Q1 2020 Revenue up 25% Driven by 57% Increase in Pega Cloud Revenue

• Total ACV up 21% to $711 million, powered by Pega Cloud Choice™
• Pega Cloud ACV up 43% to $182 million
• Pega Ends Quarter with approximately $540 million in Cash

CAMBRIDGE, Mass. — April 29, 2020 — Pegasystems Inc. (NASDAQ: PEGA), the software company empowering digital transformation at the world’s leading enterprises, released its financial results for the first quarter of 2020.

“In Q1, we demonstrated the resiliency of our business and delivered solid results, especially given the global pandemic,” said Alan Trefler, Founder and CEO, Pegasystems. “Our team has navigated through many challenging times before, and we have always come out stronger on the other side. We’ve pivoted quickly to provide solutions that help our clients respond to the crisis while accelerating their digital transformation initiatives for long-term success. Based on the business-critical nature of the value we provide, we see opportunity to further expand our value proposition with existing and new clients.”

“Total ACV grew 21% year over year to $711 million,” said Ken Stillwell, CFO, Pegasystems. “This large shift to recurring revenue is further evidence that we’re executing well on our multi-year cloud transition. Our business is now over 75 percent recurring revenue and, including Pega consulting revenue which is also highly predictable, we have over 90 percent visibility into our 2020 revenue target. Additionally, the timing of the convertible debt offering in Q1 provides us with the financial strength to market our digital transformation solutions and support our growth.”

Pega is pleased to announce Hayden Stafford as President of Global Client Engagement, effective June 1, 2020, reporting directly to Alan Trefler, Founder and CEO, joining Pega from a leadership position at Microsoft. This new role will unify Pega’s Corporate Strategy, Marketing, and Go-to-Market functions and bring together the talented teams of Doug Kra, SVP Client Success International, Tom Libretto, SVP Marketing and CMO, Jeff Taylor, SVP Business Strategy and Go-To-Market Operations, and Leon Trefler, SVP Client Success Americas.

“As Pega evolves and our business continues to grow, we are always on the lookout for people who can strengthen our culture and help accelerate our success. I’m excited to welcome Hayden to help deepen our client engagement and allow me to focus more time with strategic clients and evolving our technology,” said Mr. Trefler.

Quarterly conference call

A conference call and audio-only webcast will be conducted at 5:00 p.m. ET on April 29, 2020.

Members of the public and investors are invited to join the call and participate in the question and answer session by dialing 1-888-394-8218 (domestic), 1-323-701-0225 (international), or via webcast by logging onto www.pega.com at least five minutes prior to the event's broadcast and clicking on the webcast icon in the Investors section.

A replay of the call will also be available on www.pega.com/about/investors by clicking the earnings calls link in the Investors Relations section.

Discussion of Non-GAAP financial measures

To supplement the financial results presented in accordance with generally accepted accounting principles in the U.S. (“GAAP”), we provide Non-GAAP measures, including in this release. We utilize several different financial measures, both GAAP and Non-GAAP, in analyzing and assessing the overall performance of the business, for making operating decisions, and for forecasting and planning for future periods. Our annual financial plan is prepared on both a GAAP and a Non-GAAP basis. In addition, because of the importance of these measures in managing the business, we use Non-GAAP measures and financial performance results in the evaluation process to establish management’s compensation.

The Non-GAAP measures exclude the effects of stock-based compensation expense, amortization of intangible assets, and foreign currency transaction gains and losses, expenses arising in connection with the issuance of our convertible senior notes and the related capped call transactions, losses arising from our venture investments, losses arising in connection with the change in format of PegaWorld, and income tax effects related to the foregoing. We believe these Non-GAAP measures are helpful in understanding our past financial performance and our anticipated future results.

These Non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures. They should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP.

A reconciliation of the GAAP measures to our Non-GAAP measures is contained in the financial schedules at the end of this release.

Forward-looking statements

Certain statements contained in this press release may be construed as “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995.

Words such as expects, anticipates, intends, plans, believes, will, could, should, estimates, may, targets, strategies, intends to, projects, forecasts, guidance, likely, and usually, or variations of such words and other similar expressions are intended to identify forward-looking statements, which speak only as of the date the statement was made and are based on current expectations and assumptions.

These forward-looking statements deal with future events, and are subject to various risks and uncertainties that are difficult to predict, including, but are not limited to, statements about our future financial performance and business plans, the adequacy of our liquidity and capital resources, the continued payment of quarterly dividends, and the timing of revenue recognition, management of our transition to a more subscription-based business model, variation in demand for our products and services, including among clients in the public sector, the impact of actual or threatened public health emergencies, such as the Coronavirus (COVID-19), reliance on third-party service providers, compliance with our debt obligations and debt covenants, the potential impact of our convertible senior notes and related capped call transactions, reliance on key personnel, and the continued uncertainties in the global economy, foreign currency exchange rates, the potential legal and financial liabilities and reputation damage due to cyber-attacks, security breaches and security flaws, our ability to protect our intellectual property rights and costs associated with defending such rights, maintenance of our client retention rate, and management of our growth. These risks and other factors that could cause actual results to differ materially from those expressed in such forward-looking statements are described further in Part I of our Annual Report on Form 10-K for the year ended December 31, 2019, and other filings we make with the U.S. Securities and Exchange Commission (“SEC”). These documents are available on our website at www.pega.com/about/investors.

Except as required by applicable law, we do not undertake and expressly disclaim any obligation to publicly update or revise these forward-looking statements whether as the result of new information, future events, or otherwise.

The forward-looking statements contained in this press release represent our views as of April 29, 2020.