Pivotal Announces First Quarter Results

Signs 26 new customers; 61 existing customers make additional license purchases


Vancouver, BC – October 23, 2003, October 23, 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 first quarter of fiscal 2004 ended September 30, 2003.

Pivotal's total revenues in the first quarter of fiscal 2004 were $13.3 million, compared to $14.5 million in the prior quarter and $12.3 million in the same quarter last year. Revenues from licenses were $4.0 million in the first quarter of fiscal 2004, compared to $5.1 million in the prior quarter and $3.2 million in the same quarter last year. Revenues from services and maintenance were $9.3 million in the first quarter of fiscal 2004, compared to $9.4 million in the prior quarter and $9.1 million in the same quarter last year.

Net loss under generally accepted accounting principles (“GAAP”) for the first quarter of fiscal 2004 was $3.0 million or $0.11 per share, compared with a net loss of $2.9 million or $0.11 per share in the prior quarter and a net loss of $8.8 million or $0.36 per share in the same quarter last year. Non-GAAP net loss for the first quarter of fiscal 2004 was $1.0 million or $0.04 per share. This compares with a Non-GAAP net loss of $2.0 million or $0.08 per share in the prior quarter and a Non-GAAP net loss of $8.7 million or $0.36 per share in the same quarter last year. The Non-GAAP net loss figure excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. For a full reconciliation of adjustments between Non-GAAP and GAAP financial measures, please see the schedule incorporated into this press release.

Pivotal signed 26 new customers this quarter, bringing Pivotal’s total customer count to more than 1,660. New customers include organizations such as CMS Cameron McKenna, Barclaycard, PayGlobal Inc., Novartis South Africa (Pty) Ltd, and Ontario Family Health Networks. Sixty-one existing customers made repeat purchases including: Centex Homes, Bombardier Aerospace, Premera Blue Cross, IDEXX Laboratories Inc, New Zealand Trade and Enterprise, and Televerde.

Strategic Update

On October 8, 2003, Pivotal announced a definitive agreement under which Oak Investment Partners will pay US$1.78 cash per share for all of the outstanding shares of Pivotal. Concurrently, Pivotal's business will be combined with Talisma Corporation, a leading provider of Microsoft-based eService solutions. Oak Investment Partners will be the controlling shareholder of the combined business. The transaction is subject to the approval of Pivotal's shareholders and the Supreme Court of British Columbia, as well as customary closing conditions. The parties anticipate that the transaction will close in November or December of 2003.

“Though we made significant progress in achieving our strategic and financial goals this quarter, the market environment continues to be challenging,” said Bo Manning, president and CEO, Pivotal. “To address these market conditions, we are making two strategic moves to solidify our leadership position in the mid-enterprise segment. Oak’s participation, combined with the Pivotal-Talisma merger will strengthen our strategic and competitive position, and increase our long-term financial stability giving us the ability to continue to deliver market-leading solutions and meaningful results to our customers around the world.”

“In considering the transaction, the Board and its financial advisor, RBC Capital Markets, reviewed many strategic alternatives for Pivotal,” said Norm Francis, Chairman of the Board, Pivotal. “The Board concluded that this transaction is the best alternative for Pivotal shareholders, customers and employees and strongly recommends that Pivotal shareholders vote to approve the cash offer from Oak.”

Conference Call Details
First Quarter Fiscal 2004 Conference Call:

Date: Thursday, October 23, 2003
Start Time: 5:00 p.m. ET (2:00 p.m. PT)
Dial-In Phone Number (US/Canada): (877) 582-2649
Dial-In Phone Number (International): (706) 679-6055
Conference Name: First Quarter Fiscal 2004 Conference Call

Live Audio Streaming: http://www.pivotal.com/investor_relations

A replay will be available from 8:00 p.m. ET October 23 through 8:00 p.m. ET October 30, 2003. For callers within the U.S. or Canada, the replay number is (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 3335407. In addition, the replay will be available via our Web site at http://www.pivotal.com/investor_relations 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
September 30,

---------------------
2003 2002
---------- ----------
Revenues:
License $ 3,972 $ 3,215
Services and maintenance 9,330 9,092
---------- ----------

Total revenues 13,302 12,307
---------- ----------
Cost of revenues:
License 165 247
Services and maintenance 3,816 5,346
---------- ----------

Total cost of revenues 3,981 5,593
---------- ----------

Gross profit 9,321 6,714


Operating expenses:
Sales and marketing 4,910 9,056
Research and development 2,987 3,903
General and administrative 2,323 2,030
Restructuring costs and
other charges (1) 1,851 -
Amortization of acquired
intangibles 109 24
---------- ----------

Total operating expenses 12,180 15,013

Loss from operations (2,859) (8,299)

Interest and other income
(loss) 5 (289)

Loss before income taxes (2,854) (8,588)

Income taxes 97 163
---------- ----------

Net loss $ (2,951) $ (8,751)
---------- ----------
---------- ----------
Loss per share:
Basic and diluted $ (0.11) $ (0.36)
---------- ----------
---------- ----------
Weighted average number of
shares used to calculate
loss per share:

Basic and diluted 26,188 24,316
---------- ----------
---------- ----------



PIVOTAL CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(Expressed in United States dollars; all amounts in thousands except per share data)
(Unaudited)


Three months ended
September 30,

---------------------
2003 2002
---------- ----------
GAAP net loss reported
above $ (2,951) $ (8,751)
Add back:
Restructuring costs and
other charges $ 1,851 $ -
Amortization of acquired
intangibles 109 24
---------- ----------
1,960 24

Non-GAAP net loss $ (991) $ (8,727)
---------- ----------
---------- ----------

Non-GAAP net loss per
share
Basic and diluted $ (0.04) $ (0.36)
---------- ----------
---------- ----------

Weighted average number
of shares outstanding
Basic and diluted 26,188 24,316
---------- ----------
---------- ----------

Note to Statement of Operations
(1) Restructuring costs and other charges for the three month period ended September
30, 2003 includes $1.6 million for employee severance costs, and $0.3 million for
contract settlement costs.




PIVOTAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS

(Expressed in United States dollars; all amounts in thousands)



30-Sep-03 30-Jun-03
------------- -------------
ASSETS (unaudited)

Current Assets
Cash & short-term investments $ 9,912 $ 18,890
Restricted cash 3,779 -
Accounts receivable, net 6,762 8,248
Prepaid expenses and other 2,520 3,526
------------- -------------

Total current assets 22,973 30,664

Property and equipment, net 2,733 3,083
Goodwill 9,834 9,941
Acquired intangibles, net 546 655
Other assets 928 973
------------- -------------

Total assets $ 37,014 $ 45,316
------------- -------------
------------- -------------

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities
Accounts payable and
accrued liabilities $ 12,801 $ 14,929
Current portion of accrued
restructuring costs 2,556 3,554
Current portion of restructuring
costs assumed on acquisition 1,187 1,270
Deferred revenue 11,844 13,275
Current portion of obligations
under capital leases and
long-term debt 234 481
------------- -------------

Total current liabilities 28,622 33,509

Non-current portion of accrued
restructuring costs 2,588 3,105
Non-current portion of restructuring
costs assumed on acquisition 315 567
Non-current portion of obligations
under capital leases and
long-term debt - 37

Shareholders' equity 5,489 8,098
------------- -------------

Total liabilities and
shareholders' equity $ 37,014 $ 45,316
------------- -------------
------------- -------------

Pivotal Corporation is the only CRM company that is 100 percent purpose-built to serve the demanding requirements of mid-sized enterprises – a powerful, highly flexible application platform, a complete set of CRM applications, and low-cost, results-producing implementation services. 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 1,660 companies around the world have licensed Pivotal including: CIBC, Centex Homes, Farm Credit Services of America, HarperCollins Publishers, Hitachi Telecom Inc., Palm, Inc., Pharmacia Corporation, Premera Blue Cross, Royal Bank of Canada, Sharp Electronics Corporation, Southern Company, Vivendi and WebEx Communications.

Pivotal's complete CRM software suite includes a powerful application platform and capabilities in marketing, sales, service, contact centers, partner management and interactive selling. For more information, visit www.pivotal.com.


Non-GAAP Financial Measures

As a supplement to its consolidated financial statements presented on a generally accepted accounting principles (GAAP) basis, Pivotal provides additional Non-GAAP measures for net loss and net loss per share in its press release. A Non-GAAP financial measure is a numerical measure of a company's performance, financial position, or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. Pivotal believes that the additional Non-GAAP measures are useful to investors for the performance of financial analysis. Management uses these measures internally to evaluate its operating performance and the measures are used for planning and forecasting of the Company's future periods. However, Non-GAAP measures are not in accordance with, nor are they a substitute for, GAAP measures. Other companies may use different Non-GAAP measures and presentation of results.
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 or consolidation in the CRM industry; 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 CRM and similar enterprise software products; and the future success of our strategic alliances. Other potential risk factors are described in the Company’s 2003 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:
Gordon Neal
Tel: 604/699-8262
Email: investor-relations@pivotal.com

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