8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 8-K

Current Report

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 7, 2008

Pegasystems Inc.

(Exact name of registrant as specified in its charter)

Commission File Number: 1-11859

Massachusetts	04-2787865
(State or other jurisdiction of incorporation)	(IRS Employer Identification No.)

101 Main Street, Cambridge, Massachusetts 02142

(Address of principal executive offices, including zip code)

617-374-9600

(Registrant’s telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. Results of Operations and Financial Condition

On August 7, 2008, Pegasystems Inc. issued a press release announcing its financial results for the second quarter and six months ended June 30, 2008. A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference in its entirety.

The information in this Form 8-K and the Exhibit attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such a filing.

Item 9.01. Financial Statements and Exhibits

(d) Exhibits

Press Release issued by Pegasystems Inc. on August 7, 2008.

Signature(s)

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

		Pegasystems Inc.
Date: August 7, 2008	By:	/s/ Shawn Hoyt
		Shawn Hoyt
		General Counsel and Secretary

Exhibit Index

Exhibit No.	Description
EX-99.1	Press Release issued by Pegasystems Inc. on August 7, 2008.

EX-99.1

EXHIBIT 99.1

For Information, contact:

Craig Dynes

Chief Financial Officer

617-866-6020

CDynes@pega.com

Pegasystems Announces Record Revenue of $51.1 million for Second

Quarter and $99.6 million for First Six Months of 2008

Revenue for First Six Months Increased 36% Compared to 2007

CAMBRIDGE, Mass. – August 7, 2008 – Pegasystems Inc. (NASDAQ: PEGA), the leader in Business Process Management (BPM) software, today announced financial results for the second quarter and six months ended June 30, 2008. Total revenue for the second quarter of 2008 was $51.1 million, an increase of 43%, compared to $35.7 million for the second quarter of 2007. Net income for the second quarter of 2008 was $2.9 million, compared to $0.6 million for the second quarter of 2007. The Company generated $16.5 million and $30.5 million in cash flow from operations in the second quarter and six months ended June 30, 2008, respectively, and ended the quarter with $176.8 million in cash and short-term investments.

The following table presents selected financial information for the second quarter and six months ended June 30, 2008 and 2007:

	Three Months Ended June 30,					Six Months Ended June 30,
	2008		2007			2008		2007
	(In thousands, except per share amounts)
Software license	$	15,819	$	10,344		$	33,304	$	22,428
Maintenance		10,083		7,380			18,982		14,401
Professional services		25,217		17,939			47,311		36,323
Total Revenue	$	51,119	$	35,663		$	99,597	$	73,152
Gross Profit	$	30,346	$	21,343		$	59,272	$	43,268
Income (Loss) from Operations	$	2,584	$	(939	)	$	4,750	$	(1,183	)
Net income	$	2,852	$	647		$	5,796	$	1,667
Earnings per Share, Basic	$	0.08	$	0.02		$	0.16	$	0.05
Earnings per Share, Diluted	$	0.08	$	0.02		$	0.15	$	0.04

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Business Perspective

“The business agility delivered by our unique Build for Change® technology and solution frameworks continues to drive our growth. Customers affirm that Pega technology creates process backbones that span organizational silos, eliminating manual handoffs and automating non-value added work. Results include increased revenue, improved customer experiences, cost-saving automation, reduced operational risk and improved compliance,” said Alan Trefler, Pegasystems’ chairman and CEO.

“Customer wins in the quarter included a large telecommunications company and multiple successes in both the Financial Services and Insurance industries. We had a record 19 systems go live in Q2, powered by our customer enablement philosophy, which teams client business and IT staff with our growing partner ecosystem to deliver iterative benefit and continuous improvement of business operations.”

“Our Q2 announcements included the release of our Internet Application Composer that facilitates multi-channel process automation and injects agile business change into preexisting customer web environments. We also deepened our Insurance Industry offerings with enhanced Customer Process Manager and Claims Servicing Backbone frameworks that improve customer experiences and reduce operational costs. Our products continue to receive strong reviews from industry experts, most recently a key CRM excellence award from Customer Interaction Solutions magazine,” concluded Mr. Trefler.

Craig Dynes, Pegasystems’ CFO, added, “We remain concerned about the uncertainties associated with the current economic times and the impact on corporate buying behaviors. To date, the value proposition of our technology is driving our growth in revenue, gross profit and net income. In addition to achieving a new record in quarterly revenue, we generated $16.5 million in cash flow from operations in the quarter and $30.5 million year-to-date.”

Messrs. Trefler and Dynes will be hosting a conference call and live Webcast associated with this announcement at 9:00 a.m. ET on August 8, 2008. Dial-in information is as follows: (877) 604-9671 (domestic) or (719) 325-4870 (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.

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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 credit market turmoil and of 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 August 7, 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 August 7, 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 at www.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 June 30,					Six Months Ended June 30,
	2008		2007			2008		2007
	(in thousands, except per share amounts)
Revenue:
Software license	$	15,819	$	10,344		$	33,304	$	22,428
Maintenance		10,083		7,380			18,982		14,401
Professional services		25,217		17,939			47,311		36,323
Total Revenue		51,119		35,663			99,597		73,152
Cost of revenue:
Cost of software license		34		—			34		—
Cost of maintenance		1,320		1,152			2,552		2,297
Cost of professional services		19,419		13,168			37,739		27,587
Total cost of revenue (1)		20,773		14,320			40,325		29,884
Gross Profit		30,346		21,343			59,272		43,268
Operating expenses:
Selling and marketing (1)		14,657		11,647			29,338		23,416
Research and development (1)		7,874		6,380			14,896		12,565
General and administrative (1)		5,231		4,255			10,288		8,470
Total operating expenses		27,762		22,282			54,522		44,451
Income (loss) from operations		2,584		(939	)		4,750		(1,183	)
Installment receivable interest income		78		282			153		558
Other interest income, net		1,298		1,639			2,953		3,184
Other income, net		69		98			350		78
Income before provision for income taxes		4,029		1,080			8,206		2,637
Provision for income taxes		1,177		433			2,410		970
Net income	$	2,852	$	647		$	5,796	$	1,667
Earnings per share, basic	$	0.08	$	0.02		$	0.16	$	0.05
Earnings per share, diluted	$	0.08	$	0.02		$	0.15	$	0.04
Weighted-average number of common shares outstanding, basic		36,264		35,670			36,144		35,510
Weighted-average number of common shares outstanding, diluted		37,801		38,017			37,448		37,822
Dividends per share	$	0.03	$	0.03		$	0.06	$	0.06
(1)    Includes stock-based compensation as follows:
Cost of revenue	$	261	$	107		$	465	$	269
Selling and marketing	$	208	$	108		$	368	$	210
Research and development	$	154	$	30		$	239	$	71
General and administrative	$	497	$	55		$	651	$	146

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Pegasystems Inc.

Unaudited Condensed Consolidated Balance Sheets

	As of June 30, 2008		As of December 31, 2007
	(in thousands)
Current Assets:
Cash and cash equivalents	$	29,386	$	26,710
Short-term investments		147,457		123,271
Total cash, cash equivalents and short-term investments		176,843		149,981
Trade accounts receivable, net		31,505		45,922
Short-term license installments		9,762		19,183
Other current assets		8,016		7,240
Total current assets		226,126		222,326
Long-term license installments, net		7,011		8,267
Property and equipment, net		4,143		4,182
Long-term deferred income taxes and other assets		8,260		6,599
Goodwill		2,141		1,933
Total assets	$	247,681	$	243,307
Current liabilities:
Accounts payable	$	1,227	$	5,670
Accrued expenses		9,406		10,405
Accrued compensation and related expenses		10,655		13,526
Deferred revenue		40,262		33,178
Total current liabilities		61,550		62,779
Income taxes payable		5,597		5,185
Other long-term liabilities		2,243		2,399
Total liabilities		69,390		70,363
Stockholders’ equity:		178,291		172,944
Total liabilities and stockholders’ equity	$	247,681	$	243,307

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Pegasystems Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

	Six Months Ended June 30,
	2008			2007
	(in thousands)
Cash flows from operating activities:
Net income	$	5,796		$	1,667
Adjustments to reconcile net income to cash flows provided by operating activities:
Excess tax benefits from stock options and deferred income taxes		(2,561	)		(372	)
Depreciation and amortization, and other non-cash items		1,429			1,192
Stock-based compensation expense		1,723			696
Change in operating assets and liabilities, and other, net		24,080			8,136
Cash flows provided by operating activities		30,467			11,319
Cash flows used in investing activities		(26,881	)		(27,084	)
Cash flows (used in) provided by financing activities		(1,033	)		4,185
Effect of exchange rate on cash and cash equivalents		123			303
Net increase (decrease) in cash and cash equivalents		2,676			(11,277	)
Cash and cash equivalents, beginning of period		26,710			26,008
Cash and cash equivalents, end of period	$	29,386		$	14,731

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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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