eGain Corp (EGAN) 2011 Q1 法說會逐字稿

Good day ladies and gentlemen and welcome to the eGain's earnings call for the first fiscal quarter ending September 30, 2010. I would now like to turn the conference over to your host, Mr. Eric Smit, eGain's CFO. Sir, you may begin.

Thank you, Operator. Good afternoon ladies and gentlemen, and thank you for joining us for eGain's conference call. Today, eGain will discuss the results for the first fiscal year ended September 30, 2010. 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'll start by reading a Safe Harbor statement. All statements on this call that involve eGain's forecasts, including our stated guidance, beliefs, projections, expectations, including but not limited to our financial performance 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, our expectations related to our operations, our ability to invest resources to improve our products and to continue to innovate, our partnerships, our future markets 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 on Form 10-K filed on September 23, 2010 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 to Ashu Roy.

Thank you Eric. I am understandably pleased with our financial results this quarter. With the final accounting complete, total revenue of $13.1 million and operating income of $4.9 million were both above the preliminary results we had previously reported. This is the highest quarterly profit in the company's history. Last quarter I highlighted that our clients value our proven deployment flexibility across cloud and on-premise so we are happy to provide it, even if it means lumpy performance from time to time. I'm especially happy to report this when the lumps fall in our favor. Our record top-line growth was primarily due to a large license transaction with a global telecommunications provider. We see this as a landmark deal in our growing success in the telecommunications vertical. The large deal aside, I'm also pleased that our recurring revenue increased 12% over the same quarter a year ago.

Here are some of our business highlights for the quarter. eGain was once again positioned in the Leaders Quadrant by Gartner, in the Magic Quadrant for Web Customers Service Report released in September 2010. eGain attained this recognition for the third year in a row.

eGain Social was named by KMWorld magazine as a Trendsetting Product for 2010. We also expanded our social customer experience management suite. eGain Social Experience Suite includes the capability to create and manage online support communities, a social-blended agent desktop, integration with FaceBook, Twitter and web search, and an innovative single-sourced knowledge publishing capability for proactive social engagement.

eGain Knowledge 10 received Oracle Validated Integration with Oracle's Siebel Customer Relationship Management, Release 8.1 through the Oracle PartnerNetwork. eGain Knowledge 10 achieved SAP certification, as powered by the SAP NetWeaver technology platform. The solution is now integrated with the SAP Customer Relationship Management application 7.0.

We also announced seven new partners in North America; Cameo Solutions, CDW, INX, Nexus, Presidio, Universal E-Business Solutions, and VoiceRite. These providers will partner with eGain to deliver multichannel customer interaction management solutions to midsized businesses.

eGain announced Customer Xs as a partner to deliver multichannel customer service and knowledge management solutions in the Benelux region. The appointment of Customer Xs follows partnerships with SCHOLAND & BEILING/Partner for German-speaking countries and Novabase for Iberian markets.

We remain optimistic about our prospects for fiscal year 2011 and as a result are increasing our revenue guidance for the year. We see growing interest in our recently launched products and we continue to invest in direct sales and partner development to capitalize on these opportunities. 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 through the key financial details, as a reminder, we define new hosting and license bookings as new contractual commitments, that is excluding renewals we receive for 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 breach of contract by us.

Total new hosting and license bookings for the first quarter of fiscal year 2011 were $8.2 million, an increase of 95% from the comparable year-ago quarter. Of the total new hosting and license bookings for the first quarter of fiscal year 2011, 12% were from new hosting bookings and 88% were from new license bookings, compared to 47% from new hosting bookings and 53% from new license bookings in the comparable year-ago quarter.

Now turning to our financial results, total revenue for the quarter was $13.1 million, an increase of $5.1 million or 64% from the comparable year-ago quarter. License revenue for the quarter was $7.4 million, an increase of $5.4 million or 277% from the comparable year-ago quarter. This represents 56% of total revenue for the quarter, up from 24% in the comparable year-ago quarter.

Recurring revenue, that is revenue from hosting and maintenance and support for the quarter was $4.5 million, an increase of $466,000 or 12% from the comparable year-ago quarter. This represents 34% of total revenue, down from 50% in the comparable year-ago quarter.

Looking at the details of our recurring revenue, hosting revenue for the quarter was up 14% from the comparable year-ago quarter, while maintenance and support revenue was up 10% from the comparable year-ago quarter. Professional services revenue for the quarter was $1.3 million, a decrease of $761,000 or 37% from the comparable year-ago quarter. This represents 10% of total revenue for the quarter, down from 26% in the comparable year-ago quarter.

Looking at our gross profit and gross margins, gross profit for the quarter was $10.6 million or a gross margin of 81%, compared to $5.5 million or a gross margin of 68% in the comparable year-ago quarter.

Now turning to our operating costs. Research and development expense for the quarter was $1.4 million, an increase of $244,000 or 21% from the comparable year-ago quarter. Total research and development expense as a percentage of total revenues was 11%, down from 13% in the comparable year-ago quarter.

Sales and marketing expense for the quarter was $3.5 million, an increase of $1.1 million or 44% from the comparable year-ago quarter. Total sales and marketing expense as a percentage of total revenues was 27%, down from 30% in the comparable year-ago quarter.

General and administrative expense for the quarter was $804,000, an increase of $18,000 or 2% from the comparable year-ago quarter. Total general and administrative expenses as a percentage of total revenue was 6%, down from 10% in the comparable year-ago quarter. Included in the total costs and expenses was stock based compensation expense for the quarter of $54,000 compared to $55,000 in the comparable year-ago quarter.

Looking at our other income and expense, other income for the quarter was $281,000 compared to other expense of $6,000 in the comparable year-ago quarter. Interest expense for the quarter was $276,000 compared to $277,000 in the comparable year-ago quarter.

GAAP income from operations for the quarter, that is before interest, taxes and other non-operating income and expense, was $4.9 million, compared to $1.1 million in the comparable year-ago quarter. Net income for the quarter was $4.8 million or $0.22 per share compared to a net income of $787,000 or $0.04 per share in the comparable year-ago quarter.

Now turning to our balance sheet and cash flows. Total cash and cash equivalents were $4.8 million at September 30, 2010, down from $5.7 million at June 30, 2010, but up from $4.7 million at September 30, 2009. Cash used in operations were $600,000 for the quarter compared to cash provided by operations of $462,000 in the comparable year-ago quarter.

Total net accounts receivable were $10 million at September 30, 2010, up from $3 million at June 30, 2010 and $4.6 million at September 30, 2009. Day sales outstanding in receivables or DSOs for the quarter were 70 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 $9.8 million at September 30, 2010, up from $3.9 million at June 30, 2010 and $4.5 million at September 30, 2009. Total stockholders' equity was $742,000 at September 30, 2010 compared to a deficit of $4.2 million at June 30, 2010 and a deficit of $3.2 million at September 30, 2009. Total deferred revenue was $5.9 million at September 30, 2010, up from $5.1 million at June 30, 2010 and $5.5 million at September 30, 2009.

Now turning to our guidance, we are raising our revenue guidance for fiscal year 2011. We currently expect an increase in total revenue of between 20% and 25% when compared to fiscal year 2010. In addition, we currently expect to generate positive cash flows from operations in fiscal year 2011, while planning to invest a significant portion of our anticipated top-line growth back into growing our distribution capability.

Even though we are raising our revenue guidance for the fiscal year, I do want to remind everyone about the hybrid nature of our software deployment model and its implication on quarterly revenue recognition. Since our clients value our proven deployment flexibility across cloud and on-premise, we are happy to provide it, even if it means our revenue may fluctuate from quarter to quarter.

For license transactions, the license revenue amount is generally recognized in the quarter that delivery and acceptance of our software takes place. Whereas for hosting transactions, hosting revenue is recognized ratably over the term of the hosting contract, which is typically one or two years. As a result, our total revenue may increase or decrease in future quarters as a result of the timing and mix of license and hosting transactions.

Historically, our new hosting bookings have generally ranged from between 30% to 40% of total new quarterly bookings. Looking ahead, we expect the split between new hosting and license bookings to be closer to this range versus what we experienced in this quarter and as a result we would expect license revenues to decline in future quarters from where they were in this current quarter.

We run our business to maximize our total bookings, license or hosted so we treat revenue quarterly fluctuations due to license versus hosted bookings as a corollary to the flexible deployment proposition that we offer our customers.

In closing, we are pleased with our start to fiscal year 2011. We see growing market interest for our products and the strong financial performance this quarter provides us with additional resources that we plan to invest in our direct sales and partner development to capitalize on this market interest.

This ends the conference call for eGain's first fiscal quarter and fiscal year ended September 30, 2010. Thanks for listening.

Ladies and gentlemen, thanks for your participation in today's conference. This concludes the program. You may now disconnect.