Motive, Inc. Announces First Quarter Earnings

Motive, Inc. Announces First Quarter Earnings

    Business Editors/Technology Editors

    AUSTIN, Texas--(BUSINESS WIRE)--April 21, 2005--Motive, Inc. (NASDAQ:MOTV):

--	License revenue of $14.1 million reflects 22 percent growth over prior year
--	First quarter pro forma earnings of $0.05 per diluted share exceeds consensus estimates; GAAP earnings of $0.02 per diluted share

    Motive, Inc. (NASDAQ:MOTV), a leading provider of management software, today announced results for the first quarter ended March 31, 2005. Core revenue, which excludes impact from business acquisitions, was $23.3 million, a 21 percent increase over the first quarter of 2004. Total revenue for the first quarter of 2005 was $24.6 million.
    Motive's pro forma net income for the first quarter of 2005 was $1.5 million or $0.05 per diluted share, beating consensus estimates by a penny. Motive's GAAP net income for the first quarter of 2005 was $600,000 or $0.02 per diluted share, compared to a loss of $1.6 million or $0.16 per diluted share for the first quarter of 2004. A reconciliation of GAAP to pro forma results has been provided in the financial statement tables included in this press release.
    "For the fourth consecutive quarter, our results have met or exceeded expectations. We believe this demonstrates that we are in the right markets with the right products at the right time," said Scott Harmon, CEO of Motive. "The need for our management automation software remains strong as companies continue to invest heavily in the delivery of sophisticated networked products and services to mainstream enterprise and consumer customers."
    "The rigor and discipline we put into developing arguably the industry's most full-featured product set continues to pay-off and provide the business leverage we planned," said Logan Wray, COO of Motive. "We believe this is one of the primary reasons we have been able to garner almost twice the number of customers as our nearest competitor."

    Current Highlights

    -- Strategic joint sales, marketing and development agreement
    with Alcatel, the world's leading DSL network infrastructure
    company, that will result in the development of a new product
    for managing digital home services such as home networking,
    IP-TV and Voice over IP. This relationship also expands
    Motive's reach into new markets.

    -- Leading customer premises equipment providers Linksys, SMC,
    and Westell demonstrate interoperability with Motive's remote
    device management solution for residential gateways.

    -- Strategic licensing agreement with 3Com allows the company to
    build intelligent automation into its secure, converged
    networking solutions for enterprises.

    -- License agreement with one of the world's largest banking
    institutions allows it to build management automation into a
    new business service.

    -- More than 20 new product and service deployments reflect
    continued momentum and robust opportunity within existing
    customer base.

    Financial Outlook

    Core revenue for the second quarter of 2005 is expected to be in the range of $25.3 million to $25.8 million, and total revenue is expected to be in the range of $26.3 million to $26.8 million. Core revenue for the fiscal year 2005 is expected to be in the range of $108 million to $110 million, and total revenue is expected to be in the range of $112 million to $114 million. Pro forma earnings are expected to be in the range of $0.06 to $0.07 per diluted share for the second quarter of 2005 and in the range of $0.32 to $0.35 per diluted share for fiscal year 2005.

    Conference Call Details

    Motive has scheduled a conference call for 4:00 p.m. CDT today to discuss its first quarter of 2005 results. Listeners can access the conference call via webcast from the Investor Relations section of Motive's website at www.motive.com or by dialing 800-901-5259 and using the participant code 35614827. Presentation slides will accompany the call and can be accessed from the Investor Relations section of Motive's website at www.motive.com. For those who cannot listen to the live broadcast of the call, a replay of the webcast will be available approximately two hours after the live call ends from the Investor Relations section of Motive's website at www.motive.com or you can access a replay of the conference call at 888-286-8010. The pass code for the replay is 50522986.

    About Motive, Inc.

    Motive, Inc. has pioneered a unique approach to designing management services into Internet-era networks, systems and applications. Motive's software makes complex products and services self-managing, reducing overhead costs and optimizing customers' return on investment. Companies worldwide have relied on Motive's software to provide a range of problem remediation and configuration management tasks for more than 40 million endpoints. Founded in 1997, Motive is headquartered in Austin, Texas, and has offices in Europe and Asia. For more information, visit www.motive.com.

    Forward-Looking Statements

    This press release contains "forward-looking statements" that involve risks and uncertainties concerning our expected financial performance, as well as our future business prospects and product and service offerings. Our actual results may differ materially from the results predicted or from any other forward-looking statements made by, or on behalf of, us and reported results should not be considered as an indication of future performance. These potential risks and uncertainties include, among other things: our concentrated customer base; the mix of perpetual and term licenses; the effect of the timing of the recognition of revenue from products licensed; our typically long sales cycle; the dependence of our financial growth on the continued success and acceptance of our existing and new product and service offerings; our ability to market our products in new geographic areas; the compatibility of our software with hardware and software platforms that are used by our customers and their subscribers now or in the future; the ability to attract and retain key personnel; the intensely competitive nature of the market for our products and services; and the additional risk factors described in our SEC filings, which are available at the SEC's website at www.sec.gov. Statements included in this press release are based upon information known to us as of the date of this release, and we assume no obligation to update any information contained in this press release.

    Non-GAAP Financial Information

    Motive has provided in this release certain financial information that has not been prepared in accordance with generally accepted accounting principles (GAAP). This information includes but is not limited to core revenue, pro forma net income and pro forma fully diluted earnings per share. These measures may be different from measures used by other companies. Our management uses these non-GAAP measures to evaluate our financial results, develop budgets and manage expenditures. Investors are encouraged to review the reconciliation of these and other non-GAAP financial measures to the comparable GAAP results, which is included in this press release.

    Motive and the Motive logo are trademarks or registered trademarks of Motive, Inc. All other products or services mentioned herein are trademarks of their respective holders.

MOTIVE, INC.

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (in thousands, except per share amounts)

Three Months Ended March 31, ----------------------- 2005 2004 ----------- ----------- (unaudited) Revenue: License fees $14,068 $11,495 Services: Services 9,235 7,755 Acquired in business combination 1,258 3,426 ----------- ----------- Total services revenue 10,493 11,181 ----------- ----------- Total revenue 24,561 22,676 ----------- -----------

Cost of revenue: License fees 144 194 Amortization of acquired technology 331 214 Services 6,986 7,537 ----------- ----------- Total cost of revenue 7,461 7,945 ----------- ----------- Gross margin 17,100 14,731 ----------- -----------

Operating expenses: Sales and marketing 8,320 7,555 Research and development 4,535 4,234 General and administrative 2,506 2,169 Amortization of intangibles 850 773 Amortization of deferred stock compensation (a) 338 851 ----------- ----------- Total operating expenses 16,549 15,582 ----------- ----------- Income (loss) from operations 551 (851) Interest income (expense), net 289 (510) Other income (expense), net (72) 472 ----------- ----------- Income (loss) before income taxes 768 (889) Provision for income taxes 162 681 ----------- ----------- Net income (loss) $606 $(1,570) =========== ===========

Basic income (loss) per share $0.02 $(0.16) =========== =========== Diluted income (loss) per share $0.02 $(0.16) =========== ===========

Shares used in computing basic income (loss) per share 25,955 9,755 Shares used in computing diluted income (loss) per share 27,440 9,755

- - - - -

(a) If the amortization of deferred stock compensation were allocated to specific operating statement line items, it would be allocated as follows:

Cost of services revenue $19 $53 Sales and marketing 142 320 Research and development 100 288 General and administrative 77 190 ----------- ----------- $338 $851 =========== ===========

MOTIVE, INC.

CONSOLIDATED CONDENSED BALANCE SHEETS (in thousands, except per share amounts)

March 31, December 31, 2005 2004 ------------- ------------- (unaudited)

ASSETS Current assets: Cash and cash equivalents $40,078 $44,490 Short-term investments 30,282 24,724 Accounts receivable, net 18,866 18,823 Prepaid expenses and other current assets 3,692 3,104 ------------- ------------- Total current assets 92,918 91,141 ------------- ------------- Property and equipment, net 6,509 6,850 Goodwill 56,409 56,409 Acquired technology, net 7,656 7,987 Other intangibles, net 7,565 8,414 Other assets 2,744 3,114 ------------- ------------- Total assets $173,801 $173,915 ============= =============

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities: Accounts payable $4,116 $6,547 Accrued liabilities 6,761 7,282 Deferred revenue 12,491 11,576 ------------- ------------- Total current liabilities 23,368 25,405 Deferred revenue 3,781 4,526 ------------- ------------- Total liabilities 27,149 29,931 ------------- -------------

Stockholders' equity:

Common stock: $0.001 par value; 150,000,000 shares authorized; 26,078,612 shares issued and outstanding at March 31, 2005; 25,760,868 shares issued and outstanding at December 31, 2004 26 26 Additional paid-in capital 236,052 234,417 Deferred stock compensation (1,423) (1,796) Accumulated comprehensive loss (670) (724) Accumulated deficit (87,333) (87,939) ------------- ------------- Total stockholders' equity 146,652 143,984 ------------- ------------- Total liabilities and stockholders' equity $173,801 $173,915 ============= =============

MOTIVE, INC.

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (in thousands, unaudited)

Three Months Ended March 31, --------------------- 2005 2004 ---------- ---------- Cash flows from operating activities Net income (loss) $606 $(1,570) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation 859 911 Amortization of deferred stock compensation 338 851 Amortization of debt discount -- 116 Amortization of intangibles 1,181 987 Accretion of discount on short-term investments (80) -- Other noncash items 19 (5) Changes in operating assets and liabilities net of acquisitions (3,031) 5,846 ---------- ---------- Net cash provided by (used in) operating activities (108) 7,136 ---------- ----------

Cash flows from investing activities Purchase of short-term investments (5,437) (8,040) Restricted cash -- 15,000 Purchase of property and equipment (523) (397) ---------- ---------- Net cash provided by investing activities (5,960) 6,563 ---------- ----------

Cash flows from financing activities Payments made on long-term debt -- (99) Proceeds from issuance of common stock 1,657 650 Repurchase of common stock (1) (197) ---------- ---------- Net cash provided by financing activities 1,656 354 ---------- ---------- Net increase (decrease) in cash and cash equivalents (4,412) 14,053 Cash and cash equivalents at beginning of period 44,490 23,234 ---------- ---------- Cash and cash equivalents at end of period $40,078 $37,287 ========== ==========

MOTIVE, INC.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (in thousands, except per share amounts; unaudited)

Three Months Ended March 31, 2005 2004 -------- --------

GAAP services revenue $10,493 $11,181 Pro forma adjustments: Services revenue acquired in business combination 1,258 3,426 -------- -------- Pro forma core services revenue $9,235 $7,755 ======== ========

GAAP revenue $24,561 $22,676 Pro forma adjustments: Services revenue acquired in business combination 1,258 3,426 -------- -------- Pro forma core revenue $23,303 $19,250 ======== ========

GAAP gross margin $17,100 $14,731 Pro forma adjustments: Amortization of acquired technology 331 214 -------- -------- Pro forma gross margin $17,431 $14,945 ======== ======== Pro forma gross margin 71% 66% ======== ========

GAAP income (loss) from operations $551 $(851) Pro forma adjustments: Amortization of acquired technology 331 214 Amortization of intangibles 850 773 Amortization of deferred stock compensation 338 851 -------- -------- Total pro forma adjustments 1,519 1,838 -------- -------- Pro forma income from operations $2,070 $987 ======== ======== Pro forma operating margin 8% 4% ======== ========

GAAP net income (loss) $606 $(1,570) Total pro forma adjustments affecting income (loss) from operations 1,519 1,838 Add back of tax per GAAP financial statements 162 681 Pro forma income tax expense calculated at 35% effective tax rate (800) (332) -------- -------- Pro forma net income $1,487 $617 ======== ========

GAAP shares used in computing diluted income (loss) per share 25,955 9,755 Pro forma adjustments: Common shares subject to repurchase 22 53 Redeemable convertible preferred stock outstanding -- 10,322 Incremental shares related to stock warrants 10 474 Incremental shares related to stock options 1,453 1,646 -------- -------- Pro forma weighted average fully diluted shares outstanding 27,440 22,250 ======== ========

Pro forma fully diluted earnings per share(a) $0.05 $0.03 ======== ========

(a) Pro forma fully diluted earnings per share is calculated as pro forma net income divided by pro forma weighted average fully diluted shares outstanding.

--30--BD/sa*

CONTACT: Motive Inc., Austin Media Contact: Cybele Diamandopoulos, 512-506-4272 cdiamand@motive.com or Investor Contact: April Downing, 512-531-1038 ir@motive.com

KEYWORD: TEXAS INTERNATIONAL ASIA PACIFIC EUROPE INDUSTRY KEYWORD: HARDWARE SOFTWARE NETWORKING INTERNET E-COMMERCE EARNINGS CONFERENCE CALLS SOURCE: Motive Inc.

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