eGain Corporation (NASDAQ:EGAN) Q4 2019 Earnings Conference Call Transcript

Sep 03, 2019 • 05:00 pm ET

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eGain Corporation (NASDAQ:EGAN) Q4 2019 Earnings Conference Call Transcript

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Q & A
Operator
Operator

[Operator Instructions] We'll hear first today from Richard Baldry with Roth Capital.

Analyst
Richard Baldry

Thanks. Wondering if you can go a little bit deeper into the COGS line on the recurring side. You said there was some infrastructure investment, so that sort of one time orients [Phonetic], a little more than we've seen in the past, sort of disproportionately hit. Is that something that plays through -- throughout the rest of 2020 or fiscal '20? Are there any -- can it reverse in some parts, if it was more onetime oriented? Thanks.

Executive
Ashutosh Roy

This is Ashu here. So what I -- what we are doing right now is we are investing and continuing to scale and also making investments on geography and compliance. For instance, we are close to -- we haven't got the certification to be close to getting certified for HiTrust, which is one of the really next generations, the security certification on the cloud. So those are investments that do increase the COGS line for us on the cloud side. I think that that's something that will probably be true for fiscal 2020. But after that, I believe that as a percentage, the COGS line would start to go down again.

Analyst
Richard Baldry

Then, when we look at the SaaS revenues in 2019, they grew about a little over $12 million. Your guide now argues that they would grow less than that, somewhere between $9 million to 10.5 million range. Was there anything onetime skewing in 2019, we should be sort of remembering in the back of our minds or do we just sort of wrap that up to conservatism, because you are spending more on sales and marketing. You're arguably getting more momentum with partners and things that would typically argue that your year-over-year growth in dollar terms should expand, not contract. Thanks.

Executive
Eric Smit

So a couple of points. I think that it's a little bit of the conservatism in that number. However, I also think that the migration of existing legacy customers to SaaS which we have transparency, we mentioned as something that benefits our SaaS revenue growth over the last year or so, and even the year before is something that is starting to taper-off. So we want to make our investments that we are making in sales and marketing are going to drive -- new SaaS revenue growth. And that's an area where we feel the investments we are making are timely, but these investments might take a little time in terms of showing up as revenue. That also speaks to the decrease potentially of absolute tax revenue growth for fiscal 2020.

Analyst
Richard Baldry

And last one would be, could you talk about the sales headcount additions you've been making or planned to make kiosks [Phonetic] you're sort of ahead unfolds? Had that -- net number of seats been increasing, has been any turnover there, we should be thinking about in the back of our minds? Are there any other issues around that sort of capacity of your direct sales force in