Altigen Communs Inc

Greetings. Welcome to the Altogen Communications second quarter fiscal year 2023 results conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. I will now turn the conference over to your host, Carolyn David. You may begin.

Thank you, operator. Hello everyone and welcome to Altergen Communications earnings call for the second quarter fiscal 2023. Joining me on the call today is Jerry Fleming, President and Chief Executive Officer, and I'm Carolyn David, Vice President of Finance. Earlier this afternoon, we issued an earnings release reporting financial results for the period ended March 31st, 2023. This release can be found on our IR website at www.altagen.com. We have also arranged a replay of this call, which may be accessed by phone. This replay will be available approximately one hour after the call's completion and remain in effect for 90 days. The call can also be accessed from the investor relations section of our website. Before we begin our formal remarks, We need to remind everyone that today's call may contain forward-looking information regarding future events and future financial performance of the company. We wish to caution you that such statements are just predictions and actual results may differ materially due to certain risks and uncertainties that pertain to our business. We refer you to the financial disclosures filed periodically by the company with the OTCQB over the market specifically the company's audited annual report for the fiscal year ended September 30, 2022, as well as a safe harbor statement in the press release the company issued today. These documents contain important risk factors that could cause actual results to differ materially from those contained in the company's projections or forward-looking statements. Altogen assumes no obligation to revise any forward-looking information contained in today's call. During this call, we will also be referring to certain non-GAAP financial measures. These non-GAAP measures are not superior to or a replacement for the comparable GAAP measures, but we believe these measures help investors gain a more complete understanding of results. A reconciliation of GAAP to non-GAAP measures and additional disclosures regarding these measures are included in today's press release. Now it is my pleasure to turn the call over to Jerry for opening remarks. Jerry?

Thank you, Carolyn, and good afternoon, everyone. Thank you for joining us for today's call. So I'll begin the call today with a brief review of our second quarter results, followed by a brief update highlighting each of our lines of business. I'll then turn the call back to Carolyn for a detailed review of our financials. So earlier today, we reported revenue of $3.4 million for our fiscal second quarter, a 32% increase compared to our fiscal 2022 second quarter revenues. From a P&L perspective, we recorded a gap loss of $140,000 for the quarter and a non-gap net income of $96,000. Compared to the prior quarter, revenues for software assurance and services decreased by approximately $180,000 while software and cloud revenues increased by about $96,000. Perhaps most importantly, our cloud revenues increased by approximately 4% quarter over quarter, which is reflective of our new solutions beginning to make a contribution. And let me correct that, $96,000 in session, $93,000 I can't read, so I apologize. But based on my intro, I'm going to now provide a more detailed update on each of Altogen's four lines of business. The first line of business is our legacy Altogen business, which consists of our MaxCS PBX, which we deliver as both an on-premise and hosted PBX solution, along with our SIP trunk or voice over IP services. As we discussed in prior calls, we are in the early stages of upgrading our MaxCS customers to our new MaxCloud platform. MaxCloud introduces a complete new suite of unified communications features, including real-time presence, instant messaging, desktop sharing, HD video conferencing, and new mobile unified communications applications, none of which are available in our legacy MaxCS hosted or on-premise solution, and all of which are required by today's modern businesses. Now, as a reminder, we have over 300 MaxCS products legacy PBX customers, totaling approximately 10,000 cloud subscribers. We also have more than 500 on-premise MaxCS PBX customers, which total more than 30,000 users. We are targeting all of these users for conversion to our new MaxCloud platform. Now, the largest revenue opportunity is for our MaxCS PBX on-premises customers. for which today we are recognizing approximately $700,000 in software assurance or software maintenance annually. However, the incremental revenue potential by migrating these customers to our new MaxCloud platform is $3.5 to $4 million per year. Now, to be sure, we must approach each customer on a one-by-one basis to sell them on the benefits of the cloud in general and MaxCloud in particular. However, as we migrate the on-premise customers to MaxCloud plus add net new MaxCloud customers, I am estimating that the Altogen legacy PBX business will grow by 5% to 10% on an annualized basis. Now, of course, we also want to make sure we protect our current base of hosted MaxCS PBX customers. Again, these are the legacy customers that are hosted in the cloud, and we want to prioritize as well migration of these customers to our new MaxCloud UCaaS platform based on their desire to add the UC functionality. Primary benefit here is not so much revenue, but it is to retain these customers and avoid churn. From a metrics perspective, as of the end of March, we had approximately 20 new cloud customers split evenly between legacy migrations and net new cloud customers. Our second line of business is financial services, which also consists of our legacy PBX solutions, our interactive voice response platform, which I'll refer to as IVR, in which you may know as a bank-by-phone application, our SIP trunk services, and the front-stage contact center as a service or CCAS solution. As an Altogen business partner, Fiserv is our number one partner, and they're unique in that they host the Altogen solutions in their data centers and market them under the Fiserv brand to their bank and credit union customers. Today, Fiserv has approximately 90 legacy Altogen PBS customers. About one-third of those are hosted and about two-thirds are on-premises. All of them are targeted for conversion to our new MaxCloud platform. In addition, Fiserv has approximately 1,500 IVR customers on the Altogen platform. In this case, approximately two-thirds of them are hosted and about one-third still on-premise, which are also their primary targets to add MaxCloud and FrontStage to the IVR platform. Fiserv plans to migrate their approximately 30 hosted MaxCS customers to the new MaxCloud UCaaS platform because these customers need to be moved to a new Fiserv data center by the end of the year as the current data center is going to be shut down. In the second wave, they will be targeting their base of 60 or so legacy on-premise MaxCS PBX customers also to migrate to the new MaxCloud platform. Out of these 90 or so customers, about 30 of them between the premise and the cloud customers also have the Altogen legacy contact center platform. They will also be targeted for conversion to our new front stage CCaaS contact center as a service platform. All of these customers, on-premise and in the cloud, represent incremental revenue to Altogen in terms of additional UCaaS revenue, CCaaS revenue, or in some cases, both. Our new front-stage CCaaS platform has now been deployed for three Fiserv customers with additional three customer deployments scheduled later this year. The pipeline and prospects for front-stage remain strong with Fiserv. In addition to the MaxCloud UCaaS, Unified Communications as a Service, and FrontStage CCaaS, Contact Center as a Service platforms, Pfizer's 1,500 IVR customers are also now being targeted with Altogen's new secure SIP solution. For those of you not familiar with this service, it is a secure VoIP phone service designed to prevent fraud by verifying both the caller's device and the voice print of the callers calling in to access their accounts, and then preventing unauthorized access to those accounts. Because the secure SIP service requires integration of multiple Fiserv core processing systems, which runs the bank or credit union, we will be doing a phased rollout as each core system is supported. Ultimately, the plan is for this service to be available for all Fiserv customers. To give you an idea, of the opportunity at hand, approximately 4 million minutes of phone calls flow through the Altogen Fiserv IVR systems today. We expect this to increase to approximately 6 million minutes as new IVR customers and features are added. The revenue potential to Altogen for this new secure SIP service, assuming 100% adoption, is over $10 million per year. The top 50% of the IVR customers represent over $7.5 million annually in new incremental revenue. All of these solutions, MaxCloud, UCaaS, front-stage CCaaS, and SecureSIP, continue to be rolled out to Fiserv customers, and we do expect to see increasing cloud revenues as traction is gained. Ultimately, we believe our Fiserv revenues have the potential to grow at a rate of 75% to 100% annually. Our third line of business, Microsoft Team Solutions, which primarily consists of our Core and Rack platform, front stage for Teams, and our direct routing SIP trunk services for Teams. Today, the majority of our Teams solutions revenue is derived from our direct routing SIP trunk service, which also continues to grow. We also expect to see increasing contributions from the front stage CCaaS platform and Core and Rack as these products hit the market and gain traction. Now, Front Stage, which is the same CCaaS platform that we're selling through Fiserv with MaxCloud, is being adapted for use with Microsoft Teams. While Front Stage is not yet available for Teams, we do expect to see the inaugural Teams release sometime in calendar Q3, at which time we can start marketing that to our Microsoft Teams customers. Now, as many of you know, we do view Core Interact as our flagship offering in our Microsoft Teams solutions business. Over the past two years, Altogen has invested over $7.5 million in research and development, with much of that investment being in Core Interact. This has enabled us to introduce the first true digital customer engagement platform specifically designed for Microsoft Teams. And unlike any other vendor that I'm aware of, we are really pushing the envelope with our extensive and pervasive native Teams integration with Core Interact, which has resulted in a solution generating quite a bit of interest from resellers and customers alike. However, pushing the envelope has also caused Core Interact to be at the forefront of uncovering what I'll call anomalies in Teams that had simply not been anticipated or planned for by Microsoft. As a result, we've had to focus an undue amount of attention on responding to issues primarily due to these anomalies. So our recent focus has been on supporting these customers and creating workarounds where necessary to make up for those teams anomalies or deficiencies as customer satisfaction is critical to the success of Core Interact. I can tell you that our customers remain excited about Core Interact and are looking forward to continuing their rollouts as the team's dependent functions become available or workarounds are otherwise introduced. As an example, in the second quarter, we deployed Core Interact for a customer in the media business. In this case, we actually had a number of new capabilities to Core Interact to support the customer's business requirements and also had to develop quite a few workarounds for Teams functionality not working what I'll call as documented. This customer has 45 agents and is taking upwards of 1,000 calls daily and is continuing to continue in their rollout to additional agents. As the issues that I mentioned with teams are resolved, which will allow for much smoother operations, we expect to be able to attract many other customers having similar requirements to the company I just mentioned. More importantly, once we get this rolling, this will enable us to achieve our target of 100% annual revenue growth. Our fourth line of business is services, which consists primarily of the ZAC consulting business and project-based services, as well as the Altogen Professional Services Group, which has been merged in with the ZAC group. As evidenced this quarter, the services business will experience ups and downs as project deliverables and associated milestone payments don't necessarily align with financial quarter ends. We do expect to see moderate growth from this services line of business as we extend our custom development work and as new project opportunities such as CHAT-GPT come into focus. So with that, I will now turn the call back to Carolyn to discuss our financial results. Carolyn?