Summary
eGain's fiscal 2025 second quarter ended December 31, 2024, with total revenue of $22.4 million, down 6% from the prior-year quarter. Gross profit was $15.7 million, down 6.6%, and gross margin slipped to 70.2% from 70.6%. The operating picture weakened more sharply. Operating income was $650,000, down 73.2%, and operating margin fell to 2.9% from 10.2%. Net income was $671,000, down 69.3%, while diluted earnings per share were $0.02, down from $0.07. Capital expenditures were $0.14 million in the quarter, up 35.0%. For the first six months of fiscal 2025, revenue was $44.2 million, down 8%; operating income was $1.2 million, down 69.8%; net income was $1.3 million, down 72.3%; and diluted earnings per share were $0.05, down from $0.15.
Cash generation also contracted. Operating cash flow was $6.4 million in the quarter, down 16.5% from the prior-year quarter. For the six months, operating cash flow was $7.4 million, down 53.4%. On the non-GAAP side, net income was $1.3 million, or $0.05 per basic share and $0.04 per diluted share, compared with $3.4 million, or $0.11 per share, in the prior-year quarter. Non-GAAP operating income was $1.3 million, compared with $3.6 million. Adjusted EBITDA was $1.6 million, compared with $3.8 million. The company repurchased approximately 421,000 shares at an average cost of $5.73, totaling $2.4 million.
Operational momentum offered a partial offset. eGain won several new enterprise logos in the quarter. Annual recurring revenue from AI Knowledge Hub customers grew 17% year over year and 5% sequentially. The sales pipeline includes a growing number of seven-figure ARR deals. Remaining performance obligations were $73.6 million, down 5.5% from the prior-year quarter. Deferred revenue was $40.4 million, down 8.0%.
Guidance points to a softer near term. For the third quarter of fiscal 2025 ending March 31, 2025, eGain guided to a net loss of $300,000 to $800,000, or $0.01 to $0.03 per share. Non-GAAP net income is expected to be breakeven to $500,000, or $0.00 to $0.02 per share. The third-quarter outlook includes stock-based compensation expense of approximately $800,000 and depreciation and amortization of approximately $80,000. For the full fiscal year ending June 30, 2025, eGain lowered total revenue guidance to $88.5 million to $90.0 million. It raised net income guidance to $1.1 million to $1.7 million, or $0.04 to $0.06 per share, and lowered non-GAAP net income guidance to $4.1 million to $4.7 million, or $0.14 to $0.16 per share. The full-year outlook includes stock-based compensation expense of approximately $3.0 million and depreciation and amortization of approximately $350,000. Weighted average shares outstanding are expected to be approximately 28.5 million for the third quarter and 28.6 million for the full fiscal year.
Risks remain centered on the company's lengthy sales cycles and the difficulty of predicting deal timing. eGain depends on a relatively small number of customers for a substantial portion of revenue, so renewal rates and customer demand matter greatly. The customer engagement software market is competitive, and the company must keep pace with rapid generative AI changes. Other named risks include collection of unbilled contractual commitments, international operations, foreign currency fluctuation, data privacy and cybersecurity. The revenue decline and margin compression in the quarter show how sensitive results are to renewal timing and expense growth.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2025 | Q1 FY2025 | QoQ | Q2 FY2024 | YoY |
|---|---|---|---|---|---|
| Revenue | $22.4M | $21.8M | +2.7% | $23.8M | -6.0% |
| Gross profit | $15.7M | $15.1M | +3.8% | $16.8M | -6.6% |
| Gross margin | 70.2% | 69.4% | +0.7 pp | 70.7% | -0.5 pp |
| Research & development | $7.7M | $7.4M | +3.9% | $6.7M | +15.7% |
| Sales & marketing | $5.3M | $4.8M | +10.3% | $5.3M | -1.8% |
| General & administrative | $2.1M | $2.4M | -14.0% | $2.4M | -12.2% |
| Total operating expenses | $15.1M | $14.6M | +3.0% | $14.4M | +4.6% |
| Operating income (loss) | $650.0K | $509.0K | +27.7% | $2.4M | -73.2% |
| Operating margin | 2.9% | 2.3% | +0.6 pp | 10.2% | -7.3 pp |
| Net income (loss) | $671.0K | $652.0K | +2.9% | $2.2M | -69.3% |
| Net margin | 3.0% | 3.0% | +0.0 pp | 9.2% | -6.2 pp |
| Diluted EPS | $0.02 | $0.02 | ±$0.00 | $0.07 | -$0.05 |
Risks
Global economic climate, tightening credit markets, lower liquidity, and government or corporate spending curtailment could cause eGain customers to reduce technology budgets, delay, decrease, or cancel purchases. This pressure is relevant as total revenue for FY2025 Q2 was down 6.0% versus FY2024 Q2 and year to date was down 7.9%.
Total revenue for FY2025 Q2 was down 6.0% versus FY2024 Q2 and year to date was down 7.9%; SaaS revenue decreased 5% for the quarter and 8% for the six months ended December 31, 2024. Deferred revenue was down 8.0% and remaining performance obligations were down 5.5% versus the prior-year quarter, indicating pressure on future recognized revenue.
Operating income for FY2025 Q2 was down 73.2% versus FY2024 Q2 and year to date was down 69.8%; operating margin was down 7.3 pp for the quarter and 5.4 pp year to date. Research and development expense increased 16% for the quarter and 14% year to date, while gross margin was down 0.5 pp for the quarter and 1.4 pp year to date.
eGain cites lengthy sales cycles of six months or more, complex multi-product offerings, and more complicated customer approval processes that have caused average sales cycle to further increase and in some cases prevented closure of sales believed likely to close. This can cause license and SaaS revenue and operating results to vary significantly from period to period.
eGain has in the past and expects in the future to derive a substantial portion of revenue from sales to a relatively small number of customers. The loss of any significant customer or a decline in business with any significant customer would materially and adversely affect financial condition and results of operations.
eGain cannot accurately predict subscription renewal rates, and customers may elect not to renew, renew for fewer subscriptions, or renew for shorter contract lengths. If customers do not renew or reduce paying subscriptions, revenue will decline and the business will suffer.
The customer engagement software market, including generative AI offerings, is intensely competitive, with competitors including Genesys, LivePerson, NICE, Verint, Microsoft, Oracle, Salesforce, and ServiceNow. eGain expects to bear 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.
eGain is integrating AI into offerings developed by it or with OpenAI, and risks include flawed algorithms, inadequate or biased datasets, harmful or illegal content, and new AI regulations in the EU. These issues could expose eGain to competitive harm, regulatory actions, legal liabilities, and reputational damage.
eGain derived 23% and 24% of revenue from EMEA sales during the three and six months ended December 31, 2024, and approximately 46% of its workforce was employed in India as of December 31, 2024, with 50% of India employees allocated to research and development. Increased competition for skilled workers in India has caused increased compensation costs, and eGain expects these costs to increase in the future.
Changes in European privacy and data protection rules, including GDPR and legal challenges to the EU-U.S. Data Privacy Framework, plus U.S. state privacy laws and India's DPDP, create compliance costs, potential fines, and customer hesitancy. eGain may need additional contractual and technical safeguards for personal data transfers, increasing expense and regulatory scrutiny.
eGain states that employees or contractors have introduced vulnerabilities in, and enabled exploitation of, its IT environments in the past and may do so in the future. A successful breach involving customer data could lead to litigation, regulatory fines, customer non-renewal, and reputational damage.
eGain depends on senior management, engineering, sales, marketing, and other key personnel, including CEO and co-founder Ashutosh Roy. Technology industry competition for highly skilled personnel may cause increased compensation costs not offset by improved productivity or higher sales.
SaaS KPIs
All quarters →Remaining Performance Obligations
Operating Cash Flow Margin
Current Remaining Performance Obligations
Adjusted EBITDA
Summary, forecast, risks and KPIs are extracted from EGAIN Corp's SEC filings for Q2 FY2025 (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 1, 2026.