Chordiant Software Files Annual Report on Form 10-K for the Fourth Quarter and Fiscal Year 2005 Ended September 30, 2005

Chordiant Software, Inc. (NASDAQ: CHRD) today announced final financial results for the fourth quarter and fiscal year (FY) 2005 ended September 30 and filed its Annual Report on Form 10-K with the Securities and Exchange Commission (SEC). On December 6, 2005, the Company announced that it intended to restate its interim financial statements for the quarters ended December 31, 2004, March 31, 2005, and June 30, 2005 due to certain accounting errors. All financial information contained in the Annual Report on Form 10-K filed on December 9, 2005, gives effect to these restatements.

Fourth Quarter and Fiscal Year 2005 Results

Total revenues for the fourth quarter of FY 2005 were $21.3 million, which compares to revenues of $24.0 million reported for the three months ended September 30, 2004. For the Fiscal Year 2005, revenues were $83.7 million, compared to $80.6 million for the same period of the prior year. License revenues for the fourth quarter of FY 2005 were $6.7 million, compared to $9.0 million reported for the three months ended September 30, 2004. For the Fiscal Year 2005, license revenues were $31.7 million, compared to $32.9 million reported for the same period of 2004. After the close of the September 2005 quarter and before filing its FORM 10-K on December 9, certain significant customers increased the scope of work on their projects which impacted Chordiant's percent of completion revenue calculation. As a result, license revenue for the September 2005 quarter was reduced by approximately $2.5 million and deferred revenue was increased by an equal amount. Deferred revenue increased to $26.2 million as of September 30, 2005, compared to a balance of $20.6 million as of September 30, 2004. Service revenues for the fourth quarter of FY 2005 were $14.6 million, compared to $15.0 million reported for the three months ended September 30, 2004. For the Fiscal Year ended September 30, 2005, service revenues were $52.0 million, compared to $47.7 million for the same period of 2004.

Backlog of Business

Since an increasingly material portion of Chordiant's revenues has been derived from large orders, as major customers deploy the Company's products, Chordiant is now disclosing its backlog. As of September 30, 2005, the Company had approximately $33 million in backlog, which is defined as non-cancelable contractual commitments by the Company's customers through purchase orders or contracts. Backlog is comprised of current software license orders which have not met all of the required criteria for revenue recognition, deferred revenue from customer support contracts, and deferred consulting and education orders for services not yet completed or delivered. The backlog of Chordiant's business is not necessarily indicative of revenues to be recognized in a specified future period.

Cash Position

Chordiant increased its cash balances in the fourth quarter and had $40.9 million in cash and cash equivalents, restricted cash, and marketable securities at September 30, 2005.

GAAP and Non-GAAP Financial Measures

Chordiant posted a U.S. GAAP (Generally Accepted Accounting Principles) net loss of $5.5 million, or $0.07 per share loss for the fourth quarter of FY 2005 ended September 30, 2005, compared to a GAAP net profit of $1.5 million, or $0.02 per share for the three months ended September 30, 2004. Chordiant reported a fourth quarter FY 2005 non-GAAP financial measure loss of $2.8 million (which excludes stock-based compensation, amortization of intangible assets and restructuring expense), or a non-GAAP loss of $0.04 per share, compared to non-GAAP net income (which excludes stock-based compensation, amortization of intangible assets and restructuring expense) of $0.8 million, or non-GAAP income of $0.01 per share for the three months ended September 30, 2004.

Non-GAAP Financial Measurements

The Company's management believes that the presentation of a non-GAAP financial measure of net income or net loss, excluding purchased in-process research and development, amortization of deferred stock-based compensation, amortization of intangible assets and restructuring expenses, provides useful information regarding the Company's financial performance and earnings potential by calculating and quantifying the effect of certain charges of net income or net loss per share calculated in accordance with GAAP and gives investors and analysts insight into profitability of the Company's operating business. Management also believes that the presentation of the non-GAAP financial measures is consistent with its past practice, as well as industry practice in general, and will enable investors and analysts to compare current non-GAAP measures with non-GAAP measures presented in prior periods. The non-GAAP financial information may not be comparable to similarly titled measures used by other companies and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP.

Operating Expenses