eGain Corporation

Good day and welcome to the eGain Fiscal 2021 First Quarter 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 First Quarter Fiscal 2021 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 materially. 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 10, 2020. and assumes no obligation to publicly update or revise any of these forward-looking statements or information in this conference call. And in addition to GAAP results, we will discuss certain non-GAAP financial measures such as non-GAAP operating income. Earnings press release can be found on 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 Thank you, Jim. And good afternoon, everyone. We achieved another solid quarter for the company in Q1. Our fast revenue grew 29% year over year.

and the high end of our guidance. We generated $5.8 million of operating cash in the quarter, operating margin of 31% and we ended the quarter with a cash balance of $53 million and no debt. The strong financial position gives us increased confidence in continuing to execute to our growth plan despite the COVID uncertainty. We see fiscal 21 as and Investmentio for Regain. Given the typical nine-month enterprise sales cycle, which, if anything, is being somewhat extended in the current environment, we expect our investments to have a meaningful impact only in fiscal 22 on our top line. Let me share some more details around our investment plans and execution to date. As I have mentioned before, we are focusing our investments on the four pillars. First is brand awareness. This fiscal year, we have significantly increased our digital marketing programs, participating in virtual events, increasing ad-based spend and overall thought leadership activities. In fact, in Q1, we doubled the number of events and digital marketing activities when compared to the same quarter last year. We are also starting to see some early returns, which are good. For example, traffic to our website, gain.com, more than doubled in Q1 year over year. This is a big jump in brand awareness. Our marketing-generated leads were up nearly 90% in the U.S. in Q1 year over year. Overall worldwide, they grew by 53%. The second pillar in which we're investing is partner enablement. First off, we have expanded our contact center partner teams with more technical and sales resources, especially in the US. Our pipeline with Cisco and Avaya growing nicely, especially around new logos. Second, we are now building our go-to-market plans with some of the CRM ecosystem platforms. We have staffed up our business development team now to focus on three of those CRM platforms, Salesforce, Microsoft, and ServiceNow. We see growing demand from our customers to integrate our customer engagement platform with multiple CRM systems of record in the enterprise because we go over the top and provide one consistent layer of engagement. And underneath that, across different brands, different business units, Typically, there are different CRM systems. So it works well for the client to have one layer of engagement working across these different CRM systems. Third, we are striking new vertical-based partnerships, starting with financial services. These partnerships will be in the form of jointly developed, jointly branded customer engagement solutions, targeting clients in financial services who need turnkey capabilities to implement conversational customer engagement with AI technology. We expect to share more progress on this front next quarter. All these investments are starting to show some results now. The number of partner-driven opportunities in our pipeline at the end of Q1 was up more than 50% year-over-year for us. So that's good. The third pillar for us is direct sales. Before I share the progress on our investment in sales, let me share some relevant metrics. At the end of Q1, our sales pipeline was up 35% in dollar terms year over year. New logos now make up nearly two-thirds of our sales pipeline compared to about 50% a year ago. And we see new logo opportunities continuing to trend up. thanks to the investments we just talked about. This is very exciting because new logo wins are key to our top line growth in the medium term. So now back to our sales investments. We intend to double our sales capacity in fiscal 21. And we're executing that expansion in two phases. So in the first phase, we are on track to complete that first phase of direct sales team hiring by the end of November. We are substantially done with the selections. and most of the people have joined, but we expect the remaining ones to join by the end of November. This team, once ramped, will boost our sales capacity by about 50%. The second half of that, we plan to bring the next cohort of sales reps in the March-April timeframe of this fiscal year. Of course, assuming the markets continue to operate the way they are. In terms of geographic focus, Two-thirds of our sales capacity expansion that we are targeting is in the US, and the rest is in Europe. As a side note, we are very pleased, Todd and I, with the sales talent we are attracting now. The excitement around our market opportunity, our product leadership, growth ambition, it's all fueling this talent that we are able to attract. The fourth pillar is continued commitment to our customer success.