Pegasystems (PEGA) risk factors, FY2025 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 CEO, who is also our founder and largest stockholder
6. 06The timing of our license and Pega Cloud revenue and bookings is difficult to predict, which may cause our operating results to vary considerably
7. 07We will need to acquire or develop new products, evolve existing ones, address defects or errors, and adapt to technology changes
8. 08We 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
9. 09We rely on third-party relationships
10. 10The 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
11. 11We may not be able to maintain our retention rate for our subscription clients
12. 12Investments 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
13. 13We face risks from operations and clients based outside of the United States
14. 14The market for our offerings is intensely and increasingly competitive, rapidly changing, and fragmented
15. 15Our consulting revenue is significantly dependent upon our consulting personnel implementing new license and Pega Cloud arrangements
16. 16If we are unsuccessful in our trade secret litigation with Appian Corp. our operating results and financial condition could be adversely impacted53% rewritten

Risks Related to Information Technology Resilience and Security

1. 17We face risks related to outages, data losses, and disruptions of our online services if we fail to maintain an adequate operations infrastructure
2. 18Security of our systems and global client data is a growing challenge. Cyber-attacks and security breaches may expose us to significant legal and financial liabilities28% rewritten
3. 19Our 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. 20We 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. 21We may experience significant errors or security flaws in our products and services and could face privacy, product liability, and warranty claims

Risks Related to Intellectual Property and Government Regulation

1. 22We face risks related to intellectual property claims or appropriation of our intellectual property rights45% rewritten
2. 23Our success depends in part on maintaining and increasing our sales to clients in the public sector
3. 24The 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 flows75% rewritten
4. 25We are subject to extensive federal, state, and foreign laws and regulations, including but not limited to anti-bribery laws, data privacy, information security, resiliency, and AI lawsNew
5. 26Our tax exposures could be greater than anticipated
6. 27In 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 items47% rewritten
7. 28If 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 limitations60% rewritten

General Risk Factors

1. 29Material 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
2. 30We are exposed to fluctuations in foreign currency exchange rates that could negatively impact our financial results and cash flows
3. 31We 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 appropriate22% rewritten
4. 32Our CEO is our largest stockholder and can exert significant influence over matters submitted to our stockholders, which could materially adversely affect our other stockholders25% rewritten
5. 33The 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
6. 34We 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
7. 35If 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