SOURCE: Pegasystems

Pegasystems

February 26, 2015 16:02 ET

Pegasystems Announces Financial Results for Fourth Quarter and Fiscal Year 2014

GAAP License and Cloud Revenue Increases 24% in 2014; 2014 GAAP EPS of $0.42; 2014 Non-GAAP EPS of $0.74

CAMBRIDGE, MA--(Marketwired - Feb 26, 2015) - Pegasystems Inc. (NASDAQ: PEGA), the software company empowering the world's leading enterprises with strategic business applications, today announced results for its fourth quarter and full year ended December 31, 2014.

"This was a solid quarter for Pegasystems, capping off what was a strong year overall for the company," said Alan Trefler, Founder and CEO of Pegasystems. "Our 2014 GAAP license revenue of $232 million represents a 21% increase compared to last year. We exceeded our original, full year GAAP revenue guidance of $576 million, ending the year with $590 million in total GAAP revenue, a 16% increase over 2013. Our strength in marketing, sales and onboarding, and customer service is driving business growth across the globe. We're pleased our clients recognize the value we bring in transforming their customer relationship management initiatives and proud of the results our clients are achieving with our software."

"As previously discussed, we began a transition we are very excited about in the second half of 2014," continued Mr. Trefler. "We have evolved our market positioning and have been enhancing our products to target a broader range of clients we believe represent a significantly larger long-term revenue opportunity. We expect to continue our investment in 2015 in marketing and product development and reallocate our resources to pursue a more repeatable and scalable sales model, consistent with the value we believe our technology can bring to a broader market." 

   
SELECTED GAAP & NON-GAAP RESULTS (1)  
    Three Months Ended December 31,      
    2014   2014   2013   2013   % Increase  
($ in '000s)   GAAP   Non-GAAP   GAAP   Non-GAAP   GAAP     Non-GAAP  
Total Revenue   $ 168,924   $ 169,050   $ 153,382   $ 155,578   10 %   9 %
License Revenue   $ 77,418   $ 77,418   $ 63,659   $ 64,181   22 %   21 %
Cloud Revenue   $ 4,468   $ 4,531   $ 3,279   $ 3,893   36 %   16 %
Net Income   $ 20,104   $ 26,104   $ 15,561   $ 23,993   29 %   9 %
Diluted Earnings per share (2)   $ 0.26   $ 0.33   $ 0.20   $ 0.31   30 %   6 %
                                     
    Year Ended December 31,   % Increase  
    2014   2014   2013   2013   (Decrease)  
($ in '000s)   GAAP   Non-GAAP   GAAP   Non-GAAP   GAAP     Non-GAAP  
Total Revenue   $ 590,004   $ 593,448   $ 508,954   $ 511,150   16 %   16 %
License Revenue   $ 232,336   $ 233,901   $ 191,876   $ 192,398   21 %   22 %
Cloud Revenue   $ 16,614   $ 17,332   $ 8,720   $ 9,334   91 %   86 %
Net Income   $ 33,255   $ 58,167   $ 38,043   $ 58,377   (13 %)   (0 %)
Diluted Earnings per share (2)   $ 0.42   $ 0.74   $ 0.49   $ 0.75   (14 %)   (1 %)
(1) See a reconciliation of our GAAP to Non-GAAP measures contained in the financial schedules at the end of this release.
(2) The number of common shares and per share amounts have been retroactively restated for all prior periods to reflect the Company's two-for-one common stock split effected in the form of a common stock dividend distributed on April 1, 2014.
 
 

Cash: Total cash, cash equivalents, and marketable securities at December 31, 2014 was $211.2 million, up 35% from December 31, 2013.

Cash generated from operations for the full year 2014 was $99.9 million, an increase of 24% on a year-over-year basis. Free Cash Flow, which we define as operating cash flow less Cap Ex, was $88.4 million for 2014, an increase of 18% on a year-over-year basis.

License and Cloud Backlog: The Company computes license and cloud backlog by adding billed deferred license and cloud revenue and off-balance sheet license and cloud commitments, which is business that is contracted, unbilled, and not recorded on the Company's balance sheet.

   
License and Cloud Backlog (1)  
    December 31,   % Increase  
($ in millions)   2014   2013   (Decrease)  
  Total billed deferred license and cloud revenue   63.0   64.3   (2 %)
  Total off-balance sheet license and cloud commitments   301.5   283.1   6 %
TOTAL LICENSE AND CLOUD BACKLOG   364.5   347.4   5 %
               
(1) See historical quarterly license backlog amounts including cloud in a separate schedule at the end of this release.
 
 

"We are pleased with our performance in 2014," said Rafe Brown, Pegasystems CFO, "and with continued application enhancements, a strong customer base, and increased marketing to develop new customers, we believe the company is positioned for growth in 2015 and beyond. Our confidence is reflected in our 2015 total revenue guidance, which contemplates license and cloud revenue growth continuing to grow much faster than our professional services revenue."

Business Outlook: As of February 26, 2015, Pegasystems is initiating revenue and EPS guidance for fiscal year 2015 as follows:

Full Year 2015 Revenue: GAAP and non-GAAP revenue for the full year 2015 is projected to be approximately $653 million.

Full Year 2015 Earnings Per Share: GAAP diluted earnings per share for the full year 2015 is expected to be approximately $0.49. Non-GAAP diluted earnings per share for the full year 2015 is expected to be approximately $0.78.

See the reconciliation of our GAAP diluted EPS guidance to non-GAAP diluted EPS guidance for the full year of 2015 at the end of this release.

Quarterly Conference Call

Pegasystems will host a conference call and live Webcast associated with this announcement at 5:00 p.m. EST 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: 1-877-407-3982 (domestic) or 1-201-493-6780 (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 Earnings Call Archive link.

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 costs, and restructuring expenses. 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, including our guidance regarding 2015 GAAP and non-GAAP revenue and diluted earnings per share. The words "expect," "anticipate," "intend," "plan," "believe," "could," "estimate," "may," "target," "strategy," "is intended to," "project," "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, insurance, healthcare, and communications markets, reliance on third party relationships, the potential loss of vendor specific objective evidence for our time and materials professional services arrangements, the inherent risks associated with international operations and the continued weakness in international economies, foreign currency exchange rates, the financial impact of the Antenna acquisition and any future acquisitions, 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, 2014 and other recent filings with the Securities and Exchange Commission. 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 February 26, 2015. 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 February 26, 2015.

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About Pegasystems
Pegasystems (NASDAQ: PEGA) develops strategic applications for sales, marketing, service and operations. Pega's applications streamline critical business operations, connect enterprises to their customers seamlessly in real-time across channels, and adapt to meet rapidly changing requirements. Pega's Global 500 customers include the world's largest and most sophisticated enterprises. Pega's applications, available in the cloud or on-premises, are built on its unified Pega 7 platform, which uses visual tools to easily extend and change applications to meet clients' strategic business needs. Pega's clients report that Pega gives them the fastest time to value, extremely rapid deployment, efficient re-use and global scale. For more information, please visit us at www.pega.com

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Pegasystems Inc.  
Condensed Consolidated Statements of Operations  
(In thousands, except per share amounts)  
                         
    Three Months Ended     Year Ended  
    December 31,     December 31,  
    2014     2013     2014     2013  
Revenue:                                
  Software license   $ 77,418     $ 63,659     $ 232,336     $ 191,876  
  Maintenance     48,684       45,071       186,239       157,309  
  Services     42,822       44,652       171,429       159,769  
    Total revenue     168,924       153,382       590,004       508,954  
Cost of revenue:                                
  Software license     1,127       1,530       4,959       6,281  
  Maintenance     4,921       4,166       20,014       15,272  
  Services     40,060       38,081       160,121       135,853  
    Total cost of revenue (1)     46,108       43,777       185,094       157,406  
Gross profit     122,816       109,605       404,910       351,548  
Operating expenses:                                
  Selling and marketing     55,886       53,815       206,658       181,094  
  Research and development     28,101       20,603       108,591       79,726  
  General and administrative     9,065       8,391       37,442       29,594  
  Acquisition-related     71       761       488       1,306  
  Restructuring     -       1,731       192       1,731  
    Total operating expenses (1)     93,123       85,301       353,371       293,451  
Income from operations     29,693       24,304       51,539       58,097  
Foreign currency transaction (loss) gain     (1,242 )     73       (3,769 )     (1,593 )
Interest income, net     215       148       683       524  
Other income (expense), net     48       (217 )     (459 )     (635 )
Income before provision for income taxes     28,714       24,308       47,994       56,393  
Provision for income taxes     8,610       8,747       14,739       18,350  
  Net income   $ 20,104     $ 15,561     $ 33,255     $ 38,043  
Earnings per share (2):                                
Basic   $ 0.27     $ 0.21     $ 0.44     $ 0.50  
Diluted   $ 0.26     $ 0.20     $ 0.42     $ 0.49  
Weighted-average number of common shares outstanding (2):                                
Basic     76,369       76,080       76,327       75,946  
Diluted     78,531       78,664       78,531       77,974  
                                 
Dividends declared per share (2)   $ 0.030     $ 0.015     $ 0.105     $ 0.060  
                                 
(1) Includes stock-based compensation as follows:                                
Cost of revenue   $ 1,519     $ 951     $ 5,335     $ 4,085  
Operating expenses   $ 3,965     $ 2,205     $ 13,870     $ 8,784  
                                 
(2) The number of common shares and per share amounts have been retroactively restated for all prior periods to reflect the Company's two-for-one common stock split effected in the form of a common stock dividend distributed on April 1, 2014.  
   
                                 
 
PEGASYSTEMS INC.
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES (1)
($in thousands, except per share data)
                                                     
                                        % Increase
    Three Months Ended December 31,     (Decrease)
    2014           2014     2013           2013                  
    GAAP     Adj.     Non-GAAP     GAAP     Adj.     Non-GAAP     GAAP       Non-GAAP    
TOTAL REVENUE   $ 168,924     $ 126     $ 169,050     $ 153,382     $ 2,196     $ 155,578     10 %     9 %  
  Software license     77,418       -       77,418       63,659       522       64,181     22 %     21 %  
  Maintenance     48,684       63       48,747       45,071       435       45,506     8 %     7 %  
  Services     42,822       63       42,885       44,652       1,239       45,891     (4 %)     (7 %)  
                                                                 
TOTAL COST OF REVENUE   $ 46,108     $ (2,870 )   $ 43,238     $ 43,777     $ (2,772 )   $ 41,005     5 %     5 %  
  Amortization of intangible assets (2) (3)     1,351       (1,351 )     -       1,821       (1,821 )     -                  
  Stock-based compensation (3)     1,519       (1,519 )     -       951       (951 )     -                  
                                                                 
GROSS MARGIN %     73 %             74 %     71 %             74 %   125   bp   78   bp
                                                                 
TOTAL OPERATING EXPENSES   $ 93,123     $ (5,857 )   $ 87,266     $ 85,301     $ (6,567 )   $ 78,734     9 %     11 %  
  Amortization of intangible assets (2) (3)     1,821       (1,821 )     -       1,870       (1,870 )     -                  
  Stock-based compensation (3)     3,965       (3,965 )     -       2,205       (2,205 )     -                  
  Acquisition-related     71       (71 )     -       761       (761 )     -                  
  Restructuring     -       -       -       1,731       (1,731 )     -                  
                                                                 
INCOME FROM OPERATIONS   $ 29,693     $ 8,853     $ 38,546     $ 24,304     $ 11,535     $ 35,839     22 %     8 %  
                                                                 
OPERATING MARGIN %     18 %             23 %     16 %             23 %   173   bp   (23 ) bp
                                                                 
INCOME TAX EFFECTS (4)   $ 8,610     $ 2,853     $ 11,463     $ 8,747     $ 3,103     $ 11,850     (2 %)     (3 %)  
                                                                 
NET INCOME   $ 20,104     $ 6,000     $ 26,104     $ 15,561     $ 8,432     $ 23,993     29 %     9 %  
                                                                 
DILUTED EARNINGS PER SHARE (5)   $ 0.26     $ 0.07     $ 0.33     $ 0.20     $ 0.11     $ 0.31     30 %     6 %  
                                                                 
DILUTED WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING (5)     78,531       -       78,531       78,664       -       78,664     0 %     0 %  
                                                                 
 
 
PEGASYSTEMS INC.
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES (1)
($in thousands, except per share data)
                                                     
                                        % Increase
    Year Ended December 31,     (Decrease)
    2014           2014     2013           2013                  
    GAAP     Adj.     Non-GAAP     GAAP     Adj.     Non-GAAP     GAAP       Non-GAAP    
TOTAL REVENUE   $ 590,004     $ 3,444     $ 593,448     $ 508,954     $ 2,196     $ 511,150     16 %     16 %  
  Software license     232,336       1,565       233,901       191,876       522       192,398     21 %     22 %  
  Maintenance     186,239       533       186,772       157,309       435       157,744     18 %     18 %  
  Services     171,429       1,346       172,775       159,769       1,239       161,008     7 %     7 %  
                                                                 
TOTAL COST OF REVENUE   $ 185,094     $ (11,352 )   $ 173,742     $ 157,406     $ (10,528 )   $ 146,878     18 %     18 %  
  Amortization of intangible assets (2) (3)     6,017       (6,017 )     -       6,443       (6,443 )     -                  
  Stock-based compensation (3)     5,335       (5,335 )     -       4,085       (4,085 )     -                  
                                                                 
GROSS MARGIN %     69 %             71 %     69 %             71 %   (44 ) bp   (54 ) bp
                                                                 
TOTAL OPERATING EXPENSES   $ 353,371     $ (22,342 )   $ 331,029     $ 293,451     $ (17,391 )   $ 276,060     20 %     20 %  
  Amortization of intangible assets (2) (3)     7,792       (7,792 )     -       5,570       (5,570 )     -                  
  Stock-based compensation (3)     13,870       (13,870 )     -       8,784       (8,784 )     -                  
  Acquisition-related     488       (488 )     -       1,306       (1,306 )     -                  
  Restructuring     192       (192 )     -       1,731       (1,731 )     -                  
                                                                 
INCOME FROM OPERATIONS   $ 51,539     $ 37,138     $ 88,677     $ 58,097     $ 30,115     $ 88,212     (11 %)     1 %  
                                                                 
OPERATING MARGIN %     9 %             15 %     11 %             17 %   (268 ) bp   (231 ) bp
                                                                 
INCOME TAX EFFECTS (4)   $ 14,739     $ 12,226     $ 26,965     $ 18,350     $ 9,781     $ 28,131     (20 %)     (4 %)  
                                                                 
NET INCOME   $ 33,255     $ 24,912     $ 58,167     $ 38,043     $ 20,334     $ 58,377     (13 %)     0 %  
                                                                 
DILUTED EARNINGS PER SHARE (5)   $ 0.42     $ 0.32     $ 0.74     $ 0.49     $ 0.26     $ 0.75     (14 %)     (1 %)  
                                                                 
DILUTED WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING (5)     78,531       -       78,531       77,974       -       77,974     1 %     1 %  
                                                                 

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 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:

Revenue: Business combination accounting rules require that we determine the fair value of the deferred revenue liability for contractual obligations assumed primarily from Antenna. 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 Antenna 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 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 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 with the Antenna and 2014 acquisitions. These acquisition-related expenses were primarily professional fees to affect the acquisitions. We have also incurred restructuring expenses related to the integration of the Antenna acquisition, which we generally would not have otherwise incurred in the periods presented as a part of our continuing operations. Restructuring expenses consist primarily of lease exit costs. We believe it is useful for investors to understand the effects of these items on our total operating expenses.

(2) Estimated future annual amortization expense related to intangible assets as of December 31, 2014 is as follows:

   
Fiscal 2015 $ 12,210
Fiscal 2016   11,523
Fiscal 2017   9,824
Fiscal 2018   8,825
Fiscal 2019 and thereafter   3,282
  Total intangible assets subject to amortization $ 45,664
     

(3) Below is a reconciliation of Non-GAAP operating expenses:

                             
    Three Months Ended December 31,
    2014         2014   2013         2013
(in '000s)   GAAP   Adj.     Non-GAAP   GAAP   Adj.     Non-GAAP
Selling and marketing   $ 55,886   $ (3,045 )   $ 52,841   $ 53,815   $ (2,530 )   $ 51,285
  Amortization of intangible assets     1,526     (1,526 )     -     1,478     (1,478 )     -
  Stock-based compensation     1,519     (1,519 )     -     1,052     (1,052 )     -
Research and development   $ 28,101   $ (1,640 )   $ 26,461   $ 20,603   $ (569 )   $ 20,034
  Stock-based compensation     1,640     (1,640 )     -     569     (569 )     -
General and administrative   $ 9,065   $ (1,101 )   $ 7,964   $ 8,391   $ (976 )   $ 7,415
  Amortization of intangible assets     295     (295 )     -     392     (392 )     -
  Stock-based compensation     806     (806 )     -     584     (584 )     -
Acquisition-related   $ 71   $ (71 )   $ -   $ 761   $ (761 )   $ -
Restructuring   $ -   $ -     $ -   $ 1,731   $ (1,731 )   $ -
TOTAL OPERATING EXPENSES   $ 93,123   $ (5,857 )   $ 87,266   $ 85,301   $ (6,567 )   $ 78,734
                                         
                                         
    Year Ended December 31,
    2014         2014   2013         2013
(in '000s)   GAAP   Adj.     Non-GAAP   GAAP   Adj.     Non-GAAP
Selling and marketing   $ 206,658   $ (11,403 )   $ 195,255   $ 181,094   $ (9,176 )   $ 171,918
  Amortization of intangible assets     6,022     (6,022 )     -     5,174     (5,174 )     -
  Stock-based compensation     5,381     (5,381 )     -     4,002     (4,002 )     -
Research and development   $ 108,591   $ (4,841 )   $ 103,750   $ 79,726   $ (2,421 )   $ 77,305
  Stock-based compensation     4,841     (4,841 )     -     2,421     (2,421 )     -
General and administrative   $ 37,442   $ (5,418 )   $ 32,024   $ 29,594   $ (2,757 )   $ 26,837
  Amortization of intangible assets     1,770     (1,770 )     -     396     (396 )     -
  Stock-based compensation     3,648     (3,648 )     -     2,361     (2,361 )     -
Acquisition-related   $ 488   $ (488 )   $ -   $ 1,306   $ (1,306 )   $ -
Restructuring   $ 192   $ (192 )   $ -   $ 1,731   $ (1,731 )   $ -
TOTAL OPERATING EXPENSES   $ 353,371   $ (22,342 )   $ 331,029   $ 293,451   $ (17,391 )   $ 276,060
                                         
                                         

(4) The GAAP income tax effects were calculated using an effective tax rate of 30% and 36% for the fourth quarter of 2014 and 2013, respectively. The non-GAAP income tax effects were calculated using an effective non-GAAP tax rate of 30.5% and 33.1% for the fourth quarter of 2014 and 2013, respectively.

The GAAP income tax effects were calculated using an effective tax rate of 30.7% and 32.5% for the fiscal year 2014 and 2013, respectively. The non-GAAP income tax effects were calculated using an effective non-GAAP tax rate of 31.7% and 32.5% for the fiscal year 2014 and 2013, respectively.

The differences between our GAAP and non-GAAP effective tax rates for 2014 primarily relate to the impact of higher non-GAAP income subjected to tax in higher tax rate jurisdictions. The differences between our GAAP and non-GAAP effective tax rates for 2013 primarily relate to the impact of non-deductible acquisition-related costs.

(5) The number of common shares and per share amounts have been retroactively restated for all prior periods to reflect the Company's two-for-one common stock split effected in the form of a common stock dividend distributed on April 1, 2014.

         
Pegasystems Inc.
Condensed Consolidated Balance Sheets
(in thousands)
     
    As of   As of
    December 31, 2014   December 31, 2013
Current Assets:            
  Cash and cash equivalents   $ 114,585   $ 80,231
  Marketable securities     96,631     76,461
    Total cash, cash equivalents, and marketable securities     211,216     156,692
  Trade accounts receivable, net     154,844     165,641
  Deferred income taxes     12,974     12,336
  Income taxes receivable     4,502     4,392
  Other current assets     9,544     9,148
    Total current assets     393,080     348,209
Property and equipment, net     30,156     28,957
Long-term deferred income taxes     69,258     56,745
Long-term other assets     2,783     2,526
Intangible assets, net     45,664     56,574
Goodwill     46,860     43,469
    Total assets   $ 587,801   $ 536,480
             
Current liabilities:            
  Accounts payable   $ 4,752   $ 3,671
  Accrued expenses     42,958     31,624
  Accrued compensation and related expenses     47,250     44,401
  Deferred revenue     134,672     110,690
    Total current liabilities     229,632     190,386
Income taxes payable     24,896     21,269
Long-term deferred revenue     20,859     34,196
Other long-term liabilities     17,709     18,841
    Total liabilities     293,096     264,692
Stockholders' equity:     294,705     271,788
    Total liabilities and stockholders' equity   $ 587,801   $ 536,480
             
             
   
Pegasystems Inc.  
Condensed Consolidated Statements of Cash Flows  
(in thousands)  
   
    Year Ended  
    December 31,  
    2014     2013  
Operating activities:                
  Net income   $ 33,255     $ 38,043  
  Adjustments to reconcile net income to cash provided by operating activities:                
    Excess tax benefits from equity awards and deferred income taxes     (17,283 )     (13,443 )
    Depreciation, amortization, foreign currency transaction loss, and other non-cash items     28,290       25,074  
    Stock-based compensation expense     19,205       12,869  
    Change in operating assets and liabilities, net     36,422       18,160  
  Cash provided by operating activities     99,889       80,703  
  Cash used in investing activities     (37,657 )     (63,997 )
  Cash used in financing activities     (24,032 )     (14,567 )
Effect of exchange rate on cash and cash equivalents     (3,846 )     567  
Net increase in cash and cash equivalents     34,354       2,706  
Cash and cash equivalents, beginning of period     80,231       77,525  
Cash and cash equivalents, end of period   $ 114,585     $ 80,231  
                 
                 
 
Pegasystems Inc.
Historical License and Cloud Backlog
($in thousands)
                 
    2014   2014   2014   2014   2013   2013   2013   2013
    Q4   Q3   Q2   Q1   Q4   Q3   Q2   Q1
  Total billed deferred license and cloud revenue     63,048     68,561     54,938     62,741     64,267     34,644     37,312     31,765
  Total off-balance sheet license and cloud commitments     301,409     265,309     298,658     270,243     283,099     248,403     246,821     253,623
TOTAL LICENSE AND CLOUD BACKLOG   $ 364,457   $ 333,870   $ 353,596   $ 332,984   $ 347,366   $ 283,047   $ 284,133   $ 285,388
                                                 
 
 
Pegasystems Inc.
FY 2015 Reconciliation of Forward-Looking Guidance
($ in thousands, except per share amounts)
     
    Fiscal Year 2015
         
Net Income and Diluted EPS - GAAP basis   $ 38,943   $ 0.49
             
Adjustment to exclude amortization of intangible assets, net of tax     7,769     0.10
Adjustment to exclude stock-based compensation, net of tax     15,278     0.19
             
Net Income and Diluted EPS - Non-GAAP basis   $ 61,990   $ 0.78
             
             

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