PEGASYSTEMS INCPEGA

PEGASYSTEMS INC Debt Disclosure

10-KFiled Feb 10, 20262 min read
11. DEBT
Convertible senior notes and capped calls
Convertible senior notes
In February 2020, the Company issued Notes with an aggregate principal of $600 million, due March 1, 2025, in a private placement. No principal payments were due before maturity. The Notes accrued interest at an annual rate of 0.75%, paid semi-annually in arrears on March 1 and September 1, beginning September 1, 2020. The remaining outstanding principal balance on the Notes and accrued interest totaling $469.6 million was repaid in its entirety at maturity during the three months ended March 31, 2025.
Conversion rights
The conversion rate was 14.809 shares of common stock per $1,000 principal amount of the Notes, representing a conversion price of $67.53 per share of common stock.
Carrying value of the Notes:
(in thousands)December 31, 2025December 31, 2024
Principal$— $467,864 
Unamortized issuance costs— (394)
Convertible senior notes, net$— $467,470 

Interest expense related to the Notes:
(in thousands)20252024
Contractual interest expense (0.75% coupon)
$595 $3,725 
Amortization of issuance costs
394 2,451 
$989 $6,176 
The average interest rate on the Notes during the three months ended March 31, 2025 and year ended December 31, 2024 was 1.2%.
Capped call transactions
In February 2020, the Company entered into privately negotiated capped call transactions (the “Capped Call Transactions”) with certain financial institutions. The Capped Call Transactions expired upon maturity of the Notes during the three months ended March 31, 2025.
Change in capped call transactions:
(in thousands)20252024
January 1,$223 $893 
Settlements— (7)
Fair value adjustment(223)(663)
December 31,$— $223 
Credit facility
In November 2019, and as since amended, the Company entered into a five-year $100 million Credit Facility with PNC Bank, National Association. Effective as of February 4, 2025, the Credit Facility was amended to extend the expiration date to February 4, 2027. The Company may use borrowings for general corporate purposes and to finance working capital needs. Subject to specific conditions and the agreement of the financial institutions lending the additional amount, the aggregate commitment may be increased to $200 million. The Credit Facility, as amended, contains customary covenants, including, but not limited to, those relating to additional indebtedness, liens, asset divestitures, and affiliate transactions. Beginning with the fiscal quarter ended March 31, 2024, the Company must maintain a maximum net consolidated leverage ratio of 3.5 to 1.0 (with a step-up for certain acquisitions) and a minimum consolidated interest coverage ratio of 3.5 to 1.0. As of December 31, 2025, the Company is compliant with all Credit Facility covenants.
As of December 31, 2025 and December 31, 2024, the Company had letters of credit of $26.7 million and $27.3 million, respectively, under the Credit Facility, however we had no cash borrowings.

About Debt Disclosures

Debt disclosures detail a company's borrowing structure — the types of instruments, interest rates, maturity schedule, and covenant restrictions that define its financial obligations and flexibility. This section is essential for assessing refinancing risk, interest rate exposure, and the margin of safety against financial distress.

Key signals: the maturity schedule reveals concentration risk — large maturities within 1-2 years during tight credit markets can force dilutive refinancing or asset sales. Compare the fair value of debt against carrying amount to gauge whether the market views the company's credit risk differently than the balance sheet suggests. Watch covenant compliance disclosures for tightening cushions, especially leverage and interest coverage ratios. Variable-rate debt exposure quantifies sensitivity to interest rate changes. Secured versus unsecured mix affects recovery rates and future borrowing capacity. Compare net debt-to-EBITDA against industry peers and covenant limits to assess financial health.

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