Good afternoon, and welcome to the eGain Fiscal 2025 First Quarter Financial Results Conference Call. All participants will be in listein-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Jim Byers, MKR Investor Relations. Please go ahead.

Thank you, operator, and good afternoon, everyone. Welcome to eGain's fiscal 2025 first quarter 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 the Securities and Exchange Commission. eGain is making these statements as of today, November 12, 2024, and assumes no obligation to publicly update or revise any of the forward-looking information in this conference call. In addition to GAAP results, we will also discuss certain non-GAAP financial measures such as non-GAAP operating income. The financial tables included with the earnings press release include reconciliation of the historical non-GAAP financial measures to the most directly comparable GAAP financial measures. eGain's earnings press release can be found by clicking the press release link on the Investor Relations page of eGain's website at egain.com. And along with the earnings release, we will post an updated investor presentation to the Investor Relations page of eGain's website. And lastly, a phone replay of this conference call will be available for one week. And now with that said, I'd like to turn the call over to eGain's CEO, Ashu Roy.

Thank you, Jim, and hello, everyone. We are pleased to report first quarter revenue and profitability ahead of consensus estimates. In what is a seasonably light new bookings quarter for us, our new bookings were up significantly year-over-year. So turning to business highlights. During the quarter, we booked good new and expansion business. Let me share a couple of examples. We signed up a client who is looking to improve the productivity of its field service engineering team worldwide, about 4,000-plus engineers. They are a very large multibillion-dollar data center builders and their business is booming in the AI space. This client tried to unsuccessfully solve the knowledge problem a couple of times before we got the mandate. First, they tried to solve it with a homegrown solution. That didn't scale. Then they toyed with the knowledge capability in their CRM platform, but that couldn't handle the complexity and compliance requirements they had. As I've said before, some of our best clients tend to be those who have tried and failed at getting value out of their knowledge management initiatives before they come to us. With our Hub, this client intends to create a single source of truth, delivering trusted answers using AI and experts in the loop. This is an exciting entry for us into the market for field service, a huge adjacency to our current market focus on B2C customer service. Another one I want to mention is a recent client, one we signed up in Q4 of last year, so about five months ago. They are now expanding the use of our AI Knowledge Hub based on the quick value we delivered. The client in the first few months of their deployment established a solid knowledge foundation in their business focused on customer-facing knowledge that worked very…

Thanks, Ashu, and thanks, everyone, for joining us today. As Ashu noted, both first quarter revenue and profitability came in ahead of consensus estimates. We continue to see positive momentum in our AI Knowledge business and stabilization within our conversation and analytics customer base with strong renewals and no material losses in the quarter. Let me share more detail about our financial results for Q1 before discussing our outlook and guidance for Q2 in fiscal 2025. Looking at our revenue, total revenue for the first quarter was $21.8 million at the high end of our guidance, but down 10% year-over-year. The decline was primarily due to the impact of the 2 large client losses in our Conversation and Analytics business this past year, which we've discussed on prior calls. When looking at revenue by region, North America accounted for 75% of total revenue, down from 79% in the year-ago quarter. Looking at non-GAAP gross profits and gross margins, gross profit for the quarter was $15.4 million or a gross margin of 70% compared to a gross margin of 73% a year ago and 71% last quarter. Now turning to operations. Non-GAAP operating costs for the first quarter came in at $14.2 million, down 5% from $15 million in the year-ago quarter. R&D was up 16% year-over-year as we invest in product innovation to capitalize on the significant market opportunity. Looking at our bottom line, non-GAAP net income was $1.3 million or $0.04 per share compared to non-GAAP net income of $3.8 million or $0.12 per share in the year ago quarter. Adjusted EBITDA margin for the quarter was 6% compared to 12% in the year ago quarter. Turning to our balance sheet and cash flows. For the first quarter, we generated $954,000 in cash flow from operations or a 4%…

[Operator Instructions] And the first question will be from Jeff Van Rhee from Craig-Hallum. Please go ahead.

Hey, good evening, Ashu, Eric. This is Daniel on for Jeff. Just maybe briefly, we could speak to, in previous quarters, you've been talking about some of the improvements we're seeing in go-to-market in terms of the sales cycles coming down, more RFPs, better conversion rates. Just maybe in terms of those green shoots that you guys have been seeing, just -- any developments, what you can call out compared to 90 days ago, where that's been? And then maybe a two-parter here kind of in that vein. You mentioned new bookings up substantively year-over-year. Just any quantification there would be helpful.

Sure. This is Ashu here. So I can speak to the RFP stuff and maybe to the extent you can talk, Eric, about any bookings breakdown. So I believe the RFP pace is quite steady. We have the summer slowdown, which is always there because summers are slow time. But post that, so in October, we have seen a big pickup again. So I think the RFP pipeline continues to be quite good for us.

And on the booking side, if you recall, I think this quarter a year ago was probably one of the slowest points in the business. So again, this quarter is seasonally slow, significant improvement from a year ago, but still from a total booking standpoint, certainly not a very strong quarter relative to what we would expect as the year continues. So we certainly expect that booking number to increase as we see the quarters progress.

That's helpful. Yeah. Then one for you, Eric. Just on the additional investment into marketing and R&D, you guys have been looking to make. Just kind of update us on how far are we into actioning those R&D changes? And then specifically on S&M, it looks like that was down sequentially. Maybe just help us with what's happening there.

Let me take the marketing one. Maybe I can answer this. So the marketing stuff is impacted by our seasonality in terms of some of the big investments we make in our own events. So for example, we had the big event in October. So you'll see a spike because of that, right? So that is one way to think about marketing. It's not necessarily quarter-on-quarter sequential increase. It's more timing driven through the year. In terms of R&D, I mean, we are definitely increasing our spend in that, and it will probably go up a little bit more as we get closer to some new announcements. We will be going GA, for instance, with our AI Agent in the first quarter calendar '25. And so you'll see some of the steady pickup on that, not a huge amount, but you'll see a steady pickup.

Exactly. I think that's exactly it, Ashu. Yeah, I think -- so that number we've made good progress, and there might be some incremental spending, but I think we've done a good start to the year with those numbers that we've set.

Okay. That's helpful. And then just a high-level question for me. As the company is pivoting to sort of focusing on these GenAI products as the tip of the iceberg here on sales in terms of AssistGPT and the new agent product, just help us understand at a high level where we're at in the evolution for the company as -- in terms of both product and go-to-market in making those the drivers in terms of the maturity of where we're at in that process.

So a couple of comments I'll make. One is from a product standpoint, I would say we are fairly advanced because we've been investing in it for the last two years. And so we think we have made some very good progress on the product front. It will continue, but you'll start to see results. And as we announced this new AI Agent, that was a result of some good investment over the last 9 to 12 months and you'll see a continued string of new things coming up as we announce them. In terms of sales and marketing, we see it as a sort of somewhat of a sequential process, right? So as we are driving more product innovation and announcing new capabilities, we are also seeing our pipeline filling up. And then there are some new things we are working on that will then give us the basis, a platform, if you will, to invest much more effectively in market development and go-to-market. And I think that's going to be likely to be in the second half of this fiscal year is when we started.

That's helpful. And then just the last for me. Just in terms of kind of geographical splits, saw a particularly strong quarter out of EMEA, it looks like and a little bit lighter in North America. Just is that an anomaly? Anything we should read in there as a trajectory? Just any commentary on that would be helpful. Thanks, guys.

In terms of new business, sorry, US is still the engine of growth.

Yeah. And I think just to add to that, this was really more a function of some of that -- those customer losses. So those happen to be US-based businesses. So as the revenue declined, that adjusted that shift as opposed to it being a reflection of a change in the sort of the market demand, to Ashu's point, it's very much still US focused.

Okay. Thank you, Ashu. Thank you, Eric. Congrats on the quarter.

Thanks.

And the next question is from Richard Baldry with ROTH Capital. Please go ahead.

Thanks. It seems like AI coming into the market was largely a confusion factor for quite a while that it added to what people wanted to put into their solutions. They didn't know exactly how it would work. Can you talk how much about it's still a confusion factor in the sales cycle? Are there new competitors coming with very small point solutions that are still confusing that? Do they have real offerings? Or is a lot of that slide where you feel about -- and in the long run, we feel like it should be a driver and a market expander. But how close do you think you are to that sort of a tipping point as opposed to sort of bogging down the processes?

I think the realization in the market that you need more than just a small widget or a very narrow solution that could solve business problems across lots of use cases, we are seeing that realization more and more now. And I can see that in the -- and I review some of the RFPs that come in and RFIs, and I can see that. At the same time, I would say that new entrants continue to enter the market. So the confusion factor is not going down, but enough people in that churn are exiting that churning drum and saying, okay, let's try to solve this in a more thoughtful way using AI as opposed to just AI as the solution for everything. And we are seeing that the trend that we are seeing intersecting with it positively for us is this centralization of knowledge to deliver trusted content so that AI can, in fact, do a job that is operationally useful. That is a trend we are seeing more and more now.

Thanks. And in some quarters, you've been able to talk about sort of big trialers that are underway, sort of $10 billion-plus kind of customers. Any update on sort of that very large opportunity, how those pipelines are looking, how far people are moving through that? Is it changing sales cycles, timings and how that should play out as fiscal '25 unfolds?

I'd say we are seeing more trials. Well, let me rephrase that. We are seeing more large trials. So that, to me, is a good sign. That tells me that big companies are getting more serious about making a decision in this area, right, that I'm seeing. In terms of cycle time, it's still pretty much the same, right, 9 to 12 months for these large deals. But we have more of these large trials underway.

Lastly, still following on that. I think you said before you had something very high, like a 75% conversion of pilots to customers. Maybe that's early into the cycle. What are you seeing about when people trial it extensively, sort of win rates or the ability to move to a decision as opposed to continuing to look for solutions?

I would say that is still in the ballpark of what we are seeing. Yes. It's almost like if we are able to move them into the trial, that's our qualification to the next stage of the pipe.

Great. Thanks for your help.

Thank you.

And ladies and gentlemen, this concludes today's question-and-answer session. I would like to turn the conference back over to eGain management for any closing remarks.

Thanks, operator, and thanks, everyone, for listening to the call and look forward to giving you an update for our Q2 results. Thank you.

Thank you, sir. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.