What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-11-07 compared with 2023-05-11 · 101 added, 117 removed, 255 unchanged (46% of the section changed)

7 unchanged sentences

● our belief that SaaS revenue better reflects business momentum;

● our expectation that legacy fees will continue to decline in future quarters;

● our belief that the combination of SaaS and professional services revenue is a useful measure to value our business on a forward-looking basis;

● our belief that is useful to exclude certain non-cash charges and non-core operational charges from non-GAAP operating income;

● expected benefits of our solutions to our clients and partners;

● customer and market expectations in the market in which we operate;

● our value proposition;

● customer and market expectations in the market in which we operate, and our ability to meet expectations and satisfy such needs;

● our lengthy sales cycles and the difficulty in predicting timing of sales or delays;

● our expectations with respect to revenue, cost of revenue, expenses and other financial metrics;

● our business plan and growth strategies;

● our business plans, strategies, targets, and outlook;

● our expectations related to our product development plan;

1 unchanged sentence

● our beliefs regarding our prospects for our business;

● changes in technology, including AI technology and services;

● changes in demand for our solutions;

9 unchanged sentences

● the risks related to our international operations;

● the potential impact of foreign currency fluctuations;

● the potential impact of the COVID-19 pandemic on our business, employees and customers.

● the potential impact of foreign currency fluctuations and inflation;

● the potential impact of health epidemics.

These forward-looking statements reflect our current views with respect to future events, are based on assumptions and are subject to risks and uncertainties.

9 unchanged sentences

● our ability to compete;

● the success of our partnerships;

● the success of our strategic and distribution partnerships;

● our ability to obtain capital when needed;

2 unchanged sentences

● risks related to protection of our intellectual property;

● foreign currency fluctuations;

● foreign currency fluctuations and inflation;

● the global economic environment;

● risks related to public health pandemics such as the COVID-19 pandemic;

● risks related to public health pandemics;

● the risks set forth under “Risk Factors.”

13 unchanged sentences

● Because we depend on a relatively small number of customers for a substantial portion of our revenue, the loss of any of these customers or our failure to attract new significant customers could adversely impact our revenue and harm our business.

● The market for customer engagement software is intensely competitive, and our business will be adversely affected if we are unable to successfully compete.

● The market for customer engagement software, including generative AI product offerings, is competitive, and our business will be adversely affected if we are unable to successfully compete.

● If we fail to expand and improve our sales performance and marketing activities, or retain our sales and marketing personnel, we may be unable to grow our business, which could negatively impact our operating results and financial condition.

12 unchanged sentences

● Our offshore product development, support and professional services may prove difficult to manage or may not allow us to realize our cost reduction goals, produce effective new solutions and provide professional services to drive growth.

eGain automates customer engagement with an innovative knowledge hub, powered by conversational artificial intelligence (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 while coping with content silos, process complexity, and regulatory compliance.

● 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.

● Changes in the European regulatory environment regarding privacy and data protection regulations, such as the GDPR, could expose us to risks of noncompliance and costs associated with compliance.

● Privacy concerns and laws, evolving regulation of cloud computing and other domestic or foreign regulations may limit the use and adoption of our solutions and adversely affect our business.

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 cloud software to improve customer satisfaction, empower agents, reduce service cost, and boost sales.

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.

8 unchanged sentences

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, we disaggregate our subscription revenue growth between:

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 OEM royalties and associated support;

2 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

(in thousands)

7 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

(in thousands)

8 unchanged sentences

Three Months Ended

Nine Months Ended

(in thousands)

Loss from operations

September 30,

Income (loss) from operations

Stock-based compensation

3 unchanged sentences

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, which are described in Note 1 “Summary of Business and Significant Accounting Policies” to our condensed consolidated financial statements, associated with revenue recognition, stock-based compensation, allowance for doubtful accounts, the valuation of goodwill, the valuation of deferred tax allowance, and legal contingencies have the greatest potential impact on our condensed consolidated financial statements.

We believe that the assumptions and estimates, which are described in Note 1 “Summary of Business and Significant Accounting Policies” to our condensed consolidated financial statements, associated with revenue recognition, stock-based compensation, allowance for doubtful accounts related to estimated credit losses, the valuation of goodwill, the valuation of deferred tax allowance, and legal contingencies have the greatest potential impact on our condensed consolidated financial statements.

We evaluate these estimates on an ongoing basis.

20 unchanged sentences

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

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

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

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

Managed services include a comprehensive set of processes and activities that range from implementation to monitoring the evolution and support of eGain solutions in a company.

Our consulting and implementation service contracts are bid either on a time-and-materials basis or on a fixed-fee basis.

Managed services include a comprehensive set of processes and activities that range from implementation to monitoring the evolution and support of our solutions in a company.

Our consulting and implementation service contracts are bid either on a time-and-material basis or on a fixed-fee basis.

Managed services contracts are bid on a time-and-material basis.

5 unchanged sentences

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 March 31, 2023, our remaining performance obligations were $87.3 million, of which we expect to recognize $52.1 million and $35.2 million as revenue within one year and beyond one year, respectively.

As of September 30, 2023, our remaining performance obligations were $82.4 million, of which we expect to recognize $59.7 million and $22.7 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.

13 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Professional services

9 unchanged sentences

Total operating expenses

Loss from operations

Income (loss) from operations

We classify our revenue into two categories:

1 unchanged sentence

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 three and nine months ended March 31, 2023 and 2022, respectively:

The following table presents our subscription and professional services revenue during the three months ended September 30, 2023 and 2022, respectively:

Three Months Ended

Nine Months Ended

September 30,

(in thousands, except percentages)

1 unchanged sentence

Total revenue

Total revenue for the three months ended March 31, 2023 decreased by $891,000, compared to the same period in fiscal year 2022, primarily due to the decline in legacy revenue.

Total revenue for the nine months ended March 31, 2023 increased by $4.9 million, while SaaS revenue increased by $6.6 million, compared to the same period in fiscal year 2022.

The increase for the nine months ended March 31, 2023 was partially offset by a decline in our legacy revenue as we continue to migrate legacy perpetual license customers to our SaaS model.

Total revenue decreased approximately $587,000 during the three months ended September 30, 2023, compared to the same period in fiscal year 2023, due to a decrease in SaaS and legacy revenue of $372,000 and $228,000, offset by an increase of $13,000 in professional services, respectively, during the three months ended September 30, 2023, compared to the same period in fiscal year 2023.

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

1 unchanged sentence

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 a decrease of $534,000 and $181,000 in total revenue during the three months ended March 31, 2023 and 2022, respectively.

Foreign exchange rate fluctuation resulted in a decrease of $2.4 million and an increase of $310,000 for the nine months ended March 31, 2023 and 2022, respectively.

Foreign exchange rate fluctuation resulted in an increase of $426,000 and a decrease of $909,000 in total revenue during the three months ended September 30, 2023 and 2022, respectively.

Subscription Revenue

Three Months Ended

Nine Months Ended

September 30,

(in thousands, except percentages)

1 unchanged sentence

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

Revenue from SaaS increased by $168,000 and $6.6 million during the three and nine months ended March 31, 2023, respectively, compared to the same periods in fiscal year 2022.

Revenue from SaaS decreased by $372,000 during the three months ended September 30, 2023, compared to the same period in fiscal year 2023.

In connection with our SaaS transition, we are actively migrating our remaining perpetual license clients to SaaS and continue to sell SaaS to new customers.

SaaS revenue represents 91% of total revenue for the three and nine months ended March 31, 2023, compared to 87% and 88%, respectively, during the same periods in fiscal year 2022.

This represented an increase in SaaS revenue of 1% and 11% for the three and nine months ended March 31, 2023, respectively, compared to the same periods in fiscal year 2022.

Excluding a decrease of $490,000 and $2.0 million due to foreign exchange rate fluctuation, SaaS revenue increased by $658,000 and $8.6 million during the three and nine months ended March 31, 2023, respectively, compared to the same periods in fiscal year 2022.

SaaS revenue represents 92% of total revenue for the three months ended September 30, 2023, compared to 91% during the same period in fiscal year 2023.

This represented a decrease in SaaS revenue of 2% for the three months ended September 30, 2023, compared to the same period in fiscal year 2023.

Excluding an increase of $400,000 due to foreign exchange rate fluctuation, SaaS revenue decreased by $772,000 during the three months ended September 30, 2023, compared to the same period in fiscal year 2023.

Legacy Revenue

Three Months Ended

Nine Months Ended

September 30,

(in thousands, except percentages)

2 unchanged sentences

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

We experienced decreases of $916,000 and $2.2 million during the three and nine months ended March 31, 2023, respectively, compared to the same periods in fiscal year 2022.

We experienced a decrease of $228,000 during the three months ended September 30, 2023, compared to the same period in fiscal year 2023.

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

Excluding decreases of $10,000 and $132,000 due to foreign exchange rate fluctuation, legacy revenue decreased by $906,000 and $2.1 million during the three and nine months ended March 31, 2023, respectively, compared to the same periods in fiscal year 2022.

We expect these legacy fees to continue to decline in future quarters.

Excluding an increase of $3,000 due to foreign exchange rate fluctuation, legacy revenue decreased by $231,000 during the three months ended September 30, 2023, compared to the same period in fiscal year 2023.

Professional Services Revenue

Three Months Ended

Nine Months Ended

September 30,

(in thousands, except percentages)

1 unchanged sentence

Percentage of total revenue

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

Revenue from professional services decreased by $143,000 during the three months ended March 31, 2023 and increased by $591,000 during the nine months ended March 31, 2023, respectively, compared to the same periods in fiscal year 2022.

The decrease for three months ended March 31, 2023, compared to the prior year was primarily due to a reduction in time and effort

required for an average project.

The increase for the nine months ended March 31, 2023, compared to the same period in fiscal year 2022, was primarily due to new and ongoing customer implementations and an increase in managed services.

Excluding a decrease of $34,000 and $183,000 due to foreign exchange rate fluctuation, professional services revenue decreased by $109,000 and increased by $774,000 during the three and nine months ended March 31, 2023, respectively, compared to the same periods in fiscal year 2022.

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

Revenue from professional services increased by $13,000 during the three months ended September 30, 2023, compared to the same period in fiscal year 2023.

Excluding an increase of $23,000 due to foreign exchange rate fluctuation, professional services revenue decreased by $10,000 during the three months ended September 30, 2023, compared to the same period in fiscal year 2023.

Revenue by Geography

Three Months Ended

Nine Months Ended

September 30,

(in thousands, except percentages)

2 unchanged sentences

Total revenue

Revenue from North America sales increased by 2% from $17.5 million during the three months ended March 31, 2022 to $17.9 million during the three months ended March 31, 2023 due to increases of (i) $800,000 in SaaS revenue and (ii) $114,000 in professional services revenue;

partially offset by a decrease of $538,000 in legacy revenue.

Revenue from North America sales increased by 15% from $49.5 million during the nine months ended March 31, 2022 to $56.8 million during the nine months ended March 31, 2023 due to increases of (i) $7.6 million in SaaS revenue, and (ii) $1.1 million in professional services revenue;

partially offset by a decrease of $1.4 million in legacy revenue.

Revenue from combined Europe, Middle East, and Africa sales decreased by 20% from $6.4 million for the three months ended March 31, 2022 to $5.2 million during the three months ended March 31, 2023, due to decreases of (i) $631,000 in SaaS revenue, (ii) $379,000 in legacy revenue, and (iii) $257,000 in professional services revenue.

Revenue from combined Europe, Middle East, and Africa sales decreased by 13% from $19.0 million for the nine months ended March 31, 2022 to $16.6 million during the nine months ended March 31, 2023, due to decreases of (i) $1.1 million in SaaS revenue, (ii) $841,000 in legacy revenue, and (iii) $477,000 in professional services revenue.

Revenue from North America sales decreased by 1% from $19.1 million during the three months ended September 30, 2022 to $19.0 million during the three months ended September 30, 2023 due to a decrease of $262,000 in legacy revenue;

partially offset by increases of (i) $101,000 in SaaS revenue and (ii) $30,000 in professional services revenue.

Revenue from EMEA sales decreased by 8% from $5.6 million for the three months ended September 30, 2022 to $5.2 million during the three months ended September 30, 2023, due to decreases of (i) $473,000 in SaaS revenue and (ii) $17,000 in professional services revenue;

partially offset by an increase of $34,000 in legacy revenue.

Cost of Revenue

Three Months Ended

Nine Months Ended

September 30,

(in thousands, except percentages)

4 unchanged sentences

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 revenue increased by $1.6 million during the three months ended March 31, 2023, from the same period in fiscal year 2022.

This increase was primarily due to increases of (i) $1.8 million in cloud-computing costs and (ii) $15,000 in outside consulting cost;

partially offset by a decrease of $149,000 in personnel-related costs.

Cost of subscription revenue increased by $3.0 million during the nine months ended March 31, 2023, from the same period in fiscal year 2022.

This increase was primarily due to increases of (i) $3.2 million in cloud-computing costs and (ii) $78,000 in outside consulting costs;

partially offset by a decrease of $40,000 in personnel related costs.

Excluding a decrease of $68,000 and $276,000 due to foreign exchange rate fluctuation, cost of subscription revenue increased by $1.7 million and $3.3 million during the three and nine months ended March 31, 2023, respectively, from the same periods in fiscal year 2022.

Cost of subscription revenue increased by $1.1 million during the three months ended September 30, 2023, from the same period in fiscal year 2023.

This increase was primarily due to increases of (i) $749,000 in cloud-computing costs and (ii) $350,000 in personnel-related costs;

partially offset by a decrease of $48,000 in outside consulting costs.

Excluding an increase of $18,000 due to foreign exchange rate fluctuation, cost of subscription revenue increased by $1.0 million during the three months ended September 30, 2023, from the same period in fiscal year 2023.

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 $532,000 during the three months ended March 31, 2023, from the same period in fiscal year 2022.

This decrease was primarily due to a decrease of $556,000 in personnel-related costs;

partially offset by an increase of $87,000 in outside consulting costs.

Cost of professional services decreased by $291,000 during the nine months ended March 31, 2023, from the same period in fiscal year 2022.

Cost of professional services decreased by $513,000 during the three months ended September 30, 2023, from the same period in fiscal year 2023.

This decrease was primarily due to a decrease of $552,000 in personnel-related costs;

partially offset by an increase of $4,000 in outside consulting costs.

Excluding a decrease of $62,000 and $205,000 due to foreign exchange rate fluctuation, cost of professional services revenue decreased by $470,000 and $87,000 during the three and nine months ended March 31, 2023, respectively, compared to the same periods in fiscal year 2022.

Excluding an increase of $36,000 due to foreign exchange rate fluctuation, cost of professional services revenue decreased by $548,000 during the three months ended September 30, 2023, compared to the same period in fiscal year 2023.

Operating Expenses

1 unchanged sentence

Three Months Ended

Nine Months Ended

September 30,

(in thousands, except percentages)

4 unchanged sentences

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

Research and development expense increased by 8% to $6.7 million for the three months ended March 31, 2023, from $6.2 million in the same period in fiscal year 2022.

Excluding a decrease of $147,000 due to foreign exchange rate fluctuation, research and development expense increased primarily due to an increase of $726,000 in personnel-related costs;

partially offset by a decrease of $85,000 from outside consulting costs.

Research and development expense increased by 15% to $20.7 million for the nine months ended March 31, 2023, from $18.0 million in the same period in fiscal year 2022.

Excluding a decrease of $557,000 due to foreign exchange rate fluctuation, research and development expense increased primarily due to increases of (i) $3.2 million in personnel-related costs and (ii) $109,000 from outside consulting costs.

Research and development expense decreased by $242,000 during the three months ended September 30, 2023, from the same period in fiscal year 2023.

This decrease was primarily due to decreases of (i) $153,000 in personnel-related costs and (ii) $113,000 in outside consulting costs.

Excluding an increase of $24,000 due to foreign exchange rate fluctuation, research and development expense decreased by $266,000 during the three months ended September 30, 2023, compared to the same period in fiscal year 2023.

Sales and Marketing

Three Months Ended

Nine Months Ended

September 30,

(in thousands, except percentages)

4 unchanged sentences

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 21% to $6.8 million for the three months ended March 31, 2023, from $8.7 million in the same period in fiscal year 2022.

Excluding a decrease of $211,000 due to foreign exchange rate fluctuation, sales and marketing expense decreased primarily due to decreases of (i) $1.4 million in personnel-related costs and (ii) $240,000 in lead generation costs;

offset by an increase of $32,000 in outside consulting costs.

Sales and marketing expenses increased by 4% to $25.2 million for the nine months ended March 31, 2023, from $24.3 million in the same period in fiscal year 2022.

Excluding a decrease of $724,000 due to foreign exchange rate fluctuation, sales and marketing expense increased primarily due to increases of (i) $1.6 million in lead generation costs, (ii) $65,000 in outside consulting costs and (iii) $7,000 in personnel-related costs.

Sales and marketing expenses decreased by $3.4 million during three months ended September 30, 2023, from the same period in fiscal year 2023.

The decrease was primarily due to decreases of (i) $3.3 million in personnel-related expenses, (ii) $212,000 in marketing program expenses, and (iii) $20,000 in outside consulting expenses.

Excluding an increase of $148,000 due to foreign exchange rate fluctuation, sales and marketing expense decreased by $3.5 million during the three months ended September 30, 2023, compared to the same period in fiscal year 2023.

General and Administrative

Three Months Ended

Nine Months Ended

September 30,

(in thousands, except percentages)

4 unchanged sentences

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

General and administrative expenses decreased by 19% to $2.4 million for the three months ended March 31, 2023, from $3.0 million in the same period in fiscal year 2022.

Excluding a decrease of $57,000 due to foreign exchange rate fluctuation, general and administrative expense decreased primarily due to decreases of (i) $636,000 in personnel-related costs, (ii) $55,000 in legal related costs, (iii) $8,000 in outside-consulting costs, and (iv) $7,000 in investor relations costs;

partially offset by increases of (i) $193,000 in accounting, audit, and administrative costs and (ii) $19,000 in bad debt costs.

General and administrative expenses decreased by 10% to $7.8 million for the nine months ended March 31, 2023, from $8.7 million in the same period in fiscal year 2022.

Excluding a decrease of $162,000 due to foreign exchange rate fluctuation, general and administrative expense decreased primarily due to decreases of (i) $1.0 million in personnel-related costs, (ii) $30,000 in legal related costs, and (iii) $24,000 in investor relations costs;

partially offset by increases of (i) $170,000 in bad debt costs, (ii) $92,000 in outside consulting costs, and (iii) $64,000 in accounting, audit, and administrative costs.

Loss from Operations

General and administrative expenses increased by $368,000 during the three months ended September 30, 2023, from the same period in fiscal year 2023.

The increase was primarily due to increases of (i) $755,000 in legal expenses and (ii) $51,000 in accounting, audit, and administrative expenses;

partially offset by decreases of (i) $248,000 in personnel-related expenses, (ii) $207,000 in bad debt expenses, (iii) $17,000 in outside-consulting expenses, and (iv) $2,000 in investor relations expenses.

Excluding an increase of $36,000 due to foreign exchange rate fluctuation, general and administrative expense increased

$332,000 during the three months ended September 30, 2023, compared to the same period in fiscal year 2023.

Income (Loss) from Operations

Three Months Ended

Nine Months Ended

September 30,

(in thousands, except percentages)

Loss from operations

Income (loss) from operations

Operating margin

Loss from operations was $512,000 with an operating loss margin of 2% during the three months ended March 31, 2023.

Loss from operations during the three months ended March 31, 2023 included $1.4 million of stock-based compensation and $381,000 of amortization of costs capitalized to obtain revenue contracts.

Loss from operations was $969,000 with an operating loss margin of 1% during the nine months ended March 31, 2023.

Loss from operations during the nine months ended March 31, 2023 included $5.3 million of stock-based compensation and $1.2 million of amortization of costs capitalized to obtain revenue contracts.

Income from operations was $1.4 million with an operating profit margin of 6% during the three months ended September 30, 2023.

Income from operations during the three months ended September 30, 2023 included $1.2 million of stock-based compensation and $500,000 of amortization of costs capitalized to obtain revenue contracts.

Interest Income

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

Interest income was income of $818,000 and $3,000 during the three months ended March 31, 2023 and 2022, respectively.

Interest income was income of $1.6 million and $7,000 during the nine months ended March 31, 2023 and 2022, respectively.

Other Income (Expense), Net

Other income (expense), net was expense of $245,000 and income $200,000 during the three months ended March 31, 2023 and 2022, respectively.

Other income (expense), net was income of $20,000 and $182,000 during the nine months ended March 31, 2023 and 2022, respectively.

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

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

Interest income was $949,000 and $286,000 during the three months ended September 30, 2023 and 2022, respectively, due to higher interest rates.

Other Income, Net

Other income, net was income of $610,000 and $810,000 during the three months ended September 30, 2023 and 2022, respectively.

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

Income Tax Provision

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

Due to recent U.S.

book losses, we maintain a valuation allowance against U.S.

deferred tax assets as of March 31, 2023.

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 income tax provision of $433,000 and $1.2 million for the three and nine months ended March 31, 2023, respectively.

We recorded income tax provision of $342,000 and $663,000 for the three and nine months ended March 31, 2022, respectively.

Due to cumulative losses, we maintain a valuation allowance against U.S.

deferred tax assets as of September 30, 2023.

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

We recorded income tax provision of $379,000 and $442,000 for the three months ended September 30, 2023 and 2022, respectively.

Liquidity and Capital Resources

As of March 31, 2023 and June 30, 2022, our principal sources of liquidity were cash and cash equivalents, and accounts receivable totaling $91.5 million and $99.1 million, respectively.

Our cash, cash equivalents and restricted cash were $81.3 million and $72.2 million as of March 31, 2023 and June 30, 2022, respectively.

As of September 30, 2023 and June 30, 2023, our principal sources of liquidity were cash and cash equivalents, restricted cash, and accounts receivable totaling $98.3 million and $104.8 million, respectively.

Our cash, cash equivalents and restricted cash were $79.8 million and $73.2 million as of September 30, 2023 and June 30, 2023, 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.

2 unchanged sentences

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 nine months ended March 31, 2023 and 2022, our cash flows were as follows (in thousands):

Nine Months Ended

For the three months ended September 30, 2023 and 2022, our cash flows were as follows (in thousands):

Three Months Ended

September 30,

Net cash provided by operating activities

Net cash used in investing activities

Net cash provided by financing activities

Cash provided by operating activities mainly consists of net loss adjusted for non-cash expense items such as depreciation and amortization, expense associated with stock-based awards, 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 $3.2 million during the nine months ended March 31, 2023, from the same period in fiscal year 2022, driven primarily by the timing of accounts receivable collections and deferred revenue recognitions.

Net cash used in investing activities decreased by $324,000 during the nine months ended March 31, 2023, from the same period in fiscal year 2022, driven primarily by less activities related to the purchase of equipment for new employees and facility expenditures.

Net cash (used in) provided by financing activities

Cash provided by operating activities mainly consists of net income (loss) adjusted for non-cash expense items such as depreciation and amortization, expense associated with stock-based awards, 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 $7.4 million during the three months ended September 30, 2023, from the same period in fiscal year 2023, driven primarily by the timing of collections for accounts receivable, payments of accounts payable, and recognition of deferred revenue.

Net cash used in investing activities decreased by $88,000 during the three months ended September 30, 2023, from the same period in fiscal year 2023, driven primarily by activities related to the purchase of equipment for new 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 financing activities decreased by $2.6 million during the nine months ended March 31, 2023, from the same period in fiscal year 2022.

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 $1.1 million.

Net cash used in financing activities increased by $510,000 during the three months ended September 30, 2023, from the same period in fiscal year 2023.

Our current proceeds consist primarily of proceeds from the exercise of employee stock options, our employee stock purchase plan, and funds used for repurchases of our common stock of approximately $517,000.

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 March 31, 2023, the future non-cancelable minimum payments under these commitments were approximately $3.1 million.

As of September 30, 2023, the future non-cancelable minimum payments under these commitments were approximately $2.5 million.

Off-Balance Sheet Arrangements

As of March 31, 2023, we had no significant off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.

As of September 30, 2023, we had no significant off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.

New Accounting Pronouncements

1 unchanged sentence

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