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2 © Pegasystems 2006
Certain statements contained in this presentation may be construed as “forward-looking statements”as defined in the Private Securities Litigation Reform Act of 1995. The words “believe,” “expect,”“hope,” “anticipate,” “plan” and similar expressions 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 acceptance and consequently the timing of our license revenue recognition, the level of term software license renewals, our ability to develop new products and evolve existing ones, the impact on our business of the ongoing consolidation in the financial services and healthcare markets, our ability to attract and retain key employees, reliance on certain key third-party relationships, management of the Company’s growth, 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 presentation is contained in the Company’s most recent form 10-K and other recent filings on file with the Securities and Exchange Commission. 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.
Safe Harbor
3 © Pegasystems 2006
About Pegasystems• Software to optimize business processes
• Founded 1983, until 2002 sold:
Purpose-based applications for banks and healthcare, primarily exceptions management and membership
• 2003 introduced PegaRULES Process Commander:
All-purpose business process management (BPM) platform
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PegaRULES Process CommanderStrong Market Acceptance
• PRPC-related revenue as percentage of total
~ 2% 2003
~ 24% 2004
~ 75% 2005
• Recognized leader in smart Business Process Management (BPM)
• Worldwide customer base includes Fortune 500 and other leading corporations
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PegaRULES Process Commander• Pegasystems software unifies business
rules with system processes – SmartBPM™
• Automates all interactions:
human-to-human (ex: CRM; workflow)
human-to-system (ex: account opening; applications)
system-to-system (ex: system integration; EAI)
• Using wizards, forms and GUIs rather than lines of software programming
Build for Change, Without CodeAutomates the Programming
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Familiar Office tools (Visio, Word, Excel) accessed via web browsers
Wizards, forms and GUIs replace paper specs and
requirements
CT
CA
MA
NY
RI
Automatically generates
optimal Java
7 © Pegasystems 2006
Pegasystems
Sybase
OracleFair Isaac
Computer Associates
ILOG
Gensym
IBMMicrosoft
UnisysAMS
Magic
Mindbox HaleySoftLaw
RulesPowerESI
VersataExsys
Elity
YasuResolution EBS
RulesBPMS Gartner Magic Quadrants
Only Pega Drives Processes Via Rules
Forrester WaveTM: Human-Centric BPMS, Q1 ‘06
Pegasystems
Forrester WaveTM: Business Rules Platform for IT, Q1 ‘06
Pegasystems
“A business rule engine will be theheart and soul of Business Process Management
Suites going forward”— Jim Sinur
Gartner
Pegasystems
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Automates All Types of InteractionsJust-When-Needed
Retrieval Best SourceModel & Simulate
OpenDatabase
Productivity &Quality Alerts
Cases & Folders
Skill Based Routing
Priority
TelephonyScan & Fax
Browser
Web Services
TailoredInteractions
ProactiveFollow-up
Guided Processing
Automated Transactions
System-Driven Processing
Pegasystems Customers’ SuccessesGrowth• 25% increase in cross and up-sell• $8M in lost margin recovered• Membership up 48% with same staff• Customer acquisition up 15-30%• Time to market cut 18%
Growth• 25% increase in cross and up-sell• $8M in lost margin recovered• Membership up 48% with same staff• Customer acquisition up 15-30%• Time to market cut 18%
Productivity• 40% increase in productivity• $100M+ in taxes saved in year 1• 80% efficiency improvement• New hire training cut 60% • Claims processing cut 50-70%
Productivity• 40% increase in productivity• $100M+ in taxes saved in year 1• 80% efficiency improvement• New hire training cut 60% • Claims processing cut 50-70%
Compliance• Automate compliance reporting• Avoid material weaknesses• Reduce auditing expense 20 – 25%
Compliance• Automate compliance reporting• Avoid material weaknesses• Reduce auditing expense 20 – 25%
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10 © Pegasystems 2006
Pegasystems Past and PresentLineage
• Bifurcated strategy, apps and BPM platform
• Legacy account coverage
• PEGA only
• All or nothing, RFP sales
• One and done
Today
• BPM platform drives product line, suite of lighter frameworks
• Affinity hires and assignments
• Partner network
• “Imagineering,” quick value initial sale
• Follow-on opportunities
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Pegasystems 2Q 06 Summary ResultsIncome Statement Summary
(In millions, except per share data)
2Q 2006 2Q 2005
Total Revenue $ 29.6 $ 23.8
License Revenue $ 6.9 $ 8.0Services Revenue $ 22.7 $ 15.8
Pre-Tax Income $ 0.2 $ 0.5
• 2Q 2006 $8.8 million license signings to be recorded as future revenue
• 2Q 2006 cash flow from operations $11.8 million
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Pegasystems Q2 2006 ResultsContinued Business Success
• Product upgrade, PRPC 5.1, with user, developer and analyst enhancements
• Gartner MQ leadership recognition
• 536 Pega-certified system architects, up from 144 2Q 2005
• $0.40 cash EPS
Pegasystems 1H 2006 Overview
• More implementations, larger customer base drive service revenue
• ~ $9 million in license signings to be recognized over term of agreement
• Second $10 million buyback authorization as of July 1
• Quarterly cash dividend $0.03 per share as of July 3
• Continued investments to support growth in service and sales
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14 © Pegasystems 2006
Pegasystems Balance Sheet HighlightsAs of June 30, 2006
• $22 million deferred revenue compared to $15 million June 2005
• $126 million cash and investments
• $46 million installment receivables
• No debt
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BPM Today Must:
• Integrate:People and SystemsPolices, Procedures and Data
• Offer: Enterprise-wide interoperability for reuse, best use and competitive advantage
• Provide: Optimal outcomes and operational excellence
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Only Pegasystems • Offers rules-based technology:
integrate business processessupport enterprise-wide interoperabilitydrive optimal results
• Independently recognized BPM technology
• Proven success with Fortune 500 and other leading companies
• Strong cash generation supports growth, innovation and value to shareholders
17 © Pegasystems 2006
Pegasystems Inc.101 Main Street, Cambridge, MA 02142
617-374-9600www.pega.com