Pegasystems (PEGA) risk factors, 2025 10-K

Risks Related to Our Business and Industry

1. 01If we fail to operate our subscription-based business model successfully, our results of operations and/or cash flows could be negatively impacted
2. 02Our clients largely prefer subscription-based offerings, requiring us to have a scalable organization and make a considerable investment of technical, financial, legal, managerial, and sales resources
3. 03We may not achieve the key elements of our strategy and grow our business as anticipated
4. 04If we are not successful in executing our investments in AI, including generative AI, our business, financial condition, and results of operations may be harmed
5. 05Our business is dependent on key, highly skilled technical, managerial, consulting, sales, and marketing personnel, including our Chief Executive Officer, who is also our founder and largest stockholder
6. 06The timing of our license and Pega Cloud revenue is difficult to predict, which may cause our operating results to vary considerably
7. 07The number and value of license and Pega Cloud arrangements has been increasing, and we may not be able to sustain this growth unless our partners and we can provide sufficient high-quality consulting, training, and maintenance resources to enable our clients to realize significant business value from our software
8. 08We may not be able to maintain our retention rate for our subscription clients
9. 09Investments we are making to continue to grow license and Pega Cloud arrangements may result in decreased profitability or losses and reduced or negative cash flow if we do not continue to increase the value of our license and Pega Cloud arrangements to balance our growth in expenses
10. 10We rely on third-party relationships
11. 11We face risks from operations and clients based outside of the United States
12. 12Our consulting revenue is significantly dependent upon our consulting personnel implementing new license and Pega Cloud arrangements
13. 13We frequently enter into a series of license or Pega Cloud arrangements that each focus on a specific purpose or area of operations. If we are not successful in obtaining follow-on business from these clients, our financial performance could be materially adversely affected
14. 14We will need to acquire or develop new products, evolve existing ones, address defects or errors, and adapt to technology changes
15. 15The market for our offerings is intensely and increasingly competitive, rapidly changing, and fragmented
16. 16Our Chief Executive Officer is our largest stockholder and can exert significant influence over matters submitted to our stockholders, which could materially adversely affect our other stockholders
17. 17If we are unsuccessful in the appeal of the trial court judgment in our litigation with Appian Corp., our operating results and financial condition would be adversely impacted

Risks Related to Information Technology Resilience and Security

1. 18We face risks related to outages, data losses, and disruptions of our online services if we fail to maintain an adequate operations infrastructure
2. 19Security of our systems and global client data is a growing challenge. Cyber-attacks and security breaches may expose us to significant legal and financial liabilities
3. 20Our Pega Cloud offering involves hosting client applications on the servers of third-party technology providers. We also rely on third-party systems and technology, including encryption, virtualized infrastructure, and support, and employ a shared security model with our clients and third-party technology providers
4. 21We rely on third-party hosting providers to deliver our offerings, and any disruption or interference with our use of these services could adversely affect our business
5. 22We may experience significant errors or security flaws in our products and services and could face privacy, product liability, and warranty claims
6. 23We may require additional capital in the future
7. 24We are required to comply with certain financial and operating covenants under our revolving credit facility. Failure to comply with these covenants could cause amounts borrowed to become immediately due and payable and/or prevent us from borrowing under the credit facility

Risks Related to Intellectual Property and Government Regulation

1. 25We face risks related to intellectual property claims or appropriation of our intellectual property rights
2. 26Intellectual property rights claims by third parties are extremely costly to defend, could require us to pay significant damages, and could limit our ability to use certain technologies
3. 27Our success depends in part on maintaining and increasing our sales to clients in the public sector
4. 28The occurrence of any of those factors could cause governments and governmental agencies to delay or refrain from purchasing our software in the future or otherwise harm our business, results of operations, financial condition, and cash flows
5. 29Our tax exposures could be greater than anticipated
6. 30In addition, our future income taxes could be materially adversely affected by a shift in our jurisdictional income mix, by changes in the valuation of our deferred tax assets and liabilities, because of changes in tax laws, regulations, or accounting principles, as well as by certain discrete items
7. 31If it becomes necessary or desirable to repatriate our foreign cash balances to the United States, we may be subject to increased taxes, other restrictions, and limitations
8. 32The provision in our amended and restated bylaws, requiring exclusive forum in certain courts in The Commonwealth of Massachusetts or the federal district court for the District of Massachusetts for certain types of lawsuits, may discourage lawsuits against us and our directors, officers, and employees
9. 33Material adverse developments in global economic conditions, or the occurrence of certain other world events, could affect demand for our products, increase our costs of operation and harm our business
10. 34We are exposed to fluctuations in foreign currency exchange rates that could negatively impact our financial results and cash flows
11. 35We do not currently use foreign currency forward contracts to hedge our exposure to changes in foreign currency exchange rates. We may enter into hedging contracts again in the future if we believe it is appropriate
12. 36The market price of our common stock may be highly volatile and fluctuate due to a variety of factors, some of which are related in complex ways
13. 37We may fail to meet our publicly announced guidance or other expectations about our business and future operating results, which could cause our stock price to decline
14. 38If securities or industry analysts do not publish research or reports about our business, or publish negative reports about our business, our stock price and trading volume could decline