eGain Corp (EGAN) 2010 Q2 法說會逐字稿

Good day, ladies and gentlemen and welcome to eGain's second fiscal quarter 2010 call. (Operator Instructions). As a reminder, this conference is being recorded. Now your host for today's conference, Eric Smit. Please begin, sir.

Thank you. Good afternoon, ladies and gentlemen and thank you for joining us for eGain's conference call. Today eGain will discuss the results for the second fiscal quarter ended December 31, 2009. Please note that this call is being recorded and will be available for replay from the Investor Relations section of our website at www.eGain.com for seven days following this call.

I will start by reading a Safe Harbor statement. All statements on this call that involve eGain's plans, forecasts including any guidance, beliefs, projections, expectations, strategies and intentions, including but not limited to, our allocation of resources, enterprise focused business models effect on our bookings, and the effect of global currency exchange rates on our business 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 call, 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 on this call. These risks include, but are not limited to, the uncertainty of demand for eGain products including our guidance regarding bookings and revenue, the actual mix in new business between hosting and license transactions when compared with management's projections, volatility of the value of certain currencies in relation to the US dollar particularly the UK pound, Indian rupee and Euro, the increased complexity of certain transactions and the timing of revenue recognition on such transactions, and other risks detailed from time to time in the Company's filings with the Securities and Exchange Commission including the Company's annual report Form 10-K filed on September 28, 2009, and the Company's quarterly reports on Form 10-Q. eGain assumes no obligation to update these forward-looking statements.

With me today is Ashu Roy, Chairman and Chief Executive Officer of eGain Communications. To begin management's discussion I would now like to turn the call over Ashu Roy.

Thank you, Eric. Ladies and gentlemen, we are pleased with our progress in the quarter. Our revenue, earnings, and cash flow were all up sequentially in the quarter. We continue to see demand for both hosting and on-premise deployment of our solution. We are also seeing good interest in our innovative solution as a service, SLaaS, model where we offer a unique hosted pay per use model without any long-term contract. The SLaaS does not force clients to make significant commitment before they experience solution success in their business context.

As you know, our hybrid deployment model can result in revenue fluctuation quarter to quarter. This is because of the differences in timing of revenue recognition for hosting and licensed contracts. We don't worry about this fluctuation. Rather, we focus on new business bookings and let the revenue recognition sort itself out over time. For example, this quarter, 59% of total new booking was recognized as revenue. In contrast, 86% of total new booking was recognized as revenue in the year ago quarter. On the other hand, I am pleased that our hosting revenue is building nicely and is up 22% this quarter when compared to the same quarter a year ago.

On the product front, we see strong adoption for our recently released eGain service line both among existing clients and prospects. For enterprises, multichannel customer interaction hubs are becoming more of a necessity than a choice. And the proven eGain platform combines modular best of breed capabilities, rapid deployment options, and long term flexibility. Based on this momentum, we are increasing our investment in sales and marketing. On that note, I would like to ask Eric Smit, our CFO, to discuss in more detail our financial performance for the quarter. Eric?

Thank you, Ashu. Before I walk you through the key financial details, as a reminder we define new hosting and license bookings as new contractual commitments that excludes renewals which we receive from 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 breech of contract by us.

Total new hosting and license bookings for the quarter were $4.2 million, a decrease of $324,000 or 7% from the comparable year ago quarter. Of the total new hosting and license bookings in the quarter, 26% was from new hosting bookings and 73% was from new license bookings compared to 15% from new hosting bookings, and 85% from new license bookings in the comparable year ago quarter.

Total new hosting and license bookings for the six months was $8.4 million, a decrease of $719,000 or 8% from the same period last year. Of the total new hosting and license bookings in the six months, 38% was from new hosting bookings and 62% was from new license bookings compared to 25% from new hosting bookings and 75% from new licensing bookings in the same period last year.

Now turning to our financial results, total revenue for the quarter was $8.3 million, a decrease of $1.3 million or 13% from the comparable year ago quarter, but up sequentially by about 4%. Total revenue for the six months of fiscal year 2010 were $16.3 million, a decrease of $1.4 million or 8% from the same period last year.

Looking at the revenue details, license revenue for the quarter was $2.5 million, a decrease of $1 million or 29% from the comparable year ago quarter. On a sequential basis, license revenue was up 29%. License revenue was 30% of total revenue for the quarter, down from 37% in the comparable year ago quarter. License revenue for the six months was $4.5 million, a decrease of $658,000 or 13% from the same period last year. This represents 27% of total revenue for the six months, down from 29% in the same period last year.

Recurring services revenue, that is revenue from hosting and maintenance and support for the quarter was $4.3 million, an increase of $655,000 or 18% from the comparable year ago quarter. This represents 52% of total revenue, up from 38% in the comparable year ago quarter. Recurring services revenue for the six months was $8.3 million, an increase of $528,000 or 7% from the same period last year and this represents 51% of total revenue, up from 44% in the comparable year ago period.

Looking at the details of our recurring revenue, hosting revenue for the quarter was up 22% from the comparable year ago quarter and up 18% sequentially. For the six months, hosting revenue was up 13% from the same period last year. Maintenance and support revenue for the quarter was up 15% from the comparable year ago quarter and unchanged from last quarter. Whereas for the six months, maintenance and support revenue was up 2% from the same period last year.

Professional services revenue for the quarter was $1.5 million, a decrease of $919,000 or 38% from the comparable year ago quarter. This represents 18% of total revenue for the quarter, down from 25% in the comparable year ago quarter. Professional services revenue for the six months were $3.5 million, a decrease of $1.3 million or 27% from the same period last year. This represents 22% of total revenue, down from 27% in the comparable year ago period.

This reduction in professional services revenue was primarily due to a decrease in services revenue from the Cisco OEM agreement. As previously disclosed, last quarter we signed an amendment to our Cisco OEM agreement. Based upon certain changes in the amendment, we are now recording royalties earned under the Cisco OEM agreement as license revenue. For this quarter, there was no additional revenue recorded for the profit margin from the Cisco OEM agreement compared to $480,000 in the comparable year ago quarter.

Looking at our gross profits and gross margins, gross profit for the quarter was $5.8 million or a gross margin of 69% compared to $7.1 million or a gross margin of 73% in the comparable year ago quarter. Gross profit for the six months was $11.2 million, or a gross margin of 69%, compared to $12.3 million or a gross margin of 69% in the same period last year.

Turning to our operating costs, research and development expense for the quarter was $1.3 million, a decrease of $115,000 or 8% from the comparable year ago quarter. Total research and development expense as a percentage of total revenues was 15% and unchanged from the comparable year ago quarter. Research and development expense for the six months was $2.5 million, a decrease of $470,000 or 16% from the same period last year. Total research and development expense as a percentage of total revenues was 15%, down from 16% in the same period last year.

Sales and marking expense for the quarter was $2.4 million, a decrease of $501,000 or 18% from the comparable year ago quarter. Total sales and marketing expense as a percentage of total revenue was 28%, down from 30% in the comparable year ago quarter. Sales and marketing expense for the six months was $4.8 million, a decrease of $849,000 or 15% from the same period last year. This represents 29% of total revenue, down from 32% for same period last year.

General and administrative expense for the quarter was $731,000, a decrease of $142,000 or 16% from the comparable year ago quarter. Total general and administrative expenses as a percentage of total revenue was 9%, unchanged from the comparable year ago quarter. General and administrative expense for the six months was $1.5 million, a decrease of $403,000 or 21% from the same period last year. This represents 9% of total revenue, down from 11% for the same period last year. Included in the total cost and expenses was stock-based compensation expense for the quarter of $77,000, down from $89,000 in the comparable year ago quarter. Stock based compensation expense for the six months was $132,000 compared to $142,000 in the same period last year.

Looking at other income and expense, other income for the quarter was $36,000 compared to other income of $341,000 in the comparable year ago quarter. Other income for the six months was $30,000 compared to income of $365,000 in the same period last year. Interest expense for the quarter was $279,000, a decrease of $56,000 or 17% from the comparable year ago quarter. Interest expense for the six months was $556,000, a decrease of $264,000 or 32% from the same period last year.

GAAP income from operations for the quarter, that is before interest, taxes, and other non-operating income and expenses was $1.4 million compared to an income from operations of $1.9 million in the comparable year ago quarter. GAAP income from operations for the six months was $2.5 million compared to income from operations of $1.8 million in the same period last year. Net income for the second quarter was $1.1 million or $0.05 per share on a basic and $0.04 per share on a diluted basis, compared to net income of $2 million or $0.09 per share on a basic and diluted basis for the comparable year ago quarter.

Net income for the six months was $1.8 million or $0.08 per share on a basic and diluted basis compared to net income of $1.4 million or $0.08 per share on a basic and diluted basis for the same period last year.

Now turning to our balance sheet and cash flows, total cash and cash equivalents were $6 million at December 31, 2009, up from $4.7 million at September 30, 2009. Cash provided by operations was $2.1 million for the six months of fiscal year 2010 compared to $126,000 for the same period last year. Total net accounts receivable was $4.7 million at December 31, 2009, up from $4.3 million at June 30th, 2009.

Day sales outstanding and receivables for the quarter were 51 days compared to 52 days for the comparable year ago quarter. Adjusted working capital, that is current assets less current liabilities excluding deferred revenue, was $6.6 million at December 31, 2009, up from $3.5 million at June 30th, 2009. Total stockholders deficit was $2.2 million at December 31, 2009 compared to a deficit of $4.1 million at June 30th, 2009. Total deferred revenue was $6.3 million at December 31, 2009, up from $5.5 million at September 30, 2009.

In closing, overall we are pleased with our performance this quarter. Demand for our products is good across both our installed base and with new prospects. And based upon this demand, we are increasing our investment in sales and marketing efforts and look forward to providing you with an update on our call next quarter. This ends the conference call for eGain's second quarter of fiscal 2010 results.

Ladies and gentlemen, thank you for your participation. You may now disconnect. Have a wonderful day.