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: April 17, 2003

(Date of earliest event reported)

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)

(408) 774-2000

(Registrant’s telephone number, including area code)

Item 7. FINANCIAL STATEMENTS AND EXHIBITS

(c) Exhibits

99.1	Press release dated April 17, 2003, announcing results for the quarter ended March 31, 2003.*
99.2	Transcript of publicly available April 17, 2003 investor conference call.*

* These exhibits are furnished with this Current Report on Form 8-K and are not deemed filed with the Securities and Exchange Commission and are not incorporated by reference in 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 any filings.

Item 9. REGULATION FD DISCLOSURE (Information Furnished Under Item 12—Results of Operations and Financial Condition.)

The information contained in this Item 9 is provided pursuant to Item 12 of Form 8-K, “Results of Operations and Financial Condition,” as contemplated by SEC Release Nos. 33-8176 and 33-8216.

On April 17, 2003, Interwoven, Inc. issued a press release announcing its financial results for the quarter ended March 31, 2003, a copy of which is attached hereto as Exhibit 99.1.

On April 17, 2003, Interwoven, Inc. presented its financial results for the quarter ended March 31, 2003 in a conference call with investors and analysts. The conference call was pre-announced and was available to the public through live teleconference and audio webcast and will continue to be available through audio replay or webcast replay. A copy of the transcript of this call is attached hereto as Exhibit 99.2.

During this conference call, Interwoven, Inc. announced that it expects revenue for the second quarter of 2003 to be between $25 and $26 million and revenue for fiscal year 2003 to be between $105 million and $112 million. In addition, Interwoven, Inc. announced that it expects its loss per share for the second quarter of 2003 and fiscal year 2003, based on 103 million weighed average shares outstanding at the end of each period. Interwoven, Inc. announced that it expects loss per share to be between $0.06 and $0.08 for the second quarter, on a GAAP basis, and between $0.24 and $0.28 for 2003, on a GAAP basis. Interwoven, Inc. also announced that it expects a pro forma loss per share to be between $0.04 and $0.06 for the second quarter and between $0.16 and $0.20 for 2003. Expected pro forma loss per share differs from expected GAAP loss per share because it excludes the effect of the following estimated charges or expenses: amortization of intangible assets of approximately $500,000 for the second quarter and approximately $2 million for 2003, amortization of deferred stock-based compensation of approximately $500,000 for the second quarter and $1.7 million for 2003, and restructuring charges of approximately $1 million for the second quarter and approximately $4 million for 2003.

The foregoing projections are forward-looking statements. These statements are based on estimates and information available to Interwoven, Inc. as of April 17, 2003 and are not guarantees of future performance. Actual results could differ materially from these expectations as a result of many factors, including: customer acceptance of new product releases may be slower than Interwoven, Inc. anticipates; customer spending on web initiatives may decline during the current economic downturn, which may be longer than Interwoven, Inc. anticipates; management changes may disrupt Interwoven, Inc.’s business; and the market for Interwoven, Inc.’s products is intensely competitive and rapidly evolving, so market success of its new product offerings is unpredictable. These and other risks and uncertainties associated with Interwoven, Inc.’s business are described in its most recent annual report on Form 10-K and subsequent Forms 10-Q and 8-K, which are on file with the SEC and available through www.sec.gov.

In addition, during this conference call Interwoven, Inc. presented a slide on its webcast containing previously reported net income/loss and earnings/loss per share over the previous seven quarters, on both a GAAP and a pro forma basis. This information, along with a reconciliation to comparable GAAP financial measures, is presented below. Certain reclassifications have been made to the information set forth below to conform to the presentation as of April 17, 2003.

	June 30, 2001			Sept. 30, 2001			Dec. 31, 2001			March 31, 2002			June 30, 2002			Sept. 30, 2002			Dec. 31, 2002
Net loss as reported	$	(38,446	)	$	(39,100	)	$	(27,313	)	$	(15,664	)	$	(13,791	)	$	(86,623	)	$	(32,538	)
Add back of certain non-cash and other charges:
Amortization of deferred stock-based compensation		4,286			3,207			2,157			3,207			58			1,020			595
Amortization of acquired intangible assets		21,928			22,209			22,109			1,236			1,310			732			444
Restructuring and excess facilities charges		12,784			10,032			—			1,220			7,244			1,179			28,441
Impairment of goodwill		—			—			—			—			—			76,431			—
Pro forma net income (loss)	$	552		$	(3,652	)	$	(3,047	)	$	(10,001	)	$	(5,179	)	$	(7,261	)	$	(3,058	)
Basic pro forma net income (loss) per share	$	0.01		$	(0.04	)	$	(0.03	)	$	(0.10	)	$	(0.05	)	$	(0.07	)	$	(0.03	)
Diluted pro forma net income (loss) per share	$	0.01		$	(0.04	)	$	(0.03	)	$	(0.10	)	$	(0.05	)	$	(0.07	)	$	(0.03	)
Shares used in computing basic net income (loss) per share		99,445			100,672			101,237			102,625			103,414			101,859			101,809
Shares used in computing diluted net income (loss) per share		107,780			100,672			101,237			102,625			103,414			101,859			101,809

Interwoven, Inc. believes that this pro forma information is useful for investors because it excludes non-cash and cash expenses that Interwoven, Inc. believes are not indicative of its on-going operations. However, Interwoven, Inc. urges readers to review and consider carefully the GAAP financial information contained in its SEC filings and in earnings releases.

SIGNATURES

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

		INTERWOVEN, INC. (Registrant)
Date:	April 23, 2003	By:	/s/    DAVID M. ALLEN
			David M. Allen Senior Vice President and Chief Financial Officer

EXHIBIT INDEX

99.1	Press release dated April 17, 2003, announcing results for the quarter ended March 31, 2003.*
99.2	Transcript of publicly available April 17, 2003 investor conference call.*

* These exhibits are furnished with this Current Report on Form 8-K and are not deemed filed with the Securities and Exchange Commission and are not incorporated by reference in 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 any filings.

EX-99.1

Exhibit 99.1

Press Release Source: Interwoven, Inc.

Interwoven Announces First Quarter 2003 Results

Thursday April 17, 5:02 pm ET

SUNNYVALE, Calif., April 17 /PRNewswire-FirstCall/ – Interwoven, Inc. (Nasdaq: IWOV – News), a world-leading provider of content management for the enterprise, today reported its first quarter results. Revenues for the quarter ended March 31, 2003 were $25.6 million, a decrease of 22% from revenues of $32.7 million for the quarter ended March 31, 2002 and a decrease of 18% from revenues of $31.1 million for the quarter ended December 31, 2002. License revenues represented 36% of total revenues, and service revenues represented 64% of total revenues, for the quarter ended March 31, 2003. Interwoven signed 29 new license customers in the quarter, bringing its total customer count to 1,171 customers.

For the quarter ended March 31, 2003, net loss on a GAAP basis was $9.1 million, or $0.09 net loss per share on a basic and diluted basis, compared with a net loss of $15.7 million, or $0.15 net loss per share on a basic and diluted basis, for the quarter ended March 31, 2002. Pro forma net loss was $7.1 million, or $0.07 net loss per share on a basic and diluted basis, for the quarter ended March 31, 2003, compared with pro forma net loss of $10.0 million, or $0.10 net income per share on a basic and diluted basis, for the quarter ended March 31, 2002.

Pro forma net loss for the quarter ended March 31, 2003 differs from GAAP net loss because it excludes amortization of intangible assets of $444,000, amortization of deferred stock-based compensation of $514,000, and restructuring charges of $1.1 million. For the quarter ended March 31, 2002, pro forma net loss differs from GAAP net loss because it excludes the following expenses: amortization of intangible assets of $1.2 million, amortization of deferred stock-based compensation of $3.2 million, and restructuring charges of $1.2 million.

The Company believes that its pro forma results provide useful information to investors because they reveal the Company’s results excluding non-cash and cash expenses that the Company believes are not indicative of its on-going operations. However, Interwoven urges readers to review and consider carefully the GAAP financial information contained in the Company’s SEC filings and in earnings releases.

“I’m pleased to be back at the helm at Interwoven and have hit the ground running,” said Martin Brauns, chairman and CEO of Interwoven. “Going forward, I am focused on highlighting the successes of our world-class customer base and the many ways they have leveraged our industry-leading product line to communicate to our prospects and partners the total value of the Interwoven platform and the strong ROI it brings.”

Q1 Highlights

Key new global customers include: Ceridian, City of Santa Clara, Konica Corporation, Landry’s Seafood Restaurants, Matsushita Electric Industrial Co., Ltd., Phillips-Van Heusen, Shiseido Co., Ltd., and Warner Music Group.

Interwoven also received significant customer reorders that included: Cadence, Dow Chemical, Federal Reserve Bank of Chicago, First Data Corp., Fleet National Bank, General Motors, Hilton, Intuit, Motorola, Royal Caribbean Cruises, and Telenor Mobile.

Corporate Highlights

• Interwoven was issued a U.S. patent for its “System and Method for Website Development,” a core technology that is vital to all Internet-based initiatives, including enterprise portals, eCommerce, self-service applications, and customer relationship management applications;

• Interwoven announced general availability of Interwoven MetaTagger 3.5, the latest version of its content intelligence software, which serves as a platform dramatically enhancing the effectiveness of all Internet-based applications by providing targeted, relevant content to audiences enterprise-wide. MetaTagger is now a stand-alone product that can be used in conjunction with any content management software;

• Interwoven, together with iManage, announced the general availability of a Collaborative Document Management solution which addresses the collaborative document lifecycle for the extended enterprise: from sharing among teams, to more structured document development and approval cycles, to fully automated and secure document publishing and dissemination;

• Interwoven released Interwoven OpenDeploy 5.6, a 5th generation content distribution product that is a key component of Interwoven’s universal code and content distribution solution. Available for the first time as a stand-alone offering, this new solution enables secure, cost-effective, and automated distribution of code and content for Internet-based applications across all parts of a worldwide corporate network;

• Interwoven launched vertical marketing campaigns targeting eGovernment, Healthcare and Banking and Finance, and saw significant traction from its participation in several related industry events such as the annual ABA Conference and the Public Technology Inc. Conference;

• Interwoven and customer Toshiba America Business Solutions (TABS) won the AIIM Best Practice Award earlier this month, and were honored at AIIM’s 2003 Conference and Exposition for Toshiba’s use of Interwoven to strengthen dealer loyalty and maximize sales effectiveness through the launch of its dealer “FYI Portal”;

• Interwoven announced the opening of an office in Milan, Italy, to strengthen its presence in EMEA.

Promotions and Appointments

During the first quarter of 2003 John Bara was promoted to senior vice president of marketing and Dr. Mark Hale was promoted to vice president of field marketing.

Earnings Conference Call Information

The Company’s regular conference call to report final results for the quarter ended March 31, 2003 is scheduled for today, April 17 at 2:00 pm PDT. The dial-in number is 913-981-4901. The replay number is 719-457-0820 (Confirmation number for both is 532417). The replay will be available from April 18, 2003 – April 20, 2003. A live Web cast of the conference call can be accessed through our Website, www.interwoven.com.

About Interwoven

Interwoven, Inc. is a world-leading provider of content management software for the enterprise. Allied with leading enterprise application providers, the Interwoven 5 platform provides content management for more than 1100 organizations worldwide, including Air France, Cisco Systems, General Electric, General Motors, and Yamaha. For more information visit www.interwoven.com.

NOTE: Interwoven, TeamSite, MetaTagger, OpenDeploy, the taglines, logos and service marks are trademarks of Interwoven, Inc., which may be registered in certain jurisdictions. All other trademarks are owned by their respective owners.

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 the release and are not guarantees of future performance. Actual results could differ materially from our current expectations as a result of many factors, including: customer acceptance of new product releases may be slower than we anticipate; customer spending on web initiatives may decline during the current economic downturn, which may be longer than we anticipate; management changes may disrupt our business; and the market for our products is intensely

competitive and rapidly evolving, so market success of new product offerings is unpredictable. These and other risks and uncertainties associated with our business are described in our most recent annual report on Form 10-K and subsequent Forms 10-Q and 8-K, which are on file with the SEC and available through www.sec.gov.

INTERWOVEN, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

	Three Months Ended March 31,
	2003			2002
	(unaudited)
Revenues:
License	$	9,151		$	14,927
Services		16,435			17,745
Total revenues		25,586			32,672
Cost of revenues:
License		702			948
Services		7,895			9,973
Total cost of revenues		8,597			10,921
Gross profit		16,989			21,751
Operating expenses:
Research and development		5,884			6,971
Sales and marketing		14,514			20,747
General and administrative		4,125			5,083
Amortization of deferred stock-based compensation		514			3,207
Amortization of acquired intangible assets		444			1,236
Restructuring costs		1,066			1,220
Total operating expenses		26,547			38,464
Loss from operations		(9,558	)		(16,713	)
Interest and other income, net		899			1,503
Net loss before provision for income taxes		(8,659	)		(15,210	)
Provision for income taxes.		441			454
Net loss	$	(9,100	)	$	(15,664	)
Basic and diluted net loss per share	$	(0.09	)	$	(0.15	)
Shares used in computing basic and diluted net loss per share		102,162			102,625

	Three Months Ended March 31,
	2003			2002
	(unaudited)
Pro forma information (A)
Historical net loss	$	(9,100	)	$	(15,664	)
Add back certain non-cash and acquisition charges:
Amortization of deferred stock-based compensation		514			3,207
Amortization of acquired intangible assets		444			1,236

Restructuring costs		1,066			1,220
Total add back		2,024			5,663
Pro forma net loss excluding certain non-cash and acquisition related charges	$	(7,076	)	$	(10,001	)
Pro forma basic and diluted net loss per share	$	(0.07	)	$	(0.10	)
Shares used in computing pro forma basic and diluted net loss per share		102,162			102,625

(A) The accompanying pro forma financial information is presented for informational purposes only and should not be considered a substitute for the historical financial information presented in accordance with accounting principles generally accepted in the United States.

INTERWOVEN, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

	March 31, 2003		Dec. 31, 2002
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	47,780	$	58,855
Short-term investments		127,144		122,814
Accounts receivable, net of allowances of $1,888 and $1,926 respectively		16,695		22,151
Prepaid expenses and other current assets		7,389		7,277
Total current assets		199,008		211,097
Property and equipment, net		10,156		11,694
Intangible assets, net		73,430		73,872
Restricted cash		378		378
Other assets		1,616		1,616
	$	284,588	$	298,657
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	3,790	$	3,438
Accrued liabilities		11,486		13,319
Restructuring and excess facilities costs		10,051		10,564
Deferred revenue		34,347		36,331
Total current liabilities		59,674		63,652
Other accrued liabilities, net of current portion		2,053		2,070
Restructuring and excess facilities costs, net of current portion		27,579		29,210
Total liabilities		89,306		94,932
Stockholders’ equity		195,282		203,725
	$	284,588	$	298,657

EX-99.2

Exhibit 99.2

CORPORATE PARTICIPANTS

David Allen

Interwoven – CFO, Sr VP, Secretary

Martin Brauns

Interwoven – Chairman, CEO

CONFERENCE CALL PARTICIPANTS

Operator

David Roudough (ph)

Piper Jaffrey

Amy Fing (ph)

JMP Securities

Steve Jue (ph)

RBC Capital Markets

Michael Mahoney (ph)

EGM Capital

Jay Byrne (ph)

Rocker Partners

PRESENTATION

Operator

Good afternoon, everyone, and welcome to the Interwoven first quarter earnings conference call. Today’s call is being recorded. The replay will be available through Monday, April 21st at 719-457-0820 by entering the pass code 532417. At this time I would like to turn the conference over to Mr. David Allen, Senior Vice President and Chief Financial Officer with Interwoven. Please go ahead, sir.

David Allen – Interwoven – CFO, Sr VP, Secretary

Good afternoon. We welcome you to the teleconference and webcast of Interwoven’s fiscal 2003 first quarter investor conference call.

I’m Dave Allen, CFO, in our Bethesda, Maryland office, and we have with us Martin Brauns, our Chairman and CEO, joining us from our Sunnyvale headquarters. This afternoon we issued a press release on PR Newswire, announcing our first quarter 2003 financial results.

Let me start by informing you that the following presentation contains forward-looking statements, including statements about new customers, new products that may suggest trends for our business. These statements are based on information available to us at the time of the release, and we assume no obligation to update any of them.

Statements in this release are not guarantees of future performance, and actual results could differ materially from the current expectations as a result of many factors, including the possibility that customer spending on content management initiatives may be reduced during a protracted economic down turn. These and other risks and uncertainties associated with our business are described in our most recent annual report on Form 10K, in previous Forms 10Q and 8Ks, which are on file with the SEC and, of course, are available through the SEC’s website.

First I’m going to review the financial results for the first quarter and also go over other key operating metrics, and I’ll give you our guidance for Q2 and the remainder of the year. Then I’ll turn you over to Martin, and he will go over his observations after coming on board.

We reported revenue of $25.6 million for the first quarter, and that’s an 18% decrease from Q4 and a 22% decline from the prior year’s numbers. Total revenue for Q1 was slightly above the high end of the guidance set forth in our preliminary earnings call on April 2nd. The license portion of revenue for the quarter was $9.2

million, a 35% sequential decrease from Q4, and services revenue was $16.4 million.

Now the international revenue accounted for 36% of total revenue, and that’s consistent with the last few quarters. Now, similar to the last four quarters, we didn’t have any $1 million or greater license deals in Q1. License revenues were generated from 29 new customers with a total average sales price of $160,000, and repeated license revenues from existing customers represented approximately 53% of total license revenues. Both the average sales price of new customer orders and the percent of repeat license revenue are consistent with recent quarter results.

Gross profit margin decreased sequentially in Q1 by 4 percentage points to 66%. This is primarily attributable to the decline in license and revenue this quarter. Our services gross margin was a record 52%, higher than last quarter as a result of higher maintenance revenue in our services mix, including record maintenance renewals from our customers.

Our Q1 pro forma net loss was $7.1million. Our pro forma figures exclude noncash charges related to stock-based compensation and acquisition-related expenses of $1 million and a restructuring charge of $1.1 million. This compares with a pro forma net loss of $3.1 million in the prior quarter and a net loss of $10 million a year ago. The pro forma basic and diluted net loss per share was 7 cents per share for the quarter as compared to a net loss of 3 cents (per share) in the prior quarter and a net loss of 10 cents (per share) a year ago.

On a GAAP basis we continue to make substantial improvement. Our net loss per share was down to 9 cents as compares to 31 cents per share in the previous Q4, and 15 cents per share loss a year ago.

At quarter end, we had 585 employees, down from the 608 at the end of the prior quarter. These head count-related cost-cutting measures are consistent with our objective to get back to profitability as soon as possible while maintaining adequate investments to ensure product quality, customer satisfaction, and, of course, improved sales channel effectiveness. We anticipate at the end of Q2 this year to be at a head count of approximately 560-565 staff.

Moving on to the balance sheet, our total cash balance, including investments at the end of March, was $175 million. This is a decline of $7 million from the prior quarter, not $5 million as previously estimated. The $7 million cash reduction includes $2.5 million for previously accrued lease commitments.

Accounts receivable decreased $5.5 million to $16.7 million resulting in continued very good days sales outstanding levels of 59 days, or 64 days when adjusted for the $2 million decrease in deferred revenue.

We continue to add blue chip customers in 2003, bringing our total customer count to 1,171. Customers added this quarter include Ceridian, one of the world’s top human resource outsourcing companies, Konica, Matsushiba Electric, which is the number one consumer electronics firm in North America, Phillips Van Husen, and Warner Music Group. This past quarter we received repeat orders from some outstanding world customers including Cadence, who are automating their support data with Interwoven’s MetaTagger product, Dow Chemical, the Federal Reserve Bank of Chicago, First Data Corp, Fleet National Bank, General Motors, Hilton, who has preserved their global brand by consolidating multiple hotel sites into the single hilton.com platform. We also added orders from Intuit, Motorola, Royal Caribbean Cruises and Telenor Mobile.

Let me give you our financial guidance for Q2 2003 for the rest of the year. First, I do want to draw your attention to the safe harbor statements at the beginning of the conference call. In developing our projections for the business, we looked at many of the customary business drivers in addition to market analyst forecasts and discussions with customers and prospects regarding their 2003 spending plans. In particular we are weighing heavily our recent Q1 results and the difficult business environment for the majority of the software companies.

So with regard to Q2, our pipeline is improved, but until we see progress throughout the quarter and taking into consideration the possible impact that SARS may have on our Asia-Pac business, we project total revenue to be roughly flat to up a few percent from Q1. This would put our projected revenue for the fiscal year 2003 in the range of $105 million to $112 million. Expect our pro forma net loss per share for the next quarter to range between 4 cents to 6 cents, improving throughout the year with a targeted break-even in Q4. These pro forma earnings per share projections are exclusive of noncash charges related to stock-based compensation and acquisition-related expenses and any restructuring and facility relocation charges we may incur in the next couple of quarters. Expect our GAAP net loss per share for the next quarter to range between 6-8 cents.

Finally, as many of you are aware, earlier this month John Van Siclen stepped down as Interwoven’s President and CEO, and Martin Brauns is now our Chairman and CEO, and with that, I would like to now turn it over to Martin.

Martin Brauns – Interwoven – Chairman, CEO

Thanks, Dave.

As many of you know, I’ve been an active Chairman, and I’ve stayed close to both the market and the operations of the company. In the last weeks, I spent even more time with our field sales reps, our customers, several partners and some industry analysts as well. It’s clear to me that several things are working well.

On the customer front, we have the industry’s strongest world class customer base, bar none. We have over 1100 customers, many of whom are coming back as repeat customers after a successful initial rollouts. And maintenance renewals remain at record levels, over 90%, reinforcing the high level of customer satisfaction in the install base.

On the product front, our content management product, TeamSite, continues to receive very high marks. Our customers rave about the high quality and the ease and speed of implementation as key strengths that set Interwoven apart from the competition and, of course, as you probably saw, in January we were granted a patent for the core methods and processes included in TeamSite, validating our unique technology leadership.

In addition, I’m very enthusiastic about customer interest in the new stand-alone versions of our content distribution and content intelligence products and our recently introduced developer suite. We’re seeing pipeline generation and partnership opportunities as a direct result of introducing these products.

On the services front, we continue to get strong marks for the quality of our high-value consulting and especially our customer support organization.

And last but not least, our customers continue to get the high ROI they are looking for from our platform. For example, Toshiba American Business Systems built a portal for their 350 dealers, supporting more than 15,000 users to help them sell more effectively. Our first version of the portal required a massive amount of manual processes and eight full-time staff to support it.

But now based on Interwoven’s open content platform, they have automated many of the business processes and reduced the required staff, saving them $1.1 million a year while at the same time significantly improving the flow of critical sales and product information. Toshiba’s experience with IT savings through consolidation of IT resources and doing more with less as a result of deploying our platform is a story I hear time and again from our customers.

That’s all good news. What I’m frustrated with is that we have not effectively communicated our value proposition, and we take full responsibility for that. Interwoven is the undisputed leader in web content management, but I fear that the WCM market is being too narrowly defined by some. In practice, we’re not only underpinning customer facing WWW sites around the world, but we’re also the ideal choice for all Internet-based initiatives, regardless of the asset type.

For example, ask Rogers Communications how they have moved their call center to the web with us and saved millions (of dollars). Ask John Deere how they have enabled dealer communications through a portal with us and accelerated sales. Or ask Siemens how they are providing a unified intranet for employee communication worldwide with us and improving employees’ productivity.

The fact is our platform is perfectly suited to underpin all Internet-based applications, regardless of the underlying content type, and it supports emerging trends such as mobile computing and the real-time enterprise. Getting this message out and understood is an immediate priority for me, especially to the industry analysts and our prospective customers. In fact, watch for several announcements in the coming weeks around some exciting new Interwoven solution packages.

The two other tactical areas I’m focused on are revenue growth and ensuring the continued high satisfaction levels of our installed customer base. On the revenue front, I’ve done a detailed review of the pipeline with all three of the regional theater heads, and I feel that the opportunity is strong for Q2. In fact, we’ve already seen some of the Q1-pushed deals close in the first part of April. I expect to see sequential growth in all three regions around the world in Q2.

On the customer front, I think there is more we can do within our own install base. We need to ensure that these customers fully understand how to leverage our content management platform across all their initiatives and we need to communicate the power of our content intelligence and content distribution products to them as well. I’m focused on it, and we’ll make significant progress here, too.

With that let me open it up for questions and turn it back over to Kathy. Kathy?

QUESTION AND ANSWER

Operator

Thank you, gentlemen. Today’s question-and-answer session will be conducted electronically. If you would like to ask a question, you may do so by pressing the star key followed by the digit “1” on your touch-tone phone. We will come to you in the order that you signal and we’ll pause for one moment to assemble our roster. Once again, “star,” “1” to ask a question. We’ll go next to David Roudough with Piper Jaffray.

David Roudough – Piper Jaffrey

How are you doing, guys?

Martin Brauns – Interwoven – Chairman, CEO

Great.

David Roudough – Piper Jaffrey

A question on the pipeline. Are you changing the way that you measure it in any way? Was there any issues with the pipeline prior to you coming on board?

David Allen – Interwoven – CFO, Sr. VP, Secretary

Martin, I’ll go ahead and address that. We have not changed how we measure our pipeline. It’s a quantitative and qualitative measurement. We look at not only the size of the pipeline and the number of deals and the size of the deals. We also look at the stage of the deals. So going into Q2 – and that should be no surprise that the stage of the deals going into Q2, especially after you come through a quarter like Q1 where so many deals slipped. Not only is the size of the pipeline better but I would say qualitatively the stage of the deals is in far better shape going into Q2 than it was in Q1.

Martin Brauns – Interwoven – Chairman, CEO

And, David, Martin here. I would echo that and we primarily use Onyx (software) as our system for tracking all these kinds of opportunities in our pipeline, and we’ve had that system up, refined and running now for well over a year. So any of the sort of early disagreements from region to region about how you classify a certain deal in a certain stage, all of that’s been pretty well scrubbed out, and I’m pretty confident in a sort of measurability and value of our pipeline measurement as a forecasting tool.

David Roudough – Piper Jaffrey

Okay. So the quarter miss is not blamed on the pipeline measurement then?

David Allen – Interwoven – CFO, Sr VP, Secretary

No, sir.

Martin Brauns – Interwoven – Chairman, CEO

It’s just due to a deal slipping.

David Allen – Interwoven – CFO, Sr VP, Secretary

Deals and some execution on some of the points that I mentioned here with respect to how we’re getting our marketing message through and across.

David Roudough – Piper Jaffrey

Okay. And then in terms of the guidance, any idea what the license, the service split would be?

David Allen – Interwoven – CFO, Sr VP, Secretary

I think it would be quite comparable to what we just went through. I think we were looking for flat to modest improvement in the license services as probably flat. It’s interesting. On a theater basis I think Europe is seeing good performance, both in licenses and services, America is seeing good performance in license and services. Asia, it’s a little hard to tell because much of the quarter will be back-end loaded there. It’s questionable as to what the impact of SARS will be on the license, since so much of it is back-end loaded. Now, we are already seeing today an impact on our services in Asia from SARS due to the fact that we have professional services consultants who are kind of grounded today.

David Roudough – Piper Jaffrey

Okay. And what percent of revenue comes from Asia?

David Allen – Interwoven – CFO, Sr VP, Secretary

Asia right now is representing about 15-18% of our business.

David Roudough – Piper Jaffrey

Okay. Thanks a lot, guys. Appreciate it.

Operator

We’ll take our next question from Amy Fing with JMP Securities.

Amy Fing – JMP Securities

Yes. I wanted to ask you a little bit. What was your head count exiting the March quarter?

David Allen – Interwoven–CFO, Sr VP, Secretary

It was 585 and today I think it’s about 575.

Amy Fing – JMP Securities

Okay. And then you mentioned that you project it to be 560 to 565 at the end of the June quarter.

David Allen – Interwoven – CFO, Sr VP, Secretary

Yes.

Amy Fing – JMP Securities

Are you thinking about making any perhaps sharper head count reductions in order to get the company to break even?

David Allen – Interwoven – CFO, Sr VP, Secretary

At this time we actually have evaluated that and we’ve made the decision at this time not to do that. We feel like the outlook of our business is still strong enough and we look at Q1 as a ridiculously tough period for us.

Amy Fing – JMP Securities

Okay.

David Allen – Interwoven – CFO, Sr VP, Secretary

And we don’t want to be too reactive as a result of that, and if we felt like our market growth opportunity looked weak, if we felt like our pipeline was weak and all the things that are forward-looking that you rely upon to build your business, if we saw weakness there, we would do more, but if you have to look at all those attributes, they all look quite good. Now, in contrast to that, our performance was fairly poor last quarter, but we still have an enthusiastic outlook about our prospects.

Amy Fing – JMP Securities

Okay. What was the number of your quota carriers at the end of March?

David Allen – Interwoven – CFO, Sr VP, Secretary

It was about 50 people, somewhere between 48 and 51 people.

Amy Fing – JMP Securities

And are you expecting that to change at all going into — at the end of the June quarter?

David Allen – Interwoven – CFO, Sr VP, Secretary

Yeah, might be down one or two net, but nothing appreciable.

Amy Fing – JMP Securities

Okay. Thank you.

Operator

Just a reminder, to ask a question press the star key followed by the digit one. And we’ll go next to Steve Jue with RBC Capital Markets.

Steve Jue – RBC Capital Markets

Thanks. Martin, just looking at kind of the product portfolio when you talked about, you know, a little bit about strategic positioning around expanding the web content management area, should we expect anything on the product side being changed or is it just kind of the overall positioning that needs to be messaged a little bit better?

Martin Brauns – Interwoven – Chairman, CEO

Hi, Steve. Well, the products are actually strong and I think we just need to refine and tune and in many cases amplify our positioning and messaging. I think we’ve gotten a little confused, all of us, maybe in the industry, very obsessed with content types when we should be worrying about what customers are doing with the content and what applications they are fueling, and when you think about your business that way, there’s no better engine for building, maintaining and driving these Internet-based applications, and, Steve, as you know very well, all applications these days are Internet-centric, consumed, developed and deployed via the Internet, and there is really nobody better at managing both

code and content for Internet-based applications, content-rich applications, than Interwoven.

Steve Jue – RBC Capital Markets

And just looking at maybe some of the more marquee customers you had this quarter, I mean, were they starting to buy, you know, both the OpenDeploy and MetaTagger products? Are you starting to continue to see that continue within the small base?

Martin Brauns – Interwoven – Chairman, CEO

Yes. I’m looking at some reports that the finance team pulled together here and it’s still true that the majority of our license revenue comes from TeamSite, our core TeamSite product, but we’re seeing over 25% of the revenue now coming from non-TeamSite products.

David Allen – Interwoven – CFO, Sr. VP, Secretary

Steve, this is Dave. We just launched the stand-alone Open Deploy product. I believe it was at the very end of Q4 (2002), or the beginning of Q1(2003). It’s at least our second or third largest deal in Q1 was a stand-alone open deploy sale. So we are finding there is there is a great demand, to manage the deployment of code as well. There is a huge untapped opportunity there for us and I think our salespeople realize that they are going to have to spend a few sales cycles, but there are discrete sales opportunities, and the competitive environment is close to nil on that area.

Steve Jue – RBC Capital Markets

Great. Thanks.

Operator

Once again to ask a question, press “star,” “1”. Again, “star,” “1”. We have a follow-up question from Amy Fing with JMP securities.

Amy Fing – JMP Securities

Yes, can you tell me a little bit more about your competitive environment? Who are you seeing in most of your deals?

Martin Brauns – Interwoven – Chairman, CEO

Dave, do you want to tackle that?

David Allen – Interwoven – CFO, Sr VP, Secretary

Sure.

Martin Brauns – Interwoven – Chairman, CEO

We went over that yesterday.

David Allen – Interwoven – CFO, Sr VP, Secretary

Yeah, we did look at the details there. Actually no real change from what we’ve seen in the past. We do see the document management companies, more so Documentum than really Filenet. I think we hear more about Filenet from you folks than we actually see it in the customer base and we still see occasionally Vignette in competitive environments when we really should not because we both bring totally different solutions and value propositions to our customers. We do see some of the other players in addition to Microsoft, and, you know, our biggest competitor here is still home grown (solutions) and really budgets.

Amy Fing – JMP Securities

And in terms of Microsoft, do you think they are getting quite a bit of traction over the past 18 months?

David Allen – Interwoven – CFO, Sr. VP, Secretary

Certainly they are getting traction in accounts who are very, very Microsoft-centric. We still hear the occasional story about the CIOs being flown up to Redmond and drinking the Redmond kool-aid and they are buying Microsoft from start to finish and those are accounts that are going to be really very, very difficult for us. But the majority of IT executives who are looking at their heterogenous environment are looking at really kind of a best-of-breed approach and they are looking at a platform that can manage across that heterogenous environment. So yes, I’m sure they are getting some percentage of the accounts because of who they are but they are really not, for us, a major competitor at the enterprise level.

Amy Fing – JMP Securities

In your space currently, are there any sharp — are there any companies practicing very sharp pricing discounts?

David Allen – Interwoven – CFO, Sr VP, Secretary

You know, we’ll see one or two companies every once in a while. It seems about every other quarter, do some kind of aggressive pricing in accounts but for the most part I think the aggressive pricing practice has kind of ceased about a year ago because it’s not about customers trying to squeeze in getting better deals so much. Of course they are trying to do that to some extent, but it’s

really about whether they actually have the money to spend on it at this point. So I don’t think most of the players in the content management space are getting their pencils out and bringing the price value more. In fact, when I start looking at ASPs in the space, I don’t really see that much change here right now. So I don’t think it’s a pricing pressure. It’s just how much money people have to spend. That’s all.

Amy Fing – JMP Securities

Oh, what are your ASPs?

David Allen – Interwoven – CFO, Sr VP, Secretary

Our ASP last quarter was $160,000, and so in fairness, I don’t know. It’s probably about a third of our deals that come in don’t have services with them. And maybe they will get services a month later. So if you really gross that up, it’s probably closer to $180,000 to maybe $200,000.

Amy Fing – JMP Securities

Okay. Great. Thank you.

David Allen – Interwoven – CFO, Sr VP, Secretary

Sure thing.

Operator

Our next question comes from Michael Mahoney with EGM Capital.

Michael Mahoney – EGM Capital

Just a quick question on the Microsoft subject. The launch of the Windows server which is coming up here shortly, do you think that has implications for the way that you sell into the Microsoft-related world? Is that going to be an important thing over time?

David Allen – Interwoven – CFO, Sr VP, Secretary

Martin, I’m going to let you take that one.

Martin Brauns – Interwoven – Chairman, CEO

Sure. Hi, Mike. Well, of course. Now, and I would go back to the comments Dave just made in (earlier regarding) Microsoft-centric, Microsoft-dominated accounts, they are going to continue to be strong and get stronger, but, Mike, the bulk of our global 2000 kinds of customers are mixed platform environments where, you know, we’ll go in with one of our partners like IBM or BEA or Oracle or others and come up with comprehensive cross-platform solutions.

Michael Mahoney – EGM Capital

Thanks.

Operator

Just a reminder to press “star,” “1” for a question and we’ll go next to Jay Byrne with Rocker Partners.

Jay Byrne – Rocker Partners

Hi, guys. Two questions, please. First on the new customers wins. Dave, could you go over the numbers again on the — I don’t know what you called it, average sales per new customer?

David Allen – Interwoven–CFO, Sr. VP, Secretary

We had – the average sales price is $160,000 for our new customers.

Jay Byrne – Rocker Partners

And does that include a services component?

David Allen – Interwoven – CFO, Sr. VP, Secretary

Yes, it does.

Jay Byrne – Rocker Partners

Okay.

David Allen – Interwoven – CFO, Sr. VP, Secretary

I hope I wasn’t too confusing earlier. Somewhere about, I would say at least a third of the sales that come in don’t have services with them when they come in, and we may get a services order maybe a month later after a statement of work is completed. So I would tend to say that it likely, it might be higher. So it was ($)160k here this quarter and I think last quarter was I want to say in the ($)180k and maybe before that ($)160k.

Jay Byrne – Rocker Partners

Okay. Great. And then on the deals that you mentioned that slipped sort of the end of the first quarter, do those type of deals now close here in the first two weeks of this quarter, or did they wait until the end of this quarter and then you have to worry about them closing then?

Martin Brauns – Interwoven – Chairman, CEO

Dave, I’ll touch on that. Hi, Jay. I dove right into that, Jay, and I’m pretty pleased with the closure rate on the slipped deals. We’ve added some nice new customers. I’m not going to disclose them here now, but some good new customer additions already and also some nice follow-on orders from some bigger deals that we were working the end of last month that for a variety of reasons didn’t get done.

David Allen – Interwoven – CFO, Sr. VP, Secretary

Let me add to that. If at the end of every quarter all the deals that slipped that salespeople promised, thus they would get done in the first month of the next quarter, we would all be taking vacations in the third month, but I will tell you, if you look at this quarter, it does feel like the pace of which orders are coming in here is a little stronger than what you would typically see. And typically you do see a lot of activity in the first two or three weeks and then things start to slow down. I would say that this quarter looks like there is a strong amount of business, a high level of business that’s going to close into the third and fourth, fifth, sixth, seventh, and eighth month of the quarter. I say that because I see the negotiations taking place on license agreements, I see the customer calls the conference calls that are taking place at this time in the quarter. I also see the number of airline tickets that typically start to fall off around this time of the quarter, and they are starting to pick up. So a – there is a lot of business resuming again fairly quickly, and that is a very, very strong indicator for us here. However, you know, I’ve got to throw a little bit of cold water on that. Much of the business still would be coming in at the end of the quarter as is the case in any quarter.

Martin Brauns – Interwoven – Chairman, CEO

And, Jay, just to clarify. I think Dave miss-spoke a little bit there. As much as we would love to have a world where we had a quarter with six, seven, and eight months, we don’t have that. I think he meant weeks.

David Allen – Interwoven – CFO, Sr VP, Secretary

Oh, I wish we had have six months in this quarter.

Jay Byrne – Rocker Partners

Okay. Great. Thanks, guys.

David Allen – Interwoven – CFO, Sr. VP, Secretary

Thank you.

Operator

Once again as a reminder, to ask a question, press “star,” “1”. And, gentlemen, there are no further questions at this time. I’ll turn the call back over to you for any additional oh closing remarks.

Martin Brauns – Interwoven – Chairman, CEO

Thank you, Kathy. Thanks, everyone. We are looking forward to keeping you posted and we’ll talk again at the end of this quarter. Thanks, everyone.

Operator

This does conclude today’s conference call. You may disconnect at this time.