eGain Announces Fiscal 2016 Fourth Quarter and Full Year Financial Results

SUNNYVALE, CA--(Marketwired - Sep 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 [phone] (U.S. toll free) or [phone] (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: [phone] (US), [phone] (EMEA), or [phone] (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.

eGain Corporation
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
				June 30,  2016				June 30,  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								Tweleve Months 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 businesscombinations 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								Tweleve Months 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				77				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 subscription and support revenue ACV[1]:
	Subscription			$	25,437			$	23,152			10%		17%
	Support				18,020				20,027			-10%		-1%
Total subscription and support revenue ACV				$	43,457			$	43,179			1%		9%
Backlog [2]				$	46,812			$	42,273			11%		18%
				Three Months Ended												Tweleve Months 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 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

[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.

MKR Group Investor Relations
Todd Kehrli or Jim Byers
Phone: [phone]
Email: [e-mail]