Q1 2025 8x8 Inc Earnings Call

August 7, 2024

Unknown Executive: Thank you. Good afternoon, everyone.

Unknown Executive: Today's agenda will include a review of our results for the first quarter of fiscal 2025 with Samuel Wilson, our Chief Executive 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 investments in innovation and our focus on profitability and cash flow, as well as statements regarding our business products and growth strategies.

Thank you. Good afternoon, everyone. Today's agenda will include a review of our results for the first quarter of fiscal 2025 with Samuel Wilson, Our Chief Executive 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 four.

Unknown Executive: 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 those expressed in the forward-looking statements, as described in our risk factors in our report filed with the FCC. 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 year-over-year comparisons in some cases, were not prepared in accordance with U.S. Generally Accepted Accounting Principles, or GAAP.

Unknown Executive: 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 those expressed in the forward-looking statements, as described in our risk factors in our report filed with the FCC. 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. With that, I'll turn the call over to Samuel Wilson.

Speaker Change: We're looking statements about our future financial performance, including investments in innovation, and our focus on profitability and cash flow as well as statements regarding 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.

Curious 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 year over year comparisons in some cases were not prepared in accordance with U S. Generally accepted accounting principles or GAAP, a reconciliation of those non-GAAP measures to the closest comparable GAAP measure is provided in our earnings press release and earnings presentation slides, which are available.

Unknown Executive: A reconciliation of those non-GAAP measures to the closest comparable GAAP measure is provided in our earnings press release and 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 Samuel Wilson.

Eligible on eight by eight Investor Relations website at investors thought eight by eight dotcom.

With that I'll turn the call over to Samuel Wilson.

Samuel Wilson: Good afternoon, everyone. I appreciate you joining us today as we discuss our results for the first quarter of fiscal 2025. I am pleased to report another solid quarter in which we delivered results within our guidance ranges for service revenue, total revenue, and non-GAAP operating margins. Cash flow for the quarter was better than anticipated at $18 million, bringing cash flow from operations for the trailing 12-month period to $71 million.

Samuel Wilson: Good afternoon, everyone. I appreciate you joining us today as we discuss our results for the first quarter of fiscal 2025. However, these competitors' actions have made us think about getting more creative to push our competitive advantage and drive awareness and adoption. Nothing to announce at this point, but with the advances we've made on our platform, there may be opportunities to rock the boat a bit ourselves. In addition to delivering in-line results again this quarter, we also achieved an important milestone in our stated objective to return value to shareholders by reducing debt with the repayment of our $225 million term loan with Francisco Partners earlier this week.

Samuel Wilson: Good afternoon, everyone. I appreciate you joining us today as we discuss our results for the first quarter of fiscal 2025, I am pleased to report another solid quarter in which we delivered results within our guidance ranges for service revenue total revenue and non-GAAP operating margin.

Cash flow for the quarter was better than anticipated at $18 million, bringing cash flow from operations for the trailing 12 month period to $71 million.

Samuel Wilson: We achieve these results even though the market has become incrementally more competitive, if only from a marketing and messaging standpoint. For example, we saw Nice make a marketing splash with the $5 UCAS offering. These solutions are typically feature-light and unintegrated, but the announcements have served to disrupt and extend sales cycles in some cases. However, these competitors' actions have made us think about getting more creative to push our competitive advantage and drive awareness and adoption.

Howie: We achieved these results even though the market has become incrementally more competitive if only from a marketing and messaging standpoint. For example, we saw a nice making marketing splashed with a five dollar ucas offering. These solutions are typically feature light an unintegrated, but the announcements have served to disrupt and extend sales cycles in some cases Howie.

Samuel Wilson: Over these competitors actions have made us think about getting more creative to push our competitive advantage and drive awareness and adoption nothing to announce at this point, but with the advances we've made on our platform or maybe opportunities to rock the boat a bit ourselves.

Samuel Wilson: Nothing to announce at this point, but with the advances we've made on our platform, there may be opportunities to rock the boat a bit ourselves. In addition to delivering in-line results again this quarter, we also achieved an important milestone in our stated objective to return value to shareholders by reducing debt with the repayment of our $225 million term loan with Francisco Partners earlier this week. We funded the prepayment with a new $200 million credit facility we announced in early July, plus $28 million from our cash balances for principal plus accrued interest and fees.

Speaker Change: In addition to delivering inline results again this quarter. We also achieved an important milestone in our stated objective to return value to shareholders by reducing debts with the repayment of our $225 million term loan with Francisco partners earlier. This week, we funded the prepayment with a new $200 million.

Samuel Wilson: We funded the prepayment with a new $200 million credit facility we announced in early July, plus $28 million from our cash balances for principal plus accrued interest and fees. The new bank loan reduces our interest rate by approximately 360 basis points compared to our prior loan and was headlined by Wells Fargo Bank with participation by MUFG, First Citizens Bank, the Silicon Valley Bank's successor, Citibank, and Citi National Bank. Normally, Kevin would do this, but he has been out of the office for a week or two following a mountain bike accident. He's fine and recovering. Fortunately, he was wearing his helmet.

Howie: Credit facility, we announced in early July plus $28 million from our cash balances for principal plus accrued interest and fees the new bank loan reduces our interest rate by approximately 360 basis points compared to our prior loan and was headlined by Wells Fargo Bank with participation by M. U F G.

Samuel Wilson: The new bank loan reduces our interest rate by approximately 360 basis points compared to our prior loan and was headlined by Wells Fargo Bank with participation by MUFG, First Citizens Bank, the Silicon Valley Bank successor, Citibank, and City National Bank. The quality of the commercial banks involved and the favorable interest rate reflects our financial strength, as well as our lenders' confidence in our ability to achieve our long-term profitability and cash flow objectives.

Samuel Wilson: First citizens bank, the Silicon Valley Bank successor, Citibank and city National Bank.

Samuel Wilson: Quality of the commercial banks involved and the favorable interest rate reflects our financial strength as well as our lenders confidence in our ability to achieve our long term profitability and cash flow objectives.

Samuel Wilson: With that as an overview, I want to provide you with an update on our transformation and then pivot to more details on our financial performance and updated outlook. Normally, Kevin would do this, but he has been out of the office for a week or two following a mountain bike accident. He's fine and recovering. Fortunately, he was wearing his helmet.

Samuel Wilson: With that as an overview I don't want to provide you with an update on our transformation and then pivot to more details on our financial performance and updated outlook.

Speaker Change: Normally Kevin would do this but he has been out of the office for a week or two following a mountain bike accident. He is fine and recovering Fortunately he was wearing his helmet, we expected to make a full recovery and be back on the call next quarter.

Samuel Wilson: We expect him to make a full recovery and be back on the call next quarter. Against the current marketing-driven competitive environment and an uncertain macroeconomic and geopolitical environment, we believe that innovation remains the key to driving sustainable growth. We remain focused on the six initiatives we believe are critical to our future success. They are one, accelerating innovation with a focus on our platform and our contact center as a service while maintaining our leadership in cloud telephony. 2. Establishing communications platform as a service, or CPaaS, leadership in the Asia-Pacific region and leveraging these capabilities globally 3. Focus on small and mid-sized enterprises as our target customer segment. 4.

Samuel Wilson: We expect him to make a full recovery and be back on the call next quarter. Meanwhile, we remain focused on the six initiatives we believe are critical to our future success. They are one, accelerating innovation with a focus on our platform and our contact center as a service while maintaining our leadership in cloud telephony. Establishing communications platform as a service, or CPaaS, leadership in the Asia-Pacific region and leveraging these capabilities globally.

Speaker Change: Against the current marketing driven competitive environment, and an uncertain macroeconomic and geopolitical environment. We believe that innovation remains the key to driving sustainable growth. We remain focused on the six initiatives. We believe are critical to our future success. They are one.

Samuel Wilson: Improving platform win rates and sales productivity; Bye, maintaining an outstanding experience for our customers, allowing them to focus on their own core business. And lastly, six, building a fortress balance sheet by remaining vigilant in managing our costs, allowing us to return value to investors. Transformations rarely deliver perfectly linear results, but we continue to advance across our initiatives in the first quarter. Fiscal 2024 was a pivotal year in terms of innovation, as we introduced new products such as Engage, Voice, and Digital Intelligent Customer Assistant, a bot, and Agent Assist, as well as major platform enhancements like the Customer Interaction Data Platform, Composable Agent, and Supervisor User Interfaces.

Speaker Change: <unk> innovation with a focus on our platform and our contact center as a service while maintaining our leadership in cloud telephony.

Samuel Wilson: To establishing communications platform as a service or see past leadership in the Asia Pacific region, and levering. These capabilities globally, three focus on small and mid sized enterprises as our target customer segment.

Samuel Wilson: Focus on small and mid-sized enterprises as our target customer segment, maintaining an outstanding experience for our customers, allowing them to focus on their own core business. And lastly, six, build a fortress balance sheet by remaining vigilant in managing our costs, allowing us to return value to investors. Transformations rarely deliver perfectly linear results, but we continue to advance across our initiatives in the first quarter. We are seeing significant momentum in our Enterprise Contact Center business.

Samuel Wilson: Four improving platform win rates and sales productivity.

Samuel Wilson: Five maintaining an outstanding experience for our customers, allowing them to focus on their own core business and lastly, six building a fortress balance sheet by remaining vigilant in managing our costs, allowing us to return value to investors.

Samuel Wilson: Transformations rarely deliver perfectly linear results, but we continued to advance across our initiatives in the first quarter.

Samuel Wilson: Fiscal 2024 was a pivotal year in terms of innovation as we introduce new products, such as engage voice and digital intelligent customer assistant apart.

Samuel Wilson: An agent assist as well as major platform enhancements like the customer interaction data platform composed of all agent and supervisor user interfaces. We also develop solutions that leverage our <unk> capabilities extending beyond the Asia Pacific region by integrating these capabilities globally as we design features and enhancements for our target customers in the mid <unk>.

Samuel Wilson: We have also developed solutions that leverage our CPaaS capabilities extending beyond the Asia-Pacific region by integrating these capabilities globally. As we design features and enhancements for our target customers in the mid-market and small to medium-sized enterprises, we are building tightly integrated solutions that prioritize ease of use, out-of-box functionality, and rapid deployment without compromising functionality. Our own research, as well as third-party CIO and customer surveys, suggest that many, if not most, organizations are still evaluating how to best implement AI in their contact centers.

Samuel Wilson: <unk> and small to medium sized enterprises, we're building tightly integrated solutions that prioritize ease of use out of box functionality and rapid deployment without compromising functionality our own research as well as third party CIO and customer surveys suggest that many if not most organizations are still.

Speaker Change: <unk>, how to best implement AI in their contact centers.

Samuel Wilson: By focusing on integrated platform solutions, we are reducing the risk of implementing enterprise-grade contact centers, including sophisticated AI-driven bots and analytics for our customers so they can deliver better customer experiences to their customers. This strategy is resonating with customers and showing up in a meaningful way in the market's embrace of our contact center solution. We are seeing significant momentum in our Enterprise Contact Center business, with larger customers showing the highest growth.

Samuel Wilson: Focusing on integrated platform solutions, we are reducing the risk of implementing enterprise grade contact centers, including sophisticated AI, driven bots and analytics for our customers. So they can deliver better customer experiences to their customers.

Samuel Wilson: This strategy is resonating with customers and beginning to show up in a meaningful way in the markets embrace of our contact Center solutions.

Samuel Wilson: We are seeing significant momentum in our enterprise contact center business with larger customers showing the highest growth in fact 15 of our top 20, new logo deals in the quarter included contact center and enterprise accounts with more than 250 agent seats grew 36% year over year.

Samuel Wilson: In fact, 15 of our top 20 new logo deals in the quarter included contact center and enterprise accounts with more than 250 agencies grew 36% year over year. This is clear evidence of product market fit. We are also seeing a dramatic increase in the number of interactions using self-service bots, digital messaging, and video in the contact center. For example, video interactions from within the contact center application are up 150% quarter-on-quarter. We introduced version 1.0 of this solution in calendar 2023 to allow field repair and service providers to assess a problem by video.

Samuel Wilson: This is clear indications of product market fit.

Samuel Wilson: We are also seeing a dramatic increase in the number of interactions using self service bots digital messaging and video in the contact Center for example video interactions from within the contact center application are up 150% quarter on quarter.

Samuel Wilson: We introduce version one that all of this solution in calendar 2023 to allow field repair and service providers to assess a problem by video.

Samuel Wilson: We launched version 2.0 this year and are seeing rapid adoption. To quote a customer, it's groundbreaking and a game changer. While still a small percentage of revenue, sales of new products increased more than 40% year on year. At the same time, we are seeing more multi-product deals in our pipeline, and we are landing new logos with multiple products. For example, a leading home furnishings retailer landed on five products, including x cast, secure pay, agent assist, and workforce management. And this was not a one-off.

Samuel Wilson: We launched version two O. This year and are seeing rapid adoption to quota customer, it's groundbreaking and the game changer.

Samuel Wilson: While still a small percentage of revenue, sales of new products increased more than 40% year on year. This case study, along with the case studies of Great Places Housing Group and Atrio Health, show how our solutions approach is adaptable to vastly different use cases across vertical markets and geographies.

Samuel Wilson: While still a small percentage of revenue sales of new products increased more than 40% year on year.

Samuel Wilson: At the same time, we are seeing more multi product deals in our pipeline and we are landing new logos with multiple products. For example, a leading home furnishings retailer landed with five products, including ex gas secure pay agent assist and workforce management and this was not a one off we had other four and five.

Samuel Wilson: We had other four and five product customers land in the quarter, and there are many more in the pipeline. This case study, along with the case studies of Great Places Housing Group and Atrio Health, shows how our solutions approach is adaptable to vastly different use cases across vertical markets and geographies. Our technology partner ecosystem plays a critical role in our strategy to deliver business out, based on our platform versus a collection of loosely integrated technologies.

Samuel Wilson: Customers land in the quarter and there are many more in the pipeline.

Samuel Wilson: This case study along with the case studies of Great Places housing group.

Samuel Wilson: <unk> atrium health show, how our solutions approach is adaptable to vastly different use cases across vertical markets and geographies.

Samuel Wilson: Our technology partner ecosystem plays a critical role in our strategy to deliver business out, based on our platform versus a collection of loosely integrated technology. The Technology Partner Ecosystem has been extremely successful and is allowing us to deliver best in breed, plug and play solutions to our customers on top of our AI powered platform. This is one of the ways we are reducing the risk of implementing AI in the contact center and actually achieving measurable ROI.

Samuel Wilson: Our technology partner ecosystem plays a critical role in our strategy to deliver business outcomes based on our platform versus a collection of loosely integrated technologies technology partner ecosystem has been extremely successful and is allowing us to deliver best in breed plug and play solutions to our top our top of our AI.

Samuel Wilson: The Technology Partner Ecosystem has been extremely successful and is allowing us to deliver best-in-breed, plug and play solutions to our customers on top of our AI powered platform. This is one of the ways we are reducing the risk of implementing AI in the contact center and actually achieving a measurable ROI.

Samuel Wilson: Power platform.

Samuel Wilson: This is one of the ways, we are reducing the risk of implementing AI in the contact center and actually achieving a measurable ROI. We continue to expand this carefully curated ecosystem and most recently added Regal Io a leader in outbound campaign management to the exclusive cell with a partner tier native integration of <unk>.

Samuel Wilson: We continue to expand this carefully curated ecosystem and most recently added Regal.io, a leader in outbound campaign management, to the exclusive Sell with 8 partner tier. Native integration of Regal.io's advanced journey builder and sales dialer with 8x8's robust cloud communications platform promises customers more efficient outbound customer engagement. We have already identified multiple joint opportunities for a Regal 8x8 solution, and that's while the product is still in development

Samuel Wilson: <unk> advanced journey builder and sales dialer with API its robust cloud communications platform promises customers more efficient outbound customer engagements, we have already identified multiple joint opportunities for a regal <unk> solution and Thats why the product is still in development.

Samuel Wilson: Our investments in innovation are starting to move the flywheel. We see this in our pipeline metrics, and our partner engagement statistics, and in the ramp of new salespeople productivity. Leading indicators we watch will show we're building momentum. For example, the pipeline in new logo business is up 35% from a year ago, and the contact center as a percentage of new pipeline is increasing, which is a sign our strategy is on the right track. This doesn't mean it will all close next quarter, but we are getting more at-bats, and this is making us cautiously optimistic as we head into the back half of the year.

Samuel Wilson: Our investments innovation are starting to move the flywheel, we see this in our pipeline metrics and our partner engagement statistics and in the ramp of new salespeople productivity.

Samuel Wilson: Leading indicators, we watch will show we're building momentum for example, the pipeline of new logo business is up 35% from a year ago and contact center as a percentage of new pipeline is increasing.

Samuel Wilson: For example, the pipeline in new logo business is up 35% from a year ago, and the contact center as a percentage of new pipeline is increasing. Speaking of CPAS, it had another very strong quarter, with a 25% increase in monthly interactions and more than doubled WhatsApp messages. We helped customers engage with more than 100 million subscribers over the platform, and sales excluding SMS messaging increased more than 60% year over year, demonstrating our progress in diversifying the CPAS revenue base to higher-margin products.

Samuel Wilson: Signs our strategy is on the right track. This doesn't mean at all close next quarter, but we are getting more at bats, and this is making us cautiously optimistic as we head into the back half of the year.

Samuel Wilson: It takes time for all the changes we made, particularly in our go-to-market strategies, to flow through the sales cycle and show up in revenue. But our experience with the transformation of CPAS gives me confidence we are on the right track. Speaking of CPAS, it had another very strong quarter, with a 25% increase in monthly interactions and more than doubling WhatsApp messages. We helped customers engage with more than 100 million subscribers over the platform, and Sales Excluding SMS Messaging increased more than 60% year over year, demonstrating our progress in diversifying the CPAS revenue base to higher-margin products.

Samuel Wilson: It takes time for all of the changes we made particularly in our go to market strategies to flow through the sales cycle and show up in revenue, but our experience with the transformation of see past. It gives me confidence we are on the right track.

Speaker Change: Speaking of sea path. It had another very strong quarter with a 25% increase in monthly interactions and more than doubling whatsapp messaging.

Samuel Wilson: We helped customers engaged with more than 100 million subscribers over the platform.

Samuel Wilson: And sales, excluding SMS messaging increased more than 60% year over year, demonstrating our progress in diversifying the C pass revenue base to higher margin products.

Samuel Wilson: The story of Thailand's King Power published in IT News Asia is a great case study of how the value-added capabilities of our platform, features like intelligent routing and omni-channel campaign management, are increasing the effectiveness of their campaigns while reducing costs by 30%. While not in the major leagues as far as volumes, we are far from the minor leagues when it comes to CPAC.

Samuel Wilson: The story of Thailand's King Power published in IT News Asia is a great case study of how the value-added capabilities of our platform, features like intelligent routing and omni-channel campaign management, are increasing the effectiveness of their campaigns while reducing costs by 30%. As a point of reference, 8x8 sent over 1.2 billion SMS messages last quarter, mostly in the Asia-Pacific region but also growing outside of Asia. While not in the major leagues as far as volumes are concerned, we are far from the minor leagues when it comes to CPAC.

Speaker Change: The story of Thailand's King power published in the New Asia is a great case study and how the value added capabilities of our platform features like intelligent routing Omnichannel campaign management are increasing the effectiveness of their campaigns, while reducing costs by 30%.

Speaker Change: Just a point of reference.

Samuel Wilson: Eight set over one 2 billion SMS messages last quarter, mostly in the Asia Pac region, but also growing outside of Asia Pac.

Speaker Change: While not in the major leagues as far as volumes, we are far from the minor leagues when it comes to see pass.

Samuel Wilson: And as we roll out new solutions for our core contact center and UC-based global solutions, solutions like proactive outreach and contact center add-ons like remote fix, we are seeing increased momentum in adding CPAS features to existing UC or XCAS customers, making the ARR metric, as previously defined, less and less relevant as a key business metric. After evaluating the decline in relevance coupled with a review of peer metrics, we have decided to discontinue ARR as a key business metric.

Samuel Wilson: And as we roll out new solutions for our core contact center and UC-based global, solutions like proactive outreach and contact center add-ons like remote fix, we are seeing increased momentum in adding CPAS features to existing UC or XCAS customers. We expect CPAS to continue to deliver consistently strong growth throughout fiscal 2025, some 18 to 24 months after the transformation began. Just as we saw the early signs of success in CPAS in fiscal 2024, we are seeing early signs of momentum across our broader UC and CC business today.

Speaker Change: And as we rollout new solutions for our core contact center and you see base globally solutions like proactive outreach and contact center add ins like promote fix we are seeing increased momentum in adding C pass features to existing <unk> customers.

Samuel Wilson: We expect <unk> to continue to deliver consistently strong growth throughout fiscal 2025. Some 18 to 24 months. After the transformation began just as we saw the early signs of success in <unk> in fiscal 2024, we are seeing the early signs of momentum across our broader UC and cc business today.

Samuel Wilson: As we saw in the fourth quarter, relatively small changes in platform usage revenue are amplified in the ARR metric as previously defined. We expect platform usage from CPaaS as well as other usage-based products to increase. Making the ARR metric as previously defined less and less relevant as a key business metric. After evaluating the decline in relevance coupled with a review of peer metrics, we have decided to discontinue ARR as a key business metric.

Samuel Wilson: As we saw in the fourth quarter relatively small changes in platform usage revenue are amplified in the AAR metric as previously defined.

Samuel Wilson: We expect platform usage from CPAP as well as other usage based products to increase making the IRR metric as previously defined less and less relevant as a business is a key business metric after evaluating the decline in relevance coupled with a review of peer metrics, we have decided to dish.

Speaker Change: Continued <unk> as a key business metric, we will continue to review our metrics to provide you with visibility into our performance, but for now we're focused on trends in our reported financials, including revenue gross margin operating margin and cash flow as we've said many times cash flow from operations continues to be our north star.

Samuel Wilson: We will continue to review our metrics to provide you with visibility into our performance, but for now, we are focused on trends in our reported financials, including revenue, gross margin, operating margin, and cash flow. As we've said many times, cash flow from operations continues to be our North Star. This is a great segue into our Q1 financial performance and our updated outlook for the remainder of the year. All metrics besides revenue and cash flow are non-GAAP.

Samuel Wilson: This is a great segue into our Q1 financial performance and our updated outlook for the remainder of the year all metrics Besides revenue and cash flow are non-GAAP.

Samuel Wilson: With our Q1 results consistent with our guidance ranges, we will just highlight a few. Service and total revenue were both near the midpoint of our guidance ranges even though other revenue was below the implied performance as we continue to see preference for soft phones following the release of updated versions. The increase in platform usage, which includes CPAS, combined with lower other revenue, resulted in a slight sequential decrease in gross profit to 70.6% versus 70.8% in the prior quarter.

Samuel Wilson: With our Q1 results consistent with our guidance ranges, we will just highlight a few. The increase in platform usage, which includes CPAS, combined with lower other revenue, resulted in a slight sequential decrease in gross profit to 70.6% versus 70.8% in the prior quarter. Our stock-based compensation expense for the quarter was less than 8% of revenue, well below that of our peers as we've increased cash compensation in lieu of equity for the majority of our employees.

Samuel Wilson: With our Q1 results consistent with our guidance ranges, we will just highlight a few things service and total revenue were both near the midpoint of our guidance ranges, even though other revenue was below the implied performance as we continue to see preference for soft phones. Following the release of updated versions.

Samuel Wilson: The increase in platform usage, which includes C pass combined with lower other revenue resulted in a slight sequential decrease in gross profit to 76% versus 78% in the prior quarter.

Samuel Wilson: We continue to operate within the cost envelope Kevin outlined on last quarter's call, which resulted in a non-GAAP operating margin of 11.3%, flat with last quarter, and near the midpoint of our guidance range. Our stock-based compensation expense for the quarter was less than 8% of revenue, well below that of our peers as we've increased cash compensation in lieu of equity for the majority of our employees. Our intention is to reduce dilution by issuing fewer shares over time, but it will take a hit on our non-GAAP operating margin in the near term because cash comp isn't excluded from non-GAAP financials. We still think it's the right thing to do.

Samuel Wilson: We continue to operate within the cost envelope, Kevin outlined on last quarter's call, which resulted in non-GAAP operating margin of 11, 3% flat with last quarter and near the midpoint of our guidance range.

Samuel Wilson: Our stock based compensation expense for the quarter was less than 8% of revenue well below that of our peers as we've increased cash compensation in lieu of equity for majority of our employees.

Samuel Wilson: Our intention is to reduce dilution by issuing fewer shares over time, but it will take a hit on our non-GAAP operating margin in the near term because cash comp isn't excluded from non-GAAP financials. We still think it's the right thing to do.

Speaker Change: Our intention is to reduce dilution by issuing fewer shares over time, but it will take a hit to our non-GAAP operating margin in the near term because cash comp isn't excluded from non-GAAP financials, we still think it's the right thing to do.

Samuel Wilson: Cash from operations was $18.1 million, a little better than expected, and shareholder equity remained positive. All around, a solid quarter. We did what we said we would do, and we made progress across our key initiatives. Looking forward, we continue to build momentum with our platform and new products on our path to growth while continuing to be profitable on a non-GAAP basis with positive operating cash flow. [inaudible] An important step near term is the acceleration of the upgrade program for the remaining customers on the FUSE platform.

Speaker Change: Cash from operations was $18 1 million, a little better than expected and shareholder equity remained positive all around a solid quarter. We did what we said we would do and we made progress across our key initiatives looking forward, we continue to build momentum with our platform and new products on our path to growth.

Samuel Wilson: All in all, a solid quarter. We did what we said we would do, and we made progress across our key initiatives. Looking forward, we continue to build momentum with our platform and new products on our path to growth. An important step in the near term is the acceleration of the upgrade program for the remaining customers on the FUSE platform. And we have notified these customers of our intention to move them to the 8x8 platform. We are now two and a half years past the acquisition, and a significant number of the former users have already upgraded to the 8x8 platform or have made plans to do so. It no longer makes sense, long term, to incur the cost of maintaining this increasingly obsolete platform. Let me be clear.

Samuel Wilson: While continuing to be profitable on a non-GAAP basis with positive operating cash flow.

Samuel Wilson: And we have notified these customers of our intention to move them to the 8x8 platform. We are now two and a half years past the acquisition, and a significant number of the former users have already upgraded to the 8x8 platform or have made plans to do so. It no longer makes sense long term to incur the cost of maintaining this increasingly obsolete platform. The 8x8 platform, which is built on a modern architecture with embedded AI throughout, offers significant advantages.

Speaker Change: An important step near term is the acceleration of the upgrade program for the remaining customers on the <unk> platform and we have notified these customers our intention to move them to the AIA platform. We are now two and a half years past the acquisition and a significant number of the former <unk> users have already upgraded to the API platform or have made.

Lance: Lance to do so.

Speaker Change: It no longer makes sense long term to incur the cost of maintaining this increasingly obsolete platform.

Lance: They buy a platform, which is built on a modern architecture with embedded AI throughout offers significant advantages.

Samuel Wilson: We consider the FUSE acquisition to be a home run in terms of profitability, cash flow, and innovation. However, at this point, it makes sense to accelerate the upgrade process. At the same time, we recognize that some of them may not want to make the journey with us, and we've expanded the ranges of our guidance for service revenue to account for the possible increase in attrition as well as uncertainty as far as timing. We still expect to show year-over-year growth in service revenue as we exit fiscal 2025 in the fourth quarter, although this will depend on our success at retaining the long-tail customers' effuse and the timing of any attrition.

Samuel Wilson: Let me be clear. We consider the FUSE acquisition a home run in terms of profitability, cash flow, and innovation. However, at this point, it makes sense to accelerate the upgrade process. We are giving former Fuse customers ample time to plan their move, and we are doing everything we can to make it easy and compelling, and it is.

Lance: Let me be clear.

Lance: We consider the <unk> acquisition, a homerun in terms of profitability cash flow and innovation. However at this point it makes sense to accelerate the upgrade process, we're giving former fuse customers ample time to plan their move and we are doing everything we can to make it easy and compelling and it is at the same time we.

Samuel Wilson: At the same time, we recognize that some of them may not want to make the journey with us, and we've expanded the ranges of our guidance for service revenue to account for the possible increase in attrition as well as uncertainty as far as timing. Our new range for service revenue for the year is $685 million to $707 million. We still expect to show year-over-year growth in service revenue as we exit fiscal 2025 in the fourth quarter, although this will depend on our success at retaining the long-tail customers' effuse and the timing of any attrition.

Lance: Is that some of them may not want to make the journey with us and we've expanded the ranges of our guidance for service revenue to account for the possible increase in attrition as well as uncertainty as far as timing, our new range for service revenue for the year of $685 million to $707 million, we still expect to show year over year growth in service revenue as we.

Lance: We exited fiscal 2025 in the fourth quarter. Although this will depend on our success at retaining the long tail customers, a fuse and the timing of any attrition.

Samuel Wilson: This flows through the total revenue, which also embeds a more conservative outlook for other revenue. The range for total revenue for fiscal 2025 is now between $710 and $732 million. Additionally, we are seeing less demand for physical phones than historic norms.

Lance: This flows through to total revenue, which also embeds a more conservative outlook for other revenue.

Samuel Wilson: The range for total revenue for fiscal 2025 is now $710 to $732 million. This is at least partially driven by our innovation, both in soft phones for the contact center and our continued investment in our mobile app. We are completely fine with this because, historically, this has been a loss leader.

Lance: The range for total revenue for fiscal 2025 is now $710 million to $732 million, we are seeing less demand for physical phones than historic norms.

Samuel Wilson: This is at least partially driven by our innovation, both in soft phones for the contact center and our continued investment in our mobile app. We are completely fine with this because, historically, this has been a loss leader. We expect gross margin for the year to be a range of 69 to 71%, reflecting an increase in platform usage revenue in the service revenue mix. We expect operating margin to be a range of 10 to 11% based on our current expense envelope. This translates into fully diluted non-GAAP earnings per share in a range of 32 to 35% per share.

Lance: This is at least partially driven by our innovation both in soft phones for the contact center and our continued investment in our mobile App.

Speaker Change: We are completely fine with us because historically this has been a loss leader.

Samuel Wilson: We expect gross margin for the year to be a range of 69 to 71%, reflecting an increase in platform usage revenue in the service revenue mix. We expect operating margin to be a range of 10 to 11% based on our current expense envelope. This translates into fully diluted non-gap earnings per share in a range of 32 to 35% for Share. We remain on track to deliver operating cash flow in a range of $59 to $64 million as lower interest expense offsets the decrease in operating income.

Lance: We expect gross margin for the year to be a range of 69% to 71%, reflecting an increase in platform usage revenue in the service revenue mix, we expect operating margin in a range of 10% to 11% based on our current expense envelope. This translates into fully diluted non-GAAP earnings per share in a range of 32% to 30.

Lance: Five.

Lance: Per share.

Samuel Wilson: We remain on track to deliver operating cash flow in a range of $59 to $64 million as lower interest expense offsets the decrease in operating income. That said, we expect cash flow for the second quarter to be down from Q1 due to the timing of cash expenses, including cash interest payments. That is the summary for the year.

Lance: We remain on track to deliver operating cash flow in a range of 59% to $64 million as lower interest expense offsets the decrease in operating income.

Samuel Wilson: That said, we expect cash flow for the second quarter to be down from Q1 due to the timing of cash expenses, including cash interest payments. That is the summary for the year. For Q2, we're looking at results similar to Q1 in terms of revenue. We expect operating expenses to be about flat with Q1 and operating margin to be in a range of around 10 to 11%. I will finish my comments reiterating my confidence in the future.

Lance: That said, we expect cash flow for the second quarter to be down from Q1 due to the timing of cash expenses, including cash interest payments.

Samuel Wilson: For Q2, we're looking at results similar to Q1 in terms of revenue. We expect operating expenses to be about flat with Q1 and operating margin to be in a range of around 10 to 11%. I will finish my comments reiterating my confidence in the future. Our journey may not be perfectly linear each and every quarter, especially in terms of the financial metrics, but our progress is clear, and our solutions are compelling.

Lance: That is the summary for the year for Q2, we're looking at results similar to Q1 in terms of revenue.

Lance: We expect operating expenses will be about flat with Q1 and operating margin to be in a range of around 10% to 11%.

Lance: I will finish my comments reiterating my confidence in the future our journey may not be perfectly linear each and every quarter, especially in terms of the financial metrics, but our progress is clear and our solutions are compelling I am confident the investments, we are making innovation marketing channel programs and sales productivity.

Samuel Wilson: Our journey may not be perfectly linear each and every quarter, especially in terms of the financial metrics. In the meantime, we will continue to focus on generating cash and returning value to investors through debt reduction and efficient management of our business.

Samuel Wilson: I am confident the investments we are making in innovation, marketing, channel programs, and sales productivity will yield results. We are seeing the positive results of the transformation in parts of our business now, and I believe the rest are just a few quarters behind. In the meantime, we will continue to focus on generating cash and returning value to investors through debt reduction and efficient management of our business. Finally, I want to thank our customers, our partners, our investors, and our employees.

Lance: <unk> will yield results, we are seeing the positive results of the transformation in parts of our business now and I believe the rest are just a few quarters behind in the meantime, we will continue to focus on generating cash and returning value to investors through debt reduction and efficient management.

Lance: Of our business.

Samuel Wilson: This is Team 8x8. With that, we are excited to remind everyone that tomorrow is 8x8 day, August 8, where we have special events for customers. With that, I will turn the call over to the operator for questions.

Ey: I want to thank our customers our partners our investors and our employees. This is teammate by Ey.

Speaker Change: With that we are excited to remind everyone that tomorrow is eight by eight day August eight where we have a special events for customers with that I will turn the call over to the operator for questions.

Unknown Executive: Thank you. As a reminder, to ask a question, please press star one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A. Our first question comes from the line of Matt VanVliet from BTIG.

Speaker Change: Thank you as a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced towards the draw. Your question. Please press star one one again, please standby, while we compile the Q&A roster.

Unknown Attendee: Our first question comes from the line of Matt VanVliet from BTIG.

Speaker Change: Our first question comes from the line of Matt Vanvliet from B T I G.

Matt VanVliet: Good afternoon. Thanks for taking the time to answer the question. I guess first, as you talk about seeing a little bit more sort of usage or consumption-based revenue going forward, especially as you've integrated the CPAS components into the other products, where do you feel like that's going to show up maybe most quickly? And how is that developing in the sales pipeline to get more customers sort of using the product and then from that, expanding the revenue base?

Matt VanVliet: Hey, good afternoon, thanks for taking the question.

Matt VanVliet: I guess first as you talked about seeing a little bit more sort of usage or consumption based revenue going forward, especially as you've integrated surpasses components.

Speaker Change: Other products.

Speaker Change: Where do you feel like Thats going to show up maybe most quickly and how is that developing in the sales pipeline.

Speaker Change: To get more customers sort of using the product and then from that expanding the revenue base.

Samuel Wilson: It's a great question, Matt. Thank you for asking it.

Speaker Change: It's a great question, Matt. Thank you for asking it so to start with we launched two products. Thus far that are more contact center integrated focused one is a one way SMS Whatsapp based system. So you can text or message out and then a two way where if you want to use whatsapp messaging to go back and forth.

Samuel Wilson: So to start with, we launched two products thus far that are more contact center integrated. One is a one-way SMS WhatsApp-based system, so you can text or message out. And then a two-way, where you want to use WhatsApp or messaging to go back and forth.

Samuel Wilson: Those are the first two products launched, so sort of CC-centric and enterprise-centric, and we're getting a good pipeline. I think what's interesting is we launched those products as, you know, really packaged products, and we've actually seen an uptick also in customized CPaaS solutions. So it's allowing us to not only win CPaaS business in a packaged manner, but customers are also becoming aware of the products we offer, even in a customized manner, via an API.

Speaker Change: Those are the first two products launched so sort of cc centric enterprise centric and were getting good pipeline I think what's interesting as we launch those products as you know really packaged products and we've actually seen an uptick also in customized paas solution. So, it's allowing us to not only win <unk> business in a package manner, but also customers that.

Speaker Change: Becoming aware of the products, we offer even in a customized manner API manner.

Samuel Wilson: This quarter, we'll launch a product that focuses on emergency notification for employees or constituents, like if you're in a school district or those kinds of things. And that's kind of the big three that we're launching. And what we're seeing is a pretty healthy interest in these products, particularly as we see omnichannel and digital channels really become ever more important inside the contact center.

Speaker Change: This quarter, we will launch a product that focuses on emergency notification really for like employees or.

Speaker Change: Constituents like if youre in a school district, or those kinds of things and Thats kind of the big three that we're launching and what we're seeing is a pretty healthy.

Speaker Change: Interest in these products, particularly as we see omnichannel and digital channels really become ever more important inside of the contact center.

Samuel Wilson: I just want to address the second part of it; it's just usage in general, right? So usage is now like 10 to 12% of our revenue. It's definitely increasing. And I just want to be clear, it's not just messaging usage, we also have... Voice, you know, voice masking usage, we have ICA has, you know, the AI components are very usage centric. So that's kind of across the board. Okay, very helpful.

Speaker Change: Very helpful and then Oh, sorry, Greg I, just want to address the second part of it is just usage in general right. So usage is now like 10% to 12% of our revenue, it's definitely increasing and I just want to be clear. It's not just messaging usage. It's also we have <unk>.

Speaker Change: <unk> voice masking usage, we have.

Speaker Change: ICA has the AI components have were very usage centric. So that's the kind of across the board.

Samuel Wilson: And then as you look at the strength of the CPAS business, especially in APAC, maybe help us understand that a little bit better. Is that a recovery on the macro side? Is it better productivity and efficiency on the sales force winning new deals and sort of getting back into growth mode there? It feels like that's been a little bit of a drag over the last couple years, but now it sounds like it's a little more of a tailwind.

Matt VanVliet: Okay, very helpful. And then as you look at the strength of the CPAS business, especially in APAC, you know, maybe help us understand that a little bit better. Is that a recovery on the macro side? Is it better productivity and efficiency on the sales force winning new deals and sort of getting back into growth mode there? It feels like that's been a little bit of a drag over the last couple years, but now it sounds like it's a little more of a tailwind. So just help us understand the trends going on. Yeah, okay. So, first, I want to say...

Speaker Change: Okay very helpful. And then as you look at the strength of the CFS business, especially in APAC.

Speaker Change: Maybe help us.

Speaker Change: I understand that a little bit better is that a recovery on the macro side is it better productivity and efficiency on the sales force, winning new deals and sort of getting back into growth mode. There.

Speaker Change: It feels like that's been a little bit of a drag of over the last couple of years, but now it sounds like it's a little more of a tailwind so.

Speaker Change: Can you help us understand the trends going on there yeah.

Samuel Wilson: Yeah, okay. First, let me go. I'm going to think it's in reverse order. It was a nice tailwind in the last quarter. And, you know, I'm really, super proud of how that team performed.

Samuel Wilson: So just help us understand the trends going on. Yeah, okay. So, first...

Speaker Change: Yeah, Okay. So far.

Speaker Change: First let me take these in reverse order it was a nice tailwind this last quarter and I'm really super proud of how that team performed.

Samuel Wilson: Okay. Is it a macro recovery? Is it whatever? There's a little bit of macro-ness to it. I would say, you know, if I had to break these apart, like 20% is macro-based.

Speaker Change: Okay is it a macro recovery is it where there's a little bit of macro next to it I would say if I had to break. These apart like 20% is macro base. The carriers went through their normal price increase cycles. In this year didn't gms with massive price increases so that was easier to digest did not disrupt the business overall.

Samuel Wilson: The carriers went through their normal price increase cycles, and this year didn't jam us with massive price increases, so that was easier to digest and not disrupt the business overall. But it's really driven by the fact that we replaced the management team 18 months ago, two years ago. We've installed new leaders. We've completely redone the GTM, sorry, the go-to-market initiatives around adding enterprise business, not just sort of high volume, next generation sort of startup business. And so it's a whole host of things. The biggest reason for that was just basic blocking and tackling. Good leaders, you know, with an aligned organization taking a good product to market.

Speaker Change: But really it's driven by the fact that we replaced the management team 18 months ago, two years ago, we've installed new leaders, we've completely redone the GTS.

Speaker Change: Sorry, the go to market initiatives around adding enterprise business, not just sort of high volume.

Samuel Wilson: Next generation sort of startup business. And so it's a whole host of things.

Speaker Change: Next generation sort of startup business.

Speaker Change: And so it's a whole host of things. The biggest reason, though is just basic blocking and tackling business.

Samuel Wilson: The biggest reason for that was just basic blocking and tackling.

Speaker Change: Good leaders.

Speaker Change: With an aligned organization, taking a good product to market.

Speaker Change: Great. Thank you.

Unknown Executive: Thank you. One moment for our next question. Our next question comes from the line of Catharine Trebnick from Rosenblatt Securities.

Speaker Change: Thank you one moment for our next question.

Unknown Executive: Thank you. One moment for our next question. The next question comes from the line of Catharine Trebnick from Rosenblatt Securities.

Speaker Change: Our next question comes from the line of Catherine <unk> from Roslyn Blatt Securities.

Catharine Trebnick: Hi, thanks for taking my question. So on, you seem to have a really good quarter of 15, I think you said that the new logos were contact center. So on that piece of it, were those displacement and legacy systems, Sam, or are they mostly upgrades? Are they land and expand? Can you provide?

Catharine Trebnick: Hi, thanks for taking my question. So on, you seem to have a really good quarter of 15, I think you said that the new logos were contact center. So on that piece of it, were those displacement and legacy systems, Sam? Are they mostly? Are they upgrades? Are they land and expand? Can you provide more detail around and give us more context on those? Thanks.

Speaker Change: Hi.

Catherine <unk>: Thanks for taking my question.

Catherine <unk>: You seem to have a really good quarter of 15, I think you said that the new logos our contact center.

Sam: So on that piece of it where those displacement of legacy systems, Sam or are they mostly.

Speaker Change: Are they upgrades of the land and expand can you provide more detail around and give us more context I'll note. Thanks, yeah. So it was even a few of our top 20 deals for the quarter at all involved contact center and we're are seeing contact center as a greater percentage of mix in the pipeline.

Samuel Wilson: Yeah, so, you know, 15 of our top 20 deals for the quarter involved Contact Center. And, you know, we are seeing Contact Center as a greater percentage of mix in the pipeline. I think we say in the script that the pipeline's up substantially over the last two quarters. It is, I know for a fact, it is.

Speaker Change: We say in the script the pipeline is up substantially over the last two quarters. It is I know for fact that is I just don't know what the exact number I said in the script.

Samuel Wilson: I just don't know what the exact number I said in the script is, but it's up substantially, and we're seeing this transition that we've made to a contact letter-driven SEAC story starting to resonate and work in the marketplace. Now, look, it's still early. The larger, you know, we've got a substantial increase in pipeline that won't necessarily close this, you know, this quarter or next quarter. It takes us, you know, a year for some of the sales cycles on the bigger deals, but it's really working pretty clearly. And the message is really responding with prospects and customers.

Samuel Wilson: But it's up substantially, and we're seeing this transition that we've made to a contact letter-driven SEAC story starting to resonate and work in the marketplace. And look, it's still early. The larger, you know, we've got a substantial increase in pipeline that won't necessarily close this, you know, this quarter we're in or next quarter. It takes us, you know, a year for some of the sales cycles on the bigger deals, but it's really working pretty clearly.

Speaker Change: But it's up substantially and we're seeing this transition that we've made to a contact ladder lead CX story, starting to resonate and work in the marketplace. Now look it's still early the larger we've got a substantial increase in pipeline that that wont necessarily close. This this quarter ran our next quarter. It takes us a year.

Speaker Change: Some of the sales cycles on the bigger deals, but it's really working pretty clearly and the message is really resonating with prospects and customers.

Samuel Wilson: And the message is really resonating with prospects and customers; most of it, I would say the 15 to 20 most of it was probably a you know, it's probably 50-50 add on new logo of that top http://TheBusinessProfessor.com

Speaker Change: Most of it I would say of the 15 to 20 most of it was probably it's probably 50 50 AD on new logo.

Samuel Wilson: It was all new logos. That's all new logos. That's all new logos. So 15 of our top 20 new logo deals were all new logos.

Speaker Change: Our top 15, new logo that was that's all that's all new logos to <unk>.

Speaker Change: Of our top 20, new logo deals where all contact center based.

Samuel Wilson: Okay, and were they displacements or legacy systems? Oh, yeah. Sorry.

Speaker Change: Okay, and what are they displacement of legacy.

Samuel Wilson: Yeah, almost all, almost all are on the prem to cloud. You know, So if you go back, right, and this is, you know, maybe this will help investors, and I know you're very aware of this, Catharine, but so it's not just for your sake, it's for everybody's listening sake. So, you know, before the pandemic, there were three main drivers of our business from a macro perspective: digital transformation, end of life of existing on-premises systems, and moving to new office space, new real estate space. And then we saw the pandemic, and we saw a surge of business because of work from home. But, you know, post-pandemic, one of those three legs just doesn't really exist anymore.

Samuel Wilson: Yeah, almost all are on-premises to the cloud. You know, so if you go back, right, and this is, you know, maybe this will help investors, and I know you're very aware of this, Catharine, but so it's not just for your sake, it's for everybody's listening sake. So, you know, when we were before the pandemic, there were three main drivers of our business from a macro perspective. All right, thanks a lot.

Speaker Change: Yeah, sorry, yeah, almost all almost all our on Prem to cloud.

Speaker Change: No.

Speaker Change: So if you go back right and this is maybe this will help investors and I know you are very aware of this catherine but so it's not just for years, taking everybody's listening sake.

Speaker Change: So when we were before the pandemic there were three main drivers of our business from a macro perspective.

Samuel Wilson: And that's the move to a new office building; everybody knows the vacancy rates in the commercial real estate space. That's really not a driver of the business. So it's really this digital transformation. And as businesses want to digitally transform, i.e. messaging, You know, bots, AI, data sets, data, and analytics, all these kinds of things have to move to a cloud-based system. It just doesn't work with on-premise systems very well. All right, thanks a lot. Thanks, Catharine!

Speaker Change: Digital transformation end of life of existing on Prem systems, and moving to new office space, New real estate space and then we saw the pandemic and we saw a surge of business because of work from home.

Samuel Wilson: Post pandemic one of those three legs, just doesn't really exist anymore and thats that move to new office building everybody knows the vacancy rates in the commercial real estate space.

Speaker Change: That's really not a driver of the business. So it's really this digital transformation and as businesses want to digitally transform I E messaging.

Speaker Change: Bots, AI datasets data and analytics all of these kinds of things they have to move to a cloud based system. It just doesn't work with your on Prem systems very well.

Sam: Alright, Thanks, a lot Sam.

Catherine: Thanks Catherine.

Catharine Trebnick: Thank you one moment for our next question.

Meta Marshall: Our next question comes from the line of Meta Marshall from Morgan Stanley.

Unknown Executive: Thank you. One moment for our next question. Our next question comes from Meta Marshall from Morgan Stanley.

Meta Marshall: Our next question comes from the line of meta Marshall from Morgan Stanley.

Meta Marshall: Great, thanks. Maybe just on the contact center side, just trends on kind of the Engage product or more of that enterprise product versus kind of the XCAS or more traditional CCAS product. And if I missed that, apologies, but just kind of some helpful details around that. And then maybe on the second question, you know, understanding kind of the nice impact to the quarter and just in terms of kind of sales cycles, but given that that product has kind of meaningfully lower reliability and features, do you just feel like it's a matter of time to kind of inform customers or just how have you kind of been getting through that process?

Meta Marshall: Great. Thanks.

Meta Marshall: Maybe just on the contact center side.

Meta Marshall: Trends on kind of the.

Meta Marshall: <unk> engaged product or more of that enterprise product versus kind of the ex cats are more traditional C cap product.

Meta Marshall: And if I missed that apologies, but just kind of some helpful details around that.

Speaker Change: And then maybe on the second question.

Speaker Change: Understanding kind of the nice.

Speaker Change: The impact to the quarter and then just in terms of kind of sales cycle, but.

Speaker Change: And given that that product has kind of meaningfully lower.

Samuel Wilson: And then maybe on the second question, you know, understanding kind of the nice impact to the quarter and just in terms of kind of sales cycles. But given that that product has kind of meaningfully lower reliability and features, do you just feel like it's a matter of time to kind of inform customers, or just how have you kind of been getting through that process? Thanks.

Speaker Change: Reliability and features that.

Samuel Wilson: Do you just feel like it's a matter of time to kind of inform and.

Samuel Wilson: Thanks. Yeah. Okay. So, let me cover Engage first, and then I'll cover XCAS.

Speaker Change: <unk> customers are just how have you been getting through that process.

Samuel Wilson: Yeah, okay, so let me cover Engage first, and then I'll cover the UC sort of messaging strength and those kind of things. So first on UC, we're getting a lot of very positive feedback. The product is still in beta, and I suspect it'll be in beta for a while.

Samuel Wilson: Yeah, okay. So let me cover Engage first and then I'll cover the UC sort of messaging strength and those kind of things. So first on UC, we're getting a lot of very positive feedback. The product is still in beta. I suspect it'll be in beta for a while.

Speaker Change: Yeah. Okay. So let me cover engage first and then I'll cover that you see sort of messaging strength in those good. Thanks. So first and you see we're getting a lot of very positive feedback the product is still in beta I suspect it will be a beta for a while it is a true new product line for the company. So this isn't a you see version of this is.

Samuel Wilson: It is a true new product line for the company. So this isn't a UC version. This isn't a CC version. I mean, you can kind of call it a hybrid between the two, but that'd be really unfair to it.

Samuel Wilson: Cc version.

Samuel Wilson: It's a new product. It's a new product line. It's built for mobile first.

Catherine: Kind of call it a hybrid between the two but it'd be really unfair to it its a new product. It's a new product line, it's built mobile first.

Samuel Wilson: It's a new product. It's a new product line. It's built for mobile first.

Samuel Wilson: And so we're really in that stage, we've got it in customers' hands, they're using it, we're really excited about the first feedback we're getting so far, but it's a long way to go. In terms of contact centers in general, we are definitely seeing more momentum with our contact center-based product. And I think we say in the script, or we've said in the past, you know, for contact centers above 250 seats, the growth is very substantial for us as a company. And I don't, I want to let investors know. I mean, I like throwing out lots of numbers, but I'd like to let them know for a second, just the qualitative.

Samuel Wilson: And so we're really in that stage, we've got it in customers' hands, they're using it, we're really excited about the first feedback we're getting so far, but it's a long way to go. In terms of contact centers in general, we are definitely seeing more momentum with our contact center based product. And I think we say in the script, or we've said in the past, you know, for contact centers above 250 seats, the growth is very substantial for us as a company. And I don't, I want to let investors know. I mean, I like throwing out lots of numbers, but I'd like to let them know for a second, just the qualitative.

Samuel Wilson: And so we're really in that stage, we've got it in customers' hands, they're using it we're really excited on the first feedback we're getting so far but it's a long way to go.

Samuel Wilson: In terms of contact center in General we are definitely seeing more momentum with our contact center based product and I think we say in the script or we've said in the past for contact centers above 250 seats. The growth is very substantial for us as a company and I.

Samuel Wilson: I wanted to let investors know I mean, I like to throwing out lots of numbers, but I'd like to let them know for a second just to.

Samuel Wilson: Qualitative.

Samuel Wilson: We are going head-to-head with competitors that three years ago or four years ago we wouldn't have had a chance. We're going head-to-head with competitors that you guys all know, and we're winning deals that historically we just wouldn't win. And we're winning because of our T-PES, our technology partner ecosystem. And we're winning because of our investment in the single platform. We're winning because more customers want to buy UC and CC together on that single platform.

Samuel Wilson: We are going head-to-head with competitors that, three years ago or four years ago, we wouldn't have had a chance. We're going head-to-head with competitors that you guys all know, and we're winning deals that historically we just wouldn't win. And we're winning because of our T-PES, our technology partner ecosystem. And we're winning because of our investment in the single platform. We're winning because more customers want to buy UC and CC together on that single platform.

Samuel Wilson: Our going head to head with competitors that three years ago or four years ago. We wouldn't have had a chance with we're going to head to head with competitors, who you guys. All know and we're winning deals that historically, we just would win and we're winning because of our <unk> our technology partner ecosystem, we're winning because of our inverse.

Samuel Wilson: So all those positives together are definitely leading to a higher win in terms of pricing competition in UCAS, and I want to, in a second, I'll make this bigger. So what really happens is it just slows down the deal cycle because the customer is going to, you know, print out the press release, sort of, or email it over to the sales rep and say, well, this is five bucks, why don't we buy that? And of course, you have to read the fine print that says you have to be a CX1 user, and you have to, you know, there's a whole bunch of other stuff attached to it.

Samuel Wilson: So all those positives together are definitely leading to a higher win in terms of pricing competition in UCAS, and I want to, in a second, I'll make this bigger. So, what really happens is it just slows down the deal cycle because the customer is going to, you know, print out the press release, sort of, or email it over to the sales rep and say, well, this is five bucks, why don't we buy that? And of course, you have to read the fine print that says you have to be a CX One user, and you have to, you know, there's a whole bunch of other stuff attached to it.

Samuel Wilson: <unk> in a single platform, we're winning because more customers want to buy UC and cc together on that single platform. So all of those positives together are definitely leading to a higher win rate in.

Samuel Wilson: In terms of pricing competition, and Ucas and I wanted to in a.

Samuel Wilson: Second I'll make this figure so what.

Samuel Wilson: What really happens is it just slows down a deal cycle because the customer is going to print out the press release sort of our E mail it over to the sales wrap and say well. This is five box why don't we buy that and of course, you have to read the fine print that says you have to be a CX one user in yet.

Samuel Wilson: And it's not that great of a product. But that just slows down the sales cycle, and it anchors them to a lower price. I do want to bring this up one level, though.

Samuel Wilson: A bunch of other stuff attached to it and it's not that great of a product.

Samuel Wilson: And it's not that great of a product, but that just slows down the sales cycle, and it anchors them to a lower price. I do want to bring this up one level, though, and it's a thing that we saw last quarter, more so than we've seen in the past.

Samuel Wilson: But that just slows down the sales cycle and it anchors them on a lower price I do want to bring this up one level, though and it's a thing that we saw last quarter more so than we've seen in the past and thats vendors with sub par products, particularly subpar contact center products that they like to talk about a lot.

Samuel Wilson: And it's a thing that we saw last quarter, more so than we've seen in the past, and that's vendors with subpar products, particularly subpar contact center products, that they like to talk about a lot. Using price, the way they're getting their customer numbers because they want to report it to you guys on Wall Street is by using price, and it's the same as the three CX products by nice, etc. These are subpar products.

Samuel Wilson: And that's vendors with subpar products, particularly subpar contact center products that they like to talk about a lot. Using price, the way they're getting their customer numbers because they want to report it to you guys on Wall Street is They're using price, and it's the same as the three CX products by nice, Etc. These are subpar products. I'd go so far as to call them crappy products. But it just slows down the sales cycle because they're going to run a POC or they're going to do whatever.

Samuel Wilson: Using price the way, they're getting their end customer numbers because they want to report it to you guys on Wall Street is they're using price and it's the same as the three CX products by nice et cetera. These are sub par products.

Samuel Wilson: I'd go so far as, you know, one customer called them crappy products. But it just slows down the sales cycle because they're going to run a POC or they're going to do whatever. And I get what they're doing. They're just trying to use price to disrupt the market, and it just takes time to work our way through that. And that's what we see. We just see, sort of, you know, bad products at low prices, and you have to sell through them.

Samuel Wilson: Go so far as one customer call them crappy products, but they just slows down the sales cycle, because theyre going to run a POC or theyre going to do whatever.

Samuel Wilson: And I get what they're doing. They're just trying to use price to disrupt the market, and it just takes time to work our way through that. And that's what we see. We just see, sort of, you know, bad products at low prices, and you have to sell through them.

Samuel Wilson: And I get what they are doing they're just trying to use price to disrupt the market and it just takes time to work our way through that and that's what we see we just see.

Samuel Wilson: Sort of.

Samuel Wilson: Bad products at low prices and you have to sell through it.

Samuel Wilson: Great. Thanks.

Samuel Wilson: Yeah.

Samuel Wilson: Thank you.

David Unger: Our next question comes from the line of David Unger from Wells Fargo.

Samuel Wilson: Our next question comes from the line of David Unger from Wells Fargo.

Samuel Wilson: Hey, thanks for taking our questions. So just to take it back at the high level. So I mean, a lot has clearly happened from our seats as earnings season kicked off for software, the political side, and the economic side. So I'm wondering if you could describe the customer engagement activity level over the last month and any particular near-term catalyst that can support decision making to accelerate.

David Unger: Hey, Thanks for taking our questions. So just to take it back at the high level. So a lot has clearly happened more seats, earning season kicked off our software the political side the economic side.

Speaker Change: So I'm wondering if you could describe the customer engagement activity level over the last month and any particular near term catalysts that can support decision making to accelerate thanks.

Samuel Wilson: That's gonna be a tough one. So first, remember, I'm a NAT. You know, I'm a $725 million-a-year software company. So I'm always very reluctant to speak about this multi-billion dollar industry. I feel like I'm a little over my skis.

Speaker Change: That's going to be a tough one so first remember him in that $725 million a year software company. So I'm always very reluctant to speak about this multibillion dollar industry I feel like I'm, a little over my skis, So just FYI on that.

Samuel Wilson: So just FYI on that. And also, I should say thank you to Wells Fargo. You led our financing round, you did all your wonderful due diligence, and you came back, and you led the round of letting us borrow money. So thank you to you guys for that. Okay, in terms of the last month, what do I see? I do see a little bit more caution around some deals; we're still getting them signed, just a little bit more caution, you know, a double, triple check, those kinds of things. And in terms of acceleration, I mean, the big thing is Digital Transformation, right?

Speaker Change: And also I should say, thank you to Wells Fargo you, let our financing round you did all your wonderful due diligence and you came back in you led the round of letting us borrow money. So thank you to you guys for that okay. In terms of the last month, where do I see I do see a little bit more.

Samuel Wilson: Okay, in terms of the last month, what do I see? I do see a little bit more cautiousness around some deals; we're still getting them signed, just a little bit more cautiousness, you know, a double, triple check, those kinds of things. And in terms of acceleration, I mean, the big thing is Digital Transformation, right? If you're really looking, and I want to take this up a level and really talk about business outcomes. And I'll use an example: you're a hospital. Your most precious asset is your doctor's time. If a patient doesn't show up for a doctor's appointment, you don't get to charge him or her.

Samuel Wilson: Cautiousness around some deals we're still getting them signed it just a little bit more cautiousness.

Samuel Wilson: A double triple check those kinds of things.

Samuel Wilson: And in terms of acceleration I mean, the big thing is digital transformation right, if you're really looking and I wanted to take this up a level and really talk about business outcomes.

Samuel Wilson: If you're really looking, and I want to take this up a level and really talk about business outcomes, and I'll use an example, you're a hospital. Your most precious asset is your doctor's time. If a patient doesn't show up for a doctor's appointment, you don't get to charge him or her. And so having every doctor fully utilized is a key metric for running your business. When we deploy things like proactive outreach to notify patients and remind them that their appointment is tomorrow, press one to confirm, press two if you want to talk to an agent to change your appointment, these kinds of things move the needle.

Samuel Wilson: And I'll use an example, youre a hospital.

Samuel Wilson: And so having every doctor fully utilized is a key metric for running your business. When we deploy things like proactive outreach to notify patients and remind them that their appointment is tomorrow, press one to confirm, press two if you want to talk to an agent to change your appointment, these kinds of things move the needle. And what we need to do a better job of as a company, and I think we are starting to do that at 8x8, is educate customers on the potential for them to reduce the cost to serve, improve customer satisfaction, improve their retention rates or renewal rates, improve their ARPU, those kinds of things. And we're seeing it.

Samuel Wilson: Our most precious asset is your doctor's time, if a patient doesn't show up to a doctor's appointment you don't get to charge it.

Samuel Wilson: So are her and so having every doctor fully utilized is a key metric for you running your business when we deploy things like proactive outreach to notify patients and remind them that their appointment is tomorrow press one to confirm press two if you want to talk to an agent to change your appointment these kinds of things.

Samuel Wilson: It moves the needle.

Speaker Change: And what we need to do a better job of as a company and I think we are starting to do that today by eight is educate customers on the potential for them to reduce the cost to serve improve customer satisfaction improve their retention rates, our renewal rates improve their ARPA those kinds of things.

Samuel Wilson: We're bringing those integrated products together, and I think that's actually what's going to accelerate the business next month, the next six months, the next year. And the easiest way for me to demonstrate this to you, the investment community is remote fit. Right? We invented remote fix for field service companies. And we see, you know, a 30 to 40 percent reduction in the number of truck rolls after they deploy RemoteFix. And RemoteFix is our contact center, plus our UC, plus SMS messaging, plus video, you know, one-way video, uplift capabilities in the contact center, all those things combined.

Speaker Change: By deploying our products and we're seeing it we're bringing those integrated products together and I think that's actually what's going to accelerate the business next months or next six months. The next year is really going in and the easiest way for me to demonstrate this to you the investment community is remote fix right.

Speaker Change: We invented remote fix for field service companies and we see you know.

Samuel Wilson: 30%, 40% reduction in the number of truck rolls after they deploy remote fixed and remote fixes our contact center plus our UC plus SMS messaging plus video one way video uplift capabilities in the contact center all of those things combined.

Samuel Wilson: And that can save field service companies 10s of thousands of dollars per month; they don't mind paying us a little bit to give them that capability. So it's definitely that's what's going to drive the industry, the whole, hey, you have an on-premise solution. It's being EOL or you're moving to a new building; those legs just aren't as strong as they were in the past.

Samuel Wilson: And that can save field service companies tens of thousands of dollars per month, they don't mind paying us a little bit to give them that capabilities. So it's definitely that.

Speaker Change: That's what's going to drive the industry. The whole Hey, do you have an on Prem solution it's been.

Speaker Change: Are you moving new new building those legs, just aren't as strong as they were in the past.

Samuel Wilson: Thanks, Sam. And just one more, if I can just follow up. So we just talked about ARPU, and sorry if I missed this, but can we just talk through some of the ARPU trends you're seeing in CCAS, given the competitive dynamics going on in the landscape? Thank you.

Speaker Change: Thanks, and just one more if I can just follow up so we just talked about ARPA and sorry, if I missed this but can we just talk through some of the ARPA trends youre seeing in <unk> and <unk> given the competitive dynamics going on in the landscape. Thank you.

Samuel Wilson: Yeah, it's okay. That's a great question.

Samuel Wilson: Yeah, it's okay. That's a great question. So first off, my average revenue per customer, I'll do it that way instead of my average revenue per user. And the reason is, I think the average revenue per user in the industry is being, I was going to say, manipulated, but I'm sure if anybody's listening, they'd be upset with that word, manipulated. It doesn't tell the full story. So if you look at 8x8's average revenue per customer, it's up on a year-over-year basis. And it's up on a quarter-over-quarter basis.

Speaker Change: Yes, okay great.

Speaker Change: Great question. So first off my average revenue per customer I'll do it that way instead of by average revenue per user and the reason is I think the average revenue per user in the industry is being.

Speaker Change: Manipulated, but I'm sure if anybody is listening there'll be upset with that word is being it doesn't tell the full story. So if you look at a pace average revenue per customer is up on a year over year basis, it's up on a quarter over quarter basis, and so that's where we're seeing that multi product the higher valued contact center seats those kinds of things working now.

Samuel Wilson: So first off, my average revenue per customer, I'll do it that way instead of my average revenue per user. And the reason is, I think the average revenue per user in the industry is being, I was going to say manipulated, but I'm sure if anybody's listening, they'd be upset with that word, manipulated. It doesn't tell the full story. So if you look at 8x8's average revenue per customer, it's up on a year-over-year basis, and it's up on a quarter-over-quarter basis.

Samuel Wilson: And so that's where we're seeing that multiproduct, the higher-valued contact center seats, those kinds of things working. Now, what you can get, though, is per seat items can get a little wonky. Because, you know, I'll say something that's maybe a little contrary to everybody else, but I don't want you to blow it out of proportion is that we do have some instances where people buy fewer seats because they're buying the box. Now, I would say in a lot of cases, they buy the same number of seats and bots because they want more productivity and other things. But we do have some cases.

Speaker Change: Now what you can get though is per C items can get a little wonky, because I'll say something it's maybe a little contrary to everybody else, but I don't want to blow. It out of proportion is we do have some instances where people buy less seats because they are buying the bots.

Samuel Wilson: And when you do that, it actually skews your average revenue per user because you're dividing by a smaller denominator. And so I think average revenue per customer is a way better metric. And that's the one that we are seeing trending up. What I think with subpar products is that it just elongates the sales cycle. And I just take a step back, and this is, you know, just take this for the two cents that it's worth because I'm not the world's most visionary guy.

Samuel Wilson: Now I would say in a lot of cases, they buy the same number of seats and the bonds because they want more productivity and other things, but we do have some cases and when you do that it actually skews your average revenue per user because you're dividing by a smaller denominator and so I think average revenue per customer is a way better metric and that's the one that we are.

Samuel Wilson: Being trending up.

Speaker Change: I think with the subpar products is really just elongate the sales cycle.

Samuel Wilson: And if I just take a step back and this is.

Speaker Change: Just take this for the <unk> that it's worth because I'm not the world's most visionary Guy I do think youre going to see a trend over time over the next five years.

Samuel Wilson: I do think you're going to see a trend over time in our industry where usage and consumption-based pricing will become increasingly common. I dare say that five years from now, per-seat pricing may actually almost become extinct, because I think more and more software is being sold on that consumption-based model. It was pioneered really by the hyperscalers, GPC, Azure, and Amazon, but it's even floating around in our industry. And so I think some of those ARPU metrics are going to be less relevant to average revenue or customer metrics. So, just my two cents on that.

Samuel Wilson: In our industry, where usage and consumption based pricing will become ever more common I dare say that five years from now per seat pricing may actually almost become extinct because I think more and more software being sold on that consumption based model. It was pioneered really by the Hyperscale <unk>.

Speaker Change: GPC is your Amazon, but it's even floating into our industry and and so I think some of those <unk> metrics are going to be less relevant to the average revenue per customer metrics. So just my two cents on that.

Samuel Wilson: I appreciate it. Thank you, Sam. Thank you.

Samuel Wilson: I appreciate it. Thank you, Sam.

Sam: I appreciate it thank you Sam.

Unknown Executive: Thank you. As a reminder to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Our next question comes from the line of Taz Kaojaljee from Wedbush.

Sam: Thank you.

Speaker Change: Thank you as a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one one again.

Speaker Change: Our next question comes from the line of Taz Cow gel G from Wedbush.

Taz Kaojaljee: Hey guys, thanks for taking my question. There are two questions.

Speaker Change: Hey, guys. Thanks for taking my question two questions Sam you're very positive on the number of new customers, who are finding out with multiple products.

Samuel Wilson: Sam, you are very positive about the number of new customers who are signing up for multiple products. Can you remind us what's the average penetration or, I guess, number of products customers have? And what's the upside? What's the upper limit there? How many products does one customer have if you look at the upper limit?

Speaker Change: Remind us what the average penetration of the average I guess number one product customers haven't.

Speaker Change: What's the what's the upside like what's the upper limit there how much how many positive one customer has if you look at the upper limit.

Samuel Wilson: Okay, so right now, our average is a great question. I haven't actually counted it out, but I can tell you it'd be somewhere between one and two.

Unknown Executive: Okay. So right now.

Speaker Change: Our average it's a great question I haven't actually calculate it out but I can tell you would be somewhere between one and two so a vast majority of our customers our UC customers still.

Speaker Change: Ex cats is in the 40% of our.

Speaker Change: Total revenue, but in terms of our customer base, it's going to be a very small percentage because of the big Delta between contact center seats in UC seats.

Unknown Executive: And so.

Samuel Wilson: So a vast majority of our customers are still UC customers. XCAS is, you know, in 40% of our total revenue, but in terms of our customer base, it's going to be a very small percentage because of the big delta between contact centers. And so it's gonna be at one to two. We have hundreds of customers, probably getting closer to thousands of customers sitting at three, four, and five products. No, actually, we have thousands of customers sitting at three, four, and five products now.

Speaker Change: It's going to be I wanted to we have hundreds of customers probably getting closer to thousands of customers sitting at 345 products now actually we have thousands of customers 345 products now.

Samuel Wilson: And the upside potential, I'll tell you, I've done a back of the envelope calculation, so please don't quote me on this, but if we were to get sort of some basic benchmark type of numbers in terms of penetration and looking just at five products, not the nine products we sell today, it's an incremental 100 to 150 million plus in revenue per year.

Unknown Executive: <unk>.

Samuel Wilson: Got it. Just to follow up, can you use migration? Can you remind us how much of the base has already moved, and then when customers move from fused to 8x8, is there an uplift in pricing, or are they paying the same price?

Speaker Change: The upside potential I'll tell you I've done a back of the envelope. So please don't quote me on this but if we were to get sort of some basic benchmark type of numbers in terms of penetration and looking just at five products not the nine products we sell today.

Unknown Executive: An incremental $100 million to $150 million plus in revenue per year.

Unknown Executive: Okay.

Speaker Change: Got it and just a follow up.

Speaker Change: It was migration can you remind us how much of the base.

Speaker Change: Already moved and they've been customers more confused straight but is there an uplift in pricing or the big the same price.

Samuel Wilson: Okay, I'm so glad somebody asked because I wanted to put more details out. So Taz, I owe you. Next time I see you, I'll buy you a coffee.

Speaker Change: Okay. So glad somebody asked because I wanted to put more details out. So it has io year next time I see you are Bayou coffee.

Samuel Wilson: So when we bought Fuse, it was about 20%, you know, rough and tough of our revenue base. Today, it's about a little less than 8% of the revenue comes from Fuse. And that number is, you know, steadily declining as we migrate customers over. And so, And what we've, you know, the decision we've made now that we're sort of got the whole migration or the upgrade process down, really want to accelerate that. It doesn't make sense to keep these two platforms running in perpetuity; it was never the intention of ours.

Speaker Change: So when we bought fuse it was about 20% rough and tough of our revenue base today, it's about a little less than 8%.

Samuel Wilson: Of the revenue comes from fuse and that number is steadily declining as we migrate customers over and so.

Samuel Wilson: And so we're really accelerating those moves. And, you know, I would say the goal is to hopefully get it done in the next year or two, to get everybody's disposition, and it'll take some while to completely move them, deploy them, and shut down the old legacy platform. But, you know, a little less than 8% of our overall revenues come from customers.

Samuel Wilson: And what the decision we've made now that we're sort of got the whole migration or the upgrade process down.

Samuel Wilson: Really want to accelerate that.

Samuel Wilson: It doesn't make sense to keep this play two platforms running in perpetuity. It was never the intention of ours and so we are really accelerating those moves and.

Speaker Change: I would say the goal is to hopefully get it done in the next year or two to get everybody disposition and it will take some while to completely move them deploy them and shut down the old legacy platform.

Samuel Wilson: But a little less than 8% of our overall revenues come from views customers today.

Samuel Wilson: And then when customers migrate, is there, do they pay more, or does the price remain the same? Okay, so typically, they do not pay more. We charge them the same price.

Samuel Wilson: And then my customers migrate as they're going to pay more or.

Samuel Wilson: Okay.

Samuel Wilson: Typically they do not pay more we charge them the same price, but it opens up the door to cross selling to the problem with the fused basis I really can't cross sell them much and what I mean by that is I don't have like an integrated fused plus eight by a contact center ebay plus <unk> plus eight by a contact center.

Samuel Wilson: But it opens up the door to cross-selling. So the problem with the FUSE base is I really can't cross-sell them much. And what I mean by that is I don't have an integrated FUSE plus 8x8 contact center. I have 8x8 plus UC plus 8x8 contact center, as I do have the bots and proactive outreach, workforce management, PCI compliance, all those products, right? And so once we move on, they're open; it opens the door to crossing out. Thanks guys!

Speaker Change: As I do you have the bots and proactive outreach.

Samuel Wilson: Workforce management PCI compliance all of those products right and so once we move them there open it opens the door to cross sell.

Speaker Change: Got it helpful. Thanks, guys.

Unknown Attendee: Thanks guys.

Samuel Wilson: Yes.

Unknown Executive: Our next question comes from the line of Michael Funk from Bank of America.

Unknown Attendee: Thank you.

Speaker Change: Our next question comes from the line of Michael Funk from Bank of America.

Michael Funk: Yeah, great. Great, Sam.

Cam: Yes, great great Cam. Thank you for the question.

Speaker Change: One more on Skus, if I, if I could say I mean, you mentioned that you adjusted the guidance for 25% to account for potential churn from the acceleration of the upgrade program but.

Speaker Change: What is the expand through its still bearing from fusion and presumably you are paying for some data center space and support.

Unknown Attendee: Other factor.

Unknown Attendee: The normal.

Samuel Wilson: Thank you for the question. Um, what one more on FUSE? If I could, Sam, you mentioned that you adjusted the guidance for 25 to account for potential churn from the acceleration of the upgrade program. But what is the expense you're still bearing from FUSE? I mean, presumably, you're paying for some data center space and support and, you know, other factors. I put the normal Rob Rose cost or Cost of Service on that revenue percentage that 8% you gave up today to kind of get to the cost of that.

Speaker Change: Gross cost or cost of service on that revenue percentage of the 8% you gave us today to kind of get to the cost of that or what is that number.

Samuel Wilson: No, the cost would be less, right? I mean, Fuse has been, and I just, you know, everything we talked about on the call, Fuse has been an absolute home run in my mind. It allowed us to innovate. It gave us the 21 scrum teams we originally acquired, and we said we were acquiring them for innovation. And so we use that innovation to roll out all these products that we're talking about, the things that are taking off, the things that are growing in the 40%, 50% range, all those kinds of things.

Speaker Change: No the cost will be less right I mean, so fuse has been and I just.

Samuel Wilson: Everything we've talked about the call fuses made an absolute homerun in my mind it allowed us to innovate it gave us the 21 scrum teams. When we originally acquired and we said we are acquiring them for innovation and so we use that innovation to rollout. All these products that we're talking about the things that are taking off the things that are growing in the 40%, 50% range all of those kinds of things.

Samuel Wilson: At the same time, we stripped out a lot of costs. And so the cost to service that platform is not massive. It's not, you know, I could wing a number and I probably shouldn't, but it's single-digit millions of dollars. Okay. So it's not 10 million, 15 million on that. No, it's not that.

Samuel Wilson: At the same time, we stripped out a lot of costs. And so the cost to service that platform is not massive. It's not, you know, I could wing a number and I probably shouldn't, but it's single-digit millions of dollars. Okay, so it's not $10 million, $15 million on that. No, it's not that.

Samuel Wilson: At the same time, we shipped a lot of costs out.

Samuel Wilson: So the cost to service that platform is not massive it's not.

Samuel Wilson: Sure.

Samuel Wilson: I could win number and I, probably shouldnt, but it's not it's single digit millions of dollars.

Samuel Wilson: Okay.

Samuel Wilson: What it is, though, is it's a distraction, right? So it's a distraction, and it's a distraction we need to put behind us, right? So I can redeploy assets away from maintaining them, you know; I've got to maintain security compliance on it and all those kinds of things. It's just to the point now that it's a distraction, and we should get them over on our better, fitter platform. So it's kind of a, you know? It's a Toyota Camry with 125,000 miles on it, and it's time to buy a new car.

Samuel Wilson: $15 million no its not what it is though it is a distraction right. So it's a distraction and is it a distraction we need to put behind US right. So I can redeploy assets.

Samuel Wilson: What it is, though, is it's a distraction, right? So it's a distraction, and it's a distraction we need to put behind us, right? So I can redeploy assets away from maintaining them, you know; I've got to maintain security compliance on it and all those kinds of things. It's just to the point now that it's a distraction, and we should get them over on our better, fitter platform. You know, it's a Toyota Camry with 125,000 miles on it. It's time to buy a new car.

Samuel Wilson: Away from maintaining it I've got to maintain security compliance on it and all those kinds of things. It's just to the point now as a distraction and we should get them over on our better fitter platform, it's kind of a.

Sam: It's a Toyota Camry with 125000 miles on it Sam to buy a new car.

Unknown Attendee: And then one more on the macro, we've heard some mixed commentary this quarter from other companies about having to offer more incentives, more discounting, more free months to entice those customers over the finish line, especially SMBs. Are you seeing the same thing in the competitive environment where you are for SMB customers?

Samuel Wilson: And then one more on the macro, we've heard some mixed commentary this quarter from other companies about having to offer more incentives, more discounting, more free months to entice those customers over the finish line, especially SMBs. Are you seeing the same thing in the competitive environment where you are, for SMB customers?

Unknown Attendee: Makes sense and then one more on the macro we've heard.

Unknown Attendee: Some mixed commentary this quarter from other companies about having to offer more incentives more discounting more more fremont to entice those customers over the finish line, especially SMB are you seeing the same thing in a competitive environment, where you are for the SMB customers.

Samuel Wilson: Well, I don't think it's, to be clear, I don't think it's enticed the customer. I think this is an industry self-inflicted gunshot wound.

Samuel Wilson: Well, I don't think it's, to be clear, I don't think it's enticed the customer. I think this is an industry self-inflicted gunshot.

Speaker Change: Well I don't think to be clear I don't think it's entice the customers.

Samuel Wilson: I think this is industry self inflicted gunshot wounds right you've got small startup companies that are last raised a round of capital in 2020 at valuations at $253 billion that are desperate you've got bigger companies in.

Unknown Attendee: Right, you've got small startup companies that are, you know, last raised their round of capital in 2020 at valuations of two and a half billion dollars, and they are desperate. You've got bigger companies in their single product, desperately trying to get traction with new products that they haven't invested in and aren't very good. And so I think all that incentive stuff and free month stuff is, whatever it is, that's just us fighting each other. It has nothing to do with incentivizing the customer; the customer is just laughing all the way to the bank.

Samuel Wilson: Right, you've got small startup companies that are, you know, last raised their round of capital in 2020 at valuations of two and a half billion that are desperate. You've got bigger companies in the, you know, that are single-product companies that are desperately trying to get traction with new products that they haven't invested in and aren't very good. And so I think all that incentive stuff and free month stuff is, whatever it is, that's just us fighting each other. It has nothing to do with incentivizing the customer; the customer is just laughing all the way to the bank.

Unknown Attendee: They are single product, they're desperately trying to get traction with new products that they have and invested in and arent very good and so I think all of that incentive stuff and free months stuff is whatever is that's just us fighting each other it has nothing to do with incentive to the customer the customers just laughing all the way to the bank.

Samuel Wilson: And you mentioned NICE; thank you for mentioning that. What is your sense of customer overlap with Nice? I would have assumed it was relatively low, and you wouldn't see them that much. You know, customers who have both would think about switching to the Nice voice product. Do you have a sense of the overlap?

Unknown Attendee: And you mentioned, you know, thank you for mentioning that.

Unknown Attendee: Okay.

Speaker Change: And you mentioned you mentioned nice thank.

Speaker Change: Thank you for mentioning that.

Speaker Change: What is your sense of customer overlap with night I would I would've assumed it was relatively it was relatively low when you wouldnt see them that much.

Speaker Change: And our customers have both you would think about switching to the nice voice product do you have a central America.

Samuel Wilson: Well, okay, so let's remember that there's a certain company in Belmont, California that starts with an R and ends with central that has resold nice for years, right? And so when I say nice, I also sort of take it in the context of their go-to market partner. You know, and then number two is, I think your statement is very accurate. Circa two years ago, three years ago, but we've invested a lot in our contact center.

Speaker Change: Well, okay. So, let's remember that there is a certain company in Belmont, California, It starts with our and ends with central.

Unknown Attendee: Has resold nice for years right and so when I say nice I also sort of take it in the context of inside of their go to market partner.

Speaker Change: And then number two is that I think your statement is very accurate.

Samuel Wilson: Circa two years ago, three years ago, but we've invested a lot in our contact center. And as I mentioned earlier, we can hold our own. Now that doesn't mean I'm, you know, there are places that nice is better than we are. And I think there are places that we are better than nice.

Speaker Change: Circa two years ago, three years ago, but we've invested a lot in our contact center and as I mentioned earlier.

Samuel Wilson: And as I mentioned earlier, like we can hold our own. Now, that doesn't mean I'm, you know, there are places that nice is better than we are. And I think there are places that we are better than nice.

Samuel Wilson: We can hold our own.

Samuel Wilson: Now that doesn't mean.

Samuel Wilson: There are places at nice is better than we are and I think there's places that we are better than nice great company by the way I respect them tremendously they've done wonders for our industry.

Samuel Wilson: Great company, by the way; I respect them tremendously. They've done wonders for our industry. But the UC stuff, I think, was definitely not aimed at us. The things that they did were very much aimed at that GTM relationship with a certain vendor, because that certain vendor suddenly decided they wanted to do something, you know; they wanted to go in a different direction. That's why the fine print and everything else.

Samuel Wilson: But the UC stuff I think was definitely not aimed at us the things that they did was very much aimed at that GCM relationship with a certain vendor because that certain vendor has suddenly decided they wanted to do something they want to go into different direction, that's why the fine print and everything else.

Unknown Attendee: Okay, thank you, Sam. I hope Kevin's feeling better as well.

Samuel Wilson: Okay, thank you, Sam. I hope Kevin's feeling better as well.

Samuel Wilson: Okay. Thank you Sam I hope on what Kevin is feeling better as well.

Samuel Wilson: I'm sure he's listening to this call, and then I hope he goes back to sleep.

Speaker Change: I'm sure. He is listening to this call and I hope it goes back to sleep.

Samuel Wilson: Thank you. At this time, I would now like to turn the conference back over to Sam Wilson for closing remarks.

Unknown Executive: Thank you. At this time, I would now like to turn the conference back over to Sam Wilson for closing remarks.

Samuel Wilson: Thank you at this time I would now like to turn the conference back over to Sam Wilson for closing remarks.

Samuel Wilson: Thank you, everyone. Thank you for joining us today. Lastly, I just want to thank our partners, our customers, our investors, and our employees.

Samuel Wilson: Tomorrow is August 8th. It's 8x8 day. So we've asked our employees to take some time off and go volunteering tomorrow. And we've got a lot of events for our customers tomorrow. So happy 8x8 day, August 8th. And with that, we look forward to seeing everybody back in about 90 days for our next earnings call. Thank you.

Sam Wilson: Thank you everyone. Thank you for joining us today lastly, I just want to thank our partners our customers our investors and our employees Tomorrow's. Our state is a by a day. So we've asked our employees to take some time off and go volunteering tomorrow and we've got a number of events for our customers Tomorrow. So happy eight by eight day August eight and with that we have.

Samuel Wilson: Look forward to seeing everybody back in about 90 days for our next earnings call. Thank you.

Unknown Executive: This concludes today's conference call. Thank you for participating. You may now disconnect.

Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect.

Unknown Executive: Okay.

Unknown Executive: [music].

Samuel Wilson: ..

Q1 2025 8x8 Inc Earnings Call

Request a DemoDemo

EGHT

8x8

Earnings