What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2026-04-21 compared with 2025-10-21 · 186 added, 341 removed, 516 unchanged (51% of the section changed)

3 unchanged sentences

(in thousands)

September 30, 2025 December 31, 2024

March 31, 2026 December 31, 2025

Current assets:

11 unchanged sentences

Goodwill 81,380 81,506

Long-term deferred income taxes

174,251 175,472

Other long-term assets 304,031 294,027

6 unchanged sentences

Deferred revenue 557,449 509,275

Convertible senior notes, net — 467,470

Other current liabilities 25,061 21,935

9 unchanged sentences

168,768 and 170,347 shares issued and outstanding at

September 30, 2025 and December 31, 2024, respectively

March 31, 2026 and December 31, 2025, respectively

Additional paid-in capital 227,005 330,926

8 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2025 2024 2025 2024

Subscription services $ 280,348 $ 227,491

1 unchanged sentence

Consulting 54,773 60,421

Perpetual license 158 456 2,035 1,351

Total revenue 429,973 475,633

3 unchanged sentences

Consulting 56,834 63,934

Perpetual license — 3 6 12

Total cost of revenue 106,754 102,450

4 unchanged sentences

General and administrative 48,573 33,828

Litigation settlement, net of recoveries

Restructuring ( 153 ) 11

Total operating expenses 286,070 246,194

Income (loss) from operations 14,469 ( 11,661 ) 158,737 ( 19,107 )

Income from operations 37,149 126,989

Foreign currency transaction gain (loss) 1,850 ( 5,325 )

3 unchanged sentences

Other (loss) income, net ( 2,204 ) 561

Income (loss) before (benefit from) provision for income taxes 24,096 ( 11,625 ) 175,653 ( 11,532 )

(Benefit from) provision for income taxes ( 19,268 ) 2,765 16,790 8,369

Net income (loss) $ 43,364 $ ( 14,390 ) $ 158,863 $ ( 19,901 )

Earnings (loss) per share

Income before provision for income taxes 39,705 126,310

Provision for income taxes 6,941 40,888

Net income $ 32,764 $ 85,422

Earnings per share

Basic $ 0.19 $ 0.50

5 unchanged sentences

PEGASYSTEMS INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

Three Months Ended

September 30, Nine Months Ended

September 30,

2025 2024 2025 2024

Net income (loss) $ 43,364 $ ( 14,390 ) $ 158,863 $ ( 19,901 )

Net income $ 32,764 $ 85,422

Other comprehensive (loss) income, net of tax

Unrealized gain (loss) on available-for-sale securities 89 660 11 ( 158 )

Unrealized (loss) on available-for-sale securities ( 739 ) ( 262 )

Foreign currency translation adjustments ( 4,492 ) 8,810

Total other comprehensive (loss) income, net of tax ( 5,231 ) 8,548

Comprehensive income (loss) $ 38,858 $ ( 3,526 ) $ 180,290 $ ( 15,424 )

Comprehensive income $ 27,533 $ 93,970

See notes to unaudited condensed consolidated financial statements.

5 unchanged sentences

December 31, 2024 172,224 $ 1,722 $ 526,102 $ 87,901 $ ( 30,245 ) $ 585,480

Issuance of common stock for stock compensation plans 2,278 23 18,633 — — 18,656

Issuance of common stock under the employee stock purchase plan 64 1 1,757 — — 1,758

Stock-based compensation — — 34,781 — — 34,781

Cash dividends declared ($ 0.015 per share)

— — ( 2,550 ) — — ( 2,550 )

Other comprehensive (loss) — — — — ( 4,173 ) ( 4,173 )

Net (loss) — — — ( 12,124 ) — ( 12,124 )

March 31, 2024 170,022 $ 1,700 $ 431,367 $ ( 20,829 ) $ ( 22,052 ) $ 390,186

Issuance of common stock for stock compensation plans 652 7 5,478 — — 5,485

Issuance of common stock under the employee stock purchase plan 64 1 1,668 — — 1,669

Stock-based compensation — — 36,224 — — 36,224

Cash dividends declared ($ 0.015 per share)

— — ( 2,561 ) — — ( 2,561 )

Other comprehensive (loss) — — — — ( 2,214 ) ( 2,214 )

Net income — — — 6,613 — 6,613

June 30, 2024 170,738 $ 1,708 $ 472,176 $ ( 14,216 ) $ ( 24,266 ) $ 435,402

Repurchase of common stock ( 2,920 ) ( 30 ) ( 118,674 ) — — ( 118,704 )

5 unchanged sentences

Other comprehensive income — — — — 8,548 8,548

Net (loss) — — — ( 14,390 ) — ( 14,390 )

September 30, 2024 171,616 $ 1,716 $ 513,315 $ ( 28,606 ) $ ( 13,402 ) $ 473,023

PEGASYSTEMS INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except per share amounts)

Common Stock Additional paid-in capital Retained earnings Accumulated other comprehensive (loss) Total stockholders’ equity

of shares Amount

December 31, 2024 172,224 $ 1,722 $ 526,102 $ 87,901 $ ( 30,245 ) $ 585,480

Repurchase of common stock ( 2,920 ) ( 30 ) ( 118,674 ) — — ( 118,704 )

Issuance of common stock for stock compensation plans 1,756 18 9,736 — — 9,754

Issuance of common stock under the employee stock purchase plan 64 2 1,909 — — 1,911

Stock-based compensation — — 41,425 — — 41,425

Cash dividends declared ($ 0.015 per share)

— — — ( 2,567 ) — ( 2,567 )

Other comprehensive income — — — — 8,548 8,548

Net income — — — 85,422 — 85,422

March 31, 2025 171,124 $ 1,712 $ 460,498 $ 170,756 $ ( 21,697 ) $ 611,269

Repurchase of common stock ( 3,147 ) ( 31 ) ( 132,454 ) — — ( 132,485 )

Issuance of common stock for stock compensation plans 3,086 30 64,876 — — 64,906

Issuance of common stock under the employee stock purchase plan 39 — 1,816 — — 1,816

Stock-based compensation — — 36,730 — — 36,730

Cash dividends declared ($ 0.03 per share)

— — — ( 5,156 ) — ( 5,156 )

Other comprehensive income — — — — 17,385 17,385

Net income — — — 30,077 — 30,077

June 30, 2025 171,102 $ 1,711 $ 431,466 $ 195,677 $ ( 4,312 ) $ 624,542

December 31, 2025 170,347 $ 1,703 $ 330,926 $ 463,389 $ ( 8,637 ) $ 787,381

Repurchase of common stock ( 3,523 ) ( 35 ) ( 167,917 ) — — ( 167,952 )

6 unchanged sentences

Net income — — — 32,764 — 32,764

September 30, 2025 170,545 $ 1,705 $ 370,018 $ 233,925 $ ( 8,818 ) $ 596,830

March 31, 2026 168,768 $ 1,688 $ 227,005 $ 491,090 $ ( 13,868 ) $ 705,915

See notes to unaudited condensed consolidated financial statements.

2 unchanged sentences

(in thousands)

Nine Months Ended

September 30,

Three Months Ended

Operating activities

Net income (loss) $ 158,863 $ ( 19,901 )

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

Net income $ 32,764 $ 85,422

Adjustments to reconcile net income to cash provided by operating activities

Stock-based compensation 45,815 41,425

2 unchanged sentences

Amortization of right-of-use lease assets 3,430 2,826

Foreign currency transaction loss 12,179 7,230

Foreign currency transaction (gain) loss ( 1,850 ) 5,325

Loss on capped call transactions — 223

1 unchanged sentence

(Accretion) of investments ( 321 ) ( 1,526 )

(Gain) on investments ( 19,438 ) ( 1,628 )

Loss (gain) on investments 2,188 ( 751 )

Other non-cash 67 1,067

6 unchanged sentences

Investment in property and equipment ( 5,726 ) ( 1,880 )

Cash provided by (used in) investing activities 214,897 ( 215,999 )

Cash provided by investing activities 2,760 261,895

Financing activities

4 unchanged sentences

Common stock repurchases under stock repurchase program ( 167,254 ) ( 117,204 )

Cash (used in) provided by financing activities ( 756,391 ) 26,949

Cash (used in) financing activities ( 154,163 ) ( 575,986 )

Effect of exchange rate changes on cash, cash equivalents, and restricted cash ( 2,898 ) 3,570

Net (decrease) increase in cash, cash equivalents, and restricted cash ( 187,727 ) 66,238

Net increase (decrease) in cash, cash equivalents, and restricted cash 57,950 ( 106,293 )

Cash, cash equivalents, and restricted cash, beginning of period 216,360 341,529

4 unchanged sentences

Total cash, cash equivalents, and restricted cash $ 274,310 $ 235,236

Supplemental disclosures

Non-cash investing and financing activity:

Investment in property and equipment included in accounts payable and accrued liabilities $ 2,279 $ 1,219

Dividends payable $ 5,063 $ 2,567

excise tax payable on net stock repurchase $ 698 $ —

See notes to unaudited condensed consolidated financial statements.

9 unchanged sentences

The operating results for the interim periods presented do not necessarily indicate the expected results for fiscal year 2026.

On February 12, 2025, the Company’s Board of Directors approved a two -for-one forward stock split (the “Stock Split”) of the Company’s common stock, par value $ 0.01 (“Common Stock”), to be effected as a stock dividend and a proportionate increase in the number of authorized shares of Common Stock from 200,000,000 to 400,000,000 (the “Authorized Share Increase”).

The Authorized Share Increase was subject to shareholder approval of an amendment to the Company’s Restated Articles of Organization.

The requisite shareholder approval was obtained on June 17, 2025.

On June 20, 2025, each shareholder of record at the close of business on June 10, 2025 (the “Record Date”) received one additional share of Common Stock for each share of Common Stock held on the Record Date.

All share, per share, and equity award information in the Company’s unaudited condensed consolidated financial statements and in the accompanying notes for all periods presented have been recast to reflect the effect of the Stock Split.

The shares of Common Stock retained a par value of $ 0.01 per share.

Accordingly, an amount equal to the par value of the increased shares resulting from the Stock Split was reclassified from additional paid-in capital to common stock.

NEW ACCOUNTING PRONOUNCEMENTS

Improvements to Income Tax Disclosures

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures (“ASU 2023-09”).

ASU 2023-09 includes expanded income tax rate reconciliation disclosures, a disaggregation of income taxes paid, and other expanded disclosures.

ASU 2023-09 will be effective for the Company for the year ending December 31, 2025.

The Company expects the adoption to result in disclosure changes only.

Disaggregation of Income Statement Expenses

4 unchanged sentences

The Company is still evaluating the impact of this new guidance on its consolidated financial statements but expects the adoption to result in disclosure changes only.

Targeted Improvements to the Accounting for Internal-Use Software

In September 2025, the FASB issued ASU 2025-06, Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40):

Targeted Improvements to the Accounting for Internal-Use Software (“ASU 2025-06”).

ASU 2025-06 introduces a more principles-based framework to the capitalization of software intended for internal use focused on management’s authorization and commitment to fund a development project and the probability of whether the project will be completed and used for its intended function.

ASU 2025-06 will be effective for the Company beginning January 1, 2028.

The Company is currently evaluating the impact ASU 2025-06 will have on its consolidated financial statements.

MARKETABLE SECURITIES

September 30, 2025 December 31, 2024

March 31, 2026 December 31, 2025

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

2 unchanged sentences

$ 204,394 $ 133 $ ( 535 ) $ 203,992 $ 213,033 $ 431 $ ( 112 ) $ 213,352

As of September 30, 2025, marketable securities’ maturities ranged from October 2025 to September 2028, with a weighted-average remaining maturity of 1.4 years.

As of March 31, 2026, marketable securities’ maturities ranged from April 2026 to March 2029, with a weighted-average remaining maturity of 1.3 years.

RECEIVABLES, CONTRACT ASSETS, AND DEFERRED REVENUE

(in thousands)

September 30, 2025 December 31, 2024

March 31, 2026 December 31, 2025

Accounts receivable, net $ 173,856 $ 264,713

10 unchanged sentences

(Dollars in thousands)

September 30, 2025

March 31, 2026

1 year or less $ 142,057 62 %

4 unchanged sentences

(Dollars in thousands)

September 30, 2025

March 31, 2026

2026 $ 38,856 17 %

4 unchanged sentences

$ 229,516 100 %

Major clients

Clients that represented 10% or more of the Company’s total accounts receivable and unbilled receivables:

September 30, 2025 December 31, 2024

Accounts receivable * 20 %

Unbilled receivables * — %

Total receivables * 11 %

Accounts receivable — % *

Unbilled receivables 18 % *

Total receivables 12 % *

*Client accounted for less than 10% of total accounts receivable and unbilled receivables.

Contract assets

1 unchanged sentence

(in thousands)

September 30, 2025 December 31, 2024

March 31, 2026 December 31, 2025

Contract assets (1)

8 unchanged sentences

(in thousands)

September 30, 2025 December 31, 2024

March 31, 2026 December 31, 2025

Deferred revenue $ 557,449 $ 509,275

2 unchanged sentences

(1) Included in other long-term liabilities.

The change in deferred revenue during the nine months ended September 30, 2025 was primarily due to new billings in advance of revenue recognition and $ 384 million of revenue recognized during the period included in deferred revenue as of December 31, 2024.

PEGASYSTEMS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The change in deferred revenue during the three months ended March 31, 2026 was primarily due to new billings in advance of revenue recognition and $ 225.6 million of revenue recognized during the period included in deferred revenue as of December 31, 2025.

DEFERRED COMMISSIONS

(in thousands)

September 30, 2025 December 31, 2024

March 31, 2026 December 31, 2025

Deferred commissions (1)

2 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

(in thousands) 2026 2025

2 unchanged sentences

(1) Included in selling and marketing expenses.

GOODWILL AND OTHER INTANGIBLES

Nine Months Ended

September 30,

PEGASYSTEMS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Three Months Ended

(in thousands)

1 unchanged sentence

Currency translation adjustments ( 126 ) 73

September 30, $ 81,402 $ 81,568

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

September 30, 2025

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

Client-related

$ 63,161 $ ( 62,476 ) $ 685

68,115 ( 66,971 ) 1,144

5,361 ( 5,361 ) —

$ 136,637 $ ( 134,808 ) $ 1,829

(1) Included in other long-term assets.

December 31, 2024

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

Client-related 4 - 10 years

$ 63,107 $ ( 61,395 ) $ 1,712

Technology 2 - 10 years

68,115 ( 65,995 ) 2,120

Other 1 - 5 years

5,361 ( 5,361 ) —

$ 136,583 $ ( 132,751 ) $ 3,832

(1) Included in other long-term assets.

Future estimated amortization of intangible assets:

(in thousands) September 30, 2025

Remainder of 2025 $ 627

Amortization of intangible assets:

Three Months Ended

September 30, Nine Months Ended

September 30,

(in thousands) 2025 2024 2025 2024

Cost of revenue

$ 284 $ 357 $ 975 $ 1,425

Selling and marketing

343 343 1,028 1,028

$ 627 $ 700 $ 2,003 $ 2,453

PEGASYSTEMS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

March 31, $ 81,380 $ 81,186

OTHER ASSETS AND LIABILITIES

Other current assets

(in thousands) September 30, 2025 December 31, 2024

(in thousands) March 31, 2026 December 31, 2025

Prepaid expenses $ 53,464 $ 65,293

2 unchanged sentences

Indirect tax receivable 2,410 2,172

Capped call transactions — 223

Restricted cash 2,448 1,577

2 unchanged sentences

Other long-term assets

(in thousands) September 30, 2025 December 31, 2024

(in thousands) March 31, 2026 December 31, 2025

Deferred commissions $ 96,876 $ 104,574

1 unchanged sentence

Property and equipment 49,442 45,240

Venture investments 20,214 21,234

Contract assets 36,038 17,421

Venture investments 19,662 22,021

Income taxes receivable 15,531 15,459

Intangible assets 1,829 3,832

Deferred income taxes 3,973 4,268

Restricted cash 1,900 2,336

Intangible assets 1,644 1,202

Other 25,263 25,200

1 unchanged sentence

Accrued expenses

(in thousands) September 30, 2025 December 31, 2024

Cloud hosting $ 16,445 $ 1,802

(in thousands) March 31, 2026 December 31, 2025

Outside professional services $ 33,141 $ 15,233

Marketing and sales program 1,472 2,150

Cloud hosting 12,962 1,064

Litigation settlements 9,750 9,750

Income and other taxes 7,900 7,273

Employee related 5,380 5,464

Repurchases of common stock unsettled — 1,500

Marketing and sales program 3,549 1,519

Other 6,782 4,544

1 unchanged sentence

Other current liabilities

(in thousands) September 30, 2025 December 31, 2024

(in thousands) March 31, 2026 December 31, 2025

Operating lease liabilities $ 15,052 $ 15,142

2 unchanged sentences

$ 25,061 $ 21,935

PEGASYSTEMS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Other long-term liabilities

(in thousands) September 30, 2025 December 31, 2024

Deferred revenue $ 2,457 $ 2,121

(in thousands) March 31, 2026 December 31, 2025

Income taxes payable $ 24,063 $ 23,331

Deferred revenue 7,154 9,568

Other 13,389 12,961

$ 44,606 $ 45,860

PEGASYSTEMS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

SEGMENT INFORMATION

5 unchanged sentences

Significant Accounting Policies" included in the Annual Report on Form 10-K for the year ended December 31, 2025.

The CODM uses consolidated net income (loss) to set financial performance targets, assess performance, and make expense allocation decisions.

The CODM uses consolidated net income to set financial performance targets, assess performance, and make expense allocation decisions.

Three Months Ended

September 30, Nine Months Ended

September 30,

(in thousands) 2026 2025

7 unchanged sentences

( 2,709 ) 690

(Benefit from) provision for income taxes ( 19,268 ) 2,765 16,790 8,369

Net income (loss) $ 43,364 $ ( 14,390 ) $ 158,863 $ ( 19,901 )

(1) Includes Litigation settlement, net of recoveries, Restructuring, Foreign currency transaction gain (loss), Interest income, Interest expense, (Loss) on capped call transactions, and Other (loss) income, net.

Provision for income taxes 6,941 40,888

Net income $ 32,764 $ 85,422

(1) Includes Restructuring, Foreign currency transaction gain (loss), Interest income, Interest expense, (Loss) on capped call transactions, and Other (loss) income, net.

Long-lived assets related to the Company’s U.S.

1 unchanged sentence

(in thousands)

September 30, 2025 December 31, 2024

March 31, 2026 December 31, 2025

$ 41,979 85 % $ 40,060 89 %

1 unchanged sentence

$ 49,442 100 % $ 45,240 100 %

On January 1, 2025, the Company relocated its corporate headquarters to 225 Wyman Street, Waltham, Massachusetts.

Three Months Ended

September 30, Nine Months Ended

September 30,

(in thousands) 2026 2025

3 unchanged sentences

$ 7,096 $ 6,013

PEGASYSTEMS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Right of use assets and lease liabilities

(in thousands) September 30, 2025 December 31, 2024

(in thousands) March 31, 2026 December 31, 2025

Right of use assets (1)

5 unchanged sentences

(2) Included in other current liabilities.

PEGASYSTEMS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

September 30, 2025 December 31, 2024

March 31, 2026 December 31, 2025

Weighted-average remaining lease term 5.2 years 5.4 years

4 unchanged sentences

Maturities of lease liabilities:

(in thousands) September 30, 2025

(in thousands) March 31, 2026

Remainder of 2026 $ 13,947

4 unchanged sentences

Cash flow information

Nine Months Ended

September 30,

(in thousands) 2025 2024

Cash paid for operating leases, net of tenant improvement allowances $ 14,502 $ 13,249

Right of use assets recognized for new leases and amendments (non-cash) $ 4,765 $ 12,290

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 were due before maturity.

The Notes accrued interest at an annual rate of 0.75 %, paid semi-annually in arrears on March 1 and September 1, beginning September 1, 2020.

The remaining outstanding principal balance on the Notes and accrued interest totaling $ 469.6 million was repaid in its entirety at maturity during the three months ended March 31, 2025.

Conversion rights

The conversion rate was 14.809 shares of Common stock per $1,000 principal amount of the Notes, representing an initial conversion price of $ 67.53 per share of Common stock.

Carrying value of the Notes:

(in thousands) September 30, 2025 December 31, 2024

Principal $ — $ 467,864

Unamortized issuance costs — ( 394 )

Convertible senior notes, net $ — $ 467,470

Interest expense related to the Notes:

Three Months Ended

September 30, Nine Months Ended

September 30,

(in thousands) 2026 2025

Contractual interest expense ( 0.75 % coupon)

$ — $ 941 $ 595 $ 2,825

Amortization of issuance costs

— 621 394 1,857

$ — $ 1,562 $ 989 $ 4,682

PEGASYSTEMS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The average interest rate on the Notes during the three months ended March 31, 2025 and nine months ended September 30, 2024 was 1.2 %.

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 initially covered approximately 8.8 million shares (representing the number of shares for which the Notes were initially convertible) of the Company’s Common Stock.

As of December 31, 2024, Capped Call Transactions covering approximately 7 million shares were outstanding, and expired upon maturity of the Notes during the three months ended March 31, 2025.

Change in capped call transactions:

Nine Months Ended

September 30,

(in thousands) 2025 2024

January 1, $ 223 $ 893

Fair value adjustment ( 223 ) ( 667 )

September 30, $ — $ 226

Cash paid for operating leases, net of tenant improvement allowances $ 4,180 $ 4,581

Right of use assets obtained in exchange for operating lease obligations $ 661 $ —

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.

Effective as of February 4, 2025, the Credit Facility was amended to extend the expiration date to February 4, 2027.

The Company may use borrowings for general corporate purposes and to finance working capital needs.

2 unchanged sentences

Beginning with the fiscal quarter ended March 31, 2024, the Company must maintain 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.

Effective as of February 4, 2025, the Credit Facility was amended to extend the expiration date to February 4, 2027.

As of September 30, 2025, the Company is compliant with all Credit Facility covenants.

As of September 30, 2025 and December 31, 2024, the Company had letters of credit of $ 26.7 million and $ 27.3 million, respectively, under the Credit Facility, however had no cash borrowings.

As of March 31, 2026, the Company is compliant with all Credit Facility covenants.

As of March 31, 2026 and December 31, 2025, the Company had letters of credit of $ 26.7 million under the Credit Facility, however we had no cash borrowings.

PEGASYSTEMS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

RESTRUCTURING

The Company has undertaken the following restructuring activities as it optimizes its go-to-market strategy and reassesses its office space needs:

The Company has undertaken the following restructuring activities intended to better align roles and capacity to an AI-first delivery model:

Three Months Ended

September 30, Nine Months Ended

September 30,

(in thousands) 2026 2025

2 unchanged sentences

Office space reductions (1)

6 2,882 30 3,917

Restructuring

3 unchanged sentences

Accrued employee severance and related costs:

Nine Months Ended

September 30,

Three Months Ended

(in thousands) 2026 2025

3 unchanged sentences

Currency translation adjustments ( 37 ) 53

September 30, (1)

March 31, (1)

$ 5,957 $ 866

(1) Included in accrued compensation and related expenses.

PEGASYSTEMS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

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.

The Company records its cash equivalents, marketable securities, 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.

4 unchanged sentences

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 applied judgment when determining expected volatility.

The Company considered the underlying equity security’s historical and implied volatility levels.

The Capped Call Transactions expired upon maturity of the Notes during the three months ended March 31, 2025.

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:

September 30, 2025 December 31, 2024

March 31, 2026 December 31, 2025

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

1 unchanged sentence

Marketable securities $ — $ 203,992 $ — $ 203,992 $ — $ 213,352 $ — $ 213,352

Capped Call Transactions

$ — $ — $ — $ — $ — $ 223 $ — $ 223

Venture investments $ — $ — $ 19,662 $ 19,662 $ — $ — $ 22,021 $ 22,021

Changes in venture investments:

Nine Months Ended

September 30,

Three Months Ended

(in thousands) 2026 2025

1 unchanged sentence

New investments — 200

Sales of investments ( 33,223 ) —

Changes in foreign exchange rates ( 35 ) 65

1 unchanged sentence

included in other (loss) income, net

included in other comprehensive income (loss)

( 2,059 ) 751

September 30, $ 20,214 $ 21,172

During the three months ended June 30, 2025, one of the Company’s investees was acquired by a privately held company.

As a result, the Company received $ 33.2 million in consideration for its equity interest in the investee, composed of $ 22.1 million cash and $ 11.1 million of an ownership interest in the privately held company, and recognized a $ 18.7 million gain in excess of cost in other (loss) income, net on the condensed consolidated statements of operations.

included in other comprehensive income

( 265 ) ( 535 )

March 31, $ 19,662 $ 21,715

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

Fair value of the Convertible Senior Notes

The fair value of the Notes outstanding (including the embedded conversion feature) was $ 463.9 million as of December 31, 2024.

The Notes were repaid in full at maturity during the three months ended March 31, 2025.

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.

PEGASYSTEMS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Geographic revenue

1 unchanged sentence

Three Months Ended

September 30, Nine Months Ended

September 30,

(Dollars in thousands)

$ 219,255 51 % $ 269,192 56 %

$ 185,132 49 % $ 156,135 48 % $ 662,440 54 % $ 526,332 53 %

Other Americas 39,259 9 % 33,741 7 %

5 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

(in thousands)

2025 2024 2025 2024

Pega Cloud $ 205,031 $ 151,123

3 unchanged sentences

Subscription license 94,852 187,721

Perpetual license 158 456 2,035 1,351

Revenue recognized at a point in time 94,852 187,721

Total revenue $ 429,973 $ 475,633

PEGASYSTEMS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Three Months Ended

September 30, Nine Months Ended

September 30,

(in thousands) 2026 2025

5 unchanged sentences

Consulting 54,773 60,421

Perpetual license 158 456 2,035 1,351

Total revenue $ 429,973 $ 475,633

PEGASYSTEMS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Remaining performance obligations ("Backlog")

Expected future revenue from existing non-cancellable contracts:

As of September 30, 2025:

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

As of March 31, 2026:

(Dollars in thousands) Subscription services Subscription license Consulting Total

Pega Cloud Maintenance

6 unchanged sentences

$ 1,511,624 $ 372,220 $ 78,443 $ 48,450 $ 2,010,737 100 %

As of September 30, 2024:

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

As of March 31, 2025:

(Dollars in thousands) Subscription services Subscription license Consulting Total

Pega Cloud Maintenance

9 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

(in thousands) 2026 2025

4 unchanged sentences

Research and development

7,914 7,308 23,789 22,779

General and administrative

$ 45,815 $ 41,425

$ 43,041 $ 37,213 $ 121,196 $ 108,218

Income tax benefit

$ ( 9,164 ) $ ( 587 )

As of September 30, 2025, the Company had $ 129 million of unrecognized stock-based compensation expense, net of estimated forfeitures, which is expected to be recognized over a weighted-average period of 1.8 years.

Nine Months Ended

September 30, 2025

As of March 31, 2026, the Company had $ 206 million of unrecognized stock-based compensation expense, net of estimated forfeitures, which is expected to be recognized over a weighted-average period of 1.9 years.

Three Months Ended

March 31, 2026

(in thousands) Quantity

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(1) Includes units issued when employees 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.

(2) Performance stock options allow the holder to purchase a specified number of Common Stock shares at an exercise price equal to or greater than the shares' fair market value at the grant date.

The performance stock options granted in the nine months ended September 30, 2025 vest quarterly over two years , beginning after the achievement of specific performance conditions.

The options expire ten years from the grant date.

PEGASYSTEMS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(2) Performance stock options allow the holder to purchase a specified number of Common Stock shares at an exercise price equal to or greater than the shares' fair market value at the grant date.

Performance stock options granted in the three months ended March 31, 2026 vest on the second anniversary of the grant date, up to 200 %, subject to the achievement of specified performance metrics over fiscal years 2026 and 2027.

The options expire ten years from the grant date.

Stock repurchase program

On April 22, 2025, the Company’s Board of Directors extended the expiration date of the share repurchase program from December 31, 2025 to June 30, 2026 and increased the authorized repurchase amount by $ 500 million, bringing the total repurchase authorization to $ 810 million, of which $ 347.3 million remains available as of September 30, 2025.

During the nine months ended September 30, 2025, the Company repurchased 8.7 million of its common stock for $ 393.2 million at an average price per share of $ 44.97 .

On February 10, 2026, the Company’s Board of Directors extended the expiration date of the share repurchase program from June 30, 2026 to June 30, 2027 and increased the authorized repurchase amount by $ 1 billion, of which $ 1.1 billion remains available as of March 31, 2026.

During the three months ended March 31, 2026, the Company repurchased 3.5 million shares of its common stock for $ 167.3 million at an average price per share of $ 47.47 .

The share repurchase and authorization amounts disclosed within this Form 10-Q exclude the U.S.

1 unchanged sentence

All purchases under this program have been made on the open market.

On June 20, 2025, the Company effected the Stock Split of the Company’s Common Stock described above in “Note 1.

Basis of Presentation”.

All share and per share amounts in the Company’s unaudited condensed consolidated financial statements and in the accompanying notes for all prior periods presented have been recast to reflect the effect of the Stock Split.

Effective income tax rate

Nine Months Ended

September 30,

Three Months Ended

(Dollars in thousands) 2026 2025

(Benefit from) provision for income taxes $ 16,790 $ 8,369

Provision for income taxes $ 6,941 $ 40,888

Effective income tax rate 17 % 32 %

The Company’s effective income tax rate for the nine months ended September 30, 2025, was impacted by excess tax benefits from stock-based compensation, and by the enactment of the One Big Beautiful Bill Act (“OBBBA”) on July 4, 2025.

The OBBBA introduced several U.S.

tax law changes, including the ability to immediately expense domestic research and experimental (“R&E”) expenditures starting in 2025, and an election to accelerate any unamortized domestic R&E expenditures over a one or two year period beginning with the 2025 tax year.

In accordance with ASC 740, Accounting for Income Taxes , the impacts of the OBBBA are reflected in the Company’s results for the quarter ended September 30, 2025.

The enactment of the OBBBA reduced the Company’s forecasted U.S.

income tax expense for 2025.

However, the changes did not affect the Company’s U.S.

deferred tax assets or liabilities, as the Company continues to maintain a full valuation allowance against those balances.

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.

In assessing the Company’s ability to realize its net deferred tax assets, the Company considered various factors including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial results to determine whether it is more likely than not that some portion or all of its net deferred tax assets will not be realized.

The Company intends to maintain a valuation allowance on its U.S.

net deferred tax assets until positive sufficient evidence exists to support their realization.

Given the Company’s recent earnings, the Company believes that there is a reasonable possibility that in a near future period sufficient positive evidence may become available to allow the Company to reach a conclusion that a substantial portion of the valuation allowance will no longer be needed.

However, the exact timing and amount of the valuation allowance release are subject to significant judgment.

Release of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax expense for the period the release is recorded.

PEGASYSTEMS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

EARNINGS (LOSS) PER SHARE

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

Diluted earnings (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 Notes.

Calculation of earnings (loss) per share:

The Company’s effective income tax rate decreased in the three months ended March 31, 2026 as compared to the prior period, primarily due to excess tax benefits from stock-based compensation recognized in the current period and the absence of a valuation allowance on substantially all of the Company’s U.S.

deferred tax assets.

EARNINGS PER SHARE

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

Diluted 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 (the “Notes”), which were repaid in its entirety at maturity during the three months ended March 31, 2025.

Calculation of earnings per share:

Three Months Ended

September 30, Nine Months Ended

September 30,

(in thousands, except per share amounts) 2026 2025

2025 2024 2025 2024

Net income (loss) $ 43,364 $ ( 14,390 ) $ 158,863 $ ( 19,901 )

Net income $ 32,764 $ 85,422

Weighted-average common shares outstanding 168,817 171,804

Earnings (loss) per share, basic $ 0.25 $ ( 0.08 ) $ 0.93 $ ( 0.12 )

Net income (loss) $ 43,364 $ ( 14,390 ) $ 158,863 $ ( 19,901 )

Earnings per share, basic $ 0.19 $ 0.50

Net income $ 32,764 $ 85,422

Notes - interest expense, net of tax

6 unchanged sentences

178,841 188,826

Earnings (loss) per share, diluted $ 0.24 $ ( 0.08 ) $ 0.86 $ ( 0.12 )

Earnings per share, diluted $ 0.18 $ 0.46

Outstanding anti-dilutive stock options and RSUs (4)

54 9,056 267 7,364

(1) The number of shares and per share amounts have been recast for all prior periods presented to reflect the effect of the Company’s Stock Split effected in the form of a stock dividend distributed on June 20, 2025.

(1) All securities are excluded when their inclusion would be anti-dilutive.

(2) The weighted-average shares underlying the conversion options in the Company’s Notes are included using the if-converted method, if dilutive in the period.

(3) In February 2020, the Company entered into privately negotiated capped call transactions (the “Capped Call Transactions”) with certain financial institutions.

The Capped Call Transactions expired upon maturity of the Notes during the three months ended March 31, 2025.

The Company’s Capped Call Transactions represented the equivalent number of shares of the Company’s common stock (representing the number of shares for which the Notes are convertible).

The Capped Call Transactions are excluded from weighted-average common shares outstanding, assuming dilution, in all periods as their effect would be anti-dilutive.

(5) Outstanding stock options and RSUs that were anti-dilutive under the treasury stock method in the period were excluded from the computation of diluted earnings (loss) 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 earnings per share.

These awards may be dilutive in the future.

PEGASYSTEMS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

COMMITMENTS AND CONTINGENCIES

4 unchanged sentences

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 for the below matters as of September 30, 2025 and December 31, 2024.

PEGASYSTEMS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

As of March 31, 2026 and December 31, 2025, the Company recorded an estimated $ 9.75 million accrued loss related to the agreed in principle settlement of the In re Pegasystems Inc.

Derivative Litigation matter, see additional discussion below.

Pegasystems Inc.

& Youyong Zou

The Company is a defendant in litigation brought by Appian in the Circuit Court of Fairfax County, Virginia (the “Court”) titled Appian Corp.

The Company is a defendant in litigation brought by Appian in the Circuit Court of Fairfax County, Virginia titled Appian Corp.

Pegasystems Inc.

4 unchanged sentences

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 15, 2022, the Company filed a notice of appeal from the Virginia Uniform Trade Secrets Act 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.

A panel of the Court of Appeals of Virginia heard oral arguments on November 15, 2023, and issued a written opinion on July 30, 2024.

The Court of Appeals reversed the judgment on Appian’s Virginia Uniform Trade Secrets Act claim and ordered a new trial on that claim.

The Court of Appeals reversed the judgment and ordered a new trade secrets claim trial.

Appian filed a petition for appeal with the Supreme Court of Virginia on August 29, 2024, and the Company filed a response to the petition on October 21, 2024.

On March 7, 2025, the Supreme Court of Virginia granted Appian’s petition for appeal and Pega’s assignments of cross-error.

The parties have completed briefing before the Supreme Court of Virginia.

The Supreme Court of Virginia is scheduled to hear oral argument on the parties’ substantive appellate briefs on October 28, 2025.

The Supreme Court of Virginia heard appellate oral argument on October 28, 2025.

On January 8, 2026, the Supreme Court of Virginia issued a written opinion unanimously affirming the ruling of the Court of Appeals of Virginia.

On January 13, 2026, the Circuit Court of Fairfax County, Virginia notified the parties that this case has been reassigned to Judge David A.

Oblon for further proceedings.

On January 29, 2026, the Supreme Court of Virginia remanded Appian’s trade secret case to the Court of Appeals with direction to remand to the Circuit Court of Fairfax County for further proceedings in accordance with its written opinion.

Also on January 29, Judge Oblon scheduled a first status conference for the remanded trial proceedings for May 7, 2026.

On February 27, 2026, the Court of Appeals of Virginia issued a mandate stating that the judgment is affirmed in part, reversed in part, and remanded to the Circuit Court of Fairfax County for further proceedings consistent with the views expressed in the written opinion of the Court of Appeals of Virginia.

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.

The Company is unable to reasonably estimate possible damages because of, among other things, uncertainty as to the outcome of a new trial resulting from the appellate proceedings.

PEGASYSTEMS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

PS Lit Recovery, LLC v.

1 unchanged sentence

Pegasystems Inc., Alan Trefler, and Kenneth Stillwell

Federal court cases

On December 4, 2024, the shareholders representing approximately 3 % of the settlement class that opted out of the court approved settlement in the class action matter captioned City of Fort Lauderdale Police and Firefighters’ Retirement System, Individually and on Behalf of All Others Similarly Situated v.

6 unchanged sentences

The complaints also assert claims for common law fraud and negligent misrepresentation, and seek unspecified damages.

The defendants moved to dismiss the complaints on March 13, 2025.

The plaintiffs filed a brief in opposition to the motion to dismiss on April 10, 2025.

The defendants filed a reply brief in support of the motion to dismiss on April 10, 2025.

On May 21, 2025, the Court held a hearing on the motion to dismiss.

The defendants moved to dismiss the complaints on March 13, 2025 and on May 21, 2025, the Court held a hearing on the motion to dismiss.

At the conclusion of the hearing, the Court (i) granted the motion to dismiss as to the plaintiffs’ scheme liability claims;

(ii) granted the motion to dismiss as to all claims against Ken Stillwell, except for the plaintiffs’ control person liability claims;

(ii) granted the motion to dismiss as to certain claims against Ken Stillwell;

and (iii) took the motion to dismiss under advisement as to all other claims.

The parties are awaiting a written order ruling on the motion to dismiss as to the remaining claims.

On January 8, 2026, the Court issued a written order granting the motion to dismiss as to the Section 10(b) and common law fraud claims against Ken Stillwell and denying the motion to dismiss as to the remaining claims.

The Court also entered a scheduling order setting trial for February 2027.

State court cases

On February 26, 2025, the same shareholders filed two lawsuits against the Company, the Company’s chief executive officer, and the Company’s chief operating and financial officer in Massachusetts Superior Court.

9 unchanged sentences

The Company is unable to reasonably estimate possible damages or a range of possible damages in these matters given the stage of the lawsuits.

In re Pegasystems Inc., Derivative Litigation

In re Pegasystems Inc.

Derivative Litigation

Federal court cases

PEGASYSTEMS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

On November 21, 2022, a lawsuit was filed against the members of the Company’s board of directors, the Company’s chief operating and financial officer and the Company in the United States District Court for the District of Massachusetts, captioned Mary Larkin, derivatively on behalf of nominal defendant Pegasystems Inc.

2 unchanged sentences

On May 17, 2023, the Larkin and Sagfors cases were consolidated (the “Consolidated Action”) and, after defendants moved to dismiss the complaint in the Consolidated Action on December 4, 2024, the plaintiffs moved to voluntarily dismiss the Consolidated Action, and the Court granted the motion to dismiss on December 18, 2024.

PEGASYSTEMS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

The Company separately received confidential demand letters raising substantially the same allegations set forth in the Consolidated Action.

13 unchanged sentences

On October 14, 2025, the parties jointly notified the Court that on October 2, 2025 the Massachusetts Superior Court granted defendants’ motion to dismiss the related state court derivative action (see below) and proposed that the Court refrain from issuing a decision on the motions to dismiss pending a joint submission by the parties of their respective positions on the impact of the state court dismissal on the federal court case within thirty (30) days.

The Company believes it has strong defenses to the claims brought against the defendants and intends to defend against these claims vigorously.

The Company is unable to reasonably estimate possible damages or a range of possible damages in these matters given the stage of the lawsuits and there being no specified quantum of damages sought in the complaints.

On December 17, 2025, the court entered an order administratively closing this action in light of the developments in the State court cases, described below.

On January 7, 2026, the Collective Plaintiffs agreed in principle to a proposed settlement of the litigation.

See discussion below within the “State court cases” subsection.

State court cases

5 unchanged sentences

The complaint generally asserts the same claims asserted in the Dwyer Action.

PEGASYSTEMS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

On February 12, 2025, after submission by the parties of a stipulation and proposed order, an order was entered consolidating the Dwyer and Birch Actions and approving the schedule for the filing of a consolidated complaint and a motion to dismiss.

2 unchanged sentences

The Defendants moved to dismiss the complaint and after briefing by the parties, the Court held a hearing on defendants’ motion on September 4, 2025.

On October 2, 2025, the Court granted Defendants’ motion to dismiss and the parties’ are awaiting entry of a judgment of dismissal.

The Company believes it has strong defenses to the claims brought against the defendants and intends to defend against these claims vigorously.

The Company is unable to reasonably estimate possible damages or a range of possible damages in these matters given the stage of the lawsuits.

On October 2, 2025, the Court granted Defendants’ motion to dismiss.

On January 13, 2026, the court entered final judgment in defendants’ favor.

On January 7, 2026, the parties to the federal and state court cases agreed in principle to a proposed settlement of the litigation.

Under the terms of the proposed settlement, the plaintiffs in the federal and state court cases (“Collective Plaintiffs”) agreed to the dismissal of all claims upon the Company adopting certain governance reforms and payment of an estimated aggregate sum of $ 9.75 million, inclusive of a $ 7 million special dividend to shareholders (excluding defendants) and Collective Plaintiffs’ attorney fees.

PEGASYSTEMS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

On January 23, 2026, the parties jointly moved the court for relief from the final judgment in this action for the sole purpose of permitting the parties to seek Court approval of the proposed settlement.

On February 10, 2026, the plaintiffs submitted the proposed settlement to the Court for preliminary approval.

On March 18, 2026, the Court held a preliminary approval hearing and granted the parties relief from the final judgment.

On April 16, 2026, the Court held a further preliminary approval hearing.

The Court has preliminarily approved the proposed settlement and scheduled a final approval hearing for June 25, 2026.

Although the outcome of the litigation is not certain until final court approval, the Company has recorded an estimated $ 9.75 million accrued loss as of December 31, 2025.

However, it is possible that actual future losses related to the litigation could exceed the accrual amount if and to the extent that the court does not approve the proposed settlement.

Pegasystems v.

Appian Defamation Litigation

On August 2, 2023, the Company filed a complaint against Appian in the U.S.

District Court for the District of Massachusetts, captioned Pegasystems Inc.

Appian Corporation, 1:23-cv-11776-LTS (D.

The complaint asserts claims for defamation, trade libel, and violations of the Lanham Act, 15 U.S.C.

§ 1125(a) based on statements Appian made following the verdict in the litigation brought by Appian in the Circuit Court of Fairfax County, Virginia, described above.

In response to a motion to dismiss filed by Appian on August 18, 2023, the Company amended the complaint to add additional factual allegations in support of the same claims.

On September 22, 2023, Appian moved to dismiss the amended complaint, which the Court denied on January 5, 2024.

On February 20, 2024, Appian answered the complaint, asserted counterclaims against the Company for defamation, trade libel, violations of the Lanham Act, 15 U.S.C.

§ 1125(a), and violations of Mass.

93A §§ 2 and 11, and sought a declaratory judgment that the Company was not entitled to the recovery sought in the amended complaint.

On April 11, 2024, the Company moved for a more definite statement and to partially strike the counterclaims, which the Court denied on August 1, 2024.

On August 15, 2024, the Company moved to dismiss the counterclaims, which the Court allowed in part and denied in part on October 8, 2024;

specifically, the Court allowed the Company’s motion to dismiss the trade libel counterclaim with respect to Appian’s allegations regarding the Company’s Code of Conduct.

On November 26, 2024, Appian moved for judgment on the pleadings.

On March 11, 2025, the Court allowed the motion for judgment on the pleadings in part and entered judgment for Appian on the basis of a statement made by Appian’s chief executive officer, but otherwise denied the motion.

The parties exchanged opening expert reports in March 2026.

The Company claims $ 41.9 million in damages from Appian’s conduct.

Appian seeks $ 31.8 million in lost profits damages and further requests that the Company be required to disgorge $ 109.5 million in profits as unjust enrichment arising from business contracts Appian contends it competed with Pegasystems on from 2022-2025.

Apart from Company revenues in which Appian contends it competed with Pegasystems for business, Appian further seeks that the Company be forced to disgorge the entirety of its profits ($ 2.33 billion) from 2022-2025.

The Company vehemently disagrees with Appian’s entitlement to any recovery, and believes the disgorgement claim is consistent with Appian’s efforts to denigrate the Company that are the subject of the Company’s claims asserted in this litigation.

The Company remains confident in the merits of its claims against Appian and the damages claimed, and disputes Appian’s counterclaims, including the amount of and legal basis for the damages sought, believes it has strong defenses to the counterclaims, and intends to vigorously defend against the counterclaims.

Motions for summary judgment are due in June 2026, at which time the Company also expects to file Daubert motions.

A jury trial is currently scheduled for November 2026.

The Company is unable to reasonably estimate likelihood of success for either party or a range of possible gain or loss given the uncertainty as to the likelihood, amount, and timing of any potential gain or loss related to its claims or Appian’s counterclaims.

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