SOURCE: eGain Communications Corp.

eGain Communications Corp.

September 22, 2010 16:43 ET

eGain Announces Financial Results for the Fourth Quarter and Fiscal Year Ended June 30, 2010

MOUNTAIN VIEW, CA--(Marketwire - September 22, 2010) - eGain Communications Corporation (OTCBB: EGAN)

Fiscal Year 2010 Highlights

--  Recurring services revenue up 8% from the prior year
--  Income from operations of $1.2 million
--  Cash flow from operations of $2.5 million

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, 2010.

Total revenue for the fourth quarter of fiscal year 2010 was $6.6 million, a decrease of 25% from the comparable year-ago quarter. Total revenue for the fiscal year 2010 was $29.9 million, a decrease of 10% from the prior year.

License revenue for the fourth quarter of fiscal year 2010 was $1.5 million, a decrease of 50% from the comparable year-ago quarter. License revenue for the fiscal year 2010 was $7.4 million, a decrease of 14% from the prior year. Recurring services revenue for the fourth quarter of fiscal year 2010 was $4.1 million, an increase of 4% from the comparable year-ago quarter. Recurring services revenue for the fiscal year 2010 was $16.6 million, an increase of 8% from the prior year. Professional services revenue for the fourth quarter of fiscal year 2010 was $1.0 million, a decrease of 47% from the comparable year-ago quarter. Professional services revenue for the fiscal year 2010 was $5.9 million, a decrease of 36% from the prior year.

Gross margin for the fourth quarter of fiscal year 2010 was 65%, compared to 68% in the comparable year-ago quarter. Gross margin for the fiscal year 2010 was 68%, unchanged from the prior year. Total operating costs and expenses for the fourth quarter of fiscal year 2010 were $5.6 million, an increase of 20% from the comparable year-ago quarter. Total operating costs and expenses for the fiscal year 2010 were $18.9 million, a decrease of 1% from the prior year.

Net loss for the fourth quarter of fiscal year 2010 was $1.7 million, or $(0.07) per share, compared to a net income of $929,000, or $0.04 per share on a basic and diluted basis for the comparable year-ago quarter. Net loss for the fourth quarter of fiscal year 2010 included stock-based compensation of $53,000 and interest and tax expense of $324,000, compared to stock-based compensation expense of $19,000 and a net of interest expense and tax benefit of $240,000 from the comparable year-ago quarter.

Net loss for the fiscal year 2010 was $127,000, or $(0.01) per share, compared to a net income of $2.2 million, or $0.11 per share on a basic and diluted basis for the prior year. Net loss for the fiscal year 2010 included stock-based compensation of $244,000 and interest and tax expense of $1.3 million, compared to stock-based compensation expense of $241,000 and a net of interest expense and tax benefit of $1.3 million for the prior year.

Total cash and cash equivalents were $5.7 million at June 30, 2010, compared to $7.5 million at June 30, 2009. Cash provided by operations was $2.5 million for the fiscal year 2010, compared to cash provided by operations of $3.7 million in the prior year. Bank borrowings declined to $115,000 at June 30, 2010 from $3.2 million at June 30, 2009. Days sales outstanding in receivables for the quarter ended June 30, 2010 were 40 days, compared to 44 days for the comparable year-ago quarter. Deferred revenues totaled $5.1 million at June 30, 2010, compared to $5.5 million at June 30, 2009.

"Our fiscal year 2010 top line result was less than what we expected at the start of the year," said Ashu Roy, eGain CEO. "This was primarily due to our hybrid business model driven by our deployment flexibility. Our clients value our proven deployment flexibility across cloud and on-premise, so we are happy to provide it. Specifically, last quarter a very significant license transaction, over $5 million dollars, slipped. The good news is the deal closed in August, 2010. So we are off to an excellent start for fiscal year 2011. Top-line disappointment notwithstanding, I am delighted with our team's strong execution for the year. In fiscal year 2010 we saw a healthy growth in our recurring services revenue and generated $2.5 million of operating cash even while we invested in smart customer-centric initiatives in a tough economy.

"We consolidated our product leadership with sustained research and development investment. In 2009, we were again rated a leader by Gartner in the 'Magic Quadrant for E-Service Suites.' And in 2010, just hot off the press, we further improved our standing as a leader in the 2010 Gartner Magic Quadrant for Web Customer Service (renamed from E-Service). Our team is justifiably proud of this 'threepeat' accomplishment -- they have earned it."

Business Highlights

New Hosting and License Bookings(1)

--  New hosting and license bookings for the fourth quarter of fiscal year
    2010 were $2.8 million, a decrease of 38% from the comparable year-ago
    quarter. Of the total new hosting and license bookings in the fourth
    quarter of fiscal year 2010, 61% were from new hosting bookings and 39%
    were from new license bookings, compared to 28% from new hosting
    bookings and 72% from new license bookings in the comparable year-ago
    quarter.
--  New hosting and license bookings for the fiscal year 2010 were $13.1
    million, a decrease of 14% from the prior year. Of the total new
    hosting and license bookings in the fiscal year 2010, 42% were from new
    hosting bookings and 58% were from new license bookings, compared to
    29% from new hosting bookings and 71% from new license bookings in the
    prior year.

New milestones, products and industry recognition

--  eGain was positioned in the Leaders Quadrant by Gartner, Inc. in the
    "Magic Quadrant for E-Service Suites 2009" report.  In the 2010 Gartner
    report (renamed "Magic Quadrant for Web Customer Service") released in
    September 2010, eGain further improved its position in the Leaders
    Quadrant.
--  eGain released eGain Service™ 9 suite, the company's most advanced
    Customer Interaction Hub solution with rich functional enhancement and
    significant platform improvement.

Partnerships

--  We have had an active and growing partner program in EMEA for some
    time. In fiscal year 2010, we expanded our efforts in developing North
    America partners. We believe the eGain proposition is compelling for
    value-added resellers (VARs) who have traditionally sold contact center
    technologies to enterprises. In fiscal year 2010 we signed agreements
    with 9 new partners.
--  We extended our multi-year relationship with Cisco Systems, Inc. to be
    their OEM supplier for email management and web collaboration products
    as part of the Cisco Contact Center Suite. Our partnership with Cisco
    continues to grow. We gain from Cisco's global market reach.
    Conversely, Cisco benefits from our agile innovation and proven product
    leadership.

Customer Momentum

eGain continued to build new relationships with a wide range of enterprise customers in fiscal year 2010. Notable new customer relationships include:

--  One of the nation's largest energy companies
--  One of the nation's largest health insurers
--  A world-leading mobile telecommunications company
--  One of the world's leading providers of fully integrated mobile
    communication services
--  A leading global provider of comprehensive testing and assessment
    services
--  A leading global beauty company
--  A premier online luxury fashion retailer
--  One of the UK's largest customer management outsourcing companies

Market and Business Outlook

We are optimistic about our prospects for fiscal year 2011. Beyond the obvious running start -- the one we got from the large deal that slipped from last quarter -- we see growing market interest in our recently launched products. In response, we are increasing our investment in direct sales and partner development.

For fiscal year 2011 we currently expect an increase in new total revenue of 20% when compared to fiscal year 2010. In addition, we currently expect to generate positive cash flows from operations in fiscal year 2011, while planning to invest a significant portion of our anticipated top-line growth back into growing our distribution capability.

(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 in-house or cloud deployment. For more than a decade, hundreds of enterprises have relied on eGain to transform their traditional call centers and eService operations into multichannel customer interaction hubs. eGain solutions are designed to improve customer experience, contact center agent productivity, and service process efficiencies.

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, future financial performance and business plans and projections, 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; our ability to invest resources to improve our products and continue to innovate; the anticipated customer benefits from our products; our partnership with Cisco; 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)


                                                        June 30,  June 30,
                                                          2010      2009
                                                        --------  --------

ASSETS

Current assets:
  Cash and cash equivalents                             $  5,733  $  7,511
  Restricted cash                                             13        13
  Accounts receivable, net                                 2,955     4,308
  Prepaid and other current assets                           512       538
                                                        --------  --------
    Total current assets                                   9,213    12,370

Property and equipment, net                                  869       995
Goodwill, net                                              4,880     4,880
Other assets                                                 354       391
                                                        --------  --------
    Total assets                                        $ 15,316  $ 18,636
                                                        ========  ========

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
  Accounts payable                                      $  1,146  $    979
  Accrued compensation                                     1,987     2,429
  Accrued liabilities                                      1,946     2,141
  Current portion of deferred revenue                      4,917     5,398
  Current portion of capital lease obligation                157       181
  Current portion of bank borrowings                         115     3,125
                                                        --------  --------
    Total current liabilities                             10,268    14,253

Deferred revenue, net of current portion                     186       133
Capital lease obligation, net of current portion              28       187
Related party notes payable                                8,724     7,697
Bank borrowings, net of current portion                       --       115
Other long term liabilities                                  273       344
                                                        --------  --------
    Total liabilities                                     19,479    22,729

Stockholders' deficit:
  Common stock                                                22        22
  Additional paid-in capital                             323,700   323,550
  Notes receivable from stockholders                         (79)      (76)
  Accumulated other comprehensive loss                      (596)     (506)
  Accumulated deficit                                   (327,210) (327,083)
                                                        --------  --------
    Total stockholders' deficit                           (4,163)   (4,093)
                                                        --------  --------
    Total liabilities and stockholders' deficit         $ 15,316  $ 18,636
                                                        ========  ========




                     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,
                                    ------------------  ------------------
                                      2010      2009      2010      2009
                                    --------  --------  --------  --------

Revenue:
  License                           $  1,512  $  3,022  $  7,389  $  8,613
  Recurring services                   4,093     3,926    16,617    15,382
  Professional services                1,042     1,962     5,871     9,224
                                    --------  --------  --------  --------
    Total revenue                      6,647     8,910    29,877    33,219
  Cost of license                         16       209       168       263
  Cost of recurring services           1,107     1,130     4,492     4,371
  Cost of professional services        1,192     1,493     5,048     6,112
                                    --------  --------  --------  --------
    Gross profit                       4,332     6,078    20,169    22,473

Operating costs and expenses:
  Research and development             1,653     1,178     5,510     5,481
  Sales and marketing                  2,981     2,731    10,226    10,465
  General and administrative             939       735     3,211     3,271
                                    --------  --------  --------  --------
    Total operating costs and
     expenses                          5,573     4,644    18,947    19,217
                                    --------  --------  --------  --------
Income / (loss) from operations       (1,241)    1,434     1,222     3,256
Interest expense, net                   (285)     (297)   (1,123)   (1,435)
Other income / (expense), net            (92)     (265)      (67)      230
                                    --------  --------  --------  --------
Income / (loss) before income tax     (1,618)      872        32     2,051
Benefit / (provision) for income
 taxes                                   (39)       57      (159)      129
                                    --------  --------  --------  --------
Net income / (loss)                 $ (1,657) $    929  $   (127) $  2,180
                                    ========  ========  ========  ========
Per share information:

  Basic net income / (loss) per
   common share                     $  (0.07) $   0.04  $  (0.01) $   0.11
                                    ========  ========  ========  ========
  Diluted net income / (loss) per
   common share                     $  (0.07) $   0.04  $  (0.01) $   0.11
                                    ========  ========  ========  ========

  Weighted average shares used in
   computing basic net income /
   (loss) per common share            22,137    22,213    22,180    20,611
                                    ========  ========  ========  ========
  Weighted average shares used in
   computing diluted net income /
   (loss) per common share            22,137    22,214    22,180    20,612
                                    ========  ========  ========  ========

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