What changed in this filing

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Item 1A. Risk Factors

2022-11-14 compared with 2022-05-09 · 21 added, 44 removed, 436 unchanged (13% of the section changed)

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In addition, our customers may choose to renew for fewer subscriptions (in quantity or products) or renew for shorter contract lengths.

We cannot accurately predict renewal rates given our varied customer base of enterprise and small and medium size business customers and the number of multiyear subscription contracts.

We cannot accurately predict renewal rates given our varied customer base of enterprise and small and medium size business

customers and the number of multiyear subscription contracts.

Our renewal rates may decline or fluctuate as a result of a number of factors, including customer dissatisfaction with our service, decreases in customers’ spending levels, decreases in the number of users at our customers, pricing changes and general economic conditions.

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Other than product innovation and existing customer relationships, there are no substantial barriers to entry in this market, and established or new entities may enter this market in the future.

While software internally developed by enterprises represents indirect competition, we also compete directly with packaged application software vendors, including Genesys Telecommunications Laboratories, Inc., LivePerson, Inc., and NICE Ltd., and Verint Systems Inc.

In addition, we face actual or potential competition from larger software companies such as Microsoft Corporation, Oracle Corporation, salesforce.com Inc., and ServiceNow, Inc., and similar companies that may attempt to sell customer engagement software to their installed base.

We believe competition will continue to be fierce as current competitors increase the sophistication of their offerings and as new participants enter the market.

Many of our current and potential competitors have longer operating histories, larger

customer bases, broader brand recognition, and significantly greater financial, marketing and other resources.

Many of our current and potential competitors have longer operating histories, larger customer bases, broader brand recognition, and significantly greater financial, marketing and other resources.

With more established and better-financed competitors, these companies may be able to undertake more extensive marketing campaigns, adopt more aggressive pricing policies, and make more attractive offers to businesses to induce them to use their products or services.

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These risks in turn could cause our operating results and financial condition to suffer.

We derived 27% and 31% of our revenue from international sales during three months ended March 31, 2022 and 2021, respectively.

We derived 28% and 30% of our revenue from international sales during the nine months ended March 31, 2022 and 2021, respectively.

In addition to those discussed elsewhere in this section, our international sales operations are subject to a number of specific risks, such as:

We derived 23% and 29% of our revenue from Europe, Middle East, and Africa sales during three months ended September 30, 2022 and 2021, respectively.

In addition to those discussed elsewhere in this section, our Europe, Middle East, and Africa sales operations are subject to a number of specific risks, such as:

● general economic conditions in each country or region in which we do or plan to do business;

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● hostilities in various parts of the world, including the war in Ukraine;

● the fragmentation of longstanding regulatory frameworks caused by Brexit;

● reduced intellectual property protections in some countries.

As of March 31, 2022 approximately 45% of our workforce was employed in India.

Any of the above risks could adversely affect our international operations, reduce our revenue from customers outside of the United States or increase our operating costs, each of which could adversely affect our business, results of operations, financial condition, and growth prospects.

As of September 30, 2022 approximately 43% of our workforce was employed in India.

Of our employees in India, 51% are allocated to research and development.

Although the movement of certain operations internationally was principally motivated by cost cutting, the continued management of these remote operations requires significant management attention and financial resources that could adversely affect our operating performance.

In addition, with the significant increase in the numbers of foreign businesses that have established operations in India, the competition to attract and retain employees

there has increased significantly.

In addition, with the significant increase in the numbers of foreign businesses that have established operations in India, the competition to attract and retain employees there has increased significantly.

As a result of the increased competition for skilled workers, we experienced increased compensation costs and expect these costs to increase in the future.

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Our solutions are based on complex software that may contain errors, or “bugs,” that could be costly to correct, harm our reputation and impair our ability to sell our solutions to new customers.

Moreover, customers relying on our solutions may

be more sensitive to such errors, and potential security vulnerabilities and business interruptions for these applications.

Moreover, customers relying on our solutions may be more sensitive to such errors, and potential security vulnerabilities and business interruptions for these applications.

If we incur substantial costs to correct any errors of this nature, our operating margins could be adversely affected.

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Changes in customer and Internet user requirements and preferences, frequent new product and service introductions embodying new technologies and the emergence of new industry standards and practices such as but not limited to security standards could render our services and our proprietary technology and systems obsolete.

The rapid evolution of these products and services will require that we continually improve the performance, features and reliability of our services.

The rapid evolution of these products and services will require that

we continually improve the performance, features and reliability of our services.

Our success will depend, in part, on our ability to:

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Our technology platforms enable representatives of our customers as well as individual service providers to communicate with consumers and other persons seeking information or advice on the Internet.

The law relating to the liability of online

platform providers such as us for the activities of users of their online platforms is often challenged in the U.S.

The law relating to the liability of online platform providers such as us for the activities of users of their online platforms is often challenged in the U.S.

and internationally.

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Certain questions regarding the safe harbor under the DMCA and the CDA have yet to be litigated, and we cannot guarantee that we will meet the safe harbor requirements of the DMCA or of the CDA.

If we are not covered by a safe harbor, for any reason, we could be exposed to claims, which could be costly and time-consuming to defend.

not covered by a safe harbor, for any reason, we could be exposed to claims, which could be costly and time-consuming to defend.

If our cybersecurity systems or the systems of our vendors, partners and suppliers are breached and unauthorized access is obtained to a customer’s data or our data or IT systems, our service may be perceived as not being secure, customers may curtail or stop using our service and we may incur significant legal and financial exposure and liabilities.

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The UK is also currently consulting on its own updated version of the standard contractual clauses and the result of this may be that different standard contractual clauses are needed depending on the origin of the PII.

On May 25, 2018, the EU’s GDPR became enforceable, imposing new obligations directly on us as both a data controller and a data processor, as well as on many of our customers.

Following the UK's exit from the EU (Brexit) the UK adopted a UK version of the GDPR.

While the UK GDPR is currently aligned with the EU GDPR, Brexit has created the opportunity for the UK to develop its own data protection regime which may diverge from the European standard (as is the case with the standard contractual clauses, discussed above).

It is possible that these new legal developments may evolve in a manner that is adverse to us, unforeseen, or otherwise inconsistent with our practices or that we may not adequately adapt our internal policies and/or procedures to evolving regulations, any of which could result in litigation, regulatory investigations and potential legal liability (including potential liability exposure through higher potential penalties for non-compliance), require us to make changes to our services to enable us and/or our customers to meet the new legal requirements, in case

we have to change locations of data centers to meet privacy laws, increased requirements for customers to buy add-ons to meet additional requirements imposed by new laws, require us to change our practices in a manner adverse to our business or limit access to our products and services in certain countries.

Compliance with existing, proposed and recently enacted laws and regulations can be costly, particularly if we are subject to differing or conflicting requirements in the different countries in which we operate;

any failure to comply with these regulatory standards could subject us to legal and reputational risks.

While we have sought to implement appropriate transfer mechanisms following the invalidation of the Safe Harbor and Privacy Shield frameworks, owing to the significant changes that are ongoing in this area, we may be unsuccessful in establishing legitimate means of transferring data from the EEA or UK to the U.S.

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These statutes may increase our compliance costs and potential liability.

Some observers have noted that the CCPA and the SHIELD Act could mark the beginning of a trend toward more stringent privacy legislation in the U.S., which could increase our potential liability and adversely affect our business.

observers have noted that the CCPA and the SHIELD Act could mark the beginning of a trend toward more stringent privacy legislation in the U.S., which could increase our potential liability and adversely affect our business.

Furthermore, India has recently proposed enacting its own data protection legislation although the specifics of this are yet to be decided.

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Changes in these or other rules, or scrutiny of our current accounting practices, or a determination that our judgments or assumptions in the application of these accounting principles were incorrect, could have a significant adverse effect on our reported operating results or the way in which we conduct our business.

Continued uncertainty surrounding the implementation and effect of Brexit may cause increased economic volatility, affecting our operations and business.

In March 2017, the UK served notice to the European Council under Article 50 of the Treaty of Lisbon to withdraw membership from the EU.

Brexit could cause disruptions to, and create uncertainty surrounding, our business in the UK and EU, including affecting our relationships with our existing and future customers, suppliers, and employees.

As a result, Brexit could have an adverse effect on our future business, financial results, and operations.

The UK formally left the EU on January 31, 2020, although it was subject to a transition period through March 31, 2021.

While the transition period has now ended, and a deal was reached between the EU and the UK (avoiding a so called "hard Brexit"), the long-term nature of the UK’s relationship with the EU is still relatively unclear.

The political and economic instability created by Brexit has caused and may continue to cause significant volatility in global financial markets.

Brexit has also had the effect of disrupting the free movement of goods, services, and people between the UK, the EU, and elsewhere.

Brexit could lead to legal uncertainty and potentially divergent national laws and regulations as the UK determines which EU laws to repeal or replace.

Further, uncertainty around these and related issues could lead to adverse effects on the economy of the UK and the other economies in which we operate.

There can be no assurance that any or all of these events will not have a material adverse effect on our business operations, results of operations and financial condition.

Further, Brexit has created uncertainty with regard to the future regulation of data protection in the United Kingdom.

We may experience reluctance or refusal by current or prospective customers in Europe, including the United Kingdom, to use our products, and we may find it necessary or desirable to make further changes to our handling of personal data of European residents.

The regulatory environment applicable to the handling of European residents’ personal data, and our actions taken in response, may cause us to assume additional liabilities or incur additional costs, and could result in our business, operating results, and financial condition being harmed.

Risks Related to Intellectual Property

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Any claims and lawsuits, and the disposition of such claims and lawsuits, could be time-consuming and expensive to resolve, divert management attention from executing our business plan, lead to attempts on the part of other parties to pursue similar claims and, in the case of intellectual property claims, require us to change our technology, change our business practices or pay monetary damages, or enter into short- or long-term royalty or licensing agreements.

Any adverse determination related to intellectual property claims or other litigation could prevent us from offering our service to customers, could be material to our financial condition or cash flows, or both, or could otherwise adversely

affect our operating results.

In addition, depending on the nature and timing of any such dispute, a resolution of a legal matter could materially affect our future results of operation or cash flows or both.

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In addition, defending our intellectual property rights might entail significant expense.

Any of our trademarks or other intellectual property rights may be challenged by others or invalidated through administrative process or litigation.

Any of our trademarks or other intellectual property rights may be challenged by others or invalidated through administrative

process or litigation.

While we have some U.S.

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Our insiders who are significant stockholders have the ability to exercise significant control over matters requiring stockholder approval, including the election of our board of directors, and may have interests that conflict with those of other stockholders.

Our directors and executive officers, together with their affiliates and members of their immediate families, beneficially owned, in the aggregate, approximately 32% of our outstanding capital stock as of March 31, 2022, of which our Chief Executive Officer, Ashutosh Roy, beneficially owned approximately 28% as of such date.

Our directors and executive officers, together with their affiliates and members of their immediate families, beneficially owned, in the aggregate, approximately 33% of our outstanding capital stock as of September 30, 2022, of which our Chief Executive Officer, Ashutosh Roy, beneficially owned approximately 28% as of such date.

As a result of these concentrated holdings, Mr.

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Interactive Data Files Pursuant to Rule 405 of Regulation S-T:

(i) Condensed Consolidated Balance Sheets as of March 31, 2022 and June 30, 2021, (ii) Condensed Consolidated Statements of Operations for the three and nine months ended March 31, 2022 and 2021, (iii) Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended March 31, 2022 and 2021, (iv) Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended March 31, 2022 and 2021, (v) Condensed Consolidated Statements of Cash Flows for the nine months ended March 31, 2022 and 2021 and (vi) Notes to Condensed Consolidated Financial Statements.

(i) Condensed Consolidated Balance Sheets as of September 30, 2022 and June 30, 2022, (ii) Condensed Consolidated Statements of Operations for the three months ended September 30, 2022 and 2021, (iii) Condensed Consolidated Statements of Comprehensive Income for the three months ended September 30, 2022 and 2021, (iv) Condensed Consolidated Statements of Stockholders’ Equity for the three months ended September 30, 2022 and 2021, (v) Condensed Consolidated Statements of Cash Flows for the three months ended September 30, 2022 and 2021 and (vi) Notes to Condensed Consolidated Financial Statements.

Inline XBRL Instance Document

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Pursuant to the requirements of the Securities Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

November 14, 2022

eGain Corporation

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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 1A. Risk Factors