Q4 2019 Earnings Call

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Good day, everyone and welcome to the Egain fiscal 2019 fourth quarter and full year financial results Conference. Today's conference is being recorded at this time I'd like to turn the conference over to Jim Byers of MK, Our Investor Relations. Please go ahead Sir.

Thank you operator, and good afternoon, everyone welcome to Egains fiscal 2019 fourth quarter and full year financial results Conference call.

On the call today are you games, Chief Executive Officer, Ashu, Roy and Chief Financial Officer, Eric Smith.

Before we begin I would like to remind everyone that during this conference call management will make 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 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 Egains result.

Is detailed in the company's reports filed with the Securities and Exchange Commission you gain is making these statements as of today September Threerd 2019, 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 discuss certain non-GAAP financial measures such as non-GAAP operating income.

Our earnings press release can be found on the news release link on the Investor Relations page at Egains website at Egain Dot com.

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

To the most directly comparable GAAP financial measures.

And lastly, a replay of this conference call will also be available in the Investor Relations section of Egains website.

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

Oh, Thank you Jim and good afternoon, everyone.

Uh huh.

The top level, we executed quite well in fiscal 2019.

Our full year revenue came in ahead of our guidance and street consensus.

We also generated strong cash flow and profits for the year.

And finally, we completed a successful capital raise would those forms we pay down our debt and now we are investing in growth.

Let me share some financial highlights from the full year.

We grew our SaaS revenue, 37% over the prior year.

Most were $5 million.

Our subscription revenue grew 17% year over year, the 60 million.

And comprised 59% of our local revenue.

We were GAAP profitable with net income of $4.2 million compared to a net loss for the prior year.

And our non-GAAP net income increased to 6.2 million.

Or 21 cents per diluted share.

From 1.7 billion or six cents or that you could share a year ago.

We also had strong cash flow from operations.

$7 million what are your.

Looking at the business highlights.

We continue to see strong demand or <unk> power customer engagement capabilities.

Similarly in our partner ecosystem.

So we're ramping our investment.

In those partner.

Oh.

Engagement and.

I don't be channels that we are able to reach both through product integrations.

As well as in channel enablement.

We have several new customer wins in fiscal 2019, So let me walk you through some notable losses.

And that experience with Eaton.

I'll start with the U.S. based Uh huh.

Services provider.

Well, we helped develop a solution for automated service and sales.

For their D. white box offering in 29 he.

Using 50 capabilities weekend platform for liquid assistant shots on goal gross we rolled up in three months and new solution for their website and mobile properties.

Newsprint delivered over 50% automated service resolution rate and improved NPS in their late this tax season in 2019 since then.

This line has rolled out more virtual assistance on did you gain black Hawk, one for enterprise facing I'd and other for human resources, each time, improving their contractor pack deflection rates. So much so that now the flying to standardizing on the egain platform across its entire business.

All this was delivered upscale in less than nine months.

Just to put this in perspective, when they approached us last year.

It's like I've already spent well what are your according to them working with multiple vendors.

One for virtual assistant one pork chop one for coal cars and they have very little to show for all that.

This difference even flying experience.

Yes, what sets us apart.

We are you can easily deliver it to scale.

It kind of connected digital engagement Jordan's that typically are gathering dust on the drawing boards with other providers.

Poverty endpoint capabilities.

The next one I want to talk about as a new customer we won in partnership with Cisco.

Yeah, one of the top barrels then hold retailer in the U.S.

He has been grappling with multiple points altogether for job well you mailed for knowledge.

And they want to get to kind of.

Sleep, all that out and develop an omni channel capability that could be connected in scale.

Working with Cisco, We went live with a competitive production replacement Austin chalk capability in six weeks.

By the way we happened to be lot of course, integrating the clients Cisco contact center capability with our cloud.

Now that the client is migrating their customers email handling for the platform.

Well, we have from one another point well they had been using.

So would you see here is that our capabilities in terms of comprehensive solution integrated when needed with.

Looks like Cisco in the contact center help us deliver this sort of easy.

Valuable and differentiated experience.

The third plant I want to talk about the global payment processing provider in the U.S., we acquired them last quarter. This client when they approached US was using salesforce for contact center knowledge management.

It was struggling with poor user adoption and the business.

Once we have on the opportunity we got going on we are now in the month of September but to be rolling out our knowledge solution integrated with their sales force desktop and using our certified you gain connector disasters.

Well look like maybe some kids is a leading building products manufactured or the U.S. dozens of brands. They wanted to deliver of course in a life experience each brand ultimate central platform I can in a matter of couple of months.

We've been delivering this common knowledge base across the website works for the system and contact center.

That's just the first of many brands that could be coming out in the next few months.

A couple of names I want to talk about our examples one is a global health care Company. We won this was late in 2019, they had salesforce for Salesforce automation and cost for marketing automation.

They needed a solution for omni channel customer engagement.

We have now rolled out virtual assistance and shot email and social handling all connected on a common platform no matter the most.

But this line we have already displaced three point providers.

After a weaker virtual assistance as a newcomer.

The last one from the from fiscal 19, I want to bring out is that European manufacturer off globally marketed consumer products, we won them in partnership with Cisco.

This line to driving that digital transformation agenda on the Egain plus physical platform and now we are working to implement their solution.

For improving the customer experience.

You wouldn't in fiscal 20, we have been accelerating some new logo wins.

Early in this quarter, which we are in now.

We have been awfully good start.

We had an exciting new client win in partnership with Amazon.

Together with Amazon, we are delivering an omni channel solution to a large state agency in California, Accenture as a system integrator.

So they.

Good luck Pete got back control, that's moving from legacy to the plot and we have selected Amazon the negated as they go forward solution.

And final one I want to mention again in Q1, which is this current quarter.

Very nice win for US is a large health and started to climb from the U.S.

In partnership with the Lord we want this knowledge management opportunity in July .

And this engagement it wouldn't be the foundation for the digital transformation program that this client is driving around service automation.

The women with Deloitte and this case is now feeding the potential partnership for us with them and they have already proper thing to another opportunity early days, though [laughter] another client that potentially in the U.S.

So when you see here is the new black wins, you're getting are all serving a need which we see as the yawning gap in the market where point solution providers.

Unable to meet the Omnichannel requirements in a digital engagement.

Transformation that customers are looking to drive.

On the partner front, we continue to invest in the Threed technology platforms, we have integrated with.

Last year, we strengthened our partnership with Cisco.

Although you haven't capability that is bundled into their Cisco enterprise lifestyle and used to be activated and used by more and more of that installed base of enterprise clients.

This solution provides a great foundation for clients, who are looking to use value added solutions for knowledge, Yeah, hi, and messaging.

We are now partnering with Cisco marketing these value added solutions through this news Cisco Solutionsplus catalog that we have been using successfully on all the OEM technology.

As you all know Cisco is I'm continues to be our number one partner and we believe that this partnership will strengthen in the coming year.

I think the Vida, we have made good progress with them in the last six months.

We are accelerating we are now executing a joint go to market plans with them both in the U.S. I'm in Europe .

To deliver.

He didn't capable of using digital nei integrated with D of elite platform.

Our joint pipeline is building nicely.

And I believe that we will see bookings through this channel in the second half of fiscal 2020.

Just given the pipeline and the sales cycles associated with these enterprise clients.

So we have active funnel that we have started to develop and grow now with joint sales execution.

Right exactly.

And then finally Amazon connect as I mentioned, we signed our first customer.

And with that in the first quarter this quarter.

And what are you doing with them is really working the marketing Oh joint marketing spreading the word of the success and then building some innovative new experiences in their cloud combining our digital in AI capability and Amazon's machine learning.

To combine voice and digital experiences for cloud contact center for clients.

With along with these three partner is now reaching of installed base of over 4 million enterprise contact center seats worldwide.

Two combined with Cisco and Avaya installed basis that is combined back with our Amazon connect partnership which is targeting really the pure cloud opportunities you can see that we are in a good position drive more growth through these channels.

The strength of that business, we have recently hired additional channel failed and support staff.

I believe that these investments now in place.

Help us drive new logo acquisition in fiscal 2020 and beyond.

Looking at existing customers and success that has been a focus for us as you know in over the last two years and.

What that has helped US do is you need to migrate more and more of our legacy support customers to the fast platform.

No.

Drive healthy customer retention and expansion.

So our net fast retention rates now exceed 100% for the Europe .

The trend, we continue to see with customers.

The demand for omni channel solution connected solution not point solutions.

And something that is what came out of the box not something that they have to have developed from scratch building on whose case on our platform.

Well not neither is the primary driver that we see.

For Egain market growth and leadership.

On the product side, we continue to enhance our solution.

Interestingly in the Gartner 2019 magic quadrant for customer engagement centers.

We were the only ones explicitly called out for delivering quote unquote value for money.

Based on client interviews and commentary.

This statement from Gartner underscores our solution and that's the difference in the market and our enthusiasm to serve our clients even better.

Moving forward, we intend to increase our product investment to deepen and broaden our contact center a partner integrations as well as enhancement of our platform, particularly in AI and messaging.

This will enable us to accelerate growth over the next few years, both through new logo wins.

Lease partnerships that we talked about as well.

You think stickier and deeper engagement with our clients.

Oh in them.

This to be the enterprise wide omnichannel platform for customer engagement no matter, where we started that journey in terms of the first pinpoint can you address.

Looking ahead to fiscal 2020.

With our strong cash flow and strengthened balance sheet from from fiscal 2019, we are increasing our growth investments.

We expect to see growth both from new logo acquisition as well as installed base expansion.

And on the new logo front, we are investing specifically to support our key partnerships Cisco Avaya and Amazon connect.

As I mentioned, we are seeing significant demand and some early success with people like Amazon connect.

But as we increase these investments we believe that we'll be able to accelerate our growth rate on our topline basis.

Over the next several years.

In summary, we're off to a good start and before I turn it over to Eric for more color on the operational and finance performance I want to mention our upcoming.

Customer event, which we are calling the experienced threesixty. This time, it's going to be held in Chicago on October 15th and 16th.

We will have a separate track for analysts and investors who may be interested in joining us.

And we hope you will be able to come join us at this event will be an exciting event, we'll have speakers customer speakers from Comcast from a large consumer bank and then analyst views from quarter store and of course, we will be announcing exciting new products and capabilities as well so with that let me hand over to Eric for more commentary Eric.

Great. Thanks, I'll shoot before I review, our financial results I'd like to remind everyone that we adopted the revenue recognition accounting set of note as you six or six effective July one 2018, the start of our fiscal 2019.

This otherwise noted the results I will discuss today are presented in compliance with the a C. Six a six.

Revenue recognition standard reconciliation.

Of this city six the six through six or five results is included in our press release, we issued today that is available on our website.

Now turning to our financials as actually noted we are pleased with our performance in fiscal 2019.

Our topline results exceeded our revenue guidance for fiscal 2019, and we're ahead of street consensus.

We achieved these positive topline results, while improving our cash flow and operating profits for the year.

So let's quickly review our financial results for the fiscal year.

Total revenue was 67.2 million up 10% year over year or 4% in constant currency sets revenue was $44.8 million or 37 cents year over year and 39% in constant currency.

Subscription revenue, which includes sets in legacy revenue was 60 million up 17% year over year with 19% in constant currency.

And subscription revenue no accounted for 89% of total revenue for fiscal 2019.

Up from 83% in fiscal 2018.

And professional services revenue was 7.2 million or 11% of total revenue compared to 10 billion or 16% of total revenue a year ago.

Before I move on.

I'd like to call out too.

T. revenue topics and provide some additional color on how they impacted our performance for the year and our expectations for them in the coming fiscal year.

These topics to the transition of our legacy on premise customers to our cloud offering and our goal for our professional services revenue going forward.

Starting with assess revenue transition as we stated before while transitioning through us under but since this is a key metric that we believe is useful to measure of forward looking business is our SaaS revenue growth.

At the beginning of the year, we targeted that growth to be 25% to 30%. We raised it from Q2 to 30% to 35%. So pleased to report.

That we exceeded that with the 37% growth.

And if I look back over the last three years, we've been able to achieve a compounded annual growth rate no in excess of 25%.

Now looking forward and again as we've mentioned on previous calls.

Driving the transition of our on premise customers to assess offering.

He has been an important focus for us.

And the successful transition has helped boost boost assess growth rates in both fiscal 2018 and 2019.

Now looking forward as we see the legacy business decline and.

The target as we've stated on previous calls that we'd like to see our legacy business accounted for.

Down to approximately 10% of revenue by the end of calendar 2020 , what that means as our shoes alluded to is that we are.

Planning to increase investments in sales and marketing and R&D in fiscal 2020 to drive that growth rates going forward in fiscal 2021 and beyond.

The second point I wanted to to raise or provide some additional color is around the professional services revenue.

At the beginning of fiscal 2019, we set a goal for our PS revenue to be in the range of low teens to high single digits as a percentage of total revenue and this is something that we achieved during this fiscal year.

As we look forward.

We believe the increased investments we plan to make in product development will further improve the ease of our product deployments and require less implementation services and therefore for fiscal 20, we see the PS revenue no in the high single digit range as a percentage of total revenue.

Reflecting this.

This further improvement in the products and the need for this PS engagements going forwards.

Now moving on to our non-GAAP gross profit for fiscal 2019 gross profits.

It was $46 million or a gross margin of 68% compared to a gross profit of 39.6 million or a gross margin of 65% for the prior fiscal year.

Our subscription revenue gross margin improved to 76% compared to 75% for the prior fiscal year professional services gross margin was 9% compared to 11% two years ago.

Turning to operations.

non-GAAP operating costs for fiscal 2019 came in at $38.4 million or 4% from the prior year.

non-GAAP operating income improved significantly to 7.6 million or an operating margin of 11% compared to $2.7 million for a margin of 4% in the prior fiscal year.

Looking at our bottom line non-GAAP net income was 6.2 million or 22 cents per share on a basic basis and 21 cents on a diluted basis. This represented an improvement of $4.5 million or 262%.

Year over year and compared to the non-GAAP net income for fiscal 2018.

Adjusted EBITDA margin for the year was 12% up from 5% in fiscal 2018.

Now looking at our financial results for Q4 total revenue in Q4 was 16.8 million up 8% year over year.

And subscription revenue was 15.1 million up 4% year over year and accounted for 90% of total revenue in Q4 up from 87% revenue a year ago.

Breaking out the revenue component search revenue was up 24% year over year and legacy revenue was 3.6 million down 15% from a year ago quarter.

Professional services revenue was $17 million or 10% of total revenue which is down.

18% from 2.1 million or 13% of total revenue in the year ago quarter.

Before getting into the cost and expenses and corresponding margins for the quarter I would like to point out that our annual company wide compensation adjustments were effective the beginning of Q4.

This along with the start of our additional investments were primary drivers for the sequential increase of costs and expenses in Q4.

Now looking at non-GAAP gross profits and gross margins gross profit for the fourth quarter was $11.2 million or a gross margin of 67% up from a gross profit of $9.8 million or gross margin of 63% a year ago.

Year over year increase in your overall gross margin reflects a combination of the benefits you're seeing from the scale and efficiencies in our sets operations and the growth in our higher margin service revenue, while the lower margin PS revenue declines if you look at the.

Rick kind of gross margin by revenue talked in Q4, a search subscription revenue gross margin was 72% compared to our professional services revenue margin of 15%.

We saw a sequential decline in our subscription margin due to the increased investments in our cloud infrastructure and increased personnel costs.

However, our expectation is to see an improvement to this large units each quarter. This quarter's end to be in line with our subscription margins we achieved in fiscal 2019.

Now turning to operations non-GAAP operating costs for the fourth quarter came in at $9.9 million compared to $9.8 million in the year ago quarter.

Overall this resulted in non-GAAP operating income in the fourth quarter of 1.3 million or an operating margin of 8% compared to 54000 or zero margin in the year ago quarter.

Looking at net income non-GAAP net income for the fourth quarter were 659000 were two cents per share on a basic and diluted basis. This compares to non-GAAP net income of 300000 or one cents per share.

In the year ago quarter included in the Q4 results was an 800000 annual tax adjustment for one of our foreign subsidiaries.

Approximately 700000 equivalent to two cents per share of this was a non cash charges and credits as against the existing deferred tax asset on our balance sheets.

GAAP net income for the fourth quarter was 166000 or one cents per share compared to GAAP net loss of 536000 or two cents per share in the year ago quarter.

The adjusted EBITDA margin for the quarter was 8% up from 2% to the year ago quarter.

Now turning to our balance sheet and cash flows total cash and cash equivalents as of June 32019 was $31.9 million compared to 11.5 million at June 32018.

We ended the year with no debt and improved our net cash position of $29.6 million.

During the year, we generated cash flow from operations of $7 million, a 4% increase from $6.6 million in fiscal 2018.

Looking at our remaining performance obligation patterns or off Theo as of June 32019, the off your balance.

The total Archeo balance was 61.9 million preferred short term all pure was 42.4 million.

As this is a new metric that was introduced with the adoption of NFC six of six I'd like to provide some insights we have learnt about this metric tons in the first year of tracking it for fiscal 19.

First since this was a door since we adopted the assay six or six on a modified retrospective basis.

We did not adjust our prior year balances and therefore prior year comparisons we do not believe meaningful.

Second with the adoption of the AMC six or six.

A portion of the OEM business that we used to recognize ratably is recognized upfront.

This change resulted in most of the 3.1 million reduction in though.

Opening deferred revenue balance with the adoption there see six or six at the beginning of fiscal 2019.

And then for the treatment of the Soviet business during fiscal 19. As this is recognized upfront. There was no addition to the off your balance from this business throughout 2019.

The other factor that impacted our off your balance in fiscal 19 was the timing of renewals approximately three years ago made a concerted effort to increase the contracted term for both new contracts and upcoming renewals.

We pushed from what used to be one year.

Contracts two three year contracts.

For the first two years since Weve.

Made this change internally we saw.

Sequential increases in our backlog, we're now the off your balance, but then declining over fiscal 19, partly due to less contracts coming up for renewal as we've gone through the three year cycle.

Now that we are seeing some of the three year contracts come up for renewal.

Looking forward, we would expect.

The up your balance now to begin to grow again subject to timing of larger deals and large renewals and two evidenced that if I look at our short term akio.

For.

Let's go to the fourth quarter, we saw a sequential increase of 5% when compared to the balance as of March 31st 2019.

So as we move forward, we will continue to provide updates.

On this.

But hopefully that's a additional insights with you thats helpful.

Now turning to our guidance for fiscal 2020.

For the fiscal year, ending June 30th 2020 , We again expect service revenue of $53.8 million to $55.4 million on a constant currency basis, which would represent growth between 20 cents and 24% year over year.

And then for total revenue of $72 million or $73.6 billion on a constant currency basis, which represents growth between 7% and 10% year over year.

As stated earlier with our products.

Approvement, we expect this professional services revenue required for deployments and as a result, we expect our PS revenue for fiscal 2020 to be in the high single digit grains as a percentage of total revenue.

We expect to generate non-GAAP net income of breakeven to $2 million or zero cents per share to six cents per diluted share and we expect assuming a diluted share count of 32.6 and for the fiscal year.

Our fourth for the fiscal 21st quarter, We expect service revenue of $11.8 million to 4.1 million on a constant currency basis, which would represent growth between 23 and 26% year over year.

And for the quarter total revenue of 16.8 million to 17.2 million on a constant currency basis, which would represent growth between seven and 10% year over year.

We expect to generate non-GAAP net income of 500000 2 million or two cents to three cents per diluted share can we assume a diluted share count of 30.6 million for the first fiscal quarter.

Looking ahead, our customer base, we believe is healthy we see a strong market demand in particular with the.

Partner ecosystem in this large and growing markets and with our strength strengthened balance sheet, we are beginning to increase that investment.

In sales marketing and product development, which we believe will allow us to capture market share in fiscal 2020 and beyond.

Mostly on the Investor Relations fronts, we can we'll be participating in two investor conferences. This week, we will be presenting tomorrow at the Eightth annual Gateway Investor Conference, taking place in San Francisco and the following day Thursday, we will be participating in the Doherty <unk> company institutional Investor Conference taking place in Minneapolis, We hope to see some of you there.

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

Thank you at this time, if you do have a question. Please signals by pressing star one once again that will be start one for questions. We'll hear first today from Richard Baldry with Roth capital.

Thanks.

I'm wondering if you could go a little bit deeper into the Cogs line on the recurring side.

So there was some infrastructure investment so that sort of one time oriented so little more than we've seen in the past.

Turning disproportionately hit and is that something that plays through throughout the rest of 2020 or fiscal 20.

Are there any kind of reverse in some parts. It was more one time oriented thanks.

This is actually here. So we're right. What we are doing right. Now is we are investing in our continuing to.

Scale and also making investments on.

Geography and compliance for instance, we are close to we haven't kept got the certification to be close to getting certified for high Trust, which is one of the really.

Next generations of Securities certification on the cloud.

So those are investments that do increase the.

The Cogs line for us on the cloud side I think that that's something that will probably be true for fiscal 2020, but after that I believe that as a percentage the Cogs line would stop too.

Go down again.

And when we look at the the SAS revenues in 2019, they grew about a little over 12 million.

Your guide now argues that they would grow less than that somewhere between nine to 10 and a half million range was there anything one time skewing in 2019, we should be sort of remembering in the back of our minds or do we just sort of wrap that up to conservatism. Because you are spending more on sales and marketing arguably getting more momentum with partners and things that would typically argue that your year over year growth in dollar terms should expand not a contract. Thanks.

So a couple of points I think that is a little bit of the.

The other tourism in that number however, I also think that the migration off existing legacy customers to fast, which we have transparency, we mentioned as something that benefits our SaaS revenue growth over the last year or so and even the year before you something that is starting to taper off so we want to make our investments that we're making in sales and marketing are going to drive non news faster revenue growth and that's an area, where we feel the investments we're making are timely with these investments might take a little time in terms of showing up as revenue.

That also speaks to the.

Decrease potentially off absolute SaaS revenue growth for fiscal 2000.

And last one would be can you talk about the sales head count additions, you've been making or plan to make the year sort of ahead unfolds at the net number seats been been increasing spend any turn over there we should be thinking about in the back our minds or any other issues around that sort of capacity of your direct sales force and in fiscal 20 versus 19. Thanks.

So on the sales side as we have mentioned in the past we have a an overlay model for the enterprise sales team, where we have quota carrying enterprise salespeople, who are supported by overlay of channel sales and.

So.

The investments we are making at this time are mostly in two areas on the sales side. One is the channel sales overlay, where we think that there is an opportunity to drive more pipeline growth through these channels sales investments. So thats one area, we are investing in EMEA.

Three new people in those roles in the U.S.

One for Cisco, one for a buyer and one for Amazon connect.

They are dedicated to those.

Those channels. In addition, we are also spinning up an inside sales team again to assist the enterprise sales both in driving the early pipeline opportunities through the funnel and that's something that we we have.

We intend to to have about half a dozen people.

In back in that group in the in the U.S., primarily most of our increased sales investment at this point will be in the US we expect Europe to be fairly constant in terms of business and given the market environment.

Thanks.

Well hear next from Mark Schappel with benchmark.

Hi, Thank you for taking my question Asha starting with you in your prepared remarks, you called out several partner wins and also several competitors placements.

Are you seeing increasing competitors placements or was it just a just a function of this call where you decide to to call out a few more of them.

We are seeing more competitive point product replacement, yes.

I would say that we are needing more and more in the enterprise.

Within the vendor ecosystem, where there are lots of point products in place already not for every capability, but quite a few and the.

The clients desire to rationalize that with a platform is something that we are seeing more off.

Okay, great. Thank you and then.

Margins are expected with it with the investments margins are expected to come on come down next year I was wondering if you.

Give us a sense of when we could expect to see a return to some sort of margin expansion.

So on the gross margin side, along the lines of what I mentioned earlier to Rich's question I believe that fiscal 2020 is going to be a time of investment but fiscal 21, we should see improvement on the gross margin line.

The on the operating line I think its a function off our investment the two areas, where we are planning to increase our investment is sales and marketing and product development.

I believe that product development will will start to marginally reduce beyond 2020 in percentage terms I do think that sales and marketing will probably continue to go up and not down as we get more and more sales traction through the channel investments we are making.

Okay, great. So.

So thats kind of the full year outlook.

Thank you.

Well go next to Jeff Van Rhee with Craig Hallum.

Great. Thanks, just a couple from me actually I just want to circle back to your you have your last answer you said R&D will reduce marginally in 20 in percentage terms, but as an essent and we will go up beyond that you were talking in percentage terms or dollars.

Well.

Oh, Okay. Good got it so if I look at this this this past fiscal year, what in terms of the A.R.R. assigned in the year what percent was from new versus existing.

So roughly 16% little over 60%, both existing and 40% less than 40% was on mute.

Okay, and how did that trend through the year.

So what we have seen now and this is a trend, but we have seen over the last year is that the new logos, we acquire are increasingly.

Doing what we think is the right thing by them, which is that they want to start small even though they intend to grow big.

So you're seeing a phasing of People's investment, it's not because they are nearly all spending a lot of money upfront, but they want to prove out the case.

With some of these larger programs, so and we are fine with that because we get when we do do a good job, which we do most of the time, we get more value and more realization monetization on the back end of it. So that's the trend we are seeing now and we see that happens in the second half of 2019, we saw a little more off the scope and we are now seeing the advantage of not in fiscal 20 or with some of these early bookings, which have some of them are new wins, but also some of those are expansion wins from new logos that we had acquired earlier in fiscal 19.

Okay and four for fiscal 19, what was gross churn.

On the gross churn basis.

It was around.

For the sets customers, which is around 6%.

Okay, and what about with respect to the maintenance base trying to get a sense of what percent of them in the process decided to just not make the migration.

So that number wasn't as good as the systemic thing is it wasn't because maybe closer to 90.

Since you've been 10% sorry, 10% yet there was more was supposed to do another conversation.

Yes.

Very helpful. Thank you and then last one for me.

Just I guess two two questions together if I could.

On the new deals that you're winning talk to me about the competitive landscape just kind of the top two or three folks that you're seeing and how that might be changing and then also on interested in the the drivers from a product standpoint, I hear a lot of knowledge management across the board here, a little chat here, a little messaging there, but a lot of knowledge management. So I guess the question is the mix of drivers with respect to product and how the competitive landscape is changing.

Sure. So two things one I would say the top two drivers right. Now are one is still omni channel digital capabilities is still a big driver and the second driver is knowledge those are the two drivers right.

Knowledge in dollar size tends to be larger, but the digital opportunities that are more off and have the two are converging. We are happy to jump onto digital opportunities as well because that gives us a potential before them develop the larger scale opportunities as well.

Now looking at the competitive landscape on the Blue on the digital side. The primary competitor that we seem to see his life worsen on cap.

On the other Theres really no strong competitor to be honest I'm on the other channels.

And then on the NOL inside the primary competitor in the enterprise.

Today is salesforce.

And that.

Sounds a little odd because.

They really don't focus in the market, but because they have the full solution customers are looking at them as an alternative.

Those are the top two okay.

Okay, great. Thank you.

And from Needham and company, we'll hear from Ryan Macdonald.

I think you are this is Alex narrow them on for Ryan and I was just hoping to get a little color on the guidance for 2020, and how we should we thinking about the mix of revenue growth from new and existing customers going forward.

I think that our our intent is to make that number of more toward a 50 50 ratio with 50% coming from new logos and 50% from expansion.

And then could you give an update or could you give a little bit more color being.

On the progress being made with via and then also has there been any impact from that M&A rumors surrounding the business.

So so far we have not seen any impact.

From our perspective surrounding the M&A are there were sort of items.

We do see a lot of.

Orchestrated as Andy.

Strong interest from their side and we are working closely with the team and product teams like I mentioned, we are.

Doing some some prepackaged integration, which in the past we've had that we are going to enhancing that with that specifically for the Elia elite.

Platform.

And we are jointly executing the go to market with them that will kind of surface in the in the next month or two has as we rolling up.

Okay, great. Thank you.

And at this time I'd like to turn things back to management for any closing remarks.

Great well, thanks, everybody look forward to hopefully seeing some of you at some of the upcoming investor conferences in certain yet so we'll be holding the analyst day at the Christmas Threesixty event in Chicago. So please reach out to me if you want to get an invitation one more details around that's an otherwise we'll look forward to giving you an update on our Q1 results. Thank you.

That will conclude todays conference again, thank you everyone for joining us.