eGain Corporation

Good day and welcome to the eGain fiscal 2020 third quarter financial results conference call. Today's conference is being recorded. At this time, I would 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 third quarter fiscal 2020 financial results conference call. On the call today are eGain's Chief Executive Officer, Ashutosh 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, May 7, 2020, and assumes no obligation to publicly update or revise any of the forward-looking information on this conference call. In addition to GAAP results, we'll also discuss certain non-GAAP financial measures, such as non-GAAP operating income. Our earnings press release can be found in the news release link on the investor relations page at eGain's website at eGain.com. The tables included with the earnings press release include reconciliation of the historical non-GAAP financial measures to the most directly comparable GAAP financial measures. In addition, a replay of this conference call will also be available in the investor relations section of eGain's website. And now with that said, I'd like to turn the call over to eGain's CEO, Ashutosh Roy. Thank you, Jim, and hello, everyone.

We are pleased to report solid financial results for the third quarter. But before I go there, let me share a quick update on COVID-19 with respect to our business. As the pandemic unfolded in March, we adjusted our business, and within days, we successfully transitioned our worldwide teams to a 100% work-from-home operation. with no business interruption and no material impact to our service delivery capabilities. In short, our business continuity plans worked as expected. That was good. Turning to the business impact of COVID-19, some of our deals, especially new logos, flipped in March as purchasing decisions stalled. Some of those stalled deals have since closed in April, and most others remain engaged and they look to resume once lockdown restrictions ease. At the same time, we saw a positive increase in business from our customers looking to deflect more phone interactions to digital and drive more automation. Many of our clients successfully handled customer contact surges with our solutions, driving more self-service and more digital engagement. In addition, they also enabled workforces and reconfigured them with our knowledge and guidance solutions. In fact, some of our clients who were impacted by the sudden shutdown of their global operations, especially on DPOs, managed to use our knowledge and guidance solutions to empower their field and store staff, who are not contact center folks, to resolve customer queries in the interim. So very agile and flexible responses enabled by our solutions. Some other customers activated our virtual assistant to offer conversational self-service, reducing pressure on their contact centers. For example, a European insurance client handled a 700% increase in customer contact. They're a life insurance provider. You can imagine that concern from customers using our self-service solution and knowledge solution. a North America telco client, reconfigured thousands of field personnel and store staff to handle a double increase in their digital customer contacts, 100% increase. A financial services client in North America also doubled their use of virtual assistance and digital service from us as their customers look for more help. Faced with this disruption, now, We see most businesses recognizing that digital engagement is no longer an add-on to voice. In fact, digital is the new voice. Once the lockdowns relax, we expect to see acceleration in demand for our solution. In fact, in the last month, in April, we are already seeing growing interest from prospects in our solutions. Having said that, We do anticipate some negative impact in the short term as investment decisions get delayed and projects pause because of the COVID-19 situation. And those will take some time to spin back up. Like most technology providers, we will be subject to the economic slowdown. However, we believe that our exposure should be limited because First, roughly 90% of our existing clients are large enterprises, that is, businesses with over a billion dollars in annual revenue. This includes governmental organizations as well. Second, 75% of our business, total business, is in the verticals of banking, financials, insurance, health care, government, and health care. and we expect that these verticals should not be significantly impacted, though there will be some impact. 9% of our business comes from retail, which we think will be impacted. And finally, 2% comes from travel and hospitality, which has been severely impacted, as we know, and we can see that that will result in reduced demand as well as customer churn and reduction in the travel and hospitality sector. So our view on the whole COVID-19 situation with respect to our business is that while in the short term we have seen deal slippage, we have been able to deliver strong results with healthy bookings in the March quarter. And now let's turn to the outlook for the near future and the medium term. So before I go there, let me talk about business performance for the quarter. We saw healthy bookings, new bookings, with a mixture of new logos and strong expansion in existing clients. Some notable wins. We had a new logo, which was a financial services Fortune 500 company in the US. Another new logo, which is an insurance provider in Europe.