##### 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, 2010
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 000-31321
(Commission File No.)
 RIGHTNOW TECHNOLOGIES, INC.
  Delaware
(State or Other Jurisdiction of 
Incorporation or Organization)
    
    81-0503640
(I.R.S. Employer
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




---



##### 



RightNow Technologies, Inc.
Quarterly Report on Form 10-Q
 For the Quarterly Period Ended March 31, 2010
 INDEX
 PagePart I. FINANCIAL INFORMATION
    
    
    3Item 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
    
    
    14Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    28Item 4. Controls and Procedures
    
    
    29Part II. OTHER INFORMATION
    
    
    29Item 1. Legal Proceedings
    
    
    29Item 1A. Risk Factors
    
    
    29Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    41Item 3. Defaults Upon Senior Securities
    
    
    41Item 4. (Removed and Reserved)
    
    
    41Item 5. Other Information
    
    
    41Item 6. Exhibits
    
    
    41SIGNATURES
    
    
    43EX-31.1EX-31.2EX-32.1




---



##### Table of Contents



Part I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 RightNow Technologies, Inc.
 
 Condensed Consolidated Balance Sheets
  December 31,
    
    
    March 31,2009
    
    
    2010AssetsCash and cash equivalents
    
    $
    41,546
    
    
    $
    43,114Short-term investments
    
    
    54,977
    
    
    
    55,293Accounts receivable
    
    
    31,850
    
    
    
    29,723Term receivables, current
    
    
    2,417
    
    
    
    1,762Allowance for doubtful accounts
    
    
    (1,914
    )
    
    
    (1,794
    )Receivables, net
    
    
    32,353
    
    
    
    29,691Deferred commissions
    
    
    6,394
    
    
    
    5,828Prepaid and other current assets
    
    
    2,434
    
    
    
    3,792Total current assets
    
    
    137,704
    
    
    
    137,718Property and equipment, net
    
    
    10,122
    
    
    
    10,154Term receivables, non-current
    
    
    1,105
    
    
    
    810Intangible assets, net
    
    
    11,141
    
    
    
    11,669Deferred commissions, non-current
    
    
    3,461
    
    
    
    3,457Other
    
    
    902
    
    
    
    1,055Total Assets
    
    $
    164,435
    
    
    $
    164,863Liabilities and Stockholders EquityAccounts payable
    
    $
    5,427
    
    
    
    7,442Commissions and bonuses payable
    
    
    6,271
    
    
    
    4,964Other accrued liabilities
    
    
    11,146
    
    
    
    12,525Current portion of debt
    
    
    22
    
    
    
    10Current portion of deferred revenue
    
    
    74,446
    
    
    
    68,103Total current liabilities
    
    
    97,312
    
    
    
    93,044Deferred revenue, net of current portion
    
    
    26,881
    
    
    
    27,592Stockholders equity:Common stock
    
    
    34
    
    
    
    34Additional paid-in capital
    
    
    112,439
    
    
    
    115,680Treasury Stock
    
    
    (15,007
    )
    
    
    (15,007
    )Accumulated other comprehensive income
    
    
    1,125
    
    
    
    1,284Accumulated deficit
    
    
    (58,349
    )
    
    
    (57,764
    )Total stockholders equity
    
    
    40,242
    
    
    
    44,227Total Liabilities and Stockholders Equity
    
    $
    164,435
    
    
    $
    164,863
  3




---



##### Table of Contents



RightNow Technologies, Inc.
 
 Condensed Consolidated Statements of Operations
  Three Months EndedMarch 31,2009
    
    
    2010Revenue:Recurring revenue
    
    $
    26,045
    
    
    $
    33,025Professional services
    
    
    9,992
    
    
    
    9,077Total revenue
    
    
    36,037
    
    
    
    42,102Cost of revenue:Recurring revenue
    
    
    4,949
    
    
    
    5,879Professional services
    
    
    7,008
    
    
    
    7,332Total cost of revenue
    
    
    11,957
    
    
    
    13,211Gross profit
    
    
    24,080
    
    
    
    28,891Operating expenses:Sales and marketing
    
    
    14,863
    
    
    
    18,724Research and development
    
    
    4,756
    
    
    
    5,132General and administrative
    
    
    3,446
    
    
    
    4,299Total operating expenses
    
    
    23,065
    
    
    
    28,155Income from operations
    
    
    1,015
    
    
    
    736Interest and other income, net
    
    
    401
    
    
    
    183Income before income taxes
    
    
    1,416
    
    
    
    919Provision for income taxes
    
    
    (153
    )
    
    
    (334
    )Net income
    
    $
    1,263
    
    
    $
    585Net income per share:Basic
    
    $
    0.04
    
    
    $
    0.02Diluted
    
    $
    0.04
    
    
    $
    0.02Shares used in the computation:Basic
    
    
    31,784
    
    
    
    31,929Diluted
    
    
    32,249
    
    
    
    33,431
  4




---



##### Table of Contents



RightNow Technologies, Inc.
 
 Condensed Consolidated Statements of Cash Flows
  Three Months EndedMarch 312009
    
    
    2010Operating activities:Net income
    
    $
    1,263
    
    
    $
    585Non-cash adjustments:Depreciation and amortization
    
    
    1,887
    
    
    
    2,065Provision for losses on accounts receivable
    
    
    57
    
    
    
    50Stock-based compensation
    
    
    1,516
    
    
    
    1,755Changes in operating accounts:Receivables
    
    
    13,569
    
    
    
    2,449Prepaid expenses
    
    
    (126
    )
    
    
    (1,499
    )Deferred commissions
    
    
    525
    
    
    
    445Accounts payable
    
    
    (1,107
    )
    
    
    2,045Commissions and bonuses payable
    
    
    (2,553
    )
    
    
    (1,243
    )Other accrued liabilities
    
    
    (716
    )
    
    
    1,472Deferred revenue
    
    
    (9,429
    )
    
    
    (4,614
    )Cash provided by operating activities
    
    
    4,886
    
    
    
    3,510Investing activities:Net change in investments
    
    
    (2,251
    )
    
    
    (342
    )Acquisition of property and equipment
    
    
    (684
    )
    
    
    (1,640
    )Intangible asset additions
    
    
    
    
    
    
    (1,034
    )Cash used in investing activities
    
    
    (2,935
    )
    
    
    (3,016
    )Financing activities:Proceeds from issuance of common stock under employee benefit plans
    
    
    78
    
    
    
    1,159Excess tax benefits of stock options exercised
    
    
    89
    
    
    
    327Common stock repurchased
    
    
    (1,798
    )
    
    
    Payments on debt
    
    
    (12
    )
    
    
    (12
    )Cash provided (used) by financing activities
    
    
    (1,643
    )
    
    
    1,474Effect of foreign exchange rates on cash and cash equivalents
    
    
    (251
    )
    
    
    (400
    )Increase in cash and cash equivalents
    
    
    57
    
    
    
    1,568Cash and cash equivalents at beginning of period
    
    
    51,405
    
    
    
    41,546Cash and cash equivalents at end of period
    
    $
    51,462
    
    
    $
    43,114
  5




---



##### Table of Contents



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




---



##### Table of Contents



Three Months EndedMarch 31,2009
    
    
    2010North America
    
    $
    26,997
    
    
    $
    29,941EMEA
    
    
    6,440
    
    
    
    8,143Asia Pacific
    
    
    2,600
    
    
    
    4,018$
    36,037
    
    
    $
    42,102
 (3) Revenue Recognition
  Topic 605-25,
Multiple-Element Arrangements, Industry Topic 985, Software, Industry Topic 985
 Revenue Arrangements with Multiple Deliverables (ASU 2009-13 ASU
2009-13 Topic 605-25 Multiple-Element Arrangements, ASU
2009-13
  7




---



##### Table of Contents



Industry Topic 985,
Software.
      (4) Sales Incentives
  8




---



##### Table of Contents



(5) Net Income Per Share
  Three Months EndedMarch 31,2009
    
    
    2010Weighted average common shares
outstanding for basic net income per
share
    
    
    31,784
    
    
    
    31,929Effect of dilutive securities:Employee stock options
    
    
    465
    
    
    
    1,502Weighted average shares outstanding
for dilutive net income per share
    
    
    32,249
    
    
    
    33,431
  Three Months EndedMarch 31,2009
    
    
    2010Employee stock options
    
    
    5,416
    
    
    
    4,915
 (6) Comprehensive Income
  Three Months EndedMarch 31,2009
    
    
    2010Net income
    
    $
    1,263
    
    
    $
    585Other comprehensive income:Unrealized (loss) on short-term investments
    
    
    (129
    )
    
    
    (26
    )Foreign currency translation adjustments
    
    
    88
    
    
    
    185Comprehensive income
    
    $
    1,222
    
    
    $
    744
 (7) 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.
As a result of recent market conditions, the Company holds financial instruments
for which limited or no observable market data is available. These fair value
 9




---



##### Table of Contents



measurements are based primarily upon our own estimates and are often calculated
based on current pricing policy, the current economic and competitive environment,
the characteristics of the instrument, credit, interest, and other such factors.
Therefore, the results cannot be determined with precision, cannot be substantiated
by comparison to quoted prices in active markets, and may not be realized in a
current sale or immediate settlement of the asset. Additionally, there are inherent
uncertainties in any fair value measurement technique, and changes in the underlying
assumptions used, including discount rates, liquidity risks, and estimates of future
cash flows, could significantly affect the fair value measurement amounts.
  Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalCash
    
    $
    28,571
    
    
    
    
    
    
    
    
    
    
    $
    28,571Money market funds
    
    
    13,796
    
    
    
    
    
    
    
    
    
    
    
    13,796Certificates of deposit
    
    
    1,490
    
    
    
    
    
    
    
    
    
    
    
    1,490Commercial paper
    
    
    
    
    
    
    2,799
    
    
    
    
    
    
    
    2,799Corporate notes and bonds
    
    
    
    
    
    
    5,247
    
    
    
    
    
    
    
    5,247U.S. Government agency securities
    
    
    
    
    
    
    42,703
    
    
    
    
    
    
    
    42,703State and municipal securities
    
    
    
    
    
    
    951
    
    
    
    
    
    
    
    951Auction rate state and municipal securities
    
    
    
    
    
    
    
    
    
    
    2,681
    
    
    
    2,681Auction rate security put option
    
    
    
    
    
    
    
    
    
    
    169
    
    
    
    169$
    43,857
    
    
    $
    51,700
    
    
    $
    2,850
    
    
    $
    98,407
  Fair value at December 31, 2009
    
    $
    3,797Unrealized gain adjustmentARS
    
    
    109Unrealized loss adjustmentput option
    
    
    (106
    )Redemptions
    
    
    (950
    )Fair value at March 31, 2010
    
    $
    2,850Fair value at December 31, 2008
    
    $
    4,963Unrealized gain adjustmentARS
    
    
    356Unrealized loss adjustmentput option
    
    
    (339
    )Fair value at March 31, 2009
    
    $
    4,980
    10




---



##### Table of Contents



(8) Stock-Based Compensation
   Three Months EndedMarch 31,2009
    
    
    2010Stock-based compensation expense:Cost of software, hosting and support
    
    $
    96
    
    
    $
    113Cost of professional services
    
    
    133
    
    
    
    114Sales and marketing expenses
    
    
    622
    
    
    
    751Research and development expenses
    
    
    262
    
    
    
    257General and administrative expenses
    
    
    403
    
    
    
    520Total stock-based compensation expense
    
    $
    1,516
    
    
    $
    1,755
  11




---



##### Table of Contents



Three Months EndedMarch 31,2009
    
    
    2010Fair value per share
    
    $
    4.47
    
    
    $
    7.97Risk free rate
    
    
    1.6
    %
    
    
    2.0
    %Expected term
    
    4.4 yrs
    
    4.5 yrsVolatility
    
    
    67
    %
    
    
    65
    %Dividend yield
    
    
    0
    %
    
    
    0
    %
  Risk Free Rate:
 Expected Term
 Volatility
 Dividend Yield:
  Weighted
    
    
    
    
    
    
    Weightedaverage
    
    
    Aggregate
    
    
    averageShares
    
    
    
    
    
    
    exercise
    
    
    intrinsic
    
    
    remainingavailable
    
    
    Outstanding
    
    
    price per
    
    
    value (in
    
    
    contractualfor grant
    
    
    options
    
    
    share
    
    
    thousands)
    
    
    life (in years)Balance at December 31, 2009
    
    
    2,774
    
    
    
    5,947
    
    
    $
    10.96
    
    
    
    
    
    
    
    7.2Annual reserve addition (1)
    
    
    1,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    

    (895
    )Granted
    
    
    
    
    
    
    895
    
    
    
    15.04Exercised
    
    
    
    
    
    
    (107
    )
    
    
    10.88Forfeited, expired, exchanged or canceled (2)
    
    
    41
    
    
    
    (41
    )
    
    
    13.81Balance at March 31, 2010
    
    
    2,920
    
    
    
    6,694
    
    
    $
    11.49
    
    
    $
    43,045
    
    
    
    7.4Vested or expected to vest at March 31, 2010
    
    
    
    
    
    
    6,417
    
    
    $
    11.47
    
    
    $
    41,451
    
    
    
    7.3Exercisable at March 31, 2010
    
    
    
    
    
    
    3,538
    
    
    $
    11.29
    
    
    $
    23,633
    
    
    
    6.1
 12




---



##### Table of Contents



(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 shareholders through December 31, 2014.(2)
    
    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.  (9) Commitments and Contingencies
 Warranties and Indemnification
     Litigation
  (10) Income Taxes
  13




---



##### Table of Contents



(11) Subsequent Events
 Topic 855, Subsequent Events
 
 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 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, market acceptance and performance of our products, 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 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, general economic conditions; fluctuations in foreign currency exchange rates; our
business model; 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; fluctuations in our
earnings as a result of potential changes to our valuation allowance(s) on our deferred tax assets;
the success of our efforts to integrate HiveLives personnel and processes, following our
acquisition of that entity; the risk of asset impairment associated with the acquisition of
HiveLive; 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;
the credit markets and potential impact on the recoverability of our portfolio of auction rate
securities; our ability to sell auction rate securities under a put option with our broker; any
unanticipated ambiguities in fair value accounting standards; 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
impact of potential future acquisitions, if any; and various other factors, some of which are
described under the section below entitled Risk Factors, in Item 1A of this report. These
forward-looking statements speak only as of the date of this report. We undertake no obligation to
revise or update publicly any forward-looking statement for any reason, except as otherwise
required by law.
 Overview
  14




---



##### Table of Contents



15




---



##### Table of Contents



Sources of Revenue
        Cost of Revenue and Operating Expenses
 Cost of Revenue.
 Sales and Marketing Expenses.
 Research and Development Expenses.
 16




---



##### Table of Contents



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 Topic 605-25 Multiple-Element
Arrangements, ASU 2009-13
 Industry Topic 985, Software.
    17




---



##### Table of Contents



18




---



##### Table of Contents



Allowance for doubtful accounts
  Income Taxes
   Share-Based Compensation
 Topic 718, Compensation-Stock
Compensation,
 Software Capitalization
 Topic 350, Intangibles  Goodwill and Other,
 Industry Topic 985, Software,
 Recently Issued Accounting Standards
  19




---



##### Table of Contents



Results of Operations
  Three Months EndedMarch 31,2009
    
    
    2010Revenue:Recurring revenue
    
    
    72
    %
    
    
    78
    %Professional services
    
    
    28
    
    
    
    22Total revenue
    
    
    100
    
    
    
    100Cost of revenue:Recurring revenue
    
    
    14
    
    
    
    14Professional services
    
    
    19
    
    
    
    17Total cost of revenue
    
    
    33
    
    
    
    31Gross profit
    
    
    67
    
    
    
    69Operating expenses:Sales and marketing
    
    
    41
    
    
    
    45Research and development
    
    
    13
    
    
    
    12General and administrative
    
    
    10
    
    
    
    10Total operating expenses
    
    
    64
    
    
    
    67Income from operations
    
    
    3
    
    
    
    2Interest and other income, net.
    
    
    1
    
    
    
    Income before income taxes
    
    
    4
    
    
    
    2Provision for income taxes
    
    
    
    
    
    
    1Net income
    
    
    4
    %
    
    
    1
    %
  Three Months EndedMarch 31,2009
    
    
    2010Revenue by type:Recurring
(subscriptions, term
licenses, hosting
and support)
    
    
    72
    %
    
    
    78
    %Professional services
    
    
    28
    
    
    
    22Revenue by geography in:North America
    
    
    75
    %
    
    
    71
    %EMEA
    
    
    18
    
    
    
    19Asia Pacific
    
    
    7
    
    
    
    10
 Quarter Overview
   20




---



##### Table of Contents



Backlog
  December 31
    
    
    March 31,2009
    
    
    2010Current committed backlog
    
    $
    117,600
    
    
    $
    117,772Non-current committed backlog
    
    
    57,020
    
    
    
    52,269Total firm committed backlog
    
    
    174,620
    
    
    
    170,041Current backlog subject to
termination for convenience
    
    
    3,400
    
    
    
    2,834Non-current backlog subject to
termination for convenience
    
    
    1,980
    
    
    
    23,350Total backlog
    
    $
    180,000
    
    
    $
    196,225
   21




---



##### Table of Contents



22




---



##### Table of Contents



Three Months Ended March 31, 2009 and 2010
 Revenue
 Three Months Ended March 31,Percent(Amounts in thousands)
    
    2009
    
    
    2010
    
    
    ChangeRecurring revenue
    
    $
    26,045
    
    
    $
    33,025
    
    
    
    27
    %Professional services
    
    
    9,992
    
    
    
    9,077
    
    
    
    (9
    )Total revenue
    
    $
    36,037
    
    
    $
    42,102
    
    
    
    17
    %
     Cost of Revenue
 Three Months EndedMarch 31,Percent(Amounts in thousands)
    
    2009
    
    
    2010
    
    
    ChangeRecurring revenue
    
    $
    4,949
    
    
    $
    5,879
    
    
    
    19
    %Professional services
    
    
    7,008
    
    
    
    7,332
    
    
    
    5Total cost of revenue
    
    
    11,957
    
    
    
    13,211
    
    
    
    10
    %
 23




---



##### Table of Contents



Operating Expenses
 Three Months EndedMarch 31,Percent(Amounts in thousands)
    
    2009
    
    
    2010
    
    
    ChangeSales and marketing
    
    $
    14,863
    
    
    $
    18,724
    
    
    
    26
    %Research and development
    
    
    4,756
    
    
    
    5,132
    
    
    
    8General and administrative
    
    
    3,446
    
    
    
    4,299
    
    
    
    25Total operating expenses
    
    $
    23,065
    
    
    $
    28,155
    
    
    
    22
    %
 Sales and Marketing Expenses
  24




---



##### Table of Contents



25




---



##### Table of Contents



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)
    
    2009
    
    
    2010
    
    
    ChangeInterest income
    
    $
    320
    
    
    $
    196
    
    
    
    (39
    )%Interest expense
    
    
    (3
    )
    
    
    
    
    
    
    n/mOther income (loss)
    
    
    84
    
    
    
    (13
    )
    
    
    n/mTotal interest and other income, net
    
    $
    401
    
    
    $
    183
    
    
    
    (54
    )%
   Provision for Income Taxes
 Topic 718
 26




---



##### Table of Contents



Liquidity and Capital Resources
 Three Months Ended March 31,Percent(Amounts in thousands)
    
    2009
    
    2010
    
    ChangeCash, cash equivalents and short-term investments
    
    $
    87,979
    
    
    $
    98,407
    
    
    
    12
    %Long-term investments
    
    
    4,980
    
    
    
    
    
    
    
    (100
    )Cash provided by operating activities
    
    
    4,886
    
    
    
    3,510
    
    
    
    (28
    )%
        27




---



##### Table of Contents



Off-Balance Sheet Arrangements
  Contractual Obligations and Commitments
  
 Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
 Foreign Currency Exchange Risk
   Interest Rate Sensitivity
  Liquidation and Valuation Risk
  28




---



##### Table of Contents



Item 4.
    
    Controls and Procedures
 (a) Evaluation of Disclosure Controls and Procedures
  (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
 29




---



##### Table of Contents



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.
 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.
   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 conflicts in the Middle East,
Central Asia and elsewhere abroad, 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.
   30




---



##### Table of Contents



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 ATG, BMC Software Corporation, Inc., eGain Communications
Corporation, Inquira Software, Inc., Kana Software, Inc., Liveperson, Microsoft
Corporation, Netsuite, nGenera, 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 Microsoft,
TuVox, and Voxify; and
    
    Social CRM providers, such as Lithium and other niche social CRM providers.
  31




---



##### Table of Contents



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;
    
    the mix of revenue between license arrangements, professional services and subscription
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 professional services and software, hosting and
support, because the gross margin on professional services is typically lower than the
gross margin on software, hosting and support;
    
    changes in the mix of voice self service applications sold and/or usage volume, because
the gross margin on voice self service applications is typically lower than the gross
margin on our sales, marketing, feedback and service applications;
    
    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;
    
    changes in our assumptions of stock price volatility, employee exercise behaviors, and
option forfeiture rates, or changes in the number of stock options 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;
    
    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; and
    
    changes in credit market conditions associated with auction rate securities, which
could permanently impair the recoverability of these investments.
 32




---



##### Table of Contents



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.
   33




---



##### Table of Contents



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.
  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.
  34




---



##### Table of Contents



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.
    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.
  35




---



##### Table of Contents



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.
  
    
    on demand security capabilities and reliability;
 36




---



##### Table of Contents




    
    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;
    
    concerns with purchasing critical CRM solutions from a company with a history of
operating losses; 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;
    
    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
 37




---



##### Table of Contents




    
    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.
  With the recent volatility in the capital markets, there is a risk that we could suffer a loss
of principal in our cash and cash equivalents and short term investments and suffer a reduction
in our interest income or in our return on investments. Additionally funds associated with
auction rate securities may be inaccessible in excess of 12 months, which may result in market
value declines, which could have a material impact on our operating results in the period it is
recognized.
  We may not be able to secure additional financing on favorable terms, or at all, to meet our
future capital needs.
  38




---



##### Table of Contents



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.
    39




---



##### Table of Contents



Non-solicitation concerns, laws or regulations may adversely affect our clients ability to
perform outbound marketing and other email communications, which could 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.
   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;
 40




---



##### Table of Contents




    
    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.
  
 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.
  
 Item 6.
    
    Exhibits
 41




---



##### Table of Contents



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
    
    2004 Equity Incentive Plan, as amended and restated. (3)Exhibit 10.2
    
    Renewed lease agreement, dated February 16, 2010, between the
registrant and Genesis Partners, LLC for office space located at 77
Discovery Drive, Bozeman, Montana. (4)Exhibit 10.3
    
    Renewed lease agreement, dated February 16, 2010, between the
registrant and Genesis Partners, LLC for office space located at 110
Enterprise Boulevard, Bozeman, Montana. (5)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 10.3 of the Companys Annual
Report on Form 10-K (File No. 000-31321) filed with the Securities and
Exchange Commission on March 9, 2010.(4)
    
    Incorporated by reference to Exhibit 10.23 of the Companys Annual
Report on Form 10-K (File No. 000-31321) filed with the Securities and
Exchange Commission on March 9, 2010.(5)
    
    Incorporated by reference to Exhibit 10.24 of the Companys Annual
Report on Form 10-K (File No. 000-31321) filed with the Securities and
Exchange Commission on March 9, 2010. 42




---



##### Table of Contents



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

(Principal Financial and Accounting Officer) 43