Pegasystems Reports Third-Quarter Earnings of $0.13 EPS $25.6 Million in Revenue, $7.8 Million Positive Cash Flow from Operations
CAMBRIDGE, Mass., Oct 22, 2002 — Pegasystems Inc. (Nasdaq: PEGA) today announced its third-quarter 2002 results, reporting revenues of $25.6 million, a year-over-year increase of 7% and 4% below the second quarter of 2002. The Company achieved earnings per diluted share of $0.13 for the quarter ended September 30, 2002, up from $.12 per share for the third quarter of 2001 and even with $0.13 per share in the second quarter of 2002.
Third Quarter Financial Performance Current Qtr. Prior Qtr. Prior Yr. (In millions, except per share data and percentages) Q3 2002 Q2 2002 Q3 2001 Total Revenue $ 25.6 $ 26.7 $ 23.9 License Revenue $ 16.9 $ 19.1 $10.6 % of Total Revenue 66% 72% 44% Services Revenue $8.7 $7.6 $ 13.3 % of Total Revenue 34% 28% 56% Net Income $4.8 $4.6 $3.9 Basic Earnings Per Share $0.14 $0.14 $0.12 Diluted Earnings Per Share $0.13 $0.13 $0.12
Pegasystems posted net profits of $4.8 million and $7.8 million in positive cash flow from operations for the quarter. Total cash and cash equivalents increased to $52.3 million at September 30, 2002, up 7% from June 30, 2002 and nearly double the amount at September 30, 2001, even as the company shifted $4.8M from cash to held-to-maturity investments.
"Despite our solid performance this past quarter, this continues to be a challenging environment. New-customer license signings continue to lag behind plan. Much of our license revenue continues to be attributable to modifications and increases to existing license agreements. Our third quarter benefited from the restructuring of a reseller agreement, accounted for on a subscription basis, to a standard term license from which we recognized $2.4 million of license revenue. We were also pleased to have signed four new clients who, we anticipate, will generate revenue in future quarters as software implementations are completed," said Henry Ancona, president and COO, Pegasystems. "As previously announced, we added Bank of New York to our roster, and we signed our first client for the new PegaRULES Process Commander product during the third quarter. This is a key achievement which validates our appeal to companies outside our traditional markets."
Ancona continued, "As a result of continued softness in our services margin, the challenging bookings environment, and increasing operational efficiencies across the company, we are taking actions to reduce our workforce by approximately 50 people during the fourth quarter."
Chris Sullivan, CFO, commented, "The balance sheet continued to strengthen. We generated operating cash flows of $7.8 million in the third quarter and $20.7 million year-to-date through improved profitability and strong collections performance. It is reasonable to expect that receivables may return to a more normal level in the fourth quarter, resulting in the possibility of a slight decline in cash during the quarter. While we anticipate market conditions to remain challenging, our strong balance sheet should enable us to invest in our business strategy."
He continued, "Recognizing that our quarterly revenues may fluctuate significantly, we expect our full-year 2002 revenues to be between $95–$103 million. We remain focused on keeping costs aligned with revenues and expect that full-year 2002 diluted EPS will be between 36–48 cents. Finally, we are maintaining our guidance for year-end cash balances in the $50 million range."
Alan Trefler, founder and CEO, Pegasystems, said, "By delivering tangible productivity and operational improvements to our clients, we continue to make progress in our goal of helping companies automate complex business processes through the effective application of business rules. As such, we remain positive about our industry, our strategy, and our long-term growth prospects."
Third-Quarter Conference Call
The Company will be hosting a conference call and live Webcast associated with this announcement at 9:00 a.m. ET on Wednesday, October 23, 2002. Dial-in information is as follows: 800-982-3654 (domestic), 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 6228929.
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 September 30, 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.
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
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Director, Corporate Communications
Sr. Manager, Public Relations
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