PR Newswire
CAMBRIDGE, Mass., July 26, 2023
- Operating cash flow exceeds $110 million (Free Cash Flow exceeds $120 million)
- Annual contract value (ACV) grows 13% year over year
- Pega Cloud gross margin expands to 73%
CAMBRIDGE, Mass., July 26, 2023 /PRNewswire/ -- Pegasystems Inc., the low-code platform provider empowering the world's leading enterprises to Build for Change®, released its financial results for the second quarter of 2023.
"In this uncertain and changing environment, focusing on client success is more important than ever," said Alan Trefler, founder and CEO. "Our low-code platform for AI-powered decisioning and workflow automation uniquely empowers clients to embrace emerging trends like generative AI and, at the same time, reduce costs and improve customer engagement."
"Achieving record cash flow in the first half of 2023 reflects solid execution by our team to better balance growth and free cash flow," said Ken Stillwell, COO & CFO. "This significant shift in cash flow generation is a benefit of our successful move to a subscription model. In the second half of 2023, we will be looking to further increase operating effectiveness with additional improvements in our go-to-market alignment."
Financial and performance metrics (1)
Reconciliation of ACV and Constant Currency ACV | |||||||||||
(in millions, except percentages) | Q2 22 | Q3 22 | Q4 22 | Q1 23 | Q2 23 | 1 Year Change | |||||
ACV | $ 1,026 | $ 1,040 | $ 1,126 | $ 1,174 | $ 1,164 | 13 % | |||||
Impact of changes in foreign exchange rates | $ — | $ 24 | $ (1) | $ (5) | $ (5) | ||||||
Constant Currency ACV | $ 1,026 | $ 1,064 | $ 1,125 | $ 1,169 | $ 1,159 | 13 % |
Note: Constant currency ACV and Backlog are calculated by applying the Q2 2022 foreign exchange rates to all periods shown.
(Dollars in thousands, except per share amounts) | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||
2023 | 2022 | Change | 2023 | 2022 | Change | ||||||
Total revenue | $ 298,268 | $ 274,337 | 9 % | $ 623,740 | $ 650,644 | (4) % | |||||
Net (loss) - GAAP | $ (46,804) | $ (286,296) | 84 % | $ (67,578) | $ (286,675) | 76 % | |||||
Net income (loss) - non-GAAP | $ 1,203 | $ (31,406) | * | $ 20,423 | $ 18,768 | 9 % | |||||
Diluted (loss) per share - GAAP | $ (0.56) | $ (3.50) | 84 % | $ (0.82) | $ (3.51) | 77 % | |||||
Diluted earnings (loss) per share - non-GAAP | $ 0.01 | $ (0.38) | * | $ 0.24 | $ 0.22 | 9 % | |||||
* not meaningful |
(Dollars in thousands) | Three Months Ended June 30, | Change | Six Months Ended June 30, | Change | |||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||
Pega Cloud | $ 115,063 | 39 % | $ 93,506 | 34 % | $ 21,557 | 23 % | $ 222,942 | 36 % | $ 183,823 | 28 % | $ 39,119 | 21 % | |||||
Maintenance | 82,042 | 27 % | 78,326 | 29 % | 3,716 | 5 % | 161,672 | 26 % | 158,042 | 24 % | 3,630 | 2 % | |||||
Subscription services | 197,105 | 66 % | 171,832 | 63 % | 25,273 | 15 % | 384,614 | 62 % | 341,865 | 52 % | 42,749 | 13 % | |||||
Subscription license | 41,197 | 14 % | 41,600 | 15 % | (403) | (1) % | 125,724 | 20 % | 179,133 | 28 % | (53,409) | (30) % | |||||
Subscription | 238,302 | 80 % | 213,432 | 78 % | 24,870 | 12 % | 510,338 | 82 % | 520,998 | 80 % | (10,660) | (2) % | |||||
Perpetual license | 1,579 | 1 % | 2,266 | 1 % | (687) | (30) % | 1,982 | — % | 9,706 | 1 % | (7,724) | (80) % | |||||
Consulting | 58,387 | 19 % | 58,639 | 21 % | (252) | — % | 111,420 | 18 % | 119,940 | 19 % | (8,520) | (7) % | |||||
$ 298,268 | 100 % | $ 274,337 | 100 % | $ 23,931 | 9 % | $ 623,740 | 100 % | $ 650,644 | 100 % | $ (26,904) | (4) % |
1 Refer to the schedules at the end of this release for additional information, including a reconciliation of our GAAP to non-GAAP measures.
Quarterly conference call
A conference call and audio-only webcast will be conducted the following day at 8:00 a.m. EDT on Thursday, July 27, 2023.
Members of the public and investors are invited to join the call and participate in the question and answer session by dialing 1-877-407-9039 (domestic), 1-201-689-8470 (international), or via webcast (https://viavid.webcasts.com/starthere.jsp?ei=1622243&tp_key=962bdef8e2) by logging onto www.pega.com at least five minutes prior to the event's broadcast and clicking on the webcast icon in the Investors section.
Discussion of non-GAAP financial measures
Our non-GAAP financial measures should only be read in conjunction with our consolidated financial statements prepared in accordance with GAAP. We believe these measures help investors understand our core operating results without the effect of often one-time charges and other items outside normal operations. They are not a substitute for financial measures prepared under U.S. GAAP.
Refer to the schedules at the end of this release for additional information, including a reconciliation of our GAAP to non-GAAP measures.
Forward-looking statements
Certain statements in this press release may be "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995.
Words such as expects, anticipates, intends, plans, believes, will, could, should, estimates, may, targets, strategies, intends to, projects, forecasts, guidance, likely, and usually or variations of such words and other similar expressions identify forward-looking statements, which speak only as of the date the statement was made and are based on current expectations and assumptions.
Forward-looking statements deal with future events and are subject to risks and uncertainties that are difficult to predict, including, but not limited to:
- our future financial performance and business plans;
- the adequacy of our liquidity and capital resources;
- the continued payment of our quarterly dividends;
- the timing of revenue recognition;
- management of our transition to a more subscription-based business model;
- variation in demand for our products and services, including among clients in the public sector;
- reliance on key personnel;
- global economic and political conditions and uncertainty, including impacts from public health emergencies and the war in Ukraine;
- reliance on third-party service providers, including hosting providers;
- compliance with our debt obligations and covenants;
- the potential impact of our convertible senior notes and Capped Call Transactions;
- foreign currency exchange rates;
- the potential legal and financial liabilities and damage to our reputation due to cyber-attacks;
- security breaches and security flaws;
- our ability to protect our intellectual property rights, costs associated with defending such rights, intellectual property rights claims, and other related claims by third parties against us, including related costs, damages, and other relief that may be granted against us;
- our ongoing litigation with Appian Corp.;
- our client retention rate; and
- management of our growth.
These risks and others that may cause actual results to differ materially from those expressed in such forward-looking statements are described further in Part I of our Annual Report on Form 10-K for the year ended December 31, 2022, and other filings we make with the U.S. Securities and Exchange Commission ("SEC").
Investors are cautioned not to place undue reliance on such forward-looking statements, and there are no assurances that the results included in such statements will be achieved. Although subsequent events may cause our view to change, except as required by applicable law, we do not undertake and expressly disclaim any obligation to publicly update or revise these forward-looking statements whether as the result of new information, future events, or otherwise.
Any forward-looking statements in this presentation represent our views as of July 26, 2023.
About Pegasystems
Pega provides a powerful low-code platform that empowers the world's leading enterprises to Build for Change®. Clients use our AI-powered decisioning and workflow automation to solve their most pressing business challenges - from personalizing engagement to automating service to streamlining operations. Since 1983, we've built our scalable and flexible architecture to help enterprises meet today's customer demands while continuously transforming for tomorrow. For more information on Pegasystems (NASDAQ: PEGA), visit www.pega.com.
Press contact:
Lisa Pintchman
VP, Corporate Communications
[email protected]
617-866-6022
Twitter: @pega
Investor contact:
Peter Welburn
VP, Corporate Development & Investor Relations
[email protected]
617-498-8968
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, | ||||||
2023 | 2022 | 2023 | 2022 | ||||
Revenue | |||||||
Subscription services | $ 197,105 | $ 171,832 | $ 384,614 | $ 341,865 | |||
Subscription license | 41,197 | 41,600 | 125,724 | 179,133 | |||
Consulting | 58,387 | 58,639 | 111,420 | 119,940 | |||
Perpetual license | 1,579 | 2,266 | 1,982 | 9,706 | |||
Total revenue | 298,268 | 274,337 | 623,740 | 650,644 | |||
Cost of revenue | |||||||
Subscription services | 36,783 | 36,533 | 73,647 | 68,563 | |||
Subscription license | 623 | 673 | 1,342 | 1,295 | |||
Consulting | 58,710 | 57,873 | 119,058 | 113,384 | |||
Perpetual license | 24 | 36 | 27 | 70 | |||
Total cost of revenue | 96,140 | 95,115 | 194,074 | 183,312 | |||
Gross profit | 202,128 | 179,222 | 429,666 | 467,332 | |||
Operating expenses | |||||||
Selling and marketing | 143,858 | 157,198 | 293,655 | 319,434 | |||
Research and development | 73,931 | 74,341 | 149,307 | 145,831 | |||
General and administrative | 23,462 | 32,723 | 46,572 | 68,487 | |||
Restructuring | 2,167 | — | 3,628 | — | |||
Total operating expenses | 243,418 | 264,262 | 493,162 | 533,752 | |||
(Loss) from operations | (41,290) | (85,040) | (63,496) | (66,420) | |||
Foreign currency transaction (loss) gain | (3,290) | 1,713 | (5,965) | 4,589 | |||
Interest income | 1,814 | 309 | 3,299 | 516 | |||
Interest expense | (1,778) | (1,944) | (3,696) | (3,890) | |||
(Loss) income on capped call transactions | (1,361) | (18,945) | 1,845 | (49,505) | |||
Other income, net | 5,702 | 3,785 | 12,285 | 6,526 | |||
(Loss) before provision for income taxes | (40,203) | (100,122) | (55,728) | (108,184) | |||
Provision for income taxes | 6,601 | 186,174 | 11,850 | 178,491 | |||
Net (loss) | $ (46,804) | $ (286,296) | $ (67,578) | $ (286,675) | |||
(Loss) per share | |||||||
Basic | $ (0.56) | $ (3.50) | $ (0.82) | $ (3.51) | |||
Diluted | $ (0.56) | $ (3.50) | $ (0.82) | $ (3.51) | |||
Weighted-average number of common shares outstanding | |||||||
Basic | 83,039 | 81,847 | 82,823 | 81,764 | |||
Diluted | 83,039 | 81,847 | 82,823 | 81,764 |
PEGASYSTEMS INC. UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) | |||
June 30, 2023 | December 31, 2022 | ||
Assets | |||
Current assets: | |||
Cash and cash equivalents | $ 186,874 | $ 145,054 | |
Marketable securities | 125,939 | 152,167 | |
Total cash, cash equivalents, and marketable securities | 312,813 | 297,221 | |
Accounts receivable | 163,915 | 255,150 | |
Unbilled receivables | 182,257 | 213,719 | |
Other current assets | 78,526 | 80,388 | |
Total current assets | 737,511 | 846,478 | |
Unbilled receivables | 70,486 | 95,806 | |
Goodwill | 81,593 | 81,399 | |
Other long-term assets | 302,848 | 333,989 | |
Total assets | $ 1,192,438 | $ 1,357,672 | |
Liabilities and stockholders' equity | |||
Current liabilities: | |||
Accounts payable | $ 8,438 | $ 18,195 | |
Accrued expenses | 53,110 | 50,355 | |
Accrued compensation and related expenses | 70,965 | 127,728 | |
Deferred revenue | 311,330 | 325,212 | |
Other current liabilities | 17,269 | 17,450 | |
Total current liabilities | 461,112 | 538,940 | |
Convertible senior notes, net | 498,140 | 593,609 | |
Operating lease liabilities | 72,886 | 79,152 | |
Other long-term liabilities | 14,904 | 15,128 | |
Total liabilities | 1,047,042 |