SOURCE: eGain Communications Corp.

eGain Communications Corp.

February 11, 2010 16:08 ET

eGain Announces Financial Results for the Second Fiscal Quarter Ended December 31, 2009

MOUNTAIN VIEW, CA--(Marketwire - February 11, 2010) - eGain Communications Corporation (OTCBB: EGAN)

Quarter Highlights

--  Recurring services revenue up 18% from comparable year-ago quarter
--  Operating margin of 17%
--  GAAP net income of $1.1 million

eGain Communications Corporation (OTCBB: EGAN), a leading provider of customer service and contact center software, today announced financial results for the second fiscal quarter ended December 31, 2009.

Total revenue for the second quarter of fiscal year 2010 was $8.3 million, a decrease of 13% from the comparable year-ago quarter. Total revenue for the six months ended December 31, 2009 was $16.3 million, a decrease of 8% from the same period last year.

License revenue for the second quarter of fiscal year 2010 was $2.5 million, a decrease of 29% from the comparable year-ago quarter. License revenue for the six months ended December 31, 2009 was $4.5 million, a decrease of 13% from the same period last year. Recurring services revenue for the second quarter of fiscal year 2010 was $4.3 million, an increase of 18% from the comparable year-ago quarter. Recurring services revenue for the six months ended December 31, 2009 was $8.3 million, an increase of 7% from the same period last year. Professional services revenue for the second quarter of fiscal year 2010 was $1.5 million, a decrease of 38% from the comparable year-ago quarter. Professional services revenue for the six months ended December 31, 2009 was $3.5 million, a decrease of 27% from the same period last year.

Gross margin for the second quarter of fiscal year 2010 was 69%, compared to 73% in the comparable year-ago quarter. Gross margin for the six months ended December 31, 2009 was 69%, unchanged from the same period last year. Total operating costs and expenses for the second quarter of fiscal year 2010 were $4.4 million, a decrease of 15% from the comparable year-ago quarter. Total operating costs and expenses for the six months ended December 31, 2009 were $8.8 million, a decrease of 16% from the same period last year.

Net income for the second quarter of fiscal year 2010 was $1.1 million, or $0.05 per share on a basic and $0.04 per share on a diluted basis, compared to a net income of $2.0 million, or $0.09 per share on a basic and diluted basis for the comparable year-ago quarter. Net income for the second quarter of fiscal year 2010 included stock-based compensation of $77,000 and interest and tax expense of $373,000, compared to stock-based compensation expense of $89,000 and a net of interest expense and tax benefit of $239,000 for the comparable year-ago quarter.

Net income for the six months ended December 31, 2009 was $1.8 million, or $0.08 per share on a basic and diluted basis, compared to a net income of $1.4 million, or $0.08 per share on a basic and diluted basis for the same period last year. Net income for the six months ended December 31, 2009 included stock-based compensation of $132,000 and interest and tax expense of $650,000, compared to stock-based compensation expense of $172,000 and a net of interest expense and tax benefit of $710,000 for the same period last year.

Total cash and cash equivalents were $6.0 million at December 31, 2009, compared to $4.7 million at September 30, 2009. Cash provided by operations was $2.1 million for the six months ended December 31, 2009, compared to cash provided by operations of $126,000 for the same period last year. Days sales outstanding in receivables for the second quarter of fiscal year 2010 were 51 days, compared to 52 days for the comparable year-ago quarter. Deferred revenues totaled $6.3 million at December 31, 2009, up from $5.5 million at September 30, 2009.

eGain's revenues for the second quarter of fiscal year 2010 were positively impacted by the increased value of foreign currencies when compared to the U.S. dollar. On a constant currency basis, using the exchange rates in effect on June 30, 2009, revenues for the second quarter of fiscal year 2010 would have been down approximately 14%, rather than down 13% when compared to second quarter of fiscal year 2009.

eGain's revenues for the six months ended December 31, 2009 were negatively impacted by the reduced value of foreign currencies when compared to U.S. dollars. On a constant currency basis, using the exchange rates in effect on June 30, 2009, revenues for the six months ended December 31, 2009 would have been down approximately 6%, rather than down 8% when compared to six months ended December 31, 2008.

"We are pleased with our performance," said Ashu Roy, eGain's CEO. "Our revenue, earnings and cash flow were all up sequentially this quarter. On the product front we see strong adoption for our recently released eGain Service 9 -- among both existing clients and prospects. Based on this sustained momentum we are increasing our investment in sales and marketing."

Business Highlights

New Hosting and License Bookings(1)

--  New hosting and license bookings for the second quarter of fiscal year
    2010 were $4.2 million, a decrease of 7% from the comparable year-ago
    quarter. Of the total new hosting and license bookings in the second
    quarter of fiscal year 2010, 29% was from new hosting bookings and 71%
    was from new license bookings, compared to 15% from new hosting
    bookings and 85% from new license bookings in the comparable year-ago
    quarter. On a constant currency basis, using the exchange rates in
    effect on June 30, 2009, bookings for the second quarter of fiscal
    year 2010 would have been down approximately 9%, rather than down 7%,
    when compared to the comparable year-ago quarter.
--  New hosting and license bookings for the six months ended December 31,
    2009 were $8.4 million, a decrease of 8% from the same period last
    year. Of the total new hosting and license bookings in the six months
    ended December 31, 2009, 38% was from new hosting bookings and 62% was
    from new license bookings, compared to 25% from new hosting bookings
    and 75% from new license bookings in the same period last year. On a
    constant currency basis, using the exchange rates in effect on June 30,
    2009, bookings for the six months ended December 31, 2009 would have
    been down approximately 4%, rather than down 8%, when compared to the
    comparable year-ago quarter.

(1) We define New Hosting and License Bookings as new contractual commitments (excluding renewals) received by the company for the purchase of product licenses and hosting services. Such contracts are not cancelable for convenience but may be subject to termination by our customers for cause or breach of contract by us. Furthermore, because we offer a hybrid delivery model, the mix of new license and hosting business in a quarter could also have an impact on our revenue in a particular quarter. Due to effects that these trends have on our short-term revenue and profitability, we believe that it is useful to disclose New Hosting and License Bookings detail in this and future financial releases. We use this metric internally to focus management on the productivity of the sales team and period-to-period changes in our core business. Therefore, we believe that this information is meaningful and helpful in allowing individuals to better assess the ongoing nature of our core operations.

About eGain Communications Corporation

eGain (OTCBB: EGAN) is the leading provider of multichannel customer service and knowledge management software for on-site or on-demand deployment. For over a decade, hundreds of the world's largest companies have relied on eGain to transform their traditional call centers, help desks, and web customer service operations into multichannel customer interaction hubs (CIHs). Based on the Power of One™, the concept of one unified platform for multichannel customer interaction and knowledge management, eGain solutions improve customer experience, optimize service processes end to end, increase sales, and enhance contact center performance.

Headquartered in Mountain View, California, eGain has operating presence in North America, EMEA and APAC. To learn more about us, visit www.eGain.com or call our offices: +1-800-821-4358 (US), +44-(0)-1753-464646 (EMEA), or +91-(0)-20-6608-9200 (APAC). Also, follow us on Twitter at @eGain (http://twitter.com/egain) and Facebook at (http://facebook.com/egain).

Cautionary Note Regarding Forward-looking Statements

All statements in this release that involve eGain's plans, forecasts (including the above stated guidance), beliefs, projections, expectations, strategies and intentions, including but not limited to our allocation of resources, enterprise-focused business model's effect on our bookings and the effect of global currency exchange rates on our business are forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements, which are based on information available to eGain at the time of this release, are not guarantees of future results; rather, they are subject to risks and uncertainties that may cause actual results to differ materially from those set forth in this release. These risks include, but are not limited to, the uncertainty of demand for eGain products, including our guidance regarding bookings and revenue; the actual mix in new business between hosting and license transactions when compared with management's projections; volatility of the value of certain currencies in relation to the US dollar, particularly the U.K. pound, Indian rupee and Euro; the increased complexity of certain transactions and the timing of revenue recognition on such transactions; and other risks detailed from time to time in the Company's filings with the Securities and Exchange Commission, including the Company's annual report on Form 10-K filed on September 28, 2009, and the Company's quarterly reports on Form 10-Q. eGain assumes no obligation to update these forward-looking statements.

Note: eGain is a registered trademark, and the other eGain product and service names appearing in this release are trademarks or service marks, of eGain Communications Corp. All other company names and products are trademarks or registered trademarks of their respective companies.

                     eGain Communications Corporation
                  Condensed Consolidated Balance Sheets
                              (in thousands)
                                (unaudited)


                                                December 31,    June 30,
                                                    2009          2009
                                                ------------  ------------

ASSETS

Current assets:
  Cash and cash equivalents                     $      5,970  $      7,511
  Restricted cash                                         13            13
  Accounts receivable, net                             4,688         4,308
  Prepaid and other current assets                       437           538
                                                ------------  ------------
     Total current assets                             11,108        12,370

Property and equipment, net                              968           995
Goodwill, net                                          4,880         4,880
Other assets                                             398           391
                                                ------------  ------------
     Total assets                               $     17,354  $     18,636
                                                ============  ============

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
  Accounts payable                              $        801  $        979
  Accrued compensation                                 1,787         2,429
  Accrued liabilities                                  1,662         2,141
  Current portion of deferred revenue                  6,118         5,398
  Current portion of capital lease obligation            177           181
  Current portion of bank borrowings                     125         3,125
                                                ------------  ------------
     Total current liabilities                        10,670        14,253

Deferred revenue, net of current portion                 223           133
Capital lease obligation, net of current
 portion                                                  99           187
Related party notes payable                            8,199         7,697
Bank borrowings, net of current portion                   52           115
Other long term liabilities                              338           344
                                                ------------  ------------
     Total liabilities                                19,581        22,729

Stockholders' deficit:
 Common stock                                             22            22
 Additional paid-in capital                          323,644       323,550
 Notes receivable from stockholders                      (78)          (76)
 Accumulated other comprehensive loss                   (580)         (506)
 Accumulated deficit                                (325,235)     (327,083)
                                                ------------  ------------
     Total stockholders' deficit                      (2,227)       (4,093)
                                                ------------  ------------
     Total liabilities and stockholders'
      deficit                                   $     17,354  $     18,636
                                                ============  ============





                     eGain Communications Corporation
              Condensed Consolidated Statements of Operations
                 (in thousands, except per share amounts)
                                (unaudited)



                                          Three Months       Six Months
                                             Ended             Ended
                                          December 31,      December 31,
                                        ----------------  ----------------
                                          2009     2008     2009     2008
                                        -------  -------  -------  -------

Revenue:
  License                               $ 2,516  $ 3,529  $ 4,470  $ 5,128
  Recurring services                      4,292    3,637    8,276    7,748
  Professional services                   1,504    2,423    3,541    4,852
                                        -------  -------  -------  -------
    Total revenue                         8,312    9,589   16,287   17,728
  Cost of license                            83       19      151       38
  Cost of recurring services              1,129    1,078    2,281    2,204
  Cost of professional services           1,336    1,501    2,631    3,216
                                        -------  -------  -------  -------
    Gross profit                          5,764    6,991   11,224   12,270

Operating costs and expenses:
  Research and development                1,285    1,400    2,455    2,925
  Sales and marketing                     2,350    2,851    4,784    5,633
  General and administrative                731      873    1,517    1,920
                                        -------  -------  -------  -------
    Total operating costs and expenses    4,366    5,124    8,756   10,478
Income from operations                    1,398    1,867    2,468    1,792
Interest expense, net                      (279)    (335)    (556)    (820)
Other income net                             36      341       30      365
                                        -------  -------  -------  -------
Income before income tax                  1,155    1,873    1,942    1,337
Benefit / (provision) for income taxes      (94)      96      (94)     110
                                        -------  -------  -------  -------
Net Income                              $ 1,061  $ 1,969  $ 1,848  $ 1,447
                                        =======  =======  =======  =======
Per share information:

  Basic net income per common share     $  0.05  $  0.09  $  0.08  $  0.08
                                        =======  =======  =======  =======
  Diluted net income per common share   $  0.04  $  0.09  $  0.08  $  0.08
                                        =======  =======  =======  =======

  Weighted average shares used in
   computing basic net income per
   common share                          22,205   22,213   22,209   19,035
                                        =======  =======  =======  =======
  Weighted average shares used in
   computing diluted net income per
   common share                          24,232   22,213   22,444   19,035
                                        =======  =======  =======  =======



                     eGain Communications Corporation
                    Supplemental Financial Information
                              (in thousands)
                                (unaudited)



                       Three Months Ended
                          December 31,
                ---------------------------------
                                                               % Increase
                                                  % Increase   (Decrease)
                          % of             % of   (Decrease)  in Constant
                 2009   revenue   2008   revenue    in US$    Currency (1)
                ------- -------  ------- -------  ----------  ------------

Total revenue   $ 8,312     100% $ 9,589     100%        -13%          -14%

Gross profit    $ 5,764      69% $ 6,991      73%        -18%          -20%

Total operating
 costs and
 expenses       $ 4,366      53% $ 5,124      53%        -15%          -19%

Income from
 operations     $ 1,398      17% $ 1,867      19%        -25%          -24%

Net Income      $ 1,061      13% $ 1,969      21%        -46%          -33%


                        Six Months Ended
                          December 31,
                ---------------------------------
                                                               % Increase
                                                  % Increase   (Decrease)
                          % of             % of   (Decrease)  in Constant
                 2009   revenue   2008   revenue    in US$    Currency (1)
                ------- -------  ------- -------  ----------  ------------

Total revenue   $16,287     100% $17,728     100%         -8%           -6%

Gross profit    $11,224      69% $12,270      69%         -9%           -9%

Total operating
 costs and
 expenses       $ 8,756      54% $10,478      59%        -16%          -17%

Income from
 operations     $ 2,468      15% $ 1,792      10%         38%           40%

Net Income      $ 1,848      11% $ 1,447       8%         28%           21%


(1) We present constant currency information to provide a framework for
    assessing how our underlying business performed excluding the effect of
    foreign currency rate fluctuations.  To present this information,
    current and comparable year-ago period results for entities reporting
    in currencies other than United States dollars are converted into
    United States dollars at the exchange rate in effect June 30, 2009,
    which was the last day of our prior fiscal year, rather than the actual
    exchange rates in effect during the respective periods.

NM - Not Meaningful


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