#1PEGA Pegasystems Investor Presentation Q4 and FY23 NASDAQ: PEGA [email protected] February 14, 2024 PEGA © Pegasystems Inc. 00 O ю 00 O#2Safe Harbor Statement Certain statements in this presentation 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 represent our views only as of the date the statement was made and are based on current expectations and assumptions. Factors that could cause the Company's results to differ materially from those expressed in forward-looking statements are contained in the Company's press release announcing its Q4 2023 results and in the Company's filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2023 and other recent filings with the 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. Any forward-looking statements in this presentation represent our views as of February 14, 2024. Non-GAAP Financial Measures Our non-GAAP financial measures should only be read in conjunction with our consolidated financial statements prepared in accordance with GAAP. We believe that these measures help investors understand our core operating results and prospects, which is consistent with how management measures and forecasts our performance without the effect of often one-time charges and other items outside our normal operations. They are not a substitute for financial measures prepared under U.S. GAAP. Constant currency measures are calculated by applying the Q4 2022 foreign exchange rates to all periods shown. Reconciliations of GAAP and non- GAAP measures are in the Company's press release announcing its Q4 2023 results and at the end of this presentation. Additional Notes This presentation may contain industry market data, industry forecasts, and other statistical information. Such information was obtained from publicly available information, industry publications, and other third-party sources, and the Company makes no representations as to the accuracy of such information. The Company has not independently verified any such information. Certain information in this presentation is based upon management forecasts and reflects prevailing conditions and management's views as of the date of this presentation, all of which are subject to change. PEGA Pegasystems Inc. 2#3Pega Overview PEGA © Pegasystems Inc. 3#4PEGA 0000 OUR VISION To change the way the world builds software to unleash enterprise potential OUR SOFTWARE Enterprise Al decisioning and workflow automation platform WHAT WE DO Unlock business-transforming outcomes Pegasystems Inc.#5What we do How we do it UNLOCK BUSINESS-TRANSFORMING OUTCOMES with a powerful LOW-CODE PLATFORM FOR WORKFLOW AUTOMATION AND AI-POWERED DECISIONING Our Solutions are organized into 3 Engagement Strategies 1:1 Customer Engagement ADAPT WITH EASE Adapt instantly | Personalize for long term loyalty | Engage with empathy Customer Service AUTOMATE & SAVE TIME Resolve issues faster | Find new ways to cut costs Increase revenue & retention Intelligent Automation MAXIMIZE VALUE Streamline experiences | Automate workflows at scale | Build critical apps fast 186% 598% ROI <3-12 months 298% ROI < 6 months 489% ROI < 6 months Why we're different Intelligent technology Our Pega Infinity™ portfolio of software, all built on our open, cloud-native platform, with Al embedded everywhere, drives smarter, more intuitive workflows, and customer and employee experiences. Scalable architecture Our patented Situational Layer CakeⓇ transcends channels and internal data silos and manages variations for maximum reuse and enterprise scale. Rapid Innovation Pega Express™ design-thinking best practices are built right into our low-code platform, so you can design and deploy mission- critical workflows and experiences quickly and collaboratively Client-centricity Our clients have a lot at stake, and we don't let them down. Ever. Together with our world- class partners and highly skilled Client Success teams, we keep our promises every step of your journey. PEGA © Pegasystems Inc. 5#6Personalize Engagement Automate Customer Service Streamline Operations The world's leading enterprise-scale organizations are using Pega to connect workflows and interactions across the customer lifecycle: Communications service providers Customer engagement Order management Customer service Shared service Service assurance Network operations Financial services Customer engagement Onboarding & KYC Lending Customer service Bank operations Payment exceptions Financial crime Government Licensing Investigative case management Grants & financial management Acquisition & supply chain modernization Citizen service Enterprise modernization Healthcare Consumer engagement Onboarding & enrollment Customer service Core operations Care management services Insurance Customer engagement Sales Distribution Service excellence Underwriting Claims Manufacturing Customer engagement Onboarding Captive lending Aftermarket services Enterprise operations PEGA Rabobank cíti Australian Government Department of Home Affairs HCA+ Healthcare Afiac Unilever Pegasystems Inc. 6#7Driving Growth and Free Cash Flow PEGA 11% ACV Founded: 1983 HQ: Cambridge, MA Employees: 5,000+ 2023 Growth 21% Pega Cloud ACV Growth $201M Free Cash Flow (1) PEGA (1) For the Year Ended December 31, 2023. Starting in the third quarter of 2023, the Company calculated free cash flow as cash provided by operating activities less investments in property and equipment. To ensure comparability, previously disclosed amounts have been updated. For more information, refer to the reconciliation included later in this investor presentation. Pegasystems Inc. 7#8PEGA Corporate Social Responsibility at Pega E ENVIRONMENTAL We are committed to reducing the environmental impact of our operations on air, land, and water S SOCIAL We strive to be a responsible corporate citizen and active contributor in communities where our employees, partners, and clients' work G GOVERNANCE We believe that corporate governance is important to ensure that Pega is managed for the long- term benefit of all our stakeholders https://www.pega.com/corporate-social-responsibility Pegasystems Inc.#9• . • Key Investment Highlights Growing enterprise software company, with a view towards a $89B+ market opportunity Large enterprise client base in key verticals: financial services, insurance, telecommunications, health care, manufacturing, and public sector A proven technology leader in customer engagement and intelligent automation Mission critical to our clients Strong business driving to Rule of 40 effectiveness PEGA © Pegasystems Inc.#10Solution Overview PEGA © Pegasystems Inc. 10#11What are the Business Problems We Solve? Pega drives better business outcomes by... PEGA Making Decisions Delivering 1:1 customer engagement powered by real-time, omni-channel Al Getting work done Making customer and employee-facing processes more efficient through end- to-end automation & robotics ...and very often we do both For example, in the context of Customer Service or KYC/CLM, when customer interactions involve processing work to resolve a request. Pegasystems Inc. 11#12Pega Infinity™ PEGA REAL-TIME, OMNI- CHANNEL AI 1:1 Customer Engagement Customer Service Intelligent Automation MAKE DECISIONS END-TO-END AUTOMATION & ROBOTICS MICROJOURNEY- CENTRIC RAPID DELIVERY PEGA GET WORK DONE SITUATIONAL LAYER CAKE™ Industry-leading technology Start fast and scale PEGA DX ARCHITECTURE™ SOFTWARE THAT WRITES YOUR SOFTWARE CLOUD CHOICE Future proof your investment Pegasystems Inc. 12#13Unlock Business-Transforming Outcomes Solving the problems no one else can. Delivering value, fast. One-to-one customer engagement Maximize customer lifetime value 489% ROI < 6 months payback Customer service Simplify service and reduce costs 298% ROI < 6 months payback Intelligent automation Boost efficiency Key 3-year benefits. Forrester Total Economic Impact™ studies 2020. https://www.pega.com/forrester-tei PEGA 186% 598% ROI <3-12 months payback Pegasystems Inc. 13#14So How Do We Do It? Our software can handle quick fixes, lasting transformation, and everything in between PEGA ད Intelligent technology Scalable architecture Rapid innovation Pegasystems Inc. 14#15Pega's Technology Difference Architected differently to maximize revenue and efficiency at enterprise scale Put decisions and workflow at the center With Pega's Center-out business architecture Build layers of reuse and variation With Pega's patented Situational Layer Cake Personalize experiences and optimize workflows With Pega's real-time Al Automate across systems and channels to streamline the total experience Manage variations and adapt instantly for continuous innovation Drive empathetic, customer-relevant engagement and optimize processes PEGA Scale across enterprise needs With Pega's enterprise-grade low-code platform, App Factory, and Process Fabric From governed citizen development to the most mission-critical processes Pegasystems Inc. 15#16Analysts recognize Pega as a leader for our enterprise Al decisioning and workflow automation platform D Real-Time Interaction Management Forrester CRM Customer Engagement Center Gartner Robotic Process Automation Forrester Core CRM Solutions Forrester PEGA Pegasystems Inc. 16 16#17Customer engagement Figure 1. Magic Quadrant for the CRM Customer Engagement Center CHALLENGERS LEADERS Serviceflow Orade Verint Systems Applian Reshworks CONNEXT Salesforce NICHE PLAYER VISIONARES As of May 2020 Gartner, Inc COMPLETENESS OF VISION Source: Gartner (June 2020) Gartner. Real-time decisions & Al THE FORRESTER WAVE™ Real-Time Interaction Management Q4 2020 Strong Challengers Contenders Performers Stronger current offering Weaker current offering • FICO Treasure Data Salesforce Procisaly O Weaker strategy IMimobile ( Emarsys Adobe Market presence -0000 Leaders Pegasystem Thunderhead o Stronger strategy Digital process automation Challengers Contenders Strong Performers Stronger current offering A Aura Portal Genpact O Hyland O Pegasystems Appian- Leaders Open Text O Bizag O Bontasoft Kofax O Weaker current offering Weaker strategy ▷ Stronger strategy FORRESTER Q2 2019 End-to-end work management CHALLENGERS Biagi kzim BM Pagesystems Together, we're redefining the technology industry Unified, market-leading technology Changing the way organizations work and engage We've built the #1 real-time interaction management #1 digital decisioning #1 digital process automation #1 intelligent business process management AglePain AuraParts Nonger Genpact BP Logi Kota AXON bperfortre Bonkest Software NTT Data Intamant Software AG Whiteston MESOFTWA NICHE PLAYERS COMPLETENESS OF VISION VISONARIES As of December 2018 Gartner, Inc Q4 2020 Gartner. "A gray bubble indicates a nonparticipating vendor 157486 Source: Forrester Research, Inc. Unauthorized reproduction, otation, or distribution prohibited FORRESTER PEGA Pegasystems Inc. 17#18Business Overview PEGA © Pegasystems Inc. 18#19PEGA Differentiated Architecture WHY PEGA WINS Ease of Integration Depth of Platform Functionality @ O D P ← E Strong Team Deep Vertical Expertise Robust ROI Pegasystems Inc. 19#20Selling High-Value Use Cases to Some of the World's Largest Companies BUYER OFFERING VALUE PROPOSITION PEGA Robert Chief Customer Officer 1:1 Customer Engagement Maximize top-line growth with a centralized, real-time Al-powered customer decision hub that delivers next- best-actions at every customer interaction, across various channels. Teresa SVP, Customer Service Customer Service Chen SVP, Operations Intelligent Automation Reduce cost and streamline service experiences for customers and employees with a state-of-the-art customer service application and out-of-the-box, industry-specific microjourneys. Make customer and employee-facing processes more efficient through intelligent automation powered by end-to-end robotics and case management. 20 Pegasystems Inc. 20#21How Do Our Clients Drive Value Using Pega? CLIENT ILLUSTRATIVE USE CASE IMPACT AND RESULT 1:1 Customer Engagement Retain Commonwealth Bank customers 50 million next best action conversations delivered across 18 channels • +12 lead in NPS over the competition Read more ❘ https://www.pega.com/customers/cba-marketing Tripled customer satisfaction Increased cardmember spend by 10% Lowered card attrition 4x Read more | https://www.pega.com/insights/resources/anthem-now- elevance-health-creates-next-generation-service-desktop-pega Customer Service Elevance Health Inquire into account info • Streamline Intelligent Automation SIEMENS processes & reduce costs PEGA Implemented Pega in over 80 countries • 85,000 global users are using 22 Pega applications Consolidated legacy workflows and business process management across Siemens Read more | https://www.pega.com/customers/siemens Pegasystems Inc. 21 24#22Financial Details PEGA © Pegasystems Inc. 22 22#23Financial Outlook 00º Massive Market Opportunity Subscription Journey Q Recurring Model !K! Margin Expansion Opportunities PEGA Pegasystems Inc. 23#24Pursuing a Massive Market Opportunity in Platform & CRM FY 26 $119B+ PEGA FY 24 $89B+ Source: IDC Worldwide ICT Spending Guide (Feb. 2023) Pegasystems Inc. 24 14#25Subscription Journey From... Perpetual Less Predictable To... Recurring More Predictable Lagging Growth & Margins Rule of 40 Driven SUBSCRIPTION TRANSITION TIMELINE PEGA 2017 2023 Pegasystems Inc. 25#26Recurring Subscription Model Annual Contract Value (ACV) $1,300M $1,200M $1,100M $1,000M $900M $1,126M December 31, 2022 $1,255M December 31, 2023 Growth since Q4 2022 ACV Reported: 11% ACV Constant Currency: 11% PEGA 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, the Company revised its ACV methodology for maintenance and all contracts less than 12 months as its overall client renewal rate exceeds 90%. The impact of the change was $3 million or 0.3% of Total ACV or less for all quarters in 2022. Previously disclosed ACV amounts have been updated to allow for comparability. Pegasystems Inc. 26#27Cash Flow Growth $250M $200M $150M $100M $50M $0M Operating Cash Flow $22M $250M $218M $200M $150M $100M $50M Free Cash Flow $0M $(13)M $201M $(50)M $(50)M 2022 2023 2022 2023 PEGA Note: Starting in the third quarter of 2023, the Company calculated free cash flow as cash provided by operating activities less investments in property and equipment. To ensure comparability, previously disclosed amounts have been updated. For additional information refer to explanatory notes on slide 39 27 Pegasystems Inc. 12#28Backlog Total Backlog Up 8% as Reported (7% Constant Currency) $1,750M $1,500M $1,250M $1,000M $750M $500M $250M $0M $1,356M $720 $636 December 31, 2022 Current Long-term (1) Growth from December 31, 2022 to December 31, 2023 PEGA $1,463M $796 10% Growth (1) 5% Growth (1) $667 December 31, 2023 Pegasystems Inc. 28#292024 Guidance As of February 14, 2024, we are providing the following guidance: Annual contract value growth Year Ended December 31, 2024 11% Revenue Diluted earnings per share Year Ended December 31, 2024 GAAP $1.5 Billion $1.18 Non-GAAP $1.5 Billion $2.75 Cash provided by operating activities Free cash flow Year Ended December 31, 2024 $365 Million $350 Million PEGA Pegasystems Inc. 29#30What Does this All Mean? Strive to build a growing, recurring business to drive increased value Sustain growth While expanding margins And increasing cash flow With a view towards: • Continuing our technology leadership • Improving sales productivity • Executing our target organization go-to-market strategy Driving ACV growth • Leveraging Cloud Choice differentiation PEGA . . To drive shareholder value Balancing growth & margin Rule of 40 driven Pegasysternis Inc. 30#31PEGA Pegasystems, Pega, and other Pega products and services mentioned herein are trademarks of Pegasystems Inc. All other company, product, or service names are trademarks or service marks of their respective owners.#32Reported ACV Pega Cloud and Client Cloud $1,126M Growth since Q4 2022 $1,255M Total ACV: 11% Pega Cloud ACV: 21% $553M $459M $667M December 31, 2022 Pega Cloud Client Cloud $702M December 31, 2023 Client Cloud ACV: 5% PEGA 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, the Company revised its ACV methodology for maintenance and all contracts less than 12 months as its overall client renewal rate exceeds 90%. The impact of the change was $3 million or 0.3% of Total ACV or less for all quarters in 2022. Previously disclosed ACV amounts have been updated to allow for comparability. Pegasystems Inc. 32#33Reported ACV Pega Cloud, Maintenance, and Subscription License (Term) $1,126M $459M $318M $349M $1,255M Growth since Q4 2022 Total ACV: 11% Pega Cloud ACV: 21% $553M $324M Client Cloud ACV: 5% $378M PEGA December 31, 2022 Pega Cloud Maintenance December 31, 2023 Subscription License (Term) 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, the Company revised its ACV methodology for maintenance and all contracts less than 12 months as its overall client renewal rate exceeds 90%. The impact of the change was $3 million or 0.3% of Total ACV or less for all quarters in 2022. Previously disclosed ACV amounts have been updated to allow for comparability. Pegasystems Inc. 33#34Pega Cloud Revenue Trailing 12 Months $461 M $444M $423M $402M $384M $363M $344M $323M $301M $281 M $257M $233M $208M $186M $167M $149M Cloud Transition $134M $119M Begins $106M $95M $83M $73M $51M $64M $56M Q4 2017 Q1 2018 Q2 Q3 Q4 Q1 Q2 2018 2018 2018 2019 2019 Q3 2019 Q4 2019 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2020 2020 2020 2020 2021 2021 2021 2021 2022 2022 2022 2022 2023 2023 2023 2023 PEGA Pegasystems Inc. 34#35Pega Cloud Gross Margin (%) Pega Cloud Gross Margin At or above a 75% gross margin, Pega Cloud generates higher gross profit dollars than Client Cloud in a timeless illustrative model 90% 80% 70% --- 60% 53% 55% 51% 50% PEGA 74% 70% 67% 63% 80% 75% = Gross Profit Dollars Breakeven Between Pega Cloud and Client Cloud 2017 2018 2019 2020 2021 2022 2023 Timeless Pegasystems Inc. 35#36Net Income and EPS Guidance Reconciliation (A) (1 of 2) (in millions) Net Income - GAAP Stock-based compensation Legal fees Amortization of intangible assets Interest on convertible senior notes Incomes taxes Net Income - Non-GAAP 2024 $ 107 143 15 3 3 (32) $ 239 Diluted earnings per share - GAAP Non-GAAP adjustments Diluted earnings per share - non-GAAP Diluted weighted-average number of common shares outstanding - GAAP Non-GAAP adjustments Diluted weighted-average number of common shares outstanding - non-GAAP (A) See explanatory notes on slide 37 PEGA $ 1.18 1.57 $ 2.75 90.7 (3.7) 87.0 Pegasystems Inc. 36#37Net Income and EPS Guidance Reconciliation (2 of 2) Our non-GAAP financial measures reflect the following adjustments: . • 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 revenues, we continue to evaluate our business performance, excluding stock-based compensation. Legal fees: 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 types of events giving rise to them are not representative of our core business operations and ongoing operational performance. • 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 the timing and size of acquisitions. Investors should note that intangible assets contributed to our revenues recognized during the periods presented and are expected to contribute to future revenues. Amortization of intangible assets is likely to recur in future periods. We believe excluding these amounts provides a useful comparison of our operational performance in different periods. Interest on convertible senior notes: In February 2020, we issued convertible senior notes, due March 1, 2025, in a private placement. We believe that excluding the amortization of issuance costs provides a useful comparison of our operational performance in different periods. Income taxes: Our GAAP effective income tax rate is subject to significant fluctuations due to several factors, including our stock-based compensation plans, research and development tax credits, gains and losses on our capped call transactions, and the valuation allowance on our deferred tax assets in the U.S. and U.K. We determine our non-GAAP income tax rate using applicable rates in taxing jurisdictions and assessing certain factors, including historical and forecasted earnings by jurisdiction, discrete items, and ability to realize tax assets. We believe it is beneficial for our management to review our non-GAAP results consistent with our annual plan's effective income tax rate as established at the beginning of each year, given tax rate volatility. Diluted weighted-average number of common shares outstanding: Capped call transactions: In periods of GAAP income, the shares that would be issued if the Company's Convertible Senior Notes were fully converted to common shares are included in the diluted weighted-average shares outstanding. The capped call transactions are expected to reduce common stock dilution and/or offset any potential cash payments the Company must make, other than for principal and interest, upon conversion of the convertible senior notes, with such reduction and/or offset subject to a cap of $196.44. We believe that including the expected impact of the capped call transactions in our non-GAAP financial measures provides a useful comparison of our operational performance in different periods. PEGA Pegasystems Inc. 37 10#38Empty#39Operating and Free Cash Flow Reconciliation (1) (in thousands, except percentages) Guidance 2024 2023 2022 Cash provided by operating activities $ 365,000 Margin (2) 24 % Margin (2) $ 217,785 15 % $ 22,336 Margin (2) 2 % Investment in property and equipment (15,000) (16,781) (35,379) Free cash flow $ 350,000 23 % $ 201,004 14 % $ (13,043) (1)% Supplemental information (3) Restructuring Legal fees Interest on convertible senior notes $ 7,000 15,000 5,000 Other Income taxes 26,000 $ 53,000 $ 29,401 14,645 4,134 601 11,664 $ 60,445 4 % $ 41,789 4,500 6,805 7,645 60,739 4 % Effect of supplemental information to Rule of 40 achievement (4) 5 % (1) Our non-GAAP free cash flow is defined as cash provided by operating activities less 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 provide information on free cash flow to enable investors to assess our ability to generate cash without incurring additional external financings. This information is not a substitute for financial measures prepared under U.S. GAAP. Starting in the third quarter of 2023, the Company calculated free cash flow as cash provided by operating activities less investments in property and equipment. To ensure comparability, previously disclosed amounts have been updated. (2) Operating and free cash flow margin are calculated by comparing the respective cash flow to total revenue. (3) The supplemental information discloses items that affect our cash flows and are considered by management not to be representative of our core business operations and ongoing operational performance. Restructuring: Restructuring fluctuates in amount and frequency and is significantly affected by the timing and size of our restructuring activities. Legal fees: Legal and related fees arising from proceedings outside the ordinary course of business. Interest on convertible senior notes: In February 2020, we issued convertible senior notes, due March 1, 2025, in a private placement. The Notes accrue interest at an annual rate of 0.75%, payable semi-annually in arrears on March 1 and September 1. Other: Fees related to capital advisory services, canceled in-person sales and marketing events, and incremental costs incurred integrating acquisitions. Income taxes: Direct income taxes paid net of refunds received. 39 (4) Rule of 40: A performance metric calculated by adding the annual contract value ("ACV") growth rate and the free cash flow margin. We also provide a table of supplemental information of other items Pegasystems Inc. that affect our cash flows and Rule of 40 achievement.