What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2026-05-14 compared with 2026-02-03 · 76 added, 73 removed, 260 unchanged (36% of the section changed)

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● Changes in domestic and foreign trade policies, including the imposition of tariffs and retaliatory tariffs, and other factors beyond our control may adversely impact our business, financial condition, and results of operations.

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.

● Geopolitical instability, including the risk of military conflict involving Iran and broader escalation in the Middle East, could adversely affect our business, financial condition, and results of operations.

eGain powers AI-driven knowledge management for the enterprise.

We sell our SaaS platform to enterprises that want to deliver trusted, consumable answers to customers, employees, and AI agents — aiming to reduce cost and improve outcomes across every knowledge-intensive workflow.

Our platform centralizes enterprise knowledge and puts it to work across customer service, employee support, and AI-powered automation.

We are headquartered in Sunnyvale, California, USA.

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Critical Accounting Policies and Estimates

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.

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

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.

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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 December 31, 2025, our remaining performance obligations were $84.9 million, of which we expect to recognize $53.0 million and $31.9 million as revenue within one year and beyond one year, respectively.

As of March 31, 2026, our remaining performance obligations were $74.1 million, of which we expect to recognize $48.5 million and $25.6 million as revenue within one year and beyond one year, respectively.

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.

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Professional services

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Income from operations

The following table presents our total revenue during the three and six months ended December 31, 2025 and 2024, respectively:

The following table presents our total revenue during the three and nine months ended March 31, 2026 and 2025, respectively:

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Total revenue

Total revenue for the three months ended December 31, 2025 increased by $590,000, compared to the same period in fiscal year 2025, due to an increase of SaaS revenue by $952,000, partially offset by a decrease of $362,000 in professional services revenue.

Total revenue for the six months ended December 31, 2025 increased by $2.3 million, compared to the same period in fiscal year 2025, due to an increase of SaaS revenue by $3.0 million, partially offset by a decrease of $733,000 in professional services revenue.

Total revenue for the three months ended March 31, 2026 increased by $1.5 million, compared to the same period in fiscal year 2025, due to an increase of SaaS revenue by $1.4 million and an increase of professional services revenue by $136,000.

Total revenue for the nine months ended March 31, 2026 increased by $3.8 million, compared to the same period in fiscal year 2025, due to an increase of SaaS revenue by $4.4 million, partially offset by a decrease of $597,000 in professional services revenue.

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 $202,000 and $151,000 in total revenue during the three months ended December 31, 2025 and 2024, respectively.

Foreign exchange rate fluctuation resulted in an increase of $395,000 and an increase of $298,000 for the six months ended December 31, 2025 and 2024, respectively.

Foreign exchange rate fluctuation resulted in an increase of $318,000 and a decrease of $33,000 in total revenue during the three months ended March 31, 2026 and 2025, respectively.

Foreign exchange rate fluctuation resulted in an increase of $717,000 and $271,000 for the nine months ended March 31, 2026 and 2025, respectively.

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

Revenue from SaaS increased by $952,000 and $3.0 million during the three and six months ended December 31, 2025, respectively, compared to the same periods in fiscal year 2025.

This represented an increase in SaaS revenue of 5% and 7% for the three and six months ended December 31, 2025, respectively, compared to the same periods in fiscal year 2025.

SaaS revenue represents 95% and 94% of total revenue for the three and six months ended December 31, 2025, respectively, compared to 93% and 92% for the same periods in fiscal year 2025.

Excluding an increase of $190,000 and an increase of $372,000 due to foreign exchange rate fluctuation, SaaS revenue increased by $762,000 and $2.7 million during the three and six months ended December 31, 2025, respectively, compared to the same periods in fiscal year 2025.

Revenue from SaaS increased by $1.4 million and $4.4 million during the three and nine months ended March 31, 2026, respectively, compared to the same periods in fiscal year 2025.

This represented an increase in SaaS revenue of 7% for each of the three and nine months ended March 31, 2026, compared to the same periods in fiscal year 2025.

SaaS revenue represents 93% and 94% of total revenue for the three and nine months ended March 31, 2026, respectively, compared to 93% and 92% for the same periods in fiscal year 2025.

Excluding an increase of $306,000 and $678,000 due to foreign exchange rate fluctuation, SaaS revenue increased by $1.0 million and $3.7 million during the three and nine months ended March 31, 2026, respectively, compared to the same periods in fiscal year 2025.

We expect SaaS revenue to continue to grow as we expand our customer base and usage of existing customers, reflecting continued demand for our SaaS offering.

Professional Services Revenue

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

Revenue from professional services decreased by $362,000 and $733,000 during the three and six months ended December 31, 2025, respectively, compared to the same periods in fiscal year 2025.

We expect professional revenue to vary dependent on the volume and timing of recognition.

Excluding an increase of $12,000 and an increase of $23,000 due to foreign exchange rate fluctuation, professional services revenue decreased by $374,000 and $756,000 during the three and six months ended December 31, 2025, respectively, compared to the same periods in fiscal year 2025.

Revenue from professional services increased by $136,000 and decreased by $597,000 during the three and nine months ended March 31, 2026, respectively, compared to the same periods in fiscal year 2025.

Excluding an increase of $12,000 and $38,000 due to foreign exchange rate fluctuation, professional services revenue increased by $124,000 and decreased by $635,000 during the three and nine months ended March 31, 2026, respectively, compared to the same periods in fiscal year 2025.

We expect professional services revenue to vary dependent on the volume and timing of recognition.

Revenue by Geography

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Total revenue

Revenue from North America sales increased by 6% from $17.3 million during the three months ended December 31, 2024 to $18.4 million during the three months ended December 31, 2025, due to an increase of $1.3 million in SaaS revenue, partially offset by a decrease of $285,000 in professional services revenue.

Revenue from North America sales increased by 11% from $33.8 million during the six months ended December 31, 2024 to $37.3 million during the six months ended December 31, 2025, due to an increase of $4.0 million in SaaS revenue, partially offset by a decrease of $451,000 in professional services revenue.

Revenue from EMEA sales decreased by 9% from $5.1 million for the three months ended December 31, 2024 to $4.6 million during the three months ended December 31, 2025, due to decreases of (i) $356,000 in SaaS revenue and (ii) $75,000 in professional services revenue.

Revenue from EMEA sales decreased by 12% from $10.4 million for the six months ended December 31, 2024 to $9.2 million during the six months ended December 31, 2025, due to decreases of (i) $981,000 in SaaS revenue and (ii) $282,000 in professional services revenue.

Revenue from North America sales increased by 7% from $16.5 million during the three months ended March 31, 2025 to $17.6 million during the three months ended March 31, 2026, due to an increase of $1.5 million in SaaS revenue, partially offset by a decrease of $368,000 in professional services revenue.

Revenue from North America sales increased by 9% from $50.2 million during the nine months ended March 31, 2025 to $54.9 million during the nine months ended March 31, 2026, due to an increase of $5.5 million in SaaS revenue, partially offset by a decrease of $820,000 in professional services revenue.

Revenue from EMEA sales increased by 8% from $4.6 million for the three months ended March 31, 2025 to $4.9 million during the three months ended March 31, 2026, due to an increase of $504,000 in professional services revenue, partially offset by a decrease of $146,000 in SaaS revenue.

Revenue from EMEA sales decreased by 6% from $15.0 million for the nine months ended March 31, 2025 to $14.1 million during the nine months ended March 31, 2026, due to a decrease of $1.1 million in SaaS revenue, partially offset by an increase of $222,000 in professional services revenue.

Cost of Revenue

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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 SaaS revenue decreased by $188,000 during the three months ended December 31, 2025, from the same period in fiscal year 2025.

This decrease was primarily due to decreases of (i) $369,000 in cloud-computing costs and (ii) $31,000 in outside consulting costs, partially offset by an increase of $224,000 in personnel-related costs.

Cost of SaaS revenue decreased by $539,000 during the six months ended December 31, 2025, from the same period in fiscal year 2025.

Cost of SaaS revenue decreased by $62,000 during the three months ended March 31, 2026, from the same period in fiscal year 2025.

This decrease was primarily due to decreases of (i) $351,000 in cloud-computing costs and (ii) $31,000 in outside consulting costs, partially offset by an increase of $313,000 in personnel-related costs.

Excluding a decrease of $12,000 and $16,000 due to foreign exchange rate fluctuation, cost of SaaS revenue decreased by $176,000 and $523,000 during the three and six months ended December 31, 2025, respectively, from the same periods in fiscal year 2025.

Cost of SaaS revenue decreased by $601,000 during the nine months ended March 31, 2026, from the same period in fiscal year 2025.

This decrease was primarily due to decreases of (i) $1.1 million in cloud-computing costs and (ii) $157,000 in outside consulting costs, partially offset by an increase of $648,000 in personnel-related costs.

Excluding an increase of $2,000 and a decrease of $15,000 due to foreign exchange rate fluctuation, cost of SaaS revenue decreased by $64,000 and $586,000 during the three and nine months ended March 31, 2026, respectively, from the same periods in fiscal year 2025.

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 $320,000 during the three months ended December 31, 2025, from the same period in fiscal year 2025.

This decrease was primarily due to a decrease of $351,000 in personnel-related costs, partially offset by other professional services costs.

Excluding an increase of $16,000 due to foreign exchange rate fluctuation, cost of professional services revenue decreased by $336,000 during the three months ended December 31, 2025, compared to the same period in fiscal year 2025.

Cost of professional services decreased by $804,000 during the six months ended December 31, 2025, from the same period in fiscal year 2025.

This decrease was primarily due to a decrease of $837,000 in personnel-related costs, partially offset by other professional services costs.

Excluding an increase of $26,000 due to foreign exchange rate fluctuation, cost of professional services revenue decreased by $830,000 during the six months ended December 31, 2025, compared to the same period in fiscal year 2025.

Cost of professional services decreased by $667,000 during the three months ended March 31, 2026, from the same period in fiscal year 2025.

This decrease was primarily due to a decrease of $831,000 in personnel-related costs, partially offset by an increase of $147,000 in outside consulting costs.

Excluding an increase of $19,000 due to foreign exchange rate fluctuation, cost of professional services revenue decreased by $686,000 during the three months ended March 31, 2026, compared to the same period in fiscal year 2025.

Cost of professional services decreased by $1.5 million during the nine months ended March 31, 2026, from the same period in fiscal year 2025.

This decrease was primarily due to a decrease of $1.7 million in personnel-related costs, partially offset by an increase of $153,000 in outside consulting costs.

Excluding an increase of $44,000 due to foreign exchange rate fluctuation, cost of professional services revenue decreased by $1.5 million during the nine months ended March 31, 2026, compared to the same period in fiscal year 2025.

Operating Expenses

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

Research and development expense decreased by 6% to $7.3 million for the three months ended December 31, 2025, from $7.7 million in the same period in fiscal year 2025.

Excluding a decrease of $18,000 due to foreign exchange rate fluctuation, research and development expense decreased primarily due to decreases of (i) $296,000 in personnel-related costs and (ii) $117,000 in outside consulting costs.

Research and development expense decreased by 4% to $14.6 million for the six months ended December 31, 2025, from $15.1 million in the same period in fiscal year 2025.

Excluding a decrease of $30,000 due to foreign exchange rate fluctuation, research and development expense decreased primarily due to a decrease of $537,000 in personnel-related costs.

Research and development expense increased by 1% to $7.6 million for the three months ended March 31, 2026, from $7.5 million in the same period in fiscal year 2025.

Excluding an increase of $11,000 due to foreign exchange rate fluctuation, research and development expense increased primarily due to increases of (i) $25,000 in outside consulting costs and (ii) $14,000 in personnel-related costs.

Research and development expense decreased by 2% to $22.2 million for the nine months ended March 31, 2026, from $22.6 million in the same period in fiscal year 2025.

Excluding a decrease of $23,000 due to foreign exchange rate fluctuation, research and development expense decreased primarily due to a decrease of $518,000 in personnel-related costs, partially offset by an increase of $55,000 in outside consulting costs.

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 1% to $5.2 million for the three months ended December 31, 2025, from $5.3 million in the same period in fiscal year 2025.

Excluding an increase of $47,000 due to foreign exchange rate fluctuation, sales and marketing expense decreased primarily due to decreases of (i) $100,000 in personnel-related costs and (ii) $56,000 in outside consulting costs.

Sales and marketing expenses decreased by 8% to $9.2 million for the six months ended December 31, 2025, from $10.0 million in the same period in fiscal year 2025.

Sales and marketing expenses decreased by 1% to $4.6 million for the three months ended March 31, 2026, from $4.7 million in the same period in fiscal year 2025.

Excluding an increase of $76,000 due to foreign exchange rate fluctuation, sales and marketing expense decreased primarily due to a decrease of $143,000 in personnel-related costs, partially offset by an increase of $17,000 in outside consulting costs.

Sales and marketing expenses decreased by 6% to $13.8 million for the nine months ended March 31, 2026, from $14.7 million in the same period in fiscal year 2025.

Excluding an increase of $164,000 due to foreign exchange rate fluctuation, sales and marketing expense decreased primarily due to decreases of (i) $870,000 in personnel-related costs and (ii) $143,000 in outside consulting costs.

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

General and administrative expenses increased by 10% to $2.3 million for the three months ended December 31, 2025, from $2.1 million in the same period in fiscal year 2025.

Excluding an increase of $8,000 due to foreign exchange rate fluctuation, general and administrative expense increased primarily due to an increase of $246,000 in legal related costs.

General and administrative expenses increased by 28% to $5.8 million for the six months ended December 31, 2025, from $4.5 million in the same period in fiscal year 2025.

Excluding an increase of $14,000 due to foreign exchange rate fluctuation, general and administrative expense increased primarily due to increases of (i) $1.4 million in warrant expense and (ii) $376,000 in legal related costs, partially offset by decreases of (i) 275,000 in outside-consulting costs and (ii) $77,000 in credit loss expense.

General and administrative expenses increased by 12% to $2.3 million for the three months ended March 31, 2026, from $2.0 million in the same period in fiscal year 2025.

Excluding an increase of $15,000 due to foreign exchange rate fluctuation, general and administrative expense increased primarily due to an increase of $311,000 in legal related costs, partially offset by a decrease of $100,000 in accounting, audit, and administrative fees.

General and administrative expenses increased by 23% to $8.1 million for the nine months ended March 31, 2026, from $6.6 million in the same period in fiscal year 2025.

Excluding an increase of $29,000 due to foreign exchange rate fluctuation, general and administrative expense increased primarily due to increases of (i) $1.4 million in warrant expense and (ii) $687,000 in legal related costs, partially offset by decreases of (i) $339,000 in outside-consulting costs and (ii) $101,000 in personnel-related costs.

Income from Operations

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Operating margin

Income from operations was $2.0 million and $650,000 with an operating margin of 9% and 3% during the three months ended December 31, 2025 and 2024, respectively.

Income from operations was $2.0 million and $27,000 with an operating margin of 9% and 0% during the three months ended March 31, 2026 and 2025, respectively.

This is primarily due to an increase in gross margin.

Income from operations was $4.9 million and $1.2 million with an operating margin of 10% and 3% during the six months ended December 31, 2025 and 2024, respectively.

Income from operations was $6.9 million and $1.2 million with an operating margin of 10% and 2% during the nine months ended March 31, 2026 and 2025, respectively.

This is primarily due to an increase in gross margin.

Interest Income

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

Interest income was $624,000 and $661,000 during the three months ended December 31, 2025 and 2024, respectively.

Interest income was $1.1 million and $1.4 million during the six months ended December 31, 2025 and 2024, respectively.

Interest income primarily consists of interest earned on money market accounts.

Interest income was $603,000 and $597,000 during the three months ended March 31, 2026 and 2025, respectively.

Interest income was $1.7 million and $2.0 million during the nine months ended March 31, 2026 and 2025, respectively.

Other Income (Expense), Net

Other income (expense), net was an expense of $32,000 and $431,000 during the three months ended December 31, 2025 and 2024, respectively.

Other income (expense), net was income of $423,000 and expense of $571,000 during the six months ended December 31, 2025 and 2024, respectively.

Other income (expense), net was an income of $176,000 and expense of $304,000 during the three months ended March 31, 2026 and 2025, respectively.

Other income (expense), net was income of $599,000 and expense of $875,000 during the nine months ended March 31, 2026 and 2025, respectively.

Other income (expense), net primarily included foreign exchange rate fluctuations on international trade receivables, net of transactions.

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

We recorded income tax provision of $302,000 and $1,232,000 for the three and six months ended December 31, 2025, respectively.

We recorded income tax provision of $209,000 and $697,000 for the three and six months ended December 31, 2024, respectively.

We recorded income tax provision of $371,000 and $1.6 million for the three and nine months ended March 31, 2026, respectively.

We recorded income tax provision of $254,000 and $951,000 for the three and nine months ended March 31, 2025, respectively.

We released a majority of our valuation allowance against U.S.

deferred tax assets on June 30, 2025 and recorded higher income before tax provision in the three and six months ended December 31, 2025.

deferred tax assets on June 30, 2025 and recorded higher income before tax provision in the nine months ended March 31, 2026.

Liquidity and Capital Resources

As of December 31, 2025 and June 30, 2025, our principal sources of liquidity were cash and cash equivalents, restricted cash, and accounts receivable totaling $96.8 million and $95.7 million, respectively.

Our cash, cash equivalents and restricted cash were $83.1 million and $62.9 million as of December 31, 2025 and June 30, 2025, respectively.

As of March 31, 2026 and June 30, 2025, our principal sources of liquidity were cash and cash equivalents, restricted cash, and accounts receivable totaling $89.2 million and $95.7 million, respectively.

Our cash, cash equivalents and restricted cash were $80.5 million and $62.9 million as of March 31, 2026 and June 30, 2025, respectively.

Based upon our current business plan, we believe that existing capital resources will enable us to maintain current and planned operations for at least the next 12 months.

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Our expectations as to our future cash flows and our future cash balances are subject to a number of assumptions, including assumptions regarding anticipated increases in our revenue, our ability to retain existing customers and customer purchasing and payment patterns, many of which are beyond our control.

For the six months ended December 31, 2025 and 2024, our cash flows were as follows (in thousands):

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For the nine months ended March 31, 2026 and 2025, our cash flows were as follows (in thousands):

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Net cash provided by operating activities

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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 and warrants, the timing of employee related costs including commissions and bonus payments, and changes in operating assets and liabilities during the year.

Net cash provided by operating activities increased by $13.2 million during the six months ended December 31, 2025, from the same period in fiscal year 2025, driven primarily by the change in net income, the timing of collections for accounts receivable, the timing of payments for accrued liabilities, and recognition of deferred revenue.

Net cash used in investing activities increased by $210,000 during the six months ended December 31, 2025, from the same period in fiscal year 2025, driven primarily by activities related to the purchase of equipment for employees and facility expenditures.

Net cash provided by operating activities increased by $9.1 million during the nine months ended March 31, 2026, from the same period in fiscal year 2025, driven primarily by the change in net income and the timing of collections for accounts receivable.

Net cash used in investing activities increased by $170,000 during the nine months ended March 31, 2026, from the same period in fiscal year 2025, driven primarily by 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 provided by (used in) financing activities increased by $7.2 million during the six months ended December 31, 2025, from the same period in fiscal year 2025.

Net cash provided by (used in) financing activities increased by $12.4 million during the nine months ended March 31, 2026, from the same period in fiscal year 2025.

Our current proceeds consist primarily of the exercise of employee stock options, our employee stock purchase plan, and funds used for repurchases of our common stock.

Funds used for repurchases of our common stock was $1.4 million and $7.0 million during the six months ended December 31, 2025 and 2024, respectively.

Funds used for repurchases of our common stock was $1.4 million and $12.0 million during the nine months ended March 31, 2026 and 2025, respectively.

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

Lease agreements are evaluated to determine whether an arrangement is or contains a lease in accordance with ASC 842, Leases .

As of December 31, 2025, the future non-cancelable minimum payments under these commitments were approximately $4.4 million.

As of March 31, 2026, the future non-cancelable minimum payments under these commitments were approximately $3.9 million.

Off-Balance Sheet Arrangements

As of December 31, 2025, we had no significant off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.

As of March 31, 2026, we had no significant off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.

New Accounting Pronouncements

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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-Q

Item 2. Management’s Discussion and Analysis