What happened
Shares of Pegasystems (PEGA 0.34%) were rallying today after the business process management software company posted better-than-expected results in its fourth-quarter earnings report.
As of 1:37 p.m. ET, the stock was up 16.7% on the news.
So what
Pegasystems' revenue rose 25% to $396.4 million, easily beating estimates at $333.7 million. The timing of bookings seemed to give the top line a boost, as annual contract value rose 16% in constant currency to $1.16 billion, while its backlog was up just 4% in constant currency to $1.4 billion. Pegasystems was able to deliver that growth even as operating expenses declined, excluding a restructuring charge.
The company has been in the midst of a transition from an on-premise software company to a cloud-based one, and it said gross margin in Pega Cloud had reached 70%, a positive sign.
On the bottom line, those cost controls helped the company deliver a significant improvement, with adjusted earnings per share coming in at $0.82, up from $0.04 in the quarter a year ago and much better than the analyst consensus at $0.11.
COO and CFO Ken Stillwell said: "Surpassing $1 billion in subscription revenue is a significant milestone in our multiyear journey to transform our business. As we complete the subscription transition in 2023, we're focused on our Rule of 40 progress, which will lead to significantly improved operating leverage and cash generation."
Now what
In its guidance for 2023, Pegasystems called for annual contract value growth of $11% to 13% and sees revenue rising 6.3% to $1.4 billion, which is slightly ahead of the consensus at $1.38 billion. On the bottom line, it called for adjusted earnings per share of $1.50, which was much better than the consensus at $0.62.
Pegasystems said it was laying off 4% of its staff at the beginning of the year, and the efforts to control costs seem to be paying off. The expected top-line growth isn't going to wow the market, but after the software stock plunged 69% last year, low expectations were already baked in.
