What changed in this filing

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Item 1. Financial Statements

2021-02-12 compared with 2020-11-12 · 102 added, 94 removed, 410 unchanged (32% of the section changed)

3 unchanged sentences

(in thousands, except par value data)

September 30,

Current assets:

1 unchanged sentence

Restricted cash

Accounts receivable, less allowance for doubtful accounts of $383 and $384 as of September 30, 2020 and June 30, 2020, respectively

Accounts receivable, less allowance for doubtful accounts of $621 and $384 as of December 31, 2020 and June 30, 2020, respectively

Costs capitalized to obtain revenue contracts, net

3 unchanged sentences

Property and equipment, net

Operating lease right-of-use assets (Note 5)

Operating lease right-of-use assets

Costs capitalized to obtain revenue contracts, net of current portion

5 unchanged sentences

Accrued liabilities

Operating lease liabilities (Note 5)

Operating lease liabilities

Deferred revenue

1 unchanged sentence

Deferred revenue, net of current portion

Operating lease liabilities, net of current portion (Note 5)

Operating lease liabilities, net of current portion

Other long-term liabilities

4 unchanged sentences

50,000 shares;

30,924 shares as of September 30, 2020 and 30,821 shares as of June 30, 2020

31,048 shares as of December 31, 2020 and 30,821 shares as of June 30, 2020

Additional paid-in capital

9 unchanged sentences

Three Months Ended

September 30,

Six Months Ended

Professional services

11 unchanged sentences

Interest income, net

Other income (expense), net

Income before income tax provision

Income tax provision

Other expense, net

Income before income tax (provision) benefit

Income tax (provision) benefit

Per share information:

6 unchanged sentences

Three Months Ended

September 30,

Six Months Ended

Other comprehensive income, net of taxes:

5 unchanged sentences

(in thousands)

Three Months Ended September 30, 2020

Three Months Ended December 31, 2020

Additional Paid-in

3 unchanged sentences

Income (Loss)

Balances as of September 30, 2020

Issuance of common stock upon exercise of stock options

Issuance of common stock in connection with employee stock purchase plan

Stock-based compensation

Foreign currency translation adjustments

Balances as of December 31, 2020

Three Months Ended December 31, 2019

Additional Paid-in

Notes Receivable From

Accumulated Other Comprehensive

Total Stockholders'

Income (Loss)

Balances as of September 30, 2019

Interest on stockholder notes

Issuance of common stock upon exercise of stock options

Issuance of common stock in connection with employee stock purchase plan

Stock-based compensation

Foreign currency translation adjustments

Balances as of December 31, 2019

See accompanying notes to condensed consolidated financial statements.

EGAIN CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (cont.)

(in thousands)

Six Months Ended December 31, 2020

Additional Paid-in

Notes Receivable From

Accumulated Other Comprehensive

Total Stockholders'

Income (Loss)

Balances as of June 30, 2020

1 unchanged sentence

Issuance of common stock upon exercise of stock options

Issuance of common stock in connection with employee stock purchase plan

Stock-based compensation

Foreign currency translation adjustments

Balances as of September 30, 2020

Three Months Ended September 30, 2019

Balances as of December 31, 2020

Six Months Ended December 31, 2019

Additional Paid-in

4 unchanged sentences

Balances as of June 30, 2019

Interest on stockholder notes

Issuance of common stock upon exercise of stock options

True up of issuance costs related to public offering

Issuance of common stock in connection with employee stock purchase plan

Issuance of common stock from public offering, net of issuance costs

Stock-based compensation

Foreign currency translation adjustments

Balances as of September 30, 2019

Balances as of December 31, 2019

See accompanying notes to condensed consolidated financial statements.

2 unchanged sentences

(in thousands)

Three Months Ended

September 30,

Six Months Ended

Cash flows from operating activities:

27 unchanged sentences

Proceeds from exercise of employee stock options

Proceeds from employee stock purchase plan

Net cash provided by financing activities

22 unchanged sentences

Basis of Presentation

The accompanying condensed consolidated balance sheet as of September 30, 2020 and the condensed consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for the three months ended September 30, 2020 and 2019, are unaudited.

The accompanying condensed consolidated balance sheet as of December 31, 2020 and the condensed consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for the three and six months ended December 31, 2020 and 2019, are unaudited.

The consolidated balance sheet as of June 30, 2020 included herein was derived from the audited financial statements as of that date.

63 unchanged sentences

Invoiced amounts are recorded in accounts receivable, deferred revenue or revenue, depending if control transferred to our customers based on each arrangement.

The Company has a royalty revenue agreement with a customer related to the Company’s embedded intellectual property.

Under the terms of the agreement, the customer is to remit a percentage of sales to the Company.

The Company has royalty revenue agreements with two partners related to the Company’s embedded intellectual property.

Under the terms of these agreements, the partners are to provide to the Company a combined fixed fee and per agent fee, for each software license sold containing the embedded software.

These embedded OEM royalties are included as subscription revenue.

Under Topic 606, since these arrangements are for sales-based licenses of intellectual property, for which the guidance in paragraph ASC 606-10-55-65 applies, the Company recognizes revenue only as the subsequent sale occurs.

However, the Company notes that such sales are reported by the customer with a quarter in arrears, such revenue is recognized at the time it is reported and paid by the customer given that any estimated variable consideration would have to be fully constrained due to the unpredictability of such estimate and the unavoidable risk that it may lead to significant revenue reversals.

Under Topic 606-10-55-65 revenue guidance (Topic 606), since these arrangements are for sales-based licenses of intellectual property, the Company recognizes revenue only as the subsequent sale occurs.

However, certain sales from one partner are reported with a quarter in arrears, such revenue is recognized at the time it is reported and paid by the customer given that any estimated variable consideration would have to be fully constrained due to the unpredictability of such estimate and the unavoidable risk that it may lead to significant revenue reversals.

Professional Services Revenue

3 unchanged sentences

Our consulting and implementation service contracts are bid either on a time-and-materials basis or on a fixed-fee basis.

Fixed fees are generally paid upon milestone billing or acceptance at pre-determined points in the

Fixed fees are generally paid upon milestone billing or acceptance at pre-determined points in the contract.

Amounts that have been invoiced are recorded in accounts receivable and in deferred revenue or revenue, depending on whether transfer of control to customers has occurred.

9 unchanged sentences

Amortization of costs to obtain revenue contracts is included as a component of sales and marketing expenses in our condensed consolidated statements of operations.

During the three months ended September 30, 2020 and 2019, we capitalized $14,000 and $300,000 of costs to obtain revenue contracts, respectively, and amortized $250,000 and $196,000 to sales and marketing expense, respectively.

Capitalized costs to obtain revenue contracts, net were $3.3 million and $3.4 million as of September 30, 2020 and June 30, 2020, respectively.

During the three and six months ended December 31, 2020, we capitalized $343,000 and $370,000 of costs to obtain revenue contracts, respectively, and amortized $305,000 and $562,000 to sales and marketing expense, respectively.

During the three and six months ended December 31, 2019, we capitalized $261,000 and $561,000 of costs to obtain revenue contracts, respectively, and amortized $207,000 and $407,000 to sales and marketing expense, respectively.

Capitalized costs to obtain revenue contracts, net were $3.4 million as of December 31, 2020 and June 30, 2020, respectively.

Deferred Revenue

Deferred revenue primarily consists of payments received or invoiced in advance of revenue recognition from cloud delivery arrangements, term licenses and embedded OEM royalties and associated support.

Deferred revenue primarily consists of payments received or invoiced in advance of revenue recognition from cloud delivery arrangements, term licenses and support associated with embedded OEM royalties.

Deferred revenue is recognized as revenue once revenue recognition criteria is met.

9 unchanged sentences

The Company operates in one operating segment and all required financial segment information can be found in the condensed consolidated financial statements.

Our sales are derived from North America and Europe, Middle East, and Africa.

However, we incur operating expenses in the North America, Europe, Middle East, Africa and Asia Pacific regions.

Revenue by geography is generally determined on the region of our contracting entity rather than the region of our customer.

Information relating to our geographic areas for the three months ended September 30, 2020 and 2019 is as follows (in thousands):

The following table presents our operating income among our three operating regions (in thousands):

Three Months Ended

September 30,

North America

Europe, Middle East, & Africa

Total revenue

Six Months Ended

Income from operations:

2 unchanged sentences

Income from operations

In addition, long-lived assets, which consist primarily of property and equipment, corresponding to our geographic areas are as follows (in thousands):

September 30,

The following table presents our long-lived assets, corresponding to our geographic areas are as follows (in thousands):

Long-lived Assets:

2 unchanged sentences

Long-lived Assets

We define long-lived assets as hard assets, that cannot be easily removed, such as property and equipment.

Concentration of Credit Risk and Significant Customers

2 unchanged sentences

Receivables are written off against the allowance when we have exhausted collection efforts without success.

Two customers, who are also our partners, accounted for 19% and 11%, respectively, of total revenue during the three months ended September 30, 2020.

Two customers, who are also partners, accounted for 19% and 10% of total revenue during the three months ended September 30, 2019, respectively.

Two customers, who are also our partners, accounted for 19% and 13%, respectively, of total revenue during the three months ended December 31, 2020 and 19% and 12%, respectively for the six months ended December 31, 2020.

The same partners, accounted for 18% and 10%, respectively, of total revenue during the three months ended December 31, 2019 and 18% and 10%, respectively, for the six months ended December 31, 2019.

Accounts Receivable and Allowance for Doubtful Accounts

8 unchanged sentences

Unbilled accounts receivables are recorded when revenue recognized on the contract exceeds billings, pursuant to contract provisions, and become billable upon certain criteria being met.

Unbilled accounts receivables, for which the Company has the unconditional right to consideration, totaled $869,000 and $1.7 million as of September 30, 2020, and June 30, 2020, respectively, and are included in the accounts receivable balance.

Unbilled accounts receivables, for which the Company has the unconditional right to consideration, totaled $1.1 million and $1.7 million as of December 31, 2020, and June 30, 2020, respectively, and are included in the accounts receivable balance.

Stock-Based Compensation

9 unchanged sentences

Three Months Ended

September 30,

Six Months Ended

Stock-Based Compensation Expense:

4 unchanged sentences

Total stock-based compensation expense

Total stock-based compensation includes expense related to non-employee awards of $51,000 and $23,000 during the three months ended September 30, 2020, and 2019, respectively.

Total stock-based compensation includes expense related to the ESPP of $102,000 and $28,000 for the three months ended September 30, 2020, and 2019, respectively.

Total stock-based compensation includes expense related to non-employee awards of an expense reversal of $17,000 and expense of $33,000 during the three and six months ended December 31, 2020, respectively.

Total stock-based compensation includes expense related to non-employee awards of $20,000 and $43,000 during the three and six months ended December 31, 2019, respectively.

Total stock-based compensation includes expense related to the ESPP of $115,000 and $217,000 for the three and six months ended December 31, 2020, respectively.

Total stock-based compensation includes expense related to the ESPP of $96,000 and $124,000 for the three and six months ended December 31, 2019, respectively.

We utilize the Black-Scholes valuation model for estimating the fair value of the stock-based compensation of options granted.

All shares of our common stock issued pursuant to our stock option plans are only issued out of an authorized reserve of shares of common stock which were previously registered with the SEC on Registration Statements on Form S-8.

During the three months ended September 30, 2020 and 2019, we granted options to purchase 41,200 and 202,100 shares of common stock with a weighted-average fair value of $6.34 and $4.31 per share, respectively.

During the three months ended December 31, 2020 and 2019, we granted options to purchase 75,375 and 46,225 shares of common stock with a weighted-average fair value of $7.69 and $4.15 per share, respectively.

During the six months ended December 31, 2020 and 2019, we granted options to purchase 116,575 and 248,325 shares of common stock with a weighted-average fair value of $7.21 and $4.28 per share, respectively.

We used the following assumptions:

Three Months Ended

September 30,

Six Months Ended

Expected volatility

6 unchanged sentences

Treasury Strips rate with maturities approximating the expected lives of the awards during the period, which approximate the rate in effect at the time of the grant.

On June 1, 2020, employees were granted the right to purchase an aggregate of 58,096 shares under the ESPP, and compensation expense related to those purchase rights for the three months ended September 30, 2020 was $102,000.

On June 1, 2019, employees were granted the right to purchase an aggregate of 69,354 shares under the ESPP, and compensation expense related to those purchase rights for the three months ended September 30, 2019 was $28,000.

As of September 30, 2020, there were 773,483 shares of common stock available for issuance under the ESPP.

On December 1, 2020, employees were granted the right to purchase an aggregate of 74,752 shares under the ESPP, and compensation expense related to those purchase rights for the three and six months ended December 31, 2020 was $48,000.

On December 1, 2019, employees were granted the right to purchase an aggregate of 69,368 shares under the ESPP, and compensation expense related to those purchase rights for the three and six months ended December 31, 2019 was $29,000.

As of December 31, 2020, there were 716,122 shares of common stock available for issuance under the ESPP.

We base our estimate of expected life of a stock option on the historical exercise behavior and cancellations of all past option grants made by the Company during the time period which its equity shares have been publicly traded, the contractual term of the option, the vesting period and the expected remaining term of the outstanding options.

1 unchanged sentence

Improvements to Employee Share-Based Accounting , we elected to continue to estimate forfeitures in the calculation of stock-based compensation expense.

As of September 30, 2020 there was approximately $1.2 million of total unrecognized compensation cost related to unvested stock options, which is expected to be recognized over the weighted-average period of 1.09 years.

There were 102,905 and 58,470 options exercised during the three months ended September 30, 2020 and 2019 , respectively.

As of December 31, 2020 there was approximately $1.3 million of total unrecognized compensation cost related to nonvested stock options, which is expected to be recognized over the weighted-average period of 1.1 years.

There were 67,149 and 31,165 options exercised during the three months ended December 31, 2020 and 2019 , respectively.

There were 170,054 and 89,635 options exercised during the six months ended December 31, 2020 and 2019, respectively.

Lease agreements are evaluated to determine whether an arrangement is or contains a lease in accordance with ASC 842, Leases .

17 unchanged sentences

Disaggregation of Revenue

The following table presents our subscription and professional services revenue during the three months ended September 30, 2020 and 2019, respectively:

The following table presents our subscription and professional services revenue during the three and six months ended December 31, 2020 and 2019, respectively:

Three Months Ended

September 30,

Six Months Ended

Legacy revenue

6 unchanged sentences

Three Months Ended

September 30,

Six Months Ended

North America

5 unchanged sentences

Once the obligations are fulfilled, then deferred revenue is recognized to revenue in the respective period.

There were no contract assets for the period ended September 30, 2020 and 2019.

There were no contract assets for the period ended December 31, 2020 and 2019.

The following table presents the changes in contract liabilities (in thousands):

Balance as of June 30, 2020

Balance as of September 30, 2020

Balance as of December 31, 2020

Contract liabilities:

1 unchanged sentence

Deferred revenue, net of current portion

With respect to deferred revenue balances as of June 30, 2020, $13.9 million was recognized to revenue during the three months ended September 30, 2020.

With respect to deferred revenue balances as of June 30, 2020, $10.6 million and $24.5 million was recognized to revenue during the three and six months ended December 31, 2020, respectively.

Remaining Performance Obligations

1 unchanged sentence

The transaction price allocated to the remaining performance obligation is influenced by a variety of factors, including seasonality, timing of renewals, average contract terms and foreign currency exchange rates.

As of September 30, 2020, our remaining performance obligations were $64.2 million, of which we expect to recognize $44.9 million and $19.3 million as revenue within one year and beyond one year, respectively.

As of December 31, 2020, our remaining performance obligations were $67.8 million of which we expect to recognize $53.5 million and $14.3 million as revenue within one year and beyond one year, respectively.

NET INCOME PER COMMON SHARE

3 unchanged sentences

Three Months Ended

September 30,

Six Months Ended

Per share information:

2 unchanged sentences

Effect of dilutive options

Weighted-average shares of stock options to purchase 232,206 and 559,134 shares of common stock for the three months ended September 30, 2020 and 2019, respectively, were not included in the computation of diluted net income per common share due to their anti-dilutive effect.

Weighted-average shares of stock options to purchase 160,077 and 631,140 shares of common stock for the three months ended December 31, 2020 and 2019, respectively, and weighted-average shares of stock options to purchase 223,235 and 593,450 shares of common stock for the six months ended December 31, 2020 and 2019, respectively, were not included in the computation of diluted net income per common share due to their anti-dilutive effect.

Such securities could have a dilutive effect in future periods.

15 unchanged sentences

The 2017 Tax Cuts and Jobs Act includes a provision to tax global intangible low-taxed income (GILTI) of foreign subsidiaries.

As of September 30, 2020, we estimate $2.7 million of GILTI income inclusion and used our net operating losses to offset our taxable income.

As of December 31, 2020, we estimate $2.6 million of GILTI income inclusion and used our net operating losses to offset our taxable income.

We lease our office facilities under non-cancelable operating leases that expire on various dates through fiscal year 2024.

3 unchanged sentences

As our leases do not provide an implicit rate, we use our incremental borrowing rate based on information available at the commencement date in determining the present value of lease payments.

Total operating lease costs were $452,000 and $441,000 for the three months ended December 31, 2020 and 2019, respectively.

Total operating lease costs were $895,000 and $879,000 for the six months ended December 31, 2020 and 2019, respectively.

Operating lease amounts above do not include sublease income.

The Company secured a sublease agreement with a third party and recognized sublease income of $154,000 for the three months ended December 31, 2020 and 2019, and $309,000 for the six months ended December 31, 2020 and 2019.

For the three and six months ended December 31, 2020, operating cash outflows for operating leases were $552,000 and $1.0 million, respectively.

For the three and six months ended December 31, 2019, operating cash outflows for operating leases were $457,000 and $907,000, respectively.

The following tables present information about leases on our consolidated balance sheet (in thousands):

Three Months Ended

September 30,

Operating lease right-of-use assets

2 unchanged sentences

The following table presents information about the weighted average lease term and discount rate as follows:

Three Months Ended

September 30,

As of December 31, 2020

As of June 30, 2020

Weighted average remaining lease term (in years)

Weighted average discount rate

The following table presents information about leases on our consolidated statement of operations (in thousands):

Three Months Ended

September 30,

Operating lease expense

Sublease income

Our short-term leases consist of leases for small office equipment.

Short-term lease expense for the three months ended September 30, 2020 and 2019 was not significant.

The following table presents supplemental cash flow information about our leases (in thousands):

Three Months Ended

September 30,

Operating cash outflows from operating leases

As of September 30, 2020, remaining maturities of lease liabilities are as follows (in thousands):

As of December 31, 2020, remaining maturities of lease liabilities are as follows (in thousands):

Fiscal Period:

Remaining nine months of fiscal 2021

Remaining six months of fiscal 2021

Total minimum lease payments

11 unchanged sentences

Generally, the maximum obligation is the amount permitted by law.

Historically, cost related to these warranties have not been significant.

Historically, costs related to these warranties have not been significant.

However, we cannot guarantee that a warranty reserve will not become necessary in the future.

21 unchanged sentences

Our money market funds are measured at fair value on a recurring basis based on quoted market prices in active markets and are classified as level 1 within the fair value hierarchy.

As of September 30, 2020 and June 30, 2020, cash equivalents classified as level 1 instruments were measured at $44.4 million and $41.8 million, respectively.

INTANGIBLE ASSETS

Intangible assets are amortized over their estimated lives, as follows (in thousands, except expected life):

Intangible Asset

Carrying Amount

Net Balance September 30, 2020

Income Statement Category

Customer relationships - maintenance contracts

Cost of revenue

Intangible Asset

Carrying Amount

Net Balance June 30, 2020

Income Statement Category

Customer relationships - maintenance contracts

Cost of revenue

Amortization expense incurred for intangible assets for the three months ended September 30, 2020 and 2019 was $26,000 and $67,000, respectively.

As of December 31, 2020 and June 30, 2020, cash equivalents classified as level 1 instruments were measured at $43.1 million and $41.8 million, respectively.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements