DEF 14A of Pegasystems Inc, Apr 26, 2024

DEF 14A of Pegasystems Inc

Filed Apr 26, 2024 · FY20230001013857-24-000096

Open on EDGAR

  1. COMPENSATION DISCUSSION AND ANALYSIS HIGHLIGHTS

    | Element | Objective | Fixed/Variable | | Base Salary | Attract and retain highly qualified leaders with market-competitive compensation structure. | Fixed | | Bonus (Corporate Incentive Compensation Plan or CICP) | Link pay with our performance. Reward achievement of our financial and strategic goals. | Variable | | Additional Cash Incentives | Link pay with individual, business unit and/or corporate performance. Reward achievement of specific goals. | Variable | | Equity Awards (Stock Options, Performance-Based Stock Options, and RSUs) | Link pay with our long-term performance. Reward stock price appreciation, promote long-term retention and permit executives to accumulate equity ownership in the Company. | Variable | | Other Perquisites | Retain talent by providing financial protection and security. | Fixed |

  2. Performance metrics

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

  3. PROPOSAL 1 – ELECTION OF DIRECTORS

    PROPOSAL 1 – ELECTION OF DIRECTORS This year our Board of Directors has nominated Peter Gyenes, Richard Jones, Christopher Lafond, Dianne Ledingham, Sharon Rowlands, Alan Trefler, and Larry Weber for election to the Board of Directors. The persons named in the proxy card as proxies will vote to elect each of the nominees, unless you vote against the election of one or more nominees or abstain from voting on the election of one or more nominees, in each case, by affirmatively marking the proxy card to that effect (or through Internet or telephonic voting). Each of our nominees has indicated their willingness to serve, if elected. However, if any of the nominees shall become unable or unwilling to serve, the proxies, unless authority has been withheld as to such nominee, may be voted for the election of a substitute nominee designated by our Board of Directors, or the Board of Directors may reduce the number of directors. Proxies may not be voted for more than seven persons. There are no family relationships among any of our executive officers or directors, with the exception of Alan Trefler, our Chairman and Chief Executive Officer, whose brother, Leon Trefler, is our Chief of Clients and Markets. Unless otherwise noted, we refer to Alan Trefler as Mr. Trefler and Leon Trefler as Leon Trefler in this proxy statement. The Board of Directors recommends that you vote FOR the election of the nominees as directors, and proxies solicited by the Board of Directors will be voted in favor thereof unless a shareholder has indicated otherwise on the proxy.

  4. DIRECTOR QUALIFICATIONS

    DIRECTOR QUALIFICATIONS The following information is furnished with respect to each of our directors, as of April 1, 2024. The information presented details the characteristics, qualifications, attributes, and skills that led to the Board of Directors’ conclusion that each of our directors is qualified to serve on the Board of Directors, including significant professional experience and service on the boards of other companies. It includes information each director has given us about their age, all positions they hold with us, and their principal occupation and business experience during at least the past five years, including the names of other publicly-held companies of which they serve, or have served, as a director. Additionally, it is our view that each director exhibits integrity and high ethical standards, as well as sound business judgment and acumen, which are valued and expected characteristics for our directors. Information about the number of shares of common stock beneficially owned by each director, directly and indirectly, appears above under the heading “Security Ownership of Certain Beneficial Owners and Management.”

  5. Director Diversity Matrix

    Director Diversity Matrix The following Board Diversity Matrix presents information regarding our Board diversity in accordance with Nasdaq Rule 5606, as self-disclosed by our directors. We satisfy the current requirements under Nasdaq Rule 5605(f)(2) by having at least one director who self-identifies as female.

  6. Director Diversity Matrix

    | Board Diversity Matrix (As of April 1, 2024) | | | | Total Number of Directors: 7 | | | | | Female | Male | | Part I: Gender Identity | | | | Directors | 2 | 5 | | Part II: Demographic Background | | | | White | 2 | 5 |

  7. Director Diversity

    Director Diversity We aim to create and maintain a Board with a diversity of skills and attributes that is aligned with our current and anticipated strategic needs. We value diversity and believe that diversity among our directors’ personal and professional experiences, opinions, perspectives, and backgrounds is desirable. We seek to achieve diversity through our thoughtful selection of qualified candidates. Our candidates, as more fully described below, have experience in, among other areas: leadership, technology, international operations and growth, and sales and marketing.

  8. NOMINEES FOR ELECTION FOR A TERM OF ONE YEAR EXPIRING IN 2025

    NOMINEES FOR ELECTION FOR A TERM OF ONE YEAR EXPIRING IN 2025 •Peter Gyenes, 78, has been a member of our Board of Directors since March 2009. He has served as a member of our Audit Committee and of our Nominating and Corporate Governance Committee since July 2009. Mr. Gyenes has over four decades of experience in global technical, sales, marketing, and general management positions within the software and computer systems industries. Mr. Gyenes is a Trustee Emeritus of the Massachusetts Technology Leadership Council. He previously served as Chairman and Chief Executive Officer of Ascential Software, as well as of its predecessor companies VMark Software, Ardent Software, and Informix, and led its growth into the data integration market leader from 1996 until it was acquired by IBM in 2005. Mr. Gyenes also previously served as President and Chief Executive Officer of Racal InterLan, Inc., and in executive positions at Data General Corporation, Encore Computer Corporation, and Prime Computer, Inc. Earlier in his career, he held sales and technical positions at Xerox Data Systems and IBM. Mr. Gyenes previously served on the boards of RealPage, Inc. from January 2010 to April 2021; Sophos plc from May 2006 to March 2020; Information Builders, Inc. from November 2017 to December 2020; Carbonite, Inc. from April 2015 to February 2019; IntraLinks, Inc. from February 2008 to January 2017; Epicor from August 2011 to August 2016; EnerNOC Inc. from April 2013 to October 2015; Appfluent Technologies from August 2005 to April 2015; and Cimpress NV from February 2009 to November 2015. He is a graduate of Columbia University where he received his B.A. in mathematics and his M.B.A. Mr. Gyenes was awarded the 2005 New England Region Ernst & Young Entrepreneur of the Year award in Software. We believe Mr. Gyenes’ qualifications to serve on our Board of Directors include his decades of leadership roles for global technology companies, including his positions as a chief executive officer and director of publicly traded companies, as well as his proven ability to bridge strategy with operational excellence and his experience with mergers and acquisitions. •Richard Jones, 72, joined Pegasystems in October 1999, serving as President and Chief Operating Officer until September 2002. Mr. Jones was a part-time employee of Pegasystems from July 2002 to July 2007. Mr. Jones was elected as a member of our Board of Directors in November 2000, and served as Vice Chairman from September 2002 to July 2007. He has served as a member of our Compensation Committee and of our Nominating and Corporate Governance Committee since July 2011. Mr. Jones has served on the Board of Directors of Resonantia, Inc. since September 2022; KaliVir Immunotherapeutics, Inc. (formerly Western Oncolytics Ltd.), a private company developing novel therapies for cancer since July 2014; and as Chairman of Jones Boys Ventures, a retailer, since June 1995. Mr. Jones is also currently an Honorary Trustee of the Episcopal School of Jacksonville in Jacksonville, Florida. From 1995 to 1997, Mr. Jones served as a Chief Asset Management Executive and member of the Operating Committee at Barnett Banks, Inc., which at the time was among the nation’s 25 largest banks. From 1991 to 1995, he served as Chief Executive Officer of Fleet Investment Services, a brokerage and wealth management organization. His prior experience also includes serving as Executive Vice President with Fidelity Investments, an international provider of financial services and investment resources, and as a principal with the consulting firm of Booz, Allen & Hamilton. Mr. Jones previously served on the boards of Buyers Access, LLC and Colo5, LLC. Mr. Jones holds an undergraduate degree from Duke University, with majors in both economics and management science. He also holds an M.B.A. degree from the Wharton School of the University of Pennsylvania. We believe Mr. Jones’ qualifications to serve on our Board of Directors include his two decades of executive management, his financial expertise and business acumen, and his experience gained while serving as Pegasystems’ President and Chief Operating Officer. •Christopher Lafond, 58, has been a member of our Board of Directors since April 2019. He has served as a member of our Audit Committee and of our Nominating and Corporate Governance Committee since June 2019. Since June 2020, he has also been elected each year as the Chair of our Audit Committee. Mr. Lafond currently serves as the Chief Executive Officer and member of the board of Insurity, Inc., a role he has held since August 2019. From November 2017 to August 2019, he served as Insurity’s Chief Financial Officer. From June 2015 to June 2017, Mr. Lafond served as the Executive Vice President and Chief Financial Officer of Intralinks Holdings, Inc. From 1995 to 2014, Mr. Lafond held a variety of roles at Gartner, Inc., including Executive Vice President and Chief Financial Officer from 2003 to 2014. Previously at Gartner, he served as Chief Financial Officer for Gartner’s North America and Latin America operations, Group Vice President and North American Controller, Director of Finance, Vice President of Finance and Assistant Controller. Mr. Lafond previously served on the board of Sirius Decisions Inc. from August 2017 to January 2019 and as a member of the Small Business Advisory Committee of the Financial Accounting Standards Board (“FASB”) from March 2019 to December 2023. Mr. Lafond holds a B.A. in Economics from the University of Connecticut and an M.B.A. degree from the Columbia University Graduate School of Business. Mr. Lafond’s qualifications to serve on our Board of Directors include his extensive leadership experience and financial expertise, including positions such as Chief Financial Officer and member of the board of Insurity, Inc., and Chief Financial Officer for several companies. •Dianne Ledingham, 61, has been a member of our Board of Directors since September 2016. She has served as a member of our Compensation Committee and of our Nominating and Corporate Governance Committee since January 2017. With her 30-plus year tenure at Bain, Ms. Ledingham is one of the firm’s most prominent leaders in commercial and sales excellence with experience across a range of industries and particular depth in technology and software. Ms. Ledingham is currently an Advisory Partner in Bain & Company’s Boston office, a leader in Bain’s Customer Strategy & Marketing practice, and the firm’s Telecom, Media and Technology practice. Since September 2022 she has served on the Board of Directors of Edgio, a technology company optimizing content delivery. Additionally, since 2009, Ms. Ledingham has served on the board of City Year Boston, including as the former Chair from 2013 to 2017, and since February 2014 as Treasurer on the board of Ventures for Hope. Previously, Ms. Ledingham has served on each of Bain’s governance committees including serving on Bain’s Board of Directors, Bain’s Global Compensation and Promotion Committee, including as elected Chair, and Bain’s Global Nominating Committee, as elected Chair. Ms. Ledingham holds a degree in electrical engineering with honors from Brown University and an M.B.A. degree with distinction from Harvard Business School. We believe Ms. Ledingham’s qualifications to serve on our Board of Directors include her significant business and marketing experience, including her experience as the founding global leader for Sales and Channel Effectiveness within Bain’s Customer Strategy and Marketing practice.

  9. NOMINEES FOR ELECTION FOR A TERM OF ONE YEAR EXPIRING IN 2025

    •Sharon Rowlands, 65, has been a member of our Board of Directors since April 2016. She has served as a member of our Nominating and Corporate Governance Committee and as the Chair of our Compensation Committee since January 2017. Ms. Rowlands has more than 20 years of experience serving small to enterprise level businesses in leadership roles. Ms. Rowlands currently serves as Chief Executive Officer of Newfold Digital, Inc. (formerly Web.com), a marketing solutions company, a role she has held since January 2019. From 2019 to 2021 she also served as the President of Newfold Digital, Inc. Since February 2021, Ms. Rowlands has served on the board of Constant Contact, a digital email and marketing platform. Since March 2020, Ms. Rowlands has served as an advisor on the board of Sonihull, a company that provides ultrasonic anti-fouling solutions. Additionally, since January 2019 she has served as a director for Everbridge, a public company that develops critical event management software, where since February 2019 she has also served as the chair of the compensation committee of the board of directors. From 2017 to 2019, she served as President of USA Today Network Marketing Solutions at Gannett Co. From 2014 to 2019, Ms. Rowlands served as the Chief Executive Officer of ReachLocal, Inc., an Internet-based advertising and marketing company which specialized in search engine marketing, marketing analytics, and display advertising. From 2011 to 2013, she was the Chief Executive Officer and member of the board of Altegrity, Inc., which provides security and risk management solutions to government and commercial clients. From 2008 to 2011, Ms. Rowlands was the Chief Executive Officer of Penton Media, Inc., a business-to-business information provider producing more than 110 magazines and associated websites, and about 60 industry events. From 1997 to 2008, Ms. Rowlands held a variety of roles, including Chief Executive Officer from 2005 to 2008, at Thomson Financial Inc., a provider of market and securities data and other financial services for brokerages, investment bankers, traders, and other investment professionals. Ms. Rowlands previously served on the boards of The Glimpse Group from 2017 to 2023; the Local Search Association from 2015 to 2018; ReachLocal, Inc. from 2014 to 2016; Constant Contact, Inc. from 2010 to 2014; and Automatic Data Processing, Inc. from 2008 to 2011. Ms. Rowlands holds a B.A. in History from the University of Newcastle, Newcastle-Upon-Tyne and a Postgraduate Certificate in Education from Goldsmiths, University of London. We believe Ms. Rowlands’ qualifications to serve on our Board of Directors include her extensive leadership experience, including positions as Chief Executive Officer and as a director for several public and private companies. •Alan Trefler, 68, a founder of Pegasystems, has served as Chief Executive Officer and Chairman of the Board of Directors since Pegasystems was organized in 1983. Prior to 1983, he managed an electronic funds transfer product for TMI Systems Corporation, a software and services company. Mr. Trefler holds a B.A. degree in economics and computer science from Dartmouth College. We believe Mr. Trefler’s qualifications to serve on our Board of Directors include his extensive experience in the software industry, including as our founder, Chief Executive Officer, and Chairman of our Board of Directors since our inception in 1983. •Larry Weber, 68, has been a member of our Board of Directors since August 2012. He has served as a member of our Compensation Committee and of our Nominating and Corporate Governance Committee since May 2013, and as a member of our Audit Committee since June 2021. Since January 2015, he has also served as the Chair of our Nominating and Corporate Governance Committee. Mr. Weber has served as the Chief Executive Officer and Chairman of the Board of Racepoint Global, Inc., a digital marketing services ecosystem of marketing service companies organized to help chief marketing officers in their role as builders of communities and content aggregators, since he founded the company in September 2004. In 2001, Mr. Weber founded Weber Shandwick, one of the largest public relations agencies in the world. Mr. Weber previously served on the board as well as the Nominating and Corporate Governance Committee of RMG Networks Holding Corporation, a digital signage provider for most of the Fortune 100 companies from 2017 to 2018, and on the board of Avectra, a provider of web-based association management software (AMS) and social CRM software from 2011 to 2013. Mr. Weber is also a co-Founder and Chairman of the Board of the Massachusetts Innovation & Technology Exchange (MITX), one of the largest interactive advocacy organizations in the world. Mr. Weber has authored four books: Marketing to the Social Web: How Digital Customer Communities Build Your Business; Everywhere: Comprehensive Digital Business Strategy for the Social Media Era; Sticks and Stones: How Digital Business Reputations are Built Over Time and Lost in a Click; and The Provocateur: How a New Generation of Leaders are Building Communities, Not Just Companies. Mr. Weber holds a B.A. in English from Denison University, Ohio and a M.F.A. in Writing and Literature from Antioch College, Oxford. We believe Mr. Weber’s qualifications to serve on our Board of Directors include his extensive experience in the global marketing and public relations industry, including positions as founder and Chairman of the Board for Racepoint Global, Inc., and as a director for several companies.

  10. DIRECTOR COMPENSATION

    DIRECTOR COMPENSATION Non-employee directors are paid an annual cash retainer of $50,000 and receive an annual equity grant valued at $200,000, (the “Annual Equity Grant”). The Annual Equity Grant is granted in the form of fifty percent common stock and fifty percent stock options, which are both fully vested when granted. Additionally, we pay an annual cash retainer to non-employee directors serving on committees: $15,000 to each Audit Committee member; $27,000 to the Audit Committee Chair; $10,000 to each Compensation Committee member; $20,000 to the Compensation Committee Chair; and $7,500 to the Chair of the Nominating and Governance Committee. Directors do not receive compensation for service as non-Chair members of the Nominating and Corporate Governance Committee. The annual cash retainer and committee retainer payments are payable in full on the date of grant, with such retainers to cover the period from each annual meeting of shareholders to the following year’s annual meeting. In addition to the above, we also offer to reimburse non-employee directors for expenses incurred in attending Board, committee, or other Company meetings. Alan Trefler is our only director who is also an employee. He receives no compensation for his service as a director.

  11. Non-Employee Director Compensation

    Non-Employee Director Compensation The following table provides the total compensation earned by each non-employee director in 2023:

  12. Non-Employee Director Compensation

    | | Fees Earned or Paid in Cash | Stock Awards (1) | Total | | Peter Gyenes | $65,000(2) | $200,000 | $265,000 | | Richard Jones | $60,000(3) | $200,000 | $260,000 | | Christopher Lafond | $77,000(4) | $200,000 | $277,000 | | Dianne Ledingham | $60,000(3) | $200,000 | $260,000 | | Sharon Rowlands | $70,000(5) | $200,000 | $270,000 | | Larry Weber | $82,500(6) | $200,000 | $282,500 |

  13. Non-Employee Director Compensation

    (1) These amounts reflect the dollar amount of the aggregate grant date fair value of awards granted in 2023, in accordance with Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) Topic 718. (2) Consists of Board retainer fees of $50,000 and committee retainer fees of $15,000. (3) Consists of Board retainer fees of $50,000 and committee retainer fees of $10,000. (4) Consists of Board retainer fees of $50,000 and committee retainer fees of $27,000.

  14. EXECUTIVE SUMMARY

    EXECUTIVE SUMMARY This “Compensation Discussion and Analysis” section describes the material elements of our compensation programs for our named executive officers, comprised of our principal executive officer, our principal financial officer, and the three executive officers who were our next most highly compensated executive officers during 2023. •Alan Trefler, our Chairman of the Board of Directors and Chief Executive Officer (principal executive officer); •Kenneth Stillwell, our Chief Operating Officer and Chief Financial Officer (principal financial officer); •Kerim Akgonul, our Chief Product Officer; •John Higgins, our Chief of Client & Partner Success; and •Leon Trefler, our Chief of Clients and Markets. This section also provides an overview of our executive compensation philosophy and analyzes how and why the Compensation Committee of our Board of Directors (the “Compensation Committee”) arrives at specific compensation decisions and policies. Our executive compensation is designed to reward performance by our executives and to align the interests of our executives with our shareholders. For 2023, our executive compensation program included the following elements of fixed and variable compensation: •base salary; •annual bonus tied to the achievement of corporate goals under our Corporate Incentive Compensation Plan (“CICP”); •additional cash incentives tied to the achievement of individual, business unit, and/or corporate goals by our executive officers, the attainment of which supports our achievement of our corporate goals; •equity awards comprised of RSUs that vest over time and stock options that vest based on performance criteria; and •other perquisites. The Board of Directors and the Compensation Committee believe that our performance-based executive compensation program effectively correlates pay with performance, and, in doing so, aligns the interests of our shareholders and executives. The program ties significant variable compensation, such as annual bonus opportunities, as well as equity awards, with our achievement of our corporate goals. By linking executive compensation with corporate performance, our executive compensation program promotes shareholder value and our continued growth and success.

  15. The Compensation Committee

    The Compensation Committee The Compensation Committee oversees all the compensation programs that we offer to our executive officers. In 2023, the Compensation Committee’s schedule of meetings, as well as the agenda items for those meetings, was established by our Chief People Officer, Kate Parente. Ms. Parente received input from the Chair of the Compensation Committee, Sharon Rowlands, and our Chief Executive Officer, Alan Trefler. During 2023, the Compensation Committee met seven times. At those meetings, the Compensation Committee addressed the following matters, among others: discussion and review of the compensation paid to our executive officers, including review and approval of the 2023 base salaries, target bonuses and CICP for executive officers, in addition to 2023 equity awards granted to our executive officers; review and approval of its charter; analysis and approval of the bonus payments under the 2022 CICP; review and approval of the 2023 CICP, including approval of the 2023 CICP RSU grants; review and approval of base salary increase budgets for our employees; approval of all grants of stock options and RSUs to our employees, including our executive officers; review of the Company’s 401(k) plan; review of the Company’s ESPP; and undertook an annual performance review of the CEO as per its Charter. Ms. Rowlands has served as the Chair of the Compensation Committee since January 2017. To facilitate the Compensation Committee’s review of each of the elements of the compensation paid to the executive officers, and to assist with the Compensation Committee’s determination of compensation for 2023, management provided the Compensation Committee with “tally sheets.” These tally sheets detailed each executive officer’s total compensation in 2023, including the cash value of each element of that total compensation, including salary, bonus, additional incentives, equity awards, our 401(k) plan matching contribution, and Company-paid health, dental, and other insurance premiums. The Compensation Committee also considered more detailed information regarding the equity components of executive compensation, including the total value of outstanding “in-the-money” vested stock options, unvested stock options, RSUs, and the retention value of such awards. The Compensation Committee considers the data provided on the tally sheets and the organizational summaries, along with benchmarking information for the role of each executive officer, as further detailed in the “Objectives of Compensation Programs – Benchmarking” section below, when setting executive compensation for the year. The Compensation Committee uses this information to ensure that the total amount of compensation paid to the executive officers is consistent with our total compensation philosophy, rather than focusing only on the base salaries and bonuses of the executive officers.

  16. Benchmarking

    Benchmarking In making compensation decisions, management and the Compensation Committee compare each element of total cash compensation against a peer group of business-to-business software companies that the Compensation Committee believes compete with us for executive talent and have similar present and/or projected revenue. These benchmarking companies are listed below. In general, with the exception of our Chief Executive Officer, due to his status as a significant shareholder, the Compensation Committee targets total cash compensation, consisting of base salary and bonuses (“Total Cash Compensation”) to our executive officers that is within the range of the 50th to 75th percentile of the Total Cash Compensation paid to the executive officers of the benchmark companies. In 2023, the target Total Cash Compensation of our named executive officers generally fell within that range, with the exception of our Chief Executive Officer who is compensated below the 50th percentile due to his status as a significant shareholder. We believe that it is helpful to utilize data from a wide array of comparable companies in order to determine the best pay scales to apply to our executive compensation program. We primarily considered data from Radford, which we believe to have the most relevant and comprehensive data for this purpose. Generally, the Radford surveys included data and breakout information from software companies based upon annual revenue. The surveys analyze compensation data from several hundred technology companies and provide specific data based on each executive officer’s role. Our primary benchmarks are from software companies with annual revenue ranging from $1 billion to $1.5 billion, which we believe is the most relevant benchmark data for our executive compensation program, as we believe this accurately represents the companies from where we attract talent. In addition to our standard benchmarking industry survey mentioned above, we review compensation practices of a select group of similar companies, which are benchmarked through the use of proxy statements, because one or more of the following applies: (a) they are of comparable size and revenue; (b) they are in a comparable industry; (c) they are within our geographic market; or (d) they compete with us for talent. The list of companies below was used as our compensation benchmarking peer group for reviewing and evaluating our 2023 compensation program for our executive officers where there was data for comparable positions:

  17. Benchmarking

    | Guidewire Software | | PTC | | Splunk | | Fair Isaac Corporation | | Verint Systems |

  18. ELEMENTS OF COMPENSATION

    ELEMENTS OF COMPENSATION Elements of compensation for our executive officers consist of the following: base salary; annual bonus tied to the achievement of corporate goals; additional cash incentives opportunities tied to the achievement of specific individual, business unit and/or corporate goals by our executive officers, the attainment of which supports our achievement of our corporate goals; equity awards comprised of both stock options and RSUs that vest over time and stock options that vest based on performance criteria; and other perquisites such as health, disability and life insurance, and a match by Pegasystems of 401(k) defined contribution plan contributions. Further analysis and discussion of each element are described in the chart below and the discussion that follows.

  19. ELEMENTS OF COMPENSATION

    | | Objective | Fixed/Variable | | Base Salary | Attract and retain highly qualified leaders with market-competitive compensation structure. | Fixed | | Bonus – CICP | Link pay with our performance. Reward achievement of our financial and strategic goals. | Variable | | Additional Cash Incentives | Link pay with individual, business unit and/or corporate performance. Reward achievement of specific goals. | Variable | | Equity Awards (Stock Options, Performance-Based Stock Options, and RSUs) | Link pay with our long-term performance. Reward stock price appreciation, promote long-term retention and permit executives to accumulate equity ownership. | Variable | | Other Perquisites | Retain talent by providing financial protection and security. | Fixed |

  20. Bonus – CICP

    Bonus – CICP Annual cash bonuses are intended to reward executive officers for the achievement of our financial and strategic goals. The mechanism that we use to determine whether, and to what extent, annual cash bonuses are paid to our executive officers is the CICP for executive officers, or the Executive Incentive Plan, that is approved by the Compensation Committee each year at a regularly scheduled meeting generally occurring in the first quarter of the year. For purposes of the Executive Incentive Plan, the performance goals are divided into two categories. The first category, in the aggregate weighted at 75% of total achievement, is comprised of the corporate financial goals, which in 2023 were related to progress against our Rule of 40 targets described as the sum of ACV growth and free cash flow margin, with full achievement at 29% or greater. The second category is comprised of the strategic initiatives as approved by the Board of Directors as part of our annual strategic planning, with the strategic initiatives in the aggregate weighted at 25% of total achievement. Together, these two categories make up a single performance target under the Executive Incentive Plan, or the Corporate Performance Target. The percentage achievement of the Corporate Performance Target, or the Funding Percentage, determines the extent to which the Executive Incentive Plan is funded. The Executive Incentive Plan is funded with an amount equal to the aggregate target cash bonus amount for our named executive officers multiplied by the Funding Percentage, except that if the Funding Percentage is less than 70% (“threshold funding”) then the Executive Incentive Plan is not funded at all. In 2023, if the Corporate Performance Target had been exceeded, the percentage achievement of the Corporate Performance Target for purposes of funding the Executive Incentive Plan would have been deemed equal to 100% with an opportunity for an enhanced incentive as determined by the Board of Directors in its discretion. Once the Funding Percentage is determined, the actual bonus payment for each executive officer is subject to adjustment to reflect each individual’s level of contribution to our strategic goals, as determined by the Compensation Committee. Our strategic goals are established each year by our senior management and describe our key operational initiatives related to strategy and organizational effectiveness. The Chief Executive Officer assesses each executive officer’s contribution to the overall operational plan and to such executive officer’s specific functional unit. The Compensation Committee determines and approves executive officer compensation and has the discretion to modify individual payout amounts to reflect an individual’s performance. The target bonus levels established for our executive officers represent management’s and the Compensation Committee’s assessment of a very high level of achievement of specific goals. Where target bonus levels relate to financial goals that are also the subject of our published financial guidance, these goals are generally established at levels that represent over-performance in relation to the guidance that we publish at the beginning of each calendar year. For 2023, the Funding Percentage was 100%, which was consistent with our level of achievement of the Corporate Performance Target for the year.

  21. Additional Cash Incentives

    Additional Cash Incentives Additional cash incentives have historically been available to several executives other than our Chief Executive Officer based on the achievement of specific individual, business unit, and/or corporate performance goals established by our Chief Executive Officer. In 2023, Mr. Higgins and Leon Trefler were eligible for sales incentive compensation related to the achievement of sales objectives set by our Chief Executive Officer.

  22. Equity Awards

    Equity Awards The Compensation Committee utilizes time based stock options and RSUs as well as performance-based stock options as long-term, non-cash incentives and as a means of aligning the long-term interests of executives and shareholders. In the case of stock options and performance options, this is because they do not become valuable to the holder unless the price of our stock increases above the fair market value of our stock on the date of grant. In the case of RSUs, an RSU delivers more value than a stock option to the holder if the price of our stock remains constant, but the value to the holder increases if our stock price increases over time. Stock options deliver to the recipient a right to receive an option to purchase a specified number of shares of our common stock upon vesting, while RSUs deliver to the recipient a right to receive a specified number of shares of our common stock upon vesting. Unlike stock options, which require payment of the exercise price to purchase shares, RSUs do not require an additional payment by the executive officer at the time shares are issued. Therefore, RSUs provide value to our executives even if our stock price remains constant. Additionally, RSUs, while more expensive than options to the Company by approximately a two-and-a half-to-one ratio, can be more efficient based upon the benefit to the executive in comparison to the cost to the Company. RSU grants do not result in the same amount of dilution upon issuance to our investors’ ownership as is caused by stock options, because the same incentive associated with options can be provided to the executive with RSUs, but with fewer shares ultimately issued. In determining the value of equity grants to recipients, we value our RSUs at the fair value of our common stock on the grant date, which is the closing price of our common stock on that date, less the present value of expected dividends, as the executive officers or other employees are not entitled to dividends during the requisite vesting period. We value our stock options using a Black-Scholes option valuation model. Equity awards for employees typically vest over a four-year period. Performance-Based Stock Options The Compensation Committee granted our named executive officers and certain other employees performance-based stock options in 2023 (2023 PSOs). These 2023 PSOs are eligible to vest over two years and will vest only after the performance threshold is achieved and only to the extent the performance target is achieved. Up to 100% of the 2023 PSOs can be earned, up to 25% on the first anniversary of the grant date and up to 75% on the second anniversary, however, any 2023 PSOs not earned for the applicable year are forfeited. The performance measures for the 2023 PSOs were established on the grant date for all performance periods. This grant was established to further align our named executive officers with achieving our financial objectives. The achievement scale is based upon progress toward Rule of 40 targets (as defined in “2023 Financial Highlights – Cash Flow”) for the applicable year, with the achievement scale shown below for the 25% eligible to vest based on 2023 performance: Executive Incentive Plan Executive officers, as with other employees, may elect to receive 50% of their target incentive compensation under the Executive Incentive Plan in the form of RSUs instead of cash. As an added incentive, the number of RSUs receivable by executive officers and other employees is determined by dividing 50% of their target incentive compensation by an amount equal to 85% of the closing price of our common stock on the date of grant. If elected pursuant to the Executive Incentive Plan, the equity grant occurs during the open trading period following the public release of our financial results for the prior year and vests 100% on the first anniversary of the date of grant. This typically coincides with the cash payout date for all participants. Vesting is conditioned upon threshold funding of the Executive Incentive Plan, and status as an active employee in good standing with satisfactory performance as of the vesting date. If these conditions are not met, the equity grant does not vest and expires.

  23. Equity Award Granting Practices

    Equity Award Granting Practices Executive officers, and most employees, have typically received an initial equity grant upon joining Pegasystems. Grants to newly hired employees are determined based upon a target financial value associated with their job type, rather than a predetermined number of options or RSUs based on an individual’s level of job responsibilities, which we believe improves our ability to more effectively communicate the value of equity grants to our employees. For all employee positions which are at the director level or above, 50% of the target value is typically granted in stock options and 50% is granted in RSUs. For those employees who hold positions below the director level, equity grants are typically awarded 100% in RSUs. The Compensation Committee also makes periodic grants of stock options and RSUs to the executive officers, typically on an annual basis. For periodic grants, the number of stock options and RSUs granted to an executive officer is determined by taking into consideration factors such as: (i) equity awards previously granted to the executive; (ii) the executive’s remaining equity awards exercisable and the value of those equity awards; (iii) the performance of the executive; (iv) the anticipated value that an executive will add to Pegasystems in the future; (v) the target value, as discussed above; (vi) the retentive value of equity awards; and (vii) competitive external market data. We expect to continue to grant periodic equity awards in the future.

  24. EXECUTIVE INCENTIVE PLAN

    EXECUTIVE INCENTIVE PLAN In February 2023, the Compensation Committee adopted the 2023 Executive Incentive Plan which covered the period from January 1 through December 31, 2023, or the Incentive Period. The 2023 Executive Incentive Plan was designed to establish a pool of funds to be available for making bonus payments to the executive officers if we achieved certain performance goals during the Incentive Period. The aggregate 2023 target cash bonus amount for our named executive officers was $1,336,000 and £185,500. For our Chief Executive Officer, the target bonus represented 100% of his earned base salary; for our Chief Operating Officer and Chief Financial Officer, the target bonus represented 70% of his earned base salary; for our Chief of Clients and Markets and our Chief of Client & Partner Success, the target bonus represented 50% of each of their earned base salary; for our Chief Product Officer, the target bonus represented 60% of his earned base salary. Based on our performance, the Board of Directors determined that the 2023 Funding Percentage would be 100%. The Compensation Committee has approved the 2024 Executive Incentive Plan. Under the 2024 Executive Incentive Plan, 75% of the plan funding will be based on progress against our Rule of 40 targets described as the sum of ACV growth and free cash flow margin and 25% based on the attainment of strategic initiatives. Historically, the Compensation Committee has also approved a similar plan for our employees, with the exception of certain of our sales employees who are enrolled in a sales incentive compensation plan.

  25. Base Salary and Bonus

    Base Salary and Bonus In 2023, the Chief Executive Officer’s salary remained at $495,000. Under the 2023 Executive Incentive Plan, the target bonus for the Chief Executive Officer was 100% of his earned base salary. In determining the Chief Executive Officer’s bonus for 2023, the Compensation Committee considered the factors described above and ultimately determined that he should be granted a bonus of $495,000 under the 2023 Executive Incentive Plan, representing a payment that is consistent with the 2023 Funding Percentage. Under the 2024 Executive Incentive Plan, the target bonus for the Chief Executive Officer will continue to be 100% of his earned base salary.

  26. Equity

    Equity In 2023, in recognition of the Chief Executive Officer’s leadership driving our continued growth and market position and low-to-market cash compensation, which falls below the 50th percentile of the market range, the Compensation Committee provided Mr. Trefler with an equity grant valued at $4,550,000, comprised of 100% performance-based stock options (see above “Performance-Based Stock Options”), which falls between the 50th and 75th percentile of the market range. The Company achieved 100% of the performance metrics for 2023 and the full 25% of the 2023 PSO vested on the first anniversary of the grant date.

  27. Bonus – CICP

    Bonus – CICP Under the 2023 Executive Incentive Plan, our Chief Operating Officer’s and Chief Financial Officer’s target bonus represented 70% of his respective earned base salary; our Chief Product Officer’s target bonuses represented 60% of his earned base salary; our Chief of Client & Partner Success’s target bonus represented 50% of his earned base salary given his opportunity to earn additional cash incentives in the form of sales commissions as described further below; and for Leon Trefler, our Chief of Clients and Markets, the target bonus represented 50% of his earned base salary given his opportunity to earn additional cash incentives in the form of sales commissions as described further below. For 2023, the Compensation Committee approved bonuses for our named executive officers under the 2023 Executive Incentive Plan consistent with the 2023 Funding Percentage. In 2023, Mr. Stillwell, Mr. Akgonul, and Mr. Higgins, opted to receive 50% of their CICP payment in RSUs. Accordingly, for 2023, Mr. Stillwell, Mr. Akgonul, and Mr. Higgins, received cash bonuses of $185,500, $135,000, and £92,750 (or $118,093 based on the December 31, 2023 exchange rate), respectively. Under the 2024 Executive Incentive Plan, the target bonuses for our named executive officers were as follows: Mr. Stillwell’s target bonus will represent 80% of his earned base salary; for Mr. Akgonul the target bonus will represent 75% of his earned base salary; and for Leon Trefler and Mr. Higgins, the target bonuses will represent 50% of their earned base salary given their opportunity to earn additional cash incentives.

  28. Additional Cash Incentives

    Additional Cash Incentives Sales Commissions In 2023, Mr. Higgins and Leon Trefler had target sales commissions of £145,000 and $375,000, respectively, related to Global ACV Bookings. For 2023, Mr. Higgins’ and Leon Trefler’s actual sales commissions were £123,000 (or $157,000 based on the December 31, 2023 exchange rate) and $324,000, respectively. In 2024, Mr. Higgins and Leon Trefler will have target sales commissions of £180,000 and $410,000, respectively, related to Global ACV Bookings.

  29. Equity

    Equity In March 2023, the Compensation Committee approved a periodic equity grant for our named executive officers in the form of equal number of performance-based stock options to RSUs and additional performance-based stock option grants. The RSUs vest over a four-year period while all the options vest over two years subject to certain performance conditions (see above “Performance-Based Stock Options”). The Company achieved 100% of the performance metrics for 2023 and the full 25% of the 2023 PSO vested on the first anniversary of the grant date. Below is a table showing grant date fair value of equity awards made to our NEOs in 2023 and 2022.

  30. SEVERANCE, RETENTION, AND CHANGE IN CONTROL BENEFITS

    SEVERANCE, RETENTION, AND CHANGE IN CONTROL BENEFITS We have entered into employment offer letters with Messrs. Stillwell and Higgins containing provisions for additional compensation upon termination of employment under certain circumstances. The agreement with Mr. Stillwell provides for a severance payment equal to six months of then-current base salary in the event that his employment is terminated by us without cause. In Mr. Stillwell’s agreement, an additional month of severance will be paid for each year of service with a maximum of 12 months total severance. In addition, in the event of a sale of Pegasystems (as defined in our 2004 Long-Term Incentive Plan, as amended and restated, or the “2004 Long-Term Incentive Plan”) and termination of his employment, all unvested stock options and RSUs would be subject to immediate full acceleration of vesting. In Mr. Higgins’ agreement, in the event of a sale of Pegasystems (as defined in our 2004 Long-Term Incentive Plan, as amended and restated) and termination of Mr. Higgins’ employment, all unvested stock options and RSUs granted as part of his new hire grant would be subject to immediate full acceleration of vesting. The terms of these agreements are more fully described in the “Potential Payments upon Termination or Change in Control” section below. Our primary rationale for these payments is that we believe that it is standard in our industry to provide a reasonable severance payment to certain high ranking executive officers in the event that they are terminated without cause, and that the absence of such arrangements might jeopardize our chances of hiring and retaining such executives. We limit such post-termination compensation arrangements to situations in which such executive officers are actually terminated, rather than those in which there is a mere change of control. While Mr. Stillwell’s offer letter, which was previously filed with the SEC, does not specifically define what constitutes a termination “without cause,” in this context, we believe that the term “cause” would be construed consistently with Massachusetts case law, which generally defines it to mean, in this context, that we had a reasonable good faith basis for dissatisfaction with the employee, due to lack of capacity or diligence, failure to conform to usual standards of conduct, or other culpable or inappropriate behavior, or grounds for discharge reasonably related, in our good faith judgment, to the needs of the business. There are, or were, no other conditions to the payment of the severance amount. Under our 2004 Long-Term Incentive Plan, in the event of the sale of Pegasystems, the Board of Directors, acting through a majority of directors who are determined to be “independent directors” under the applicable Nasdaq rules, may, in its discretion, provide that all outstanding RSUs, unvested stock options or other stock-based awards granted under the plan shall be assumed or an equivalent option, right, unit, or restricted stock be substituted by the successor entity; accelerated in full prior to the effective date of the sale of Pegasystems; or cancelled as of the effective date of the sale of Pegasystems; or the Board of Directors may apply any combination of the foregoing.

  31. POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL

    POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL As discussed above, under the terms of his employment offer letter, if Mr. Stillwell is terminated without cause, he would receive a severance payment equal to six months of his then-current base salary. In addition, Mr. Stillwell would receive an additional month of severance for each year of service with a maximum of 12 months total severance. If Mr. Stillwell had been terminated without cause on December 31, 2023, he would have received a severance payment of $574,167. In addition, in the event of a sale of Pegasystems and the termination of Mr. Stillwell’s employment, all his unvested stock options and RSUs would be subject to immediate full acceleration of vesting. If, on December 31, 2023, Mr. Stillwell had been terminated following a sale of Pegasystems, the value of his accelerated RSUs would have been $3,458,213, and the value of his accelerated stock options would have been $2,456,590, excluding out-of-the-money options. Similarly, in the event of a sale of Pegasystems and the termination of Mr. Higgins’ employment, all his unvested stock options and RSUs from his new hire grant would be subject to immediate full acceleration of vesting. If, on December 31, 2023, Mr. Higgins had been terminated following a sale of Pegasystems, the value of his accelerated RSUs would have been $391,515, and the value of his accelerated stock options would have been $0, as all of the options subject to acceleration were out-of-the-money. The value of accelerated unvested options as of December 31, 2023 is calculated by taking the difference between the closing price of our common stock on NASDAQ Global Select Market on the last trading day of the fiscal year ($48.86 on December 31, 2023) and the option exercise price and multiplying it by the number of accelerated options. For RSUs, the value represents the closing price of our common stock on the last trading day of the fiscal year multiplied by the number of accelerated units. Additionally, as noted above, under our 2004 Long-Term Incentive Plan, in the event of the sale of the Company, the Board of Directors may provide that all outstanding RSUs, unexercised stock options or other stock-based awards granted under the plan would accelerate in full prior to the effective date of the sale of the Company. The table entitled “Outstanding Equity Awards at Fiscal Year-End” lists all outstanding equity awards held by our named executive officers as of December 31, 2023.

  32. COMPENSATION PRACTICES RISK ASSESSMENT

    COMPENSATION PRACTICES RISK ASSESSMENT We have conducted a risk assessment of our compensation programs for executive officers and all other employees. Our Finance, Legal, People, Internal Audit, Sales, and Compliance functions reviewed our compensation programs, practices and policies, referred to as the Compensation Programs. Management reviewed and discussed the findings of this review with the Compensation Committee, and with our Disclosure Committee, including representatives from our Finance, Legal, Communications, Compliance, and People functions. Based upon this assessment, we have concluded that our Compensation Programs are balanced and do not, by design, motivate excessive risk taking by management and other employees. As part of our risk assessment, we review our Compensation Programs to ensure they are consistent with current market practices. In determining that the programs contained an appropriate mix of risk and reward in relation to our strategy and long-term goals without encouraging excessive risk taking by management and other employees, the following elements were considered: •In general, compensation consists of a balanced mix of fixed and variable compensation. The fixed component, base salary, provides a stable income stream to employees, including management and executives, while variable compensation, consisting of annual bonuses, and commissions for sales and certain services employees, provides compensation opportunities tied to our company performance and strategic initiatives; •Annual incentive payments, or bonuses, provide the potential for variable pay based upon the achievement of our annual financial and strategic business objectives. These objectives are set at the company level and are not based upon the results for any one individual, team, or division. Our Board of Directors reviews and approves the corporate funding percentage. Moreover, the Compensation Committee determines and approves executive officer compensation and has the discretion to modify individual payout amounts to reflect an individual’s performance; •The incentive plans for our sales teams align variable compensation with both short- and long-term goals. Commissions are payable on contract signing; however, our incentive plans permit us to recover the value of payments on sales commissions for client non-payment. Corporate controls require a risk-based approach for review and approval of customer contracts by Finance, Legal, and Sales management prior to execution. Our senior management also reviews and approves material nonstandard contract terms; and •Equity awards, which are granted to approximately 40% of employees on an annual basis, may consist of RSUs and/or stock options, and align employee equity compensation with our long-term success. Senior level employees typically receive equity compensation in both RSUs and stock options. Equity awards typically vest over four years and increase in value if our stock price increases over time. Additionally, in 2023 and 2024, our named executive officers and certain other employees received performance-based options that vest over 2-years subject to certain performance conditions, to further align their interests with achieving our financial objectives. To further mitigate against risk, our equity incentive plan allows for the cancellation and forfeiture, as well as the clawback, of equity awards, and shares obtained pursuant to equity awards, for employee misconduct; and provides that equity awards, and shares obtained pursuant to equity awards, are subject to cancellation, forfeiture, and clawback if we determine that is required by applicable law or company policy as amended from time to time.

  33. CEO PAY RATIO

    CEO PAY RATIO As required by the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S-K, we are providing the following information about the relationship of the annual total compensation of our employees and the annual total compensation of our Chief Executive Officer. For 2023, our last completed fiscal year: •The median of the annual total compensation of all employees (excluding the Chief Executive Officer) (the “median employee”) was $105,809; and •The annual total compensation of our Chief Executive Officer, as reported in the Summary Compensation Table included elsewhere in this proxy statement, was $5,549,906. Based on this information, for 2023 the ratio of the annual total compensation of our Chief Executive Officer to the median employee was approximately 52 to 1. To identify the median of the annual total compensation of all employees, we used the following methodology: •We selected December 1, 2023, which is within the last three months of 2023, as the date upon which we would identify the median employee. As of December 1, 2023, we had 5,452 employees worldwide. •In determining the employee population to be used to calculate the compensation of the median employee, we included employees in all countries. •We compared the annual base salary, target bonus, sales commissions, and additional cash incentive compensation for the employee population for the 2023 calendar year. This is referred to as On-Target Earnings. •Based on the On-Target Earnings of each employee, we identified a cohort, referred to as the Median Cohort, of approximately 547 employees consisting of the median employee and the employees 5% above and 5% below the median On-Target Earnings. •We examined the applicable payroll data of actual cash earnings for each employee in the Median Cohort, including base salary, bonus, sales commissions, additional cash incentive compensation and car allowance paid in calendar year 2023 and we identified the employee who earned the median actual cash earnings within the Median Cohort. That employee is our median employee. •A U.S. dollar exchange rate as of a date in December 2023 was applied to compensation reported in a foreign currency. We combined all elements of the median employee’s compensation for 2023 in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K, resulting in annual total compensation of $105,809. With respect to the annual total compensation of our Chief Executive Officer, we used the amount reported in the “Total” column of our “Summary Compensation Table” included in this proxy statement under the heading “Executive Compensation.” The pay ratio reported above is a reasonable estimate calculated in a manner consistent with SEC rules, based on our internal records and the methodology described above. The SEC rules for identifying the median compensated employee allow companies to adopt a variety of methodologies, to apply certain exclusions and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices. Accordingly, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies have different employee populations and compensation practices and may use different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.

  34. EQUITY COMPENSATION PLAN INFORMATION

    EQUITY COMPENSATION PLAN INFORMATION The following table provides certain information with respect to our equity compensation plans in effect as of December 31, 2023:

  35. EQUITY COMPENSATION PLAN INFORMATION

    | (in thousands, except per share amounts) | (a) Number of Shares of Common Stock to be Issued Upon Exercise of Outstanding Stock Options and Vesting of RSUs(3) (4) | (b) Weighted-average Exercise price per Share of Outstanding Stock Options(5) | (c) Number of Shares of Common Stock Remaining Available for Future Issuance (excluding those in column (a))(6) | | Equity compensation plans approved by shareholders(1) | 17,352 | $58.60 | 6,898 | | Equity compensation plans not approved by shareholders(2) | 3 | $— | — |

  36. EQUITY COMPENSATION PLAN INFORMATION

    (1) We currently maintain two equity compensation plans: the 2004 Long-Term Incentive Plan as amended and restated, the (“2004 Plan”) and the 2006 Employee Stock Purchase Plan as amended (“2006 ESPP”). In addition to the issuance of stock options, the 2004 Plan allows for the issuance of stock purchase rights and other stock-based awards, including RSUs. Our shareholders previously approved each of these plans and all amendments that were subject to shareholder approval. See “16. Stock-Based Compensation” in Item 8 of our Annual Report filed on Form 10-K for the year ended December 31, 2023 for additional information. (2) In connection with our acquisition of In the Chat Communications Inc. on May 10, 2019 and in reliance on the Regulation D exemption from registration requirements under the Securities Act, we granted an employee the right to obtain up to 14,000 shares of our common stock, which will be issued in five equal tranches contingent upon continued employment. No general solicitation or advertising to market the securities occurred. (3) The number of shares of common stock issued upon exercise of vested stock options and vesting of RSUs will be less than the 17.4 million shown above because equity grants to our executive officers subject to Section 16 of the Securities Exchange Act of 1934, as amended, use the “net settlement” feature for stock options and RSUs. This feature enables the Company to withhold shares to cover the cost to exercise stock options and, if applicable, to cover taxes due (in the case of stock options and RSUs) based on the fair value of the shares at the exercise date (in the case of stock options) or vesting date (in the case of RSUs), instead of selling all the shares on the open market to satisfy these obligations. The settlement of exercised stock options and vested RSUs on a net share basis for our executive officers subject to Section 16 of the Securities Exchange Act of 1934, as amended will result in fewer shares issued by the Company. (4) During 2023, the Company issued 1.2 million shares of common stock upon exercise of vested stock options and vesting of RSUs. (5) The weighted-average exercise price does not consider the shares issuable upon vesting of outstanding RSUs, which have no exercise price. (6) Includes approximately 1 million shares remaining available for issuance as of December 31, 2023 under the 2006 ESPP.

  37. SUMMARY COMPENSATION TABLE

    SUMMARY COMPENSATION TABLE The following table sets forth information required under applicable SEC rules about the compensation for 2023, 2022, and 2021 of our named executive officers:

  38. SUMMARY COMPENSATION TABLE

    | | Year | Salary | Bonus | Stock Awards(1) | Option Awards(2) | Non-Equity Incentive Plan Compensation(3) | All Other Compensation(4) | Total | | Alan Trefler Chairman and Chief Executive Officer | 2023 | $495,000 | $— | $— | $4,550,006(5) | $495,000 | $9,900 | $5,549,906 | | | 2022 | $495,000 | $— | $— | $6,499,058 | $445,500 | $9,150 | $7,448,708 | | | 2021 | $495,000 | $— | $3,541,415(6) | $3,250,033 | $222,750 | $8,700 | $7,517,898 | | Kenneth Stillwell Chief Operating Officer and Chief Financial Officer | 2023 | $530,000 | $— | $2,181,866(5)(6) | $1,539,691(5) | $185,500 | $9,900 | $4,446,957 | | | 2022 | $516,306 | $— | $2,197,143(6) | $6,663,138 | $174,577 | $9,150 | $9,560,314 | | | 2021 | $473,588 | $— | $1,689,509(6) | $1,500,003 | $156,492 | $8,700 | $3,828,292 | | Rifat Kerim Akgonul Chief Product Officer | 2023 | $450,000 | $— | $1,015,747(5)(6) | $908,114(5) | $135,000 | $9,900 | $2,518,761 | | | 2022 | $444,016 | $— | $1,150,976(6) | $3,177,303 | $124,357 | $9,150 | $4,905,802 | | | 2021 | $424,194 | $— | $746,650(6) | $600,032 | $118,773 | $8,700 | $1,898,349 | | John Gerard Higgins Chief of Client and Partner Success(7) | 2023 | $472,372 | $156,522(8) | $988,164(5)(6) | $1,002,264(5) | $118,093 | $— | $2,737,415 | | | 2022 | $441,153 | $167,186(8) | $985,400(6) | $3,136,672 | $113,032 | $— | $4,843,443 | | Leon Trefler Chief of Clients and Markets | 2023 | $400,000 | $324,198(8) | $999,621(5) | $1,059,451(5) | $200,000 | $9,900 | $2,993,170 | | | 2022 | $390,712 | $278,433(8) | $1,000,030 | $3,177,303 | $175,820 | $9,150 | $5,031,448 | | | 2021 | $365,000 | $265,188(8) | $500,090 | $500,014 | $164,250 | $8,700 | $1,803,242 |

  39. SUMMARY COMPENSATION TABLE

    (1) These amounts reflect the dollar amount of the aggregate grant date fair value of RSU awards granted in the years ended December 31, 2023, 2022, and 2021 in accordance with FASB ASC Topic 718. The calculation of the fair value of RSU awards is set forth in "16. Stock-Based Compensation" in Item 8 of our Annual Report filed on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 14, 2024. (2) These amounts reflect the dollar amount of the aggregate grant date fair value of stock option awards granted in years ended December 31, 2023, 2022, and 2021 in accordance with FASB ASC Topic 718. The assumptions used to calculate the value of option awards are set forth in “16. Stock-Based Compensation” in Item 8 of our Annual Report filed on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 14, 2024. (3) Represents cash bonuses earned under the CICP in the year shown and paid in the following year. (4) These amounts are comprised of our 401(k) match in 2023, 2022, and 2021. (5) Represents RSUs and performance-based stock options granted in March 2023 as part of the named executive officer’s annual compensation package. (6) These amounts include the named executive officer’s election to receive 50% of his target incentive compensation under the CICP in the year shown in the form of RSUs instead of cash. (7) Mr. Higgins became a named executive officer in 2022. Mr. Higgins’ salary, bonus, and non-equity incentive plan comp was converted from British Pounds to USD using the exchange rate as of December 31st of each applicable year. (8) Represents additional cash incentives for the achievement of operational metrics and sales commissions earned during the year shown.

  40. GRANTS OF PLAN-BASED AWARDS

    GRANTS OF PLAN-BASED AWARDS The following table sets forth certain information with respect to the plan-based awards granted during or for the fiscal year ended December 31, 2023 to each of the named executive officers:

  41. GRANTS OF PLAN-BASED AWARDS

    | | | Estimated Future Payouts Under | | | | | | All Other Stock Awards: Number of Shares of Stock or Units(2) | All Other Option Awards: Number of Securities Underlying Options(2) | Exercise or Base Price of Option Awards | Grant Date Fair Value of Stock and Option Awards(3) | | | | Non-Equity Incentive Plan Awards(1) | | | Equity Incentive Plan Awards | | | | | | | | | Grant Date | Threshold | Target | Maximum | Threshold | Target | Maximum | | | | | | Alan Trefler | | $346,500 | $495,000 | $—(5) | | | | | | | | | | 3/7/2023 | | | | $2,275,003 | $4,550,006 | $4,550,006 | | 241,636 | $47.27 | $4,550,006 | | Kenneth Stillwell | | $129,850(4) | $185,500(4) | $—(5) | | | | | | | | | | 3/7/2023 | | | | | $218,352 | | 4,631(4) | | | $218,352 | | | 3/7/2023 | | | | | $1,963,514 | | 41,768 | | | $1,963,514 | | | 3/7/2023 | | | | $393,246 | $786,491 | $786,491 | | 41,768 | $47.27 | $786,491 | | | 3/7/2023 | | | | $376,600 | $753,200 | $753,200 | | 40,000 | $47.27 | $753,200 | | Rifat Kerim Akgonul | | $94,500(4) | $135,000(4) | $—(5) | | | | | | | | | | 3/7/2023 | | | | | $158,896 | | 3,370(4) | | | $158,896 | | | 3/7/2023 | | | | | $856,851 | | 18,227 | | | $856,851 | | | 3/7/2023 | | | | $171,607 | $343,214 | $343,214 | | 18,227 | $47.27 | $343,214 | | | 3/7/2023 | | | | $282,450 | $564,900 | $564,900 | | 30,000 | $47.27 | $564,900 | | John Gerard Higgins (6) | | $82,665(4) | $118,093(4) | $—(5) | | | | | | | | | | 3/7/2023 | | | | | $131,313 | | 2,785(4) | | | $131,313 | | | 3/7/2023 | | | | | $856,851 | | 18,227 | | | $856,851 | | | 3/7/2023 | | | | $171,607 | $343,214 | $343,214 | | 18,227 | $47.27 | $343,214 | | | 3/7/2023 | | | | $329,525 | $659,050 | $659,050 | | 35,000 | $47.27 | $659,050 | | Leon Trefler | | $140,000 | $200,000 | $—(5) | | | | | | | | | | 3/7/2023 | | | | | $999,621 | | 21,264 | | | $999,621 | | | 3/7/2023 | | | | $200,201 | $400,401 | $400,401 | | 21,264 | $47.27 | $400,401 | | | 3/7/2023 | | | | $329,525 | $659,050 | $659,050 | | 35,000 | $47.27 | $659,050 |

  42. GRANTS OF PLAN-BASED AWARDS

    (1) All awards were made pursuant to our 2023 CICP. (2) All equity awards were made pursuant to our 2004 Long-Term Incentive Plan. (3) Reflects the dollar amount of the aggregate grant date fair value for the option and RSU awards granted in 2023, in accordance with FASB ASC Topic 718. (4) Reflects the named executive officer’s election to receive 50% of his target incentive compensation under the 2023 CICP in the form of RSUs instead of cash. The RSUs granted were determined by dividing 50% of the employee's annual Target Incentive Opportunity by 85% of the closing price of our stock on the date of grant, less the present value of expected dividends during the vesting period. The 15% discount to the closing price, which is used to calculate the number of RSUs granted, provides an additional incentive to employees to acquire our stock. (5) There is no maximum payout amount, as additional incentives can be earned for performance above targets, as determined by the Board of Directors in its discretion. (6) Mr. Higgins’ Non-Equity Incentive Plan Awards are converted from British Pounds to USD using the exchange rate as of December 31, 2023.

  43. OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

    OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END The following table sets forth certain information with respect to the value of outstanding equity awards at December 31, 2023, previously granted to the named executive officers. All equity awards were granted under our 2004 Long-Term Incentive Plan.

  44. OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

    | | Option Awards | | | | Stock Awards | | | | Number of Securities Underlying Unexercised Options | | Option Exercise Price | Option Expiration Date(1) | Number of Shares or Units of Stock That Have Not Vested(2) | Market Value of Shares or Units of Stock That Have Not Vested(3) | | | Exercisable | Unexercisable | | | | | | Alan Trefler | 126,264 | 6,645 | $64.35 | 3/6/2029 | | | | | 82,819 | 27,606 | $90.05 | 3/3/2030 | | | | | 46,985 | 38,443 | $130.45 | 3/2/2031 | | | | | 84,011 | 156,019 | $85.40 | 3/1/2032 | | | | | —(4) | 241,636(4) | $47.27 | 3/7/2033 | | | | | | | | | 1,951 | $95,326 | | | | | | | 6,965 | $340,310 | | | | | | | 11,239 | $549,138 | | Kenneth Stillwell | 938 | — | $44.30 | 3/2/2027 | | | | | 8,233 | — | $58.95 | 3/5/2028 | | | | | 13,158 | 1,462 | $64.35 | 3/6/2029 | | | | | 41,410 | 13,803 | $90.05 | 3/3/2030 | | | | | 21,685 | 17,743 | $130.45 | 3/2/2031 | | | | | 25,850 | 48,006 | $85.40 | 3/1/2032 | | | | | 55,000(5) | 55,000(5) | $52.47 | 6/5/2032 | | | | | 51,844(6) | 155,520(6) | $33.90 | 11/2/2032 | | | | | —(4) | 81,768(4) | $47.27 | 3/7/2033 | | | | | | | | | 429 | $20,961 | | | | | | | 3,483 | $170,179 | | | | | | | 5,187 | $253,437 | | | | | | | 15,280 | $746,581 | | | | | | | 41,768(7) | $2,040,784 | | | | | | | 4,631(8) | $226,271 | | Rifat Kerim Akgonul | 1,777 | — | $25.20 | 3/9/2026 | | | | | 15,534 | — | $44.30 | 3/2/2027 | | | | | 21,954 | — | $58.95 | 3/5/2028 | | | | | 21,465 | 1,130 | $64.35 | 3/6/2029 | | | | | 19,877 | 6,625 | $90.05 | 3/3/2030 | | | | | 8,675 | 7,097 | $130.45 | 3/2/2031 | | | | | 12,925 | 24,003 | $85.40 | 3/1/2032 | | | | | 25,000(5) | 25,000(5) | $52.47 | 6/5/2032 | | | | | 24,672(6) | 74,010(6) | $33.90 | 11/2/2032 | | | | | —(4) | 48,227(4) | $47.27 | 3/7/2033 | | | | | | | | | 332 | $16,222 | | | | | | | 1,672 | $81,694 | | | | | | | 2,075 | $101,385 | | | | | | | 7,640 | $373,290 | | | | | | | 18,227(7) | $890,571 | | | | | | | 3,370(8) | $164,658 |

  45. OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

    | | Option Awards | | | | Stock Awards | | | | Number of Securities Underlying Unexercised Options | | Option Exercise Price | Option Expiration Date(1) | Number of Shares or Units of Stock That Have Not Vested(2) | Market Value of Shares or Units of Stock That Have Not Vested(3) | | | Exercisable | Unexercisable | | | | | | John Gerard Higgins | 3,465 | 2,835 | $136.08 | 3/1/2031 | | | | | 17,500(9) | 14,310(9) | $136.08 | 3/1/2031 | | | | | 2,022(10) | 3,754(10) | $136.08 | 3/1/2031 | | | | | —(11) | 5,274(11) | $136.08 | 3/1/2031 | | | | | 11,309 | 21,003 | $85.40 | 3/1/2032 | | | | | 25,000(5) | 25,000(5) | $52.47 | 6/5/2032 | | | | | 26,192(6) | 78,576(6) | $33.90 | 11/2/2032 | | | | | —(4) | 53,227(4) | $47.27 | 3/7/2033 | | | | | | | | | 829 | $40,505 | | | | | | | 4,140(9) | $202,280 | | | | | | | 1,199(10) | $58,583 | | | | | | | 1,845(11) | $90,147 | | | | | | | 6,685 | $326,629 | | | | | | | 18,227(7) | $890,571 | | | | | | | 2,785(8) | $136,075 | | Leon Trefler | 24,553 | — | $20.05 | 3/7/2024 | | | | | 30,365 | — | $20.49 | 3/2/2025 | | | | | 35,295 | — | $25.20 | 3/9/2026 | | | | | 24,382 | — | $44.30 | 3/2/2027 | | | | | 23,327 | — | $58.95 | 3/5/2028 | | | | | 25,253 | 1,329 | $64.35 | 3/6/2029 | | | | | 19,877 | 6,625 | $90.05 | 3/3/2030 | | | | | 7,229 | 5,914 | $130.45 | 3/2/2031 | | | | | 12,925 | 24,003 | $85.40 | 3/1/2032 | | | | | 25,000(5) | 25,000(5) | $52.47 | 6/5/2032 | | | | | 24,672(6) | 74,010(6) | $33.90 | 11/2/2032 | | | | | —(4) | 56,264(4) | $47.27 | 3/7/2033 | | | | | | | | | 390 | $19,055 | | | | | | | 1,672 | $81,694 | | | | | | | 1,729 | $84,479 | | | | | | | 7,640 | $373,290 | | | | | | | 21,264(7) | $1,038,959 |

  46. OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

    (1) Unless otherwise noted, stock options vest on a five-year schedule, with 20% vesting after one year and the remaining 80% vesting in equal quarterly installments over the remaining four years. Options expire ten years from the grant date. (2) Unless otherwise noted, RSUs vest on a five-year schedule, with 20% vesting after one year and the remaining 80% vesting in equal quarterly installments over the remaining four years. (3) Market value is calculated using a share price of $48.86, the closing price of our common stock on the NASDAQ Global Select Market on December 31, 2023. (4) Includes awards which vest based on the achievement of certain performance targets over two years, with up to one quarter vesting after one year and up to the remaining three quarters eligible to vest after two years. (5) Includes awards which vest on a three-year schedule, with one third vesting after one year and the remaining two thirds vesting in equal quarterly installments over the remaining two years. (6) Includes awards which vest in equal quarterly installments over four years. (7) Includes awards which vest on a four-year schedule, with one quarter vesting after one year and the remaining three quarters vesting in equal quarterly installments over the remaining three years. (8) RSUs granted in connection with the named executive officer’s election to receive 50% of his target incentive compensation under the 2023 CICP in the form of RSUs instead of cash, which vests in full one year from the grant date. (9) Includes awards that vest in equal quarterly installments over five years. (10) Includes awards that vest on a six-year schedule, with 20% vesting on the second anniversary of the grant date and the remaining 80% vesting in equal quarterly installments over the remaining four years. (11) Includes awards that vest on a seven-year schedule, with 20% vesting on the third anniversary of the grant date and the remaining 80% vesting in equal quarterly installments over the remaining four years.

  47. OPTION EXERCISES AND STOCK VESTED TABLE

    OPTION EXERCISES AND STOCK VESTED TABLE The following table sets forth certain information with respect to stock option exercises and restricted stock unit vestings for each of the named executive officers during the fiscal year ended December 31, 2023:

  48. OPTION EXERCISES AND STOCK VESTED TABLE

    | | Option Awards | | Stock Awards | | | | Number of Shares Acquired on Exercise | Value Realized on Exercise(1) | Number of Shares Acquired on Vesting | Value Realized on Vesting(2) | | Alan Trefler | — | $— | 18,373 | $909,903 | | Kenneth Stillwell | — | $— | 17,775 | $859,020 | | Rifat Kerim Akgonul | — | $— | 9,811 | $473,064 | | John Gerard Higgins | — | $— | 7,747 | $371,885 | | Leon Trefler | — | $— | 8,144 | $396,040 |

  49. OPTION EXERCISES AND STOCK VESTED TABLE

    (1) This amount is equal to the difference between the fair market value of the shares acquired on the exercise date less the exercise price, multiplied by the number of options exercised. (2) This amount is the closing price per share of our common stock on the vesting date, multiplied by the number of shares vested.

  50. PAY VERSUS PERFORMANCE

    PAY VERSUS PERFORMANCE As described in greater detail in the “Compensation Discussion and Analysis” section, our executive compensation program reflects a variable pay-for-performance philosophy. The following table and related disclosures provide further “pay versus performance” disclosures with respect to our chief executive officer, also referred to as our principal executive officer (PEO), and our other named executive officers (NEOs), as contemplated by Item 402(v) of Regulation S-K.

  51. PAY VERSUS PERFORMANCE

    | | | | | | Value of Initial Fixed $100 Investment Based on: | | | | | Year | Summary Compensation Table Total to PEO(1) | Compensation Actually Paid to PEO(2) | Average Summary Compensation Table Total for Non-PEO NEOs(3) | Average Compensation Actually Paid to Non-PEO NEOs(2) | Company TSR(4) | Peer Group TSR(5) | Net Income (Loss)(6) | Annual Contract Value (ACV) Growth(7) | | (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) | | 2023 | $5,549,906 | $9,282,305 | $3,174,076 | $6,770,951 | $61.78 | $178.86 | $67,808,000 | 11% | | 2022 | $7,448,708 | $(8,421,292) | $6,085,252 | $926,336 | $43.19 | $112.05 | $(345,582,000) | 16% | | 2021 | $7,517,898 | $3,999,210 | $2,050,969 | $977,576 | $140.66 | $175.13 | $(63,040,000) | 21% | | 2020 | $5,903,647 | $17,617,005 | $3,670,931 | $8,544,796 | $167.49 | $151.90 | $(61,373,000) | 19% |

  52. PAY VERSUS PERFORMANCE

    (1) The dollar amounts in column (b) are the amounts of total compensation reported for Mr. Trefler (our Chief Executive Officer or PEO) for each corresponding year in the “Total” column of the Summary Compensation Table. Refer to “Executive Compensation – Summary Compensation Table.” (2) The dollar amounts reported in column (c) and (e), represent the amount of “compensation actually paid” (CAP) to Mr. Trefler and the average amount of CAP to the Non-PEO NEOs as a group, respectively, in the applicable year, as computed in accordance with Item 402(v) of Regulation S-K. The dollar amounts do not reflect the actual amount of compensation earned by or paid to the applicable persons during the applicable year. In accordance with Item 402(v) of Regulation S-K, the following adjustments were made to the compensation for Mr. Trefler, and the Non-PEO NEOs as a group, for each year to determine the “compensation actually paid”:

  53. PAY VERSUS PERFORMANCE

    | PEO | | | | | | Year | SCT Total | Reported Value of Equity Awards | Equity Award Adjustments | Compensation Actually Paid to PEO | | | | (a) | (b) | | | 2023 | $5,549,906 | $(4,550,006) | $8,282,405 | $9,282,305 | | 2022 | $7,448,708 | $(6,499,058) | $(9,370,942) | $(8,421,292) | | 2021 | $7,517,898 | $(6,791,448) | $3,272,760 | $3,999,210 | | 2020 | $5,903,647 | $(5,000,079) | $16,713,437 | $17,617,005 | | Average for Non-PEO NEOs | | | | | | Year | Average SCT Total | Average Reported Value of Equity Awards | Average Equity Award Adjustments | Average Compensation Actually Paid to Non-PEO NEOs | | | | (a) | (b) | | | 2023 | $3,174,076 | $(2,423,730) | $6,020,605 | $6,770,951 | | 2022 | $6,085,252 | $(5,371,991) | $213,075 | $926,336 | | 2021 | $2,050,969 | $(1,380,855) | $307,462 | $977,576 | | 2020 | $3,670,931 | $(2,836,839) | $7,710,704 | $8,544,796 |

  54. PAY VERSUS PERFORMANCE

    (a) Represents the grant date fair value of equity-based awards granted each year as reported in the “Stock Awards” and “Option Awards” column in the Summary Compensation Table for the applicable year. Because we do not maintain a pension in which the PEO or Non-PEO NEOs participate, no adjustments from the SCT total related to pension value are needed to calculate “compensation actually paid” in accordance with Item 402(v) of Regulation S-K. (b) The equity award adjustments for each applicable year include the addition (or subtraction, as applicable) of the following: (i) the year-end fair value of any equity awards granted in the applicable year that are outstanding and unvested as of the end of the year; (ii) the amount of change as of the end of the applicable year (from the end of the prior fiscal year) in fair value of any awards granted in prior years that are outstanding and unvested as of the end of the applicable year; (iii) for awards that are granted and vest in the same year, the fair value as of the vesting date; (iv) for awards granted in prior years that vest in the applicable year, the amount equal to the change as of the vesting date (from the end of the prior fiscal year) in fair value; (v) for awards granted in prior years that are determined to fail to meet the applicable vesting conditions during the applicable year, a deduction for the amount equal to the fair value at the end of the prior fiscal year; and (vi) the dollar value of any dividends or other earnings paid on awards in the applicable year prior to the vesting date that are not otherwise reflected in the fair value of such award or included in any other component of total compensation for the applicable year. In calculating the fair values of unvested equity awards at each year end and the fair value of equity awards vested in the year for each year presented, the assumptions and calculations used did not materially differ from those set forth in “16. Stock-Based Compensation” in Item 8 of our Annual Report filed on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 14, 2024, with the exception of the expected term assumptions for option awards that were out of the money as of each calculation date. The Company’s option awards have historically been granted at the money, thus the historical experience was not considered to be relevant to expectations for purposes of the above “compensation actually paid” calculations for option awards that were out of the money during each applicable year. For purposes of the above “compensation actually paid” calculations, the expected term for out of the money options was calculated based off the remaining time to vest plus one half of the remaining contractual life as of each calculation date. The amounts deducted or added in calculating the equity award adjustments are as follows:

  55. PAY VERSUS PERFORMANCE

    | PEO | 2020 | 2021 | 2022 | 2023 | | Plus: Fair Value for Equity Awards Granted in the Covered Year that are Unvested at End of Year | $9,849,868 | $5,970,863 | $1,670,442 | $4,227,862 | | Change in Fair Value of Outstanding Unvested Equity Awards from Prior Year | $5,212,530 | $(3,176,116) | $(8,254,132) | $1,630,247 | | Change in Fair Value of Equity Awards from Prior Years that Vested in the Covered Year | $1,651,039 | $478,013 | $(2,787,252) | $2,424,296 | | Total Adjustment | $16,713,437 | $3,272,760 | $(9,370,942) | $8,282,405 | | Average for Non-PEO NEOs | 2020 | 2021 | 2022 | 2023 | | Plus: Fair Value for Equity Awards Granted in the Covered Year that are Unvested at End of Year | $4,535,557 | $1,212,976 | $3,242,092 | $2,390,255 | | Change in Fair Value of Outstanding Unvested Equity Awards from Prior Year | $2,100,482 | $(1,003,521) | $(2,220,401) | $1,799,119 | | Plus: Fair Value as of Vesting Date for Equity Awards Granted and Vested in the Covered Year | $121,799 | $— | $— | $— | | Change in Fair Value of Equity Awards from Prior Years that Vested in the Covered Year | $952,866 | $98,007 | $(808,616) | $1,831,231 | | Total Adjustment | $7,710,704 | $307,462 | $213,075 | $6,020,605 |

  56. PAY VERSUS PERFORMANCE

    (3) The dollar amounts reported in column (d) represent the average of the amounts reported for the Company’s named executive officers (NEOs) as a group (excluding Mr. Trefler, who has served as our CEO in each of the covered years) in the “Total” column of the Summary Compensation Table in each applicable year. The names of each of the NEOs (excluding Mr. Trefler) included for purposes of calculating the average amounts in each applicable year are as follows: (i) for 2023 and 2022, Kenneth Stillwell, Rifat Kerim Akgonul, John Gerard Higgins, and Leon Trefler; (ii) for 2021, Kenneth Stillwell, Rifat Kerim Akgonul, Michael Pyle, Hayden Stafford, and Leon Trefler, and (iii) for 2020, Kenneth Stillwell, Douglas Kra, Hayden Stafford, and Leon Trefler. Refer to “Executive Compensation – Summary Compensation Table.” (4) Company TSR is calculated to show the cumulative shareholder return on our common stock during the covered period, including reinvestment of dividends. (5) Represents the weighted peer group TSR, weighted according to the respective companies’ stock market capitalization at the beginning of each period for which a return is indicated. The peer group used for this purpose is the following published industry index: The Standard & Poor’s North American Technology Sector – Software IndexTM. (6) The dollar amounts reported represent the amount of net income (loss) reflected in our audited financial statements for the applicable year. (7) Annual Contract Value (ACV) growth is the percentage increase in ACV on a constant currency basis compared to the prior year.

  57. Pay versus Performance Descriptive Disclosure

    Pay versus Performance Descriptive Disclosure We chose ACV Growth as our Company Selected Measure for evaluating Pay versus Performance because it is a key metric used in our Executive Incentive Plan and the 2023 PSOs. From 2020 to 2023, the year-over-year changes in Compensation Actually Paid (“CAP”) to Mr. Trefler, as well as CAP to our Non-PEO Named Executives, were directionally aligned with the changes in the Company’s cumulative total shareholder return (“TSR”) for the respective period, as equity is a significant component of compensation for our PEO and to a lesser extent our non-PEO NEOs. Except for 2021, the Company’s TSR was directionally aligned with our peer group TSR. The impact of our share price on the CAP to Mr. Trefler and our Non-PEO NEOs was the primary cause for the inverse relationship between the year-over-year change in CAP and ACV Growth in 2021 and 2023. From 2020 to 2023, the year-over-year changes in CAP to Mr. Trefler and our Non-PEO NEOs were directionally aligned with Pega’s net income (loss). During 2022, we recognized a net loss of $345.6 million, in part due to the recognition of a full valuation allowance of $188.3 million on our U.S. and U.K. deferred tax assets as well as a charge of $21.7 million in the fourth quarter of 2022 related principally to cash severance and related benefit costs for terminated employees.

  58. Pay versus Performance Tabular List

    Pay versus Performance Tabular List The following table lists our most important performance measures we use to link “Compensation Actually Paid” to our NEOs to our performance, over the year ended December 31, 2023:

  59. Pay versus Performance Tabular List

    | ACV Growth | | New bookings | | Profitability |

  60. Pay versus Performance Tabular List

    The information contained above under the heading “Pay Versus Performance” shall not be incorporated by reference into any future filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that we specifically incorporate it by reference in any such filing.