Exhibit 99.1
Contacts:
Pegasus Solutions
Susan Cole 214-234-4140
Press: Cindy Foor 214-234-4129
PEGASUS SOLUTIONS REPORTS FIRST QUARTER 2005 RESULTS
COMPLETES SEVERAL PRODUCT ENHANCEMENTS
Q1 2005 Results
---------------
o Revenues (GAAP): $41.6 million
o Revenues (adjusted): $43.7 million
o Net loss per share (GAAP): ($0.08)
o Diluted net income per share (adjusted): $0.03
Q2 2005 Estimates
o Revenues (GAAP): $46 million to $48 million
o Revenues (adjusted): $45 million to $47 million
o Diluted net income per share (GAAP): $0.05 to $0.08
o Diluted net income per share (adjusted): $0.08 to $0.11
DALLAS, MAY 3, 2005 -- 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 first quarter ended March 31, 2005.
Lower than expected first quarter GAAP results were primarily attributable to
the implementation of the company's weekly commission processing service and
lower than expected revenues for the company's reservation and financial service
lines. The impact of implementing weekly commission processing is expected to be
substantially complete by the end of the second quarter of 2005 when a few large
hotel participants convert from monthly to weekly processing.
"While I am disappointed with our first quarter financial results, I am pleased
to report that we completed several key development projects during the
quarter," said John F. Davis III, president, chief executive officer and
chairman of Pegasus Solutions. Davis continued: "We expect the delivery of these
projects will create incremental revenue, preserve existing revenue, create
operating efficiencies and/or help to improve customer satisfaction."
FIRST QUARTER 2005 HIGHLIGHTS (See tables included with this release for
reconciliation of GAAP to non-GAAP measures.)
o On a GAAP basis, revenues were $41.6 million. Adjusted for the initial
impact of transitioning from monthly to weekly commission processing,
revenues were $43.7 million, compared to $45.3 million in the first
quarter of 2004.
o Net loss was $1.6 million compared to $979,000 in the year-ago quarter.
o On a GAAP basis, net loss per share was $0.08 compared to $0.04 in the
same quarter in 2004.
o Adjusted net income per diluted share was $0.03 compared to $0.06 in
the first quarter of 2004.
o EBITDA was $3.5 million, or 8 percent of revenues, compared to EBITDA
of $5.1 million, or 11 percent of revenues, in the year-ago quarter.
o Adjusted EBITDA margin was 12 percent, compared to 16 percent in the
first quarter of 2004.
o Operating cash flows remain strong and increased to $5.9 million,
compared to $1.2 million in the first quarter of 2004. The initial
implementation of weekly commission processing fueled this improvement.
o Pegasus repurchased 488,000 shares of common stock at an aggregate cost
of $5.9 million during the first quarter.
o Pegasus launched weekly commission processing in March. With this
enhancement to its commission processing service, both hotels and
travel agencies can benefit from more efficient cash flow.
o Pegasus also completed several other development projects during the
quarter: a customer service portal, international direct deposit for
travel agencies using its commission processing service, a
"push-to-talk" pilot for a central reservation service (CRS) client,
and a number of other enhancements to existing services.
SERVICE LINE REVIEW
- -------------------
o Representation services revenues were $15.8 million, down 4 percent
compared to the prior year, primarily due to reduced pricing and the
transition of a significant customer to the company's central
reservation service. Increased reservation volume and average daily
room rates for the company's Utell by PegasusTM service were offset by
a decrease in the average commission earned.
o Reservation services revenues were $8.9 million, down 4 percent
compared to the prior year. Reduced pricing on contract renewals
continued to drive the year-over-year decrease in revenue for the
company's CRS. This was partially offset by the positive impact from a
significant representation customer converting to the CRS service. Net
CRS reservations decreased 8 percent compared to the same quarter last
year.
o Revenues for the company's financial services, adjusted for the impact
of converting to weekly commission processing, were $7.7 million, up 2
percent year-over-year. Financial services revenues continued to
benefit from improved average daily room rates but were partially
offset by reduced pricing resulting from travel agency consolidations.
o For Pegasus' distribution services, revenues were $6.7 million, down 5
percent from the year-ago quarter. GDS transactions increased 5 percent
and Internet transactions decreased 7 percent year-over-year. However,
the company has started to see the benefit of improved pricing for its
Internet transactions. The decline in Internet transaction volumes
reflect an increase in the percentage of Internet bookings made at
hotel companies' proprietary Web sites that do not utilize Pegasus'
Internet distribution service. The company continues sign new customers
for its PegsTourTM service and recently announced the addition of
Marriott International and Sol Melia.
o Property services revenues of $639, 000 were negatively impacted by
declining revenues from the GuestviewTM property management system
(PMS), which Pegasus plans to sunset in 2005. During the second
quarter, the company expects to deliver an upgraded version of
PegasusCentralTM to its primary PMS customer - InterContinental Hotel
Group (IHG). At such time, Pegasus expects a determination of whether
IHG will accept the upgrade, the timing of continued installations, and
the timing and amount of new and resumed billing to IHG.
FINANCIAL OUTLOOK
- -----------------
Given the uncertainty of several key elements in the company's financial
forecast, such as PegasusCentral and the potential for a strategic transaction,
the company is withdrawing its previous fiscal year 2005 guidance and will not
provide fiscal year 2005 guidance at this time. However, the company will
continue to give guidance for the upcoming quarter.
"We expect the trending from price competition and decreased Internet
transaction volumes to continue for the remainder of the year. We are
experiencing a slower implementation of new business and our new product
offerings. Once implemented, it is also taking longer for new customers to ramp
up to expected volumes," said Susan K. Cole, executive vice president and chief
financial officer. "We still have a healthy pipeline, but it is clear that it's
not what we originally predicted for 2005."
Cole added: "Despite our first quarter performance, we are seeing a number of
positive operating trends like improving average daily room rates and favorable
foreign exchange rates. We are also making good progress on several key growth
strategies like launching two consumer Web sites, which will add a sales channel
for the independent hotels we represent, and expanding our operations in China
and Latin America."
Davis concluded: "Although we are not pleased with the first quarter
performance, we remain financially strong and are optimistic about our growth
opportunities. We recently announced that our board engaged an investment bank
to explore strategic alternatives. This action reinforces our commitment to
deliver value to our shareholders. As our financial advisors evaluate the
alternatives, the Pegasus management team remains focused on our core business
and the growth strategies that will continue to deliver value to our customers
and shareholders."
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." 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, property management systems, and marketing
representation services. The company's representation services, including Utell
by Pegasus and Unirez by Pegasus, are used by more than 7,000 member hotels in
140 countries, making Pegasus the hotel industry's largest third-party marketing
and reservations provider. Pegasus has 17 offices in 12 countries, including
regional hubs in London, Scottsdale and Singapore. For more information, please
visit www.pegs.com.
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, 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 net
income 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 net income per share consists of GAAP
net loss 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 provides a better baseline for assessing the company's future earnings
expectations. However, these measures do not provide a complete picture of our
operations. Therefore revenues and net income (loss) 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, 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 net income 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, adjusted net income per share, EBITDA and adjusted
EBITDA to GAAP net loss per share are included with this release and the
presentation accompanying the company's conference call webcast.
# # #
PEGASUS SOLUTIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended
March 31,
--------------------------------------------------
2005 2004
--------------------- ------------------------
Revenues:
Service revenues $ 37,729 $ 41,845
Customer reimbursements 3,908 3,479
--------------------- ------------------------
Total revenues 41,637 45,324
--------------------- ------------------------
Costs of services (exclusive of depreciation and amortization
shown separately
below):
Cost of services 22,111 24,296
Customer reimbursements 3,908 3,479
--------------------- ------------------------
Total costs of services 26,019 27,775
--------------------- ------------------------
Research and development 838 1,403
General and administrative expenses 6,013 6,381
Marketing and promotion expenses 5,311 4,713
Depreciation and amortization 5,536 5,882
--------------------- ------------------------
Operating loss (2,080) (830)
Other income (expense):
Interest expense, net (345) (501)
Other 174 (207)
--------------------- ------------------------
Loss before income taxes (2,251) (1,538)
Income tax benefit 610 559
--------------------- ------------------------
Net loss $ (1,641) $ (979)
===================== ========================
Basic and diluted net loss per share $ (0.08) $ (0.04)
===================== ========================
Basic and diluted weighted average shares outstanding 20,762 24,456
===================== ========================
PEGASUS SOLUTIONS, INC.
RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended
March 31, 2005
-------------------------------------------
As Reported Adjustments Adjusted
----------- ----------- --------
Revenues:
Service revenues $ 37,729 $ 2,100(1) $ 39,829
Customer reimbursements 3,908 -- 3,908
-------- -------- --------
Total revenues 41,637 2,100 43,737
-------- -------- --------
Costsof services (exclusive of depreciation
and amortization shown separately below):
Cost of services 22,111 300(1) 22,411
Customer reimbursements 3,908 -- 3,908
-------- -------- --------
Total costs of services 26,019 300 26,319
-------- -------- --------
Research and development 838 -- 838
General and administrative expenses 6,013 -- 6,013
Marketing and promotion expenses 5,311 -- 5,311
Depreciation and amortization 5,536 (1,357)(2) 4,179
-------- -------- --------
Operating income (loss) (2,080) 3,157 1,077
Other income (expense):
Interest expense, net (345) -- (345)
Other 174 -- 174
-------- -------- --------
Income (loss) before income taxes (2,251) 3,157 906
Income tax benefit (expense) 610 (936)(3) (326)
-------- -------- --------
Net income (loss) $ (1,641) $ 2,221 $ 580
======== ======== ========
Diluted net income (loss) per share $ (0.08) $ 0.10 $ 0.03
======== ======== ========
Diluted weighted average shares outstanding 20,762 304(4) 21,066
======== ======== ========
PEGASUS SOLUTIONS, INC.
RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended
March 31, 2004
-----------------------------------------------------------------------------
As Reported Adjustments Adjusted
----------------------- ------------------------- ------------------
Revenues:
Service revenues $ 41,845 $ - $ 41,845
Customer reimbursements 3,479 - 3,479
----------------------- ------------------------- ------------------
Total revenues 45,324 - 45,324
----------------------- ------------------------- ------------------
Costs of services (exclusive of depreciation
and amortization shown separately
below):
Cost of services 24,296 (1,915) (1) 22,381
Customer reimbursements 3,479 - 3,479
----------------------- ------------------------- ------------------
Total costs of services 27,775 (1,915) 25,860
----------------------- ------------------------- ------------------
Research and development 1,403 - 1,403
General and administrative expenses 6,381 (465) (1) 5,916
Marketing and promotion expenses 4,713 - 4,713
Depreciation and amortization 5,882 (1,393) (2) 4,489
----------------------- ------------------------- ------------------
Operating income (loss) (830) 3,773 2,943
Other income (expense):
Interest expense, net (501) - (501)
Other (207) - (207)
----------------------- ------------------------- ------------------
Income (loss) before income taxes (1,538) 3,773 2,235
Income tax benefit (expense) 559 (1,408) (3) (849)
----------------------- ------------------------- ------------------
Net income (loss) $ (979) $ 2,365 $ 1,386
======================= ========================= ==================
Diluted net income (loss) per share $ (0.04) $ 0.10 $ 0.06
======================= ========================= ==================
Diluted weighted average shares outstanding 24,456 309 (4) 24,765
======================= ========================= ==================
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 income tax expense for assumed 38% tax rate.
(4) Represents shares issuable upon the exercise of stock options.
PEGASUS SOLUTIONS, INC.
RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES
(In thousands)
(Unaudited)
Three Months Ended March 31,
----------------------------
2005 2004
-------- --------
Total revenues $ 41,637 $ 45,324
Adjustment:
Impact of converting from monthly to weekly commission
processing 2,100 --
-------- --------
Adjusted revenues $ 43,737 $ 45,324
======== ========
Net loss $ (1,641) $ (979)
Reconciling items:
Income tax expense (610) (559)
Interest expense, net 345 501
Other income (174) 207
Depreciation and amortization 5,536 5,882
-------- --------
EBITDA $ 3,456 $ 5,052
======== ========
EBITDA margin 8% 11%
======== ========
Adjustments:
Net impact of converting from monthly to weekly commission
processing 1,800 --
Severance and other costs related to changes in the
company's information technology organization -- 2,380
-------- --------
Adjusted EBITDA $ 5,256 $ 7,432
======== ========
Adjusted EBITDA margin 12% 16%
======== ========
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 June 30, 2005
-------------------------------------------------------------------
GAAP Adjustments Adjusted
------------------ ----------------- ------------------
LOW END OF RANGE:
Revenues $ 45,700 $ (700)(1) $ 45,000
================== ================= ==================
Income before income taxes 1,600 950(2),(3) 2,550
Income tax expense (576) (342)(4) (918)
------------------ ----------------- ------------------
Net income $ 1,024 $ 608 $ 1,632
================== ================= ==================
Net income per share (diluted) $ 0.05 $ 0.03 $ 0.08
================== ================= ==================
Weighted average shares outstanding (diluted) 21,100 - 21,100
HIGH END OF RANGE:
Revenues $ 47,700 $ (700)(1) $ 47,000
================== ================= ==================
Income before income taxes 2,600 950(2),(3) 3,550
Income tax expense (936) (342)(4) (1,278)
------------------ ----------------- ------------------
Net income $ 1,664 $ 608 $ 2,272
================== ================= ==================
Net income per share (diluted) $ 0.08 $ 0.03 $ 0.11
================== ================= ==================
Weighted average shares outstanding (diluted) 21,100 - 21,100
NOTES (IN 000'S):
(1) Represents the financial services revenue impact of $700 associated
with converting to weekly commission processing.
(2) Represents the net impact of $400 associated with converting to
weekly commission processing.
(3) Represents $1,350 for the amortization of software and identifiable
intangible assets obtained through acquisitions.
(4) Assumes a 36% tax rate on both a GAAP and an adjusted basis.
PEGASUS SOLUTIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
MARCH 31, DECEMBER 31,
2005 2004
--------- ------------
ASSETS
Cash and cash equivalents $ 22,417 $ 17,599
Auction rate securities - 5,650
Short-term investments - 6,001
Accounts receivable, net 29,334 28,551
Other current assets 9,246 9,061
--------- ---------
Total current assets 60,997 66,862
Goodwill 163,585 163,585
Intangible assets, net 5,326 5,827
Property and equipment, net 82,803 80,326
Other noncurrent assets 11,647 12,614
--------- ---------
Total assets $ 324,358 $ 329,214
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued liabilities $ 30,905 $ 29,531
Unearned revenue 7,115 6,763
Other current liabilities 6,083 5,621
--------- ---------
Total current liabilities 44,103 41,915
Noncurrent uncleared commission checks 5,757 5,576
Other noncurrent liabilities 18,656 19,407
Convertible debt 75,000 75,000
Commitments and contingencies
Stockholders' equity:
Common stock 207 211
Additional paid-in capital 237,238 242,112
Unearned compensation (402) (408)
Accumulated other comprehensive loss (956) (995)
Accumulated deficit (55,245) (53,604)
--------- ---------
Total stockholders' equity 180,842 187,316
--------- ---------
Total liabilities and stockholders' equity $ 324,358 $ 329,214
========= =========