EPS of $0.05 increased by 515.5% from previous year
Gross margin of 67.9%
Net income of 1.49M
"We saw good momentum in new logo wins and business activity in the quarter, driven by our AI knowledge offering." - Ashu Roy
eGain Corporation (EGAN) QQ3 2024 Results: AI Knowledge Momentum Drives New Logos and Structural Margin Expansion
Executive Summary
eGain reported a modest top-line decline in QQ3 2024, with total revenue of approximately $22.4 million, down 3% year over year, largely attributed to Cisco OEM timing and a shift toward rateable recognition. The company delivered a gross margin of 71% (up from 69% year-ago), non-GAAP net income of $2.6 million ($0.08 per share), and an Adjusted EBITDA margin of 10%, marking a 500 basis point year-over-year improvement. Operating cash flow was $1.7 million for the quarter, supported by a disciplined cost structure and continued stock buybacks ($5.5 million in the quarter; ~881k shares). Management reinforced the strategic emphasis on AI knowledge and the AssistGPT rollout, reporting meaningful pipeline and new logo momentum, including a U.S. megabank and other large enterprise opportunities. The balance sheet remains capital-light with cash and cash equivalents of $83.1 million and no net debt, underpinning ongoing share repurchases and investment in R&D and marketing. Near-term headwinds from the Cisco revenue shift temper the topline trajectory, but long-term metrics, such as LTM 109% dollar-based SaaS net expansion for knowledge customers and a 50% YoY increase in new logo/RFP activity over the last nine months of fiscal 2024, suggest meaningful upside as large deployments mature and AssistGPT scales into self-service channels.
Key Performance Indicators
Revenue
22.35M
QoQ: -6.15% | YoY:-2.88%
Gross Profit
15.17M
67.86% margin
QoQ: -9.85% | YoY:-1.63%
Operating Income
938.00K
QoQ: -61.32% | YoY:283.20%
Net Income
1.49M
QoQ: -31.67% | YoY:501.34%
EPS
0.05
QoQ: -31.24% | YoY:515.52%
Revenue Trend
Margin Analysis
Key Insights
Revenue: $22.4 million in Q3 2024, down 3% YoY; Cisco OEM contribution shifted to rateable recognition, pressuring upfront revenue.- Gross margin: 71% in Q3 2024 vs 69% prior year; gross profit $15.8 million.
Non-GAAP net income: $2.6 million ($0.08 per share), up 142% YoY.
Adjusted EBITDA: 10% margin, up 500 bps YoY.
Cash flow: Operating cash flow $1.7 million in Q3; nine-month OCF $17.6 million (25% OCF margin).
Financial Highlights
- Revenue: $22.4 million in Q3 2024, down 3% YoY; Cisco OEM contribution shifted to rateable recognition, pressuring upfront revenue.- Gross margin: 71% in Q3 2024 vs 69% prior year; gross profit $15.8 million.
- Operating costs (non-GAAP): $13.8 million, down ~7% YoY; cost discipline supporting profitability.
- Non-GAAP net income: $2.6 million ($0.08 per share), up 142% YoY.
- Adjusted EBITDA: 10% margin, up 500 bps YoY.
- Cash flow: Operating cash flow $1.7 million in Q3; nine-month OCF $17.6 million (25% OCF margin).
- Liquidity and capital return: Cash balance $83.1 million; repurchased ~881k shares for $5.5 million; remaining $5.7 million under a $20 million authorization.
- Customer and ARR metrics: LTM SaaS net expansion rate for knowledge customers 109%; total net expansion 105%; LTM SaaS net retention for knowledge customers 97%; total ARR for knowledge customers +4% YoY; total SaaS ARR down 1% YoY; remaining performance obligations (RPO) down 22% YoY to $67.9 million; short-term RPO $48.1 million, down 8% YoY.
- Geographic mix: North America revenue 78% of total; NA $17.4 million (down 2% YoY); Europe $5.0 million (down 4% YoY).
- Guidance (Q4 and full-year 2024): Q4 revenue guidance of $21.1–$21.4 million; GAAP net loss of $0.3–$0.9 million; non-GAAP net income of $0.2–$0.8 million. Full-year revenue guidance raised to $91.5–$91.8 million; GAAP net income $5.4–$6.0 million; non-GAAP net income $10.0–$10.6 million. Management attributes changes to Cisco revenue timing and rateable recognition, with improved profitability and strong cash flow continuing.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
22.35M
-2.88%
-6.15%
Gross Profit
15.17M
-1.63%
-9.85%
Operating Income
938.00K
283.20%
-61.32%
Net Income
1.49M
501.34%
-31.67%
EPS
0.05
515.52%
-31.24%
Key Financial Ratios
currentRatio
1.97
grossProfitMargin
67.9%
operatingProfitMargin
4.2%
netProfitMargin
6.68%
returnOnAssets
1.24%
returnOnEquity
2.34%
debtEquityRatio
0.06
operatingCashFlowPerShare
$0.06
freeCashFlowPerShare
$0.06
priceToBookRatio
3.12
priceEarningsRatio
33.35
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Themes from the earnings call:
- AI knowledge leadership and AssistGPT momentum: Ashu Roy highlighted that momentum in new logo wins and pipeline activity was driven by the AI knowledge offering, with 9 months into fiscal 2024 showing a 50% YoY increase in new logo and RFP counts. He emphasized the goal of delivering trusted AI-powered knowledge at scale to reduce customer service costs.
- Strategic customer wins and deployment trajectory: The megabank and a Fortune 100 mortgage finance company were cited as net-new logos, with plans to expand enterprise-wide and integrate with customer-facing and employee-facing knowledge capabilities. Roy noted the importance of a composable architecture to plug in LLMs as ready.
- Cisco OEM revenue headwind and shift to rateable recognition: Eric Smit explained that revenue recognition timing shifted more revenue toward rateable recognition, causing Q3 to miss expectations on upfront revenue but aligning with longer-term ARR and cash-flow visibility. The team suggested this headwind could have pushed results toward the upper end of the prior range had it not occurred.
- Financial discipline and profitability: Non-GAAP gross margins improved to 71%, non-GAAP operating costs declined ~7% YoY, and adjusted EBITDA expanded to 10% of revenue, aided by cost controls. The company also highlighted robust cash flow, a solid balance sheet, and ongoing buybacks.
- Outlook for 2024 and catalysts: Management underscored AI knowledge as a growth catalyst, continued pipeline strength, and budget-season planning for 2025 as indicators of durable demand. They expect to capitalize on the shift toward rateable revenue while maintaining investment in R&D and marketing to defend and extend market leadership.
We saw good momentum in new logo wins and business activity in the quarter, driven by our AI knowledge offering.
— Ashu Roy
AssistGPT... doubles the proposition of whatever you think you can do on the agent side, you can roughly do the same on the customer self-service side in terms of business value and therefore revenue to us.
— Ashu Roy
Forward Guidance
Near-term outlook for Q4 2024 implies a modest sequential revenue profile ($21.1–$21.4 million), reflecting the ongoing Cisco OEM revenue shift to rateable models. Full-year 2024 guidance was raised to $91.5–$91.8 million in revenue with GAAP net income of $5.4–$6.0 million and non-GAAP net income of $10.0–$10.6 million. The guidance incorporates the expectation that upfront Cisco revenue will be lower than prior periods but recognized over the term of the contracts, improving long-term visibility and ARR. The management commentary points to continued new logo momentum and opportunities in AI knowledge, including AssistGPT enhancements, and to a pipeline that remains robust. Key risk factors include: (1) execution risk in deploying large-scale customer deployments and achieving the anticipated ARR uplift, (2) further Cisco timing headwinds or accelerated rateable recognition beyond current expectations, and (3) macro headwinds affecting IT budgets and enterprise buying cycles. Observers should monitor: large-logo conversions, progression from pilots to fully deployed ARR, gross margin stability as services mix evolves, and the pace of RPO replenishment.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
EGAN Focus
67.86%
4.20%
2.34%
33.35%
ASUR
67.20%
-12.40%
-1.96%
-15.33%
CCRD
30.70%
3.08%
-0.41%
-190.55%
DMRC
62.40%
-1.17%
-15.30%
-13.39%
UPLD
69.10%
-10.40%
-3.77%
-3.76%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
EAverage QQ3 2024 performance combined with a meaningful long-term AI knowledge strategy supports a constructive investment thesis for eGain. The company improves profitability, maintains a strong balance sheet, and is actively monetizing AI through AssistGPT, while generating a robust pipeline with several large logos in play. Short-term headwinds from Cisco’s shift to rateable recognition temper the near-term top line, but the longer-term ARR and net expansion dynamics imply upside once large deployments scale. Key catalysts include additional large-logo conversions (beyond the megabank and mortgage lender), accelerated adoption of AssistGPT across self-service channels, and ongoing improvements in gross margins as services mix stabilizes. Given the current multiple metrics (P/S around 8.9x, P/E around 33x) and the scale of potential ARR uplift, investors may view eGain as a strategic, high-uncertainty, high-upside position within enterprise software. Recommendation: Maintain a constructive stance with selective exposure on pullbacks, monitoring Cisco revenue timing, pilot-to-deployment progression, and ARR growth from AI-enabled knowledge platforms.
Key Investment Factors
Growth Potential
AI knowledge market leadership with AssistGPT and a composable platform position eGain to scale with large enterprises across multiple verticals; potential for ROI uplift through improved self-service, which can roughly double the value proposition versus agent-only interactions. The ongoing rollout with megabank and other large logos suggests significant addressable ARR upside as deployments scale.
Profitability Risk
Concentration risk in large enterprise pilots with long procurement cycles; revenue volatility from Cisco OEM shift to rateable recognition; potential churn or delays in renewal activity impacting RPO; competitive pressures from larger cloud incumbents; geographic concentration with 78% of revenue from North America.
Financial Position
Healthy balance sheet with $83.1 million cash and equivalents and no debt; solid operating cash flow ($1.7 million in Q3; $17.6 million over 9 months); active capital return via share repurchases; meaningful remaining RPO buffer ($67.9 million) that provides revenue visibility, albeit with a YoY decline.
SWOT Analysis
Strengths
AI knowledge leadership with AssistGPT and a composable platform.
Strong liquidity and no debt; robust operating cash flow and active share repurchase program.