eGain Announces Financial Results for the Third Fiscal Quarter Ended March 31, 2008

Market Wire, May, 2008

Quarter Highlights

--  Total revenue up 64% from the comparable year-ago quarter and up 9%
    sequentially from last quarter
--  License revenue up 273% from the comparable year-ago quarter
--  Hosting revenue up 50% from the comparable year-ago quarter
--  Net income of $542,000 compared to a net loss of $2.2 million in the
    same quarter a year ago
    

eGain Communications Corporation (OTCBB: EGAN), a leading provider of customer service and contact center software, today announced financial results for the third fiscal quarter ended March 31, 2008.

Total revenue for the third quarter of fiscal year 2008 was $8.8 million, an increase of 64% from the comparable year-ago quarter. License revenue was $2.2 million, an increase of 273% from the comparable year-ago quarter. Support and services revenue was $6.6 million, an increase of 37% from the comparable year-ago quarter.

Gross margin for the third quarter of fiscal year 2008 was 65% compared to 56% in the comparable year-ago quarter. Total operating costs and expenses for the third quarter of fiscal year 2008 were $5.0 million, an increase of 2% from the comparable year-ago quarter.

Net income on a GAAP basis for the third quarter of fiscal year 2008 was $542,000, or $0.04 basic net income per share or $0.03 diluted net income per share, compared to a net loss on a GAAP basis of $2.2 million, or $(0.14) per share, for the comparable year-ago quarter. Net income for the quarter included stock-based compensation of $114,000 and interest and tax expense of $421,000, compared to stock-based compensation expense of $68,000 and interest and tax expense of $297,000 for the comparable year-ago quarter.

Total cash and cash equivalents were $4.0 million on March 31, 2008, compared to $5.0 million on December 31, 2007. The decrease in cash was primarily due to a $910,000 reduction in bank borrowings in the quarter. The company was cash flow break-even from operations for the quarter. Days sales outstanding in receivables for the quarter ended March 31, 2008 were 30 days compared to 28 days for the comparable year-ago quarter. Deferred revenues totaled $5.2 million at March 31, 2008, up from $5.0 million at March 31, 2007.

New hosting and license bookings(1) for the third quarter of fiscal year 2008 were $2.0 million, an increase of 71% from the comparable year-ago quarter. Of the total new hosting and license bookings in the quarter, 42% was from new hosting contracts and 58% was from new license contracts, compared to 44% new hosting and 56% new license bookings in the same quarter a year ago.

"We are very pleased with our year-to-date financial performance," said Ashu Roy, eGain CEO. "This was a record quarter for us on a number of fronts. We recorded the highest quarterly net income in the company's history. In addition, revenue for first three quarters of fiscal 2008 exceeded total revenue for fiscal 2007; this means that revenue for fiscal 2008 will be at the highest level since fiscal 2001. Based upon this momentum we are updating our fiscal 2008 revenue guidance for the second time this fiscal year."

Updated Guidance for Fiscal Year 2008

--  The company currently expects new hosting and license bookings for
    fiscal  year 2008 to be in the range of $12.0 million to $14.0 million,
    compared to the previously announced guidance of $13.0 million to $15.0
    million.
--  The company currently expects total revenue for fiscal year 2008 to be
    in the range of $30.0 million to $32.5 million, compared to the previously
    announced guidance of $27.2 million to $31.0 million.
--  The company currently expects support and services revenue for fiscal
    year 2008 to be in the range of $23.0 million to $24.0 million compared to
    the previously announced guidance of $22.0 million to $23.0 million.
--  The company currently expects license revenue for fiscal year 2008 to
    be in the range of $7.0 million to $9.0 million, compared to the previously
    announced guidance of $5.2 million to $9.0 million.
    

(1) New Hosting and License Bookings is a non-GAAP measure we define as new contractual commitments (excluding renewals) received by the company 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. Furthermore, because we offer a hybrid delivery model, the mix of new license and hosting business in a quarter could also have an impact on our revenue in a particular quarter. Due to effects that these trends have on our short-term revenue and profitability, we believe that, in addition to the information contained in the GAAP presentation of financial information, it is useful to disclose New Hosting and License Bookings detail in this and future financial releases. We internally use this metric to focus management on the productivity of the sales team and period-to-period changes in our core business. Therefore, we believe that this information is meaningful and helpful in allowing individuals to better assess the ongoing nature of our core operations. The presentation of this additional non-GAAP financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP.