What: Shares of Pegasystems (NASDAQ:PEGA) were up 10.7% as of 12:50 p.m. Wednesday after the enterprise software company released strong third-quarter results.
So what: Adjusted quarterly revenue climbed 17% year over year to $162.4 million, driven by a 21% increase in license revenue to $58.9 million, 10.6% growth in maintenance revenue to $52.3 million, and a 78% jump in cloud revenue to $8.2 million. That translated to a 58% increase in adjusted net income to $13.2 million, and 55% growth in adjusted net income per diluted share to $0.17.
Analysts, on average, were only expecting adjusted net income of $0.15 per share on revenue of $156.8 million.
Meanwhile, Pegasystems' total license and cloud backlog grew 14% year over year to $379.7 million, including a 19% decline in total billed deferred license and cloud revenue to $55.4 million, and a 22% increase in off-balance sheet license and cloud commitments to $324.3 million.
"Once again, we exceeded our revenue goals while building backlog during what is often our most challenging quarter," added Pegasystems' founding CEO Alan Trefler. "Our strategy to reach a broader target base is bearing fruit, and we are seeing an increase in the number and size of deals from new logos, while continuing to expand our business with existing clients."
Now what: Looking forward, Pegasystems didn't provide specific financial guidance for the fourth quarter. But CFO Rafe Brown did remind investors during the subsequent conference call that the fourth quarter is typically the company's busiest in terms of bookings, revenue, and earnings.
He also warned that as Pegasystems works "to balance the mix of deal types," customer preferences dictating how particular deals are structured can create significant variability in Pegasystems' near-term results. Namely, keep in mind if deals are cloud or term-based, they're recognized over the course of the term as opposed to the entire amount of up-front revenue immediately recognized through perpetual licenses.
"With this said," Brown insisted, "we've a very busy Q4 ahead of us where we're looking to build on our strong year-to-date performance."
All things considered, investors are right to be encouraged by Pegasystems' continued progress in building its business for a more predictable, sustainable revenue stream. Given Pegasystems' solid beat and optimistic outlook, it's no surprise the market is bidding the stock up today.