Summary
Pegasystems posted a softer top line but stronger cloud and cash trends in its fiscal 2024 third quarter. Total revenue for the three months ended September 30, 2024 was $325.05 million, down 2.9% from $334.64 million in the prior-year quarter. Through the first nine months of the year, revenue reached $1.01 billion, up 5.0% from $958.38 million. The quarterly decline traces to subscription license revenue, which fell after several large multi-year contracts were recognized in the prior-year period, and to smaller dips in maintenance and consulting. Pega Cloud revenue rose, so the mix keeps tilting toward hosted offerings.
Annual contract value, the metric management leads with, ended the quarter at $1.360 billion, up 16% year over year and 14% in constant currency. Pega Cloud ACV was $640.574 million, up 30% and 26% in constant currency. Founder and CEO Alan Trefler said Pega GenAI Blueprint is changing how the company engages with clients, and COO and CFO Ken Stillwell pointed to the cloud acceleration as evidence of client commitment to digital transformation. Remaining performance obligations, the company's backlog measure, stood at $1.48 billion, up 16.6%, while constant currency backlog was $1.432 billion, up 13%. Deferred revenue of $347.76 million rose 16.0%.
Profitability remains the weak spot in the quarter. Gross profit was $228.34 million, down 5.2%, and gross margin slipped to 70.2% from 72.0%, a decline of 1.7 percentage points. The year-to-date picture is different. Gross profit of $718.04 million rose 7.1% and gross margin of 71.4% was up 1.4 percentage points. The company recorded an operating loss of $11.66 million in the quarter, wider than the $10.82 million loss a year earlier, with an operating margin of -3.6%. For the nine months, the operating loss narrowed to $19.11 million from $74.31 million, and operating margin of -1.9% improved by 5.9 percentage points. The quarterly net loss was $14.39 million, wider than $7.28 million a year ago, and diluted EPS was -$0.17 against -$0.09. The nine-month net loss narrowed to $19.90 million from $74.86 million, with diluted EPS of -$0.23 versus -$0.90.
Non-GAAP results show the same split between the quarter and the year. Non-GAAP net income was $34.594 million for the quarter, down 8%, and non-GAAP diluted EPS was $0.39, down 11%. Over nine months, non-GAAP net income reached $122.589 million, up 111%, and non-GAAP EPS was $1.38, up 100%. The gap between GAAP and non-GAAP results comes from items such as stock-based compensation, restructuring, legal fees, the litigation settlement and foreign currency movements. Restructuring expense fell to $2.485 million in the quarter from $17.822 million a year earlier, and legal and related fees tied to proceedings outside the ordinary course of business continue to run.
Cash generation is the clearest positive. Operating cash flow for the nine months was $250.70 million, up 81.8% from $137.92 million, and free cash flow, which subtracts investment in property and equipment, was $245.776 million, up 99%. Operating cash flow and free cash flow are different measures. In the quarter alone, operating cash flow of $30.45 million rose 26.0%. Capital expenditures of $3.06 million in the quarter rose 806.5%, though nine-month capital expenditures of $4.92 million fell 65.5% as the company optimized office space.
Risks look familiar. The company carries an ongoing litigation matter with Appian Corp., and a litigation settlement, net of recoveries, of $32.4 million weighed on nine-month results. A foreign currency transaction loss of $4.405 million hit the quarter. The filings also flag reliance on third-party hosting providers, cyber security exposure, variation in public sector demand, client retention and the convertible senior notes, of which $502.3 million in principal stays outstanding and matures on March 1, 2025. The release carried no numeric guidance for the next quarter or the full fiscal year. On capital returns, the board extended the share repurchase program to December 31, 2025 and raised the authorization by $250 million to $310 million, and the company intends to keep paying a quarterly dividend of $0.03 per share.
Forecast
No forward guidance in this quarter's filings.
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2024 | Q2 FY2024 | QoQ | Q3 FY2023 | YoY |
|---|---|---|---|---|---|
| Revenue | $325.1M | $351.2M | -7.4% | $334.6M | -2.9% |
| Gross profit | $228.3M | $254.2M | -10.2% | $240.9M | -5.2% |
| Gross margin | 70.3% | 72.4% | -2.1 pp | 72.0% | -1.7 pp |
| Research & development | $74.2M | $75.4M | -1.7% | $75.0M | -1.1% |
| Sales & marketing | $127.7M | $139.8M | -8.7% | $131.6M | -3.0% |
| General & administrative | $35.7M | $25.4M | +40.4% | $27.3M | +30.6% |
| Total operating expenses | $240.0M | $241.2M | -0.5% | $251.7M | -4.6% |
| Operating income (loss) | -$11.7M | $13.0M | -189.9% | -$10.8M | -7.8% |
| Operating margin | -3.6% | 3.7% | -7.3 pp | -3.2% | -0.4 pp |
| Net income (loss) | -$14.4M | $6.6M | -317.6% | -$7.3M | -97.7% |
| Net margin | -4.4% | 1.9% | -6.3 pp | -2.2% | -2.2 pp |
| Diluted EPS | -$0.17 | $0.07 | -$0.24 | -$0.09 | -$0.08 |
Risks
The MD&A highlights ongoing litigation with Appian Corp. and a litigation settlement, net of recoveries, of $32.4 million for the nine months ended September 30, 2024, compared with none in the prior-year period. Legal fees also rose to $9.2 million from $5.9 million over the same year-to-date periods.
As of September 30, 2024, the company had $502.3 million aggregate principal amount of convertible senior notes outstanding, maturing March 1, 2025, with $504.2 million of contractual obligations due in 2025. The MD&A lists compliance with debt obligations and covenants and the convertible notes as risks.
The filing flags timing of revenue recognition and variation in demand, including among public sector clients. FY2024 Q3 revenue decreased 2.9% to $325.05 million versus the prior-year quarter, and subscription license revenue decreased 39% due to large multi-year contracts recognized in the prior-year quarter.
Client retention rate is called out as a forward-looking risk, and growth depends on existing clients expanding their use of Pega Cloud. Maintenance revenue decreased 3% in the three months ended September 30, 2024 as clients shifted to Pega Cloud-based offerings that generally do not generate maintenance revenue.
The MD&A attributes lower selling and marketing expense to reduced headcount from go-to-market optimization, while reliance on key personnel remains a listed risk. Restructuring expense was $3.3 million for the nine months ended September 30, 2024, down from $21.6 million in the prior-year period.
SaaS KPIs
All quarters →Annual Contract Value (ACV)
Pega Cloud ACV
Constant Currency Backlog
Constant Currency ACV
Remaining Performance Obligations (Backlog)
Summary, forecast, risks and KPIs are extracted from PEGASYSTEMS INC's SEC filings for Q3 FY2024 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.