Good day and welcome to the eGain Fiscal 2015 Third Quarter Financial Results Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Charles Messman, Vice Preside of Finance, please go ahead, sir.

Good afternoon. Thank you for joining us today for eGain’s conference call to discuss results for fiscal 2015 third quarter ended March 31, 2015. 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 following days. Before I begin, I’d like to remind all listeners that this conference call contains forward-looking statements within the meanings 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 pertaining for the Company’s integration of Exony; statement about the Company’s financial results for the third quarter of fiscal 2015 ended March 31, 2015, with respect to total revenue; statements regarding deferred revenue, subscription and support revenue, license revenue, and statements regarding our 2015 guidance including sources of revenue and business mix. The achievement or success of the matters covered by such forward-looking statement involve risk and uncertainties and assumptions. If any such risk or uncertainties materialize or if any assumptions prove incorrect, the Company results could differ materially from the results expressed or implied by forward-looking statements. The risk and uncertainties referred to include but are not limited to, risks 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 channels; risk associated with new product releases; risk related to our international operations; our ability to invest resources to improve…

Thank you Charles and good morning everyone. I assume you have had a chance to glance through our press release. Let me start by saying that I am quite pleased with our progress this quarter. Our gross bookings are up sequentially this quarter as well as year-over-year. In fact, our gross bookings have grown sequentially four quarters in a row, the last three under our new sales leadership. On the revenue front, we sequentially grew in the face of about $450,000 of negative ForEx impact from Q2 to Q3 and about $1.2 million of professional services revenue reduction. You may recall from our last call that this professional services revenue reduction was planned, mostly based on our simplified product suite Version 14 that we launched late last year, our increased focus on best practice delivery and our growing partner leverage, so all-in-all that professional services revenue reduction is something that we anticipated and planned for. On the bottom-line we made significant strides. As we discussed last quarter the improvement has been the result of the planned PS adjustments, sales and marketing optimization and Exony integration synergies that we got out of that. Based on these we are now on track to deliver 5% adjusted EBITDA margins in Q4. On the customer front we saw some good success in the quarter. For example, the U.S. Department of Veterans Affairs, one of our premium clients has now expanded their use of eGain Knowledge to more than users across multiple groups. They also deployed eGain Superchat to offer secured chat based service for veterans. A new deal that we won in the quarter was with a global top-10 insurance provider, they will deploy eGain VIM by the way this is the core Exony product that is now part of the eGain portfolio to…

Thank you, Ashu. And thanks for joining us today. Overall we are pleased with our financial performance this quarter and the progress towards our goal of delivering sustained profitable growth. In what is historically a slower quarter for us, bookings increased sequentially and year-over-year. As Ashu mentioned revenue was slightly below our expectations due to the addition of $450,000 foreign currency headwinds when compared to last quarter and the reduced PS revenues. But on the positive side our adjusted EBITDA improved significantly as we executed to the plans outlined in our earlier call. Now turning to our financial performance. Our ACV and bookings metrics for the quarter, our total subscription and support revenue ACV at the end of the quarter was 42 million compared to 40.6 million at the end of the third quarter last year and 41.5 million for the second quarter of fiscal 2015. Excluding an unfavorable foreign exchange impact of approximately 940,000 the ACV would have been 43 million. Gross bookings or revenue plus change in deferred for the quarter was 15.6 million up 32% year-over-year. For the nine months gross bookings were 57.2 million up 49% year-over-year. On a constant currency basis gross bookings for the quarter were 17.6 million up 49% from the comparable year ago quarter and for the nine months were 65 million up 72% year-over-year. Backlog as of March 31, 2015 or total deferred revenue plus unbilled and uncollected that’s off the balance sheet was 38.1 million or 40.3 million on a constant currency basis compared to 31.5 million at the end of the third quarter last year. Now turning to our revenue, total revenue for the third quarter was 19.2 million, a 7% increase from 8 million in the comparable year ago quarter. Total revenue on a constant currency basis was…

[Operator Instructions] And we'll go first to Michael Huang from Needham.

So first of all, it seems the only space on the low that you shared with us that you had the strong success in the government vertical across geographies and is there something in this vertical that better aligned to the eGain strengthen then maybe in other verticals and maybe you could just trail into those little I mean where do whether cloud wins or on premise and do you see competitively in this?

Sure, so to your point that the whole government sector has been slow to adopt some of the new capabilities around digital service and knowledge management, at the same time the potential benefits are humongous because as we all know the target market like we go out after where it makes the most sense for these kinds of solutions to be deployed is where you have millions of customers or citizens on the other side so B to C companies. And in large government organizations the classic examples where you can create very cost effective and very valuable sort of service improvements because of these solutions, so to your point government is at good vertical even if it adopts slower, but as long as we give example in the case of VA we're talking where it sort of treat them as a blend of healthcare and government. So I think what you see is the fact that they have tens of thousands of contact center agents. They have hundreds of actually over a thousand facilities for medical care and so those become great used cases or our customer engagement solutions. So that was just an instance of that. The other agency that we're talking about is an instance of our partnership through Cisco where this UK agency that you're talking about is a customer that we won two fiscal and a partner of Cisco, so that happens to be, but to your point the government sector is a big market for our solutions just like other B2C verticals.

And it is cloud or it is cloud wins are on tenant?

So, the government, examples I gave were both on premise. What is interesting is that we are seeing and we are in somewhat seasonal where the U.S. Government in fact U.S. Federal Government Agency where we are bidding a cloud deal based on the improved cloud capabilities that we have. So I’m just trying to answer your question more completely.

And then on that if you can provide specifics here but, can you talk about qualitatively what you saw on the new logo front, there maybe -- if you have to break it out in North America and also internationally or you are happy with your performance there and how they trend it?

So, overall we are quite happy with the total logo acquisition, the new logo acquisition. We have been focusing on both new logo as well as expansion so that is important for us because as we have mentioned in the past some of the new wins when they come in especially through channel and to be smaller deals. So we’ve been focusing on both acquiring these new logs as well as the follow-ons. So the example I gave of Cisco SolutionsPlus deal was seven figure deal we got this last quarter was the follow on deal. It was the deal that we had won six months ago as the small deal initially. So to your point we are quite pleased with the new logo acquisition, we haven’t broken that out geographically or in totality but what is equally encouraging is the fact that we are able to systematically grow some of [indiscernible].

And then maybe last question from me, as you’re looking at your pipeline and maybe the graphics of that pipeline, what you’re seeing in terms of the mix between cloud versus on-premise opportunities and maybe if you can comment around the opportunity that might be in customer [indiscernible] analytics? Thanks.

Sorry, the last part of your question again, Michael?

Just kind of opportunity around Exony, like what you [indiscernible]?

So, I’m quite sure that fiscal ’16 our cloud bookings will as a percentage will grow significantly because of three things that the one I’ve already mentioned, last quarter we talked about the fact that we are doing some things around the channel, particularly around the Cisco channel where we are simplifying the cloud offer making it more attractive so that we can get more cloud plan there because that’s the main area where we not have cloud success in meaningful way so far. So I believe that’s going to start to have an impact on more cloud business coming through that channel. In the direct channel we are seeing more and more cloud interest in adoption and so in ‘16 we believe that our cloud business in the direct part of our business I believe is going to be more cloud than non-cloud in terms of new bookings. The partner channels will be slight explore to change and so we have to make sure that we’re guiding them the same work. The third piece is the migration of some of our on-premise lines into the cloud. We are seeing that quite an interesting area where with our new products and compelling package we’re putting in front of these customers which involves essentially no cost migration from their on-premise environment. They don’t have to pay any service as long as sign up for a multiyear cloud deal with us and they pay double of what they’re paying in support. So if they’re paying $100 a year in support they would a pay a total of $200 including support to get into our cloud. So that sort of very compelling offer. We’ve already done a couple of small wins but we think we’ll get some of the bigger ones singing up for this deal this quarter and next as well.

We’ll go next to Jeff Van Rhee from Craig-Hallum.

Ashu, with respect to Exony the expectations during last quarter you’re building to around 10 million for the year, is that still look that’s going to be the right number for Exony for this fiscal year here?

Jeff, I don’t know if we have broken that down this quarter, have we Eric?

No, I think from an Exony standpoint as we’ve really combined the business going forward I think this is now something that we’ve now explicitly breaking out. I think the cross sell in the combined teams I think it doesn’t make sense to continue to breakout the Exony business to that level of detail.

Just to add to that Jeff, the sales teams are now fully integrated. So we have very, very small that is an overlay sort of expert group around the products just like we have for some of the other products. But as far direct account management has concerned we have that.

I guess qualitative is it -- has your expectation for the cross sell in the opportunity that you would mentally stride to Exony gene since last quarter

No, that has not changed. But what we're seeing, okay so to answer that in a qualitative way, we're seeing that, an example would be large top 10 bank in North America, where we have seen now they were an Exony client and now we've seen our solutions become par than parcel our meaning the total solution, including the classic eGain becoming part of that adoption of the bank. So, yes, the cross sale is working well.

So, I guess just jumping around here than if I look at the guidance '15 to '20, which is obviously well ahead where the street is, given the recent quarters which with actions you're look like their modest organic year-over-year decline, what is it that's driving this big acceleration clearly you've got some conviction here, I know you have a lot of confidence in the Cisco pipeline for sometime that's been slow to develop where the incremental confidence so put something out there that's -- can you just walk me through where you getting that conviction?

So, I'd say two big things there, Jeff one is that as you've mentioned and others have mentioned and we obviously are operating through this cycle on the direct sales investments and performance that we have started to put together even though it's not where we've wanted to be yet but the trend is looking good in the pipeline is building nicely. So, that is one part of it. So, the pipeline that we've seen ahead of us is what gives us that additional confidence. The second bit is the Cisco channel which had good new logo adoption at wins, the follow on sales is where the big deals and the bigger dollars are and that something that we believe will be an important part of our next year's growth as well. And then finally the migration of existing clients, on premise clients into the cloud business is where we see incremental business opportunities for us next year.

So can you explain on those two, I think you've mentioned the Cisco and kind of the you've got -- we've seen some modest absolute customer adds there but we certainly seen as well as ramp, it's ramping but seemingly comparatively slowly, with the comment that, is there big cross sales, which you've talked about for a while the ability to come and sell something much larger, so the question here from me would be is that have you done enough of track record or enough of an example, sample group I guess it's the right wording to give you that conviction as you can do that systematically and then along lines of the migration of the existing customers to the cloud, what are the economics behind that in terms of an incremental revenue of -- some of these current on maintenance premise deploy how did they get a over to the cloud, what is that mean economically?

Sure. So on the first one, yes you are right, we have seen new logo wins on the Cisco S plus but we have not seen the level of follow on large sales that we would all want to see but we've starting to see that more and more on the follow on sales in the pipeline and they're moving into the deeper stages of the pipe. So that's one part of it. The example I gave of the seven figure deal with a follow on that particular client just to give an example not to drop to complex curve through one data point but that one in itself is some as a place where we believe that we will see more business in fiscal '16 as further follow on. So, these are very large accounts and once it start to expand them the success of the initial deployment combined with their budgetary plans then start to give us more confidence on the Cisco side, so that's one. Second question is at around the migration. So, like I said the package we've put in front of these customers, if they're paying us a $100 in annual support because they on-premise client that -- if they move to the eGain cloud for the same applications we would migrate them for no charge on the services types, so we'll do that because we have an efficient model to that and the second bit is that instead of a $100 a year, they would be paying us $200 a year. So an incremental $100 to get the same application in our cloud with all the advantages, you know that. So that kind of the economics and -- by the way they have to sign up for multiyear deals for that.

And then I guess what were on the sale side with respect to the sales organization 7.8 -- non-GAAP expense there this quarter, if I go to the year earlier which was the free period it was like 0.5 million, so close you taking cost out of the structure, can you just talk about what you've done within the sales organization and particularly I'm interested in the headcount sales capacity in sort of structural changes that have taken place there?

So, answering your last question first. So the in terms of headcount on the quota carrying side with still at 33, ending last quarter. We expect to now start to add some hedges on the quota carrying side starting this quarter and continuing in a more systematic way, so that's one. Most of the investment, incremental investment moving forward is going to be in the U.S. and that's why we'll be putting more of instrumental investments, then going back to your first point. Okay bring back to your first point so the reduction of cost has come from three areas, one is we have reduced the absolute headcount in the organization so we used to be north of 40 for the guys sales reps in that timeframe that you comparing us again and we have cut that down that mostly on the underperformance side, but we have decided not to up until now refill those positions because we want to make sure that the pipeline got to a point where it was -- the pipeline growths were leading hiring as opposed to the other way which was the lots of we've gone with earlier and so AJ approaches it's the other way. So he's been looking at the pipeline and when he's finding those opportunities mostly in the U.S. where we have a pipeline growth as to a point where we can add more than he is looking at EBITDA. Then the second piece is that we have also taken out in some of the new geographies where we have gone in like Germany for instance and Northern Europe, we have a taken a blend of partner and direct and not just mostly direct, so that's been another change in our or AJ' s sales philosophy. So in some of these new markets it's blended it back into more of direct and on partner model.

And then last one for me, if you commented on a professional services margins obviously materially negative here as you've messaged the last quarter you were going to go a transition pushing more of that revenue partners and also because there will be less implementation need given the simplicity of these all new products, so with respect to the cost structure still around 4.5 million in costs from the services line this quarter, how do you think about that absolutely dollars in terms of both I guess dollar and margins for that work -- we're going to see that materially shrink if we're pushing this off of the partners and the product that just doesn't have as much service dollars just help me understand what kind of where that line goes revenue wise in terms of what you've embedded in your 16 guide and how you think about margins for that segment?

I think you've talked about that three more couple that's in Q4 and then ’16.

Sure, I think just given the timing of some of the changes that we've already took place in Q3, we didn't see the full benefits, so we certainly expect to see at least another 10% reductions so getting that number close to certainly below the 4 million range and I think again from an actual revenue standpoint where we ended up in the quarter it's probably the 3.2 I wouldn't say as steady state. I'd say this is a little lower than we would anticipate to be, so I think both from the increased type line and deals that we'll still be servicing I know I see that the revenue is getting closer to that closer to 4 million and therefore being at a breakeven if we're in that ballpark. And I think looking forward into 16. We obviously expect to see some modest growth from that but certainly not significant growth.

What has been the growth in numbers or however else you'd quantify partners that are taking that implementation work if you're passing that off the partners, what is that partner ecosystem look like if you're catching the overflow, how are you preparing them to take and drive that side of the business?

So that part is continued, its working better now just we enable when stop not just the cloud through enablement. I think we've got actual projects with many of these partners and implementing it. We have couple of people who are dedicated and our team to just help these partners implement those subjects without necessarily looking to generate eGain revenue from services. And so that part I think is in much better shape now, it's also been timed and just ongoing execution. So our expectation is that more and more of these larger value-added capabilities the people are looking to add on top of our platform for instance by using our programming APIs in particularly in the areas of knowledge is an area where we see more and more partners taking on that work and doing all that development on top of the APIs and our team focusing more on best practice configuration and solutioning some tasks more and more so that’s kind of our breakdown moving forward.

Last one for me and then just going back to the overall guide, if we look at the growth that you're looking in the forward year, how would you segment -- you don't have to precise but I guess I just two of the one understand where most of that upside is coming, you envisioned the bulk of that incremental revenue coming from the Cisco channel and the upsell of some of these early pilot deal pilot deals into much broader deploys, would you say sort of 80/20 Cisco versus poor direct offerings 50/50 just however precise you will into be give me the sense of where the growth is going to from?

I think it's my sense as it's going to be 50/50 the growth from our direct business is going to come from the cloud side and the growth from Cisco even though we're guiding more toward the cloud is likely to come more from the on-prem business through the next fiscal and then start to trend into the cloud business after that.

We’ll take our next question from Jon Hickman from Ladenburg.

Hi. All of my questions have been answered. Thank you.

We’ll go next to Mark Chappell from Benchmark.

Just one question on subscription revenue growth, it’s actually been declining consistently here over the last six quarters or so I was just wondering if you can just give a little guidance or a little direction when should that soften and structuring up?

So, Mark I think as we’ve stated in prior calls the big reason for the decline really came from the couple of large customers, one where they were having duplicate system that go through reduction and then that follows with a large renewal that reduced rate that took place in the Q2 time period so I think as we start to see, so even in this quarter we’re still seeing predominately our booking are coming from on premise sale. So, but certainly as we look into fiscal ’16 I guess is where we start to see that really reverse I think probably Q4 we still not anticipating the big turnaround at this point but I think again with lot of these initiatives we’re shifting more of the business to the cloud. We’ll start to see that turnaround in ’16.

Okay. Thank you.

Thank you. That concludes today’s question-and-answer session. I’d like to turn the call back to our moderator for any additional or closing remarks.

I want to thank everyone for joining us today. And if you do have any further questions please feel free to give us a call. We’ll be available. And we look forward to talking to you on our fourth quarter call. Thanks.

This does conclude today’s conference. We thank you for your participation. You may now disconnect.