EGAN - Earnings call transcript Q2 2020

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Operator

Good day. And welcome to the eGain's Fiscal 2020 Second Quarter Financial Results Conference Call. Today's call is being recorded.

At this time, I'd like to turn the conference over to Jim Byers of MKR Investor Relations. Please go ahead.

Jim Byers

good and operator, you, afternoon, everyone. Thank eGain's call. to second quarter conference results financial XXXX fiscal Welcome call eGain's today's Financial On are Officer, and Ashu Eric Chief Roy; Smit. Chief Executive Officer,

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

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

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

In as operating addition certain will we non-GAAP income. measures financial to results, non-GAAP GAAP such discuss

available financial release of Relations the be historical The Investor the release of the found be replay on the the A release measures. GAAP this most measures include of call at to comparable non-GAAP link eGain's press also at financial earnings Investor press on Relations recently tables conference will the website. section earnings page Our website can eGain's with at news www.egain.com. included reconciliation

Roy. CEO, call said, over And turn eGain's to that the now with Ashu I'd like to

Ashu Roy

Thank you, and Jim, afternoon, good everyone.

for top-line head the growth in pleased exceeded guidance bottom-line, and on quarter, and we're SaaS and with both year-over-year. second quite solid the are and sequentially saw both revenue our consensus we our financial three we of results We the

total represents a is march XX% it's in our go SaaS-only continue business revenue, business which quarter, quarter fact forward grew is also And same total last QX. up in revenue revenue essentially progress. professional professional SaaS in services plus toward this XX% services year-over-year. the to This our year, model, revenue plus of XX% of good rapidly our We that a from

our risk legacy even attrition have our talked sometimes, As adopt this SaaS few we solution actively at customers quarters to of drive about for a the now. we

relevant forward, the top-line SaaS number, business. the is professional top-line Going services plus believe this number for we which relevant regimen, our is

focused on and a we standpoint. value So that growth from

well business and in our health quarter the the as new at in booked Looking quarter, across existing customer logos good business strong, customers. remains we

exciting our of One new was Cisco. logos where a very partnered with retailer quarter last large we

growing market, they're couple services heavily service. to in financial customer trends and self see vertical one continue and in vertical Especially the services The and are in the number as engagement Turning fastest. of a U.S., financial always geography. to the positive intelligence, our of be clients terms we investing

of On negative, we in down slowing see technology terms the investments. Europe

more so our we we and risk more in in this services financial the than Accordingly, Given the U.S. European investing Europe. are in customer increased in trend, anticipate attrition vertical base.

low you we marketing, in may and hiring closer and to expect at the it marketing move with QX range and XX% have move XX% sales in in Our continued stands then as revenue of increased into up investment, to XX% see QX QX.

marketing and investment sales buckets. in our before, mentioned have falls three we As

with includes deliver partnering success which expanding closely to our our services teams customer First, team value SaaS customers. customer to success, continuous professional

and most as sales people in marketing, expanded [indiscernible]. expansion, generation, recruiting, and demand programs which well includes enablement partners, capacity as third, inside training and Second, more the both

increased the growth street. and terms in So, investment plan sales of we the are in marketing to attracting nicely across

our around to topic wanted our solution. on I new share progress go-to-market update on next sales an The advisor

the regional to launched has credit broad-based last we very mega been know, encouraging in unions, fintechs, good banks, feedback Since solution and advisor October across then, banks, very companies As reception you broad-based. very market mortgage Chicago. sales all insurance so and funds,

our XX Evan last over demos Siegel team prospects conducted the in the by interested led fact, to including holidays. has three In months,

are is are growth that and addressing with in be we advisor are in approach they needle. both midsize the Solution interesting for advisor the strategic us vertically outstanding for in are consistently partners. [ph] three to interesting some on these consulting who large of focused relevant are conversations It's [C-suite] an solution sales [ph] teams is our working approaches with also how to and provide us. to attracting good because to They is and partners pain These hearing times [C-suite] What looking move organizations. conversations they interested solution interest potential points. our

is effectiveness. fintech now in mission client ? Number better services almost companies corporate in it how do universal one, improving you health. sales how what And the it a and up? operationalizing customer auditable, drive ensured Second, we provable way, third adherence, financial financial and an

we is broad-based three differentiated addressing pain compelling these seem be quite seem they strategic So them and points compared what what to in hear. there? be and available to a to out we is are getting That's way that

know. the conversation you we relationship abstract are we is customers their both area of So as engagement. sides. and are off the those landed because CEO SMB now in the have Interestingly, our the XXX sponsors two direct of They with in both decision-making

actively deploying team solution. is the our Now

natural what focused current a which service. our is, sales customer advisor sales be which customer engagement, to is centered around Overall, proving business, extension of is

We are super excited potential. about the

digital Avaya. we this around Avaya entered engagement through with Engage Avaya, that OEM an buyout capability to at Phoenix suite. agreement Avaya is in customer other the of solution capabilities announced customers. This event, be branded share for quarter. announced workspace their Avaya cloud-based later into to have slated elite generally a which available Third will the currently enable to this offer The our and finally, I partnership with update want we day an Avaya

a jointly serve to opportunity very this with the Avaya about thrilled integrated have We clients Digital. Western solutions We across second nice one. best-in-class see as

successful believe is many partnership, just easy rich Early with this global Avaya like we and the over more at businesses serve We solutions partner interest enable level are. our Cisco to field time that their partnership us in strong. ecosystem

us, to best-in-class As with ecosystems customers this example, Cisco market is course of usability, tell are in terms an now solutions solutions these increasingly analysts to partnership scale, complimentary of and are partnerships and partnership and technology these feature, client. to on as direct as our platforms our cloud-based our with well successful what the we focused lever Avaya

both. driving we're So

more I our Eric? operations. color With Smit, Financial ask Chief financial Eric to that, around will Officer add

Eric Smit

Thanks, Ashu.

bottom-line we and that exceeded achieved our noted, results of in top consensus. ahead QX and guidance Ashu we're As street

SaaS the at for Looking highlights QX XX% sequentially. financial was year-over-year and XX% up revenue

the XX% were year-over-year, are quarter, points well a XXX margins XX%. we gross basis pace to on of improvement target non-GAAP Our long-term achieve for our

income million generated million we share per operations was $X.X XX%. X.X flow in from $X.XX cash Non-GAAP during and or the quarter, of net cash margin

basis. quarterly value combination lead detail, Now mentioned, looking XXX% our more to as all results measure the revenue our to shifted our SaaS so of SaaS now service essentially we the revenue, have Ashu at forward-looking and of professional professional customers, SaaS we business as on for is a in business useful our services

something of down end comprised services constantly revenue the basis XX% total get and our on legacy For revenue bucket we revenue calendar XXXX. our of QX, tracking of that in million by of leaves SaaS total revenue. to total a $XX.X our the are professional XX% quarterly to XX% of This

growth XX% plan. year-over-year grew on year-over-year. This as increase Further, SaaS progress our at a between year-to-date of our XX% our grew we basis total long-term line to sales XX% and in QX revenue revenue per and investment plus in towards XX% a professional marketing model, services highlights with year target

QX was XXX,XXX XX% a accounted components, last we last benefit for SaaS revenue revenue over at XX% And of revenue SaaS $XX revenue On grew as up XX% up sequential total and comp We're up revenue year tough given one-time QX. a experienced basis, the against XX% year-over-year. in was year-to-date million seasonal year. Looking our QX. year-over-year from

year the primary The lumped three impact expansion base when our of and of approximately this new growth installed migration large expected, the the benefits looking the significantly SaaS. to categories. sequential be estimate amount seasonal drivers bookings, we a a XXX,XXX ago. into And of quarter. down saw seasonal legacy We to at to rates, As compared was customer

up positive the to Our lift the our sell, includes The be which retention, XX-month retention be SaaS retentions up rates XX% low remain in and in continued to and above continue quarter. and retention renewals trailing with gross net range XXX%. healthy

as quarter Legacy our to calls we to from migration. the legacy remaining further of transition, see revenue the as XX% quarter $X.X XX% driving revenue SaaS we and the primarily you've in legacy the for driven the customers million was are expect accounted our such in and a year customer down several next large noted total on revenue offering And on-premise ago quarters. decline our over by past

Professional X% or down total was $X.X services revenue X.X XX% from million of revenue million.

revenue noted revenue. single we've digits total As the to PS percentage our in get a a was of before, high as goal

would PS revenue percentage this achieved of a range going we've that Now total as forward. to expect this goal, our we revenue in remain

of profits for million Those gross a our our our improvements a higher XX% the declined. XXX million starting margin point a a see at are margin margins margin and QX. basis reflects the revenue, XX% second $XX profit combination in now gross to lower a and gross ago. in profit PS $XX.X benefits from saw efficiencies year scale quarter our SaaS or while looking and operations gross Now, margin revenue overall we was year-over-year, has we margins, or growth the improvement SaaS are gross margin non-GAAP of of healthy the gross of Gross around

operating year non-GAAP $XX.X from quarter quarter. turning Now in $XX.X operations, ago in the at million million the to for second costs came

the while has and We continue hiring sales of in was quarter increase the very terms underway. in to investments actually noted And increased, activity is due to now much hiring December marketing. prudently it's holidays and investments quieter planned our

a XX% sales QX to to XX% expect marketing close in from QX. in as revenue percentage of to get We and up

the of non-GAAP X.X compared XX% operating XX% to a of Our year operating quarter. ago margin quarter margin was second million an in $X.X or or in million income the

of X.X in the $X.XX per X.X non-GAAP basic net per $X.XX non-GAAP at on second million a and year per or share Looking to basis net basic the quarter. million share compares income net ago This on or for on was basis. and $X.XX diluted quarter a diluted share income a income,

per was compared for in $X quarter $X.XX net $X.XX GAAP income share per second net or income share the million GAAP the $X of or quarter. ago to

XX, June at XX, as million to balance XXXX. flows, and XXXX to XX.X was and XX.X of December equivalents cash total Turning cash cash million compared sheet

year. we million During up generated the from quarter in operations last from X.X of cash QX significantly XXX,XXX flow

margin quarter. flow cash improved to operating the XX% Our for

Now turning guidance. to our financial and outlook

As product Ashu opportunity see our healthy we large in for balance sheet. best a stated, class a with offering

to around sales. We positioned our investments ramping with marketing new are base our well installed particularly sales to opportunities our [indiscernible] support business inside through increase partners and and

Before providing our revenue highlight. guidance, to few points a

about we our into Avaya factored not the guidance. First, announcement, are but have excited FY'XX

in And expected, in QX. SaaS calendar XX% our we Ashu increase seeing year, As in was we to for a continue with some of we would is great again, last impacted of impact seasonality this of the saw going QX of expect expect $XXX,XXX migration revenue before that are as revenue core increasingly metric drop our will We renewal in by negatively quarter. business still plus measure as QX forward. accounts reoccur below believe some SaaS up do not is XXX,XXX becoming the not were the services to a about XX. but seasonal growth as revenue approximately and to the in our end mentioned rates that overall we reduction of the be to legacy professional relevant. our EMEA, see softness, year best which is business total that And

XXX,XXX factored Year-to-date, the guidance. negative have a revenue for into on which and SaaS our FX total is XXX,XXX we impact our and negative revenue

for impact further to don't year. exchange rate remains British the we dollar revenue remainder the U.S. levels, of the the anticipate the a With at on significant pounds current

XXXX revenue fiscal for June million we SaaS guidance, provided end ending the $XX.X the increasing to million basis, new $XX.X $XX.X range would The from which previously year the XXXX, between a for and currency on full million. between XX% XX% for growth SaaS range our year to are for bottom of up onto represent million our guidance Now $XX.X constant year-over-year. revenue is XX, full

year-over-year. and and expect between XX% and professional represent revenue of a services basis, on between XX% Further, we which currency XX.X growth $XX.X of SaaS million million would constant

$X the at which X% $XX was end provided diluted non-GAAP for to of are of the X.X fiscal revenue expect to or million year to net lower basis, XX.X for million XXXX guidance on which finally, share, We year constant we X.X the diluted between to year-over-year. provided full to $X.XX net total currency breakeven million would represent for new And the guidance, a be of non-GAAP to for fiscal $X.XX income between previously guidance per $X.XX growth our previously share. raising $X.XX income per million or million of

to fiscal we services the million and total of revenue $XX.X non-GAAP breakeven 'XX, to or XXX,XXX to to of million; share. $X.XX million. SaaS $X.XX and For to million revenue initiating third per generate million $XX.X to $XX.X SaaS of are net guidance $XX.X million of diluted of professional revenue $XX.X income $XX.X

and XX.X quarter for for count share diluted a fiscal third fiscal the assuming now are the of year. We million

the later Lastly, County, California place be in will February Relations there. to then, on in Conference see the now front, month, annual call Technology we This you And hope fourth the on presenting will Conference open Investor concludes San questions. taking XXth next operator, at will presenting eGain ROTH Securities our XX. at remarks, this the we of to month prepared Francisco. JMP Orange March some We

Operator

Thank first with Koji you. question [Operator Oppenheimer. comes Instructions] And from our Ikeda

Chad Schoening

the taking up I give is you've between customers and ARR a Thanks this Can the of split in quarter? Koji. Hi, know for increasingly versus Chad idea the split, you an mentioned guys. on new starting for past this the Congrats a good small signed on existing during growing. Schoening question quarter.

be have And one products customers in forward. curious about to hear question. I'd most end, are then up more of to of So opportunities that kind what excited Thanks. terms going I sell

Ashu Roy

is This Roy Okay. Ashu here.

still something kind much So we trend the yes, case, are very the accustomed which I to now. think is of is

in like terms logos. the that is question? trend build to been new we your now. but see still dollars, we mean I time logos, new, answer of like level which terms So Does time, more is that but see we tend has something more some not over two-thirds for one-third in expansion, now is of new a acquire of they

Chad Schoening

what great. that'd then, customers excited And most If terms that of That's you. kind to Thank mind, Yes. be sell of are great? comes up about, in motion. of kind anything kind of

Ashu Roy

around the other say an two have is the that highest the Right messaging. we level a interest virtual two Those on of increase. course of the don't see and always quickly, top. the these interest whole are say systems now lot I see terms than where areas are pull steady those would that I silos -- most we in intelligent self-service of of Omni-channel to real And ability that a market. the capability mentioned I capability of trigger in is would you But

Chad Schoening

Great. Thank you.

Operator

Mark Our next Schappel question from comes Benchmark. with

Mark Schappel

question. thank Hi, for taking my you

in where your in Europe if just noted you noticing in slowing slowing. little that you detail remarks, wondering prepared the a Ashu, you're I was could the bit Europe more address particularly

Ashu Roy

Sure.

differentially, at you mainland decisions it, are even longer. slower but looked say seeing definitely than we Europe would in if is U.K., U.K., just are I So taking

one that's of So, kind observation.

that The comments. and continues U.S. are I even the other to pattern, in quite right? it's therefore be is comparison two more So think the those active

Mark Schappel

migrations wondering was great. was SaaS. you in the the customer year? you. legacy for additional remarks, Eric, your Okay, for prepared of what noted I large a migrating outlook company's Thank to then And remainder the sales

Eric Smit

That's good. actually very

for and think the or accounts in the of for we've different high us. a think migration. most we're And communicating that this that numbers been see I that very encouraged coming stages down, this us, engaged interested as we're top with I of as in is to obviously focus

that continue continue remainder the absolutely, expect of calendar the see -- So we'll to to year. through

Mark Schappel

hub I And great. progress released just us Okay, but any and -- there? messaging you recently question. just Thank realized good I you. finally then, early, wondering your was it's Ashu update maybe an That's news. if on one you're still last making could give

Ashu Roy

Sure.

very of market. kind the opted by been that's well So

We overall just not the as Omni-channel. as but messaging are of it messaging selling part

we a interested suite. ended which buying didn't but signed So, couple they out messaging, in up mention the up recently, eventually I entire mid-market, with in on customers started of fact the

part the of entry in terms interest of mentioned those point you to assistants we see story, a two like the a demand, of in as great but messaging prior and bots, virtual omni-channel question. lot seeing So it's I conversational just interest are the Messaging in. are and things

Mark Schappel

helpful. for Very all That's me. you. Thank Great.

Operator

you. Thank

from comes with Baldry Capital. ROTH question next Our Richard

Richard Baldry

Thanks.

that. rising for I recurring fell that trending unusual second there? a with see there the second do has think quarter and that's How anything revenues next costs be quarter even half row you happening Is the unfold? on in or maybe year the the in and

Ashu Roy

point, Good Rich.

So cap expenses, our with in many of towards reduction. what combined their from resulted consistent particular the with provides that [indiscernible] seen the And then, as may years, tax taking a previous benefits in off end calendar well it employees people impact in of reaching time California in we've in expenses. the reduction security of social positive year

there in I would components an of will obviously probably on not to received that would certainly that was QX. So effort $XXX,XXX $XXX,XXX that those estimate worth we repeat -- two

Richard Baldry

type from maybe to that contrast of sort of your you the maybe that. Avaya and a need more to resources can OEM, that to allocate bit talk will compare or Cisco And to little about Avaya to relationship. you commitments What allocate

Thanks. the outlook size market could think be, So would we what opportunity maybe kind be? its of understand you what

Ashu Roy

Sure.

So many questions in that.

is know very the can Let had. with installed opportunity, limited some you now It enterprise, in me the even Avaya if market that I they've despite large, historic time. that say base attrition would well largest goes off I see as pick the probably

point. So that's first the

Avaya is capability that has in the we announced and are cloud-based solution provider enterprise Second is the a into that Avaya. the that that integrates announced solution we eGain from

what is In so partnership, Cisco current from cloud, eGain as that component So of know. eGain the resell components from eGain and OEM from OEM of Cisco the different is with is are the so you from is the not not our arrangement cloud. that

So that ability just into cloud and we is deliver is arrangement this the moved be greater adoption distinction. control for good client. to speaking customer able that experience the the important as an cloud comparatively has the market and of that nature the in model the We to will success given think implementation now eventual

the that's second So point.

OEM it is, a now which which unlike is OEM partnership, the arrangement provider is optional the Avaya unlike the get partnership, to branded way own will additional would the partnership, other the its The for attach something customer digital stands this points which words, Cisco has we an the rate third would capabilities, that that. one. the is In bundled be and buy be price and

are three up. can I those comparison So, points of kind bring

opportunity the In Avaya it's joint clearly of but number very sense building our of success. of we're looks years we still closely We've it's just terms and here, them one very customer and partner, days that with a number days. for early Avaya, our have business Cisco successful. at promising working but is been early very

in 'XX, them. anything see as fiscal we for should but from do think that that impact we partnership, positive factoring mentioned, from fiscal the So, we Eric not 'XX, are

think it. I Thanks. that's

Richard Baldry

way Maybe deploy the cash small buybacks, that's cash lastly been about other building nicely, that balance up. the acquisition, any to any the thoughts has tuck-in sheet growing on Thanks.

Ashu Roy

with nothing highlight. and progress obviously Again, so those that we stage but are pleased to want we're Rich. would something considering, definitely this that that we're It's the all at point, options good

Richard Baldry

quarter. good Thanks. Congrats a on

Operator

Group. comes Craig-Hallum Rhee Our Capital Jeff with next question from Van

Rudy Kessinger

me. Jeff. for Rudy Hey guys, this is for of questions on Couple

said be That'd from Europe. I from a want If it's Just QX back Eric, you go attrition customers heard XXX,XXX for taking coming less to less that renewal more First be bit going I that up to in customers great. Is a in think color or seats? at there? renewal. to product correctly, headwind I that weakness

Eric Smit

a or of think bit as I loss. it was so but opposed both, a driver, there's less at reduction think was renewal part to the the I most primary taking was up

Rudy Kessinger

great Got with it. it. the Helpful. had color and there. then Avaya Got OEM

solutions guys' into and them or but installed that's Just early the know also cloud guys' one well solutions available? their on-prem? are OEMs cloud, target so I solutions, as workspace more it's your on-prem offering just their their or for to available contact also thing, guys' your the their base for center your in seats

Ashu Roy

have has partnership. that not or in Avaya announced all So anything not we the looking regard. at anything as things We those of announced obviously part

Rudy Kessinger

Okay. Got get sheet, at want just on the to RPOs deferred will the it. And the revenues in balance obviously, the lastly, XX-Q. we look then,

guided the RPOs should think should or four divergence five over look last gotten about RPO and How and between going has forward? in the up quarters, deferred trend short-term I sort wider. revenues As revenue in of the the from how here going the revenue we

Ashu Roy

Yes.

we've know in Rudy. I So, this plots, the addressed

the a past, an have concentrated of that because sway renewals be two a to or renewed said current metric I basis provide seen the think of I've of or a is it impact multi-year sort on things. just large customers our since I factors haven't as in that's as it's been group business going structure, would on sort could that unfortunately useful is given some leading we this this think And patents obvious annual done one indicators. is relatively main adopted we

So renewals I up. big these it's come when think timing really around the of

next, where happening. one out. point And have to quarter may indication the growth you on so is fluctuations the going It's as are revenue from really on of that you an

numbers than renewals of your say think of the around to more more -- the would haven't moved I So, timing so again, function anything the much. often point I these else. really And a length

Rudy Kessinger

Got That's me. Got it. for Helpful. it. it

Operator

Thank you.

Our from McDonald Needham & with next comes question Company. Ryan

Alex Narum

was front? an I Amazon if partnership on you're seeing the with to and And update traction that any Ryan. for on hoping Narum Alex is this Hey, get on

Ashu Roy

with work continue we yes, Amazon. So to

we progress, worthwhile [indiscernible] and doing been with of working we shared, working then have share an milestone, for Amazon, real with terms in work case, marketing some time an like and progress something with and and right? partners to them, kind When it ongoing we some have share to will when bring with we We their have of joint up. we that's just Avaya certainly we and are something Avaya

now they other the one three Cisco we are of Avaya the two. of with. being As and partners are top working

Alex Narum

then, out organization how that? an you're updates Okay, you and sales to building revenue we'll in great. of could the And contribution when be on and the us give mid-market investment see some that from the able

Ashu Roy

Good question.

expectation the how So side. is acquisition really the what contribute a do the we 'XX, on with that we logo already in working to expectation should fiscal mid-market that sort to real starting impact now of systematically be booking evidence can scale that show the are we on of able acquisition. team, engine? customer And My sales our as and the is attributable to new we kind have

I they'll is make going increase But real in a to difference. new think standpoint, total to the me obviously booking acquisition. be from the a interesting local

So, forward that. sharing yes, that's something about to we look

Alex Narum

Okay, you. great. Thank

Operator

at in there questions gentlemen, time. this further queue the right, All are

Ashu Roy

everybody. Thanks Okay.

Operator

you for concludes Thank today's participation. conference. your This

You disconnect. may now

eGain (EGAN) 6 Feb 202020 Q2 Earnings call transcript