10q10k10q10k.net

What changed in EGAIN Corp's 10-K — 2022 vs 2023

vs

Paragraph-level year-over-year comparison of EGAIN Corp's 2022 and 2023 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 2023 report.

+211 added−216 removedSource: 10-K (2023-09-14) vs 10-K (2022-09-13)

Top changes in EGAIN Corp's 2023 10-K

211 paragraphs added · 216 removed · 180 edited across 3 sections

Item 1. Business

Business — how the company describes what it does

52 edited+5 added−1 removed22 unchanged
Biggest changeWe 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 product functionality; o financial stability and viability of the vendor; o 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 whether the software is delivered via the cloud or on-premises; 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. 9 Table of Contents Invest in Direct Sales and Marketing ​ We are enhancing our digital marketing to boost brand awareness, based on client success, product leadership and no-risk trial offers.
Biggest changeWe 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.
This transition affords businesses the opportunity to reimagine and design customer contact strategies to drive digital-first automation, fueled by Knowledge and AI. Customer Engagement Automation is a Large, Growing Market ​ 6 Table of Contents Businesses are investing heavily in digital transformation, with customer engagement as a top priority.
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.
Our customer support centers are in United States, United Kingdom, and India. ​ Research and Development ​ The market for our products changes rapidly and is characterized by evolving industry standards, swift changes in customer requirements, and frequent product introductions. ​ We continuously analyze market and customer requirements and evaluate external technology that we believe will enhance our competitiveness, increase our lifetime customer value and expand our target market.
Our customer support centers are in the United States, the United Kingdom, and India. ​ Research and Development ​ The market for our products changes rapidly and is characterized by evolving industry standards, swift changes in customer requirements, and frequent product introductions. ​ We continuously analyze market and customer requirements and evaluate external technology that we believe will enhance our competitiveness, increase our lifetime customer value, and expand our target market.
Mr. Roy holds a B.S. in Computer Science from the Indian Institute of Technology, New Delhi, a Master’s degree in Computer Science from Johns Hopkins University and a M.B.A. from Stanford University. ​ Eric N. Smit has served as Chief Financial Officer since August 2002. Prior to that, Mr.
Roy holds a B.S. in Computer Science from the Indian Institute of Technology, New Delhi, a Master’s degree in Computer Science from Johns Hopkins University and a M.B.A. from Stanford University. ​ Eric N. Smit has served as Chief Financial Officer since August 2002. Prior to that, Mr.
We complement direct sales with resell partnerships based on product connectors into Cloud Contact Center platforms, including Amazon, Avaya, Cisco, Five9 and Genesys. 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.
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.
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.
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.
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 x 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. ​ 11 Table of Contents Customer Support ​ We offer 24/7 customer support via online and phone channels worldwide under support agreements.
Rich applications, powered by our Knowledge and AI capabilities (from our Knowledge Hub), proactively guide agents to efficiently interact with customers using messaging, 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.
This benefit is particularly sought after in regulated sectors like financial services and healthcare, as well as government. o Deliver rich insights to 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.
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.
Solve with eGain Knowledge Hub ​ Our Knowledge Hub helps businesses to centralize knowledge, policies, procedures, 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 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.
From over a hundred thousand users at a healthcare client using our solution on a 24x7 basis to a 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.
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.
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 orchestrate their omnichannel service operations.
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.
Coming out of the pandemic tunnel and dealing with the new normal of millennial employee expectations, businesses realize that they need to invest in tools to quickly and easily empower agents, while ensuring customer satisfaction and compliance.
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.
Our conversation hub, deeply integrated with our knowledge hub, enables plug and play of third-party bots, channels, and desktops. ​ 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.
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.
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 cloud software to improve customer satisfaction, empower agents, reduce service cost, and boost sales. We are headquartered in the United States.
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.
Our solution experts and partners guide clients by aligning with their strategic priorities and demonstrating quick value across a series of 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.
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.
Approximately 90% of our annual recurring cloud revenue for the fiscal year ended June 30, 2022 (which we refer to as fiscal year 2022) came from such large enterprises. ​ We focus on the following verticals: financial services, telecommunication, retail, government, health care and utilities.
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.
Businesses can experience our product with their data, content, and process in a production setting. 8 Table of Contents 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.
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.
Specifically, we help businesses: o Enhance customer experience with digital-first, omnichannel service. 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 serviced customer segments.
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.
Inc., an Internet-services company co-founded by Mr. Roy. From June 1994 to April 1995, Mr. Roy worked at Parsec Technologies, a call center company based in New Delhi, India, which he co-founded. From August 1988 to August 1992, Mr. Roy worked as a software engineer at Digital Equipment Corporation, a major company in the computer industry at the time .
From June 1994 to April 1995, Mr. Roy worked at Parsec Technologies, a call center company based in New Delhi, India, which he co-founded. From August 1988 to August 1992, Mr. Roy worked as a software engineer at Digital Equipment Corporation, a major company in the computer industry at the time . Mr.
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 13, 2022: ​ ​ ​ ​ ​ Name Age Position Ashutosh Roy 56 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 14, 2023: ​ ​ ​ ​ ​ Name Age Position Ashutosh Roy 57 Chief Executive Officer and Chairman Eric N.
Competition ​ We compete with application software providers, including LivePerson, Inc., NICE, Ltd, Oracle Corporation, and Verint Systems Inc..
Competition ​ We compete with application software providers, including LivePerson, Inc., NICE, Ltd, and Verint Systems Inc.
Pre-built integrations include connectors to Adobe, Apple Business Chat, Avaya, Amazon, Cisco, Five9, Google Dialogflow, Genesys, IBM Watson, Microsoft Dynamics, Microsoft SharePoint, Salesforce, SAP and ServiceNow. Compelling Benefits ​ We believe 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 and ServiceNow. Compelling Benefits ​ Our solution delivers quick value, easy innovation, and big business impact.
The pressing challenge for solution buyers, however, is to separate the wheat from the chaff as they look for trusted, innovative, and aligned partners. 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.
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.
From April 1993 to November 1996, Mr. Smit served as Vice President of Operations and Chief Financial Officer of Velocity Incorporated, a software game developer and publishing company. Mr. Smit holds a Bachelor of Commerce in Accounting from Rhodes University, South Africa. Promod Narang has served as Senior Vice President of Products and Engineering since March 2000. Mr.
From April 1993 to November 1996, Mr. Smit served as Vice President of Operations and Chief Financial Officer of Velocity Incorporated, a software game developer and publishing company. Mr. Smit holds a Bachelor of Commerce in Accounting from Rhodes University, South Africa. Promod Narang has served as Chief Technology Officer since November 2022. Mr.
Not surprisingly, businesses are increasingly seeking modern knowledge management solutions to layer on top of traditional systems of record like CRM, contact centers, and content management. Their goal is to empower contact center agents and automate customer self-service with relevant knowledge everywhere.
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.
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 communications and demand generation.
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.
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.
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.
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 assistant – powered by AI, machine learning, and knowledge – delivers transformational impact in complex use cases to solve, guide, and coach agents and customers.
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.
This growing knowledge and guidance gap for agents explains Gartner Research’s only technology recommendation for customer service and support leaders in 2022: invest in knowledge management tools! It is time to reimagine the Contact Center Agent Experience.
And 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.
Knowledge-Powered Customer Engagement ​ Energized by big-data, cloud-computing and AI technologies in a digital world, Knowledge Hubs can deliver transformational value in customer engagement. Smart, connected experiences can be automated to successfully resolve majority of customer interactions.
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.
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 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.
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.
Moving forward, we will look for strategic acquisitions that 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 enterprises, 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. ​ ​ 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.
In addition, the group performs market analyses and customer reviews 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.
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.
As of June 30, 2022, we had 691 employees, including 687 full-time employees, of which 231 were in product development, 252 in services and support, 148 in sales and marketing, and 60 in finance and administration. ​ None of our employees are covered by collective bargaining agreements.
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.
Smit 60 Chief Financial Officer Promod Narang 64 Senior Vice President of Products and Engineering ​ ​ 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?
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.
To complement our marketing investment, we significantly expanded our field sales team to increase high-touch presence in target accounts. 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.
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.
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, 2022, we had 11 issued patents in the United States.
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.
Narang joined eGain in October 1998, and served as Director of Engineering prior to assuming his current position. Prior to joining eGain, Mr. Narang served as President of VMpro, a system software consulting company, from September 1987 to October 1998. Mr. Narang holds a Bachelor of Science in Computer Science from Wayne State University. ​ 13 Table of Contents
Narang joined eGain in October 1998 and served as Director of Engineering and from March 2000 to October 2022, he served as Senior Vice President of Products and Engineering prior to assuming his current position. Prior to joining eGain, Mr. Narang served as President of VMpro, a system software consulting company, from September 1987 to October 1998. Mr.
We believe what customers still want is help in three categories: informational, transactional, and situational. 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.
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.
We believe that our understanding of the customer need and our ability to fulfil it at scale with enterprise-grade sophistication is unmatched.
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.
Siloed solutions like transactional, simplistic chatbots without contextual escalation or effective knowledge and guidance don’t work. The eGain Solution is Comprehensive ​ eGain offers a comprehensive, unified Knowledge Hub solution to automate, augment and orchestrate 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. Our feature-rich portfolio of applications empowers businesses to holistically connect, flexibly solve, and continuously optimize the experience for agents, businesses and customers.
For fiscal year 2022, North America (NA) and combined Europe, Middle East, and Africa (EMEA) revenue accounted for 73% and 27% of total revenue. ​ Two of our largest customers, who are also our partners, accounted for 21% and 11% of total revenue in fiscal year 2022.
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.
In addition, we have a number of pending patent applications in the United States, including one provisional filing and several non-provisional filings. Our issued U.S. patents expire at various times between 2029 and 2035. ​ 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 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.
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. And recall it contextually in the moment of truth when serving customers.
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.
We also operate in United Kingdom and India. ​ Industry Background Introduction ​ According to Gartner, 84% of contact center agents surveyed are not satisfied with their desktop tools. 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.
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.
Globally, there are close to 15 million contact center agents. Time-starved customers consuming complex products and grappling with marketing offers generate stubbornly high levels of customer contact. Furthermore, contact centers worldwide are undergoing a technology refresh cycle from on-premise call centers to cloud-based contact centers.
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.
ITEM 1. BUSINESS ​ Overview ​ eGain automates customer engagement with an innovative knowledge hub, powered by conversational AI and analytics. We sell mostly to large enterprises across financial services, telecommunications, retail, government, healthcare, and utilities. That is, organizations seeking to better serve customers at scale while coping with content silos, process complexity, and regulatory compliance.
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.
Cloud-based solutions and a growing Application Programming Interface (API) economy present exciting opportunities to connect, solve, and optimize customer interactions. As predicted by industry analysts, the number of customer interactions involving emerging technology such as machine-learning applications, chatbots, or mobile messaging is increasing every day.
Cloud-based solutions and a growing Application Programming Interface (API) economy present exciting opportunities to connect, solve, and optimize customer interactions.
We are developing vertical solutions on our platform to better acquire and serve customers. We continue to enhance our core capabilities to improve usability and personalization. ​ Selectively Pursue Acquisitions ​ From time to time, we pursue inorganic strategies to strengthen our product portfolio. In 2014, we acquired Exony Limited, a provider of advanced contact center analytics software.
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.
To effectively harness these novel capabilities, businesses are looking toward innovative platform providers with proof at scale to guide them on their automation journey. ​ The eGain Approach and Benefits What Customers Want ​ Technology acceleration notwithstanding, human needs for customer engagement and service change slowly.
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.
Furthermore, we offer an “Always On” capability for businesses who cannot afford to be down at any time, day or night, for scheduled maintenance. Transformative Value at Scale Across Diversified Customer Base ​ Our solution delivers transformative value at scale today.
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.
Removed
With respect to security and certification, we offer SOC2, PCI, HIPAA, HITRUST, FedRAMP, and GDPR certification. Two of the largest federal tax services, one in North America and the other in Europe, use eGain solutions served from the eGain Cloud.
Added
ITEM 1. BUSINESS ​ Overview ​ eGain automates customer engagement with an innovative knowledge hub, powered by conversational and generative AI and analytics.
Added
Furthermore, contact centers worldwide are undergoing a technology refresh cycle from on-premise call centers to cloud-based contact centers.
Added
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.
Added
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.
Added
Narang holds a Bachelor of Science in Computer Science from Wayne State University. ​ 13 Table of Contents

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

60 edited+16 added−14 removed152 unchanged
Biggest changeFurther, 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; ● we could experience disruptions in our operations as a result of office closures, risks associated with our employees returning to work remotely, a significant portion of our workforce suffering illness and travel restrictions.
Biggest changeFurther, 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.
Acquisitions and investments involve numerous risks, including: ● the potential failure to achieve the expected benefits of the combination or acquisition; ● difficulties in and the cost of integrating operations, technologies, services and personnel; ● diversion of financial and managerial resources from existing operations; ● risks of entering new markets in which we have little or no experience or where competitors may have stronger market positions; ● potential write-offs of acquired assets or investments, and potential financial and credit risks associated with acquired customers; ● potential loss of key employees; ● inability to generate sufficient revenue to offset acquisition or investment costs; ● the inability to maintain relationships with customers and partners of the acquired business; ● the difficulty of transitioning the acquired technology onto our existing platforms and maintaining the security standards consistent with our other services for such technology; ● potential unknown liabilities associated with the acquired businesses; ● unanticipated expenses related to acquired technology and its integration into existing technology; 23 Table of Contents ● negative impact to our results of operations because of the depreciation and amortization of amounts related to acquired intangible assets, fixed assets and deferred compensation, and the loss of acquired deferred revenue and unbilled deferred revenue; ● delays in customer purchases due to uncertainty related to any acquisition; ● the need to implement controls, procedures and policies at the acquired company; ● challenges caused by distance, language and cultural differences; ● in the case of foreign acquisitions, the challenges associated with integrating operations across different cultures and languages and any currency and regulatory risks associated with specific countries; and ● the tax effects of any such acquisitions.
Acquisitions and investments involve numerous risks, including: ● the potential failure to achieve the expected benefits of the combination or acquisition; ● difficulties in and the cost of integrating operations, technologies, services and personnel; ● diversion of financial and managerial resources from existing operations; ● risks of entering new markets in which we have little or no experience or where competitors may have stronger market positions; ● potential write-offs of acquired assets or investments, and potential financial and credit risks associated with acquired customers; ● potential loss of key employees; ● inability to generate sufficient revenue to offset acquisition or investment costs; ● the inability to maintain relationships with customers and partners of the acquired business; ● the difficulty of transitioning the acquired technology onto our existing platforms and maintaining the security standards consistent with our other services for such technology; ● potential unknown liabilities associated with the acquired businesses; ● unanticipated expenses related to acquired technology and its integration into existing technology; ● negative impact to our results of operations because of the depreciation and amortization of amounts related to acquired intangible assets, fixed assets and deferred compensation, and the loss of acquired deferred revenue and unbilled deferred revenue; ● delays in customer purchases due to uncertainty related to any acquisition; ● the need to implement controls, procedures and policies at the acquired company; ● challenges caused by distance, language and cultural differences; ● in the case of foreign acquisitions, the challenges associated with integrating operations across different cultures and languages and any currency and regulatory risks associated with specific countries; and ● the tax effects of any such acquisitions.
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, 2022 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, 2023, approximately 44% of our workforce was employed in India.
Of our employees in India, 50% 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, 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.
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, 2022, 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, 2023, 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 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 16 Table of Contents greater resources to market, resell, implement and support competing products and services, our future revenue growth could be impeded.
Some customers never enter into a definitive contract for our paid subscription service despite the time and effort we may have expended on such initiatives. 22 Table of Contents To the extent that these customers do not become paying customers, we will not realize the intended benefits of this marketing effort, and our ability to grow our business and revenue may be harmed.
Some customers never enter into a definitive contract for our paid subscription service despite the time and effort we may have expended on such initiatives. To the extent that these customers do not become paying customers, we will not realize the intended benefits of this marketing effort, and our ability to grow our business and revenue may be harmed.
Because we sell complex and deeply integrated solutions, it can take many months of customer education to 16 Table of Contents secure sales. Since our potential customers may evaluate our products before, if ever, executing definitive agreements, we may incur substantial expenses and spend significant management and legal effort in connection with a potential customer.
Because we sell complex and deeply integrated solutions, it can take many months of customer education to secure sales. Since our potential customers may evaluate our products before, if ever, executing definitive agreements, we may incur substantial expenses and spend significant management and legal effort in connection with a potential customer.
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.
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.
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 20 Table of Contents ● the inability to implement, or delays in implementing, technology-based efficiencies and efforts to streamline and consolidate processes to reduce operating costs.
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.
Our distribution partners engage with us in a 17 Table of Contents number of ways, including assisting us to identify prospective customers, distributing our products and services in geographies where we do not have a physical presence and distributing our products and services where they are considered complementary to other products of the partner or third-party products distributed by the partner.
Our distribution partners engage with us in a number of ways, including assisting us to identify prospective customers, distributing our products and services in geographies where we do not have a physical presence and distributing our products and services where they are considered complementary to other products of the partner or third-party products distributed by the partner.
In addition, domestic and foreign legislation has been proposed that could prohibit or impose liability for the transmission over the Internet of certain types of information. Our defense of any of these actions could be costly and involve significant time and attention of our management and other resources.
In addition, domestic and foreign legislation has been proposed that could prohibit or impose liability for the transmission over the Internet of certain types of information. Our 23 Table of Contents defense of any of these actions could be costly and involve significant time and attention of our management and other resources.
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.
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.
Department of Commerce’s Safe Harbor Privacy Principles, the U.S.-European Union (EU) and U.S. - Swiss Safe Harbor Frameworks, and their successors, the EU-U.S. and Swiss-U.S. Privacy Shield Frameworks, as agreed to and set forth by the U.S.
Department of Commerce’s Safe Harbor Privacy Principles, the U.S.- EU and U.S.-Swiss Safe Harbor Frameworks, and their successors, the EU-U.S. and Swiss-U.S. Privacy Shield Frameworks, as agreed to and set forth by the U.S.
Changes in the European regulatory environment regarding privacy and data protection regulations, such as the European Union’s General Data Protection Regulation (GDPR), could expose us to risks of noncompliance and costs associated with compliance. We have in the past relied on adherence to the U.S.
Changes in the European regulatory environment regarding privacy and data protection regulations, such as the GDPR, could expose us to risks of noncompliance and costs associated with compliance. ​ We have in the past relied on adherence to the U.S.
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 the U.S., California enacted the California Consumer Privacy Act (CCPA) on June 28, 2018, which went into effect on January 1, 2020.
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.
Impairment or interruptions in our service may reduce our revenue, cause us to issue credits or pay penalties, cause customers to 19 Table of Contents terminate their subscriptions and adversely affect our renewal rate and our ability to attract new customers. Our business will also be harmed if our customers and potential customers believe our cloud operations are unreliable.
Impairment or interruptions in our service may reduce our revenue, cause us to issue credits, pay penalties, or cause customers to terminate their subscriptions and adversely affect our renewal rate and our ability to attract new customers. Our business will also be harmed if our customers and potential customers believe our cloud operations are unreliable.
If losses due to delays or inability to pay are greater than our reserves, it could harm our business, operating results and financial condition. If we acquire companies or technologies, we may not realize the expected business benefits, the acquisitions could prove difficult to integrate, disrupt our business and adversely affect our operations.
If losses due to delays or inability to pay are greater than our reserves, it could harm our business, operating results and financial condition. 22 Table of Contents If we acquire companies or technologies, we may not realize the expected business benefits, the acquisitions could prove difficult to integrate, disrupt our business and adversely affect our operations.
Our directors and executive officers, together with their affiliates and members of their immediate families, beneficially owned, in the aggregate, approximately 31% of our outstanding capital stock as of June 30, 2022, 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 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.
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.
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.
Even the perception that the privacy of personal information is not satisfactorily protected or does not meet regulatory requirements could inhibit sales of our products or services, and could 26 Table of Contents limit adoption of our subscription solution.
Even the perception that the privacy of personal information is not satisfactorily protected or does not meet regulatory requirements could inhibit sales of our products or services, and could limit adoption of our subscription solution.
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 25 Table of Contents significant repapering exercise is therefore required.
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.
Foreign Corrupt Practices Act of 1977, as amended, or the FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the USA PATRIOT Act, the U.K. Bribery Act 2010, and other anti-corruption, anti-bribery, and anti-money laundering laws in countries in which we conduct activities.
Foreign Corrupt Practices Act of 1977, as amended, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the USA PATRIOT Act, the UK Bribery Act 2010, and other anti-corruption, anti-bribery, and anti-money laundering laws in countries in which we conduct activities.
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.
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.
Additionally, third parties may attempt to fraudulently induce 24 Table of Contents employees or customers into disclosing sensitive information such as user names, passwords or other information in order to gain access to our customers’ data or our data or IT systems.
Additionally, third parties may attempt to fraudulently induce employees or customers into disclosing sensitive information such as user names, passwords or other information in order to gain access to our customers’ data or our data or IT systems.
Accordingly, we believe that period-to-period comparisons of our results of operations should not be relied upon as definitive indicators of future performance. 15 Table of Contents Other factors that may cause our revenue and operating results to fluctuate include: ● timing of customer budget cycles; ● the priority our customers place on our products compared to other business investments; ● size, timing and contract terms of new customer contracts, and unpredictable and often lengthy sales cycles; ● reduced renewals; ● competitive factors, including new product introductions, upgrades and discounted pricing or special payment terms offered by our competitors, as well as strategic actions by us or our competitors, such as acquisitions, divestitures, spin-offs, joint ventures, strategic investments or changes in business strategy; ● technical difficulties, errors or service interruptions in our solutions that may cause customer dissatisfaction with our solutions; ● consolidation among our customers, which may alter their buying patterns, or business failures that may reduce demand for our solutions; ● operating expenses associated with expansion of our sales force or business, and our product development efforts; ● cost, timing and management efforts related to the introduction of new features to our solutions; ● our ability to obtain, maintain and protect our intellectual property rights and adequately safeguard the information imported to our solutions or otherwise provided to us by our customers; and ● extraordinary expenses such as impairment charges, litigation or other payments related to settlement of disputes. ​ Any of these developments may adversely affect our revenue, operating results and financial condition.
Other factors that may cause our revenue and operating results to fluctuate include: ● timing of customer budget cycles; ● the priority our customers place on our products compared to other business investments; ● size, timing and contract terms of new customer contracts, and unpredictable and often lengthy sales cycles; ● reduced renewals; 14 Table of Contents ● competitive factors, including new product introductions, upgrades and discounted pricing or special payment terms offered by our competitors, as well as strategic actions by us or our competitors, such as acquisitions, divestitures, spin-offs, joint ventures, strategic investments or changes in business strategy; ● technical difficulties, errors or service interruptions in our solutions that may cause customer dissatisfaction with our solutions; ● consolidation among our customers, which may alter their buying patterns, or business failures that may reduce demand for our solutions; ● operating expenses associated with expansion of our sales force or business, and our product development efforts; ● cost, timing and management efforts related to the introduction of new features to our solutions; ● our ability to obtain, maintain and protect our intellectual property rights and adequately safeguard the information imported to our solutions or otherwise provided to us by our customers; and ● extraordinary expenses such as impairment charges, litigation or other payments related to settlement of disputes. ​ Any of these developments may adversely affect our revenue, operating results and financial condition.
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. 29 Table of Contents ITEM 1B . UNRESOLVED STAFF COMMENTS None.
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.
In addition to those discussed elsewhere in this section, our Europe, Middle East, and Africa 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; 18 Table of Contents ● changes in data privacy laws including 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, including the war in Ukraine; and ● reduced intellectual property protections in some countries.
Holders ​ As of June 30, 2022, there were approximately 139 stockholders of record. ​ Dividends ​ We have never declared or paid any cash dividends on our common stock.
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.
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.
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.
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.
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.
Some of our more significant accounting policies that could be affected by changes in the accounting rules and the related implementation guidelines and interpretations include: ● recognition of revenue; ● contingencies and litigation; and ● accounting for income taxes. 27 Table of Contents Changes in these or other rules, or scrutiny of our current accounting practices, or a determination that our judgments or assumptions in the application of these accounting principles were incorrect, could have a significant adverse effect on our reported operating results or the way in which we conduct our business. ​ Risks Related to Intellectual Property ​ We have been and may in the future be sued by third parties for various claims including alleged infringement of proprietary rights that can be time-consuming, incur substantial costs and divert the attention of management, which could adversely affect our operations and cash flow.
Changes in these or other rules, or scrutiny of our current accounting practices, or a determination that our judgments or assumptions in the application of these accounting principles were incorrect, could have a significant adverse effect on our reported operating results or the way in which we conduct our business. ​ Risks Related to Intellectual Property ​ We have been and may in the future be sued by third parties for various claims including alleged infringement of proprietary rights that can be time-consuming, incur substantial costs, and divert the attention of management, which could adversely affect our operations and cash flow.
The ultimate impact of the COVID-19 pandemic on our business, results of operations, financial condition and cash flows is dependent on future developments, including the duration of the pandemic, the severity of the disease and outbreak, the impact of new strains of the virus, effectiveness and availability of a vaccine, future and ongoing actions that may be taken by governmental authorities, the lockdown orders in China that began in April 2022, the impact on the businesses of our customers and partners, and the length of its impact on the global economy, which are uncertain and are difficult to predict at this time.
The ultimate impact of the COVID-19 pandemic on our business, results of operations, financial condition and cash flows is dependent on future developments, including the duration of the pandemic, the severity of the disease and outbreak, the impact of new strains or resurgence of the virus, future and ongoing actions that may be taken by governmental authorities, the impact on the businesses of our customers and partners, and the length of its impact on the global economy, which are uncertain and are difficult to predict at this time.
Any failure or perceived failure by us to comply with such requirements could have an adverse impact on our business. ​ 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.
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.
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. 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.
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 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.
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.
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.
New York enacted the Stop Hacks and Improve Electronic Data Security Act (SHIELD Act), which became effective March 2020 and requires companies with data relating to New Yorkers to adopt comprehensive cybersecurity programs. These statutes may increase our compliance costs and potential liability.
Furthermore, New York enacted the Stop Hacks and Improve Electronic Data Security Act (SHIELD Act), which became effective March 2020 and requires companies with data relating to New Yorkers to adopt comprehensive cybersecurity programs.
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.
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.
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.
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.
Our failure or inability to develop non-infringing technology or license proprietary rights on a timely basis would harm our business. We may be subject to legal proceedings and claims from time to time in the ordinary course of our business, including claims of alleged infringement of the patents and other intellectual property rights of third parties.
We may be subject to legal proceedings and claims from time to time in the ordinary course of our business, including claims of alleged infringement of the patents and other intellectual property rights of third parties.
In addition, we face actual or potential competition from larger software companies such as Microsoft Corporation, Oracle Corporation, salesforce.com Inc., and ServiceNow, Inc., and similar companies that may attempt to sell customer engagement software to their installed base.
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.
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.
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.
Our failure to expand our operations in an efficient manner could cause our expenses to grow, our revenue to decline or grow more slowly than expected and could otherwise have a material adverse effect on our business, results of operations and financial condition. 21 Table of Contents We employ third-party technologies for use in or with our platform and the inability to license such technologies on commercially reasonable terms or the inability to maintain these licenses or errors in the software we license could result in increased costs, or reduced service levels, which could adversely affect our business .
We employ third-party technologies for use in or with our platform and the inability to license such technologies on commercially reasonable terms or the inability to maintain these licenses or errors in the software we license could result in increased costs, or reduced service levels, which could adversely affect 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.
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.
Even after the COVID-19 pandemic has subsided, we may continue to experience an adverse impact to our business and the value of our securities as a result of its global economic impact, including any recession that has occurred or may occur in the future.
We may continue to experience an adverse impact to our business and the value of our securities as a result of its global economic impact, including any recession that has occurred or may occur in the future. 27 Table of Contents To the extent the COVID-19 pandemic adversely affects our business, results of operations, financial condition and cash flows, it may also heighten many of the other risks described in this “Risk Factors” section.
Data for the Standard & Poor’s 500 Index and the Nasdaq Composite Total Return Index assume no dividends. 31 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. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 6/30/2017 6/30/2018 6/30/2019 6/30/2020 6/30/2021 6/30/2022 eGain Corporation $ 100.00 $ 915.15 $ 493.33 $ 673.33 $ 695.76 $ 590.91 Nasdaq Composite $ 100.00 $ 123.60 $ 133.22 $ 168.73 $ 245.60 $ 188.07 S&P Software & Services Select Industry Index $ 100.00 $ 130.24 $ 155.70 $ 181.79 $ 280.81 $ 182.53 ​ 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. ​ ​ ​ ​ ​ ​ ​ ​ 6/30/2018 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 ​ ​ ​ ​
We believe 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.
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.
In addition, defending our intellectual property rights might entail significant expense. Any of our trademarks or other intellectual property rights may be challenged by others or invalidated through administrative process or litigation. While we have some U.S. patents and pending U.S. patent applications, we may be unable to obtain patent protection for the technology covered in our patent applications.
If we fail to protect our intellectual property rights adequately, our competitors might gain access to our technology, and our business might be harmed. In addition, defending our intellectual property rights might entail significant expense. Any of our trademarks or other intellectual property rights may be challenged by others or invalidated through administrative process or litigation.
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. In addition, customers could cancel or delay product implementations.
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.
Effective patent, trademark, copyright and trade secret protection may not be available to us in every country in which our service is available. The laws of some foreign countries may not be as protective of intellectual property rights as those in the U.S., and mechanisms for enforcement of intellectual property rights may be inadequate.
Furthermore, legal standards relating to the validity, enforceability and scope of protection of intellectual property rights are uncertain. Effective patent, trademark, copyright and trade secret protection may not be available to us in every country in which our service is available.
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.
We have invested, and expect to continue to invest, substantial resources to expand, market, implement, and refine our cloud offerings.
We may initiate claims or litigation against third parties for infringement of our proprietary rights or to establish the validity of our 28 Table of Contents proprietary rights. Any litigation, whether or not it is resolved in our favor, could result in significant expense to us and divert the efforts of our technical and management personnel.
Any litigation, whether or not it is resolved in our favor, could result in significant expense to us and divert the efforts of our technical and management personnel. Our failure or inability to develop non-infringing technology or license proprietary rights on a timely basis would harm our business.
In addition, our existing patents and any patents issued in the future may not provide us with competitive advantages, or may be successfully challenged by third parties. Furthermore, legal standards relating to the validity, enforceability and scope of protection of intellectual property rights are uncertain.
While we have some U.S. patents and pending U.S. patent applications, we may be unable to obtain patent protection for the technology covered in our patent applications. In addition, our existing patents and any patents issued in the future may not provide us with competitive advantages, or may be successfully challenged by third parties.
Accordingly, despite our efforts, we may be unable to prevent third parties from infringing upon or misappropriating our intellectual property. We might be required to spend significant resources to monitor and protect our intellectual property rights.
We might be required to spend significant resources to monitor and protect our intellectual property rights. We may initiate claims or litigation against third parties for infringement of our proprietary rights or to establish the validity of our proprietary rights.
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.
In particular, the corporate decision-making and approval process of our customers and potential customers has become more complicated.
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.
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.
We derived 27% and 31% of our revenue from Europe, Middle East, and Africa sales during the fiscal years ended June 30, 2022 and 2021, respectively.
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 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. ​ 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.
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.
Furthermore, India has recently proposed enacting its own data protection legislation although the specifics of this are yet to be decided. ​ In addition to government activity, privacy advocacy and other industry groups have established or may establish new self-regulatory standards that may place additional burdens on us.
We will continue to monitor developments related to new privacy laws which will require us to incur additional costs and expenses in an effort to monitor and comply with such laws. ​ In addition to government activity, privacy advocacy and other industry groups have established or may establish new self-regulatory standards that may place additional burdens on us.
Removed
Starting in early 2020, we temporarily closed our offices, instituted a global remote work mandate and instituted significant travel restrictions. While we have begun to re-open our offices, the vast majority of our 14 Table of Contents employees are on a hybrid work model.
Added
Accordingly, we believe that period-to-period comparisons of our results of operations should not be relied upon as definitive indicators of future performance.
Removed
We have implemented significant new safety protocols, which may limit the effectiveness and productivity of our employees; ● we may be unable to collect amounts due on billed and unbilled revenue if our customers or partners delay payment or fail to pay us under the terms of our agreements as a result of the impact of the COVID-19 pandemic on their businesses, including their seeking bankruptcy protection or other similar relief.
Added
Our failure to expand our operations in an efficient manner could cause our expenses to grow, our revenue to decline or grow more slowly than expected and could otherwise have a material adverse effect on our business, results of operations and financial condition.
Removed
As a result, our cash flows could be adversely impacted, which could affect our ability to fund future product development and acquisitions or return capital to shareholders; ● we may experience disruptions or delays to our supply chain or fulfillment and delivery operations as a result of the COVID-19 pandemic; ● our marketing effectiveness and demand generation efforts may be impacted due to the cancelling of customer events or shifting events to virtual-only experiences.
Added
On November 3, 2020, California passed the California Privacy Rights Act (CPRA), which became effective on January 1, 2023 and amends and expands the CCPA, including the introduction of sensitive personal information as a new regulated dataset in California that is subject to new disclosure and purpose limitation requirements.
Removed
We may need to postpone or cancel other customer, employee or industry events or other marketing initiatives in the future; ● our business is dependent on attracting and retaining highly skilled employees, and our ability to attract and retain such employees may be adversely impacted by intensified restrictions on travel, immigration, or the availability of work visas during the COVID-19 pandemic; ● 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.
Added
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.
Removed
There are no comparable recent events which may provide guidance as to the effect of the spread of COVID-19 and a pandemic, and, as a result, the ultimate impact of COVID-19 pandemic or a similar health epidemic is highly uncertain and subject to change.
Added
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..
Removed
We do not yet know the full extent of COVID-19’s impact on our business, our operations, or the global economy as a whole. However, the effects could have a material impact on our results of operations, and we will continue to monitor the situation closely.
Added
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.
Removed
To the extent the COVID-19 pandemic adversely affects our business, results of operations, financial condition and cash flows, it may also heighten many of the other risks described in this “Risk Factors” section.
Added
DPDP applies to personal data processed within India and personal data outside the territory of India if such processing is in connection with any activity related to offering of goods or services to data subjects.
Removed
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. These risks in turn could cause our operating results and financial condition to suffer.
Added
Even though the COVID-19 pandemic has presumably subsided, it remains difficult to predict the full impact of the pandemic on the broader economy and how consumer behavior may change, and whether such change is temporary or permanent .
Removed
The 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.
Added
Some of our more significant accounting policies that could be affected by changes in the accounting rules and the related implementation guidelines and interpretations include: ● recognition of revenue; ● contingencies and litigation; and ● accounting for income taxes.
Removed
Some observers have noted that the CCPA and the SHIELD Act could mark the beginning of a trend toward more stringent privacy legislation in the U.S., which could increase our potential liability and adversely affect our business.
Added
The laws of some foreign countries may not be as protective of intellectual property rights as those in the U.S., and mechanisms for enforcement of intellectual property rights may be inadequate. Accordingly, despite our efforts, we may be unable to prevent third parties from infringing upon or misappropriating our intellectual property.

… 10 more changes not shown on this page.

Item 7. Management's Discussion & Analysis

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

68 edited+10 added−21 removed35 unchanged
Biggest changeThe effect of recording stock-based compensation for fiscal year 2022 and 2021 is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended June 30, ​ ​ 2022 2021 Stock-based compensation by type of award ​ (in thousands) Stock options $ 10,923 $ 1,227 Employee stock purchase plan ​ 457 ​ 473 Total stock-based compensation ​ $ 11,380 ​ $ 1,700 43 Table of Contents ​ 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, ​ ​ ​ ​ ​ ​ ​ 2022 2021 Change ​ ​ (in thousands, except percentages) Cost of revenue $ 3,056 $ 326 $ 2,730 837 % Research and development ​ 2,935 ​ 509 ​ 2,427 477 % Sales and marketing ​ 2,367 ​ 657 ​ 1,710 260 % General and administrative ​ 3,022 ​ 208 ​ 2,814 1,354 % Total stock-based compensation ​ $ 11,380 ​ $ 1,700 ​ $ 9,680 569 % ​ The increase in our stock-based compensation expense in fiscal year 2022 compared to fiscal year 2021 was primarily due to an increase in option grant activity. ​ We expect our stock-based compensation expense to decrease in fiscal year 2023. ​ (Loss) Income from Operations ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended June 30, ​ ​ ​ ​ ​ ​ ​ 2022 2021 ​ Change ​ ​ ​ (in thousands, except percentages) (Loss) Income from operations $ (2,138) ​ $ 7,339 ​ $ (9,477) ​ Operating (loss) margin ​ (2) % ​ 9 % ​ ​ ​ ​ ​ Results from operations was loss of $2.1 million in fiscal year 2022, compared to income of $7.3 million in fiscal year 2021.
Biggest changeWe 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.
In accordance with our accounting policy, we recognize accrued interest and penalties related to unrecognized tax benefits as a component of other income (expense), net in the consolidated statements of operations.
In accordance with our accounting policy, we recognize accrued interest and penalties related to unrecognized tax benefits as a component of other (expense) income, net in the consolidated statements of operations.
Management believes that it is useful to exclude certain non-cash charges and non-core operational charges from non-GAAP operating income because (i) the amount of such expenses in any specific period may not directly correlate to the underlying performance of our business operations; and (ii) such expenses can vary significantly between periods as a result of the timing of new stock-based awards and acquisitions.
Management believes that it is useful to exclude certain non-cash charges and non-core operational charges from non-GAAP operating income because (i) the amount of such expenses in any specific period may not directly correlate to the underlying performance of our business operations; and (ii) such expenses can vary significantly between periods as a result of the timing of new stock-based awards.
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 and intangible assets, the valuation of deferred tax allowance, and legal contingencies have the greatest potential impact on our consolidated financial statements.
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.
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 revenues that have not yet been recognized, and include billed deferred revenues, consisting of amounts invoiced to customers whether collected or uncollected which have not been recognized as revenues, as well as unbilled amounts that will be invoiced and recognized as revenues 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 recognized as revenue, as well as unbilled amounts that will be invoiced and recognized as revenue in future periods.
We believe that, if market interest rates were to change immediately and uniformly by 10% from levels between June 30, 2022 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, 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
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.
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.
We consider all available evidence, both positive and negative, including but not limited to earnings history, projected future outcomes, industry and market trends and the nature of each of the deferred tax assets.
We consider all available evidence, both positive and negative, including but not limited to earnings history, expiring attributes, projected future outcomes, industry and market trends and the nature of each of the deferred tax assets.
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.
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.
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, 2022.
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.
Goodwill and Other Intangible Assets We review goodwill annually for impairment or sooner whenever events or changes in circumstances indicate that it may be impaired. These events or circumstances could include a significant change in the business climate, legal factors, operating performance indicators, competition, or sale or disposition of a significant portion of a reporting unit.
Goodwill We review goodwill annually for impairment or sooner whenever events or changes in circumstances indicate that it may be impaired. These events or circumstances could include a significant change in the business climate, legal factors, operating performance indicators, competition, or sale or disposition of a significant portion of a reporting unit.
A 10% increase in the value of the dollar relative to other currencies would decrease the value of these assets by $2.9 million between June 30, 2022 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 $2.1 million between June 30, 2023 and our next financial reporting period. We do not currently use derivative instruments to hedge against foreign exchange risk.
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, 2022 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 ​ 3,955 ​ 1,193 ​ 2,234 ​ 528 ​ — Total ​ $ 3,955 ​ $ 1,193 ​ $ 2,234 ​ $ 528 ​ $ — Off-Balance Sheet Arrangements As of June 30, 2022, 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, 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.
We have not recorded a deferred tax liability related to state income taxes and foreign withholding taxes on approximately $21.3 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 $24.6 million of undistributed earnings of foreign subsidiaries indefinitely invested outside the United States.
We recorded an income tax provision of $1.2 million and tax benefit of $166,000 in the fiscal years ended June 30, 2022 and 2021, 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.
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.
Other income (expense), net was income of $838,000 and expense of $559,000 for the fiscal years ended June 30, 2022 and 2021, respectively. ​ Income Tax Provision ​ Provision for income taxes consists of federal, state and foreign income taxes.
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.
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, 2022 and 2021 totaled approximately $29.2 million and $24.6 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, 2023 and 2022 totaled approximately $20.8 million and $29.2 million, respectively.
Fiscal year 2022 affirmed our view that SaaS clients adopt our product innovation much faster than the perpetual license model and get better service levels.
Historical fiscal years affirmed our view that SaaS clients adopt our product innovation much faster than the perpetual license model and get better service levels.
The transaction price allocated to the remaining performance obligations are influenced by a variety of factors, including seasonality, timing of renewals, average contract terms and foreign currency rates.
The transaction price allocated to the remaining performance obligation is influenced by a variety of factors, including seasonality, timing of renewals, average contract terms and foreign currency exchange rates.
This increase was partially offset by a decline in our legacy revenue of $1.8 million as we continue to migrate legacy perpetual license customers to our SaaS model. ​ Our revenue was impacted by foreign exchange rate fluctuation between the U.S. Dollar, Euro, and British Pound.
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.
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 $1.3 million during the fiscal year ended June 30, 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 $3.9 million or 26% during the fiscal year ended June 30, 2023 from the same period in fiscal year 2022.
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. ​ 38 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 2021 Revenue: ​ ​ ​ ​ ​ Subscription 92 % ​ 92 % Professional services 8 ​ ​ 8 ​ Total revenue 100 ​ ​ 100 ​ Cost of revenue: ​ ​ ​ ​ ​ ​ Cost of subscription 16 ​ ​ 17 ​ Cost of professional services 11 ​ ​ 8 ​ Total cost of revenue 27 ​ ​ 25 ​ Gross profit 73 ​ ​ 75 ​ Operating Expenses: ​ ​ ​ ​ ​ Research and development 27 ​ ​ 23 ​ Sales and marketing 37 ​ ​ 33 ​ General and administrative 12 ​ ​ 10 ​ Total operating expenses 76 ​ ​ 66 ​ (Loss) Income from operations (2) % ​ 9 % ​ 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. ​ 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.
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 2022, our U.S. and foreign income before our income tax provision was a loss of $4.2 million and income of $3.0 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. 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.
As of June 30, 2022, we had a valuation allowance of approximately $32.4 million of which approximately $23.0 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, 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.
The following table presents a reconciliation of GAAP (loss) income from operations to non-GAAP income from operations for each of the following periods: ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended June 30 ​ 2022 2021 (Loss) Income from operations ​ $ (2,138) ​ $ 7,339 Add: ​ ​ ​ ​ ​ ​ Stock-based compensation ​ ​ 11,380 ​ ​ 1,700 Amortization of intangible assets ​ ​ — ​ ​ 26 Non-GAAP income from operations ​ $ 9,242 ​ $ 9,065 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 accounting principles generally accepted in the United States.
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.
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, 2022 and 2021, our cash flows were as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended June 30, ​ 2022 2021 Net cash provided by operating activities $ 8,121 ​ $ 13,862 Net cash used in investing activities ​ (628) ​ ​ (402) Net cash provided by financing activities ​ 3,327 ​ ​ 2,352 ​ Cash provided by operating activities mainly consists of net (loss) 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 45 Table of Contents 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 $5.7 million during the fiscal year ended June 30, 2022, driven primarily by the change in our net loss, stock-based compensation, the timing of prepayments received from customers for new cloud arrangements, and the renewal of existing cloud and support arrangements, which is a significant source of operating cash flows. ​ Net cash used in investing activities decreased by $226,000 during the fiscal year ended June 30, 2022, driven primarily by 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. ​ 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.
In fiscal year 2021, our U.S. and foreign income before our income tax benefit was $5.0 million and $1.8 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.
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.
Included in these costs are salaries, benefits, bonuses, and stock-based compensation and 42 Table of Contents allocated overhead.
Included in these costs are salaries, benefits, bonuses, and stock-based compensation and allocated overhead.
As of June 30, 2022, our remaining performance obligations were $100.5 million of which we expect to recognize $63.2 million and $37.3 million as revenue within one year and beyond one year, respectively. ​ 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, 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.
SaaS Revenues 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 OEM royalties and associated support; and ● Legacy revenue, which is defined as revenue from license, maintenance and support contracts on perpetual license arrangements that we no longer sell. ​ 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 ​ ​ ​ ​ ​ ​ 2022 2021 ​ Change Revenue ​ (in thousands, except percentages) SaaS revenue ​ $ 80,904 ​ $ 66,929 ​ $ 13,975 21 % Legacy revenue ​ 3,653 ​ 5,442 ​ ​ (1,789) (33) % Total SaaS and legacy revenue ​ $ 84,557 ​ $ 72,371 ​ $ 12,186 ​ ​ ​ 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. ​ ​ ​ ​ ​ 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.
The change in our effective tax rate for fiscal year 2022 as compared to fiscal year 2021 was primarily due to the expiration of tax attributes, the change in valuation allowance, foreign rate differential, stock-based compensation and the research and development tax credit.
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.
Legacy revenue represents 4% and 7% of total revenue for the fiscal years ended June 30, 2022 and 2021, respectively. ​ Excluding a decrease of $5,000 due to foreign exchange rate fluctuation, legacy revenue decreased by $1.8 million during the fiscal year ended June 30, 2022, as compared to the comparable period in 2021. ​ ​ Professional Services Revenue ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended June 30, ​ ​ ​ ​ ​ ​ ​ 2022 2021 Change Revenue ​ (in thousands, except percentages) Professional services revenue ​ $ 7,394 ​ $ 5,916 ​ $ 1,478 25 % Percentage of total revenue ​ 8 % 8 % ​ ​ ​ ​ Professional services revenue includes consulting, implementation, training, and managed services.
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.
As of June 30, 2022, our deferred revenue was $49.4 million as compared to $49.5 million as of June 30, 2021. ​ 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.
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.
Liquidity and Capital Resources ​ Overview ​ As of June 30, 2022, our principal sources of liquidity were cash and cash equivalents, and accounts receivable totaling $99.1 million.
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.
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 increased 30% to $33.7 million during the fiscal year ended June 30, 2022, from $26.0 million in the comparable period in 2021.
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.
Our cash, cash equivalents and restricted cash were $72.2 million and $63.2 million as of June 30, 2022 and 2021, respectively. ​ As of June 30, 2022, our working capital was $42.1 million compared to $31.1 million as of June 30, 2021.
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.
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 AI and analytics. We sell mostly to large enterprises across financial services, telecommunications, retail, government, healthcare, and utilities.
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.
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 increased 47% to $11.4 million during the fiscal year ended June 30, 2022, from $7.7 million in the comparable period in 2021.
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.
Foreign exchange rate fluctuation resulted in a decrease of $354,000 and an increase of $2.0 million in total revenue during the fiscal years ended June 30, 2022 and 2021, respectively. ​ ​ ​ ​ ​ 39 Table of Contents Subscription Revenue ​ SaaS Revenue ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended June 30, ​ ​ ​ ​ ​ ​ 2022 2021 Change Revenue ​ (in thousands, except percentages) SaaS revenue ​ $ 80,904 ​ $ 66,929 ​ $ 13,975 21 % Percentage of total revenue ​ 88 % 85 % ​ ​ ​ ​ ​ SaaS revenue includes revenue from cloud delivery arrangements, term licenses and embedded OEM royalties and associated support.
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.
Under the terms of the agreement, the customer is to provide a combined fixed fee, per agent, for each software license sold containing the embedded software to us. These embedded OEM royalties are included as subscription revenue. Under revenue guidance, since these arrangements are for sales-based licenses of intellectual property, we recognize revenue only as the subsequent sale occurs.
Under the terms of the agreement, the customer is to provide a combined fixed fee, per agent, for each software license sold containing the embedded software to us. These embedded OEM royalties are included as subscription revenue.
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, and amortization of intangible assets. ​ Research and development expense increased 36% to $24.4 million during the fiscal year ended June 30, 2022, from $17.9 million in the comparable period in 2021.
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.
Interest Income ​ Interest income consists primarily of interest earned on money market funds. Interest income was $94,000 and $13,000 for the fiscal years ended June 30, 2022 and 2021, respectively. ​ 44 Table of Contents Other Income (Expense), Net ​ Other income (expense), net primarily included foreign exchange rate fluctuations on international trade receivables.
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.
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 ​ ​ ​ ​ ​ 2022 2021 Change Revenue ​ (in thousands, except percentages) SaaS revenue ​ $ 80,904 ​ $ 66,929 ​ $ 13,975 21 % Professional services ​ 7,394 ​ 5,916 ​ 1,478 25 % Total SaaS and professional services revenue ​ $ 88,298 ​ $ 72,845 ​ $ 15,453 ​ ​ ​ ​ ​ 34 Table of Contents Non-GAAP Operating Income ​ Non-GAAP operating income is defined as (loss) income from operations, adjusted for the impact of stock-based compensation expense and amortization of acquired intangible assets.
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.
SaaS revenue represents 88% and 85% of total revenue for the fiscal years ended June 30, 2022 and 2021, respectively. ​ Excluding a decrease of $317,000 due to foreign exchange rate fluctuation, SaaS revenue increased by $14.3 million during the fiscal year ended June 30, 2022, as compared to the comparable period in 2021.
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.
Revenues from SaaS increased by $14.0 million during the fiscal year ended June 30, 2022, as compared to the comparable period in 2021. ​ SaaS revenue was $80.9 million and $66.9 million during the fiscal years ended June 30, 2022 and 2021, respectively, which represented an increase of 21% or $14.0 million.
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.
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, ​ ​ ​ ​ ​ ​ 2022 2021 ​ Change Revenue ​ (in thousands, except percentages) Subscription ​ $ 84,557 ​ $ 72,371 ​ $ 12,186 17 % Professional services ​ 7,394 ​ 5,916 ​ ​ 1,478 25 % Total revenue ​ $ 91,951 ​ $ 78,287 ​ $ 13,664 ​ ​ ​ Total Revenue Total revenue increased $13.7 million during the fiscal year ended June 30, 2022, from the comparable period in 2021, largely due to increased revenues from SaaS of $14.0 million and professional service revenue of $1.5 million in fiscal year 2022.
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.
See our “Risk Factors” for further discussion of the possible impact of the COVID-19 pandemic on our business. ​ Key Financial Measures We monitor the key financial performance measures set forth below as well as cash and cash equivalents and available debt capacity, which are discussed in Liquidity and Capital Resources, to help us evaluate trends, establish budgets, measure the effectiveness of our sales and marketing efforts and assess operational effectiveness and efficiencies.
We believe SaaS clients enjoy up to 50% faster time to value from their eGain investment. ​ Key Financial Measures We monitor the key financial performance measures set forth below as well as cash and cash equivalents and available debt capacity, which are discussed in Liquidity and Capital Resources, to help us evaluate trends, establish budgets, measure the effectiveness of our sales and marketing efforts and assess operational effectiveness and efficiencies.
We review our trade receivables by aging category to identify specific customers with known disputes or collectability issues. We exercise judgment when determining the adequacy of these reserves as we evaluate historical bad debt trends, general economic conditions in the U.S. and internationally, and changes in customer financial conditions.
We exercise judgment when determining the adequacy of these reserves as we evaluate historical bad debt trends, general economic conditions in the U.S. and internationally, and changes in customer financial conditions.
We expect our SaaS revenue to increase in future periods. ​ Legacy Revenue ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended June 30, ​ ​ ​ ​ ​ ​ ​ 2022 ​ 2021 ​ Change Revenue ​ (in thousands, except percentages) Legacy revenue ​ $ 3,653 ​ ​ $ 5,442 ​ ​ $ (1,789) (33) % Percentage of total revenue ​ 4 % ​ 7 % ​ ​ ​ ​ ​ Legacy revenue is associated with license, maintenance and support contracts on perpetual license arrangements that we no longer sell.
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.
Dollar, Euro, British Pound and Indian Rupee, sales and marketing expense increased by $7.9 million primarily due to increases of (i) $6.8 million in personnel-related costs, of which $2.4 million is associated with stock-based compensation cost, and (ii) $1.1 million in marketing program costs; partially offset by a decrease of $4,000 in outside consulting costs. ​ Excluding any future foreign exchange rate fluctuation, we expect our sales and marketing expense to increase as a percentage of total revenue in future quarters based on our current business plan. ​ General and Administrative ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended June 30, ​ ​ ​ ​ ​ ​ ​ 2022 2021 Change ​ ​ (in thousands, except percentages) General and administrative $ 11,419 $ 7,749 $ 3,670 47 % Percentage of total revenue ​ 12 % 10 % ​ ​ ​ ​ 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 $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.
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 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 .
We experienced a decrease of $1.8 million for the fiscal year ended June 30, 2022. This decrease was primarily due to our focus on migrating our legacy customers to SaaS.
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.
Accounts Receivable and Allowance for Doubtful Accounts We extend unsecured credit to customers on a regular basis. 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.
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.
We recorded a negative operating margin of 2% in fiscal year 2022, and a positive operating margin of 9% in fiscal year 2021. During the fiscal year ended June 30, 2022, SaaS revenue increased by $14.0 million to $80.9 million compared to $66.9 million in fiscal year 2021 due to the continued growth of our cloud delivery business.
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.
Dollar, Euro, British Pound and Indian Rupee, research and development expense increased by $6.6 million primarily due to increases of (i) $6.3 million in personnel-related costs, of which $2.9 million is associated with stock-based compensation cost, and (ii) $258,000 in outside consulting costs. ​ Excluding any future foreign exchange rate fluctuation, we expect our research and development expense to increase in future periods based on our product development plans. ​ ​ Sales and Marketing ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended June 30, ​ ​ ​ ​ ​ ​ ​ 2022 2021 Change ​ ​ (in thousands, except percentages) Sales and marketing $ 33,746 $ 25,999 $ 7,747 30 % Percentage of total revenue ​ 37 % 33 % ​ ​ ​ Sales and marketing expense primarily consists of personnel-related expenses directly associated with our sales, marketing, and business development staff.
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.
Professional services revenue represents 8% of total revenue for both fiscal years ended June 30, 2022 and 2021. ​ Excluding a decrease of $32,000 due to foreign exchange rate fluctuation, professional services revenues increased by $1.5 million during the fiscal year ended June 30, 2022, as compared to the comparable period in 2021. ​ Revenue by Geography ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended June 30, ​ ​ ​ ​ ​ ​ 2022 2021 ​ Change Revenue ​ (in thousands, except percentages) North America ​ $ 66,793 ​ $ 54,380 ​ $ 12,413 23 % Europe, Middle East, & Africa ​ 25,158 ​ 23,907 ​ ​ 1,251 5 % Total revenue ​ $ 91,951 ​ $ 78,287 ​ $ 13,664 ​ ​ ​ Revenue from North America sales increased by 23% from $54.4 million during the fiscal year ended June 30, 2021 to $66.8 million during the fiscal year ended June 30, 2022 due to an increase of (i) $12.6 million in SaaS revenue, and (ii) $1.3 million in professional service revenue; offset by a decrease of (i) $1.5 million in legacy revenue. ​ Revenue from Europe, Middle East, and Africa sales increased by 5% from $23.9 million during the fiscal year ended June 30, 2021 to $25.2 million during the fiscal year ended June 30, 2022 due to an increase of (i) $1.4 million in SaaS revenue and (ii) $208,000 in professional services revenue; offset by a decrease of $287,000 in legacy revenue. ​ Cost of Revenue ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended June 30, ​ ​ ​ ​ ​ ​ ​ 2022 2021 Change Cost of revenue ​ (in thousands, except percentages) Subscription ​ $ 14,780 ​ $ 13,507 ​ $ 1,273 9 % Professional services ​ 9,757 ​ 5,760 ​ ​ 3,997 69 % Total cost of revenue ​ $ 24,537 ​ $ 19,267 ​ $ 5,270 ​ ​ Percentage of total revenue ​ 27 % 25 % ​ ​ ​ Gross margin ​ 73 % 75 % ​ ​ ​ ​ 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, 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.
Dollar, Euro, British Pound and Indian Rupee, general and administrative expense increased by $3.7 million primarily due to increases of (i) $3.7 million in personnel-related expenses, of which $3.0 million is associated with stock-based compensation cost, (ii) $147,000 in legal expenses, (iii) $146,000 in accounting, audit, and administrative expenses, (iv) $12,000 in investor relations expense, and (v) $3,000 in outside consulting cost; partially offset by a decrease of $319,000 in bad debt expense. ​ Excluding any future foreign exchange rate fluctuation, we expect our general and administrative expense to increase or remain relatively consistent as a percentage of total revenue in future periods based on our current business plan. ​ 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 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.
In addition, we evaluate purchased intangible assets to determine that all such assets have determinable lives. 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, 2022 and 2021.
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.
The transaction price is allocated to various performance obligations based on their stand-alone selling prices. Revenue allocated to each performance obligation is recognized as work is performed. Our consulting and implementation service contracts are bid either on a time-and-materials basis or on a fixed-fee basis. Fixed fees are generally paid on milestone billing at pre-determined points in the contract.
Our consulting and implementation service contracts are bid either on a time-and-material basis or on a fixed-fee basis. Managed services contracts are bid on a time-and-material basis. Fixed fees are generally paid on milestone billing at pre-determined points in the contract.
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 increased by $975,000 during the fiscal year ended June 30, 2022, principally consisted of proceeds from employee stock plans. ​ Commitments Our principal commitments consist of obligations under leases for office space.
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.
Excluding any future foreign exchange rate fluctuation, we expect our cost of subscription revenue to increase in absolute dollar terms as revenues increase but expect subscription revenue gross margins to improve or remain relatively consistent. ​ 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 increased $4.0 million during the fiscal year ended June 30, 2022 from the comparable period in 2021.
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.
Leading brands use eGain’s cloud software to improve customer satisfaction, empower agents, reduce service cost, and boost sales. We are headquartered in the United States. We also operate in 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.
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.
Dollar, Euro, British Pound and Indian Rupee, cost of professional services revenue increased by $3.9 million for the fiscal year ended June 30, 2022, from the comparable period in 2021. ​ Operating Expenses ​ Research and Development ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended June 30, ​ ​ ​ ​ ​ ​ ​ 2022 2021 Change ​ ​ (in thousands, except percentages) Research and development $ 24,387 $ 17,933 $ 6,454 36 % Percentage of total revenue ​ 27 % 23 % ​ ​ ​ ​ 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 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.
Unbilled accounts receivables are recorded when revenue recognized on the contract exceeds billings, pursuant to contract provisions, and become billable at contractually specified dates. Tax Legislation 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.
Unbilled accounts receivables are recorded when revenue recognized on the contract exceeds billings, pursuant to contract provisions, and become billable at contractually specified dates.
Dollar, Euro, British Pound and Indian Rupee, the increase in total costs and operating expenses in fiscal year 2022 was $23.5 million primarily due to increases of (i) $21.4 million in personnel-related expenses, of which $11.4 million is associated with stock-based compensation cost, (ii) $1.1 million in marketing costs, (iii) $951,000 in cloud computing costs, (iv) $147,000 in legal expenses, (v) $146,000 in accounting and administrative services, (vi) $101,000 in outside consulting costs, and (vii) $12,000 in investor relations cost; partially offset by a decrease of (i) $319,000 in bad debt expenses and (ii) $26,000 in intangible asset amortization.
The 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.
Fiscal Year 2022 Compared with Fiscal Year 2021 Our effective tax rate for fiscal years 2022 and 2021 was a tax provision of $1.2 million and a tax benefit of $166,000, respectively.
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.
As we continue to onboard new customers and migrate legacy customers to SaaS, we expect the time required for product deployment and implementation projects to decrease further. ​ Professional services revenue was $7.4 million during the fiscal year ended June 30, 2022, which represented an increase of 25% or $1.5 million.
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.
That is, organizations seeking to better serve customers at scale while coping with content silos, process complexity, and regulatory compliance. 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).
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.
Removed
Today, we only sell SaaS to new clients and are actively migrating our remaining perpetual license clients to SaaS.
Added
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.
Removed
We believe SaaS clients enjoy up to 50% faster time to value from their eGain investment. ​ COVID-19 ​ Since early 2020, several public health organizations have recommended, and many local governments have implemented, certain measures to slow and limit the transmission of COVID-19, including shelter-in-place and social distancing orders, which has resulted in a significant deterioration of economic conditions in the countries in which we operate. ​ The impact of COVID-19 and the related disruptions caused to the global economy and our business did not have a material adverse impact on our business during the year ended June 30, 2022.
Added
Under revenue guidance, since these arrangements are for usage-based licenses of intellectual property, we estimate revenue recognized only as the performance obligation of the OEM royalties has been satisfied or partially satisfied. ​ Professional Services Revenue ​ Professional services revenue includes system implementation, consulting, training, and managed services.
Removed
However, the ongoing spread of the COVID-19 virus, including new variants, current availability of COVID-19 vaccinations, and recent lockdown orders in China, caused us to adapt and modify our business practices, including implementing hybrid work model policies and limiting travel by our employees, among other things. ​ In response to the ongoing spread of COVID-19, we have taken the following measures to date: ​ ● Implemented hybrid work model and social distancing policies throughout our organization ; ● Limited employee travel ; ● Cancelled certain sales and marketing events; and ● Looked to our customer’s needs to best support their operations during this crisis. ​ The effect of the COVID-19 pandemic, may not be fully reflective in our results of operations and overall financial performance until further periods, if at all.
Added
The transaction price is allocated to various performance obligations based on their standalone selling prices (SSP). Revenue allocated to each performance obligation is recognized as work is performed. Managed services include a comprehensive set of processes and activities that range from implementation to monitoring the evolution and support of our solutions in a company.
Removed
The impact, if any, of operational changes we may implement is uncertain, 33 Table of Contents but changes we have implemented as of the filing date have not affected and are not expected to affect our ability to maintain operations.
Added
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.
Removed
We will continuously monitor the situation to determine what actions may be necessary or appropriate to address the impact of the COVID-19 pandemic, which may include actions mandated or recommended by federal, state or local government authorities.
Added
The CARES Act had no impact on our consolidated financial statements. Beginning in 2022, the TCJA eliminates the option to immediately deduct research and development expenditures and requires taxpayers to capitalize and amortize domestic expenditures over five years and foreign expenditures over 15 years.
Removed
However, since such sales are reported by the customer with a quarter in arrears, such revenue is recognized at the time it is reported and paid by the customer given that any estimated variable consideration would have to be fully constrained due to the unpredictability of such estimate and the unavoidable risk that it may lead to significant revenue reversals. ​ Professional Services Revenue ​ Professional services revenue includes system implementation, consulting, training, and managed services.
Added
While the mandatory capitalization requirement increases our deferred tax assets and cash tax liabilities for 2022, the tax year in which the provision took effect, the impact will decline annually over the five-year amortization period to an immaterial amount in year six.

… 19 more changes not shown on this page.

Other EGAN 10-K year-over-year comparisons