What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-02-13 compared with 2024-11-12 · 92 added, 77 removed, 244 unchanged (41% of the section changed)

31 unchanged sentences

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 manage our business plans, strategies, target and outlooks and any business-related forecasts or projections;

● our ability to improve our current solutions;

52 unchanged sentences

Many global brands use eGain to improve experience and reduce costs.

We are headquartered in the Sunnyvale, California, United States.

We are headquartered in Sunnyvale, California in the United States.

We also operate in the United Kingdom and India.

7 unchanged sentences

Three Months Ended

September 30,

Six Months Ended

(in thousands)

4 unchanged sentences

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

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).

and (ii) such expenses can vary significantly between periods as a result of the timing of new stock-based awards.

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,

Six Months Ended

(in thousands)

Income from operations

6 unchanged sentences

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.

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.

1 unchanged sentence

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.

SaaS revenue includes cloud delivery arrangements, term licenses, embedded 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.

7 unchanged sentences

These embedded OEM royalties are included as SaaS revenue.

Under revenue guidance, since

these arrangements are for sales-based licenses of intellectual property, we recognize revenue only as the subsequent sale occurs.

Under revenue guidance, since 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.

12 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 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.

As of December 31, 2024, our remaining performance obligations were $73.6 million, of which we expect to recognize $50.9 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

September 30,

Six Months Ended

Professional services

11 unchanged sentences

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:

The following table presents our SaaS and professional services revenue during the three and six months ended December 31, 2024 and 2023, respectively:

Three Months Ended

September 30,

Six Months Ended

(in thousands, except percentages)

1 unchanged sentence

Total revenue

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.

Total revenue for the three months ended December 31, 2024 decreased by $1.4 million, while SaaS revenue decreased by $1.1 million, compared to the same period in fiscal year 2024.

Total revenue for the six months ended December 31, 2024 decreased by $3.8 million, while SaaS revenue decreased by $3.7 million, compared to the same period in fiscal year 2024.

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 an increase of $144,000 and $426,000 in total revenue during the three months ended September 30, 2024 and 2023, respectively.

Foreign exchange rate fluctuation resulted in an increase of $151,000 and $340,000 in total revenue during the three months ended December 31, 2024 and 2023, respectively.

Foreign exchange rate fluctuation resulted in an increase of $298,000 and an increase of $769,000 for the six months ended December 31, 2024 and 2023, respectively.

Three Months Ended

September 30,

Six Months Ended

(in thousands, except percentages)

Percentage of total revenue

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.

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

Revenue from SaaS decreased by $1.1 million and $3.7 million during the three and six months ended December 31, 2024, respectively, compared to the same periods in fiscal year 2024.

This represented a decrease in SaaS revenue of 5% and 8% for the three and six months ended December 31, 2024, respectively, compared to the same periods in fiscal year 2024.

SaaS revenue represents 93% and 92% of total revenue for the three and six months ended December 31, 2024, respectively, compared to 92% for the same periods in fiscal year 2024.

Excluding an increase of $144,000 and $276,000 due to foreign exchange rate fluctuation, SaaS revenue decreased by $1.3 million and $3.9 million during the three and six months ended December 31, 2024, respectively, compared to the same periods in fiscal year 2024.

Professional Services Revenue

Three Months Ended

September 30,

Six Months Ended

(in thousands, except percentages)

2 unchanged sentences

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 from professional services decreased by $277,000 and $151,000 during the three and six months ended December 31, 2024, respectively, compared to the same periods in fiscal year 2024.

Excluding an increase of $7,000 and $21,000 due to foreign exchange rate fluctuation, professional services revenue decreased by $284,000 and $172,000 during the three and six months ended December 31, 2024, respectively, compared to the same periods in fiscal year 2024.

Revenue by Geography

Three Months Ended

September 30,

Six Months Ended

(in thousands, except percentages)

2 unchanged sentences

Total revenue

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.

Revenue from North America sales decreased by 8% from $18.8 million during the three months ended December 31, 2023 to $17.3 million during the three months ended December 31, 2024, due to decreases of (i) $1.1 million in SaaS revenue and (ii) $356,000 in professional services revenue.

Revenue from North America sales decreased by 11% from $37.8 million during the six months ended December 31, 2023 to $33.8 million during the six months ended December 31, 2024, due to decreases of (i) $3.8 million in SaaS revenue and (ii) $288,000 in professional services revenue.

Revenue from EMEA sales increased by 2% from $5.0 million for the three months ended December 31, 2023 to $5.1 million during the three months ended December 31, 2024, due to increases of (i) $73,000 in SaaS revenue and (ii) $5,000 in professional services revenue.

Revenue from EMEA sales increased by 3% from $10.2 million for the six months ended December 31, 2023 to $10.4 million during the six months ended December 31, 2024, due to increases of (i) $131,000 in SaaS revenue and (ii) $138,000 in professional services revenue.

Cost of Revenue

Three Months Ended

September 30,

Six Months Ended

(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 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.

Cost of SaaS revenue decreased by $483,000 during the three months ended December 31, 2024, from the same period in fiscal year 2024.

This decrease was primarily due to decreases of (i) $208,000 in cloud-computing costs, (ii) $164,000 in personnel-related costs, and (iii) $116,000 in outside consulting costs.

Cost of SaaS revenue decreased by $1.0 million during the six months ended December 31, 2024, from the same period in fiscal year 2024.

This decrease was primarily due to decreases of (i) $490,000 in cloud-computing costs, (ii) $393,000 in personnel related costs, and (iii) $132,000 in outside consulting costs.

Excluding an increase of $4,000 and $7,000 due to foreign exchange rate fluctuation, cost of SaaS revenue decreased by $487,000 and $1.0 million during the three and six months ended December 31, 2024, respectively, from the same periods 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.

Cost of professional services increased by $173,000 during the three months ended December 31, 2024, from the same period in fiscal year 2024.

This increase was primarily due to increases of (i) $146,000 in personnel-related costs and (ii) $16,000 in outside consulting costs.

Cost of professional services increased by $526,000 during the six months ended December 31, 2024, from the same period in fiscal year 2024.

This increase was primarily due to increases of (i) $505,000 in personnel-related costs and (ii) $14,000 in outside consulting costs.

Excluding increase of $13,000 and $8,000 due to foreign exchange rate fluctuation, cost of professional services revenue increased by $160,000 and $518,000 during the three and six months ended December 31, 2024, respectively, compared to the same periods in fiscal year 2024.

Operating Expenses

1 unchanged sentence

Three Months Ended

September 30,

Six Months Ended

(in thousands, except percentages)

2 unchanged sentences

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,

benefits, bonuses, and stock-based compensation and allocated overhead.

Included in these costs are salaries, 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.

Research and development expense increased by 16% to $7.7 million for the three months ended December 31, 2024, from $6.7 million in the same period in fiscal year 2024.

Excluding an increase of $7,000 due to foreign exchange rate fluctuation, research and development expense increased primarily due to increases of (i) $848,000 in personnel-related costs and (ii) $191,000 in outside consulting costs.

Research and development expense increased by 14% to $15.1 million for the six months ended December 31, 2024, from $13.3 million in the same period in fiscal year 2024.

Excluding an increase of $13,000 due to foreign exchange rate fluctuation, research and development expense increased primarily due to increases of (i) $1.6 million in personnel-related costs and (ii) $179,000 in outside consulting costs.

Sales and Marketing

Three Months Ended

September 30,

Six Months Ended

(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 $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.

Sales and marketing expenses decreased by 2% but remained consistent at $5.3 million for the three months ended December 31, 2024, compared to the same period in fiscal year 2024.

Excluding an increase of $40,000 due to foreign exchange rate fluctuation, sales and marketing expense decreased primarily due to a decrease of $718,000 in personnel-related costs;

partially offset by increases of (i) $530,000 in lead generation costs and (ii) $50,000 in outside consulting costs.

Sales and marketing expenses decreased by 13% to $10.0 million for the six months ended December 31, 2024, from $11.5 million in the same period in fiscal year 2024.

Excluding an increase of $116,000 due to foreign exchange rate fluctuation, sales and marketing expense decreased primarily due to decreases of (i) $1.5 million in personnel-related costs and (ii) $120,000 in lead generation costs;

partially offset by an increase of $83,000 in outside consulting costs.

General and Administrative

Three Months Ended

September 30,

Six Months Ended

(in thousands, except percentages)

4 unchanged sentences

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.

General and administrative expenses decreased by 12% to $2.1 million for the three months ended December 31, 2024, from $2.4 million in the same period in fiscal year 2024.

Excluding an increase of $7,000 due to foreign exchange rate fluctuation, general and administrative expense decreased primarily due to decreases of (i) $106,000 in credit loss expense, (ii) $103,000 in outside-consulting costs, (iii) $70,000 in accounting, audit, and administrative fees, (iv) $57,000 in personnel-related costs and (v) $1,000 in investor relations cost;

partially offset by an increase of $37,000 in legal related costs.

General and administrative expenses decreased by 19% to $4.5 million for the six months ended December 31, 2024, from $5.6 million in the same period in fiscal year 2024.

Excluding an increase of $14,000 due to foreign exchange rate fluctuation, general and administrative expense decreased primarily due to decreases of (i) $792,000 in legal related costs, (ii) $155,000 in outside consulting costs, (iii) $121,000 in personnel-related costs, and (iv) $58,000 in accounting, audit, and administrative fees;

partially offset by an increase of (i) $78,000 in credit loss expense.

Income from Operations

Three Months Ended

September 30,

Six Months Ended

(in thousands, except percentages)

1 unchanged sentence

Operating margin

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.

Income from operations was $650,000 and $2.4 million with an operating margin of 3% and 10% during the three months ended December 31, 2024 and 2023, respectively.

This is primarily due to a reduction in gross margin and an increase in total research and development cost.

Income from operations was $1.2 million and $3.8 million with an operating margin of 3% and 8% during the six months ended December 31, 2024 and 2023, respectively.

This is primarily due to a reduction in gross margin and an increase in total research and development cost.

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.

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

Interest income was $661,000 and $982,000 during the three months ended December 31, 2024 and 2023, respectively.

Interest income was $1.4 million and $1.9 million during the six months ended December 31, 2024 and 2023, respectively.

Other Expense, Net

Other expense, net was $431,000 and $697,000 during the three months ended December 31, 2024 and 2023, respectively.

Other expense, net was $571,000 and $87,000 during the six months ended December 31, 2024 and 2023, respectively.

Other expense, 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.

As of December 28, 2024, the Company concluded that a full valuation allowance on its deferred tax assets in the U.S.

continued to be appropriate considering cumulative pre-tax losses in recent years and uncertainty with respect to future taxable income.

Release of the valuation allowance in the U.S.

would result in a benefit to the income tax provision in the period the release is recorded, which could have a material impact on net earnings.

The timing and amount of the potential valuation allowance release are subject to significant management judgment, as well as prospective earnings in the U.S.

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

We recorded income tax provision of $525,000 and $904,000 for the three and six months ended December 31, 2023, respectively.

Liquidity and Capital Resources

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.

As of December 31, 2024 and June 30, 2024, our principal sources of liquidity were cash and cash equivalents, restricted cash, and accounts receivable totaling $86.3 million and $101.7 million, respectively.

Our cash, cash equivalents and restricted cash were $70.5 million and $70.0 million as of December 31, 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.

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 three months ended September 30, 2024 and 2023, our cash flows were as follows (in thousands):

Three Months Ended

September 30,

For the six months ended December 31, 2024 and 2023, our cash flows were as follows (in thousands):

Six Months Ended

Net cash provided by operating activities

2 unchanged sentences

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.

Net cash provided by operating activities decreased by $8.4 million during the six months ended December 31, 2024, from the same period in fiscal year 2024, driven primarily by the change in net income, deferred revenue, stock-based compensation expense, and the timing of collections for accounts receivable.

Net cash used in investing activities increased by $113,000 during the six months ended December 31, 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.

Net cash used in financing activities increased by $4.0 million during the six months ended December 31, 2024, from the same period in fiscal year 2024, driven primarily by funds used for repurchases of our common stock of approximately $7.0 million, offset by proceeds from exercises of employee stock options and our employee stock purchase plan.

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.

As of December 31, 2024, the future non-cancelable minimum payments under these commitments were approximately $5.0 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.

As of December 31, 2024, 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