EGAIN Corp - FORM 8-K - EX-99.1

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8-K - 8-K - EGAIN Corp	egan-20160908x8k.htm

Exhibit 99.1

eGain Announces Fiscal 2016 Fourth Quarter and Full Year Financial Results

Sunnyvale, Calif. (September 8, 2016) – eGain (NASDAQ: EGAN), a leading provider of cloud customer engagement solutions, today announced financial results for its fiscal 2016 fourth quarter and full year ended June 30, 2016.

Fiscal 2016 Fourth Quarter Financial Highlights

Total revenue was $17.6 million, up 3% from $17.1 million in the same quarter a year ago (up 8% on a constant currency basis)

Subscription and support revenue was $10.8 million, up 8% from $10.1 million in the same quarter a year ago (up 12% on a constant currency basis)

Gross margin increased to 69%, compared to 63% in the year ago quarter

GAAP net income was $1.4 million, or $0.05 per share on a basic and diluted basis (which included a $1.5 million income tax benefit), compared to a GAAP net loss of $2.9 million, or a loss of $0.11 per share on a basic and diluted basis, for the year ago quarter

Adjusted EBITDA improved to $1.9 million, up from an Adjusted EBITDA loss of $307,000 in the year ago quarter

Cash flow generated from operations in the fourth quarter was $2.2 million, compared to cash flow used in operations of $3.6 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 $3.4 million, up 76% year over year

Fiscal 2016 Full Year Financial Results

Total revenue was $69.4 million, down 9% from $75.9 million in fiscal 2015 (down 6% on a constant currency basis) as the company transitioned to a cloud only offering

Subscription and support revenue was $42.8 million, up 1% from $42.3 million in fiscal 2015 (up 4% on a constant currency basis)

Gross margin increased to 66%, compared to 61% in the prior year

GAAP net loss was $6.2 million, or a loss of $0.23 per share on a basic and diluted basis, compared to net loss of $12.4 million, or a loss of $0.47 per share on a basic and diluted basis, for fiscal 2015

Adjusted EBITDA improved to $1.9 million, up from an Adjusted EBITDA loss of $1.4 million for the prior fiscal year

Cash flow generated from operations for fiscal 2016 was $1.9 million, compared to cash used in operations of $10.5 million for fiscal 2015

Total cash, cash equivalents and restricted cash as of June 30, 2016 was $11.8 million, up from $9.3 million as of June 30, 2015

New subscription ACV (non-GAAP) for the full year fiscal 2016 was $7.7 million, up 113% year over year

Total subscription ACV (non-GAAP) for the full year fiscal 2016 was $25.4 million, up 10% year over year (up 17% on a non-GAAP constant currency basis)

Ashu Roy, eGain CEO, commented, “Our solid bookings growth reflects our continued business transition to the cloud. We aligned our sales and business operations this year around a land and expand strategy that is showing positive early results. We are excited to see the enterprise market increasingly preferring our broad and deep customer engagement suite delivered via the secure eGain cloud.”

Eric Smit, eGain CFO, added, “While successfully executing our cloud transition through the year, we improved our gross margin. We also delivered significantly improved net loss of $6.2 million for the full year, compared to a $12.4 million net loss a year ago, and an Adjusted EBITDA of $1.9 million for the full year, compared to a $1.4 million loss a year ago. In addition, we generated $1.9 million in cash flow from operations for the year compared to using cash of $10.5 million in 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 Daylight Time. To access the live call, please dial (888) 710-4011 (U.S. toll free) or (913) 312-0380 (international), and give the participant pass code 3077138. 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’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 transition to a cloud-based business and will continue to see success in implementing a land and expand sales model, and that the enterprise market is increasingly preferring our broad and deep customer engagement suite delivered via the

secure eGain cloud, 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 quarterly report on Form 10-Q for the quarter ended March 31, 2016 and its annual report on Form 10-K filed on September 11, 2015,, 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.

MKR Group Investor Relations

Todd Kehrli or Jim Byers

Phone: 323-468-2300

Email: egain@mkr-group.com

eGain Corporation

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)


	June 30,		June 30,
	2016		2015
ASSETS
Current assets:
Cash and cash equivalents	$	11,780	$	8,633
Restricted cash		5		676
Accounts receivable, net		11,876		13,118
Deferred commissions		787		633
Prepaid Expenses		1,480		906
Other current assets		426		719
Total current assets		26,354		24,685
Property and equipment, net		1,688		3,136
Deferred commissions, net of current portion		325		297
Intangible assets, net		4,839		7,620
Goodwill		13,186		13,186
Other assets		1,671		807
Total assets	$	48,063	$	49,731


LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
Current liabilities:
Accounts payable	$	2,099	$	1,779
Accrued compensation		5,642		6,910
Accrued liabilities		5,670		2,664
Deferred revenue		12,672		14,395
Capital lease obligations		329		471
Bank borrowings		828		505
Total current liabilities		27,240		26,724
Deferred revenue, net of current portion		3,045		1,417
Capital lease obligations, net of current portion		153		295
Bank borrowings, net of current portion		20,223		18,259
Other long term liabilities		1,679		1,937
Total liabilities		52,340		48,632
Stockholders' (deficit) equity:
Common stock		27		27
Additional paid-in capital		342,689		341,329
Notes receivable from stockholders		(81)		(78)
Accumulated other comprehensive loss		(1,663)		(1,170)
Accumulated deficit		(345,249)		(339,009)
Total stockholders' (deficit) equity		(4,277)		1,099
Total liabilities and stockholders' (deficit) equity	$	48,063	$	49,731

eGain Corporation

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)


	Three Months Ended				Year Ended
	June 30,				June 30,
	2016		2015		2016		2015
Revenue:
Subscription and support	$	10,828	$	10,070	$	42,783	$	42,311
License		3,807		2,784		14,466		18,325
Professional services		2,987		4,220		12,126		15,277
Total revenue		17,622		17,074		69,375		75,913
Cost of subscription and support		3,065		2,918		12,401		12,082
Cost of license		5		3		29		61
Cost of professional services		2,450		3,442		11,259		16,998
Total cost of revenue		5,520		6,363		23,689		29,141
Gross profit		12,102		10,711		45,686		46,772
Operating expenses:
Research and development		3,939		3,999		16,063		16,042
Sales and marketing		6,311		6,716		27,722		32,703
General and administrative		1,743		1,986		7,774		9,313
Total operating expenses		11,993		12,701		51,559		58,058
Income (loss) from operations		109		(1,990)		(5,873)		(11,286)
Interest expense, net		(437)		(256)		(1,958)		(834)
Other income (expense), net		217		(157)		728		11
Loss before income tax benefit (provision)		(111)		(2,403)		(7,103)		(12,109)
Income tax benefit (provision)		1,488		(530)		863		(320)
Net income (loss)	$	1,377	$	(2,933)	$	(6,240)	$	(12,429)

Per share information:
Basic net income (loss) per common share	$	0.05	$	(0.11)	$	(0.23)	$	(0.47)
Weighted average shares used in computing basic net income (loss) per common share		27,096		26,890		27,056		26,609
Diluted net income (loss) per common share	$	0.05	$	(0.11)	$	(0.23)	$	(0.47)
Weighted average shares used in computing diluted net income (loss) per common share		27,607		26,890		27,056		26,609

Summary of amortization of purchased intangibles from business combinations in the costs and expenses above:
Cost of revenue	$	67	$	67	$	268	$	242
Research and development	$	437	$	437	$	1,748	$	1,577
Sales and marketing	$	173	$	172	$	690	$	623
General and administrative	$	18	$	19	$	75	$	68

Summary of stock-based compensation included in the costs and expenses above:
Cost of revenue	$	45	$	67	$	249	$	476
Research and development	$	98	$	142	$	472	$	736
Sales and marketing	$	53	$	153	$	169	$	574
General and administrative	$	4	$	125	$	298	$	531

eGain Corporation

GAAP to Non-GAAP Reconciliation Table

(in thousands)

(unaudited)


	Three Months Ended				Year Ended
	June 30,				June 30,
	2016		2015		2016			2015
Revenue	$	17,622	$	17,074	$	69,375		$	75,913
Add: Purchase accounting adjustments to deferred revenue related to acquisitions		19		53	7		7		372
Non-GAAP Revenue	$	17,641	$	17,127	$	69,452		$	76,285

Adjusted EBITDA
Net income (loss)	$	1,377	$	(2,933)	$	(6,240)		$	(12,429)
Add: Purchase accounting adjustments to deferred revenue related to acquisitions		19		53		77			372
Depreciation and amortization		459		605		2,057			2,503
Stock-based compensation expense		200		487		1,188			2,317
Interest expense, net		437		256		1,958			834
Income tax provision (benefit)		(1,488)		530		(863)			320
Amortization of acquired intangible assets		695		695		2,781			2,510
Acquisition-related expenses		—		—		—			844
Severance and related charges		224		—		959			1,294
Adjusted EBITDA	$	1,923	$	(307)	$	1,917		$	(1,435)

Per share information:
Basic Adjusted EBITDA per common share	$	0.07	$	(0.01)	$	0.07		$	(0.05)
Diluted Adjusted EBITDA per common share	$	0.07	$	(0.01)	$	0.07		$	(0.05)
Weighted average shares used in computing basic Adjusted EBITDA per common share		27,096		26,890		27,056			26,609
Weighted average shares used in computing diluted Adjusted EBITDA per common share		27,607		26,890		27,615			26,609

eGain Corporation

Other GAAP to Non-GAAP Supplemental Financial Information

(in thousands)

(unaudited)


	June 30,				Growth	Constant currency
	2016		2015		rates	growth rates [5]
Total recurring revenue ACV[1]:
Subscription	$	25,437	$	23,152	10%	17%
Support		18,020		20,027	-10%	-1%
Total recurring revenue ACV	$	43,457	$	43,179	1%	9%

Backlog [2]	$	46,812	$	42,273	11%	18%


	Three Months Ended						Year Ended
	June 30,				Growth	Constant currency	June 30,				Growth	Constant currency
	2016		2015		rates	growth rates [5]	2016		2015		rates	growth rates [5]
New Subscription and support ACV [3]
Subscription	$	3,378	$	1,916	76%	93%	$	7,667	$	3,595	113%	124%
Support		559		374	49%	51%		3,615		3,656	-1%	3%
Total new subscription and support ACV	$	3,937	$	2,290	72%	86%	$	11,282	$	7,251	56%	63%

Gross bookings [4]	$	26,900	$	21,300	26%	42%	$	73,900	$	78,500	-6%	1%

Revenue:
GAAP Subscription and support	$	10,828	$	10,070	8%	12%	$	42,783	$	42,311	1%	4%
GAAP License		3,807		2,784				14,466		18,325
GAAP Professional services		2,987		4,220				12,126		15,277
GAAP total revenue		17,622		17,074				69,375		75,913
Purchase accounting adjustments to deferred revenue related to acquisitions		19		53				77		372
Non-GAAP revenue	$	17,641	$	17,127	3%	8%	$	69,452	$	76,285	-9%	-6%

Cost of revenue:
GAAP subscription and support	$	3,065	$	2,918			$	12,401	$	12,082
Add back:
Depreciation and amortization		(288)		(364)				(1,259)		(1,466)
Amortization of acquired intangible assets		(67)		(67)				(268)		(242)
Severance and related charges		—		—				(36)		(4)
Non-GAAP subscription and support	$	2,710	$	2,487			$	10,838	$	10,370


GAAP professional services	$	2,450	$	3,442			$	11,259	$	16,998
Add back:
Depreciation and amortization		(37)		(80)				(210)		(344)
Stock-based compensation expense		(45)		(67)				(249)		(476)
Severance and related charges		—		—				(26)		(269)
Non-GAAP professional services	$	2,368	$	3,295			$	10,774	$	15,909

GAAP total cost of revenue	$	5,520	$	6,363			$	23,689	$	29,141
Add back:
Depreciation and amortization		(325)		(444)				(1,469)		(1,810)
Stock-based compensation expense		(45)		(67)				(249)		(476)
Amortization of acquired intangible assets		(67)		(67)				(268)		(242)
Severance and related charges		—		—				(62)		(273)
Non-GAAP total cost of revenue	$	5,083	$	5,785	-12%	-7%	$	21,641	$	26,340	-18%	-14%

Gross profit:
Non-GAAP subscription and support	$	8,137	$	7,636			$	32,022	$	32,313
Non-GAAP license		3,802		2,781				14,437		18,264
Non-GAAP professional services		619		925				1,352		(632)
Non-GAAP gross profit	$	12,558	$	11,342	11%	16%	$	47,811	$	49,945	-4%	-2%

Operating expenses:
GAAP research and development	$	3,939	$	3,999			$	16,063	$	16,042
Add back:
Depreciation and amortization		(53)		(76)				(261)		(306)
Stock-based compensation expense		(98)		(142)				(472)		(736)
Amortization of acquired intangible assets		(437)		(437)				(1,748)		(1,577)
Severance and related charges		—		—				(5)		(35)
Non-GAAP research and development	$	3,351	$	3,344	0%	3%	$	13,577	$	13,388	1%	4%

GAAP sales and marketing	$	6,311	$	6,716			$	27,722	$	32,703
Add back:
Depreciation and amortization		(52)		(62)				(229)		(297)
Stock-based compensation expense		(53)		(153)				(169)		(574)
Amortization of acquired intangible assets		(173)		(172)				(690)		(623)
Severance and related charges		(141)		—				(718)		(843)
Non-GAAP sales and marketing	$	5,892	$	6,329	-7%	1%	$	25,916	$	30,366	-15%	-9%

GAAP general and administrative	$	1,743	$	1,986			$	7,774	$	9,313

Add back:
Depreciation and amortization		(29)		(23)				(98)		(90)
Stock-based compensation expense		(4)		(125)				(298)		(531)
Amortization of acquired intangible assets		(18)		(19)				(75)		(68)
Severance and related charges		(83)		—				(174)		(143)
Acquisition-related expenses		—		—				—		(844)
Non-GAAP general and administrative	$	1,609	$	1,819	-12%	-8%	$	7,129	$	7,637	-7%	-4%

GAAP operating expenses	$	11,993	$	12,701			$	51,559	$	58,058
Add back:
Depreciation and amortization		(134)		(161)				(588)		(693)
Stock-based compensation expense		(155)		(420)				(939)		(1,841)
Amortization of acquired intangible assets		(628)		(628)				(2,513)		(2,268)
Severance and related charges		(224)		—				(897)		(1,021)
Acquisition-related expenses		—		—				—		(844)
Non-GAAP operating expenses	$	10,852	$	11,492	-6%	0%	$	46,622	$	51,391	-9%	-5%

Adjusted EBITDA
Net loss	$	1,377	$	(2,933)			$	(6,240)	$	(12,429)
Add: Purchase accounting adjustments to deferred revenue related to acquisitions		19		53				77		372
Depreciation and amortization		459		605				2,057		2,503
Stock-based compensation expense		200		487				1,188		2,317
Interest expense, net		437		256				1,958		834
Income tax provision (benefit)		(1,488)		530				(863)		320
Amortization of acquired intangible assets		695		695				2,781		2,510
Acquisition-related expenses		—		—				—		844
Severance and related charges		224		—				959		1,294
Adjusted EBITDA	$	1,923	$	(307)			$	1,917	$	(1,435)

Per share information:
Basic net loss per common share	$	0.07	$	(0.01)			$	0.07	$	(0.05)
Diluted net loss per common share	$	0.07	$	(0.01)			$	0.07	$	(0.05)
Weighted average shares used in computing basic net loss per common share		27,096		26,890				27,056		26,609
Weighted average shares used in computing diluted net loss per common share		27,607		26,890				27,615		26,609

[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.

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