Pegasystems Announces Record Revenues of $162 Million for 2007 and $47 Million for Fourth Quarter

Net income for 2007 was $6.6 million, compared to $1.8 million in 2006. During 2007, the Company generated $25.3 million in cash flow from operations and ended the year with $150.0 million in cash and short-term investments.

The following table shows selected financial information for the fourth quarter and year ended December 31, 2007 and 2006

			Quarter				Full Year
			Q4 2007		Q4 2006		2007		2006
			(In thousands, except per share data and percentages)
License Revenue			$ 14,919		$ 13,082		$ 51,084		$ 35,424
Services Revenue			31,837		22,887		110,865		90,599
Total Revenue			46,756		35,969		161,949		126,023
Gross Profit			27,159		22,540		96,747		72,260
Income (Loss) from Operations			177		671		1,951		(7,114)
Net income			1,418		3,422		6,595		1,842
Earnings per Share, Basic			$ 0.04		$ 0.10		$ 0.18		$ 0.05
Earnings per Share, Diluted			$ 0.04		$ 0.09		$ 0.18		$ 0.05

Business Perspective
“Throughout the year, we won business with important new customers around the world, including one of the largest commercial banks in Europe, large government agencies in the US and UK, several large insurance companies, and major pharmaceutical and life sciences companies. We also saw Business Process Outsourcing begin to develop as an important market for us in the US and Europe, as we won business with companies like Transcom, the leading customer relationship and credit management service provider in Europe. Continuing our strategy of expanding relationships across large existing customers, we won additional business with some of the world’s largest insurers and financial services companies, and continued to drive our success with healthcare insurers and government agencies,” said Alan Trefler, Pegasystems’ chairman and CEO.

“Customers are using our products to grow their businesses, retain customers, improve productivity and reduce expenses. Our business continues to be diversified and well-balanced, with continued success from the domestic and international insurance, banking and financial services, healthcare and government sectors as well as from the CRM market,” Trefler continued. “Industry analysts position us as the leader in the expanding BPM market, and we are the BPM of choice for the top companies in each of our target industries.”

Craig Dynes, Pegasystems’ CFO, added, “This is our second consecutive year of strong revenue growth. Our 2007 revenue of $162 million represents a 29% increase over 2006 revenue, which was a 26% increase over 2005. This dramatic increase reflects strong license revenue, which grew 44% in 2007 and contributed to the $4.8 million increase in net income. Additionally, the value of term license fees which will be recognized as revenue in future periods increased from $14.2 million at the end of 2006 to $71.4 million at the end of 2007. We currently expect revenue in 2008 to surpass $200 million. However, given the instability of the current economic environment, revenue could vary by +/- 10% from our $200 million revenue guidance. We are forecasting net income in 2008 to be approximately $9 to $12 million, and cash flow from operations to be over $25 million.”