Pivotal Announces Second Quarter Results

License revenue increases 118% sequentially


Vancouver, BC, January 22, 2003 — Pivotal Corporation (Nasdaq: PVTL; TSX: PVT), the leading provider of customer relationship management (CRM) software for mid-sized enterprises, today announced financial results for its second quarter of fiscal 2003 ended December 31, 2002.

Pivotal's total revenues in the second quarter of fiscal 2003 were $16.1 million compared to $12.3 million in the prior quarter and $16.7 million in the same quarter last year. Revenues from licenses were $7.0 million in the second quarter of fiscal 2003 compared to $3.2 million in the prior quarter and $6.9 million in the same quarter last year. Revenues from services and maintenance were $9.1 million in the second quarter of fiscal 2003, compared to $9.1 million in the prior quarter and $9.8 million in the same quarter last year.

Pro forma net loss for the second quarter of fiscal 2003 was $3.1 million or $0.12 per share. This compares with a pro forma net loss of $8.7 million or $0.36 per share in the prior quarter and a pro forma net loss of $7.4 million or $0.31 per share in the same quarter last year. Net loss under United States generally accepted accounting principles (“GAAP”) for the second quarter of fiscal 2003 was $11.8 million or $0.47 per share, compared with net loss of $8.8 million or $0.36 per share in the prior quarter and a net loss of $63.0 million or $2.63 per share in the same quarter last year. For a full reconciliation of adjustments between pro forma and GAAP financial statements, please see the schedule incorporated into this press release.

Total revenues for the six months ended December 31, 2002 were $28.4 million compared to $32.8 million for the same period last year. Revenues from licenses for the six months ended December 31, 2002 were $10.2 million compared to $12.9 million for the same period last year. Revenues from services and maintenance for the six months December 31, 2002 were $18.2 million, compared to $19.9 million for the same period last year.

Pro forma net loss for the six months ended December 31, 2002 was $11.9 million or $0.48 per share, compared to $19.3 million or $0.80 per share for the same period last year. Net loss under United States generally accepted accounting principles for the six months ended December 31, 2002 was $20.6 million or $0.83 per share, compared with a net loss of $85.6 million or $3.57 per share for the same period last year.

“We continue to manage our business with a long-term perspective for our shareholders, customers and employees,” said Divesh Sisodraker, chief financial officer. “This quarter we made solid progress toward our goal of achieving profitability in the latter half of this fiscal year.”

Execution of Strategic Plan

According to Bo Manning, president and chief executive officer, “We believe that mid-sized enterprises have unique requirements in five areas: products, services, partners, total cost of ownership, and business style. Pivotal has made substantial progress in these areas, and we believe that we have established ourselves as the leader in the mid-enterprise market. Moving forward, we will move even more aggressively to dramatically differentiate ourselves as the runaway leader in this market.”

Highlights of Pivotal’s corporate momentum include:

  • Signed 34 new customers including: Teekay Shipping Corporation, UOP LLC, bioMérieux, Inc., Association Générale de Prévoyance Militaire, and Rainbow Technologies. Fifty-two existing customers made repeat purchases including: Ceridian Corporation, Pacific Life Insurance Company, Federal Home Loan Bank of Atlanta, Wise Business Forms, Inc., and B&Q plc.
  • Won coveted Microsoft award for ‘Best CRM Solution’ in France for success at Banque Entenial, one of the largest financial institutions in France
  • Achieved planned cost reductions for the second quarter
  • Ended the quarter with a strong balance sheet and almost $30 million in total cash
  • Achieved average days’ sales outstanding in accounts receivable of 56 days, well below target range of 75-85 days
  • Completed MarketFirst acquisition and the first phase of Pivotal-MarketFirst product integration
  • Signed agreement with Experio Solutions, one of North America’s largest mid-enterprise CRM consulting practices
  • Began expansion of development, technical consulting and product support capabilities with the launch of Pivotal India

    Conference Call Details

    Second quarter 2003 conference call:

    Date: Wednesday, January 22, 2003
    Start Time: 8:30 a.m. ET (5:30 a.m. PT)
    Dial-In Phone Number: (706) 679-6055
    Conference Name: Second quarter 2003 earnings conference call
    Live Audio Streaming: www.pivotal.com

    A replay will be available from 12:00 p.m. ET January 22 through 12:00 p.m. ET January 31, 2003. 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 confirmation number for all callers is 7490736. 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 December 31, Six months ended December 31,
    2002 2001 2002 2001
    Revenues:
    License $ 7,017 $ 6,870 $ 10,232 $ 12,923
    Services and maintenance 9,078 9,828 18,170 19,905
    Total revenues 16,095 16,698 28,402 32,828
    Cost of revenues:
    License 906 557 1,153 1,049
    Services and maintenance 4,719 5,895 10,065 11,863
    Total cost of revenues 5,625 6,452 11,218 12,912
    Gross profit 10,470 10,246 17,184 19,916
    Operating expenses:
    Sales and marketing 7,080 10,476 16,136 23,880
    Research and development 4,214 4,795 8,205 9,877
    General and administrative 2,395 2,780 4,425 7,985
    Restructuring costs and other charges 8,596 49,504 8,596 51,429
    Amortization of goodwill
    -
    5,996
    -
    12,700
    Total operating expenses 22,285 73,551 37,362 105,871
    Loss from operations (11,815) (63,305) (20,178) (85,955)
    Interest and other income (loss) 16 481 (273) 699
    Loss before income taxes (11,799) (62,824) (20,451) (85,256)
    Income taxes 16 180 179 335
    Net loss $ (11,815) $ (63,004) $ (20,630) $ (85,591)
    Loss per share :
    Basic and diluted $ (0.47) $ (2.63) $ (0.83) $ (3.57)
    Weighted average number of shares used to calculate loss per share:
    Basic and diluted 25,161 24,001 24,737 23,996
    Pro forma earnings and earnings per share:
    GAAP loss reported above $ (11,815) $ (63,004) $ (20,630) $ (85,591)
    Add back:
    Restructuring costs and other charges $ 8,596 (1) $49,504 (2) $ 8,596 (1) $ 51,429
    Amortization of goodwill and acquired intangible assets 88 6,131 176 12,970
    Additional provision for doubtful accounts receivable
    -
    -
    -
    1,901
    8,684 55,635 8,772 66,300
    Pro forma net loss $ (3,131) $ (7,369) $ (11,858) $ (19,291)
    Pro forma basic and diluted loss per share $ (0.12) $ (0.31) $ (0.48) $ (0.80)
    Weighted average number of shares used to calculate pro forma loss per share 25,161 24,001 24,737 23,996

    Notes to Pro Forma Statements of Operations

    (1) Restructuring costs and other charges for the three and six month periods ended December 31, 2002 include $3.3 million for employee severance costs, $4.8 million for excess facilities and equipment lease costs, and $0.5 million for write downs of leasehold improvements and furniture related to excess facilities.

    (2) Restructuring costs and other charges for the three month period ended December 31, 2001 include $2.8 million for employee severance costs, $9.6 million for excess facilities and asset impairments, $4.1 million for contract settlement costs, and $33.0 million for the impairment in value of recorded goodwill and other purchased intangible assets.

    (3) Restructuring costs and other charges for the six month period ended December 31, 2001 include $3.2 million for employee severance costs, $10.6 million for excess facilities and asset impairments $4.7 million for contract settlement costs, and $33.0 for the impairment in value of recorded goodwill and other purchased intangible assets.

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

    31-Dec-02 30-Jun-02
    ASSETS (unaudited)
    Current Assets
    Cash and short term investments $ 28,690 41,283
    Restricted cash 1,240
    -
    Accounts receivable 9,785 11,100
    Prepaid expenses and other 2,462 2,546
    Total current assets 42,177 54,929
    Property and equipment, net 3,597 4,201
    Goodwill, acquired intangibles and other assets, net 12,104 9,515
    Total assets $ 57,878 $ 68,645
    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current Liabilities
    Accounts payable and accrued liabilities $ 17,083 $ 16,414
    Current portion of accrued restructuring costs 6,176 2,296
    Deferred revenue 13,036 12,327
    Current portion of obligations under capital leases and long-term debt 487 320
    Current portion of restructuring costs assumed on acquisition 2,075
    -
    Total current liabilities 38,857 31,357
    Non-current portion of accrued restructuring costs 3,396 3,082
    Non-current portion of obligations under capital leases and long-term debt 111 423
    Non-current portion of restructuring costs assumed on acquisition 771
    -
    Shareholders' equity 14,743 33,783
    Total liabilities and shareholders' equity $ 57,878 $ 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.

    Pro Forma Information

    Pro forma measures are not recognized measures for financial statement presentation under United States generally accepted accounting principles (U.S. GAAP). Non-U.S. GAAP earnings measures such as the pro forma measures presented herein do not have any standardized meaning and are therefore unlikely to be comparable to similar measures presented by other issuers. The pro forma measures are provided to assist readers in evaluating the operating performance of Pivotal Corporation’s ongoing business and certain items, which are outlined in the pro forma reconciliation included in the attached schedules, were excluded because they were considered to be of a non-operational nature in the applicable period. Investors are encouraged to consider these pro forma measures in the context of Pivotal Corporation’s U.S. GAAP results (a reconciliation to which is set out in the attached schedules).
    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 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. Divesh Sisodraker
    Tel: 604-699-8000
    Email: investor-relations@pivotal.com

    Press Contact:
    Leslie Castellani
    Tel: 604-699-8151
    Email: lcastellani@pivotal.com