8x8 Q3 2026 8x8 Inc Earnings Call | AllMind AI Earnings | AllMind AI
Q3 2026 8x8 Inc Earnings Call
Operator: Good day, everyone, and welcome to 8x8, Inc.'s Q3 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To participate, you will need to press star one one on your telephone. You will then hear a message advising your hand is raised. To withdraw your question, simply press star one one again. Please note, this conference is being recorded. Now it's my pleasure to turn the call over to the head of Investor Relations, Kate Patterson.
Operator: Good day, everyone, and welcome to 8x8, Inc.'s Q3 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To participate, you will need to press star one one on your telephone. You will then hear a message advising your hand is raised. To withdraw your question, simply press star one one again. Please note, this conference is being recorded. Now it's my pleasure to turn the call over to the head of Investor Relations, Kate Patterson.
Speaker #1: After the speakers' presentation, there will be a question-and-answer session. To participate, you will need to press star one one on your telephone. You will then hear a message advising your hand is raised.
Speaker #1: To withdraw your question, simply press star 11 again. Please note this conference is being recorded. Now it's my pleasure to turn the call over to the Head of Investor Relations, Kate
Speaker #1: Patterson. Thank you.
Kate Patterson: Thank you. Good afternoon, everyone. Today's agenda will include a review of our results for Q3 of fiscal 2026 with Samuel Wilson, our Chief Executive Officer, and Kevin Krause, our Chief Financial Officer. Following our prepared remarks, there will be a question-and-answer session. In addition to our prepared remarks, we have posted a more detailed letter to shareholders in the quarterly results section of our investor relations website. Before we get started, let me remind you that our discussion today includes forward-looking statements about 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.
Kate Patterson: Thank you. Good afternoon, everyone. Today's agenda will include a review of our results for Q3 of fiscal 2026 with Samuel Wilson, our Chief Executive Officer, and Kevin Kraus, our Chief Financial Officer. Following our prepared remarks, there will be a question-and-answer session. In addition to our prepared remarks, we have posted a more detailed letter to shareholders in the quarterly results section of our investor relations website.
Speaker #2: Good afternoon, everyone. Today's agenda will include a review of our results for the third quarter of fiscal 2026 with Samuel Wilson, our Chief Executive Officer, and Kevin Kraus, our Chief Financial Officer.
Speaker #2: Following our prepared remarks, there will be a question-and-answer session. In addition to our prepared remarks, we have posted a more detailed letter to shareholders in the quarterly results section of our Investor Relations website.
Speaker #2: Before we get started, let me remind you that our discussion today includes forward-looking statements about 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.
Kate Patterson: Before we get started, let me remind you that our discussion today includes forward-looking statements about 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.
Speaker #2: We caution you not to put undue reliance on these forward-looking statements, as they involve risks and uncertainties that may cause actual results to vary materially from forward-looking statements, as described in our risk factors in our reports filed with the SEC.
Kate Patterson: We caution you not to put undue reliance on these forward-looking statements as they involve risks and uncertainties that may cause actual results to vary materially from forward-looking statements as described in our risk factors in our reports 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 obligations to update them. All financial metrics that will be discussed on this call are non-GAAP, unless otherwise noted. These non-GAAP metrics, together with year-over-year comparisons in some cases, were not prepared in accordance with US generally accepted accounting principles, or GAAP. A reconciliation of these non-GAAP metrics to the closest comparable GAAP metric is provided in our earnings press release and our earnings presentation slides, which are available on eight by eight's investor relations website at investors.8x8.com.
Kate Patterson: We caution you not to put undue reliance on these forward-looking statements as they involve risks and uncertainties that may cause actual results to vary materially from forward-looking statements as described in our risk factors in our reports 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 obligations to update them. All financial metrics that will be discussed on this call are non-GAAP, unless otherwise noted.
Speaker #2: Any forward-looking statements made on this call and in the presentation slides reflect our analysis as of today, and we have no plans or obligations to update them.
Speaker #2: All financial metrics that will be discussed on this call are non-GAAP unless otherwise noted. These non-GAAP metrics, together with year-over-year comparisons in some cases, were not prepared in accordance with U.S. GAAP.
Kate Patterson: These non-GAAP metrics, together with year-over-year comparisons in some cases, were not prepared in accordance with US generally accepted accounting principles, or GAAP. A reconciliation of these non-GAAP metrics to the closest comparable GAAP metric is provided in our earnings press release and our earnings presentation slides, which are available on eight by eight's investor relations website at investors.8x8.com.
Speaker #2: Generally accepted accounting principles, or GAAP. A reconciliation of these non-GAAP metrics to the closest comparable GAAP metric is provided in our earnings press release and our earnings presentation slides, which are available on 8x8's Investor Relations website at investors.8x8.com.
Speaker #2: With that, I'll turn the call over to our Chief Financial—sorry. With that, I'll turn the call over to our Chief Executive Officer, Samuel.
Kate Patterson: With that, I'll turn the call over to our Chief Financial... Sorry. With that, I'll turn the call over to our Chief Executive Officer, Samuel Wilson.
Kate Patterson: With that, I'll turn the call over to our Chief Financial... Sorry. With that, I'll turn the call over to our Chief Executive Officer, Samuel Wilson.
Speaker #2: Wilson.
Speaker #3: Good afternoon,
Samuel Wilson: Good afternoon, everyone, and thank you for joining us today. I'm excited to share the highlights of our Q3 results... which show our strategic investments across innovation, operational efficiency, and distribution are beginning to yield measurable results. More details are included in our letter to shareholders posted on the investor relations website. I can summarize our Q3 results and our outlook in a single sentence: We're seeing encouraging momentum across multiple dimensions of the business, though we remain focused on the execution work ahead. The most visible evidence of our growing momentum is our return to top-line growth. This marks our third consecutive quarter of year-on-year service revenue growth and our 20th consecutive quarter of positive operating cash flow. We exceeded the high end of our guidance range for service revenue, total revenue, operating profit, and cash flow. I believe this shows our operating model is working.
Samuel Wilson: Good afternoon, everyone, and thank you for joining us today. I'm excited to share the highlights of our Q3 results... which show our strategic investments across innovation, operational efficiency, and distribution are beginning to yield measurable results. More details are included in our letter to shareholders posted on the investor relations website. I can summarize our Q3 results and our outlook in a single sentence: We're seeing encouraging momentum across multiple dimensions of the business, though we remain focused on the execution work ahead.
Speaker #3: everyone, and thank you for joining us today. I'm excited to share the highlights of our third quarter results. We show our strategic investments across innovation, operational efficiency, and distribution are beginning to yield measurable results.
Speaker #3: More details are included in our letter to shareholders posted on the Investor Relations website. I can summarize our Q3 results and our outlook in a single sentence.
Speaker #3: We're seeing encouraging momentum across multiple dimensions of the business, though we remain focused on the execution work ahead. The most visible evidence of our growing momentum is our return to top-line growth.
Samuel Wilson: The most visible evidence of our growing momentum is our return to top-line growth. This marks our third consecutive quarter of year-on-year service revenue growth and our 20th consecutive quarter of positive operating cash flow. We exceeded the high end of our guidance range for service revenue, total revenue, operating profit, and cash flow. I believe this shows our operating model is working.
Speaker #3: This marks our third consecutive quarter of year-on-year service revenue growth and our 20th consecutive quarter of positive operating cash flow. We exceeded the high end of our guidance range for service revenue, total revenue, operating profit, and cash flow.
Speaker #3: I believe this shows our operating model is working. We're driving growth in strategic components of our service revenue while maintaining discipline on profitability and cash generation.
Samuel Wilson: We're driving growth in strategic components of our service revenue while maintaining discipline on profitability and cash generation. A key driver of our growth was our increased consumption of our usage-based offerings, which grew nearly 60% year-over-year and now represents more than 20% of our service revenue, up from mid-teens a year ago. Much of this growth comes from our CPaaS APIs. We are also seeing an acceleration in the adoption of digital channels and AI-based offerings as customers move beyond pilot projects into production at scale. This is clear from some of the metrics we shared in a separate press release. Customer contracts for our intelligent customer assistant increased 70% year-over-year. Voice AI interactions increased more than 200% and now represent a vast majority of all AI interactions on our platform.
Samuel Wilson: We're driving growth in strategic components of our service revenue while maintaining discipline on profitability and cash generation. A key driver of our growth was our increased consumption of our usage-based offerings, which grew nearly 60% year-over-year and now represents more than 20% of our service revenue, up from mid-teens a year ago. Much of this growth comes from our CPaaS APIs. We are also seeing an acceleration in the adoption of digital channels and AI-based offerings as customers move beyond pilot projects into production at scale.
Speaker #3: A key driver of our growth was our increased consumption of our usage-based offerings. We grew nearly 60% of our service revenue, up from mid-teens a year ago.
Speaker #3: Much of this growth comes from our CPATH APIs. We are also seeing an acceleration in the adoption of digital channels and AI-based offerings as customers move beyond pilot projects into production at scale.
Speaker #3: This is clear from some of the metrics we shared in a separate press release. Customer contracts for our intelligent customer assistant increased 70% year-over-year.
Samuel Wilson: This is clear from some of the metrics we shared in a separate press release. Customer contracts for our intelligent customer assistant increased 70% year-over-year. Voice AI interactions increased more than 200% and now represent a vast majority of all AI interactions on our platform.
Speaker #3: Voice AI interactions increased more than 200% and now represent a vast majority of all AI interactions on our platform. Voice remains the channel of choice, and our core IP in voice communications is an increasingly valuable competitive advantage.
Samuel Wilson: Voice remains the channel of choice, and our core IP in voice communications is an increasingly valuable competitive advantage. We've built this capacity over decades, and it positions us uniquely as voice becomes the preferred interface for AI-powered customer experiences. The increase in consumption of our usage-based solutions reflects a broader industry shift away from pure SaaS subscriptions to hybrid and tokenized pricing models. The pay-as-you-go approach appeals to customers because it reduces risk as they adopt new technologies. It also raises the bar for vendors. Revenue is linked directly to successful customer outcomes and business activity, instead of long-term subscriptions that may or may not be implemented. We believe this is the way of the future.
Samuel Wilson: Voice remains the channel of choice, and our core IP in voice communications is an increasingly valuable competitive advantage. We've built this capacity over decades, and it positions us uniquely as voice becomes the preferred interface for AI-powered customer experiences. The increase in consumption of our usage-based solutions reflects a broader industry shift away from pure SaaS subscriptions to hybrid and tokenized pricing models. The pay-as-you-go approach appeals to customers because it reduces risk as they adopt new technologies. It also raises the bar for vendors.
Speaker #3: capacity over We've built this decades, and it positions us uniquely as voice becomes the preferred interface for AI-powered customer experiences. The increase in consumption of our usage-based solutions reflects a broader industry shift away from pure SaaS subscriptions to hybrid and tokenized pricing models.
Speaker #3: The pay-as-you-go approach appeals to customers because it reduces risk as they adopt new technologies. It also raises the bar for vendors. Revenue is linked directly to successful customer outcomes and business activity, instead of long-term subscriptions that may or may not be implemented.
Samuel Wilson: Revenue is linked directly to successful customer outcomes and business activity, instead of long-term subscriptions that may or may not be implemented. We believe this is the way of the future.
Speaker #3: We believe this is the wave of the future. We are positioning ourselves ahead of the curve in multiple ways. With investments that enable simplified consumption-based pricing across our portfolio, process improvements, that make it easier to do business with us, allow customers to try before you product-led growth initiatives that buy, and AI-driven automations that allow us to scale our customer success organization.
Samuel Wilson: We are positioning ourselves ahead of the curve in multiple ways, with investments that enable simplified, consumption-based pricing across our portfolio, process improvements that make it easier to do business with us, product-led growth initiatives that allow customers to try before you buy, and AI-driven automations that allow us to scale our customer success organization. We are customer zero as we reimagine every aspect of our business for the AI era. We are seeing the impact of these transformational initiatives across our business. Our multi-product strategy is gaining traction. All of our top 20 customers now have multiple products, and most have three or more. This matters because customers with multiple products see us as a strategic platform partner rather than a point solution. This results in substantially higher revenue, customer satisfaction, and retention.
Samuel Wilson: We are positioning ourselves ahead of the curve in multiple ways, with investments that enable simplified, consumption-based pricing across our portfolio, process improvements that make it easier to do business with us, product-led growth initiatives that allow customers to try before you buy, and AI-driven automations that allow us to scale our customer success organization. We are customer zero as we reimagine every aspect of our business for the AI era. We are seeing the impact of these transformational initiatives across our business. Our multi-product strategy is gaining traction.
Speaker #3: We are customer zero, as we reimagine every
Speaker #1: of our aspect Every AI for the are seeing the impact of business , we these transformational era across our business multi-product , our , across our business , strategy multi-product our is gaining traction .
Samuel Wilson: All of our top 20 customers now have multiple products, and most have three or more. This matters because customers with multiple products see us as a strategic platform partner rather than a point solution. This results in substantially higher revenue, customer satisfaction, and retention.
Speaker #1: our 20 customers products , and top multiple have three or more have most All of . now This because matters customers with products multiple us as a see strategic platform partner rather than a point solution .
Speaker #1: higher in results substantially This revenue customer satisfaction retention and average , on with three or more products generate more than revenue of three times the customers , with We are two products .
Samuel Wilson: On average, customers with three or more products generate more than three times the revenue of customers with two products. We are seeing a re-acceleration in sales of new products, reflecting our investments in innovation. Four of our strategic new products grew triple digits year-over-year, including 8x8 Engage. 8x8 Engage is one of the fastest-growing products in our history, and it continues to gain momentum across industries like healthcare, retail, and professional services. A substantial portion of customer interactions routinely occur outside the formal contact center in these industries, making Engage a compelling solution. Engage recently won gold at the London Design Awards for user experience, a strong external validation of our product strategy and design focus. This is one of many awards won by Engage for its incredible user interface. We are seeing increased momentum in our revenue from our channel partners.
Samuel Wilson: On average, customers with three or more products generate more than three times the revenue of customers with two products. We are seeing a re-acceleration in sales of new products, reflecting our investments in innovation. Four of our strategic new products grew triple digits year-over-year, including 8x8 Engage. 8x8 Engage is one of the fastest-growing products in our history, and it continues to gain momentum across industries like healthcare, retail, and professional services.
Speaker #1: seeing a re-acceleration in sales of new products , reflecting our innovation investments in . Four of our strategic new products grew triple digits year over year , including eight by eight engage , eight by eight .
Speaker #1: Engage is one of the fastest growing products in our history , and it continues to gain momentum across industries like retail healthcare , and professional services .
Samuel Wilson: A substantial portion of customer interactions routinely occur outside the formal contact center in these industries, making Engage a compelling solution. Engage recently won gold at the London Design Awards for user experience, a strong external validation of our product strategy and design focus. This is one of many awards won by Engage for its incredible user interface. We are seeing increased momentum in our revenue from our channel partners.
Speaker #1: A substantial customer portion of interactions routinely occur outside the formal contact center . In these industries , making engage a compelling solution . Engage recently won gold at the London for user Design Awards Experience , a external validation strong of our product strategy focus .
Speaker #1: design This and one of many won by is awards its incredible engage for user interface . We are increased seeing momentum in our revenue from our channel partners .
Samuel Wilson: We know we have work to do to expand our distribution globally, but we are seeing early traction from newly implemented partner programs and incentives. Importantly, channel source pipeline is showing sequential improvement as new programs take root. Let me share three examples that bring the momentum we're seeing across the business to life. First, a regional healthcare system with over 850 employees selected 8x8 over both Zoom and RingCentral for a competitive UC and contact center deployment. We went on-site when competitors didn't. We provided industry-matched references and demonstrated a deep understanding of their patient care operations. We won because we approached the sale as a strategic partner, not just a technology vendor. Next, a major national early education provider with over 43,000 employees chose us for a significant UC expansion.
Samuel Wilson: We know we have work to do to expand our distribution globally, but we are seeing early traction from newly implemented partner programs and incentives. Importantly, channel source pipeline is showing sequential improvement as new programs take root. Let me share three examples that bring the momentum we're seeing across the business to life. First, a regional healthcare system with over 850 employees selected 8x8 over both Zoom and RingCentral for a competitive UC and contact center deployment. We went on-site when competitors didn't.
Speaker #1: We know we have work to do to expand our distribution globally , but we are seeing early traction from newly partner programs and implemented incentives .
Speaker #1: Importantly, channel source pipeline is sequential, showing improvement as new take let root. Programs me three examples that we're seeing that bring share across the momentum business to life.
Speaker #1: First, a regional healthcare system with over 850 employees selected 8x8 over both Zoom and for a RingCentral competitive UC and contact center deployment.
Samuel Wilson: We provided industry-matched references and demonstrated a deep understanding of their patient care operations. We won because we approached the sale as a strategic partner, not just a technology vendor. Next, a major national early education provider with over 43,000 employees chose us for a significant UC expansion.
Speaker #1: We went on site when competitors didn't . We provided industry matched references and demonstrated deep a understanding of their patient operations . care We strategic approached the we won because a partner , not just a technology .
Speaker #1: Next , a major national early provider with over 43,000 employees chose us for a significant UC expansion . This complex sale required a flexible OpEx model aligned with their finance driven process .
Samuel Wilson: This complex sale required a flexible OpEx model aligned with their finance-driven process. We acted as a transformation partner, maintaining strong alignment across IT, procurement, finance, and professional services throughout their buying cycle. Finally, a large veterinary pet hospital company expanded their contact center capacity with us. We earned this business through disciplined weekly engagement with their leadership team, aligning on roadmap priorities, and then demonstrating how our solutions supported their evolving initiatives. This is land and expand done right. These wins reflect a common theme. Customers are choosing integrated platforms over point solutions, valuing strategic partnerships, and selecting vendors positioned for the future of AI-powered communications. These also reflect our internal commitment to leveraging AI across the organization. In our sales process, we're using AI to map customer journeys, tailor solutions to customers' requirements, and improve the quality and quantity of customer interactions.
Samuel Wilson: This complex sale required a flexible OpEx model aligned with their finance-driven process. We acted as a transformation partner, maintaining strong alignment across IT, procurement, finance, and professional services throughout their buying cycle. Finally, a large veterinary pet hospital company expanded their contact center capacity with us. We earned this business through disciplined weekly engagement with their leadership team, aligning on roadmap priorities, and then demonstrating how our solutions supported their evolving initiatives. This is land and expand done right.
Speaker #1: We acted as a transformation partner , strong maintaining alignment across it procurement , finance , and professional services throughout their buying cycle . Finally , a large veterinarian pet hospital company expanded their contact center capacity us .
Speaker #1: with We earned this business Disciplined through weekly engagement with their leadership team , aligning on roadmap priorities and demonstrating how our solution supported their evolving initiatives .
Samuel Wilson: These wins reflect a common theme. Customers are choosing integrated platforms over point solutions, valuing strategic partnerships, and selecting vendors positioned for the future of AI-powered communications. These also reflect our internal commitment to leveraging AI across the organization. In our sales process, we're using AI to map customer journeys, tailor solutions to customers' requirements, and improve the quality and quantity of customer interactions.
Speaker #1: is land This and expand . Done right wins . These reflect a common theme . Customers are choosing integrated platforms over point solutions strategic , valuing partnerships selecting and vendors positioned for the of future AI powered communications .
Speaker #1: These also reflect our internal commitment to leveraging AI across the organization in our sales process . We're using AI to map customer journeys solutions to , tailor customers requirements , and improve the quality and quantity of customer interactions .
Samuel Wilson: Over the last year, we've made huge progress in using AI to improve our go-to-market analytics and coaching, and it's starting to show up in our results. Beyond new customer wins, we reached a significant operational milestone in Q3, with the completion of the final upgrades of Fuze customers to the 8x8 platform. Every 8x8 customer is now on our modern, integrated 8x8 communications platform. This sets the stage for improved customer interaction, better expansion opportunities, and higher satisfaction, and more meaningfully, more efficient operations across our network and back office. While the decommissioning of the Fuze platform has created a near-term revenue headwind, as not all the remaining Fuze customers elected to upgrade, resulting in higher churn in Q3 that will be reflected in Q4 and fiscal 2027 revenue, the strategic benefit is clear.
Samuel Wilson: Over the last year, we've made huge progress in using AI to improve our go-to-market analytics and coaching, and it's starting to show up in our results. Beyond new customer wins, we reached a significant operational milestone in Q3, with the completion of the final upgrades of Fuze customers to the 8x8 platform. Every 8x8 customer is now on our modern, integrated 8x8 communications platform. This sets the stage for improved customer interaction, better expansion opportunities, and higher satisfaction, and more meaningfully, more efficient operations across our network and back office.
Speaker #1: Over the year , we've made huge last using AI to improve our go to market analytics and coaching . And it's starting to our show up in results .
Speaker #1: Beyond new customer wins . We reached a significant operational milestone in Q3 completion of the with the final fuse upgrades of customers to the eight by eight platform .
Speaker #1: Every eight customer is eight by now on our modern integrated , eight communications eight by platform . This sets the improved stage for customer interaction , better expansion and opportunities higher , and more meaningfully , satisfaction more efficient across our operations network office .
Samuel Wilson: While the decommissioning of the Fuze platform has created a near-term revenue headwind, as not all the remaining Fuze customers elected to upgrade, resulting in higher churn in Q3 that will be reflected in Q4 and fiscal 2027 revenue, the strategic benefit is clear.
Speaker #1: While the and back decommissioning of platform has fuse created a near-term revenue headwind , remaining fuse customers elected to as not all the upgrade , resulting in churn in higher Q3 , that reflected will be in Q4 and fiscal 27 revenue .
Samuel Wilson: We can now focus 100% of our energy on growth and customer success rather than managing legacy infrastructure. To wrap up, we are seeing encouraging signs across the business. Usage-based revenue is scaling rapidly. Adoption of our AI-based solutions is accelerating. Multi-product customers are expanding. New products are gaining traction, and our outcome-focused platform strategy is resonating with customers and partners. As we look ahead, we're realistic about the competitive and the evolving marketplace. We know we need to accelerate installed base expansion and drive stronger channel momentum. Kevin's updated guidance ranges reflect this realism as we navigate through these market dynamics. We believe that Q3 marks a true inflection point. We have momentum entering Q4, and strong confidence in our ability to deliver sustained, profitable growth and shareholder value. With that, I will turn it over to Kevin for the financial details.
Samuel Wilson: We can now focus 100% of our energy on growth and customer success rather than managing legacy infrastructure. To wrap up, we are seeing encouraging signs across the business. Usage-based revenue is scaling rapidly. Adoption of our AI-based solutions is accelerating. Multi-product customers are expanding. New products are gaining traction, and our outcome-focused platform strategy is resonating with customers and partners. As we look ahead, we're realistic about the competitive and the evolving marketplace. We know we need to accelerate installed base expansion and drive stronger channel momentum.
Speaker #1: strategic benefit is The clear . We can now focus 100% of our energy on growth and customer success , rather than managing legacy .
Speaker #1: infrastructure To we are seeing up , wrap signs across encouraging the business usage based revenue is scaling rapidly . Adoption of our AI based solutions is accelerating multi-product customers are expanding new products are traction gaining , and our outcome platform focused strategy is resonating with customers and partners .
Speaker #1: As we ahead , look we're about the realistic competitive and the marketplace . evolving We know we need to installed accelerate base expansion drive and stronger momentum .
Samuel Wilson: Kevin's updated guidance ranges reflect this realism as we navigate through these market dynamics. We believe that Q3 marks a true inflection point. We have momentum entering Q4, and strong confidence in our ability to deliver sustained, profitable growth and shareholder value. With that, I will turn it over to Kevin for the financial details.
Speaker #1: Kevin's channel-updated guidance ranges reflect this realism as we go through these market dynamics. We believe that Q3 marks a true inflection point.
Speaker #1: have momentum We entering Q4 and strong confidence in our ability to deliver sustained , profitable growth and shareholder value . With that , I will turn it over to Kevin for the financial details .
Kevin Krause: Thanks, Sam. Good afternoon, everyone, and thank you for joining us for our fiscal Q3 2026 earnings call. In addition to the shareholder letter Sam mentioned, detailed financial results are available in our press release and in the trended financials on our investor relations website. Therefore, I'll focus my remarks on a few key highlights. Unless otherwise noted, all figures other than revenue and cash flow are presented on a non-GAAP basis. First, let me put our Q3 results in context. This was our third consecutive quarter of year-over-year revenue growth and an all-time record high for service revenue. We exceeded our guidance ranges for service revenue, total revenue, operating profit, earnings per share, and cash flow from operations.
Kevin Kraus: Thanks, Sam. Good afternoon, everyone, and thank you for joining us for our fiscal Q3 2026 earnings call. In addition to the shareholder letter Sam mentioned, detailed financial results are available in our press release and in the trended financials on our investor relations website. Therefore, I'll focus my remarks on a few key highlights. Unless otherwise noted, all figures other than revenue and cash flow are presented on a non-GAAP basis. First, let me put our Q3 results in context. This was our third consecutive quarter of year-over-year revenue growth and an all-time record high for service revenue.
Speaker #2: Thanks , Sam . Good afternoon , everyone , and thank you for joining us for our fiscal Q3 2026 Earnings Call . In addition to the shareholder letter , Sam mentioned detailed financial results are available in our release press financials on our Investor Relations website .
Speaker #2: Therefore, I'll focus my remarks on a few key highlights. Unless otherwise noted, all figures other than cash flow are presented on a non-GAAP basis.
Speaker #2: basis First , let me put our Q3 results in consecutive our third This quarter context . of year revenue growth over year and all an time record for high service revenue We .
Kevin Kraus: We exceeded our guidance ranges for service revenue, total revenue, operating profit, earnings per share, and cash flow from operations.
Speaker #2: our guidance exceeded for ranges service revenue . Total operating revenue , profit , per share , and cash flow earnings operations . revenue Total was $185 million .
Kevin Krause: Total revenue was $185 million, and service revenue was $179.7 million, both exceeding the high end of guidance by approximately $3 million and growing 3.4% and 3.6% year-over-year, respectively. These results reflected strong growth in consumption of our usage-based offerings, combined with improved sales execution. Looking into the details, our usage-based offerings, which include our CPaaS communication APIs, digital channels, and AI solutions, saw another record quarter and accounted for approximately 21% of service revenue, compared to approximately 14% in Q3 2025. 8x8 service revenue, excluding revenue from FUSE customers, both upgraded and those still on the legacy FUSE platform, rose approximately 6% year-over-year, a growth rate similar to the previous quarter.
Kevin Kraus: Total revenue was $185 million, and service revenue was $179.7 million, both exceeding the high end of guidance by approximately $3 million and growing 3.4% and 3.6% year-over-year, respectively. These results reflected strong growth in consumption of our usage-based offerings, combined with improved sales execution. Looking into the details, our usage-based offerings, which include our CPaaS communication APIs, digital channels, and AI solutions, saw another record quarter and accounted for approximately 21% of service revenue, compared to approximately 14% in Q3 2025.
Speaker #2: In service . Revenue was $179.7 million . Both exceeding the high end guidance by of approximately $3 million and growing 3.4% and 3.6% year over year , respectively .
Speaker #2: These results reflected strong growth in of our usage based consumption offerings , combined with improved sales execution Looking into the . our usage details , based offerings , which include our Cpaas communication , digital APIs and AI saw another solutions , record quarter and accounted for approximately 21% of service compared to revenue approximately Q3 25 .
Kevin Kraus: 8x8 service revenue, excluding revenue from FUSE customers, both upgraded and those still on the legacy FUSE platform, rose approximately 6% year-over-year, a growth rate similar to the previous quarter.
Speaker #2: Eight revenue , by eight service revenue excluding fused both upgraded customers , still on the and those legacy fuse platform rose approximately 6% year over year , a growth rate similar to the quarter previous .
Kevin Krause: As of 31 December 2025, we met our commitment to successfully complete the upgrade of the Fuze customer base to the 8x8 platform. Operating on a single platform improves efficiency, reduces complexity, and supports higher customer satisfaction and engagement. Gross profit was approximately $120 million, about $3 million above the gross profit implied by the midpoint of our Q3 guidance ranges for revenue and gross margin. Gross margin as a percent of revenue was 64.8%, down sequentially due to the continued mix shift toward our usage-based offerings, which carry a lower margin profile but add meaningful operating profit dollars as usage-based revenue continues to scale.
Kevin Kraus: As of 31 December 2025, we met our commitment to successfully complete the upgrade of the Fuze customer base to the 8x8 platform. Operating on a single platform improves efficiency, reduces complexity, and supports higher customer satisfaction and engagement. Gross profit was approximately $120 million, about $3 million above the gross profit implied by the midpoint of our Q3 guidance ranges for revenue and gross margin.
Speaker #2: As December 31st , of 2025 , we met our successfully the complete the fuse base to the eight customer by eight platform operating on a single platform improves reduces efficiency , complexity , and supports customer higher and satisfaction commitment to .
Speaker #2: profit was approximately About $120 million . $3 million above the gross profit implied by the midpoint of our Q3 guidance . Ranges for revenue and gross margin .
Kevin Kraus: Gross margin as a percent of revenue was 64.8%, down sequentially due to the continued mix shift toward our usage-based offerings, which carry a lower margin profile but add meaningful operating profit dollars as usage-based revenue continues to scale.
Speaker #2: Gross margin as a percent of engagement revenue was 64.8% , down due to sequentially the mix shift toward our continued usage based offerings , which carry a margin profile but lower add operating meaningful profit dollars as usage based revenue to scale .
Kevin Krause: Operating income came in at $21.7 million, an increase of over $4 million sequentially, resulting in an 11.7% operating margin, substantially above the high end of our guidance of 9 to 10%. Additionally, year-to-date operating expenses are down approximately $8 million compared to the first nine months of fiscal 2025. We are on track to reduce our operating expenses by about $12 million in fiscal 2026 compared to fiscal 2025, reflecting continued discipline in how we manage our cost structure. Interest expense of $4.2 million was consistent with our previous guidance, but down more than 20% from Q3 2025, as we continue to reduce our debt.
Kevin Kraus: Operating income came in at $21.7 million, an increase of over $4 million sequentially, resulting in an 11.7% operating margin, substantially above the high end of our guidance of 9 to 10%. Additionally, year-to-date operating expenses are down approximately $8 million compared to the first nine months of fiscal 2025. We are on track to reduce our operating expenses by about $12 million in fiscal 2026 compared to fiscal 2025, reflecting continued discipline in how we manage our cost structure.
Speaker #2: continues Operating income came in at an of $21.7 million , increase over $4 million sequentially , resulting in a . 11.7% operating margin , substantially above the high end of our guidance of 9 to 10% .
Speaker #2: Additionally , year to date operating expenses are down approximately $8 million compared to the first nine months of fiscal 2025 . We are on to track reduce our operating expenses by about $12 million fiscal 2026 , compared to in fiscal 2025 , reflecting continued discipline in how we manage our cost structure , interest expense of consistent with our $4.2 million was previous guidance , but down more than 20% from Q3 25 .
Kevin Kraus: Interest expense of $4.2 million was consistent with our previous guidance, but down more than 20% from Q3 2025, as we continue to reduce our debt.
Kevin Krause: The combination of higher revenue, lower operating expenses, and lower interest expense resulted in net income of $17.1 million and fully diluted EPS of $0.12 per share, which was $0.03 above the high end of our guidance range. Cash flow from operations was $20.7 million for the quarter, well above the high end of the guidance range, due to a net timing benefit from our collections and payments. We ended the quarter with $88.2 million in cash, cash equivalents, and restricted cash, after making a $5 million principal prepayment on the term loan. Since August 2022, we have reduced our debt principal by $224 million, or 41%. As a result, we have reduced our annualized interest expense by more than 50% versus the second half of fiscal 2023.
Kevin Kraus: The combination of higher revenue, lower operating expenses, and lower interest expense resulted in net income of $17.1 million and fully diluted EPS of $0.12 per share, which was $0.03 above the high end of our guidance range. Cash flow from operations was $20.7 million for the quarter, well above the high end of the guidance range, due to a net timing benefit from our collections and payments. We ended the quarter with $88.2 million in cash, cash equivalents, and restricted cash, after making a $5 million principal prepayment on the term loan.
Speaker #2: As we continue to reduce our debt, the combination of higher revenue, lower operating expenses, and lower net interest expense resulted in income of $17.1 million and fully diluted EPS of $0.12 per share, which was $0.03 above the high end of our guidance range.
Speaker #2: Cash flow from operations was $20.7 million for the quarter, well above the high end of the guidance range due to a timing benefit from our payments.
Speaker #2: net ended the quarter with $88.2 million in cash . Cash equivalents and restricted cash after making a $5 million principal prepayment on the term loan .
Kevin Kraus: Since August 2022, we have reduced our debt principal by $224 million, or 41%. As a result, we have reduced our annualized interest expense by more than 50% versus the second half of fiscal 2023.
Speaker #2: Since August 2022 , we have reduced our debt by principal $224 million , or 41% , as result , we have a reduced our annualized interest expense by more than 50% versus the second half of fiscal 2023 , following our strong Q3 results , we are revenue and fourth quarter operating raising margin our relative to the guidance implied Q4 guidance midpoint from our prior earnings call outlook .
Kevin Krause: Following our strong Q3 results, we are raising our fourth quarter revenue and operating margin guidance relative to the implied Q4 guidance midpoint from our prior earnings call. This outlook continues to reflect expected seasonality in our usage-based offerings, as well as the remaining revenue dynamics associated with the Fuze upgrades and related churn resulting from the 31 December end of life of the Fuze legacy platform. For fiscal Q4 2026, we are providing the following guidance: Service revenue is expected to be between $173.5 million and $178.5 million, an increase of approximately $7 million versus the midpoint of our prior implied guidance.
Kevin Kraus: Following our strong Q3 results, we are raising our fourth quarter revenue and operating margin guidance relative to the implied Q4 guidance midpoint from our prior earnings call. This outlook continues to reflect expected seasonality in our usage-based offerings, as well as the remaining revenue dynamics associated with the Fuze upgrades and related churn resulting from the 31 December end of life of the Fuze legacy platform. For fiscal Q4 2026, we are providing the following guidance:
Speaker #2: continues to This . Reflect seasonality in our expected usage based offerings , as well as the remaining revenue dynamics associated with the upgrades and related churn , resulting from the fuze December 31st end of life of the fuze .
Speaker #2: Legacy platform for fiscal Q4 26 . We are providing the following guidance . Service revenue is expected to be between 173.5 million and $178.5 million , an increase of approximately $7 million versus the midpoint of our prior implied guidance .
Kevin Kraus: Service revenue is expected to be between $173.5 million and $178.5 million, an increase of approximately $7 million versus the midpoint of our prior implied guidance.
Kevin Krause: Total revenue is anticipated to be between $178.5 million and $183.5 million, also a $7 million increase over the midpoint of our prior implied guidance. Our revenue guidance ranges reflect a year-over-year decrease in revenue generated by former Fuze customers of approximately $4.5 million compared to Q4 2025, and a quarter-over-quarter decrease of approximately $3 million. We also expect typical seasonality in revenue from our CPaaS APIs related to holidays in the Asia Pacific region. We anticipate gross margin between 64% and 65%. Our operating margin range of 8.5% and 9.5% reflects the lower revenue compared to the prior quarter and a seasonal uptick in operating expenses associated with the 1 January restart of employee-related expenses like FICA taxes and 401(k) matching.
Kevin Kraus: Total revenue is anticipated to be between $178.5 million and $183.5 million, also a $7 million increase over the midpoint of our prior implied guidance. Our revenue guidance ranges reflect a year-over-year decrease in revenue generated by former Fuze customers of approximately $4.5 million compared to Q4 2025, and a quarter-over-quarter decrease of approximately $3 million. We also expect typical seasonality in revenue from our CPaaS APIs related to holidays in the Asia Pacific region. We anticipate gross margin between 64% and 65%.
Speaker #2: Total revenue is anticipated to be between 178.5 million and $183.5 million . Also , a $7 million increase over the midpoint of prior implied guidance our .
Speaker #2: Our revenue guidance ranges for the year reflect a decrease in revenue generated by former Fuze customers, with an approximate decrease of $4.5 million quarter over quarter, compared to approximately $3 million in Q4 '25.25. This is a year-over-year decrease.
Speaker #2: We also expect typical seasonality in revenue from our CPaaS APIs related to holidays in the Pacific region of Asia. We anticipate gross margin between 64% and 65%.
Kevin Kraus: Our operating margin range of 8.5% and 9.5% reflects the lower revenue compared to the prior quarter and a seasonal uptick in operating expenses associated with the 1 January restart of employee-related expenses like FICA taxes and 401(k) matching.
Speaker #2: Our margin range of operating 8.5 and 9.5% reflects the lower revenue compared to the prior quarter and a seasonal uptick in expenses associated with the operating January 1st restart of employee related expenses like FICA taxes and 401 matching .
Kevin Krause: This is a typical pattern for us. This results in a range for fully diluted non-GAAP earnings per share of 7 cents to 8 cents per share, based on approximately 145 million fully diluted shares outstanding. In fiscal Q4, we expect to make cash interest payments of approximately $6.1 million, which reflects both the term loan interest payment, plus the semiannual interest on our 2028 convertible notes. We anticipate cash flow from operations to be between $1 million and $4 million, reflecting the higher cash interest payments compared to Q3, and a lower balance of collectible receivables starting Q4 compared to Q3. Note that our updated Q4 cash flow range, plus our year-to-date performance, implies an increase in fiscal 2026 operating cash flow of about $4 million.
Kevin Kraus: This is a typical pattern for us. This results in a range for fully diluted non-GAAP earnings per share of 7 cents to 8 cents per share, based on approximately 145 million fully diluted shares outstanding. In fiscal Q4, we expect to make cash interest payments of approximately $6.1 million, which reflects both the term loan interest payment, plus the semiannual interest on our 2028 convertible notes.
Speaker #2: a This is pattern for us typical . This results in a range for fully diluted non-GAAP earnings per share of $0.07 to $0.08 per share , based on approximately diluted 145 million fully shares outstanding fiscal in Q4 .
Speaker #2: We expect to make cash interest payments approximately which $6.1 million , reflects term loan both the interest payment plus the semiannual on interest our 2028 convertible notes .
Kevin Kraus: We anticipate cash flow from operations to be between $1 million and $4 million, reflecting the higher cash interest payments compared to Q3, and a lower balance of collectible receivables starting Q4 compared to Q3. Note that our updated Q4 cash flow range, plus our year-to-date performance, implies an increase in fiscal 2026 operating cash flow of about $4 million.
Speaker #2: We anticipate cash flow from operations to be between $1,000,004 million , reflecting the higher interest payments compared to Q3 and a cash balance of collectible receivables .
Speaker #2: Starting Q4 compared to Q3 . Note that our Q4 updated cash flow range , plus our year to date performance , implies an increase in fiscal 2026 .
Speaker #2: Operating cash flow of about $4 million . We are updating the rest of our full year guidance as follows . Service revenue is anticipated to be between $708.6 million and $713.6 million , an increase of $12 million compared to the midpoint of our prior guidance .
Kevin Krause: We are updating the rest of our full year guidance as follows: Service revenue is anticipated to be between $708.6 million and $713.6 million, an increase of $12 million compared to the midpoint of our prior guidance. Total revenue is anticipated to be between $729 million and $734 million, an increase of $12.5 million compared to the midpoint of our prior guidance. Our guidance ranges for service and total revenue reflect our Q3 overperformance and the increase to the previously implied Q4 guidance. We anticipate gross margin to be between 65% and 66%. Full year operating margin is projected between 9.5% and 10%, translating to non-GAAP operating income of approximately $71 million at the midpoint.
Kevin Kraus: We are updating the rest of our full year guidance as follows: Service revenue is anticipated to be between $708.6 million and $713.6 million, an increase of $12 million compared to the midpoint of our prior guidance. Total revenue is anticipated to be between $729 million and $734 million, an increase of $12.5 million compared to the midpoint of our prior guidance. Our guidance ranges for service and total revenue reflect our Q3 overperformance and the increase to the previously implied Q4 guidance. We anticipate gross margin to be between 65% and 66%.
Speaker #2: Revenue total anticipated to be between $729 million and $734 million, an increase of $12.5 million compared to the midpoint of our prior guidance.
Speaker #2: Our guidance ranges for service and revenue reflect total our Q3 , Overperformance and the increase to the previously implied guidance Q4 . We anticipate gross margin to be between 65 and full year operating margin is projected between 9.5% and 10% , non-GAAP operating income of approximately $71 million at the midpoint .
Kevin Kraus: Full year operating margin is projected between 9.5% and 10%, translating to non-GAAP operating income of approximately $71 million at the midpoint.
Kevin Krause: The additional $6 million of operating income compared to our prior guidance midpoint reflects overperformance relative to the guidance midpoint in Q3 and our confidence in Q4. We expect non-GAAP net income to increase year-over-year, supported by lower interest expense compared to fiscal 2025. We expect fully diluted non-GAAP earnings per share to be in the range of $0.36 to $0.37 for the year, assuming approximately 142 million average diluted shares outstanding. Before we finish, I want to provide a little more context around the impact of the Fuze acquisition. As of 31 December 2025, we met our commitment to successfully complete the upgrade of the Fuze customer base to the 8x8 platform. This marks a major milestone for us, both culturally and financially....
Kevin Kraus: The additional $6 million of operating income compared to our prior guidance midpoint reflects overperformance relative to the guidance midpoint in Q3 and our confidence in Q4. We expect non-GAAP net income to increase year-over-year, supported by lower interest expense compared to fiscal 2025. We expect fully diluted non-GAAP earnings per share to be in the range of $0.36 to $0.37 for the year, assuming approximately 142 million average diluted shares outstanding. Before we finish, I want to provide a little more context around the impact of the Fuze acquisition.
Speaker #2: The additional $6 million of operating income compared to our prior guidance midpoint , reflects Overperformance relative to the guidance midpoint in Q3 and our confidence in Q4 , we expect non-GAAP net income to increase year over year , supported by lower interest expense compared to fiscal 2025 .
Speaker #2: We expect fully diluted non-GAAP earnings per share to be in the range of $0.36 to $0.37 for the year, assuming approximately 142 million shares.
Speaker #2: Million average diluted shares outstanding. Before we finish, I want to provide a little more context around the impact of the Fuze acquisition.
Kevin Kraus: As of 31 December 2025, we met our commitment to successfully complete the upgrade of the Fuze customer base to the 8x8 platform. This marks a major milestone for us, both culturally and financially....
Speaker #2: December 31st , As of 2025 , we met our commitment to successfully complete the upgrade of the fuze customer base to the eight by eight platform .
Speaker #2: This marks a major milestone for us both culturally and financially , comparing eight by eight pre and post fuze . is It clear the acquisition was catalyst and our transformation to a larger and more a organization efficient over the last four years , the former fuze customers generated cumulative revenue than of more $300 million .
Kevin Krause: Comparing 8x8 pre- and post-Fuze, it is clear the acquisition was a catalyst in our transformation to a larger and more efficient organization. Over the last four years, the former Fuze customers generated cumulative revenue of more than $300 million. The resulting cash flow from the acquisition allowed us to increase our investments in innovation, just as the market's pace of change accelerated. It also enabled us to aggressively pay down the principal balance of our debt while still maintaining healthy cash balances. As we look at the business today versus Q3 2022, the quarter preceding the Fuze acquisition, our service revenue is up 20%, operating income has increased nearly 7 times, and our net income has increased nearly 9 times. Our solid financial foundation and proven ability to achieve operational efficiencies sets the stage for the future.
Kevin Kraus: Comparing 8x8 pre- and post-Fuze, it is clear the acquisition was a catalyst in our transformation to a larger and more efficient organization. Over the last four years, the former Fuze customers generated cumulative revenue of more than $300 million. The resulting cash flow from the acquisition allowed us to increase our investments in innovation, just as the market's pace of change accelerated. It also enabled us to aggressively pay down the principal balance of our debt while still maintaining healthy cash balances.
Speaker #2: The cash flow resulting from the acquisition increased our investments into innovation, just as the market's pace of change accelerated. Also, it enabled us to pay down aggressively the principal balance of our debt while still maintaining healthy cash balances.
Kevin Kraus: As we look at the business today versus Q3 2022, the quarter preceding the Fuze acquisition, our service revenue is up 20%, operating income has increased nearly 7 times, and our net income has increased nearly 9 times. Our solid financial foundation and proven ability to achieve operational efficiencies sets the stage for the future.
Speaker #2: As we look at the business today versus Q3 22 , the quarter preceding the fuze acquisition , our service revenue is up 20% .
Speaker #2: Income has increased nearly seven times, and our net income has increased nearly nine times. Our solid financial foundation and proven ability to achieve operational efficiencies sets the stage for the future.
Kevin Krause: While we are not providing guidance for fiscal 2027 at this time, I would note that we will continue to experience year-over-year growth headwinds related to Fuze churn as we move through the next fiscal year. We expect these impacts to be most pronounced in the first half of fiscal 2027 and to fully roll off by Q4. Even with this headwind, we expect to deliver service revenue growth in fiscal 2027. In summary, the quarter reflected continued steady execution, consistent profitability, and ongoing progress in strengthening our balance sheet. With disciplined expense management and a clear focus on profitable growth, we enter the final quarter of the fiscal year with solid momentum and confidence in our ability to deliver sustained shareholder value. With that, I will turn the call over for Q&A.
Kevin Kraus: While we are not providing guidance for fiscal 2027 at this time, I would note that we will continue to experience year-over-year growth headwinds related to Fuze churn as we move through the next fiscal year. We expect these impacts to be most pronounced in the first half of fiscal 2027 and to fully roll off by Q4. Even with this headwind, we expect to deliver service revenue growth in fiscal 2027. In summary, the quarter reflected continued steady execution, consistent profitability, and ongoing progress in strengthening our balance sheet.
Speaker #2: While we are not providing guidance for fiscal 2027 at this time , I would note that continue to we will experience year over year growth headwinds related to Fuze churn as we move through the year .
Speaker #2: next fiscal We expect these impacts to be most pronounced in the of fiscal first half 2027 , and to fully off by the fourth quarter .
Speaker #2: with this Even headwind , we expect to deliver service revenue growth in fiscal 2027 . In summary , quarter reflected continued steady execution , consistent profitability , and ongoing progress in strengthening our balance sheet with disciplined expense management and a clear focus on profitable We growth .
Kevin Kraus: With disciplined expense management and a clear focus on profitable growth, we enter the final quarter of the fiscal year with solid momentum and confidence in our ability to deliver sustained shareholder value. With that, I will turn the call over for Q&A.
Speaker #2: We enter the quarter of the fiscal year with solid momentum and in our confidence and ability to deliver sustained shareholder value. With that, I will turn the call over for Q&A.
Operator: Thank you so much, and as a reminder, to ask a question, press star one one on your telephone and wait for your name to be announced. To remove yourself, press star one one again. One moment while we compile the Q&A roster. Right. Our first question comes from the line of Josh Nichols with B. Riley Securities. Please proceed.
Operator: Thank you so much, and as a reminder, to ask a question, press star one one on your telephone and wait for your name to be announced. To remove yourself, press star one one again. One moment while we compile the Q&A roster. Right. Our first question comes from the line of Josh Nichols with B. Riley Securities. Please proceed.
Speaker #2: .
Speaker #3: so much . And as a Thank you reminder ask a to question , press star one one on your telephone and wait for your name to be announced .
Speaker #3: To queue yourself, press star one again. One moment while we compile the roster for Q&A. Right. Our first question comes from the line of Michael Nichols with B. Riley Securities.
Speaker #3: Please proceed .
Josh Nichols: Yeah, thanks for taking my question. Congratulations on the exceptionally strong quarter, but also getting Fuze across the finish line. I know that was a big undertaking for the company as a whole. Just want to touch on, I think you talked about it a little bit, but backing out some of the numbers for fiscal 4Q, I think you said Fuze was like a $4.5 million service headwind in fiscal 4Q. So if you adjust for that, that kind of implies that service revenue guidance in the fourth quarter, you know, ex-Fuze, is up, like, 5%+ year-over-year, which is kind of in line with the last couple of quarters. Is that right?
Josh Nichols: Yeah, thanks for taking my question. Congratulations on the exceptionally strong quarter, but also getting Fuze across the finish line. I know that was a big undertaking for the company as a whole. Just want to touch on, I think you talked about it a little bit, but backing out some of the numbers for fiscal 4Q, I think you said Fuze was like a $4.5 million service headwind in fiscal 4Q. So if you adjust for that, that kind of implies that service revenue guidance in the fourth quarter, you know, ex-Fuze, is up, like, 5%+ year-over-year, which is kind of in line with the last couple of quarters. Is that right?
Speaker #4: Yeah , thanks for taking my question . Congratulations on the exceptionally quarter . strong But also get infused across the finish line . I know that was a big undertaking for the the company as a whole .
Speaker #4: Just wanted to touch on . think I you talked about it a little bit , but backing out some of the numbers for fiscal four .
Speaker #4: I think you said for us it was like a $4.5 million service headwind in fiscal Q4. So if you adjust for that, it kind of implies that service revenue guidance in the fourth quarter is up like 5% plus year over year, which is kind of in line with the last couple of quarters.
Kevin Krause: Yeah, that's a fair assessment of it. And as we go into next year, you can think about it as like a $4 million, $3 million, $3 million kind of headwind from Q1 to Q3, Josh, and then we anniversary it in Q4.
Kevin Kraus: Yeah, that's a fair assessment of it. And as we go into next year, you can think about it as like a $4 million, $3 million, $3 million kind of headwind from Q1 to Q3, Josh, and then we anniversary it in Q4.
Speaker #4: Is that, is that right?
Speaker #5: fair Yeah , it's a assessment of it . And as you go as we into next think about it as like can a 4 million , 3 million , 3 million kind of headwind from Q1 to Q3 .
Speaker #5: Josh . And then we anniversary Q4 in .
Samuel Wilson: And Josh, then just say for the large number of people that had to shut down Fuze, they appreciate your thanks.
Samuel Wilson: And Josh, then just say for the large number of people that had to shut down Fuze, they appreciate your thanks.
Speaker #1: And Josh , thank you for for the for number of people that had to shut down fuze . They think they appreciate your thanks .
Josh Nichols: Yep. Then, I wanted to touch on this, like so the gross margin has been, trending lower, you know, as expected, with higher, growth in the, in the service revenue component. But, the operating margin performance was a real standout. I think that kind of shows that, while the gross margin is lower, there's a lot of operating leverage as you continue to scale this usage-based business model. And what needs to happen or what type of levels do you need to get to so that the company is gonna get to, like, a sustainable level where the operating margins are back into, like, the double digit category like you did for this quarter? Is that something that you're targeting for, for 2027?
Josh Nichols: Yep. Then, I wanted to touch on this, like so the gross margin has been, trending lower, you know, as expected, with higher, growth in the, in the service revenue component. But, the operating margin performance was a real standout. I think that kind of shows that, while the gross margin is lower, there's a lot of operating leverage as you continue to scale this usage-based business model.
Speaker #4: Yep . Yeah . And then I want to touch on this like so the gross margin has been trending lower . You know as expected with the growth in the service revenue component .
Speaker #4: But the operating margin performance was a real standout . I think that shows kind of that while the gross margin is lower , there's a lot of operating leverage as you continue to scale this usage business based model .
Josh Nichols: And what needs to happen or what type of levels do you need to get to so that the company is gonna get to, like, a sustainable level where the operating margins are back into, like, the double digit category like you did for this quarter? Is that something that you're targeting for, for 2027?
Speaker #4: And what needs to happen or what type of levels do you need to get to so that the company is going to get a to sustainable level where the operating margins are back into the double digit category , like you did Is that targeting you're for this something that for quarter ?
Samuel Wilson: All right, so let me break this up, because you raised a number of good points, and I think sometimes, no matter how many times I repeat myself, it's not quite understood. So I'm gonna use this as a bit of a soapbox answer, Josh, and thank you for asking it, because I get to do this. Okay. Gross margins on our usage-based business are probably structurally slightly lower than on our SaaS business because you don't have shelf wear, and you don't have a bunch of other things that lead to sort of higher structural gross margins. But on an operating margin side, they're perfectly fine. And I think we've tried to say this over and over and over again, but it seems to get lost in the noise.
Samuel Wilson: All right, so let me break this up, because you raised a number of good points, and I think sometimes, no matter how many times I repeat myself, it's not quite understood. So I'm gonna use this as a bit of a soapbox answer, Josh, and thank you for asking it, because I get to do this. Okay. Gross margins on our usage-based business are probably structurally slightly lower than on our SaaS business because you don't have shelf wear, and you don't have a bunch of other things that lead to sort of higher structural gross margins. But on an operating margin side, they're perfectly fine.
Speaker #1: so right , All
Speaker #1: let for 27 ? me let me break this up you raised because good a number of And points . I think sometimes no matter times I repeat myself how many quite , it's not going to use this as a bit of understood .
Speaker #1: a soapbox answer . Josh , and thank you for asking it , because I get to this So I'm . Gross margins on our usage based business are probably structurally lower slightly than on our SaaS business because you don't have shelfware , you bunch of other things that lead of higher to sort gross margins .
Speaker #1: But on an operating margin side, they're perfectly fine. And I think we've tried to say this over and over and over again, but it seems to get lost in the noise.
Samuel Wilson: And I think we've tried to say this over and over and over again, but it seems to get lost in the noise.
Samuel Wilson: And if you look at a pure usage-based business, à la Twilio or somebody like that, one of our competitors, you see that they have structurally lower gross margins. And I'm not saying we're heading for 52, 53, wherever they're at on a Non-GAAP basis. But what I am saying is, you know, their operating margins are just fine. And so as we get more scale in this usage-based business, I think you'll continue to see this. You'll continue to see a slight downward trend in gross margins, and I don't know where it's gonna bottom because I don't know yet where usage is gonna peak. And then offsetting that, is we'll get scale over time, and we're working very diligently on that. And so when exactly we'll get back to double digits sustained operating margins, I don't know. Is it a target? Absolutely.
Samuel Wilson: And if you look at a pure usage-based business, à la Twilio or somebody like that, one of our competitors, you see that they have structurally lower gross margins. And I'm not saying we're heading for 52, 53, wherever they're at on a Non-GAAP basis. But what I am saying is, you know, their operating margins are just fine. And so as we get more scale in this usage-based business, I think you'll continue to see this. You'll continue to see a slight downward trend in gross margins, and I don't know where it's gonna bottom because I don't know yet where usage is gonna peak.
Speaker #1: And if you in the a look at pure usage based business , a la Twilio or somebody like that , one of our competitors , you see that they have structurally lower gross margins .
Speaker #1: And I'm not saying we're heading for 52 , 53 wherever they're at non-GAAP basis on a what I am saying is , you know , their operating margins are just fine .
Speaker #1: And so as we get more scale in this usage based you'll see this . continue to business , I You'll continue to see a slight downward trend in gross I don't know margins .
Speaker #1: And going to bottom where it's—because I don't know yet where usage is going to peak. And then offsetting that is we'll get scale over time.
Samuel Wilson: And then offsetting that, is we'll get scale over time, and we're working very diligently on that. And so when exactly we'll get back to double digits sustained operating margins, I don't know. Is it a target? Absolutely.
Speaker #1: And we're working very diligently on that . And so when exactly we'll get back to double sustained operating digit it a know , is target .
Speaker #1: Absolutely .
Josh Nichols: I appreciate the context there. I'll hop back in the queue. Thanks.
Josh Nichols: I appreciate the context there. I'll hop back in the queue. Thanks.
Speaker #4: I appreciate context . the There . Our hop back in the queue . Thanks .
Samuel Wilson: Thanks, Josh.
Samuel Wilson: Thanks, Josh.
Operator: Thank you. Our next question comes from the line of Siti Panigrahi with Mizuho. Please proceed.
Operator: Thank you. Our next question comes from the line of Siti Panigrahi with Mizuho. Please proceed.
Speaker #1: Thanks , Josh .
Speaker #3: Thank you . Our next question comes from the line of Citi Panigrahi with Mizuho . Please .
Siti Panigrahi: Great, thanks for taking my question. I just want to dig into one of your commentary about Voice AI. I guess the interaction you talked about how grew now 200%, and now 80% of all interaction. Wondering what are you seeing from customer or their adoption of Voice AI? Are you seeing, like, lately, any kind of increased adoption there? Any color would be helpful there.
Siti Panigrahi: Great, thanks for taking my question. I just want to dig into one of your commentary about Voice AI. I guess the interaction you talked about how grew now 200%, and now 80% of all interaction. Wondering what are you seeing from customer or their adoption of Voice AI? Are you seeing, like, lately, any kind of increased adoption there? Any color would be helpful there.
Speaker #6: Great . Thanks
Speaker #6: my question proceed . I just want to dig one of your into for taking commentary about I voice . , I guess the interaction you talked how about grew now 200% and now 80% of all interaction wondering what are you seeing from adoption of customer there voice AI ?
Speaker #6: Are you, like, lately kind of increased adoption there? Any color you would be seeing helpful there?
Samuel Wilson: Yeah, absolutely. So I, what I would say is, you know, we, and I think we've commented on this in the past, is we're starting to see all the AI products start to move out of the first phase, prototyping, beta sites, et cetera, and really move into production. I think the idea, you know, of two years ago, that you would have a voice bot at the front end answering every support question to triage it or these kinds of things, was a little bit foreign, and today we're seeing that run-of-the-mill. Our voice technology is so fantastic, and our voice AI technology is awesome. And I'm not talking about just the stuff we resell from Cognigy. There's other voice AI technologies we have in-house that are doing absolutely fantastic.
Samuel Wilson: Yeah, absolutely. So I, what I would say is, you know, we, and I think we've commented on this in the past, is we're starting to see all the AI products start to move out of the first phase, prototyping, beta sites, et cetera, and really move into production. I think the idea, you know, of two years ago, that you would have a voice bot at the front end answering every support question to triage it or these kinds of things, was a little bit foreign, and today we're seeing that run-of-the-mill. Our voice technology is so fantastic, and our voice AI technology is awesome. And I'm not talking about just the stuff we resell from Cognigy.
Speaker #1: Yeah , absolutely . So what I would say is , you know , I think we've commented on this in the past is we're starting to see all the AI products start to move out of the phase first prototyping beta sites , etc.
Speaker #1: and , into production . really move think the idea , you know , of two years ago that you would have a voice bot at the front end answering support every question to triage it , or these kinds of things was a little bit boring .
Speaker #1: And today we're seeing that run of the mill , our voice technology fantastic , is so and our voice AI is technology talking about just the stuff I'm not we resell from .
Samuel Wilson: There's other voice AI technologies we have in-house that are doing absolutely fantastic.
Speaker #1: There's other voice AI have technologies . We in-house doing absolutely that are fantastic so what . And seeing is , as those from that prototyping , you know , beta stage to production , we're seeing that they're working .
Samuel Wilson: And so what we're seeing is, as those move from that prototyping, you know, beta stage to production, we're seeing that they're working. And then once they're working, the customer comes back and starts adding more and more use cases. And this further validates the usage-based model because it doesn't require a whole new sales cycle and everything else. They just slap down another use, another use case on it. Usage goes up, and they pay the bill 'cause they're getting the ROI. And so I think it, it shows not only that people still wanna focus on voice, I'm a big believer in that. We, as human beings, you know, type in bullets and, and speak in paragraphs. Number two is, the usage-based business model is absolutely the right way to go for these technologies, and it's working.
Samuel Wilson: And so what we're seeing is, as those move from that prototyping, you know, beta stage to production, we're seeing that they're working. And then once they're working, the customer comes back and starts adding more and more use cases. And this further validates the usage-based model because it doesn't require a whole new sales cycle and everything else. They just slap down another use, another use case on it. Usage goes up, and they pay the bill 'cause they're getting the ROI. And so I think it, it shows not only that people still wanna focus on voice, I'm a big believer in that.
Speaker #1: And then once they're working , the customer comes back and starts adding more and more use cases . And this further validates the usage based model because it doesn't require a whole new sales cycle .
Speaker #1: And everything else . They just down another slap use another use case on it . Usage goes up and they pay the bill because they're getting the ROI .
Speaker #1: And so I think it shows not only that people still want to focus on voice . I'm a big believer in that we as human beings , you know , type in bullets and and speak in paragraphs .
Samuel Wilson: We, as human beings, you know, type in bullets and, and speak in paragraphs. Number two is, the usage-based business model is absolutely the right way to go for these technologies, and it's working.
Speaker #1: Number two is the usage-based business is the way to model for these technologies. And it's working. Absolutely the right [approach], and I've been doing this for a while, so we'll do more and more of this.
Samuel Wilson: And I've been signaling this for a while, that we'll do more and more of this. And number three is, AI is the real deal, and we are getting positive ROI out of the AI we sell.
Samuel Wilson: And I've been signaling this for a while, that we'll do more and more of this. And number three is, AI is the real deal, and we are getting positive ROI out of the AI we sell.
Speaker #1: And number three is the real AI is deal . And we positive ROI out of the AI . We sell . .
Siti Panigrahi: Great. Thanks for that color. Quick housekeeping question. Did you see any kind of FX impact on this quarter on the revenue? And how should we think about any revenue contribution from Maven Lab?
Siti Panigrahi: Great. Thanks for that color. Quick housekeeping question. Did you see any kind of FX impact on this quarter on the revenue? And how should we think about any revenue contribution from Maven Lab?
Speaker #6: Thanks Great . for that color and quick housekeeping question . Did you see any kind effects impact on this revenue quarter in the and how think about any revenue should we contribution from Maven Lab ?
Samuel Wilson: No. Maven Lab closed in January, so there was zero contribution for the quarter.
Samuel Wilson: No. Maven Lab closed in January, so there was zero contribution for the quarter.
Speaker #1: No, Maven Lab closed in January, so there was zero contribution for the quarter. And I...
Siti Panigrahi: Oh-
Siti Panigrahi: Oh-
Samuel Wilson: And I believe-
Samuel Wilson: And I believe-
Siti Panigrahi: I'm sorry for the guidance.
Siti Panigrahi: I'm sorry for the guidance.
Samuel Wilson: Yeah. No, no, no, it's-
Samuel Wilson: Yeah. No, no, no, it's-
Speaker #6: I believe I'm sorry for the guidance.
Kevin Krause: Too small.
Kevin Kraus: Too small.
Speaker #1: Can yeah . No , no no it's a too small . It's too small to move the needle . It's a very it's just a little teeny technology .
Samuel Wilson: It's too small to move the needle.
Samuel Wilson: It's too small to move the needle.
Siti Panigrahi: Okay.
Siti Panigrahi: Okay.
Samuel Wilson: It's very. It's just a little teeny technology tuck-in.
Samuel Wilson: It's very. It's just a little teeny technology tuck-in.
Siti Panigrahi: I see.
Siti Panigrahi: I see.
Samuel Wilson: Kevin can speak on that.
Samuel Wilson: Kevin can speak on that.
Speaker #1: Tuck in, and Kevin can speak on. Yeah.
Kevin Krause: Yeah, we had, relative to the beginning of the quarter guidance, we had a little bit of a headwind, well under $1 million, and on a year-over-year basis, we had a bit of a tailwind, we had a $1 million-ish plus, so pretty small.
Kevin Kraus: Yeah, we had, relative to the beginning of the quarter guidance, we had a little bit of a headwind, well under $1 million, and on a year-over-year basis, we had a bit of a tailwind, we had a $1 million-ish plus, so pretty small.
Speaker #5: We had relative to the beginning of quarter guidance . We had a little bit of a headwind . Well under $1 million . And on a year over year basis , we had a bit of a tailwind , about a million ish plus .
Siti Panigrahi: All right. Thank you.
Siti Panigrahi: All right. Thank you.
Operator: And then, do you wanna speak as a natural hedge?
Kate Patterson: And then, do you wanna speak as a natural hedge?
Speaker #5: pretty So small . .
Kevin Krause: Yeah, the other thing is... Thanks, Kate. This is important for the analysts to know. We have basically a natural hedge in-built into our company operationally. So we may incur headwinds or tailwinds on revenue, but the opposite effect occurs on the expense base, so our net-
Kevin Kraus: Yeah, the other thing is... Thanks, Kate. This is important for the analysts to know. We have basically a natural hedge in-built into our company operationally. So we may incur headwinds or tailwinds on revenue, but the opposite effect occurs on the expense base, so our net-
Speaker #1: Thank All right .
Speaker #1: you .
Speaker #7: We want to natural hedge.
Speaker #5: Yeah . other thing The is thanks Kate . This is important for for the analysts to know we have a basically a natural hedge in built into our operationally .
Speaker #5: company So we may incur and headwinds tailwinds on revenue . But the opposite effect occurs on the expense base . So .
Speaker #5: So we may incur headwinds and tailwinds on revenue. But the opposite effect occurs on the expense base. So.
Siti Panigrahi: Mm-hmm
Siti Panigrahi: Mm-hmm
Kevin Krause: ... profit is neutralized.
Kevin Kraus: ... profit is neutralized.
Samuel Wilson: Kevin, too nice to say it, but I'll say it, like, we beat by $5 million, and $1 million of that ± on a year-over-year basis actually was a headwind for the quarter relative to last quarter, so the beat was clean.
Samuel Wilson: Kevin, too nice to say it, but I'll say it, like, we beat by $5 million, and $1 million of that ± on a year-over-year basis actually was a headwind for the quarter relative to last quarter, so the beat was clean.
Speaker #2: net Our profit is neutralized . .
Speaker #1: And nice to say it , but I'll say it like we beat by five and 1 million of that plus minus on a year over year basis .
Speaker #1: Actually, it was a headwind for the quarter relative to last quarter. So, the beat was clean.
Siti Panigrahi: Yeah. Thank you.
Siti Panigrahi: Yeah. Thank you.
Kevin Krause: Yeah.
Kevin Kraus: Yeah.
Operator: Thank you. Our next question comes from Peter Levine with Evercore ISI. Please proceed.
Operator: Thank you. Our next question comes from Peter Levine with Evercore ISI. Please proceed.
Speaker #6: Thank Yeah . you .
Speaker #3: Thank you. Our next question comes from Peter Levine with Evercore. Please proceed.
Peter Levine: Great. Thanks, guys, for taking my questions here. Maybe to piggyback off of Sam, the comment you made earlier on the usage base, but a comment you made on the call, you know, you kind of called out some customers moving from pilot projects to, like, larger scale deployments. Can you maybe just be a little bit more specific on what kind of projects and how these customers are using it in terms of just the modernization?
Peter Levine: Great. Thanks, guys, for taking my questions here. Maybe to piggyback off of Sam, the comment you made earlier on the usage base, but a comment you made on the call, you know, you kind of called out some customers moving from pilot projects to, like, larger scale deployments. Can you maybe just be a little bit more specific on what kind of projects and how these customers are using it in terms of just the modernization?
Speaker #8: Thanks taking for my questions here . Maybe to piggyback off of Sam , the comment you on the usage base , but a comment you made on the call know , , you kind of called out you customers moving some from pilot projects to deployments .
Speaker #8: Can you maybe just be a bit more on what kind of projects how these customers are and it using modernization just the in terms of ?
Samuel Wilson: Yeah. I'm more than happy to, Peter, and we may have to go back and forth a little bit, depending on what level of detail you want. So what we're seeing right now with the AI stuff is a lot of it is very use case-based centric. And, you know, I can-- we can talk about this extensively, but when we first went into market a couple of years ago, we tried to sell, like, an AI platform that, customers could build their use cases on top of, and that really struggled. And we sort of switched to taking the platform and going in and targeting customers on a more use case base type thing. So what's a use case?
Samuel Wilson: Yeah. I'm more than happy to, Peter, and we may have to go back and forth a little bit, depending on what level of detail you want. So what we're seeing right now with the AI stuff is a lot of it is very use case-based centric. And, you know, I can-- we can talk about this extensively, but when we first went into market a couple of years ago, we tried to sell, like, an AI platform that, customers could build their use cases on top of, and that really struggled. And we sort of switched to taking the platform and going in and targeting customers on a more use case base type thing. So what's a use case?
Speaker #1: happy to . more than Peter , and we may have to go I'm back and , depending on little bit what level of detail you forth a want .
Speaker #1: what we're right now with the AI So stuff is it is a lot of very use case based , centric , and , you know , I talk about can this extensively , but when we first went into market a couple of we ago , sell like years an AI platform that build their customers could use cases of .
Speaker #1: And that really struggled . And we sort of switched to taking the platform and going in and customers on a use case , base type thing .
Samuel Wilson: Having a person say their serial number at the front end of a call and routing the call differently based on that, or answering simple questions that are out of the FAQ, or doing the biometric identification so that they can be passed to the proper agent. At financial service firms, you know, doing the biometric security check and pulling the balances. We also have a lot of self-service capabilities, so if you wanna pay your bill, let's say you call and you say: I just wanna pay my bill, you don't need an agent. We'll just, you know, pull it, we'll authenticate you, pull it, send you an SMS message, let you pay with Apple Pay via your phone, and take care of that stuff. And so I know you're asking me, like, what's happening?
Samuel Wilson: Having a person say their serial number at the front end of a call and routing the call differently based on that, or answering simple questions that are out of the FAQ, or doing the biometric identification so that they can be passed to the proper agent. At financial service firms, you know, doing the biometric security check and pulling the balances. We also have a lot of self-service capabilities, so if you wanna pay your bill, let's say you call and you say: I just wanna pay my bill, you don't need an agent.
Speaker #1: So use what's a case ? Having a person say more their serial number at the of a routing the call differently based on front end that or answering simple questions that are out of the or doing the FAQ biometric identification .
Speaker #1: So that can they be passed proper agent to the and service financial firms . , you know , doing a biometric security Pulling the check and pulling the balances .
Speaker #1: have a lot of We also self-service capabilities . So if you want to pay your bill , let's say you an don't need and you say , I to pay my call agent .
Samuel Wilson: We'll just, you know, pull it, we'll authenticate you, pull it, send you an SMS message, let you pay with Apple Pay via your phone, and take care of that stuff. And so I know you're asking me, like, what's happening?
Speaker #1: We'll just pull it . bill . You We'll authenticate you , pull it , send you an SMS message , let you Apple pay with Pay via your phone and take care of that stuff .
Samuel Wilson: What I'll tell you is right now, we're still at the phase that these are micro use cases. Each individual customer is seeing a land, and maybe it's, you know, their second one or their third use case, but we're still at the micro use case stage. What I believe we'll start to see out several years is those all come together in more macro use cases, right? So what do I mean by a micro? Micro, as I said, self-service payments, right? Very simple use case, et cetera. Macro will be, Hey, you can come in, you can authenticate a user, you can interact with them extensively, you can do different things with them on the phone... and those kinds of things, that'll be, I think, still several years out. So we're seeing those first case use cases.
Samuel Wilson: What I'll tell you is right now, we're still at the phase that these are micro use cases. Each individual customer is seeing a land, and maybe it's, you know, their second one or their third use case, but we're still at the micro use case stage. What I believe we'll start to see out several years is those all come together in more macro use cases, right? So what do I mean by a micro? Micro, as I said, self-service payments, right? Very simple use case, et cetera.
Speaker #1: And so I know you're me like , , you know , happening ? What ? I'll tell what's you is right now we're phase that these are the still at cases .
Speaker #1: individual customer is seeing Each a land it's , you know , and maybe their third their second one or still at the use use case stage .
Speaker #1: individual customer is seeing Each a land it's , you know , and maybe their third their second one or still at the use use case micro What I believe we'll start see to out several years is those all come together macro use cases .
Speaker #1: So, right. I mean, by what do I mean by micro? Micro, as I said, self-service payments. Right. Very simple use case, etc.
Samuel Wilson: Macro will be, Hey, you can come in, you can authenticate a user, you can interact with them extensively, you can do different things with them on the phone... and those kinds of things, that'll be, I think, still several years out. So we're seeing those first case use cases.
Speaker #1: macro will be hey , you can come in , you can authenticate a user , you can interact with them you can do extensively , different them on the things with phone .
Speaker #1: And those kinds of things . That'll be , still several I think years seeing out . So we're those first case use cases .
Samuel Wilson: We got a big healthcare deal, and all it does is book appointments, but it books it 7 by 24, and that took 4 agents, and moved those agents into more productive roles. A question you're not asking, that I do wanna address on the call up front, is our total number of contact center seats was up quarter-over-quarter and year-over-year. So one of the questions we've gotten with all this AI stuff is, "Oh, my God, all the agents are going away." Well, if they're going away for some reason, you know, our customers are buying more seats. So total seats, I'm gonna repeat this, total seats for contact center are up quarter-over-quarter and year-over-year.
Samuel Wilson: We got a big healthcare deal, and all it does is book appointments, but it books it 7 by 24, and that took 4 agents, and moved those agents into more productive roles. A question you're not asking, that I do wanna address on the call up front, is our total number of contact center seats was up quarter-over-quarter and year-over-year. So one of the questions we've gotten with all this AI stuff is, "Oh, my God, all the agents are going away." Well, if they're going away for some reason, you know, our customers are buying more seats.
Speaker #1: We got to big healthcare is it does And all deal . appointments book it books seven And that at by 24 . took and move those agents into four agents productive roles .
Speaker #1: A question more asking, but I do — you're not addressed on the want to call up, is front number of total center seats was up quarter on quarter.
Speaker #1: And year on contact year. So one of the questions gotten with all this AI stuff is, oh my God, all the agents are going away.
Speaker #1: Well , if they're going away for some reason , our you know , customers are buying more seats . So total seats . I'm this going to repeat seats for contact .
Speaker #1: Well , if they're going away for some reason , our you know , customers are buying more seats . So total seats . I'm this going to repeat seats for contact . center up quarter on Total quarter and year on year .
Samuel Wilson: So total seats, I'm gonna repeat this, total seats for contact center are up quarter-over-quarter and year-over-year.
Peter Levine: Maybe to that point, then, is, you know, you're not seeing seats compressing now, but if you look out 12, 24, 36 months, is this a different conversation?
Peter Levine: Maybe to that point, then, is, you know, you're not seeing seats compressing now, but if you look out 12, 24, 36 months, is this a different conversation?
Speaker #8: Maybe to that point is you're not then seeing seats compressing now . But if you look 12 is this a different conversation ?
Samuel Wilson: Maybe. I mean, I'm not opposed to seat counts coming down if they're not being used. That's why we're moving more and more to usage-based capabilities, to make sure that ROI adoption's there. As long as my total revenue per customer is going up and my stickiness is going up, I sort of don't care if they buy it via seats or buy it versus digital messaging or buy it versus AI bot interactions or any of those other things. As long as we're sort of solving customer problems, they'll pay us. But I, I think this notion that contact center seats are gonna go off a cliff any quarter is just a misnomer. It's. So far, we don't see it.
Samuel Wilson: Maybe. I mean, I'm not opposed to seat counts coming down if they're not being used. That's why we're moving more and more to usage-based capabilities, to make sure that ROI adoption's there. As long as my total revenue per customer is going up and my stickiness is going up, I sort of don't care if they buy it via seats or buy it versus digital messaging or buy it versus AI bot interactions or any of those other things. As long as we're sort of solving customer problems, they'll pay us. But I, I think this notion that contact center seats are gonna go off a cliff any quarter is just a misnomer. It's. So far, we don't see it.
Speaker #1: Maybe . I mean , I'm not opposed to see counts coming not being down if they're used . That's why we're moving more and more to usage based capabilities to make sure that ROI and adoption is there .
Speaker #1: As long as my total revenue per customer is going up, stickiness is up, and my ARPU is up, I sort of don't care if they buy it as seats or buy it via interactions or any of those other things.
Speaker #1: As long as we're sort of solving customer problems, they'll pay us. But I think this notion that contact center seats are going to go off a cliff any quarter is just a misnomer.
Samuel Wilson: What we see is total number of cases being handled by agents going down, handle times going up, and customer satisfaction trying to catch up to where, you know, people want it to be.
Samuel Wilson: What we see is total number of cases being handled by agents going down, handle times going up, and customer satisfaction trying to catch up to where, you know, people want it to be.
Speaker #1: So far, we don't see it. What we see is the total number of cases being handled by agents going down. Handle times, we see, and customer satisfaction is catching up to where you people want it to be.
Peter Levine: Maybe just the last question. Another comment made: new partner programs starting to see some real momentum building. Maybe just talk about what, you know, what you're seeing, what's working, and then if you look out over the next 12 months, any additional changes to your go-to-market, or are you just kind of doubling down on the strategy that you've deployed?
Peter Levine: Maybe just the last question. Another comment made: new partner programs starting to see some real momentum building. Maybe just talk about what, you know, what you're seeing, what's working, and then if you look out over the next 12 months, any additional changes to your go-to-market, or are you just kind of doubling down on the strategy that you've deployed?
Speaker #8: the last question . Another comment . You made new partner programs , starting to see some real momentum building It was just . Maybe just talk what what you're seeing , about working .
Speaker #8: And then if you look out 12 months , any over the next additional your go to market , or changes to are you just kind of doubling down on the strategy that you've deployed
Samuel Wilson: Look, we're seeing quarter-on-quarter increases in pipeline. We're seeing quarter-on-quarter increase, especially around the new products. And we're seeing really the channel. Like, the channel is also on a journey, a la the customer, about understanding AI. And now that we're moving out of this phase of prototyping, experimentation, more into production, the channel is getting a lot more comfortable selling AI-based products, and we're starting to see that show up in the pipeline, the experience, et cetera. And so that's what I was trying to hint at, is we're seeing growth. You know, for a while, our channel business was a bit behind our direct business, and now we're seeing our channel business do better than our direct business.
Samuel Wilson: Look, we're seeing quarter-on-quarter increases in pipeline. We're seeing quarter-on-quarter increase, especially around the new products. And we're seeing really the channel. Like, the channel is also on a journey, a la the customer, about understanding AI. And now that we're moving out of this phase of prototyping, experimentation, more into production, the channel is getting a lot more comfortable selling AI-based products, and we're starting to see that show up in the pipeline, the experience, et cetera. And so that's what I was trying to hint at, is we're seeing growth.
Speaker #8: ?
Speaker #1: Oh , look ,
Speaker #1: seeing quarter we're on quarter increases in pipeline . We're seeing quarter increase , especially around the new products . And we're seeing really the channel like the channels a journey , a lot of also on the about customer understanding AI .
Speaker #1: And now that we're moving out of this phase of prototyping and experimentation, more into production, the channel is getting a lot more comfortable selling AI-based products.
Speaker #1: we're starting to see that show up in the . The experience , etc. so And hint at , is we're seeing growth . You know , for a while our channel business was a bit behind our direct business , seeing our and now we're channel do better direct business business
Samuel Wilson: You know, for a while, our channel business was a bit behind our direct business, and now we're seeing our channel business do better than our direct business.
Peter Levine: Thank you for taking my questions.
Peter Levine: Thank you for taking my questions.
Speaker #1: .
Samuel Wilson: Thank you.
Samuel Wilson: Thank you.
Speaker #8: taking my questions .
Operator: As a reminder, ladies and gentlemen, if you do have a question, press star one one to get in the queue. All right, as I see no further questions in the queue, I will pass it back to Mr. Wilson for closing comments.
Operator: As a reminder, ladies and gentlemen, if you do have a question, press star one one to get in the queue. All right, as I see no further questions in the queue, I will pass it back to Mr. Wilson for closing comments.
Speaker #1: you Thank .
Speaker #3: as a And and if you do have a question , press one one to get in the queue star . All right . no As I see further questions in the queue , I will pass it back to Mr. Wilson for closing comments .
Samuel Wilson: All right. Thank you to all the people listening to the call today. We appreciate it. We'll talk to you again in three months. As you heard from the commentary and the Q&A, we feel pretty comfortable where the company is right now. We're seeing our usage-based business grow nearly 60% and now 21% of service revenue. So I just wanna highlight that, that we expect that trend to continue, and we think the company is on the right track in where it's going right now. Thank you very much, and feel free to call us in our investor relations team, myself, or whatever the case may be, if you have any questions.
Samuel Wilson: All right. Thank you to all the people listening to the call today. We appreciate it. We'll talk to you again in three months. As you heard from the commentary and the Q&A, we feel pretty comfortable where the company is right now. We're seeing our usage-based business grow nearly 60% and now 21% of service revenue. So I just wanna highlight that, that we expect that trend to continue, and we think the company is on the right track in where it's going right now. Thank you very much, and feel free to call us in our investor relations team, myself, or whatever the case may be, if you have any questions.
Speaker #1: All Thank you to right . all the people listening to the call today . We appreciate it . We'll talk to you again three months .
Speaker #1: in , as We you heard from the commentary and the Q&A , we feel pretty comfortable where the company is right now . We're seeing our usage based business grow nearly 60% , it's now 21% of service want to highlight that that we expect that trend to continue .
Speaker #1: in , as We you heard from the commentary and the Q&A , we feel pretty comfortable where the company is right now . We're seeing our usage based business grow nearly 60% , it's now 21% of service want to highlight that that we expect that trend to So I just the right track .
Speaker #1: And where it's going right now. Thank you very much. Feel free to call us and our Investor Relations. And feel free to reach out to myself or whatever the case may be, if you have any questions.
Operator: This concludes our conference. Thank you for participating, and you may now disconnect.
Operator: This concludes our conference. Thank you for participating, and you may now disconnect.
