Pegasystems Announces Second Quarter 2017 Financial Results
Pegasystems Announces Second Quarter 2017 Financial Results
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  • 승인 2017.08.10 05:02
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  • License and Cloud Backlog increases 32% year over year
  • First half revenue growth of 15% coupled with operating margin expansion
  • Record operating cash flow of $86 million in first half of 2017

CAMBRIDGE, Mass., Aug. 09, 2017 (GLOBE NEWSWIRE) -- Pegasystems Inc. (NASDAQ:PEGA), the software company empowering customer engagement at the world’s leading enterprises, today announced its second quarter and first half 2017 financial results.

“The first half of 2017 has created a great foundation for the year,” said Alan Trefler, founder and CEO, Pegasystems. “We’re excited about the reception of our CRM capabilities and see a good mix of business between our applications and platform. We’re entering the second half of the year with tremendous momentum coming out of PegaWorld, our largest customer engagement and sales event to date, and we are very pleased with how the new products and partnerships we launched there are being received.”

“We’re very pleased with our first half results,” said Ken Stillwell, CFO, Pegasystems, “with revenue growth outpacing spending. In the second quarter we continued to see a higher than historical mix of recurring, which increases our longer-term visibility and predictability, and contributed to a 32% increase in license and cloud backlog compared to a year ago.”

 
SELECTED GAAP AND NON-GAAP FINANCIAL RESULTS (1)
($ in thousands, except per share amounts and %) Three Months Ended
 June 30,
  Six Months Ended
 June 30,
 2017  2016  Change  2017  2016 Change
Total Revenue (GAAP) $197,980   $188,996   5%  $421,227   $367,854  15%
Total Revenue (Non-GAAP) 197,980   189,846   4%  421,227   368,704  14%
Net Income (GAAP) 11,406   4,536   151%  38,427   14,936  157%
Net Income (Non-GAAP) 12,231   14,644   (16%)  44,171   32,447  36%
Diluted Earnings per share (GAAP) 0.14   0.06   133%  0.47   0.19  147%
Diluted Earnings per share (Non-GAAP) 0.15   0.19   (21%)  0.54   0.41  32%

(1) See a reconciliation of our GAAP to Non-GAAP measures contained in the financial schedules at the end of this release.

Impact of New Revenue Standard: Historically, Recurring Revenue and License and Cloud Backlog have been our primary performance metrics. However, due to the change in the revenue recognition patterns of term license arrangements as a result of the expected implementation of the new revenue accounting standard (ASC 606 “Revenue from Contracts with Customers”) in the first quarter of 2018, we have started tracking the performance measure Annualized Contract Value (“ACV”). The change in ACV measures the growth and predictability of future cash flows from committed term license, cloud, and maintenance arrangements as of the end of the particular reporting period. Additional information about our future adoption of the new revenue standard and its impact can be found in Note 2. “New Accounting Pronouncements” contained in Item 1 of the Quarterly Report on Form 10-Q for the quarter ended June 30, 2017.

Recurring Revenue and Total License, Cloud, and Maintenance Revenue

($ in thousands)  Three Months Ended
 June 30,
  Six Months Ended
 June 30,
  2017  2016  Change  2017  2016  Change
Term license  $30,782   $18,864   63%  $84,492   $73,196   15%
Cloud  12,733   11,269   13%  23,560   19,767   19%
Maintenance  59,590   55,161   8%  118,555   108,136   10%
Total recurring revenue  103,105   85,294   21%  226,607   201,099   13%
Perpetual license  30,255   51,807   (42%)  68,935   65,820   5%
Total license, cloud, and maintenance revenue  $133,360   $137,101   (3%)  $295,542   $266,919   11%
                             

License and Cloud Backlog(1): The Company computes license and cloud backlog by adding deferred license and cloud revenue as recorded on the Company’s balance sheet and license and cloud contractual commitments, which are not yet billed and not recorded on its balance sheet.

   June 30,   
($ in thousands)  2017  2016  Change
Deferred license and cloud revenue on the balance sheet:(2)           
Term license and cloud  $25,104  45%  $19,021  37%  32%
Perpetual license  30,542  55%  32,834  63%  (7%)
Total deferred license and cloud revenue  55,646  100%  51,855  100%  7%
License and cloud contractual commitments not on the balance sheet:(3)           
Term license and cloud  422,414  91%  309,338  91%  37%
Perpetual license  39,949  9%  31,439  9%  27%
Total license and cloud commitments  462,363  100%  340,777  100%  36%
Total license (term and perpetual) and cloud backlog  $518,009    $392,632    32%
Total term license and cloud backlog  447,518  86%  328,359  84%  36%

(1) See historical quarterly license and cloud backlog amounts in a separate schedule at the end of this release.

(2) See Note 9. “Deferred Revenue” contained in Item 1 of the Quarterly Report on Form 10-Q for the quarter ended June 30, 2017.

(3) See “Future Cash Receipts from Committed License and Cloud Arrangements” contained in Item 2 of the Quarterly Report on Form 10-Q for the quarter ended June 30, 2017.

An infographic accompanying this release is available at http://www.globenewswire.com/NewsRoom/AttachmentNg/4677385e-56ba-4f54-aad8-f75dfab7665b

Annualized Contract Value (ACV): The change in ACV measures the growth and predictability of future cash flows from committed term license, cloud, and maintenance arrangements as of the end of the particular reporting period.

ACV is the sum of the following two components:

  • Term and Cloud contract value divided by the number of committed contract years
  • Quarterly Maintenance revenue reported for the three months ended multiplied by 4.

A second infographic accompanying this release is available at http://www.globenewswire.com/NewsRoom/AttachmentNg/b1edfca7-f50b-46ea-b42c-391f5d4ed379

Quarterly Conference Call

Pegasystems will host a conference call and audio-only Webcast associated with this announcement at 5:00 p.m. EDT today. A live audio Webcast of the conference call, together with detailed financial information, can be accessed through the Company’s Website at www.pega.com/about/investors. Dial-in information is as follows: 1-877-705-6003 (domestic) or 1-201-493-6725 (international). To listen to the Webcast, log onto www.pega.com at least five minutes prior to the event’s broadcast and click on the Webcast icon in the Investors section. A replay of the call will also be available on www.pega.com by clicking the Earnings Calls link in the Investors section.

Discussion of Non-GAAP Financial Measures

To supplement financial results presented in accordance with Generally Accepted Accounting Principles in the U.S. (“GAAP”), the Company provides non-GAAP measures, including in this release. Pegasystems’ management utilizes a number of 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. The Company’s annual financial plan is prepared both on a GAAP and non-GAAP basis, and both are approved by our board of directors. In addition and as a consequence of the importance of these measures in managing the business, the Company uses non-GAAP measures and financial performance results in the evaluation process to establish management’s compensation.

The non-GAAP measures exclude the effects of certain business combination accounting entries, stock-based compensation expense, amortization of acquired intangibles, acquisition-related and restructuring expenses, and certain other adjustments. The Company believes that these non-GAAP measures are helpful in understanding its past financial performance and its anticipated future results. These non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read only in conjunction with the Company’s consolidated financial statements prepared in accordance with GAAP. A reconciliation of the Company’s GAAP to non-GAAP measures is included in the financial schedules at the end of this release.

Forward-Looking Statements

“Safe harbor” statement under the Private Securities Litigation Reform Act of 1995: 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 the Company’s behalf. Words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “could,” “estimate,” “may,” “target,” “strategy,” “is intended to,” “project,” “guidance,” “likely,” “usually,” or variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties, and assumptions that are difficult to predict. Important factors that could cause actual future activities and results to differ materially from those expressed in such forward-looking statements include, among others, variation in demand for the Company’s products and services and the difficulty in predicting the completion of product acceptance and other factors affecting the timing of license revenue recognition; the ongoing consolidation in the financial services, insurance, healthcare, and communications markets; reliance on third party relationships; the potential loss of vendor specific objective evidence for the Company’s consulting services; the inherent risks associated with international operations and the continued uncertainties in international economies; foreign currency exchange rates; the financial impact of the Company’s past acquisitions and any future acquisitions; the potential legal and financial liabilities and reputation damage due to cyber-attacks and security breaches; and management of the Company’s growth. These risks, and other factors that could cause actual results to differ materially from those expressed in such forward-looking statements, are described more completely in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

These documents are available on the Company’s website at http://www.pega.com/about/investors. The forward-looking statements contained in this press release represent the Company’s views as of August 9, 2017. Investors are cautioned not to place undue reliance on such forward-looking statements and there are no assurances that the matters contained in such statements will be achieved. Although subsequent events may cause the Company’s view to change, except as required by applicable law, the Company does not undertake and specifically disclaims any obligation to publicly update or revise these forward-looking statements whether as the result of new information, future events or otherwise. The statements should therefore not be relied upon as representing the Company’s view as of any date subsequent to August 9, 2017.

About Pegasystems

Pegasystems Inc. is the leader in software for customer engagement and operational excellence. Pega’s adaptive, cloud-architected software - built on its unified Pega® Platform - empowers people to rapidly deploy, and easily extend and change applications to meet strategic business needs. Over its 30-year history, Pega has delivered award-winning capabilities in CRM and BPM, powered by advanced artificial intelligence and robotic automation, to help the world’s leading brands achieve breakthrough business results. For more information on Pegasystems (NASDAQ:PEGA) visit www.pega.com.

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
 June 30,
  Six Months Ended
 June 30,
   2017  2016  2017  2016
Revenue:            
Software license  $61,037   $70,671   $153,427   $139,016 
Maintenance  59,590   55,161   118,555   108,136 
Services  77,353   63,164   149,245   120,702 
Total revenue  197,980   188,996   421,227   367,854 
Cost of revenue:            
Software license  1,250   1,312   2,550   2,333 
Maintenance  7,011   6,315   14,229   12,230 
Services  59,614   52,473   119,186   102,047 
Total cost of revenue  67,875   60,100   135,965   116,610 
Gross profit  130,105   128,896   285,262   251,244 
Operating expenses:            
Selling and marketing  75,887   74,016   147,175   135,094 
Research and development  39,762   35,574   80,058   70,494 
General and administrative  12,706   11,294   25,041   22,342 
Acquisition-related     1,623      2,542 
Restructuring     29      287 
Total operating expenses  128,355   122,536   252,274   230,759 
Income from operations  1,750   6,360   32,988   20,485 
Foreign currency transaction (loss) gain  (917)  306   (241)  1,682 
Interest income, net  161   188   326   478 
Other income (expense), net  566   (1,356)  287   (3,654)
Income before (benefit)/provision for income taxes  1,560   5,498   33,360   18,991 
(Benefit)/provision for income taxes  (9,846)  962   (5,067)  4,055 
Net income  $11,406   $4,536   $38,427   $14,936 
Earnings per share:            
Basic  $0.15   $0.06   $0.50   $0.20 
Diluted  $0.14   $0.06   $0.47   $0.19 
Weighted-average number of common shares outstanding:            
Basic  77,313   76,318   77,039   76,347 
Diluted  82,945   79,422   82,412   79,329 
Cash dividends declared per share  $0.03   $0.03   $0.06   $0.06 


             
PEGASYSTEMS INC.
UNAUDITED RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES (1)
(in thousands, except per share amounts)
             
   Three Months Ended
 June 30,
     Six Months Ended
 June 30,
   
   2017  2016  Change  2017  2016  Change
GAAP total revenue  $197,980   $188,996   5%  $421,227   $367,854   15%
Deferred revenue purchase accounting     850         850    
Non-GAAP total revenue  $197,980   $189,846   4%  $421,227   $368,704   14%
                   
GAAP gross profit  $130,105   $128,896   1%  $285,262   $251,244   14%
Deferred revenue purchase accounting     850         850    
Amortization of intangible assets  1,305   1,638      2,639   2,984    
Stock-based compensation (2)  3,677   2,914      7,299   5,594    
Non-GAAP gross profit  $135,087   $134,298   1%  $295,200   $260,672   13%
                   
GAAP income from operations  $1,750   $6,360   (72%)  $32,988   $20,485   61%
Deferred revenue purchase accounting     850         850    
Amortization of intangible assets  3,174   3,604      6,374   6,569    
Stock-based compensation (2)  13,932   10,881      26,440   19,816    
Other adjustments     (220)        (220)   
Acquisition-related     1,271         2,190    
Restructuring     29         287    
Non-GAAP income from operations  $18,856   $22,775   (17%)  $65,802   $49,977   32%
                   
GAAP net income  $11,406   $4,536   151%  $38,427   $14,936   157%
Deferred revenue purchase accounting     850         850    
Amortization of intangible assets  3,174   3,604      6,374   6,569    
Stock-based compensation (2)  13,932   10,881      26,440   19,816    
Other adjustments     (220)        (220)   
Acquisition-related     1,271         2,190    
Restructuring     29         287    
Income tax effects (3)  (16,281)  (6,307)     (27,070)  (11,981)   
Non-GAAP net income  $12,231   $14,644   (16%)  $44,171   $32,447   36%
                   
GAAP diluted earnings per share  $0.14   $0.06   133%  $0.47   $0.19   147%
Deferred revenue purchase accounting     0.01         0.01    
Amortization of intangible assets  0.04   0.05      0.08   0.08    
Stock-based compensation (2)  0.17   0.14      0.32   0.25    
Acquisition-related     0.02         0.03    
Income tax effects (3)  (0.20)  (0.09)     (0.33)  (0.15)   
Non-GAAP diluted earnings per share  $0.15   $0.19   (21%)  $0.54   $0.41   32%
                   
GAAP and non-GAAP diluted weighted average common shares outstanding  82,945   79,422   4%  82,412   79,329   4%
                         

(1) This presentation includes non-GAAP measures. Our non-GAAP measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures, and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP. For a detailed explanation of the adjustments made to comparable 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 disclosure under Discussion of Non-GAAP Financial Measures included earlier in this release and below.

Our non-GAAP financial measures reflect adjustments based on the following items, as well as the related income tax effects:

  • Deferred revenue purchase accounting: Business combination accounting rules require that we determine the fair value of the deferred revenue liability for contractual obligations assumed primarily from our acquisition of OpenSpan in April 2016. In post-acquisition reporting periods, we recognize revenue for the fair value of these contracts, when all the revenue recognition criteria are satisfied, instead of the revenue that would have been recognized by OpenSpan as an independent company. We add back the effect of the deferred revenue fair value adjustment in non-GAAP revenue to reflect the full amount of these revenues to provide a more complete comparison of the revenue guidance to peer companies.

  • Amortization of intangible assets: We have excluded the amortization expense of intangible assets from our non-GAAP operating expenses and net earnings measures. Amortization of intangible assets is inconsistent 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 earned during the periods presented and will contribute to our future period revenues as well. Amortization of intangible assets will recur in future periods.

  • Stock-based compensation expense: We have excluded stock-based compensation expense from our non-GAAP operating expenses and net earnings measures. Although stock-based compensation is a key incentive offered to our employees, and we believe such compensation contributed to the revenues earned during the periods presented and will contribute to the generation of future period revenues, we continue to evaluate our business performance excluding stock-based compensation expense.

  • Acquisition-related and restructuring expenses: We have excluded the effect of acquisition-related and restructuring expenses from our non-GAAP operating expenses and net earnings measures. We incurred direct and incremental expenses associated primarily with the OpenSpan acquisition. These acquisition related expenses were primarily professional fees to affect the acquisition. We have also incurred restructuring expenses for one-time employee termination benefits related to the closure of one of our domestic offices, which we generally would not have otherwise incurred in the periods presented as a part of our continuing operations. We believe it is useful for investors to understand the effects of these items on our total operating expenses.

(2) Stock-based compensation expense (in thousands) was as follows:

   Three Months Ended
 June 30,
  Six Months Ended
 June 30,
   2017  2016  2017  2016
Cost of revenues  $3,677   $2,914   $7,299   $5,594 
Operating expenses  $10,255   $7,967   $19,141   $14,222 
Total stock-based compensation before tax  $13,932   $10,881   $26,440   $19,816 

(3) The GAAP effective tax rate was (631%) and 17% for the three months ended June 30, 2017 and 2016, respectively. The effective non-GAAP tax rate was 34% and 33% for the three months ended June 30, 2017 and 2016, respectively. The differences between our GAAP and non-GAAP effective tax rates for the three months ended June 30, 2017 and 2016 primarily relate to the impact of excess tax benefits generated by our stock compensation plans adjustments on our GAAP effective tax rate.

The GAAP effective tax rate was (15%) and 21% for the six months ended June 30, 2017 and 2016, respectively. The effective non-GAAP tax rate was 33% and 33% for the six months ended June 30, 2017 and 2016, respectively. The differences between our GAAP and non-GAAP effective tax rates for the six months ended June 30, 2017 and 2016 primarily relate to the impact of excess tax benefits generated by our stock compensation plans adjustments on our GAAP effective tax rate.

       
PEGASYSTEMS INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
       
   June 30,
 2017
  December 31,
 2016
Assets:      
Total cash, cash equivalents, and marketable securities  $180,040   $133,761 
Trade accounts receivable, net  217,020   265,028 
Property and equipment, net  38,881   38,281 
Deferred income taxes  71,096   69,898 
Goodwill and Intangible assets, net  110,734   117,355 
Other assets  45,201   30,333 
Total assets  $662,972   $654,656 
       
Liabilities and Stockholders’ Equity:      
Accrued expenses, including compensation and related expenses  $82,524   $97,411 
Deferred revenue  178,357   186,636 
Other liabilities  33,456   34,720 
Stockholders’ equity  368,635   335,889 
Total liabilities and stockholders’ equity  $662,972   $654,656 

 


    
PEGASYSTEMS INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
    
   Six Months Ended
 June 30,
   2017  2016
Operating activities:      
Net Income  $38,427   $14,936 
Adjustments to reconcile net income to cash provided by operating activities:      
Depreciation, amortization, foreign currency transaction loss, and other non-cash items  11,724   13,379 
Stock-based compensation expense  26,440   19,816 
Change in operating assets and liabilities, net  9,178   (36,562)
Cash provided by operating activities  85,769   11,569 
Cash used in investing activities  (1,159)  (7,930)
Cash used in financing activities  (34,860)  (31,666)
Effect of exchange rates on cash and cash equivalents  1,282   (738)
Net increase (decrease) in cash and cash equivalents  51,032   (28,765)
Cash and cash equivalents, beginning of period  70,594   93,026 
Cash and cash equivalents, end of period  $121,626   $64,261 


          
PEGASYSTEMS INC.
HISTORICAL LICENSE AND CLOUD BACKLOG
(in thousands)
          
   2017  2016  2015
   Q2Q1  Q4Q3Q2Q1  Q4Q3
Deferred license and cloud revenue on the balance sheet:
Term license and cloud  $25,104  $29,297   $30,725  $19,627  $19,021  $18,409   $29,929  $14,123 
Perpetual license  30,542  32,141   31,098  27,653  32,834  39,381   33,483  41,247 
Total deferred license and cloud revenue  55,646  61,438   61,823  47,280  51,855  57,790   63,412  55,370 
License and cloud contractual commitments not on the balance sheet:
Term license and cloud  422,414  416,088   434,323  352,804  309,338  287,926   322,844  287,863 
Perpetual license  39,949  35,532   31,652  19,728  31,439  43,944   33,544  36,477 
Total license and cloud commitments  462,363  451,620   465,975  372,532  340,777  331,870   356,388  324,340 
Total license (term and perpetual) and cloud backlog  518,009  513,058   527,798  419,812  392,632  389,660   419,800  379,710 
Total term license and cloud backlog  $447,518  $445,385   $465,048  $372,431  $328,359  $306,335   $352,773  $301,986 
Term license and cloud backlog as a % of total license and cloud backlog  86% 87%  88% 89% 84% 79%  84% 80%


 

CONTACT: Press Contact:
Lisa Pintchman
Pegasystems Inc.
lisa.pintchman@pega.com
(617) 866-6022
Twitter: @pega

Investor Contact:
Garo Toomajanian
ICR for Pegasystems
PegaInvestorRelations@pega.com
(617) 866-6077

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