Company

AUSTIN, TEXAS - October 25, 2005 - Pervasive Software® Inc. (Nasdaq:PVSW), a global value leader in data infrastructure software, today announced financial results for the first fiscal quarter ending September 30, 2005. Revenue in the first quarter is within the range of guidance previously provided for the quarter in our press release dated July 26, 2005, while first quarter GAAP-basis diluted earnings per share is at the high end of the range of guidance previously provided for the quarter.

Revenue, as reported under generally accepted accounting principles (GAAP), was $11.7 million for the first quarter of fiscal year 2006, compared to $11.8 million for the first quarter of last fiscal year. Net income was $0.3 million, or $0.01 diluted earnings per share, for the first quarter, compared to net income of $0.8 million, or $0.03 diluted earnings per share, for the first quarter of last fiscal year. On a pro forma basis, as described below, Pervasive realized pro forma net income of $1.5 million, or $0.07 diluted earnings per share, in the first quarter of fiscal year 2006, compared to net income of $1.1 million, or $0.05 diluted earnings per share, in the first quarter of last fiscal year.

Pervasive began accounting for stock options in accordance with Financial Accounting Standards No. 123R, Share-Based Payment ("FAS 123R"), beginning on July 1, 2005, which means the quarter ending September 30, 2005 is the first quarter in which Pervasive has reflected expenses associated with stock options in its GAAP-basis income statement. GAAP-basis profitability includes amortization of purchased intangibles of approximately $0.3 million and, for the first time, stock option based compensation expense of approximately $0.9 million, together representing approximately $0.05 per share in the first quarter of fiscal year 2006.

Pervasive continued to generate positive cash flow from operations with $2.4 million in the first quarter of fiscal 2006, ending the quarter with $39.7 million in cash and marketable securities and no debt.

"We are pleased with the results we achieved in the September quarter, delivering revenue and profitability at the mid to high end of our expectations in the summer months," said Dave Sikora, president and CEO, Pervasive Software. "Going forward, we're focused on driving growth in our integration and open source database product lines, while maintaining healthy levels of revenue and customer satisfaction within our embedded database business. And, as always, we remain focused on the bottom line, a reflection of the thread of fiscal responsibility that drives our decision-making and underscores our view that earnings are the ultimate creator of shareholder value."

Pervasive management believes that the pro forma results described in this release are useful for an understanding of Pervasive's ongoing operations because GAAP results include non-cash charges associated with the amortization of purchased intangibles and stock option-based compensation expense. Management uses these pro forma results to compare the company's performance to that of prior periods for analysis of trends, and to evaluate the company's financial strength, develop budgets, manage expenditures and develop a financial outlook. Pro forma results are supplemental and are not intended as a substitute for GAAP results.

About Pervasive Software
Pervasive Software is a global value leader in data infrastructure software. The company's award-winning products enable customers to manage, integrate, analyze and secure their critical data, providing the industry's best combination of performance, reliability and cost. Pervasive's strength is evidenced by the size and diversity of its customer base, serving tens of thousands of customers in virtually every industry market around the world. With headquarters in Austin, Texas, Pervasive was founded in 1994 and sells its products into more than 150 countries. More information may be found on the Web at http://www.pervasive.com.

Cautionary Statement
This document contains forward-looking statements that involve risks and uncertainties concerning the company, including the company's expected performance for the second quarter 2005 and the company's strategy going forward. Actual events or results may differ materially from those described in this document due to a number of risks and uncertainties. These risks and uncertainties include, among others, the company's ability to attract and retain existing and/or new customers; the company's ability to issue new products or releases of solutions that meet customers' needs or achieve acceptance by the company's customers; changes to current accounting policies which may have a significant, adverse impact upon the company's financial results; the introduction of new products by competitors or the entry of new competitors; the company's ability to preserve its key strategic relationships; the company's ability to hire and retain key employees; and economic and political conditions in the US and abroad. All of these factors may result in significant fluctuations in the company's quarterly operating results and/or its ability to sustain or increase its profitability. More about potential factors that could affect the company's business and financial results is included in Pervasive's Form 10-K for the year ended June 30, 2005, which is on file with the SEC and available at the SEC's website at www.sec.gov. Pervasive is not obligated to update these forward-looking statements to reflect events or circumstances after the date of this document.

All Pervasive brand and product names are trademarks or registered trademarks of Pervasive Software Inc. in the United States and other countries. All other marks are the property of their respective owners.

			Three months ended
			September 30
			2005		2004
Revenues:     Product licenses			$    8,856		$    8,983
Services and other			2,834		2,801
Total revenue			11,690		11,784
Costs and expenses:
Cost of product licenses			573		512
Cost of services and other			1,451		1,392
Sales and marketing			5,041		5,398
Research and development			2,877		2,641
General and administrative			1,625		1,091
Total costs and expenses			11,567		11,034
Operating income			123		750
Interest and other income, net			259		84
Income tax provision			(50)		(46)
Net income			$      332		$      788
Diluted earnings per share			$     0.01		$     0.03
Shares used in computing diluted     earnings per share			22,536		23,622

(A) See pro forma results of operations and related reconciliation to GAAP results for the three months       ended September 30, 2005 and 2004, respectively, on a subsequent page of this release.

 

	Three months ended September 30, 2005					Three months ended September 30, 2004

	Total Consolidated GAAP	Pro Forma Adjustments(B)	Pro Forma Adjusted		Total Consolidated GAAP	Pro Forma Adjustments (B)	Pro Forma Adjusted
Revenues:    Product licenses	$      8,856	$            -	$     8,856		$      8,983	$          -	$    8,983
Services and other	2,834	-	2,834		2,801	-	2,801
Total revenue	11,690	-	11,690		11,784	-	11,784
Costs and expenses:      Cost of product licenses	573	(317)	256		512	(317)	195
Cost of services and        other	1,451	(29)	1,422		1,392	-	1,392
Sales and marketing	5,041	(274)	4,767		5,398	-	5,398
Research and        development	2,877	(162)	2,715		2,641	-	2,641
General and        administrative	1,625	(405)	1,220		1,091	-	1,091
Total costs and expenses	11,567	(1,187)	10,380		11,034	(317)	10,717
Operating income	123	1,187	1,310		750	317	1,067
Interest and other         income, net	259	-	259		84	-	84
Income tax provision	(50)	-	(50)		(46)	-	(46)
Net income	$         332	$       1,187	$       1,519		$        788	$        317	$       1,105
Diluted earnings per share	$        0.01		$        0.07		$       0.03		$         0.05
Shares used in computing       diluted earnings       per share	22,536	735	23,271		23,622		23,622

(A) See Unaudited Condensed Consolidated Statements of Operations on a prior page of this release. Pro forma       presentation is not intended to replace GAAP presentation. Pro forma measures are calculated in the       manner described in this release.

(B) Pro forma adjustments consist of $0.3 million of purchased intangibles amortization in the quarters      ending September 30, 2005 and 2004, and $0.9 million of stock based compensation expense for      the quarter ending September 30, 2005 in accordance with Statement of Financial Accounting Standards No. 123R.