EGAN - Earnings call transcript Q2 2019

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Operator

Good day, and welcome to the eGain Fiscal 2019 Second Quarter Financial Results Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Jim Byers of MKR Group. Please go ahead, sir.

Jim Byers

Thank you, operator, and good afternoon, everyone. Quarter Financial Second Conference eGain’s to Fiscal Results XXXX Call. Welcome

Chief call Eric Ashu today the Executive Smit. are Officer, On Financial eGain’s Officer, Chief Roy; and

Before future statements, which everyone management’s expectations, to call, we and will operational convey would objectives performance. plans this regarding management forward-looking during and conference remind certain make beliefs, begin, I financial that like

such Forward-looking statements similar intend, expressions. expect, plan, are generally as preceded anticipate believe, by words or

and of by protected of Securities Exchange eGain safe harbor these These eGain’s in today, subject X, contained are the Private Act as or that making results risks February could conference range are Commission. provisions Litigation cause of detailed to the in to statements Reform Information of respects. any affect actual update and factors forward-looking statements to Company’s material publicly are information on obligation XXXX. uncertainties wide Securities this assumes reports revise that no XXXX, statements forward-looking results Forward-looking the is a in could the various differ and in filed with call.

results, will to GAAP non-GAAP income. financial call, such we this addition also as operating non-GAAP discuss measures In in certain conference

financial be financial the measures the included to the eGain’s non-GAAP found release release directly link earnings news measures. press GAAP on the in press earnings at www.egain.com. Our of reconciliation Investor historical the can at page tables Relations on website The release comparable include most

call replay eGain’s Relations I’d now Ashu a said, over of call with also Investor And the section to CEO, addition, In website. the conference to turn Roy. like available eGain’s will be this of in that

Ashu Roy

afternoon, everyone. you, Thank and Good Jim,

in And the bottom a quarter strong the We business. with are momentum we to performance line. on continues second top both solid execution positive as improve pleased see report very and our to

quarter in So, was quarter from Subscription Gross last a QX margin growth revenue share XX% from the year-over-year revenue financial XX%, some XX%. for up was was on the in basis let the highlights year. SaaS growth quarter. year-over-year XX%. me

a we the net in addition, In given for quarter, compared million $X we QX the guidance a positive our loss And results and of to income our raise year. year. will finally, last for were GAAP to date momentum, profitable net

the demand we see. QX looking are optimistic of within activity base. mix about installed So, a levels customer healthy business and at we and is new the expansion

in success is customer investment paying products continued it Our off. and and

U.S. guide market U.S., We significant their are business year to feet you the clients been better evenly between the as we ever, we are the in now a U.S.-based from digital from trend efforts and have than because a on help opportunities. encouraging, scale engaging focus more or geographic now them in may Europe. standpoint and are standpoint seeing we operationalize two to then America split This increased focus Historically, to an our remember, With we North next transformation in us with a is to starting over quicker. scale. uptick

terms Let’s some wins. look quarter the in at now of notable

capability. all by our to our seamlessly powered and and implemented was that are our agents to by for assistant Block H&R closed AI-powered consistently engagement deal by prep desktop these This agent-assisted capability our This use customers. the help quarter, a for we the with virtual tax for and During chat structured digital backed giant. our we cobrowse and service significant And solution. Knowledge is omnichannel AI Block, H&R interactions,

marketing to to XX We as seen faster clients the and to we the help to part to customers are some and and with very So, of you them it, holiday with on and from it. continuing season. automate and solution their the easier be customer through experience engagement proud capability. our have some look the online, short more start partnering TV to campaign finish, for augment of forward I would days add implemented we latest designed color suspect in may now

mentioned engagement now I market. digital earlier, As we are seeing such for demand the in more AI-powered

points, hot in the fact, global in using high-tech sales us an one is cetera, teams. the time sales their outstanding then a was for top win where AI win because – group, XX digital to real Phase we what across the their in will and quarter of large companies. notable, social, operation is technology develop good be engage sales visitors to deploy through X, source opportunities sales need et opportunities and in these Another touch transfer digital online, in This there would

engagement As much whole interest clients, for about. like talked we as sales out we principle that that this some to good foundation an the turns sustainable emerge starting sales. the is It look of so service for our attendance, win for customer at is space, engagement customer still area

Turning things the like to point in in tend us after messaging Clients to begin connecting of have around social. our customer played challenge base, suite, new our specifically we assistant, point with virtual and they realize increased they themselves. to are trying these capabilities seeing and interest solutions, engage out capabilities

because out asset and agent quickness their a noteworthy was large Our global experience from In base. experience experience we They overall and services the expansions good of their Desktop deliver the advisers Advisor saw management to message experience, financial deliver now resonating in rolled business. with speed. some client. it our claim digital in to well One our customer with business quarter, our we is a financial with and optimizing customer clients, all

Within a messaging channel in volume. of U.S., expanded messaging client they very use in on eGain our double ours, expect their a Another XX to more deployed of provider and large months, platform. SMS-based than communication for also new ground the the

rich As I we said before, across platform all connected with a offer application these touch-points. capabilities

connected them is typically the not stitch hovering for way. ourselves then base, capabilities We a multiple to from customer capabilities So, have our in pride in these easy together do vendors. and low-XXs. our anticipating now really retention Across clients point these in rate our clients coming delivering

be we our migrating work to that expect XXXX. continue of as migrate to our end we We calendar platform, to remaining our have on-premise we before, the customers, mentioned customers the legacy done with with substantially and by cloud cloud help should them to legacy

that’s So engagement. good customer synopsis a of our

saw chat in OEM teams, partner to the through Cisco continued bookings front, in contact solution, to two email Moving Cisco. Cisco’s have healthy center we the OEM we quarter the is Working which enhance with our and enterprise platform. embedded and

solution, launched well center market last we that seems iteration contact to added offering. broad on that, some features latest included the email the the that Cisco to late year, it and compelling together OEM based the chat responding to be we With

very customer with and continue accordingly. are growing we pleased the ecosystem with to invest We pool and traction this partnership

making are Beyond Cisco, partnerships our with Avaya and Amazon relatively new Connect progress.

generate interest to continuing are and pipeline. build We

mentioned of these before, expect become I’ve of we partnerships business fiscal to year. the As relevant some towards this end

market and increased awareness the interest. to Turning

it customer we U.S., was Chicago called November. in event in Our the in annual DXXX, held

the client He use operation. So, too, how knowledge very hope prior attempts giving so after the confidence deliver clients was their exciting especially stories. SVP attending. of hear their eGain you were success eGain Velocity, and of there eGain Marking experience in solution for out and implementations. for management program the helped customer sales to in thank two case share agents called our talked about you them them context at at It remarkable service

large may of and a They Another they services sophisticated to they many analytics discussed know. customer insurance eGain’s and rely Asurion, are provider you different of efficiently manage agents. client, service thousands platform zones as run across how their on time

successful growing their on AI-powered In we event continued partners scores, innovative are and efficiency to their for to expanding vital in and our their them, them process [indiscernible] very engagement All dollars hundreds customer and all, a is organization, of to For NTS implementation we the capitalizing millions of focused thanks growing amortization. eGain ensuring And and transform it. our in customers, market their shared And eGain, effort, market finally, dynamics improving was solution. I’m with we our a need service while especially saving demand U.S. inspiring see it agility. annually and literally summary, see us. journey for

and continue to capabilities are with Eric ask also financial of customer Chief operations. focused retain, Officer, installed add our With our eGain on our the cloud Eric? I’ll platform. we of exciting Smit, base to add color migrate expand to Financial that, We around that to success custom use more

Eric Smit

Ashu. Thanks,

like Unless we statement. With income business. SaaS changed our known quarterly to I’d with license, the adopted categories, like said, we everyone growth. are a review results, ASC we today of revenue Recurring, accounting as using key ASC breakdown XXX the to SaaS we We revenue our XXX X, discuss to the XXX the are classification revenue revenue year. professional now today with I’d way recognition available presented new forward the ASC professional legacy legacy noted align I remind standard, XXXX, on the The issued classified that measure on XX, we better everyone our revenue compliance subscription we support results in completes, subscription services standard the July otherwise that to that our of ASC with being of accounting fiscal revenue in two made XXXX in Before through gain the results revenue revenue. reconciliation this our June press three classify in in our classify change of our website. that our further categories with a and standard. effective services. also recognition the start was and adoption a to transition growth is will conjunction XXX into new metric included is remind and revenue in internally revenue release

XXXX. no X% our in of longer than As is revenue revenue less accounted legacy and fiscal material for year license

are our it subscription part revenue. as We of and breaking out no instead longer included

Ashu to pleased noted, are our turning overall financials Now, quarter. with as performance we this our

X from high XX% quarter. quarter. services XX% Professional cloud. of again revenue been XX% half in seasonal goal million line year-ago that Total XX% third XX% components, of year-ago to and accounted $XX.X by June this consensus down to the QX, was percentage Legacy XX% a with PS renewals as XX% revenue for $X.X and approximately not in Subscription sequentially. a revenue we support $X.X year-over-year revenue in progress, growth This driven up of line some Breaking to customer was New up fiscal and of year-over-year $X.XX business than based continue to in quarter. we ranges progress I revenue the the strong total was first helped – were in total the in from revenue for decline the SaaS QX the and like originally XX% year-over-year. that is the for from revenue fostered do we’ve primarily revenue in reduction point year-ago top in or or the quarter. drive, strong million our bottom migrating from in was on-premise revenue, which expect million to our to teens $XX.X projected. SaaS from revenue revenue me, performance upon sequential XXXX. bookings expect XX% benefited XX% single our digits million, And the $XX.X total QX revenue $XXX,XXX seasonal would remainder was million expectations we total estimates. that repeat the down or PS SaaS up year that up of out was towards has The revenue low customers was and million the both excuse internal of XX% of

breakout gross looking or XX% profit million compared to was a a Gross our at and or profits of year operations The and gross gross gross gross quarter margin margin to gross the our a for year-over-year profit of $XX cloud non-GAAP we’re million around the second overall of margins. Now, a reflects on ago. see efficiency in the of margin benefits XX% the combination starting increase scale in growth $X.X a if declines high-margin margin at SaaS the our margin illustrate revenue point, and while we in the gross of total further PS XX% by QX, compared our margin revenue look this from to was low the of X% XX%, as revenue gross year To revenue. in and subscription revenue a year-ago margin was professional quarter the gross services ago. type our up XX%

XXX on the margin basis million X% $X.XX to on the of for in non-GAAP and margin XXX operating income are compares resulted at maintain share X% per to and investments reduction The Non-GAAP came This non-GAAP per quarter approximately quarter share operations. second a line $X.XX in net $X of $X.X looking this or share, quarter. diluted was at quarter top in up net we the on to partially per quarter. our non-GAAP due net or to income, the $X.X in the to the X% quarter compared basic of or year-ago advantage diluted loss was from $X.XX income offset net product for share $X.XX per transition. quarter. quarter. GAAP year-ago year-ago per turning in first for of basis. the million, in of and loss compared the or or million was of to by making an year-ago a Overall, the $X.X GAAP a XX% income million net to our $XXX,XXX share operating increased a $X.XX Now $XXX,XXX a income $XXX,XXX or operating grow basic a cost

Now turning balance our to flows. cash and sheets

of sheets. X% operating generated quarter our pay million, took and from our net operations $X.X debt in million at improvements $XXX,XXX continue continued cash the flow cash quarter this in with the to a the or XX, to down with pleased are December position $X.X advantage net of and up ended position of from balance cash XXXX. margin We We of a

revenue XX% for XX% solid XX% the guidance, XXXX. and given and positive up to of from between business and our raising SaaS to between up previously date, our we turning provided year expectations the report XX%, subscription are momentum to continued fiscal to and growth XX% expect XX%. XX% results to from the Now revenue for XX%, for our now year We our growth

the grow business. We increased to investments are making

be expect continue positive to cash We year. from the fiscal full flow operations for to

see will Finally Investor call on taking conference of there. you front, in we’ll to eGain the Annual some in Relations World month concludes next participating the Orange County, be questions. the We now prepared open XXth This remarks. place for California. our Operator, hope

Operator

Company. take and MacDonald ahead first go We’ll from Instructions]. & question with Ryan [Operator our Needham

Ryan MacDonald

and from Ashu both excellent the into what it in down sounds and congrats quarter. was Obviously, I you nice on the Eric. Good between market there maybe mid logos I from expansion Yes. given guess at versus of a just an year? saw new afternoon, across you talk doubling of and But spectrum mix you the quarter. net sort there size focus like the the success customer, contribution look opportunities. enterprise can this guess as about enhanced

Ashu Roy

Sure.

all thanks. of First

in this much continue we’re would mid accounts under some see larger, there dollar is acquisitions say being new still to exciting. the our the logo actual interesting enterprise not at So quickly is quite to as in point. now, of terms doing and of is bookings, of mid it’s market still the expand XX% that but that quite I opportunity those very implementation market we – bookings

that I both I beginning. we base, us we become as logos to may that continues which market So, very though amounts start mid for the think the the the source larger expansion opportunities, looking that some enterprise think are dollar will not dominant to in new of is – significant. to the with see But acquire be starting be those even build

Ryan MacDonald

able just to of demand, what that And a how that’s any that planning around you’re demand follow-up you’ve in it. the talk clearly, be capacity increasing, demand? that keep investments can I sales you’re environment, about able make, to the incremental you’re with Got that talked is some think seeing around about – up service to you and to to

Ashu Roy

Yes.

creating our kind going So of are is function so first our something is investing in of investment right what which is sales marketing. we sales now, incremental is right capacity more that where demand, now, into –

the adding and expertise people third more mouth we’re proposition can more. our customer going process, better in win convey more sales success, to we The then so that that sales is to we second of more so doing enable the word effectively the get is in our

model the then And feet in four which and to to of So the that’s kind starting element mentioned sales engage pillar something I that add up we’re we’re now. of that the some focus. starting is parallel last of our the that’s on in street,

Ryan MacDonald

seasonal Got the more $XXX,XXX and on revenue. see the that just was just mentioned or little about what for provide moving benefit forward? benefit a a won’t Can that clarity one-time And SaaS Eric, last why benefit on quick it. one bit one we you you

Ashu Roy

Sure.

is that last I that’s we this that think, businesses need as for mean type resulted side, holiday in with I saw volume something on well, So this increase the period. of retail the to them year the particular around their there’s

pricing that, of of the would result a some as benefit the the that way – customer. so type And adjusted this of works we’ve

very in So that of we’re number obviously, see uptick that as to period achieve down. holiday quarter. go level obviously, happy back subside, we But that the of

Ryan MacDonald

Got another on great congrats and again, it. quarter. Thanks

Ashu Roy

Thank you.

Operator

Thank you. from next Schappel our question Mark We’ll Benchmark. take with

Mark Schappel

evening. good Hi,

in starting out your those customers one those didn’t try just for wondering time. remarks, Ashu, new in a to noted capabilities if capabilities you’re that just what your besides review I more question of you your comments you could was messaging. some see I prepared exactly you suite. were catch

Ashu Roy

Sure.

virtual I now. one is the assistant would So, say right number

whole chatbot, with virtual our completely the of applications our talked platform. have So, rest connected assistant before, as is and the the we

So virtual of looking chat have, of instance, customers in who application a are it. lot the to for front add assistant our today

So first that’s the one.

I social. is second then and was the mentioned The messaging, third

Mark Schappel

the And you quarter? real much here, you. guys pay quick How debt then thank down Great, did in

Eric Smit

That around in million was I think $X or another quarter. so the

Mark Schappel

million. $X Another

Nice thank Okay, you. job from the That’s on me. quarter. great, all

Operator

of you. We’ll Roth take next our Partners. Richard Thank Capital question Baldry from

Richard Baldry

you looks trend like there the anything Thanks. in from against grew is about? think there? legacy in existing you an Thanks. the have that’s side support Is there actually way Is And unusual changing? Do an expansion congrats quarter, it is the trend. on something it which the customer? Or sequentially,

Eric Smit

sequential there. So, nothing number, unusual the on

that renew, from from to bit that’s decided think a may certainly, sold. catch-up been customer of I but business a little had any new been there have not

Ashu Roy

Yes. time of, That’s I kind support There some exactly and know note were of that. stopped that of they one that started what and it paying Richard. a was, for startup have on reengaged

Richard Baldry

overall we ahead thought. would And was what of the have far profitability

expected Would So next I would’ve quarter, would’ve like of in from that’s basis sales to the feel Thanks. faster the think material half Was side, a think, marketing pushed a any one be move that on maybe hiring and there in maybe the I thought half some or quarter? a expense above. the into we quarter going events in and of bit the out you we like second second second to spending do could’ve the be the first level been in probably to half?

Ashu Roy

Yes. I would say so.

think I correct. so, you’re

to So going half, the half. this things December, we by in could do the very likely be we thought more are second

Eric Smit

I general course, then FICO to North the reset. the And within think just commentary there’s a follow-up America, of

you cost categories So natural that tax, increased expense across Security uptick in. that all even with see comes Social

Richard Baldry

feeling you’re And through of or right. it’s I we headcount All good base? how seeing Thanks. you of direct think in attainment first the Are quota if your the breadth a sales quota about concentrated. think then half across sales about year, hitting your been this

Ashu Roy

is right small, Sure. The now as quite team you know.

We haven’t to team. added significantly sales the

have big people, way. rotated in some headcount We a incremental added not but

We have the some made changes the structure changes. COGS on on organizational COGS, made some

on put meaning, my in team improvements we get feel like I better of So, performance reorganization our sense a of place, [ph] right now. the that’s the done the and should has sales result as efficiency, average

Richard Baldry

Thanks. right. All

Operator

Capital. We’ll next Jeff Van you. of question Craig-Hallum take Thank Rhee our from

Rudy Kessinger

Jeff. on of for quick is from me. ones couple This guys. A Hey, Rudy

know have the First, XXXX. guys with on-prem legacy migration by completed timeline being done a you revenue, that I

the several imply sequential be would last time looking a decline, longer. the at Over it that quarters little would

the that do declining the XXXX as can much of How you that over Just quarters? – heavily-weighted cloud? couple color you see give, see next transferring to with you on-prem do than as over more in on-prem much

Ashu Roy

large So, as customers. we’re I of you a is terms mean size customers, working of concentration there know, with these in these

of we of would calendar revenue the Yes. is So that, probably my the base cloud. have sense that half by end and into year, moved this

Eric Smit

continue will step probably to similar it think function. I a be in

of number to think, I group quite small a concentrated there’s of customers. Ashu’s point,

decline, whenever it one those would of that so… So moves, result any in

Rudy Kessinger

Okay, That got helpful. was it. really

being then and regards chat interest been on to you pain with did you – and customers you talked them base. that messaging, Okay. what the new with engaging? had assistant, it to just virtual guys AI, so, initial And the or with? I that install bringing know But on, days new last engaging made from coming is point What’s they’re all start customers, the XX

Ashu Roy

But seeing would right people one areas Those that; So, second is in say us talking virtual AI. are talking terms a to to new to us can about the in the interest I’m us, see lot logos, now talking is most about coming and them customers. I the are the most about people of Existing customers, other existing those is we two. we top not twofold: as for. assistant, are we And to the I’m talk people of two excitement things coming well.

Rudy Kessinger

particularly then you And strengths have any higher. demand-driven seen? another would seeing, financial be that surprises weaknesses or verticals, demand in? just strength any communications in or verticals been or noticed -- Any Okay. guys services, any strengths particular you’re I particular one U.S. have

Ashu Roy

the be function And healthcare. third would The is the then question. financial is them of the is definitely pipeline And positive no say us, we continuing a are U.S., top and those I in strong delta function. government. three seeing are areas services delta other for in buildup lot to the

Rudy Kessinger

helpful. it. from now. Got all That’s Okay. me That’s Thanks.

Ashu Roy

Sure.

Operator

closing remarks. Thank call you. the to At this back for management we’ll time, turn

Ashu Roy

the results. for to work listen. everybody taking Thank Thanks, Great. to We through you. as QX look forward you time we updating our

Operator

Ladies you. concludes today’s gentlemen, Thank and teleconference. this

disconnect. may now You

eGain (EGAN) 7 Feb 192019 Q2 Earnings call transcript