Company Reports

We are discontinuing analyst coverage of Pegasystems.

Pegasystems reported second-quarter results that included revenue growth of 9% year over year to $421 million and non-GAAP operating margin of 12.6%. The firm does not provide quarterly guidance, so results can be volatile against consensus expectations.

We believe Pegasystems is well established in the business process management software niche and further benefits from related customer relationship management applications. We expect the firm to remain a leading provider for enterprise users in the coming years as it moves customers to its new Pega Infinity platform, which unifies customer engagement with automation. The company’s revenue model transition was messy at times but is largely complete, and Pegasystems has emerged leaner and more focused. We still believe that Pegasystems demonstrates high customer switching costs, as evidenced by its long customer relationships and strong annual contract value metrics.

Pegasystems hosted an investor day that was more evolutionary than revolutionary. The firm announced several new products and features and continued to hammer home messaging on its Blueprint solution, but did not update financial targets.

Pegasystems' first-quarter results included a revenue contraction of 10% year over year to $430 million and non-GAAP operating margin of 19.5%. The firm does not provide quarterly guidance, so results can be volatile against consensus expectations.

Pegasystems reported fourth-quarter results that included revenue growth of 17% year over year to $504 million and non-GAAP operating margin of 27.6%. The firm does not provide quarterly guidance, so results can be volatile against consensus expectations.

We believe Pegasystems is well established in the business process management software niche and further benefits from related customer relationship management applications. We expect the firm to remain a leading provider for enterprise users in the coming years as it moves customers to its new Pega Infinity platform, which unifies customer engagement with automation. The company’s revenue model transition was messy at times but is largely complete, and Pegasystems has emerged leaner and more focused. We still believe that Pegasystems demonstrates high customer switching costs, as evidenced by its long customer relationships and strong annual contract value metrics.

Pegasystems reported third-quarter results that included revenue growth of 17% year over year to $381 million and non-GAAP operating margin of 15.2%. The firm does not provide quarterly guidance, so results can be volatile against consensus expectations.

We believe Pegasystems is well established in the business process management software niche and further benefits from related customer relationship management applications. We expect the firm to remain a leading provider for enterprise users in the coming years as it moves customers to its new Pega Infinity platform, which unifies customer engagement with automation. The company’s revenue model transition was messy at times but is largely complete, and we expect Pegasystems to emerge leaner and more focused. We still believe that Pegasystems demonstrates high customer switching costs, as evidenced by its long customer relationships and strong annual contract value metrics.

Pegasystems reported second-quarter results that included revenue growth of 9% year over year to $385 million and non-GAAP operating margin of 14.2%. The firm does not provide quarterly guidance, so results can be volatile against expectations.

We believe Pegasystems is well established in the business process management software niche and further benefits from related customer relationship management applications. We expect the firm to remain a leading provider for enterprise users in the coming years as it moves customers to its new Pega Infinity platform, which unifies customer engagement with automation. The company’s revenue model transition was messy at times but is largely complete, and we expect Pegasystems to emerge leaner and more focused. We still believe that Pegasystems demonstrates high customer switching costs, as evidenced by its long customer relationships and strong annual contract value metrics.

We believe Pegasystems is well established in the business process management software niche and further benefits from related customer relationship management applications. We expect the firm to remain a leading provider for enterprise users in the coming years as it moves customers to its new Pega Infinity platform, which unifies customer engagement with automation. The company’s revenue model transition was messy at times but is largely complete, and we expect Pegasystems to emerge leaner and more focused. We still believe that Pegasystems demonstrates high customer switching costs, as evidenced by its long customer relationships and strong annual contract value metrics.

We believe Pegasystems is well established in the business process management software niche and further benefits from related customer relationship management applications. We expect the firm to remain a leading provider for enterprise users in the coming years as it moves customers to its new Pega Infinity platform, which unifies customer engagement with automation. The company’s revenue model transition was messy at times but is largely complete, and we expect Pegasystems to emerge leaner and more focused. We still believe that Pegasystems demonstrates high customer switching costs, as evidenced by its long customer relationships and strong annual contract value metrics.

Pegasystems hosted an investor day that leaned heavily into its Blueprint solution, while marking a pivot to include midmarket companies and outlining new financial guideposts for the medium term.

Pegasystems reported blowout first-quarter results based on strength in term licenses. Revenue grew 44% year over year to $476 million, while non-GAAP operating margin was 35.6%. The firm does not provide quarterly guidance, so results can be volatile against expectations.

We believe Pegasystems is well established in the business process management software niche and further benefits from related customer relationship management applications. We expect the firm to remain a leading provider for enterprise users in the coming years as it moves customers to its new Pega Infinity platform, which unifies customer engagement with automation. The company’s revenue model transition was messy at times but is largely complete, and we expect Pegasystems to emerge leaner and more focused. We still believe that Pegasystems demonstrates high customer switching costs, as evidenced by its long customer relationships and strong annual contract value metrics.

No-moat Pegasystems reported fourth-quarter results that were above our expectations on the top and bottom lines. Guidance was mixed, with revenue slightly better and non-GAAP earnings per share slightly worse than anticipated. The shares sold off sharply after the release, which supports our notion that they were overheated heading into results. The company’s artificial intelligence strategy is core to our long-term thesis, and it's executing it well, reflected in strong growth this quarter in annual contract value. Along the same lines, we are encouraged by engagement on Blueprint ramping up, as it gives the company a chance to cross-sell and upsell on its installed customer base while also bringing in new clients into the fold. After several modest model tweaks, we are raising our fair value estimate to $82 per share from $80. We see the shares as fairly valued after the Feb. 13 selloff.

We believe Pegasystems is well established in the business process management software niche and further benefits from related customer relationship management applications. We expect the firm to remain a leading provider for enterprise users in the coming years as it moves customers to its new Pega Infinity platform, which unifies customer engagement with automation. The company’s revenue model transition was messy at times but is largely complete, and we expect Pegasystems to emerge leaner and more focused. We still believe that Pegasystems demonstrates high customer switching costs, as evidenced by its long customer relationships and strong annual contract value metrics.

We believe Pegasystems is well established in the business process management software niche and further benefits from related customer relationship management, or CRM, applications. We expect the company to remain a leading provider for enterprise users in the coming years as it moves customers to its new Pega Infinity platform, which unifies customer engagement with automation. The company’s revenue model transition was messy at times but is largely complete, and we expect Pegasystems to emerge leaner and more focused. With that said, we still believe that Pegasystems demonstrates high customer switching costs as evidenced by its long customer relationships and strong annual contract value, or ACV, metrics.

No-moat Pegasystems posted decent third-quarter results with top- and bottom-line results below our estimates. However, key growth drivers, annual contract value and backlogs, exhibited healthy momentum. Pegasystems’ cloud segment showed good acceleration, largely driven by increased migration and rapid adoption of artificial intelligence within workflows and client engagement with Blueprint. We see Pegasystems' ongoing AI investments driving product innovation, creating more value for clients, and attracting new customers to the fray, reinforcing our long-term thesis for the company. We have made some small adjustments including modest increases to revenue and margins, which drives our fair value estimate to $80 per share, from $77 previously. We view shares as fairly valued.