8x8 Inc

Good day and welcome to the Q4 2024 8x8 Inc. earnings call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question, please press star 1-1. As a reminder, this call may be recorded. I would like to turn the call over to Kate Patterson. Please go ahead.

Good afternoon, everyone. Today's agenda will include a review of our fourth quarter and fiscal 2024 results with Samuel Wilson, our Chief Executive Officer, and Kevin Krause, our 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 investments in innovation and our focus on profitability and cash flow, as well as statements regarding our business, products, 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 filed with 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 U.S. generally accepted accounting principles or GAAP. A reconciliation of those non-GAAP measures to the closest comparable GAAP measure is provided in our earnings release and in 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, Sam Wilson.

Good afternoon, everyone. I appreciate you joining us today as we discuss our fourth quarter and our fiscal 2024 results and the strategic initiatives that have defined a year of transformation for 8x8. I'm pleased to report solid fourth quarter in which we delivered results within our guidance range for service and total revenue and once again exceeded our guidance for operating at margin. Cash flow from operations for the quarter was also better than anticipated which resulted in cash flow for the year of 62% from fiscal 2023. This significantly exceeded our expectations for the year. We ended the quarter with about $118 million in cash, restricted cash, and investments after repaying the remaining $63 million of 2024 notes. Since Kevin will review the quarter's financial results in detail, I will focus my comments on the progress we've made on our transformation journey. This year has been nothing short of incredible from both a professional and personal perspective. We've strengthened our leadership team, expanded our product portfolio, and continue to build on our strong financial foundation. A year ago, I outlined a strategic framework with six key imperatives aligned with the three pillars of our transformation strategy, innovation, financial strength, and go to market. I'm pleased to report that we are executing well against each of these strategic imperatives. They include, one, accelerating innovation in contact center as a service, CCaaS, while maintaining our leadership in cloud telephony. This includes embedding artificial intelligence across our integrated platform. Two, establishing communications platform as a service, CPaaS, leadership in the Asia-Pacific region. Three, increasing our focus on small and mid-sized enterprises as our target customer segment. Four, improving platform win rates and sales productivity. Five, maintaining an outstanding experience for our customers, allowing them to focus on their own core businesses. And lastly, six, increasing profitability and cash flow to drive a fortress balance sheet and fund further innovation. Although our journey has not always been perfectly linear, We are undoubtedly stronger and better positioned financially as we exit fiscal 2024 compared to the end of fiscal 2023. This year has been pivotal in terms of innovation. We've introduced several new products that not only differentiated our offerings, but also positioned us for future growth. These new products, as well as platform enhancements like the customer interaction data platform, composable user interfaces, and the integrated solutions from our technology partner ecosystem are intentionally engineered to deliver superior business outcomes without the heavy integration burden typically required to build an AI-enabled contact center. The introduction of our engaged solution extends our customer experience capabilities beyond the traditional boundaries of the contact center and is one of just many examples of how We're leading innovation in an industry leveraging our history as a combined UC, CC, CPaaS company. We believe this product dramatically increases our cross-sell opportunities to existing customers and provides an accessible entry point for new customers looking to improve their customer experience across the organization. Shortly after the end of the quarter, we introduced 8x8 Operator Connect for Microsoft Teams, expanding our portfolio of enterprise voice solutions and further strengthening our leadership position in Microsoft Teams environments. With this introduction, 8x8 now offers the industry's broadest portfolio of enterprise voice solutions for Microsoft Teams and is the only Operator Connect provider with a native contact center solution certified to integrate with Teams. The initial market response has been very positive, generating numerous new opportunities within days of the announcement. We believe this solution could be the key to unlocking millions of UC seats not yet migrated to the cloud. As we all know, there are hundreds of millions of on-prem telephony seats, and the industry craves low-cost solutions to unlock this base. I want to highlight the progress we're making in broadening our CPaaS product offerings and expanding this part of our business globally. With the renewed focus on CPaaS, we are finding new ways to embed CPaaS capabilities into our integrated UC and CC solutions to provide complete solutions that deliver specific business outcomes for our customers. First was the video elevation 2.0. Most recently, we launched proactive outreach, enabling highly personalized messaging campaigns at scale for both contact center and unified communications customers. These capabilities were important differentiators in the wins at Upward Health in the US, Induction Healthcare in the UK, and Palawan Pay in the Philippines. In addition to these product launches, we continue to innovate across our platform with solutions like our AI-powered Intelligent Customer Assistant, available as either digital or voice bots. Usage of ICA in self-service options continues to increase sequentially, and we are achieving resolution rates as high as 80%. This is a compelling testament to the advanced AI capabilities of 8x8 and our technology partner ecosystem. Further, 100% of our digital intelligent customer assistant customers are referenceable, demonstrating our focus on delivering superior business outcomes with rapid time-to-values. Our omni-channel engagement solutions and the introduction of new digital channels and automation were key factors in our win at Southern Housing in the UK. We strive to make our customers heroes in their organizations, and this is driving wins like Sky Chefs, a well-known catering and hospitality expert serving airline customers where our agility and speed to deployment won the day. Customer acceptance of our new solutions is the most important indicator of success. I'm pleased to report that sales of new products were up by more than 50% year-over-year for the second consecutive quarter. Given the timing of launches throughout the year and the enterprise sales cycles, I view this as a positive leading indicator of our future success. From a financial perspective, this year has been about strengthening our foundation and positioning ourselves for sustainable growth in the future. we've seen a substantial reduction in our non-GAAP cost structure, with cost reductions totaling more than $47 million from fiscal 2023. This disciplined fiscal management enabled us to invest strategically in innovation while increasing our non-GAAP operating margins to double digits. With our cost structure aligned with our current revenue runway and cash generation objectives, we intend to increase focus on revving our go-to-market engine to drive awareness and sales for our expanded product portfolio. Turning to our go-to-market efforts, we've made considerable progress. Our sales, marketing, and customer success teams are more aligned than ever, focusing on the cross-functional initiatives that drive value across our customer base. This alignment has improved the quality of our pipeline and resulted in increased close rates more multi-product lands, and higher customer satisfaction scores. These are the early indicators that our efforts to build a high-performance go-to-market organization are working. Given the nature of enterprise sales cycles and our ratable revenue growth, there is a lag before our progress is evident in our revenue growth. But I am confident that the changes we've made will drive improved performance and accelerating growth by the end of the current fiscal year. As we look to the future, our strategy is clear. We will continue to drive innovation, intentionally engineered solutions that deliver superior business outcomes for our customers. I encourage you to watch a short video case study of the San Diego Zoo's implementation of our integrated solution as an example of our solution approach and rapid time to value. Working in partnership with the internal team at the zoo, we implemented a full service contact center with an AI-based self-service option for inbound calls in less than 45 days. We have intentionally engineered our products and solutions for this level of agility and rapid time to value. We can leverage this advantage to develop our own purpose-built solutions as well. For example, 2024 is a big year for elections in both the US and UK. Using the power of conversational AI, and automation. Our UK team built a library of out-of-the-box templates to support local government and improve citizen access to important information for upcoming elections. To drive awareness and adoptions of our innovations, we are committed to continued improvement in our go-to-market activities. We intend to remain within our current cost envelope as we make the necessary investments to elevate our partner programs increase awareness for our solutions and improve our processes we are taking a balanced approach to growth and profitability and with cash operations as our financial north star we intend to continue returning value to our investors through reducing debt we have repaid 88.3 million dollars of principal in fiscal 2024 35 of our commitment to return 250 million dollars to investors through debt repayments over three years. Before I turn the call over to Kevin, I want to thank our employees, partners, and investors who are with us on this journey.