Pega Delivers Double-Digit ACV Growth and Record Cash Flow in Q4 2023
Pegasystems Inc. (PEGA) reports record-breaking financial results for Q4 and full-year 2023, with cash flow from operations and free cash flow surpassing $200 million for the first time. Annual contract value (ACV) sees an 11% year-over-year growth, and Pega Cloud gross margin spikes to 74%.
The reported increase in both cash flow from operations and free cash flow surpassing $200 million marks a significant milestone for the company, signaling robust operational efficiency and financial health. This is particularly noteworthy given the current economic environment where liquidity is paramount. The ability to generate substantial free cash flow is often viewed favorably by investors as it provides the company with the flexibility to reinvest in the business, pay down debt, or return value to shareholders through dividends or share buybacks.
An 11% year-over-year growth in Annual Contract Value (ACV) suggests a solid expansion in the company's customer base or an increase in the value of contracts with existing customers. This growth trajectory is essential for projecting future revenue streams and is a critical metric for evaluating the company's long-term sustainability and market competitiveness.
The leap in Pega Cloud's gross margin to 74% is also a strong indicator of cost efficiency and pricing power within its cloud segment. A higher gross margin implies that the company is becoming more effective at delivering its services at a lower cost relative to its sales, which can translate to improved profitability over time.
The performance of Pegasystems Inc. is indicative of the broader trend within the enterprise AI and workflow automation market, which has been experiencing accelerated growth. As businesses increasingly seek digital transformation solutions, providers that demonstrate the ability to innovate and maintain high gross margins are well-positioned to capture market share. The company's success in enhancing its cloud offerings and deepening client relationships reflects a strategic alignment with industry demand for scalable and efficient cloud solutions.
The reported financial figures can have a positive influence on investor sentiment, potentially impacting the company's stock valuation. Market analysts might consider the implications of these results on Pegasystems' market position and the broader industry outlook. The ability to consistently grow ACV and improve cloud margins could signal to investors that Pegasystems is effectively capitalizing on market opportunities and managing its resources efficiently.
From an economic perspective, the performance of Pegasystems Inc. provides insights into the broader economic conditions affecting the tech sector. The company's ability to generate higher cash flows despite potential macroeconomic headwinds could be indicative of strong sectoral resilience. Additionally, the company's financial health might influence its investment in R&D and innovation, contributing to the overall economic growth through technological advancements and increased productivity.
The impressive gross margin in the cloud segment also suggests that the company may have pricing power, which can be an advantage in inflationary periods. In the long-term, the company's strategic focus on expanding its client base and increasing ACV could lead to sustained growth, potentially supporting job creation and economic activity in the regions where it operates.
02/14/2024 - 04:05 PM
Cash flow from operations and free cash flow both exceed $200 million
Annual contract value (ACV) grows 11% year over year
Pega Cloud gross margin jumps to 74% for 2023
CAMBRIDGE, Mass. --(BUSINESS WIRE)--
Pegasystems Inc. (NASDAQ: PEGA), the leading enterprise AI decisioning and workflow automation platform provider, released its financial results for the fourth quarter and full-year 2023.
This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20240214539360/en/
(Graphic: Business Wire)
“It’s awesome to see how well our team performed in 2023,” said Alan Trefler, founder and CEO. “We delivered transformative innovation to change the way the world builds software while deepening and expanding our client relationships. I couldn’t be more excited about the incredible opportunity ahead to leverage GenAI and revolutionize the way clients use our technology to drive success in 2024 and beyond.”
“Our team did an excellent job balancing growth and profitability last year,” said Ken Stillwell, Pega COO and CFO. “We delivered double-digit ACV growth and record free cash flow by focusing on client success and by transforming our go-to-market model. As we exited 2023, we hit our Rule of 30 target, a big transformation for how we run the business. And, we’re on track to achieve the Rule of 40 as we exit 2024.”
Financial and performance metrics (1)
Reconciliation of ACV and ACV (constant currency)
(in millions, except percentages)
December 31, 2022
December 31, 2023
1-Year Change
ACV
$
1,126
$
1,255
11
%
Impact of changes in foreign exchange rates
—
(11
)
ACV (constant currency)
$
1,126
$
1,244
11
%
Note: ACV (constant currency) is calculated by applying the December 31, 2022 foreign exchange rates to all periods shown.
1 Refer to the schedules at the end of this release for additional information, including a reconciliation of GAAP and non-GAAP measures.
(Dollars in thousands,
except per share amounts)
Three Months Ended
December 31,
Year Ended
December 31,
2023
2022
Change
2023
2022
Change
Total revenue
$
474,233
$
396,470
20
%
$
1,432,616
$
1,317,845
9
%
Net income (loss) - GAAP
$
142,665
$
34,613
312
%
$
67,808
$
(345,582
)
*
Net income - non-GAAP
$
152,141
$
68,341
123
%
$
210,159
$
59,611
253
%
Diluted earnings (loss) per share - GAAP
$
1.61
$
0.41
293
%
$
0.73
$
(4.22
)
*
Diluted earnings per share - non-GAAP
$
1.77
$
0.82
116
%
$
2.48
$
0.72
244
%
* not meaningful
(Dollars in thousands)
Three Months Ended
December 31,
Change
Year Ended
December 31,
Change
2023
2022
2023
2022
Pega Cloud
$
120,346
25
%
$
103,089
26
%
$
17,257
17
%
$
461,328
32
%
$
384,271
29
%
$
77,057
20
%
Maintenance
86,646
18
%
81,996
21
%
4,650
6
%
331,856
24
%
317,564
24
%
14,292
5
%
Subscription services
206,992
43
%
185,085
47
%
21,907
12
%
793,184
56
%
701,835
53
%
91,349
13
%
Subscription license
207,559
44
%
155,818
39
%
51,741
33
%
407,625
28
%
366,063
28
%
41,562
11
%
Subscription
414,551
87
%
340,903
86
%
73,648
22
%
1,200,809
84
%
1,067,898
81
%
132,911
12
%
Perpetual license
5,372
1
%
364
—
%
5,008
1376
%
10,101
1
%
19,293
1
%
(9,192
)
(48
)%
Consulting
54,310
12
%
55,203
14
%
(893
)
(2
)%
221,706
15
%
230,654
18
%
(8,948
)
(4
)%
$
474,233
100
%
$
396,470
100
%
$
77,763
20
%
$
1,432,616
100
%
$
1,317,845
100
%
$
114,771
9
%
2024 Guidance (1)
As of February 14, 2024, we are providing the following guidance:
2024
Annual contract value growth
11%
2024
GAAP
Non-GAAP (1)
Revenue
$1.5 Billion
$1.5 Billion
Diluted earnings per share
$1.18
$2.75
2024
Cash provided by operating activities
$365 million
Free cash flow
$350 million
(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 8:00 a.m. EST on Thursday, February 15, 2024. Members of the public and investors are invited to join the call and participate in the question-and-answer session by dialing 1 (888) 415-4305 (domestic), 1 (646) 960-0336 (international), or via https://events.q4inc.com/attendee/543203270 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
Our non-GAAP financial measures should only be read in conjunction with our consolidated financial statements prepared in accordance with GAAP. We believe that these measures help investors understand our core operating results and prospects, which is consistent with how management measures and forecasts our performance without the effect of often one-time charges and other items outside our normal operations. They are not a substitute for financial measures prepared under U.S. GAAP. Refer to the schedules at the end of this release for additional information, including a reconciliation of GAAP and non-GAAP measures.
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, intends to, projects, forecasts, guidance, likely, and usually or variations of such words and other similar expressions, identify forward-looking statements, which represent our views only as of the date the statement was made and 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;
variation in demand for our products and services, including among clients in the public sector;
reliance on key personnel;
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;
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, intellectual property rights claims, and other related claims by third parties against us, including related costs, damages, and other relief that may be granted against us;
our ongoing litigation with Appian Corp.;
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, 2023, and other filings we make with the U.S. Securities and Exchange Commission (“SEC”).
Investors are cautioned not to place undue reliance on such forward-looking statements, and there are no assurances that the results included in such statements will be achieved. Although subsequent events may cause our view to change, except as required by applicable law, we do not undertake and expressly disclaim any obligation to publicly update or revise these forward-looking statements, whether as the result of new information, future events, or otherwise.
Any forward-looking statements in this press release represent our views as of February 14, 2024.
About Pegasystems
Pega provides a powerful platform that empowers the world's leading organizations to unlock business-transforming outcomes with real-time optimization. Clients use our enterprise AI decisioning and workflow automation to solve their most pressing business challenges - from personalizing engagement to automating service to streamlining operations. Since 1983, we've built our scalable and flexible architecture to help enterprises meet today's customer demands while continuously transforming for tomorrow. For more information on how Pega (NASDAQ: PEGA) empowers its clients to Build for Change®, visit 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 Ended
December 31,
Year Ended
December 31,
2023
2022
2023
2022
Revenue
Subscription services
$
206,992
$
185,085
$
793,184
$
701,835
Subscription license
207,559
155,818
407,625
366,063
Consulting
54,310
55,203
221,706
230,654
Perpetual license
5,372
364
10,101
19,293
Total revenue
474,233
396,470
1,432,616
1,317,845
Cost of revenue
Subscription services
34,697
35,632
144,250
138,736
Subscription license
635
719
2,606
2,642
Consulting
55,298
55,920
231,560
227,082
Perpetual license
16
2
67
175
Total cost of revenue
90,646
92,273
378,483
368,635
Gross profit
383,587
304,197
1,054,133
949,210
Operating expenses
Selling and marketing
133,924
151,838
559,177
624,789
Research and development
71,250
73,176
295,512
294,349
General and administrative
22,850
23,204
96,743
117,734
Restructuring
297
21,743
21,747
21,743
Total operating expenses
228,321
269,961
973,179
1,058,615
Income (loss) from operations
155,266
34,236
80,954
(109,405
)
Foreign currency transaction (loss) gain
(1,271
)
(3,855
)
(5,242
)
4,560
Interest income
3,428
607
9,259
1,643
Interest expense
(1,647
)
(1,910
)
(6,876
)
(7,792
)
(Loss) on capped call transactions
(899
)
(1,001
)
(1,348
)
(57,382
)
Other income, net
25
82
18,693
6,579
Income (loss) before provision for (benefit from) income taxes
154,902
28,159
95,440
(161,797
)
Provision for (benefit from) income taxes
12,237
(6,454
)
27,632
183,785
Net income (loss)
$
142,665
$
34,613
$
67,808
$
(345,582
)
Earnings (loss) per share
Basic
$
1.71
$
0.42
$
0.82
$
(4.22
)
Diluted
$
1.61
$
0.41
$
0.73
$
(4.22
)
Weighted-average number of common shares outstanding
Basic
83,654
82,257
83,162
81,947
Diluted
89,447
87,339
84,914
81,947
PEGASYSTEMS INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
December 31, 2023
December 31, 2022
Assets
Current assets:
Cash and cash equivalents
$
229,902
$
145,054
Marketable securities
193,436
152,167
Total cash, cash equivalents, and marketable securities
423,338
297,221
Accounts receivable, net
300,173
255,150
Unbilled receivables, net
237,379
213,719
Other current assets
68,137
80,388
Total current assets
1,029,027
846,478
Long-term unbilled receivables, net
85,402
95,806
Goodwill
81,611
81,399
Other long-term assets
314,696
333,989
Total assets
$
1,510,736
$
1,357,672
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable
$
11,290
$
18,195
Accrued expenses
39,941
50,355
Accrued compensation and related expenses
126,640
127,728
Deferred revenue
377,845
325,212
Other current liabilities
21,343
17,450
Total current liabilities
577,059
538,940
Long-term convertible senior notes, net
499,368
593,609
Long-term operating lease liabilities
66,901
79,152
Other long-term liabilities
13,570
15,128
Total liabilities
1,156,898
1,226,829
Total stockholders’ equity
353,838
130,843
Total liabilities and stockholders’ equity
$
1,510,736
$
1,357,672
PEGASYSTEMS INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year Ended
December 31,
2023
2022
Net income (loss)
$
67,808
$
(345,582
)
Adjustments to reconcile net income (loss) to cash provided by operating activities
Non-cash items
227,983
432,270
Change in operating assets and liabilities, net
(78,006
)
(64,352
)
Cash provided by operating activities
217,785
22,336
Cash (used in) provided by investing activities
(50,750
)
13,075
Cash (used in) financing activities
(81,963
)
(46,989
)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
2,701
(3,333
)
Net increase (decrease) in cash, cash equivalents, and restricted cash
87,773
(14,911
)
Cash, cash equivalents, and restricted cash, beginning of period
145,054
159,965
Cash, cash equivalents, and restricted cash, end of period
$
232,827
$
145,054
PEGASYSTEMS INC.
RECONCILIATION OF SELECTED GAAP AND NON-GAAP MEASURES
(in thousands, except percentages and per share amounts)
Three Months Ended
December 31,
Year Ended
December 31,
2023
2022
Change
2023
2022
Change
Net income (loss) - GAAP
$
142,665
$
34,613
312
%
$
67,808
$
(345,582
)
*
Stock-based compensation (1)
33,269
28,909
143,352
122,210
Restructuring
297
21,743
21,747
21,743
Legal fees
2,817
2,139
13,883
34,559
Amortization of intangible assets
963
1,048
3,940
4,093
Interest on convertible senior notes
615
725
2,603
2,888
Capped call transactions
899
1,001
1,348
57,382
Repurchases of convertible senior notes
—
—
(7,855
)
—
Foreign currency transaction loss (gain)
1,271
3,855
5,242
(4,560
)
Other
19
37
(10,266
)
(94
)
Income taxes (2)
(30,674
)
(25,729
)
(31,643
)
166,972
Net income - non-GAAP
$
152,141
$
68,341
123
%
$
210,159
$
59,611
253
%
Diluted earnings (loss) per share - GAAP
$
1.61
$
0.41
293
%
$
0.73
$
(4.22
)
*
non-GAAP adjustments
0.16
0.41
1.75
4.94
Diluted earnings per share - non-GAAP
$
1.77
$
0.82
116
%
$
2.48
$
0.72
244
%
Diluted weighted-average number of common shares outstanding - GAAP
89,447
87,339
2
%
84,914
81,947
4
%
Capped call transactions
(3,719
)
(4,443
)
(235
)
—
Stock-based compensation
—
—
—
1,405
Diluted weighted-average number of common shares outstanding - non-GAAP
85,728
82,896
3
%
84,679
83,352
2
%
* not meaningful
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.
Restructuring : We have excluded restructuring from our non-GAAP financial measures. Restructuring fluctuates in amount and frequency and is significantly affected by the timing and size of our restructuring activities. We believe excluding these amounts from our non-GAAP financial measures is useful to investors as these amounts are not representative of our core business operations and ongoing operational performance.
Legal fees: Legal and related fees arising from proceedings outside the ordinary course of business. 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 operational performance.
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 intangible assets contributed to our revenues recognized during the periods presented and are expected to contribute to future revenues. Amortization of intangible assets is likely to recur in future periods. We believe excluding these amounts provides a useful comparison of our operational performance in different periods.
Interest on convertible senior notes : In February 2020, we issued convertible senior notes, due March 1, 2025, in a private placement. We believe that excluding the amortization of issuance costs provides a useful comparison of our operational performance in different periods.
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 convertible senior 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 operational performance.
Repurchases of convertible senior notes : We have excluded gains from the repurchases of Convertible Senior 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 operational performance.
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. We believe excluding these amounts provides a useful comparison of our operational performance in different periods.
Other : We have excluded gains and losses from our venture investments, capital advisory expenses, expenses incurred due to the cancellation of in-person sales and marketing events, and incremental expenses incurred integrating acquisitions. 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 operational performance.
Diluted weighted-average number of common shares outstanding :
Capped call transactions : In periods of GAAP income, the shares that would be issued if the Company’s Convertible Senior Notes were fully converted to common shares are included in the diluted weighted-average shares outstanding. The capped call transactions are expected to reduce common stock dilution and/or offset any potential cash payments the Company must make, other than for principal and interest, upon conversion of the convertible senior notes, with such reduction and/or offset subject to a cap of $196.44
Stock-based compensation : In periods of non-GAAP income, we have included the dilutive impact of stock-based compensation in our non-GAAP weighted-average shares. In periods of GAAP loss, these shares would have been excluded from our GAAP results as they would be anti-dilutive for GAAP. We believe including the dilutive effect of stock-based compensation in our non-GAAP financial measures in periods of income is helpful to investors as this provides a useful comparison of our operational performance in different periods.
(1) Stock-based compensation:
Three Months Ended
December 31,
Year Ended
December 31,
2023
2022
2023
2022
Cost of revenue
$
6,497
$
6,646
$
28,994
$
26,400
Selling and marketing
14,265
10,245
57,675
46,769
Research and development
6,753
6,841
31,039
29,266
General and administrative
5,754
5,177
25,644
19,775
$
33,269
$
28,909
$
143,352
$
122,210
Income tax benefit
$
(618
)
$
(376
)
$
(2,187
)
$
(1,881
)
(2) Effective income tax rates:
Year Ended
December 31,
2023
2022
GAAP
29
%
114
%
non-GAAP
22
%
22
%
Our GAAP effective income tax rate is subject to significant fluctuations due to several factors, including our stock-based compensation plans, research and development tax credits, gains and losses on our capped call transactions, and the valuation allowance on our deferred tax assets in the U.S. and U.K. We determine our non-GAAP income tax rate using applicable rates in taxing jurisdictions and assessing certain factors, including historical and forecasted earnings by jurisdiction, discrete items, and 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.
PEGASYSTEMS INC.
RECONCILIATION OF FREE CASH FLOW (1) AND OTHER METRICS
(in thousands, except percentages)
Year Ended
December 31,
2023
2022
Growth
Growth
ACV (Constant Currency)
$
1,243,931
11
%
$
1,125,701
16
%
Margin (2)
Margin (2)
Cash provided by operating activities
$
217,785
15
%
$
22,336
2
%
Investment in property and equipment
(16,781
)
(35,379
)
Free cash flow
$
201,004
14
%
$
(13,043
)
(1
)%
Supplemental information (3)
Restructuring
$
29,401
$
—
Legal fees
14,645
41,789
Interest on convertible senior notes
4,134
4,500
Other
601
6,805
Income taxes
11,664
7,645
$
60,445
$
60,739
Effect of supplemental information to Rule of 40 achievement (4)
4
%
5
%
(1) Our non-GAAP free cash flow is defined as cash provided by operating activities less investment in property and equipment. Investment in property and equipment fluctuates in amount and frequency and is significantly affected by the timing and size of investments in our facilities. We provide information on free cash flow to enable investors to assess our ability to generate cash without incurring additional external financings. This information is not a substitute for financial measures prepared under U.S. GAAP. Starting in the third quarter of 2023, the Company calculated free cash flow as cash provided by operating activities less investments in property and equipment. To ensure comparability, previously disclosed amounts have been updated.
Restructuring : Restructuring fluctuates in amount and frequency and is significantly affected by the timing and size of our restructuring activities.
Legal fees: Legal and related fees arising from proceedings outside the ordinary course of business.
Interest on convertible senior notes : In February 2020, we issued convertible senior notes, due March 1, 2025, in a private placement. The convertible senior notes accrue interest at an annual rate of 0.75% , payable semi-annually in arrears on March 1 and September 1.
Other : Fees related to capital advisory services, canceled in-person sales and marketing events, and incremental costs incurred integrating acquisitions.
Income taxes : Direct income taxes paid net of refunds received.
(4) Rule of 40 : A performance metric calculated by adding the annual contract value (“ACV”) growth rate and the free cash flow margin. We also provide a table of supplemental information of other items that affect our cash flows and Rule of 40 achievement.
PEGASYSTEMS INC.
ANNUAL CONTRACT VALUE
(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. ACV is a performance measure that we believe provides useful information to our management and investors.
In 2023, the Company revised its ACV methodology for maintenance and all contracts less than 12 months as its overall client renewal rate exceeds 90% . The impact of the change was $3 million 0.3% of Total ACV or less for all quarters in 2022. Previously disclosed ACV amounts have been updated to allow for comparability. This simplification, made possible by improvements to the Company’s financial systems, ensures that ACV for all contract types and lengths is consistently calculated as the total contract value divided by the duration in years. Previously, ACV for maintenance was calculated as the maintenance revenue for the quarter then ended, multiplied by four, and ACV for contracts less than 12 months was equal to the contract’s total value. The Company believes the simplified methodology better represents the current value of its contracts and better aligns its definition with comparable companies.
December 31, 2023
December 31, 2022
Change
Pega Cloud
$
552,998
$
458,619
$
94,379
21
%
Maintenance
324,091
318,400
5,691
2
%
Subscription services
877,089
777,019
100,070
13
%
Subscription license
377,794
348,682
29,112
8
%
$
1,254,883
$
1,125,701
$
129,182
11
%
PEGASYSTEMS INC.
BACKLOG
(in thousands, except percentages)
Remaining performance obligations (“Backlog”) - Expected future revenue from existing non-cancellable contracts:
As of December 31, 2023:
Subscription services
Subscription license
Perpetual license
Consulting
Total
Maintenance
Pega Cloud
1 year or less
$
245,271
$
446,160
$
62,070
$
2,284
$
39,810
$
795,595
54%
1-2 years
67,720
279,474
9,138
443
2,020
358,795
25%
2-3 years
37,142
144,453
9,789
—
2,896
194,280
13%
Greater than 3 years
24,421
90,177
100
—
—
114,698
8%
$
374,554
$
960,264
$
81,097
$
2,727
$
44,726
$
1,463,368
100%
% of Total
25%
66%
6%
—%
3%
100%
Change since December 31, 2022
$
23,926
$
74,576
$
9,636
$
(4,836)
$
4,334
$
107,636
7%
8%
13%
(64)%
11%
8%
As of December 31, 2022:
Subscription services
Subscription license
Perpetual license
Consulting
Total
Maintenance
Pega Cloud
1 year or less
$
242,073
$
379,648
$
60,668
$
5,310
$
32,374
$
720,073
53%
1-2 years
66,207
246,195
3,803
2,253
6,371
324,829
24%
2-3 years
26,746
143,901
1,707
—
1,647
174,001
13%
Greater than 3 years
15,602
115,944
5,283
—
—
136,829
10%
$
350,628
$
885,688
$
71,461
$
7,563
$
40,392
$
1,355,732
100%
% of Total
26%
65%
5%
1%
3%
100%
PEGASYSTEMS INC.
RECONCILIATION OF GAAP BACKLOG AND CONSTANT CURRENCY BACKLOG
(in millions, except percentages)
December 31, 2022
December 31, 2023
1 Year Growth Rate
Backlog - GAAP
$
1,356
$
1,463
8
%
Impact of changes in foreign exchange rates
—
(16
)
Constant currency backlog
$
1,356
$
1,447
7
%
Note: Constant currency Backlog is calculated by applying the Q4 2022 foreign exchange rates to all periods shown.
PEGASYSTEMS INC.
RECONCILIATION OF FORWARD-LOOKING GUIDANCE
(in millions, except percentages and per share amounts)
2024
Annual contract value growth
11
%
Revenue (GAAP and Non-GAAP)
$
1,500
Net Income - GAAP
$
107
Stock-based compensation
143
Legal fees
15
Amortization of intangible assets
3
Interest on convertible senior notes
3
Incomes taxes
(32
)
Net Income - Non-GAAP
$
239
Diluted earnings per share - GAAP
$
1.18
Non-GAAP adjustments
1.57
Diluted earnings per share - non-GAAP
$
2.75
Diluted weighted-average number of common shares outstanding - GAAP
90.7
Non-GAAP adjustments
(3.7
)
Diluted weighted-average number of common shares outstanding - non-GAAP
87.0
2024
Margin (2)
Cash provided by operating activities
$
365
24
%
Investment in property and equipment
(15
)
Free cash flow
$
350
23
%
Supplemental information
Restructuring
$
7
Legal fees
15
Interest on convertible senior notes
5
Income taxes (1)
26
$
53
Effect of supplemental information to Rule of 40 achievement
4
%
(1) Evolving U.S. tax legislation may impact the amount of tax payments.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240214539360/en/
Press contact:
Lisa Pintchman
lisapintchman.rogers@pega.com
Investor contact:
Peter Welburn
PegaInvestorRelations@pega.com
Source: Pegasystems Inc.
What were Pegasystems Inc.'s cash flow from operations and free cash flow for the first time in company history?
Both cash flow from operations and free cash flow exceeded $200 million for the first time in company history.
How much did the Annual contract value (ACV) grow year over year?
The ACV grew by 11% year over year.
What was the Pega Cloud gross margin for 2023?
Pega Cloud gross margin jumped to 74% for 2023.
