eGain Corporation Q3 FY2026 earnings call

• Business Momentum and Market Shift

  • The company delivered strong Q3 performance with ongoing momentum in its AI knowledge business, driven by customer expansion, growing partner engagement, and new product innovation. Year-to-date operating cash flow is $18.7 million, representing a 27% cash flow margin.
  • A meaningful surge in RFP activity has occurred over the past 60 days in the U.S., mostly from Fortune 1000 BFSI (banking, insurance) and healthcare enterprises, with most RFPs prioritizing AI-ready knowledge, open API/MCP architecture, and deep CX stack integration. 67% YoY growth in partner-sourced opportunities has been recorded year-to-date.
  • Management notes the market is shifting from early adopter to early majority adoption of AI knowledge, which is increasingly viewed as core required enterprise AI infrastructure rather than a nice-to-have capability.

• Customer Expansion Highlights

  • Multiple large clients expanded deployments this quarter: a top 10 U.S. insurance company expanded from 3,000 licenses in one business unit to add 5,600 licenses in a second unit to create a unified enterprise knowledge hub, and is piloting eGain's contact center AI agent. A top 10 global airline added licenses to support growing customer care teams, standardizing on eGain as its single knowledge platform.
  • Newer clients are delivering rapid follow-on expansion: a European financial services conglomerate expanded beyond contact center customer service to add enterprise-wide self-service capabilities, and a global engineering services leader expanded from initial field service knowledge deployment to cover contact center and partner personnel.
  • The consistent pattern observed is that deployments starting in customer service/contact center CX use cases naturally expand to become centralized enterprise knowledge platforms for both AI and employee use cases.

• Product Innovation and Events

  • Q3 product launches included: the eGain AI Knowledge Suite purpose-built for retail banking and credit unions; an AI agent for Cisco WebEx Contact Center; knowledge connectors for Microsoft Teams, Slack, and Zoom Team Chat to enable cross-enterprise employee knowledge reuse; and enterprise AI connectors for leading agentic development environments (Copilot, Plod, Gemini, Cursor) that let developers access governed, trusted eGain knowledge directly from their workflows.
  • The company hosted its annual European Solve26 customer and partner event in London, where it launched additional products to simplify knowledge consumption in agentic workflows, improve AI knowledge pipeline quality assessment, bring conversational self-service to the voice channel via a new IBA product, and launch AI Agent for Salesforce Version 2 with native Salesforce Service Cloud integration.
  • The event reinforced market demand for trusted governed knowledge as the foundation for reliable enterprise AI, with research showing over 80% of organizations are still in early stages of AI knowledge transformation, creating large market opportunity.

• Leadership Update

  • The company strengthened its leadership team by appointing Steve Pappas as Head of Innovation, who brings deep expertise in knowledge management, AI, CX, and scaling enterprise SaaS businesses to accelerate innovation delivery and market expansion.

Total revenue for Q3 FY26 was $22.5 million, up 7% year-over-year (YoY). SaaS revenue grew 7% YoY and accounted for 93% of total revenue. Excluding the $600,000 quarterly impact from non-core sunset messaging products, total revenue would have grown 13% YoY and SaaS revenue 14% YoY. Total non-GAAP gross margin was 74%, up 500 basis points from 69% YoY; SaaS gross margin was 78%, up 100 basis points YoY, driven by margin improvements and mix shift to higher-margin SaaS revenue. Non-GAAP operating costs were $13.9 million, up 1% YoY and down 3% sequentially. R&D expense rose 3% sequentially, sales and marketing expense was $4.5 million, down 11% sequentially. Non-GAAP net income was $3.2 million ($0.12 basic / $0.11 diluted per share), up from $765,000 ($0.03 per share) YoY. Adjusted EBITDA margin was 14%, up from 6% YoY. SaaS ARR for AI knowledge customers grew 26% YoY; total SaaS ARR for all customers grew 7% YoY (11% YoY excluding non-core products). LTM dollar-based SaaS net retention was 116% for knowledge customers (up from 97% YoY) and 101% for all customers (up from 88% YoY). LTM dollar-based SaaS net expansion rate was 120% for knowledge customers and 107% for all customers. Total remaining performance obligations (RPO) increased 11% YoY, with short-term RPO of $48.5 million up 9% YoY. AI knowledge business now represents 64% of total company revenue.

• For Q4 FY26, management guides total revenue between $21.5 million and $22 million. It expects GAAP net income between a loss of $300,000 and a profit of $400,000 (-$0.01 to +$0.01 per share), which includes approximately $900,000 in stock-based compensation expense.
• For Q4 FY26, non-GAAP net income is guided between $600,000 and $1.3 million ($0.02 to $0.05 per share), with adjusted EBITDA between $500,000 and $1 million, representing a margin of 2% to 5%.
• For full fiscal 2026 ending June 30, 2026, total revenue is guided between $90.5 million and $91 million, marking a return to full-year growth. GAAP net income is guided between $7 million and $7.8 million ($0.25 to $0.28 per share), including approximately $2.9 million in stock-based compensation and $1.4 million in warrant expense.
• For full fiscal 2026, non-GAAP net income is guided between $11.3 million and $12.1 million ($0.39 to $0.42 per share), with adjusted EBITDA between $11.9 million and $12.4 million, representing a 13% margin.
• While no formal FY27 guidance is provided, management expects AI knowledge ARR to grow double digits in FY27, driven by substantial increases in new logos in the company's target profile and accelerating expansion in existing customer accounts that will lift average ARR per customer.

• A one-off $1.6 million reduction in total SaaS ARR occurred this quarter when an on-premise subscription customer in EMEA terminated its agreement and chose not to migrate to the eGain cloud product suite, due to local cloud service usage restrictions; $900,000 of the lost ARR was from AI knowledge components.
• The recent shift toward larger, more strategic enterprise AI infrastructure opportunities has resulted in longer sales cycles that impact the timing of revenue conversion.
• Forward-looking statements about future performance are subject to a range of risks and uncertainties that could cause actual results to differ materially from current expectations, with detailed risk factors disclosed in the company's SEC filings.

Q: Can you provide context on the magnitude of the recent RFP activity surge compared to past periods, and what is your outlook for FY27 top-line growth? / A: The number of RFPs responded to in the last 60 days is roughly double the 60-day average from prior periods. Most of these large opportunities have a 2-4 month decision timeline. Management expects substantial growth in new logos in the target customer profile for FY27, and accelerating expansion in existing accounts is already visible, supporting double-digit growth for AI knowledge ARR in FY27. AI knowledge already makes up 64% of total business, and this share will continue to increase.

Q: What is the update on the Cisco partnership, and how does the company plan to use its strong cash balance? / A: The Cisco relationship is active and healthy, with further expansion opportunities to integrate eGain's new AI agent capability into the Cisco WebEx Contact Center ecosystem. The company's primary use of cash is continued targeted investment in go-to-market execution to capture the growing AI knowledge opportunity. Management is opportunistic about inorganic acquisitions to acquire customers and capabilities when attractive opportunities arise, and there is approximately $20 million remaining in the existing share buyback program, with potential re-engagement depending on stock price.

Q: What is driving the recent increase in RFP activity, and how will Salesforce's expanded integrated contact center offering change eGain's market opportunity? / A: The RFP increase comes equally from growing market awareness and eGain's marketing outreach. Many enterprises have found that their existing large AI investments do not scale reliably because they lack a governed, trusted knowledge foundation, which has increased demand for eGain's solution. To date, Salesforce's expanded offering has not impacted eGain's active opportunities, as Salesforce maintains an open ecosystem architecture. Customers that want a best-in-class knowledge layer for their AI strategy are still able to adopt eGain's platform even with integrated Salesforce CRM and contact center solutions.