eGain Corporation

Hello and welcome to the eGain 2022 fourth quarter and full year financial results conference call. All participants will be in a listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch tone phone. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Jim Byers of MKR Investor Relations. Please go ahead.

Thank you, operator, and good afternoon, everyone. Welcome to eGain's fiscal 2022 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 Smith. 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, excuse me, 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, September 8, 2022, 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 reconciliation of the historical non-GAAP financial measures to the most directly comparable GAAP financial measures. Our earnings press release can be found by clicking the press releases link on the investor relations page of eGain's website at eGain.com. Along with the earnings release, we have also posted an updated investor presentation to the investor relations page of eGain's site. 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 good afternoon, everyone. We finished the year strong. And overall, we are very pleased with our progress this year. Both our top and bottom line results were ahead of our guidance and street consensus. So our total revenue for the year grew 17% year over year to 92 million. And we generated good cash flow from operations for the year of over $8 million. That was a good way to end the fiscal year for us. Looking at the last quarter, let me share some notable new wins. The first one is a top 10 airline in the world. and they selected eGain Knowledge as their centralized platform to empower agents across their global contact centers. This is phase one. In the second phase, they'll use the same knowledge assets to drive better customer self-service. Interestingly, we are partnering with Deloitte to deliver this solution to the airline client. The next one is a leading U.S.-based provider of health and benefit plans. Their challenge was similar. They were struggling with knowledge silos, and it was showing up in long customer calls and repeat contacts. So, again, our Knowledge Hub solution is what they went with. The third one is the Department of Taxation, for a state government in the US. They selected eGain for knowledge as well as the omni-channel advisor desktop capabilities. And in this case, our FedRAMP authorization was a significant factor in their selection. The last one I want to bring out is one of the clients we won, which is a European-based leading vehicle leasing companies, one of the biggest vehicle leasing companies in the world. They plan to deploy the eGain Knowledge Hub as a central platform across 29 countries in 19 different languages. So the power of centralization where there is a need for multilingual and appropriate regulatory personalization, that's something which was very important to them. Those were really good wins. Excited about those new plans and more. In terms of customer expansion in the quarter, one of the notable ones was, again, a federal agency who's an existing customer. They have upgraded to the FedRAMP version of the eGain Knowledge Solution. Looking back at the fiscal year, I just want to observe that at the start of the year, we mentioned we were making a bet to scale our sales capacity. And that's something we continue to do through the year. And by the end of the year, so over the year, we ended up increasing our sales capacity by over 50%. And that steady investment increase also then ramped up improvement in our bookings and our pipeline build. So just a few metrics to share to show our progress over the whole year. These metrics are tricky for quarterly... because they tend to vary. But over the year, you can see the difference is something I'm sharing at this time. Our new logo-based ARR, new logo-based ARR for fiscal 22 was up 45% year-over-year. In terms of pipeline, the RFP volume from prospects went up by over 50% year-over-year in fiscal 2022 compared to fiscal 2021. And then we ended the year with our RTO, our remaining performance obligation, at over $100 million, which is, again, up over 50% year-over-year. These are some relevant metrics. Of course, we look at these and they tend to be a little volatile, but over the year, the progress is evident. Looking at the market, we continue to see the big opportunity in knowledge management and overall customer engagement powered by knowledge. Even with the economic slowdown, leaning into this market with the current level of sales investment we have built up to is a good bet. We believe in a tough market, customers will continue to invest in agent experience and also in self-service automation. Further, our top two verticals, that is financial services and insurance being one, and government now being the second biggest. Together, these two comprise over half of our business now. These two verticals, we believe, should not get too negatively impacted in the market slowdown. Of course, there will be some impact. So we do anticipate decision-making slowdown. That's natural. So we feel it's prudent for us to plan conservatively while maintaining current levels of sales investment. In fiscal 23, we intend to focus on driving sales productivity, as we take a balanced view of growth and profits in the current climate. On the product front, a couple of interesting things in the quarter. We recently announced our eGain Knowledge Connector for Microsoft SharePoint. As you all know, probably, SharePoint is the leading content management tool out there now. And what we are seeing is increasingly our clients want to modernize their knowledge management, but at the same time, they also want to federate all their legacy content from multiple SharePoint repositories. Just to give you an example, one of the clients we recently won, not in the last quarter, but a couple of quarters before that, and we are deploying and going live with a solution, They have over 60 SharePoint repositories in their enterprise that they want to federate into. Yes, they'll have a small bit of curated knowledge and intelligence in the e-game knowledge platform, but still the vast majority of legacy content continues to sit in these SharePoint repositories. So we believe this is a a good opportunity for us to layer on our modern knowledge hub alongside the SharePoint install base in the enterprise. And then just yesterday, we announced our connector to IBM Watson. This leverages our bring your own bot or BYOB architecture. We are seeing that businesses have built many bots and continue to build their specialized bots using technologies like IBM Watson. And now they want to leverage that specialized bot investment in combination with a modern knowledge platform like ours to deliver better service. So these connectors make it easy for them to do so. Looking ahead, We see businesses continuing to invest in digital transformation. So demand for our solutions, I believe, is still strong and will get stronger while accommodating for the economic slowdown, which is a cycle. So a couple of things I want to highlight. One was beginning of the year, I think we had mentioned this, published an annual research paper early 2022, calendar 2022, which brought out the technologies that are important for enterprises looking to improve customer service. And then number one technology recommendation at that time to these customer service leaders for the year was to invest in knowledge management tools. So now you fast-forward that, and in July, so a couple of months ago, they published another Gartner estimate where it talked about the hype cycle of different technologies, which they publish every year and refresh every year. And in that, the penetration of knowledge management technology for customer service, they rated that still under 20%. It was anywhere between 5% and 20%, so definitely under 20%. The fact that there's a big market ahead of us. At the same time, they assess that the value of this technology is high for enterprises. Their assessment in that document, which we completely agree with, is that the three reasons knowledge is seeing a resurgence of interest in the enterprise. The first two are more demand-oriented. The third one is more capabilities of technology and solutions. The first thing is just the proliferation of number of customer contact points. That's driving a lot of inconsistency and customer frustration in service. The second is the world of hybrid work and high levels of employee attrition. That's highlighting the need for better knowledge and guidance tools for these frontline agents. And then the third bit, which is the supply side, Their assessment, and we are part of that solution, is that new knowledge and AI technologies are making it possible to deliver these better solutions and show the value of knowledge and guidance using AI and knowledge technologies. These solution stories and client successes at scale, that's creating a virtuous dynamic in the markets. With our leading solutions in the space and our client successes, we believe we are well positioned to capture market share with our scale sales capacity. Before I hand over to Eric a couple of comments, first a plug for our annual customer conference. After a two-year gap, we are very excited to announce eGames Solve 22. This is our annual customer conference. We will be holding it on October 11th and 12th, the MGM grant in Las Vegas. This time around, we have a record number of customer speakers, so we're very excited about it. We've been missing it for two years. And we'll also be announcing some exciting capabilities of the conference. In addition, several legal partners, including Deloitte, will be showcasing value-added solutions alongside our proposition. In conclusion, I just want to wrap up with a couple of summary thoughts. The first thing is the market need for our solutions continues to be strong and relevant, and we are more excited than ever. Second, given the economic environment, we are adopting a prudent stance, and so we're focusing on productivity of our sales team in fiscal 23. and not necessarily further increasing our investment on the sales capacity side until we see the productivity showing up, which we expect. And then lastly, our product strategy overall remains unchanged as we continue to build out our platform and grow our partner ecosystem with connectors, APIs, and developer support. With that, I'll ask Eric Smith, our Chief Financial Officer, to add more color around our financial operations. Eric.

Thanks, Ashu, and thanks, everyone, for joining us today. As Ashu noted, we finished the year strong with both our top and bottom line results ahead of our guidance and street consensus. Let me share some financial highlights for the quarter and full year before getting into our outlook and guidance for fiscal 2023. Total revenue for the fourth quarter was 23.5 million, up 16% year-over-year, or 20% in constant currency. Cash revenue for Q4 was 20.6 million, up 15% year-over-year, or 18% in constant currency. For the full year, total revenue was 92 million, up 17% year-over-year, or 18% in constant currency. This is an important milestone for us when compared to the 8% growth we realized in fiscal 21 and fiscal 20. For the full year, SAS revenue was 80.9 million of 21% year-over-year. Legacy revenue in Q4 was down to 805,000, which was down 14% year-over-year and accounted for now only 3% of total revenue. Looking at non-GAAP gross profits and gross margins, gross profit for the fourth quarter was $17.6 million for a gross margin of 75% compared to 75% in the prior year quarter. For fiscal 2022, gross profit was $70.5 million for a gross margin of 77% compared to a gross margin of 76% for the prior year. Now turning to our operations, non-GAAP Operating costs for the fourth quarter came in at $16.9 million compared to $13.3 million in the year-ago quarter. The increase was primarily driven by investments in product development and sales and marketing. Looking at our bottom line, non-GAAP operating income for the fourth quarter was $722,000 for an operating margin of 3% compared to an operating margin of 10% in the year-ago quarter. Non-GAAP net income for Q4 was $893,000 or $0.03 per share. This compares to non-GAAP net income of $2.5 million or $0.08 per share in the year-ago quarter. Non-GAAP operating income for the fiscal year was $9.2 million or an operating margin of 10% compared to an operating margin of 4% last year. Non-GAAP net income for the fiscal year was $8.9 million or 28 cents per share on a basic basis and 27 cents per share on a diluted basis. This compares to non-GAAP net income of 8.7 million or 28 cents per share on a basic basis and 27 cents per share on a diluted basis in the prior fiscal year. Turning to our balance sheet and cash flows, during the year we generated cash flow from operations of 8.1 million for a 9% operating cash flow margin. our balance sheet remains strong, with total cash and cash equivalents at the end of fiscal year was $72.2 million, up 14% from a year ago. Now, turning to our customer metrics, as Asha mentioned, our strong bookings in the quarter reflected a combination of new customer wins as well as expansion and renewals with existing customers. The number of 1 million ARR customers increased 31% year-over-year, given our continued focus on selling to large B2C organizations and government organizations. And our OPIO increased 54% year-over-year to 100 million.5, driven by the strong renewals. Our SAS ARR, excluding our OEM business, increased 20% year-over-year, and our LTM retention rate was 105% compared to 107% a year ago. What we saw with some of our customers that had increased volume due to the COVID spike, that there were some reductions at the renewal time as these customers saw their volumes normalize. These reductions when they renewed contributed to that slight decline in our retention rates this quarter. Before moving on to our financial outlook and guidance, I'd like to add to some of the metrics that Ashu discussed around, specifically around our new AR bookings and looking to do this really to highlight some of the key initiatives that we focused on in fiscal 22. Again, given the variability, we plan to share these additional metrics on an annual basis. Again, if you look back, our strategic focus in fiscal 2022 was to invest in sales and marketing with an emphasis on the U.S. markets to accelerate the growth of new ARR bookings with knowledge-led focus. So when drilling down into these areas, first off, on the product front, when looking at new knowledge ARR bookings. This went up 69% year-over-year in fiscal 22, so significant increase. And for comparative purposes, this comprised 57% of total new ARR in fiscal 22, and that is up from 48% in fiscal 21. On the second point, focusing on new customer wins to complement the expansion within the install base, which has been historically our primary area of new ARR, bookings from new customer wins were up 102% year-over-year in fiscal 22 and comprised 42% of total new ARR bookings. And this is up from 30% in fiscal year 21. So again, sort of a marked increase in new ARR coming from the new customers. And then finally, the regional focus. As we've discussed, bookings in North America has been an area that we've seen a big ramp up. And overall bookings in North America were up 75% year over year in fiscal 22. and comprised 79% of total new ARR bookings in 22. And this is up from 64% in fiscal 21. So looking at these metrics, we are encouraged to see the early positive results while expanding the sales team's capacity by more than 50%. Now onto our financial outlook and guidance. As I noted last quarter, with the current strength of the US dollar to the pound, For comparable purposes, we are also providing revenue estimates on a constant currency basis to provide better visibility into the underlying business trends. For the first quarter of fiscal 2023, we expect total revenue of between 24 million to 24.5 million, which would represent growth of 12% to 14% year-over-year. Adjusted for constant currency, we expect Q1 total revenue of between 25.1 million to 25.6 million, representing growth of 17 to 19%. Turning to the bottom line for Q1, we expect gap net loss of 2.1 million or 2.3 million, to 2.3 million, or a loss of 7 cents per share, which includes stock-based compensation expense of approximately 2.5 million, and depreciation and amortization of approximately 120,000. We expect non-GAAP net income of 200,000 to 400,000, or break even to one cent per share. The sequential increase in spending in Q1 is primarily driven by our annual compensation adjustments, which become effective in the first quarter, and then also the full impact of hiring that took place in Q4, many of the people that came on board towards the end of the quarter, so we'll obviously be seeing the full impact of those hires for the full duration of the quarter. And as Ashu had mentioned, given the current macro environment where we are seeing some of the deals taking longer to close, I believe it's prudent to pause the hiring of these additional sales cohorts and really move our focus to making the current team productive. Looking at fiscal 23 full year ending June 30th, 2023, we expect total revenue of between 101 million to 103 million, which would represent growth of 10 to 4% year over year. Adjusted for constant currency, that would equal 103.2 million to 105.3 million, representing growth of 12 percent to 15 percent, and non-GAAP net income of 3.8 million to 4.8 million, or 12 cents to 15 cents per share. On a GAAP net loss of 3.7 million to 4.7 million, or a loss of 12 cents to 15 cents per share, where we estimated share-based compensation expense of approximately 8.5 million, and depreciation and amortization of approximately 500,000. Current currency conversion rates assumptions are as follows. For Q1 of 23 and FY23, we are assuming the US dollar to GDP of $1.15 to one pound. This compares to Q1 of 22, where the rate was $1.38 to the pound. And then, for comparable purposes, for FY22, that exchange rate was, we used the dollar rate, was $1.33 to the pound. Looking at the weighted average shares outstanding, we expect approximately 31.9 million for the first quarter, and for fiscal 23, 32 million for the full year. So, in summary, we feel we executed well and are pleased with our strong financial performance this past year. We made significant progress ramping our business in fiscal 22 and are seeing positive results from our strategic investments. For fiscal 2023, we will take a more balanced view of growth and profitability, and we'll be holding off on making additional sales investments until the current team is productive. In the meantime, the demand for our knowledge-led offering continues to be robust, and with our strong balance sheets, we are well-positioned to continue a positive momentum and grow our market share this fiscal year. And lastly, as Ashu mentioned, We will be hosting an Analyst Investor Day as part of the eGain Solve 2022 conference in Las Vegas on October 11th. You know, just very excited about the attendance, the number of customers and partners that will be at the event. And we'll look forward to hopefully seeing some of you attend in person at this event. Feel free to go and sign up at the eGain.com website. This concludes our prepared remarks. Operator, we will now open the call for questions.

Thank you. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then 2. Our first question today comes from Richard Baldry with Roth Capital. Please go ahead.

Thanks. First, curious, given the strength you had in new logo, ARR, and a lot of the sort of new productivity from the hiring you've recently done, and you've got a very large cash reserve on the balance sheet. why not keep up the hiring and sales? And even if that resulted in some modest near-term losses, you can clearly more than support that. So walk through the logic of pulling back on that when you're seeing some successes there. Thanks.

Sure. So that's a good point. So this is a judgment call. The way we are looking at it is, From an annual standpoint, we are guiding conservatively, but what we are going to do is watch it very carefully. which is what we're doing right now. So what we will miss is maybe the next cohort cycle, but if we feel, which could very well be the case, that the sales investments are turning productive and the market environment is not as tough as some fear, then we will resume that in the middle of the year. So that's something we are keeping the option open around.

Okay, and... And maybe could you talk about, you know, there's two significant cohorts you brought in. You know, have they been tracking sort of similarly to each other in terms of the ramp from, you know, cohort one versus two? Have there been any changes maybe as the macro conditions have gotten a little tougher between the two? Are those the types of lessons that you're sort of watching in real time?

I think the kind of sales rep rehiring I feel like are more aligned to our direct selling strategy. in the more recent cohort. So that's a change I see. These guys are out there banging on doors, just going direct. So that I see is the difference. And then in terms of performance, I feel like that the most recent one is not something that they haven't performed yet, but the one before that, they are in performance mode now. So that is good.

Talk about the legacy maintenance side. Do you feel like that's something that terminates sort of by the end of fiscal 23? Or is that, given the conditions, you'd hate to sort of press customers to either make a decision or not in a tougher backdrop, so maybe it lasts out another year or two after that?

My sense is that we will probably drop another notch in the legacy revenue, maybe get to, if I were to take a bold guess, I'd say maybe get to half of the current level by the end of this fiscal 23, but then the rest we'll sort of pretty much ignore and move on.

And the last for me would be, if you look in, you know, sort of the changing conditions, does that change any of the thought process around you've been running the professional services with, you know, modest losses as you're ramping it, you know, Do you think you manage that to maybe break even for a period of time until you figure out when it's time to kind of get back to pushing on that in a growth mode?

Again, that's a good point. Right now we feel like that investment is quite helpful in making customers successful and making them advocates. So I think the way we will drive more profits there or not profits but margin there is going to be more likely scale than just efficiency gains at this time.

Maybe one last one. Sorry, but can you talk very generally about the inflationary environment too? Sort of what you're seeing the impact on the P&L, whether that's a revenue pricing power side or on the cost side on the wage inflation, et cetera. It may be hard to discern with the changing currencies and stuff. So I'm sort of curious your overall thoughts broad thoughts on the concept. Thanks.

I'll say something. My sense is that the impact on cost of doing businesses is real. I don't know if it is unusually high compared to prior years, to be honest. I think it's somewhat mitigated by the economic environment as well, and so So from a people cost side, I think we'll have our increase in costs, but not unusually high. That's my sense. And then on the pricing power side, for now we haven't decided if we are going to pass on any costs. I think from our perspective, it's probably a market share game. So that's a trade-off we have to think about more.

Eric, your thoughts? Yeah, I think just to echo Eric's Asha's point, when you think of the labor market, how it's been the last couple of years, it feels like we've been in a very inflationary condition already, right? We've been needing to absorb fairly significant annual increases. So I think in the current environment, we don't see too big a difference from what we've needed to do in previous years. And I think given the increased demand Investment, you know, this was beyond just the sales and marketing organizations. You know, I think this always gives us the opportunity to really have a close look at and ensure that we're driving efficiencies across the organization. So, you know, hopefully through that process we can mitigate just the expected cost that we may see from pass-throughs from other vendors that we have to deal with.

Great. Thanks, and congrats on the acceleration you saw in fiscal 22. Thank you.

The next question comes from Jeff Vannery from Craig Hallam. Please go ahead.

Great. Thanks. Thanks for taking my questions, guys. A couple for me. Just to the sort of the overall reflection in your guidance of a more cautious sort of macro outlook, if you would, In terms of the caution you've embedded in the guide, is there any way you can put some quantification around that? And specifically, I guess I'm wondering how much of it is based on things you've already seen and how much is based on things you're anticipating?

Thanks, Jeff. I think for us, it's really more at the anticipation part of it. So that way, Josh's point, you know, In general, we feel good about the opportunities, the way the teams are ramping. So just consistent with what we've done in previous years, we'd like to start the year out with a more conservative view, and then hopefully as things develop, we can provide updates as the year progresses.

Okay. And then in the quarter, you didn't specifically comment, and I know there's some details in the Q and the K, but can you talk a bit about any differences you saw recently in behaviors, specifically even up to today, with respect to the OEM side channels and direct, all acting the same as they have been? Again, no wiggles in any of those?

No, I think, you know, other than some of these additional metrics that we've talked about that, you know, with the increased focus on the direct selling, you know, we've obviously seen more business come through these direct team members, but nothing of note on the changes on the, I mean, I think from a connector side, we're seeing sort of increased traction with more partners that we're looking to do, you know, connections through their systems. But, you know, I think in general, nothing worth adding on. Are there any

Yeah, I would say quantitatively, no. But qualitatively, there is a change as you've seen us over the last year really bring out a more Swiss approach to the partner ecosystem. And I think that is working well for us. We see the partner ecosystem increasingly becoming a source of opportunities as opposed to source of revenue. And with our bigger sales team, we are able to go after those opportunities and work with the partner. So just expanding our – if we go back to, let's say, beginning of fiscal 22, we have integrations with Cisco and Avaya, and we have integration with Amazon Connect at that point. Since then, on the contact center side, we've added three more. We've added Genesys. We've added Five9s. And we just, while we have the connector into Topdesk, but that's something they're rolling out as well. So that's a big expansion of the available market. Interestingly, some of the new wins we had, you know, they are Genesis shops. You know, we closed another account in the last quarter where it's a Genesis shop and we got the opportunity through the Genesis marketplace. we're seeing the same with FiveLine. So the pure cloud vendors, they're seeing an interesting, very much a modern partner approach based on product connectors and mutual sort of referrals, as opposed to a very channel centric approach to, okay, you're gonna get a PO at the end of it. If that helps in the color.

It does, thanks. Thanks, I appreciate it. Two others, I guess, I think you referenced in the script some impacts of lessening volumes as contracts are getting renewed post-COVID and as overall volumes contract. Can you put that in a little more context in terms of if you want to call it a vulnerability? You know, what kind of correlation or revenue, you know, impact could take place if you see that more widely? Just maybe help put some bounds around that. how much of a concern that might or might not be and how much it might be able to impact.

I think, Jeff, I mean, the good news is that, you know, now that we're lapping it, you know, the exposure to significant further renewals, you know, we don't see that too much because, you know, I think with things trying to return to normal or the new normal, you know, within the last year, but from a, I think with sort of the increased volumes around probably, you know, what we saw was a spike in the usage of the chatbot, the virtual assistant. So we saw a spike in volumes of the messaging, you know, so that as these businesses normalized their business, that these numbers came down. So, I think we haven't calculated the exact impact it would have, but, again, hopefully we'll absorb that sort of obviously with this new business that's coming through.

Okay. I'll leave it there. Thanks for taking my questions.

The next question comes from Tim Horan from Oppenheimer. Please go ahead.

Thanks, guys. So the COVID impact, Do you think you've largely seen it? You know, is that behind you at this point, or is it in front of you, or is it relatively minor?

Sorry, could you repeat the question?

Yeah, so the impact on COVID. Is it material? Is it largely done, do you think, at this point, or is it still in front of you? Sorry, I just didn't understand the answer, though.

Okay. I would say that business is pretty much back. People are in their normal operation now. So to that extent, I don't think that COVID is terribly impactful moving forward. In terms of some of the COVID level, the extra levels of business that we had in the COVID times, we already talked about that. Anything else?

Nope, I think that's it.

I think we're back in business. So I guess the question is, are you back to normalization like COVID? I mean, is the impact from COVID behind you in terms of the increased usage? Are you back to steady state, or do you think there will be more impacts from COVID going forward? From the excess usage, yeah. Yeah.

I mean, there might be some further adjustments in the next quarter or two. Yeah, I think.

Okay, got it. And are they material or relatively minor at this point?

So I think, you know, probably not significantly material. I mean, there will be some adjustments, but, again, I think these are items that we'll be able to absorb, that we factored into the guidance as we go forward.

Got it. And I think you also said the sales cycle was elongating. When did you start to see that? Is it material? You know, any more color around that?

Not yet, but I would say that is the anticipation right now, yeah.

Okay, but you haven't seen it yet. Got it. It makes a lot of sense. And can you give us a sense, I know you also said, you know, focuses on gaining market share. Can you talk about, you know, who you're gaining share from, or is the TAM expanding a lot more? You know, just some sense around that.

Yeah, primarily it's a lot of legacy tools we see in these enterprises that have been implemented, you know, five, six, seven years ago. They haven't really done a good job. So you see a bunch of those. We also see of the market in terms of people who have been looking at existing content management systems as knowledge management, and now they're saying, well, that doesn't do the job, so we need a knowledge management overlay on top of it. Then those are the two we see mostly. That's kind of where the market is at today, and I think moving forward, we'll see more expansion as the market expands beyond just knowledge for customer service. I think there is opportunity I'd say in the next year, these are the proof.

And you gave a whole bunch of metrics on growth that seemed really impressive. You know, it seems like a lot of the bookings numbers and ARPU numbers are up above 40, you know, close to 50%. I mean, absent your concern about the economy, I mean, would growth be accelerating next year or for this year's revenue growth? Or, you know, those metrics are, you know, not indicative of,

you know what should happen next year on revenue growth next year being fiscal 24 correct yeah next 12 months yeah sorry next 12 months sorry okay I mean the fiscal 23 which is we just you know starting out now that's where we're giving the guidance which we have right If you're talking about fiscal 24, yes, we certainly think that.

No, no, no. I meant 23. I mean, you're growing bookings, ARPU, a lot of numbers, sales productivity is up close to over 40%, but your guidance is going for pretty major deceleration and growth because of the weaker economy. I guess what I'm asking is if you weren't concerned about the economy, would revenue growth be accelerating next year? Yes. Sorry about that. Okay. So the answer is yes, it would be accelerating?

Yes, it would. Sorry for that.

Okay, that makes sense. And then lastly, I know one of the reasons that you gave for increased spending in the lower margins this year was you wanted to get to a more scaled business model. I mean, do you think you're there now with this scale, or is it a much bigger number? Just any sense of what you meant by that and how you're thinking about a scaled business model?

I think as we get the productivity from the current levels of sales investment that we are at, I think we get to a scale where we see the advantages of better margins and so on, yes.

And is that a certain revenue number? Is it $150 million in revenue, $200 million in revenue, or just any sense what you think is a location where margins will start to expand again because you're at the right scale?

I would say 150 would be a reasonable place to see the impact, yes.

Perfect. Thanks a lot, guys.

Sure.

Seeing no more questions in the queue, this concludes our question and answer session. I would like to turn the conference back over to management for any closing remarks.

Thank you, Operator, and thanks, everybody, for listening, and hopefully we'll get to see some of you at the Amnesty in Las Vegas. Thank you.

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