Altigen Communs Inc

Good afternoon, ladies and gentlemen, and thank you for your patience. Your conference will begin shortly. Once again, thank you for your patience. The conference will begin shortly.

Good afternoon, ladies and gentlemen, and thank you for your patience. Good afternoon, ladies and gentlemen, and thank you for your patience. Good afternoon, ladies and gentlemen, and thank you for your patience.

Good day, everyone, and welcome to the Altigen Communications First Quarter Fiscal Year 2024 Results. At this time, all participants have been placed on a listen-only mode, and we will open the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Carolyn David. Ma'am, the floor is yours.

Thank you, Matthew. Hello, everyone, and welcome to Altigen Technologies Earnings Call for the First Quarter Fiscal 2024. Joining me on the call today is Jerry Fleming, President and Chief Executive Officer, Joe Hamlin, Chief Digital and Transformation Officer, and I'm Carolyn David, Vice President of Finance. Before we get started, I'm sure you may have seen our press release announcing our new name change. Altigen Communications has rebranded as Altigen Technologies. The strategic name change signifies the company's evolution from a communications software developer to a leading innovator of next-generation customer experience solutions and services. The company's legal name and stock ticker symbol, ATGN, remain unchanged. Earlier this afternoon, we issued an earnings release reporting financial results for the period ended December 31, 2023. This release can be found on our IR website at .altigen.com. We have also arranged a tape replay of this call, which may be accessed by phone. The 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 -the-counter market, specifically the company's audited annual report for the fiscal year ended September 30, 2023, as well as the 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. Altigen assumes no obligation to revise any forward-looking information contained in today's call. In addition, during today's 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 let me turn the call over to Jerry Fleming for opening remarks. Jerry?

Thanks, Carolyn, and hello everyone. Thanks for joining us for today's call. I'll start the call today with a brief review of our fiscal first quarter results, followed by a more detailed business update. I'll then turn the call over to Joe Hamblin, our new Chief Digital and Transformation Officer, to provide more color on our execution strategies. Following Joe's commentary, Carolyn will provide a detailed review of our first quarter 24 financial results. Earlier today, we reported revenue of $3.2 million in fiscal Q1, resulting in a GAAP net loss of $346,000 compared to a non-GAAP net loss of $156,000. These financial results, particularly on the expense side, were impacted by a number of factors, including investments in new internal systems, organizational realignment, and some minor delays in product availability. Those issues are now largely behind us, although I do expect some spillover in the current quarter. After that, I'm anticipating a return to profitability with a target of being both cash flow positive and profitable for the full fiscal year. With that, I'll provide an update on the state of the business. Starting with our services business, revenues were down quarter over quarter primarily due to a transition to new leadership in our services division, which resulted in both an increase in expenses and lower than anticipated billings. The expense increase was primarily due to the hiring of a new Director of Technology Consulting, Sherick Shake, who comes to us via Sprint T-Mobile, where he ran a very large services organization. On a positive note, the increased expenses are behind us. Just as importantly, our monthly billings are now on the increase, as we are experiencing the impact of the new contract we signed with the Connecticut Department of Transportation, or CTDOT. That contract is for $12 million over five years. However, there's also an additional $6 million in funding, which comes from previously contracted but unused funds, plus a new federal grant. In actuality, the total funding available to us, or CTDOT projects, is more than $18 million over the next five years. Outside of CTDOT, we're also picking up the pace in terms of expanding our services offerings and adding new customer logos. To date, most of our services revenue has been based on custom development services. We're now extending our services offerings to include cloud technology consulting, Microsoft Teams migration services, and AI consulting services, which will be delivered in conjunction with our new AI solutions. These services add value to, and are much more synergistic with, our cloud software solutions. Turning to the cloud software solutions, during the quarter we made the decision to merge the capabilities of Core Interact with our front-stage contact center in order to provide an entry-level contact center solution, which we call Front Stage Core. The primary reason for merging the products is that customers were requesting more and more contact center features to be incorporated into Core Interact to the point that there was becoming too much overlap between the products. By merging the capabilities of Core Interact with Front Stage, we now have a single CCAS platform, Contact Center as a Service, which is natively integrated with Microsoft Teams that is able to meet the entire spectrum of customer requirements from simple to sophisticated. In addition, this also frees up development resources that can now be redeployed for our new AI solutions. Finally, we are in the process of both migrating the Core Interact customers and targeting new opportunities with the Front Stage Core application. Regarding our MaxCloud UC UCAS platform, we've been dealing with several constraining issues, not the least of which has been to meet Fiserv's stringent security standards for solutions that are deployed in their data centers. That objective has now been met, with Fiserv planning to start their customer migrations to MaxUC in April. Looking ahead to our new AI solutions, we've been working on a number of innovative applications, all targeting, at least initially, the financial services vertical market. We started on these new AI-based fintech solutions by extending our Interactive Voice Response, or IVR solution, to become a complete customer self-service platform. Toward this end, we're incorporating into the platform conversational AI, which is based on Microsoft Azure OpenAI services. This capability enables customers to use natural language speech to perform a multitude of transactions on a 24 by 7 basis, without the need to engage a live customer service agent. This will be a new fee-based solution offered by Fiserv to their 1,500 banking credit union customers using the Altigen IVR. We expect a solution which is easily cost-justified by improved customer service and cost savings associated with eliminating the need for human intervention to be launched early next quarter. We also have several new and exciting AI solutions in our development pipeline. Targeting those same 1,500 banks and credit unions using the Altigen IVR will initially deliver a -its-kind AI executive dashboard, which we're calling Core Analytics IVR. Current IVR analytics solutions only report on call-based transactional or usage statistics. Core Analytics adds caller-specific demographic data, which we are able to uniquely access via our integrations with the Fiserv Core processing platforms. With Core Analytics IVR, banks and credit union executives will have a real-time view of transactional data, which will correlate with customer demographic data, which will then display not only transactions performed, but more importantly, which customers are performing those transactions. This unique view provides business executives with previously unavailable actionable insights, which are used to customize the IVR options, selections, and offers presented to each unique caller based on their customer demographic information. As a result, Core Analytics will enable financial institutions to optimize their customer service capabilities by delivering a personalized experience to each and every customer. We're also working on a version of Core Analytics for Contact Centers, which provides analytics when customers interact with a live customer service agent. Core Analytics CCE, stands for Contact Center Addition, will correlate traditional contact center KPI data with caller-specific demographic data to provide unique insights into individual customer transactions. It will also use AI to monitor the conversations and provide valuable insights showing customer intent, sentiment of the call, call quality, and even score the agent's interaction with the customer, thus providing a 360 degree view of every customer interaction. Finally, we're also actively working on the introduction of a web-based conversational AI solution using intelligent chatbot technology. Delivered as a managed service will first deploy knowledge bases specifically tailored to an individual bank or credit union's requirements. The solution, called Core AI, will then process customer chats using AI to appropriately respond, essentially functioning as a 24 by 7 virtual customer service agent, again increasing customer service while reducing the cost of servicing those customers. As I mentioned, our AI solutions will initially be targeting the financial services vertical where we have the greatest expertise. While we will be offering these solutions through Fiserv, we'll also be directly providing the Core AI solution to customers as part of the managed AI service. By the way, for those of you not familiar with Fiserv, at $17 billion in revenue, they are the world's largest financial services solutions provider. They currently white label Altigen's UCAS, CCAS, and IVR solutions along with our secure SIP fraud prevention service. Adding Altigen's AI solutions to the mix provides Fiserv with a comprehensive and much larger portfolio of customer engagement solutions than they have ever had from Altigen. With Fiserv having over 5,000 bank and credit union customers, the AI business opportunity is nothing short of massive. That concludes my initial review. At this time, I'll

hand the call over to Joe for additional commentary. Joe?

Thank you, Jerry. Good afternoon, everyone. I promised to keep my comments brief today. However, I want to start off by saying how great it is to be back here at Altigen Technologies, working with Jerry and the entire leadership team. The discussions leading up to my return have been taking place for some time now, and to finally be able to get started is really exciting. As many of you understand, transforming and evolving a company with a rich history such as Altigen is no easy task. And we have our set of challenges, but we also have a lot of opportunities ahead of us. Jerry and I spent a lot of evenings and weekends laying out the opportunities and challenges and developing a set of strategies aimed at protecting both our base while at the same time setting us up for future growth. With my return today being announced today, we are now ready to move to the execution part of the plan. There's three major areas I'll be focused on over the next two quarters. First is operational readiness for several key products and initiatives headlined by Frontstage that Jerry's already talked about. When I started reviewing Altigen status in preparation for my return, it was the progress of Frontstage that really stood out to me in the advancements and capabilities that have been added into the product, along with the user experience and GUIs and graphics. Looking at the sales pipeline and initial positive partner and customer feedback, I'm very optimistic we can be extremely competitive in the CCAS, UCAS market. And look forward to seeing that area grow as we move forward. Second, we'll be focused on some cost reduction efforts, including data center and trunk optimization efforts that will help us improve our financial efficiencies and our bottom line performance. We currently have line of sight to about $100,000 of monthly operational savings that will allow us to not only expand, but also put that back into our bottom line. And then finally, and third is talent optimization and acquisition for both our cloud solutions and our consulting services pillars of our business. Jerry talked about the recruitment of Sharik Shaikh to lead our consulting division. This is one example of the areas that we're already focused. Sharik and I spent years partnering at Sprint T-Mobile together on several strategic custom developed solutions. And I'm really looking forward to working with him closely to expand that portion of our business. And one of the areas I will look to fully leverage as we progress is tapping into my network of colleagues and business associates to find and attract even more talent to help us grow and expand our services even further. So a lot to go, lots going on here. We got a lot of activities. We got a lot of optimism. I'm excited. I think we have a bright future, but we have a lot of work to do. So happy to visit with you more in the future. But with that, I'll turn it over to turn the floor back over to Carolyn for the financial review. Carolyn.

Thank you, Joe, and great to have you back.

Thank

you. For our 20, for our 2024 fiscal first quarter, we reported total revenue of 3.2 million, down 6% compared to Q1 2023. Total cloud services revenue for Q1 was approximately 1.9 million, up 4% compared to 1.8 million in Q1 last year. Our services revenue decreased 1 million from 1.2 million in the prior year quarter. Gross margin decreased 60 to 60% compared to 64% in Q1 last year, representing a decline of approximately 350 basis points. The decrease in gross margin resulted from low revenues and an unfavorable shift in product mix. Gap operating expenses for the quarter total 2.3 million, roughly 4% lower than the comparable period last year. On a non-gap basis, operating expenses total 2.3 million for Q1, the same for Q1 last year. Gap net loss for Q1 was $346,000 or negative one cent per share compared to gap net loss of $187,000 or negative one cent per share in the prior year quarter. On a non-gap basis, net loss was $157,000 or one cent per share compared to non-gap net income of $44,000 or one cent per diluted share in the prior year quarter. The -over-quarter change, both on the gap and on a non-gap basis, was mostly due to the, was a result of lower revenues. Now let's turn to liquidity. We ended the quarter with $2 million in cash and cash equivalents. Working capital was $1.9 million compared to $2.1 million in the prior year quarter. This completes the financial summary, and now I'd like to turn the call back over to Jerry. Jerry?

Thanks again, Carolyn. For the past several

years, we've been focused on transforming our business from a PBX company to a technology solutions provider, not without its challenges. However, we've made a lot of progress in that business transformation, particularly over the course of the past couple of quarters, to the point of driving us to change the company name from Altigen Communications to Altigen Technologies. The final piece of the puzzle now is to improve our ability to execute, which is exactly why Joe is here. I'm confident that we now have all of the pieces in place that we need in order to grow the business and to do so on a profitable basis. I look forward to updating everyone on our progress on our next quarterly call. So at this time, I'll turn the call back to the operator for questions.

Certainly, everyone at this time will be conducting a question and answer session. If you have any questions or comments, please press star 1 on your phone at this time. We do ask that while posing your question, please pick up your handset if you're listening on speakerphone to provide optimum sound quality. Once again, if you have any questions or comments, please press star 1 on your phone. Please hold while we poll for questions.

There

are no questions in the queue at this time. I'll now hand the conference back to Jerry Fleming for closing remarks. Please go ahead.

All right. Thank you, Matthew. And thank you again, everyone. Look forward to talking to you on our next call.

Thank you, everyone. Thank you. You may disconnect at this time and have a wonderful day. Thank you for your participation.