SOURCE: eGain Communications Corp.

eGain Communications Corp.

September 14, 2009 16:04 ET

eGain Announces Financial Results for the Fourth Quarter and Fiscal Year Ended June 30, 2009

Also Announces the Approval of a Stock Repurchase Program

MOUNTAIN VIEW, CA--(Marketwire - September 14, 2009) - eGain Communications Corporation (OTCBB: EGAN)

Quarter Highlights

--  Total revenue of $8.9 million up 33% from the comparable year-ago
    quarter
--  GAAP net income of $929,000 compared to a net loss of $1.9 million in
    the comparable year-ago quarter
    

Fiscal Year 2009 Highlights

--  Total revenue of $33.2 million up 10% from the prior year
--  GAAP net income of $2.2 million compared to a net loss of $4.1 million
    in the prior year
    

eGain Communications Corporation (OTCBB: EGAN), a leading provider of customer service and contact center software, today announced financial results for the fourth quarter and fiscal year ended June 30, 2009.

Total revenue for the fourth quarter of fiscal year 2009 was $8.9 million, an increase of 33% from the comparable year-ago quarter. Total revenue for the fiscal year 2009 was $33.2 million, an increase of 10% from the prior year.

Gross margin for the fourth quarter of fiscal year 2009 was 68% compared to 57% in the comparable year-ago quarter. Gross margin for the fiscal year 2009 was 68% compared to 61% in the prior year. Total operating costs and expenses for the fourth quarter of fiscal year 2009 were $4.6 million, a decrease of 10% from the comparable year-ago quarter. Total operating costs and expenses for the fiscal year 2009 were $19.2 million, a decrease of 9% from the prior year.

Net income for the fourth quarter of fiscal year 2009 was $929,000, or $0.04 per share on a basic and diluted basis, compared to a net loss of $1.9 million, or $(0.12) per share for the comparable year-ago quarter. Net income for the fourth quarter of fiscal year 2009 included stock-based compensation of $19,000 and a net of interest expense and tax benefit of $240,000, compared to stock-based compensation expense of $77,000 and interest and tax expense of $542,000 for the comparable year-ago quarter.

Net income for the fiscal year 2009 was $2.2 million, or $0.11 per share on a basic and diluted basis, compared to a net loss of $4.1 million, or $(0.27) per share for the prior year. Net income for the fiscal year 2009 included stock-based compensation of $241,000 and a net of interest expense and tax benefit of $1.3 million, compared to stock-based compensation expense of $318,000 and interest and tax expense of $1.9 million for the prior year.

Total cash and cash equivalents were $7.5 million at June 30, 2009, compared to $3.8 million at June 30, 2008. Cash provided by operations was $3.7 million for the fiscal year 2009, compared to cash used in operations of $2.8 million in the prior year. Days sales outstanding in receivables for the quarter ended June 30, 2009 were 43 days, compared to 37 days for the comparable year-ago quarter. Deferred revenues totaled $5.5 million at June 30, 2009, up from $5.2 million at June 30, 2008.

eGain's revenues for the year ended June 30, 2009 were negatively impacted by the reduced value of foreign currencies when compared to U.S. dollars. If currency exchange rates had remained constant from June 30, 2008 through June 30, 2009, revenues for the fiscal year 2009 would have been up approximately 24%, rather than up 10% when compared to fiscal year 2008.

"We grew our top line in a challenging economic environment, while delivering profits and positive cash flow," said Ashu Roy, eGain CEO. "Our leading products continue to set the standard in enterprise Customer Interaction Hub implementations for scalable architecture and best-of-breed functionality on a unified platform."

Stock Repurchase Program

eGain also announced today that its board of directors has approved a repurchase program under which it may begin purchasing up to 1,000,000 shares of its Common Stock. The duration of the repurchase program is open-ended. Under the program, the Company could purchase shares of Common Stock from time to time through open market and privately negotiated transactions at prices deemed appropriate by management. The repurchase will be funded by cash on hand. As of June 30, 2009, the Company had 22.2 million shares of Common Stock outstanding.

"We are pleased to announce the approval of a stock repurchase program," said Eric Smit, eGain CFO. "We qualified for this program based upon our positive financial performance in fiscal year 2009 and believe that the repurchase of our stock is an attractive investment opportunity."

Business Highlights

New Hosting and License Bookings(1)

--  New hosting and license bookings for the fourth quarter of fiscal year
    2009 were $4.5 million, an increase of 261% from the comparable year-ago
    quarter. Of the total new hosting and license bookings in the fourth
    quarter of fiscal year 2009, 28% was from new hosting bookings and 72% was
    from new license bookings, compared to 19% from new hosting bookings and
    81% from new license bookings in the comparable year-ago quarter. If
    currency exchange rates had remained constant from June 30, 2008 (the last
    day of our prior fiscal year) through June 30, 2009, bookings for the
    fourth quarter of fiscal year 2009 would have been up approximately 328%,
    rather than up 261% when compared to the same period last year.
--  New hosting and license bookings for the fiscal year 2009 were $15.2
    million, an increase of 65% from the prior year. Of the total new hosting
    and license bookings in the fiscal year 2009, 29% was from new hosting
    bookings and 71% was from new license bookings, compared to 38% from new
    hosting bookings and 62% from new license bookings in the prior last year.
    If currency exchange rates had remained constant from June 30, 2008 through
    June 30, 2009, bookings for the fiscal year 2009 would have been up
    approximately 92%, rather than up 65% when compared to the same period last
    year.
    

New milestones, products and industry recognition

--  eGain was selected by Forrester as a leader in interaction-centric
    customer service software solutions in the October 2008 report.
--  eGain was positioned in the Leaders Quadrant by Gartner, Inc. in the
    "Magic Quadrant for E-Service Suites 2008" report.
--  eGain released eGain Service™ 8 suite, the company's most advanced
    Customer Interaction Hub solution with rich functional enhancement and
    significant platform improvement.
--  eGain introduced a unique "Solution-as-a-Service" offering called
    "eGain SLaaS™." "Solution-as-a-Service is a unique combination of value-
    based pricing with hosted software and bundled services on tap," said Johan
    Jacobs, Research Director at Gartner, Inc. "SLaaS has the potential to
    transform enterprise software adoption in a tough economic climate."
    

Partnerships

--  Our steady investment in partnerships is showing results. For fiscal
    year 2009, new hosting and license bookings through partners grew to 45% of
    total new hosting and license bookings.
    
--  We extended our multi-year relationship with Cisco to be their OEM
    supplier for email management and web collaboration products as part of the
    Cisco Contact Center Suite.
    

Customer Momentum

eGain continued to acquire marquee enterprise customers in fiscal year 2009. Notable customer acquisitions include:

--  A fortune 100 personal lines insurer
--  A fortune 100 leader in networking for the Internet
--  One of the nation's top 10 financial holding companies
--  One of the world's foremost nutrition companies
--  A multinational insurance group
--  Multiple subsidiaries of a world leading mobile telecommunications
    company
--  A leading European entertainment and communications company
    

Market and Business Outlook

According to market analysts, the market for Customer Interaction Hub solutions continues to grow -- based on the need for improved efficiency and better customer experience. Businesses are looking for integrated solutions for multi-channel service that are scalable, quick to deploy, and cost-effective. We continue to extend our product leadership by leveraging our proven, scalable J2EE platform architecture and rapid innovation capability to deliver unified, feature-rich solutions for demanding enterprise clients.

Even though the economic environment seems to be stabilizing, we believe that many businesses will continue to be cautious in increasing their investment in the near future. So in fiscal year 2010, we will remain prudent in our sales and marketing investment -- choosing selective growth opportunities in new geographies and specific verticals. Further, the mix of on-premise (one time license deals) and on-demand (steady subscription revenue stream) deployments in the enterprise will be difficult to predict. Therefore, instead of fixating on the short-term revenue impact of license versus hosted bookings on our business, we will measure our progress in terms of new bookings growth and operating cash flow.

For fiscal year 2010 we currently expect an increase in new license and hosting bookings when compared to fiscal 2009. In addition, we currently expect to generate positive cash flows from operations in fiscal year 2010.

(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 a leading provider of multichannel customer service and knowledge management software for in-house or on-demand SaaS deployment. For more than a decade, several 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. Based on the Power of One™, the concept of one unified platform for multichannel customer interaction and knowledge management, these hubs enable dramatically improved customer experience, contact center agent productivity, service process efficiencies, sales, and overall contact center performance. To find out more about eGain, visit www.eGain.com or call the company's offices: 800-821-4358 (US headquarters), 1753-464646 (UK and Continental Europe).

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 enterprise-focused business model's effect on our bookings, our Cisco OEM partnership, our investment in global customer care infrastructure, our projected growth and our targeted customer growth, our management of our business, goals, implementation methods and investments, and the mix of our business on our revenues 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 29, 2008, 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)


                                                        June 30,  June 30,
                                                          2009      2008
                                                        --------  --------

ASSETS

Current assets:
  Cash and cash equivalents                             $  7,511  $  3,790
  Restricted cash                                             13        13
  Accounts receivable, net                                 4,308     2,749
  Prepaid and other current assets                           538       818
                                                        --------  --------
    Total current assets                                  12,370     7,370

Property and equipment, net                                  995     1,230
Goodwill, net                                              4,880     4,880
Other assets                                                 391       434
                                                        --------  --------
    Total assets                                        $ 18,636  $ 13,914
                                                        ========  ========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable                                      $    979  $  1,669
  Accrued compensation                                     2,429     1,712
  Accrued liabilities                                      2,141     1,632
  Deferred revenue                                         5,398     4,871
  Current portion of capital lease obligation                181        52
  Current portion of bank borrowings                       3,125       100
                                                        --------  --------
    Total current liabilities                             14,253    10,036

Deferred revenue, net of current portion                    133       293
Capital lease obligation, net of current portion            187        78
Related party notes payable                               7,697    13,283
Bank borrowings, net of current portion                     115     3,192
Other long term liabilities                                 344       321
                                                        --------  --------
    Total liabilities                                     22,729    27,203

Stockholders' deficit:
  Common stock                                          $     22  $     15
  Additional paid-in capital                             323,550   316,527
  Notes receivable from stockholders                         (76)      (74)
  Accumulated other comprehensive loss                      (506)     (494)
  Accumulated deficit                                   (327,083) (329,263)
                                                        --------  --------
    Total stockholders' deficit                           (4,093)  (13,289)
                                                        --------  --------
                                                        $ 18,636  $ 13,914
                                                        ========  ========





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


                                                          Twelve Months
                                    Three Months Ended        Ended
                                         June 30,            June 30,
                                    ------------------  ------------------
                                      2009      2008      2009      2008
                                    --------  --------  --------  --------

Revenue:
  License                           $  3,022  $    721  $  8,613  $  6,570
  Support and services                 5,888     5,971    24,606    23,537
                                    --------  --------  --------  --------
    Total revenue                      8,910     6,692    33,219    30,107
  Cost of license                        209        20       263        80
  Cost of support and services         2,623     2,874    10,483    11,556
                                    --------  --------  --------  --------
    Gross profit                       6,078     3,798    22,473    18,471

Operating costs and expenses:
  Research and development             1,178     1,433     5,481     5,098
  Sales and marketing                  2,731     2,843    10,465    11,747
  General and administrative             735       912     3,271     4,240
                                    --------  --------  --------  --------
    Total operating costs and
     expenses                          4,644     5,188    19,217    21,085
Income / (Loss) from operations        1,434    (1,390)    3,256    (2,614)
Interest expense, net                   (297)     (432)   (1,435)   (1,659)
Other income (expense), net             (265)       75       230       332
                                    --------  --------  --------  --------
Income / (Loss) before income tax        872    (1,747)    2,051    (3,941)
Income tax benefit / (expense), net       57      (110)      129      (206)
                                    --------  --------  --------  --------
Net Income / (Loss)                 $    929  $ (1,857) $  2,180  $ (4,147)
                                    ========  ========  ========  ========
Per share information:

  Basic net income / (loss) per
   common share                     $   0.04  $  (0.12) $   0.11  $  (0.27)
                                    ========  ========  ========  ========
  Diluted net income / (loss) per
   common share                     $   0.04  $  (0.12) $   0.11  $  (0.27)
                                    ========  ========  ========  ========

  Weighted average shares used in
   computing basic net income /
   (loss) per common share            22,213    15,333    20,611    15,330
                                    ========  ========  ========  ========
  Weighted average shares used in
   computing diluted net income /
   (loss) per common share            22,214    15,333    20,612    15,330
                                    ========  ========  ========  ========


    Summary of stock-based
     compensation included in the
     costs and expense above:
    Cost of support and services    $      7  $     11  $     29  $     42
    Research and development               8        12        46        57
    Sales and marketing                    3         8        25        66
    General and administrative             1        46       141       153
                                    --------  --------  --------  --------
                                    $     19  $     77  $    241  $    318
                                    --------  --------  --------  --------




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


                                               Three Months Ended
                                                   June 30,
                                     -------------------------------------
                                         2008         2009         2009
                                     -----------  ------------ ------------
                                                                 Constant
                                       Actual       Actual     Currency (1)

Total revenue                        $     6,692  $      8,910 $     10,096

Gross profit                               3,798         6,078        7,125

Total operating costs and expenses         5,188         4,644        5,323

Income / (loss) from operations           (1,390)        1,434        1,802

Net Income / (loss)                  $    (1,857) $        929 $      1,058


                                             Twelve Months Ended
                                                   June 30,
                                     -------------------------------------
                                         2008         2009         2009
                                     -----------  ------------ ------------
                                                                 Constant
                                       Actual       Actual       Currency

Total revenue                        $    30,107  $     33,219 $     37,311

Gross profit                              18,471        22,473       26,047

Total operating costs and expenses        21,085        19,217       21,514

Income / (loss) from operations           (2,614)        3,256        4,533

Net Income / (loss)                  $    (4,147) $      2,180 $      2,857


(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 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, 2008, which was the last day of our
    prior fiscal year, rather than the actual exchange rates in effect
    during the respective periods.


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