UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 27, 2004
____________________
Commission File Number 0-22935
PEGASUS SOLUTIONS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 75-2605174
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
CAMPBELL CENTRE I, 8350 NORTH CENTRAL EXPRESSWAY, SUITE 1900, DALLAS, TEXAS
75206
(Address of principal executive office)
(Zip Code)
Registrant's telephone number, including area code: (214) 234-4000
Item 12. Results of Operations and Financial Condition
On April 27, 2004, Pegasus Solutions, Inc. issued a press release announcing its
unaudited financial results for the first quarter ending March 31, 2004 as well
as other business matters. Attached to this current report on Form 8-K is a
copy of the related press release dated April 27, 2004.
The information included herein and in Exhibit 99.1 shall not be deemed "filed"
for purposes of Section 18 of the Securities and Exchange Act of 1934, nor shall
it be incorporated by reference in any filing under the Securities Act of 1933.
Exhibit Number Description
- --------------- -----------
99.1 Press release issued April 27, 2004
2
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this current report on Form 8-K to be signed on its
behalf by the undersigned hereunto duly authorized.
PEGASUS SOLUTIONS, INC.
April 27, 2004 /s/ SUSAN K. COLE
--------------------
Chief Financial Officer
3
EXHIBIT INDEX
Exhibit Number Description
--------------- -----------
99.1 Press release issued April 27, 2004
4
Exhibit 99.1 Press release issued April 27, 2004
5
Contacts:
Pegasus Solutions
Marcie Hyder 214-234-4120
Press: Cindy Foor 214-234-4129
PEGASUS SOLUTIONS REPORTS SOLID FIRST QUARTER 2004 RESULTS
REVENUES AND EPS EXCEED COMPANY'S ESTIMATES
RESERVATION TRENDS INDICATE CORPORATE TRAVEL IMPROVEMENT
- - Q1 2004 revenues - $45.3 million
- - Q1 2004 EPS (GAAP) - ($0.04)
- - Q1 2004 diluted EPS (Cash) - $0.06
- - Estimated revenues - Q2 2004 $48 million to $50 million; FY 2004 $192
million to $200 million
- - Estimated diluted EPS (GAAP) - Q2 2004 $0.07 to $0.09; FY 2004 $0.28 to
$0.35
- - Estimated diluted EPS (Cash) - Q2 2004 $0.10 to $0.12; FY 2004 $0.48 to
$0.55
DALLAS, APRIL 27, 2004 - Pegasus Solutions, Inc. (Nasdaq: PEGS), a leading
global provider of hotel reservations-related services and technology, today
reported its financial results for the first quarter ended March 31, 2004.
Revenues and earnings per share for the quarter topped the high end of the
company's guidance, with strong performance from its hotel representation
service line.
"I am very pleased with the first quarter results and encouraged that
reservation trends indicate corporate travel is improving," said John F. Davis
III, president, chief executive officer and chairman of Pegasus Solutions.
Davis continued: "The strong performance of our representation service line
validates our strategic acquisition of Unirez. As we continue to execute on our
initiatives, we have substantially completed the integration of Unirez and are
on track with bringing PegasusCentral back on line."
FIRST QUARTER 2004 FINANCIAL HIGHLIGHTS (See attached tables.)
- -------------------------------------------
- - Revenues increased 11 percent to $45.3 million compared to $40.9 million
in the first quarter of 2003.
- - On a GAAP basis, net loss per share was $0.04 compared to a net loss per
share of $0.25 in the same quarter in 2003. For the current year quarter,
GAAP net loss includes $2.4 million, or approximately $0.06 per share, of
severance and other non-recurring costs related to changes in the
company's information technology organization.
- - Cash earnings doubled to $0.06 per diluted share compared to $0.03 in the
first quarter of 2003.
- - EBITDA was $5.1 million, or 11 percent of revenues, compared to $1.8
million, or 4 percent of revenues, in the year-ago quarter. Net loss was
$979,000 compared to a net loss of $6.3 million in the year-ago quarter.
- - Adjusted EBITDA was $7.4 million, or 16 percent of revenues, compared to
$5.9 million, or 14 percent of revenues in the first quarter of 2003.
- - Pegasus repurchased 1.6 million shares of common stock at an aggregate
cost of $18.7 million during the first quarter. As of yesterday, the
company has repurchased 2.2 million of the 2.5 million shares authorized.
"Increased volumes across all of our service lines as well as the foreign
exchange benefit from the strong euro and British pound contributed to the solid
first quarter results," said Susan K. Cole, executive vice president and chief
financial officer of Pegasus Solutions. "Our aggressive share repurchase
program demonstrates the commitment and confidence we have in our long-term
strategy."
SERVICE LINE REVIEW
- ---------------------
- - Service revenues for representation services were $16.5 million in the
first quarter, an increase of 26 percent year-over-year. A significant
portion of the increase was related to the company's new connectivity-
service offering - Unirez by Pegasus(TM). In addition, a 7 percent
increase in reservations for the company's full-service offering
- Utell by Pegasus(TM) - combined with a strong euro and British pound
also contributed to the increase in representation service revenues.
Pegasus added 368 new properties to its representation portfolio and
now serves more than 7,300 independent and small hotel group properties.
- - First quarter service revenues for Pegasus' distribution services were
$7.1 million, an increase of 5 percent year-over-year. The increase in
distribution services revenues was primarily due to increases in both GDS
and Internet transactions of 15 percent and 23 percent, respectively.
Another first quarter highlight for this service line - the company
announced PegsTour(TM), an upcoming service to automate bookings by
wholesale travel companies and tour operators with hotel reservation
systems.
- - Financial services revenues for the first quarter increased 5 percent to
$7.6 million compared to the first quarter of 2003, primarily due to a 5
percent increase in gross commissions processed. Pegasus also expanded
its relationship with American Express to provide hotel commission
processing, reconciliation and tracking services to its European
subsidiary.
- - First quarter service revenues for the company's central reservation
service were $9.4 million, down 6 percent on a year-over-year basis,
despite a 13 percent increase in net transactions processed. The decrease
in revenues was primarily related to pricing pressure, as expected.
- - Property services revenues were $1.4 million in the first quarter compared
to $1.5 million in the first quarter of 2003.
PEGASUSCENTRAL(TM) UPDATE
- ------------------------
As previously announced, one of the company's top priorities in 2004 is
resolving stability issues with its Web-based property management system,
PegasusCentral. Pegasus delivered for testing an upgraded version of
PegasusCentral to Intercontinental Hotel Group, its largest PegasusCentral
customer, on schedule. The upgrade not only corrected previously identified
issues with the software but also included some increased functionality.
Davis commented: "We received very positive feedback from the IHG acceptance
testing. We have started a limited deployment of the upgrade in existing
Holiday Inn Express properties and plan to complete the deployment in existing
properties in June. Additionally, we expect to start new installations with
further functionality during the third quarter. We will continue to provide
updates on our progress."
INDECORP UPDATE
- ----------------
Previously, Pegasus believed that it would be required to consolidate IndeCorp
Corporation's financial results under Financial Accounting Standards Board
Interpretation No. 46, "Consolidation of Variable Interest Entities" (FIN 46)
effective as of March 31, 2004. Because Pegasus had no visibility into
IndeCorp's financial forecasts, Pegasus was unable to provide GAAP-based
estimates. During March 2004, IndeCorp obtained an additional third-party
capital infusion, causing Pegasus to conclude that it is no longer required to
consolidate IndeCorp. As a result, Pegasus is now able to provide GAAP-based
estimates. However, management will continue to present cash earnings per share
and believes it is the best measure to evaluate the company's core cash-based
operating results from ongoing operations.
OUTLOOK FOR 2004
- ------------------
- - Q2 2004 revenues estimated to range from $48 million to $50 million
- - Q2 2004 diluted EPS (GAAP) estimated to range from $0.07 to $0.09
- - Q2 2004 diluted EPS (cash) estimated to range from $0.10 to $0.12
- - Maintains full year 2004 revenue estimate of $192 million to $200 million
- - Introduces full year 2004 diluted EPS (GAAP) estimate of $0.28 to $0.35
- - Revises full year 2004 diluted EPS (cash) estimate to range from $0.48 to
$0.55
Regarding the company's financial outlook, Cole said: "Based on our current
visibility and despite our better than expected first quarter results, we are
reiterating our full year revenue guidance. Our new business expectations
remain on plan, but we do not anticipate the foreign exchange benefit to
continue to be as significant as it was in the first quarter." Cole continued:
"We are revising our full year cash EPS estimate to range from $0.48 to $0.55
due to the anticipated benefit from our share repurchase program as well as our
strong first quarter performance. We believe that our strong financial position
allows us to fund our anticipated capital spending for our product development
priorities and enables us to take advantage of the positive momentum we have
started to gain."
Davis concluded: "During the past year, we have made some difficult decisions
related to our executive team and IT organization that better position us to
achieve our long-term goals. With our new leadership team in place, we are
keenly focused on execution and improving customer satisfaction. This focus
combined with encouraging reservation trends, is why I am optimistic about our
future."
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
- -------------------------------------------------
Reconciling items between GAAP net loss and cash earnings primarily consist of
purchase accounting amortization, restructure costs and other non-recurring
items. Schedules that reconcile GAAP amounts to cash earnings, EBITDA and
adjusted EBITDA are included with this release, as well as the presentation
accompanying the company's conference call Webcast. Reconciling items between
EBITDA and adjusted EBITDA consist of restructure charges and other
non-recurring items.
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 on "Investor." The online archive of the Webcast will
------------
be available two hours after the call for 30 days.
COMPANY INFORMATION
- --------------------
Dallas-based Pegasus Solutions, Inc. (Nasdaq: PEGS) is a leading global provider
of hotel reservations-related services and technology. Founded in 1989,
Pegasus' customers include a majority of the world's travel agencies and more
than 50,000 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 7,300 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 and timing of sales, general economic conditions
including a slowdown in technology spending by the company's current and
prospective customers, failure to maintain successful relationships with and to
establish new relationships with customers, the success of the company's
international operations, the level of product and price competition from
existing and new competitors, changes in the company's level of operating
expenses and its ability to control costs, delays in developing, marketing and
deploying new products and services, 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 2003 Annual Report on Form 10-K
and Form S-3, as amended, declared effective in November 2003.
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 on "Investor."
------------
Management believes that presentation of non-GAAP financial measures such as
cash earnings per share, EBITDA and adjusted EBITDA is useful because it allows
investors and management to evaluate and compare the company's core cash-based
operating results from ongoing operations from period to period in a more
meaningful and consistent manner than relying exclusively on GAAP financial
measures. Non-GAAP financial measures however should not be considered in
isolation or as an alternative to financial measures calculated and presented in
accordance with GAAP. In addition, Pegasus' calculation of cash earning per
share, EBITDA and adjusted EBITDA is not necessarily comparable to similarly
titled measures reported by other companies. Schedules that reconcile cash
earnings per share, EBITDA and adjusted EBITDA to the most directly comparable
GAAP amounts 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,
---------
2004 2003
-------- ---------
Revenues:
Service revenues $41,845 $ 38,390
Customer reimbursements 3,479 2,523
-------- ---------
Total revenues 45,324 40,913
-------- ---------
Costs of services:
Cost of services 24,320 21,490
Customer reimbursements 3,479 2,523
-------- ---------
Total costs of services 27,799 24,013
-------- ---------
Research and development 1,403 1,513
General and administrative expenses 6,357 6,135
Marketing and promotion expenses 4,713 4,238
Depreciation and amortization 5,882 12,118
Restructure costs - 3,193
-------- ---------
Operating loss (830) (10,297)
Other income (expense):
Interest income (expense), net (501) 380
Other (207) (34)
-------- ---------
Loss before income taxes (1,538) (9,951)
Income tax benefit 559 3,674
-------- ---------
Net loss $ (979) $ (6,277)
======== =========
Basic and diluted net loss per share $ (0.04) $ (0.25)
======== =========
Basic and diluted weighted average shares outstanding 24,456 24,651
======== =========
PEGASUS SOLUTIONS, INC.
RECONCILIATION OF CASH EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Three Months Ended
March 31, 2004
--------------
As Reported Adjustments Cash Earnings
------------- ------------- ---------------
Revenues:
Service revenues $ 41,845 $ - $ 41,845
Customer reimbursements 3,479 - 3,479
------------- ------------- ---------------
Total revenues 45,324 - 45,324
------------- ------------- ---------------
Costs of services:
Cost of services 24,320 (1,915) (1) 22,405
Customer reimbursements 3,479 - 3,479
------------- ------------- ---------------
Total costs of services 27,799 (1,915) 25,884
------------- ------------- ---------------
Research and development 1,403 - 1,403
General and administrative expenses 6,357 (465) (1) 5,892
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 income (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
============= ============= =======
<FN>
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 purchased identifiable intangible assets.
(3) To adjust income tax expense for assumed 38% tax rate for cash earnings.
(4) Represents shares issuable upon the exercise of stock options.
PEGASUS SOLUTIONS, INC.
RECONCILIATION OF CASH EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Three Months Ended
March 31, 2003
--------------
As Reported Adjustments Cash Earnings
------------- ------------- ---------------
Revenues:
Service revenues $ 38,390 $ - $ 38,390
Customer reimbursements 2,523 - 2,523
------------- ------------- ---------------
Total revenues 40,913 - 40,913
------------- ------------- ---------------
Costs of services:
Cost of services 21,490 - 21,490
Customer reimbursements 2,523 - 2,523
------------- ------------- ---------------
Total costs of services 24,013 - 24,013
------------- ------------- ---------------
Research and development 1,513 - 1,513
General and administrative expenses 6,135 - 6,135
Marketing and promotion expenses 4,238 - 4,238
Depreciation and amortization 12,118 (7,803) (1) 4,315
Restructure costs 3,193 (3,193) (2) -
------------- ------------- -------
Operating income (loss) (10,297) 10,996 699
Other income (expense):
Interest income, net 380 - 380
Other (34) - (34)
------------- ------------- ---------------
Income (loss) before income taxes (9,951) 10,996 1,045
Income tax benefit (expense) 3,674 (4,071) (3) (397)
------------- ------------- -------
Net income (loss) $ (6,277) $ 6,925 $ 648
============= ============= ===============
Diluted net income (loss) per share $ (0.25) $ 0.28 $ 0.03
============= ============= ===============
Diluted weighted average shares outstanding 24,651 398 (4) 25,049
============= ============= =======
<FN>
Notes:
------
(1) To adjust for amortization of purchased identifiable intangible assets.
(2) To adjust for non-recurring restructure costs.
(3) To adjust income tax benefit (expense) for assumed 38% tax rate for cash earnings.
(4) Represents shares issuable upon the exercise of stock options.
PEGASUS SOLUTIONS, INC.
RECONCILIATION OF EBITDA AND ADJUSTED EBITDA
(IN THOUSANDS)
(UNAUDITED)
Three Months Ended March 31,
----------------------------
2004 2003
-------- ---------
Total revenues $45,324 $ 40,913
======== =========
Operating loss (1) (830) (10,297)
Add: depreciation and amortization 5,882 12,118
-------- ---------
EBITDA $ 5,052 $ 1,821
======== =========
EBITDA margin 11% 4%
Adjustments:
Restructure costs - 3,193
Non-recurring items 2,380 (2) 900 (3)
-------- ------
Adjusted EBITDA $ 7,432 $ 5,914
======== =========
Adjusted EBITDA margin 16% 14%
<FN>
(1) For reconciling items between operating loss and net loss, see the
Condensed Consolidated Statements of Operations included in this
release.
(2) Amount represents severance and other non-recurring costs related
to changes in the company's information technology organization.
(3) Amount includes costs related to moving the company's Phoenix
facilities and transition-related activities resulting from the
company's strategic integration. These costs cannot be classified
as restructure costs because they provide some future benefit to
ongoing operations.
PEGASUS SOLUTIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
MARCH 31, DECEMBER 31,
2004 2003
--------- ---------
ASSETS
Cash and cash equivalents $ 39,505 $ 58,983
Short-term investments 5,094 4,046
Accounts receivable, net 28,265 22,298
Other current assets 11,088 11,092
--------- ---------
Total current assets 83,952 96,419
Goodwill, net 164,120 164,120
Intangible assets, net 7,330 7,831
Property and equipment, net 75,952 75,474
Other noncurrent assets 20,144 22,716
--------- ---------
Total assets $351,498 $366,560
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued liabilities $ 25,889 $ 24,672
Unearned income 7,023 7,213
Other current liabilities 6,399 5,477
--------- ---------
Total current liabilities 39,311 37,362
Noncurrent uncleared commission checks 4,758 4,545
Other noncurrent liabilities 20,385 20,997
Convertible debt 75,000 75,000
Commitments and contingencies
Stockholders' equity:
Common stock 238 251
Additional paid-in capital 275,182 290,828
Unearned compensation - -
Accumulated other comprehensive loss (808) (834)
Accumulated deficit (62,568) (61,589)
--------- ---------
Total stockholders' equity 212,044 228,656
--------- ---------
Total liabilities and stockholders' equity $351,498 $366,560
========= =========