SOURCE: eGain Communications Corp.

eGain Communications Corp.

May 11, 2011 16:14 ET

eGain Announces Third Quarter Fiscal 2011 Financial Results

Increases revenue guidance for fiscal year 2011

Mountain View, CA--(Marketwire - May 11, 2011) - eGain Communications (OTCBB: EGAN)

Third Fiscal Quarter Highlights
--  New hosting and license bookings increased to $3.7 million, up 96% from
    comparable year-ago quarter
--  Total revenue increased to $8.9 million, up 28% from comparable
    year-ago quarter
--  Recurring services revenue increased to $5.2 million, up 22% from
    comparable year-ago quarter

eGain Communications (OTCBB: EGAN), a leading provider of cloud and on-premise customer interaction hub software, today announced financial results for its fiscal 2011 third quarter ended March 31, 2011.

Total revenue for the third quarter of fiscal 2011 was $8.9 million, an increase of 28% from the comparable year-ago quarter. License revenue for the fiscal third quarter was $1.7 million, an increase of 21% from the comparable year-ago quarter. Recurring revenue for the fiscal third quarter was $5.2 million, an increase of 22% from the comparable year-ago quarter. Professional services revenue for the fiscal third quarter was $2.1 million, an increase of 59% from the comparable year-ago quarter.

Gross profit for the third quarter of fiscal 2011 was $6.1 million, an increase of 33% from the comparable year-ago quarter. Gross margin for the fiscal third quarter increased to 69%, from 66% in the comparable year-ago quarter.

Net income for the third quarter of fiscal 2011 was $567,000, or $0.03 per share on a basic and $0.02 on a diluted basis, compared to a net loss of $318,000, or a loss of $0.01 per share for the comparable year-ago quarter. Net income for the fiscal third quarter included stock-based compensation expense of $54,000 and interest and tax expense of $302,000, compared to stock-based compensation expense of $59,000 and interest and tax expense of $308,000 in the comparable year-ago quarter.

Total revenue for the nine months ended March 31, 2011 was $31.5 million, an increase of 36% from the same period last year. License revenue for the nine months was $11.7 million, an increase of 100% from the same period last year. Recurring revenue for the nine months was $14.8 million, an increase of 19% from the same period last year. Professional services revenue for the nine months was $4.9 million, an increase of 1% from the same period last year.

Gross profit for the nine months ended March 31, 2011 was $23.4 million, an increase of 48% from the same period last year. Gross margin for the nine months increased to 75%, from 68% in the same period last year.

Net income for the nine months ended March 31, 2011 was $6.4 million, or $0.29 per share on a basic and $0.27 on a diluted basis, compared to net income of $1.5 million, or $0.07 per share on a basic and diluted basis for the same period last year. Net income for the nine months included stock-based compensation expense of $158,000 and interest and tax expense of $948,000, compared to stock-based compensation expense of $191,000 and interest and tax expense of $957,000 in the same period last year.

Total cash and cash equivalents were $13.3 million at March 31, 2011, compared to $5.7 million at June 30, 2010. Cash provided by operations was $7.4 million for the nine months ended March 31, 2011, compared to cash provided by operations of $4.1 million for the same period last year. Days sales outstanding in receivables for the third quarter of fiscal 2011 was 42 days, compared to 35 days for the comparable year-ago quarter. Deferred revenues totaled $6.6 million at March 31, 2011, compared to $5.1 million at June 30, 2010.

"We are raising our revenue guidance for the full fiscal year based on growing traction for our market-leading customer interaction hub suite as enterprises increasingly move away from single point solutions," said Ashu Roy, eGain CEO. "We are increasing our direct sales capacity and we plan to introduce new products in the fourth quarter to expand our served markets."

Business Highlights

New Hosting and License Bookings(1)

--  New hosting and license bookings for the third quarter of fiscal 2011
    increased to $3.7 million, up 96% from the comparable year-ago quarter.
    Of the total new hosting and license bookings in the fiscal third
    quarter, 45% were from new hosting bookings and 55% were from new
    license bookings, compared to 31% from new hosting bookings and 69%
    from new license bookings in the comparable year-ago quarter.
--  New hosting and license bookings for the nine months ended
    March 31, 2011 increased to $17.2 million, up 67% from the same period
    last year. Of the total new hosting and license bookings for the nine
    months, 29% were from new hosting bookings and 71% were from new
    license bookings, compared to 37% from new hosting bookings and 63%
    from new license bookings in the same period last year.

Recent milestones, products and industry recognition

--  Announced strategic partnership with mobile device solutions provider
    WorldManuals to provide cloud-based solution enabling mobile operators
    to accelerate and elevate the quality of web self-service and contact
    center support experiences
--  Engaged new channel partnership with NextiraOne to support rising
    demand for unified multichannel customer service solutions in the UK
    and deliver email and chat customer service products with Cisco Systems
    contact center solutions
--  Engaged new channel partnership with Seven Seas Technologies to expand
    market reach of innovative customer service solutions to East African
    businesses
--  Named in the 2011 KMWorld list of "100 Companies that Matter in
    Knowledge Management" for the fifth year in a row and inducted into
    KMWorld's 2011 "Hall of Fame.

Customer Momentum

eGain continued to build new and expand existing relationships with a wide range of enterprise customers during the third quarter of fiscal 2011. Notable new or expanded customer relationships include:

--  A Fortune 100 insurance company
--  A global financial services organization
--  A Fortune 100 diversified technology company
--  A Fortune 100 integrated provider of prescriptions and related health
    services
--  A large European telecommunications company
--  A leading pan-African multichannel digital satellite television
    operator
--  A multinational wireless service provider
--  A premier European online luxury fashion retailer
--  A leading online bike store
--  A top-10 utility company in the United States
--  A top-10 energy supplier in the United Kingdom

Guidance

eGain is increasing its revenue guidance for its fiscal 2011 full year, and currently expects a year-over-year increase in total fiscal 2011 revenue between 30% and 35%, up from the previously provided range of between 25% and 30%. In addition, eGain expects to be profitable and generate positive cash flows from operations in fiscal year 2011 and plans to invest a significant portion of anticipated top-line growth back into growing its distribution capability.

(1) eGain defines New Hosting and License Bookings as new contractual commitments (excluding renewals) received by it 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 eGain. Furthermore, because eGain offers a hybrid delivery model, the mix of new license and hosting business in a quarter could also have an impact on its revenue in a particular quarter. Due to effects that these trends have on eGain's short-term revenue and profitability, it believes that it is useful to disclose New Hosting and License Bookings detail in this and future financial releases. eGain uses this metric internally to focus management on the productivity of the sales team and period-to-period changes in its core business. Therefore, eGain believes that this information is meaningful and helpful in allowing individuals to better assess the ongoing nature of its core operations.

Quarterly Conference Call

eGain will discuss its quarterly results today via teleconference at 5:00 p.m. Eastern Standard Time. To access the call, please dial (866) 871-4879, or outside the U.S. (703) 639-1472, at least five minutes prior to the start time. A live webcast of the call will also be available on the investor relations section of eGain's Web site. An audio replay will be offered until May 18, 2011 by dialing (888) 266-2081 (U.S. toll-free) or (703) 925-2533 (international) and entering the access code #1528292. An archive of the webcast will also be available on the investor relations section of eGain's Web site.

About eGain Communications Corporation

eGain (OTCBB: EGAN) is the leading provider of cloud and on-site customer interaction hub software. For over a decade, eGain solutions have helped improve customer experience, grow sales, and optimize service process -- across the web, social, and phone channels. Hundreds of global enterprises rely on eGain to transform their fragmented sales engagement and customer service operations into unified Customer Interaction Hubs (CIHs).

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 (http://twitter.com/egain) and Facebook (http://facebook.com/egain).

Cautionary Note Regarding Forward-Looking Statements

All statements in this release that involve eGain's forecasts (including the above stated guidance), beliefs, projections, expectations, including but not limited to our financial performance and guidance, plans to invest in our business and expectations regarding our ability to introduce new products, 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 expectations related to our operations; our ability to invest resources to improve our products and continue to innovate; our partnerships; our future markets; 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 23, 2010, and eGain'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
                        Consolidated Balance Sheets
                              (in thousands)
                                (unaudited)

                                                      March 31,  June 30,
                                                        2011       2010
                                                      ---------  ---------
ASSETS

Current assets:
  Cash and cash equivalents                           $  13,276  $   5,733
  Short term investments                                    643         --
  Restricted cash                                            13         13
  Accounts receivable, net                                4,112      2,955
  Prepaid and other current assets                          584        512
                                                      ---------  ---------
    Total current assets                                 18,628      9,213

Property and equipment, net                               1,022        869
Goodwill, net                                             4,880      4,880
Long term investment                                         14         --
Other assets                                                456        354
                                                      ---------  ---------
    Total assets                                      $  25,000  $  15,316
                                                      =========  ========= 

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:
  Accounts payable                                    $     846  $   1,146
  Accrued compensation                                    2,153      1,987
  Accrued liabilities                                     1,582      1,946
  Current portion of deferred revenue                     6,060      4,917
  Current portion of capital lease obligation                63        157
  Current portion of related party notes payable          9,571         --
  Current portion of bank borrowings                         21        115
                                                      ---------  ---------
    Total current liabilities                            20,296     10,268

Deferred revenue, net of current portion                    542        186
Capital lease obligation, net of current portion             --         28
Related party notes payable                                  --      8,724
Other long term liabilities                                 274        273
                                                      ---------  ---------
    Total liabilities                                    21,112     19,479

Stockholders' equity / (deficit):
  Common stock                                               24         22
  Additional paid-in capital                            325,478    323,700
  Notes receivable from stockholders                        (81)       (79)
  Accumulated other comprehensive loss                     (750)      (596)
  Accumulated deficit                                  (320,783)  (327,210)
                                                      ---------  ---------
    Total stockholders' equity / (deficit)                3,888     (4,163)
                                                      ---------  ---------
    Total liabilities and stockholders' equity        $  25,000  $  15,316
                                                      =========  =========




                     eGain Communications Corporation
              Condensed Consolidated Statements of Operations
                 (in thousands, except per share amounts)
                                (unaudited)

                                 Three Months Ended     Nine Months Ended
                                      March 31,             March 31,
                                --------------------  --------------------
                                  2011       2010       2011       2010
                                ---------  ---------  ---------  ---------
Revenue:
  License                       $   1,702  $   1,407  $  11,739  $   5,877
  Recurring                         5,162      4,248     14,848     12,524
  Professional services             2,051      1,288      4,890      4,829
                                ---------  ---------  ---------  ---------
    Total revenue                   8,915      6,943     31,477     23,230
  Cost of license                      14          1         36        152
  Cost of recurring                 1,359      1,104      3,879      3,385
  Cost of professional services     1,412      1,225      4,120      3,857
                                ---------  ---------  ---------  ---------
    Gross profit                    6,130      4,613     23,442     15,836
                                ---------  ---------  ---------  ---------

Operating costs and expenses:
  Research and development          1,308      1,402      4,065      3,857
  Sales and marketing               3,165      2,461      9,595      7,245
  General and administrative          900        755      2,490      2,272
                                ---------  ---------  ---------  ---------
    Total operating costs and
     expenses                       5,373      4,618     16,150     13,374
                                ---------  ---------  ---------  ---------
Income / (loss) from operations       757         (5)     7,292      2,462
Interest expense, net                (270)      (282)      (832)      (837)
Other income (expense), net           112         (5)        83         25
                                ---------  ---------  ---------  ---------
Income / (loss) before income
 tax                                  599       (292)     6,543      1,650
Income tax provision                  (32)       (26)      (116)      (120)
                                ---------  ---------  ---------  ---------
Net Income / (loss)             $     567  $    (318) $   6,427  $   1,530
                                =========  =========  =========  =========
Per share information:

  Basic net income / (loss) per
   common share                 $    0.03  $   (0.01) $    0.29  $    0.07
                                =========  =========  =========  =========
  Diluted net income / (loss)
   per common share             $    0.02  $   (0.01) $    0.27  $    0.07
                                =========  =========  =========  =========

  Weighted average shares used
   in computing basic net
   income / (loss) per common
   share                           22,648     22,162     22,265     22,194
                                =========  =========  =========  =========
  Weighted average shares used
   in computing diluted net
   income / (loss) per common
   share                           24,385     22,162     23,560     22,513
                                =========  =========  =========  =========

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