Pegasystems Announces 1998 Results CFO Resigns
PR Newswire - April 16, 1999 02:15
CAMBRIDGE, Mass., April 16 /PRNewswire/ -- Pegasystems Inc. (Nasdaq: PEGA), a leading provider of Customer Relationship Management (CRM) solutions, announced its financial results for its fourth fiscal quarter and full year 1998, and that it has filed Form 10-K for fiscal 1998 with the Securities and Exchange Commission.
For the fourth fiscal quarter of 1998, total revenues were $10.4 million, a decrease of 54% from the $22.5 million reported for the fourth fiscal quarter of 1997. License revenues totaled $2.2 million compared with $16.1 million for the prior year quarter, having been negatively impacted by delays in customer acceptance and weakness in demand for the Company's products and services primarily due to uncertainty brought about by the Company's significant delay in filing its third quarter of 1998 Form 10-Q. Service revenues for the quarter totaled $8.2 million, an increase of 28% from the $6.4 million reported for the fourth fiscal quarter of 1997, reflecting the increased service opportunities in the larger installed customer base. For the fourth fiscal quarter of 1998, the Company incurred a net loss of $12.0 million or $.43 per diluted share compared with a net profit of $4.5 million or $.15 per diluted share for the 1997 period.
For the full year 1998, total revenues were $60.4 million compared with $44.4 million for 1997, an increase of 36%. License revenues increased 3%, and service revenues increased 97% over the 1997 period. The net loss for the full year was $13.1 million or $.46 per diluted share compared with a net profit for 1997 of $1.1 million or $.04 per share. The net loss for the full year 1998 is largely a function of revenue weakness during the latter part of fiscal 1998 coupled with significant expansion of the Company's sales, consulting services, and R&D staff. The fourth quarter loss also reflects additional charges relating to professional services and increased reserves.
The Company also announced that Vice President, CFO, and Treasurer, Richard B. Goldman, has decided to leave the Company in the near future. Mr. James O'Halloran, the former Director of Arthur Andersen's Worldwide Enterprise Practice, will lead the Company's Financial and Administration operations while a search ensues for Mr. Goldman's permanent replacement.
Alan Trefler, President and CEO, noted, "We were disappointed with our poor fourth quarter results, which were due, in part, to the distractions surrounding our delays in financial reporting. While we expect this overhang to continue to impact our early 1999 results, we look forward to resuming our growth path later in 1999. We also have taken actions to improve collections and reduce the expense base of the Company, which, we expect, will help to stabilize our cash position. Additionally, we entered fiscal 1999 with $22 million in deferred revenues, a significant portion of which is expected to be recognized as revenues in fiscal 1999, and contributing to a backlog of $35 million. We thank Dick Goldman for his contributions during this challenging period, and look forward to working with Jim O'Halloran to continue our progress."
About Pegasystems
Pegasystems is a leading provider of Customer Relationship Management (CRM) solutions. These solutions allow large organizations to better manage customer interactions, and to automate the business processes within their sales and service delivery operations. Many of the world's largest institutions use Pegasystems' solutions to manage mission-critical customer activities. The Pegasystems solutions support multiple channels of customer contact, helping organizations improve staff productivity, operational efficiency, and customer satisfaction. Pegasystems' solutions are Internet- enabled, and operate in multi-tiered, client/server environments.
Pegasystems' headquarters is located in Cambridge, Massachusetts. The Company has regional offices in North America, Europe, and Australia. Access Pegasystems on the World Wide Web at www.pegasystems.com.
Forward-Looking Statements
Except for the historical information contained in this announcement, the matters discussed in this announcement are "forward-looking statements" (as that term is used in the Private Securities Litigation Reform Act of 1995) that involve risks and uncertainties detailed from time-to-time in Pegasystems' filings with the Securities and Exchange Commission (the "SEC"). Pegasystems draws the reader's attention to the factors described in its report on Form 10-K for the year ending December 31, 1998 under the heading "Certain Statements for Purposes of the 'Safe Harbor' Provisions of the Private Securities Litigation Reform Act of 1995." Any such forward-looking statements speak only as of the date such statements are made, and the Company undertakes no obligation to publicly release the results of any revision to these forward-looking statements.
PEGASYSTEMS INC.
Consolidated Balance Sheets
(In Thousands, Except Share-Related Data)
12/31/98 12/31/97
Assets
Current Assets:
Cash and cash equivalents $ 24,806 $ 52,005
Trade and installment accounts
receivable, net of allowance
for doubtful accounts of
$2,753 in 1998 and $2,200 in 1997 $ 42,316 $ 20,319
Prepaid expenses and other
current assets $ 2,427 $ 1,514
Total current assets $ 69,549 $ 73,838
Long term license installments, net $ 49,000 $ 36,403
Equipment and improvements, net $ 10,044 $ 5,578
Purchased software, net $ 9,505 $ 11,701
Total Assets $ 138,098 $ 127,520
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable and accrued
expenses $ 14,842 $ 5,398
Deferred revenue $ 21,714 $ 1,754
Deferred income taxes -- $ 3,978
Current portion of capital lease
obligations $ 123 --
Total current liabilities $ 36,679 $ 11,130
Deferred income taxes $ 750 $ 3,669
Capital lease obligations, net of
current portion $ 202 --
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; $ 287 $ 285
28,683,100 shares and 28,545,100
shares issued and outstanding
in 1998 and 1997, respectively
Additional paid-in capital $ 87,757 $ 86,841
Deferred compensation $ (36) $ (55)
Stock warrant $ 2,897 $ 2,897
Retained earnings $ 10,037 $ 23,107
Cumulative foreign currency
translation adjustment $ (475) $ (354)
Total Stockholders' equity $ 100,467 $ 112,721
Total Liabilities and
Stockholders' Equity $ 138,098 $ 127,520
PEGASYSTEMS INC.
Consolidated Statements of Income
(in thousands, except per share amounts)
12/31/98
Three months ended Twelve months ended
12/31/98 12/31/97 12/31/98 12/31/97
Revenue
Software license $ 2,185 $ 16,056 $ 29,409 $ 28,657
Services $ 8,198 $ 6,407 $ 30,997 $ 15,704
Total Revenue $ 10,383 $ 22,463 $ 60,406 $ 44,361
Cost of Revenue
Cost of software
license $ 601 $ 150 $ 1,598 $ 256
Cost of services $ 7,454 $ 4,417 $ 23,449 $ 11,782
Total Cost of
Revenue $ 8,055 $ 4,567 $ 25,047 $ 12,038
Gross Profit $ 2,328 $ 17,896 $ 35,359 $ 32,323
Operating Expenses
Research and
development $ 6,524 $ 5,004 $ 23,380 $ 5,104
Selling and
marketing $ 8,389 $ 5,605 $ 25,769 $ 17,483
General and
administrative $ 6,144 $ 1,157 $ 10,459 $ 3,124
Total Operating
Expenses $ 21,057 $ 11,766 $ 59,608 $ 35,711
(Loss) income from
operations $ (18,729) $ 6,130 $ (24,249) $ (3,388)
License interest
income $ 805 $ 518 $ 2,662 $ 1,789
Other interest income $ 114 $ 678 $ 2,059 $ 3,348
Other income $ 47 -- $ 47 --
(Loss) income before
provision for income
taxes $ (17,763) $ 7,326 $ (19,481) $ 1,749
(Benefit) Provision for
income taxes $ (5,758) $ 2,783 $ (6,411) $ 664
Net (loss) income $ (12,005) $ 4,543 $ (13,070) $ 1,085
Earnings (loss)
per share
Basic $ (0.43) $ 0.16 $ (0.46) $ 0.04
Diluted $ (0.43) $ 0.15 $ (0.46) $ 0.04
Weighted average
number of common
shares outstanding
Basic 28,664 28,543 28,604 28,284
Diluted 28,664 30,319 28,604 30,268
SOURCE Pegasystems Inc.
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