Daegis (DAEG) 8-K Daegis Reports Fiscal 2013 Second Quarter Financial Results

FOR IMMEDIATE RELEASE

For more information, contact:
Deb Thornton
Daegis
(916) 218-4779
dthornton@daegis.com

Daegis Reports Fiscal 2013 Second Quarter Financial Results

• GAAP Net Income of $252,000
• Cash Flow from Operations of $687,000
• Released Acumen Predictive Coding Solution

ROSEVILLE, Calif. – November 29, 2012 – Daegis Inc. (NASDAQ: DAEG), an eDiscovery and information management company, today announced financial results for its fiscal 2013 second quarter ended October 31, 2012.

Second quarter total revenue was $10.3 million, compared to $11.1 million in the second quarter last year. Electronic discovery revenue was $4.0 million, compared to $5.5 million in the comparable quarter last year. Total revenue for the database, archive and migration business segment was $6.3 million, compared to $5.5 million in the second quarter of fiscal 2012. Adjusted EBITDA was $1.7 million or 17% of revenue, compared to $2.3 million or 21% of revenue, in the comparable quarter last year (see reconciliation table below regarding the presentation of Adjusted EBITDA and Non-GAAP net income).

Second quarter GAAP net income was $252,000 or $0.01 per share, compared to net income of $795,000 or $0.05 per share in the second quarter of fiscal 2012. Non-GAAP net income was $978,000 or $0.07 per share, compared to $1.4 million or $0.10 per share in the same quarter last year (see reconciliation table). The Company generated cash from operations of $687,000 during the second quarter, compared to $2.1 million during the second quarter last year.

Cash and cash equivalents at October 31, 2012 were $4.0 million, compared to $4.8 million reported at April 30, 2012. Total outstanding debt at October 31, 2012 was $18.6 million, a decrease of $2.7 million, compared to $21.3 million at April 30, 2012.

For the six-month period of fiscal 2013, total revenue was $20.0 million, compared to $22.6 million for the same period of the prior year. GAAP net income was $409,000 or $0.01 per share, compared to GAAP net loss of $983,000 or $0.08 loss per share last year. Non-GAAP net income was $1.2 million or $0.08 per share, compared to $2.2 million or $0.14 per share for the first six months of last year. Adjusted EBITDA was $2.8 million, compared to $4.1 million in the same period last year. Cash generated from operations was $1.3 million, compared to $3.1 million in the comparable period last year.

Commenting on results, Chief Executive Officer Todd Wille said, “During the first two quarters of the fiscal year, we rebuilt the eDiscovery executive team, significantly enhanced our cloud-based eDiscovery Platform, and added experienced sales professionals. We delivered a major new release of the Daegis eDiscovery Platform with enhanced self-service usability and our innovative technology assisted review solution known as Acumen. In addition, we right sized our cost structure to deliver profitability as we implement our plans to grow. We are extremely focused on execution and expect to see improved results in the second half of the year. In our database, archive and migration business segment, we saw stronger than anticipated performance with 14% growth quarter over quarter and 13% sequentially. We launched a major release of our AXS-One archive product, achieved significant archive and migration wins, and continued our trend of strong maintenance renewals.”

Investor Conference CallManagement will host a conference call today, November 29, 2012, at 2:00 p.m. PT (5:00 p.m. ET) to review the second quarter 2013 financial results. The call can be accessed by dialing (877) 941-1427 or (480) 629-9664 for international callers and providing the company name. Participants are asked to call the assigned number approximately 10 minutes before the conference call begins. In addition, the conference call will be available over the Internet atwww.daegis.com. A replay of the call will be available approximately two hours following the end of the call through 11:59 p.m. ET on December 9, 2012 by dialing (800) 406-7325 or (303) 590-3030 for international callers and using the following passcode: 4576354#.

About Daegis Inc.
Daegis delivers eDiscovery and information management solutions. Daegis’ eDiscovery Platform combines technology and on-demand services to deliver end-to-end and cost-effective solutions for corporations and law firms. The Company’s information management business delivers solutions for developing, managing, modernizing, and archiving applications and business data. For additional information, visitwww.daegis.com.

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 and the Company’s Adjusted EBITDA, including how these measures are calculated, please see the tables in this release captioned "Reconciliation of GAAP to Non-GAAP Net Income" which includes a reconciliation of the GAAP results to Non-GAAP results as well as “Reconciliation of GAAP Operating Income to Adjusted EBITDA.”

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. Wille. 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. The Company undertakes no obligation to update or revise the information in this press release, whether as a result of new information, future events, circumstances or otherwise.

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DAEGIS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)

	Three Months Ended						Six Months Ended
	October 31,						October 31,
	2012			2011			2012			2011
Revenues:
eDiscovery	$	4,043		$	5,529		$	8,116		$	11,555
Database, archive, and migration		6,302			5,546			11,867			11,034
Total revenues		10,345			11,075			19,983			22,589
Operating Expenses:
Direct costs of eDiscovery revenue		2,222			2,234			4,377			4,632
Direct costs of database, archive, and migration revenue		1,273			1,352			2,555			2,700
Product development		1,802			1,863			3,686			3,838
Selling, general and administrative		4,146			4,428			9,179			9,376
Gain on sale of intangible assets		—			—			(1,000	)		—
Total operating expenses		9,443			9,877			18,797			20,546
Income from operations		902			1,198			1,186			2,043
Other income (expense):
Loss on extinguishment of debt		—			—			—			(2,166	)
Gain (loss) from change in fair value of common stock                warrant liability		(188	)		158			271			602
Interest expense		(400	)		(469	)		(842	)		(1,369	)
Other, net		(16	)		(24	)		(108	)		26
Total other income (expense)		(604	)		(335	)		(679	)		(2,907	)
Income (loss) before income taxes		298			863			507			(864	)
Provision for income taxes		46			68			98			119
Net income (loss)	$	252		$	795		$	409		$	(983	)
Income (loss) per share:
Basic	$	0.01		$	0.05		$	0.01		$	(0.08	)
Diluted	$	0.01		$	0.05		$	0.01		$	(0.08	)
Weighted-average shares used in computing income (loss) per share
Basic		14,718			14,657			14,718			14,629
Diluted		14,729			14,809			14,723			14,629

DAEGIS INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)

	October 31,			April 30,
	2012			2012
ASSETS
Current assets:
Cash and cash equivalents	$	4,037		$	4,752
Accounts receivable, net		8,956			10,968
Prepaid expenses and other current assets		1,327			1,805
Total current assets		14,320			17,525
Property and equipment, net		2,438			2,827
Goodwill		11,706			11,706
Intangibles, net		7,921			8,690
Other assets, net		1,010			1,121
Total assets	$	37,395		$	41,869
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	398		$	450
Current portion of long term debt		1,190			2,945
Accrued compensation and related expenses		2,032			2,465
Common stock warrant liability		298			569
Other accrued liabilities		999			819
Deferred revenue		6,602			8,412
Total current liabilities		11,519			15,660
Long term debt, net of current portion		17,364			18,306
Deferred tax liabilities		841			734
Other long term liabilities		1,165			1,148
Total liabilities		30,889			35,848
Commitments and contingencies		—			—
Stockholders’ equity:
Preferred Stock		2			2
Common stock		15			15
Additional paid-in capital		99,989			99,860
Accumulated other comprehensive income		289			341
Accumulated deficit		(93,789	)		(94,197	)
Total stockholders’ equity		6,506			6,021
Total liabilities and stockholders’ equity	$	37,395		$	41,869

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,
	2012		2011			2012			2011
GAAP income from operations	$	902	$	1,198		$	1,186		$	2,043
Amortization of intangible assets		384		558			769			1,123
Stock based compensation expenses		154		245			330			473
Depreciation		277		279			555			509
Total adjustments to GAAP income from operations		815		1,082			1,654			2,105
Adjusted EBITDA	$	1,717	$	2,280		$	2,840		$	4,148
RECONCILIATION OF GAAP TO NON-GAAP NET INCOME (In thousands, except per share data)
GAAP net income (loss)	$	252	$	795		$	409		$	(983	)
Amortization of intangible assets and warrant discount		384		558			769			1,166
Stock based compensation expenses		154		245			330			473
Gain from change in fair value of common stock warrant liability		188		(158	)		(271	)		(602	)
Loss on extinguishment of debt		—		—			—			2,166
Total adjustments to GAAP net loss		726		645			828			3,203
Non-GAAP net income	$	978	$	1,440		$	1,237		$	2,220
Non-GAAP diluted earnings per share	$	0.07	$	0.10		$	0.08		$	0.14
Weighted average shares used in computing earnings per share:
Diluted		14,729		14,809			14,723			15,933