EGAN 10-K & 10-Q changes, risk factors and insider trading

The global economic climate continues to influence our business. This includes factors such as a general tightening in the credit markets, lower levels of liquidity, increases in the rates of default and bankruptcy, and extreme volatility in credit, equity and fixed income markets. These macroeconomic developments negatively affected, and could continue tohave negatively affect,affected our business, operating results orand financial condition which,in the past, and may continue to do so in turn,the could adversely affect our stock price.future. A general weakening of, and related declining corporate confidence in, the global economy or the curtailment in government or corporate spending couldhas causecaused, and may in the future cause, certain current or potential customers to reduce their technology budgets or be unable to fund software or services purchases, which couldhas causeresulted, and may in the future result, in customers todelaying, delay, decreasedecreasing or cancelcancelling purchases of our products and services or causedelaying customers to not pay us or to delay paying uspayment for previously purchased products and services.

Other factors that have caused, and may causein the future cause, our revenue and operating results to fluctuate include:

Any of these developments may adversely affect our revenue, operating results and financial condition. Furthermore, we maintain a provision for credit losses resulting from the inability of our customers to make required payments. InWe have experienced instances in which customers have failed to make required payments, and in such cases, we may be required to defer revenue recognition on sales to affected customers. InWe have recorded, and may in the future,future webe may haverequired, to record additional reserves or write-offs, or defer revenue on sales transactions, which could negatively impact our financial results.

Our business is highly dependent on our ability to continue to expand our SaaS business and cloud operations, including keeping pace with the market transition to SaaS solutions. Some customers have elected not to renew their subscriptions, and customers have reduced, and may in the future reduce, their subscriptions. If customers choose not to renew, or further reduce, their subscriptions, our operating results and financial results will suffer.

The deferral or loss of one or more significant orders canhas alsoadversely affected, and may in the future materially adversely affect our operating results, especially in a given quarter. As with other software-focused companies, a large amount of our quarterly business tends to come in the last few weeks, or even the last few days, of each quarter. This trend complicates the process of accurately predicting revenue and other operating results, particularly on a quarterly basis. In addition, our business is subject to seasonal factors that have caused, and may alsocontinue causeto cause, our results to fluctuate from quarter to quarter.

We allow our customers to elect not to renew their subscriptions for our service after the expiration of their initial subscription period, which is typically 12 to 36 months, and some customers have elected not to renew. In addition, oursome customers have renewed, and other customers may choosein tothe renewfuture renew, for fewer subscriptions (in quantity or products) or renew for shorter contract lengths. We cannot accurately predict renewal rates given our varied customer base of enterprise customers and the number of multiyear subscription contracts. Our renewal rates have fluctuated and may decline or fluctuate as a result of a number of factors, including customer dissatisfaction with our service, decreases in customers’ spending levels, decreases in the number of users at our customers, pricing changes and general economic conditions. If our customers do not renew their subscriptions for our service or reduce the number of paying subscriptions at the time of renewal, our revenue will decline,be adversely affected, and our business willmay suffer.

The long sales cycle for our products has caused, and may causecontinue to cause, SaaS revenue and operating results to vary significantly from period to period. The sales cycle for our products can be six months or more and varies substantially from customer to customer. Because we sell complex and deeply integrated solutions, it can take many months of customer education to secure sales. Since our potential customers may evaluate our products before, if ever, executing definitive agreements, we may incur substantial expenses and spend significant management and legal effort in connection with a potential customer.

Our multi-product offering and the increasingly complex needs of our customers contribute to a longer and unpredictable sales cycle. Consequently, we often face difficulty predicting the quarter in which expected sales will actually occur. This contributeshas contributed, and may continue to contribute, to the uncertainty and fluctuations in our future operating results. In particular, the corporate decision-making and approval process of our customers and potential customers has become more complicated. This has caused our average sales cycle to further increase and, in some cases, has prevented the closure of sales that we believed were likely to close.

We have in the past and expect in the future to derive a substantial portion of our revenue from sales to a relatively small number of customers. For the fiscal year ended June 30, 2026, our ten largest customers accounted for approximately 56% of our total revenue, compared with approximately 58% for the fiscal year ended June 30, 2025. Our largest customer accounted for approximately 15% and 16% of our total revenue for fiscal 2026 and fiscal 2025, respectively. The composition of these customers has varied in the past, and we expect that it will continue to vary over time. The loss of any significant customer or a decline in business with any significant customer wouldhas adversely affected, and could in the future materially and adversely affect our financial condition and results of operations.

The market for customer engagement software is intensely competitive. Other than product innovation and existing customer relationships, there are no substantial barriers to entry in this market, and established or new entities may enter this market in the future. While software internally developed by enterprises represents indirect competition, we alsoWe compete directly with packaged application software vendors,providers, including Genesys Telecommunications Laboratories, Inc., LivePerson, Inc., NICE Ltd.,Ltd. and Verint Systems Inc. In addition,the knowledge management systems market specifically, we facealso actualcompete orwith potentialproviders competitionof fromknowledge largermanagement softwaresystems, companiesincluding suchKMS asLighthouse, MicrosoftShelf, Corporation,Talkdesk, OracleUpland Corporation, salesforce.com, Inc., ServiceNow,Software, Inc., and similarUSU. companiesIn addition, we occasionally compete with some of our platform partners where some of our product capabilities overlap, including Five9, Genesys, Microsoft, Salesforce, and ServiceNow. We also compete with providers of general-purpose generative AI platforms and with enterprises that maydevelop attemptknowledge tomanagement, sellAI customerand engagementrelated softwarecapabilities tousing their installedown base.internal resources.

We believe that competition will continue to be fierce as current competitors increase the sophistication of their offerings and as new participants enter the market. Many of our current and potential competitors have longer operating histories, larger customer bases, broader brand recognition, and significantly greater financial, marketing and other resources. Our brand awareness and market visibility may also be more limited than that of certain larger or more established competitors, which has adversely affected, and may continue to adversely affect, our ability to attract prospective customers and compete for enterprise opportunities. With more established and better-financed competitors, these companies have been, and may becontinue to be, able to undertake more extensive marketing campaigns, adopt more aggressive pricing policies, and make more attractive offers to businesses to induce them to use their products or services. If we are unable to compete successfully, our business will be adversely affected.

We are also investing in AI across the entire company and integrating generative AI capabilities into our product and service offerings. We expect AI technology and services to be aare highly competitive and rapidly evolving market.markets. We willhave bearincurred, and expect to continue to incur, significant development and operational costs to build and support the generative AI capabilities, products, and services necessary to meet the needs of our customers. To compete effectively, we must also be responsive to technological change, potential regulatory developments, and public scrutiny. Such competitive pressure has resulted, and may causecontinue to result, in decreased sales volumes, price reductions, and/or increased operating costs, such as for research and development, marketing, and sales activities. This has adversely affected, and may leadcontinue to adversely affect, lower revenue, gross margins, and operating income. In addition, customers are currently assessing and evolving their AI utilization strategy, so it is difficult to estimate with any reasonable degree of precision the impact of generative AI product offerings on our future revenue, the expected timing or demand for our products and services, and the extent to which customer investment in AI-enabled solutions may displace or accelerate purchases of our existing offerings.

Expansion and growth of our business is dependent on our ability to expand our sales force and on the ability of our sales force to increase sales. For example, we have experienced workforce reductions and turnover, and additional reductions or turnover as recently as late fiscal year ended June 30, 2025 may limit our capacity to develop and maintain awareness of our products in a cost-effective manner,manner. whichThis could hinder widespread adoption of our existing and future products.products Thisand maycould result in a failure to expand and attract new customers and enhance relationships with existing customers. This maycould impede our efforts to improve operations in our other areas and may result in declines in the market price of our common stock.

Our success and future growth depend in part upon the skills, experience, performanceperformance, and continued service of our distribution partners, including software and hardware vendors and resellers. Our distribution partners engage with us in a number of ways, including assisting us to identify prospective customers, distributing our products and services in geographies where we do not have a physical presence and distributing our products and services where they are considered complementary to other products of the partner or third-party products distributed by the partner. We believe that our future success depends in part upon our ability to develop, maintain and expand strategic, long-term and profitable partnerships and reseller relationships. We have experienced, and may in the future experience, instances in which distribution partners have not marketed, resold, implemented or supported our products to the extent anticipated, or have devoted greater resources to competing products and services. If we are unable to dodevelop, somaintain and expand these relationships for any reason, including as a result of any change in the leadership of our distribution partners, or if any existing or future distribution partners fail to successfully market, resell, implement or support our products for their customers, or if distribution partners represent multiple providers and devote greater resources to market, resell, implement and support competing products and services, our future revenue growth could be impeded.

We sometimes rely on distribution partners to recommend our products to their customers. We likewise depend on broad market acceptance by these distribution partners of our product and service offerings. Our agreements generally do not prohibit competitive offerings and our distribution partners may develop market or recommend software applications that compete with our products. ToWe thehave extent we devotedevoted resources to these relationships and the partnerships dothat have not proceedalways as anticipatedproceeded or providegenerated revenue or other results as anticipated, ourand businessthis may beoccur harmed.again in the future. Once partnerships are forged, theresome canrelationships may not be norenewed, guaranteeand thatwe such relationships willmay be renewedunable to renew other relationships in the future or availablemay only be able to renew them on acceptableless favorable terms. If we lose strategic third-party relationships, fail to renew or develop new relationships, or fail to fully exploit revenue opportunities within such relationships, our results of operations and future growth may suffer.

We generally recognize revenue upon the transfer of control of promised services to our customers in the amount that is commensurate with the consideration that we expect to receive in exchange for those services. If an arrangement requires significant customization or implementation services from us, recognition of the associated subscription and service revenue couldhas bebeen, and may in the future be, delayed. The timing of the commencement and completion of these services is subject to factors that may be beyond our control, as this process may require access to the customers’ facilities and coordination with the customer’s personnel after delivery of the software obligations. In addition, customers could cancel or delay product implementations. Implementation typically involves working with sophisticated software, computing,computing and communications systems. If we experience difficulties with implementation or do not meet project milestones in a timely manner, we could be obligated to devote more customer support, engineering, and other resources to a particular project. Some customers have required, and may alsoin requirethe future require, us to develop customized features or capabilities. If new or existing customers cancel or have difficulty deploying our products or require significant amounts of our professional services, support, or customized features, revenue recognition could be cancelled or further delayed and our costs could increase, causing increased variability in our operating results.

Implementation services may be performed by our own staff, by a third-party partnerpartner, or by a combination of the two. Our strategy is to work with partners to increase the breadth of capability and depth of capacity for delivery of these services to our customers, and we expect the number of our partner-led implementations to continue to increase over time. If a customer is not satisfied with the quality of work performed by us or a partner or with the type of professional services or functionality delivered, even if we are not contractually responsible for the partner services, then we could incur additional costs to address the situation, the profitability of that work might be impaired and the customer’s dissatisfaction with our or our partner’s services could damage our ability to expand the scope of functionality subscribed to by that customer. In addition, negative publicity related to our customer relationships, regardless of its accuracy, may further damage our business by affecting our ability to compete for new business with current and prospective customers.

RevenueWe fromderived EMEA21% sales remained consistent atand 22% of our totalrevenue revenuefrom EMEA sales during the fiscal years ended June 30, 20252026 and 2024.2025, respectively. In addition to those discussed elsewhere in this section, our EMEA sales operations are subject to a number of specific risks, such as:

We have experienced, and may continue to experience, adverse effects from certain of these risks, including foreign currency fluctuations, increased costs of staffing and managing our international operations, and geopolitical and regulatory developments. Any of the above risks could adversely affect our international operations, reduce our revenue from customers outside of the U.S.United States or increase our operating costs, each of which could adversely affect our business, results of operations, financial condition, and growth prospects.

As of June 30, 2025,2026, approximately 43%44% of our workforce was employed in India. Of our employees in India, 45%57% are allocated to research and development. Although the movement of certain operations internationally was principally motivated by cost cutting, the continued management of these remote operations requires significant management attention and financial resources that couldhave adverselyaffected, affectand may continue to affect, our operating performance. In addition, with the significant increase in the numbersnumber of foreign businesses that have established operations in India, the competition to attract and retain employees there has increased significantly. As a result of the increased competition for skilled workers, we have experienced increased compensation costs and expect these costs to increase in the future. Our reliance on our workforce in India makes us particularly susceptible to disruptions in the business environment in that region. In particular, sophisticated telecommunications links, high-speed data communications with other eGain offices and customers, and overall consistency and stability of our business infrastructure are vital to our day-to-day operations, and anywe impairmenthave ofexperienced, and may in the future experience, disruptions or impairments to such infrastructure willthat causecould adversely affect our financial condition and results to suffer.results. In addition, the maintenance of stable political relations between the U.S., the European Union (EU) and India are also of great importance to our operations. RecentChanges developments,in suchU.S.-India astrade policy have introduced uncertainty into the U.S.relationship, administration'sincluding the imposition in 2025 of aadditional 50% tarifftariffs on certain Indian goods effectiveand Augustsubsequent 27,modifications 2025,to havethose introducedtariffs significantin uncertainties.2026. ThisFuture tariffchanges escalationin hastariffs, strainedtrade U.S.-Indiarestrictions relations.or other trade policies could create additional uncertainty or adversely affect the broader business environment in India.

Any of these risks couldhave havehad, and may in the future have, a significant impact on our product development, customer support, or professional services. To the extent the benefit of maintaining these operations abroad does not exceed the expense of establishing and maintaining such activities, our operating results and financial condition will suffer.

Our customers have in the past experienced some interruptions with our cloud operations. We believe that these interruptions willmay continue to occur from time to time. These interruptions couldhave beresulted, dueand tomay in the future result, from hardware and operating system failures, issues with third-party PaaS platforms, or other operational disruptions. AsSuch ainterruptions result,have affected, and may in the future affect, the availability or performance of our hosted operations and our ability to provide remote management services. Our business willcould sufferbe materially harmed if we experience frequent or long system interruptionsinterruptions. thatWe resulthave inalso theexperienced, unavailabilityand ormay reduced performance of our hosted operations or reduce our abilitycontinue to provide remote management services. We expect to experienceexperience, occasional temporary capacity constraints due to sharply increased traffic or other Internet-wide disruptions, which have caused, and may causein the future cause, unanticipated system disruptions, slower response times, impaired quality, and degradation in levels of customer service. If thisthese wereinterruptions toor continuedisruptions tobecome happen,more frequent or prolonged, our business and reputation could be seriously harmed.

Our success largely depends on the efficient and uninterrupted operation of our computer and communications hardware network systems, and third-party cloud platforms. We currently serve our customers from third-party data center facilities and third-party PaaS providers operated in the U.S. and other international locations. We have experienced, and may in the future experience, service interruptions or impairments resulting from issues affecting our systems or those of our third-party providers. Any damage to, or failure of, our systems or those of our third-party providers generally could interrupt service or impair the use or functionality of our cloud operations. In addition, as we continue to increase the number of customers and users on our cloud operations, we will need to increase the capacity of our data center and PaaS infrastructure. If we do not increase our capacity in a timely manner, customers could experience interruptions or delays in access to our cloud operations. Customer data that we store in third-party data centers may also be vulnerable to damage or interruption from floods, fires, earthquake, power loss, telecommunications failures and similar events. Any damage to, or failure of, our systems, or those of our third-party providers, could result in impairment of, or interruptions in, our service. Impairment or interruptions in our service may reduce our revenue, cause us to issue credits, pay penalties, or cause customers to terminate their subscriptions and adversely affect our renewal rate and our ability to attract new customers. Our business will also be harmed if our customers and potential customers believe our cloud operations are unreliable.

Our solutions are based on complex software that may contain errors, or “bugs,” that could be costly to correct, harm our reputation, and impair our ability to sell our solutions to new customers. Moreover, customers relying on our solutions may be more sensitive to such errorserrors, and potential security vulnerabilities and business interruptions for these applications. If we incur substantial costs to correct any errors of this nature, our operating margins could be adversely affected. Because our customers depend on our solutions for critical business functions, any service interruptions could result in lost or delayed market acceptance and lost sales, higher service-level credits and warranty costs, diversion of development resources, and product liability suits.

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

If we are unable, for technological, legal, financial or other reasons, to adapt in a timely manner to changing market conditions in the online sales, marketing, customer service and/or e-commerce industry or our customers’ or Internet users’ requirements or preferences, our business, results of operations and financial condition would be materially and adversely affected. Business on the Internet is characterized by rapid technological change. In particular, generative AI, agentic AI and other AI technologies are evolving rapidly and are changing customer expectations regarding the functionality, performance, automation and cost of customer engagement and knowledge management solutions. In addition, the market for online sales, marketing, customer service and expert advice solutions is relatively new. Changes in customer and Internet user requirements and preferences, frequent new product and service introductions embodying new technologiestechnologies, including AI-enabled technologies, and the emergence of new industry standards and practices such as but not limited to security standards could render our services and our proprietary technology and systems obsolete.obsolete or less competitive. We have invested, and expect to continue to invest, significant resources in developing and integrating AI capabilities into our products and services. However, the pace and direction of AI development and customer adoption are difficult to predict, and our AI offerings may not develop as anticipated or achieve the level of customer adoption that we expect. The rapid evolution of these products and services will require that we continually improve the performance, features and reliability of our services. Our success will depend, in part, on our ability to:

If any of our new services, including upgrades to our current services, or new or enhanced AI capabilities, do not meet our customers’ expectations, our business may be harmed. Our development and deployment of AI-enabled offerings may also require substantial investments in technology, infrastructure, third-party models and services, personnel, security and compliance. Updating our technology may require significant additional capital expenditures and could materially and adversely affect our business, results of operationsoperations, and financial condition.

If new services require us to grow rapidly, this could place a significant strain on our managerial, operational, technicaltechnical, and financial resources. In order to manage our growth, we could be required to implement new or upgraded operating and financial systems, procedures and controls. Our failure to expand our operations in an efficient manner could cause our expenses to grow, our revenue to decline or grow more slowly than expected and could otherwise have a material adverse effect on our business, results of operations and financial condition.

Our platform incorporates certain third-party software obtained under licenses from other companies, and we use third-party software development tools and other third-party technologies, including APIs, libraries, cloud-based services and AI models, as we continue to develop and enhance our platform. We anticipate that we will continue to rely on such third-party software in the future. Although we believe that there are commercially reasonable alternatives to many of the third-party software we currently license, this may not always be the case, or it may be difficult or costly to replace such software. In addition, integration of the software used in our platform with new third-party software may require significant work and require substantial investment of our time and resources. Also, to the extent that our platform depends upon the successful operation of third-party software in conjunction with our software, any undetected errors or defects in this third-party software could prevent the deployment or impair the functionality of our platform, delay new feature introductions, result in a failure of our functionality, and injure our reputation. Third-party providers may also modify, discontinue or restrict access to their technologies, change their pricing or licensing terms, or impose new technical, contractual or usage limitation. Our use of additional or alternative third-party software would require us to enter into license agreements with third parties. To the extent we need to license third-party technologies, we may be unable to do so on commercially reasonable terms or at all.

Third-party licenses may expose us to increased risks, including risks associated with the integration of new technology, the diversion of resources from the development of our own proprietary technology, dependency on the continued availability and performance of third-party technologies, and our inability to generate revenue from new technology sufficient to offset associated acquisition and maintenance costs. In the event that we are not able to maintain our licenses to third-party software, or cannot obtain licenses to new software as needed, or in the event third-party software used in conjunction with our platform contains errors or defects, or become unavailable or materially more costly, our business, operating results, and financial condition may be adversely affected.

Our success will dependdepends in large part on the skills, experience and performance of our senior management, engineering, sales, marketing and other key personnel. The loss of the services of any of our senior management or other key personnel, including our Chief Executive Officer and co-founder, Ashutosh Roy, could harm our business. Additionally, in the technology industry, there is substantial and continuous competition for highly skilled business, product development, technical and other personnel. We mayhave alsoexperienced, experienceand expect to continue to experience, significant competition for qualified personnel and increased compensation costs thatin arecertain markets. Such increased cost may not be offset by either improved productivity or higher sales. Our failure to recruit new personnel and to retain and motivate existing personnel could have significant negative effects on us, including impairing our ability to expand our business, and our results of operations could suffer.

We offer a limited version of our subscription service to customers or potential customers free of charge (known as “Innovation in 30 Days”) in order to promote usage, brand and product awareness, and adoption, and we invest time and resources for such initial engagements without compensation from the customers. Some customers neverdo not enter into a definitive contractcontracts for our paid subscription service despite the time and effort we may have expended on such initiatives. To the extent that these customers do not become paying customers, we will not realize the intended benefits of this marketing effort, and our ability to grow our business and revenue may be harmed.

We assume a certain level of credit risk with our customers in order to do business. Conditions affecting any of our customers couldhave causecaused, and may in the future cause, them to become unable or unwilling to pay us in a timely manner, or at all, for products or services we have already provided. In the past, we have experienced collection delays from certain customers, and we cannot predict whether we willmay continue to experience similar or more severe delays in the future. Although we have established a provision to cover losses due to delays or inability to pay, there can be no assurance that such reserves will be sufficient to cover our losses. If losses due to delays or inability to pay are greater than our reserves, it could harm our business, operating results and financial condition.

Our technology platforms enable representatives of our customers as well as individual service providers to communicate with consumers and other persons seeking information or advice on the Internet. The law relating to the liability of online platform providers such as us for the activities of users of their online platforms is often challenged in the U.S. and internationally. We may behave unablelimited ability to preventcontrol usersthe information, advice or other content transmitted through our platforms by our customers or their users. Users of our technology platforms frommay providingprovide negligent, unlawful or otherwise inappropriate advice, information or content through our technology platforms, or fromotherwise behavingengage in an unlawful manner,conduct, and we may be subject to allegations of civilclaims or criminalregulatory liabilityscrutiny forarising negligent,from fraudulent,such unlawful or inappropriate activities carried out by users of our technology platforms.activities.

Claims could be made against providers of online services companies under both U.S. and foreign law suchbased ason fraud, defamation, libel, invasion of privacy, negligence, copyright or trademark infringement, or other theories basedrelating onto thecontent natureor activities occurring through their services. Laws governing online platforms, intermediary liability, user-generated content and content ofmoderation continue to evolve in the materialsUnited disseminatedStates byand usersinternationally, ofand changes in these laws or their interpretation could increase our technologypotential platforms. In addition, domestic and foreign legislation has been proposed that could prohibitliability or imposecompliance liability for the transmission over the Internet of certain types of information.obligations. Our defense of any of these actions could be costly and involve significant time and attention of our management and other resources.

Security incidents have become more prevalent across industries and the methods and techniques used by threat actors continue to evolve at a rapid pace.pace, Theseincluding cyberattacksthrough the use of artificial intelligence and other increasingly sophisticated tools. We have experienced, and may occurcontinue onto experience, cybersecurity threats and incidents affecting or targeting our systemssystems. and weWe may be unable to identify current attacks, anticipate these attacks or implement adequate security measures. Our service involves the storage and transmission of customers’ proprietary information, and security incidents could expose us to a risk of loss of this information, loss of access, litigation and possible liability. The techniques used to effect unauthorized penetration of computer systems are constantly evolving and have been increasing in sophistication. While we have security measures in place that are designed to protect customer information and prevent data loss and other security breaches, these security measures may be breached as a result of third-party action, including intentional misconduct by computer hackers (which may involve nation states and individuals sponsored by them), employee error, malfeasance or otherwise and result in someone obtaining unauthorized access to our customers’ data or our data, including our intellectual property and other confidential business information, or our IT systems. Additionally, third-parties have attempted, and may continue to attempt, through phishing, social engineering or otherwise, to fraudulently induce employees or customers into disclosing sensitive information such as usernames, passwords or other information in order to gain access to our customers’ data or our data or IT systems.

Employees or contractors have introduced vulnerabilities in, and enabled the exploitation of, our IT environments in the past and may do so in the future. These cybersecurity attacks threaten to misappropriate our proprietary information, cause interruptions of our IT services and commit fraud. Because the techniques used to obtain unauthorized access, or to sabotage systems, change frequently and generally are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. Further, if unauthorized access or sabotage remains undetected for an extended period of time, the effects of such breachincidents could be exacerbated. In addition, our ability to defend against and mitigate cyberattacks depends in part on prioritization decisions that we and third parties upon whom we rely on to address vulnerabilities and security defects. While we endeavor to address all identified vulnerabilities in our products, we must make determinations as to how we prioritize developing and deploying the respective fixes, and we may be unable to do so prior to an attack.

We transfer personal data from the European Economic Area (EEA), the United Kingdom, and Switzerland to the U.S. Historically, these transfers relied on the U.S.-EU and U.S.-Swiss Safe Harbor Frameworks and their successors, the EU-U.S. and Swiss-U.S. Privacy Shield Frameworks.Frameworks, However,which were invalidated by the EU Court of JusticeJustice. (ECJ) rulings in 2015 (Schrems 1) and 2020 (Schrems II) invalidated both frameworks and standard contractual clauses (approved by the European Commission as an adequate personal data transfer mechanism) may not necessarily be relied upon in all circumstances. In addition to other mechanisms, in limited circumstances we may rely on Privacy Shield certifications of third parties (for example, vendors and partners). The European Commission and the United Kingdom’s Information Commissioner’s OfficeWe have published new standard contractual clauses that are requiredself-certified to be implemented. Following issuance of a U.S. Executive Order, a new framework, the EU-U.S. Data Privacy Framework (EU-U.S. DPF) was created as a successor to, the PrivacyUK Shield.extension Following an adequacy decision issued by the European Commission on July 10, 2023,to the EU-U.S. DPF is(UK availableDPF forExtension), companiesand the Swiss-U.S. DPF, which serve as athe current lawful transfer mechanismmechanisms for personal data transfers to the U.S. from the EEA. Further, following an adequacy regulation that came into force inEEA, the UKUnited in October 2023Kingdom, and anSwitzerland, amendmentrespectively. toLike thetheir Swisspredecessors, Datathese Protection Ordinance that came into force in Switzerland in September 2024, a UK extension to the EU-U.S. DPF that allows the transfer of personal data from the UK to the U.S. (the UK DPF Extension) and a Swiss framework that allows for the transfer of personal data from Switzerland to the U.S. (the Swiss-U.S. DPF) are currently available. We have self-certified to the EU-U.S. DPF, the UK DPF Extension, and the Swiss-U.S. DPF. These mechanismsframeworks remain subject to legal challenges and future review,challenge, and the European Commission may suspend, amend, or limit their scope. In addition to our DPF certifications, we rely on standard contractual clauses (SCCs) approved by the European Commission as a supplementary transfer mechanism. These developments regarding cross-border data transfers have created uncertainty and increased the risk around our international operations and may require us to review and amend the legal mechanisms by which we make or receive personal data transfers to the U.S. and other jurisdictions. We may, among other things, be required to implement additional contractual and technical safeguards for any personal data transferred out of the EEA, Switzerland, the United Kingdom or other regions which may increase compliance costs, lead to increased regulatory scrutiny or liability, may require additional contractual negotiations, and may adversely impact our business, financial condition and operating results.

We publicly post our privacy policies and practices concerning our processing, use and disclosure of personal information. Our publication ofIf our privacyactual policypractices andare otherinconsistent, publicor are alleged to be inconsistent, with these statements thator provide promises and assurances aboutapplicable privacy andrequirements, securitywe cancould be subject us to potential governmental actionor regulatory action, litigation, contractual claims or reputational harm if they are found to be deceptive or misrepresentative of our practices.harm. Further, the costs of compliance with, and other burdens imposed by, such laws, regulations and policies that are applicable to us may limit the use and adoption of our products and solutions and could have a material adverse impact on our results of operations.

We are subject to a growing number of federal, state and foreign laws, regulations and standards governing data privacy, cybersecurity and the collection, processing, storage, use and transfer of personal information. RegulatoryThese requirements are evolving rapidly and have increased, and may continue to expandincrease, globally,our compliance obligations, operational complexity and unfavorablecosts. Unfavorable laws, regulations, or interpretations could limit demand for our services, increase compliance costs, or restrict our ability to offer our services and solutions in certain locations. Although we have implemented contracts, diligence programs, policies and procedures designed to address compliance with applicable laws and regulations, there can be no assurance that our employees, contractors, partners, suppliers, data providers or agents will not violate such laws and regulations or our contracts, policies and procedures. Additionally, public perception and standards related to the privacy of personal information can shift rapidly, in ways that may affect our reputation or influence legislatorlegislators to enact regulations and laws, or regulators to enforce such laws or issue guidance, in each case that may limit our ability to provide certain products and services.

In the U.S., the California Consumer Privacy Act (CCPA), as amended by the California Privacy Rights Act (CPRA) provides California residents with expanded rights to regarding personal information and impose significant compliance obligations. The CCPA, also applies to our collection and use of personal information relating to personnel. This may require separate compliance workflows for personnel data, increasing our administrative burden and compliance costs. In addition, numerous other states have adopted comprehensive privacy laws with varying requirements and enforcement mechanisms, including obligations related to sensitive personal information, data subject rights, and cybersecurity programs. Compliance with these laws increases operational complexity and costs, and failure to comply could result in investigations, fines, litigation, contractual liability, or reputational harm.

Internationally, global “digital” regulations continue to develop and evolve, including the EU’s GDPR, ePrivacy Directive, Network and Information Systems 2 Directive, Digital Operational ResilianceResilience Act, Cyber Resilience Act, Data Act, and Digital Services Act. In addition, India’s Digital Personal Data Protection BillAct, 2023 (DPDP Act), publishedwith implementing rules notified in 2023,November but2025 withand ancore implementationcompliance timelineobligations thatcommencing remainsin uncertain,May 2027, applies broadly to personal data processed within India and personal data outside the territory of India if such processing is in connection with any activity related to offering of goods or services to data subjects. We will continue to monitor developments related to existing and new “digital” laws which will require us to incur additional costs and expenses in an effort to monitor and comply with such laws. In addition to costs involved in monitoring and analyzing such laws to determine to what extent they apply, and costs involved in any compliance measures, there are also financial risks in the event of enforcement action, with many imposing obligations and penalties for noncompliance. Further, to the extent that any new laws may limit our ability to provide our solutions to customers.customers, our business, financial condition, and operating results could be adversely affected.

In addition to government activity, privacy advocacy and other industry groups have established or may establish new self-regulatory standards that may place additional burdens on us. Our customers expect us to meet voluntary certification or other standards established by third parties, such as TRUSTe.TRUSTe and other privacy, security and compliance frameworks. If we are unable to maintain these certifications or meet these standards, it could adversely affect our ability to provide our solutions to certain customers and could harm our business.

The costs of compliance with and other burdens imposed by laws, regulations and standards have increased, and may continue to increase, our costs and operational requirements and may limit the use and adoption of our service and reduce overall demand for it, or lead to significant fines, penalties or liabilities for any noncompliance.

Furthermore, concerns regarding data privacy may cause our customers’ customers to resist providing the data necessary to allow our customers to use our service effectively. Even the perception that the privacy of personal information is not satisfactorily protected or does not meet regulatory requirements could inhibit sales of our products or services, and could limit adoption of our subscription solution. Moreover, as our customers face increased scrutiny for data privacy breaches, they have sought, and may electcontinue to transferseek, theto allocate additional privacy and cybersecurity risk to us through contractual provisionsrequirements, indemnities and liability provisions, which may subjectincrease us to increasing levels ofour contractual liability for data privacy breaches.exposure.

We are integrating AI into several of our offerings and anticipate significant growth in this area. However, like many innovations, AI comes with risks and challenges that could impact its adoption and our business. These may include flawed algorithms or training methods, inadequate or biased datasets,datasets and outputs, hallucinations, concept drift, and harmful, misleading, or unlawful content that may be generated by AI systems. AI systems may be deployed without adequate human oversight, particularly in customer service contexts. These risks may be heightened in our regulated industry verticals, including financial services, insurance, healthcare, and telecommunications, where inaccurate or harmful AI outputs or AI-based decisions could cause customer harm, trigger regulatory scrutiny or claims, and result in legal liability, reputational damage, or competitive harm. While eGain does not control or assume responsibility for such AI-generated outputs, their use by customers could nonetheless result in disputes, regulatory scrutiny, legal liability, or reputational harm that may indirectly affect us. In addition, poor development or deployment practices could undermine customer confidence, hinder AI acceptance, cause harm, or result in products not performing as intended.

The regulatory environment for AI is evolving rapidly. Emerging laws and regulations, including the EU AI Act, U.S. federal and state initiatives, and other international measures, may require transparency, documentation, risk assessment, monitoring, and mitigation. SuchIn the absence of comprehensive federal AI legislation in the U.S., a growing number of states have enacted AI-specific laws, creating a patchwork of regulatory scrutinyrequirements. These state laws vary in scope, definitions, and compliance requirements, which may increase our operational complexity and costs. Compliance with these evolving laws and regulations could increase complianceour costs, and any failure to comply may harm our reputation, customer trust, operations, and financial condition. Further, a number of countries and states are still considering their legislative approach to AI and the law in this area, creating uncertainty. These challenges, along with other issues related to innovative technologies, could expose us to increased compliance costs, competitive harm, regulatory actions, legal liabilities, and reputational damage. Some AI applications raise ethical concerns or have broad societal impacts. If our AI solutions lead to unintended consequences, misuse, or controversy due to their effects on human rights, privacy, employment, or other social, economic, or political issues, we may face reputational harm, negatively affecting our business and financial performance. We also rely in part on third-party AI technologies, such as those provided by OpenAI and other partners. If these partners experience disruptions, errors, restrictions on training data, regulatory challenges, or cease to provide access on commercially reasonable terms, our ability to offer AI-enabled solutions could be impaired.

We are subject to anti-corruption and anti-bribery and similar laws, such as the U.S. Foreign Corrupt Practices Act of 1977, as amended, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the USA PATRIOT Act, the UK Bribery Act 2010, and other anti-corruption, anti-bribery, and anti-money launderingapplicable laws in the countries in which we conduct activities. Anti-corruption and anti-briberyThese laws have been enforced aggressively in recent years and are interpreted broadly and generally prohibit companies and their employeesemployees, agents and agentsother intermediaries from promising, authorizing, making or offering improper payments,payments or other benefits to government officials and othersand, in thesome jurisdictions, private sector.parties. As we increaseconduct ourbusiness international salesinternationally and business,engage ourwith customers, partners, resellers and other third parties in multiple jurisdictions, we face compliance risks under these lawslaws, which may increase.increase as our international business expands. We have implemented policies and procedures designed to promote compliance with applicable anti-corruption and anti-bribery laws, but we cannot assure that our employees, agents, partners or other third parties will always comply with such requirements. Noncompliance with these laws could subject us to investigations, sanctions, settlements, prosecution, other enforcement actions, disgorgement of profits, significant fines, damages, other civil and criminal penalties or injunctions, adverse media coverage, and other consequences. Any investigations, actions, or sanctions could harm our business, operating results, and financial condition.

Our customers and potential customers conduct business in a variety of industries, including financial services, the public sector, healthcare, telecommunications and other highly regulated industries. Regulators in certain industries have adopted and maycontinue in the futureto adopt and interpret regulations orand interpretive positionsguidance regarding the use of cloud computing, AI and other outsourced services. The costs of compliance with, and other burdens imposed by, industry-specific laws, regulations and interpretive positions have affected, and may limitcontinue to affect customers’ use and adoption of our services and reduce overall demand for our services. For example, some financial services regulators have imposed guidelines for use of cloud computing services that mandate specific controls or require financial services enterprises to obtain regulatory approval prior to outsourcing certain functions. If we are unable to comply with these guidelines or controls, or if our customers are unable to obtain regulatory approval to use our service where required, our business may be harmed. Our business mayis also besubject affectedto byan evolving and increasingly complex regulatory frameworks,environment includingrelating those focused onto AI, cybersecurity, outsourcing,outsourcing and data governance, such asincluding the AIEU Act,Artificial Digital ServicesIntelligence Act, Network and Information Systems 2 Directive, and Digital Operational ResilianceResilience Act in the EU, as well as U.S. and international initiativesregulatory incorporatingrequirements theand NISTframeworks applicable to AI Riskand Managementcloud Framework.services. These developments have resulted, and may continue to result, in increased customer diligence, contractual requirements and requests for additional controls, transparency, documentation and monitoring. We may be faced with questions and additional requirements from customers, and compliance may require us to implement additional controls, transparency measures, or monitoring obligations. In addition, an inability to satisfy the standards of certain voluntarycertification, third-partyauthorization certificationor bodiescompliance frameworks that our customers may require or expect, such as an attestation of compliance with the PCI Data Security Standards, requirements applicable under HIPAA, FEDRAMP requirements or similar frameworks, may adversely affect our ability to provide services to certain customers. Requirements under these frameworks continue to evolve, and maintaining compliance or applicable certifications or authorizations may require significant resources. If we are unable to achieve or maintain these industry-specific certifications or other requirements or standards relevant to our customers, it could adversely affect our ability to provide our services to certain customers and harm our business.

Overview eGain automatespowers customer experience with an AIAI-driven knowledge hubmanagement solution.for the enterprise. We sell our SaaS solutionplatform to enterprises whothat want to improve customer experience while reducing cost, by using AI to synthesize and deliver trusted, consumable answers fromto acustomers, knowledgeemployees, hub.and AI agents — aiming to reduce cost and improve outcomes across knowledge-intensive workflow.. We are headquartered in Sunnyvale, California, USA. We also operate in the United Kingdom and India.

We monitor the key financial performance measures set forth below as well as cash and cash equivalents and available debt capacity, which are discussed in “Liquidity and Capital Resources,” to help us evaluate trends, establish budgets, measure the effectiveness of our sales and marketing efforts and assess operational effectiveness and efficiencies.

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

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 thethis 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 generally accepted accounting principles in the United States of America (GAAP).GAAP.

Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses our consolidated financial statements, which have been prepared in accordance with GAAP in the United States.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.

Sources of RevenuesRevenue

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.

On August 16, 2022, the Inflation Reduction Act of 2022 (IRA) was signed into lawenacted and is effective for taxable years beginning after December 31, 2022. The IRA includes multiple incentives to promoteseveral clean energy withincentives and significant tax provisionsprovisions, primarily focused on implementingincluding a 15% corporate alternative minimum tax based on global adjusted financial statement income and a 1% excise tax on sharecertain stock repurchases. TheseBased measureson maythe affectCompany's ourcurrent analysis, the IRA's corporate alternative minimum tax is not expected to have a material impact on the Company's consolidated financial statementsstatements. However, the Company remains subject to the 1% excise tax on applicable share repurchases and werecords any related expense as incurred. The Company will continue to monitor future guidance and evaluate the applicabilityimpact andof effectany changes in facts, circumstances, or interpretations of the IRA as more guidance is issued.law. In 2024, California enacted legislation, with the first being S.B.167, which suspends the use of NOLs by businesses and individuals for tax years 2024 through 2026, limits the use of tax credits by businesses and individuals to $5 million for tax years 2024 through 2026, and clarifies that income not included in apportionable business income is excluded from the sales factor of the apportionment formula. The second, S.B.175, provides some relief from the $5 million credit limitation in S.B. 167 by allowing taxpayers subject to the limit to elect to later receive a refund of credits they would have otherwise used to reduce tax liabilities during the limitation period.

On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was enacted in the U.S.United TheStates. OBBBA includes significant tax provisions, such asincluding the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax frameworkregime, and the restoration of favorable tax treatment for certain business provisions.expenditures. This newThe legislation hascontains multiple effective dates, with certain provisions becoming effective in 2025 and others implementedphased in through 2027. WeThe areCompany has evaluated the provisions currently assessingin effect and continues to assess the impact of OBBBAfuture effective provisions on ourits consolidated financial statements. The Company will recognize the effects of OBBBA in the periods in which the relevant provisions become effective or additional guidance is issued, as applicable.

Our effective tax rate for both fiscal years 20252026 and 20242025 was a tax provision of $1.9 million and a tax benefit of $26.6 million and a tax provision of $1.9 million, respectively. The change in our effective tax rate for fiscal year 20252026 as compared to fiscal year 20242025 was primarily due to the decreasechange in valuation allowance, foreignfederal ratestatutory differential,income Sectiontax 267, stock-based compensation andrate, the research and development tax credits.credits, and current state taxes, net of federal benefit.

The income before income tax benefit (provision) benefit between the U.S. and foreign countries impacted our effective tax rate as a result of the geographic distribution and customer demand related to our products and services. In fiscal year 2025,2026, our U.S. and foreign income before our income tax (provision) benefit was an income of $3.6$7.6 million and $2.0$3.2 million, respectively. In fiscal year 2024,2025, our U.S. and foreign income before our income tax was an income of $6.2$3.6 million and $3.5$2.0 million, respectively.

When we prepare our consolidated financial statements, we estimate our income tax liability for each of the various jurisdictions where we conduct business. This requires us to estimate our actual current tax exposure and to assess temporary differences that result from differing treatment of certain items for tax and accounting purposes. The net deferred tax assets are reduced by a valuation allowance if, based upon weighted available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. We make significant judgments to determine our provision for income taxes, our deferred tax assets and liabilities and any valuation allowance to be recorded against our net deferred tax assets. In the fiscal year ended June 30, 2025, we concluded that the valuation allowance related to the U.S. federal and state (excluding certain California tax attributes) deferred tax assets was no longer required due to the assessment of our recent income/loss and forecast future taxable income. As of June 30, 2025,2026, we had a valuation allowance of approximately $5.5$6.2 million attributable to California net operating losses and research and development credit carryforwards.

We consider the earnings of certain non-U.S. subsidiaries to be indefinitely invested outside the United States, on the basis of estimates, that future domestic cash generation will be sufficient to meet future domestic cash needs and our specific plans for reinvestments of those subsidiary earnings. We have not recordedprovided a deferred tax liability related to state income taxes and foreign withholdingfor taxes of approximately $28.2$30.3 million of undistributed earnings of foreign subsidiaries indefinitely invested outside the United States. If we decide to repatriate the foreign earnings, we would need to adjust our income tax provision in the period we determined that the earnings will no longer be indefinitely invested outside the United States.

Total revenue decreasedincreased $4.4$2.7 million during the fiscal year ended June 30, 2025,2026, from the same period in fiscal year 2024,2025, largely due to decreasedincreased SaaS revenue of $3.2$3.4 million and decreasedoffset with a decrease in professional services revenue of $1.2 million$660,000 in fiscal year 2025.2026.

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 $546,000$741,000 and $1.0 million$546,000 in total revenue during the fiscal years ended June 30, 20252026 and 2024,2025, respectively.

SaaS revenue includes revenue from cloud delivery arrangements, term licenses and embedded OEM royalties and associated support. RevenuesRevenue from SaaS decreasedincreased by $3.2$3.4 million during the fiscal year ended June 30, 2025,2026, from the same period in fiscal year 2024.2025.

SaaS revenue was $81.9$85.3 million and $85.1$81.9 million during the fiscal years ended June 30, 20252026 and 2024,2025, respectively, which represented aan decreaseincrease of 4% or $3.2$3.4 million. SaaS revenue represents 93%94% and 92%93% of total revenue for the fiscal years ended June 30, 20252026 and 2024,2025, respectively.

Excluding an increase of $510,000$702,000 due to foreign exchange rate fluctuation, SaaS revenue decreasedincreased by $3.7$2.7 million during the fiscal year ended June 30, 2025,2026, from the same period in fiscal year 2024.2025.

Professional services revenue includes consulting, implementation, training, and managed services. Revenues from professional services decreased by $1.2 million$660,000 during the fiscal year ended June 30, 2025,2026, from the same period in fiscal year 2024.2025.

Professional services revenue was $6.5$5.9 million and $7.7$6.5 million during the fiscal years ended June 30, 20252026 and 2024,2025, respectively, which represented a decrease of 16%10% or $1.2 million.$660,000. Professional services revenue represents 7%6% and 8%7% of total revenue for the fiscal years ended June 30, 20252026 and 2024,2025, respectively.

Excluding an increase of $36,000$40,000 due to foreign exchange rate fluctuation, professional services revenuesrevenue decreased by $1.2 million$700,000 during the fiscal year ended June 30, 2025,2026, from the same period in fiscal year 2024.2025. We expect professional services revenue to vary depending on the volume of projects and timing of recognition.

Revenue from North America sales decreasedincreased by 5% from $72.6 million during the fiscal year ended June 30, 2024 to $68.8 million during the fiscal year ended June 30, 2025 to $72.3 million during the fiscal year ended June 30, 2026 due to decreasesan increase of (i) $2.6$4.8 million in SaaS revenue; andpartially (ii)offset by a decrease of $1.2 million in professional service revenue.

Revenue from EMEA sales decreased by 3%4% from $20.2 million during the fiscal year ended June 30, 2024 to $19.7 million during the fiscal year ended June 30, 2025 to $18.8 million during the fiscal year ended June 30, 2026 due to a decrease of $570,000$1.4 million in SaaS revenue; partially offset by an increase of $32,000$553,000 in professional services revenue.

Cost of SaaS revenuesrevenue consistconsists 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 revenuesrevenue decreased by $1.5 million$243,000 or 8%1% during the fiscal year ended June 30, 20252026 from the same period in fiscal year 2024.2025. TheThis decrease iswas primarily due to decreases inof (i) personnel$1.3 relatedmillion in cloud computing costs of $1.5 million and (ii) $105,000 in outside consulting cost of $258,000costs; partially offset by an increase of $1.3 million in cloudpersonnel-related computing cost of $279,000costs during the fiscal year ended June 30, 2025,2026, from the same period in fiscal year 2024. Foreign exchange rate fluctuation had an immaterial impact on cost of SaaS revenues when comparing fiscal year ended June 30, 2025 and 2024.2025.

Cost of professional services increaseddecreased by $370,000$1.9 million or 5%22% during the fiscal year ended June 30, 20252026 from the same period in fiscal year 2024.2025. This increase iswas due to increasesa decrease of $2.2 million in (i) personnel-related costs; partially offset by an increase of $339,000$322,000 and (ii)in outside consulting cost of $13,000costs from the same period in fiscal year 2024.2025.

Excluding an increase of $17,000$27,000 due to foreign exchange rate fluctuation, cost of professional services revenue increaseddecreased by $353,000$1.9 million for the fiscal year ended June 30, 2025,2026, from the same period in fiscal year 2024.2025.

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, stock-based compensationcompensation, and allocated overhead. Research and development expense also includes outside consulting services contracted for research and development.

Research and development expense increaseddecreased by $3.0 million$155,000 or 11%1% during the fiscal year ended June 30, 2025,2026, from the same period in fiscal year 2024.2025. TheThis increase iswas primarily due to increasesa indecrease (i)of $2.8 million$270,000 in personnel-related costs; andpartially (ii)offset $197,000by an increase of $200,000 in outside consulting costs.

Excluding a decrease of $5,000$85,000 due to foreign exchange rate fluctuation, research and development expense increaseddecreased by $3.0 million$70,000 for the fiscal year ended June 30, 2025,2026, from the same period in fiscal year 2024.2025.

Sales and marketing expense primarily consists of personnel-related expenses directly associated with our sales, marketing, and business development staff. Included in these costs are salaries, benefits, bonuses, and stock-based compensationcompensation, and allocated overhead. Sales and marketing expenses also include amortization of commissions paid to our sales staff, lead generation activities, advertising, trade show and other promotional costs and, to a lesser extent, occupancy costs and related overhead.

Sales and marketing expenses decreasedincreased by $2.8 million$120,000 or 12%1% during the fiscal year ended June 30, 20252026 from the same period in fiscal year 2024.2025. TheThis decrease iswas primarily due to a decreaseincreases of $3.4(i) million$162,000 in personnel-related costs and (ii) $57,000 in lead generation costs; partially offset by increasesa decrease of (i) $273,000 in lead generation costs and (ii) $145,000$257,000 in outside consulting costs.

Excluding an increase of $205,000$158,000 due to foreign exchange rate fluctuation, sales and marketing expense decreased $3.0by million$38,000 for the fiscal year ended June 30, 2025,2026, from the same period in fiscal year 2024.2025.

General and administrative expense primarily consists of personnel-related expenses directly associated with our finance, human resources, administrative and legal personnel. Included in these costs are salaries, benefits, bonuses, and stock-based compensationcompensation, and allocated overhead. General and administrative expenses also include fees for professional services, warrants, provision for credit losses and, to a lesser extent, occupancy costs and related overhead.

General and administrative expenseexpenses decreasedincreased by $1.9$1.3 million or 18%16% during the fiscal year ended June 30, 2025,2026, from the same period in fiscal year 2024.2025. TheThis decrease iswas primarily due to decreasesincreases inof (i) $992,000$1.4 million in warrant expense and (ii) $688,000 in legal expenses,expenses; partially offset by decreases of (i) $441,000 in outside consulting costs and (ii) $608,000 in personnel-related expenses, (iii) $296,000$162,000 in accounting, audit, and administrative expenses, and (iv) $28,000 in credit loss expenses.costs.

Excluding an increase of $39,000$22,000 due to foreign exchange rate fluctuation, general and administrative expense increased $1.9by $1.3 million for the fiscal year ended June 30, 2025,2026, from the same period in fiscal year 2024.2025.

Stock-based compensation expense includes the amortization of the fair value primarily of stock options awarded to employees, members of our board of directors and consultants. The fair value of stock options granted is recognized as an expense over their respectablerespective vesting schedule. The decreaseincrease in our stock-based compensation expense in fiscal year 20252026 compared to fiscal year 20242025 was primarily due to decreasesincreases in stock option vesting over their respectablerespective periods, company-wide headcount, and equity grant activity.

Interest IncomeIncome, Net

Interest incomeincome, net primarily consists primarily of interest earned on money market accounts, which have decreased in rates compared to prior year.accounts. Interest income, was income of $2.5$2.3 million and $3.8$2.5 million for the fiscal years ended June 30, 20252026 and 2024,2025, respectively.

Other Expense,Income (Expense), Net

Other expense,income (expense), net primarily included foreign exchange rate fluctuations on international trade receivables. Other expense,income (expense), net was income of $581,000 and expense of $1.3 million and $51,000 for the fiscal years ended June 30, 20252026 and 2024,2025, respectively.

Income Tax Benefit (Provision) Benefit

ProvisionIncome fortax income(provision) taxesbenefit consists of federal, state and foreign income taxes and the release of a substantial portion of our valuation allowance against U.S. deferred tax assets as of June 30, 2025.2026. We consider all available evidence, both positive and negative, including but not limited to earnings history, expiring attributes, projected future outcomes, industry and market trends and the nature of each of the deferred tax assets. We recorded an income tax provision of $1.9 million and benefit of $26.6 million and provision of $1.9 million in the fiscal years ended June 30, 20252026 and 2024,2025, respectively.

Our principal sources of liquidity were cash and cash equivalents, restricted cash, and accounts receivable, net.receivable. Our liquidity sources were $95.7$97.7 million compared to $101.7$95.7 million as of June 30, 20252026 and 2024,2025, respectively. Our cash, cash equivalents, and restricted cash were $62.9$73.3 million and $70.0$62.9 million as of June 30, 20252026 and 2024,2025, respectively.

Cash provided by operating activities mainly consists of net income adjusted for non-cash expense items such as depreciation and amortization, expense associated with stock-based awards,awards and warrants, the timing of employee related costs including costs capitalized to obtain revenue contracts, amortization of right-of-use assets, and changes in operating assets and liabilities during the year.

Cash provided by operating activities decreasedincreased by $7.2$15.9 million during the fiscal year ended June 30, 2025,2026, driven primarily by the decreasestiming inof deferredaccounts incomereceivable taxes related to our valuation release, stock-based compensation,collections and payments for accrued liabilities mainly offset by the increase in net income.liabilities.

Net cash used in financing activities decreased by $1.0$6.2 million during the fiscal year ended June 30, 2025.2026, The changes consistdriven primarily of proceeds from the exercise of employee stock options, our employee stock purchase plan, and a decrease ofby funds used withfor repurchases of our common stock and offset by proceeds of approximatelyemployee $1.5stock million.option exercises and employee stock purchase plan purchases. Funds used for repurchases of our common stock were $11.5 million and $15.8 million during fiscal year ended June 30, 2026 and 2025, respectively.

Revenue from EMEA sales wasremained 20%consistent at 22% of our total revenue during the three months ended DecemberMarch 31, 20252026 comparedand to 23% during the three months ended December 31, 2024.2025. Revenue from EMEA sales was 20% of our total revenue during the sixnine months ended DecemberMarch 31, 20252026 compared to 24%23% during the sixnine months ended DecemberMarch 31, 2024.2025. In addition to those discussed elsewhere in this section, our EMEA sales operations are subject to a number of specific risks, such as:

As of DecemberMarch 31, 2025,2026, approximately 44% of our workforce was employed in India. Of our employees in India, 61% are allocated to research and development. Although the movement of certain operations internationally was principally motivated by cost cutting, the continued management of these remote operations requires significant management attention and financial resources that could adversely affect our operating performance. In addition, with the significant increase in the numbers of foreign businesses that have established operations in India, the competition to attract and retain employees there has increased significantly. As a result of the increased competition for skilled workers, we experienced increased compensation costs and expect these costs to increase in the future. Our reliance on our workforce in India makes us particularly susceptible to disruptions in the business environment in that region. In particular, sophisticated telecommunications links, high-speed data communications with other eGain offices and customers, and overall consistency and stability of our business infrastructure are vital to our day-to-day operations, and any impairment of such infrastructure will cause our financial condition and results to suffer. In addition, the maintenance of stable political relations between the U.S., the European Union (EU) and India are also of great importance to our operations. RecentPrior developments, such as the U.S. administration's imposition of atariffs of up to 50% tariffon oncertain Indian goods effective August 27, 2025, have introduced significant uncertainties. This tariff escalation has strained U.S.-India relations.

Security incidents have become more prevalent across industries and the methods and techniques used by threat actors continue to evolve at a rapid pace. These cyberattacks may occur on our systems and we may be unable to identify current attacks, anticipate these attacks or implement adequate security measures. Our service involves the storage and transmission of customers’ proprietary information, and security incidents could expose us to a risk of loss of this information, loss of access, litigation and possible liability. The techniques used to effect unauthorized penetration of computer systems are constantly evolving and have been increasing in sophistication. While we have security measures in place that are designed to protect customer information and prevent data loss and other security breaches, these security measures may be breached as a result of third-party action, including intentional misconduct by computer hackers (which may involve nation states and individuals sponsored by them), employee error, malfeasance or otherwise and result in someone obtaining unauthorized access to our customers’ data or our data, including our intellectual property and other confidential business information, or our IT systems. Additionally, third-partiesthird parties may attempt, through phishing, social engineering or otherwise, to fraudulently induce employees or customers into disclosing sensitive information such as usernames, passwords or other information in order to gain access to our customers’ data or our data or IT systems.

We are subject to a growing number of federal, state and foreign laws, regulations and standards governing data privacy, cybersecurity and the collection, processing, storage, use and transfer of personal information. Regulatory requirements continue to expand globally, and unfavorable laws, regulations, or interpretations could limit demand for our services, increase compliance costs, or restrict our ability to offer our services and solutions in certain locations. Although we have implemented contracts, diligence programs, policies and procedures designed to address compliance with applicable laws and regulations, there can be no assurance that our employees, contractors, partners, suppliers, data providers or agents will not violate such laws and regulations or our contracts, policies and procedures. Additionally, public perception and standards related to the privacy of personal information can shift rapidly, in ways that may affect our reputation or influence legislatorlegislators to enact regulations and laws, or regulators to enforce such laws or issue guidance, in each case that may limit our ability to provide certain products and services.

In the U.S., the California Consumer Privacy Act (CCPA), as amended by the California Privacy Rights Act (CPRA) provides California residents with expanded rights to regarding personal information and impose significant compliance obligations. In addition, numerous other states have adopted comprehensive privacy laws with varying requirements and enforcement mechanisms, including obligations related to sensitive personal information, data subject rights, and cybersecurity programs. Compliance with these laws increases operational complexity and costs, and failure to comply could result in investigations, fines, litigation, contractual liability, or reputational harm.

Internationally, global “digital” regulations continue to develop and evolve, including the EU’s GDPR, ePrivacy Directive, Network and Information Systems 2 Directive, Digital Operational Resilience Act, Data Act, and Digital Services Act. In addition, India’s Digital Personal Data Protection Bill (DPDP), published in 2023, but with an implementation timeline that remains uncertain, applies broadly to personal data processed within India and personal data outside the territory of India if such processing is in connection with any activity related to offering of goods or services to data subjects. We will continue to monitor developments related to existing and new “digital” laws which will require us to incur additional costs and expenses in an effort to monitor and comply with such laws. In addition to costs involved in monitoring and analyzing such laws to determine to what extent they apply, and costs involved in any compliance measures, there are also financial risks in the event of enforcement action, with many imposing obligations and penalties for noncompliance. Further, to the extent that any new laws may limit our ability to provide our solutions to customers.customers, our business, financial condition, and operating results could be adversely affected.

Our directors and executive officers, together with their affiliates and members of their immediate families, beneficially owned, in the aggregate, approximately 36%35% of our outstanding capital stock as of DecemberMarch 31, 2025,2026, of which our Chief Executive Officer, Ashutosh Roy, beneficially owned approximately 32% as of such date. As a result of these concentrated holdings, Mr. Roy individually or together with this group has the ability to exercise significant control over most matters requiring our stockholders’ approval, including the election and removal of directors and the approval of significant corporate transactions, such as a merger or sale of our company or its assets.

Overview eGain automatespowers customer experience with an AIAI-driven knowledge hubmanagement solution.for the enterprise. We sell our SaaS solutionplatform to enterprises whothat want to improve customer experience while reducing cost, by using AI to synthesize and deliver trusted, consumable answers fromto acustomers, employees, and AI agents — aiming to reduce cost and improve outcomes across every knowledge-intensive workflow. Our platform centralizes enterprise knowledge hub.and puts it to work across customer service, employee support, and AI-powered automation. We are headquartered in Sunnyvale, California, USA. We also operate in the United Kingdom and India.

Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses our condensed 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.

As of DecemberMarch 31, 2025,2026, our remaining performance obligations were $84.9$74.1 million, of which we expect to recognize $53.0$48.5 million and $31.9$25.6 million as revenue within one year and beyond one year, respectively.

The following table presents our total revenue during the three and sixnine months ended DecemberMarch 31, 20252026 and 2024,2025, respectively:

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$318,000 and $151,000a decrease of $33,000 in total revenue during the three months ended DecemberMarch 31, 20252026 and 2024,2025, respectively. Foreign exchange rate fluctuation resulted in an increase of $395,000$717,000 and an increase of $298,000$271,000 for the sixnine months ended DecemberMarch 31, 20252026 and 2024,2025, respectively.

SaaS revenue includes revenue from cloud delivery arrangements, term licenses and embedded OEM royalties and associated support. Revenue from SaaS increased by $952,000$1.4 million and $3.0$4.4 million during the three and sixnine months ended DecemberMarch 31, 2025,2026, respectively, compared to the same periods in fiscal year 2025. This represented an increase in SaaS revenue of 5% and 7% for each of the three and sixnine months ended DecemberMarch 31, 2025, respectively,2026, compared to the same periods in fiscal year 2025.

SaaS revenue represents 95%93% and 94% of total revenue for the three and sixnine months ended DecemberMarch 31, 2025,2026, respectively, compared to 93% and 92% for the same periods in fiscal year 2025.

Excluding an increase of $190,000$306,000 and an increase of $372,000$678,000 due to foreign exchange rate fluctuation, SaaS revenue increased by $762,000$1.0 million and $2.7$3.7 million during the three and sixnine months ended DecemberMarch 31, 2025,2026, respectively, compared to the same periods in fiscal year 2025. We expect SaaS revenue to continue to grow as we expand our customer base and usage of existing customers, reflecting continued demand for our SaaS offering.

Professional services revenue includes consulting, implementation, training, and managed services. Revenue from professional services increased by $136,000 and decreased by $362,000 and $733,000$597,000 during the three and sixnine months ended DecemberMarch 31, 2025,2026, 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$38,000 due to foreign exchange rate fluctuation, professional services revenue increased by $124,000 and decreased by $374,000 and $756,000$635,000 during the three and sixnine months ended DecemberMarch 31, 2025,2026, respectively, compared to the same periods in fiscal year 2025. We expect professional services revenue to vary dependent on the volume and timing of recognition.

Revenue from North America sales increased by 6%7% from $17.3$16.5 million during the three months ended DecemberMarch 31, 20242025 to $18.4$17.6 million during the three months ended DecemberMarch 31, 2025,2026, due to an increase of $1.3$1.5 million in SaaS revenue, partially offset by a decrease of $285,000$368,000 in professional services revenue.

Revenue from North America sales increased by 11%9% from $33.8$50.2 million during the sixnine months ended DecemberMarch 31, 20242025 to $37.3$54.9 million during the sixnine months ended DecemberMarch 31, 2025,2026, due to an increase of $4.0$5.5 million in SaaS revenue, partially offset by a decrease of $451,000$820,000 in professional services revenue.

Revenue from EMEA sales decreasedincreased by 9%8% from $5.1$4.6 million for the three months ended DecemberMarch 31, 20242025 to $4.6$4.9 million during the three months ended DecemberMarch 31, 2025,2026, due to decreasesan increase of (i) $356,000 in SaaS revenue and (ii) $75,000$504,000 in professional services revenue, partially offset by a decrease of $146,000 in SaaS revenue.

Revenue from EMEA sales decreased by 12%6% from $10.4$15.0 million for the sixnine months ended DecemberMarch 31, 20242025 to $9.2$14.1 million during the sixnine months ended DecemberMarch 31, 2025,2026, due to decreasesa decrease of (i)$1.1 $981,000million in SaaS revenuerevenue, andpartially (ii)offset $282,000by an increase of $222,000 in professional services revenue.

Cost of SaaS revenue decreased by $188,000$62,000 during the three months ended DecemberMarch 31, 2025,2026, from the same period in fiscal year 2025. This decrease was primarily due to decreases of (i) $369,000$351,000 in cloud-computing costs and (ii) $31,000 in outside consulting costs, partially offset by an increase of $224,000$313,000 in personnel-related costs.

Cost of SaaS revenue decreased by $539,000$601,000 during the sixnine months ended DecemberMarch 31, 2025,2026, from the same period in fiscal year 2025. This decrease was primarily due to decreases of (i) $729,000$1.1 million in cloud-computing costs and (ii) $126,000$157,000 in outside consulting costs, partially offset by an increase of $332,000$648,000 in personnel-related costs.

Excluding an increase of $2,000 and a decrease of $12,000 and $16,000$15,000 due to foreign exchange rate fluctuation, cost of SaaS revenue decreased by $176,000$64,000 and $523,000$586,000 during the three and sixnine months ended DecemberMarch 31, 2025,2026, respectively, from the same periods in fiscal year 2025.

Cost of professional services decreased by $320,000$667,000 during the three months ended DecemberMarch 31, 2025,2026, from the same period in fiscal year 2025. This decrease was primarily due to a decrease of $351,000$831,000 in personnel-related costs, partially offset by otheran professionalincrease servicesof $147,000 in outside consulting costs.

Excluding an increase of $16,000$19,000 due to foreign exchange rate fluctuation, cost of professional services revenue decreased by $336,000$686,000 during the three months ended DecemberMarch 31, 2025,2026, compared to the same period in fiscal year 2025.

Cost of professional services decreased by $804,000$1.5 million during the sixnine months ended DecemberMarch 31, 2025,2026, from the same period in fiscal year 2025. This decrease was primarily due to a decrease of $837,000$1.7 million in personnel-related costs, partially offset by otheran professionalincrease servicesof $153,000 in outside consulting costs.

Excluding an increase of $26,000$44,000 due to foreign exchange rate fluctuation, cost of professional services revenue decreased by $830,000$1.5 million during the sixnine months ended DecemberMarch 31, 2025,2026, compared to the same period in fiscal year 2025.

Research and development expense decreasedincreased by 4%1% to $14.6$7.6 million for the sixthree months ended DecemberMarch 31, 2025,2026, from $15.1$7.5 million in the same period in fiscal year 2025. Excluding aan decreaseincrease of $30,000$11,000 due to foreign exchange rate fluctuation, research and development expense decreasedincreased primarily due to a decreaseincreases of $537,000(i) $25,000 in outside consulting costs and (ii) $14,000 in personnel-related costs.

Sales and marketing expenses decreased by 1% to $5.2$4.6 million for the three months ended DecemberMarch 31, 2025,2026, from $5.3$4.7 million in the same period in fiscal year 2025. Excluding an increase of $47,000$76,000 due to foreign exchange rate fluctuation, sales and marketing expense decreased primarily due to decreasesa decrease of (i) $100,000$143,000 in personnel-related costscosts, andpartially (ii)offset $56,000by an increase of $17,000 in outside consulting costs.

Sales and marketing expenses decreased by 8%6% to $9.2$13.8 million for the sixnine months ended DecemberMarch 31, 2025,2026, from $10.0$14.7 million in the same period in fiscal year 2025. Excluding an increase of $89,000$164,000 due to foreign exchange rate fluctuation, sales and marketing expense decreased primarily due to decreases of (i) $727,000$870,000 in personnel-related costs and (ii) $161,000$143,000 in outside consulting costs.

General and administrative expenses increased by 10%12% to $2.3 million for the three months ended DecemberMarch 31, 2025,2026, from $2.1$2.0 million in the same period in fiscal year 2025. Excluding an increase of $8,000$15,000 due to foreign exchange rate fluctuation, general and administrative expense increased primarily due to an increase of $246,000$311,000 in legal related costs.costs, partially offset by a decrease of $100,000 in accounting, audit, and administrative fees.

General and administrative expenses increased by 28%23% to $5.8$8.1 million for the sixnine months ended DecemberMarch 31, 2025,2026, from $4.5$6.6 million in the same period in fiscal year 2025. Excluding an increase of $14,000$29,000 due to foreign exchange rate fluctuation, general and administrative expense increased primarily due to increases of (i) $1.4 million in warrant expense and (ii) $376,000$687,000 in legal related costs, partially offset by decreases of (i) 275,000$339,000 in outside-consulting costs and (ii) $77,000$101,000 in creditpersonnel-related loss expense.costs.

Income from operations was $2.0 million and $650,000$27,000 with an operating margin of 9% and 3%0% during the three months ended DecemberMarch 31, 20252026 and 2024,2025, respectively. This is primarily due to an increase in gross margin.

Income from operations was $4.9$6.9 million and $1.2 million with an operating margin of 10% and 3%2% during the sixnine months ended DecemberMarch 31, 20252026 and 2024,2025, respectively. This is primarily due to an increase in gross margin.

Interest income primarily consists of interest earned on money market accounts which have decreased rates compared to prior years.accounts. Interest income was $624,000$603,000 and $661,000$597,000 during the three months ended DecemberMarch 31, 20252026 and 2024,2025, respectively. Interest income was $1.1$1.7 million and $1.4$2.0 million during the sixnine months ended DecemberMarch 31, 20252026 and 2024,2025, respectively.

Other income (expense), net was an income of $176,000 and expense of $32,000 and $431,000$304,000 during the three months ended DecemberMarch 31, 20252026 and 2024,2025, respectively. Other income (expense), net was income of $423,000$599,000 and expense of $571,000$875,000 during the sixnine months ended DecemberMarch 31, 20252026 and 2024,2025, respectively. Other income (expense), net primarily included foreign exchange rate fluctuations on international trade receivables, net of transactions.

Provision for income taxes consists of federal, state, and foreign income taxes. We recorded income tax provision of $302,000$371,000 and $1,232,000$1.6 million for the three and sixnine months ended DecemberMarch 31, 2025,2026, respectively. We recorded income tax provision of $209,000$254,000 and $697,000$951,000 for the three and sixnine months ended DecemberMarch 31, 2024,2025, respectively. We released a majority of our valuation allowance against U.S. deferred tax assets on June 30, 2025 and recorded higher income before tax provision in the three and sixnine months ended DecemberMarch 31, 2025.2026.

As of DecemberMarch 31, 20252026 and June 30, 2025, our principal sources of liquidity were cash and cash equivalents, restricted cash, and accounts receivable totaling $96.8$89.2 million and $95.7 million, respectively. Our cash, cash equivalents and restricted cash were $83.1$80.5 million and $62.9 million as of DecemberMarch 31, 20252026 and June 30, 2025, respectively.

For the sixnine months ended DecemberMarch 31, 20252026 and 2024,2025, our cash flows were as follows (in thousands):

Net cash provided by operating activities increased by $13.2$9.1 million during the sixnine months ended DecemberMarch 31, 2025,2026, from the same period in fiscal year 2025, driven primarily by the change in net income,income and the timing of collections for accounts receivable, the timing of payments for accrued liabilities, and recognition of deferred revenue.receivable.

Net cash used in investing activities increased by $210,000$170,000 during the sixnine months ended DecemberMarch 31, 2025,2026, from the same period in fiscal year 2025, driven primarily by activities related to the purchase of equipment for employees and facility expenditures. Historically, cash used in investing activities has been used to purchase equipment and software to support our business and growth.

Net cash provided by (used in) financing activities increased by $7.2$12.4 million during the sixnine months ended DecemberMarch 31, 2025,2026, from the same period in fiscal year 2025. Our current proceeds consist primarily of the exercise of employee stock options, our employee stock purchase plan, and funds used for repurchases of our common stock. Funds used for repurchases of our common stock was $1.4 million and $7.0$12.0 million during the sixnine months ended DecemberMarch 31, 20252026 and 2024,2025, respectively.

Our principal 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. As of DecemberMarch 31, 2025,2026, the future non-cancelable minimum payments under these commitments were approximately $4.4$3.9 million.

As of DecemberMarch 31, 2025,2026, we had no significant off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.