eGain(US:EGAN)2025-09-04 22:00Financial Data and Key Metrics Changes - Total revenue for Q4 was $23.2 million, up 11% sequentially and up 3% year over year, marking the first year-over-year increase in revenue in eight quarters [17] - Non-GAAP gross margin for Q4 was 73%, up from 71% a year ago, while sales gross margin was 80%, up from 76% [17] - For the full year, total revenue was $88.4 million, down 5% year over year, primarily due to churn in the messaging business [19] - Non-GAAP net income for the full year was $5.7 million or $0.20 per share, compared to $4.3 million or $0.40 per share in the prior year [20] Business Line Data and Key Metrics Changes - AI knowledge ARR grew by 25% year over year, with expectations of 20% growth in fiscal 2026 [11] - Sales ARR for knowledge customers increased 25% year over year, while sales ARR for all customers increased 11% [22] - Non-GAAP operating costs for the full fiscal year were $56 million, flat compared to the prior year [19] Market Data and Key Metrics Changes - The company signed significant clients, including the largest nonprofit healthcare network in New Jersey and a major credit union, indicating strong market demand for AI knowledge solutions [5][6] - The partnership with JPMorgan Chase is expected to enhance customer experience and drive AI efficiencies across their business [9][10] Company Strategy and Development Direction - The company plans to focus on AI knowledge solutions, defocusing from less strategic products, such as messaging, which will be sunset in fiscal 2026 [12] - R&D spending is expected to increase by 6% year over year to extend product leadership in the AI knowledge infrastructure market [11][27] - The company aims to achieve gross margin expansion to between 74% and 75% for the year, up from 71% in fiscal 2025 [26] Management's Comments on Operating Environment and Future Outlook - Management noted that AI investments are not showing significant ROI due to a lack of trusted knowledge, which is critical for delivering value [10] - The company expressed optimism about the growing demand for trusted knowledge to support AI initiatives, which is reflected in their bookings for fiscal 2025 [11] - Guidance for fiscal 2026 indicates total revenue is expected to return to growth, with projections between $90.5 million and $92 million [25] Other Important Information - The company repurchased 2.6 million shares at an average price of $6.03 per share during fiscal 2025, with a total of $15.8 million spent [21] - An investor and analyst day event is scheduled for October 14th and 15th in Chicago, providing opportunities for engagement with customers and insights into the business [27] Q&A Session Summary Question: Timing on the sunsetting of the messaging products - Management indicated that the decision was driven by the need to focus on AI knowledge, which is expected to yield better ROI [29] Question: Expected impact of messaging product sunsetting on numbers - The impact is expected to begin in Q2, with a run rate reduction of roughly 50% by the end of fiscal 2026 [31] Question: Details on the partnership with JPMorgan Chase - The partnership is seen as a strategic opportunity to strengthen the relationship and gain insights into customer needs [33] Question: Trends in AI pilot to conversion rates - The conversion rate for AI solutions is currently stable at about two out of three [35] Question: Sustainability of cost reductions in OpEx and COGS - Management noted improvements in COGS due to migration to a new cloud platform and automation processes [37][38] Question: Breakdown of SaaS ARR components - Approximately 60% of total ARR is now from AI knowledge, with the remainder from eGain Analytics Hub and eGain Conversation Hub [44] Question: Competitive position on the Conversation Hub - Management expressed optimism about the Conversation Hub's growth potential as the AI Knowledge Hub expands [48] Question: Pipeline status for mega deals - Currently, there are no deals of JPMorgan Chase's size in the pipeline, but there are several attractive seven-figure opportunities [49] Question: Services gross margins outlook - The goal is to bring services margins closer to break even as efficiencies improve [50]