Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and the related notes included in Item 1 of Part I of this Quarterly Report on Form 10-Q, and with our audited financial statements and the related notes included in our Annual Report on Form 10-K for the year ended June 30, 2024.
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to future periods, future events or our future operating or financial plans or performance. Often, these statements include the words “believe,” “expect,” “target,” “anticipate,” “intend,” “plan,” “seek,” “estimate,” “potential,” or words of similar meaning, or future or conditional verbs such as “will,” “would,” “should,” “could,” “might,” or “may,” or the negative of these terms, and other similar expressions. These forward-looking statements that involves risks and uncertainties include statements as to:
● 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;
● 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 plans, strategies, targets, and outlook;
● changes in technology, including AI technology and services;
● our expectations related to our product development plan;
● competition in the markets in which we do business and our competitive advantages;
● our beliefs regarding our prospects for our business;
● changes in demand for our solutions;
● our expectations regarding the composition of our customers and the result of a loss of a significant customer;
● our reliance on strategic and third party distribution partnerships;
● the risk of unauthorized access to a customer’s data or our data or our IT systems and cybersecurity attacks;
● our ability to timely adapt and comply with changing European regulatory and political environments;
● the effect of recent changes in U.S. tax legislation;
● the effect of compliance with privacy laws and regulations on our business and our customers;
● our ability to take adequate precautions against claims or lawsuits made by third parties, including alleged infringement of proprietary rights;
● the adequacy of our capital resources and our ability to raise additional financing;
● the risks related to our international operations;
● the potential impact of foreign currency fluctuations and inflation; and
● the potential impact of health epidemics.
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These forward-looking statements reflect our current views with respect to future events, are based on assumptions and are subject to risks and uncertainties. These risks and uncertainties could cause actual results to differ materially from those projected and include, but are not limited to:
● our ability to manage our business plans, strategies, targets, and outlooks and any business-related forecasts or projections;
● our ability to improve our current solutions;
● our ability to innovate and respond to rapid technological change and competitive challenges;
● our ability to execute our sales and marketing strategy;
● customer acceptance of our existing and future solutions;
● our ability to predict subscription renewals;
● the impact of new legislation or regulations on our business;
● the impact of accounting pronouncements and our critical accounting policies, judgments, estimates, models and assumptions on our financial results;
● our ability to compete;
● the success of our strategic and distribution partnerships;
● our ability to obtain capital when needed;
● our ability to manage future growth;
● our ability to retain key personnel and hire additional personnel;
● risks related to protection of our intellectual property;
● foreign currency fluctuations and inflation;
● the global economic environment;
● risks related to public health pandemics; and
● the risks set forth under “Risk Factors.”
Given these risks and uncertainties, you should not place undue reliance on these forward-looking statements. Except as required by federal securities laws, we undertake no obligation to update any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.
All references to “eGain”, the “Company”, “our”, “we” or “us” mean eGain Corporation and its subsidiaries, except where it is clear from the context that such terms mean only eGain and exclude its subsidiaries.
eGain and eGain® are trademarks of eGain Corporation. We also refer to trademarks of other corporations and organizations in this report.
Summary Risk Factors
Our business is subject to numerous risks and uncertainties that could affect our ability to successfully implement our business strategy and affect our financial results. You should carefully consider all of the information in this report and, in particular, the following principal risks and all of the other specific factors described in Item 1A. of this report, “Risk Factors,” before deciding whether to invest in our company.
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● Our business is influenced by a range of factors that are beyond our control and that we have no comparative advantage in forecasting.
● Our SaaS business model is subject to certain risks.
● Our revenue and operating results have fluctuated in the past and are likely to fluctuate in the future, and because we recognize revenue from subscriptions over a period of time, downturns in revenue may not be immediately reflected in our operating results.
● We cannot accurately predict subscription renewal rates and the impact these rates may have on our future revenue and operating results.
● Our lengthy sales cycles and the difficulty in predicting timing of sales or delays may impair our operating results.
● 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, 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.
● Our failure to maintain, develop or expand strategic and third-party distribution channels would impede our revenue growth.
● Difficulties and delays in customers implementing our products could harm our revenue and margins.
● We conduct a significant portion of our business and operations outside of the United States, which exposes us to additional risks that may not exist in the United States. These risks in turn could cause our operating results and financial condition to suffer.
● Unplanned system interruptions, delays in service or inability to increase capacity, including internationally, at our third-party data center facilities could impair the use or functionality of our cloud operations and harm our business.
● Software errors could be costly and time-consuming for us to correct, and could harm our reputation and impair our ability to sell our solutions.
● The terms we agree to in our Service Level Agreements or other contracts may result in increased costs or liabilities, which would in turn affect our results of operations.
● If we are unable to increase the profitability of SaaS revenue, if we experience significant customer attrition, or if we are required to delay recognition of revenue, our operating results could be adversely affected.
● We depend on broad market acceptance of our applications and of our business model. If our expectations regarding the market for our applications are not met, our business could be seriously harmed.
● We may be unable to respond to the rapid technological change and changing customer preferences in the online sales, marketing, customer service, and/or online consumer services industries and this may cause our business to suffer.
● We employ third-party technologies for use in or with our platform and the inability to license such technologies on commercially reasonable terms or the inability to maintain these licenses or errors in the software we license could result in increased costs, or reduced service levels, which could adversely affect our business.
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● 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.
● 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.
Overview
eGain automates customer engagement with an AI knowledge hub SaaS solution. We sell to enterprises who want to better serve customers at scale by delivering trusted answers across self-service, contact centers, and field staff. True to our mantra of AX + BX + CX = DX™ , our AI knowledge hub orchestrates effortless Digital eXperience (DX) as it assists Agent eXperience (AX), empowers Business eXperience (BX) and assures Customer eXperience (CX). Many global brands use eGain to improve experience and reduce costs. We are headquartered in the Sunnyvale, California, United States. We also operate in the United Kingdom and India
Key Financial Measures
We monitor the key financial performance measures set forth below as well as cash and cash equivalents and available debt capacity, which are discussed in “Liquidity and Capital Resources,” to help us evaluate trends, establish budgets, measure the effectiveness of our sales and marketing efforts and assess operational effectiveness and efficiencies.
SaaS and Professional Services Revenue
We believe the combination of SaaS and professional services revenue is a useful measure to value our business. SaaS revenue is defined as revenue from cloud delivery arrangements, term licenses, embedded OEM royalties and associated support. Professional services revenue includes system implementation, consulting, training, and managed services.
The following table presents total SaaS and professional services revenue for each of the following periods:
Three Months Ended
September 30,
(in thousands)
2024
2023
Change
SaaS revenue
$
19,820
$
22,323
$
(2,503)
(11)
%
Professional services revenue
1,979
1,853
126
7
%
Total SaaS and professional services revenue
$
21,799
$
24,176
$
(2,377)
(10)
%
Non-GAAP Operating Income
Non-GAAP operating income is defined as income from operations, adjusted for the impact of stock-based compensation expense.
Management believes that it is useful to exclude certain non-cash charges and non-core operational charges from non-GAAP operating income because (i) the amount of such expenses in any specific period may not directly correlate to the underlying performance of our business operations; and (ii) such expenses can vary significantly between periods as a
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result of the timing of new stock-based awards. The presentation of the non-GAAP financial measures is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with generally accepted accounting principles in the United States of America (GAAP).
The following table presents a reconciliation of GAAP income from operations to non-GAAP income from operations for each of the following periods:
Three Months Ended
September 30,
2024
2023
Income from operations
$
509
$
1,416
Add:
Stock-based compensation
632
1,208
Non-GAAP income from operations
$
1,141
$
2,624
Critical Accounting Policies and Estimates
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.
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, provision for 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. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Sources of Revenue
Our revenue is comprised of two categories including SaaS and professional services. SaaS revenue includes cloud delivery arrangements, term licenses, embedded original equipment manufacturer (OEM) royalties, and associated support. An immaterial amount of SaaS revenue is comprised of our legacy revenue which is associated with license, maintenance, and support contracts on perpetual license arrangements that we no longer sell. Professional services includes consulting, implementation, training, and managed services.
SaaS Revenue
For our cloud delivery arrangements, our maintenance and support arrangements and our term license subscriptions that incorporate substantial cloud functionality, the combined performance obligation is recognized ratably over the contract term as the obligation is delivered. For contracts involving distinct software licenses, the license performance obligation is satisfied at a point in time when control is transferred to the customer.
We typically invoice our customers in advance upon execution of the contract or subsequent renewals. Invoiced amounts are recorded in accounts receivable, deferred revenue or revenue, depending on when control is transferred to our customers based on each arrangement.
We have a royalty revenue agreement with a customer related to our embedded intellectual property. Under the terms of the agreement, the customer is to provide a combined fixed fee, per agent, for each software license sold containing the embedded software to us. These embedded OEM royalties are included as SaaS revenue. Under revenue guidance, since
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these arrangements are for sales-based licenses of intellectual property, we recognize revenue only as the subsequent sale occurs. However, since such sales are reported by the customer with a quarter in arrears, such revenue is recognized at the time it is reported and paid by the customer given that any estimated variable consideration would have to be fully constrained due to the unpredictability of such estimate and the unavoidable risk that it may lead to significant revenue reversals.
Professional Services Revenue
Professional services revenue includes system implementation, consulting, training, and managed services. The transaction price is allocated to various performance obligations based on their 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 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. Fixed fees are generally paid on milestone billing at pre-determined points in the contract. Amounts that have been invoiced are recorded in accounts receivable and in deferred revenue or revenue, depending on whether transfer of control to customers has occurred.
Training revenue that meets the criteria to be accounted for separately is recognized when training is provided.
Remaining Performance Obligations
Remaining performance obligations represent contracted revenue that had not yet been recognized, and include billed deferred revenue, consisting of amounts invoiced to customers whether collected or uncollected which have not been recognized as revenue, as well as unbilled amounts that will be invoiced and recognized as revenue in future periods. The transaction price allocated to the remaining performance obligation is influenced by a variety of factors, including seasonality, timing of renewals, average contract terms and foreign currency exchange rates.
As of September 30, 2024, our remaining performance obligations were $70.4 million, of which we expect to recognize $54.5 million and $15.9 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. We typically issue renewal invoices in advance of the renewal service period. Depending on timing, the initial invoice and subsequent renewal invoices may occur in different quarters. This may result in an increase or decrease to our accounts receivable and deferred revenue.
Costs Capitalized to Obtain Revenue Contracts
Under Topic 606, we capitalize incremental costs to obtain non-cancelable subscription and maintenance and support revenue contracts with amortization periods that may extend longer than the non-cancelable subscription and maintenance and support revenue contract terms.
We capitalize incremental costs of obtaining a non-cancelable subscription and maintenance and support revenue contract with amortization periods of one year or more. The capitalized amounts consist primarily of sales commissions paid to our direct sales force. Capitalized amounts also include (i) amounts paid to employees other than the direct sales force who earn incentive payouts under annual compensation plans that are tied to the value of contracts acquired and (ii) the associated payroll taxes and fringe benefit costs associated with the payments to our employees.
Costs capitalized related to new revenue contracts are generally deferred and amortized on a straight-line basis over a period of benefit that we estimate to be five years. We determine the period of benefit by taking into consideration the period from initial contract through renewal, which constitutes the length of our customer relationship or customer life. Amortization of costs capitalized related to new revenue contracts is included as a component of sales and marketing expense in our operating results.
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Results of Operations
The following table sets forth certain items reflected in our condensed consolidated statements of operations expressed as a percent of total revenue for the periods indicated:
Three Months Ended
September 30,
2024
2023
Revenue:
SaaS
91
%
92
%
Professional services
9
%
8
%
Total revenue
100
%
100
%
Cost of revenue:
Cost of SaaS
21
%
21
%
Cost of professional services
10
%
7
%
Total cost of revenue
31
%
28
%
Gross profit
69
%
72
%
Operating expenses:
Research and development
34
%
27
%
Sales and marketing
22
%
25
%
General and administrative
11
%
13
%
Total operating expenses
67
%
65
%
Income from operations
2
%
6
%
Revenue
We classify our revenue into two categories: SaaS and professional services revenue, with SaaS revenue being a key metric.
The following table presents our SaaS and professional services revenue during the three months ended September 30, 2024 and 2023, respectively:
Three Months Ended
September 30,
(in thousands, except percentages)
2024
2023
Change
SaaS
$
19,820
$
22,323
$
(2,503)
(11)
%
Professional services
1,979
1,853
126
7
%
Total revenue
$
21,799
$
24,176
$
(2,377)
(10)
%
Total revenue decreased approximately $2.4 million during the three months ended September 30, 2024, compared to the same period in fiscal year 2024, due to a decrease in SaaS revenue of $2.5 million offset by an increase of $126,000 in professional services, respectively, during the three months ended September 30, 2024, compared to the same period in fiscal year 2024.
Our revenue was impacted by foreign exchange rate fluctuation between the U.S. Dollar, Euro, and British Pound. 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 $144,000 and $426,000 in total revenue during the three months ended September 30, 2024 and 2023, respectively.
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SaaS Revenue
Three Months Ended
September 30,
(in thousands, except percentages)
2024
2023
Change
SaaS revenue
$
19,820
$
22,323
$
(2,503)
(11)
%
Percentage of total revenue
91
%
92
%
SaaS revenue includes revenue from cloud delivery arrangements, term licenses and embedded OEM royalties, associated support, and an immaterial amount of legacy revenue. Revenue from SaaS decreased by $2.5 million during the three months ended September 30, 2024, compared to the same period in fiscal year 2024 primarily due to departures of two impactful customers.
SaaS revenue represents 91% of total revenue for the three months ended September 30, 2024, compared to 92% during the same period in fiscal year 2024. This represented a decrease in SaaS revenue of 11% for the three months ended September 30, 2024, compared to the same period in fiscal year 2024.
Excluding an increase of $132,000 due to foreign exchange rate fluctuation, SaaS revenue decreased by $2.6 million during the three months ended September 30, 2024, compared to the same period in fiscal year 2024.
Professional Services Revenue
Three Months Ended
September 30,
(in thousands, except percentages)
2024
2023
Change
Professional services revenue
$
1,979
$
1,853
$
126
7
%
Percentage of total revenue
9
%
8
%
Professional services revenue includes consulting, implementation, training, and managed services. Revenue from professional services increased by $126,000 during the three months ended September 30, 2024, compared to the same period in fiscal year 2024.
Excluding an increase of $12,000 due to foreign exchange rate fluctuation, professional services revenue increased by $114,000 during the three months ended September 30, 2024, compared to the same period in fiscal year 2024.
Revenue by Geography
Three Months Ended
September 30,
(in thousands, except percentages)
2024
2023
Change
North America
$
16,423
$
18,989
$
(2,566)
(14)
%
Europe, Middle East, & Africa
5,376
5,187
189
4
%
Total revenue
$
21,799
$
24,176
$
(2,377)
(10)
%
Revenue from North America sales decreased by 14% from $19.0 million during the three months ended September 30, 2023 to $16.4 million during the three months ended September 30, 2024 primarily due to a decrease of $2.5 million in SaaS revenue.
Revenue from EMEA sales increased by 4% from $5.2 million for the three months ended September 30, 2023 to $5.4 million during the three months ended September 30, 2024, due to increases of (i) $57,000 in SaaS revenue and (ii) $132,000 in professional services revenue.
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Cost of Revenue
Three Months Ended
September 30,
(in thousands, except percentages)
2024
2023
Change
SaaS
$
4,522
$
5,047
$
(525)
(10)
%
Professional services
2,144
1,791
353
20
%
Total cost of revenue
$
6,666
$
6,838
$
(172)
(3)
%
Percentage of total revenue
31
%
28
%
Gross margin
69
%
72
%
SaaS
Cost of SaaS revenue consists primarily of expenses related to our cloud services and providing support to our customers. These expenses are comprised of cloud computing costs, personnel-related costs directly associated with cloud operations, and customer support, including salaries, benefits, bonuses and stock-based compensation and allocated overhead.
Cost of SaaS revenue decreased by $525,000 during the three months ended September 30, 2024, from the same period in fiscal year 2024. This decrease was primarily due to decreases of (i) $282,000 in cloud-computing costs and (ii) $230,000 in personnel-related costs, and (iii) $16,000 in outside consulting costs.
Excluding an increase of $3,000 due to foreign exchange rate fluctuation, cost of SaaS revenue decreased by $528,000 during the three months ended September 30, 2024, from the same period in fiscal year 2024.
Professional Services
Cost of professional services consists primarily of personnel-related costs directly associated with our professional services and training departments, including salaries, benefits, bonuses, and stock-based compensation and allocated overhead.
Cost of professional services increased by $353,000 during the three months ended September 30, 2024, from the same period in fiscal year 2024. This increase was primarily due to an increase of $358,000 in personnel-related costs; partially offset by a decrease of $2,000 in outside consulting costs.
Excluding a decrease of $3,000 due to foreign exchange rate fluctuation, cost of professional services revenue increased by $356,000 during the three months ended September 30, 2024, compared to the same period in fiscal year 2024.
Operating Expenses
Research and Development
Three Months Ended
September 30,
(in thousands, except percentages)
2024
2023
Change
Research and development
$
7,421
$
6,632
$
789
12
%
Percentage of total revenue
34
%
27
%
Research and development expense primarily consists of personnel-related expenses directly associated with our engineering, product management and development, and quality assurance staff. Included in these costs are salaries,
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benefits, bonuses, and stock-based compensation and allocated overhead. Research and development expense also includes outside consulting services contracted for research and development.
Research and development expense increased by $789,000 during the three months ended September 30, 2024, from the same period in fiscal year 2024. This increase was primarily due to increase of $795,000 in personnel-related costs and partially offset by a decrease of $12,000 in outside consulting costs.
Excluding an increase of $6,000 due to foreign exchange rate fluctuation, research and development expense increased by $783,000 during the three months ended September 30, 2024, compared to the same period in fiscal year 2024.
Sales and Marketing
Three Months Ended
September 30,
(in thousands, except percentages)
2024
2023
Change
Sales and marketing
$
4,760
$
6,104
$
(1,344)
(22)
%
Percentage of total revenue
22
%
25
%
Sales and marketing expense primarily consists of personnel-related expenses directly associated with our sales, marketing and business development staff. Included in these costs are salaries, benefits, bonuses, and stock-based compensation and allocated overhead. 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 $1.3 million during three months ended September 30, 2024, from the same period in fiscal year 2024. The decrease was primarily due to decreases of (i) $804,000 in personnel-related expenses and (ii) $654,000 in marketing program expenses; partially offset by an increase of $33,000 in outside consulting expenses.
Excluding an increase of $81,000 due to foreign exchange rate fluctuation, sales and marketing expense decreased by $1.4 million during the three months ended September 30, 2024, compared to the same period in fiscal year 2024.
General and Administrative
Three Months Ended
September 30,
(in thousands, except percentages)
2024
2023
Change
General and administrative
$
2,443
$
3,186
$
(743)
(23)
%
Percentage of total revenue
11
%
13
%
General and administrative expense primarily consists of personnel-related expenses directly associated with our finance, human resources, administrative and legal personnel. Included in these costs are salaries, benefits, bonuses, and stock-based compensation and allocated overhead. General and administrative expenses also include fees for professional services, provision for credit losses and, to a lesser extent, occupancy costs and related overhead.
General and administrative expenses decreased by $743,000 during the three months ended September 30, 2024, from the same period in fiscal year 2024. The decrease was primarily due to decreases of (i) $829,000 in legal expenses and (ii) $64,000 in personnel-related expenses, and (iii) $53,000 in outside-consulting expenses; partially offset by increases in (i) $185,000 in bad debt expenses, (ii) $12,000 in accounting, audit, and administrative expenses, and (iii) $1,000 in investor relations expenses.
Excluding an increase of $5,000 due to foreign exchange rate fluctuation, general and administrative expense decreased
$748,000 during the three months ended September 30, 2024, compared to the same period in fiscal year 2024.
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Income from Operations
Three Months Ended
September 30,
(in thousands, except percentages)
2024
2023
Change
Income from operations
$
509
$
1,416
$
(907)
(64)
%
Operating margin
2
%
6
%
Income from operations was $509,000 with an operating profit margin of 2% during the three months ended September 30, 2024. Income from operations was $1.4 million during the three months ended September 30, 2023.
Interest Income
Interest income primarily consists of interest earned on money market accounts. Interest income was $771,000 and $949,000 during the three months ended September 30, 2024 and 2023, respectively, due to lower interest rates in the current period.
Other (Expense) Income, Net
Other (expense) income, net was expense of $140,000 and income of $610,000 during the three months ended September 30, 2024 and 2023, respectively. Other (expense) 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 cumulative losses, we maintain a valuation allowance against U.S. deferred tax assets as of September 30, 2024. 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 $488,000 and $379,000 for the three months ended September 30, 2024 and 2023, respectively.
Liquidity and Capital Resources
Overview
As of September 30, 2024 and June 30, 2024, our principal sources of liquidity were cash and cash equivalents, restricted cash, and accounts receivable totaling $90.3 million and $101.7 million, respectively. Our cash, cash equivalents and restricted cash were $67.2 million and $70.0 million as of September 30, 2024 and June 30, 2024, 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. From time to time, however, we may consider opportunities for raising additional capital. We can make no assurances that such opportunities will be available to us on economic terms we consider favorable, if at all. 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.
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Cash Flows
For the three months ended September 30, 2024 and 2023, our cash flows were as follows (in thousands):
Three Months Ended
September 30,
2024
2023
Net cash provided by operating activities
$
954
$
8,131
Net cash used in investing activities
(109)
(32)
Net cash used in financing activities
(4,422)
(480)
Cash provided by operating activities mainly consists of net income adjusted for non-cash expense items such as depreciation and amortization, expense associated with stock-based awards, the timing of employee related costs including commissions and bonus payments, and changes in operating assets and liabilities during the year.
Net cash provided by operating activities decreased by $7.2 million during the three months ended September 30, 2024, from the same period in fiscal year 2024, 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 increased by $77,000 during the three months ended September 30, 2024, from the same period in fiscal year 2024, 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 used in financing activities increased by $3.9 million during the three months ended September 30, 2024, from the same period in fiscal year 2024. 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 $4.6 million.
Commitments
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 September 30, 2024, the future non-cancelable minimum payments under these commitments were approximately $4.7 million.
Off-Balance Sheet Arrangements
As of September 30, 2024, we had no significant off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.
New Accounting Pronouncements
See Note 1 “Summary of Business and Significant Accounting Policies” to the condensed consolidated financial statements for our discussion of new accounting pronouncements adopted and those pending.
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