Pegasus (NASDAQ:PEGS)
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Pegasus Solutions, Inc. (Nasdaq:PEGS):
Q3 2005 Results
-- Revenues (GAAP): $45.7 million
-- Net income per share (GAAP): Basic and Diluted: $0.11
-- Diluted income from continuing operations per share (GAAP):
$0.12
-- Diluted income from continuing operations per share
(adjusted): $0.17
Pegasus Solutions, Inc. (Nasdaq:PEGS), a global leader in
providing technology and services to hotels and travel distributors,
today reported its financial results for the third quarter ended
September 30, 2005.
"With the assistance of Bear Stearns, we continue to make
considerable progress evaluating our strategic alternatives," said
John F. Davis III, president, chief executive officer and chairman of
Pegasus Solutions. "While no assurance can be given as to the outcome,
we expect to make an announcement regarding the results of this
process in the near future."
Davis continued: "During the third quarter we delivered solid
financial results. Our sales and marketing focus has expanded our
presence throughout the Asia-Pacific region; we launched our new
travel Web site, hotelbook.com(TM); we initiated transactions using
our new PegsTour(R) service; and completed numerous technology
enhancements."
Third Quarter and Other 2005 Highlights (See tables included with
this release for reconciliation of non-GAAP measures to GAAP
measures.)
-- On a GAAP basis, revenues were $45.7 million for the quarter,
compared to $48.4 million in the third quarter of 2004.
-- Income from continuing operations per diluted share was $0.12
for the quarter, compared to $0.20 in the third quarter of
2004.
-- Adjusted income from continuing operations per diluted share
was $0.17 for the quarter, compared to $0.22 in the year ago
quarter. In addition to the exclusion of amortization of
software and identifiable assets obtained through acquisitions
in both quarters, third quarter 2005 adjusted per share
results also exclude facility closing and severance costs of
$985,000.
-- Adjusted EBITDA was $9.9 million, or 22 percent of revenues
for the quarter, compared to adjusted EBITDA of $11.8 million,
or 24 percent of revenues, in the same quarter last year.
-- Year-to-date operating cash flows increased to $21.2 million,
compared to $20.4 million through the third quarter of 2004.
-- During the quarter, Pegasus launched its travel Web site,
hotelbook.com(TM); began processing transactions using its new
PegsTour(R) service; increased the functionality of its
NetBooker(R) booking engine; added a new rate tracking
service; and continued customer conversions onto its new
release of the RezView(R) central reservation system (CRS).
-- In October 2005, Pegasus initiated development work for
property management system (PMS) interfaces to its RezView CRS
including Multi-Systems, Inc.'s (MSI) WinPM system, as well as
an Open Travel Alliance (OTA) interface.
-- The cash balance (including auction rate securities) increased
to $30.2 million versus $26.7 million at June 30, 2005 as a
result of positive operating cash flows and the expected
slow-down in capital expenditures.
-- Pegasus' decision to exit the PMS business resulted in the
October sale of its NovaPlus and GuestView business to MSI.
The financial impact of this transaction is not expected to be
material to the operations of the company and will be recorded
in discontinued operations in the fourth quarter.
Service Line Review
-- Representation services revenues were $16.9 million, down 9
percent compared to the prior year, primarily due to the
sustained impact of reduced pricing and the transition of a
significant Unirez by Pegasus(TM) customer to the company's
central reservation service (CRS). Average daily room rates
increased 1 percent for the company's Utell by Pegasus(TM)
service, offset by a 5 percent decrease in reservation volume
and average commission earned. On a sequential quarter basis,
the Utell by Pegasus(TM) average commission earned has
stabilized and the representation portfolio count has
increased over 2 percent. Pegasus fourth quarter initiatives
include representation product road shows and customer focused
revenue and yield management programs.
-- Reservation services revenues were $8.3 million, down 11
percent compared to the same period last year. The loss of a
CRS customer was partially offset by the positive impact from
a significant representation customer converting to the CRS
service. Excluding the reservations attributable to those two
customers, CRS transactions increased 6 percent. However,
reduced pricing on contract renewals continued to drive the
year-over-year decrease in revenue.
-- For Pegasus' distribution services, revenues were $7.6
million, up 5 percent from the year-ago quarter. During the
third quarter switch transactions increased 5 percent in
total. The company expects the positive trends in distribution
services to continue in the fourth quarter.
-- Revenues for the company's financial services were $8.5
million, down 9 percent year-over-year. Financial services
revenues were impacted by reduced transactions and pricing,
resulting from travel agency consolidations, partially offset
by the continued benefit from improved average daily room
rates.
Outlook for Fourth Quarter and Full Year 2005
-- Q4 2005 revenues: $40 million to $42 million
-- Q4 2005 diluted income from continuing operations per share
(GAAP): $0.03 to $0.06
-- Q4 2005 diluted income from continuing operations per share
(adjusted): $0.05 to $0.08
-- Full year 2005 revenues: $174 million to $176 million; $175
million to $177 million on an adjusted basis
-- Full year diluted income from continuing operations per share
(GAAP): $0.25 to $0.28
-- Full year diluted income from continuing operations per share
(adjusted): $0.42 to $0.45
Financial Outlook
"We are very pleased to report third quarter revenues and adjusted
EPS results in-line with our previous guidance," said Susan K. Conner,
executive vice president and chief financial officer. "As a result of
usual seasonality and continued top-line pressure, we expect fourth
quarter revenues to range from $40 million to $42 million. As we have
done all year, we will continue to operate with a cost-conscious focus
and expect fourth quarter adjusted diluted income from continuing
operations to range from $0.05 to $0.08 per share."
Davis added: "As part of our strategy to provide integrated
technology and business process solutions with best of breed
capabilities, we are beginning to see the benefits of our technology
development that we focused on so heavily earlier this year, as well
as the integration of capabilities from our partners. In 2005, we have
delivered significant enhancements to each of our service lines.
Financial services started weekly commission processing. In
reservation services, RezView had a major release and we supplemented
our offering with rate checking capabilities. In the representation
services group, we rolled out significant upgrades to the
HotelFactory(TM) CRS and launched our own travel Web site. In
distribution services, we initiated transactions for our wholesale
travel companies and tour operator customers using the PegsTour
service. We have also delivered on our strategy of providing
outstanding customer service, expanding into emerging hospitality
markets and building strategic alliances and partnerships."
Davis concluded: "Pegasus has a rich heritage of providing
technology solutions for hotels and travel distributors throughout the
world. Our ability to anticipate industry trends and respond to
customer needs is how we built this company. Moving forward, we plan
to intensify our efforts on what we do best -- helping our customers
grow by providing our leading technology solutions to the market."
Conference Call
Pegasus will host a conference call today at 5:00 p.m. Eastern
Time and will simultaneously broadcast it live over the Internet. To
access the webcast, go to www.pegs.com and click "Investor Center."
The online archive of the webcast will be available two hours after
the call for 30 days.
About Pegasus Solutions, Inc.
Dallas-based Pegasus Solutions, Inc. (Nasdaq:PEGS) is a global
leader in providing technology and services to hotels and travel
distributors. Founded in 1989, Pegasus' customers include a majority
of the world's travel agencies and more than 60,000 hotel properties
around the globe. Pegasus' services include central reservation
systems, electronic distribution services, commission processing and
payment services and marketing representation services, including the
consumer Web site, www.hotelbook.com(TM). The company's representation
services, including Utell by Pegasus(TM) and Unirez by Pegasus(TM),
are used by nearly 7,000 member hotels in 140 countries, making
Pegasus the hotel industry's largest third-party marketing and
reservations provider. Pegasus has 18 offices in 13 countries,
including regional hubs in London, Scottsdale and Singapore. For more
information, please visit www.pegs.com.
Forward-Looking Statements
Some statements made in this press release are forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements include statements
regarding future events, financial projections, estimated transaction
volumes and expected average daily room rates, as well as management's
expectations, beliefs, hopes, intentions or strategies regarding the
future. Because such statements deal with future events, they are
subject to various risks and uncertainties, and actual results could
differ materially from current expectations. Factors that could cause
or contribute to such difference include, but are not limited to,
terrorist acts or war, global health epidemics, variation in demand
for and acceptance of the company's products and services, the level
of product and price competition from existing and new competitors,
delays in developing, marketing and deploying new products and
services, any strategic alternative undertaken by the company, the
inability of the company to sell the PMS operations, risks associated
with a PMS sale transaction and the inability of the company to
terminate the PMS services as expected, as well as other risks
identified in the company's Securities and Exchange Commission
filings, including those appearing under the caption Risk Factors in
the company's Annual Report on Form 10-K for the year ended December
31, 2004.
The conference call may include other forward-looking statements
related to transaction volume and average daily room rates. Such
information can be found in the presentation accompanying the
conference call webcast. To access the webcast, go to www.pegs.com and
click "Investor."
Use of Non-GAAP Financial Measures
Pegasus provides financial measures and terms not calculated in
accordance with generally accepted accounting principles in the United
States (GAAP). We believe that presentation of non-GAAP measures such
as adjusted revenues, adjusted income from continuing operations per
share, EBITDA and adjusted EBITDA provide investors with an
alternative method for assessing our operating results in a manner
that enables investors to more thoroughly evaluate our current
performance as compared to past performance. We also believe these
non-GAAP measures provide investors with a better baseline for
assessing the company's future earnings expectations. Our management
uses these non-GAAP measures for the same purpose. The non-GAAP
measures included in this release are provided to give investors
access to the types of measures that we use in analyzing our results.
Adjusted revenues consist of GAAP revenues adjusted for the items
included in the accompanying reconciliation. Adjusted income from
continuing operations per share consists of GAAP income from
continuing operations per share adjusted for the items included in the
accompanying reconciliation. We believe these measures enable
management and investors to more thoroughly evaluate our current
performance as compared to past performance and provide a better
baseline for assessing the company's future earnings expectations.
However, these measures do not provide a complete picture of our
operations. Therefore net income (loss) per share and revenues and
income from continuing operations per share on both a non-GAAP basis
and GAAP basis may need to be considered to get a comprehensive view
of our results.
EBITDA consists of GAAP net income (loss) adjusted for the items
included in the accompanying reconciliation. We believe that EBITDA
provides useful information to investors about the company's
performance because it eliminates the effects of period to period
changes in taxes, discontinued operations, cost associated with
capital investments and interest income (expense). Adjusted EBITDA
consists of EBITDA adjusted for the items included in the accompanying
reconciliation. EBITDA and adjusted EBITDA do not give effect to the
cash the company must use to service its debt or pay its income taxes
and thus do not reflect the funds generated from operations or
actually available for capital expenditures.
Pegasus' calculation of adjusted revenues, adjusted income from
continuing operations per share, EBITDA and adjusted EBITDA is not
necessarily comparable to similarly titled measures reported by other
companies. These non-GAAP measures may be considered in addition to
results prepared in accordance with GAAP, but should not be considered
a substitute for or superior to GAAP results. Schedules that reconcile
adjusted revenues and adjusted income from continuing operations per
share to their most directly comparable GAAP measure and EBITDA and
adjusted EBITDA to GAAP net income (loss) are included with this
release and the presentation accompanying the company's conference
call webcast.
-0-
*T
PEGASUS SOLUTIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
Three Months Nine Months Ended
Ended
September 30, September 30,
----------------- -------------------
2005 2004 2005 2004
-------- -------- --------- ---------
Revenues:
Service revenues $41,278 $44,470 $120,883 $129,419
Customer reimbursements 4,397 3,929 13,111 11,549
-------- -------- --------- ---------
Total revenues 45,675 48,399 133,994 140,968
-------- -------- --------- ---------
Costs of services (exclusive of
depreciation and amortization
shown separately below):
Cost of services 20,822 21,422 62,930 66,229
Customer reimbursements 4,397 3,929 13,111 11,549
-------- -------- --------- ---------
Total costs of services 25,219 25,351 76,041 77,778
-------- -------- --------- ---------
Research and development 879 676 2,462 3,039
General and administrative
expenses 5,775 5,797 17,721 18,223
Marketing and promotion expenses 4,860 4,815 15,809 14,509
Depreciation and amortization 4,955 4,156 13,890 13,447
-------- -------- --------- ---------
Operating income 3,987 7,604 8,071 13,972
Other income (expense):
Gain on sale -- -- -- 1,961
Interest expense, net (323) (498) (1,050) (1,523)
Other 129 159 268 (134)
-------- -------- --------- ---------
Income from continuing
operations before income taxes 3,793 7,265 7,289 14,276
Income tax expense (1,361) (2,383) (2,647) (5,073)
-------- -------- --------- ---------
Income from continuing
operations 2,432 4,882 4,642 9,203
Discontinued operations, net of
tax (226) (1,096) (13,083) (2,993)
-------- -------- --------- ---------
Net income (loss) $2,206 $3,786 $(8,441) $6,210
======== ======== ========= =========
Basic income (loss) per share:
Continuing operations $0.12 $0.22 $0.22 $0.39
Discontinued operations (0.01) (0.05) (0.63) (0.12)
-------- -------- --------- ---------
Net income (loss) $0.11 $0.17 $(0.41) $0.27
======== ======== ========= =========
Diluted income (loss) per share:
Continuing operations $0.12 $0.20 $0.22 $0.39
Discontinued operations (0.01) (0.04) (0.62) (0.11)
-------- -------- --------- ---------
Net income (loss) $0.11 $0.16 $(0.40) $0.28
======== ======== ========= =========
Weighted average shares
outstanding:
Basic 20,758 22,131 20,743 23,355
======== ======== ========= =========
Diluted (See Note 1) 20,941 26,224 20,973 27,406
======== ======== ========= =========
Note:
(1) The company's third quarter and year-to-date 2004 diluted per
share data includes approximately 3.7 million additional shares,
applicable to its contingently convertible debt, in the weighted
average share base used in the diluted per share computations. See
attached reconciliation of per share computations.
Subject to certain conditions, the company's convertible debt is
convertible into common stock at a conversion price of
approximately $20.13 per share.
PEGASUS SOLUTIONS, INC.
RECONCILIATION OF PER SHARE COMPUTATIONS
(In thousands, except per share amounts)
(Unaudited)
Three Months Nine Months Ended
Ended
September 30, September 30,
--------------- -----------------
2005 2004 2005 2004
------- ------- -------- --------
Income from continuing
operations (a) $2,432 $4,882 $4,642 $9,203
Discontinued operations, net
of tax (b) (226) (1,096) (13,083) (2,993)
------- ------- -------- --------
Net income (loss) (c) $2,206 $3,786 $(8,441) $6,210
======= ======= ======== ========
Income from continuing
operations (a) $2,432 $4,882 $4,642 $9,203
Adjustment for interest on
convertible debt, net of
tax -- 444 -- 1,383
------- ------- -------- --------
Income from continuing
operations, as adjusted (d) $2,432 $5,326 $4,642 $10,586
======= ======= ======== ========
Net income (loss) (c) $2,206 $3,786 $(8,441) $6,210
Adjustment for interest on
convertible debt, net of
tax -- 444 -- 1,383
------- ------- -------- --------
Net Income (loss), as
adjusted (e) $2,206 $4,230 $(8,441) $7,593
======= ======= ======== ========
Basic income (loss) per
share:
Continuing operations (a)/(f) $0.12 $0.22 $0.22 $0.39
Discontinued operations (b)/(f) $(0.01) (0.05) (0.63) (0.12)
------- ------- -------- --------
Net income (loss) (c)/(f) $0.11 $0.17 $(0.41) $0.27
======= ======= ======== ========
Diluted income (loss) per
share:
Continuing operations (d)/(g) $0.12 $0.20 $0.22 $0.39
Discontinued operations (b)/(g) $(0.01) (0.04) (0.62) (0.11)
------- ------- -------- --------
Net income (loss) (e)/(g) $0.11 $0.16 $(0.40) $0.28
======= ======= ======== ========
Basic weighted average
shares outstanding (f) 20,758 22,131 20,743 23,355
Dilutive effect of stock
options 183 367 230 325
Dilutive effect of
convertible debt (See
Note 1) -- 3,726 -- 3,726
------- ------- -------- --------
Diluted weighted average
shares outstanding (g) 20,941 26,224 20,973 27,406
------- ------- -------- --------
Note:
(1) Subject to certain conditions, the company's convertible debt is
convertible into common stock at a conversion price of
approximately $20.13 per share.
PEGASUS SOLUTIONS, INC.
RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL
MEASURES
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended
September 30, 2005
--------------------------------
As
Reported Adjustments Adjusted
--------- ----------- --------
Revenues:
Service revenues $41,278 $-- $41,278
Customer reimbursements 4,397 -- 4,397
--------- ----------- --------
Total revenues 45,675 -- 45,675
--------- ----------- --------
Costs of services (exclusive of
depreciation and amortization shown
separately below):
Cost of services 20,822 (389)(1) 20,433
Customer reimbursements 4,397 -- 4,397
--------- ----------- --------
Total costs of services 25,219 (389) 24,830
--------- ----------- --------
Research and development 879 (46)(1) 833
General and administrative expenses 5,775 (467)(1) 5,308
Marketing and promotion expenses 4,860 (83)(1) 4,777
Depreciation and amortization 4,955 (789)(2) 4,166
--------- ----------- --------
Operating income 3,987 1,774 5,761
Other income (expense):
Interest expense, net (323) -- (323)
Other 129 -- 129
--------- ----------- --------
Income from continuing operations
before income taxes 3,793 1,774 5,567
Income tax expense (1,361) (643)(3) (2,004)
--------- ----------- --------
Income from continuing operations 2,432 $1,131 $3,563
=========== ========
Discontinued operations, net of tax (226)
---------
Net loss $2,206
=========
Diluted income (loss) per share:
Continuing operations $0.12 $0.17
========
Discontinued operations (0.01)
---------
Net loss $0.11
=========
Diluted weighted average shares
outstanding 20,941 -- 20,941
========= =========== ========
Notes:
(1) To adjust for the impact of severance and facility closure costs.
(2) To adjust for amortization of software and identifiable intangible
assets obtained through acquisitions.
(3) To adjust income tax expense for assumed 36% tax rate.
PEGASUS SOLUTIONS, INC.
RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL
MEASURES
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended
September 30, 2004
--------------------------------
As
Reported Adjustments Adjusted
--------- ----------- --------
Revenues:
Service revenues $44,470 $-- $44,470
Customer reimbursements 3,929 -- 3,929
--------- ----------- --------
Total revenues 48,399 -- 48,399
--------- ----------- --------
Costs of services (exclusive of
depreciation and amortization shown
separately below):
Cost of services 21,422 -- 21,422
Customer reimbursements 3,929 -- 3,929
--------- ----------- --------
Total costs of services 25,351 -- 25,351
--------- ----------- --------
Research and development 676 -- 676
General and administrative expenses 5,797 -- 5,797
Marketing and promotion expenses 4,815 -- 4,815
Depreciation and amortization 4,156 (767)(1) 3,389
--------- ----------- --------
Operating income 7,604 767 8,371
Other income (expense):
Gain on sale -- -- --
Interest expense, net (498) -- (498)
Other 159 -- 159
--------- ----------- --------
Income from continuing operations
before income taxes 7,265 767 8,032
Income tax expense (2,383) (669)(2) (3,052)
--------- ----------- --------
Income from continuing operations 4,882 $98 $4,980
=========== ========
Discontinued operations, net of tax (1,096)
---------
Net income $3,786
=========
Diluted income (loss) per share:
Continuing operations $0.20 $0.22
========
Discontinued operations (0.04)
---------
Net income $0.16
=========
Diluted weighted average shares
outstanding 26,224 (3,726)(3) 22,498
========= =========== ========
Notes:
(1) To adjust for amortization of software and identifiable intangible
assets obtained through acquisitions.
(2) To adjust income tax expense for assumed 38% tax rate.
(3) To exclude the dilutive effect of convertible debt -- convertible
at $20.13 per share.
PEGASUS SOLUTIONS, INC.
RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL
MEASURES
(In thousands, except per share amounts)
(Unaudited)
Nine Months Ended
September 30, 2005
--------------------------------------
As
Reported Adjustments Adjusted
--------- ----------- ---------
Revenues:
Service revenues $120,883 $1,500 (1) $122,383
Customer reimbursements 13,111 -- 13,111
--------- ----------- ---------
Total revenues 133,994 1,500 135,494
--------- ----------- ---------
Costs of services (exclusive of
depreciation and amortization
shown separately below):
Cost of services 62,930 (239)(1), (2) 62,691
Customer reimbursements 13,111 -- 13,111
--------- ----------- ---------
Total costs of services 76,041 (239) 75,802
--------- ----------- ---------
Research and development 2,462 (46)(2) 2,416
General and administrative
expenses 17,721 (467)(2) 17,254
Marketing and promotion expenses 15,809 (83)(2) 15,726
Depreciation and amortization 13,890 (2,345)(3) 11,545
--------- ----------- ---------
Operating income 8,071 4,680 12,751
Other income (expense):
Interest expense, net (1,050) -- (1,050)
Other 268 -- 268
--------- ----------- ---------
Income from continuing
operations before income taxes 7,289 4,680 11,969
Income tax expense (2,647) (1,662)(4) (4,309)
--------- ----------- ---------
Income from continuing
operations 4,642 $3,018 $7,660
=========== =========
Discontinued operations, net of
tax (13,083)
---------
Net loss $(8,441)
=========
Diluted income (loss) per share:
Continuing operations $0.22 $0.37
=========
Discontinued operations (0.62)
---------
Net loss $(0.40)
=========
Diluted weighted average shares
outstanding 20,973 -- 20,973
========= =========== =========
Notes:
(1) To adjust for the impact of converting from monthly to weekly
commission processing.
(2) To adjust for the $985 impact of severance and facility closure
costs.
(3) To adjust for amortization of software and identifiable intangible
assets obtained through acquisitions.
(4) To adjust income tax expense for assumed 36% tax rate.
PEGASUS SOLUTIONS, INC.
RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL
MEASURES
(In thousands, except per share amounts)
(Unaudited)
Nine Months Ended
September 30, 2004
---------------------------------
As
Reported Adjustments Adjusted
--------- ----------- ---------
Revenues:
Service revenues $129,419 $-- $129,419
Customer reimbursements 11,549 -- 11,549
--------- ----------- ---------
Total revenues 140,968 -- 140,968
--------- ----------- ---------
Costs of services (exclusive of
depreciation and amortization shown
separately below):
Cost of services 66,229 (1,915)(1) 64,314
Customer reimbursements 11,549 -- 11,549
--------- ----------- ---------
Total costs of services 77,778 (1,915) 75,863
--------- ----------- ---------
Research and development 3,039 -- 3,039
General and administrative expenses 18,223 (465)(1) 17,758
Marketing and promotion expenses 14,509 -- 14,509
Depreciation and amortization 13,447 (2,301)(2) 11,146
--------- ----------- ---------
Operating income 13,972 4,681 18,653
Other income (expense):
Gain on sale 1,961 (1,961)(3) --
Interest expense, net (1,523) -- (1,523)
Other (134) -- (134)
--------- ----------- ---------
Income from continuing operations
before income taxes 14,276 2,720 16,996
Income tax expense (5,073) (1,386)(4) (6,459)
--------- ----------- ---------
Income from continuing operations 9,203 $1,334 $10,537
=========== =========
Discontinued operations, net of tax (2,993)
---------
Net income $6,210
=========
Diluted income (loss) per share:
Continuing operations $0.39 $0.44
=========
Discontinued operations (0.11)
---------
Net income $0.28
=========
Diluted weighted average shares
outstanding 27,406 (3,726)(5) 23,680
========= =========== =========
Notes:
(1) To adjust for severance and other non-recurring costs related to
the company's information technology organization.
(2) To adjust for amortization of software and identifiable intangible
assets obtained through acquisitions.
(3) To adjust for gain on sale of Travelweb LLC.
(4) To adjust income tax expense for assumed 38% tax rate.
(5) To exclude the dilutive effect of convertible debt -- convertible
at $20.13 per share.
PEGASUS SOLUTIONS, INC.
RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL
MEASURES
(In thousands)
(Unaudited)
Three Months Ended
September 30,
------------------
2005 2004
-------- ---------
Total revenues $45,675 $48,399
======== =========
Net income $2,206 $3,786
Reconciling items:
Discontinued operations, net of tax 226 1,096
Income tax expense 1,361 2,383
Gain on sale -- --
Interest expense, net 323 498
Other income (129) (159)
Depreciation and amortization 4,955 4,156
-------- ---------
EBITDA $8,942 $11,760
======== =========
EBITDA margin 20% 24%
======== =========
Adjustments:
Severance and facility closure costs 985 --
-------- ---------
Adjusted EBITDA $9,927 $11,760
======== =========
Adjusted EBITDA margin 22% 24%
======== =========
PEGASUS SOLUTIONS, INC.
RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL
MEASURES
(In thousands)
(Unaudited)
Nine Months Ended
September 30,
-------------------
2005 2004
--------- ---------
Total revenues $133,994 $140,968
Adjustment:
Impact of converting from monthly to weekly
commission processing 1,500 --
--------- ---------
Adjusted revenues $135,494 $140,968
========= =========
Net income (loss) $(8,441) $6,210
Reconciling items:
Discontinued operations, net of tax 13,083 2,993
Income tax expense 2,647 5,073
Gain on sale -- (1,961)
Interest expense, net 1,050 1,523
Other income (expense) (268) 134
Depreciation and amortization 13,890 13,447
--------- ---------
EBITDA $21,961 $27,419
========= =========
EBITDA margin 16% 19%
========= =========
Adjustments:
Net impact of converting from monthly to weekly
commission processing
1,350 --
Severance and facility closure costs 985 2,380
--------- ---------
Adjusted EBITDA $24,296 $29,799
========= =========
Adjusted EBITDA margin 18% 21%
========= =========
PEGASUS SOLUTIONS, INC.
RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL
MEASURES
(In 000's, except per share amounts)
(Unaudited)
Estimated Results
Three Months Ending
December 31, 2005
---------------------------------
GAAP Adjustments Adjusted
-------- ------------------------
Low End of Range:
Revenues $40,000 $-- $40,000
======== ============ =========
Income before income taxes 900 789 (1) 1,689
Income tax expense (324) (284)(2) (608)
-------- ------------ ---------
Income from continuing operations 576 505 1,081
=========
Discontinued operations, net of tax 150
--------
Net income $726
========
Diluted income per share:
Continuing operations $0.03 $0.05
=========
Discontinued operations --
--------
Net income $0.03
========
Diluted weighted average shares
outstanding: 21,000 -- 21,000
======== ============ =========
High End of Range:
Revenues $42,000 $-- $42,000
======== ============ =========
Income before income taxes 1,900 789 (1) 2,689
Income tax expense (684) (284)(2) (968)
-------- ------------ ---------
Income from continuing operations 1,216 505 1,721
Discontinued operations, net of tax 150
--------
Net income $1,366
========
Diluted income per share:
Continuing operations $0.06 $0.08
=========
Discontinued operations 0.01
--------
Net income $0.07
========
Diluted weighted average shares
outstanding: 21,000 -- 21,000
======== ============ =========
Notes (in 000's):
(1) Represents $789 for the amortization of software and identifiable
intangible assets obtained through acquisitions.
(2) Assumes a 36% tax rate on both a GAAP and an adjusted basis.
PEGASUS SOLUTIONS, INC.
RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL
MEASURES
(In 000's, except per share amounts)
(Unaudited)
Estimated Results
Full Year Ending December 31, 2005
--------------------------------------------
GAAP Adjustments Adjusted
--------- ----------------------------------
Low End of Range:
Revenues $173,994 $1,500 (1) $175,494
========= ============ =========
Income before income taxes 8,189 5,469 (1), (2), (3) 13,658
Income tax expense (2,948) (1,969)(4) (4,917)
--------- ------------ ---------
Income from continuing
operations 5,241 3,500 8,741
=========
Discontinued operations,
net of tax (12,933)
---------
Net income $(7,692)
=========
Diluted income per share:
Continuing operations $0.25 $0.42
=========
Discontinued
operations (0.62)
---------
Net income $(0.37)
=========
Diluted weighted
average shares
outstanding: 21,000 -- 21,000
========= ============ =========
High End of Range:
Revenues $175,994 $1,500 (1) $177,494
========= ============ =========
Income before income taxes 9,189 5,469 (1), (2), (3) 14,658
Income tax expense (3,308) (1,969)(4) (5,277)
--------- ------------ ---------
Income from continuing
operations 5,881 3,500 9,381
Discontinued operations,
net of tax (12,933)
---------
Net income $(7,052)
=========
Diluted income per share:
Continuing operations $0.28 $0.45
=========
Discontinued
operations (0.62)
---------
Net income $(0.34)
=========
Diluted weighted
average shares
outstanding: 21,000 -- 21,000
========= ============ =========
Notes (in 000's):
(1) To adjust for the impact of converting from monthly to weekly
commission processing.
(2) Represents $3,134 for the amortization of software and
identifiable intangible assets obtained through acquisitions.
(3) To adjust for the $985 impact of severance and facility closure
costs.
(4) Assumes a 36% tax rate on both a GAAP and an adjusted basis.
PEGASUS SOLUTIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
September December
30, 31,
2005 2004
--------- ----------
ASSETS
Cash and cash equivalents $27,175 $17,599
Auction rate securities 3,000 5,650
Short-term investments -- 6,001
Accounts receivable, net 27,402 28,551
Other current assets 8,292 9,061
--------- ----------
Total current assets 65,869 66,862
Goodwill 163,585 163,585
Intangible assets, net 4,667 5,827
Property and equipment, net 61,185 80,326
Other noncurrent assets 17,919 12,614
--------- ----------
Total assets $313,225 $329,214
========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued liabilities $28,411 $29,531
Unearned revenue 6,926 6,763
Other current liabilities 6,809 5,621
--------- ----------
Total current liabilities 42,146 41,915
Noncurrent uncleared commission checks 5,387 5,576
Other noncurrent liabilities 16,228 19,407
Convertible debt 75,000 75,000
Commitments and contingencies
Stockholders' equity:
Common stock 208 211
Additional paid-in capital 237,570 242,112
Unearned compensation (339) (408)
Accumulated other comprehensive loss (930) (995)
Accumulated deficit (62,045) (53,604)
--------- ----------
Total stockholders' equity 174,464 187,316
--------- ----------
Total liabilities and stockholders' equity $313,225 $329,214
========= ==========
*T