SOURCE: eGain Corporation

eGain Corporation

May 05, 2016 16:05 ET

eGain Announces Fiscal 2016 Third Quarter Financial Results

SUNNYVALE, CA--(Marketwired - May 5, 2016) - eGain (NASDAQ: EGAN), a leading provider of cloud customer engagement solutions, today announced financial results for its fiscal 2016 third quarter ended March 31, 2016.

Ashu Roy, eGain's CEO, commented, "We delivered solid new subscription bookings this quarter, including a seven figure cloud deal through our Cisco channel. We continued to streamline our business as we operationalize our cloud transition, achieving cash flows from operations of $2.8 million this quarter. Our top line revenue declined over the prior year, primarily due to lower sales of perpetual licenses as we continue our transition to the cloud."

Ashu added, "The enterprise market continues to embrace our customer engagement solutions delivered via the secure eGain cloud. We look forward to finishing the year strong in new cloud bookings."

Fiscal 2016 Third Quarter Results:

Total GAAP revenue for the fiscal 2016 third quarter was $16.3 million, compared to $19.2 million in the same period last year. Subscription and support revenue for the fiscal third quarter was $10.3 million, compared to $10.8 million in the same period last year. License revenue for the fiscal third quarter was $3.2 million, a decrease of 39% from the $5.2 million in the same period last year. Professional services revenue for the fiscal third quarter was $2.8 million, a decrease of 12% from the $3.2 million in the same period last year.

For the nine months ended March 31, 2016, total GAAP revenue was $51.8 million, a decrease of 12% from the same period last year. Subscription and support revenue was $32.0 million, a decrease of 1% from the same period last year. License revenue was $10.7 million, a decrease of 31% from the same period last year. Professional services revenue was $9.1 million, a decrease of 17% from the same period last year.

Gross profit for the fiscal 2016 third quarter was $10.6 million, compared to $11.7 million in the same period last year. Gross margin for the fiscal third quarter increased to 65%, compared to 61% in the third quarter last year. The subscription and support revenue gross margin for the fiscal third quarter was 70%, compared to 72% in the same period last year.

For the nine months ended March 31, 2016, gross profit was $33.6 million, compared to $36.1 million from the same period last year. Gross margin was 65%, compared to 61% from the same period last year. The subscription and support revenue gross margin for the nine months ended March 31, 2016 was 71%, compared to 72% from the same period last year.

Adjusted EBITDA for the fiscal third quarter was a loss of $280,000, or a loss of $0.01 per share on a basic and diluted basis, compared to an adjusted EBITDA net income of $345,000, or $0.01 per share on a basic and diluted basis for the third quarter of fiscal 2015.

For the nine months ended March 31, 2016, adjusted EBITDA was a loss of $6,000, or no loss per share on a basic and diluted basis compared to an adjusted EBITDA net loss of $1.1 million, or $0.04 per share on a basic and diluted basis, for the same period last year.

GAAP net loss for the fiscal third quarter was $3.0 million, or a loss of $0.11 per share on a basic and diluted basis, compared to a GAAP net loss of $2.4 million, or a loss of $0.09 per share on a basic and diluted basis, for the third quarter of last year. Net loss for the fiscal third quarter includes amortization of acquired intangible assets of $696,000, stock-based compensation expense of $246,000 and interest, net expense of $512,000 and tax expense of $178,000, compared to amortization of acquired intangible assets of $695,000, stock-based compensation expense of $522,000 and interest, net expense of $310,000 and tax benefit of $51,000 in the third quarter last year.

For the nine months ended March 31, 2016, GAAP net loss was $7.6 million, or a loss of $0.28 per share on a basic and diluted basis, compared to net loss of $9.5 million, or $0.36 per share on a basic and diluted basis, for the same period last year. Net loss for the nine months ended March 31, 2016 includes amortization of acquired intangible assets of $2.1 million, stock-based compensation expense of $988,000 and interest, net expense of $1.5 million and tax expense of $625,000, compared to amortization of acquired intangible assets of $1.8 million, stock-based compensation expense of $1.8 million and interest, net expense of $578,000 and tax benefit of $210,000 for the same period last year.

Total cash, cash equivalents and restricted cash was $7.6 million as of March 31, 2016, compared to $9.8 million as of December 31, 2015. In the fiscal third quarter, we repaid $4.8 million of bank borrowings.

Total deferred revenue (which includes both deferred revenue on the balance sheet of $14.5 million and unbilled deferred revenue that remains off balance sheet of $23.0 million, collectively representing contractual commitments that have not been recognized as revenue) was $37.5 million as of March 31, 2016, compared to $41.0 million as of December 31, 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 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 (benefit), 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) 278-8465 (U.S./Canada toll free) or (913) 312-0647 (international), and give the participant pass code 4077723. 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 via the following link: http://jsp.premiereglobal.com/webrsvp

The replay will be available starting two hours after the call and remain in effect for one week. The required pass code is 4077723. 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 subscription business, and the Company's belief that it will finish the fiscal year strongly in new subscription business, 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)  
           
  March 31,
2016
    June 30,
2015
 
ASSETS              
Current assets:              
  Cash and cash equivalents $ 7,541     $ 8,633  
  Restricted cash   13       676  
  Accounts receivable, net   6,639       13,118  
  Deferred commissions   550       633  
  Prepaid and other current assets   2,010       1,625  
    Total current assets   16,753       24,685  
Property and equipment, net   2,142       3,136  
Deferred commissions, net of current portion   319       297  
Intangible assets, net   5,534       7,620  
Goodwill   13,186       13,186  
Other assets   834       807  
    Total assets $ 38,768     $ 49,731  
               
               
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY              
Current liabilities:              
  Accounts payable $ 2,110     $ 1,779  
  Accrued compensation   4,515       6,910  
  Accrued liabilities   2,308       2,664  
  Deferred revenue   9,948       14,395  
  Capital lease obligations   351       471  
  Bank borrowings   826       505  
    Total current liabilities   20,058       26,724  
Deferred revenue, net of current portion   4,568       1,417  
Capital lease obligations, net of current portion   196       295  
Bank borrowings, net of current portion   17,595       18,259  
Other long term liabilities   1,914       1,937  
    Total liabilities   44,331       48,632  
Stockholders' (deficit) equity:              
  Common stock   27       27  
  Additional paid-in capital   342,468       341,329  
  Notes receivable from stockholders   (81 )     (78 )
  Accumulated other comprehensive loss   (1,352 )     (1,170 )
  Accumulated deficit   (346,625 )     (339,009 )
    Total stockholders' (deficit) equity   (5,563 )     1,099  
    Total liabilities and stockholders' (deficit) equity $ 38,768     $ 49,731  
                   
                   
                   
eGain Corporation  
Condensed Consolidated Statements of Operations  
(in thousands, except per share data)  
(unaudited)  
                       
  Three Months Ended     Nine Months Ended  
  March 31,     March 31,  
  2016     2015     2016     2015  
Revenue:                              
  Subscription and support $ 10,330     $ 10,840     $ 31,955     $ 32,241  
  License   3,169       5,230       10,659       15,541  
  Professional services   2,792       3,162       9,139       11,057  
    Total revenue   16,291       19,232       51,753       58,839  
  Cost of subscription and support   3,141       3,021       9,335       9,164  
  Cost of license   8       4       24       58  
  Cost of professional services   2,572       4,525       8,809       13,556  
  Total cost of revenue   5,721       7,550       18,168       22,778  
    Gross profit   10,570       11,682       33,585       36,061  
Operating expenses:                              
  Research and development   4,208       4,142       12,124       12,043  
  Sales and marketing   7,126       7,883       21,412       25,987  
  General and administrative   1,892       1,812       6,031       7,327  
    Total operating expenses   13,226       13,837       39,567       45,357  
Loss from operations   (2,656 )     (2,155 )     (5,982 )     (9,296 )
Interest expense, net   (512 )     (310 )     (1,521 )     (578 )
Other income (expense), net   345       15       512       168  
Loss before income tax benefit (provision)   (2,823 )     (2,450 )     (6,991 )     (9,706 )
Income tax benefit (provision)   (178 )     51       (625 )     210  
Net loss $ (3,001 )   $ (2,399 )   $ (7,616 )   $ (9,496 )
                               
Per share information:                              
  Basic and diluted net loss per common share $ (0.11 )   $ (0.09 )   $ (0.28 )   $ (0.36 )
  Weighted average shares used in computing basic and diluted net loss per common share   27,070       26,709       27,043       26,516  
                               
Summary of amortization of purchased intangibles from businesscombinations in the costs and expenses above:                              
  Cost of revenue $ 67     $ 67     $ 201     $ 175  
  Research and development $ 437     $ 437     $ 1,311     $ 1,141  
  Sales and marketing $ 173     $ 172     $ 518     $ 450  
  General and administrative $ 19     $ 19     $ 56     $ 49  
                               
Summary of stock-based compensation included in the costs and expenses above:                              
  Cost of revenue $ 44     $ 106     $ 204     $ 409  
  Research and development $ 104     $ 184     $ 374     $ 594  
  Sales and marketing $ 46     $ 102     $ 116     $ 421  
  General and administrative $ 52     $ 130     $ 294     $ 406  
                                 
                                 
                                 
eGain Corporation  
GAAP to Non-GAAP Reconciliation Table  
(in thousands)  
(unaudited)  
   
  Three Months Ended     Nine Months Ended  
  March 31,     March 31,  
  2016     2015     2016     2015  
  Revenue $ 16,291     $ 19,232     $ 51,753     $ 58,839  
  Add: Purchase accounting adjustments to deferred revenue related to acquisitions   19       71       58       319  
  Non-GAAP Revenue $ 16,310     $ 19,303     $ 51,811     $ 59,158  
                               
Adjusted EBITDA                              
  Net loss $ (3,001 )   $ (2,399 )   $ (7,616 )   $ (9,496 )
  Add: Purchase accounting adjustments to deferred revenue related to acquisitions   19       71       58       319  
      Depreciation and amortization   506       607       1,598       1,898  
      Stock-based compensation expense   246       522       988       1,830  
      Interest expense, net   512       310       1,521       578  
      Income tax provision (benefit)   178       (51 )     625       (210 )
      Amortization of acquired intangible assets   696       695       2,086       1,815  
      Acquisition-related expenses   -       -       -       844  
      Severance and related charges   564       590       734       1,294  
  Adjusted EBITDA $ (280 )   $ 345     $ (6 )   $ (1,128 )
                               
Per share information:                              
    Basic Adjusted EBITDA per common share $ (0.01 )   $ 0.01     $ (0.00 )   $ (0.04 )
    Diluted Adjusted EBITDA per common share $ (0.01 )   $ 0.01     $ (0.00 )   $ (0.04 )
    Weighted average shares used in computing basic Adjusted EBITDA per common share   27,070       26,709       27,043       26,516  
    Weighted average shares used in computing diluted Adjusted EBITDA per common share   27,070       27,430       27,043       26,516  
                               
                               
                               
eGain Corporation
Other GAAP to Non-GAAP Supplemental Financial Information
(in thousands)
(unaudited)
                                             
                                             
    March 31,                              
    2016     2015   Growth
rates
  Constant currency growth rates [5]                      
Total recurring revenue ACV[1]:                                            
  Subscription   $ 24,215     $ 21,667   12%   13%                      
  Support     20,459       20,374   0%   3%                      
Total recurring revenue ACV   $ 44,674     $ 42,041   6%   8%                      
                                             
Backlog [2]   $ 37,502     $ 38,058   -1%   0%                      
                                             
    Three Months Ended           Nine Months Ended        
    March 31,           March 31,        
    2016     2015   Growth
rates
  Constant currency growth rates [5]   2016     2015   Growth
rates
  Constant currency growth rates [5]
                                             
New Subscription ACV [3]   $ 1,890     $ 730   159%   160%   $ 4,290     $ 1,680   155%   152%
                                             
Gross bookings [4]   $ 12,804     $ 15,603   -18%   -12%   $ 46,953     $ 57,140   -18%   -12%
                                             
Revenue:                                            
  GAAP Subscription and support   $ 10,330     $ 10,840           $ 31,955     $ 32,241        
  GAAP License     3,169       5,230             10,659       15,541        
  GAAP Professional services     2,792       3,162             9,139       11,057        
  GAAP total revenue     16,291       19,232             51,753       58,839        
  Purchase accounting adjustments to deferred revenue related to acquisitions     19       71             58       319        
  Non-GAAP revenue   $ 16,310     $ 19,303   -16%   -13%   $ 51,811     $ 59,158   -12%   -10%
                                             
Cost of revenue:                                            
  GAAP subscription and support   $ 3,141     $ 3,021           $ 9,335     $ 9,164        
  Add back:                                            
    Depreciation and amortization     (309 )     (350 )           (972 )     (1,103 )      
    Amortization of acquired intangible assets     (67 )     (67 )           (201 )     (175 )      
    Severance and related charges     (36 )     (3 )           (36 )     (2 )      
  Non-GAAP subscription and support   $ 2,729     $ 2,601           $ 8,126     $ 7,884        
                                             
  GAAP professional services   $ 2,572     $ 4,525           $ 8,809     $ 13,556        
  Add back:                                            
    Depreciation and amortization     (46 )     (86 )           (173 )     (264 )      
    Stock-based compensation expense     (44 )     (106 )           (204 )     (409 )      
    Severance and related charges     (26 )     (269 )           (26 )     (269 )      
  Non-GAAP professional services   $ 2,456     $ 4,064           $ 8,406     $ 12,614        
                                             
  GAAP total cost of revenue   $ 5,721     $ 7,550           $ 18,168     $ 22,778        
  Add back:                                            
    Depreciation and amortization     (355 )     (436 )           (1,145 )     (1,367 )      
    Stock-based compensation expense     (44 )     (106 )           (204 )     (409 )      
    Amortization of acquired intangible assets     (67 )     (67 )           (201 )     (175 )      
    Severance and related charges     (62 )     (272 )           (62 )     (271 )      
  Non-GAAP total cost of revenue   $ 5,193     $ 6,669   -22%   -19%   $ 16,556     $ 20,556   -19%   -16%
                                             
Gross profit:                                            
  Non-GAAP subscription and support   $ 7,620     $ 8,310           $ 23,887     $ 24,676        
  Non-GAAP license     3,161       5,226             10,635       15,483        
  Non-GAAP professional services     336       (902 )           733       (1,557 )      
  Non-GAAP gross profit   $ 11,117     $ 12,634   -12%   -10%   $ 35,255     $ 38,602   -9%   -6%
                                             
Operating expenses:                                            
  GAAP research and development   $ 4,208     $ 4,142           $ 12,124     $ 12,043        
  Add back:                                            
    Depreciation and amortization     (59 )     (79 )           (208 )     (230 )      
    Stock-based compensation expense     (104 )     (184 )           (374 )     (594 )      
    Amortization of acquired intangible assets     (437 )     (437 )           (1,311 )     (1,141 )      
    Severance and related charges     (5 )     -             (5 )     (35 )      
  Non-GAAP research and development   $ 3,603     $ 3,442   5%   8%   $ 10,226     $ 10,043   2%   5%
                                             
  GAAP sales and marketing   $ 7,126     $ 7,883           $ 21,412     $ 25,987        
  Add back:                                            
    Depreciation and amortization     (59 )     (71 )           (177 )     (235 )      
    Stock-based compensation expense     (46 )     (102 )           (116 )     (421 )      
    Amortization of acquired intangible assets     (173 )     (172 )           (518 )     (450 )      
    Severance and related charges     (406 )     (314 )           (576 )     (843 )      
  Non-GAAP sales and marketing   $ 6,442     $ 7,224   -11%   -9%   $ 20,025     $ 24,038   -17%   -11%
                                             
  GAAP general and administrative   $ 1,892     $ 1,812           $ 6,031     $ 7,327        
  Add back:                                            
    Depreciation and amortization     (33 )     (21 )           (68 )     (66 )      
    Stock-based compensation expense     (52 )     (130 )           (294 )     (406 )      
    Amortization of acquired intangible assets     (19 )     (19 )           (56 )     (49 )      
    Severance and related charges     (91 )     (4 )           (91 )     (145 )      
    Acquisition-related expenses     -       -             -       (844 )      
  Non-GAAP general and administrative   $ 1,697     $ 1,638   4%   6%   $ 5,522     $ 5,817   -5%   -3%
                                             
  GAAP operating expenses   $ 13,226     $ 13,837           $ 39,567     $ 45,357        
  Add back:                                            
    Depreciation and amortization     (151 )     (171 )           (453 )     (531 )      
    Stock-based compensation expense     (202 )     (416 )           (784 )     (1,421 )      
    Amortization of acquired intangible assets     (629 )     (628 )           (1,885 )     (1,640 )      
    Severance and related charges     (502 )     (318 )           (672 )     (1,023 )      
    Acquisition-related expenses     -       -             -       (844 )      
  Non-GAAP operating expenses   $ 11,742     $ 12,304   -5%   -2%   $ 35,773     $ 39,898   -10%   -6%
                                             
Adjusted EBITDA                                            
  Net loss   $ (3,001 )   $ (2,399 )         $ (7,616 )   $ (9,496 )      
  Add: Purchase accounting adjustments to deferred revenue related to acquisitions     19       71             58       319        
    Depreciation and amortization     506       607             1,598       1,898        
    Stock-based compensation expense     246       522             988       1,830        
    Interest expense, net     512       310             1,521       578        
    Income tax provision (benefit)     178       (51 )           625       (210 )      
    Amortization of acquired intangible assets     696       695             2,086       1,815        
    Acquisition-related expenses     -       -             -       844        
    Severance and related charges     564       590             734       1,294        
  Adjusted EBITDA   $ (280 )   $ 345           $ (6 )   $ (1,128 )      
                                             
Per share information:                                            
  Basic Adjusted EBITDA per common share   $ (0.01 )   $ 0.01           $ (0.00 )   $ (0.04 )      
  Diluted Adjusted EBITDA per common share   $ (0.01 )   $ 0.01           $ (0.00 )   $ (0.04 )      
  Weighted average shares used in computing basic Adjusted EBITDA per common share     27,070       26,709             27,043       26,516        
  Weighted average shares used in computing diluted Adjusted EBITDA per common share     27,070       27,430             27,043       26,516        
 
[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 our balance sheets plus unbilled and uncollected contractual commitments.
[3] New Subscription ACV is defined as the annualized value of new cloud and term license contractual obligations signed in the reporting period.
[4] Gross bookings presented are derived from GAAP revenue plus the change in Backlog from the beginning and the end of the reporting period.
[5] 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.
 

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