What changed in this filing

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Item 1. Business

2024-02-14 compared with 2023-02-15 · 47 added, 49 removed, 143 unchanged (40% of the section changed)

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Our powerful, low-code platform for workflow automation and artificial intelligence-powered decisioning enables the world’s leading brands and government agencies to hyper-personalize customer experiences, streamline customer service, and automate mission-critical business processes and workflows.

With Pega, our clients can leverage our intelligent technology and scalable architecture to accelerate their digital transformation.

With Pega, our clients can leverage our artificial intelligence (“AI”) technology and scalable architecture to accelerate their digital transformation.

In addition, our client success teams, world-class partners, and clients leverage our Pega Express™ methodology to design and deploy mission-critical applications quickly and collaboratively.

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• Execute our marketing and sales strategies;

• appropriately manage our expenses as we grow our organization;

• effectively develop new products and enhance our existing products;

• incorporate acquired technologies into our solutions and unified Pega Platform™.

Subscription transition

We are transitioning our business to sell software primarily through subscription arrangements.

Until we fully complete our subscription transition, which we expect will occur in 2023, our operating results may be impacted.

Operating performance, revenue mix, and new arrangements in each period can fluctuate based on client preferences for our perpetual and subscription offerings.

See risk factor "If we fail to manage our transition to a more subscription-based business model successfully, our results of operations and/or cash flows could be negatively impacted" in Item 1A of this Annual Report for additional information.

• Manage our expenses appropriately as we grow our organization;

• Develop new products and enhance our existing products;

• Incorporate acquired technologies into our solutions and the unified Pega Platform™.

Pega Infinity

Pega Infinity™, the latest version of our software portfolio, helps build agility into our clients’ organizations so they can work smarter, unify experiences, and adapt to meet changing requirements.

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Consistent omnichannel experiences

With centrally defined business and process logic, Pega provides dynamic, open APIs to keep front-end channels and business logic aligned for consistent customer experiences.

With centrally defined business and process logic, Pega provides dynamic, open APIs to align front-end channels and business logic for consistent customer experiences.

By leveraging innovative user interface (UI) technology, Pega-powered processes and decisions can be easily embedded into existing front ends or used as the basis for new employee-facing applications.

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Our Services and Support

We offer services and support through our Global Client Success, Global Service Assurance, Global Client Support, and Pega Academy groups.

We offer services and support through our Global Client Success, Global Service Assurance and Client Support, and Pega Academy groups.

We also use third-party contractors to assist us in providing these services.

• Global Client Success – Global Client Success guides our clients to maximize their investment in our technology and realize the business outcomes they are targeting.

Within Global Client Success, our Client Innovation team helps clients transform and prototype their customer journeys through our Pega Catalyst™ offering, our Success team ensures our clients receive the maximum business value from their Pega investments, and our Pega Consulting team provides planning, design, implementation, and advisory and assurance services.

• Global Service Assurance – Global Service Assurance addresses risks to client success because of technical concerns.

• Global Service Assurance and Client Support – Global Service Assurance addresses risks to client success because of technical concerns.

By providing technical staff dedicated to client success, we reduce the time to resolve technical issues, eliminate lengthy deliberations of technical resource logistics, and increase clients’ confidence in our technology and client service.

• Global Client Support – Global Client Support provides technical support for our products and Pega Cloud services.

Global Client Support provides technical support for our products and services.

Support services include cloud service reliability management, online support community management, self-service knowledge, proactive problem prevention through information and knowledge sharing, problem tracking, prioritization, escalation, diagnosis, and resolution.

• Pega Academy – The success of our sales strategy for repeat sales to target clients depends on enablement and ecosystem engagement.

• Pega Academy – Pega Academy offers enablement content for all Pega product implementations to ensure the success of our Clients and Partners.

We have increased our ability to train partners and clients to implement our technology and made it easier for individuals to stay current as it evolves.

We offer instructor-led and online training to our employees, clients, and partners.

We have also partnered with universities to provide our courseware as part of student curriculum to expand our ecosystem.

Engagement is an important part of our strategy to create a broad ecosystem passionate about Pega technology.

We offer many mediums, including instructor-led and online training to our employees, clients, and partners so individuals can learn in the way that best suits them.

We have also partnered with universities to provide our courseware as part of the student curriculum to expand our ecosystem of enablement content.

In addition, we have robust and comprehensive documentation on our documentation portal, so people have the information at their fingertips in the moment of need.

Lastly, engagement is an important part of our strategy to create a broad ecosystem passionate about Pega technology to further increase our advocates across our clients and other key stakeholders.

We collaborate with global systems integrators and technology consulting firms that provide consulting services to our clients, as well as Independent Software Vendors (“ISVs”) and technology partners that extend clients’ investments with integrated solutions .

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Our clients represent many industries, including:

• Financial services – Pega’s low-code platform for AI-powered decisioning and workflow automation is used by financial services organizations for Customer Engagement, Onboarding and KYC, Lending, Customer Service, Payment Exceptions, Bank Operations and Managing Financial Crime.

• Financial services – Pega’s software for AI-powered decisioning and workflow automation is used by financial services organizations for Customer Engagement, Onboarding and KYC, Lending, Customer Service, Payment Exceptions, Bank Operations, and Managing Financial Crime.

Our platform enables clients to increase loyalty and wallet share, reduce time and effort to close loans and open accounts, address compliance more effectively while simplifying customer experiences, resolve service requests across channels more quickly with less effort, and boost the efficiency of various back-office processes with fewer human touches.

• Communications and media – Pega’s low-code platform for AI-powered decisioning and workflow automation is used by communications and media organizations for Customer Engagement, Order Management, Customer Service, Service Assurance, Network Operations and Shared Services.

Our platform enables clients to increase loyalty and wallet share, simplify experiences while accelerating revenues and processes, resolve service requests across channels more quickly with less effort, drive a faster, simpler repair experience, and boost efficiency of 5G, fiber and cloud processes.

• Government – Pega’s low-code platform for AI-powered decisioning and workflow automation is used by government agencies for Enterprise Modernization, Licensing, Investigative Case Management, Grants and Financial Management, Acquisition and Supply Chain Modernization, and Citizen Service.

• Government – Pega’s software for AI-powered decisioning and workflow automation is used by government agencies for Enterprise Modernization, Licensing, Investigative Case Management, Grants and Financial Management, Acquisition and Supply Chain Modernization, and Citizen Service.

Our platform enables clients to modernize legacy systems and processes to meet the growing demands for improved constituent service, lower costs, reduced fraud, and greater transparency.

• Healthcare – Pega’s low-code platform for AI-powered decisioning and workflow automation is used by healthcare organizations for Consumer Engagement, Onboarding and Enrollment, Customer Service, Care Management Services and Core Admin.

• Healthcare – Pega’s software for AI-powered decisioning and workflow automation is used by healthcare organizations for Consumer Engagement, Onboarding and Enrollment, Customer Service, Care Management Services and Claims/Core Admin.

Our platform enables clients to improve member and patient outcomes, loyalty, and retention, simplify experiences with reduced time and effort, resolve service requests faster and easier across channels, advance efficient flexible healthcare coordination, and deliver streamlined, modern experiences for members, providers, and employees.

• Insurance – Pega’s low-code platform for AI-powered decisioning and workflow automation is used by insurance companies for Customer Engagement, Sales, Distribution, Underwriting, Policy Holder Service and Claims.

• Communications and media – Pega’s software for AI-powered decisioning and workflow automation is used by communications and media organizations for Customer Engagement, Order Management, Customer Service, Service Assurance, Network Operations, and Shared Services.

• Insurance – Pega’s software for AI-powered decisioning and workflow automation is used by insurance companies for Customer Engagement, Sales, Distribution, Underwriting, Policy Holder Service, and Claims.

Our platform enables clients to nurture and grow their book of business, increase agent sales effectiveness, power better partner performance and loyalty, automate application intake and processing with intelligence, personalize seamless policy lifecycle experiences, and improve claims handling efficiencies with more modern customer and employee experiences.

• Consumer services – Pega’s low-code platform for AI-powered decisioning and workflow automation is used by consumer services organizations for Customer Engagement, Supplier Onboarding, Customer Service, and Enterprise Operations in industries such as transportation, utilities, internet providers, retail, hospitality, and entertainment.

Our platform enables clients to enable more personalized real-time next best action, accelerate onboarding with simplified experiences, automate resolution of customer requests across channels with increased digital self-servicing, and streamline operations to rapidly reduce cost, time, and risks while increasing customer satisfaction.

• Manufacturing and high tech – Pega’s low-code platform for AI-powered decisioning and workflow automation is used by manufacturers to streamline their complex global operations and create more value for their customers, dealers, distributors, and suppliers while directly managing the performance, uptime, and impact of their connected products, equipment, and experiences.

• Consumer services – Pega’s software for AI-powered decisioning and workflow automation is used by consumer services organizations for Customer Engagement, Supplier Onboarding, Customer Service, and Enterprise Operations in industries such as transportation, utilities, internet providers, retail, hospitality, and entertainment.

Our platform enables clients to enable more personalized real-time next best action, accelerate onboarding with simplified experiences, automate the resolution of customer requests across channels with increased digital self-servicing, and streamline operations to rapidly reduce cost, time, and risks while increasing customer satisfaction.

• Manufacturing and high tech – Pega’s software for AI-powered decisioning and workflow automation is used by manufacturers to streamline their complex global operations and create more value for their customers, dealers, distributors, and suppliers while directly managing the performance, uptime, and impact of their connected products, equipment, and experiences.

Our platform enables clients to reduce the complexity of enterprise operations in domains like supply chain, order management, quality management, shared services, customer service, and aftermarket services, including warranty management and captive finance, while minimizing the constraints on digital transformation caused by legacy systems.

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We also compete with clients’ internal information systems departments that seek to modify their existing systems or develop their own proprietary systems and professional service organizations that develop their own products or create custom software in conjunction with rendering consulting services.

Competitors vary in size, scope, and breadth of the products and services they offer and include some of the world’s largest companies, including Salesforce.com, Microsoft Corporation, Oracle Corporation, SAP SE, ServiceNow, and International Business Machines Corporation (“IBM”).

We have been most successful in competing for clients whose businesses are characterized by a high degree of change, complexity, or regulation.

Competitors vary in size, scope, and breadth of the products and services they offer and include some of the world’s largest companies, including International Business Machines Corporation (“IBM”), Microsoft Corporation, Oracle Corporation, Salesforce.com, SAP SE, and ServiceNow.

We have been most successful in competing for clients whose businesses are characterized by a high degree of change, complexity, and/or regulation.

We believe we are competitively differentiated because our unified Pega Platform is designed to allow client business and IT staff, using a single, intuitive user interface, to build and evolve enterprise applications in a fraction of the time it would take with disjointed architectures and tools offered by many of our competitors.

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In addition, we may be at a competitive disadvantage against our larger competitors with respect to our ability to provide expertise outside our target industries.

See risk factor "The market for our offerings is intensely and increasingly competitive, rapidly changing, and fragmented" in Item 1A of this Annual Report for additional information.

For additional information, see risk factor "The market for our offerings is intensely and increasingly competitive, rapidly changing, and fragmented" in Item 1A of this Annual Report.

Intellectual Property

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To protect our proprietary rights, we also control access to and ownership of software, services, documentation, and other information.

We also purchase or license technology that we incorporate into our services.

We also purchase or license technology that we incorporate into our products and services.

Sales and Marketing

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Our goal with all products is to enhance product capabilities, implementation ease, long-term flexibility, and improve client service.

As of December 31, 2022, we expected to recognize approximately $1.4 billion in revenue from backlog on existing contracts in future periods.

See "Remaining performance obligations ("Backlog")" in Item 7 of this Annual Report for additional information.

As of December 31, 2023, we expected to recognize $1.5 billion in revenue from backlog on existing contracts in future periods.

For additional information, see "Remaining Performance Obligations ("Backlog")" in Item 7 of this Annual Report.

As of January 31, 2024, we had 5,406 employees, of which 1,998 were based in the Americas, 1,224 were based in Europe, 1,873 were based in India, and 311 were based elsewhere in Asia-Pacific.

As a high-technology company, our people are critical to our success.

We strive to be a place where people come to build a career in an equitable, inclusive, and diverse culture.

We believe that cultivating our talent is at the heart of engaging, motivating, and retaining our workforce to support our clients and our business.

We evolve our corporate culture through various initiatives, including global equity, inclusion and belonging, employee engagement, pay equity, and employee development.

Our people are critical to our success.

We strive to be a place where people build their career in an inclusive, equitable, and diverse culture.

We believe cultivating our talent is at the heart of engaging, motivating, and retaining our workforce to support our clients, partners, and business.

We evolve our corporate culture through various initiatives, including global equity, inclusion, and belonging initiatives, employee engagement, pay equity, and employee development.

Diversity, Equity, Inclusion, and Belonging (“DEIB”)

We celebrate, welcome, and foster diverse perspectives at Pega because we believe this will accelerate our ability to deliver innovative products and services to our clients.

It is critical to strive for representation of diverse backgrounds, but it is even more critical to create an environment where all individuals are respected, valued and supported, have access to opportunities, and feel that they belong.

Our commitment to DEIB begins with a highly skilled and diverse board, and includes inclusion and allyship programs amongst other investments.

It is critical for us to create an environment where all individuals are respected, valued, and supported, have access to opportunities, and feel that they belong.

Our commitment to DEIB includes inclusion and allyship programs, amongst other investments.

We are continuously expanding our sponsorship of formal employee resource groups and are proud to share our support for the following communities:

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Employee Engagement, Health, and Well-Being

Our efforts to retain and attract diverse and passionate employees include providing competitive rewards packages and encouraging active two-way communication throughout the Company.

We promote a culture of transparency, regularly seeking feedback to better understand and improve our employee experience, and are committed to fostering an environment where every team member feels connected at Pega.

Our efforts to retain and attract employees include providing competitive reward packages and encouraging active and transparent communication throughout the Company.

We regularly seek feedback to better understand and improve our employee experience, and we are committed to fostering an environment where everyone feels connected at Pega.

We share the responsibility to preserve, strengthen, and evolve our culture while continuously reviewing the way we do things to propel us forward together.

In addition to our employee survey and continuous feedback tools, we host regular sessions led by executive leadership team where any employee can ask any question.

We are committed to fostering an environment that supports our employees’ health and overall well-being, with emphasis on physical, emotional, financial, and personal wellness.

PegaUp!, our employee wellness program, includes awareness campaigns, fitness classes, guided meditation, as well as health, wellness, and in 2022, we implemented quarterly global Wellness Days when our entire company takes a break for a day to recharge.

In addition to our employee engagement survey and continuous feedback tools, we host regular sessions led by the executive leadership team where any employee can ask questions.

We are committed to fostering an environment that supports our employees’ health and overall well-being, with an emphasis on physical, emotional, financial, and personal wellness.

PegaUp!, our employee wellness program, includes awareness campaigns, fitness classes, guided meditation, and health and wellness offerings.

In 2022, we also implemented global Wellness Days, where we encourage our people to take a break to recharge.

We compensate our employees for what they do and how they do it, regardless of their gender, race, or other characteristics.

To deliver on that commitment, we benchmark and set pay ranges based on market data and consider individual factors, such as an employee’s role and experience, job location, and job performance.

To deliver on that commitment, we benchmark and set pay ranges based on market data and consider individual factors, such as an employee’s role and experience, location, and performance.

We regularly review our compensation practices, in terms of our overall workforce and individual employees, to ensure our pay is fair and equitable against local markets.

Talent Cultivation

Talent Cultivation is at the foundation of our people strategy and enables us to provide innovative products and services to our clients.

It is an ongoing, dynamic process that enables our employees to focus on both performance and development goals, receive continuous feedback, and drive their future path for growth.

We invest in our employees’ career growth and progression by providing a wide range of opportunities, including formal and informal development, mentoring, and coaching.

Talent Cultivation is at the foundation of our people strategy.

It is an ongoing, dynamic process that encourages our employees to focus on performance and development goals, receive continuous feedback, and drive their future path for growth.

We invest in our employees’ career growth and progression by providing a wide range of opportunities, including formal and informal development, mentoring, sponsorship, and coaching.

Pega Academy helps employees, clients, and partners gain and rapidly advance Pega software skills.

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was incorporated in Massachusetts in 1983.

Our stock is traded on the NASDAQ Global Select Market under the symbol “PEGA.” Our website is located at www.pega.com, and our investor relations website is located at www.pega.com/about/investors.

Our stock is traded on the NASDAQ Global Select Market under the symbol “PEGA.” Our website is at www.pega.com, and our investor relations website is at www.pega.com/about/investors.

Available Information

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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-K

Item 1. Business