Summary
eGain reported fiscal 2024 second quarter revenue of $23.8 million, down 7.0% from the prior-year quarter. Gross profit fell 10.7% to $16.8 million. Gross margin slipped to 70.6%, down 3.0 percentage points. The revenue decline came as the company continued its shift to a SaaS-only model and migrated remaining perpetual license clients. Operating income rose to $2.4 million, up 1038.5%. Operating margin expanded to 10.2%, up 9.4 percentage points. Net income was $2.2 million, up 2201.0% and swung to a profit. Diluted EPS was $0.07, up $0.07.
For the first six months of fiscal 2024, revenue was $48.0 million, down 4.7%. Gross profit was $34.2 million, down 8.5%. Gross margin was 71.2%, down 2.9 percentage points. Operating income was $3.8 million, up 940.5% and swung to a profit. Operating margin was 8.0%, up 8.9 percentage points. Net income was $4.8 million, up 4084.2% and swung to a profit. Diluted EPS was $0.15, up $0.15.
Operating cash flow was $7.7 million in the quarter, up 3.8%. Year-to-date operating cash flow was $15.8 million, up 93.6%. Capital expenditures were $0.1 million in the quarter, down 40.5%, and $0.1 million year to date, down 53.9%. Deferred revenue was $43.9 million. RPO was $77.9 million, down 15.4% from the prior-year quarter. The company said its AssistGPT offering helped win new logos in the quarter. Management sees growing interest in knowledge management as a foundation for generative AI in customer service.
Non-GAAP net income was $3.4 million, or $0.11 per share, compared with $1.7 million, or $0.05 per share, in the prior-year quarter. Adjusted EBITDA was $3.8 million compared with $2.2 million. For the first six months, non-GAAP net income was $7.2 million, or $0.23 per basic share and $0.22 per diluted share, compared with $3.7 million, or $0.12 per basic share and $0.11 per diluted share. Adjusted EBITDA was $6.6 million compared with $3.8 million. Management guided third-quarter non-GAAP net income to $1.6 million to $2.2 million, or $0.05 to $0.07 per share, and full-year non-GAAP net income to $9.3 million to $9.8 million, or $0.29 to $0.31 per share. The company also provided third-quarter and full-year revenue guidance. Guidance assumes weighted average shares of approximately 31.9 million for the third quarter and 32.0 million for the full year.
eGain repurchased about 391,000 shares at an average cost of $6.39, totaling $2.5 million. The company reported an operating cash flow margin of 32% for the quarter and 33% for the first six months. eGain automates customer engagement with a knowledge hub powered by conversational and generative AI and analytics. The company sells mostly to large enterprises across financial services, telecommunications, retail, government, healthcare, and utilities. Management believes the SaaS-only model affords recurring revenue visibility and more predictability. Management expects legacy fees to continue to decline in future quarters. Risks include lengthy sales cycles, reliance on a relatively small number of customers, competition in customer engagement software, foreign exchange fluctuations, and the need to manage growth and third-party distribution channels. The company also flagged risks around cybersecurity, privacy regulations, macroeconomic conditions, difficulties and delays in customer implementations, unplanned system interruptions, software errors, and changes in European privacy regulations. The company also cited risks related to its reliance on strategic and third-party distribution partnerships, its ability to innovate and respond to rapid technological change, and the impact of new legislation or regulations on its business.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2024 | Q1 FY2024 | QoQ | Q2 FY2023 | YoY |
|---|---|---|---|---|---|
| Revenue | $23.8M | $24.2M | -1.5% | $25.6M | -7.0% |
| Gross profit | $16.8M | $17.3M | -3.0% | $18.8M | -10.7% |
| Gross margin | 70.7% | 71.7% | -1.1 pp | 73.6% | -3.0 pp |
| Research & development | $6.7M | $6.6M | +0.4% | $7.2M | -7.3% |
| Sales & marketing | $5.3M | $6.1M | -12.4% | $8.9M | -39.9% |
| General & administrative | $2.4M | $3.2M | -25.0% | $2.6M | -6.3% |
| Total operating expenses | $14.4M | $15.9M | -9.6% | $18.6M | -22.7% |
| Operating income (loss) | $2.4M | $1.4M | +71.3% | $213.0K | +1038.5% |
| Operating margin | 10.2% | 5.9% | +4.3 pp | 0.8% | +9.3 pp |
| Net income (loss) | $2.2M | $2.6M | -15.8% | -$104.0K | +2201.0% |
| Net margin | 9.2% | 10.7% | -1.6 pp | -0.4% | +9.6 pp |
| Diluted EPS | $0.07 | $0.08 | -$0.01 | $0.00 | +$0.07 |
Risks
The global economic climate, credit tightening, lower liquidity, and potential government or corporate spending cuts could reduce technology budgets and cause customers to delay, decrease, or cancel purchases. Total revenue decreased 7.0% for the quarter ended December 31, 2023 and 4.7% for the six months ended December 31, 2023.
The sales cycle for eGain's products can be six months or more and corporate decision-making has become more complicated, further increasing the average sales cycle and in some cases preventing expected closings. This makes quarter-to-quarter revenue timing unpredictable.
eGain has derived and expects to derive a substantial portion of revenue from a relatively small number of customers. 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, including generative AI offerings from Microsoft, Oracle, Salesforce, ServiceNow, Genesys, LivePerson, NICE, and Verint. eGain expects significant development and operational costs for generative AI, and competitive pressure may cause decreased sales volumes, price reductions, and increased operating costs, leading to lower revenue, gross margins, and operating income.
Because subscription revenue is recognized over the contract term, declines in new or renewed agreements are felt in future quarters and may not be immediately reflected in operating results. Renewal rates are difficult to predict, customers may renew for fewer subscriptions or shorter contract lengths, and remaining performance obligations declined 15.4% to $77.9 million versus the prior-year quarter.
Gross margin declined 3.0 percentage points to 70.6% for the quarter ended December 31, 2023 from 73.6% in the prior-year quarter. Cost of subscription revenue rose due to higher cloud-computing and personnel costs, and the filing warns that inability to improve gross margins or significant customer attrition could adversely affect operating profitability.
Sales and marketing expense decreased 40% for the quarter and 38% for the six months ended December 31, 2023, driven by lower personnel-related costs and lead generation costs. The risk factors warn that failure to expand and improve sales performance and marketing activities, or retain sales and marketing personnel, may prevent business growth.
As of December 31, 2023, approximately 46% of eGain's workforce was in India, with 51% of those employees allocated to research and development. Increased competition for skilled workers in India has already raised compensation costs, and the company expects these costs to increase in the future.
EMEA sales represented 21% and 23% of revenue during the three and six months ended December 31, 2023. International operations carry risks including foreign currency fluctuations, GDPR and data privacy changes, hostilities such as the war in Ukraine, and difficulties collecting accounts receivable.
Privacy and data protection regulation is expanding, including GDPR, CCPA/CPRA, VCDPA, and India's DPDP. eGain must rely on alternative transfer mechanisms and may face significant repapering and compliance costs, enforcement actions, or customer hesitation.
Incorporating generative AI into products may increase governmental and regulatory scrutiny, litigation, confidentiality, and security risks. Intellectual property ownership and license rights around AI remain unsettled, and compliance costs could increase operating expenses and harm financial results.
Cybersecurity attacks could result in theft of customer or company data, service interruptions, litigation, regulatory fines, and reputational harm. The filing notes that employees or contractors have introduced vulnerabilities in eGain's IT environments in the past and may do so again.
SaaS KPIs
All quarters →SaaS Revenue
Operating Cash Flow Margin
Total SaaS and Professional Services Revenue
Adjusted EBITDA
Non-GAAP Income from Operations
Non-GAAP Net Income
Summary, forecast, risks and KPIs are extracted from EGAIN Corp's SEC filings for Q2 FY2024 (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.