Executive Summary

Q1 2025 delivered accelerated growth and profitability: revenue $475.6M (+44% YoY), GAAP diluted EPS $0.91 and non-GAAP diluted EPS $1.53; operating cash flow $204M and free cash flow $202M, both quarterly records .
Commercial KPIs strengthened: ACV up 13% YoY to $1.445B; Pega Cloud ACV up 23% to ~$701M; backlog up 21% YoY to $1.728B (constant currency growth also 21%) .
Results materially exceeded Street: revenue beat consensus by ~$118.6M and EPS (S&P “Primary EPS”) beat by ~$0.52 in Q1; company highlighted term-license seasonality and FX pressure on Pega Cloud revenue timing as key context . Values retrieved from S&P Global.*
Capital allocation and balance sheet: repurchased ~1.5M shares for $120M in Q1 and authorized an additional $500M buyback; fully repaid ~$468–$470M of convertible notes, achieving debt-free status; quarterly dividend maintained at $0.03/share (Q2 payment announced in March) .
Catalyst: acceleration in ACV/Pega Cloud ACV, record free cash flow, debt extinguishment, and larger buyback authorization; management maintained 2025 guidance and emphasized Rule-of-40 discipline with potential FX headwinds to Cloud revenue conversion in coming quarters .

What Went Well and What Went Wrong

What Went Well

“We accelerated ACV growth and delivered record free cash flow in Q1 2025, reflecting the benefits of the subscription model” — COO & CFO Ken Stillwell; ACV +13% YoY, FCFO $202M, CFO $204M .
Pega Cloud ACV +23% YoY to ~$701M validates focus on driving workloads to Pega Cloud; management reiterated target to expand Cloud’s share of total ACV and improve durability/predictability .
Blueprint/Agentic AI momentum: management described pervasive Blueprint adoption influencing “every single piece of business,” with >1,000 new Blueprints created weekly and strong partner engagement .

What Went Wrong

FX headwinds pressured Pega Cloud revenue despite strong Cloud ACV; timing lag (backlog/ACV to revenue takes “a few quarters”), creating near-term optical disconnect between bookings and revenue .
Maintenance ACV declined (–5% YoY) as expected given migrations; term-license revenue remains inherently seasonal and non-linear under ASC 606, complicating quarter-over-quarter comparability .
GAAP tax rate volatility (32% in Q1) and FX transaction losses ($5.3M) affected GAAP profit; company emphasized non-GAAP view and recurring nature of FX variability .

Financial Results

Quarterly Trend (oldest → newest)

Metric	Q3 2024	Q4 2024	Q1 2025
Revenue ($USD Thousands)	$325,050	$490,830	$475,633
Gross Profit ($USD Thousands)	$228,344	$388,475	$373,183
Operating Income ($USD Thousands)	$(11,661)	$142,989	$126,989
GAAP Diluted EPS ($)	$(0.17)	$1.25	$0.91
Non-GAAP Diluted EPS ($)	$0.39	$1.61	$1.53

YoY Comparison – Q1 2025 vs Q1 2024

Metric	Q1 2024	Q1 2025
Revenue ($USD Thousands)	$330,147	$475,633
GAAP Net Income ($USD Thousands)	$(12,124)	$85,422
GAAP Diluted EPS ($)	$(0.14)	$0.91
Non-GAAP Net Income ($USD Thousands)	$42,154	$140,542
Non-GAAP Diluted EPS ($)	$0.48	$1.53

Segment Revenue Breakdown – Q1 2025

Segment	Q1 2024 ($000s)	Q1 2025 ($000s)	YoY Change ($000s)	YoY %
Pega Cloud	$130,902	$151,123	$20,221	15%
Maintenance	$81,001	$76,368	$(4,633)	(6)%
Subscription Services	$211,903	$227,491	$15,588	7%
Subscription License	$63,338	$186,555	$123,217	195%
Subscription (Total)	$275,241	$414,046	$138,805	50%
Consulting	$54,047	$60,421	$6,374	12%
Perpetual License	$859	$1,166	$307	36%
Total Revenue	$330,147	$475,633	$145,486	44%

KPIs and Cash Flow

KPI	Prior (as stated)	Current
ACV ($USD Millions)	$1,273 (Mar 31, 2024)	$1,445 (Mar 31, 2025)
Pega Cloud ACV ($USD Thousands)	$570,356 (Mar 31, 2024)	$701,311 (Mar 31, 2025)
Backlog – GAAP ($USD Millions)	$1,425 (Mar 31, 2024)	$1,728 (Mar 31, 2025)
Cash from Operations ($USD Thousands, Q1)	$180,146 (Q1 2024)	$204,228 (Q1 2025)
Free Cash Flow ($USD Thousands, Q1)	$179,542 (Q1 2024)	$202,348 (Q1 2025)

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
ACV Growth (%)	FY 2025	12% (Feb 12, 2025)	12% (maintained on Q1 call)	Maintained
Revenue ($B)	FY 2025	$1.6B GAAP & Non-GAAP	$1.6B (no change)	Maintained
GAAP Diluted EPS ($)	FY 2025	$1.60	No change noted	Maintained
Non-GAAP Diluted EPS ($)	FY 2025	$3.10	No change noted	Maintained
Cash from Ops ($M)	FY 2025	$455	No change noted	Maintained
Free Cash Flow ($M)	FY 2025	$440	No change noted	Maintained
Dividend	Q2 2025	$0.03/share (ongoing program)	$0.03/share (announced Mar 21, 2025)	Maintained

Notes: Management flagged FX headwinds to Pega Cloud revenue and Cloud margin investment pacing as modeling considerations, but did not change formal guidance .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q3 2024)	Previous Mentions (Q4 2024)	Current Period (Q1 2025)	Trend
Blueprint / GenAI adoption	Blueprint central to client/prospect discussions; expanding TAM; legacy replace narrative	Legacy transformation via Blueprint; AgentX introduced; pervasive sales change	“Every single piece of business” influenced; >1,000 new Blueprints weekly; partner adoption	Accelerating
Pega Cloud migration	Cloud ACV drives ACV growth; backlog-to-revenue lag noted	Expect declines in maintenance/term over time; Cloud margins flat amid migration investment	Cloud ACV +23%; FX and timing delay on revenue conversion	Positive mix shift, near-term FX/timing headwinds
Rule of 40 discipline	Targeting Rule of 40 via ACV + FCF margin; buybacks begin	Achieved Rule of 40; 2025 guide ACV +12%, FCF $440M	Maintain guide; “grow FCF per share” and expand growth with margins	Sustained focus
Macro/FX	Market nervousness; public sector seasonality not outsized	Currency headwind to Cloud revenue (current backlog to revenue ~$25M impact)	FX impact to Cloud revenue and ACV adds constant-currency context	FX headwind persists
Public sector / FedRAMP	Government Empowered; FedRAMP High noted	Public sector healthy; FedRAMP High timing	Blueprint for Government Efficiency; FedRAMP High status for GenAI solutions (June)	Building credentials
Capital allocation	Buybacks authorized/increasing; convert repayment capacity	Buybacks, strong cash/investments, repay converts in Mar	$120M repurchases; +$500M authorization; converts repaid; debt-free	More aggressive buybacks; de-levered

Management Commentary

CEO Alan Trefler: “Pega GenAI has dramatically transformed how we engage with our clients… [It] enables clients to accelerate progress in reaching their digital and legacy transformation goals” .
COO & CFO Ken Stillwell: “Operating as a Rule of 40 company allows us to focus on accelerating profitable growth while thoughtfully returning capital to shareholders” .
On revenue composition and timing: “You shouldn’t expect term revenue… to be linear and consistent… ACV does not immediately flow into Pega Cloud revenue… it takes a few quarters” .
On FX: “Please keep in mind, currency fluctuations may create noise… we had some currency impact to Pega Cloud backlog and you’re seeing some of that flow into Pega Cloud revenue in 2025” .
On Blueprint ubiquity: “Every single piece of business… is influenced by Blueprint… it has profoundly changed our business” .

Q&A Highlights

Term-license seasonality and ASC 606 create quarterly volatility; Q1 showed strong term license revenue, but management cautioned not to extrapolate linearly .
ACV acceleration authentic, not a Q4 rollover or Q2 pull-in; constant-currency net adds in the “low 60s” versus $74M reported due to FX .
Pega Cloud revenue lags ACV/backlog by “a few quarters”; FX rolled over from 2024 impacting Cloud revenue optics .
Backlog interpretation: focus on current RPO as better aligned signal with ACV versus total RPO laddering dynamics .
Capital returns: ~~1.5M shares repurchased for $120M; new $500M authorization; convertible notes repaid (~~$468–$470M), resulting in debt-free status .

Estimates Context

Metric	Q3 2024 Estimate	Q3 2024 Actual	Q4 2024 Estimate	Q4 2024 Actual	Q1 2025 Estimate	Q1 2025 Actual
Revenue ($USD)	327,725,870	325,050,000	471,384,520	490,830,000	357,014,550	475,633,000
Primary EPS ($)	0.16776	0.195	0.73895	0.805	0.24766	0.765

Values retrieved from S&P Global.*

Context:

Q1 2025 revenue beat by ~$118.6M and EPS by ~$0.52 on S&P “Primary EPS,” driven by outsized term-license revenue and accelerated ACV; management emphasized timing and FX on Cloud revenue conversion .
Q4 2024 beat revenue by ~$19.4M and EPS by ~$0.07; Q3 2024 was a slight revenue miss and modest EPS beat. Values retrieved from S&P Global.*

Key Takeaways for Investors

ACV and Cloud ACV trajectories are inflecting; structural mix shift toward Pega Cloud supports more durable growth and cash generation medium term .
Near-term optics: expect potential disconnect between Cloud ACV and Cloud revenue due to conversion lag and FX; model a few-quarter delay and sensitivity to USD strength .
Term-license seasonality can materially swing quarterly revenue/EPS; do not extrapolate Q1 term performance linearly — focus on ACV/current RPO signals .
Capital allocation accelerating: larger buyback authorization (+$500M) and debt repayment de-risk equity; free cash flow per share a management focus (positive for TSR) .
Guidance maintained: ACV +12%, revenue $1.6B, FCF $440M; FX and migration investments may flatten Cloud margin near-term but benefit long-term mix and ARR durability .
Blueprint/Agentic AI adoption is broad-based across clients and partners; use this as a leading indicator for pipeline velocity and migration-led uplift .
Watch macro/public sector dynamics and FX; management remains confident but highlights uncertainty; monitor June investor session for incremental updates .

PEGASYSTEMS INC (PEGA)·Q1 2025 Earnings Summary