Pegasystems Reports Fourth Quarter and Year-End Financial Results

CAMBRIDGE, Mass., Feb. 28, 2001 — Pegasystems Inc. (NASDAQ: PEGA) today reported its preliminary unaudited financial results for the fourth quarter and year ended December 31, 2000.

Fourth quarter Financial Performance (Unaudited)
(In millions, except per share data and percentages)
                                             Q4 2000    Q4 1999

Total Revenue                                $   18.9   $   19.7
License Revenue                              $    5.6   $    6.7
         % of Total Revenue                      30%        34%
     Services Revenue                        $   13.3   $   13.0
         % of Total Revenue                      70%        66%
Net Income (Loss)                            ($   5.5)  $    0.8
Diluted Net Income (Loss) Per Share          ($   0.18) $    0.03

"The fourth quarter was challenging from a financial perspective, and we addressed those challenges by restructuring and refocusing the organization," said Rick Jones, President and COO, Pegasystems. "As we announced in early January, our fourth quarter financial results were affected by a shortfall in license revenue and a $1 million dollar charge for a strategic restructuring plan. There was also a decrease in the company's cash position during the fourth quarter of approximately $7.9 million due to increased operating expenses, the settlement of the two securities lawsuits and capital expenditures. While we are disappointed by our fourth quarter results, we are encouraged by the deepening of our pipeline, with increasing numbers of new prospects complemented by stronger relationships with existing customers. As a result, we are confident that Pegasystems enters 2001 ready to capitalize on the increasing demand for rules-driven workflow automation for CRM and rules management products."

Other Recent Corporate Achievements

Pegasystems' recent corporate achievements include:

  • Signing a letter of intent to form an alliance with Accenture, formerly Andersen Consulting, to deliver leading-edge, service-fulfillment solutions to financial services organizations in North America.

  • Naming Sun iForce an application provider and adopting Sun as premier hardware vendor.

  • Announcing an integration between Pegasystems' eCRM solution and the claims and eligibility system for Blue Cross and Blue Shield of Massachusetts.

  • Forming an alliance with Acxiom to offer companies stronger CRM cross-sell opportunities by combining general market intelligence with their customer's profiles and related data.

  • Demonstrating PegaRULES to customers and partners at a successful PegaVISION user conference.
12-Month Financial Performance         (Unaudited)
                                        Year ended       Year ended
(In millions, except per share
data and percentages)                   December 31,    December 31,
                                            2000            1999
Total Revenue                            $   80.8        $   76.6
     License Revenue                     $   33.8        $   28.1
         % of Total Revenue                  42%             37%
     Services Revenue                    $   47.0        $   48.5
         % of Total Revenue                  58%             63%
Net Income (Loss)                        ($  20.9)       ($   2.4)
Diluted Net (Loss) Per Share             ($   0.71)      ($   0.08)

Commenting on Pegasystems' 12-month results, Jones said, "At the beginning of 2000, we embarked on a campaign to enhance the management team, expand our sales channels and increase customer satisfaction. I am happy with our progress toward these objectives during the year. We added new executives to our management team and Board of Directors, and we realigned our workforce to focus on the company's target vertical markets such as financial services and healthcare. We also made significant progress rolling out our new template-based project methodology. The result, we believe, is a stronger, more focused and more capable Pegasystems as we enter 2001."

Business Outlook

"Our PegaRULES technology, announced earlier this month, is a landmark for Pegasystems and a revolutionary advancement in the way that corporations think about implementing and automating business practices across the enterprise and over the Web," said Alan Trefler, Founder and CEO, Pegasystems. "Pegasystems has provided nearly two decades of rules technology thought leadership with prominent customers, and we see exciting new market opportunities for PegaRULES ahead."

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. These statements 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 the impact of pending regulatory proceedings, material weaknesses in the Company's financial control environment, 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, 2000 on file with the Securities and Exchange Commission.

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

Pegasystems' Consolidated Balance Sheet and Consolidated Statements of Operations are attached.

(in thousands, except share-related data)
                                               DECEMBER 31,
Assets                                       2000         1999
Current assets:
 Cash and cash equivalents               $  17,339    $  30,004
 Trade and installment accounts
  receivable, net of
     allowance for doubtful
     accounts of $1,037 in
     2000 and $1,026 in 1999                41,416       40,716
 Prepaid expenses and other
  current assets                             2,297        1,676
       Total current assets                 61,052       72,396

Long-term license installments              37,401       36,744
Equipment and improvements, net              6,568        8,335
Purchased software and other, net            5,472        7,516
           Total assets                  $ 110,493    $ 124,991

Liabilities and Stockholders' Equity
Current liabilities:
 Accounts payable and accrued expenses   $  11,917    $  13,643
 Deferred revenue                            5,065        8,765
 Current portion of capital lease
  obligations                                  312          198
          Total current liabilities         17,294       22,606

Commitments and Contingencies
Deferred income taxes                        1,000        1,000
Capital lease obligations, net of
 current portion                                84          253
Other long-term liabilities                     52           87
Stockholders' equity:
 Preferred stock, $.01 par value,
     authorized; no shares issued
     and outstanding                          --           --
 Common stock, $.01 par value,
  45,000,000 shares authorized;
     32,570,094 shares and
     28,995,821 shares issued and
     Outstanding in 2000 and 1999,
      respectively                             326          290
 Additional paid-in capital                100,886       88,941
 Deferred compensation                        --            (18)
 Stock warrant                               2,897        2,897
 Retained (deficit)earnings                (11,777)       9,079
 Accumulated other comprehensive loss         (269)        (144)
          Total stockholders' equity        92,063      101,045
          Total liabilities and
           stockholders' equity          $ 110,493    $ 124,991

(in thousands, except per share amounts)

                                        YEARS ENDED DECEMBER 31,
                                      2000        1999        1998
       Software license            $ 33,806    $ 28,123    $ 29,259
       Services                      47,000      48,506      32,510
           Total revenue             80,806      76,629      61,769

Cost of revenue:
       Cost of software license       2,383       3,018       1,555
       Cost of services              39,005      31,928      28,544
           Total cost of revenue     41,388      34,946      30,099
Gross profit                         39,418      41,683      31,670

Operating expenses:
       Research and development      15,073      19,810      23,809
       Selling and marketing         24,142      19,115      18,980
       General and administrative    10,334       8,678      11,678
       Litigation Settlement and
        Restructuring                15,821        --          --

           Total operating
            expenses                 65,370      47,603      54,467
Loss from operations                (25,952)     (5,920)    (22,797)

Installment receivable interest
 income                               4,015       3,772       2,662
Other interest income, net            1,667         900       2,059
Other (expense) income, net            (286)        338          47
Loss before provision (benefit)
 for Income taxes                   (20,556)       (910)    (18,029)
Provision (benefit) for
 income taxes                           300       1,500      (6,411)

           Net loss                $(20,856)   $ (2,410)   $(11,618)

Loss per share:

       Basic                       $  (0.71)   $  (0.08)   $  (0.41)

       Diluted                     $  (0.71)   $  (0.08)   $  (0.41)

   Weighted average number of
    common shares outstanding:

       Basic                         29,206      28,947      28,604

       Diluted                       29,206      28,947      28,604

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.


Press Kit


Media Contacts

Lisa Pintchman Rogers
VP, Corporate Communications
[email protected]
+1 617-866-6022

North America:
Sean Audet
Director, Corporate Communications
[email protected]
+1 617-528-5230

Ilena Ryan
Sr. Manager, Public Relations
[email protected]
+1 617-866-6722

Joanna Richardson
Director, Corporate Communications
[email protected]
+44 (0) 118 9651 660

Jon Brigden
PR & Communications Manager
[email protected]
+44 (0) 118 9398 584

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