Pegasystems Announces Record Revenue for Third Quarter and First Nine Months

Pegasystems Inc. (NASDAQ: PEGA), the leader in Business Process Management (BPM) software, today announced financial results for the third quarter and first nine months of 2008. Total revenue for the third quarter of 2008 increased 25% to $52.7 million, compared to the third quarter of 2007. License revenue for the third quarter of 2008 increased 30% to $17.9 million, compared to the third quarter of 2007. Net income for the third quarter of 2008 was $2.4 million, compared to $3.5 million for the third quarter of 2007.

Total revenue for the first nine months of 2008 increased 32% to $152.3 million, compared to the same period last year. License revenue increased 42% to $51.2 million, compared to the same period last year. Net income for the first nine months of 2008 was $8.1 million, compared to $5.2 million for the same period last year. The Company generated $32.9 million in cash flow from operations in the first nine months of 2008 and ended the third quarter with $171.4 million in cash and short-term investments. The following table presents selected financial information for the third quarter and first nine months of 2008 and 2007:

Business Perspective

"I am pleased that in our 25^th year, we have set new records for revenue in every quarter. Our continued growth in today’s challenging economic times is simply because our new and existing customers are realizing a revolutionary level of business agility through our Build for Change^® technology. This was demonstrated throughout our recent PegaWORLD BPM user conference where, despite economic conditions, attendance was 35% higher than last year’s record registrations. Our customers and partners show that our Build for Change^® technology significantly reduces time to market of new products; provides the ability to attack new market segments; and increases customer loyalty while reducing operational costs,” said Alan Trefler, Pegasystems’ Chairman and CEO.

"In the quarter we also announced SmartBPM^® Platform as a Service. This is the BPM industry’s first Platform-as-a-service capability and is targeted at large corporate and public sector clients who want the benefits of cloud computing and software as a service without the risks, liabilities and limitations inherent in traditional SaaS offerings,” concluded Mr. Trefler.

Craig Dynes, Pegasystems’ CFO, added, "In spite of the current economy, license signings for the third quarter were the second highest in the Company’s history. With all the economic reports forecasting a recession, we are working hard on our Q4 pipeline to keep the momentum up into next year.”

Messrs. Trefler and Dynes will be hosting a conference call and live Webcast associated with this announcement at 9:00 a.m. ET on November 7, 2008. Dial-in information is as follows: (877) 419-6600 (domestic) or (719) 325-4879 (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.

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 financial crisis in the global capital markets, the negative global economic trends 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 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 November 6, 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 November 6, 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.

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