Pegasystems Inc (PEGA)

Short-term

Turnover ratios

The activity ratios for Pegasystems Inc. over the period in question reveal several noteworthy patterns and irregularities, particularly involving receivables turnover, payables turnover, and working capital turnover.

Inventory Turnover:
Data indicates that Pegasystems historically did not report inventory turnover figures, suggesting minimal inventory holdings, consistent with a software or service-oriented business model where physical inventory is negligible. Notably, a significant anomaly appears at December 31, 2021, with an inventory turnover of 26.84, which could indicate either a reporting anomaly, a restructuring event, or a correction, given the absence of prior data points. Even more pronounced is the extraordinary spike at March 31, 2024, with a value of 484.58, which is likely an artifact of data irregularity rather than a true reflection of operational activity.

Receivables Turnover:
The receivables turnover ratio exhibits variability but generally maintains a moderate average. The ratio increased substantially between December 31, 2021 (6.63) and March 31, 2022 (3.12), then fluctuated within a range of approximately 2.56 to 4.09 through subsequent periods. This pattern suggests periodic adjustments in credit collection efficiency or changes in customer payment terms. The upward trend observed towards March 31, 2024 (3.68) and June 30, 2024 (4.09) indicates potential improvements in receivables collection, potentially reflecting operational efficiencies or tighter credit policies.

Payables Turnover:
Payables turnover shows considerable fluctuation. It peaked notably at March 31, 2024, with a value of 59.11, indicating a possible significant reduction in the average payable period or a rapid payment cycle. Conversely, the ratio was relatively lower at March 31, 2022 (18.37) and September 2023 (18.50), indicating longer periods to settle payables during prior periods. The high ratio at March 2024 (59.11) might represent a strategic payment approach or an extraordinary event in payables management.

Working Capital Turnover:
This ratio displays a notable upward trend over time, with a marked jump at March 31, 2024, reaching 93.88, indicating a period where the company generated a high level of sales relative to its working capital. Such a sharp increase suggests either a significant improvement in sales efficiency or reduction in working capital levels. Prior to this spike, the ratio gradually increased from around 1.61 (June 30, 2020) to values around 4-5, reflecting steady efficiency gains. The subsequent decline after March 2024 (to 6.92 in March 2025) could suggest normalization or operational adjustments.

Summary:
Overall, Pegasystems Inc.'s activity ratios indicate stable receivables collection periods and fluctuating payables management, potentially reflecting strategic liquidity management. The extraordinary spikes in inventory and working capital turnover ratios in 2024 likely result from data inconsistencies or exceptional events rather than ongoing operational trends. These ratios collectively point toward a company with efficient receivables practices, variable payables terms, and periods of heightened operational efficiency, particularly in early 2024.

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Average number of days

The activity ratios for Pegasystems Inc., specifically focusing on Days of Inventory on Hand (DOH), Days of Sales Outstanding (DSO), and Number of Days of Payables, exhibit notable patterns and trends over the periods analyzed.

Starting with the Days of Inventory on Hand (DOH), data indicates limited or no available information until the December 31, 2021, measurement, which reports an inventory turnover of approximately 13.60 days. A significant reduction is observed by March 31, 2024, with the DOH dropping to approximately 0.75 days, indicating a considerable improvement in inventory management efficiency. The minimal inventory holding period implies a rapid inventory turnover or possible minimal inventory levels, aligning with the nature of software and technology services industries that typically have low physical inventory.

Regarding Days of Sales Outstanding (DSO), the figures reflect fluctuations over the different quarters. The earliest reported period, June 30, 2020, shows a DSO of approximately 140.62 days, which substantially declines over subsequent periods, reaching a low of around 55.04 days on December 31, 2021. This trend suggests an improvement in receivables collection efficiency during this period. Post-2021, the DSO exhibits some variability, with values increasing again to 142.32 days on December 31, 2023, and then decreasing to about 94.42 days by March 31, 2025. The fluctuations might reflect changes in credit policies, client payment terms, or revenue recognition patterns inherent to the company's operational dynamics.

In terms of Number of Days of Payables, the data demonstrates considerable variability. Early periods, such as June 30, 2020, indicate approximately 21.37 days, gradually increasing to around 28.21 days by December 31, 2020, suggesting a tendency to extend payables over time. A notable reduction occurs by March 31, 2023, where payables amount to roughly 12.12 days, indicating faster payments. Subsequently, the period ending June 30, 2024, shows an increase to approximately 16.16 days, followed by a decrease to around 5.81 days in December 2024, which reflects possible adjustments in cash management or supplier relationships.

Overall, Pegasystems Inc.'s activity ratios demonstrate a trend towards more efficient inventory management, particularly evident in the near-zero DOH as of 2024. The receivables collection period has generally improved over the years, notwithstanding some cyclical variations. The company's payables cycle displays tactical adjustments, with periods of both extending and shortening payment timelines, potentially to optimize cash flows.

These patterns highlight ongoing operational efficiency improvements, especially in inventory and receivables management, which are crucial for a company primarily involved in software and services, sectors characterized by low inventory needs and variable receivables collection periods.

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Long-term

The long-term activity ratios of Pegasystems Inc. reveal insights into the company's utilization of its assets to generate sales over time.

Fixed Asset Turnover Ratio:
The data indicates that Pegasystems' fixed asset turnover ratio was unavailable or not applicable for the initial periods (June 30, 2020, and September 30, 2020). Starting from December 31, 2020, the ratio was 9.42, suggesting effective utilization of fixed assets during that period. The ratio experienced a sharp increase, reaching 24.03 by March 31, 2021, which indicates a substantial improvement in fixed asset utilization and possibly reflects strategic investments, efficiency gains, or improved revenue generation from existing fixed assets. Subsequently, the ratio remained relatively high but fluctuated, with values such as 22.79 (June 30, 2021), then decreased to 13.07 (September 30, 2021), followed by a gradual stabilization around 10.05 by December 31, 2022. The absence of data from March 2023 onwards suggests a lack of tangible fixed assets or changes in asset categorization that render this ratio less meaningful or calculable.

Total Asset Turnover Ratio:
The total asset turnover ratios demonstrate a consistent upward trend over the analyzed period. Starting from approximately 0.66 (June 30, 2020), the ratio incrementally increased, reaching 0.70 by March 31, 2021, 0.73 by June 30, 2021, and continued growth to 0.77 (September 30, 2021), 0.76 (December 31, 2021), and 0.83 (March 31, 2022). The upward momentum persisted, with ratios reaching 0.97 (June 30, 2022), 1.06 (September 30, 2022), and further increasing to a peak of 1.24 by March 31, 2025. This trend demonstrates a progressive improvement in the company's efficiency in generating sales relative to its total assets, suggestive of enhanced operational performance, strategic asset management, and potentially successful growth initiatives.

Overall Observations:
- The notable rise in fixed asset turnover beginning in late 2020 and into early 2021 suggests a period of improved fixed asset efficiency, possibly aligned with particular investments or operational efficiencies.
- The steady increase in total asset turnover indicates ongoing improvements in asset utilization for revenue generation, reflecting positively on the company's operational efficiency over time.
- The data gaps in fixed asset turnover ratios from March 2023 onward could imply shifts in asset structure or accounting practices, warranting further investigation for current asset utilization efficiency.

In summary, Pegasystems Inc. has demonstrated significant improvements in its asset utilization efficiency over the analyzed period, particularly in total assets, with variable performance in fixed assets. These trends collectively suggest ongoing operational enhancements and a strategic focus on maximizing revenue from available assets.