eGain(EGAN) - 2025 Q4 - Annual Report

Forward-Looking Statements The report contains forward-looking statements subject to risks and uncertainties, covering future financial performance, market expectations, and business plans - The report contains forward-looking statements regarding future periods, events, and financial performance, identified by words like "believe," "expect," "target," and conditional verbs; these statements are subject to various risks and uncertainties that could cause actual results to differ materially from projections[10][11] - Key forward-looking statements include beliefs about non-GAAP operating income, expected benefits of solutions, market opportunities, customer and market expectations, sales cycles, financial metrics, AI automation in contact centers, business plans, technology changes (including AI), product development, competition, demand for solutions, customer composition, reliance on partnerships, cybersecurity risks, regulatory compliance, tax legislation effects, privacy laws, trade policies, intellectual property, capital resources, international operations, foreign currency fluctuations, inflation, and health epidemics[10] Summary Risk Factors The company faces numerous risks including operational unpredictability, SaaS model challenges, intense competition, and regulatory changes, which could impact its strategy and financial results - The company's business is exposed to numerous risks and uncertainties that could impact its strategy and financial results; key risks include the ability to manage business plans, improve solutions, innovate, execute sales and marketing, ensure customer acceptance, predict subscription renewals, adapt to new legislation, compete effectively, manage partnerships, obtain capital, manage growth, retain key personnel, protect intellectual property, and mitigate impacts from foreign currency fluctuations, inflation, global economic environment, trade policies, and public health pandemics[13][14] - Specific operational risks highlighted are the inherent unpredictability of factors beyond control, risks associated with the SaaS business model, revenue and operating result fluctuations due to deferred revenue recognition, inability to accurately predict subscription renewal rates, lengthy and unpredictable sales cycles, dependence on a small number of key customers, intense competition in the customer engagement software market (including generative AI), and challenges in expanding sales and marketing[15] - Further risks include difficulties in customer product implementation, significant international operations exposure, unplanned system interruptions or capacity issues in third-party data centers, costly software errors, increased costs/liabilities from Service Level Agreements, dependence on broad market acceptance of applications and business model, inability to respond to rapid technological change, reliance on third-party technologies, and challenges in managing offshore product development and services[15] - Cybersecurity breaches, changes in privacy and data protection laws (e.g., GDPR), evolving regulations for cloud computing and AI, and changes in domestic and foreign trade policies (e.g., tariffs) also pose significant risks[16] PART I ITEM 1. BUSINESS eGain Corporation automates customer experience with an AI knowledge hub SaaS solution for enterprises, operating globally to enhance service and reduce costs through integrated AI Agent, AI Knowledge Hub, and Conversation Hub - eGain automates customer experience with an AI knowledge hub SaaS solution, aiming to improve customer experience and reduce costs for enterprises by synthesizing and delivering trusted answers[18] - The company's solution is structured into three main hubs: eGain AI Agent (for agent assistance), eGain AI Knowledge Hub (for centralized, guided knowledge), and eGain Conversation Hub (for omnichannel interaction management)[27][28][29][30] - eGain's solutions offer benefits such as enhanced customer experience, reduced operating costs through self-service automation and improved agent productivity, ensured compliance, and delivery of insights for service and product improvement[32] - The company primarily sells to large enterprises (over $1 billion in annual revenue or government organizations), which accounted for over 87% of its annual recurring cloud revenue in fiscal year 2025; North America and EMEA collectively generated 78% and 22% of total revenue, respectively, in FY2025[37] - eGain competes with application software providers like LivePerson, NICE, and Verint, and occasionally with platform partners such as Five9, Genesys, Microsoft, Salesforce, and ServiceNow[39] - Growth strategies include advancing product and platform leadership (especially in AI), investing in direct sales and marketing, developing new partner relationships, and expanding within existing enterprise accounts[42][43][44][45] - As of June 30, 2025, eGain had 446 employees (444 full-time), with significant portions in product development (173) and services/support (176)[59] ITEM 1A. RISK FACTORS eGain faces diverse risks from its business model, market competition, international operations, and technology, including revenue fluctuations, intense AI-driven competition, global operational exposure, cybersecurity threats, and evolving data privacy and AI regulations - The SaaS business model is subject to risks, including customer non-renewal or reduction of subscriptions, which can adversely affect operating and financial results; revenue recognition over time means downturns are not immediately reflected[68][72][74] - The market for customer engagement software, including generative AI, is highly competitive; failure to compete successfully against established and new entities with greater resources could adversely affect the business[82][83][84] - Significant international operations (22% of revenue from EMEA, 43% of workforce in India) expose the company to risks like foreign currency fluctuations, changes in data privacy laws (e.g., GDPR), geopolitical conflicts, and increased compensation costs in regions like India[95][97][99] - Cybersecurity breaches, unauthorized access to data, and system interruptions at third-party data centers or PaaS providers could harm reputation, lead to customer attrition, and incur significant legal and financial liabilities[100][101][130][131][136] - Evolving data privacy laws (e.g., GDPR, CCPA, CPRA, India's DPDP) and AI regulations (e.g., EU AI Act) increase compliance costs, create legal uncertainties, and may limit the use and adoption of eGain's solutions[137][141][142][143][150] - The development and use of AI technologies carry risks such as flawed algorithms, biased datasets, and potential for harmful content, which could lead to reputational harm, regulatory scrutiny, or legal liability[148][149][150] - Dependence on a relatively small number of customers for a substantial portion of revenue means the loss of any significant customer could materially and adversely affect financial condition and results of operations[81] ITEM 1B. UNRESOLVED STAFF COMMENTS There are no unresolved staff comments from the SEC regarding the company's filings - The company has no unresolved staff comments from the Securities and Exchange Commission[176] ITEM 1C. CYBERSECURITY eGain maintains a robust cybersecurity framework aligned with NIST and ISO27001, overseen by a CISO and the Audit Committee, conducting third-party evaluations and managing risks, with no material impact from past incidents - eGain has an enterprise cybersecurity risk mitigation and governance process, detailed in its Information Security Protection Program (Security Plan), which aligns with NIST and ISO27001 frameworks[177][179][180] - The company engages third-party providers for security control evaluations, including penetration testing and independent audits, to test the design and operational effectiveness of its security controls[178] - A Third-Party Cyber Risk Management Plan ensures due diligence on third parties, including security and privacy clauses in contracts and regular reviews[181] - A Cyber Incident Response Plan outlines processes for detecting, identifying, prioritizing, and analyzing security events, involving the CISO, legal counsel, and business stakeholders for appropriate response and mitigation[182] - The CISO, with over 25 years of experience in IT and security, leads the company's cybersecurity strategy and reports to the Chief Financial Officer; the Audit Committee of the board oversees data privacy and cybersecurity risks, receiving annual updates from the CISO[185][186][187] - As of the report date, eGain is not aware of any material risks from cybersecurity threats or past incidents that have materially affected or are likely to materially affect its business strategy, financial condition, results of operations, or cash flows[184] ITEM 2. PROPERTIES eGain leases all its facilities, including headquarters in Sunnyvale, California, and offices in Newbury, England, and Pune, India, which are considered adequate for current and near-future operations - eGain leases all its facilities, including corporate headquarters in Sunnyvale, California, and offices in Newbury, England, and Pune, India[188] - The company believes its current offices are adequate for its present and near-future operating needs[188] ITEM 3. LEGAL PROCEEDINGS eGain is not a party to any material legal proceedings and is unaware of significant pending or threatened actions, though it evaluates claims including intellectual property infringement and indemnifies customers - eGain is not currently a party to any legal proceedings, nor is it aware of any pending or threatened legal proceedings that could have a material adverse effect on its business, consolidated operating results, or financial condition[189] - In the ordinary course of business, the company is involved in various legal proceedings and claims, including alleged infringement of third-party patents and other intellectual property rights, commercial, labor, and employment matters[189] - The company indemnifies its customers against third-party intellectual property infringement claims, which could increase costs in the event of an adverse ruling[190] ITEM 4. MINE SAFETY DISCLOSURES This item is not applicable to eGain Corporation - The disclosure requirement for mine safety is not applicable to eGain Corporation[191] PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES eGain's common stock trades on Nasdaq under 'EGAN', with approximately 120 stockholders as of June 30, 2025; the company has never paid cash dividends and has a $40.0 million stock repurchase program with $1.2 million remaining - eGain's common stock is traded on the Nasdaq Stock Market under the symbol "EGAN"[194] - As of June 30, 2025, there were approximately 120 stockholders of record[195] - The company has never declared or paid any cash dividends on its common stock and does not intend to in the foreseeable future, planning to retain all available funds for business operations[196] - On May 31, 2024, the board authorized a $20.0 million increase in its stock repurchase program, bringing the aggregate amount to $40.0 million; as of June 30, 2025, approximately $1.2 million remained available[197] Stock Repurchase Activity (Q4 FY2025) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Approximate Dollar Value of Shares That May Yet Be Purchased Under the Program (in thousands) | | :--- | :--- | :--- | :--- | | April 1, 2025 to April 30, 2025 | 183,906 | $5.38 | $3,962 | | May 1, 2025 to May 31, 2025 | 215,648 | $5.87 | $2,696 | | June 1, 2025 to June 30, 2025 | 230,858 | $6.53 | $1,188 | | Total | 630,412 | | | Cumulative Total Stockholder Return (FY2020-FY2025) | Index | 6/30/2020 | 6/30/2021 | 6/30/2022 | 6/30/2023 | 6/30/2024 | 6/30/2025 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | eGain Corporation | $100.00 | $103.33 | $87.76 | $67.42 | $56.80 | $56.26 | | Nasdaq Composite | $100.00 | $145.56 | $111.46 | $140.60 | $182.23 | $210.79 | | S&P Software & Services Select Industry Index | $100.00 | $154.47 | $100.40 | $120.90 | $137.30 | $172.80 | ITEM 6. RESERVED This item is intentionally reserved and contains no information ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS eGain's total revenue decreased by $4.4 million (4.7%) to $88.4 million in FY2025, while net income significantly increased to $32.3 million due to a $26.6 million deferred tax valuation allowance release, with stable liquidity of $62.9 million in cash - eGain automates customer experience with an AI knowledge hub solution, selling its SaaS solution to enterprises to improve customer experience and reduce costs[210] Total Revenue (FY2025 vs. FY2024) | Revenue Category | FY2025 (in thousands) | FY2024 (in thousands) | Change (in thousands) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | SaaS revenue | $81,921 | $85,082 | $(3,161) | (4)% | | Professional services | $6,510 | $7,721 | $(1,211) | (16)% | | Total revenue | $88,431 | $92,803 | $(4,372) | (4.7)% | Non-GAAP Operating Income (FY2025 vs. FY2024) | Metric | FY2025 (in thousands) | FY2024 (in thousands) | | :--- | :--- | :--- | | Income from operations (GAAP) | $4,433 | $5,971 | | Add: Stock-based compensation | $2,449 | $4,529 | | Non-GAAP income from operations | $6,882 | $10,500 | - Net income significantly increased to $32.3 million in FY2025 from $7.8 million in FY2024, primarily due to an income tax benefit of $26.6 million in FY2025 (compared to a provision of $1.9 million in FY2024) resulting from the release of a deferred tax valuation allowance[285][319] - Total costs and operating expenses decreased by $2.8 million in FY2025, mainly due to decreases in personnel-related expenses, legal expenses, outside consulting costs, and credit loss expenses, partially offset by increases in cloud computing and lead generation costs[281] Key Financial Measures (FY2025 vs. FY2024) | Metric | FY2025 (in thousands) | FY2024 (in thousands) | Change (in thousands) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Income from operations | $4,433 | $5,971 | $(1,538) | (26)% | | Operating margin | 5% | 6% | -1% | | | Interest income, net | $2,469 | $3,798 | $(1,329) | (35)% | | Other expense, net | $(1,265) | $(51) | $(1,214) | 2380% | | Income before income tax benefit (provision) | $5,637 | $9,718 | $(4,081) | (42)% | | Benefit from (provision for) income taxes | $26,617 | $(1,938) | $28,555 | -1473% | | Net income | $32,254 | $7,780 | $24,474 | 315% | | Basic EPS | $1.15 | $0.25 | $0.90 | 360% | | Diluted EPS | $1.13 | $0.25 | $0.88 | 352% | Liquidity and Capital Resources (FY2025 vs. FY2024) | Metric | June 30, 2025 (in thousands) | June 30, 2024 (in thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | $62,909 | $70,003 | | Restricted cash | $8 | $8 | | Total liquidity sources | $95,700 | $101,700 | | Working capital | $38,400 | $44,500 | | Deferred revenue | $50,531 | $49,269 | Cash Flows (FY2025 vs. FY2024) | Cash Flow Activity | FY2025 (in thousands) | FY2024 (in thousands) | Change (in thousands) | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $5,263 | $12,454 | $(7,191) | | Net cash used in investing activities | $(565) | $(198) | $(367) | | Net cash used in financing activities | $(14,393) | $(15,391) | $998 | | Effect of exchange rate differences on cash and cash equivalents | $2,601 | $(62) | $2,663 | | Net decrease in cash, cash equivalents and restricted cash | $(7,094) | $(3,197) | $(3,897) | | Cash, cash equivalents and restricted cash at end of year | $62,917 | $70,011 | $(7,094) | ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK eGain faces market risks from foreign currency fluctuations, particularly USD, Euro, GBP, and INR, and interest rate changes, but does not use derivatives, with a 10% USD increase potentially decreasing foreign assets by $2.6 million - eGain is exposed to foreign currency exchange risk, principally from fluctuations between the U.S. Dollar, Euro, British Pound, and Indian Rupee, as international sales are made in local currencies[299] - As of June 30, 2025, identifiable assets denominated in foreign currency totaled approximately $25.9 million; a 10% increase in the U.S. dollar's value relative to other currencies would decrease these assets by $2.6 million[299] - The company does not currently use derivative instruments to hedge against foreign exchange risk[299][301] - eGain's exposure to interest rate risk relates primarily to interest earned on cash and cash equivalents; the company's investment policy focuses on short-term, low-risk investment-grade debt instruments[300] - A hypothetical 10% change in market interest rates is not expected to have a material impact on the fair value of securities or cash flows/income[301] PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Information on eGain's directors, executive officers, and corporate governance, including an insider trading policy, is incorporated by reference from the 2025 Annual Meeting of Stockholders Proxy Statement - Information on directors, executive officers, and corporate governance is incorporated by reference from the 2025 Annual Meeting of Stockholders Proxy Statement[477] - Specific information about executive officers is also provided in Part I, Item 1 of this report[478] - eGain has adopted an insider trading policy designed to promote compliance with insider trading laws, rules, and Nasdaq listing standards[479] ITEM 11. EXECUTIVE COMPENSATION Executive compensation details are incorporated by reference from the Proxy Statement, with the company not granting equity awards in anticipation of material nonpublic information and historically limiting stock option grants to named executive officers - Information on executive compensation is incorporated by reference from the Proxy Statement[480] - eGain does not grant equity awards in anticipation of material nonpublic information, nor does it time the release of such information based on equity award grant dates[481] - Historically, including in fiscal year 2025, the compensation committee has not granted stock options, stock appreciation rights, or similar option-like instruments to named executive officers, except in certain circumstances like hiring or promotion[481] ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS Security ownership information is incorporated by reference from the Proxy Statement; as of June 30, 2025, eGain had 3,954,716 outstanding options and rights with a weighted-average exercise price of $8.80, and 2,089,443 shares available for future issuance - Information on security ownership of certain beneficial owners and management is incorporated by reference from the Proxy Statement[482] Equity Compensation Plan Summary (as of June 30, 2025) | Plan Category | Number of securities to be issued upon exercise of outstanding options and rights (a) | Weighted-average exercise price of outstanding options and rights (b) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by security holders (2005 Stock Incentive Plan) | 3,477,199 | $9.67 | 2,089,443 | | Equity compensation plans not approved by security holders (2005 Management Stock Option Plan) | 477,517 | $2.49 | — | | Total | 3,954,716 | $8.80 | 2,089,443 | ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE Information regarding certain relationships, related party transactions, and director independence is incorporated by reference from the Proxy Statement - Information on related party transactions, director independence, and board meetings/committees is incorporated by reference from the Proxy Statement[484] ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES Information concerning principal accounting fees and services is incorporated by reference from the Proxy Statement - Information on principal accounting fees and services is incorporated by reference from the Proxy Statement[485] PART IV ITEM 15. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES This section details the financial statements, schedules, and exhibits filed with the Form 10-K, including consolidated financial statements, a valuation and qualifying accounts schedule, and a comprehensive list of corporate documents and certifications - The report includes consolidated financial statements as of June 30, 2025 and 2024, and for the years ended June 30, 2025 and 2024, as listed in Item 8[488] Schedule II—Valuation and Qualifying Accounts (FY2025 vs. FY2024) | Provision for Credit Losses | Balance at Beginning of Period | Additions Charged to Expense | Written Off, Net of Recoveries | Balance at End of Period | | :--- | :--- | :--- | :--- | :--- | | Year ended June 30, 2025 | $59 | $63 | $(115) | $7 | | Year ended June 30, 2024 | $237 | $93 | $(271) | $59 | - A comprehensive list of exhibits is provided, including organizational documents, stock plans, lease agreements, insider trading policy, and various certifications[492][493][494] ITEM 16. FORM 10-K SUMMARY This item is not applicable to the report - The Form 10-K Summary is not applicable[497] SIGNATURES The report is signed by eGain Corporation's CEO, Ashutosh Roy, and CFO, Eric N. Smit, along with other directors, as of September 12, 2025, granting power of attorney for amendments - The report is signed by Ashutosh Roy (Chief Executive Officer) and Eric N. Smit (Chief Financial Officer) on September 12, 2025[502][505] - A power of attorney is granted to the Chief Executive Officer and Chief Financial Officer to sign and file any amendments to this annual report[503]