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Pegasystems growth continues, but clouds remain wispy

Pegasystems just announced its full-year financial results for 2016, and as of December 31, it attained a shade over $750m in revenue – that’s a 10% increase over 2015’s total of $682.7m.

Pegasystems had been forecasting full-year revenue of $800m as recently as October 2016, and Q4 reported revenue was actually down very slightly over the same period in 2015 – whereas growth for the first three quarters had averaged 15% over the year-before periods.

However behind the headlines, Pegasystems continues to shift its business towards renewable term licensing and away from perpetual licensing: as a result its revenue backlog has grown around 20% over the previous year – with a significant chunk of that increase coming in the last quarter. The company asserted on a recent investor call that the shortfall against its $800m revenue guidance is in the main down to this, and also partly down to the impacts of currency fluctuations.

Overall, then, Pegasystems seems to be continuing to perform well – even if the headline reported revenue figure was a little depressed in its most recent quarter. It’s certainly continuing to invest, and has aggressive plans to reach a new, broader range of customers (beyond the largest 400 or so corporations).

You might wonder how much a ‘shift to cloud’ is part of this shift in licensing models.

The answer is that right now, it’s not a big contributor at all. Pegasystems cloud revenue, at $41.4m, is still only 5.5% of the company’s overall revenue even though it grew around 35% over 2015. The company is starting to make noise about its new ‘cloud choice’ proposition, which enables customers to choose a Pega-managed cloud service; a partner-managed cloud service; or a self-managed cloud deployment (as well as on-premise deployment) – we’ll soon see if this starts to have an effect. Pega’s success in aggressively developing business with a broader range of customers will depend to a significant degree on offering choice here: and certainly, if it wants to continue with recent competitive marketing campaigns targeting Salesforce and expect to be credible, it’s going to need to up its game.


The post Pegasystems growth continues, but clouds remain wispy appeared first on The Advisor.

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