Pegasystems Reports Revenue Growth and Earnings for Fourth Quarter and Full Year 2001; Financial Turnaround Evident for Fourth Consecutive Quarter
CAMBRIDGE, Mass., Feb. 19, 2002 — Pegasystems Inc. (NASDAQ: PEGA) today announces its fourth-quarter and full-year 2001 earnings results, reporting record revenues of $92.3 million for 2001, an increase of 14% from 2000. The Company achieved earnings per share of $0.37 for the full year 2001, up from $(0.71) in 2000.
Full Year Financial Performance (In millions, except per share data and percentages) 2001 2000 Total Revenue $92.3 $80.8 License Revenue $44.1 $33.8 % of Total Revenue 48% 42% Services Revenue $48.2 $47.0 % of Total Revenue 52% 58% Net Income (Loss) $12.5 $(20.9) Diluted Net Income (Loss) Per Share $0.37 $(0.71)
Total revenues were $23.5 million for the fourth quarter ended December 31, 2001, an increase of 25% from $18.9 million recorded for the same period one year ago. License revenues totaled $13.9 million in the recent quarter, a year-over-year increase of 148%. Services revenues for the quarter were $9.6 million, down from $13.3 million in the fourth quarter of 2000. Pegasystems net income for the fourth quarter of 2001 is $4.9 million, or $0.15 per share, versus a net loss of $(5.5) million, or a loss of $(0.18) per share for the same period in 2000.
"We are proud to report strong fourth-quarter results that continue our journey towards competitive financial results," said Rick Jones, president and COO, Pegasystems. "We made customer satisfaction a priority and our management and delivery teams remained dedicated to operational efficiency and personal accountability. This translated into record results for our shareholders, customers, and employees."
Added Jones, "Throughout 2001, Pegasystems remained focused and effectively executed against its business plan. We expanded important partnerships with Accenture and Sun Microsystems. We added prominent customers, including HealthNow New York, Société Générale, Rabobank, and Fin-Force. We responded to the demand for industry-specific applications by offering new tools and products for private banking, check research and adjustments, and healthcare. Additionally, we announced our emerging technology, PegaRULES and PegaRULES Process Commander. We are pleased with the positive results we achieved this year and believe they provide the foundation for success in 2002."
Net increase in cash, primarily from operations, was $6.8 million for the quarter. Cash flow for the year ending December 31, 2001 was $15.7 million.
"This year showed an accelerating awareness of how business management is a critical component of CRM," said Alan Trefler, founder and CEO, Pegasystems. "The need for a rules engine to unify, drive, and manage business process is gaining traction. This is particularly true in the CRM arena, where many companies have struggled to achieve a return on their CRM investment. Such companies are starting to realize that a business-rules architecture can help to optimize their CRM investments and help to enable tangible improvements in cost, consistency, and responsiveness."
Added Trefler, "Our software is an attractive investment even in difficult times because of its demonstrated effectiveness in rapidly streamlining back-office operations, and its sophisticated integration capabilities that help to leverage legacy systems. In 2002, we believe we are further advancing our value proposition with the commercialization of our patented PegaRULES technology and are encouraged by the industry acceptance that our PegaRULES architecture has already started to receive."
"We are happy with the financial turnaround evident in 2001 and we remain optimistic for revenue growth in 2002," indicated Chris Sullivan, CFO and treasurer, Pegasystems. "Nonetheless, we acknowledge the effect of the recent industry-wide slow down in IT spending. Despite a growing sales pipeline, the number of new license contracts signed fell in the latter part of 2001. This resulted in a reduction in service revenues from $12.5 million in the third quarter of 2001 to $9.6 million in the fourth quarter of 2001 and may impact Pegasystems' overall revenue prospects in the first half of 2002. We have developed a plan for growth in 2002 and we are adding sales resources to drive that growth. However, we will continue to manage expenses in line with revenue growth according to the dictates of the economic climate."
Fourth-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 Wednesday, February 20, 2002. Dial-in information is as follows: 888-747-3510 (local), 703-871-3085 (international). A digital replay of the teleconference will be available at 888-266-2081 (local), 703-925-2533 (international), with a passcode of 5830042.
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 impact of pending regulatory proceedings, performance of the Company's products, 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, 2001 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.
NOTE: Pegasystems is a registered trademark of Pegasystems Inc. Other product and company names may be trademarks of their respective owners.
PEGASYSTEMS INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share-related data) December 31, 2001 2000 ASSETS Current assets: Cash and cash equivalents $33,017 $17,339 Trade accounts receivable, net of allowance for doubtful accounts of $1,034 in 2001 and $1,037 in 2000 9,592 12,373 Short-term license installments, net 31,359 29,756 Prepaid expenses and other current assets 2,286 1,584 Total current assets 76,254 61,052 Long-term license installments, net 43,155 37,401 Equipment and improvements, net 3,053 6,568 Purchased software and other, net 2,610 5,472 Total assets $125,072 $110,493 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses $12,840 $11,917 Deferred revenue 6,176 5,065 Current portion of capital lease obligations 81 312 Total current liabilities 19,097 17,294 Deferred income taxes 1,000 1,000 Capital lease obligations, net of current portion -- 84 Other long-term liabilities 17 52 Total liabilities 20,114 18,430 Commitments and contingencies Stockholders' equity: 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; 32,754,648 shares and 32,570,094 shares issued and outstanding in 2001 and 2000, respectively 328 326 Additional paid-in capital 101,318 100,886 Stock warrant 2,897 2,897 Retained earnings (deficit) 757 (11,777) Accumulated other comprehensive loss (342) (269) Total stockholders' equity 104,958 92,063 Total liabilities and stockholders' equity $125,072 $110,493 PEGASYSTEMS INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) Years Ended December 31, 2001 2000 Revenue: Software license $44,053 $33,806 Services 48,234 47,000 Total revenue 92,287 80,806 Cost of revenue: Cost of software license 3,049 2,383 Cost of services 34,572 39,005 Total cost of revenue 37,621 41,388 Gross profit 54,666 39,418 Operating expenses: Research and development 20,812 15,073 Selling and marketing 17,522 24,142 General and administrative 9,798 10,334 Litigation settlement and restructuring -- 15,821 Total operating expenses 48,132 65,370 Income (loss) from operations 6,534 (25,952) Installment receivable interest income 6,159 4,015 Other interest income, net 826 1,667 Other income (expense), net (286) 15 Income (loss) before provision for income taxes 13,534 (20,556) Provision for income taxes 1,000 300 Net income (loss) $12,534 $(20,856) Earnings (loss) per share, basic $0.38 $(0.71) Earnings (loss) per share, diluted $0.37 $(0.71) Weighted average number of common shares outstanding, basic 32,677 29,206 Weighted average number of common shares outstanding, diluted 33,434 29,206 PEGASYSTEMS INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Years Ended December 31, 2001 2000 Cash flows from operating activities: Net income (loss) $12,534 $(20,856) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Provision for deferred income taxes -- -- Depreciation and amortization 6,228 6,631 Reduction in provision for doubtful accounts -- -- Issuance of compensatory stock option 73 -- Stock issued in settlement of litigation -- 10,361 Loss on disposal of fixed assets 153 -- Change in operating assets and liabilities: Trade accounts receivable and license installments (4,581) (1,358) Prepaid expenses and other current assets (714) (678) Accounts payable and accrued expenses 1,089 (1,601) Deferred revenue 1,111 (3,700) Net cash provided by (used in) operating activities 15,893 (11,201) Cash flows from investing activities: Purchase of equipment and improvements (561) (2,626) Other long term assets and liabilities (354) 475 Net cash used in investing activities (86) (2,980) Cash flows from financing activities: Payments net of proceeds under capital lease obligations (315) (54) Exercise of stock options 60 806 Proceeds from sale of stock under Employee Stock Purchase Plan 301 814 Net cash provided by financing activities 46 1,566 Effect of exchange rate on cash and cash equivalents (175) (50) Net increase (decrease) in cash and cash equivalents 15,678 (12,665) Cash and cash equivalents, beginning of year 17,339 30,004 Cash and cash equivalents, end of year $33,017 $17,339 Supplemental disclosures of cash flow information: Cash paid during the year for: Interest $36 $88 Income taxes $1,191 $834 Non-cash financing activity: Equipment acquired under capital lease $-- $292 Stock issued in settlement of litigation $-- $10,361
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.
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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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