Release Date: November 12, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• eGain Corp (NASDAQ:EGAN) reported first quarter revenue and profitability ahead of consensus estimates.
• The company experienced significant year-over-year growth in new bookings, particularly in the AI knowledge business.
• eGain Corp (NASDAQ:EGAN) saw good renewals with no significant churn during the quarter.
• The company is witnessing a trend towards centralized knowledge hubs, which is positively impacting their market position.
• eGain Corp (NASDAQ:EGAN) launched a new AI agent solution aimed at improving customer self-service, which is expected to drive significant adoption.

Negative Points

• Total revenue for the first quarter was down 10% year over year, primarily due to the loss of two large clients in the conversation and analytics business.
• Gross margin decreased to 70% from 73% a year ago, indicating a decline in profitability.
• Non-GAAP net income decreased to $1.3 million from $3.8 million in the year-ago quarter.
• Operating cash flow margin dropped to 4% from 8.1% in the previous year.
• The company anticipates a net loss for the second quarter of fiscal 2025, reflecting ongoing financial challenges.

Q & A Highlights

• Warning! GuruFocus has detected 5 Warning Sign with EGAN.

Q: Can you provide an update on the improvements in your go-to-market strategy, specifically regarding sales cycles, RFPs, and conversion rates? A: Ashu Roy, CEO: The RFP pace remains steady, with a noticeable pickup in October following the summer slowdown. Eric Smith, CFO: Compared to a year ago, we've seen significant improvement in bookings, although this quarter remains seasonally slow. We expect bookings to increase as the year progresses.

Q: Could you elaborate on the additional investments in marketing and R&D, and why S&M expenses were down sequentially? A: Ashu Roy, CEO: Marketing expenses are influenced by seasonality, with spikes during major events like the one in October. R&D spending is increasing as we prepare for new announcements, such as the AI agent in early 2025. Eric Smith, CFO: We've made good progress with our investments, and while there might be some incremental spending, we've started the year well.

Q: How is the company progressing in focusing on generative AI products, and where are you in terms of product and market development? A: Ashu Roy, CEO: We are advanced in product development, having invested in it for the past two years. Our AI agent is a result of this investment. We see a sequential process where product innovation leads to a growing pipeline, and we expect to invest more in market development in the second half of the fiscal year.

Q: There was a strong quarter in international markets, particularly in Europe, while North America was lighter. Is this an anomaly or a trend? A: Ashu Roy, CEO: The U.S. remains the engine of growth. Eric Smith, CFO: The shift is more due to customer losses in the U.S., rather than a change in market demand. The focus is still very much on the U.S. market.

Q: How is AI impacting the sales cycle, and are there new competitors with point solutions causing confusion in the market? A: Ashu Roy, CEO: The market is realizing the need for comprehensive solutions rather than narrow AI tools. While new entrants continue to add confusion, many businesses are now seeking more thoughtful AI implementations. The trend towards centralizing knowledge to deliver trusted content is growing, which aligns with our offerings.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.