Pegasystems (PEGA) 8-K Pegasystems Announces Financial Results for Second Quarter and First Six Months of 2015

Exhibit 99.1

Pegasystems Announces Financial Results for Second Quarter and First Six Months of 2015

Exceeds Revenue Targets and Continues to Build Backlog in First Half of 2015

CAMBRIDGE, Mass. – July 29, 2015 –Pegasystems Inc. (NASDAQ: PEGA), the software company empowering the world’s leading enterprises with strategic business applications, today announced results for its second quarter and six months ended June 30, 2015.

“We are delighted with our strong performance in the first half of 2015, which we believe reflects our unique ability to help clients manage customer engagement on a global scale and rapidly adapt to change,” said Alan Trefler, Founder and CEO of Pegasystems. “We exceeded our revenue goals while building backlog, demonstrating strong execution throughout the organization. We continue to be gratified that the most successful enterprises in the world are choosing Pega to transform their organizations for efficiency and competitive advantage.”

SELECTED GAAP & NON-GAAP RESULTS (1)

	Three Months Ended June 30,
($ in thousands except per share amounts)	2015		2015		2014		2014		% Increase
	GAAP		Non-GAAP		GAAP		Non-GAAP		GAAP		Non-GAAP
Total Revenue	$	162,019	$	162,019	$	142,985	$	143,868		13%		13%
License Revenue	$	63,497	$	63,497	$	54,012	$	54,533		18%		16%
Cloud Revenue	$	7,279	$	7,279	$	3,727	$	3,936		95%		85%
Net Income	$	3,104	$	10,945	$	1,504	$	7,989		106%		37%
Diluted Earnings per share	$	0.04	$	0.14	$	0.02	$	0.10		100%		40%
	Six Months Ended June 30,								% Increase (Decrease)
($ in thousands except per share amounts)	2015		2015		2014		2014
	GAAP		Non-GAAP		GAAP		Non-GAAP		GAAP		Non-GAAP
Total Revenue	$	315,937	$	315,937	$	283,449	$	286,091		11%		10%
License Revenue	$	121,472	$	121,472	$	106,626	$	107,669		14%		13%
Cloud Revenue	$	13,456	$	13,456	$	7,585	$	8,182		77%		64%
Net Income	$	9,039	$	21,131	$	11,269	$	23,695		(20%)		(11%)
Diluted Earnings per share	$	0.11	$	0.27	$	0.14	$	0.30		(21%)		(10%)

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

Cash: Total cash, cash equivalents, and marketable securities at June 30, 2015 was $226.9 million, up 7% from 2014 year-end.

Cash generated from operations for the first six months of 2015 was $39.4 million. Free Cash Flow, which we define as operating cash flow less Cap Ex, was $32.1 million for the first six months of 2015.

License and Cloud Backlog: The Company computes license and cloud backlog by adding billed deferred license and cloud revenue and off-balance sheet license and cloud commitments, which is business that is contracted, unbilled, and not recorded on the Company’s balance sheet.

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License and Cloud Backlog (1)

	June 30,
($ in thousands)	2015		2014		% Increase
Total billed deferred license and cloud revenue		61,339		54,938		12%
Total off-balance sheet license and cloud commitments (2)		330,043		298,658		11%
TOTAL LICENSE AND CLOUD BACKLOG		391,382		353,596		11%

(1) See historical quarterly license backlog amounts including cloud in a separate schedule at the end of this release.

(2) See the “Future Cash Receipts from License and Cloud Arrangements” table on page 23 of the Quarterly Report on Form 10-Q for the period ending June 30, 2015.

“With a strong first half to 2015, Pegasystems continues to execute against its financial performance goals,” said Rafe Brown, Pegasystems CFO. “As a result of the increased visibility gained by building backlog in the first half, we believe we will modestly exceed our previously issued GAAP and non-GAAP revenue guidance of approximately $653 million for the full year 2015. We reiterate our previously issued GAAP diluted EPS guidance for the year of approximately 49 cents per share and non-GAAP diluted EPS guidance for the year of approximately 78 cents per share, as we continue to invest in our strategic applications, cloud, sales, and marketing efforts.”

See the reconciliation of our GAAP diluted EPS guidance to non-GAAP diluted EPS guidance for the full year of 2015 at the end of this release.

Quarterly Conference Call

Pegasystems will host a conference call and audio-only Webcast associated with this announcement at 5:00 p.m. EDT today. A live audio webcast of the conference call, together with detailed financial information, can be accessed through the Company’s Website atwww.pega.com/about/investors. Dial-in information is as follows: 1-877-407-3982 (domestic) or 1-201-493-6780 (international). To listen to theWebcast, log ontowww.pega.com at least 5 minutes prior to the event’s broadcast and click on theWebcast icon in theInvestors section. A replay of the call will also be available onwww.pega.com in the Investors sectionEarnings Calls link.

Discussion of Non-GAAP Financial Measures

To supplement 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 both on a GAAP and non-GAAP basis, and both are approved by our board of directors. In addition and as a consequence 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 certain business combination accounting entries, stock-based compensation expense, amortization of acquired intangibles, acquisition-related expenses, and the benefit associated with favorable settlements of certain indemnification claims and indirect tax liabilities. The Company believes that 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 to non-GAAP measures is included in the financial schedules at the end of this release.

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Forward-Looking Statements

“Safe harbor” statement under the Private Securities Litigation Reform Act of 1995: 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. The words “expect,” “anticipate,” “intend,” “plan,” “believe,” “could,” “estimate,” “may,” “target,” “strategy,” “is intended to,” “project,” “guidance” and similar expressions, among others, identify forward-looking statements, which speak only as of the date the statement was made. These statements are based on current expectations and assumptions and involve various risks and uncertainties, which could cause the Company’s actual results to differ from those expressed in such forward-looking statements. These risks and uncertainties include, among others, variation in demand for our products and services and the difficulty in predicting the completion of product acceptance and other factors affecting the timing of our license revenue recognition; the ongoing consolidation in the financial services, insurance, healthcare, and communications markets; reliance on third party relationships; the potential loss of vendor specific objective evidence for our time and materials professional services arrangements; the inherent risks associated with international operations and the continued weakness in international economies; foreign currency exchange rates; the financial impact of the Company’s past acquisitions and any future acquisitions; and management of the Company’s growth. Further information regarding these and other factors which could cause the Company’s actual results to differ materially from any forward-looking statements contained in this press release is contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 and other recent filings with the Securities and Exchange Commission. These documents are available on the Company’s website athttp://www.pega.com/about/investors. The forward-looking statements contained in this press release represent the Company’s views as of July 29, 2015. Investors are cautioned not to place undue reliance on such forward-looking statements and there are no assurances that the matters contained in such statements will be achieved. Although subsequent events may cause the Company’s view to change, except as required by applicable law, the Company does not undertake and specifically disclaims any obligation to publicly update or revise these forward-looking statements whether as the result of new information, future events or otherwise. The statements should therefore not be relied upon as representing the Company’s view as of any date subsequent to July 29, 2015.

About Pegasystems

Pegasystems (NASDAQ: PEGA) develops strategic applications for sales, marketing, service, and operations. Pega’s applications streamline critical business operations, connect enterprises to their customers seamlessly in real-time across channels, and adapt to meet rapidly changing requirements. Pega’s Global 2000 customers include many of the world’s most sophisticated and successful enterprises. Pega’s applications, available in the cloud or on-premises, are built on its unified Pega 7 platform, which uses visual tools to easily extend and change applications to meet clients’ strategic business needs. Pega’s clients report that Pega gives them the fastest time to value, extremely rapid deployment, efficient re-use, and global scale. For more information, please visit us atwww.pega.com.

Press Contacts:

Lisa Pintchman

Pegasystems Inc.

lisa.pintchman@pega.com

(617) 866-6022

Twitter:@pega

Investor Contact:

Sheila Ennis

ICR for Pegasystems

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,
	2015			2014			2015			2014
Revenue:
Software license	$	63,497		$	54,012		$	121,472		$	106,626
Maintenance		49,329			45,393			98,081			90,274
Services		49,193			43,580			96,384			86,549
Total revenue		162,019			142,985			315,937			283,449
Cost of revenue:
Software license		1,030			1,177			2,106			2,756
Maintenance		5,476			5,044			10,656			9,708
Services		48,275			40,470			92,078			80,140
Total cost of revenue (1)		54,781			46,691			104,840			92,604
Gross profit		107,238			96,294			211,097			190,845
Operating expenses:
Selling and marketing		60,389			56,342			116,124			102,149
Research and development		31,372			27,323			61,216			51,932
General and administrative		10,214			10,250			16,559			19,552
Acquisition-related		13			157			39			363
Total operating expenses (1)		101,988			94,072			193,938			173,996
Income from operations		5,250			2,222			17,159			16,849
Foreign currency transaction (loss) gain		(968	)		(4	)		(3,930	)		318
Interest income, net		216			163			529			287
Other income (expense), net		3			6			3			(526	)
Income before provision for income taxes		4,501			2,387			13,761			16,928
Provision for income taxes		1,397			883			4,722			5,659
Net income	$	3,104		$	1,504		$	9,039		$	11,269
Earnings per share:
Basic	$	0.04		$	0.02		$	0.12		$	0.15
Diluted	$	0.04		$	0.02		$	0.11		$	0.14
Weighted-average number of common shares outstanding:
Basic		76,626			76,286			76,514			76,385
Diluted		78,950			78,280			78,771			78,563
Dividends declared per share	$	0.03		$	0.03		$	0.06		$	0.045
(1) Includes stock-based compensation as follows:
Cost of revenue	$	2,281		$	1,387		$	4,234		$	2,398
Operating expenses	$	6,364		$	3,771		$	10,680		$	6,055

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PEGASYSTEMS INC.

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

($ in thousands, except per share amounts)

	Three Months Ended June 30,												% Increase (Decrease)
	2015 GAAP		Adj.		2015 Non-GAAP		2014 GAAP		Adj.		2014 Non-GAAP		GAAP			Non-GAAP
TOTAL REVENUE		$ 162,019		$         -		$ 162,019		$ 142,985		$       883		$ 143,868		13%			13%
Software license		63,497		-		63,497		54,012		521		54,533		18%			16%
Maintenance		49,329		-		49,329		45,393		153		45,546		9%			8%
Services		49,193		-		49,193		43,580		209		43,789		13%			12%
TOTAL COST OF REVENUE		$   54,781		$   (3,628)		$   51,153		$   46,691		$ (2,831)		$   43,860		17%			17%
Amortization of intangible assets (2)		1,347		(1,347)		-		1,444		(1,444)		-
Stock-based compensation		2,281		(2,281)		-		1,387		(1,387)		-
GROSS MARGIN %		66%				68%		67%				70%		(116)	bp		(109)	bp
TOTAL OPERATING EXPENSES (3)		$ 101,988		$   (8,149)		$   93,839		$   94,072		$ (5,908)		$   88,164		8%			6%
Amortization of intangible assets (2)		1,772		(1,772)		-		1,980		(1,980)		-
Stock-based compensation		6,364		(6,364)		-		3,771		(3,771)		-
Acquisition-related		13		(13)		-		157		(157)		-
INCOME FROM OPERATIONS		$     5,250		$    11,777		$   17,027		$     2,222		$    9,622		$   11,844		136%			44%
OPERATING MARGIN %		3%				11%		2%				8%		169	bp		228	bp
INCOME TAX EFFECTS (4)		$     1,397		$      3,936		$     5,333		$        883		$    3,137		$     4,020		58%			33%
NET INCOME		$     3,104		$      7,841		$   10,945		$     1,504		$    6,485		$     7,989		106%			37%
DILUTED EARNINGS PER SHARE		$       0.04		$        0.10		$       0.14		$       0.02		$      0.08		$       0.10		100%			40%
DILUTED WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING		78,950		-		78,950		78,280		-		78,280		1%			1%

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PEGASYSTEMS INC.

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

($ in thousands, except per share amounts)

	Six Months Ended June 30,															% Increase (Decrease)
	2015 GAAP			Adj.			2015 Non-GAAP		2014 GAAP		Adj.			2014 Non-GAAP		GAAP			Non-GAAP
TOTAL REVENUE		$ 315,937			$         -			$ 315,937		$ 283,449		$     2,642			$ 286,091		11%			10%
Software license		121,472			-			121,472		106,626		1,043			107,669		14%			13%
Maintenance		98,081			-			98,081		90,274		375			90,649		9%			8%
Services		96,384			-			96,384		86,549		1,224			87,773		11%			10%
TOTAL COST OF REVENUE		$ 104,840			$    (6,849	)		$   97,991		$   92,604		$  (5,682	)		$   86,922		13%			13%
Amortization of intangible assets (2)		2,690			(2,690	)		-		3,284		(3,284	)		-
Stock-based compensation		4,234			(4,234	)		-		2,398		(2,398	)		-
Indemnification claim and indirect tax settlements		(75	)		75			-		-		-			-
GROSS MARGIN %		67%						69%		67%					70%		(51)	bp		(63)	bp
TOTAL OPERATING EXPENSES (3)		$ 193,938			$ (10,431)			$ 183,507		$ 173,996		$ (10,314	)		$ 163,682		11%			12%
Amortization of intangible assets (2)		3,567			(3,567	)		-		3,896		(3,896	)		-
Stock-based compensation		10,680			(10,680	)		-		6,055		(6,055	)		-
Indemnification claim and indirect tax settlements		(3,855	)		3,855			-
Acquisition-related		39			(39	)		-		363		(363	)		-
INCOME FROM OPERATIONS		$   17,159			$   17,280			$   34,439		$   16,849		$   18,638			$   35,487		2%			(3%)
OPERATING MARGIN %		5%						11%		6%					12%		(51)	bp		(150)	bp
INCOME TAX EFFECTS (4)		$     4,722			$     5,188			$     9,910		$     5,659		$     6,212			$   11,871		(17%)			(17%)
NET INCOME		$     9,039			$   12,092			$   21,131		$   11,269		$   12,426			$   23,695		(20%)			(11%)
DILUTED EARNINGS PER SHARE		$       0.11			$       0.16			$       0.27		$       0.14		$       0.16			$       0.30		(21%)			(10%)
DILUTED WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING		78,771			-			78,771		78,563		-			78,563		0%			0%

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PEGASYSTEMS INC.

FOOTNOTES FOR RECONCILIATON OF

SELECTED GAAP MEASURES TO NON-GAAP MEASURES

(1) This presentation includes non-GAAP measures. Our non-GAAP 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. For a detailed explanation of the adjustments made to comparable 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 disclosure under Discussion of Non-GAAP Financial Measures included earlier in this release and below. Our non-GAAP financial measures reflect adjustments based on the following items, as well as the related income tax effects:

Revenue: Business combination accounting rules require that we determine the fair value of the deferred revenue liability for contractual obligations assumed primarily from our acquisition of Antenna Software, Inc. and its subsidiaries (“Antenna”) in October 2013. In post-acquisition reporting periods, we recognize revenue for the fair value of these contracts, when all the revenue recognition criteria are satisfied, instead of the revenue that would have been recognized by Antenna as an independent company. We add back the effect of the deferred revenue fair value adjustment in non-GAAP revenue to reflect the full amount of these revenues to provide a more complete comparison of the revenue guidance to peer companies. No adjustments were made to revenue for the first six months of 2015.

Amortization of intangible assets: We have excluded the amortization expense of intangible assets from our non-GAAP operating expenses and net earnings measures. Amortization of intangible assets is inconsistent 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 earned during the periods presented and will contribute to our future period revenues as well. Amortization of intangible assets will recur in future periods.

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

Acquisition-related expenses: We have excluded the effect of acquisition-related expenses from our non-GAAP operating expenses and net earnings measures. We incurred direct and incremental expenses associated with the Antenna and 2014 acquisitions. These acquisition-related expenses were primarily professional fees to affect the acquisitions. We believe it is useful for investors to understand the effects of these items on our total operating expenses.

Indemnification claim and indirect tax settlements: We reached an agreement with the former shareholders of Antenna to release a portion of the funds held in escrow as security for their indemnification obligations to us in settlement of the outstanding indemnification claims. The settlement resulted in a benefit to cost of revenue and operating expenses in the first quarter of 2015. In addition, we favorably settled indirect tax liabilities related to the Antenna acquisition, which resulted in a benefit to operating expenses in the first quarter of 2015. We believe the benefit associated with the settlements of the Antenna indemnification claims and indirect tax liabilities is not representative of our ongoing business, and we have excluded the effects of these items from our non-GAAP operating results and net earnings measures.

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(2) Estimated future annual amortization expense related to intangible assets as of June 30, 2015 is as follows:

(in thousands)
Remainder of 2015	$	5,954
2016		11,524
2017		9,826
2018		8,826
2019		3,034
2020 and thereafter		255
Total intangible assets subject to amortization	$	39,419

(3) Below is a reconciliation of non-GAAP operating expenses:

	Three Months Ended June 30,
	2015						2015		2014					2014
(in thousands)	GAAP			Adj.			Non-GAAP		GAAP		Adj.			Non-GAAP
Selling and marketing	$	60,389		$	(3,866)		$	56,523	$	56,342		$  (2,971)		$	53,371
Amortization of intangible assets		1,534			(1,534)			-		1,499		(1,499)			-
Stock-based compensation		2,332			(2,332)			-		1,472		(1,472)			-
Research and development	$	31,372		$	(2,265)		$	29,107	$	27,323		$  (1,106)		$	26,217
Stock-based compensation		2,265			(2,265)			-		1,106		(1,106)			-
General and administrative	$	10,214		$	(2,005)		$	8,209	$	10,250		$  (1,674)		$	8,576
Amortization of intangible assets		238			(238)			-		481		(481)			-
Stock-based compensation		1,767			(1,767)			-		1,193		(1,193)			-
Acquisition-related	$	13		$	(13)		$	-	$	157		$     (157)		$	-
TOTAL OPERATING EXPENSES	$	101,988		$	(8,149)		$	93,839	$	94,072		$  (5,908)		$	88,164
	Six Months Ended June 30,
	2015						2015		2014					2014
(in thousands)	GAAP			Adj.			Non-GAAP		GAAP		Adj.			Non-GAAP
Selling and marketing	$	116,124		$	(6,936	)	$	109,188	$	102,149	$	(5,431	)	$	96,718
Amortization of intangible assets		3,065			(3,065	)		-		2,995		(2,995	)		-
Stock-based compensation		3,878			(3,878	)		-		2,436		(2,436	)		-
Indemnification claim and indirect tax settlements		(7	)		7			-		-		-			-
Research and development	$	61,216		$	(3,691	)	$	57,525	$	51,932	$	(1,749	)	$	50,183
Stock-based compensation		4,131			(4,131	)		-		1,749		(1,749	)		-
Indemnification claim and indirect tax settlements		(440	)		440			-		-		-			-
General and administrative	$	16,559		$	235		$	16,794	$	19,552	$	(2,771	)	$	16,781
Amortization of intangible assets		502			(502	)		-		901		(901	)		-
Stock-based compensation		2,671			(2,671	)		-		1,870		(1,870	)		-
Indemnification claim and indirect tax settlements		(3,408	)		3,408			-		-		-			-
Acquisition-related	$	39		$	(39	)	$	-	$	363	$	(363	)	$	-
TOTAL OPERATING EXPENSES	$	193,938		$	(10,431	)	$	183,507	$	173,996	$	(10,314	)	$	163,682

(4) The GAAP income tax effects were calculated using an effective tax rate of 31.0% and 37.0% for the second quarter of 2015 and 2014, respectively. The non-GAAP income tax effects were calculated using an effective non-GAAP tax rate of 32.8% and 33.5% for the second quarter of 2015 and 2014, respectively.

The GAAP income tax effects were calculated using an effective tax rate of 34.3% and 33.4% for the first six months of 2015 and 2014, respectively. The non-GAAP income tax effects were calculated using an effective non-GAAP tax rate of 31.9% and 33.4% for the first six months of 2015 and 2014, respectively.

The difference between our GAAP and non-GAAP effective tax rates in the second quarter of 2015 primarily relates to the impact of non-GAAP income subjected to tax in higher tax rate jurisdictions during the period. The difference between our GAAP and non-GAAP effective tax rates in the first six months of 2015 primarily relates to the impact of higher non-GAAP income subjected to tax in lower tax rate jurisdictions during the period.

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Pegasystems Inc.

Unaudited Condensed Consolidated Balance Sheets

(in thousands)

	As of     June 30, 2015		As of December 31, 2014
Current Assets:
Cash and cash equivalents	$	120,864	$	114,585
Marketable securities		106,068		96,631
Total cash, cash equivalents, and marketable securities		226,932		211,216
Trade accounts receivable, net		135,585		154,844
Deferred income taxes		12,948		12,974
Income taxes receivable		8,429		4,502
Other current assets		12,536		9,544
Total current assets		396,430		393,080
Property and equipment, net		33,855		30,156
Long-term deferred income taxes		70,765		69,258
Long-term other assets		3,016		2,783
Intangible assets, net		39,419		45,664
Goodwill		46,882		46,860
Total assets	$	590,367	$	587,801
Current liabilities:
Accounts payable	$	8,330	$	4,752
Accrued expenses		40,326		42,958
Accrued compensation and related expenses		37,249		47,250
Deferred revenue		143,001		134,672
Total current liabilities		228,906		229,632
Income taxes payable		24,919		24,896
Long-term deferred revenue		16,214		20,859
Other long-term liabilities		16,751		17,709
Total liabilities		286,790		293,096
Stockholders’ equity:		303,577		294,705
Total liabilities and stockholders’ equity	$	590,367	$	587,801

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Pegasystems Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)

	Six Months Ended June 30,
	2015		2014
Operating activities:
Net income		$        9,039		$        11,269
Adjustments to reconcile net income to cash provided by operating activities:
Excess tax benefits from equity awards and deferred income taxes		(3,805)		(3,425)
Depreciation, amortization, foreign currency transaction loss (gain), and other non-cash items		15,738		11,589
Stock-based compensation expense		14,914		8,453
Change in operating assets and liabilities, net		3,513		46,049
Cash provided by operating activities		39,399		73,935
Cash used in investing activities		(18,212)		(18,008)
Cash used in financing activities		(13,234)		(11,287)
Effect of exchange rates on cash and cash equivalents		(1,674)		2,240
Net increase in cash and cash equivalents		6,279		46,880
Cash and cash equivalents, beginning of period		114,585		80,231
Cash and cash equivalents, end of period		$        120,864		$        127,111

10

Pegasystems Inc.

Historical License and Cloud Backlog

(in thousands)

	2015		2015		2014		2014		2014		2014		2013		2013
	Q2		Q1		Q4		Q3		Q2		Q1		Q4		Q3
Total billed deferred license and cloud revenue		61,339		79,639		63,048		68,561		54,938		62,741		64,267		34,644
Total off-balance sheet license and cloud commitments		330,043		294,412		301,409		265,309		298,658		270,243		283,099		248,403
TOTAL LICENSE AND CLOUD BACKLOG	$	391,382	$	374,051	$	364,457	$	333,870	$	353,596	$	332,984	$	347,366	$	283,047

11

Pegasystems Inc..

FY 2015 Reconciliation of Forward-Looking Guidance

($ in thousands, except per share amounts)

	Fiscal Year 2015
Net Income and Diluted EPS - GAAP basis	$	38,943	$	0.49
Adjustment to exclude amortization of intangible assets, net of tax		7,769		0.10
Adjustment to exclude stock-based compensation, net of tax		15,278		0.19
Net Income and Diluted EPS - Non-GAAP basis	$	61,990	$	0.78

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