Pega Cloud ACV Grows 54% in 2019
CAMBRIDGE, Mass., Feb. 12, 2020 /PRNewswire/ -- Pegasystems Inc. (NASDAQ: PEGA), the software company empowering digital transformation at the world's leading enterprises, released its financial results for the fourth quarter and full year 2019.
"We delivered a very strong Q4, capping off a solid year, and we're excited about our prospects in this new decade," said Alan Trefler, founder and CEO, Pegasystems. "We have a tremendous opportunity to help our clients achieve their digital transformation goals, and I'm confident in our ability to execute."
"Total ACV increased 22% year over year, reaching $693 million, and total Backlog increased by 33% to $836 million," said Ken Stillwell, CFO, Pegasystems. "We expect these outstanding results to set the foundation for Pega to breakthrough $1 billion in annual revenue in 2020."
Financial and performance metrics ((1))
(Dollars in thousands,
Three Months Ended
Year Ended
December 31, December 31,
except per share amounts)
2019 2018 Change 2019 2018 Change
---
Total revenue $
276,542 $
256,357 8% $
911,383 $
891,581 2%
Subscription revenue (2) $
189,486 $
142,273 33% $
613,759 $
524,758 17%
Net income (loss) - GAAP $
918 $
16,413 (94)% $
(90,433) $
10,617
*
Net income (loss) - Non-GAAP $
15,682 $
26,480 (41)% $
(35,082) $
46,006
*
Diluted earnings (loss) per share - GAAP $
0.01 $
0.20 (95)% $
(1.14) $
0.13
*
Diluted earnings (loss) per share - Non-GAAP $
0.19 $
0.32 (41)% $
(0.44) $
0.55
*
* not meaningful
(1) A reconciliation of the GAAP measures to our Non-GAAP measures is contained in the financial schedules at the end of this release.
(2) Reflects client arrangements (term license, cloud, and maintenance) that are subject to renewal.
(Dollars in thousands)
Three Months Ended
Year Ended
December 31, December 31,
2019 2018 Change 2019 2018 Change
Cloud $
39,136 14% $
24,660 10% $
14,476 59% $
133,746 15% $
82,627 9% $
51,119 62%
Term license 77,176 28% 50,186 20% 26,990 54% 199,433 22% 178,256 20% 21,177 12%
Maintenance 73,174 27% 67,427 25% 5,747 9% 280,580 30% 263,875 30% 16,705 6%
Subscription 189,486 69% 142,273 55% 47,213 33% 613,759 67% 524,758 59% 89,001 17%
Perpetual license 36,729 13% 53,034 21% (16,305) (31)% 80,015 9% 109,863 12% (29,848) (27)%
Consulting 50,327 18% 61,050 24% (10,723) (18)% 217,609 24% 256,960 29% (39,351) (15)%
Total revenue $
276,542 100% $
256,357 100% $
20,185 8% $
911,383 100% $
891,581 100% $
19,802 2%
Remaining performance obligations ("Backlog")
Expected future revenue on existing contracts:
December 31, 2019
(Dollars in thousands) Perpetual license Term license Maintenance Cloud Consulting Total
1 year or less $
2,305 $
97,826 $
206,882 $
165,571 $
20,798 $
493,382 58%
1-2 years 2,179 12,014 30,291 128,109 1,439 174,032 21%
2-3 years - 3,132 17,844 84,788 132 105,896 13%
Greater than 3 years - 3,861 13,277 43,702 1,993 62,833 8%
$
4,484 $
116,833 $
268,294 $
422,170 $
24,362 $
836,143 100%
===
Change in Backlog Since December 31, 2018
---
$
(14,185) $
32,453 $
60,380 $
123,353 $
3,169 $
205,170
(76)% 38% 29% 41% 15% 33%
December 31, 2018
(Dollars in thousands) Perpetual license Term license Maintenance Cloud Consulting Total
1 year or less $
14,665 $
72,378 $
192,274 $
103,354 $
17,235 $
399,906 63%
1-2 years 2,343 10,355 10,436 80,214 2,810 106,158 17%
2-3 years 1,661 1,414 3,644 61,906 940 69,565 11%
Greater than 3 years - 233 1,560 53,343 208 55,344 9%
$
18,669 $
84,380 $
207,914 $
298,817 $
21,193 $
630,973 100%
===
Guidance for 2020
As of February 12, 2020, we are providing the following guidance:
Year Ended
December 31, 2020
(in millions, except per share amounts) GAAP Non-GAAP (1)
---
Revenue $
1,100 $
1,100
Net income (loss) $
(70.5) $
16.7
Diluted earnings (loss) per share $
(0.89) $
0.20
(1) A reconciliation of our GAAP and Non-GAAP guidance is contained in the financial schedules at the end of this release.
Quarterly conference call
A conference call and audio-only webcast will be conducted at 5:00 p.m. EST on February 12, 2020.
Members of the public and investors are invited to join the call and participate in the question and answer session by dialing 1-866-548-4713 (domestic), 1-323-794-2093 (international), or via webcast by logging onto www.pega.com at least five minutes prior to the event's broadcast and clicking on the webcast icon in the Investors section.
A replay of the call will also be available on www.pega.com/about/investors by clicking the earnings calls link in the Investors Relations section.
Discussion of Non-GAAP financial measures
To supplement the financial results presented in accordance with generally accepted accounting principles in the U.S. ("GAAP"), we provide Non-GAAP measures, including in this release. We utilize several different financial measures, both GAAP and Non-GAAP, in analyzing and assessing the overall performance of the business, for making operating decisions, and for forecasting and planning for future periods. Our annual financial plan is prepared on both a GAAP and a Non-GAAP basis. In addition, because of the importance of these measures in managing the business, we use Non-GAAP measures and financial performance results in the evaluation process to establish management's compensation.
The Non-GAAP measures exclude the effects of stock-based compensation expense, amortization of intangible assets, and foreign currency transaction gains and losses. We believe these Non-GAAP measures are helpful in understanding our past financial performance and our anticipated future results.
These Non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures. They should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP.
A reconciliation of the GAAP measures to our Non-GAAP measures is contained in the financial schedules at the end of this release.
Forward-looking statements
Certain statements contained in this press release may be construed as "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995
These forward-looking statements are based on current expectations, estimates, forecasts, and projections about the industry and markets in which we operate and management's beliefs and assumptions. In addition, other written or oral statements that constitute forward-looking statements may be made by us or on our behalf. Words such as "expect," "anticipate," "intend," "plan," "believe," "could," "estimate," "may," "target," "strategy," "project," "guidance," "likely," "usually," or variations of such words and similar expressions are intended to identify such forward-looking statements.
Important factors that could cause actual future activities and results to differ materially from those expressed in such forward-looking statements include, among others, management of our transition to a more subscription-based business model, variation in demand for our products and services, the adequacy of our liquidity and capital resources, compliance with our debt obligations and debt covenants, reliance on third-party relationships, reliance on key personnel, the inherent risks associated with international operations and the continued uncertainties in the global economy, our continued effort to market and sell both domestically and internationally, foreign currency exchange rates, the potential legal and financial liabilities and reputation damage due to cyber-attacks and security breaches, and management of our growth. These risks and other factors that could cause actual results to differ materially from those expressed in such forward-looking statements are described further in Part I of our Annual Report on Form 10-K for the year ended December 31, 2019, and other filings we make with the U.S. Securities and Exchange Commission ("SEC"). These documents are available on the Company's website at www.pega.com/about/investors.
Investors are cautioned not to place undue reliance on such forward-looking statements, and there are no assurances that the results contained in such statements will be achieved. Although new information, future events, or risks may cause actual results to differ materially from future results expressed or implied by such forward-looking statements, except as required by applicable law, we do not undertake and expressly disclaim any obligation to publicly update or revise these forward-looking statements whether as the result of new information, future events, or otherwise.
The forward-looking statements contained in this press release represent the Company's views as of February 12, 2020.
About Pegasystems
Pega is the leader in cloud software for customer engagement and operational excellence. The world's most recognized and successful brands rely on Pega's AI-powered software to optimize every customer interaction on any channel while ensuring their brand promises are kept. Pega's low-code application development platform allows enterprises to quickly build and evolve apps to meet their customer and employee needs and drive digital transformation on a global scale. For more than 35 years, Pega has enabled higher customer satisfaction, lower costs, and increased customer lifetime value.
For more information on Pegasystems (NASDAQ: PEGA) visit www.pega.com.
Press contact:
Lisa Pintchman
Pegasystems Inc.
lisa.pintchman@pega.com
(617) 866-6022
Twitter: @pega
Investor contact:
Garo Toomajanian
ICR for Pegasystems Inc.
pegainvestorrelations@pega.com
(617) 866-6077
All trademarks are the property of their respective owners.
PEGASYSTEMS INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
Three Months Ended Year Ended
December 31, December
31,
2019 2018 2019 2018
---
Revenue
Software license $
113,905 $
103,220 $
279,448 $
288,119
Maintenance 73,174 67,427 280,580 263,875
Services 89,463 85,710 351,355 339,587
---
Total revenue 276,542 256,357 911,383 891,581
---
Cost of revenue
Software license 674 1,397 3,656 5,169
Maintenance 6,341 6,530 25,656 24,565
Services 70,592 69,984 280,710 272,031
---
Total cost of revenue 77,607 77,911 310,022 301,765
---
Gross profit 198,935 178,446 601,361 589,816
---
Operating expenses
Selling and marketing 133,395 103,650 474,459 373,495
Research and development 52,408 46,449 205,210 181,710
General and administrative 14,877 12,894 56,570 51,643
Total operating expenses 200,680 162,993 736,239 606,848
---
(Loss) income from operations (1,745) 15,453 (134,878) (17,032)
---
Foreign currency transaction gain (loss) 1,242 1,863 (2,335) 2,421
Interest (loss) income, net (15) 629 1,808 2,705
Other income, net 181 559 363
---
(Loss) income before (benefit from) provision for (337) 17,945 (134,846) (11,543)
income taxes
(Benefit from) provision for income taxes (1,255) 1,532 (44,413) (22,160)
---
Net income (loss) $
918 $
16,413 $
(90,433) $
10,617
===
Earnings (loss) per share
Basic $
0.01 $
0.21 $
(1.14) $
0.14
Diluted $
0.01 $
0.20 $
(1.14) $
0.13
Weighted-average number of common shares outstanding
Basic 79,430 78,680 79,055 78,564
Diluted 83,624 82,536 79,055 83,064
PEGASYSTEMS INC.
UNAUDITED RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES (1)
(in thousands, except percentages and per share amounts)
Three Months Ended
Year Ended
December 31, December 31,
2019 2018 Change 2019 2018 Change
---
Total revenue - GAAP and Non-GAAP $
276,542 $
256,357 8% $
911,383 $
891,581 2%
Net income (loss) - GAAP $
918 $
16,413 (94)% $
(90,433) $
10,617
*
Amortization of intangible assets 1,018 2,935 6,625 11,443
Stock-based compensation (2) 20,666 16,289 80,909 63,862
Foreign currency transaction (gain) loss (1,242) (1,863) 2,335 (2,421)
Income tax effects (3) (5,678) (7,294) (34,518) (37,495)
Net income (loss) - Non-GAAP $
15,682 $
26,480 (41)% $
(35,082) $
46,006
*
Diluted earnings (loss) per share - GAAP $
0.01 $
0.20 (95)% $
(1.14) $
0.13
*
Non-GAAP adjustments 0.18 0.12 0.70 0.42
Diluted earnings (loss) per share - Non-GAAP $
0.19 $
0.32 (41)% $
(0.44) $
0.55
*
Diluted weighted-average number of common 83,624 82,536 1% 79,055 83,064 (5)%
shares outstanding - GAAP
Incremental dilutive shares for Non-GAAP -
Diluted weighted-average number of common shares 83,624 82,536 1% 79,055 83,064 (5)%
outstanding - Non-GAAP
* not meaningful
(1) Our Non-GAAP financial measures are not
meant to be considered in isolation or as
a substitute for comparable GAAP
measures. They should be read only in
conjunction with our consolidated
financial statements prepared in
accordance with GAAP.
Our Non-GAAP financial measures reflect
adjustments based on the following items:
Amortization of intangible assets: We have
excluded the amortization of intangible assets
from our Non-GAAP operating expenses and
profitability measures. Amortization of
intangible assets fluctuates in amount and
frequency and is significantly affected by the
timing and size of our acquisitions. Investors
should note that the use of intangible assets
contributed to our revenues recognized during
the periods presented and is expected to
contribute to our future period revenues as
Stock-based compensation: We have excluded
stock-based compensation from our Non-GAAP
operating expenses and profitability measures.
Although stock-based compensation is a key
incentive offered to our employees, and we
believe such compensation contributed to our
revenues recognized during the periods
presented and is expected to contribute to our
future period revenues, we continue to
evaluate our business performance excluding
stock-based compensation.
Foreign currency transaction (gain) loss: We
have excluded foreign currency transaction
gains and losses from our Non-GAAP
profitability measures. Foreign currency
transaction gains and losses fluctuate in
amount and frequency and are significantly
affected by changes in foreign exchange market
rates. Foreign currency transaction gains and
losses will recur in future periods.
For additional information about our use of
Non-GAAP measures, the reasons why management
uses these measures, the usefulness of these
measures, and the material limitations on the
usefulness of these measures, see "Discussion
of Non-GAAP financial measures" included
earlier in this release and below.
(2)
Stock-based compensation was:
Three Months Ended
Year Ended
December 31, December 31,
(in thousands) 2019 2018 2019 2018
---
Cost of revenues $
4,605 $
4,585 $
18,822 $
16,862
Selling and marketing 8,610 6,342 32,665 23,237
Research and development 4,948 3,919 18,938 15,274
General and administrative 2,503 1,443 10,484 8,489
$
20,666 $
16,289 $
80,909 $
63,862
===
Income tax benefit $
(4,166) $
(3,346) $
(16,392) $
(13,383)
(3) Effective income tax rates were:
Year Ended
December 31,
2019 2018
GAAP 33% 192%
Non-GAAP 22% 25%
Our effective income tax rate under GAAP is subject to significant fluctuations due to a variety of factors, including excess tax benefits generated by our stock-based compensation plans, tax credits for stock-based compensation awards to research and development employees, and unfavorable foreign stock-based compensation adjustments. We determine our Non-GAAP income tax rate by using applicable rates in taxing jurisdictions and assessing certain factors, including our historical and forecast earnings by jurisdiction, discrete items, and our ability to realize tax assets. We believe it is beneficial for our management to review our Non-GAAP effective income tax rate on a basis consistent with the effective income tax rate in our annual plan as established at the beginning of each year given this tax rate volatility.
PEGASYSTEMS INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
December 31, 2019 December 31, 2018
---
Assets
Cash, cash equivalents, and marketable securities $
68,363 $
207,423
Receivables (billed and unbilled) 501,675 504,765
Goodwill 79,039 72,858
Other assets 335,735 197,507
Total assets $
984,812 $
982,553
===
Liabilities and stockholders' equity
Accrued expenses, including compensation and related expenses $
152,127 $
127,814
Deferred revenue, current 190,080 185,145
Other liabilities 103,595 48,063
Stockholders' equity 539,010 621,531
Total liabilities and stockholders' equity $
984,812 $
982,553
===
PEGASYSTEMS INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year Ended
December 31,
2019 2018
---
Net (loss) income $
(90,433) $
10,617
Adjustments to reconcile net (loss) income to cash (used in) provided by operating
activities
Non-cash items 99,251 73,027
Change in operating assets and liabilities, net (50,983) 20,712
Cash (used in) provided by operating activities (42,165) 104,356
Cash provided by (used in) investing activities 70,074 (48,196)
Cash (used in) financing activities (74,258) (101,460)
Effect of exchange rate changes on cash and cash equivalents 290 (2,557)
Net (decrease) in cash and cash equivalents (46,059) (47,857)
Cash and cash equivalents, beginning of period 114,422 162,279
Cash and cash equivalents, end of period $
68,363 $
114,422
===
PEGASYSTEMS INC.
ANNUAL CONTRACT VALUE ("ACV") (1) (2)
(in thousands, except percentages)
December 31,
Change
2019 2018 Reported Constant
currency
---
Maintenance $
292,696 $
269,708 $
22,988 9% 8%
Term 231,267 190,349 40,918 21% 21%
Client Cloud 523,963 460,057 63,906 14% 14%
Pega Cloud 169,329 109,973 59,356 54% 54%
Total ACV $
693,292 $
570,030 $
123,262 22% 22%
(1) Total ACV, as of a given date, is the sum of the following
two components:
Client Cloud: the sum of (1) the annual value of
each term license contract in effect on such
date, which is equal to its total license value
divided by the total number of years and (2)
maintenance revenue reported for the quarter
ended on such date, multiplied by four. We do
not provide hosting services for Client Cloud
arrangements.
Pega Cloud: the sum of the annual value of each
cloud contract in effect on such date, which is
equal to its total value divided by the total
number of years.
(2) As foreign currency exchange rates are an important factor
in understanding period to period comparisons, we believe
the presentation of ACV growth rates on a constant
currency basis enhances the understanding of our results
and evaluation of our performance in comparison to prior
periods.
PEGASYSTEMS INC.
RECONCILIATION OF FORWARD-LOOKING GUIDANCE
(in millions, except per share amounts)
Year Ended
December 31, 2020
Revenue (GAAP and Non-GAAP) $
1,100.0
Net loss (GAAP) $
(70.5)
Amortization of intangible assets 4.0
Stock-based compensation 101.6
Income tax effects (18.4)
Net income (Non-GAAP) $
16.7
===
Diluted loss per share (GAAP) $
(0.89)
Non-GAAP adjustments 1.09
Diluted income per share (Non-GAAP) $
0.20
===
Diluted weighted-average number of common shares outstanding - GAAP 79.2
Incremental dilutive shares for Non-GAAP 5.8
Diluted weighted-average number of common shares outstanding - Non-GAAP 85.0
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SOURCE Pegasystems Inc.
