eGain Announces Fiscal 2015 Second Quarter Financial Results

SUNNYVALE, CA--(Marketwired - Feb 5, 2015) - eGain (NASDAQ: EGAN)

• Total quarterly revenue of $18.9 million, up 7% year over year.
• Six month total revenue of $39.6 million, up 19% year over year.
• Quarterly subscription and support revenue of $11.0 million, up 7% year over year.
• Six months subscription and support revenue of $21.4 million, up 9% year over year.

eGain (NASDAQ: EGAN), the leading provider of cloud customer engagement solutions, today announced financial results for its fiscal 2015 second quarter ended December 31, 2014.

"The Exony integration is going well," said Ashu Roy, eGain CEO. "Our innovative value proposition around omnichannel customer journeys, which leverages Exony capabilities, is resonating with clients driving digital transformation. I am encouraged by the progress AJ Berkeley has made in the short time he has been in charge of worldwide sales. Our company has rallied behind the plan of 'Easy with eGain,' simplifying our product and standardizing service options with the launch of eGain 14 in December. With increased scale, enhanced partner traction, unique value proposition, and agile operating adjustments, we are confident of delivering profitable growth in FY16."

Operating Highlights:

• For the first six months, gross booking increased 57% year over year
• Significant progress on Exony integration with teams and technologies now integrated into the eGain platform
• Launched eGain 14 with increased out of the box capabilities and enhanced APIs, significantly reducing deployment and upgrade effort
• Announced new partnership with Nuance Communications, Inc. to jointly market integrated customer experience solutions across voice and digital channels
• Launched Beta version of CJA (Customer Journey Analytics) Service at eGain World San Jose in November
• Appointed ex-CTO of Avaya, Brett Shockley, to Board of Directors
• Announced new $20 million credit facility with Wells Fargo Capital Finance

Financial Update:

Total GAAP revenue for the fiscal second quarter was $18.9 million, an increase of 7% on a year over year basis. Total GAAP revenue on a constant currency basis, reflecting the strengthening US dollar compared to foreign currencies, was $19.6 million, an increase of 9% year over year. Subscription and support revenue for the fiscal second quarter was $11.0 million, an increase of 7% on a year over year basis. Subscription and support revenue on a constant currency basis, reflecting the strengthening US dollar compared to foreign currencies, was $11.3 million, up 9%. License revenue for the fiscal second quarter was $3.6 million, an increase of 17% on a year over year basis. Professional services revenue for the fiscal second quarter was $4.4 million, flat on a year over year basis.

For the six months ended December 31, 2014, total GAAP revenue was $39.6 million, an increase of 19% from the same period last year. Subscription and support revenue was $21.4 million, an increase of 9% from the same period last year. License revenue was $10.3 million, an increase of 49% from the same period last year. Professional services revenue was $7.9 million, an increase of 17% from the same period last year.

Gross profit for the fiscal second quarter was $10.7 million, compared to $11.8 million for the second quarter of fiscal 2014. Gross margin for the fiscal second quarter was 56%, compared to 67% in the second quarter last year. The subscription and support revenue gross margin for the fiscal second quarter was 70%, compared to 81% in the second quarter last year.

For the six months ended December 31, 2014, gross profit was $24.4 million, compared to $22.0 million for the same period last year. Gross margin was 62%, compared to 66% for the same period last year. The subscription and support revenue gross margin for the six months ended December 31, 2014 was 71%, compared to 80% for the same period last year.

Adjusted EBITDA for the fiscal second quarter was a loss of $2.4 million compared to a loss of $269,000 for the second quarter of fiscal 2014.

For the six months ended December 31, 2014, adjusted EBITDA was a loss of $1.5 million compared to a loss of $1.2 million for the same period last year.

GAAP net loss for the fiscal second quarter was $5.5 million, or a loss of $0.20 per share on a basic and diluted basis, compared to net loss of $1.2 million, or $0.05 per share on a basic and diluted basis, for the second quarter of last year.

For the six months ended December 31, 2014, GAAP net loss was $7.1 million, or a loss of $0.27 per share on a basic and diluted basis, compared to net loss of $3.2 million, or $0.13 per share on a basic and diluted basis, for the same period last year.

Total cash, cash equivalents and restricted cash increased to $9.3 million as of December 31, 2014, compared to $8.8 million as of June 30, 2014.

Total deferred revenue (which includes both deferred revenue on the balance sheet of $12.6 million and unbilled deferred revenue that remains off balance sheet of $29.1 million, collectively representing contractual commitments that have not been recognized as revenue) was $41.7 million as of December 31, 2014, compared to $36.3 million as of June 30, 2014.

Fiscal 2015 Guidance:

eGain is revising its total annual revenue guidance for fiscal 2015, ending June 30, 2015, to between $80 million and $85 million. Based on recent cost adjustments, the company currently expects to exit fiscal 2015 with an adjusted EBITDA run rate of at least 5%.

The three primary reasons for the revised annual revenue guidance are:

• A reduction in expected annual revenue contribution from Exony.
• A reduction in expected annual professional services revenue as a result of a simplified product set, best practice implementations, and increased partner leverage.
• The strengthening of the U.S. dollar compared to foreign currencies.

Non-GAAP Financial Measures:

The reported results include adjusted EBITDA, a non-GAAP financial measure, defined as net income (loss), adjusted for the impact of purchase accounting adjustments to deferred revenue related to acquisitions, depreciation and amortization, stock-based compensation expense, interest expense, net, income tax (benefit) provision, amortization of acquired intangible assets, acquisition-related expenses and severance and related charges. Non-GAAP results are presented for supplemental informational purposes only and should not be considered a substitute for financial information presented in accordance with generally accepted accounting principles, and may be different from non-GAAP measures used by other companies. eGain's management uses these non-GAAP measures to compare the company's performance to that of prior periods for trend analyses, and for budgeting and planning purposes. eGain believes that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing the company's financial measures with other software companies, many of which present similar non-GAAP financial measures to investors, and that it allows for greater transparency with respect to key metrics used by management in its financial and operational decision-making. Reconciliation tables of the most comparable GAAP financial measures to the non-GAAP financial measures used in this press release are included with the financial tables at the end of this release. eGain urges investors to review the reconciliation and not to rely on any single financial measure to evaluate the company's business.

Quarterly Conference Call
eGain will discuss its quarterly results today via teleconference at 2:00 p.m. Pacific Time. To access the live call, please dial (888) 510-1785 (U.S. toll free) or (719) 325-2432 (international), and give the participant pass code 5395297. A live webcast of the call can be accessed from the investors section at www.egain.com. An audio replay of the conference call can be accessed at (888) 203-1112 (U.S. toll-free) or (719) 457-0820 (international). The replay will be available starting two hours after the call and remain in effect for one week. The required pass code is 5395297. An archive of the webcast will also be available on the investors section at www.egain.com.

About eGain
eGain's customer engagement solutions power digital transformation for leading brands. Our top-rated cloud applications for social, mobile, web, and contact centers help clients deliver connected customer journeys in a multichannel world. To find out more about eGain Corporation, visit http://www.egain.com/company/investors/

Headquartered in Sunnyvale, 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).

Cautionary Note Regarding Forward-Looking Statements. This press release contains forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements include, among other matters, statements about the Company's market opportunities, statements pertaining to Company's integration of Exony, statements referring to organizational changes, statements about the Company's financial results for the fiscal second quarter and the six months ended December 31, 2014, statements with respect to total revenue, statements regarding deferred revenue, subscription and support revenue, license revenue and statements regarding our fiscal 2015 guidance, including sources of revenue and business mix. The achievement or success of the matters covered by such forward-looking statements involves risks, uncertainties and assumptions. If any such risks or uncertainties materialize or if any of the assumptions prove incorrect, the Company's results could differ materially from the results expressed or implied by the forward-looking statements we make. The risks and uncertainties referred to above include, but are not limited to; risks that our hybrid revenue model and lengthy sales cycles may negatively affect our operating results; risks related to our reliance on a relatively small number of customers for a substantial portion of our revenue; our ability to successfully integrate Exony; our ability to compete successfully and manage growth; our ability to develop and expand strategic and third party distribution channels; risks associated with new product releases; our ability to comply with the covenants of the Wells Fargo Credit Agreement; risks related to our international operations; our ability to invest resources to improve our products and continue to innovate; and other risks detailed from time to time in eGain's filings with the Securities and Exchange Commission, including eGain's annual report on Form 10-K filed on September 12, 2014, and eGain's quarterly reports on Form 10-Q, which are available on the Securities and Exchange Commission's Web site at www.sec.gov. These forward-looking statements are based on current expectations and speak only as of the date hereof. The Company 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. All other company names and products are trademarks or registered trademarks of their respective companies.

eGain Corporation
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
				December 31,  2014				June 30,  2014
ASSETS
Current assets:
	Cash and cash equivalents			$	8,296			$	8,785
	Restricted cash				1,017				30
	Accounts receivable, net				10,736				11,163
	Deferred commissions				533				865
	Prepaid and other current assets				1,867				1,348
		Total current assets			22,449				22,191
Property and equipment, net					3,941				4,489
Deferred commissions, net of current portion					178				337
Intangible assets					9,010				-
Goodwill					13,230				4,880
Other assets					1,193				750
		Total assets		$	50,001			$	32,647
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Accounts payable			$	2,555			$	2,162
	Accrued compensation				7,159				5,729
	Accrued liabilities				2,894				1,456
	Deferred revenue				11,473				12,920
	Capital lease obligation				437				392
	Bank borrowings				500				1,417
		Total current liabilities			25,018				24,076
Deferred revenue, net of current portion					1,157				793
Capital lease obligations, net of current portion					386				625
Bank borrowings, net of current portion					16,500				3,583
Other long term liabilities					2,043				521
		Total liabilities			45,104				29,598
Stockholders' equity:
	Common stock				27				25
	Additional paid-in capital				339,779				330,657
	Notes receivable from stockholders				(76	)			(83	)
	Accumulated other comprehensive loss				(1,156	)			(970	)
	Accumulated deficit				(333,677	)			(326,580	)
		Total stockholders' equity			4,897				3,049
		Total liabilities and stockholders' equity		$	50,001			$	32,647

eGain Corporation
Condensed Consolidated Statements of Operation
(in thousands, except per share data)
(unaudited)
				Three Months Ended								Six Months Ended
				December 31,								December 31,
				2014				2013				2014				2013
Revenue:
	Subscription and support			$	10,956			$	10,246			$	21,401			$	19,712
	License				3,583				3,065				10,311				6,903
	Professional services				4,364				4,354				7,895				6,732
		Total revenue			18,903				17,665				39,607				33,347
	Cost of subscription and support				3,264				1,951				6,143				3,922
	Cost of license				26				26				54				52
	Cost of professional services				4,951				3,859				9,031				7,395
	Total cost of revenue				8,241				5,836				15,228				11,369
		Gross profit			10,662				11,829				24,379				21,978
Operating expenses:
	Research and development				4,160				2,390				7,901				4,496
	Sales and marketing				9,599				8,617				18,104				16,012
	General and administrative				2,573				1,930				5,515				4,136
		Total operating expenses			16,332				12,937				31,520				24,644
Loss from operations					(5,670	)			(1,108	)			(7,141	)			(2,666	)
Interest expense, net					(145	)			(37	)			(268	)			(129	)
Other income (expense), net					163				(18	)			153				(278	)
Loss before income tax benefit (provision)					(5,652	)			(1,163	)			(7,256	)			(3,073	)
Income tax benefit (provision)					191				(54	)			159				(148	)
Net loss				$	(5,461	)		$	(1,217	)		$	(7,097	)		$	(3,221	)
Per share information:
	Basic and diluted net loss per common share			$	(0.20	)		$	(0.05	)		$	(0.27	)		$	(0.13	)
	Weighted average shares used in computing basic and diluted net loss per common share				26,657				25,356				26,422				25,267
Summary of amortization of purchased intangibles from business combinations in the costs and expenses above:
	Cost of revenue			$	67			$	-			$	108			$	-
	Research and development			$	437			$	-			$	704			$	-
	Sales and marketing			$	172			$	-			$	278			$	-
	General and administrative			$	19			$	-			$	30			$	-
Summary of stock-based compensation included in the costs and expenses above:
	Cost of revenue			$	174			$	85			$	303			$	152
	Research and development			$	217			$	52			$	410			$	99
	Sales and marketing			$	195			$	160			$	319			$	293
	General and administrative			$	164			$	97			$	276			$	196

eGain Corporation
GAAP to Non-GAAP Reconciliation Table
(in thousands)
(unaudited)
				Three Months Ended								Six Months Ended
				December 31,								December 31,
				2014				2013				2014				2013
Adjusted EBITDA
	Net loss			$	(5,461	)		$	(1,217	)		$	(7,097	)		$	(3,221	)
	Add:	Purchase accounting adjustments to deferred revenue related to acquisitions			162				-				248				-
		Depreciation and amortization			623				463				1,291				984
		Stock-based compensation expenses			750				394				1,308				740
		Interest expense, net			145				37				268				129
		Income tax (benefit) provision			(191	)			54				(159	)			148
		Amortization of acquired intangible assets			695				-				1,120				-
		Acquisition-related expenses			229				-				844				-
		Severance and related charges			644				-				704				-
	Adjusted EBITDA			$	(2,404	)		$	(269	)		$	(1,473	)		$	(1,220	)

eGain Corporation

Supplemental Financial Information

(in thousands)

(unaudited)

	Three Months Ended												Six Months Ended
	December 31,												December 31,
					Percent Change												Percent Change
	2014				Actual		Constant		2013				2014				Actual		Constant		2013
Total revenue	$	18,903			7%		9%		$	17,665			$	39,607			19 %		19%		$	33,347
Gross profit	$	10,662			(10)%		(8)%		$	11,829			$	24,379			11 %		11%		$	21,978
Total operating expenses	$	16,332			26%		29%		$	12,937			$	31,520			28 %		28%		$	24,644
Loss from operations	$	(5,670	)		NM		NM		$	(1,108	)		$	(7,141	)		NM		NM		$	(2,666	)
Net loss	$	(5,461	)		NM		NM		$	(1,217	)		$	(7,097	)		NM		NM		$	(3,221	)
* NM - Not Meaningful