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eGain announces financial results for the December 2001 quarter; reports 30% growth in calendar year 2001 revenues

Revenue Growth and Dramatic Cost Reductions in Line with Targets

SUNNYVALE, Calif. (February 12, 2002) – eGain Communications Corporation (Nasdaq: EGAN), a leading provider of eService software for the Global 2000, today announced financial results for the quarter ended December 31, 2001, the second quarter of its fiscal year 2002.

Revenue for the quarter was $10.2 million, compared to revenue of $8.0 million in the prior quarter, a 27 % sequential increase. On a pro-forma (non-GAAP) EBDA basis, which reflects earnings before depreciation, amortization, and other non-cash and restructuring charges, net loss for the quarter was $448,000, or $0.01 per share, compared to a net loss of $11.9 million, or $0.33 per share, in the prior quarter. Non-cash charges include amortization of goodwill, other intangible assets and deferred compensation, as well as accreted dividends and other non-cash charges related to the company’s cumulative convertible preferred stock.

On a GAAP basis, excluding non-cash and restructuring charges (EBA), net loss for the quarter was $2.3 million, or $0.06 per share, compared to a net loss of $13.8 million, or $0.38 per share, in the prior quarter.

“We are pleased with our results and momentum. Calendar year 2001 and December quarter results are watershed periods in the evolution of the company. In January 2001, we made a commitment to focus on taking new market share from our competitors. While most in the software industry experienced negative year-over-year revenue growth during 2001, eGain outpaced the market by growing its top-line by almost 30%,” said Ashutosh Roy, eGain’s Chairman and Chief Executive Officer. “By exclusively focusing on the eService market need, we continue to win new enterprise customers, with over 60% of sales coming from new customers. Our revenue growth is the result of compelling ROI for eService investment in large enterprises, the superior value of our E3 suite and the growing momentum of our market success.”

“In addition to market share gains, we made an equally important commitment to reduce our operating expenses and drive towards profitability, on an EBDA basis, by the December 2001 quarter,” continued Mr. Roy. “Over the last four quarters, we have reduced our quarterly expense run-rate by approximately 65%, reducing our EBDA losses from over $14 million a year ago to less than $450,000 in the December 2001 quarter. These improvements in cost efficiency are all the more impressive given the company’s simultaneous top-line revenue growth for the calendar year.”

“These results reflect the advantage of eGain’s global operating model – a model that allows us to strengthen our commitment to superior customer service, product innovation and market share gains while realizing substantial benefits on the bottom line,” continued Gunjan Sinha, eGain’s President. “We have made significant progress in establishing an operating model with a cost-per-headcount that is substantially lower than most other software companies. Today we are able to operate at about half the cost basis of similarly sized software companies. This is, and will continue to be, an increasingly important competitive advantage for eGain.”

“As a company, we executed in line with the targets we established a year ago,” noted Harpreet Grewal, eGain’s Chief Financial Officer. “Our top-line grew faster than the competition, costs and expenses fell by nearly 65%, we reduced our quarterly operating losses on an EBDA basis, from $14 million to less than $450,000, and we end the December quarter with a strong balance sheet. The results of the December quarter underscore our continued commitment to execution. With a sustainable cost structure, solid cash balance and a growing pipeline, eGain has created the foundation for growth in calendar year 2002.”

Global 2000 Customer Momentum

Despite market conditions, eGain continues to expand its customer base, adding new customers while deepening its relationships with existing customers. In the December quarter, eGain’s new customers included Aegis Communications Group, an industry leader in integrated marketing services; AT&T Wireless, the largest independently traded wireless carrier in the United States; Bayer AG, one of the world’s largest health care and chemicals companies; Charter One Bank, one of the 25 largest bank holding companies in the United States; Iomega Corporation, a global leader of portable personal storage devices; Ineas, one of Europe’s leading independent international insurance companies; Siemens, one of the world’s largest diversified conglomerates;Victoria Insurance, a UK-based on-line automobile insurance company; and People Magazine, one of the nations leading weekly magazines.

Existing customers that expanded their relationships with eGain by making additional purchases included ABN AMRO, Barclays, Daimler Chrysler, Gymboree, HSBC, Inland Revenue, Staples, Thomas Cook, and Vodafone. Consistent with past quarters, approximately 60% of new applications sold in the quarter were sold to new customers with the remainder being sold to existing customers. The balanced selling between new and existing customers is an important metric that the company uses to gauge its overall strength and traction in a growing market.

The strength of eGain’s solutions continued to be validated through the recognition awarded to many of our customers for providing superior customer service. J.P.Morgan, for example, was awarded by Forbes magazine its “Best of the Web” for full service brokerage, while Cooking.com, was featured in Jupiter Media Metrix as being one of the few online retailers with prompt and effective email customer service. Adding to the award they received from Microbanker Magazine for Best in Remote Banking, eGain customer ABN AMRO was nominated as a finalist in the Aberdeen Group’s annual listing, “What Works: Top CRM Implementations of 2001.”

eGain itself won awards from Customers Interactions Solutions magazine and KM World. Customer Interactions Solutions honored the new eGain suite, eGain eService Enterprise, with its 2001 Product of the Year Award, while KM World named eGain to their “The Top 100 Companies in Knowledge Management”. In addition eGain was awarded the 2001 Frost & Sullivan Product Line Strategy Award for the company that “demonstrated the most insight into customer needs and product demands.”

Expanding Relationships with Outsource Providers and System Integrators

In the December quarter, eGain experienced strong traction with partners and outsourcers, further demonstrating the trend of Web-enabling call centers. eGain entered into partnerships with multiple outsourcers over the quarter, including Aegis, Experian, Decision One, Connextions and Spherion.

In addition to new outsourcer partnerships, eGain signed partnerships with several new regional and specialized systems integrators (SIs). These new SI partners include Braun, a global CRM strategy and implementation firm, as well as Aheeva, a Canadian based system integrator with particular strength in the self-service channel. eGain also continued to deepen its existing alliances. Most notably the company completed the integration of eGain Mail Global with Aspect Communication’s contact server solution. Revenues from partner activities, either direct or indirect, represented approximately 25% of revenue for the quarter.

Financial Guidance

“Calendar year 2001 and December quarter results represent important milestones,” said Mr. Grewal. “Looking ahead, we intend to build further on these gains, while acknowledging the continued difficult market environment. We look to drive greater levels of profitability through continued market share gains and on-going efficiency improvements. In addition, we anticipate generating cash by the June 2002 quarter and do not expect our cash balances to fall below approximately $17 million for the remainder of fiscal year 2002.”

eGain offers the following guidance for the March 2002 quarter, the third quarter of eGain’s fiscal year 2002.

DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA Q3: FY02March 2002
Net revenue $10.5 – $11.0
Gross margin (a) 60% – 65%
Pro forma EPS EBA (earnings before amortization expense) (a) (b) $0.04 – $0.05
Depreciation expense (b) $1.5 – $1.6
Pro forma EPS EBDA (earnings before depreciation and amortization expense) (a) (b) $0.01 – $0.00
Cash balance $17.0 – $19.0

(a) Excludes the impact of restructuring charges of approximately $400,000.
(b) Depreciation and amortization are non-cash charges.

About eGain Communications Corporation

eGain (Nasdaq: EGAN) is a leading provider of eService software. Selected by 24 of the 50 largest global companies to transform their traditional call centers into multi-channel contact centers, eGain solutions measurably improve operational efficiency and customer retention – thus delivering a significant return on investment (ROI). eGain eService Enterprise – the company’s integrated software suite – includes applications for email management, Web collaboration and self-service, and enterprise-wide knowledge management. Headquartered in Sunnyvale, Calif., eGain has an operating presence in 18 countries and serves close to 800 enterprise customers on a worldwide basis – including Vodafone, DaimlerChrysler, and ABN AMRO Bank. To find out how eGain can help you gain customers and sustain relationships, please visit http://www.eGain.com or call the company’s offices – United States: (888) 603-4246; London: +44 (0) 1753 464646; or Sydney: +612 9492 5400.

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Cautionary Note Regarding Forward-looking Statements: All statements in this release that involve eGain’s plans, forecasts, beliefs, projections, expectations, strategies and intentions 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 release, 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 in this release. These risks include, but are not limited to, the challenging economic environment; the uncertainty of demand for eGain products; the anticipated customer benefits from eGain products; increased competition and technological changes in the markets in which eGain competes; eGain’s ability to manage its expenditures; 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 28, 2001, and the company’s quarterly reports on Form 10-Q. eGain 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 Communications Corp. All other company names and products may be trademarks or registered trademarks of their respective companies.

December Quarter Financial Data

eGain Media Contact:

eGain Communications Corp.
Anne Carr
(408) 331-7721
acarr@eGain.com

Investor Contact: 

408-212-3448
ir@eGain.com

The Financial Relations Board:

Pam Roberts
Karen Keating
415-986-1591