8x8 Inc

Good evening. My name is Joanna and I will be your conference operator today. At this time, I would like to welcome everyone to the 8x8 Incorporated Fiscal Third Quarter 2021 Earnings Conference Call. I would now like to turn the call over to Victoria Hajdan, Head of Investor Relations.

Good afternoon and welcome to 8x8 Third Quarter Fiscal 2021 Earnings Conference Call. Speaking on our call today is Dave Sipes, Chief Executive Officer and Sam Wilson, Chief Financial Officer. Before we get started, just a reminder that our discussion today includes four looking statements about 8x8's future financial performance, as well as its business, product, and growth strategies, including the impact of the COVID-19 pandemic. We caution you not to put undue reliance on these four looking statements as they involve risk and uncertainties, they may cause actual results to vary materially from the four looking statements as described in our risk factors in our reports filed with the SEC. Any four looking statements made on this call reflect our analysis as of today and we have no plans or obligation 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 these non-GAAP measures to the closest comparable GAAP measures is provided in our earnings press release and PowerPoint presentation deck, which are available on the Investor Relations website. And with that, I'll turn the call over to Dave.

Thank you, Victoria. Good afternoon, everyone. I hope you and your families are healthy and safe. I'm pleased to speak with you today on my first earnings call with 8x8. I will cover business highlights from our third quarter results, and Sam will walk us through financial results and guidance for the fourth quarter and full year. I will then share my observations from my first 50 days and initial thoughts on the company's next level of growth. Now, let me start with Q3. Q3 was a good quarter. Total revenue grew to $137 million, a 15% increase year over year, and above the high end of our guidance range. Key drivers of the growth were strong demand for our bundled CCAS and UCAS offerings, continued upmarket focus, new logo acquisition, channel contribution, and improving operational execution. Our fully integrated CTAS and UCAS solution is a clear differentiator for us as a mid-market enterprise organization to replace legacy on-premise systems and shift employee and customer engagement to the cloud. The industry continues to recognize the value of 8x8's fully integrated platform. For the ninth consecutive year, Gartner named 8x8 as a leader in the magic quadrant for unified communications as a service worldwide. Also in the quarter, for the sixth year in a row, Gardner named 8x8 as a challenger in the Magic Quadrant for contact center as a service. Of note, 8x8 is the only UCAS Magic Quadrant leader that is also in the contact center as a service Magic Quadrant. Furthermore, we achieved our fourth sequential quarter of improved profitability. We exceeded top and bottom line guidance, improved operating efficiency, and strengthened our cash position. With a clear line of sight to improving revenue growth and profitability in the fourth quarter, we are raising full year guidance and cash balance outlook for the fiscal year. Sam will speak to this in a moment. Now let me turn to highlights from the quarter. We are pleased with the success we are seeing from our channel first strategy and upmarket focus with mid-market and enterprise customers. We had a record quarter upmarket with over 730 customers with greater than $100,000 in ARR, a 24% increase year over year. This was a result of strong execution across sales, marketing, and channel, and a combined product solution that is fit for purpose for enterprise customers. Channel execution was strong again. driving 64% of bookings in the quarter, eight of the top 10 deals, and enterprise ARR growth of 46%. The channel team across all regions delivered their highest bookings quarter on record. Channel partners are turning to 8x8 because of our integrated contact center and communication solutions deliver exceptional value for our mutual customers. Our UK value added reseller or VAR route to market is the fastest growing segment within our channel. Nearly 40% of channel pipeline in the quarter came from the UK VAR community and the number of partners registering deals grew by 70% year over year. We were also honored to be awarded the 2020 CRN UK cloud services vendor of the year and the 2020 TechTarget Archer Award for Best Channel Enablement Program in North America. Turning to specific customer wins, we observed strong growth in new logos overall, representing 56% of new bookings, up from 44% last quarter. We saw strong execution in all geographies and in key verticals such as healthcare, retail, transportation, and public sector. Let me highlight a few recent examples. In North America, a notable win was CEC Entertainment, which operates Chuck E. Cheese, the number one family entertainment center with operations in 47 states and 15 countries around the world. CEC Entertainment was looking to consolidate from multiple providers and lower their IT infrastructure expense. They needed a vendor that could rapidly deploy a unified communications platform for their restaurants and their corporate offices. They found 8x8 was able to reduce their overall cost and completely deploy our UC platform within four weeks. An additional win is a seven-figure TCB competitive cloud replacement with a medical office solutions provider who wanted an integrated CCAS and UCAS solution. This customer required outstanding call quality and integration between its voice and contact center platforms. They selected 8x8 to deploy 800 UCAS and 150 CCAS licenses. Outside of North America, we also had many important customer wins attracted by our differentiated UCAS and CCAS bundled offering. A major example is Ryanair Holdings, Europe's largest airline group. Ryanair connects travelers to over 240 destinations in 40 countries on a fleet of 470 aircraft, with a further 210 on order. Ryanair chose 8x8 to support their expected growth and provide more than 600 agents with a unified UCAS and CCAS platform. Our platform will be used to cross-run our customer service agents who will utilize our Zendesk integration to automatically log all customer activity within their CRM. Additionally, they will use our speech analytics and quality management solution to drive improvements in customer experience and to help upscale their agents. Next is Certis Energy UK Limited. the UK's largest independent distributor of fuels and lubricants. They selected 8x8 CCAS and UCAS platform to modernize communication with their customers. 8x8 will support 500 contact center agents and 1,000 back office and depot-based staff. Our solution allows Certus to have a single operational view of their contact center functions and customer interactions. Another example comes from our Australia, New Zealand region with a top multinational cybersecurity company. They wanted to replace their multi-vendor communication and contact center solutions with a single vendor solution that could provide a higher level of voice quality, call routing, and reporting globally. They chose 8x8 for a combined CCaaS and UCaaS solution and integration capabilities with CRM systems. This seven-figure TCV win is for over 850 globally distributed business users and multiple contact center locations across 44 countries. This is the initial deployment and has ample opportunity for future expansion. The public sector in the UK also continues to be a bright spot. Our UK public sector customer base has nearly doubled year over year. Notable wins this quarter included NHS Public Health Scotland, which provides specialist national healthcare services in Scotland to support the 14 regional NHS health boards. They are responsible for managing vaccination helplines and booking services for Scotland's COVID-19 response. and selected 8x8 CCAS and UCAS solutions, supporting over 3,300 seats. Kent Community Health, a UK NHS provider of community services, also selected 8x8 with 4,000 seats to accelerate their digital transformation and improve customer experience. Newham College of Further Education was an important bar win with 480 seats secured through our partnership with Virgin Media Business. Furthermore, we continue to see existing customers adopt more 8x8 services, creating a land and expand opportunity that will fuel future growth. A great example is Halfords Group, a British retailer of car parts and enhancement tools, camping, and touring equipment. Hallford selected 8x8 CCAS and UCAS for more than 4,700 seats in 2019 and have now added an additional 450 CCAS seats across their UK locations to further enhance their customer experience and solve compliance challenges after several acquisitions. Another notable example is a seven-figure TCV deal with one of Canada and Europe's leading equipment service providers who placed an add-on order of approximately 2,300 bundled CCAS and UCAS seats. Almost all of these wins, our channel partners were critical to our success, and I would like to thank them for their collaboration and support. Now, I'd like to discuss the market success of our products. CCAS and UCAS funnel offerings continue to lead the way. Fundle's contact center and communications represented 67% of upmarket bookings, bookings that were 12,000 or more in ARR. ARR from combo customers, customers who have purchased UC and CC, now represents over a third of total company ARR. Additionally, for the second quarter in a row, Combo Customer ARR grew at twice the rate of market growth. Also, I'm proud to say that more than two-thirds of our filled sales reps closed a bundled UCCC deal last quarter. The channel is also seeing the benefit of bundled UCCC. our sub-agents who historically sold UCaaS are now selling more CCaaS. The number of partners selling our bundled solution grew by over 38% year over year. Finally, this week we announced a partnership with Barent to enhance our CCaaS offering by adding additional integrated cloud workforce management applications for mid-market enterprise businesses worldwide. Next is 8x8 Voice for Microsoft Teams, which continues to generate strong demand from customers that want to modernize their tele-opening platform with a direct routing solution from a proven UCaaS and CCaaS provider. The overall opportunity is extremely large. In a study we commissioned through Hanover Institute Research, found that more than three-quarters of organizations are likely to integrate Microsoft Teams with third-party telephony providers. In the quarter, we added the ability to manage settings such as calling configurations, voicemail, call forwarding, and logging in and out of call queues directly from Microsoft Teams. Additionally, 8x8 Contact Center is now included in Microsoft's Connected Contact Center for Microsoft Teams certification program. A couple of notable wins include a fast-growing retailer which operates 2,000 stores across 37 U.S. states, selected 8x8 for its ability to seamlessly integrate unified communications with Microsoft Teams. After a competitive RFP, 8x8 will deploy a mix and match solution of 10,000 UCAS seats, of which 3,500 will utilize voice for Microsoft Teams. This solves their need for a combined solution for both frontline and knowledge workers. A large one in EMEA is BDO, one of the largest global networks of public accounting, tax, consulting, and business advisory firms. BDO had been working on a large-scale digital transformation initiative and needed a communications platform that would enhance Microsoft Teams functionality. They selected 8x8 in the UK with an initial 6,000-seat license for a mix-and-match solution across UCaaS, CCaaS, and utilizing voice for Microsoft Teams. Lastly, turning to CPaaS, 8x8's API offerings are also driving new customer acquisition. An Indonesian government ministry selected 8x8 as a CPAC provider for an SMS-based application to support a job creation initiative to upskill blue-collar workers with an easily accessible learning platform. Their SMS usage increased 200% quarter-on-quarter to provide critical services to citizens. added support for KCowTalk, a mobile messaging app with over 52 million monthly active users in South Korea. The 8x8 chat app API now allows companies to reach customers across seven different services, including WhatsApp, Fiverr, and Facebook Messenger. Additionally, the Google service, Google Verified SMS, is now available to 8x8 business customers through our 8x8 SMS API. To sum up, CIOs and enterprisers are moving with urgency to the cloud. Our integrated platform sets us apart in the market and continues to drive growth globally. With that, let me now turn the call over to Sam to cover the financial results.