Name: EGAIN Corp Q2 2025 Earnings Call
Start: 2025-02-13T22:01:00.000Z

Executive Summary

Q2 FY25 revenue of $22.4M declined 6% YoY and rose 3% QoQ; non-GAAP EPS was $0.04 diluted ($0.05 basic). Results were within company guidance; SaaS gross margin held at 78% and total gross margin at 71% .
Management cut FY25 revenue guidance to $88.5–$90.0M (from $92–$93M) and lowered non-GAAP NI to $4.1–$4.7M, but raised GAAP NI to $1.1–$1.7M; Q3 FY25 revenue guided to $21.0–$21.5M with a GAAP loss of $(0.3)–$(0.8)M .
Mix shift continues: AI Knowledge Hub ARR grew 17% YoY and now represents 55% of SaaS ARR; PS attach is falling by design as deployments streamline, prompting a ~$2M reduction to FY25 PS revenue targets and tempering total revenue growth near term .
Cash generation and capital return remained strong: $6.4M operating cash flow (29% margin) and 421K shares repurchased for $2.4M; cash and equivalents ended at $70.5M with no debt highlighted .
Near-term stock reaction catalysts: lowered revenue outlook and PS mix drag vs. resilient SaaS margin/AI momentum; watch timing of 7‑figure deals (sales cycles extending as “AI offices” increase scrutiny) and Q3 headwinds (fewer calendar days and non‑recurring ~$0.6M usage revenue) .

What Went Well and What Went Wrong

What Went Well
- AI momentum: “We won several new enterprise logos… AI Knowledge Hub ARR grew 17% YoY and 5% sequentially,” with more 7‑figure opportunities in the pipeline .
- Margin resilience and cash generation: SaaS gross margin remained 78% (unchanged YoY); total gross margin was 71%; Q2 operating cash flow $6.4M (29% margin) .
- Strategic wins: Examples include a major U.S. airline, a top interactive entertainment company (800M player accounts), and a global money transfer firm; AI Agent on track to launch in current quarter .
What Went Wrong
- Top-line pressure: Total revenue declined 6% YoY; GAAP EPS fell to $0.02 from $0.07; adjusted EBITDA margin compressed to 7% from 16% YoY .
- Guidance cut: FY25 revenue lowered to $88.5–$90.0M and non-GAAP NI to $4.1–$4.7M reflecting reduced PS attach and elongated large-deal cycles .
- PS revenue headwind: PS revenue missed internal expectations; management lowered FY25 PS revenue target by about $2M as product improvements reduce PS scope (beneficial long-term, near-term revenue drag) .

Financial Results

Metric	Q2 FY24	Q1 FY25	Q2 FY25	Consensus Q2 FY25
Revenue ($M)	$23.815	$21.799	$22.389	N/A (S&P Global consensus unavailable)
GAAP EPS ($)	$0.07	$0.02	$0.02	N/A (S&P Global consensus unavailable)
Non-GAAP EPS (diluted, $)	$0.11	$0.04	$0.04	N/A (S&P Global consensus unavailable)
Total Gross Margin (%)	72%	70%	71%	N/A
SaaS Gross Margin (%)	78% (YoY ref.)	N/A	78%	N/A
Adjusted EBITDA ($M)	$3.771	$1.357	$1.632	N/A
Adjusted EBITDA Margin (%)	16%	6%	7%	N/A
Operating Cash Flow ($M)	$7.7	$1.0	$6.4	N/A

Segment revenue

Metric	Q2 FY24	Q1 FY25	Q2 FY25
SaaS Revenue ($M)	$21.996	$19.820	$20.847
Professional Services Revenue ($M)	$1.819	$1.979	$1.542

KPIs and balance items

KPI	Q2 FY24	Q1 FY25	Q2 FY25
AI Knowledge Hub SaaS ARR YoY Growth (%)	N/A	+16%	+17%
AI Knowledge as % of SaaS ARR (%)	N/A	N/A	55% (vs 46% a year ago)
LTM Dollar-Based SaaS Net Retention – AI Knowledge (%)	N/A	103%	99%
LTM Dollar-Based SaaS Net Retention – All (%)	N/A	90%	89%
LTM Dollar-Based SaaS Net Expansion – AI Knowledge (%)	N/A	108%	104%
LTM Dollar-Based SaaS Net Expansion – All (%)	N/A	108%	105%
Total RPO YoY (%)	N/A	(15%)	(5%)
Total RPO QoQ (%)	N/A	N/A	+5%
Short-term RPO ($M)	N/A	$54.5	$51
Cash & Equivalents ($M)	$70.0 (FY-end ref)	$67.2	$70.5
Shares Repurchased (QTD, K)	N/A	671	421

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Total Revenue ($M)	FY2025	$92.0–$93.0	$88.5–$90.0	Lowered
GAAP Net Income ($M)	FY2025	$0.0–$1.0	$1.1–$1.7	Raised
Non-GAAP Net Income ($M)	FY2025	$5.0–$6.0	$4.1–$4.7	Lowered
Stock-based Comp ($M)	FY2025	~$5.0	~$3.0	Lowered
D&A ($M)	FY2025	~$0.40	~$0.35	Lowered
Wtd Avg Shares (M)	FY2025	~29.7	~28.6	Lowered
Total Revenue ($M)	Q3 FY2025	N/A	$21.0–$21.5	New
GAAP Net Income (Loss) ($M)	Q3 FY2025	N/A	$(0.8)–$(0.3); EPS $(0.03)–$(0.01)	New
Non-GAAP Net Income ($M)	Q3 FY2025	N/A	$0.0–$0.5; EPS $0.00–$0.02	New
Professional Services Revenue Target	FY2025	N/A	Lowered by approx. $2M (qualitative)	Lowered

Notes: Q3 headwinds include fewer calendar days (~$0.33M revenue impact) and ~$0.6M usage-based revenue in Q2 not expected to recur in Q3 .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 FY24 and Q1 FY25)	Current Period (Q2 FY25)	Trend
AI/technology initiatives	AssistGPT traction; Solve24 event; strong AI knowledge pipeline . AI Agent announced; GA targeted for calendar Q1’25 .	AI Agent on track to launch this quarter; AI Knowledge ARR +17% YoY; multiple marquee wins .	Accelerating product cadence and traction
Sales cycles/pipeline	Inbound interest rose; 75% pilot conversion; strong summer pipeline . Bookings up YoY; more large trials; 9–12 month cycles .	More 7‑figure deals; added “AI office” scrutiny extending timelines .	Larger deals, longer cycles
Professional Services attach	Not highlighted as a drag previously.	PS attach intentionally declining (faster deployments); FY25 PS revenue target cut by ~$2M .	PS mix down; margin/velocity up
Cisco OEM revenue recognition	~$1.3M shift to ratable; mostly Q1 impact .	Reiterated Q1 impact; no new Q2 callouts .	Mostly behind
R&D and brand investment	Plan to increase R&D and brand marketing .	R&D up 21% YoY; continued product investment .	Increasing
Regional trends	NA 75% of revenue (down from 79% prior year) .	Not updated in detail.	Stable/Not emphasized

Management Commentary

CEO Ashu Roy: “We won several new enterprise logos in the second quarter… our annual recurring revenue from AI Knowledge Hub customers grew by 17% year over year and 5% sequentially… we are seeing a growing number of seven-figure ARR deals in our sales pipeline” .
“In the last 6 months… the number of 7‑figure deals in our pipeline [has] more than double[d]… the side effect… is more scrutiny… vetting process now includes groups like the AI office… these bigger deals are taking some more time to close” .
CFO Eric Smit: “SaaS revenue… accounted for 93% of total revenue… PS revenue [came] in lower than expectations… we are lowering our PS revenue targets for fiscal 2025 by approximately [$2 million]… SaaS gross margin… 78%… total gross margin… 71%” .
Q3 setup: “Fewer number of days… ~[$330,000] negative impact… Q2 revenue included approximately $600,000 of usage-based revenue, which we do not expect to recur in Q3” .

Q&A Highlights

PS revenue outlook: Product connectors/templates reduce integration scope; building partner-led implementation capacity. Management will reallocate/reduce resources as needed to align with lower PS revenue base .
Competitive displacement (U.S. airline win): Replacing a patchwork of legacy KM, CRM KM (Microsoft) and SharePoint—both consolidation and replacement play .
Guidance context: FY25 revenue lowered to add “cushion” given extended cycles for large strategic AI Knowledge deals; SaaS expected ~93% of FY revenue .
Capital return and balance sheet: $2.4M buyback in Q2; $70.5M cash at quarter-end; $10M remains on authorization .

Estimates Context

Wall Street consensus (S&P Global) for Q2 FY25 EPS and revenue could not be retrieved at this time due to data access limits; therefore, we cannot provide a beat/miss vs. Street for Q2 or for forward periods. The company stated Q2 revenue was within internal guidance .
Where estimate comparisons are essential, we recommend revisiting once S&P Global data access is restored; current guidance implies lower FY25 revenue and non-GAAP NI than prior outlook, with GAAP NI raised .

Key Takeaways for Investors

AI-led mix shift is real: AI Knowledge ARR +17% YoY and now 55% of SaaS ARR, supporting durable SaaS margin (78%) even as total revenue growth pauses; focus on timing of large deals as “AI office” scrutiny lengthens cycles .
Near-term revenue headwinds are mechanical and mix-driven: intentional decline in PS attach (faster time-to-value), Q3 calendar-day headwind (~$0.33M), and non-recurring ~$0.6M usage revenue from Q2; these dampen near-term growth optics but improve scalability .
Guidance reset lowers bar: FY25 revenue cut to $88.5–$90.0M and non-GAAP NI to $4.1–$4.7M; GAAP NI raised to $1.1–$1.7M with lower SBC and D&A; watch for execution against Q3 targets and cadence into Q4 .
Cash generation and buybacks provide downside support: $6.4M OCF in Q2 and ongoing repurchases (~421K shares in Q2), with $70.5M cash enabling flexibility for continued investment and capital returns .
Product cycle catalysts: eGain AI Agent launch this quarter and expanding enterprise AI Knowledge use-cases could re-accelerate bookings; monitor pilot conversions and scaling at marquee wins (airline, gaming, money transfer) .
Risk-monitoring: Large-deal timing risk, PS revenue drag, and any renewed churn outside Conversation/Analytics legacy losses; RPO trends (total down 5% YoY but up 5% QoQ) and short-term RPO trajectory ($51M) are key signals .
Trading setup: With lowered FY25 bar and intact AI margin profile, prints on large 7‑figure wins, AI Agent adoption, and stabilization of RPO/ARR should be incremental positives; disappointment on deal timing or additional guide cuts would be negatives .

EGAIN Corp (EGAN)·Q2 2025 Earnings Summary