Correcting PegaSystems Earnings Announcement, BW2808, MA-PEGASYSTEMS

CAMBRIDGE, Mass., Feb. 19, 2002 — Pegasystems Inc. (NASDAQ: PEGA) today announces its fourth-quarter and full-year 2001 earnings results, reporting record revenues of $92.3 million for 2001, an increase of 14% from 2000. The Company achieved earnings per share of $0.37 for the full year 2001, up from $(0.71) in 2000.

Full Year Financial Performance
(In millions, except per share data and
percentages)                             2001      2000
Total Revenue                            $92.3     $80.8
License Revenue                          $44.1     $33.8
         % of Total Revenue               48%       42%
Services Revenue                         $48.2     $47.0
         % of Total Revenue               52%       58%
Net Income (Loss)                        $12.5    $(20.9)
Diluted Net Income (Loss) Per Share       $0.37    $(0.71)

Total revenues were $23.5 million for the fourth quarter ended December 31, 2001, an increase of 25% from $18.9 million recorded for the same period one year ago. License revenues totaled $13.9 million in the recent quarter, a year-over-year increase of 148%. Services revenues for the quarter were $9.6 million, down from $13.3 million in the fourth quarter of 2000. Pegasystems net income for the fourth quarter of 2001 is $4.9 million, or $0.15 per share, versus a net loss of $(5.5) million, or a loss of $(0.18) per share for the same period in 2000.

"We are proud to report strong fourth-quarter results that continue our journey towards competitive financial results," said Rick Jones, president and COO, Pegasystems. "We made customer satisfaction a priority and our management and delivery teams remained dedicated to operational efficiency and personal accountability. This translated into record results for our shareholders, customers and employees."

Added Jones, "Throughout 2001, Pegasystems remained focused and effectively executed against its business plan. We expanded important partnerships with Accenture and Sun Microsystems. We added prominent customers, including HealthNow New York, Societe Generale, Rabobank, and Fin-Force. We responded to the demand for industry-specific applications by offering new tools and products for private banking, check research and adjustments and healthcare. Additionally, we announced our emerging technology, PegaRULES and PegaRULES Process Commander. We are pleased with the positive results we achieved this year and believe they provide the foundation for success in 2002."

Net increase in cash, primarily from operations, was $6.8 million for the quarter. Cash flow for the year ending December 31, 2001 was $15.7 million.

"This year showed an accelerating awareness of how business management is a critical component of CRM," said Alan Trefler, founder and CEO, Pegasystems. "The need for a rules engine to unify, drive and manage business process is gaining traction. This is particularly true in the CRM arena, where many companies have struggled to achieve a return on their CRM investment. Such companies are starting to realize that a business rules architecture can help to optimize their CRM investments and help to enable tangible improvements in cost, consistency and responsiveness."

Added Trefler, "Our software is an attractive investment even in difficult times because of its demonstrated effectiveness in rapidly streamlining back-office operations, and its sophisticated integration capabilities that help to leverage legacy systems. In 2002, we believe we are further advancing our value proposition with the commercialization of our patented PegaRULES technology and are encouraged by the industry acceptance that our PegaRULES architecture has already started to receive."

"We are happy with the financial turnaround evident in 2001 and we remain optimistic for revenue growth in 2002," indicated Chris Sullivan, CFO and treasurer, Pegasystems. "Nonetheless, we acknowledge the effect of the recent industry-wide slow down in IT spending. Despite a growing sales pipeline, the number of new license contracts signed fell in the latter part of 2001. This resulted in a reduction in service revenues from $12.5 million in the third quarter of 2001 to $9.6 million in the fourth quarter of 2001 and may impact Pegasystems' overall revenue prospects in the first half of 2002. We have developed a plan for growth in 2002 and we are adding sales resources to drive that growth. However, we will continue to manage expenses in line with revenue growth according to the dictates of the economic climate."

Fourth Quarter Conference Call

The Company will be hosting a conference call and live Webcast associated with this announcement at 9:00 a.m. EST on Wednesday, February 20, 2002. Dial-in information is as follows: 888-747-3510 (local), 703-871-3085 (international). A digital replay of the teleconference will be available at 888-266-2081 (local), 703-925-2533 (international), with a passcode of 5830042.

If interested in listening to the Webcast, log onto at least 5 minutes prior to the event's broadcast, and click on the Webcast icon in the "Investors" section.

Forward-Looking Statements

Certain statements contained in this press release may be construed as "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. The words "believe," "expect," "hope," "anticipate," "plan," and similar expressions identify forward-looking statements, which speak only as of the date the statement was made. The company does not undertake and specifically disclaims any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. These statements are based on current expectations and assumptions and involve various risks and uncertainties, which could cause the Company's actual results to differ from those expressed in such forward-looking statements. These risks and uncertainties include impact of pending regulatory proceedings, performance of the Company's products, difficulty in predicting the completion of product implementations and consequently the timing of revenue recognition, the inability to attract and retain key employees, reliance on key third-party relationships, management of the Company's growth, and other risks and uncertainties. Further information regarding these and other factors which could cause the Company's actual results to differ materially from any forward-looking statements contained in this press release is contained in the Company's Quarterly Report on Form 10Q for the quarter ended September 30, 2001 and other recent filings on file with the Securities and Exchange Commission. Investors are cautioned not to place undue reliance on such forward-looking statements and there are no assurances that the matters contained in such statements will be achieved.

NOTE: Pegasystems is a registered trademark of Pegasystems Inc. Other product and company names may be trademarks of their respective owners.

About Pegasystems

Pegasystems (NASDAQ: PEGA) develops strategic applications for marketing, sales, service, and operations. Pega’s applications streamline critical business operations, connect enterprises to their customers seamlessly in real-time across channels, and adapt to meet rapidly changing requirements. Pega’s Global 3000 customers include many of the world’s most sophisticated and successful enterprises. Pega’s applications, available in the cloud or on-premises, are built on its unified Pega 7 platform, which uses visual tools to easily extend and change applications to meet clients’ strategic business needs. Pega’s clients report that Pega gives them the fastest time to value, extremely rapid deployment, efficient re-use, and global scale. For more information, please visit us at

All trademarks are the property of their respective owners.

The information contained in this press release is not a commitment, promise, or legal obligation to deliver any material, code or functionality. The development, release and timing of any features or functionality described remains at the sole discretion of Pegasystems, Pegasystems specifically disclaims any liability with respect to this information.


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Pegasystems Inc.
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Cambridge, MA 02142
Phone +1 617-374-9600
Fax +1 617-374-9620