Pivotal Reports Fourth Quarter and Full Year Results

Pivotal Reports Third Consecutive Quarter of License Revenue Growth


Vancouver, BC, July 25, 2002 — Pivotal Corporation (Nasdaq: PVTL; TSE: PVT), the leading provider of customer relationship management (CRM) software for mid-sized enterprises, today announced financial results for its fourth quarter and fiscal year ended June 30, 2002.

Pivotal's total revenues in the fourth quarter of fiscal 2002 were $19.1 million compared to $17.7 million in the previous quarter and $22.2 million in the fourth quarter of fiscal 2001. Revenues from licenses were $8.8 million in the fourth quarter of fiscal 2002 compared to $7.5 million in the previous quarter and $12.0 million in the fourth quarter of fiscal 2001. Revenues from services and maintenance were $10.2 million in the fourth quarter of fiscal 2002, compared to $10.2 million in the previous quarter and $10.2 million in the fourth quarter of last fiscal year.

Pro forma net loss for the fourth quarter of fiscal 2002 was $0.8 million or $0.03 per share. This compares with pro forma net loss of $1.8 million or $0.07 per share in the previous quarter and pro forma net loss of $6.5 million or $0.27 per share in the fourth quarter of fiscal 2001. Net loss under generally accepted accounting principles (GAAP) for the fourth quarter of fiscal 2002 was $7.0 million or $0.29 per share, compared with a net loss of $3.4 million or $0.14 per share in the previous quarter and a net loss of $16.7 million or $0.70 per share in the fourth quarter of fiscal 2001. For a full reconciliation of adjustments between pro forma and GAAP financial statements, see the schedule incorporated into this press release.

Total revenues for the year ended June 30, 2002 were $69.6 million compared to $96.2 million for the year ended June 30, 2001. Revenues from licenses for the year ended June 30, 2002 were $29.3 million compared to $58.5 million in the previous year. Revenues from services and maintenance for the year ended June 30, 2002 were $40.3 million, compared to $37.6 million in the previous year. Pro forma net loss for the year ended June 30, 2002 was $21.4 million or $0.89 per share, compared to $5.8 million or $0.25 per share for the year ended June 30, 2001. Net loss under generally accepted accounting principles for the year ended June 30, 2002 was $95.9 million or $3.99 per share, compared with a net loss of $32.5 million or $1.40 per share in the prior fiscal year.

“This quarter Pivotal continued to demonstrate solid financial results despite challenges in the broader economy,” said Divesh Sisodraker, CFO, Pivotal. “We grew license revenue for a third consecutive quarter, continued to improve our operating margin, and demonstrated strong working capital management.”

Pivotal signed 53 new customers this quarter including: Pfizer Ilaclari A.S, Federal Home Loan Bank of Atlanta, Critical Path Inc. and Xtra Corporation. Sixty-nine existing customers made repeat purchases including: Centex Homes, Industry New Zealand, The Warehouse Ltd., Principal Financial Services, Inc., Thomson Legal & Regulatory Limited, and Genesis Power Ltd.

Market Momentum

According to Bo Manning, president and CEO, Pivotal, “Pivotal has outperformed the competition to become the clear leader in mid-enterprise CRM. Since launching our transformation ten months ago, we significantly outpaced nine out of ten companies in our primary competitive set in terms of license revenue growth, and we outpaced all ten of them in terms of operating margin improvement. Our competitive set includes the other two pure CRM vendors, the three leading ERP vendors, and the leading point solutions in marketing, eService, contact centers, PRM, and interactive selling.”

Execution of Strategic Plan

Highlights of Pivotal’s success in the mid-enterprise CRM market include:

  • Increased average deal size by 13 percent
  • Maintained professional service margins of 47 percent
  • Reduced quarterly cash consumption to $700,000
  • Decreased DSOs to below Pivotal’s target range
  • Won coveted Microsoft award for customer success at Alcatel in Germany

    According to Manning, “Pivotal is capitalizing on a significant market opportunity as the only CRM provider that is 100 percent purpose-built to meet the needs of companies and business units in the mid-enterprise market. Pivotal has the right technology, services, partners, business style and cost to fit the needs of these prudent buyers.”

    Conference Call Details

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

    Date: Thursday, July 25, 2002
    Start Time: 8:30 a.m. ET (5:30 a.m. PT)
    Dial-In Phone Number: (706) 679-6055
    Conference Name: Fourth quarter and fiscal year 2002 conference call
    Live Audio Streaming: www.pivotal.com

    A replay will be available from 12:00 p.m. ET July 25 through 12:00 p.m. ET July 31, 2002. For callers within 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 (706) 645-9291. The replay pass code for all callers is 4840573. In addition, the replay will be available via our website at www.pivotal.com for 90 days.

    PIVOTAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Expressed in United States dollars; all amounts in thousands except per share data)
    Three months ended Twelve months ended
    June 30 June 30 June 30 June 30
    2002 2001 2002 2001
    (Unaudited) (Unaudited) (Unaudited)
    Revenues:
    Licences $8,849 $12,028 $29,282 $58,510
    Services and maintenance 10,223 10,216 40,334 37,644
    Total revenues 19,072 22,244 69,616 96,154
    Cost of revenues:
    Licenses 522 946 1,956 3,800
    Services and maintenance 5,443 6,108 22,331 21,030
    Total cost of revenues 5,965 7,054 24,287 24,830
    Gross profit 13,107 15,190 45,329 71,324
    Operating expenses :
    Sales and marketing 8,803 14,129 41,417 51,230
    Research and development 3,720 5,228 16,963 18,750
    General and administrative 2,774 6,904 12,820 13,567
    Restructuring costs and other charges 2,147
    -
    53,576
    -
    Amortization of goodwill 1,594 6,594 16,157 23,062
    Total operating expenses 19,038 32,855 140,933 106,609
    Loss from operations (5,931) (17,665) (95,604) (35,285)
    Interest and other income 245 1,352 1,289 3,333
    Impairment of investments (1,244)
    -
    (1,244)
    -
    (999) 1,352 45 3,333
    Loss before income taxes (6,930) (16,313) (95,559) (31,952)
    Income taxes 60 344 386 503
    Net loss $(6,990) $ (16,657) $(95,945) $(32,455)
    Loss per share:
    Basic and diluted $ (0.29) $ (0.70) $ (3.99) $ (1.40)
    Weighted average number of shares used to calculate loss per share:
    Basic and diluted 24,090 23,848 24,039 23,173

    Pro forma loss and loss per share:
    Net loss under GAAP reported above $ (6,990) $ (16,657) $ (95,945) $ (32,455)
    Add back:
    Restructuring costs and other charges (Note 1) $ 2,147 $1,781 $ 53,576 $1,866
    Amortization of goodwill 1,594 6,594 16,157 23,062
    Impairment of investments 1,244
    -
    1,244
    -
    Additional provision for doubtful accounts receivable (Note 2) 1,250 1,762 3,601 1,762
    6,235 10,137 74,578 26,690
    Pro forma net loss (Note 3) $(755) $(6,520) $(21,367) $(5,765)
    Pro forma basic net loss per share
    Basic and diluted $(0.03) $(0.27) $(0.89) $(0.25)
    Weighted average number of shares outstanding
    Basic and diluted 24,090 23,848 24,039 23,173

    Notes to pro forma loss and loss per share:
    (1) Restructuring costs and other charges for the three months ended June 30, 2002 includes $0.6 million for workforce reduction, $0.9 million for asset impairments, and $0.6 million for contract settlement and other costs.
    Restructuring costs and other charges for the three months ended June 30, 2001 includes $1.8 million for asset impairments and deferred stock compensation charges, which are included under general and administrative expenses in the condensed consolidated statement of operations.
    Restructuring costs and other charges for the twelve months ended June 30, 2002 includes $3.7 million for workforce reduction, $5.4 million for contract settlement and other costs, $11.5 million for excess facilities and asset impairments, and $33.0 million for the impairment of goodwill and other purchased intangible assets.
    Restructuring costs and other charges for the twelve months ended June 30, 2001 includes $1.9 million for asset impairments and deferred stock compensation charges, which are included under general and administrative expenses in the condensed consolidated statement of operations.

    (2) Additional provisions for doubtful accounts receivable are included under general and administrative expenses in the condensed consolidated statement of operations.

    (3) The Company believes that this pro forma presentation of earnings is useful for an understanding of the Company's underlying operations and uses it internally to evaluate its operating performance. However, pro forma income statements are not in accordance with, nor are they a substitute for, generally accepted accounting principles, and different pro forma presentations may be used by other companies.

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

    June 30, 2002 June 30, 2001
    (unaudited)
    ASSETS
    Current assets
    Cash and cash equivalents $ 41,283 $ 68,715
    Accounts receivable 11,100 25,645
    Prepaid and other 2,546 3,656
    Total current assets 54,929 98,016
    Property and equipment, net 4,201 9,183
    Goodwill, intangibles and other assets, net 9,515 61,244
    Total assets $ 68,645 $ 168,443
    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current liabilities
    $ 16,414 $ 25,324
    Current portion of accrued restructuring costs 2,296 -
    Deferred revenue 12,327 13,810
    Current portion of obligations under capital leases and long-term debt 320 516
    Total current liabilities 31,357 39,650
    Non-current portion of capital leases and long-term debt 423 592
    Non-current portion of accrued restructuring costs 3,082 -
    Shareholders' equity 33,783 128,201
    Total liabilities and shareholders' equity $ 68,645 $ 168,443


  • Pivotal Corporation is the only CRM company that is 100 percent purpose-built to serve the unique requirements of mid-sized enterprises. Pivotal delivers software and services that produce meaningful increases in revenues, margins and customer loyalty for companies and business units in the revenue range of $100 million to $3 billion. More than 1,500 companies around the world use Pivotal including: CIBC, Centex Homes, HarperCollins Publishers, Hitachi Telecom Inc., Premera Blue Cross, Royal Bank of Canada, Southern Company, and Vivendi.

    Pivotal's complete CRM software suite includes capabilities in marketing, sales, service, contact centers, partner management and interactive selling. For more information, visit 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 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