Q3 2025 eGain Corp Earnings Call
Speaker Change: [music].
Operator: Good afternoon, and welcome to the eGain Fiscal 2025 3rd Quarter Financial Results Conference 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.
Good afternoon, and welcome to the gain in fiscal 'twenty twenty-five third quarter financial results Conference 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: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on your telephone keypad. To withdraw your question, please press star then 2. Please note, this event is being recorded.
After today's presentation there'll 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 note this event is being recorded.
Jim Byers: I would now like to turn the conference over to Jim Byers, Pondell Investor Relations. Please go ahead.
Speaker Change: Now, let's turn the conference over to Jim Byers Pando Investor Relations. Please go ahead.
Speaker Change: Thank you operator, and good afternoon, everyone welcome to Ea's fiscal 'twenty 'twenty five third quarter financial results Conference call.
Jim Byers: Thank you, Operator, and good afternoon, everyone. Welcome to eGain's Fiscal 2025 Third Quarter Financial Results Conference Call.
Jim Byers: On the call today are eGain's Chief Executive Officer, Ashutosh Roy. and Chief Financial Officer, Eric Smit.
Speaker Change: On the call today are <unk>, Chief Executive Officer as your ROI.
Eric Smith: And Chief Financial Officer, Eric Smith.
Jim Byers: Before we begin, I would like to remind everyone that during this conference call, management will make 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. For 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 respect. Information on various factors that could affect eGain's results are detailed on the company's reports filed with the Securities and Exchange Commission.
Eric Smith: Before we begin I would like to remind everyone that during this conference call managed we'll make 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.
Eric Smith: Or similar expressions forward looking statements are protected by Safe Harbor provisions contained in the private Securities Litigation Reform Act of 1995.
Eric Smith: These forward looking statements are subject to a wide range of risks and uncertainties that could cause actual results to differ in material respects.
Eric Smith: Information on various factors that could affect these gains results are detailed in the company's reports filed with the Securities and Exchange Commission.
Jim Byers: eGain is making these statements as of today, May 14, 2025, 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. The tables included with the earnings press release include reconciliation of the historical non-GAAP financial measures to the most directly comparable. Gap Financial Measures.
Eric Smith: Gain is making these statements as of today May 14, 2025, and assumes no obligation to publicly update or revise any of the forward looking information in this conference call.
Eric Smith: In addition to GAAP results, we will also discuss certain non-GAAP financial measures such as non-GAAP operating income.
Eric Smith: Tables included with the earnings press release include racking reconciliation of historical non-GAAP financial measures to the most directly comparable.
Eric Smith: GAAP financial measures.
Jim Byers: eGain's earnings press release can be found by clicking the press release's link on the investor relations page of eGain's website at eGain.com. And along with the earnings release, we will post an updated investor presentation to the investor relations page of eGain's website.
Eric Smith: He gains earnings press release can be found by clicking the press releases link on the Investor Relations page of your gains 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, a phone replay of this conference call will be available for one week.
Jim Byers: And lastly, a phone replay of this conference call will be available for one.
Ashutosh Roy: 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. In our third quarter, we exceeded our profitability projections and delivered solid operating cash flow. Bookings for the quarter, however, were impacted by the extended sales cycles we had mentioned last quarter. Despite this, we continue to grow our pipeline as demand for our AI knowledge offering continues to gather momentum.
Speaker Change: Now with that said I'd like to turn the call over to E. C. E O S. You really.
E.C.E.O.S.: Thank you Jim and good afternoon, everyone.
E.C.E.O.S.: And our third quarter, we exceeded our profitability projections and delivered solid operating cash flow.
E.C.E.O.S.: Bookings for the quarter, however were impacted by the extended sales cycles. We had mentioned last quarter. Despite this we continue to grow our pipeline as demand for our knowledge offering continues to gather momentum.
E.C.E.O.S.: Having said that we're very excited to report that we secured one of our largest deals ever soon after the quarter closed.
Ashutosh Roy: Having said that, we're very excited to report that we secured one of our largest deals ever soon after the quarter closed. This deal is with the U.S. consumer group of a U.S. megabank, one of the big four. Like most innovative businesses, they have concluded that they needed an enterprise knowledge foundation to deliver trusted content to customers, employees, and AI. We started out in this account by establishing a beachhead with the client over a year ago in one of their fast-growing international divisions. Shortly thereafter, we replaced their homegrown knowledge solution in one of their U.S. subsidiaries.
E.C.E.O.S.: This deal is with a U S consumer group off our U S. Mega Bank one of the big four like.
E.C.E.O.S.: Like most businesses they have concluded that they need.
E.C.E.O.S.: Enterprise knowledge Foundation.
E.C.E.O.S.: To deliver trusted content to customers employees.
E.C.E.O.S.: Hi.
E.C.E.O.S.: We started to open this accounting by establishing a beachhead with the client over a year ago as one of their fast growing international divisions. Shortly thereafter, we are replaced.
E.C.E.O.S.: We placed their homegrown knowledge solution and one of their U S subsidiaries.
Ashutosh Roy: And now, with this third win, which is in the U.S. Consumer Banking Group. which, by the way, is the largest business unit. We are going to have our AI knowledge platform used across more than half the bank. over 100,000 users. And that's very exciting to us because it exemplifies the vision that we have been pursuing, and that is establishing a single source of truth, which delivers trusted content across the business in the AI era.
E.C.E.O.S.: Now with this third win which is in the U S consumer banking group.
E.C.E.O.S.: Which by the way is the largest business unit.
E.C.E.O.S.: Well, we all we are going to have our.
E.C.E.O.S.: Knowledge platform.
E.C.E.O.S.: Used across more than half the bank.
E.C.E.O.S.: 100000 users.
E.C.E.O.S.: And that's very exciting to us because it's exemplifies the vision that we have been pursuing and that is establishing a single source of truth.
E.C.E.O.S.: Which delivers trusted content across the business.
E.C.E.O.S.: Hi.
E.C.E.O.S.: Okay.
E.C.E.O.S.: Turning to our products.
Ashutosh Roy: Turning to our products, in March, we launched the eGain AI Agent for Contact Center. This is the second of the offerings of our AI agent product capability. The first one was the eGain AI agent for customer self-service.
E.C.E.O.S.: March we launched the game AI agent for contact Center.
E.C.E.O.S.: This is the second of the offerings of our egg AI agent product capability. The first one was the gain AI agent for customer self service.
Ashutosh Roy: Now, this contact center solution is a breakthrough conversational assistant that guides contact center agents to resolve customer issues across all touch points. So phone, chat, e-mail. Unlike other solutions, the eGain AI agent delivers proactive real-time guidance beyond simple FAQs or Narrow pre-programmed domain interaction. And it does so by using the trusted answers from our eGain Knowledge Hub. The solution connects out-of-the-box with Amazon Connect, Genesys Cloud, and Salesforce. Plus, it has APIs to integrate with other CRM and CCAS platforms. Now, we are seeing very good interest in the solution, particularly from businesses who are in the past have struggled to get value out of the first wave of AI solutions in the market.
E.C.E.O.S.: Now this.
E.C.E.O.S.: Central solution is a breakthrough conversational assistant.
E.C.E.O.S.: Contact center agents to resolve customer issues across all touch points of phone chat email.
E.C.E.O.S.: Unlike other solutions, but you gain AI agent delivers proactive real time guidance.
E.C.E.O.S.: Beyond simple if accused or.
E.C.E.O.S.: Narrow pre programmed domain interactions.
E.C.E.O.S.: And it does so by using the trusted answers from our knowledge hub.
E.C.E.O.S.: The solution connects out of the box with Amazon connect Genesis cloud and Salesforce.
E.C.E.O.S.: Because apis to integrate with other CRM on CCAR platforms.
E.C.E.O.S.: We are seeing very good interest in the solution, particularly from businesses, who are in the past have struggled to get value out of the first wave of AI solutions in the market.
E.C.E.O.S.: One of our banking clients existing ones is already rolling out the solution for their contact centers.
Ashutosh Roy: One of our banking clients, existing ones, is already rolling out the solution for their contact center. They are keen to reduce the variability of agent performance and improve compliance in the flow of service, rather than policing for compliance and performance after the fact. Interestingly, they had tried out a couple of AI assistant solutions from their CCAS provider and another vendor, but they could never scale it beyond the corporate.
E.C.E.O.S.: They are keen to reduce the variability of performance.
E.C.E.O.S.: And improve compliance in the flow of service rather than policing for compliance and performance after the fact.
E.C.E.O.S.: Interestingly they had tried our a couple of AI assistant solutions from their <unk> provider and another vendor, but they could never scaling beyond the prototype.
E.C.E.O.S.: So we're very excited about these AI agent offerings, we have two of them now.
Ashutosh Roy: So we are very excited about these AI agent offerings. We have two of them now. One, as I mentioned, for customer self-service, and now for the contact center agent. The easy try and use models that we have created. we believe will accelerate new logo acquisition and innovation consumption among our clients.
E.C.E.O.S.: One as I mentioned for customer self service and now for the contact center agents.
E.C.E.O.S.: The easy try and use models that we have created.
E.C.E.O.S.: We believe will accelerate new logo acquisition and innovation consumption among our clients.
E.C.E.O.S.: I'm also excited to note that during the quarter Gartner published their first emerging market quadrant four.
Ashutosh Roy: I'm also excited to note that during the quarter, Gartner published their first emerging market quadrant for Generative AI Knowledge Management App. It's a mouthful, but this is a category that they have created. In this category, they rated eGain a leader. in the upper right corner. This emerging category, as they call it, is defined by Gartner as technologies that enable companies to better retrieve and contextualize information and insight from their knowledge bases, including search and insight engines, conversational AI, and productivity tools, all toward communication and content development. In the AI era, as Gartner states, knowledge management is no longer a nice-to-have capability.
E.C.E.O.S.: Generally AI knowledge management apps, it's a mouthful, but this is a category that they have created.
E.C.E.O.S.: And this category they rated E again a leader.
E.C.E.O.S.: The upper right quadrant.
E.C.E.O.S.: This emerging category as they call it the defined by Gartner as technologies that enable companies to better retrieve and contextualize information and insight from their knowledge basis.
E.C.E.O.S.: Including such and in fact engines conversational AI and productivity tools, all the word communication and content.
E.C.E.O.S.: Yeah.
In the AI era.
Gartner States knowledge management is no longer it nice to have capability.
Ashutosh Roy: It is a must-have infrastructure. an enterprise-wide system of record for trusted answers that power AI and empower all employees and customers.
E.C.E.O.S.: It is a must have or infrastructure.
Enterprise wide system of record for trusted answers.
E.C.E.O.S.: Power.
E.C.E.O.S.: And then our all employees and customers.
E.C.E.O.S.: In this emerging market opportunity. We are focused we are investing in it and we are capitalizing on that.
Ashutosh Roy: In this emerging market opportunity, we are focused, we're investing in it, and we are capitalizing on it.
E.C.E.O.S.: To conclude while macro uncertainty impacted the timing of closing new deals during the third quarter. We are seeing good deal closure in the current quarter.
Ashutosh Roy: To conclude, while macro uncertainty impacted the timing of closing new deals during the third quarter, we are seeing good deal closure in the current quarter, starting with the mega bank deal that I mentioned. We launched our Breakthrough AI Agent for Contact Center offering during the quarter, and we are seeing very good customer interest. And finally, our strategic efforts and increased R&D investments over the past year are starting to show results. And we are starting to establish eGain as the trusted knowledge foundation for the AI enterprise.
E.C.E.O.S.: Starting with the Mega Bank deal that I mentioned.
We launched a breakthrough AI agent for contact center offering during the quarter.
E.C.E.O.S.: And we are seeing very good customer interest.
E.C.E.O.S.: And finally, our strategic efforts and increased R&D investments over the past year I was starting to show results.
E.C.E.O.S.: And we are starting to establish <unk> as the trusted knowledge Foundation.
E.C.E.O.S.: AI enterprise.
E.C.E.O.S.: With that I'll ask Ed Smith, our Chief financial officer to add more color around our financial operations.
Eric Smit: With that, I'll ask Eric Smit, our Chief Financial Officer, to add more color around our financial operations. Great. Thanks, everyone, for joining us today. As Ashu noted, our third quarter results included profitability that exceeded our projections and solid operating cash flow. Let me share more details about our financial results for Q3 before discussing our outlook and guidance for Q4 and fiscal 2025. Looking at our revenue, total revenue for the third quarter was $21 million, which was within our guidance but down 6% year-over-year. As previously discussed, the year-over-year decline reflects the impact of the two large client losses last year.
E.C.E.O.S.: Eric.
E.C.E.O.S.: Great.
E.C.E.O.S.: Thanks.
E.C.E.O.S.: Thanks, everyone for joining us today.
E.C.E.O.S.: It's actually noted our third quarter results.
E.C.E.O.S.: Included profitability that exceeded our projections and solid operating cash flow.
E.C.E.O.S.: Let me share more details about our financial results for Q3 before discussing our outlook and guidance for Q4 and fiscal 2025.
E.C.E.O.S.: Looking at our revenue total revenue for the third quarter was 21 billion, which was within our guidance, but down 6% year over year.
E.C.E.O.S.: As previously discussed the year over year decline reflects the impact of the two large client losses last year, one conversation to have customer and the other in analytics customer. This.
Eric Smit: One, a conversation hub customer, and the other, an analytics customer. This will be the final quarter with year-over-year comparisons affected by these former customers. Looking at the revenue in more detail, our SAS revenue in the quarter accounted for 93% of total revenue. The remainder was professional services revenue. As I've noted before, with the recent product improvements, our PS attach rate on new implementations decreases by design. The improvements we are making to our products have resulted in faster deployment and quicker time to value for clients, which means less need for low margin professional services, which is good for our business.
E.C.E.O.S.: This will be the final quarter with year over year comparisons are affected by these former customers.
E.C.E.O.S.: Looking at revenue in more detail, our SaaS revenue in the quarter accounted for 93% of total revenue.
E.C.E.O.S.: The remainder was professional services revenue.
E.C.E.O.S.: As I've noted before with the recent product improvements P. S attach rates on new implementations decreases by design.
E.C.E.O.S.: The improvements we are making to our products have resulted in faster deployments and quicker time to value for clients, which means less need for low margin professional services, which is good for our business.
Eric Smit: Looking at non-GAAP gross profit and gross margins. SAS gross margin for the quarter was 77% compared to 78% a year ago, and total gross margin for the quarter was 69% compared to 71% a year ago. Now turning to our operations, non-GAP operating costs for the third quarter were $13.8 million, down 6% sequentially and flat compared to the year-ago quarter. R&D was up 15% year-over-year as we continued to invest in product innovation to capitalize on the significant emerging market opportunity that Ashutosh just talked about. Looking at our bottom line, non-GAAP net income was $765,000 or 3 cents per share.
E.C.E.O.S.: Looking at non-GAAP gross profit and gross margins.
E.C.E.O.S.: <unk> gross margin for the quarter was 77% compared to 78% a year ago.
E.C.E.O.S.: Total gross margin for the quarter was 69% compared to 71% a year ago.
E.C.E.O.S.: Now turning to our operations non-GAAP non-GAAP operating costs for the third quarter with $13 8 million down, 6% sequentially and flat compared to the year ago quarter.
E.C.E.O.S.: R&D was up 15% year over year as we've continued to invest in product innovation to capitalize on the significant emerging market opportunities that I just talked about.
E.C.E.O.S.: Looking at our bottom line non-GAAP net income was $765000 or <unk> <unk> per share.
Eric Smit: and ahead of the high-end of our guidance range for the quarter, just compared to non-GAAP net income of $2.6 million, or $0.08 per share, in the year-ago quarter. Adjusted EBITDA margin for the quarter was 6% compared to 10% in the year ago quarter. Turning to our balance sheet and cash flows, for the third quarter we generated $2.2 million in cash flow from operations for an 11% operating cash flow margin, up from $1.7 million generated in the year-ago quarter. During the quarter, under our share repurchase program, we repurchased 895,000 shares at an average price of $5.61 per share, totaling $5 million.
E.C.E.O.S.: And the heads of all the high end of our guidance range for the quarter.
E.C.E.O.S.: This compared to non-GAAP net income of $2 6 million or eight cents per share in the year ago quarter.
E.C.E.O.S.: Adjusted EBITDA margin for the quarter was 6% compared to 10% in the year ago quarter.
E.C.E.O.S.: Turning to our balance sheet and cash flows for the third quarter, we generated $2 2 million in cash flow from operations for an 11% operating cash flow margin up from $1 7 million generated in the year ago quarter.
E.C.E.O.S.: During the quarter under our share repurchase program, we repurchased.
E.C.E.O.S.: 95000 shares.
E.C.E.O.S.: On an average price of $5 61 per share totaling $5 million.
Eric Smit: At the end of the quarter, $5 million of the $40 million of authorized remaining available is made available under the program. Our balance sheet remains very strong. Total cash and cash equivalents at the end of the quarter was $68.7 million.
E.C.E.O.S.: It was a quarter $5 million of the $40 million of authorized remaining available.
E.C.E.O.S.: Available under the program.
E.C.E.O.S.: Our balance sheet remains very strong total cash and cash equivalents at the end of the quarter was $68 7 billion.
E.C.E.O.S.: Now turning to our customer metrics of broken out so all our knowledge metrics from the total metrics to highlight medicine.
Eric Smit: Now turning to our customer metrics, I've broken out our AR, our knowledge metrics from the total metrics to highlight the momentum in our knowledge business. Looking at ARR, SAS ARR for our knowledge customers increased 11% year over year. while the total SAS ARR for all customers decreased 6% year over year. With the strong booking start to Q4, as you mentioned, we expect the SAS ARR for our knowledge customers for fiscal 2025 to increase in the high teens year over year. We also expect year over year growth in the total SAS ARR in fiscal 2025. Turning to our net retention rate.
E.C.E.O.S.: Which business.
E.C.E.O.S.: Looking at a all says Oh for our knowledge customers increased 11% year over year.
E.C.E.O.S.: While the total says it all for all customers decreased 6% year over year.
E.C.E.O.S.: With the strong bookings start to Q4 as you mentioned, we expect this S. A off where our knowledge customers for fiscal 'twenty five to increase in the high teens year over year.
E.C.E.O.S.: We also expect year over year growth in the total says a all in fiscal 2025.
E.C.E.O.S.: Turning to our net retention rates.
Eric Smit: LTM dollar-based SAS net retention for knowledge customers was 97 percent, while net retention for all customers was 88 percent. Our LTM dollar-based SAS Net Expansion Rate was 103 for our knowledge customers and 104 for all customers. Looking at our remaining performance obligations, total RPO decreased 2% year-over-year, and our short-term RPO of 44.3 million was down 7% year-over-year. The year-over-year declines was primarily due to the two large customer losses last year, as previously mentioned. Now, turning to guidance for the fourth quarter of fiscal 2025, we expect total revenue of between $22.8 million to $23.3 million. Turning to the bottom line, for Q4, we expect cap net income of $1.1 million to $1.6 million, or $0.04 to $0.06 per share, which includes stock-based compensation expense of approximately $700,000 and depreciation and amortization of approximately $100,000.
E.C.E.O.S.: LTM dollar based net retention for knowledge customers was 97% while.
E.C.E.O.S.: While net retention for all customers was 88%.
E.C.E.O.S.: Our LTM dollar based says its expansion rate was 103 for.
E.C.E.O.S.: For our knowledge customers and one of them for all customers.
E.C.E.O.S.: Looking at our remaining performance obligations total OPO decreased 2% year over year, and our short term up your $44 3 million was down 7% year over year.
E.C.E.O.S.: The year over year decline was primarily due to the two large customer losses last year as previously mentioned.
E.C.E.O.S.: Now turning to guidance for the fourth quarter of fiscal 2025, we expect total revenue of between 22 8 million to $23 3 million.
E.C.E.O.S.: Turning to the bottom line for Q4, we expect GAAP net income of $1 1 billion to $1 6 million or four since two six cents per share which includes stock based compensation expense of approximately 700000 in depreciation and amortization.
E.C.E.O.S.: 100000, we.
Eric Smit: We expect non-GAAP net income of $1.7 million to $2.2 million, or $0.06 to $0.08 per share. For the fiscal 2025 full year, due to the deals taking longer to close than previously projected, we are revising our guidance range for total revenue to between $88 million to $88.5 million, down slightly from the original range of $88.5 to $90 million. With our ongoing cost optimization efforts, we are increasing our bottom line guidance range to gap net income of $2.5 million to $3 million or $0.09 to $0.10 per share, up from the original guidance range of $1.1 million to $1.7 million or $0.04 to $0.06 per share.
E.C.E.O.S.: We expect non-GAAP net income of $1 7 billion to $2 2 million or six cents per.
E.C.E.O.S.: Sure.
E.C.E.O.S.: The full.
E.C.E.O.S.: For the fiscal 'twenty to 'twenty five full year due to the deals taking longer to close than previously projected we are revising our guidance range for total revenue to between 88 million to $88 5 million down slightly from the original range of $88 five to 19 billion.
E.C.E.O.S.: With our ongoing cost optimization efforts, we are increasing our bottom line guidance range to GAAP net income of $2 5 billion to $3 million or <unk> <unk> per share up from the original guidance range of $1 1 billion to $1 7 billion or four since two six cents per share. This.
Eric Smit: This includes stock-based compensation expense of approximately $2.6 million and depreciation and amortization of approximately $360,000. We expect non-GAAP net income of $5.1 million to $5.6 million, or $0.18 to $0.20 per share.
E.C.E.O.S.: Include stock based compensation expense of approximately $2 6 million and depreciation and amortization of approximately 360000.
E.C.E.O.S.: We expect non-GAAP net income of $5 1 million to $5 6 million or 18 cents to <unk> 26 per share.
E.C.E.O.S.: In summary.
Eric Smit: In summary, with eGain now increasingly recognized as the knowledge foundation for enterprise AI initiatives and backed by our profitable core business, we continue to invest in product innovation to capitalize on the emerging market opportunity. Notably, we closed one of the largest deals in the company history shortly after the quarter end. securing a significant expansion of our knowledge offering across the U.S. megabanks enterprise. We're also seeing strong customer interest and early traction with our newly launched AI agent for contact center, which is already demonstrating its potential to enhance service performance and broaden our addressable market.
E.C.E.O.S.: But again no increasingly recognized as the knowledge foundation for enterprise AI initiatives and backed by our profitable core business. We've continued to invest in product innovation to capitalize on the emerging market opportunity.
E.C.E.O.S.: Notably we closed one of the largest deals in the company his history shortly after the quarter end.
E.C.E.O.S.: Securing a significant expansion of our knowledge offering across the U S.
E.C.E.O.S.: Mega banks enterprise.
We are also seeing strong customer interest and early traction with our newly launched AI agent for contact center, which is already demonstrating its potential to enhance service performance and broaden our addressable market.
Operator: With that, I would like to open the call for questions, operator. We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the key. To withdraw your question, please press star then 2.
E.C.E.O.S.: With that I would like to open the call for questions operator.
Speaker Change: We will now begin the question and answer session to.
Speaker Change: To ask a question you May press Star then one on your telephone keypad.
Speaker Change: If you were using a speakerphone please pick up your handset before pressing the keys.
Speaker Change: To withdraw your question. Please press Star then two.
Operator: At this time, we will pause momentarily to assemble our roster.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Speaker Change: Our first question today is from Richard Baldry with Roth Capital. Please go ahead.
Richard Baldry: Our first question today is from Richard Baldry with Roth Capital, please go ahead. Thanks. Can you talk about a little bit more about the MegaBank win? I'm sort of curious about the pace to roll out the deployment, how big the expansion is by scale, sort of compared to what they were. Is it 50 percent bigger, 2X? And then maybe sort of how unique or repeatable that that win was across the rest of your customer base. Right, OK.
Speaker Change: Thanks can you talk about a little bit more about than Mega bank, when I'm sort of curious about the pace to rollout the deployment.
Speaker Change: How big the expansion is by scale sort of compared to what they were.
Speaker Change: 50% bigger than <unk>, and then maybe sort of how unique our repeatable that that win was the across the rest of your customer base.
Speaker Change: Right Okay.
Ashutosh Roy: Rich is actually here. So yeah, let's start with the first one so. I would say the deployment is at pace right now. So I think the customer will be fully deployed on this expansion by the in my late fall. So it's a pretty aggressive schedule between now, you know, when we when we secured the deals. So about a six month deployment in multiple phases. And then in terms of the rollout and expansion, I'd say we It's a, it's an order of magnitude bigger, right? I would say the of what we were before that, so it's a much bigger sized deal than what we were before we got into this third expansion, the second expansion and the third deal.
Rich: Rich this is actually here so let's start with the first one so.
Speaker Change: Let's say the.
Speaker Change: Employment is up right now so I think those customers will be fully deployed on this expansion.
Speaker Change: I V.
Speaker Change: By late fall.
Speaker Change: So it's a pretty aggressive schedule between now and when we when we secured the deals so about six months deployment in multiple phases.
Speaker Change: And then in terms of the rollout and the expansion I would say we.
Speaker Change: So it's an order of magnitude bigger right, let's say.
Speaker Change: Annex what reward before that so it's a much bigger sizes starting to build and what we were before we got into the end of its term.
Speaker Change: Expansion, the second expansion and return to you.
Ashutosh Roy: And then, as far as the repeatability, I would say it's a pretty common pattern we are seeing in all businesses, as I mentioned earlier, I think maybe two quarters ago. We used to see a lot more functional engagement with customer service and contact centers, mostly for knowledge management, and that still continues to be our primary entry point in businesses. But we are seeing more and more collapse of the functional boundaries because of the AI drivers, and so knowledge is becoming a solution that people are looking to deploy across the business so that they can then have that single source of truth across all functions.
Speaker Change: And then on them.
Speaker Change: So I'll take a peek ability I would say.
Speaker Change: It's a pretty common pattern, we're seeing in all businesses as I've mentioned earlier, I think maybe two quarters ago.
Speaker Change: We used to see a lot more functional.
Speaker Change: Engagement with customer service and contact centers, mostly for knowledge management.
Speaker Change: It still continues to be our primary entry point and businesses.
Speaker Change: We are seeing more and more collapsed.
Speaker Change: The functional boundaries because of the AI.
Speaker Change: Driving force and so knowledge is becoming a solution that people are looking to deploy across the business. So that they can then have that single source of truth across all functions. So that's kind of the repeatability, we are seeing in the.
Ashutosh Roy: So that's kind of the repeatability we are seeing in the sales.
Speaker Change: And the sales now.
Speaker Change: Thanks, maybe last for me.
Ashutosh Roy: Thanks, maybe last for me, you know, you talked about sales cycles have been a bit extended. Do you feel like they well extended, they've maybe stabilized here? Do you think it's getting, you know, any worse, any better? Sort of curious? I think the increase has been mostly because of the size of the opportunities as well as the number of groups that need to be involved to go through that process of evaluation and ultimately decision. So, yeah, I would say that it's stabilized, so it's probably more like nine to 12 months now on average as opposed to nine months.
Speaker Change: You talked about sales cycles have been a bit extended do you feel like.
Speaker Change: While extended they've maybe stabilized here do you think its getting any worse any better.
Sorry, I'm curious.
Speaker Change: Let's take a look.
Speaker Change: So I think it does.
Speaker Change: Kris has been mostly because of the size of the opportunities as well as the number of groups that need to be involved who go through that process of evaluation and ultimately their decision.
Speaker Change: I would say that our stabilized so it's probably more like nine to 12 months now on average as opposed to.
Speaker Change: Nine months.
Ashutosh Roy: This is an extra quarter, if you will, add it. Great, thanks.
Speaker Change: As an extra quarter or two will elaborate on this.
Speaker Change: Great. Thanks.
Speaker Change: The next question is from Jeff Van <unk> with Craig Hallum. Please go ahead.
Jeff Van Ree: The next question is from Jeff Van Ree with Craig Hallam. Please go ahead. Evening, Ashu, Eric.
Speaker Change: Evening Osteo Erik this is Daniel on for Jeff just maybe one more question on the Mega Bank before we move elsewhere, just maybe unpack a little bit more you know what that ramp up through the fall will look like in terms of the process.
Daniel Hibshman: This is Daniel on for Jeff. Just maybe one more question on the megabank before we move elsewhere. Just maybe unpack a little bit more, you know, what that ramp up through the fall will look like in terms of the process. You know, is there, is that all, you know, sort of sealed and done? It's going to be a very linear, very easy rollout. Is there, you know, what are sort of the hurdles in terms of implementation, training, you know, approvals? Just how will that look like? And then, you know, going along with that, the revenue ramp, will that be, will that be linear?
Speaker Change: Where is that.
Speaker Change: Sort of field and Don is going to be very linear very easy rollout. There you know what are sort of the hurdles in terms of implementation training.
Speaker Change: Approvals, so how will that look like and then you know.
Speaker Change: Going along with that the revenue ramp will that be will that be linear how will that curve.
Ashutosh Roy: How will that curve? Sure.
Speaker Change: Sure I'll take the first maybe you can take the second.
Ashutosh Roy: I'll take the first. Maybe you can take the second. So, in terms of the implementation, I would say that it's not unusually custom. It's sort of like many other large enterprises we have worked with. The only big difference, I would say, is that this bank is super aggressive on the AI front, so their internal AI teams are much more advanced, and they expect to pull a lot more knowledge content from our knowledge hub to further drive their AI-based workflows on the user end. So, that part is kind of new and exciting, but other than that, I would say it's fairly par for the course for a large enterprise.
So in terms of the implementation I would say that it's not unusually.
Speaker Change: It's sort of like many other large enterprises, we have worked with only big difference I would say is that.
Speaker Change: This bank is super aggressive on the AI front so their internal.
Speaker Change: Teams are much more advanced and they are pulling our hair expect sorry expect too.
A lot more knowledge content from our knowledge hub to further drive is there kind of AI based workflows on the on the user and.
Speaker Change: So that part is kind of new and exciting but other than that I would say, it's fairly par for of course for a large enterprise deal.
Speaker Change: And on the reverse side, where the deal structure that it'll be.
Eric Smit: And on the Rev-Rec side, the way the deal is structured, it'll be ramped up pretty much from the beginning as opposed to a phased purchase over time. Okay, that's helpful. And I think that gets sort of to, you know, my next question, which was in terms of the sequential growth we're looking for from Q3 to Q4, it looks like around 10%. You know, what's the visibility? What are the drivers of that? Is there any sort of rebound in PS? Is this, you know, all visibility from this major mega bank deal sort of starting off hot?
Speaker Change: Ramped up pretty much from the beginning as opposed to a phased purchase over time.
Speaker Change: Okay. That's helpful and I think that gets sort of to my next question, which was in terms of the sequential growth. We were looking for from Q3 Q4, it looks like around 10%.
Speaker Change: What's the visibility what are the drivers of that is there any sort of rebound in P. F.
Speaker Change: You know all visibility from this major Mega bank deal sort of starting off hot.
Eric Smit: Just what's the visibility there? Yeah, exactly. I think it's a combination. I mean, given the size of this deal and the timing of it, that'll certainly have a meaningful impact of that sequential growth. Okay.
Speaker Change: What's the visibility there.
Speaker Change: Yeah, exactly I think it's a combination I mean.
Speaker Change: Given the size of this deal and the timing of it that will certainly have a meaningful impact of that sequential growth.
Speaker Change: Okay, and then just as we look a little further out.
Ashutosh Roy: And then just as we look a little further out, you know, to 26 and beyond, you know, if a bottom was going to be reached on the growth and sort of a rebound back to positive growth, I mean, how do you think about at a high level what that growth formula would look like? You know, is that analytics and conversation hub, you know, hitting a bottom? Is that, you know, an acceleration in knowledge? Is that, you know, a change in top 10 customers? Where's sort of the change in that growth formula? I would say that 26 should be our year of showing real top-line impact of the AI knowledge investments that we have been making for the last two years, and particularly in the last year, meaning fiscal 25, so I think we'll see.
Speaker Change: Six and beyond.
Speaker Change: If a bottom was going to be reached on on the growth in sort of a rebound back to positive growth I mean, how do you think about at a high level what that growth Formula would look like is that analytics and conversation hub you know hitting a bottom is that any celebration and knowledge is that changing.
Speaker Change: Top 10 customers just sort of a change in that growth formula.
Speaker Change: I would say that 26 should be our you're off showing real topline impact off the AI knowledge investments that we have been making for the last two years and particularly in the last year, meaning fiscal 'twenty five so I think we will see.
Ashutosh Roy: at the benefit of that in fiscal 26. And as I'd mentioned on the call, I think obviously with this deal, the ARR, which obviously is the leading indicator, we see that getting up for the knowledge business up into the high teens, and so certainly that's what we'll be targeting in that range as we look to fiscal 26. Okay, that's helpful.
Speaker Change: The benefit of that in fiscal 'twenty six.
Speaker Change: And as I've mentioned on the call I think obviously with the steel.
Speaker Change: Hey, all which obviously is a leading indicator we see that getting up to the knowledge business up into the high teens and so certainly that's what we'll be targeting.
Speaker Change: In that range as we look to fiscal 'twenty six.
Speaker Change: Okay. That's helpful. And then just last for me in terms of the visit to clarify that so the knowledge. They all knowledge side of the business.
Eric Smit: And then, just last for me in terms of the results... Just to clarify, that's for the knowledge, the AR knowledge side of the business. Okay, that's helpful, Eric. Thank you.
Speaker Change: Yeah.
Speaker Change: Okay. That's helpful. All right. Thank you and then just last for me just in terms of revisiting the results for this quarter and obviously.
Eric Smit: And then just last for me, just in terms of revisiting, you know, the results for this quarter, and obviously, you know, the decline was already called out last quarter, and we got to discuss it in terms of, you know, expecting some headwinds in PS and, you know, some pushouts in terms of deals slipping, but sort of beyond deals slipping and beyond, you know, PS with subscription down sequentially, just where was, you know, was that churn? Is there something seasonal? Is that, you know, pushout of renewals where a deal, you know, temporarily goes suspended, and then it comes back?
The decline was already called out last quarter, when we got to discuss it in terms of you know we're expecting some headwinds in PFS and you know some push outs in terms of deals slipping, but sort of be on deals slipping and beyond.
Speaker Change: With subscription down sequentially.
Speaker Change: Just revisit.
Speaker Change: There was was that churn is there something seasonal is that pushout of renewables, where a deal temporarily suspended and then it comes back.
Eric Smit: Just the sequential there for this quarter. Yeah, so I think just sort of highlighted this during the call, just given the fewer number of days, if you look back historically, there's often that sequential decline in in this quarter. So that certainly accounts for a portion of it. So I think, and then timing of the deals, I think being pushed out, we didn't see any. Meaningful impact of revenue of deals that closed in the quarter and I think finally I think there was some catch-up in the previous quarter that we talked about so I think as you said we talked about these items on the previous call.
Speaker Change: Just the sequential there for this quarter.
Speaker Change: Okay.
I think just sort of highlighted this during the call just given the fewer number of days. If you look back historically this often that sequential decline in this quarter, so that certainly accounts.
Speaker Change: Four.
Speaker Change: So I think.
Speaker Change: And then timing of the deals I think being pushed out we didn't see any.
Speaker Change: The meaningful impact of revenue of deals that closed in the quarter.
Speaker Change: Finally.
Speaker Change: I think there was some catch up in the previous quarter that we talked about so.
Speaker Change: I think as you said, we've talked about these items.
Speaker Change: On the previous call.
Speaker Change: Okay. Thanks, Akhil, Eric that's it for me.
Ashutosh Roy: Okay, thanks Ashu, Eric.
Operator: That's it for me. Again, if you have a follow-up question, please press star then 1.
Again, if you have a follow up question. Please press Star then one.
Speaker Change: Showing no further questions. This concludes our question and answer session I would like to turn the conference back over to management for any closing remarks.
Operator: Showing no further questions, this concludes our question and answer session.
Jim Byers: I would like to turn the conference back over to management for any closing remarks. Thanks, Operator, and thanks, everybody, for listening today and look forward to providing the update at the end of Fiscal 25. Thank you.
Speaker Change: Thanks, operator, and thanks, everybody for listening today and look forward to providing the updates at the end of fiscal 'twenty five.
Speaker Change: Sure.
Operator: The conference is now concluded. Thank you for attending today's presentation.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Operator: You may now disconnect.
Speaker Change: [music].