eGain Announces Fiscal 2017 First Quarter Financial Results

SUNNYVALE, CA--(Marketwired - Nov 9, 2016) - eGain ( NASDAQ : EGAN ), a leading provider of cloud customer engagement solutions, today announced financial results for its fiscal 2017 first quarter ended September 30, 2016.

Fiscal 2017 First Quarter Financial Summary

• Total revenue was $14.7 million ($16.0 million on a constant currency basis), compared to $16.5 million in the same quarter a year ago
• Subscription and support revenue was $10.9 million ($11.7 million on a constant currency basis), compared to $10.8 million in the same quarter a year ago
• Professional services revenue was $2.2 million, down from $3.2 million in the prior year quarter, with margin improving to 5% compared to negative 6% in the prior year quarter
• License revenue was $1.7 million, down from $2.4 million in the same quarter a year ago, as the company continued its transition to a SaaS based business
• Gross margin increased to 66%, compared to 61% in the year ago quarter
• GAAP net loss improved to $2.4 million, or $0.09 per share on a basic and diluted basis, compared to a GAAP net loss of $3.2 million, or a loss of $0.12 per share on a basic and diluted basis, for the year ago quarter
• Adjusted EBITDA improved to $75,000, compared to an adjusted EBITDA loss of $769,000 in the year ago quarter
• Cash flow generated from operations in the first quarter improved to $2.4 million, compared to cash flow used in operations of $5.6 million in the year ago quarter
• New subscription ACV (non-GAAP), which is the annualized value of new cloud and term license contractual obligations signed in the quarter, was $1.9 million, up 63% year over year (82% on a constant currency basis)
• 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 $2.1 million, up 15% year over year (30% on a constant currency basis)

Ashu Roy, eGain CEO, commented, "We are pleased with the continued acceleration in our shift to a SaaS based business model. As a result, during the quarter we saw a decrease in license revenue, reflecting our business mix shift to a SaaS model."

Eric Smit, eGain CFO, added, "As we successfully transition to a SaaS based business, we drove significant year-over-year improvement in gross margin and net loss in the first quarter. Despite the reduction in quarterly revenue, we achieved breakeven on an adjusted EBITDA basis and generated significant improvement in our cash flow from operations in the first quarter compared to the prior year."

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 (benefit), amortization of acquired intangible assets, acquisition-related expenses and severance and related charges. We define ACV as being the annualized value of new cloud 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) 278-8471 (U.S. toll free) or (913) 312-1471 (international), and give the participant pass code 3718892 . 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)
				September 30,  2016				June 30,  2016
ASSETS
Current assets:
	Cash and cash equivalents			$	9,469			$	11,780
	Restricted cash				6				5
	Accounts receivable, net				7,275				11,876
	Deferred commissions				791				787
	Prepaid expenses				1,168				1,480
	Other current assets				531				426
		Total current assets			19,240				26,354
Property and equipment, net					1,379				1,688
Deferred commissions, net of current portion					374				325
Intangible assets, net					4,260				4,839
Goodwill					13,186				13,186
Other assets					1,676				1,671
		Total assets		$	40,115			$	48,063
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
Current liabilities:
	Accounts payable			$	1,907			$	2,099
	Accrued compensation				3,138				5,642
	Accrued liabilities				4,666				5,670
	Deferred revenue				15,473				12,672
	Capital lease obligations				273				329
	Bank borrowings				831				828
		Total current liabilities			26,288				27,240
Deferred revenue, net of current portion					2,511				3,045
Capital lease obligations, net of current portion					116				153
Bank borrowings, net of current portion					15,632				20,223
Other long term liabilities					1,902				1,679
		Total liabilities			46,449				52,340
Stockholders' (deficit) equity:
	Common stock				27				27
	Additional paid-in capital				342,925				342,689
	Notes receivable from stockholders				(81	)			(81	)
	Accumulated other comprehensive loss				(1,545	)			(1,663	)
	Accumulated deficit				(347,660	)			(345,249	)
		Total stockholders' (deficit) equity			(6,334	)			(4,277	)
		Total liabilities and stockholders' (deficit) equity		$	40,115			$	48,063

eGain Corporation
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
				Three Months Ended
				September 30,
				2016				2015
Revenue:
	Subscription and support			$	10,863			$	10,842
	License				1,650				2,426
	Professional services				2,232				3,208
		Total revenue			14,745				16,476
	Cost of subscription and support				2,927				3,079
	Cost of license				7				7
	Cost of professional services				2,130				3,386
	Total cost of revenue				5,064				6,472
		Gross profit			9,681				10,004
Operating expenses:
	Research and development				3,675				3,900
	Sales and marketing				5,240				6,668
	General and administrative				2,031				2,246
		Total operating expenses			10,946				12,814
Loss from operations					(1,265	)			(2,810	)
Interest expense, net					(422	)			(333	)
Other income, net					108				240
Loss before income tax provision					(1,579	)			(2,903	)
Income tax provision					(832	)			(334	)
Net loss				$	(2,411	)		$	(3,237	)
Per share information:
	Basic and diluted net loss per common share			$	(0.09	)		$	(0.12	)
	Weighted average shares used in computing basic and diluted net loss per common share				27,108				27,022
Summary of amortization of purchased intangibles from businesscombinations in the costs and expenses above:
	Cost of revenue			$	67			$	67
	Research and development			$	437			$	437
	Sales and marketing			$	67			$	172
	General and administrative			$	8			$	19
Summary of stock-based compensation included in the costs and expenses above:
	Cost of revenue			$	45			$	94
	Research and development			$	88			$	147
	Sales and marketing			$	58			$	132
	General and administrative			$	45			$	140

eGain Corporation
GAAP to Non-GAAP Reconciliation Table
(in thousands)
(unaudited)
				Three Months Ended
				September 30,
				2016				2015
	Revenue			$	14,745			$	16,476
	Add: Purchase accounting adjustments to deferred revenue related to acquisitions				16				20
	Non-GAAP Revenue			$	14,761			$	16,496
Adjusted EBITDA
	Net loss			$	(2,411	)		$	(3,237	)
	Add: Purchase accounting adjustments to deferred revenue related to acquisitions				16				20
		Depreciation and amortization			354				549
		Stock-based compensation expense			236				513
		Interest expense, net			422				333
		Income tax provision			832				334
		Amortization of acquired intangible assets			579				695
		Acquisition-related expenses			-				-
		Severance and related charges			47				24
	Adjusted EBITDA			$	75			$	(769	)

eGain Corporation
Other GAAP to Non-GAAP Supplemental Financial Information
(in thousands)
(unaudited)
															Constant
				September 30,								Growth			currency
				2016				2015				rates			growth rates [5]
Total subscription and support revenue ACV[1]:
	Subscription			$	26,299			$	23,168			14	%		21	%
	Support				17,905				19,860			-10	%		-1	%
Total subscription and support revenue ACV				$	44,204			$	43,028			3	%		11	%
Backlog [2]				$	44,775			$	39,680			13	%		20	%
				Three Months Ended											Constant
				September 30,								Growth			currency
				2016				2015				rates			growth rates [5]
New subscription and support ACV [3]
	Subscription			$	1,901			$	1,163			63	%		82	%
	Support				238				691			-66	%		-57	%
Total new subscription and support ACV				$	2,139			$	1,854			15	%		30	%
Gross bookings [4]				$	12,740			$	13,900			-8	%		5	%
Revenue:
	GAAP Subscription and support			$	10,863			$	10,842			0	%		8	%
	GAAP License				1,650				2,426
	GAAP Professional services				2,232				3,208
	GAAP total revenue				14,745				16,476
	Purchase accounting adjustments to deferred revenue related to acquisitions				16				20
	Non-GAAP revenue			$	14,761			$	16,496			-11	%		-3	%
Cost of revenue:
	GAAP subscription and support			$	2,927			$	3,079
	Add back:
		Depreciation and amortization			(224	)			(330	)
		Amortization of acquired intangible assets			(67	)			(67	)
		Severance and related charges			(10	)			-
	Non-GAAP subscription and support			$	2,626			$	2,682
	GAAP professional services			$	2,130			$	3,386
	Add back:
		Depreciation and amortization			(31	)			(69	)
		Stock-based compensation expense			(45	)			(94	)
		Severance and related charges			-				-
	Non-GAAP professional services			$	2,054			$	3,223
	GAAP total cost of revenue			$	5,064			$	6,472
	Add back:
		Depreciation and amortization			(255	)			(399	)
		Stock-based compensation expense			(45	)			(94	)
		Amortization of acquired intangible assets			(67	)			(67	)
		Severance and related charges			(10	)			-
	Non-GAAP total cost of revenue			$	4,687			$	5,912			-21	%		-15	%
Gross profit:
	Non-GAAP subscription and support			$	8,253			$	8,180
	Non-GAAP license				1,643				2,419
	Non-GAAP professional services				178				(15	)
	Non-GAAP gross profit			$	10,074			$	10,584			-5	%		4	%
Operating expenses:
	GAAP research and development			$	3,675			$	3,900
	Add back:
		Depreciation and amortization			(46	)			(71	)
		Stock-based compensation expense			(88	)			(147	)
		Amortization of acquired intangible assets			(437	)			(437	)
		Severance and related charges			-				-
	Non-GAAP research and development			$	3,104			$	3,245			-4	%		-1	%
	GAAP sales and marketing			$	5,240			$	6,668
	Add back:
		Depreciation and amortization			(33	)			(61	)
		Stock-based compensation expense			(58	)			(132	)
		Amortization of acquired intangible assets			(67	)			(172	)
		Severance and related charges			(27	)			(24	)
	Non-GAAP sales and marketing			$	5,055			$	6,279			-19	%		-15	%
	GAAP general and administrative			$	2,031			$	2,246
	Add back:
		Depreciation and amortization			(20	)			(18	)
		Stock-based compensation expense			(45	)			(140	)
		Amortization of acquired intangible assets			(8	)			(19	)
		Severance and related charges			(10	)			-
		Acquisition-related expenses			-				-
	Non-GAAP general and administrative			$	1,948			$	2,069			-6	%		-2	%
	GAAP operating expenses			$	10,946			$	12,814
	Add back:
		Depreciation and amortization			(99	)			(150	)
		Stock-based compensation expense			(191	)			(419	)
		Amortization of acquired intangible assets			(512	)			(628	)
		Severance and related charges			(37	)			(24	)
		Acquisition-related expenses			-				-
	Non-GAAP operating expenses			$	10,107			$	11,593			-13	%		-8	%
Adjusted EBITDA
	Net income (loss)			$	(2,411	)		$	(3,237	)
	Add: Purchase accounting adjustments to deferred revenue related to acquisitions				16				20
		Depreciation and amortization			354				549
		Stock-based compensation expense			236				513
		Interest expense, net			422				333
		Income tax provision (benefit)			832				334
		Amortization of acquired intangible assets			579				695
		Acquisition-related expenses			-				-
		Severance and related charges			47				24
	Adjusted EBITDA			$	75			$	(769	)
[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 and support ACV is defined as the annualized value of new cloud, term license and support 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.