Good day and welcome to the eGain Fiscal 2015 Second Quarter Financial Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Charles Messman, from eGain Corporation, please go ahead, sir.

Good afternoon, everyone and thank you for joining us today for eGain's conference call to discuss results for fiscal 2015 second quarter and ended December 31, 2014. Please note this call is being recorded and will be available for replay from the Investor Relations section of our web site at www.egain.com for seven days following this call. Before I begin, I'd like to remind all listeners that this conference call contains forward-looking statements within the meaning of the Safe Harbor provision of the U.S. Private Securities Litigation Reform Act of 1995. This conference call contains forward-looking statements that involve risk and uncertainties. These forward-looking statements include, among other matters, statements about the company's market opportunities; statements pertained to the company integration of Exony; statements about the company's financial results for the second quarter of fiscal 2015 ended December 31, 2014, with respect to total revenue; statements regarding deferred revenue, subscription and support revenue, license revenue, and statements regarding our fiscal 2015 guidance including some sources of revenue and business mix. The achievement or success of the matters covered by such forward-looking statements involve risks and uncertainties and assumptions. If any such risk or uncertainty materialized or if any assumptions prove incorrect, the company's results could differ materially from the results expressed or implied by forward-looking statements we make. The risks and uncertainties refer to above included but are not limited to, risk that our hybrid revenue model and lengthy sales cycles may negatively affect our operating results; risk related to our reliance on a relatively small number of customers for a substantial portion of our revenue; our ability to successfully integrate Exony; our ability to compete successfully and manage growth; our ability to develop and expand strategic and third-party distribution channel; risk associated with new product releases; risks related to…

Thank you, Charles and thank you, everyone for joining us today. You may have had a chance to see the press release. So let me focus on adding colour for the quarter and also for the first half of the fiscal year. This is been an exciting and transformational six months for eGain. As a company, we have rallied behind a simple theme. Easy with eGain, this means we are building, implementing and selling and easy to use product and will make it easy for our customers and partners to do business with us. So starting with the products, we released the eGain 14 our latest version in December, this has an easier to use, fresh user interface, richer out of the box capabilities and simple best practice implementation models. As the result, we expect to reduce services implementation effort in typical engagements by up to 30%. This improvement is received very well by clients and partners. As we all know, speed of delivered business innovation is the biggest differentiator today and our platform enables the fastest customer engagement innovation in the market. On the cloud front, we have mentioned to you before, we have invested in securing scaling and simplifying our cloud over the past year. As a result, this quarter we are rolling out a robust cloud offering with market leading SLA guarantees with actual service credits not just commitments [indiscernible]. This offering will deliver enterprise class security, scalability, reliability and integration capabilities required by our enterprise plans for mission critical customer engagement. On the sales front, AJ Berkeley is driving a data driven transparent investment approach and developing a performance based culture, I like it. He began by investing more in building pipeline first, our eGain World panels day event in November was a good example. Attendance…

Thank you, Ashu and thanks for joining us today. Before I review quarterly financial results. I'd first like to provide more detail on the changes we announced today regarding guidance and our initiatives to deliver profitable growth. As we announced in our press release, we are revising our guidance for fiscal 2015 annual total revenue between $80 million and $85 million and annual subscription and support revenue between $42 million and $44 million. We also have currently to exit fiscal 2015, with an adjusted EBITDA run rate for Q4 of at least 5%. I'd like to now provide some additional details for the reasons for these changes. On the top line, there are three factors I'd like to highlight. First, the strengthening of the U.S. Dollar against the Pound and Euro. Given that close to 50% of our revenues come from EMEA, if the exchange rate stay account levels, we estimate the top line impact to be approximately $2 million to $3 million for the fiscal year. Now on the flipside, given our global operating model at the current exchange rates, we estimate a cost benefit of approximately $2 million for the year, based upon on the current exchange rates. Secondly, we lowered our previous expectations of revenue contribution from Exony as Ashu mentioned earlier. The estimates that we cannot process around $3 million. Again the two points worth noting on this, is one, when looking into the details of the pipeline they did not support our initial estimates, as Ashu indicated and then secondly, as we got into the detailed integration process we began to see the clear benefits of the combined synergies of the organization and as a result, we have shifted our focus to building and selling a combined solution. The third point also addressed by Ashu…

[Operator Instructions] we will take our first question from Jeff Van Rhee with Craig-Hallum

Great, thank you. Ashu, on the Cisco front, could you update us there with some quantification in terms of deals closed up selling and sort of some high level thoughts of your level of expectations at this point versus may 3 months, 6 months, 12 months ago give us a little more insight is to what's going on there?

Sure, so Jeff the fiscal contribution for the quarter was around 14%, 1-4. The lap that sort of part of the story, I think on the front end in terms of pipeline and the pull that we are seeing, that's continuing to grow. I'm feeling, like that's an area where we want to drive even harder. The only thing that we are now trying to kind of address is the fact that, the cloud part of that channel is not getting the kind of traction that we wanted and so, we're working through some rationalization of the skew, that we are shipping through that channel on the cloud and looking at some pricing options to see how we can make it more attractive. I think, there are some sales impediments in that, that we need to address and we're doing that, as we speak, but that's the only [indiscernible] I see right now, other than that I see it as getting better by the quarter. So I'm very bullish about, not just the Cisco itself but the whole ecosystem around Cisco and some of the bigger partners of Cisco like the VP's of the world, they're now bringing us deals, that's different from where we were 3 months ago, where we 6 months ago. And we have early wins in six accounts that all should be shipping into very nice large deals over the 6 months, 9 months. So I'm feeling very good about it.

Just to be clear, the 14% is that, 14% of bookings, 14% of revenues?

That's revenue, Jeff.

Okay, thanks and then. Well around the Cisco, just any way you can quantify how many logos came through, how many deals have come through them in the 3-year, 6-month windows and any even crude commentary or quantification of maybe year-over-year growth in the delayed state value of that pipe?

We don't have that off the top, but we can get back to you on that. I know that we closed, let's say through the fiscal channel. I'd say north of eight deals this quarter. The most of them are small early wins, but they're in good names. So the rate is definitely picking up.

Okay and then can you comment on the business flow this quarter. Obviously, you're lowering on currency Exony and some professional services, but can you comment on the flow this quarter in terms of the signings, a little more colour on where the business came and where it didn't come and how the bookings were relative to your expectations coming in?

Sure, so in terms of what I thought we would do, I don't think we got to that point. We're probably off by three deals that we were trapping, that did not get closed. Two of those already closed, but the third one it's in the channel right. It's kind of signed up by the customer, but still working its way through the partner. So that's the answer to the bookings expectation versus where we ended up.

Where are we, I guess two questions. One, the professional services reduction and expectation. I would have thought with the increase complexity of existing at least initially, there would actually be more integration in work challenges, until the products are fully streamlined to be integrated several levels deeper that I would think there now. Can you just fill in some of the gaps there on the professional services side, both that question and is are there partners that are geared up and ready to pick up this flow, as it stands?

So on the Exony front, the complexity it's sort of the services business is relatively steady I would say, it's not dramatically down or up in anyway. The part which has significantly simplified is the core eGain product set and so that's where the services requirement we feel, in fact we are trying to reduce the services requirement even more, so that the speed of deployment and speed of expansion in these wins can be accelerated.

Okay, last one from me. I'll let somebody jump on. On the bookings growth, I think there was 6-month bookings growth number and I may have missed in the commentary, but what was the bookings growth for the quarter, both as I guess as reported and organic if you're able to give it to us, so we can compare without Exony?

For the quarter, the growth is 4%, Jeff and well we didn't break up the Exony number.

I mean, I'm not looking at the numbers, but is it reasonable to think at least it was organically up excluding Exony, if you haven't take a guess at it.

Oh! That's [indiscernible] Exony number there was no significant contributions, so that's absolute, yes.

Okay, thank you.

We'll go next to Mark Chappell with Benchmark

Eric, what was the Exony revenue in the quarter?

We have not spoken out the Exony, as again I think moving forward with this combination. So that's not concerning us, we've disclosed at this point.

I mean, is it fair to say, that it underperformed in the quarter.

Yes, I think aligned with what we're talking about this in the guidance, that certainly from the new business standpoint came in lower than what we had expected.

And I didn't catch the foreign currency impact on total revenue quarter, what was that impact?

We will go next to Jon Hickman with Ladenburg Thalmann

Sorry, just a second I was getting back to the that earlier question.

I apologize; we'll go back to the previous questionnaire.

Could just discuss a little bit more detail some of the changes, that AJ has implementing the sales force as a result of the current happenings in the quarter.

This process started out, when he took on the responsibility but over the last 6 months he's been, like I said three big things that he's driving on the team side. One is, just a lot more transparency and who's contributing what and whose pipeline is developing and the performance areas are and where the areas of weakness are? So I think based on that, he had the first quarter assessment and then on the second quarter assessment, he made some changes on people who are not performing and brought in some more people who were in the places, where we had pipeline strength, that's one thing. The second thing is from a pipeline building standpoint, he's working a lot more closely with marketing on driving very tangible opportunity driven pipeline building for to have marketing dollars go into those areas and one of the areas we had identified early in the fiscal year was that, we wanted to market more heavily around our own installed base and eGain World. In the past, we used to spend x amount of money on that, we increased that, we increased the investment in those areas and the return so far seem to be very good because we are seeing the kind of interest from not just our customers, but also from partners and prospects who seem to be very keen to hear our go forward vision and story, which then results in pipeline. Those two things and then finally, his focus on bringing together a more cohesive go-to market, dedicated go-to market team and that's an area, where in the past we had a dispersed set of responsibilities, which now we've got under one team and that's actively now kind of focused on enablement and training of all the sales people. So those are the three big things, that I see happening under his watch.

Okay, great any word yet on?

Yes, sorry it was about $500,000 with the impact for the quarter, on the foreign currency.

Great, thank you. That's all from me.

[Operator Instructions] we will go to next Jon Hickman with Ladenburg Thalmann

Eric, could you clarify for us, exactly what do you mean by exiting the fourth quarter with a 5% run rate, EBITDA will be 5% of revenues, is that what you're talking about?

That is correct, yes.

Okay and then, so could you quantify for us a little bit, a little bit more the where the fading's are coming from in each of the categories sales and marketing and the professional services, side? Can you give us a percentage of revenues that you would like hit for each of those in the fourth quarter?

So I think, we're still working through the details in this particular groups. I think overall, we're comfortable with that as a bottom line item. So I think at this point, we haven't sort of onto the position to give you the specifics into each of the groups. I think, we'll work through that process, but I think from an R&D standpoint, our expectations there are not, we shouldn't expect to see sort of dramatic adjustments. I think, most of the savings are going to be coming obviously from adjustments on the professional services side. We have anticipate probably cutting that by, as much as 20% of our current cost structure is and the same would apply to sales and marketing. So maybe cutting the current spend level of our sales and marketing by in the region of 20%. So those are the two primary areas, where we'll be seeing a cost savings come from.

Okay and then I don't know how wants to take this question, but I mean from my modelling way, the shortfall in the quarter was primarily in the license revenue business, but you seem to be focused on the fact that the cloud business didn't come through as you wanted? So I'm a little confuse there.

So I think, Jon as you know with the revenue recognition, the cloud bookings I expect is obviously what drives the, it doesn't have any immediate impact on the revenue from a business standpoint. So I think that, some of the deals that Ashu alluded to, certainly were licensed deals that would have had an impact for the quarter, that closed although, one of them was the cloud deal, when that closes we're obviously having impact on our future cloud revenue, but wouldn't have that immediate impact from the quarter.

So those three deals that Ashu commented on that would have boosted your bookings by quite a bit and revenue by $2 million?

That's exactly right, that's right. Two out of those, three were on-prem deal and one was the cloud deal.

Okay. I think that's it from me. Thank you.

And we will go to follow-up Jeff Van Rhee with Craig-Hallum

Yes, just a couple from me there. What was end of quarter sales headcount?

About 33.

And what was that say 6 months ago?

It was probably closer to 14.

Okay, alright that's helpful and then on the recurring side. I think it's 42 to 44 for the year. So what we've done here, we done almost 22 already. Just in terms of the pipeline and bookings activity at Cisco, can you, I think that was the one you called out that maybe hadn't, that they weren't necessarily gravitating to it, the way would have expected initially, can you just expand on that little bit, I'm not sure I understood that.

Sure. As you know, we announced the cloud-based product in the Cisco channel middle of last calendar year, right around May, June timeframe and we were expecting that by now, we would see more cloud [indiscernible] starting to get deep in the pipeline, we've seen one or two, but we are not seeing as much as we want to on the cloud side. So we're going through an iteration with Cisco working with them and understanding and our field teams of Vicky McGovern, who works for AJ, she's sort of leading the charge to understand where the impediments are for the Cisco folks and the partners to pitch and sell the cloud effectively and we think, we understand some of issues, that they seem to be struggling with. So we are going and fixing that, that's the one negative on that channel side that had brought out.

Okay and then on the premise side, with Cisco, they started to ramp the deal counts a year maybe a bit ago and I think initially the deals came in smaller than expected, but the belief was these are some pilots, but there was some massive customers that wouldn't have had access to otherwise and the potential to cross sell, up sell those customers was substantial. So if I take the deal counts and the total license revenues this quarter, it doesn't look like some of those folks are following on, can you just colour in, what you've learned from those early customers or the 12-month ago kind of customers?

Sure. So we're working on expanding them. You're right in saying that, we haven't had many of those expansions this last quarter in Q2, but we are seeing those are actively being worked on and those opportunities are continuing to be important to us and whether that cadence becomes a more regular one, is something that we have to keep filling the pipe on the expansion opportunities with.

Okay, that's it. Thank you.

Now we conclude our question-and-answer session. At this time, I would like to turn the call back over to management for any additional or closing remarks.

I want to thank everyone for joining us today again, if you do have any other questions. Please feel free to give us a call and also like to mention again, that we are having our eGain World in London next week on February 10th and 11th. Well we hope, if anyone happens to be in the neighbourhood of London to come join us and thanks again. We'll look forward to talking to you on our next conference call. Thanks.

This does conclude the conference. We thank you for your participation.