Art Technology (ARTG) 8-K ATG Reports Second Quarter 2008 Financial Results

Exhibit 99.1

ATG Reports Second Quarter 2008 Financial Results

Year-Over-Year, Revenue Increased 29%, Product License Bookings Increased 29%, and Company Raises Annual Product License Bookings Guidance

CAMBRIDGE, Mass.--(BUSINESS WIRE)--Art Technology Group, Inc. (NASDAQ: ARTG), the leading e-commerce solutions provider, today reported financial results for the second quarter ended June 30, 2008.

Revenue for the second quarter of 2008 grew to $41.9 million, a 29% increase over second quarter 2007 revenue of $32.6 million.

“ATG delivered another strong quarter of revenue and bookings growth,” stated Bob Burke, ATG’s president and CEO. “We continue to see robust demand for our e-commerce solutions across a wide variety of industries.”

Product license revenue recognized in accordance with United States Generally Accepted Accounting Principles (GAAP) during the second quarter of 2008 was $12.3 million, compared to $6.5 million in the year ago quarter. Product license bookings, a non-GAAP measure which the company defines as product license revenue recognized plus net change in deferred product license revenue, grew 29% year-over-year to $15.7 million for the second quarter from $12.2 million in the year ago quarter. Approximately 62% of product license bookings in the second quarter were deferred and will be recognized ratably.

Short and long term deferred revenue grew to $54.2 million at June 30, 2008, a 37% increase over June 30, 2007.

Fifteen new customers purchased ATG commerce solutions and thirty net new customers purchased eStara e-commerce optimization services this past quarter. New and repeat business was generated from customers including Cineplex Entertainment, Conde Nast, Epson, LexisNexis, Louis Vuitton, Royal Canadian Mint, Talbots and T-Mobile.

Net income in accordance with GAAP for the second quarter of 2008 was $348 thousand, or breakeven on a per diluted share basis. This compares with a net loss of $2.7 million, or a loss of $0.02 per share, in the second quarter of 2007.

Non-GAAP net income increased to $3.4 million for the second quarter of 2008, or $0.03 per diluted share compared with a non-GAAP net loss of $81 thousand, or breakeven per share for the second quarter of 2007.

At June 30, 2008, ATG had $52.7 million in cash, cash equivalents, and short-term and long-term marketable securities. Cash flow from operations for the second quarter of 2008 was $7.3 million.

“We are very pleased with our second quarter financial performance,” said Julie Bradley, ATG’s senior vice president and CFO. “With two quarters behind us, product license bookings growth has exceeded our expectations. Based on the expected continuation of accelerating growth in e-commerce and our current pipeline our guidance and outlook for the full-year remain positive. As a result we are raising product license bookings guidance.”

Financial Guidance

Product license bookings are now expected to grow 15% – 22% for 2008, up from our previously stated guidance of 10% - 20% growth. Consistent with our business model, we expect cross-selling to remain strong which equates to greater deferrals and ratable revenue recognition.

In considering revenue guidance, we analyzed our assumptions around our estimates of product license revenue that may be deferred. Since the amount of product license bookings that are recognized ratably may vary, we concluded that our original revenue guidance range remains appropriate. Therefore, we are reiterating our full year revenue guidance. We expect revenue to be in the range of $159 to $165 million.

We are also reiterating our full year income (loss) guidance. GAAP net income (loss) for the year ending December 31, 2008 is expected to be in the range of $(4.0) million to $1.0 million. GAAP net income (loss) guidance includes an estimated $8.5 - $9.0 million of non-cash equity-related compensation expense and amortization of acquired intangibles of $4.5 - $5.0 million. Non-GAAP net income for the year ending December 31, 2008 is expected to be in the range of $9.0 million to $15.0 million. Cash flow from operations for 2008 is expected to be in the range of $28.0 million to $32.0 million.

Quarterly Conference Call

ATG management will discuss the company’s second quarter 2008 financial results, recent highlights, and business outlook for the remainder of 2008 on its quarterly conference call for investors at 10:00 a.m. ET today. The conference call will be broadcast live over the Internet. Investors interested in listening to the webcast should log on to the “Investors” section of the ATG website, www.atg.com. The live conference call also can be accessed by dialing (866) 723-3575 (or (706) 634-8872 for international calls) and using conference ID No. 50490096. A replay of the call will be available on the company’s website later in the day.

About ATG

A trusted, global specialist in e-commerce, ATG (Art Technology Group, Inc., NASDAQ: ARTG) has spent the last decade focused on helping the world’s premier brands maximize the success of their online businesses. ATG’s software and on demand solutions are used by over 900 companies to attract prospects, convert them to buyers and enhance their multi-channel experience. ATG's e-commerce suite is top ranked by the industry's most influential analyst firms. ATG powers more of the top 300 internet retailers than any other vendor. ATG is headquartered in Cambridge, Massachusetts, with additional locations throughout North America and Europe.

© 2008 Art Technology Group, Inc. ATG and Art Technology Group are registered trademarks of Art Technology Group, Inc. All other product names, service marks, and trademarks mentioned herein are trademarks of their respective owners.

*Use of Non-GAAP Financial Measures

ATG is providing the non-GAAP historical and forward-looking financial measures presented above as the company believes that these figures are helpful in allowing individuals to better assess the ongoing nature of ATG's core operations. A "non-GAAP financial measure" is a numerical measure of a company's historical or future financial performance that excludes amounts that are included in the most directly comparable measure calculated and presented in the GAAP statement of operations.

Net income (non-GAAP) and net income per share (non-GAAP), as we present them in the financial data included in this press release, have been normalized to exclude the net effects of restructuring actions, the amortization of intangible assets, acquisition-related compensation charges, and equity-related compensation. Management believes that these normalized non-GAAP financial measures excluding these items better reflect its operating performance as these non-GAAP figures exclude the effects of non-recurring or non-cash expenses. Management believes that these charges are not necessarily representative of underlying trends in the company's performance and their exclusion provides individuals with additional information to compare the company's results over multiple periods.

ATG considers “product license bookings,” a non-GAAP financial measure which the company defines as product license revenue recognized plus net change in deferred license revenue during any given period, to be an important indicator of growth in its software license business, as its business increasingly evolves toward a recurring, ratable revenue model.

The company uses these non-GAAP financial measures internally to focus management on period-to-period changes in the company's core business. Therefore, the company believes that this information is meaningful in addition to the information contained in the GAAP presentation of financial information. The presentation of this additional non-GAAP financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP.

In accordance with the requirements of Regulation G issued by the Securities and Exchange Commission, the tables above present the most directly comparable GAAP financial measure and reconcile non-GAAP net income and product license bookings to the comparable GAAP measures.

ATG Statement Under Private Securities Litigation Reform Act

This press release contains forward-looking statements about the company’s estimated revenue and earnings. These statements involve known and unknown risks and uncertainties that may cause ATG’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. These risks include the effect of weakened or weakening economic conditions or perceived conditions on the level of spending by customers and prospective customers for ATG’s software and services; financial and other effects of cost control measures; quarterly fluctuations in ATG’s revenues or other operating results; customization and deployment delays or errors associated with ATG’s products; the risk of longer sales cycles for ATG’s products and ATG’s ability to conclude sales based on purchasing decisions that are delayed; satisfaction levels of customers regarding the implementation and performance of ATG’s products; ATG’s need to maintain, enhance, and leverage business relationships with resellers and other parties who may be affected by changes in the economic climate; ATG’s ability to attract and maintain qualified executives and other personnel and to motivate employees; activities by ATG and others related to the protection of intellectual property; potential adverse financial and other effects of litigation (including intellectual property infringement claims) and the release of competitive products and other activities by competitors. Further details on these risks are set forth in ATG’s filings with the Securities and Exchange Commission (SEC), including the company’s annual report on Form 10-K for the period ended December 31, 2007, and its quarterly report on Form 10-Q for the period ended March 31, 2008, as filed with the SEC. These filings are available free of charge on a website maintained by the SEC at http://www.sec.gov.

ART TECHNOLOGY GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(UNAUDITED)
		June 30,		March 31,		December 31,		June 30,
		2008		2008		2007		2007
ASSETS
Current Assets:
	Cash, cash equivalents and marketable securities (including restricted cash of $1,669 as of June 30, 2008 and March 31, 2008)	$	50,573	$	44,711	$	50,879	$	41,197
	Accounts receivable, net		40,501		36,850		40,443		34,561
	Deferred costs, current		777		692		790		-
	Prepaid expenses and other current assets		3,705		4,288		2,741		4,502
Total current assets			95,556		86,541		94,853		80,260
	Property and equipment, net		8,611		8,576		7,208		6,368
	Intangible assets, net		9,938		11,021		11,109		13,561
	Deferred costs, less current portion		2,331		2,613		2,337		775
	Marketable securities (including restricted cash of $419 as of June 30, 2008 and March 31, 2008)		2,124		2,222		1,062		-
	Other assets		1,733		1,376		1,475		1,661
	Goodwill		67,787		67,522		59,675		59,358
Total long-term assets			92,524		93,330		82,866		81,723
Total assets		$	188,080	$	179,871	$	177,719	$	161,983
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
	Accounts payable	$	3,823	$	4,485	$	3,619	$	4,259
	Accrued expenses		19,182		16,711		19,082		14,283
	Deferred revenue, current portion		42,610		37,501		35,577		34,902
	Accrued restructuring, current portion		646		857		855		1,050
	Capital lease obligations		-		-		-		21
Total current liabilities			66,261		59,554		59,133		54,515
Accrued restructuring, less current portion			-		-		225		578
Other liabilities			498		498		487		-
Deferred revenue, less current portion			11,558		10,826		10,777		4,745
Total long-term liabilities			12,056		11,324		11,489		5,323
Stockholders' equity			109,763		108,993		107,097		102,145
Total liabilities and stockholders' equity		$	188,080	$	179,871	$	177,719	$	161,983

ART TECHNOLOGY GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(UNAUDITED)
	Three months ended								Six months ended
	June 30,		March 31,			June 30,			June 30,
	2008		2008			2007			2008			2007
Revenue:
Product licenses	$	12,300	$	9,257		$	6,515		$	21,557		$	13,124
Recurring services		22,946		20,943			18,519			43,889			35,989
Professional and education services		6,674		6,330			7,582			13,004			12,735
Total revenue		41,920		36,530			32,616			78,450			61,848
Cost of Revenue:
Product licenses		519		387			549			906			1,089
Recurring services		9,241		7,606			5,379			16,847			10,522
Professional and educational services		6,495		6,914			7,171			13,409			12,769
Total cost of revenue		16,255		14,907			13,099			31,162			24,380
Gross Profit		25,665		21,623			19,517			47,288			37,468
Operating Expenses:
Research and development		7,373		7,021			6,270			14,394			12,051
Sales and marketing		13,156		11,537			11,773			24,693			21,317
General and administrative		4,863		4,329			4,648			9,192			9,183
Total operating expenses		25,392		22,887			22,691			48,279			42,551
Income (loss) from operations		273		(1,264	)		(3,174	)		(991	)		(5,083	)
Interest and other income, net		240		628			521			868			969
Income (loss) before provision for income taxes		513		(636	)		(2,653	)		(123	)		(4,114	)
Provision for income taxes		165		206			95			371			95
Net income (loss)	$	348	$	(842	)	$	(2,748	)	$	(494	)	$	(4,209	)
Basic net income (loss) per share	$	0.00	$	(0.01	)	$	(0.02	)	$	(0.00	)	$	(0.03	)
Diluted net income (loss) per share	$	0.00	$	(0.01	)	$	(0.02	)	$	(0.00	)	$	(0.03	)
Basic weighted average common shares outstanding		128,805		128,435			127,388			128,620			127,291
Diluted weighted average common shares outstanding		135,010		128,435			127,388			128,620			127,291

Art Technology Group, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(UNAUDITED)
		Three months ended									Six Months Ended
		June 30,			March 31,			June 30,			June 30,			June 30,
		2008			2008			2007			2008			2007
Cash Flows from Operating Activities:
Net income (loss)		$	348		$	(842	)	$	(2,748	)	$	(494	)	$	(4,209	)
	Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization			2,191			2,028			1,925			4,219			3,779
Non-cash stock-based compensation expense			2,001			1,830			1,441			3,831			2,525
Net changes in operating assets and liabilities			2,742			4,079			5,832			6,821			12,432
Net cash provided by operating activities			7,282			7,095			6,450			14,377			14,527
Cash Flows from Investing Activities:
Purchases of marketable securities			(5,393	)		(9,197	)		(3,931	)		(14,590	)		(5,609	)
Maturities of marketable securities			6,550			11,050			5,300			17,600			9,950
Purchases of property and equipment			(1,040	)		(2,375	)		(1,023	)		(3,415	)		(2,422	)
Collateralization of letters of credit			-			(2,088	)		-			(2,088	)		-
Payment of acquisition costs, net of cash acquired			1,150			(10,672	)		(36	)		(9,522	)		(829	)
Decrease in other assets			-			-			(31	)		-			(22	)
Net cash provided by (used in) in investing activities			1,267			(13,282	)		279			(12,015	)		1,068
Cash Flows from Financing Activities:
Proceeds from exercise of stock options			147			509			413			656			647
Proceeds from employee stock purchase plan			265			250			234			515			436
Repurchase of common stock			(1,479	)		-			(2,190	)		(1,479	)		(2,190	)
Payment of employee restricted stock tax withholdings			(478	)		-			-			(478	)		-
Payments on capital leases			-			-			(18	)		-			(35	)
Net cash (used in) provided by financing activities			(1,545	)		759			(1,561	)		(786	)		(1,142	)
Effect of foreign exchange rate changes on cash and cash equivalents			(84	)		186			(70	)		102			(138	)
Net increase (decrease) in cash and cash equivalents			6,920			(5,242	)		5,098			1,678			14,315
Cash and cash equivalents, beginning of period			29,177			34,419			27,128			34,419			17,911
Cash and cash equivalents, end of period		$	36,097		$	29,177		$	32,226		$	36,097		$	32,226

ART TECHNOLOGY GROUP, INC.
STATEMENTS OF OPERATIONS DATA
(In thousands)
(UNAUDITED)
	Three months ended						Six months ended
	June 30,		March 31,		June 30,		June 30,
	2008		2008		2007		2008		2007
Equity-Related Compensation:
Cost of revenue	$	401	$	344	$	268	$	745	$	474
Research and development		332		405		324		737		545
Sales and marketing		608		570		393		1,178		709
General and administrative		660		511		456		1,171		797
Total equity-related compensation	$	2,001	$	1,830	$	1,441	$	3,831	$	2,525
Depreciation and Amortization:
Depreciation
Cost of revenue	$	686	$	551	$	335	$	1,237	$	654
Research and development		223		213		178		436		334
Sales and marketing		131		128		128		259		239
General and administrative		68		79		58		147		100
	$	1,108	$	971	$	699	$	2,079	$	1,327
Amortization
Cost of revenue	$	406	$	460	$	504		866		1,008
Research and development		81		-		-		81		-
Sales and marketing		596		597		694		1,193		1,388
General and administrative		-		-		28		-		56
	$	1,083	$	1,057	$	1,226	$	2,140	$	2,452
Total depreciation and amortization	$	2,191	$	2,028	$	1,925	$	4,219	$	3,779
Capital Expenditures:
Purchases of property and equipment	$	1,040	$	2,375	$	1,023	$	3,415	$	2,422

RECONCILIATION OF GAAP TO NON-GAAP NET INCOME
(In thousands)
(UNAUDITED)
	Three months ended,									Six months ended
	June 30,			March 31,			June 30,			June 30,			June 30,
	2008			2008			2007			2008			2007
Net income (loss) GAAP	$	348		$	(842	)	$	(2,748	)	$	(494	)	$	(4,209	)
Amortization of acquired intangibles		1,083			1,057			1,226			2,140			2,452
Equity-related compensation		2,001			1,830			1,441			3,831			2,525
Net restructuring		-			-			-			-			(68	)
Net income (non-GAAP)	$	3,432		$	2,045		$	(81	)	$	5,477		$	700
Net income (non-GAAP) per share:
Basic	$	0.03		$	0.02		$	(0.00	)	$	0.04		$	0.01
Diluted	$	0.03		$	0.02		$	(0.00	)	$	0.04		$	0.01
Shares used in per share calculations:
Basic		128,805			128,435			127,388			128,620			127,291
Diluted		135,010			134,100			127,388			134,551			131,576
Reconciliation of Product License Bookings
(In thousands)
(UNAUDITED)
	Three months ended,									Six months ended
	June 30,			March 31,			June 30,			June 30,			June 30,
	2008			2008			2007			2008			2007
Product license bookings	$	15,693		$	11,448		$	12,166		$	27,141		$	21,087
Increase in product license deferred revenue		(9,670	)		(5,693	)		(5,997	)		(15,363	)		(8,423	)
Product license deferred revenue recognized		6,277			3,502			346			9,779			460
Product license revenue	$	12,300		$	9,257		$	6,515		$	21,557		$	13,124

CONTACT:
Art Technology Group, Inc.
Julie Bradley, 617-386-1005
Chief Financial Officer
jbradley@atg.com
or
Tucker Walsh, 617-386-1159
twalsh@atg.com