Q1 2021 eGain Corp Earnings Call

Good day and welcome to the games the school Twentytwenty, one first quarter financial results Conference call. Today's conference is being recorded at this time I'd like to turn the conference over to Jim Byers of MTR Investor Relations. Please go ahead Sir.

Thank you operator, and good afternoon, everyone welcome to <unk> first quarter fiscal 2021 financial results Conference call.

The call today are you gauge Chief Executive Officer Ashu Roy.

And Chief Financial Officer, Eric Smith.

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

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

Forward looking statements are protected by the Safe Harbor provisions contained in the private Securities Litigation Reform Act of 1995 <unk>.

Forward looking statements are subject to a wide range of risks and uncertainties that could cause actual results to differ materially.

Information on various factors that could affect Egains result are detailed in the company's reports filed with the Securities and Exchange Commission you gain is making these statements as of today November 10th 2020.

And assumes no obligation to publicly update or revise any of these forward looking.

Payments or information in this conference call.

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

Earnings press release can be found on the news release link on the Investor Relations page at Egains website at <unk> Dot com.

Tables included with the earnings press release include a reconciliation of the historical non-GAAP financial measures.

Jurors to the most directly comparable GAAP financial measures.

Lastly, a replay of this conference call will be available in the Investor Relations section of the games website and.

Now with that said I'd like to turn the call over to gain CEO Ashu Roy.

Thank you Jim and good.

Afternoon, everyone.

We achieved although solid quarter for the company in Q1.

Oh, the SaaS revenue grew 29% year over year, the height and AFFO guidance, we generated $5.8 million off operating cash in the quarter operating margin was 21%.

And we ended the quarter with see cash balance off 53 million no debt.

The strong financial position gives us increased confidence in continuing to execute to our girls club despite the covert uncertainty.

We see fiscal 21.

I think that's the deal for you guys.

Given the typical nine months at a price she'll cycle, which if anything is being somewhat extended in the current environment. We expect our investments to have a meaningful impact in fiscal 22 on topline.

Let me share some more details around our.

Investment plans on execution to date.

As I've mentioned before.

We are focusing our investments on the four pillars.

First is brand awareness.

This fiscal year, we have significantly increased our digital digital marketing programs participating.

Participating in virtual events, increasing based spend.

Overall thought leadership activities.

In fact in Q1, we doubled the number of events and digital marketing activities when compared to the same quarter last year.

We're also starting to see some mortgage returns which are good for example.

Traffic to our website <unk> dot com more than doubled in Q1 year over year. This is a big jump in brand awareness.

Our marketing generated leads were up nearly 90% in the U.S. in Q1 year over year.

Overall worldwide they grew by 53%.

The second pillar in which we are investing is partnered and they didnt.

First off.

We have expanded our contact center partner teams with more technical and sales resources, especially in the U.S.

Our pipeline, what's the score on the bio.

Growing nicely, especially around the locals.

Second we are now building our go to market plans with some of the CRM ecosystem platforms.

We have stopped up our business development team now to focus on three of those CRM platform Salesforce, Microsoft and solar cells.

We see growing demand from our customers to integrate our customer engagement platform with multiple CRM systems of record, Indiana price.

Because we go over the top and provide one consistent level of engagement.

And he thought across different brands different business units typically there are different CRM systems. So.

Works well for the Clark.

One measure of engagement working across these different CRM systems.

Sure Yes.

Yes, striking new vertical based partnerships just talking with financial services. These.

These partnerships will be in the form of jointly developed jointly branded customer engagement solutions.

Getting clients in financial services will need turnkey capabilities to.

A man conversational customer engagement with the high technology.

We expect to ship more progress on this front like sports.

All these investments are starting to show some results from that.

I'm going to talk not driven opportunities in our pipeline at the end of Q1 was up more than 50% year over year for us.

That's good.

So they look for us is direct sales.

Before I share the progress of our investment in sales, let me share some relevant metrics.

At the end of Q1 O sales pipeline goes up 35% in dollar terms year over year.

New logos now make.

Make up nearly.

Nearly two thirds of our sales pipeline compared to about 50% of your football.

And we see new logo opportunities continuing to trend up.

Thanks to the investments we just talked about this.

This is very exciting because new logo wins are key to our topline growth in the medium term.

No backlog filled investments.

We intend to double our sales capacity in fiscal 21.

I'd be executing about extension in two phases.

So on the first phase we are on track to complete.

First Faisal.

<unk> sales team hard by the end of November.

We are substantially done with the selection and most of the people that join but we expect the the main remaining ones to join by the end of November this steam once ramped little.

Boost our sales capacity by about 50%.

The second half, but we plan to bring the next cohort of sales reps.

The March April timeframe, most this fiscal year.

I was assuming the markets continue to operate the way they are.

In terms of geographic focus.

The far field capacity expansion that we are targeting is in the U.S. and the rest is in Europe.

As a side note we have.

Very pleased Oh dennard with the sales talent, we are attracting though yeah.

The excitement around our market opportunity I'll try to viewership growth ambition. So fueling this.

Hello, everyone. Good track.

The fourth pillar is continued commitment to our customer success.

We see big opportunity in our installed base on.

And it continues to grow.

So looking at us as an enterprise wide system of engagement.

Awesome brands across customer segments connecting back into systems of record and communication.

More and more of our clients are now taking advantage of our innovation in 30 days children should try Oh new capabilities.

At the same time, given our current size and relatively small subscale store basis, roughly 150 clients. We are susceptible to the law of small numbers.

In Q1.

We had a couple of.

Out of Boston.

Oh.

One attrition and one termination.

Which clients those put together.

Will negatively impact our quarterly fostered.

By $750000 quarterly in Q2.

One of the clients decided to implement an on premise solution in their private cloud.

The other consolidated our capabilities that people are also onto a larger CRM platform.

Well, we used to put together with significant in dollar terms, we do see them somewhat isolated incidents.

This sort of volatility in a relatively concentrated client base. The key house makes the need for expanding on new logos, even more diligent Joe.

We have good news to report.

In Q1, we doubled the pace of our new logo wins, you are where you are.

And do you see this trend continuing into Q2, thanks to our growing pipeline and increase in new logo percentage in our pipeline.

Based on new logo wins, you have already had until now in Q2.

We believe that we will again double our new logo count in Q2 year over year.

We expect that this momentum will continue.

But this is very exciting equally exciting is the fact that the quality of new logos are really impressive for us in Q1 for example.

Well, we were selected by global automotive brands to modernize their digital customer engagement kit.

Another one was a leading US based hospital system, where we were selected as one of the providers in their large contact center modernization Cobra.

And a final mentioned.

Another new logo, which is a multinational manufacturer based in the U.S. household names, but if you're just caught into the program where they are looking to.

Execute digital transformation.

These new clients all of them start relatively small.

They scaled investment based on success.

As we build our sales momentum.

New logos we are.

Concentrate that we will translate them into [laughter] upscale just like we did with it.

The U.S. based health insurance client, we won late last year.

Dr to the public opportunity.

Since then that line has standardized on our platform.

Enterprise wide.

Knowledge followed engagement.

It's a seven figure it out.

The account for us.

So these new logos are a key indicator of our leading office.

Our topline growth.

Turning to products and trends.

We announced how are you getting messaging hub in Q1, and it has been very well.

Our ability to deliver a one stop solution.

Connex solvent optimized.

Messaging based engagement is unique.

Unlike other solutions, we are allowing businesses to bring their own bought their own messaging channel just to have their own private implementations their own desktop if they already have an existing desktop and advisors.

Don't need all of that.

We don't need to bring all of it we all for all of them together, but it's an open texel.

This sort of convenience that combines comprehensive capability with openness is unique.

In fact, the auto major right before to the new logo win.

They were particularly impressed with how England comprehensive messaging hub.

They selected us as a partner.

And just this morning. This morning, we launched another exciting new capability.

You can't smoke IDR.

What we are offering here is simple and Bobby.

Simple because it business can modernize their existing I'd be honest take.

Without throwing away that existing technology investments.

Robbie cool because they.

They can deliver digital service through I V are too old smartphone users.

With.

Bush will assistance and guidance you know my couple of days.

No matter of days without huge upfront investment.

I was talking about drivers get it utilized.

Yeah. It is a huge pain point for our clients. They don't have an easy way to bring that existing I've yada stake into their digital transformation plan.

And let's begin smart IDR, they can do just that.

We have a U.S. based retailer who is now implementing the smart IDR solution from us and they will be going live with it later this month just in time for the holiday season.

Right exactly.

Looking at the market the need to automate customer engagement continues to grow.

Actually with a cold would affect on contactless commerce from the more work.

We are thrilled with our new logo momentum in Q1 and get confidence that we can sustain that moving forward.

Oh that you see our sales investment showing only results in brand awareness by playing house and new logo wins.

We are increasing increasingly comfortable in our ability to.

Effectively execute.

Vicious and actually we can Cook times and this is a good place what I came to be.

With that I'll ask Eric Smith, our Chief financial officer to add more color around the financial operations.

Great. Thanks, I sure thanks, very much and thanks, everybody for joining us today.

It's actually noted we are pleased to report another strong quarter, which included solid service revenue growth year over year.

Along with solid bottom line results and strong cash flow from operations.

As I've noted on prior calls we believe the combination obsessed revenue and professional services revenue or what we call. Our sets business review is it useful measure to value our business on a forward looking basis, there's one that will highlight on the school.

Looking at our financial highlights for the first quarter segment revenue was up 29% year over year non-GAAP gross margins were 76% for the quarter.

600 basis points improvement year over year.

Non-GAAP net income was 2.5 million well it since Fisher and cash provided by operations was 3.7 billion or operating cash flow margin of 30% okay.

Looking at the quarterly results in more detail sets and professional services revenue was up 23% and comprised 91% of total revenue.

For the first quarter assessed revenue was 16 billion up 29% year over year.

Legacy revenue was 1.8 million down 44% from a year ago, driven by the continued migration OBO remaining legacy customers to the cloud and the sunsetting of our legacy non cloud offerings.

Professional services revenue was 1.3 million for the quarter down 19% from the first quarter last year.

And accounted for 7% of total revenue.

A continued product innovation is driving increased efficiencies Ono service delivery driving.

The Pos numbers down so much and as a result, we've been able to redeploy keep P.S. resources to assist in the winning of the new logos that talks you talked about.

Now looking at our non-GAAP gross profits and gross margins gross profit for the first quarter was 14.5 million or a gross margin of 76% up from the gross profit of 12 million or a gross margin of 70% a year ago.

This was driven by a solid improvement you know subscription gross margin, which was 82% up from 76 cents in the first quarter last year profession.

Professional services gross margin was a negative 1% compared to 5% in the first quarter last year.

Now turning to operations non-GAAP operating cost for the first quarter came in at 11.7 million compared to 10.4 billion in the year ago quarter.

The increase was primarily driven by our investments in sales and marketing, which was up 20% year over year and accounted for 29% of revenue.

27% in the year ago quarter.

This is actually we stated we have made good progress in expanding our sales and marketing efforts and expect this level to spend to increase sequentially as many of the new hires joined towards the end of the quarter.

Non-GAAP operating income in the first quarter was 2.8 million or an operating margin of 15% compared to an operating margin of 9% in the year ago quarter.

Looking at net income niche non-GAAP net income for the first quarter was 2.5 million or eight cents per share.

This compares to non-GAAP net income of 1.7 billion or six cents per share on a basic basis and five cents per share on a diluted basis in the year ago quarter.

GAAP net income for the first quarter was 2 million or seven cents per basic share and six cents per diluted share compared to GAAP net income of 1.2 billion or four cents per basic and diluted share in the year ago quarter.

Turning to our balance sheet and cash flows I'm pleased to report we believe our balance sheet has never been stronger with our cash flow from operations of 5.7 billion, 108% increase over the prior year quarter.

We ended the quarter with cash and cash equivalents of 53.1 million compared to 46.6 million at June 30th Twentytwenty.

Now onto the financial outlook and guidance.

The tremendous customer engagement opportunity in front of us along with the strength of the balance sheet. Our plan is to continue to invest in sales and marketing to capitalize on this opportunity.

So I guess you indicated we are encouraged by the early positive signs from this increased investment to date.

And given the length of the enterprise sales cycle and the patent of new logos, starting small and expanding we inspect we expect increased investments in sales and.

Marketing to further accelerate our growth seems to school twin T 22.

To illustrate this point yeah BJ all for new logos signed in Q1 came in at around 115000, whereas if you looked at the existing says customers. The average are you all is north of 300000.

With our continued focus on customer success. We believe these new logos presents a significant opportunity for expansion as you indicated on some of the.

Recent successes that we've experienced.

No finally before getting into the actual guidance numbers a few additional comments so just to reiterate the point that actually made.

During the quarter, we had two two reductions one the reduction in the other termination.

That actually referenced which would impact.

[music].

Okay, you too revenue by about $750000 a reduction.

From Q1.

And the other point I wanted to mention as discussed before as a result of certain customer contract changes, which included the increase in the minimum payments will minimum commitments. We are not expecting the approximately 250000 increase in seasonal business.

When you look back to Q2 a year ago.

And finally as noted on our law school given the continued level of uncertainty in the current business environment. We have elected to continue to only provide quarterly guidance. We know it will provide we'll revisit this as the year progresses.

So for the first school.

When she 21 second quarter ended December 31st Twentytwenty, We expect service revenue of between 15.2 billion to 15.6 billion, which would represent growth of between 8% to 11% year over year.

The on Q2 based upon Oh upcoming renewals for the year and current pipeline activity. We expect service revenue to increase sequentially in Q3 and in Q4.

Looking assessment professional services revenue mix.

Pick that to be between 16.6 million and 17.1 million, which would represent growth of between five and 8% year over year.

Total revenue.

18.1 million to 18.7 million, which would represent growth between zero and three cents you ever be yeah.

GAAP net loss.

A 1 billion to breakeven well, Nick it's a three cents to zero cents per basic share and not <unk> non-GAAP net loss of.

Multimillion two net income was <unk> million or.

And negative two cents per basic share to two cents per diluted share.

We just assume a diluted share count of 32.8 million for the second quarter and for the fiscal year.

Mostly on the Investor Relations front, we will be participating in multiple virtual investor conferences. This month tomorrow, we'll be participating in the Roth technology Virtual conference. The following day will be participating in the benchmark technology. One on one Investor Virtual conference and then a week from now on November 17.

We will also be participating in the Craig Hallum Office select so what's your conference and on the 19th we will be participating in the 10th annual Needham virtual sets. One on one conference we hope to see some of your virtually at these conferences.

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

Thank you if you would like to ask a question. Please signal by pressing the star key followed by the one key on your Touchtone phone now if you are using a speakerphone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment again press star one to ask the question well pause for just a moment to allow everyone an opportunity to signal for questions.

The first question will come from Philip <unk> with D.A. Davidson. Please go ahead.

Hi, there. Thanks for taking the question I wanted to start by circling back on Twoq guidance. It really appreciate the insights and numbers you. All provided there can you just give us a bit more color on the customers on the attrition customer that termination customer maybe what led to that decision was it a cost base decision.

To reduce spend or competitive pressures any color you can give there would be really helpful.

Sure I can take that this is our sugar so the.

The one that we talked about producing and want to be talked about terminating the one that was a huge thing they use multiple applications from us and they decided.

That they wanted to bring the solution into their private cloud.

Because all of it.

Security reasons that they felt that they were exposing themselves to.

We obviously have the best security and the best cloud certifications, but their IP organization felt that they needed to bring a capability like back in house in house, meaning in their private club.

So they still continue to use the other parts of our platform, but they.

Took a significant chunk of the digital engagement that took it in house so that was one.

The second one was I believe more a change in the.

C level suite off the company that is our assessment I'm the CEO changed in that organization. It's a multi billion dollar business, but we are talking about.

And and he kind of brought in a new crew, who decided that they wanted to standardize they have done it before and they wanted to standardize on one CRM platform. They told us about it and.

And it was something where we were doing really good job, they're very happy with that but it was a decision on their part to.

Standardize and so that was the.

The logic work from what they told us.

Very helpful. Thank you. There's a question on your demo initiatives like fast track or.

Innovation 30 could you talk about what you're seeing in terms of appetite for the demos, maybe you're now relative to what you're seeing in the the early innings of the locked down.

And then if you could maybe talk about what you've seen in terms of conversion customers take advantage of these done demos you really just to get inside of that.

Okay. Yeah. This is <unk> I did not really touched on by as much as I.

Could have or should happen because the whole these both the demos and the innovation in 30 days these are men.

They are oversubscribed right now in fact, we are as Eric mentioned in his remarks, we are moving.

Some of those spare capacity, we have on the services team into doing more of those trials and demos because there's a lot of appetite, particularly around two areas, which will assist instant messaging those are really good right now in fact.

So we have seen some good because I'm from Bakken Deconversion, you're seeing right now with those is right around let's say north of 50%. So both one and two will end up.

Actually going into an investment mode and the others are not because they think it doesn't work, but because they don't have the budgets right now in the <unk>.

The current environment, we are seeing a lot of people, saying they are they have run out of budget in the second half of this calendar year and so that's something we know we'll hopefully stop too.

Backend with the with the new calendar year.

Great. Thank you.

Thank you. The next question will come from Koji Ikeda with Oppenheimer. Please go ahead.

Thanks for taking my questions, Hey, guys nice quarter on that fast growth line I wanted to dig deeper on the SaaS revenue growth.

Second quarter, and just thinking about exit.

Excluding the customer attrition in that contract he for the prior seasonal business. It looks like the fast growth guidance somewhere mid teen and nothing I think isn't easy comps too. So is there anything else, we should be aware of in that fiscal second quarter, and then just thinking a bit further out I know you're not guiding to the full year today, but just thinking about the second half growth.

Versus the first half.

And is there any sort of second half seasonality or large upcoming renewals that we should be aware of.

Hi, Joe This is Eric I'll take that question. So I think just for one point of clarification. If you look back and I alluded to the seasonality I think in the post.

We have seen a big.

Spike So if you if you look last year from from Q1 to Q2, there was a significant increase so I think that's elements. We have found is that has been reduced so.

I would say that this is a pretty tough comp in relation to sit that's components.

And then I think to the point that you made you know what we have seen.

Is that for some of these new logos, although the business activity is healthy we've we've seen some constraints on their their level of budget spending it with the expectation that this will pick up.

Q3, although fiscal.

Fiscal year, and so that also contributed to treat that the guidance we've provided.

Granted I think ER and then to the <unk> the second point I think.

You know from our perspective, and obviously I always subject to change when we just look at the upcoming renewals that both the dollar value in and sort of the timing of them we don't.

See anything significant from that regard and again over time, we've seen the seasonality it's somewhat subside. So so nothing.

Two.

How does the Audrey that we expect as of now on that.

I think there are that that's actually really really really helpful.

I wanted to ask a question on the lab partners that shit [laughter], specifically on the Abi partnership I recently saw a press release from another vendor in the state expanding its partnership.

So I guess thinking about that partnership that.

Partnership announcement change anything with Egains relationship with the buy out from a technology partner standpoint, and also from a go to market strategy.

Yeah, No I know what you mean this is actually good question, yes. So.

No the short answer before I give you a little more color is no nothing changes and the long version of these responses as you know they're.

There are two parts to our partnership with Avago and I'm, just focusing a lot. It one is the.

The digital capabilities of our platform, which are.

So I looked labeled and all young has a why a C.D.

And then that is the reseller component, which is all the knowledge and the ice solutions.

We're trying to be sold out you can find it so.

Both of those will continue to be active.

We are we are seeing the pipeline continuing to mature and grow so.

We we.

Two and expect to start to share some of the results from the alliance partnership in Q2, two meaning the quarter, we're going right now and then moving forward.

Great. Thanks, Ashley Thanks for that last question for me and I will jump back in the queue I'm just thinking about overall sales force and ramp today, where are you at today and how long are you thinking well take that November coal sales.

Sales cohort to become fully ramped I in your view thanks for taking my questions.

Okay. So.

I think the like I said about 50% of our planned growth. So we we are increasing we are increasing our sales capacity doubling it by the end of this fiscal year from where we were at the end of fiscal 21.

And the first half of that increase is gonna be done by November this month end.

And we expect that that will hurt will become productive by end of fiscal 21 by six months So Rob.

And so we see a six month ramp in though most of these sounds hires.

The second cohort were looking to bring on board because the other 50% increase in the March April time frame up the school 21.

Got it thanks for taking my questions.

Okay.

Thank you. The next question will come from Richard Baldry with Roth Capital. Please go ahead.

Thanks.

Earlier in the call I think I heard you say some of the sales cycles are extending and sort of curious if you can add.

I had a bad I felt that maybe cool that would pressure people to make some decisions faster and you've talked about you know getting in some smaller deals for new logo deals.

The kind of see the world personal land and expand later I would've thought those would be faster so.

Can you maybe talk about that a little and I may have just missed her thanks.

Sure. So that is you are right.

You heard it correct. So let me let me try to.

On some more detail to that.

So what we're seeing is with existing customers they are doing more with.

Yes.

By buying pace.

It's picked up incrementally and also the the cadence has picked up.

With.

New logos, what we are seeing is months not as much about the.

And tire sales cycle how's it tended, but the fact that they are chunky.

Chunking intellectual, but so its starting small.

And then there's scaling it and there is the odd that bic, which we have heard a few times now where people are saying, we get out a budget for this calendar year and we will have a bigger budget next year. So let's do a smaller do you might want to do more like her so that's sort of the.

Extension of the sales cycle on new logos that I was referring to.

Okay and can you talk about in terms of the overall platform your feeling on completeness in this world content that you can do the bring your own bought do you feel like there could be a need to go out and buy some things like pots for people who.

I do want to have sort of an in house preference offered up as well.

Or different flavors of those things can sort of react differently in different environments.

I guess that against the backdrop of your cash setting a new high in the quarter. Thanks sure.

Sure sure so I may have.

Somehow conveyed the wrong impression what I meant with the conversation on the messaging hub was that we have a messaging hub solution.

All floors, all those capabilities to begin with as part of our solution.

That's the first thing right. So we have the block the how the channel that kind of activity we have the desktop.

What we are seeing Indiana prices that we are selling into for instance, the auto company that I talked about they already have an enterprise wide initiative around box.

So.

When you go into these conversations they like the fact that you have your own but they also want to make sure that whatever they have built there are lots of domain specific box that people are developing now.

So that's where the ability to bring your own domain specific block becomes quite important.

The part that was funny no.

Second point that you mentioned about looking at GAAP.

Gaps in our solution and whether we should go up yes, I think that we have the opportunity and we do see a lot of.

I guess.

Oh, mostly smaller companies much smaller than us who have some interesting technology, we keep looking at it.

And that's an area that that is of interest to us.

And lastly, the App.

Maintenance revenue line its I back it out.

We felt very narrowly in the quarter and had been on a pretty steady downtrend is there anything you know sort of unusual in that or any sort of change in your expectation for how long it'll take sunset that maintenance revenue base. Thanks.

Oh I'm sorry.

Yeah, I do yeah. So I think it was just more of a timing issue I think absolutely if anything we've accelerated the push pull that migration. So that's certainly as we look forward. So there's plenty of on.

On premise customers, that's always the pipeline to make their chips. So certainly would expect that to continue to move downward in future quarters.

Thanks.

Thank you. The next question will come from Jeff Van Rhee with Craig Hallum. Please go ahead.

Great. Thanks for taking my questions guys. Several for me first on on the usage I think you commented on a decent amount of usage revenue in March a little bit less and you just don't continue that trajectory. What did you see with respect to usage in the September quarter for scar course.

Eric.

So.

I think that's.

Jeff for Paul just maybe if you could clarify the question just a little bit more just to make sure.

Good morning, Christy yes.

Yeah, Yeah, Yeah, I mean, you've got some volume expose revenue streams and I think you've commented in both of the prior quarters about usage and I think you had expressed the March quarter was a warm juror usage during June and I think the expectation was that that that amount would continue to taper off so I'm, just trying to get a sense of magnitude and directionally.

What you saw in the usage based transactionally.

Based and need the revenue streams that reactive volumes.

Hi, good no. Thanks for the clarification, yes, I think we definitely have seen seen that continue to taper off I think given the pricing model that we have in place.

Weve sort of worked with many of our customers that had overages that's of no sort of worked into a higher minimum and so that usage amounts is dropped off and as I indicated.

Last year.

We saw that spike up into Q2 and again this year, we really don't anticipate that same level of spike based upon the changes.

Okay.

Helpful and then on the on the two customers I'm. The one that decided to take the solution in house, maybe actually can you just expand on that a little bit what was it in terms of going in house what were they usually prior to going in house and once they go in house and sort of the building. Your you know build your own or that you use a gift.

Premise based package you know solution just what does that look like in terms of whats going from into the question. Yeah. So before they they started with US they had an on prem.

Solution. Thanks.

Kind of moved into the cloud with us.

And I think what they're going with now is a combination of their own internal development. It was a large organization big like tea shop entirely.

Hi, some on premise software that they have from an existing banker, but mostly they are kind of taking all the intelligence and building it into their own internally developed solution.

Okay lot too many boxes in the world can afford to do that [laughter]. These guys are super large which is how they can.

Yeah, Yeah that makes sense and then on the CRM. The the other customer what were they using from you what specific functionality was it and then you said they I'm curious it sounded like some embedded solution in the CRM was able to to ultimately yeah, you slow the capability.

Yeah Yeah.

Yeah digital engagement, so largely track.

And self service.

Oh web based assets.

Yeah, Okay, and then just one last one for me the the IDR replacement opportunity I mean, I think you had some press out today and and you emphasize again Tonight. He just talk in a little more specifics exactly what that looks like you've got to legacy IDR solution. What's how does that do you just how does that look to the consumer what exactly are you bringing in.

How does it extend the lifecycle the IDR I get a fair volume the questions in a little bit of confusion around that.

Sure. Okay. So the three parts to it the first part is that let's take an idea, let's take an IDR from in this case I'll give you. An example of the retailer that you're working with that'll make it real well so.

What.

The retail business has is an existing Ivy are from one of the big vendors and what you're doing is.

Going into their IB our design studio, we have a piece of code that will just plug into one off the.

No software points Austin IDR treat so pressed in mind lets say and it automatically detects the fact that you're calling from Oh smartphone.

Based on Decisioning that the business was set up.

You would get an option to say would you like to chat with how some SMS, let's say and you say, yes, you start to talk on SMS with the customer.

At that point, they still can't retain the position of the IDR, but they they're not shopping on SMS and im not going to mess. They can as in this case they will have our virtual assistant doing the automated responses to begin with and if the customer then gets escalated than go to a human choppy agent on the other side on our desktop you can do.

Stop.

That conversation will conclude.

The doing part effect, both the connect part in the South Park and then that is the analytics on top to make sure of that.

We can do that we have the ability to do analytics across IDR across digital across the contact center, so and doing analytics. So all those two pieces together.

[laughter] very helpful. Thanks, so much.

Sure.

Thank you for the question. The next question will come from Mark Schappel with benchmark. Please go ahead.

[noise] Hi, Thank you for taking my question, Eric Let me start with you I mean if.

If you could better understand the SAS revenue guide for fiscal two Q. It appears that even with the $750000 reduction and termination growth appears to be significantly lower than say the past 18 months or so help me help me with the puts and takes there.

So I think in addition to the pipe.

Oh, that's in addition to the 750 Oh syndicated the fact that there was about this 150 k. of seasonality that we weren't expecting this quarter that we saw.

Last quarter and then.

From a business standpoint, I think as we've seen this increased focus on new logos I think some of these initial deals that weve been closing you know have stalled a little smaller which I think is contributing to this in this environment, but overtime, we would expect that to pick up.

Okay, great. Thank you and then Oh sure with respect to the priority or initiative to expand your partnerships to CRM vendors, how far along are you with respect to partnerships with the various urine burners.

Oh, some of them are more advanced than others, but I would say that.

We are still probably six months away from meaningful pipeline that we can have and so I expect that.

These CRM partnerships with you new business to us in the second half of.

A second half of calendar 21, so beginning fiscal 22.

Great. Thank you that's all for me.

Sure.

Thank you. The next question will come from Ryan Macdonald with Needham and company. Please go ahead.

Hi, Thanks for the question. This is Alex on for Ryan wasn't now the company achieved in process data once that ramp what do you expect to receive in coal that wrap authorization can you give us any sense of what you're seeing with the government vertical prototype line perspective.

Oh.

So I.

At this time, our expectation and again this is dependent on the certification no parties them whatever we discovered in the process of certification that we have to remedy and we are actively in the process as we speak.

The expectation is that we should be certified by.

Oh calendar Q2.

In 21 calendar Q2.

Okay, Great and then with the recent shutdown occurring in EMEA can you give us a sense of what you're seeing from it from customers over the past couple of weeks do you think that business is oh.

Now positioned better to operate effectively in a lockdown environment first of all it's happening.

Before coven and as well as what do you kind of seeing a in EMEA with elongated sales cycles as well.

Yeah, we've seen no.

I don't know if those last two weeks change Oh I see.

Quite triple to our ER business, but what we haven't seen up until say a month ago and leading up to now.

Is that businesses have kind of a common day to operating in EMEA around the new rules.

I am not sure how the recent lock down say in Europe, particularly the UK is going to affect things so hard to say, but I would say that the leading up to that we were seeing a reasonable business activity, mostly around more automation more digitalization. So all the things we talked about in the U.S., we see that there as well.

Great. Thank you.

Sure.

Thank you I'm showing no further questions at this time I'll turn it back to our speakers.

Great well, thanks, operator, and thanks, everybody for joining us today and look forward to updating you wouldn't be a finish up though Q2. Thanks.

Thank you ladies and gentlemen. This concludes today's event you may now disconnect your line.

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