Q3 2022 8x8 Inc Earnings Call

Okay.

Thank you, ladies and gentlemen for joining and welcome to the eight by eight fiscal Q3 2022 earnings Conference call. My name is Selena and I'll be facilitating you'll call. Today. If you wish to ask a question you will have the opportunity to decide at the end of the presentation. Please press star followed by one on your telephone keypad, if you wish to ask the quest.

Speaker 1: Thank you, ladies and gentlemen, for joining and welcome to the 8x8 fiscal Q3 2022 earnings conference call. My name is Delina and I'll be facilitating your call today. If you wish to ask a question, you'll have the opportunity to do so at the end of the presentation. Please press star followed by one on your telephone keypad if you wish to ask a question. To your reader question, please press star followed by two. And I have the pleasure of handing over to your host today, Kate Patterson, VP of Investable Relations to begin. Kate, please go ahead.

And so you'll read a question. Please press star followed by Chi I now have the pleasure handing over to your house today, Kate Patterson VP of Investor Relations to begin Kate. Please go ahead.

Thank you and good afternoon. Today's agenda will include a review of our third quarter results with Dave Sipes, Our Chief Executive Officer, and Sam Wilson, Our Chief Financial Officer. Following our prepared remarks, there will be a question and answer session. Before we get started let me remind you that our discussion today includes forward looking statements about our future financial.

Speaker 2: Thank you and good afternoon. Today's agenda will include a review of our third quarter results with Dave Types, our Chief Executive Officer, and Sam Wilson, our Chief Financial Officer. Following our prepared remarks, there will be a question and answer session. Before we get started, let me remind you that our discussion today includes forward-looking statements about our future financial performance, including the impact of the Fuse acquisition, as well as our business, product, and growth strategies. We caution you not to put undue reliance on these forward-looking statements as they involve risks and uncertainties that may cause actual results to vary materially from forward-looking statements, as described in our risk factors in our report filed with the SEC.

<unk>, including the impact of the <unk> acquisition as well as our business products and growth strategies. We caution you not to put undue reliance on these forward looking statements as they involve risks and uncertainties that may cause actual results to vary materially from forward looking statements as described in our risk factors in our report filed with the SEC.

Any forward looking statements made on this call and in the presentation slides reflect our analysis as of today and we have no plans or obligation to update them certain financial measures that will be discussed on this call together with the year over year comparisons in some cases were not prepared in accordance with U S generally accepted accounting principles or GAAP.

Speaker 2: Any forward-looking statements made on this call and in the presentation slides reflect our analysis as of today and we have no plans or obligation to update them.

Speaker 2: Certain financial measures that will be discussed on this call, together with the year-over-year comparisons in some cases, were not prepared in accordance with U.S. generally accepted accounting principles or GAAP. A reconciliation of these non-GAAP measures to the closest comparable GAAP measures is provided in our earnings press release and our earnings presentation slides, which are available on 8x8's investor relations website at investors.8x8.com. With that, I'll turn the call over to our CEO , Dave Seitz.

A reconciliation of these non-GAAP measures to the closest comparable GAAP measures is provided in our earnings press release, and our earnings presentation slides, which are available on <unk> Investor Relations website at investors Dot eight by eight dot com with that I'll turn the call over to our CEO Dave Sipes.

Thank you Kate good afternoon, everyone and thank you for joining US today, let's turn to a review of our third quarter and update on our acquisition of fuse and our progress and plans for the future.

Speaker 3: Thank you, Kate. Good afternoon, everyone, and thank you for joining us today. Let's turn to a review of our third quarter, an update on our acquisition of views and our progress and plans for the future. In fiscal Q3, we delivered service and total revenue above the high end of our guidance ranges.

Fiscal Q3, we delivered service and total revenue above the high end of our guidance ranges.

Speaker 3: Additionally, we delivered positive operating cash flow for the fourth consecutive quarter and achieved our urn Operating margin target at quarter ahead of plan

Ali we delivered positive operating cash flow for the fourth consecutive quarter and achieved our year end operating margin target a quarter ahead of plan.

We also announced our acquisition of fuse, which increases our enterprise customer base and adds resources for innovation. This transaction closed on January 18th.

Speaker 3: We also announced our acquisition of Fuse, which increases our enterprise customer base and adds resources for innovation. This transaction closed on January 18th.

The market opportunity to migrate business communications to the cloud is massive we're beginning to see the impact of our focused investments in ex gas go to market and especially channel and the global coverage and our Q3 results. We have built a strong foundation for growth I believe we are well positioned as the market evolves.

Speaker 3: The market opportunity to migrate business communications to the cloud is massive. We are beginning to see the impact of our focus investments in X-Cast, Go-To-Market, and especially Channel and the global coverage in our Q3 results. We have built a strong foundation for growth. I believe we are well positioned as the market evolves.

Speaker 3: I will frame my comments today around three pillars of our competitive advantage. Our X-Cast platform, our leadership with 8x8 voice for Microsoft Teams, and our global coverage.

I'll frame my comments today around three pillars of our competitive advantage, our ex gas platform, our leadership with a buy a voice for Microsoft teams and our global coverage.

Turning to a discussion of ex cast first capitalizing on the demand for integrated Ucas see task and C pass offerings ex cash provides a single platform for customer and employee engagement ex cats eliminate silos and speeds information flow across the enterprise enabling.

Speaker 3: Turning to a discussion of XCAS first, capitalizing on the demand for integrated U-CAS, C-CAS, and C-PAS offerings, XCAS provides a single platform for customer and employee engagement.

Speaker 3: X-Cast eliminates silos and speeds information flow across the enterprise, enabling organizations to be more agile and responsive to customer needs while operating at a lower cost of ownership.

To be more agile and responsive to customer needs, while operating at a lower cost of ownership.

<unk> was recently awarded the 2021 CRM Tech Innovator award. Additionally, we were named a leader in the IDC markets gape worldwide unified communication and collaboration 2021 vendor assessment.

Speaker 3: A by AXCAS was recently awarded the 2021 CRN Tech Innovator Award. Additionally, we were named a leader in the IDC market Scape Worldwide Unified Communication and Collaboration 2021 vendor assessment.

Speaker 3: XCAS AR is now more than 35% of total AR and continues to grow at more than 35% year-over-year. On a dollar basis, we delivered our best ever sequential and year-over-year growth in XCAS ARR.

Kathy or is now more than 35% of total and continues to grow at more than 35% year over year on.

On a dollar basis, we delivered our best ever sequential and year over year growth in ex gas.

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Adoption of ex gas often with our voice for teams capability is gaining momentum across a broad range of industrial verticals and geographic regions, including the public sector.

Speaker 3: Adoption of XCAS, often with our 8x Voice for Teams capability, is gaining momentum across a broad range of industrial, vertical, and geographic regions, including the public sector.

A few recent examples are both new logo and land and expand <unk> deals include coupon.

Speaker 3: If you recent examples of both new logo and landing expand X-Cast deals include

Speaker 3: Kubota, North America, a leading manufacturer of agricultural construction equipment implemented their one Kubota initiative to bring multiple business units onto a single communication platform. Following a successful pilot led by eight by eight center of excellence, Kubota selected eight by eight ex-cats for 1,000 UC and 200 contact center seats to enable streamlined business communications across the organization.

Kubota North America, a leading manufacturer of agricultural construction equipment implemented their <unk> initiatives to bring multiple business units onto a single communications platform. Following a successful pilot led by eight by eight center of Excellence Kubota selected API ex gas.

For 1000, UC and 200 contact center seats to enable streamline business communications across the organization.

Our second win was at the London Borough of New Ham.

Speaker 3: A second win was the London Bureau of Newham, which provides service for more than 350,000 residents in East London. They most recently expanded their 8x8 contact center by more than 90%, bringing the total number to over 220 C-Cast seats. 8x8 X-Casts is deployed across more than one third of London's 32 bureaus now.

Which provide service for more than 350000 residents and east London. They most recently expanded their contact center by more than 90%, bringing the total number to over 220 <unk> seats.

<unk> cash is deployed across more than one third of London 32 bureaus now.

Hays County in the Austin, Texas Metro area is one of the fastest growing counties in the U S with more than 240000 residents.

Speaker 3: Hayes County in the Austin, Texas metro area is one of the fastest growing counties in the US with more than 240,000 residents. The local government saw a single cloud communications platform with high availability. Working with a channel partner, they selected 8 by 8x gas with boys from Microsoft Teams to support nearly 1,000 users.

Local government sort of single cloud communications platform with high availability working with a channel partner. They selected eight by eight ex gas with voice for Microsoft teams to support nearly 1000 users.

Looking now at <unk> by voice for teams, we're seeing increased adoption as organizations seek to provide their distributed workforces with the ability to interact with colleagues in September we announced that we had surpassed 100000 business users for our teams integration and we continue to see strong momentum.

Speaker 3: Looking now at 8-by-8 Voice for Teams, we are seeing increased adoption as organizations seek to provide their distributive workforces with the ability to interact with colleagues. In September , we announced that we had surpassed 100,000 business users for our team's integration, and we continue to see strong momentum. In the third quarter, we experienced business user growth of more than 30% quarter over quarter as a growing number of new and existing customers adopt 8-by-8 Voice for Teams.

In the third quarter, we experienced business user growth of more than 30% quarter over quarter as a growing number of new and existing customers adopt AI voice for teams.

Customers choosing <unk> voice for teams in Q3 included.

Speaker 3: Customers choosing A-Bite Voice for Teams in Q3 included the Financial Embudsman Service in the UK, which investigates and settles complaints between consumers and businesses that provide financial service.

Financial and Bud's Mint service in the UK, which investigates and settles complaints between consumers and businesses that provide financial services.

Working with our partner Virgin media owe to financial Ombudsman service selected <unk> ex cast with over 1000, <unk> seats and several hundred Ccs seats, our ability to help them advance their digital strategy combined with our tight integration with Microsoft teams and direct agent routing.

Speaker 3: Working with our partner, Virgin Media 02, Financial Embudsman Service selected A-8XCAS with over 1,000 UCAS seats and several 100 C-CAS seats. Our ability to help them advance their digital strategy combined with our tight integration with Microsoft Teams and direct agent routing integral in their decision to select A-8.

Raul and their decision to select AIA.

In pro.

Speaker 3: In Pro, which is a global manufacturer of high performance architectural products for commercial buildings, they selected eight by eight X-CAS and voice for Microsoft teams to support more than 600 employees around the world. They chose X-CAS for composed experiences such as front desk, which will empower receptionists with advanced call handling capabilities and for tight integration with Salesforce.

Which is a global manufacturer of high performance architectural products for commercial buildings. They selected a buy ex gas and voice for Microsoft teams to support more than 600 employees around the world. They chose ex Casper composed experiences such as front desk, which will empower receptionists with advanced call handling capabilities.

And for tight integration with Salesforce.

Turning to our global coverage, which further differentiates our solutions and creates a strong competitive advantage with multinational organizations in the third quarter. We expanded our coverage to include the Philippines. Another industry first and also to Panama and the Philippines expansion follows our announcement.

Speaker 3: Turning to our global coverage, which further differentiates our solutions and creates a strong competitive advantage with multinational organizations.

Speaker 3: In the third quarter, we expanded our coverage to include the Philippines, another industry first.

Speaker 3: and also to Panama. The Philippines expansion follows our announcements earlier this year of delivering an industry first integrated cloud-found and contact center solution in China and Russia.

Earlier this year of delivering an industry first integrated cloud phone and contact center solution in China, and Russia are regulatory compliant cloud based global Ucas solution is now available in 48 countries and territories up from 41, a year ago, our global reach service now covers more than 80% of the world's G.

Speaker 3: Our regulatory compliant, cloud-based, global UCAS solution is now available in 48 countries and territories, up from 41 a year ago.

Speaker 3: Our Global Reach service now covers more than 80% of the world's GDP.

DP.

Examples of new and expanding global customer wins include beam Suntory, a great example of a customer that has standardized on ex gas with AI voice for teams on a global basis.

Speaker 3: Examples of new and expanding global customer wins include Beam Suntory, a great example of a customer that is standardized on XCAS with 8x8 voice for teams on a global basis.

Beam Suntory is one of the world's largest producers of just still beverages, including the world's best selling Bourbon Jim beam.

Speaker 3: Beam Suntory is one of the world's largest producers of distilled beverages, including the world's best-selling bourbon, Jim Beam.

And they buy a customer since 2020 beam Suntory. Most recently added more you see and teams' licenses in Scotland and Germany.

Speaker 3: and a by a customer since 2020 beam centauri most recently added more you see it and teams licenses in stoutland and germany to now support over two thousand six hundred employees in thirty five sites across seventeen

To now support over 2600 employees in 35 sites across 17 countries.

Headquartered in Brisbane, Australia, AOS limited provides testing inspection certification and verification services for over 370 sites across 65 countries. They continue to increase their global E Bay eight investment most recently, adding another 800 users.

Speaker 3: Headquartered in Brisbane, Australia, ALS Limited, provides testing, inspection, certification, and verification services for over 370 sites across 65 countries. They continue to increase their global A by A investment, most recently adding another 800 users with Microsoft Teams integration to support employees in Australia, Canada, New Zealand, and the US.

As with Microsoft teams integration to support employees in Australia, Canada, New Zealand and the U S.

Integral to our global strategy is growing our see past share in the Asia Pacific Region C. Pass revenue continued strong year over year growth as we added new customers across the region for example.

Speaker 3: Integral to our global strategy is growing our C-Pass share in the Asia-Pacific region. C-Pass revenue continues to strong year-over-year growth as we add new customers across the region. For example,

Speaker 3: Cell here, a leading e-commerce platform with more than 6 million users in Thailand use 8x8 FMF APIs for its marketing campaigns, as well as updates and notifications to boost customer experience.

Al here, a leading e-commerce platform with more than 6 million users in Thailand use API SMS Apis for its marketing campaigns as well as updates and notifications to boost customer experience.

Ooh, La Indonesia's leading e-commerce marketplace for more than 70000, traditional small and micro retailers use API SMS Apis to enhance its customer experience with marketing promotions notifications as well as one time passwords.

Speaker 3: ULAH, Indonesia's leading e-commerce marketplace for more than 70,000 traditional small and micro retailers use 8x8 SMS APIs to enhance customer experience with marketing promotions, notifications, as well as one-time pass.

Whilst water the only not for profit water company in England, and Wales use AI video interaction API is to provide remote customer support and turn boosting customer satisfaction, while improving operational efficiency.

Speaker 3: Well-shed water, the only not-for-profit water company in England and Wells uses 8-by-video interaction APIs to provide remote customer support in turn boosting customer satisfaction while improving operational efficiency.

Yeah.

With our cash strategy teams integration and global coverage or shift upmarket as well underway enterprise.

Speaker 3: With our XCAS strategy, Teams integration, and global coverage, our shift up market is well underway. Enterprise ARR now accounts for 54% of total ARR and increased 30% year over year.

<unk> now accounts for 54% of total IRR and an increased 30% year over year.

The shift to enterprise is also evident in our third quarter retention metrics, which were the best we've seen in the last several years. This performance reflects our customer first culture and changes we've implemented in our customer success organization.

Speaker 3: The shift to enterprise is also evident in our third quarter retention metrics, which were the best we've seen in the last several years. This performance reflects our customer first culture and changes we've implemented in our customer success organization.

Our focus on enterprise customers and global approach to the market are among the reasons. The fuse acquisition makes so much sense with the acquisition now closed we increased our installed base of enterprise customers by about 30% and created a large cross sell opportunity for our contact center solution in the two weeks since the acquisition closed.

Speaker 3: Our focus on enterprise customers and global approach to the market are among the reasons the FUSE acquisition makes so much sense. With the acquisition now closed, we increased our installed base of enterprise customers by about 30% and created a large cross-sell opportunity for our contact center solution.

Speaker 3: In the two weeks since the acquisition closed, we're already talking with a number of customers who are excited about the additional solutions A-Bite can provide. In particular, we see the potential for many customers to add A-Bite's contact center solution even before they upgrade to an overall X-GEST platform. Many customers have also inquired about A-Bite's solution for Microsoft Teams.

We're already talking with a number of customers who are excited about the additional solutions.

It can provide in particular, we see the potential for many customers to add <unk> contact center solution, even before they upgrade to an overall ex gas platform. Many customers have also inquired about <unk> solution for Microsoft teams. Finally fused partners many of whom were already AIA partners are excited about the <unk>.

Speaker 3: Finally, fuse partners, many of whom were already 8x8 partners are excited about the prospect of delivering more complete solutions for a

Aspect of delivering more complete solutions for our mutual customers.

Although it's still early in the integration process. We are excited by the response, we're seeing from customers and partners.

Speaker 3: Although still early in the integration process, we are excited by the response we are seen from customers and partners. I am also pleased to report that our R&D and customer system X teams are working together and mapping out strategies to accelerate our product roadmap that will increase XCAST adoption worldwide.

I'm also pleased to report that our R&D and customer success teams are working together and mapping out strategies to accelerate our product roadmap that will increase ex cat adoption worldwide.

Speaker 3: We have already integrated the Fuse development teams and redeploy Fuse engineers to fuel our innovation. Watch for some of the exciting XCAS and contact center announcements later this quarter.

We have already integrated the fuse development teams and redeployed fuse engineers to fuel our innovation watch for some of the exciting ex gas in contact center announcements later this quarter.

In summary in the third quarter, we delivered strong revenue performance demonstrated continued operational discipline and excellence and expanded our base of enterprise customers as.

Speaker 3: In summary, in the third quarter, we delivered strong revenue performance, demonstrated continued operational discipline and excellence, and expanded our base of enterprise customers.

As the customer wins show it is often the combination of all three competitive advantages ex Cas API voice for teams and our unparalleled global coverage that makes our solutions compelling for customers as they migrate to the cloud.

Speaker 3: As the customer wins show, it is often the combination of all three competitive advantages, X-Cath, 8x8 voice routines, and our unparalleled global coverage that makes our solutions compelling for customers as they migrate to the cloud.

Speaker 3: Our channel contribution continues to increase globally, but we recognize that there is further opportunity. We recently hired Lisa DeLary-Al, as our global channel chief, to lead and scale our channel organization. Lisa was most recently vice president, strategic partnerships at Ring Central, and I'm confident she will take our channel programs to a higher level.

Our channel contribution continues to increase globally, but we recognize that there is further opportunity. We recently hired Lisa daily real as our global challenge <unk> to lead and scale. Our channel organization. Liza was most recently vice president of strategic partnerships that ring central and I'm confident she will take our channel programs to a higher level.

We also announced that Stephanie Garcia joined <unk> as our Chief Human Resource Officer, Stephanie is a recognized HR executive in cloud and SaaS industries with experience at Salesforce, and Paypal, leading and scaling high performing global HR operations, a dynamic fast growth companies.

Speaker 3: We also announce that Stephanie Garcia joined 8x8 as our chief human resource officer. Stephanie is a recognized HR executive in cloud and theft industries with experience itself for some PayPal leading and scaling, high performing, global HR operations at dynamic fast growth companies.

She will be responsible for leading the HR organization and expanding the company's team first culture as we enter the next phase of growth I welcome them, both to <unk> and our customer first product first team first culture.

Speaker 3: She will be responsible for leading the HR organization and expanding the company's team first culture as we enter the next phase of growth. I welcome them both to API-18 and our customer first product first team first culture.

I will now turn it over the call to Sam Wilson, our CFO .

Speaker 3: I will now turn over the call to Sam Wilson or CSO.

Thanks, Dave and good afternoon, we are pleased to delivered results for the third quarter that exceeded guidance showed improve operating leverage and generated positive free cash flow.

Speaker 4: Thanks, Dave, and good afternoon. We are pleased to deliver results for the third quarter that exceeded guidance, showed improved operating leverage, and generated positive free cash flow. Better-than-expected performance from our product categories were the key drivers, with both XCAS and CPAS both strong performers.

Better than expected performance from our product categories were the key drivers with both ex cash and surpassed both strong performers.

Speaker 4: Total revenue for the quarter was 156.8 million, an increase of 15% year by year, and above our guidance of 152.7 to 154.2 million dollar rent.

Total revenue for the quarter was $156 8 million, an increase of 15% year over year and above our guidance of 152, 7% to $154 $2 million range.

C pass in contact center revenue was more substantial than expected during the quarter contributing to the over performance in service revenue.

Speaker 4: CPAS and contact center revenue was more substantial than expected during the quarter contributing to the overperformance in service revenue. This offset weaker endpoint shipments and other revenue due to ongoing supply chain shortages.

This offset weaker endpoint shipments and other revenue due to ongoing supply chain shortages.

Looking at service revenue, we generated $149 4 million, an increase of 18% year over year and above our 144% to $145 million guidance range adjusted for exiting the wholesale business last year service revenue growth would have been about 21% year over year or 3% higher.

Speaker 4: Looking at service revenue, we generated $149.4 million, an increase of 18% year-to-year, and above our 144 to $145 million guidance range. Adjusted for exiting the wholesale business last year, service revenue growth would have been about 21% year-to-year, or 3% higher.

Total <unk> growth was $572 million at quarters end up 16% year over year Enterprise <unk>.

Speaker 4: Total ARR growth was $572 million at quarters end, up 16% year-over-year. Enterprise ARR accounted for 54% of the total and increased 30% year-over-year. The shift we have made in our demand generation efforts towards enterprise resulted in strong sequential growth in enterprise ARR up approximately $25 million, or 9% quarter-on-quarter.

Accounted for 54% of the total and increased 30% year over year. The shift we have made in our demand generation efforts towards enterprise resulted in strong sequential growth in enterprise.

Up approximately $25 million or 9% quarter on quarter growing our enterprise business is one of the core tenants of our long term strategy due to its longer commitments higher retention and better efficiency ratios.

Speaker 4: Growing our enterprise business is one of the core tenets of our long-term strategy due to its longer commitments, higher retention, and better efficiency rates.

The third quarter non-GAAP gross margin was 64, 7% and higher sequentially as service revenue accounted for a more significant percentage of total revenue.

Speaker 4: The third quarter non-GAAP gross margin was 64.7% and higher sequentially as service revenue accounted for a more significant percentage of total revenue. non-GAAP service revenue margin increased approximately 20 basis points over the previous quarter to nearly 70% and was up over 350 basis points versus the third quarter of 2021 driven by our focus on improved spending efficiency.

non-GAAP service revenue margin increased approximately 20 basis points over the previous quarter to nearly 70% and was up over 350 basis points versus the third quarter of 2021, driven by our focus on improved spending efficiency.

non-GAAP other revenue margin came in at minus 32, 2% for the quarter, reflecting the decline in endpoint shipments and some increased investment in our professional services organization as we prepare to welcome the fuse customers two eight by eight.

Speaker 4: non-GAAP other revenue margin came in at minus 32.2% for the quarter, reflecting the decline in endpoint shipment and some increased investment in our professional services organization as we prepare to welcome the FUSE customers to 8x8.

Speaker 4: As a reminder, other revenue represented only 5% of our total revenue for the quarter, so the decline in other gross margin had minimal impact. In total, gross profit dollars grew 25% year-over-year as we focused on the higher margin portions of our business, such as XCAS, and continued to drive unit cost improvement in COGS.

As a reminder, other revenue represented only 5% of our total revenue for the quarter. So the decline in other gross margin had minimal impact in total gross profit dollars grew 25% year over year as we focused on the higher margin portions of our business such as ex cast and continued to drive unit.

Cost improvement in Cogs.

Speaker 4: Looking ahead to the fourth quarter, we expect overall gross margins to be generally flattish sequentially.

Looking ahead to the fourth quarter, we expect overall gross margins to be generally flattish sequentially.

Turning to third quarter operating expenses, we continue to make focused investments in R&D, mainly in the contact center capabilities within the <unk> platform and in sales and marketing, while keeping G&A cost tight we have made significant investments in sales and marketing over the last four quarters to increase awareness.

Speaker 4: Turning to third quarter operating expenses, we continue to make focused investments in R&D, mainly in the contact center capabilities within the XCAS platform, and in sales and marketing while keeping G&A cost tight. We have made significant investments in sales and marketing over the last four quarters to increase awareness for XCAS to expand our partner programs and to target enterprise customers.

<unk> cash to expand our partner programs and to target enterprise customers.

Going forward, we expect year over year dollar growth in this category to slow compared with the growth of the past few quarters. After just adjusting for the step up due to the addition of fuse.

Speaker 4: Going forward, we expect year-to-year dollar growth in this category to slow compared with the growth of the past few quarters after adjusting for the step-up due to the addition of few.

Speaker 4: Total spending as measured by non-GAP cost of good sold, R&D, sales and marketing, and G&A was up 11% year-to-year below our 50% total revenue growth. We had focused non-GAP operating margins to exit this fiscal year at approximately 2% and hit that target in Q3 a quarter earlier than expected.

Total spending as measured by non-GAAP cost of goods sold R&D sales and marketing and G&A was up 11% year over year below our 15% total revenue growth.

We had focused non-GAAP operating margins to exit this fiscal year at approximately 2% and hit that target in Q3, a quarter earlier than expected.

Going forward, we expect total spending to grow more slowly than total revenue on a rolling four quarter basis, as we drive efficiencies throughout the business, but there can be some quarter to quarter variability.

Speaker 4: Going forward, we expect total spending to grow more slowly than total revenue on a rolling 4-4-4 basis as we drive efficiencies throughout the business. But there can be some, quarter to quarter, variability.

Turning to the balance sheet total cash restricted cash and investments ended the third quarter at approximately $264 million, excluding $8 6 million of restricted cash balance was $251 $8 million, increasing roughly $94 million quarter on quarter.

Speaker 4: Turning to the balance sheet, total cash, restricted cash, and investments ended the third quarter at approximately $260.4 million, excluding $8.6 million of restricted cash. The balance was $251.8 million, increasing roughly $94 million quarter on quarter.

Speaker 4: Cash from Operations was a positive $9 million for the quarter, much better than expected on collections and expense management. We were free cash flow positive for the quarter.

Cash from operations was a positive $9 million for the quarter much better than expected on collections and expense management, we were free cash flow positive for the quarter.

Speaker 4: After we announced the FUSE acquisition, several of our note holders indicated an interest in increasing their positions, so we opportunistically raised capital. During the quarter, we raised $139 million by offering more of our 0.5% notes due in 2024 and simultaneously conducted a buyback of $45 million or 2.3 million shares.

After we announced the <unk> acquisition several of our note holders indicated an interest in increasing their positions. So we opportunistically raised capital during the quarter, we raised $139 million by offering more of our 0.5% notes due in 2024 and simultaneously conducted a buyback of $45 million or $2 <unk>.

3 million shares.

The buyback helped to offset any dilution from the offering and reduce our paid discount and resulted in a net increase in cash of approximately $89 million after.

Speaker 4: The buy-back helped offset any delusions from the offering and reduced our paid discount and resulted in a net increase in cash of approximately $89 million after transaction cost.

<unk> costs.

Excluding the capital rates quarter on quarter total cash increased by about $5 million better than the small burn forecasted. This was driven by strong collections and higher than expected revenue for.

Speaker 4: Excluding the capital raise, quarter-on-quarter total cash increased by about $5 million, better than the small burn forecasted. This was driven by strong collections and higher-than-expected revenue. For the fourth quarter, we expect total cash balance to decline due to the fused purchase, but cash from operations should be stronger on a combined basis, excluding one-time cash items around restructuring and transaction costs.

For the fourth quarter, we expect total cash balance to decline due to the fuse purchase but cash from operations should be stronger on a combined basis, excluding one time cash items around restructuring and transaction costs.

Speaker 4: One item I'd like to mention are liabilities and deferred revenue, which was over $25 million during the quarter and up 23% year-over-year as we moved towards billing in advance of service delivery. Our PO was approximately $565 million for the third quarter, up from $550 million in the second quarter. Okay. Thank you. Thank you. Thank you.

One item I would like to mention our liabilities as deferred revenue, which was over $25 million during the quarter and up 23% year over year as we move towards building in advance of service delivery. Our appeal was approximately $565 million for the third quarter up from $550 million in the second quarter.

Okay.

Let's talk about views.

We closed the acquisition on January 18th earlier than we had expected we sent them about $132 million in cash and $5 8 million shares or approximately $250 million in total consideration based on the share price at the time of the announcement as expected. We will report a stub period of about 10 weeks for fuse in the fourth quarter.

Speaker 4: We closed the acquisition on January 18th, earlier than we had expected. We sent them about $132 million in cash and 5.8 million shares or approximately $250 million in total consideration based on the share price at the time of the announcement.

Speaker 4: As expected, we will report a stub period of about 10 weeks for FUSE in the fourth quarter and an entire quarter in the first quarter of fiscal 23. The guidance provided in a moment will be for the combined company.

<unk> and an entire quarter in the first quarter of fiscal 'twenty three the guidance provided in a moment will be for the combined company. We intend to provide commentary for the first few quarters on revenue contribution from fuse customers as we further integrate the two companies this will become less relevant, especially around items like cross selling.

Speaker 4: We intend to provide commentary for the first few quarters on revenue contribution from FUSE customers.

Speaker 4: As we further integrate the two companies, this will become less relevant, especially around items like cross-selling and upgrades.

And upgrades.

Next turning to cost synergies, we had said we expect it to remain non-GAAP profitable when we announced the transaction at the time of the announcement fused with losing money at a non-GAAP operating line around $16 million on an annualized basis. We believe we can generate over $20 million in annual cost savings, though it will take a few quarters.

Speaker 4: Next, turning to cost synergies, we had said we expected to remain non-GAAP profitable when we announced the transaction. At the time of the announcement, FUSE was losing money at a non-GAAP operating line around $16 million on an annualized basis. We believe we can generate over $20 million in annual cost savings, though it will take a few quarters to be fully realized.

To be fully realized if we execute the plan fuse will be additive to our non-GAAP operating income overtime, but a small headwind in the short term. This week, we took a step in this direction with a restructuring that will appear in the March quarter numbers as we move into fiscal 'twenty. Four we believe we could find further cost synergies.

Speaker 4: If we execute the plan, FUSE will be additive to our non-deaf operating income over time, but a small headwind in the short term. This week, we took a step in this direction with a restructuring that will appear in the March quarter numbers.

Speaker 4: As we move into fiscal 24, we believe we could find further cost synergies as we integrate.

As we integrate.

Taking all this into account we are establishing guidance for the fourth quarter of fiscal 2022, ending March 31, 2022 as follows.

Speaker 4: Taking all this into account, we are establishing guidance for the fourth quarter, fiscal 2022, ending March 31, 2022, as follows.

We anticipate service revenue to be in a range of 173 5 million to $175 $5 million representing.

Speaker 4: We anticipate service revenue to be in a range of $173.5 million to $175.5 million, representing approximately 30 to 31 percent year-over-year growth. We expect that FUSA's revenue contribution will be about $20 million for the rough 10-week subperiod.

Approximately 30% to 31% year over year growth, we expect that fuses revenue contribution will be about $20 million for the rough 10 week stub period.

We anticipate total revenue to be in a range of $180 million to $182 million, representing approximately 24% to 26% year over year growth.

Speaker 4: We anticipate total revenue to be in a range of $180 to $182 million, representing approximately 24% to 26% year-over-year growth.

Speaker 4: Please note that we expect to have continued supply chain issues with endpoint hardware shipments and expect other revenue to be down about $1 million sequentially from the third quarter because of these.

Please note that we expect to have continued supply chain issues with endpoint hardware shipments and expect other revenue to be down about $1 million sequentially from the third quarter because of these.

We expect non-GAAP operating margin remain positive on a non-GAAP basis, but down on a quarter over quarter basis, as we begin integration and employee related FICA and benefit expenses increased again at the beginning of the calendar year. We believe integration will take approximately six to nine months and expect to show some financial leverage on the operating line throughout the year.

Speaker 4: We expect non-GAAP operating margin to remain positive on a non-GAAP basis, but down on a quarter-over-quarter basis as we begin integration and employee-related FICA and benefit expenses increase again at the beginning of the calendar year. We believe integration will take approximately six to nine months and expect to show some financial leverage on the operating line throughout the year.

Some modeling notes these numbers reflect a combination of eight by eight and fuse as well as the ongoing investments. We are making please note that Q4 FY 'twenty to range is below are based on the stub period I mentioned for fuse.

Speaker 4: These numbers reflect a combination of 8x8 and FUSE, as well as ongoing investments we are making. Please note that Q4 FY22 ranges below are based on the stub period I mentioned for FUSE.

We are keeping a majority of fuses R&D. So on a combined company basis, we expect to step up R&D to approximately 25% to $26 million for fiscal Q4 dollars 22.

Speaker 4: We are keeping a majority of fuses R&D. So on a combined company basis, we expect to step up R&D to approximately $25 to $26 million for fiscal Q4 2020.

On a non-GAAP sales and marketing, we expect to step up into a range of 73 to $74 5 million for fiscal Q4 dollars 22 on a non-GAAP G&A, we expect to step up to a range of $17 million to $18 million for fiscal Q4, we are giving line item guidance for this quarter only so you can adjust your models to include <unk>.

Speaker 4: On a non-GAAP sales and marketing, we expect to step up into a range of $73 to $74.5 million for fiscal Q4-22. On a non-GAAP G&A, we expect to step up to a range of $17 to $18 million for fiscal Q4. We are giving line item guidance for this quarter only, so you can adjust your models to include FUSE expenses, but there may be some reallocations as we integrate.

Expenses, but there may be some reallocations as we integrate.

Speaker 4: Combining our outperformance for the third quarter with the outlook above, we are raising revenue guidance for full year fiscal 2022 ending March 31, 2022 as follows.

Combining our outperformance for the third quarter with the outlook above we are raising revenue guidance for full year fiscal 2022, ending March 31, 2022 as follows we are raising total revenue outlook to a range of $636 million to $639 million approximately 20% year over year growth we are raising serve.

Speaker 4: We are raising total revenue outlook to a range of $636 to $639 million, approximately 20% year-over-year growth. We are raising service revenue range to $603 to $605 million, representing approximately 22% year-over-year growth.

This revenue range to $603 million to $605 million, representing approximately 22% year over year growth.

We have raised our outlook every quarter this year and our update for Q4 shows that we continue to execute our plan. We outlined last may we believe the business is trending in the right direction looking a little further into fiscal 'twenty, three which begins on April one 2022, we currently expect.

Speaker 4: We have raised our outlook every quarter this year, and our update for Q4 shows that we continue to execute our plan we outlined last May. We believe the business is trending in the right direction.

Speaker 4: Looking a little further into fiscal 23, which begins on April 1, 2022, we currently expect year-over-year growth rate for fiscal 23 service revenue, including the revenue contribution from the FUSE customer base, will be in the mid-20 percent range.

Year over year growth rate for fiscal 'twenty, three service revenue, including the revenue contribution from the <unk> customer base will be in the mid 20% range. We only closed views a few weeks ago and this is a very preliminary view we.

Speaker 4: We only closed views a few weeks ago, and this is a very preliminary view.

Speaker 4: We will be able to give you more details when we announce our fourth quarter results in early May.

We will be able to give you more details when we announce our fourth quarter results in early may.

Let me end with some closing thoughts since Dave joined eight by eight a little over a year ago, we have concentrated our investments in select areas to reaccelerate growth and deliver improved operating profit and cash flows. The fused acquisition is a key component of this strategy. We still have work to do but the investments we have made in the.

Speaker 4: Let me end with some closing thoughts. Since Dave joined 8x8 a little over a year ago, we have concentrated our investments in select areas to re-accelerate growth and deliver improved operating profit and cash flows. The fused acquisition is a key component of this strategy.

Speaker 4: We still have work to do, but the investments we have made and the focus Dave has brought to our business are beginning to take root. With the investments in XCAS, global coverage, voice for teams, and sales efficiency including key leadership team additions, we are well positioned to execute against these goals in the upcoming fiscal year.

Focused Dave has brought to our business are beginning to take route with the investments in X Cas global coverage voice for teams and sales efficiency, including key leadership team additions, we are well positioned to execute against these goals in the upcoming fiscal year.

Speaker 4: We remain focused on re-accelerating our core business, integrating our FUSE acquisition to achieve cost and revenue synergies, including cross-selling and customer retention.

We remain focused on re accelerating our core business integrating our <unk> acquisition to achieve cost and revenue synergies, including cross selling and customer retention. We believe the cloud communications market is large growing and dynamic.

Speaker 4: We believe the cloud communications market is large, growing and dynamic.

Speaker 4: and that we are well positioned with our XCAT platform, our global reach, and our market leading Microsoft teams for integration.

And we are well positioned with our <unk> platform, our global reach and our market leading Microsoft teams.

Integration with that thank you and let me turn the call over to the operator for questions.

Speaker 4: With that, thank you, and let me turn the call over to the operator for questions.

Speaker 1: Thank you. If you would like to ask a question, please press star followed by 1 on your telephone keypad. If for any reason you would like to remove that question, please press star followed by 2. Again, to ask a question, press star 1. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question. We will pause you briefly as questions are raised.

Thank you if you'd like to ask a question. Please press star followed by one on your telephone keypad. If for any reason like to remove that question. Please press star followed by chance again to ask a question Press Star one as a reminder, if you are using a speaker phone. Please remember to pick up your handset before asking your question, we will pursue briefly ask quest.

<unk> are registered.

The first question comes from CET Ponikarovsky with Mizuho. Please proceed.

Speaker 1: The first question comes from C.T. Panigarahi with Mizzouho, please proceed.

Yes.

Hey, guys. This is actually Matt Diamond on <unk> behalf, congrats on the very solid print and it's glad to see that she uses is working out.

Speaker 5: Hey guys, this is actually Matt Diamond on Cities behalf. Congrats on the very solid print. I'm glad to see that Fuse is working out. The question I have is around the cross-ill opportunity. There was obviously some promising cost energies here, but I know it's early in the integration to maybe speak about this concretely, but Dave, after your first couple weeks of closing the deal, could you give us any sense of your confidence in that 50 million incremental ARR that was talked about when the deal was announced?

Question I have is around the cross sell opportunity. There was obviously some promising cost synergies here, but and I know it's early in the integration to maybe speak about this concretely, but Dave. After your first couple of weeks of closing the deal could you give us some color or any sense of your confidence in that $50 million incremental.

<unk> that was talked about when the deal was announced.

We just closed the deal two weeks ago, and we're having conversations with customers currently and very positive. So encouraged overall, although it's well too early to give updates on the quantifiable number of the cross sell and I'll, let Sam.

Yeah, So as Dave said look the feedback so far from the customer base very positive I would say.

Speaker 4: Yeah, so as Dave said, look, the feedback so far from the customer base, very positive, I would say. We're going through and validating customer by customer. As Dave said, we only closed it two weeks ago. So we actually literally got the names of the actual customers two weeks ago. And so we're working through all that, I would say, incrementally more positive, not ready to change.

We're going through and validating customer by customer as Dave said, we only closed it two weeks ago. So we actually literally got the names of the actual customers two weeks ago.

And so we're working through all that I would say incrementally more positive not ready to change numbers.

Got it and around the margin front. It sounds like there is a promising trajectory on the cost saves I'm curious, how you're thinking about inflationary costs. This year, if there's anything we need to keep in mind, when we're modeling the magnitude of spending growth.

Speaker 5: Got it. And around the margin front, it sounds like there's a promising trajectory on the cost phase. I'm curious how you're thinking about inflationary costs this year. If there's anything we need to keep in mind when we're modeling the magnitude of spending growth and margins for fiscal 23.

And margins for fiscal 'twenty three.

Speaker 4: No, specifically around inflation, look, we're dealing with it internally, so we are seeing things like wage inflation, some T&E inflation, those kinds of things. We're dealing with it in the overall guidance we're giving that total spending increases should be less than revenue growth. That's for us to deal with.

No specifically around inflation look we are dealing with it internally. So we are seeing things like wage inflation.

<unk> inflation those kinds of things we're dealing it within the overall guidance, we're giving that total spending increases should be less than revenue growth.

That's for us to deal with.

Okay. Thanks, so much.

Thank you.

Thank you. The next question comes from Matt Van Vliet with P. Qi <unk>. Please.

Speaker 1: Thank you the next question, because you're met then greet with PTIG, please proceed.

Please proceed.

Yes. Good afternoon, thanks for taking the question and nice job on the quarter.

Speaker 6: Yeah, good afternoon. Thanks for taking the question and nice job on the quarter. Dave, I guess bringing in Lisa to run the channel group here, you know, what incremental, you know, sort of improvements or strategy do you think will help get pushed through not only given your experience working with her, but maybe where you're trying to take the channel program from here now that you've built up a nice big stable of partners that are helping out?

Dave I guess, bringing in Lisa to run the channel group here.

What incremental.

Sort of improvements or strategy do you think will help get pushed through.

Given your experience working with her but maybe where youre trying to take the channel program.

I'm here now that you've built up a nice big stable of partners that are helping you out.

Yes channel is core to our overall strategy, we see the reseller network is the key element. That's worked with these customers historically bandwidth them on legacy solutions and are helping them through the migration to the cloud.

Speaker 3: to our overall strategy. We see the reseller network as the key element.

Speaker 3: worked with these customers historically, been with them on legacy solutions, and are helping them through the migration to the cloud. And so as we built up our channel program, and it's been several years as we've done that. We continue to aspire to be the easiest to work with, and build the most trust with the channel itself.

And so as we built up our channel program and it's been several years as we've done that we continue to aspire to be the easiest to work with and <unk>.

Build the most trust with the channel itself.

Thats shown already with the strength of our team as well as the strength of the channel that we've added but I think there is still a long ways to go.

Speaker 3: That's shown already with the strength of our team, as well as the strength of the channel that we've added, but I think there's still a long ways to go.

Lisa.

Has a decade plus of experience with the channel and she'll bring a lot of operational excellence and ease of ease and trust that we will continue to build with that channel and do that globally and I see a lot of opportunity still as we work some of the elements of our.

Speaker 3: Has a decade plus of experience with the channel and shall bring a lot of operational excellence and ease of...

Speaker 3: ease and trust that we will continue to build with that channel and do that globally. And I see a lot of opportunities still as we work some of the elements of

Speaker 3: are differentiated approach to offering both agency and wholesale billing models to channel that's been very successful for us in Europe to bring that into the US as well as capitalizing on the tremendous.

Our differentiated approach to offering both agency and wholesale billing models to channel that's been very successful for us.

In Europe to bring that into the U S as well as capitalizing on this tremendous Microsoft teams opportunity. That's ahead of us and using the channel to do that so.

Speaker 3: you know, Microsoft Teams opportunity that's ahead of us and using the channel to do that.

We still have a ways to go but I think it's been a positive experience for us today and I know at least is going to help us move that to the next level.

Speaker 3: We still have a ways to go, but I think it's been a positive experience for us today, and I know Lisa's gonna help us move that to the next.

Okay, Great and then looking at both the mid market and the SMB groups little slower growth, even on us and be a little bit of contraction here can you just help us kind of breakdown.

Speaker 6: Great. And then looking at both the mid-market and the S&B groups, you know, a little slower growth, even on S&B, a little bit of contraction here. Can you just help us kind of break down what some of the puts and takes are around there? Did you see any sort of elevated churn? Are you seeing pricing compression as contracts are renewed? And then what maybe kind of new growth help offset that, any of that downward movement there?

What some of the puts and takes are around there did you see any sort of elevated churn or are you seeing pricing compression.

As contracts are renewed.

And then what maybe kind of new growth help offset that.

Any of the downward movement there. Thanks.

Yes churn in small business is inherently higher as you have business mortality and seasonal use of the product and our core focus and which goes along with our strategy is really focusing our go to market.

Speaker 3: Yeah, churn in small business is inherently higher as you have business mortality and seasonal use of the product. And our core focus, which goes along with our strategy, is really focusing our go-to-market exercise and activities and incremental dollar, both sales and marketing, on the enterprise market. The enterprise is...

Exercise and activities and incremental dollar both sales and marketing on the enterprise market. The enterprise is core aligned to our strategy of ex cast. If you think about ex cats combines both the employee experience on the UC side and the agent experience on the contact center side only the larger customers.

Speaker 3: a core aligned to our strategy of XCAS, if you think about XCAS, it combines both the employee experience on the UC side and the agent experience on the contact center side, only the larger customers.

<unk> have that contact center need so it inherently aligns us with enterprise as well as if you look at our other advantages of Microsoft teams and our global <unk>.

Speaker 3: have that contact center need. So it inherently aligns us with enterprise, as well as if you look at our other advantages of Microsoft Teams.

Speaker 3: and our global capabilities taking that to 48 countries. Those are really aligned with enterprise. So that's where we've been leaning in and focusing our go-to-market activities. And we have one of our best, you know, enterprise, air-art growth, this quarter.

Capability is taking that to 48 countries. Those are really aligned with enterprise. So that's where we've been leaning in and focusing our go to market activities.

And we had one of our best Enterprise <unk>.

Growth this quarter. So while it takes time to grow that enterprise business as you build pipeline and mature that pipeline into deals. We are already seeing some of the benefits of that work, which I'm happy about.

Speaker 3: while it takes time to grow that enterprise business as you

Speaker 3: build pipeline and then mature that pipeline into deals. We are already seeing some of the benefits of that work, which I'm happy about.

And that's where you're going to see I think we've talked about it on previous calls that's where you're going to see our continued focus. So that's that's that's where we'll focus our metrics on what's important to us.

Speaker 3: That's where you're going to see, I think we talked about it on previous calls. That's where you're going to see our continued focus. So that's...

Speaker 3: That's where we'll focus our metrics on what's important to us.

Alright, great. Thank you.

Thank you Mr. Van Fleet. The next question comes from Brian Mcwilliams with Barclays. Please proceed.

Speaker 1: Thank you, Mr. VanVleet. The next question comes from Brian McWilliams with Barclays, please proceed.

Hey, guys. Thanks for taking the question.

Speaker 4: Hey guys, thanks for taking the question. Excluding Fuse for a second, it looks like a strong fourth quarter guide in terms of sequential service revenue dollars added compared to your guides in the previous quarters. So anything in your business or anything in your market opportunity that's given you confidence for this fiscal 4Q?

Excluding fees for a second it looks like a strong fourth quarter guide in terms of sequential service revenue dollars added compared to your guidance in the previous quarters. So anything in your business or anything in your market opportunity, that's giving you confidence for this fiscal <unk>.

Yeah.

Speaker 4: I'd love to say something insightful at this moment, but it's business as usual. We've got a great product, Teams is doing really, really well, our global reach message is resonating.

I'd love to say something insightful at this moment, but it's business as usual like we got a great product teams is doing really really well our global reach messages resonating and so.

I have nothing incredibly type, let's say other than I think we're doing really great and all the investments that we've made are just paying off.

Speaker 4: I have nothing incredibly insightful to say other than I think we're doing really great and all the investments that we've made are just paying off.

That works for me and just as we think about.

Speaker 7: That works for me. And just as we think about views, in its addition to a bite, how should we think about the year-to-year growth rate for Fuse in 2021? And is there anything since getting on your hands in the company? I know it's just been the last two weeks that maybe you're more excited about from a revenue or a senior year standpoint. Nice guys. All right, so I'll take a look.

And in addition to the API, how should we think about the year over year growth rate for fuse in 2021.

And is there anything since getting your hands on the company I know it just been the last few weeks that maybe you're more excited about from a revenue or synergy standpoint, thanks guys.

Alright, so I'll take those in reverse order.

Speaker 4: Look, as I mentioned on an earlier question, I think the cross-sell opportunity, you know, we had said on the call that we had zero modeled in for cross-sell. That's still the case right now. And so, you know, I think there is some positive stuff there, but too early, nothing in guidance, those kinds of things. And so when you talk about the year over year growth from fused customers, it gets a little mushy and I'm sorry to say that, but what we would expect is we expect fused revenue to decline from the customer base.

Look as I mentioned on an earlier question I think the cross sell opportunity.

We had said on the call that we had zero modeled in for cross sell that's still the case right now and so.

I think there are some positive stuff there, but too early nothing in guidance those kinds of things and so when you talk about the year over year growth from fuse customers. It gets a little mushy and I'm, sorry to say that but what we would expect as we expect fuze revenue to decline from the customer base part of that will be natural attrition part of that will be.

Speaker 4: Part of that will be natural attrition. Part of that will be we're gonna migrate them or upgrade them over to the eight by eight size.

We're going to migrate them or upgrade them over to the <unk> side.

Speaker 4: And so I think it's purely that's the key drivers right there.

And so.

I think it's purely that the key drivers right there.

If I could just follow up on that real quick I guess, how should we think about like the timing of that migration or is that something we can track or is that just like huckleberry. Good.

Speaker 7: If I could just follow up on that real quick, I guess, how should we think about like the timing of that migration, or is that something we can track? Or is that just like, how are you going to incentivize that? Like, what's the best way for us to monitor the progress there?

To incentivize that like what's the best way for us to monitor the progress there.

So I mean, the big thing is customer choice number one right. So we're not going to force anything any any of that sort of stuff customer choice. We're analyzing it now can I begged you asked me that again in 90 days and I'll give you a more coherent answer but it's still early we want to make sure that customers get the best of both worlds. That's something we said earlier, we absolutely want to stick with that so choices the number one thing.

Speaker 4: So I mean, the big thing is customer choice number one, right? So we're not gonna force anything, you know, any of that sort of stuff. Customer choice, we're analyzing it now. Can I beg that you ask me that again in 90 days and I'll give you more coherent answer? But it's still early. We wanna make sure that customers get the bus to both worlds, that's something we said earlier. We absolutely wanna stick with that. So choice is the number one thing and trying to bring forth that best of both world solutions.

And trying to bring forth that best of both world solution.

Speaker 3: And this is something that's going to be a positive for customers as they get to add a greater breadth of products, contact center, solution from 8x8, both with their current platform as well as getting the full XCAS experience when they decide to upgrade to the 8x8 XCAS platform. We do expect some of that to happen very quickly and continue to happen for multiple years.

And this is something that's going to be a positive for customers as they get to add a greater breadth of products contact center solution from eight by eight us with their current platform as well as getting the full X Cas experience when they decide to upgrade to the <unk> platform. We do expect some of that to happen very quickly.

Continue to happen for them.

Multiple years.

Appreciate the color thanks, guys.

Yeah.

Thank you Ms. Mcwilliams. The next question comes from Michael <unk> with Wells Fargo. Please proceed.

Speaker 1: Thank you, Mr. McWilliams. The next question comes from Michael Turrent with Wells Fargo. Please proceed.

Okay.

Hey, guys. This is Austin Williams on for Michael Thanks for taking my question I just wanted to follow up on the question on the used guide.

Speaker 8: Hey, guys. This is Austin Williams off for Michael. Thanks for taking my question. I just wanted to follow up on the question on the FUSE guide. The guide is for $20 million for the partial quarter. I think the previous disclosure was $100 million or $125 million run rate. Are there any purchase accounting adjustments or other call-outs as to why that might be lower than we were previously modeling?

The guide for 'twenty.

The partial quarter I think the previous disclosure was 100 or $125 million run rate are there any purchase accounting adjustments or other callouts as to why that might be lower than we were previously modeling.

Speaker 4: Well, yeah. So, I mean, first off, it's service revenue and second off, it's a stub period, right? So, I only get the time I own them. I can't take the full quarter. I'd love to, but I can't. So, I mean, you'll see another step. That's why I try to be really clear in the script. You'll see the first full quarter on that kind of run rate will be, you know, our fiscal first quarter of 2020.

Well, yes, so let me first off its service revenue and second half, it's a stub period right. So I only get to look at the time I own them I can't take the full quarter I'd love to but I can't so I mean, you'll you'll see another step up that's why I tried to be really clear in the script Youll see a full the first full quarter on that kind of run rate will be.

Our fiscal first quarter of 'twenty three.

Got it thank you.

Thank you. The next question comes from Peter Levine with Evercore. Please proceed.

Speaker 1: Thank you. The next question comes from Peter Levine with Evercore. Please press.

Great. Thanks for taking my questions guys I'll leave it there.

Speaker 9: I think the first one is, as you think about the service revenue re-acceleration at or above that 20% three-year target, first, can you just clarify, that's an organic target, and then second, the go-to-market investments that you guys made internally and towards expanding your partner ecosystem, obviously, that's gaining traction, so really, what has to work to get to that 20% number, and then the reverse is, where does the risk lie?

First one is as you think about the service revenue reacceleration at or above that 20% three year target first can you just clarify that's organic target and then second.

Go to market investments you guys made internally in towards extending your partner ecosystem. Obviously, that's gaining traction. So so really what has to work to get to that 20% number and then the reverse is where does the risk alive.

Alright, I'll take the first part of that and maybe I'll, let Dave talk about the risks so.

Speaker 4: all right i'll take the first part of that maybe i'll take talk about the risk uh... so we weren't clear organic or in organic we've done both in the history of the company and i like

So we werent clear organic or inorganic we've done both in the history of the company.

And like I.

Speaker 4: I think you're reading too much into it, it's 20% growth, like it's just what we expect the revenue growth side to be. In terms of what has to work, this question was asked a lot when I gave the long-term guidance. The thing I tried to make very clear is that we need to improve our sales and marketing efficiency that naturally lifts the growth rate. And so that's one of the areas that we continue to work on, how we invest, where we invest is a key part of that strategy. But that's one of the things that has to continue to work in our favor to drive higher growth rates.

Youre reading too much into it as 20% growth.

What we expect the revenue growth side to be.

In terms of what has to work. This question was asked a lot when I gave the long term guidance. The thing I tried to make very clear is that we need to improve our sales and marketing efficiency that naturally lifts the growth rate and so that's one of the areas that we continue to work on that.

How we invest where we invest is a key part of that strategy, but that's one of the things that has to continue to work in our favor to drive higher growth rates and where.

Where we will get that acceleration and improved sales and marketing efficiency. It is as we have success selling ex cast and we've seen now it's more than 35% of our IRR and growing at over 35% year over year.

Speaker 3: Where we'll get that acceleration and improve self-marking efficiency as we have success.

Speaker 3: selling X-Casts and we've seen now it's more than 35% of our ARR and growing at over 35%.

Speaker 3: year over year to drive enterprise customers, which I talked about earlier, as well as keeping those customers very happy.

To drive enterprise customers, which I talked about earlier as well as keeping those customers very happy.

Speaker 3: And that's where we've made a lot of progress today. It would be, you know, always your ongoing risk, but we have driven...

And that's where we've made a lot of progress today it would be.

Always your ongoing risk, but we have driven the customer retention improvement every quarter that I've been here and we have a multi year run.

Speaker 3: The customer are retention improvement every quarter that I've been here and we had a multi year.

Speaker 3: record on that this quarter. So.

Record on that this quarter. So those those are the key elements to drive customer retention of large accounts to drive the enterprise business and to drive the <unk> adoption over time and doing that also with our differentiators of teams and global.

Speaker 3: Those are the key elements to drive customer retention of large accounts, to drive the enterprise business, and to drive the XCAS adoption over time. And doing that also with our differentiators of Teams and global.

Yes.

And then just one last one a housekeeping question I don't know if I missed it on the call but could you.

Speaker 4: And then this one last one, how's keeping question? I don't know if I missed it on the call, but could you give us the RPO number? I just didn't catch it. I said it's your 565.

So it gave us the <unk> number is a good candidate.

$5 65.

Great. Thanks again cake.

Sure.

Thank you Mr. Levine. The next question comes from meta Marshall with Morgan Stanley . Please proceed.

Speaker 1: Thank you, Mr. Levine. The next question comes from Meadow Marshall with Morgan Stanley .

Great. Thanks.

Speaker 10: Great, thanks. Sam, I wanted to know if you could just kind of give what the headwind was from just the exudate of the wholesale business either to this quarter or to the guide. And then this maybe as a...

Sam I just wanted to know if you could just kind of give what the.

The headwind was from just the exiting of the wholesale business either to this quarter or end to that guide.

And then just maybe as a.

Speaker 10: You know, question for Dave. You know, clearly you guys have made efficiencies to the services organization, you know, and maybe deemphasize kind of that smaller business.

Question for Dave.

Clearly you guys have made efficiencies to the services organization.

And maybe deemphasize kind of that smaller business.

Our book of business should we consider that as there are any growth opportunity or an additional churn we should be mindful of if there's anything to know kind of on the smaller end of the business as you guys have kind of.

Speaker 10: or book of business, you know, should we consider, you know, that as there are any growth opportunity or additional churn we should be mindful of, just anything to note kind of on the smaller end of the business, you know, as you guys have kind of de-emphasized or changed the services organization around that business.

We emphasize or change the services organization around that business.

Yes, so the headwind from.

Speaker 4: Yeah, so the headwind from exiting the wholesale business was about 3% service revenue growth.

The exiting the wholesale business was about 3% service revenue growth.

Speaker 4: So I think I said in the script, the server-serving growth would have been about three percent each points higher if, you know, assuming that we hadn't exited and the business was flat.

So I think I said in the scripted.

Total service revenue growth of about three percentage points higher.

Assuming.

That we hadn't exited and the business was flat.

It seems that the guidance correct.

Yes, yes fiscal Q okay.

Speaker 3: Yeah. Yeah. Okay. Yeah. And then to your question on our services organization and business, obviously as a fast business, one thing we're striving as we go through reorganization of the product and of that organization is to make deployment easier, more out of the box for customers. We've made some.

And then to your question on our services organization and business, obviously as a SaaS business. One thing that we are striving as we go through reorganization of the product and of that organization is to make deployment easier more out of the box.

For customers, we've made some progress on that but that creates inherently a little bit of revenue headwind, but obviously, we're focused on the service revenue component of the business and we believe easier deployment implementation configuration creates.

Speaker 3: progress on that, but that creates inherently a little bit of revenue headwind, but obviously we're focused on the service revenue component of the business. And we believe easier deployment implementation configuration creates strong advantages, strong TCO opportunities for customers. So that will be a continued focus for us as a business.

Strong advantages strong tcl opportunities for customers. So that will be a continued focus for us as a business.

Got it thanks.

Thank you Ms Marshall.

Speaker 1: Thank you, Ms. Marshall. The next question comes from Michael Ademura with Northland Capital Markets. Please proceed.

Next question comes from Mike Latimore with Northland Capital markets. Please proceed.

Great. Thanks.

Speaker 8: Great, thanks. On the record revenue retention, can you just give a little more data on that?

The record revenue retention can you just give a little more data on that.

Yes, I mean, basically our retention rates were the highest we've seen pre pandemic even before that.

Speaker 3: Yeah, I mean, basically, our retention rates were the highest we've seen pre-pandemic, even before that. Churn's really come down. I mean, it's been a key area of Dave's focus the last year. Churn's really come down the last year. And arguably, it's across the board. We saw some of the lowest credit card decline rates we've ever seen. We saw great enterprise retention. It's across the board. We've made significant investments in our customer

<unk> really come down I mean, it's been a key area of Dave's focus last year turns really come down to last year and it's arguably it's across the board. We saw some of the lowest credit card decline rates, we've ever seen we saw great enterprise retention, it's across the board we've made significant investments in our customer.

Success organization over the last year as well as product usability stability enhancements.

Speaker 3: that's organization over the last year, as well as product usability stability enhancements. And I think those are paying off. Obviously there's other macro trends, possibly affecting, but those, I think, are really critical for what we're doing here. And getting great.

I think those are paying off obviously, there's there's other macro trends, possibly affecting but those I think are really critical for what we're doing here and getting greater customer happiness.

Great and then.

In terms of the.

The X Kaz verticals are they is there any sort of material difference between the verticals that are index kaz business versus say <unk>.

Independent of ex Caviar independent contact center.

Sorry, the vertical is pretty much similar the mix it vertical similar between the two.

Speaker 8: are the verticals pretty much similar, the mix of verticals similar between the two.

Yeah.

For us to date, the verticals have been similar as we focus on a lot of.

Speaker 3: For us today, the verticals have been similar as we focus on a lot of.

The blend between the UC user in the contact center user we focused on informal queues.

Speaker 3: We blend between the UC user and the contact center user. We focused on informal queues and bringing contact center capability into UC users. We talked about our front desk product as one of those. So we are, there is, for us, there's a high crossover in verticals. Our core vertical being sled out in the EMEA market and that also is buying XCAS. So we're seeing it across the board.

Bringing contact center capability into UC users, we talked about our front desk product as one of those so we are there is for US there is a high crossover and verticals our core vertical being been flood out in.

The EMEA market and that also is buying X cast so we're seeing that across the board.

Yes.

Thanks.

Yes.

Thank you Mr Latimore.

Speaker 1: Thank you, Mr. Lathamore. The next question comes from George Sudden with Craig Helen, please proceed.

Question comes from George Sutton with Craig Hallum. Please proceed.

Thank you I'm glad to hear Youre going to continue to focus heavily on R&D did mentioned, bringing overviews.

Speaker 9: Thank you. I'm glad to hear you're going to continue to focus heavily on R&D. You did mention bringing over FUSE developers in large part. Can you just talk about how does that influence the product roadmap going forward? In other words, how might the product look different in a couple of years as a result of this move?

Developers in large part can you just talk about how does that influence the product roadmap going forward.

Other words, how might the product what's different in a couple of years as a result of this move.

Sure and we are.

Speaker 3: Sure, and we are, you know, I am happy to say we've brought over that team. We've been able to align them into our organization. This is all relatively new, but obviously planned. And it does create a force multiplier on innovation for us as we're able to put incremental resources on key

I am happy to say, we've brought over that team, we've been able to align them into our organization. This is all relatively new but obviously planned.

And it does create a force multiplier on innovation for us as we're able to put ink.

Incremental resources on key product innovation areas as we have the basics covered right from an R&D perspective.

Speaker 3: product innovation areas as we have the basics covered, right, from an R&D perspective. And we – and it's nice that we're able to do it while making this profit, you know, being able to contribute to profit over the next 12 months.

And we and it's nice that we're able to do it well.

Making this profit being able to contribute to profit over the next 12 months.

What we will focus on obviously as those core pillars of ex cats, our team's product and our global global reach we have made progress across all of those already in the last year. So there are already additional innovations in the pipe, but what youll see us incur.

Speaker 3: And what we will focus on, obviously, is those core pillars of XCAS, our team's product, and our global reach. We have made progress across all of those already in the last year or so. There are already additional innovations in the pipe. But what you'll see is increased velocity of innovation over the next nine plus months.

Greece velocity of innovation over the next nine plus months and areas that we'll focus on are things like admin usability for managing very very large organizations some of the Polish around our omnichannel and AI capabilities additional deeper.

Speaker 3: And areas that we'll focus on are things like ad men usability for managing very, very large organizations. Some of the polish around our Omni Channel and AI capabilities, additional deeper integrations that go with that. And additional personas, the front desk, was an initial.

Integrations that go with that and additional persona is the front desk was an initial.

Speaker 3: our first foray into personas and we have some additional ideas there. So I would say we have a couple of interesting announcements planned for late this quarter and I would say stay tuned for the specifics.

Our first foray into personas and we have some additional ideas. There. So I would say we have a couple of interesting announcements planned for late this quarter and I would say stay tuned.

For the specific rate I appreciate the detail thanks, guys.

Thank you.

Thank you Mr. Setting. The next question comes from James Breen with William Blair. Please proceed.

Speaker 1: Thank you, Mr. Siden. The next question comes from James Brain with William Blair, please proceed.

Thanks for taking the question.

Speaker 11: Thanks for taking the question. You had mentioned a little bit about some of the supply chain issues. Just wondering sort of how maybe you've had to change the business a little bit around some of that, and if you're seeing it alleviate at all. And does it impact your sales cycles as the supply chain starts to right itself? Thanks.

You'd mentioned a little bit about some of the supply chain issues, just wondering sort of how maybe that's changed the business a little bit around some of that and have you seen it alleviate at all and doesn't impact your sales cycles are shortening the supply chain starts to write itself. Thanks.

Yes.

Okay. So here's what happens yes, I think it does have some effect it's hard to quantify.

Speaker 4: Okay, so here's what happens. Yes, I think it does have some effect. It's hard to quantify. But I think we are seeing some enterprise customers play smaller orders front because they have to have a slightly different deployment schedule. So there may be some end-up demand. There's certainly we've got the largest back orders that we've had in a long time backlog, if you will, of hardware.

But I think we are seeing.

Some enterprise customers placed smaller orders upfront because they have to have a slightly different deployment schedule and so there may be some pent up demand. There certainly we've got the largest back orders that we've had in a long time backlog. If you will of hardware in that that is.

Our statement as it alleviated not really it's still something we manage everyday every week right now.

Speaker 4: You know, a statement as it alleviated, not really. It's still something we manage every day, every week right now. You know, I'm hoping that at some point in the next four quarters it alleviates. But there's nothing that I can concretely say, you know, that we have the signs on the horizon that it's going to be alleviated.

I'm, hoping that at some point in the next four quarters alleviates, but theres nothing that I can concretely say that.

We have the signs on the horizon that is going to be alleviated.

So you basically you've adjusted to the working environment that Youre in now.

Speaker 11: So you basically, you've adjusted to the working environment that you're in now. Haven't seen necessarily a change, but it just hasn't come to a completion.

<unk> seen necessarily a change, but it just hasnt come to completion here.

Yes, I mean, theres a change I think like as I said I think just some of the enterprise orders the bigger orders are probably a little smaller than they would have been because they're placing the first order in a place a second order here in a couple of months when we get more hardware to meet their deployment needs.

Speaker 4: Yeah. I mean, there's a change. I think, like I said, I think just some of the enterprise orders, the bigger orders are probably a little smaller than they would have been because they're placing the first order and they'll place a second order here in a couple months when we can get more hardware to meet their deployment.

And we're building a greater than just hardware option to create more flexibility for customers.

Speaker 3: And we're building a greater breadth of hardware options to create more flexibility.

Okay.

Speaker 11: Okay, and then just qualitatively, you mentioned a little bit about the cross-sell with Fuse. Any real difference in the size of their customer base relative to the size of your customer base, small, large, et cetera? Well.

<unk>.

Just qualitatively.

You mentioned, a little bit about the cross so with fuze.

Any any real difference in the size of their customer base relative to the size of your customer base small large et cetera.

Well on in terms of the size of the company.

Yes on average the size of their customers was larger but if you look at our enterprise segment in their enterprise segment Theyre very comparable.

Speaker 4: Yeah, on average, the size of their customers was larger, but if you look at our enterprise segment and their enterprise segment, they're very comparable.

If that makes any sense, we had a little we are a larger small business components in there but are on the enterprise side. Both companies are very similar to each other.

Speaker 4: If that makes any sense, we have a larger small business component than they have. But on the enterprise side, both companies are very similar to each other.

Okay, great. Thanks.

Thank you Mr Breen the.

Speaker 1: Thank you, Mr. Brain. The next question comes from Catherine Treb, Nick, would call yours, please proceed.

The next question comes from Katherine trip Necklet Colliers. Please proceed.

Hello, Thanks for taking my question congratulations on a good quarter. So you spent some time talking about Microsoft.

Speaker 12: Well, thanks for taking my question. Congratulations on a good quarter. So you spent some time talking about Microsoft's voice with Teams, and I'm wondering why aren't you pursuing a relationship with Slack? And it seems to me that would be another avenue of good growth. Thank you.

Voice with teams and I'm wondering why arent you pursuing a relationship with slack and it seems to me that would be another avenue of growth. Thank you.

Thanks Catherine.

Speaker 3: Thanks Catherine. So on the team's opportunity, I do think it is...

So on the team's opportunity I do think it is.

Speaker 3: Like more partners is always good. So we're open to that relationship that the team's platform itself is a larger platform, honestly. And they create an opportunity that I think is still just lightly, lightly touched.

Like more partners is always good.

We're open to that relationship.

The teams platform itself is a larger platform honestly and they create an opportunity that I think is still just likely lightly touched.

Speaker 3: And we are doing a lot in that regard to.

And we are doing a lot in that regard to help penetrate these users that don't have an enterprise communication.

Speaker 3: help penetrate these users that don't have an enterprise communication.

System attached to their teams usage and we're doing that through direct routing and we're adding a lot of value through our contact center powering all of our employees global coverage.

Speaker 3: system attached to their team's usage, and we're doing that through direct routing. And we're adding a lot of value through our contact center, powering all our employees' global coverage. We do have a strong relationship with Salesforce overall, and obviously with integrations across both our UC and CC products.

We do have a strong relationship with sales force overall.

Obviously with integrations across both our UC and Cc products, and we see that as a very important relationship overall for us.

Speaker 3: and we see that as a very important relationship overall for us.

Alright, Thanks I appreciate it.

Thanks Catherine.

Yes.

Thank you Ms. Chapnick. The next question comes from will power with Baird. Please proceed.

Speaker 1: Thank you, Ms. Trebnik. The next question comes from Will Powyer with Baird. Please proceed.

Great. Thanks, Yeah, I guess, a couple of questions, maybe just starting with the service revenue upside in the quarter I think Sam you indicated it was really driven by strength in C pass and seek Cas and just wondering if we could get any other color there.

Speaker 13: Great, thanks. Yeah, I guess a couple of questions. Maybe just starting with the service revenue upside in the quarter I think Sam you indicated it was really driven by Strengthened CPAS and C-CAS and just wonder if we could get any other color there You know with any particular products or areas within CPAS and then within C-CAS You know is that seats is that usage any other color and just that the sustainability of that upside I guess as we move into Q4

Fuller products or areas within C pass and then within see Cas is that seaters that usage and any other color and just the sustainability of that upside I guess as we move into Q4.

Yes.

Speaker 4: So, on the CPAS side, it was, you know, Southeast Asian usage, and so I think, you know, we've got a great presence there. We've won some new customers. I mean, I think Dave has mentioned some pretty big brand names over the last few earnings calls. You can imagine those flowing through as usage as they ramp up, starts to show up. And then on the contact center side, it was just minute usage. And so... And so...

So on the <unk> side, it was southeast Asian usage, and so I think.

We've got a great presence there.

We've won some new customers I mean, I think David mentioned, some pretty big brand names over the last few earnings calls you can imagine those flowing through as usage as they ramp up starts to show up and then on the contact center side. It was just minute usage and so.

I do think it's sustainable yes, it feels like the world's opening up and Theres a lot more business activity going on and that just correspondingly shows up as more usage.

Speaker 4: I do I think it's sustainable yes. It feels like the world's opening up and there's a lot more business activity going on and that just correspondingly shows up as more use.

Okay. That's great and then just a question on <unk> growth.

Speaker 13: Okay, that's great. And then, just a question on ARR growth, you know, it looks like the XCAS ARR growth, you know, accelerated. I know you called that out. I know that's the primary focus. And I think as you touched

It looks like the ex cats are our growth accelerated I know you called it out I know that's the primary focus.

And I think you touched on.

Speaker 13: you know, as you look at mid-market and S&B a bit weaker. So I guess really the big question, or one of the big questions.

As you look at mid market and SMB a bit weaker so I guess really the big question or one of the big questions is when do we get to an inflection point where that excess cash.

Speaker 13: is when do we get to an inflection point where that XCAS ARR can more than offset some of the pressure points in mid-market and S&B to help drive an acceleration or an ARR growth? What are the key drivers of that? Any rough timeline to how to think about that?

And more than offset some of the pressure points in midmarket and SMB to.

To help drive an acceleration in AOR growth what are the key drivers of that in your rough timeline to how to think about that.

David and I are looking each other we're wondering if you want us to give you an answer of like three months six days four hours and eight minutes or just the key drivers right. So sorry, a little bit of humor today.

Speaker 4: David and I are looking at each other. We're wondering if you want us to give you an answer of like...

Speaker 4: three months, six days, four hours, and eight minutes, or just the key drivers, right? So the, sorry, a little bit of humor today. So look, what's really driving it is we're pushing in there, we're seeing the first signs that the investments we're making in the demand generation, in the branding, in the channel, and all those kinds of things are paying off.

So look what's really driving it is we're pushing in there we're seeing the first signs that the investments we're making in the demand generation in the branding in the channel and all those kinds of things are paying off.

Speaker 4: Yes, it's continuing to grow faster than overall growth rates, so it's becoming a larger percentage of our business. Exactly what Dave wants.

Yes, it's continuing to grow faster than overall growth rate. So, it's becoming a larger percentage of our business exactly what Dave wants and he's been driving towards in excess of a year now.

Speaker 14: And he's been driving towards in excess of a year now. And I'm hoping that every call from this point on, we keep saying it's a bigger percentage of the business, because it is one of our tenets to drive the overall growth rate of the company up. Right, okay, thank you.

And I'm, hoping that every call from this point on we keep saying, it's a bigger percentage of the business because it is one of our tenants to drive the overall growth rate of the company.

Alright.

Okay. Thank you.

Thank you Mr power.

The next question.

Comes from Tim Horan with Oppenheimer. Please proceed.

Thanks, guys can you go into teams a little bit deeper.

Speaker 11: Thanks, guys. Can you go into themes a little bit deeper? Where are you with developing the channel there? I would think it's a very different channel than the Legacy channel. And where are you with just like the processes to kind of implement? And I guess just lastly, what inning are we in do you think in terms of your ability to kind of execute on that and penetrate that market?

Where are you with developing the channel that I would think it's a very different channel than the legacy channel and where are you just like the processes to implement them.

Yes.

And I guess, just lastly, what inning are we in do you think in terms of your ability to execute on that and penetrate that market.

I'm sorry can I ask a question. The first part came a little muffled did you say teams channel.

Speaker 4: I'm sorry, can I ask a question? The first part came a little muffled. Did you say team's channel?

Yes, sorry, Microsoft where.

Speaker 11: Yeah, sorry, Microsoft Teams, yeah, where are you developing the channel that kind of can sell into a legacy kind of Microsoft, you know, basic systems integrator supporter?

Where are you developing the channel that can sell into.

Legacy kind of Microsoft.

<unk> systems integrator support.

Yeah, so I'm going to start with the last part.

Speaker 3: So, and I'm gonna start with the last part. I think it's early in this that there are...

It's early in this that there are a lot of Microsoft teams users when you look at the MAA use.

Speaker 3: a lot of Microsoft Teams users when you look at the MAUs.

But they are predominantly all using it for messaging right and so attaching enterprise communications to that I think is whats early and I think just a small fraction have really attached enterprise communications and when you do do that theres different ways to do it.

Speaker 3: but they're predominantly all using it for messaging, right? And so attaching enterprise communications to that, I think is what.

Speaker 3: early, and I think just a small fraction have really attached enterprise communications. And when you do do that, there's different ways to do it, whether it's

Whether it's direct routing or operator can act or calling plans I think what we see is the predominant solution today is direct routing and Thats, where we are differentiated so I think.

Speaker 3: direct routing, or Operator Connect, or calling plans. I think what we see as the predominant solution today is direct routing, and that's where we're differentiated. So I think we sensed this. We got into this early, and we've been capitalizing on it. Obviously, we had 30% quarter-over-quarter growth.

<unk> census, we got into this early and we've been capitalizing on it obviously, we had 30% quarter over quarter growth, but I don't think we have yet really capitalized on the full channel opportunity and so that is something that is a.

Speaker 3: but I don't think we have yet really capitalized on the full-channel opportunity, and so that is something that is a key initiative for us. We've been mostly

A key initiative for us we've been mostly.

Speaker 3: riding our current channel relationships and there is overlap there but I think there's a whole additional set of channel partners to exploit to your point and so that that's something that we will be working on over time as we go ahead and improve this and obviously we've been doing it when we do it we do it by you know the advantages we bring here is really powering all employees your contact center employees

Riding our current channel relationships and there is overlap there, but I think there is a whole additional set of channel partners to exploit to your point and so that's something that we will be working on over time as we go ahead and improve this and obviously we've been doing it when we do it we do it by the <unk>.

Vantages, we bring here is really powering all employees your contact center employees, giving.

Giving global coverage to those and these enhanced capabilities of SMS call to use fax things like that so we've been having a lot of success I think there is an opportunity for a much bigger opportunity for success here.

Speaker 3: giving global coverage to those and these enhanced capabilities of SMS, call queues, fax, things like that. So we've been having a lot of success. I think there is an opportunity for a much bigger opportunity.

And where are you with the ability to provision and support customers in just quality of the product line teams.

Speaker 11: And where are you with the ability to provision and support customers and just quality of the product on teams?

Yes, it's a great question.

Speaker 3: Yeah, that's a great question. We, you know, those customers are predominantly provisioned and deployed. And we work on, you know, quality of service.

We.

Those customers are predominantly provision and deployed.

And we work.

Quality of service.

Speaker 3: Uptime Reliability of Service is our core tenants. That's where we come from. And so I would say we have an ability to do that. We are still figuring out some of those components, but I think it's better than anyone else and a core special sauce for us to do that in a high quality, a high reliability environment.

Uptime reliability of service as our core tenants Thats, where we come from.

And so I would say, we have an ability to do that.

We are still figuring out some of those components, but I think it's better than anyone else and.

Our core special sauce for us to do that in a high quality and high reliability environment.

Thank you.

Thank you. The next question comes from Michael Funk with Bank of America. Please proceed.

Speaker 1: Thank you. The next question comes from Michael Fonk with the Think of America. Please proceed.

Yeah. Thank you for taking the question is could it be here.

Speaker 15: Yeah, thank you for taking the question. It's good to be here. A couple if I could, you know, first on the enterprise deal funnel, any kind of comment you can give on the change in size of that funnel, and then early and late stage?

A couple if I could first on the on the enterprise deal funnel and you kind of comment you can give on it.

The change in the size of that funnel and then early and late stage.

Hi.

Speaker 4: I got, we don't, Mike, first, thank you for the recent initiation. It was a great read. I appreciate it. Um, second, look, um, we, we don't give those kind of funnel metrics. I think it would be inappropriate with, with, you know, we certainly know our competitors listen to our calls. And so I think it would just be the wrong thing to give out right.

Mike first thank you for recent initiation it was a great read I appreciate it.

Secondly, we don't give those kind of funnel metrics that he would be inappropriate.

We certainly know our competitors listen to our calls and so I think it would just be the wrong thing to give out right now.

I'm going to try one time at least so on the.

Speaker 15: I could just try one time at least. So on the broader question of enterprise adoption, obviously they've been different rates of an inflection of retirement for UCAS and NCAS, can you just kind of peel apart kind of the broader acceleration in market adoption versus when you're having in terms of market share gains?

On the broader question of enterprise adoption, obviously, they've been different rates of inflection over time for you cash in.

And fee cash can you just kind of Peel apart.

The broader acceleration in market adoption versus the success youre, having in terms of market share gains.

Okay.

B.

Speaker 3: The movement to the cloud has been occurring for almost a decade, but we barely scratched it. It's accelerated at this point. And the enterprises have been the latter ones to migrate over time. And so I still think there's a lot of large enterprises on legacy solutions.

The movement to the cloud has been occurring for almost a decade, but we barely scratched at its accelerated at this point and the enterprises have been less than the latter ones to migrate over time, and so I still think theres a lot of large enterprises on legacy solutions.

Speaker 3: But we are seeing a greater acceptance, partly because of the work from home mandate.

But we are seeing a greater acceptance acceptance, partly because of the work from home mandates, but partially also because people realize thats, where the innovation investment is going into the cloud.

Speaker 3: But partially also because people realize that's where the innovation investment is going into the cloud solutions over legacy solutions. So I think when people are choosing their future platform.

Cloud solutions over legacy solutions. So I think when people are choosing their future platform, it's becoming obvious to move to a cloud platform. In this next replacement cycle of that replacement cycle could still be up to seven to 10 years. So I still think it's going to be a long.

Speaker 3: It's becoming obvious to to move to a cloud platform in this next replacement cycle that replacement cycle.

Speaker 3: could still be up to seven to 10 years. So I still think it's gonna be a long run in that regard, but the propensity to move to cloud has increased.

Run in that regard, but the propensity to move to cloud has increased.

Understood and then maybe kind of more quantitative than.

Speaker 15: Understood. And maybe kind of more quantitative then. How much breakage are you are you modeling into the fees acquisition? You mentioned earlier you're modeling in some insurance. How much breakage are you modeling in?

How much of breakage or are you modeling into the <unk> acquisition, you mentioned earlier, you're modeling in some challenge how much breakage argue modeling in.

Speaker 4: So by breakage, you mean churn, right? So we're, yeah, so I've, I mean, you have some rough estimates of what their installed base looks like, and I've taken industry norms and doubled it.

So by breakage, you mean churn rate so.

Sure.

Yes.

So I mean, you have some rough estimates of what the installed base looks like and I've taken industry norms and doubled it.

Speaker 4: So, just to be safe, I doubled the industry average churn rate for their portfolio and that's what I've been running through the model.

So just to be safe I doubled the industry average churn rate for their portfolio and thats, what ive been running through the model.

Great. Thank you guys. So much appreciate it.

Speaker 2: Thank you. I think we have time for one more question, operator.

Thank you I think we have time for one more question operator.

Absolutely. The last question comes from Ryan Koontz with Needham. Please proceed.

Speaker 1: Absolutely. The last question comes from Ryan Koontz with Needham. Please proceed.

Thanks for the question I wanted to double back on the teams a little bit more and it.

Speaker 13: I think some of the question, I wanted to double back on teens a little bit more and something increasingly important part of your new bookings. Can you give us any help there? Is it, you know, what I hear it's up 30% terms ARR is that Q over Q and E-Mort code you can give us on where that stands as a percentage of, you know, new enterprise bookings and anything like that.

Sounds like an increasingly important part of your new bookings can you give us any help there is it.

Sure it's up 30% from two <unk> is it Q over Q and any more color you can give us on where that stands as a percentage of new enterprise bookings or anything like that.

Yeah, I think what we said it was.

Speaker 3: Yeah, I think what we said is we, you know, a quarter ago, we said we had 100,000 users in the first five quarters of launching that, and that user number went up 30% quarter over quarter.

A quarter ago, We said, we had 100000 users in the first five quarters of launching that.

That user number went up 30% quarter over quarter.

The.

And then.

Speaker 3: And then it is important both, we are seeing it both on new bookings, but also even the land and expand deals I mentioned today of ALS. Beam Centauri and London Bureau of Newham all have expansion of teams also. So we're seeing it in both, you know, new and land and expand.

Is important both we are seeing it both on new bookings, but also even the land and expand deals I mentioned today a L. S.

Beam Suntory in London Bureau, new them all have expansion of teams also so we're seeing it in both.

New and land and expand.

That's helpful. Dave Thank you.

There are no additional questions at this time and that concludes the Q&A session I will pass the conference back to the management team for closing remarks.

Speaker 1: There are no additional questions at this time, and that concludes the Q&A session. I will pass the conference back to the management team for closing remarks.

There is a report theirs.

Replace it's one of those days is a replay available on the web and thank you very much for your time today.

Speaker 4: It's one of those days. There's a replay available on the web, and thank you very much for your time today.

Yes.

That concludes the eight by eight fiscal Q3 2022 earnings conference call. Thank you for your participation you may now disconnect your line.

Speaker 1: That concludes the 8x8 Fiscal Q3 2022 Earnings Conference Call. Thank you for your participation. You may now disconnect your line.

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