Summary
eGain's fiscal 2021 third quarter, which ended March 31, 2021, produced total revenue of $19.7 million, up 7.6% from the prior-year quarter. Revenue for the first nine months was $58.0 million, up 8.1%. The growth engine remains SaaS, which rose 14% in the quarter and 19% over the first nine months, while legacy revenue from perpetual license maintenance fell 43% in the quarter. Management pointed to SaaS logo wins up more than 100% year over year for both the quarter and year to date, and said the count of million-dollar SaaS customers rose 63% year over year. In March the company launched Virtual Financial Coach, an AI-powered proactive engagement product now being piloted by more than 25 credit unions. Subscription made up 92% of total revenue in the first nine months.
Profitability at the gross line improved. Gross profit was $14.9 million in the quarter, up 15.9%, and $43.9 million for the first nine months, up 16.5%. Gross margin reached 75.5% in the quarter, up 5.4 percentage points, and 75.6% year to date, up 5.5 percentage points. On a non-GAAP basis, total gross margin was 76%, up 500 basis points, and subscription gross margin was 82%, up 400 basis points. Lower cloud computing and personnel costs in the subscription cost base did most of the work.
Below the gross line the picture was more mixed. Operating income was $1.6 million in the quarter, down 10.2%, though it reached $5.8 million for the first nine months, up 20.0%. Operating margin was 8.0% for the quarter, down 1.6 percentage points, and 10.0% year to date, up 1.0 percentage point. Net income was $1.3 million in the quarter, down 32.5%, and $4.9 million year to date, down 2.9%. Diluted EPS was $0.04, down $0.02, and $0.15 year to date, down $0.01. Non-GAAP net income was $1.6 million, or $0.05 per diluted share, compared with $2.4 million, or $0.07 per diluted share, a year earlier.
Cash generation slipped. Operating cash flow was negative $0.9 million in the quarter, down from the prior-year quarter, and it was $5.0 million for the first nine months, down 40.8%. Capital expenditures were $0.04 million in the quarter, down 82.7%. Deferred revenue was $31.7 million, up 22.1% from the prior-year quarter, while remaining performance obligations were $62.3 million, down 3.1%.
Guidance is for the full fiscal year ending June 30, 2021. eGain expects SaaS revenue growth of 16% to 17% year over year and total revenue growth of 6% to 7%. Non-GAAP net income is guided to $6.2 million to $7.1 million, or $0.19 to $0.22 per share. The guidance assumptions include stock-based compensation expense of approximately $500,000 and depreciation and amortization of approximately $100,000.
The quarter also showed pressure from operating expenses. Sales and marketing expense rose 37% in the quarter and 29% year to date. Management expects sales and marketing expense to increase as a percentage of total revenue in future quarters, while research and development and general and administrative expenses should stay relatively consistent as a percentage of total revenue. On the risk side, eGain cites lengthy sales cycles, intense competition in customer engagement software, and reliance on a relatively small number of customers for a substantial portion of revenue. COVID-19 remains a stated risk, although the company said the pandemic did not have a material adverse impact on the business during the three and nine months ended March 31, 2021.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2021 | Q2 FY2021 | QoQ | Q3 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $19.7M | $19.2M | +2.7% | $18.4M | +7.6% |
| Gross profit | $14.9M | $14.5M | +2.6% | $12.9M | +15.9% |
| Gross margin | 75.5% | 75.5% | -0.1 pp | 70.0% | +5.4 pp |
| Research & development | $4.4M | $4.5M | -3.0% | $4.2M | +3.9% |
| Sales & marketing | $6.9M | $6.3M | +10.5% | $5.1M | +36.8% |
| General & administrative | $2.0M | $1.9M | +9.2% | $1.8M | +10.6% |
| Total operating expenses | $13.3M | $12.6M | +5.5% | $11.1M | +20.0% |
| Operating income (loss) | $1.6M | $1.9M | -16.8% | $1.8M | -10.2% |
| Operating margin | 8.0% | 9.9% | -1.9 pp | 9.6% | -1.6 pp |
| Net income (loss) | $1.3M | $1.6M | -21.5% | $1.9M | -32.5% |
| Net margin | 6.4% | 8.3% | -2.0 pp | 10.2% | -3.8 pp |
| Diluted EPS | $0.04 | $0.05 | -$0.01 | $0.06 | -$0.02 |
Risks
Shift to SaaS only model means legacy revenue, mainly maintenance and support on perpetual licenses, is expected to continue declining. Legacy revenue declined 43% in the quarter and 40% year to date, while SaaS revenue grew 14% in the quarter and 19% year to date; failure to offset the legacy decline could pressure results.
Sales and marketing expense increased 37% in the quarter to $6.9 million and 29% year to date, and management expects it to increase as a percentage of total revenue in future quarters. Inability to expand sales performance or retain sales and marketing personnel could impede growth and pressure operating margins.
International sales were 31% of revenue in the quarter and 30% for the nine months ended March 31, 2021, with international revenue decreasing 11% in the quarter and 19% year to date. About 46% of the workforce is in India and 50% of those employees are allocated to R&D, exposing operations to political, infrastructure, and compensation risks.
European privacy and data protection rules, including GDPR and the invalidation of the US-EU Privacy Shield, plus the CCPA and SHIELD Act, raise compliance costs and could limit cross-border data transfers or use of the service. Noncompliance could result in litigation, regulatory investigations, and penalties.
Sales cycles can be six months or more and have become longer and less predictable as customer approval processes grow more complex. This has prevented closure of sales the company believed were likely to close and impairs forecasting of quarterly operating results.
Success depends on key personnel including CEO and co-founder Ashutosh Roy, and attrition in the Indian workforce that supports R&D could harm results. Competition for skilled workers in India has increased compensation costs, and the company expects these costs to increase in the future.
A breach of company or customer systems could expose proprietary and personally identifiable information and lead to customer loss, litigation, and regulatory action. The filing notes that employees or contractors have introduced vulnerabilities in the past and that attackers may include nation states.
The customer engagement software market is intensely competitive with no substantial barriers to entry. Competitors include Genesys, LivePerson, Moxie, Microsoft, and Oracle, many of which have longer operating histories, larger customer bases, and significantly greater resources.
COVID-19 and related government measures, including shelter-in-place orders at Sunnyvale headquarters and offices in India and the UK, could disrupt sales, operations, and customer demand. MD&A states the pandemic did not have a material adverse impact on the three and nine months ended March 31, 2021, but uncertainty remains.
The company derives a substantial portion of revenue from a relatively small number of customers. The loss of any significant customer or a decline in business with a significant customer would materially and adversely affect financial condition and results of operations.
Reserves may be insufficient to cover receivables the company is unable to collect. General and administrative expense increased due in part to $109,000 in bad debt expenses in the quarter and $194,000 year to date, and customer payment delays or failures could harm financial condition.
The company has experienced some interruptions with eGain cloud operations and expects them to continue. Frequent or long system interruptions could reduce revenue, trigger service credits, cause customer terminations, and harm renewal rates.
Subscription renewal rates are difficult to predict and customers may elect not to renew, renew fewer subscriptions, or renew for shorter contract lengths. Declines in renewal rates or subscription quantities would reduce revenue and harm the business.
SaaS KPIs
All quarters →Remaining Performance Obligations
SaaS Revenue
Remaining Performance Obligations (beyond one year)
Subscription non-GAAP gross margin
Total non-GAAP gross margin
Summary, forecast, risks and KPIs are extracted from EGAIN Corp's SEC filings for Q3 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.