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): July 21, 2005

INTERWOVEN, INC.

(Exact name of registrant as specified in its charter)

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

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

     On July 21, 2005, Interwoven, Inc. (the “Company” or “Interwoven”) released its consolidated financial results for the quarter and six months ended June 30, 2005 in a press release and convened a conference call with shareholders, investors and analysts. The conference call was announced on July 6, 2005, is available to the public through live teleconference and audio Web cast and will continue to be available for a limited time through audio replay or Web cast replay. During this conference call, Interwoven presented slides in its Web cast containing reported gross margin percentage, operating margin percentage and net income (loss) per share over the current and the previous four quarters, on both a basis of accounting principles generally accepted in the United States of America and on a non-GAAP basis. This information, along with a quantitative 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 non-GAAP gross margin percentage in each period. The Company computes its gross margin percentage by dividing gross profit, as reported, by total revenues, and computes its non-GAAP gross margin percentage by dividing non-GAAP gross profit by total revenues.

	Three Months Ended
	June 30,			Mar. 31,			Dec. 31,			Sept. 30,			June 30,
	2005			2005			2004			2004			2004
	(in thousands, except percentages)
Total revenues	$	41,034		$	42,485		$	43,238		$	40,261		$	39,495
Gross profit, as reported	$	27,483		$	28,996		$	29,985		$	27,169		$	26,677
Add amortization of purchased technology		2,725			2,725			2,719			2,739			2,589
Non-GAAP gross profit	$	30,208		$	31,721		$	32,704		$	29,908		$	29,266
Gross margin percentage, as reported		67	%		68	%		69	%		68	%		68	%
Non-GAAP gross margin percentage		74	%		75	%		76	%		74	%		74	%

     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 non-GAAP operating margin percentage in each period. The Company computes its operating margin percentage by dividing income (loss) from operations by total revenues, and computes its non-GAAP operating margin percentage by dividing non-GAAP income from operations by total revenues.

	Three Months Ended
	June 30,			Mar. 31,			Dec. 31,			Sept. 30,			June 30,
	2005			2005			2004			2004			2004
	(in thousands, except percentages)
Total revenues	$	41,034		$	42,485		$	43,238		$	40,261		$	39,495
Income (loss) from operations, as reported	$	(649	)	$	(662	)	$	51		($	1,727	)	($	15,476	)
Add (deduct) certain charges:
Amortization of purchased technology		2,725			2,725			2,719			2,739			2,589
Amortization of stock-based compensation		283			510			630			941			806
Amortization of intangible assets		782			856			910			1,217			1,207
Restructuring and excess facilities		(303	)		(330	)		(695	)		(1,360	)		11,837
Non-GAAP income from operations	$	2,838		$	3,099		$	3,615		$	1,810		$	963
Operating margin, as reported		(1	%)		(2	%)		0	%		(4	%)		(39	%)
Non-GAAP operating margin percentage		7	%		7	%		8	%		4	%		2	%

     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 non-GAAP net income per share in each period. The Company computes net income (loss) per share by dividing net income (loss) by shares used in computing net income (loss) per share. The Company computes non-GAAP net income per share by dividing non-GAAP net income by shares used in computing non-GAAP net income per share. Shares used in computing these amounts include the weighted average shares outstanding for the period presented plus dilutive common stock options.

	Three Months Ended
	June 30,			Mar. 31,			Dec. 31,			Sept. 30,			June 30,
	2005			2005			2004			2004			2004
	(in thousands, except per share amounts)
Net income (loss), as reported	$	(66	)	$	(249	)	$	405		$	(1,502	)	$	(15,586	)
Add (deduct) certain charges:
Amortization of purchased technology		2,725			2,725			2,719			2,739			2,589
Amortization of stock-based compensation		283			510			630			941			806
Amortization of intangible assets		782			856			910			1,217			1,207
Restructuring and excess facilities		(303	)		(330	)		(695	)		(1,360	)		11,837
Tax impact of non-GAAP adjustments		(949	)		(996	)		(1,180	)		(532	)		(130	)
Non-GAAP net income	$	2,472		$	2,516		$	2,789		$	1,503		$	723
Net income (loss) per share	($	0.00	)	($	0.01	)	$	0.01		($	0.04	)	($	0.39	)
Non-GAAP net income per share	$	0.06		$	0.06		$	0.07		$	0.04		$	0.02
Shares used in computing net income (loss) per share		41,635			41,137			41,940			40,564			40,420
Dilutive securities used in non-GAAP computation		519			975			—			755			1,209
Shares used in computing non-GAAP net income per share		42,154			42,112			41,940			41,319			41,629

     The press release furnished under Item 9.01 of this Current Report on Form 8-K includes non-GAAP operating results of Interwoven and a reconciliation of those results to Interwoven’s results prepared in accordance with accounting principles generally accepted in the United States of America. These non-GAAP results are not in accordance with, or an alternative for, results prepared in accordance with accounting principles generally accepted in the United States of America and the Company’s non-GAAP measures may be different from non-GAAP measures used by other companies. Interwoven believes that the presentation of non-GAAP results provides useful information to management and investors regarding underlying trends in its consolidated financial condition and results of operations. Interwoven uses these non-GAAP measures in assessing corporate performance and determining incentive compensation. Readers 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.

     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 July 21, 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.
July 21, 2005	By:	/s/	JOHN E. CALONICO, JR.
		John E. Calonico, Jr.
		Senior Vice President and Chief Financial Officer

EXHIBIT INDEX

99.1 Press release dated July 21, 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 Second Quarter 2005 Results

Revenues of $41.0 Million; Non-GAAP Profit of 6 Cents Per Share; 73 New Customers

SUNNYVALE, Calif. – July 21, 2005 – Interwoven, Inc. (Nasdaq: IWOV), provider of Enterprise Content Management (ECM) solutions for business, today announced financial results for the second quarter and six months ended June 30, 2005.

Interwoven reported total revenues of $41.0 million for the second quarter, an increase of 4% from the $39.5 million for the same period last year. Net loss for the second quarter of 2005 calculated in accordance with generally accepted accounting principles was $66,000, or essentially break even on a per share basis, as compared to a net loss of $15.6 million, or $0.39 per share, for the same period last year. On a non-GAAP basis, Interwoven reported a net income of $2.5 million for the second quarter of 2005, or $0.06 per share, versus a non-GAAP net income of $723,000, or $0.02 per share, for the same period last year. Non-GAAP results exclude restructuring and excess facilities charges and amortization of stock-based compensation and intangible assets and the related tax impact of these adjustments. At the end of the second quarter, Interwoven had cash and investments of $144.1 million, an increase of $3.0 million from the $141.1 million at March 31, 2005.

For the six months ended June 30, 2005, Interwoven reported total revenues of $83.5 million, an increase of 9% from the $76.9 million for the same period last year. Net loss for the six months ended June 30, 2005, calculated in accordance with generally accepted accounting principles, was $315,000, or $0.01 per share, compared to a net loss of $22.6 million, or $0.56 per share, for the same period last year. On a non-GAAP basis, Interwoven reported net income of $5.0 million for the six months ended June 30, 2005, or $0.12 on a per share basis, compared to a non-GAAP net income of $140,000, or essentially break even on a per share basis, for the same period last year. Non-GAAP results exclude restructuring and excess facilities charges and amortization of stock-based compensation and intangible assets and the related tax impact of these adjustments.

A reconciliation of net loss calculated in accordance with generally accepted accounting principles and non-GAAP net income, is provided in the tables immediately following the consolidated statements of operations and a further description of non-GAAP adjustments can be found under the caption “Non-GAAP Financial Information” below.

“While it is disappointing to report lower than expected license revenue in Q2, Interwoven’s business remains strong, with solid non-GAAP profits and cash flow,” said Martin Brauns, chairman and CEO of Interwoven. “Moving forward, we continue to expand the business with key growth catalysts including deepened ECM solutions and increased market reach through global partnerships including Microsoft and Sun.”

Continued Global Customer Acquisition

Interwoven continued its strong global customer momentum in the second quarter with 73 new customers. Today, over 3,300 enterprises and professional services organizations worldwide are Interwoven customers.

New customers selecting Interwoven worldwide in the second quarter include: Computerworld; Ubisoft; MVP Healthcare; Neteller; Vitale, Caturano & Co., a top 50

accounting firm, Sky Italia: the National Heritage Board in South Asia; and the Rashi Foundation in Europe. Interwoven also continued to attract new world-class law firm and corporate legal department customers in the second quarter. New corporate legal department customers include: Brooks Pharmacy; Edison Properties; Banco BBM in Brazil; and others. New law firm customers include: Seyfarth Shaw; McGuireWoods; Adorno, Yoss, Alvarado & Smith; Ehrhardt Keefe Steiner & Hottman; Carey Y Cia in Chile; and Blake Dawson Waldron, an international law firm with offices in England, Australia, and China. Interwoven was also selected by The Massachusetts District Attorney’s Office. As a result of Interwoven’s continued legal success throughout the quarter, including nearly a dozen competitive replacements, Interwoven now has 59 of the AmLaw100 and 107 of the AmLaw200 firms (the definitive rankings of the largest American law firms) as customers.

In the second quarter, Interwoven also received orders from existing customers including: Allstate Insurance; BT; Qantas; Boeing; Avaya; FedEx; Bell Canada; OppenheimerFunds, Inc.; Citigroup; Starz Encore Group; Staples; Heidelberg, a global printing systems vendor based in Germany with offices worldwide; and Cathay Life, Taiwan’s largest life insurance company. Reorders from law firms include: Freshfields Bruckhaus Deringer, a leading UK-based law firm; Archer & Greiner; Stinson Morrison Hecker; Pillsbury Winthrop Shaw Pittman; and Mannheimer Swartling, the largest law firm in Scandinavia.

During the quarter, customers also continued to expand their Interwoven implementations, reflecting Interwoven’s successful cross-sell focus. For example, Heidelberg, an existing Interwoven Web Content Management (WCM) customer, purchased Interwoven Digital Asset Management (DAM) during the quarter to manage all of their images in one central repository for use on their website, in corporate collateral, and for advertising pieces, enabling them to achieve multi-channel distribution. Additionally, Starz Encore Group, an existing DAM customer, purchased Interwoven’s WCM solution, while Tyco, an existing WCM customer, extended its Interwoven ECM implementation with the purchase of Collaborative Document Management (CDM).

ECM Solution Leadership and Partner Success

Interwoven continued to deliver on its strategy of bringing to market innovative new ECM solutions, underscored by key partnerships.

• Microsoft—Interwoven and Microsoft expanded their partnership through which Interwoven will deliver tightly integrated end-to-end ECM solutions on the Microsoft platform. With these high-velocity ECM solutions, Interwoven will enable information workers—starting with professional services firms including legal, accounting, management consulting, corporate legal departments, and IT consulting—to manage the entire content lifecycle through the tight integration of the Interwoven WorkSite CDM, E-Mail Management, and RecordsManager solutions with the Microsoft platform including Office and Windows.

• Sun—Yesterday, Interwoven and Sun Microsystems, Inc. announced an expanded partnership under which Sun has agreed to resell the Interwoven ECM platform for enterprise content and compliance customers. By combining Sun’s Java Enterprise System software, Sun Fire enterprise servers, and Sun StorEdge products with the

	Interwoven ECM platform, Sun’s Client Solutions Organization can provide a complete, end-to-end system for governments, enterprises, and service providers.
•	Brandbank Partnership—Interwoven and Brandbank, the U.K.’s premier supplier of product images and data to the retail e-commerce community, unveiled a partnership in which Brandbank has agreed to provide Interwoven’s DAM solution as a hosted offering to its over 900 retail clients, enabling them to more effectively manage their brands. Current retail and manufacturing customers that rely on Brandbank include Tesco, Sainsbury’s, and Procter & Gamble.
•	Content Storage Solutions—Interwoven is providing customers with content storage solutions based on integrations with key storage partners including EMC, Network Appliance, and Sun Microsystems. Interwoven’s content storage solutions—Storage-Enabled Collaborative Document Management and End-to-End Web Record Retention—enable customers to effectively address evolving and often highly-complex document retention and compliance mandates at any content level.
•	Salesforce Productivity Intranet and Channel Extranet Solutions—Further reinforcing its WCM leadership, Interwoven introduced its new Salesforce Productivity Intranet and Channel Extranet solutions. The solutions are based on Interwoven’s revolutionary new LiveSite Content Publishing technology, and are the first on the market designed specifically to empower marketing organizations to quickly and easily achieve sales and channel optimization.
•	Discovery Management Solution—Interwoven and Fios, a tier-one provider of IT-enabled electronic discovery services, announced a strategic partnership in which the two companies are collaborating to bring to market the first complete discovery management solution for the enterprise. Under the agreement, Fios will also integrate Interwoven’s CDM technology as the foundation of its evidence management services.
•	Collaborative Document Management Partner Solutions—Interwoven announced that a growing number of highly-targeted solutions based on its CDM technology are available to customers through its partner network. Solutions built on Interwoven CDM address a growing range of business processes including: Imaging and Accounts Payable; Deal Management; Campaign Management; IT Project Management; Claims Management; and more.

Industry Recognition/Awards

In the second quarter, Interwoven continued to receive widespread recognition from leading industry analysts, publications, and award associations across the globe for its best-in-class ECM solutions, market leadership, and strong customer ROI.

• Industry & Editorial Awards—Interwoven received several awards for solution performance, strong commitment to customer support, and market leadership. Awards included: Network Computing Magazine’s ‘Well Connected Award’ for the Interwoven CDM solution; ‘Top Ten Provider of Online Customer Assistance’ by the Association of Support Professionals; Network World’s ‘200,’ a ranking of the largest companies involved in the networking industry; and MIS Magazine’s ‘Top 50 Global Leaders,’ a prestigious ranking of the top 50 global leaders in IT.

• Industry Analyst Recognition—In its recent 2004 ECM market share report, Gartner highlighted Interwoven as a company that exceeded the average ECM market growth. Additionally, in a report following Interwoven’s GearUp ’05 ECM Solutions conference (“Interwoven Gears Up for the Future,” May 2005), InfoTrends/CapVentures commended the company for its ECM solution strategy, recent partnerships, and the overall success of GearUp. According to InfoTrends, Interwoven’s focus on delivering

highly targeted ECM solutions has reinforced its position as an industry leader: “More and more, Interwoven’s customers need technology solutions to solve specific business problems with quick, measurable return on investment (ROI). Interwoven’s ability to provide these solutions has enabled the company to take its place among the top ECM providers.”

•

Press Coverage—Interwoven and its customers continued to receive positive coverage in leading technology trade press. In a recent product review from InfoWorld, Interwoven’s Content Provisioning solution received a high rating, with the publication concluding that “Interwoven tames unwieldy Web sites.” Furthermore, reinforcing Interwoven’s strong customer ROI, InformationWeek detailed in a May 2005 article (“British Telecom Standardizes on Interwoven System”) how BT is leveraging Interwoven to transition itself from a traditional telco to an e-commerce company, substantially increasing online transactions.

Interwoven GearUp ’05 Europe, ‘The ECM Solutions Conference’

Following the successful Interwoven GearUp ’05 U.S. event, the company will be hosting Interwoven GearUp ’05 Europe this October, which is poised to bring together hundreds of leading European customers, partners and ECM industry experts for sessions on ECM products, solutions, and best practices. The event will include a keynote address by leading industry analyst firm Gartner; customer and solution tracks; partner pavilion; exclusive gala reception; and presentations from world-class European customers and key Interwoven executives. The Interwoven GearUp ’05 U.S. event attracted 1,000 people, featured 70 track sessions, showcased over 50 partners, and included over 30 customer presentations.

Non-GAAP Financial Information

To supplement the company’s consolidated financial statements presented in accordance with generally accepted accounting principles in the United States of America, Interwoven uses measures of operating results, net loss and net loss per share, which are adjusted to exclude restructuring charges, amortization of stock-based compensation and intangible assets and the related tax impact of these adjustments. These non-GAAP results are not in accordance with, or an alternative for, results prepared in accordance with accounting principles generally accepted in the United States of America and the Company’s non-GAAP measures may be different from non-GAAP measures used by other companies. Interwoven believes that the presentation of non-GAAP results provides useful information to management and investors regarding underlying trends in its consolidated financial condition and results of operations. Interwoven uses these non-GAAP measures in assessing corporate performance and determining incentive compensation. Readers 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.

Conference Call Information

Interwoven’s 2005 second quarter results and its business outlook for the third quarter of 2005 will be discussed today, July 21, 2005 at 2:00 p.m. PT (5:00 p.m. ET).

Live Dial-in #:	(913) 981-5522
Replay #:	(719) 457-0820 or (888) 203-1112
Pass code:	9054354

Audio Webcast instructions will be available on Interwoven’s Website at http://www.interwoven.com/investors The call replay will be available starting July 21, 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, over 3,300 enterprises, law firms and professional services organizations worldwide are Interwoven customers including BT, 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. Our forward-looking statements include management quotations, statements about customer momentum and statements about technology leadership. Actual results could differ materially from our current expectations as a result of many factors, including: our ability to develop new products, features and functionality; customer acceptance of our solutions; the changing pace of customer spending on enterprise content management initiatives; our ability to cross-sell and up-sell additional products into our installed base of customers; the success of our strategic alliances; intense competition in our market; potentially delayed development of products or services; and the introduction of new products or services by competitors and the ongoing consolidation in our marketplace. These and other risks and uncertainties associated with our business are described in our most recent Annual Report on Form 10-K, 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)
(Unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2005			2004			2005			2004
Revenues:
License	$	14,666		$	16,502		$	31,083		$	33,178
Support and service		26,368			22,993			52,436			43,711
Total revenues		41,034			39,495			83,519			76,889
Cost of revenues:
License		3,342			3,318			6,830			6,477
Support and service		10,209			9,500			20,210			18,938
Total cost of revenues		13,551			12,818			27,040			25,415
Gross profit		27,483			26,677			56,479			51,474
Operating expenses:
Sales and marketing		16,624			17,557			33,743			35,285
Research and development		7,781			7,713			15,868			15,287
General and administrative		2,965			3,033			6,381			5,970
Amortization of stock-based compensation		283			806			793			3,411
Amortization of intangible assets		782			1,207			1,638			2,414
Restructuring and excess facilities charges		(303	)		11,837			(633	)		11,837
Total operating expenses		28,132			42,153			57,790			74,204
Loss from operations		(649	)		(15,476	)		(1,311	)		(22,730	)
Interest income and other, net		908			133			1,621			646
Income (loss) before provision for income taxes		259			(15,343	)		310			(22,084	)
Provision for income taxes		325			243			625			486
Net loss	$	(66	)	$	(15,586	)	$	(315	)	$	(22,570	)
Basic and diluted net loss per common share	$	(0.00	)	$	( 0.39	)	$	(0.01	)	$	(0.56	)
Shares used in computing basic and diluted net loss per common share		41,635			40,420			41,386			40,278

INTERWOVEN, INC.
Impact of Non-GAAP Adjustments on Reported Net Loss
(In thousands, except per share data)
(Unaudited)

	Three Months Ended								Three Months Ended
	June 30, 2005								June 30, 2004
	As reported			Adjustments*			Non-GAAP		As reported			Adjustments*			Non-GAAP
Revenues:
License	$	14,666		$	—		$	14,666	$	16,502		$	—		$	16,502
Support and service		26,368			—			26,368		22,993			—			22,993
Total revenues		41,034			—			41,034		39,495			—			39,495
Cost of revenues:
License		3,342			(2,725	)		617		3,318			(2,589	)		729
Support and service		10,209			—			10,209		9,500			—			9,500
Total cost of revenues		13,551			(2,725	)		10,826		12,818			(2,589	)		10,229
Gross profit		27,483			2,725			30,208		26,677			2,589			29,266
Operating expenses:
Sales and marketing		16,624			—			16,624		17,557			—			17,557
Research and development		7,781			—			7,781		7,713			—			7,713
General and administrative		2,965			—			2,965		3,033			—			3,033
Amortization of stock-based compensation		283			(283	)		—		806			(806	)		—
Amortization of intangible assets		782			(782	)		—		1,207			(1,207	)		—
Restructuring and excess facilities charges		(303	)		303			—		11,837			(11,837	)		—
Total operating expenses		28,132			(762	)		27,370		42,153			(13,850	)		28,303
Income (loss) from operations		(649	)		3,487			2,838		(15,476	)		16,439			963
Interest income and other, net		908			—			908		133			—			133
Income (loss) before income taxes		259			3,487			3,746		(15,343	)		16,439			1,096
Provision for income taxes		325			949			1,274		243			130			373
Net income (loss)	$	(66	)	$	2,538		$	2,472	$	(15,586	)	$	16,309		$	723
Net income (loss) per share	$	(0.00	)				$	0.06	$	(0.39	)				$	0.02
Shares used in computing net income (loss) per share**		41,635						42,154		40,420						41,629

*	The non-GAAP adjustments represent the reversal of restructuring and excess facilities charges, the amortization of stock-based compensation and intangible assets and the related tax impact of these adjustments.
**	The shares used in computing non-GAAP net income for the three months ended June 30, 2005 include the dilutive impact of common stock options.

INTERWOVEN, INC.

Impact of Non-GAAP Adjustments on Reported Net Loss

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

	Six Months Ended								Six Months Ended
	June 30, 2005								June 30, 2004
	As reported			Adjustments*			Non-GAAP		As reported			Adjustments*			Non-GAAP
Revenues:
License	$	31,083		$	—		$	31,083	$	33,178		$	—		$	33,178
Support and service		52,436			—			52,436		43,711			—			43,711
Total revenues		83,519			—			83,519		76,889			—			76,889
Cost of revenues:
License		6,830			(5,450	)		1,380		6,477			(5,178	)		1,299
Support and service		20,210			—			20,210		18,938			—			18,938
Total cost of revenues		27,040			(5,450	)		21,590		25,415			(5,178	)		20,237
Gross profit		56,479			5,450			61,929		51,474			5,178			56,652
Operating expenses:
Sales and marketing		33,743			—			33,743		35,285			—			35,285
Research and development		15,868			—			15,868		15,287			—			15,287
General and administrative		6,381			—			6,381		5,970			—			5,970
Amortization of stock-based compensation		793			(793	)		—		3,411			(3,411	)		—
Amortization of intangible assets		1,638			(1,638	)		—		2,414			(2,414	)		—
Restructuring and excess facilities charges		(633	)		633			—		11,837			(11,837	)		—
Total operating expenses		57,790			(1,798	)		55,992		74,204			(17,662	)		56,542
Income (loss) from operations		(1,311	)		7,248			5,937		(22,730	)		22,840			110
Interest income and other, net		1,621			—			1,621		646			—			646
Income (loss) before income taxes		310			7,248			7,558		(22,084	)		22,840			756
Provision for income taxes		625			1,945			2,570		486			130			616
Net income (loss)	$	(315	)	$	5,303		$	4,988	$	(22,570	)	$	22,710		$	140
Net income (loss) per share	$	(0.01	)				$	0.12	$	(0.56	)				$	0.00
Shares used in computing net income (loss) per share**		41,386						42,007		40,278						41,854

*	The non-GAAP adjustments represent the reversal of restructuring and excess facilities charges, the amortization of stock-based compensation and intangible assets and the related tax impact of these adjustments.
**	The shares used in computing non-GAAP net income for the six months ended June 30, 2005 include the dilutive impact of common stock options.

INTERWOVEN, INC.
Consolidated Balance Sheets
(In thousands)

	June 30, 2005			December 31, 2004
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	57,249		$	22,466
Short-term investments		86,820			111,291
Accounts receivable, net		25,194			28,292
Prepaid expenses and other current assets		6,480			8,450
Total current assets		175,743			170,499
Property and equipment, net		5,782			5,831
Goodwill		185,464			185,464
Other intangible assets, net		22,947			30,035
Other assets		1,947			1,947
Total assets	$	391,883		$	393,776
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	4,536		$	5,568
Accrued liabilities		19,032			20,370
Restructuring and excess facilities accrual		7,750			8,966
Deferred revenues		50,831			50,121
Total current liabilities		82,149			85,025
Accrued liabilities		3,078			3,413
Restructuring and excess facilities accrual		13,214			16,716
Total liabilities		98,441			105,154
Commitments and contingencies
Stockholders’ equity:
Common stock		42			41
Additional paid-in capital		702,045			697,860
Deferred stock-based compensation		(1,074	)		(2,067	)
Accumulated other comprehensive income (loss)		(249	)		(205	)
Accumulated deficit		(407,322	)		(407,007	)
Total stockholders’ equity		293,442			288,622
Total liabilities and stockholders’ equity	$	391,883		$	393,776