PEGA 8-K
Pegasystems Inc (PEGA)
8-K
2022-02-16
For: 2022-02-14
View Original
Added on
April 11, 2026
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________________
FORM 8-K
_________________________________
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 14, 2022
____________________
(Exact name of Registrant as specified in its charter)
_________________________________
| (State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||||||
(Address of principal executive offices, including zip code)
(617 ) 374-9600
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions:
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |||||
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |||||
| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |||||
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |||||
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol(s) | Name of each exchange on which registered | ||||||
Indicate by check mark whether the Registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On February 16, 2022, Pegasystems Inc. issued a press release announcing its financial results for the fourth quarter and full-year 2021. A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference in its entirety.
The information in this Item 2.02 and the Exhibits attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such a filing.
ITEM 5.02 DEPARTURE OF DIRECTORS OR CERTAIN OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF CERTAIN OFFICERS; COMPENSATORY ARRANGEMENTS OF CERTAIN OFFICERS.
(b)
On February 14, 2022, Hayden Stafford, President of Global Client Engagement, informed Pegasystems Inc. (the “Company”) that he has accepted an executive role at a Pre-IPO technology company. His resignation will be effective in early March 2022. Mr. Stafford’s resignation is not the result of any disagreements with the Company on any matter relating to the Company’s operations, policies, or practices.
In connection with the resignation of Mr. Stafford, the Company has appointed Leon Trefler as the Company’s Chief of Clients and Markets.
(c)
On February 16, 2022, the Company announced that it has appointed Leon Trefler as the Company’s Chief of Clients and Markets. Leon Trefler, age 61, joined the Company in April 1998 and has held senior management positions in the Company’s go to market leadership, most recently serving as the Company’s Chief of Client Experience. Mr. Leon Trefler and Alan Trefler are brothers.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
| Exhibit No. | Description | |||||||
| 99.1 | ||||||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL) | |||||||
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Pegasystems Inc. | |||||||||||
| Dated: | February 16, 2022 | By: | /s/ KENNETH STILLWELL | ||||||||
| Kenneth Stillwell | |||||||||||
| Chief Operating Officer and Chief Financial Officer | |||||||||||
| (Principal Financial Officer) | |||||||||||
EXHIBIT 99.1
Annual contract value exceeds $1 billion in Q4 2021
•ACV grows 20 percent year over year
•Total Backlog up 25 percent year over year to $1.3 billion
•2022 Revenue Guidance of $1.46 billion - $1.49 billion
CAMBRIDGE, Mass. — February 16, 2022 — Pegasystems Inc. (NASDAQ: PEGA), the software company that crushes business complexity, released its financial results for the fourth quarter and full-year 2021.
“Robust demand for digital transformation projects in both the front and back-office resulted in continued strong growth for Pega,” said Alan Trefler, founder and CEO, Pegasystems. “In 2022 and beyond, our goal is to capitalize on this demand to become the enterprise standard workflow engine, servicing backbone, and centralized brain for the largest and most demanding enterprises globally."
“As we get closer to exiting the cloud transition, I’m excited to see Pega achieve ACV of $1 billion for the first time in its history,” said Ken Stillwell, COO and CFO, Pegasystems. “We’re now experiencing improving profitability and cash flow that reveals the underlying power of our subscription model. This increasing profitability and accelerating ACV growth will keep us on the path to becoming a Rule of 40 business.“
Financial and performance metrics (1)
(Dollars in thousands, except per share amounts) | Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||||||||||||||||||||
| 2021 | 2020 | Change | 2021 | 2020 | Change | ||||||||||||||||||||||||||||||
| Total revenue | $ | 316,184 | $ | 298,600 | 6 | % | $ | 1,211,653 | $ | 1,017,517 | 19 | % | |||||||||||||||||||||||
| Net (loss) income - GAAP | $ | (37,246) | $ | 4,006 | * | $ | (63,040) | $ | (61,373) | (3) | % | ||||||||||||||||||||||||
| Net income (loss) - Non-GAAP | $ | 3,051 | $ | 16,817 | (82) | % | $ | 18,812 | $ | (26,410) | * | ||||||||||||||||||||||||
| Diluted (loss) earnings per share - GAAP | $ | (0.46) | $ | 0.05 | * | $ | (0.77) | $ | (0.76) | (1) | % | ||||||||||||||||||||||||
| Diluted earnings (loss) per share - Non-GAAP | $ | 0.04 | $ | 0.20 | (80) | % | $ | 0.22 | $ | (0.33) | * | ||||||||||||||||||||||||
* not meaningful.
| Three Months Ended December 31, | Change | Year Ended December 31, | Change | ||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||||||||||||||||
| Pega Cloud | $ | 81,446 | $ | 61,188 | $ | 20,258 | 33 | % | $ | 300,966 | $ | 208,268 | $ | 92,698 | 45 | % | |||||||||||||||||||||||||
| Maintenance | 82,726 | 76,122 | 6,604 | 9 | % | 320,257 | 296,709 | 23,548 | 8 | % | |||||||||||||||||||||||||||||||
| Subscription services | 164,172 | 137,310 | 26,862 | 20 | % | 621,223 | 504,977 | 116,246 | 23 | % | |||||||||||||||||||||||||||||||
Subscription license (A) | 85,022 | 95,897 | (10,875) | (11) | % | 336,248 | 266,352 | 69,896 | 26 | % | |||||||||||||||||||||||||||||||
| Subscription | 249,194 | 233,207 | 15,987 | 7 | % | 957,471 | 771,329 | 186,142 | 24 | % | |||||||||||||||||||||||||||||||
| Perpetual license | 11,250 | 11,990 | (740) | (6) | % | 32,172 | 28,558 | 3,614 | 13 | % | |||||||||||||||||||||||||||||||
| Consulting | 55,740 | 53,403 | 2,337 | 4 | % | 222,010 | 217,630 | 4,380 | 2 | % | |||||||||||||||||||||||||||||||
| Total revenue | $ | 316,184 | $ | 298,600 | $ | 17,584 | 6 | % | $ | 1,211,653 | $ | 1,017,517 | $ | 194,136 | 19 | % | |||||||||||||||||||||||||
(A) Revenue from term licenses.
(1) See the Schedules at the end of this release for additional information, including a reconciliation of our Non-GAAP and GAAP measures.
1
Note: Foreign currency exchange rate changes were a 1% headwind to ACV growth in 2021.
2
2022 Guidance (1)
As of February 16, 2022, we are providing the following guidance:
| (in millions) | Year Ended December 31, 2022 | ||||
| Annual contract value growth | 20 - 22% | ||||
| Year Ended December 31, 2022 | |||||||||||
| GAAP | Non-GAAP (1) | ||||||||||
| Revenue | $1.46 - $1.49 billion | $1.46 - $1.49 billion | |||||||||
| Net income (loss) | $(71.7) - $(50.4) million | $64.7 - $86.0 million | |||||||||
| Diluted earnings (loss) per share | $(0.89) - $(0.62) | $0.75 - $1.00 | |||||||||
(1) A reconciliation of our GAAP and Non-GAAP guidance is contained in the financial schedules at the end of this release.
Quarterly conference call
A conference call and audio-only webcast will be conducted at 5:00 p.m. EST on February 16, 2022.
Members of the public and investors are invited to join the call and participate in the question and answer session by dialing 1-800-437-2398 (domestic), 1-323-994-2093 (international), or via webcast (https://viavid.webcasts.com/starthere.jsp?ei=1524699&tp_key=509709a596) 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.
A reconciliation of our Non-GAAP and GAAP measures is 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:
•our future financial performance and business plans;
•the adequacy of our liquidity and capital resources;
•the continued payment of our quarterly dividends;
•the timing of revenue recognition;
•management of our transition to a more subscription-based business model;
•variation in demand for our products and services, including among clients in the public sector;
•reliance on key personnel;
•the impact of actual or threatened public health emergencies, such as the Coronavirus (“COVID-19”);
•reliance on third-party service providers, including hosting providers;
•compliance with our debt obligations and covenants;
•the potential impact of our convertible senior notes and Capped Call Transactions;
•the relocation of our corporate headquarters;
•the continued uncertainties in the global economy;
•foreign currency exchange rates;
•the potential legal and financial liabilities and damage to our reputation due to cyber-attacks;
•security breaches and security flaws;
•our ability to protect our intellectual property rights, costs associated with defending such rights, as well as intellectual property rights claims and other related claims by third parties;
3
•our client retention rate; and
•management of our growth.
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, 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 February 16, 2022.
About Pegasystems
Pega delivers innovative software that crushes business complexity. From maximizing customer lifetime value to streamlining service to boosting efficiency, we help the world’s leading brands solve problems fast and transform for tomorrow. Pega clients make better decisions and get work done with real-time AI and intelligent automation. And, since 1983, we’ve built our scalable architecture and low-code platform to stay ahead of rapid change. Our solutions save people time, so our clients’ employees and customers can get back to what matters most. For more information on Pegasystems (NASDAQ: PEGA) visit www.pega.com.
Press contact:
Lisa Pintchman
Pegasystems Inc.
617-866-6022
Twitter: @pega
Investor contact:
Garo Toomajanian
ICR for Pegasystems Inc.
617-866-6077
All trademarks are the property of their respective owners.
4
PEGASYSTEMS INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
| Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||
| Revenue | |||||||||||||||||||||||
| Subscription services | $ | 164,172 | $ | 137,310 | $ | 621,223 | $ | 504,977 | |||||||||||||||
| Subscription license | 85,022 | 95,897 | 336,248 | 266,352 | |||||||||||||||||||
| Perpetual license | 11,250 | 11,990 | 32,172 | 28,558 | |||||||||||||||||||
| Consulting | 55,740 | 53,403 | 222,010 | 217,630 | |||||||||||||||||||
| Total revenue | 316,184 | 298,600 | 1,211,653 | 1,017,517 | |||||||||||||||||||
| Cost of revenue | |||||||||||||||||||||||
| Subscription services | 32,240 | 26,003 | 120,446 | 98,886 | |||||||||||||||||||
| Subscription license | 579 | 510 | 2,389 | 2,644 | |||||||||||||||||||
| Perpetual license | 77 | 64 | 229 | 284 | |||||||||||||||||||
| Consulting | 52,267 | 50,318 | 213,299 | 209,099 | |||||||||||||||||||
| Total cost of revenue | 85,163 | 76,895 | 336,363 | 310,913 | |||||||||||||||||||
| Gross profit | 231,021 | 221,705 | 875,290 | 706,604 | |||||||||||||||||||
| Operating expenses | |||||||||||||||||||||||
| Selling and marketing | 168,245 | 150,009 | 625,886 | 545,693 | |||||||||||||||||||
| Research and development | 69,065 | 59,366 | 260,630 | 236,986 | |||||||||||||||||||
| General and administrative | 25,899 | 18,260 | 83,506 | 67,452 | |||||||||||||||||||
| Total operating expenses | 263,209 | 227,635 | 970,022 | 850,131 | |||||||||||||||||||
| (Loss) from operations | (32,188) | (5,930) | (94,732) | (143,527) | |||||||||||||||||||
| Foreign currency transaction (loss) gain | (1,476) | 1,159 | (6,459) | 3,704 | |||||||||||||||||||
| Interest income | 149 | 131 | 704 | 1,223 | |||||||||||||||||||
| Interest expense | (2,209) | (5,565) | (7,956) | (19,356) | |||||||||||||||||||
| (Loss) income on capped call transactions | (16,090) | 11,881 | (23,633) | 31,697 | |||||||||||||||||||
| Other (loss) income, net | (19) | (4) | 89 | 1,370 | |||||||||||||||||||
| (Loss) income before (benefit from) income taxes | (51,833) | 1,672 | (131,987) | (124,889) | |||||||||||||||||||
| (Benefit from) income taxes | (14,587) | (2,334) | (68,947) | (63,516) | |||||||||||||||||||
| Net (loss) income | $ | (37,246) | $ | 4,006 | $ | (63,040) | $ | (61,373) | |||||||||||||||
| (Loss) earnings per share | |||||||||||||||||||||||
| Basic | $ | (0.46) | $ | 0.05 | $ | (0.77) | $ | (0.76) | |||||||||||||||
| Diluted | $ | (0.46) | $ | 0.05 | $ | (0.77) | $ | (0.76) | |||||||||||||||
| Weighted-average number of common shares outstanding | |||||||||||||||||||||||
| Basic | 81,692 | 80,770 | 81,387 | 80,336 | |||||||||||||||||||
| Diluted | 81,692 | 86,080 | 81,387 | 80,336 | |||||||||||||||||||
5
PEGASYSTEMS INC.
UNAUDITED RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES (1)
(in thousands, except percentages and per share amounts)
| Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||||||||||||||||||||||
| 2021 | 2020 | Change | 2021 | 2020 | Change | ||||||||||||||||||||||||||||||
| Net (loss) income - GAAP | $ | (37,246) | $ | 4,006 | * | $ | (63,040) | $ | (61,373) | (3) | % | ||||||||||||||||||||||||
Stock-based compensation (2) | 26,463 | 26,313 | 115,947 | 103,068 | |||||||||||||||||||||||||||||||
| Capped call transactions | 16,090 | (11,881) | 23,633 | (31,697) | |||||||||||||||||||||||||||||||
| Litigation | 9,782 | 1,675 | 18,198 | 3,823 | |||||||||||||||||||||||||||||||
| Convertible senior notes | 952 | 4,408 | 2,977 | 14,813 | |||||||||||||||||||||||||||||||
| Headquarters lease | — | — | (15,111) | — | |||||||||||||||||||||||||||||||
| Amortization of intangible assets | 982 | 919 | 3,987 | 3,970 | |||||||||||||||||||||||||||||||
| Foreign currency transaction loss (gain) | 1,476 | (1,159) | 6,459 | (3,704) | |||||||||||||||||||||||||||||||
| Other | — | (384) | 15 | 757 | |||||||||||||||||||||||||||||||
Income tax effects (3) | (15,448) | (7,080) | (74,253) | (56,067) | |||||||||||||||||||||||||||||||
| Net income (loss) - Non-GAAP | $ | 3,051 | $ | 16,817 | (82) | % | $ | 18,812 | $ | (26,410) | * | ||||||||||||||||||||||||
| Diluted (loss) earnings per share - GAAP | $ | (0.46) | $ | 0.05 | * | $ | (0.77) | $ | (0.76) | (1) | % | ||||||||||||||||||||||||
| Non-GAAP adjustments | 0.50 | 0.15 | 0.99 | 0.43 | |||||||||||||||||||||||||||||||
| Diluted earnings (loss) per share - Non-GAAP | $ | 0.04 | $ | 0.20 | (80) | % | $ | 0.22 | $ | (0.33) | * | ||||||||||||||||||||||||
| Diluted weighted-average number of common shares outstanding - GAAP | 81,692 | 86,080 | (5) | % | 81,387 | 80,336 | 1 | % | |||||||||||||||||||||||||||
| Non-GAAP Adjustments | 3,795 | — | 4,487 | — | |||||||||||||||||||||||||||||||
| Diluted weighted-average number of common shares outstanding - Non-GAAP | 85,487 | 86,080 | (1) | % | 85,874 | 80,336 | 7 | % | |||||||||||||||||||||||||||
* not meaningful.
(1) 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.
Our Non-GAAP financial measures reflect the following adjustments:
•Stock-based compensation: We have excluded stock-based compensation from our Non-GAAP operating expenses and profitability measures. Although stock-based compensation is a key incentive offered to our employees, and we believe such compensation contributed to our revenues recognized during the periods presented and is expected to contribute to our future revenues, we continue to evaluate our business performance excluding stock-based compensation.
•Capped call transactions: We have excluded gains and losses related to our capped call transactions held at fair value under U.S. GAAP. The capped call transactions are expected to reduce common stock dilution and/or offset any potential cash payments we must make, other than for principal and interest, upon conversion of the Notes. We believe excluding these amounts from our Non-GAAP financial measures is useful to investors as the types of events giving rise to them are not representative of our core business operations and ongoing operating performance. In addition, we reflect the effect of the capped call transactions on the weighted-average number of common shares outstanding in our Non-GAAP financial measures as we believe it provides investors with useful information when evaluating our financial performance on a per-share basis.
•Litigation: Includes legal fees and related expenses arising from proceedings that originated outside of the ordinary course of business. We believe excluding these expenses from our Non-GAAP financial measures is useful to investors as the disputes giving rise to them are not representative of our core business operations and ongoing operating performance.
•Convertible senior notes: In February 2020, we issued convertible senior notes with an aggregate principal amount of $600 million, due March 1, 2025, in a private placement. See "Note 11. Debt" in Item 8 of this Annual Report for additional information. We believe excluding the amortization of debt discounts and issuance costs provide a useful comparison of our operational performance in different periods.
•Headquarters lease: In February 2021, we agreed to accelerate our exit from our then Cambridge, Massachusetts headquarters to October 1, 2021, in exchange for a one-time payment from our landlord of $18 million which was received in October 2021. We believe excluding the impact from our Non-GAAP financial measures is useful to investors as the modified lease, including the $18 million payment, is not representative of our core business operations and ongoing operating performance.
6
•Amortization of intangible assets: We have excluded the amortization of intangible assets from our Non-GAAP operating expenses and profitability measures. Amortization of intangible assets fluctuates in amount and frequency and is significantly affected by the timing and size of acquisitions. Investors should note that the use of intangible assets contributed to our revenues recognized during the periods presented and is expected to contribute to future revenues. Amortization of intangible assets is likely to recur in future periods.
•Foreign currency transaction loss (gain): We have excluded foreign currency transaction gains and losses from our Non-GAAP profitability measures. Foreign currency transaction gains and losses fluctuate in amount and frequency and are significantly affected by foreign exchange market rates. Foreign currency transaction gains and losses are likely to recur in future periods.
•Other: We have excluded gains and losses on our venture investments and incremental fees incurred due to the cancellation of in-person sales and marketing events due to the COVID-19 pandemic, including the live event portion of our 2020 PegaWorld conference. We believe excluding these amounts from our Non-GAAP financial measures is useful to investors as the types of events giving rise to them are not representative of our core business operations and ongoing operating performance.
(2) Stock-based compensation:
| Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||||||||||
| (in thousands) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Cost of revenue | $ | 4,933 | $ | 5,160 | $ | 21,822 | $ | 20,796 | |||||||||||||||
| Selling and marketing | 12,337 | 12,315 | 54,182 | 46,283 | |||||||||||||||||||
| Research and development | 6,070 | 5,819 | 25,413 | 22,885 | |||||||||||||||||||
| General and administrative | 3,123 | 3,019 | 14,530 | 13,104 | |||||||||||||||||||
| $ | 26,463 | $ | 26,313 | $ | 115,947 | $ | 103,068 | ||||||||||||||||
| Income tax benefit | $ | (5,382) | $ | (5,171) | $ | (23,410) | $ | (20,464) | |||||||||||||||
(3) Effective income tax rates:
| Year Ended December 31, | |||||||||||
| 2021 | 2020 | ||||||||||
| GAAP | 52 | % | 51 | % | |||||||
| 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 by 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. 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.
7
PEGASYSTEMS INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
| December 31, 2021 | December 31, 2020 | ||||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 159,965 | $ | 171,899 | |||||||
| Marketable securities | 202,814 | 293,269 | |||||||||
| Total cash, cash equivalents, and marketable securities | 362,779 | 465,168 | |||||||||
| Accounts receivable | 182,717 | 215,827 | |||||||||
| Unbilled receivables | 226,714 | 207,155 | |||||||||
| Other current assets | 68,008 | 88,760 | |||||||||
| Total current assets | 840,218 | 976,910 | |||||||||
| Unbilled receivables | 129,789 | 113,278 | |||||||||
| Goodwill | 81,923 | 79,231 | |||||||||
| Other long-term assets | 541,601 | 434,843 | |||||||||
| Total assets | $ | 1,593,531 | $ | 1,604,262 | |||||||
| Liabilities and stockholders’ equity | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | 15,281 | $ | 24,028 | |||||||
| Accrued expenses | 63,890 | 59,261 | |||||||||
| Accrued compensation and related expenses | 120,946 | 123,012 | |||||||||
| Deferred revenue | 275,844 | 232,865 | |||||||||
| Other current liabilities | 9,443 | 20,969 | |||||||||
| Total current liabilities | 485,404 | 460,135 | |||||||||
| Convertible senior notes, net | 590,722 | 518,203 | |||||||||
| Operating lease liabilities | 87,818 | 59,053 | |||||||||
| Other long-term liabilities | 13,499 | 24,699 | |||||||||
| Total liabilities | 1,177,443 | 1,062,090 | |||||||||
| Total stockholders’ equity | 416,088 | 542,172 | |||||||||
| Total liabilities and stockholders’ equity | $ | 1,593,531 | $ | 1,604,262 | |||||||
PEGASYSTEMS INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
| Year Ended December 31, | |||||||||||
| 2021 | 2020 | ||||||||||
| Net (loss) | $ | (63,040) | $ | (61,373) | |||||||
| Adjustments to reconcile net (loss) to cash provided by (used in) operating activities | |||||||||||
| Non-cash items | 161,690 | 93,795 | |||||||||
| Change in operating assets and liabilities, net | (59,532) | (32,985) | |||||||||
| Cash provided by (used in) operating activities | 39,118 | (563) | |||||||||
| Cash provided by (used in) investing activities | 72,503 | (321,683) | |||||||||
| Cash (used in) provided by financing activities | (121,843) | 423,448 | |||||||||
| Effect of exchange rate changes on cash and cash equivalents | (1,712) | 2,334 | |||||||||
| Net (decrease) increase in cash and cash equivalents | (11,934) | 103,536 | |||||||||
| Cash and cash equivalents, beginning of period | 171,899 | 68,363 | |||||||||
| Cash and cash equivalents, end of period | $ | 159,965 | $ | 171,899 | |||||||
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PEGASYSTEMS INC.
ANNUAL CONTRACT VALUE (“ACV”)
(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 term license and Pega Cloud contracts. 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 during our subscription transition. Foreign currency exchange rate changes were a 1% headwind to ACV growth in 2021.
| December 31, 2021 | December 31, 2020 | Change | ||||||||||||||||||
| Pega Cloud | $ | 363,970 | $ | 266,642 | $ | 97,328 | 37 | % | ||||||||||||
| Maintenance | 330,904 | 304,488 | 26,416 | 9 | % | |||||||||||||||
| Subscription services | 694,874 | 571,130 | 123,744 | 22 | % | |||||||||||||||
Subscription license (1) | 307,750 | 264,346 | 43,404 | 16 | % | |||||||||||||||
| $ | 1,002,624 | $ | 835,476 | $ | 167,148 | 20 | % | |||||||||||||
(1) ACV from term licenses.
PEGASYSTEMS INC.
BACKLOG
(in thousands, except percentages)
Remaining performance obligations (“Backlog”) - Expected future revenue from existing non-cancellable contracts:
As of December 31, 2021:
| Subscription services | Subscription products (1) | Perpetual license | Consulting | Total | ||||||||||||||||||||||||||||||||||
| Maintenance | Pega Cloud | |||||||||||||||||||||||||||||||||||||
1 year or less | $ | 234,917 | $ | 330,426 | $ | 153,467 | $ | 10,952 | $ | 41,411 | $ | 771,173 | 58 | % | ||||||||||||||||||||||||
1-2 years | 65,502 | 220,231 | 14,968 | 4,505 | 8,917 | 314,123 | 23 | % | ||||||||||||||||||||||||||||||
2-3 years | 38,432 | 124,969 | 1,955 | 2,252 | 5,512 | 173,120 | 13 | % | ||||||||||||||||||||||||||||||
Greater than 3 years | 28,157 | 55,937 | 1,765 | — | 619 | 86,478 | 6 | % | ||||||||||||||||||||||||||||||
| $ | 367,008 | $ | 731,563 | $ | 172,155 | $ | 17,709 | $ | 56,459 | $ | 1,344,894 | 100 | % | |||||||||||||||||||||||||
| % of Total | 28 | % | 54 | % | 13 | % | 1 | % | 4 | % | 100 | % | ||||||||||||||||||||||||||
| Change since December 31, 2020 | ||||||||||||||||||||||||||||||||||||||
| $ | 37,093 | $ | 141,426 | $ | 53,341 | $ | 5,800 | $ | 34,847 | $ | 272,507 | |||||||||||||||||||||||||||
| 11 | % | 24 | % | 45 | % | 49 | % | 161 | % | 25 | % | |||||||||||||||||||||||||||
(1) Backlog from term licenses.
As of December 31, 2020:
| Subscription services | Subscription products (1) | Perpetual license | Consulting | Total | ||||||||||||||||||||||||||||||||||
| Maintenance | Pega Cloud | |||||||||||||||||||||||||||||||||||||
1 year or less | $ | 227,803 | $ | 248,223 | $ | 105,920 | $ | 11,514 | $ | 19,226 | $ | 612,686 | 57 | % | ||||||||||||||||||||||||
1-2 years | 54,509 | 193,064 | 7,962 | 395 | 346 | 256,276 | 24 | % | ||||||||||||||||||||||||||||||
2-3 years | 28,320 | 104,542 | 4,928 | — | 851 | 138,641 | 13 | % | ||||||||||||||||||||||||||||||
Greater than 3 years | 19,283 | 44,308 | 4 | — | 1,189 | 64,784 | 6 | % | ||||||||||||||||||||||||||||||
| $ | 329,915 | $ | 590,137 | $ | 118,814 | $ | 11,909 | $ | 21,612 | $ | 1,072,387 | 100 | % | |||||||||||||||||||||||||
| % of Total | 31 | % | 55 | % | 11 | % | 1 | % | 2 | % | 100 | % | ||||||||||||||||||||||||||
(1) Backlog from term licenses.
9
PEGASYSTEMS INC.
RECONCILIATION OF FORWARD-LOOKING GUIDANCE
(in millions, except per share amounts)
| Year Ended December 31, 2022 | |||||||||||
| Low | High | ||||||||||
| Annual contract value growth | 20 | % | 22 | % | |||||||
| Revenue (GAAP and Non-GAAP) | $ | 1,460 | $ | 1,490 | |||||||
| Net loss (GAAP) | $ | (71.7) | $ | (50.4) | |||||||
| Stock-based compensation | 146.2 | 146.2 | |||||||||
| Litigation | 24.0 | 24.0 | |||||||||
| Convertible senior notes | 2.7 | 2.7 | |||||||||
| Amortization of intangible assets | 3.9 | 3.9 | |||||||||
| Foreign currency transaction (gain) | (2.0) | (2.0) | |||||||||
| Income tax effects | (38.4) | (38.4) | |||||||||
| Net Income (Non-GAAP) | $ | 64.7 | $ | 86.0 | |||||||
| Diluted earnings (loss) per share - GAAP | $ | (0.89) | $ | (0.62) | |||||||
| Non-GAAP adjustments | 1.64 | 1.62 | |||||||||
| Diluted earnings (loss) per share - Non-GAAP | $ | 0.75 | $ | 1.00 | |||||||
| Diluted weighted-average number of common shares outstanding - GAAP | 81 | 81 | |||||||||
| Incremental dilutive shares for Non-GAAP | 5 | 5 | |||||||||
| Diluted weighted-average number of common shares outstanding - Non-GAAP | 86 | 86 | |||||||||
10