Q2 2024 eGain Corp Earnings Call

Good day and welcome to the game fiscal 'twenty 'twenty four second quarter financial results call. All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.

Operator: Good day, and welcome to the eGain Fiscal 2024 Second Quarter Financial Results Call. All participants will be in listen-only mode.

Operator: Should you need assistance, please signal a conference representative by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Jim Byers with NKR Investor Relations. Please go ahead.

After today's presentation there'll be an opportunity to ask questions. Please.

Please note. This event is being recorded I.

I would now like to turn the conference over to Jim Byers with NK or Investor Relations. Please go ahead.

Jim Byers: Thank you, Operator, and good afternoon, everyone. This is eGain's fiscal 2024 second quarter financial results conference call. On the call today are eGain's Chief Executive Officer, Ashu Roy, 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. Forward-looking statements are generally 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.

Thank you operator, and good afternoon, everyone welcome to Ea's fiscal 2024 second quarter financial results Conference call.

On the call today are your games, Chief Executive Officer, Ashley 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.

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

Looking statements are protected by Safe Harbor provisions contained in the private Securities Litigation Reform Act of 1995.

Jim Byers: These 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 eGain's results is detailed in the company's reports filed with the Securities and Exchange Commission. eGain is making these statements as of today, February 8, 2024, and assumes no obligation to publicly update or revise any of the forward-looking information in this conference call. In addition to GAAP results, we will also discuss certain non-GAAP financial measures, such as non-GAAP operating income.

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 gains results are detailed in the Companys reports filed with the Securities and Exchange Commission.

<unk> is making these statements as of today February eight 2024 and assumes no obligation to publicly update or revise any of the forward looking information in this conference call.

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

Jim Byers: Tables included with the earnings press release include reconciliation of the historical non-GAAP financial measures to the most directly comparable GAAP financial measure. And our earnings press release can be found by clicking the press release link on the investor relations page of eGain's website, www.eGain.com. And along with the earnings release, we will also post an updated investor presentation on the investor relations page on eGain's website. And lastly, a phone replay of this conference call will be available for one week. And now, with that said, I'd like to turn the call over to eGain's CEO, Ashu Roy. Thank you, Jim, and good afternoon, everyone.

Ables included with the earnings press release include reconciliation of the historical non-GAAP financial measures to the most directly comparable GAAP financial measures.

In our earnings press release can be found by clicking the press release link on the Investor Relations page of your games website at you gained dot com.

And along with the earnings release, we have also posted an updated investor presentation to the Investor Relations page on the game's website.

And lastly, a phone replay of this conference call will be available for one week.

And now with that said I'd like to turn the call over to E. C E O S you're right.

Thank you Jim.

Afternoon, everyone.

Ashu Roy: Our top and bottom line results for the quarter have exceeded our guidance, and our assist GPT AI offering is being well received by the market and helping us win new logos. Turning to business, we signed several new logos in the quarter. Some notable women here.

Our top and bottom line results for the quarter.

We have exceeded our guidance.

And our efforts to GPP AI offering.

Being well received by the market and helping us win new logos.

Turning to business, we signed several new logos in the quarter.

Some notable wins here.

Ashu Roy: A global investment management company chose eGain to modernize their knowledge management capability. Their services staff was struggling to find answers in what are long, complex documents in their business spread across many silos. They selected eGain based on our ability to unify that knowledge and deliver consumable answers using generative AI in a safe, auditable way. Another new logo is a membership-based primary care practice that is in hyper-growth mode. They selected eGain to enable their associates with a unified knowledge platform. Again, they will integrate all their content and knowledge sources on the eGain platform and use our assist GPT capability to deliver easy answers and ramp up their new hire. And lastly, I'll mention a pioneering U.S.-based mutual auto insurance company.

Our global investment management company, Joe began to modernize their knowledge management capability.

There are services staff, who are struggling to find answers.

What are the long complex documents in their business spread across many silos. They selected again based on our ability to unify we've got some knowledge and deliver consumable cancers using geography.

Safe Auditable way.

Another new logo is a membership based primary care practice, which is in hyper growth mode.

We selected the game to enable their associates with a unified knowledge platform again, they will integrate all their content and knowledge sources on the platform and use our assist assist.

<unk> capability to deliver easy answers and ramp up their new hires.

Lastly, I mentioned.

And here in the U S based mutual auto insurance company.

Ashu Roy: They selected us to streamline their agent experience and, therefore, improve their customer experience. They've gone live with eGain already for their service group and are now looking to roll out the knowledge capability across the enterprise. We also saw good expansion from existing customers during the quarter. A couple of notable ones, a large PNC insurance company and a Global Electronic Component Distributor, are turning to renewal.

We selected us to streamline their agent experience and therefore improve their customer experience.

They have gone live with Vijay already for the service group and are now looking to rollout the knowledge capability across the universe.

We also saw good expansion from existing customers during the quarter.

A couple of notable one large.

P&C insurance company and a.

Global electronic component distributor.

Turning to renewals.

Ashu Roy: In the current macro environment, we are working hard to serve and retain customers as they look to reduce their operating costs. We've had good renewals in the quarter, including large health care insurance clients, an industry-leading HCM SaaS solution provider, and a large multinational bank. At the same time... We have received notice from two large clients about their intent to not renew with us. The first is a conversation hub client. They're choosing to consolidate vendors for all their digital customer communication. The second is an analytics subclient.

Current macro environment, we are working hard to serve and retain customers as they look to reduce their operating costs.

We've had good renewals in the quarter, including large health care insurance clients.

Our industry, leading HCM SaaS solution provider.

And a large multinational bank.

At the same time.

We have received notice from two large clients about their intent to not renew with us.

The first is a conversation hub client.

Choosing to consolidate vendors for all their digital customer communications.

The second is in analytics hub clients.

Ashu Roy: They are choosing to build out their homegrown capability to measure and manage their contact center. The combined ARR of these two accounts is approximately $8 million. Beard, Current events are challenging, as they are not factored in our fiscal 2024 plan.

They are choosing to build out their homegrown capability to measure and manage their contact centers.

The mind at all of these new accounts is approximately $8 million.

B G.

Current events are challenging.

As they are not factored in our fiscal 2024 Atlanta.

At the same time, we are very encouraged by the growing interest in our assist GPP proposition.

Ashu Roy: At the same time, we are very encouraged by the growing interest in our ASSIST-GPT proposition. Our new local pipeline is growing nicely with knowledge and AI opportunities. We're also feeling good about our new logo sales performance in the quarter. And as macro conditions improve, we believe we can grow our new logo acquisitions without adding sales capacity.

Our new logo pipeline is growing nicely with knowledge and AI opportunities.

We are also feeling good about our new logo sales performance in the quarter.

And as macro conditions improve.

We believe we can grow our new logo acquisitions without adding sales capacity.

Ashu Roy: Our new assist GPT and instant answers capabilities are generating lots of good marketing. With assist GPT, customers can speed up knowledge creation by 4X. For an early client in the energy vertical who we piloted with, what historically would have taken eight weeks of human effort was done in less than two weeks. With Instant Answers, another AI product, agents get much better and faster answers from our knowledge base at one of our insurance clients, TNC Insurance.

Our new assist GPT.

Instant answers capabilities are generating lots of good market interest.

The consistent GPT customers can speed up knowledge creation by four.

So normally clients in the energy vertical who we piloted with.

What historically would have taken eight weeks of human effort was done in less than two weeks.

With instant answers another AI product.

Agents get much better and faster answers from our knowledge base.

One of our insurance clients insurance.

This is a P&C insurance agents have seen more than a double improvement in speed to answer.

Ashu Roy: Agents have seen more than a double improvement in speed to answer, even as answer quality has improved. Our product investments and leadership continue to be recognized by the market and clients. We were honored to be the sole recipient of the 2023 KM Promise Award from KM World magazine.

Even his answer quality has improved.

Our product investments and leadership continues to be recognized by the market and clients.

We're honored to be the sole recipe and of the 2023 can promise award from <unk> magazine.

Ashu Roy: This award recognizes the provider who best delivers on the promise to customers, with innovative solutions integrated into their business processes. Also in November, eGain was named a visionary in the Gartner Magic Quadrant for CRM customer engagement. We had mentioned this in our prior call, but that was followed by us receiving the top rating for knowledge management in the 2023 Gartner Critical Capabilities Report. And that was something new that we had not mentioned before.

This award recognizes the provider who's best delivers on the promise to customers.

With innovative solutions integrated into their business process.

Also in November.

Dan was named a visionary in the Gartner Magic quadrant for CRM customer engagement, we had mentioned this in our prior call.

But that was followed by our receiving operating for knowledge management in the 2023 Gartner critical capabilities report.

And that was something new that we have not mentioned before.

Ashu Roy: We continue to invest at this intersection of AI knowledge and digital technologies to extend our product leadership. To conclude, we see good momentum in new logo wins and pipeline activity. We continue to invest in innovative AI capabilities like assist GPT and instant answers to enhance our knowledge hub, and as market conditions improve, we are well positioned to capitalize on this big opportunity to help automate knowledge for customer service. With that, I'll ask Eric Smit, our Chief Financial Officer, to add more color around our financial operation.

We continue to invest at this intersection of AI knowledge and digital technologies.

And our product leadership.

We see good momentum in new logo wins and pipeline activity.

We continue to invest in innovative AI capabilities like assist GPT.

And bouncers.

To enhance our knowledge hub.

And as market conditions improve.

We are well positioned to capitalize on this big opportunity to help automate knowledge for customer service.

With that I'll ask Eric Smit, our chief financial officer to add more color around our financial operations.

Alright.

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

Eric N. Smit: Thanks, Ashut, and thanks everyone for joining us today. We delivered another quarter of significantly improved profitability and strong cash flow from operations. Both our top and bottom line results exceeded our guidance. Let me share more detail about our financial results for Q2 before getting into our outlook and guidance for Q3 and fiscal 2024. Starting with revenue, total revenue for Q2 was $23.8 million, above our expectations but down 7% year-over-year, reflecting the current cautious spending environment and the tough comparison where last year we benefited from a seasonal volume increase of approximately $1 million that did not repeat this year. In looking at revenue by region, North America accounted for 79% of total revenue this quarter, up from 77% in the year-ago quarter.

We delivered another quarter of significantly improved profitability and strong cash flow from operations.

Both our top and bottom line results exceeded our guidance.

Street expectations.

Let me share more detail about our financial results for Q2 before getting into our outlook and guidance for Q3 and fiscal 2024.

Starting with revenue total revenue for Q2 was 23 8 billion.

But our expectations, but down 7% year over year, reflecting the current cautious spending environment and the tough comparison with last year, we benefited from a seasonal volume increase of approximately $1 million did not repeat this year.

And looking at the revenue by region North America accounted for 79% of total revenue this quarter up from 77% in the year ago quarter.

Eric N. Smit: Total revenue from North America was $18.8 million, down 5% from last year, whereas, in contrast, total revenue from Europe was $5 million, down 14% year over year. Looking at non-GAAP gross profits and gross margins, gross profit for the second quarter was $17.1 million, for a gross margin of 72% compared to 75% for the prior-year quarter and 73% last quarter. Now turning to operations, ONGAP operating expenses for the second quarter came in at $13.5 million, a 22% improvement from $17.3 million in the year-ago quarter, reflecting the expense controls we have implemented. Looking at the bottom line, non-GAAP net income for Q2 was $3.4 million, or $0.11 per share, up 100% on a dollar basis from non-GAAP net income of $1.7 million, or $0.05 per diluted share, in The adjusted EBITDA margin for the quarter was 16%, up 700 basis points from 9% in the year-ago quarter.

Total revenue from North America was $18 8 million.

Down 5% from last year, whereas in contrast, total revenue from Europe was $5 million down 14% year over year.

Looking at non-GAAP gross profits and gross margins gross profit for the second quarter was $17 1 million for a gross margin of 72% compared to 75%.

Prior year quarter, and 73% last quarter.

Now turning to operations on GAAP operating costs for the second quarter came in at $13 5 million.

22% improvement from $17 3 million in the year ago quarter, reflecting the expense controls we have implemented.

Looking at the bottom line non-GAAP net income for Q2 was $3 4 million or <unk> <unk> per share up 100% on a dollar basis non-GAAP net income of <unk>.

$1 7 million or <unk> <unk> per diluted share in the year ago quarter.

Adjusted EBITDA margin for the quarter was 16% up 700 basis points from 9% in the year ago quarter.

Eric N. Smit: According to our balance sheet and cash flows, we generated very strong cash flow from operations for the quarter of $7.7 million, or a 32% operating cash flow margin. During the second quarter, under our share repurchase program, we repurchased approximately 391,000 shares, or $2.5 million, at an average price of $6.39 per share. Of the $20 million authorized, $11.2 million remain 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 were $86.8 million, up from $18.9 million a year ago.

Turning to our balance sheet and cash flows we generated very strong cash flow from operations for the culture of $7 7 million or 32% operating cash flow margin.

During the second quarter under our share repurchase program, we purchased we repurchased approximately 391000 shares $2 5 million at an average price of $6 30.

39 cents per share.

Of the $20 million authorized $11 2 million remained available under the program at the end of the quarter.

Our balance sheet remains very strong total cash cash equivalents at the end of the quarter were $86 8 million.

Up from $18 9 million a year ago.

Now turning to our customer metrics.

Eric N. Smit: Now turning to our customer metrics. With our continued focus on knowledge, as outlined by Ashu this quarter and going forward, I will share some additional customer metrics for our knowledge customers. First, looking at LTM dollar-based SaaS net retention from knowledge customers was 103%, while our total net retention has dropped down to 94%. The LTM dollar-based SAS Net Expansion Rate for Knowledge Customers was 113%, while our total net expansion rate was 106%. Looking at our total ARR, the total SAS ARR for knowledge customers increased 6% year-over-year, while the total SAS ARR decreased 13% year-over-year. Looking at our remaining performance obligation, total RPO decreased 15% year-over-year to 77.9 million, and our short-term RPO was 55.8 million, down 4% year-over-year. Now turning to our guidance for the third quarter of fiscal 2024, we expect total revenue of between $22.6 million and $23 million. Turning to the bottom line, for Q3, we expect a net income of $400,000 to $1,000,000, or $0.01 to $0.03 per share, which includes stock-based compensation expense of approximately $1.2 million and depreciation and amortization of $100,000.

With our continued focus on knowledge as outlined by our shoe.

For this quarter and going forward I will share some additional customer metrics for our knowledge customers.

First looking at all.

LTM dollar based net.

Our retention from knowledge customers was 103%, while our net total net retention.

That dropped down to 94%.

The LTM dollar based net expansion rates for knowledge customers.

313%.

Our total net expansion rate was 106%.

Looking at our.

Total <unk> total.

Total says they are all for knowledge customers increased 6% year over year.

Total <unk> decreased 13%.

Looking at our remaining performance obligation total <unk> decreased decreased 15% year over year to $77 9 million and our short term OPO was $55 8 million down 4% year over year.

Now turning to our guidance for the third quarter.

2024, we expect tow.

Total revenue of between $22 6 billion to 23 million.

Turning to the bottom line for Q3, we expect GAAP net income of 400000 to a million dollars or <unk> <unk> per share, which includes stock based compensation expense of approximately $1 2 million and depreciation and amortization of 100000.

Eric N. Smit: We expect non-GAAP net income of $1.6 million to $2.2 million, or $0.05 to $0.07 per share. For the full year, fiscal 2024, given the increased churn as outlined by ASHA, we are revising our previously provided guidance as follows. For fiscal 2024, the full year ending June 30th, 2023, we now expect total revenue of between $92 million and $93 million, non-definite income of $9.3 million to $9.8 million, or $0.29 to $0.31 per share, and gap net income of $4.5 million to $5 million, or $0.14 to $0.16 per share. We estimate share-based compensation expense of approximately $4.8 million and depreciation and amortization expense of approximately $500,000 for the year.

We expect non-GAAP net income of $1 6 billion to $2 2 million or five cents to <unk> <unk> per share.

For the full year fiscal 'twenty two before given the increased churn as outlined by issue. We are revising our previously provided guidance as follows for fiscal 2020 for full year ending June 32023, and now expect total revenue of between 92 million to $93 million.

non-GAAP net income of $9 3 million to $9 8 million or <unk> 29 to 31 per share.

And GAAP net income of $4 5 million to $5 million or 14 to 16 cents per share.

We estimate share based compensation expense of approximately $4 8 million and depreciation and amortization expense of approximately 500000 for the year.

Looking at weighted average shares outstanding we expect approximately 31 9 million for the third quarter and for fiscal 2024 32.

Eric N. Smit: Looking at weighted average shares outstanding, we expect approximately $31.9 million for the third quarter and, for fiscal 2024, $32 million for the full year. So, in summary, while the macro environment remains challenging, we are very pleased with the increased number of new knowledge customer wins in Q2. And we expect to see continued positive momentum in new business activity going forward, given the level of interest in our new assist GPT product offering. The opportunity for eGain is significant, and with our leadership and focus on knowledge and AI, we remain well positioned to capitalize on the expanding market opportunity with our strong balance sheet and cash flow generation. Lastly, on the investor relations calendar, eGain will be presenting and meeting with investors at the annual Roth conference taking place March 17 through March 19 in Dana Point, California.

For the full year.

So in summary, while the macro environment remains challenging we are very pleased with the increased number of new knowledge customer wins in Q2.

And we expect to see continued positive momentum in new business activity going forward given the level of interest for our new assist GPT product offering.

The opportunity for you again, this significant and with our leadership and focus on knowledge and AI, we remain well positioned to capitalize on the expanding market opportunity with a strong balance sheet and cash flow generation.

Lastly, on the Investor Relations calendar, we'll be presenting and meeting with investors at the.

The annual Roth Conference, taking place March 17 to March 19 in Dana point, California.

We will be providing more details as we get closer to that 8% hope to see some of you there in person.

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

Thank you.

We will now begin the question and answer session.

Operator: We'll be providing more details as we get closer to that date and hope to see some of you there in person. This concludes our prepared remarks. Operator, we will now open the call for questions. Thank you. To ask a question, press star, then 1 on your touchtone phone.

To ask a question press Star then one on your Touchtone phone.

To withdraw your question. Please press Star then two.

At this time, we will pause momentarily to assemble our roster.

And our first question comes from Richard Baldry with Roth M Cam.

Thanks.

Operator: To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. And our first question comes from Richard Baldry with Roth MKM. Thanks. In terms of the unexpected attrition, can you talk about, you know, is there any commonality there in terms of, you know, geographies or vertical end markets? And then, in terms of the timing, it looks, if I backed it out right, that most of it hits in the fourth quarter. Is that right? Or is there some, you know, residual pressures into the September quarter as well?

In terms of the unexpected nutrition can you talk about it or is there any commonality there in terms of geographies or vertical end markets and then.

And in terms of the timing of it it looks if I'm backing out right that most of it hits.

Hits in the fourth quarter is that right or is there some residual pressures into the September quarter as well. Thanks.

Okay. So let me address the first part maybe Richard.

No.

Uh huh.

There is nothing particularly common one of those are direct clients the conversation offline because of direct clients.

Ashu Roy: Thanks. OK, so let me address the first part. Maybe Richard and then, to ehhh, No, there's nothing particularly common.

The analytics hub client goes through a partner.

<unk>.

Alright my.

The exclusion I guess neither of them our knowledge clients, but that's not to say that we.

Ashu Roy: One was a direct client. The conversation hub client was a direct client. The analytics hub client was through a partner. My exclusion, I guess, neither of them are knowledge clients, but that's not to say that we may not have customers in that area.

We may not have customers in that area, because the usual sort of pattern to that but.

I think both of them are under tremendous cost pressure in their businesses that we see.

And as there is a lot of public news about them looking to reduce cost head count reduction so not I guess is a commonality right now.

Ashu Roy: There's a usual sort of pattern for that, and I think both of them are under tremendous cost pressure in their businesses, as we see. And there's a lot of public news about them looking to reduce costs and headcount reduction. So that, I guess, is a commonality right now. Both of them have been using our products well. They seem to still be, the operational teams are still very happy with us, and seem to be engaged with the product. They have been given marching orders, and so that's where the outcome is.

Both of them have been using our products well they seem to still be the operational teams are still very happy with us seem to be.

<unk> engaged with the product, but they are being given marching orders and so that's that's where the covenants.

Eric do you want it.

And I think Youre correct.

Both of these accounts.

The impact will be.

In the Q4.

Okay. Okay.

Flipping over to the AI side of the table could you talk about some of the early deal wins sort of how it is impacting.

Ashu Roy: I think you're correct that for both of these accounts, the impact will be felt in Q4. Okay, and flipping over to the AI side of the table, can you talk about some of the early deal wins, sort of how it's impacting deal sizes, deal cycles, you know, are you seeing a noticeable increase in the pipeline of people evaluating AI-type solutions? And sort of, when do you think that if that becomes a tailwind? When could that start to emerge?

Deal sizes deal cycles.

Are you seeing a noticeable increase in the pipeline of people evaluating the AI type solutions.

And sort of when do you think that if that becomes a tailwind when could that start to emerge. Thanks, yes.

So firstly I would say that.

A couple of things one in terms of the ITD pilots that we do the innovation in 30 days.

We are doing more pilots now.

We have done in the last several years right. So.

Almost all of those lets say are.

<unk>.

AI pilots right around assist.

Ashu Roy: Thanks. Yes. So, firstly, I would say that there are a couple of things. One, in terms of the IITD pilots that we do, do the innovation in 30 days, we are doing more pilots now than we have done in the last several years, right? So, and almost all of those, let's say, are those AI pilots right around Assist GPT or more, at this point, more instant answers, which is part of Assist GPT. And so we're seeing a lot of instant answers pilots right now, both in prospects as well as existing accounts. That's one thing.

Assist GPT or more at this point more instant answers.

Which is part of the assessed GPT.

We're seeing a lot of instant answers pilots right now both in <unk>.

Prospects as well as existing accounts.

So that's one thing second thing we are seeing and this is early but my sense is that the early engagement with prospects.

Early in the funnel people seem to be coming in with them.

AI oriented project in AI oriented into.

Interest into knowledge.

Ashu Roy: The second thing we are seeing, and this is early, but my sense is that early engagement with prospects, early in the funnel, people seem to be coming in with an AI-oriented budget and AI-oriented interest in new knowledge, saying, "what can I do with AI?" And so that's something different from what we had seen, say, six months ago; there were not a lot of ground-level conversations that started with AI; there was a lot of talk about it, but people were not starting their conversations. We're just chatting with our SDR team, and that's one of the trends that we are seeing much more of now. Those are the two things I would point out. Okay, maybe last for me is it, you know, if the AI traction seems to be picking up, and you see sort of an inflection point ahead for growth, but not reflected in your current results or maybe, arguably, your valuation, do you think you'd find a period where you might be willing to get more aggressive on the buyback front, given the strength of the balance sheet? How do you view the sort of trade-offs there?

What can I do with AI, and so thats something different from what we had seen.

Six months ago.

We're not a lot of <unk>.

Round level conversation that started with AI there was a lot of.

Talk about it but people are not starting the conversations we're just chatting with our.

SDR team.

That's one of the trends we are seeing much more now.

Those are the two things I would point out.

And maybe last for me is it.

The AI traction seems to be picking up.

And you see sort of an inflection point ahead for growth, but it's not reflected in current results term maybe arguably your valuation do you think you'd find a period, where you might be willing to get more aggressive on the buyback front given the strength of the balance sheet.

How do you view sort of the trade offs there. Thanks.

Yeah.

Yes, I think that's a valid point, so I think certainly as we.

Look at the cash.

<unk> that we have.

Generated again.

Certainly something that we will continue to look at closely for sure.

Thanks.

And our next question comes from Jeff Henry.

Eric N. Smit: Thanks. Yep, I think that's a valid point. I think certainly as we look at the past generation that we've generated again, certainly something that we'll continue to look at closely for sure.

Craig Hallum.

Great. Thanks for taking the questions.

Just maybe high level in terms of the splits of the business. So.

Operator: And our next question comes from Jeff VanRee with Craig Hullam. Great, thanks for taking the questions. Just maybe a high level in terms of the splits of the business. So from a percent of revenue perspective, how much is sitting in, I think you gave some splits in SAS error, but can you give it holistically where the revenue sits with respect to knowledge management versus conversation hub versus analytics, so we have a sense of proportion? I think, just roughly speaking, the knowledge business is just under 50%.

From a revenue percent of revenue perspective, how much is sitting in I think you gave some splits in SaaS area, but can you give it holistically, where the revenue sits with respect to our knowledge management versus conversation hub versus analytics. So we have a sense of proportion.

Yes.

So I think.

Just roughly speaking the knowledge business is just under 50%.

And then I would say the analytics business is probably in the 15.

Eric N. Smit: And then I would say the analytics business is probably in the 15, and Jim Smit. Thank you. The conversation happens in, in that 35% range.

Range.

And.

The compensation to help us in.

Net.

35% range.

Okay.

And then with respect to the two losses.

Ashu Roy: Okay. And then with respect to the two losses, I think it sounded like you had some visibility into where they were going in terms of whatever platforms they're moving over to. They're under cost pressure. Is the move that they're making, is it your impression that there's that substantial of a cost benefit by just consolidating onto the platforms of the existing providers, or are there other motivations? I mean, certainly if they've got a platform provider, maybe there's some cost benefit.

I think it sounded like the.

You had some visibility into where they're going.

In terms of whatever platforms are moving over to their under cost pressure is the move that they're making is it your impression there's that substantial of a cost to benefit by just consolidating onto the platforms of the existing providers or are there. Other motivations I mean, certainly if they've got a platform.

Or maybe there is some cost benefit just a little bit more about why the why the shift and if you know what the cost benefit was if there was some for their departures.

Ashu Roy: Just a little bit more about why the shift and if you know what the cost benefit was if there was any for their departures. Yes, I can tell you what we know so far. Yes, we were aware that that was an ongoing battle inside, let's say, the conversation. Let's talk about that first. We were aware that there was a hustle going on between the people who were using the solution from us and were very happy with it and sort of a company-wide agenda to try to reduce the number of vendors, and, Ultimately, I think what we've been told is that they're moving in this direction. They'll see how the quality of that service goes in that migration. And they are open to the idea.

Yes, so I can tell you what we know so far yes, we were aware of that Apple is an ongoing battle inside let's say that the conversation hub client, let's talk about breakfast. We were aware that was a tussle going on between the people who are using the solution from us and we're very happy with it.

Okay.

Companywide agenda to try to reduce number of vendors.

And.

Ultimately I think what we have been told is that they are moving the direction. They will see how the quality of that service in that migration.

They are open to the idea and we are still working with them, but no guarantees to see if we can continue to operate as a trusted second source.

Yeah.

So that's what we know on the first one the compensation.

Eric N. Smit: And we're still working with them, but there are no guarantees to see if we can continue to operate as a trusted second source. So that's what we have on the first one, the conversation on one. On the second one, the analytics one, I think the But we don't know enough about that, to be honest, because it's behind a partner, and we don't have enough visibility to know what the economic sort of trade-offs between their homegrown and ours.

On the second one.

Analytics, one I think the.

But we don't know enough about that to be honest, because it's behind a partner and we don't have enough visibility to know what is.

The economic sort of.

Uh huh.

Tradeoffs between their homegrown them ours.

Mhm.

Okay.

Alright, Thats helpful. And then Eric you mentioned on the year over year compares I think you mentioned something about a volume of a million dollars in volume that Didnt repeat can you just refresh me on what that once a year ago.

Ashu Roy: Okay. All right. That's helpful. And then, Eric, you mentioned on the year-over-year comparers that you mentioned something about volume, a million dollars in volume, that didn't repeat. Can you just refresh me on what that was a year ago? Yes, I think what we'd seen was an account that was driving an increase in the messaging business that was running a special program at the end of this quarter last year that drove that spike for more information or increase in volume usage.

Yes, so I think what we had seen was.

And the account that was driving that.

Increase in messaging business.

That was running a special program.

At the end of this quarter last year.

It drove that spike.

Mhm.

No.

<unk> volume usage.

Okay Alright.

Alright, and then just on the assist GPT.

You know obviously you tried to get it in the hands of a lot of folks that will let them use it and get feedback I realize it's early but any areas of pushback in places, where you've decided to pivot accentuate deemphasize already.

Eric N. Smit: OK. All right, and then just on the assist GPT, you know, obviously you tried to get it in the hands of a lot of folks who will let them use it and get feedback. I realize it's early, but any areas of pushback in places where you've decided to pivot, accentuate, de-emphasize already? Yeah, a couple of learnings we have got. One is that, Uh, people are very focused in the enterprise, not in the mid market, but in the enterprise, people are very focused on controls, safety, and auditability.

Yeah couple of learnings we have got one is that.

<unk>.

People are <unk>.

Very.

<unk>.

In the enterprise not in the mid market, but in the enterprise people are very focused on.

<unk> safety unaudited ability so we have we.

Ashu Roy: So we have, we are enhancing that significance around generative capabilities. So that is a learning for us. And the second is that the results that people are seeing in the pilots. And these pilots are obviously trials, right? They're not production level at scale, they're limited production trials.

We are enhancing that significantly.

Generative capabilities, so that as that is the learning for us and.

And the second is that the results that people are seeing in the pilots.

And these pilots are obviously trials right, they're not production level.

Gail limited production trials.

Ashu Roy: People seem to be very happy with the results of the solution. So we're consistently seeing strong, positive feedback saying, "Yes, we like this." So that's the second thing that we do. Okay, and then maybe just one last time, Eric, and then we can take this offline if it's easier. Just trying to, there's obviously going to be some volatility in results the next couple quarters as you kind of reset to the new revenue level. Do you have a sense of gross margins for Q3, Q4? So we'll definitely see some pressure, obviously, given the that reduction, but, You know, I think one of these accounts actually had. So the profile wasn't at a high level, so, but Yes, I think we'll, maybe I'll have to get back to you on the exact percentage where we see it, but certainly there'll be some pressure.

People seem to be very happy with the <unk>.

The solution results, so we consistently seeing.

Strong positive feedback, saying, yes, we like this right. So that's the second thing Thats interesting.

Mhm.

Okay, and then maybe just one last Eric and we can take this offline if it's easier just trying to.

There's obviously going to be some volatility in results next couple of quarters as you kind of reset to the new revenue level do you have a sense of gross margins Q3 Q4.

So we will definitely see some pressure obviously given the.

That production.

<unk>.

But I think one of these accounts actually had.

So the profile it wasn't at the high level so but.

Yes, I think we will.

Maybe I'll have to get back to you on the exact percentage, where we see it but certainly there'll be some pressure.

Yeah, Okay fair enough I'll leave it there thank you.

Thanks.

Thank you.

As a reminder, if you would like to ask a question. Please press Star then one.

And seeing no further questions. We will conclude the question and answer session.

Eric N. Smit: Yeah. Okay. Fair enough.

Operator: I'll leave it there. Thank you. Thank you. As a reminder, if you would like to ask a question, please press star then 1. And seeing no further questions, we will conclude the question and answer session. I would like to turn the conference back over to management for any closing remarks. Okay. Well, thanks, everybody. Appreciate you taking the time. We look forward to updating you as we continue to proceed with this exciting knowledge driven by the assist GPT product. Yeah, thank you. Thank you. This concludes the conference. Thank you for attending today's presentation. You may now disconnect. BF-WATCH TV 2021 BF-WATCH TV 2021 BF-WATCH TV 2021, BF-WATCH TV 2021

I would like to turn the conference back over to management for any closing remarks.

Okay, well thanks, everybody I appreciate you taking the time, we look forward to updating you as we continue to.

Proceed versus exciting.

Knowledge is driven by the assist GPT.

Jeff Thank you.

Yeah.

Thank you. This concludes the conference. Thank you for attending today's presentation you may now disconnect.

[music].

Okay.