Richard Baldry

Richard Baldry inquired about the challenges and moats protecting eGain's system of record software platform against new AI-driven competitors, the potential for internal AI tools to speed up feature development and lower costs, the impact of generative AI on profitability, efficient deployment strategies for the growing cash reserves, and future hiring plans across sales, marketing, and development.

Answer

CEO Ashu Roy acknowledged AI's acceleration of software creation but emphasized architecture, use case understanding, reliability, scalability, and performance as enduring differentiators. He suggested AI could increase profitability if pricing holds, but anticipates future pricing pressure, viewing the current market as a 'land grab' for knowledge platforms. CFO Eric Smith outlined cash deployment priorities: internal investments for top-line growth, the existing share buyback program, and opportunistic inorganic options. Ashu Roy detailed hiring shifts towards high-end engineering and AI talent, increased investment in marketing, and specialist-led sales roles for the Composer proposition.

Richard Baldry asked about the challenges and barriers to replicating a system of record class software platform using AI. He also questioned the internal use of AI tools to speed up feature development and lower service delivery costs, and how this impacts profitability. Furthermore, he inquired about the efficient deployment of the company's growing cash reserves and future hiring plans, specifically regarding sales, marketing, and development.

Answer

Ashu Roy, CEO, acknowledged AI accelerates coding but highlighted architecture, use case understanding, and non-functional aspects like reliability and scalability as ongoing challenges, emphasizing focus and proven track record as differentiators. He believes profitability would be higher if pricing holds, but anticipates pricing pressure, viewing the current market as a 'land grab' for enterprise knowledge. Eric Smith, CFO, stated cash deployment priorities include internal investments for top-line growth, leveraging AI for cost savings, utilizing the share buyback program, and opportunistically considering inorganic options. Ashu Roy added that hiring focuses on high-end engineering and AI talent, increased investment in marketing, and expert-led sales roles, with systematic sales muscle to be added as demand scales.

Richard Baldry inquired about the strategic rationale and timing for sunsetting eGain's messaging products, the financial impact on fiscal 2026, the strategic thinking behind the JPMorgan Chase & Co. partnership including the board seat and warrant, the conversion rates of AI solution pilots, and the sustainability of recent reductions in operating expenses and cost of goods sold.

Answer

Jim Byers, Director at PondelWilkinson Inc., explained that the messaging products are being sunset due to lack of investment in new capabilities and a strategic focus on AI knowledge for better ROI. Eric Smit, CFO, detailed that the impact will begin in Q2 FY26, with the run rate reducing by roughly 50%, and reaching zero by Q1 FY27. Jim Byers further elaborated that the JPMorgan Chase & Co. partnership is strategic for gaining design insights in financial services AI. He also noted that AI pilot conversion rates are now stable at two out of three, and COGS improvements are sustainable due to cloud migration completion and automation in cloud operations.

Richard Baldry from Roth Capital inquired about the strategic rationale and financial impact of eGain's decision to sunset its messaging products, the thought process behind the strategic partnership with JPMorgan Chase & Co. including warrants and a board observer seat, the conversion rates of AI solution pilots to paid deals, and the sustainability of recent improvements in operating expenses and cost of goods sold.

Answer

CEO Ashu Roy explained the messaging product sunsetting is due to a lack of investment and a strategic focus on AI knowledge for higher ROI, with CFO Eric Smit detailing the financial impact starting in Q2 and concluding by Q1 fiscal 2027. Roy described the JPMorgan Chase & Co. partnership as strategic for gaining an "unfair advantage" in product development, especially in financial services. He also noted that AI pilot conversion rates have stabilized at "two out of three" due to better expectation management. Roy further clarified that COGS improvements are sustainable, driven by completing cloud platform migration and automating cloud operations for efficiency.

Richard Baldry inquired about the specifics of the recent mega bank win, asking about the deployment timeline, the scale of the expansion, and the repeatability of such a deal across eGain's customer base. He also asked for an update on whether the previously mentioned extended sales cycles have stabilized.

Answer

CEO Ashutosh Roy explained that the mega bank deployment is on an aggressive 6-month schedule to be completed by late fall and represents an expansion that is an 'order of magnitude bigger,' roughly 10 times their previous engagement. He confirmed this pattern is repeatable as AI initiatives are driving the need for a single source of truth across enterprises. Roy also stated that sales cycles have stabilized at an average of 9 to 12 months, which is about one quarter longer than before.

Inquired about whether AI is still a confusion factor in the sales cycle, the status of trials with very large customers, and the conversion rate of pilots to paying customers.

Answer

Executives responded that the market is increasingly realizing the need for more than narrow AI widgets, and the trend towards centralized knowledge hubs is beneficial. While new entrants still cause some confusion, the overall trend is positive. The company is seeing more large trials, which is a good sign, though sales cycles for these remain around 9-12 months. The high conversion rate from trials to customers, in the ballpark of 75%, is still holding true.

Richard Baldry of ROTH Capital Partners asked about the current level of AI-related confusion in the market, the progress of trials with very large enterprise customers, and the current conversion rate from pilots to full customer contracts.

Answer

CEO Ashutosh Roy acknowledged that market confusion from new entrants persists but sees a growing trend toward thoughtful, centralized knowledge hubs, which benefits eGain. He confirmed that the company is engaged in more large-scale trials than before, viewing it as a sign of serious buyer intent, though sales cycles for these deals remain 9-12 months. Roy also stated that the high pilot-to-customer conversion rate remains 'in the ballpark' of previously successful levels.

Inquired about the reasons for shifting from cost controls to investment, updates on large-scale customer pilots, and the company's capital allocation strategy, particularly regarding its cash balance and potential acquisitions versus buybacks.

Answer

The shift to investment is driven by increased interest from existing clients, strong inbound lead flow (the best since 2019), and more predictable sales cycles. The company is engaging with high-quality, large-brand companies, though initial deal sizes are smaller now. Capital allocation prioritizes internal R&D investment to differentiate and dominate the AI knowledge market over acquisitions, while still having a buyback program.

Richard Baldry asked about the strategic shift from cost controls to making new investments, seeking the underlying drivers for this change. He also requested an update on large-scale pilots and inquired about the company's capital allocation priorities between share buybacks and technology investments.

Answer

Executive Ashutosh Roy detailed three key drivers for the investment shift: increased interest from existing clients for knowledge rollouts, a significant rise in inbound sales interest, and a higher predictability of sales opportunities moving to a decision. He noted that while initial deal sizes are around $200k ARR, the new logos are high-quality, large companies. Roy also clarified that the primary capital allocation focus is on internal R&D investment to differentiate and lead in the AI knowledge market, rather than M&A.

Richard Baldry asked about Athena's architecture and its extensibility to new platforms like Marigold, and whether Athena makes Zeta more inquisitive about tuck-in acquisitions. He also asked Chris Greiner about buybacks as a percentage of free cash flow.

Answer

David Steinberg (Co-Founder, Chairman, and CEO, Zeta Global) explained that Athena's architecture is internally built, partnering with OpenAI for voice, and can be layered on any platform with an OpenAI API. He noted Athena could expand TAM and serve as a bridge for future acquisitions. Chris Greiner (CFO, Zeta Global) stated the focus is on using greater than half of free cash flow for share repurchases, with 85% year-to-date, and significant dry powder remaining.

Richard Baldry asked about Athena's architecture and the ease of extending its coverage to new platforms, specifically mentioning Marigold. He also inquired if Athena's capabilities would make Zeta more inclined towards tuck-in acquisitions and sought Chris Greiner's current thinking on buybacks as a percentage of free cash flow.

Answer

CEO David Steinberg stated that Athena's architecture is internally built, partnering with OpenAI for the voice interface, and can be easily layered on top of any platform with an OpenAI API, eventually becoming native. He noted that while Athena doesn't necessarily make Zeta more inquisitive about acquisitions, it serves as a bridge for future integrations and expands TAM. David Steinberg and CFO Chris Greiner confirmed the focus on using greater than half of free cash flow for share repurchases, with 85% year-to-date, limited only by quiet periods.

Richard Baldry asked about the drivers behind the significant acceleration in scaled customer additions and requested quantification of Zeta's brand penetration within large agency holding companies.

Answer

CEO David Steinberg attributed the customer growth to an expanded sales force and improved brand recognition ('Why Zeta') boosting conversion rates. CFO Chris Greiner added that the LiveIntent acquisition also contributed new customers. Regarding agencies, David Steinberg gave a 'wild guess' that Zeta works with 1-3% of brands represented by U.S. holdcos, highlighting the large runway for growth.

Richard Baldry from ROTH Capital Partners asked for the reasons behind the agency mix shifting from indirect to direct. He also inquired about the company's overall M&A strategy, given the use of free cash flow for buybacks.

Answer

CEO David Steinberg explained the shift is happening because Zeta can prove that the on-platform (direct) business delivers a higher ROI, prompting agencies to migrate existing clients and onboard new ones directly. Regarding M&A, Steinberg mentioned that while they continue to evaluate opportunities against their M&A pillars, he has recently been spending a 'disproportionate percentage' of his time fielding inbound interest from parties looking to acquire Zeta.

Richard Baldry from ROTH Capital Partners inquired about the rationale for the accelerated share buyback in Q4 and the go-forward strategy for repurchases, as well as the company's current thinking on M&A opportunities.

Answer

CEO David Steinberg explained the Q4 buyback was accelerated because the stock price was 'stupidly low,' and he considers share repurchases the best use of cash. He suggested using at least half of 2025's free cash flow for buybacks. On M&A, Steinberg noted that while deal flow is increasing, Zeta remains disciplined and will only pursue opportunistic, non-transformative deals that fit its established strategic pillars and create a '1+1=4' value proposition.

Richard Baldry of ROTH MKM inquired about early market feedback and synergy realization from the LiveIntent acquisition. He also asked about the company's appetite for future M&A given its increased cash position.

Answer

CEO David Steinberg stated that synergy recognition from LiveIntent is ahead of schedule, with cross-selling already underway and full data integration expected by month-end. He added that while Zeta is generating significant free cash flow, the company will remain disciplined yet opportunistic regarding future acquisitions that fit its strategic pillars.

Richard Baldry of ROTH MKM inquired about early market feedback and synergy realization from the LiveIntent acquisition, and how Zeta's significantly increased cash position might influence its strategy for future M&A or share buybacks.

Answer

CEO David Steinberg reported that synergy recognition with LiveIntent is ahead of schedule, with several cross-selling deals already executed. He confirmed that despite the strong cash flow, Zeta will remain disciplined but continue to seek opportunistic acquisitions that align with its strategic pillars.

Richard Baldry asked about the trends in the platform's Cost of Goods Sold (COGS), which decreased while revenue grew, questioning if this indicates peak optimization or further cost improvement potential. He also inquired about the sustainability of the 4X growth rate of AI-related deals compared to non-AI deals and the factors driving the increase in deals over $100,000, such as customer type, value proposition, or sales execution.

Answer

William Nurthen, CFO, explained that platform COGS optimization stems from stabilized labor, limited hosting cost increases through prepayments (e.g., Amazon Web Services), and cheaper AI providers, expecting gross margins to remain high. Roy Olivier, CEO and President, and Josh Nicholson, CSO, anticipate similar strong growth for AI-related B2B deals, especially with the headless strategy allowing usage-based pricing for company-wide integrations. Roy Olivier attributed the larger deals to improved sales execution under the new CRO, better customer qualification, value-based pricing, and a revamped academic segment pricing model.

Richard Baldry asked about the trends in platform-side Cost of Goods Sold (COGS), questioning if the current optimization is near its peak or if further cost improvements are expected. He also inquired about the sustainability of the 4x growth rate for AI-related deals compared to non-AI deals and sought more details on the drivers behind the strength in deals exceeding $100,000.

Answer

William Nurthen, CFO, explained that platform COGS optimization stems from stabilized labor costs and strategic prepayments for hosting services like Amazon Web Services, which reduce costs over time. He also noted that some AI providers are becoming cheaper as usage grows. Roy Olivier, President, CEO & Director, and Josh Nicholson, Chief Strategy Officer, indicated that the strong growth in AI-related B2B deals is expected to continue, driven by the headless strategy and usage-based API pricing for company-wide integrations. Roy Olivier attributed the larger deals to improved sales execution, a new sales process, and wholesale changes to academic segment pricing.

Richard Baldry inquired about the platform's Cost of Goods Sold (COGS) line, which was slightly down despite revenue growth, asking if this indicated peak optimization or further cost improvement potential. He also questioned the sustainability of the 4X growth rate for AI-related deals compared to non-AI deals and sought deeper insight into the drivers behind the strength in deals exceeding $100,000.

Answer

William Nurthen, CFO, attributed the COGS improvement to a stabilized labor base, limited increases in hosting costs through prepayments with Amazon Web Services, and cheaper AI providers. Roy W. Olivier, CEO and President, and Josh Nicholson, Chief Strategy Officer, anticipate similar strong growth for AI-based products in the B2B space, with the headless strategy enabling larger contract sizes based on API usage. For the $100,000+ deals, Roy W. Olivier and William Nurthen highlighted improved sales execution, a new CRO, better customer qualification, value-based pricing, and a revamped pricing model for the academic segment as key drivers.

Richard Baldry of ROTH MKM inquired about the potential for accelerating growth by increasing sales and marketing spend, given the strong adjusted EBITDA, and asked about the internal use of AI to improve operational efficiency and its impact on the 'Rule of 40'.

Answer

President and CEO Roy W. Olivier explained that the company is focused on building a predictable sales model before significantly increasing investment, aiming to replicate the predictable customer acquisition metrics of its B2C business. Regarding internal AI, Olivier stated the focus is on using it as a productivity enhancement, particularly as a 'force multiplier' in R&D to accelerate code development, rather than for immediate cost reduction, though cost-saving opportunities would be pursued.

Richard Baldry of ROTH MKM inquired about the company's strategy for increasing sales and marketing investment to accelerate growth and the potential for internal AI adoption to improve operational efficiency and impact the Rule of 40.

Answer

President and CEO Roy W. Olivier explained that the company aims to build a more predictable B2B sales model before significantly increasing spending, noting progress under the new CRO. He stated they are close to having the confidence to invest more for predictable returns. Regarding internal AI, Olivier acknowledged they are in the early stages but are now tracking its use to enhance productivity, particularly as a 'force multiplier' in R&D, rather than for immediate cost reduction.

Richard Baldry of Roth MKM inquired about the potential to accelerate growth by increasing sales and marketing investment, and how the company is leveraging AI internally to improve productivity and efficiency.

Answer

President and CEO Roy W. Olivier explained that the company is focused on building a more predictable B2B sales model before aggressively increasing spending, aiming for a system where investment yields predictable returns. Regarding internal AI, Olivier stated that while they are starting to focus more on it for productivity, particularly in R&D, the primary goal is to be a 'force multiplier' for enhancement rather than immediate cost reduction, given their existing lower-cost workforce in Mexico.

Inquired about the progress of integrating recent acquisitions on both the cost and cross-selling sides, and also asked about the M&A pipeline and the company's capacity for future deals.

Answer

Cost and team integrations are mostly complete, with ongoing work to create a seamless user workflow between Scite and Article Galaxy. The M&A pipeline is active with many potential targets, and the company has the capacity for 1-2 deals per year, though they are being more selective and don't anticipate another deal in calendar 2024.

Richard Baldry of Roth Capital Partners, LLC inquired about the key drivers determining the outcome of the full-year 2025 revenue and adjusted EBITDA guidance. He also asked for an update on the M&A environment, the sources of recent organic growth, and the potential impact of AI on operational efficiency.

Answer

Max Wygod, Co-Founder, CEO & Executive Chair, explained that achieving the full-year guidance depends on second-half contract renewals, particularly for the Kyber business. He noted that the M&A environment has improved with more reasonable valuations, and Forian is actively seeking accretive targets. Wygod identified Health Economics and Outcomes Research (HEOR) and the Kyber Data Science platform as the primary drivers of organic growth. He clarified that the adjusted EBITDA range is influenced by both revenue performance and potential discretionary investments in data assets. Regarding AI, Wygod stated that while Forian is exploring its use for efficiency, it is proceeding cautiously due to data sensitivity, though AI is already a component of the predictive KYBER offering.

Richard Baldry of ROTH MKM inquired about the nature of Kyber's revenue stream, the drivers for its path to profitability, the current M&A environment for similar acquisitions, and the potential impact of executive orders on the pharmaceutical market and Forian's deal pipeline.

Answer

Executive Max Wygod explained that Kyber's revenue is primarily from one-year SaaS contracts. He stated that Kyber's profitability will be driven by top-line growth, as significant G&A cost reductions have already been implemented. Regarding M&A, Wygod described a bifurcated market with opportunities for accretive deals among struggling VC-backed companies. Finally, he noted that while there's some hesitation from clients awaiting FDA approvals, Forian has been largely insulated from broader market pressures and is winning deals with its data-driven marketing expertise.

Richard Baldry of ROTH MKM inquired about the drivers behind Forian's expected revenue breakout in 2025, the reasons for the recent increase in sales win rates, and the company's strategy for capital allocation, particularly regarding investments in sales and marketing versus other uses of cash.

Answer

Executive Max Wygod explained that the anticipated 2025 revenue growth, excluding the Kyber acquisition, is driven by significant Q3 sales wins and larger contract renewals whose financial impact will materialize in subsequent quarters. Wygod attributed the improved momentum to a more stable market environment post-data disruptions and typical seasonality. Regarding capital allocation, he stated that the Kyber acquisition added strong personnel, and the focus remains on bottom-line efficiency, debt redemption, and pursuing synergistic acquisitions rather than simply increasing sales headcount.

Richard Baldry asked about the financial recourse for data feed disruptions, the company's M&A strategy given its large cash balance, and the status of its top-of-funnel sales pipeline.

Answer

Executive Max Wygod explained that data disruption impacts are managed through contract volume metrics and vendor diversification. Regarding M&A, he noted that the challenging fundraising environment is creating more reasonably priced transaction opportunities, and the valuation gap between public and private targets is narrowing. Wygod also confirmed that long-term growth drivers are intact, with a growing pipeline of RFPs from larger pharmaceutical companies, despite the longer sales cycles associated with them.

Richard Baldry of Roth Capital Partners, LLC inquired about the market traction for the SafePoint solution, the development of the international pipeline, the reason for the significant post-quarter cash increase, and visibility into the second-half revenue forecast.

Answer

CEO Ralph Clark confirmed the SafePoint pipeline is healthy, particularly in healthcare and casinos, and highlighted international progress with new deployments in Brazil and expansions in Uruguay. CFO Alan Stewart explained the post-quarter cash balance increase to over $16 million was due to the timing of collections, reflecting strong underlying free cash flow. Stewart also affirmed confidence in the second-half guidance, noting that while the timing of large deals can be a factor, they have strong visibility.

Richard Baldry inquired about how SoundThinking manages its product pipeline across its expanding suite of tools and asked for early customer feedback and use cases for the recently revamped SafePointe solution.

Answer

Ralph Clark, an executive, explained that each product has its own pipeline metrics with a target of 3-4x coverage based on sales quotas, noting particular strength in the Resource Router and CrimeTracer pipelines. Regarding SafePointe, Clark confirmed the focus on healthcare, casino, and high-end commercial verticals and mentioned a proof-of-concept with a top-tier U.S. healthcare chain was progressing well.

Richard Baldry inquired about the competitive landscape for the Chicago RFI, the pipeline strength for the new SafePointe Next Gen solution, the go-live assumptions for ShotSpotter and SafePointe embedded in the 2025 guidance, and potential supply chain constraints for SafePointe's hardware.

Answer

CEO Ralph Clark stated that the Chicago RFI's requirements are familiar and that the company has won similar bids before. He confirmed the SafePointe pipeline is strong, with deals expected in Q4. CFO Alan Stewart added that 2025 guidance assumes over 100 new ShotSpotter miles and highlighted significant bookings growth for SafePointe, which has already exceeded $1 million in Q3 and Q4. Ralph Clark acknowledged a potential supply constraint for an NVIDIA chipset in the SafePointe edge device but expressed confidence that supply would increase to meet 2025 projections.

Richard Baldry inquired about the STEP program's renewal rates and customer model preferences, the potential impact of new depreciation rules, and any notable trends within the quarter's bookings.

Answer

Executives confirmed that STEP renewal rates remain above 95% despite the shift to a 3-year model, with customer choice depending on funding sources. New depreciation rules are not expected to have a major impact. Recent booking trends show slowness in federally funded deals but positive signs from opening grant programs, new state-level training requirements, and international markets.

Richard Baldry from Roth Capital Partners, LLC inquired about changes in STEP renewal rates and customer preferences, the potential impact of accelerated depreciation accounting, and any emerging geographic or end-market trends within the quarter's bookings.

Answer

CEO John Givens stated that the STEP renewal rate remains strong at over 95% despite a shift to a three-year model, with customer acquisition choices (STEP vs. capital) depending on their funding sources. He also highlighted that grant funding is beginning to open up and noted increased activity internationally. CFO Alanna Boudreau added that early STEP renewals were driven by customers wanting new technology and that she does not foresee a major impact from accelerated depreciation accounting.

Richard Baldry of ROTH Capital Partners sought clarification on the funding status of reported bookings, the expected revenue conversion from the current backlog, booking trends and seasonality, the quarterly impact of a revenue restatement, and the market opportunity and pricing for the new V-XR platform.

Answer

CFO Alanna Boudreau confirmed that reported bookings are fully funded and the majority of the $22 million backlog is expected to convert to revenue in 2025. She also clarified a $750,000 revenue restatement will affect Q1 2024's reported results. CEO John Givens discussed the V-XR platform, noting its competitive price point is designed to penetrate smaller, budget-constrained agencies and that it will not include a STEP subscription option.

Inquired about whether bookings are fully funded, the expected revenue recognition from the backlog in 2025, booking trends for Q1, the timing of a specific revenue adjustment, the market opportunity and pricing for the new V-XR product, and whether V-XR would be offered with a STEP subscription.

Answer

Management confirmed that all bookings are fully funded and the majority of the backlog is expected to be recognized as revenue in 2025. Q1 booking trends are consistent with the recent soft environment. The V-XR product is priced to target smaller agencies and is seen as a long-term growth driver, but it will not be offered through a STEP program due to its price point and hardware characteristics.

Richard Baldry of Roth Capital Partners, LLC questioned the drivers behind OptimizeRx's significant Q2 revenue beat, asking about potential one-time items, the sustainability of flat operating expenses, the faster growth from non-top 20 customers, and the exceptionally high "Rule of 40" performance.

Answer

CEO Steve Silvestro and CFO & COO Edward Stelmakh attributed some of the outperformance to higher-than-expected managed service revenue, which they do not forecast to continue at the same level. They emphasized that operating leverage from prior technology investments allows for revenue growth without material OpEx increases. They also confirmed that accelerating adoption by mid-cap and smaller clients is driving the shift in revenue concentration.

Richard Baldry questioned if there were further headwinds expected for the Net Revenue Retention (NRR) rate in the second half, given it nearly accounts for the high end of the revenue guide. He also asked if the current operating expense level is a good run rate for the future and inquired about the outcome of the RFP season for the DTC business and new wins for the DAAP platform.

Answer

Executive Andrew D'Silva projected that NRR would normalize to around 100% by year-end due to lapping the Medicx acquisition. CEO Stephen Silvestro confirmed the current OpEx is a stable run rate following last year's cost savings. Both executives noted a strong DTC recovery and continued momentum for DAAP, but stated they would no longer disclose specific DAAP deal counts for competitive reasons.

Richard Baldry sought to reconcile the conservative 10% baseline growth outlook with stronger underlying KPIs like net retention and DAAP deal growth, and asked how strong retention translates to new client wins.

Answer

CEO Stephen Silvestro and CFO Edward Stelmakh confirmed their optimism based on strong KPIs but stressed a strategic decision to be conservative with guidance and aim to 'underpromise and overdeliver.' Silvestro highlighted a significant Q4 increase in new logos, especially from mid-tier companies, as a key growth driver. Stelmakh also noted that favorable FDA drug approval trends are a positive external factor they are monitoring.

Richard Baldry of Roth Capital Partners, LLC asked about the drivers behind the record-high blended gross margins and their sustainability. He also questioned the digital growth outlook, the composition of the M&A pipeline, and the company's deal sourcing strategy.

Answer

CFO Jim Heindelmeyer attributed the strong gross margins to a favorable revenue mix, including lower-margin physical revenue declining as a percentage of the total. He affirmed expectations for digital revenue to return to growth, citing positive industry trends like Spotify's price increases. Founder and CEO Golnar Khosrowshahi described the M&A pipeline as robust and evenly split, noting that the most substantial deals are sourced off-market through relationships rather than competitive auctions.

Richard Baldry of Roth Capital Partners, LLC inquired about the return on investment in international markets like India, the expected revenue seasonality for fiscal 2026, the company's interest rate hedging strategy, and capital deployment plans. He also questioned the factors behind the fiscal 2026 guidance, noting it appeared conservative relative to the second-half 2025 run-rate.

Answer

Founder, CEO & Director Golnar Khosrowshahi confirmed that emerging markets offer better ROIs due to less competition and that capital deployment remains opportunistic rather than pre-allocated by segment. CFO Jim Heindelmeyer stated that seasonality should normalize, the company is hedged at $150 million, and the FY26 guidance is prudent as it does not forecast potential large one-off hits or non-recurring items like the audit recoveries seen in FY25.

Richard Baldry of ROTH Capital Partners asked for clarification on the Q4 guidance, which implies a sequential decline, the factors causing fluctuations in neighboring rights revenue, the company's debt hedging strategy, and the current state of the M&A deal pipeline.

Answer

Executive Jim Heindlmeyer explained that Q3 benefited from a one-time royalty recovery, though it may lead to higher ongoing royalties. He also noted their guidance incorporates appropriate conservatism. He described neighboring rights revenue as inherently lumpy due to hit timing and retroactive payments. Regarding debt, $150 million is hedged through December 2027, and they continuously evaluate adding more. Executive Golnar Khosrowshahi reiterated that the M&A pipeline remains strong with no change in seller appetite.

Richard Baldry asked about the key factors in winning high-profile deals like Snoop Dogg, the process for sourcing deals internationally, the P&L impact of swap charges, the timing of streaming price increases, and how EBITDA growth affects liquidity.

Answer

CEO Golnar Khosrowshahi credited major deal wins to the company's high-touch creative team and emphasized the necessity of on-the-ground, local teams for sourcing deals in emerging markets. CFO Jim Heindlmeyer clarified the swap charge was due to expiring contracts and expects less volatility, noted that streaming price hikes are reflected in revenues quickly, and explained that the company's revolver access is not tied to a leverage ratio, providing full liquidity.

Richard Baldry from Roth Capital Partners, LLC questioned the long-term profitability of Latham, asking if it would be more accretive than the core business post-synergies. He also asked about the typical client size for Latham and how this larger acquisition impacts Asure's near-term M&A appetite.

Answer

CFO John Pence stated that Latham is expected to be highly accretive, potentially reaching a 50%+ contribution margin after an 18-month integration period. He confirmed Latham's client size is 'almost spot on' with Asure's. Regarding M&A, Pence noted that while Asure still has the capacity for smaller, 'bite-sized' deals, the near-term focus will be on integrating recent acquisitions.

Richard Baldry asked about the best forward-looking indicators for investors to watch to track the revenue ramp from large enterprise tax deals, such as Venture and Strata.

Answer

CEO Patrick Goepel identified the contracted backlog as the primary indicator, noting it grew to $82 million. He explained that these large deals involve phased installations and that the company will provide updates each quarter. CFO John Pence also mentioned that internal tools built for these deals, like the client life cycle management platform, can be sold as standalone products.

Richard Baldry questioned whether the 86% new bookings growth was driven more by unit growth or ARPU, and asked about the strategic decision to reinvest Q1's seasonal revenue uplift rather than letting it improve margins.

Answer

CEO Pat Goepel and President Eyal Goldstein explained that while 2024 bookings growth was strong in units, the primary focus for 2025 is to increase ARPU by attaching more solutions. CFO John Pence clarified that the Q1 investment is targeted at scaling the technology and service infrastructure to support large enterprise clients like Kroger and Nucor, which requires a higher upfront cost.

Richard Baldry questioned the adjusted EBITDA calculation, specifically why a contingent consideration charge was not excluded, and asked about the company's plans to use the cash from the CRYOPDP divestiture to enhance shareholder value.

Answer

CEO Jerrell Shelton clarified that the contingent consideration was backed out of adjusted EBITDA, noting it was a release from a prior acquisition that positively impacted the figure. Regarding the post-divestiture cash, Shelton stated the company will be prudent and opportunistic, highlighting that the stock's undervaluation and an existing stock buyback authorization would be key considerations for capital allocation.

Richard Baldry questioned if IntegriCell can be adopted by existing trials, if there is seasonality in the commercial cell and gene business, and whether spending will remain flat or rise with new facility openings.

Answer

CSO Dr. Mark W. Sawicki confirmed existing trials can transition to the IntegriCell platform and that there is no significant seasonality in the commercial business. CFO Robert Stefanovich noted CapEx for new facilities but does not expect a significant increase in OpEx, as the company continues to seek efficiencies.

Richard Baldry asked about the company's cost structure, questioning if it has reached an optimal baseline, and inquired about the geographic and customer profile of new business prospects.

Answer

Executive Lou Ferraro responded that after significant reductions in late 2023 and 2024, the current cost structure is largely where the company wants it to be. Executive Jeffrey Miller added that new business opportunities are global, with active conversations in the United States, Asia Pacific, Europe, and Africa with emerging mobile and broadband players.

Richard Baldry of Roth MKM inquired about the completion status of cost-cutting efforts, potential revenue or OpEx seasonality in 2025, and the dual role of AI in creating new revenue opportunities versus becoming a standard feature, as well as its potential for internal cost savings.

Answer

Executive Lou Ferraro stated that cost-cutting actions are 'substantially complete,' though the company will continue seeking efficiencies, particularly through AI. Executive Jeffrey Miller added that revenue is expected to be steady with sequential growth through 2025, with a potential Q4 lift from new customers. Miller also detailed that AI is already enhancing the user experience with features like 'Genius,' which could become a premium offering, and is being used internally to improve operational efficiency in areas like QA, promising future OpEx reductions.

Asked for details on the allocation of increased sales and marketing spend, the productivity ramp of new hires, the impact of AI misperceptions on customer evaluations, and whether there was any anti-U.S. sentiment from European prospects.

Answer

The increased sales and marketing spend is for paid ads and new headcount in both the U.S. and EU, with many new hires still ramping up. The company focuses on controllable metrics like free cash flow rather than speculating on the evolving perceptions of AI. No anti-U.S. sentiment has been observed among European prospects.

Asked about new partner acquisition activities, the capital allocation strategy between share buybacks and debt reduction, customer retention metrics for 2024, and potential operational bottlenecks if European growth accelerates unexpectedly.

Answer

The company is actively in discussions with potential new partners in the EU. They view share buybacks as an attractive use of increasing free cash flow. Customer retention metrics have remained consistently high and stable year-over-year. The primary bottleneck to faster scaling in Europe would be the challenge of hiring enough high-quality salespeople.

Inquired about the source of synergies from the ADA Site Compliance acquisition, the company's ability to scale with its major partnerships, and the future strategy for balancing growth and profitability after exceeding the Rule of 40.

Answer

The company expects acquisition synergies to come from revenue growth, similar to a past acquisition, rather than just cost-cutting. They are confident in their ability to scale partnership-driven growth due to their AI and automation platform. They plan to continue growing both revenue and EBITDA margins simultaneously.

Richard Baldry inquired about the drivers of new logo strength, the impact of macro uncertainty on the business, and the rationale for pausing cost-cutting to reinvest in growth.

Answer

CEO Seth Ravin explained that new logo growth resulted from a strategic split of the sales team into a 'hunter-farmer' model to ensure focus on new client acquisition. He asserted that global macro uncertainty is a net benefit, as it drives clients to seek cost savings and avoid large, risky projects. He justified pausing deeper cost cuts by stating that improved execution and strong market demand for new offerings like ServiceNow and VMware require investment now to capture growth, though optimization will continue.