# Pegasystems Inc: Form 10-Q for the period ended Jun 30, 2023

- Company: [Pegasystems Inc](/companies/pega.md) (CIK 1013857)
- Form: 10-Q
- Filed: 2023-07-26
- Accepted by EDGAR: Jul 26, 2023, 16:11 ET
- Period: 2023-06-30
- Accession: 0001013857-23-000144
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1013857/000101385723000144/pega-20230630.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1013857/000101385723000144/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-04-01 to 2023-06-30 | $298.3m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 6 months, 2023-01-01 to 2023-06-30 | $623.7m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2023-04-01 to 2023-06-30 | $96.1m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 6 months, 2023-01-01 to 2023-06-30 | $194.1m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2023-04-01 to 2023-06-30 | $202.1m | us-gaap:GrossProfit |
| Gross profit | 6 months, 2023-01-01 to 2023-06-30 | $429.7m | us-gaap:GrossProfit |
| Research and development | 3 months, 2023-04-01 to 2023-06-30 | $73.9m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 6 months, 2023-01-01 to 2023-06-30 | $149.3m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2023-04-01 to 2023-06-30 | −$41.3m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2023-01-01 to 2023-06-30 | −$63.5m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2023-04-01 to 2023-06-30 | $1.8m | us-gaap:InterestExpense |
| Interest expense | 6 months, 2023-01-01 to 2023-06-30 | $3.7m | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-04-01 to 2023-06-30 | $6.6m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2023-01-01 to 2023-06-30 | $11.8m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-04-01 to 2023-06-30 | −$46.8m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2023-01-01 to 2023-06-30 | −$67.6m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-04-01 to 2023-06-30 | −$0.56 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2023-01-01 to 2023-06-30 | −$0.82 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-04-01 to 2023-06-30 | −$0.56 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2023-01-01 to 2023-06-30 | −$0.82 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-04-01 to 2023-06-30 | 83,039,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2023-01-01 to 2023-06-30 | 82,823,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2023-01-01 to 2023-06-30 | $113.8m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2023-01-01 to 2023-06-30 | $13.9m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 6 months, 2023-01-01 to 2023-06-30 | $5.0m | us-gaap:PaymentsOfDividendsCommonStock |
| Share repurchases | 6 months, 2023-01-01 to 2023-06-30 | $1.4m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2023-06-30 | $186.9m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-06-30 | $737.5m | us-gaap:AssetsCurrent |
| Total assets | at 2023-06-30 | $1.19bn | us-gaap:Assets |
| Current liabilities | at 2023-06-30 | $461.1m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-06-30 | $1.05bn | us-gaap:Liabilities |
| Shareholders' equity | at 2023-06-30 | $145.4m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 25,041 characters.

### FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (“Quarterly Report”) contains or incorporates forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Words such as expects, anticipates, intends, plans, believes, will, could, should, estimates, may, targets, strategies, intends to, projects, forecasts, guidance, likely, and usually or variations of such words and other similar expressions identify forward-looking statements, which speak only as of the date the statement was made and are based on current expectations and assumptions.

Forward-looking statements deal with future events and are subject to risks and uncertainties that are difficult to predict, including, but not limited to:

- our future financial performance and business plans;
- the adequacy of our liquidity and capital resources;
- the continued payment of our quarterly dividends;
- the timing of revenue recognition;
- management of our transition to a more subscription-based business model;
- variation in demand for our products and services, including among clients in the public sector;
- reliance on key personnel;
- global economic and political conditions and uncertainty, including impacts from public health emergencies and the war in Ukraine;
- reliance on third-party service providers, including hosting providers;
- compliance with our debt obligations and covenants;
- the potential impact of our convertible senior notes and Capped Call Transactions;
- foreign currency exchange rates;
- the potential legal and financial liabilities and damage to our reputation due to cyber-attacks;
- security breaches and security flaws;
- our ability to protect our intellectual property rights, costs associated with defending such rights, intellectual property rights claims, and other related claims by third parties against us, including related costs, damages, and other relief that may be granted against us;
- our ongoing litigation with Appian Corp.;
- our client retention rate; and
- management of our growth.

These risks and others that may cause actual results to differ materially from those expressed in such forward-looking statements are described further in Part I of our Annual Report on Form 10-K for the year ended December 31, 2022, Part II of this Quarterly Report on Form 10-Q, and other filings we make with the U.S. Securities and Exchange Commission (“SEC”).

Investors are cautioned not to place undue reliance on such forward-looking statements, and there are no assurances that the results included in such statements will be achieved. Although subsequent events may cause our view to change, except as required by applicable law, we do not undertake and expressly disclaim any obligation to publicly update or revise these forward-looking statements whether as the result of new information, future events, or otherwise.

The forward-looking statements in this Quarterly Report represent our views as of July 26, 2023.

### NON-GAAP MEASURES

Our non-GAAP financial measures should only be read in conjunction with our consolidated financial statements prepared in accordance with GAAP. We believe these measures help investors understand our core operating results without the effect of often one-time charges and other items outside normal operations. They are not a substitute for financial measures prepared under U.S. GAAP.

A reconciliation of our GAAP to non-GAAP measures is located with each non-GAAP measure.

### BUSINESS OVERVIEW

We develop, market, license, host, and support enterprise software that helps organizations build agility into their business so they can adapt to change. Our powerful low-code platform for workflow automation and artificial intelligence-powered decisioning enables the world’s leading brands and government agencies to hyper-personalize customer experiences, streamline customer service, and automate mission-critical business processes and workflows. With Pega, our clients can leverage our intelligent technology and scalable architecture to accelerate their digital transformation. In addition, our client success teams, world-class partners, and clients leverage our Pega Express™ methodology to design and deploy mission-critical applications quickly and collaboratively.

Our target clients are Global 2000 organizations and government agencies that require solutions to distinguish themselves in the markets they serve. Our solutions achieve and facilitate differentiation by increasing business agility, driving growth, improving productivity, attracting and retaining customers, and reducing risk. Along with our partners, we deliver solutions tailored to the specific industry needs of our clients.

### Performance metrics

We use performance metrics to analyze and assess our overall performance, make operating decisions, and forecast and plan for future periods, including:

### Annual contract value (“ACV”)

ACV represents the annualized value of our active contracts as of the measurement date. The contract's total value is divided by its duration in years to calculate ACV. ACV is a performance measure that we believe provides useful information to our management and investors. In 2023, we changed our ACV calculation methodology for maintenance and all contracts less than 12 months to align with other contract types. Previously disclosed ACV amounts have been updated to allow for comparability.

#### Reconciliation of ACV and Constant Currency ACV

*(in millions, except percentages)*

|  | Q2 22 | Q3 22 | Q4 22 | Q1 23 | Q2 23 | 1 Year Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| ACV | $1,026 | $1,040 | $1,126 | $1,174 | $1,164 | **13%** |
| Impact of changes in foreign exchange rates | $— | $24 | $(1) | $(5) | $(5) |  |
| Constant Currency ACV | $1,026 | $1,064 | $1,125 | $1,169 | $1,159 | **13%** |

Note: Constant currency ACV is calculated by applying the Q2 2022 foreign exchange rates to all periods shown.

### Cash flow

*(in thousands, except percentages)*

| 2023 | Six Months Ended June 30, 2022 | Change |  |
| --- | ---: | ---: | ---: |
| **Cash provided by (used in) operating activities** | **$113,752** | **$(5,069)** | **\*** |
| Investment in property and equipment | (13,933) | (11,863) |  |
| Legal fees | 2,950 | 26,437 |  |
| Restructuring | 17,521 | — |  |
| Interest on convertible senior notes | 2,250 | 2,250 |  |
| Other | — | 167 |  |
| Free cash flow | $122,540 | $11,922 | 928% |
| Total revenue | $623,740 | $650,644 |  |
| Free cash flow margin | 20% | 2% |  |

\* not meaningful

Our non-GAAP free cash flow measures reflect the following adjustments:

- Investment in property and equipment: Investment in property and equipment fluctuates in amount and frequency and is significantly affected by the timing and size of investments in our facilities. We believe excluding these amounts provides a useful comparison of our operational performance in different periods.
- Legal fees: Includes legal and related fees arising from proceedings outside the ordinary course of business. We believe excluding these amounts from our non-GAAP financial measures is useful to investors as the disputes giving rise to them are not representative of our core business operations and ongoing operational performance.
- Restructuring: We have excluded restructuring from our non-GAAP financial measures. Restructuring fluctuates in amount and frequency and is significantly affected by the timing and size of our restructuring activities. We believe excluding the impact from our non-GAAP financial measures is useful to investors as these amounts are not representative of our core business operations and ongoing operational performance.
- Interest on convertible senior notes: In February 2020, we issued convertible senior notes, due March 1, 2025, in a private placement. We believe excluding the interest payments provides a useful comparison of our operational performance in different periods.
- Other: We have excluded fees incurred due to the cancellation of in-person sales and marketing events, and incremental expenses incurred from the integration of acquisitions. We believe excluding these amounts from our non-GAAP financial measures is useful to investors as the types of events giving rise to them are not representative of our core business operations and ongoing operating performance.

### Remaining performance obligations (“Backlog”)

#### Reconciliation of Backlog and Constant Currency Backlog (Non-GAAP)

*(in millions, except percentages)*

|  | Q2 2023 | 1 Year Growth Rate |
| --- | ---: | ---: |
| **Backlog** | **$1,266** | **12%** |
| Impact of changes in foreign exchange rates | (8) | —% |
| Backlog - Constant Currency | $1,258 | 12% |

Note: Constant currency Backlog is calculated by applying the Q2 2022 foreign exchange rates to all periods shown.

### CRITICAL ACCOUNTING POLICIES

Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon our unaudited condensed consolidated financial statements, which have been prepared following accounting principles generally accepted in the United States of America (“U.S.”) and the rules and regulations of the SEC for interim financial reporting. Preparing these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses, and the related disclosure of contingent assets and liabilities. We base our estimates and judgments on historical experience, knowledge of current conditions, and expectations of what could occur in the future, given the available information.

For more information about our critical accounting policies, we encourage you to read the discussion in the following locations in our Annual Report on Form 10-K for the year ended December 31, 2022:

- “Critical Accounting Estimates and Significant Judgments” in Item 7; and
- “Note 2. Significant Accounting Policies” in Item 8.

There have been no other significant changes to our critical accounting policies as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022.

### RESULTS OF OPERATIONS

### Revenue

*(Dollars in thousands)*

| 2023 | Three Months Ended June 30, |  | 2022 |  | Change 2023 |  | Six Months Ended June 30, 2022 |  |  |  | Change |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Pega Cloud | $115,063 | 39% | $93,506 | 34% | $21,557 | 23% | $222,942 | 36% | $183,823 | 28% | $39,119 | 21% |
| Maintenance | 82,042 | 27% | 78,326 | 29% | 3,716 | 5% | 161,672 | 26% | 158,042 | 24% | 3,630 | 2% |
| Subscription services | 197,105 | 66% | 171,832 | 63% | 25,273 | 15% | 384,614 | 62% | 341,865 | 52% | 42,749 | 13% |
| Subscription license | 41,197 | 14% | 41,600 | 15% | (403) | (1)% | 125,724 | 20% | 179,133 | 28% | (53,409) | (30)% |
| Subscription | 238,302 | 80% | 213,432 | 78% | 24,870 | 12% | 510,338 | 82% | 520,998 | 80% | (10,660) | (2)% |
| Consulting | 58,387 | 19% | 58,639 | 21% | (252) | —% | 111,420 | 18% | 119,940 | 19% | (8,520) | (7)% |
| Perpetual license | 1,579 | 1% | 2,266 | 1% | (687) | (30)% | 1,982 | —% | 9,706 | 1% | (7,724) | (80)% |
|  | $298,268 | 100% | $274,337 | 100% | $23,931 | 9% | $623,740 | 100% | $650,644 | 100% | $(26,904) | (4)% |

- The increases in Pega Cloud revenue for the three and six months ended June 30, 2023, were primarily due to continued growth of the installed client base.
- The decrease in subscription license revenue in the six months ended June 30, 2023 was primarily due to several large software license contracts recognized in revenue in the six months ended June 30, 2022.
- The decreases in perpetual license revenue in the three and six months ended June 30, 2023 were primarily due to our strategy of promoting subscription-based arrangements.
- The decreases in consulting revenue in the three and six months ended June 30, 2023 were primarily due to lower realization rates.

### Gross profit

*(Dollars in thousands)*

| 2023 | Three Months Ended June 30, |  | 2022 |  | Change 2023 |  | Six Months Ended June 30, 2022 |  |  |  | Change |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Pega Cloud | $84,761 | 74% | $62,259 | 67% | $22,502 | 36% | $162,390 | 73% | $125,677 | 68% | $36,713 | 29% |
| Maintenance | 75,561 | 92% | 73,040 | 93% | 2,521 | 3% | 148,577 | 92% | 147,625 | 93% | 952 | 1% |
| Subscription services | 160,322 | 81% | 135,299 | 79% | 25,023 | 18% | 310,967 | 81% | 273,302 | 80% | 37,665 | 14% |
| Subscription license | 40,574 | 98% | 40,927 | 98% | (353) | (1)% | 124,382 | 99% | 177,838 | 99% | (53,456) | (30)% |
| Subscription | 200,896 | 84% | 176,226 | 83% | 24,670 | 14% | 435,349 | 85% | 451,140 | 87% | (15,791) | (4)% |
| Consulting | (323) | (1)% | 766 | 1% | (1,089) | \* | (7,638) | (7)% | 6,556 | 5% | (14,194) | \* |
| Perpetual license | 1,555 | 98% | 2,230 | 98% | (675) | (30)% | 1,955 | 99% | 9,636 | 99% | (7,681) | (80)% |
|  | $202,128 | 68% | $179,222 | 65% | $22,906 | 13% | $429,666 | 69% | $467,332 | 72% | $(37,666) | (8)% |

\* not meaningful

- The increases in Pega Cloud gross profit percent in the three and six months ended June 30, 2023 were primarily due to increased cost efficiency, particularly for hosting services, as Pega Cloud continues to grow and scale.
- The decrease in maintenance gross profit percent in the three months ended June 30, 2023 was primarily due to an increase in compensation and benefits due to an increase in headcount.
- The decrease in consulting gross profit percent in the three months ended June 30, 2023 was primarily due to lower consultant realization rates. The decrease in consulting revenue in the six months ended June 30, 2023 was primarily due to lower consultant realization and utilization rates.

### Operating expenses

*(Dollars in thousands)*

| 2023 | Three Months Ended June 30, 2022 |  | Change 2023 | 2022 | Six Months Ended June 30, |  | Change |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Selling and marketing | $143,858 | $157,198 | $(13,340) | (8)% | $293,655 | $319,434 | $(25,779) | (8)% |
| % of Revenue | 48% | 57% |  |  | 47% | 49% |  |  |
| Research and development | $73,931 | $74,341 | $(410) | (1)% | $149,307 | $145,831 | $3,476 | 2% |
| % of Revenue | 25% | 27% |  |  | 24% | 22% |  |  |
| General and administrative | $23,462 | $32,723 | $(9,261) | (28)% | $46,572 | $68,487 | $(21,915) | (32)% |
| % of Revenue | 8% | 12% |  |  | 7% | 11% |  |  |
| Restructuring | $2,167 | $— | $2,167 | 100% | $3,628 | $— | $3,628 | 100% |
| % of Revenue | 1% | —% |  |  | 1% | —% |  |  |

- The decreases in selling and marketing during the three and six months ended June 30, 2023, were primarily due to decreases in compensation and benefits totaling $14.2 million and $26.4 million, respectively. The decreases are due to reduced headcount associated with the optimization of our go-to-market strategy. For additional information, see "Note 9. Restructuring" in Part I, Item 1 of this Quarterly Report.
- The decrease in research and development for the three months ended June 30, 2023, was primarily due to a $1.2 million decrease in hosting services costs from cost-efficiency gains as the Company’s use of hosting services grows.
- The increase in research and development for the six months ended June 30, 2023, was primarily due to additional investments in our products and services.
- The decreases in general and administrative in the three and six months ended June 30, 2023 were primarily due to decreases of $7.7 million and $23.6 million, in legal fees and related expenses arising from proceedings outside the ordinary course of business. In the six months ended June 30, 2023 the decrease was partially offset by a $4.2 million increase in compensation and benefits due to an increase in equity compensation. We expect to continue to incur additional costs for these proceedings. See "Note 15. Commitments and Contingencies" in Part I, Item 1 of this Quarterly Report and “Risk Factors” in Part I, Item 1A of our Annual Report for the year ended December 31, 2022.
- The increases in restructuring expenses during the three and six months ended June 30, 2023, were primarily due to a $1.6 million restructuring expense related to the optimization of our go-to-market organization in the U.S. in the three months ended June 30, 2023 and $1.2 million primarily due to the closure of leased office space in Poland in the three months ended March 31, 2023.

### Other income and expenses

*(Dollars in thousands)*

| 2023 | Three Months Ended June 30, 2022 |  | Change 2023 | 2022 | Six Months Ended June 30, |  | Change |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Foreign currency transaction (loss) gain | $(3,290) | $1,713 | $(5,003) | \* | $(5,965) | $4,589 | $(10,554) | \* |
| Interest income | 1,814 | 309 | 1,505 | 487% | 3,299 | 516 | 2,783 | 539% |
| Interest expense | (1,778) | (1,944) | 166 | 9% | (3,696) | (3,890) | 194 | 5% |
| (Loss) income on capped call transactions | (1,361) | (18,945) | 17,584 | 93% | 1,845 | (49,505) | 51,350 | \* |
| Other income, net | 5,702 | 3,785 | 1,917 | 51% | 12,285 | 6,526 | 5,759 | 88% |
|  | $1,087 | $(15,082) | $16,169 | \* | $7,768 | $(41,764) | $49,532 | \* |

\* not meaningful

- The changes in foreign currency transaction (loss) gain in the three and six months ended June 30, 2023 were primarily due to the impact of fluctuations in foreign currency exchange rates associated with foreign currency-denominated cash and receivables held by our subsidiary in the United Kingdom.
- The increases in interest income in the three and six months ended June 30, 2023 was primarily due to increases in market interest rates.
- The decreases in interest expense in the three and six months ended June 30, 2023 were due to our repurchases of our Convertible Senior Notes. For additional information, see "Note 8. Debt" in Part I, Item 1 of this Quarterly Report.
- The changes in (loss) income on capped call transactions in the three and six months ended June 30, 2023 were due to fair value adjustments for our capped call transactions.
- The increases in other income, net in the three and six months ended June 30, 2023 were due to gains from repurchases of our convertible senior notes and our venture investments portfolio.

### Provision for income taxes

*(Dollars in thousands)*

|  | Six Months Ended June 30, 2023 | 2022 |
| --- | ---: | ---: |
| Provision for income taxes | $11,850 | $178,491 |
| Effective income tax rate | (21)% | (165)% |

The effective income tax rate in the six months ended June 30, 2023 was impacted by the valuation allowance on our deferred tax assets in the U.S. and U.K. Also, impacted by current taxes payable in the U.S. due to projected taxable income partially offset by net operating losses and available tax credits.

### LIQUIDITY AND CAPITAL RESOURCES

*(in thousands)*

| Cash provided by (used in): | Six Months Ended June 30, 2023 | 2022 |
| --- | ---: | ---: |
| Operating activities | $113,752 | $(5,069) |
| Investing activities | 15,979 | (1,523) |
| Financing activities | (86,988) | (41,191) |
| Effect of exchange rate changes on cash, cash equivalents, and restricted cash | 1,010 | (2,907) |
| Net increase (decrease) in cash, cash equivalents, and restricted cash | $43,753 | $(50,690) |

*(in thousands)*

|  | June 30, 2023 | December 31, 2022 |
| --- | ---: | ---: |
| Held by U.S. entities | $232,524 | $248,389 |
| Held by foreign entities | 80,289 | 48,832 |
| Total cash, cash equivalents, and marketable securities | $312,813 | $297,221 |

We believe that our current cash, cash flow from operations, borrowing capacity, and ability to engage in capital market transactions will be sufficient to fund our operations, stock repurchases, and quarterly cash dividends for at least the next 12 months and to meet our known long-term cash requirements. Whether these resources are adequate to meet our liquidity needs beyond that period will depend on our future growth, operating results, and the investments needed to support our operations. We may utilize available funds or seek external financing if we require additional capital resources.

If it becomes necessary or desirable to repatriate foreign funds, we may be required to pay federal, state, and local income and foreign withholding taxes upon repatriation. However, due to the complexity of income tax laws and regulations, estimating the amount of taxes we would have to pay is impracticable.

### Operating activities

The change in cash provided by (used in) operating activities in the six months ended June 30, 2023 was primarily due to growth in client collections and the impact of our cost-efficiency initiatives. In addition, in the six months ended June 30, 2023 and 2022, we paid $3.0 million and $26.4 million in legal fees and related expenses arising from proceedings that originated outside the ordinary course of business. We expect to continue to incur additional costs for these proceedings. For additional information, see "Note 15. Commitments and Contingencies" in Part I, Item 1 of this Quarterly Report.

### Investing activities

The change in cash provided by (used in) investing activities in the six months ended June 30, 2023 was primarily due to our investments in

financial instruments

### Financing activities

#### Debt financing

In February 2020, we issued $600 million in aggregate principal amount of convertible senior notes, which mature on March 1, 2025. In the six months ended June 30, 2023, we paid $89 million to repurchase $97.7 million in aggregate principal amount of convertible senior notes. As of June 30, 2023, we had $502 million in aggregate principal amount of convertible senior notes outstanding due on March 1, 2025. For additional information, see "Note 8. Debt" in Part I, Item 1 of this Quarterly Report.

In November 2019, and as since amended, we entered into a five-year $100 million senior secured revolving credit agreement (the “Credit Facility”) with PNC Bank, National Association. As of June 30, 2023 and December 31, 2022, we had $27.3 million in outstanding letters of credit, which reduced the Company’s available borrowing capacity under the Credit Facility and no outstanding cash borrowings under the Credit Facility. For additional information, see "Note 8. Debt" in Part I, Item 1 of this Quarterly Report.

#### Stock repurchase program

Changes in the remaining stock repurchase authority:

*(in thousands)*

|  | Six Months Ended June 30, 2023 |
| --- | ---: |
| December 31, 2022 | $58,075 |
| Authorizations (1) | 1,925 |
| June 30, 2023 | $60,000 |

(1) On April 25, 2023, our Board of Directors extended the expiration date of our current share repurchase program from June 30, 2023 to June 30, 2024, and the amount of stock we are authorized to repurchase has been increased to $60 million.

#### Common stock repurchases

*(in thousands)*

|  | Six Months Ended June 30, 2023 Shares | Amount | 2022 Shares | Amount |
| --- | ---: | ---: | ---: | ---: |
| Stock repurchase program | — | — | 279 | 24,508 |
| Tax withholdings for net settlement of equity awards | 34 | 1,422 | 196 | 15,379 |
|  | 34 | $1,422 | 475 | $39,887 |

In the six months ended June 30, 2023 and 2022, instead of receiving cash from the equity holders, we withheld shares with a value of $0.9 million and $8.3 million, respectively, for the exercise price of options. These amounts are not included in the table above.

#### Dividends

We intend to pay a quarterly cash dividend of $0.03 per share. However, the Board of Directors may terminate or modify the dividend program without prior notice.

*(in thousands)*

|  | Six Months Ended June 30, 2023 | 2022 |
| --- | ---: | ---: |
| Dividend payments to stockholders | $4,962 | $4,908 |

### Contractual obligations

As of June 30, 2023, our contractual obligations were:

*(in thousands)*

|  | Payments due by period Remainder of 2023 | 2024 | 2025 | 2026 | 2027 | 2028 and after | Other | Total |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Convertible senior notes (1) | $1,998 | $3,767 | $504,154 | $— | $— | $— | $— | $509,919 |
| Purchase obligations (2) | 68,729 | 135,345 | 123,104 | 117,550 | 133,500 | 14 | — | 578,242 |
| Operating lease obligations | 8,596 | 18,024 | 14,869 | 10,940 | 9,882 | 39,461 | — | 101,772 |
| Investment commitments | 1,000 | — | — | — | — | — | — | 1,000 |
| Liability for uncertain tax positions (3) | — | — | — | — | — | — | 3,989 | 3,989 |
|  | $80,323 | $157,136 | $642,127 | $128,490 | $143,382 | $39,475 | $3,989 | $1,194,922 |

(1) Includes principal and interest.

(2) Represents the fixed amount owed for purchase obligations of software licenses, hosting services, and sales and marketing programs.

(3) We cannot reasonably estimate the timing of this cash outflow due to uncertainties in the timing of the effective settlement of tax positions.

## Market risk

As filed, 1,459 characters.

Market risk is the risk of loss from adverse changes in financial market prices and rates.

### Foreign currency exposure

### Translation risk

Our international operations’ operating expenses are primarily denominated in foreign currencies. However, our international sales are also primarily denominated in foreign currencies, partially offsetting our foreign currency exposure.

A hypothetical 10% strengthening in the U.S. dollar against other currencies would have resulted in the following:

|  | Six Months Ended June 30, 2023 | 2022 |
| --- | ---: | ---: |
| (Decrease) in revenue | (4)% | (3)% |
| Increase (decrease) in net income | (1)% | 3% |

### Remeasurement risk

We incur transaction gains and losses from the remeasurement of monetary assets and liabilities denominated in currencies other than the functional currency of the entities in which they are recorded.

We are primarily exposed to changes in foreign currency exchange rates associated with the Australian dollar, Euro, and U.S. dollar-denominated cash, cash equivalents, receivables, and intercompany balances held by our U.K. subsidiary, a British pound functional entity.

A hypothetical 10% strengthening in the British pound exchange rate in comparison to the Australian dollar, Euro, and U.S. dollar would have resulted in the following impact:

*(in thousands)*

|  | Six Months Ended June 30, 2023 | 2022 |
| --- | ---: | ---: |
| Foreign currency (loss) | $(9,869) | $(7,185) |

## Controls and procedures

As filed, 1,250 characters.

### (a) Evaluation of disclosure controls and procedures

Our management, with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”)) as of June 30, 2023. In designing and evaluating our disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and our management necessarily applied its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on this evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of June 30, 2023.

### (b) Changes in internal control over financial reporting

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended June 30, 2023 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

## Risk factors

As filed, 517 characters.

We encourage you to carefully consider the risk factors identified in Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the U.S. Securities and Exchange Commission. These risk factors could materially affect our business, financial condition, and future results and may cause our actual business and financial results to differ materially from those contained in forward-looking statements made in this Quarterly Report on Form 10-Q or elsewhere by management.

Filed Jul 26, 2023.
Source: SEC EDGAR, the filing index for accession 0001013857-23-000144. Last ingested by Listed: Nov 6, 2026, 16:40 ET. No prices; not investment advice.