Summary
eGain reported record total revenue of $25.6 million for its fiscal 2023 second quarter ended December 31, 2022, up 10.9% from the prior-year quarter. Gross profit was $18.85 million, also up 10.9%, and gross margin held steady at 73.6%. The company swung to operating income of $0.21 million from an operating loss in the same quarter last year. Net loss narrowed to $0.10 million. Diluted earnings per share was $0.00, up from a loss per share a year earlier. Operating cash flow was $7.42 million, up sharply from negative cash flow in the prior-year quarter. Capital expenditures were $0.17 million, up 19.3%. Deferred revenue, current portion, was $41.77 million, up 7.1%, and remaining performance obligations were $92.1 million, up 2.6%.
Over the first six months of fiscal 2023, total revenue reached $50.4 million, up 13.1% year over year. Gross profit was $37.33 million, up 12.6%. The six-month period swung to an operating loss of $0.46 million from operating income a year earlier. Net loss improved to $0.12 million from a loss in the prior-year period, and diluted earnings per share was $0.00. Operating cash flow for the six months was $8.18 million, up 74.6%, while capital expenditures were $0.29 million, up 6.2%.
SaaS revenue of $23.4 million rose 15% and accounted for 91% of total revenue in the quarter. Legacy revenue fell 78% to $185,000 as eGain moves perpetual license customers onto SaaS. Professional services revenue rose 11%. North America revenue grew 18%, while Europe, Middle East and Africa revenue declined 8%. Non-GAAP net income was $1.7 million, or $0.05 per share, compared with $3.0 million, or $0.10 per share, in the year-ago quarter. Non-GAAP operating income was $1.984 million. Total cash and cash equivalents were $80.9 million.
Guidance for the third quarter of fiscal 2023 ending March 31, 2023 calls for non-GAAP total revenue, adjusted for constant currency, of $23.5 million to $24.0 million. Non-GAAP net income for that quarter is expected to range from breakeven to $400,000, or $0.00 to $0.01 per share. For the full fiscal year 2023 ending June 30, 2023, non-GAAP total revenue, adjusted for constant currency, is guided to $100.0 million to $102.0 million, with non-GAAP net income of $4.3 million to $6.3 million, or $0.13 to $0.20 per share. Weighted average shares outstanding are expected to be roughly 32.1 million for the third quarter and 32.3 million for the full year.
Management said sales cycles continue to lengthen, and foreign exchange rate fluctuation cut total revenue by $863,000 in the quarter. The company announced eGain Instant Answers, a generative AI experience for knowledge users. Research and development expense rose 16% and sales and marketing expense rose 9%, while general and administrative expense fell 22%. eGain states that existing capital resources will fund current and planned operations for at least the next 12 months. Named risks include reliance on a relatively small number of customers for a substantial share of revenue, intense competition in customer engagement software, lengthy sales cycles, currency swings, and the lingering effects of the COVID-19 pandemic.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2023 | Q1 FY2023 | QoQ | Q2 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $25.6M | $24.8M | +3.4% | $23.1M | +10.9% |
| Gross profit | $18.8M | $18.5M | +2.0% | $17.0M | +10.9% |
| Gross margin | 73.6% | 74.6% | -1.0 pp | 73.6% | +0.0 pp |
| Research & development | $7.2M | $6.9M | +4.6% | $6.2M | +16.2% |
| Sales & marketing | $8.9M | $9.5M | -6.0% | $8.2M | +9.1% |
| General & administrative | $2.6M | $2.8M | -9.4% | $3.3M | -22.2% |
| Total operating expenses | $18.6M | $19.2M | -2.7% | $17.6M | +5.7% |
| Operating income (loss) | $213.0K | -$670.0K | +131.8% | -$630.0K | +133.8% |
| Operating margin | 0.8% | -2.7% | +3.5 pp | -2.7% | +3.6 pp |
| Net income (loss) | -$104.0K | -$16.0K | -550.0% | -$826.0K | +87.4% |
| Net margin | -0.4% | -0.1% | -0.3 pp | -3.6% | +3.2 pp |
| Diluted EPS | $0.00 | $0.00 | ±$0.00 | -$0.03 | +$0.03 |
Risks
The sales cycle for products can be six months or more, and complicated customer approval processes have caused the average sales cycle to increase and in some cases prevented closure of sales believed likely to close.
The company derives a substantial portion of revenue from a relatively small number of customers, and the loss of any significant customer or a decline in business with one would materially and adversely affect financial condition and results of operations.
The customer engagement software market is intensely competitive with no substantial barriers to entry, and competitors include Genesys, LivePerson, NICE, Verint, Microsoft, Oracle, Salesforce, and ServiceNow, many with greater financial and marketing resources.
Employees or contractors have introduced vulnerabilities in and enabled exploitation of IT environments in the past, and a successful attack could result in theft of proprietary or personal data, contractual disputes, litigation, regulatory fines, and loss of customer confidence.
Because revenue from subscriptions is recognized over time, declines in new or renewed subscription agreements in one quarter may not be immediately reflected, and legacy revenue decreased 78% in the quarter ended December 31, 2022 and 73% in the six months ended December 31, 2022 as customers migrate to SaaS.
Global economic tightening, lower liquidity, and volatility could cause customers to reduce technology budgets or delay purchases, which may disproportionately affect EMEA where revenue decreased 8% in the quarter ended December 31, 2022 and 9% in the six months ended December 31, 2022.
Foreign exchange rate fluctuation decreased total revenue by $863,000 in the quarter ended December 31, 2022 and by $1.7 million in the six months ended December 31, 2022, and decreased SaaS revenue by $789,000 and $1.5 million over the same periods.
Approximately 43% of the workforce was employed in India as of December 31, 2022, with 51% of those employees allocated to research and development, and increased competition for skilled workers in India has caused higher compensation costs that are expected to increase in the future.
Changes in European data protection rules, including invalidation of the Safe Harbor and Privacy Shield frameworks and replacement of standard contractual clauses, require a significant repapering exercise and could expose the company to enforcement actions or force it to maintain EU/UK-origin data locally at substantial expense.
Customers have experienced interruptions with cloud operations, and standard disaster recovery only assures data availability within 72 hours, while premium disaster recovery provides return to operations within one business day, so outages could cause customer terminations or credits.
SaaS KPIs
All quarters →Remaining Performance Obligations
SaaS Revenue
Operating Cash Flow Margin
SaaS Revenue as % of Total Revenue
Total SaaS and Professional Services Revenue
Non-GAAP Operating Income
Remaining Performance Obligations (within one year)
Summary, forecast, risks and KPIs are extracted from EGAIN Corp's SEC filings for Q2 FY2023 (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.