Pegasystems Reports Increased Revenue, Earnings, and Cash; Delivers Sixth Consecutive Quarter of Profitability and Growth for Second Quarter 2002
CAMBRIDGE, Mass., Jul 22, 2002 — Pegasystems Inc. (NASDAQ: PEGA) today announced its second-quarter 2002 results, reporting revenues of $26.7 million, an increase of 10% from the first quarter of 2002 and a year-over-year increase of 13%. The Company achieved earnings per diluted share of $0.13 for the quarter ended June 30, 2002, up from $0.10 per share in the first quarter of 2002 and $.08 per share for the second quarter of 2001.
Second Quarter Financial Performance (In millions, except per share data and Current Qtr. Prior Qtr. Prior Yr. percentages) Q2 2002 Q1 2002 Q2 2001 Total Revenue $ 26.7 $ 24.2 $ 23.5 License Revenue $ 19.1 $ 16.3 $ 8.6 % of Total Revenue 72% 67% 37% Services Revenue $ 7.6 $ 7.9 $ 14.9 % of Total Revenue 28% 33% 63% Net Income $ 4.6 $ 3.4 $ 2.7 Basic Earnings Per Share $ 0.14 $ 0.10 $ 0.08 Diluted Earnings Per Share $ 0.13 $ 0.10 $ 0.08
Pegasystems reported sequential growth in revenues, and posted net profits of $4.6 million and $7.7 million in positive cash flow for the quarter. Total cash and cash equivalents increased to $49.0 million at June 30, 2002, up 19% sequentially and nearly doubled from June 2001.
"In the midst of challenging economic times, we have successfully delivered our sixth consecutive quarter of profitability and growth," said Rick Jones, president and COO, Pegasystems. "This achievement was primarily driven by the strength and satisfaction of our existing customer base, which enabled us to generate increased license revenues through significant renewals, expansions, and product extensions.
"This quarter, we announced two significant license agreements, adding the Inland Revenue of the United Kingdom and Hospitals Contribution Fund of Australia to our client roster. Additionally, we recorded more than $2.0 million in revenue from six new customers in the quarter. Noteworthy among these accomplishments, the Federal Reserve completed its rollout of our software to three new Federal Reserve banks. With the inclusion of these additional banks, our software is now the sole and standard check-adjustment platform for the entire Federal Reserve system. This national platform will allow the Federal Reserve to achieve efficiencies and provide consistent levels of service across the nation."
"In looking toward the second half of the year, we anticipate market conditions will remain challenging," commented Chris Sullivan, treasurer and CFO, Pegasystems. "However, due to increased visibility, anticipated incremental revenue from renewals, and our strong second-quarter results, we are reiterating our guidance for full-year revenue and earnings, and raising our expectations for year-end cash balances. We currently expect full-year revenues will be $100 million, plus or minus 15%, and anticipate that full-year diluted EPS will be $0.42, plus or minus $0.10. We expect ending cash balances for 2002 to be $50 million, plus or minus 10%."
"As we announced last quarter, we are once again an active participant in the credit-card services market," continued Jones. "We have demonstrated strength in this industry in the past, where our rules-based technology currently automates complex business processes at seven of the top fifteen North American card issuers, including Citibank, N.A. In support of this market initiative, we launched our PegaCARD SERVICES product during the second quarter, which includes industry-specific capabilities, including customer service, collections, dispute and chargeback management, credit fraud, and correspondence management. We are optimistic that PegaCARD SERVICES will allow us to deepen our penetration of the credit-card services market."
Added Jones, "Our partner program gained momentum this quarter, with positive developments in both new and existing relationships. Through our relationship with EDS, we completed a competitive selection process and were successfully chosen as the call center solution and a business process management platform of choice for Inland Revenue. This is an exciting opportunity to serve the public sector and is compatible with our notable history of providing similar capabilities for large, transaction-intensive financial services organizations."
Concluded Jones, "Overall, capital spending remains weak. However, we continue to invest in sales, marketing, and new technologies. These investments have helped to keep our pipeline strong. Our management team remains cautiously optimistic for the second half of the year."
"We are pleased with the interest we continue to see from large blue-chip organizations for our software," commented Alan Trefler, founder and CEO, Pegasystems. "Our rules-driven approach to process automation and business process management has delivered tangible productivity and operational improvements for our customers, often prompting them to extend the use of our software deeper into the enterprise.
"Recently, HealthNow successfully completed its implementation of the first phase of Pegasystems' claims-automation software. After three weeks of use, this BlueCross BlueShield provider reduced claims inventory by more than 40%, eliminated numerous manual processes, increased the number of pending claims handled per hour, reduced overtime, and increased management control. This type of demonstrable financial return is the reason transaction-intensive organizations can justify the purchase of our software during difficult economic times."
Concluded Trefler, "We continue to make progress in the early stages of the adoption of PegaRULES Process Commander. This quarter, we signed our first PegaRULES partners and have successfully engaged in several proof-of-concepts with leading companies in industries divergent from those of our traditional business. Our sales and marketing efforts have increased in support of Process Commander, and we are hopeful that revenues from the PegaRULES business will occur in the second half of this year."
Second 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 Tuesday, July 23, 2002. Dial-in information is as follows: 800-982-3472 (local), 703-871-3022 (international). A digital replay of the teleconference will be available at 888-266-2081 (local), 703-871-3022 (international), with a passcode of 6067826.
If interested in listening to the Webcast, log onto www.pegasystems.com at least 5 minutes prior to the event's broadcast, and click on the Webcast icon in the "Investors" section.
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 volatility of our quarterly operating results, 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, 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 10-Q for the quarter ended March 31, 2002 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.
Notes: Pegasystems is a registered trademark of Pegasystems Inc. Other product and company names may be trademarks of their respective owners.
Condensed Consolidated Balance Sheets
(in thousands, except share-related amounts)
June 30, December 31,
Cash and cash equivalents $ 49,020 $ 33,017
Trade accounts receivable, net of
allowance for doubtful accounts
of $1,038 in 2002 and $1,034 in 2001 4,790 9,592
Short-term license installments,
net 35,733 31,359
Prepaid expenses and other
current assets 663 2,286
Total current assets 90,206 76,254
Long-term license installments, net 45,088 43,155
Equipment and improvements, net 2,325 3,053
Acquired technology, net 1,254 --
Purchased software and other assets, net 1,443 2,610
Goodwill 3,167 --
Total assets $143,483 $125,072
Liabilities and Stockholders' Equity
Accrued payroll expenses $ 7,313 $ 7,940
Accounts payable and accrued other expenses 4,820 4,900
Deferred revenue 9,033 6,176
Current portion of capital lease
obligations -- 81
Total current liabilities 21,166 19,097
Commitments and contingencies
Deferred income taxes 1,000 1,000
Other long-term liabilities 202 17
Total liabilities 22,368 20,114
Preferred stock, $.01 par value,
1,000,000 shares authorized; no
shares issued and outstanding -- --
Common stock, $.01 par value,
45,000,000 shares authorized;
34,135,434 shares and 32,754,648
shares issued and outstanding in
2002 and 2001, respectively 341 328
Additional paid-in capital 108,407 101,318
Stock warrants 3,271 2,897
Retained earnings 8,798 757
Accumulated other comprehensive
income (loss) 298 (342)
Total stockholders' equity 121,115 104,958
Total liabilities and
stockholders' equity $143,483 $125,072
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
Software license $19,105 $ 8,653 $35,371 $19,534
Services 7,562 14,862 15,507 27,585
Total revenue 26,667 23,515 50,878 47,119
Cost of revenue:
Cost of software license 673 1,231 1,316 1,878
Cost of services 7,601 9,900 14,893 20,144
Total cost of revenue 8,274 11,131 16,209 22,022
Gross Profit 18,393 12,384 34,669 25,097
Research and development 5,604 4,995 11,354 9,986
Selling and marketing 5,979 4,231 11,708 9,140
General and administrative 3,103 2,106 5,512 5,096
Total operating expenses 14,686 11,332 28,574 24,222
Income from operations 3,707 1,052 6,095 875
interest income 1,258 1,450 2,516 2,900
Other interest income, net 180 234 323 448
Other income (expense), net (292) 141 (443) (2)
Income before provision for
income taxes 4,853 2,877 8,491 4,221
Provision for income taxes 250 225 450 475
Net income $ 4,603 $ 2,652 $ 8,041 $ 3,746
Earnings per share:
Basic $ 0.14 $ 0.08 $ 0.24 $ 0.11
Diluted $ 0.13 $ 0.08 $ 0.22 $ 0.11
Weighted average number of
common and common
Basic 33,738 32,655 33,442 32,625
Diluted 36,819 33,379 35,900 33,371
Condensed Consolidated Statements of Cash Flows
Six Months Ended
Cash Flows from Operating Activities:
Net income $ 8,041 $ 3,746
Adjustments to reconcile net
income to net cash provided by
Depreciation and amortization 2,504 3,539
Changes in operating assets and
Trade and installment accounts
receivable (1,208) (3,575)
Prepaid expenses and other
current assets 1,650 337
Accounts payable and accrued
expenses (946) 1,531
Deferred revenue 2,798 1,889
Net cash provided by
operating activities 12,839 7,467
Cash Flows from Investing Activities:
Acquisition of 1mind (573) --
Purchase of equipment and improvements (291) (252)
Other long term assets and liabilities (3) 173
Net cash used in investing
activities (867) (79)
Cash Flows from Financing Activities:
Payments of capital lease obligations (81) (159)
Proceeds from sale of stock under
employee stock purchase plan 177 164
Exercise of stock options 3,631 49
Net cash provided by financing
activities 3,727 54
Effect of exchange rate changes on cash and
cash equivalents 304 (192)
Net INCREASE IN cash and cash
equivalents 16,003 7,250
Cash and cash equivalents, beginning of period 33,017 17,339
Cash and cash equivalents, end of period $49,020 $24,589CONTACT: Pegasystems Inc. Chris Sullivan Chief Financial Officer (617) 374-9600, ext. 6020 [email protected] or Pegasystems Inc. Leah Goldman Investor Relations Manager (617) 374-9600, ext. 6154 [email protected]
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 www.pega.com.
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.
Lisa Pintchman Rogers
VP, Corporate Communications
Director, Corporate Communications
Sr. Manager, Public Relations
Director, Corporate Communications
+44 (0) 118 9651 660
PR & Communications Manager
+44 (0) 118 9398 584
One Rogers St.
Cambridge, MA 02142
Phone +1 617-374-9600
Fax +1 617-374-9620