EXHIBIT 99.1

Pega Cloud ACV Grows 65% in the First Half of 2019

• Total ACV of $613 million, powered by Pega Cloud Choice™

• Pega Cloud RPO (“backlog”) up 69% to $362 million

• Pega Cloud and Client Cloud RPO (“backlog”) up 45% to $600 million

CAMBRIDGE, Mass. — August 7, 2019 — Pegasystems Inc. (NASDAQ: PEGA), the software company empowering digital transformation at the world’s leading enterprises, released its financial results for the second quarter of 2019.

"At mid-year, I’m excited with the strong progress we’re making in our business and in our transition to cloud,” said Alan Trefler, founder and CEO, Pegasystems. “I’m pleased with how our strategy is working, and we continue to gain traction in seizing the huge opportunity in front of us."

“Pega Cloud ACV increased 65% year over year, reaching $136 million,” said Ken Stillwell, CFO, Pegasystems. “This strong ACV growth reflects solid demand worldwide for digital transformation solutions.”

Financial metrics ⁽¹⁾ 

(Dollars in thousands, except per share amounts)	Three Months Ended   June 30,											Six Months Ended   June 30,
	2019				2018				Change			2019				2018				Change
Total revenue	$	205,592			$	196,779			4	%		$	418,138			$	431,961			(3	)%
Subscription revenue (2)	$	125,982			$	117,416			7	%		$	269,760			$	262,218			3	%
Net (loss) income - GAAP	$	(32,296	)		$	(10,409	)		(210	)%		$	(61,013	)		$	1,791			*
Net (loss) income - Non-GAAP	$	(23,427	)		$	(2,732	)		(758	)%		$	(32,803	)		$	17,525			*
Diluted (loss) earnings per share - GAAP	$	(0.41	)		$	(0.13	)		(215	)%		$	(0.77	)		$	0.02			*
Diluted (loss) earnings per share - Non-GAAP	$	(0.30	)		$	(0.03	)		(900	)%		$	(0.42	)		$	0.21			*

* not meaningful

⁽¹⁾ A reconciliation of the GAAP measures to our Non-GAAP measures is contained in the financial schedules at the end of this release.

⁽²⁾ Reflects client arrangements (term license, cloud, and maintenance) that are subject to renewal.

(Dollars in thousands)	Three Months Ended   June 30,																		Six Months Ended   June 30,
	2019						2018						Change						2019						2018						Change
Cloud	$	31,699		15	%		$	20,201		10	%		$	11,498		57	%		$	59,457		14	%		$	35,783		8	%		$	23,674		66	%
Term license	24,954			12	%		31,309			16	%		(6,355		)	(20	)%		73,268			18	%		96,004			22	%		(22,736		)	(24	)%
Maintenance	69,329			34	%		65,906			34	%		3,423			5	%		137,035			33	%		130,431			31	%		6,604			5	%
Subscription	125,982			61	%		117,416			60	%		8,566			7	%		269,760			65	%		262,218			61	%		7,542			3	%
Perpetual license	19,320			9	%		13,475			7	%		5,845			43	%		34,270			8	%		36,553			8	%		(2,283		)	(6	)%
Consulting	60,290			30	%		65,888			33	%		(5,598		)	(8	)%		114,108			27	%		133,190			31	%		(19,082		)	(14	)%
Total revenue	$	205,592		100	%		$	196,779		100	%		$	8,813		4	%		$	418,138		100	%		$	431,961		100	%		$	(13,823	)	(3	)%

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Annual contract value (“ACV”) ^{(1) (2)} 

The change in ACV measures the growth and predictability of future cash flows from Pega Cloud and Client Cloud committed arrangements as of the end of the particular reporting period.

	June 30,								Change						Constant Currency Change
(Dollars in thousands)	2019				2018
Maintenance ACV	$	277,316			$	263,624			$	13,692		5	%		7	%
Term ACV	199,299				168,528				30,771			18	%		19	%
Client Cloud ACV	476,615				432,152				44,463			10	%		12	%
Pega Cloud ACV	136,074				82,376				53,698			65	%		67	%
Total ACV	$	612,689			$	514,528			$	98,161		19	%		21	%

⁽¹⁾ Total ACV, as of a given date, is the sum of the following two components:

• Client Cloud: the sum of (1) the annual value of each term license contract in effect on such date, which is equal to its total license value divided by the total number of years and (2) maintenance revenue reported for the quarter ended on such date, multiplied by four. We do not provide hosting for Client Cloud arrangements.

• Pega Cloud: the total of the annual value of each cloud contract in effect on such date, which is equal to its total value divided by the total number of years.

⁽²⁾ As foreign currency exchange rates are an important factor in understanding period to period comparisons, we believe the presentation of ACV growth rates on a constant currency basis enhances the understanding of our results and evaluation of our performance in comparison to prior periods. The percent change in constant currency is calculated by applying the applicable current period exchange rates to prior period ACV.

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Remaining performance obligations (“RPO”)

Expected future revenue on existing contracts:

	June 30, 2019
(Dollars in thousands)	Perpetual license				Term license				Maintenance				Cloud				Consulting				Total
1 year or less	$	8,429			$	38,080			$	173,421			$	124,134			$	16,259			$	360,323		57	%
1-2 years	915				4,678				12,530				98,842				942				117,907			19	%
2-3 years	1,306				641				5,801				75,828				227				83,803			13	%
Greater than 3 years	—				185				2,812				63,259				—				66,256			11	%
	$	10,650			$	43,584			$	194,564			$	362,063			$	17,428			$	628,289		100	%
Change in RPO Since June 30, 2018
	$	(36,623	)		$	6,640			$	32,273			$	148,253			$	1,086			$	151,629
	(77		)%		18		%		20		%		69		%		7		%		32		%

	June 30, 2018
(Dollars in thousands)	Perpetual license				Term license				Maintenance				Cloud				Consulting				Total
1 year or less	$	28,626			$	20,457			$	111,086			$	41,036			$	12,039			$	213,244		45	%
1-2 years	15,862				9,878				43,837				66,529				4,103				140,209			29	%
2-3 years	2,423				5,665				5,265				50,250				—				63,603			13	%
Greater than 3 years	362				944				2,103				55,995				200				59,604			13	%
	$	47,273			$	36,944			$	162,291			$	213,810			$	16,342			$	476,660		100	%

Quarterly conference call

A conference call and audio-only webcast will be conducted at 5:00 p.m. EDT on August 7, 2019.

Members of the public and investors are invited to join the call and participate in the question and answer session by dialing 1-800-289-0438 (domestic), 1-323-794-2423 (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 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”), the Company provides non-GAAP measures, including in this release. Pegasystems’ management utilizes a number of 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. The Company’s annual financial plan is prepared on both a GAAP and non-GAAP basis, and both are approved by our board of directors. In addition, because of the importance of these measures in managing the business, the Company uses 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. The Company believes these non-GAAP measures are helpful in understanding its past financial performance and its anticipated future results.

These non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read only in conjunction with the Company’s consolidated financial statements prepared in accordance with GAAP.

A reconciliation of the Company’s GAAP measures to Non-GAAP measures is included 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.

These forward-looking statements are based on current expectations, estimates, forecasts, and projections about the industry and markets in which we operate, and management’s beliefs and assumptions. In addition, other written or oral statements that constitute forward-looking statements may be made by us or on our behalf. Words such as “expect,”

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“anticipate,” “intend,” “plan,” “believe,” “could,” “estimate,” “may,” “target,” “strategy,” “is intended to,” “project,” “guidance,” “likely,” “usually,” or variations of such words and similar expressions are intended to identify such forward-looking statements.

Important factors that could cause actual future activities and results to differ materially from those expressed in such forward-looking statements include, among others, variation in demand for our products and services, reliance on third party relationships, reliance on key personnel, the inherent risks associated with international operations and the continued uncertainties in the global economy, our continued effort to market and sell both domestically and internationally, foreign currency exchange rates, the potential legal and financial liabilities and reputation damage due to cyber-attacks and security breaches, 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 more completely in Part I of our Annual Report on Form 10-K for the year ended December 31, 2018, and other filings we make with the U.S. Securities and Exchange Commission (“SEC”). These documents are available on the Company’s website at www.pega.com/about/investors.

Investors are cautioned not to place undue reliance on such forward-looking statements and there are no assurances that the results contained in such statements will be achieved. Although new information, future events, or risks may cause actual results to differ materially from future results expressed or implied by such forward-looking statements, except as required by applicable law, we do not undertake and specifically 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 the Company’s views as of August 7, 2019.

About Pegasystems

Pegasystems Inc. is the leader in software for customer engagement and operational excellence. Pega’s adaptive, cloud-architected software - built on its unified Pega Platform™ - empowers people to rapidly deploy, and easily extend and change applications to meet strategic business needs. Over its 35-year history, Pega has delivered award-winning capabilities in CRM and digital process automation (DPA), powered by advanced artificial intelligence and robotic automation, to help the world’s leading brands achieve breakthrough business results.

For more information on Pegasystems (NASDAQ: PEGA) visit www.pega.com.

Press contact:

Lisa Pintchman

Pegasystems Inc.

lisa.pintchman@pega.com

(617) 866-6022            

Twitter: @pega

Investor contact:

Garo Toomajanian                

ICR for Pegasystems Inc.    

pegainvestorrelations@pega.com

(617) 866-6077

All trademarks are the property of their respective owners.

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PEGASYSTEMS INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

	Three Months Ended   June 30,								Six Months Ended   June 30,
	2019				2018				2019				2018
Revenue
Software license	$	44,274			$	44,784			$	107,538			$	132,557
Maintenance	69,329				65,906				137,035				130,431
Services	91,989				86,089				173,565				168,973
Total revenue	205,592				196,779				418,138				431,961
Cost of revenue
Software license	928				1,262				2,306				2,517
Maintenance	6,292				5,874				12,627				11,956
Services	69,860				66,681				136,584				134,958
Total cost of revenue	77,080				73,817				151,517				149,431
Gross profit	128,512				122,962				266,621				282,530
Operating expenses
Selling and marketing	116,962				93,972				225,827				182,355
Research and development	49,714				41,972				100,310				88,757
General and administrative	14,174				10,181				26,850				26,645
Total operating expenses	180,850				146,125				352,987				297,757
(Loss) from operations	(52,338		)		(23,163		)		(86,366		)		(15,227		)
Foreign currency transaction gain (loss)	2,105				1,244				(1,607		)		159
Interest income, net	544				629				1,267				1,393
Other income, net	55				—				55				363
(Loss) before (benefit from) income taxes	(49,634		)		(21,290		)		(86,651		)		(13,312		)
(Benefit from) income taxes	(17,338		)		(10,881		)		(25,638		)		(15,103		)
Net (loss) income	$	(32,296	)		$	(10,409	)		$	(61,013	)		$	1,791
(Loss) earnings per share
Basic	$	(0.41	)		$	(0.13	)		$	(0.77	)		$	0.02
Diluted	$	(0.41	)		$	(0.13	)		$	(0.77	)		$	0.02
Weighted-average number of common shares outstanding
Basic	78,987				78,635				78,787				78,436
Diluted	78,987				78,635				78,787				83,247

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PEGASYSTEMS INC.

UNAUDITED RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES ⁽¹⁾ 

(in thousands, except percentages and per share amounts)

	Three Months Ended   June 30,											Six Months Ended   June 30,
	2019				2018				Change			2019				2018				Change
Total revenue - GAAP and Non-GAAP	$	205,592			$	196,779			4	%		$	418,138			$	431,961			(3	)%
Net (loss) income - GAAP	$	(32,296	)		$	(10,409	)		(210	)%		$	(61,013	)		$	1,791			*
Amortization of intangible assets	1,656				2,836							4,592				5,673
Stock-based compensation (2)	20,047				16,056							38,397				31,165
Foreign currency transaction gain (loss)	(2,105		)		(1,244		)					1,607				(159		)
Income tax effects (3)	(10,729		)		(9,971		)					(16,386		)		(20,945		)
Net (loss) income - Non-GAAP	$	(23,427	)		$	(2,732	)		(758	)%		$	(32,803	)		$	17,525			*
Diluted (loss) earnings per share - GAAP	$	(0.41	)		$	(0.13	)		(215	)%		$	(0.77	)		$	0.02			*
Non-GAAP adjustments	0.11				0.10							0.35				0.19
Diluted (loss) earnings per share - Non-GAAP	$	(0.30	)		$	(0.03	)		(900	)%		$	(0.42	)		$	0.21			*
Diluted weighted-average number of common shares outstanding - GAAP	78,987				78,635				—	%		78,787				83,247				(5	)%
Diluted weighted-average number of common shares outstanding - Non-GAAP	78,987				78,635				—	%		78,787				83,247				(5	)%

* not meaningful

⁽¹⁾ Our non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP.

Our non-GAAP financial measures reflect adjustments based on the following items:

• Amortization of intangible assets: We have excluded amortization of intangible assets from our non-GAAP operating expenses and profitability measures. Amortization of intangible assets fluctuates in amount and frequency and is significantly affected by the timing and size of our acquisitions. Investors should note that the use of intangible assets contributed to our revenues recognized during the periods presented and is expected to contribute to our future period revenues as well. Amortization of intangible assets is likely to recur in future periods.

• Stock-based compensation: We have excluded stock-based compensation from our non-GAAP operating expenses and profitability measures. Although stock-based compensation is a key incentive offered to our employees, and we believe such compensation contributed to our revenues recognized during the periods presented and is expected to contribute to our future period revenues, we continue to evaluate our business performance excluding stock-based compensation.

• Foreign currency transaction gain (loss): We have excluded foreign currency transaction gains and losses from our non-GAAP profitability measures. Foreign currency transaction gains and losses fluctuate in amount and frequency and are significantly affected by changes in foreign exchange market rates. Foreign currency transaction gains and losses will recur in future periods.

For additional information about our use of Non-GAAP measures, the reasons why management uses these measures, the usefulness of these measures, and the material limitations on the usefulness of these measures, see “Discussion of non-GAAP financial measures” included earlier in this release and below.

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⁽²⁾ Stock-based compensation was as follows:

	Three Months Ended   June 30,								Six Months Ended   June 30,
(in thousands)	2019				2018				2019				2018
Cost of revenues	$	4,911			$	4,257			$	9,430			$	7,958
Selling and marketing	8,364				6,038				15,738				10,696
Research and development	4,572				3,802				9,132				7,439
General and administrative	2,200				1,959				4,097				5,072
	$	20,047			$	16,056			$	38,397			$	31,165
Income tax benefit	$	(4,056	)		$	(3,341	)		$	(7,796	)		$	(6,482	)

⁽³⁾ Effective income tax rates were as follows:

	Six Months Ended   June 30,
	2019			2018
GAAP	30	%		113	%
Non-GAAP	22	%		25	%

Our effective income tax rate under GAAP is subject to significant fluctuations due to a variety of factors, including excess tax benefits generated by our stock-based compensation plans, tax credits for stock-based compensation awards to research and development employees, and unfavorable foreign stock-based compensation adjustments. We determine our non-GAAP income tax rate by using applicable rates in taxing jurisdictions and assessing certain factors including our historical and forecast earnings by jurisdiction, discrete items, and our ability to realize tax assets. We believe it is beneficial for our management to review our non-GAAP effective income tax rate on a basis consistent with the effective income tax rate in our annual plan as established at the beginning of each year given this tax rate volatility.

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PEGASYSTEMS INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

	June 30, 2019				December 31, 2018
Assets
Total cash, cash equivalents, and marketable securities	$	155,049			$	207,423
Total receivables (billed and unbilled)	422,408				504,765
Goodwill	79,037				72,858
Other assets	284,123				197,507
Total assets	$	940,617			$	982,553
Liabilities and stockholders’ equity
Accrued expenses, including compensation and related expenses	$	113,252			$	130,177
Deferred revenue, current	169,009				185,145
Deferred income tax liabilities	6,918				6,939
Other liabilities	94,151				38,761
Stockholders’ equity	557,287				621,531
Total liabilities and stockholders’ equity	$	940,617			$	982,553

PEGASYSTEMS INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Six Months Ended   June 30,
	2019				2018
Operating activities:
Net (loss) income	$	(61,013	)		$	1,791
Adjustments to reconcile net (loss) income to cash provided by operating activities
Non-cash items	73,562				51,081
Change in operating assets and liabilities, net	(4,829		)		22,560
Cash provided by operating activities	7,720				75,432
Cash provided by (used in) investing activities	17,210				(46,369		)
Cash (used in) financing activities	(44,367		)		(45,825		)
Effect of exchange rate changes on cash and cash equivalents	515				(1,226		)
Net (decrease) in cash and cash equivalents	(18,922		)		(17,988		)
Cash and cash equivalents, beginning of period	114,422				162,279
Cash and cash equivalents, end of period	$	95,500			$	144,291

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