Continued Profitability in Challenging Economic Environment

Financial Highlights

     - Revenue & earnings in line with September 3rd pre-announcement
     - Revenue for the quarter was $22.0 million
     - EPS for the quarter was $0.04 per share
     - Net income for the quarter was $1.4 million
     - Cash and investments at $243 million
     - Repurchased $6.6 million in Verity common stock during the quarter
     - DSO's of 71 days

    Strategic Highlights

     - K2 Enterprise 4.5 launch gets strong positive response
     - Verity technology is a key component in just-launched Documentum 5
       content management platform
     - K2 software is used by the U.S. Department of Defense, E*Trade and KPMG
       UK to enhance their knowledge management infrastructures
     - Signed significant deals with Alcoa, Boeing, Caterpillar, CSFB, Diageo
       PLC, Dupont, Eastman Kodak, Home Depot, Pfizer, Standard Life, Unocal,
       Verizon, Wells Fargo and others
     - Continued leadership in OEM market with significant new or extended
       licensing agreements with Plumtree, Stellent, TrendMicro and others

SUNNYVALE, Calif., Sept. 12 -- Verity, Inc. (Nasdaq: VRTY), a leading provider of infrastructure software powering corporate intranets and e-commerce sites as well as e-business applications, today reported financial results for its first fiscal quarter ended August 31, 2002. Verity's revenues for its first quarter were $22.0 million, representing a 9% increase over revenues of $20.1 million for the same period last year. Software product revenues, which represented 56% of total revenues for the quarter, were $12.3 million, a 20% increase from the $10.3 million for the same period last year. Net income for the quarter was $1.4 million, or $0.04 per diluted share, compared with a net loss of $2.5 million, or $0.07 per share, for the same period last year.

"First quarter results were in line with the projections we provided on September 3, 2002," said Gary J. Sbona, Verity's chairman and chief executive officer. "As we indicated at that time, we believe that Verity's long-term prospects for growth and profitability continue to be strong. While global economic conditions remain challenging, our goal at Verity continues to be maximizing long-term shareholder value, by developing and delivering industry leading products, by prudently managing our expenses and by constantly focusing on sales execution."

Customer Activity

During the period, Verity realized sales from a range of world-class companies in the banking and financial services, high technology, professional services, and telecommunications industries. First quarter wins include Alcoa, Boeing, Caterpillar, CSFB, Diageo PLC, Dupont, Eastman Kodak, Home Depot, Pfizer, Standard Life, Unocal, Verizon, Wells Fargo and others.

The company extended its position in the OEM market for enterprise search and categorization software technology by way of new or extended licensing agreements achieved with Plumtree, Stellent, TrendMicro and others.

Business Outlook

Based on current economic conditions, Verity is projecting second quarter revenues between $21 million and $23 million with continued profitability.

Operating Results Conference Call Scheduled

During a conference call, scheduled for Thursday, September 12, 2002 at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time), Gary J. Sbona, chairman and chief executive officer, and key members of Verity's management team will review the operating results from the Company's first quarter that ended August 31, 2002 and Verity's current business outlook.

To participate, dial 1-888-789-0089, in the United States or Canada, or 1-416-695-6120 (International) five (5) minutes prior to the scheduled start time.

Alternatively, investors may access the web cast of Verity's earnings call at: http://www.vcall.com/EventPage.asp?ID=82280 .

A replay of the operating results call will be available through September 27, 2002 at the above listed Web site or by dialing 1-888-509-0082, 4 a.m. to 8 p.m. PT.

About Verity

Headquartered in Sunnyvale, Calif., Verity is a leading provider of business portal infrastructure software. Verity software gives businesses a multitude of ways to improve access to vital information and perform a range of e-business operations, while enhancing the end-user experience. Verity-powered business portals, which include corporate intranets used for sharing information within an enterprise; e-commerce sites for online selling; and market exchange portals for B2B activities, all provide personalized information to employees, partners, customers and suppliers.

Verity products are used by approximately 80 percent of the Fortune 50 and by more than 1,500 corporations in various markets. Customers include Adobe Systems, AT&T, Cap Gemini Ernst & Young, Cisco, CNET, Compaq, Dow Jones, EDGAR Online, FairMarket, Financial Times, Globe and Mail, Home Depot, Lotus, SAP, Siemens, Sybase, Time New Media and Timex.

Forward-Looking Statements

The statements in this press release regarding Verity's beliefs regarding its long term prospects for growth and profitability, how it intends to maximize long-term shareholder value, and under the heading "Business Outlook," are forward-looking statements. Actual financial results could differ materially as a result of many factors, including: these expectations and beliefs are based on assumptions that may not prove to be accurate, including the future demand for Verity's products may not be as strong as Verity predicts; many of Verity's product orders are large, and a delay in closing a large sale during the second quarter could materially reduce Verity's revenues for that period; transactions accounting for a disproportionate percentage of Verity's quarterly revenues are frequently closed in the last few weeks or days of a quarter and, accordingly, even a slight delay in the closing of some of these transactions could materially reduce Verity's revenues for that period; Verity incurs expenses based upon anticipated revenues and, consequently, if the revenues are less than anticipated, Verity will have lower gross margins and operating results; if competitors develop new products that compete favorably against Verity's products, sales of Verity's products will be less than projected; and a portion of Verity's sales are into the international market, which exposes Verity to currency fluctuation and other risks. These and other risks relating to Verity and its business and products are as set forth under the caption "Risk Factors" in Item 1 of Verity's latest Form 10-K filed with the Securities and Exchange Commission.

NOTE: Verity and the Verity logo are registered trademarks or trademarks of Verity, Inc.

All other trademarks are the property of their respective owners. World Wide Web site http://www.verity.com .

VERITY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data)

                                                        Quarter Ended
                                                   August 31,     August 31,
                                                      2002           2001
                                                         (Unaudited)

    Revenues:
      Software products                              $12,306        $10,267
      Service and other                                9,704          9,838
        Total revenues                                22,010         20,105

    Costs of revenues:
      Software products                                  374            542
      Service and other                                2,570          3,046
        Total costs of revenues                        2,944          3,588

    Gross profit                                      19,066         16,517

    Operating expenses:
      Research and development                         5,943          5,936
      Marketing and sales                             10,204         14,598
      General and administrative                       2,595          2,832
        Total operating expenses                      18,742         23,366

    Income (loss) from operations                        324        (6,849)

    Other income, net                                  1,904          2,870

    Net income (loss) before income tax provision      2,228        (3,979)

    Income tax provision (benefit)                       847        (1,512)

    Net income (loss)                                 $1,381       $(2,467)
    Net income (loss) per share - basic                $0.04        $(0.07)
    Net income (loss) per share - diluted              $0.04        $(0.07)

    Number of shares used in per share
     calculation - basic                              35,548         35,362
    Number of shares used in per share
     calculation - diluted                            36,645         35,362

                                   VERITY, INC.

                           CONSOLIDATED BALANCE SHEETS
                                  (in thousands)

                                                   August 31,       May 31,
                                                      2002           2002
                                                  (unaudited)     (audited)

                  ASSETS

    Current Assets:
      Cash and cash equivalents                      $14,384        $23,251
        Short-term investments                       119,958        130,672
      Trade accounts receivable, less allowance for
       doubtful accounts of $1,577 and $1,428         17,278         20,961
      Deferred tax assets                              2,636          3,114
      Prepaid and other current assets                 4,724          5,497
        Total current assets                         158,980        183,495

      Property and equipment                           6,100          6,625
      Long-term investments                          108,548         91,433
      Deferred tax assets                             16,597         16,597
        Total assets                                $290,225       $298,150

                 LIABILITIES
    Current Liabilities:
      Accounts payable                                $4,796         $5,749
      Accrued compensation                             9,537         10,376
      Other accrued liabilities                        2,724          2,779
      Deferred revenue                                12,271         14,981
        Total current liabilities                     29,328         33,885

              STOCKHOLDERS' EQUITY

    Common stock                                          35             36
    Additional paid-in capital                       244,048        250,133
    Other comprehensive income                         3,300          1,963
    Retained earnings                                 13,514         12,133
        Total stockholders' equity                   260,897        264,265

        Total liabilities and stockholders'
         equity                                     $290,225       $298,150

                     

SOURCE Verity, Inc.

/CONTACT: Derek van Bronkhorst of Verity, Inc., +1-408-542-2217, or
derekvb@verity.com/

/Web site: http://www.verity.com/

(VRTY)