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eGain announces financial results for the June 2002 quarter

Increase in sequential revenues and decrease in losses.

SUNNYVALE, Calif. (August 8, 2002) – eGain Communications Corporation (Nasdaq: EGAN), a leading provider of eService software for the Global 2000, today announced financial results for the fourth quarter and fiscal year ended June 30, 2002.

Revenue for the quarter was $6.3 million, an increase of approximately 7% over revenue of $5.9 million in the prior quarter. For the fiscal year ended June 30, 2002, revenue was $30.4 million compared to revenue of $53.4 million in fiscal 2001.

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 narrowed to $5.6 million, or $0.15 per share, compared to a net loss of $7.1 million, or $0.19 per share, in the prior quarter. For the fiscal year ended June 30, 2002, net loss on a pro-forma EBDA basis narrowed to $25.0 million, or $0.69 per share, compared to a net loss of $53.6 million, or $1.53 per share, in fiscal 2001. 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, including non-cash and restructuring charges, net loss for the quarter was $57.5 million, or $1.57 per share, compared to a net loss of $20.6 million, or $0.57 per share, in the prior quarter. For the fiscal year ended June 30, 2002, net loss on a GAAP basis was $166.1 million, or $4.58 per share, compared to a net loss of $127.4 million, or $3.62 per share, in fiscal 2001. Net loss for the June quarter includes a non-cash goodwill impairment charge, under the Statement of Financial Accounting Standard No. 121, of $36.8 million.

In a tough market, we have been able to modestly increase our revenue on a sequential basis,” said Ashutosh Roy, eGain’s chairman and CEO. What is encouraging is that our license revenue almost doubled over the March quarter. eGain’s proven knowledge-powered multi-channel customer service solutions deliver rapid, tangible ROI and therefore continue to be adopted by our target customers in the Global 2000, as they evaluate new investments against a very high hurdle rate.

As we have said in the past, despite the tough market we are able to continue our investment in product innovation by leveraging our global operating model, continued Mr. Roy. The results of our commitment to product innovation are beginning to show. In the June quarter, we released a new version of eGain Knowledge, our knowledge management solution for enterprise contact centers. This new version offers improved workflow authoring capability, dramatically improves scalability, and delivers unique global capabilities and enterprise security features. Over the past year, our product vision in the eService market has been recognized in the market by industry analysts, including Gartner. Moving forward, we intend to launch our version 6.0 products in the December quarter, with first revenue shipments anticipated to be in the March quarter.

In addition to our growth in licensed revenues, the company closed almost $800,000 in licensed bookings that it did not recognize, reflecting the robust market adoption of our offerings and strengthening our future revenue visibility, noted Harpreet Grewal, eGain’s chief financial officer. Continuing our record of fiscal prudence, we reduced total costs and expenses by more than 10% over the prior quarter. In a market environment where top-line visibility remains poor, eGain is unique in its ability to drive sustainable cost savings by leveraging our operating model while investing in customer satisfaction and product innovation.

“Moreover, we have undertaken steps to gain additional cost savings for the remainder of the calendar year,” continued Mr. Grewal.  “With cash reserves of approximately $10 million at the end of the June quarter, we believe the company has sufficient resources to continue to invest in the business.We remain committed to achieving our breakeven target in the December 2002 quarter.”

Increased Leverage through Partners

In the last quarter, eGain continued to develop and strengthen relationships with partners, both domestically and internationally. The company forged new partnerships with companies like CGEY, Hitachi, Logica, NSD and TSC. Additionally, the company continued to invest in and expand its relationship with leading system integrators like PWC and KPMG.

Global 2000 Customer Momentum

eGain continued to expand its customer base, adding new customers while deepening its relationships with existing customers. International operations displayed particular strength in the June quarter, representing more than 50% of total revenue. Customers during the quarter included ABN AMRO Bank, Barclays Bank, Centrica, Continental Casualty Company, DecisionOne, Halifax, Inland Revenue, Virgin Mobile and Vodafone.

Customer Satisfaction Driving Results

Over the past 12 months, the company implemented significant customer-focused initiatives and reorganized elements of the customer-facing organization to provide better responsiveness and service.

These included :

  • Cross-functional “Customer Sat” initiative reporting to the President/CEO’s office to track and improve customer responsiveness;
  • Integrating all front-end sales functions worldwide under the leadership of Arnold Adriaanse, Senior VP of Worldwide Sales and Business Development, and integrating all worldwide back-end delivery responsibilities, including product development, support, services and hosting, under Promod Narang, Senior VP of Worldwide Products;
  • Creation of a worldwide business solutions group to articulate the strategic value proposition for the eGain offering and to increase account penetration in existing enterprise customers.

As a result, customer satisfaction and responsiveness has improved significantly. Bookings from existing customers represented approximately 90% of total bookings in the June quarter – an increase from approximately 60% in prior quarters. Average selling prices increased in the quarter as customers made significantly larger purchases than in the past.

Financial Guidance

Management provides the following financial guidance.

DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA Q1: FY03September 2002 Q2: FY03December 2002
Net revenue $5.75 – $6.25 $6.75 – $7.25
Total costs & expenses (a) $8.5 – $9.0 $7.0 – $7.5
Pro forma EBDA per share (earnings before depreciation, amortization and restructuring charges) (a) (b) $0.09 – $0.06 $0.02 – $0.00

(a) Excludes depreciation, amortization, other non-cash charges and one-time restructuring charges.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 .

(b) Depreciation and amortization are non-cash charges.

About eGain Communications Corporation

eGain (Nasdaq: EGAN) is a leading provider of software and services for the Global 2000 that enable knowledge-powered multi-channel customer service. 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 knowledge management, self-service, email management,Web collaboration and productized integrations with existing call center infrastructure and business systems. Headquartered in Sunnyvale, Calif., eGain has an operating presence in 18 countries and serves over 800 enterprise customers on a worldwide basis – including ABN AMRO Bank, DaimlerChrysler, and Vodafone. 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 are trademarks or registered trademarks of their respective companies.

June Quarter Financial Data

eGain Company Contact:
Anand Subramaniam
408-212-3448
pr@eGain.com

Investor Contact:
408-212-3448
ir@eGain.com

The Financial Relations Board:
Pam Roberts
Karen Keating
415-986-1591