eGain(EGAN) - 2025 Q2 - Earnings Call Transcript

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]