Pivotal Reports First Quarter Results

Pivotal completes acquisition of MarketFirst; announces new strategic initiatives with Microsoft; and structures for profitability


Vancouver, BC, October 23, 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 first quarter of fiscal 2003 ended September 30, 2002.

“Pivotal continues to move forward with our key strategic initiatives including our acquisition strategy, the expansion of research and development, the innovation of our service offerings, and the execution of targeted marketing outreach to the mid-enterprise market,” said Bo Manning, president and CEO, Pivotal.

Recent highlights of the company’s corporate momentum include:

  • 20 new customers including: Visa International, Sentara Health Management, Mid-States Corporate Federal Credit Union, Management Ventures, Inc., and Financial Technologies International

  • 44 repeat purchases by existing customers including: Farm Credit Services of America, Thomson Legal & Regulatory Limited, The Warehouse Ltd., Digital Insight Corporation, and Compuware Asia-Pacific Pty. Ltd.

  • Acquisition of MarketFirst, a leading marketing automation provider

  • New demand generation initiatives with Microsoft for the healthcare and contact center markets

  • The creation of Pivotal India to augment R&D, professional services, technical support and sales support

Pivotal's total revenues in the first quarter of fiscal 2003 were $12.3 million compared to $16.1 million in the first quarter of fiscal 2002 and $19.1 million in the previous quarter. Revenues from licenses were $3.2 million in the first quarter of fiscal 2003 compared to $6.1 million in the first quarter of fiscal 2002 and $8.8 million in the previous quarter. Revenues from services and maintenance were $9.1 million in the first quarter of fiscal 2003, compared to $10.1 million in the first quarter of last fiscal year and $10.2 million in the previous quarter.

Net loss under generally accepted accounting principles for the first quarter of fiscal 2003 was $8.8 million or $0.36 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 $7.0 million or $0.29 per share in the previous quarter.

Pivotal and Microsoft Target Healthcare and Contact Center Markets

Pivotal announced new demand generation initiatives with Microsoft targeting the healthcare and contact center markets. These initiatives mark the latest advancement in the companies’ long-standing business development agreement to jointly target the mid-enterprise CRM market. The companies are closely collaborating on an integrated series of activities to promote their combined offering to the market.

MarketFirst Acquisition Closes

Pivotal also completed the acquisition of MarketFirst Software, a leading marketing automation provider. The definitive agreement to acquire 100 percent of MarketFirst was announced on October 3, 2002. Under the terms of the agreement, Pivotal issued 725,000 of its common shares for all of the issued and outstanding securities of MarketFirst.

MarketFirst founder and CTO, Anurag Khemka, has been appointed to the position of Vice President and General Manager of Marketing Products reporting to Jesper Andersen, executive vice president of products. Pivotal CTO, Kirk Herrington, has left the company to pursue other interests.

Conference Call Details

First quarter 2003 conference call:

Date: Thursday, October 24, 2002
Start Time: 8:30 a.m. ET (5:30 a.m. PT)
Dial-In Phone Number: (706) 679-6055
Conference Name: First quarter 2003 earnings conference call
Live Audio Streaming: www.pivotal.com

A replay will be available from 12:30 p.m. ET October 24 through 2:00 p.m. ET October 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 passcode for all callers is 6071631. In addition, the replay will be available via our Web site 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)
(Unaudited)
Three months ended Three months ended
September 30, 2002 September 30, 2001
(Unaudited)
Revenues:
License $3,215 $ 6,053
Services and maintenance 9,092 10,077
Total revenues 12,307 16,130
Cost of revenues:
License 247 492
Services and maintenance 5,346 5,968
Total cost of revenues 5,593 6,460
Gross profit 6,714 9,670
Operating expenses :
Sales and marketing 9,056 13,404
Research and development 3,903 4,947
General and administrative 2,030 5,206
Restructuring costs and other charges - 1,925
Amortization of goodwill and intangible assets 88 6,839
Total operating expenses 15,077 32,321
Loss from operations (8,363) (22,651)
Interest and other income (expenses) (289) 218
Loss before income taxes (8,652) (22,433)
Income taxes 163 154
Net loss $(8,815) $ (22,587)
Loss per share :
Basic and diluted $ (0.36) $ (0.94)
Weighted average number of shares used to calculate loss per share:
Basic and diluted 24,316 23,988


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

Sept. 30 2002 June 30 2002
(unaudited)
ASSETS
Current assets
Cash and cash equivalents $30,286 $ 41,283
Restricted cash 1,477 -
Accounts receivable 8,007 11,100
Prepaid and other 2,945 2,546
Total current assets 42,715 54,929
Property and equipment, net 3,783 4,201
Goodwill, intangibles and other assets, net 9,131 9,515
Total assets $ 55,629 $ 68,645
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities $ 13,707 $ 16,414
Current portion of accrued restructuring costs 1,554 2,296
Deferred revenue 10,926 12,327
Current portion of obligations under capital leases and long-term debt 328 320
Total current liabilities $ 26,515 $ 31,357
Non-current portion of accrued restructuring costs 2,851 3,082
Non-current portion of obligations under capital leases and long-term debt 143 423
Shareholders' equity $ 26,120 $ 33,783
Total liabilities and shareholders' equity $ 55,629 $ 68,645


Pivotal Corporation is the number one choice for mid-enterprise CRM. The company 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 2002 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: 604.699.8262
Email: investor-relations@pivotal.com

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