EGAIN Corp 10-K

ITEM 1. BUSINESS ​ Overview ​ eGain automates customer engagement with an innovative knowledge hub, powered by conversational and generative AI and analytics. We sell mostly to large enterprises across financial services, telecommunications, retail, government, healthcare, and utilities seeking to better serve customers at scale by eliminating content silos and helping to automate customer engagement processes of all levels of complexity that may also require regulatory compliance. With our mantra of AX + BX + CX = DX™ , we guide clients to effortless digital experience (DX) by holistically optimizing agent experience (AX), business experience (BX) and customer experience (CX). Leading brands use eGain’s SaaS solution to improve customer satisfaction, empower agents, reduce service cost, and boost sales. We are headquartered in the United States. We also operate in the United Kingdom and India. ​ Industry Background Introduction ​ According to Gartner, a majority of contact center agents are not satisfied with their desktop tools. Our assessment, based on two decades of serving clients is that contact center agents when serving customers ignore most of the information piled on their screens across multiple windows and tabs. Meanwhile, most businesses expect agents to retain and routinely refresh all relevant knowhow in their head - across complex, expanding product portfolios and compliance-heavy processes. And recall it contextually in the moment of truth when serving customers. This growing knowledge and guidance gap for agents explains Gartner Research’s only technology recommendation for customer service and support leaders since 2022: invest in knowledge management tools! It is time to reimagine the Contact Center Agent Experience. Digital Economy Demands Modern Software In a world selling commoditized products to information-rich customers who are short on time, smart tools must automate the routine and augment the interesting across agent, business and customer tasks. This need has been amplified by the disruption of traditional work models by COVID-19. Coming out of the pandemic tunnel and dealing with the new normal of millennial and generation Z employee expectations, businesses realize that they need to invest in tools to quickly and easily empower agents, while ensuring customer satisfaction and compliance. Not surprisingly, businesses are increasingly seeking modern knowledge management solutions to layer on top of traditional systems of record like Customer Relationship Management (CRM), Contact Center as a Service (CCaaS) solutions, and content management systems. Their goal is to empower contact center agents and deliver customer self-service with relevant knowledge everywhere. Knowledge-Powered Customer Engagement ​ Energized by big-data, cloud-computing and most recently by generative AI, unsiloed Knowledge Hubs deliver transformational value in customer engagement. Smart, connected experiences can be automated to successfully resolve majority of customer interactions. The pressing challenge for solution buyers, however, is to separate the wheat from the chaff as they look for trusted, innovative, and aligned partners that can also add quick business value. So they seek sustained product leadership, at-scale proof points and no-risk trials. Contact Centers are a Brand Battleground ​ Contact centers offer significant opportunity to automate customer engagement. Globally, there were close to 17 million contact center agents in 2022 with 71% of contact centers looking to hire more, according to a 2023 Forrester survey. Time-starved customers consuming complex products and grappling with marketing offers generate stubbornly high levels of customer contact. Furthermore, contact centers worldwide are undergoing a technology refresh cycle from on-premise call centers to cloud-based contact centers. This transition affords businesses the opportunity to reimagine and design customer contact strategies to drive digital-first automation, fueled by Knowledge and AI. 6 Table of Contents Customer Engagement Automation is a Large, Growing Market ​ Businesses are investing heavily in digital transformation, with customer engagement as a top priority. Cloud-based solutions and a growing Application Programming Interface (API) economy present exciting opportunities to connect, solve, and optimize customer interactions. Contact volumes are soaring and to handle them effectively while delivering great experiences, businesses are looking for innovative platform providers that harness AI, conversational interfaces, and digital channels with proof at scale to guide them on their automation journey. ​ The eGain Approach and Benefits What Customers Want ​ We believe where customers want help falls into three categories: informational, transactional, and situational. Any given customer contact can morph across these categories as the conversation develops. Tools must orchestrate customer contact with context —accounting for machine-human hand-offs, channel switching, multimodal interaction, and conversational pause-and-resume. During these interactions, customers increasingly want to be guided, even anticipated. Siloed solutions like simplistic chatbots without contextual escalation or effective knowledge and guidance don’t work. The eGain Solution is Comprehensive ​ eGain offers a comprehensive, unified solution organized into three hubs—eGain Knowledge Hub™, eGain Conversation Hub™, and eGain Analytics Hub™, to automate, augment and orchestrate digital-first customer engagement. Our feature-rich portfolio of applications empowers businesses to holistically connect, flexibly solve, and continuously optimize the experience for agents, businesses and customers. Our solution experts and partners guide clients by aligning with their strategic priorities and demonstrating quick value through agile sprints. Connect with eGain Conversation Hub ​ Our Conversation Hub offers comprehensive, scalable capabilities for digital-first, omnichannel interaction management within a modern, purpose-built desktop. Rich applications, powered by our Knowledge and AI capabilities (from our Knowledge Hub), proactively guide agents to efficiently interact with customers using chatbots, messaging applications, short message service (SMS), chat, email, social media, phone, video, fax, and letter. As part of our Conversation Hub, we offer a novel Bring Your Own (BYO) architecture to plug in external bots, messaging channels, and third-party agent desktops to compose differentiated customer experiences. Finally, we offer a rich library of pre-built connectors to popular CRM, Contact Center, and Content Management platforms. Solve with eGain Knowledge Hub ​ Our Knowledge Hub helps businesses to centralize knowledge, policies, procedures, situational expertise, and best-practices, while delivering guided, personalized solutions to customers and agents across all touch points. Our guided knowledge and virtual assistance applications ensure that all agents effectively resolve all contact types, regardless of product or procedure. Correct, compliant, and consistent responses across touchpoints boost customer satisfaction as first contact resolution surges and agent’s time to competency drops. ​ Optimize with eGain Analytics Hub ​ Our Analytics Hub enables clients to measure, manage and optimize their omnichannel service operations and knowledge. In addition, embedded AI and Machine Learning (ML) helps clients generate product improvement and customer insights, while spotting opportunities to improve experience and automate processes. ​ 7 Table of Contents Open, Secure APIs and Third-Party Connectors Deliver Quick Value ​ Our open, secure platform APIs enable clients and partners to extend and enhance our solutions and to integrate with enterprise assets to enable a single view of the customer. Pre-built integrations include connectors to Adobe, Apple Business Chat, Avaya, Amazon Connect, Cisco, Five9, Google Dialogflow, Genesys, Talkdesk, IBM Watson, Microsoft Dynamics, Microsoft SharePoint, Microsoft Teams, Salesforce, SAP and ServiceNow. Compelling Benefits ​ Our solution delivers quick value, easy innovation, and big business impact. Specifically, we help businesses: o Enhance customer experience with digital-first, omnichannel service, backed by AI knowledge. o Reduce operating costs through self-service automation, improved first contact resolution, and compressed agent time-to-competence. o Ensure compliance with regulations, policies, procedures, and best practices even as clients expand their product portfolio and customer segments. This benefit is particularly sought after in regulated sectors like financial services and healthcare, as well as government. o Deliver rich insights to improve service, enhance products and design new offerings. Analyzing and learning from customer conversations provides a unique tool to quickly respond to customer dissatisfaction or agent challenges, while generating ideas for product innovation and process automation. Competitive Strengths Composable Experience Platform with Rich APIs, Events, and UX Widgets ​ The eGain solution is a comprehensive omnichannel solution for the customer engagement market, with AI and knowledge applications at its core. We unlock the full power of our cloud platform with extensive APIs through a developer portal to enable digital engagement, knowledge management, and decision support capabilities. ​ Enterprise-Grade, Secure Cloud Service with Differentiated Offerings ​ Our cloud offering is secure, scalable, and offers unique capabilities. With respect to security and certification, we offer SOC2, PCI, HIPAA, FedRAMP, and GDPR certification. We are also approved as a supplier on Crown Commercial Service’s (CCS) G-Cloud Framework in the UK market. The Internal Revenue Service uses our solutions served from the eGain Cloud. Furthermore, we offer an “Always On” capability for businesses who cannot afford to be down at any time, day or night, for scheduled maintenance. Transformative Value at Scale Across Diversified Customer Base ​ Our solution delivers transformative value at scale today. We believe that our understanding of the customer need and our ability to fulfill it with enterprise-grade capability is unmatched. From over a hundred thousand users at a healthcare client using our solution on a 24x7 basis to a Property and Casualty (P&C) insurer with fifteen thousand contact center advisors and thirty-thousand field agents, we are the preferred choice for large brands looking to automate customer engagement. Market-leading Innovation with a Risk-free Trial Model ​ We are consistently seen as product leaders in knowledge-powered customer engagement by leading analysts. Our enterprise-class virtual assistance and agent augmentation – powered by AI, ML, and knowledge – delivers transformational impact in simple to sophisticated use cases to solve, guide, and coach agents and customers. Our conversation hub, deeply integrated with our knowledge hub, enables plug and play of third-party bots, channels, and desktops. ​ 8 Table of Contents To de-risk customer decisions, we offer a unique Innovation in 30 Days ™ program—a 30-day guided production pilot in the eGain Cloud – at no cost and with no strings attached. Businesses can experience our product with their data, content, and process in a production setting. Direct Go-to-market Strategy, Complemented by a Growing Partner Ecosystem ​ We take our solutions to market through a direct sales model, primarily in North America and Western Europe. We complement direct sales with resell partnerships based on product connectors into Cloud Contact Center platforms, including Amazon, Avaya, Cisco, Five9, Genesys, and Talkdesk. We also partner with System Integrators and Managed Service Providers. Customers ​ We mostly sell to large enterprises, which we define as businesses with over a billion dollars in annual revenue or government organizations. Approximately 83% of our annual recurring cloud revenue for the fiscal year ended June 30, 2023 (which we refer to as fiscal year 2023) came from such large enterprises. ​ We focus on the following verticals: financial services, telecommunication, retail, government, health care and utilities. For fiscal year 2023, North America (NA) and combined Europe, Middle East, and Africa (EMEA) revenue accounted for 78% and 22% of total revenue. ​ One of our largest customers, who is also our partner, accounted for 20% of total revenue in fiscal year 2023. Competition ​ We compete with application software providers, including LivePerson, Inc., NICE, Ltd, and Verint Systems Inc. In addition, we occasionally compete with some of our platform partners where some of our product capabilities overlap, including Five9, Genesys, Microsoft, Salesforce, and ServiceNow. ​ Our target market is highly competitive and some of our competitors may have longer operating histories, greater economies of scale, greater financial resources, greater engineering and technical resources, greater sales and marketing resources, stronger strategic partnerships and distribution channels, larger user bases, products and services with different functions, and feature sets and greater brand recognition than we have. We believe the principal competitive factors in our market include the following: o proven track record of customer success; o speed and ease of implementation; o quick value realization; o rich product functionality; o strong analyst ratings; o strong customer references; o financial stability and viability of the vendor; o strong product adoption; o ease of use and rates of user adoption; o low total cost of ownership and demonstrable cost-effective benefits for customers; o performance, security, scalability, flexibility and reliability of the service; o ease of integration with existing applications; o quality of customer support; 9 Table of Contents o availability and quality of implementation, consulting and training services; and o vendor reputation and brand awareness. ​ Growth Strategy ​ We are investing in multiple programs to accelerate growth. Invest in Direct Sales and Marketing ​ We design and execute scalable and personalized marketing programs to boost brand awareness, based on client success, product leadership and no-risk trial offers. To complement our marketing investment, we have built and trained a field sales team to maintain high-touch presence in target accounts. Develop New Partner Relationships ​ We are developing new partnerships with complementary platform providers (with large customer bases) to enhance their proposition with our Knowledge-powered customer engagement capabilities. Our Business Development team continues to develop and operationalize new partnerships. Land and Expand in the Enterprise ​ With the sustained progress we have made in customer success, we see a replicable pattern emerging: land enterprise logos with a limited footprint in one business unit, demonstrate business value, and then expand in the enterprise. We believe we are increasing the value of investment in eGain for our clients by deeply integrating our capabilities via our enhanced APIs with enterprise assets like enterprise collaboration platforms, CRM systems, transaction and billing, and content sources. ​ Maintain Platform Leadership ​ Innovation is in our DNA. We are developing vertical solutions on our platform to better acquire and serve customers. We are also leveraging generative AI technologies to reduce manual effort and accelerate automation in knowledge management and customer engagement. We continue to enhance our core capabilities, while improving usability and personalization. ​ Selectively Pursue Acquisitions ​ From time to time, we pursue inorganic strategies to strengthen our product portfolio. As opportunities arise, we look for strategic acquisitions we believe will deliver compelling value faster than organic options. ​ ​ 10 Table of Contents Sales and Marketing Sales Strategy ​ Our sales strategy is to pursue targeted accounts, mostly B2C (Business-to-Consumer) enterprises and consumer-centric government agencies, through a combination of our direct sales force and partners. These enterprises typically have thousands of customer service agents in their contact centers and, in the aggregate, communicate with billions of customers each year. We utilize thought leadership and other marketing events to demonstrate our leadership position in the customer engagement software market and highlight our customer successes. ​ Our direct sales force is organized into teams that include field sales representatives and sales consultants. Our direct sales force is complemented by lead generation representatives and sales development representatives. We also complement our direct effort with sales alliances. Marketing and Partner Strategy ​ Our marketing strategy is to build our brand around innovative and robust products trusted by leading enterprises. We accomplish this via public relations, analyst relations, marketing programs, and demand generation, infused with relevant content for our target audiences. We employ a wide range of marketing avenues to deliver our message, including print and digital, targeted electronic and postal mailing, email newsletters, and a variety of trade shows, seminars, webinars, and interest groups. ​ Our marketing group produces sales tools, including product collateral, customer case studies, demonstrations, and presentations. In addition, the group performs market and customer analyses to identify and develop key partnership opportunities and product capabilities. ​ We believe that our partners help extend the breadth and depth of our product offerings, drive market penetration, and augment our professional service capabilities. We believe these relationships are important to delivering successful integrated products and services to our customers. Our partner portal, eGain Econet™, provides comprehensive sales support and services information for channel partners. ​ Subscription Services ​ Our subscription services provide customers with access to our software on a cloud-based platform that we manage and offer on a subscription basis. These subscription services allow our customers to easily consume our product innovation without dealing with infrastructure, installation and ongoing administration. We generally offer these services through a 36-month contract, with pricing based on the number of agents or self-service sessions. ​ Professional Services ​ Our worldwide professional services organization provides consulting, implementation, training, and managed services to deliver business value, drive customer success and build customer loyalty. o Consulting and Implementation Services . Our offering includes rapid implementation services, platform-based solution extension, and systems integration services. Our consultants work with customers to understand their requirements, analyze their business needs, and implement effective solutions. We provide these services independently or in partnership with distribution partners who have developed expertise on our platform. o Training Services. We provide comprehensive training options to customers and partners. Training programs are offered either online (remote training) or in-person at the customer site. We also offer complementary e-learning through our eGain University education portal to our customers and partners. o Managed Services. We provide a comprehensive set of processes and activities that range from implementation to monitoring the evolution and support of eGain solutions in a company. ​ 11 Table of Contents Customer Support ​ We offer 24/7 customer support via online and phone channels worldwide under support agreements. Our customer support centers are in the United States, the United Kingdom, and India. ​ Research and Development ​ The market for our products changes rapidly and is characterized by evolving industry standards, swift changes in customer requirements, and frequent product introductions. ​ We continuously analyze market and customer requirements and evaluate external technology that we believe will enhance our competitiveness, increase our lifetime customer value, and expand our target market. Our product roadmap effectively combines build, partner, and buy options. ​ Intellectual Property ​ We regard our intellectual property as critical to our success. We rely on intellectual property and other laws, in addition to confidentiality procedures and licensing arrangements, to protect the proprietary aspects of our technology and business. ​ As of June 30, 2023, we had 16 issued patents in the United States. In addition, we have one pending patent application in the United States, which is a non-provisional filing. Our issued U.S. patents expire at various times between 2028 and 2039. ​ We continually assess the strength of our intellectual property protection for those aspects of our technology that we believe constitute innovations providing significant competitive advantages. Future applications may or may not receive the issuance of valid patents or registered trademarks. ​ We routinely require our employees, customers, and potential business partners to enter into confidentiality and nondisclosure agreements before we disclose any sensitive aspects of our products, technology, or business plans. In addition, we require employees to agree to surrender to us any proprietary information, inventions or other intellectual property they generate or come to possess while employed by us. Despite our efforts to protect our proprietary rights through confidentiality and license agreements, unauthorized parties may attempt to copy or otherwise obtain and use our products or technology. These precautions may not prevent misappropriation or infringement of our intellectual property. In addition, some of our license agreements with certain customers and partners require us to place the source code for our products into escrow. These agreements typically provide that some party will have a limited, non-exclusive right to access and use this code as authorized by the license agreement if there is a bankruptcy proceeding instituted by or against us, or if we materially breach a contractual commitment to provide support and maintenance to the party. ​ Human Capital ​ Our key human capital management objectives are to attract, retain and develop the highest quality talent. To support these objectives, our human resources programs are designed to develop talent to prepare them for critical roles and leadership positions for the future; reward and support employees through competitive pay and benefits; enhance our culture through efforts aimed at making the workplace more engaging and inclusive; acquire talent and facilitate internal talent mobility to create a high-performing and diverse workforce. As of June 30, 2023, we had 592 employees, including 580 full-time employees, of which 208 were in product development, 240 in services and support, 84 in sales and marketing, and 60 in finance and administration. ​ None of our employees are covered by collective bargaining agreements. While we believe our relations with our employees are good, our future performance depends largely upon the continued service of our key technical, sales and marketing, and senior management personnel, none of whom are bound by employment agreements requiring service for a defined period of time. ​ 12 Table of Contents Available Information ​ We were incorporated in Delaware in September 1997, and our website is located at www.egain.com. We make available free of charge on our website our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports, as soon as reasonably practicable after we electronically file or furnish such materials to the Securities and Exchange Commission. Our website and the information contained therein or connected thereto are not intended to be incorporated into this Annual Report on Form 10-K. ​ Information About Our Executive Officers The following table sets forth information regarding eGain’s executive officers as of September 14, 2023: ​ ​ ​ ​ ​ Name Age Position Ashutosh Roy 57 Chief Executive Officer and Chairman Eric N. Smit 61 Chief Financial Officer Promod Narang 65 Chief Technology Officer ​ ​ Ashutosh Roy co-founded eGain and has served as Chief Executive Officer and a Director of eGain since September 1997 and as President since October 1, 2003. From May 1995 through April 1997, Mr. Roy served as Chairman of WhoWhere? Inc., an Internet-services company co-founded by Mr. Roy. From June 1994 to April 1995, Mr. Roy worked at Parsec Technologies, a call center company based in New Delhi, India, which he co-founded. From August 1988 to August 1992, Mr. Roy worked as a software engineer at Digital Equipment Corporation, a major company in the computer industry at the time . Mr. Roy holds a B.S. in Computer Science from the Indian Institute of Technology, New Delhi, a Master’s degree in Computer Science from Johns Hopkins University and a M.B.A. from Stanford University. ​ Eric N. Smit has served as Chief Financial Officer since August 2002. Prior to that, Mr. Smit served in a variety of roles at eGain, including Vice President, Operations from April 2001 to July 2002, Vice President, Finance and Administration from June 1999 to April 2001, and Director of Finance from June 1998 to June 1999. From December 1996 to May 1998, Mr. Smit served as Director of Finance for WhoWhere? Inc., an Internet services company. From April 1993 to November 1996, Mr. Smit served as Vice President of Operations and Chief Financial Officer of Velocity Incorporated, a software game developer and publishing company. Mr. Smit holds a Bachelor of Commerce in Accounting from Rhodes University, South Africa. Promod Narang has served as Chief Technology Officer since November 2022. Mr. Narang joined eGain in October 1998 and served as Director of Engineering and from March 2000 to October 2022, he served as Senior Vice President of Products and Engineering prior to assuming his current position. Prior to joining eGain, Mr. Narang served as President of VMpro, a system software consulting company, from September 1987 to October 1998. Mr. Narang holds a Bachelor of Science in Computer Science from Wayne State University. ​ 13 Table of Contents