Q3 2024 eGain Corp Earnings Call
Operator: Good afternoon, everyone, and welcome to the eGain fiscal 2024 third quarter conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and then one on a touch-tone telephone. To withdraw your question, you may press star and two. Please also note today's event is being recorded. It's time I turned the floor over to Jim Byers from MKR Investor Relations. Sir, please go ahead.
Good afternoon, everyone and welcome to the gain in fiscal 2024 third quarter Conference call.
Operator: All participants will be in a listen only mode should you need assistance. Please signal our conference specialist by pressing the star key followed by you all.
Jim Byers: After todays presentation, there will be an opportunity to ask questions.
Operator: To ask a question you May press Star and then one on a touchtone telephone to withdraw your question you May press star and two.
Jim Byers: Please also note today's event caught.
Operator: Courted.
Operator: I'd like to turn the floor over to Jim Byers from MTR Investor Relations. Sir. Please go ahead.
Jim Byers: Thank you, Operator, and good afternoon, everyone. This is the eGain Fiscal 2024 Third Quarter Financial Results Conference Call. On the call today are eGain's Chief Executive Officer, Ashutosh 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 that 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 and are protected by the Safe Harbor provisions contained in the Private Securities Litigation Reform Act of 1995.
Jim Byers: Thank you operator, and good afternoon, everyone welcome to Ea's fiscal 'twenty 'twenty four third quarter financial results Conference call.
Jim Byers: On the call today are <unk>, Chief Executive Officer, as your ROI, and Chief Financial Officer, Eric Smit.
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, May 9, 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: 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.
Jim Byers: The tables included with the earnings press release include reconciliation of the historical non-GAAP financial measures to the most directly comparable GAAP financial measures. eGain's earnings press release can be found by clicking the press releases link on the investor relations page of eGain's website at eGain.com. And along with the earnings release, we have also posted, and will post an updated investor presentation to the investor relations page of eGa 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, Ashutosh Roy.
Jim Byers: Forward looking statements are generally preceded by words, such as believe plan intend expect anticipate or similar expressions.
Jim Byers: And 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 he gains results are detailed in the.
Jim Byers: The company's reports filed with the Securities and Exchange Commission.
Ashutosh Roy: He gave me is making these statements as of today may nine 2024 and assumes no obligation to publicly update or revise any of the forward looking information in this conference call.
Ashutosh Roy: In addition to GAAP results. We show we will also discuss certain non-GAAP financial measures such as non-GAAP operating income. The tables included with the earnings press release include reconciliation of the historical non-GAAP financial measures to the most directly comparable GAAP financial measures.
Jim Byers: He gains earnings press release can be found by clicking the press releases link on the Investor Relations page of any gains website at <unk> Dot com and.
Jim Byers: And along with the earnings release, we have also posted a will post an updated investor presentation to the Investor Relations page of the game's website and.
Ashutosh Roy: And lastly, a phone replay of this conference call will be available for one week.
Ashutosh Roy: And now with that said I'd like to turn the call over to you gained CEO as you Roy.
Ashutosh Roy: Thank you, Jim, and good afternoon, everyone. We saw good momentum in new logo wins and business activity in the quarter driven by our AI knowledge offering. In McKinsey's report from last year, I talked about the potential of generative AI to revolutionize customer operations functions across the economy and talked about improving customer experience and agent productivity using generative AI through Digital Self-Service and Enhancing Agent Skills.
Ashutosh Roy: Thank you Jim and good afternoon, everyone.
Ashutosh Roy: We saw good momentum in our new logo wins and business activity in the quarter driven by our AI technology offering.
Ashutosh Roy: And Mckinsey report from last year.
Ashutosh Roy: Talked about the potential loss generally high to revolutionize.
Ashutosh Roy: Customer operation function across the economy.
Ashutosh Roy: <unk> talked about <unk>.
Ashutosh Roy: Improving customer experience and agent productivity.
Ashutosh Roy: Using <unk>.
Ashutosh Roy: Generally we are a true digital self service.
Ashutosh Roy: Enhancing agents.
Ashutosh Roy: And it said that there is a potential to deliver $400 billion in savings annually for businesses who today collectively spend $1.5 trillion a year on customer service. I say this because with our latest AI knowledge offering, which is eGain Assist GPT, we are breaking down the technology barrier that has prevented companies from delivering trusted answers for customer service at scale. That barrier was the manual effort in creating and curating knowledge within a hub that could serve as a single source of truth.
Ashutosh Roy: It said that there was a potential to deliver $400 billion in <unk>.
Ashutosh Roy: I remember when we.
Ashutosh Roy: What businesses.
Ashutosh Roy: So they collectively spent one five trillion dollars of you're in customer service.
Ashutosh Roy: I say this because with our latest.
Ashutosh Roy: AI knowledge offering which is E G.
Ashutosh Roy: GPT, we are breaking down the technology barrier that prevented the company's strong delivering trusted answers for customer service at scale.
Ashutosh Roy: That was the manual effort in creating in Curating knowledge.
Ashutosh Roy: Within the hub that could serve.
Ashutosh Roy: Single source of truth.
Ashutosh Roy: As companies are looking to significantly reduce customer service costs, our comprehensive solution delivers on the promise of AI for them to reduce the cost of customer service while boosting their customer experience. These are exciting times for us. So looking at our business, we signed some new good knowledge customers in Q3. I'll mention a few. First one is the US megabank. So one of the big four.
Ashutosh Roy: As companies are looking to significantly reduce customer service cost.
Ashutosh Roy: Our comprehensive solution delivers on the promise of <unk>.
Ashutosh Roy: For them to reduce cost of customer service, while boosting the customer experience.
Ashutosh Roy: These are exciting times for us right.
Ashutosh Roy: So looking at our business, we signed some new good knowledge customers in Q3.
Ashutosh Roy: I will mention a few.
Ashutosh Roy: First one is the U S. So one of the big four.
Ashutosh Roy: We are starting with them in one of their fast-growing multibillion-dollar divisions. They're looking to contain costs as they're grappling with customer and agent experience in a rapidly growing service group. Be right following that; we have more opportunities with them this time in our pipeline.
Ashutosh Roy: We are starting with them in one of their fast growing multibillion dollar divisions.
Ashutosh Roy: We're looking to contain their costs as they are grappling with customer and agent experience in these rapidly growing service group.
Ashutosh Roy: Following that we have more opportunities with this time.
Ashutosh Roy: Our pipeline.
Ashutosh Roy: And we are looking forward to becoming the platform for AI knowledge across the bank. It's really exciting for us, you know, Megabank, something that we have been working on with them for a couple of years now. And I'll talk about that opportunity a little more later on.
Ashutosh Roy: And we're looking forward to becoming the platform for AI knowledge across the bank.
Ashutosh Roy: It's really exciting for us.
Ashutosh Roy: Mega back something that we have been working with them in Florida, a couple of years now.
Ashutosh Roy: And I'll talk through that opportunity a little more later on.
Ashutosh Roy: The next one I want to bring out was a fortune 100 mortgage financing enterprise.
Ashutosh Roy: The next one I want to bring out is a Fortune 100 mortgage financing enterprise in the US is starting out with them by replacing an existing solution for conversational service for one of their business units. Over time, the intent is to enable an enterprise-wide capability that is contextual and compliant, available both to customers and employees. The next one I want to mention is a fast-growing U.S.-based property management company. They see AI knowledge as a core capability to improve the customer experience and empower their employees, as they are driving growth in a billion-dollar business. And the next one, and the last one I want to mention, is a leading manufacturer of high-end bicycles and related products.
Ashutosh Roy: Yes.
Ashutosh Roy: You're starting out with them.
Ashutosh Roy: Placing of existing solution for conversational service well one.
Ashutosh Roy: One of their business units.
Ashutosh Roy: The intent is to enable an enterprise wide capability that gives contextual noncompliant available both to customers and employees.
Ashutosh Roy: The next one I want to mention is.
Ashutosh Roy: A fast growing U S based property management company.
Ashutosh Roy: <unk> AI.
Ashutosh Roy: AI knowledge as a core capability to improve customer experience and empower their employees.
Ashutosh Roy: They are driving growth in a billion dollar business.
Ashutosh Roy: And the next one and the last point I'll mention is.
Ashutosh Roy: Leading manufacturer.
Ashutosh Roy: High end bicycles and related products.
Ashutosh Roy: They're replacing their current knowledge platform with eGain to deliver trusted answers to customers in need. Looking at the market, our business activity in this market continues to improve, and it improved in the quarter as well. In fact, over the last nine months of Fiscal 24, our new logo and RFP counts, both of them, grew by 50% year-over-year. This reflects the growing trust, sorry, the growing interest we are seeing in knowledge management as a foundation for effective AI use in customer service. Now, the megabank I talked about that we won in the quarter is a case in point.
Ashutosh Roy: They are replacing their current knowledge platform with the game to deliver trusted answers to customers in Asia.
Ashutosh Roy: Looking at the market.
Ashutosh Roy: Our business activity in this market continues to improve.
Ashutosh Roy: Improved in the quarter as well in fact over the last nine months of fiscal 'twenty four.
Ashutosh Roy: Our new logo and oglesby counts both of them grew by 50% year over year.
Ashutosh Roy: This reflects the growing trust.
Ashutosh Roy: I'm sorry, the gross interest we are seeing and knowledge management as a foundation for expected ARU.
Ashutosh Roy: In customer service.
Ashutosh Roy: No the Mega banks I talked about that we won in the quarter as a case in point.
Ashutosh Roy: For the past year and a half, they've been running multiple AI initiatives within their business, no surprise. And having gone through their exploration and evaluation of AI in their context, they concluded that they needed a knowledge foundation to feed trusted content to their AI tool. In their case, as for most large enterprises, they like our composable architecture so they can plug in their LLMs whenever they are ready for prime Time. And most of the new opportunities we are engaging with share this growing awareness of the complementarity of AI and knowledge to deliver trusted answers for customer services, as we all know.
Ashutosh Roy: For the past year, and a half <unk> been driving multiple initiatives within their business no surprise.
Ashutosh Roy: Having gone through the exploration and evaluation of it in that context. They concluded that they needed a solid foundation with feed trusted content.
Ashutosh Roy: Cool.
Ashutosh Roy: In that case as for most large enterprises.
Ashutosh Roy: Our proposal architecture, so they can plug into their 11th whenever they are ready for primetime.
Ashutosh Roy: Most of the new opportunities, we are engaging with share of this growing awareness of the complementarity of AI in college.
Ashutosh Roy: <unk> trusted answers for customer service.
Ashutosh Roy: As we all know.
Ashutosh Roy: Customer service is a business function where 80% answer accuracy is not good enough, with a wrong or thoughtless answer delivered by unsupervised AI tapping directly into uncurated content would easily result in a lawsuit or, worse yet, sustained grant compromise, a la Air Canada, extending our product leadership in the AI knowledge market for customer service. We rolled out our assist GPT solution in Q3 to help our clients automate knowledge creation and curation.
Ashutosh Roy: So this is a business function, where 80% accuracy is not good enough.
Ashutosh Roy: With a wrong a couple of banks are delivered by uncontrolled AI tapping directly into our curated content easily result in a lawsuit or worse, yet sustained brand come from us.
Ashutosh Roy: Air Canada recently.
Ashutosh Roy: Extending our product leadership in the <unk> market for customer service.
Ashutosh Roy: We rolled out our assisted GPT solution in Q3 to help our clients automate knowledge creation and duration.
Ashutosh Roy: In fact, earlier today on a well-intended marketing webinar, a European client of ours joined us to share their success story and lessons learned as we helped them slash their knowledge build effort by a factor of five and reduced, at the same time, the answer errors by improving quality by 6x using our solution. Our current market position gives us a unique vantage point in the AI knowledge innovation race. And so we are taking full advantage of it to enrich our products faster and better, which orchestrate AI and export, to automate knowledge management, thereby driving down the cost of customer service with trust.
Ashutosh Roy: In fact yesterday.
Ashutosh Roy: Marketing webinar.
Ashutosh Roy: European client of ours joined us who shared their success stories and lessons learned.
Ashutosh Roy: We help them slash their knowledge build effort.
Ashutosh Roy: Doctor off cloud.
Ashutosh Roy: And reduced at the same time the answer is by improving quality.
Ashutosh Roy: Six banks using our solution.
Ashutosh Roy: Our current market position gives us a unique vantage point in the AI knowledge innovation Grace.
Ashutosh Roy: And so we are taking full advantage of it.
Ashutosh Roy: Great job products faster and backup.
Ashutosh Roy: Orchestrate <unk> exports.
Ashutosh Roy: Exports.
Ashutosh Roy: <unk> knowledge management.
Ashutosh Roy: Thereby driving down the cost of customer service with trusted answers.
Ashutosh Roy: To conclude we see continued momentum in new logo wins and supporting pipeline activity.
Ashutosh Roy: To conclude, we see continued momentum in new logo wins and supporting pipeline activity. And as such, we are investing in R&D and marketing to capitalize on this disruption. I'll put you on the, At the same time, we're keeping a keen eye on cost and making sure that we're putting all our work behind this arrow to dominate the AI knowledge market for customer service. With that, I'll ask Eric Smit, our Chief Financial Officer, to add more color around the financial operations. Eric?
Eric: As such we are investing in R&D and marketing to capitalize on this disruptive opportunity.
Eric: At the same time, we are keeping a keen eye on costs.
Eric: And making sure that we are putting all our wood behind this IRA to dominate the AI acknowledged market.
Eric N. Smit: <unk> service.
Ashutosh Roy: With that I'll ask Eric Smit, our Chief Financial Officer, who have more color around our financial operations.
Eric N. Smit: Thanks, Ashu, and thanks, everyone, for joining us today. Let me provide more details about the financial results for Q3 before discussing our outlook and guidance for Q4 of fiscal 2024. Starting with revenue, total revenue for Q3 was $22.4 million, down 3% year over year. Contribution from our Cisco OEM business in the quarter was lower than anticipated due to a timing issue with revenue recognition as Cisco continues to implement its shift from an on-premise model to the cloud.
Eric N. Smit: Thanks, Joshua and thanks to everyone for joining US today, let me provide more details about the financial results for Q3 before discussing our outlook and guidance for Q4 of fiscal 2024.
Eric N. Smit: Starting with revenue total revenue for Q3 was $22 4 million down 3% year over year.
Eric N. Smit: Contribution from our Cisco OEM business in the quarter was lower than anticipated.
Eric N. Smit: Due to a timing issue on revenue recognition. The Cisco continues to implemented shift from an on premise model to the cloud.
Eric N. Smit: In this quarter, more revenue shifted to rateable recognition than originally anticipated, which caused our revenue to come in below our expectations. And looking at revenue by region, North America accounted for 78% of total revenue this quarter, the same as in the year-ago quarter.
Eric N. Smit: In this quarter more revenue shifted to ratable recognition than originally anticipated, which caused our revenues to come in below our expectations.
Eric N. Smit: When looking at revenue by region, North America accounted for 78% of total revenue this quarter.
Eric N. Smit: In the year ago quarter.
Eric N. Smit: Total revenue for North America was $17.4 million, down 2% from last year, whereas, in contrast, total revenue from Europe was $5 million, down 4% year-over-year. Looking at non-GAAP gross profits and gross margins, gross profit for the third quarter was $15.8 million, for a gross margin of 71% compared to 69% for the prior-year quarter. Now turning to operations, non-GAAP operating costs for the third quarter came in at $13.8 million, a 7% improvement from $14.9 million in the year-ago quarter, reflecting the expense controls we have implemented.
Eric N. Smit: Total revenue for North America was $17 4 million down 2% from last year, whereas in contrast, total revenue from Europe was $5 million down 4% year over year.
Eric N. Smit: Looking at non-GAAP gross profits and gross margins gross profit for the third quarter was $15 8 million for a gross margin of 71% compared to 69%.
Eric N. Smit: Prior year quarter.
Eric N. Smit: Now turning to operations non-GAAP operating costs for the third quarter came in at $13 8, Million% to 7% improvement from $14 9 million in the year ago quarter, reflecting the expense controls we have implemented.
Eric N. Smit: Looking at the bottom line, non-GAAP net income for Q3 was $2.6 million, or $0.08 per share, up 142 percent on a dollar basis from non-GAAP net income of $1.1 million, or $0.03 per share, in the year-ago quarter. Adjusted EBITDA margin for the quarter was 10%, up 500 basis points from 5% in the year-ago quarter. Turning to our balance sheet and cash flows, we generated $1.7 million in cash flow from operations for the quarter, or an 8% operating cash flow margin, up from $905,000 in the year-ago quarter.
Eric N. Smit: At the bottom line non-GAAP net income for Q3 was $2 6 million or <unk> <unk> per share.
Eric N. Smit: 142% on a dollar basis from non-GAAP net income of $1 1 million or <unk> <unk> per share in the year ago quarter.
Eric N. Smit: Adjusted EBITA margin for the quarter was 10% up 500 basis points from 5% in the year ago quarter.
Eric N. Smit: Turning to our balance sheet and cash flows we generated $1 7 billion in cash flow from operations for the quarter or 8% operating cash flow margin up from 905000 in the year ago quarter.
Eric N. Smit: For the first nine months, cash flow from operations was $17.6 million, for an operating cash flow margin of 25%. During the quarter, under our share repurchase program, we repurchased approximately 881,000 shares for $5.5 million at an average price of $6.26 per share. Of the $20 million authorized, $5.7 million remained available under the program at the end of the quarter.
Eric N. Smit: For the first nine months cash flow from operations was $17 6 million or an operating cash flow margin of 25%.
Eric N. Smit: During the quarter under our share repurchase program, we repurchased approximately 881000 shares for $5 5 million at an average price of $6 26 per share.
Eric N. Smit: Of the $20 million authorized $5 7 million remains available under the program at the end of the quarter.
Eric N. Smit: Our balance sheet remains very strong; total cash and cash equivalents at the end of the quarter were 83.1 million, up from 81.3 million a year ago. Now turning to our customer metrics, with our continued focus on knowledge, I will share some additional custom metrics for our knowledge customers.
Eric N. Smit: Our balance sheet remains very strong total cash and cash equivalents at the end of the quarter were 83 million up from $81 3 million a year ago.
Eric N. Smit: LTM dollar-based SAS Net Expansion Rate for Knowledge Customers was 109%, but our total net expansion rate was 105%. Our LTM dollar-based SaaS Net Retention for Knowledge Customers was 97%; our Net Retention was 96%, looking at total ARR. The SAS AOR for knowledge customers increased 4% year over year, while total SAS AOR decreased 1% year over year. Looking at our remaining performance obligation, total RPO decreased 22% year-over-year to 67.9 million. The decrease was driven by the customer losses we discussed last quarter and a lower number of accounts up for renewal in the quarter.
Eric N. Smit: Now turning to our customer metrics.
Eric N. Smit: With our continued focus on knowledge I will share some additional customer metrics for our mortgage customers.
Eric N. Smit: LTM dollar based net expansion rates to knowledge customers was 109%, while our total net expansion rate was one 5%.
Eric N. Smit: LTM dollar based net retention for knowledge customers with 97%, while net retention was 96%.
Eric N. Smit: Looking at total they all Saturday all for knowledge customers increased 4% year over year, while total says or decreased 1% year over year.
Eric N. Smit: Looking at our remaining performance obligation total opioid decreased 22% year over year to $67 9 million. The decrease was driven by the customer losses, we discussed last quarter and a lower number of accounts up for renewal in the quarter.
Eric N. Smit: Our short term <unk> was $48 1 million down 8% year over year.
Eric N. Smit: Our short-term RPO was 48.1 million, down 8% year-over-year. Now turning to our financial outlook and guidance, for the fourth quarter, we expect total revenue of between $21.1 million and $21.4 million. Turning to the bottom line, for Q4, we expect a net loss of $300,000 to $900,000, or $0.01 to $0.03 per share, which includes stock-based compensation expense of approximately $1.1 million and depreciation and amortization of $100,000. We expect non-GAAP net income of $200,000 to $800,000, for $0.01 to $0.03 per share.
Eric N. Smit: Now turning to our financial outlook and guidance for the for the fourth quarter. We expect total revenue between $41 1 billion to 21 4 million.
Eric N. Smit: Turning to the bottom line for Q4, we expect GAAP net loss of 300000 to 900000 or <unk> <unk> per share, which includes stock based compensation expense of approximately $1 1 million and depreciation and amortization of 100000, we expect non-GAAP net income of 200 to 800.
Eric N. Smit: Or <unk> <unk> per share.
Eric N. Smit: For the full fiscal 2024, we now expect total revenue of between $91.5 and $91.8 million. The slight reduction in full-year guidance is to adjust for the accelerated shift in Cisco OEM revenue to a rateable model, where we expect to see less revenue up front and more spread across the term of the contract. We are increasing our guidance for Gap Net Income to $5.4 million to... $6 million, or $0.17 to $0.19 per share for the year.
Eric N. Smit: For the full fiscal 2024, we now expect total revenue between 91, 5% to $91 8 million a slight reduction in full year guidance is to adjust for the accelerated shift in Cisco OEM revenue to a ratable model, where we see expect to see less revenue upfront and more spread across the 12 months of contracts.
Eric N. Smit: We are increasing our guidance for GAAP net income to $5 4 million.
Eric N. Smit: $6 million or 17 to 19 cents per share for the year, we estimate ship as compensation expense of approximately $4 6 million and depreciation and amortization expense of approximately 400000 for the year.
Eric N. Smit: We estimate share-based compensation expense of approximately $4.6 million and depreciation and amortization expense of approximately $400,000 for the year. We are also increasing our guidance for non-GAAP net income for the year to $10 million to $10.6 million, or $0.32 to $0.34 per share. Looking at weighted average shares outstanding, we expect approximately $30.5 million for the fourth quarter and $31.6 million for the fourth fiscal year.
Eric N. Smit: We are also increasing our guidance for non-GAAP net income for the year to $10 billion to $10 6 million or <unk> 34 per share.
Eric N. Smit: Looking at weighted average shares outstanding we expect approximately $35 million for the fourth quarter and $31 6 billion for the full fiscal year.
Eric N. Smit: So in summary, we are pleased with the continued good momentum in new customer wins in business activity in the quarter, which continues into Q4, driven by our AI knowledge offering we can.
Eric N. Smit: So in summary, we are pleased with the continued good momentum in new customer wins and business activity in the quarter, which continues in PQ4, driven by our AI knowledge offerings. We continue to generate significantly improved profitability and strong cash flow from operations while buying back shares of our stock. We continue to invest in knowledge and generative AI capabilities, and with our healthy balance sheets and cash flows, we remain well positioned to capitalize on the significant opportunity ahead. This concludes our prepared remarks. Operator, we will now open the call for questions. Ladies and gentlemen, it's
Eric N. Smit: Continued to generate significantly improved profitability and strong cash flow from operations, while buying back shares of our stock.
Eric N. Smit: We've continued to invest in knowledge and generative AI capabilities and with our healthy balance sheet and cash flows remain well positioned to capitalize on the significant opportunity ahead.
Eric N. Smit: This concludes our prepared remarks, operator, we will now open the call for questions.
Operator: Ladies and gentlemen, at this time we'll begin our question-and-answer session. If you'd like to ask a question, please press star and then one on a touch-tone telephone. To withdraw your question, you may press star and two. If you are using a speakerphone, we do ask that you please pick up the handset before pressing the numbers to ensure the best sound quality.
Speaker Change: Ladies and gentlemen at this time well begin the question and answer session. If you'd like to ask a question. Please press star and then one using a touchtone telephone to withdraw your questions. You May press star two if.
Operator: Once again, that is, the star and then one to join the question will pause momentarily to assemble the roster. Our first question today comes from Richard Baldry from Roth. Please go ahead with your question.
Operator: If you are using a speaker phone, we do ask that you. Please pick up the handset before pressing the numbers to ensure the best sound quality.
Operator: But again that is star and then wanted to join the question queue, we'll pause momentarily to assemble the roster.
Operator: Our first question today comes from Richard Baldry from Roth. Please go ahead with your question.
Richard Kenneth Baldry: Thanks. Can you talk a little bit about any changes you're seeing in sales cycles, you know, faster or shorter? And then the second would be, I think it was last quarter you talked about the six largest companies you had in trials. A couple were, you know, Fortune 30s, a few others were, you know, north of 10 billion in revenue. But all would be new logos.
Richard Kenneth Baldry: Thanks, and maybe talk a little bit about any changes you're seeing in sales cycles.
Richard Kenneth Baldry: Faster shorter and then the second would be I think it was last quarter you talked about the six largest companies out in trials a couple we're fortunate.
Richard Kenneth Baldry: Fortunately 30 few others were north of 10 billion in revenue.
Ashutosh Roy: Can you talk about, you know, how the status of those trials is? Do you think they're nearing completion? Have any fallen out? Have any been added on a similar scale? Thanks.
Richard Kenneth Baldry: But all would be new logos can you talk about how the status of those trials is do you think it's nearing completion, but he's fallen out and then even added a similar large scale. Thanks.
Ashutosh Roy: Yes, sure. So, a couple of the ones that I mentioned, including the U.S. Mega Bank and the Fortune 100, which is actually a Fortune 20 company, the mortgage financing company. So, yes, those two did convert. Then we have a couple of the... We have a lot of pilots that we're going on that are still tracking to close this quarter. That's good. Interestingly, of those half a dozen that I mentioned, none have fallen off yet, so that's also promising.
Ashutosh Roy: Sure.
Ashutosh Roy: A couple of the ones that I mentioned, including the U S Mega banks in the Fortune 100.
Ashutosh Roy: That's actually a fortune 20 company the mortgage financing company. So yes, those two did convert.
Ashutosh Roy: Then we have a couple of the.
Ashutosh Roy: The pilots that were going on that are.
Ashutosh Roy: Still tracking to close this quarter.
Ashutosh Roy: Good.
Ashutosh Roy: Interestingly of those half a dozen that I mentioned non have fallen off yet so thats also promising.
Ashutosh Roy: We say 75% conversion kind of is where we are at this point with our pilots, but what we're seeing is with advanced opportunities, the change we are seeing now is that people are making decisions, even though the sales cycles are not shorter, but they seem to be more predictable, and that is coming across with the RFPs and just the number of RFPs we are seeing with larger organizations. The other thing we are seeing, which I didn't mention in my prepared remarks, but we are seeing a lot of early, early conversations around when we are prepping for budgeting for twenty five. So, we are seeing a lot of that now. So, I think that's also a good thing for us.
Ashutosh Roy: When we say, 75% conversion kind of is where we are at this point with our pilots.
Ashutosh Roy: We look you are seeing is with advanced opportunities. The change. We're seeing now is that people are making decisions, even though the sales cycles are much shorter, but they seem to be more predictable and that is coming across with the rfps and just the number of rfps, we're seeing with larger organizations.
Ashutosh Roy: The other thing we are seeing which is I didnt mentioned in my prepared remarks, but we are seeing a lot of early early conversations which are around when we are prepping for budgeting for 25. So we are seeing a lot of that as well now. So I think that's also a good thing for us.
Ashutosh Roy: And on those larger deals than when they move from being you know Tyler's to life just talking about the complexities how long it would take to get into sort of a full deployment for revenue recognition purposes do they start.
Ashutosh Roy: And on those larger deals, then, when they move from being, you know, trialers to live, you talk about, you know, the complexities, how long it would take to get into, you know, sort of a full deployment for revenue recognition purposes. Do they start, you know, with a big bang, or will they, you know, sort of grow into scale over time? So we have an idea of how those should play in to the P&L over time. Thanks. Most of them start with an initial.
Ashutosh Roy: And with a big Bang or will they sort of grow into scale over time. So we have an idea of how those should play out to.
Ashutosh Roy: To the P&L over time thanks.
Ashutosh Roy: Most of them start with an initial deployment. That could still be, you know, our average. I think we have shared this in the past, right? Our average ARR for new logos is in that $200,000 range, right? So that's relatively small for some of these large logos we're talking about. So the initial deployments tend to be in that zip code, maybe a little north of that in some cases, a little south of that in others, but then the opportunity scales from there.
Ashutosh Roy: Most of them start with an initial deployment.
Ashutosh Roy: That could be still be not our average I think we have shared this in the past Greg our average IRR for new logos isn't that.
Ashutosh Roy: $200000 range right.
Ashutosh Roy: So that's relatively small for some of these large logos we're talking about so the initial deployments tend to be in that ZIP code, maybe a little north of that in some cases, a little south of that and others, but then the opportunity scale from there.
Speaker Change: Great. Thanks.
Ashutosh Roy: Sure.
Operator: Our next question comes from Daniel Hibshman from Craig Haven. Please go ahead with your question.
Ashutosh Roy: Our next question comes from Daniel Hajj.
Daniel Hibshman: Craig Hallum. Please go ahead with your question.
Daniel Hibshman: Hey, thanks for taking my question. This is Daniel on for Jeff and Rhee.
Daniel Hibshman: Hey, Thanks for taking my question. This is Daniel on for <unk>, just one may be used in the U S. Mega Bank and as an example of some of these upsells you have coming down the Pike.
Daniel Hibshman: Just on maybe using the U.S. Mega Bank as an example of some of these upsells that you have coming down the pipe, I understood that to be, correct me if I'm wrong, an upsell of assist GPT to, you know, the Mega Bank having already, you said, been using you for several years. Now, how would that upsell compare, say, as a percentage to what they're already doing with you? Just trying to get a sense for the scale of these wins or maybe just sizing up the potential win in terms of, you know, five, six, seven figures, etc.
Ashutosh Roy: [inaudible]
Ashutosh Roy: That would be an absolutely correct me, if im wrong and upsell of the CPT on the Mega Bank, having already you said been using you for several years now how would that upsell compare say as a percentage to what they're already doing with your just trying to get a sense for the scale of these wins or maybe just sizing that.
Ashutosh Roy: To win in terms of 567 figures et cetera.
Ashutosh Roy: I got it. So I think I may have somehow conveyed the wrong impression. The mega bank we're talking about is a completely new logo for us, so that's one point. But having said that, I can give you a feel for what we are seeing in terms of expansion and existing accounts, which is, I think, part of your question, right? What we see is with AssistGPT, there's a lot more excitement to roll out the capability into self-service. Self-service has been an area where there has historically been a lot of challenge in getting consumers to use your self-service because it's still very. [inaudible]
Speaker Change: Got it so I think I may have somehow conveyed the wrong impression the mega banks, we're talking about is a net new logo for us.
Ashutosh Roy: So that's one point, but having said that I can give you a feel for what we are seeing in terms of expansion in existing accounts.
Ashutosh Roy: Which is I think part of your question right. So.
Ashutosh Roy: What we see is with assess GPT theres a lot more excitement.
Ashutosh Roy: Rollout the capability.
Ashutosh Roy: Into self service. So self service has been an area, where there has been historically a lot of challenge in getting consumers to use your self service because it's still very.
Ashutosh Roy: Richard down and not very comfortable Conversationally and so we're seeing that will persist GPT that is something people are driving as well. So that works that is interesting because in our mind that effectively doubled the proposition.
Ashutosh Roy: Whatever you think you can do on the agent side you can roughly the same on the customer self service in terms of business value and therefore revenue to us.
Ashutosh Roy: Thanks for that. Then just on the timing headwind in relation to Cisco, just what was the size of that headwind, or maybe it's not exactly the size, just, you know, where would that have gotten you near, say, the middle or upper bounds of the guide or just having that comparison?
Speaker Change: Thanks for that and then just on that.
Ashutosh Roy: The timing headwind in relation to Cisco just what was the size of that headwind or maybe its not exactly size.
Ashutosh Roy: That have gotten in and you say that the middle or upper bounds as a guide or just how did that compare.
Ashutosh Roy: Again, a good point; it would have got us to the upper end of the bounds, probably ahead of the top end of our range.
Ashutosh Roy: Okay. Good point it would have got us to the upper end of the bounds probably ahead of the.
Ashutosh Roy: The top end of our range.
Daniel Hibshman: Okay, and then just one housecleaning item for me on the clogs and specifically the service gross margins. Should we, you know, sort of be thinking of the new levels as sort of a new normal, or how should we be sort of thinking of that developing?
Speaker Change: Okay, and then just one housecleaning item for me on the on that.
Speaker Change: Cogs and.
Daniel Hibshman: Particularly the service gross margins should we be thinking of the new levels as sort of a new normal or how should we be sort of thinking of that developing.
Eric N. Smit: I think this quarter there was some movement where the margins came in certainly lower than where we've seen them before, so I think looking forward, we would expect those margins to sort of service margins to get back into the sort of high single-digit low teens range.
Speaker Change: So I think this quarter there was some movement, where the margins came in.
Eric N. Smit: Certainly lower than where we've seen it. So I think looking forward, we would expect that those margins too soon so it was more just to get back into the sort of high single digit low teens range.
Daniel Hibshman: Okay, thanks. That's it for me. Thanks, guys.
Speaker Change: Okay. Thanks, that's it for me thanks, guys.
Operator: Once again, if you would like to ask a question, please press star and one. To remove yourself from the question queue, you may press R and D. And ladies and gentlemen, at this time, to ensure there are no additional questions, I'd like to turn the floor back over to any closing remarks.
Speaker Change: But again, if you would like to ask a question. Please press Star then one.
Operator: So you remove yourself from the question can you May press star two.
Ashutosh Roy: Thanks, Operator, and thanks, everyone, for listening today. I think it's an exciting time for us, so I look forward to updating you with our Q4 results. Thank you.
Operator: And ladies and gentlemen at this time in showing no additional questions I'd like to turn the floor back over for any closing remarks.
Speaker Change: Thanks, operator, and thanks, everyone for listening today, I think an exciting time for us so look forward to updating you.
Speaker Change: With our Q4 results. Thank you.
Operator: And ladies and gentlemen, with that, we'll conclude today's conference call and presentation. We thank you for joining us. You may now disconnect your lines.
Speaker Change: And ladies and gentlemen, with that we'll conclude today's conference call and presentation. We thank you for joining you may now disconnect your lines.