Pegasus Solutions Reports Solid Third Quarter 2002 Results

Pegasus Solutions, Inc. (Nasdaq: PEGS), a
leading worldwide provider of hotel reservations-related services and
technology, today announced financial results for the third quarter
ended September 30, 2002.

Caption: John F. Davis III, chairman and
chief executive officer of Pegasus Solutions

Total revenues were $45.6 million for the third quarter of 2002,
compared to $45.2 million for the third quarter of 2001. 
Company`s net income per diluted share for the three months ended
September 30, 2002 was $0.03, compared to a net loss per diluted share
of $0.44 for the third quarter of 2001. 
Cash earnings, which excludes non-cash items in 2002 and 2001 and
non-recurring items in 2001, were $0.22 per diluted share for the
third quarter, a 29 percent increase compared to $0.17 per diluted
share for the same quarter last year.  Non-cash items consisted of
amortization expense for purchased intangible assets, while
non-recurring items in the third quarter of 2001 included $8.1 million
of one-time restructuring charges and consulting fees associated with
the restructuring.

“Considering the difficult economic climate, I am extremely pleased
with our third quarter results,” said John F. Davis III

, chairman and
chief executive officer of Pegasus Solutions.  “When we originally
budgeted for 2002, we had anticipated an improvement in the economy in
the second half of this year. 

“Unfortunately, we, and others in the industry, have not seen the
expected improvement in various key hotel industry metrics, including
the number of reservations and average daily room rates.  Since we
cannot control these and other macro economic factors, we have focused
on managing our discretionary costs, which has helped us overcome the
lingering adverse effects of the weak economy.  We have also invested
internally in preparation for an eventual economic rebound.  Until
then, we remain committed to attaining our goal of delivering EBITDA
margins on an annual basis in excess of 20 percent.”


Third Quarter Highlights

* Consolidated EBITDA increased to $13.2 million, a 35 percent
increase over adjusted EBITDA for the third quarter of 2001.

* EBITDA margins for Pegasus` two divisions, technology and
hospitality (Utell), each improved to 29 percent, compared to third
quarter 2001 adjusted EBITDA margins of 23 percent and 19 percent,

* Higher margin Internet hotel reservation transaction volumes
increased 38 percent over the third quarter of 2001 and 4 percent over
the second quarter of 2002.

* Financial Services continued its impressive sales performance
by adding approximately 2,500 new travel agency locations to its
commission processing customer base.

“Our Utell team continues to execute initiatives to increase Utell
revenues and margins on a per-hotel basis,” stated Davis.  “On a
`comparable hotel` basis, reservations made during the third quarter
of 2002 for the U.S. and Asia Pacific regions experienced double-digit
gains over the prior year.  However, `comparable hotel` reservations
for Europe, which is our largest market, were down primarily because
of decreased outbound traffic from the U.S. to Europe.”

Commenting on new business and contract renewals, Davis said,
“Although our sales cycle has lengthened due to the stagnant economy
and weak lodging environment, we signed or renewed 37 technology
customer contracts during the third quarter.  In addition, I am
extremely pleased that we signed a new contract with Travelodge UK
earlier this month to provide both CRS and Property Systems services
to its approximately 230 properties.  This new contract gives us a
strong presence in the European marketplace for PegasusCentral, our
new Web-based property management system.”


“A year ago, we announced a strategic restructuring plan and estimated
annual savings to range from
$9 million to $11 million.  Our ability to execute against this plan
has resulted in greater than planned
efficiencies.  These savings have allowed us to overcome the shortfall
in expected revenues,” commented Susan K. Cole, chief financial
officer of Pegasus Solutions.  “Additionally, our strong balance sheet
and operating cash flows have allowed us to continue investing in
technology that has upgraded and improved the capacity of our IT
infrastructure, enhancing both our operations and customer service.  I
remain confident that, when the economy improves, we have positioned
our Company`s cost structure to take full advantage of any incremental
revenue growth.  The slower than anticipated recovery in the nation`s
economy, the continued lack of corporate business travel and the
anniversary of September 11th have all negatively affected our topline
results.  As a result of these factors and the uncertain timing of an
economic recovery, we now project our fourth quarter 2002 revenue and
cash earnings estimates to be in the range of $39 million to $42
million and $0.11 to $0.15, respectively.”
Cole further commented, “We have historically had good visibility into
economic and booking patterns.  However, with the continued threat of
war and terrorist-related activities, as well as an increasing trend
of last minute travel, our visibility is not as clear.  We are working
hard at understanding the trends we are seeing and will hold a
conference call later this year to discuss our 2003 outlook.” 
Davis concluded, “Because we strategically reorganized our company
last year, we were well-positioned to weather the economic storm which
began after September 11, 2001, and continues through today.
Similarly, we continued to invest in our business, demonstrating our
commitment to providing world-class operations and customer service.
We intend to continue investing in new services and in enhancements to
existing services so we will be at the forefront of any economic
recovery or improvement in business
and leisure travel.”

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(22/10/2002) TravelCLICK To Partner With Pegasus Solutions

(08/10/2002) Six Continents Renews Agreement with Pegasus