Pegasystems Reports $26.8 Million Revenue In Third Quarter

CAMBRIDGE, Mass., Nov. 8 — Pegasystems today announced its 2005 third-quarter results, reporting revenue of $26.8 million, pre-tax profits of $3.1 million, and earnings per share of $0.04.

                            Financial Performance

    (In millions, except per share
     data and percentages)           Q3 2005         Q2 2005        Q3 2004

    Total Revenue                     $26.8           $23.8         $21.5
    License Revenue                   $11.6            $8.0          $6.9
        % of Total Revenue              43%             34%           32%
    Services Revenue                  $15.2           $15.8         $14.6
        % of Total Revenue              57%             66%           68%
    Pre-tax Income                     $3.1            $0.5          $1.1
    Provision for income taxes         $1.8            $0.1          $0.4
    Net Income                         $1.4            $0.4          $0.7
    Earnings Per Share, Basic and
     Diluted                          $0.04           $0.01         $0.02

Alan Trefler, CEO, commented, "Leading corporations are recognizing that Pegasystems' SmartBPM software brings rapid value by better aligning their business systems with their business objectives. Thirteen customers in the third quarter chose our business process management (BPM) software to support a broad variety of processes ranging from enhanced call center customer service to more efficient billing.

"Four new customers selected Pegasystems included a leading North American insurer who will be using Pegasystems SmartBPM software to broadly manage business processes; a global insurance broker to support customer billing; and a provider of employee benefits to support the company's sales and service throughout the US."

Mr. Trefler continued, "Equally important were the nine existing customers who extended their relationships with Pegasystems, including two who bought their initial PegaRULES Process Commander® (PRPC) licenses less than six months ago. One of the world's largest banking organizations, and a long-time customer, selected Pegasystems' PRPC platform as its global BPM standard. These sales are evidence that PRPC and our PRPC-based frameworks provide true business enablement with 'Build for Change' agility, function, and scale.

"This quarter's 13 license signings brings to 32 the number secured this year, compared to 22 through this time last year. We are delighted with this success and look forward to continuing to provide real value for our customers."

Chris Sullivan, CFO, commented, "The value of our license signings during the third quarter was significantly higher than the previously reported weak license signings in the first and second quarters of 2005. While this included one large transaction, we are also encouraged by the number of new and existing customers who purchased licenses.

"We have increased our investment in expanding our pool of trained services personnel, including new Pegasystems staff and partners, to better meet anticipated demand associated with new license signings. This has resulted in lower service gross margins in the third quarter.

"We now expect 2005 full-year revenue to be between $97 and $105 million. The broad range of our revenue estimate is attributable to a small number of large value license opportunities in the fourth quarter. We continue to expect services revenue to be above 50% of total revenue for 2005. We are committed to being the leader in BPM software and have continued to invest in services delivery capacity as well as sales and marketing during the first three quarters of 2005. We expect to continue this investment during the fourth quarter of 2005 and believe this will better position Pegasystems to achieve accelerated growth in future years, but we also anticipate it will continue to result in lower profit before tax in 2005 compared to 2004. As a result, we now expect full-year 2005 earnings per diluted share to be between $0.03 and $0.15. Cash flow from operations in 2005 is now expected to be in the range of $18 to $22 million."

The Company will be hosting a conference call and live Webcast associated with this announcement at 9:00 a.m. ET on Wednesday, November 9, 2005. Dial-in information is as follows: 800-250-4434 (domestic) or 706-634-0667 (international), passcode 1856609.

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 "Investor Relations" section. A replay of the call will also be available on in the "Investor Relations" section, "Audio Archives" link.

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 including without limitation our financial guidance with respect to 2005 revenue, services revenue as a percentage of total revenue, profit before tax, earnings per diluted share and cash flow from operations. The words "believe," "expect," "anticipate" and similar expressions, among others, 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 volatility of our quarterly operating results, changes in estimates, judgments, positions and assumptions relative to our income tax provisions, difficulty in predicting the completion of product implementations and consequently the timing of our license revenue recognition, our ability to develop new products and evolve existing ones, the impact on our business of the ongoing consolidation in the financial services market, historically our core market, our ability to attract and retain key employees, reliance on certain key third-party relationships, 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 most recent report on form 10-Q or 10-K and other recent filings on file with the Securities and Exchange Commission. The forward-looking statements contained in this press release represent the Company's views as of November 8, 2005. 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. Although subsequent events may cause the Company's view to change, the Company does not undertake and specifically disclaims any obligation to publicly update or revise these forward-looking statements whether as the result of new information, future events or otherwise. The statements should therefore not be relied upon as representing the Company's view as of any date subsequent to November 8, 2005.

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.
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Phone +1 617-374-9600
Fax +1 617-374-9620