Pegasystems (NASDAQ:PEGA) Misses Q1 Revenue Estimates

Enterprise workflow software provider Pegasystems (NASDAQ:PEGA) missed analyst expectations in Q1 FY2023 quarter, with revenue down 13.5% year on year to $325.5 million. However, ACV, an important alternate revenue metric, beat by 4%.  Pegasystems made a GAAP loss of $20.8 million, down on its loss of $379 thousand, in the same quarter last year.

Is now the time to buy Pegasystems? Access our full analysis of the earnings results here, it's free.

"I'm pleased with our strong start to the year and progress against our 2023 goals," said Alan Trefler, Pega founder and CEO.

Founded by Alan Trefler in 1983, Pegasystems (NASDAQ:PEGA) offers a software-as-a-service platform to automate and optimize workflows in customer service and engagement.

The whole purpose of software is to automate tasks to increase productivity. Today, innovative new software techniques, often involving AI and machine learning, are finally allowing automation that has graduated from simple one- or two-step workflows to more complex processes integral to enterprises. The result is surging demand for modern automation software.

Sales Growth

As you can see below, Pegasystems's revenue growth has been unremarkable over the last two years, growing from quarterly revenue of $313.5 million in Q1 FY2021, to $325.5 million.

But this quarter Pegasystems's revenue was down 13.5% year on year, which might be a disappointment to some shareholders.

Ahead of the earnings results the analysts covering the company were estimating sales to grow 12.7% over the next twelve months.

In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.

Cash Is King

If you have followed StockStory for a while, you know that we put an emphasis on cash flow. Why, you ask? We believe that in the end cash is king, as you can't use accounting profits to pay the bills. Pegasystems's free cash flow came in at $56.6 million in Q1, up 227% year on year.

Pegasystems has generated $26.3 million in free cash flow over the last twelve months, 2.08% of revenues. This FCF margin is a result of Pegasystems asset lite business model, and provides it with at least some cash to invest in the business without depending on capital markets.

Key Takeaways from Pegasystems's Q1 Results

With a market capitalization of $3.6 billion Pegasystems is among smaller companies, but its more than $323.9 million in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.

The positives this quarter were that ACV beat by 4% and free cash flow was nicely ahead. On the other hand, revenue growth was quite weak and it missed analysts' revenue expectations. Overall, this quarter's results were mixed. The company is up 4.19% on the results and currently trades at $45.5 per share.

Pegasystems may have had a tough quarter, but does that actually create an opportunity to invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.

The author has no position in any of the stocks mentioned.