Pega Cloud Soars in First Quarter 2019

Pega Cloud Soars in First Quarter 2019

Pegasystems Inc. released its financial results for the first quarter of 2019.

"We're off to a solid start for 2019," said Alan Trefler, founder and CEO, Pegasystems. "We continue to see strong demand from companies engaging in digital transformation to improve customer experience and automate business processes."

"It's really exciting to see Pega becoming a much larger recurring business," said Ken Stillwell, CFO. "Pega Cloud reached 70% of new client commitments, above our Q1 2018 mix of 50%.  While this is terrific for our business, it resulted in a reduction of nearly $20 million of Q1 revenue with a commensurate increase to backlog."

Financial metrics (1)

(Dollars in thousands, except per share amounts)Three Months Ended
March 31,
20192018Change
Total revenue$212,546$235,182(10)%
Subscription revenue (2)$143,778$144,802(1)%
Net (loss) income (GAAP)$(28,717)$12,200*
Net (loss) income (Non-GAAP)$(9,376)$20,257*
Diluted (loss) earnings per share (GAAP)$(0.37)$0.15*
Diluted (loss) earnings per share (Non-GAAP)$(0.12)$0.24*

* not meaningful

(1) A reconciliation of the GAAP measures to our Non-GAAP measures is contained in the financial schedules at the end of this release.

(2) Reflects client arrangements (term license, cloud, and maintenance) that are subject to renewal.

(Dollars in thousands)Three Months Ended
March 31,
20192018Change
Cloud$27,75813%$15,5827%$12,17678%
Term license48,31423%64,69528%(16,381)(25)%
Maintenance67,70632%64,52527%3,1815%
Subscription143,77868%144,80262%(1,024)(1)%
Perpetual license14,9507%23,07810%(8,128)(35)%
Consulting53,81825%67,30228%(13,484)(20)%
Total revenue$212,546100%$235,182100%$(22,636)(10)%


Annual contract value ("ACV") (1)

The change in ACV measures the growth and predictability of future cash flows from Pega cloud and client cloud committed arrangements as of the end of the particular reporting period.

ACV, as of a given date, is the sum of the following two components:

  • Client Cloud: the sum of (1) the annual value of each term license contract in effect on such date, which is equal to its total value divided by the total number of years and (2) maintenance revenue reported for the quarter ended on such date, multiplied by four. We do not provide hosting for Client Cloud arrangements.
  • Pega Cloud: the total of the annual value of each cloud contract in effect on such date, which is equal to its total value divided by the total number of years.

Remaining performance obligations

Revenue recognition timing on existing contracts:

March 31, 2019
(Dollars in thousands)Perpetual licenseTerm licenseMaintenanceCloudConsultingTotal
1 year or less$10,263$44,404$187,324$115,548$13,251$370,79058%
1-2 years9984,2749,35091,5391,363107,52417%
2-3 years2,1807564,43871,50947379,35613%
Greater than 3 years1352,00872,7422774,91212%
$13,441$49,569$203,120$351,338$15,114$632,582100%
Increase (decrease) from March 31, 2018(73)%40%10%96%44%38%
March 31, 2018
(Dollars in thousands)Perpetual licenseTerm licenseMaintenanceCloudConsultingTotal
1 year or less$33,859$21,087$156,702$47,764$9,403$268,81559%
1-2 years14,1067,87721,38152,8491,09897,31121%
2-3 years1,2045,6344,92437,84449,60611%
Greater than 3 years3828531,82540,47843,5389%
$49,551$35,451$184,832$178,935$10,501$459,270100%

The above amounts include contracts that have an original expected duration of one year or less.

Quarterly conference call

A conference call and audio-only webcast will be conducted at 5:00 p.m. EDT on May 7, 2019.

Members of the public and investors are invited to join the call and participate in the question and answer session by dialing 1-800-263-0877 (domestic), 1-646-828-8143 (international), or via webcast 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.

A replay of the call will also be available on www.pega.com/about/investors by clicking the earnings calls link in the investors section.

Discussion of non-GAAP financial measures

To supplement the 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 on both a GAAP and non-GAAP basis, and both are approved by our board of directors. In addition, because 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 stock-based compensation expense, amortization of intangible assets, and foreign currency transaction gains and losses. The Company believes 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 measures 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.

These forward-looking statements are based on current expectations, estimates, forecasts, and projections about the industry and markets in which we operate, and management's beliefs and assumptions. In addition, other written or oral statements that constitute forward-looking statements may be made by us or on our behalf. Words such as "expect," "anticipate," "intend," "plan," "believe," "could," "estimate," "may," "target," "strategy," "is intended to," "project," "guidance," "likely," "usually," or variations of such words and similar expressions are intended to identify such forward-looking statements.

Important factors that could cause actual future activities and results to differ materially from those expressed in such forward-looking statements include, among others, variation in demand for our products and services, reliance on third party relationships, reliance on key personnel, the inherent risks associated with international operations and the continued uncertainties in the global economy, our continued effort to market and sell both domestically and internationally, foreign currency exchange rates, the potential legal and financial liabilities and reputation damage due to cyber-attacks and security breaches, and management of our growth. These risks and other factors that could cause actual results to differ materially from those expressed in such forward-looking statements are described more completely in Part I of our Annual Report on Form 10-K for the year ended December 31, 2018, as well as other filings we make with the U.S. Securities and Exchange Commission ("SEC"). These documents are available on the Company's website at www.pega.com/about/investors.

The forward-looking statements contained in this press release represent the Company's views as of May 7, 2019. Investors are cautioned not to place undue reliance on such forward-looking statements and there are no assurances that the results contained in such statements will be achieved. Although new information, future events, or risks may cause actual results to differ materially from future results expressed or implied by such forward-looking statements, except as required by applicable law, we do not undertake and specifically disclaim any obligation to publicly update or revise these forward-looking statements whether as the result of new information, future events, or otherwise.

logo
Telecom Today
www.telecomtoday.in