Summary
eGain's fiscal 2022 third quarter, ended March 31, 2022, produced record revenue of $23.9 million. That was up 21.1% from $19.7 million in the year-ago quarter. The gain came from the SaaS business, which grew faster than the total, while legacy revenue, the maintenance and support tail from perpetual licenses the company no longer sells, kept shrinking as those clients move to SaaS. Professional services also expanded, helped by new customer implementations and managed services. For the nine months ended March 31, 2022, revenue reached $68.4 million, up 17.9% from a year earlier.
Profitability went the other way. Gross profit rose 16.6% to $17.4 million, slower than revenue, so gross margin slipped 2.8 percentage points to 72.7%. Cost of professional services and personnel costs, including stock-based compensation, rose faster than the related revenue. Operating expenses climbed across the board, with research and development, sales and marketing, and general and administrative all up sharply. The quarter delivered an operating loss of $476,000, against operating income of $1.6 million a year earlier. Operating margin was -2.0%, down 10.0 percentage points. Net loss was $615,000, or $0.02 per diluted share, compared with net income of $1.3 million, or $0.04 per diluted share. Over the nine months, the net loss was $890,000, or $0.03 per diluted share, and the operating loss was $416,000. Non-GAAP net income for the quarter was $2.4 million, or $0.08 per basic share and $0.07 per diluted share.
Cash generation held up. Operating cash flow was $1.2 million for the quarter, against a $0.9 million outflow a year earlier, and $5.8 million for the nine months, up 16.8%, for an operating cash flow margin of 9% over that stretch. Capital expenditures were $266,000 for the quarter and $542,000 for the nine months. Cash and cash equivalents were $70.5 million at March 31, 2022, versus $53.4 million in the year-ago third quarter. Current deferred revenue was $38.1 million, up 20%. Remaining performance obligations were $84.2 million, up 35.2%, and management expects to recognize $53.4 million of that within one year and $30.8 million beyond one year.
Guidance for the fourth quarter of fiscal 2022, ending June 30, 2022, points to slower growth and a wider loss. Revenue is guided to $23.1 million to $23.5 million, growth of 14% to 16% year over year, with constant currency non-GAAP revenue of $23.6 million to $24.0 million. GAAP net loss is guided to $3.1 million to $3.7 million, or $0.10 to $0.12 per share, and includes about $3.0 million of stock-based compensation plus roughly $120,000 of depreciation and amortization. Non-GAAP net loss is guided to zero to $700,000, or $0.00 to $0.02 per share, on about 31.7 million weighted average shares.
The filing's risk list is long. Sales cycles are long and the timing of deals is hard to predict, and a relatively small number of customers accounts for a substantial portion of revenue. Competition in customer engagement software is intense. Currency trimmed $181,000 from total revenue in the quarter. Legacy revenue should keep falling as those clients migrate. The company also flags COVID-19 and its international operations as live exposures. Management expects sales and marketing expense to rise as a percentage of total revenue under the current plan, so profit will depend on whether SaaS growth keeps outrunning the spending increases.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2022 | Q2 FY2022 | QoQ | Q3 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $23.9M | $23.1M | +3.5% | $19.7M | +21.1% |
| Gross profit | $17.4M | $17.0M | +2.2% | $14.9M | +16.6% |
| Gross margin | 72.7% | 73.6% | -0.9 pp | 75.5% | -2.8 pp |
| Research & development | $6.2M | $6.2M | +0.1% | $4.4M | +41.7% |
| Sales & marketing | $8.7M | $8.2M | +6.6% | $6.9M | +25.5% |
| General & administrative | $3.0M | $3.3M | -9.9% | $2.0M | +46.2% |
| Total operating expenses | $17.8M | $17.6M | +1.3% | $13.3M | +34.0% |
| Operating income (loss) | -$476.0K | -$630.0K | +24.4% | $1.6M | -130.2% |
| Operating margin | -2.0% | -2.7% | +0.7 pp | 8.0% | -10.0 pp |
| Net income (loss) | -$615.0K | -$826.0K | +25.5% | $1.3M | -148.8% |
| Net margin | -2.6% | -3.6% | +1.0 pp | 6.4% | -9.0 pp |
| Diluted EPS | -$0.02 | -$0.03 | +$0.01 | $0.04 | -$0.06 |
Risks
The sales cycle for complex products can be six months or more; the company says customer approval processes have become more complicated, the average sales cycle has increased, and some likely sales were not closed. MD&A and summary risk factors both flag this.
GAAP operating income swung to a loss of $0.48 million in FY2022 Q3 from income of $1.58 million in FY2021 Q3, down 130.2%, and net income swung to a loss of $0.62 million from $1.26 million, down 148.8%. The company also recorded $3.0 million of stock-based compensation in the quarter.
Gross margin declined to 72.7% in FY2022 Q3 from 75.5% in FY2021 Q3, down 2.8 percentage points, and cost of professional services increased 82% in the quarter and 63% year to date, reflecting implementation and service delivery cost pressure.
About 45% of the workforce was employed in India as of March 31, 2022, and the company says competition for skilled workers there has increased compensation costs and expects these costs to increase. Stock-based compensation rose to $3.0 million in FY2022 Q3 from $0.4 million in FY2021 Q3.
Risk factors cite general economic conditions, tightening credit markets, lower liquidity, government budgetary constraints, and COVID-19-related disruptions including April 2022 China lockdowns, any of which could cause customers to delay, decrease or cancel purchases.
Legacy revenue decreased 13% in the quarter and 37% year to date as perpetual license clients migrate to SaaS, and the company expects legacy revenue to continue to decline. If SaaS growth does not offset that decline, total revenue could be pressured.
Risk factors state that employees or contractors have introduced vulnerabilities in, and enabled the exploitation of, the company's IT environments in the past and may do so again; a successful attack could lead to theft of customer or proprietary data, litigation, and regulatory action.
The company faces evolving privacy and data protection rules including GDPR, CCPA, and the SHIELD Act, and says invalidation of Safe Harbor and Privacy Shield required alternative transfer mechanisms and a significant repapering exercise. Compliance failures could lead to litigation, investigations, and penalties.
The company depends on a relatively small number of customers for a substantial portion of revenue; 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 named competitors including Genesys, LivePerson, NICE, Verint, Microsoft, Oracle, Salesforce, and ServiceNow, many with greater resources. The company says competition may lead to aggressive pricing and more attractive competitor offers.
Directors and executive officers together with affiliates beneficially owned approximately 32% of outstanding capital stock as of March 31, 2022, and CEO Ashutosh Roy owned approximately 28%, giving concentrated control over stockholder votes and corporate transactions.
SaaS KPIs
All quarters →Remaining Performance Obligations
SaaS Revenue
SaaS Revenue as % of Total Revenue
Non-GAAP Operating Income
SaaS and Professional Services Revenue
Summary, forecast, risks and KPIs are extracted from EGAIN Corp's SEC filings for Q3 FY2022 (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.