INCOME TAXES - Schedule of Components of (loss) before Provision for (benefit from) Income Taxes (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
Income Tax Disclosure [Abstract] | |||
Domestic | $ (185,820) | $ (125,947) | $ (59,281) |
Foreign | 24,023 | (6,040) | (65,608) |
(Loss) before provision for (benefit from) income taxes | $ (161,797) | $ (131,987) | $ (124,889) |
INCOME TAXES - Schedule of Co_2
INCOME TAXES - Schedule of Components of Provision for (benefit from) Income Taxes (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
Current: | |||
Federal | $ 3,920 | $ 1,921 | $ (11,251) |
State | 775 | 363 | 399 |
Foreign | 10,200 | 4,105 | 7,113 |
Total current provision for (benefit from) | 14,895 | 6,389 | (3,739) |
Deferred: | |||
Federal | 149,028 | (42,214) | (34,573) |
State | 20,704 | (9,413) | (8,119) |
Foreign | (842) | (23,709) | (17,085) |
Total deferred provision (benefit) | 168,890 | (75,336) | (59,777) |
Income tax expense (benefit), total | $ 183,785 | $ (68,947) | $ (63,516) |
INCOME TAXES - Reconciliation o
INCOME TAXES - Reconciliation of Effective Income Tax Rate from Statutory Federal Income Tax Rate (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
Income Tax Disclosure [Abstract] | |||
U.S. federal income taxes at statutory rates | $ (33,977) | $ (27,717) | $ (26,227) |
Valuation allowance | 188,258 | (469) | (5,881) |
State income taxes, net of federal benefit and tax credits | (2,433) | (7,217) | (6,994) |
Permanent differences | 11,561 | 541 | 1,773 |
Federal research and experimentation credits | (5,012) | (6,380) | (5,716) |
Tax effects of foreign activities | 3,770 | 3,599 | 3,050 |
GILTI, FDII, and BEAT | 16,390 | 0 | 0 |
Provision to return adjustments | (6,317) | (2,016) | 3,416 |
Non-deductible compensation | 4,769 | 5,464 | 1,806 |
Expiration of statutes and changes in estimates | 5,673 | (2,250) | 55 |
Excess tax benefits related to stock-based compensation | 1,563 | (20,697) | (25,797) |
CARES Act | 0 | 0 | (10,576) |
Impact of change in tax law | (793) | (11,811) | 7,489 |
Other | 333 | 6 | 86 |
Income tax expense (benefit), total | $ 183,785 | $ (68,947) | $ (63,516) |
INCOME TAXES - Additional Infor
INCOME TAXES - Additional Information (Details) - USD ($) $ in Thousands | 12 Months Ended | |||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | |
Income Tax Contingency [Line Items] | ||||
Recognition of valuation allowance on deferred tax assets | $ 188,300 | |||
Unrecognized tax benefits | 19,746 | $ 17,584 | $ 23,801 | $ 23,271 |
Federal | ||||
Income Tax Contingency [Line Items] | ||||
Carryforwards with unlimited carryforward period | 119,900 | |||
State | ||||
Income Tax Contingency [Line Items] | ||||
Carryforwards with unlimited carryforward period | $ 1,200 |
INCOME TAXES - Components of Ne
INCOME TAXES - Components of Net Deferred Tax Asset and Liabilities (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Dec. 31, 2021 |
Deferred tax assets: | ||
Net operating loss carryforwards | $ 109,286 | $ 133,164 |
Accruals and reserves | 32,467 | 38,526 |
Interest expense carryforward | 208 | 7,759 |
Software revenue | 1,828 | 336 |
Convertible senior notes | 5,794 | 8,362 |
Depreciation | 3,698 | 3,764 |
Tax credit carryforwards | 39,122 | 40,590 |
Research and development capitalization | 38,425 | 0 |
Other | 622 | 1,015 |
Total deferred tax assets | 231,450 | 233,516 |
Valuation allowances | (212,808) | (25,855) |
Total net deferred tax assets | 18,642 | 207,661 |
Deferred tax liabilities: | ||
Capped call transactions | (644) | (14,961) |
Convertible senior notes | 0 | 0 |
Software revenue | 0 | 0 |
Intangibles | (14,280) | (12,044) |
Total deferred tax liabilities | (14,924) | (27,005) |
Deferred tax assets, net | $ 3,718 | $ 180,656 |
INCOME TAXES - Net Operating Lo
INCOME TAXES - Net Operating Losses and Credit Carryforwards (Details) $ in Thousands | Dec. 31, 2022 USD ($) |
Federal | |
Operating Loss Carryforwards [Line Items] | |
Net operating losses | $ 147,294 |
Credit carryforwards | 29,080 |
Net operating losses expected to expire unused | 19,800 |
Tax credits expected to expire unused | 100 |
State | |
Operating Loss Carryforwards [Line Items] | |
Net operating losses | 10,807 |
Credit carryforwards | 1,686 |
Net operating losses expected to expire unused | 800 |
Tax credits expected to expire unused | 9,200 |
OpenSpan, Inc. | Federal | |
Operating Loss Carryforwards [Line Items] | |
Net operating losses | 27,442 |
Credit carryforwards | 640 |
OpenSpan, Inc. | State | |
Operating Loss Carryforwards [Line Items] | |
Net operating losses | 2,849 |
Credit carryforwards | $ 60 |
INCOME TAXES - Reconciliation_2
INCOME TAXES - Reconciliation of Beginning and Ending Balances of Gross Unrecognized Tax Benefits (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 | |
Reconciliation of Unrecognized Tax Benefits, Excluding Amounts Pertaining to Examined Tax Returns [Roll Forward] | |||
Balance at beginning of period | $ 17,584 | $ 23,801 | $ 23,271 |
Additions for tax positions related to the current year | 1,706 | 653 | 653 |
Additions for tax positions of prior years | 728 | 0 | 962 |
Reductions for tax positions of prior years | (272) | (6,870) | (1,085) |
Balance at end of period | $ 19,746 | $ 17,584 | $ 23,801 |
(LOSS) PER SHARE (Details)
(LOSS) PER SHARE (Details) $ / shares in Units, shares in Thousands, $ in Thousands | 1 Months Ended | 12 Months Ended | ||
Feb. 29, 2020 $ / derivative shares | Dec. 31, 2022 USD ($) $ / shares $ / derivative shares | Dec. 31, 2021 USD ($) $ / shares $ / derivative shares | Dec. 31, 2020 USD ($) $ / shares $ / derivative shares | |
Earnings Per Share [Abstract] | ||||
Net (loss) | $ | $ (345,582) | $ (63,040) | $ (61,373) | |
Weighted-average common shares outstanding (in shares) | 81,947 | 81,387 | 80,336 | |
(Loss) per share, basic (in dollars per share) | $ / shares | $ (4.22) | $ (0.77) | $ (0.76) | |
Weighted - average common shares outstanding, assuming dilution (in shares) | 81,947 | 81,387 | 80,336 | |
(Loss) per share, diluted (in dollars per share) | $ / shares | $ (4.22) | $ (0.77) | $ (0.76) | |
Outstanding anti-dilutive stock options and RSUs (in shares) | 3,367 | 5,862 | 6,278 | |
Convertible debt (in shares) | 4,400 | 4,400 | 4,400 | |
Number of shares issuable upon conversion | 4,400 | 4,400 | 4,400 | 4,400 |
Cap price (in dollars per share) | $ / derivative | 196.44 | 196.44 | 196.44 | 196.44 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details) - USD ($) | 4 Months Ended | ||
May 09, 2022 | Sep. 15, 2022 | Dec. 31, 2022 | |
Loss Contingencies [Line Items] | |||
Letters of credit outstanding, amount | $ 27,300,000 | ||
Appian Corp. v. Pegasystems Inc. & Youyong Zou | |||
Loss Contingencies [Line Items] | |||
Letters of credit outstanding, amount | $ 25,000,000 | ||
Appian Corp. v. Pegasystems Inc. & Youyong Zou | Judicial Ruling | |||
Loss Contingencies [Line Items] | |||
Loss contingency, damages awarded, value | $ 2,060,479,287 | ||
Trade Secret Misappropriation | Appian Corp. v. Pegasystems Inc. & Youyong Zou | |||
Loss Contingencies [Line Items] | |||
Legal fees, post-judgement interest rate | 6% | ||
Trade Secret Misappropriation | Appian Corp. v. Pegasystems Inc. & Youyong Zou | Judicial Ruling | |||
Loss Contingencies [Line Items] | |||
Loss contingency, damages awarded, value | $ 2,036,860,045 | ||
Violation of the Virginia Computer Crimes Act | Appian Corp. v. Pegasystems Inc. & Youyong Zou | Judicial Ruling | |||
Loss Contingencies [Line Items] | |||
Loss contingency, damages awarded, value | $ 1 |