Pegasus Solutions, Inc. Announces First Quarter Results; Cash EPS of $0.04 on 11% Revenue Increase

Apr 30, 2001, 01:00 ET from Pegasus Solutions, Inc.

    DALLAS, April 30 /PRNewswire/ -- Pegasus Solutions, Inc. (Nasdaq: PEGS), a
 leading provider of transaction processing and electronic commerce solutions
 to the hotel industry worldwide, today announced financial results for the
 three months ended March 31, 2001.  The results of the first quarter include
 the operations of REZ, Inc. (REZsolutions), which was acquired on
 April 3, 2000, in a transaction that was accounted for under the purchase
 method of accounting.
     Total revenue for the three months ended March 31, 2001, was
 $46.1 million.  Cash earnings, which excludes a one-time gain associated with
 the sale of its Summit and Sterling branded hotel representation services,
 restructuring charges, and non-cash charges, such as the amortization of
 goodwill and purchased software and intangible assets, were $0.04 per diluted
 share.
     Assuming the REZsolutions acquisition had taken place at the beginning of
 fiscal 2000, pro forma cash earnings per share for the first quarter of 2000
 would have been approximately breakeven on total revenue of $41.6 million.
     Pegasus Solutions' technology business, comprised of Pegasus Commission
 Processing, TravelWeb.com, Electronic Distribution, Application Service
 Processing (ASP) central reservations services, and Property Systems and
 Services, generated $26.8 million in revenue in the three months ended
 March 31, 2001. The Company's Utell subsidiary, which includes the Utell and
 Golden Tulip Worldwide representation services, reported $19.3 million in
 revenue in the three months ended March 31, 2001.
     "Our ASP central reservations systems (CRS) business was a key driver in
 this quarter's revenue growth," said John F. Davis, III, chairman and chief
 executive officer of Pegasus Solutions.  "This business grew by 24 percent
 compared to the first quarter of 2000, primarily as a result of the new Summit
 and Sterling CRS contracts that we gained through the sale of these two brands
 in January to Indecorp Corporation," said Mr. Davis.  "We believe we will see
 continued growth in this area, especially as we implement Preferred Hotels and
 Resorts and Kimpton Hotels, based upon contracts signed earlier this year.
     "Revenues from Pegasus Commission Processing were up 32 percent compared
 to the first quarter of 2000, as we processed  $131 million in hotel
 commissions during the quarter.  New customers, including Wyndham, Delta,
 Fairmont, Omni and Four Seasons, contributed to the transaction growth, as did
 the ramp up of our new Commission Processing service that provides commission
 reconciliation and tracking for travel agencies.  Notable recent signings for
 this value-added service include Carlson North America and American Express,"
 Mr. Davis noted.
     "In our Utell and Golden Tulip hotel representation services, we saw
 encouraging growth in the number of electronic bookings processed.  Electronic
 bookings for member hotels were up 19 percent compared to the first quarter of
 2000, during a time when hotel reservations industry-wide were slowing. We
 believe this is an indication that reliance upon Utell's marketing services
 may increase when the economy begins to soften because hotels need more help
 in generating bookings," said Mr. Davis.
     "During the first quarter of 2001, we took steps to consolidate and
 improve the efficiencies of our Utell operations in Europe, which we believe
 will enable us to operate more cost effectively, while continuing to provide
 high quality services to our customers.
     "Looking forward to the remainder of 2001, we will continue our efforts
 aimed at growing our commission processing and ASP operations through the
 addition of new customers and services, and improving the financial results of
 our Utell subsidiary through a reduced cost structure.
     In regard to new product offerings, we are particularly excited about the
 long-term potential of our new Web-based property management service (PMS).
 Our initial customer reaction to this system is very favorable, our pilot
 tests continue to go well, and we expect to launch the product later this
 year," said Mr. Davis.
 
     Financial Outlook
     Commenting on the Company's economic outlook, Jerry Galant, chief
 financial officer of Pegasus Solutions, said, "Some of our hotel customers
 have indicated that they are seeing a softening of the travel market,
 particularly in the UK and in certain U.S. business destinations. We too are
 beginning to see a softening of our reservation volumes. As a result, we
 believe that our revenue guidance for the remainder of the year should be
 reduced per quarter by about $1 million, or 2 percent, per quarter.
 Accordingly, our revised revenue guidance for the next three quarters is as
 follows: $51 to $53 million for the second quarter, $54 to $56 million for the
 third quarter, and $52 to $54 million for the fourth quarter.
     "However, we believe that in light of the productivity efficiencies we are
 implementing and the cost reduction steps we are taking, our previous cash EPS
 guidance for the next three quarters remains the same as previously stated,"
 Mr. Galant said.  The Company expects to see cash earnings per share in the
 range of $0.18 to $0.20 for the second quarter, $0.23 to $0.24 for third
 quarter and $0.13 to $0.15 for the fourth quarter.
 
     Conference Call
     In conjunction with this release, Pegasus Solutions will host a conference
 call today at 4:45 p.m. (EDT), 3:45 p.m. (CDT).  The call will be
 simultaneously Webcast over the Internet.  To access the Webcast, go to the
 Company's Web site, http://www.pegs.com.  Click on "investor information."
 
     Dallas-based Pegasus Solutions, Inc. (http://www.pegs.com) is a leading
 provider of transaction processing and electronic commerce solutions to the
 hotel industry worldwide. Its services include central reservations systems;
 electronic distribution services that connect more than 40,000 hotels to the
 Internet and to the global distribution systems (GDS); travel agent commission
 processing and payment services; the consumer Internet site TravelWeb.com
 (http://www.travelweb.com); customer relationship management services; the
 Utell and Golden Tulip Worldwide marketing and reservation representation
 services; and soon, a Web-based enterprise solution with property management
 applications.  Pegasus' customers comprise more than 100,000 travel agencies
 around the world, including nine of the 10 largest U.S.-based travel
 agencies(1); more than 40,000 hotel properties around the globe, including
 18 of the 20 largest hotel companies in the world based on revenues and total
 number of guest rooms(2); and more than 1,000 Web sites/services have their
 hotel reservations Powered by Pegasus(TM).  In addition to its corporate
 headquarters in Dallas, Pegasus has 35 offices in 22 countries, including
 regional hubs in Phoenix, London and Singapore.  The company's stock is traded
 on the Nasdaq National Market under the symbol PEGS.
 
     This statement contains references to future events and projected results,
 including anticipated transactions involving the Company and its service
 offerings.  There can be no assurance that the referenced future events or
 projected results will actually occur or that the future financial performance
 of the Company will be as projected.  Actual occurrences, results and
 performance may differ substantially and materially from those projected as a
 result of risks and uncertainties mentioned in this statement or detailed in
 the Company's periodic reports and registration statements filed with the
 Securities and Exchange Commission including its Form 10-K for the year ended
 December 31, 2000.
 
     (1) Travel Weekly, June 26, 2000, "Top 50 Travel Agencies"
     (2) Business Travel News, May 29, 2000, "The Top Hotel Companies"
 
                              PEGASUS SOLUTIONS, INC.
                CONSOLIDATED STATEMENT OF OPERATIONS - CASH EARNINGS
                    (In thousands except for per share amounts)
                                    (Unaudited)
 
 
                                                   Three Months Ended
                                                     March 31, 2001
 
                                                     Cash Earnings
                                             As       Adjustments        Cash
                                          Reported                     Earnings
 
     Net revenues                          $46,108     $--             $46,108
 
     Cost of services                       26,259      --              26,259
     Restructure costs                         797     (797)              --
     Research and development                1,994      --               1,994
     General and administrative expenses     6,552      --               6,552
     Marketing and promotion expenses        6,352      --               6,352
     Depreciation and amortization          16,425  (13,229) (1)         3,196
     Operating income (loss)               (12,271)  14,026              1,755
     Other income (expense):
        Interest income, net                    39      --                  39
        Gain on sale of business unit        4,789   (4,789)               --
        Equity in loss of investee            (298)     298  (2)           --
        Other                                  (43)     --                 (43)
     Income (loss) before income taxes      (7,784)   9,535              1,751
     Income tax expense (benefit)           (1,270)   1,935  (3)           665
     Net income (loss)                     $(6,514)  $7,600             $1,086
 
     Diluted net income per share                                        $0.04
 
     Diluted weighted average shares
      outstanding                                                       25,010
 
        Notes:
        (1)  To adjust for amortization of purchased goodwill and intangible
             assets.
        (2)  To adjust for amortization of excess cost over net assets acquired
             for investment in Global Enterprise Technology Solutions LLC.
        (3)  To adjust income tax expense (benefit) for assumed 38% tax rate
             for cash earnings.
 
                              PEGASUS SOLUTIONS, INC.
                       CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (In thousands)
 
 
                                                 (Unaudited)
                                                  March 31,        December 31,
                                                      2001              2000
     ASSETS
 
     Cash and cash equivalents                      $30,800            $32,576
     Restricted cash                                  4,618              4,574
     Short-term investments                           5,808              1,563
     Accounts receivable, net                        36,007             29,889
     Other current assets                             6,322              4,189
        Total current assets                        $83,555            $72,791
 
     Goodwill, net                                  146,145            149,764
     Intangible assets, net                          52,666             62,909
     Property and equipment, net                     61,844             64,434
     Other noncurrent assets                         10,929              7,807
           Total assets                            $355,139           $357,705
 
     LIABILITIES AND STOCKHOLDERS' EQUITY
 
     Accounts payable and accrued
      liabilities                                   $38,776            $36,097
     Deferred tax liability                          12,078             12,078
     Unearned income                                 13,292              9,428
     Income tax payable                               7,213              6,212
     Other current liabilities                        5,900              2,771
        Total current liabilities                   $77,259            $66,586
 
     Note payable                                    20,000             20,000
     Deferred tax liability                           2,714              8,961
     Other noncurrent liabilities                     2,593              1,586
 
     Stockholders' equity:
        Common stock                                    249                249
        Additional paid-in capital                  288,495            288,422
        Unearned compensation                          (124)              (157)
        Accumulated comprehensive loss                 (252)              (265)
        Accumulated deficit                         (33,015)           (26,501)
        Less treasury stock                          (2,780)            (1,176)
           Total stockholders' equity              $252,573           $260,572
           Total liabilities and
            stockholders' equity                   $355,139           $357,705
 
 
                              PEGASUS SOLUTIONS, INC.
                  CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                    (In thousands except for per share amounts)
                                    (Unaudited)
 
 
                                                   Three Months Ended
                                                        March 31,
                                             2001                       2000
 
     Net revenues                           $46,108                    $10,661
 
     Cost of services                        26,259                      3,431
     Restructure costs                          797                        --
     Research and development                 1,994                        603
     General and administrative expenses      6,552                      1,905
     Marketing and promotion expenses         6,352                      1,594
     Depreciation and amortization           16,425                        605
     Operating income (loss)               $(12,271)                    $2,523
     Other income (expense):
        Interest income (expense), net           39                      1,588
        Gain on sale of business unit         4,789                        --
        Equity in loss of investee             (298) (1)                   --
        Other                                   (43)                       --
     Income (loss) before income taxes      $(7,784)                    $4,111
     Income tax expense (benefit)            (1,270)                     1,090
     Net income (loss)                      $(6,514)                    $3,021
 
     Net income (loss) per share:
        Basic                                $(0.26)                     $0.15
 
        Diluted                              $(0.26)                     $0.14
 
     Weighted average shares outstanding:
        Basic                                24,596                     20,356
 
        Diluted                              24,596                     21,048
 
        Note:
        (1) Includes amortization of excess cost over net assets acquired for
            investment in Global Enterprise Technology Solutions LLC.
 
 

SOURCE Pegasus Solutions, Inc.
    DALLAS, April 30 /PRNewswire/ -- Pegasus Solutions, Inc. (Nasdaq: PEGS), a
 leading provider of transaction processing and electronic commerce solutions
 to the hotel industry worldwide, today announced financial results for the
 three months ended March 31, 2001.  The results of the first quarter include
 the operations of REZ, Inc. (REZsolutions), which was acquired on
 April 3, 2000, in a transaction that was accounted for under the purchase
 method of accounting.
     Total revenue for the three months ended March 31, 2001, was
 $46.1 million.  Cash earnings, which excludes a one-time gain associated with
 the sale of its Summit and Sterling branded hotel representation services,
 restructuring charges, and non-cash charges, such as the amortization of
 goodwill and purchased software and intangible assets, were $0.04 per diluted
 share.
     Assuming the REZsolutions acquisition had taken place at the beginning of
 fiscal 2000, pro forma cash earnings per share for the first quarter of 2000
 would have been approximately breakeven on total revenue of $41.6 million.
     Pegasus Solutions' technology business, comprised of Pegasus Commission
 Processing, TravelWeb.com, Electronic Distribution, Application Service
 Processing (ASP) central reservations services, and Property Systems and
 Services, generated $26.8 million in revenue in the three months ended
 March 31, 2001. The Company's Utell subsidiary, which includes the Utell and
 Golden Tulip Worldwide representation services, reported $19.3 million in
 revenue in the three months ended March 31, 2001.
     "Our ASP central reservations systems (CRS) business was a key driver in
 this quarter's revenue growth," said John F. Davis, III, chairman and chief
 executive officer of Pegasus Solutions.  "This business grew by 24 percent
 compared to the first quarter of 2000, primarily as a result of the new Summit
 and Sterling CRS contracts that we gained through the sale of these two brands
 in January to Indecorp Corporation," said Mr. Davis.  "We believe we will see
 continued growth in this area, especially as we implement Preferred Hotels and
 Resorts and Kimpton Hotels, based upon contracts signed earlier this year.
     "Revenues from Pegasus Commission Processing were up 32 percent compared
 to the first quarter of 2000, as we processed  $131 million in hotel
 commissions during the quarter.  New customers, including Wyndham, Delta,
 Fairmont, Omni and Four Seasons, contributed to the transaction growth, as did
 the ramp up of our new Commission Processing service that provides commission
 reconciliation and tracking for travel agencies.  Notable recent signings for
 this value-added service include Carlson North America and American Express,"
 Mr. Davis noted.
     "In our Utell and Golden Tulip hotel representation services, we saw
 encouraging growth in the number of electronic bookings processed.  Electronic
 bookings for member hotels were up 19 percent compared to the first quarter of
 2000, during a time when hotel reservations industry-wide were slowing. We
 believe this is an indication that reliance upon Utell's marketing services
 may increase when the economy begins to soften because hotels need more help
 in generating bookings," said Mr. Davis.
     "During the first quarter of 2001, we took steps to consolidate and
 improve the efficiencies of our Utell operations in Europe, which we believe
 will enable us to operate more cost effectively, while continuing to provide
 high quality services to our customers.
     "Looking forward to the remainder of 2001, we will continue our efforts
 aimed at growing our commission processing and ASP operations through the
 addition of new customers and services, and improving the financial results of
 our Utell subsidiary through a reduced cost structure.
     In regard to new product offerings, we are particularly excited about the
 long-term potential of our new Web-based property management service (PMS).
 Our initial customer reaction to this system is very favorable, our pilot
 tests continue to go well, and we expect to launch the product later this
 year," said Mr. Davis.
 
     Financial Outlook
     Commenting on the Company's economic outlook, Jerry Galant, chief
 financial officer of Pegasus Solutions, said, "Some of our hotel customers
 have indicated that they are seeing a softening of the travel market,
 particularly in the UK and in certain U.S. business destinations. We too are
 beginning to see a softening of our reservation volumes. As a result, we
 believe that our revenue guidance for the remainder of the year should be
 reduced per quarter by about $1 million, or 2 percent, per quarter.
 Accordingly, our revised revenue guidance for the next three quarters is as
 follows: $51 to $53 million for the second quarter, $54 to $56 million for the
 third quarter, and $52 to $54 million for the fourth quarter.
     "However, we believe that in light of the productivity efficiencies we are
 implementing and the cost reduction steps we are taking, our previous cash EPS
 guidance for the next three quarters remains the same as previously stated,"
 Mr. Galant said.  The Company expects to see cash earnings per share in the
 range of $0.18 to $0.20 for the second quarter, $0.23 to $0.24 for third
 quarter and $0.13 to $0.15 for the fourth quarter.
 
     Conference Call
     In conjunction with this release, Pegasus Solutions will host a conference
 call today at 4:45 p.m. (EDT), 3:45 p.m. (CDT).  The call will be
 simultaneously Webcast over the Internet.  To access the Webcast, go to the
 Company's Web site, http://www.pegs.com.  Click on "investor information."
 
     Dallas-based Pegasus Solutions, Inc. (http://www.pegs.com) is a leading
 provider of transaction processing and electronic commerce solutions to the
 hotel industry worldwide. Its services include central reservations systems;
 electronic distribution services that connect more than 40,000 hotels to the
 Internet and to the global distribution systems (GDS); travel agent commission
 processing and payment services; the consumer Internet site TravelWeb.com
 (http://www.travelweb.com); customer relationship management services; the
 Utell and Golden Tulip Worldwide marketing and reservation representation
 services; and soon, a Web-based enterprise solution with property management
 applications.  Pegasus' customers comprise more than 100,000 travel agencies
 around the world, including nine of the 10 largest U.S.-based travel
 agencies(1); more than 40,000 hotel properties around the globe, including
 18 of the 20 largest hotel companies in the world based on revenues and total
 number of guest rooms(2); and more than 1,000 Web sites/services have their
 hotel reservations Powered by Pegasus(TM).  In addition to its corporate
 headquarters in Dallas, Pegasus has 35 offices in 22 countries, including
 regional hubs in Phoenix, London and Singapore.  The company's stock is traded
 on the Nasdaq National Market under the symbol PEGS.
 
     This statement contains references to future events and projected results,
 including anticipated transactions involving the Company and its service
 offerings.  There can be no assurance that the referenced future events or
 projected results will actually occur or that the future financial performance
 of the Company will be as projected.  Actual occurrences, results and
 performance may differ substantially and materially from those projected as a
 result of risks and uncertainties mentioned in this statement or detailed in
 the Company's periodic reports and registration statements filed with the
 Securities and Exchange Commission including its Form 10-K for the year ended
 December 31, 2000.
 
     (1) Travel Weekly, June 26, 2000, "Top 50 Travel Agencies"
     (2) Business Travel News, May 29, 2000, "The Top Hotel Companies"
 
                              PEGASUS SOLUTIONS, INC.
                CONSOLIDATED STATEMENT OF OPERATIONS - CASH EARNINGS
                    (In thousands except for per share amounts)
                                    (Unaudited)
 
 
                                                   Three Months Ended
                                                     March 31, 2001
 
                                                     Cash Earnings
                                             As       Adjustments        Cash
                                          Reported                     Earnings
 
     Net revenues                          $46,108     $--             $46,108
 
     Cost of services                       26,259      --              26,259
     Restructure costs                         797     (797)              --
     Research and development                1,994      --               1,994
     General and administrative expenses     6,552      --               6,552
     Marketing and promotion expenses        6,352      --               6,352
     Depreciation and amortization          16,425  (13,229) (1)         3,196
     Operating income (loss)               (12,271)  14,026              1,755
     Other income (expense):
        Interest income, net                    39      --                  39
        Gain on sale of business unit        4,789   (4,789)               --
        Equity in loss of investee            (298)     298  (2)           --
        Other                                  (43)     --                 (43)
     Income (loss) before income taxes      (7,784)   9,535              1,751
     Income tax expense (benefit)           (1,270)   1,935  (3)           665
     Net income (loss)                     $(6,514)  $7,600             $1,086
 
     Diluted net income per share                                        $0.04
 
     Diluted weighted average shares
      outstanding                                                       25,010
 
        Notes:
        (1)  To adjust for amortization of purchased goodwill and intangible
             assets.
        (2)  To adjust for amortization of excess cost over net assets acquired
             for investment in Global Enterprise Technology Solutions LLC.
        (3)  To adjust income tax expense (benefit) for assumed 38% tax rate
             for cash earnings.
 
                              PEGASUS SOLUTIONS, INC.
                       CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (In thousands)
 
 
                                                 (Unaudited)
                                                  March 31,        December 31,
                                                      2001              2000
     ASSETS
 
     Cash and cash equivalents                      $30,800            $32,576
     Restricted cash                                  4,618              4,574
     Short-term investments                           5,808              1,563
     Accounts receivable, net                        36,007             29,889
     Other current assets                             6,322              4,189
        Total current assets                        $83,555            $72,791
 
     Goodwill, net                                  146,145            149,764
     Intangible assets, net                          52,666             62,909
     Property and equipment, net                     61,844             64,434
     Other noncurrent assets                         10,929              7,807
           Total assets                            $355,139           $357,705
 
     LIABILITIES AND STOCKHOLDERS' EQUITY
 
     Accounts payable and accrued
      liabilities                                   $38,776            $36,097
     Deferred tax liability                          12,078             12,078
     Unearned income                                 13,292              9,428
     Income tax payable                               7,213              6,212
     Other current liabilities                        5,900              2,771
        Total current liabilities                   $77,259            $66,586
 
     Note payable                                    20,000             20,000
     Deferred tax liability                           2,714              8,961
     Other noncurrent liabilities                     2,593              1,586
 
     Stockholders' equity:
        Common stock                                    249                249
        Additional paid-in capital                  288,495            288,422
        Unearned compensation                          (124)              (157)
        Accumulated comprehensive loss                 (252)              (265)
        Accumulated deficit                         (33,015)           (26,501)
        Less treasury stock                          (2,780)            (1,176)
           Total stockholders' equity              $252,573           $260,572
           Total liabilities and
            stockholders' equity                   $355,139           $357,705
 
 
                              PEGASUS SOLUTIONS, INC.
                  CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                    (In thousands except for per share amounts)
                                    (Unaudited)
 
 
                                                   Three Months Ended
                                                        March 31,
                                             2001                       2000
 
     Net revenues                           $46,108                    $10,661
 
     Cost of services                        26,259                      3,431
     Restructure costs                          797                        --
     Research and development                 1,994                        603
     General and administrative expenses      6,552                      1,905
     Marketing and promotion expenses         6,352                      1,594
     Depreciation and amortization           16,425                        605
     Operating income (loss)               $(12,271)                    $2,523
     Other income (expense):
        Interest income (expense), net           39                      1,588
        Gain on sale of business unit         4,789                        --
        Equity in loss of investee             (298) (1)                   --
        Other                                   (43)                       --
     Income (loss) before income taxes      $(7,784)                    $4,111
     Income tax expense (benefit)            (1,270)                     1,090
     Net income (loss)                      $(6,514)                    $3,021
 
     Net income (loss) per share:
        Basic                                $(0.26)                     $0.15
 
        Diluted                              $(0.26)                     $0.14
 
     Weighted average shares outstanding:
        Basic                                24,596                     20,356
 
        Diluted                              24,596                     21,048
 
        Note:
        (1) Includes amortization of excess cost over net assets acquired for
            investment in Global Enterprise Technology Solutions LLC.
 
 SOURCE  Pegasus Solutions, Inc.