SOURCE: Pegasystems

Pegasystems

August 09, 2012 16:30 ET

Pegasystems Reports YTD Q2 12 Revenue of $216.2 Million, a 5% Increase Compared to YTD Q2 11

Q2 12 GAAP EPS of $(0.06) and Q2 12 Non-GAAP EPS of $0.09; YTD Q2 12 GAAP EPS of $0.05 and YTD Q2 12 Non-GAAP EPS of $0.31

CAMBRIDGE, MA--(Marketwire - Aug 9, 2012) -  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 second quarter and first six months of 2012. Revenue for the second quarter of 2012 was slightly higher compared to the second quarter of 2011. Net loss for the second quarter of 2012 was $(2.3) million, or $(0.06) per diluted share, compared to net income of $2.3 million, or $0.06 per diluted share, for the second quarter of 2011. Revenue for the first six months of 2012 increased 5% to $216.2 million compared to the first six months of 2011. Net income for the first six months of 2012 was $1.8 million, or $0.05 per diluted share, compared to net income of $7 million, or $0.18 per diluted share for the first six months of 2011.

 
SELECTED FINANCIAL RESULTS
                   
    Three Months Ended   Six Months Ended
    June 30,   June 30,
($ in '000s)   2012     2011   2012   2011
Total revenue   $ 105,056     $ 103,518   $ 216,223   $ 205,878
(Loss) income from operations   $ (2,684 )   $ 3,234   $ 3,235   $ 8,798
Net (loss) income   $ (2,267 )   $ 2,273   $ 1,790   $ 7,004
(Loss) earnings per share, basic   $ (0.06 )   $ 0.06   $ 0.05   $ 0.19
(Loss) earnings per share, diluted   $ (0.06 )   $ 0.06   $ 0.05   $ 0.18
                           

Business Perspective
"We continue to find exciting and innovative ways to deliver accelerated value for our clients. They are leveraging Pega technology to optimize the customer experience and rapidly automate operations to save money," said Alan Trefler, Founder and CEO of Pegasystems. "Our record-setting PegaWORLD 2012 customer conference demonstrated this with numerous transformational keynotes from some of the world's leading brands. We are also seeing increased demand for training, and are launching Pega Academy, an online source for self-paced, video-based training. Pega Academy slashes training time and can scale to accommodate exponentially more students than traditional classroom instruction."

"During Q2, client wins were well represented across all verticals and included a number of new global brands in telecommunications, manufacturing, and financial services. We are pleased that Pega technology continues to lead the pack. A leading industry analyst firm recently recognized Pega as having the #1 platform and architecture for enterprise CRM Suites for large organizations, which is great news for customers wanting a future-proof alternative to legacy approaches," concluded Mr. Trefler.

Craig Dynes, Pegasystems' CFO, added, "Economic uncertainty, especially in Europe, is delaying many customers from executing new license agreements. Some larger deals are being split into smaller projects, which, while still planned, are being pushed into future quarters. Even though we are still working hard to hit our bookings targets, the delays we've seen in executing licenses, along with our seeing a greater proportion of term licenses, makes our goal to surpass $500 million of revenue in 2012 very challenging. Accordingly, though we are continuing to selectively invest, we are managing expenses to keep our earnings targets in sight even at 95% of our $500 million revenue goal, which we believe represents a more appropriate objective in this economic environment."

Messrs. Trefler and Dynes will host a conference call and live Webcast associated with this announcement at 6:00 p.m. EDT on August 9, 2012. 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 Investor Relations section. A replay of the call will also be available on www.pega.com in the Investor Relations section Audio Archives link.

Discussion of Non-GAAP Measures
To supplement financial results presented on a GAAP basis, 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 the Non-GAAP annual financial plan is 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 results in the evaluation process to establish management's compensation.

The Non-GAAP measures exclude certain business combination accounting entries and expenses related to our 2010 acquisition of Chordiant, as well as other significant expenses including stock-based compensation. 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 the 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, including those relating to our future financial performance, including our revenue and expenses. 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 uncertainty and volatility in the global financial markets related to the European sovereign debt crisis, 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, 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, 2011, the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 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 August 9, 2012. 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 August 9, 2012.

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About Pegasystems
Pegasystems revolutionizes how leading organizations optimize customer experience and automate operations. Our patented Build for Change® technology empowers business people to create and evolve their critical business systems. Pegasystems is the recognized leader in business process management and is also ranked as a leader in customer relationship management software by leading industry analysts. For more information, please visit us at www.pega.com.  

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.

   
Pegasystems Inc.  
Unaudited Condensed Consolidated Statements of Operations  
(In thousands, except per share amounts)  
   
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2012     2011     2012     2011  
Revenue:                                
Software license   $ 30,999     $ 34,645     $ 66,942     $ 68,107  
Maintenance     34,495       28,294       65,340       55,742  
Professional services     39,562       40,579       83,941       82,029  
  Total revenue     105,056       103,518       216,223       205,878  
Cost of revenue:                                
Cost of software license     1,579       1,631       3,178       3,305  
Cost of maintenance     3,718       3,260       7,327       6,634  
Cost of professional services     34,690       35,506       71,016       70,474  
  Total cost of revenue (1)     39,987       40,397       81,521       80,413  
Gross profit     65,069       63,121       134,702       125,465  
Operating expenses:                                
Selling and marketing     41,188       37,208       79,583       71,244  
Research and development     18,901       15,696       37,905       30,829  
General and administrative     7,664       6,839       13,979       13,971  
Acquisition-related costs     --       144       --       482  
Restructuring costs     --       --       --       141  
  Total operating expenses (1)     67,753       59,887       131,467       116,667  
(Loss) income from operations     (2,684 )     3,234       3,235       8,798  
                                 
Foreign currency transaction (loss) gain     (841 )     173       (101 )     1,189  
Interest income, net     94       91       205       177  
Other income (expense), net     263       (167 )     (576 )     (139 )
                                 
(Loss) income before (benefit) provision for income taxes     (3,168 )     3,331       2,763       10,025  
                                 
(Benefit) provision for income taxes     (901 )     1,058       973       3,021  
  Net (loss) income   $ (2,267 )   $ 2,273     $ 1,790     $ 7,004  
Net (loss) earnings per share:                                
                                 
Basic   $ (0.06 )   $ 0.06     $ 0.05     $ 0.19  
Diluted   $ (0.06 )   $ 0.06     $ 0.05     $ 0.18  
Weighted-average number of common shares outstanding:                                
Basic     37,865       37,405       37,812       37,341  
Diluted     37,865       38,851       38,931       38,828  
Dividends per share   $ 0.03     $ 0.03     $ 0.06     $ 0.06  
(1) Includes stock-based compensation as follows:                                
Cost of revenue     884       553       1,861       1,350  
Operating expenses     2,102       1,312       3,977       3,050  

 

PEGASYSTEMS INC.
RECONCILIATION OF SELECTED GAAP TO NON-GAAP MEASURES (1)
($ in thousands, except per share data)
                     
    Three Months Ended     Six Months Ended
    June 30, 2012     June 30, 2012
                             
Net (Loss) Income and Diluted EPS - GAAP basis   $ (2,267 )   $ (0.06 )   $ 1,790   $ 0.05
                             
Adjustment to exclude amortization of intangible assets, net of tax     1,859       0.05       3,646     0.09
Adjustment to exclude stock-based compensation, net of tax     1,999       0.05       3,814     0.10
Adjustment to exclude expenses for relocation of headquarters, net of tax     1,770       0.05       2,988     0.07
                             
Net Income and Diluted EPS - Non-GAAP basis   $ 3,361     $ 0.09     $ 12,238   $ 0.31
                             
Weighted-average common shares - diluted GAAP     37,865               38,931      
                             
Weighted-average common shares - diluted Non-GAAP     38,969               38,931      

 

 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 effect of amortization of intangible assets acquired from Chordiant 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 the effect of stock-based compensation expenses 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.

Headquarters relocation expenses: As a result of our entering into a lease arrangement in June 2011 for our new office headquarters in Cambridge, Massachusetts, we expect to cease the use of our existing offices in Cambridge, Massachusetts in the second half of 2012 and abandon certain leasehold improvements and furniture and fixtures. Accordingly, in June 2011 we revised the remaining useful lives of these fixed assets and recorded incremental depreciation expense of $0.1 million and $0.2 million during the second quarter and first six months of 2012, respectively. In addition, we recorded rent expense of $1.5 million and $3 million associated with our new office headquarters during the second quarter and first six months of 2012, respectively. Lastly, we incurred approximately $1 million and $1.4 million for rent-related and equipment expenses and furniture and fixtures in connection with our move during the second quarter and first six months of 2012, respectively. We believe these incremental expenses for existing and new office headquarters as a result of our moving our headquarters is not representative of our ongoing business.

Taxes: The differences between our GAAP and Non-GAAP effective tax rates in the second quarter and first six months of 2012 were primarily due to the impact of higher Non-GAAP income before taxes.

Weighted-average common shares: The diluted weighted-average common shares used for the calculation of Non-GAAP diluted earnings per share for the second 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.

 
PEGASYSTEMS INC.
Unaudited Condensed Consolidated Balance Sheets
 
    As of   As of
    June 30,
2012
  December 31,
2011
ASSETS            
Current assets:            
  Cash and cash equivalents   $ 54,827   $ 60,353
  Marketable securities     48,037     51,079
    Total cash, cash equivalents, and marketable securities     102,864     111,432
  Trade accounts receivable, net of allowance     92,542     98,293
  Deferred income taxes     9,827     9,826
  Income taxes receivable     10,035     7,545
  Other current assets     5,512     4,865
      Total current assets     220,780     231,961
Property and equipment, net     28,175     14,458
Long-term deferred income taxes     43,581     43,286
Long-term other assets     1,782     2,186
Intangible assets, net     63,787     69,369
Goodwill     20,451     20,451
      Total assets   $ 378,556   $ 381,711
LIABILITIES AND STOCKHOLDERS'EQUITY            
Current liabilities:            
  Accounts payable   $ 7,405     10,899
  Accrued expenses     21,597     18,336
  Accrued compensation and related expenses     26,240     39,170
  Deferred revenue     79,358     73,840
      Total current liabilities     134,600     142,245
Income taxes payable     9,633     9,547
Long-term deferred revenue     11,898     15,367
Other long-term liabilities     10,813     5,796
      Total liabilities     166,944     172,955
Stockholders' equity:     211,612     208,756
      Total liabilities and stockholders' equity   $ 378,556   $ 381,711

 

PEGASYSTEMS INC.  
Unaudited Condensed Consolidated Statements of Cash Flows  
   
             
    Six Months Ended  
    June 30,  
    2012     2011  
    (in thousands)  
Operating activities:                
  Net income   $ 1,790     $ 7,004  
  Adjustments to reconcile net income to cash used in operating activities:                
  Excess tax benefit from equity awards and deferred income taxes     (2,530 )     (4,094 )
  Depreciation, amortization, and other non-cash items     9,388       8,642  
  Stock-based compensation expense     5,838       4,400  
  Foreign currency transaction loss     460       377  
  Change in operating assets and liabilities, and other, net     (2,419 )     891  
  Cash provided by operating activities     12,527       17,220  
  Cash used in investing activities     (12,502 )     (20,139 )
  Cash used in financing activities     (4,717 )     (2,173 )
Effect of exchange rate changes on cash and cash equivalents     (834 )     948  
Net decrease in cash and cash equivalents     (5,526 )     (4,144 )
Cash and cash equivalents, beginning of period     60,353       71,127  
Cash and cash equivalents, end of period   $ 54,827     $ 66,983  
                 

Contact Information

  • For Information, contact:
    Craig Dynes
    Chief Financial Officer
    617-866-6020
    CDynes@pega.com