Please standby. Good day. And welcome to the eGain Fiscal 2021 Fourth Quarter and Full Year Financial Results Conference Call. Today’s conference is being recorded. At this time, I’d like to turn the conference over to Jim Byers of MKR Investor Relations. Please go ahead, sir.

Thank you, Operator, and good afternoon, everyone. Welcome to eGain’s fiscal 2021 fourth quarter and full year financial results conference call. On the call today are eGain’s Chief Executive Officer, Ashu Roy; and Chief Financial Officer, Eric Smit. Before we begin, I would like to remind everyone that during this conference call, management will make certain forward-looking statements, 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 eGain’s results are detailed in the company’s reports filed with Securities and Exchange Commission. eGain is making these statements as of today, September 1, 2021, 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. The tables included with the earnings press release include a reconciliation of the historical non-GAAP financial measures to the most directly comparable GAAP financial measures. Our earnings press release can be found on the News Release link on the Investor Relations page at eGain’s website at egain.com and a phone replay of this conference call will be available for one week. 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. We are very pleased with our financial performance for the quarter and fiscal 2021 full year. We exceeded our guidance for the quarter, as well as for the fiscal year 2021. Plus our top and bottomline results were ahead of street consensus. With a strong balance sheet, we intend to continue to invest in our business to further translate our product leadership into market leadership. In fiscal 2021, we grew our topline by 8%. In fiscal 2022, we believe we can grow our topline faster. We plan to grow 13% to 15% in fiscal 2022. That’s an exciting jump for us as a team and we are off to a good start in pursuit of that growth goal. We’ve already closed to seven figure ARR deals in the current first quarter of fiscal 2022. The first one is a new logo win a hyper-growth crypto exchange looking to better serve its global customers. The other one is an existing client, a U.S. Government agency actively deploying knowledge powered automation to improve the design experience. In both cases, our leading cloud security, on-demand scalability, and proven CRM and contact center connectors were key considerations beyond the functional richness of our solution. According to Gartner, enterprises are looking to modernize knowledge management systems to get more value from digital investment and customer engagement. And we, eGain, are being seen as the premier provider of modern knowledge management solutions in that context. The status is validated by analysts like Gartner and Forrester, when they rate our product capabilities, plus a growing roster of big platform partners who are looking to enhance their customer engagement offerings with best-in-class, knowledge and digital engagement capabilities are partnering with us. Last week for instance, we announced the availability of our…

Great. Thanks, Ashu, and thanks, everyone, for joining us today. As Ashu noted, we delivered a strong financial performance in fiscal 2021, with top and bottomline results that exceeded our guidance and street consensus. And even with our increased investments in sales and marketing, we do improve gross margins and strong earnings and cash flow for the fiscal year. Another highlight was hitting target to bring our legacy [Technical Difficulty] less than 5% of total revenue in Q4 2021. With our model transition finally behind us, we are starting the new fiscal year with a plan to accelerate our topline growth in fiscal 2022 and beyond. Before getting into our outlook and guidance for fiscal 2022, let me share some financial highlights for the quarter and full year. We grew our SaaS revenue 15% for the quarter and 18% for the year, compared to the same period a year ago. Our total revenue grew by 6% for the quarter and 8% for the year compared to the same period a year ago. Looking at our non-GAAP gross profits and gross margins, gross profit for the fourth quarter was $15.3 million or a gross margin of 75%, up from 74% a year ago. For fiscal 2021, gross profit was $69.4 million or a gross margin of 76% from 72% in the prior year. Looking at our bottomline, non-GAAP net income for the fourth quarter was $2.5 million or $0.08 per share. This compares to non-GAAP net income of $2.7 million or $0.08 per diluted share in the year ago quarter. Non-GAAP net income for the fiscal year was $8.7 million or $0.27 per diluted share, compared to non-GAAP net income of $9.3 million or $0.29 per diluted share in the prior fiscal year. Turning to our balance sheet and cash flows.…

Thank you. [Operator Instructions] Our first question come from Richard Baldry with ROTH Capital.

Thanks. Could you maybe talk about the drivers of the deferred revenue line this quarter, it spiked pretty sharply, both sequentially and up 26% year-over-year? And I’m just looking at the current deferred. Is there anything unusual in there, I mean, that would argue for growth to accelerate fairly meaningfully above even what the implied guidance says. So I’m just trying to figure out if there is anything anomalous there? Thanks.

Hi, Rich. Yes. I think, as I’d mentioned, we had a strong number of renewals that came in at the end of the quarter. So I’d say that’s a big part of what drove that? So I think, again, we feel good about the renewal rates, no unusual churn, but nothing outside of that would want to comment on at this point.

So there wasn’t any meaningful change to the average duration of contracts or anything else to drive that?

Though, I think we did have a couple of federal contract renewals that those are typically one year in duration. So that’s certainly would have skewed the shorter term elements from that regards.

Okay. And then maybe can you talk about you are into some cohorts a little deeper on the hiring or tenure now? How has that experience been both from recruiting onboarding ramping? There are things that you’ve learned that you think will help you with the next cohorts that you plan to add by year-end? Is just overall how that process is going in a sort of COVID dampened environment?

Yes. That’s a good way to put it. COVID dampen, Rich, so, yes, we obviously learning much like everyone else, how to do this in a remote way. What we found is that we are able to attract it’s not easy to attract sales talent, but we are able to attract the mid-level sales talent, which then we feel we can bring him on board quite well. So that’s been our strategy. And we are working that quite consistently now. I think the first bunch we had some hiccups, some people join some people are those few left. And what we found was that the big thing outside of things that are not in our control like COVID. But other than that, the big thing we noticed was that people who were more learn faster, learn easier seem to be the ones that stuck around. So that’s one of the things we have learned and we are obviously driving that car over the next cohort.

And then it looks like the legacy maintenance sides now $100 million, and dropping several 100,000 a quarter. Can you talk about the end of that, is that really maybe only another two, three quarters? And then that should run to zero and be done or is that something that you think will push past fiscal ‘22?

Eric, do you want to provide some color on that?

I can take that Ashu. So I think where we sit at the moment, so obviously very pleased that it’s now down below that 5% level. The good news is that for the material customers that make up the remainder, we’re actively engaged with most of them. And again, many of them have plans to move and migrate, but there may be internal dependencies that they have been placed that are creating the lag. So instead of forcing them to meet a date, so that we can sort of drop this off to zero, we are working with this small list of customers. So from that perspective, can you trail out over time, but for us as we look forward to fiscal ‘22, we don’t believe that it’s going to have that meaningful drag that said in previous years. So that’s why our focus on this call is to really focus on total revenue growth knowing that this is going to have less of an impact than it’s had in previous years of course.

Okay. And last for me would be the revenues beat what we had going pretty solidly, but the professional service is actually below, so recurring being above this where we’d want to see it just sort of curious the Pro-Services was down below the prior two quarters. Is there any way to think about how that should grow in tandem with the topline or what factors sort of make it oscillate quarter-over-quarter as we look to build our ‘22 models? Thanks.

No, I think - good. Something that we’ve been looking at closely. I think as we’ve talked about in [Technical Difficulty] deployments with the test numbers decline as a percentage of revenue down below that 10-step mock forward [Technical Difficulty] expansion opportunities, where customers are just buying all of the same products, there’s typically less [Technical Difficulty] associated with that. But as you get into new deployments that’s where the attach rate [Technical Difficulty]. I would say that as we look forward, our expectation is not just the significance further decline [Technical Difficulty]

Sir, is becoming difficult to hear you. And we did lose connection with that speaker, please just remain on the line while we re-establish his line. Thank you.

Hi, Richard, we will come back to you once Eric reconnects, I’m not sure he is having some technical issues. But I’m sure he will complete his talk, I apologize for that.

No, he largely did answer my question. I’ll take anything else offline. Congrats on a good end of the year and a nice outlook for next year.

Thank you, Rich.

And our next question come from Mark Schappel with Benchmark.

Hi, thank you for taking my question. Some of the Salesforce in fiscal ‘21, the company grew or at least plan to grow its sales headcount by 50%. I think that was announced the beginning of the year. How much of a sales capacity increase are you anticipating in the coming fiscal year?

Yes. My sense is that we will endeavor to scale by another 50%. Certainly go capacity wise, I think we will go up by 50%. Whether its headcount wise or not that depends on how we organize the quarters and the direct versus channel kind of programs. But I think capacity wise, that’s what we are targeting.

Okay. Great. Thank you. And then let’s see if you could provide some additional color around the product development investments that you’re planning for the upcoming year. I mean, what capabilities are you looking to add or grow into, and what are you planning to focus on in product development?

Sure. So one thing I already mentioned, which was kind of the Delta that I alluded to in terms of level of investment as a percentage of our revenue. And that has to do with building out the marketplace and the developer environment for a platform so that we can get more small-to-midsize value added solution providers. And we are getting quite a few inbound inquiries around that both from direct partners or partners we’re working with some of the clients we are now selling to. And they are all interested in kind of integrating into the eGain platform and do it efficiently and do it profitably. So that’s a marketplace capability that we do not have today. And we want to make sure that we put that in place quickly. So that’s one big element. The second area where more on the functional side, where we are going to be focusing is the whole knowledge - embedding knowledge into more and more parts of the enterprise is something we are getting a lot of interest in. We starting out in almost every case, we start out on the customer engagement side, whether it is self-service, or it is agent tracing. But what we are seeing as a quick, the next step with customers is interest in taking that capability and system of knowledge management and scaling it across the enterprise, sometimes internal facing HR, IT so on so forth. So that’s an area where we will also increase our product investment in.

Great. Thank you. That’s all for me. Thanks.

Thank you.

And our next question comes from Jeff Van Rhee with Craig-Hallum.

Great. Thanks for taking my questions. A couple from me, if you would. Ashu on the partner side, I know it’s been a big focus. I didn’t hear as much commentary about it this quarter. I guess a couple of specific questions. You’ve had two, I think, in the most recent quarter, 10% customers, 123% and 130%. Any commentary or directionally any changes with those two customers in terms of meaningful trend one way or another? And then the second question is, is kind of more specific to the overall partner growth? And that is, can you put some numbers around maybe the growth in bookings value from partners or the growth in logos from partners? Just give us a little finer point on your momentum there.

Okay. I’ll try to address the second question first, Jeff, and then, Eric, maybe you could take the first part of Jeff’s question. Okay.

Sure.

Okay. So in terms of new logos from last fiscal, meaning fiscal 2021, we saw good new logo acquisition through partners. And that continues even this fiscal year, fiscal 2022. Our pipeline has good number of new logo opportunities from partners as well. So I think we’re seeing a healthy split, if you will, that split as probably in the, I would say, a 50:50 kind of zone on the new logo side of partner versus direct today. In terms of the first question, Eric, maybe you can answer that more.

Sure.

Yes.

So just to be clear both of those customers as they’re listed one is solely a partner, so resale relationship. And then the second one is a combination of a partner and a customer. And so, I think, for this quarter haven’t seen if anything, the business has continued in the right direction. So, no changes anticipated was in the revenue from those two customers in the quarter.

Yes. And maybe just along that line then on the partner side, I mean, I know you’ve had a lot going with Avaya. You’ve talked from time to time about Amazon. Cisco’s obviously for BT and eGain. I mean, you’ve got a lot of things going just any particular callouts in terms of where you’re seeing particular strength?

I would say, on the - in the U.S. for Cisco and Avaya are the top two right now on the channel side for us. In Europe, BT is probably the leader from a partner standpoint for us. And now we’re kind of excited about though it’s $0 so far but about the SAP partnership because we are seeing good mutual interest in the developing go-to market motion with some of their field teams globally as well as in the U.S.

Fair enough. One last one, if I could. You mentioned the two seven figure ARR deals that you signed post quarter close. And I think you said one was an existing government agency, the other being a new logo crypto player. Assuming there was some competition in each of those, can you just give us a quick glimpse into who you’re seeing in deals like that?

Right. So the expansion was clearly we already were in the game, so that there was no competitive - significant competitive play in that deal though there were some very large players in the government agency environment where we - our sponsors made the case to go with the eGain proposition versus all in one kind of solutions from alternatives. In the case of the crypto client, which is a new logo, the competitive environment was with people like - in this case, this particular client has Salesforce as their CRM system of record. So they were evaluating Salesforce for the knowledge management piece as well. And they were evaluating some pure-play knowledge players like in this case they evaluated Oracle as well very seriously. So those were the ones they told us about. And what we will be doing in the case of this crypto client is we will be integrating our solution tightly through our connectors into Salesforce.

Okay. Great. Very nice quarter. Thank you.

Thank you.

And our next question comes from Tim Horan with Oppenheimer.

Thanks, guys. Can you give a little bit more color on the value-added services that partners can bring? Do you think kind of where does this evolve to in the next couple of years? And then I just had a quick follow up on the financial guidance.

Okay. So we are just beginning the journey here, Tim. So the idea is to create a - to begin with a simple marketplace where we can certify these apps and put them for our clients to be able to use with the confidence that it will work in the eGain environment and not in but connected into the eGain platform. And that will be step one. And then step two will be looking at whether we want to create some sort of economic model around that something that people like Salesforce and others do today. So we are a couple of steps behind that. But we know that there is a need, and especially in our market segment, which is knowledge centric customer engagement, I think that there is an unmet need and we are seeing that from both small players trying to add value as well as customers and prospects asking for that sort of ease of plugging and playing with smaller value add providers onto our platform. Does that help?

Yes. That’s helpful. Thanks. And then on the guide, it looks like you’re looking for operating expenses to grow basically double what your revenue is going to grow out if I’m looking at it right over 30%. I mean, can you even ramp up spending that rapidly? And are you doing this because you think you can accelerate revenue growth faster than you’re showing this year? Or are you doing it to kind of maintain revenue growth the next few years? Thanks.

My view - and Eric, you can add more here. My view is that we need to get to what I would call minimum efficient scale that are using industry parlance. And we are at a level in an operational if you look at the operational capabilities and the foundational IP systems and sort of core people capabilities, we need to invest in that somewhat in a step function way to get to that level where we can then look at more marginal investments and better returns on top of that. So that’s what you’re seeing in fiscal 2022. That may not reflect in fiscal 2022 topline growth as in a lot of surprise on top of whatever we are saying. But it certainly will and should accelerate our topline growth in tail end of 2022 and 2023.

So I think just to add to that one other point, I think, is many of the investments that we began in 2021 more back end loaded. So if you just look at the sequential ramp, it’s not as steep as it looks when just looking at the year-over-year comparisons.

That’s helpful. Thank you.

Thank you.

And that does conclude the question-and-answer session. I’ll now turn the conference back over to management.

Great. Well, thanks everybody for listening in. Again very excited about the upcoming year, so I look forward to providing you updates as we put out our Q1 results. Thank you.

Thank you. And that does conclude today’s conference. We do thank you for your participation. Have an excellent day.