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eGain Corporation (NASDAQ:EGAN) reported its financial results for the third quarter of fiscal year 2025, revealing a shortfall in both earnings per share (EPS) and revenue compared to forecasts. The company posted an EPS of $0.03, falling short of the expected $0.07. Revenue came in at $21 million, below the forecasted $23.58 million. Following the announcement, eGain’s stock price declined by 4.17% during regular trading hours to close at $5.27, with no change in aftermarket trading. According to InvestingPro data, the company maintains a "FAIR" financial health score of 2.47 out of 5, with particularly strong marks in profit and cash flow metrics.
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Key Takeaways
- eGain’s Q3 2025 EPS and revenue missed analysts’ expectations.
- The stock fell by 4.17% in regular trading following the earnings release.
- SaaS revenue constituted 93% of total revenue, with an 11% increase in SaaS ARR for knowledge customers.
- The company launched a new AI agent for contact centers, enhancing its product offerings.
- Extended sales cycles and market transition to AI-powered solutions impacted results.
Company Performance
eGain’s Q3 2025 performance reflected challenges in meeting market expectations, with a year-over-year revenue decline of 6%. Despite the revenue drop, the company continues to focus on its SaaS business, which now represents a significant portion of its revenue. The launch of a new AI agent for contact centers marks a strategic step in strengthening its product suite, aligning with the growing demand for AI-driven solutions.
Financial Highlights
- Revenue: $21 million (6% year-over-year decline)
- Earnings per share: $0.03
- Operating cash flow: $2.2 million
- Total cash and equivalents: $68.7 million
- SaaS ARR for knowledge customers increased by 11% year-over-year
Earnings vs. Forecast
eGain reported an EPS of $0.03, missing the forecasted $0.07 by approximately 57%. Revenue fell short by 10.9%, coming in at $21 million against an expected $23.58 million. This marks a notable deviation from the company’s previous performance trends, indicating potential operational challenges.
Market Reaction
Following the earnings announcement, eGain’s stock price decreased by 4.17% to $5.27. This decline reflects investor disappointment with the company’s financial performance, particularly the missed earnings and revenue targets. The stock remains closer to its 52-week low of $4.34, suggesting cautious investor sentiment.
Outlook & Guidance
Looking ahead, eGain projects Q4 revenue between $22.8 million and $23.3 million, with full fiscal year revenue guidance set at $88 to $88.5 million. The company anticipates a continued increase in SaaS ARR for knowledge customers, expecting growth in the high teens. Executives have highlighted 2026 as a pivotal year for realizing the impact of AI knowledge investments on the top line.
Executive Commentary
CEO Ashu Roy emphasized the strategic importance of AI, stating, "In the AI era, knowledge management is no longer a nice to have capability. It is a must have infrastructure." Roy also noted the collapse of functional boundaries driven by AI, underscoring the company’s focus on establishing a "single source of truth" for enterprise AI.
Risks and Challenges
- Extended sales cycles could delay revenue realization.
- Increased R&D spending may pressure short-term profitability.
- Competitive pressures in the AI knowledge management space.
- Macroeconomic factors potentially affecting enterprise spending.
- Dependence on successful deployment of new AI products.
Q&A
During the earnings call, analysts inquired about the mega bank deal, which involves a significant expansion of previous engagements and is expected to deploy by late fall. The deal covers over 100,000 users, with aggressive AI implementation anticipated from the client. Executives also addressed the stabilization of sales cycles at 9-12 months, indicating a more predictable revenue flow moving forward.
Full transcript - eGain Corporation (EGAN) Q3 2025:
Conference Operator: Please note this event is being recorded. I would now like to turn the conference over to Jim Byers, Pondell Investor Relations. Please go ahead.
Jim Byers, Investor Relations, eGain: Thank you, operator, and good afternoon, everyone. Welcome to eGain’s fiscal twenty twenty five third quarter financial results conference call. On the call today are eGain’s Chief Executive Officer, Ashu Roy and Chief Financial Officer, Eric Smith. Before we begin, I would like to remind everyone that during this conference call, management will make forward looking statements, which convey management’s expectations, beliefs, plans and objectives regarding future financial and operational performance. Forward looking statements are generally preceded by words such as believe, plan, intend, expect, anticipate or similar expressions.
Forward looking statements are protected by Safe Harbor provisions contained in the Private Securities Litigation Reform Act of 1995. These forward looking statements are subject to a wide range of risks and uncertainties that could cause actual results to differ in material respects. Information on various factors that could affect eGain’s results are detailed on the company’s reports filed with the Securities and Exchange Commission. EGain is making these statements as of today, 05/14/2025, and assumes no obligation to publicly update or revise any of the forward looking information in this conference call. In addition to GAAP results, we will also discuss certain non GAAP financial measures such as non GAAP operating income.
The tables included with the earnings press release include reconciliation of the historical non GAAP financial measures to the most directly comparable GAAP financial measures. EGain’s earnings press release can be found by clicking the Press Releases link on the Investor Relations page of eGain’s website at eGain.com. And along with the earnings release, we will post an updated investor presentation to the Investor Relations page of eGain’s website. And lastly, a phone replay of this conference call will be available for one week. And now with that said, I would like to turn the call over to eGain’s CEO, Ashu Roy.
Ashu Roy, Chief Executive Officer, eGain: Thank you, Jim and good afternoon everyone. In our third quarter, we exceeded our profitability projections and delivered solid operating cash flow. Bookings for the quarter however were impacted by the extended sales cycles we had mentioned last quarter. Despite this, we continue to grow our pipeline as demand for our AI knowledge offering continues to gather momentum. Having said that, we are very excited to report that we secured one of our largest deals ever soon after the quarter closed.
This deal is with The U. S. Consumer Group Of U. S. Megabank, One of the big four.
Like most innovative businesses, they have concluded that they needed an enterprise knowledge foundation to deliver trusted content to customers, employees and AI. We started out in this account by establishing a beachhead with the client over a year ago in one of their fast growing international divisions. Shortly thereafter, we replaced their homegrown knowledge solution in one of their U. S. Subsidiaries.
And now with this third win, which is in the U. S. Consumer Banking Group, which by the way is the largest business unit. We are going to have our AI knowledge platform used across more than half the bank, over 100,000 users. And that’s very exciting to us because it exemplifies the vision that we have been pursuing and that is establishing a single source of truth, which delivers trusted content across the business in the AI era.
Turning to our products, in March, we launched the eGain AI agent for contact center. This is the second of the offerings of our AI agent product capability. The first one was the eGain AI agent for customer self-service. Now this contact center solution is a breakthrough conversational assistant that guides contact center agents to resolve customer issues across all touch points, so phone, chat, email. Unlike other solutions, the eGain AI agent delivers proactive real time guidance beyond simple FAQs or narrow pre programmed domain interactions and it does so by using the trusted answers from our eGain knowledge hub.
The solution connects out of the box with Amazon Connect, Genesys Cloud and Salesforce. Plus, it has APIs to integrate with other CRM and CCaaS platforms. Now we are seeing very good interest in the solution, particularly from businesses who are in the past have struggled to get value out of the first wave of AI solutions in the market. One of our banking clients, existing ones is already rolling out the solution for their contact centers. They are keen to reduce the variability of agent performance and improve compliance in the flow of service rather than policing for compliance and performance after the fact.
Interestingly, they had tried out a couple of AI assistant solutions from their CCaaS provider and another vendor, but they could never scale it beyond the prototype. We are very excited about these AI agent offerings. We have two of them now. One as I mentioned for customer self-service and now for the contact center agents. The easy try and use models that we have created, we believe will accelerate new logo acquisition and innovation consumption among our clients.
I’m also excited to note that during the quarter, Gartner published their first emerging market quadrant for generative AI knowledge management apps. It’s a mouthful, but this is a category that they have created. In this category, rated eGain a leader, so
Jim Byers, Investor Relations, eGain: in
Ashu Roy, Chief Executive Officer, eGain: the upper right quadrant. This emerging category as they call it, is defined by Gartner as technologies that enable companies to better retrieve and contextualize information and insight from their knowledge bases, including search and insight engines, conversational AI and productivity tools, all toward communication and content development. In the AI era, as Gartner states, knowledge management is no longer a nice to have capability. It is a must have infrastructure. An enterprise wide system of record for trusted answers that power AI and empower all employees and customers.
In this emerging market opportunity, we are focused. We’re investing in it and we are capitalizing on it. To conclude, while macro uncertainty impacted the timing of closing new deals during the third quarter, we are seeing good deal closure in the current quarter, starting with the mega bank deal that I mentioned. We launched our breakthrough AI agent for contact center offering during the quarter and we are seeing very good customer interest. And finally, our strategic efforts and increased R and D investments over the past year are starting to show results and we are starting to establish eGain as the trusted knowledge foundation for the AI enterprise.
Eric Smith, Chief Financial Officer, eGain: With that, I will ask Eric Smith, our Chief Financial Officer to add more color around our financial operations. Eric? Great. Thanks everyone for joining us today. As Ashu noted, our third quarter results included profitability that exceeded our projections and solid operating cash flow.
Let me share more details about our financial results for Q3 before discussing our outlook and guidance for Q4 and fiscal twenty twenty five. Looking at our revenue, total revenue for the third quarter was $21,000,000 which was within our guidance, but down 6% year over year. As previously discussed, the year over year decline reflects the impact of the two large client losses last year, one a Conversation Hub customer and the other an Analytics customer. This will be the final quarter with year over year comparisons affected by these former customers. Looking at the revenue in more detail, our SaaS revenue in the quarter accounted for 93% of total revenue.
The remainder was professional services revenue. As I’ve noted before, with the recent product improvements, our PS attach rates on new implementations decreases by design. Improvements we are making to our products have resulted in faster deployment and quicker time to value for clients, which means less need for low margin professional services, which is good for our business. Looking at non GAAP gross profit and gross margins, SaaS gross margin for the quarter was 77% compared to 78% a year ago and total gross margin for the quarter was 69% compared to 71% a year ago. Now turning to our operations.
Non GAAP operating costs for the third quarter were $13,800,000 down 6% sequentially and flat compared to the year ago quarter. R and D was up 15% year over year as we continued to invest in product innovation to capitalize on the significant emerging market opportunity that Ashu just talked about. Looking at our bottom line, non GAAP net income was $765,000 or $03 per share and ahead of the high end of our guidance range for the quarter. This compared to non GAAP net income of $2,600,000 or $08 per share in the year ago quarter. Adjusted EBITDA margin for the quarter was 6% compared to 10% in the year ago quarter.
Turning to our balance sheet and cash flows. For the third quarter, we generated $2,200,000 in cash flow from operations or an 11% operating cash flow margin, up from $1,700,000 generated in the year ago quarter. During the quarter, under our share repurchase program, we repurchased 895,000 shares at an average price of $5.61 per share, totaling $5,000,000 At the end of the quarter, 5,000,000 of the $40,000,000 of authorized remaining available is remained available under the program. Our balance sheet remains very strong. Total cash and cash equivalents at the end of the quarter was $68,700,000 Now turning to our customer metrics.
I’ve broken out our ARR knowledge metrics from the total metrics to highlight the momentum in our knowledge business. Looking at ARR, SaaS ARR for our knowledge customers increased 11% year over year, while the total SaaS ARR for all customers decreased 6% year over year. With the strong booking starts to Q4, as we mentioned, we expect the SaaS ARR for our knowledge customers for fiscal twenty twenty five to increase in the high teens year over year. We also expect year over year growth in the total SaaS ARR in fiscal twenty twenty five. Turning to our net retention rates, LTM dollar based SaaS net retention for knowledge customers was 97%, while net retention for all customers was 88%.
Our LTM dollar based SaaS net expansion rate was 103 for our knowledge customers and 104 for all customers. Looking at our remaining performance obligations, total RPO decreased 2% year over year and our short term RPO of $44,300,000 was down 7% year over year. The year over year declines was primarily due to the two large customer losses last year as previously mentioned. Now turning to guidance, for the fourth quarter of fiscal twenty twenty five, we expect total revenue of between $22,800,000 to $23,300,000 Turning to the bottom line, for Q4, we expect GAAP net income of $1,100,000 to $1,600,000 or $04 to $06 per share, which includes stock based compensation expense of approximately $700,000 and depreciation and amortization of approximately $100,000 We expect non GAAP net income of $1,700,000 to $2,200,000 or $06 to $08 per share. For fiscal twenty twenty five full year, due to the deals taking longer to close than previously projected, we are revising our guidance range for total revenue to between $88,000,000 to $88,500,000 down slightly from the original range of 88,500,000.0 to $90,000,000 With our ongoing cost optimization efforts, we are increasing our bottom line guidance range to GAAP net income of $2,500,000 to $3,000,000 or $09 to $0.10 per share, up from the original guidance range of $1,100,000 to $1,700,000 or $04 to $06 per share.
This includes stock based compensation expense of approximately $2,600,000 and depreciation and amortization of approximately $360,000 We expect non GAAP net income of $5,100,000 to $5,600,000 or $0.18 to $0.20 per share. In summary, with eGain now increasingly recognized as the knowledge foundation for enterprise AI initiatives and backed by our profitable core business, we continue to invest in product innovation to capitalize on the emerging market opportunity. Notably, we closed one of the largest deals in the company’s history shortly after the quarter end, securing a significant expansion of our knowledge offering across The U. S. Mega banks enterprise.
We are also seeing strong customer interest and early traction with our newly launched AI agent for contact center, which is already demonstrating its potential to enhance service performance and broaden our addressable market. With that, I would like to open the call for questions. Operator?
Conference Operator: Our first question today is from Richard Baldry with ROTH Capital. Please go ahead.
Richard Baldry, Analyst, ROTH Capital: Thanks. Can you talk about a little bit more about the mega bank win? I’m sort of curious about the pace to roll out the deployment. How big the expansion is by scale sort of compared to what they were? Is it 50% bigger 2x?
And then maybe sort of how unique or repeatable that win was across the rest of your customer base?
Ashu Roy, Chief Executive Officer, eGain: Okay. Rich, this is Ashu here. So yes, let’s start with the first one. So I would say the deployment is at pace right now. So I think those customer will be fully deployed on this expansion by the by late fall.
So it’s a pretty aggressive schedule between now and when we secured the deals. So about a six months deployment in multiple phases. And then in terms of the rollout and the expansion, I’d say we it’s an order of magnitude bigger, right? I would say the 10x of what we were before that, so it’s a much bigger size deal than what we were before we got into this current expansion, the second expansion and the third deal. And then, far as the repeatability, I would say, it’s a pretty common pattern we are seeing in all businesses.
As I mentioned earlier, I think maybe two quarters ago, we used to see a lot more functional engagement with customer service and contact centers mostly for knowledge management and that still continues to be our primary entry point in businesses. But we are seeing more and more collapse of the functional boundaries because of the AI drivers. And so knowledge is becoming a solution that people are looking to deploy across the business so that they can then have that single source of truth across all functions. So that’s kind of the repeatability we are seeing in these sales now.
Richard Baldry, Analyst, ROTH Capital: Thanks. Maybe last for me. You talked about sales cycles have been a bit extended. Do you feel like they while extended, they’ve maybe stabilized here? Do you think they’re getting any worse, any better?
Sort of curious of how much
Ashu Roy, Chief Executive Officer, eGain: And it should have stabilized. They’ve stabilized. I think the increase has been mostly because of the size of the opportunities as well as the number of groups that need to be involved to go through that process of evaluation and ultimately decision. So yes, I would say that it’s stabilized. So it’s probably more like nine to twelve months now on average as opposed to nine months.
This is an extra quarter if you will add it to all of this.
Richard Baldry, Analyst, ROTH Capital: Great. Thanks.
Conference Operator: The next question is from Jeff Van Rhee with Craig Hallum. Please go ahead.
Daniel, Analyst, Craig Hallum: Good evening, Ashu, Eric. This is Daniel on for Jeff. Just maybe one more question on the mega bank before we move elsewhere. Just maybe unpack a little bit more what that ramp up through the fall will look like in terms of the process? Is there is that all sort of sealed and done?
It’s going to be a very linear, very easy rollout? Is there what are sort of the hurdles in terms of implementation, training, approvals? Just how will that look like? And then going along with that, the revenue ramp, will that be linear? How will that curve?
Ashu Roy, Chief Executive Officer, eGain: Sure. I’ll take the first. Maybe you can take the second. So in terms of the implementation, I would say that it’s not unusually custom. It’s sort of like many other large enterprises we have worked with.
The only big difference I would say is that this bank is super aggressive on the AI front. So their internal AI teams are much more advanced and they are pulling they expect to pull a lot more knowledge content from our knowledge hub to further drive their kind of AI based workflows on the user end. So that part is kind of new and exciting. But other than that, I would say it’s fairly par for a course for a large enterprise deal.
Eric Smith, Chief Financial Officer, eGain: And on the rev rec side, the way the deal is structured, it will be ramped up pretty much from the beginning as opposed to a phased purchase over time.
Daniel, Analyst, Craig Hallum: Okay. That’s helpful. And I think that gets sort of to my next question, which was in terms of the sequential growth we’re looking for from Q3 to Q4, it looks like around 10%. What’s the visibility? What are the drivers of that?
Is there any sort of rebound in TS? Is this all visibility from this major mega bank deal sort of starting off hot? Just what’s the visibility there?
Eric Smith, Chief Financial Officer, eGain: Yes, exactly. I think it’s a combination. I mean, given the size of this deal and the timing of it, that will certainly have a meaningful impact of that sequential growth.
Daniel, Analyst, Craig Hallum: Okay. And then just as we look a little further out to 2026 and beyond, if a bottom was going to be reached on the growth and sort of a rebound back to positive growth, I mean, do you think about at a high level what that growth formula would look like? Is that Analytics and Conversation Hub hitting a bottom? Is that an acceleration in knowledge? Is that a change in top 10 customers?
Just where is sort of the change in that growth formula?
Ashu Roy, Chief Executive Officer, eGain: I would say that 2026 should be our year of showing real top line impact of the AI knowledge investments that we have been making for the last two years and particularly in the last year, meaning fiscal twenty twenty five. So I think we’ll see the benefit of that in fiscal twenty twenty six.
Eric Smith, Chief Financial Officer, eGain: And as I’ve mentioned on the call, I think obviously with this deal, the ARR, which obviously is the leading indicator, we see that getting up for the knowledge business up into the high teens. And so certainly that’s what we’ll be targeting in that range as we look to fiscal twenty twenty six.
Daniel, Analyst, Craig Hallum: Okay. That’s helpful. And then just last for me in terms of the results Just
Eric Smith, Chief Financial Officer, eGain: to clarify, that’s for the knowledge the ARR knowledge side of the business, so obviously not for revenue.
Daniel, Analyst, Craig Hallum: Okay. That’s helpful, Eric. Thank you. And then just last for me, just in terms of revisiting the results for this quarter and obviously the decline was already called out last quarter and we got to discuss it in terms of expecting some headwinds in TS and some push outs in terms of deals slipping. But sort of beyond deals slipping and beyond PS with subscription down sequentially, just where was was that churn?
Is there something seasonal? Is that push out of renewals where a deal temporarily goes suspended and then it comes back, just the sequential there for this quarter?
Eric Smith, Chief Financial Officer, eGain: Yes. So I think just sort of highlighted this during the call, just given the fewer number of days, if you look back historically, there’s often that sequential decline in this quarter. So that certainly accounts for a portion of it. So I think and then timing of the deals, I think being pushed out, we didn’t see any meaningful impact of revenue of deals that closed in the quarter. And I think finally, I think there was some catch up in the previous quarter that we talked about.
So I think, as you said, we talked about these items on the previous call.
Daniel, Analyst, Craig Hallum: Okay. Thanks, Ashu, Eric. That’s it for me.
Conference Operator: Showing no further questions, this concludes our question and answer session. I would like to turn the conference back over to management for any closing remarks.
Eric Smith, Chief Financial Officer, eGain: Thanks, operator and thanks everybody for listening today and look forward to providing the updates at the end of fiscal twenty twenty five. Thank you.
Conference Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.
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