Q1 2020 Earnings Call

July 30, 2019

Kavita: Good evening. My name is Kavita, and I'll be your conference operator today. At this time, I would like to welcome everyone to the 8x8, Inc. Fiscal Q1 2020 Earnings Conference Call. I will now turn the call over to Victoria Hyde-Dunn, Head of Investor Relations.

Operator: Good evening. My name is Kavita, and I'll be your conference operator today. At this time, I would like to welcome everyone to the 8x8, Inc. Fiscal Q1 2020 Earnings Conference Call. I will now turn the call over to Victoria Hyde-Dunn, Head of Investor Relations.

At this time I want to welcome everyone to the eight by eight Inc.'s fiscal first quarter 2020 earnings conference call.

I will now turn the call over to Victoria hard done head of Investor Relations.

Thank you good afternoon, and welcome to eight Fiats first fiscal 2020 <unk> earnings Conference call.

Victoria Hyde-Dunn: Thank you. Good afternoon, and welcome to 8x8's First Fiscal 2020 Earnings Conference Call. Joining me today are Vikram Verma, Chief Executive Officer, and Steven Gatoff, Chief Financial Officer. During today's call, Vik will begin with business highlights of our first quarter performance. Following this, Steven will provide details on our financial results and guidance. After these prepared remarks, we look forward to taking your questions. Before we get started, just a reminder that our discussion today includes forward-looking statements about 8x8's future business, product, and growth strategies that are pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. 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 the forward-looking statements, as described in our risk factors in our reports filed with the SEC.

Joining me today are Vik Verma, Chief Executive Officer, and Stephen Gate off Chief Financial Officer. During today's call Vic will begin with business highlights of our first quarter performance. Following this Steven will provide details on our financial results and guidance. After these prepared remarks, we look forward to taking your questions.

Before we get started just a reminder, that our discussion today includes forward looking statements about eight by its future business products and growth strategies that are pursuant to the safe Harbor provision of the private Securities Litigation Reform Act of 1995.

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 the forward looking statements as described in our risk factors and our reports filed with the SEC.

Victoria Hyde-Dunn: Any forward-looking statements made on this call reflect our analysis as of today, and we have no plans or duty to update them. In addition, some financial measures that will be discussed on this call, 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 non-GAAP measures to the closest comparable GAAP measures is provided with our earnings press release, and PowerPoint presentation deck, which are available on our investor relations website. Additionally, we will be discussing new annual recurring revenue and annual average service revenue per customer metrics. These new metrics are discussed in the press release, and included in a financial and operating metrics worksheet that is posted on our investor relations website. With that, let me turn the call over to Vik.

Any forward looking statements made on this call reflect our analysis as of today, and we have no plans or duty to update them.

In addition, some financial measures that will be discussed on this call together with year over year comparison in some cases were not prepared in accordance with the U.S. generally accepted accounting principles or GAAP.

A reconciliation of non-GAAP measures to the closest comparable GAAP measures is provided with our earnings press release, and Powerpoint presentation deck, which are available on our Investor Relations website.

Additionally, we will be discussing new annual recurring revenue and annual average service revenue per customer metrics. These new metrics are discussed in the press release and include it in a financial and operating metrics worksheet that is posted on our Investor Relations website.

With that let me turn the call over to Vic.

Thank you Victoria Good afternoon, and thank you everyone for joining us today as we review our first quarter results.

Vikram Verma: Thank you, Victoria. Good afternoon, and thank you everyone for joining us today as we review our Q1 results. I would like to share 3 points about the quarter that highlight both our business performance and the capabilities of our cloud technology platform that we are using to disrupt the $60 billion market for voice, chat, video, Team Messaging, contact center, and now enterprise-class API solutions. First, mid-market and enterprise customers continue to drive strong revenue growth with an increasing contribution from our channel partners. As a reminder from our last call, our customer segments are not based on how much revenue we get from them, but rather based on industry convention in which mid-market is defined as businesses with revenue greater than $50 million and less than $1 billion, and enterprise customers as businesses with revenue greater than $1 billion.

I would like to share three points about the quarter that highlight both our business performance and the capabilities of our cloud technology platform that we are using to disrupt the 16 billion dollar market for voice chat video team messaging contact center and now enterprise Enterprise class PPI solutions.

First.

Midmarket and enterprise enterprise customers continue to drive strong revenue growth with an increasing contribution from our channel partners.

As a reminder, from our last call.

Oh customer segments are not based on how much revenue, we get from them, but rather based on industry convention in which Midmarket is defined as businesses with revenue greater than 50 million and less than 1 billion and enterprise customers as businesses with revenue greater than 1 billion.

Combined Midmarket and enterprise eight our AR grew at a healthy rate of 39% year over year and was one of the factors why we were able to beat the high end of our guidance.

Vikram Verma: Combined mid-market and enterprise ARR grew at a healthy rate of 39% year-over-year and was one of the factors why we were able to beat the high end of our guidance. Second, we continue to differentiate 8x8 with the pace of our innovation. We had 4 major new service announcements, more evidence that our one technology platform is delivering both velocity and innovation and clear differentiation from a shared data model that provides cross-platform analytics. My third point centers around our recent acquisition of Wavecell. We have invested $ hundreds of millions of R&D dollars over many years into building, transforming, and integrating a fully owned technology platform for global voice, contact center, video, and team messaging. With Wavecell, we round out our framework with enterprise-class CPaaS APIs.

Second we continue to differentiate eight by eight with the pace of our innovation.

We had four major new service announcement more evidence that our one technology platform is delivering both velocity in innovation and clear differentiation from a shared data model that provides cross block from analytics.

[noise] My third point centers around our recent acquisition of wave so.

We have invested hundreds of millions of R&D dollars over many years into building transforming and integrating a fully owned technology platform for global voice contact center video and team messaging.

With wave sell we round out our framework with enterprise class C pass HP eyes.

Vikram Verma: We have now fully realized our vision of one complete cloud-based technology platform that combines the simplicity of prepackaged solutions with the power and flexibility of enterprise-class APIs to enable global, high-scale, fully personalized customer engagement. This is explicitly what our customers have been asking us for and allows us to take market share from legacy on-premise vendors and further differentiate ourselves from cloud competitors. Let me touch on each of these in a bit more detail. First, our Q1 fiscal year 2020 results illustrate the fundamental strength in our core business, with 39% growth in ARR for mid-market and enterprise customers. Total ARR growth for the quarter was 21% year-over-year. Service revenue for the first quarter was $92.4 million and grew over 18% year-over-year.

We have now fully realize that vision of one complete cloud based technology platform that combines the simplicity of pre packaged solutions with the power and flexibility of Interplast class eight p. eyes to enable global high scale fully personalized customer engagement.

This is explicitly what our customers have been asking us for and allows us to take market share from legacy on premise vendors and further differentiate ourselves from cloud competitors.

Let me touch on each of these in a bit more detail.

First our Q1 fiscal year 2020 results illustrate the fundamental strength in our core business with 39% growth in our our from Midmarket and enterprise customers.

Total HR our growth for the quarter was 21% year over year service revenue for the first quarter was 92.4 million and grew over 18% year over year.

Vikram Verma: Steven will cover our financial results and guidance in greater detail, but suffice to say, we're off to a strong start as we see bookings growth that allow us to increase our full year guidance. We saw improved sales and marketing execution in Q1. Pipeline growth was robust, with improving coverage ratios across the board. Overall win rates remained strong and consistent with prior quarters. New customer logos in the quarter were 57% of total bookings. Our US enterprise business was a particularly strong contributor with bookings growth of around 95% year-over-year. Enterprise ARR grew 52% year-over-year. We saw success not only in our core UCaaS market and in combination deals including both UCaaS and CCaaS, but also with standalone contact center deals. Channel execution was strong again in Q1, with channel bookings growing 86% year-over-year, marking our second consecutive quarter of approximately 90% growth.

Stephen will cover our financial results and guidance in greater detail, but suffice to say we're off to a strong start as we see bookings growth that allow us to increase our full year guidance.

We saw improved sales and marketing execution in the first quarter.

Pipeline growth was robust with improving coverage ratios across the board.

Overall win rates remained strong and consistent with prior quarters.

New customer logos in the quarter were 57% of total bookings.

Our U.S. enterprise business was a particularly strong contributor with bookings growth of around 95% year over year.

Enterprise E.R.R. grew 52% year over year.

We saw success not only in our core you cast market and in combination deals, including both you cast and see Caf.

But also with Standalone contact center deals.

Channel execution was strong again in Q1 with channel bookings growing 86% year over year, marking our second consecutive quarter of approximately 90% growth.

As we talked about during our last call we implemented a series of changes six months ago that have driven material improvements.

Vikram Verma: As we talked about during our last call, we implemented a series of changes six months ago that have driven material improvements. Clearly, our channel strategy is now working, and we are seeing consistent execution. Channel was also an important driver behind increasing our reach in the mid-market, where ARR grew 32% year-over-year. Investments in our channel enablement program allowed us to expand to 15 strategic masters and 813 active partners, an increase from 12 strategic masters and 698 partners last quarter. We also launched the Elevate Partner Program so that 8x8's channel community has the resources it needs to drive expanded pipeline generation initiatives. Overall, 57% of new bookings were from the channel, including a record high 9 of our top 10 deals. Our One Technology platform continues to be an important differentiator as we replace legacy on-premise systems and single point solution providers.

Clearly our channel strategy is not working and we are seeing consistent execution.

Channel was also an important driver behind increasing our reach in the Midmarket, where eight our our grew 32% year over year.

Investments in our channel enablement program allowed us to expand to 15 strategic Masters and 813 active partners an increase from 12 strategic Masters and 698 partners last quarter.

We also launched the elevate partner program. So that eight bytes channel community has the resources it needs to drive expanded pipeline generation initiatives.

Overall, 57% of new bookings were from the channel, including a record high nine of our top 10 deals.

Our one technology platform continues to be an important differentiator as we replace legacy on premise systems and single point solution providers and customers continue to ask for cross platform analytics that can only be delivered from a single platform with a unified data model.

Vikram Verma: Customers continue to ask for cross-platform analytics that can only be delivered from a single platform with a unified data model. This past quarter, we had a number of marquee wins, including a Fortune 500 global leader in financial services technologies with clients in over 130 countries. They chose 8x8 to replace their legacy system, and they're starting with 15,000 X Series seats. The company considered several other cloud and on-premise providers, but in the end, chose 8x8 for our global presence, voice quality, and analytics that require a single technology platform. Another significant win this quarter included Thrive, a leading software company serving more than 400,000 small businesses. Thrive was looking for a single vendor to replace their mix of legacy systems and cloud providers, including Genesys, Cisco, and Five9.

This past quarter, we had a number of marquee wins, including a fortune 500 global leader in financial services technologies with clients in over 130 countries.

They chose eight by eight to replace their legacy system and they are starting with 15000 X series seats.

The company considered several other cloud and on premise providers, but in the end chose eight by eight for our global presence voice quality and analytics that require a single technology platform.

Another significant wins this quarter included drive.

A leading software companies serving more than 400000 small businesses.

Thrive was looking for a single vendor to replace their mix of legacy systems, and cloud providers, including Genesis Cisco and Fivenine.

The overarching requirements driving their buying decision what to have a single unified communications and contact center cloud platform with global voice quality and to easily manage ICTI operation and costs.

Vikram Verma: The overarching requirements driving their buying decision were to have a single unified communications and contact center in a cloud platform with global voice quality and to easily manage IT operation and costs. They considered several of the cloud providers, but in the end, chose to initially move more than 5,000 licensed seats of X Series, including contact center. Another marquee win was Halfords, a British cycling and motoring retailer operating in the United Kingdom and Ireland. Halfords was looking for a single provider to replace legacy Avaya and various mix of solutions. Their business requirements included a cloud provider with one technology platform for voice and contact center, as well as integration with workforce management. Halfords considered several other cloud providers, but in the end, chose to start with a 4,000 seats of X Series solutions, including contact center, to meet their growing retail needs.

They considered several of the cloud providers, but in the end chose to initially move more than 5000 licensed seats of X series, including contact Center.

Another marquee win was how ferts it British cycling and motoring retailer operating in the United Kingdom and Ireland.

How large was looking for a single provider to replace legacy Avaya and various mix of solutions.

Their business requirements included a cloud provider with one technology platform for voice and contact center as well as integration with workforce management.

Hi, Alfred is considered several other cloud providers, but in the yen chose to start with a 4000 seats of X series solutions, including contact center to meet that growing retail needs.

My second point is that we continue to accelerate the pace of innovation on our platform.

Vikram Verma: My second point is that we continue to accelerate the pace of innovation on our platform. We have the advantage of a single platform that can be sold to customers through our inside sales, field sales, and channel, as well as through our newly launched e-commerce store. A single platform also gives us a key technology advantage in the pace of innovation because any new capability developed for one particular use case is immediately available to other applications on the platform. 8x8 owning a single, fully integrated cloud platform will provide us with a lasting competitive advantage in the pace of innovation for years to come. As evidence of this, we would highlight four key product innovation announcements since our last earnings call. First, we launched 8x8 Managed Technical Services, MTS, a service which optimizes and manages local and wide area network performance to ensure world-class voice performance.

We have the advantage of a single platform that can be sold to customers through our insight sales field sales and channel as well as through our newly launched ecommerce store.

But a single platform also gives us a key technology advantage in the pace of innovation.

Because any new capability develop for one particular use case is immediately available to other applications on the platform.

Eight by owning a single fully integrated cloud platform will provide us with a lasting competitive advantage in the pace of innovation for years to come.

As evidence of this we would highlight four key product innovation announcements since our last earnings call.

First we launched eight by eight managed technical services MTS is service, which Optimizes and manages local and wide area network performance to ensure world class voice performance.

Vikram Verma: For some customers, particularly those with limited IT resources, understanding how issues in their local network configuration impact communication services can be difficult. By combining SD-WAN with 8x8's premium support, we solve this problem for customers of all sizes, ensuring optimum voice quality without the need for the customer to dedicate resources to network optimization. Second, we launched a brand-new 8x8 Meetings, a next-generation WebRTC-based cloud video collaboration solution based on Jitsi technology acquired from Atlassian. It allows teams to collaborate effortlessly with high-definition video conferencing accessible on mobile, desktop, and in-room devices. We believe this solution will drive broader adoption of voice, chat, and team messaging capabilities present in X Series, as customers experience the power of seamless multi-mode communication. Additionally, we are planning to enter the standalone video collaboration market in the late fall.

For some customers, particularly those with limited resources.

Understanding how issues in their local network configuration impact communication services can be difficult.

By combining SD Lan with eight bytes premium support we solve this problem for customers of all sizes, ensuring optimum voice quality without the need for the customer to dedicate resources to network optimization.

Second we launched a brand new eight by meetings a next generation web RTC based cloud video collaboration solution based on just feed technology acquired from a glassia.

It allows teams to collaborate effortlessly with high definition video conferencing accessible on mobile desktop and in room devices.

We believe this solution will drive broader adoption of voice chat and team messaging capabilities present in X series as customers experience the power of seamless multi mode communication.

Additionally, we are planning to enter the Standalone video collaboration market in the late fall.

Third we announced the availability of eight by express it complete communication system that empowers emerging businesses to quickly and seamlessly establish a professional identity.

Vikram Verma: Third, we announced the availability of 8x8 Express, a complete communication system that empowers emerging businesses to quickly and seamlessly establish a professional identity. 8x8 Express is available for purchase exclusively in 8x8's e-commerce store. 8x8 Express also includes the new 8x8 Meetings solution. Fourth, we announced new capabilities for 8x8 Contact Center, including improved IVR functionality and Google AI-enabled self-service with the use of automatic speech recognition and natural language processing. Also included is Expert Finder, which combines the value of 8x8's Team Messaging and 8x8's AI engine to search and rank message rooms based on past chats and expert interactions. Out of the box, Expert Finder interoperates with more than 24 third-party messaging platforms, such as Slack, Webex Teams, and Google Hangouts.

Eight by express is available for purchase exclusively in eight bytes E Commerce store.

Eight by it Express also includes the new eight by meeting solution.

Fourth we announced new capabilities for eight bite contact center, including improved IB, our functionality and Google AI enabled self service with the use of automatic speech recognition and natural language processing.

Also included is expert finder, which combines the value of eight by its team messaging and eight bytes AI engine to search and rank message rooms based on past chats and expert interactions.

Out of the box expert finder inter operates with more than 24 third party messaging platforms, such as slack Webex teams and Google Hangouts.

Vikram Verma: These are just a few of our initial AI capabilities for Contact Center, and we expect to announce more as we continue to innovate in the broader AI capabilities across our technology platform. Contact Center, both bundled and standalone, is an increasingly important component of our overall strategy and represented approximately 30% of our mid-market and enterprise bookings in the quarter. X Series success is highlighted by the strength of combination deals, which include Contact Center. Seven of our top 10 deals were combination deals. We are also seeing acceleration in standalone Contact Center deals with ARR growing 35% year-over-year. My final point is to reinforce our excitement about the Wavecell team and technology joining 8x8. As the leading CPaaS provider in Asia Pacific, Wavecell brings to 8x8 three important strategic advantages.

These are just a few of our initial AI capabilities for contact center, and we expect to announce more as we continue to innovate in the broader capabilities across our technology platform.

Contact center, both bundled and Standalone is an increasingly important component of our overall strategy and represented approximately 30% of our Midmarket and enterprise bookings in the quarter.

X series success is highlighted by the strength of combination deals which include contact center.

Seven of our top 10 deals what combination deals.

We are also seeing acceleration in Standalone contact center deals with a our our growing 35% year over year.

My final point is to reinforce our excitement about the waves sell team and technology joining eight by eight.

As the leading see past provider in Asia Pacific waves. So brings to eight by eight three important strategic advantages first this acquisition expands eight bytes market to include C pass, creating a total addressable market in excess of 60 billion.

Vikram Verma: First, this acquisition expands 8x8's market to include CPaaS, creating a total addressable market in excess of $60 billion. Second, this acquisition enhances 8x8's fully owned end-to-end cloud technology platform with API offerings for SMS, chat apps, voice, and video, as well as a proven API framework that can be extended across the entirety of 8x8's cloud communication platform. Third, Wavecell expands 8x8's global presence by adding local offices in five Asian countries and enhances 8x8's global voice coverage through existing relationships with more than 190 carriers. The Wavecell founding team will continue to drive 8x8's CPaaS business, which is growing rapidly in Asia, while close collaboration with 8x8's sales, marketing, and engineering teams will accelerate the global expansion of that CPaaS business with additional geographies and services.

Second this acquisition enhances eight bites fully owned end to end cloud technology platform with ATP offerings for SMS chat apps voice and video as well as a proven apiay framework that can be extended across the entirety of eight bytes cloud communication platform.

Third wave Selic spans eight by global presence by adding local offices in five Asian countries and enhances eight bytes global voice coverage through existing relationships with more than 190 carriers.

The waves. So founding team will continue to drive eight bytes sea bass business, which is growing rapidly in Asia, while close collaboration with eight bytes sales marketing and engineering teams will accelerate the global expansion of that sea bass business with additional geographies and services.

We have a successful track record of integrating new technologies into our platform and we will pursue a similar approach, where we will invest in and grow the existing team in place to minimize distraction while rapidly we're pursuing shared opportunities globally.

Vikram Verma: We have a successful track record of integrating new technologies into our platform, and we will pursue a similar approach where we will invest in and grow the existing team in place to minimize distraction while rapidly pursuing shared opportunities globally. I was present at the Wavecell office in Singapore for our day one activities, and I can tell you, I am very excited about the talent that we have brought on board and the business they have collectively built. Now, as part of 8x8, I'm confident in our combined teams to grow and innovate even faster. Even in these early days, we are seeing cross-sell interest in both directions.

I was present at the waves sell office in Singapore for our day, one activities and I can tell you I'm very excited about the talent that we have brought on board and the business they have collectively boat.

Now as part of eight by eight I'm confident in our combined teams to grow and innovate even faster.

Even in these early days, we are seeing cross sell interest in both directions.

Vikram Verma: Immediately following our announcement, we received inbound calls from existing large US and UK 8x8 X-Series customers who wanted to know more about how the Wavecell APIs can extend their existing UCaaS and CCaaS solution to enable highly personalized interactions with end customers. As one example, using the Wavecell APIs together with the 8x8 platform, we were able to quickly demonstrate the delivery of alerts via SMS to shared workspace customers when their facilities and services are available. This enhances the end user experience for those clients and illustrates one of the many personalized interactions Wavecell can deliver on top of 8x8 solutions. We have also received inquiries from Wavecell customers for core 8x8 service offerings like X-Series and standalone contact center. For example, one of Wavecell's insurance customers that leverage CPaaS capabilities to enhance mobile apps for its claims adjusters now wants a solution for its contact center agents.

Immediately following our announcement, we received inbound calls from existing large for us and UK eight by X series customers, who wanted to know more about how the waves. So.

It can extend their existing ucas and see cast solution to enable highly personalized interactions with end customers.

As one example, using the waves so enterprise together with the eight by platform, we were able to quickly demonstrate the delivery of alerts via SMS to shared workspace customers when their facilities and services are available.

This enhances the enduring user experience for those clients and illustrates one of the many personalized interactions wave so can deliver on top of eight by solutions.

We have also received inquiries from wave so customers for core eight bytes service offerings like X series and Standalone contact Center.

For example, one of wave sells insurance customers that leverage see past capabilities to inhabit and enhance mobile apps for its claims adjusters now want see solution for its contact center agents.

Vikram Verma: As Wavecell's customers include some of the largest and fastest-growing e-commerce, fintech, and shared logistics providers across Asia, we know there will be immediate opportunities for both UCaaS and CCaaS with those businesses. Reinforcing our strategy and approach, customers want all communications data in one platform so they can drive improved experiences and insights. 8x8's one cloud platform delivers this across all forms of communication, voice, contact center, video, and team messaging. One cloud platform that is API extensible and delivers omni-channel communication services with integrated analytics and AI capabilities is unique in the industry. In summary, we believe our strategy is correct. It is delivering what customers want. It is differentiated, and our results demonstrate we are executing against it. As such, first, we continue to see strong bookings growth driven by mid-market and enterprise businesses, helped by our focus on channel partners.

As weve cells customers include some of the largest and fastest growing e-commerce , Fintech and shared logistics providers across Asia. We know there will be immediate opportunities for both you gas and seek as with those businesses.

Reinforcing our strategy and approach customers want all communications data in one platform. So they can drive improved experiences and insights eight bytes. One cloud platform delivers this across all forms of communication voice contact center video and team messaging.

One cloud platform that is eightb extensible and delivers omni channel communication services with integrated analytics and the capabilities is unique in the industry.

In summary, we believe our strategy is correct. It is delivering what customers want it is differentiated and our results demonstrate we are executing against it.

As such first we continue to see strong bookings growth driven by Midmarket and enterprise businesses helped by our focus on channel partners second our fully owned cloud technology platform allows us to innovate faster and deliver more value to a broader range of customers than bundles competitive offerings third with wave sale, we expand our total addressable market to greater than 60 billion. We extend our platform to include enterprise class enterprise and we immediately below grow our global footprint to include offices across Asia.

Vikram Verma: Second, our fully owned cloud technology platform allows us to innovate faster and deliver more value to a broader range of customers than bundled competitive offerings. Third, with Wavecell, we expand our total addressable market to greater than $60 billion. We extend our platform to include enterprise-class APIs, and we immediately grow our global footprint to include offices across Asia. In short, we are proud of the work we've accomplished this quarter to deliver strong results. As we have continued to execute on our strategy, so too, we have had a deliberate strategy to add targeted expertise to our board. Most recently, we brought on board Elizabeth Theophille, the Chief Technology Officer and Digital Officer at Novartis. Elizabeth brings over 30 years of global IT experience in transforming large customer-centric enterprises.

In short we are proud of the work we have accomplished this quarter to deliver strong results.

And as we have continued to execute on our strategy. So too we have had a deliberate strategy to add targeted expertise to our board.

Most recently, we brought onboard Elizabeth profile, the Chief Technology Officer, and digital officer at Novartis.

Elizabeth brings over 30 years of global experience and transforming large customer centric enterprises.

Vikram Verma: I would also like to thank Ian Potter, who will be stepping down from the board after more than five years of distinguished service. Before I turn the call over to Steven, let me also thank our more than 1,700 global employees, which now includes the Wavecell team, for their hard work and dedication to excellence, as well as our customers and partners for continued loyalty and support. It is all coming together, and I have never been more excited about the future of 8x8 than I am right now. On to Steven.

I would also like to thank Ian Potter, who will be stepping down from the board after more than five years of distinguished service.

Before I turn the call over to Steven Let me also thank our more than 1700 global employees, which now includes the wave sell team for their hard work and dedication to excellence.

As well as our customers and partners for continued loyalty and support.

It is all coming together and I have never been more excited about the future rate by than I am right now.

On to Steven.

Thanks, Nick.

Steven Gatoff: Thanks, Vic. Good afternoon, everyone. We appreciate you joining us. I'd like to cover four topics today. First, review our Q1 fiscal 2020 financial results and business metrics. Second, discuss the Wavecell acquisition. Third, share some insights on how we're managing and balancing our growth portfolio. Fourth, provide our financial outlook for Q2 and fiscal 2020. We'll, of course, wrap up by opening the call to your questions. Starting with our Q1 financial results, as Vic mentioned, we had a strong start to fiscal 2020, with our investments in demand gen and pipeline build bearing fruit, channel delivering another strong growth quarter, and bookings coming in from a nice blend of new logo generation and existing customer expansion. As a result, total revenue for Q1 fiscal 2020 grew to $96.7 million, up 16.2% year-over-year.

Good afternoon, everyone. We appreciate you joining us I'd like to cover four topics today first review, our Q1 fiscal 2020 financial results and business metrics second discuss the waste cell acquisition.

Third share some insights on how we're managing and balancing our growth portfolio and fourth provide our financial outlook for Q2 and fiscal 2020, we'll of course wrap up by opening the call to your questions starting with our Q1 financial results as Vik mentioned, we had a strong start to fiscal 2020.

With our investments and demand Gen and pipeline build bearing fruit channel delivering another strong growth quarter and bookings coming in from a nice blend of new logo generation and existing customer expansion.

As a result total revenue for the first quarter of fiscal 2020 grew to $96.7 million up 16.2% year over year service revenue came in at $92.4 million an increase of 18.2%.

Steven Gatoff: Service revenue came in at $92.4 million, an increase of 18.2% year over year. While large enterprise deals continue to be a bit lumpy quarter to quarter, this key segment delivered strong revenue growth in aggregate and on a revenue per customer basis. This was evidenced in both the land and expand dynamic with these larger accounts and the favorable impact of both the multi-product nature and increasing usage of our cloud platform among customers. Our international operations also generated nice revenue growth and contribution in Q1, coming in at approximately 13% of service revenue.

Year over year.

While large enterprise deals continue to be a bit lumpy quarter to quarter. This key segment delivered strong revenue growth in aggregate and on a revenue per customer basis. This was evidenced in both the land and expand dynamic with these larger accounts and the favorable impact of both a multiproduct nature and increasing usage of our cloud platform among customers.

Our international operations also generated nice revenue growth and contribution in Q1 coming in at approximately 13% of service revenue and that despite a weaker British pound negatively impacted service revenue growth by about 50 basis points in the quarter.

Steven Gatoff: That, despite a weaker British pound that negatively impacted service revenue growth by about 50 basis points in the quarter. Non-GAAP pretax loss for Q1 was approximately $14 million, meaningfully better than our May outlook, and driven by a mix of the timing of certain expenses and rigor in our expense management in both program, and headcount spend. On the OpEx front, our increased go-to-market spend that we talked a lot about on our last call, drove what we believe is the high water mark in the non-GAAP sales and marketing expense to revenue ratio, which came in at 51% in Q1. We expect to see increasing sales efficiencies as we move through Q2 and the rest of the year.

non-GAAP pre tax loss for Q1 was approximately $14 million meaningfully better than our may outlook and driven by a mix of the timing of certain expenses and rigor in our expense management and both program and head count stand.

On the Opex front, our increased go to market spends that we talked a lot about on our last call drove what we believe is the high watermark in the non-GAAP sales and marketing expense to revenue ratio, which came in at 51% in Q1.

We expect to see increasing sales efficiencies as we move through Q2 and the rest of the year.

Around this we'd like to share some new SaaS metrics that we use internally and are providing in order to continue to drive transparency as we execute on our business and make key investments to accelerate revenue growth.

Steven Gatoff: Around this, we'd like to share some new SaaS metrics that we use internally and are providing in order to continue to drive transparency as we execute on our business and make key investments to accelerate revenue growth. The first new metric that we're adding is the percentage of new bookings closed by the channel, a good measure of our growing channel program and their involvement in creating pipeline and closing deals. In Q1, we saw 57% of new bookings closed by channel partners, including nine of our top 10 deals. The second new metric that we're introducing is average annual service revenue per customer. This added definition is intended to align our business metrics and performance around an annual viewpoint, and provide insights on the revenue profile across our more than 50,000 customers, and insofar as our revenue composition among small business, mid-market, and enterprise customers.

The first new metric that we're adding is the percentage of new bookings close by the channel.

A good measure of our growing channel program and their involvement and creating pipeline in closing deals.

In Q1, we saw 57% of new bookings close by channel partners, including nine of our top 10 deals.

The second new metric that we're introducing as average annual service revenue per customer.

This added definition is intended to align our business metrics and performance around an annual viewpoint and provide insights on the revenue profile across our more than 50000 customers and so far as our revenue composition, among small business midmarket and enterprise customers.

Steven Gatoff: Average annual service revenue per customer increased 18% in the mid-market and 20% in our enterprise segment, coming in at more than $37,000 per year for mid-market customers and more than $154,000 per year for enterprise customers. This is largely a function of our customers purchasing more seats and our X Series solutions, including contact center, as we're seeing good bookings, traction, and growth across our largest contributors to service revenue. The third new SaaS metric we're now reporting is total ARR, which came in at $332 million at the end of the June quarter, growing 21% year over year. The drivers of ARR growth in Q1 were supported by the addition of 28 new deals that we closed in the quarter with ARR in excess of $100,000, and they represented 31% of new bookings, up from 26% in the prior year.

Average annual service revenue per customer increased 18% in the Midmarket and 20% in our enterprise segment coming in at more than $37000 per year for mid market customers and more than $154000 per year for enterprise customers.

This is largely a function of our customers purchasing more seats and our X series solutions, including contact center as we are seeing good bookings traction and growth across our largest contributors to service revenue.

The third new SaaS metric, we're now reporting as total ARR, which came in at $332 million at the end of the June quarter growing 21% year over year.

The drivers of ARR growth in Q1 were supported by the addition of 28 new deals that we closed in the quarter with a are in excess of $100000 and they represented 31% of new bookings up from 26% in the prior year.

Steven Gatoff: In addition, overall, we had 449 customers generating ARR greater than $100,000 in Q1, a strong 50% year-over-year growth. We'll close out Q1 results with perspective on ARR customer segment dynamics that we initiated last quarter. Looking at ARR by customer size, we saw another quarter of solid growth in Q1. ARR grew essentially at the market in small business, a very healthy 32% in the mid-market, and a strong 52% year over year with our enterprise customers. With that, let's turn to my second topic and talk about the Wavecell acquisition. As we've said, we're very bullish on the CPaaS business and the opportunity that it brings to 8x8. We expect Wavecell to be accretive to our service revenue growth rate, and we see tremendous opportunity ahead with Wavecell in expanding our TAM, adding the terrific API CPaaS technology to our platform, and expanding our global growth.

In addition, overall, we had 449 customers generating a are greater than $100000 in Q1, a strong 50% year over year growth.

Well, both our Q1 results with perspective on air our customer segment dynamics that we initiated last quarter.

Looking at AMR by customer size, we saw another quarter of solid growth in Q1.

Air our grew essentially at the market and small business, a very healthy 32% in the mid market and a strong 52% year over year, whether enterprise customers.

And so with that let's turn to my second topic and talk about the ways tell acquisition.

As we've said, we're very bullish on the C pass business and the opportunity that it brings to eight by eight.

We expect waves cell to be accretive to our service revenue growth rate and we see tremendous opportunity ahead with weight cell and expanding our Tam, adding the terrific.

Past technology to our platform and expanding our global growth.

Steven Gatoff: As we talked about in the announcement press release, the transaction economics were attractive as we acquired a very strategic technology and business that brings high growth revenue, and we paid less than 4 times their anticipated calendar 2019 revenue. Importantly, we also consciously structured the transaction to both minimize dilution and not use a lot of cash. Total consideration of $125 million was comprised of approximately $69 million in cash and $56 million in common stock, of which we tied approximately $12 million to certain vesting restrictions over the next 3 years. This resulted in a net US GAAP purchase price of approximately $113 million, and that is subject to customary adjustments and holdbacks.

As we talked about in the announcement press release, the transaction economics were attractive as we acquired a very strategic technology and business that brings high growth revenue.

We paid less than four times their anticipated calendar 2019 revenue.

Importantly, we also consciously structure the transaction to both minimize dilution and not use a lot of cash.

Total consideration of $125 million was comprised of approximately $69 million in cash and $56 million in common stock.

Of which we tied approximately $12 million to certain vesting restrictions over the next three years.

This resulted in a net us GAAP purchase price of approximately $113 million and that is subject to customary adjustments and hold backs.

Looking at the acquisition and the impact of the C pass business on our revenue model. In addition to the powerful existing subscription based EMR driving our economics see past brings an increasing important usage based aspect to our model.

Steven Gatoff: Looking at the acquisition and the impact of the CPaaS business on our revenue model, in addition to the powerful existing subscription-based ARR driving our economics, CPaaS brings an increasing and important usage-based aspect to our model. Going forward, our core subscription business now benefits even more directly from customer expansion upside, which we suspect will be an increasing contributor to our model in the form of high growth usage-based revenue. On that front, I'd like to talk about my third topic and share our perspective on our decided approach of optimizing a balanced growth portfolio across our technology platform and businesses. Our deliverable is very clear. Drive increasing revenue growth and scale efficiently in order to grow stockholder value.

Going forward, our core subscription business now benefits, even more directly from customer expansion upside.

Which we suspect will be an increasing contributor to our model in the form of high growth usage based revenue.

On that front I'd like to talk about my third topic and share our perspective on our decided approach of optimizing a balanced growth portfolio across our technology platform and businesses.

Our deliverable is very clear.

Drive increasing revenue growth and scale efficiently in order to grow stockholder value.

To accomplish this we are executing on a balanced growth portfolio, and making investments and driving our core subscription business with usage based upside across all three business segments and all of this leveraging one technology platform.

Steven Gatoff: To accomplish this, we're executing on a balanced growth portfolio and making investments and driving our core subscription business with usage-based upside across all three business segments, and all of this leveraging one technology platform. On this framework, we are better optimizing our growth trajectory and our operations. As you've seen in the metrics, we're already seeing strong traction and bookings results in the channel and in the mid-market and enterprise segments, where we're explicitly investing for growth. These larger customers are becoming an increasing part of our portfolio and are expanding at high growth rates. In the small business segment, we're investing for higher velocity and efficiency. We're looking to drive more attractive customer acquisition to lower CAC and deliver more favorable economics.

On this framework, we are better optimizing our growth trajectory and our operations as you've seen in the metrics, we're already seeing strong traction and bookings results in the channel and in the Midmarket and enterprise segments, where were explicitly investing for growth.

These larger customers are becoming an increasing part of our portfolio and our expanding at high growth rates.

In the small business segment, we're investing for higher velocity and efficiency.

We're looking to drive more attractive customer acquisition to lower CAC and deliver more favorable economics.

Steven Gatoff: We're accomplishing this through several opportunities and initiatives, such as our recent 8x8 Express e-commerce platform launch, where we're driving higher new customer volumes at materially lower costs. That is the advantage that a single technology platform provides. It offers us multiple levers to optimize our growth, giving 8x8 a differentiated advantage for several years ahead. In that context, let's turn to our financial outlook. Our guidance for Q2 fiscal 2020 is as follows. We anticipate total revenue to be in the range of $106 million to $107 million, representing 24% to 25% year-over-year growth. We anticipate service revenue to be in the range of $102.5 million to $103.5 million, representing 26% to 27% year-over-year growth. We anticipate non-GAAP pre-tax loss to be approximately $16.5 million. Looking at the full year fiscal 2020, we are raising our previously issued guidance.

We are accomplishing this through several opportunities and initiatives such as our recent eight by eight express ecommerce platform launch, where we're driving higher new customer volumes at materially lower costs.

That is the advantage that a single technology platform provides it offers us multiple leavers to optimize our growth, giving a differentiated advantage for several years ahead.

In that context, let's turn to our financial outlook.

Our guidance for Q2 fiscal 2020 is as follows.

We anticipate total revenue to be in the range of $106 million to $107 million, representing 24% to 25% year over year growth.

We anticipate service revenue to be in the range of $102.5 million to $103.5 million, representing 26% to 27% year over year growth and we anticipate non-GAAP pre tax loss to be approximately $16.5 million.

Looking at the full year fiscal 2020, we are raising our previously issued guidance.

Steven Gatoff: We anticipate total revenue to be approximately $438 million, representing 24% growth over fiscal 2019. We anticipate service revenue to be approximately $420 million, which equates to year-over-year growth of 26%. We anticipate non-GAAP pre-tax loss to be approximately $53 million. Our service revenue guidance reflects both our confidence in accelerating growth in our core business and contributions from revenue from Wavecell. Note that with the Wavecell acquisition closing on 17 July, Q2 will include a stub period of about 10 weeks. I did also want to note that we're modeling flat foreign exchange rates through today's market, and so to the extent GBP or other currencies depreciate further against the dollar, that would put marginal pressure on our year-over-year revenue growth. We're pleased to drive stockholder value with the addition of the highly strategic CPaaS technology onto the 8x8 platform with the addition of Wavecell.

We anticipate total revenue to be approximately $438 million, representing 24% growth over fiscal 2019.

We anticipate service revenue to be approximately $420 million, which equates to year over year growth of 26%.

And we anticipate non-GAAP pre tax loss to be approximately $53 million.

Our service revenue guidance reflects both our confidence and accelerating growth in our core business and contributions from revenue from wave style.

Note that with the waste cell acquisition closing on July 17th Q2 will include a stub period of about 10 weeks.

I did also want to note that we are.

Modeling flat foreign exchange rates to today's market and so to the extent GBP or other currencies depreciate further against the dollar that would put marginal pressure on our year over year revenue growth.

We're pleased to drive stockholder value with the addition of the highly strategic see past technology onto the eight by platform with the addition of way so directly related to this we wanted to highlight that the gross margin profile of waste sales revenue is lower than that of the ucas SNC cast portfolio is consistent with other see past providers and models in the space and as such we expect a modest decline in gross margin in Q2 and through fiscal 2020.

Steven Gatoff: Directly related to this, we wanted to highlight that the gross margin profile of Wavecell's revenue is lower than that of the UCaaS and CPaaS portfolio. It's consistent with other CPaaS providers and models in the space, and as such, we expect a modest decline in gross margin in Q2 and through fiscal 2020. Looking at operating expenses going forward, while we continue to maintain a posture of investing in OpEx for growth, primarily in go-to-market, we continue to expect to realize sequential improvements in operating leverage and sales efficiency coming out of Q1 and throughout fiscal 2020, as we said on our last call. We continue to anticipate improving expense to revenue ratios among all of sales and marketing, R&D, and G&A expenses in Q2 and through the year.

Looking at operating expenses going forward, while we continue to maintain a posture of investing in opex for growth primarily in go to market. We continue to expect to realize sequential improvements in operating leverage and sales efficiency coming out of Q1 and throughout fiscal 2020, as we said on our last call. We continue to anticipate improving expense to revenue ratios.

All of sales and marketing R&D and Gionee expenses in Q2 and through the year.

And so far some color on the bottom line in fiscal 2020. We also mentioned in the acquisition press release that we expect will sell to have a minimal impact on the pre tax loss this year.

Steven Gatoff: For some color on the bottom line in fiscal 2020, we also mentioned in the acquisition press release that we expect Wavecell to have a minimal impact on the pre-tax loss this year and have added roughly an additional $4 million loss to the full year non-GAAP pre-tax loss number. Rounding things out with some color on our balance sheet, we continue to be in a strong financial position with ample cash, strong working capital, and our very attractive 50 basis points of convertible notes as our only debt. As a final takeaway, we continue to see a path to profitability through a combination of accelerating revenue growth and operating efficiency in the business that provides us the ability to achieve non-GAAP breakeven exiting next fiscal year, March 2021. With that, we appreciate your time and support, and we're glad to open the call for any questions. Operator?

And have added roughly an additional $4 million loss to the full year non-GAAP pre tax loss number.

Rounding things out with some color on our balance sheet, we continue to be in a strong financial position with ample cash strong working capital and are very attractive 50 basis points of convertible notes as our only debt.

As a final takeaway, we continue to see a path to profitability through a combination of accelerating revenue growth and operating efficiency in the business that provides us the ability to achieve non-GAAP breakeven exiting next fiscal year March 2021.

With that we appreciate your time and support and we're glad to open the call for any questions.

Operator.

Operator: At this time, if you would like to ask a question, press star followed by the number one on your telephone keypad. That's star followed by the number one, and we'll pause for just a moment. Our first questions come from Matt VanVliet with Stifel.

And at this time would you like to ask a question press Star followed by the number one on your telephone keypad and the star followed by the number one and we'll pause for just a moment.

And our first question is come from Matt Vanvliet with Stifel.

Hi, Thanks for taking my question I'm really appreciate it.

Matt VanVliet: Yes. Hi, thanks for taking my question. Really appreciate it. I guess, looking at the very much improved channel performance in the quarter, it's been a big focus of yours, and you mentioned about six months ago you made some changes. Curious on how you'd place the mix between the improving performance between some of the recent changes, some of the programs put in place a little over a year ago, and then some of it just being the time that it takes to build up those pipelines and sales cycles for the channel partners.

I guess looking at a very much improved channel performance in the quarter.

It's been a big focus of yours in and you mentioned about six months ago. You made made some changes, but curious on how you place the mix between the improving performance between some of the recent changes some of the programs put in place a little over a year ago and then some of it just being the time that it takes to build up.

Those pipelines and sales cycles for the channel partners.

Okay. Thanks.

Steven Gatoff: Thanks, Matt. It's a combination of all of the above. Channel, we were a little late to the party, as you know, and we started to take the channel seriously about a year and a half ago. Had a few missteps, but I think corrected that. Two quarters does not a trend make, but I'm pretty happy with 90-odd% year-over-year growth. I think we're just barely scratching the surface. Nine out of our top 10 deals came from the channel, and we're increasingly seeing the channel liking this idea of this one platform approach that we've got. Because once you train somebody on the whole platform, they can upsell everything from there. They can literally go into a classic land and expand model, and the channel is ideal for that. They can start with selling essentially an X Series.

Vikram Verma: Thanks, Matt. It's a combination of all of the above. Channel, we were a little late to the party, as you know, and we started to take the channel seriously about a year and a half ago. Had a few missteps, but I think corrected that. Two quarters does not a trend make, but I'm pretty happy with 90-odd% year-over-year growth. I think we're just barely scratching the surface. Nine out of our top 10 deals came from the channel, and we're increasingly seeing the channel liking this idea of this one platform approach that we've got. Because once you train somebody on the whole platform, they can upsell everything from there. They can literally go into a classic land and expand model, and the channel is ideal for that. They can start with selling essentially an X Series.

So it's a combination of all of the above.

Channel, we were a little late to the party as you know and we started to take the channels seriously about a year year and a half ago had a few missteps, but I think corrected that and two quarters does not a trend make but I'm pretty happy with 90 odd percent.

Year over year growth and I think we just barely scratching the surface. We nine out of our top 10 deals came from the channel and we are increasingly seeing the channel liking. This idea of this one platform approach that we have got because once you train somebody on the whole platform. They can up sell everything from there. They can literally go into classic land and expand model and the channel is ideal for that they can start with selling essentially an X series. They can sell and then upgrade to Xcede, which is a contact center. We are launching standalone video meetings, starting late fall they will be able to sell that we obviously have the ability also to sell Standalone contact center and then analytics on top of that so it's a process that team has done a great job coverage has improved and I think we've finally cracked the formula. So now it's a question of timing just keep executing at those kind of rates.

Steven Gatoff: They can sell and then upgrade to X8, which is our contact center. We are launching standalone video meetings starting late fall. They'll be able to sell that. We obviously have the ability also to sell standalone contact center and then analytics on top of that. It's a process. The team has done a great job. Coverage has improved, and I think we've finally cracked the formula. Now it's a question of time and just keep executing at those kind of rates.

Vikram Verma: They can sell and then upgrade to X8, which is our contact center. We are launching standalone video meetings starting late fall. They'll be able to sell that. We obviously have the ability also to sell standalone contact center and then analytics on top of that. It's a process. The team has done a great job. Coverage has improved, and I think we've finally cracked the formula. Now it's a question of time and just keep executing at those kind of rates.

And then Stephen can you can you maybe help us narrow it down a little bit more in terms of the guidance being raised about 20 million how much of that contribution is going to be some additional upside from the organic business and the booking trends that you saw in the first quarter.

Matt VanVliet: Then Steven Gatoff, could you maybe help us narrow it down a little bit more in terms of the guidance being raised about $20 million? How much of that contribution is going to be some additional upside from the organic business and the booking trends that you saw in Q1 versus the expectations for contributions from Wavecell?

Versus.

The expectations for contributions from wave so.

Yes, the increases from bulk candidly its fall our confidence in the core business and the growth we see through the rest of the year, the increasing growth as well as obviously the contribution.

Steven Gatoff: Yeah. The increase is from both. Candidly, it's both our confidence in the core business and the growth we see through the rest of the year, the increasing growth, as well as obviously the contribution of Wavecell. We wanted to provide you with that map, which is why we disclosed the acquisition multiple so that you all had a sense of what their calendar 2019 revenue was like. That now you have the numbers to model that out.

Of waste out and so we wanted to provide you with that math, which is why we disclosed the acquisition multiple so that.

You all had a sense of what their COVID-19 revenue was like.

And so that now you have the numbers to model that out.

All right great. Thank you.

Matt VanVliet: All right, great. Thank you.

Sure.

Steven Gatoff: Sure.

Vikram Verma: Sure.

And our next question comes from Nandan Amladi from Guggenheim Partners.

Operator: Our next question comes from Nandan Aladangady from Guggenheim Partners.

Hi, good afternoon. Thanks for taking my question. So Vic you mentioned this on the previous question too but.

Nandan Aladangady: Hi, good afternoon. Thanks for taking my question. Vik, you mentioned this on the previous question too, but two quarters into major changes in the channel, what do you think is left to do? Is there anything that from just a channel development perspective that you still need to implement?

Nandan Amladi: Hi, good afternoon. Thanks for taking my question. Vik, you mentioned this on the previous question too, but two quarters into major changes in the channel, what do you think is left to do? Is there anything that from just a channel development perspective that you still need to implement?

Two two quarters into major changes in the channel.

What do you think is left to do.

Is there anything that from.

Just a a channel development perspective that.

Stephanie.

Need to implement.

No actually it's more execution, if you think about it the company has gone through a massive amount of change over the last few years.

Vikram Verma: No, actually, it's more execution. If you think about it, the company has gone through a massive amount of change over the last few years. We introduced X Series as a bundled offering to the channel around the July timeframe, and we are starting to get that moving in the right direction. We went through and upgraded the entire team. We have dramatically improved coverage, leadership, et cetera. We have started what is called an Elevate program, where we are going in sub-agent by sub-agent and training them. I think now it's much more of we know the formula. It is all about enablement, execution, and literally keep on executing, keep adding coverage, keep increasing the level of knowledge that different channel partners have to our product, and little by little, keep adding additional products that they can upsell.

We introduced X series as a bundled offering to the channel around the July timeframe, and we are starting to get that moving in the right direction. We went through an upgrade of the entire team weve dramatically improved coverage leadership et cetera. We've started what is called and elevate program, where we're going in some agent by sub region and training them. So I think now it's much more of we know the formula. It is all about enablement execution and literally keep on executing keep adding coverage keep increasing the the level of knowledge that different channel partners have to our product and little by little keep adding additional products that they can upset as you know we started out with the X series, but we also started to include now Standalone contact center, where they can sell just standalone contact center by itself that seemed quite a bit of uptick very quickly because I think we have positioned our contact center standalone to be something competitive with the leaders in the.

Vikram Verma: As you know, we started out with the X Series, but we also started to include now standalone contact center, where they can sell just standalone contact center by itself. That's seen quite a bit of uptick very quickly because I think we have positioned our contact center standalone to be something competitive with the leaders in the industry, and we're starting to see good progress there. We are going to be introducing meetings in the late fall timeframe, and the initial response to CPaaS has been extremely positive because CPaaS allows you to customize our platform, increase the level of integration to back office systems, as well as provide end users with bite-sized pieces of this various technology. That is tailor-made for the channel that has spent all this time building customer intimacy and the ability to go in and keep adding more and more features to the channel.

Industry, and we're starting to see good progress there.

We are going to be introducing meetings in the late fall timeframe and the initial.

Response to see pass has been extremely positive because see past allows you to customize our platform increased the level of integration to back office systems as well as provide end users with bite size pieces of this various technology that is tailor made for the channel that has been all this time building customer intimacy and the ability to go in and keep adding more and more features to the channels. So for us it literally comes down to execution.

Vikram Verma: For us, it literally comes down to execution.

And just related to that question as you begin to settle into larger enterprises.

Nandan Aladangady: Just related to that question, as you begin to sell into larger enterprises, how much of the emphasis will be channel-driven versus direct selling?

Nandan Amladi: Just related to that question, as you begin to sell into larger enterprises, how much of the emphasis will be channel-driven versus direct selling?

How much of the emphasis will be a channel driven versus direct selling.

I think our focus initially is channel first but I am a big fan of diversification. So we will continue to put emphasis on direct demand generation. As you know that was another area, where we had a few missteps.

Vikram Verma: I think our focus initially is channel first, but I am a big fan of diversification, so we will continue to put emphasis on direct demand generation. As you know, that was another area where we had a few missteps. We have now put in place our outbound demand generation activity. Our website has dramatically improved, so we're starting to see the demand generation from direct has a nice uptick. Channel has had a nice uptick. We see a good mix of channel as well as a direct demand generation, and we see all of this coming together to keep driving enhanced bookings.

We have now put in pace, our outbound demand generation activity. Our website has dramatically improved so we're starting to see even demand generation from.

Direct have a nice uptick channel has had a nice uptick and so we see a good mix of.

Channel as well as a direct demand generation and we see all of this coming together to see to keep driving enhanced bookings.

Thank you.

Nandan Aladangady: Thank you.

Nandan Amladi: Thank you.

And our next question comes from will power with Baird.

Operator: Our next question comes from William Power with Baird.

Great. Thanks, Yeah, I guess, a couple of questions I, just I just want to come back to where you sell first I wonder if you could provide any further color on how we think about the growth opportunity. There I know you provided.

William Power: Great. Thanks. Yeah, I guess a couple of questions. I just want to come back to Wavecell first. I wonder if you could provide any further color on how we think about the growth opportunity there. I know you provided some color on calendar 2019 contribution, but what does the growth rate look like there, and what do you expect going forward? The second part of Wavecell, just any thoughts on how quickly that can be introduced to the US and other markets, and maybe any breakdown on SMS versus voice there?

Some color on.

COVID-19 contribution, but what does the growth rate look like there and what do you expect.

Going forward.

And the second part of C. Avoid sell just any thoughts on how quickly that can be introduced to the U.S. and other markets and maybe any break down on SMS versus voice there.

Sure. Thanks will so so we wanted obviously as you said to provide you the numbers. It's obviously very early on in the journey for us.

Steven Gatoff: Sure. Thanks, Will. We wanted, obviously, as we said, to provide you the numbers. It's obviously very early on in the journey for us. We have been fairly conservative in the approach with how we're setting out guidance for that business. It's a pretty cool business at the core. It's super strategic, obviously, for what we're doing. We will update you gladly as we report out this first quarter of having that, meaning Q2, where we have the business as part of ours, where we can provide a little bit more informed view on what that growth profile looks like in the bigger portfolio.

And so we have been fairly conservative in the approach with how were setting out guidance for that business. Its a.

It's pretty cool business at the core it's Super strategic obviously for what we're doing and so we will update you gladly as we report out this first quarter of having that meaning Q2, right, where we have the business as part of ours, where you can provide a little bit more informed view on what that growth profile looks like in the bigger portfolio.

And what I can add is more the cross sell opportunities.

Vikram Verma: What I can add is more the cross-sell opportunities. The reason we did this Wavecell acquisition, it's been a technology we have been looking for the last two-plus years, and I always start with the technology because in the end, if the technology is great, everything else eventually takes care of itself. As an added benefit, we love the fact that in essence, they have penetrated a lot of the fast-moving, fast-growing unicorns over in Asia Pacific and in logistics and fintech, et cetera, as well as in the ride-sharing. They've positioned themselves extremely well.

The reason we did this wave cell acquisition, it's been a technology, we have been looking for for the last two plus years and I always start with the technology because in the end of the technology is great everything else. Eventually takes care of itself as an added benefit we love. The fact that in essence, they have they have penetrated a lot of the fast moving.

Fast growing.

Unicorns over in Asia Pacific and logistics in Fintech et cetera, and they have gotten as well as in the ride sharing so they position themselves extremely well and then what we noticed more and more is our core customers have always been looking for customization and bite size pieces on top of our core voice offering we used to do that with pure professional same service engagements now we're able to do it literally with npis out of the box. So we closed the acquisition and within.

Steven Gatoff: What we notice more and more is our core customers have always been looking for customization and bite-sized pieces on top of our core voice offering. We used to do that with pure professional service engagements. Now we're able to do it literally with APIs out of the box. We closed the acquisition, and within 48 hours, some of our largest customers, and you know who they are, were reaching out to us to start projects and how you can add additional capabilities to their core, either contact center or UCaaS offering that they have from 8x8. Surprisingly, one of Wavecell's customers right off the bat also reached out because they have. It's an insurance adjuster. They basically are using video, at the very end, on cell phones to help with insurance adjustment. They want to then tie in the customer support agents in.

48 hours some of our largest customers and you know who they are we are reaching out to us to start projects and how you can add additional capabilities to their core EDA contact center or ucas offering that they have from a bite surprisingly one of waves cells customers right off the bat also reached out because they have it's an insurance adjuster. They basically are using video at the very end on camera on cellphones to help with insurance adjustment. They want then tie and the customer support agents in so in essence, using an X series type platform. So in essence, you can do real time.

Steven Gatoff: In essence, using an X Series type platform, you can do real-time claims assessment. You can see how CCaaS and CPaaS are just kind of starting to merge together, and it's always been our vision. All of these things will come together, and the reason the timing for us was right is we have spent the last few years integrating our platform. Wavecell will not be run as a standalone, bite-size acquisition, just selling pure SMS, two-factor authentication or whatever. It's an API framework for our entire platform, and we see massive cross-sell opportunities on both sides.

Claims assessment. So you can see how seed casts and see path and are just kind of starting to merge together and it's always been our vision. All of these things will come together and the reason the timing for US was right is we have spent the last few years integrating our platform. So wave. So we'll not be run as a standalone bite size acquisition, just selling pure SMS.

Two factor authentication or whatever it's an AI framework for our entire platform and we see massive cross sell opportunities on both sides.

Okay. Thank you.

William Power: Okay, thank you.

Thanks, a lot.

Steven Gatoff: Thanks, Will.

And our next question comes from Rich Valera with Needham and company.

Operator: Our next question comes from Rich Valera with Needham & Company.

Thank you.

Rich Valera: Thank you. With respect to Wavecell, I wonder if you can give any color on how their OpEx break out relative to your sort of proportions on the OpEx lines, and do you see any opportunities for synergies or OpEx savings down the road?

Richard Valera: Thank you. With respect to Wavecell, I wonder if you can give any color on how their OpEx break out relative to your sort of proportions on the OpEx lines, and do you see any opportunities for synergies or OpEx savings down the road?

With respect to waive sale I Wonder if you can give any color on how their opex break out relative to your sort of proportions on the on the Opex lines and do you see any opportunities for synergies or Opex savings down the road.

Yes to the discussion earlier.

Steven Gatoff: Yeah. To the discussion earlier, it's part of the portfolio, and we talk about a balanced portfolio, investing for growth, and investing for efficiency. There is a lot of both with this asset. There is a tremendous amount of overlap on the go-to-market side, and so there is a bunch of efficiency and synergy there. There's also a lot of engineering cost redeployment. It's not a question of we acquired Wavecell and now we have to go spend a ton more money. It's really the money that we would have spent in various capacities in R&D as well as go-to-market, now integrate quite well from an OpEx standpoint.

It's part of the portfolio and we've talked about a balanced portfolio and investing for growth and investing for efficiency and.

There is a lot of both with this asset and so there is a tremendous amount of overlap on the go to market side and so there is a bunch of efficiency and synergy there. There's also a lot of engineering cost redeployment. So it's not a question of we acquired way cell and now we have to go spend a ton more money. It's really the money that we would have spent in various capacities on in R&D as well as go to market.

Now integrate quite well from an Opex standpoint, that's why the litmus test on that if you will as when you look at our full year guidance.

Steven Gatoff: That's why the litmus test on that, if you will, is when you look at our full year guidance, a very small single-digit $ million of incremental investment is what we would see from our own run rate. That's the sanity check on that, if you will. From a margin profile and OpEx profile, we talked about this a little bit in the prepared comments, but at the core, there are very different services that CPaaS provides, right? There's the core SMS messaging services that have its gross margin profile. There are the higher value application services that sit on top of that. That range of gross margin contribution is in the 18% to 22% ZIP code, like the rest of the space.

A very small single digit million dollars of incremental investment is what we would see from our own run rate. So thats that sanity check on that if you will.

From a margin profile and Opex profile, we've talked about this a little bit on the prepared comments, but you know.

At the core there are very different services that C pass provides right theres the core.

SMS messaging services that had its gross margin profile. There are the higher value application services that sit on top of that and so that range of gross margin contribution is in the.

18% to 22% that out like the rest of the space.

Got it.

Rich Valera: Got it. Just to follow up on the contribution expected from Wavecell from a revenue perspective, you pointed out that you've given the kind of sub-4x multiple, and we obviously know the valuation. I would have expected kind of a low $30 million annualized run rate there. If you prorate that for, say, eight and a half months, you'd get kind of a low $20 million expected contribution, which is a little more than what you're raising your guidance by. I'm just trying to reconcile that with your comments that you're raising both the organic and the inorganic components of the guidance.

Richard Valera: Got it. Just to follow up on the contribution expected from Wavecell from a revenue perspective, you pointed out that you've given the kind of sub-4x multiple, and we obviously know the valuation. I would have expected kind of a low $30 million annualized run rate there. If you prorate that for, say, eight and a half months, you'd get kind of a low $20 million expected contribution, which is a little more than what you're raising your guidance by. I'm just trying to reconcile that with your comments that you're raising both the organic and the inorganic components of the guidance.

And then just a follow up on the contribution expected from wave sell from a revenue perspective, you pointed out that you've given the kind of sub fourx multiple.

And we obviously know the valuation so I would have expected kind of a low $30 million annualized run rate there and if you pro rate that first say eight and a half months you'd get kind of a low $20 million expected contribution.

Which is a little more than what you're raising your guidance by so I'm just trying to reconcile that with.

Your comments that you're raising both the organic and the inorganic components of the guidance.

Steven Gatoff: Sure. Your numbers make sense. That's not off the reservation. We would offer that there is a dynamic of the numbers that they have provided and that the transaction was executed on. There's how we run the business. As we said, we're being fairly thoughtful and mindful in so far as how we set guidance for our own business, let alone for something that we just acquired and thinking multiple quarters out. It's really just a sense of being fairly thoughtful and responsible, candidly, so we don't get out over our skis on something that's brand new.

Sure your numbers make sense, so that's not off the reservation.

And we would offer that there is a dynamic of the numbers that they are have provided and that the transaction was executed on there is how we run the business and then as we said, we're being fairly thoughtful and mindful and so far as how we set guidance for our own business, let alone for something that we just acquired and thinking multiple quarters out and so it's really just a sense of being fairly thoughtful and responsible candidly so.

We don't get out over our skis on something that's brand new.

Fair enough okay. Thanks for taking my questions.

Rich Valera: Fair enough. Okay, thanks for taking my questions.

Richard Valera: Fair enough. Okay, thanks for taking my questions.

Steven Gatoff: Yeah, sure. Thanks, Rich.

Yes, sure thanks rich.

And our next question comes from that or Marshall with Morgan Stanley .

Operator: Our next question comes from Meta Marshall with Morgan Stanley.

Great. Thanks.

Meta Marshall: Great, thanks. Maybe turning to kind of the contact center commentary around the 30% of bookings from contact center or having some element. I guess, does that mean that 30% of new bookings bought like an X8 license or 30% of deals have X8 kind of as a portion of them? Just how to think of that factor. Maybe a second question for me-

Maybe turning to credit the contact center commentary around that 30% of bookings from contact center or having some element I guess is that mean that 30% of new bookings thought like an x. eight license or 30% of deals have actually.

Portion of them, just how to think of that an actor.

And then maybe a second question for me.

Go ahead go ahead and I'll ask the second question a follow up.

Steven Gatoff: Go ahead.

Meta Marshall: Go ahead, and I'll ask the second question to follow up.

Yeah, no, 30%, but off a bookings by value is directly attributed this is for Midmarket and enterprise is directly attributed to contact center contact center is starting to become a bigger and bigger piece of our business. The part that's the most exciting me then you have been with US on our journey, we launched the X series X series. When you have Axeight. We just we have a certain value circumscribed contact center certain value ascribed to the voice piece. So part I'm talking about is the stuff that subscribe to contact center, but were also seeing standalone contact center uptick as well.

Steven Gatoff: Yeah, no. 30% of our bookings by value is directly attributed. This is for mid-market and enterprise. It is directly attributed to contact center. Contact center is starting to become a bigger and bigger piece of our business. The part that's the most exciting, Meta, and you've been with us on our journey. We launched the X Series. X Series, when you have X8, we have a certain value ascribed to contact center, a certain value ascribed to the voice piece. The part I'm talking about is the stuff that's ascribed to contact center, but we're also seeing standalone contact center uptick as well. Both of those things reinforce each other. Keep in mind, contact center standalone is a relatively new introduction for us, but we're seeing, again, good acceleration on that.

So both of those things reinforce each other keep in mind contact center stand alone is a relatively new introduction for us, but we're seeing again good acceleration on that we brought a sales team on board over the last few.

Steven Gatoff: We've brought a sales team on board over the last few, actually last four or five months.

Actually last four five months.

From several competitors as well as a product marketing team and we're starting to see as I said uptick on both standalone as well as on combo deals, but contact center is going to be a very appreciable part of our business going forward.

Vikram Verma: From several competitors as well as a product marketing team, and we're starting to see, as I said, uptick on both standalone as well as on combo deals. Contact Center is going to be a very appreciable part of our business going forward.

Okay.

Meta Marshall: Okay. Maybe just a second question, just on what is the difference between ARR and service revenue? Because it seems as if ARR is a little bit lower than the service revenue. Just helping reconcile that piece.

And then maybe just a second question just on what is the difference between air are and kind of service revenue because it seems as if they are a little bit lower than the service revenue just helping reconcile that piece.

Yes sure. So so our our is our book of business right. So thats a point in time value of the recurring revenue measure for our customers as of a given point for example, as of June service revenue is a period concept is that the revenue that we took in on the PNM now over that period.

Steven Gatoff: Yeah, sure. ARR is our book of business, right? That's a point in time value of the recurring revenue measure for our customers as of a given point, for example, as of June. Service revenue is a period concept, that's the revenue that we took in on the P&L over that period.

And so yes, there are.

Meta Marshall: Yeah.

Steven Gatoff: Your ARR is basically your leading indicator a bit, right? ARR grew about 21%, and service revenue also includes other components beyond subscription. There's a little bit of usage revenue. There's a little bit of professional services revenue in there as well.

Hey, you're a R.R. is basically are leading indicator a bit right air grew about 21%.

And service revenue also includes other component beyond subscription so theres a little bit of usage revenue is a little bit of professional services revenue in there as well.

Meta Marshall: Okay. Got it. Thank you.

Steven Gatoff: Yeah, sure.

Operator: Your next question comes from Josh Nichols with B. Riley.

Josh Nichols: Thanks for taking my question. I did want to ask two things. One, the company's obviously been investing in a lot of growth. Can you talk about the target year-over-year headcount increases going forward? Obviously, not including the acquisition, but just organic growth from here. Given that you're increasing the pro forma pretax loss expectation for the year to $54 million, although you beat for Q1, could you walk us through how that's going to translate to free cash flow and your expectations for the year?

This is a lot of growth could you talk about the target year over year head count increases going forward.

Obviously.

Not including the acquisition, but just organic growth from here and given that you're increasing the pro forma pre tax loss expectation for the year two to 54 million, although you beat for the first quarter.

Could you walk us through how thats going to translate to free cash flow and your expectations for the year.

Sure.

Steven Gatoff: Sure. The high level point of view on our headcount is we were growing and will continue to grow headcount at a lower rate than our other expenses. There was some investment you've seen in the last few months, particularly this quarter. It is the largest component of our OpEx, something like 70% of our OpEx are headcount costs. It's something that we can control very closely. Basically, we're starting to see leverage in the last, gosh, probably 18 months. Something like 60% of our company, the employee base, has been here for 18 months or less. You've seen a big increase in headcount over the last 18 months, and that rate is now declining meaningfully so that it's much less than the overall expense increase, and it's much less than the revenue growth rate.

So the high level point of view on our headcount is we were growing and will continue to grow headcount at a lower rate than than our other expenses and so there were some investment you've seen in the last few months.

Particularly this quarter right. It is the largest component of our opex something like 70% of our Opex, our head count cost. So it's something that we can control very closely but basically we're starting to see leverage in the last.

Gosh.

Probably 18 months something like something like 60% of our company employee base has been here for 18 months or less.

So you've seen a big increase in head count over the last 18 months and that.

Rate is now.

Declining meaningfully so that it's much less than the overall expense increase and it's much less than the revenue.

Growth rate, so you're starting to see leverage on the people side of the business.

Steven Gatoff: You're starting to see leverage on the people side of the business, full stop. On free cash flow and what that means, yeah, we manage our cash very frugally. It's an important aspect of the business and obviously of stockholder value, and so we see that metric dovetailing with our point of view and our desire to manage to break even. That should be something that goes part and parcel with that.

Full stop.

On free cash flow and what that means.

Yeah, we we manage our cash very frugally.

It's an important aspect of the business and obviously, a stockholder value and so we see that metric dovetailing with our point of view and our desire to manage to breakeven and so that that should be something that goes part and parcel with that.

No Im just I guess, what I'm really trying to get a handle on.

Josh Nichols: I guess what I'm really trying to get a handle on is, you've targeted being break even exiting next year on a pro forma pretax basis, right? That just seems like it could be a bit of a stretch given the guide for the pretax loss is up pretty significantly quarter over quarter for the September expectation. Although you're talking about getting some increasing leverage on the operating line. Just looking on the cash flow perspective, you had about a $14 million pretax loss, but you burned through about $30 million of cash in the quarter, and how that's going to flow through in the next six to 12 months.

Is.

You've targeted being breakeven exiting this next year.

On a pro forma pre tax basis right.

That just seems like it could be a bit of a stretch given the guide for the pre tax loss is up pretty significantly quarter over quarter for the September expectation, although you're talking about getting some increasing leverage on the operating line and then just looking.

From a cash flow perspective, you had about a $14 million.

Pre tax loss, but you burned through about $30 million of cash in the quarter and how that's going to flow through in the next six to 12 months.

Yes, so one correction as we guided on non-GAAP basis.

Steven Gatoff: Yeah. One correction is we guided on non-GAAP basis to break even by the end of next year in 2021. Look, we have confidence in the leverage that we're seeing right now in the model, and so I would differentiate guidance from how we run the business, right? We've messaged that we have confidence in our ability to drive leverage, and we just messaged that for our expectations right now for Q2, coming out of Q1, where you'll see improved sales efficiency as well as operating efficiency and lower ER ratios and therefore lower burn. We see that continuing on quarter to quarter. That's something that we feel confident about and that we do not draw a direct line with guidance.

Breakeven by the end of next year on point.

2021.

And look we we have confidence in the leverage that we're seeing right now in the model and so we don't see eye without differentiate guidance from from how we run the business right. So weve message that we have confidence in our ability to drive leverage and we just message that.

For our expectations right now for Q2 coming out of Q1, where you will see it improved sales efficiency as well as operating efficiency and lower eat our ratios and therefore lower burn.

And we see that continuing on quarter to quarter.

And so thats something that we feel confident about and that we do not draw a direct line with guidance our guidance approach on the bottom line.

Steven Gatoff: Our guidance approach on the bottom line builds in an appropriate comfort zone and variability, certainly on a brand new business that we just acquired, for example.

Builds in a.

An appropriate comfort zone and variability on certainly on a brand new business that we just acquired for example.

Okay.

Josh Nichols: Okay. That's helpful. I guess, fair to say then, so you are guiding to non-GAAP profitability exiting next year, but there are a lot of non-GAAP costs as far as deferred commission, capitalization of costs. You expect cash flow to probably continue to be negative through next year. Is that a fair assumption?

That's helpful. I guess fair to say that I guess, so you are guiding to non-GAAP profitability actually next year, but there are a lot of.

Non non-GAAP costs as far as deferred commission right.

Capitalization of costs or you expect cash flow to probably continue to be negative through next year is that fair assumption.

Yes, Thats right, we said non-GAAP breakeven by the end of next year and.

Steven Gatoff: Yeah, that's right. We said non-GAAP break even by the end of next year, and the non-GAAP costs are some odds and ends, but it's mostly amortization and SBC.

The non-GAAP costs or some odds and ends but as.

Most of the amortization SPC.

Great. Thanks, a lot.

Josh Nichols: Great. Thanks a lot.

Sure.

Steven Gatoff: Yeah, sure.

Your next question comes from Tim Horan with Oppenheimer.

Operator: Your next question comes from Tim Horan with Oppenheimer.

Thanks, guys can you talk about just customer awareness at this point of all the new products out there obviously see past is really new but I mean, we've had some.

Timothy Horan: Thanks, guys. Can you talk about just customer awareness at this point of all the new products out there? Obviously, CPaaS is really new, but we've had some

Timothy Horan: ... major company come public in the collaboration space, in the video conferencing space, major improvements in contact center. I guess ultimately what I'm trying to get at is, what percentage do you think you have of your enterprise or mid-market total cloud communications spend at this point, and where do you think you can go?

Major all simply come public and the collaboration space and the video conferencing space major improvements in contact center and I guess ultimately what I'm trying to get at is what percentage do you think you have with your enterprise and mid market.

Total cloud communication spend at this point and where where do you think you can kind of go.

I didn't answer the last part, but let me let me address the gist of the question yes.

Vikram Verma: I didn't understand the last part, but let me address the gist of the question. Yeah. Our timing on our acquisitions, frankly, if I may say so myself, has been brilliant. We acquired Sameroom, which is essentially a chat function, which interoperates with 24-odd collaboration platforms, literally out of the box, a couple of years ago, and it is now totally integrated with our products. The team messaging aspect of it is a huge differentiator for us, and we're finding customers are increasingly using it more and more. The second part of it, contact center, as you know, we did three acquisitions in contact center. Contact center has now become a very big part of our business. As we indicated, for our mid-market and enterprise business, 30% of bookings are coming from contact center, and both standalone and on a combined basis, we see that.

Our timing on our acquisitions frankly, if I may say, so myself has been brilliant we acquired same room, which is essentially a chat function, which inter operates with 24 odd.

Collaboration platform literally out of the box.

A couple of years ago, and it is now totally integrated with our products. It's a huge the team messaging that aspect of it is a huge differentiator for us and we are finding customers are increasingly using it more and more the second part of it contact center as you know we did three acquisitions in contact Center contact Center has now become a very big part of our business as we indicated for our Midmarket and enterprise business, 30% of bookings are coming from contact center and both Standalone and on a combined basis, we see that as a and we're winning I think I can't remember the exact number but I think seven out of 10 deals or something like that were.

Vikram Verma: We're winning, I think. I can't remember the exact number, but I think 7 out of 10 deals or something like that had contact center in it. Now we're starting to see a big shift in video. As you know, we acquired Jitsi from Atlassian about October, November of last year. We are launching it or just launched it a few days ago, bundled as part of our X Series and also as part of our Express. That's starting to have quite a bit of impact, and we're hearing more and more from customers. We'll be launching that standalone by late fall timeframe.

Contact center.

D had contact center in it now we're starting to see a big shift in video as you know we acquired you'd see from a glassy and about Oh October November of last year. We are launching it just launched it a few days ago bundled as part of our X series and also as part of our express.

That's starting to have quite a bit of impact and we're hearing more and more from customers, we'll be launching that stand alone by late fall timeframe. So we'll have both contribution one as a way to protect the overall.

Vikram Verma: We'll have both contribution, one, as a way to protect the overall pricing power of our X Series because it's bundled in, but also as a standalone product that we can sell on itself, and since it's all on one platform, you get double leverage essentially. Indicated over time, we start to see the ability to then offer not just the Express piece, which we just launched also, which is for our low-end SMB business, basically is a micro SMB business, which is fully automated, and that has bundled meetings in it. All of these growth vectors are just starting to happen. If I were to stage it, I would say for the majority of our business in the past has been UCaaS. Increasingly, CCaaS is becoming a bigger and bigger portion of our business.

Pricing power of our X series, because it's bundled in but also as a standalone product that we can sell on itself and thats. It. So since it's all on one platform you get double leverage essential.

Gated overtime.

We start to see the ability to then offer not just the express piece, which we just launched also which is for a low end SMB business.

Basically the micro SMB business, which is fully automated and that has bundled meetings in it.

So all of these growth vectors are just starting to happen. So if I were to stage. It I would say the majority of our business in the past has been ucas increasingly see gas is becoming a bigger and bigger portion of our business collaboration is built into all our ucas and we're seeing pretty significant adoption, particularly from enterprise customers. We are now starting to see the beginnings of adoption by offer video meeting solution. The APEI meeting solution that we just launched and then we anticipate that express will help us increase the efficiency of our SMB cat quite dramatically because its complete self service is launched on our E Commerce platform and there will be no essentially chat support et cetera, and its intended for 510 c. tight.

Vikram Verma: Collaboration is built into all our UCaaS, and we're seeing pretty significant adoption, particularly from enterprise customers. We are now starting to see the beginnings of adoption of our video meeting solution, the 8x8 Meetings that we just launched. We anticipate that Express will help us increase the efficiency of our SMB CAC quite dramatically because it's complete self-service. It's launched on our e-commerce platform, and there will be no essentially chat support, et cetera, and it's intended for 5- or 10-seat low-end SMB businesses that are just starting out.

Our low end SMB businesses that are just starting out.

Very helpful. Thank you.

Timothy Horan: Very helpful. Thank you.

And the next question comes from George George Sutton with Craig Hallum.

Operator: The next question comes from George Sutton with Craig-Hallum.

Thank you I want to go back to rich Rich's question, because I think thats really the key question relative to guidance and the contribution from the acquisition is there not some deferred revenue you're losing.

George Sutton: Thank you. I want to go back to Rich's question because I think that's really the key question relative to guidance and the contribution from the acquisition. Is there not some deferred revenue you're losing as a result of the acquisition? Because that would answer that question a little more cleanly.

As a result of the acquisition because that would answer that question a little more cleanly.

There is no deferred revenue that we are losing at all it's a usage based model and that was not part of the calculus in the acquisition.

Vikram Verma: There is no deferred revenue that we are losing at all. It's a usage-based model, and that was not part of the calculus in the acquisition.

Okay.

George Sutton: Okay. One other question, relative to your mission to do the standalone video collaboration in the fall. I'm just curious how that's being funded, how you're going to market there, who you're viewing as the competition.

One other question relative to your mission to do the Standalone video collaboration in the fall.

Im just curious how thats being funded how you're going to market, there, who you're viewing as the competition.

So.

Vikram Verma: I'll do it in a couple of ways. One, it's funded as part. Remember, I have one platform. The whole idea of having one platform is it's one engineering team, and so we are able to have our engineers work interoperably on all of our various capabilities, and a lot of the services on that one platform are shared. The way we'll be going to market initially is we are bundling it as part of our X Series. We just launched that over the last few weeks. We are also going to market with it as part of our Xpress, which is our e-commerce solution.

I'll do it in a couple of ways one its funded as part remember I have one platform the whole idea of having one platform is its one engineering team and so we are able to have our engineers work inter operatively on all of our various capabilities and a lot of the services under one platform our shared.

The way, we will be going to market.

Initially is we are bundling it as part of our X series, We just launched that.

Over the last few weeks, we are also going to market with it as part of our express which is our e-commerce solution I want to see how both of those go out and then depending on that we will either go to market with it using our e-commerce platform as a standalone meeting solution or as a standalone meeting solution that will have either our inside sales our field sales. So that's why I keep hammering. This concept the one platform because it gives us ultimate flexibility with one platform you can bundle it as part of your X series you can sell it through your inside sales channel sales to your field sales or you can sell it through your ecommerce platform as Standalone. What we are trying to do and put the focus on is the customer the way our customers want to buy is the way we want to sell them whats increasingly starting to happen and I think you are you have your.

Vikram Verma: I want to see how both of those go out, and then depending on that, we will either go to market with it using our e-commerce platform as a standalone meeting solution or as a standalone meeting solution that will have either our inside sales or our field sales sell. That's why I keep hammering this concept of one platform because it gives us ultimate flexibility. With one platform, you can bundle it as part of your X Series, you can sell it through your inside sales, your channel sales, your field sales, or you can sell it through your e-commerce platform as standalone. What we are trying to do and put the focus on is the customer. The way our customers want to buy is the way we want to sell them.

Vikram Verma: What's increasingly starting to happen, and I think you have your finger on the pulse of the industry. I think as you check around with certain analysts that have had early looks at 8x8 Meetings, they're pretty impressed with the overall product and how effective it is, and we're starting to see large enterprise customers saying, "Hey, we've got your UCaaS solution. Can you just give us essentially the meeting solution, and we can add that on and use it to replace Webex?" The primary competitors we have are no secret. It's primarily the legacy guys, right? So it's the Avayas, the Ciscos, the Mitels, the ShoreTels, and whatever tel there is. It's also increasingly people like Webex and Cisco, where we see them as legacy vendors. We obviously see cloud vendors such as RingCentral and Five9 and inContact all the time. Every once in a while we'll see Zoom.

Finger on the pulse of the industry I think as you check around certain analysts that ahead early looks at it by meetings. They are pretty impressed with the overall product and how effective it is and we are starting to see large enterprise customer, saying, Hey, we've got your Ucas solution can you just give us essentially the meeting solution and we can add that on and use it to replace Webex.

I see the primary competitors, we have our no secret is primarily the legacy guys right. So it's the via via the Sysco, the mitel to Shoretels and whatever tell there is it's also increasingly people like Webex and Cisco, where we see them.

As legacy vendors, we obviously see cloud vendors, such as Ringcentral and five nine and Incontact all the time.

And every once in a while we'll see soon but though target initially for our meetings will be people like Webex and then go to meeting and then eventually people like zoom between our.

Vikram Verma: The target initially for our meetings will be people like Webex and then GoToMeeting, and then eventually people like Zoom. We'll take our time over the whole process. Initially, as I said, we would start with a bundle solution.

We will take our time over the full process and initially as I said, we would start with a bundled solution.

Okay helpful clarity. Thank you.

George Sutton: Okay. Helpful clarity. Thank you.

And our next question comes from James Breen with William Blair.

Operator: Our next question comes from James Breen with William Blair.

Thanks for taking the question just with respect to way so obviously.

James Breen: Thanks for taking the question. Just with respect to Wavecell, obviously, we know the product set that you're getting and how you're going to integrate that in. Is there some expertise you're getting also behind the scenes you can talk about, just in terms of, because of their geographic location and just from a sales perspective and management perspective in Asia? Thanks.

Product set to getting to know you and integrate that in.

Is there some expertise to getting also behind the scenes you can talk about in terms of became their geographic location and just some missed sales perspective and that he expected in Asia. Thanks.

They are so I'll take the lead on that one so a couple of things one they have an incredible team that has carrier relations with I think about 190 carriers. They have built an amazing telco network and the ability to do seamless messaging all over the world. These guys are excellent that's one aspect of it.

Vikram Verma: I'll take the lead on that one. A couple of things. One, they have an incredible team that has carrier relations with, I think, about 190 carriers. They have built an amazing telco network and the ability to do seamless messaging all over the world. These guys are excellent at it. That's one aspect of it. All of them have been in this industry. This is a nine or 10-year-old company that we've been tracking for some time. Second, what they have is a lot of ability to work with customers where they do essentially design wins and they embed their product in. Some of their customers, for example, have used them not just for initially SMS, but now are starting to use them for voice and video, which we see as a huge opportunity for upsell with us.

They're all of them have been in this industry that a nine or 10 year old company that we've been tracking for sometime second what they have is a lot of.

Ability to work with customers, where they do essentially design wins and the embed their product in.

Some of their customers for example have used them not just for initially SMS, but now are starting to use them for voice and video, which we see as a huge opportunity for upsell.

With us third they have a local presence in Singapore as well as Philippines in Hong Kong, and Japan, and a few other local markets, Indonesia, Malaysia et cetera.

Vikram Verma: Third, they have a local presence in Singapore as well as Philippines, Hong Kong, and Japan and a few other local markets, Indonesia, Malaysia, et cetera. We have already an installed base of customers that are global, but maybe MNCs based in either US, UK, or Australia that have headquarters all over the place. It was quite interesting how several of them essentially see both Wavecell as an opportunity for additions to their product, and we also have, as I indicated, Wavecell customers who see the ability for UCaaS and CCaaS. Particularly our UCaaS solution, the 8x8 Express, which is the e-commerce solution. We see great opportunities to go global with it because it's a completely seamless solution.

And we have already an installed base of customers that are global that may be made comments is based in the us the UK, Australia that have headquarters all over the place and it was quite interesting how several of them essentially see both wave sell as an opportunity for.

Additions to their product and we also have as I indicated waves, so customers, who see the ability for EWC SNC gas and particularly our ucas solution. The express the eight by express which is the E. Commerce solution, we see great opportunities to go global with it because it's a completely seamless solution and so the intent is overtime. We're testing it out in the US initially but launch that all over the world and we will now have an installed footprint all over the world and if you think about it we have become a truly global company. We have one 900000 employees in the US we have people in Australia and.

Vikram Verma: The intent is, over time, we're testing it out in the US initially, but launch that all over the world, and we will now have an installed footprint all over the world. If you think about it, we have become a truly global company. We have, what, 900,000 employees in the US. We have people in Australia and Asia Pacific. We now have people in Singapore. We also have about 500 people in—sorry, I said 900,000. We have about 900 to 1,000 employees in—I'm not quite there yet. We have between 900 to 1,000 employees in the US, about 500 plus employees between UK and Europe. We now have a pretty appreciable 70, 80 employees in Asia Pacific region plus ANZ.

Asia Pacific area, we now have people in Singapore, We also have about 500 people in.

Yes.

Sorry actions I said 900000 with about 902000 employees im not quite there yet.

So we have between 900 to 1000 employees in the US about 500 plus employees in between UK and Europe . We now have a pretty appreciable 70, 80 employees in Asia Pacific region plus.

NZ, we've really built a global footprint and with the kind of carrier relationships that wave cell has we truly have a really differentiated offering, particularly SMS eight by it is the best Global voice company add that with a great SMS network, you really have something powerful.

Vikram Verma: We have really built a global footprint, and with the kind of carrier relationships that Wavecell has, we truly have a really differentiated offering, particularly SMS. 8x8 is the best global voice company. Add that with a great SMS network, you really have something powerful.

And the investments that you're making in the channel.

James Breen: The investments that you're making in the channel that you've made over the last 12 months or so, will those overlap into the Wavecell territories? Is there a different group of channel partners that you have to deal with there?

That you've made over the last 12 months or so will those overlap into the wait till territories, there sort of a different group of channel partners that you have to deal with there.

Both actually some channel partners have actually a presence in that part.

Vikram Verma: Both, actually. Some channel partners have actually a presence in that part. Some don't. There will be some overlap. The most immediate overlap is we see the ability for channel partners that are existing channel partners in US and UK to be able to sell Wavecell services on top of the 8x8 UCaaS platform. We also have, as I indicated, partners in Australia. There's a tight integration between the partners in Australia and all of Asia Pacific. We see opportunities for growth there as well.

Some don't so there will be some overlap the most immediate overlap is we see the ability for channel partners that are existing channel partners and us and UK to be able to sell waves sell services on top of the eight by Ucas platform. We also have as I indicated partners in Australia. So there's a tight integration between the partners in Australia, and all of Asia Pacific. So we see opportunities for growth there as well.

Great. Thank you.

James Breen: Great. Thank you.

And our next question comes from Mike Latimore with Northland capital.

Operator: Our next question comes from Mike Latimore with Northland Capital.

Great. Thanks.

Mike Latimore: Great, thanks. Yeah, I guess first on Wavecell, have they historically mainly sold to developers or are their channels more diverse than that? I guess, given their usage model, is there any seasonality in their business throughout the year?

I guess first on the way, so historically, mainly sold to developers or other channels.

A more diverse than that and then I guess given their usage model is there any seasonality in there when their business traveler.

So I'll take that one so one.

Vikram Verma: I'll take that one. One, Wavecell is primarily sold to enterprises. They are not about a developer community, which if you think back to some of my own views, that is totally aligned with our vision. We see APIs as a logical extension of SaaS as a way to customize and as a way to go to local markets. What Wavecell has done is they have traditionally worked with enterprises to embed their solution as part of a larger solution that the enterprise is offering. One of their customers, for example, does ride sharing and is one of the most prominent ride-sharing companies in that part of the world. They provide essentially SMS. Now, there's a logical extension of voice and other capabilities like video that you can add to that.

Wave cell is primarily sold to enterprises. They are not about a developed community, which a few.

Think back to some of my own views that is totally aligned with our vision, we see exercise as a logical extension of SaaS as a way to customize and as a way to go to local markets and so what wave cell has done is they have traditionally worked with enterprises to embed their solution as part of a larger solution that the enterprise offering one of their customers. For example, does ride sharing and as one of the most prominent ride sharing companies and that part of the world. They provide essentially SMS now there is a logical extension of voice and other capabilities like video that you can add to that so again, there as a geared more towards the enterprise as opposed to the developer community and that will remain our focus our focus is the ability to work with enterprise to create applications that we can embed into larger applications as well as the framework that we can use to take our core you gassy guest offerings, plus the X series and be able to provide cost.

Vikram Verma: Again, their APIs are geared more towards the enterprise as opposed to the developer community, and that will remain our focus. Our focus is the ability to work with enterprise to create applications that we can embed into larger applications as well as the framework that we can use to take our core UCaaS, CCaaS offerings, both the X Series, and be able to provide customization and additional features on top of that. Again, the focus is not on the developer community. The focus is on professional services organizations.

Amortization and additional features on top of that so again the focus is not on the developer community. The focus is on professional services organizations.

Steven Gatoff: To your question on seasonality, there's some at the customer level. There's some verticals that they have some specialty in that have seasonality naturally, but the portfolio effect kicks in, so that from an aggregate level, when you look at the revenue stream, there's not a tremendous amount of seasonality.

And then to your question the seasonality there is some at the customer level. There's some verticals that they have some specialty and then have seasonality naturally, but the portfolio effect kicks in so that from an aggregate level. When you look at the revenue stream there is not a tremendous amount of seasonality.

Got it and then just last on the the deployment cycles, I guess, especially with your ex series.

Mike Latimore: Got it. Just last on the deployment cycles, I guess, especially with your X Series, how have they been sort of trending over the last year?

How have they been sort of trending over the last year.

Getting faster I mean every VX series as you know it was a difficult birth, but.

Vikram Verma: Getting faster. I mean, the X Series, as you know, it was a difficult birth, but once we got past it, once we got it introduced to the channel partners, once our own deployment team got much more comfortable with it is definitely accelerating our time to revenue across the board. That's a good sign. It's been a long journey. Bundling everything into the X and completely upgrading the platform was a nontrivial amount of work, but I think it is paying fruit, and we're seeing revenue acceleration there. With regard to Wavecell also, I think we see an opportunity where because we have one platform, the API framework will apply to the entire platform, and you won't run Wavecell as standalone.

Once we got past it.

I think it is bearing fruit and we are seeing revenue acceleration there with regard to wave. So so I think we see an opportunity where because we have one platform. The apia framework will apply to the entire platform and you wont runway of seller standalone. It will have a standalone poor part of the business, but the real value will be how it tightly integrates as an EPA framework for the entire consolidated platform. They advised as built together.

Vikram Verma: It'll have a standalone core part of the business, but the real value will be how it tightly integrates as an API framework for the entire consolidated platform that 8x8 has built together.

Great. Thanks.

Mike Latimore: Great. Thanks.

And our next question comes from Jonathan Kees with Summit insights group.

Operator: Our next question comes from Jonathan Kees with Summit Insights Group.

Great. Thanks for taking my questions.

Jonathan Kees: Great. Thanks for taking my questions. Dick, I think I'm going to tag along to what you just talked about in terms of how the Wavecell is going to be tightly integrated with the network. I guess I'm just curious in terms of the time frame in terms of this integration, not just from the network. I mean, it has its own cloud network. This is the core stuff that you just referenced. What is the time frame you think about in terms of integrating that onto your cloud platform, or excuse me, your cloud network? In terms of the platform in general, you're talking about your engineers being able to work on multiple products, being able to interoperate in terms of their functionality.

<expletive> I think are going to tag on to what you just talked about in terms of how.

The waste tells me tightly integrated with the.

The network I guess and I'm, just curious in terms of or the timeframe in terms of this integration not just from the network I mean, it has its own cloud network and it's you know this is the core stuff that you just referenced.

What is the time from we think when terms of integrating that onto your cloud platform or excuse me your cloud network and insurance the platform in general you know you're talking about your engineers being able to work on multiple products being able to inter operate in terms of their functionality.

Jonathan Kees: You've already also talked about sales, some of the sales teams already in channel also being able to sell Wavecell on top of your UCaaS. Just trying to get a sense in terms of the integration from both a technical level as well as the engineering level and in the total sales and channel level.

You've also talked about sales some of the sales teams already in channel or he also being able to sell we sell the top of your Ucas, just trying to get sense in terms of the integration for from both a technical level as all the engineering level and in the <unk> total sales and channel level.

Okay, let's break it out into different this integration will happen incrementally over the course of the year.

Vikram Verma: The integration will happen incrementally over the course of the year. To give you one interesting anecdote, one of our customers had a need on top of our UCaaS platform, and I'm sure you can guess the type of customer, where they wanted to send alerts out to people on shared office spaces. Our engineers were able to put together a demo for them in 48 hours using Wavecell on top of our core offering. Portions of it will work. The integration will happen over time, but portions of it will work. The classic model we will follow is exactly the model we have followed for all the various technologies we have acquired over the years. I'll pick the last two.

To give you one interesting anecdote one off our customer had a need on top of our Ucas platform and I'm sure. You can guess the type of customer where they wanted to send alerts to people on shared office spaces. Our engineers are able to put together a demo put them in 48 hours are using wave. So on top of our core offerings. So portions of it will be worth the integration will happen over time, but portions of it will work.

The way the classic model, we will follow is exactly how the model. We have followed for all the various technologies, we have acquired over the years I'll pick the last two same room, which was essentially a collaboration engine was embedded into both our mobile app as well as into our desktop App and now is part and parcel of everything that has ever shipped to anybody at all time customers of every size and so collaborate which is our team messaging capabilities now completely embedded video that is just starting to happen. It started to happen. A video. If you recall was acquired in I think October November of last year and already the video has been embedded into our core our virtual office desktop App has also been embedded into our core virtual office mobile App, it's not part of our integrated.

Vikram Verma: Sameroom, which was essentially a collaboration engine, was embedded into both our mobile app as well as into our desktop app, and now is part and parcel of everything that has ever shipped to anybody at all time and customers of every size. Collaborate, which is our team messaging capability, is now completely embedded. Video, that is just starting to happen. It started to happen. Now, Video, if you recall, was acquired in, I think, October, November of last year, and already the Video has been embedded into our core Virtual Office desktop app. It's also been embedded into our core Virtual Office mobile app. It's now part of our integrated Express solution, and it's also integrated about new X Series sales on a case-by-case basis. As I said, that is being sold by the exact same sales team.

Express solution and it's also integrated about new ex series sales.

On a case by case basis, and as I said that it is being sold by the exact same sales team, we will make a determination on standalone meetings, where it will be sold by the exact sales same sales team. We will use the E. Commerce platform that we are testing essentially with our express offering to also additionally, hide meetings to that same ecommerce platform with regard to wave. So I think we will essentially assists them and.

Vikram Verma: We will make a determination on standalone meetings where it'll be sold by the exact same sales team, but we will use the e-commerce platform that we are testing essentially with our Express offering to also additionally add meetings to that same e-commerce platform. With regard to Wavecell, I think we will essentially assist them. They've got some amazing high growth e-commerce, fintech, logistics players that are household names in Asia Pacific. They've done a phenomenal job of embedding their solution into several of these, and as these companies are growing, Wavecell grows with them. We will be working with them to add not just SMS messaging, but voice and other capabilities right off the bat. Several of Wavecell's customers now want contact center solutions because that's a logical extension to essentially a CPaaS application. That's easy for us to do.

They've got some amazing high growth.

E Commerce Fintech logistics players that are household names in Asia Pacific they've done a phenomenal job of embedding their solution into several of these and as these companies are growing wave. So grows with that we will be working with them to add not just SMS messaging, but voice and other capabilities right off the bat several waves of customers now want contact center solutions, because that's a logical extension to essentially a sea bass application that's easy for us to do a contact center were.

Vikram Verma: Our contact center works globally, and that's why the standalone contact center is so valuable because that can be immediately sold as an addendum to Wavecell. It'll happen, as I said, over time, incrementally over the course of the year, but I think in about a year or so, it'll be fully integrated.

Centre of workers globally, and that's why the Standalone contact center is so valuable because that can be immediately.

So as an addendum to wave so so it'll happen as I said overtime.

As I said incrementally over the course of the year, but I think in about a year or so that will be fully integrated.

Great that's helpful and if I can one of the question.

Jonathan Kees: Great. That's helpful. If I can, one other question. In terms of your deal strategy, and maybe I can step back and ask about your deals in general. You've had a large amount of standalone contact center sales, and that's a positive surprise. That's certainly a trend that it would be encouraging to see continuing. Wavecell already has that. You're talking about Video coming out in the fall as a standalone product. Do you have a change in terms of deal strategy? Are you looking at profitable deals, or are you looking at just get a footprint in and then profitability in the mid to long term?

In terms of your deal strategy.

And maybe I can step back and ask about your your deals in general you've had a.

A large amount of Standalone contact center sales and that's a positive surprise.

And that's certainly a trend that.

It would be encouraging to see continuing.

Oh wait for Hillary has that you're talking about video coming out in the fall as a standalone product gets them.

What are you are you.

You have a change in terms of a dual strategy are you looking at profitable deals or are you looking at Ah you know just get a footprint in and then profitability in the mid to long term.

For operating it is worth all across our product okay.

Jonathan Kees: For each-

Jonathan Kees: I'll break it into

Jonathan Kees: For all across the product? Okay.

Vikram Verma: Yeah. Let's walk through. We've had the same vision, and so I think you have the benefit of us never having changed our strategy with regard to what we think the customers want. The strategy has been this creation of one platform with the ultimate mix or match. I can sell you the entire suite of products bundled in an X Series, or I can sell you elements of it standalone, and that has always been. Now the great thing is, when you do development for standalone, it applies to the bundle and vice versa. When you do anything that changes, say, for example, single sign-on, data layer, security, or reliability for the platform, it applies to every individual component as well as to the bundle. The way we are going to market is we launched X Series in the July timeframe.

Yes, so let let's let's walk too we've had the same vision and so I think you have the benefit of US never haven't changed our strategy with regard to what we think the customers want the strategy has been this creation of one platform with the ultimate mix or match I can sell you the entire suite of products bundled in an X series or I can sell you elements of bit Standalone and that has always been so not a great thing is when you do development for Standalone it applies to the bundle and vice versa.

When you do anything that changes say for example.

Single sign on our data layer or security or reliability for the platform. It applies to every individual component as well as to the bundle. So the way we are going to market is we launched X series in the July timeframe, we're getting that out there we're starting to see traction across the board with X series and overtime over the next 18 months or so our entire platform will be on the same common platform.

Vikram Verma: We're getting that out there. We're starting to see traction across the board with X Series, and over time, over the next 18 months or so, our entire platform will be on the same common platform. What we've done is once X Series is launched, we took a component of X Series, which is contact center, and we launched that standalone. We took a portion of X Series, essentially tightened it all up so it was very easy and self-service, launched that as 8x8 Express. We will take a portion of X Series, which is our meeting solution, and we will launch that essentially as standalone, and it's already been launched as bundled.

Then what we've done is once X series launch we took a component of X series, which is contact center. When we launch that Standalone. Then we took a portion of X series essentially.

Tightened it all up so it was very easy and self service launch that as expressed video as a pilot express we will take a portion of X series, which is our meeting solution and we will launch that essentially a standalone and has already been launched as bundled. So the intent is essentially a land and expand model, which is classic wherever you SaaS company and it's the same common sales team that sells all of course of all our products and to be the same channel that we'll use to go to market with all our products. So thats fundamentally how we believe we're going to drive very significant leverage in the model. That's why we've had this one platform strategy because all the work that you do for one element or for the platform applies equally for everything and then because you on your own technology can split it up and sell it and you also maintain pricing.

Vikram Verma: The intent is essentially a land and expand model, which is classic for every SaaS company, and it's the same common sales team that sells all our products, and it'll be the same channel that we'll use to go to market with all our products. That's fundamentally how we believe we're going to drive very significant leverage in the model. That's why we've had this one platform strategy, because all the work that you do for one element or for the platform applies equally for everything. Then because you own your own technology, you can split it up and sell it, and you also maintain pricing leverage, because in essence, you can defray costs between different elements and always ensure the customer is getting full value.

Our leverage because in essence, you can defray costs between different elements and always ensure the customer is getting full value.

Okay, great. Thank you.

Operator: Okay, great. Thank you. Our final question comes from Ryan Koontz with Rosenblatt Securities. Thanks. My question's been answered already. Appreciate it.

Operator: Okay, great. Thank you. Our final question comes from Ryan Koontz with Rosenblatt Securities.

And our final question comes from Ryan Krueger with Rosenblatt Securities.

Thanks, My questions been answered already appreciate it.

Ryan Koontz: Thanks. My question's been answered already. Appreciate it.

All right. Thank you.

Vikram Verma: All right. Thank you.

And I would like to thank everyone for joining today's conference call you may now disconnect.

Operator: I would like to thank everyone for joining today's conference call, and you may now disconnect.

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