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| 8-K - 8-K - PEGASYSTEMS INC | a8kq313.htm |
Exhibit 99.1
Pegasystems Reports YTD 2013 License Revenue Increases 34% Compared to YTD 2012
YTD 2013 Total Revenue increases to $355.6M, driving significant increase in profit;
YTD 2013 GAAP Diluted EPS of $0.58 and YTD 2013 Non-GAAP Diluted EPS of $0.88
CAMBRIDGE, Mass. – November 12, 2013 – Pegasystems Inc. (NASDAQ: PEGA), the leader in Business Process Management (BPM) and a leading provider of Customer Relationship Management (CRM) solutions, today announced financial results for the third quarter and first nine months of 2013. Revenue for the third quarter of 2013 increased 20% compared to the third quarter of 2012. Net income for the third quarter of 2013 was $8.7 million, or $0.22 per diluted share, compared to net loss of $0.3 million, or $(0.01) per diluted share, for the third quarter of 2012. Revenue for the first nine months of 2013 increased 12% to $355.6 million compared to the first nine months of 2012. Net income for the first nine months of 2013 was $22.5 million, or $0.58 per diluted share, compared to net income of $1.5 million, or $0.04 per diluted share, for the first nine months of 2012.
SELECTED FINANCIAL RESULTS (1) | |||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
($ in '000s) | 2013 | 2012 | 2013 | 2012 | |||||||||||||
License revenue | $ | 44,802 | $ | 28,575 | $ | 128,217 | $ | 95,517 | |||||||||
Total revenue | $ | 122,011 | $ | 101,657 | $ | 355,572 | $ | 317,880 | |||||||||
Gross profit | $ | 83,913 | $ | 63,992 | $ | 241,943 | $ | 198,694 | |||||||||
Income from operations | $ | 13,789 | $ | 401 | $ | 33,793 | $ | 3,636 | |||||||||
Net income (loss) | $ | 8,710 | $ | (331 | ) | $ | 22,482 | $ | 1,459 | ||||||||
Earnings (loss) per share, basic - GAAP | $ | 0.23 | $ | (0.01 | ) | $ | 0.59 | $ | 0.04 | ||||||||
Earnings (loss) per share, diluted - GAAP | $ | 0.22 | $ | (0.01 | ) | $ | 0.58 | $ | 0.04 | ||||||||
Earnings per share, diluted - Non-GAAP | $ | 0.33 | $ | 0.13 | $ | 0.88 | $ | 0.45 | |||||||||
(1) See a reconciliation of our GAAP to Non-GAAP measures contained in the financial schedules at the end of this release | |||||||||||||||||
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Business Perspective
“Through Q3, Pegasystems showed a 34 percent year-to-date growth in software license revenue, which is significantly higher than industry growth forecasts for our segments,” said Alan Trefler, Founder and CEO of Pegasystems. “Our better business software is helping leading organizations build and evolve their critical business solutions. We are delighted by the enthusiastic feedback regarding the increased capability and ease of use in our Pega 7 release. Our October acquisition of Antenna Software, a recognized industry leader in mobile application development platforms, is indicative of our ongoing commitment to market leadership. Empowering our unique, unified and fully model-driven architecture to deliver and manage omni-channel customer engagement with smart process mobile apps will further differentiate Pega from its competitors.”
Rafe Brown, Pegasystems' CFO, added, “In addition to strong top-line growth, the Company delivered operating cash flow of $83.4 million year to date, up 187 percent over the same period last year. Year-to-date earnings per share jumped to $0.88 per diluted share on a Non-GAAP basis related in part to a slightly higher than expected ratio of perpetual license revenue recognized in the current quarter.”
Antenna Acquisition Impact
The Company expects Antenna’s fourth quarter 2013 operations will reduce the Company’s
earnings by approximately $0.03 - $0.05 per share on a Non-GAAP basis.
Pegasystems will host a conference call and live Webcast associated with this announcement at 6:00 p.m. EST on November 12, 2013. Dial-in information is as follows: 1 (877) 348-9349 (domestic) or 1 (678) 809-1046 (international). To listen to the Webcast log onto www.pega.com at least 5 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 in the Investors section Audio Archives link.
Discussion of Non-GAAP 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 amortization of intangible assets, stock-based compensation, acquisition-related costs and relocation expenses associated with the move of our office headquarters. The Company believes that 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 and should be read only in conjunction with our 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
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. The words “anticipate,” “project,” “expect,” “plan,” “intend,” “believe,” “estimate,” “should,” “target,” “forecast,” “could,” “preliminary,” “guidance” and similar expressions, among others, identify forward-looking statements, which speak only as of the date the statement was made. These statements are based on current expectations and assumptions and involve various risks and uncertainties, which could cause the Company's actual results to differ from those expressed in such forward-looking statements. These risks and uncertainties include, among others, variation in demand for our products and services and the difficulty in predicting the completion of product acceptance and other factors affecting the timing of our license revenue recognition, the ongoing consolidation in the financial services and healthcare markets, reliance on third party relationships, the potential loss of vendor specific objective evidence for our professional services, the financial impact of the Antenna acquisition, and management of the Company's growth. Further information regarding these and other factors which could cause the Company's actual results to differ materially from any forward-looking statements contained in this press release is contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2012 and other recent filings with the Securities and Exchange Commission. The forward-looking statements contained in this press release represent the Company's views as of November 12, 2013. 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, 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 November 12, 2013.
RSS Feeds for Pegasystems Press Releases, Pegasystems Media Coverage and Pegasystems Events
About Pegasystems
Pegasystems Build for Change® technology is the heart of better business software. It delivers business agility and empowers leading organizations to rapidly close execution gaps and seize new opportunities. Pegasystems is the recognized leader in Business Process Management and is also ranked as a leader in Customer Relationship Management solutions by leading industry analysts. For more information, please visit us at www.pega.com.
Press Contacts:
Brian Callahan
Pegasystems Inc.
brian.callahan@pega.com
(617) 866-6364
Twitter: @pega
All trademarks are the property of their respective owners.
The information contained in this press release is not a commitment, promise, or legal obligation to deliver any material, code or functionality. The development, release and timing of any features or functionality described remains at the sole discretion of Pegasystems. Pegasystems specifically disclaims any liability with respect to this information.
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Pegasystems Inc. | |||||||||||||||||
Unaudited Condensed Consolidated Statements of Operations | |||||||||||||||||
(In thousands, except per share amounts) | |||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||||
Revenue: | |||||||||||||||||
Software license | $ | 44,802 | $ | 28,575 | $ | 128,217 | $ | 95,517 | |||||||||
Maintenance | 37,979 | 32,317 | 112,238 | 97,657 | |||||||||||||
Professional services | 39,230 | 40,765 | 115,117 | 124,706 | |||||||||||||
Total revenue | 122,011 | 101,657 | 355,572 | 317,880 | |||||||||||||
Cost of revenue: | |||||||||||||||||
Software license | 1,592 | 1,585 | 4,751 | 4,763 | |||||||||||||
Maintenance | 3,599 | 3,745 | 11,106 | 11,072 | |||||||||||||
Professional services | 32,907 | 32,335 | 97,772 | 103,351 | |||||||||||||
Total cost of revenue (1) | 38,098 | 37,665 | 113,629 | 119,186 | |||||||||||||
Gross profit | 83,913 | 63,992 | 241,943 | 198,694 | |||||||||||||
Operating expenses: | |||||||||||||||||
Selling and marketing | 42,663 | 36,893 | 127,279 | 116,476 | |||||||||||||
Research and development | 19,786 | 19,506 | 59,123 | 57,411 | |||||||||||||
General and administrative | 7,130 | 7,192 | 21,203 | 21,171 | |||||||||||||
Acquisition-related costs | 545 | — | 545 | — | |||||||||||||
Total operating expenses (1) | 70,124 | 63,591 | 208,150 | 195,058 | |||||||||||||
Income from operations | 13,789 | 401 | 33,793 | 3,636 | |||||||||||||
Foreign currency transaction gain (loss) | 661 | 438 | (1,666 | ) | 337 | ||||||||||||
Interest income, net | 123 | 113 | 376 | 318 | |||||||||||||
Other expense, net | (1,163 | ) | (920 | ) | (418 | ) | (1,496 | ) | |||||||||
Income before provision for income taxes | 13,410 | 32 | 32,085 | 2,795 | |||||||||||||
Provision for income taxes | 4,700 | 363 | 9,603 | 1,336 | |||||||||||||
Net income (loss) | $ | 8,710 | $ | (331 | ) | $ | 22,482 | $ | 1,459 | ||||||||
Earnings (loss) per share: | |||||||||||||||||
Basic | $ | 0.23 | $ | (0.01 | ) | $ | 0.59 | $ | 0.04 | ||||||||
Diluted | $ | 0.22 | $ | (0.01 | ) | $ | 0.58 | $ | 0.04 | ||||||||
Weighted-average number of common shares outstanding: | |||||||||||||||||
Basic | 37,955 | 37,881 | 37,950 | 37,834 | |||||||||||||
Diluted | 39,079 | 37,881 | 38,872 | 38,897 | |||||||||||||
Dividends declared per share | $ | 0.03 | $ | 0.03 | $ | 0.09 | $ | 0.09 | |||||||||
(1) Includes stock-based compensation as follows: | |||||||||||||||||
Cost of revenue | 947 | 849 | 3,134 | 2,710 | |||||||||||||
Operating expenses | 2,053 | 1,935 | 6,579 | 5,912 | |||||||||||||
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PEGASYSTEMS INC. | |||||||||||||||
RECONCILIATION OF SELECTED GAAP TO NON-GAAP MEASURES (1) | |||||||||||||||
($ in thousands, except per share data) | |||||||||||||||
Three Months Ended | |||||||||||||||
September 30, | |||||||||||||||
2013 | 2012 | ||||||||||||||
Net Income (Loss) and Diluted EPS - GAAP basis | $ | 8,710 | $ | 0.22 | $ | (331 | ) | $ | (0.01 | ) | |||||
Adjustment to exclude amortization of intangible assets, net of tax | 1,861 | 0.05 | 1,889 | 0.05 | |||||||||||
Adjustment to exclude stock-based compensation, net of tax | 2,014 | 0.05 | 1,893 | 0.05 | |||||||||||
Adjustment to exclude acquisition-related costs, net of tax | 366 | 0.01 | — | — | |||||||||||
Adjustment to exclude expenses for relocation of headquarters, net of tax | — | — | 1,623 | 0.04 | |||||||||||
Net Income and Diluted EPS - Non-GAAP basis | $ | 12,951 | $ | 0.33 | $ | 5,074 | $ | 0.13 | |||||||
Weighted-average common shares - diluted GAAP | 39,079 | 37,881 | |||||||||||||
Weighted-average common shares - diluted Non-GAAP | 39,079 | 38,833 | |||||||||||||
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PEGASYSTEMS INC. | |||||||||||||||
RECONCILIATION OF SELECTED GAAP TO NON-GAAP MEASURES (1) | |||||||||||||||
($ in thousands, except per share data) | |||||||||||||||
Nine Months Ended | |||||||||||||||
September 30, | |||||||||||||||
2013 | 2012 | ||||||||||||||
Net Income and Diluted EPS - GAAP basis | $ | 22,482 | $ | 0.58 | $ | 1,459 | $ | 0.04 | |||||||
Adjustment to exclude amortization of intangible assets, net of tax | 5,331 | 0.14 | 5,535 | 0.14 | |||||||||||
Adjustment to exclude stock-based compensation, net of tax | 6,222 | 0.16 | 5,709 | 0.15 | |||||||||||
Adjustment to exclude acquisition-related costs, net of tax | 349 | — | — | — | |||||||||||
Adjustment to exclude expenses for relocation of headquarters, net of tax | — | — | 4,609 | 0.12 | |||||||||||
Net Income and Diluted EPS - Non-GAAP basis | $ | 34,384 | $ | 0.88 | $ | 17,312 | $ | 0.45 | |||||||
Weighted-average common shares - diluted GAAP and Non-GAAP | 38,872 | 38,897 | |||||||||||||
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PEGASYSTEMS INC.
FOOTNOTES FOR RECONCILIATON OF
SELECTED GAAP MEASURES TO NON-GAAP MEASURES
(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 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: |
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 expenses: 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 that it will contribute to the generation of future period revenues, we continue to evaluate our business performance excluding stock-based compensation expense.
Acquisition-related costs: We have excluded the effect of acquisition-related costs from our Non-GAAP operating expenses and net earnings measures. We incurred direct and incremental costs associated with the Antenna acquisition that primarily consisted of legal and advisory fees and due diligence costs. We believe it is useful for investors to understand the effect of these items on our total operating expenses.
Headquarters relocation expenses: We completed the move of our office headquarters in the third quarter of 2012. As a result of this planned move, we accelerated the depreciation on certain leasehold improvements and furniture and fixtures to be abandoned from our prior headquarters. We recorded incremental depreciation expense of $0.1 million and $0.4 million during the third quarter and first nine months of 2012, respectively. In addition, we recorded rent expense of $1.4 million and $4.4 million associated with our new office headquarters during the third quarter and first nine months of 2012, respectively. Lastly, we incurred approximately $0.9 million and $2.2 million for rent-related and equipment expenses and other moving expenses in connection with our move during the third quarter and first nine months of 2012, respectively. We believe these incremental expenses for existing and new office headquarters as a result of our moving our headquarters was not representative of our ongoing business.
Weighted-average common shares: The diluted weighted-average common shares used for the calculation of Non-GAAP diluted earnings per share for the third quarter of 2012 includes the dilutive effect of outstanding options, restricted stock units, and warrants, and the average market price of our common stock during the applicable period using the treasury stock method.
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PEGASYSTEMS INC.
Unaudited Condensed Consolidated Balance Sheets
(In thousands)
As of | As of | ||||||
September 30, 2013 | December 31, 2012 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 108,827 | $ | 77,525 | |||
Marketable securities | 79,618 | 45,460 | |||||
Total cash, cash equivalents, and marketable securities | 188,445 | 122,985 | |||||
Trade accounts receivable, net of allowance | 90,583 | 134,066 | |||||
Deferred income taxes | 10,152 | 10,202 | |||||
Income taxes receivable | 4,199 | 6,261 | |||||
Other current assets | 6,929 | 5,496 | |||||
Total current assets | 300,308 | 279,010 | |||||
Property and equipment, net | 28,977 | 30,827 | |||||
Long-term deferred income taxes | 49,693 | 49,292 | |||||
Long-term other assets | 1,657 | 1,680 | |||||
Intangible assets, net | 49,910 | 58,232 | |||||
Goodwill | 20,451 | 20,451 | |||||
Total assets | $ | 450,996 | $ | 439,492 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 2,347 | 3,330 | ||||
Accrued expenses | 20,741 | 15,534 | |||||
Accrued compensation and related expenses | 31,925 | 40,715 | |||||
Deferred revenue | 91,758 | 95,546 | |||||
Total current liabilities | 146,771 | 155,125 | |||||
Income taxes payable | 13,748 | 13,551 | |||||
Long-term deferred revenue | 17,954 | 18,719 | |||||
Other long-term liabilities | 17,466 | 15,618 | |||||
Total liabilities | 195,939 | 203,013 | |||||
Stockholders’ equity: | 255,057 | 236,479 | |||||
Total liabilities and stockholders’ equity | $ | 450,996 | $ | 439,492 | |||
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PEGASYSTEMS INC.
Unaudited Condensed Consolidated Statements of Cash Flows
Nine Months Ended | |||||||||
September 30, | |||||||||
2013 | 2012 | ||||||||
(in thousands) | |||||||||
Operating activities: | |||||||||
Net income | $ | 22,482 | $ | 1,459 | |||||
Adjustments to reconcile net income to cash provided by operating activities: | |||||||||
Excess tax benefit from equity awards and deferred income taxes | (3,207 | ) | (3,672 | ) | |||||
Depreciation, amortization, foreign currency transaction loss (gain), and other non-cash items | 18,575 | 17,670 | |||||||
Stock-based compensation expense | 9,713 | 8,622 | |||||||
Change in operating assets and liabilities | 35,872 | 5,005 | |||||||
Cash provided by operating activities | 83,435 | 29,084 | |||||||
Cash used in investing activities | (39,674 | ) | (16,746 | ) | |||||
Cash used in financing activities | (11,942 | ) | (7,050 | ) | |||||
Effect of exchange rate changes on cash and cash equivalents | (517 | ) | 596 | ||||||
Net increase in cash and cash equivalents | 31,302 | 5,884 | |||||||
Cash and cash equivalents, beginning of period | 77,525 | 60,353 | |||||||
Cash and cash equivalents, end of period | $ | 108,827 | $ | 66,237 | |||||
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