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): February 22, 2010

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 February 22, 2010, Pegasystems Inc. issued a press release announcing its financial results for the fourth quarter and year ended December 31, 2009. A copy of such 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

Press Release issued by Pegasystems Inc. on February 22, 2010.

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: February 22, 2010	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 February 22, 2010.

EX-99.1

Exhibit 99.1

For Information, contact:

Craig Dynes

Chief Financial Officer

617-866-6020

CDynes@pega.com

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, Mass. – 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 December 31,				Year Ended 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

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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.

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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,” “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.

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Pegasystems Inc.

Unaudited Condensed Consolidated Statements of Income

	Three Months Ended December 31,						Year Ended 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

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Pegasystems Inc.

Unaudited Condensed Consolidated Balance Sheets

	As of December 31, 2009		As of December 31, 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

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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

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