Pegasystems Reports Increased Earnings and Revenues in Second Quarter 2001

CAMBRIDGE, Mass., Aug. 2, 2001 — Pegasystems Inc. (NASDAQ: PEGA) today reported its unaudited financial results for the second quarter of 2001.

Second Quarter Financial Performance (Unaudited)
(In millions, except per share data and percentages)

                                       Q2, 2001      Q2, 2000

Total Revenue                          $   22.9      $   21.3
License Revenue                        $    8.7      $    9.2
         % of Total Revenue                  38%           43%
     Services Revenue                  $   14.2      $   12.1
         % of Total Revenue                  62%           57%
Net Income (Loss)                      $    2.7      ($  13.7)(a)
Diluted Net Income (Loss) Per Share    $   0.08      ($  0.47)

(a) Includes $14.1 million charge for litigation settlement.

"We are effectively executing against the operational plan we put in place at the end of Q4 2000, and are seeing the results from our disciplined management and commitment to customer service," stated Rick Jones, President and COO, Pegasystems. "Our overall competitive position continues to strengthen as our message of rules-driven process automation for CRM gains traction in our target markets. In light of a challenging economic environment, the sustained demand from our blue-chip customer base yielded a second consecutive quarter of profitable results and increased earnings for our shareholders."

Quarterly Highlights

The following highlights were announced or occurred since Pegasystems' last earnings statement:

  • Continued growth and leadership in financial services through the new implementation of an integrated payments investigation and customer relationship management (CRM) solution with Rabobank Group, a broad financial services provider with over 9 million business and private customers. Additionally, Pegasystems sponsored seminars in Asia-Pacific on customer service for the securities industry.

  • Increased market presence through an alliance with Cognizant Technology Solutions, a leading provider of custom software development, integration and maintenance services.

  • Strengthened geographical penetration in German-speaking market through a strategic alliance in the financial services market with Systor, a leading systems integrator in Europe that has become a Pegasystems Certified Solutions Provider (PegaCSP).

  • Growth through Pegasystems' existing customer base through our expanded relationship with American National Insurance Company (NASDQ: ANAT), a Pegasystems customer since 1998, expanding its PegaCRM implementation to offer Web self-service to its customers.

  • Return to profitability, posting an operating and net profit, and $7.5 million in cash flow from operations for the first half of 2001. Total cash and cash equivalents increased to $24.6 million at June 30, 2001.

Business Outlook

"We are encouraged by recent industry reports stating that process automation is a key element in helping companies achieve a return on investment from their CRM investments," stated Alan Trefler, founder and CEO, Pegasystems. "As a leader in this segment, we hope to see continued demand from companies realizing the benefits of process automation for CRM, mainly more cost-efficient operations that automate and drive work through an enterprise and over the Web."

Trefler continued, "We continue to refine our PegaCRM offerings for the corporate banking, retail banking, healthcare and insurance markets. Because of PegaCRM's rules-based foundation, our customers have the flexibility to shape our products to their individual business needs. The PegaCRM solution is also attractive due to its integration capability, allowing customers to implement PegaCRM while leveraging investments with previously existing legacy systems. We continue to move toward packaged solutions that can be maximized through customization and personalization and responsive evolution."

Second-Quarter Conference Call

In conjunction with this news release, Pegasystems Inc. plans to Webcast its quarterly conference call live at 9:00 a.m. EST today, August 2, 2001. 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. Statements made by Rick Jones and Alan Trefler and other statements contained herein that are not statements of historical fact may be deemed forward-looking statements. 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 the impact of pending regulatory proceedings, 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 Form 10-Q for the quarter ended June 30, 2001 on file with the Securities and Exchange Commission. Investors are cautioned not to place undue reliance on such forward-looking statements and no assurances that the matters contained in such statements will be achieved.

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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Media Contacts

Lisa Pintchman Rogers
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+1 617-866-6022

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+1 617-528-5230

Ilena Ryan
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Joanna Richardson
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+44 (0) 118 9651 660

Jon Brigden
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+44 (0) 118 9398 584

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