Pervasive Software Reports Revenue Growth for its Fourth Quarter and Fiscal Year...

Pervasive Software Reports Revenue Growth for its Fourth Quarter and Fiscal Year 2008

Company Reports 30th Consecutive Profitable Quarter
AUSTIN, Texas--(Business Wire)--
Pervasive Software(R) Inc. (NASDAQ:PVSW), a global value leader in
embeddable data management and agile integration software, today
announced financial results for the fourth quarter and fiscal year
ending June 30, 2008.

"We are pleased to report results for fourth quarter and fiscal
year ending June 30, 2008, representing our 30th consecutive quarter
and seventh consecutive year of profitability. We are also pleased to
report year over year revenue growth for the quarter of 9% and for the
year of 4%," said John Farr, president and CEO of Pervasive Software.
"Our increased revenues are the result of new product version releases
and improved execution in both of our core product lines.

"Our database products continued to generate approximately
two-thirds of our revenue during the fourth quarter and fiscal year
2008. Channel adoption trends for version 10 of our Pervasive PSQL
database have been quite positive in the first nine months since its
launch - a great testament to the quality of this release - and in
June we released Pervasive PSQL Summit(TM) v10.10, which is Microsoft
Certified for Windows Server 2008," Farr continued.

"Our integration products continued to generate the remaining
one-third of our revenue. These products and services continue to be
well-received by our existing and new customers, including end users
and commercial software developers alike, resulting in year over year
quarterly revenue growth of approximately 10% in this business for the
second quarter in a row.

"Our solid results allow us to continue to fund our commitment to
innovation," added Farr. "Our Pervasive DataSolutions team completed
development work on a new integration solution, Pervasive
DataSynch(TM) for QuickBooks and Microsoft Dynamics CRM, which we
announced in conjunction with Microsoft's recent Worldwide Partner
Conference in early July. In May, our Pervasive DataRush(TM) team
participated with AMD in their keynote presentation and exhibit booth
at the 2008 JavaOne conference, demonstrating our respective
technologies to help software developers tap the power of multicore
processing. We are very pleased with our performance and the positive
feedback we have received related to our innovation investments."

For the fourth quarter ended June 30, 2008:

-- Revenue was $11.2 million, an increase of 9% compared to $10.3
million for the fourth quarter of last fiscal year.

-- Net income was $0.8 million, or $0.04 diluted earnings per
share, compared to net income of $1.9 million, or $0.09
diluted earnings per share, for the fourth quarter of last
fiscal year. Net income for the fourth quarter included
reduced interest income reflective of the reduced interest
yield environment over the past year and an increased income
tax provision for a combined net expense of $0.1 million, or
$0.01 per share, compared to a combined net benefit of $1.1
million, or $0.05 per share, for the fourth quarter of the
previous fiscal year.

-- Operating income, a financial measure before interest income
and taxes, was $0.9 million, an increase of 20% compared to
operating income of $0.8 million for the fourth quarter of
last fiscal year.

-- On a non-GAAP basis, as described below, Pervasive realized
net income of $1.3 million, or $0.07 diluted earnings per
share, compared to net income of $1.4 million, or $0.07
diluted earnings per share, in the fourth 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%.

For the fiscal year ended June 30, 2008:

-- Revenue was $42.5 million, an increase of 4% compared to $40.8
million for the previous fiscal year.

-- Net income was $3.0 million, or $0.15 diluted earnings per
share, compared to net income of $4.0 million, or $0.19
diluted earnings per share, for the previous fiscal year. Net
income included reduced interest income and an increased
income tax provision for a combined net benefit of $0.2
million, or $0.01 per share, for the full fiscal year,
compared to a combined net benefit of $1.8 million, or $0.08
per share, for the previous fiscal year.

-- Operating income, a financial measure before interest income
and taxes, was $2.8 million, an increase of 25% compared to
operating income of $2.2 million for the previous fiscal year.

-- On a non-GAAP basis, Pervasive realized net income of $4.9
million, or $0.24 diluted earnings per share, compared to net
income of $5.2 million, or $0.23 diluted earnings per share,
for the previous fiscal year.

Pervasive continued to generate positive cash flow from operations
with $2.1 million in the fourth quarter of fiscal 2008, ending the
quarter with $44.9 million in cash and marketable securities and no
debt, representing approximately $2.35 per issued and outstanding
share. Issued and outstanding shares of common stock as of June 30,
2008 totaled approximately 19.1 million.

Pervasive acquired approximately 164,000 shares of Pervasive
common stock on the open market at a total cost of approximately
$740,000, or approximately $4.50 weighted average price per share,
during the quarter ended June 30, 2008. The Company has approximately
$9.3 million authorized repurchase funds remaining under its $10.0
million stock repurchase program announced in March 2008. Depending on
market conditions and other factors, such purchases may be commenced
or suspended at any time without prior notice.

"This brings to a close our fiscal year 2008 and we look forward
to fiscal 2009," continued Farr. "Our focus for 2009 will be on the
continued marketing of the most recent major release of our embedded
database product, Pervasive PSQL Summit v10.10; growing the sales of
our integration product line both through direct sales and through
highly leverageable indirect channels; and the continued development
and deployment of innovative new products by our Pervasive
DataSolutions team to take advantage of market trends in
Integration-as-a-Service and by our Pervasive DataRush team to serve
new application development capturing the parallel processing
capabilities of new-generation multi-core technologies. We are making
strategic investments for the future, while also maintaining our
intense focus on profitability."

Business Outlook

For the first fiscal quarter ending September 30, 2008, Pervasive
expects revenue to be in the range of $10.5 million to $11.5 million
and GAAP-basis diluted earnings per share of $0.02 to $0.05, compared
to $10.2 million revenue and $0.03 diluted earnings per share for the
September quarter of the previous fiscal year. GAAP-basis
profitability is expected to include amortization of purchased
intangibles and stock-based compensation expense, together
representing approximately $0.7 million, pre-tax, in the first quarter
of fiscal year 2009. As a result, non-GAAP diluted and fully taxed
earnings per share is expected to be in the range of approximately
$0.04 to $0.07 in the September quarter, compared to $0.05 non-GAAP
diluted and fully taxed earnings per share for the September quarter
of the previous fiscal year. The expectation for revenue for the
quarter ending September 30, 2008 reflects the potential for a
sequential decrease from the quarter ended June 30, 2008 due primarily
to the typical international seasonality associated with the summer
months.

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 www.pervasive.com/ircalendar. Check the Web site before the
call for login information. Replay will be available 8:00 P.M. Eastern
Tuesday, July 22, to midnight, Tuesday, July 29, by dialing
800-642-1687 (toll-free) or 706-645-9291 (international), and
selecting Conference ID 54693169. Additionally, the Webcast will be
archived on Pervasive's Web site at 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 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 first quarter ending September
30, 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. Additional information regarding these and other
factors can be found in Pervasive's reports filed with the Securities
and Exchange Commission, including its Form 10-Q for the quarter ended
March 31, 2008. 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.

-0-
*T
Pervasive Software Inc.
Condensed Consolidated Balance Sheets
(in thousands)

June 30, June 30,
2008 2007
----------- -----------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 33,190 $ 31,563
Marketable securities 11,759 14,788
Trade accounts receivable, net 5,581 5,563
Deferred tax assets, net 744 771
Prepaid expenses and other current assets 1,249 1,507
----------- -----------
Total current assets 52,523 54,192

Property and equipment, net 1,474 1,574

Purchased technology, net 626 2,126
Goodwill 38,508 38,508
Deferred tax assets, net 1,310 1,071
Other assets 303 269
----------- -----------

Total assets $ 94,744 $ 97,740
=========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 5,123 $ 4,694
Deferred revenue 6,345 6,042
----------- -----------
Total current liabilities 11,468 10,736

Stockholders' equity 83,276 87,004
----------- -----------

Total liabilities and stockholders' equity $ 94,744 $ 97,740
=========== ===========
*T

-0-
*T
Pervasive Software Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(Unaudited)

Three months ended Twelve months ended
June 30 June 30
------------------ -------------------

2008 2007 2008 2007
--------- -------- --------- ---------

Revenues:
Product licenses $ 7,688 $ 7,134 $ 29,343 $ 28,851
Services and other 3,491 3,162 13,124 11,932
--------- -------- --------- ---------
Total revenue 11,179 10,296 42,467 40,783

Costs and expenses:
Cost of product licenses 505 578 2,229 3,437
Cost of services and other 1,068 1,112 4,244 4,439
Sales and marketing 4,982 4,089 17,949 15,349
Research and development 2,453 2,489 10,205 9,819
General and administrative 1,240 1,252 5,084 5,539

--------- -------- --------- ---------
Total costs and expenses 10,248 9,520 39,711 38,583
--------- -------- --------- ---------

Operating income 931 776 2,756 2,200

Interest and other income,
net 263 594 1,659 2,269
Income tax benefit
(provision) (357) 517 (1,405) (432)

--------- -------- --------- ---------
Net income $ 837 $ 1,887 $ 3,010 $ 4,037
========= ======== ========= =========

Diluted earnings per share: $ 0.04 $ 0.09 $ 0.15 $ 0.19
========= ======== ========= =========

Shares used in computing
diluted earnings per share 19,162 21,197 19,951 21,744
*T

-0-
*T
Pervasive Software Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)

Three months ended Twelve months ended
June 30 June 30
------------------ -------------------

2008 2007 2008 2007
--------- -------- -------- ----------

Cash from operations
Net income $ 837 $ 1,887 $ 3,010 $ 4,037
Adjustments to reconcile net
income to net cash provided
by operations:
Depreciation & amortization 520 553 2,120 2,419
Write-off of purchased
technology - 36 147 1,072
Non-cash stock compensation
expense 428 941 1,793 2,096
Non-cash changes in deferred
tax assets 28 34 (126) 1,035
Changes in current assets
and liabilities:
(Increase) decrease in
trade accounts receivable 184 463 (20) 1,845
(Increase) decrease in
prepaid expenses and other
current assets (302) (250) 182 (286)
Increase (decrease) in
accounts payable and
accrued liabilities (15) (1,061) 453 (784)
Increase in deferred
revenue 390 365 305 418
--------- -------- -------- ----------
Net cash provided by
operations 2,070 2,968 7,864 11,852

Cash from investing activities
Purchase of property and
equipment (203) (181) (651) (705)
Sales and (purchases) of
marketable securities, net (2,040) (4,229) 3,077 (2,383)
(Increase) decrease in other
assets 10 (78) (33) (65)
--------- -------- -------- ----------
Net cash used in investing
activities (2,233) (4,488) 2,393 (3,153)

Cash from financing activities
Proceeds from exercise of
stock options 126 273 425 2,550
Acquisition of Treasury Stock (746) (3,695) (9,153) (10,840)
--------- -------- -------- ----------
Net cash used in financing
activities (620) (3,422) (8,728) (8,290)

Effect of exchange rate on
cash and cash equivalents (48) (42) 98 17
--------- -------- -------- ----------
Increase (decrease) in cash
and cash equivalents (831) (4,984) 1,627 426
Cash and cash equivalents at
beginning of period 34,021 36,547 31,563 31,137
--------- -------- -------- ----------
Cash and cash equivalents at
end of period $ 33,190 $ 31,563 $ 33,190 $ 31,563
========= ======== ======== ==========
*T

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.

-0-
*T
Pervasive Software Inc.
Reconciliation of GAAP Measures to Non-GAAP
(in thousands, except per share data)
(Unaudited)

Three months Twelve months
ended ended
June 30, June 30,
----------------- -----------------
2008 2007 2008 2007
-------- -------- -------- --------
Net Net Net Net
Income Income Income Income
-------- -------- -------- --------

GAAP $ 837 $ 1,887 $ 3,010 $ 4,037
Amortization of intangible
assets - cost of product
licenses 317 317 1,268 1,268
Stock-based compensation -
cost of services and other 10 19 47 70
Stock-based compensation -
sales and marketing expense 121 140 494 594
Stock-based compensation -
research and development
expense 44 61 212 240
Stock-based compensation -
general and administrative
expense 254 274 1,041 1,192
Income tax adjustment for
non-GAAP (302) (1,258) (1,136) (2,233)

------- -------- -------- --------
Non-GAAP $ 1,281 $ 1,440 $ 4,936 $ 5,168
======= ======== ======== ========

GAAP net income per share -
diluted $ 0.04 $ 0.09 $ 0.15 $ 0.19

Non-GAAP net income per share -
diluted $ 0.07 $ 0.07 $ 0.24 $ 0.23

Shares used to compute GAAP net
income per share - diluted 19,162 21,197 19,951 21,744

Shares used to compute non-GAAP
net income per share - diluted 19,610 21,764 20,520 22,312
*T

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

Copyright Business Wire 2008