eGain Reports 40% Growth Year over Year in SaaS Revenue (46% growth under ASC 605)
November 08 2018 - 3:23PM
eGain (NASDAQ: EGAN), a leading provider of cloud customer
engagement solutions, today announced financial results for its
fiscal 2019 first quarter ended September 30, 2018.
Ashu Roy, eGain CEO, commented, “Our SaaS and subscription
revenue grew nicely in the first quarter. We also generated $3.3
million in operating cash, helping us achieve GAAP profitability
for the quarter. Our pipeline is strengthening around our
exciting virtual assistant offering. We look forward to hosting
customers, partners and thought leaders at eGain DX18 in Chicago
next week.”
Adoption of the New Revenue Recognition Standard - ASC
606eGain adopted the new revenue recognition accounting
standard Accounting Standards Codification (“ASC”) 606
effective July 1, 2018 on a modified retrospective basis.
Financial results for reporting periods during fiscal 2019 are
presented in compliance with the new revenue recognition standard.
Historical financial results for reporting periods prior to fiscal
2019 are presented in conformity with amounts previously disclosed
under the prior revenue recognition standard ASC 605. This press
release includes additional information to reconcile the impacts of
the adoption of the new revenue recognition standard on the
Company’s financial results for the quarter ended September
30, 2018, which includes the presentation of financial results
during fiscal 2019 under ASC 605 for comparison to the prior
year.
Fiscal 2019 First Quarter Financial Highlights
– ASC 606 (standard adopted effective July 1,
2018):
- SaaS revenue was $9.7 million, up 40% year over year from Q1
2018 (up 46% year over year under ASC 605).
- Total revenue was $15.7 million, up 8% year over year from Q1
2018 (up 9% year over year under ASC 605).
- Subscription revenue, which includes SaaS and legacy support
revenue, was $13.7 million, up 16% year over year and 87% of total
revenue (up 19% year over year and 89% of total revenue under ASC
605).
- Subscription revenue gross margin was 75%, up from 74% in Q1
2018.
- GAAP operating income was $753,000, compared to a GAAP
operating loss of $254,000 in Q1 2018.
- Non-GAAP operating income was $1.4 million, compared to
non-GAAP operating income of $569,000 in Q1 2018.
- GAAP net income was $604,000, or $0.02 per share on a basic and
diluted basis, compared to a GAAP net loss of $568,000, or $(0.02)
per share on a basic and diluted basis, for Q1 2018.
- Non-GAAP net income was $1.2 million, or $0.04 per share on a
basic and diluted basis, compared to non-GAAP net income of
$255,000, or $0.01 per share on a basic and diluted basis, for Q1
2018.
- Cash provided by operations in the first quarter was $3.3
million, compared to cash provided by operations of $5.9 million in
Q1 2018.
- Total cash and cash equivalents as of September 30, 2018 was
$11.5 million, compared to $11.5 million as of June 30, 2018.
- GAAP deferred revenue increased 37% year over year to $36.9.
million as of September 30, 2018
- Total deferred revenue increased 15% year over year to $71.4
million as of September 30, 2018
Non-GAAP Financial MeasuresThis press release
includes non-GAAP operating income/(loss) and non-GAAP net
income/(loss) as supplemental information relating to our operating
results. Non-GAAP operating income/(loss) is defined as operating
income/(loss) adjusted for stock-based compensation expense and
amortization of acquired intangible assets. Non-GAAP net
income/(loss) is defined as net income/(loss) adjusted for
stock-based compensation expense and amortization of acquired
intangible assets. Total deferred revenue includes both GAAP
deferred revenue and non-GAAP unbilled deferred revenue that
remains off balance sheet, collectively representing contractual
commitments that have not been recognized as revenue. 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.
Adjusted Presentation of Condensed Consolidated
Statement of OperationsThrough June 30, 2018, eGain’s
revenue was classified as recurring, legacy license and
professional services revenue. In connection to eGain’s adoption of
accounting standard ASC 606 as of July 1, 2018, the Company now
classifies its revenue as subscription and professional services
revenue. eGain’s legacy license revenue, which has been declining
related to the Company’s focus on cloud offerings, is included with
subscription revenue. Subscription revenue is made up of SaaS
revenue and legacy support revenue. SaaS revenue includes revenue
from cloud delivery arrangements, term licenses and embedded OEM
royalties and associated support contracts. Legacy support is
revenue associated with perpetual license arrangements the Company
is no longer selling.
Quarterly Conference CalleGain will discuss its
quarterly results today via teleconference at 2:00 p.m. Pacific
Daylight Time. To access the live call, please dial (877)
260-1479 (U.S. toll free) or (334)
323-0522 (international), and give the participant pass
code 8529536. 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 eGaineGain 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 beliefs regarding demand for
our products, including our belief that our pipeline and demand for
our virtual assistant offering is strong, that we will continue to
see benefits to the Company from our transition to a SaaS based
business, including growth in our SaaS and recurring revenue,
improvements in our recurring revenue gross margin, increased
operating income and net income, and increased cash from
operations, 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: risks associated with new product releases;
risks that customer demand may fluctuate or decrease; risks that we
are unable to collect unbilled contractual commitments; risks that
our SaaS based revenue model and lengthy sales cycles may
negatively affect our operating results; currency risks; our
ability to capitalize on customer engagement; the success of
organization changes; 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 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
public filings, including eGain’s annual report on Form 10-K filed
on September 13, 2018 and subsequent reports filed with the
Securities and Exchange Commission, 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.
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.
MKR Group Investor RelationsTodd Kehrli or Jim
ByersPhone: 323-468-2300Email: egain@mkr-group.com
|
eGain CorporationCondensed
Consolidated Balance Sheets(in
thousands)(unaudited) |
|
|
|
|
|
|
|
September 30, 2018
(*) |
|
June 30, 2018 |
ASSETS |
|
|
|
|
|
Current assets: |
|
|
|
|
|
Cash and cash
equivalents |
$ |
11,542 |
|
|
$ |
11,498 |
|
Restricted cash |
|
6 |
|
|
|
6 |
|
Accounts
receivable, net |
|
16,872 |
|
|
|
7,389 |
|
Costs
capitalized to obtain revenue contracts, net |
|
623 |
|
|
|
986 |
|
Prepaid
expenses |
|
1,925 |
|
|
|
2,374 |
|
Other
current assets |
|
334 |
|
|
|
285 |
|
Total
current assets |
|
31,302 |
|
|
|
22,538 |
|
Property and equipment,
net |
|
507 |
|
|
|
559 |
|
Costs capitalized to
obtain revenue contracts, net of current portion |
|
1,819 |
|
|
|
891 |
|
Intangible assets,
net |
|
496 |
|
|
|
733 |
|
Goodwill |
|
13,186 |
|
|
|
13,186 |
|
Other assets |
|
2,112 |
|
|
|
1,715 |
|
Total
assets |
$ |
49,422 |
|
|
$ |
39,622 |
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' DEFICIT |
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
Accounts
payable |
$ |
2,426 |
|
|
$ |
3,905 |
|
Accrued
compensation |
|
4,719 |
|
|
|
5,706 |
|
Accrued
liabilities |
|
2,141 |
|
|
|
2,285 |
|
Deferred
revenue |
|
28,972 |
|
|
|
18,364 |
|
Capital
lease obligations |
|
21 |
|
|
|
42 |
|
Bank
borrowings, net of deferred financing costs |
|
325 |
|
|
|
259 |
|
Total
current liabilities |
|
38,604 |
|
|
|
30,561 |
|
Deferred revenue, net
of current portion |
|
7,917 |
|
|
|
7,833 |
|
Bank borrowings, net of
current portion and deferred financing costs |
|
5,744 |
|
|
|
8,941 |
|
Other long-term
liabilities |
|
918 |
|
|
|
1,000 |
|
Total
liabilities |
|
53,183 |
|
|
|
48,335 |
|
Commitments and
contingencies |
|
|
|
|
|
Stockholders'
deficit: |
|
|
|
|
|
Common
stock |
|
28 |
|
|
|
28 |
|
Additional paid-in capital |
|
346,801 |
|
|
|
346,222 |
|
Notes
receivable from stockholders |
|
(86 |
) |
|
|
(85 |
) |
Accumulated other comprehensive loss |
|
(1,664 |
) |
|
|
(1,618 |
) |
Accumulated deficit |
|
(348,840 |
) |
|
|
(353,260 |
) |
Total
stockholders' deficit |
|
(3,761 |
) |
|
|
(8,713 |
) |
Total
liabilities and stockholders' deficit |
$ |
49,422 |
|
|
$ |
39,622 |
|
(*) Includes the impact
from the adoption of ASU 2014-09 (Topic 606) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
eGain Corporation Condensed
Consolidated Statements of Operations (in
thousands, except per share data)
(unaudited) |
|
|
|
|
|
|
|
Three Months
Ended |
|
September 30, |
|
2018 |
|
|
2017 |
|
Revenue: |
|
|
|
|
|
Subscription |
$ |
13,727 |
|
|
$ |
11,830 |
|
Professional services |
|
1,974 |
|
|
|
2,745 |
|
Total
revenue |
|
15,701 |
|
|
|
14,575 |
|
Cost of
revenue: |
|
|
|
|
|
Cost of
subscription |
|
3,395 |
|
|
|
3,038 |
|
Cost of
professional services |
|
1,840 |
|
|
|
2,388 |
|
Total
cost of revenue |
|
5,235 |
|
|
|
5,426 |
|
Gross
profit |
|
10,466 |
|
|
|
9,149 |
|
Operating
expenses: |
|
|
|
|
|
Research
and development |
|
3,559 |
|
|
|
3,431 |
|
Sales and
marketing |
|
3,994 |
|
|
|
4,166 |
|
General
and administrative |
|
2,160 |
|
|
|
1,806 |
|
Total
operating expenses |
|
9,713 |
|
|
|
9,403 |
|
Income (loss) from
operations |
|
753 |
|
|
|
(254 |
) |
Interest expense,
net |
|
(190 |
) |
|
|
(344 |
) |
Other income (expense),
net |
|
17 |
|
|
|
(131 |
) |
Income (loss) before
income tax benefit |
|
580 |
|
|
|
(729 |
) |
Income tax benefit |
|
24 |
|
|
|
161 |
|
Net income (loss) |
$ |
604 |
|
|
$ |
(568 |
) |
Per share
information: |
|
|
|
|
|
Earnings (loss) per
share: |
|
|
|
|
|
Basic |
$ |
0.02 |
|
|
$ |
(0.02 |
) |
Diluted |
$ |
0.02 |
|
|
$ |
(0.02 |
) |
Weighted-average shares
used in computation: |
|
|
|
|
|
Basic |
|
27,687 |
|
|
|
27,185 |
|
Diluted |
|
29,954 |
|
|
|
27,185 |
|
|
|
|
|
|
|
Stock-based compensation included in above costs and expenses: |
|
|
|
|
|
Cost of
revenue |
$ |
74 |
|
|
$ |
63 |
|
Research
and development |
|
116 |
|
|
|
110 |
|
Sales and
marketing |
|
45 |
|
|
|
63 |
|
General
and administrative |
|
126 |
|
|
|
83 |
|
|
$ |
361 |
|
|
$ |
319 |
|
|
|
|
|
|
|
Amortization of intangible assets included in above costs and
expenses: |
|
|
|
|
|
Cost of
revenue |
$ |
67 |
|
|
$ |
67 |
|
Research
and development |
|
170 |
|
|
|
437 |
|
|
$ |
237 |
|
|
$ |
504 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
eGain Corporation GAAP to Non-GAAP
Reconciliation Table (in thousands) (unaudited) |
|
|
|
|
|
|
|
Three Months Ended September
30, |
|
2018 |
|
2017 |
|
|
Reported under Topic
606 |
|
Reported under Topic
605 |
Income (loss) from
operations |
$ |
753 |
|
$ |
(254 |
) |
Add: |
|
|
|
|
|
Stock-based compensation |
|
361 |
|
|
319 |
|
Amortization of acquired intangibles |
|
237 |
|
|
504 |
|
Non-GAAP income from
operations |
$ |
1,351 |
|
$ |
569 |
|
|
|
|
|
|
|
Net income (loss) |
$ |
604 |
|
$ |
(568 |
) |
Add: |
|
|
|
|
|
Stock-based compensation |
|
361 |
|
|
319 |
|
Amortization of acquired intangibles |
|
237 |
|
|
504 |
|
Non-GAAP net
income |
$ |
1,202 |
|
$ |
255 |
|
Per share
information: |
|
|
|
|
|
Non-GAAP earnings
(loss) per share: |
|
|
|
|
|
Basic |
$ |
0.04 |
|
$ |
0.01 |
|
Diluted |
$ |
0.04 |
|
$ |
0.01 |
|
Weighted-average shares
used in computation: |
|
|
|
|
|
Basic |
|
27,687 |
|
|
27,185 |
|
Diluted |
|
29,954 |
|
|
27,514 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
eGain Corporation Other GAAP to Non-GAAP
Supplemental Financial Information (in thousands)
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September
30, |
|
Growth Rates |
|
2018 |
|
2017 |
|
|
|
|
|
|
Reported under Topic
606 |
|
Topic 606 Impact |
|
Excluding
Topic 606 Impact |
|
Reported under Topic
605 |
|
Reported under Topic
606 |
|
Excluding Topic 606
Impact |
Total deferred
revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP
deferred revenue |
$ |
36,889 |
|
|
|
|
|
|
|
|
$ |
26,959 |
|
|
|
|
|
Unbilled
and uncollected contractual commitments (off-balance sheet) |
|
34,529 |
|
|
|
|
|
|
|
|
|
35,229 |
|
|
|
|
|
Total
deferred revenue: |
$ |
71,418 |
|
|
|
|
|
|
|
|
$ |
62,188 |
|
|
15 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SaaS |
$ |
9,724 |
|
|
$ |
420 |
|
|
$ |
10,144 |
|
$ |
6,944 |
|
|
40 |
% |
|
46 |
% |
Legacy support |
|
4,003 |
|
|
|
(27 |
) |
|
|
3,976 |
|
|
4,886 |
|
|
(18 |
%) |
|
(19 |
%) |
GAAP
subscription |
|
13,727 |
|
|
|
393 |
|
|
|
14,120 |
|
|
11,830 |
|
|
16 |
% |
|
19 |
% |
GAAP
professional services |
|
1,974 |
|
|
|
(203 |
) |
|
|
1,771 |
|
|
2,745 |
|
|
(28 |
%) |
|
(35 |
%) |
Total
non-GAAP revenue |
$ |
15,701 |
|
|
$ |
190 |
|
|
$ |
15,891 |
|
$ |
14,575 |
|
|
8 |
% |
|
9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP
subscription |
$ |
3,395 |
|
|
|
|
|
|
|
|
$ |
3,038 |
|
|
|
|
|
Add
back: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangible assets |
|
(67 |
) |
|
|
|
|
|
|
|
|
(67 |
) |
|
|
|
|
Non-GAAP
subscription |
$ |
3,328 |
|
|
|
|
|
|
|
|
$ |
2,971 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP
professional services |
$ |
1,840 |
|
|
|
|
|
|
|
|
$ |
2,388 |
|
|
|
|
|
Add
back: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation |
|
(74 |
) |
|
|
|
|
|
|
|
|
(63 |
) |
|
|
|
|
Non-GAAP
professional services |
$ |
1,766 |
|
|
|
|
|
|
|
|
$ |
2,325 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP
total cost of revenue |
$ |
5,235 |
|
|
|
|
|
|
|
|
$ |
5,426 |
|
|
|
|
|
Add
back: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangible assets |
|
(67 |
) |
|
|
|
|
|
|
|
|
(67 |
) |
|
|
|
|
Stock-based compensation |
|
(74 |
) |
|
|
|
|
|
|
|
|
(63 |
) |
|
|
|
|
Non-GAAP
total cost of revenue |
$ |
5,094 |
|
|
|
|
|
|
|
|
$ |
5,296 |
|
|
(4 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
subscription |
$ |
10,399 |
|
|
|
|
|
|
|
|
$ |
8,859 |
|
|
|
|
|
Non-GAAP
professional services |
|
208 |
|
|
|
|
|
|
|
|
|
420 |
|
|
|
|
|
Non-GAAP
gross profit |
$ |
10,607 |
|
|
|
|
|
|
|
|
$ |
9,279 |
|
|
14 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP
research and development |
$ |
3,559 |
|
|
|
|
|
|
|
|
$ |
3,431 |
|
|
|
|
|
Add
back: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense |
|
(116 |
) |
|
|
|
|
|
|
|
|
(110 |
) |
|
|
|
|
Amortization of acquired intangible assets |
|
(170 |
) |
|
|
|
|
|
|
|
|
(437 |
) |
|
|
|
|
Non-GAAP
research and development |
$ |
3,273 |
|
|
|
|
|
|
|
|
$ |
2,884 |
|
|
13 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP
sales and marketing |
$ |
3,994 |
|
|
|
|
|
|
|
|
$ |
4,166 |
|
|
|
|
|
Add
back: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense |
|
(45 |
) |
|
|
|
|
|
|
|
|
(63 |
) |
|
|
|
|
Amortization of acquired intangible assets |
|
— |
|
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
Non-GAAP
sales and marketing |
$ |
3,949 |
|
|
|
|
|
|
|
|
$ |
4,103 |
|
|
(4 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP
general and administrative |
$ |
2,160 |
|
|
|
|
|
|
|
|
$ |
1,806 |
|
|
|
|
|
Add
back: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense |
|
(126 |
) |
|
|
|
|
|
|
|
|
(83 |
) |
|
|
|
|
Amortization of acquired intangible assets |
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
Non-GAAP
general and administrative |
$ |
2,034 |
|
|
|
|
|
|
|
|
$ |
1,723 |
|
|
18 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP
operating expenses |
$ |
9,713 |
|
|
|
|
|
|
|
|
$ |
9,403 |
|
|
|
|
|
Add
back: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense |
|
(287 |
) |
|
|
|
|
|
|
|
|
(256 |
) |
|
|
|
|
Amortization of acquired intangible assets |
|
(170 |
) |
|
|
|
|
|
|
|
|
(437 |
) |
|
|
|
|
Non-GAAP
operating expenses |
$ |
9,256 |
|
|
|
|
|
|
|
|
$ |
8,710 |
|
|
6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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