Pegasystems Announces Eleventh Consecutive Quarter of Record Revenue; Revenue Guidance Increased as Chordiant Acquisition Completed
CAMBRIDGE, Mass. – April 22, 2010 – Pegasystems Inc. (NASDAQ: PEGA), the leader in Business Process Management (BPM) software solutions, today announced financial results for the first quarter ended March 31, 2010. Revenue for the first quarter of 2010 increased 20% to $75.1 million compared to the first quarter of 2009. Net income for the first quarter of 2010 was $3.9 million compared to $8.6 million for the first quarter of 2009. The Company generated $4.8 million in cash from operations and had $202.1 million in cash, cash equivalents, and marketable securities as of March 31, 2010. The first quarter 2010 results do not include the operating results of Chordiant as the acquisition was completed in April 2010.
Selected financial information:
"We continued to see strong demand for our patented Build for Change® technology during the first quarter of 2010," said Alan Trefler, Founder and CEO of Pegasystems. "We have seen increased adoption across industries including insurance, financial services, healthcare, government agencies, airport management, and warranty management. Our new SmartBPM® 6 software release continues to raise the bar by delivering unparalleled power, ease of use, and collaboration. SmartBPM® is becoming the unifying force that bridges the gap between business and IT, while also bringing increased operational efficiency to our customers for rapid returns on investment. We continue to complement SmartBPM® with preconfigured industry solutions, such as the Individual Sales Process Manager for Healthcare™, which coincided with the new healthcare reform legislation in time to help insurers enroll millions of new individual participants in health plans."
"The addition of Chordiant staff, technology, and clients strengthens our position in the growing customer experience management market. We are looking forward to showcasing our complementary solutions to over 1,000 Pegasystems clients and partners at our PegaWORLD conference in Philadelphia next week. This record setting event will highlight the power of BPM with over 30 client speakers attesting to the tremendous value that SmartBPM® drives," concluded Mr. Trefler.
"We are executing well on our plan to invest in support of continued growth. Our operating expenses reflect our investment in sales, marketing, and R&D headcount, which made up the significant majority of the record 113 new employees in the quarter," added Craig Dynes, Pegasystems' CFO. "With the completion of the Chordiant acquisition, we are able to increase our 2010 revenue guidance to approximately $348 million on a GAAP basis, or $360 million on a non-GAAP basis. We don't expect changes in the profitability of the core Pegasystems business in 2010 and expect the Chordiant acquisition to be accretive, but since the acquisition was just completed yesterday, we have not finished our purchase accounting, and thus are unable to provide updated 2010 earnings guidance. However, the new business combination rules are already impacting our financial statements; in Q1 we recorded $1.5 million of acquisition-related expenses, many of which are not tax deductible and caused our effective tax rate to jump up to almost 39%.These acquisition expenses, along with foreign currency issues in Europe, do not reflect any change in our business conditions, but impacted our earnings per share by about ten cents in the quarter."
Messrs. Trefler and Dynes will be hosting a conference call and live Webcast associated with this announcement at 9:00 a.m. ET on April 23, 2010. 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 Investor Relations section. A replay of the call will also be available on www.pega.com in the Investor Relations section Audio Archives link.
Discussion of Non-GAAP Measure
Pegasystems provides non-GAAP revenue guidance as additional information for investors. Chordiant recorded deferred revenue related to past transactions for which revenue would have been recognized in future periods as revenue recognition criteria were satisfied. Purchase accounting for the acquisition requires the Company to write down this acquired deferred revenue to its current fair value. As a result, in post-acquisition reporting periods, the Company does not recognize the full amount of this revenue that otherwise would have been recognized by Chordiant as an independent company. The Company will adjust for the effect of the deferred revenue write-down adjustment in non-GAAP revenue guidance to reflect the full amount of these revenues and provide a more complete comparison of the revenue guidance to peer companies. The Company believes the non-GAAP revenue adjustment is useful to management and investors as a measure of the ongoing revenue stream of the business because while the Company cannot be certain that customers will renew their contracts, the Company historically has experienced strong renewal rates on maintenance and support agreements and other customer contracts.
This non-GAAP measure is not in accordance with, or an alternative to, generally accepted accounting principles in the United States (GAAP). Such measure is intended to supplement GAAP and may be different from non-GAAP measures used by other companies. The Company's non-GAAP financial measure is 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 and revenue guidance prepared in accordance with GAAP. A reconciliation of the Company's GAAP revenue guidance to non-GAAP revenue guidance is included in the table below.
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 those regarding 2010 revenue and profitability. The words "anticipate," "project," "expect," "plan," "intend," "believe," "estimate," "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. 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, the Company's ability to successfully integrate the operations of Chordiant Software, Inc., 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 mix of perpetual and term licenses and the level of term license renewals, our ability to develop new products and evolve existing ones, the weak global economy and the ongoing consolidation in the financial services and healthcare markets, our ability to attract and retain key personnel, reliance on key third party relationships, the potential loss of vendor specific objective evidence for our professional services, 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, 2009 and other recent filings with the Securities and Exchange Commission. The forward-looking statements contained in this press release represent the Company's views as of April 22, 2010. 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 April 22, 2010.
Pegasystems (NASDAQ: PEGA) develops strategic applications for marketing, sales, 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 3000 customers include many of the world’s most sophisticated and successful 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.
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The information contained in this press release is not a commitment, promise, or legal obligation to deliver any material, code or functionality. The development, release and timing of any features or functionality described remains at the sole discretion of Pegasystems, Pegasystems specifically disclaims any liability with respect to this information.
Lisa Pintchman Rogers
VP, Corporate Communications
Director, Corporate Communications
Sr. Manager, Public Relations
Director, Corporate Communications
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