Pegasystems Announces Preliminary Financial Results for 2006

CAMBRIDGE, Mass. — April 25, 2007 — Pegasystems Inc. (Nasdaq: PEGA) today announced that for the full year 2006 it expects total revenue to be approximately $126 million and for the Company to be profitable. The Company ended 2006 with $128 million in total cash and investments, an increase of $13 million from the end of 2005.

The Company filed an amendment to its 2005 Annual Report on Form 10-K and amendments to its first and second quarter 2006 Quarterly Reports on Form 10-Q, in each case to restate certain previously issued financial statements and other financial information. The following table shows selected financial information for 2005 and the six months ended June 30, 2006, as previously reported and as restated:

                    Selected Financial Performance
                                Year ended         Six Months ended
                               Dec 31, 2005          June 30, 2006
                           --------------------- ---------------------
 (In millions, except per      As         As         As          As
      share data and        Previously  Restated  Previously  Restated
        percentages)         Reported              Reported
                           ------------ -------- ------------ --------
Total Revenue                $102.0     $100.2      $56.7      $56.5
License Revenue               $40.8      $40.9      $13.9      $13.8
         % of Total Revenue    40%        41%        24%        24%
Services Revenue              $61.2      $59.3      $42.9      $42.7
         % of Total Revenue    60%        59%        76%        76%
Gross Profit                  $66.4      $66.9      $31.7      $31.4
Income (Loss) From
 Operations                   $0.5       $1.2       $(5.3)     $(5.7)
Net Income (Loss)             $4.7       $5.2       $(0.9)     $(1.2)
Earnings (Loss) Per Share,
 Basic                        $0.13      $0.15     $(0.03)    $(0.03)
Earnings (Loss) Per Share,
 Diluted                      $0.13      $0.14     $(0.03)    $(0.03)

Pegasystems also filed its third quarter 2006 Quarterly Report on Form 10-Q (the "Third Quarter 10-Q"). The following table shows selected financial information for the three and nine months ended September 30, 2006 and 2005:

                    Selected Financial Performance
                                 Three months ended Nine months ended
                                      Sep 30,            Sep 30,
                                 ------------------ ------------------
 (In millions, except per share             2005               2005
      data and percentages)                 (As                (As
                                  2006    Restated)  2006    Restated)
                                 ------- ---------- ------- ----------
Total Revenue                    $33.5     $27.2    $90.1     $74.5
License Revenue                   $8.5     $11.7    $22.3     $30.5
               % of Total Revenue  25%      43%       25%      41%
Services Revenue                 $25.0     $15.5    $67.7     $44.0
               % of Total Revenue  75%      57%       75%      59%
Gross Profit                     $18.4     $17.8    $49.7     $50.4
Income (Loss) From Operations    $(2.1)    $2.0     $(7.8)    $1.7
Net Income (Loss)                $(0.4)    $2.2     $(1.6)    $3.0
Earnings (Loss) per Share, Basic $(0.01)   $0.06    $(0.04)   $0.08
Earnings (Loss) per Share,
 Diluted                         $(0.01)   $0.06    $(0.04)   $0.08

The Company was notified in November 2006 by the Nasdaq Listing Qualifications Department ("Nasdaq") that the Company was out of compliance with the filing requirement for continued listing of the Company's common stock, as a result of the Company's delay in filing the Third Quarter 10-Q. In March 2007, Nasdaq notified the Company that it was also out of compliance with the filing requirement for continued listing as a result of the Company's delay in filing its Annual Report on Form 10-K for 2006 (the "2006 10-K"). Nasdaq agreed to stay the delisting of the Company's stock, subject to the condition that the Company file with the SEC on or before April 25, 2007 the Third Quarter 10-Q, the 2006 10-K and the restatement-related amendments.

The Company expects to file its 2006 10-K next week. The Company has requested an extension from Nasdaq with respect to the 2006 10-K, given that the restatement-related amendments and Third Quarter 10-Q have been filed and further given that the Company only became delayed in filing the 2006 10-K last month. There can be no assurance Nasdaq will grant the Company's extension request. Once the Company has filed the 2006 10-K, it will issue a press release announcing the filing of the 2006 10-K and scheduling a conference call to discuss its financial results for the third quarter of 2006 and for the full year 2006.

Craig Dynes, the Company's Chief Financial Officer, said, "We have now completed and filed all of our restatements. We are pleased to have filed our third quarter 2006 Form 10-Q and we are working diligently to file our 2006 Form 10-K and to regain compliance with the filing requirement for continued listing on the Nasdaq Global Select Market."

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

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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.
One Rogers St.
Cambridge, MA 02142
Phone +1 617-374-9600
Fax +1 617-374-9620