CAMBRIDGE, Mass. – February 25, 2014 – Pegasystems Inc. (NASDAQ: PEGA), the software company powering the digital enterprise with Better Business Software™ that helps organizations engage customers, simplify operations, and embrace change, today announced results for its fourth quarter and full year ended December 31, 2013.
“With a strong second half, Pega crossed the half-billion dollar revenue mark while also materially increasing license backlog," said Alan Trefler, Founder and CEO of Pegasystems. “Our license and maintenance revenue grew to 69% of total revenue, consistent with our strategy of expanding our partner ecosystem and providing online customer education through PegaACADEMY. Both customers and partners are showing great enthusiasm for our recently released Pega 7 Build For Change®Platform.”
“We are seeing strong demand for both tactical and transformative client engagements across our industry and government verticals. Empowered customers, heightened regulation, and increased competition are driving organizations to recognize they must become digital enterprises in order to adapt and thrive. Our industry leading platform unifies the best of Business Process Management (BPM), Multi-Channel Customer Relationship Management (CRM), Business Rules, and Adaptive Analytics to uniquely meet these needs. Increasingly, the world’s most sophisticated companies are relying on Pega to improve customer engagement, simplify business operations and Build For Change®,” concluded Mr. Trefler.
Cash: Total cash, cash equivalents, and marketable securities at the end of the year was $156.7 million, down from Q3 primarily as a result of the $25.6 million of net cash used to complete the acquisition of Antenna early in the quarter.
Cash generated from operations for the full year 2013 was $80.7 million, an increase of 85% on a year-over-year basis. Free Cash Flow, which we define as operating cash flow less Cap Ex, was $75 million.
License Backlog: The Company computes license backlog by adding billed deferred license revenue and off-balance sheet license commitments, which is business that is contracted, unbilled and not recorded on the Company’s balance sheet.
Total billed deferred license revenue on the balance sheet as of December 31, 2013 was $61.5 million, an increase of 55% on a year-over-year basis. Off-balance sheet license commitments as of December 31, 2013 totaled $264.3 million, an increase of 4% on a year-over-year basis.
Current billed deferred license revenue on the balance sheet as of December 31, 2013 was $28.8 million, an increase of 19% on a year-over-year basis. Current off-balance sheet license commitments as of December 31, 2013 expected to be billed and realized in the next twelve months, totaled $92.2 million, an increase of 26% on a year-over-year basis.
“Our fourth quarter bookings performance showed a very high ratio of ratable license deals, which led to a significant year-over-year increase in our license backlog as of the end of 2013. Nonetheless, we had extremely strong EPS performance as a result of vigilant expense management given uncertainty around the macro economy earlier in the year,” said Rafe Brown, Pegasystems’ CFO. “The combination of our increased backlog, our solid pipeline of opportunities, and compelling value proposition, provides us with a strong foundation for fiscal 2014. This view is supported by our 2014 revenue guidance, which calls for total revenue growth in the low teens and assumes even faster growth in our license revenue.”
Business Outlook: As of February 25, 2014, Pegasystems is initiating revenue and EPS guidance for fiscal year 2014 as follows:
Full Year 2014 Revenue: GAAP revenue for the full year 2014 is projected to be approximately $576 million. Non-GAAP revenue for the full year 2014 is projected to be approximately $580 million.
Full Year 2014 Earnings Per Share: GAAP earnings per share for the full year 2014 is expected to be approximately $1.00. Non-GAAP earnings per share for the full year 2014 is expected to be approximately $1.56.
See the reconciliation of our GAAP revenue and EPS guidance to non-GAAP revenue and EPS guidance for the full year of 2014 at the end of this release.
Quarterly Conference Call
Pegasystems will host a conference call and live Webcast associated with this announcement at 6:00 p.m. EST today. A live audio webcast of the conference call, together with detailed financial information, can be accessed through the Company's Web site by at www.pega.com/about-us/investors. 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 Investors section. A replay of the call will also be available on www.pega.com in the Investors section Audio Archives 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, restructuring costs, and one-time expenses associated with relocation of the Company’s headquarters. 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.
“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. 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. This press release contains forward-looking statements about expected GAAP and non-GAAP financial results for the full fiscal year of 2014, including revenue and EPS.
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 and healthcare markets, reliance on third party relationships, the potential loss of vendor specific objective evidence for our professional services, the financial impact of the Antenna acquisition, 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, 2013 and other recent filings with the Securities and Exchange Commission. These documents are available on the Company’s website at www.pega.com/about-us/investors/sec-filings. The forward-looking statements contained in this press release represent the Company's views as of February 25, 2014. 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 February 25, 2014.