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Daegis Inc. Reports Fiscal 2014 Second Quarter Results



  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 through Daegis 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. The Gupta Technologies and Composer
Technologies businesses 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
dthornton@daegis.com
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