Exhibit 99.1
For Information, contact:
Craig Dynes
Chief Financial Officer
617-866-6020
CDynes@pega.com
Pegasystems Announces Record Revenue for Third Quarter and First Nine Months
Total Revenue for First Nine Months of 2008 Increased 32% Compared to 2007
CAMBRIDGE, Mass. – November 6, 2008 –Pegasystems Inc. (NASDAQ: PEGA), the leader in Business Process Management (BPM) software, today announced financial results for the third quarter and first nine months of 2008. Total revenue for the third quarter of 2008 increased 25% to $52.7 million, compared to the third quarter of 2007. License revenue for the third quarter of 2008 increased 30% to $17.9 million, compared to the third quarter of 2007. Net income for the third quarter of 2008 was $2.4 million, compared to $3.5 million for the third quarter of 2007.
Total revenue for the first nine months of 2008 increased 32% to $152.3 million, compared to the same period last year. License revenue increased 42% to $51.2 million, compared to the same period last year. Net income for the first nine months of 2008 was $8.1 million, compared to $5.2 million for the same period last year. The Company generated $32.9 million in cash flow from operations in the first nine months of 2008 and ended the third quarter with $171.4 million in cash and short-term investments. The following table presents selected financial information for the third quarter and first nine months of 2008 and 2007:
| | | | | | | | | | | | |
| | | Three Months Ended
September 30, | | Nine Months Ended
September 30, |
| | 2008 | | 2007 | | 2008 | | 2007 |
| | (In thousands, except per share amounts) |
Software License | | $ | 17,910 | | $ | 13,737 | | $ | 51,214 | | $ | 36,165 |
Maintenance | | | 10,045 | | | 7,760 | | | 29,027 | | | 22,161 |
Professional Services | | | 24,743 | | | 20,544 | | | 72,054 | | | 56,867 |
| | | | | | | | | | | | |
Total Revenue | | $ | 52,698 | | $ | 42,041 | | $ | 152,295 | | $ | 115,193 |
Gross Profit | | $ | 32,142 | | $ | 26,320 | | $ | 91,414 | | $ | 69,588 |
Income from Operations | | $ | 3,441 | | $ | 2,957 | | $ | 8,191 | | $ | 1,774 |
Net Income | | $ | 2,351 | | $ | 3,510 | | $ | 8,147 | | $ | 5,177 |
| | | | | | | | | | | | |
Earnings per Share, Basic | | $ | 0.06 | | $ | 0.10 | | $ | 0.23 | | $ | 0.14 |
| | | | | | | | | | | | |
Earnings per Share, Diluted | | $ | 0.06 | | $ | 0.09 | | $ | 0.22 | | $ | 0.14 |
| | | | | | | | | | | | |
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Business Perspective
“I am pleased that in our 25th year, we have set new records for revenue in every quarter. Our continued growth in today’s challenging economic times is simply because our new and existing customers are realizing a revolutionary level of business agility through our Build for Change® technology. This was demonstrated throughout our recent PegaWORLD BPM user conference where, despite economic conditions, attendance was 35% higher than last year’s record registrations. Our customers and partners show that our Build for Change® technology significantly reduces time to market of new products; provides the ability to attack new market segments; and increases customer loyalty while reducing operational costs,” said Alan Trefler, Pegasystems’ Chairman and CEO.
“In the quarter we also announced SmartBPM® Platform as a Service. This is the BPM industry’s first Platform-as-a-service capability and is targeted at large corporate and public sector clients who want the benefits of cloud computing and software as a service without the risks, liabilities and limitations inherent in traditional SaaS offerings,” concluded Mr. Trefler.
Craig Dynes, Pegasystems’ CFO, added, “In spite of the current economy, license signings for the third quarter were the second highest in the Company’s history. With all the economic reports forecasting a recession, we are working hard on our Q4 pipeline to keep the momentum up into next year.”
Messrs. Trefler and Dynes will be hosting a conference call and live Webcast associated with this announcement at 9:00 a.m. ET on November 7, 2008. Dial-in information is as follows: (877) 419-6600 (domestic) or (719) 325-4879 (international).
To listen to theWebcast log ontowww.pega.com at least 5 minutes prior to the event’s broadcast and click on the Webcast icon in theInvestor Relations section. A replay of the call will also be available onwww.pega.com in the Investor Relations sectionAudio Archives link.
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Forward-Looking Statements
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 “anticipate,” “project,” “expect,” “plan,” “intend,” “believe,” “estimate,” “target,” “forecasting,” “could” and similar expressions, among others, identify forward-looking statements, which speak only as of the date the statement was made. 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, without limitation, variation in demand and the difficulty in predicting the completion of product acceptance and other factors affecting the timing of our license revenue recognition, the level of term license renewals, our ability to develop new products and evolve existing ones, the impact on our business of the recent financial crisis in the global capital markets, the negative global economic trends and the ongoing consolidation in the financial services and healthcare markets, our ability to attract and retain key personnel, reliance on key third party relationships and management of the Company’s growth. 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 Annual Report on Form 10-K for the year ended December 31, 2007 and other recent filings with the Securities and Exchange Commission. The forward-looking statements contained in this press release represent the Company’s views as of November 6, 2008. 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. Although subsequent events may cause the Company’s view to change, the Company does not undertake and specifically disclaims any obligation to publicly update or revise these forward-looking statements whether as the result of new information, future events or otherwise. The statements should therefore not be relied upon as representing the Company’s view as of any date subsequent to November 6, 2008.
About Pegasystems
Pegasystems (NASDAQ: PEGA), the leader in Business Process Management, provides software to drive revenue growth, productivity and agility for the world’s most sophisticated organizations. Customers use our award-winning SmartBPM® suite to improve customer service, reach new markets and boost operational effectiveness.
Our patented SmartBPM® technology makes enterprise applications easy to build and change by directly capturing business objectives and eliminating manual programming. SmartBPM® unifies business rules and processes into composite applications that leverage existing systems — empowering businesspeople and IT staff to Build for Change®, deliver value quickly and outperform their competitors.
Pegasystems’ suite is complemented by best-practice frameworks designed for leaders in financial services, insurance, healthcare, government, life sciences, communications, manufacturing and other industries.
Headquartered in Cambridge, MA, Pegasystems has offices in North America, Europe and Asia. Visit us atwww.pega.com.
All trademarks are the property of their respective owners.
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Pegasystems Inc.
Unaudited Condensed Consolidated Statements of Income
| | | | | | | | | | | | | | |
| | | Three Months Ended
September 30, | | Nine Months Ended
September 30, |
| | 2008 | | | 2007 | | 2008 | | | 2007 |
| | (in thousands, except per share amounts) |
Revenue: | | | | | | | | | | | | | | |
Software license | | $ | 17,910 | | | $ | 13,737 | | $ | 51,214 | | | $ | 36,165 |
Maintenance | | | 10,045 | | | | 7,760 | | | 29,027 | | | | 22,161 |
Professional services | | | 24,743 | | | | 20,544 | | | 72,054 | | | | 56,867 |
| | | | | | | | | | | | | | |
Total Revenue | | | 52,698 | | | | 42,041 | | | 152,295 | | | | 115,193 |
| | | | | | | | | | | | | | |
Cost of revenue: | | | | | | | | | | | | | | |
Cost of software license | | | 30 | | | | — | | | 64 | | | | — |
Cost of maintenance | | | 1,454 | | | | 1,204 | | | 4,006 | | | | 3,501 |
Cost of professional services | | | 19,072 | | | | 14,517 | | | 56,811 | | | | 42,104 |
| | | | | | | | | | | | | | |
Total cost of revenue (1) | | | 20,556 | | | | 15,721 | | | 60,881 | | | | 45,605 |
| | | | | | | | | | | | | | |
Gross Profit | | | 32,142 | | | | 26,320 | | | 91,414 | | | | 69,588 |
| | | | | | | | | | | | | | |
Operating expenses: | | | | | | | | | | | | | | |
Selling and marketing (1) | | | 15,698 | | | | 12,800 | | | 45,036 | | | | 36,216 |
Research and development (1) | | | 7,936 | | | | 6,768 | | | 22,832 | | | | 19,333 |
General and administrative (1) | | | 5,067 | | | | 3,795 | | | 15,355 | | | | 12,265 |
| | | | | | | | | | | | | | |
Total operating expenses | | | 28,701 | | | | 23,363 | | | 83,223 | | | | 67,814 |
| | | | | | | | | | | | | | |
Income from operations | | | 3,441 | | | | 2,957 | | | 8,191 | | | | 1,774 |
Installment receivable interest income | | | 95 | | | | 291 | | | 248 | | | | 849 |
Other interest income, net | | | 1,151 | | | | 1,749 | | | 4,104 | | | | 4,933 |
Other income (expense), net | | | (1,970 | ) | | | 157 | | | (1,620 | ) | | | 235 |
| | | | | | | | | | | | | | |
Income before provision for income taxes | | | 2,717 | | | | 5,154 | | | 10,923 | | | | 7,791 |
Provision for income taxes | | | 366 | | | | 1,644 | | | 2,776 | | | | 2,614 |
| | | | | | | | | | | | | | |
Net income | | $ | 2,351 | | | $ | 3,510 | | $ | 8,147 | | | $ | 5,177 |
| | | | | | | | | | | | | | |
Earnings per share, basic | | $ | 0.06 | | | $ | 0.10 | | $ | 0.23 | | | $ | 0.14 |
| | | | | | | | | | | | | | |
Earnings per share, diluted | | $ | 0.06 | | | $ | 0.09 | | $ | 0.22 | | | $ | 0.14 |
| | | | | | | | | | | | | | |
Weighted-average number of common shares outstanding, basic | | | 36,419 | | | | 36,225 | | | 36,201 | | | | 35,751 |
Weighted-average number of common shares outstanding, diluted | | | 38,212 | | | | 38,542 | | | 37,668 | | | | 38,081 |
Dividends per share | | $ | 0.03 | | | $ | 0.03 | | $ | 0.09 | | | $ | 0.09 |
| | | | | | | | | | | | | | |
(1) Includes stock-based compensation as follows: | | | | | | | | | | | | | | |
Cost of revenue | | $ | 238 | | | $ | 86 | | $ | 703 | | | $ | 355 |
Selling and marketing | | $ | 214 | | | $ | 99 | | $ | 582 | | | $ | 169 |
Research and development | | $ | 130 | | | $ | 24 | | $ | 369 | | | $ | 170 |
General and administrative | | $ | 247 | | | $ | 346 | | $ | 898 | | | $ | 557 |
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Pegasystems Inc.
Unaudited Condensed Consolidated Balance Sheets
| | | | | | |
| | | As of September 30,
2008 | | As of December 31,
2007 |
| | (in thousands) |
Current Assets: | | | | | | |
Cash and cash equivalents | | $ | 41,177 | | $ | 26,710 |
Short-term investments | | | 130,244 | | | 123,271 |
| | | | | | |
Total cash, cash equivalents and short-term investments | | | 171,421 | | | 149,981 |
Trade accounts receivable, net | | | 33,276 | | | 45,922 |
Short-term license installments | | | 6,065 | | | 19,183 |
Other current assets | | | 8,580 | | | 7,240 |
| | | | | | |
Total current assets | | | 219,342 | | | 222,326 |
| | |
Long-term license installments, net | | | 5,732 | | | 8,267 |
Property and equipment, net | | | 5,152 | | | 4,182 |
Long-term deferred income taxes and other assets | | | 8,384 | | | 6,599 |
Goodwill | | | 2,141 | | | 1,933 |
| | | | | | |
Total assets | | $ | 240,751 | | $ | 243,307 |
| | | | | | |
Current liabilities: | | | | | | |
Accounts payable | | $ | 4,849 | | $ | 5,670 |
Accrued expenses | | | 6,949 | | | 10,405 |
Accrued compensation and related expenses | | | 16,417 | | | 13,526 |
Deferred revenue | | | 28,826 | | | 33,178 |
| | | | | | |
Total current liabilities | | | 57,041 | | | 62,779 |
Income taxes payable | | | 5,337 | | | 5,185 |
Other long-term liabilities | | | 2,271 | | | 2,399 |
| | | | | | |
Total liabilities | | | 64,649 | | | 70,363 |
| | |
Stockholders’ equity: | | | 176,102 | | | 172,944 |
| | | | | | |
Total liabilities and stockholders’ equity | | $ | 240,751 | | $ | 243,307 |
| | | | | | |
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Pegasystems Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
| | | | | | | | |
| | | Nine Months Ended
September 30, | |
| | 2008 | | | 2007 | |
| | (in thousands) | |
Cash flows from operating activities: | | | | | | | | |
Net income | | $ | 8,147 | | | $ | 5,177 | |
Adjustments to reconcile net income to cash flows provided by operating activities: | | | | | | | | |
Excess tax benefits from stock options and deferred income taxes | | | (4,046 | ) | | | (357 | ) |
Depreciation and amortization, and other non-cash items | | | 2,668 | | | | 1,886 | |
Stock-based compensation expense | | | 2,552 | | | | 1,251 | |
Change in operating assets and liabilities, and other, net | | | 23,550 | | | | 10,185 | |
| | | | | | | | |
Cash flows provided by operating activities | | | 32,871 | | | | 18,142 | |
| | | | | | | | |
Cash flows used in investing activities | | | (12,318 | ) | | | (24,543 | ) |
| | | | | | | | |
Cash flows (used in) provided by financing activities | | | (5,526 | ) | | | 1,660 | |
| | | | | | | | |
Effect of exchange rate on cash and cash equivalents | | | (560 | ) | | | 693 | |
| | | | | | | | |
Net increase (decrease) in cash and cash equivalents | | | 14,467 | | | | (4,048 | ) |
Cash and cash equivalents, beginning of period | | | 26,710 | | | | 26,008 | |
| | | | | | | | |
Cash and cash equivalents, end of period | | $ | 41,177 | | | $ | 21,960 | |
| | | | | | | | |
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Pegasystems Inc.
2007 - Expanded captions (unaudited)
(in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Q1 | | Q2 | | Q3 | | Q4 | | YTD |
| | As
Reported | | Expanded | | As
Reported | | Expanded | | As
Reported | | Expanded | | As
Reported | | Expanded | | As
Reported | | Expanded |
Revenue: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Software license | | $ | 12,084 | | $ | 12,084 | | $ | 10,344 | | $ | 10,344 | | $ | 13,737 | | $ | 13,737 | | $ | 14,919 | | $ | 14,919 | | $ | 51,084 | | $ | 51,084 |
Maintenance | | | | | | 7,021 | | | | | | 7,380 | | | | | | 7,760 | | | | | | 9,035 | | | | | | 31,196 |
Professional services | | | | | | 18,384 | | | | | | 17,939 | | | | | | 20,544 | | | | | | 22,802 | | | | | | 79,669 |
Services | | | 25,405 | | | | | | 25,319 | | | | | | 28,304 | | | | | | 31,837 | | | | | | 110,865 | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Revenue | | | 37,489 | | | 37,489 | | | 35,663 | | | 35,663 | | | 42,041 | | | 42,041 | | | 46,756 | | | 46,756 | | | 161,949 | | | 161,949 |
| | | | | | | | | | |
Cost of revenue: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cost of software license | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — |
Cost of maintenance | | | — | | | 1,145 | | | — | | | 1,152 | | | — | | | 1,204 | | | — | | | 1,290 | | | — | | | 4,791 |
Cost of professional services | | | — | | | 14,419 | | | — | | | 13,168 | | | — | | | 14,517 | | | — | | | 18,307 | | | — | | | 60,411 |
Cost of services | | | 15,564 | | | — | | | 14,320 | | | — | | | 15,721 | | | — | | | 19,597 | | | — | | | 65,202 | | | — |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Cost of revenue | | | 15,564 | | | 15,564 | | | 14,320 | | | 14,320 | | | 15,721 | | | 15,721 | | | 19,597 | | | 19,597 | | | 65,202 | | | 65,202 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Gross Profit | | $ | 21,925 | | $ | 21,925 | | $ | 21,343 | | $ | 21,343 | | $ | 26,320 | | $ | 26,320 | | $ | 27,159 | | $ | 27,159 | | $ | 96,747 | | $ | 96,747 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
As of January 1, 2008, the Company expanded the presentation of the services revenue and the associated cost of services lines in the condensed consolidated statements of income to separately disclose the amounts related to maintenance and professional services. Maintenance revenue is a significant portion of the Company’s total revenue and is directly attributable to its installed base of software licenses. Professional services revenue includes revenue from consulting services and training. The Company believes separate disclosure of the maintenance revenue and the associated direct costs is meaningful to investors and provides an important measure of the Company’s business performance. Previously reported amounts have been expanded to conform to the current year presentation and have no impact on previously reported total revenue, total cost of revenue or net income.
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