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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2025

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 001-35314

eGain Corporation

(Exact name of registrant as specified in its charter)


Delaware		77-0466366
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1252 Borregas Avenue, Sunnyvale, CA		94089
(Address of principal executive offices)		(Zip Code)

(408) 636-4500

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	EGAN	The Nasdaq Stock Market, LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:


Large Accelerated Filer	☐	Accelerated Filer	☐
Non-accelerated Filer	☒	Smaller Reporting Company	☒
		Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

The number of outstanding shares of the registrant’s common stock, par value $0.001 per share, was 27,386,110 as of January 27, 2026.

Table of Contents

EGAIN CORPORATION

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2025

TABLE OF CONTENTS

		Page

PART I.	FINANCIAL INFORMATION	2
Item 1.	Financial Statements (Unaudited)	2
	Condensed Consolidated Balance Sheets as of December 31, 2025 and June 30, 2025	2
	Condensed Consolidated Statements of Operations for the Three and Six Months Ended December 31, 2025 and 2024	3
	Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended December 31, 2025 and 2024	4
	Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended December 31, 2025 and 2024	5
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended December 31, 2025 and 2024	9
	Notes to Condensed Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	37
Item 4.	Controls and Procedures	37
PART II.	OTHER INFORMATION	39
Item 1.	Legal Proceedings	39
Item 1A.	Risk Factors	39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	56
Item 5.	Other Information	57
Item 6.	Exhibits	58
	Signatures	59

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

EGAIN CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except par value data)

(unaudited)


	December 31,			June 30,
	2025			2025
ASSETS
Current assets:
Cash and cash equivalents	$	83,059		$	62,909
Restricted cash		8			8
Accounts receivable, less provision for credit losses of $2 and $7 as of December 31, 2025 and June 30, 2025, respectively		13,769			32,775
Costs capitalized to obtain revenue contracts, net		970			1,148
Prepaid expenses		1,600			2,841
Other current assets		682			886
Total current assets		100,088			100,567
Property and equipment, net		930			670
Operating lease right-of-use assets		3,230			3,530
Costs capitalized to obtain revenue contracts, net of current portion		1,291			1,460
Goodwill		13,186			13,186
Other assets, net		28,042			28,592
Total assets	$	146,767		$	148,005

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	1,422		$	2,596
Accrued compensation		4,782			6,749
Accrued liabilities		2,974			2,821
Operating lease liabilities		1,517			1,220
Deferred revenue		42,089			48,765
Total current liabilities		52,784			62,151
Deferred revenue, net of current portion		2,358			1,766
Operating lease liabilities, net of current portion		1,995			2,449
Other long-term liabilities		845			908
Total liabilities		57,982			67,274
Commitments and contingencies (Note 6)
Stockholders' equity:
Common stock, par value $0.001 per share - authorized: 60,000 shares; issued: 33,766 and 33,237 shares as of December 31, 2025 and June 30, 2025, respectively; outstanding: 27,381 and 27,083 shares as of December 31, 2025 and June 30, 2025, respectively		34			33
Additional paid-in capital		416,258			411,253
Treasury stock, at cost: 6,385 and 6,154 shares of common stock as of December 31, 2025 and June 30, 2025, respectively		(40,252)			(38,812)
Accumulated other comprehensive loss		(1,004)			(336)
Accumulated deficit		(286,251)			(291,407)
Total stockholders' equity		88,785			80,731
Total liabilities and stockholders' equity	$	146,767		$	148,005

See accompanying notes to condensed consolidated financial statements.

Table of Contents

EGAIN CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)


	Three Months Ended					Six Months Ended
	December 31,					December 31,
	2025			2024		2025			2024
Revenue:
SaaS	$	21,799		$	20,847	$	43,699		$	40,667
Professional services		1,180			1,542		2,788			3,521
Total revenue		22,979			22,389		46,487			44,188
Cost of revenue:
Cost of SaaS		4,438			4,626		8,609			9,148
Cost of professional services		1,734			2,054		3,394			4,198
Total cost of revenue		6,172			6,680		12,003			13,346
Gross profit		16,807			15,709		34,484			30,842
Operating expenses:
Research and development		7,277			7,708		14,592			15,129
Sales and marketing		5,174			5,251		9,203			10,011
General and administrative		2,310			2,100		5,810			4,543
Total operating expenses		14,761			15,059		29,605			29,683
Income from operations		2,046			650		4,879			1,159
Interest income		624			661		1,086			1,432
Other income (expense), net		(32)			(431)		423			(571)
Income before income tax provision		2,638			880		6,388			2,020
Income tax provision		(302)			(209)		(1,232)			(697)
Net income	$	2,336		$	671	$	5,156		$	1,323
Per share information:
Earnings per share:
Basic	$	0.09		$	0.02	$	0.19		$	0.05
Diluted	$	0.08		$	0.02	$	0.19		$	0.05
Weighted-average shares used in computation:
Basic		27,186			28,573		27,074			28,622
Diluted		28,349			29,059		27,858			29,176

See accompanying notes to condensed consolidated financial statements.

Table of Contents

EGAIN CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)


	Three Months Ended				Six Months Ended
	December 31,				December 31,
	2025		2024		2025		2024
Net income	$	2,336	$	671	$	5,156	$	1,323
Other comprehensive income, net of taxes:
Foreign currency translation adjustments		3		(92)		(668)		298
Total comprehensive income	$	2,339	$	579	$	4,488	$	1,621

See accompanying notes to condensed consolidated financial statements.

Table of Contents

EGAIN CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

(unaudited)


	Three Months Ended December 31, 2025
	Common Stock					Additional Paid-in			Treasury Stock					Accumulated Other Comprehensive			Accumulated			Total Stockholders'
	Shares		Amount			Capital			Shares		Amount			Loss			Deficit			Equity
Balances as of September 30, 2025	26,914		$	33		$	413,372		6,385		$	(40,283)		$	(1,007)		$	(288,587)		$	83,528
Issuance of common stock upon vesting of restricted stock units	162			—			—		—			—			—			—			—
Issuance of common stock upon exercise of stock options	235			1			1,921		—			—			—			—			1,922
Issuance of common stock in connection with employee stock purchase plan	70			—			320		—			—			—			—			320
Repurchase of common stock and related	—			—			—		—			31			—			—			31
Stock-based compensation	—			—			645		—			—			—			—			645
Foreign currency translation adjustments	—			—			—		—			—			3			—			3
Net income	—			—			—		—			—			—			2,336			2,336
Balances as of December 31, 2025	27,381		$	34		$	416,258		6,385		$	(40,252)		$	(1,004)		$	(286,251)		$	88,785

See accompanying notes to condensed consolidated financial statements.

Table of Contents

EGAIN CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

(unaudited)


	Three Months Ended December 31, 2024
	Common Stock					Additional Paid-in			Treasury Stock				Notes Receivable From			Accumulated Other Comprehensive			Accumulated			Total Stockholders'
	Shares		Amount			Capital			Shares		Amount		Stockholders			Loss			Deficit			Equity
Balances as of September 30, 2024	28,522		$	33		$	408,211		4,208		$	(27,616)	$	(21)		$	(1,850)		$	(323,009)		$	55,748
Issuance of common stock upon exercise of stock options	117			—			294		—			—		—			—			—			294
Issuance of common stock upon vesting of restricted stock units	169			—			—		—			—		—			—			—			—
Issuance of common stock in connection with employee stock purchase plan	94			—			424		—			—		—			—			—			424
Repurchase of common stock	(421)			—			—		421			(2,409)		—			—			—			(2,409)
Stock-based compensation	—			—			622		—			—		—			—			—			622
Foreign currency translation adjustments	—			—			—		—			—		—			(92)			—			(92)
Net income	—			—			—		—			—		—			—			671			671
Balances as of December 31, 2024	28,481		$	33		$	409,551		4,629		$	(30,025)	$	(21)		$	(1,942)		$	(322,338)		$	55,258

See accompanying notes to condensed consolidated financial statements.

Table of Contents

EGAIN CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (cont.)

(in thousands)

(unaudited)


	Six Months Ended December 31, 2025
	Common Stock					Additional Paid-in			Treasury Stock					Accumulated Other Comprehensive			Accumulated			Total Stockholders'
	Shares		Amount			Capital			Shares		Amount			Loss			Deficit			Equity
Balances as of June 30, 2025	27,083		$	33		$	411,253		6,154		$	(38,812)		$	(336)		$	(291,407)		$	80,731
Issuance of common stock upon vesting of restricted stock units	162			—			—		—			—			—			—			—
Issuance of common stock upon exercise of stock options	297			1			2,167		—			—			—			—			2,168
Issuance of common stock in connection with employee stock purchase plan	70			—			320		—			—			—			—			320
Issuance of common stock warrant for services	—			—			1,350		—			—			—			—			1,350
Repurchase of common stock	(231)			—			—		231			(1,440)			—			—			(1,440)
Stock-based compensation	—			—			1,168		—			—			—			—			1,168
Foreign currency translation adjustments	—			—			—		—			—			(668)			—			(668)
Net income	—			—			—		—			—			—			5,156			5,156
Balances as of December 31, 2025	27,381		$	34		$	416,258		6,385		$	(40,252)		$	(1,004)		$	(286,251)		$	88,785

See accompanying notes to condensed consolidated financial statements.

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EGAIN CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (cont.)

(in thousands)

(unaudited)


	Six Months Ended December 31, 2024
	Common Stock					Additional Paid-in		Treasury Stock				Notes Receivable From		Accumulated Other Comprehensive		Accumulated		Total Stockholders'
	Shares		Amount			Capital		Shares		Amount		Stockholders		Loss		Deficit		Equity
Balances as of June 30, 2024	29,160		$	33		$	407,416	3,538		$	(23,031)	$	(21)	$	(2,240)	$	(323,661)	$	58,496
Issuance of common stock upon exercise of stock options	149			—			457	—			—		—		—		—		457
Issuance of common stock upon vesting of restricted stock units	169			—			—	—			—		—		—		—		—
Issuance of common stock in connection with employee stock purchase plan	94			—			424	—			—		—		—		—		424
Repurchase of common stock	(1,091)			—			—	1,091			(6,994)		—		—		—		(6,994)
Stock-based compensation	—			—			1,254	—			—		—		—		—		1,254
Foreign currency translation adjustments	—			—			—	—			—		—		298		—		298
Net income	—			—			—	—			—		—		—		1,323		1,323
Balances as of December 31, 2024	28,481		$	33		$	409,551	4,629		$	(30,025)	$	(21)	$	(1,942)	$	(322,338)	$	55,258

See accompanying notes to condensed consolidated financial statements.

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EGAIN CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


		Six Months Ended
		December 31,
		2025			2024
Cash flows from operating activities:
Net income		$	5,156		$	1,323
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of costs capitalized to obtain revenue contracts			626			684
Amortization of right-of-use assets			572			545
Depreciation and amortization			183			175
Provision for (recovery of) credit losses			(5)			73
Deferred income taxes			484			(41)
Stock-based compensation			1,168			1,254
Issuance of common stock warrant for services			1,350			—
Gain on disposal of property and equipment			—			(6)
Changes in operating assets and liabilities:
Accounts receivable			18,905			15,823
Costs capitalized to obtain revenue contracts			(297)			(518)
Prepaid expenses			1,750			679
Other current assets			269			328
Other non-current assets			(28)			119
Accounts payable			(1,691)			(886)
Accrued compensation			(1,935)			(1,395)
Accrued liabilities			397			(1,544)
Deferred revenue			(5,903)			(8,835)
Operating lease liabilities			(427)			(462)
Other long-term liabilities			(34)			62
Net cash provided by operating activities			20,540			7,378
Cash flows from investing activities:
Purchases of property and equipment			(458)			(248)
Net cash used in investing activities			(458)			(248)
Cash flows from financing activities:
Proceeds from exercise of stock options			2,168			457
Proceeds from employee stock purchase plan			320			424
Repurchases of common stock			(1,440)			(6,994)
Net cash provided by (used in) financing activities			1,048			(6,113)
Effect of change in exchange rates on cash and cash equivalents			(980)			(489)
Net increase in cash, cash equivalents and restricted cash			20,150			528
Cash, cash equivalents and restricted cash at beginning of period			62,917			70,011
Cash, cash equivalents and restricted cash at end of period		$	83,067		$	70,539

Supplemental cash flow disclosures:
Cash paid for taxes		$	133		$	691
Right-of-use (ROU) assets and lease liabilities recognized from lease modification		$	338		$	599
Non-cash items:
Purchases of equipment included in accounts payable		$	55		$	4

See accompanying notes to condensed consolidated financial statements.

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EGAIN CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

Organization and Nature of Business

eGain automates customer experience with an AI knowledge hub solution. We sell our SaaS solution to enterprises who want to improve customer experience while reducing cost, by using AI to synthesize and deliver trusted, consumable answers from a knowledge hub. We are headquartered in Sunnyvale, California, USA. We also operate in the United Kingdom and India.

Fiscal Year

The Company’s fiscal year ends on June 30. References to fiscal year 2026 refers to the Company’s fiscal year ending June 30, 2026. References to fiscal year 2025 refers to the Company’s fiscal year ended June 30, 2025.

Basis of Presentation

The accompanying condensed consolidated balance sheet as of December 31, 2025 and the condensed consolidated statements of operations, comprehensive income, and stockholders’ equity for the three and six months ended December 31, 2025 and cash flows for the six months ended December 31, 2025 and 2024, are unaudited. The condensed consolidated balance sheet as of June 30, 2025 was derived from audited consolidated financial statements as of that date but does not include all the information and footnotes required by generally accepted accounting principles (GAAP) for complete financial statements.

Certain information and footnote disclosures, normally included in consolidated financial statements prepared in accordance with GAAP, have been condensed or omitted pursuant to such rules and regulations, although we believe that the disclosures made are adequate to make the information not misleading. In our opinion, the unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of our financial position, results of operations, and cash flows for the periods presented.

These condensed consolidated financial statements and notes should be read in conjunction with our audited consolidated financial statements and accompanying notes for the fiscal year ended June 30, 2025, included in our Annual Report on Form 10-K. The results of our operations for the interim periods presented are not necessarily indicative of results that may be expected for any other interim period or for the full fiscal year ending June 30, 2026.

Principles of Consolidation

We prepared the condensed consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) and included the accounts of our wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated.

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Use of Estimates

The preparation of financial statements requires us to make estimates and assumptions in the condensed consolidated financial statements and accompanying notes. Actual results could differ significantly from estimates. We make estimates that we believe to be reasonable based on historical experience and other assumptions. Significant estimates and assumptions made by management include the following:

●

Standalone selling price (SSP) of performance obligations for contracts with multiple performance obligations;

●

Estimate of variable consideration for performance obligations in connection with Topic 606;

●

Period of benefit associated with capitalized costs to obtain revenue contracts;

●

Valuation, measurement and recognition of current and deferred income taxes;

●

Fair value of stock-based awards;

●

Fair value of warrants; and

●

Lease term and incremental borrowing rate for lease liabilities.

Recent Accounting Pronouncements

Pronouncements Not Yet Adopted

In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires disaggregated disclosure of income statement expenses for public business entities. The objective of this guidance is to improve the disclosures about a public business entity’s expenses and address requests from investors for more detailed information about the types of expenses (including purchases of inventory, employee compensation, depreciation, amortization, and depletion) included in each relevant expense caption. This ASU is effective for fiscal years beginning after December 15, 2026 (our fiscal year 2028), and interim reporting periods beginning after December 15, 2027, with early and retrospective adoption permitted. We are currently evaluating the impact of this update on our condensed consolidated financial statements and related disclosures.

Revenue Recognition

Revenue Recognition Policy

Our revenue is comprised of two categories including SaaS and professional services. SaaS revenue includes cloud delivery arrangements, term licenses, embedded original equipment manufacturer (OEM) royalties, and associated support. An immaterial amount of SaaS revenue is comprised of our legacy revenue which is associated with license, maintenance, and support contracts on perpetual license arrangements that we no longer sell. Professional services include consulting, implementation, training, and managed services.

Significant Judgment Applied in the Determination of Revenue Recognition

We enter into contractual arrangements with customers that may include promises to transfer multiple services, such as subscription, support, and professional services. With respect to our business, a performance obligation is a promise to transfer a service to a customer that is distinct. Significant judgment is required to determine whether services are distinct performance obligations that should be accounted for separately or combined as one unit of accounting. Additionally, significant judgment is required to determine the timing of revenue recognition.

We allocate the transaction price to each performance obligation based on relative SSP. The SSP is the price at which we would sell a promised service separately to one of our customers. Judgment is required to determine the SSP for each distinct performance obligation.

We determine the SSP by considering our pricing objectives in relation to market demand. Consideration is placed based on our history of discounting prices, size and volume of transactions involved, customer demographics and geographic locations, price lists, contract prices, and our market strategy.

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Determination of Revenue Recognition

Under Topic 606, we recognize revenue upon the transfer of control of promised services to our customers in the amount that is commensurate with the consideration that we expect to receive in exchange for those services. If consideration includes a variable amount in the arrangement, such as service level credits or contingent fees, then we include an estimate of the amount that we expect to receive for the total transaction price.

The amount of revenue that we recognize is based on (i) identifying the contract with a customer; (ii) identifying the performance obligations in the contract; (iii) determining the transaction price; (iv) allocating the transaction price to the performance obligations in the contract on a relative SSP basis; and (v) recognizing revenue when, or as, we satisfy each performance obligation in the contract typically through delivery or when control is transferred to the customer.

SaaS Revenue

The following customer arrangements are recognized ratably over the contract term as the performance obligations are delivered:

●

Cloud delivery arrangements;

●

Maintenance and support arrangements; and

●

Term licenses which incorporate on-premise software licenses and a subscription to substantial cloud functionalities.

For contracts involving distinct software licenses, the license performance obligation is satisfied at a point in time when control is transferred to the customer.

We typically invoice our customers in advance upon execution of the contract or subsequent renewals with payment terms generally between 30 and 45 days. Invoiced amounts are recorded in accounts receivable, deferred revenue or revenue, depending if control transferred to our customers based on each arrangement.

We have a royalty revenue agreement with a customer related to our embedded intellectual property. Under the terms of the agreement, the customer is to provide us a combination of fixed fee and per agent fee, for each software license sold containing the embedded software. These embedded OEM royalties are included as SaaS revenue. Under Topic 606 revenue guidance, since these arrangements are for usage-based licenses of intellectual property, for which the guidance in paragraph ASC 606-10-55-65 applies, we estimate revenue recognized only as the performance obligation of the embedded OEM royalties has been satisfied or partially satisfied. Differences between actual results and estimated amounts are adjusted in the following period as such sales are reported by the customer with a quarter in arrears.

Professional Services Revenue

Professional services revenue includes system implementation, consulting, training, and managed services. The transaction price is allocated to various performance obligations based on their SSP. Revenue allocated to each performance obligation is recognized at the earlier of satisfaction of discrete performance obligations, or as work is performed on a time and material basis. Managed services include a comprehensive set of processes and activities that range from implementation to monitoring the evolution and support of eGain solutions in a company. 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 upon milestone billing or customer acceptance at pre-determined points in the contract. Amounts that have been invoiced are recorded in accounts receivable and in deferred revenue or revenue, depending on whether transfer of control to customers has occurred.

Training revenue that meets the criteria to be accounted for separately is recognized when training is provided.

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Contracts with Multiple Performance Obligations

The Company enters into contracts that can include various combinations of subscriptions, professional services and maintenance and support, which are generally distinct and accounted for as separate performance obligations. For contracts with multiple performance obligations, the Company allocates the transaction price of the contract to each performance obligation on a relative basis using the respective SSP for each performance obligation.

Costs Capitalized to Obtain Revenue Contracts, Net

Under Topic 606, we capitalize incremental costs of obtaining non-cancelable subscription and support revenue contracts. The capitalized amounts consist primarily of sales commissions paid to our direct sales force. Capitalized amounts also include (i) amounts paid to employees other than the direct sales force who earn incentive payouts under annual compensation plans that are tied to the value of contracts acquired and (ii) the associated payroll taxes and fringe benefit costs associated with the payments to our employees.

Costs capitalized related to new revenue contracts are generally deferred and amortized on a straight-line basis over a period of benefit that we estimate to be five years. We determine the period of benefit by taking into consideration the historical and expected durations of our customer contracts, the expected useful lives of our technologies, and other factors. Commissions for renewal contracts relating to our cloud-based arrangements are expensed when incurred, as we do not consider renewal contracts to be commensurate with initial customer contracts. Historically, any commission associated with renewals have been immaterial. Amortization of costs to obtain revenue contracts is included as a component of sales and marketing expenses in our condensed consolidated statements of operations.

During the three and six months ended December 31, 2025, we capitalized $200,000 and $297,000 of costs to obtain revenue contracts, respectively, and amortized $306,000 and $626,000 to sales and marketing expense, respectively.

During the three and six months ended December 31, 2024, we capitalized $329,000 and $518,000 of costs to obtain revenue contracts, respectively, and amortized $330,000 and $684,000 to sales and marketing expense, respectively.

Capitalized costs to obtain revenue contracts, net were $2.3 million and $2.6 million as of December 31, 2025 and June 30, 2025, respectively, on our condensed consolidated balance sheets.

Deferred Revenue

Deferred revenue primarily consists of payments received in advance of revenue recognition from cloud, term and ratable licenses, and maintenance and support services and is recognized as the revenue recognition criteria are met. We generally invoice customers in annual or quarterly installments. The deferred revenue balance does not represent the total contract value of annual or multi-year, non-cancelable cloud or maintenance and support agreements. Deferred revenue is influenced by several factors, including seasonality, the compounding effects of renewals, invoice duration, invoice timing and new business linearity within the financial reporting period.

Segment Information

We operate in one segment - the development, license, implementation, and support of our customer service infrastructure software solutions. Operating segments are identified as components of an enterprise for which discrete financial information is available and regularly reviewed by our Chief Operating Decision-Maker (CODM) in order to make decisions about resources to be allocated to the segment and assess its performance. Our CODMs under ASC 280, Segment Reporting, are our executive management team. Our CODMs review financial information presented on a consolidated basis for purposes of making operating decisions and assessing financial performance. The CODMs regularly evaluate non-GAAP operating income, which is defined as income from operations as presented on the condensed consolidated statements of operations and adding back stock-based compensation, along with significant revenue and expense categories aligned with those presented on our condensed consolidated statement of operations, and the accounting policies governing our segment are the same as those described in Note 1, “Summary of Business and Significant Accounting Policies.”

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Our revenue is derived from North America and combined Europe, Middle East, and Africa (EMEA) and is disclosed in Note 2. However, we incur operating expenses in the North America, EMEA, and Asia Pacific regions.

The following table presents our income (loss) from operations among our three operating regions (in thousands):


	Three Months Ended					Six Months Ended
	December 31,					December 31,
	2025			2024		2025			2024
Income (loss) from operations:
North America	$	1,445		$	461	$	3,468		$	368
Europe, Middle East, & Africa		2,174			1,873		4,521			4,161
Asia Pacific		(1,573)			(1,684)		(3,110)			(3,370)
Income from operations	$	2,046		$	650	$	4,879		$	1,159

The following table presents our long-lived assets, corresponding to our geographic areas are as follows (in thousands):


	December 31,			June 30,
	2025			2025
Long-lived assets:
North America	$	524		$	390
Europe, Middle East, & Africa		110			63
Asia Pacific		296			217
Long-lived assets	$	930		$	670

For the purposes of entity-wide geographic area disclosures, long-lived assets consist of computers and equipment, furniture and fixtures, and leasehold improvements, net of accumulated depreciation and amortization. These items are included in property and equipment, net, on the accompanying Company’s condensed consolidated balance sheets.

Concentration of Credit Risk and Significant Customers

Our financial instruments that are exposed to concentrations of credit risk include cash and cash equivalents, restricted cash, and accounts receivable. We complement direct sales with resell partnerships based on product connectors into cloud contact center platforms. We also partner with system integrators and managed service providers. One customer accounted for more than 10% of total revenue during the three and six months ended December 31, 2025. One customer, who is also one of our resell partners, accounted for more than 10% of total revenue during the three and six months ended December 31, 2024. Two customers accounted for 10% or more of our accounts receivable balance, less provision for credit losses, as of December 31, 2025. Three customers accounted for 10% or more of our accounts receivable balance, less provision for credit losses, as of June 30, 2025.

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Accounts Receivable and Provision for Credit Losses

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 provision for credit losses to reserve for potential uncollectible trade receivables. We review our trade receivables by aging category to identify specific customers with known disputes or collectability issues. 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. If we make different judgments or utilize different estimates, then material differences may result in additional reserves for trade receivables, which would be reflected by charges in general and administrative expenses for any period presented. We write-off receivables after all collection efforts have been exhausted and the amounts are deemed uncollectible.

In certain revenue contracts, contractual billings do not coincide with revenue recognized on the contract. Unbilled accounts receivables are recorded when revenue recognized on the contract exceeds billings, pursuant to contract provisions, and becomes billable upon certain criteria being met. Unbilled accounts receivables, for which the Company has the unconditional right to consideration, totaled $1.3 million and $1.4 million, as of December 31, 2025 and June 30, 2025, respectively, and are included in the accounts receivable, less provision for credit losses balance on the accompanying condensed consolidated balance sheets.

Stock-Based Compensation

We account for stock-based compensation in accordance with ASC 718, Compensation—Stock Compensation. Under the fair value recognition provisions of ASC 718, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the vesting period, net of expected forfeitures. Stock-based compensation expense consists of expenses for stock options, restricted stock units (RSUs), and discounted employee common stock granted under our Amended and Restated 2005 Management Stock Option Plan, our Amended and Restated 2005 Stock Incentive Plan, and our 2017 Employee Stock Purchase Plan (ESPP).

The ESPP provides that eligible employees may purchase the Company’s common stock through payroll deductions at a price equal to 85% of the lower of the fair market value at the entry date of the applicable offering period or at the end of each applicable purchasing period. The offering period, meaning a period with respect to which the right to purchase shares of our common stock may be granted under the ESPP, will not exceed twenty-seven months and consist of a series of six-month purchase periods. Eligible employees may join the ESPP at the beginning of any six-month purchase period. Under the terms of the ESPP, employees can choose to have between 1% and 15% of their base earnings withheld to purchase the Company’s common stock.

Determining the fair value of the stock-based awards at the grant date requires significant judgment and the use of estimates, particularly surrounding Black-Scholes valuation assumptions such as stock price volatility and expected option term.

Below is a summary of stock-based compensation included in the costs and expenses (in thousands):


		Three Months Ended					Six Months Ended
		December 31,					December 31,
		2025			2024		2025			2024
Stock-based compensation expense:
Cost of revenue		$	133		$	232	$	228		$	462
Research and development			313			74		543			251
Sales and marketing			115			114		226			179
General and administrative			84			202		171			362
Total stock-based compensation expense		$	645		$	622	$	1,168		$	1,254

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Total stock-based compensation includes expenses related to non-employee awards of $2,900 and $5,600 during the three and six months ended December 31, 2025, respectively. Total stock-based compensation includes expenses related to non-employee awards of $11,000 and $31,000 during the three and six months ended December 31, 2024, respectively.

Total stock-based compensation includes expenses related to the ESPP of $68,000 and $128,000 for the three and six months ended December 31, 2025, respectively. Total stock-based compensation includes expenses related to the ESPP of $81,000 and $161,000 for the three and six months ended December 31, 2024, respectively.

We utilize the Black-Scholes valuation model for estimating the fair value of the stock-based compensation of options granted and ESPP stock purchase rights. We estimate the fair value for stock based RSU awards based on the closing market price of grant date. All shares of our common stock issued pursuant to our stock option, RSUs, and ESPP plans are only issued out of an authorized reserve of shares of common stock which were previously registered with the SEC on Registration Statements on Form S-8.

During the three months ended December 31, 2025 and 2024, we granted options to purchase 103,800 and 287,067 shares of common stock with a weighted-average grant date fair value of $6.41 and $2.67 per share, respectively.

During the six months ended December 31, 2025 and 2024, we granted options to purchase 219,500 and 313,767 shares of common stock with a weighted-average grant date fair value of $4.96 and $2.74 per share, respectively.

We used the following weighted-average assumptions as inputs into the Black-Scholes valuation model to estimate the fair value of the options granted:


		Three Months Ended				Six Months Ended
		December 31,				December 31,
		2025		2024		2025		2024
Expected volatility		55	%	54	%	53	%	54	%
Average risk-free interest rate		3.67	%	4.13	%	3.74	%	4.10	%
Expected life (in years)		4.51		4.57		4.52		4.57
Dividend yield		—		—		—		—

The dividend yield of zero is based on the fact that we have never paid cash dividends and have no present intention to pay cash dividends. We determined the appropriate measure of expected volatility by reviewing historic volatility in the share price of our common stock, as adjusted for certain events that management deemed to be non-recurring and non-indicative of future events. The risk-free interest rate is derived from the average U.S. Treasury Strips rate with maturities approximating the expected lives of the awards during the period, which approximate the rate in effect at the time of the grant.

On December 1, 2025, certain employees were granted the right to purchase an aggregate of 60,914 shares under the ESPP. Stock-based compensation expense for the three and six months ended December 31, 2025 was $31,000.

On December 1, 2024, certain employees were granted the right to purchase an aggregate of 103,618 shares under the ESPP. Stock-based compensation expense for the three and six months ended December 31, 2024 was $31,000.

As of December 31, 2025, there were 519,491 shares of common stock available for issuance under the ESPP.

We base our estimate of expected life of a stock option on the historical exercise behavior and cancellations of all past option grants made by the Company during the time period which its equity shares have been publicly traded, the contractual term of the option, the vesting period and the expected remaining term of the outstanding options.

In accordance with ASU 2016-09, Compensation—Stock Compensation: Improvements to Employee Share-Based Accounting, we elected to continue to estimate forfeitures in the calculation of stock-based compensation expense.

As of December 31, 2025, there was approximately $1.2 million of total unrecognized compensation cost, net of expected forfeitures, related to unvested stock options, which is expected to be recognized over the weighted-average period of 1.53

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years. There were 234,618 and 117,000 options exercised during the three months ended December 31, 2025 and 2024, respectively. There were 296,724 and 149,317 options exercised during the six months ended December 31, 2025 and 2024, respectively.

As of December 31, 2025, there was approximately $1.2 million of total unrecognized compensation cost, net of expected forfeitures, related to unvested RSUs, which is expected to be recognized over the weighted-average period of 0.87 years. There were 123,767 and 226,654 RSUs granted during the three and six months ended December 31, 2025 and 2024, with a weighted average grant date fair value of $13.58 and $5.71 per share, respectively.

Warrants

We account for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in FASB ASC Topic 480, Distinguishing Liabilities from Equity, and ASC Topic 815, Derivatives and Hedging. The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC Topic 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC Topic 815, including whether the warrants are indexed to our own common stock and whether the warrant holders require mandatory cash settlement, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance.

For warrants that meet all of the criteria for equity classification, the warrants are recorded as a component of additional paid-in capital at the time of issuance. The grant date fair value of the warrants were estimated using a Black Scholes valuation model.

Leases

Lease agreements are evaluated to determine whether an arrangement is or contains a lease in accordance with ASC 842, Leases.

Operating leases are included in operating lease right-of-use (ROU) assets, current operating lease liabilities, and noncurrent operating lease liabilities in the condensed consolidated financial statements. ROU assets represent the Company’s right to use leased assets over the agreed upon term. Lease liabilities represent the Company’s contractual obligation to make lease payments over the lease term.

For operating leases, ROU assets and lease liabilities are recognized at the commencement date of the lease. The lease liability is measured as the present value of the lease payments over the lease term, using the rate implicit in the lease if readily determinable. If the rate implicit in the lease cannot be readily determined, the Company uses its incremental borrowing rate at lease commencement. The operating lease ROU assets are calculated as the present value of the remaining lease payments plus unamortized initial direct costs and any prepayments, less unamortized lease incentives received.

Operating leases typically include non-lease components such as common-area maintenance costs. We have elected to include non-lease components with lease payments for the purpose of calculating lease ROU assets and liabilities, to the extent that they are fixed. Non-lease component payments that are not fixed are expensed as incurred as variable lease payments.

Lease terms may include renewal or extension options to the extent they are reasonably certain to be exercised. The assessment of whether renewal or extension options are reasonably certain to be exercised is made at lease commencement. Factors considered in determining whether an option is reasonably certain of exercise include, but are not limited to, the value of any leasehold improvements, the value of renewal rates compared to market rates, and the presence of factors that would cause a significant economic penalty to the Company if the option were not exercised. Lease expense is recognized on a straight-line basis over the lease term. The Company has elected not to recognize ROU assets and obligations for leases with an initial term of twelve months or less, and has applied a capitalization threshold to recognize a lease on the

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condensed consolidated balance sheet. The expense associated with short-term leases and leases that do not meet the Company’s capitalization threshold are recorded to lease expense in the period it is incurred.

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. We operate under a single reporting unit and accordingly, all of our goodwill is associated with the entire company. We had no indicators of impairment during the three and six months ended December 31, 2025.

2. REVENUE RECOGNITION

Disaggregation of Revenue

The following table presents our revenue recognized over-time and at a point-in-time during the three and six months ended December 31, 2025 and 2024, respectively (in thousands):


		Three Months Ended				Six Months Ended
		December 31,				December 31,
	2025		2024		2025		2024
Revenue:
Over-time	$	22,040	$	20,950	$	43,885	$	40,852
Point-in-time		939		1,439		2,602		3,336
Total revenue	$	22,979	$	22,389	$	46,487	$	44,188

The following table presents our revenue by geography. Revenue by geography is generally determined on the region of our contracting entity rather than the region of our customer. The relative proportion of our total revenue between each geographic region as presented in the table below was materially consistent across each of our operating regions’ revenue for the periods presented (in thousands):


	Three Months Ended					Six Months Ended
	December 31,					December 31,
	2025			2024		2025			2024
Revenue:
North America	$	18,353		$	17,330	$	37,315		$	33,753
Europe, Middle East, & Africa		4,626			5,059		9,172			10,435
Total revenue	$	22,979		$	22,389	$	46,487		$	44,188

Contract Balances

Contract assets, if any, consist of unbilled receivables for completed performance obligations which have not been invoiced, and for which we do not have an unconditional right to consideration. Unbilled receivables are included in accounts receivable, less provision for credit losses on our condensed consolidated balance sheets. Contract liabilities consist of deferred revenue for which we have an obligation to transfer services to customers and have received consideration in advance or the amount is due from customers. Once the obligations are fulfilled, then deferred revenue is recognized to revenue in the respective period.

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The following table presents our contract liabilities (in thousands):


	December 31, 2025		June 30, 2025
Contract liabilities:
Deferred revenue	$	42,089	$	48,765
Deferred revenue, net of current portion		2,358		1,766
Total deferred revenue	$	44,447	$	50,531

$13.6 million and $32.9 million of deferred revenue as of June 30, 2025 was recognized as revenue during the three and six months ended December 31, 2025, respectively.

Remaining Performance Obligations

Remaining performance obligations represent contracted revenue that has not yet been recognized, and include deferred revenue, invoices that have been issued to customers but are uncollected and not yet recognized as revenue, and amounts that will be invoiced and recognized as revenue in future periods. 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. As of December 31, 2025, our remaining performance obligations were $84.9 million, of which we expect to recognize $53.0 million and $31.9 million as revenue within one year and beyond one year, respectively.

3. EARNINGS PER SHARE

Basic earnings per share is computed using the weighted-average number of shares of common stock outstanding. In periods where net income is reported, the weighted-average number of shares is increased by stock options in the money, shares issuable for RSUs subject to service-based vesting requirements, and the warrants in the money to calculate diluted earnings per share.

The following table represents the calculation of basic and diluted earnings per share (unaudited; in thousands, except per share data):


	Three Months Ended				Six Months Ended
	December 31,				December 31,
	2025		2024		2025		2024
Net income	$	2,336	$	671	$	5,156	$	1,323
Per share information:
Earnings per share:
Basic	$	0.09	$	0.02	$	0.19	$	0.05
Diluted	$	0.08	$	0.02	$	0.19	$	0.05
Weighted-average shares used in computation:
Basic		27,186		28,573		27,074		28,622
Effect of dilutive instruments		1,163		486		784		554
Diluted		28,349		29,059		27,858		29,176

Weighted-average shares of stock options to purchase 279,097 and 3,361,087 shares of common stock for the three months ended December 31, 2025 and 2024, respectively, and weighted-average shares of stock options to purchase 2,319,733 and 3,415,156 shares of common stock for the six months ended December 31, 2025 and 2024, respectively, were not included in the computation of diluted earnings per share due to their anti-dilutive effect. Such securities could have a dilutive effect in future periods.

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4. INCOME TAXES

Income taxes are accounted for using the asset and liability method in accordance with ASC 740, Income Taxes. Under this method, deferred tax liabilities and assets are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. For the legacy eGain business in the United States, based upon the weight of available evidence, which includes our historical operating performance, our future investment plans, and the uncertainty in the current market and economic environment, we have determined that it is more likely than not that we will be able to utilize the deferred tax assets and as such, do not have a valuation allowance against our net deferred tax assets except for the California net operating losses and research and development credits. For the legacy eGain business in the United Kingdom, based on the positive evidence, the Company has determined it would be able to utilize the deferred tax assets and does not have a valuation allowance against the deferred tax assets. The remaining eGain foreign operations, including its wholly-owned subsidiary Exony Limited, have historically been profitable and we believe it is more likely than not that those assets will be realized. Our tax provision primarily relates to federal, foreign, and state income taxes. Our income tax rate differs from the statutory tax rates primarily due to stock-based compensation, research and development tax credits, and our foreign operations.

We account for uncertain tax positions according to the provisions of ASC 740. ASC 740 contains a two-step approach for recognizing and measuring uncertain tax positions. Tax positions are evaluated for recognition by determining if the weight of available evidence indicates that it is probable that the position will be sustained on audit, including resolution of related appeals or litigation. Tax benefits are then measured as the largest amount which is more than 50% likely of being realized upon ultimate settlement. We consider many factors when evaluating and estimating tax positions and tax benefits, which may require periodic adjustments and which may not accurately anticipate actual outcomes.

As of December 31, 2025, utilization of the net operating loss (NOL) or tax credit carryforwards to offset future taxable income and taxes, respectively, are subject to an annual limitation under the Internal Revenue Code of 1986 and similar state provisions, which is determined by first multiplying the value of the Company’s stock at the time of the ownership change by the applicable long-term, tax-exempt rate, and then could be subject to additional adjustments such as built in gain or built in loss, as required. Any limitation may result in expiration of all or a portion of its NOL and or tax credit carryforwards before utilization. The Company has not identified a change in ownership as of December 31, 2025 that would significantly limit the NOL carryovers.

5. LEASES

We lease our office facilities under non-cancelable operating leases that expire on various dates through fiscal year 2033. On September 29, 2025, the Company entered into a lease agreement in Sunnyvale, California. The term of the lease expires on March 31, 2027 and requires an average monthly rent of approximately $21,000 for 18 months from the lease commencement date in October 2025. All of our office leases are classified as operating leases with lease expense recognized on a straight-line basis over the lease term. Lease ROU assets and liabilities are recognized on the commencement date at the present value of lease payments over the lease term. As our leases do not provide an implicit rate, we use our incremental borrowing rate based on information available at the commencement date to determine the present value of lease payments.

Total operating lease costs were $390,000 and $383,000 for the three months ended December 31, 2025 and 2024, respectively. Total operating lease costs were $722,000 and $683,000 for the six months ended December 31, 2025 and 2024, respectively.

For the three and six months ended December 31, 2025, operating cash outflows for operating leases were $288,000 and $575,000, respectively. For the three and six months ended December 31, 2024, operating cash outflows for operating leases were $322,000 and $596,000, respectively.

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The following tables present information about leases on our condensed consolidated balance sheets (in thousands):



	December 31,		June 30,
	2025		2025
Assets:
Operating lease right-of-use assets	$	3,230	$	3,530
Liabilities:
Operating lease liabilities		1,517		1,220
Operating lease liabilities, net of current portion		1,995		2,449

The following table presents information about the weighted average lease term and discount rate as follows:


	December 31,			June 30,
	2025			2025
Weighted average remaining lease term (in years)		4.70			5.14
Weighted average discount rate		8.47	%		8.41	%

As of December 31, 2025, remaining maturities of lease liabilities are as follows (in thousands):


Fiscal Period:
Remaining six months of fiscal year 2026	$	769
Fiscal year 2027		1,307
Fiscal year 2028		573
Fiscal year 2029		414
Fiscal year 2030		296
Fiscal year 2031		296
Fiscal year 2032 and thereafter		741
Total minimum lease payments		4,396
Less: Imputed interest		(884)
Total operating lease liabilities		3,512
Less: Current operating lease liabilities		(1,517)
Total operating lease liabilities, net of current portion	$	1,995

6. COMMITMENTS AND CONTINGENCIES

Litigation

In the ordinary course of business, we are involved in various legal proceedings and claims related to alleged infringement of intellectual property rights, commercial, corporate and securities, labor and employment, wage and hour, and other claims that are not expected to have a material impact on our business or our condensed consolidated financial statements. We have been, and may in the future be, put on notice and/or sued by third parties for alleged infringement of their proprietary rights, including patent infringement.

We evaluate all claims and lawsuits with respect to their potential merits, our potential defenses and counterclaims, settlement or litigation potential and the expected effect on us. Our technologies may be subject to injunction if they are found to infringe the rights of a third-party. In addition, our agreements require us to indemnify our customers for third-party intellectual property infringement claims, which could increase the cost to us of an adverse ruling on such a claim.

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Warranty

We generally warrant that the program portion of our software will perform substantially in accordance with certain specifications for a period up to one year from the date of delivery. Our liability for a breach of this warranty is either a return of the license fee or providing a fix, patch, work-around or replacement of the software.

We also provide standard warranties against and indemnification for the potential infringement of third-party intellectual property rights to our customers relating to the use of our products, as well as indemnification agreements with certain officers and employees under which we may be required to indemnify such persons for liabilities arising out of their duties to us. The terms of such obligations vary. Generally, the maximum obligation is the amount permitted by law. Historically, cost related to these warranties have not been significant. However, we cannot guarantee that a warranty reserve will not become necessary in the future.

Indemnification

We have agreed to indemnify our directors and executive officers for costs associated with any fees, expenses, judgments, fines and settlement amounts incurred by any of these persons in any action or proceeding to which any of those persons is, or is threatened to be, made a party by reason of the person’s service as a director or officer, including any action by us, arising out of that person’s services as our director or officer or that person’s services provided to any other company or enterprise at our request.

Transfer Pricing

We have received transfer-pricing assessments from tax authorities with regard to transfer pricing issues for certain fiscal years, which we have appealed with the appropriate authority. We review the status of each significant matter and assess its potential financial exposure. We believe that such assessments are without merit and would not have a significant impact on our condensed consolidated financial statements.

Contractual Commitments

Our principal contractual commitments consist of obligations under leases for office space. Lease agreements are evaluated to determine whether an arrangement is or contains a lease in accordance with ASC 842, Leases.

7. FAIR VALUE MEASUREMENT

ASC 820, Fair Value Measurement (ASC 820), defines fair value, establishes a framework for measuring fair value of assets and liabilities, and expands disclosures about fair value measurements. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the assets or liabilities in an orderly transaction between market participants on the measurement date. Subsequent changes in fair value of these financial assets and liabilities are recognized in earnings or other comprehensive income when they occur. ASC 820 applies whenever other statements require or permit assets or liabilities to be measured at fair value.

ASC 820 includes a fair value hierarchy, of which the first two are considered observable and the last unobservable, that is intended to increase the consistency and comparability in fair value measurements and related disclosures. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources while unobservable inputs reflect a reporting entity’s pricing based upon their own market assumptions.

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The fair value hierarchy consists of the following three levels:

Level 1 – instrument valuations are obtained from real-time quotes for transactions in active exchange markets involving identical assets.

Level 2 – instrument valuations are obtained from readily-available pricing sources for comparable instruments.

Level 3 – instrument valuations are obtained without observable market value and require a high level of judgment to determine the fair value.

Our money market funds are measured at fair value on a recurring basis based on quoted market prices in active markets and are classified as level 1 within the fair value hierarchy. As of December 31, 2025 and June 30, 2025, cash equivalents classified as level 1 instruments, including money market account investments, were measured at $63.5 million and $43.0 million, respectively.

8. SHARE REPURCHASE PROGRAM

On November 14, 2022, eGain’s Board of Directors authorized a stock repurchase program under which the Company may purchase up to $20 million of its own outstanding common stock. In May 2024 and again in September 2025, the Board of Directors approved a $20 million increase in its stock repurchase program, bringing the aggregate amount eGain may purchase thereunder from $20 million to $60 million of its outstanding common stock. As of December 31, 2025, approximately $19.7 million remained available for stock repurchases pursuant to our stock repurchase program.

Under the stock repurchase program, we may purchase shares of common stock on a discretionary basis from time to time through open market transactions or privately negotiated transactions at prices deemed appropriate by us. In addition, at the discretion of eGain, open market repurchase of common stock may also be made under a Rule 10b5-1 plan, which would permit common stock to be repurchased when the Company might otherwise be precluded from doing so under its insider trading laws or self-imposed trading restrictions.

The timing and number of shares repurchased will be determined based on an evaluation of market conditions and other factors, including stock price, trading volume, general business and market conditions, and the availability of capital. On September 3, 2025, the Board of Directors also approved to extend the stock repurchase program until the earlier of (i) the date the aggregate amount of shares that can be repurchased under the stock repurchase program have been repurchased and (ii) the date the Board of Directors decides to terminate the stock repurchase program. The stock repurchase program does not obligate us to acquire a specified number of shares and may be modified, suspended, or discontinued at any time at our discretion without notice. The stock repurchase program will be funded using existing cash or future cash flows. During the three months ended December 31, 2025, there were no share repurchases. During the six months ended December 31, 2025, 230,734 shares have been repurchased for an average acquisition cost per share of $6.24, totaling $1.4 million. We intend to reissue repurchased shares at a later date and therefore carry the shares as treasury stock, at cost.

9. WARRANTS

On August 14, 2025, the Company issued a warrant (Warrant) to JPMC Strategic Investments I Corporation (JPMC) to acquire 500,000 shares of the Company’s common stock at an exercise price of $7.10 per share. The fully vested Warrant was issued without cash consideration and is exercisable through the fifth anniversary of issuance. The offer and issuance of the Warrant is expected to be exempt from registration under the Securities Act of 1933 (Securities Act), pursuant to Section 4(a)(2) of the Securities Act. JPMC has represented to the Company that it is an “accredited investor” as defined in Regulation D and that the Warrant is being acquired for investment purposes and not with a view to, or for sale in connection with, any distribution thereof.

The Warrant was first evaluated under ASC Topic 480, Distinguishing Liabilities from Equity, and determined that it does not meet the criteria for a liability classification. The Warrant was then evaluated under ASC 815-40, Derivatives and

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Hedging—Contracts in Entity’s Own Equity, and determined to be an equity-classified instrument. Accordingly, the fair value of the warrant at grant date was recognized in additional paid-in capital within stockholders’ equity.

The grant-date fair value of the Warrant was estimated at $2.70 per warrant using the Black-Scholes valuation model with the following assumptions: expected volatility of 54%, risk-free interest rate of 2.87%, expected term of 5 years, and no expected dividends. No warrant expenses were recognized during the three months ended December 31, 2025. The total fair value of the Warrant was $1.35 million and was recognized as a non-cash general and administrative expense during the six months ended December 31, 2025.

No warrants were exercised or expired during the three and six months ended December 31, 2025.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and the related notes included in Item 1 of Part I of this Quarterly Report on Form 10-Q, and with our audited financial statements and the related notes included in our Annual Report on Form 10-K for the year ended June 30, 2025.

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to future periods, future events or our future operating or financial plans or performance. Often, these statements include the words “believe,” “expect,” “target,” “anticipate,” “intend,” “plan,” “seek,” “estimate,” “potential,” or words of similar meaning, or future or conditional verbs such as “will,” “would,” “should,” “could,” “might,” or “may,” or the negative of these terms, and other similar expressions. These forward-looking statements that involve risks and uncertainties include statements as to:

●

our belief that it is useful to exclude certain non-cash charges and non-core operational charges from non-GAAP operating income;

●

our expectation that SaaS revenue will continue to increase;

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expected benefits of our solutions;

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our value proposition;

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our market opportunities;

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customer and market expectations in the market in which we operate, and our ability to meet expectations and satisfy such needs;

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our lengthy sales cycles and the difficulty in predicting timing of sales or delays;

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our expectations with respect to revenue, cost of revenue, expenses and other financial metrics;

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our business plans, strategies, target, goals and outlook;

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changes in technology, including artificial intelligence (AI) technology and services;

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our expectations related to our product development plan;

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competition in the markets in which we do business and our competitive advantages;

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our beliefs regarding our prospects for our business;

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changes in demand for our solutions;

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our expectations regarding the composition of our customers;

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our reliance on strategic and third-party distribution partnerships;

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the risk of unauthorized access to a customer’s data or our data or our IT systems and cybersecurity attacks;

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our ability to timely adapt and comply with changing European regulatory and political environments;

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the effect of recent changes in U.S. tax legislation;

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the effect of compliance with privacy laws and regulations on our business and our customers;

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the effect of recent changes to trade policies;

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our ability to take adequate precautions against claims or lawsuits made by third parties, including alleged infringement of proprietary rights;

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the adequacy of our capital resources and our ability to raise additional financing;

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the risks related to our international operations;

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the potential impact of foreign currency fluctuations and inflation; and

●

the potential impact of health epidemics.

These forward-looking statements reflect our current views with respect to future events, are based on assumptions and are subject to risks and uncertainties. These risks and uncertainties could cause actual results to differ materially from those projected and include, but are not limited to:

●

our ability to manage our business plans, strategies, targets, and outlooks and any business-related forecasts or projections;

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our ability to improve our current solutions;

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our ability to innovate and respond to rapid technological change and competitive challenges;

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our ability to execute our sales and marketing strategy;

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customer acceptance of our existing and future solutions;

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our ability to predict subscription renewals;

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the impact of new legislation or regulations on our business;

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the impact of accounting pronouncements and our critical accounting policies, judgments, estimates, models and assumptions on our financial results;

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our ability to compete;

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the success of our strategic and distribution partnerships;

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our ability to obtain capital when needed;

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our ability to manage future growth;

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our ability to retain key personnel and hire additional personnel;

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risks related to protection of our intellectual property;

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foreign currency fluctuations and inflation;

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the global economic environment, including trade policies and tariffs;

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risks related to public health pandemics; and

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the risks set forth under “Risk Factors.”

Given these risks and uncertainties, you should not place undue reliance on these forward-looking statements. Except as required by federal securities laws, we undertake no obligation to update any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

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All references to “eGain”, the “Company”, “our”, “we” or “us” mean eGain Corporation and its subsidiaries, except where it is clear from the context that such terms mean only eGain and exclude its subsidiaries.

eGain and eGain® are trademarks of eGain Corporation. We also refer to trademarks of other corporations and organizations in this report.

Summary Risk Factors

Our business is subject to numerous risks and uncertainties that could affect our ability to successfully implement our business strategy and affect our financial results. You should carefully consider all of the information in this report and, in particular, the following principal risks and all of the other specific factors described in Item 1A. of this report, “Risk Factors,” before deciding whether to invest in our company:

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Our business is influenced by a range of factors that are beyond our control and that we have no comparative advantage in forecasting.

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Our SaaS business model is subject to certain risks.

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Our revenue and operating results have fluctuated in the past and are likely to fluctuate in the future, and because we recognize revenue from subscriptions over a period of time, downturns in revenue may not be immediately reflected in our operating results.

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We cannot accurately predict subscription renewal rates and the impact these rates may have on our future revenue and operating results.

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Our lengthy sales cycles and the difficulty in predicting timing of sales or delays may impair our operating results.

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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.

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The market for customer engagement software, including generative AI product offerings, is competitive, and our business will be adversely affected if we are unable to successfully compete.

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If we fail to expand and improve our sales performance and marketing activities, or retain our sales and marketing personnel, we may be unable to grow our business, which could negatively impact our operating results and financial condition.

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Our failure to maintain, develop or expand strategic and third-party distribution channels would impede our revenue growth.

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Difficulties and delays in customers implementing our products could harm our revenue and margins.

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We conduct a significant portion of our business and operations outside of the U.S., which exposes us to additional risks that may not exist in the U.S. These risks in turn could cause our operating results and financial condition to suffer.

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Unplanned system interruptions, delays in service or inability to increase capacity, including internationally, at our third-party data center facilities or third-party Platform-as-a-Service (PaaS) provider could impair the use or functionality of our cloud operations and harm our business.

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Software errors could be costly and time-consuming for us to correct, and could harm our reputation and impair our ability to sell our solutions.

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The terms we agree to in our Service Level Agreements or other contracts may result in increased costs or liabilities, which would in turn affect our results of operations.

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If we are unable to increase the profitability of SaaS revenue, if we experience significant customer attrition, or if we are required to delay recognition of revenue, our operating results could be adversely affected.

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We depend on broad market acceptance of our applications and of our business model. If our expectations regarding the market for our applications are not met, our business could be seriously harmed.

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We may be unable to respond to the rapid technological change and changing customer preferences in digital customer engagement, marketing, and service and this may cause our business to suffer.

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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.

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Our offshore product development, support and professional services may prove difficult to manage or may not allow us to realize our cost reduction goals, produce effective new solutions and provide professional services to drive growth.

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If our cybersecurity systems or the systems of our vendors, partners and suppliers are breached and unauthorized access is obtained to a customer’s data, our data or IT systems, our service may be perceived as not being secure, customers may curtail or stop using our service and we may incur significant legal and financial exposure and liabilities.

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Changes in privacy and data protection laws and regulations, including in the European Union (such as the GDPR), the United Kingdom, and other jurisdictions in which we operate, could expose us to risks of noncompliance and costs associated with compliance.

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Privacy concerns and laws, evolving regulation of cloud computing, AI and other domestic or foreign regulations may limit the use, functionality and adoption of our solutions and adversely affect our business.

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Changes in domestic and foreign trade policies, including the imposition of tariffs and retaliatory tariffs, and other factors beyond our control may adversely impact our business, financial condition, and results of operations.

Overview

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.

Revenue

We believe total revenue is a useful measure to value our business. SaaS revenue is defined as revenue from cloud delivery arrangements, term licenses, embedded OEM royalties and associated support. Professional services revenue includes system implementation, consulting, training, and managed services.

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The following table presents total revenue for each of the following periods:


		Three Months Ended								Six Months Ended
		December 31,								December 31,
(in thousands)		2025		2024		Change				2025		2024		Change
SaaS revenue		$	21,799	$	20,847	$	952	5	%	$	43,699	$	40,667	$	3,032	7	%
Professional services revenue			1,180		1,542		(362)	(23)	%		2,788		3,521		(733)	(21)	%
Total SaaS and professional services revenue:		$	22,979	$	22,389	$	590	3	%	$	46,487	$	44,188	$	2,299	5	%

Non-GAAP Operating Income

Non-GAAP operating income is defined as income from operations, adjusted for the impact of warrants and stock-based compensation expense.

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 presentation of the non-GAAP financial measures is not intended to be considered in isolation, or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

The following table presents a reconciliation of GAAP income (loss) from operations to non-GAAP income from operations for each of the following periods:


	Three Months Ended					Six Months Ended
	December 31,					December 31,
(in thousands)	2025			2024		2025			2024
Income from operations	$	2,046		$	650	$	4,879		$	1,159
Add:
Issuance of common stock warrant for services		—			—		1,350			—
Stock-based compensation		645			622		1,168			1,254
Non-GAAP income from operations	$	2,691		$	1,272	$	7,397		$	2,413

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. 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, which are described in Note 1 “Summary of Business and Significant Accounting Policies” to our condensed consolidated financial statements, associated with revenue recognition, stock-based compensation, provision for credit losses, the valuation of goodwill, the valuation of deferred tax allowance, and legal contingencies have the greatest potential impact on our condensed consolidated financial statements. We evaluate these estimates on an ongoing basis. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

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Sources of Revenue

Our revenue is comprised of two categories including SaaS and professional services. SaaS revenue includes cloud delivery arrangements, term licenses, embedded OEM royalties, and associated support. An immaterial amount of SaaS revenue is comprised of our legacy revenue which is associated with license, maintenance, and support contracts on perpetual license arrangements that we no longer sell. Professional services include consulting, implementation, training, and managed services.

SaaS Revenue

For our cloud delivery arrangements, our maintenance and support arrangements and our term license subscriptions that incorporate substantial cloud functionality, the combined performance obligation is recognized ratably over the contract term as the obligation is delivered. For contracts involving distinct software licenses, the license performance obligation is satisfied at a point in time when control is transferred to the customer.

We typically invoice our customers in advance upon execution of the contract or subsequent renewals. Invoiced amounts are recorded in accounts receivable, deferred revenue or revenue, depending on when control is transferred to our customers based on each arrangement.

We have a royalty revenue agreement with a customer related to our embedded intellectual property. 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 SaaS revenue. Under revenue guidance, since these arrangements are for sales-based licenses of intellectual property, we recognize revenue only as the subsequent sale occurs. 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. Any estimated variable consideration would have to be fully constrained due to the unpredictability of such estimates and the risk of significant revenue reversals.

Professional Services Revenue

Professional services revenue includes system implementation, consulting, training, and managed services. The transaction price is allocated to various performance obligations based on their 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. 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. Amounts that have been invoiced are recorded in accounts receivable and in deferred revenue or revenue, depending on whether transfer of control to customers has occurred.

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. 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.

As of December 31, 2025, our remaining performance obligations were $84.9 million, of which we expect to recognize $53.0 million and $31.9 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. We typically issue renewal invoices in advance of the renewal service period. Depending on

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timing, the initial invoice and subsequent renewal invoices may occur in different quarters. This may result in an increase or decrease to our accounts receivable and deferred revenue.

Costs Capitalized to Obtain Revenue Contracts

Under Topic 606, we capitalize incremental costs to obtain non-cancelable subscription and maintenance and support revenue contracts with amortization periods that may extend longer than the non-cancelable subscription and maintenance and support revenue contract terms.

We capitalize incremental costs of obtaining a non-cancelable subscription and maintenance and support revenue contract with amortization periods of one year or more. The capitalized amounts consist primarily of sales commissions paid to our direct sales force. Capitalized amounts also include (i) amounts paid to employees other than the direct sales force who earn incentive payouts under annual compensation plans that are tied to the value of contracts acquired and (ii) the associated payroll taxes and fringe benefit costs associated with the payments to our employees.

Costs capitalized related to new revenue contracts are generally deferred and amortized on a straight-line basis over a period of benefit that we estimate to be five years. 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. Amortization of costs capitalized related to new revenue contracts is included as a component of sales and marketing expense in our operating results.

Results of Operations

The following table sets forth certain items reflected in our condensed consolidated statements of operations expressed as a percent of total revenue for the periods indicated:


		Three Months Ended				Six Months Ended
		December 31,				December 31,
		2025		2024		2025		2024
Revenue:
SaaS		95	%	93	%	94	%	92	%
Professional services		5	%	7	%	6	%	8	%
Total revenue		100	%	100	%	100	%	100	%
Cost of revenue:
Cost of SaaS		19	%	21	%	19	%	21	%
Cost of professional services		8	%	9	%	7	%	10	%
Total cost of revenue		27	%	30	%	26	%	31	%
Gross profit		73	%	70	%	74	%	69	%
Operating expenses:
Research and development		32	%	34	%	31	%	34	%
Sales and marketing		23	%	23	%	20	%	23	%
General and administrative		10	%	9	%	12	%	10	%
Total operating expenses		65	%	67	%	63	%	67	%
Income from operations		9	%	3	%	10	%	3	%

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Revenue

The following table presents our total revenue during the three and six months ended December 31, 2025 and 2024, respectively:


		Three Months Ended								Six Months Ended
		December 31,								December 31,
(in thousands, except percentages)		2025		2024		Change				2025		2024		Change
SaaS		$	21,799	$	20,847	$	952	5	%	$	43,699	$	40,667	$	3,032	7	%
Professional services			1,180		1,542		(362)	(23)	%		2,788		3,521		(733)	(21)	%
Total revenue		$	22,979	$	22,389	$	590	3	%	$	46,487	$	44,188	$	2,299	5	%

Total revenue for the three months ended December 31, 2025 increased by $590,000, compared to the same period in fiscal year 2025, due to an increase of SaaS revenue by $952,000, partially offset by a decrease of $362,000 in professional services revenue. Total revenue for the six months ended December 31, 2025 increased by $2.3 million, compared to the same period in fiscal year 2025, due to an increase of SaaS revenue by $3.0 million, partially offset by a decrease of $733,000 in professional services revenue.

Our revenue was impacted by foreign exchange rate fluctuation between the U.S. Dollar, Euro, and British Pound. We recalculate our current period results using the comparable prior period exchange rates to exclude the impact of foreign exchange rate fluctuation. Foreign exchange rate fluctuation resulted in an increase of $202,000 and $151,000 in total revenue during the three months ended December 31, 2025 and 2024, respectively. Foreign exchange rate fluctuation resulted in an increase of $395,000 and an increase of $298,000 for the six months ended December 31, 2025 and 2024, respectively.

SaaS Revenue


		Three Months Ended										Six Months Ended
		December 31,										December 31,
(in thousands, except percentages)		2025			2024			Change				2025			2024			Change
SaaS revenue		$	21,799		$	20,847		$	952	5	%	$	43,699		$	40,667		$	3,032	7	%
Percentage of total revenue			95	%		93	%						94	%		92	%

SaaS revenue includes revenue from cloud delivery arrangements, term licenses and embedded OEM royalties and associated support. Revenue from SaaS increased by $952,000 and $3.0 million during the three and six months ended December 31, 2025, respectively, compared to the same periods in fiscal year 2025. This represented an increase in SaaS revenue of 5% and 7% for the three and six months ended December 31, 2025, respectively, compared to the same periods in fiscal year 2025.

SaaS revenue represents 95% and 94% of total revenue for the three and six months ended December 31, 2025, respectively, compared to 93% and 92% for the same periods in fiscal year 2025.

Excluding an increase of $190,000 and an increase of $372,000 due to foreign exchange rate fluctuation, SaaS revenue increased by $762,000 and $2.7 million during the three and six months ended December 31, 2025, respectively, compared to the same periods in fiscal year 2025.

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Professional Services Revenue


		Three Months Ended										Six Months Ended
		December 31,										December 31,
(in thousands, except percentages)		2025			2024			Change				2025			2024			Change
Professional services revenue		$	1,180		$	1,542		$	(362)	(23)	%	$	2,788		$	3,521		$	(733)	(21)	%
Percentage of total revenue			5	%		7	%						6	%		8	%

Professional services revenue includes consulting, implementation, training, and managed services. Revenue from professional services decreased by $362,000 and $733,000 during the three and six months ended December 31, 2025, respectively, compared to the same periods in fiscal year 2025. We expect professional revenue to vary dependent on the volume and timing of recognition.

Excluding an increase of $12,000 and an increase of $23,000 due to foreign exchange rate fluctuation, professional services revenue decreased by $374,000 and $756,000 during the three and six months ended December 31, 2025, respectively, compared to the same periods in fiscal year 2025.

Revenue by Geography


		Three Months Ended								Six Months Ended
		December 31,								December 31,
(in thousands, except percentages)		2025		2024		Change				2025		2024		Change
North America		$	18,353	$	17,330	$	1,023	6	%	$	37,315	$	33,753	$	3,562	11	%
Europe, Middle East, & Africa			4,626		5,059		(433)	(9)	%		9,172		10,435		(1,263)	(12)	%
Total revenue		$	22,979	$	22,389	$	590	3	%	$	46,487	$	44,188	$	2,299	5	%

Revenue from North America sales increased by 6% from $17.3 million during the three months ended December 31, 2024 to $18.4 million during the three months ended December 31, 2025, due to an increase of $1.3 million in SaaS revenue, partially offset by a decrease of $285,000 in professional services revenue.

Revenue from North America sales increased by 11% from $33.8 million during the six months ended December 31, 2024 to $37.3 million during the six months ended December 31, 2025, due to an increase of $4.0 million in SaaS revenue, partially offset by a decrease of $451,000 in professional services revenue.

Revenue from EMEA sales decreased by 9% from $5.1 million for the three months ended December 31, 2024 to $4.6 million during the three months ended December 31, 2025, due to decreases of (i) $356,000 in SaaS revenue and (ii) $75,000 in professional services revenue.

Revenue from EMEA sales decreased by 12% from $10.4 million for the six months ended December 31, 2024 to $9.2 million during the six months ended December 31, 2025, due to decreases of (i) $981,000 in SaaS revenue and (ii) $282,000 in professional services revenue.

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Cost of Revenue


		Three Months Ended										Six Months Ended
		December 31,										December 31,
(in thousands, except percentages)		2025			2024			Change				2025			2024			Change
SaaS		$	4,438		$	4,626		$	(188)	(4)	%	$	8,609		$	9,148		$	(539)	(6)	%
Professional services			1,734			2,054			(320)	(16)	%		3,394			4,198			(804)	(19)	%
Total cost of revenue		$	6,172		$	6,680		$	(508)	(8)	%	$	12,003		$	13,346		$	(1,343)	(10)	%
Percentage of total revenue			27	%		30	%						26	%		30	%
Gross margin			73	%		70	%						74	%		70	%

SaaS

Cost of SaaS revenue consists primarily of expenses related to our cloud services and support provided to customers. 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 SaaS revenue decreased by $188,000 during the three months ended December 31, 2025, from the same period in fiscal year 2025. This decrease was primarily due to decreases of (i) $369,000 in cloud-computing costs and (ii) $31,000 in outside consulting costs, partially offset by an increase of $224,000 in personnel-related costs.

Cost of SaaS revenue decreased by $539,000 during the six months ended December 31, 2025, from the same period in fiscal year 2025. This decrease was primarily due to decreases of (i) $729,000 in cloud-computing costs and (ii) $126,000 in outside consulting costs, partially offset by an increase of $332,000 in personnel-related costs.

Excluding a decrease of $12,000 and $16,000 due to foreign exchange rate fluctuation, cost of SaaS revenue decreased by $176,000 and $523,000 during the three and six months ended December 31, 2025, respectively, from the same periods in fiscal year 2025.

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 $320,000 during the three months ended December 31, 2025, from the same period in fiscal year 2025. This decrease was primarily due to a decrease of $351,000 in personnel-related costs, partially offset by other professional services costs.

Excluding an increase of $16,000 due to foreign exchange rate fluctuation, cost of professional services revenue decreased by $336,000 during the three months ended December 31, 2025, compared to the same period in fiscal year 2025.

Cost of professional services decreased by $804,000 during the six months ended December 31, 2025, from the same period in fiscal year 2025. This decrease was primarily due to a decrease of $837,000 in personnel-related costs, partially offset by other professional services costs.

Excluding an increase of $26,000 due to foreign exchange rate fluctuation, cost of professional services revenue decreased by $830,000 during the six months ended December 31, 2025, compared to the same period in fiscal year 2025.

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Operating Expenses

Research and Development


		Three Months Ended										Six Months Ended
		December 31,										December 31,
(in thousands, except percentages)		2025			2024			Change				2025			2024			Change
Research and development		$	7,277		$	7,708		$	(431)	(6)	%	$	14,592		$	15,129		$	(537)	(4)	%
Percentage of total revenue			32	%		34	%						31	%		34	%

Research and development expense primarily consists of personnel-related expenses directly associated with our engineering, product management and development, and quality assurance staff. Included in these costs are salaries, benefits, bonuses, and stock-based compensation and allocated overhead. Research and development expense also includes outside consulting services contracted for research and development.

Research and development expense decreased by 6% to $7.3 million for the three months ended December 31, 2025, from $7.7 million in the same period in fiscal year 2025. Excluding a decrease of $18,000 due to foreign exchange rate fluctuation, research and development expense decreased primarily due to decreases of (i) $296,000 in personnel-related costs and (ii) $117,000 in outside consulting costs.

Research and development expense decreased by 4% to $14.6 million for the six months ended December 31, 2025, from $15.1 million in the same period in fiscal year 2025. Excluding a decrease of $30,000 due to foreign exchange rate fluctuation, research and development expense decreased primarily due to a decrease of $537,000 in personnel-related costs.

Sales and Marketing

Three Months Ended

Six Months Ended

December 31,

(in thousands, except percentages)

 

2025

2024

Change

EGAIN Corp 10-Q