Primus Knowledge Solutions Reports Third Quarter Sequential Revenue Growth of 45%

Business Wire, Oct 29, 2002

Business Editors/High-Tech Writers

SEATTLE--(BUSINESS WIRE)--Oct. 29, 2002

Primus Knowledge Solutions (Nasdaq:PKSI), a global provider of knowledge application software for customer contact centers, IT help desks, and Web self-service, today announced financial results for the third quarter ended September 30, 2002 and that The Nasdaq Stock Market, Inc. approved its application to transfer the listing of its shares of common stock from the Nasdaq National Market to the Nasdaq SmallCap Market.

Revenues for the quarter ended September 30, 2002, were $6.1 million, compared to $4.2 million for the quarter ended June 30, 2002, an increase of 45%. Excluding restructuring charges of $827,000, total operating expenses were $5.5 million and the net loss was approximately $750,000 or $0.04 per share for the quarter ended September 30, 2002. On a GAAP basis, total operating expenses (including restructuring charges) were $6.4 million and the net loss was approximately $1.6 million or $0.08 per share. For the quarter ended June 30, 2002, total operating expenses were $6.3 million and the net loss was $3.2 million or $0.17 per share.

During the quarter Primus closed an enterprise deal with T-Mobile, and signed agreements with Airbus, GE Power Systems, Hitachi Data Systems, Lexmark, Online Development, Primus KK and others.

As of September 30, 2002, Primus had cash, cash equivalents and short-term investments of $13.1 million, representing a decrease of approximately $2 million from June 30, 2002.

For the nine-month period ended September 30, 2002, revenues were $16.4 million. Excluding restructuring expenses of $1.3 million, total operating expenses were $18.6 million and excluding the cumulative effect of the change in accounting principle of $2.3 million, the net loss was $6.0 million or $0.32 per share. On a GAAP basis, total operating expenses were $19.9 million (including restructuring expenses of $1.3 million), the loss before the cumulative effect of the change in accounting principle was $7.3 million or $0.38 per share, and the net loss was $9.6 million or $0.50 per share (including the cumulative effect of the change in accounting principle of $2.3 million).

During the third quarter of 2002, Primus incurred a restructuring charge of approximately $827,000 related to the decision to exit certain domestic and international facilities and reduce its workforce.

During the first quarter of 2002, Primus recorded a non-cash, transitional impairment loss of approximately $2.3 million, or $0.12 per share, as a result of the January 1, 2002 adoption of Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, which requires that goodwill no longer be amortized to earnings, but instead be tested at least annually for impairment. Primus also incurred a restructuring charge of approximately $435,000 related to a reduction in its worldwide workforce.

The Nasdaq Stock Market, Inc. has approved Primus' application to transfer the listing of its shares of common stock from the Nasdaq National Market to the Nasdaq SmallCap Market. Primus' common stock will commence trading on the Nasdaq SmallCap Market effective November 1, 2002. Primus' trading symbol will continue to be "PKSI". As a result of its transfer to the Nasdaq SmallCap Market, Primus' delisting determination will be extended for an additional 90 days until January 29, 2003. To maintain this listing, the bid price of our common stock must close at $1.00 per share or more for a minimum of ten consecutive trading days. Primus may also be eligible for an additional grace period to July 28, 2003, if its meets the initial listing criteria for the Nasdaq SmallCap Market. As of September 30, 2002, Primus' stockholders' equity of approximately $12.5 million exceeded the $5 million Nasdaq SmallCap Market initial listing requirement.

About Primus Knowledge Solutions

For more than a decade, Primus(R) (Nasdaq:PKSI) has provided knowledge management software solutions that help companies define, meet, and exceed the productivity and quality goals of their contact centers, help desks, and Web self-service environments. Businesses around the world use Primus software to increase customer satisfaction, improve employee efficiency, and lower operating costs. Primus customers include such industry leaders as 3Com, The 3M Company, Airbus, The Boeing Company, Compaq Computer Corp., EMC, Enterasys, Ericsson, Inc., Fujitsu Limited, Inc., IBM, Motorola, Novell, T-Mobile, and VeriSign. For more information, visit Primus on the Web at www.primus.com or call 206/834-8100.

Primus, Primus Knowledge Solutions, Primus Answer Engine, Primus eServer, Primus eSupport and Primus eServer iView are registered trademarks or service marks of Primus Knowledge Solutions, Inc. Other products and company names mentioned in this press release may be the trademarks of their respective owners.

Any statements, expectations and assumptions contained in this press release that do not describe historical facts, such as statements about the integration, performance, use, and deployment of Primus products, customer orders, preliminary expected financial statement results, revenues required to achieve profitability, future spending levels and the anticipated results of our operations constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. There is no guarantee that these results will actually occur. Any forward-looking statements contained in this release are based on current expectations, are not guarantees of future performance, and are subject to a number of risks and uncertainties. Factors that could cause actual results to differ materially from current expectations include the following: any accounting adjustments made during the close of Primus's year-end; the pace of information technology spending; general economic conditions; failure in the customer's widespread adoption and use of the Primus products; fluctuations in customer demand; use of the Web as a delivery vehicle for customer support solutions; risk resulting from new product introductions and customer acceptance of new products; our need to develop new products and service offerings in the face of rapid technological change; the risks associated with competition and the rapid consolidation of competitors; the impact of class action securities litigation against Primus and certain of its officers; continued growth in the use of the Internet; the ability of Primus to manage its integration efforts and the ability of Primus to compete successfully in the future, as well as other risks identified in Primus' Securities and Exchange Commission filings, including but not limited to those appearing under the caption "Factors Affecting our Future Operating Results" in the Primus report on 10-K filed in March of 2002 and the Primus reports on 10-Q filed in May of 2002 and August of 2002.