8x8 Inc

Good afternoon. Thank you for attending the eight by eight fiscal third quarter earnings call. My name is Matt and I'll be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star one on your telephone keypad. I will now have to pass the conference over to our host, Kate Patterson, Vice President of Investor Relations. Kate, please go ahead.

Thank you, operator. Good afternoon, everyone. Today's agenda will include a review of our third quarter results with Samuel Wilson, our Interim Chief Executive Officer, and Kevin Krause, our Interim Chief Financial Officer. Following our prepared remarks, there will be a question and answer session. Before we get started, let me remind you that our discussion today includes forward-looking statements about our future financial performance, including our increased focus on profitability and cash flow, as well as our 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 vary materially from forward-looking statements, as described in our risk factors in our report files of the SEC. Any forward-looking statements made on this call and in the presentation slides reflect our analysis as of today, and we have no plans or obligation 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 the U.S. generally accepted accounting principles, or GAAP. A reconciliation of those non-GAAP measures to the closest comparable GAAP measures is provided in our earnings press release and earnings presentation slides, which are available on 8x8's investor relations website at investors.8x8.com. With that, I'll turn the call over to Samuel Wilson.

Thank you, Kate, and thank you to everyone joining us on the call today. I believe our solid third quarter results were a strong indicator of our ability to perform against our objectives. We said we would forego some near-term revenue growth for profitability as we build a sustainable long-term business, and that's exactly what our teams did in the quarter. Despite the lower than expected total revenue, we delivered almost 10% operating income, increased deferred revenue and RPO, and experienced high customer retention, all early indicators of future success for a SaaS business. I am impressed with the quality of our performance in the third quarter, and I want to thank our employees and everyone in the 8x8 community for their hard work. Turning to the future, I have been working closely with the leadership team and the board of directors on a multiyear strategy to grow our business and create value for our stakeholders. We laid the foundation for our next step several years ago when we re-architected our core technology. We built a modern microservices-based platform that powers both our current UCaaS and CCaaS solutions. We have fully embraced continuous integration and continuous deployment and are delivering more than 1,000 microservice updates every quarter. This enabled near-perfect uptime for the third quarter and reduced the number of customer-identified defects to single digits. we are innovating faster than we ever have before. At the same time we embarked on this journey, we could not have predicted the global COVID pandemic or how it would accelerate adoption of cloud-based telephony and internal collaboration tools, especially Microsoft Teams. While UCAS migration continues to create revenue and profit opportunities for efficient providers like 8x8, I believe the opportunities to differentiate based on standalone UCAS are becoming increasingly rare. Our XCAS platform, which delivers the high availability, scalability, and security of a unified cloud-native solution at a lower TCO is highly differentiated. By focusing on CCAS innovation within the platform, we can continue to extend our leadership. Specifically, I believe the contact center market is at an inflection. According to PWC's Future of Customer Experience Survey, one in three customers would leave a brand they love after one poor experience. No longer can the contact center be viewed solely through a cost lens. It has become the primary way for companies to interact with their customers and build brand loyalty. At the same time, advances in MLAI technologies, as well as customers' growing preference for high-quality digital and self-service interactions, sets the stage for a new wave of contact center migrations and upgrades. Technologies like large language models, such as ChatGPT, have the potential to transform the customer experience. Our modern platform enables these technologies today, and I believe we are well positioned as this opportunity evolves. We have identified six areas I believe are critical to our future success. Further acceleration in CCaaS innovation while maintaining our leadership position in cloud telephony. We began our shift to an innovation-led company with the acquisition of Fuse, which doubled the R&D resources dedicated to innovation. We have successfully accelerated the pace of project completion and are already seeing the results of our increased investment. We are already in beta on a number of new CCaaS features, including capabilities based on advanced machine learning and large language models. We remain committed to our leadership position in cloud telephony as an important component of the XCAS platform. Our ability to deliver both voice and CCAS solutions for Microsoft Teams users is increasingly a deciding factor in new business wins around the world. We saw triple-digit growth in voice for Teams seats in the third quarter and have now sold more than 300,000 licenses. Our first and largest Teams customer has already deployed the technology to more than 30 countries. Global coverage matters. Recent XCAS with Teams wins include the Australian Computer Society selected 8x8 XCAS with voice for Teams to help drive operational efficiencies, productivity gains, and enhance their contact center performance. This channel-led win demonstrates the competitive differentiation of our XCAS solution within the Teams environment. In the UK, Gateshead Metropolitan Borough selected 8x8 XCAS with voice for teams to support hybrid work for their nearly 3,000 employees and enhance their 200 plus agent contact center. Two, increasing our focus on small and mid-sized enterprise customers. Small and mid-sized enterprise customers need the same automation and MLAI contact center capabilities as large enterprises, but don't have the large enterprise budgets or a team of in-house developers. Our mix and match pricing model, unified communications, and enterprise class APIs make XCAS the natural choice for these customers. Just as important, our modern platform enables the adoption of advanced contact center capabilities, future-proofing their investments. The strong product-market fit improves customer satisfaction, often leading to follow-on sales and reference sales down the lines. A great example of a win directly tied to a happy existing customer is Chubb Group Security Limited, a global fire safety and security solutions provider protecting more than 1 million locations worldwide. After acquiring a division from an existing 8x8 CCaaS customer, Chubb reviewed and selected 8x8 CCaaS for a complete, secure cloud contact center solution. Another example of a customer satisfaction-driving new business is Indiana Hemophilia and Thrombosis Center, the only federally recognized comprehensive hemophilia treatment center in Indiana and one of the largest centers in the nation. With a key decision-maker having previous experience with 8x8, the nonprofit entity selected 8x8 XCAS for its comprehensive CCAS solution that is certified for Microsoft Teams. Our best-in-class reliability was also a factor in the decision. Increasing XCAS win rates and sales and marketing productivity. As we continue to innovate and expand our XCAS platform, our win rates should increase. We are attracting more go-to-market and technology partners every day, especially around our market-leading Teams integration. This expands our market reach, increases our capacity for innovation, and creates an ecosystem of application and features that allow our customers to tailor their customer experience to their business needs. A customer that fits squarely in our sweet spot is Pennine Care NHS Foundation Trust in the UK, a provider of mental health, learning disability, and autism services to 1.3 million people across Greater Manchester and beyond. They selected 8x8xCAS to upgrade to modern reliable cloud communications and deliver enhanced patient engagement capabilities for over 3,000 staff. Another UK win, the Southampton Football Club in the English Premier League is a good example of how a unified XCAS platform delivers contact center features to users across the organization to enhance the customer experience. The Saints selected 8x8 XCAS with 8x8 front desk to deliver a premier fan and hospitality experience and introduced new communications channels such as email and web chat because they are customer obsessed. Four. maintaining an outstanding experience for customers so they can focus on theirs. The investments we've made in customer success, including more than 8,500 hours of training for our Tier 1 support engineers, are evident in our statistics and customer success scores. We've seen a 50% reduction in escalated issues, a 20% improvement in first-day resolutions, and a 49% reduction in global backlogs. As a result, our customer satisfaction scores are up double digits versus a year ago. We still have a lot of work to do, but are passionate about leveraging our platform and the solutions of our technology partners to drive continuous improvement in customer experience and customer satisfaction. We use our own products and intend to document our progress as an early adopter of each new innovation in an ongoing case study. In this way, we remain accountable to our commitment for improving the experiences of our customers and we provide a roadmap for our customers to do the same in their organizations. Five, establish CPAS leadership in the Asia-Pacific region. CPAS was down year over year and sequentially again this quarter. It was the single largest factor in our third quarter revenue miss and downward revision to our revenue guidance for the fiscal year. That said, the CPaaS technology is important to the XCAS platform, and we continue to add new customers on a regular basis. We are going through a transition in the business, and there are some signs of stability. This gives me confidence that CPaaS will make a positive contribution to our operating performance in the future. Several third quarter wins illustrate this point. Plugo, an Indonesian D2C e-commerce platform with a vision to democratize e-commerce, uses a combination of 8x8 SMS APIs and WhatsApp through 8x8 chat apps API to send secure one-time passwords and notifications as well as for customer care. Privy, Indonesia's first and leading legally binding digital signature with more than 37 million users and 1800 enterprise customers uses 8x8 SMS API to keep all users secure with one-time passwords. Plus Dane Housing, a UK housing association that owns and manages over 13,000 homes across northwest of England. They selected 8x8 XCAS with 8x8 CPAS, voice for teams, and variant workforce management to support their over 500 employees and drive customer satisfaction with greater omnichannel capabilities. We love our Triple Play customers. Sixth. increase our profitability and cash flow to deliver our balance sheet and fund investments innovation that will drive our future growth. We have already shown tremendous progress in fiscal 2023 and we have come very close to our second half 24 target of double digit non gap operating margin this quarter, a full year ahead of schedule. As Kevin will discuss, we believe we can drive our margins higher again in fiscal 24 as we align our investments and cost structure and improve our sales productivity. We intend to leverage improvements in our operating margin to pay down debt, which will reduce our interest payments and allow more enterprise value to accrue to our equity holders. We began this process in Q2 when we repurchased $6 million in aggregate principal value of our 24 notes, and we continued in the third quarter with the repurchase of approximately $22 million in principal. What I have outlined here is a long-term strategy based on an efficient, focused innovation engine and a modern cloud-based platform. At the heart of this strategy is delivering superior customer experiences. The experiences of our customers and partners as they engage with us and the experiences they can deliver to their customers and their employees with our XCAS platform. This is our North Star. Every customer interaction is an opportunity to delight, and our goal is to make every touch matter, whether digital or in person. This commitment to our customer's experience is already built into our DNA. Our financially backed commitment to five nines availability is just one example. We are already well on our way on our multi-year plan to lead with innovation and be the customer success platform of choice for our customers. The best measurement of our continued progress is the willingness of our customers to recommend our solutions to their peers. Our goal is to achieve 100% referenceability within our targeted customer segment. It is a lofty goal, but one I believe will allow us to deliver sustained growth and profitability for many years to come. I will turn the call over to CFO Kevin Krause for a more detailed review of our financial performance.