Exhibit 99.1
Pegasystems Announces Financial Results for Fourth Quarter and Fiscal Year 2014
GAAP License and Cloud Revenue increases 24% in 2014;
2014 GAAP EPS of $0.42; 2014 Non-GAAP EPS of $0.74
CAMBRIDGE, Mass. – February 26, 2015 – Pegasystems Inc. (NASDAQ: PEGA), the software company empowering the world’s leading enterprises with strategic business applications, today announced results for its fourth quarter and full year ended December 31, 2014.
“This was a solid quarter for Pegasystems, capping off what was a strong year overall for the company,” said Alan Trefler, Founder and CEO of Pegasystems. “Our 2014 GAAP license revenue of $232 million represents a 21% increase compared to last year. We exceeded our original, full year GAAP revenue guidance of $576 million, ending the year with $590 million in total GAAP revenue, a 16% increase over 2013. Our strength in marketing, sales and onboarding, and customer service is driving business growth across the globe. We’re pleased our clients recognize the value we bring in transforming their customer relationship management initiatives and proud of the results our clients are achieving with our software.”
“As previously discussed, we began a transition we are very excited about in the second half of 2014,” continued Mr. Trefler. “We have evolved our market positioning and have been enhancing our products to target a broader range of clients we believe represent a significantly larger long-term revenue opportunity. We expect to continue our investment in 2015 in marketing and product development and reallocate our resources to pursue a more repeatable and scalable sales model, consistent with the value we believe our technology can bring to a broader market.”
SELECTED GAAP & NON-GAAP RESULTS (1)
| Three Months Ended December 31, | ||||||||||||||||||||||||
| 2014 | 2014 | 2013 | 2013 | % Increase | ||||||||||||||||||||
| ($ in ‘000s) |
GAAP | Non-GAAP | GAAP | Non-GAAP | GAAP | Non-GAAP | ||||||||||||||||||
| Total Revenue |
$ | 168,924 | $ | 169,050 | $ | 153,382 | $ | 155,578 | 10 | % | 9 | % | ||||||||||||
| License Revenue |
$ | 77,418 | $ | 77,418 | $ | 63,659 | $ | 64,181 | 22 | % | 21 | % | ||||||||||||
| Cloud Revenue |
$ | 4,468 | $ | 4,531 | $ | 3,279 | $ | 3,893 | 36 | % | 16 | % | ||||||||||||
| Net Income |
$ | 20,104 | $ | 26,104 | $ | 15,561 | $ | 23,993 | 29 | % | 9 | % | ||||||||||||
| Diluted Earnings per share (2) |
$ | 0.26 | $ | 0.33 | $ | 0.20 | $ | 0.31 | 30 | % | 6 | % | ||||||||||||
| Year Ended December 31, | % Increase | |||||||||||||||||||||||
| 2014 | 2014 | 2013 | 2013 | (Decrease) | ||||||||||||||||||||
| ($ in ‘000s) |
GAAP | Non-GAAP | GAAP | Non-GAAP | GAAP | Non-GAAP | ||||||||||||||||||
| Total Revenue |
$ | 590,004 | $ | 593,448 | $ | 508,954 | $ | 511,150 | 16 | % | 16 | % | ||||||||||||
| License Revenue |
$ | 232,336 | $ | 233,901 | $ | 191,876 | $ | 192,398 | 21 | % | 22 | % | ||||||||||||
| Cloud Revenue |
$ | 16,614 | $ | 17,332 | $ | 8,720 | $ | 9,334 | 91 | % | 86 | % | ||||||||||||
| Net Income |
$ | 33,255 | $ | 58,167 | $ | 38,043 | $ | 58,377 | (13 | %) | (0 | %) | ||||||||||||
| Diluted Earnings per share (2) |
$ | 0.42 | $ | 0.74 | $ | 0.49 | $ | 0.75 | (14 | %) | (1 | %) | ||||||||||||
| (1) | See a reconciliation of our GAAP to Non-GAAP measures contained in the financial schedules at the end of this release. |
| (2) | The number of common shares and per share amounts have been retroactively restated for all prior periods to reflect the Company’s two-for-one common stock split effected in the form of a common stock dividend distributed on April 1, 2014. |
Cash: Total cash, cash equivalents, and marketable securities at December 31, 2014 was $211.2 million, up 35% from December 31, 2013.
Cash generated from operations for the full year 2014 was $99.9 million, an increase of 24% on a year-over-year basis. Free Cash Flow, which we define as operating cash flow less Cap Ex, was $88.4 million for 2014, an increase of 18% on a year-over-year basis.
1
License and Cloud Backlog: The Company computes license and cloud backlog by adding billed deferred license and cloud revenue and off-balance sheet license and cloud commitments, which is business that is contracted, unbilled, and not recorded on the Company’s balance sheet.
License and Cloud Backlog (1)
| December 31, | % Increase | |||||||||||
| ($ in millions) |
2014 | 2013 | (Decrease) | |||||||||
| Total billed deferred license and cloud revenue |
63.0 | 64.3 | (2 | %) | ||||||||
| Total off-balance sheet license and cloud commitments |
301.5 | 283.1 | 6 | % | ||||||||
| TOTAL LICENSE AND CLOUD BACKLOG |
364.5 | 347.4 | 5 | % | ||||||||
| (1) | See historical quarterly license backlog amounts including cloud in a separate schedule at the end of this release. |
“We are pleased with our performance in 2014,” said Rafe Brown, Pegasystems CFO, “and with continued application enhancements, a strong customer base, and increased marketing to develop new customers, we believe the company is positioned for growth in 2015 and beyond. Our confidence is reflected in our 2015 total revenue guidance, which contemplates license and cloud revenue growth continuing to grow much faster than our professional services revenue.”
Business Outlook: As of February 26, 2015, Pegasystems is initiating revenue and EPS guidance for fiscal year 2015 as follows:
Full Year 2015 Revenue: GAAP and non-GAAP revenue for the full year 2015 is projected to be approximately $653 million.
Full Year 2015 Earnings Per Share: GAAP diluted earnings per share for the full year 2015 is expected to be approximately $0.49. Non-GAAP diluted earnings per share for the full year 2015 is expected to be approximately $0.78.
See the reconciliation of our GAAP diluted EPS guidance to non-GAAP diluted EPS guidance for the full year of 2015 at the end of this release.
Quarterly Conference Call
Pegasystems will host a conference call and live Webcast associated with this announcement at 5:00 p.m. EST today. A live audio webcast of the conference call, together with detailed financial information, can be accessed through the Company’s Website at www.pega.com/about/investors. Dial-in information is as follows: 1-877-407-3982 (domestic) or 1-201-493-6780 (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 Earnings Call Archive 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, and restructuring expenses. 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.
2
Forward-Looking Statements
“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, including our guidance regarding 2015 GAAP and non-GAAP revenue and diluted earnings per share. The words “expect,” “anticipate,” “intend,” “plan,” “believe,” “could,” “estimate,” “may,” “target,” “strategy,” “is intended to,” “project,” “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 consolidation in the financial services, insurance, healthcare, and communications markets, reliance on third party relationships, the potential loss of vendor specific objective evidence for our time and materials professional services arrangements, the inherent risks associated with international operations and the continued weakness in international economies, foreign currency exchange rates, the financial impact of the Antenna acquisition and any future acquisitions, 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, 2014 and other recent filings with the Securities and Exchange Commission. 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 February 26, 2015. 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, except as required by applicable law, 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 26, 2015.
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About Pegasystems
Pegasystems (NASDAQ: PEGA) develops strategic applications for sales, marketing, service and operations. Pega’s applications streamline critical business operations, connect enterprises to their customers seamlessly in real-time across channels, and adapt to meet rapidly changing requirements. Pega’s Global 500 customers include the world’s largest and most sophisticated enterprises. Pega’s applications, available in the cloud or on-premises, are built on its unified Pega 7 platform, which uses visual tools to easily extend and change applications to meet clients’ strategic business needs. Pega’s clients report that Pega gives them the fastest time to value, extremely rapid deployment, efficient re-use and global scale. For more information, please visit us at www.pega.com.
Press Contacts:
Lisa Pintchman
Pegasystems Inc.
lisa.pintchman@pega.com
(617) 866-6022
Twitter: @pega
Investor Contact:
Sheila Ennis
ICR for Pegasystems
sheila.ennis@icrinc.com
617-866-6077
All trademarks are the property of their respective owners.
3
Pegasystems Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
| Three Months Ended December 31, |
Year Ended December 31, |
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| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| Revenue: |
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| Software license |
$ | 77,418 | $ | 63,659 | $ | 232,336 | $ | 191,876 | ||||||||
| Maintenance |
48,684 | 45,071 | 186,239 | 157,309 | ||||||||||||
| Services |
42,822 | 44,652 | 171,429 | 159,769 | ||||||||||||
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| Total revenue |
168,924 | 153,382 | 590,004 | 508,954 | ||||||||||||
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|||||||||
| Cost of revenue: |
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| Software license |
1,127 | 1,530 | 4,959 | 6,281 | ||||||||||||
| Maintenance |
4,921 | 4,166 | 20,014 | 15,272 | ||||||||||||
| Services |
40,060 | 38,081 | 160,121 | 135,853 | ||||||||||||
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|
|||||||||
| Total cost of revenue (1) |
46,108 | 43,777 | 185,094 | 157,406 | ||||||||||||
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| Gross profit |
122,816 | 109,605 | 404,910 | 351,548 | ||||||||||||
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| Operating expenses: |
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| Selling and marketing |
55,886 | 53,815 | 206,658 | 181,094 | ||||||||||||
| Research and development |
28,101 | 20,603 | 108,591 | 79,726 | ||||||||||||
| General and administrative |
9,065 | 8,391 | 37,442 | 29,594 | ||||||||||||
| Acquisition-related |
71 | 761 | 488 | 1,306 | ||||||||||||
| Restructuring |
— | 1,731 | 192 | 1,731 | ||||||||||||
|
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|||||||||
| Total operating expenses (1) |
93,123 | 85,301 | 353,371 | 293,451 | ||||||||||||
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| Income from operations |
29,693 | 24,304 | 51,539 | 58,097 | ||||||||||||
| Foreign currency transaction (loss) gain |
(1,242 | ) | 73 | (3,769 | ) | (1,593 | ) | |||||||||
| Interest income, net |
215 | 148 | 683 | 524 | ||||||||||||
| Other income (expense), net |
48 | (217 | ) | (459 | ) | (635 | ) | |||||||||
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|||||||||
| Income before provision for income taxes |
28,714 | 24,308 | 47,994 | 56,393 | ||||||||||||
| Provision for income taxes |
8,610 | 8,747 | 14,739 | 18,350 | ||||||||||||
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| Net income |
$ | 20,104 | $ | 15,561 | $ | 33,255 | $ | 38,043 | ||||||||
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| Earnings per share (2): |
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| Basic |
$ | 0.27 | $ | 0.21 | $ | 0.44 | $ | 0.50 | ||||||||
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| Diluted |
$ | 0.26 | $ | 0.20 | $ | 0.42 | $ | 0.49 | ||||||||
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| Weighted-average number of common shares outstanding (2): |
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| Basic |
76,369 | 76,080 | 76,327 | 75,946 | ||||||||||||
| Diluted |
78,531 | 78,664 | 78,531 | 77,974 | ||||||||||||
| Dividends declared per share (2) |
$ | 0.030 | $ | 0.015 | $ | 0.105 | $ | 0.060 | ||||||||
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| (1) Includes stock-based compensation as follows: |
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| Cost of revenue |
$ | 1,519 | $ | 951 | $ | 5,335 | $ | 4,085 | ||||||||
| Operating expenses |
$ | 3,965 | $ | 2,205 | $ | 13,870 | $ | 8,784 | ||||||||
| (2) | The number of common shares and per share amounts have been retroactively restated for all prior periods to reflect the Company’s two-for-one common stock split effected in the form of a common stock dividend distributed on April 1, 2014. |
4
PEGASYSTEMS INC.
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES (1)
($ in thousands, except per share data)
| Three Months Ended December 31, | % Increase (Decrease) | |||||||||||||||||||||||||||||||
| 2014 GAAP |
Adj. | 2014 Non-GAAP |
2013 GAAP |
Adj. | 2013 Non-GAAP |
GAAP | Non-GAAP | |||||||||||||||||||||||||
| TOTAL REVENUE |
$ | 168,924 | $ | 126 | $ | 169,050 | $ | 153,382 | $ | 2,196 | $ | 155,578 | 10 | % | 9 | % | ||||||||||||||||
| Software license |
77,418 | — | 77,418 | 63,659 | 522 | 64,181 | 22 | % | 21 | % | ||||||||||||||||||||||
| Maintenance |
48,684 | 63 | 48,747 | 45,071 | 435 | 45,506 | 8 | % | 7 | % | ||||||||||||||||||||||
| Services |
42,822 | 63 | 42,885 | 44,652 | 1,239 | 45,891 | (4 | %) | (7 | %) | ||||||||||||||||||||||
| TOTAL COST OF REVENUE |
$ | 46,108 | $ | (2,870 | ) | $ | 43,238 | $ | 43,777 | $ | (2,772 | ) | $ | 41,005 | 5 | % | 5 | % | ||||||||||||||
| Amortization of intangible assets (2) (3) |
1,351 | (1,351 | ) | — | 1,821 | (1,821 | ) | — | ||||||||||||||||||||||||
| Stock-based compensation (3) |
1,519 | (1,519 | ) | — | 951 | (951 | ) | — | ||||||||||||||||||||||||
| GROSS MARGIN % |
73 | % | 74 | % | 71 | % | 74 | % | 125 | bp | 78 | bp | ||||||||||||||||||||
| TOTAL OPERATING EXPENSES |
$ | 93,123 | $ | (5,857 | ) | $ | 87,266 | $ | 85,301 | $ | (6,567 | ) | $ | 78,734 | 9 | % | 11 | % | ||||||||||||||
| Amortization of intangible assets (2) (3) |
1,821 | (1,821 | ) | — | 1,870 | (1,870 | ) | — | ||||||||||||||||||||||||
| Stock-based compensation (3) |
3,965 | (3,965 | ) | — | 2,205 | (2,205 | ) | — | ||||||||||||||||||||||||
| Acquisition-related |
71 | (71 | ) | — | 761 | (761 | ) | — | ||||||||||||||||||||||||
| Restructuring |
— | — | — | 1,731 | (1,731 | ) | — | |||||||||||||||||||||||||
| INCOME FROM OPERATIONS |
$ | 29,693 | $ | 8,853 | $ | 38,546 | $ | 24,304 | $ | 11,535 | $ | 35,839 | 22 | % | 8 | % | ||||||||||||||||
| OPERATING MARGIN % |
18 | % | 23 | % | 16 | % | 23 | % | 173 | bp | (23 | ) bp | ||||||||||||||||||||
| INCOME TAX EFFECTS (4) |
$ | 8,610 | $ | 2,853 | $ | 11,463 | $ | 8,747 | $ | 3,103 | $ | 11,850 | (2 | %) | (3 | %) | ||||||||||||||||
| NET INCOME |
$ | 20,104 | $ | 6,000 | $ | 26,104 | $ | 15,561 | $ | 8,432 | $ | 23,993 | 29 | % | 9 | % | ||||||||||||||||
| DILUTED EARNINGS PER SHARE (5) |
$ | 0.26 | $ | 0.07 | $ | 0.33 | $ | 0.20 | $ | 0.11 | $ | 0.31 | 30 | % | 6 | % | ||||||||||||||||
| DILUTED WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING (5) |
78,531 | — | 78,531 | 78,664 | — | 78,664 | 0 | % | 0 | % | ||||||||||||||||||||||
5
PEGASYSTEMS INC.
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES (1)
($ in thousands, except per share data)
| Year Ended December 31, | % Increase (Decrease) |
|||||||||||||||||||||||||||||||
| 2014 GAAP |
Adj. | 2014 Non-GAAP |
2013 GAAP |
Adj. | 2013 Non-GAAP |
GAAP | Non-GAAP | |||||||||||||||||||||||||
| TOTAL REVENUE |
$ | 590,004 | $ | 3,444 | $ | 593,448 | $ | 508,954 | $ | 2,196 | $ | 511,150 | 16 | % | 16 | % | ||||||||||||||||
| Software license |
232,336 | 1,565 | 233,901 | 191,876 | 522 | 192,398 | 21 | % | 22 | % | ||||||||||||||||||||||
| Maintenance |
186,239 | 533 | 186,772 | 157,309 | 435 | 157,744 | 18 | % | 18 | % | ||||||||||||||||||||||
| Services |
171,429 | 1,346 | 172,775 | 159,769 | 1,239 | 161,008 | 7 | % | 7 | % | ||||||||||||||||||||||
| TOTAL COST OF REVENUE |
$ | 185,094 | $ | (11,352 | ) | $ | 173,742 | $ | 157,406 | $ | (10,528 | ) | $ | 146,878 | 18 | % | 18 | % | ||||||||||||||
| Amortization of intangible assets (2) (3) |
6,017 | (6,017 | ) | — | 6,443 | (6,443 | ) | — | ||||||||||||||||||||||||
| Stock-based compensation (3) |
5,335 | (5,335 | ) | — | 4,085 | (4,085 | ) | — | ||||||||||||||||||||||||
| GROSS MARGIN % |
69 | % | 71 | % | 69 | % | 71 | % | (44) | bp | (54) | bp | ||||||||||||||||||||
| TOTAL OPERATING EXPENSES |
$ | 353,371 | $ | (22,342 | ) | $ | 331,029 | $ | 293,451 | $ | (17,391 | ) | $ | 276,060 | 20 | % | 20 | % | ||||||||||||||
| Amortization of intangible assets (2) (3) |
7,792 | (7,792 | ) | — | 5,570 | (5,570 | ) | — | ||||||||||||||||||||||||
| Stock-based compensation (3) |
13,870 | (13,870 | ) | — | 8,784 | (8,784 | ) | — | ||||||||||||||||||||||||
| Acquisition-related |
488 | (488 | ) | — | 1,306 | (1,306 | ) | — | ||||||||||||||||||||||||
| Restructuring |
192 | (192 | ) | — | 1,731 | (1,731 | ) | — | ||||||||||||||||||||||||
| INCOME FROM OPERATIONS |
$ | 51,539 | $ | 37,138 | $ | 88,677 | $ | 58,097 | $ | 30,115 | $ | 88,212 | (11 | %) | 1 | % | ||||||||||||||||
| OPERATING MARGIN % |
9 | % | 15 | % | 11 | % | 17 | % | (268) | bp | (231) | bp | ||||||||||||||||||||
| INCOME TAX EFFECTS (4) |
$ | 14,739 | $ | 12,226 | $ | 26,965 | $ | 18,350 | $ | 9,781 | $ | 28,131 | (20 | %) | (4 | %) | ||||||||||||||||
| NET INCOME |
$ | 33,255 | $ | 24,912 | $ | 58,167 | $ | 38,043 | $ | 20,334 | $ | 58,377 | (13 | %) | 0 | % | ||||||||||||||||
| DILUTED EARNINGS PER SHARE (5) |
$ | 0.42 | $ | 0.32 | $ | 0.74 | $ | 0.49 | $ | 0.26 | $ | 0.75 | (14 | %) | (1 | %) | ||||||||||||||||
| DILUTED WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING (5) |
78,531 | — | 78,531 | 77,974 | — | 77,974 | 1 | % | 1 | % | ||||||||||||||||||||||
6
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 Financial 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: |
Revenue: Business combination accounting rules require that we determine the fair value of the deferred revenue liability for contractual obligations assumed primarily from Antenna. In post-acquisition reporting periods, we recognize revenue for the fair value of these contracts, when all the revenue recognition criteria are satisfied, instead of the revenue that would have been recognized by Antenna as an independent company. We add back the effect of the deferred revenue fair value adjustment in non-GAAP revenue to reflect the full amount of these revenues to provide a more complete comparison of the revenue guidance to peer companies.
Amortization of intangible assets: We have excluded the amortization expense of intangible assets 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 stock-based compensation expense 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 will contribute to the generation of future period revenues, we continue to evaluate our business performance excluding stock-based compensation expense.
Acquisition-related and restructuring expenses: We have excluded the effect of acquisition-related and restructuring expenses from our non-GAAP operating expenses and net earnings measures. We incurred direct and incremental expenses associated with the Antenna and 2014 acquisitions. These acquisition-related expenses were primarily professional fees to affect the acquisitions. We have also incurred restructuring expenses related to the integration of the Antenna acquisition, which we generally would not have otherwise incurred in the periods presented as a part of our continuing operations. Restructuring expenses consist primarily of lease exit costs. We believe it is useful for investors to understand the effects of these items on our total operating expenses.
| (2) | Estimated future annual amortization expense related to intangible assets as of December 31, 2014 is as follows: |
| Fiscal 2015 |
$ | 12,210 | ||
| Fiscal 2016 |
11,523 | |||
| Fiscal 2017 |
9,824 | |||
| Fiscal 2018 |
8,825 | |||
| Fiscal 2019 and thereafter |
3,282 | |||
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| Total intangible assets subject to amortization |
$ | 45,664 | ||
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7
| (3) | Below is a reconciliation of Non-GAAP operating expenses: |
| Three Months Ended December 31, | ||||||||||||||||||||||||
| 2014 | 2014 | 2013 | 2013 | |||||||||||||||||||||
| (in ‘000s) |
GAAP | Adj. | Non-GAAP | GAAP | Adj. | Non-GAAP | ||||||||||||||||||
| Selling and marketing |
$ | 55,886 | $ | (3,045 | ) | $ | 52,841 | $ | 53,815 | $ | (2,530 | ) | $ | 51,285 | ||||||||||
| Amortization of intangible assets |
1,526 | (1,526 | ) | — | 1,478 | (1,478 | ) | — | ||||||||||||||||
| Stock-based compensation |
1,519 | (1,519 | ) | — | 1,052 | (1,052 | ) | — | ||||||||||||||||
| Research and development |
$ | 28,101 | $ | (1,640 | ) | $ | 26,461 | $ | 20,603 | $ | (569 | ) | $ | 20,034 | ||||||||||
| Stock-based compensation |
1,640 | (1,640 | ) | — | 569 | (569 | ) | — | ||||||||||||||||
| General and administrative |
$ | 9,065 | $ | (1,101 | ) | $ | 7,964 | $ | 8,391 | $ | (976 | ) | $ | 7,415 | ||||||||||
| Amortization of intangible assets |
295 | (295 | ) | — | 392 | (392 | ) | — | ||||||||||||||||
| Stock-based compensation |
806 | (806 | ) | — | 584 | (584 | ) | — | ||||||||||||||||
| Acquisition-related |
$ | 71 | $ | (71 | ) | $ | — | $ | 761 | $ | (761 | ) | $ | — | ||||||||||
| Restructuring |
$ | — | $ | — | $ | — | $ | 1,731 | $ | (1,731 | ) | $ | — | |||||||||||
| TOTAL OPERATING EXPENSES |
$ | 93,123 | $ | (5,857 | ) | $ | 87,266 | $ | 85,301 | $ | (6,567 | ) | $ | 78,734 | ||||||||||
| Year Ended December 31, | ||||||||||||||||||||||||
| 2014 | 2014 | 2013 | 2013 | |||||||||||||||||||||
| (in ‘000s) |
GAAP | Adj. | Non-GAAP | GAAP | Adj. | Non-GAAP | ||||||||||||||||||
| Selling and marketing |
$ | 206,658 | $ | (11,403 | ) | $ | 195,255 | $ | 181,094 | $ | (9,176 | ) | $ | 171,918 | ||||||||||
| Amortization of intangible assets |
6,022 | (6,022 | ) | — | 5,174 | (5,174 | ) | — | ||||||||||||||||
| Stock-based compensation |
5,381 | (5,381 | ) | — | 4,002 | (4,002 | ) | — | ||||||||||||||||
| Research and development |
$ | 108,591 | $ | (4,841 | ) | $ | 103,750 | $ | 79,726 | $ | (2,421 | ) | $ | 77,305 | ||||||||||
| Stock-based compensation |
4,841 | (4,841 | ) | — | 2,421 | (2,421 | ) | — | ||||||||||||||||
| General and administrative |
$ | 37,442 | $ | (5,418 | ) | $ | 32,024 | $ | 29,594 | $ | (2,757 | ) | $ | 26,837 | ||||||||||
| Amortization of intangible assets |
1,770 | (1,770 | ) | — | 396 | (396 | ) | — | ||||||||||||||||
| Stock-based compensation |
3,648 | (3,648 | ) | — | 2,361 | (2,361 | ) | — | ||||||||||||||||
| Acquisition-related |
$ | 488 | $ | (488 | ) | $ | — | $ | 1,306 | $ | (1,306 | ) | $ | — | ||||||||||
| Restructuring |
$ | 192 | $ | (192 | ) | $ | — | $ | 1,731 | $ | (1,731 | ) | $ | — | ||||||||||
| TOTAL OPERATING EXPENSES |
$ | 353,371 | $ | (22,342 | ) | $ | 331,029 | $ | 293,451 | $ | (17,391 | ) | $ | 276,060 | ||||||||||
| (4) | The GAAP income tax effects were calculated using an effective tax rate of 30% and 36% for the fourth quarter of 2014 and 2013, respectively. The non-GAAP income tax effects were calculated using an effective non-GAAP tax rate of 30.5% and 33.1% for the fourth quarter of 2014 and 2013, respectively. |
The GAAP income tax effects were calculated using an effective tax rate of 30.7% and 32.5% for the fiscal year 2014 and 2013, respectively. The non-GAAP income tax effects were calculated using an effective non-GAAP tax rate of 31.7% and 32.5% for the fiscal year 2014 and 2013, respectively.
The differences between our GAAP and non-GAAP effective tax rates for 2014 primarily relate to the impact of higher non-GAAP income subjected to tax in higher tax rate jurisdictions. The differences between our GAAP and non-GAAP effective tax rates for 2013 primarily relate to the impact of non-deductible acquisition-related costs.
| (5) | The number of common shares and per share amounts have been retroactively restated for all prior periods to reflect the Company’s two-for-one common stock split effected in the form of a common stock dividend distributed on April 1, 2014. |
8
Pegasystems Inc.
Condensed Consolidated Balance Sheets
(in thousands)
| As of | As of | |||||||
| December 31, 2014 | December 31, 2013 | |||||||
| Current Assets: |
||||||||
| Cash and cash equivalents |
$ | 114,585 | $ | 80,231 | ||||
| Marketable securities |
96,631 | 76,461 | ||||||
|
|
|
|
|
|||||
| Total cash, cash equivalents, and marketable securities |
211,216 | 156,692 | ||||||
| Trade accounts receivable, net |
154,844 | 165,641 | ||||||
| Deferred income taxes |
12,974 | 12,336 | ||||||
| Income taxes receivable |
4,502 | 4,392 | ||||||
| Other current assets |
9,544 | 9,148 | ||||||
|
|
|
|
|
|||||
| Total current assets |
393,080 | 348,209 | ||||||
| Property and equipment, net |
30,156 | 28,957 | ||||||
| Long-term deferred income taxes |
69,258 | 56,745 | ||||||
| Long-term other assets |
2,783 | 2,526 | ||||||
| Intangible assets, net |
45,664 | 56,574 | ||||||
| Goodwill |
46,860 | 43,469 | ||||||
|
|
|
|
|
|||||
| Total assets |
$ | 587,801 | $ | 536,480 | ||||
|
|
|
|
|
|||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 4,752 | $ | 3,671 | ||||
| Accrued expenses |
42,958 | 31,624 | ||||||
| Accrued compensation and related expenses |
47,250 | 44,401 | ||||||
| Deferred revenue |
134,672 | 110,690 | ||||||
|
|
|
|
|
|||||
| Total current liabilities |
229,632 | 190,386 | ||||||
| Income taxes payable |
24,896 | 21,269 | ||||||
| Long-term deferred revenue |
20,859 | 34,196 | ||||||
| Other long-term liabilities |
17,709 | 18,841 | ||||||
|
|
|
|
|
|||||
| Total liabilities |
293,096 | 264,692 | ||||||
| Stockholders’ equity: |
294,705 | 271,788 | ||||||
|
|
|
|
|
|||||
| Total liabilities and stockholders’ equity |
$ | 587,801 | $ | 536,480 | ||||
|
|
|
|
|
|||||
9
Pegasystems Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
| Year Ended December 31, |
||||||||
| 2014 | 2013 | |||||||
| Operating activities: |
||||||||
| Net income |
$ | 33,255 | $ | 38,043 | ||||
| Adjustments to reconcile net income to cash provided by operating activities: |
||||||||
| Excess tax benefits from equity awards and deferred income taxes |
(17,283 | ) | (13,443 | ) | ||||
| Depreciation, amortization, foreign currency transaction loss, and other non-cash items |
28,290 | 25,074 | ||||||
| Stock-based compensation expense |
19,205 | 12,869 | ||||||
| Change in operating assets and liabilities, net |
36,422 | 18,160 | ||||||
|
|
|
|
|
|||||
| Cash provided by operating activities |
99,889 | 80,703 | ||||||
|
|
|
|
|
|||||
| Cash used in investing activities |
(37,657 | ) | (63,997 | ) | ||||
|
|
|
|
|
|||||
| Cash used in financing activities |
(24,032 | ) | (14,567 | ) | ||||
|
|
|
|
|
|||||
| Effect of exchange rate on cash and cash equivalents |
(3,846 | ) | 567 | |||||
|
|
|
|
|
|||||
| Net increase in cash and cash equivalents |
34,354 | 2,706 | ||||||
| Cash and cash equivalents, beginning of period |
80,231 | 77,525 | ||||||
|
|
|
|
|
|||||
| Cash and cash equivalents, end of period |
$ | 114,585 | $ | 80,231 | ||||
|
|
|
|
|
|||||
10
Pegasystems Inc.
Historical License and Cloud Backlog
($ in thousands)
| 2014 Q4 |
2014 Q3 |
2014 Q2 |
2014 Q1 |
2013 Q4 |
2013 Q3 |
2013 Q2 |
2013 Q1 |
|||||||||||||||||||||||||
| Total billed deferred license and cloud revenue |
63,048 | 68,561 | 54,938 | 62,741 | 64,267 | 34,644 | 37,312 | 31,765 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total off-balance sheet license and cloud commitments |
301,409 | 265,309 | 298,658 | 270,243 | 283,099 | 248,403 | 246,821 | 253,623 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| TOTAL LICENSE AND CLOUD BACKLOG |
$ | 364,457 | $ | 333,870 | $ | 353,596 | $ | 332,984 | $ | 347,366 | $ | 283,047 | $ | 284,133 | $ | 285,388 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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11
Pegasystems Inc.
FY 2015 Reconciliation of Forward-Looking Guidance
($ in thousands, except per share amounts)
| Fiscal Year 2015 | ||||||||
| Net Income and Diluted EPS - GAAP basis |
$ | 38,943 | $ | 0.49 | ||||
| Adjustment to exclude amortization of intangible assets, net of tax |
7,769 | 0.10 | ||||||
| Adjustment to exclude stock-based compensation, net of tax |
15,278 | 0.19 | ||||||
|
|
|
|
|
|||||
| Net Income and Diluted EPS - Non-GAAP basis |
$ | 61,990 | $ | 0.78 | ||||
|
|
|
|
|
|||||
12