Q1 2024 eGain Corp Earnings Call
Good day and welcome to the he gained fiscal 'twenty 'twenty four.
First quarter financial results call all participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing Star then zero on your telephone keypad.
After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad to withdraw your question. Please press Star then two please.
Please note. This event is being recorded I would now.
Now I'd like to turn the conference over to Jim Byers of N. K R. Investor Relations. Please go ahead.
Thank you operator, and good afternoon, everyone. Welcome to your game fiscal 'twenty 'twenty four first quarter financial results Conference call.
On the call today are E gains Chief Executive Officer, actually ROI, and Chief Financial Officer, Eric Smit.
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.
We're looking statements are generally preceded by words, such as believe plan intend expect anticipate or similar expressions.
Forward looking statements are protected by Safe Harbor provisions contained in the private Securities Litigation Reform Act of 1995.
These forward looking statements are subject to a wide range of risks and uncertainties that could cause actual results to differ in material respects.
Information on various factors that could affect your game results are detailed in the company's reports filed with the Securities and Exchange Commission. He gained is making these statements as of today November 2nd 2023, and assumes no obligation to publicly update or revise any of the forward looking information in this conference call.
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In addition to GAAP results, we will also discuss certain non-GAAP financial measures such as non-GAAP operating income. The tables included with the earnings press release issued today include reconciliation of the historical non-GAAP financial measures to the most really to the most directly comparable GAAP financial measures.
And our earnings press release can be found by clicking the press releases link on the Investor Relations page of your games website at <unk> Dot Com and along with the earnings release, we will post an updated investor presentation to the Investor Relations page of the game's website and lastly.
Phone replay of this conference call will be available for one week.
And now I'd like to turn the call over to eat gain C. E O ask your ROI.
Thank you Jim and good afternoon, everyone.
We are off to a good start to our fiscal year, both our top and bottom line results exceeded our guidance and street consensus for the quarter.
Our adjusted EBITDA for the quarter at 12% was 600 basis points better than the year ago quarter.
Turning to business highlights we closed some nice new logos in the first quarter.
Building.
Large north American industrial distributor.
And a top 10 Canadian back.
We also saw continued expansion across our client base during the quarter.
Some expansion borrowings included a large California State agency.
One of the largest U S utilities.
The U K financial services company, a global insurance provider.
On a U S health plan management provider.
Looking at the market.
The macro environment remains challenging.
At the same time, we see continued pickup in evaluations and decision making in our pipeline.
These include new opportunities as well as reengagement from opportunities that were on hold.
But what we are really excited about is the launch of <unk>.
GPT, our newest product that we announced that the customer event in London in September.
It's the first of its kind solution that leverages is generally hard to automate knowledge management.
Using human effort by all.
Pat.
The result is correct consumable answers so dupont.
That center agents using the cost of service.
The fifth GPT allows businesses to confidently usually are.
Context off reliable knowledge content effective controls and rich analytics within your games compliance Composedly balloon scalable knowledge platform.
Given the continued focus in the market on reducing cost and improving agent experience.
We believe this.
GPT presents.
Biggest bang for the Buck for businesses looking to invest in projects that improve.
Business cost.
Improved agent experience.
Gartner in 2022 recommended knowledge management as the number one technology investment for customer service.
Now with an offering like you gain a physics GPT. This recommendation can become a reality.
Speaking of Gartner, we are excited to note that Gartner recently published its 2023 magic quadrant for CRM customer engagement.
And we were named a visionary at this time.
Last time around we were in the niche category.
Sure.
From a doctor or highlight our operational capabilities, our composite well architecture and our rich product functionality.
We are the team could not be prouder.
Turning to market awareness.
Our customer event in London in September was a resounding success, we had a record number of attendees.
And we had exciting customer success stories shared on stage, including presentations from RSA, a global insurance company.
And Nordic insurance giant.
And a L D automotive the largest vehicle leasing company in Europe.
In addition Pacific one of our recent client presented their knowledge journey with your game along with Deloitte, Our Si partner on this project.
Finally, our assist GPT announcements have deep dives demos generated a lot of buzz among customers and prospects.
With our focus on knowledge management.
And particularly for customer service.
Our product innovation and improved analytics recognition positions us well.
As macro conditions improve.
To conclude.
Three points I want to make a first cost adjustments in our business over the last couple of quarters.
That will help improve our profitability, even as we continue to invest in product innovation and customer success.
While new logo acquisition is still relatively slow in this market. We are seeing increased pipeline activity from both new Rfps and Reengagement from deals previously on hold.
And finally, the market opportunity you have to automate knowledge management for customer service.
It's exciting and it's large.
And we are well positioned to capitalize on it as conditions improve.
With that I'll ask Eric Smit, our Chief Financial Officer, who will add more color around our financial operations.
Thanks Sasha.
Thanks, everyone for joining us today.
That's actually noted we delivered a significantly improved bottom line performance in the first quarter, reflecting the adjustments we made to operate more profitably in the current.
<unk> environment.
Continuing to invest in product innovation and customer success.
Let me share more detail about our financial results for Q1 before getting into our outlook and guidance for Q2 and fiscal 'twenty to 'twenty four.
Starting with revenue total revenue for Q1 was $24 2 million above our expectations, but down 2% year over year.
When looking at revenue by region, North America accounted for 79% of total revenue this quarter up from 77% in the year ago quarter.
North America continues to be our primary focus in the market, where we see the greatest opportunity.
Total revenue for North America was 19 million essentially unchanged year over year, when contra sort of revenue from Europe was $5 2 million down 8% year over year.
Looking at non-GAAP gross profits and gross margins gross profit for the quarter was $17 6 million for a gross margin of 73% compared to 76% for the prior year quarter and 74% last quarter.
Now turning to operations.
non-GAAP operating costs for the quarter came in at $15 million, a 14% improvement from $17 5 million in the year ago quarter.
Reflecting the expense controls we have implemented.
Looking at our bottom line non-GAAP net income for the quarter was $3 8 million or 12 cents per share.
This is up approximately 90% on a dollar basis non-GAAP net income of 2 million or six cents per share in the year ago quarter.
Adjusted EBITDA margin for the quarter was 12% up 600 basis points from 6% in the year ago quarter.
Turning to our balance sheet and cash flows we generated very strong cash flow from operations for the quarter.
With $1 million.
Or a 34% operating cash flow margin.
During the quarter under our share repurchase program, we purchased a books approximately 83000 shares for $517000.
The average price of $6 33 per share.
Of the 20 million authorized 13 7 million remained available under the program at the end of the quarter.
Our balance sheet remains very strong total cash and cash equivalents at the end of the quarter was $79 8 million up from $71 5 million a year ago.
Now turning to our customer metrics.
Mentioned on previous calls given our increased focused on north American market. So she has some additional customer metrics on a regional basis.
LTM dollar based net retention for North America customers was 103%, while the near cause retention was 84% due to the churn that we've discussed on previous calls, resulting in overall or dropping to 97% compared to 103% a year ago.
That's all for North America customers increased 4% year over year.
Total Saturday or decreased 1%.
And looking at all by product type.
Knowledge now makes up 45% of our total says it all.
The number of $1 million all customers remained relatively constant year over year.
When looking at our remaining performance obligation or OPO total rpms decreased 13% year over year to $82 4 million, while our short term up here was $59 7 million or 3% year over year.
Now turning to our guidance for the second quarter of fiscal 'twenty 'twenty four we expect total revenue of between 23 million to $23 6 million.
Turning to the bottom line for Q2, we expect GAAP net income of 800000 to one 4 million or <unk> two four cents per share which includes stock based.
Sensation expense of approximately $1 5 million and depreciation and amortization of approximately 125000.
We expect non-GAAP net income of $2 3 million to $2 9 million or seven cents to nine cents per share.
Looking at the fiscal 'twenty to 'twenty four full year ending June 30th 'twenty 'twenty four we are reiterating our previously provided total revenue guidance of between 96 million to $98 million.
But with our increased profitability, we are increasing our non-GAAP net income guidance to $12 1 billion to $4 6 million or <unk> 37 to 39 cents per share.
From 33 to 35 cents per share.
And we are reiterating our GAAP net income guidance of $6 6 million to $7 1 million or 22, 20 <unk> per share.
We estimate share based compensation expense of approximately $5 5 million and depreciation and amortization.
<unk> expense of approximately 500000.
Looking at weighted average shares outstanding we expect approximately $31 6 million for the second quarter and $32 3 million for the full year.
So in summary, we delivered top and bottom line results ahead of both our projections and street expectations. We are seeing positive results from the adjustments, we made to our business operations to operate more profitably and generate increased cash flow in the current environment, while we've continued to invest in product.
Innovation and customer success.
The macro environment remains challenging we are seeing increased RFP activity and reengagement from deals previously put on hold.
Business sales team is working hard to close these deals.
We also see significant growth opportunity ahead of us with a new assist G. P T offering.
This is the first of its kind solution to automate knowledge for customer engagement.
The opportunity is significant and we remain well positioned to capitalize on our <unk>.
Pending market opportunity with a strong balance sheet and cash flow generation.
Lastly, before I close on the Investor Relations calendar you gained will be in New York later this month meeting with investors at two investor conferences, we will be at the 12th annual Roth, New York Conference on Wednesday November 15th.
Annual Craig Hallum Alpha Select conference. The following day on Thursday November 16, we hope to see you at these conferences.
This concludes our prepared remarks, operator, we will now open the call for questions.
We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.
If you are using a speakerphone please pick up your handset before pressing the keys.
If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
The first question comes from Richard Baldry with Roth Capital. Please go ahead.
Thanks can you talk about sort of the early indications you are getting on where the greatest interest is in the U S. G. P. T part curious if theres anything else.
Certain verticals that seem to be looking at things faster.
Is it you know to replace them.
You know human interactions or.
You know for an ROI based sale or maybe to automate things. They previously didn't want to address because they thought the human side too expensive.
A little more color around where you're seeing sort of the car.
<unk> opportunities.
Sure So rich lashway here.
With this the GPT, we have Uh huh.
Ride generative capability across the whole platform.
Where there is real.
Interest in the market is around helping improve productivity in the knowledge creation curation and improvement optimization kind of cycle through that part of the assist students that we are automating with GPT.
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Is what seems to be most exciting to people because with knowledge management that has always been one of the challenges. So for example, with the new solution. We have we are seeing improvement in productivity of knowledge management team.
Up by three to Forex.
So 80% improvement in sort of automation. So that's what we are seeing is the biggest pool. You are also seeing interest in agent assist but in that area is kind of there are many providers who have that we have it too, but the knowledge management partners, where the real excitement seems to be driven at this point.
And you talk a little about what maybe your early thoughts are around pricing pricing mechanisms.
How much of a premium offerings to be or it's sort of an extension to existing thing. It's just kind of give us an idea of how much this might expand your your addressable market.
That's true that's a great question right now we are making it super easy for people to try it and not create a barrier in terms of pricing upfront.
It's based on actual usage off the generative capability on the platform.
That's the incremental fee, it's a little bit like how many sessions. So how many gpus request few making our platform via pricing.
That's kind of the incremental.
Yeah.
Revenue generation for us, but but the park we are focusing on per day is an initial market launches.
Driving more adoption and that's that's the appropriate fit.
And there's obviously a lot of hype around the degenerative side of the world. So do you feel like the low hanging fruit is obviously going after existing customers, who know where you have a track record with he would feel comfortable or quickly evaluating adopting or you know is this really kind of opening new opportunities where.
People are seeking out vendors capable of offering solutions in the space rapidly slipped sort of some credibility.
Yeah. So we get an idea for how youre going to be quick.
Attacking the market.
That direction. Thanks.
Yeah at this point I think what we see what the market interest is.
People, even in the new logo conversations people want.
Platform for knowledge not includes generative capability, but not just generative capability right. So in the enterprise, where we are a seller generative is a great addition, and differentiation.
Seidman.
Theres still a core need for knowledge hub for all of the core need of correct content controls analytics all of the rest of it. So that's that's the place where we are focusing now.
Great. Thanks for your help.
Okay.
The next question comes from Daniel Bitumen.
With Craig Hallum Capital Group. Please go ahead.
Hey, guys. Thanks for taking my question Daniel on for Jeff Van re just for any improvement in pipeline activity. Some of that re engagement youre seeing of clients that were in a sales cycle and previously were on hold.
Just maybe if you could give us any additional color on those conversations but those conversations are like what's driving you know those customers to be engage if theres any common themes either in terms of the conversations with the verticals that are coming back just any additional thoughts there.
So one dimension, we see is this businesses seem to have.
Gotten back into evaluating and running rfps and structured sort of buying process, you're seeing that happening much more often now so tire kicking is much less.
Let's say six months ago. So that's a big change we are seeing across the board. So.
Many many more of the early stage conversations are resulting in time bound rfps that has not changed we are seeing that across the board.
In terms of vertical I would say a.
Financial and insurance.
Seem to be.
From thing that there's a there's more excitement in that space on a vertical basis, but others are also getting in so it's not that it's only in financial services and insurance.
But yeah that sector seems to be leading.
The others.
And maybe just one follow up for me in terms of the macro headwinds.
Can dial that in a little bit in terms of do you see this mostly as general Tech budget pressure is in particular to the contact center. It's particular to knowledge management is uniquely the combination of.
General macro pressure as well as people, taking a step back to assess AI in their roadmap, maybe just give us some additional thoughts on on the nature of the headwind.
Yeah, I would say the EIA assessment.
Seems to have run its course, a little bit not entirely I'm sure. There are quite a few companies that are still doing that but we see people who are coming back from their assessments and saying all right. We need AI. They also need AI in the context of our knowledge platform. So that we can actually use it and rely.
Right right. So that's one one thing I'll comment in a macro sense.
I would say the other big comment would be just the overall geopolitical uncertainty in the economic.
Uh huh.
Environment.
Think that budgets are still fairly cautious at the sense, we get but we do see.
I can see and budgeted for calendar 'twenty four or so so there is a little bit of loosening of the bone springs, but not as much as one would expect in a in a more stable economic environment.
Thanks, so much for the answers.
Welcome.
As there are no further questions I would like to turn the conference back over to management for any closing remarks.
Thanks, operator, and thanks, everybody for listening to the call we look forward to hopefully.
Hopefully you're seeing some of you at our Investor conferences later this month and are providing the updates at the end of next quarter. Thank you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Okay.
Okay.
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