Pivotal Announces Third Quarter Results

Second consecutive quarter of sequential license growth


Vancouver, BC, April 23, 2002 — Pivotal Corporation (Nasdaq: PVTL; TSE: PVT), the leading provider of sensible customer relationship management (CRM) software, today announced financial results for the third quarter ended March 31, 2002.

Pivotal's total revenues in the third quarter of fiscal 2002 were $17.7 million compared to $16.7 million in the previous quarter and $26.6 million in the third quarter of fiscal 2001. Revenues from licenses were $7.5 million in the third quarter of fiscal 2002 compared to $6.9 million in the previous quarter and $16.4 million in the third quarter of fiscal 2001. Revenues from services and maintenance were $10.2 million in the third quarter of fiscal 2002, compared to $9.8 million in the previous quarter and $10.3 million in the third quarter of last fiscal year.

Pro forma net loss for the third quarter of 2002 was $1.8 million or $0.07 per share. This compares with pro forma net loss of $7.4 million or $0.31 per share in the second quarter of fiscal 2002 and pro forma net income of $0.4 million or $0.02 per share in the third quarter of fiscal 2001. The pro forma net loss for the third quarter of 2002 excludes $1.6 million for amortization of goodwill. The comparative pro forma net loss amount for the second quarter of fiscal 2002 excludes $6.1 million for amortization of goodwill and $49.5 million for restructuring-related costs and other charges. The comparative pro forma net income amount for the third quarter of fiscal 2001 excludes $6.1 million for amortization of goodwill.

Net loss under generally accepted accounting principles for the third quarter of fiscal 2002 was $3.4 million or $0.14 per share, compared with a net loss of $63.0 million or $2.63 per share in the second quarter of fiscal 2002 and a net loss of $5.7 million or $0.24 per share in the third quarter of fiscal 2001.

"This quarter Pivotal demonstrated sound financial management and solid financial results,” said Divesh Sisodraker, CFO, Pivotal. “We improved across key operating metrics, and had strong cost controls without impacting our ability to execute on our strategic plan. We achieved sequential license revenue growth, grew our top line and improved our bottom line."

Pivotal signed 49 new customers this quarter including: RS Components International, The Bankers Bank, Nikon Systems, Somera Communications, Lee Technologies Group, Inc., InSystems, and TempoSoft.

Sixty-three existing customers made repeat purchases including: The Principal Financial Group, LexisNexis, Pacific Life Insurance Company, Premera Blue Cross, Accor Services, Metro Nashville, Industry New Zealand, The Warehouse Ltd., and FKI Logistex.

Highlights of Strategic Plan Execution

According to Bo Manning, president and CEO, Pivotal, “We are pleased by our results this quarter – Pivotal is building momentum by executing our strategic plan to become the CRM leader for mid-sized enterprises. Pivotal’s innovative sales approach is a competitive differentiator. After two full quarters of executing our plan, our business is uniquely positioned to meet the specific needs of the mid-sized enterprise market – companies or business units with revenues between $100 million to $3 billion.”

The following results highlight Pivotal’s momentum in the mid-sized enterprise market:
  • Achieved leader quadrant placement on Gartner’s quadrant for mid-enterprise CRM, according to Gartner, Inc.’s latest mid-enterprise magic quadrant research.*

  • Bolstered Pivotal’s sales leadership with the addition of Melanie Bell, former regional vice president of sales at Siebel Systems, to the position of senior vice president of North America strategic accounts and central region.

  • Continued to roll out our go-to-market programs resulting in increased lead flow, increased participation in our new sales model, and increased partner generated leads and sales influence.

  • Completed development of three vertical products including investment banking; homebuilding; and health care insurance. Early versions of these products are already in use by customers, and will be formally launched in May 2002.

  • Appointed Jesper Andersen, formerly of Oracle Corporation, as executive vice-president of products.

Conference Call Details

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

Date: Tuesday April 23, 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 3rd Quarter Earnings Call
Live Audio Streaming: www.pivotal.com

A replay will be available from 1:00 p.m. ET April 23 through 1:00 p.m. ET April 30, 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 3727902. The replay will also be available via our website at www.pivotal.com for 90 days.

* The Magic Quadrant is copyrighted February 2002, by Gartner, Inc. and is reused with permission. Gartner's permission to print or reference its Magic Quadrant should not be deemed to be an endorsement of any company or product depicted in the quadrant. The Magic Quadrant is Gartner's opinion and is an analytical representation of a marketplace at and for a specific time period. It measures vendors against Gartner-defined criteria for a marketplace. The positioning of vendors within a Magic Quadrant is based on the complex interplay of many factors. Gartner does not advise enterprises to select only those firms in the Leaders segment. In some situations, firms in the Visionary, Challenger, or Niche Player segments may be the right match for an enterprise's requirements. Well-informed vendor selection decisions should rely on more than a Magic Quadrant. Gartner research is intended to be one of many information sources and the reader should not rely solely on the Magic Quadrant for decision-making. Gartner expressly disclaims all warranties, express or implied of fitness of this research for a particular purpose.


PIVOTAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Expressed in United States dollars; all amounts in thousands except per share data)
(Unaudited)

Three months ended March 31, Nine months ended March 31,
2002 2001 2002 2001
Revenues:
Licences $ 7,510 $ 16,368 $ 20,433 $ 46,482
Services and maintenance 10,206 10,271 30,111 27,428
Total revenues 17,716 26,639 50,544 73,910
Cost of revenues:
Licenses 385 1,009 1,434 2,854
Services and maintenance 5,025 5,591 16,888 14,922
Total cost of revenues 5,410 6,600 18,322 17,776
Gross profit 12,306 20,039 32,222 56,134
Operating expenses:
Sales and marketing 8,734 12,689 32,614 37,101
Research and development 3,636 5,096 13,243 13,522
General and administrative 2,060 2,787 10,046 6,663
Restructuring costs and other charges - - 51,429 -
Amortization of goodwill 1,593 6,068 14,563 16,468
Total operating expenses 16,023 26,640 121,895 73,754
Loss from operations (3,717) (6,601) (89,673) (17,620)
Other Income (expenses):
Foreign exchange gain/(loss) 153 (39) 39 (257)
Interest and other income 192 1,033 1,005 2,238
345 994 1,044 1,981
Loss before income taxes (3,372) (5,607) (88,629) (15,639)
Income taxes (8) 56 326 159
Net loss $ (3,364) $ (5,663) $ (88,955) $ (15,798)
Loss per share :
Basic and diluted $ (0.14) $ (0.24) $ (3.70) $ (0.66)
Weighted average number of shares used to calculate loss per share:
Basic and diluted 24,075 23,856 24,022 23,818
Pro forma earnings (loss) and earnings (loss) per share:
GAAP earnings reported above $ (3,364) $ (5,663) $ (88,955) $ (15,798)
Add back:
Restructuring costs and other charges $- $ - $ 51,429 $ -
Amortization of goodwill 1,593 6,068 14,563 16,468
Additional provision for doubtful accounts receivable - - 1,901 -
1,593 6,068 67,893 16,468
Pro forma net earnings (loss) $ (1,771) $ 405 $ (21,062) $ 670
Pro forma basic net earnings (loss) per share
Basic $ (0.07) $ 0.02 $ (0.88) $ 0.03
Diluted $ (0.07) $ 0.02 $ (0.88) $ 0.03
Weighted average number of shares outstanding
Basic $ 24,075 $ 23,856 $ 24,022 $ 23,818
Diluted $ 24,075 $ 23,856 $ 24,022 $ 24,682

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

March 31, 2002 June 30, 2001
ASSETS (unaudited)
Current Assets
Cash and Short term investments $ 41,942 $ 68,715
Accounts receivable 16,094 25,645
Prepaids and other 2,805 3,656
Total current assets 60,841 98,016
Property and equipment, net 4,741 9,183
Goodwill, intangibles and other assets, net 12,726 61,244
Total assets $ 78,308 $ 168,443
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued liabilities $ 19,332 $ 25,324
Current portion of accrued restructuring costs $ 3,038 $ -
Deferred revenue 11,991 13,810
Current portion of obligations under capital leases and long-term debt 348 516
Total current liabilities 34,709 39,650
Non-current portion of accrued restructuring costs 2,873 -
Non-current portion of obligations under capital leases and long-term debt 448 592
Shareholders' equity 40,278 128,201
Total liabilities and shareholders' equity $ 78,308 $ 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 mid-sized enterprises. More than 1,400 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, Pivotal Corporation
Tel: 425/897-6992
Email: jvoci@pivotal.com