Group 1 - eGain (NASDAQ: EGAN) reported weak Q2 results and lowered its full-year revenue guidance [1] - Despite the weak performance, the bullish investment thesis for eGain remains intact [1] Group 2 - The author has a long position in eGain shares, indicating confidence in the company's future performance [2] - The analysis focuses on undercovered companies, particularly in technology, software, electronics, and energy transition sectors [1]

Financial Data and Key Metrics Changes - Total revenue for Q2 was $22.4 million, down 6% year over year, primarily due to the impact of two large client losses last year [21] - SaaS revenue accounted for 93% of total revenue, exceeding internal expectations, while PS revenue came in lower than expected [22] - Non-GAAP net income was $1.3 million or $0.05 per share, compared to $3.4 million or $0.11 per share in the year-ago quarter [25] - Non-GAAP gross margin for SaaS was 78%, unchanged from a year ago, while total gross margin was 71%, down from 72% a year ago [24] Business Line Data and Key Metrics Changes - AI knowledge hub ARR increased by 17% year over year, while total SaaS ARR decreased by 3% year over year but was up 2% sequentially [20][28] - The number of seven-figure deals in the pipeline has more than doubled in the last six months, indicating larger knowledge opportunities [14] Market Data and Key Metrics Changes - SaaS ARR for AI knowledge customers accounted for 55% of total SaaS ARR at the end of the quarter, up from 46% a year ago [28] - LTM dollar-based SaaS net retention for AI knowledge customers was 99%, while net retention for all customers was 89% [28] Company Strategy and Development Direction - The company is focusing on knowledge centralization in enterprises, which is critical for AI projects [12] - eGain AI Agent, an omnichannel conversational product, is set to launch in the current quarter, reflecting strong customer interest [17][19] - The company is actively investing in shaping the AI knowledge market to automate business operations, starting with customer service [19] Management's Comments on Operating Environment and Future Outlook - Management noted that larger deals are taking more time to close due to increased scrutiny and vetting processes [14] - The company is lowering its PS revenue targets for fiscal 2025 by approximately $2 million due to product improvements leading to faster deployment [23] - Updated guidance for total revenue is now $88.5 million to $90 million, down from $92 million to $93 million [32] Other Important Information - The company repurchased 121,000 shares at an average price of $5.73 per share, totaling $2.4 million [26] - Total cash and cash equivalents at the end of the quarter were $70.5 million, indicating a strong balance sheet [26] Q&A Session Summary Question: Can you discuss the evolution of professional services and the substantial reduction in guidance? - Management explained that the reduction is due to efforts to add more connectors and prebuilt capabilities, which decreases the need for custom integration [41] Question: What was the competitive landscape in winning the US airline deal? - The airline had multiple knowledge systems and was looking for a consolidation solution, which eGain provided by replacing their legacy systems [45][46]

Group 1: Earnings Performance - eGain reported quarterly earnings of $0.04 per share, exceeding the Zacks Consensus Estimate of $0.02 per share, but down from $0.11 per share a year ago, representing an earnings surprise of 100% [1] - Over the last four quarters, eGain has surpassed consensus EPS estimates four times [2] - The company posted revenues of $22.39 million for the quarter ended December 2024, missing the Zacks Consensus Estimate by 0.32%, compared to $23.82 million in the same quarter last year [2] Group 2: Stock Performance and Outlook - eGain shares have not increased since the beginning of the year, while the S&P 500 has gained 2.9% [3] - The company's earnings outlook is crucial for investors, as it includes current consensus earnings expectations for upcoming quarters and any recent changes to these expectations [4] - The current consensus EPS estimate for the coming quarter is $0.07 on revenues of $23.37 million, and $0.23 on revenues of $92.13 million for the current fiscal year [7] Group 3: Industry Context - The Internet - Software industry, to which eGain belongs, is currently in the top 30% of over 250 Zacks industries, indicating a favorable outlook [8] - Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5] - Another company in the same industry, Synchronoss, is expected to report quarterly earnings of $0.10 per share, reflecting a year-over-year change of +111.8% [9]

Revenue Performance - Total revenue for Q2 2025 was $22.4 million, down 6% year over year[4] - Total revenue for Q2 2024 was $22,389 million, a decrease of 6% compared to $23,815 million in Q2 2023[15] - SaaS revenue was $20,847 million, down 5% from $21,996 million year-over-year[19] - GAAP total revenue decreased by 8% to $44,188 million compared to $47,991 million in the previous year[21] - GAAP SaaS revenue declined by 8% to $40,667 million from $44,319 million year-over-year[21] - Annual recurring revenue from AI Knowledge Hub customers grew by 17% year over year and 5% sequentially[2] Income Metrics - GAAP net income for Q2 2025 was $671,000, or $0.02 per share, compared to $2.2 million, or $0.07 per share in Q2 2024[4] - Non-GAAP net income for Q2 2025 was $1.3 million, or $0.05 per share, compared to $3.4 million, or $0.11 per share in Q2 2024[4] - Net income for Q2 2024 was $671 million, a significant drop from $2,185 million in Q2 2023, marking a decrease of 69%[15] - Non-GAAP net income for Q2 2024 was $1,293 million, compared to $3,380 million in Q2 2023, reflecting a decline of 62%[17] - eGain is raising its GAAP net income guidance range to $1.1 million to $1.7 million, or $0.04 to $0.06 per share[9] - eGain is lowering its non-GAAP net income range to $4.1 million to $4.7 million, or $0.14 to $0.16 per share[9] Cash Flow and Assets - Cash provided by operating activities was $6.4 million, with an operating cash flow margin of 29%[4] - Total cash and cash equivalents were $70.5 million, down from $86.8 million in Q2 2024[4] - Total assets decreased from $127.9 million in June 2024 to $111.3 million in December 2024[13] Expenses - Operating expenses increased to $15,059 million in Q2 2024, up from $14,400 million in Q2 2023, representing a rise of 4.6%[15] - Research and development expenses rose to $7,708 million in Q2 2024, up from $6,660 million in Q2 2023, an increase of 15.7%[15] - Non-GAAP research and development expenses increased by 19% to $14,878 million from $12,528 million[21] - GAAP operating expenses slightly increased by 1% to $29,683 million from $30,322 million[21] - Non-GAAP sales and marketing expenses decreased by 11% to $9,832 million compared to $11,097 million last year[21] - Non-GAAP general and administrative expenses decreased by 14% to $4,181 million from $4,875 million[21] Profitability - Gross profit for Q2 2024 was $15,709 million, compared to $16,825 million in Q2 2023, reflecting a decline of 6.6%[15] - Adjusted EBITDA for Q2 2024 was $1,632 million, down from $3,771 million in Q2 2023, a decrease of 57%[17] - Non-GAAP gross profit fell by 10% to $31,304 million compared to $34,744 million in the prior year[21] Guidance and Future Strategy - eGain is lowering its total revenue guidance range to $88.5 million to $90.0 million for fiscal 2025[9] - The company is focusing on new product development and market expansion strategies to drive future growth[21]

Core Insights - eGain reported a 17% year-over-year growth in annual recurring revenue from AI Knowledge Hub customers, indicating strong demand for customer service automation solutions [2] - Total revenue for the second quarter of fiscal 2025 was $22.4 million, a decrease of 6% year-over-year [5] - The company expects total revenue for fiscal 2025 to be between $88.5 million and $90.0 million, reflecting a downward adjustment from previous guidance [5] Financial Highlights for Q2 Fiscal 2025 - GAAP net income was $671,000, or $0.02 per share, compared to $2.2 million, or $0.07 per share, in Q2 2024 [5] - Non-GAAP net income was $1.3 million, or $0.05 per share, down from $3.4 million, or $0.11 per share, in the same quarter last year [5] - Adjusted EBITDA for the quarter was $1.6 million, compared to $3.8 million in Q2 2024 [5] Financial Performance for the First Six Months of Fiscal 2025 - Total revenue for the first six months was $44.2 million, down 8% year-over-year [5] - GAAP net income for the first half was $1.3 million, or $0.05 per share, compared to $4.8 million, or $0.15 per share, in the same period last year [5] - Non-GAAP net income for the first six months was $2.6 million, or $0.09 per share, down from $7.2 million, or $0.23 per share, in the prior year [5] Financial Guidance for Q3 and Full Year Fiscal 2025 - For Q3 fiscal 2025, eGain anticipates total revenue between $21.0 million and $21.5 million, with a GAAP net loss projected between $300,000 and $800,000 [5] - The company has raised its GAAP net income guidance for the full fiscal year to a range of $1.1 million to $1.7 million, or $0.04 to $0.06 per share [5] - Non-GAAP net income guidance for the full year has been lowered to a range of $4.1 million to $4.7 million, or $0.14 to $0.16 per share [5]

Revenue Performance - SaaS revenue for Q2 2024 was $20,847,000, a decrease of 5% from $21,996,000 in Q2 2023, and for the first half of 2024, it was $40,667,000, down 8% from $44,319,000 in the same period last year[149] - Professional services revenue for Q2 2024 was $1,542,000, a decline of 15% from $1,819,000 in Q2 2023, and for the first half of 2024, it was $3,521,000, down 4% from $3,672,000 in the same period last year[149] - Total SaaS and professional services revenue for Q2 2024 was $22,389,000, a decrease of 6% from $23,815,000 in Q2 2023, and for the first half of 2024, it was $44,188,000, down 8% from $47,991,000 in the same period last year[149] - Total revenue for the three months ended December 31, 2024 decreased by $1.4 million (6%) to $22.4 million, while SaaS revenue decreased by $1.1 million (5%) to $20.8 million[170] - Total revenue for the six months ended December 31, 2024 decreased by $3.8 million (8%) to $44.2 million, with SaaS revenue down by $3.7 million (8%)[170] - Revenue from North America decreased by 8% to $17.3 million for the three months ended December 31, 2024, primarily due to a $1.1 million decrease in SaaS revenue[177] Operating Performance - Non-GAAP income from operations for Q2 2024 was $1,272,000 compared to $3,620,000 in Q2 2023, and for the first half of 2024, it was $2,413,000 compared to $6,244,000 in the same period last year[152] - Income from operations was $650,000 for the three months ended December 31, 2024, down 73% from $2.4 million in the same period in 2023[203] - Income from operations for the six months ended December 31, 2024, was $1.2 million, a decrease of 70% from $3.8 million in the same period in 2023[204] - Net cash provided by operating activities decreased by $8.4 million to $7.4 million for the six months ended December 31, 2024, from $15.8 million in the same period in 2023[214] Cost and Expenses - Cost of revenue for the three months ended December 31, 2024 was $6.7 million, a decrease of $310,000 (4%) compared to the same period in 2023[182] - Gross profit margin for the three months ended December 31, 2024 was 70%, down from 71% in the same period in 2023[168] - Operating expenses increased to 67% of total revenue for the three months ended December 31, 2024, compared to 60% in the same period in 2023[168] - Research and development expenses increased by 16% to $7.7 million for the three months ended December 31, 2024, compared to $6.7 million in the same period in 2023[193] - Research and development expenses for the six months ended December 31, 2024, rose by 14% to $15.1 million from $13.3 million in the same period in 2023[194] - Sales and marketing expenses decreased by 2% to $5.3 million for the three months ended December 31, 2024, compared to $5.3 million in the same period in 2023[198] - Sales and marketing expenses for the six months ended December 31, 2024, decreased by 13% to $10.0 million from $11.5 million in the same period in 2023[199] - General and administrative expenses decreased by 12% to $2.1 million for the three months ended December 31, 2024, from $2.4 million in the same period in 2023[201] - General and administrative expenses for the six months ended December 31, 2024, decreased by 19% to $4.5 million from $5.6 million in the same period in 2023[202] Market and Competitive Environment - The company operates in a competitive market for customer engagement software, including generative AI product offerings, which may impact future revenue growth[142] - The lengthy sales cycles and reliance on a small number of customers for a significant portion of revenue pose risks to the company's financial stability[142] - The company is focused on expanding its SaaS and professional services revenue streams to enhance overall business valuation[148] - The company is exposed to risks related to cybersecurity, regulatory changes, and market demand fluctuations that could affect operational performance[140] - The company aims to innovate and respond to rapid technological changes to maintain competitive advantages in the market[142] Future Obligations and Liquidity - As of December 31, 2024, remaining performance obligations were $73.6 million, with $50.9 million expected to be recognized as revenue within one year[163] - As of December 31, 2024, the company's principal sources of liquidity totaled $86.3 million, down from $101.7 million as of June 30, 2024[211] Legal and Compliance - The company is not currently involved in any legal proceedings that could materially affect its business or financial condition[228] - The company evaluates all claims and lawsuits for their potential merits and expected effects on operations[229] - The company may face injunctions if its technologies are found to infringe third-party rights[229] - The company is required to indemnify customers for third-party intellectual property infringement claims, which could increase costs[229] Internal Controls - As of December 31, 2024, the company's disclosure controls and procedures were effective at the reasonable assurance level[225] - There were no changes in internal control over financial reporting that materially affected the company during the last fiscal quarter[226]

Core Viewpoint - eGain (EGAN) is set to report its second-quarter fiscal 2025 results on February 13, with expectations of non-GAAP earnings between break-even and 2 cents per share, and revenues anticipated between $22.2 million and $22.6 million [1][2]. Financial Performance Expectations - The Zacks Consensus Estimate for earnings is 2 cents per share, reflecting an 81.82% decline from the previous year's quarter, while the revenue consensus is $22.46 million, indicating a 5.71% drop year-over-year [3]. - eGain has consistently surpassed the Zacks Consensus Estimate in the last four quarters, with an average surprise of 162.95% [3]. Key Factors Influencing Results - eGain has been expanding its AI Knowledge Hub, integrating it with customer service, sales, and support platforms to enhance response times [4]. - In the first quarter of fiscal 2025, the company reported a 16% year-over-year increase in SaaS annual recurring revenues from AI Knowledge Hub customers, indicating strong demand and high customer retention [5]. - A significant increase in new bookings in the first quarter highlights the growing adoption of eGain's AI-powered solutions, which is expected to positively impact revenue growth and customer retention in the upcoming quarter [6]. Business Developments - eGain has secured new and expansion business, including the launch of the eGain AI Agent and a major contract with a multibillion-dollar data center builder, which are likely to drive revenue growth and improve customer retention [7]. - However, a cautious outlook for the second quarter may have weakened client confidence, potentially leading to slower decision-making and delays in investments [8].

Core Points - eGain will announce its fiscal 2025 second quarter financial results on February 13, 2025, after market close [1] - The announcement will be followed by an investor conference call and webcast at 2:00 p.m. Pacific Time (5:00 p.m. ET) [2] - CEO Ashu Roy and CFO Eric Smit will host the call and webcast [1] Additional Information - A phone replay of the conference call will be available starting two hours after the call and will remain accessible for one week [3] - The replay can be accessed by dialing 877-344-7529 (U.S. toll free) or +1 412-317-0088 (International) with the access code 6223725 [3] - A live and archived webcast of the conference call can be accessed from the investors section of eGain's website [5]

Core Insights - eGain (EGAN) shares have increased by 31.6% over the past three months, outperforming the broader Zacks Computer & Technology sector and the Zacks Internet - Software industry [1] - The company is experiencing strong business momentum, particularly in its AI Knowledge Hub segment, which has seen a 16% year-over-year growth in annual recurring revenues [2][4] Revenue Composition - The AI Knowledge Hub segment contributes 50% of eGain's total revenues, with the remaining 50% coming from the Conversation Hub and Analytics Hub, indicating a balanced product portfolio [3] Client Acquisition and Demand - eGain achieved a 50% increase in client acquisitions in 2024 compared to the previous year, reflecting the rising demand for AI-driven knowledge management solutions [8] - Virginia529's adoption of eGain's AI Knowledge Hub highlights the company's expanding presence in the financial services sector [5] Product Innovation - eGain launched the eGain AI Agent, enhancing customer self-service capabilities and positioning the company to meet the growing demand for AI-driven solutions in customer engagement [6] - The introduction of AssistGPT, a generative AI-driven solution, aims to automate tasks and significantly reduce knowledge-building costs by up to 5X while doubling agent productivity [7] Financial Outlook - For the second quarter of fiscal 2025, eGain expects total revenues between $22.2 million and $22.6 million, with non-GAAP earnings anticipated between break-even to 2 cents per share [9] - For fiscal 2025, total revenues are projected between $92 million and $93 million, with non-GAAP earnings expected between 17 cents and 20 cents per share [10] Performance Metrics - eGain has consistently outperformed the Zacks Consensus Estimate in the trailing four quarters, with an average earnings surprise of 187.50% [11] - The company's operational excellence is demonstrated through robust recurring revenue growth, strong new bookings, and effective cost management [12] Investment Potential - eGain's operational advancements and market positioning indicate strong potential for sustained growth, making it a compelling choice for investors [13]

Company Overview - eGain (EGAN) shares increased by 14.6% to $6.19 in the last trading session, with a higher-than-average trading volume, compared to a 5.3% gain over the past four weeks [1] - eGain is experiencing strong momentum in its AI Knowledge offering, with a 16% year-over-year growth in Annual Recurring Revenue (ARR) for AI Knowledge customers in Q1 of fiscal 2025, driven by increased interest in AI and knowledge management solutions [1] Earnings Expectations - eGain is expected to report quarterly earnings of $0.02 per share, reflecting a year-over-year decline of 81.8%, with revenues projected at $22.46 million, down 5.7% from the same quarter last year [2] - The consensus EPS estimate for eGain has remained unchanged over the last 30 days, indicating that stock price movements may not sustain without trends in earnings estimate revisions [3] Industry Context - eGain belongs to the Zacks Internet - Software industry, which includes other companies like Paycor HCM, Inc. (PYCR), that closed 0.8% higher at $19.33, with a 5.8% return over the past month [3] - Paycor HCM's consensus EPS estimate for the upcoming report has also remained unchanged at $0.11, showing no change from the previous year, and it currently holds a Zacks Rank of 2 (Buy) [4]