PEGA(PEGA) - 2021 Q1 - Quarterly Report

Company Information Registrant Details This section provides key identification information for Pegasystems Inc, including its filing status, stock market listing, and outstanding shares - The registrant is a large accelerated filer[3][4] Company Basic Information | Metric | Value | |:---|:---| | Filing Type | Quarterly Report (Form 10-Q) | | Period Ended | March 31, 2021 | | Commission File Number | 1-11859 | | Registrant Name | PEGASYSTEMS INC. | | State of Incorporation | Massachusetts | | Trading Symbol | PEGA | | Exchange | NASDAQ Global Select Market | | Common Stock Outstanding (April 19, 2021) | 81,281,726 shares | PART I - FINANCIAL INFORMATION Item 1. Financial Statements This section contains the company's unaudited condensed consolidated financial statements as of March 31, 2021, detailing its financial position and performance Unaudited Condensed Consolidated Balance Sheets Key Condensed Consolidated Balance Sheet Data (in thousands of U.S. dollars) | Metric | March 31, 2021 | December 31, 2020 | Change | |:---|:---|:---|:---| | Assets | | | | | Total current assets | $922,153 | $976,910 | $(54,757) | | Total assets | $1,528,503 | $1,604,262 | $(75,759) | | Liabilities | | | | | Total current liabilities | $404,450 | $460,135 | $(55,685) | | Convertible senior notes, net | $588,418 | $518,203 | $70,215 | | Total liabilities | $1,049,578 | $1,062,090 | $(12,512) | | Stockholders' Equity | | | | | Total stockholders' equity | $478,925 | $542,172 | $(63,247) | Unaudited Condensed Consolidated Statements of Operations Key Condensed Consolidated Statements of Operations Data (in thousands of U.S. dollars, except per share amounts) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Change (YoY) | % Change (YoY) | |:---|:---|:---|:---|:---| | Total revenue | $313,499 | $265,591 | $47,908 | 18.0% | | Gross profit | $231,052 | $186,063 | $44,989 | 24.2% | | Income (loss) from operations | $1,601 | $(24,318) | $25,919 | N/A | | Net (loss) | $(6,617) | $(25,372) | $18,755 | N/A | | Basic (loss) per share | $(0.08) | $(0.32) | $0.24 | N/A | | Diluted (loss) per share | $(0.08) | $(0.32) | $0.24 | N/A | Unaudited Condensed Consolidated Statements of Comprehensive (Loss) Key Condensed Consolidated Statements of Comprehensive (Loss) Data (in thousands of U.S. dollars) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Change (YoY) | |:---|:---|:---|:---| | Net (loss) | $(6,617) | $(25,372) | $18,755 | | Total other comprehensive income (loss), net of tax | $280 | $(414) | $694 | | Comprehensive (loss) | $(6,337) | $(25,786) | $19,449 | Unaudited Condensed Consolidated Statements of Stockholders' Equity - The adoption of ASU 2020-06 resulted in a cumulative-effect adjustment that decreased total stockholders' equity by $52.2 million[16] Stockholders' Equity Changes (in thousands of U.S. dollars) | Metric | March 31, 2021 | December 31, 2020 | March 31, 2020 | |:---|:---|:---|:---| | Total Stockholders' Equity | $478,925 | $542,172 | $566,611 | | Common Stock (shares) | 81,246 | 80,890 | 80,076 | | Additional Paid-In Capital | $140,558 | $204,432 | $196,310 | | Retained Earnings | $340,223 | $339,879 | $383,142 | | Accumulated Other Comprehensive (Loss) | $(2,668) | $(2,948) | $(13,642) | Unaudited Condensed Consolidated Statements of Cash Flows Key Condensed Consolidated Statements of Cash Flows Data (in thousands of U.S. dollars) | Cash Flow Activity | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Change (YoY) | |:---|:---|:---|:---| | Operating activities | $21,650 | $(18,323) | $39,973 | | Investing activities | $15,489 | $(12,562) | $28,051 | | Financing activities | $(34,794) | $502,174 | $(536,968) | | Net increase in cash and cash equivalents | $809 | $469,779 | $(468,970) | | Cash and cash equivalents, end of period | $172,708 | $538,142 | $(365,434) | Notes to Unaudited Condensed Consolidated Financial Statements NOTE 1. BASIS OF PRESENTATION - The unaudited condensed consolidated financial statements are prepared according to SEC rules for interim reporting and do not include all information required for complete financial statements[20] - Management believes the financial statements include all necessary normal recurring adjustments for a fair presentation of the interim periods presented[21] - The operating results for the interim periods presented are not necessarily indicative of the results expected for the full year 2021[22] NOTE 2. NEW ACCOUNTING PRONOUNCEMENTS - The company adopted ASU 2020-06 on January 1, 2021, simplifying the accounting for convertible instruments by removing the separation model for convertible instruments with cash conversion features[23][24] Impact of Adopting ASU 2020-06 (in thousands of U.S. dollars) | Metric | Impact | |:---|:---| | Convertible Senior Notes Book Value Increase | $69,500 | | Retained Earnings Increase | $9,400 | NOTE 3. MARKETABLE SECURITIES - As of March 31, 2021, the weighted-average remaining term of marketable securities was approximately 1.4 years[26] Fair Value of Marketable Securities (in thousands of U.S. dollars) | Category | March 31, 2021 Fair Value | December 31, 2020 Fair Value | |:---|:---|:---| | Government debt | $13,001 | $39,988 | | Corporate debt | $256,649 | $253,281 | | Total marketable securities | $269,650 | $293,269 | NOTE 4. RECEIVABLES, CONTRACT ASSETS, AND DEFERRED REVENUE - Unbilled receivables expected to be invoiced within one year represent 68% of the total[28] - No customer accounted for 10% or more of the company's total receivables as of March 31, 2021, or December 31, 2020[29] - The change in deferred revenue was primarily due to new billings, partially offset by the recognition of $107 million in revenue that was included in deferred revenue as of December 31, 2020[34] Receivables, Contract Assets, and Deferred Revenue (in thousands of U.S. dollars) | Metric | March 31, 2021 | December 31, 2020 | |:---|:---|:---| | Accounts receivable | $159,324 | $215,827 | | Unbilled receivables (current) | $228,603 | $207,155 | | Long-term unbilled receivables | $108,048 | $113,278 | | Total receivables | $495,975 | $536,260 | | Contract assets (current) | $13,454 | $15,296 | | Long-term contract assets | $7,284 | $7,777 | | Total contract assets | $20,738 | $23,073 | | Deferred revenue (current) | $244,170 | $232,865 | | Long-term deferred revenue | $7,565 | $8,991 | | Total deferred revenue | $251,735 | $241,856 | NOTE 5. DEFERRED COMMISSIONS - Amortization of deferred commissions increased by $3.0 million (35.3%) year-over-year[35] Deferred Commissions (in thousands of U.S. dollars) | Metric | March 31, 2021 | December 31, 2020 | |:---|:---|:---| | Deferred commissions | $103,474 | $108,624 | | Amortization of deferred commissions (3 months ended March 31) | $11,496 | $8,497 | NOTE 6. GOODWILL AND OTHER INTANGIBLES - Future estimated amortization expense for intangible assets is $3.0 million for the remainder of 2021, with a total remaining amount of $17.0 million[39] Goodwill Changes (in thousands of U.S. dollars) | Metric | March 31, 2021 | January 1, 2021 | |:---|:---|:---| | Goodwill | $82,037 | $79,231 | | Acquisition | $2,701 | N/A | | Currency translation adjustments | $105 | N/A | Net Book Value of Intangible Assets (in thousands of U.S. dollars) | Category | March 31, 2021 Net Book Value | December 31, 2020 Net Book Value | |:---|:---|:---| | Client-related | $6,920 | $7,291 | | Technology | $10,128 | $8,457 | | Other | $0 | $0 | | Total | $17,048 | $15,748 | Amortization of Intangible Assets (in thousands of U.S. dollars) | Category | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | |:---|:---|:---| | Cost of revenue | $629 | $647 | | Selling and marketing | $373 | $371 | | Total amortization | $1,002 | $1,018 | NOTE 7. LEASES - The company agreed to accelerate its Cambridge headquarters exit to October 1, 2021, in exchange for a one-time $18 million payment from the landlord and a $21.1 million reduction in lease liabilities[40][109] - As of March 31, 2021, the company's leases had a weighted-average remaining lease term of 5.1 years and a weighted-average discount rate of 4.7%[43] Lease Costs (in thousands of U.S. dollars) | Lease Cost Type | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Change (YoY) | |:---|:---|:---|:---| | Fixed lease costs | $300 | $4,818 | $(4,518) | | Short-term lease costs | $459 | $455 | $4 | | Variable lease costs | $1,387 | $1,278 | $109 | | Total lease costs | $2,146 | $6,551 | $(4,405) | Lease Liabilities and Right-of-Use Assets (in thousands of U.S. dollars) | Metric | March 31, 2021 | December 31, 2020 | |:---|:---|:---| | Right of use assets | $44,330 | $67,651 | | Current lease liabilities | $14,161 | $18,541 | | Long-term lease liabilities | $36,471 | $59,053 | | Total lease liabilities | $50,632 | $77,594 | NOTE 8. DEBT - The company issued $600 million in aggregate principal amount of convertible senior notes in February 2020, due March 1, 2025, with an annual interest rate of 0.75%[46] - The conversion rate is 7.4045 shares of common stock per $1,000 principal amount of notes, representing an initial conversion price of $135.05 per share[47] - As of March 31, 2021, the notes were not eligible for conversion at the option of the note holders[48] - The company entered into capped call transactions in February 2020 covering approximately 4.4 million shares to reduce potential common stock dilution and/or offset cash payments upon note conversion, with a cap price of $196.44[56] - The company has a five-year, $100 million senior secured revolving credit facility with PNC Bank, with no outstanding borrowings as of March 31, 2021[60][61] Book Value of Convertible Senior Notes (in thousands of U.S. dollars) | Metric | March 31, 2021 | December 31, 2020 | |:---|:---|:---| | Principal | $600,000 | $600,000 | | Unamortized debt discount | $0 | $(71,222) | | Unamortized issuance costs | $(11,582) | $(10,575) | | Convertible senior notes, net | $588,418 | $518,203 | Capped Call Transaction Changes (in thousands of U.S. dollars) | Metric | March 31, 2021 | January 1, 2021 | |:---|:---|:---| | Capped Call Transactions | $64,480 | $83,597 | | Fair value adjustment (3 months ended March 31) | $(19,117) | N/A | NOTE 9. FAIR VALUE MEASUREMENTS - The company records cash equivalents, marketable securities, capped call transactions, and venture investments at fair value on a recurring basis, using a three-tier fair value hierarchy for classification[62][63][65] - As of March 31, 2021, the fair value of the convertible senior notes was $665.9 million, classified as Level 2 within the fair value hierarchy[67] Assets Measured at Fair Value (in thousands of U.S. dollars) | Asset | March 31, 2021 Total Fair Value | December 31, 2020 Total Fair Value | Fair Value Level (March 31, 2021) | |:---|:---|:---|:---| | Cash equivalents | $26,657 | $56,339 | Level 1 | | Marketable securities | $269,650 | $293,269 | Level 2 | | Capped Call Transactions | $64,480 | $83,597 | Level 2 | | Venture investments | $9,756 | $8,345 | Level 3 | Venture Investment Changes (in thousands of U.S. dollars) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | |:---|:---|:---| | January 1, Balance | $8,345 | $4,871 | | New investments | $500 | $1,490 | | Sales of investments | $(400) | $(1,424) | | Changes in fair value (included in other income) | $100 | $1,374 | | Changes in fair value (included in other comprehensive income) | $1,220 | $100 | | March 31, Balance | $9,756 | $6,338 | NOTE 10. REVENUE - Total backlog grew by 30% since March 31, 2020[90] Revenue by Geography (in thousands of U.S. dollars) | Region | Three Months Ended March 31, 2021 | % of Total 2021 | Three Months Ended March 31, 2020 | % of Total 2020 | |:---|:---|:---|:---|:---| | U.S. | $194,568 | 62% | $172,417 | 65% | | Other Americas | $11,901 | 4% | $15,342 | 6% | | U.K. | $28,212 | 9% | $21,837 | 8% | | Europe (excl. U.K.), Middle East, Africa | $51,659 | 16% | $31,938 | 12% | | Asia-Pacific | $27,159 | 9% | $24,057 | 9% | | Total revenue | $313,499 | 100% | $265,591 | 100% | Revenue by Stream (in thousands of U.S. dollars) | Revenue Stream | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Change (YoY) | % Change (YoY) | |:---|:---|:---|:---|:---| | Perpetual license | $5,452 | $3,659 | $1,793 | 49.0% | | Term license | $111,509 | $90,257 | $21,252 | 23.5% | | Maintenance | $75,561 | $73,695 | $1,866 | 2.5% | | Pega Cloud | $67,858 | $43,466 | $24,392 | 56.1% | | Consulting | $53,119 | $54,514 | $(1,395) | (2.6)% | | Total revenue | $313,499 | $265,591 | $47,908 | 18.0% | Remaining Performance Obligations (Backlog) (in thousands of U.S. dollars) | Period | March 31, 2021 Total | March 31, 2020 Total | |:---|:---|:---| | 1 year or less | $543,946 | $433,262 | | 1-2 years | $251,239 | $168,577 | | 2-3 years | $134,009 | $107,209 | | Greater than 3 years | $50,616 | $44,778 | | Total Backlog | $979,810 | $753,826 | NOTE 11. STOCK-BASED COMPENSATION - As of March 31, 2021, unrecognized stock-based compensation expense was $183.4 million, expected to be recognized over a weighted-average period of 2.3 years[72] Stock-Based Compensation Expense (in thousands of U.S. dollars) | Category | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Change (YoY) | |:---|:---|:---|:---| | Cost of revenue | $5,925 | $5,152 | $773 | | Selling and marketing | $13,720 | $9,718 | $4,002 | | Research and development | $6,770 | $5,496 | $1,274 | | General and administrative | $3,685 | $2,809 | $876 | | Total stock-based compensation | $30,100 | $23,175 | $6,925 | Stock-Based Compensation Grants (in thousands of U.S. dollars) | Grant Type | Shares (thousands) | Total Fair Value | |:---|:---|:---| | RSUs | 684 | $89,291 | | Non-qualified stock options | 1,248 | $47,380 | NOTE 12. INCOME TAXES - The effective income tax benefit rate rose to 73% from 48% in the prior year, primarily due to excess tax benefits from stock-based compensation and fair value adjustments on capped call transactions, which had a larger proportional impact on a lower pre-tax loss[74] (Benefit from) Income Taxes (in thousands of U.S. dollars) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | |:---|:---|:---| | (Benefit from) income taxes | $(17,618) | $(23,810) | | Effective income tax benefit rate | 73% | 48% | NOTE 13. (LOSS) PER SHARE - All dilutive securities, including stock options, RSUs, and convertible senior notes, were excluded from the diluted EPS calculation during loss periods as their inclusion would be anti-dilutive[76][77] - As of March 31, 2021, anti-dilutive outstanding stock options and RSUs totaled 6,465 thousand shares[76][78] (Loss) Per Share Calculation (in thousands of U.S. dollars, except per share amounts) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | |:---|:---|:---| | Net (loss) | $(6,617) | $(25,372) | | Weighted-average common shares outstanding (Basic) | 81,004 | 79,808 | | (Loss) per share, basic | $(0.08) | $(0.32) | | Weighted-average common shares outstanding (Diluted) | 81,004 | 79,808 | | (Loss) per share, diluted | $(0.08) | $(0.32) | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's analysis of the company's financial condition and results of operations, focusing on its cloud transition, expenses, and market risks FORWARD-LOOKING STATEMENTS - This quarterly report contains forward-looking statements subject to risks and uncertainties, and the company undertakes no obligation to publicly update them[80][82] - Key risks include future financial performance, liquidity, dividend payments, revenue timing, subscription model transition, demand fluctuations, COVID-19 impacts, and other operational and economic factors[81] BUSINESS OVERVIEW - Pegasystems develops, markets, and supports enterprise software applications on its low-code, cloud-native Pega Platform™ to help organizations simplify business complexity[84] - The company is transitioning to a subscription-based model, primarily through Pega Cloud, which may result in lower revenue and operating cash flow growth until late 2022 or early 2023[86] - As of March 31, 2021, the COVID-19 pandemic has not had a material impact on the company's operating results or financial condition[87] - Foreign currency exchange rate changes contributed 3% to the total ACV growth in 2021[88] Key Performance Indicators | Metric | Change since March 31, 2020 | |:---|:---| | Annual Contract Value (ACV) | Increased 20% | | Remaining Performance Obligations (Backlog) | Increased 30% | | Year to date Pega Cloud revenue | Increased 56% | CRITICAL ACCOUNTING POLICIES - There have been no material changes to critical accounting policies, except for the adoption of ASU 2020-06 as disclosed in Note 2[94] RESULTS OF OPERATIONS Revenue (MD&A) - Total revenue increased by 18% year-over-year, primarily driven by the cloud transition[96][97] - Multi-year committed maintenance agreements contributed $3.4 million to maintenance revenue growth and reduced term license revenue growth by $5.5 million[99] - The decline in consulting revenue was primarily due to a reduction in billable travel expenses resulting from COVID-19[99] Revenue and Growth by Stream (in thousands of U.S. dollars) | Revenue Stream | 3 Months Ended Mar 31, 2021 | 3 Months Ended Mar 31, 2020 | Change (YoY) | % Change (YoY) | |:---|:---|:---|:---|:---| | Pega Cloud | $67,858 | $43,466 | $24,392 | 56% | | Maintenance | $75,561 | $73,695 | $1,866 | 3% | | Term license | $111,509 | $90,257 | $21,252 | 24% | | Subscription (Total) | $254,928 | $207,418 | $47,510 | 23% | | Perpetual license | $5,452 | $3,659 | $1,793 | 49% | | Consulting | $53,119 | $54,514 | $(1,395) | (3)% | | Total Revenue | $313,499 | $265,591 | $47,908 | 18% | Gross profit (MD&A) - The increase in gross profit was primarily attributable to the cloud transition, revenue growth, and improved cost efficiencies for Pega Cloud[97] - The increase in consulting gross profit was mainly due to improved consultant utilization[98] Gross Profit by Revenue Stream (in thousands of U.S. dollars) | Revenue Stream | 3 Months Ended Mar 31, 2021 Gross Profit | 3 Months Ended Mar 31, 2020 Gross Profit | Change (YoY) | % Change (YoY) | |:---|:---|:---|:---|:---| | Software license | $116,311 | $93,232 | $23,079 | 25% | | Maintenance | $69,775 | $68,119 | $1,656 | 2% | | Pega Cloud | $45,301 | $25,933 | $19,368 | 75% | | Consulting | $(335) | $(1,221) | $886 | 73% | | Total Gross Profit | $231,052 | $186,063 | $44,989 | 24% | Operating expenses (MD&A) - The increase in selling and marketing expense was due to a $25.4 million increase in compensation and benefits from headcount and stock-based compensation, partially offset by reductions in travel and marketing activities due to COVID-19[100] - Increases in R&D and G&A expenses were primarily attributable to higher compensation and benefits from increased headcount and stock-based compensation[101] - Facilities expenses decreased by $4.1 million across operating expense categories due to the early exit from the Cambridge headquarters[101] Operating Expenses (in thousands of U.S. dollars) | Expense Category | 3 Months Ended Mar 31, 2021 | 3 Months Ended Mar 31, 2020 | Change (YoY) | % Change (YoY) | |:---|:---|:---|:---|:---| | Selling and marketing | $148,739 | $136,024 | $12,715 | 9% | | Research and development | $62,442 | $58,727 | $3,715 | 6% | | General and administrative | $18,270 | $15,630 | $2,640 | 17% | Other income (expense), net (MD&A) - Interest expense decreased due to the adoption of ASU 2020-06[102] - The decrease in other income, net was due to a higher valuation of the venture investment portfolio in the prior year period[103] Other Income (Expense), Net (in thousands of U.S. dollars) | Metric | 3 Months Ended Mar 31, 2021 | 3 Months Ended Mar 31, 2020 | Change (YoY) | % Change (YoY) | |:---|:---|:---|:---|:---| | Foreign currency transaction (loss) | $(5,098) | $(5,947) | $849 | 14% | | Interest income | $153 | $607 | $(454) | (75)% | | Interest expense | $(1,880) | $(2,306) | $426 | 18% | | (Loss) on capped call transactions | $(19,117) | $(18,592) | $(525) | (3)% | | Other income, net | $106 | $1,374 | $(1,268) | (92)% | | Total Other income (expense), net | $(25,836) | $(24,864) | $(972) | (4)% | (Benefit from) income taxes (MD&A) - The effective income tax benefit rate rose to 73% from 48% in the prior year, primarily due to excess tax benefits from stock-based compensation and fair value adjustments on capped call transactions, which had a larger proportional impact on a lower pre-tax loss[104] (Benefit from) Income Taxes (in thousands of U.S. dollars) | Metric | 3 Months Ended Mar 31, 2021 | 3 Months Ended Mar 31, 2020 | |:---|:---|:---| | (Benefit from) income taxes | $(17,618) | $(23,810) | | Effective income tax benefit rate | 73% | 48% | LIQUIDITY AND CAPITAL RESOURCES Cash Flow Summary - The company believes its current cash, cash flow from operations, and borrowing capacity are sufficient to meet its operating needs for at least the next 12 months[106] Cash Flow Activities (in thousands of U.S. dollars) | Cash Flow Activity | 3 Months Ended Mar 31, 2021 | 3 Months Ended Mar 31, 2020 | Change (YoY) | |:---|:---|:---|:---| | Operating activities | $21,650 | $(18,323) | $39,973 | | Investing activities | $15,489 | $(12,562) | $28,051 | | Financing activities | $(34,794) | $502,174 | $(536,968) | | Net increase in cash and cash equivalents | $809 | $469,779 | $(468,970) | Cash, Cash Equivalents, and Marketable Securities Holdings (in thousands of U.S. dollars) | Location | March 31, 2021 | December 31, 2020 | |:---|:---|:---| | Held by U.S. entities | $342,016 | $399,138 | | Held by foreign entities | $100,342 | $66,030 | | Total cash, cash equivalents, and marketable securities | $442,358 | $465,168 | Operating activities (MD&A) - Cash provided by operating activities increased significantly year-over-year, primarily due to strong growth in customer collections[106][109] - The cloud transition is expected to continue impacting the timing of billings and cash collections, potentially leading to slower or negative operating cash flow growth in the short term[108] - The early exit from the Cambridge headquarters reduced future lease liabilities by $21.1 million, with an expected payment of $18.0 million to be received in Q4 2021[109] Investing activities (MD&A) - The increase in cash provided by investing activities was driven by investments in financial instruments, an acquisition, and reduced capital expenditures related to office space[110] Financing activities (MD&A) - Financing activities shifted from a significant cash inflow in 2020, due to the issuance of convertible senior notes, to a cash outflow in 2021[18][111] - There were no outstanding borrowings under the $100 million revolving credit facility as of March 31, 2021[111] Stock repurchase program (MD&A) Stock Repurchase Program (in thousands of U.S. dollars) | Metric | March 31, 2021 | December 31, 2020 | |:---|:---|:---| | Remaining stock repurchase authority | $28,580 | $37,726 | Common Stock Repurchases (shares in thousands, amounts in thousands of U.S. dollars) | Repurchase Type | 3 Months Ended Mar 31, 2021 Shares | 3 Months Ended Mar 31, 2021 Amount | 3 Months Ended Mar 31, 2020 Shares | 3 Months Ended Mar 31, 2020 Amount | |:---|:---|:---|:---|:---| | Tax withholdings for net settlement of equity awards | 197 | $25,509 | 257 | $23,011 | | Stock repurchase program | 70 | $9,146 | 87 | $6,000 | | Total | 267 | $34,655 | 344 | $29,011 | Dividends (MD&A) - The company plans to pay a quarterly cash dividend of $0.03 per share, though the Board of Directors may terminate or modify the program at any time[113] Dividend Payments (in thousands of U.S. dollars) | Metric | 3 Months Ended Mar 31, 2021 | 3 Months Ended Mar 31, 2020 | |:---|:---|:---| | Dividend payments to stockholders | $2,427 | $2,388 | Item 3. Quantitative and Qualitative Disclosures About Market Risk This section discloses the company's market risks, primarily focusing on foreign currency translation and remeasurement risks and their potential impact on financials Foreign currency exposure - The company faces foreign currency translation risk; a hypothetical 10% appreciation of the U.S. dollar against other currencies would have decreased revenue by 4% and increased net income by 20% for the three months ended March 31, 2021[116] - The company is exposed to remeasurement risk, primarily from its U.K. subsidiary holding monetary assets and liabilities denominated in Australian dollars, Euros, and U.S. dollars[117][118] Item 4. Controls and Procedures This section reports on management's evaluation of disclosure controls and procedures and any changes to internal control over financial reporting Evaluation of disclosure controls and procedures - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of March 31, 2021[119] Changes in internal control over financial reporting - There were no changes in internal control over financial reporting during the quarter ended March 31, 2021, that have materially affected, or are reasonably likely to materially affect, internal controls[120] PART II - OTHER INFORMATION Item 1A. Risk Factors This section advises investors to consider the risk factors outlined in the company's Annual Report, which could materially affect its business and financial results - Readers are encouraged to review the risk factors identified in the company's Annual Report on Form 10-K for the year ended December 31, 2020, as they could materially impact the business, financial condition, and future results[121] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section provides details on the company's common stock repurchases during the reporting period, including volume, price, and remaining authorization Issuer purchases of equity securities - The Board of Directors has extended the expiration of the current stock repurchase program to June 30, 2021, and increased the remaining repurchase authorization to $60 million[123] Common Stock Repurchase Program (shares in thousands, amounts in thousands of U.S. dollars) | Period | Total Shares Purchased | Average Price Paid per Share | Shares Purchased under Publicly Announced Program | Approximate Dollar Value Remaining under Program | |:---|:---|:---|:---|:---| | Jan 1 - Jan 31, 2021 | 29 | $134.92 | N/A | $34,877 | | Feb 1 - Feb 28, 2021 | 81 | $140.75 | N/A | $32,028 | | Mar 1 - Mar 31, 2021 | 234 | $125.62 | N/A | $28,580 | | Total (3 months ended Mar 31, 2021) | 344 | $129.95 | 70 | $28,580 | Item 6. Exhibits This section lists the exhibits filed with the report, including corporate charters, officer certifications, and XBRL data files - The report includes various exhibits, such as the Restated Articles of Organization, Amended and Restated By-laws, CEO and CFO certifications (31.1, 31.2, 32), and Inline XBRL files (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)[124] Signature This section confirms the formal signing of the report by the company's Chief Operating Officer and Chief Financial Officer, Kenneth Stillwell - The report was signed on April 28, 2021, by Kenneth Stillwell, Chief Operating Officer and Chief Financial Officer of Pegasystems Inc[130]