8x8 (EGHT) 1 Feb 232023 Q3 Earnings call transcript

Good afternoon. Thank you for attending the 8x8 Fiscal Third Quarter Earnings Call. My name is Matt, and I'll be your moderator for today's call. All lines have been muted during presentation portion of the call and opportunity for question and answer session at the end [Operator Instructions]

I would now like to pass the conference over to our host, Kate Patterson, Vice President of Investor Relations. ahead. go please Kate,

Interim Good our Today's Samuel third Executive Kraus, Interim operator. a Wilson, will review Chief our Kevin and of quarter Officer, Financial afternoon, you, Officer. agenda everyone. include our Chief Thank results with

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

growth includes including uncertainties and obligation as flow get Any of me and made slides no on our risks our undue not business, on and cause in risk cash analysis today increased well vary you we to about factors as our in product that have our plans reflect remind or forward-looking this in focus We our them. call Before forward-looking materially statements statements you and future as update to our filed results on the SEC. started, from reliance that involve our discussion presentation today, statements let statements the caution described forward-looking may forward-looking we strategy. as reports to and financial performance profitability they as put these actual with

Certain on some financial to Investor prepared is closest press available investors.XxX.com. measures slides, were be Relations of earnings those measures reconciliation website non-GAAP measures or principles accordance call, in on XxX accepted GAAP. in generally provided presentation the accounting cases, with are U.S. the not comparisons year-over-year A that which our comparable GAAP together release with earnings at this will in discussed and

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

of forgo for long-term near-term our teams were business we sustainable us exactly I our you objectives. perform quarter. and the Kate, joining the a we solid a our profitability call did some quarter would against to believe thank build said our you, third that's growth Thank in ability and We results revenue what as on strong indicator everyone today. to

customer experienced our of the and indicators retention, a deferred business. the thank Despite with XX% in almost XxX work. for employees hard operating increased success performance income, I and the for and the lower-than-expected everyone quarter, RPO, in their and quality of total future our revenue, high revenue SaaS all impressed community third to want we delivered I'm early

the We step several and the years when have leadership our laid platform modern the We to technology. a team closely future. solutions. powers to UCaaS the our that create on for our next strategy working of stakeholders. been our our re-architectured Directors we built multiyear Turning ago current I business a both foundation with value Board and grow for and core microservices-based CCaaS

embraced fully for have near We continuous defects single deployment reduced updates the integration third quarter. enabled every quarter uptime than digits. and are customer micro service more the to and This continuous number of and delivering identified X,XXX perfect

we we ever the faster time, predicted and same innovating pandemic We before. than on are At COVID would global Teams. it this could adoption especially telephony have of embarked journey accelerate we Microsoft cloud-based tools, collaboration internal how the have not or

opportunities to create increasingly UCaaS profit stand-alone based I providers becoming the differentiate efficient XxX, revenue While for and rare. like to believe on migration are UCaaS opportunities continues

which platform, delivers unified XCaaS a is highly TCO and availability, of security scalability native differentiated. cloud Our a solution the high lower and

to By platform, extend within focusing can the we on CCaaS continue leadership. innovation our

growing contact in It primary cost in preference Specifically, after they well the Future interactions X companies PwC's same is and the center the of poor I brand set experience. viewed be and new Experience stage a longer with as can customers love digital the their interact would loyalty. According high-quality advances market a as become Customer for believe upgrades. ML-AI customers' through lens. wave for the and for to to self-service a way contact brand contact inflection. solely At build an technologies center X leave time, migrations at has center No customers X survey,

such have language to like as the transform ChatGPT models the large customer potential Technologies experience.

this Our modern believe platform enables these as well opportunity positioned we evolves. and today technologies I are

We critical R&D maintaining success. an future are cloud to X our our CCaaS innovation shift We position to acceleration Fuze, further in leadership areas dedicated innovation. I which of our identified the with have began telephony. doubled believe while company innovation-led in to One, the acquisition resources

already We the have project and increased investment. completion pace our of the of seeing are successfully accelerated results

features, a capabilities large on and on CCaaS based We machine models. number of are language already learning advanced including in beta new

platform. We XCaaS important component to in an remain committed our leadership cloud telephony of as the position

ability and already in factor voice for deployed around users is in saw technology XX than matters. licenses. customer the growth for triple-digit quarter Teams CCaaS the deliver increasingly countries. largest Our more the team's solutions Global in now both more We new business wins deciding Teams third has seats have Microsoft sold and XXX,XXX The than to voice coverage a to world.

with the the include operational XCaaS for wins of our contact Teams help channel-led Teams productivity their differentiation demonstrates Australian Society competitive solution efficiencies, enhance Computer Teams voice and selected with XCaaS performance. This gains win XCaaS Recent the drive XxX environment. center to within

their Gateshead selected XxX XCaaS for XXX-plus agent Metropolitan Borough with work hybrid U.K., voice nearly employees their to X,XXX support the contact and for In Teams enhance center.

customers developers. customers. budgets center don't need have in-house but ML-AI as midsized focus on and of large enterprise a same capabilities midsized contact or small the enterprises, large automation team and our increasing enterprise the Two, Small and enterprise

and enterprise model, class choice unified APIs, communications Our natural and these customers. XCaaS make for pricing the mix match

The Limited, market follow-on more the to example existing our as the customer directly worldwide. leading happy global customer solutions reference their improves Chubb product great center Security platform of to often contact provider win Group a satisfaction, and sales Just a is advanced safety security a down than A sales locations and modern important, adoption million enables fire fit investments. of future-proofing capabilities, tied line. X protecting strong

for a selected secure complete contact CCaaS an division center a XxX customer, from reviewed CCaaS acquiring Chubb solution. After existing XxX cloud and

Indiana of experience nation. treatment Hemophilia XCaaS key nonprofit centers certified is having CCaaS example its business Hemophilia only federally solution decision-maker Another XxX, satisfaction Thrombosis for XxX entity comprehensive the the Center, with largest Teams. comprehensive that a new of X and in recognized previous With Indiana a and customer selected center in for is driving the Microsoft the

in a reliability Our also best-in-class the factor decision. was

win XCaaS sales rates productivity. increasing and marketing Three, and

As rates we continue to innovate our and expand increase. platform, should our XCaaS win

creates around reach, customers attracting our partners of that to innovation are more business We ecosystem to capacity integration. and customer features This go-to-market an for increases allow and every their experience especially needs. day, expands technology market-leading our our and their application market tailor Teams our

XxX Panine over that in of Greater Trust services in health, fits customer million to cloud to Care spot beyond. the They staff. across for reliable engagement and people a learning provider Foundation U.K., squarely A X,XXX our and NHS communications modern and upgrade mental autism disability is deliver capabilities X.X XCaaS selected enhanced Manchester sweet to patient

web in the win, Football to Club the English is good Hampton to organization U.K. fan customer experience. South League Another Sanks introduce to channels contact XCaaS the communications Desk customer a obsessed. The hospitality e-mail center premier XxX how as users platform of features the example Premier enhance are selected across such XCaaS delivers unified new with because in they chat and Front deliver and experience XxX a

are scores. a seen in resolutions First XX% escalated X than can so XX% including for on experience X,XXX outstanding our in theirs. XX% statistics of global Tier backlog. we've in for in support reduction training customer customer investments The focus engineers We've hours and made they customers success an maintaining more improvement and a Day evident a reduction our Four, in success, issues,

lot our result, satisfaction drive the solutions a improvement have but in a up experience digits customer customer are ago. As year versus do, partners double continuous customer scores work of and technology leveraging passionate platform about of a to We our our satisfaction. still are to and

own innovation our organizations. study. early of intend progress map products accountable to and same a document our this In to their use experiences we for improving remain our we as customers case our to in the do in our We way, road for new an customers provide and each commitment adopter of the an ongoing

revenue CPaaS year-over-year and revenue regular for establish important the sequentially we platform, technology to revision on down was That is XCaaS Pacific the the the again and leadership new quarter the this a Five, to single basis. factor customers our said, in and It quarter. guidance third CPaaS miss CPaaS year. region. fiscal continue add was our largest in downward Asia to

in We are gives there This going business and the the confidence me make performance a a transition through will of signs to in future. operating are our stability. CPaaS positive contribution that some

customer WhatsApp this API to onetime e-commerce, democracize Several a as care. point. APIs to a notifications with combination XxX, SMS, passwords Chat wins secure DXC vision through illustrate and third Plugo, as well platform for XxX e-commerce Indonesian of quarter uses Apps send and an

users and Privy, customers, onetime digital Indonesia's XX signature and binding passwords. enterprise more with keep first secure to uses SMS than XxX API legally X,XXX all with leading users million

Plusdane housing customer omnichannel XCaaS manages Housing, their with support customers. selected XxX England. XXX that They with Northwest for XxX and of U.K. a management satisfaction Teams triple to XX,XXX and voice over Verint homes capabilities. CPaaS, play over owns association our workforce and employees drive across We greater love

flow fund cash sheet balance investments future our our increase Sixth, and delever innovation will our growth. drive to and in profitability that

full non-GAAP fiscal already quarter, in second have operating year our we to double-digit half XXXX, have 'XX of progress of close this We schedule. very ahead shown and a come tremendous target margin

to we and our payments repurchased value in believe drive began our quarter productivity. the our interest holders. as higher in and margins with continued improve will investments structure we in this sales we $X to of reduce allow leverage we $XX our As notes, Kevin we in operating of approximately million improvements accrue in our margin and QX equity value repurchase principal 'XX can our debt, process will fiscal 'XX intend aggregate to cost in and discuss, which again align million our down third more pay We enterprise principal. We the to when

dative person. strategy partners of customer outlined strategy us the and they engage engine to XCaaS opportunity Every the in superior they on is cloud What delight. long-term deliver their experiences digital interaction based and to experiences I innovation our employees an have customers is can efficient, And a matter, with is goal is our and modern customers and heart to customer a whether is as with At of This The an touch our delivering North here this or every our experiences. their make platform. focused Star. platform.

is our This experience already customers' DNA. built our commitment into to

is Our backed availability X's X to commitment example. financially Five just

way progress to our recommend to customers We is for best solutions well the the of our measurement The peers. our our to success plan platform customers. are on multiyear be and lead our continued customer of already with innovation on of willingness our choice their

to referenceability segment. XXX% our goal Our achieve is targeted within customer

believe will sustained growth come. us years I X It to is but allow to a for many lofty goal, and profitability deliver

will review turn Kevin call over more detailed a of I our the performance. CFO, to Kraus, for financial

to Sam, and for Thanks, fiscal results remained profit good solid disciplined cash financially delivered and afternoon quarter. everyone. and the We third

In profit revenue, both and ranges, operating the non-GAAP and being an increase despite the revenue of generated slightly XX% quarter, for cash Total year-over-year. from was our service and we total we $XXX.X expectations. gross $XXX.X million revenue below delivered our above quarter non-GAAP million, service guidance margin, third operations in

Our strong in by in customer region. decline business partially our a retention and performance revenue offset the reflected continued Asia-Pacific renewals, CPaaS

the prior with with million, the for and roughly in revenue quarter expectations. flat Other was line $X.X quarter

made third and of quarter for million to strong the accounted a processes. total remains customer part and reserve expectations. revenue of outperform as revenue by our service $XX.X integration Fuze' back-office our of retention and initial was continues business Fuze $X we million adjustment impacted

customer the obligation for in on million across performance performance. Customer approximately bookings reflected notably been Strong highest has was from retention it RPO Remaining in base the $XXX our was renewals was and $XXX second strong quarters. our quarter ARR million customer were and many quarter, the the in up solid metrics. retention

in quarter but was CPaaS Total ARR ARR. year-over-year, down sequentially total ARR customers $X was continued accounted up the million and XX% Enterprise due approximately $XXX to up for end, ARR, Enterprise at decline million XX% of year-over-year. XX%

part continued we taking challenges, the revenue potential but stabilized contribution of conservative to forward. a had quarter, the going due hoped business We this last had view are of

COGS Please costs an at came Turning unit points and of items remember from otherwise XXX and which to discussed margin XX.X%, to basis drove QX sequentially, gross improvement all operating lower driven are non-GAAP Service gross lesser extent, profit. margin. basis continued Operating noted. CPaaS that approximately increase revenue. points in programs, revenue a and, XXX 'XX unless by expenses down

shown QX quarter Other revenue due in plus margin professional XX.X% gross better X.X% consistent few with revenue quarters margins. to negative product has operational in efficiencies gross negative margin services for over increased improvement came 'XX. past at the Other compared the

Overall, and an of up points sequentially. over gross points XXX increase second basis margin XXX basis XX.X%, quarter was year-over-year

which target. of Turning to marketing leverage we operating revenue, marketing marketing of over We expenses realigned as R&D and in as down a and range in declining sales sequentially, sales expenses. XXX percentage early sequentially. million and improved with $X.X was costs was XX.X% and points revenue our the of basis XX% sales quarter

initiatives We sales in marketing of as cost in in expect and the improvements areas efficiency nonstrategic result most January, our in of sales a which action recent reduced further alignment and marketing further our business. investment

first costs partially in This increase by be will quarter. in the employee-related offset the seasonal calendar

and cost sales Fuze' of a marketing to G&A it G&A, percentage was to sold declined but below of year-over-year, our well Total revenue primarily was spending R&D, by approximately as up non-GAAP plus plus addition points $X due basis operations, million plus the total of measured goods X% revenue XX% XX.X%. sequentially, improved growth. as XXX

operating nearly Xx fiscal million, was than double $XX.X Non-GAAP profit from QX and up sequentially. 'XX more

As full ahead year Sam we of approximately previous operating opening achieved in XX% remarks, nearly margin mentioned QX, in a expectations. his

to see, operating enhanced efficiency As delivering improved and are profit. you we can committed operational

cash Turning to equal $XXX consuming cash, ended repurchases. debt approximately million balance quarter to substantially last $XX cash third for despite at restricted quarter sheet. the Total and equivalents cash in million, the

after aggregate quarter, As during $X remarks, convertible mentioned million balance million XXXX in made our prepared 'XX. principal sheet Sam repurchasing senior in amount notes, delevering progress repurchasing QX approximately notable $XX of his in by the we

approximately XXXX These repurchases value and August million of exchange of remaining. $XX aggregate the notes transaction leave debt X, senior principal from convertible

issues see and debt cash no the we with Given our XXXX current XXXX. repaying balance February positive expected flow, future at maturity with cash cash in

use differences shifting cash other expect loan. innovation excess timing more to payments lower to continued will cash simultaneously our operating we interest in the flow enable payables. subject our our with collections term We opportunistically product increase prepay This holders. in value and will and equity to will of forward, to Going including enterprise investment generated leverage intend our while debt,

million was $XX approximately QX expectations operations than our interest paying the the $X in from more ahead million for over million and third higher of quarter, $X Cash expense quarter. despite approximately in

than $XX Free We continue flow million a to solid cash flow customer in $X cash increase. and was the manage actively for QX. collections quarter, remained over greater million sequential

on costs CapEx time capital declining we Our over as been efficiency. have focused have

this will previously stated, decision to severance took to and January When our action be workforce guidance, of X% and we accelerate As headcount. enterprise completed, we in quarter into reduce realign XCaaS. non-GAAP to costs to flow shift This approximately action our cash to our impact fourth restructuring will our onetime the difficult continue impact and And innovation further as employee and included our action total the will GAAP factored results. expect some population. we

a SaaS-like operating sustainable commitment based building to Before provide context business our growth metrics. turning some to let me guidance, on with

ensure The to from all been strategic operating areas and doing activities realignment October while us top-to-bottom operating improving the allow focus strategic resources future, cost reallocate for review January to a term. limited our are the efficiently. in near business metrics that have the areas in our of We to of last

pursuing. raising on We the the exit are business and based we for efficiency discipline fiscal our year operating around improving target are margin

on exit on we XX% expenses, X fiscal revenue, R&D and spend our operating ago. and like with remain For emphasis of XX% sales R&D year plan an our to customer-focused XX% as the down focus features percent on center expect in We and XX% to of we of functions. between and strategy to from our offerings marketing plan path core a would control efforts quarters product investment to contact product continue XXXX and about as revenue

focused as improve leverage are G&A work in operating areas. on extracting functions We those more from our to we efficiencies

growth we to range $XXX anticipate cautious guidance follows. at and of X-year the from ending X% QX approximately We We for up as CPaaS to remain of March Fuze in the $XXX revenue X% outlook. pass to on are service million, establishing anniversary XXXX year-over-year quarter revenue XXXX, as sequentially million fourth and the the midpoint XX, fiscal representing be

with Fuze expect quarter will note approximately we the contribution that flat be the that we as now roughly be We time $XX Fuze' contribution will QX revenue Please have and passed the last revenue next service anniversary million. at provide businesses are will X-year integrated.

million to revenue total and of Fuze approximately to at $XXX up the sequentially revenue CPaaS anticipate We midpoint and the of X-year the $XXX approach the be in guidance range outlook. growth. to X% X% our representing anniversary cautious to This year-over-year reflects million,

We flat QX. expect other to be approximately revenue to compared

an 'XX, other headwinds impact our lines normal XXX(k) approximately of XX%, benefits, roughly as of are taxes as employer match. such and to expense we in related These the QX margin We fiscal of operating flat headwinds cost targeting consolidated the the operations. with restart experience statement expense all

We cash quarter-over-quarter our from payments January debt absorb on reductions. our semiannual as and we flow from interest and positive, XXXX down operations XXXX costs but make be to expect headcount convertible severance

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

be a low single cautious fiscal business anniversary X-year and us, XXXX revenue Fuze with CPaaS regarding exit to the basis. in we past digits our growth with continue year-over-year expect We service on to the

midpoint. total million to year-over-year We in million, the be at revenue XX% growth $XXX.X approximately of the anticipate $XXX.X to representing range

Our combined impact, at total in reflects and guidance fiscal million $X revenue resulting QX a approximately of the QX reduction year guidance for the the midpoint.

and fiscal X.X% anticipate time improving landing to for focus operating continue over XXXX. at margin We on approximately

XXXX, revenue total and XXXX. growth as from some step-up revenue XXXX. low single reflected to the directional commences fiscal which digits, will We would in color revenue April We be also acquisition service quarter in X, the on every fiscal of Fuze provide like the anticipate

regarding remain the the Additionally, trend CPaaS for business. revenue we cautious

operating 'XX anticipate We digits hitting non-GAAP XXXX. base every double margins from in fiscal expected quarter steadily QX the of approximately growing XX%,

to full be X year, full margin percentage For the expect higher XXXX. X we to operating points fiscal than year

operations flow operating anticipate aligned with We the profit be cash from trend. directionally to non-GAAP

that that we into key to growth providing our are would the insight appropriate we Additionally, our revenue metrics like to reviewing ensure drivers. I mention are

We will calls this up in on follow subsequent earnings matter.

on flow us focus remain enables strategy our in product believe cash innovation-led for fund at In us company investments the strategy to key time. closing, continued operating the This as this and margin correct I an areas. is we

On a we to say Sam would to as platform, are happy modern, on like to center in capture our delight and interim of deploy cash to personal to XCaaS note, I'm our customers strategy to profitability I with commitment generation. also flow more role well continuing my our market, that my new XxX's business CFO. With be to positioned unified deliver the contact partnership improve and

for are Operator, we ready questions.

VanVliet question line First from the BTIG. Instructions] [Operator is of with Matt

Your is now line open.

sort I ecosystem. Teams focus customers realigned structure and here kind an of servicing the around of and smaller cost also guess at you the as outlined look

that focal Just seeing sort sort of of curious areas and it of team. investments some leadership like on we where are within previous in cuts? the organization are were And maybe sales these less go-to-market for most the feels the

to So of X this much another. moving just on versus is curious how pocket change from just a of kind

I -- to mean those I'm CEOs the we in moderate while that side we the house, in going we've in segment, which bit customer of to smaller great so and investment both. said enterprise. of in give, answers continue line the our so invest we of are mid-market with X to you small a is continue to like business little past, our what give

that line X.X% some have investments made sales margins growth in the the clearly past, some have willing we for in front, revenue and reduced some forgo and said We seriously. increased again with marketing that the shows where we're in what we're -- to taking profitability operating

on we bit I those not aggressive in investing we're little to on more I think contact sooner XCaaS later, focus little things. X a more little things, we're those bit a aggressive investments Matt, those continuing than that changed changes And think innovation, is center, the behind and making bit also. we're a and

So a can give that you bit I of answer. both, if

create how at But think that XxX? as should guess, business curious, just eventually, understandably and that still at of look what maybe is help we're that I much around grow base, than customer and there the looks that I to move we us then, of is acquired you the as that is development the them Fuze much and limitations we're about And growth. as on acquisition that any -- headwinds technology at team, legacy about some lapping that and think in the plans the you on XCaaS? And guess there can growing different you sort pace look you Fuze base like? base Is to

and not order is in first base. have into So -- a most yet, center great job done important that thing, UC the and cross-selling contact our we of this

to already tremendous numbers after a quarter, in and we there's report if not the his those. report reason continue the prepared it each Kevin the remarks, the of that. report show necessarily So wind meaningless house. gets platform, we'll can part if the just of started these. of said but we you the we've to continue kind next the XxX to opportunity, side anniversary imagine wouldn't open the to That's going up to that in that We're of customers Fuze upgrading do And some as and

not XxX acquisition We're new a Fuze investing we're side investing the -- house. house. adding not of the we're remember, side the And the on of logo on

to originally done a GCC expected show, a was last well little better we we much It's UC things, numbers a the the to year. the as -- than report slowly team. over And kudos over Fuze number done in better much It very So bit time. slow the base. when is been expect sort Fuze natural notional And the with the that it's did we'd degrade of it's we sense, acquisition.

cross-selling continue. focus to of revenue expect number into center is The that besides would contact our retaining one I it. the so area And

of Marshall line question the next is The from Stanley. with Morgan Meta

Your line is now open.

and look you you fiscal low just gave. 'XX of single-digit the as kind Maybe to outlook that

conservatism guys trajectory, as as environment. just just But the of what given far far seeing of a like as macro lot of on kind CPaaS around Fuze just if you could an as or you're kind You activity, update mentioned conservatism give deal term.

then as on a business of rationale And in, do what business. guess, maybe a follow-up that of invest it's rationale region cost amount don't you I tremendous question kind CPaaS continuing ongoing just that the particularly of the is elsewhere? business business kind the you're guys in a in given like just like what when making is to decisions

This is Kevin.

So CPaaS of see dynamic since of that of the But as in are change. respect said. on we We digits, absolute business. signs signs do conservative in low being it's it's growth our usage-based, terms until with forward-looking see to we we the of to conservatism pretty market. just going the single that, forecast a We're into business, XXXX stabilization continue

business, In that can of turn investments rationale pretty revenue the terms really that for business quickly. the in up

on our more very in short business we're business. does. recurring growth that interested -- It of pretty So provide lot a order, could typical revenue so in than

where our growth. up So of that's we're potentially looking at the ramping X areas

Yes.

revenue, So so little which add bit economic like talk that of a things couple things seeing you sensitivity, contracted isn't small about probably of a CPaaS, I'd some is, more we're economic sensitivity.

our fantastic. were is collections on absolutely core it's really think I the where interesting business,

in talked quarter. we our the sort of cash So balance cash for expected was of what Kevin and excess about, as

collections long portfolio a best Our time. been also clear metrics. sign a And that's the retention is in our it's in

of out of economic said, -- good X so retention our highest in look, you And is perspective contracted portfolio other So many Kevin were had see up, what metrics a an right? quarter did from pretty you quarters, if revenue things. I to relative trended So those the exactly in some the quality but the of fantastic. forget RPO months, absolutely our

and to recurring front, about health So lastly, super on -- I of side for. first look, of the of model. we with definitely stressed super in to an the add got side which into aggressive a really And conservative then house of X also. economic We're not model going the the CCaaS We've conservative both have I'm stick logos. of our new on innovation think basically right just that's out -- on it's the the trying a beta, the sorry, neck not side from my new ability to going economic be quarter. the I'm my the far model, now CPaaS nature ton

So a on of slack. I'm bit conservative quarter cut out. me first the

question is the Panigrahi with Mizuho. The next of line Siti from

open Your line is now.

side. good to it's see on profitability focus Sam,

side. to Just ask wanted on the revenue

organic revenue, was Fuze. service Your say I growth services revenue flat, excluding

are So you Is enterprise did What seeing definitely do of in what it talk market you about the now? anything you trend, see terms disoriented. in macro CCaaS, but the on side? right

We beginning took it's I took for me January. in hard tell. and in the -- of an another it's a -- a fair action action just question, and yes, your to It's math is we little October, correct.

makes reallocate think margin balance delever in of for allows better walking both and areas. company margin had or said better those We we're improved So we as away revenue the to investments to us just allows off sheet, from the earlier, profitability low us negative our ROIC improved consequences. And the profitability.

long investment So in we've think a would absolutely, retention levels a working, I I is performance, up played the in of commission's relatively was deferred the up economics thing revenue's reallocation seen that I highest and And deferred quarter-on-quarter, quarter-on-quarter role the say other up quarter-on-quarter, at is small time. revenue think really RPO's it self-generated.

of better terms of underlying a got indicators business, in healthy the last they SaaS So all quarter.

better. little to of And substantially right now sacrifice those things so a I to sort of bit revenue the believe right all is make play growth that

you CPaaS business then And the business, in weakness about the CPaaS the few know talked in last I quarters.

right the what's of run current wondering rate So now? CPaaS

don't We that. disclose

looking disclosing out mentioned we so we're his X Kevin the breadcrumbs at potentially in it's that the As it's in of put quarters, review. future kind things script, but of there, under

question the Partners. of is from with Roth Catharine Capital next Trebnick The line

Your line open. is now

assets so other growth and about you #X, that build you that talked with, Asia are has up bullet revenue a drive point your Pac when really can What driver? down. as CPaaS key you Sam, looking to been

completely a question. It's fair

in product think in we I I up So on cycle, And another Asia. business. but product we that. missed at and in the of a could the in a missed like time, platform you the past, -- cycle We're bit -- in in CPaaS we of just into the caught get sort investing more details can

have name continuing in to And remarks. mentioned to land brand unit I as continued volumes prepared Our increase. the we're customers,

the to features. gap think the business on I business. And that's near some need the in close also in so other on And front there's just a is news funnel CPaaS cetera. the future We few there, that et coming product

I turn taking so stars longer around that and that stars I to than we the for to is starting And expected, are to do and the business everyone, align grant better. that think around. I but turn It are think had therefore, us to

then, market, layer that you market a Australian it your also you. would seems Well, for then the business CCaaS right in like on like be

those Right if now, the because California I Australia. I'm markets population be California wouldn't great not market. just happens sure center I'm Ireland, California pooh, don't I U.S., State the Australia right in than to aggressively in pooh, us. sorry, is the world Australian the pretty is in like just sixth. know the want country that now we're Canada, rather largest U.K., -- It for of invest I in the investing are to XXth contact and

line from the George is with The of next Craig-Hallum. Sutton question

line open. is now Your

can seen? there? as -- something Sam, you driver your something customer detail? to of recommendations a your more being Can is you've of peers, talk you about business. there the a actually importance little their about that And quantify in that is Is that you talked

know numbers head, our on focused but last ability. been has we've the that been the over the X may Kate improving things of top her very of the quarters few quantification off reference

I about in all So So about were saw in NPS, very referenceability. substantial we talked we of really about This investment in success. prepared our right? so retention and customer high pretty sort a we're rates circle, Kevin my there's referenceability the goes talking notion remarks, having. full talked of our increase

in past. then, those it give to happy right? turn, that happy trying improvements little than drives the a So RPO get to spinning customers virtuous leads turn revenue of which in things, and maybe references, in That deferred customers, has improvements kinds good cycle, we're faster and

Just as follow-up. a

churn course, about churn. to layoffs results? mentioned talk to something we're if some And the the around with. market. as curious you can I'm of starting starting you're impact an in You customer see seat have that is comfortable Is

Kevin count years. seats, if XXX down many a a let about talk from retention about you we add right? X, talk to up that seats, goes XX sells if the when plus And so highest follow the retention, had in we to last we seats where customer XX anything. Look, customer from want to seats So we logo I'll quarter, same.

And that a we're really of of we launching beta, don't et Conversational think interesting things I the cetera. lot what's it's so important is things, I -- much have think some IQ, in

uptick an seats, just going So we're little seeing add-ons we bit are seeing number core center. from product, even of a our decrease number if of contact of in into the the ARPU the

Yes.

think we can't on delighting years and just -- better in also to right years more just our global the than retention, get customer more I the any put will up that we -- than to care we're ones find back say I quarter. I go that making than customers. over X X are this numbers need customer the that investments so for

do We're starting very that We're we and So that right any look looking coming although renewing, out. of pay what don't we give way. for us, to it's customers. forward, very, risks now. high-value up, really good the address and job a customers we're keeping what's proactive guidance this, And doing are really about dividends we right on

our that's recent in think trend. I reflected So

question of The Will the is Power Baird. with line next from

line Your now open. is

had I both initial and question is guess I guidance, I recognize QX the for Yes, framework a a on in guess 'XX, going to thanks that headwind. And be CPaaS revenue the I there. fiscal for

kind Is help different of there? mean CCaaS, strategic there color I that. what UCaaS? the seeing growth which in and any demonstrably us are versus way about you parse I on priority front? talked You've provide kind there Any rates that XCaaS to is could know you're of apart

start, and fill Yes. in. I'll I'll Kevin I mean, let

across rate ARR our seeing is has XCaaS growth now things, growth couple of well the right? rates and our a XX% So what high business, is of almost we're right? in So in and XCaaS whole XXs. excess flat the business of is whole So

And lot so the table. got under a we've where definitely pieces a situation moving of

not business, you basis, year-over-year numbers. UCaaS. small of mentioned those It quarter. blowout a CPaaS, It okay up X%, had kinds quarter this on an of things. was kind right, But flattish

under are covers. And so the we still

is show in this I though, And That's small the center starting to our to higher smaller growth become business mix. smaller contact starting driving doing component in complete think better. a overall up enterprise. and right? a of all is XCaaS, soup of ARR rates

rates. lift that flushes should time, naturally a we as so growth out all And in over see

Let helping this are mean nice adoption? RPO I that into me the drive of then that. -- ties that? X of XCaaS was I sequential And mean is had you what's that? you ask noted kind a What key maybe pieces increase.

mean, super to I love pulling contact but cool, growth Microsoft mean The we Teams to for sophisticated UC, and of right? right? quarter love Microsoft combination CC mentioned -- sales, good I'd make triple-digit we year-over-year. a no, it I integration, That's well, in and Yes. -- XCaaS our center. Teams make had I'd world-class it a

ARPUs associated margins Our to then it good contact center dollar higher it. has with attached and

can in numbers that, get continue So if keep we just to and the princing better. repeating will

Yes.

bookings, of a we indicative delighting customers. addition as in had the investments which logo well, new is in making mean, quarter strong I the the -- to renewal also great We we're

Thank you that for out, calling Kevin.

So that's in reflected our RPO.

well. revenue deferred is up also as Our quarter-over-quarter

right? more retention starts bigger the like XCaaS out. in the business, well has that net math itself more the work XXX, excess to the And XCaaS dollar So part becomes of a a of Yes.

sorry, I'm And a clarification. just maybe quick

operating -- exit above that the full Or margin of basis 'XX? the for fiscal guidance, fiscal rate on the that Was you to above year is XXX 'XX XXX the On 'XX? I think points. said

then Yes, strength on add points XXX we for and to the basis X.X% full on do the but balance the year, improvement the steady a expect XXX sheet. we'll full of we just year have about took top of for that

The ISI. of from question Peter Evercore is line Levine with next the

open. now is line Your

about profitability, for near-term more think, cash. managing think business of we growth foregoing, When I the

that comments become marketing. but more a, does will of an sound having, your innovation company, think be like sales it on and I the offsets by

a rely what going efficiencies, to I to deliver, base? more sales think, on the bit play, partners the new? marketing greater to sales idea is and I the to be strategy is Or pulling Just back are if net on on initiatives for you're So for? think, kind today the little back of focus in

Yes.

So we are a partner-led company.

But of before And takes I putting in so a that that timing sort pipeline. -- the it innovation, is that. and up show aspect -- while this, we're key to know today if think a everybody to we invest little in gets for and there's that I

we worked around sales improving company, a and And so marketing at efficiency solid map, particularly incubate while what on road innovation center. have contact is the done the really we've we

and partner over of model, And road get sales or a that time. a more innovation we of be model should and so to instead that's more into once push customer map market starts the efficient whatever, much pull

XCaaS this. larger as the transition to with some of And rates timing this We'll of being new relatively quarters driving growth more so make low we innovation a to to to there products is a part, aspect business. deal

on that's of focusing efficiency things that number done But in to of what instead really some the past. improve we've we're the

this at think, I'm but year-over-year, to just if kind macro of understand CPaaS If was versus quantify, how the much just that decisions? trying the quarter? impacting you growth can purchasing it, customer headwind apologize I of organic headwind I I to I missed attributable look CPaaS

that of there. SEC some We run would a don't the rules the We if vast majority reporting don't actually out want we between other what out the of the segment I rules separately. of to produce, and you guidance CPaaS our -- break foul CPaaS the it that and that you was are the helps was tell the difference business, it. quantify that of just

The of Koontz next question Ryan is from Needham. with line the

now is open. line Your

the Sam, of Are you broader the that the across could slowing the the board. seeing I growth as consolidation UC industry? at look you want improve kind of signs space and yet health obviously of

Well, deal. that we consolidated like and Fuze Street didn't the

soon. I wouldn't to going it be whole I anybody sure is has -- in us so not the consolidating too Fuze do anything But I'm I far, consolidation a no. for big space. lot over again. see don't would So a success. all been

model migration point? of Fuze at or forward this installed the customer no should of base, going of terms any in how update we And terms there the expect on in kind impact

front And We're seamless on automated that and to easy work as to really upgrades. is got we've transition, migration the just market. we accelerating engineering selling my upgrades into the starting we've I make say, tools done a come

those expect of upgrades to accelerate -- to that couple would we So over next that, the quarters. start

going you're migrate. customers listening, not And you if going any we're ready. Fuze to when going force force do to are to it not to it We're We're upgrade.

question MacWilliams next of The with is from Ryan Barclays. the line

Your line is open. now

improvement It Sam, targeting non-GAAP right seems also to the the like in revenue. certainly gross see profit. you're quarter-over-quarter nice

some you of growth first year-over-year any you For in thinking half? I'll are quarterly year XXXX slack and low revenue line about this on cut differences should we growth half later the Like second basis, rates growth single-digit versus look, for year? the the this year-over-year think the top a stronger point, the at for target on but one, in the

Last it and on. baked things, excess growth year profits. any goes out, calling we in, would in naturally as for expect we mean new growth Thank gross of in that growth. is XX% I And rates haven't year-over-year profit revenue you other right. next quarter, products gross of Yes. of because the growth year the of the but some the lift comps really the will

the But improvements. year. want of back We to more solid half you Kevin, continue to add? get margin anything yes, gross

with And conservative provided CPaaS, our estimation. above be that at we're and a to look what ramp that what to help going can taking we doing happens

Yes. Good for to hear that sure.

around Microsoft the quarter? with And additional the from Teams then renewals, any you renewals strength headwinds, did comes Microsoft business integration? from around disclosure new went separately, perhaps but your over this in hundred quarter you of also a of what competition noticed have for few $XXX,XXX percentage to Teams notice licenses net that last those in Do sense a the quarter. We price XxX's thousand

the to give we X, I'll away effectively Teams you for because first Microsoft So integration get for back the on free.

on real number. no has it the So consequence UCaaS

XX it's go Just seats integration I'm to or stop XX, out, freaks buy free. to The XX free. XX with not for before seat an giving They everybody or away is it.

I get number, of easy some to it's to to go have do say but percentage what was. the math that for me seat dollars So logo new

new of X Microsoft our is Microsoft Teams it's triple becoming Teams the pulling and and if aspect. through a other of important wins. about at growth larger contact growing organic And things. share we're center think logo obviously, I an at it is talking some And digits,

the around like Did the notice competition in Or similar? was you quarter. renewals? additional around it price pretty renewals any just And Sure.

of speak for quarter, candidly, I end really If no and swear the they at year, of of it's pricing fiscal year at Yes. December end the I have their number fourth fiscal absolutely all. and discipline the the our at a competitors,

on posting while to see they're in quarter. busy, we thrown sure. forget SKOs I do mud they're that they'll did suspect that now directions, So this several and LinkedIn,

The Turrin next question of Wells with from is Fargo. Michael the line

Your open. now line is

the wondering to quantify just much Michael how way back taking Williams if you've wanted core any to that that are out is go margins. margin thus the how for there's improvement from to seen of on far Fuze to I of business costs I'm Turrin. efficiencies? This Austin compares and

the really have as of core business we as gotten great a of margin Fuze. well out lot So

really organic kind sides. the Fuze the And work we with comparable margins done with of So XxX gross the on, base. that both same gross say, Fuze on we've COGS did it's And margins. the

in So it's kind tandem. of been done

a there's improvement from entities, of both So fairly you will. if that I would distribution equal say margin

relates any just Just X are to as anything there basis. to call out wondering on follow-up. it there? deal sequential if a longer-term if RPO I'm deals up nicely there's in duration, was

roughly a change, the saw was same. but roughly contracts. vast It's same. of slight the majority We it just It's Yes. the more

question Funk from America. The of Bank line is next of Michael the with

Your is open. now line

I if couple A Yes. could.

mentioned earlier, time. increase of you attach rate So CCaaS hoping to see over

gating it on a there? just and what's So just the partner sales training? more better that to happen? details that make what's Is Is going processes, factor technical training So wondering integration?

through house, center the believe start is I of -- we're we IQ, the and innovation UC distinct things advantage And Conversational on going that to gives on platform. which more. same from to our in, more given investing pull the a as that as fact we -- the okay, to base the contact have like comes your center believe into side of I moving to contact vendor so the on market, the same particularly

in things, it that, it contact SLA, other high our up lay all single and just a deals FiveX have as those set gets makes makes we us package. gets turn, involved So better, the in in center platform, all the a availability, high fact look more prospects reliability, at that to buy feature it tremendous together X

retention contact And I rates, side on there's amount the more all more, center think room XX% the market, seeing faster terms white retention those And dollar right, tremendous because higher invest we of we're in higher and contact of things. ARR, think faster, today. the center where a the flywheel with spins space that's is resonate of I net XCaaS why innovation numbers, that

incremental How and being the that market? how Is with to then expirations Is product related discounting, you rate. Understood. about you comment the customers? made with some are were about helpful the And retention that risks? was I also, that are And then addressing seeing you pressure addressing risk that the in those think of through pricing additions? competitive addressing

was how forward. that looking about my think we're I comment

we've comes we're And they're the it's and making they're product delighted trying so just we make that sure the the do trying in customer well operationalized that came mentioned that's that using performance making of good happy. customers about advance have is in in investment promised, and a and up sure of the I -- yes comment to is as understanding product, sure forth. investment the renewals the of working well fairly the in the we're an are -- when that what first so where coming customer of -- So pretty their renewal, all, --

make ahead we could sure renewal. of It basically, discount don't we it. so, to that want doing by So get necessarily but on happen, have we just go to

would on said, Kevin with everything costs in I line right? piggyback Yes. low are of and this And nonreporting not else. what sort industry Switching

are organization bottlenecks like We training agents right? ours just customers, it doing we land exceptional the has job the number GCC are lose. other And or once to one. an there to So removing renewal, things, here done really, as of to

meet reliability. we engineering I And kinds platform just because mean and can't very organization numbers. job done our SLA, the competitors with of have most they exceptional don't those an has of then FiveX high

the from The Riley. Nichols next with question line of B. Josh is

is open. line Your now

as deleveraging see make progress to company continues guidance to the improving on Good operating here. margin the front the

what guess most the -- have and of answered, that but you're kind seeing as such interesting given I U.K. say, could seeing other been lot if markets from versus markets in questions economic the of compare you I'd my have contrast U.S. faster that'd weakness that Just and late. a be of you foreign we're been growing

Just that curious like looks today. what

chime should you Kevin, in.

market and the bit In think XCaaS messaging our there's Teams telecom better. the our and resonates Microsoft being channel difference I is little channels. channel bit is messaging biggest Microsoft a U.S., X a the of U.K. the still in the resonates little I strongly separate the market in foreign see really

work, channel, paying Teams And a so that's the and dividends. done building -- our yeoman's our channel tremendous team has Microsoft

And X foreign just traction easier it's It's in structured just And different sweet less. us gain our markets. it's think economics for I in see I that to so particular. -- markets,

would accelerate but potentially question business you process? a here. a know on I the that repayment I that's And notes will of opportunities as One, deleveraging aside of on like next stabilizing for last couple from like you this one, like lower-margin that to core deleveraging, that I companies headwind. are focus bit over there business the your CPaaS quarters been me. not due look you consider restrictions like at guess likely or in are little the also it And debt a have remaining has a then like of sounds kind 'XX? guess, any offering, the

one. It's is from options is business strength, unit seller from it know economics strategic it. CPaaS But X it's running me, Josh, as Step not a a for about got we the right. the second take when to talk Kevin let weakness. you great I'll running Look, beautiful and right, get I'm business. then can

Yes.

debt is when due. are question, we the XXXX XXXX On the converts February have remaining X,

think I -- on the on the can XX%. we he's back term pay notes, asking, though,

Yes, August. small we succeeding the penalty. Starting And have. that's is in then And there year, prepayment what prepayment then for penalty there's that, a after none.

any back There questions are CEO, this no remarks. the at additional so will closing time, Wilson, waiting to for I pass Samuel conference

can All right. some excitement recognition tempered Thank we and our of commitment am future Matt. hard we the path have our this. confident I by support. about I you conveyed work. success your hope do will opportunity you, for and that the continued require Thank

tailored are and stream a coming we positioned a features this are for vibrant are the products new innovation. year, including We based experiences, and organization, accelerating and strong we ML-AI financially pace of well With the steady of calendar future.

you so and I much, next forward Thank reporting look quarter. progress our to

conference you concludes call. Thank That participation. for your the