eGain Announces Fiscal 2016 Second Quarter Financial Results

SUNNYVALE, CA--(Marketwired - Feb 4, 2016) - eGain (NASDAQ: EGAN), a leading provider of cloud customer engagement solutions, today announced financial results for its fiscal 2016 second quarter ended December 31, 2015.

Ashu Roy, eGain's CEO, commented, "I am pleased with our performance this quarter, with gross bookings up 35% year over year including a large Cisco SolutionsPlus license expansion deal. We were also awarded a large expansion of our agreement with the Veterans Administration that significantly increased their web self-service sessions. On the cloud front, we signed a leading US financial institution that will deploy eGain's Knowledge Management solution."

"We continued to streamline our operations to increase efficiencies and saw significant improvement to our adjusted EBITDA and cash flow for the quarter. This improvement was driven by a 16% reduction in operating expenses year to date, which included a 21% year to date decrease in sales and marketing, while still improving our overall sales productivity. With a growing pipeline, particularly around new cloud business, we look to finish the fiscal year strong as we execute on our new land and expand sales strategy."

Fiscal 2016 Second Quarter Results:

Total GAAP revenue for the fiscal 2016 second quarter was $19.0 million, compared to $18.9 million in the same period last year. Subscription and support revenue for the fiscal second quarter was $10.8 million, compared to $11.0 million in the same period last year. License revenue for the fiscal second quarter was $5.1 million, an increase of 41% on a year-over-year basis. Professional services revenue for the fiscal second quarter was $3.1 million, a decrease of 28% on a year-over-year basis.

For the six months ended December 31, 2015, total GAAP revenue was $35.5 million, a decrease of 10% from the same period last year. Subscription and support revenue was $21.6 million, an increase of 1% from the same period last year. License revenue was $7.5 million, a decrease of 27% from the same period last year. Professional services revenue was $6.3 million, a decrease of 20% from the same period last year.

Gross profit for the fiscal second quarter was $13.0 million, compared to $10.7 million for the second quarter of fiscal 2015. Gross margin for the fiscal second quarter was 69%, compared to 56% in the second quarter last year, attributable to the business mix. The subscription and support revenue gross margin for the fiscal second quarter was 71%, compared to 70% in the same quarter last year.

For the six months ended December 31, 2015, gross profit was $23.0 million, compared to $24.4 million for the same period last year. Gross margin was 65%, compared to 62% for the same period last year. The subscription and support revenue gross margin for the six months ended December 31, 2015 was 71%, compared to 71% for the same period last year.

Adjusted EBITDA for the fiscal second quarter was $1.0 million, or $0.04 per share on a basic and diluted basis, compared to an adjusted EBITDA net loss of $2.4 million, or $0.09 per share on a basic and diluted basis, for the second quarter of fiscal 2015.

For the six months ended December 31, 2015, adjusted EBITDA was $274,000, or $0.01 per share on a basic and diluted basis compared to an adjusted EBITDA net loss of $1.5 million, or $0.06 per share on a basic and diluted basis, for the same period last year.

GAAP net loss for the fiscal second quarter was $1.4 million, or a loss of $0.05 per share on a basic and diluted basis, compared to a GAAP net loss of $5.5 million, or a loss of $0.20 per share on a basic and diluted basis, for the second quarter of last year. Net loss for the fiscal second quarter includes amortization of acquired intangible assets of $695,000, stock-based compensation expense of $229,000 and interest, net expense of $676,000 and tax expense of $113,000, compared to amortization of acquired intangible assets of $695,000, stock-based compensation expense of $750,000 and interest, net expense of $145,000 and tax benefit of $191,000 in the second quarter last year.

For the six months ended December 31, 2015, GAAP net loss was $4.6 million, or a loss of $0.17 per share on a basic and diluted basis, compared to net loss of $7.1 million, or $0.27 per share on a basic and diluted basis, for the same period last year. Net loss for the six months ended December 31, 2015 includes amortization of acquired intangible assets of $1.4 million, stock-based compensation expense of $742,000 and interest, net expense of $1.0 million and tax expense of $447,000, compared to amortization of acquired intangible assets of $1.1 million, stock-based compensation expense of $1.3 million and interest, net expense of $268,000 and tax benefit of $159,000 for the same period last year.

Total cash, cash equivalents increased to $9.8 million as of December 31, 2015, from $8.6 million as of June 30, 2015.

Total deferred revenue (which includes both deferred revenue on the balance sheet of $12.7 million and unbilled deferred revenue that remains off balance sheet of $28.3 million, collectively representing contractual commitments that have not been recognized as revenue) was $41.0 million as of December 31, 2015, compared to $42.3 million as of June 30, 2015.

Non-GAAP Financial Measures
These reported results include Annual Contract Value (ACV), Gross Bookings, Backlog and Adjusted EBITDA as supplemental information relating to our operating results. Adjusted EBITDA is 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 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 Standard Time. To access the live call, please dial (888) 395-3227 (U.S./Canada toll free) or (719) 457-2645 (international), and give the participant pass code 8593463. 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 8593463. 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 our belief that we are seeing and will continue to see benefits of the Company's organizational changes, including a growing business pipeline, particularly around new cloud business, the Company's belief that it will finish the fiscal year strongly, and that we can execute on our new land and expand sales strategy, among other matters. 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: our ability to capitalize on customer engagement; the success of organization changes; 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 compete successfully and manage growth; our ability to develop and expand strategic and third party distribution channels; risks associated with new product releases; 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 11, 2015, 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, 2015				June 30, 2015
ASSETS
Current assets:
	Cash and cash equivalents			$	9,792			$	8,633
	Restricted cash				17				676
	Accounts receivable, net				10,830				13,118
	Deferred commissions				514				633
	Prepaid and other current assets				1,445				1,625
		Total current assets			22,598				24,685
Property and equipment, net					2,542				3,136
Deferred commissions, net of current portion					342				297
Intangible assets, net					6,229				7,620
Goodwill					13,186				13,186
Other assets					783				807
		Total assets		$	45,680			$	49,731
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
Current liabilities:
	Accounts payable			$	2,170			$	1,779
	Accrued compensation				4,993				6,910
	Accrued liabilities				3,089				2,664
	Deferred revenue				11,510				14,395
	Capital lease obligations				323				471
	Bank borrowings				807				505
		Total current liabilities			22,892				26,724
Deferred revenue, net of current portion					1,198				1,417
Capital lease obligations, net of current portion					227				295
Bank borrowings, net of current portion					22,348				18,259
Other long term liabilities					1,881				1,937
		Total liabilities			48,546				48,632
Stockholders' (deficit) equity:
	Common stock				27				27
	Additional paid-in capital				342,145				341,329
	Notes receivable from stockholders				(78	)			(78	)
	Accumulated other comprehensive loss				(1,335	)			(1,170	)
	Accumulated deficit				(343,625	)			(339,009	)
		Total stockholders' (deficit) equity			(2,866	)			1,099
		Total liabilities and stockholders' (deficit) equity		$	45,680			$	49,731

eGain Corporation
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
			Three Months Ended								Six Months Ended
			December 31,								December 31,
			2015				2014				2015				2014
Revenue:
	Subscription and support		$	10,783			$	10,956			$	21,625			$	21,401
	License			5,064				3,583				7,490				10,311
	Professional services			3,139				4,364				6,347				7,895
		Total revenue		18,986				18,903				35,462				39,607
	Cost of subscription and support			3,116				3,264				6,195				6,143
	Cost of license			9				26				16				54
	Cost of professional services			2,851				4,951				6,237				9,031
	Total cost of revenue			5,976				8,241				12,448				15,228
		Gross profit		13,010				10,662				23,014				24,379
Operating expenses:
	Research and development			4,016				4,160				7,916				7,901
	Sales and marketing			7,617				9,599				14,285				18,104
	General and administrative			1,893				2,573				4,139				5,515
		Total operating expenses		13,526				16,332				26,340				31,520
Loss from operations				(516	)			(5,670	)			(3,326	)			(7,141	)
Interest expense, net				(676	)			(145	)			(1,009	)			(268	)
Other income (expense), net				(74	)			163				166				153
Loss before income tax benefit (provision)				(1,266	)			(5,652	)			(4,169	)			(7,256	)
Income tax benefit (provision)				(113	)			191				(447	)			159
Net loss			$	(1,379	)		$	(5,461	)		$	(4,616	)		$	(7,097	)
Per share information:
	Basic and diluted net loss per common share		$	(0.05	)		$	(0.20	)		$	(0.17	)		$	(0.27	)
	Weighted average shares used in computing basic and diluted net loss per common share		$	27,036			$	26,657			$	27,029			$	26,422
Summary of amortization of purchased intangibles from business combinations in the costs and expenses above:
	Cost of revenue		$	67			$	67			$	134			$	108
	Research and development		$	437			$	437			$	874			$	704
	Sales and marketing		$	172			$	172			$	344			$	278
	General and administrative		$	19			$	19			$	38			$	30
Summary of stock-based compensation included in the costs and expenses above:
	Cost of revenue		$	66			$	174			$	160			$	303
	Research and development		$	123			$	217			$	270			$	410
	Sales and marketing		$	(62	)		$	195			$	70			$	319
	General and administrative		$	102			$	164			$	242			$	276

eGain Corporation
GAAP to Non-GAAP Reconciliation Table
(in thousands)
(unaudited)
			Three Months Ended								Six Months Ended
			December 31,								December 31,
			2015				2014				2015				2014
	Revenue		$	18,986			$	18,903			$	35,462			$	39,607
	Add: Purchase accounting adjustments to deferred revenue related to acquisitions			19				162				39				248
	Non-GAAP Revenue		$	19,005			$	19,065			$	35,501			$	39,855
Adjusted EBITDA
	Net loss		$	(1,379	)		$	(5,461	)		$	(4,616	)		$	(7,097	)
	Add: Purchase accounting adjustments to deferred revenue related to acquisitions			19				162				39				248
		Depreciation and amortization		543				623				1,092				1,291
		Stock-based compensation expense		229				750				742				1,308
		Interest expense, net		676				145				1,009				268
		Income tax benefit (provision)		113				(191	)			447				(159	)
		Amortization of acquired intangible assets		695				695				1,390				1,120
		Acquisition-related expenses		-				229				-				844
		Severance and related charges		147				644				171				704
	Adjusted EBITDA		$	1,043			$	(2,404	)		$	274			$	(1,473	)
Per share information:
	Basic Adjusted EBITDA per common share		$	0.04			$	(0.09	)		$	0.01			$	(0.06	)
	Diluted Adjusted EBITDA per common share		$	0.04			$	(0.09	)		$	0.01			$	(0.06	)
	Weighted average shares used in computing basic Adjusted EBITDA per common share			27,036				26,657				27,029				26,422
	Weighted average shares used in computing diluted Adjusted EBITDA per common share			27,625				26,657				27,614				26,422

eGain Corporation

Other GAAP to Non-GAAP Supplemental Financial Information

(in thousands)

(unaudited)

				December 31,								Growth		Constant currency
				2015				2014				rates		growth rates [4]
Total recurring revenue ACV[1]:
	Subscription			$	22,759			$	21,845			4%		6%
	Support				20,538				19,684			4%		8%
Total recurring revenue ACV				$	43,297			$	41,529			4%		7%
Backlog [2]				$	40,998			$	41,672			-2%		0%
				Three Months Ended												Six Months Ended
				December 31,								Growth		Constant currency		December 31,								Growth		Constant currency
				2015				2014				rates		growth rates [4]		2015				2014				rates		growth rates [4]
Gross bookings [3]				$	20,292			$	14,991			35%		42%		$	34,148			$	41,551			-18%		-13%
Revenue:
	GAAP Subscription and support			$	10,783			$	10,956							$	21,625			$	21,401
	GAAP License				5,064				3,583								7,490				10,311
	GAAP Professional services				3,139				4,364								6,347				7,895
	GAAP total revenue				18,986				18,903								35,462				39,607
	Purchase accounting adjustments to deferred revenue related to acquisitions				19				162								39				248
	Non-GAAP revenue			$	19,005			$	19,065			0%		2%		$	35,501			$	39,855			-11%		-8%
Cost of revenue:
	GAAP subscription and support			$	3,116			$	3,264							$	6,195			$	6,143
	Add back:
		Depreciation and amortization			(332	)			(354	)							(662	)			(752	)
		Amortization of acquired intangible assets			(67	)			(67	)							(134	)			(108	)
	Non-GAAP subscription and support			$	2,717			$	2,843							$	5,399			$	5,283
	GAAP professional services			$	2,851			$	4,951							$	6,237			$	9,031
	Add back:
		Depreciation and amortization			(58	)			(91	)							(127	)			(178	)
		Stock-based compensation expense			(66	)			(174	)							(160	)			(303	)
	Non-GAAP professional services			$	2,727			$	4,686							$	5,950			$	8,550
	GAAP total cost of revenue			$	5,976			$	8,241							$	12,448			$	15,228
	Add back:
		Depreciation and amortization			(390	)			(445	)							(789	)			(930	)
		Stock-based compensation expense			(66	)			(174	)							(160	)			(303	)
		Amortization of acquired intangible assets			(67	)			(67	)							(134	)			(108	)
	Non-GAAP total cost of revenue			$	5,453			$	7,555			-28%		-26%		$	11,365			$	13,887			-18%		-15%
Gross profit:
	Non-GAAP subscription and support			$	8,085			$	8,230							$	16,265			$	16,321
	Non-GAAP license				5,055				3,601								7,474				10,301
	Non-GAAP professional services				412				(321	)							397				(654	)
	Non-GAAP gross profit			$	13,552			$	11,510			18%		20%		$	24,136			$	25,968			-7%		-5%
Operating expenses:
	GAAP research and development			$	4,016			$	4,160							$	7,916			$	7,901
	Add back:
		Depreciation and amortization			(78	)			(79	)							(149	)			(151	)
		Stock-based compensation expense			(123	)			(217	)							(270	)			(410	)
		Amortization of acquired intangible assets			(437	)			(437	)							(874	)			(704	)
		Severance and related charges			-				(10	)							-				(10	)
	Non-GAAP research and development			$	3,378			$	3,417			-1%		1%		$	6,623			$	6,626			0%		3%
	GAAP sales and marketing			$	7,617			$	9,599							$	14,285			$	18,104
	Add back:
		Depreciation and amortization			(58	)			(77	)							(120	)			(165	)
		Stock-based compensation expense			62				(195	)							(70	)			(319	)
		Amortization of acquired intangible assets			(172	)			(172	)							(344	)			(278	)
		Severance and related charges			(147	)			(491	)							(171	)			(551	)
	Non-GAAP sales and marketing			$	7,302			$	8,664			-16%		-7%		$	13,580			$	16,791			-19%		-12%
	GAAP general and administrative			$	1,893			$	2,573							$	4,139			$	5,515
	Add back:
		Depreciation and amortization			(17	)			(22	)							(34	)			(45	)
		Stock-based compensation expense			(102	)			(164	)							(242	)			(276	)
		Amortization of acquired intangible assets			(19	)			(19	)							(38	)			(30	)
		Severance and related charges			-				(143	)							-				(143	)
		Acquisition-related expenses			-				(229	)							-				(844	)
	Non-GAAP general and administrative			$	1,755			$	1,996			-12%		-9%		$	3,825			$	4,177			-8%		-6%
	GAAP operating expenses			$	13,526			$	16,332							$	26,340			$	31,520
	Add back:
		Depreciation and amortization			(153	)			(178	)							(303	)			(361	)
		Stock-based compensation expense			(163	)			(576	)							(582	)			(1,005	)
		Amortization of acquired intangible assets			(628	)			(628	)							(1,256	)			(1,012	)
		Severance and related charges			(147	)			(644	)							(171	)			(704	)
		Acquisition-related expenses			-				(229	)							-				(844	)
	Non-GAAP operating expenses			$	12,435			$	14,077			-12%		-5%		$	24,028			$	27,594			-13%		-7%

[1] Annual Contract Value (ACV) is defined as the annualized value of the contractual obligations in place at the end of the reporting period.

[2] Backlog presented are derived from the deferred revenue on balance sheet plus unbilled and uncollected contractual commitments.

[3] Gross bookings presented are derived from GAAP revenue plus change in Backlog from the beginning and the end of the reporting period.

[4] Constant currency growth rates presented are derived from converting the current period results for entities reporting in currencies other than U.S. Dollars into U.S. Dollars at the exchange rates in effect during the prior period presented rather than the actual exchange rates in effect during the current period.