##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 10-Q
 
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2011
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For
the transition period fromto
 000-31321
(Commission File No.)
 RIGHTNOW TECHNOLOGIES, INC.
  Delaware
    
    81-0503640(State or Other Jurisdiction of
    
    (I.R.S. EmployerIncorporation or Organization)
    
    Identification No.)
 136 Enterprise Boulevard
Bozeman, Montana 59718-9300
 (406) 522-4200
 N/A
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



RightNow Technologies, Inc.
Quarterly Report on Form 10-Q
 For the Quarterly Period Ended March 31, 2011
 INDEX
 PagePart I. FINANCIAL INFORMATIONItem 1. Financial Statements
    
    
    3a) Condensed consolidated balance sheets (unaudited)
    
    
    3b) Condensed consolidated statements of operations (unaudited)
    
    
    4c) Condensed consolidated statements of cash flows (unaudited)
    
    
    5d) Notes to condensed consolidated financial statements (unaudited)
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    15Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    26Item 4. Controls and Procedures
    
    
    26Part II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    27Item 1A. Risk Factors
    
    
    27Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    39Item 3. Defaults Upon Senior Securities
    
    
    39Item 4. (Removed and Reserved)
    
    
    39Item 5. Other Information
    
    
    39Item 6. Exhibits
    
    
    40SIGNATURES
    
    
    41EX-10.4EX-10.5EX-10.6EX-10.7EX-31.1EX-31.2EX-32.1
  2




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##### Table of Contents



Part I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 RightNow Technologies, Inc.
 
 Condensed Consolidated Balance Sheets
 December 31,
    
    
    March 31,2010
    
    
    2011AssetsCash and cash equivalents
    
    $
    181,948
    
    
    $
    131,998Short-term investments
    
    
    94,759
    
    
    
    117,659Accounts receivable
    
    
    39,338
    
    
    
    34,558Allowance for doubtful accounts
    
    
    (2,021
    )
    
    
    (1,800
    )Receivables, net
    
    
    37,317
    
    
    
    32,758Deferred commissions
    
    
    5,418
    
    
    
    5,461Prepaid and other current assets
    
    
    4,662
    
    
    
    5,406Deferred tax assets, net
    
    
    3,801
    
    
    
    3,806Total current assets
    
    
    327,905
    
    
    
    297,088Property and equipment, net
    
    
    10,702
    
    
    
    12,644Intangible assets, net
    
    
    6,149
    
    
    
    19,115Goodwill
    
    
    7,975
    
    
    
    31,953Deferred commissions, non-current
    
    
    4,747
    
    
    
    4,649Other
    
    
    4,921
    
    
    
    4,669Deferred tax assets, non-current, net
    
    
    16,480
    
    
    
    16,713Total Assets
    
    $
    378,879
    
    
    $
    386,831Liabilities and Stockholders EquityAccounts payable
    
    $
    10,463
    
    
    $
    12,114Commissions and bonuses payable
    
    
    7,137
    
    
    
    4,678Other accrued liabilities
    
    
    13,363
    
    
    
    15,193Current portion of deferred revenue
    
    
    90,350
    
    
    
    86,244Total current liabilities
    
    
    121,313
    
    
    
    118,229Deferred revenue, net of current portion
    
    
    2,969
    
    
    
    1,939Other long-term liabilities
    
    
    
    
    
    
    4532.50% Convertible senior notes due 2030
    
    
    175,000
    
    
    
    175,000Total liabilities
    
    
    299,282
    
    
    
    295,621Stockholders equity:Common stock
    
    
    35
    
    
    
    36Additional paid-in capital
    
    
    136,717
    
    
    
    145,359Treasury stock
    
    
    (29,149
    )
    
    
    (29,149
    )Accumulated other comprehensive income
    
    
    1,953
    
    
    
    3,533Accumulated deficit
    
    
    (29,959
    )
    
    
    (28,569
    )Total stockholders equity
    
    
    79,597
    
    
    
    91,210Total Liabilities and Stockholders Equity
    
    $
    378,879
    
    
    $
    386,831
  3




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##### Table of Contents



RightNow Technologies, Inc.
 
 Condensed Consolidated Statements of Operations
 Three Months EndedMarch 31,2010
    
    
    2011Revenue:Recurring revenue
    
    $
    33,025
    
    
    $
    41,913Professional services
    
    
    9,077
    
    
    
    10,416Total revenue
    
    
    42,102
    
    
    
    52,329Cost of revenue:Recurring revenue
    
    
    5,879
    
    
    
    7,326Professional services
    
    
    7,332
    
    
    
    9,410Total cost of revenue
    
    
    13,211
    
    
    
    16,736Gross profit
    
    
    28,891
    
    
    
    35,593Operating expenses:Sales and marketing
    
    
    18,724
    
    
    
    22,550Research and development
    
    
    5,132
    
    
    
    5,596General and administrative
    
    
    4,299
    
    
    
    6,171Total operating expenses
    
    
    28,155
    
    
    
    34,317Income from operations
    
    
    736
    
    
    
    1,276Interest and other income, net
    
    
    183
    
    
    
    768Income before income taxes
    
    
    919
    
    
    
    2,044Provision for income taxes
    
    
    (334
    )
    
    
    (654
    )Net income
    
    $
    585
    
    
    $
    1,390Net income per share:Basic
    
    $
    0.02
    
    
    $
    0.04Diluted
    
    $
    0.02
    
    
    $
    0.04Shares used in the computation:Basic
    
    
    31,929
    
    
    
    32,585Diluted
    
    
    33,431
    
    
    
    35,482
  4




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RightNow Technologies, Inc.
 
 Condensed Consolidated Statements of Cash Flows
 Three Months EndedMarch 31,2010
    
    
    2011Operating activities:Net income
    
    $
    585
    
    
    $
    1,390Non-cash adjustments:Depreciation and amortization
    
    
    2,065
    
    
    
    2,802Provision for losses on accounts receivable
    
    
    50
    
    
    
    20Stock-based compensation
    
    
    1,755
    
    
    
    2,739Foreign currency gain related to acquisition
    
    
    
    
    
    
    (1,819
    )Changes in operating accounts, net of business acquisitions:Receivables
    
    
    2,449
    
    
    
    8,029Prepaid expenses
    
    
    (1,499
    )
    
    
    (342
    )Deferred commissions
    
    
    445
    
    
    
    140Accounts payable
    
    
    2,045
    
    
    
    885Commissions and bonuses payable
    
    
    (1,243
    )
    
    
    (2,512
    )Other accrued liabilities
    
    
    1,472
    
    
    
    593Deferred revenue
    
    
    (4,614
    )
    
    
    (8,428
    )Cash provided by operating activities
    
    
    3,510
    
    
    
    3,497Investing activities:Net change in investments
    
    
    (342
    )
    
    
    (22,886
    )Acquisition of property and equipment
    
    
    (1,640
    )
    
    
    (3,117
    )Business acquisitions, net of cash acquired
    
    
    
    
    
    
    (33,837
    )Intangible asset additions
    
    
    (1,034
    )
    
    
    (1,491
    )Cash used in investing activities
    
    
    (3,016
    )
    
    
    (61,331
    )Financing activities:Proceeds from issuance of common stock under employee benefit plans
    
    
    1,159
    
    
    
    5,311Excess tax benefits of stock options exercised
    
    
    327
    
    
    
    591Payments on debt
    
    
    (12
    )
    
    
    (240
    )Cash provided by financing activities
    
    
    1,474
    
    
    
    5,662Effect of foreign exchange rates on cash and cash equivalents
    
    
    (400
    )
    
    
    2,222Increase (decrease) in cash and cash equivalents
    
    
    1,568
    
    
    
    (49,950
    )Cash and cash equivalents at beginning of period
    
    
    41,546
    
    
    
    181,948Cash and cash equivalents at end of period
    
    $
    43,114
    
    
    $
    131,998
  5




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RightNow Technologies, Inc.
 
 Notes to Condensed Consolidated Financial Statements
  (1) Business Description and Basis of Presentation
 Business Description
  Basis of Presentation
    (2) Certain Risks and Concentrations
  6




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Three Months EndedMarch 31,2010
    
    
    2011North America
    
    $
    29,941
    
    
    $
    34,075EMEA
    
    
    8,143
    
    
    
    10,238Asia Pacific
    
    
    4,018
    
    
    
    8,016$
    42,102
    
    
    $
    52,329
 (3) Revenue Recognition
 ASU 2009-13, Revenue Arrangements with Multiple Deliverables (ASU
2009-13), Industry Topic 985, Software, Industry Topic
985
  Financial Accounting Standards Board (FASB) Accounting
Standards Update 2009-13, Revenue Arrangements with Multiple Deliverables ASU 2009-13 Topic 605-25, Multiple-Element Arrangements ASU 2009-13
  7




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##### Table of Contents



Industry Topic 985
      (4) Sales Incentives
  (5) Internal Use Software
 Topic 350, Intangibles  Goodwill and Other
 8




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##### Table of Contents



(6) 2.50% Convertible Senior Notes
       (7) Net Income Per Share
  Three Months EndedMarch 31,2010
    
    
    2011Weighted average common shares outstanding for basic net income per share
    
    
    31,929
    
    
    
    32,585Effect of dilutive securities: Employee stock awards
    
    
    1,502
    
    
    
    2,897Weighted average shares outstanding for dilutive net income per share
    
    
    33,431
    
    
    
    35,482
   Three Months EndedMarch 31,2010
    
    
    2011Employee stock options
    
    
    4,915
    
    
    
    3,918
 9




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##### Table of Contents



(8) Comprehensive Income
  Three Months EndedMarch 31,2010
    
    
    2011Net income
    
    $
    585
    
    
    $
    1,390Other comprehensive income:Unrealized (loss) on short-term investments
    
    
    (26
    )
    
    
    (14
    )Foreign currency translation adjustments
    
    
    185
    
    
    
    1,594Comprehensive income
    
    $
    744
    
    
    $
    2,970
 (9) Fair Value
 Topic 820
  
    
    Level 1  Quoted prices in active markets for identical assets or liabilities.
    
    Level 2  Inputs other than Level 1 that are observable, either directly or indirectly,
such as quoted prices for similar assets or liabilities; quoted prices in markets that are
not active; or other inputs that are observable or can be corroborated by observable market
data for substantially the full term of the assets or liabilities.
    
    Level 3  Unobservable inputs that are supported by little or no market activity and
that are significant to the fair value of the assets or liabilities.
  Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalCash
    
    $
    108,274
    
    
    $
    
    
    
    $
    
    
    
    $
    108,274Money market funds
    
    
    4,002
    
    
    
    
    
    
    
    
    
    
    
    4,002Certificates of deposit
    
    
    2,490
    
    
    
    
    
    
    
    
    
    
    
    2,490Commercial paper
    
    
    
    
    
    
    23,594
    
    
    
    
    
    
    
    23,594Corporate notes and bonds
    
    
    
    
    
    
    12,886
    
    
    
    
    
    
    
    12,886U.S. Government agency securities
    
    
    
    
    
    
    84,880
    
    
    
    
    
    
    
    84,880State and municipal securities
    
    
    
    
    
    
    13,531
    
    
    
    
    
    
    
    13,531$
    114,766
    
    
    $
    134,891
    
    
    $
    
    
    
    $
    249,657
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(10) Stock-Based Compensation
   Three Months EndedMarch 31,2010
    
    
    2011Stock-based compensation expense:Cost of recurring revenue
    
    $
    113
    
    
    $
    204Cost of professional services
    
    
    114
    
    
    
    298Sales and marketing expenses
    
    
    751
    
    
    
    977Research and development expenses
    
    
    257
    
    
    
    307General and administrative expenses
    
    
    520
    
    
    
    953Total stock-based compensation expense
    
    $
    1,755
    
    
    $
    2,739
    Three Months EndedMarch 31,2010
    
    
    2011Fair value per share
    
    $
    7.97
    
    
    $
    14.10Risk free rate
    
    
    2.0
    %
    
    
    2.0
    %Expected term
    
    4.5 yrs
    
    4.7 yrsVolatility
    
    
    65
    %
    
    
    62
    %Dividend yield
    
    
    0
    %
    
    
    0
    %
  Risk Free Rate:
 Expected Term
 Volatility
 Dividend Yield:
 11




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##### Table of Contents



Weighted
    
    
    
    
    
    
    WeightedShares
    
    
    average
    
    
    Aggregate
    
    
    averageShares
    
    
    underlying
    
    
    exercise
    
    
    intrinsic
    
    
    remainingavailable
    
    
    outstanding
    
    
    price per
    
    
    value (in
    
    
    contractualfor grant
    
    
    options
    
    
    share
    
    
    thousands)
    
    
    life (in years)Balance at December 31, 2010
    
    
    2,433
    
    
    
    6,223
    
    
    $
    12.02
    
    
    
    
    
    
    
    7.0Annual reserve addition (1)
    
    
    1,000
    
    
    
    
    
    
    
    Granted (2)
    
    
    (1,353
    )
    
    
    1,324
    
    
    
    26.96Exercised
    
    
    
    
    
    
    (644
    )
    
    
    8.34Forfeited, expired, exchanged or canceled (3)
    
    
    89
    
    
    
    (88
    )
    
    
    11.83Balance at March 31, 2011
    
    
    2,169
    
    
    
    6,815
    
    
    $
    15.27
    
    
    $
    109,366
    
    
    
    7.6Vested or expected to vest at March 31, 2011
    
    
    
    
    
    
    6,483
    
    
    $
    14.94
    
    
    $
    106,199
    
    
    
    7.5Exercisable at March 31, 2011
    
    
    
    
    
    
    3,159
    
    
    $
    11.91
    
    
    $
    61,304
    
    
    
    6.1
 
 (1)
    
    The 2004 Equity Incentive Plan provides for an automatic, annual increase on the first of
each year in an amount equal to the lesser of: a) 1,000,000 shares; b) 4% of the number of
outstanding common shares on the last day of the previous fiscal year; or c) such lesser
amount as determined by the board of directors. The annual automatic increase has been
approved by stockholders through December 31, 2014.(2)
    
    During the three months ended March 31, 2011, there were 29,365 restricted stock units
granted under the 2004 Equity Incentive Plan.(3)
    
    Shares forfeited, expired, exchanged or canceled under the 1998 Long-Term Equity Incentive
and Stock Option Plan are not available for re-grant under the 2004 Equity Incentive Plan.  (11) Commitments and Contingencies
 Warranties and Indemnification
     12




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Litigation
  (12) Income Taxes
  (13) Acquisition
   Cash consideration
    
    $
    35,673Total purchase price
    
    $
    35,673Purchase price allocation:Net assets assumed
    
    $
    531Goodwill and intangible assets
    
    
    35,142Total purchase price
    
    $
    35,673
   Goodwill
    
    $
    23,091Developed technology
    
    
    9,586Customer relationships
    
    
    1,369Trade name and trademarks
    
    
    685Non-compete agreements
    
    
    411Intangible assets
    
    $
    35,142
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(14) Subsequent Events
 Topic 855, Subsequent Events Topic 855
 14




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 In this report, the terms RightNow Technologies, RightNow, Company, we, us and our
refer to RightNow Technologies, Inc. and its separate, wholly-owned independent subsidiaries.
 Cautionary Statement
 All statements included or incorporated by reference in this report, other than statements or
characterizations of historical fact, are forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on our
current expectations, estimates and projections about our industry, managements beliefs, and
certain assumptions made by us, all of which are subject to change. Forward-looking statements can
often be identified by words such as anticipates, expects, intends, plans, predicts,
believes, seeks, estimates, may, will, should, would, could, potential,
continue, ongoing, similar expressions, and variations or negatives of these words, and
include, but are not limited to, statements regarding projected results of operations, managements
future strategic plans, our business, market acceptance and performance of our products, the impact
of our technology and products, our ability to pay interest and principal when due on our
convertible senior notes or to repurchase such notes in certain circumstances, our ability to
retain and hire key executives, sales and technical personnel and other employees in the numbers,
with the capabilities, and at the compensation levels needed to implement our business and product
plans, the competitive nature of and anticipated growth in our markets, our ability to find
suitable acquisitions on favorable terms, if at all, our accounting estimates, and our assumptions
and judgments. These forward looking statements are not guarantees of future results and are
subject to risks, uncertainties and assumptions that are difficult to predict and that could cause
our actual results to differ materially and adversely from those expressed in any forward-looking
statement. The risks and uncertainties referred to above include, but are not limited to, our
business model; our success in transitioning to a new President and Chief Operating Officer; our
ability to develop or acquire and gain market acceptance for new products and enhancements to
existing products in a cost-effective and timely manner; general economic conditions; fluctuations
in foreign currency exchange; the gain or loss of key customers; competitive pressures and other
similar factors such as the availability and pricing of competing products and technologies and the
resulting effects on sales and pricing of our products; our ability to expand or contract
operations, manage expenses and grow profitability; the rate at which our present and future
customers adopt our existing and future products and services; fluctuations in our operating
results including our revenue mix and our rate of growth; fluctuations in backlog; the risk that
our investments in partner relationships and additional employees will not achieve expected
results; interruptions or delays in our hosting operations; breaches of our security measures; our
ability to protect our intellectual property from infringement, and to avoid infringing on the
intellectual property rights of third parties; any unanticipated ambiguities in fair value
accounting standards; the amount and timing of any stock repurchases under our stock repurchase
program; fluctuations in our operating results from the impact of stock-based compensation expense;
our ability to manage and expand our partner relationships; our ability to hire, retain and
motivate our employees and manage our growth; the risks associated with our recent acquisition of
Q-go, including our ability to retain and motivate Q-gos employees, our ability to integrate and
market Q-gos solutions to new customers, our ability to retain Q-gos existing customers, the
speed, quality and
cost of our efforts to integrate Q-gos solutions with our solution set, the
security and reliability of Q-gos service, and the risks associated with forecasting the impact of
Q-go on combined financial results; the impact of potential future acquisitions, if any; and risks
associated with our offering of convertible senior notes including the potential impact on earnings
per share calculations; and various other factors. Further information on potential factors that
could affect our financial results is included in our Annual Report on Form 10-K, quarterly reports
on Form 10-Q, and in other filings with the Securities and Exchange Commission. The
forward-looking statements in this release speak only as of the date they are made. We undertake
no obligation to revise or update publicly any forward-looking statement for any reason.
 Overview
 tm
 15




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tm tm tm tm tm tm
  Sources of Revenue
        Cost of Revenue and Operating Expenses
 Cost of Revenue. CRM
 16




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Sales and Marketing Expenses.
 Research and Development Expenses.
 General and Administrative Expenses.
 Critical Accounting Policies and Estimates
  Revenue Recognition
 Industry
Topic 985, Software
 Revenue Arrangements with Multiple
Deliverables (ASU 2009-13 ASU 2009-13
 17




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##### Table of Contents



Topic 605-25 Multiple-Element Arrangements, ASU 2009-13
 Industry Topic 985, Software.
    Allowance for doubtful accounts
  Income Taxes
  Topic 740, Income Taxes, Topic 740
  18




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Share-Based Compensation
 Topic 718, Compensation-Stock
Compensation,
 Software Capitalization
 Topic 350, Intangibles  Goodwill and Other,
 Recently Issued Accounting Standards
  Results of Operations
  Three Months EndedMarch 31,2010
    
    
    2011Revenue:Recurring revenue
    
    
    78
    %
    
    
    80
    %Professional services
    
    
    22
    
    
    
    20Total revenue
    
    
    100
    
    
    
    100Cost of revenue:Recurring revenue
    
    
    14
    
    
    
    14Professional services
    
    
    17
    
    
    
    18Total cost of revenue
    
    
    31
    
    
    
    32Gross profit
    
    
    69
    
    
    
    68Operating expenses:Sales and marketing
    
    
    45
    
    
    
    43Research and development
    
    
    12
    
    
    
    11General and administrative
    
    
    10
    
    
    
    12Total operating expenses
    
    
    67
    
    
    
    66Income from operations
    
    
    2
    
    
    
    2Interest and other income, net.
    
    
    
    
    
    
    2Income before income taxes
    
    
    2
    
    
    
    4Provision for income taxes
    
    
    (1
    )
    
    
    (1
    )Net income
    
    
    1
    %
    
    
    3
    %
 19




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##### Table of Contents



Three Months EndedMarch 31,2010
    
    
    2011Revenue by type:Recurring
    
    
    78
    %
    
    
    80
    %Professional services
    
    
    22
    
    
    
    20Revenue by geography in:North America
    
    
    71
    %
    
    
    65
    %EMEA
    
    
    19
    
    
    
    20Asia Pacific
    
    
    10
    
    
    
    15
 Quarter Overview
       20




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##### Table of Contents



Backlog
  December 31
    
    
    March 31,2010
    
    
    2011Current committed backlog
    
    $
    126,860
    
    
    $
    125,858Non-current committed backlog
    
    
    27,314
    
    
    
    28,361Total firm committed backlog
    
    
    154,174
    
    
    
    154,219Current backlog subject to termination for convenience
    
    
    21,759
    
    
    
    28,741Non-current backlog subject to termination for convenience
    
    
    119,897
    
    
    
    133,164Total backlog
    
    $
    295,830
    
    
    $
    316,124
       21




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Three Months Ended March 31, 2010 and 2011
 Revenue
 Three Months Ended March 31,Percent(Amounts in thousands)
    
    2010
    
    
    2011
    
    
    ChangeRecurring revenue
    
    $
    33,025
    
    
    $
    41,913
    
    
    
    27
    %Professional services
    
    
    9,077
    
    
    
    10,416
    
    
    
    15Total revenue
    
    $
    42,102
    
    
    $
    52,329
    
    
    
    24
    %
     22




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Cost of Revenue
 Three Months EndedMarch 31,Percent(Amounts in thousands)
    
    2010
    
    
    2011
    
    
    ChangeRecurring revenue
    
    $
    5,879
    
    
    $
    7,326
    
    
    
    25
    %Professional services
    
    
    7,332
    
    
    
    9,410
    
    
    
    28Total cost of revenue
    
    
    13,211
    
    
    
    16,736
    
    
    
    27
    %
      Operating Expenses
 Three Months EndedMarch 31,Percent(Amounts in thousands)
    
    2010
    
    
    2011
    
    
    ChangeSales and marketing
    
    $
    18,724
    
    
    $
    22,550
    
    
    
    20
    %Research and development
    
    
    5,132
    
    
    
    5,596
    
    
    
    9General and administrative
    
    
    4,299
    
    
    
    6,171
    
    
    
    44Total operating expenses
    
    $
    28,155
    
    
    $
    34,317
    
    
    
    22
    %
 Sales and Marketing Expenses
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Research and Development Expenses
  General and Administrative Expenses
  Stock-Based Compensation Expense
  Interest and Other Income (Expense), Net
 Three Months EndedMarch 31,Percent(Amounts in thousands)
    
    2010
    
    
    2011
    
    
    ChangeInterest income
    
    $
    196
    
    
    $
    249
    
    
    
    27
    %Interest expense
    
    
    
    
    
    
    (1,098
    )
    
    
    100Other income (expense)
    
    
    (13
    )
    
    
    1,617
    
    
    
    12,538Total interest and other income, net
    
    $
    183
    
    
    $
    768
    
    
    
    320
    %
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Provision for Income Taxes
 Topic 718
 Liquidity and Capital Resources
 Three Months Ended March 31,Percent(Amounts in thousands)
    
    2010
    
    
    2011
    
    
    ChangeCash, cash equivalents and short-term investments
    
    $
    98,407
    
    
    $
    249,657
    
    
    
    154
    %Cash provided by operating activities
    
    
    3,510
    
    
    
    3,497
    
    
    
    n/m
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Off-Balance Sheet Arrangements
  Contractual Obligations and Commitments
  
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
 Foreign Currency Exchange Risk
   Interest Rate Sensitivity
  
 Item 4. Controls and Procedures
 (a) Evaluation of Disclosure Controls and Procedures
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##### Table of Contents



(b) Changes to Internal Control over Financial Reporting
  
 Part II. Other Information
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  Before deciding to purchase, hold or sell our common stock, you should carefully consider the
risks described below, in addition to the other cautionary statements and risks described elsewhere
and the other information contained in this report and in our other filings with the SEC, including
our reports on Forms 10-K, 10-Q and 8-K. The risks and uncertainties described below are not the
only ones we face. Additional risks and uncertainties not presently known to us or that we
currently deem immaterial may also affect our business. If any of these known or unknown risks or
uncertainties actually occurs with material adverse effects on RightNow, our business, financial
condition and results of operations could be seriously harmed. In that event, the market price for
our common stock could decline and you may lose all or part of your investment.
 We have significant international sales and are subject to risks associated with operating in
international markets including the risk of foreign currency exchange rate fluctuations.
  
    
    fluctuations in foreign currency exchange rates;
    
    political, social and economic instability, including terrorist attacks and security
concerns in general;
    
    adverse changes in tariffs and other protectionist laws and business practices that
favor local competitors;
    
    longer collection periods and difficulties in collecting receivables from foreign
entities;
    
    exposure to different legal standards and burdens of complying with a variety of
foreign laws, including employment, tax, privacy and data protection laws and regulations;
    
    reduced protection for our intellectual property in some countries;
    
    expenses associated with localizing products for foreign countries, including
translation into foreign languages; and
    
    import and export license requirements and restrictions of the United States and each
other country in which we operate.
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We may not be able to sustain or increase profitability in the future.
  We face intense competition, and our failure to compete successfully could make it difficult for
us to add and retain clients and could reduce or impede the growth of our business.
   
    
    companies currently providing customer service solutions, some of whom offer hosted
services, including BMC Software Corporation, Inc., eGain Communications Corporation,
Inquira Software, Inc., Kana Software, Inc., Liveperson, Microsoft Corporation, Moxie
Software, Inc., Oracle Corporation, Parature, SAP AG, and salesforce.com;
    
    CRM systems that are developed and maintained internally by businesses;
    
    CRM products or services that are developed, or bundled with other products or
services, and installed on a clients premises by software vendors;
    
    outsourced contact center providers that bundle solutions and agent labor in their
service offerings;
    
    new companies entering the CRM software market, the on-demand applications market and
the on-demand CRM market, or expanding from any one of these markets to the others;
    
    voice system integrators and voice-enabled IVR technology providers, such as Angel.com,
Microsoft, and Voxify; and
    
    social CRM providers, such as Lithium and other niche social CRM providers.
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Our quarterly results of operations may fluctuate in the future.
  
    
    our ability to retain and increase sales to existing clients, attract new clients and
satisfy our clients requirements;
    
    general economic, industry and market conditions;
    
    fluctuations in foreign currency exchange rates;
    
    the mix of revenue between subscription arrangements, professional services and license
arrangements as sales commissions are generally expensed ratably over the term of an
agreement for subscription services, and expensed when invoiced for license arrangements
and professional services;
    
    changes in the mix of revenue between recurring revenue and professional services
revenue, because the gross margin on professional services is typically lower than the
gross margin on recurring revenue;
    
    changes in the mix of products sold with managed services and/or usage volume, because
the gross margins on voice self-service applications and intent guide is typically lower
than the gross margin on our sales, marketing, feedback and service applications;
    
    the timing of contracts signed and amount of usage fees;
    
    the timing and success of new product introductions or upgrades by us or our
competitors;
    
    the timing of professional service sales and our ability to appropriately staff and
train professional service resources without negatively impacting professional service
margins;
    
    changes in our pricing policies or those of our competitors;
    
    the amount and timing of expenditures related to expanding our operations;
    
    stock price volatility, employee exercise behaviors, and stock option or restricted
stock unit forfeiture rates, or changes in the number of stock options or restricted stock
units granted and vesting requirements in any particular period, which effects the amount
of stock-based compensation expense;
    
    changes in the payment terms for our products and services, including changes in the
mix of payment options chosen by our customers;
    
    the purchasing and budgeting cycles of our clients; and
    
    changes in tax rate affected by changes in the mix of earnings and losses in
jurisdictions with differing statutory tax rates, certain non-deductible expenses arising
from the requirement to expense stock options and the valuation of deferred tax assets and
liabilities, including our ability to use our net operating losses.
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Failure to effectively develop and expand our sales and marketing capabilities could harm our
ability to increase our client base and achieve broader market acceptance of our solutions.
  Most of our solutions are sold pursuant to time-based agreements, and if our existing clients
elect not to renew or to renew on terms less favorable to us, our business, financial condition
and results of operations will be adversely affected.
  We have experienced growth in recent periods. If we fail to manage our growth effectively, we may
be unable to execute our business plan, maintain high levels of service or adequately address
competitive challenges.
   General economic conditions could adversely affect our clients ability or willingness to purchase
our products, which could materially and adversely affect our results of operations.
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If there are interruptions or delays in our hosting services through third-party error, our own
error or the occurrence of unforeseeable events, delivery of our solutions could become impaired,
which could harm our relationships with clients and subject us to liability.
   If the security of our clients confidential information contained in our systems or stored by use
of our software is breached or otherwise subjected to unauthorized access, our hosting service or
our software may be perceived as not being secure and clients may curtail or stop using our
hosting service and our solutions.
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If we fail to respond effectively to rapidly changing technology and evolving industry standards,
particularly in the on-demand CRM industry, our solutions may become less competitive or obsolete.
   Our failure to attract and retain qualified or key personnel may prevent us from effectively
developing, marketing, selling, integrating and supporting our products.
  Our failure to attract, manage, support and retain qualified partners may prevent us from
effectively deploying product and professional services.
  If our solutions fail to perform properly or if they contain technical defects, our reputation
will be harmed, our market share would decline and we could be subject to product liability
claims.
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If we are unable to protect our intellectual property rights, our competitive position could be
harmed or we could be required to incur significant expenses to enforce our rights.
  Our product development efforts may be constrained by the intellectual property of others, and we
may become subject to claims of intellectual property infringement, which could be costly and
time-consuming.
   The market for our on-demand application services is not at the same stage of development as
traditional on-premise enterprise software, and if it does not develop or develops more slowly
than we expect, our business will be harmed.
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
    
    on-demand security capabilities and reliability;
    
    concerns with entrusting a third party to store and manage critical customer data;
    
    the level of customization we offer;
    
    our ability to continue to achieve and maintain high levels of client satisfaction; and
    
    the price, performance and availability of competing products and services.
  If our efforts to enhance existing solutions, introduce new solutions or expand the applications
for our products and solutions to broader CRM markets do not succeed, our ability to grow our
business will be adversely affected.
  Recently completed and/or future acquisitions could disrupt our business and harm our financial
condition and results of operations.
  
    
    an acquisition may negatively impact our results of operations because it may require
incurring large one-time charges, substantial debt or liabilities; it may require the
amortization or write down of amounts related to deferred compensation, goodwill and other
intangible assets; or it may cause adverse tax consequences, substantial depreciation or
deferred compensation charges;
    
    we may encounter difficulties in assimilating and integrating the business,
technologies, products, personnel or operations of companies that we acquire, particularly
if key personnel of the acquired company decide not to work for us;
    
    our existing and potential clients and the customers of the acquired company may delay
purchases due to uncertainty related to an acquisition;
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
    
    an acquisition may disrupt our ongoing business, divert resources, increase our
expenses and distract our management;
    
    the acquired businesses, products or technologies may not generate sufficient revenue
to offset acquisition costs and could result in material asset impairment charges;
    
    we may have to issue equity securities to complete an acquisition, which would dilute
our stockholders and could adversely affect the market price of our common stock; and
    
    acquisitions may involve the entry into a geographic or business market in which we
have little or no prior experience.
  Changes to financial accounting standards may affect our results of operations and financial
condition.
  We may not be able to secure additional financing on favorable terms, or at all, to meet our
future capital needs.
  Our debt service obligations may adversely affect our financial condition and cash flows from
operations.
   
    
    it may impair our ability to obtain additional financing in the future;
    
    an increased portion of our cash flows from operations may have to be dedicated towards
making semi-annual interest payments and repaying the principal in 2015;
    
    it may make us more vulnerable to downturns in our business, our industry or the
economy in general.
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We may issue additional shares of our common stock or instruments convertible into shares of our
common stock, including additional shares associated with the potential conversion of the Notes,
and thereby materially and adversely affect the market price of our common stock and the trading
price of the Notes and cause dilution to existing stockholders.
   We may not have the ability to raise the funds necessary to repurchase the Notes upon a
fundamental change or at the option of the holders of the Notes on certain dates.
  The fundamental change provisions in the Notes may delay or prevent an otherwise beneficial
takeover attempt of us.
  We cannot assure our stockholders that our stock repurchase program will enhance long-term
stockholder value and stock repurchases, if any, could increase the volatility of the price of our
common stock and will diminish our cash reserves.
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The success of our products and our hosted business depends on the continued use of the internet
as a business and communications tool, and the related expansion of the internet infrastructure.
    Privacy concerns and laws or other domestic or foreign regulations may adversely affect our
business or reduce sales of our solutions.
    The significant influence over stockholder voting matters and our office leases that may be
exercised by our founder and Chief Executive Officer will limit your ability to influence
corporate actions and may require us to find alternative office space to lease or buy in the
future.
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Anti-takeover provisions in our charter documents and Delaware law could discourage, delay or
prevent a change in control of our company and may affect the trading price of our common stock.
  
    
    establishing a classified board in which only a portion of the total board members will
be elected at each annual meeting;
    
    authorizing the board to issue preferred stock;
    
    providing the board with sole authority to set the number of authorized directors and
to fill vacancies on the board;
    
    limiting the persons who may call special meetings of stockholders;
    
    prohibiting certain transactions under certain circumstances with interested
stockholders;
    
    requiring supermajority approval to amend certain provisions of the certificate of
incorporation; and
    
    prohibiting stockholder action by written consent.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 (a) Sales of Unregistered Securities
  (b) Use of Proceeds from Sales of Registered Securities
   (c) Purchases of Equity Securities.
  
 Item 3. Defaults Upon Senior Securities.
  
 Item 4. (Removed and Reserved).
 
 Item 5. Other Information.
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Item 6. Exhibits
 Exhibits
  Exhibit 3.1
    
    Amended and Restated Certificate of Incorporation of the Registrant. (1)Exhibit 3.2
    
    Amended and Restated Bylaws of the Registrant. (2)Exhibit 10.1
    
    Renewed lease agreement dated February 7, 2011, between the Registrant and Genesis Partners, LLC
for office space located at 40 Enterprise Boulevard, Bozeman, Montana.(3)Exhibit 10.2
    
    Renewed lease agreement dated February 7, 2011, between the Registrant and Genesis Partners, LLC
for office space located at 77 Discovery Drive, Bozeman, Montana.(4)Exhibit 10.3
    
    Amended lease agreement dated February 7, 2011, between the Registrant and Genesis Partners, LLC
for office space located at 136 Enterprise Boulevard, Bozeman, Montana.(5)Exhibit 10.4
    
    Greg Gianforte amended severance agreement in the event of termination of employment.Exhibit 10.5
    
    Wayne Huyard amended severance agreement in the event of termination of employment.Exhibit 10.6
    
    Jeff Davison amended severance agreement in the event of termination of employment.Exhibit 10.7
    
    Alan Rassaby amended severance agreement in the event of termination of employment.Exhibit 31.1
    
    Certification of Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a) or 15(d)-14(a), as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.Exhibit 31.2
    
    Certification of Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a) or 15(d)-14(a),
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.Exhibit 32.1
    
    Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
 
 (1)
    
    Incorporated by reference to Exhibit 4.2 to the Companys registration statement on Form S-8
(File No. 333-118515) filed with the Securities and Exchange Commission on August 24, 2004.(2)
    
    Incorporated by reference to Exhibit 3.1 of the Companys Current Report on Form 8-K (File
No. 000-31321) filed with the Securities and Exchange Commission on January 25, 2006.(3)
    
    Incorporated by reference to Exhibit 10.1 of the Companys Current Report on Form 8-K (File
No. 000-31321) filed with the Securities and Exchange Commission on February 9, 2011.(4)
    
    Incorporated by reference to Exhibit 10.2 of the Companys Current Report on Form 8-K (File
No. 000-31321) filed with the Securities and Exchange Commission on February 9, 2011.(5)
    
    Incorporated by reference to Exhibit 10.3 of the Companys Current Report on Form 8-K (File
No. 000-31321) filed with the Securities and Exchange Commission on February 9, 2011. 40




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SIGNATURE
   RightNow Technologies, Inc.
 By:
    /s/ Jeffrey C. DavisonJeffrey C. DavisonChief Financial Officer,
Senior Vice President, and Treasurer
(Principal Financial and Accounting Officer) 41