MatrixOne Reports Financial Results For Q3 And Q4 Fiscal 2005
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MatrixOne Reports Financial Results For Q3 And Q4 Fiscal 2005

Company Completes Financial Review and Restatement and Files Form 10-Q and Form 10-K with the SEC

WESTFORD, Mass.—(BUSINESS WIRE)—Nov. 8, 2005— MatrixOne, Inc. (NASDAQ: MONEE), a leading provider of collaborative product lifecycle management (PLM) solutions for the value chain(TM), today announced results for its third quarter ended April 2, 2005 as well as its fourth quarter and fiscal year ended July 2, 2005. The Company also announced that the financial review conducted under the direction of the Audit Committee of the Company's Board of Directors has been completed. Further, the Company has completed the related restatements of its financial statements from fiscal 1999 through the second quarter of fiscal 2005 and filed with the Securities and Exchange Commission its Quarterly Report on Form 10-Q for the quarter ended April 2, 2005 and its Annual Report on Form 10-K for the fiscal year ended July 2, 2005.

Financial Results for Third and Fourth Quarter of Fiscal 2005

For the third quarter ended April 2, 2005, total revenues were $27.0 million, compared to $27.7 million in the same period last year. For the third quarter, net loss was $6.5 million, or $0.13 per share, compared to a net loss of $2.4 million, or $0.05 per share, in the same period last year. For the third quarter ended April 2, 2005, adjusted net loss(1), which excludes amortization of intangible assets of $0.3 million, was $6.2 million, or $0.12 per share. There were no adjustments to net loss for the third quarter ended April 3, 2004.

For the fourth quarter ended July 2, 2005, total revenues were $32.5 million, compared to $29.6 million in the same period last year. For the fourth quarter, net loss was $11.7 million, or $0.23 per share, compared to net income of $0.9 million, or $0.02 per share, in the same period last year. Net loss for the fourth quarter ended July 2, 2005 includes expenses related to the financial review and restatement of $4.2 million, or $0.08 per share. For the fourth quarter ended July 2, 2005, adjusted net loss(1), which excludes amortization of intangible assets of $0.3 million, was $11.4 million, or $0.22 per share, compared to adjusted net income(1), which excludes restructuring gains of $0.1 million, of $0.8 million, or $0.02 per share, in the same period last year.

For the fiscal year ended July 2, 2005, total revenues were $124.1 million, compared to $109.6 million in the prior fiscal year. For the fiscal year ended July 2, 2005, net loss was $20.3 million, or $0.40 per share, compared to a net loss of $12.4 million, or $0.26 per share, in the prior fiscal year. Net loss for the fiscal year ended July 2, 2005 includes expenses related to the financial review and restatement of $4.2 million, or $0.08 per share. For the fiscal year ended July 2, 2005, adjusted net loss(1), which excludes amortization of intangible assets of $1.1 million, was $19.2 million, or $0.37 per share. For the fiscal year ended July 3, 2004, adjusted net loss(1), which excludes stock-based compensation, restructuring charges and asset impairment and disposal charges of $4.0 million, was $8.4 million, or $0.17 per share.

Financial Review and Restatement Completed

The Company also announced today that the financial review conducted under the direction of the Audit Committee of the Company's Board of Directors has been completed. As previously announced, management and the Audit Committee concluded that errors in revenue recognition at the Company's Japanese subsidiary required the Company to restate its previously reported financial results. The restatement, which affected previously reported financial results from fiscal 1999 through the second quarter of fiscal 2005, has also been completed. The revenue adjustments made in the restatement related to errors in revenue recognition principally at the Company's Japanese subsidiary and resulted in a change in the timing of the recognition of revenue previously paid for and recognized. The Company also made adjustments due to: (a) the timing of revenue recognition for certain transactions in Europe; (b) the timing of revenue recognized related to several customer arrangements that included certain commitments to provide future software functionality; (c) the recognition as research and development expense certain third-party development and licensing arrangements previously capitalized and recognized as cost of software license revenues; (d) the timing of the recognition of certain expenses associated with the revenue being adjusted; and (e) adjustments to certain other asset and liability accounts.

Total revenues for the six month period ended January 1, 2005, as restated, were $64.7 million compared to $64.7 million as previously reported. Net loss for the six month period ended January 1, 2005, as restated, was $2.0 million compared to $2.3 million as previously reported. Total revenues, as restated, for fiscal 2004 were $109.6 million compared to $109.1 million as previously reported. Net loss, as restated, for fiscal 2004 was $12.4 million compared to $16.2 million as previously reported. Expenses related to the financial review and restatement totaled approximately $5.0 million. The Company recognized $4.2 million of expenses related to the financial review and restatement in the fourth quarter of fiscal 2005 and expects to recognize approximately $0.8 million of expenses related to the financial review and restatement in the first quarter of fiscal 2006.

Company Files Form 10-Q and Form 10-K

On November 8, 2005, the Company filed with the Securities and Exchange Commission its Quarterly Report on Form 10-Q for the quarter ended April 2, 2005 and its Annual Report on Form 10-K for the fiscal year ended July 2, 2005. The Company believes that it is now in compliance with the conditions set forth by the Nasdaq Listing Qualifications Panel when it granted the Company an additional extension for continued listing on The Nasdaq National Market until November 8, 2005. The fifth character "E" will remain appended to the Company's symbol pending a final determination that the Company is fully compliant with Nasdaq's filing requirements. The Company anticipates filing, as soon as practicable, an amended Quarterly Report on Form 10-Q for the second quarter of fiscal 2005 for the purpose of restating its condensed consolidated financial statements for the second quarter of fiscal 2005. The Company will not be filing an amended Quarterly Report on Form 10-Q for the first quarter of fiscal 2005 as previously stated.

Company to Host Live Conference Call and Webcast on November 9, 2005

The Company's management team will host a live conference call and webcast at 5:30 p.m. eastern time on Wednesday, November 9, 2005 to discuss the Company's financial results for the third quarter ended April 2, 2005 as well as the fourth quarter and fiscal year ended July 2, 2005. The conference call may be accessed in the United States by dialing (877) 777-1972 and using passcode "MONE." The conference call may be accessed outside of the United States by dialing (612) 332-0636 and using passcode "MONE." The webcast will be accessible from the Company's website at www.matrixone.com/investor.

Key Operational Highlights

The following milestones were completed or announced during the third and fourth quarters of fiscal 2005:

-- MatrixOne recognized revenue from a number of the world's most innovative companies, including ARM, a leading provider of power-efficient microprocessors and related technology and software; Agilent Technologies' Semiconductor Products Group, a leading supplier of advanced semiconductor components to the mobile phone, enterprise storage and networking, and broad optoelectronic markets; Barilla, the world leader in the pasta market and the largest producer of bakery products in Italy; Cummins Inc., a leading provider of power solutions; Fujitsu Network Communications, a leading provider of customer-focused IT and carrier-class telecommunications solutions for the service provider and cable television market; Legrand, a leading provider of products and systems for electrical installations and information networks; and Lockheed Martin Corporation, an advanced technology company.

-- MatrixOne announced several new solutions including the release of Matrix 10.6, which includes advanced capabilities for synchronous product development across electrical, semiconductor, mechanical and software design, enabling companies to compress development cycles, improve information reuse and reduce the possibility of product rework, ultimately enabling companies to produce better products at a lower cost. Matrix 10.6 also featured a new business process application called MatrixOne Designer Central(TM), a comprehensive workgroup design application that allows product designers and their extended supply chains to manage the design process and collaborate from one central application, regardless of the design tools they are using.

-- MatrixOne announced the availability of three new MatrixOne Accelerators - the MatrixOne Accelerator for Apparel Design and Development(TM), the MatrixOne Semiconductor Accelerator for Design to Manufacturing(TM), and the MatrixOne Semiconductor Accelerator for Enterprise Project Management(TM). Each of the MatrixOne Accelerators enable companies to efficiently meet the unique product development challenges of specific industries by bundling MatrixOne Business Process Applications with specific industry language and terminology, data models and schema, pre-defined work processes and reports, and role-based user interfaces to speed deployment and ease user adoption.

-- MatrixOne and Telelogic, the leading global provider of solutions for advanced systems and software development, announced the availability of a Customer Needs Management solution that integrates Telelogic DOORS, the leading solution for requirements management, with MatrixOne Product Central(TM), the Company's solution for managing a portfolio of products, features and configurations throughout the product lifecycle. Together, MatrixOne and Telelogic are delivering a solution that closes the gap between requirements definition and design and provides an enterprise-wide view of product requirements to all product stakeholders including sales and marketing; product management; systems and software engineers; electrical, electronic and mechanical engineers; manufacturing; customers; and suppliers.

-- MatrixOne hosted the MatrixOne Global Customer Conference 2005 (GCC 2005) which was attended by a record number of customers, prospects and partners from around the world and across every major vertical market. GCC 2005, themed "Accelerating Return on Innovation," provided attendees with a unique opportunity to learn how some of the world's leading-edge companies are leveraging PLM strategies and solutions from MatrixOne to transform their businesses and achieve measurable results. Some of the companies presenting at GCC 2005 included AMR Research, Agilent Technologies, Boeing Australia Ltd., Johnson & Johnson Consumer Products Company, LSI Logic, Keppel Corporation, New Balance, Nortel, Possis Medical, Procter & Gamble, and Sony Ericsson.

-- MatrixOne was highlighted as a PLM market leader in two recent industry research reports by Massachusetts-based AMR Research and Michigan-based CIMdata. MatrixOne was awarded high marks in AMR Research's recent report entitled "The CIO's Guide to the PERFECT Product Launch: Translating Innovation to Business Benefit," which ranked the capabilities of 18 PLM vendors. MatrixOne received high rankings in some of the report's most important areas - including customer needs management, product data management, portfolio management and direct material sourcing. MatrixOne was also noted as a mindshare and market presence leader in CIMdata's annual PLM Market Analysis Report which provides a perspective on PLM across a variety of industry and geographic sectors, identifies market trends, reviews investments in PLM-related software and services during 2004 and forecasts PLM investments for 2005 through 2009.

(1) The Company uses the financial measure adjusted net income (loss) to supplement its consolidated financial statements, which are presented in accordance with accounting principles generally accepted in the United States ("GAAP"). The presentation of adjusted net income (loss) is not meant to be a substitute for net income (loss) presented in accordance with GAAP but rather should be evaluated in conjunction with net income (loss). The Company's management believes that the presentation of adjusted net income (loss) provides useful information to investors because this financial measure excludes amortization of purchased technology and intangible assets, which are fixed acquisition-related charges, restructuring charges, and asset impairment and disposal charges, which are charges relating to an unusual event, and stock-based compensation, which is a non-cash charge that ended during the three month period ended January 3, 2004. For the three and nine month periods ended April 2, 2005, adjusted net income (loss) excludes amortization of purchased technology and intangible assets. For the three month period ended April 3, 2004, there were no adjustments to net loss. For the nine month period ended April 3, 2004, adjusted net income (loss) excludes restructuring charges, asset impairment and disposal charges and stock-based compensation. For the three and twelve month periods ended July 2, 2005, adjusted net income (loss) excludes amortization of purchased technology and intangible assets. For the three month period ended July 3, 2004, adjusted net income (loss) excludes restructuring gains. For the twelve month period ended July 3, 2004, adjusted net income (loss) excludes restructuring charges, asset impairment and disposal charges and stock-based compensation. Management does not consider amortization of purchased technology and intangible assets, restructuring charges, asset impairment and disposal charges and stock-based compensation to be part of the Company's on-going operating activities or meaningful in evaluating the Company's past financial performance or future prospects. In addition, adjusted net income (loss) is a primary financial indicator that the Company's management uses to evaluate the Company's financial results and forecast anticipated financial results for future periods. Amortization of purchased technology and intangible assets relates to the amortization of identified intangible assets, such as purchased technology, customer relationships and trademarks and trade names, purchased through an acquisition. Restructuring charges and asset impairment and disposal charges are material costs that were incurred relating to an unusual event to align the Company's operations and cost structure with market conditions. Stock-based compensation represents the difference between the stock option exercise price and the deemed fair value of the Company's common stock on the date of grant and relates only to the grant of certain stock options to employees during fiscal 2000 and 1999, which do not require cash settlement. The Company's definition of adjusted net income (loss) may differ from similar measures used by other companies and may differ from period to period.

About MatrixOne

MatrixOne, Inc. (NASDAQ: MONEE), a leading global provider of collaborative product lifecycle management (PLM) software and services, enables companies to accelerate product innovation to achieve top line revenue growth and improve bottom line profitability. With world-class PLM solutions and a commitment to customer success, MatrixOne is focused on helping companies across the automotive, aerospace & defense, consumer, machinery, medical device, semiconductor and high-tech industries solve their most challenging new product development and introduction problems. More than 800 companies use MatrixOne's solutions to drive business value and gain a competitive advantage, including industry leaders such as BAE Systems, Bosch, Comau, General Electric, Honda, Johnson Controls, Linde AG, NCR, Nokia, Philips, Porsche, Procter & Gamble, Sony Ericsson, STMicroelectronics and Toshiba. MatrixOne ( www.matrixone.com) is headquartered in Westford, Massachusetts, with locations throughout North America, Europe and Asia-Pacific.

MatrixOne and the MatrixOne logo are registered trademarks, and "a leading provider of collaborative product lifecycle management (PLM) solutions for the value chain" is a trademark of MatrixOne, Inc. All other trademarks and service marks are the property of their respective owners.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995 - Forward-looking statements in this release do not constitute guarantees of future performance. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words "believes," "anticipates," "plans," "expects," "intends," and similar expressions are intended to identify forward-looking statements. Such statements relate, among other things, to our expected compliance with Nasdaq requirements for continued listing and our anticipated filings with the Securities and Exchange Commission. Such forward-looking statements are subject to risks and uncertainties that could cause our actual results to differ materially from those anticipated. The risks and uncertainties that may affect forward-looking statements include, among others: the continued listing of our common stock on the NASDAQ Stock Market. For a more detailed discussion of the risks and uncertainties of our business, please refer to our periodic reports and registration statements filed with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the fiscal year ended July 2, 2005 and our Quarterly Report on Form 10-Q for the fiscal quarter ended April 2, 2005. The forward-looking statements included in this press release represent our views as of the date of this press release. We anticipate that subsequent events and developments may cause our views to change. We assume no obligation to update any forward-looking information contained in this press release or with respect to the announcements described herein.
                            MATRIXONE, INC.
                 CONSOLIDATED STATEMENTS OF OPERATIONS
               (in thousands, except per share amounts)

                             Three Months Ended   Nine Months Ended
                            -----------------------------------------
                             April 2,  April 3,   April 2,  April 3,
                              2005      2004       2005      2004
                            -----------------------------------------
                                     (As Restated)       (As Restated)
 Revenues:
  Software license          $  7,789  $  10,006  $ 35,647  $  27,549
  Service                     19,227     17,738    55,892     52,445
                             --------  ---------  --------  ---------
  Total revenues              27,016     27,744    91,539     79,994
                             --------  ---------  --------  ---------
Cost of Revenues:
  Software license               653        645     3,067      2,385
  Amortization of purchased
   technology                    199         --       531         --
  Service                     12,115     11,428    35,688     34,592
                             --------  ---------  --------  ---------
  Total cost of revenues      12,967     12,073    39,286     36,977
                             --------  ---------  --------  ---------
Gross Profit                  14,049     15,671    52,253     43,017
                             --------  ---------  --------  ---------
Operating Expenses:
  Selling and marketing       10,271      9,933    31,974     28,092
  Research and development     7,795      5,596    21,530     17,227
  General and administrative   2,738      2,839     8,020      7,854
  Amortization of intangible
   assets                        121         --       297         --
  Stock-based compensation        --         --        --        567
  Restructuring charges           --         --        --      1,884
  Asset impairment and
   disposal charges               --         --        --      1,680
                             --------  ---------  --------  ---------
  Total operating expenses    20,925     18,368    61,821     57,304
                             --------  ---------  --------  ---------
Loss from Operations          (6,876)    (2,697)   (9,568)   (14,287)
Other Income, Net                498        300     1,253        949
                             --------  ---------  --------  ---------
Loss Before Income Taxes      (6,378)    (2,397)   (8,315)   (13,338)
Provision for Income Taxes       155         42       263         (5)
                             --------  ---------  --------  ---------
Net Loss                    $ (6,533) $  (2,439) $ (8,578) $ (13,333)
                             ========  =========  ========  =========

Basic and Diluted Net Loss
 Per Share                  $  (0.13) $   (0.05) $  (0.17) $   (0.28)
                             ========  =========  ========  =========

Shares Used in Computing
 Basic and Diluted Net Loss
 Per Share                    51,566     48,394    51,079     48,186
                             ========  =========  ========  =========


Reconciliation of Adjusted Net Loss(1):
Net Loss                    $ (6,533) $  (2,439) $ (8,578) $ (13,333)
Adjustments:
  Amortization of purchased
   technology                    199         --       531         --
  Amortization of intangible
   assets                        121         --       297         --
  Stock-based compensation        --         --        --        567
  Restructuring charges           --         --        --      1,884
  Asset impairment and disposal
   charges                        --         --        --      1,680
                             --------  ---------  --------  ---------
Adjusted Net Loss(1)         $ (6,213) $  (2,439) $ (7,750) $  (9,202)
                             ========  =========  ========  =========

Adjusted Basic Net Loss
  Per Share                  $  (0.12) $   (0.05) $  (0.15) $   (0.19)
                             ========  =========  ========  =========
Adjusted Diluted Net Loss
  Per Share                  $  (0.12) $   (0.05) $  (0.15) $   (0.19)
                             ========  =========  ========  =========

Shares Used in Computing
 Adjusted and Diluted Basic 
 Net Loss Per Share            51,566     48,394    51,079     48,186
                             ========  =========  ========  =========

(1) The Company uses the financial measure adjusted net income (loss)
    to supplement its consolidated financial statements, which are
    presented in accordance with accounting principles generally
    accepted in the United States ("GAAP"). The presentation of
    adjusted net income (loss) is not meant to be a substitute for net
    income (loss) presented in accordance with GAAP but rather should
    be evaluated in conjunction with net income (loss). The Company's
    management believes that the presentation of adjusted net income
    (loss) provides useful information to investors because this
    financial measure excludes amortization of purchased technology
    and intangible assets, which are fixed acquisition-related
    charges, restructuring charges, and asset impairment and disposal
    charges, which are charges relating to an unusual event, and
    stock-based compensation, which is a non-cash charge that ended
    during the three month period ended January 3, 2004. For the three
    and nine month periods ended April 2, 2005, adjusted net income
    (loss) excludes amortization of purchased technology and
    intangible assets. For the three month period ended April 3, 2004,
    there were no adjustments to net loss. For the nine month period
    ended April 3, 2004, adjusted net income (loss) excludes
    restructuring charges, asset impairment and disposal charges and
    stock-based compensation. For the three and twelve month periods
    ended July 2, 2005, adjusted net income (loss) excludes
    amortization of purchased technology and intangible assets. For
    the three month period ended July 3, 2004, adjusted net income
    (loss) excludes restructuring gains. For the twelve month period
    ended July 3, 2004, adjusted net income (loss) excludes
    restructuring charges, asset impairment and disposal charges and
    stock-based compensation. Management does not consider
    amortization of purchased technology and intangible assets,
    restructuring charges, asset impairment and disposal charges and
    stock-based compensation to be part of the Company's on-going
    operating activities or meaningful in evaluating the Company's
    past financial performance or future prospects. In addition,
    adjusted net income (loss) is a primary financial indicator that
    the Company's management uses to evaluate the Company's financial
    results and forecast anticipated financial results for future
    periods. Amortization of purchased technology and intangible
    assets relates to the amortization of identified intangible
    assets, such as purchased technology, customer relationships and
    trademarks and trade names, purchased through an acquisition.
    Restructuring charges and asset impairment and disposal charges
    are material costs that were incurred relating to an unusual event
    to align the Company's operations and cost structure with market
    conditions. Stock-based compensation represents the difference
    between the stock option exercise price and the deemed fair value
    of the Company's common stock on the date of grant and relates
    only to the grant of certain stock options to employees during
    fiscal 2000 and 1999, which do not require cash settlement. The
    Company's definition of adjusted net income (loss) may differ from
    similar measures used by other companies and may differ from
    period to period.


                            MATRIXONE, INC.
                 CONSOLIDATED STATEMENTS OF OPERATIONS
               (in thousands, except per share amounts)

                            Three Months Ended      Year Ended
                            ----------------------------------------
                             July 2,  July 3,    July 2,   July 3,
                              2005      2004      2005       2004
                            ----------------------------------------
                                    (As Restated)        (As Restated)
Revenues:
  Software license          $ 11,653  $ 11,198   $ 47,300  $ 38,747
  Service                     20,862    18,385     76,754    70,830
                             --------  --------   --------  --------
  Total revenues              32,515    29,583    124,054   109,577
                             --------  --------   --------  --------
Cost of Revenues:
  Software license             1,220       838      4,287     3,223
  Amortization of purchased
   technology                    200        --        731        --
  Service                     13,784    11,626     49,472    46,218
                             --------  --------   --------  --------
  Total cost of revenues      15,204    12,464     54,490    49,441
                             --------  --------   --------  --------
Gross Profit                  17,311    17,119     69,564    60,136
                             --------  --------   --------  --------
Operating Expenses:
  Selling and marketing       12,664     8,529     44,638    36,621
  Research and development     7,550     5,801     29,080    23,028
  General and administrative   8,010     2,402     16,030    10,256
  Amortization of intangible
   assets                        117        --        414        --
  Stock-based compensation        --        --         --       567
  Restructuring charges           --      (133)        --     1,751
  Asset impairment and
   disposal charges               --        --         --     1,680
                             --------  --------   --------  --------
  Total operating expenses    28,341    16,599     90,162    73,903
                             --------  --------   --------  --------
Income (Loss) from
 Operations                  (11,030)      520    (20,598)  (13,767)
Other Income, Net                527       444      1,780     1,393
                             --------  --------   --------  --------
Income (Loss) Before Income
 Taxes                       (10,503)      964    (18,818)  (12,374)
Provision for Income Taxes     1,240        37      1,503        32
                             --------  --------   --------  --------
Net Income (Loss)           $(11,743) $    927   $(20,321) $(12,406)
                             ========  ========   ========  ========

Basic Net Income (Loss) Per
 Share                      $  (0.23) $   0.02   $  (0.40) $  (0.26)
                             ========  ========   ========  ========
Diluted Net Income (Loss)
 Per Share                  $  (0.23) $   0.02   $  (0.40) $  (0.26)
                             ========  ========   ========  ========

Shares Used in Computing
 Basic Net Income
 (Loss) per Share             51,714    48,596     51,238    48,411
                             ========  ========   ========  ========
Shares Used in Computing
 Diluted Net Income
 (Loss) per Share             51,714    51,445     51,238    48,411
                             ========  ========   ========  ========


Reconciliation of Adjusted Net Income (Loss)(1):

Net Income (Loss)           $(11,743) $    927   $(20,321) $(12,406)
Adjustments:
  Amortization of purchased
   technology                    200        --        731        --
  Amortization of
   intangible assets             117        --        414        --
  Stock-based compensation        --        --         --       567
  Restructuring charges           --      (133)        --     1,751
  Asset impairment and disposal
   charges                        --        --         --     1,680
                             --------  --------   --------  --------
Adjusted Net Income
 (Loss)(1)                  $(11,426) $    794   $(19,176) $ (8,408)
                             ========  ========   ========  ========

Adjusted Basic Net Income
 (Loss) Per Share           $  (0.22) $   0.02   $  (0.37) $  (0.17)
                             ========  ========   ========  ========
Adjusted Diluted Net Income
 (Loss) Per Share           $  (0.22) $   0.02   $  (0.37) $  (0.17)
                             ========  ========   ========  ========

Shares Used in Computing
 Adjusted Basic Net Income
 (Loss) Per Share             51,714    48,596     51,238    48,411
                             ========  ========   ========  ========
Shares Used in Computing
 Adjusted Diluted Net Income
 (Loss) Per Share             51,714    51,445     51,238    48,411
                             ========  ========   ========  ========

(1) The Company uses the financial measure adjusted net income (loss)
    to supplement its consolidated financial statements, which are
    presented in accordance with accounting principles generally
    accepted in the United States ("GAAP"). The presentation of
    adjusted net income (loss) is not meant to be a substitute for net
    income (loss) presented in accordance with GAAP but rather should
    be evaluated in conjunction with net income (loss). The Company's
    management believes that the presentation of adjusted net income
    (loss) provides useful information to investors because this
    financial measure excludes amortization of purchased technology
    and intangible assets, which are fixed acquisition-related
    charges, restructuring charges, and asset impairment and disposal
    charges, which are charges relating to an unusual event, and
    stock-based compensation, which is a non-cash charge that ended
    during the three month period ended January 3, 2004. For the three
    and nine month periods ended April 2, 2005, adjusted net income
    (loss) excludes amortization of purchased technology and
    intangible assets. For the three month period ended April 3, 2004,
    there were no adjustments to net loss. For the nine month period
    ended April 3, 2004, adjusted net income (loss) excludes
    restructuring charges, asset impairment and disposal charges and
    stock-based compensation. For the three and twelve month periods
    ended July 2, 2005, adjusted net income (loss) excludes
    amortization of purchased technology and intangible assets. For
    the three month period ended July 3, 2004, adjusted net income
    (loss) excludes restructuring gains. For the twelve month period
    ended July 3, 2004, adjusted net income (loss) excludes
    restructuring charges, asset impairment and disposal charges and
    stock-based compensation. Management does not consider
    amortization of purchased technology and intangible assets,
    restructuring charges, asset impairment and disposal charges and
    stock-based compensation to be part of the Company's on-going
    operating activities or meaningful in evaluating the Company's
    past financial performance or future prospects. In addition,
    adjusted net income (loss) is a primary financial indicator that
    the Company's management uses to evaluate the Company's financial
    results and forecast anticipated financial results for future
    periods. Amortization of purchased technology and intangible
    assets relates to the amortization of identified intangible
    assets, such as purchased technology, customer relationships and
    trademarks and trade names, purchased through an acquisition.
    Restructuring charges and asset impairment and disposal charges
    are material costs that were incurred relating to an unusual event
    to align the Company's operations and cost structure with market
    conditions. Stock-based compensation represents the difference
    between the stock option exercise price and the deemed fair value
    of the Company's common stock on the date of grant and relates
    only to the grant of certain stock options to employees during
    fiscal 2000 and 1999, which do not require cash settlement. The
    Company's definition of adjusted net income (loss) may differ from
    similar measures used by other companies and may differ from
    period to period.


                            MATRIXONE, INC.
                 CONDENSED CONSOLIDATED BALANCE SHEETS
                            (in thousands)

                                        July 2,   April 2,    July 3,
                                         2005       2005       2004
                                     ---------------------------------
                                                               (As
               ASSETS                                        Restated)

Current Assets:
  Cash and cash equivalents          $  107,677  $ 104,990  $ 118,414
  Accounts receivable, net               28,620     29,646     25,862
  Prepaid expenses and other current
   assets                                 8,822      8,930      5,963
                                      ----------  ---------  ---------
     Total current assets               145,119    143,566    150,239
Property and Equipment, Net               6,096      6,346      7,062
Goodwill                                 11,929     11,938         --
Other Intangible Assets                   7,645      7,962         --
Other Assets                              2,171      2,297      2,077
                                      ----------  ---------  ---------
                                     $  172,960  $ 172,109  $ 159,378
                                      ==========  =========  =========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
  Accounts payable                   $    5,941  $   4,593  $   3,862
  Accrued expenses                       23,034     15,869     14,592
  Deferred revenues                      37,040     35,579     31,250
                                      ----------  ---------  ---------
     Total current liabilities           66,015     56,041     49,704
                                      ----------  ---------  ---------

Long Term Deferred Revenues               5,163      2,165      1,728

Stockholders' Equity:
  Common stock                              518        516        487
  Additional paid-in capital            227,489    226,776    213,152
  Accumulated deficit                  (128,088)  (116,345)  (107,767)
  Accumulated other comprehensive
   income                                 1,863      2,956      2,074
                                      ----------  ---------  ---------
     Total stockholders' equity         101,782    113,903    107,946
                                      ----------  ---------  ---------
                                     $  172,960  $ 172,109  $ 159,378
                                      ==========  =========  =========




Contact:
Brian Norris                                     
Investor Relations                               
MatrixOne, Inc.                                  
978-589-4040                                     

Email Contact                       
    or
Sharon Rodger       
Public Relations              
MatrixOne, Inc.               
978-589-4066        

Email Contact