8x8 Inc

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

Thank you. Good afternoon and welcome to 8x8's Third Quarter Fiscal 2020 Earnings Conference Call. Joining me today are Vic Verma, Chief Executive Officer, and Steven Gadoff, Chief Financial Officer. During today's call, Vic will begin with business highlights of our third quarter performance. Following this, Steven will provide details on our financial results and guidance. After these prepared remarks, we look forward to taking your questions. Before we get started, just a reminder that our discussion today includes forward-looking statements about 8x8's future financial performance as well as its business Product and Growth Strategies We caution you not to put undue reliance on these forward-looking statements as they involve risks and uncertainties that may cause actual results to materially vary from the forward-looking statements as described in our risk factors in our reports filed with the SEC. Any forward-looking statements made on this call reflect our analysis as of today and we have no plans or duty to update them. In addition, some financial measures that will be discussed on this call, together with year-over-year comparisons in some cases, were not prepared in accordance with U.S. generally accepted accounting principles or GAAP. A reconciliation of non-GAAP measures to the closest comparable GAAP measures is provided with our earnings press release and PowerPoint presentation deck, which are available on our investor relations website. With that, let me turn the call over to Vic.

Thank you, Victoria. Good afternoon, everyone, and thank you for joining us today. Building on our Q2 results, I'm very pleased with continued improvements in execution and financial performance, which led to very strong Q3 results. I'd like to focus my remarks on three topics. Strong financial results in Q3, continued channel success, and aligning our global operations for both revenue growth and profitability. 32% year-over-year and exceeded the high end of our financial outlook. Key drivers of growth performance included success with mid-market and enterprise customers and broad-based global strength across our product suite including both Contact Center and CPaaS. The momentum we are seeing is clear customer validation of our strategy of owning a global integrated single stack technology platform. Customers are increasingly migrating to cloud for their communication needs and they want to work with the platform leader. The investments we have made over the last few years in both go-to market and product innovation are succeeding. Sales execution was strong in Q3 with robust pipeline growth in all segments. Total organic bookings grew 30% year-over-year. Enterprise ARR grew 85% year-over-year. Four of our top 10 wins were Avaya replacements who opted for our X-Series bundle platform solutions. X-Series now represents over 37% of our installed base, up from 32% last quarter. We also continue to broaden our enterprise customer base with a record 40 new deals closed in the quarter with ARR greater than $100,000. And the common theme for many of these successes was our integrated platform. In fact, 71% of our new bookings greater than $12,000 ARR were from customers that selected bundled UCAS and CCAS as compared to 51% one year ago. This continues to validate the power of our single technology platform with our customers. Channel execution was strong again in Q3, with channel bookings growing 62% year over year. Channel drove 54% of new bookings overall, including nine of our top 10 deals. Channel also helped the mid-market achieve ARR growth of 44% year over year. I'm particularly pleased to see accelerating market adoption of our contact center solutions. Contact center bookings grew 90% year over year as compared to 41% growth in our last quarter. It represented 33% of our total new bookings this quarter as compared to 24% last quarter. More importantly, all of our top 10 deals included Contact Center, which demonstrates the criticality of having Contact Center as part of a single scalable technology platform. New customer logos represented 59% of total bookings. One such win was a seven-digit TCV Avaya on-premise replacement. This deal included more than 1,300 seats of 8x8X series, including both UC and contact center, with an insurance-adjusting firm that manages complex environments that must scale up with little notice. Their business requirements included a more flexible contact center and a mobile collaboration solution with a single user experience for voice, video meetings, and messaging. Another large seven-digit TCV Avaya on-premise replacement win was with a North American industrial distributor with over 20 centers throughout US and Canada. The customer was looking to modernize their contact center and enhance workforce collaboration as well as offer omni-channel communication options to its customers. 8x8x series was selected for its tight integration of contact center and workforce management capabilities. A large Mitel on-premise replacement was a seven-digit TCB win with a UK-based service provider. This customer is replacing on-premise communication systems across 250 sites and chose the 8x8x series including contact center to deliver multi-channel capability to over 4,000 seats. I'm also pleased to see that land and expand continues to be the norm with our mid-market and enterprise customers. A great example of our X-Series platform driving a seven-digit TCV customer expansion is Vacasa, North America's largest vacation rental management platform. After a recent purchase of Wyndham Vacation Rentals, Vacasa wanted to remain true to its mission, drive industry-leading revenue for homeowners and unforgettable experience for its guests. It was important to bring the Wyndham Vacation Rentals property management into its contact center process. In doing so, they've added additional 8x8X series seats to the initial contact center deployment so the business can continue to operate seamlessly. Turning to product innovation, We launched 8x8 Video Meetings, a free standalone service enabling users to easily schedule, start, and join HD video and audio conferencing from any device or room without the need to register or download software. Released just in mid-November, early adoption has been very encouraging and stands as another entry point onto the X-Series platform. We are on track to launch our 8x8 meetings room solution this quarter. This goal is to bring easy video collaboration to every huddle and conference room space with an intuitive interface and smart pairing technology to connect to devices. We also recently purchased WebRTC quality monitoring and analytics technology from callstats.io. CallStats has been a long-term technology partner and with this acquisition, these strategic capabilities become part of our integrated X-Series platform. Looking at Contact Center, we recently announced new capabilities including 8x8 SecurePay, enhanced outbound dialer and expanded quality management capabilities. Also, we were honored to receive the 2019 Customer Experience Innovation Award from TNC's Customer Magazine recognizing 8byte's contact center approach to delivering exceptional customer experiences. Turning to CPaaS, we continue to build traction with large multinational customers including signing a leading food retailer with more than 1,000 outlets across the Asia-Pacific region. This enterprise customer will use our CPaaS SMS solution to improve their consumer delivery service. Additionally, We are very excited to have deployed our initial voice CPaaS services, bringing expertise and capabilities from our X-Series platform to our portfolio of CPaaS offerings. We now have several production customers on our voice CPaaS services, including a new contract with one of the largest and fastest growing ride-hailing and digital service companies in Southeast Asia. Our strategy of coupling CPaaS capabilities with voice, chat, video, and contact center opens up a huge opportunity for us to penetrate our installed customer base and expands the differentiated use case we can deliver with our single technology platform. The second topic I'd like to address is continued channel progress, particularly with the addition of significant new strategic partners this quarter. As you are aware, there are two different types of channel partners in the community. The master agent referral channel and the VAR channel. As I mentioned earlier, our referral program has grown dramatically over the past year and now consistently delivers over 50% of new bookings. Our global VAR program allows us to reach yet another massive installed base of customers that are also looking to replace the legacy on-premise communications infrastructure but prefer to buy from their trusted VAR instead of directly from the service provider. 8x8 offers a compelling value proposition for VARs for three reasons. First, thanks to the X-Series platform, we are the only ones in the market today who can offer both standalone and bundled solutions with no need to integrate additional products. Second, VARs can leverage 8Buy's best-in-class partner portal, Partner Exchange, which was enhanced for VARs to independently quote, order, provision, and manage customers, as well as access certification content and marketing assets. And finally, the VAR community can continue to operate in their existing reseller business model, retaining ownership of the end customer and leveraging their existing selling motions. It was these foundational advantages that led to CloudFuel, our partnership with ScanSource and Poly. As we have talked about before, this was the first time a comprehensive, frictionless hardware replacement and cloud migration program has been offered to the VAR community. CloudFuel opens up access to over 15 million Avaya seats and gives 8x8 a large market for ongoing customer acquisition. An initial set of ScanSource VARs have already undergone training and enablement, and we expect CloudFuel to be available to end-user customers this month. In addition to this, I am pleased to announce the expansion of our UK VAR program with Softcat, Charterhouse, NSL, and Computacenter. For prominent UK VARs, including the UK's two largest VARs for channel reseller news. We have already closed an initial set of X-series deals with these partners including the replacement of an on-premise Mitel customer that is a leading home care provider in the UK with both UCAS and CCAS solutions. We're excited to continue to see the VAR community approach us on a global basis to work with them across our all-in-one cloud-based platform for voice, video, meetings, collaboration, contact center, and APIs. In total, there are more than 350 million legacy seats globally via Cisco, Shortel, Mitel, and other on-premise solutions right for cloud migration. And 8x8 has the leading cloud platform available today to meet business needs across unified communications, video meetings, collaboration, and contact centers. Finally, I'd like to take a minute to discuss recent leadership appointments and how we are aligning our global business to drive both improved execution and efficiency. We announced Marge Breya as our new Chief Marketing Officer responsible for all marketing globally including product and corporate marketing, communications, and demand generation. Second, we promoted Sam Wilson to Chief Customer Officer and Manager Director of EMEA. Sam will own the customer lifecycle globally including deployment, professional services, customer success, and customer support. Sam ran the global small business and U.S. mid-market sales for over two years where he built out the sales engine and e-commerce capabilities to drive the flywheel of adding customers and reducing acquisition costs. Our third executive appointment is the promotion of Homero Salinas to Group Vice President, Commercial Sales. Homero will provide leadership for our commercial sales team in both North America and the UK. I'm excited to have Homero take the reins from SAM on the broader commercial sales front and expect that moving ahead, we will be able to run even faster. In conjunction with these announcements, we also took steps to realign our global operations. We have spent a lot of time and energy building out a true global footprint over the past several years with offices in the UK, Singapore, Sydney, Cluj, Minneapolis, and new offices in the Bay Area in Campbell and San Ramon. We're now in a great position where we can hire talent globally to optimize and streamline our operations. In parallel, we continue to invest in product innovation. We see not just customers, but also market and industry analysts really starting to understand the value of a single technology platform. We will continue to invest to maintain our technology leadership to provide true differentiation for the long term. In summary, it was a very strong quarter for us, driven by steadily improving execution and market momentum across our global business. We're focused on broadening the mid-market and enterprise business with the investments we are making in our customer-facing teams and deepening our relationship with customers and partners. With today's new VAR partnership announcement and the earlier announced strategic partnership with ScanSource and Poly, we're excited to broaden our global channel partner reach and empower enterprises to migrate to the cloud with confidence. Finally, I'd like to take a moment to thank my 8x8 teammates around the world for their hard work. Their commitment to our customers and partners will enable us to finish the year strong and positions us for future growth in delivering a half a billion dollar revenue run rate in the near term. With that, let me turn the call over to Steve.