8x8 (EGHT) 28 Jul 222023 Q1 Earnings call transcript

Good afternoon. Thank you for attending today's 8x8 Fiscal First Quarter Conference Call. My name is Amber, and I will be your moderator for today's call. [Operator Instructions] I now have the pleasure of handing the conference over to Kate Patterson, Head of Investor Relations. Kate, please proceed.

good and operator, you, afternoon, everyone. Thank Chief will results with agenda our overview Financial Middleton, of include you strategy. will Officer; a quarter first Chief our Hunter and our our of Officer; Officer, Dave an Wilson, who give review Sam Today's Product Sipes, product Executive Chief

will Following there question-and-answer be our prepared session. a remarks,

investors.XxX.com. the A are which available provided to of that, press reconciliation Sipes. our these measures turn earnings non-GAAP factors cash our financial no in you update we prepared flow on plans Relations these strategies. with CEO, the our and measures on Any forward-looking statements includes may materially call, that to or presentation I'll get we report cases, over forward-looking discussion presentation slides, our to today on focus together forward-looking with uncertainties comparisons, not accordance our analysis accepting as generally SEC. vary started, Before well on at put some We or this U.S. closest principles on statements increased the as is release website risk GAAP statements from in our as GAAP. have with comparable let forward-looking that reliance performance, risks described With future call this in and business, measures were to actual Certain that profitability growth our financial slides year-over-year me as and and the not them. today, remind you results involve and filed in Dave Investor undue and in including obligations as cause about product statements made to our caution accounting call reflect they be will earnings our discussed of in XxX

today. joining Thank and you Good us you, afternoon, everyone, for thank Kate.

as continues update Fuze, the this another the will results shareholders. integration is and profitability call near with an quarter which value on review plans to emphasis stakeholders, with I quarter retention. cash deliver to generation non-GAAP for flow discuss place will ARR cash our I first delivered operating outperform also go and We first customers, year give to greater on and growth, that the our On expectations we in right XXXX today, the believe customer solid and in well. of our our employees to flow Fuze positive quarter. We term. strategy fiscal the strong continues all profitability

we ARR. materially next at of total was sequential ARR. for ARR grow several accounts to contact see empowering now continues XX% shift our every of this and opportunity ARR strong, to than and to We and contributed more to over continue unified center total The very XX% we growth strategy future. excess an the integrated communication enterprise XX% with improve Enterprise for continues ARR through employee growth capabilities, the our to grew foundation grow quality of company-wide over and year-over-year year-over-year The XCaaS. ARR advance XCaaS sustainable and years. are XX% the of in and the strengthening in

sequentially declined an to was growth. ARR and business CPaaS Our and total year-over-year $X enterprise million headwind and

profitability in gross and in service first efficiency non-GAAP year-over-year another flow. non-GAAP Our resulted resulted XX%. cash continued margins of margin quarter sequential higher and gross The improvement increases operational profit high focus operating in gross on revenue multiyear with at in

and ahead cash operating As a our were result, of both expectations. non-GAAP operating income flow

increased had time. XCaaS fiscal increased call, innovation and margin flow and are XXXX in to remainder operating we of last and As we as we margin On of the efficiencies investing as for the to said to cash year well to continue operating line the service the beyond, increased revenue R&D sales driving profitability to guidance for 'XX. reflected range to X% committed operating will over in in X% allow range. doubling we operational our deliver in in programs mid-XX% growth This that investment sight full fiscal year look year and us our 'XX core fiscal capacity original margin to marketing drive needed and

quarter, to Over profitability. we the last investing evaluate have versus of our mix growth increasing continued for

customers. flow increased We marketing cautious are by growth reflect prioritizing and more to in cash our of the sales SMB profitability and and and moderating CPaaS behavior investment

achieve we additional 'XX. in Sam can that fiscal more changes XXXX us unit target, exit detail, XXX flow I X% leverage or now least achieve percentage margin. less and believe operating to revenue or are operating Further, we're economics our in allowing year improved expenses discuss year to throughout As to operating making a as fiscal 'XX the an holding XXX in our the will operating in flat year To will gross of to fiscal at margin reflected income. points at greater we allow above basis

and also are million for million, in investment annual reducing well our CPaaS. by and $XX and ranges in total as $XX initiatives foreign weakness incremental continued as We lower marketing sales headwinds service revenue and reflecting respectively, guidance exchange

provide the benefits to even recessionary benefits of environment. in address cost terms me be more our a little We detail offers compelling likely and on telephony Let a behind that a enormous cloud huge thinking opportunity. flexibility, to more market our Migrating in guidance. are organizations

communications workforce Our between the internal work blurring the opportunity to than cloud, hybrid is and transformation need is just communications offer greater and and functionality. contact the boundaries environment mobile digital increasingly moving center to on-premise

advantage, and Teams' XCaaS experience, to will competitive the to an we are contact enhance to contact journey. end-to-end to the by invest this the features realize delivering tailored only fully needed innovation in center advanced the the we uniquely cloud-based user needs emphasis opportunity wherever of each UC core As organization. center fully owned global our contact To with this in and positioned on capitalize center on connectivity driving unified, expanding customer extending continue offering platform,

create revenue way for and best per greater is build Frontdesk, With for in the workforce, build cross-sell. future. innovations user new add I we like today's sustained IQ R&D through in investment continued that As future, Conversation our can to opportunity enable critical long-term term believe Agent foundation modern we innovations in to we in the a the our trade-offs better some investment near the making future. to we are growth the Workspace

and result, are in moderating we a As initiatives. incremental marketing sales and investments extent, a G&A lesser to

and strategy have incremental growth. priority to the top believe I it for immediate drive an the macro our our right refinancing While current our capacity of environment convertible is line does debt, given on us impact this

make and grow our XCaaS profitability, customers. enterprise with to adoption to installed progress on we shift base we As a emphasis greater on continue our

continues A verticals XCaaS solutions Our of transformation the rare CCaaS XCaaS efforts new a to the recent enhance including platform ecosystem with regions, cancer. patients selected Inception They seats to health an U.K. public XXX include diseases across patient experience Europe, sector. long-term range and be brands. customers and of XCaaS tech-enabled providing of the with Europe. in their experience XxX nearly [indiscernible], patient geographic of Fertility in the care examples fertility conditions, the few digital it's company leading to broadly pharmacy improving through a industry as deployed part specialty and is

employees and largest clinics, important becoming XX of support and of our that our selected over needed partner XCaaS more even X,XXX fastest-growing is agile sites. to XCaaS across America's an their fertility XxX strategy expands. base aspect Inception Cross-sell would communications network an than North growth As support as more enterprise

potential has user growth. Our the our revenue expand average to be sales number of revenue driver per the ability installed within efficiency to of base and an important seats and

communication land-and-expand significant Microsoft solution in Teams Voice which final After QX wins X,XXX their XX our in Canada, leading same-day and platform America. contact a XCaaS XxX locations UCaaS U.S. single this deploying TForce for over Logistics, to vendor and provider in for for employees to is center grow help the expanded of One quarter they business. mile by the was adding next-day with across transportation cloud North

for care patients. public employees Voice multiple services health Voice of Voice for the gain more QX in Management, Teams Properties due X,XXX now ease supporting solutions routing deployed. of Teams the with to a solutions behalf company, and over UCaaS Microsoft direct world. momentum. develops seamless of for managers experience XxX technology-enabled on with and largest Brookfield in users investments Customers continues alternative seats across XxX to their X,XXX XxX one XXX,XXX Teams Brookfield and They the of included UCaaS choosing for integrated a real with which suite for for payers care solution Microsoft Within administration our XCaaS and estate XxX Voice XxX operates selected We They Modivcare locations. asset Teams selected over have provides than is reliability. which a portfolio, FiveX's supportive Asset private

set CC differentiators reach, more Teams to recently an program XxX customers, competitive an global Elevate customers of with across launched reach continue we Our calling, add Voice voice, be To UC integrations our managed rich upgrade tight partner direct in easily of their and introduced XT as addition advanced the contact Azure-based including center. as routing feature SBC seats and these all a adopting IQ addition important and for Microsoft functionality, technology, Customers collaboration platform. DIDs, with audio domestic or package. calling, Teams. XT can HD The combines a Service, or nationwide Secure global Conversation single and

and expanded first global calling include reach We market Slovenia. in Taiwan, capabilities. quarter, continue to global to Israel, lead Latvia the the we In

global solution XX% now are and GDP. of is UCaaS representing users our America. nearly global Today, territories cloud-based Our of about North countries XX XX% in available outside

construction high-performance across the with including and more A materials full building continents, PSTN important multiple customer of PSTN in X and China basis continues that ability becomes on also X,XXX XCaaS reduce with our in include to that cost Our sector XCaaS public GCP, another a seats is traction over the of continues across employees global implementing where support Teams cost-conscious selected than connectivity supports complexity Microsoft for single to advantage in health chemicals to a more Philippines. in to organization competitive of a expand is a XX for Voice government include for XxX provider XxX coverage is Trust, organization the countries global QX managing wins and increasingly great to in specialty gain example providing Peterborough the and a of on XCaaS regions products Southwestern to the spanning system environment. construction and NHS Foundation users. employee turn people Examples the provides. which social Ontario, community. Canada. cloud supporting for UCaaS care creates Voice X in a a experience XX,XXX X,XXX engagement municipal residents support to sector Microsoft the Norfolk and platform administration Cambridgeshire million Teams a UCaaS nearly County competitive in advantage. public customer with communication They ability simplified & XxX They

The large CPaaS usage to who yet business. pre-QX CPaaS Finally, returned our brief customers reduced a have not comment on usage. in QX their

While with revenue continue we any programs, work our from not customers to design forward. new these usage guidance them going assume does to

new KitaBeli, service we contact revenue Despite a recently services. continue self-service e-commerce customers They from one and added platform verification for passwords usage to API APIs the apps list, commerce continued notifications. our customers user us CPaaS for the to we names our and XxX's users. over service use maintenance Although rebounds. usage metrics impacted voice up convenient in for secure fastest-growing ARR both customer way and using Indonesia's chat And quarter, to They when APIs base These setting their apps, reliably messaging component to also our providing apps expanded all customer XxX's onetime to of WhatsApp, and chat with things weaken to IVR SMS APIs, names send QX supplies well-known BXB to customer include and Voice success their in workflows office Daruma, user use Indonesia's XxX SMS us. business growth. this, the XxX of automate add to long-term social #X

enterprise customer way experiences Builder no-code, We always coding Builder, XxX regardless In easily efficiency. a has continue CPaaS been users for innovation of XxX, a platform, and and I'm enhance to deployed ago. effortless launched March. multiple proud mid-market of And for with and productivity, at since CPaaS. communications Automation have our new acceptance. UI Frontdesk the flexibility customers Agent summary, core that enhance launch visual, of deployed innovations it new are its to value X in and gaining have our Connect build offers solution Automation anyone experience channel most since quarters to say recently just XXX% new Workspace XX% engaging a management new

we which to Our and these XXX,XXX leads Teams Voice surpassed the improved users, in history. retention, such as in Innovations of for fastest offering see one satisfaction customer numbers. ramps our the

will We on made our Chief Officer, strategy. XCaaS Middleton, our detail give some Hunter have rapid our map on already Product year. product additional road progress you product this

call commitment. XxX thank advantages welcome Before to remain want hard confident Seandel to handing teammates their I want strategy. our I do over at in competitive for Chief also to new Hunter, as our the our here I our Suzy Accounting and work and opportunity, our Officer.

As we and believe sustainable our deliver all in enterprise building flows we and we're growth for grow the business, cash stakeholders. this our and for foundation value XCaaS revenue will

Dave, Thanks, the our I'm community. to strategy. and R&D joining an product give on to investments investment hello and today update

R&D compared of get year platform Fuze an upgrade target. the so already with of R&D our And last full fiscal right saw are with an and complete. sustaining infusion teams results early, FY 'XX up is the have acquisition. the efforts combined looking since engineering Overall XCaaS is to the the integration QX the acquisition. while fully recent the you know, pleased and the was team automation our output resources As far. to of already R&D development we QX Fuze with for on in of platform XX% been first combined investment customers quarter The

We in. in Fuze this the contact the in XxX core a as I'm single map base range come with MS has demands a proud and teams, delivery platform of and of investing With has Teams ability increase technical extremely our we're for enterprise road throughout segments the everyone together. with target the our and the in value organization, XxX not personally of capacity, accelerate differentiated services, a by the have impressed to very that wide using one services. how center. mid-sized innovation internal collaboration organization high-value market find that of quality customer engagement A just I'm

in differentiate. Let each turn of points those we to me how cover share

don't move expertise. telephony enterprise to midsized worry maintaining about cloud, With the to organizations in-house own want their

voice for a is enterprise-ready service ever, a telephony. by global and be cloud cloud low XxX's and than for cloud drama longtime recent more looking and to cloud midsized low move of with FiveX's a telephony the solution they entrant. expert, premium enterprise voice continues the full-featured Now and This any option ensure carrier are vendor reliable, global that motivated cloud. the ability is SMS risk largest vendor to not XxX's a market footprint especially to best-in-class

to entire Over retention the last while X own our new increasing customer our years, we have our base XCaaS platform rate. from upgraded platform legacy our customer

tooling and We are now enabling this preparing the is our to to number to get execute that same adopters move a with platform even the cloud. how risk-averse process, late Fuze in import one customer another, from of critical deployment know expertise further. to to execution move customer's significant expertise and base and the We extending to

import even messaging start, expanding to include segment. tooling is XxX investments we've very They and is top Some additional reliability, focused our experience platform, a time availability impressive our to communicates that ROI-focused reviews. on-prem this the helped to be of other agents via ROI. so the area exceeding of in proven recently its value customer global their contact this redeployment and agent every operational Agent better and comments from enhance countries from from interface cloud. better a up our had to Workspace aiding an footprint pick short overall midsized are experience with core customer new for the of outcomes. very high training to organizations voice, delivering the to add across seamless These customers to customer We technology omnichannel and far positive of extremely to straightforward, we making want methods. delivery the really expense minimize differentiation Typical tend deepening key easy-to-use easy incredibly telephony an XxX that or delivered FiveX's in center is large self-explanatory enterprise ensure experience right great less National and launched was this Almost experimental. user on Express. for through

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our MS provides use end-to-end have a We user designed today XxX internal to Teams' the use tuned and and to native significant organizations incredibly MS to The mix friendly, teams in research solutions dialed MS customer enterprise communication XCaaS and and are opting fine deliver case, design is enable easily messaging. that midsized solution on usability of internal with on making profile segment. Teams sure this customers high A we external portion meetings our needs for are scores collaboration of this complete to everything service. the Teams

to Our adaptable match the with app the and service from and fully Teams' makes Teams for companies diverse to having with most in easily Voice with sense MS themselves operate enabling MS SMS on the the to embedded ways integration maintaining is each users XxX while adopting that choose platform. that interoperability effective users mix

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our and For product the of strategy. Sam about now, a XCaaS Dave while talking success have been

and UC a able found solution, capabilities differentiation are and contract. solutions in deliver needed between X beyond organizations for uniquely org, goes focusing CC is to well platform, wherever distinct XCaaS engagement but our break on primary they and selling XxX enterprise single-vendor avenues in UC all almost value contact customers. traditional single integrated CC solutions one down for While creating the walls simply center value our can on the

contact that new capability it any center we the gets user to every First, organization. team throughout level or a so built can also platform at deliver

CC UC that and Second, we're and the designing investing And UI data visualization bring together dedicated personas. engagement journey. and functionality in third, end-to-end we're insights customer customer purpose-built analytics on app that the infrastructure experiences in key configurable enables for

So know that on. I Silicon Valley. companies all see what's sounds going a can bit really that

make quality this recent the service, a of XxX is looks topic IQ, So typically user This that be that analytics transcripts those lead. interaction the for to and speech management let me our considered into to capability. tangible. team more any contact discuss analytics X at identify product approach speech recently Conversation trends feed availability launches product and individual organization. extended center coachable moments application AI to coaching a then the and throughout

as apply add-on now capabilities a can You organization. to service the in user the premium any

and were and we inbound throughout teams effectiveness individual support agent assess instance, need in sitting recruiting the adherence have it coach functionality of customer experience on the that how is XCaaS the just it to on monitor For screens, their they satisfaction center. script to org. as use right their delivers teams that reception if customer number, greeting billing to recruiters phone agencies engagement with This use that verify a the contact right to

more a a the handling directory all call more our just last job is year. highly this usable UC Gone needed, meetings the available full components used company first sell of And than single-screen doesn't have but phone user they're to done. our to ensures hop screen, when by that released UI full in example, omnichannel persona core different application rarely cues at away to are middle need less their around while from premium Frontdesk, composed a a of during traditional the the this and than chat our customer license affordable with familiar our contact and center combines company voice space. new shows attendant than extensive simpler to center act the click of the workday. Frontdesk get that but UC in console the that Receptionists multiuser in contact experiences was research a experiences still contact Seats to for app was licenses, the Another premium seat. being deploy. a these center a

adoption Our of new that among XX%. already our over data Frontdesk logos shows enterprise is

the Looking map. coming forward the in road of year to on XCaaS some highlights our

options digital provide across AI entire new Our conversation capabilities organization. will the self-service customer

for customer center. insight will into deliver Our to outside CC analytics teams new span as the team effectively interactions experience and contact are the that it nodes. are in UC enhanced engagement leader those being for customer does journey And that center more the contact work equally

you the questions. you also target working that the that additional I'll line about on calls. app roles actively time We Q&A today, more we'll throughout key and customer are future Thank have in share and be experiences premium your Sam? any company, for engagement on for if

Hunter, results good a quarter. We financial remained and afternoon. Thanks, organization the for solid and agile disciplined and delivered

us $XXX.X to strong, continue foreign in $XXX will range. We 'XX in with guidance which an were our revenue, back service year-over-year our business increase experience operating as revenue cash a $XXX of was and XX% to hoped We XX% million CPaaS and guidance with range. the million sequential The the not million our $XXX.X we year-over-year guidance broad for continue decline gross of bounce guidance. by total versus $XXX was headwinds second better and end especially income million positive CPaaS $XX.X accounted Service revenue range, business expected, to about year-over-year generated of did million $XXX high for service during some was revenue. post million currency million. of Fuze service of and operations. solid sterling the challenges, Fuze make $XX.X from million, quarter challenges of driven in quarter negatively impacted for The by $X.X spite improvements million pound revenue revenue and in quarter, row. of another dollar, an fiscal than margin, revenue first a to our impacted both strengthening retention. higher Total increase In line the and of revenue near these the quarter and inside from performance adjust in of delivered and

expected Fuze and revenue accretive On to operating did far, post remaining than We so to and in non-GAAP therefore, committed income. the acquisition both was non-GAAP so whole, profitable good. better costs, and

Fuze achieve communicated further savings we to the continue to We of we as at but acquisition. operations million take as year-over-year. our Total opportunities time quarter's ARR $XXX with at cost own, will time up expect these the end, XX% integrate was

As segment enterprise is year-over-year. XX% prior of to of of visibility contribution Small because revenue. the ratios. XxX SB in we our we declining business better about was our separately and is XX% Enterprise Fuze out these the of customers' customers small but long-term business one was ARR needs. calls, down grew XX% be and longer Fuze stated our earnings us the of breaking declined ARR core now and Growing not reporting, strategy the nonstrategic year-over-year. efficiency X% for business efficiency reported comment of for absence from will give enterprise center year-over-year. and higher low XX% due to contact will X% A continue retention total into account of to for was tenets commitments, ARR year-over-year, and metrics up Mid-market ARR and to XX% ARR

X,XXX investors, reporting, We X,XXX. been to quarter's integrated call inadvertently total like as both a would included into parent purchasing of to total number percentage from a the and ARR. some last expect we change out When to it shrink enterprise will subsidiaries Fuze customers, lowering we corrected. made to continue has This centers. I the we of

and drove first all XX.X% sequentially Other the fourth driven which margin compared at negative unit expenses. first points quarter noted. to quarter of gross in to lower of XX.X% you revenue negative the and costs XXX items 'XX. CPaaS Turning expense remind extent, otherwise came the disclosed 'XX for and came XX.X%, revenue from non-GAAP unless down quarter with margin 'XX of basis programs, lesser I Service continued XX.X% quarter an by improvement points minus in are a increase in revenue. basis the gross at in fiscal COGS XXX that

improvement points Looking first time mix further over sequentially. basis was XXX of year-over-year we was and gross revenue improvement The driven Overall, margin integrate points higher we by a XXX revenue up XX.X%, to see margin margin forward, service hope other gross in projects. quarter Fuze. nearly increase and growth, our as basis

of This in leverage, the Without better. margin want up see increase full to the items and first full half Turning X% stepped we is operating to margin goal expenses. sequential impact to first increases, plus normalized with to decrease our quarter base we revenue, our expenses. at expenses where quarter annual the fiscal unusual the XX.X% closer of of R&D several with pay operating There of wanted. combined quarter we benefit unusual a year second onetime in exit of items getting a the financial basis. to expect in to in operating small quarter, Fuze a the $X income profit total operating employee still income Non-GAAP quarter-on-quarter expect million $X that On operating our the of improvements $X.X been driving on up about operating have or year-on-year. million. by normalized would million, second million. and increased grew basis, Consistent $XX.X quarter-over-quarter nearly nicely were the in second resulting a in year and

the restricted approximately approximately a to investments cash first sheet. last million million year million $XXX ended at compared and to $XXX balance ago. $XXX and Total quarter the Turning cash, quarter

of down $XXX small approximately million restricted in The was shortening for remaining duration. million $XXX RPO balance quarter, was quarter-on-quarter Excluding the contract from $XXX.X to the decline quarter. million by last compared million the quarter. was $XXX.X a fourth cash, driven mainly

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actively flow and to cash collections it continue manage remain watch solid. and closely We

few to cash next income between operating see from larger-than-usual the We a expect operations quarters. difference over and

cash, several convertible will or will Fuze-related million a our out. notes XXXX February have use Recently, about but due XX We in items non-GAAP income not some statement. months $XXX be received a questions of that we number

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believe our become to profits the continue analyzing strategy. to We our the as to quarter being cautious decisions. pivot it plus continued has and We have more CIOs spent slower and mix environment evaluate with to to CFOs situation make selling makes incrementally the growth sense

and are in such, fiscal X our operating by in guidance. down we suppressing marketing in to and rate dollar, are CPaaS. but two, revenue taking driven efficiency the was As raising growth our U.S. weakness One, pound stronger guidance particularly on improving factors: the for dollar, the British of we which to revenue; growth revenue three, focus decline is margins; The investments major impact moderating sales income continued and 'XX,

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Lastly, of This or operations. as Fuze higher in we expect margin see leverage half operating the to fully drive revenue of second we G&A as brings of will to expect exit the take. continued integrate a operating in 'XX above about we give for to year percentage our margin operating set and This X%. initiatives the 'XX, margin X%,

and improve the sales Fuze as year we add continued next 'XX operating mentioned, savings progresses margin improvement Dave G&A fiscal in more As we efficiency. unit incremental can in through in economics, think integration

second recent $XXX approximately service business expect impact fiscal the and to FX, year-over-year gives are CPaaS essentially in our flat options performance revenue to account emphasis $XXX With shareholder the we range representing term, value in We debt ended taking of the with top for more line of further XX% While follows: profitability mind, we have and increased first million, guidance in million refinance a an in anticipate on into to growth. drive to this on near us cash the the 'XX establishing are the quarter, flexibility we to growth it and future. the our September XX, as to quarter XXXX, XX% be of flow

$XXX million. anticipate $XXX to to We contribution of million $XX service revenue million, $XX growth. total revenue range to expect will and million be We in between Fuze year-over-year be XX% approximately the XX%

first for quarter. compared We expect to the have hardware revenue on but uncertain slightly the visibility chain shipments, flat supply with down and other for now be to

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million our to are follows: We We year-over-year $XXX revenue of a XXXX, fiscal be XX% in guidance XX, 'XX updating March representing for approximately million, XX% range to ending anticipate to service $XXX growth. as

high 'XX to We basis. range growth. to revenue a revenue expect mid- growth million on We of $XXX.X the a year-over-year year-over-year representing fiscal single approximately to service anticipate in be digits XX% XX% exit to total $XXX.X with million to in

fourth over improving cash margin year. are strategy to least a of I outlined flow connectivity at product exiting at margin continue need In on time and time. are integration. our operating for believe the this leverages large and opportunity platform, global strategy market in focused We unique on and Hunter R&D. the advantages and unified 'XX address we for right our leading believe fund our a focus to the closing, I exactly the investment goal fiscal focused a the and Teams X% increased X% operating quarter over have of We

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[Operator Instructions].

Siti question with first Mizuho. Our from Panigrahi comes

guidance your to fiscal plan ask your for year. reduce to Just this about wanted

Also, what you and the lowering talk about are the triggered didn't slowdown. of marketing I macro appreciate. this QX? spend You market seeing sales or any environment what's Wondering demand kind in after now? right

Yes.

On any customers were seeing not side, the demand our enterprise impact. material

clear reflect business business. CPaaS not from impact We our not on in slight our and average caution, some have seen and sign. a few small have diligence a But it's but contract due in customers. overall, a We decline do signals coming some major length performing cases customers may additional enterprise a

moderating efficiency we drive want right. we to spending in to growth. the All I'll that. we're take up and that that's to continue second think I by fact driven just the also the that focus sales marketing stage and for ROIC, debt just continuing sales setting we And are and careful year. refinancing of ROIC, the the on And later our We're part and be

moderate it just sales So those year. our so I little all combined, bit growth think a make things we marketing just this and

their Microsoft And a then years is point? what the is? follow-up with to And competition planning offering offering, do Microsoft so do few in quick see Microsoft especially this Where to the you telephony do How next at Teams. Okay. Where strategy? competitive? pricing Teams you it compete what's the

is connect Microsoft plans. into a calling Yes. approach telephony addition On direct Microsoft Teams, to connect through both operator platform in there to Teams, enable and

opportunities. Teams' added and there. thousand top We're we've we direct launched connect, connect, the fit hundred Elevate a Microsoft a significantly Partners we're see and big as the a couple -- why the larger. XT make direct So will as focused get program users connect over SKU that nicely of That's we see in operator that on big player We offering. into to that really our even -- opportunity

I'd so next years. XXx And like couple the to see users us over those of

question with MacWilliams from Barclays. Ryan Our comes next

followup side. Teams on the a Microsoft Just

you Another added the for Are XX,XXX cloud here Voice success into Microsoft contact XxX opportunities? center seeing to good upselling seats in Teams.

both fit and a X with does specialty XX SKU is good XCaaS, which as and our as XX success XX into Series of We're well seeing The our platform. Yes. our contact SKUs. that's center and XT UC and

SKUs. it's sell grow xX, see those XX% XX, nicely. We installed do We sell center continue ARR all over base. SKUs, did our XX, XCaaS So of at and those to contact UC and XX% year-over-year our are

to share So our the it's up is accreting and that push within of our business, goal into business. a majority

think the towards Just Sam, year quarter of how is you your the then, of it kind guide, or I the each I kind digits [XXX] perspective? conservatism because this revenue from on in year end mid-single And guide, is like line exit if for more of next the then guess, to add just here? top quarter, gets you of Like where about like the that Excellent. growth. but midpoint you would the do

it more you click that. towards end of traffic thoughts the CPaaS near could looks just on are We what some like around year? then or double of what is outlook this term back, your So if And there. coming the maybe that appreciate

All right.

We more and I de-risk in. companies, up drives quarter-on-quarter. have So visibility in progressively, just CPaaS we I'll just term, it of generic gets down in visibility forecast, that's use what was we like because did visibility, bottoms time, And over naturally get conservatism or all more quarter guess conservative. further we're more the model that. less the then so mean, I the terms and We a

that everyone about then how take flat run layer of of then and in rate of that for customers, and in the that. we we that's business exit kind sort think incrementally, a So new those knows, it we little customers got business worse. on run perpetuity top of it And as

I Fuze say gotten for say, script the incrementally, say, a exactly more then I et once And just go that in question general, seeing hard always exit growth a in think don't We're in the would not just I mid- specific so cetera. And X. customer things, more year know my I conservative. macroeconomic CPaaS, single-digit little numbers. did to- tell environment high your the on or if of to I definitely And would to has it's customers substantially kind we It's usage-based harder. us business. lap

seeing think aggregate don't traffic the is moving. less I just traffic. So We're total

Our Stanley. next Morgan question from with Marshall comes Meta

see, to- rates? how do second on your kind foregoing? And you compares think you're of And of think of get trying Sam, kind focus marketing. that questions. when growth SMB that enterprise you share services as just impact growth? efficiency bit of at conservative spend mentioned mid- the high that the or market does sales you little on couple more? think Do those exiting then on you single-digit do fiscal on you operational basically growth sustaining the question, overall be you'll What that, and -- A get and a more to business does kind 'XX, just to opportunities rate the

All right.

let I in. Dave these, think I'll take of both and chime

a the right? we've -- bit in on high transition So talked remember, to- So mid- in this the of and past. we're here, a about

So a our down. business That's is headwind. small coming

growing the our is ARR we quality believe over is enterprise improving. relatively and our While pool quickly

numbers the the overall side growth higher is at for And that with saw plus/minus. a we rate side. business the look, that -- the -- it enterprise to market, around offset Relative small UC I market a whatever growth rate, the means slow exit we'd year industry so take be by the XX% expect would on in is in growing last then is and

So I ballpark. in that think we're plus/minus,

think side, other I where general faster, enterprise strategic, business on-prem to we're on side, And vendors. it's a we're less relative share we particularly the may the area. treading growing issues, just water it's and gaining on be of that in the small host got

of constant having. we're efficiency a a look, In think, I conversation It's that's great some improving things, question, Matt. terms and foregoing

one pushing see is envelope we opportunities. invest you clearly in wanted call some this think are the of time you innovation. prime on reasons very we the to I the Hunter sometimes really new and the have What place to forgo opportunities was

increased now R&D So to if our intermediate about which we model spending be XX% at. think we our XX%, in talked we've to you it, what long-term to wanted and about is

place the innovation, I marketing. that get innovation sales think look to is are side So But you financial in that is to on objectives. on pushing now, fund on marketing. where and meet definitely coming little we invest R&D financial right pulling see a We're the and to Once through our that corporate sales we model. back reinvest through cycle, the in and and we'll

VanVliet Our Matt next BTIG. with question comes from

also with in overall seeing on XCaaS a we're I know us and the terms I where big attach but at as integration migrating that you're guess can you as rates update Fuze to closed of opportunity contact when give you deal? the terms center just platform, customers the what not highlighted in an on upsell you of

All right.

that I'll part BTIG, Matt the right. take of VanVliet at So equation. All

I look, with integrated operations, effectively back-office would Fuze. we're So of the now say terms in

a I of do. I'll say, you You few a throw words tell And please to in and Hunter, And R&D, love But would Fuze is R&D, now. integrated difference. want fully if case. separate and can't the really terms we're

Fuze add from non-Fuze the the if you anything? can't You Teams? I know to tell want And Teams don't

on a I No, single a road single development We've right, innovation exactly think fully on the platform map. forward. integrated Sam. is focused to that's We're Teams. working The going

really has gone the on that excited and has really great smoothly. about working So come that team integration We're together. everybody is board

All right.

of that always a of is initiative. and on 'XX hinted this fiscal migration cross-sell, type sort Specifically we've

mean, the average, cycle we've company still a I average generally only for type sales we that, this X months. think that year is had stuff. so of The remember, And

keep And easy push We them of like them cross-selling you super if strategy base, migrate. We're just us. for cycle. hoped actually We'll marketing going want we automation And our revenue just But to starting better over we're front the really the normal next cetera. think are showing get blank, numbers year with as those them baby too Fuze comfortable also trying Fuze customers, of so migrated want we it time. our lot customers them aggressively. et I than of through even it been to there over now point really we're substantially things comfortable Fuze interest having to focusing right to have for. now, notice, the and make that's is the in be to really transaction. them engaged, occurring. a the and The get webinars, not of And them, get numbers on that. them from we through not through get We'll sales pushing these things. And keep And takes there activities other time in campaigns, get

to All Teams help the broader offset channel should more a you about profitability up then your Microsoft a how channel Is rate right. program of the sell volumes selling into little Can XCaaS. the in think meaningful organization Teams' Very contribution relative further ramp traditional partnerships often of partnerships helpful. Elevate any And we pricing? and the as the to the the ecosystem, difference there? bit there lower or

Yes.

focused necessarily I cloud think economically, is on that Microsoft program traditionally the resellers telephony Elevate market, volumes are the in and and that been not people significant have resellers.

bringing to through make Teams' it's category and and contact So that up it higher market, you're it's base into selling. our that in into sells an XCaaS go right, as we we far how incremental volumes group additional installed add-ons, with fold. as And center the

as the when than at average look sellers. well very as larger -- the per it's partners creates you revenue that and account, it's overall, opportunity So our large, for

Our question Evercore. from next Levine Peter comes with

talk that is think convert kind a probably kind you table for the how the options the is before can that thanks Sam, how it? about the of -- And that what some it? have you'll should becomes on -- you're of color through thinking the just then on convert. convert Also, to it Maybe, confirm, liability. you now What current and about of we

say in get moment. would of of this year. fiscal you taken do liability that. it year, -- this But with current we'll would a yes, be Well, that it could as suits needs objective care at become it I And my the year, and which everyone this calendar to did our so the end take fiscal,

us, broad and traditional a literally, how like on the got there We've much got banks, I options, -- only. many ago, lenders. be how it's first of different I got is from options XX alternative And equity would I company first there pretty mean, term was mean, we've -- terms at capabilities. exchange In street, equity capabilities. are. now for loan options years it a when capabilities. equity We've range of amazing

Each talked approached best of trying and for different have that's certain a minuses, and us. all to with weight options funds with stakeholders. complete opportunities. of we're together literally and Sovereign to pluses all come host We've our a literally package through those

And the do environment. is versus to macro CPaaS then break an much here of much headwind out that guide the of how versus the is CPaaS, for is, final you kind can if of just like And think remainder a FX the how FX related then year? to of there one you down is like it

applications the say, a million kind to I take million, a one I $XX $XX number maybe if or you $XX $XX you side million X/X mean million at would of so look to service FX, X/X when it the and together, for and macro, use be UC/CC me for word of in CPaaS it big and all -- kind mix to look, pond. we're fish a X/X small is

we add like So willing conservative think way I'm would But And I all expected. UC/CC trying look, to to things. where the That's never then sure to that's about I the is the kinds say with of side, on we're thing be really buy business would it. the small piece. those I'm really only

the to given strategic environment. cetera. -- et We trying initiatives where to side really more the cautious, It's That's continue will expect grow. That's where money our are our enterprise is going. going, we're be

that is that's of the small gotten maybe so business side macro house. on -- say just the And where incrementally it's tougher would you on side,

question next with William from Our James Blair. comes Breen

in seen about maybe have et talk bids, it's changes Can dynamics? and the pricing whether a bit cetera. you there, And you little of the potential may any channel a slowdown some

beginning growing in brought with customer with is growing back year, channel also of the you in do support on improved Lisa into that. XX% nicely, -- know, continue been we And very and channel the the the gone improved deal how has the channel escalations, as elements reputation Real, well. We performing Yes. at We've quite our that to and I team Del have and at channel year-over-year. think, the new leadership

And market. we're in programs that is that we're Elevate programs doing love doing specialized I'd market. success we're that the So and now some in the bringing That other with bear. to lease having

So overall, there's I I traction numbers. a there for it think seeing the we're in lot improving But our think you're more opportunity and us.

with Horan next question Oppenheimer. Tim comes from Our

what would there? relatively this you this new would of use point maybe doing at probably at your just the ahead really I Microsoft Maybe partnership can are Elevate, On are prefer you describe how guys even competitors the channel to you than or And competition far themselves think point? others.

color little Just a bit more would that great. around be

Yes.

make I money think the much itself Microsoft. channel doesn't selling really

them is them getting the contact nice well, we're SKU doing sell teaching to like is higher-value these into really doing our stuff And contact to the after category with sellers economics things and fit center, that and telephony -- have incremental center. going are that and cloud XT create channel. incremental telephony and services, for so is huge such And on those make into to fold how sell high And as team those Hunter's alignment. traditionally a not the now been the able not win product higher-level focused for opportunity that the our those get services cloud bringing that a

cash talk free And of around well? next bit maybe how that? much can all generate little you a just Any color you you can flow goes year if think

mean Next 'XX, you? fiscal don't year, you

I do.

and some million generating And other guess not that's I'll hours, an number. off-the-cuff refined an I'd SEC off-the-cuff me $XX on around but million, But like plus/minus. more guess, if get probably of it. that's between it's be $XX to us guidance, give see a put words couple you

question Power Will next comes from Our Baird. with

and just Erlikh coming question remainder of gross to next I is are for year? They're for had Sam. on strong a the Will. This Charlie expectations ask what and the the in on margin, wanted quarter

to We flat continue lot look, quarter, quarter-on-quarter. see like me. a programs to down, Next and for big Slightly CPaaS rate quarters, year, margins. there. moving slow CPaaS margins the Look, the a from to of just being we'd would gross But The -- it then weaker trend over you'll to up. down. want think to pieces will I down underway, we on being that. at down, CPaaS a have multiple margin improves business gross just flat business, yelling some trending Kate's in have And higher. Not down. back, dilution obviously, the wildcard slightly with little If that gross some of see still increase see bounces the business the

next George Craig-Hallum. comes Our with question from Sutton

You little seeing more mentioned if go wondered shortening? shortening of could contract into where you on duration, I just you're that a detail

look great at over a it in RPO question, detail. That's didn't I pool. George. looked the I at that

X.X probably remains month there. in see side. you, the And we'll it word tell duration. generally strong, weaker on want That's decline so month, saw business slightly I The to RPO the trends. solid, -- pool, just relatively business you it to we quarter-on-quarter more where didn't guess the that overall small I'll enterprise we pool side like a still I just break see use whatever could

Hunter. A quick question for

XX%. increased clarify I by that? being that wasn't to what just sure You Can were up output was XX%. mentioned referring you you

our we and is every the number track we complete completions up quarter XX%. projects what and were of that -- by overall We initiate project

our the do I a we of Now projects have team -- lot size. we across of R&D mean,

we we're something we're terms So law throughput on in there. averages of higher But projects essentially, complete. relying significant getting that of a

Our comes from Bank next Michael with of America. question Funk

Sam a equity there balance always to One between I holders. Sam, for is versus messaging debt could. if again

decisions market near-term and the view and versus marketing market the the of geared sales opportunity? your then is guidance refi on how and and the expected So profitability much towards around debt

more more And say projects in the Look, change certainty equity that more become trim holders growth don't and we're the given we company. our pushing do and the profile back little see are potentially I I in profitable. low of environment market I mean a more that the differently. to what is them radically view would in ROIC overall us

to I or there -- a if how equity flow don't the flow in depending same we a any And say different that the two maintain that we to both model refinancing. cash that debt post I the want push I'm would I mean end, make between we we of different refinancing, so want a is the profitability -- ways. make sure works message them. think do on the cash that sure sorry, do we discounted

that sure So we're prepared -- there making some that also. for is

I I one dollars. of sales marketing And understand a think number comment, and different to and return and efficiency and that profitability then sales just ways more, of it. marketing, could, sales marketing obviously, if to dollar in those per clarify, about

more about on talking profitability. are return we So

becoming return, it in innovation? simply group So per shifting away sales the salesperson? profitable, sales is lower more revenue marketing product dollars or from less towards and just Or per

Okay.

ARR great you So say answer, and I'll and I long talk question to knowing it's to shorter love about definitely at I'd you a is length, would a a to try give deep, look there that what types behind certainly change answer it We in at or the both and marketing those We look sales this. service at ways. sits in core revenue spending, that divided change by of metrics.

picture you there's enterprises we here. and back, if cloud. see But to now, more a bookings and the a sales in move wanting make kinds change bigger step Right to of to relative at take to those look and it marketing. makes also, our things -- more we also We see industry it that to We on spend market our meet enterprise and sense to starting to that logjam trends that to meet need. through. benefiting And break see those continue numbers. We R&D innovate customers, more product

better also. lower those of And kinds obviously, those LTV-to-CAC customers, they ratios have business you get all so mortality and risk, when enterprise things

put of sure sales more continuing of always the that, more land create in to making the we on focus more The are And we numbers better we customers, on our efficiency will sales can areas innovate, differentiation. the efficiency. then that we higher top marketing we naturally. can the spending and enterprise be can So incremental product

Koontz comes & Needham question from with final Company. Our Ryan

some if for organic CPaaS channels? are to color without respective could then the secondly, deals customer with communication set can these Fuze? alternate driving on your driven give way lost Wonder growth you give us volumes? your And transparency, Is ARR you more Or like and by price increases any this decline. like cost the lower

the Dave, first take part. to you want the part? second take I'll

we're some costs. come there getting about better campaigns What those their working accounts that communication talked -- were over were large that those customers We have on going our back. them is reduce programs marketing API lower APIs. not And ROIC in marketing through for

usage customers, don't to usage-based see that on Additionally, we believe bit. we business, And continue do ARR... but have our we a the overall standard we add predictability It's a down so business. UC/CC of the I level in

one. that take I'll

and The so be. case you get Fuze the XxX don't numbers, now have them is we of on ARR reason or side you out give migrating we side count revenue by should break Fuze We this the into you So can XxX. extrapolate may whatever which or we you customers the see conversation the don't fit. how and you big because

continues ARR which XX% which as XCaaS, can think probably of take numbers. big And enterprise because just those grow you revenue you about healthy, trying over through we as the Enterprise enterprise to numbers that for don't to so year-on-year. over think euphemism growing I is we clean, that's for very types of add XX% thing to us sort we we're we when have the to easy segments, give and anything. go say is year-on-year, mentioned, would a our

So is. there ARR the of is the parts stronger where

for That Fiscal participation. Q&A concludes Conference First Call. the your Quarter well Earnings as session Thank you as Thank you. XxX today's

You may now disconnect your lines.

Amber. you, Thank