Pegasystems (NASDAQ:STICKS) shares won 17% on Thursday after the applications software company reported better-than-expected fourth-quarter results and issued an upbeat 2023 earnings forecast.
The company posted adjusted earnings of $0.82 per share on revenue of $396.5 million, which grew 25% year-over-year. He the results exceeded analyst expectations of $333.78 million in revenue and $0.15 in earnings per share.
In the fourth quarter, annual contract value grew 16% year-over-year in constant currency and 13% as reported, reaching $1.1 billion. The company attributed the growth to its go-to-market strategy, which focuses heavily on cross-selling and upselling to existing customers.
Another highlight was subscription revenue, which surpassed $1 billion in 2022 and now accounts for 81% of Pega’s total revenue. Focusing only on subscription services, which include Pega Cloud and maintenance, backlog grew 13% year-over-year, in line with the company’s reported ACV growth rate.
Attributing its strong bottom line to disciplined expense management, the company stated that it expects to see another significant increase in profitability in 2023.
By 2023, it guides annual contract value growth of 11% to 13%, revenue of $1.4bn vs. $1.4bn consensus, and Adjusted EPS of $1.50 vs. $0.74 consensus. Free cash flow is expected to increase to $150 million.