Earnings call transcript Q3 2023

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Operator

Good day, and welcome to the eGain Fiscal 2023 Third Quarter Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Jim Byers of MKR Investor Relations. ahead. go Please

Jim Byers

and XXXX operator, everyone. to Welcome Thank quarter good financial fiscal third results eGain's you, afternoon conference call.

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

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

such forward-looking as similar Forward-looking are believe, intend, of by statements are harbor or these generally XXXX. expect, the Litigation safe expressions. by words And in Private statements preceded protected anticipate contained Reform plan, provisions Securities Act

factors reports These Securities uncertainties filed in could are and update these results forward-looking of in eGain subject statements and to XX, to affect is no are the of the Commission. forward-looking or cause obligation detailed making Exchange company's could XXXX, today, wide to various conference publicly call. actual May any assumes with results statements respects. as range that and and that material differ revise this eGain’s the of information risks in a on Information

income. In earnings tables financial addition results, also operating will certain included financial the most the to to measures financial measures a non-GAAP as with GAAP we non-GAAP the reconciliation include measures. press such non-GAAP release discuss of GAAP The historical comparable recently

phone release page this the presentation And will found Relations post clicking by the conference available updated the be the earnings will to press an we link of Along a one can eGain's be page of Investor investor for Investor call our on website release week. press lastly, Relations website. earnings the In at replay addition, press egain.com. of release, with

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

Ashu Roy

hello and you. everyone. Jim, you, Thank Thank

with bottom consensus. range pleased of came our our was quarter. Revenue line this and overall and within are performance ahead We guidance guidance

cash our increase positive flow we program balance in still cash reported initiated the in also and our stock buyback quarter. due We an to

$XX non-GAAP million, expense align cash that EPS at total Looking than $XX And deliver financial consensus. in were guidance ending implemented flow results, with and more our our to conditions the positive within the quarter quarter guidance cash. current to we market of $X.XX million range. was our exceeded We revenue with for controls

have what knowledge on we Turning our to enterprises business in paused the logo on business the reorganization leads new quarter. Decision challenge; pipeline, engagement re-engaging This and several be after continues toward dust the in stabilizing. so deals is the a highlights, sign several strong. still interest to customer may or our be end platform seen powered now believe we of in that internal the month market deals adjustment. did new conditions And to opportunities after however, making last seems us like settling

U.S. Our and base with show customer the to renewal healthy expansion continues resilience quarter, in rates.

business. base European customer no additional expansion with Our churn some nice and significant stabilized

of As I near several signed the end quarter. new the noted, we customers

ones. Let me share notable some

want I provider based is insurance health the top The business. commercial in credit one XX is the then union a The and first insurance one bring to Midwest. one next major U.S. a another out is in a U.S.,

dollar general global a energy company, BPO In insurance XXX multinational A of wins, global highlight and mentioned airline fortune XXX capital a of company. holding telecom XX few. me management top expansion services, terms a the a let multi-billion space; in large human provider

effective employee a Recent improve our customer findings revealed business, knowledge. from Looking major remain KMWorld about silos at technologies legacy we to to excited the using the experiences market be and and that opportunity. content and overall survey continue very obstacles

service employee experience organizations. has the one simultaneously in customer number is highlight technology improve management operating a that continued can to As knowledge CX Gartner performance result, that and

they we solution, and for critical employ are management enterprises the that increasingly automation. our confident as AI offering we mission to With will for have become need believe knowledge look we the more best powered

of campaign you we generative Instant powered and pilots knowledge, around Instant improvements. generative to February. eGain are rolled quarterly AI. the if with and we agent and for we This compelling was in customers recall AI quite Speaking been in and Answers applied use out Answers successful capability performance shared marketing call, announced engaging then Interest highlighting automation the which, prospects. cases last author has in now a Since we by as strong

highlighted from. we of knowledge and Looking consistent tools the for serves modern content learn AI the the that to excitement as one back, see a that a for AI correct has hub, need enterprises reliable source in generative around generative compliant

we result, a needs management to customer among within platform refresh tech engagement value deliver knowledge AI interest to are Effectively stacks. their scale on. enterprises generative seeing a to knowledge experiment As operational in renewed modern and automation,

our and that rates expansion to customers customer As the increasing leading evidence we solutions. in our industry renewal strong fact subscription find of are North look our existing engagement value continue ahead, American

as pipeline new remains build the quarter. in continue closed in new logos We our steady new to and multiple interest to have we bound parallel business are pleased

a new We pipeline. sales in with our fiscal execute we flow, sheet will balance profitability capacity balanced and continue to our to nurture cash assess growth plan sales performance, And even we our our strong as business and to XXXX. diligently intend optimize positive lastly,

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

Eric Smit

joining today. thanks Ashu, and for us Thanks, everyone

Let into and quarter me full highlights for the financial guidance outlook the for our fiscal QX and share before some getting year XXXX.

business our been constant our has business. and was line OEM good or timing guidance despite forecast, focus see to of from down the the in our top internal consensus. Contribution our shift line down million, issue OEM on the $XX would range believe profitability in recognition, growth. year-over-year was in with to our balanced indicated have and that sequentially our from within business Cisco QX for contribution continue in the Cisco X% a in guidance they revenue which we currency, coming as momentum revenue Had Total declined, results X% to Cisco been ahead due

revenue year-over-year. months, was was million, year-over-year $XX.X $XX.X for SaaS total nine the For up up million, X% currency. X% up constant or revenue QX in X% first

For first SaaS months, $XX.X up revenue was year-over-year. million, nine XX% the

quarter. X% from Total $X.X from to total XXX,XXX revenue QX the revenue for or million, year-over-year. up than revenue. North and was accounts America from was million, quarter, a revenue XX% $XX.X revenue Europe America at this in year Legacy X% region, of just down looking contrast year-over-year XX% in total by less in XX% of up accounted total decrease for ago When North was revenue

non-GAAP and profit margin the revenue or for gross for $XX.X of in was gross last the million, The decline gross for and primarily to lower function down XX% Looking margins, compared quarter the gross margins year-over-year is quarter. year XX% XX% profits XX% quarter. of prior at a gross a

major in migration are middle of a AWS product to with margins temporary costs in we associated impact as latest addition, of the these release, customers. the In the upgrade reflect a our increase of

consensus. were quarter. to at from for third ahead controls non-GAAP costs $XX.X deliver ago street bottom results guidance that implemented down we operations, line operating have to the in Turning year enable of our us and the in quarter expense $XX.X million The came million,

year net of $X.XX operating quarter was was ago compared or the XX% quarter. Non-GAAP the Non-GAAP for X% operating $X.X of income year an $XXX,XXX operating for in to million or income QX third margin per margin $X.X an to quarter. share share. $X.XX quarter. non-GAAP in X% or in the This million per the ago net XX% ago to margins EBITDA compares compared income for of the year diluted was Adjusted quarter

quarter the margin. to operations Turning balance X% $XXX,XXX our cash a cash flows, and sheets for operating was flow cash or from flow

the cash margin. was million or first cash from flow For $X.X months, nine XX% a operating flow operations

available under authorized, approximately for XXX,XXX share an at price the repurchased of we repurchase $XX During Of the the program million shares $X.XX end $X.X $XX.X of under the million our at the quarter. million, program per share. average remained quarter,

balance Our ago. Total the from year were million, remains up equivalents the cash sheet XX% of the $XX.X and quarter end at cash strong.

to additional America dollar-based metrics. metrics, North retention will increased was total resulting on last XXX%, while XXX% below XXX% to compared the Now EMEA discussed retention on regional XXX% turning customer our LTM ago. North to The to call, due our America the I dropping SaaS the our previously year share customer given in market, NRR a some focus was customers for churn

we XXX%. the the which large $X Within revenue more have define enterprises having maintaining the as or north customer well, particularly net retention with U.S. billion of base, performed rates of

base, We within U.S. which is healthy expansion the XX%. customer north of to also continue see rates

knowledge SaaS ARR of number new have in approximately And year-over-year RPO accounted at is two-thirds and increased SaaS customers X%. looking ARR, total year-over-year increased X ARR relatively XX% North hub total deals ARR hub, for of four XX% SaaS The constant while product remain still total bookings ARR as year-over-year, looking $XX.X knowledge at increased to by last our million America of the million. RPO, months. X% customers for

Now our financial about implementing AI-powered this for the updated we to reflects management in environment, will marketing automation continue the very with they know we opportunity. must market the align guidance grow, and conditions, enterprise expense additional remain to and and outlook onto customer have business controls are excited guidance, that given change. knowledge current We marketplace engagements. the as our But

the with better estimates $XX trends. constant are currency fourth and we $XX.X But the also currency where underlying purposes fluctuations a million, with currency expect to exchange we over provide material the to expected basis business currency for revenue no year, quarter, into visibility reminder, between total a based the on million last rates. of impact applicable, As for revenue comparable providing on

amortization to and For based $X.X expenses per to resulting non-GAAP to or the in approximately share, $X.XX stock compensation income fourth $X.X $X.XX and of share. million of million of $XXX,XXX, which $XXX,XXX net net approximately per depreciation of income to million of $X.XX or then quarter, GAAP $X.X $X.XX and $XXX,XXX includes

full $XX.X million expect XXXX. and total $X.XX $XXX,XXX a loss million to approximately million GAAP $XX.X $XX.X be are share fourth for currency stock-based share. of constant positive, of and million, million Included GAAP of approximately full these $X net total of weighted revenue For net $XXX,XXX, million between or outstanding $X.XX to $XX.X average year XXXX, million to for including $X.XX for million to million income includes quarter non-GAAP $X.X and per adjusted to of or and $XX.X the per $X.XX the income and $XX.X expense expected fiscal of XXXX, depreciation compensation between the amortization non-GAAP $X.X to of approximately of fiscal to then assumptions, loss shares with revenue of fiscal we $XXX,XXX

low are year a building double on digits preliminary our balanced see, Looking beyond to we targets EBITDA fiscal ‘XX with margins. ‘XX, top-line year digits to and continues remain double plan growth to assuming improve business focused adjusted and to business growth to starting fiscal as of is returning profitability

So expansion existing with base customer no churn in healthy, in our additional summary, the remains significant robust rates quarter. and

to several While quarter be focused that the signed the logo momentum. at continues of new logos end new on we business continuing and challenging, remain

expenses, we're buying volume We are limitations we flow, continues we capitalize can controlling With and the have our that cash sheet expanding back our cash resulting on that the our our program. shares strong XXbX to strong and under opportunity conditions improve. on been have well-positioned based as maximum bottom-line we position balance business strong, to to market in and positive be results, up

XX, calendar, hope the Conference May Institutional events. you to and Investor in California Lastly, Software Minneapolis Newport, eGain We these on X. see at investor meeting taking place place in relations June Craig the at Hallum taking investors Jefferies the will Conference Annual on be with on

will concludes This our questions. for we remarks. the open now prepared Operator, call

Operator

question Craig Instructions] ahead. go [Operator Hallum. you. Our Please Thank comes with from Van Rhee first Jeff

Jeff Van Rhee

taking for questions. a of Thanks them me. for guess my Great! I bunch just

context guess sequential a Just sequential start going talk your just change I you the expectations, in there. think on this more to play about on basis, how here. SaaS Maybe quarter, that’s maybe a little

Eric Smit

that…? that’s Jeff, revenue. the Sorry to just clear, SaaS on Is

Jeff Van Rhee

talked about in SaaS just the touch was know a happened But SaaS the on Yes, trying weak. to at which second line line. sequential on EMEA, drop. sequentially Cisco. I in what discern just, I I the looking to am want it very sequentially. I just and you was

Eric Smit

about there QX, just XXXK highlighted in the I impact. And in recap, said estimated had expect was last probably as then being we EMEA component we repeat, days So think had believe that also the customer fewer we on to that discussed. discussed quarter. first I up business then the a the was to ended And didn’t we there that we’ve which seasonal the a correct. were losses call

in those expected. had pretty as So we all came much

decline that side, OEM sequentially. XXX,XXX Cisco to the was on then close And

we that surprise anticipated So the that was hadn’t the in quarter.

Jeff Van Rhee

play? in Okay. And think about coming margins about we pressure does that the do gross the quarters? AWS margin talked How next gross several How duplicative then you from costs.

Eric Smit

So to us cycle. but say that through take closely we’re quarter obviously complete the start see the to would to you for I some improvements, two looking we optimize – – working that. or will know will another get it

I into movement low would see the say back to So up that into will couple within XX% the we start moving range of again. quarters, next mid-XX’s the

Jeff Van Rhee

right, you some are the okay. talked then Instant that about and you All the Answers. Yeah, doing of around pilots AI

Just Just use how cost deployed, cases, just bit interested in any many are more kind How economics talk are a they obviously the doing? about of of that. the those. surprises deploying and on and being you then

Ashu Roy

content it stuff multiple knowledge we built are the into bringing the the case right or yeah, all now associates groups with Answers answer it use comments. right are couple primary piloting out in background a of use a and from into in service that's are the have customer sources that we the the Instant generated that is so these One now. who verification helping that so with case agents primary tapping is deploying the Right, consumable base, in and we and

Piloting that's most moment lots answer call we easy interaction. this. process need, piloting not multiple but which seeing or find to Say, the where in places. where we all we finding the long-form contact place the I the of and are it most the correct, right are documents, have the is and that are That's where of organizations in in and are approved what interest

Jeff Van Rhee

you you to? are And you a it maybe cost at using for the a those dynamic? whatever looking just compare have are consumer terms of the end AI, last me, deploys, you once something when for GPT Do what's you in underlying that to benchmark, incorporate just cost can or

Ashu Roy

of we are amount So yet that. the that the for we now, are content of work doing, them, charging that usage because we we through monitoring haven't deliver are level and the these pilots started pilots, to have and to

that that's next refining be is bundled are out and should to to months. to client, it solution, able we a be into something able sense the defining Our we a larger be going – few with bring but over

Jeff Van Rhee

understood. Yeah, Thank you.

Ashu Roy

Sure.

Operator

question Baldry next with Roth. Our Please from ahead. comes go Richard

Richard Baldry

will some because it the of people It it confusion genre a from of feels you perspective, impact a expands saying it deals, of a talk to work. because of some Maybe class AI Thanks. now that fact on more has need they the broader or creates delayed like they about think have the TAM, it that lot it platform companies short over think more saying term. are could is record the have. system functionality but are the the Others hook of online, to are coming about aware make to learning

it could understand of Thanks. its versus So XX, out. where months XX we sort where you're be now impacting thinking six,

Ashu Roy

Sure.

go though need working initial at but are agree the they or points of we The to consideration, raised sort I definitely element with, has is timeline try sort created generative excitement our I cross-purposes, saw think few of out in the factor of another even different. a or – any the capability, I that both conversations. think of that another you and of GPT

they what just way. working generatives, incorporate a cycle doing domain it, some could if a Like it we are point at also wanted through were plug we another but with with we of not that confirming in with doing in in large they fact went specific to bank internally are what

getting extra yes, these is loop to extra added cycle that discussions. there or So is that

these that, usual from say, positive of cannot are right. clearer contend understanding said, is that and a well modern that side, not a things clear it businesses once have generative of the you is there from a now, with, is the because you that or to somehow need learning aware right know on understanding is platform, while standpoint, getting knowledge something the the a you would I without risk businesses as But everyone risks wrong in

these we In are choice other of just knowledge hub, positioning hammering both platform modern So, are as the both ourselves different for on our words, out really doing they in those internal pointing silos. otherwise businesses that capabilities own true, them. would a and out environment, are also connections generative content of better much but than by can of we their easier and not try into

Richard Baldry

just do long-term basis been additive over the And markets expand do that you’ve you intermediate-term it’s or an you of already? think applicable think does it of addressing meaningfully sort a the TAM and sort more or to

Ashu Roy

it that in say would brings the market faster. I

this at I sort knowledge is content happen. which you the will replatforming going of people to will, rate assets going I of certainly their accelerate. drive that’s and think to that if think

to incorporating something whether the as that it to into yes, market as So, will But those are need process well. we today, is the will. capabilities market that more the doing beyond what we enhancements see in which solution, grows this of sort generative

Richard Baldry

to looks is any becomes with, you or know engines do flavor of be like any you are or And important platform like given be either out going competing should there, sort whichever multiple much ones feel it with successful pretty how up to which there care client? meaningful given do much way, plug-and-play market in ends share your you AI

Ashu Roy

can so connectors that’s or we the we to ensure with, one don’t something work sure other, different just with we and So is making inclination begin platform. doing is our we our a what really and open but strong are flavors, architecture composable, have way that with

Richard Baldry

to talk you prioritized understand just for of is we based to how how engine? looks the are impacted me, hid your about in a it Can cost-cutting multi-platformed, versus area. the and make Okay. sell lot go-to-market last on the cuts? much where marketing like sort so point that And sales people it can solutions that’s of ready those Is Thanks. tenure, you

Ashu Roy

Sure.

we building be and turns the of know the so is marketing be we’ll are front So, steady, and relatively around. very going to of market funnel keeping end the that that continuously, the because top as that funnel valuable creating we

In terms are at here this have and we that we in that's is and people enterprise, done the really people, of can the who people, performance the sales best on. proposition have building assessments group sell and looked goal the retaining to so

Richard Baldry

Thanks. Great.

Operator

turn the would management our question-and-answer to closing like over to concludes This back session. conference for remarks. I any

Ashu Roy

Operator, providing I an time for quarter. and next to update everybody today. look Thanks taking thanks forward the Great.

Operator

The you conference today's is presentation. now concluded. attending Thank for

You disconnect. may now

eGain (EGAN) 11 May 232023 Q3 Earnings call transcript