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Company profile

American Well Corporation is a telehealth company enabling digital delivery of care for the healthcare sector. The Amwell Platform is a digital care delivery solution that equips its health system and health plan, including government, clients with the tools to enable new models of care for their patients and members. Its technology embeds with its clients’ existing offerings and clinical workflows, spanning the continuum of care and enabling care delivery across a range of clinical, retail, school and home settings. The Amwell Platform consists of the home line, provider-to-patient telehealth interactions, typically in the home, and the hospital line, supporting provider-to-provider telehealth interactions, or provider-to-patient, typically in an inpatient or ambulatory setting. The Company offers a range of management software, clinical workflows, Carepoint hardware and system integrations to deliver care across various modalities, including video, phone and secure messaging.

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Pega Cloud Continues to Expand in Third Quarter of 2020

4:05 pm ET October 28, 2020 (PR Newswire) Print

Pegasystems Inc. (NASDAQ: PEGA), the software company empowering digital transformation at the world's leading enterprises, released its financial results for the third quarter of 2020.

"Our results through Q3 demonstrate our ability to forge through and succeed during a challenging time," said Alan Trefler, founder and CEO, Pegasystems. "Digital transformation is central to our clients' continued existence and prosperity, and our software is ideally suited for organizations that continue to face immediate needs today while they transform for tomorrow."

"Our subscription revenue grew 27 percent year over year in the first nine months of 2020, reflecting the impact of passing the midpoint of our cloud transition," said Ken Stillwell, CFO, Pegasystems. "This demonstrates the power of achieving ACV growth of more than 20 percent over multiple years. With over $450 million of cash and investments on the balance sheet and an impressive portfolio of enterprise clients, Pega is in a strong position to capture an even greater share of the $50+ billion market for digital transformation solutions."

Financial and performance metrics (1)
(Dollars in thousands,              Three Months Ended                    Nine Months Ended
except per share amounts)           September 30,                         September 30,
                                    2020          2019          Change    2020          2019          Change
Total revenue                       $  225,951    $  216,703    4    %    $  718,917    $  634,841    13  %
Net (loss) - GAAP                   $  (19,267)   $  (30,338)   36   %    $  (65,379)   $  (91,351)   28  %
Net (loss) - Non-GAAP               $  (26,701)   $  (17,961)   (49) %    $  (44,905)   $  (50,764)   12  %
Diluted (loss) per share - GAAP     $  (0.24)     $  (0.38)     37   %    $  (0.82)     $  (1.16)     29  %
Diluted (loss) per share - Non-GAAP $  (0.33)     $  (0.23)     (43) %    $  (0.56)     $  (0.64)     13  %
(1) A reconciliation of our Non-GAAP and GAAP measures is at the end of this release.
(Dollars in thousands) Three Months Ended                        Change                Nine Months Ended                         Change
                       September 30,                                                   September 30,
                       2020                 2019                                       2020                 2019
Pega Cloud             $   54,776   24  %   $   35,153   16  %   $    19,623  56   %   $   147,080  20  %   $   94,610   15  %   $    52,470  55   %
Maintenance            74,670       33  %   70,371       32  %   4,299        6    %   220,587      31  %   207,406      33  %   13,181       6    %
Term license           35,932       16  %   48,989       23  %   (13,057)     (27) %   170,455      24  %   122,257      19  %   48,198       39   %
Subscription (2)       165,378      73  %   154,513      71  %   10,865       7    %   538,122      75  %   424,273      67  %   113,849      27   %
Perpetual license      3,852        2   %   9,016        4   %   (5,164)      (57) %   16,568       2   %   43,286       7   %   (26,718)     (62) %
Consulting             56,721       25  %   53,174       25  %   3,547        7    %   164,227      23  %   167,282      26  %   (3,055)      (2)  %
Total revenue          $   225,951  100 %   $   216,703  100 %   $    9,248   4    %   $   718,917  100 %   $   634,841  100 %   $    84,076  13   %
(2) Reflects client arrangements subject to renewal (Pega Cloud, maintenance, and term license).

https://mma.prnewswire.com/media/1322175/Pegasystems__Q3_ACV.jpg

https://mma.prnewswire.com/media/1322173/Pegasystems__Q3_Backlog.jpg

https://mma.prnewswire.com/media/1322174/Pegasystems__Q3_Page_Cloud_Revenue.jpg

Note: See the schedules at the end of this release for additional information.

Quarterly conference call

We will conduct a conference call and audio-only webcast at 5:00 p.m. EDT on October 28, 2020.

Members of the public and investors may join the call and participate in the question and answer session by dialing 1-800-289-0438 (domestic), 1-323-794-2423 (international), or via webcast (http://public.viavid.com/index.php?id=142049) by logging onto www.pega.com at least five minutes before the event's broadcast and clicking on the webcast icon in the Investors section.

A replay of the call will also be available on www.pega.com by clicking the Earnings Calls link in the Investors section.

Discussion of Non-GAAP financial measures

To supplement our GAAP financial results presented, we provide Non-GAAP measures, including in this release. We utilize several different financial measures, both GAAP and Non-GAAP, to analyze and assess the business' overall performance, make operating decisions, and forecast and plan for future periods. We prepare our annual financial plan on both a GAAP and a Non-GAAP basis. We use Non-GAAP measures in the evaluation process to establish management compensation because of the importance of these measures in managing the business.

The Non-GAAP measures exclude the effects of stock-based compensation expense, amortization of intangible assets, foreign currency transaction gains and losses, costs from the issuance of our convertible senior notes and the related capped call transactions, gains and losses arising from our venture investments, gains and losses from our capped call transactions, gains and losses from the change in the format of PegaWorld, and related income tax effects. Non-GAAP measures allow investors and others to better understand and evaluate operating results and prospects in the same manner as management, compare financial results across accounting periods, and better understand our core business's long-term performance. We also use Non-GAAP measures for purposes of determining company-wide incentive compensation.

Non-GAAP financial measures should not be considered in isolation or as a substitute for comparable GAAP measures. Our Non-GAAP financial measures should only be read in conjunction with our consolidated GAAP financial statements.

A reconciliation of our Non-GAAP and GAAP measures is at the end of this release.

Forward-looking statements

In this press release, certain statements may be "forward-looking statements" as defined in 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 are based on current expectations and assumptions.

These forward-looking statements deal with future events, and are subject to various risks and uncertainties that are difficult to predict, including, but not limited to, statements about our future financial performance and business plans, the adequacy of our liquidity and capital resources, the continued payment of 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, the impact of actual or threatened public health emergencies, such as the Coronavirus (COVID-19), reliance on third-party service providers, compliance with our debt obligations and debt covenants, the potential impact of our convertible senior notes and related Capped Call Transactions, reliance on key personnel, the continued uncertainties in the global economy, foreign currency exchange rates, the potential legal and financial liabilities and reputation damage due to cyber-attacks, security breaches and security flaws, our ability to protect our intellectual property rights and costs associated with defending such rights, maintenance of 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, 2019, and other filings we make with the U.S. Securities and Exchange Commission ("SEC"). These documents are available on our website at www.pega.com/about/investors.

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 contained in this press release represent our views as of October 28, 2020.

About Pegasystems

Pega is the leader in cloud software for customer engagement and operational excellence. The world's most recognized and successful brands rely on Pega's AI-powered software to optimize every customer interaction on any channel while ensuring their brand promises are kept. Pega's low-code application development platform allows enterprises to quickly build and evolve apps to meet their customer and employee needs and drive digital transformation on a global scale. For more than 35 years, Pega has enabled higher customer satisfaction, lower costs, and increased customer lifetime value.

Press contact: Lisa Pintchman Pegasystems Inc. lisa.pintchman@pega.com (617) 866-6022 Twitter: @pega

Investor contact: Garo Toomajanian ICR for Pegasystems Inc. pegainvestorrelations@pega.com (617) 866-6077

All trademarks are the property of their respective owners.

PEGASYSTEMS INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
                                                     Three Months Ended              Nine Months Ended
                                                     September 30,                   September 30,
                                                     2020            2019            2020            2019
Revenue
Software license                                     $    39,784     $    58,005     $    187,023    $    165,543
Maintenance                                          74,670          70,371          220,587         207,406
Pega Cloud                                           54,776          35,153          147,080         94,610
Consulting                                           56,721          53,174          164,227         167,282
Total revenue                                        225,951         216,703         718,917         634,841
Cost of revenue
Software license                                     691             676             2,354           2,982
Maintenance                                          5,478           6,688           16,645          19,315
Pega Cloud                                           19,717          17,824          56,238          47,769
Consulting                                           51,913          55,710          158,781         162,349
Total cost of revenue                                77,799          80,898          234,018         232,415
Gross profit                                         148,152         135,805         484,899         402,426
Operating expenses
Selling and marketing                                132,053         115,237         395,684         341,064
Research and development                             60,024          52,492          177,620         152,802
General and administrative                           17,907          14,843          49,192          41,693
Total operating expenses                             209,984         182,572         622,496         535,559
(Loss) from operations                               (61,832)        (46,767)        (137,597)       (133,133)
Foreign currency transaction gain (loss)             4,236           (1,970)         2,545           (3,577)
Interest income                                      243             598             1,092           1,865
Interest expense                                     (5,956)         (42)            (13,791)        (42)
Gain on capped call transactions                     18,989          --              19,816          --
Other income, net                                    --              323             1,374           378
(Loss) before (benefit from) income taxes            (44,320)        (47,858)        (126,561)       (134,509)
(Benefit from) income taxes                          (25,053)        (17,520)        (61,182)        (43,158)
Net (loss)                                           $    (19,267)   $    (30,338)   $    (65,379)   $    (91,351)
(Loss) per share
Basic                                                $    (0.24)     $    (0.38)     $    (0.82)     $    (1.16)
Diluted                                              $    (0.24)     $    (0.38)     $    (0.82)     $    (1.16)
Weighted-average number of common shares outstanding
Basic                                                80,537          79,200          80,191          78,928
Diluted                                              80,537          79,200          80,191          78,928
PEGASYSTEMS INC.
UNAUDITED RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES (1)
(in thousands, except percentages and per share amounts)
                                                 Three Months Ended                        Nine Months Ended
                                                 September 30,                             September 30,
                                                 2020            2019            Change    2020            2019            Change
Net (loss) - GAAP                                $    (19,267)   $    (30,338)   36   %    $    (65,379)   $    (91,351)   28  %
Amortization of intangible assets                1,018           1,017                     3,051           5,608
Stock-based compensation (2)                     27,925          21,846                    76,755          60,242
Foreign currency transaction (gain) loss         (4,236)         1,970                     (2,545)         3,577
Convertible senior notes                         4,372           --                        10,405          --
Capped call transactions                         (18,989)        --                        (19,816)        --
Venture investments                              --              --                        (1,374)         --
PegaWorld                                        --              --                        2,515           --
Income tax effects (3)                           (17,524)        (12,456)                  (48,517)        (28,840)
Net (loss) - Non-GAAP                            $    (26,701)   $    (17,961)   (49) %    $    (44,905)   $    (50,764)   12  %
Diluted (loss) per share - GAAP                  $    (0.24)     $    (0.38)     37   %    $    (0.82)     $    (1.16)     29  %
Non-GAAP adjustments                             (0.09)          0.15                      0.26            0.52
Diluted (loss) per share - Non-GAAP              $    (0.33)     $    (0.23)     (43) %    $    (0.56)     $    (0.64)     13  %
Diluted weighted-average number of common        80,537          79,200          2    %    80,191          78,928          2   %
shares outstanding - GAAP
Diluted weighted-average number of common shares 80,537          79,200          2    %    80,191          78,928          2   %
outstanding - Non-GAAP
(1) Our Non-GAAP financial measures reflect adjustments based on the following items:
-   Amortization of intangible assets: We have excluded the amortization of intangible assets from our Non-GAAP operating expenses and profitability measures. Amortization of intangible assets fluctuates in amount and frequency and is significantly affected by our acquisitions' timing and size. Investors should note that the use of intangible assets contributed to our revenues recognized during the periods presented and is expected to contribute to our future period revenues. Amortization of intangible assets is likely to recur in future periods.
-   Stock-based compensation: We have excluded stock-based compensation from our Non-GAAP operating expenses and profitability measures. Although stock-based compensation is a key incentive offered to our employees, and we believe such compensation contributed to our revenues recognized during the periods presented and is expected to contribute to our future period revenues, we continue to evaluate our business performance excluding stock-based compensation.
-   Foreign currency transaction (gain) loss: We have excluded foreign currency transaction gains and losses from our Non-GAAP profitability measures. Foreign currency transaction gains and losses fluctuate in amount and frequency and are significantly affected by foreign exchange market rates. Foreign currency transaction gains and losses are likely to recur in future periods.
-   Convertible senior notes: In February 2020, we issued $600 million of convertible senior notes, which bear interest at an annual fixed rate of 0.75%. A debt discount resulting from the conversion feature and debt issuance costs reduced the convertible debt instrument's carrying value. Debt discount and issuance costs are amortized as interest expense over the debt's life based upon an effective interest rate of 4.31%. We believe excluding these amounts provides a more useful comparison of our operational performance in different periods.
-   Capped call transactions: We have excluded gains and losses from our privately negotiated capped call transactions entered into concurrent with our issuance of the convertible senior notes to reduce potential dilution to our common stock upon any conversion of the convertible senior notes and/or offset any cash payments we are required to make in excess of the principal amount of convertible senior notes that may be converted, with such reduction and/or offset subject to a cap. 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.
-   Venture investments: We have excluded gains and losses from our venture investments. 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.
-   PegaWorld: Due to the global COVID-19 pandemic, to help ensure the health and safety of attendees and employees, we converted our annual PegaWorld conference from a multi-day live event to a free virtual event. We have excluded the incremental fees we incurred due to the live event's cancellation from our Non-GAAP operating expenses and profitability measures.
    For additional information about our use of Non-GAAP measures, the reasons why management uses these measures, the usefulness of these measures, and the material limitations on these measures' usefulness, see "Discussion of Non-GAAP financial measures" included in this release and below.
(2) Stock-based compensation was:
                           Three Months Ended         Nine Months Ended
                           September 30,              September 30,
(in thousands)             2020          2019         2020           2019
Cost of revenue            $   5,100     $  4,787     $   15,636     $   14,216
Selling and marketing      12,658        8,317        33,968         24,055
Research and development   5,765         4,858        17,066         13,990
General and administrative 4,402         3,884        10,085         7,981
                           $   27,925    $  21,846    $   76,755     $   60,242
Income tax benefit         $   (5,604)   $  (4,430)   $   (15,293)   $   (12,226)
(3) Effective income tax rates were:
         Nine Months Ended
         September 30,
         2020     2019
GAAP     48  %    32  %
Non-GAAP 22  %    22  %
Our effective income tax rate under GAAP is subject to significant fluctuations due to various factors, including excess tax benefits generated by our stock-based compensation plans, tax credits for stock-based compensation awards to research and development employees, and unfavorable foreign stock-based compensation adjustments. We determine our Non-GAAP income tax rate by using applicable rates in taxing jurisdictions and assessing certain factors, including our historical and forecast earnings by jurisdiction, discrete items, and our ability to realize tax assets. We believe it is beneficial for our management to review our Non-GAAP results consistent with the effective income tax rate in our annual plan as established at the beginning of each year, given this tax rate volatility.
PEGASYSTEMS INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
                                                              September 30, 2020 December 31, 2019
Assets
Cash, cash equivalents, and marketable securities             $      468,028     $     68,363
Receivables (billed and unbilled)                             455,232            501,675
Goodwill                                                      78,864             79,039
Other assets                                                  485,203            335,735
Total assets                                                  $      1,487,327   $     984,812
Liabilities and stockholders' equity
Accrued expenses, including compensation and related expenses $      134,283     $     152,127
Deferred revenue, current                                     181,680            190,080
Convertible senior notes, net                                 513,794            --
Other liabilities                                             128,248            103,595
Stockholders' equity                                          529,322            539,010
Total liabilities and stockholders' equity                    $      1,487,327   $     984,812
PEGASYSTEMS INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
                                                                           Nine Months Ended
                                                                           September 30,
                                                                           2020               2019
Net (loss)                                                                 $       (65,379)   $       (91,351)
Adjustments to reconcile net (loss) to cash (used in) operating activities
Non-cash items                                                             72,797             73,547
Change in operating assets and liabilities, net                            (33,675)           4,342
Cash (used in) operating activities                                        (26,257)           (13,462)
Cash (used in) provided by investing activities                            (210,701)          53,448
Cash provided by (used in) financing activities                            449,630            (61,941)
Effect of exchange rate changes on cash and cash equivalents               183                (363)
Net increase (decrease) in cash and cash equivalents                       212,855            (22,318)
Cash and cash equivalents, beginning of period                             68,363             114,422
Cash and cash equivalents, end of period                                   $       281,218    $       92,104
PEGASYSTEMS INC.
ANNUAL CONTRACT VALUE ("ACV")
(in millions, except percentages)
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 for term license and Pega Cloud contracts. Maintenance revenue for the quarter then ended is multiplied by four to calculate ACV for maintenance. Client Cloud ACV is composed of maintenance ACV and ACV from term license contracts. We believe the presentation of ACV on a constant currency basis enhances the understanding of our results, as it provides visibility into the impact of changes in foreign currency exchange rates, which are outside of our control. All periods shown reflect foreign currency exchange rates as of September 30, 2020.
                                                          September 30, 2020                                              September 30, 2019                                             Change
Maintenance                                               $                                                         299   $                                                         286  $      13   5  %
Term                                                      246                                                             209                                                            37          18 %
Client Cloud                                              545                                                             495                                                            50          10 %
Pega Cloud                                                232                                                             148                                                            84          57 %
Total                                                     $                                                         777   $                                                         643  $      134  21 %
PEGASYSTEMS INC.
BACKLOG
(in thousands, except percentages)
Remaining performance obligations ("Backlog") - Backlog represents contracted revenue that has not yet been recognized and includes deferred revenue and non-cancellable amounts expected to be invoiced and recognized as revenue in future periods.
                     September 30, 2020
                     Perpetual license      Term license           Maintenance            Pega Cloud             Consulting             Total
1 year or less       $         8,708        $         50,788       $         170,643      $         211,661      $         14,977       $         456,777     54        %
1-2 years            1,700                  5,341                  40,631                 157,500                2,042                  207,214               25        %
2-3 years            --                     7,052                  18,277                 93,283                 770                    119,382               14        %
Greater than 3 years --                     4                      9,597                  44,363                 653                    54,617                7         %
                     $         10,408       $         63,185       $         239,148      $         506,807      $         18,442       $         837,990     100       %
Change in Backlog Since September 30, 2019
                     $         560          $         32,763       $         49,056       $         143,435      $         3,593        $         229,407
                     6                   %  108                 %  26                  %  39                  %  24                  %  38                  %
                     September 30, 2019
                     Perpetual license      Term license           Maintenance            Pega Cloud             Consulting             Total
1 year or less       $         7,689        $         25,948       $         158,220      $         133,785      $         13,145       $         338,787     56        %
1-2 years            853                    3,798                  18,590                 105,081                863                    129,185               21        %
2-3 years            1,306                  591                    8,323                  72,915                 841                    83,976                14        %
Greater than 3 years --                     85                     4,959                  51,591                 --                     56,635                9         %
                     $         9,848        $         30,422       $         190,092      $         363,372      $         14,849       $         608,583     100       %

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