Pivotal Announces Second Quarter Results

New customer wins jump 84 percent; new customers include Microsoft, Olivetti and Sapient


Vancouver, BC, January 24, 2002 — Pivotal Corporation (Nasdaq: PVTL; TSE: PVT), the leading provider of sensible customer relationship management (CRM) software, today announced financial results for the second quarter ended December 31, 2001. The company also announced the latest results of its new strategic plan and the signing of 70 new customers.

Pivotal's total revenues in the second quarter of fiscal 2002 were $16.5 million compared to $16.0 million in the previous quarter and $25.7 million in the second quarter of fiscal 2001. Revenues from licenses were $6.9 million in the second quarter of fiscal 2002 compared to $6.1 million in the previous quarter and $16.3 million in the second quarter of fiscal 2001. Revenues from services and maintenance were $9.6 million in the second quarter of fiscal 2002, compared to $10.0 million in the previous quarter and $9.4 million in the second quarter last fiscal year.

Pro forma net loss for the second quarter of 2002 was $7.4 million or $0.31 per share. This compares with pro forma net loss of $11.9 million or $0.50 per share in the first quarter of fiscal 2002 and pro forma net income of $0.7 million or $0.03 per share in the second quarter of fiscal 2001. The pro forma net loss for the second quarter of 2002 excludes $6.1 million for amortization of goodwill and $49.5 million for restructuring-related costs and other charges. These charges included $16.5 million for workforce reduction, consolidation of excess facilities, contract termination costs, and the writedown of property, equipment, leasehold improvements, and other assets, and a $33.0 million charge for the impairment of goodwill and other purchased intangible assets. The comparative pro forma net loss amount for the first quarter of fiscal 2002 excludes $6.8 million for amortization of goodwill and $3.8 million for restructuring-related charges and doubtful accounts receivable. The comparative pro forma net income amount for the second quarter of fiscal 2001 excludes $5.4 million for amortization of goodwill.

Net loss under generally accepted accounting principles for the second quarter of fiscal 2002 was $63.0 million or $2.63 per share, compared with a net loss of $22.6 million or $0.94 per share in the first quarter of fiscal 2002 and a net loss of $4.7 million or $0.20 per share in the second quarter of fiscal 2001.

“I am pleased with our top line growth this quarter, particularly in license revenue,” said Divesh Sisodraker, CFO, Pivotal. “In addition, we are executing well against our plan to reduce our cost structure and have made significant progress during the last three months.”

Pivotal signed 70 new customers this quarter including: Microsoft Corporation, Olivetti (DomusTech, Olivetti Tecnost Group), Pfizer Health Solutions (wholly owned, clinical informatics subsidiary of Pfizer Inc), Sapient Corporation, nCipher Corporation Ltd., KLA-Tencor Corporation and Banque Entenial.

Eighty-six existing customers made repeat purchases including: Vivendi Water, ATS Automation Tooling Systems, Fincentric Corporation, Thomson Legal & Regulatory, and Pacific Life Insurance Company.

Strategic Plan Execution

After appointing a new leadership team and implementing a new cost structure during his first two months, Bo Manning, president and CEO, announced a new strategic plan in late October 2001. The plan addresses all aspects of company performance including marketing, sales, service, alliances and products. Key early elements of the plan that have been executed include:

  • Marketing: Launched advertising campaign in the Wall Street Journal and industry publications
  • Sales: Introduced new ‘Test-Drive’ Program sales strategy
  • Services: Broadened service offering to include business and integration consulting
  • Partners: Deepened commitment to Pivotal partners by launching a systems integrator partner certification program, and a new program for technology partners
  • Products: Further enhanced product architecture by releasing Pivotal Integration Engine; shipped Pivotal Service – Pivotal’s next-generation service solution
“In my second month at Pivotal I announced our new strategic plan,” said Bo Manning, president and CEO, Pivotal. “Now, after my first full quarter, we are pleased to announce that we are executing on all aspects of the plan and are seeing some early results. We’re particularly pleased that this quarter, Microsoft and Sapient, two highly technology-savvy companies, did an exhaustive evaluation of the major CRM products on the market and selected Pivotal. That’s clear evidence of our ability to meet the demands of the world’s most discerning technology buyers.”

Conference Call Details

Pivotal will host a conference call to discuss the financial results. Here is the dial in information:

Date: Thursday January 24, 2002
Start Time: 8:30 a.m. ET (5:30 a.m. PT)
Dial-In Phone Number: 706-679-6055
Conference Call Name: Fiscal 2002 2nd Quarter Earnings Call
Live Audio Streaming: www.pivotal.com

A replay will be available from 12:00 p.m. ET January 24 through 12:00 p.m. ET January 31, 2002. For callers in the U.S. or Canada, the replay number is 1-800-642-1687. For callers outside the U.S. or Canada, the replay number is 1-706-645-9291. The replay pass code for all callers is 2870040. The replay will also be available via our website at www.pivotal.com for 90 days.


PIVOTAL CORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Expressed in United States dollars; all amounts inthousands except per share data)(Unaudited)
Three months ended December 31, Six months ended December 31,
2001 2000 2001 2000
Revenues:
Licences $ 6,870 $ 16,346 $ 12,923 $ 30,114
Services and maintenance 9,633 9,385 19,602 16,675
Total revenues 16,503 25,731 32,525 46,789
Cost of revenues:
Licenses 557 979 1,049 1,845
Services and maintenance 5,700 4,979 11,560 8,849
Total cost of revenues 6,257 5,958 12,609 10,694
Gross profit 10,246 19,773 19,916 36,095
Operating expenses:
Sales and marketing 10,476 12,914 23,880 24,412
Research and development 4,660 4,509 9,607 8,426
General and administrative 2,780 2,100 7,985 3,876
Restructuring costs and other charges 49,504 - 51,429 -
Amortization of goodwill 6,131 5,405 12,970 10,400
Total operating costs 73,551 24,928 105,871 47,114
Loss from operations (63,305) (5,155) (85,955) (11,019)
Interest and other income 481 644 699 987
Loss before income taxes (62,824) (4,511) (85,256) (10,032)
Income taxes 180 170 335 103
Net loss $ (63,004) $ (4,681) $ (85,591) $ (10,135)
Loss per share :
Basic and diluted $ (2.63) $ (0.20) $ (3.57) $ (0.45)
Weighted average number of shares used to calculate loss per share:
Basic and diluted 24,001 23,002 23,996 22,750
Pro forma earnings and earnings per share:
GAAP earnings $ (63,004) $ (4,681) $ (85,591) $ (10,135)
Add back:
Restructuring costs and other charges $ 49,504 $ - $ 51,429 $ -
Amortization of goodwill 6,131 5,405 12,970 10,400
Additional provision for doubtful accounts receivable - - 1,901 -
55,635 5,405 66,300 10,400
Pro forma net income (loss) $ (7,369) $ 724 $ (19,291) $ 265
Pro forma net income (loss) per share $ (0.31) $ 0.03 $ (0.80) $ 0.01
Weighted average number of shares outstanding 24,001 23,002 23,996 22,750

CONDENSED CONSOLIDATED BALANCE SHEETS
(Expressed in United States dollars; all amounts in thousands)

December 31, 2001 June 30 2001
ASSETS (unaudited)
Current Assets
Cash and cash equivalents $ 14,602 $ 13,247
Short-term investments 33,151 55,468
Accounts receivable 16,626 26,610
Prepaid expenses 1,797 2,691
Total current assets 66,176 98,016
Property and equipment, net 5,854 9,183
Goodwill, intangibles and other assets, net 15,108 61,244
Total assets $ 87,138 $ 168,443
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued liabilities $ 22,810 $ 25,324
Current portion of accrued restructuring costs $ 5,434 $ -
Deferred revenue 11,480 13,810
Current portion of obligations under capital leases and long-term debt 516 516
Total current liabilities 40,240 39,650
Non-current portion of obligations under capital leases and long-term debt 292 592
Non-current portion of accrued restructuring costs 3,228
Shareholders' equity 43,378 128,201
Total liabilities and shareholders' equity $ 87,138 $ 168,443



Pivotal Corporation offers clear, complete and sensible Customer Relationship Management (CRM) software that delivers results for a fraction of the cost of typical CRM software. Pivotal and its partners provide the software, services, and support required to produce significant improvements in marketing, sales, and service effectiveness for entrepreneurial enterprises. More than 1,300 companies globally use Pivotal including: Hewlett Packard, CIBC, HarperCollins Publishers, Hitachi Telecom Inc., Intrawest Corporation, Vivendi, Royal Bank of Canada, Southern Company, and Ziff Davis Media Inc.

Pivotal's advanced software technology includes powerful capabilities in: CRM, Internet commerce, interactive selling, partner management, corporate portals, and wireless technologies. For more information visit http://www.pivotal.com/
Statements made herein and in today’s conference call may contain forward-looking information about management’s expectations, new strategic objectives, new market segments, business prospects, anticipated financial performance and other similar matters. A variety of factors, many of which are beyond our control, affect the operations, performance and business strategy and results of Pivotal and could cause actual results and experiences to differ materially from the expectations and objectives expressed in these statements. These factors include, but are not limited to: the severity and duration of adjustment of the market; fluctuations in operating results and general industry, economic and market conditions and growth rates; fluctuations in cash flow, the level of outstanding debt and debt ratings; international growth and global economic conditions, particularly in emerging markets and including interest rate and currency exchange rate fluctuations; the impact of the credit risks of our customers; the sufficiency of our restructuring activities and strategic initiatives, including the potential for higher actual costs to be incurred in connection with restructuring actions and strategic initiatives compared to the estimated costs of such actions or initiatives; the ability to retain and recruit qualified employees; the ability to manage business in light of recent management changes and personnel reductions; the impact of rationalization in the eBusiness and CRM industries; the impact of rapid technological and market change; the impact of price and product competition; the dependence on new product development; stock market volatility; the entrance into contracts which contain delivery, installation, and performance provisions, which, if not met, could result in the non-payment of fees or even damages; uncertain economic conditions, particularly as they affect spending by our prospective customers on eBusiness and CRM and similar enterprise software products; and the future success of our strategic alliances. Other potential risk factors are described in the company’s 2001 annual report on Form 10-K, in addition to reports on Form 8-K and form 10-Q, which are available at the SEC’s Web site at www.sec.gov. or the Canadian Depository for Securities Web site at www.sedar.com . Pivotal undertakes no responsibility to update or revise any forward-looking statements. Investor Contact:
Divesh Sisodraker, Pivotal Corporation
Tel: 604.904.5323
Email: dsisodraker@pivotal.com

Press Contact:
Jacqueline Voci
Tel: 425.897.6992
Fax: 425.897.8401
Email: jvoci@pivotal.com