CAMBRIDGE, Mass., July 27, 2022 /PRNewswire/ -- Pegasystems Inc. (NASDAQ: PEGA), the low-code platform provider that builds agility into the world's leading organizations, released its financial results for the second quarter of 2022.
"This year has turned out to be an extremely volatile business environment," said Alan Trefler, founder and CEO, Pegasystems. "The ongoing uncertainty will continue to put pressure on our clients. But this is an environment for which Pega is uniquely suited, as our low-code platform allows these same organizations to more easily adapt to change."
"In the first half of 2022, we've grown annual contract value ("ACV") 19 percent year-over-year in constant currency while showing additional signs of improving profitability," said Ken Stillwell, COO and CFO, Pegasystems. "We're doubling down on our work to become a Rule of 40 company in 2024."
Financial and performance metrics (1) | |||||||||||
(Dollars in thousands, except per share amounts) | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||
2022 | 2021 | Change | 2022 | 2021 | Change | ||||||
Total revenue | $ 274,337 | $ 325,702 | (16) % | $ 650,644 | $ 639,201 | 2 % | |||||
Net (loss) income - GAAP | $ (286,296) | $ 37,291 | * | $ (286,675) | $ 30,674 | * | |||||
Net (loss) income - non-GAAP | $ (31,406) | $ 21,792 | * | $ 18,768 | $ 45,433 | (59) % | |||||
Diluted (loss) earnings per share - GAAP | $ (3.50) | $ 0.43 | * | $ (3.51) | $ 0.36 | * | |||||
Diluted (loss) earnings per share - non-GAAP | $ (0.38) | $ 0.25 | * | $ 0.22 | $ 0.53 | (58) % |
(Dollars in thousands) | Three Months Ended June 30, | Change | Six Months Ended June 30, | Change | |||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||
Pega Cloud | $ 93,506 | 34 % | $ 73,293 | 23 % | $ 20,213 | 28 % | $ 183,823 | 28 % | $ 141,151 | 22 % | $ 42,672 | 30 % | |||||
Maintenance | 78,326 | 29 % | 78,782 | 24 % | (456) | (1) % | 158,042 | 24 % | 154,343 | 24 % | 3,699 | 2 % | |||||
Subscription services | 171,832 | 63 % | 152,075 | 47 % | 19,757 | 13 % | 341,865 | 52 % | 295,494 | 46 % | 46,371 | 16 % | |||||
Subscription license | 41,600 | 15 % | 104,296 | 32 % | (62,696) | (60) % | 179,133 | 28 % | 215,805 | 34 % | (36,672) | (17) % | |||||
Subscription | 213,432 | 78 % | 256,371 | 79 % | (42,939) | (17) % | 520,998 | 80 % | 511,299 | 80 % | 9,699 | 2 % | |||||
Perpetual license | 2,266 | 1 % | 12,596 | 4 % | (10,330) | (82) % | 9,706 | 1 % | 18,048 | 3 % | (8,342) | (46) % | |||||
Consulting | 58,639 | 21 % | 56,735 | 17 % | 1,904 | 3 % | 119,940 | 19 % | 109,854 | 17 % | 10,086 | 9 % | |||||
$ 274,337 | 100 % | $ 325,702 | 100 % | $ (51,365) | (16) % | $ 650,644 | 100 % | $ 639,201 | 100 % | $ 11,443 | 2 % |
(1) | See the Schedules at the end of this release for additional information, including a reconciliation of our non-GAAP and GAAP measures |
Quarterly conference call
A conference call and audio-only webcast will be conducted at 5:00 p.m. EDT on Wednesday, July 27, 2022. Members of the public and investors are invited to join the call and participate in the question and answer session by dialing 1-888-394-8218 (domestic), 1-323-794-2588 (international), or via webcast (https://viavid.webcasts.com/starthere.jsp?ei=1558139&tp_key=0cc6605362) 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
We believe that non-GAAP financial measures help investors understand our core operating results and prospects, consistent with how management measures and forecasts our performance without the effect of often one-time charges and other items outside our normal operations. The supplementary non-GAAP financial measures are not meant to be superior to or a substitute for financial measures prepared under U.S. GAAP.
Reconciliations of our non-GAAP and GAAP measures are at the end of this release.
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, projects, forecasts, guidance, likely, and usually, or variations of such words and other similar expressions identify forward-looking statements, which 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:
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, 2021, Part II of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, and other filings we make with the U.S. Securities and Exchange Commission ("SEC").
Except as required by applicable law, we do not undertake and expressly disclaim any obligation to update or revise these forward-looking statements publicly, whether due to new information, future events, or otherwise.
The forward-looking statements in this press release represent our views as of July 27, 2022.
About Pegasystems
Pega provides a powerful low-code platform that builds agility into the world's leading organizations so they can adapt to 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 PintchmanVP, Corporate Communicationslisapintchman.rogers@pega.com617-866-6022Twitter: @pega
Investor contact:Peter WelburnVP, Corporate Development & Investor RelationsPegaInvestorRelations@pega.com617-498-8968
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, | ||||||
2022 | 2021 | 2022 | 2021 | ||||
Revenue | |||||||
Subscription services | $ 171,832 | $ 152,075 | $ 341,865 | $ 295,494 | |||
Subscription license | 41,600 | 104,296 | 179,133 | 215,805 | |||
Perpetual license | 2,266 | 12,596 | 9,706 | 18,048 | |||
Consulting | 58,639 | 56,735 | 119,940 | 109,854 | |||
Total revenue | 274,337 | 325,702 | 650,644 | 639,201 | |||
Cost of revenue | |||||||
Subscription services | 36,533 | 29,046 | 68,563 | 57,389 | |||
Subscription license | 673 | 585 | 1,295 | 1,205 | |||
Perpetual license | 36 | 71 | 70 | 101 | |||
Consulting | 57,873 | 54,829 | 113,384 | 108,283 | |||
Total cost of revenue | 95,115 | 84,531 | 183,312 | 166,978 | |||
Gross profit | 179,222 | 241,171 | 467,332 | 472,223 | |||
Operating expenses | |||||||
Selling and marketing | 157,198 | 156,423 | 319,434 | 305,162 | |||
Research and development | 74,341 | 64,395 | 145,831 | 126,837 | |||
General and administrative | 32,723 | 19,161 | 68,487 | 37,431 | |||
Total operating expenses | 264,262 | 239,979 | 533,752 | 469,430 | |||
(Loss) income from operations | (85,040) | 1,192 | (66,420) | 2,793 | |||
Foreign currency transaction gain (loss) | 1,713 | (403) | 4,589 | (5,501) | |||
Interest income | 309 | 236 | 516 | 389 | |||
Interest expense | (1,944) | (1,959) | (3,890) | (3,839) | |||
(Loss) income on capped call transactions | (18,945) | 26,309 | (49,505) | 7,192 | |||
Other income, net | 3,785 | — | 6,526 | 106 | |||
(Loss) income before provision for (benefit from) income taxes | (100,122) | 25,375 | (108,184) | 1,140 | |||
Provision for (benefit from) income taxes | 186,174 | (11,916) | 178,491 | (29,534) | |||
Net (loss) income | $ (286,296) | $ 37,291 | $ (286,675) | $ 30,674 | |||
(Loss) earnings per share | |||||||
Basic | $ (3.50) | $ 0.46 | $ (3.51) | $ 0.38 | |||
Diluted | $ (3.50) | $ 0.43 | $ (3.51) | $ 0.36 | |||
Weighted-average number of common shares outstanding | |||||||
Basic | 81,847 | 81,316 | 81,764 | 81,161 | |||
Diluted | 81,847 | 90,320 | 81,764 | 86,006 |
PEGASYSTEMS INC.UNAUDITED RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES | ||||||
(in thousands, except percentages and per share amounts) | Three Months Ended June 30, | Six Months Ended June 30, | ||||
2022 | 2021 | Change | 2022 | 2021 | Change | |
Net (loss) income - GAAP | $ (286,296) | $ 37,291 | * | $ (286,675) | $ 30,674 | * |
Stock-based compensation (1) | 31,300 | 30,688 | 59,527 | 60,788 | ||
Capped call transactions | 18,945 | (26,309) | 49,505 | (7,192) | ||
Litigation | 10,582 | 2,369 | 27,950 | 4,329 | ||
Convertible senior notes | 720 | 675 | 1,439 | 1,348 | ||
Headquarters lease | — | (6,266) | — | (9,683) | ||
Amortization of intangible assets | 1,025 | 1,002 | 1,997 | 2,004 | ||
Foreign currency transaction (gain) loss | (1,713) | 403 | (4,589) | 5,501 | ||
Other | (1,001) | — | (3,583) | 12 | ||
Income tax effects (2) | 195,032 | (18,061) | 173,197 | (42,348) | ||
Net (loss) income - non-GAAP | $ (31,406) | $ 21,792 | * | $ 18,768 | $ 45,433 | (59) % |
Diluted (loss) earnings per share - GAAP | $ (3.50) | $ 0.43 | * | $ (3.51) | $ 0.36 | * |
non-GAAP adjustments | 3.12 | (0.18) | 3.73 | 0.17 | ||
Diluted (loss) earnings per share - non-GAAP | $ (0.38) | $ 0.25 | * | $ 0.22 | $ 0.53 | (58) % |
Diluted weighted-average number of common shares outstanding - GAAP | 81,847 | 90,320 | (9) % | 81,764 | 86,006 | (5) % |
non-GAAP Adjustments | — | (4,443) | 2,063 | — | ||
Diluted weighted-average number of common shares outstanding - non-GAAP | 81,847 | 85,877 | (5) % | 83,827 | 86,006 | (3) % |
* not meaningful |
Our non-GAAP financial measures reflect the following adjustments:
(1) Stock-based compensation: | |||||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||
(in thousands) | 2022 | 2021 | 2022 | 2021 | |||
Cost of revenue | $ 6,579 | $ 5,849 | $ 12,957 | $ 11,774 | |||
Selling and marketing | 12,633 | 14,748 | 23,591 | 28,468 | |||
Research and development | 7,355 | 6,343 | 14,701 | 13,113 | |||
General and administrative | 4,733 | 3,748 | 8,278 | 7,433 | |||
$ 31,300 | $ 30,688 | $ 59,527 | $ 60,788 | ||||
Income tax benefit | $ (543) | $ (6,192) | $ (905) | $ (12,183) |
(2) Effective income tax rates: | |||
Six Months Ended June 30, | |||
2022 | 2021 | ||
GAAP | 165 % | (2,591) % | |
non-GAAP | 22 % | 22 % |
Our GAAP effective income tax rate is subject to significant fluctuations due to several factors, including excess tax benefits generated by our stock-based compensation plans, gains and losses on our capped call transactions, tax credits for stock-based compensation awards to research and development employees, and unfavorable foreign stock-based compensation adjustments. We determine our non-GAAP income tax rate using applicable rates in taxing jurisdictions and assessing certain factors, including our historical and forecasted earnings by jurisdiction, discrete items, and our ability to realize tax assets. Under GAAP we recorded a valuation allowance on our deferred tax assets of $192 million in the three months ended June 30, 2022. See "Note 12. Income Taxes" in Part I, Item 1 of our Quarterly Report on Form 10-Q for the three months ended June 30, 2022 for additional information. We believe it is beneficial for our management to review our non-GAAP results consistent with our annual plan's effective income tax rate as established at the beginning of each year, given tax rate volatility.
PEGASYSTEMS INC.UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS(in thousands) | |||
June 30, 2022 | December 31, 2021 | ||
Assets | |||
Current assets: | |||
Cash and cash equivalents | $ 109,275 | $ 159,965 | |
Marketable securities | 187,613 | 202,814 | |
Total cash, cash equivalents, and marketable securities | 296,888 | 362,779 | |
Accounts receivable | 171,556 | 182,717 | |
Unbilled receivables | 201,130 | 226,714 | |
Other current assets | 70,633 | 68,008 | |
Total current assets | 740,207 | 840,218 | |
Unbilled receivables | 115,901 | 129,789 | |
Goodwill | 81,717 | 81,923 | |
Other long-term assets | 320,557 | 541,601 | |
Total assets | $ 1,258,382 | $ 1,593,531 | |
Liabilities and stockholders' equity | |||
Current liabilities: | |||
Accounts payable | $ 21,465 | $ 15,281 | |
Accrued expenses | 63,120 | 63,890 | |
Accrued compensation and related expenses | 73,945 | 120,946 | |
Deferred revenue | 269,121 | 275,844 | |
Other current liabilities | 7,800 | 9,443 | |
Total current liabilities | 435,451 | 485,404 | |
Convertible senior notes, net | 592,161 | 590,722 | |
Operating lease liabilities | 84,170 | 87,818 | |
Other long-term liabilities | 12,821 | 13,499 | |
Total liabilities | 1,124,603 | 1,177,443 | |
Total stockholders' equity | 133,779 | 416,088 | |
Total liabilities and stockholders' equity | $ 1,258,382 | $ 1,593,531 |
PEGASYSTEMS INC.UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands) | |||
Six Months Ended June 30, | |||
2022 | 2021 | ||
Net (loss) income | $ (286,675) | $ 30,674 | |
Adjustments to reconcile net (loss) income to cash (used in) provided by operating activities | |||
Non-cash items | 314,231 | 76,906 | |
Change in operating assets and liabilities, net | (32,625) | (88,170) | |
Cash (used in) provided by operating activities | (5,069) | 19,410 | |
Cash (used in) provided by investing activities | (1,523) | 10,493 | |
Cash (used in) financing activities | (41,191) | (60,717) | |
Effect of exchange rate changes on cash and cash equivalents | (2,907) | (1,207) | |
Net (decrease) in cash and cash equivalents | (50,690) | (32,021) | |
Cash and cash equivalents, beginning of period | 159,965 | 171,899 | |
Cash and cash equivalents, end of period | $ 109,275 | $ 139,878 |
PEGASYSTEMS INC.ANNUAL CONTRACT VALUE(in thousands, except percentages) | ||||||
Annual contract value ("ACV") - ACV represents the annualized value of our active contracts as of the measurement date. The contract's total value is divided by its duration in years to calculate ACV for subscription license and Pega Cloudcontracts. Maintenance revenue for the quarter then ended is multiplied by four to calculate ACV for maintenance. ACV is a performance measure that we believe provides useful information to our management and investors, particularly duringour subscription transition. | ||||||
June 30, 2022 | June 30, 2021 | Change | ||||
Pega Cloud | $ 404,109 | $ 306,919 | $ 97,190 | 32 % | ||
Maintenance | 313,304 | 315,128 | (1,824) | (1) % | ||
Subscription services | 717,413 | 622,047 | 95,366 | 15 % | ||
Subscription license | 310,139 | 277,388 | 32,751 | 12 % | ||
$ 1,027,552 | $ 899,435 | $ 128,117 | 14 % |
PEGASYSTEMS INC.BACKLOG(in thousands, except percentages) | ||||||||||||
Remaining performance obligations ("Backlog") - Expected future revenue from existing non-cancellable contracts: | ||||||||||||
As of June 30, 2022: | ||||||||||||
Subscription services | Subscription license | Perpetual license | Consulting | Total | ||||||||
Maintenance | Pega Cloud | |||||||||||
1 year or less | $ 204,974 | $ 320,102 | $ 46,810 | $ 6,681 | $ 32,159 | $ 610,726 | 54 % | |||||
1-2 years | 57,862 | 200,135 | 10,711 | 4,505 | 7,919 | 281,132 | 25 % | |||||
2-3 years | 28,403 | 96,861 | 2,126 | 2,252 | 2,574 | 132,216 | 12 % | |||||
Greater than 3 years | 18,447 | 81,069 | 1,680 | — | 424 | 101,620 | 9 % | |||||
$ 309,686 | $ 698,167 | $ 61,327 | $ 13,438 | $ 43,076 | $ 1,125,694 | 100 % | ||||||
% of Total | 28 % | 62 % | 5 % | 1 % | 4 % | 100 % | ||||||
Change since June 30, 2021 | ||||||||||||
$ (26,763) | $ 95,432 | $ (1,691) | $ 6,497 | $ 21,083 | $ 94,558 | |||||||
(8) % | 16 % | (3) % | 94 % | 96 % | 9 % |
As of June 30, 2021: | ||||||||||||
Subscription services | Subscription license | Perpetual license | Consulting | Total | ||||||||
Maintenance | Pega Cloud | |||||||||||
1 year or less | $ 214,645 | $ 281,793 | $ 46,146 | $ 6,707 | $ 17,863 | $ 567,154 | 56 % | |||||
1-2 years | 59,164 | 194,841 | 15,708 | 234 | 2,675 | 272,622 | 26 % | |||||
2-3 years | 36,076 | 88,855 | 909 | — | 762 | 126,602 | 12 % | |||||
Greater than 3 years | 26,564 | 37,246 | 255 | — | 693 | 64,758 | 6 % | |||||
$ 336,449 | $ 602,735 | $ 63,018 | $ 6,941 | $ 21,993 | $ 1,031,136 | 100 % | ||||||
% of Total | 33 % | 58 % | 6 % | 1 % | 2 % | 100 % |
RECONCILIATION OF GAAP BACKLOG AND CONSTANT CURRENCY BACKLOG | |||
(in millions) | Q2 2022 | 1 Year Growth Rate | |
Backlog - GAAP | $ 1,126 | 9 % | |
Impact of changes in foreign exchange rates | 57 | 6 % | |
Backlog - Constant Currency | $ 1,183 | 15 % |
Note: Constant currency Backlog is calculated by applying foreign exchange rates for the earliest period shown to all periods. The above constant currency measures reflect foreign exchange rates applicable as of Q2 2021.
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SOURCE Pegasystems Inc.