Summary
eGain reported results for its fiscal 2021 first quarter, the three months ended September 30, 2020. Total revenue was $19.1 million, up 10.9% from the prior-year quarter. Gross profit was $14.4 million, up 21.5%, and gross margin was 75.7%, up 6.6 percentage points. Operating income was $2.4 million, up 114.8%, and operating margin was 12.3%, up 6.0 percentage points. Net income was $2.0 million, up 68.0%. Diluted earnings per share was $0.06, up $0.02. Operating cash flow was $5.7 million, up 110.5% from the prior-year quarter. Capital expenditures were $0.08 million, up 12.9%. Deferred revenue was $34.0 million, up 3.0%, while remaining performance obligations were $64.2 million, down 1.4%.
The mix kept shifting toward SaaS. SaaS revenue rose 29% year over year, and SaaS plus professional services revenue rose 23% and accounted for 91% of total revenue. Legacy revenue, which comes from maintenance and support on perpetual licenses the company no longer sells, fell 44% as customers move to the cloud. Professional services revenue declined 19%, which the company ties to faster deployments. Domestic revenue rose 44% on higher SaaS revenue, while international revenue fell 30% on lower legacy, SaaS and professional services revenue. Currency movements added $233,000 to total revenue. The $64.2 million of remaining performance obligations includes $44.9 million expected to be recognized within one year and $19.3 million beyond one year. On a non-GAAP basis, net income was $2.5 million, or $0.08 per basic and diluted share, compared with $1.7 million, or $0.06 per basic and $0.05 per diluted share, in the prior-year quarter.
Guidance covers the second quarter of fiscal 2021, which ends December 31, 2020. eGain expects total revenue of $18.1 million to $18.7 million, growth of 0% to 3% year over year. GAAP net loss is guided to $1.0 million to breakeven, or $(0.03) to $0.00 per basic share. Non-GAAP net loss is guided to $0.5 million to net income of $0.5 million, or $(0.02) per basic share to $0.02 per diluted share. Management also expects legacy revenue to keep declining as the migration continues.
Costs moved in different directions. Research and development expense rose 13%, sales and marketing rose 19%, and general and administrative expense fell 5%. Management expects research and development expense to remain roughly consistent as a percentage of total revenue, sales and marketing expense to increase as a percentage of total revenue, and general and administrative expense to increase or remain roughly consistent. COVID-19 did not have a material adverse effect on the quarter, but the 10-Q lists it among the main risks, along with possible delays in customer payments, work-from-home disruption, lengthy sales cycles, dependence on a relatively small number of customers, intense competition, international operations, currency swings, privacy rules such as GDPR, cybersecurity breaches, and intellectual property protection. The filing also notes that revenue and operating results have fluctuated in the past and are likely to fluctuate again, and that subscription revenue is recognized over time, so downturns may not show up immediately.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2021 | Q4 FY2020 | QoQ | Q1 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $19.1M | $19.0M | +0.2% | $17.2M | +10.9% |
| Gross profit | $14.4M | $14.0M | +3.0% | $11.9M | +21.5% |
| Gross margin | 75.7% | 73.6% | +2.1 pp | 69.1% | +6.6 pp |
| Research & development | $4.5M | $4.4M | +2.8% | $4.0M | +12.7% |
| Sales & marketing | $5.6M | $5.0M | +12.6% | $4.7M | +18.8% |
| General & administrative | $1.9M | $2.1M | -6.1% | $2.0M | -4.9% |
| Total operating expenses | $12.1M | $11.5M | +5.5% | $10.8M | +12.1% |
| Operating income (loss) | $2.4M | $2.6M | -7.9% | $1.1M | +114.8% |
| Operating margin | 12.3% | 13.4% | -1.1 pp | 6.4% | +6.0 pp |
| Net income (loss) | $2.0M | $2.2M | -5.0% | $1.2M | +68.0% |
| Net margin | 10.7% | 11.3% | -0.6 pp | 7.1% | +3.6 pp |
| Diluted EPS | $0.06 | $0.07 | -$0.01 | $0.04 | +$0.02 |
Risks
The filing highlights COVID-19 as an ongoing risk; although it did not have a material adverse impact during the quarter ended September 30, 2020, government measures affected eGain offices in Sunnyvale, India and the UK, sales and marketing activities, and work-from-home arrangements, and future impact remains uncertain.
eGain derives a substantial portion of revenue from a relatively small number of customers, and the loss of or a decline in business with any significant customer would materially and adversely affect financial condition and results of operations.
International sales decreased 30% to $5.295 million during the quarter ended September 30, 2020 from $7.599 million, and as of September 30, 2020 approximately 49% of the workforce was in India, exposing eGain to local disruptions and increased compensation costs from competition for skilled workers.
eGain's service stores and transmits customer proprietary information, and the filing states that employees or contractors have introduced vulnerabilities and enabled exploitation of its IT environments in the past; a breach could cause customer curtailment, litigation and regulatory action.
As eGain migrates perpetual license clients to SaaS, legacy revenue decreased 44% to $1.777 million during the quarter ended September 30, 2020 and the filing expects legacy fees to continue to decline; SaaS revenue increased 29% to $15.970 million in the same quarter.
Most revenue each quarter comes from recognition of deferred revenue from prior agreements, so declines in new or renewed subscriptions may not be immediately reflected; remaining performance obligations were $64.20 million as of September 30, 2020, down 1.4% from the prior-year quarter, while deferred revenue was $34.02 million, up 3.0%.
The filing says the sales cycle for eGain products can be six months or more, customer approval processes have become more complicated, and the average sales cycle has further increased, making the timing of expected sales difficult to predict.
The market for customer engagement software is intensely competitive; eGain names Genesys, LivePerson and Moxie as direct competitors and larger software companies such as Microsoft and Oracle as potential competitors with greater resources and possible aggressive pricing.
Privacy and cross-border data transfer rules, including GDPR, the ECJ decision invalidating the U.S.-EU Privacy Shield, the CCPA and New York's SHIELD Act, could increase compliance costs, restrict data transfers, or limit customer adoption of eGain's cloud services.
Success depends on senior management, including CEO and co-founder Ashutosh Roy, and on the Indian research and development workforce; attrition or difficulty hiring could impair expansion, especially as competition for skilled workers in India has increased compensation costs.
Sales and marketing expense increased 19% to $5.631 million during the quarter ended September 30, 2020, and management expects it to increase as a percentage of total revenue; failure to expand or retain sales and marketing personnel could impede growth.
SaaS KPIs
All quarters →Remaining Performance Obligations
SaaS Revenue
Operating Cash Flow Margin
Current Remaining Performance Obligations
SaaS Revenue as % of Total Revenue
Non-GAAP Operating Income
Cash Provided by Operations
SaaS and Professional Services Revenue
Summary, forecast, risks and KPIs are extracted from EGAIN Corp's SEC filings for Q1 FY2021 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.