SOURCE: eGain

eGain

February 09, 2017 16:05 ET

eGain Announces Fiscal 2017 Second Quarter Financial Results

New Subscription and Support ACV bookings in Q2 up 47% sequentially

SUNNYVALE, CA--(Marketwired - Feb 9, 2017) - eGain (NASDAQ: EGAN), a leading provider of cloud customer engagement solutions, today announced financial results for its fiscal 2017 second quarter ended December 31, 2016.

Fiscal 2017 Second Quarter Financial Summary

  • Total revenue was $15.0 million ($16.6 million on a constant currency basis with the prior year), compared to $14.7 million in the first quarter of fiscal 2017 and $19.0 million in the same quarter a year ago.
  • Subscription and support revenue was $11.0 million ($12.0 million on a constant currency basis with the prior year), compared to $10.9 million in the first quarter of fiscal 2017 and $10.8 million in the same quarter a year ago.
  • Professional services revenue was $2.6 million, compared to $2.2 million in the first quarter of fiscal 2017 and $3.1 million in the prior year quarter, with margin improving to 13% compared to 9% in the same quarter a year ago.
  • License revenue was $1.4 million, compared to $1.7 million in the first quarter of fiscal 2017 and $5.1 million in the same quarter a year ago, as the company continued its transition to a SaaS based business.
  • Gross margin was 66%, compared to 69% in the same quarter a year ago.
  • GAAP net loss improved to $(1.0) million, or $(0.04) per share on a basic and diluted basis, compared to a GAAP net loss of $(1.4) million, or $(0.05) per share on a basic and diluted basis, for the same quarter a year ago.
  • Adjusted EBITDA was $684,000, compared to adjusted EBITDA of $1.0 million in the same quarter a year ago.
  • New subscription and support ACV (non-GAAP), which is the annualized value of new cloud, support and term license contractual obligations signed in the quarter, was $3.1 million, up 47% sequentially and 5% year over year (13% on a constant currency basis with the prior year).

Ashu Roy, eGain CEO, commented, "We made very good progress with our SaaS transition this quarter. Our subscription and support revenue comprised 73 percent of total revenue for the second quarter, up from 57 percent in the prior year quarter. Moving forward, we expect all new business to be SaaS based, except for a very small amount of legacy business. In addition, during the quarter we launched a new version of our software suite with enhanced AI, expanded analytics and a new chat SDK."

Eric Smit, eGain CFO, added, "We significantly improved operating efficiencies in the first six months of fiscal 2017, which resulted in a year-over-year increase in adjusted EBITDA during the period, despite a decrease in total revenue due to our transition to a SaaS based business model."

Non-GAAP Financial Measures
These reported results include Annual Contract Value (ACV), Constant Currency 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 and severance and related charges. We define subscription and support ACV as being the annualized value of new cloud, support and term license contractual obligations signed in the quarter. 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. 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) 631-5926 (U.S. toll free) or (913) 312-0946 (international), and give the participant pass code 5566416. A live webcast of the call and slide presentation can be accessed from the investors section at www.egain.com. A replay of the conference call will also be available via telephone beginning approximately two hours after conclusion of the call and remain in effect for one week. To access the replay dial-in information, please click here. An archive of the webcast will also be available on the investors section at www.egain.com.

About eGain
eGain 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 an omnichannel world. To learn more about eGain, visit www.egain.com.

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 transition to a SaaS based 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 13, 2016, which is 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.

eGain, the eGain logo, and all other eGain product names and slogans are trademarks or registered trademarks of eGain Corp. in the United States and/or other countries. All other company names and products mentioned in this release may be trademarks or registered trademarks of the respective companies.

   
   
eGain Corporation  
Condensed Consolidated Balance Sheets  
(in thousands)  
(unaudited)  
             
    December 31,
2016
    June 30,
2016
 
ASSETS                
Current assets:                
  Cash and cash equivalents   $ 9,727     $ 11,780  
  Restricted cash     6       5  
  Accounts receivable, net     8,538       11,876  
  Deferred commissions     704       787  
  Prepaid expenses     699       1,480  
  Other current assets     437       426  
    Total current assets     20,111       26,354  
Property and equipment, net     1,395       1,688  
Deferred commissions, net of current portion     355       325  
Intangible assets, net     3,756       4,839  
Goodwill     13,186       13,186  
Other assets     1,648       1,671  
    Total assets   $ 40,451     $ 48,063  
                 
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT                
Current liabilities:                
  Accounts payable   $ 1,713     $ 2,099  
  Accrued compensation     3,571       5,642  
  Accrued liabilities     2,379       5,670  
  Deferred revenue     13,729       12,672  
  Capital lease obligations     327       329  
  Bank borrowings     833       828  
    Total current liabilities     22,552       27,240  
Deferred revenue, net of current portion     3,179       3,045  
Capital lease obligations, net of current portion     87       153  
Bank borrowings, net of current portion     20,033       20,223  
Other long term liabilities     1,763       1,679  
    Total liabilities     47,614       52,340  
Stockholders' deficit:                
  Common stock     27       27  
  Additional paid-in capital     343,144       342,689  
  Notes receivable from stockholders     (81 )     (81 )
  Accumulated other comprehensive loss     (1,544 )     (1,663 )
  Accumulated deficit     (348,709 )     (345,249 )
    Total stockholders' deficit     (7,163 )     (4,277 )
    Total liabilities and stockholders' deficit   $ 40,451     $ 48,063  
   
   
   
eGain Corporation  
Condensed Consolidated Statements of Operations  
(in thousands, except per share data)  
(unaudited)  
                         
    Three Months Ended     Six Months Ended  
    December 31,     December 31,  
    2016     2015     2016     2015  
Revenue:                                
  Subscription and support   $ 10,982     $ 10,783     $ 21,845     $ 21,625  
  License     1,418       5,064       3,068       7,490  
  Professional services     2,599       3,139       4,831       6,347  
    Total revenue     14,999       18,986       29,744       35,462  
  Cost of subscription and support     2,800       3,116       5,727       6,195  
  Cost of license     4       9       11       16  
  Cost of professional services     2,259       2,851       4,389       6,237  
  Total cost of revenue     5,063       5,976       10,127       12,448  
    Gross profit     9,936       13,010       19,617       23,014  
Operating expenses:                                
  Research and development     3,231       4,016       6,906       7,916  
  Sales and marketing     5,541       7,617       10,781       14,285  
  General and administrative     1,462       1,893       3,493       4,139  
    Total operating expenses     10,234       13,526       21,180       26,340  
Loss from operations     (298 )     (516 )     (1,563 )     (3,326 )
Interest expense, net     (459 )     (676 )     (881 )     (1,009 )
Other income (expense), net     (73 )     (74 )     35       166  
Loss before income tax provision     (830 )     (1,266 )     (2,409 )     (4,169 )
Income tax provision     (219 )     (113 )     (1,051 )     (447 )
Net loss   $ (1,049 )   $ (1,379 )   $ (3,460 )   $ (4,616 )
                                 
Per share information:                                
  Basic and diluted net loss per common share   $ (0.04 )   $ (0.05 )   $ (0.13 )   $ (0.17 )
  Weighted average shares used in computing basic and diluted net loss per common share     27,106       27,036       27,107       27,029  
                                 
Summary of amortization of purchased intangibles from business combinations in the costs and expenses above:                                
  Cost of revenue   $ 67     $ 67     $ 135     $ 134  
  Research and development   $ 437     $ 437     $ 874     $ 874  
  Sales and marketing   $ -     $ 172     $ 67     $ 344  
  General and administrative   $ -     $ 19     $ 7     $ 38  
                                 
Summary of stock-based compensation included in the costs and expenses above:                                
  Cost of revenue   $ 34     $ 66     $ 79     $ 160  
  Research and development   $ 81     $ 123     $ 169     $ 270  
  Sales and marketing   $ 58     $ (62 )   $ 116     $ 70  
  General and administrative   $ 50     $ 102     $ 95     $ 242  
   
   
   
eGain Corporation  
GAAP to Non-GAAP Reconciliation Table  
(in thousands)  
(unaudited)  
   
    Three Months Ended     Six Months Ended  
    December 31,     December 31,  
    2016     2015     2016     2015  
  Revenue   $ 14,999     $ 18,986     $ 29,744     $ 35,462  
  Add: Purchase accounting adjustments to deferred revenue related to acquisitions     8       19       24       39  
  Non-GAAP Revenue   $ 15,007     $ 19,005     $ 29,768     $ 35,501  
                                 
Adjusted EBITDA                                
  Net loss   $ (1,049 )   $ (1,379 )   $ (3,460 )   $ (4,616 )
  Add: Purchase accounting adjustments to deferred revenue related to acquisitions     8       19       24       39  
    Depreciation and amortization     320       543       674       1,092  
    Stock-based compensation expense     223       229       459       742  
    Interest expense, net     459       676       881       1,009  
    Income tax provision     219       113       1,051       447  
    Amortization of acquired intangible assets     504       695       1,083       1,390  
    Severance and related charges     -       147       47       171  
  Adjusted EBITDA   $ 684     $ 1,043     $ 759     $ 274  
 
 
 
eGain Corporation
Other GAAP to Non-GAAP Supplemental Financial Information
(in thousands)
(unaudited)
 
    December 31,     Growth   Constant currency                        
    2016     2015     rates   growth rates [4]                        
Total subscription and support ACV[1]   $ 45,352     $ 43,297     5%   14%                        
                                                 
Backlog [2]   $ 46,425     $ 40,998     13%   23%                        
                                                 
      Three Months Ended               Six Months Ended          
      December 31,     Growth   Constant currency     December 31,     Growth   Constant currency
      2016       2015     rates   growth rates [4]     2016       2015     rates   growth rates [4]
                                                 
Gross bookings [3]   $ 16,650     $ 20,292     -18%   -2%   $ 29,390     $ 34,148     -14%   6%
                                                 
Revenue:                                                
  GAAP Subscription and support   $ 10,982     $ 10,783             $ 21,845     $ 21,625          
  GAAP License     1,418       5,064               3,068       7,490          
  GAAP Professional services     2,599       3,139               4,831       6,347          
  GAAP total revenue     14,999       18,986               29,744       35,462          
  Purchase accounting adjustments to deferred revenue related to acquisitions     8       19               24       39          
  Non-GAAP revenue   $ 15,007     $ 19,005     -21%   -13%   $ 29,768     $ 35,501     -16%   -8%
                                                 
Cost of revenue:                                                
  GAAP subscription and support   $ 2,800     $ 3,116             $ 5,727     $ 6,195          
  Add back:                                                
    Depreciation and amortization     (214 )     (332 )             (437 )     (662 )        
    Amortization of acquired intangible assets     (67 )     (67 )             (135 )     (134 )        
    Severance and related charges     -       -               (10 )     -          
  Non-GAAP subscription and support   $ 2,519     $ 2,717             $ 5,145     $ 5,399          
                                                   
  GAAP professional services   $ 2,259     $ 2,851             $ 4,389     $ 6,237          
  Add back:                                                
    Depreciation and amortization     (24 )     (58 )             (54 )     (127 )        
    Stock-based compensation expense     (34 )     (66 )             (79 )     (160 )        
  Non-GAAP professional services   $ 2,201     $ 2,727             $ 4,256     $ 5,950          
                                                   
  GAAP total cost of revenue   $ 5,063     $ 5,976             $ 10,127     $ 12,448          
  Add back:                                                
    Depreciation and amortization     (238 )     (390 )             (491 )     (789 )        
    Stock-based compensation expense     (34 )     (66 )             (79 )     (160 )        
    Amortization of acquired intangible assets     (67 )     (67 )             (135 )     (134 )        
    Severance and related charges     -       -               (10 )     -          
  Non-GAAP total cost of revenue   $ 4,724     $ 5,453     -13%   -5%   $ 9,412     $ 11,365     -17%   -10%
                                                 
Gross profit:                                                
  Non-GAAP subscription and support   $ 8,471     $ 8,085             $ 16,724     $ 16,265          
  Non-GAAP license     1,414       5,055               3,057       7,474          
  Non-GAAP professional services     398       412               575       397          
  Non-GAAP gross profit   $ 10,283     $ 13,552     -24%   -16%   $ 20,356     $ 24,136     -16%   -8%
                                                 
Operating expenses:                                                
  GAAP research and development   $ 3,231     $ 4,016             $ 6,906     $ 7,916          
  Add back:                                                
    Depreciation and amortization     (34 )     (78 )             (73 )     (149 )        
    Stock-based compensation expense     (81 )     (123 )             (169 )     (270 )        
    Amortization of acquired intangible assets     (437 )     (437 )             (874 )     (874 )        
  Non-GAAP research and development   $ 2,679     $ 3,378     -21%   -15%   $ 5,790     $ 6,623     -13%   -8%
                                                   
  GAAP sales and marketing   $ 5,541     $ 7,617             $ 10,781     $ 14,285          
  Add back:                                                
    Depreciation and amortization     (31 )     (58 )             (72 )     (120 )        
    Stock-based compensation expense     (58 )     62               (116 )     (70 )        
    Amortization of acquired intangible assets     -       (172 )             (67 )     (344 )        
    Severance and related charges     -       (147 )             (27 )     (171 )        
  Non-GAAP sales and marketing   $ 5,452     $ 7,302     -25%   -19%   $ 10,499     $ 13,580     -23%   -16%
                                                   
  GAAP general and administrative   $ 1,462     $ 1,893             $ 3,493     $ 4,139          
  Add back:                                                
    Depreciation and amortization     (17 )     (17 )             (38 )     (34 )        
    Stock-based compensation expense     (50 )     (102 )             (95 )     (242 )        
    Amortization of acquired intangible assets     -       (19 )             (7 )     (38 )        
    Severance and related charges     -       -               (10 )     -          
  Non-GAAP general and administrative   $ 1,395     $ 1,755     -21%   -15%   $ 3,343     $ 3,825     -13%   -7%
                                                   
  GAAP operating expenses   $ 10,234     $ 13,526             $ 21,180     $ 26,340          
  Add back:                                                
    Depreciation and amortization     (82 )     (153 )             (183 )     (303 )        
    Stock-based compensation expense     (189 )     (163 )             (380 )     (582 )        
    Amortization of acquired intangible assets     (437 )     (628 )             (948 )     (1,256 )        
    Severance and related charges     -       (147 )             (37 )     (171 )        
  Non-GAAP operating expenses   $ 9,526     $ 12,435     -23%   -18%   $ 19,632     $ 24,028     -18%   -12%
 
[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 is 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.
 

Contact Information

  • MKR Group Investor Relations
    Todd Kehrli or Jim Byers
    Phone: 323-468-2300
    Email: egain@mkr-group.com