8x8 Inc

Good afternoon. My name is Tania, and I will be your conference operator today. At this time, I would like to welcome everyone to the 8x8 Fiscal Second Quarter 2022 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. Thank you. At this time, I will turn the call over to Kate Patterson, Vice President of Investor Relations. You may begin your conference.

Thank you. Good afternoon. Today's agenda will include a review of our second quarter results with Dave Sipes, Chief Executive Officer, and Samuel Wilson, Chief Financial Officer. Following our prepared remarks, there will be a question and answer session. 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 growth strategies. We caution you not to put undue reliance on these forward-looking statements, as they may involve risks and uncertainties that may cause actual results to vary materially from forward-looking statements, as described in our risk factors in our report filed with the SEC. Any forward-looking statements made on this call and the presentation slides reflect our analysis as of today, and we have no plans or obligations to update them. Certain 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 those non-GAAP measures to the closest comparable GAAP measures is provided within our earnings release, and our earnings presentation slides, which are available on 8x8's investor relations website at investors.8x8.com. With that, I will turn the call over to our CEO, Dave Sipes.

Good afternoon, everyone, and thank you for joining us today. Before we begin our review of the quarter, please join me in welcoming Kate Patterson to 8x8. She joins us at an exciting time as our XCAS vision is resonating in the market and as we work toward our goal of one billion in revenue, a milestone few software companies achieve. Let's turn to a review of our second quarter and an update on our progress and plans for the future. We delivered revenue above high end of our guidance range and non-gap profitability again in Q2. We ended the quarter with over 550 million in ARR, up 18% from a year ago. The strength of our revenue performance combined with continued operational discipline across the company resulted in sequential and year-over-year improvement in our non-GAAP gross margins and non-GAAP operating margin. We delivered positive non-GAAP operating margin and positive operating cash flow for the third consecutive quarter. Let me provide some context on the market trends and our competitive advantages. The hybrid workplace is the new normal. I believe we are in the early innings of a massive migration to cloud-based communications. As the market has demonstrated, customers are demanding a single vendor, integrated platform for communication, collaboration, and customer engagement. We are proud to be delivering on this critical requirement today. 8x8xCaTS unifies the employee and customer experiences by eliminating silos and speeding information flow for an enterprise. allowing businesses to be more agile and responsive to customer needs. Our differentiated cloud technology has been widely recognized by the marketplace. We recently announced that 8x8 has again been included as a leader in the Gartner Magic Quadrant for unified communications as a service worldwide. This is the 10th year in a row and makes us the longest running leader in the UCaaS MQ. We have also been recognized as a challenger in the Gartner Magic Quadrant for Contact Center as a Service for the seventh straight year. 8x8 is the only UCAS Magic Quadrant leader also recognized in the Contact Center as a Service Magic Quadrant. This recognition and our growing base of more than 2 million business users is a solid testament to our leading position in XCAS. In May of this year, I outlined our vision and our focus on four strategic pillars. These are one, expanding the platform advantage, two, winning together with partners, three, expanding the base, and four, driving operational excellence. This clarity of purpose allows us to gain alignment and prioritize our investments to achieve our growth and profitability objectives I will use the four pillars to frame our Q2 business highlights. First, we continued to aggressively expand our platform advantage through innovation. We introduced new features to our XCAS platform and extended our XCAS solution to new countries and territories through our patented global reach technology. We also deepened our integration with Microsoft Teams, which I'll discuss shortly. Platform enhancements delivered in Q2 included the introduction of 8x8 Front Desk, a new XCAS composed experience that provides a great first impression for organizations as they adapt to the new hybrid workplace. Front Desk empowers the receptionist with advanced contact center and UC capabilities within a personalized experience for high volume interactions. With its revolutionary product, a receptionist is no longer tied to location or hardware or in-person visitors, effectively freeing the front desk. We also extended our global footprint, adding dedicated cloud PBX and storage in Canada to further enhance quality of service and provide Canadian organizations with superior business resilience and data sovereignty adherence. This will open up new vertical markets such as public sector, healthcare, and financial services. We announced advanced enterprise capabilities for large video meetings, including enhanced moderation, polling, and emoji reactions. This further strengthens our video meeting solution for enterprise customers. Both new and existing customers are embracing our XCAS vision and technology. For example, the NHS National Services Scotland, which handles over 1 million calls per month supporting Scotland's vaccination, health lines, and booking services, expanded their 8x8 XCAS investment. Since their original purchase in fiscal Q1 2021, they have more than tripled their investment in XCAS, expanding every quarter and now total more than 2,500 UCAS seats and over 1,300 CCAS seats. The San Diego Zoo Wildlife Alliance, the nonprofit conservation organization that operates the San Diego Zoo and San Diego Zoo Safari Park, selected 8x8xCAS as its single vendor integrated communications platform, supporting over 1,500 employees and agents. They will use speech analytics and quality management to enhance the customer experience and help train and upskill agents. Our 8x8 voice per team solution is an important component of our XCAS platform strategy, and I believe will provide the most feature-rich enterprise integration in the industry. Since the launch five quarters ago, We continue to drive consistent innovation with an integration that now goes well beyond direct routing and keeps us far ahead of the competition. In Q2, we added shared presence, UC and CC users, call recording, and 8x8 front desk support. We are seeing more organizations provide their distributed workforces with the ability to interact with colleagues and customers from anywhere using Teams. And we recently announced that we had surpassed 100,000 business users. Recent examples of 8x8 voice from Microsoft Teams customer wins included the city of Rochester in Minnesota. They needed to replace an aging on-premise communication system to provide better support for their population of more than 120,000 residents. They selected 8x8 XCAS for business resilience and tight integration with Microsoft Teams to support their more than 800 employees. Another local government win was the London Borough of Humslow, which provides services for more than 270,000 residents. They selected XCAS and 8x8 Voids for Microsoft Teams to consolidate disparate systems on a single cloud platform to support more than 2,800 employees. We continue to see strong demand for the CPaaS portion of our portfolio. Our focus strategy to extend our leadership in Southeast Asia has resulted in new customers and strong growth in that region. Wins this quarter included Top Value, one of Thailand's biggest e-commerce platforms, uses the 8x8 SMS API for marketing campaigns to send promotions efficiently and reliably to customers. Additionally, we added Quala, an omnichannel insurance technology company operating in Indonesia and Thailand, which uses the 8x8 SMS API to keep customers informed and secure on their platform with one-time passwords and notifications. Additionally, Timsy, a US-based provider of electronic health record management software turned to 8x8 Jitsi as a service, or JAZZ, to embed a secure HIPAA-compliant telehealth video solution for its customers. Another way we extend our platform advantage is through global expansion. In Q2, we delivered the industry's first integrated cloud phone and contact center solution for multinational organizations with operations in Russia. We also added Japan and Puerto Rico to our service coverage area. This follows our industry first edition of China in fiscal Q1. Our cloud infrastructure now delivers full PSTN replacement services in a market leading 46 countries and territories. Our ability to deliver high availability and reduce cost and complexity globally makes our platform ideal for multinational organizations. An example, is UK-based Inchescape PLC, which is the leading independent automotive distributor and retailer operating on a global scale in 36 international markets. They selected 8x8 XCAS with over 3,000 seats for our omnichannel, contact center, and unified communication capabilities, including speech analytics and global coverage. International revenue now accounts for 31% of our total revenue compared to 26% one year ago. Winning with partners is our second strategic pillar. Promoting a fully engaged channel community allows us to extend our reach to new market segments and geographies more efficiently. In Q2, we expanded our go-to channels through a strategic distribution agreement with Cinex Corporation, a leading IT distributor and solutions aggregator for the technology industry. Cinex's partner community of VARs, MSPs, and system integrators in North America are now empowered to offer 8x8 XCAS solutions to their customers. Our reseller channel metrics show our success at increasing partner engagement and productivity. The number of active channel partners increased 15% from a year ago, and ARR from channel-led transactions increased 36% year-over-year. Examples of the channel-led XCAS customer wins included Howdin Group Holdings, which is the largest European insurance intermediary group in the world. They selected 8x8 XCAS for integration with Microsoft Teams and Salesforce to support 3,000 employees. Pet Supermarket is a leading pet supply retailer with over 200 stores in the southeastern United States. They selected 8x8 XCAS for its robust contact center capabilities and lower total cost of ownership to support the communications and engagement needs of more than 600 employees. Our third pillar is expanding our installed base of users. Growth in our base was led by another record quarter in enterprise with ARR up 33% and the number of customers with more than $100,000 in ARR increasing to 871. Enterprise represented more than half of our ARR for the first time. We also saw expanded deployments and existing customers, including SRS Distribution, which is one of the largest building products companies in the United States and has grown rapidly over the last two years. 8x8 has been their communication partner through this period, with XCAS now supporting more than 6,000 employees. Another longtime customer who expanded their commitment to 8x8's platform a leading digital solutions firm and a customer since 2009. The company continues to enhance client engagement to support its growing consultancy business, and most recently added 50% more seats to support their 234-agent contact center. The Range, a multi-channel retailer selling products in the home, garden, and leisure categories, With over 180 stores in the United Kingdom and Ireland, they selected 8x8 for full cloud capabilities and flexibility to enhance communication and collaboration to improve customer experience. The fourth strategic pillar is driving operational excellence throughout the organization. Our dedicated focus in this area has contributed to our improvement in non-GAAP gross margins, which increased from 62.6% to 64.2% sequentially, as well as continued operating leverage. We remain committed to achieving profitable growth. We also appointed Allison Gleason to our board of directors. Allison is a globally recognized sales executive who was previously SVP of Cisco Americas overseeing a $25 billion revenue organization. She has led multiple top performing sales organizations by focusing on a customer first mentality. We are excited to welcome Allison to the board. In summary, since I joined 8x8 nearly a year ago, we have strengthened our leadership team, aligned our R&D investment, and leveraged a massive market opportunity. and created a CPT culture built on the core tenants of customer-first, product-first, and team-first. The migration to cloud-based communications is just beginning, and we are well positioned with differentiated technology, market-leading global coverage, and a unified platform to optimize customer and employee communications. Leading industry analysts are embracing our XCAS vision. It has been a team effort, and I want to thank everyone at 8x8 for their contribution. We appreciate your continued support and look forward to keeping you updated. I will now turn the call over to Sam.