Pegasystems Reports Third Consecutive Quarter of Increased Earnings and Revenue
CAMBRIDGE, Mass., Oct. 23, 2001 — Pegasystems Inc. (NASDAQ:PEGA) today reported its unaudited financial results for the third quarter of 2001.
Third Quarter Financial Performance (Unaudited) (In millions, except per share data and percentages) Q3 2001 Q3 2000 Total Revenue $ 23.1 $ 22.7 License Revenue $ 10.6 $ 12.9 % of Total Revenue 46% 57% Services Revenue $ 12.5 $ 9.7 % of Total Revenue 54% 43% Net Income (Loss) $ 3.9 $ (0.2) Diluted Net Income (Loss) Per Share $ 0.12 $ (0.01)
"Pegasystems achieved a third consecutive quarter of profits and growth, delivering positive results in a difficult economic environment," said Rick Jones, president and COO, Pegasystems. "We continue to see a solid stream of revenue from our customer base, which consists of blue-chip, industry-leading companies. Our pipeline has remained strong despite the economic uncertainty. Our ability to deliver cost reductions and productivity improvement, through our powerful process automation software, is in tune with the needs of today's market."
"Our customers and prospects embrace the reality that rules engines are not only an integral component to their CRM strategy, but are at the heart of delivering a demonstrative ROI," said Alan Trefler, founder and CEO, Pegasystems. "We signed our fourth BlueCross BlueShield customer. We expanded our partnership with Sun Microsystems. These, and other recent accomplishments, point to Pegasystems gaining recognition and market traction as companies begin to understand the many facets of a CRM solution and the critical role of process automation in making CRM work."
Pegasystems reported sequential and year-to-date growth in revenues, posting a year-to-date increase in revenues of 11% over the first nine months of 2000. The Company posted operating and net profits for the quarter of $2.2 million and $3.9 million, respectively. The Company generated $9 million in cash flow from operations year-to-date. Total cash and cash equivalents increased to $26 million at September 30, 2001.
"We are pleased to deliver another quarter of profitability," said Chris Sullivan, chief financial officer and treasurer, Pegasystems. "The company's continuing attention to performance management and accountability have been key drivers of our success this quarter. We remain focused on expense management and positive cash flow while delivering revenue growth."
Quarterly Highlights and Business Outlook
Focus and growth in strategic markets
In August, Pegasystems went to market with PegaCRM Healthcare, its specialized healthcare CRM solution that automates many types of member inquiries, helps to increase operational efficiencies and aims to reduce operational costs for healthcare organizations. As previously announced, several large healthcare organizations are currently in production and seeing results from this CRM solution.
Additionally, the Company signed its fourth BlueCross BlueShield customer, HealthNOW New York. HealthNOW purchased an enterprise license for claims exception processing, a component of PegaCRM Healthcare. HealthNOW is a leading New York health insurer, which serves over 750,000 members.
Expansion through partnerships
In September, Pegasystems announced an expanded alliance with Sun Microsystems, Inc., that combines its powerful rules-driven process automation solution with Sun's leading Solaris platform. The alliance is designed to help Pegasystems increase its presence in both the healthcare and banking markets — two key vertical markets for the Company. As announced, joint solutions have already been implemented with several customers, including BlueCross BlueShield of Massachusetts and Westdeutsche Landesbank Girozentrale (WestLB).
Strengthening the management team
Pegasystems continues to pursue its goal of establishing PegaRULES as a premier development and management tool among systems integrators and software developers for building rules-based solutions and work management systems. In support of this objective, the Company appointed Paul McNulty as the vice president of PegaRULES to lead the organization in the successful commercialization of this technology.
"Looking ahead to 2002, we are confident that our differentiated solutions, loyal customer base and strong management team position us for long-term success,'' said Sullivan. "While the current economic uncertainty has caused some customers and prospects to delay or defer IT investments, we continue to plan for growth. At the same time, we will continue prudent expense management to deliver profitability. We are committed to generate positive results for our shareholders, customers, and employees."
Third-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, October 24, 2001. 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. Statements made by Rick Jones, Alan Trefler and Chris Sullivan 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 September 30, 2001, filed on October 23, 2001 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.
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) Sept. 30, Dec. 31, 2001 2000 Assets Current assets: Cash and cash equivalents $ 26,251 $ 17,339 Trade and installment accounts receivable, net of allowance for doubtful accounts of $1,035 in 2001 and $1,037 in 2000 45,246 42,129 Prepaid expenses and other current assets 1,933 1,584 Total current assets 73,430 61,052 Long-term license installments, net 40,771 37,401 Equipment and improvements, net 3,717 6,568 Purchased software and other assets, net 3,376 5,472 Total assets $ 121,294 $ 110,493 Liabilities and Stockholders' Equity Current liabilities: Accounts payable and accrued expenses $ 13,783 $ 11,917 Deferred revenue 6,446 5,065 Current portion of capital lease obligations 156 312 Total current liabilities 20,385 17,294 Commitments and contingencies Deferred income taxes 1,000 1,000 Capital lease obligations, net of current portion -- 84 Other long-term liabilities 26 52 Total liabilities 21,411 18,430 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; 32,694,388 shares and 32,570,094 shares issued and outstanding in 2001 and 2000, respectively 327 326 Additional paid-in capital 101,178 100,886 Stock warrant 2,897 2,897 Retained deficit (4,147) (11,777) Accumulated other comprehensive loss (372) (269) Total stockholders' equity 99,883 92,063 Total liabilities and stockholders' equity $ 121,294 $ 110,493 PEGASYSTEMS INC. Condensed Consolidated Statements of Operations (in thousands, except per share amounts) Three Months Ended Nine Months Ended September 30, September 30, 2001 2000 2001 2000 Revenue: Software license $10,629 $12,946 $30,163 $28,210 Services 12,478 9,718 38,617 33,740 Total revenue 23,107 22,664 68,780 61,950 Cost of revenue: Cost of software license 585 585 2,464 1,756 Cost of services 8,513 11,127 27,210 28,064 Total cost of revenue 9,098 11,712 29,674 29,820 Gross Profit 14,009 10,952 39,106 32,130 Operating expenses: Research and development 5,386 3,557 15,372 11,425 Selling and marketing 3,960 5,853 13,100 17,449 General and administrative 2,419 3,039 7,515 8,244 Litigation settlement -- -- -- 14,088 Total operating expenses 11,765 12,449 35,987 51,206 Income (loss) from operations 2,244 (1,497) 3,119 (19,076) Installment receivable interest income 1,450 900 4,350 2,743 Other interest income, net 211 451 658 1,339 Other income (expense), net 229 -- 228 (179) Income (loss) before provision for income taxes 4,134 (146) 8,355 (15,173) Provision for income taxes 250 100 725 150 Net income (loss) $3,884 ($246) $7,630 ($15,323) Earnings (loss) per share: Basic $0.12 ($0.01) $0.23 ($0.53) Diluted $0.12 ($0.01) $0.23 ($0.53) Weighted average number of common and common equivalent shares outstanding: Basic 32,695 29,454 32,649 29,173 Diluted 33,420 29,454 33,398 29,173
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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