Exhibit 99.1

PEGASYSTEMS INC.	101 Main Street,
	Cambridge, MA. 02142-1590. USA.

FOR IMMEDIATE RELEASE

For information, contact:
Chris Sullivan	Beth Lewis
Chief Financial Officer	Investor Relations Manager
Pegasystems Inc.	Pegasystems Inc.
(617) 374-9600, ext. 6020	(617) 374-9600, ext. 6077
chris.sullivan@pega.com	beth.lewis@pega.com

Pegasystems Reports Third Quarter Revenue of $25.1 Million,

Year-to-Date Pre-Tax Profits of $18.9 Million — Up 38% Over Prior Year

Financial Services, Insurance and BPM Platform Success

CAMBRIDGE, Mass., October 23, 2003 – Pegasystems Inc. (NASDAQ: PEGA), a leader in rules-based, smart business process management (BPM) software, today announced its third quarter results, reporting revenue of $25.1 million, pre-tax profits of $5.2 million, earnings per diluted share of $0.10 and positive cash flow from operations of $6.4 million.

Third Quarter Financial Performance

	Quarter				Nine months ended
(In millions, except per share data and percentages)	Q3 2003		Q3 2002		9/30/03		9/30/02
Total Revenue	$	25.1	$	25.6	$	76.2	$	76.4
License Revenue	$	13.6	$	16.9	$	45.7	$	52.3
% of Total Revenue		54%		66%		60%		68%
Services Revenue	$	11.5	$	8.7	$	30.5	$	24.2
% of Total Revenue		46%		34%		40%		32%
Pre-tax Income	$	5.2	$	5.1	$	18.9	$	13.6
Provision for income taxes	$	1.8	$	0.3	$	4.7	$	0.8
Net Income	$	3.4	$	4.8	$	14.2	$	12.9
Basic Earnings Per Share	$	0.10	$	0.14	$	0.41	$	0.38
Diluted Earnings Per Share	$	0.10	$	0.13	$	0.40	$	0.35

Henry Ancona, President and Chief Operating Officer commented, “Our focus on operational execution continues to drive results with year-to-date pre-tax profits up 38% over the first nine months of 2002. Services revenue was up 26% over the first nine months of 2002 on the strength of new license sales and the resulting customer implementations and our services

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margins have improved significantly over last year. Service margins were 33% through the first nine months of 2003 compared to 8% for the same period last year. As noted previously, the rate of services revenue growth and margin improvement may not be sustainable as we continue to build our network of service integration partners.

“During the quarter we saw continued success in the financial services market. A major mutual fund manager elected to deploy the PegaRULES Process Commander platform in its call center and direct processing environments. Working with EDS, we significantly expanded our contract with Inland Revenue to provide enhanced taxpayer services. In the insurance market, alliance partner AgencyPort sold its privately labeled solution, built in part on PegaRULES Process Commander, to two property and casualty customers.

Ancona continued, “In terms of products, we have continued the release of packaged applications built on PegaRULES Process Commander. Most recently we announced PegaPAYMENT Smart Adjust 3.1, a product that can reach beyond our traditional check market and into other payment types. We also announced the release of PegaCARD Smart Dispute, a new product that helps credit and debit card companies streamline the processing of card charge disputes.”

Founder and CEO Alan Trefler commented, “We continue to focus on our brand, our product and our ability to compete. We continue to invest in PegaRULES Process Commander to provide developers and users extended capabilities with even greater ease of use. We look forward to leveraging our successes and helping a widening circle of customers manage complex and changing business processes.”

Chris Sullivan, CFO, commented, “The third quarter was the first quarter in which we recognized license revenue related to completed implementations of our PegaRULES Process Commander sales.

“With the strong results year to date and continued confidence in our ability to generate cash, we are revising our 2003 guidance for annual cash from operations upward to $15 - $19 million.

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We are maintaining our 2003 EPS expectation at $0.45, plus or minus 10%. In addition, as previously indicated, we continue to evaluate the possible reversal of an approximate $1.8 million tax allowance which would have the effect of adding $0.05 to EPS.”

The Company will be hosting a conference call and live Webcast associated with this announcement at 9:00 a.m. ET on Friday, October 24, 2003. Dial-in information is as follows: 800-250-4434 (domestic) or 706-634-0667 (international). A replay of the teleconference will be available at 800-642-1687 (domestic) or 706-645-9291 (international).

If interested in listening 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.

About Pegasystems

Pegasystems Inc. (Nasdaq: PEGA) provides rules-based, smart business process management (BPM) software to large organizations, helping to deliver significant ROI and providing them with the flexibility and agility to respond to changing business needs. With annualized revenues of approximately $100 million and a blue-chip customer base, the company offers applications for the financial services, healthcare, insurance and government markets, as well as a cross-industry BPM application. Pegasystems is headquartered in Cambridge, Mass., and has regional offices in North America, Europe and the Pacific Rim. For more information, visit www.pega.com.

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 including without limitation our financial guidance with respect to 2003 earnings per share and cash from operations. The words “believe,” “expect,” “hope,” “anticipate,” “plan” and similar expressions, among others, 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, 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 most recent report on form 10-Q or 10-K and other recent filings on file with the Securities and Exchange Commission. The forward-looking statements contained in this press release represent the Company’s views as of October 23, 2003. 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

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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 October 23, 2003.

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PEGASYSTEMS INC.

Condensed Consolidated Balance Sheets

(in thousands, except share-related amounts)

	September 30, 2003		December 31, 2002
Assets
Current assets
Cash and cash equivalents	$	73,134	$	57,393
Trade accounts receivable, net of allowance for doubtful accounts of $418 in 2003 and $507 in 2002		7,915		4,897
Short-term license installments		33,544		32,178
Short-term investments		8,841		5,303
Prepaid expenses and other current assets		949		790
Total current assets		124,383		100,561
Long-term license installments, net of unearned interest income		50,927		48,667
Long-term investments		—		750
Equipment and improvements, net of accumulated depreciation and amortization		1,139		1,727
Acquired technology, net of accumulated amortization		817		1,079
Other assets		151		196
Goodwill		2,346		3,246
Total assets	$	179,763	$	156,226
Liabilities and Stockholders’ Equity
Current liabilities
Accrued payroll related expenses	$	7,908	$	7,695
Accounts payable and accrued expenses		9,865		5,220
Deferred revenue		14,248		12,145
Total current liabilities		32,021		25,060
Deferred income taxes		1,100		—
Other long-term liabilities		231		239
Total liabilities		33,352		25,299
Commitments and contingencies
Stockholders’ equity
Preferred stock, $0.01 par value, 1,000,000 shares authorized; no shares issued and outstanding		—		—
Common stock, $0.01 par value, 45,000,000 shares authorized; 34,571,655 shares and 34,291,389 shares issued and outstanding in 2003 and 2002, respectively		346		343
Additional paid-in capital		114,424		113,488
Stock warrants		374		374
Retained earnings		30,218		16,054
Accumulated other comprehensive income:
Net unrealized gain on investments available for sale		12		—
Foreign currency translation adjustments		1,037		668
Total stockholders’ equity		146,411		130,927
Total liabilities and stockholders’ equity	$	179,763	$	156,226

See notes to condensed consolidated financial statements

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PEGASYSTEMS INC.

Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)

	Three Months Ended September 30,					Nine Months Ended September 30,
	2003		2002			2003		2002
Revenue
Software license	$	13,587	$	16,902		$	45,721	$	52,273
Services		11,524		8,663			30,502		24,170
Total revenue		25,111		25,565			76,223		76,443
Cost of revenue
Cost of software license		87		672			262		1,988
Cost of services		7,392		7,352			20,313		22,245
Total cost of revenue		7,479		8,024			20,575		24,233
Gross profit		17,632		17,541			55,648		52,210
Operating expenses
Research and development		5,305		5,349			15,504		16,703
Selling and marketing		5,966		6,296			17,878		18,003
General and administrative		2,766		1,871			8,155		7,383
Total operating expenses		14,037		13,516			41,537		42,089
Income from operations		3,595		4,025			14,111		10,121
Installment receivable interest income		1,350		1,258			3,900		3,774
Other interest income, net		188		218			524		541
Other income (expense), net		106		(373	)		327		(816	)
Income before provision for income taxes		5,239		5,128			18,862		13,620
Provision for income taxes		1,798		302			4,698		752
Net income	$	3,441	$	4,826		$	14,164	$	12,868
Earnings per share
Basic	$	0.10	$	0.14		$	0.41	$	0.38
Diluted	$	0.10	$	0.13		$	0.40	$	0.35
Weighted average number of common and common equivalent shares outstanding
Basic		34,488		34,176			34,393		33,956
Diluted		36,086		36,275			35,551		36,292

See notes to condensed consolidated financial statements.

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PEGASYSTEMS INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

	Nine Months Ended September 30,
	2003			2002
Cash flows from operating activities
Net income	$	14,164		$	12,868
Adjustments to reconcile net income to net cash provided by operating activities:
Stock option income tax benefits		617			—
Deferred income tax		1,100			—
Depreciation and amortization		1,207			3,512
Reduction in provision for doubtful accounts receivable		(90	)		—
Changes in operating assets and liabilities:
Trade and installment accounts receivable		(6,582	)		(306	)
Prepaid expenses and other current assets		(114	)		974
Accounts payable and accrued expenses		4,668			(151	)
Deferred revenue		2,103			3,762
Net cash provided by operating activities		17,073			20,659
Cash flows from investing activities
Purchase of investments		(11,196	)		(4,800	)
Maturing investments		8,421			—
Acquisition of 1mind		—			(573	)
Purchase of equipment and improvements		(346	)		(558	)
Other long-term assets and liabilities		59			(3	)
Net cash used in investing activities		(3,062	)		(5,934	)
Cash flows from financing activities
Payments under capital lease obligation		—			(81	)
Proceeds from sale of stock under Employee Stock Purchase Plan		253			177
Exercise of stock options		969			3,887
Net cash provided by financing activities		1,222			3,983
Effect of exchange rate on cash and cash equivalents		508			538
NET INCREASE IN CASH AND CASH EQUIVALENTS		15,741			19,246
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		57,393			33,017
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	73,134		$	52,263

See notes to condensed consolidated financial statements.

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