eGain(US:EGAN)2022-11-15 05:13Financial Data and Key Metrics Changes - Total revenue for Q1 2023 was a record $24.8 million, up 20% year-over-year in constant currency [7][20] - SaaS revenue grew 23% year-over-year in constant currency, reaching $22.6 million [7][20] - Non-GAAP operating income was $1.4 million, with an operating margin of 6%, compared to 13% in the prior year [23] - Non-GAAP net income for Q1 was $2 million, or $0.06 per share, down from $2.7 million or $0.08 per share in the year-ago quarter [23] - Cash flow from operations was $760,000, with a 3% operating cash flow margin [24] Business Line Data and Key Metrics Changes - Legacy revenue decreased to $295,000, now accounting for less than 2% of total revenue [20] - The knowledge hub now constitutes 50% of total SaaS ARR, with knowledge deals accounting for two-thirds of new bookings in the last 12 months [26] Market Data and Key Metrics Changes - North America accounted for 77% of total revenue, up from 71% in the year-ago quarter, with revenue from North America increasing by 26% year-over-year [20] - Total revenue from Europe was $5.7 million, a decrease of 9% year-over-year [20] - The LTM dollar-based net retention rate was 103%, down from 113% a year ago, with U.S. retention closer to 110 and European retention dropping below 100 [25] Company Strategy and Development Direction - The company plans to take a more balanced approach to growth and profitability, pausing the hiring of new sales reps to focus on current rep productivity [16][17] - The company remains optimistic about the market opportunity in knowledge management and AI-powered automation [17][18] - A $20 million stock repurchase program was announced, indicating confidence in the current stock price and a strong balance sheet [27][28] Management's Comments on Operating Environment and Future Outlook - Management noted that decision-making timelines are extending due to economic uncertainty, particularly in Europe [15][19] - There is a healthy pipeline with new inbound interest, but caution is advised due to the current economic environment [15][18] - The company expects total revenue for Q2 2023 to be between $25 million to $25.4 million, representing growth of 8% to 10% year-over-year [29] Other Important Information - The company received accolades for its eGain knowledge hub, including a perfect score from Gartner and the 2022 Readers' Choice Award from KMWorld [14] - The eGain marketplace was announced, showcasing value-added solutions built by the company and partners [13] Q&A Session Summary Question: Changes to the sales funnel and slower sales cycles - Management indicated that the primary issue is the delaying of decision-making rather than a decrease in interest levels [37] Question: Legacy maintenance revenue sunset - Management stated that there are no significant cost impacts from the remaining legacy revenue, which is minimal [38] Question: Decision to slow down hiring - Management explained that they want to see stabilization in decision cycles before resuming hiring [40] Question: EMEA NRR and customer behavior - Management noted that larger customers in Europe are reducing spend, impacting NRR significantly [43] Question: Lengthening sales cycles - Management observed that budgets expected in fiscal calendar '22 have been pushed to calendar '23, contributing to longer decision cycles [47] Question: Channel-related sales momentum - Both direct and channel sales efforts are experiencing similar changes, with potential for channel sales to be beneficial in the future [48] Question: Customer trading down to lower quality services - Management confirmed that some customers are opting for lower-priced solutions, which may not meet their needs [50] Question: Overall industry impact - Management believes that the macroeconomic effects are more pronounced in Europe, with potential impacts on contact centers [53]