Credit: Image source: Pegasystems.What happened
Shares of Pegasystems Inc. (NASDAQ: PEGA) fell as much as 14.8% early Thursday, then partially recovered to trade down 9% as of 1 p.m. EST after the customer-engagement software specialist announced disappointing third-quarter 2017 results.
More specifically, Pegasystems' quarterly revenue declined 2% year over year to $179.8 million, which translated to a 68% decline in adjusted (non- GAAP ) net income to $4.2 million, or $0.05 per diluted share. Both the top and bottom lines fell far short of investors' expectations for earnings of $0.18 per share on revenue of $201.4 million.
Image source: Pegasystems.
So what
To be fair, Pegasystems' annual contract value (ACV) climbed 17% year over year to $449 million, including a 23% increase in term license and cloud ACV to $200.2 million, and a 13% gain in maintenance ACV to $248.8 million. For that strength, the company credited an accelerating shift in mix toward recurring revenue sources.
Pegasystems CFO Ken Stillwell elaborated:
Now what
While it's hard to blame the market for reacting negatively to Pegasystems' quarterly shortfall relative to expectations, patient shareholders should be encouraged that the underlying reasons for the miss aren't indicative of a struggling business. Rather, as Pegasystems' sales continue to shift toward recurring sources, it should emerge stronger and with a more predictable revenue stream in the end. As such, I think now could be an attractive opportunity for long-term investors to open or add to their positions.
10 stocks we like better than Pegasystems
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor , has tripled the market.*
David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Pegasystems wasn't one of them! That's right -- they think these 10 stocks are even better buys.
Click here to learn about these picks!
*Stock Advisor returns as of November 6, 2017
Steve Symington has no position in any of the stocks mentioned. The Motley Fool recommends Pegasystems. The Motley Fool has a disclosure policy .
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
