Shares in Pegasystems Inc. were down slightly in late trading after the business process management software provider reported mixed results in its latest earnings report.
For the quarter that ended March 31, Pegasystems reported non-generally accepted accounting principles earnings per share of 23 cents, down 61% from 59 cents per share in the same quarter of last year. Revenue came in at $352.47 million, down 14% year-over-year. Analysts had been expecting EPS of 38 cents and revenue of $349.74 million.
The mixed headline results were reflected in Pegasystems’ income figures, with the company seeing increased interest in its cloud product while its software licensing headed in the opposite direction. Revenue from the company’s Pega Cloud cloud offering was up 19% year-over-year to $107.9 million, while its subscription licensing revenue was down 39% to $84.5 million. Pegasystems also saw a 13% drop in consulting revenue to $53 million.
The growth in cloud revenue while subscription licensing dropped was part of a move announced by Pegasystems back in 2017 to shift its offerings to the cloud from more traditional software. In the fourth quarter of 2017, when the company announced its cloud transition, cloud revenue was $51 million in terms of trailing 12 Months GAAP revenue compared to $402 million now.
While Pegasystems continues to go through its cloud transformation, the company is also seeing an improvement in key metrics such as cash flow, which was up 351% in the quarter for operating cash flow and 325% in terms of free cash flow. Annual contract value was also up 13% or 15% on a constant currency basis.
“Our team delivered well on our three most important financial metrics of ACV growth, free cash flow and backlog,” Ken Stillwell, chief operating officer and chief financial officer of Pegasystems, said in the company’s earning release. “There’s great excitement throughout our team on our journey to becoming a Rule of 40 company.”
For its outlook, Pegasystems said it expects full financial year 2023 EPS of $1.50 on revenue of $1.4 billion. Analysts had expected 62 cents and $1.38 billion.
The surprise outlook was not enough to overcome the EPS miss in the quarter, with Pegasystems shares down around 1.5% in after-hours trading.
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