| Small & micro cap project
Egain: Signs of moat
The company is a provider of cloud-based customer engagement software.
Transitioning from a legacy model to SaaS
In fiscal year 2017, the company completed its transition from a hybrid model where it sold both SaaS and perpetual license solutions, to a SaaS only business model. Today, the company only sells SaaS to new clients and is actively migrating its remaining perpetual license clients to SaaS.
Growing recurring revenue; true growth is masked by a declining legacy business
- Declining legacy and professional service: The company is migrating from a legacy platform to the cloud. As a result, the company’s legacy licensing revenue is declining. Moreover, since the average time required for product deployment is declining due to the simpler SaaS business model, coupled with the operational improvement, the company’s “professional service” revenue is also declining.
- Growing SaaS revenue: In the FY 2019 and the first quarter of FY 2020, SaaS revenue increased by 37% and 29.5% respectively.
Note: The company strangely uses the word “subscription” for reporting the total revenue from SaaS and legacy business models.
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