Published: November 09, 2010
Pegasystems Announces Thirteenth Consecutive Quarter of Record Revenue
GAAP Revenue Increases 39% to $90 Million, Non-GAAP Revenue Increases 47% to $95.4 Million; GAAP Net Income Was $3.1 Million or $0.08 per Share (Basic), Non-GAAP Net Income Was $9.9 Million or $0.27 per Share (Basic)
Pegasystems Inc. (NASDAQ: PEGA) today
announced financial results for the third quarter and nine months ended
September 30, 2010. These results include the operations of Chordiant
Software, Inc. from the April 21, 2010 acquisition date. GAAP revenue for
the third quarter of 2010 increased 39% to $90 million compared to the
third quarter of 2009, and for the first nine months of 2010 increased 29%
to $247 million compared to first nine months of 2009. Non-GAAP revenue for
the third quarter of 2010 increased 47% to $95.4 million compared to the
third quarter of 2009, and for the first nine months of 2010 increased 34%
to $256.4 million compared to first nine months of 2009. GAAP net income
for the third quarter of 2010 was $3.1 million or $0.08 per share
(diluted), compared to GAAP net income of $6.0 million, or $0.16 per share
(diluted), for the third quarter of 2009. Non-GAAP net income for the third
quarter of 2010 was $9.9 million or $0.26 per share (diluted), compared to
Non-GAAP net income of $6.7 million, or $0.17 per share (diluted), for the
third quarter of 2009. GAAP net loss for the first nine months of 2010 was
($1.2) million, or ($0.03) per share, compared to GAAP net income of $25.9
million, or $0.68 per share (diluted) for the first nine months of 2009.
Non-GAAP net income for the first nine months of 2010 was $19.9 million, or
$0.51 per share (diluted), compared to Non-GAAP net income of $28.4
million, or $0.75 per share (diluted) for the first nine months of 2009.
SELECTED GAAP & NON-GAAP RESULTS (1)
Three Months Ended September 30, % Increase
----------------------------------- (Decrease)
2010 2010 2009 2009 -------------
($ in '000s) GAAP Non-GAAP GAAP Non-GAAP GAAP Non-GAAP
-------- -------- -------- -------- ----- -----
Total Revenue $ 90,016 $ 95,433 $ 64,821 $ 64,821 39 % 47 %
Operating Income $ 1,943 $ 12,282 $ 7,465 $ 8,463 (74)% 45 %
Net Income $ 3,139 $ 9,899 $ 6,001 $ 6,703 (48)% 48 %
Basic Earnings per
share $ 0.08 $ 0.27 $ 0.16 $ 0.18 (50)% 50 %
Diluted Earnings per
share $ 0.08 $ 0.26 $ 0.16 $ 0.17 (50)% 53 %
Nine Months Ended September 30, % Increase
----------------------------------- (Decrease)
2010 2010 2009 2009 -------------
($ in '000s) GAAP Non-GAAP GAAP Non-GAAP GAAP Non-GAAP
-------- -------- -------- -------- ----- -----
Total Revenue $247,346 $256,356 $191,066 $191,066 29 % 34 %
Operating Income $ 1,365 $ 31,920 $ 31,630 $ 35,258 (96)% (9)%
Net (Loss) Income $ (1,198) $ 19,854 $ 25,884 $ 28,446 (105)% (30)%
Basic (Loss) Earnings
per share $ (0.03) $ 0.54 $ 0.72 $ 0.79 (104)% (32)%
Diluted (Loss)
Earnings per share $ (0.03) $ 0.51 $ 0.68 $ 0.75 (104)% (32)%
(1) See a reconciliation of our GAAP to Non-GAAP measures contained in the
financial schedules at the end of this release.
Business Perspective
"During the third quarter of 2010, we were recognized by the two leading
industry analyst firms as a market-leader in the category of business
process management," said Alan Trefler, Founder and CEO of Pegasystems.
"This recognition reflects the sustained success our clients are having
with our software. They have achieved rapid returns on their investments
and are beginning to see transformational opportunities across their
organizations. We were also pleased to be recognized by Fortune Magazine as
number eight on their list of 'Fastest-Growing Companies' for 2010."
"We have continued our efforts and investments to drive further innovation
across a broadening portfolio of industry leading solutions. During the
third quarter, we announced the latest release of our CRM solution, which
is focused on helping organizations deliver a superior customer experience
to their clients. We also released solutions that expanded our capabilities
in the financial services and insurance industries, which provide
opportunities for growth within our existing customers and fuel engagement
with new clients," concluded Mr. Trefler.
Craig Dynes, Pegasystems' CFO, added, "During the third quarter, we set a
new record for quarterly revenue with GAAP revenue totaling $90 million.
Our financial results for the third quarter demonstrate that so far, 2010
is very back-end loaded. In fact, Q3 non-GAAP license revenue of $36.5
million was 25% higher than Q2, and Q3 non-GAAP net income of $9.9 million
was almost equal to non-GAAP net income for the first six months of 2010.
Our pipeline for Q4 and 2011 is both substantial and encouraging as we
believe it reflects a continuing increase in both the BPM market and our
market share."
Messrs. Trefler and Dynes will be hosting a conference call and live
Webcast associated with this announcement at 9:00 a.m. EST on November 10,
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 Measures
To supplement financial results presented on a GAAP basis, the Company
provides non-GAAP measures included in this release, including the tables
contained herein. 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 the
non-GAAP annual financial plan is 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 results in
the evaluation process to establish management's compensation.
These measures exclude certain business combination accounting entries and
expenses related to our acquisition of Chordiant, as well as other
significant expenses including stock-based compensation. The Company
believes that these non-GAAP measures are helpful in understanding our past
financial performance and our 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 our 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 the
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, including those relating to our revenue and
pipeline. 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 November 9, 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 November 9, 2010.
About Pegasystems
Pegasystems, the leader in business process management and a leading
provider of CRM solutions, helps organizations enhance customer loyalty,
generate new business, and improve productivity. Our patented Build for
Change® technology speeds the delivery of critical business solutions by
directly capturing business objectives and eliminating manual programming.
Pegasystems enables clients to quickly adapt to changing business
conditions in order to outperform the competition. For more information,
please visit us at www.pega.com.
All trademarks are the property of their respective owners.
Pegasystems Inc.
Unaudited Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
Three Months Nine Months
Ended Ended
September 30, September 30,
2010 2009 2010 2009
-------- -------- ------- --------
Revenue:
Software license $ 33,889 $ 28,358 $92,432 $ 82,045
Maintenance 23,418 12,489 58,892 36,608
Professional services 32,709 23,974 96,022 72,413
-------- -------- ------- --------
Total revenue 90,016 64,821 247,346 191,066
-------- -------- ------- --------
Cost of revenue:
Cost of software license 1,571 28 2,711 90
Cost of maintenance 3,187 1,558 7,839 4,452
Cost of professional services 30,232 22,474 82,136 61,641
-------- -------- ------- --------
Total cost of revenue (1) 34,990 24,060 92,686 66,183
-------- -------- ------- --------
Gross profit 55,026 40,761 154,660 124,883
-------- -------- ------- --------
Operating expenses:
Selling and marketing 31,199 19,568 82,988 51,663
Research and development 14,924 9,930 40,560 28,198
General and administrative 6,442 3,798 18,246 13,392
Acquisition-related costs 111 - 5,014 -
Restructuring costs 407 - 6,487 -
-------- -------- ------- --------
Total operating expenses (1) 53,083 33,296 153,295 93,253
-------- -------- ------- --------
Income from operations 1,943 7,465 1,365 31,630
Foreign currency transaction gain
(loss) 1,513 266 (4,103) 2,377
Interest income, net 129 721 761 2,404
Installment receivable interest income 51 74 155 224
Other income, net 572 - 814 17
-------- -------- ------- --------
Income (loss) before provision for
income taxes 4,208 8,526 (1,008) 36,652
Provision for income taxes 1,069 2,525 190 10,768
-------- -------- ------- --------
Net income (loss) $ 3,139 $ 6,001 $(1,198) $ 25,884
======== ======== ======= ========
Net earnings (loss) per share:
Basic $ 0.08 $ 0.16 $ (0.03) $ 0.72
======== ======== ======= ========
Diluted $ 0.08 $ 0.16 $ (0.03) $ 0.68
======== ======== ======= ========
Weighted-average number of common
shares outstanding:
Basic 36,996 36,462 37,008 36,035
Diluted 38,534 38,441 37,008 37,995
Dividends per share $ 0.03 $ 0.03 $ 0.09 $ 0.09
======== ======== ======= ========
(1) Includes stock-based compensation
as follows:
Cost of revenue $ 447 $ 250 $ 1,328 $ 884
Operating expenses $ 1,134 $ 715 $ 3,885 $ 2,639
PEGASYSTEMS INC.
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES (1)
($ in thousands, except per share data)
Three Months Ended September 30,
----------------------------------------------------------
2010 2010 2009 2009
GAAP Adj. Non-GAAP GAAP Adj. Non-GAAP
-------- -------- -------- -------- -------- --------
TOTAL REVENUE
(2) (3) (4) $ 90,016 $ 5,417 $ 95,433 $ 64,821 $ - $ 64,821
Software
license (2) 33,889 2,605 36,494 28,358 - 28,358
Maintenance
(3) 23,418 2,685 26,103 12,489 - 12,489
Professional
services (4) 32,709 127 32,836 23,974 - 23,974
TOTAL COST OF
REVENUE (5)
(6) $ 34,990 $ (1,997) $ 32,993 $ 24,060 $ (278) $ 23,782
Amortization
of intangible
assets (5) 1,550 (1,550) - 28 (28) -
Stock-based
compensation
(6) 447 (447) - 250 (250) -
TOTAL OPERATING
EXPENSES (5)
(6) $ 53,083 $ (2,925) $ 50,158 $ 33,296 $ (720) $ 32,576
Amortization
of intangible
assets (5) 1,273 (1,273) - 5 (5) -
Stock-based
compensation
(6) 1,134 (1,134) - 715 (715) -
Acquisition-
related costs 111 (111) - - - -
Restructuring
costs 407 (407) - - - -
INCOME FROM
OPERATIONS $ 1,943 $ 10,339 $ 12,282 $ 7,465 $ 998 $ 8,463
OPERATING
MARGIN % 2.16% 12.87% 11.52% 13.06%
INCOME TAX
EFFECTS (7) $ 1,069 $ 3,579 $ 4,648 $ 2,525 $ 296 $ 2,821
NET INCOME $ 3,139 $ 6,760 $ 9,899 $ 6,001 $ 702 $ 6,703
NET EARNINGS
PER SHARE:
BASIC $ 0.08 $ 0.27 $ 0.16 $ 0.18
DILUTED $ 0.08 $ 0.26 $ 0.16 $ 0.17
WEIGHTED-AVERAGE
NUMBER OF COMMON
SHARES
OUTSTANDING
BASIC 36,996 - 36,996 36,462 - 36,462
DILUTED 38,534 - 38,534 38,441 - 38,441
% Increase
(Decrease)
---------------------
GAAP Non-GAAP
-------- --------
TOTAL REVENUE
(2) (3) (4) 39% 47%
Software
license (2) 20% 29%
Maintenance
(3) 88% 109%
Professional
services (4) 36% 37%
TOTAL COST OF
REVENUE (5)
(6) 45% 39%
Amortization
of intangible
assets (5) n/m 0%
Stock-based
compensation
(6) 79% 0%
TOTAL OPERATING
EXPENSES (5)
(6) 59% 54%
Amortization
of intangible
assets (5) n/m 0%
Stock-based
compensation
(6) 59% 0%
Acquisition-
related costs 100% 0%
Restructuring
costs 100% 0%
INCOME FROM
OPERATIONS -74% 45%
OPERATING
MARGIN % (0.0936) bp (0.0019) bp
INCOME TAX
EFFECTS (7) -58% 65%
NET INCOME -48% 48%
NET EARNINGS PER
SHARE:
BASIC -50% 50%
DILUTED -50% 53%
WEIGHTED-AVERAGE
NUMBER OF COMMON
SHARES OUTSTANDING
BASIC 1% 1%
DILUTED 0% 0%
n/m - not meaningful
PEGASYSTEMS INC.
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES (1)
($ in thousands, except per share data)
Nine Months Ended September 30,
----------------------------------------------------------
2010 2010 2009 2009
GAAP Adj. Non-GAAP GAAP Adj. Non-GAAP
-------- -------- -------- -------- -------- --------
TOTAL REVENUE
(2) (3) (4) $247,346 $ 9,010 $256,356 $191,066 $ - $191,066
Software
license (2) 92,432 3,664 96,096 82,045 - 82,045
Maintenance
(3) 58,892 5,107 63,999 36,608 - 36,608
Professional
services (4) 96,022 239 96,261 72,413 - 72,413
TOTAL COST OF
REVENUE (5)
(6) $ 92,686 $ (3,988) $ 88,698 $ 66,183 $ (974) $ 65,209
Amortization
of intangible
assets (5) 2,660 (2,660) - 90 (90) -
Stock-based
compensation
(6) 1,328 (1,328) - 884 (884) -
TOTAL OPERATING
EXPENSES (5)
(6) $153,295 $(17,557) $135,738 $ 93,253 $ (2,654) $ 90,599
Amortization
of intangible
assets (5) 2,171 (2,171) - 15 (15) -
Stock-based
compensation
(6) 3,885 (3,885) - 2,639 (2,639) -
Acquisition-
related costs 5,014 (5,014) - - - -
Restructuring
costs 6,487 (6,487) - - - -
INCOME FROM
OPERATIONS $ 1,365 $ 30,555 $ 31,920 $ 31,630 $ 3,628 $ 35,258
OPERATING
MARGIN % 1% 12% 17% 18%
INCOME TAX
EFFECTS (7) $ 190 $ 9,503 $ 9,693 $ 10,768 $ 1,066 $ 11,834
NET (LOSS)
INCOME $ (1,198) $ 21,052 $ 19,854 $ 25,884 $ 2,562 $ 28,446
NET (LOSS)
EARNINGS PER
SHARE:
BASIC $ (0.03) $ 0.54 $ 0.72 $ 0.79
DILUTED $ (0.03) $ 0.51 $ 0.68 $ 0.75
WEIGHTED-AVERAGE
NUMBER OF COMMON
SHARES
OUTSTANDING
BASIC 37,008 - 37,008 36,035 - 36,035
DILUTED (8) 37,008 1,682 38,690 37,955 - 37,955
% Increase
(Decrease)
---------------------
GAAP Non-GAAP
-------- --------
TOTAL REVENUE
(2) (3) (4) 29% 34%
Software
license (2) 13% 17%
Maintenance
(3) 61% 75%
Professional
services (4) 33% 33%
TOTAL COST OF
REVENUE (5)
(6) 40% 36%
Amortization
of intangible
assets (5) n/m 0%
Stock-based
compensation
(6) 50% 0%
TOTAL OPERATING
EXPENSES (5)
(6) 64% 50%
Amortization
of intangible
assets (5) n/m 0%
Stock-based
compensation
(6) 47% 0%
Acquisition-
related costs 100% 0%
Restructuring
costs 100% 0%
INCOME FROM
OPERATIONS -96% -9%
OPERATING
MARGIN % (0.1600) bp (0.0600) bp
INCOME TAX
EFFECTS (7) -98% -18%
NET (LOSS)
INCOME -105% -30%
NET (LOSS)
EARNINGS PER
SHARE:
BASIC -104% -32%
DILUTED -104% -32%
WEIGHTED-AVERAGE
NUMBER OF COMMON
SHARES
OUTSTANDING
BASIC 3% 3%
DILUTED (8) -2% 2%
n/m - not meaningful
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 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 rules require that we determine the
fair value of the deferred revenue liability for contractual obligations
assumed from Chordiant. The fair value represents an amount equal to the
estimated costs of fulfilling the assumed contracts plus a reasonable
profit margin. 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 Chordiant as an independent company. We add back the affect
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 effect of
amortization of intangible assets acquired from Chordiant 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 the effect of
stock-based compensation expenses 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 also believe it will
contribute to the generation of future period revenues, we continue to
evaluate our business performance excluding stock-based compensation
expense.
Acquisition-related costs and restructuring costs: We have excluded
the effect of
acquisition-related costs and restructuring costs from our non-GAAP
operating expenses and non-GAAP net earnings measures. We incurred direct
and incremental costs associated with the Chordiant acquisition. These
acquisition-related costs were primarily due diligence costs, advisory and
legal transaction fees, and valuation and tax consulting fees. We have also
incurred restructuring costs related to the integration of the acquisition,
which we generally would not have otherwise incurred in the periods
presented as a part of our continuing operations. Restructuring costs
consist of employee severance and other exit costs. We believe it is useful
for investors to understand the effects of these items on our total
operating expenses.
(2) As of April 21, 2010, approximately $4.0 million, $0.6 million, $0.5
million and $0.2 million in estimated revenues related to assumed software
license contracts will not be recognized for the remainder of fiscal 2010,
fiscal 2011, fiscal 2012 and fiscal 2013, respectively, due to business
combination accounting rules.
(3) As of April 21, 2010, approximately $7.3 million, $3.0 million and $0.5
million in estimated revenues related to assumed software support contracts
will not be recognized for the remainder of fiscal 2010, fiscal 2011 and
fiscal 2012, respectively, due to business combination accounting rules.
(4) As of April 21, 2010, approximately $0.3 million, $0.3 million, $0.3
million and $0.1 million in estimated revenues related to assumed software
installation services contracts will not be recognized for the remainder of
fiscal 2010, fiscal 2011, fiscal 2012 and fiscal 2013, respectively, due to
business combination accounting rules.
(5) Estimated future annual amortization expense related to intangible
assets as of September 30, 2010 is as follows:
Remainder of Fiscal 2010 $ 2,870
Fiscal 2011 11,315
Fiscal 2012 11,137
Fiscal 2013 11,095
Fiscal 2014 9,489
Fiscal 2015 8,688
Fiscal 2016 and thereafter 28,960
-------
Total intangible assets subject to amortization $83,554
=======
(6) Stock-based compensation is included in operating expense as follows:
Three Months Ended Three Months Ended
September 30, 2010 September 30, 2009
-------------------------- --------------------------
GAAP Adj. Non-GAAP GAAP Adj. Non-GAAP
-------- ------- -------- -------- ------- --------
Cost of revenue $ 447 $ (447) $ - $ 250 $ (250) $ -
Selling and Marketing 520 (520) - 228 (228) -
Research and
development 251 (251) - 170 (170) -
General and
administrative 363 (363) - 317 (317) -
-------- ------- -------- -------- ------- --------
Total stock-based
compensation $ 1,581 $(1,581) $ - $ 965 $ (965) $ -
-------- ------- -------- -------- ------- --------
Nine Months Ended Nine Months Ended
September 30, 2010 September 30, 2009
-------------------------- --------------------------
GAAP Adj. Non-GAAP GAAP Adj. Non-GAAP
-------- ------- -------- -------- ------- --------
Cost of revenue $ 1,328 $(1,328) $ - $ 884 $ (884) $ -
Selling and Marketing 1,594 (1,594) - 579 (579) -
Research and
development 764 (764) - 559 (559) -
General and
administrative 1,527 (1,527) - 1,501 (1,501) -
-------- ------- -------- -------- ------- --------
Total stock-based
compensation $ 5,213 $(5,213) $ - $ 3,523 $(3,523) $ -
-------- ------- -------- -------- ------- --------
(7) Income tax effects were calculated using an effective GAAP tax rate of
25.4% and 29.6% in the third quarter of 2010 and 2009, respectively, and an
effective non-GAAP tax rate of 31.9% and 29.6% in the third quarter of 2010
and 2009, respectively. The difference between our GAAP and non-GAAP tax
rates in the third quarter of 2010 was due to the differences in allowable
acquisition-related deductions for income tax purposes.
Income tax effects were calculated using an effective GAAP tax rate of
18.8% and 29.4% in the first nine months of 2010 and 2009, respectively,
and an effective non-GAAP tax rate of 32.8% and 29.4% in the first nine
months of 2010 and 2009, respectively. The difference between our GAAP and
non-GAAP tax rates in the first nine months of 2010 was due to the
differences in allowable acquisition-related deductions for income tax
purposes.
(8) The diluted weighted-average common shares used for the calculation of
Non-GAAP diluted earnings per share for the first nine months of 2010
include the dilutive effect of outstanding options, restricted stock units,
and warrants, and the average market price of our common stock during the
first three quarters of 2010 using the treasury stock method.
Pegasystems Inc.
Unaudited Condensed Consolidated Balance Sheets
As of As of
September 30, December 31,
2010 2009
------------ ------------
(in thousands)
Current Assets:
Cash and cash equivalents $ 52,777 $ 63,857
Marketable securities 16,076 138,796
------------ ------------
Total cash, cash equivalents, and
marketable securities 68,853 202,653
Trade accounts receivable, net 75,952 39,396
Short-term license installments 2,447 2,829
Deferred income taxes 6,516 2,523
Income taxes receivable and other current
assets 17,010 8,840
------------ ------------
Total current assets 170,778 256,241
Long-term license installments, net 1,383 2,976
Property and equipment, net 10,769 8,931
Long-term deferred income taxes 30,521 7,515
Other assets 2,489 1,195
Intangible assets, net 83,554 336
Goodwill 21,613 2,391
------------ ------------
Total assets $ 321,107 $ 279,585
============ ============
Current liabilities:
Accounts payable $ 5,445 $ 4,791
Accrued expenses 26,417 6,748
Accrued compensation and related expenses 23,746 23,280
Deferred revenue 48,773 32,870
------------ ------------
Total current liabilities 104,381 67,689
Income taxes payable 6,134 4,828
Other long-term liabilities 5,192 1,849
------------ ------------
Total liabilities 115,707 74,366
Stockholders' equity: 205,400 205,219
------------ ------------
Total liabilities and stockholders'
equity $ 321,107 $ 279,585
============ ============
Pegasystems Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
Nine Months Ended
September 30,
2010 2009
-------- --------
(in thousands)
Operating activities:
Net (loss) income $ (1,198) $ 25,884
Adjustments to reconcile net (loss) income to cash
(used in) provided by operating activities:
Excess tax benefit from equity awards and
deferred income taxes (7,544) (15,310)
Depreciation, amortization, and other non-cash
items 7,013 2,021
Foreign currency transaction loss 3,775 -
Amortization of investments and realized gain
on sale of investments 671 2,963
Stock-based compensation expense 5,213 3,523
Change in operating assets and liabilities,
and other, net (17,436) 19,758
-------- --------
Cash (used in) provided by operating activities (9,506) 38,839
-------- --------
Cash provided by (used in) investing activities 8,725 (17,650)
-------- --------
Cash used in financing activities (6,919) (2,071)
-------- --------
Effect of exchange rate on cash and cash equivalents (3,380) 1,214
-------- --------
Net (decrease) increase in cash and cash equivalents (11,080) 20,332
Cash and cash equivalents, beginning of period 63,857 36,087
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Cash and cash equivalents, end of period $ 52,777 $ 56,419
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