Daegis Inc. Reports Fiscal 2014 Second Quarter Results Company Announces Completion of Organizational Alignment Combining its Archive and eDiscovery Businesses Business Wire IRVING, Texas -- December 3, 2013 Daegis Inc. (NASDAQ: DAEG), an eDiscovery and information management company, today announced financial results for its fiscal 2014 second quarter ended October 31, 2013. Second Quarter Fiscal 2014 Financial Highlights *Second quarter total revenue of $7.7 million, compared to $10.3 million year over year. *Second quarter GAAP net loss of $210,000 or $0.01 per share, compared to GAAP net income of $252,000 or $0.01 per share for the same period last year. *Second quarter Adjusted EBITDA of $755,000, compared to $2.1 million last year. ^ (1) *Non-GAAP net income of $118,000 or $0.01 per share, compared to $1.3 million or $0.08 per share last year. *Cash at October 31, 2013 was $4.0 million, compared to $4.0 million at October 31, 2012. *Total debt outstanding at October 31, 2013 was $15.7 million, a decrease of $2.9 million from October 31, 2012. Six Months Ended Fiscal 2014 Financial Highlights *Six month total revenue of $15.7 million, compared to $20.0 million last year. *Six month GAAP net loss of $843,000 or $0.06 per share, compared to GAAP net income of $409,000 or $0.01 per share for the same period last year. *Six month Adjusted EBITDA of $1.6 million, compared to $3.2 million last year. ^ (1) *Non-GAAP net income of $155,000 or $0.01 per share, compared to Non-GAAP net income of $1.6 million or $0.09 per share last year. “We have executed on our strategy announced in January to combine our archive and eDiscovery businesses to deliver clients one approach for information governance, compliance and litigation readiness, and eDiscovery,” said Tim Bacci, CEO of Daegis Inc. “Our newly aligned business will enhance services to clients and drive new efficiencies by centralizing key operational functions in our Irving, Texas office and reducing our real estate footprint. While we had a challenging second quarter from a revenue standpoint, we believe we’ll begin to see our plans translate into growth starting in the second half of the year.” Organizational Alignment Highlights *The Company has aligned its operations by combining the archive and eDiscovery businesses. *Daegis Inc. expects to take a charge of approximately $1.2 to $1.4 million in the second half of Fiscal 2014 related to this alignment. *The alignment is expected to result in annualized savings of approximately $2.4 million. *The Company will close its San Francisco and New York offices, while maintaining its bi-coastal presence with the Roseville, Calif. and Rutherford, New Jersey offices. *Daegis Inc. will align into two core business segments: Daegis archiving and eDiscovery, and Gupta Technologies development and migration and databases. Second Quarter Comparative Financial Summary $ In Millions, except per share and Q2 Q2 % or $ % data FY 2014 FY 2013 Change ^(3) Total Revenue $7.7 $10.3 (25%) Total eDiscovery Revenue $2.7 $4.0 (34%) Total Database, Archive, and $5.1 $6.3 (20%) Migration Revenue GAAP Net Income (Loss) ($0.2) $0.3 ($0.5) GAAP Net Income (Loss) Per Share - ($0.01) $0.01 ($0.02) Diluted Adjusted EBITDA ^(1) $0.8 $2.1 ($1.3) Adjusted EBITDA Margin ^(1) 9.8% 19.8% (10.0%) Non-GAAP Net Income ^(1) $0.1 $1.3 ($1.2) Non-GAAP Net Income Per Share – $0.01 $0.08 ($0.07) Diluted ^(1) Cash from Operations ($0.5) $0.7 ($1.2) Cash ^(2) $4.0 $4.0 ($0.0) Total Debt Outstanding ^(2) $15.7 $18.6 ($2.9) ^(1) See reconciliation table below regarding the presentation of Adjusted EBITDA and Non-GAAP net income. ^(2) Results as of October 31, 2013 and 2012. ^(3) The calculation of percentage or dollar change is based on unrounded numbers. Investor Conference Call Management will host a conference call December 3, 2013, at 4:00 p.m. CT (5:00 p.m. ET) to review the second quarter financial results. The call can be accessed by dialing (877) 941-2068 or (480) 629-9712 for international callers.Additionally, the conference call will be broadcast live on the Daegis Inc. website at www.daegisinc.com. A replay of the call will be available through Dec. 13, 2013 by dialing (800) 406-7325 or (303) 590-3030 for international callers and using the following passcode: 4649830#. About Daegis Inc. Daegis Inc. (NASDAQ: DAEG) is an eDiscovery and information management company, delivering eDiscovery, archiving software, data management tools, and migration solutions. Daegis delivers leading-edge eDiscovery and archiving software throughDaegis Edge, an end-to-end platform for managing the eDiscovery life cycle,Daegis Acumen technology assisted review and AXS-One enterprise information archiving. Daegis also offers specialized services including data collection, analytics consulting, project management and managed document review. TheGupta TechnologiesandComposer Technologiesbusinesses serve customers around the globe with development tools, databases and application migration software. Visit our websites to learn more. 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. UNAUDITED CONSOLIDATED BALANCE SHEETS (In thousands) October 31, April 30, 2013 2013 ASSETS Current assets: Cash $ 4,035 $ 5,459 Accounts receivable, net 7,584 10,594 Prepaid expenses and other current assets 659 1,203 Assets held for sale — 926 Total current assets 12,278 18,182 Property and equipment, net 1,439 1,934 Goodwill 11,706 11,706 Intangibles, net 6,383 7,152 Other assets 609 733 Total assets $ 32,415 $ 39,707 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 657 $ 243 Current portion of long-term debt 1,349 2,519 Accrued compensation and related expenses 1,338 2,697 Common stock warrant liability 92 204 Other accrued liabilities 519 863 Deferred revenue 6,128 8,449 Liabilities held for sale — 526 Total current liabilities 10,083 15,501 Long-term debt, net of current portion 14,307 15,170 Deferred tax liabilities, net 938 923 Other long-term liabilities 1,220 1,429 Total liabilities 26,548 33,023 Commitments and contingencies — — Stockholders’ equity: Preferred stock — 2 Common stock 17 15 Additional paid-in capital 100,079 100,053 Accumulated other comprehensive income 280 280 Accumulated deficit (94,509 ) (93,666 ) Total stockholders’ equity 5,867 6,684 Total liabilities and stockholders’ equity $ 32,415 $ 39,707 DAEGIS INC. UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) Three Months Ended Six Months Ended October 31, October 31, 2013 2012 2013 2012 Revenues: eDiscovery $ 2,675 $ 4,043 $ 6,003 $ 8,116 Database, archive, and 5,061 6,302 9,697 11,867 migration Total revenues 7,736 10,345 15,700 19,983 Operating expenses: Direct costs of eDiscovery 1,461 2,099 3,085 4,247 revenue Direct costs of database, archive, and migration 972 1,273 1,888 2,555 revenue Product development 1,618 1,802 3,288 3,686 Selling, general and 3,719 4,269 7,497 9,309 administrative Sale of intangible trade — — — (1,000 ) name Total operating expenses 7,770 9,443 15,758 18,797 Income (loss) from (34 ) 902 (58 ) 1,186 operations Other income (expense): Gain (loss) from change in fair value of common stock 210 (188 ) 112 271 warrant liability Interest expense (311 ) (400 ) (727 ) (842 ) Other, net 34 (16 ) 3 (108 ) Total other income (67 ) (604 ) (612 ) (679 ) (expense) Income (loss) before (101 ) 298 (670 ) 507 income taxes Provision for income taxes 109 46 173 98 Net income (loss) $ (210 ) $ 252 $ (843 ) $ 409 Income (loss) per share: Basic $ (0.01 ) $ 0.01 $ (0.06 ) $ 0.01 Diluted $ (0.01 ) $ 0.01 $ (0.06 ) $ 0.01 Weighted-average shares used in computing income (loss) per share: Basic 16,384 14,718 15,841 14,718 Diluted 16,384 14,729 15,841 14,723 DAEGIS INC. RECONCILIATION OF GAAP OPERATING INCOME TO ADJUSTED EBITDA (In thousands, except per share data) Three Months Ended Six Months Ended October 31, October 31, 2013 2012 2013 2012 GAAP income (loss) from $ (34 ) $ 902 $ (58 ) $ 1,186 operations Amortization of intangible 384 384 769 769 assets Stock based compensation 39 154 92 330 expenses Depreciation 251 277 515 555 Charges related to alignment of business 115 333 249 333 units^(1) Total adjustments to GAAP 789 1,148 1,625 1,987 income from operations Adjusted EBITDA $ 755 $ 2,050 $ 1,567 $ 3,173 RECONCILIATION OF GAAP TO NON-GAAP NET INCOME (In thousands, except per share data) GAAP net income (loss) $ (210 ) $ 252 $ (843 ) $ 409 Amortization of intangible 384 384 769 769 assets Stock based compensation 39 154 92 330 expenses (Gain) loss from change in fair value of common stock (210 ) 188 (112 ) (271 ) warrant liability Charges related to alignment of business 115 333 249 333 units^(1) Total adjustments to GAAP 328 1,059 998 1,161 net income (loss) Non-GAAP net income $ 118 $ 1,311 $ 155 $ 1,570 Non-GAAP diluted income per $ 0.01 $ 0.08 $ 0.01 $ 0.09 share Weighted average shares used in computing income per share: Dilutive 16,384 14,729 15,841 14,723 (1) Prior year alignment costs have been reported to conform with the current year presentation. Use of Non-GAAP Financial Information Daegis utilizes financial measures not calculated in accordance with generally accepted accounting principles in the United States ("GAAP") to supplement the Company's unaudited condensed consolidated financial statements and provide investors with an alternative method for assessing our operating results. We also believe these Non-GAAP measures provide investors with a more informed baseline for modeling the Company's future financial performance. Management uses the Non-GAAP financial measures to make operational decisions, to evaluate the Company's performance and to forecast. We believe that our investors should have access to, and that we are obligated to provide, the same set of tools that we use in analyzing our results. 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. Our Non-GAAP measures adjust GAAP income (loss) from operations and GAAP net income (loss) for non-cash stock based compensation expenses, amortization of intangible assets, depreciation and non-recurring charges. 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. Contact: Daegis Investor Relations Deb Thornton, 916-218-4779 email@example.com
Daegis Inc. Reports Fiscal 2014 Second Quarter Results
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