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eGain announces financial results for the March 2002 quarter

Financial Guidance for Calendar 2002 Reflects Continued Investment

SUNNYVALE, Calif. (April 18, 2002) – eGain Communications Corporation (NASDAQ: EGAN), a leading provider of eService software for the Global 2000, today announced financial results for the quarter ended March 31, 2002, the third quarter of its fiscal year 2002.

Revenue for the quarter was $5.9 million, compared to revenue of $10.2 million in the prior quarter. 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 $7.1 million, or $0.19 per share, compared to a net loss of $448,000, or $0.01 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, including non-cash and restructuring charges, net loss for the quarter was $20.6 million, or $0.57 per share, compared to a net loss of $14.2 million, or $0.39 per share, in the prior quarter.

“Our March quarter results were disappointing,” said Ashutosh Roy, eGain’s chief executive officer. “Like many enterprise software companies we were surprised by the continued economic uncertainty and cautious decision making in the marketplace, resulting in deal slippage. Looking ahead, however, we remain confident in the eService market opportunity. Our strategy to capitalize on this opportunity remains consistent — our commitment to product innovation, extending our recognized market leadership, our unique global operating model, and our dedication to customer satisfaction, will drive long-term shareholder value.”

“eGain remains financially sound and able to weather a difficult economy because of our record of prudent spending and cash management,” noted Harpreet Grewal, eGain’s chief financial officer. “With cash reserves of approximately $16 million at the end of the March quarter, we believe the company has sufficient resources to continue to invest in the business while achieving breakeven by the December quarter of calendar year 2002. We therefore do not envision the need to raise additional capital. Leveraging our global operating model, we will continue to manage costs without sacrificing our commitments to customer service or product innovation. We are committed to rewarding our stakeholders by restoring our record of consistent financial execution.”

eGain and the eService Market Opportunity

The fundamentals of the eService market and eGain’s relative position within that market remain strong. Morgan Stanley’s April 2002 CIO Survey notes that “connecting with customers over the Internet” is one of the top three technology priorities this year for large enterprises. Also, Gartner Group, in their March 2002 eService Magic Quadrant, predicts that the eService market will grow five-fold by 2004. Relative to other market participants, eGain was ranked by Gartner as one of the three visionary companies in the eService market.

To further capitalize on this market opportunity, the company continues to invest in the customer-facing elements of the organization. Over the past three months, eGain has announced four key executive appointments in worldwide sales, marketing, business development and professional services. Together, this new team brings to the company more than 75 years of combined experience in enterprise selling and partnerships, providing eGain with one of the most seasoned teams for go-to-market strategy execution in the eService industry.

“We have attracted a world-class leadership team,” said Gunjan Sinha, eGain’s president. “The eGain brand is increasingly becoming synonymous with eService for the Global 2000. We believe that our strengthened management team will extend eGain’s leadership and deliver predictable business success.”

Global 2000 Customer Momentum Continues

Despite market conditions, eGain continues to expand its customer base, adding new customers while deepening its relationships with existing customers. In the March quarter, eGain’s new customers included Digital Federal Credit Union, ranked among the top 25 credit unions nationwide; Hokkaido Bank, one of Japan’s largest banks with approximately $28 billion in assets; Irish Ferries (a division of Irish Continental Group), operating Ireland’s largest ferry service between Ireland and Britain; Janus, a large mutual fund company with approximately $170 billion in assets under management; and Spectrum Contact Services, a global provider of contact and support services outsourcing. Existing customers that expanded their relationships with eGain by making additional purchases included ABN AMRO Bank, Daimler Chrysler, Freedom Furniture Group, HSBC, Northern Rock, NTL Ireland, and Siemens. 

Advancing eGain’s Product and Technology Lead

eGain’s delivery of innovative products was especially strong in the March quarter, with the launch of new and expanded versions of eGain Live, eGain Assistant, and internationalized products. eGain Assistant 5.0 speeds content development for creating virtual agents, enabling companies to create up to 1,000 knowledge cases per day — and thus deploy a virtual agent and achieve ROI much more rapidly. eGain Live Web 5.0 provides a comprehensive solution for any type of real-time Web-collaboration, including advanced multi-chat, true proxy-based co-browsing, application sharing, remote diagnostics and repair, and online meetings. With the Gartner Group predicting that by 2003, 40% of all eService deployments will include Web-collaboration functionality, eGain Live Web 5.0 is well positioned to gain early mover advantage in this dynamic segment of the eService market. eGain also continues to reinforce its leadership in supporting global languages. In the March quarter, the company introduced the German version of eGain Live, and the Japanese version of eGain Assistant. Hokkaido Bank of Japan became the first company in Japan to offer a virtual agent through its deployment of eGain Assistant.

Financial Guidance 

Though the software market continues to experience weakness and elongated sales cycles, eGain forecasts that revenues will stabilize and increase on a sequential basis over the course of the calendar year. In light of the current market environment, coupled with the company’s commitment to continue investing prudently to meet the eService needs of the Global 2000, eGain expects to achieve breakeven, on an earnings before depreciation and amortization basis, in the December quarter of calendar year 2002.

Management provides the following financial guidance for the remainder of the calendar year.

DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA Q4: FY02

June 2002

 Q1: FY03

 September 2002

Q2: FY03

December 2002

Net revenue $7.5 – $8.5 $7.5 – $8.5 $9.5 – $10.5
Gross margin (a) 55% – 60% 55% – 60% 60% – 65%
Total costs & expenses (b) $9.8 – $10.2 $9.8 – $10.2 $9.8 – $10.2
Pro forma EBDA per share (earnings before depreciation, amortization   and restructuring charges) (a) (c)  

$0.11 – $0.08

 

$0.11 – $0.08

 

$0.06 – $0.03

Depreciation expense (c) $1.5 $1.5 $1.5
Pro forma EBDA per share (earnings before depreciation, amortization   and restructuring charges) (b) (c) $0.07 – $0.04 $0.07 – $0.04 $0.00

 (a) Excludes amortization and one-time restructuring charges. 

(b) 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. 

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

 

About eGain Communications Corporation

eGain (Nasdaq: EGAN) is a leading provider of eService software for the Global 2000. 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 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 may be trademarks or registered trademarks of their respective companies. 

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March Quarter Financial Data

eGain Company Contact:

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

The Financial Relations Board:

Pam Roberts
Karen Keating
415-986-1591

Investor Contact:

408-212-3448
ir@eGain.com