Pegasystems Inc. revenue growth accelerated to 11.6% in 2020 vs. 2.2% a year earliner
02/17/2021 • About Pegasystems Inc. (
$PEGA) • By InTwits
Pegasystems Inc. reported 2020 financial results today. Here are the key drivers of the company's long term financial model:
- The company operates at negative EBITDA Margin: -9.9%
- EBITDA Margin is quite volatile: -9.9% in 2020, -10.4% in 2019, 1.1% in 2018, 13.4% in 2017, 10.1% in 2016
- Pegasystems Inc. motivates its personel by high Stock Based Compensation (SBC): average SBC/Revenue for 2016-2020 was 3.5% while average EBITDA Margin was 0.2% for the sames years
- Pegasystems Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.8%. At the same time it's in pair with industry average of 3.7%
- CAPEX is quite volatile: $25m in 2020, $11m in 2019, $12m in 2018, $14m in 2017, $19m in 2016
- The company has unprofitable business model: ROIC is -13.1%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue jumped on 11.6%. Revenue growth showed slowdown in 20Q4 - it was 8.0% YoY. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin decreased on 5.1 pp from 26.0% to 20.9% in 2020. EBITDA Margin stuck to a declining trend at -6.4 pp per annum in the last 5 years.
Gross Margin increased on 3.5 pp from 66.0% to 69.4% in 2020. During 2016-2020 Gross Margin bottomed in 2019 at 66.0%. SG&A as a % of Revenue increased slightly on 2.0 pp from 58.3% to 60.3% in 2020. SG&A as a % of Revenue followed a growing trend at 5.4 pp per annum in the last 5 years.
Net Income margin increased on 3.9 pp from -9.9% to -6.0% in 2020.
Investments (CAPEX, working capital and M&A)
In 2020 the company had CAPEX/Revenue of 2.5%. The company's CAPEX/Revenue increased slightly on 0.95 pp from 1.5% in 2017 to 2.5% in 2020. It's average level of CAPEX/Revenue for the last three years was 1.7%. During 2016-2020 CAPEX as a % of Revenue bottomed in 2019 at 1.2%.
Return on investment
The company operates at negative ROIC (-13.1%) and ROE (-11.4%). ROIC increased on 3.4 pp from -16.5% to -13.1% in 2020. ROE increased on 4.2 pp from -15.6% to -11.4% in 2020. ROIC stuck to a declining trend at -9.2 pp per annum in 2016-2020. ROE stuck to a declining trend at -8.5 pp per annum in 2016-2020.
Leverage (Debt)
Company's Net Debt / EBITDA is -2.2x and Debt / EBITDA is . Net Debt / EBITDA didn't change in 2020. Debt jumped on 770% while cash jumped on 151%.
Pegasystems Inc. has no short term refinancing risk: cash is higher than short term debt (927.1%).
Management team
Alan Trefler is a the company's CEO. Alan Trefler has spent 21 years with the company. Kenneth Stillwell "Ken" is a Pegasystems Inc.'s CFO. Kenneth Stillwell "Ken" has spent 4 years at the company.
Financial and operational results
FY ended 12/31/2020
Pegasystems Inc. ($PEGA) key annual financial indicators| mln. $ | 2016 | 2017 | 2018 | 2019 | 2020 | 2020/2019 |
|---|
P&L
|
|---|
| Revenue | 762 | 888 | 892 | 911 | 1,018 | 11.6% |
| Gross Profit | 523 | 609 | 590 | 601 | 707 | 17.5% |
| SG&A | 324 | 353 | 425 | 531 | 613 | 15.5% |
| EBITDA | 77 | 119 | 10 | -94 | -101 | |
| EBIT | 51 | 93 | -17 | | | |
| Tax | 10 | -12 | -22 | | | |
| Net Income | 45 | 99 | 11 | -90 | -61 | |
| Stock Based Compensation | 41 | 53 | 64 | | | |
Balance Sheet
|
|---|
| Cash | 71 | 162 | 114 | 68 | 172 | 151.5% |
| Accounts Receivable | 265 | 223 | 181 | | | |
| Accounts Payable | 14 | 17 | 16 | | | |
| Short Term Debt | 0 | 0 | 0 | 16 | 19 | 16.7% |
| Long Term Debt | 0 | 0 | 0 | 53 | 577 | 997.2% |
Cash flow
|
|---|
| Capex | 19 | 14 | 12 | 11 | 25 | 139.1% |
| Dividends | 9 | 9 | 9 | | | |
| Acquisitions | 49 | 0 | 1 | | | |
Ratios
|
|---|
| Revenue growth | 11.7% | 16.6% | 0.4% | 2.2% | 11.6% | |
| EBITDA growth | -14.8% | 55.6% | -91.7% | -1,057.8% | 6.8% | |
|
|---|
| Gross Margin | 68.6% | 68.5% | 66.2% | 66.0% | 69.4% | 3.5% |
| EBITDA Margin | 10.1% | 13.4% | 1.1% | -10.4% | -9.9% | 0.4% |
| EBIT Margin | 6.6% | 10.5% | -1.9% | | |
| SG&A, % of revenue | 42.5% | 39.7% | 47.7% | 58.3% | 60.3% | 2.0% |
| SBC, % of revenue | 5.4% | 6.0% | 7.2% | | |
| Net Income Margin | 5.9% | 11.1% | 1.2% | -9.9% | -6.0% | 3.9% |
| CAPEX, % of revenue | 2.5% | 1.5% | 1.3% | 1.2% | 2.5% | 1.3% |
|
|---|
| ROIC | 16.1% | 16.8% | -2.1% | -16.5% | -13.1% | 3.4% |
| ROE | 13.7% | 19.9% | 1.7% | -15.6% | -11.4% | 4.2% |
| Net Debt/EBITDA | -0.9x | -1.4x | -11.6x | | |
People
|
|---|
| Insider ownership | 52.2% | 52.2% | 52.2% | | | |
| Employees | 3,908 | 4,237 | 4,650 | | | |
| Revenue/Employee, th. $ | 195 | 210 | 192 | | | |
Pegasystems Inc. ($PEGA) key quoterly financial indicators
| mln. $ | 20Q1 | 20Q2 | 20Q3 | 20Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 266 | 227 | 226 | 299 | | 25.0% | 10.6% | 4.3% | 8.0% |
| EBITDA | -15 | -46 | -56 | 1 | | - | - | - | - |
| Net Income | -25 | -21 | -19 | 4 | | - | - | - | 336.4% |
Balance Sheet
|
|---|
| Cash | 538 | 512 | 281 | 172 | | 387.6% | 436.2% | 205.3% | 151.5% |
| Short Term Debt | 15 | 0 | 0 | 19 | | 23.6% | -100.0% | -100.0% | 16.7% |
| Long Term Debt | 553 | 562 | 576 | 577 | | 1,120.1% | 936.0% | 912.8% | 997.2% |
Ratios
|
|---|
| Gross Margin | 70.1% | 66.3% | 65.6% | 74.2% | | 5.1% | 3.8% | 2.9% | 2.3% |
| EBITDA Margin | -5.5% | -20.3% | -24.9% | 0.3% | | -0.3% | -4.3% | -13.3% | 0.3% |
| Net Income Margin | -9.6% | -9.1% | -8.5% | 1.3% | | 4.0% | 6.6% | 5.5% | 1.0% |
Peers in Application Software
Below we provide Pegasystems Inc. benchmarking against other companies in Application Software industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| VirnetX Holding Corp ($VHC) | - | -0.2% | -95.9% | 34.9% | 355,942.4% |
| AudioEye, Inc. ($AEYE) | - | 175.5% | 106.6% | 90.2% | 90.2% |
| Cloudera, Inc. ($CLDR) | - | 57.2% | 42.6% | 28.9% | 65.5% |
| Integrated Ventures Inc ($INTV) | - | - | - | -8.9% | 62.7% |
| Smartsheet Inc. ($SMAR) | - | 64.3% | 66.1% | 59.7% | 52.4% |
| |
|---|
| Median (92 companies) | 12.0% | 14.8% | 15.2% | 19.5% | 14.7% |
|---|
| Pegasystems Inc. ($PEGA) | - | 16.6% | 0.4% | 2.2% | 11.6% |
Top companies by Gross margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Aware, Inc. ($AWRE) | 90.3% | 94.6% | 92.3% | 89.7% | 92.8% |
| Alteryx, Inc. ($AYX) | 81.3% | 83.4% | 91.0% | 90.6% | 91.1% |
| Autodesk, Inc. ($ADSK) | 85.2% | 83.2% | 85.2% | 88.9% | 90.1% |
| Smith Micro Software, Inc. ($SMSI) | 73.2% | 77.9% | 83.5% | 90.9% | 89.9% |
| Cadence Design Systems, Inc. ($CDNS) | 85.9% | 87.8% | 87.9% | 88.6% | 88.6% |
| |
|---|
| Median (89 companies) | 63.8% | 64.4% | 65.3% | 68.4% | 70.6% |
|---|
| Pegasystems Inc. ($PEGA) | 68.6% | 68.5% | 66.2% | 66.0% | 69.4% |
Top companies by EBITDA margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| VirnetX Holding Corp ($VHC) | -1,837.2% | -1,118.0% | -40,379.4% | -23,127.1% | 52.2% |
| j2 Global, Inc. ($JCOM) | 41.7% | 36.5% | 35.7% | 38.6% | 40.5% |
| Intelligent Systems Corporation ($INS) | -5.4% | -12.8% | 33.6% | 43.6% | 40.4% |
| Adobe Inc. ($ADBE) | 31.2% | 34.2% | 35.3% | 35.8% | 39.7% |
| SS&C Technologies Holdings, Inc. ($SSNC) | 34.9% | 37.9% | 27.7% | 38.2% | 38.3% |
| |
|---|
| Median (89 companies) | -5.3% | -4.2% | -3.3% | 4.5% | 7.7% |
|---|
| Pegasystems Inc. ($PEGA) | 10.1% | 13.4% | 1.1% | -10.4% | -9.9% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| MicroStrategy Incorporated ($MSTR) | 0.5% | 0.8% | 1.4% | 2.1% | 234.8% |
| Integrated Ventures Inc ($INTV) | - | - | 199.9% | 15.2% | 27.2% |
| Intelligent Systems Corporation ($INS) | 3.8% | 9.7% | 4.3% | 4.9% | 19.2% |
| LivePerson, Inc. ($LPSN) | 5.5% | 7.9% | 8.8% | 16.3% | 11.4% |
| PROS Holdings, Inc. ($PRO) | 4.7% | 0.8% | 0.7% | 2.1% | 11.3% |
| |
|---|
| Median (87 companies) | 3.0% | 2.3% | 2.4% | 3.0% | 2.6% |
|---|
| Pegasystems Inc. ($PEGA) | 2.5% | 1.5% | 1.3% | 1.2% | 2.5% |
Top companies by ROIC, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| VirnetX Holding Corp ($VHC) | -210.9% | -256.8% | -416.3% | -247.2% | 137.3% |
| Manhattan Associates, Inc. ($MANH) | 99.3% | 102.5% | 80.9% | 71.7% | 53.4% |
| Citrix Systems, Inc. ($CTXS) | 16.1% | 16.7% | 25.2% | 29.8% | 33.5% |
| Sonic Foundry, Inc. ($SOFO) | -18.1% | -50.6% | -786.4% | - | 31.3% |
| Paycom Software, Inc. ($PAYC) | 75.4% | 51.1% | 47.5% | 47.5% | 28.7% |
| |
|---|
| Median (92 companies) | -9.8% | -11.8% | -10.6% | -4.2% | -1.8% |
|---|
| Pegasystems Inc. ($PEGA) | 16.1% | 16.8% | -2.1% | -16.5% | -13.1% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Dropbox, Inc. ($DBX) | - | -3.8x | - | 2.4x | 1,341.0x |
| Avaya Holdings Corp. ($AVYA) | - | - | 7.4x | - | 77.9x |
| Alteryx, Inc. ($AYX) | - | - | 2.5x | 6.1x | 32.2x |
| Five9, Inc. ($FIVN) | -6.7x | -8.6x | 7.3x | 5.3x | 17.6x |
| Synchronoss Technologies, Inc. ($SNCR) | - | - | - | - | 11.6x |
| |
|---|
| Median (54 companies) | -0.9x | -0.8x | -0.6x | 0.4x | 0.2x |
|---|
