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Item 7. Management’s Discussion and Analysis

2025-09-12 compared with 2024-09-12 · 80 added, 114 removed, 245 unchanged (44% of the section changed)

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These risks and uncertainties may cause actual results to differ materially from those discussed in the forward-looking statements.

eGain automates customer engagement with an AI knowledge hub SaaS solution.

We sell to enterprises who want to better serve customers at scale by delivering trusted answers across self-service, contact centers, and field staff.

True to our mantra of AX + BX + CX = DX™, our AI knowledge hub orchestrates effortless Digital eXperience (DX) as it assists Agent eXperience (AX), empowers Business eXperience (BX) and assures Customer eXperience (CX).

Many global brands use eGain to improve experience and reduce costs.

We are headquartered in the Sunnyvale, California, United States.

eGain automates customer experience with an AI knowledge hub solution.

We sell our SaaS solution to enterprises who want to improve customer experience while reducing cost, by using AI to synthesize and deliver trusted, consumable answers from a knowledge hub.

We are headquartered in Sunnyvale, California, USA.

We also operate in the United Kingdom and India.

We have transitioned from a hybrid model, where we sold both SaaS and perpetual license solutions, to a SaaS only business model.

As we migrated our legacy perpetual license clients to SaaS, we expect our legacy revenue, primarily comprising annual maintenance and support fees for legacy perpetual license clients to continue to decline to a non-significant amount in our SaaS business.

We believe our go-forward SaaS business model affords us recurring revenue visibility and more predictability.

Historical fiscal years affirmed our view that SaaS clients adopt our product innovation much faster than the perpetual license model and get better service levels.

We believe SaaS clients enjoy up to 50% faster time to value from their eGain investment.

Key Financial Measures

We monitor the key financial performance measures set forth below as well as cash and cash equivalents and available debt capacity, which are discussed in Liquidity and Capital Resources, to help us evaluate trends, establish budgets, measure the effectiveness of our sales and marketing efforts and assess operational effectiveness and efficiencies.

With our transition to a SaaS only business model, we believe SaaS revenue better reflects our business momentum and to analyze progress and thus, we disaggregate our subscription revenue growth between:

● SaaS revenue, which is defined as revenue from cloud delivery arrangements, term licenses and embedded original equipment manufacturer (OEM) royalties and associated support;

● Legacy revenue, which is defined as revenue, maintenance and support contracts on perpetual license arrangements that we no longer sell.

The following table presents a break out of subscription revenue between SaaS and legacy revenues for each of the following periods:

Fiscal Year Ended June 30

(in thousands, except percentages)

Legacy revenue

Total subscription revenue

SaaS and Professional Services Revenue

As we have shifted to a SaaS only business model, substantially all of professional services revenue is now generated from our SaaS customer base.

We believe the combination of SaaS and professional services revenue is a useful measure to value our business on a forward-looking basis.

The following table presents total SaaS and professional services revenue for each of the following periods:

We believe total revenue is a useful measure to value our business.

SaaS revenue is defined as revenue from cloud delivery arrangements, term licenses, embedded OEM royalties and associated support.

Professional services revenue includes system implementation, consulting, training, and managed services.

The following table presents total revenue for each of the following periods:

Fiscal Year Ended June 30

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Professional services

Total SaaS and professional services revenue

Total revenue

Non-GAAP Operating Income

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Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses our consolidated financial statements, which have been prepared in accordance with GAAP in the United States.

The preparation of these

financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.

The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.

We believe that the assumptions and estimates associated with revenue recognition, stock-based compensation, provision for credit losses, the valuation of goodwill, the valuation of deferred tax allowance, and legal contingencies have the greatest potential impact on our consolidated financial statements.

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Sources of Revenues

Our revenue is comprised of two categories, subscription and professional services.

Subscription includes SaaS revenue and legacy revenue.

SaaS revenue includes revenue from cloud delivery arrangements, term licenses and embedded OEM royalties and associated support.

Legacy revenue is associated with license, maintenance and support contracts on perpetual license arrangements that we no longer sell.

Our revenue is comprised of two categories including SaaS and professional services.

SaaS revenue includes cloud delivery arrangements, term licenses, embedded OEM royalties, and associated support.

An immaterial amount of SaaS revenue is comprised of our legacy revenue which is associated with license, maintenance, and support contracts on perpetual license arrangements that we no longer sell.

Professional services include consulting, implementation, training, and managed services.

Subscription Revenue

For our cloud delivery arrangements, our maintenance and support arrangements and our term license subscriptions that incorporate substantial cloud functionality, the combined performance obligation is recognized ratably over the contract term as the obligation is delivered.

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We have a royalty revenue agreement with a customer related to our embedded intellectual property.

Under the terms of the agreement, the customer is to provide a combined fixed fee, per agent, for each software license sold containing the embedded software to us.

These embedded OEM royalties are included as subscription revenue.

Under revenue guidance, since these arrangements are for usage-based licenses of intellectual property, we estimate revenue recognized only as the performance obligation of the OEM royalties has been satisfied or partially satisfied.

Under the terms of the agreement, the customer is to provide a combined fixed fee, per agent, for each software license sold containing the

embedded software to us.

These embedded OEM royalties are included as SaaS revenue.

Under revenue guidance, since these arrangements are for sales-based licenses of intellectual property, we recognize revenue only as the subsequent sale occurs.

However, since 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.

Any estimated variable consideration would have to be fully constrained due to the unpredictability of such estimates and the risk of significant revenue reversals.

Professional Services Revenue

Professional services revenue includes system implementation, consulting, training, and managed services.

The transaction price is allocated to various performance obligations based on their standalone selling prices (SSP).

The transaction price is allocated to various performance obligations based on their SSP.

Revenue allocated to each performance obligation is recognized as work is performed.

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Remaining Performance Obligations

recognized as revenue, as well as unbilled amounts that will be invoiced and recognized as revenue in future periods.

Remaining performance obligations represent contracted revenue that have not yet been recognized, and include billed deferred revenue, consisting of amounts invoiced to customers whether collected or uncollected which have not been recognized as revenue, as well as unbilled amounts that will be invoiced and recognized as revenue in future periods.

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 June 30, 2025, our remaining performance obligations were $91.6 million, of which we expect to recognize $63.0 million and $28.6 million as revenue within one year and beyond one year, respectively.

Under Topic 606, we expect our remaining performance obligations to change quarterly for several reasons including the timing of new contracts and renewals, duration and size of our subscription and support arrangements, variable billing cycles and foreign exchange rate fluctuation.

We expect our remaining performance obligations to change quarterly for several reasons including the timing of new contracts and renewals, duration and size of our subscription and support arrangements, variable billing cycles and foreign exchange rate fluctuation.

We typically issue renewal invoices in advance of the renewal service period.

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Costs Capitalized to Obtain Revenue Contracts

We capitalize incremental costs to obtain non-cancelable subscription and maintenance and support revenue contracts with amortization periods that may extend longer than the non-cancelable subscription and maintenance and support revenue contract terms.

Under Topic 606, we capitalize incremental costs to obtain non-cancelable subscription and maintenance and support revenue contracts with amortization periods that may extend longer than the non-cancelable subscription and maintenance and support revenue contract terms.

We capitalize incremental costs of obtaining a non-cancelable subscription and maintenance and support revenue contract with amortization periods of one year or more.

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If we make different judgments or utilize different estimates, then material differences may result in additional reserves for trade receivables, which would be reflected by charges in general and administrative expenses for any period presented.

We write-off a receivable after all collection efforts have been exhausted and the amount is deemed uncollectible.

We write-off receivables after all collection efforts have been exhausted and the amounts are deemed uncollectible.

As described in Note 1 of Notes to Consolidated Financial Statements included in Item 8 Financial Statements and Supplementary Data of this Annual Report, certain Company contracts have contractual billings which do not coincide with revenue recognized on the contract.

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Tax Legislation

Under the Tax Cuts and Jobs Act, enacted on December 22, 2017 (TCJA), federal Net Operating Losses (NOLs) incurred in 2018 and in future years may be carried forward indefinitely, but generally may not be carried back, and the deductibility of such NOLs is limited to 80% of taxable income.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), P.L.

116-136, was passed into law, amending portions of certain relevant US tax laws.

The CARES Act included a number of federal income tax law changes, including, but not limited to:

(i) permitting net operating loss carrybacks to offset 100% of taxable income for taxable years beginning before 2021, (ii) accelerating alternative minimum tax credit refunds, (iii) temporarily increasing the allowable business interest deduction from 30% to 50% of adjusted taxable income, and (iv) providing a technical correction for depreciation related to qualified improvement property.

The CARES Act had no impact on our consolidated financial statements.

Beginning in 2022, the TCJA eliminates the option to immediately deduct research and development expenditures and requires taxpayers to capitalize and amortize domestic expenditures over five years and foreign expenditures over 15 years.

While the mandatory capitalization requirement increases our deferred tax assets and cash tax liabilities for 2022, the tax year in which the provision took effect, the impact will decline annually over the five-year amortization period to an immaterial amount in year six.

On August 16, 2022, the Inflation Reduction Act of 2022 (IRA) was signed into law and is effective for taxable years beginning after December 31, 2022.

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167 by allowing taxpayers subject to the limit to elect to later receive a refund of credits they would have otherwise used to reduce tax liabilities during the limitation period.

On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was enacted in the U.S.

The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions.

This new legislation has multiple effective dates, with certain provisions becoming effective in 2025 and others implemented through 2027.

We are currently assessing the impact of OBBBA on our consolidated financial statements.

Fiscal Year 2025 Compared with Fiscal Year 2024

Our effective tax rate for both fiscal years 2024 and 2023 was a tax provision of $1.9 million and $1.2 million, respectively.

The change in our effective tax rate for fiscal year 2024 as compared to fiscal year 2023 was primarily due to the change in valuation allowance, foreign rate differential, Section 267, stock-based compensation and the research and development tax credits.

The income before income tax provision between the U.S.

Our effective tax rate for both fiscal years 2025 and 2024 was a tax benefit of $26.6 million and a tax provision of $1.9 million, respectively.

The change in our effective tax rate for fiscal year 2025 as compared to fiscal year 2024 was primarily due to the decrease in valuation allowance, foreign rate differential, Section 267, stock-based compensation and the research and development tax credits.

The income before income tax benefit (provision) between the U.S.

and foreign countries impacted our effective tax rate as a result of the geographic distribution and customer demand related to our products and services.

In fiscal year 2025, our U.S.

foreign income before our income tax provision was an income of $6.2 million and $3.5 million, respectively.

and foreign income before our income tax benefit was an income of $3.6 million and $2.0 million, respectively.

In fiscal year 2024, our U.S.

and foreign income before our income tax was loss of $460,000 and income of $3.8 million, respectively.

and foreign income before our income tax was an income of $6.2 million and $3.5 million, respectively.

Deferred Tax Valuation Allowance

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We make significant judgments to determine our provision for income taxes, our deferred tax assets and liabilities and any valuation allowance to be recorded against our net deferred tax assets.

As of June 30, 2024, we had a valuation allowance of approximately $35.6 million of which approximately $13.8 million was attributable to U.S.

and state net operating losses and domestic research and development credit carryforwards.

In the year ended June 30, 2025, we concluded that the valuation allowance related to the U.S.

federal and state (excluding certain California tax attributes) deferred tax assets was no longer required due to the assessment of our recent income/loss and forecast future taxable income.

As of June 30, 2025, we had a valuation allowance of approximately $5.5 million attributable to California net operating losses and research and development credit carryforwards.

We apply ASC 740, Income Taxes , in determining any uncertain tax positions.

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subsidiaries to be indefinitely invested outside the United States, on the basis of estimates, that future domestic cash generation will be sufficient to meet future domestic cash needs and our specific plans for reinvestments of those subsidiary earnings.

We have not recorded a deferred tax liability related to state income taxes and foreign withholding taxes on approximately $26.2 million of undistributed earnings of foreign subsidiaries indefinitely invested outside the United States.

We have not recorded a deferred tax liability related to state income taxes and foreign withholding taxes of approximately $28.2 million of undistributed earnings of foreign subsidiaries indefinitely invested outside the United States.

If we decide to repatriate the foreign earnings, we would need to adjust our income tax provision in the period we determined that the earnings will no longer be indefinitely invested outside the United States.

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Cost of revenue:

Cost of subscription

Cost of professional services

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We classify our revenue into two categories;

subscription and professional services revenue.

We further break down subscription revenue into SaaS revenue and legacy revenue, with SaaS revenue being a key metric.

The following table presents our subscription and professional services revenue during the fiscal years indicated:

SaaS and professional services revenue.

The following table presents our SaaS and professional services revenue during the fiscal years indicated:

Fiscal Year Ended June 30,

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Total Revenue

Total revenue decreased $5.2 million during the fiscal year ended June 30, 2024, from the same period in fiscal year 2023, largely due to decreased SaaS revenue of $4.7 million and our legacy revenue of $500,000;

partially offset by an increase in professional services revenue of $34,000 in fiscal year 2024.

Total revenue decreased $4.4 million during the fiscal year ended June 30, 2025, from the same period in fiscal year 2024, largely due to decreased SaaS revenue of $3.2 million and decreased professional services revenue of $1.2 million in fiscal year 2025.

Our revenue was impacted by foreign exchange rate fluctuation between the U.S.

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We recalculate our current period results using the comparable prior period exchange rates to exclude the impact of foreign exchange rate fluctuation.

Foreign exchange rate fluctuation resulted in an increase of $1.0 million and $2.4 million in total revenue during the fiscal years ended June 30, 2024 and 2023, respectively.

Subscription Revenue

Foreign exchange rate fluctuation resulted in an increase of $546,000 and $1.0 million in total revenue during the fiscal years ended June 30, 2025 and 2024, respectively.

Fiscal Year Ended June 30,

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SaaS revenue was $81.9 million and $85.1 million during the fiscal years ended June 30, 2025 and 2024, respectively, which represented a decrease of 4% or $3.2 million.

SaaS revenue represents 91% of total revenue for the fiscal years ended June 30, 2024 and 2023.

SaaS revenue represents 93% and 92% of total revenue for the fiscal years ended June 30, 2025 and 2024, respectively.

Excluding an increase of $510,000 due to foreign exchange rate fluctuation, SaaS revenue decreased by $3.7 million during the fiscal year ended June 30, 2025, from the same period in fiscal year 2024.

Legacy Revenue

Fiscal Year Ended June 30,

(in thousands, except percentages)

Legacy revenue

Percentage of total revenue

Legacy revenue is associated with license, maintenance and support contracts on perpetual license arrangements that we no longer sell.

We experienced a decrease of $497,000 for the fiscal year ended June 30, 2024.

This decrease was primarily due to our focus on migrating our legacy customers to SaaS.

Legacy revenue was $208,000 and $705,000 during the fiscal years ended June 30, 2024 and 2023, respectively, which represented a decrease of 70% or $497,000.

Legacy revenue represents 0% and 1% of total revenue for the fiscal years ended June 30, 2024 and 2023, respectively.

Excluding an increase of $14,000 due to foreign exchange rate fluctuation, legacy revenue decreased by $511,000 during the fiscal year ended June 30, 2024, from the same period in fiscal year 2023.

Professional Services Revenue

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Professional services revenue includes consulting, implementation, training, and managed services.

Revenues from professional services increased by $34,000 and remained flat at $7.7 million during the fiscal year ended June 30, 2024.

Professional services revenue represents 8% of total revenue for the fiscal years ended June 30, 2024 and 2023.

Excluding an increase of $62,000 due to foreign exchange rate fluctuation, professional services revenues decreased by $28,000 during the fiscal year ended June 30, 2024, from the same period in fiscal year 2023.

Revenues from professional services decreased by $1.2 million during the fiscal year ended June 30, 2025, from the same period in fiscal year 2024.

Professional services revenue was $6.5 million and $7.7 million during the fiscal years ended June 30, 2025 and 2024, respectively, which represented a decrease of 16% or $1.2 million.

Professional services revenue represents 7% and 8% of total revenue for the fiscal years ended June 30, 2025 and 2024, respectively.

Excluding an increase of $36,000 due to foreign exchange rate fluctuation, professional services revenues decreased by $1.2 million during the fiscal year ended June 30, 2025, from the same period in fiscal year 2024.

Revenue by Geography

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Total revenue

Revenue from North America sales decreased by 5% from $76.4 million during the fiscal year ended June 30, 2023 to $72.6 million during the fiscal year ended June 30, 2024 due to decreases of (i) $3.6 million in SaaS revenue and (ii) $392,000 in legacy revenue;

partially offset by the increase of $224,000 in professional service revenue.

Revenue from EMEA sales decreased by 7% from $21.6 million during the fiscal year ended June 30, 2023 to $20.2 million during the fiscal year ended June 30, 2024 due to decreases of (i) $1.1 million in SaaS revenue, (ii) $190,000 in professional services revenue, and (iii) $106,000 in legacy revenue.

Revenue from North America sales decreased by 5% from $72.6 million during the fiscal year ended June 30, 2024 to $68.8 million during the fiscal year ended June 30, 2025 due to decreases of (i) $2.6 million in SaaS revenue and (ii) $1.2 million in professional service revenue.

Revenue from EMEA sales decreased by 3% from $20.2 million during the fiscal year ended June 30, 2024 to $19.7 million during the fiscal year ended June 30, 2025 due to a decrease of $570,000 in SaaS revenue;

partially offset by an increase of $32,000 in professional services revenue.

Cost of Revenue

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Percentage of total revenue

Cost of subscription revenues consist primarily of expenses related to our cloud services and support provided to customers.

Cost of SaaS revenues consist primarily of expenses related to our cloud services and support provided to customers.

These expenses are comprised of cloud computing costs, personnel-related costs directly associated with cloud operations, and customer support, including salaries, benefits, bonuses and stock-based compensation and allocated overhead.

Cost of subscription revenues increased by $837,000 or 4% during the fiscal year ended June 30, 2024 from the same period in fiscal year 2023.

The increase is primarily due to an increase in personnel related costs of $1.3 million;

partially offset by a decrease in (i) outside consulting cost of $390,000 and (ii) cloud computing cost of $158,000 during the fiscal year ended June 30, 2024, from the same period in fiscal year 2023.

Excluding an increase of $45,000 due to foreign exchange rate fluctuation, cost of subscription revenues increased by $793,000 during the fiscal year ended June 30, 2024, from the same period in fiscal year 2023.

Cost of SaaS revenues decreased by $1.5 million or 8% during the fiscal year ended June 30, 2025 from the same period in fiscal year 2024.

The decrease is primarily due to decreases in (i) personnel related costs of $1.5 million and (ii) outside consulting cost of $258,000;

partially offset by an increase in cloud computing cost of $279,000 during the fiscal year ended June 30, 2025, from the same period in fiscal year 2024.

Foreign exchange rate fluctuation had an immaterial impact on cost of SaaS revenues when comparing fiscal year ended June 30, 2025 and 2024.

Professional Services

Cost of professional services consists primarily of personnel-related costs directly associated with our professional services and training departments, including salaries, benefits, bonuses, and stock-based compensation and allocated overhead.

Cost of professional services decreased by $560,000 or 6% during the fiscal year ended June 30, 2024 from the same period in fiscal year 2023.

This decrease is due to a decrease in personnel-related costs of $560,000 from the same period in fiscal year 2023.

Excluding an increase of $74,000 due to foreign exchange rate fluctuation, cost of professional services revenue decreased by $634,000 for the fiscal year ended June 30, 2024, from the same period in fiscal year 2023.

Cost of professional services increased by $370,000 or 5% during the fiscal year ended June 30, 2025 from the same period in fiscal year 2024.

This increase is due to increases in (i) personnel-related costs of $339,000 and (ii) outside consulting cost of $13,000 from the same period in fiscal year 2024.

Excluding an increase of $17,000 due to foreign exchange rate fluctuation, cost of professional services revenue increased by $353,000 for the fiscal year ended June 30, 2025, from the same period in fiscal year 2024.

Operating Expenses

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Research and development expense primarily consists of personnel-related expenses directly associated with our engineering, product management and development, and quality assurance staff.

Included in these costs are salaries, benefits, bonuses, stock-based compensation and allocated overhead.

Included in these costs are salaries,

benefits, bonuses, stock-based compensation and allocated overhead.

Research and development expense also includes outside consulting services contracted for research and development.

Research and development expense decreased by $674,000 or 2% during the fiscal year ended June 30, 2024, from the same period in fiscal year 2023.

The decrease is primarily due to decreases in (i) $470,000 in personnel-related costs and (ii) $268,000 in outside consulting costs.

Excluding an increase of $64,000 due to foreign exchange rate fluctuation, research and development expense decreased by $738,000 for the fiscal year ended June 30, 2024, from the same period in fiscal year 2023.

Research and development expense increased by $3.0 million or 11% during the fiscal year ended June 30, 2025, from the same period in fiscal year 2024.

The increase is primarily due to increases in (i) $2.8 million in personnel-related costs and (ii) $197,000 in outside consulting costs.

Excluding a decrease of $5,000 due to foreign exchange rate fluctuation, research and development expense increased by $3.0 million for the fiscal year ended June 30, 2025, from the same period in fiscal year 2024.

Sales and Marketing

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Sales and marketing expenses also include amortization of commissions paid to our sales staff, lead generation activities, advertising, trade show and other promotional costs and, to a lesser extent, occupancy costs and related overhead.

Sales and marketing expenses decreased by $9.6 million or 30% during the fiscal year ended June 30, 2024 from same period in fiscal year 2023.

The decrease is primarily due to a decrease of (i) $8.4 million in personnel-related costs and (ii) $1.2 million in marketing program costs.

Sales and marketing expenses decreased by $2.8 million or 12% during the fiscal year ended June 30, 2025 from the same period in fiscal year 2024.

The decrease is primarily due to a decrease of $3.4 million in personnel-related costs;

partially offset by increases of (i) $273,000 in lead generation costs and (ii) $145,000 in outside consulting costs.

Excluding an increase of $205,000 due to foreign exchange rate fluctuation, sales and marketing expense decreased $3.0 million for the fiscal year ended June 30, 2025, from the same period in fiscal year 2024.

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General and administrative expenses also include fees for professional services, provision for credit losses and, to a lesser extent, occupancy costs and related overhead.

General and administrative expense increased by $199,000 or 2% during the fiscal year ended June 30, 2024, from the same period in fiscal year 2023.

The increase is primarily due to an increase in (i) $829,000 in legal expenses and (ii) $154,000 in accounting, audit, and administrative expenses;

partially offset by decreases of (i) $526,000 in personnel-related expenses, (ii) $175,000 in bad debt expense, (iii) $150,000 in outside consulting cost and (iv) $2,000 in investor relations expense.

Excluding an increase of $68,000 due to foreign exchange rate fluctuation, general and administrative expense increased $131,000 for the fiscal year ended June 30, 2024, from the same period in fiscal year 2023.

General and administrative expense decreased by $1.9 million or 18% during the fiscal year ended June 30, 2025, from the same period in fiscal year 2024.

The decrease is primarily due to decreases in (i) $992,000 in legal expenses, (ii) $608,000 in personnel-related expenses, (iii) $296,000 in accounting, audit, and administrative expenses, and (iv) $28,000 in credit loss expenses.

Excluding an increase of $39,000 due to foreign exchange rate fluctuation, general and administrative expense increased $1.9 million for the fiscal year ended June 30, 2025, from the same period in fiscal year 2024.

Stock-Based Compensation

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The fair value of stock options granted is recognized as an expense over their respectable vesting schedule.

The decrease in our stock-based compensation expense in fiscal year 2024 compared to fiscal year 2023 was primarily due to decreases in stock option vesting over their respectable periods, company-wide headcount, and option grant activity.

The decrease in our stock-based compensation expense in fiscal year 2025 compared to fiscal year 2024 was primarily due to decreases in stock option vesting over their respectable periods, company-wide headcount, and equity grant activity.

We expect to review our share-based payment awards annually, as necessary.

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During the fiscal year ended June 30, 2025, SaaS revenue decreased by $3.2 million to $81.9 million compared to $85.1 million in fiscal year 2024.

The decrease in total costs and operating expenses in fiscal year ended June 30, 2024 was $10.1 million primarily due to decreases of (i) $8.6 million in personnel-related expenses, (ii) $1.2 million in outside consulting costs, (iii) $1.2 million in marketing costs, (iv) $175,000 in bad debt expenses, (v) $158,000 in cloud computing costs , and (vi) $2,000 in investor relations cost;

partially offset with increases in (i) $829,000 in legal expense and (ii) $154,000 in accounting and administrative services expenses.

Excluding a decrease from foreign exchange fluctuation of $627,000, total costs and operating expenses decreased by $10.4 million for the fiscal year ended June 30, 2024, from the same period in fiscal year 2023.

The decrease in total costs and operating expenses in fiscal year ended June 30, 2025 was $2.8 million primarily due to decreases of (i) $2.4 million in personnel-related expenses, (ii) $992,000 in legal expenses, (iii) $199,000 in outside consulting costs, and (iv) $28,000 in credit loss expenses;

partially offset by increases in (i) $279,000 in cloud computing costs and (ii) $273,000 in lead generation costs.

Excluding an increase from foreign exchange fluctuation of $257,000, total costs and operating expenses decreased by $3.1 million for the fiscal year ended June 30, 2025, from the same period in fiscal year 2024.

Interest Income

Interest income consists primarily of interest earned on money market accounts, which have increased in rates compared to prior year.

Interest income consists primarily of interest earned on money market accounts, which have decreased in rates compared to prior year.

Interest income, was income of $2.5 million and $3.8 million for the fiscal years ended June 30, 2025 and 2024, respectively.

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Other expense, net primarily included foreign exchange rate fluctuations on international trade receivables.

Other expense, net was $51,000 and $434,000 for the fiscal years ended June 30, 2024 and 2023, respectively.

Income Tax Provision

Provision for income taxes consists of federal, state and foreign income taxes.

Due to the current economic state of the U.S.

economy, expiring tax attributes and uncertainty of future profitability, we maintain a valuation allowance against U.S.

Other expense, net was $1.3 million and $51,000 for the fiscal years ended June 30, 2025 and 2024, respectively.

Income Tax Benefit (Provision)

Provision for income taxes consists of federal, state and foreign income taxes and the release of a substantial portion of our valuation allowance against U.S.

deferred tax assets as of June 30, 2025.

We consider all available evidence, both positive and negative, including but not limited to earnings history, expiring attributes, projected future outcomes, industry and market trends and the nature of each of the deferred tax assets.

We recorded an income tax provision of $1.9 million and $1.2 million in the fiscal years ended June 30, 2024 and 2023, respectively.

We recorded an income tax benefit of $26.6 million and provision of $1.9 million in the fiscal years ended June 30, 2025 and 2024, respectively.

New Accounting Pronouncements

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Cash provided by operating activities mainly consists of net income adjusted for non-cash expense items such as depreciation and amortization, expense associated with stock-based awards, the timing of employee related costs including costs capitalized to obtain revenue contracts, amortization of right-of-use assets, and changes in operating assets and liabilities during the year.

Cash provided by operating activities increased by $7.8 million during the fiscal year ended June 30, 2024, driven primarily by the increase in net income and timing of accounts receivable collections and accrued compensation payments.

Net cash used in investing activities decreased by $90,000 during the fiscal year ended June 30, 2024, driven primarily by reduced activities related to the purchase of equipment for new employees and facility expenditures.

Cash provided by operating activities decreased by $7.2 million during the fiscal year ended June 30, 2025, driven primarily by the decreases in deferred income taxes related to our valuation release, stock-based compensation, and accrued liabilities mainly offset by the increase in net income.

Net cash used in investing activities increased by $367,000 during the fiscal year ended June 30, 2025, driven primarily by increased activities related to the purchase of equipment for employees and facility expenditures.

Historically, cash used in investing activities has been used to purchase equipment and software to support our business and growth.

Net cash used in financing activities increased by $11.3 million during the fiscal year ended June 30, 2024.

The changes consist primarily of proceeds from the exercise of employee stock options, our employee stock purchase plan, and funds used with repurchases of our common stock of approximately $11.5 million.

Net cash used in financing activities decreased by $1.0 million during the fiscal year ended June 30, 2025.

The changes consist primarily of proceeds from the exercise of employee stock options, our employee stock purchase plan, and a decrease of funds used with repurchases of our common stock of approximately $1.5 million.

Our principal commitments consist of obligations under leases for office space.

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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-K

Item 7. Management’s Discussion and Analysis