8x8 Inc

by 8 Inc earnings conference call at this time all participants are in a listen-only mode after the speaker's presentation and there will be a question and answer session to participate you will need to press star 1 1 on your telephone you will see and hear a message advising your hand is raised to withdraw your question simply press star 1 1 again please be advised that today's conference is being recorded. Now it's my pleasure to turn the call over to the Vice President of Investor Relations, Kate Patterson. Please proceed.

Thank you. Good afternoon, everyone. Today's agenda will include a review of our results for the third quarter of fiscal 2025 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 future financial performance, including 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 undereliance 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 reports 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 obligations to update them. All financial metrics that will be discussed on this call are non-GAAP unless otherwise noted. These non-GAAP metrics, 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 metrics to the closest comparable GAAP metric is provided in our earnings release and the 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.

Good afternoon, everyone, and thank you for joining us on today's third quarter fiscal 2025 earnings call. It's my pleasure to share results, progress, and vision for the future. Our third quarter story is one of continued transformation. We delivered solid results and made strides in executing our broader strategic initiatives. We achieved service revenue above the midpoint of our guidance range, even with an FX headwind of more than $2 million from last quarter. Operating margin was also above the midpoint. The quality of the earnings remained high, and we generated record cash flow from operations. We used the excess cash to further reduce our debt by $33 million in the quarter and another 15 million in early January. Our results for the quarter show both resilience and opportunity as we navigate a rapidly evolving landscape. Signs of our progress on our CX transformation journey were evident in various operational metrics as well. New product MRR increased more than 60% year-over-year, reflecting strong growth in AI-based intelligent customer assistance, Secure payments and video elevation are video-enabled solutions for field service organizations. The number of customers with three or more products continue to increase. The average monthly recurring revenue of customers with three or more products is more than three times the MRR of two product customers, and retention is higher. For these reasons, we've made cross-sell a high priority at 8x8. We continue to expand our presence internationally, especially in Asia-Pac region, as we expand our platform as a service offerings. The region even booked its largest deal ever with a well-known auto manufacturer. We closed the largest follow-on deal in our history when a major U.S. retailer chose 8x8 for their new contact center and expanded their UCAS commitment. This customer is in the process of evaluating additional products. customer satisfaction remains high. This is reflected in our own customer satisfaction surveys, which show CSAT scores in the mid to high 90% range for our targeted enterprise customers. Finally, our platform and our reputation as an innovator in CX are rapidly gaining increased visibility with customers and industry analysts. Our peer review scores on Gartner's Insights reflect our strong product portfolio and continue to increase as the number of reviews have grown. Our UC and CC score are now both 4.4 on a scale of 1 to 5. Also, as our market presence continues to grow, we are frequently included on the short list of companies to watch. For example, in an article in CX Today, Liz Miller of Constellation Research and Zia Karavala of ZK Research named 8x8 as one of 10 innovative global vendors differentiating within the contact center as a service space. Our Platform as a Service API offerings are also receiving accolades. In a Channel Futures article of the top 20 CPaaS vendors to know, Forrester's Craig LeCaire counted 8x8 among its top pure play CPaaS players. We continue to receive more formal awards and recognition as well, which we included in our earnings presentation. This quarter, I want to call out our inclusion in Newsweek's annual Excellence 1000 Index. Inclusion is based on wide-ranging criteria from employee and customer reviews to R&D spending to governance and ethical impact. We are honored to be included as a company that balances strategic growth with a deep commitment to ethics, social responsibility, and sustainability. All in all, these results and awards highlight our disciplined execution and progress towards our strategic initiatives. We outlined a bold plan to transform 8x8 into a CX leader and have made huge progress. Our acquisition of Fuse played a key role in jump-starting our journey. We have also made substantial headway with Fuse integration during the quarter and have a clear path to platform shutdown. Priority number one was fixing the financial model and building a strong balance sheet. We reduced our costs. increased our cash flow, and returned value to our investors through debt reduction. We have now been generating cash for 16 quarters and have made 10 debt repayments, reducing our total debt, including convertible debt, from a peak of $548 million in August 2022 to approximately $354 million today, 35% less in just over two years. Priority number two was accelerate innovation. As a technology company, this is the only way to drive durable growth. We increased investment in R&D and sharpened our focus to designing a CX platform for small and medium-sized enterprises. This doesn't mean we can't handle thousands of concurrent users in our contact center, and we have customers that size. But this is the market segment where we can differentiate the most by delivering on simplicity, eliminating complexity, and reducing technology risk. We set our sights on going beyond core contact center functionality to a flexible CX platform with plug-and-play tools that reduce customers' integration burden. Based on our feedback from agents, supervisors, and system administrators, we prioritize investments in reliability, ease of use, security and compliance, and seamless multi-channel communication. We also embedded artificial intelligence across the platform to enhance data analytics, call transcription, meaning summarizations, and a host of other core platform services. We began building an ecosystem of carefully curated technology partners for best-in-class solutions, applied AI solutions that are tightly integrated with our platform to deliver native-like user experience. Our R&D organization's exceptional work delivering hundreds of releases per month has allowed us to enhance our platform substantially over the past few years. These enhancements have significantly improved usability, leveraged AI-driven automation, increased security, and directly addressed our customers' most pressing pain points. We deliver better outcomes, allowing our customers to achieve their business goals. A few of our recent platform announcements in our winter software release included self-service or agent-assisted secure payments integrated directly into the contact center, AI-powered directory to quickly route calls using a natural-sounding voice bot that supports over 50 languages and 91 accent variants, and AI-based tools to help agents quickly assess and share knowledge-based content. We continue to expand our technology partner ecosystem, giving customers the flexibility to choose the best add-ons for their use cases. Call Cabinet, a leader in compliance, call recording, and analytics, is the most recent addition to our cell-width tier. With direct integration across 8x8 Work and 8x8 Contact Center, Call Cabinet becomes the only compliant call recording add-on within the 8x8 ecosystem for Microsoft Teams Operator Connect offering. Our platform approach is resonating with customers. For example, a world leader in flooring and sports surfaces chose 8x8 Unified Platform for CX over several competitors shown in the leaders quadrant of the Gartner MQ for CCAS. A Canadian-based leader in insurance and benefit consulting chose 8x8's platform for CX, including UC, CC, and Engage for its high-quality service upgrade flexibility, and French language support. A leading FinTech company delivering secure and innovative payment solutions chose 8x8 SMS and WhatsApp business solutions to power multi-channel customer engagement. Deciding factors were our global reach, built-in security and compliance, and a dedicated support team with deep platform-as-a-service expertise. In addition to highlighting the strength of our product portfolio, these multi-product wins show significant progress we've made transforming our go-to-market strategies. As the green shoots of increased platform sales and multi-product adoption multiply, we are investing in selectively ramping our sales capabilities and launching new marketing programs to raise our visibility. In November, we unveiled the next evolution of our brand. More than a refreshed look and feel, this brand signals the next chapter in 8x8's CX transformation. The response from customers, partners, and industry influence has been overwhelmingly positive. We've included a sampling of social posts and feedback in the earnings presentation. A solid financial foundation and a powerful CX platform designed to deliver business impact for our customers the building blocks are in place. As we approach fiscal 26, our focus is clear, accelerate our transformation. To do this, we plan to, one, improve our sales execution, two, scale our proven successes, three, differentiate our solutions, four, continue to optimize our cost structures, and five, shut down the FUSE platform by the end of the calendar year. Executing transformations of this magnitude are seldom linear, and we know there will be bumps along the way. We are still working through the revenue headwinds of the fused customer upgrades to our platform, and the market dynamics are fluid, especially in UCAS. While this winds the range of near-term outcomes, I remain confident in our future success. As I visit our offices, customers, and partners around the world, I see a powerful new energy at 8x8. fueled by a common vision and a strategy aligned on our mission, solve customer problems. It is an exciting time for us, and I want to express my gratitude and appreciation to all of our employees, partners, and investors for our progress so far. I look forward to sharing our future success with all of you. I now turn the call over to Kevin.