What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-10-26 compared with 2022-07-27 · 148 added, 118 removed, 575 unchanged (32% of the section changed)

3 unchanged sentences

(in thousands)

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Current assets:

28 unchanged sentences

82,164 and 81,712 shares issued and outstanding at

June 30, 2022 and December 31, 2021, respectively

September 30, 2022 and December 31, 2021, respectively

Additional paid-in capital 204,189 145,810

9 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

16 unchanged sentences

Total operating expenses 254,902 237,383 788,654 706,813

(Loss) income from operations ( 85,040 ) 1,192 ( 66,420 ) 2,793

(Loss) from operations ( 77,221 ) ( 65,337 ) ( 143,641 ) ( 62,544 )

Foreign currency transaction gain (loss) 3,826 518 8,415 ( 4,983 )

1 unchanged sentence

Interest expense ( 1,992 ) ( 1,908 ) ( 5,882 ) ( 5,747 )

(Loss) income on capped call transactions ( 18,945 ) 26,309 ( 49,505 ) 7,192

Other income, net 3,785 — 6,526 106

(Loss) income before provision for (benefit from) income taxes ( 100,122 ) 25,375 ( 108,184 ) 1,140

(Loss) on capped call transactions ( 6,876 ) ( 14,735 ) ( 56,381 ) ( 7,543 )

Other (loss) income, net ( 29 ) 2 6,497 108

(Loss) before provision for (benefit from) income taxes ( 81,772 ) ( 81,294 ) ( 189,956 ) ( 80,154 )

Provision for (benefit from) income taxes 11,748 ( 24,826 ) 190,239 ( 54,360 )

Net (loss) income $ ( 286,296 ) $ 37,291 $ ( 286,675 ) $ 30,674

(Loss) earnings per share

Net (loss) $ ( 93,520 ) $ ( 56,468 ) $ ( 380,195 ) $ ( 25,794 )

(Loss) per share

Basic $ ( 1.14 ) $ ( 0.69 ) $ ( 4.65 ) $ ( 0.32 )

5 unchanged sentences

PEGASYSTEMS INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS)

(in thousands)

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Net (loss) income $ ( 286,296 ) $ 37,291 $ ( 286,675 ) $ 30,674

Other comprehensive (loss) income, net of tax

Net (loss) $ ( 93,520 ) $ ( 56,468 ) $ ( 380,195 ) $ ( 25,794 )

Other comprehensive (loss), net of tax

Unrealized (loss) gain on available-for-sale securities ( 73 ) 53 ( 1,000 ) 1,184

Foreign currency translation adjustments ( 6,700 ) ( 4,400 ) ( 20,936 ) ( 3,669 )

Total other comprehensive (loss) income, net of tax $ ( 12,615 ) $ 1,582 $ ( 15,163 ) $ 1,862

Comprehensive (loss) income $ ( 298,911 ) $ 38,873 $ ( 301,838 ) $ 32,536

Total other comprehensive (loss), net of tax $ ( 6,773 ) $ ( 4,347 ) $ ( 21,936 ) $ ( 2,485 )

Comprehensive (loss) $ ( 100,293 ) $ ( 60,815 ) $ ( 402,131 ) $ ( 28,279 )

See notes to unaudited condensed consolidated financial statements.

26 unchanged sentences

June 30, 2021 81,456 $ 815 $ 147,670 $ 375,069 $ ( 1,086 ) $ 522,468

Repurchase of common stock ( 96 ) ( 1 ) ( 12,795 ) — — ( 12,796 )

Issuance of common stock for stock compensation plans 286 3 ( 18,117 ) — — ( 18,114 )

Issuance of common stock under the employee stock purchase plan 24 — 2,639 — — 2,639

Stock-based compensation — — 28,701 — — 28,701

Cash dividends declared ($ 0.03 per share)

— — — ( 2,451 ) — ( 2,451 )

Other comprehensive (loss) — — — — ( 4,347 ) ( 4,347 )

Net (loss) — — — ( 56,468 ) — ( 56,468 )

September 30, 2021 81,670 $ 817 $ 148,098 $ 316,150 $ ( 5,433 ) $ 459,632

PEGASYSTEMS INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except per share amounts)

Paid-In Capital Retained Earnings (Accumulated Deficit) Accumulated Other Comprehensive (Loss)

Stockholders’ Equity

of Shares Amount

December 31, 2021 81,712 $ 817 $ 145,810 $ 276,449 $ ( 6,988 ) $ 416,088

17 unchanged sentences

June 30, 2022 81,940 $ 819 $ 170,251 $ ( 15,140 ) $ ( 22,151 ) $ 133,779

Issuance of common stock for stock compensation plans 138 2 ( 2,198 ) — — ( 2,196 )

Issuance of common stock under the employee stock purchase plan 86 1 2,362 — — 2,363

Stock-based compensation — — 33,774 — — 33,774

Cash dividends declared ($ 0.03 per share)

— — — ( 2,466 ) — ( 2,466 )

Other comprehensive (loss) — — — — ( 6,773 ) ( 6,773 )

Net (loss) — — — ( 93,520 ) — ( 93,520 )

September 30, 2022 82,164 $ 822 $ 204,189 $ ( 111,126 ) $ ( 28,924 ) $ 64,961

See notes to unaudited condensed consolidated financial statements.

2 unchanged sentences

(in thousands)

Six Months Ended

Nine Months Ended

September 30,

Operating activities

Net (loss) income $ ( 286,675 ) $ 30,674

Adjustments to reconcile net (loss) income to cash (used in) provided by operating activities

Net (loss) $ ( 380,195 ) $ ( 25,794 )

Adjustments to reconcile net (loss) to cash (used in) operating activities

Stock-based compensation 93,301 89,483

Deferred income taxes 169,489 ( 53,638 )

Loss (gain) on capped call transactions 49,505 ( 7,192 )

Loss on capped call transactions 56,381 7,543

Amortization of deferred commissions 39,752 31,388

4 unchanged sentences

Change in operating assets and liabilities, net ( 5,935 ) ( 97,836 )

Cash (used in) provided by operating activities ( 5,069 ) 19,410

Cash (used in) operating activities ( 13,446 ) ( 5,321 )

Investing activities

4 unchanged sentences

Investment in property and equipment ( 22,285 ) ( 7,089 )

Cash (used in) provided by investing activities ( 1,523 ) 10,493

Cash provided by investing activities 10,104 42,730

Financing activities

21 unchanged sentences

MARKETABLE SECURITIES

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

(in thousands) Amortized Cost Unrealized Gains Unrealized Losses Fair Value Amortized Cost Unrealized Gains Unrealized Losses Fair Value

2 unchanged sentences

$ 171,886 $ — $ ( 3,801 ) $ 168,085 $ 203,659 $ 2 $ ( 847 ) $ 202,814

As of June 30, 2022, marketable securities’ maturities ranged from July 2022 to November 2024, with a weighted-average remaining maturity of 0.9 years.

As of September 30, 2022, marketable securities’ maturities ranged from November 2022 to November 2024, with a weighted-average remaining maturity of 0.7 years.

RECEIVABLES, CONTRACT ASSETS, AND DEFERRED REVENUE

(in thousands)

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Accounts receivable $ 139,670 $ 182,717

6 unchanged sentences

(Dollars in thousands)

June 30, 2022

September 30, 2022

1 year or less $ 182,403 63 %

4 unchanged sentences

(Dollars in thousands)

June 30, 2022

September 30, 2022

2022 $ 87,874 30 %

8 unchanged sentences

Clients accounting for 10% or more of the Company’s total receivables:

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Accounts receivable * 1 %

5 unchanged sentences

(in thousands)

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Contract assets (1)

8 unchanged sentences

(in thousands)

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Deferred revenue $ 245,146 $ 275,844

2 unchanged sentences

(1) Included in other long-term liabilities.

The change in deferred revenue in the six months ended June 30, 2022 was primarily due to new billings in advance of revenue recognition offset by $ 205.0 million of revenue recognized during the period that was included in deferred revenue as of December 31, 2021.

The change in deferred revenue in the nine months ended September 30, 2022 was primarily due to new billings in advance of revenue recognition offset by $ 252.8 million of revenue recognized during the period that was included in deferred revenue as of December 31, 2021.

DEFERRED COMMISSIONS

(in thousands)

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Deferred commissions (1)

2 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(in thousands) 2022 2021 2022 2021

6 unchanged sentences

Change in goodwill:

Six Months Ended

Nine Months Ended

September 30,

(in thousands)

2 unchanged sentences

Currency translation adjustments ( 722 ) 22

June 30, $ 81,717 $ 82,173

September 30, $ 81,201 $ 81,954

Intangible assets are recorded at cost and amortized using the straight-line method over their estimated useful lives.

June 30, 2022

September 30, 2022

(in thousands) Useful Lives Cost Accumulated Amortization Net Book Value (1)

17 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(in thousands) 2022 2021 2022 2021

6 unchanged sentences

(in thousands)

June 30, 2022

September 30, 2022

Remainder of 2022 $ 1,048

1 unchanged sentence

Other current assets

(in thousands) June 30, 2022 December 31, 2021

(in thousands) September 30, 2022 December 31, 2021

Income tax receivables $ 11,948 $ 25,691

5 unchanged sentences

Other long-term assets

(in thousands) June 30, 2022 December 31, 2021

(in thousands) September 30, 2022 December 31, 2021

Deferred income taxes $ 6,041 $ 180,656

9 unchanged sentences

Other current liabilities

(in thousands) June 30, 2022 December 31, 2021

(in thousands) September 30, 2022 December 31, 2021

Operating lease liabilities $ 5,787 $ 6,989

2 unchanged sentences

Other long-term liabilities

(in thousands) June 30, 2022 December 31, 2021

(in thousands) September 30, 2022 December 31, 2021

Deferred revenue $ 3,949 $ 5,655

10 unchanged sentences

The annual rent equals the base rent plus a portion of building operating costs and real estate taxes.

Rent first becomes payable on August 1, 2022.

Rent first became payable on August 1, 2022.

Base rent for the first year is approximately $ 6 million and will increase by 3 % annually.

2 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(in thousands) 2022 2021 2022 2021

4 unchanged sentences

$ 6,509 $ ( 1,467 ) $ 19,652 $ ( 1,438 )

(1) The lower fixed lease costs in the six months ended June 30, 2021 was due to the modification of the corporate headquarters lease.

(1) The lower fixed lease costs in the nine months ended September 30, 2021 was due to the modification of the corporate headquarters lease.

PEGASYSTEMS INC.

1 unchanged sentence

Right of use assets and lease liabilities

(in thousands) June 30, 2022 December 31, 2021

(in thousands) September 30, 2022 December 31, 2021

Right of use assets (1)

7 unchanged sentences

Weighted-average remaining lease term and discount rate for the Company’s leases were:

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Weighted-average remaining lease term 7.4 years 7.7 years

4 unchanged sentences

Maturities of lease liabilities:

(in thousands) June 30, 2022

(in thousands) September 30, 2022

Remainder of 2022 $ ( 4,717 )

4 unchanged sentences

Cash flow information

Six Months Ended

Nine Months Ended

September 30,

(in thousands) 2022 2021

17 unchanged sentences

• 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).

As of June 30, 2022, the Notes were not eligible for conversion.

As of September 30, 2022, the Notes were not eligible for conversion.

Repurchase rights

3 unchanged sentences

Carrying value of the Notes:

(in thousands) June 30, 2022 December 31, 2021

(in thousands) September 30, 2022 December 31, 2021

Principal $ 600,000 $ 600,000

3 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(in thousands) 2022 2021 2022 2021

5 unchanged sentences

The effective interest rate for the Notes:

Six Months Ended

Nine Months Ended

September 30,

Weighted-average effective interest rate 1.2 % 1.2 %

Future payments of principal and contractual interest:

June 30, 2022

September 30, 2022

(in thousands) Principal Interest Total

Remainder of 2022 $ — $ 2,250 $ 2,250

2023 $ — $ 4,500 $ 4,500

12 unchanged sentences

Change in capped call transactions:

Six Months Ended

Nine Months Ended

September 30,

(in thousands) 2022 2021

1 unchanged sentence

Fair value adjustment ( 56,381 ) ( 7,543 )

June 30, $ 10,459 $ 90,789

September 30, $ 3,583 $ 76,054

Credit facility

7 unchanged sentences

must maintain at least $ 200 million in cash, investments, and availability under the Revolving Credit Loan.

• Beginning with the quarter ended 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 June 30, 2022 and December 31, 2021, the Company had no outstanding borrowings under the Credit Facility.

• Beginning with the fiscal quarter ended 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 September 30, 2022 and December 31, 2021, the Company had no outstanding cash borrowings under the Credit Facility.

As of September 30, 2022, the Company had $ 27.3 million in outstanding letters of credit which reduce the available borrowing capacity under the Credit Facility.

FAIR VALUE MEASUREMENTS

12 unchanged sentences

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.

PEGASYSTEMS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Assets and liabilities measured at fair value on a recurring basis:

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

(in thousands) Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total

7 unchanged sentences

(2) Investments in privately-held companies.

PEGASYSTEMS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Changes in venture investments:

Six Months Ended

Nine Months Ended

September 30,

(in thousands) 2022 2021

6 unchanged sentences

included in other comprehensive income 2,502 1,220

June 30, $ 16,073 $ 9,779

The carrying value of certain other financial instruments, including receivables and accounts payable, approximates fair value due to these items’ short maturity.

September 30, $ 11,910 $ 9,713

The carrying value of certain other financial instruments, including receivables and accounts payable, approximates fair value due to these items’ short maturities.

Fair value of the Notes

The Notes’ fair value (including the conversion feature embedded in the Notes) was $ 482.5 million as of June 30, 2022 and $ 642.0 million as of December 31, 2021.

The Notes’ fair value (including the conversion feature embedded in the Notes) was $ 488.3 million as of September 30, 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.

1 unchanged sentence

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(Dollars in thousands)

8 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(in thousands)

8 unchanged sentences

Total revenue $ 270,731 $ 256,268 $ 921,375 $ 895,469

PEGASYSTEMS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(in thousands) 2022 2021 2022 2021

7 unchanged sentences

$ 270,731 $ 256,268 $ 921,375 $ 895,469

PEGASYSTEMS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Remaining performance obligations ("Backlog")

Expected future revenue from existing non-cancellable contracts:

As of June 30, 2022:

As of September 30, 2022:

(Dollars in thousands) Subscription services Subscription license Perpetual license Consulting Total

7 unchanged sentences

$ 286,880 $ 739,638 $ 77,020 $ 7,571 $ 36,823 $ 1,147,932 100 %

As of June 30, 2021:

As of September 30, 2021:

(Dollars in thousands) Subscription services Subscription license Perpetual license Consulting Total

7 unchanged sentences

$ 327,696 $ 571,461 $ 66,802 $ 22,971 $ 45,096 $ 1,034,026 100 %

Major clients

Clients accounting for 10% or more of the Company’s total revenue:

Three Months Ended

June 30, Six Months Ended

(Dollars in thousands) 2022 2021 2022 2021

Total revenue $ 274,337 $ 325,702 $ 650,644 $ 639,201

Client A * 13 % * *

STOCK-BASED COMPENSATION

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(in thousands) 2022 2021 2022 2021

10 unchanged sentences

$ ( 600 ) $ ( 5,845 ) $ ( 1,505 ) $ ( 18,028 )

As of June 30, 2022, the Company had $ 195.7 million of unrecognized stock-based compensation expense, net of estimated forfeitures, which is expected to be recognized over a weighted-average period of 2.1 years.

Six Months Ended

June 30, 2022

As of September 30, 2022, the Company had $ 161.0 million of unrecognized stock-based compensation expense, net of estimated forfeitures, which is expected to be recognized over a weighted-average period of 2.1 years.

Nine Months Ended

September 30, 2022

(in thousands) Shares Total Fair Value

3 unchanged sentences

4,529 $ 102,332

Common stock 14 $ 600

PEGASYSTEMS INC.

2 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(Dollars in thousands) 2022 2021 2022 2021

1 unchanged sentence

Effective income tax rate (benefit rate) 100 % ( 68 ) %

The change in the effective income tax rate (benefit rate) in the six months ended June 30, 2022 was primarily due to the recognition of a $ 191.9 million valuation allowance on the Company’s deferred tax assets.

The change in the effective income tax rate (benefit rate) in the nine months ended September 30, 2022 was primarily due to the recognition of a $ 191.9 million valuation allowance recognized at June 30, 2022, on the Company’s U.S.

and U.K deferred tax assets.

As a result of recording the valuation allowance, the Company is no longer recording any income tax benefit on its U.S and U.K losses.

The $ 11.7 million provision for (benefit from) income taxes for the three months ended September 30, 2022 primarily represents non-U.K.

foreign income taxes.

The Company recognizes deferred tax assets to the extent that it believes that these assets are more likely than not to be realized.

1 unchanged sentence

The Company’s deferred tax valuation allowance requires significant judgment and uncertainties, including assumptions about future taxable income based on historical and projected information.

On a quarterly basis, the Company reassess 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.

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.

3 unchanged sentences

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 no longer 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 net deferred tax assets.

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.

net deferred tax assets.

Accordingly, the Company recorded a valuation allowance of $ 191.9 million in income tax expense during the three months ended June 30, 2022.

(LOSS) EARNINGS PER SHARE

Basic (loss) earnings per share is calculated using the weighted-average number of common shares outstanding during the period.

Diluted (loss) earnings 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) earnings per share:

The Company intends to continue maintaining a full valuation allowance on our U.S and U.K deferred tax assets until there is sufficient evidence to support the realization of these deferred tax assets.

(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:

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(in thousands, except per share amounts) 2022 2021 2022 2021

Net (loss) income $ ( 286,296 ) $ 37,291 $ ( 286,675 ) $ 30,674

Net (loss) $ ( 93,520 ) $ ( 56,468 ) $ ( 380,195 ) $ ( 25,794 )

Weighted-average common shares outstanding 81,996 81,526 81,842 81,284

(Loss) earnings per share, basic $ ( 3.50 ) $ 0.46 $ ( 3.51 ) $ 0.38

Net (loss) income $ ( 286,296 ) $ 37,291 $ ( 286,675 ) $ 30,674

Interest expense associated with convertible debt instruments, net of tax — 1,351 — —

Numerator for diluted EPS $ ( 286,296 ) $ 38,642 $ ( 286,675 ) $ 30,674

Weighted-average effect of dilutive securities:

Convertible debt — 4,443 — —

Stock options — 3,266 — 3,416

RSUs — 1,295 — 1,429

Effect of dilutive securities — 9,004 — 4,845

(Loss) per share, basic $ ( 1.14 ) $ ( 0.69 ) $ ( 4.65 ) $ ( 0.32 )

Net (loss) $ ( 93,520 ) $ ( 56,468 ) $ ( 380,195 ) $ ( 25,794 )

Weighted-average common shares outstanding, assuming dilution (1) (2) (3)

81,996 81,526 81,842 81,284

(Loss) earnings per share, diluted $ ( 3.50 ) $ 0.43 $ ( 3.51 ) $ 0.36

(Loss) per share, diluted $ ( 1.14 ) $ ( 0.69 ) $ ( 4.65 ) $ ( 0.32 )

Outstanding anti-dilutive stock options and RSUs (4)

8 unchanged sentences

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) earnings per share.

(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.

5 unchanged sentences

In addition, as the Company is a party to ongoing litigation, it is at least reasonably possible that our estimates will change in the near term and the effect may be material.

As of June 30, 2022 and December 31, 2021, the Company has no accrued losses for litigation.

As of September 30, 2022 and December 31, 2021, the Company has no accrued losses for litigation.

Pegasystems Inc.

7 unchanged sentences

On April 15, 2022, each of the parties filed motions for summary judgment with the court.

These motions were heard on July 15, 2022 and no decision has been rendered as of the date of this filing .

On September 30, 2022, the court entered an order allowing in part and denying in part each party’s motion for summary judgment, thereby narrowing the potential issues for trial.

On October 24, 2022, the court entered an order setting a trial date of January 3, 2023.

The Company continues to believe the counterclaims brought by Appian against the Company are without merit, and the Company intends to vigorously pursue its claims against Appian and defend against the counterclaims brought against the Company in this matter.

8 unchanged sentences

The jury awarded damages in the amount of $ 2,036,860,045 for trade secret misappropriation and $ 1.00 for the violation of the Virginia Computer Crimes Act.

Since the jury rendering its verdict, the Company and Appian have filed post-trial motions with the court.

On May 26, 2022, the Company filed a motion for judicial investigation of juror misconduct.

Appian filed its opposition on June 17, 2022.

A hearing on that motion is scheduled for July 28, 2022.

On June 8, 2022, the Company filed a motion to set aside the verdict, Appian filed a response with the court on July 8, 2022, and the Company filed a reply to Appian’s filing on July 22, 2022.

Also on June 8, 2022, Appian filed a motion for attorneys’ fees and costs and for post-judgment interest, seeking an award of attorneys’ fees in the amount of approximately $ 22.6 million, costs in the amount of approximately $ 4.2 million, and post-judgment interest at the rate of 6 % per annum.

The Company filed its opposition to that motion on July 8, 2022.

Appian filed a reply brief on July 22, 2022.

The Court has not yet set a date for a hearing on the motions filed on June 8, 2022.

As of the date of this Quarterly Report on Form 10-Q, the court has not yet ruled on the post-trial motions or entered a judgment in this matter.

The Company intends to appeal any judgment against it, if such a judgment is entered.

On September 15, 2022, the circuit court of Fairfax County entered judgment in the amount 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.

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 post-trial motions, any appellate proceedings, and/or any potential new trial resulting from the post-trial motions or the appellate proceedings.

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.

PEGASYSTEMS INC.

6 unchanged sentences

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 vigorously defend against these claims.

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements