Pervasive Software Reports Results for its Second Quarter of Fiscal Year 2008

Company Reports 28th Consecutive Profitable Quarter

AUSTIN, Texas, Jan. 22 /PRNewswire-FirstCall/ -- Pervasive Software(R)
Inc. (Nasdaq: PVSW), a global value leader in embeddable data management and
integration software, today announced financial results for the second fiscal
quarter ending December 31, 2007.
Revenue was $10.3 million for the second quarter of fiscal year 2008,
compared to $10.1 million for the second quarter of last fiscal year. Net
income was $0.7 million, or $0.03 diluted earnings per share, for the quarter,
compared to net income of $0.6 million, or $0.03 diluted earnings per share,
for the second quarter of last fiscal year.
On a non-GAAP basis, Pervasive realized net income of $1.1 million, or
$0.05 diluted earnings per share, in the second quarter of fiscal year 2008,
compared to net income of $1.3 million, or $0.06 diluted earnings per share,
in the second quarter of last fiscal year. Non-GAAP results exclude
amortization of purchased intangibles and stock-based compensation expense,
and assume a non-GAAP effective tax rate of 34%.
"I am pleased to report our 28th consecutive quarter of profitability, a
positive reflection of the dedication and loyalty of Pervasive customers,
partners and employees around the globe," said John Farr, president and CEO of
Pervasive Software. "Our continued profitability is complemented by our
commitment to strategic investments for the future. During the December
quarter, we continued development of the next version of our embedded database
which will support the upcoming release of Microsoft Windows Server(R) 2008.
And in November, we launched the next major version of our integration
product, Pervasive Data Integrator(TM) v9.
"These ongoing investments in our flagship products are in addition to our
investments in development of innovative new products," said Farr. "The
Pervasive DataSolutions(TM) team, which is focused on taking advantage of
market trends in Integration-as-a-Service, recently released version 2 of
Pervasive DataSynch(TM) for Quickbooks to Salesforce. We also continued to
invest in our Pervasive DataRush(TM) initiative, having released Beta v2 in
October, and we are focused on identifying and supporting lighthouse customers
who want to leverage the parallel processing capabilities of multi-core
technologies for data-intensive applications. We continue to execute well on
the investments we are making in both our flagship and emerging products while
maintaining an intense focus on profitability."
Pervasive again generated positive cash flow from operations with $1.3
million in the second quarter of fiscal 2008, ending the quarter with $46.6
million in cash and marketable securities and no debt, representing
approximately $2.28 per issued and outstanding share. Issued and outstanding
shares of common stock as of December 31, 2007 totaled approximately 20.4
million.
Pervasive acquired approximately 570,000 shares of Pervasive common stock
on the open market at a total cost of approximately $2.5 million, or
approximately $4.39 weighted average price per share, during the quarter ended
December 31, 2007. The Company has approximately $5.5 million authorized
repurchase funds remaining under its $10.0 million stock repurchase program
announced in June 2007. Depending on market conditions and other factors,
such purchases may be commenced or suspended at any time without prior notice.
Business Outlook
For the third fiscal quarter ending March 31, 2008, Pervasive expects
revenue to be in the range of $9.5 million to $10.5 million and GAAP-basis
diluted earnings per share of $0.01 to $0.03. GAAP-basis profitability is
expected to include amortization of purchased intangibles and stock-based
compensation expense, together representing approximately $0.8 million,
pre-tax, in the third quarter of fiscal year 2008. The company expects
non-GAAP adjustments to result in non-GAAP diluted and fully taxed earnings
per share of approximately $0.03 to $0.06 in the March quarter, compared to
non-GAAP diluted earnings per share of $0.06 for the March quarter of fiscal
year 2007.
Conference Call Details
Pervasive will host a conference call to discuss these results with the
investment community today at 5:00 P.M. Eastern time. The dial-in numbers for
the call are 877-808-2426 (toll-free) or 706-634-9536 (international). The
conference name is "Pervasive Software Inc". The conference call may also be
accessed live over the Web at http://www.pervasive.com/ircalendar. Check the
Web site before the call for login information. Replay will be available 8:00
P.M. Eastern Tuesday, January 22, to midnight, Tuesday, January 29, by dialing
800-642-1687 (toll-free) or 706-645-9291 (international), and selecting
Conference ID 29993667. Additionally, the Webcast will be archived on
Pervasive's website at http://www.pervasive.com/ircalendar.
About Pervasive Software
Pervasive Software (Nasdaq: PVSW) helps companies get the most out of
their data investments through embeddable data management and agile
integration software. The embeddable PSQL database engine allows
organizations to successfully embrace new technologies while maintaining
application compatibility and robust database reliability in a near-zero
database administration environment. Pervasive's agile, multi-purpose
integration platform accelerates the sharing of information between multiple
databases, applications, or hosted business systems and allows customers to
re-use the same software for diverse integration scenarios. For more than two
decades, Pervasive products have delivered value with a compelling combination
of performance, flexibility, reliability and low total cost of ownership.
Pervasive's hallmark is the size, diversity and loyalty of its customer base,
partners and channels: tens of thousands of customers in virtually every
industry, in more than 150 countries, rely on Pervasive to manage, integrate,
analyze and secure their critical data. For additional information, go to
http://www.pervasive.com.
About Non-GAAP Financial Information
This press release includes non-GAAP financial measures. For a
description of these non-GAAP financial measures, including the reasons
management uses each measure, and reconciliations of these non-GAAP financial
measures to the most directly comparable financial measures prepared in
accordance with Generally Accepted Accounting Principles (GAAP), please see
the section entitled "About Non-GAAP Financial Measures" and the accompanying
table entitled "Reconciliation of GAAP Measures to Non-GAAP."
Cautionary Statement
This document contains forward-looking statements that involve risks and
uncertainties concerning the company, including the company's expected
performance for the third quarter ending March 31, 2008, and the company's
strategy and profitability going forward. Actual events or results may differ
materially from those described in this document due to a number of risks and
uncertainties. These risks and uncertainties include, among others, the
company's ability to attract and retain existing and/or new customers; the
company's ability to issue new products or releases of solutions that meet
customers' needs or achieve acceptance by the company's customers; changes to
current accounting policies which may have a significant, adverse impact upon
the company's financial results; the introduction of new products by
competitors or the entry of new competitors; the company's ability to preserve
its key strategic relationships; the company's ability to hire and retain key
employees; and economic and political conditions in the US and abroad. All of
these factors may result in significant fluctuations in the company's
quarterly operating results and/or its ability to sustain or increase its
profitability. More about potential factors that could affect the company's
business and financial results is included in Pervasive's Form 10-K for the
fiscal year ended June 30, 2007, which is on file with the SEC and available
at the SEC's website at www.sec.gov. Pervasive is not obligated to update
these forward-looking statements to reflect events or circumstances after the
date of this document.
All Pervasive brand and product names are trademarks or registered
trademarks of Pervasive Software Inc. in the United States and other
countries. All other marks are the property of their respective owners.
Contact:
Randy Jonkers
Chief Financial Officer
800.287.4383
investor.relations@pervasive.com

Pervasive Software Inc.
Condensed Consolidated Balance Sheets
(in thousands)

December 31, June 30,
2007 2007
----------- -----------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $34,594 $31,563
Marketable securities 12,016 14,788
Trade accounts receivable, net 5,182 5,563
Deferred tax assets, net 700 771
Prepaid expenses and other current
assets 1,361 1,507
----------- -----------
Total current assets 53,853 54,192

Property and equipment, net 1,478 1,574

Purchased technology, net 1,278 2,126
Goodwill 38,508 38,508
Deferred tax assets, net 1,301 1,071
Other assets 324 269
----------- -----------
Total assets $96,742 $97,740
=========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
liabilities $5,066 $4,694
Deferred revenue 5,651 6,042
----------- -----------
Total current liabilities 10,717 10,736

Stockholders' equity 86,025 87,004
----------- -----------
Total liabilities and stockholders'
equity $96,742 $97,740
=========== ===========

Pervasive Software Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(Unaudited)

Three months ended Six months ended
December 31 December 31
------------------ ----------------
2007 2006 2007 2006
------ ------ ------ ------
Revenues:
Product licenses $7,155 $7,268 $14,181 $14,249
Services and other 3,187 2,808 6,331 5,794
------ ------ ------ ------
Total revenue 10,342 10,076 20,512 20,043

Costs and expenses:
Cost of product licenses 691 908 1,223 1,949
Cost of services and other 1,047 1,078 2,107 2,225
Sales and marketing 4,305 3,693 8,585 7,409
Research and development 2,617 2,506 5,162 4,755
General and administrative 1,241 1,405 2,671 2,922
------ ------ ------ ------
Total costs and expenses 9,901 9,590 19,748 19,260
------ ------ ------ ------

Operating income 441 486 764 783

Interest and other income, net 459 563 1,042 1,082
Income tax provision (215) (488) (568) (574)
------ ------ ------ ------
Net income $685 $561 $1,238 $1,291
====== ====== ====== ======

Diluted earnings per share $0.03 $0.03 $0.06 $0.06
====== ====== ====== ======

Shares used in computing diluted
earnings per share 20,482 21,932 20,664 22,075

Pervasive Software Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)

Three months ended Six months ended
December 31 December 31
--------------- ---------------
2007 2006 2007 2006
------ ------ ------ ------
Cash from operations
Net income $685 $561 $1,238 $1,291
Adjustments to reconcile net income
to net cash provided by operations:
Depreciation & amortization 539 667 1,081 1,286
Write-off of purchased technology 147 286 147 691
Non-cash stock compensation
expense 464 544 949 1,120
Changes in current assets and
liabilities:
Decrease in trade accounts
receivable 441 410 382 1,123
(Increase) decrease in prepaid
expenses and other current
assets (1) 71 153 2
Increase (decrease) in accounts
payable and accrued liabilities (552) 340 252 76
Decrease in deferred revenue (399) (48) (392) (29)
------ ------ ------ ------
Net cash provided by operations 1,324 2,831 3,810 5,560

Cash from investing activities
Purchase of property and equipment (179) (211) (275) (312)
Sales and purchases of marketable
securities, net 6,591 2,501 2,823 1,952
Decrease in other assets (58) 2 (54) 46
------ ------ ------ ------
Net cash provided by investing
activities 6,354 2,292 2,494 1,686

Cash from financing activities
Proceeds from exercise of stock
options 51 677 285 1,109
Acquisition of Treasury Stock (2,524) (2,550) (3,601) (5,000)
------- ------- ------- -------
Net cash used in financing activities (2,473) (1,873) (3,316) (3,891)

Effect of exchange rate on cash and
cash equivalents 17 56 43 64
------ ------ ------ ------
Increase in cash and cash equivalents 5,222 3,306 3,031 3,419
Cash and cash equivalents at beginning
of period 29,372 31,250 31,563 31,137
------- ------- ------- -------
Cash and cash equivalents at end of
period $34,594 $34,556 $34,594 $34,556
======= ======= ======= =======

About Non-GAAP Financial Measures
The Company provides non-GAAP measures for net income and net income per
share data as supplemental information regarding the Company's core business
operational performance. The Company believes that these non-GAAP financial
measures are useful to investors because they exclude certain non-operating or
non-recurring charges. The Company's management excludes these non-operating
or non-recurring charges when it internally evaluates the performance of the
Company's business and makes operating decisions, including internal
budgeting, performance measurement and the calculation of bonuses and
discretionary compensation. In addition, these non-GAAP measures more closely
reflect the essential revenue generation activities of the Company and the
direct operating expenses (resulting in or from cash expenditures) needed to
perform these revenue generating activities. Accordingly, management excludes
the amortization of purchased intangible assets related to the Data Junction
acquisition and stock-based compensation related to employee stock options.
The Company believes that providing the non-GAAP measures that management
uses is useful to investors for two primary reasons. First, it provides a
consistent basis for investors to understand the Company's financial
performance on a trended basis across many historical periods, particularly
given the adoption of SFAS 123R at the beginning of fiscal year 2006 and the
changes it has introduced for calculating stock-based compensation expenses
relative to prior periods. And second, it allows investors to evaluate the
Company's performance using the same methodology and information as that used
by the Company's management.
Non-GAAP measures are subject to material limitations as these measures
are not in accordance with, or a substitute for, US GAAP and therefore the
Company's definition or interpretation may be different from similar non-GAAP
measures used by other companies and independent financial analysts. However,
the Company's management compensates for these limitations by providing the
relevant and detailed disclosure of the items excluded in the calculation of
non-GAAP net income and non-GAAP diluted earnings per share, which should be
supplementally considered when evaluating the Company's results. In addition,
items such as amortization of purchased intangibles, stock compensation
charges and significant and non-recurring items that are excluded from
non-GAAP net income and non-GAAP diluted earnings per share can have a
significant impact on earnings. Management compensates for these limitations
by evaluating the non-GAAP measure together with the most directly comparable
GAAP measure. The Company has historically provided non-GAAP measures to the
investment community as a supplement to its GAAP results, to enable investors
to evaluate the Company's core operating performance the way management does.
The non-GAAP adjustments, and the basis for excluding them, are outlined
below:
Amortization of Purchased Intangibles
The Company has recorded amortization of acquired intellectual property
intangibles, included in its GAAP financial statements, related to the
acquisition of Data Junction. Management excludes these items for purposes of
calculating non-GAAP net income and non-GAAP diluted earnings per share. The
Company believes that eliminating this expense in determining its non-GAAP
measures is useful to investors because doing so provides a consistent basis
for investors to understand the Company's financial performance on a trended
basis across many historical periods, it allows investors to evaluate the
Company's performance using the same methodology and information as that used
by the Company's management, and it allows a comparison with other peer
companies in the software industry, many of whom use similar non-GAAP
financial measures to supplement their GAAP results. Finally, the Company
believes that non-GAAP measures of profitability that exclude amortization of
acquired intellectual property intangibles are widely used by analysts and
investors in the software industry.
Stock-based Compensation Expense
The Company has incurred stock based compensation expense as determined
under SFAS 123R for the quarters ending on or after September 30, 2005, and
under APB 25 for earlier comparable periods in its GAAP financial results.
Since stock based compensation is a non-cash charge, the Company excludes this
item for the purposes of calculating non-GAAP net income and non-GAAP diluted
earnings per share. In addition, the exclusion of stock based compensation
from the non-GAAP measures is done to allow a consistent basis for investors
to understand the Company's financial performance on a trended basis across
many historical periods, allow investors to evaluate the Company's performance
using the same methodology and information as that used by the Company's
management, and allow a comparison with other peer companies in the software
industry, many of whom use similar non-GAAP financial measures to supplement
their GAAP results. The very nature of the stock-based compensation expense
also makes it very difficult to estimate prospectively, since the expense will
vary with changes in the stock price and market conditions at the time of new
grants, varying valuation methodologies, subjective assumptions and different
award types, making the comparison of current results with forward looking
guidance potentially difficult for investors to interpret. The tax effects of
stock based compensation expenses may also vary significantly from period to
period, without any change in underlying operational performance, thereby
obscuring the underlying profitability of core revenue generating operations
relative to prior periods (including prior periods following the adoption of
SFAS 123R). Finally, the Company believes that non-GAAP measures of
profitability that exclude stock-based compensation are widely used by
analysts and investors in the software industry.
Income Tax Adjustment
Income taxes represent a complex element of any company's income statement
and effective tax rates can vary widely from year to year and from company to
company, especially in periods in which adjustments are made to a company's
valuation reserve for deferred tax assets. The Company uses a statutory tax
rate of 34% to reflect income tax adjustments in presentation of its non-GAAP
net income and non-GAAP diluted earnings per share. Utilization of a
statutory tax rate for presentation of the non-GAAP measures is done to allow
a consistent basis for investors to understand the Company's financial
performance on a trended basis across many historical periods, allow investors
to evaluate the Company's performance using the same methodology and
information as that used by the Company's management, and allow a comparison
with other peer companies in the software industry, many of whom use similar
non-GAAP financial measures to supplement their GAAP results. Finally, the
Company believes that non-GAAP measures of profitability that are based on
more standardized statutory tax rates are widely used by analysts and
investors in the software industry.

Pervasive Software Inc.
Reconciliation of GAAP Measures to Non-GAAP
(in thousands, except per share data)
(Unaudited)

Three months ended Six months ended
December 31, December 31,
------------------ ----------------
2007 2006 2007 2006
------ ------ ------ ------
Net Net Net Net
Income Income Income Income
------ ------ ------ ------

GAAP $685 $561 $1,238 $1,291
Amortization of intangible assets -
cost of product licenses 317 317 634 634
Stock-based compensation -
cost of services and other 13 17 27 35
Stock-based compensation -
sales and marketing expense 126 133 260 324
Stock-based compensation -
research and development
expense 59 57 123 117
Stock-based compensation -
general and administrative
expense 266 337 539 644
Income tax adjustment for
non-GAAP (357) (161) (584) (656)
------- ------- ------- -------
Non-GAAP $1,109 $1,261 $2,237 $2,389
======= ======= ======= =======
GAAP net income per share - diluted $0.03 $0.03 $0.06 $0.06

Non-GAAP net income per share -
diluted $0.05 $0.06 $0.11 $0.11

Shares used to compute GAAP net
income per share - diluted 20,482 21,932 20,664 22,075

Shares used to compute non-GAAP net
income per share - diluted 21,086 22,472 21,269 22,721

SOURCE Pervasive Software Inc.

Randy Jonkers, Chief Financial Officer of Pervasive Software Inc.,
1-800-287-4383, investor.relations@pervasive.com