PEGASYSTEMS INC 10-Q

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market risk represents the risk of loss from adverse changes in financial market prices and rates. Foreign currency exposure Translation risk Our foreign operations’ operating expenses are primarily denominated in foreign currencies. However, our international sales are also primarily denominated in foreign currencies, which partially offsets our foreign currency exposure. A hypothetical 10% strengthening in the U.S. dollar against other currencies would have resulted in: Three Months Ended March 31, 2021 2020 (Decrease) increase in revenue (4) % (3) % (Decrease) increase in net income 20 % (14) % Remeasurement risk We experience fluctuations in transaction gains and losses from the remeasurement of monetary assets and liabilities denominated in currencies other than the functional currency of the entities in which they are recorded. We are primarily exposed to changes in foreign currency exchange rates associated with the Australian dollar, Euro, and U.S. dollar-denominated cash and cash equivalents, receivables, and intercompany receivables and payables held by our U.K. subsidiary, a British pound functional entity. A hypothetical 10% strengthening in the British pound exchange rate in comparison to the Australian dollar, Euro, and U.S. dollar would have resulted in the following impact: Three Months Ended March 31, (in thousands) 2021 2020 Foreign currency gain (loss) $ (7,522) $ 7,190 24