[The smugness quite literally goes over Sagi's head.]

Yeah. We found out that we saw each other before, when those flower pods sprang up around town and gave people strange dreams. He looked different that night, so I wasn't sure.

[He's genuinely happy to have gotten that one figured out, too. It was just a dream. The only potentially awkward part would be someone overthinking it in front of him, and he gets the impression Hythlodaeus has plenty of other things to overthink first. Like t-shirts.]