eGain Corp (EGAN) 2011 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to your eGain second-fiscal quarter ended December 31, 2010 conference call. At this time all participants will be in a listen only mode. But later we will conduct a question-and-answer session, which instructions will be given at that time. (Operator Instructions).

As a reminder, today's conference is being recorded. Now I would like to introduce your host for today, Eric Smit. Eric, please go ahead.

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 second-fiscal quarter ended December 31, 2010. We will open up the call for questions after the management presentation.

Please note 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 the Safe Harbor statement. All statements on this call that involve eGain's forecasts, including the stated guidance, beliefs, projections, expectations, including but not limited to our financial performance and guidance, plans to invest in our business, and expectations regarding our product 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 relating to operations, our ability to invest resources to improve our products and 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, and good afternoon everyone. We are pleased with our overall performance for the first half of this fiscal year. Our revenue, bookings, profits and cash flow are all up significantly over the same period last year.

We remain optimistic about our prospects, and plan to continue investing in the business with the intent to accelerate revenue growth and increase our marketshare.

On the business front eGain acquired and expanded business with several enterprise customers during the quarter. Notable new or expanded customer relationships include those with a Fortune 100 insurance company; one of the largest health insurers in the US; a leading full-service outsourcing provider to the global financial industry; one of the largest utilities in the US; a leader in the global hospitality industry; a multinational telecommunication group; and one of the largest grocery retailers in the US.

Turning to the market, we see growing worldwide interest in our products. In response we are expanding our global distribution through partners in Continental Europe, Middle East and Africa and Latin America. We are also leveraging the fiscal partner network, offering complementary products to increase market reach.

We are systematically expanding our deployed application footprint in the installed base, where our flexible delivery options, which include cloud-managed service and on-premise, help us effectively serve enterprise clients.

Finally, we are developing a channel to reach midmarket clients, those are businesses under $250 million a year in revenue, with a cost effective cloud-based eGain suite. We expect to see meaningful results from this initiative in fiscal 2012.

Thanks to our platform-based product strategy, successful co-innovation with leading clients, and an agile global model we have an exciting product pipeline in fiscal 2011.

EGain introduced eGain Multisearch, a unique all-in-one search capability last quarter. This technology combines federated search, multifaceted navigation and best agent process expertise behind the ubiquitous search box for radically better findability and ease-of-use.

This new capability was heralded by KMWorld as a breakthrough in self-service.

Looking ahead we intend to continue to innovate in the multichannel customer interaction space, especially around customer engagement models in new channels like social, mobile and web.

In summary, we are optimistic about our prospects for fiscal 2011, so we are increasing our revenue guidance for the year. Eric Smit, our CFO, will tell you more about it and share detailed financials.

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, 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 second quarter of fiscal year 2011 were $5.4 million, an increase of 29% from the comparable year-ago quarter. Of the total new hosting and license bookings in the quarter, 44% were from new hosting bookings and 56% were from new license bookings. This is compared to 29% for new hosting bookings and 71% from new license bookings in the comparable year-ago quarter.

Total new hosting and license bookings for the first six months of 2011 were $13.6 million, an increase of 62% from the same period last year. Of the total new hosting and license bookings for the first six months, 25% were from new hosting bookings and 75% from license bookings. This compares to 38% from new hosting bookings and 62% from new license bookings in the same period last year.

Now turning to our financial results. Total revenue for the quarter was $9.5 million, an increase of $1.2 million or 14% from the comparable year-ago quarter. Total revenue for the first six months was $22.6 million, an increase of $6.3 million or 39% from the comparable year-ago quarter.

License revenue for the quarter was $2.7 million, an increase of $161,000 or 6% from the comparable year-ago quarter. This represents 28% of total revenue for the quarter, down from 30% in the comparable year-ago quarter.

License revenue for the first six months was $10 million, an increase of $5.6 million or 125% from the same period last year. This represents 44% of total revenue, up from 27% in the same period last year.

Recurring revenue, that is revenue from hosting and maintenance and support, for the quarter was $5.2 million, an increase of $944,000 or 22% from the comparable year-ago quarter. This represents 55% of total revenue, up from 52% in the comparable year-ago quarter.

Recurring revenue for the first six months was $9.7 million, an increase of $1.4 million or 17% from the same period last year. This represents 43% of total revenue, down from 51% in the same period last year.

Looking at the details of our recurring revenue, hosting revenue for the quarter was up 24% from the comparable year-ago quarter. And hosting revenue for the first six months was up 19% from the same period last year.

I do want to highlight that part of the strong sequential increase in our hosting revenue was due to a one-time catch-up of approximately $300,000.

So looking forward sequentially we expect hosting revenue for Q3 to decrease, but based on our recent bookings and renewal expectations, we do expect an increase of approximately 10% of our hosting revenue on a year-over-year basis.

Maintenance and support revenue for the quarter was up 20% from the comparable year-ago quarter. Maintenance and support revenue for the first six months was up 15% from the same period last year.

Professional services revenue for the quarter was $1.6 million, an increase of $59,000 or 4% from the comparable year-ago quarter. This represents 17% of total revenue for the quarter, down from 18% in the comparable year-ago quarter.

Professional services revenue for the first six months was $2.8 million, a decrease of $702,000 or 20% from the same period last year. This represents 13% of total revenue, down from 22% in the same period last year.

Looking at our gross profit and gross margins, gross profit for the quarter was $6.7 million for a gross margin of 71% compared to $5.8 million or a gross margin of 69% in the comparable year-ago quarter.

Gross profit for the first six months was $17.3 million or a gross margin of 77% compared to $11.2 million or a gross margin of 69% in the same period last year.

Now turning to our operating costs, research and development expense for the quarter was $1.3 million, an increase of $58,000 or 5% from the comparable year-ago quarter.

Total research and development expense as a percentage of total revenues was 14%, down from 15% in the comparable year-ago quarter.

Research and development expense for the first six months was $2.8 million, an increase of $302,000 or 12% from the same period last year. Total research and development expense as a percentage of total revenues was 12%, down from 15% from the same period last year.

Sales and marketing expense for the quarter was $2.9 million, an increase of $566,000 or 24% from the comparable year-ago quarter. Total sales and marketing expense as a percentage of total revenues was 31%, up from 28% in the comparable year-ago quarter.

Sales and marketing expense for the six months was $6.4 million, an increase of $1.6 million or 34% from the same period last year. Total sales and marketing expense as a percentage of total revenues was 29%, down from 30% in the same period last year.

G&A expense for the quarter was $785,000 an increase of $54,000 or 7% from the comparable year-ago quarter. Total G&A expense as a percentage of total revenues was 8%, down from 9% in the comparable year-ago quarter.

G&A expense for the first six months was $1.6 million, an increase of $72,000 or 5% from the same period last year. Total G&A expenses as a percentage of total revenue was 7%, down from 9% in the same period last year.

Included in the total costs and expenses was stock-based compensation expense for the quarter of $50,000 compared to $77,000 in the comparable year-ago quarter. Stock-based compensation expense for the first six months was $104,000 compared to $132,000 in the same period last year.

Looking at other income and expense, other expense for the quarter was $310,000, which was primarily due to exchange rate loss compared to other income of $36,000 in the comparable year-ago quarter.

Other expense for the first six months was $29,000 compared to other income of $30,000 in the same period last year.

Interest expense for the quarter was $286,000 compared to $279,000 in the comparable year-ago quarter. Interest expense for the first six months was $562,000 compared to $556,000 in the same period last year.

GAAP income from operations for the quarter, that is before interest, taxes and other nonoperating income and expenses, was $1.7 million compared to $1.4 million in the comparable year-ago quarter.

GAAP income for the first six months was $6.5 million compared to $2.5 million in the same period last year. That is income from operations.

Net income for the second quarter of fiscal year 2011 was $1 million or $0.05 per share on a basic and $0.04 per share on a diluted basis compared to net income of $1.1 million or $0.05 per share on a basic and $0.04 on a diluted basis for the comparable year-ago quarter.

Net income for the first six months was $5.9 million or $0.27 per share on a basic and $0.24 on a diluted basis compared to net income of $1.8 million or $0.08 per share on a basic and diluted basis for the comparable period.

I would now like to turn to our balance sheet and cash flows. Total cash and cash equivalents were $12.2 million at December 31, 2010, up from $5.7 million at June 30, 2010 and $6 million at December 31, 2009.

Cash provided by operations was a record $7.3 million for the first six months compared to cash provided by operations of $2.1 million in the same period last year.

Total net accounts receivable was $2.9 million at December 31, 2010, unchanged from June 30, 2010, and down from $4.7 million at December 30, 2009.

DSOs for the quarter were 28 days compared to 51 days for the comparable year-ago quarter. And our adjusted working capital, that is current assets less current liabilities, excluding deferred revenue, was $11.2 million at December 31, 2010, up from $3.9 million at June 30, 2010, and $6.6 million at December 31, 2009.

Total stockholders equity was $1.5 million at December 31, 2010 compared to a deficit of $4.2 million at June 30, 2010, and a deficit of $2.2 million at December 31, 2009.

Total deferred revenue was $7 million at December 31, 2010, up from $5.1 million at June 30, 2010, and $6.3 million at December 31, 2009.

Now turning to our guidance, we are raising our revenue guidance again for fiscal year 2011. We now expect a year-over-year increase in total revenue of between 25% and 30%, up from the previously provided range of 20% to 25%.

In addition, we currently expect to be profitable on an operating basis and generate positive cash flows from operations in fiscal year 2011. But we do plan to invest a significant portion of our anticipated topline growth back into growing our distribution capability.

In closing, we are pleased with our financial performance this quarter and for the first half of fiscal year 2011. What is encouraging to us in Q2, our new bookings did not have the same concentration of Q1 but was spread over a number of new and existing customers.

We also saw more of a balance between new hosting and license bookings, where in Q1 most of the bookings were from the one large license deal.

We are continuing to see growing market interest for our products. And with our solid year-to-date financial performance, in particular our record cash flow from operations, with additional resources we plan to continue to invest in our direct sales and partner development to capitalize on this market interest.

This ends management's presentation, and we will now open up the call for questions. Thank you, operator.

(Operator Instructions). Noah Steinberg.

Very nice results here. A couple of questions. First, is there any way to give a total bookings number, not just the bookings to new customers, so I can get to a book to bill for the Company?

At this point for this quarter we are not providing that information. This is something that we are working on internally, and plan to start providing that level of guidance likely starting next fiscal year. So I think we would rather work through that internally for a quarter or two before providing that additional level of guidance.

Okay, because I saw the deferreds were up, and the growth in deferred is accelerating, so that is a good sign.

Second question was, why was the share count up sequentially from 22.39 to 24.05?

So this is, again, just based upon the increase in the stock price, and with net income looking at the diluted impact of the options that are outstanding, that is driving that -- the options and warrants (multiple speakers) will be in the money.

And then the invest -- the last question -- the investments that you will be making that will be mostly seen on the sales and marketing line?

That is correct, Noah. Most of it is going to be sales and marketing, though there will be some investment on the customer service and professional services as well. But the bulk of the investment is going to be in sales and marketing.

Got it. All right, thanks so much. Keep up the good work.

(Operator Instructions). At the moment I'm showing no further questions.

Okay, thank you, operator. Thanks again and we look forward to providing you an update following our Q3 financial results.

Thank you, ladies and gentlemen, for your participation in today's conference. The conference has concluded. You may now disconnect.