Prospectus Summary
The following summary is qualified in its entirety by the more detailed information and the Consolidated Financial Statements and Notes thereto appearing elsewhere in this Prospectus. Investors should carefully consider the information set forth under the heading "Risk Factors."
The Company
Pegasystems develops customer service management software to automate customer interactions across transaction-intensive enterprises. Many of the world's largest banks, mutual funds and credit card organizations use the Company's solutions to integrate, automate, standardize and manage a broad array of mission-critical customer service activities, including account set-up, record retrieval, correspondence, disputes, investigations and adjustments. The Company's systems can be used by thousands of concurrent users to manage customer interactions and to generate billions of dollars a day in resulting transactions. Work processes initiated by the Company's systems are driven by a highly adaptable "rule base" defined by the user-organization for its specific needs. The rule base facilitates a high level of consistency in customer interactions, yet drives different processes depending on the customer profile or the nature of the request. The Company's open, multi-tier, client/server systems operate on a broad variety of platforms, including UNIX, Windows/NT and IBM/MVS. The Company offers consulting, training and support services to facilitate the use of its solutions.
Intensifying competition is forcing businesses to reduce costs while focusing on customer service management as an important means of differentiation. Due to the volume and precise nature of their transactions, it is especially critical for financial services organizations to implement cost-effective systems to manage customer interactions accurately and efficiently. The Company's solutions provide a service backbone that drives intelligent processing and seamlessly integrates an organization's geographically dispersed and product specific service operations and isolated computer systems. By bridging these "islands of automation" within large organizations, the Company's solutions increase the efficiency of service representatives and enable organizations to address multiple customer needs during a single contact.
The Company's objective is to become the leading provider of mission-critical client/server customer service management software to organizations performing a high volume of complex interactions with demanding customers. To achieve this objective, the Company is pursuing a number of strategies, including expanding its marketing to additional business units within its existing customers; leveraging its relationships and expertise with large financial services organizations to penetrate the medium-sized financial services market; targeting markets outside of financial services which have similar customer service management needs; and developing standard product templates to facilitate the more rapid implementation of its solutions.
The Company markets its software and services primarily through a direct sales force which consisted of six people as of April 30, 1996. The Company intends to increase substantially the size of its sales force, which will be necessary if the Company is to achieve significant revenue growth in the future.
The Company was incorporated in the Commonwealth of Massachusetts in April 1983 and has been profitable in each quarter since the first quarter of 1985.
The Company's principal executive offices are located at 101 Main Street, Cambridge, Massachusetts 02142, and its telephone number is (617) 374-9600.
Pegasystems, PegaCARD, PegaCLAIMS, PegaSHARES, PegaTRACE, PegaINDEX, PegaPRISM, PegaREELAY, PegaSEARCH, PegaVIEW-ACE, PegaSTAR, Integrated Service Backbone, Service Excellence Through Automation, and Virtual Archive are trademarks of the Company. This Prospectus also includes trademarks of companies other than the Company.
The Offering
Common Stock offered by the Company 2,700,000 shares
Common Stock offered by the Selling Stockholders 700,000 shares
Common Stock to be outstanding after the offering 26,290,800 shares (1)
Use of proceeds by the Company For general corporate purposes, including working
capital, product development, capital expenditures
and possible acquisitions. See "Use of Proceeds."
Proposed Nasdaq National Market symbol PEGA
(1) Based on the number of shares of Common Stock outstanding on May 13, 1996, plus 100,800 shares of Common Stock issuable upon exercise of stock options to be exercised immediately prior to the closing of this offering. Excludes 2,308,200 shares of Common Stock issuable upon exercise of stock options outstanding as of May 13, 1996, at a weighted average exercise price of $2.60 per share, of which options to purchase 487,950 shares were then exercisable. See "Capitalization" and "Management--Stock Plans."
Summary Consolidated Financial Data (in thousands, except per share data)
Three Months
Ended
Year ended December 31, March 31,
1993 1994 1995 1995 1996
Consolidated Statement of Income Data: Total revenue $10,212 $16,263 $22,247 $4,005 $ 4,941 Income from operations 793 2,236 3,257 66 456 License interest income 1,305 1,457 1,486 370 368 Net income 1,233 2,193 2,878 263 486 Net income per common and common equivalent share $ 0.05 $ 0.09 $ 0.11 $ 0.01 $ 0.02 Weighted average number of common and common equivalent shares outstanding 24,231 24,102 25,551 25,600 25,505
March 31, 1996 As Adjusted Actual (1)
Consolidated Balance Sheet Data: Cash and cash equivalents $ 2,644 $33,318 Working capital 6,952 38,356 Long-term license installments, net 11,444 11,444 Total assets 26,555 57,228 Long-term debt 672 -- Stockholders' equity 15,136 47,212
(1) Gives effect to (i) the sale of the 2,700,000 shares of Common Stock offered by the Company hereby at an assumed initial public offering price of $13.00 per share, after deducting the estimated underwriting discount and offering expenses payable by the Company, and gives effect to the anticipated application of the net proceeds therefrom, and (ii) the exercise of stock options to purchase 100,800 shares of Common Stock at an aggregate exercise price of $32,928, which exercise will occur immediately prior to the closing of this offering. See "Use of Proceeds" and "Capitalization."
Unless otherwise indicated herein, all information in this Prospectus (i) has been adjusted to give effect to a 15-for-1 split of the outstanding Common Stock, in the form of a stock dividend, effective December 9, 1994, (ii) has been adjusted to give effect to an amendment and restatement of the Company's Articles of Organization (the "Restated Articles") to become effective immediately prior to this offering, providing for, among other things, the creation of a new undesignated class of Preferred Stock, (iii) has been adjusted to give effect to a 3-for-1 split of the outstanding Common Stock, in the form of a stock dividend, to be effective immediately prior to this offering, and (iv) assumes no exercise of the Underwriters' over-allotment option. See "Description of Capital Stock" and "Underwriting."