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EGAIN Corp (EGAN)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 FY2025 revenue of $21.009M declined 6% YoY and came in slightly below consensus, while non-GAAP EPS of $0.03 beat Street expectations; profitability and operating cash flow exceeded internal projections . Revenue actual $21.009M vs consensus $21.242M*, and non-GAAP EPS actual $0.03 vs consensus $0.015*; GAAP EPS was $0.00 .
  • Management lowered full-year revenue guidance to $88.0–$88.5M (from $88.5–$90.0M), but raised GAAP net income to $2.5–$3.0M (from $1.1–$1.7M) and raised non-GAAP net income to $5.1–$5.6M (from $4.1–$4.7M) .
  • Sequential acceleration is guided for Q4: revenue $22.8–$23.3M and non-GAAP EPS $0.06–$0.08, supported by one of the largest expansion deals in company history at a U.S. “mega bank” and early traction for the new AI Agent for Contact Center .
  • Strategic narrative strengthened: Gartner recognition in an emerging GenAI quadrant, ARR growth within Knowledge customers (+11% YoY in Q3), and pipeline skewing to larger seven‑figure Knowledge deals, albeit with longer (9–12 month) sales cycles .

Note: Values marked with * are retrieved from S&P Global.

What Went Well and What Went Wrong

What Went Well

  • Secured one of the largest expansion deals in company history with a U.S. mega bank, expanding to >100,000 users and ramping from the beginning rather than phased purchases; deployment targeted by late fall .
  • Launched AI Agent for Contact Center, with integrations to Amazon Connect, Genesys Cloud, Salesforce, and strong early customer interest; management positioning eGain as the “trusted knowledge foundation” for enterprise AI initiatives .
  • Profitability ahead of guidance with operating cash flow of $2.2M (11% margin); non-GAAP EPS $0.03 above the high end of the guide (breakeven to $0.02) .

Management quotes:

  • “We secured one of our largest expansion deals ever with a U.S. megabank.”
  • “We launched our AI Agent for Contact Center…using trusted knowledge and reasoning.”
  • “We are starting to establish eGain as the trusted knowledge foundation for the AI enterprise.”

What Went Wrong

  • Total revenue declined 6% YoY, reflecting prior-year losses of two large clients (Conversation Hub and Analytics), marking the last quarter with YoY compares affected by those exits .
  • Gross margin compressed (total gross margin 69% vs 71% YoY) and adjusted EBITDA margin fell to 6% (from 10% YoY), with increased R&D to drive product innovation .
  • Longer enterprise deal cycles (now ~9–12 months) and reduced Professional Services attach rates (by design) pressured near-term PS revenue, prompting a $2M reduction in FY25 PS revenue targets .

Financial Results

Quarterly Summary

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD Millions)$21.799 $22.389 $21.009
GAAP Diluted EPS ($)$0.02 $0.02 $0.00
Non-GAAP Diluted EPS ($)$0.04 $0.04 $0.03
Total Gross Margin (%)70% 71% 69%
Operating Income ($USD Millions)$0.509 $0.650 $0.027
Adjusted EBITDA ($USD Millions)$1.357 $1.632 $1.172
Cash from Operations ($USD Millions)$0.954 $6.4 $2.2
Cash & Equivalents ($USD Millions)$67.205 $70.531 $68.737

YoY context for Q3: Revenue $21.009M vs $22.350M in Q3 2024; GAAP net income $0.066M vs $1.493M; non-GAAP net income $0.765M vs $2.603M .

Segment Revenue Breakdown

MetricQ1 2025Q2 2025Q3 2025
SaaS Revenue ($USD Millions)$19.820 $20.847 $19.563
Professional Services Revenue ($USD Millions)$1.979 $1.542 $1.446
SaaS % of Total Revenue91% 93% 93%

KPIs and Customer Metrics

KPIQ1 2025Q2 2025Q3 2025
Knowledge Customers SaaS ARR YoY Growth (%)+16% +17% +11%
LTM Dollar-Based SaaS Net Retention – Knowledge (%)103% 99% 97%
LTM Dollar-Based SaaS Net Retention – All Customers (%)90% 89% 88%
LTM Dollar-Based SaaS Net Expansion – Knowledge (%)108% 104% 103%
LTM Dollar-Based SaaS Net Expansion – All Customers (%)108% 105% 104%
Short-term RPO ($USD Millions)$54.5 $51.0 $44.3
Total RPO YoY Change (%)-15% -5% -2%

Results vs Estimates

MetricQ3 2025 ActualQ3 2025 Consensus Estimate*Delta
Revenue ($USD)$21,009,000 $21,242,000*-$233,000 (miss)
Non-GAAP EPS ($)$0.03 $0.015*+$0.015 (beat)
  • Revenue was slightly below consensus; non-GAAP EPS exceeded consensus. GAAP EPS was $0.00 .

Note: Values marked with * retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Revenue ($USD Millions)FY 2025$88.5–$90.0 $88.0–$88.5 Lowered
GAAP Net Income ($USD Millions)FY 2025$1.1–$1.7 $2.5–$3.0 Raised
Non-GAAP Net Income ($USD Millions)FY 2025$4.1–$4.7 $5.1–$5.6 Raised
Q4 Revenue ($USD Millions)Q4 2025—$22.8–$23.3 New
Q4 GAAP EPS ($)Q4 2025—$0.04–$0.06 (incl. ~$0.7M SBC, ~$0.1M D&A) New
Q4 Non-GAAP EPS ($)Q4 2025—$0.06–$0.08 New
Weighted Avg Shares (millions)Q4 2025 / FY 2025Q3: 28.5; FY: 28.6 Q4: 27.8; FY: 28.6 Updated

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q1)Current Period (Q3)Trend
AI Agent product strategyAnnounced AI Agent at Solve; launching in Q3; strong interest; integrations and full-stack approach Launched AI Agent for Contact Center; early rollouts; differentiates via trusted Knowledge Hub Advancing launch-to-adoption
Enterprise Knowledge Hub centralizationLarger seven-figure pipeline; consolidation replacing legacy KM/SharePoint/CRM add-ons Mega bank expansion exemplifies cross-enterprise “single source of truth” (>100k users) Scaling enterprise-wide
Sales cycles & deal scrutinyLonger cycles due to AI office vetting; 7‑figure deals more frequent Stabilized at ~9–12 months; more groups involved in decisions Stabilizing, still extended
Professional Services attachProduct improvements reduce PS attach; FY25 PS target cut by ~$2M Continued lower PS mix by design; faster deployments, quicker time-to-value Structural decline (positive mix)
Revenue drivers & sequential outlookQ3 guide $21.0–$21.5M; noted fewer days and non-recurring usage Q4 guide implies ~10% seq growth, driven by mega bank ramp Improving sequential momentum
KPIs/RetentionKnowledge ARR +16–17% YoY; net retention Knowledge 99–103% Knowledge ARR +11% YoY; net retention Knowledge 97% Slight deceleration in Q3
External validationCustomer testimonials; Solve event momentum Gartner recognition in emerging GenAI quadrant; KMWorld survey highlights need for trusted content Strengthening third-party validation

Management Commentary

  • Strategic positioning: “We are starting to establish eGain as the trusted knowledge foundation for the AI enterprise.”
  • Product differentiation: “Unlike other solutions, the eGain AI agent delivers proactive real-time guidance…using trusted answers from our eGain knowledge hub.”
  • Pipeline quality and size: “Number of seven-figure deals in our pipeline more than double[d] in the last 6 months…with increased review cycles.”
  • Mega bank expansion: “Order of magnitude bigger…maybe 10x of what we were before…fully deployed by late fall.”
  • Revenue ramp clarity: “Will be ramped up pretty much from the beginning as opposed to a phased purchase.”

Q&A Highlights

  • Mega bank deployment/ramp: Implementation is standard enterprise complexity but bank’s advanced AI teams will pull more knowledge content; revenue ramps from inception, not phased .
  • Sales cycle duration: Stabilized around 9–12 months due to broader stakeholder involvement and deal size .
  • Q4 sequential growth drivers: Combination of mega bank expansion plus other factors underpin ~10% sequential revenue growth .
  • PS dynamics: Reduced PS attach driven by product connectors/templates and partner implementations; cost alignment in PS resources contemplated .
  • 2026 top-line view: Expect FY2026 to reflect top-line impact from FY2025 AI Knowledge investments; Knowledge ARR growth targeted “high teens” .

Estimates Context

  • Q3 FY2025: Revenue actual $21.009M vs consensus $21.242M* (miss); non-GAAP EPS actual $0.03 vs consensus $0.015* (beat) .
  • Q4 FY2025: Guidance revenue $22.8–$23.3M vs consensus $23.0385M*; guidance non-GAAP EPS $0.06–$0.08 vs consensus $0.065* .
  • Full-year: FY2025 consensus revenue $88.236M* and EPS $0.185* vs reported guidance; FY2026 consensus revenue $91.39M* and EPS $0.33* [GetEstimates].
  • Consensus recommendation text not available; target price consensus $17.5* [GetEstimates].

Note: Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Near-term setup: Expect sequential acceleration in Q4 driven by mega bank expansion and new AI Agent traction; guidance implies revenue $22.8–$23.3M and non-GAAP EPS $0.06–$0.08 .
  • Mix quality improving: SaaS at 93% of revenue, PS attach intentionally reduced as product improvements accelerate deployments and time-to-value .
  • Profitability resilience: Despite YoY revenue decline, Q3 delivered non-GAAP EPS above guidance and $2.2M in operating cash flow (11% margin) .
  • Strategic moat: Gartner recognition and KMWorld survey underscore importance of trusted knowledge; eGain’s Knowledge Hub centralization is aligned with enterprise AI needs .
  • Sales cycle risk: Larger, strategic deals extend cycles (~9–12 months) and can push revenue timing; management has adjusted FY revenue guidance accordingly .
  • 2026 inflection watch: Management targets high‑teens Knowledge ARR growth and expects FY2026 to reflect the top-line impact of FY2025 AI investments .
  • Capital allocation: Ongoing buybacks ($5.0M in Q3; $2.4M in Q2; $4.6M in Q1) and strong cash balance ($68.7M) provide flexibility .

Additional Context

  • Prior quarters for trend analysis: Q2 revenue $22.389M; non-GAAP diluted EPS $0.04; operating cash flow $6.4M; adjusted EBITDA $1.632M . Q1 revenue $21.799M; non-GAAP diluted EPS $0.04; operating cash flow $0.954M; adjusted EBITDA $1.357M .
  • Other relevant press releases: Earnings date announcement (May 7, 2025) ; KMWorld/Enterprise AI survey on AI failure modes emphasizing trusted content (June 3, 2025) .