SOURCE: Pegasystems Inc.

Pegasystems Inc.

February 22, 2010 16:35 ET

Pegasystems Announces Tenth Consecutive Quarterly Record Revenue of $72.9 Million

Annual revenue increases to $264 million with license revenue growth of 51%; 2010 revenue guidance increased to $315 million

CAMBRIDGE, MA--(Marketwire - February 22, 2010) - Pegasystems Inc. (NASDAQ: PEGA), the leader in Business Process Management (BPM) software solutions, today announced financial results for the year and fourth quarter ended December 31, 2009. Revenue for 2009 increased 25% to $264 million compared to 2008. Net income for 2009 nearly tripled and increased to $32.2 million.

The Company generated $49.6 million in cash from operations and had $202.7 million in cash, cash equivalents, and marketable securities as of December 31, 2009.

The following table presents selected financial information for the quarters and years ended December 31, 2009 and 2008:

                                    Three Months Ended      Year Ended
                                       December 31,        December 31,
                                      2009      2008      2009      2008
                                    --------- --------- --------- ---------
                                   (In thousands, except per share amounts)
Software license                    $  33,889 $  25,358 $ 115,934 $  76,572
Maintenance                            13,491    11,088    50,099    40,115
Professional services                  25,567    22,906    97,980    94,960
                                    --------- --------- --------- ---------
Total revenue                       $  72,947 $  59,352 $ 264,013 $ 211,647
Gross profit                        $  48,193 $  38,476 $ 173,076 $ 129,890
Income from operations              $  10,189 $   6,288 $  41,819 $  14,479
Net income                          $   6,328 $   2,830 $  32,212 $  10,977
                                    ========= ========= ========= =========
Earnings per share, basic           $    0.17 $    0.08 $    0.89 $    0.30
                                    ========= ========= ========= =========
Earnings per share, diluted         $    0.16 $    0.08 $    0.85 $    0.29
                                    ========= ========= ========= =========

Business Perspective

"Our business showed continued strength in 2009, highlighted by our second consecutive year of 50% license revenue growth," said Alan Trefler, Chairman and CEO of Pegasystems. "Growth has been driven by the pragmatic benefits that our patented Build for Change® technology delivers in helping our clients increase market share, improve customer experience, and reduce operating costs."

"We have been able to deliver a rapid return on our clients' investments, with many of their Pegasystems projects paying for themselves within a matter of months. Our clients continue to tell us that our software's unique ability to directly capture their business objectives radically improves collaboration between business and IT. This has resulted in exceptional quality and speed to market for their business applications, enabling them to rapidly seize new growth opportunities," concluded Mr. Trefler.

"In addition to record revenues, we had strong license signings in Q4," added Craig Dynes, Pegasystems' CFO. "We now expect 2010 revenue to be approximately $315 million. We will continue to invest in growth and estimate net income in 2010, on a GAAP basis, to be approximately $36.5 million or $1.00 per share. Our after tax charge for stock-based compensation expense is estimated to be approximately $3 million. These estimates assume a stable U.S. dollar."

Messrs. Trefler and Dynes will be hosting a conference call and live Webcast associated with this announcement at 9:00 a.m. ET on February 23, 2010. Dial-in information is as follows: (877) 638-9568 (domestic) or (914) 495-8529 (international).

To listen to the Webcast log onto www.pega.com at least 5 minutes prior to the event's broadcast and click on the Webcast icon in the Investor Relations section. A replay of the call will also be available on www.pega.com in the Investor Relations section Audio Archives link.

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," "forecast," "could" "preliminary" 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 mix of perpetual and term licenses and 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 weak global economy 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, the potential loss of vendor specific objective evidence for our professional services, 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, 2009 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 February 22, 2010. 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 February 22, 2010.

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 Pacific. Visit us at www.pega.com.

All trademarks are the property of their respective owners.

                             Pegasystems Inc.
          Unaudited Condensed Consolidated Statements of Income

                                    Three Months Ended      Year Ended
                                       December 31,        December 31,
                                      2009      2008      2009      2008
                                    --------  --------  --------- --------

                                   (in thousands, except per share amounts)
Revenue:
  Software license                  $ 33,889  $ 25,358  $ 115,934 $ 76,572
  Maintenance                         13,491    11,088     50,099   40,115
  Professional services               25,567    22,906     97,980   94,960
                                    --------  --------  --------- --------
    Total Revenue                     72,947    59,352    264,013  211,647
                                    --------  --------  --------- --------

Cost of revenue:
  Cost of software license                31        31        121       95
  Cost of maintenance                  1,751     1,384      6,203    5,390
  Cost of professional services       22,972    19,461     84,613   76,272
                                    --------  --------  --------- --------
    Total cost of revenue (1)         24,754    20,876     90,937   81,757
                                    --------  --------  --------- --------
Gross Profit                          48,193    38,476    173,076  129,890
                                    --------  --------  --------- --------

Operating expenses:
  Selling and marketing               22,715    18,763     74,378   63,799
  Research and development            10,664     8,640     38,862   31,472
  General and administrative           4,625     4,785     18,017   20,140
                                    --------  --------  --------- --------
    Total operating expenses (1)      38,004    32,188    131,257  115,411
                                    --------  --------  --------- --------

Income from operations                10,189     6,288     41,819   14,479
Interest income, net                     740       925      3,144    5,029
Foreign currency transaction (loss)
 gain                                   (294)   (2,779)     2,083   (4,537)
Installment receivable interest
 income                                  123       349        347      597
Other income (expense), net                5       (34)        22      104
                                    --------  --------  --------- --------
Income before provision for income
 taxes                                10,763     4,749     47,415   15,672
Provision for income taxes             4,435     1,919     15,203    4,695
                                    --------  --------  --------- --------

  Net income                        $  6,328  $  2,830  $  32,212 $ 10,977
                                    ========  ========  ========= ========

Earnings per share
Basic                               $   0.17  $   0.08  $    0.89 $   0.30
                                    ========  ========  ========= ========
Diluted                             $   0.16  $   0.08  $    0.85 $   0.29
                                    ========  ========  ========= ========
Weighted-average number of common
 shares outstanding

Basic                                 36,725    35,985     36,208   36,146
Diluted                               38,584    37,420     38,113   37,605

Cash dividends declared per share   $   0.03  $   0.03  $    0.12 $   0.12
                                    ========  ========  ========= ========

(1) Includes stock-based
    compensation as follows:
Cost of revenue                     $    212  $    292  $   1,096 $    995
Operating expenses                  $    938  $    688  $   3,577 $  2,537





                             Pegasystems Inc.
              Unaudited Condensed Consolidated Balance Sheets

                                                     As of        As of
                                                  December 31, December 31,
                                                      2009         2008
                                                  ------------ ------------
                                                       (in thousands)
Current Assets:
   Cash and cash equivalents                      $     63,857 $     36,087
   Marketable securities                               138,796      131,142
                                                  ------------ ------------
        Total cash, cash equivalents, and
         marketable securities                         202,653      167,229
   Trade accounts receivable, net                       39,396       42,801
   Short-term license installments                       2,829        5,445
   Deferred income taxes                                 2,523        4,351
   Income taxes receivable                               5,046          514
   Other current assets                                  3,794        3,637
                                                  ------------ ------------
        Total current assets                           256,241      223,977

Long-term license installments, net                      2,976        5,413
Property and equipment, net                              8,931        5,723
Long-term deferred income taxes and other assets         8,710        8,117
Intangible assets, net                                     336          479
Goodwill                                                 2,391        2,141
                                                  ------------ ------------
        Total assets                              $    279,585 $    245,850
                                                  ============ ============

Current liabilities:
   Accounts payable                               $      4,791 $      4,726
   Accrued expenses                                      6,748        9,925
   Accrued compensation and related expenses            23,280       18,015
   Deferred revenue                                     32,870       32,231
                                                  ------------ ------------
        Total current liabilities                       67,689       64,897
Income taxes payable                                     4,828        5,665
Other long-term liabilities                              1,849        2,174
                                                  ------------ ------------
        Total liabilities                               74,366       72,736

Stockholders' equity:                                  205,219      173,114
                                                  ------------ ------------
        Total liabilities and stockholders'
         equity                                   $    279,585 $    245,850
                                                  ============ ============




                             Pegasystems Inc.
        Unaudited Condensed Consolidated Statements of Cash Flows

                                                            Year ended
                                                           December 31,
                                                          2009      2008
                                                        --------  --------
                                                          (in thousands)
Operating activities:
    Net income                                          $ 32,212  $ 10,977
    Adjustments to reconcile net income to cash
     provided by operating activities:
         Excess tax benefit from equity awards and
          deferred income taxes                          (13,998)   (7,277)
         Depreciation, amortization, and other non-cash
          items                                            6,824     4,275
         Stock-based compensation expense                  4,673     3,532
         Change in operating assets and liabilities,
          and other, net                                  19,870    26,892
                                                        --------  --------
    Cash provided by operating activities                 49,581    38,399
                                                        --------  --------
    Cash used in investing activities                    (18,163)  (13,764)
                                                        --------  --------
    Cash used in financing activities                     (5,049)  (13,354)
                                                        --------  --------
Effect of exchange rate on cash and cash equivalents       1,401    (1,904)
                                                        --------  --------
Net increase in cash and cash equivalents                 27,770     9,377
Cash and cash equivalents, beginning of period            36,087    26,710
                                                        --------  --------
Cash and cash equivalents, end of period                $ 63,857  $ 36,087
                                                        ========  ========

Contact Information

  • For Information, contact:
    Craig Dynes
    Chief Financial Officer
    617-866-6020
    CDynes@pega.com