Good day and welcome to this eGain Fiscal 2017 Second Quarter Financial Results Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Jim Byers of MKR Group. Please go ahead, sir.

Thank you, operator, and good afternoon everyone. Welcome to you eGains' fiscal 2017 second quarter financial results conference call. On the call today are eGain's Chief Executive Officer, Ashu 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 contains management 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 the 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. Including those relating to our belief that we are seeing and will continue to see the benefits of the company's transition to a cloud-based business, and we'll continue to see success in implementing the land-and-expand sales model. Actual results could differ materially from those described in this conference call and presentation. Information on various factors that could affect eGains' results are detailed in the reports filed with the Securities and Exchange Commission. eGain is making statements, as of today, February 9, 2017 and assumes no obligation to publicly update or revise any of the forward-looking information in this conference call. In addition to GAAP result, we will also discuss certain non-GAAP financial measures such as adjusted EBITDA and non-GAAP net income. Our earnings press release can be found on the news release link on the Investor Relations page of eGains website at www.egain.com. The tables included with the earnings press release include a reconciliation of the historical non-GAAP financial measures to the most directly comparable GAAP financial measures. A replay of this conference call will also be available at the Investor Relations section of the eGain website. And with that said, I'd now like to turn the call over to our CEO, Ashu Roy.

Thank you, Jim and good afternoon everyone. We have made very good progress in the quarter towards completing our SaaS transition. Our software and subscription revenue was roughly 73% of our total revenue in the quarter, compared to our perpetual license revenue which was around 10% of the total revenue, the rest was professional services. Critical to sustaining this progress moving forward will be our new resale agreement with Cisco which we have talked to you all about in the past, where all eGain products sells through Cisco SolutionsPlus part of the program for us is going to be subscription based beginning of this month, and so that is already in effect, which means that we can now look forward to building a nice operational cadence and develop our confidence as a team in our SaaS oriented business metrics. So over the next two quarters as we do that, we’ll be in a much better place to forecast managed plan and report on our business, and you can compare that with the challenges we have had and you have seen in doing the same during those volatile transition that we have undergone over the last two and a half years. As a team, we are really excited about the business model transition and the fact that we are done with it substantially. It’s so much easier to scale one model than to juggle a hybrid one. Of course we still need to and will continue to support our legacy clients for a long period of time, guiding and occasionally enticing them towards a better way in the eGain cloud. So that’s great. Turning to bookings, we did well in the quarter, growing our new subscription and support ACV bookings by 13% in constant currency terms over the same quarter last…

Thank you Ashu and thanks for joining us today. Before I begin my prepared remarks, I’d like to note that the P&L numbers I’ll be sharing are non-GAAP unless otherwise noted. Included with the press release is a supplemental table that provides a reconciliation of the non-GAAP to GAAP numbers. I’ll start by reviewing our ACV and booking metrics for the quarter and then go in to details of our second quarter financial results. As Ashu mentioned we are very pleased with our shift to our SaaS business model. We believe this is will provide more predictability in our quarterly results and we are already seeing significant business benefits from the simplified operations of not having to manage a hybrid model. Our new subscription and support ACV for the quarter was 3.1 million, up 27% sequentially and 5% year-over-year or 13% in constant currency. Our total subscription and support ACV at the end of the quarter was 43.3 million, up 5% year-over-year and 14% in constant currency. Backlog as of December 31, 2016 or total deferred revenue plus unbilled and uncollected orders was 46.4 million, up 13% year-over-year and up 23% in constant currency. When reviewing our backlog, I want to highlight the 750,000 ACV contracts we signed in Q1 with an existing customer who’s moved to legislation with our product in the cloud with the migration effort. He is still likely to take our record projected nine months and that’s still on track. As a result of revenue recognition for this deal, it is only expected to start sometime next fiscal year. Typically, we do not see such complex migration projects, but when we do, we do our best to accelerate the migration efforts. We continue to standardize our terms of our cloud migration projects for existing clients, so…

[Operator Instructions] And we’ll take our first next question today from Jeff Van Rhee with Craig-Hallum.

A couple of question from me guys. First I just missed it, the subscription, the support, ACVs, both acquired support and total could you give those again.

So I think Jeff now that we have made this transition to the SaaS business we will be reporting just the subscription and support as the combined number. So what that is, the total number was - 3.1 million is the combined number and that’s a new number and then the total number is 43.3 million.

43.3, okay, alright. So that compares to 43.3 and the year earlier, just want to make sure we are talking the same time series.

The 43.3 compared was up 5% from a year ago.

I have to back track on that. I guess from a sales standpoint it sounds like you’re making an adjustment there. Maybe Ashu how will the sales approach vary going forward on the direct side. I guess Joe is going to focus on additional partnerships which obviously take time to ramp. So in the near term in terms of being able to drive new bookings tell me what’s going on in the direct sales team and kind of what you see changing?

Sure. So three things, first of all, there’s not a major change in what we are going to be doing on the sales side. We’re going to be executing the same game plan. So the game plan is three parts, one, we are seeing that we are able to get new logos in the target market and the target opportunity that we want to go after. We are able to get those big logos easier when we are partnering with fiscal and for instance than when we are going at it ourselves. Not surprising right, given the advantage of lots of time with someone who has (inaudible) and insider status in many of these accounts. So the first thing here we want to do is for Joe to kind of continue to drive the operationalization and scale of the Cisco partnership, so that’s number one. He will continue to do that. But more at an enablement and strategic level, rather than working the field deals. So that’s the difference. And the second thing that he’ll focus on after this one is, to build additional partnerships of which we are in conversations but we don’t have anything to announce yet. So that’s the second bit that he’s doing. So those are the top two things he’s working on. Coming back to what we’re doing on the sale side. It’s still the same three step plan, which is, on the direct side we are being opportunistic and focusing on our direct marketing efforts to drive qualified leads and then go after closing new logos that way. So that’s one set of land reps we have, the second set of land reps are the ones that are working with Cisco and the channel. And then we have the third group which is the expand group, that’s focusing on renewal first and then expanding any [counts]. So that’s still the game plan no big change there, and that’s the approach going forward.

And then if you touched on cash, but I missed a part of it. How do you expect the year to come in from cash from ops and a free cash flow standpoint?

So still expect to be positive on a cash flow from operations basis for the year.

And how about free cash flow or ask differently what is CapEx and other look like?

So at this stage we aren’t providing specifics in to that. I think focusing on the cash flow from operations, but given the transition we are now seeing a significant expenditure on the CapEx side. And Jeff I looked back at the previous number, I apologize, but you are correct, the number for subscription and support ACV is 45.4 compared to the 43.3.

And then also just from a balance sheet standpoint, what is the available liquidity at this point?

We had about a couple of million dollars at the end of the -.

I can grab it offline.

A couple of million dollars or so.

Maybe while you’re grabbing that, just Ashu talk to me about just sort of your satisfaction with the positioning of the product, you certainly are solving - the customer care issues that you solve is a pretty hot space right now, lot of activity. And understanding you’ve transitioning going on from license to recurring, but given you had enough focus on recurring for some time, just how do you feel about execution thus far in capturing new subscription and just talk to me about sort of market dynamics there.

So we are signing up a good number of new deals, that’s to me quite encouraging. The part that we are working through and we will continue to, as you have seen is, the migration of existing customers in to the SaaS model and in that process we’ve had some attrition and so that’s something that we have to keep working. So on the top end of the growth end our gross ACV, new gross ACV bookings have continued work, reasonably Q2 was better than Q1 and also it was sequentially and marginally better than the prior year Q2 on new subscription and support ACV bookings. And so that part is good. Like I said, our ability to get large enterprise logos, new logos, it’s easier to get those logos when we are alongside a partner like Cisco than when it is without that, when we are going direct. So that’s another dynamic that we are mindful of.

Last one from me then just with respect to licenses, obviously I think you called it out in the script that you’re at this point all in on subscriptions. Can you give us some bounds around licenses either for the year or sort of some sense of how quickly that piece falls off? You’ve been running 1.5 million or so each a last few quarters, do we tail off that half million and then zeros for ’18 or how should we think about that?

I think for the rest of fiscal ’17 I feel for the remaining two quarters I feel Jeff we are going to be around 10% of the total revenue, around the same place we are now, but it’s not going to be more than that. And then ’18 I think it’s going to whittle down from there Jeff, but let us get back to you on that with some more thoughts around fiscal ’18. But it will come down from that 10%, it aint going to go up, that’s for sure.

We’ll take our next question from Mark Schappel with Benchmark.

Ash one of the sales initiatives you were working on or the company has been working on over the past year or so, was concentrating on certain vertical market. So I was wondering if you could just talk about what you saw in that area this quarter and what markets are performing well and maybe which ones weren’t.

Sure. So we continue to focus on the top five verticals that we have been talking about some time, and that is working well for us. And I’ll give you some color on them. They are all in D to C and the top five are banking financial services, retail, telco, government, and the last one is utilities. I would say the utilities, the first top four are the big ones. Across the top four about over 70% of our bookings are in those top four.

Like which.

Banking and financial services being the biggest. So that continues to be the case and that’s an area where we are increasingly sharpening our marketing targeting not necessarily the product or sales virtualization yet. The other thing that we are starting to do which we’ll be talking more about in London is things that we are doing around these verticals from our solutions standpoint. So that’s something that is forth coming.

And then kind of building on one of the earlier questions here, I was wondering if you could just go into a little bit more detail on your decision to move Joe Brown out of the entire sales org and to moving him in to the partnered channel. Did you foresee that the partner channel kind of being your principle go-to-market mechanism or channel if you will over the direct overtime is that one of the reasons for the move or are you seeing --.

I think the biggest reason for us to make the change now are two things, one was we believe just as a team that that’s where the biggest needle movement is going to come from in the next year to two years for us in terms of getting new logos. I think that in that large enterprise segment that we know we have the best fixed (inaudible) and where the need is strong and the alternatives are much worse than and not as good as. So that’s sort of the first reason for it. It doesn’t mean that our direct push is not going to be there. But we believe that incremental dollar investment for us on sales and marketing we want to put it more on the partner side than on the direct side. So I don’t know if that answers your question clearly or not, but that’s the driver.

We’ll take our next question from Mike Latimore with Northland Capital Markets.

Hey guys this is Nick Altmann, I’m for Mike thanks for taking my question. First, just kind of going back to the Cisco partnership, were any bookings this quarter or did any bookings this quarter come from Cisco? And then just a follow-up on that, if you could just give us an update on the pipeline there that would be really helpful too.

Sure. Yes, we did have bookings through Cisco absolutely, and that continues to be a good percentage of our total business and bookings. So that is very encouraging. Mind you a lot of the - all the bookings we’re talking about here from Cisco is still based on the older partnership that we - partnership meaning the older contract that we had with Cisco, the new contract which was put in place in October but has officially taken affect in the field through the price book changes and contract changes etcetera is taking affect beginning of February roughly a couple of days before that. So just to kind of put it out there. And then the second comment is, you asked about Cisco pipeline. So that’s an area where I would say that the pipeline continues to get stronger and the part that is interesting to me though, I don’t want to quantify the pipeline yet, but the thought that’s very interesting to me is that the adoption of cloud seems to be getting better and better in Cisco channel and that’s very encouraging for us and that’s one of the big things that we want to see how we can drive even more and I’m sure you’re aware even Cisco internally is moving its business model more and more towards the SaaS model.

And then if you could, what kind of effect will - there’s been some things around Avaya filing Chapter 11 bankruptcy. Can you just talk about the affects there?

It’s not a direct effect on us, however when I’m talking to clients in prospects and I’m talking to many, I do see that as a conversation topic quite often, which means that, that brings the two viable vendors especially in the US markets are seen as Cisco and Genesys and therefore that has a positive impact on our potential business just because we are working with Cisco. But that’s sort of an indirect effect for us.

[Operator Instructions] And with no further questions in the queue at this time, I’d like to turn the call back over to Ashu Roy for any additional or closing remarks.

Sure. So thank you all for joining us and we look forward to updating you on the next quarter’s call. Thanks a lot. Bye, bye.

And that will conclude todays’ conference. Thank you for your participation and you may now disconnect.