8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of report (Date of earliest event reported): January 27, 2005

INTERWOVEN, INC.

(Exact name of registrant as specified in its charter)

Delaware	000-27389	77-0523543
(State or other jurisdiction of	(Commission File Number)	(IRS Employer Identification No.)
incorporation)

803 11TH Avenue Sunnyvale, CA	94089
(Address of principal executive offices)	(Zip code)

Registrant’s telephone number, including area code: (408) 774-2000

Not Applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

EXHIBIT 99.1

Item 2.02 Results of Operations and Financial Condition

     The press release furnished under Item 9.01 of this Form 8-K includes pro forma operating results and a reconciliation of pro forma operating results to accounting principles generally accepted in the United States of America. Interwoven, Inc. (the “Company” or “Interwoven”) provides pro forma results as additional information to its consolidated results of operations. These pro forma measures are not in accordance with, or an alternative for, accounting principles generally accepted in the United States of America and may be different from pro forma measures used by other companies. Interwoven believes that the presentation of pro forma results provides useful information to management and investors regarding underlying trends in its consolidated financial condition and results of operations. Readers of Interwoven’s consolidated financial statements are advised to review and consider carefully the financial information prepared in accordance with accounting principles generally accepted in the United States of America contained in this press release and Interwoven’s periodic filings with the Securities and Exchange Commission.

     On January 27, 2005, the Company released its consolidated financial results for the quarter and year ended December 31, 2004 in a conference call with shareholders, investors and analysts. The conference call was announced on December 5, 2004, was available to the public through live teleconference and audio Webcast and will continue to be available for a limited time through audio replay or Webcast replay. During this conference call, Interwoven presented a slide in its Webcast containing reported gross margin percentage, operating margin percentage and net income (loss) per share over the current and the previous four quarters, on a basis of accounting principles generally accepted in the United States of America and on a pro forma basis. This information, along with a reconciliation to comparable financial measures in accordance with generally accepted accounting principles, is presented below.

     The table below reconciles the Company’s gross margin percentage calculated in accordance with accounting principles generally accepted in the United States of America to the pro forma gross margin percentage. The Company computes its gross margin percentage by dividing gross profit, as reported, by total revenues and its pro forma gross margin percentage by dividing pro forma gross profit by total revenues.

	Three Months Ended
(in thousands, except percentages)	Dec. 31,			Sept. 30,			June 30,			Mar. 31,			Dec. 31,
	2004			2004			2004			2004			2003
Total revenues	$	43,238		$	40,261		$	39,495		$	37,394		$	33,658
Gross profit, as reported	$	29,985		$	27,169		$	26,677		$	24,797		$	22,449
Add amortization of purchased technology		2,719			2,739			2,589			2,589			1,962
Pro forma gross profit	$	32,704		$	29,908		$	29,266		$	27,386		$	24,411
Gross margin percentage, as reported		69.3	%		67.5	%		67.5	%		66.3	%		66.7	%
Pro forma gross margin percentage		75.6	%		74.3	%		74.1	%		73.2	%		72.5	%

     The table below reconciles the Company’s operating margin percentage calculated in accordance with accounting principles generally accepted in the United States of America to the pro forma operating margin percentage. The Company computes its operating margin percentage by dividing income (loss) from operations by total revenues and its pro forma operating margin percentage by dividing pro forma income (loss) from operations by total revenues.

	Three Months Ended
(in thousands, except percentages)	Dec. 31,			Sept. 30,			June 30,			Mar. 31,			Dec. 31,
	2004			2004			2004			2004			2003
Total revenues	$	43,238		$	40,261		$	39,495		$	37,394		$	33,658
Income (loss) from operations, as reported	$	51		($	1,727	)	($	15,476	)	($	7,254	)	($	13,027	)
Add (deduct) certain charges:
Amortization of purchased technology		2,719			2,739			2,589			2,589			1,962
Amortization of stock-based compensation		630			941			806			2,605			866
Amortization of intangible assets		910			1,217			1,207			1,207			803
In-process research and development		—			—			—			—			4,575
Restructuring and excess facilities		(695	)		(1,360	)		11,837			—			3,112
Pro forma income (loss) from operations	$	3,615		$	1,810		$	963		($	853	)	($	1,709	)
Operating margin, as reported		0.1	%		(4.3	%)		(39.2	%)		(19.4	%)		(38.7	%)
Pro forma operating margin percentage		8.4	%		4.5	%		2.4	%		(2.3	%)		(5.1	%)

     The table below reconciles the Company’s net income (loss) per share calculated in accordance with accounting principles generally accepted in the United States of America to the pro forma net income (loss) per share. The Company computes pro forma net income (loss) per share by dividing pro forma net income (loss) by shares used in computing pro forma net income (loss) per share. Share used in computing pro forma net income (loss) per share includes the weighted average shares outstanding for the period presented plus dilutive common stock options.

	Three Months Ended
(in thousands, except for per share amounts)	Dec. 31,			Sept. 30,			June 30,			Mar. 31,			Dec. 31,
	2004			2004			2004			2003			2003
Net income (loss), as reported	$	405		($	1,502	)	($	15,586	)	($	6,984	)	($	12,397	)
Add (deduct) certain charges:
Amortization of purchased technology		2,719			2,739			2,589			2,589			1,962
Amortization of stock-based compensation		630			941			806			2,605			866
Amortization of intangible assets		910			1,217			1,207			1,207			803
In-process research and development		—			—			—			—			4,575
Restructuring and excess facilities		(695	)		(1,360	)		11,837			—			3,112
Tax impact of pro forma adjustments		(1,180	)		(532	)		(130	)		—			—
Pro forma net income (loss)	$	2,789		$	1,503		$	723		($	583	)	($	1,079	)
Pro forma net income (loss) per share	$	0.07		$	0.04		$	0.02		($	0.01	)	($	0.03	)
Shares used in computing pro forma net income (loss) per share		41,940			41,319			41,629			40,137			32,742

     The information contained in this Item 2.02 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, and is not incorporated by reference into any filing of Interwoven, Inc. under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in the filing.

Item 9.01. Financial Statements and Exhibits.

(c)   Exhibits.

Exhibit No.	Description
99.1	Press Release dated January 27, 2005*

* This exhibit is furnished with this Current Report on Form 8-K and is not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, and is not incorporated by reference into any filing of Interwoven, Inc. under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in the filing.

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	INTERWOVEN, INC.
	By:	/s/ JOHN E. CALONICO, JR.
January 27, 2005		John E. Calonico, Jr.
		Senior Vice President and Chief Financial Officer

EXHIBIT INDEX

99.1   Press release dated January 27, 2005.*

* This exhibit is furnished with this Current Report on Form 8-K and is not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, and is not incorporated by reference into any filing of Interwoven, Inc. under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in the filing.

EX-99.1

EXHIBIT 99.1

Interwoven Announces Strong Fourth Quarter and 2004 Year-End Results

Record Pro Forma Profitability; 96 New Customers Added;
Pro Forma Profit of $0.07 Per Share

SUNNYVALE, Calif. – January 27, 2005 – Interwoven, Inc. (Nasdaq: IWOV), provider of Enterprise Content Management (ECM) solutions for business, today announced strong financial results for the fourth quarter ended December 31, 2004.

Interwoven reported total revenues of $43.2 million for the fourth quarter of 2004, an increase of 7 percent from the $40.3 million posted in the quarter ended September 30, 2004, and an increase of 28 percent from total revenues of $33.7 million for the same period last year. Net income for the fourth quarter of 2004, calculated in accordance with generally accepted accounting principles, was $405,000, or $0.01 per share, compared to a net loss of $12.4 million, or $0.38 per share, for the same period last year. On a pro forma basis, Interwoven reported net income of $2.8 million for the fourth quarter of 2004, or $0.07 per share compared to a pro forma net loss of $1.1 million, or $0.03 per share, in the fourth quarter last year. Pro forma net income (loss) excludes restructuring adjustments, amortization of stock-based compensation and intangible assets, a charge for in-process research and development in 2003 and the related tax impact of these items.

For the year ended December 31, 2004, Interwoven reported total revenues of $160.4 million, an increase of 44 percent from the $111.5 million for the same period last year. Net loss for the year ended December 31, 2004, calculated in accordance with generally accepted accounting principles, was $23.7 million, or $0.58 per share, compared to a net loss of $47.5 million, or $1.72 per share, for the same period last year. On a pro forma basis, Interwoven reported net income of $4.4 million for the year ended December 31, 2004, or $0.11 on a per share basis, compared to a pro forma net loss of $16.9 million, or $0.61 per share, last year. Pro forma net income (loss) excludes restructuring adjustments, amortization of stock-based compensation and intangible assets, a charge for in-process research and development in 2003 and the related tax impact of these items.

A reconciliation of net income (loss) calculated in accordance with generally accepted accounting principles and pro forma net income (loss), is provided in the tables immediately following the consolidated statements of operations below. These pro forma measures are not in accordance with, or an alternative for, similar measures calculated in accordance with generally accepted accounting principles and may be different from pro forma measures used by other companies. Interwoven believes that the presentation of pro forma results provides useful information to management and investors regarding underlying trends in its consolidated financial condition and results of operations. Readers of Interwoven’s consolidated financial statements are advised to review and carefully consider the financial information prepared in accordance with generally accepted accounting principles contained in this press release and Interwoven’s periodic filings with the Securities and Exchange Commission.

“Q4 was a very strong quarter for us, and capped off an equally impressive 2004,” said Martin Brauns, chairman and CEO of Interwoven. “Executing on our promise at the start of 2004 to lead the ECM marketplace, Interwoven demonstrated exceptional performance on a number of fronts throughout the year—we successfully integrated iManage and Interwoven, consistently beat our competition with new customer wins, continued to cross-sell into our existing customer base,

drove innovation across all of our industry-leading products and solutions, and finished off the year by achieving record pro forma profitability. I’m thrilled with both our Q4 and 2004 achievements and look forward to capitalizing on this success in 2005.”

Customer Momentum Continues

Interwoven continued its momentum in the fourth quarter with 96 new customers. Today, approximately 3,200 enterprises and professional services organizations worldwide are Interwoven customers.

New customers selecting Interwoven include the Canadian Broadcasting Company; EchoStar Satellite LLC; Chubb Security; Church Pension Group; Financial Security Assurance; NEC Semiconductor in Malaysia; Symbol Technologies; and many more. In the legal vertical market, Interwoven continued to attract new law firm and corporate legal department customers worldwide. New corporate legal department customers include Pacificare Health; PalmSource; and Lincoln Financial Group. New law firm customers include: Orrick, Herrington & Sutcliffe; Taylor Wessing; Deutsch, Kerrigan & Stiles; Hannes Snellman; and Maddocks. Interwoven continues to help leading law firms address key business process challenges such as document management, collaboration, and e-mail management, and has the majority of AmLaw 200 firms as customers (the definitive ranking of the largest American law firms). In 2004, 42 law firms, representing nearly 19,000 seats, converted to Interwoven WorkSite from the nearest competitor.

In Q4, Interwoven also received new orders from existing customers including: Adidas; Kraft; Boeing; Motorola; Tyco; Royal Caribbean Cruise Lines; Kaiser Permanente; Blue Cross Blue Shield of Rhode Island; HSBC; Norfolk Southern; WellPoint Health Networks; NYC Law Department; and State of Mississippi. Reorders from law firms include: Butler, Snow, O’Mara, Stevens; King & Spalding; Sheppard Mullin Richter & Hampton; and Holland and Knight, to name a few.

As Interwoven continued its cross-selling focus, existing customers expanded their Interwoven implementations with the adoption of additional products and solutions. For example, Blue Cross Blue Shield of Massachusetts, an existing TeamSite customer, extended its Interwoven implementation with the addition of MediaBin for digital asset management and WorkSite MP for collaborative document management. BCBSMA also purchased additional OpenDeploy for content provisioning to enable faster, accurate and cost-effective synchronization of a disaster recovery site for its member and provider websites.

Furthermore, Boeing, a long-time TeamSite customer, added MediaBin to better merchandise aircraft, aerospace and related images to its customers. And, Tyco, an existing WorkSite customer, will be implementing Interwoven’s new LiveSite Content Publishing Server in 2005.

ECM Technology Leadership

Throughout the quarter, Interwoven continued to extend its ECM technology leadership in key product and solution areas:

•   LiveSite—Interwoven introduced Interwoven LiveSite™ Content Publishing Server, a revolutionary new Web content publishing product that is expected to significantly change how websites are created, deployed and managed within enterprises. Powered by new WYSIWYG (What You See Is What You Get) content publishing technology, LiveSite is the industry’s first Web publishing product that empowers business users to

	quickly create and publish dynamic microsites—including public sites, intranets and extranets—while still providing IT with the tools to maintain a high degree of control and security.
•	Extranet—Continuing its focus on delivering leading ECM solutions for business, Interwoven introduced the new Interwoven Extranet solution, empowering companies to expand revenue channels and reduce partner support costs. Unlike other content management systems that require complex IT intervention, the Interwoven Extranet solution enables business users to easily build and rollout extranets. The solution also integrates with commercial or custom developed Web portals, portable devices and e-mail systems to help companies reach their business partners wherever and however they work.
•	Imaging—Interwoven continued its strong imaging success with over 600 customers to date. Underpinned by a dozen world-class imaging partners, the Interwoven Image Processing offering is central to automating key business processes such as accounts payable, claims processing, legal document processing, contract management and complying with regulations such as Sarbanes-Oxley. Core to the Interwoven offering is the upfront document capture capabilities delivered by Interwoven’s imaging partners including Kofax, eCopy, Notable Solutions, Document Automation Developers, ImageTag and Lexmark.

Awards/Accolades

Interwoven continued to demonstrate market traction with prestigious industry awards and accolades in Q4.

•   Frost & Sullivan ‘Market Leadership Award for Asia Pacific ECM’—Frost & Sullivan, a global growth consulting company, awarded Interwoven with the coveted ‘Market Leadership Award in the Asia Pacific ECM Market 2004’ for its demonstrated leadership in the implementation of market strategy. The benchmark study is based on a rigorous methodology combining focused interviews with all market participants and extensive research of proprietary data on specific measurement criteria.

•   Network Computing ‘Top Web-Based Collaboration Provider’—Reinforcing Interwoven’s position as a leading provider of document management and collaboration, Network Computing magazine rated Interwoven as a top Web-based collaboration vendor in a comparative review of collaborative workspace providers. After thorough product testing in Network Computing’s lab, Interwoven WorkSite MP outranked five other Web-based collaboration vendors in a comparison of features, interoperability and price.

•   EContent 100—Interwoven continued its strong market leadership and momentum with its naming to the annual EContent 100 list as a leader in the content management category. Each year, EContent magazine honors the top “stand-out companies that demonstrate the winning strategies and solutions that define the digital content industry.”

•   DM Review 100—During the quarter, Interwoven was also recognized by DM Review Magazine for demonstrating exceptional product quality, customer satisfaction and market share. The prestigious annual 100 list is compiled based on responses from the magazine’s readership.

•   LOTIES—Interwoven received a highly-regarded award in the annual LOTIES (Legal Office Technology Innovation Awards), which recognize companies for valuable technology contributions that revolutionize the way law firms work. Interwoven WorkSite 8 software was chosen by the UK legal community for leading document management, collaboration and e-mail management in the category of ‘Best Legal Office Technology Newcomer.’

Partners

Interwoven continued to strengthen key strategic alliances and drive revenue through the channel.

•   Partner Solutions—During the quarter, Interwoven partners delivered over 20 targeted solutions based on Interwoven technology to address key business challenges, such as deal management, contract management, marketing asset management and more. The solutions include: Marketing Asset Management from Accenture; Process Portals from BEA Systems and Hyperion; Accounts Payable Imaging from BCS; Metadata and Content Management from Deloitte & Touche; Accelerated Deal Management from Entology; and Contract Management from Perfectus.

•   Landor Associates—Interwoven and Landor Associates, the world’s most accomplished and internationally recognized branding and design consultancy, entered into a strategic partnership in which Landor is now reselling MediaBin Asset Server, Interwoven’s proven Digital Asset Management product, as a component of many Landor Brand Management and Marketing systems. These systems provide Landor clients with instant access and control over virtually any branding situation or promotional opportunity. Additionally, the unique transformation capabilities of MediaBin are employed by Landor to enable a new level of targeting and visual personalization for clients’ brand marketing campaigns.

•   Data Return—Interwoven announced during the quarter that it has expanded its partnership with Data Return, a leading tier-one provider of IT operations services, naming Data Return as Interwoven’s go-to provider for hosting services across all Interwoven products and solutions. As a result, customers now have an end-to-end hosted solution for the entire Interwoven ECM platform utilizing Data Return’s Highly Managed Hosting services. Current customers benefiting from the partnership include DIRECTV, Inc. and Landry’s Restaurants, Inc.

Conference Call Information

Interwoven’s 2004 fourth quarter results and its business outlook for the first quarter of 2005 will be discussed today, January 27, 2005 at 2:00 p.m. PT (5:00 p.m. ET).

Live Dial-in #:	(913) 981-4911
Replay #:	(719) 457-0820 or (888) 203-1112
Replay Passcode #:	182401

Webcast instructions will be available on Interwoven’s Website at http://www.interwoven.com/investors. The call replay will be available starting January 27, 2005 (5:00 p.m. PT) for a limited period.

About Interwoven

Interwoven, Inc., provider of Enterprise Content Management solutions for business, enables organizations to unify people, content and processes to minimize business risk, accelerate time-to-value and sustain lower total cost of ownership. Interwoven delivers deep industry-specific solutions which reduce business process cycle time from initial collaboration through design, production, sales, marketing, legal review, IT and service. Interwoven leads the industry with a service-oriented architecture today and easy-to-use, best-in-class components and solutions. Today, approximately 3,200 enterprises, law firms and professional services organizations worldwide are Interwoven customers including British Telecom, Ford, Freshfields Bruckhaus Deringer, General Motors, Jones Day, Motorola and Yamaha. Interwoven is headquartered in

Sunnyvale, Calif., with offices around the world. For more information visit www.interwoven.com.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This press release contains “forward-looking” statements, including statements about historical results that may suggest trends for our business. These statements are based on estimates and information available to us at the time of this press release and are not guarantees of future performance. All statements other than statements of historical fact are statements that could be deemed as forward-looking statements. Actual results could differ materially from our current expectations as a result of many factors, including: customer acceptance of our enterprise content management solutions and new product releases may be slower than we anticipate; customer spending on enterprise content management initiatives may decline; our ability to cross-sell additional products into our installed base of customers; intense competition in our market which makes our results difficult to predict; development of certain Interwoven products and services may not proceed as planned; and the introduction of new products or services by competitors and the ongoing consolidation in our market place could delay or reduce sales. These and other risks and uncertainties associated with our business are described in our most recent Annual Report on Form 10-K, subsequent Quarterly Reports on Form 10-Q and Current Reports on Forms 8-K, which are on file with the Securities and Exchange Commission and available through www.sec.gov.

###

INTERWOVEN, INC.

Consolidated Statements of Operations

(In thousands, except per share data)

	Three Months Ended						Year Ended
	December 31,						December 31,
	2004			2003			2004			2003
	(Unaudited)
Revenues:
License	$	18,006		$	16,210		$	67,341		$	45,936
Support and service		25,232			17,448			93,047			65,576
Total revenues		43,238			33,658			160,388			111,512
Cost of revenues:
License		3,472			2,775			13,336			5,368
Support and service		9,781			8,434			38,424			32,276
Total cost of revenues		13,253			11,209			51,760			37,644
Gross profit		29,985			22,449			108,628			73,868
Operating expenses:
Sales and marketing		18,239			16,441			70,824			57,959
Research and development		7,792			6,551			30,825			24,613
General and administrative		3,058			3,128			12,080			12,474
Amortization of stock-based compensation		630			866			4,982			2,348
Amortization of intangible assets		910			803			4,541			2,348
In-process research and development		—			4,575			—			5,174
Restructuring and excess facilities		(695	)		3,112			9,782			18,813
Total operating expenses		29,934			35,476			133,034			123,729
Income (loss) from operations		51			(13,027	)		(24,406	)		(49,861	)
Interest income and other, net		611			888			1,725			3,401
Income (loss) before income taxes		662			(12,139	)		(22,681	)		(46,460	)
Provision for income taxes		257			258			986			1,071
Net income (loss)	$	405		$	(12,397	)	$	(23,667	)	$	(47,531	)
Basic net income (loss) per common share	$	0.01		$	(0.38	)	$	(0.58	)	$	(1.72	)
Shares used in computing basic net income (loss) per common share		40,855			32,742			40,494			27,585
Diluted net income (loss) per common share	$	0.01		$	(0.38	)	$	(0.58	)	$	(1.72	)
Shares used in computing diluted net income (loss) per common share		41,940			32,742			40,494			27,585

INTERWOVEN, INC.

Impact of Pro Forma Adjustments on Reported
Consolidated Statements of Operations

(In thousands, except per share data)
(Unaudited)

	Three Months Ended								Three Months Ended
	December 31, 2004								December 31, 2003
	As reported			Adjustments*			Pro forma		As reported			Adjustments*			Pro forma
Revenues:
License	$	18,006		$	—		$	18,006	$	16,210		$	—		$	16,210
Support and service		25,232			—			25,232		17,448			—			17,448
Total revenues		43,238			—			43,238		33,658			—			33,658
Cost of revenues:
License		3,472			(2,719	)		753		2,775			(1,962	)		813
Support and service		9,781			—			9,781		8,434			—			8,434
Total cost of revenues		13,253			(2,719	)		10,534		11,209			(1,962	)		9,247
Gross profit		29,985			2,719			32,704		22,449			1,962			24,411
Operating expenses:
Sales and marketing		18,239			—			18,239		16,441			—			16,441
Research and development		7,792			—			7,792		6,551			—			6,551
General and administrative		3,058			—			3,058		3,128			—			3,128
Amortization of stock- based compensation		630			(630	)		—		866			(866	)		—
Amortization of intangible assets		910			(910	)		—		803			(803	)		—
In-process research and development		—			—			—		4,575			(4,575	)		—
Restructuring and excess facilities charges		(695	)		695			—		3,112			(3,112	)		—
Total operating expenses		29,934			(845	)		29,089		35,476			(9,356	)		26,120
Income (loss) from operations		51			3,564			3,615		(13,027	)		11,318			(1,709	)
Interest income and other, net		611			—			611		888			—			888
Income (loss) before income taxes		662			3,564			4,226		(12,139	)		11,318			(821	)
Provision for income taxes		257			1,180			1,437		258			—			258
Net income (loss)	$	405		$	2,384		$	2,789	$	(12,397	)	$	11,318		$	(1,079	)
Net income (loss) per share	$	0.01					$	0.07	$	(0.38	)				$	(0.03	)
Shares used in computing pro forma net income (loss) per share**		41,940						41,940		32,742						32,742

*	The pro forma adjustments represent the reversal of restructuring and excess facilities charges, in-process research and development, the amortization of stock-based compensation and intangible assets and the related tax impact of these adjustments.
**	The shares used in computing pro forma net income per share for the three months ended December 31, 2004 include the dilutive impact of common stock options.

INTERWOVEN, INC.

Impact of Pro Forma Adjustments on Reported
Consolidated Statements of Operations

(In thousands, except per share data)
(Unaudited)

	Year Ended								Year Ended
	December 31, 2004								December 31, 2003
	As reported			Adjustments*			Pro forma		As reported			Adjustments*			Pro forma
Revenues:
License	$	67,341		$	—		$	67,341	$	45,936		$	—		$	45,936
Support and service		93,047			—			93,047		65,576			—			65,576
Total revenues		160,388			—			160,388		111,512			—			111,512
Cost of revenues:
License		13,336			(10,636	)		2,700		5,368			(1,962	)		3,406
Support and service		38,424			—			38,424		32,276			—			32,276
Total cost of revenues		51,760			(10,636	)		41,124		37,644			(1,962	)		35,682
Gross profit		108,628			10,636			119,264		73,868			1,962			75,830
Operating expenses:
Sales and marketing		70,824			—			70,824		57,959			—			57,959
Research and development		30,825			—			30,825		24,613			—			24,613
General and administrative		12,080			—			12,080		12,474			—			12,474
Amortization of stock- based compensation		4,982			(4,982	)		—		2,348			(2,348	)		—
Amortization of intangible assets		4,541			(4,541	)		—		2,348			(2,348	)		—
In-process research and development		—			—			—		5,174			(5,174	)		—
Restructuring and excess facilities charges		9,782			(9,782	)		—		18,813			(18,813	)		—
Total operating expenses		133,034			(19,305	)		113,729		123,729			(28,683	)		95,046
Income (loss) from operations		(24,406	)		29,941			5,535		(49,861	)		30,645			(19,216	)
Interest income and other, net		1,725			—			1,725		3,401			—			3,401
Income (loss) before income taxes		(22,681	)		29,941			7,260		(46,460	)		30,645			(15,815	)
Provision for income taxes		986			1,842			2,828		1,071			—			1,071
Net income (loss)	$	(23,667	)	$	28,099		$	4,432	$	(47,531	)	$	30,645		$	(16,886	)
Net income (loss) per share	$	(0.58	)				$	0.11	$	(1.72	)				$	(0.61	)
Shares used in computing pro forma net income (loss) per share**		40,494						41,256		27,585						27,585

*	The pro forma adjustments represent the reversal of restructuring and excess facilities charges, in-process research and development, amortization of stock-based compensation and intangible assets and the related tax impact of these adjustments.
**	The shares used in computing pro forma net income per share for the year ended December 31, 2004 include the dilutive impact of common stock options.

INTERWOVEN, INC.

Consolidated Balance Sheets

(In thousands)

	December 31, 2004			December 31, 2003
Assets
Current assets:
Cash and cash equivalents	$	52,952		$	43,566
Short-term investments		80,805			96,921
Accounts receivable, net		28,292			33,834
Prepaid expenses and other current assets		8,450			8,629
Total current assets		170,499			182,950
Property and equipment, net		5,831			7,403
Goodwill		185,464			185,991
Other intangible assets, net		30,035			43,134
Other assets		1,947			2,347
Total assets	$	393,776		$	421,825
Liabilities and Stockholders’ Equity
Current liabilities:
Bank borrowings	$	—		$	1,213
Accounts payable		5,568			4,576
Accrued liabilities		20,370			22,961
Restructuring and excess facilities accrual		8,966			15,733
Deferred revenues		50,121			44,066
Total current liabilities		85,025			88,549
Accrued liabilities		3,413			912
Restructuring and excess facilities accrual		16,716			31,430
Total liabilities		105,154			120,891
Commitments and contingencies
Stockholders’ equity:
Common stock		41			40
Additional paid-in capital		697,860			693,773
Deferred stock-based compensation		(2,067	)		(9,564	)
Accumulated other comprehensive income (loss)		(205	)		25
Accumulated deficit		(407,007	)		(383,340	)
Total stockholders’ equity		288,622			300,934
Total liabilities and stockholders’ equity	$	393,776		$	421,825