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What changed in EGAIN Corp's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of EGAIN Corp's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+244 added−208 removedSource: 10-K (2024-09-12) vs 10-K (2023-09-14)

Top changes in EGAIN Corp's 2024 10-K

244 paragraphs added · 208 removed · 170 edited across 3 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeAnd recall it contextually in the moment of truth when serving customers. This growing knowledge and guidance gap for agents explains Gartner Research’s only technology recommendation for customer service and support leaders since 2022: invest in knowledge management tools! It is time to reimagine the Contact Center Agent Experience.
Biggest changeIn addition, this is expected of an entry-level workforce that is not well-paid, routinely replaced, and globally dispersed – mainly for cost reasons. This knowledge and guidance gap for agents in the flow of their work explains Gartner Research’s top technology recommendation for customer service and support leaders since 2022: invest in knowledge management tools.
Transformative Value at Scale Across Diversified Customer Base ​ Our solution delivers transformative value at scale today. We believe that our understanding of the customer need and our ability to fulfill it with enterprise-grade capability is unmatched.
Transformative Value at Scale Across Diversified Customer Base ​ Our solution delivers transformative value at scale. We believe that our understanding of the customer need and our ability to fulfill it with enterprise-grade capability is unmatched.
We also operate in the United Kingdom and India. ​ Industry Background Introduction ​ According to Gartner, a majority of contact center agents are not satisfied with their desktop tools.
We also operate in the United Kingdom and India. ​ Industry Background Introduction ​ According to Gartner Research, a majority of contact center agents are not satisfied with their desktop tools.
Competitive Strengths Composable Experience Platform with Rich APIs, Events, and UX Widgets ​ The eGain solution is a comprehensive omnichannel solution for the customer engagement market, with AI and knowledge applications at its core.
Competitive Strengths Composable Platform with Rich APIs, Events, and UX Widgets ​ The eGain solution is a comprehensive omnichannel solution for the customer engagement market, with AI and knowledge applications at its core.
We believe the principal competitive factors in our market include the following: o proven track record of customer success; o speed and ease of implementation; o quick value realization; o rich product functionality; o strong analyst ratings; o strong customer references; o financial stability and viability of the vendor; o strong product adoption; o ease of use and rates of user adoption; o low total cost of ownership and demonstrable cost-effective benefits for customers; o performance, security, scalability, flexibility and reliability of the service; o ease of integration with existing applications; o quality of customer support; 9 Table of Contents o availability and quality of implementation, consulting and training services; and o vendor reputation and brand awareness. ​ Growth Strategy ​ We are investing in multiple programs to accelerate growth.
We believe the principal competitive factors in our market include the following: o proven track record of customer success; o speed and ease of implementation; o quick value realization; o rich product functionality; o strong analyst ratings; o strong customer references; o financial stability and viability of the vendor; o strong product adoption; o ease of use and rates of user adoption; o low total cost of ownership and demonstrable cost-effective benefits for customers; o performance, security, scalability, flexibility and reliability of the service; o ease of integration with existing applications; o quality of customer support; o availability and quality of implementation, consulting and training services; and o vendor reputation and brand awareness. ​ Growth Strategy ​ We are investing in multiple programs to accelerate growth.
While we believe our relations with our employees are good, our future performance depends largely upon the continued service of our key technical, sales and marketing, and senior management personnel, none of whom are bound by employment agreements requiring service for a defined period of time. ​ 12 Table of Contents Available Information ​ We were incorporated in Delaware in September 1997, and our website is located at www.egain.com.
While we believe our relations with our employees are good, our future performance depends largely upon the continued service of our key technical, sales and marketing, and senior management personnel, none of whom are bound by employment agreements requiring service for a defined period of time. ​ Available Information ​ We were incorporated in Delaware in September 1997, and our website is located at www.egain.com.
Our issued U.S. patents expire at various times between 2028 and 2039. ​ We continually assess the strength of our intellectual property protection for those aspects of our technology that we believe constitute innovations providing significant competitive advantages.
Our issued U.S. patents expire at various times between 2028 and 2040. ​ We continually assess the strength of our intellectual property protection for those aspects of our technology that we believe constitute innovations providing significant competitive advantages.
In addition, embedded AI and Machine Learning (ML) helps clients generate product improvement and customer insights, while spotting opportunities to improve experience and automate processes. ​ 7 Table of Contents Open, Secure APIs and Third-Party Connectors Deliver Quick Value ​ Our open, secure platform APIs enable clients and partners to extend and enhance our solutions and to integrate with enterprise assets to enable a single view of the customer.
In addition, embedded AI and Machine Learning (ML) helps clients generate product improvement and customer insights, while spotting opportunities to improve experience and automate processes. ​ Open, Secure APIs and Third-Party Connectors Deliver Quick Value ​ Our open, secure platform APIs enable clients and partners to extend and enhance our solutions and to integrate with enterprise assets to enable a single view of the customer.
As opportunities arise, we look for strategic acquisitions we believe will deliver compelling value faster than organic options. ​ ​ 10 Table of Contents Sales and Marketing Sales Strategy ​ Our sales strategy is to pursue targeted accounts, mostly B2C (Business-to-Consumer) enterprises and consumer-centric government agencies, through a combination of our direct sales force and partners.
As opportunities arise, we look for strategic acquisitions we believe will deliver compelling value faster than organic options. ​ Sales and Marketing Sales Strategy ​ Our sales strategy is to pursue targeted accounts, mostly B2C (Business-to-Consumer) enterprises and consumer-centric government agencies, through a combination of our direct sales force and partners.
We generally offer these services through a 36-month contract, with pricing based on the number of agents or self-service sessions. ​ Professional Services ​ Our worldwide professional services organization provides consulting, implementation, training, and managed services to deliver business value, drive customer success and build customer loyalty. o Consulting and Implementation Services .
We generally offer these services through a 36-month contract, with pricing based on the number of agents or self-service sessions. ​ Professional Services ​ Our worldwide professional services organization provides consulting, implementation, training, and managed services to deliver business value, drive customer success and build customer loyalty. 11 Table of Contents o Consulting and Implementation Services .
To support these objectives, our human resources programs are designed to develop talent to prepare them for critical roles and leadership positions for the future; reward and support employees through competitive pay and benefits; enhance our culture through efforts aimed at making the workplace more engaging and inclusive; acquire talent and facilitate internal talent mobility to create a high-performing and diverse workforce.
To support these objectives, our human resources programs are designed to develop talent to prepare them for critical roles and leadership positions for the future; reward and support employees through competitive pay and benefits; enhance our culture through 12 Table of Contents efforts aimed at making the workplace more engaging and inclusive; acquire talent and facilitate internal talent mobility to create a high-performing and diverse workforce.
We provide a comprehensive set of processes and activities that range from implementation to monitoring the evolution and support of eGain solutions in a company. ​ 11 Table of Contents Customer Support ​ We offer 24/7 customer support via online and phone channels worldwide under support agreements.
We provide a comprehensive set of processes and activities that range from implementation to monitoring the evolution and support of eGain solutions in a company. ​ Customer Support ​ We offer 24/7 customer support via online and phone channels worldwide under support agreements.
Smit 61 Chief Financial Officer Promod Narang 65 Chief Technology Officer ​ ​ Ashutosh Roy co-founded eGain and has served as Chief Executive Officer and a Director of eGain since September 1997 and as President since October 1, 2003. From May 1995 through April 1997, Mr. Roy served as Chairman of WhoWhere? Inc., an Internet-services company co-founded by Mr. Roy.
Smit 62 Chief Financial Officer Promod Narang 66 Chief Technology Officer ​ ​ Ashutosh Roy co-founded eGain and has served as Chief Executive Officer and a Director of eGain since September 1997 and as President since October 1, 2003. From May 1995 through April 1997, Mr. Roy served as Chairman of WhoWhere? Inc., an Internet-services company co-founded by Mr. Roy.
Our website and the information contained therein or connected thereto are not intended to be incorporated into this Annual Report on Form 10-K. ​ Information About Our Executive Officers The following table sets forth information regarding eGain’s executive officers as of September 14, 2023: ​ ​ ​ ​ ​ Name Age Position Ashutosh Roy 57 Chief Executive Officer and Chairman Eric N.
Our website and the information contained therein or connected thereto are not intended to be incorporated into this Annual Report on Form 10-K. ​ Information About Our Executive Officers The following table sets forth information regarding eGain’s executive officers as of September 12, 2024: ​ ​ ​ ​ ​ Name Age Position Ashutosh Roy 58 Chief Executive Officer and Chairman Eric N.
The eGain Solution is Comprehensive ​ eGain offers a comprehensive, unified solution organized into three hubs—eGain Knowledge Hub™, eGain Conversation Hub™, and eGain Analytics Hub™, to automate, augment and orchestrate digital-first customer engagement. Our feature-rich portfolio of applications empowers businesses to holistically connect, flexibly solve, and continuously optimize the experience for agents, businesses and customers.
The eGain Solution is Comprehensive ​ eGain offers a comprehensive, unified solution organized into three hubs—eGain Knowledge Hub™, eGain Conversation Hub™, and eGain Analytics Hub™, to automate, augment and orchestrate digital-first customer engagement. We believe our feature-rich portfolio of applications empowers businesses to connect, solve, and optimize agent, business, and customer experience.
Rich applications, powered by our Knowledge and AI capabilities (from our Knowledge Hub), proactively guide agents to efficiently interact with customers using chatbots, messaging applications, short message service (SMS), chat, email, social media, phone, video, fax, and letter.
Rich applications, powered by our Knowledge and AI capabilities (from our Knowledge Hub), proactively guide agents to efficiently interact with customers using chatbots, messaging applications, short message service (SMS), chat, email, social media, phone, video, fax, and letter. ​ Optimize with eGain Analytics Hub ​ Our Analytics Hub enables clients to measure, manage and optimize their omnichannel service operations and knowledge.
Our partner portal, eGain Econet™, provides comprehensive sales support and services information for channel partners. ​ Subscription Services ​ Our subscription services provide customers with access to our software on a cloud-based platform that we manage and offer on a subscription basis.
We believe these relationships are important to delivering successful integrated products and services to our customers. Our partner portal, eGain Econet™, provides comprehensive sales support and services information for partners. ​ Subscription Services ​ Our subscription services provide customers with access to our software on a cloud-based platform that we manage and offer on a subscription basis.
Digital Economy Demands Modern Software In a world selling commoditized products to information-rich customers who are short on time, smart tools must automate the routine and augment the interesting across agent, business and customer tasks. This need has been amplified by the disruption of traditional work models by COVID-19.
AI Economy Demands Modern Knowledge Management In a world selling commoditized, yet complex products to time-strapped customers, smart tools must automate the routine and augment the interesting across agent, business and customer support tasks. This need has been amplified by the disruption of traditional work models by COVID-19.
Solve with eGain Knowledge Hub ​ Our Knowledge Hub helps businesses to centralize knowledge, policies, procedures, situational expertise, and best-practices, while delivering guided, personalized solutions to customers and agents across all touch points. Our guided knowledge and virtual assistance applications ensure that all agents effectively resolve all contact types, regardless of product or procedure.
Solve with eGain Knowledge Hub ​ Our Knowledge Hub helps businesses to centralize knowledge, policies, procedures, situational expertise, and best-practices, while delivering guided, personalized, and trusted answers to customers, agents, and field staff. We believe our guided knowledge and virtual assistance applications ensure that all agents easily resolve customer queries, regardless of product or procedure.
From over a hundred thousand users at a healthcare client using our solution on a 24x7 basis to a Property and Casualty (P&C) insurer with fifteen thousand contact center advisors and thirty-thousand field agents, we are the preferred choice for large brands looking to automate customer engagement.
Our clients range from over a hundred thousand users at a healthcare client using our solution on a 24x7 basis to a Property and Casualty (P&C) insurer with fifteen thousand contact center advisors and thirty-thousand field agents.
As of June 30, 2023, we had 592 employees, including 580 full-time employees, of which 208 were in product development, 240 in services and support, 84 in sales and marketing, and 60 in finance and administration. ​ None of our employees are covered by collective bargaining agreements.
As of June 30, 2024, we had 544 employees, including 539 full-time employees, of which 195 were in product development, 229 in services and support, 64 in sales and marketing, and 56 in finance and administration. ​ None of our employees are covered by collective bargaining agreements.
Land and Expand in the Enterprise ​ With the sustained progress we have made in customer success, we see a replicable pattern emerging: land enterprise logos with a limited footprint in one business unit, demonstrate business value, and then expand in the enterprise.
At the same time, we are investing in delivery partnerships to scale our delivery capabilities. Land and Expand in the Enterprise ​ With the sustained progress we have made in customer success, we see a replicable pattern emerging: land enterprise logos with a small footprint in one business unit, demonstrate business value, and then expand in the enterprise.
We rely on intellectual property and other laws, in addition to confidentiality procedures and licensing arrangements, to protect the proprietary aspects of our technology and business. ​ As of June 30, 2023, we had 16 issued patents in the United States. In addition, we have one pending patent application in the United States, which is a non-provisional filing.
We rely on intellectual property and other laws, in addition to confidentiality procedures and licensing arrangements, to protect the proprietary aspects of our technology and business. ​ As of June 30, 2024, we had 17 issued patents in the United States.
We believe we are increasing the value of investment in eGain for our clients by deeply integrating our capabilities via our enhanced APIs with enterprise assets like enterprise collaboration platforms, CRM systems, transaction and billing, and content sources. ​ Maintain Platform Leadership ​ Innovation is in our DNA.
We believe we are increasing the value of investment in eGain for our clients by deeply integrating our capabilities via our enhanced APIs with enterprise assets like enterprise collaboration platforms, CRM systems, transaction and billing, and content sources. ​ Selectively Pursue Acquisitions ​ From time to time, we pursue inorganic strategies to strengthen our product portfolio.
Invest in Direct Sales and Marketing ​ We design and execute scalable and personalized marketing programs to boost brand awareness, based on client success, product leadership and no-risk trial offers. To complement our marketing investment, we have built and trained a field sales team to maintain high-touch presence in target accounts.
Invest in Direct Sales and Marketing ​ We design and execute scalable and personalized marketing programs to boost brand awareness, based on client success, product leadership and no-risk trial offers.
Any given customer contact can morph across these categories as the conversation develops. Tools must orchestrate customer contact with context —accounting for machine-human hand-offs, channel switching, multimodal interaction, and conversational pause-and-resume. During these interactions, customers increasingly want to be guided, even anticipated. Siloed solutions like simplistic chatbots without contextual escalation or effective knowledge and guidance don’t work.
Any given customer contact can morph across these categories as the conversation develops. Tools must orchestrate customer contact with context —accounting for machine-human hand-offs (mixed-initiative interaction), channel switching, multimodal interaction, and conversational pause-and-resume. During these interactions, customers increasingly want trusted answers and guidance.
Specifically, we help businesses: o Enhance customer experience with digital-first, omnichannel service, backed by AI knowledge. o Reduce operating costs through self-service automation, improved first contact resolution, and compressed agent time-to-competence. o Ensure compliance with regulations, policies, procedures, and best practices even as clients expand their product portfolio and customer segments.
Specifically, we help businesses: o Enhance customer experience with digital-first, omnichannel service, powered by AI knowledge. o Reduce operating costs with self-service automation, improved agent productivity and time-to-competence. o Ensure compliance with regulations, policies, procedures, and best practices. o Deliver insights to improve service, enhance products and design new offerings .
Businesses can experience our product with their data, content, and process in a production setting. Direct Go-to-market Strategy, Complemented by a Growing Partner Ecosystem ​ We take our solutions to market through a direct sales model, primarily in North America and Western Europe.
Direct Go-to-market Strategy, Complemented by a Growing Partner Ecosystem ​ We take our solutions to market through a direct sales model, primarily in North America and Western Europe. We complement direct sales with resell partnerships. We also partner with System Integrators and boutique consultants.
Our solution experts and partners guide clients by aligning with their strategic priorities and demonstrating quick value through agile sprints. Connect with eGain Conversation Hub ​ Our Conversation Hub offers comprehensive, scalable capabilities for digital-first, omnichannel interaction management within a modern, purpose-built desktop.
Connect with eGain Conversation Hub ​ Our Conversation Hub offers comprehensive, scalable capabilities for digital-first, omnichannel interaction management within a modern, purpose-built desktop.
We unlock the full power of our cloud platform with extensive APIs through a developer portal to enable digital engagement, knowledge management, and decision support capabilities. ​ Enterprise-Grade, Secure Cloud Service with Differentiated Offerings ​ Our cloud offering is secure, scalable, and offers unique capabilities. With respect to security and certification, we offer SOC2, PCI, HIPAA, FedRAMP, and GDPR certification.
We unlock the full power of our cloud platform with extensive APIs on a composable architecture, served via a developer portal to enable knowledge everywhere to power omnichannel customer and employee experiences. ​ Enterprise-Grade, Secure Cloud Service with Differentiated Offerings ​ Our cloud offering is secure, scalable, and offers unique capabilities.
Develop New Partner Relationships ​ We are developing new partnerships with complementary platform providers (with large customer bases) to enhance their proposition with our Knowledge-powered customer engagement capabilities. Our Business Development team continues to develop and operationalize new partnerships.
To complement our marketing investment, we have built and trained a field sales team to maintain high-touch presence in target accounts. 10 Table of Contents Develop New Partner Relationships ​ We are developing new partnerships with complementary platform providers (with large customer bases) to enhance their proposition with our Knowledge-powered customer engagement capabilities.
For fiscal year 2023, North America (NA) and combined Europe, Middle East, and Africa (EMEA) revenue accounted for 78% and 22% of total revenue. ​ One of our largest customers, who is also our partner, accounted for 20% of total revenue in fiscal year 2023.
Over 82% of our annual recurring cloud revenue for the fiscal year ended June 30, 2024 (which we refer to as fiscal year 2024) came from such large enterprises. ​ For fiscal year 2024, North America (NA) and combined Europe, Middle East, and Africa (EMEA) revenue accounted for 78% and 22% of total revenue. 9 Table of Contents ​ One of our largest customers, who is also our partner, accounted for 18% of total revenue in fiscal year 2024.
We are also approved as a supplier on Crown Commercial Service’s (CCS) G-Cloud Framework in the UK market. The Internal Revenue Service uses our solutions served from the eGain Cloud. Furthermore, we offer an “Always On” capability for businesses who cannot afford to be down at any time, day or night, for scheduled maintenance.
With respect to security and certification, we offer SOC2, PCI, HIPAA, FedRAMP, and GDPR certification. We are also approved as a supplier on Crown Commercial Service’s (CCS) G-Cloud Framework in the UK market. The Internal Revenue Service uses our solutions served from the eGain Cloud.
Our assessment, based on two decades of serving clients is that contact center agents when serving customers ignore most of the information piled on their screens across multiple windows and tabs. Meanwhile, most businesses expect agents to retain and routinely refresh all relevant knowhow in their head - across complex, expanding product portfolios and compliance-heavy processes.
Our assessment, based on more than two decades of serving clients is that good contact center agents ignore most information piled on their screens across multiple windows and tabs when they are interacting with customers. They focus on the customer conversation.
Our conversation hub, deeply integrated with our knowledge hub, enables plug and play of third-party bots, channels, and desktops. ​ 8 Table of Contents To de-risk customer decisions, we offer a unique Innovation in 30 Days ™ program—a 30-day guided production pilot in the eGain Cloud – at no cost and with no strings attached.
Market-leading Innovation with a Risk-free Trial Model ​ To de-risk customer decisions, we offer a unique Innovation in 30 Days ™ program—a 30-day guided production pilot in the eGain Cloud – at no cost and with no strings attached. Businesses can experience our product with their data, content, and process in a production setting.
With our mantra of AX + BX + CX = DX™ , we guide clients to effortless digital experience (DX) by holistically optimizing agent experience (AX), business experience (BX) and customer experience (CX). Leading brands use eGain’s SaaS solution to improve customer satisfaction, empower agents, reduce service cost, and boost sales. We are headquartered in the United States.
True to our mantra of AX + BX + CX = DX™, our AI knowledge hub orchestrates effortless Digital eXperience (DX) as it assists Agent eXperience (AX), empowers Business eXperience (BX) and assures Customer eXperience (CX). Many global brands use eGain to improve experience and reduce costs. We are headquartered in the Sunnyvale, California, United States.
Pre-built integrations include connectors to Adobe, Apple Business Chat, Avaya, Amazon Connect, Cisco, Five9, Google Dialogflow, Genesys, Talkdesk, IBM Watson, Microsoft Dynamics, Microsoft SharePoint, Microsoft Teams, Salesforce, SAP and ServiceNow. Compelling Benefits ​ Our solution delivers quick value, easy innovation, and big business impact.
Pre-built integrations include connectors to Adobe, Apple Business Chat, Avaya, Amazon Connect, Cisco, Five9, Google Dialogflow, Genesys, Talkdesk, IBM Watson, Microsoft Dynamics, Microsoft SharePoint, Microsoft Teams, Salesforce, SAP, ServiceNow, and Zendesk. We offer a novel 8 Table of Contents “Bring Your Own” composable architecture to plug external bots, messaging channels, and third-party agent desktops to compose differentiated customer experiences.
We complement direct sales with resell partnerships based on product connectors into Cloud Contact Center platforms, including Amazon, Avaya, Cisco, Five9, Genesys, and Talkdesk. We also partner with System Integrators and Managed Service Providers. Customers ​ We mostly sell to large enterprises, which we define as businesses with over a billion dollars in annual revenue or government organizations.
Customers ​ We mostly sell to large enterprises, which we define as businesses with over a billion dollars in annual revenue or government organizations.
We utilize thought leadership and other marketing events to demonstrate our leadership position in the customer engagement software market and highlight our customer successes. ​ Our direct sales force is organized into teams that include field sales representatives and sales consultants. Our direct sales force is complemented by lead generation representatives and sales development representatives.
These enterprises typically have thousands of customer service agents in their contact centers. Our direct sales force is organized into teams that include field sales representatives and sales consultants. Our direct sales force is complemented by lead generation representatives and sales development representatives. We also complement our direct effort with sales alliances.
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ITEM 1. BUSINESS ​ Overview ​ eGain automates customer engagement with an innovative knowledge hub, powered by conversational and generative AI and analytics.
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ITEM 1. BUSINESS ​ Overview ​ eGain automates customer engagement with an AI knowledge hub SaaS solution. We sell to enterprises who want to better serve customers at scale by delivering trusted answers across self-service, contact centers, and field staff.
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We sell mostly to large enterprises across financial services, telecommunications, retail, government, healthcare, and utilities seeking to better serve customers at scale by eliminating content silos and helping to automate customer engagement processes of all levels of complexity that may also require regulatory compliance.
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Meanwhile, businesses expect agents to remember and refresh growing knowhow that is needed to answer customer questions across complex, expanding product portfolios and compliance-heavy processes, and then recall relevant knowhow contextually in the moment of truth – when the customer is on the line.
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Coming out of the pandemic tunnel and dealing with the new normal of millennial and generation Z employee expectations, businesses realize that they need to invest in tools to quickly and easily empower agents, while ensuring customer satisfaction and compliance.
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Businesses realize that they need to invest in tools that can guide agents and customers with trusted answers, ensuring customer satisfaction and compliance. Recently we have seen the generative AI surprises pop up across businesses as businesses jumped into generative AI without solving the foundational knowledge needed to provide trusted input content to generative AI.
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Not surprisingly, businesses are increasingly seeking modern knowledge management solutions to layer on top of traditional systems of record like Customer Relationship Management (CRM), Contact Center as a Service (CCaaS) solutions, and content management systems. Their goal is to empower contact center agents and deliver customer self-service with relevant knowledge everywhere.
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Not surprisingly, businesses are quickly seeking modern knowledge management solutions. AI Knowledge for Customer Engagement ​ To automate customer engagement, generative AI needs trusted content from a knowledge hub that ensures correct, compliant content is served with adequate controls. A knowledge hub can be built and maintained with much less time and cost using AI.
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Knowledge-Powered Customer Engagement ​ Energized by big-data, cloud-computing and most recently by generative AI, unsiloed Knowledge Hubs deliver transformational value in customer engagement. Smart, connected experiences can be automated to successfully resolve majority of customer interactions.
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It is a perfect technology intersection where AI needs knowledge and knowledge can be built easier with AI. Contact Centers are a Brand Battleground ​ Contact centers offer significant opportunities to realize the transformation potential of generative AI. According to Forrester Research, there were 17 million contact center agents in 2023, with 71% of contact centers looking to hire more.
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The pressing challenge for solution buyers, however, is to separate the wheat from the chaff as they look for trusted, innovative, and aligned partners that can also add quick business value. So they seek sustained product leadership, at-scale proof points and no-risk trials. Contact Centers are a Brand Battleground ​ Contact centers offer significant opportunity to automate customer engagement.
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Time-starved customers consuming complex products and grappling with extreme choices generate stubbornly high levels of customer contact. They need quick, correct, and assured help.
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Globally, there were close to 17 million contact center agents in 2022 with 71% of contact centers looking to hire more, according to a 2023 Forrester survey. Time-starved customers consuming complex products and grappling with marketing offers generate stubbornly high levels of customer contact.
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The business impact of applying AI at scale on contact center operations can save the global economy hundreds of billions of dollars annually. 7 Table of Contents Customer Engagement Automation is a Large, Growing Market ​ Businesses continue to invest in digital transformation, especially in customer engagement.
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Furthermore, contact centers worldwide are undergoing a technology refresh cycle from on-premise call centers to cloud-based contact centers.
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To further reduce cost and improve experience, businesses want to harness AI knowledge to automate customer service via omnichannel, conversational interfaces. According to McKinsey, the aggregate cost of customer operations in the global economy is $1.5 trillion. They anticipate that businesses could reduce this cost by 35% using AI.
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This transition affords businesses the opportunity to reimagine and design customer contact strategies to drive digital-first automation, fueled by Knowledge and AI. 6 Table of Contents Customer Engagement Automation is a Large, Growing Market ​ Businesses are investing heavily in digital transformation, with customer engagement as a top priority.
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Given these potential savings, the associated market opportunity for SaaS solutions is huge.
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Cloud-based solutions and a growing Application Programming Interface (API) economy present exciting opportunities to connect, solve, and optimize customer interactions.
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According to a recent Gartner Research prediction, by 2025, 100% of all virtual customer assistant and virtual agent assistant projects that are not integrated with a modern knowledge management system will fail to meet their experience improvement and operational cost-reduction goals. ​ The eGain Approach and Benefits What Customers Want ​ We believe customer service queries fall into three categories: informational, transactional, and situational.
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Contact volumes are soaring and to handle them effectively while delivering great experiences, businesses are looking for innovative platform providers that harness AI, conversational interfaces, and digital channels with proof at scale to guide them on their automation journey. ​ The eGain Approach and Benefits What Customers Want ​ We believe where customers want help falls into three categories: informational, transactional, and situational.
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Compelling Benefits ​ Our solution delivers quick value, easy innovation, and big business impact.
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As part of our Conversation Hub, we offer a novel Bring Your Own (BYO) architecture to plug in external bots, messaging channels, and third-party agent desktops to compose differentiated customer experiences. Finally, we offer a rich library of pre-built connectors to popular CRM, Contact Center, and Content Management platforms.
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Advance Product and Platform Leadership Innovation is in our DNA. We are investing actively in experimenting with, enhancing, and applying AI technologies to accelerate and automate tasks in the knowledge management and customer engagement lifecycle. In addition, we are expanding our platform connectivity to CRM, CCaaS, UCaaS, and CMS platforms with enhanced APIs and connectors.
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Correct, compliant, and consistent responses across touchpoints boost customer satisfaction as first contact resolution surges and agent’s time to competency drops. ​ Optimize with eGain Analytics Hub ​ Our Analytics Hub enables clients to measure, manage and optimize their omnichannel service operations and knowledge.
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Marketing and Partner Strategy ​ Our marketing strategy is to build our brand around the following pillars: thought leadership, product leadership, and customer advocacy. We have a long track record of thought leadership in this market. Our popular “Knowledge Management for Dummies” publication, for example, enjoys thousands of digital downloads and physical distribution in our target community.
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This benefit is particularly sought after in regulated sectors like financial services and healthcare, as well as government. o Deliver rich insights to improve service, enhance products and design new offerings. Analyzing and learning from customer conversations provides a unique tool to quickly respond to customer dissatisfaction or agent challenges, while generating ideas for product innovation and process automation.
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Recently, we published a revised edition of this pioneering work with generative AI updates, including relevant AI-powered product info, customer case studies, and best-practices. ​ Our partners help extend the breadth and depth of our product offerings, drive market awareness, and augment our professional service capabilities.
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Market-leading Innovation with a Risk-free Trial Model ​ We are consistently seen as product leaders in knowledge-powered customer engagement by leading analysts. Our enterprise-class virtual assistance and agent augmentation – powered by AI, ML, and knowledge – delivers transformational impact in simple to sophisticated use cases to solve, guide, and coach agents and customers.
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Approximately 83% of our annual recurring cloud revenue for the fiscal year ended June 30, 2023 (which we refer to as fiscal year 2023) came from such large enterprises. ​ We focus on the following verticals: financial services, telecommunication, retail, government, health care and utilities.
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We are developing vertical solutions on our platform to better acquire and serve customers. We are also leveraging generative AI technologies to reduce manual effort and accelerate automation in knowledge management and customer engagement.
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We continue to enhance our core capabilities, while improving usability and personalization. ​ Selectively Pursue Acquisitions ​ From time to time, we pursue inorganic strategies to strengthen our product portfolio.
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These enterprises typically have thousands of customer service agents in their contact centers and, in the aggregate, communicate with billions of customers each year.
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We also complement our direct effort with sales alliances. Marketing and Partner Strategy ​ Our marketing strategy is to build our brand around innovative and robust products trusted by leading enterprises. We accomplish this via public relations, analyst relations, marketing programs, and demand generation, infused with relevant content for our target audiences.
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We employ a wide range of marketing avenues to deliver our message, including print and digital, targeted electronic and postal mailing, email newsletters, and a variety of trade shows, seminars, webinars, and interest groups. ​ Our marketing group produces sales tools, including product collateral, customer case studies, demonstrations, and presentations.
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In addition, the group performs market and customer analyses to identify and develop key partnership opportunities and product capabilities. ​ We believe that our partners help extend the breadth and depth of our product offerings, drive market penetration, and augment our professional service capabilities. We believe these relationships are important to delivering successful integrated products and services to our customers.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeMoreover, further challenges may be raised against the transfer mechanisms that we have adopted which may require future adaptation. We may also experience hesitancy, reluctance, or refusal by European or multi-national customers to continue to use our services due to the potential risk exposure to such customers as a result of the international legal developments.
Biggest changeWe may, among other things, be required to implement additional contractual and technical safeguards for any personal data transferred out of the EEA, Switzerland, the United Kingdom or other regions which may increase compliance costs, lead to increased regulatory scrutiny or liability, may require additional contractual negotiations, and may adversely impact our business, financial condition and operating results. ​ We may also experience hesitancy, reluctance, or refusal by European or multi-national customers to continue to use our services due to the potential risk exposure to such customers as a result of the international legal developments.
We currently anticipate that we will retain all available funds for use in the operation of our business and do not intend to pay any cash dividends in the foreseeable future. ​ Repurchases ​ On November 14, 2022, our board of directors authorized a stock repurchase program under which we may purchase up to $20.0 million of our outstanding common stock.
We currently anticipate that we will retain all available funds for use in the operation of our business and do not intend to pay any cash dividends in the foreseeable future. ​ Share Repurchases ​ On November 14, 2022, our board of directors authorized a stock repurchase program under which we may purchase up to $20.0 million of our outstanding common stock.
We generally recognize revenue upon the transfer of control of promised services to our customers in the amount that is commensurate with the consideration that we expect to receive in exchange for those services. If an arrangement requires significant customization or implementation services from us, recognition of the associated license or subscription and service revenue could be delayed.
We generally recognize revenue upon the transfer of control of promised services to our customers in the amount that is commensurate with the consideration that we expect to receive in exchange for those services. If an arrangement requires significant customization or implementation services from us, recognition of the associated subscription and service revenue could be delayed.
In the past, we have experienced collection delays from certain customers, and we cannot predict whether we will continue to experience similar or more severe delays in the future. Although we have established reserves to cover losses due to delays or inability to pay, there can be no assurance that such reserves will be sufficient to cover our losses.
In the past, we have experienced collection delays from certain customers, and we cannot predict whether we will continue to experience similar or more severe delays in the future. Although we have established provision to cover losses due to delays or inability to pay, there can be no assurance that such reserves will be sufficient to cover our losses.
LEGAL PROCEEDINGS We are not currently a party to any legal proceedings, and are not aware of any pending or threatened legal proceedings against us that we believe could have a material adverse effect on our business, operating results, or financial condition.
LEGAL PROCEEDINGS We are not currently a party to any legal proceedings, and are not aware of any pending or threatened legal proceedings against us that we believe could have a material adverse effect on our business, consolidated operating results, or consolidated financial condition.
In addition, depending on the nature and timing of any such dispute, a resolution of a legal matter could materially affect our future results of operation or cash flows or both. 28 Table of Contents We rely on trademark, copyright, trade secret laws, contractual restrictions and patent rights to protect our intellectual property and proprietary rights and, if these rights are impaired, then our ability to generate revenue will be harmed.
In addition, depending on the nature and timing of any such dispute, a resolution of a legal matter could materially affect our future results of operation or cash flows or both. 29 Table of Contents We rely on trademark, copyright, trade secret laws, contractual restrictions and patent rights to protect our intellectual property and proprietary rights and, if these rights are impaired, then our ability to generate revenue will be harmed.
Of our employees in India, 49% are allocated to research and development. Although the movement of certain operations internationally was principally motivated by cost cutting, the continued management of these remote operations requires significant management attention and financial resources that could adversely affect our operating performance.
Of our employees in India, 46% are allocated to research and development. Although the movement of certain operations internationally was principally motivated by cost cutting, the continued management of these remote operations requires significant management attention and financial resources that could adversely affect our operating performance.
MIN E SAFETY DISCLOSURES Not applicable. ​ ​ ​ 30 Table of Contents P ART II ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is traded on the Nasdaq Stock Market under the symbol “EGAN”.
MIN E SAFETY DISCLOSURES Not applicable. ​ ​ ​ 33 Table of Contents P ART II ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is traded on the Nasdaq Stock Market under the symbol “EGAN”.
The graph below compares the cumulative total stockholder return on our common stock with the cumulative total return on the Standard & Poor’s 500 Index and the Nasdaq Composite Total Return Index for each of the last five fiscal years ended June 30, 2023, assuming an initial investment of $100.
The graph below compares the cumulative total stockholder return on our common stock with the cumulative total return on the Standard & Poor’s 500 Index and the Nasdaq Composite Total Return Index for each of the last five fiscal years ended June 30, 2024, assuming an initial investment of $100.
If we are unable to do so for any reason, including as a result of any change in the leadership of our distribution partners, or if any existing or future distribution partners fail to successfully market, resell, implement or support our products for their customers, or if distribution partners represent multiple providers and devote 16 Table of Contents greater resources to market, resell, implement and support competing products and services, our future revenue growth could be impeded.
If we are unable to do so for any reason, including as a result of any change in the leadership of our distribution partners, or if any existing or future distribution partners fail to successfully market, resell, implement or support our products for their customers, or if distribution partners represent multiple providers and devote greater resources to market, resell, implement and support competing products and services, our future revenue growth could be impeded.
This may also require increasingly sophisticated and costly sales efforts that are targeted at senior management. Similarly, the rate at which our customers purchase new or enhanced services depends on a number of factors, including general economic conditions and our customers’ reactions to price changes related to these additional features and services.
This may also require increasingly sophisticated and costly sales efforts that are targeted at senior management. Similarly, the rate at which our customers purchase new or enhanced services depends on a number of factors, including general economic conditions and our customers’ reactions to price 15 Table of Contents changes related to these additional features and services.
Further, the impact of the COVID-19 pandemic could delay prospective customers’ purchasing decisions and cause them to become less inclined to trade-up from existing solutions, impact customers’ pricing expectations for our offerings, lengthen payment terms, reduce the value or duration of their subscription contracts, or adversely impact renewal rates; ● increased cyber incidents during the COVID-19 pandemic and our increased reliance on a remote workforce could increase our exposure to potential cybersecurity breaches and attacks; and/or ● our results of operations are subject to fluctuations in foreign currency exchange rates, which risks may be heightened due to increased volatility of foreign currency exchange rates as a result of COVID-19.
Further, the impact of a pandemic or public health emergency could delay prospective customers’ purchasing decisions and cause them to become less inclined to trade-up from existing solutions, impact customers’ pricing expectations for our offerings, lengthen payment terms, reduce the value or duration of their subscription contracts, or adversely impact renewal rates; ● increased cyber incidents during a pandemic or public health emergency and our increased reliance on a remote workforce could increase our exposure to potential cybersecurity breaches and attacks; and/or ● our results of operations are subject to fluctuations in foreign currency exchange rates, which risks may be heightened due to increased volatility of foreign currency exchange rates as a result of a pandemic or public health emergency.
Any investigations, actions, or sanctions could harm our business, operating results, and financial condition. ​ 26 Table of Contents Industry-specific regulation is evolving and unfavorable industry-specific laws, regulations or interpretive positions could limit our ability to provide services and harm our business . ​ Our customers and potential customers conduct business in a variety of industries, including financial services, the public sector, healthcare and telecommunications.
Any investigations, actions, or sanctions could harm our business, operating results, and financial condition. ​ Industry-specific regulation is evolving and unfavorable industry-specific laws, regulations or interpretive positions could limit our ability to provide services and harm our business . ​ Our customers and potential customers conduct business in a variety of industries, including financial services, the public sector, healthcare and telecommunications.
We have been, and may in the future be, put on notice and/or sued by third parties for alleged infringement of their proprietary rights, including patent infringement. We evaluate all claims and lawsuits with respect to their potential merits, our potential defenses and counterclaims, settlement or litigation potential and the expected effect on us.
We have been, and may in the future be, put on notice and/or sued by third parties for alleged infringement of their proprietary rights, including patent infringement. 32 Table of Contents We evaluate all claims and lawsuits with respect to their potential merits, our potential defenses and counterclaims, settlement or litigation potential and the expected effect on us.
Outsourcing services to offshore providers may expose us to misappropriation of our intellectual property or that of our customers, or make it more difficult to defend intellectual property rights in our technology. If we are unable to hire and retain key personnel, our business and results of operations would be negatively affected.
Outsourcing services to offshore providers may expose us to misappropriation of our intellectual property or that of our customers, or make it more difficult to defend intellectual property rights in our technology. 21 Table of Contents If we are unable to hire and retain key personnel, our business and results of operations would be negatively affected.
These broad market fluctuations may cause the market price of our common stock to decline. Our insiders who are significant stockholders have the ability to exercise significant control over matters requiring stockholder approval, including the election of our board of directors, and may have interests that conflict with those of other stockholders.
These broad market fluctuations may cause the market price of our common stock to decline. 30 Table of Contents Our insiders who are significant stockholders have the ability to exercise significant control over matters requiring stockholder approval, including the election of our board of directors, and may have interests that conflict with those of other stockholders.
If we were required to provide any of these in a material way, our results of operations would suffer. If we are unable to increase the profitability of subscription revenue, if we experience significant customer attrition, or if we are required to delay recognition of revenue, our operating results could be adversely affected.
If we were required to provide any of these in a material way, our results of operations would suffer. 19 Table of Contents If we are unable to increase the profitability of subscription revenue, if we experience significant customer attrition, or if we are required to delay recognition of revenue, our operating results could be adversely affected.
If we are unable to increase the volume of our subscription business, we may not be able to achieve sustained profitability. 19 Table of Contents Factors that could harm our ability to improve our gross margins, which may affect our operating profitability, include: ● increased costs to license and maintain third party software embedded in our software applications or the cost to create or substitute such third-party software if it can no longer be licensed on commercially reasonable terms; ● our inability to maintain or increase the prices customers pay for our products and services based on competitive pricing pressures and general economic conditions limiting customer demand; ● increased cost of third-party services providers, including data centers for our cloud operations and professional services contractors performing implementation and technical support services to cloud customers; ● customer contractual requirements that delay revenue recognition until customer implementations commence production operations or customer-specific requirements are met; ● significant attrition as customers decide for their own economic or other reasons to not renew their subscription contracts when they are up for renewal negatively impacting the efficiency of our data centers and leading to the costs being spread over fewer customers negatively impacting gross margin; and ● the inability to implement, or delays in implementing, technology-based efficiencies and efforts to streamline and consolidate processes to reduce operating costs.
Factors that could harm our ability to improve our gross margins, which may affect our operating profitability, include: ● increased costs to license and maintain third party software embedded in our software applications or the cost to create or substitute such third-party software if it can no longer be licensed on commercially reasonable terms; ● our inability to maintain or increase the prices customers pay for our products and services based on competitive pricing pressures and general economic conditions limiting customer demand; ● increased cost of third-party services providers, including data centers for our cloud operations and professional services contractors performing implementation and technical support services to cloud customers; ● customer contractual requirements that delay revenue recognition until customer implementations commence production operations or customer-specific requirements are met; ● significant attrition as customers decide for their own economic or other reasons to not renew their subscription contracts when they are up for renewal negatively impacting the efficiency of our data centers and leading to the costs being spread over fewer customers negatively impacting gross margin; and ● the inability to implement, or delays in implementing, technology-based efficiencies and efforts to streamline and consolidate processes to reduce operating costs.
Our success will depend, in part, on our ability to: ● enhance the features and performance of our services; ● develop and offer new services that are valuable to companies; and 20 Table of Contents ● respond to technological advances and emerging industry standards and practices in a cost-effective and timely manner.
Our success will depend, in part, on our ability to: ● enhance the features and performance of our services; ● develop and offer new services that are valuable to companies; and ● respond to technological advances and emerging industry standards and practices in a cost-effective and timely manner.
Further, our forecasted revenue, operating results and cash flows could vary materially from those we provide as guidance or from those anticipated by investors and analysts if the assumptions on which we base our financial projections are inaccurate as a result of the unpredictability of the impact that the COVID-19 pandemic will have on our businesses, our customers’ and partners’ businesses and the global markets and economy or we make changes to our licensing programs or payment terms in connection with COVID-19.
Further, our forecasted revenue, operating results and cash flows could vary materially from those we provide as guidance or from those anticipated by investors and analysts if the assumptions on which we base our financial projections are inaccurate as a result of the unpredictability of the impact that a pandemic or public health emergency will have on our businesses, our customers’ and partners’ businesses and the global markets and economy or we make changes to our licensing programs or payment terms in connection with a pandemic or public health emergency.
We and our customers are at risk of enforcement actions taken by an EU or UK data protection authority until such point in time that we ensure that all data transfers to us from the EEA and UK are legitimized.
We and our customers are at risk of enforcement actions taken by an EU or UK data protection authority until such point in time 25 Table of Contents that we ensure that all data transfers to us from the EEA and UK are legitimized.
Roy individually or together with this group has the ability to exercise significant control over most matters requiring our stockholders’ approval, including the election and removal of directors and the approval of significant corporate transactions, such as a merger or sale of our company or its assets. ITEM 1B . UNRESOLVED STAFF COMMENTS None. IT EM 2.
Roy individually or together with this group has the ability to exercise significant control over most matters requiring our stockholders’ approval, including the election and removal of directors and the approval of significant corporate transactions, such as a merger or sale of our company or its assets. ITEM 1B . UNRESOLVED STAFF COMMENTS None. ITEM 1C .
In addition to those discussed elsewhere in this section, our EMEA sales operations are subject to a number of specific risks, such as: ● general economic conditions in each country or region in which we do or plan to do business; ● foreign currency fluctuations and imposition of exchange controls; ● changes in data privacy laws including European Union’s General Data Protection Regulation (GDPR); ● difficulty and costs in staffing and managing our international operations; ● difficulties in collecting accounts receivable and longer collection periods; ● health or similar issues, such as a pandemic or epidemic; ● various trade restrictions and tax consequences; ● hostilities in various parts of the world, including the war in Ukraine; and ● reduced intellectual property protections in some countries.
In addition to those discussed elsewhere in this section, our EMEA sales operations are subject to a number of specific risks, such as: ● general economic conditions in each country or region in which we do or plan to do business; ● foreign currency fluctuations and imposition of exchange controls; ● changes in data privacy laws including European Union’s General Data Protection Regulation (GDPR); ● difficulty and costs in staffing and managing our international operations; ● difficulties in collecting accounts receivable and longer collection periods; ● health or similar issues, such as a pandemic or epidemic; ● various trade restrictions and tax consequences; ● hostilities in various parts of the world, such as the conflict between Russia and Ukraine and the evolving events in Israel and Gaza; and ● reduced intellectual property protections in some countries.
Noncompliance with these laws could subject us to investigations, sanctions, settlements, prosecution, other enforcement actions, disgorgement of profits, significant fines, damages, other civil and criminal penalties or injunctions, adverse media coverage, and other consequences.
Noncompliance with these laws could subject us to investigations, sanctions, settlements, prosecution, other enforcement actions, disgorgement of profits, significant fines, 27 Table of Contents damages, other civil and criminal penalties or injunctions, adverse media coverage, and other consequences.
Any of the above risks could adversely affect our international operations, reduce our revenue from customers outside of the United States or increase our operating costs, each of which could adversely affect our business, results of operations, financial condition, and growth prospects. As of June 30, 2023, approximately 44% of our workforce was employed in India.
Any of the above risks could adversely affect our international operations, reduce our revenue from customers outside of the United States or increase our operating costs, each of which could adversely affect our business, results of operations, financial condition, and growth prospects. As of June 30, 2024, approximately 45% of our workforce was employed in India.
Additionally, in the 21 Table of Contents technology industry, there is substantial and continuous competition for highly skilled business, product development, technical and other personnel. We may also experience increased compensation costs that are not offset by either improved productivity or higher sales.
Additionally, in the technology industry, there is substantial and continuous competition for highly skilled business, product development, technical and other personnel. We may also experience increased compensation costs that are not offset by either improved productivity or higher sales.
As a result, unauthorized access to customer data or security breaches could result in the loss, or 24 Table of Contents unauthorized dissemination, of such data, which could seriously harm our or our customers’ businesses and reputations.
As a result, unauthorized access to customer data or security breaches could result in the loss, or unauthorized dissemination, of such data, which could seriously harm our or our customers’ businesses and reputations.
Our directors and executive officers, together with their affiliates and members of their immediate families, beneficially owned, in the aggregate, approximately 32% of our outstanding capital stock as of June 30, 2023, of which our Chief Executive Officer, Ashutosh Roy, beneficially owned approximately 28% as of such date. As a result of these concentrated holdings, Mr.
Our directors and executive officers, together with their affiliates and members of their immediate families, beneficially owned, in the aggregate, approximately 34% of our outstanding capital stock as of June 30, 2024, of which our Chief Executive Officer, Ashutosh Roy, beneficially owned approximately 30% as of such date. As a result of these concentrated holdings, Mr.
If we are not able to raise additional funds on terms acceptable to us, if and when needed, our ability to fund our operations, take advantage of opportunities, and develop or expand our business could be significantly limited. Our reserves may be insufficient to cover receivables we are unable to collect.
If we are not able to raise additional funds on terms acceptable to us, if and when needed, our ability to fund our operations, take advantage of opportunities, and develop or expand our business could be significantly limited. Our provision may be insufficient to cover accounts receivable we are unable to collect.
As of June 30, 2023, approximately $14.2 million remained available for stock repurchases pursuant to our stock repurchase program. ​ Under the stock repurchase program, we may purchase shares of common stock on a discretionary basis from time to time through open market transactions or privately negotiated transactions at prices deemed appropriate by us.
As of June 30, 2024, approximately $17.0 million remained available for stock repurchases pursuant to our stock repurchase program. ​ Under the stock repurchase program, we may purchase shares of common stock on a discretionary basis from time to time through open market transactions or privately negotiated transactions at prices deemed appropriate by us.
The loss of any significant customer or a decline in business with any significant customer would materially and adversely affect our financial condition and results of operations. The market for customer engagement software is intensely competitive, and our business will be adversely affected if we are unable to successfully compete. The market for customer engagement software is intensely competitive.
The loss of any significant customer or a decline in business with any significant customer would materially and adversely affect our financial condition and results of operations. The market for customer engagement software, including generative AI product offerings, is competitive, and our business will be adversely affected if we are unable to successfully compete.
The rapid evolution of these products and services will require that we continually improve the performance, features and reliability of our services.
The rapid evolution of these products and services will require that 20 Table of Contents we continually improve the performance, features and reliability of our services.
Holders ​ As of June 30, 2023, there were approximately 138 stockholders of record. ​ Dividends ​ We have never declared or paid any cash dividends on our common stock.
Holders ​ As of June 30, 2024, there were approximately 133 stockholders of record. ​ Dividends ​ We have never declared or paid any cash dividends on our common stock.
If we experience difficulties with implementation or do not meet project milestones in a timely manner, we could be obligated to devote more customer support, engineering, and other resources to a particular project. Some customers may also require us to develop customized features or capabilities.
Implementation typically involves working with sophisticated software, computing, and communications systems. If we experience difficulties with implementation or do not meet project milestones in a timely manner, we could be obligated to devote more customer support, engineering, and other resources to a particular project. Some customers may also require us to develop customized features or capabilities.
Other than product innovation and existing customer relationships, there are no substantial barriers to entry in this market, and established or new entities may enter this market in the future.
The market for customer engagement software is intensely competitive. Other than product innovation and existing customer relationships, there are no substantial barriers to entry in this market, and established or new entities may enter this market in the future.
Cybersecurity attacks could require significant expenditures of our capital and diversion of our resources. If these attacks are successful, they could result in the theft of proprietary, personally identifiable, confidential and sensitive information of ours, our employees, our customers and our business partners, and could materially disrupt business for us, our customers and our business partners.
If these attacks are successful, they could result in the theft of proprietary, personally identifiable, confidential and sensitive information of ours, our employees, our customers and our business partners, and could materially disrupt business for us, our customers and our business partners.
The price at which our common stock trades has been and will likely continue to be highly volatile and show wide fluctuations due to factors such as the following: ● transition to a subscription revenue model; ● concerns related to liquidity of our stock; ● actual or anticipated fluctuations in our operating results, our ability to meet announced or anticipated profitability goals and changes in or failure to meet securities analysts’ expectations; ● announcements of technological innovations and/or the introduction of new services by us or our competitors; ● developments with respect to intellectual property rights and litigation, regulatory scrutiny and new legislation; ● conditions and trends in the Internet and other technology industries; and ● general market and economic conditions. 29 Table of Contents Furthermore, the stock market has experienced significant price and volume fluctuations that have affected the market prices for the common stock of technology companies, regardless of the specific operating performance of the affected company.
The price at which our common stock trades has been and will likely continue to be highly volatile and show wide fluctuations due to factors such as the following: ● concerns related to liquidity of our stock; ● actual or anticipated fluctuations in our operating results, our ability to meet announced or anticipated profitability goals and changes in or failure to meet securities analysts’ expectations; ● announcements of technological innovations and/or the introduction of new services by us or our competitors; ● developments with respect to intellectual property rights and litigation, regulatory scrutiny and new legislation; ● conditions and trends in the Internet and other technology industries; and ● general market and economic conditions.
These royalty or license agreements, if required, may not be available on acceptable terms, if at all, in the event of a successful claim of infringement. ​ General Risk Factors Our stock price has demonstrated volatility and continued market conditions may cause declines or fluctuations.
Litigation could also require us to develop non-infringing technology or enter into royalty or license agreements. These royalty or license agreements, if required, may not be available on acceptable terms, if at all, in the event of a successful claim of infringement. General Risk Factors Our stock price has demonstrated volatility and continued market conditions may cause declines or fluctuations.
Furthermore, On August 11, 2023, India’s Digital Personal Data Protection Bill (DPDP) received presidential assent after passing both houses of India’s legislature but there has been no official slated implementation date.
These statutes may increase our compliance costs and potential liability. ​ Furthermore, on August 11, 2023, India’s Digital Personal Data Protection Bill (DPDP) received presidential assent after passing both houses of India’s legislature but there has been no official slated implementation date.
We expect to experience occasional temporary capacity constraints due to sharply increased traffic or other Internet-wide disruptions, which may cause unanticipated system disruptions, slower response times, impaired quality, and degradation in levels of customer service.
We expect to experience occasional temporary capacity constraints due to sharply increased traffic or other Internet-wide disruptions, which may cause unanticipated system disruptions, slower response times, impaired quality, and degradation in levels of customer service. If this were to continue to happen, our business and reputation could be seriously harmed.
Aspects of the CCPA, CPRA and other laws remain unclear and we may be required to modify our practices further in an effort to comply with them. These statutes may increase our compliance costs and potential liability..
Aspects of the CCPA, CPRA and other states’ privacy laws remain unclear and we may be required to modify our practices further in an effort to comply with them.
Any successful denial of service attack could result in a loss of customer confidence in the security of our platform and damage to our brand. Our platform involves the storage and transmission of our customers’ information, which may including their business and financial data.
For example, third parties may conduct attacks designed to temporarily deny customers access to our services. Any successful denial of service attack could result in a loss of customer confidence in the security of our platform and damage to our brand. Our platform involves the storage and transmission of our customers’ information, which may including their business and financial data.
We believe that these interruptions will continue to occur from time to time. These interruptions could be due to hardware and operating system failures. As a result, our business will suffer if we experience frequent or long system interruptions that result in the unavailability or reduced performance of our hosted operations or reduce our ability to provide remote management services.
As a result, our business will suffer if we experience frequent or long system interruptions that result in the unavailability or reduced performance of our hosted operations or reduce our ability to provide remote management services.
If this were to continue to happen, our business and reputation could be seriously harmed. 18 Table of Contents Our success largely depends on the efficient and uninterrupted operation of our computer and communications hardware and network systems. We currently serve our customers from third-party data center facilities operated by third parties in the United States and other international locations.
Our success largely depends on the efficient and uninterrupted operation of our computer and communications hardware and network systems. We currently serve our customers from third-party data center facilities operated by third parties in the United States and other international locations.
Any failure or perceived failure by us to comply with such requirements could have an adverse impact on our business. We face risks related to health epidemics, including the COVID-19 pandemic, which could have a material adverse effect on our business, financial condition and results of operations . The COVID-19 pandemic has created significant worldwide uncertainty, volatility and economic disruption.
Any failure or perceived failure by us to comply with such requirements could have an adverse impact on our business. We face risks related to pandemic and public health emergencies which could have a material adverse effect on our business, financial condition and results of operations.
If new or existing customers cancel or have difficulty deploying our products or require significant amounts of our professional services, support, or customized features, revenue recognition could be cancelled or further delayed and our costs could increase, causing increased variability in our operating results.
If new or existing customers cancel or have difficulty deploying our products or require significant amounts of our professional services, support, or customized features, revenue recognition could be cancelled or further delayed and our costs could increase, causing increased variability in our operating results. 17 Table of Contents Implementation services may be performed by our own staff, by a third-party partner or by a combination of the two.
Implementation services may be performed by our own staff, by a third-party partner or by a combination of the two. Our strategy is to work with partners to increase the breadth of capability and depth of capacity for delivery of these services to our customers, and we expect the number of our partner-led implementations to continue to increase over time.
Our strategy is to work with partners to increase the breadth of capability and depth of capacity for delivery of these services to our customers, and we expect the number of our partner-led implementations to continue to increase over time.
The stock repurchase program will be funded using existing cash or future cash flows. ​ The following table summarizes the stock repurchase activity for the three months ended June 30, 2023, and the approximate dollar value of shares that may yet be purchased pursuant to our stock repurchase program: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Period ​ Total Number of Shares Purchased ​ Average Price Paid per Share ​ Total Number of Shares Purchased as Part of Publicly Announced Program ​ Approximate Dollar Value of Shares That May Yet Be Purchased Under the Program (in thousands) April 1, 2023 to April 30, 2023 ​ 152,648 ​ $ 7.41 ​ 152,648 ​ $ 17,767 May 1, 2023 to May 31, 2023 ​ 261,865 ​ $ 7.16 ​ 261,865 ​ $ 15,893 June 1, 2023 to June 30, 2023 ​ 225,947 ​ $ 7.33 ​ 225,947 ​ $ 14,237 Total ​ 640,460 ​ ​ ​ ​ 640,460 ​ ​ ​ ​ 31 Table of Contents Stock Performance Graph ​ The following shall not be deemed incorporated by reference into any of our other filings under the Securities Exchange Act of 1934, as amended, or the Securities Act of 1933, as amended.
The stock repurchase program will be funded using existing cash or future cash flows. ​ The following table summarizes the stock repurchase activity for the three months ended June 30, 2024, and the approximate dollar value of shares that may yet be purchased pursuant to our stock repurchase program: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Period ​ Total Number of Shares Purchased ​ Average Price Paid per Share ​ Total Number of Shares Purchased as Part of Publicly Announced Program ​ Approximate Dollar Value of Shares That May Yet Be Purchased Under the Program (in thousands) April 1, 2024 to April 30, 2024 ​ 493,576 ​ $ 6.30 ​ 493,576 ​ $ 2,600 May 1, 2024 to May 31, 2024 ​ 403,511 ​ $ 6.29 ​ 403,511 ​ $ 20,060 June 1, 2024 to June 30, 2024 ​ 500,054 ​ $ 6.18 ​ 500,054 ​ $ 16,969 Total ​ 1,397,141 ​ ​ ​ ​ 1,397,141 ​ ​ ​ ​ 34 Table of Contents Stock Performance Graph ​ The following shall not be deemed incorporated by reference into any of our other filings under the Securities Exchange Act of 1934, as amended, or the Securities Act of 1933, as amended.
A successful cybersecurity attack involving our data center, network or software products could also negatively impact the market perception of the effectiveness of our products or lead to contractual disputes, litigation or government regulatory action against us, any of which could materially adversely affect our business, reputation and resulting operations.
A successful cybersecurity attack involving our data center, network or software products could also negatively impact the market perception of the effectiveness of our products or lead to contractual disputes, litigation or government regulatory action against us, any of which could materially adversely affect our business, reputation and resulting operations. 24 Table of Contents We may also experience disruptions, outages, and other performance problems on our systems due to service attacks, unauthorized access, or other security-related incidents.
The stock repurchase program is effective immediately as of November 14, 2022, has a term of one year from adoption unless extended, does not obligate us to acquire a specified number of shares and may be modified, suspended, or discontinued at any time at our discretion without notice.
The stock repurchase program does not obligate us to acquire a specified number of shares and may be modified, suspended, or discontinued at any time at our discretion without notice.
Changes to current accounting policies could have a significant effect on our reported financial results or the way in which we conduct our business. ​ Generally accepted accounting principles and the related accounting pronouncements, implementation guidelines and interpretations for some of our significant accounting policies are highly complex and require subjective judgments and assumptions.
To the extent a pandemic or public health emergency adversely affects our business, results of operations, financial conditions, and cash flows, it may also heighten many of the other risks described in this “Risk Factors” section. ​ Changes to current accounting policies could have a significant effect on our reported financial results or the way in which we conduct our business. ​ Generally accepted accounting principles and the related accounting pronouncements, implementation guidelines and interpretations for some of our significant accounting policies are highly complex and require subjective judgments and assumptions.
In addition, we face actual or potential competition from larger software companies such as Microsoft Corporation, Salesforce, Inc., ServiceNow, Inc., and similar companies that may attempt to sell customer engagement software to their installed base. We believe competition will continue to be fierce as current competitors increase the sophistication of their offerings and as new participants enter the market.
In addition, we face actual or potential competition from larger software companies such as Microsoft Corporation, Oracle Corporation, salesforce.com, Inc., ServiceNow, Inc., and similar companies that may attempt to sell customer engagement software to their installed base.
The comparisons in the graph below are based upon historical data and are not indicative of, nor intended to forecast, future performance of our common stock. ​ ​ ​ ​ ​ ​ ​ ​ 6/30/2018 6/30/2019 6/30/2020 6/30/2021 6/30/2022 6/30/2023 eGain Corporation $ 100.00 $ 53.91 $ 73.58 $ 76.03 $ 64.57 $ 49.60 Nasdaq Composite $ 100.00 $ 107.78 $ 136.51 $ 198.71 $ 152.16 $ 191.93 S&P Software & Services Select Industry Index $ 100.00 $ 119.54 $ 139.58 $ 215.60 $ 140.14 $ 168.74 ​ Equity Compensation Plan Information See Item 12 of Part III of this Annual Report regarding information about securities authorized for issuance under our equity compensation plan. ​ 32 Table of Contents ​ ​ ​ ​
The comparisons in the graph below are based upon historical data and are not indicative of, nor intended to forecast, future performance of our common stock. ​ ​ ​ ​ ​ ​ ​ ​ 6/30/2019 6/30/2020 6/30/2021 6/30/2022 6/30/2023 6/30/2024 eGain Corporation $ 100.00 $ 136.49 $ 141.03 $ 119.78 $ 92.01 $ 77.52 Nasdaq Composite $ 100.00 $ 126.66 $ 184.36 $ 141.17 $ 178.08 $ 230.80 S&P Software & Services Select Industry Index $ 100.00 $ 116.76 $ 180.35 $ 117.23 $ 141.16 $ 160.31 ​ Equity Compensation Plan Information See Item 12 of Part III of this Annual Report regarding information about securities authorized for issuance under our equity compensation plan. ​ 35 Table of Contents ​ ​ ​ ​
This has caused our average sales cycle to further increase and, in some cases, has prevented the closure of sales that we believed were likely to close. 15 Table of Contents Because we depend on a relatively small number of customers for a substantial portion of our revenue, the loss of any of these customers or our failure to attract new significant customers could adversely impact our revenue and harm our business.
Because we depend on a relatively small number of customers for a substantial portion of our revenue, the loss of any of these customers or our failure to attract new significant customers could adversely impact our revenue and harm our business.
In addition, negative publicity related to our customer relationships, regardless of its accuracy, may further damage our business by affecting our ability to compete for new business with current and prospective customers. 17 Table of Contents We conduct a significant portion of our business and operations outside of the United States, which exposes us to additional risks that may not exist in the United States.
In addition, negative publicity related to our customer relationships, regardless of its accuracy, may further damage our business by affecting our ability to compete for new business with current and prospective customers.
The timing of the commencement and completion of these services is subject to factors that may be beyond our control, such as customers’ timely meeting their agreed obligations. In addition, customers could cancel or delay product implementations. Implementation typically involves working with sophisticated software, computing, and communications systems.
The timing of the commencement and completion of these services is subject to factors that may be beyond our control, as this process may require access to the customer’s facilities and coordination with the customer’s personnel after delivery of the software obligations. In addition, customers could cancel or delay product implementations.
Security incidents have become more prevalent across industries and may occur on our systems. Our service involves the storage and transmission of customers’ proprietary information, and security incidents could expose us to a risk of loss of this information, loss of access, litigation and possible liability.
Our service involves the storage and transmission of customers’ proprietary information, and security incidents could expose us to a risk of loss of this information, loss of access, litigation and possible liability. The techniques used to effect unauthorized penetration of computer systems are constantly evolving and have been increasing in sophistication.
Many of our current and potential competitors have longer operating histories, larger customer bases, broader brand recognition, and significantly greater financial, marketing and other resources.
We believe that competition will continue to be fierce as current competitors increase the sophistication of their offerings and as new participants enter the market. Many of our current and potential competitors have longer operating histories, larger customer bases, broader brand recognition, and significantly greater financial, marketing and other resources.
Furthermore, we maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. In such cases, we may be required to defer revenue recognition on sales to affected customers.
Furthermore, we maintain a provision for credit losses resulting from the inability of our customers to make required payments. In such cases, we may be required to defer revenue recognition on sales to affected customers. In the future, we may have to record additional reserves or write-offs, or defer revenue on sales transactions, which could negatively impact our financial results.
Unplanned system interruptions , delays in service or inability to increase capacity, including internationally, at our third-party data center facilities could impair the use or functionality of our cloud operations and harm our business . Our customers have in the past experienced some interruptions with our cloud operations.
To the extent the benefit of maintaining these operations abroad does not exceed the expense of establishing and maintaining such activities, our operating results and financial condition will suffer. 18 Table of Contents Unplanned system interruptions , delays in service or inability to increase capacity, including internationally, at our third-party data center facilities could impair the use or functionality of our cloud operations and harm our business .
These risks in turn could cause our operating results and financial condition to suffer. We derived 22% and 27% of our revenue from EMEA sales during the fiscal years ended June 30, 2023 and 2022, respectively.
We derived 22% of our revenue from EMEA sales during the fiscal years ended June 30, 2024 and 2023.
We have invested, and expect to continue to invest, substantial resources to expand, market, implement, and refine our cloud offerings.
We have invested, and expect to continue to invest, substantial resources to expand, market, implement, and refine our cloud offerings. If we are unable to increase the volume of our subscription business, we may not be able to achieve sustained profitability.
In addition, our customers may authorize third party access to their customer data located in our cloud environment. Because we do not control the transmissions between customer authorized third parties, or the processing of such data by customer authorized third parties, we cannot ensure the integrity or security of such transmissions or processing.
Because we do not control the transmissions between customer authorized third parties, or the processing of such data by customer authorized third parties, we cannot ensure the integrity or security of such transmissions or processing. Cybersecurity attacks could require significant expenditures of our capital and diversion of our resources.
These 25 Table of Contents and other requirements could reduce demand for our solutions or restrict our ability to store and process data or, in some cases, impact our ability to offer our services and solutions in certain locations. ​ In the U.S., California enacted the California Consumer Privacy Act (CCPA) on June 28, 2018, which went into effect on January 1, 2020.
These and other requirements could reduce demand for our solutions or restrict our ability to store and process data or, in some cases, impact our ability to offer our services and solutions in certain locations.
In particular, the corporate decision-making and approval process of our customers and potential customers has become more complicated.
In particular, the corporate decision-making and approval process of our customers and potential customers has become more complicated. This has caused our average sales cycle to further increase and, in some cases, has prevented the closure of sales that we believed were likely to close.
Moreover, as our customers face increased scrutiny for data privacy breaches, they may elect to transfer the risk to us through contractual provisions which may subject us to increasing levels of contractual liability for data privacy breaches. ​ Anti-corruption, anti-bribery, and similar laws, and failure to comply with these laws, could subject us to criminal penalties or significant fines and harm our business and reputation. ​ We are subject to anti-corruption and anti-bribery and similar laws, such as the U.S.
Moreover, as our customers face increased scrutiny for data privacy breaches, they may elect to transfer the risk to us through contractual provisions which may subject us to increasing levels of contractual liability for data privacy breaches. ​ Issues in the development and use of AI may result in reputational or competitive harm or liability. ​ We are integrating AI into several of our offerings, developed either by us or in collaboration with our strategic partner, OpenAI.
PROPERTIES We lease all facilities used in our business as of June 30, 2023. Our corporate headquarters is located in Sunnyvale, California, and we also have corporate offices in Newbury, England, and Pune, India. We believe that our offices are adequate to meet our current and near future operating needs. ITEM 3 .
Management also reports on strategic key risk indicators, ongoing initiatives, and significant incidents and their effect. IT EM 2. PROPERTIES We lease all facilities used in our business as of June 30, 2024. Our corporate headquarters is located in Sunnyvale, California, and we also have corporate offices in Newbury, England, and Pune, India.
If we fail to expand and improve our sales performance and marketing activities, or retain our sales and marketing personnel, we may be unable to grow our business, which could negatively impact our operating results and financial condition.
In addition, customers are currently assessing their AI utilization strategy, so it is difficult to estimate with any reasonable degree of precision the impact of generative AI product offerings on our future revenue or expected demand for our products. 16 Table of Contents If we fail to expand and improve our sales performance and marketing activities, or retain our sales and marketing personnel, we may be unable to grow our business, which could negatively impact our operating results and financial condition.
In the future, we may have to record additional reserves or write-offs, or defer revenue on sales transactions, which could negatively impact our financial results. We cannot accurately predict subscription renewal rates and the impact these rates may have on our future revenue and operating results.
In addition, our business is subject to seasonal factors that may also cause our results to fluctuate from quarter to quarter. ​ If we are unable to properly manage our SaaS transition, our business may suffer. ​ We cannot accurately predict subscription renewal rates and the impact these rates may have on our future revenue and operating results.
Removed
To the extent the benefit of maintaining these operations abroad does not exceed the expense of establishing and maintaining such activities, our operating results and financial condition will suffer.
Added
Our SaaS business model is subject to certain risks. ​ Our business is highly dependent on our ability to continue to expand our SaaS business and cloud operations, including keeping pace with the market transition to SaaS solutions.
Removed
The techniques used to effect unauthorized penetration of computer systems are constantly evolving and have been increasing in sophistication.
Added
If customers choose not to renew, or reduce, their subscriptions, our operating results and financial results will suffer. ​ The deferral or loss of one or more significant orders can also materially adversely affect our operating results, especially in a given quarter.
Removed
We may also experience disruptions, outages, and other performance problems on our systems due to service attacks, unauthorized access, or other security-related incidents. For example, third parties may conduct attacks designed to temporarily deny customers access to our services.
Added
As with other software-focused companies, a large amount of our quarterly business tends to come in the last few weeks, or even the last few days, of each quarter. This trend complicates the process of accurately predicting revenue and other operating results, particularly on a quarterly basis.
Removed
We are therefore required to rely on alternative mechanisms permitted under European law, such as consent and approved standard contractual clauses. The standard contractual clauses approved by the European Commission for these purposes have recently been replaced and a significant repapering exercise is therefore required.
Added
We are also investing in AI across the entire company and infusing generative AI capabilities into our product and service offerings. We expect AI technology and services to be a highly competitive and rapidly evolving market.
Removed
The United Kingdom (UK) is also currently consulting on its own updated version of the standard contractual clauses and the result of this may be that different standard contractual clauses are needed depending on the origin of the PII. ​ While we have sought to implement appropriate transfer mechanisms following the invalidation of the Safe Harbor and Privacy Shield frameworks, owing to the significant changes that are ongoing in this area, we may be unsuccessful in establishing legitimate means of transferring data from the EEA or UK to the U.S.
Added
We will bear significant development and operational costs to build and support the generative AI capabilities, products, and services necessary to meet the needs of our customers. To compete effectively, we must also be responsive to technological change, potential regulatory developments, and public scrutiny.
Removed
Additionally, the Virginia Consumer Data Protection Act (VCDPA) became effective on January 1, 2023, the Colorado Privacy Act and the Connecticut Data Privacy Act both become effective on July 1, 2023, and the Utah Consumer Privacy Act will become effective on December 31, 2023.

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Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

62 edited+6 added−4 removed47 unchanged
Biggest changeThe increase in total costs and operating expenses in fiscal year ended June 30, 2023 was $4.6 million primarily due to increases of (i) $4.2 million in cloud computing costs, (ii) $1.3 million in marketing costs, (iii) $549,000 in outside consulting costs, (iv) $178,000 in bad debt expenses, (v) $25,000 in accounting and administrative services, and (vi) $4,000 in legal expenses; partially offset by decreases of (i) $1.6 million in personnel-related expenses and (ii) $27,000 in investor relations cost. 44 Table of Contents Excluding a decrease from foreign exchange fluctuation of $2.1 million, total costs and operating expenses increased by $4.6 million for the fiscal year ended June 30, 2023, from the same period in fiscal year 2022. ​ Interest Income ​ Interest income consists primarily of interest earned on money market accounts, which have increased in rates compared to prior year.
Biggest changeThe decrease in total costs and operating expenses in fiscal year ended June 30, 2024 was $10.1 million primarily due to decreases of (i) $8.6 million in personnel-related expenses, (ii) $1.2 million in outside consulting costs, (iii) $1.2 million in marketing costs, (iv) $175,000 in bad debt expenses, (v) $158,000 in cloud computing costs , and (vi) $2,000 in investor relations cost; partially offset with increases in (i) $829,000 in legal expense and (ii) $154,000 in accounting and administrative services expenses.
Included in these costs are salaries, benefits, bonuses, and stock-based compensation and allocated overhead.
Included in these costs are salaries, benefits, bonuses, and stock-based compensation and allocated overhead.
Based on our historical experience of option pre-vesting cancellations, we have assumed an annualized forfeiture rate for our options. We record additional expense if the actual forfeiture rate is lower than we estimated and record a recovery of prior expense if the actual forfeiture rate is higher than what we estimated.
Based on our historical experience of option pre-vesting cancellations, we have assumed an annualized forfeiture rate for our stock options. We record additional expense if the actual forfeiture rate is lower than we estimated and record a recovery of prior expense if the actual forfeiture rate is higher than what we estimated.
Tax Legislation Under the Tax Cuts and Jobs Act, enacted on December 22, 2017 (TCJA), federal NOLs incurred in 2018 and in future years may be carried forward indefinitely, but generally may not be carried back, and the deductibility of such NOLs is limited to 80% of taxable income. ​ On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), P.L. 116-136,was passed into law, amending portions of certain relevant US tax laws.
Tax Legislation Under the Tax Cuts and Jobs Act, enacted on December 22, 2017 (TCJA), federal Net Operating Losses (NOLs) incurred in 2018 and in future years may be carried forward indefinitely, but generally may not be carried back, and the deductibility of such NOLs is limited to 80% of taxable income. ​ On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), P.L. 116-136, was passed into law, amending portions of certain relevant US tax laws.
The CARES Act included a number of federal income tax law changes, including, but not limited to: (i) permitting net operating loss carrybacks to offset 100% of taxable income for taxable years beginning before 2021, (ii) accelerating alternative minimum tax credit refunds, (iii) temporarily increasing the allowable business interest deduction from 30% to 50% of adjusted taxable income, and (iv) providing a technical 37 Table of Contents correction for depreciation related to qualified improvement property.
The CARES Act included a number of federal income tax law changes, including, but not limited to: (i) permitting net operating loss carrybacks to offset 100% of taxable income for taxable years beginning before 2021, (ii) accelerating alternative minimum tax credit refunds, (iii) temporarily increasing the allowable business interest deduction from 30% to 50% of adjusted taxable income, and (iv) providing a technical correction for depreciation related to qualified improvement property.
Training revenue that meets the criteria to be accounted for separately is recognized when training is provided. ​ Remaining Performance Obligations ​ Remaining performance obligations represent contracted revenue that have not yet been recognized, and include billed deferred revenue, consisting of amounts invoiced to customers whether collected or uncollected which have not been recognized as revenue, as well as unbilled amounts that will be invoiced and recognized as revenue in future periods.
Training revenue that meets the criteria to be accounted for separately is recognized when training is provided. ​ Remaining Performance Obligations ​ Remaining performance obligations represent contracted revenue that have not yet been recognized, and include billed deferred revenue, consisting of amounts invoiced to customers whether collected or uncollected which have not been 38 Table of Contents recognized as revenue, as well as unbilled amounts that will be invoiced and recognized as revenue in future periods.
If we decide to repatriate the foreign earnings, we would need to adjust our income tax provision in the period we determined that the earnings will no longer be indefinitely invested outside the United States. 38 Table of Contents Fair Value of Financial Instruments Our financial instruments consist of cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued liabilities.
If we decide to repatriate the foreign earnings, we would need to adjust our income tax provision in the period we determined that the earnings will no longer be indefinitely invested outside the United States. Fair Value of Financial Instruments Our financial instruments consist of cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued liabilities.
Due to the current economic state of the U.S. economy, expiring tax attributes and uncertainty of future profitability, we maintain a valuation allowance against U.S. deferred tax assets as of June 30, 2023.
Due to the current economic state of the U.S. economy, expiring tax attributes and uncertainty of future profitability, we maintain a valuation allowance against U.S. deferred tax assets as of June 30, 2024.
Our deferred revenue was $49.9 million and $49.4 million as of June 30, 2023, and 2022, respectively. ​ Based upon our current business plan, we believe that existing capital resources will enable us to maintain current and planned operations for at least the next 12 months. From time to time, however, we may consider opportunities for raising additional capital.
Our deferred revenue was $49.3 million and $49.9 million as of June 30, 2024 and 2023, respectively. ​ Based upon our current business plan, we believe that existing capital resources will enable us to maintain current and planned operations for at least the next 12 months. From time to time, however, we may consider opportunities for raising additional capital.
For contracts involving distinct software licenses, the license performance obligation is satisfied at a point in time when control is transferred to the customer. 35 Table of Contents We typically invoice our customers in advance upon execution of the contract or subsequent renewals.
For contracts involving distinct software licenses, the license performance obligation is satisfied at a point in time when control is transferred to the customer. We typically invoice our customers in advance upon execution of the contract or subsequent renewals.
We believe that, if market interest rates were to change immediately and uniformly by 10% from levels between June 30, 2023 and our next financial reporting period, the impact on the fair value of these securities or our cash flows or income would not be material. ​ 47 Table of Contents
We believe that, if market interest rates were to change immediately and uniformly by 10% from levels between June 30, 2024 and our next financial reporting period, the impact on the fair value of these securities or our cash flows or income would not be material. ​ 50 Table of Contents
A 10% increase in the value of the dollar relative to other currencies would decrease the value of these assets by $2.1 million between June 30, 2023 and our next financial reporting period. We do not currently use derivative instruments to hedge against foreign exchange risk.
A 10% increase in the value of the dollar relative to other currencies would decrease the value of these assets by $2.5 million between June 30, 2024 and our next financial reporting period. We do not currently use derivative instruments to hedge against foreign exchange risk.
We have not recorded a deferred tax liability related to state income taxes and foreign withholding taxes on approximately $24.6 million of undistributed earnings of foreign subsidiaries indefinitely invested outside the United States.
We have not recorded a deferred tax liability related to state income taxes and foreign withholding taxes on approximately $26.2 million of undistributed earnings of foreign subsidiaries indefinitely invested outside the United States.
The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. ​ We believe that the assumptions and estimates associated with revenue recognition, stock-based compensation, allowance for doubtful accounts, the valuation of goodwill, the valuation of deferred tax allowance, and legal contingencies have the greatest potential impact on our consolidated financial statements.
The preparation of these 37 Table of Contents financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. ​ We believe that the assumptions and estimates associated with revenue recognition, stock-based compensation, provision for credit losses, the valuation of goodwill, the valuation of deferred tax allowance, and legal contingencies have the greatest potential impact on our consolidated financial statements.
Other (expense) income, net was expense of $434,000 and income of $838,000 for the fiscal years ended June 30, 2023 and 2022, respectively. ​ Income Tax Provision ​ Provision for income taxes consists of federal, state and foreign income taxes.
Other expense, net was $51,000 and $434,000 for the fiscal years ended June 30, 2024 and 2023, respectively. ​ Income Tax Provision ​ Provision for income taxes consists of federal, state and foreign income taxes.
The changes consist primarily of proceeds from the exercise of employee stock options, our employee stock purchase plan, and funds used with repurchases of our common stock of approximately $5.8 million. ​ Commitments Our principal commitments consist of obligations under leases for office space.
The changes consist primarily of proceeds from the exercise of employee stock options, our employee stock purchase plan, and funds used with repurchases of our common stock of approximately $11.5 million. ​ 48 Table of Contents Commitments Our principal commitments consist of obligations under leases for office space.
As a result, our financial results could be affected by factors such as changes in foreign currency exchange rates or weak economic conditions in foreign markets. Identifiable assets denominated in foreign currency as of June 30, 2023 and 2022 totaled approximately $20.8 million and $29.2 million, respectively.
As a result, our financial results could be affected by factors such as changes in foreign currency exchange rates or weak economic conditions in foreign markets. Identifiable assets denominated in foreign currency as of June 30, 2024 and 2023 totaled approximately $24.9 million and $20.8 million, respectively.
Our accounts receivable is derived from revenue earned from customers and are not interest bearing. We also maintain an allowance for doubtful accounts to reserve for potential uncollectible trade receivables. We review our trade receivables by aging category to identify specific customers with known disputes or collectability issues.
Our accounts receivable is derived from revenue earned from customers and are not interest bearing. We also maintain provision for credit losses to reserve for potential uncollectible trade receivables. We review our trade receivables by aging category to identify specific customers with known disputes or collectability issues.
Sales and marketing expenses also include amortization of commissions paid to our sales staff, lead generation activities, advertising, trade show and other promotional costs and, to a lesser extent, occupancy costs and related overhead. ​ 42 Table of Contents Sales and marketing expenses decreased by $2.0 million or 6% during the fiscal year ended June 30, 2023 from same period in fiscal year 2022.
Sales and marketing expenses also include amortization of commissions paid to our sales staff, lead generation activities, advertising, trade show and other promotional costs and, to a lesser extent, occupancy costs and related overhead. ​ Sales and marketing expenses decreased by $9.6 million or 30% during the fiscal year ended June 30, 2024 from same period in fiscal year 2023.
Interest income, was income of $2.4 million and income of $94,000 for the fiscal years ended June 30, 2023 and 2022, respectively. ​ Other (Expense) Income, Net ​ Other (expense) income, net primarily included foreign exchange rate fluctuations on international trade receivables.
Interest income, was income of $3.8 million and $2.4 million for the fiscal years ended June 30, 2024 and 2023, respectively. ​ Other Expense, Net ​ Other expense, net primarily included foreign exchange rate fluctuations on international trade receivables.
These expenses are comprised of cloud computing costs, personnel-related costs directly associated with cloud operations, and customer support, including salaries, benefits, bonuses and stock-based compensation and allocated overhead. ​ Cost of subscription revenues increased by $3.9 million or 26% during the fiscal year ended June 30, 2023 from the same period in fiscal year 2022.
These expenses are comprised of cloud computing costs, personnel-related costs directly associated with cloud operations, and customer support, including salaries, benefits, bonuses and stock-based compensation and allocated overhead. ​ Cost of subscription revenues increased by $837,000 or 4% during the fiscal year ended June 30, 2024 from the same period in fiscal year 2023.
We can make no assurances that such opportunities will be available to us on economic terms we consider favorable, if at all. ​ Our expectations as to our future cash flows and our future cash balances are subject to a number of assumptions, including assumptions regarding anticipated increases in our revenue, our ability to retain existing customers and customer purchasing and payment patterns, many of which are beyond our control. ​ 45 Table of Contents Cash Flows For the fiscal years ended June 30, 2023 and 2022, our cash flows were as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended June 30, ​ 2023 2022 Net cash provided by operating activities $ 4,621 ​ $ 8,121 Net cash used in investing activities ​ (288) ​ ​ (628) Net cash provided by (used in) financing activities ​ (4,079) ​ ​ 3,327 ​ Cash provided by operating activities mainly consists of net income (loss) adjusted for non-cash expense items such as depreciation and amortization, expense associated with stock-based awards, the timing of employee related costs including costs capitalized to obtain revenue contracts, amortization of right-of-use assets, and changes in operating assets and liabilities during the year. ​ Cash provided by operating activities decreased by $3.5 million during the fiscal year ended June 30, 2023, driven primarily by the timing of accounts receivable collections and deferred revenue recognitions. ​ Net cash used in investing activities increased by $340,000 during the fiscal year ended June 30, 2023, driven primarily by reduced activities related to the purchase of equipment for new employees and facility expenditures.
We can make no assurances that such opportunities will be available to us on economic terms we consider favorable, if at all. ​ Our expectations as to our future cash flows and our future cash balances are subject to a number of assumptions, including assumptions regarding anticipated increases in our revenue, our ability to retain existing customers and customer purchasing and payment patterns, many of which are beyond our control. ​ Cash Flows For the fiscal years ended June 30, 2024 and 2023, our cash flows were as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended June 30, ​ 2024 2023 Net cash provided by operating activities $ 12,454 ​ $ 4,621 Net cash used in investing activities ​ (198) ​ ​ (288) Net cash used in financing activities ​ (15,391) ​ ​ (4,079) ​ Cash provided by operating activities mainly consists of net income adjusted for non-cash expense items such as depreciation and amortization, expense associated with stock-based awards, the timing of employee related costs including costs capitalized to obtain revenue contracts, amortization of right-of-use assets, and changes in operating assets and liabilities during the year. ​ Cash provided by operating activities increased by $7.8 million during the fiscal year ended June 30, 2024, driven primarily by the increase in net income and timing of accounts receivable collections and accrued compensation payments. ​ Net cash used in investing activities decreased by $90,000 during the fiscal year ended June 30, 2024, driven primarily by reduced activities related to the purchase of equipment for new employees and facility expenditures.
Lease agreements are evaluated to determine whether an arrangement is or contains a lease in accordance with ASC 842, Leases . ​ The following table summarizes our contractual obligations as of June 30, 2023 and the effect such obligations are expected to have on its liquidity and cash flow in future periods (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Payments Due by Period ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ Less than 1 Year ​ 1 – 3 Years ​ 3 – 5 Years ​ More than 5 Years Operating leases ​ 2,819 ​ 935 ​ 1,356 ​ 528 ​ — Total ​ $ 2,819 ​ $ 935 ​ $ 1,356 ​ $ 528 ​ $ — Off-Balance Sheet Arrangements As of June 30, 2023, we had no significant off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K. ​ ​ ​ ​ 46 Table of Contents ITEM 7A.
Lease agreements are evaluated to determine whether an arrangement is or contains a lease in accordance with ASC 842, Leases . ​ ​ The following table summarizes our contractual obligations as of June 30, 2024 and the effect such obligations are expected to have on its liquidity and cash flow in future periods (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Payments Due by Period ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ 1 – 3 Years ​ 3 – 5 Years ​ More than 5 Years Operating leases ​ 4,852 ​ 3,044 ​ 556 ​ 1,252 Total ​ $ 4,852 ​ $ 3,044 ​ $ 556 ​ $ 1,252 Off-Balance Sheet Arrangements As of June 30, 2024, we had no significant off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K. ​ ​ ​ ​ 49 Table of Contents ITEM 7A.
The change in our effective tax rate for fiscal year 2023 as compared to fiscal year 2022 was primarily due to the change in valuation allowance, foreign rate differential, GILTI inclusion, stock-based compensation and the research and development tax credits.
The change in our effective tax rate for fiscal year 2024 as compared to fiscal year 2023 was primarily due to the change in valuation allowance, foreign rate differential, Section 267, stock-based compensation and the research and development tax credits.
As we continue to migrate our legacy perpetual license clients to SaaS, we expect our legacy revenue, primarily comprising annual maintenance and support fees for legacy perpetual license clients to continue to decline. ​ We believe our go-forward SaaS business model affords us recurring revenue visibility and more predictability.
As we migrated our legacy perpetual license clients to SaaS, we expect our legacy revenue, primarily comprising annual maintenance and support fees for legacy perpetual license clients to continue to decline to a non-significant amount in our SaaS business. ​ We believe our go-forward SaaS business model affords us recurring revenue visibility and more predictability.
We believe the reported carrying amounts of these financial instruments approximate fair value, based upon their short-term nature and comparable market information available at the respective balance sheet dates. ​ Results of Operations ​ The following table sets forth certain items reflected in our consolidated statements of operations expressed as a percent of total revenue for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 2022 Revenue: ​ ​ ​ ​ ​ Subscription 92 % ​ 92 % Professional services 8 ​ ​ 8 ​ Total revenue 100 ​ ​ 100 ​ Cost of revenue: ​ ​ ​ ​ ​ ​ Cost of subscription 19 ​ ​ 16 ​ Cost of professional services 9 ​ ​ 11 ​ Total cost of revenue 28 ​ ​ 27 ​ Gross profit 72 ​ ​ 73 ​ Operating Expenses: ​ ​ ​ ​ ​ Research and development 28 ​ ​ 27 ​ Sales and marketing 32 ​ ​ 37 ​ General and administrative 11 ​ ​ 12 ​ Total operating expenses 71 ​ ​ 76 ​ Income (Loss) from operations 1 % ​ (3) % ​ Revenue ​ We classify our revenue into two categories; subscription and professional services revenue.
We believe the reported carrying amounts of these financial instruments approximate fair value, based upon their short-term nature and comparable market information available at the respective balance sheet dates. ​ ​ ​ ​ ​ ​ ​ ​ ​ 41 Table of Contents Results of Operations ​ The following table sets forth certain items reflected in our consolidated statements of operations expressed as a percent of total revenue for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ 2024 2023 Revenue: ​ ​ ​ ​ ​ Subscription 92 % ​ 92 % Professional services 8 ​ ​ 8 ​ Total revenue 100 ​ ​ 100 ​ Cost of revenue: ​ ​ ​ ​ ​ ​ Cost of subscription 21 ​ ​ 19 ​ Cost of professional services 9 ​ ​ 9 ​ Total cost of revenue 30 ​ ​ 28 ​ Gross profit 70 ​ ​ 72 ​ Operating Expenses: ​ ​ ​ ​ ​ Research and development 29 ​ ​ 28 ​ Sales and marketing 24 ​ ​ 32 ​ General and administrative 11 ​ ​ 11 ​ Total operating expenses 64 ​ ​ 71 ​ Income from operations 6 % ​ 1 % ​ Revenue ​ We classify our revenue into two categories; subscription and professional services revenue.
As of June 30, 2023, our remaining performance obligations were $97.3 million, of which we expect to recognize $66.7 million and $30.6 million as revenue within one year and beyond one year, respectively. ​ Under Topic 606, we expect our remaining performance obligations to change quarterly for several reasons including the timing of new contracts and renewals, duration and size of our subscription and support arrangements, variable billing cycles and foreign exchange rate fluctuation.
As of June 30, 2024, our remaining performance obligations were $78.4 million, of which we expect to recognize $60.4 million and $18 million as revenue within one year and beyond one year, respectively. ​ Under Topic 606, we expect our remaining performance obligations to change quarterly for several reasons including the timing of new contracts and renewals, duration and size of our subscription and support arrangements, variable billing cycles and foreign exchange rate fluctuation.
We operate under a single reporting unit and accordingly, all of our goodwill is associated with the entire company. We had no impairment for fiscal years ended June 30, 2023 and 2022. Accounts Receivable and Allowance for Doubtful Accounts We extend unsecured credit to customers on a regular basis.
We operate under a single reporting unit and accordingly, all of our goodwill is associated with the entire company. We had no impairment for fiscal years ended June 30, 2024 and 2023. 39 Table of Contents Accounts Receivable and Provision for Credit Losses We extend unsecured credit to customers on a regular basis.
Included in these costs are salaries, benefits, bonuses, stock-based compensation and allocated overhead. Research and development expense also includes outside consulting services contracted for research and development. ​ Research and development expense increased by $2.9 million or 12% during the fiscal year ended June 30, 2023, from the same period in fiscal year 2022.
Included in these costs are salaries, benefits, bonuses, stock-based compensation and allocated overhead. Research and development expense also includes outside consulting services contracted for research and development. ​ Research and development expense decreased by $674,000 or 2% during the fiscal year ended June 30, 2024, from the same period in fiscal year 2023.
As of June 30, 2023, we had a valuation allowance of approximately $34.1 million of which approximately $18.5 million was attributable to U.S. and state net operating losses and domestic research and development credit carryforwards. We apply ASC 740, Income Taxes , in determining any uncertain tax positions.
As of June 30, 2024, we had a valuation allowance of approximately $35.6 million of which approximately $13.8 million was attributable to U.S. and state net operating losses and domestic research and development credit carryforwards. We apply ASC 740, Income Taxes , in determining any uncertain tax positions.
We recalculate our current period results using the comparable prior period exchange rates to exclude the impact of foreign exchange rate fluctuation.
Dollar, Euro, and British Pound. We recalculate our current period results using the comparable prior period exchange rates to exclude the impact of foreign exchange rate fluctuation.
The following table presents a reconciliation of GAAP income (loss) from operations to non-GAAP income from operations for each of the following periods: ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended June 30 ​ 2023 2022 Income (loss) from operations ​ $ 1,389 ​ $ (2,138) Add: ​ ​ ​ ​ ​ ​ Stock-based compensation ​ ​ 6,246 ​ ​ 11,380 Non-GAAP income from operations ​ $ 7,635 ​ $ 9,242 Critical Accounting Policies and Estimates ​ Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses our consolidated financial statements, which have been prepared in accordance with GAAP in the United States.
The following table presents a reconciliation of GAAP income from operations to non-GAAP income from operations for each of the following periods: ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended June 30 ​ 2024 2023 Income from operations ​ $ 5,971 ​ $ 1,389 Add: ​ ​ ​ ​ ​ ​ Stock-based compensation ​ ​ 4,529 ​ ​ 6,246 Non-GAAP income from operations ​ $ 10,500 ​ $ 7,635 Critical Accounting Policies and Estimates ​ Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses our consolidated financial statements, which have been prepared in accordance with GAAP in the United States.
The increase is primarily due to increases in (i) cloud computing cost of $4.2 million and (ii) outside consulting cost of $39,000, partially offset by a decrease in personnel related costs of $14,000 during the fiscal year ended June 30, 2023, from the same period in fiscal year 2022. ​ 41 Table of Contents Excluding a decrease of $299,000 due to foreign exchange rate fluctuation, cost of subscription revenues increased by $4.2 million during the fiscal year ended June 30, 2023, from the same period in fiscal year 2022. ​ ​ ​ Professional Services ​ Cost of professional services consists primarily of personnel-related costs directly associated with our professional services and training departments, including salaries, benefits, bonuses, and stock-based compensation and allocated overhead. ​ Cost of professional services decreased by $1.1 million or 11% during the fiscal year ended June 30, 2023 from the same period in fiscal year 2022.
The increase is primarily due to an increase in personnel related costs of $1.3 million; partially offset by a decrease in (i) outside consulting cost of $390,000 and (ii) cloud computing cost of $158,000 during the fiscal year ended June 30, 2024, from the same period in fiscal year 2023. ​ Excluding an increase of $45,000 due to foreign exchange rate fluctuation, cost of subscription revenues increased by $793,000 during the fiscal year ended June 30, 2024, from the same period in fiscal year 2023. ​ ​ Professional Services ​ Cost of professional services consists primarily of personnel-related costs directly associated with our professional services and training departments, including salaries, benefits, bonuses, and stock-based compensation and allocated overhead. ​ Cost of professional services decreased by $560,000 or 6% during the fiscal year ended June 30, 2024 from the same period in fiscal year 2023.
We experienced a decrease of $2.9 million for the fiscal year ended June 30, 2023. This decrease was primarily due to our focus on migrating our legacy customers to SaaS. ​ Legacy revenue was $705,000 and $3.7 million during the fiscal years ended June 30, 2023 and 2022, respectively, which represented a decrease of 81% or $2.9 million.
We experienced a decrease of $497,000 for the fiscal year ended June 30, 2024. This decrease was primarily due to our focus on migrating our legacy customers to SaaS. ​ Legacy revenue was $208,000 and $705,000 during the fiscal years ended June 30, 2024 and 2023, respectively, which represented a decrease of 70% or $497,000.
The decrease is primarily due to decreases of (i) $1.2 million in personnel-related expenses and (ii) $27,000 in investor relations expense; partially offset by increases of (i) $178,000 in bad debt expense, (ii) $101,000 in outside consulting cost, (iii) $25,000 in accounting, audit, and administrative expenses, and (iv) $4,000 in legal expenses. ​ Excluding a decrease of $173,000 due to foreign exchange rate fluctuation, general and administrative expense decreased $946,000 for the fiscal year ended June 30, 2023, from the same period in fiscal year 2022. ​ Stock-Based Compensation ​ Stock-based compensation expense is accounted for in accordance with the provisions of the accounting guidance which requires the measurement and recognition of compensation expense for all equity-based payment awards made to employees, members of our board of directors and consultants, based upon the grant-date fair value of those awards.
The increase is primarily due to an increase in (i) $829,000 in legal expenses and (ii) $154,000 in accounting, audit, and administrative expenses; partially offset by decreases of (i) $526,000 in personnel-related expenses, (ii) $175,000 in bad debt expense, (iii) $150,000 in outside consulting cost and (iv) $2,000 in investor relations expense. ​ Excluding an increase of $68,000 due to foreign exchange rate fluctuation, general and administrative expense increased $131,000 for the fiscal year ended June 30, 2024, from the same period in fiscal year 2023. ​ Stock-Based Compensation ​ Stock-based compensation expense is accounted for in accordance with the provisions of the accounting guidance which requires the measurement and recognition of compensation expense for all equity-based payment awards made to employees, members of our board of directors and consultants, based upon the grant-date fair value of those awards.
Historically, cash used in investing activities has been used to purchase equipment and software to support our business and growth. Net cash provided by financing activities decreased by $7.4 million during the fiscal year ended June 30, 2023.
Historically, cash used in investing activities has been used to purchase equipment and software to support our business and growth. Net cash used in financing activities increased by $11.3 million during the fiscal year ended June 30, 2024.
We recorded a positive operating margin of 1% in fiscal year 2023, and a negative operating margin of 3% in fiscal year 2022. During the fiscal year ended June 30, 2023, SaaS revenue increased by $8.7 million to $89.6 million compared to $80.9 million in fiscal year 2022.
We recorded a positive operating margin of 6% in fiscal year 2024, and a positive operating margin of 1% in fiscal year 2023. During the fiscal year ended June 30, 2024, SaaS revenue decreased by $4.7 million to $84.9 million compared to $89.6 million in fiscal year 2023.
We also operate in the United Kingdom and India. ​ We have transitioned from a hybrid model, where we sold both SaaS and perpetual license solutions, to a SaaS only business model. Today, we only sell SaaS to new clients and are actively migrating our remaining perpetual license clients to SaaS.
We also operate in the United Kingdom and India. ​ We have transitioned from a hybrid model, where we sold both SaaS and perpetual license solutions, to a SaaS only business model.
SaaS Revenue With our transition to a SaaS only business model, we believe SaaS revenue better reflects our business momentum and to analyze progress and thus, we disaggregate our subscription revenue growth between: ● SaaS revenue, which is defined as revenue from cloud delivery arrangements, term licenses and embedded original equipment manufacturer (OEM) royalties and associated support; and ● Legacy revenue, which is defined as revenue, maintenance and support contracts on perpetual license arrangements that we no longer sell. ​ ​ ​ ​ ​ 33 Table of Contents The following table presents a break out of subscription revenue between SaaS and legacy revenues for each of the following periods: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended June 30 ​ ​ ​ ​ ​ ​ 2023 2022 ​ Change Revenue ​ (in thousands, except percentages) SaaS revenue ​ $ 89,619 ​ $ 80,904 ​ $ 8,715 11 % Legacy revenue ​ 705 ​ 3,653 ​ ​ (2,948) (81) % Total subscription revenue ​ $ 90,324 ​ $ 84,557 ​ $ 5,767 ​ ​ ​ As we continue to migrate our legacy perpetual license clients to SaaS, we expect our legacy revenue to continue to decline. ​ SaaS and Professional Services Revenue ​ As we continue to shift to a SaaS only business model, substantially all of professional services revenue is now generated from our SaaS customer base.
SaaS Revenue With our transition to a SaaS only business model, we believe SaaS revenue better reflects our business momentum and to analyze progress and thus, we disaggregate our subscription revenue growth between: ● SaaS revenue, which is defined as revenue from cloud delivery arrangements, term licenses and embedded original equipment manufacturer (OEM) royalties and associated support; and ● Legacy revenue, which is defined as revenue, maintenance and support contracts on perpetual license arrangements that we no longer sell. ​ ​ ​ ​ ​ ​ 36 Table of Contents The following table presents a break out of subscription revenue between SaaS and legacy revenues for each of the following periods: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended June 30 ​ ​ ​ ​ ​ ​ 2024 2023 ​ Change Revenue ​ (in thousands, except percentages) SaaS revenue ​ $ 84,874 ​ $ 89,619 ​ $ (4,745) (5) % Legacy revenue ​ 208 ​ 705 ​ ​ (497) (70) % Total subscription revenue ​ $ 85,082 ​ $ 90,324 ​ $ (5,242) ​ ​ ​ ​ SaaS and Professional Services Revenue ​ As we have shifted to a SaaS only business model, substantially all of professional services revenue is now generated from our SaaS customer base.
We believe the combination of SaaS and professional services revenue is a useful measure to value our business on a forward-looking basis. ​ The following table presents total SaaS and professional services revenue for each of the following periods: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended June 30 ​ ​ ​ ​ ​ 2023 2022 Change Revenue ​ (in thousands, except percentages) SaaS revenue ​ $ 89,619 ​ $ 80,904 ​ $ 8,715 11 % Professional services ​ 7,687 ​ 7,394 ​ 293 4 % Total SaaS and professional services revenue ​ $ 97,306 ​ $ 88,298 ​ $ 9,008 ​ ​ ​ ​ ​ 34 Table of Contents Non-GAAP Operating Income ​ Non-GAAP operating income is defined as income (loss) from operations, adjusted for the impact of stock-based compensation expense.
We believe the combination of SaaS and professional services revenue is a useful measure to value our business on a forward-looking basis. ​ The following table presents total SaaS and professional services revenue for each of the following periods: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended June 30 ​ ​ ​ ​ ​ 2024 2023 Change Revenue ​ (in thousands, except percentages) SaaS revenue ​ $ 84,874 ​ $ 89,619 ​ $ (4,745) (5) % Professional services ​ 7,721 ​ 7,687 ​ 34 0 % Total SaaS and professional services revenue ​ $ 92,595 ​ $ 97,306 ​ $ (4,711) ​ ​ ​ ​ Non-GAAP Operating Income ​ Non-GAAP operating income is defined as income from operations, adjusted for the impact of stock-based compensation expense.
This decrease is primarily due to a decrease in personnel-related costs of $1.2 million; partially offset by an increase in outside consulting costs of $344,000 from the same period in fiscal year 2022. ​ Excluding a decrease of $235,000 due to foreign exchange rate fluctuation, cost of professional services revenue decreased by $884,000 for the fiscal year ended June 30, 2023, from the same period in fiscal year 2022. ​ Operating Expenses ​ Research and Development ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended June 30, ​ ​ ​ ​ ​ ​ ​ 2023 2022 Change ​ ​ (in thousands, except percentages) Research and development $ 27,300 $ 24,387 $ 2,913 12 % Percentage of total revenue ​ 28 % 27 % ​ ​ ​ ​ Research and development expense primarily consists of personnel-related expenses directly associated with our engineering, product management and development, and quality assurance staff.
This decrease is due to a decrease in personnel-related costs of $560,000 from the same period in fiscal year 2023. 44 Table of Contents ​ Excluding an increase of $74,000 due to foreign exchange rate fluctuation, cost of professional services revenue decreased by $634,000 for the fiscal year ended June 30, 2024, from the same period in fiscal year 2023. ​ Operating Expenses ​ Research and Development ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended June 30, ​ ​ ​ ​ ​ ​ ​ 2024 2023 Change ​ ​ (in thousands, except percentages) Research and development $ 26,626 $ 27,300 $ (674) (2) % Percentage of total revenue ​ 29 % 28 % ​ ​ ​ ​ Research and development expense primarily consists of personnel-related expenses directly associated with our engineering, product management and development, and quality assurance staff.
General and administrative expenses also include fees for professional services, provision for doubtful accounts and, to a lesser extent, occupancy costs and related overhead. ​ General and administrative expense decreased by $1.1 million or 10% during the fiscal year ended June 30, 2023, from the same period in fiscal year 2022.
General and administrative expenses also include fees for professional services, provision for credit losses and, to a lesser extent, occupancy costs and related overhead. ​ General and administrative expense increased by $199,000 or 2% during the fiscal year ended June 30, 2024, from the same period in fiscal year 2023.
Legacy revenue represents 1% and 4% of total revenue for the fiscal years ended June 30, 2023 and 2022, respectively. ​ Excluding a decrease of $130,000 due to foreign exchange rate fluctuation, legacy revenue decreased by $2.8 million during the fiscal year ended June 30, 2023, from the same period in fiscal year 2022. ​ ​ Professional Services Revenue ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended June 30, ​ ​ ​ ​ ​ ​ ​ 2023 2022 Change Revenue ​ (in thousands, except percentages) Professional services revenue ​ $ 7,687 ​ $ 7,394 ​ $ 293 4 % Percentage of total revenue ​ 8 % 8 % ​ ​ ​ 40 Table of Contents ​ Professional services revenue includes consulting, implementation, training, and managed services.
Legacy revenue represents 0% and 1% of total revenue for the fiscal years ended June 30, 2024 and 2023, respectively. ​ Excluding an increase of $14,000 due to foreign exchange rate fluctuation, legacy revenue decreased by $511,000 during the fiscal year ended June 30, 2024, from the same period in fiscal year 2023. ​ Professional Services Revenue ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended June 30, ​ ​ ​ ​ ​ ​ ​ 2024 2023 Change Revenue ​ (in thousands, except percentages) Professional services revenue ​ $ 7,721 ​ $ 7,687 ​ $ 34 0 % Percentage of total revenue ​ 8 % 8 % ​ ​ ​ ​ Professional services revenue includes consulting, implementation, training, and managed services.
The decrease is primarily due to a decrease of $2.6 million in personnel-related costs; partially offset by increases of (i) $1.3 million in marketing program costs and (ii) $54,000 in outside consulting costs. ​ Excluding a decrease of $743,000 due to foreign exchange rate fluctuation, sales and marketing expense decreased $1.3 million for the fiscal year ended June 30, 2023, from the same period in fiscal year 2022. ​ ​ General and Administrative ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended June 30, ​ ​ ​ ​ ​ ​ ​ 2023 2022 Change ​ ​ (in thousands, except percentages) General and administrative $ 10,300 $ 11,419 $ (1,119) (10) % Percentage of total revenue ​ 11 % 12 % ​ ​ ​ ​ General and administrative expense primarily consists of personnel-related expenses directly associated with our finance, human resources, administrative and legal personnel.
The decrease is primarily due to a decrease of (i) $8.4 million in personnel-related costs and (ii) $1.2 million in marketing program costs. ​ Excluding an increase of $376,000 due to foreign exchange rate fluctuation, sales and marketing expense decreased $10.0 million for the fiscal year ended June 30, 2024, from the same period in fiscal year 2023. ​ General and Administrative ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended June 30, ​ ​ ​ ​ ​ ​ ​ 2024 2023 Change ​ ​ (in thousands, except percentages) General and administrative $ 10,499 $ 10,300 $ 199 2 % Percentage of total revenue ​ 11 % 11 % ​ ​ ​ ​ 45 Table of Contents General and administrative expense primarily consists of personnel-related expenses directly associated with our finance, human resources, administrative and legal personnel.
We recorded an income tax provision of $1.2 million in each of the fiscal years ended June 30, 2023 and 2022. ​ New Accounting Pronouncements For information with respect to recent accounting pronouncements and the impact of these pronouncements on our consolidated financial statements, see Note 1 of Notes to Consolidated Financial Statements included in Item 8 Financial Statements and Supplementary Data of this Annual Report.
We recorded an income tax provision of $1.9 million and $1.2 million in the fiscal years ended June 30, 2024 and 2023, respectively. ​ New Accounting Pronouncements For information with respect to recent accounting pronouncements and the impact of these pronouncements on our consolidated financial statements, see Note 1 of Notes to Consolidated Financial Statements included in Item 8 Financial Statements and Supplementary Data of this Annual Report. 47 Table of Contents Liquidity and Capital Resources ​ Overview ​ Our principal sources of liquidity were cash and cash equivalents, and accounts receivable, net.
The decrease in our stock-based compensation expense in fiscal year 2023 compared to fiscal year 2022 was primarily due to decreases in stock option vesting over their respectable periods, company-wide headcount, and option grant activity. ​ We expect our stock-based compensation expense to continue to decrease in fiscal year 2024 as existing stock options continue to vest over their respectable periods. ​ Income (Loss) from Operations ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended June 30, ​ ​ ​ ​ ​ 2023 2022 ​ Change ​ ​ (in thousands, except percentages) Income (Loss) from operations $ 1,389 ​ $ (2,138) ​ $ 3,527 Operating (loss) margin ​ 1 % ​ (3) % ​ ​ ​ ​ Results from operations was income of $1.4 million in fiscal year 2023, compared to loss of $2.1 million in fiscal year 2022.
The decrease in our stock-based compensation expense in fiscal year 2024 compared to fiscal year 2023 was primarily due to decreases in stock option vesting over their respectable periods, company-wide headcount, and option grant activity. ​ We expect to review our share-based payment awards annually, as necessary. ​ 46 Table of Contents Income from Operations ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended June 30, ​ ​ ​ ​ ​ 2024 2023 ​ Change ​ ​ (in thousands, except percentages) Income from operations $ 5,971 ​ $ 1,389 ​ $ 4,582 Operating margin ​ 6 % ​ 1 % ​ ​ ​ ​ Results from operations was income of $6 million in fiscal year 2024, compared to income of $1.4 million in fiscal year 2023.
The income before income tax provision between the U.S. and foreign countries impacted our effective tax rate as a result of the geographic distribution and customer demand related to our products and services. In fiscal year 2023, our U.S. and foreign income before our income tax provision was a loss of $460,000 and an income of $3.8 million, respectively.
The income before income tax provision between the U.S. and foreign countries impacted our effective tax rate as a result of the geographic distribution and customer demand related to our products and services.
Revenues from SaaS increased by $8.7 million during the fiscal year ended June 30, 2023, from the same period in fiscal year 2022. ​ SaaS revenue was $89.6 million and $80.9 million during the fiscal years ended June 30, 2023 and 2022, respectively, which represented an increase of 11% or $8.7 million.
Revenues from SaaS decreased by $4.7 million during the fiscal year ended June 30, 2024, from the same period in fiscal year 2023. ​ SaaS revenue was $84.9 million and $89.6 million during the fiscal years ended June 30, 2024 and 2023, respectively, which represented a decrease of 5% or $4.7 million.
The increase is primarily due to increases in (i) $3.5 million in personnel-related costs and (ii) $11,000 in outside consulting costs. ​ Excluding a decrease of $622,000 due to foreign exchange rate fluctuation, research and development expense increased by $3.5 million for the fiscal year ended June 30, 2023, from the same period in fiscal year 2022. ​ ​ Sales and Marketing ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended June 30, ​ ​ ​ ​ ​ ​ ​ 2023 2022 Change ​ ​ (in thousands, except percentages) Sales and marketing $ 31,707 $ 33,746 $ (2,039) (6) % Percentage of total revenue ​ 32 % 37 % ​ ​ ​ Sales and marketing expense primarily consists of personnel-related expenses directly associated with our sales, marketing, and business development staff.
The decrease is primarily due to decreases in (i) $470,000 in personnel-related costs and (ii) $268,000 in outside consulting costs. ​ Excluding an increase of $64,000 due to foreign exchange rate fluctuation, research and development expense decreased by $738,000 for the fiscal year ended June 30, 2024, from the same period in fiscal year 2023. ​ Sales and Marketing ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended June 30, ​ ​ ​ ​ ​ ​ ​ 2024 2023 Change ​ ​ (in thousands, except percentages) Sales and marketing $ 22,115 $ 31,707 $ (9,592) (30) % Percentage of total revenue ​ 24 % 32 % ​ ​ ​ Sales and marketing expense primarily consists of personnel-related expenses directly associated with our sales, marketing, and business development staff.
Foreign exchange rate fluctuation resulted in a decrease of $2.4 million and $354,000 in total revenue during the fiscal years ended June 30, 2023 and 2022, respectively. ​ Subscription Revenue ​ SaaS Revenue ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended June 30, ​ ​ ​ ​ ​ ​ ​ 2023 ​ 2022 ​ Change Revenue ​ (in thousands, except percentages) SaaS revenue ​ $ 89,619 ​ ​ $ 80,904 ​ ​ $ 8,715 11 % Percentage of total revenue ​ 91 % ​ 88 % ​ ​ ​ ​ ​ ​ SaaS revenue includes revenue from cloud delivery arrangements, term licenses and embedded OEM royalties and associated support.
Foreign exchange rate fluctuation resulted in an increase of $1.0 million and $2.4 million in total revenue during the fiscal years ended June 30, 2024 and 2023, respectively. ​ 42 Table of Contents Subscription Revenue ​ SaaS Revenue ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended June 30, ​ ​ ​ ​ ​ ​ ​ 2024 ​ 2023 ​ Change Revenue ​ (in thousands, except percentages) SaaS revenue ​ $ 84,874 ​ ​ $ 89,619 ​ ​ $ (4,745) (5) % Percentage of total revenue ​ 91 % ​ 91 % ​ ​ ​ ​ ​ ​ SaaS revenue includes revenue from cloud delivery arrangements, term licenses and embedded OEM royalties and associated support.
We value our share-based payments under ASC 718, and record compensation expense for all share-based payments made to employees based on the fair value at the date of the grant. 43 Table of Contents The effect of recording stock-based compensation for fiscal year 2023 and 2022 is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended June 30, ​ ​ 2023 2022 Stock-based compensation by type of award ​ (in thousands) Stock options $ 5,847 $ 10,923 Employee stock purchase plan ​ 399 ​ 457 Total stock-based compensation ​ $ 6,246 ​ $ 11,380 ​ Determining the fair value of the equity-based payment awards at the grant date required significant judgment and the use of estimates, particularly surrounding the Black-Scholes valuation assumptions such as stock price volatility and expected option term. ​ Below is a summary of stock-based compensation included in the cost and expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended June 30, ​ ​ ​ ​ ​ ​ ​ 2023 2022 Change ​ ​ (in thousands, except percentages) Cost of revenue $ 1,469 $ 3,056 $ (1,587) (52) % Research and development ​ 1,970 ​ 2,935 ​ (965) (33) % Sales and marketing ​ 997 ​ 2,367 ​ (1,370) (58) % General and administrative ​ 1,810 ​ 3,022 ​ (1,212) (40) % Total stock-based compensation ​ $ 6,246 ​ $ 11,380 ​ $ (5,134) (45) % ​ Stock-based compensation expense includes the amortization of the fair value primarily of stock options awarded to employees, members of our board of directors and consultants.
The effect of recording stock-based compensation for fiscal year 2024 and 2023 is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended June 30, ​ ​ 2024 2023 Stock-based compensation by type of award ​ (in thousands) Stock options $ 3,348 $ 5,847 Restricted stock units ​ 819 ​ — Employee stock purchase plan ​ 362 ​ 399 Total stock-based compensation ​ $ 4,529 ​ $ 6,246 ​ Determining the fair value of the equity-based payment awards at the grant date required significant judgment and the use of estimates, particularly surrounding the Black-Scholes valuation assumptions such as stock price volatility and expected option term. ​ Below is a summary of stock-based compensation included in the cost and expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended June 30, ​ ​ ​ ​ ​ ​ ​ 2024 2023 Change ​ ​ (in thousands, except percentages) Cost of revenue $ 1,237 $ 1,469 $ (232) (16) % Research and development ​ 1,424 ​ 1,970 ​ (546) (28) % Sales and marketing ​ 645 ​ 997 ​ (352) (35) % General and administrative ​ 1,223 ​ 1,810 ​ (587) (32) % Total stock-based compensation ​ $ 4,529 ​ $ 6,246 ​ $ (1,717) (27) % ​ Stock-based compensation expense includes the amortization of the fair value primarily of stock options awarded to employees, members of our board of directors and consultants.
Professional services revenue represents 8% of total revenue for the fiscal years ended June 30, 2023 and 2022. ​ Excluding a decrease of $190,000 due to foreign exchange rate fluctuation, professional services revenues increased by $483,000 during the fiscal year ended June 30, 2023, from the same period in fiscal year 2022. ​ Revenue by Geography ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended June 30, ​ ​ ​ ​ ​ ​ 2023 2022 ​ Change Revenue ​ (in thousands, except percentages) North America ​ $ 76,375 ​ $ 66,793 ​ $ 9,582 14 % Europe, Middle East, & Africa ​ 21,636 ​ 25,158 ​ ​ (3,522) (14) % Total revenue ​ $ 98,011 ​ $ 91,951 ​ $ 6,060 ​ ​ ​ Revenue from North America sales increased by 14% from $66.8 million during the fiscal year ended June 30, 2022 to $76.4 million during the fiscal year ended June 30, 2023 due to increases of (i) $10.4 million in SaaS revenue and (ii) $1.0 million in professional service revenue; offset by a decrease of $1.8 million in legacy revenue. ​ Revenue from EMEA sales decreased by 14% from $25.2 million during the fiscal year ended June 30, 2022 to $21.6 million during the fiscal year ended June 30, 2023 due to decreases of (i) $1.7 million in SaaS revenue, (ii) $1.1 million in legacy revenue, and (iii) $722,000 in professional services revenue. ​ Cost of Revenue ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended June 30, ​ ​ ​ ​ ​ ​ ​ 2023 2022 Change Cost of revenue ​ (in thousands, except percentages) Subscription ​ $ 18,677 ​ $ 14,780 ​ $ 3,897 26 % Professional services ​ 8,638 ​ 9,757 ​ ​ (1,119) (11) % Total cost of revenue ​ $ 27,315 ​ $ 24,537 ​ $ 2,778 ​ ​ Percentage of total revenue ​ 28 % 27 % ​ ​ ​ Gross margin ​ 72 % 73 % ​ ​ ​ ​ Subscription ​ Cost of subscription revenues consist primarily of expenses related to our cloud services and support provided to customers.
Professional services revenue represents 8% of total revenue for the fiscal years ended June 30, 2024 and 2023. ​ Excluding an increase of $62,000 due to foreign exchange rate fluctuation, professional services revenues decreased by $28,000 during the fiscal year ended June 30, 2024, from the same period in fiscal year 2023. 43 Table of Contents ​ Revenue by Geography ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended June 30, ​ ​ ​ ​ ​ ​ 2024 2023 ​ Change Revenue ​ (in thousands, except percentages) North America ​ $ 72,611 ​ $ 76,375 ​ $ (3,764) (5) % Europe, Middle East, & Africa ​ 20,192 ​ 21,636 ​ ​ (1,444) (7) % Total revenue ​ $ 92,803 ​ $ 98,011 ​ $ (5,208) ​ ​ ​ Revenue from North America sales decreased by 5% from $76.4 million during the fiscal year ended June 30, 2023 to $72.6 million during the fiscal year ended June 30, 2024 due to decreases of (i) $3.6 million in SaaS revenue and (ii) $392,000 in legacy revenue; partially offset by the increase of $224,000 in professional service revenue. ​ Revenue from EMEA sales decreased by 7% from $21.6 million during the fiscal year ended June 30, 2023 to $20.2 million during the fiscal year ended June 30, 2024 due to decreases of (i) $1.1 million in SaaS revenue, (ii) $190,000 in professional services revenue, and (iii) $106,000 in legacy revenue. ​ Cost of Revenue ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended June 30, ​ ​ ​ ​ ​ ​ ​ 2024 2023 Change Cost of revenue ​ (in thousands, except percentages) Subscription ​ $ 19,514 ​ $ 18,677 ​ $ 837 4 % Professional services ​ 8,078 ​ 8,638 ​ ​ (560) (6) % Total cost of revenue ​ $ 27,592 ​ $ 27,315 ​ $ 277 ​ ​ Percentage of total revenue ​ 30 % 28 % ​ ​ ​ Gross margin ​ 70 % 72 % ​ ​ ​ ​ Subscription ​ Cost of subscription revenues consist primarily of expenses related to our cloud services and support provided to customers.
We determine the period of benefit by taking into consideration the period from initial contract through renewal, which constitutes the length of our customer relationship or customer life. 36 Table of Contents Amortization of costs capitalized related to new revenue contracts is included as a component of sales and marketing expense in our operating results. ​ Stock-Based Compensation We account for stock-based compensation in accordance with Accounting Standards Codification (ASC) 718, Compensation — Stock Compensation .
Amortization of costs capitalized related to new revenue contracts is included as a component of sales and marketing expense in our operating results. ​ Stock-Based Compensation We account for stock-based compensation in accordance with Accounting Standards Codification (ASC) 718, Compensation — Stock Compensation .
We further break down subscription revenue into SaaS revenue and legacy revenue, with SaaS revenue being a key metric. ​ The following table presents our subscription and professional services revenue during the fiscal years indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended June 30, ​ ​ ​ ​ ​ ​ 2023 2022 ​ Change Revenue ​ (in thousands, except percentages) Subscription ​ $ 90,324 ​ $ 84,557 ​ $ 5,767 7 % Professional services ​ 7,687 ​ 7,394 ​ ​ 293 4 % Total revenue ​ $ 98,011 ​ $ 91,951 ​ $ 6,060 ​ ​ ​ Total Revenue Total revenue increased $6.1 million during the fiscal year ended June 30, 2023, from the same period in fiscal year 2022, largely due to increased SaaS revenue of $8.7 million and professional services revenue of $293,000 in fiscal year 2023.
We further break down subscription revenue into SaaS revenue and legacy revenue, with SaaS revenue being a key metric. ​ The following table presents our subscription and professional services revenue during the fiscal years indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended June 30, ​ ​ ​ ​ ​ ​ 2024 2023 ​ Change Revenue ​ (in thousands, except percentages) Subscription ​ $ 85,082 ​ $ 90,324 ​ $ (5,242) (6) % Professional services ​ 7,721 ​ 7,687 ​ ​ 34 0 % Total revenue ​ $ 92,803 ​ $ 98,011 ​ $ (5,208) ​ ​ ​ Total Revenue Total revenue decreased $5.2 million during the fiscal year ended June 30, 2024, from the same period in fiscal year 2023, largely due to decreased SaaS revenue of $4.7 million and our legacy revenue of $500,000; partially offset by an increase in professional services revenue of $34,000 in fiscal year 2024. ​ Our revenue was impacted by foreign exchange rate fluctuation between the U.S.
This requires us to estimate our actual current tax exposure and to assess temporary differences that result from differing treatment of certain items for tax and accounting purposes.
Deferred Tax Valuation Allowance When we prepare our consolidated financial statements, we estimate our income tax liability for each of the various jurisdictions where we conduct business. This requires us to estimate our actual current tax exposure and to assess temporary differences that result from differing treatment of certain items for tax and accounting purposes.
These measures may affect our consolidated financial statements and we will continue to evaluate the applicability and effect of the IRA as more guidance is issued. Fiscal Year 2023 Compared with Fiscal Year 2022 Our effective tax rate for both fiscal years 2023 and 2022 was a tax provision of $1.2 million.
These measures may affect our consolidated financial statements and we will continue to evaluate the applicability and effect of the IRA as more guidance is issued.
Our cash, cash equivalents, and restricted cash were $73.2 million and $72.2 million as of June 30, 2023 and 2022, respectively. ​ Our working capital was $46.1 million and $42.1 million as of June 30, 2023 and 2022, respectively.
Our liquidity sources were $101.7 million compared to $104.8 million as of June 30, 2024 and 2023, respectively. Our cash, cash equivalents, and restricted cash were $70.0 million and $73.2 million as of June 30, 2024 and 2023, respectively. ​ Our working capital was $44.5 million and $46.1 million as of June 30, 2024 and 2023, respectively.
These risks and uncertainties may cause actual results to differ materially from those discussed in the forward-looking statements. Overview ​ eGain automates customer engagement with an innovative knowledge hub, powered by conversational and generative AI and analytics.
These risks and uncertainties may cause actual results to differ materially from those discussed in the forward-looking statements. Overview ​ eGain automates customer engagement with an AI knowledge hub SaaS solution. We sell to enterprises who want to better serve customers at scale by delivering trusted answers across self-service, contact centers, and field staff.
With our mantra of AX + BX + CX = DX™ , we guide clients to effortless digital experience (DX) by holistically optimizing agent experience (AX), business experience (BX) and customer experience (CX). Leading brands use eGain’s SaaS solution to improve customer satisfaction, empower agents, reduce service cost, and boost sales. We are headquartered in the United States.
True to our mantra of AX + BX + CX = DX™, our AI knowledge hub orchestrates effortless Digital eXperience (DX) as it assists Agent eXperience (AX), empowers Business eXperience (BX) and assures Customer eXperience (CX). Many global brands use eGain to improve experience and reduce costs. We are headquartered in the Sunnyvale, California, United States.
In connection with our SaaS transition, we are actively migrating our remaining perpetual license clients to SaaS and continue to sell SaaS to new customers. ​ Legacy Revenue ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended June 30, ​ ​ ​ ​ ​ ​ ​ 2023 ​ 2022 ​ Change Revenue ​ (in thousands, except percentages) Legacy revenue ​ $ 705 ​ ​ $ 3,653 ​ ​ $ (2,948) (81) % Percentage of total revenue ​ 1 % ​ 4 % ​ ​ ​ ​ ​ Legacy revenue is associated with license, maintenance and support contracts on perpetual license arrangements that we no longer sell.
SaaS revenue represents 91% of total revenue for the fiscal years ended June 30, 2024 and 2023. ​ Excluding an increase of $965,000 due to foreign exchange rate fluctuation, SaaS revenue decreased by $5.7 million during the fiscal year ended June 30, 2024, from the same period in fiscal year 2023. ​ Legacy Revenue ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended June 30, ​ ​ ​ ​ ​ ​ ​ 2024 ​ 2023 ​ Change Revenue ​ (in thousands, except percentages) Legacy revenue ​ $ 208 ​ ​ $ 705 ​ ​ $ (497) (70) % Percentage of total revenue ​ - % ​ 1 % ​ ​ ​ ​ ​ Legacy revenue is associated with license, maintenance and support contracts on perpetual license arrangements that we no longer sell.
SaaS revenue represents 91% and 88% of total revenue for the fiscal years ended June 30, 2023 and 2022, respectively. ​ Excluding a decrease of $2.1 million due to foreign exchange rate fluctuation, SaaS revenue increased by $10.8 million during the fiscal year ended June 30, 2023, from the same period in fiscal year 2022.
Excluding a decrease from foreign exchange fluctuation of $627,000, total costs and operating expenses decreased by $10.4 million for the fiscal year ended June 30, 2024, from the same period in fiscal year 2023. Interest Income ​ Interest income consists primarily of interest earned on money market accounts, which have increased in rates compared to prior year.
Revenues from professional services increased by $293,000 during the fiscal year ended June 30, 2023. This increase was primarily due to growth of managed services. ​ Professional services revenue was $7.7 million during the fiscal year ended June 30, 2023, which represented an increase of 4% or $293,000.
Revenues from professional services increased by $34,000 and remained flat at $7.7 million during the fiscal year ended June 30, 2024.
Removed
We sell mostly to large enterprises across financial services, telecommunications, retail, government, healthcare, and utilities seeking to better serve customers at scale by eliminating content silos and helping to automate customer engagement processes of all levels of complexity that may also require regulatory compliance.
Added
We determine the period of benefit by taking into consideration the period from initial contract through renewal, which constitutes the length of our customer relationship or customer life.
Removed
In fiscal year 2022, our U.S. and foreign income before our income tax was loss of $4.2 million and income of $3.0 million, respectively. Deferred Tax Valuation Allowance When we prepare our consolidated financial statements, we estimate our income tax liability for each of the various jurisdictions where we conduct business.
Added
In 2024, California enacted legislation, with the first being S.B.167, which suspends the use of NOLs by businesses and individuals for tax years 2024 through 2026, limits the use of tax credits by businesses and individuals to $5 million for tax years 2024 through 2026, and clarifies that income not included in apportionable business income is excluded from the sales factor of the apportionment formula.
Removed
This increase was partially offset by a decline of $2.9 million in our legacy revenue. Legacy revenue decreases as we continue to migrate legacy perpetual license customers to our SaaS model. ​ 39 Table of Contents Our revenue was impacted by foreign exchange rate fluctuation between the U.S. Dollar, Euro, and British Pound.
Added
The second, S.B.175, provides some relief from the $5 million credit limitation in S.B. 167 by allowing taxpayers subject to the limit to elect to later receive a refund of credits they would have otherwise used to reduce tax liabilities during the limitation period.
Removed
Liquidity and Capital Resources ​ Overview ​ Our principal sources of liquidity were cash and cash equivalents, and accounts receivable, net. Our liquidity sources were $104.8 million compared to $99.1 million as of June 30, 2023 and 2022, respectively.
Added
Fiscal Year 2024 Compared with Fiscal Year 2023 Our effective tax rate for both fiscal years 2024 and 2023 was a tax provision of $1.9 million and $1.2 million, respectively.
Added
In fiscal year 2024, our U.S. and 40 Table of Contents foreign income before our income tax provision was an income of $6.2 million and $3.5 million, respectively. In fiscal year 2023, our U.S. and foreign income before our income tax was loss of $460,000 and income of $3.8 million, respectively.
Added
We value our share-based payments under ASC 718, and record compensation expense for all share-based payments made to employees based on the fair value at the date of the grant.

Other EGAN 10-K year-over-year comparisons