Pegasystems Reports Second-Quarter Financial Results; Announces Settlement of Shareholder Lawsuits
CAMBRIDGE, Mass., Aug. 14, 2000 — Pegasystems Inc. (NASDAQ: PEGA), a leading provider of rules-based, Internet-architected electronic Customer Relationship Management (eCRM) software and solutions, today announced its second-quarter 2000 financial results. Total revenues were $21.3 million for the second quarter ended June 30, 2000, compared with $18.0 million recorded in the first quarter of 2000 and $21.3 million recorded in the second quarter of 1999. License revenues totaled $9.2 million in the most recent quarter, compared with $6.1 million in the previous quarter and $9.1 million for the comparable period last year. Services revenues for the quarter were $12.1 million, compared with $11.9 million for the first quarter of 2000 and $12.2 million for the second quarter of 1999. The Company settled its two class action lawsuits. As a result, the Company reported a $13.7 million net loss for the second quarter of 2000, or $0.47 per diluted share. Excluding the one-time charge of $14.1 million associated with the settlement of two shareholder lawsuits, Pegasystems' net income would have been $0.4 million, or $0.01 per diluted share, for the second quarter of 2000. This compares with a net loss of $1.4 million, or $0.05 per diluted share in the first quarter of 2000 and net income of $1.0 million, or $0.03 per diluted share in the second quarter of 1999. The Company ended the quarter with $34.1 million of cash and cash equivalents.
"The second quarter was highlighted by significant strides toward building a more solid management foundation for the company and advancing our position as a leading innovator of customer relationship management technologies," stated Alan Trefler, CEO and Founder, Pegasystems.
Rick Jones, President and COO, Pegasystems, stated, "During the second quarter, Pegasystems continued to focus on building the management infrastructure and functions that will make Pegasystems a stronger company going forward. We reorganized the management of the North American and European sales and service organizations, and brought other strategic departments into alignment with our vertical sales strategy. We are working to increase our direct sales force and anticipate significant growth before year-end. Finally, we put in place a product-management function that will guide our development and sales efforts toward strategic opportunities in our target markets."
Shareholder Lawsuit Settlements
Pegasystems also announced today that it has entered into agreements in principle to resolve the two separate securities class-action lawsuits pending against the Company relating to its past restatements of revenue for certain quarters in 1997 and 1998. In each case, the agreements in principle are subject to court approval and the negotiation and execution of definitive settlement agreements.
In the Chalverus litigation, brought on behalf of purchasers of Pegasystems stock between July 29, 1997 and October 29, 1997, Pegasystems has agreed to pay $5.25 million, in cash or in shares of its common stock, at Pegasystems' option. In the Gelfer litigation, brought on behalf of purchasers of Pegasystems common stock between April 2, 1998 and November 23, 1998, Pegasystems has agreed to pay $4.5 million in cash and, in addition, $7.75 million in cash or in shares of its common stock, at Pegasystems' option. Approximately $4.3 million has been covered by Pegasystems' insurance. The settlement amounts plus associated legal expenses, net of the insurance recovery, were accrued in the second quarter.
"This resolution is an encouraging development for Pegasystems," Trefler said. "While there will be a short-term financial impact as a result of this settlement, we maintain a very strong cash position and can now focus our full attention on the growth of our business."
Other Company achievements during the second quarter include:
- Announcing the availability of the PegaSYSTEM™ V7.1 upgrade for existing customer implementations. This upgraded version benefits Pegasystems' customers by increasing uptime, scalability and capacity on their existing systems with minimal disruption to previously defined workflows.
- Sale to Suncorp Metway Group. Pegasystems announced an agreement with Suncorp, Australia's seventh-largest bank and eighth-largest general insurance company, to deliver a fully integrated loan-origination solution. The agreement will help streamline the process of service and lending transactions by automating many routine tasks and allowing the staff to focus more on the customer's needs.
- Sale and implementation of a Pegasystems' solution at Westdeutsche Landesbank Girozentrale (WestLB), a Germany-based credit institution. WestLB has implemented Pegasystems' solution to automate its payment-investigations processing and resolve payment discrepancies faster.
- Promoting Michael Pyle to Senior Vice President of Product Development; Kenneth Olson to Senior Vice President of Advanced Technology; David Wells to Vice President and Managing Director of North American and European Service; Keith Hawker to Vice President of North American and European Sales; and Daniel Smith to Vice President of Product Management.
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 resolution and impact of pending litigation and 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 report on Form 10-Q for the quarter ended March 31, 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 owners.
PEGASYSTEMS INC. Condensed Consolidated Balance Sheets (in thousands, except share-related amounts) June 30, Dec. 31, 2000 1999 Assets Current assets: Cash and cash equivalents $ 34,065 $ 30,004 Trade and installment accounts receivable, net of allowance for doubtful accounts of $1,054 in 2000 and $1,026 in 1999 31,449 40,716 Prepaid expenses and other current assets 1,884 1,676 Total current assets 67,398 72,396 Long-term license installments 41,768 36,744 Equipment and improvements, net 7,080 8,335 Purchased software and other assets, net 6,273 7,516 Total assets $ 122,519 $ 124,991 Liabilities and Stockholders' Equity Current liabilities: Accounts payable and accrued expenses $ 12,921 $ 13,643 Accrued litigation settlement 17,700 -- Deferred revenue 3,448 8,765 Current portion of capital lease obligations 207 198 Total current liabilities 34,276 22,606 Commitments and contingencies Deferred income taxes 1,000 1,000 Capital lease obligations, net of current portion 147 253 Other long-term liabilities 69 87 Total liabilities 35,492 23,946 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; 29,252,677 shares and 28,995,821 shares issued and outstanding in 2000 and 1999, respectively 293 290 Additional paid-in capital 90,063 88,941 Deferred compensation (9) (18) Stock warrant 2,897 2,897 (Accumulated deficit) retained earnings (5,997) 9,079 Other comprehensive income (220) (144) Total stockholders' equity 87,027 101,045 Total liabilities and stockholders' equity $ 122,519 $ 124,991 PEGASYSTEMS INC. Condensed Consolidated Statements of Operations (in thousands, except per share amounts) Three Months Ended Six Months Ended June 30, June 30, 2000 1999 2000 1999 Revenue: Software license $ 9,168 $ 9,125 $ 15,264 $ 15,145 Services 12,112 12,222 24,022 21,267 Total revenue 21,280 21,347 39,286 36,412 Cost of revenue: Cost of software license 586 586 1,171 1,171 Cost of services 8,356 7,842 16,937 16,640 Total cost of revenue 8,942 8,428 18,108 17,811 Gross profit 12,338 12,919 21,178 18,601 Operating expenses: Research and development 3,933 5,026 7,868 10,230 Selling and marketing 6,559 5,395 11,596 10,919 General and administrative 2,608 2,696 5,205 5,264 Litigation Settlement 14,088 -- 14,088 -- Total operating expenses 27,188 13,117 38,757 26,413 Loss from operations (14,850) (198) (17,579) (7,812) Installment receivable interest income 900 837 1,843 1,665 Other interest income, net 485 162 888 327 Other (expense) income, net (206) 224 (178) 135 (Loss) income before provision for Income taxes (13,671) 1,025 (15,026) (5,685) Provision for income taxes 28 -- 50 -- Net (loss) income ($13,699) $ 1,025 ($15,076) ($ 5,685) (Loss) earnings per share: Basic ($ 0.47) $ 0.04 ($ 0.52) ($ 0.20) Diluted ($ 0.47) $ 0.03 ($ 0.52) ($ 0.20) Weighted average number of common and common equivalent shares outstanding: Basic 29,152 28,752 29,144 28,732 Diluted 29,152 30,291 29,144 28,732
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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