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Daegis Inc. Reports Fiscal 2013 Third Quarter Financial Results



  Daegis Inc. Reports Fiscal 2013 Third Quarter Financial Results

  * Adjusted EBITDA of $1.2 million
  * Cash flow from operations of $771,000
  * Unveiled New Platform Brand: Daegis Edge

Business Wire

ROSEVILLE, Calif. -- March 7, 2013

Daegis (NASDAQ:DAEG), an eDiscovery and information management company, today
announced financial results for its fiscal 2013 third quarter, ended January
31, 2013.

Third quarter total revenue was $10.4 million, compared to $11.1 million in
the third quarter of fiscal 2012. Electronic discovery revenue was $4.1
million, compared to $4.2 million in the comparable period last year. Revenue
for the Company’s database, archive and migration business segment was $6.4
million, compared to $6.9 million in the comparable quarter last year.

Operating income for the third quarter was $367,000, compared to $604,000 in
the third quarter of fiscal 2012. Adjusted EBITDA was $1.2 million, or 11% of
revenue, compared to $1.6 million, or 15% of revenue, in the comparable
quarter last year (see reconciliation table below regarding the presentation
of Adjusted EBITDA and Non-GAAP net income).

Third quarter GAAP net loss was $65,000 or $0.01 loss per share, compared to
GAAP net income of $53,000, or $0.00 per share, in the third quarter of fiscal
2012. Non-GAAP net income was $449,000, or $0.03 per share, compared to
Non-GAAP net income of $757,000, or $0.05 per share, in the third quarter last
year (see reconciliation table). The Company generated cash from operations of
$771,000 during the third quarter.

Cash and cash equivalents at January 31, 2013 were $4.4 million, compared to
$4.8 million reported at April 30, 2012. Total outstanding debt at January 31,
2013 was $18.2 million, compared to $21.3 million at April 30, 2012.

Commenting on results, Interim Chief Executive Officer Tim Bacci said, “As a
result of optimizing the eDiscovery business coupled with a focus on
developing leading-edge technology, we’re now positioned to meet or exceed our
growth expectations. We’re seeing increased sales traction in our eDiscovery
business with new client wins and an expanding sales pipeline. We unveiled a
new brand for our eDiscovery platform, now known as Daegis Edge, and we
delivered new functionality including integrated iterative search and
analytics, access through mobile devices and support for big data
environments. Our AXS-One archive business had an exceptionally strong quarter
with new client and product wins and our latest product release has been
well-received by customers. We executed consistent performance in the Gupta
database and tools business, delivering a new version of our database and
holding successful developer conferences. We are now focused on execution and
are excited about the future potential of the business.”

Fiscal 2013 Nine-Months Financial Results

Total revenue for the first nine months of fiscal 2013 was $30.4 million,
compared to $33.7 million for the same period of the prior year. GAAP net
income for the first nine months was $344,000 or $0.00 per share, compared to
a net loss of $931,000 or $0.08 loss per share in the nine-month period last
year. Non-GAAP net income was $1.7 million, or $0.10 per share, compared to
$3.0 million, or $0.18 per share for the first nine months of last year.
Adjusted EBITDA for the first nine months was $4.0 million, compared to $5.8
million in the first nine months of fiscal 2012. For the nine-month period,
the Company generated cash from operations of $2.0 million.

Investor Conference Call

Management will host a conference call today, March 7, 2013, at 2:00 p.m. PT
(5:00 p.m. ET) to review the third quarter 2013 financial results. The call
can be accessed by dialing (877) 941-1427 or (480) 629-9664 for international
callers. Additionally, the conference call will be broadcast live on Daegis’
website at www.daegis.com. A replay of the call will be available through
March 17, 2013 by dialing (800) 406-7325 or (303) 590-3030 for international
callers and using the following passcode: 4595350#.

About Daegis Inc.

Daegis Inc. (NASDAQ: DAEG) is an eDiscovery and information management
company, delivering eDiscovery, archiving software, data management tools, and
migration solutions through its four businesses. The Daegis eDiscovery
division delivers market-leading eDiscovery software through Daegis Edge, an
end-to-end platform to manage the entire litigation lifecycle, and Acumen, our
revolutionary predictive coding software. Our AXS-One archiving software helps
corporations to preserve and manage electronic information for legal discovery
and regulatory compliance. Our Gupta Technologies and Composer
Technologies businesses serve customers around the globe with development
tools, databases and application migration software. The Composer
Solutions business helps state government agencies to modernize legacy
applications through our automated migration solutions. Visit our websites to
learn more.

Use of Non-GAAP Financial Information

To supplement the Company's unaudited condensed consolidated financial
statements presented in accordance with GAAP, Daegis uses certain Non-GAAP
measures of financial performance. The presentation of these Non-GAAP
financial measures is not intended to be considered in isolation from, as a
substitute for, or superior to, the financial information prepared and
presented in accordance with GAAP, and may be different from Non-GAAP
financial measures used by other companies. In addition, these Non-GAAP
measures have limitations in that they do not reflect all of the amounts
associated with the Company's results of operations as determined in
accordance with GAAP. For more information on these Non-GAAP financial
measures including how they are calculated, please see the tables in this
release captioned "Reconciliation of GAAP to Non-GAAP Net Income" and
“Reconciliation of GAAP Operating Income to Adjusted EBITDA” which includes a
reconciliation of the GAAP results to Non-GAAP and Adjusted EBITDA results.

Some of the information in this press release may contain projections or other
forward-looking statements regarding future events or the future financial
performance of the Company. We wish to caution you that these statements
involve risks and uncertainties and actual events or results may differ
materially. When the words “believes,” “expects,” “plans,” “projects,”
“estimates” and similar expressions are used, they identify forward-looking
statements. These forward-looking statements are based on management’s current
beliefs and assumptions and information currently available to management and
involve known and unknown risks, uncertainties and other factors which may
cause the actual results, performance or achievements of the Company to be
materially different from any future results, performance or achievements
expressed or implied by these forward-looking statements. Examples of
forward-looking statements in the press release include the statements made by
Mr. Bacci. Among the important factors which could cause actual results to
differ materially from those in the forward-looking statements are general
market and economic conditions, our ability to execute our business strategy
and integrate acquired businesses, the effectiveness of our sales team and
approach, our ability to target, analyze and forecast the revenue to be
derived from a client and the costs associated with providing services to that
client, the date during the course of a fiscal year that a new client is
acquired, the length of the integration cycle for new clients and the timing
of revenues and costs associated therewith, our client concentration given
that the Company is currently dependent on a few large client relationships,
potential competition in the marketplace, the ability to retain and attract
employees, market acceptance of our service programs and pricing options, our
ability to maintain our existing technology platform and to deploy new
technology, our ability to sign new clients and control expenses, the
possibility of the discontinuation of some client relationships, the financial
condition of our clients' business and other factors detailed in the Company's
filings with the Securities and Exchange Commission.

DAEGIS INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
                                                          
                                             January 31,   April 30,
                                               2013          2012     
ASSETS
Current assets:
Cash and cash equivalents                    $ 4,436       $ 4,752
Accounts receivable, net                       9,623         10,968
Prepaid expenses and other current assets      1,079         1,805    
Total current assets                           15,138        17,525
                                                            
Property and equipment, net                    2,122         2,827
Goodwill                                       11,706        11,706
Intangibles, net                               7,536         8,690
Other assets, net                              960           1,121    
Total assets                                 $ 37,462      $ 41,869   
                                                            
LIABILITIES AND STOCKHOLDERS' EQUITY
                                                            
Current liabilities:
Accounts payable                             $ 553         $ 450
Current portion of long term debt              1,120         2,945
Accrued compensation and related expenses      2,397         2,465
Common stock warrant liability                 266           569
Other accrued liabilities                      1,215         819
Deferred revenue                               6,392         8,412    
Total current liabilities                      11,943        15,660
                                                            
Long term debt, net of current portion         17,094        18,306
Deferred tax liabilities                       835           734
Other long term liabilities                    1,079         1,148    
Total liabilities                              30,951        35,848   
                                                            
Commitments and contingencies                  —             —
                                                            
Stockholders’ equity:
Preferred stock                                2             2
Common stock                                   15            15
Additional paid-in capital                     100,050       99,860
Accumulated other comprehensive income         299           341
Accumulated deficit                            (93,855 )     (94,197 )
Total stockholders’ equity                     6,511         6,021    
Total liabilities and stockholders’ equity   $ 37,462      $ 41,869   

                                                                   
DAEGIS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
                                                                     
                           Three Months Ended          Nine Months Ended
                           January 31,                 January 31,
                             2013         2012           2013         2012    
                                                                     
Revenues:
eDiscovery                 $ 4,090      $ 4,159        $ 12,206     $ 15,714
Database, archive, and       6,350        6,910          18,217       17,944  
migration
Total revenues               10,440       11,069         30,423       33,658  
                                                                     
Operating Expenses:
Direct costs of              1,680        2,491          6,056        7,123
eDiscovery revenue
Direct costs of
database, archive, and       1,395        1,255          3,950        3,955
migration revenue
Product development          1,725        1,830          5,411        5,669
Selling, general and         5,273        4,889          14,453       14,264
administrative
Gain on sale of              —            —              (1,000 )     —       
intangible assets
Total operating expenses     10,073       10,465         28,870       31,011  
Income from operations       367          604            1,553        2,647   
                                                                     
Other income (expense):
Loss on extinguishment       —            —              —            (2,166 )
of debt
Gain from change in fair
value of common stock        31           34             303          636
warrant liability
Interest expense             (407   )     (462   )       (1,249 )     (1,832 )
Other, net                   19           (93    )       (90    )     (66    )
Total other income           (357   )     (521   )       (1,036 )     (3,428 )
(expense)
                                                                     
Income (loss) before         10           83             517          (781   )
income taxes
Provision for income         75           30             173          150     
taxes
Net income (loss)          $ (65    )   $ 53           $ 344        $ (931   )
                                                                     
Income (loss) per share:
Basic                      $ (0.01  )   $ 0.00         $ 0.00       $ (0.08  )
Diluted                    $ (0.01  )   $ 0.00         $ 0.00       $ (0.08  )
                                                                     
Weighted-average shares
used in computing income
(loss) per share:
Basic                        14,718       14,713         14,718       14,657
Diluted                      14,718       14,713         14,726       14,657

                                                                   
DAEGIS INC.
RECONCILIATION OF GAAP OPERATING INCOME TO ADJUSTED EBITDA
(In thousands, except per share data)
                                                                     
                           Three Months Ended          Nine Months Ended
                           January 31,                 January 31,
                             2013         2012           2013         2012    
                                                                     
                                                                     
GAAP income from           $ 367        $ 604          $ 1,553      $ 2,647
operations
                                                                     
Amortization of              384          508            1,153        1,632
intangible assets
Stock based compensation     161          230            492          704
expenses
Depreciation                 287          287            842          796     
Total adjustments to
GAAP income from             832          1,025          2,487        3,132   
operations
                                                                     
Adjusted EBITDA            $ 1,199      $ 1,629        $ 4,040      $ 5,779   
                                                                     
                                                                     
RECONCILIATION OF GAAP
TO NON-GAAP NET INCOME
(In thousands, except
per share data)
                                                                     
GAAP net income (loss)     $ (65    )   $ 53           $ 344        $ (931   )
                                                                     
Amortization of
intangible assets and        384          508            1,153        1,675
warrant discount
Stock based compensation     161          230            492          704
expenses
Gain from change in fair
value of common stock        (31    )     (34    )       (303   )     (636   )
warrant liability
Loss on extinguishment       —            —              —            2,166   
of debt
Total adjustments to         514          704            1,342        3,909   
GAAP net loss
                                                                     
Non-GAAP net income        $ 449        $ 757          $ 1,686      $ 2,978   
                                                                     
Non-GAAP diluted           $ 0.03       $ 0.05         $ 0.10       $ 0.18    
earnings per share
                                                                     
Weighted average shares
used in computing
earnings per share:
Diluted                      16,399       16,448         16,393       16,109

Contact:

Daegis
Deb Thornton, 916-218-4779
dthornton@daegis.com
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