The deteriorating economy and strengthening U.S. dollar hit Cambridge software developer Pegasystems, which reported a surprise second-quarter revenue decline and said it would fall short of previous forecasts for 2022. The company said it would cut its costs by $100. million, but without layoffs.
Revenue fell 16 percent to $274 million, more than $50 million less than Wall Street analysts had expected. And analysts expected the company to report 5 cents a share of adjusted earnings. Instead, it lost 38 cents a share.
“This year has proved to be an extremely volatile business environment,” former chief executive Alan Trefler said during an interview with analysts. Customers are downscaling orders for Pegasystems’ software, which is used to automate computing tasks in financial services, healthcare, manufacturing and other industries.
Pegasystems stock price fell 15 percent on Thursday after the deficit announcement and is down 64 percent this year.
In February, Pegasystems said it expected revenue for the year to be close to $1.5 billion, up a whopping $280 million, or 24 percent, from 2021. Now it forecasts growth of $160 million or less, only an increase of 13 percent.
“This quarter looks to be the first shoe to fall fundamentally into the Pega story and we fear more pain could come as we were surprised by the difficulty of closing deals in the quarter,” noted Wedbush analyst Daniel Ives. Securities up.
The company is hardly the only software company to suffer from the weak economy. Microsoft’s second-quarter revenue rose just 12 percent, less than analysts had expected and the slowest growth rate in two years. Google CEO Sundar Pichai said he is slowing hiring amid slower revenue growth, and Apple is also cutting costs.
With Pegasystems’ sales falling short of expectations, chief financial officer Ken Stillwell said the company wanted to cut costs for the remainder of the year to push the blow back to profitability.
The company will look for reductions in operating costs and corporate structure, Stillwell said. “However, there are no plans for staff reductions within the company, real estate closures or other drastic measures,” Stillwell said in an email. “We will continue to hire, but will carefully evaluate the need for new features or replacements.”
The company started the year with 6,133 employees, 6 percent more than at the beginning of 2021.
Pegasystems did not provide an update on the legal battle with rival software developer Appian. In May, a Virginia jury awarded Appian $2 billion in damages for stolen trade secrets. Pegasystems wants to overturn the verdict and both parties have filed several legal requests in court over the past two months.
Aaron Pressman can be reached at aaron.pressman@globe.com. Follow him on Twitter @ampressman.