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spk_0: thank you ladies and gentlemen for joining a welcome to the eight by a fiscal keep three twenty twenty two earnings conference call my name's on not be facilitating your coach day if you wish to offer question will have the opportunity to fire at the end of the presentation please press staff from by one or the the phone keypad if you wish to ask a question for you need a question please stuff from a by to and i have the pleasure of handing over to your house today kate practice and vp of escalations to begin kate please go ahead
spk_1: thank you and good afternoon traded and it will include a review of our third quarter results with dave sites or chief executive officer and sam wilson our chief financial officer following are 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 finance for performance including the impact of the feud acquisition as well as our business product and growth strategy we caution you not to put undue reliance on a forward looking statements as they involve risks and uncertainties that may cause actual results to very materially from forward looking statements as described in our risk factors in our report filed the dscc any forward looking statements made on the 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 earth call together with the year over year comparisons in some cases were not prepared in accordance with us generally accepted accounting principles or gap a reconciliation of the non gap measure to the closest comparable gap measure it provided in are earning press release and our earnings presentation slides which are available on a by investor relations website at investors got eight by a dot com with that altering the call over to our ceo gave side
spk_2: thank you kate good afternoon everyone and thank you for joining us today let's turn to a review of our third quarter an update on our acquisition of years and our progress from plans for the future and they're so cute three we delivered service and total revenue about the high end of our guidance ranges additionally we delivered positive operating cash flow for the fourth consecutive quarter and achieved or your and operating margin target a quarter and had a plan we also announcer acquisition of use which increases are enterprise software base and ads resources for innovation there's transaction closed on january eighteenth the market opportunity to migrate business communications for the cloud is massive were beginning to see the impact of our founders for the next gas go to market and especially channel and the global coverage than are three results were built a strong foundation for growth i believe we are well positioned as the market evolve i will frame my comments today around three pillars of are competitive advantage or and gas platform our leadership with a by a voice for microsoft teams and our global coverage turning to a discussion of act first capitalizing on the the man for integrated you can see calf and see path offerings access provides a single platform for customer an employee engagement at caf eliminate silos and speeds information flow across the enterprise enabling are you
spk_1: patients to be more agile and responsive to up for needs while operating at a lower cost of ownership
spk_2: a by that cavs was recently awarded a twenty twenty one the are an innovator award additionally we were named a leader in the i d c markets deep worldwide unified communication and collaboration twenty twenty one vendor assessment
spk_1: a cafe are is now more than thirty five percent of total a are to continue to grow of more than thirty five percent year over year
spk_2: on a dollar basis we delivered our best ever sequential and year over year growth in at caf a are are adoption of a gas often with our a bite voice for teams capability is gaining momentum across a broad range of industrial verticals and geographic regions including the public sector if few recent examples about new logo and land and expanded care field include kubota north america a leading manufacturer of agricultural construction equipment implemented or one about the initiative to bring multiple business units onto a single communication platform falling successful pilot led by a by a center of excellence to botha selected a played x gas for one thousand you see and two hundred contacts on our seats to enable streamlined there's a communications across the organization as that your when was the london borough of new him which provide service for more than three hundred and fifty thousand residents and responded the most recently expanded their a by contrast and are by more than ninety percent bringing the total number two hundred two hundred and twenty three cats to eat a beta cast is deployed across more than one third third of london's thirty two bureau's now phase county in the austin texas metro area is one of the fastest growing county than the us with more than two hundred forty thousand residents the local government thought a single cloud communications platform with high availability working weather channel partner they selected eight by electric cars with boys for microsoft teams to support nearly one thousand users looking now at a by voice for teams we're seen increased adoption as organization seek to provide their distributor workforces with the ability to interact with colleagues in september we announced that we have surpassed one hundred thousand business users four teams integration and will continue to be strong moment i'm in the third quarter we experience is that user growth of more than thirty percent quarter over quarter as a growing number of new and existing customers adopt a by a voice for teams customers choosing a bite voice for teams and cute three included the financial ombudsman service in the uk which investigates and settles complaints between consumers and businesses that provide financial services where he want our partner virgin media or to financial ombudsman service selected a a by that gas with over one thousand newcastle and several hundred z kathy's our ability to help them advance their digital strategy combined with are tight integration with microsoft teams and direct agent routing integral in their decision to fly a plane in pro which is a global manufacture of high performance architectural products for commercial buildings they selected a by acts gas and boys for microsoft teams to support more than six hundred employees around the world they chose ex gf are composed experiences such as front desk which will empower receptionists with advanced call handling capabilities and for tight integration with felt worse turning to our global coverage which further differentiates are solutions and creates a strong competitive advantage with multinational organizations in the third quarter we expanded our coverage to include the philippines another industry first and also to panama the philippines expansion follow or announcements earlier this year of delivering an industry first integrated cloud fun and contacts on a solution in china and russia our regulatory compliance cloud based global you can flourish and is now available on forty eight countries and territories up from forty one year ago our global reach service now covers more than eighty percent of the world's gdp examples of new and expanding global customer wins included been suntory a great example of a customer that a standardized on a calf with a by voice for teams on a global basis being suntory as one of the world's largest producers of the still beverages including the world's best selling berman jim beam and a by customers and twenty twenty beans and toy most recently added more you see it and teams licenses in scotland and germany two now support of two thousand six hundred employees and thirty five sites across seventeen countries headquartered in brisbane australia a our limited provide testing inspection certification and verification services for over three hundred and seventy five across sixty five countries they continued to increase their global a by investment most recently adding another eight hundred years there's with microsoft teams integration to support employees in australia canada new zealand and the us integral to our global strategy is growing our see past share in the asia pacific region the pass revenue continued strong year over year growth as we had a new customers across the region for example they'll hear a leading ecommerce platform with one in six million users in thailand use a by at them as a p eyes for it's marketing campaigns as well world update and notifications to boost customer experience oh lot indonesia leading ecommerce marketplace for more than seventy thousand and traditional small and micro retailers use a by estimates a p eyes to enhance customer experience with marketing promotions notification and as was one time passwords
spk_1: whilst water the only not for profit water company in england and wales use a by video interaction a pr eyes of
spk_2: what are your strategy teams integration and global coverage or shift that market is well underway enterprise air are now accounts for fifty four percent of total a are and increased thirty percent year over year the shift the enterprise is awful and evident in our third quarter retention many traits which were the best we've seen in the last several years this performance reflects our customer first culture and changes we've implemented in our customers success organization our focus on enterprise customers and global approach to the market are among the reasons the few the acquisition make so much time with the acquisition now closed we increased or installed base of enterprise customers by about thirty percent and created a large cross all opportunity for contact our solution and a two weeks since the acquisition costs close were already talking with a number of customers are excited about the additional solution a bike can provide in particular we see the potential for many customers add a by contact and our solution even before they upgrade general i guess platform many customers have also inquired about eight by solution for microsoft teams finally few partners many of whom were already a by partners are excited about the prospect of delivery more complete solutions for mutual customers although it's still early in the integration process we are excited by the response we're seeing from customers and partners i am also pleased to report that are are the and catharsis that teams are working together and mapping out strategies to accelerate our product roadmap that will increase acts caps adoption worldwide we have already integrated the few development teams and redeployed views engineers to feel honored innovation watch for some of the exciting at gas and contact and or announcements later this quarter in summary in the third quarter we delivered strong revenue performance demonstrated continued operational disappointing next one and expanded our base of enterprise customers as a customer one show it is often the combination of all three competitive advantages at caf a by voice or teams and are in parallel global coverage that makes our solutions compelling for customers as they migrate to the cloud
spk_1: our channel contribution continues to increase global
spk_2: boy that we recognize that there's further opportunity we recently hired lisa daily ryall as our global challenge cheap to lead and scale our channel organization lethal was most recently vice president strategic partnerships that ring central competent she will take our channel programs to hire level we also announced that stephanie garcia join a by as are cheap human resource officer stephanie as a rock and ice age are executive and cloud in fact industries with experience that sells for some pay pal leading and scaling high performing global hr operations that dynamic fast growth companies she will respond for leading the hr organization and expanding the company's team first culture as we enter the next days ago
spk_1: i welcome them both to a by team and our customer first product first team first culture
spk_3: i will now turn over the call to sam wilson or see of them
spk_1: think days and good afternoon we are pleased to deliver results with the third quarter that exceeded guidance should improve operating leverage and generally positive free cash flow better than expected performance from our product categories where the key drivers with both cast and he passed both strong performance
spk_4: total revenue the quarter was one hundred fifty six point eight million an increase of fifty percent year over year and a bar guidance of one hundred fifty two point seven to one hundred and fifty four point two million dollar range
spk_1: sea bass and conference center you revenue was more substantial than expected during the quarter contributing to the older perform a service revenue get outside weaker and point shipments and other revenue due to ongoing supply chain shortages looking at service revenue generated one hundred forty nine point four million dollars an increase in eighty percent year over year and above our hundred and forty four to one hundred and forty five million dollar guidance range adjusted for exiting the whole your business last year service revenue growth would have been about twenty one percent year over year or three percent higher or total a our growth was five hundred and seventy two million dollars a quarters end up sixty percent year over year enterprise a are accounted for fifty four percent of the total and increase thirty percent year over year the we have made in our demand generation efforts toward enterprise resulted in strong sequential growth in enterprise they are up approximately twenty five million dollars or nine percent quarter on quarter growing our enterprise business is one of the core tenets of our long term strategy due to it's wandered commitment higher retention and better of the ratio the third quarter not get gross margin with sixty four point seven percent and higher sequentially a service revenue accounted for more significant percentage of total revenue non gas or three hundred fifty basis points versus the third quarter of twenty twenty one driven by our focus on spending efficiency not yet other revenue margin came in at minus thirty two point two percent for the quarter reflecting the decline in endpoints shipments and some increased investment in our professional services organization as we prepare to welcome the fuse customers to a buying as a reminder other rather when he represented only five percent of our total revenue for the quarter so the decline in other gross margin had minimal impact in total gross profit dollars grew twenty five percent year over year as we focus on the higher margin portions of our business such as a calf and continue to drive unit cost improvement in cogs
spk_4: looking ahead to the fourth quarter we expect a gross margins to be generally flattish sequentially
spk_2: turning to third quarter operating expenses we continue to make focused investment in indeed namely in the context center capabilities within the i guess platform and in feel good marketing while keeping gene a part time we have made significant investments in sales and marketing over the last four quarters to increase awareness
spk_1: spread gas to spare and our partner program and a target enterprise customers going forward we expect year by year dollar growth in that category to slow compared with the growth of the past few quarters after just adjusting for the step up due to the addition of use total spending as measured by non gap and percent year over year below are fifty percent total revenue growth we had focused now get operating margins to exit this fiscal year here at approximately two percent and hit that target in few three a quarter earlier than expected going forward we expect total spending to grow more slowly than total revenue on a rolling for quarter baited as we drive efficiency throughout the business but there can be some quarter to quarter variability turning to the balance sheet total cash for strictly cash and investment and a third quarter at approximately two hundred sixty point four million dollars excluding eight point six million dollars a restricted cast ballots with to earn fifty one point eight million dollars increasing roughly ninety four million dollars quarter encore cashman operations with a positive nine million dollars for the quarter much better than expected on flexion expect management we were free cash flow positive for the quarter after we announced the feud acquisition several of our noteholders indicated in the interest in increasing their positions so we opportunistically raid capital during the quarter we read the hundred thirty nine million by offering more of our zero point five percent know you and twenty twenty four and simultaneously conducted a buyback a forty five million dollars or two point three million shares the by to help offset any diversion from the offering and reduce our paid discount and resulted in a net increase in cash or partially eighty nine million dollars after transaction costs excluding the capital raise quarter on quarter total cash increased by about five million dollars better than a small burn forecasted this was driven by strong collections and higher than expected revenue for the fourth quarter we expect total cash balance the decline due to fuse purchase the cash from operations should be stronger to by
spk_5: basis excluding one time cash items around restructuring and transaction costs
spk_1: one item i'd like to mention or liability to deferred revenue which with over twenty five million dollars during the quarter and twenty three percent year over year as we move towards building in advance of service delivery are pr department five hundred fifty five million dollars for the third quarter up from five hundred fifty million dollars in the second quarter okay
spk_3: but talk about you
spk_1: because the acquisition of january eighteenth earlier than we are expected we sent them about one hundred thirty two million in cash and five hundred million shares are partially to earn fifty million dollars in total consideration based on the share price at the time of the announcement as expected will report as third period of about ten weeks for few in the quarter and an entire quarter in the first quarter of fiscal two thousand and three the guidance provided in a moment will be for the combined company we tend to provide commentary for the first few quarters or revenue contribution from few customers as with the transaction with
spk_5: how many announcement feuds was losing money at a non gap operating lying around sixteen million dollars on an annual basis
spk_1: we believe we can generate over twenty million dollars in annual caught dating though to take a few quarters to be fully realized if we execute the plan will be attitudes to are not gaap operating income overtime but a small headwind of a short term this where we took a step in this direction with a restructuring that will appear in the march quarter numbers as we move into physical twenty four we believe we could find further the energy as we integrate taking orders to do cow we are established guidance for the fourth quarter physical twenty twenty two at to as follows we anticipate service revenues are been a range of one hundred seventy three point five million to one hundred seventy five point five million dollars representing approximately thirty to thirty one percent year over year growth week that it's users were going to contribution will be about twenty million dollars for the rough ten weeks that period
spk_6: we anticipate total revenue to be arranged million dollars representing of
spk_1: actually twenty four to twenty six percent year over year growth please know that week have continued supply chain issues with and point hardware shipments and expect other revenue to be down about one million dollars sequentially from the third quarter because of the we'd like non gap operating margin or a positive on and on yeah faces but down on a quarter over quarter basic as we begin integration and employee related fica and benefit prices increased again at the beginning of the county year legally integration will take approximately sixty nine month and expect to show some financial leverage on the opera line proud to hear some modeling know the numbers reflect a combination of a pain and viewed as well the ongoing that meant we're making please note that que four f y twenty two ranges blow are based on the stump period i mentioned refuse we are keeping a majority of users are being cited combined company betas we expect to step up already to approximately twenty five to twenty nine dollars for fiscal que four twenty two on and on gas field and marketing respect to step up into a range of seventy three seventy four point five million for fiscal que four twenty two
spk_2: on and on yeah dna we expected to range of seventeen eighteen million dollars for fiscal que for we are giving why not and guidance for this quarter only for you can adjust your models they include feud expensive but there may be some we allocate to as we integrate
spk_3: combining our performance for the third quarter with the an outlook above we are raising revenue guy and for full year fiscal twenty twenty two ending march thirty one twenty twenty two as follows we are raging total revenue i'll have to range of six hundred thirty six to six hundred thirty nine million dollars for like twenty percent year over year growth we are really
spk_7: service revenue range to six hundred and three to six hundred five million that as representing approximately twenty two percent year over year growth
spk_1: we have raised our outlook every quarter this year and are often for que for shows that we continue to execute our plan we outlined last may we believe a business is trending in the right direction looking a little further into physical twenty three which begins on april one twenty twenty two we currently that year over year growth rate for fiscal twenty three service revenue including the revenue contribution from the feud customer base will be in the mid twenty percent range we only close views a few weeks ago in the to them very poor women airy view we will be able to get you more detail when we announce our fourth quarter result in early may when the and with them closing thoughts
spk_0: they joined a paid a little over a year ago we had come to treat our investments in select areas to read our growth and deliver improved operating profit in cash flows the fuse acquisition it a key component of this strategy we don't work you do but the investments we have made in the focus data is brought to our business or the
spk_8: getting to take root would be investment connect caf global coverage voice for teams and failed efficiency including t leadership team addition we are well positioned to execute guess the gold in the upcoming fiscal year
spk_0: we remain focused are we celebrating our core business integrating are few that position to achieve costing revenue synergies including cross only and customer retention we believe that cloud communications market as large growing and dynamic and the we are well positioned were accurate platform our global reach and
spk_9: our market leading microsoft he's from integration with that thank you and when he turned the call over the operator for questions thankyou if you like to ask a question please post star fell by one on your telephone keep had it for any reason why terminal that question please post star by again to ask a question for star one as a reminder if you are using a speaker phone for each member to pick up your handset before asking your question will cause you briefly
spk_2: yes questions are registered
spk_1: the first question concerns he tea party guy he mentioned how please proceed and as who's actually met diamond and on behalf congrats on a very solid pointless glad to see the fuses is working out the question i have is around the castle opportunity there was a obviously some probably cost synergies here but and i know it's early in the integration to make speak about this concretely but gave after yours first couple weeks of closing the deal could you give us some cause any sense of your complex and that fifty million incremental a are our that was talked about when the deal was announced
spk_9: we can cause ideal two weeks ago and word having conversations with customers currently and a very positive so encouraged overall although as well too early to give updates on the quantifiable number of the class and of hello i'm talking yeah so i take a look at the feedback so partly cause debate very positive i would say
spk_1: what we're going through invalidating coach mike at a and really close the two weeks ago we actually know literally got the name of the actual got her few weeks ago
spk_9: and so or into all that i would say incrementally more positive not ready to change numbers
spk_0: got it and around the market mortgage fraud it it's the celtic as a promising trajectory on the car says i'm curious how years thinking about inflationary costs this year if there's anything we need to keep in mind when would modeling the magnitude of spending growth
spk_10: and margins for fiscal point three ah no specifically around inflation but we were dealing with it internally so we are seeing things like wage inflation you know some feel any inflation those kind of thing we're dealing it in with it in the overall guidance were giving that total spending increases should be less than revenue growth that you know that's for us to deal with
spk_9: okay thanks so much thank you thank you the next question comes from that then we'll eat with p t i g p proceed
spk_2: yeah good afternoon tasting that question and in my job on the quarter it did i guess bringing in lisa to run the the channel group here in a what what incremental sort of improvements are strategy take will help get pushed through not only giving your experience working with her but maybe where you're trying to take the channel program from here now that you've built up a nice big stable as of partners that are helping out yeah and channel in court to our overall strategy we see the retailer network as the the key element that you know worked with your customers historically been what them on legacy solutions and are helping them through the migration to the cloud and so as we felt that our channel program and it's been several years as we've done that
spk_9: we continue to aspire to be easier to work with and you know build the most trust with the channel itself that's shown already with the strengthen our team as well as the strength of the channel that we've added but i think they're still a long ways to go lisa is has a decade plus to experience with the channel and shall bring a lot of operational at once and and he's of even trust that we will come
spk_11: two new to build with a channel and do that globally and i see a lot of opportunity well as we work some of the element of are differentiated approach to offering both agency and wholesale building models to channel that's been very successful for us
spk_9: in europe to bring that into the us as well as capitalizing on this tremendous microsoft teams opportunity as ahead of us and and using the channel to do that so
spk_2: we have a a ways to go but i think it's not a positive experience for us today and i i know it's going to help us move that to the next level grade and then looking at the low to mid market in the us and be groups a little slower growth and even on us below but a contraction here to needed help us kind of break down what what from of the person takes are around their did you see any sort of elevated churn are you seeing pricing compression as just as contracts a renewed and then what may be kind of new growth help offset that any that that downward movement there thanks yeah turn and mother this is inherently hired you have business mortality and seasonal years of that product and our core focus on which goes on with our strategy is really focusing our got a market exercise and activities and incremental dollar but thousand marketing on the
spk_9: enterprise market the enterprise is core a line to our strategy about half of you think about acts cats combines both the employee experience on the you see side and the agents parents on the context on our side only the larger customers have that contact than are need so inherently
spk_12: lines us live enterprise as long as you will get our other advantages of microsoft team and our global capabilities taking that to forty eight country those are really aligned with an upright let that's where we've been leaning in and focusing on and we had one of our best you know enterprise and progress
spk_13: this quarter so
spk_8: while it takes time to grow that enterprise business as you build pipeline and then mature that pipeline and into deals we are already seen some of the benefits of that work which unhappy about it
spk_0: can you tell your so that's that's
spk_2: that's where we'll focus our metric ton
spk_14: on what's important us
spk_1: or great thank you thank you mr van vliet the next
spk_2: question comes from brian williams looked barclays please proceed a guy thinks they can question excluding fuse her second and looks like a strong fourth quarter guide turned loved sequential thermostat new dollars added compared to your guide in the previous corners so anything in your business or anything in your market opportunity that gives you confidence for the school for you
spk_1: palm i'd like to think of the encyclopedic knowledge but it's business as usual like we got a great product he's doing really really well our global reach message is resonating and sell i i had nothing incredibly that with a other than i think we're doing really great and all the investment that we've made her just hang off now our survey and just as you think about peace
spk_9: and in addition to a bite has you think about the year over year growth rate for a few than twenty twenty one and is there anything since getting on your hands on the computer has been like you week that yeah maybe are more excited about the from a revenue or a complaint against
spk_1: i thought he goes in reverse order on look i i mentioned earlier question i think the crocodile opportunity you know we we had said on the call that we have zero modeled in for cross sell that's still the case right now and so on yeah i figure if i'm positive stuff there but too early nothing and guidance both had to thing and so when you talk about a year of your growth from few customers it get a little machine i'm i'm sorry to say that but what we would expect respect fuse revenue through declined from the customer base part of that will be natural attrition part of that
spk_2: that will be we're going to migrate them or or upgrade them over to the a by a side and so i think a purely that's the key drivers right there
spk_15: packages well but never cook i get a posh we think about like a time you that migration nor that them the we can track or that just like a couple are going into divide that like what the dudley fresca monitor the progress there
spk_0: so i made a big thing is customer choice number one right when i could afford anything any get out and to stop customer to a random idea now can i beg you ask me how to get in ninety days i'll give you more coherent anther by it's still early we we want to make sure that customers get the but the both worlds that something we said earlier we absolutely want to stick with applet choices the number
spk_16: one thing and find to bring for that that the both what solution
spk_9: and and that some of your the a positive for customers of they get to add a great of read the product contacts on our solution for made by eight of the with their the current platform as well as getting the full ascap experience when they decide to upgrade to the a direct caspar farm we do expect them to happen very quickly and
spk_1: and continue to happen for multiple years
spk_2: pritchard to go and
spk_16: thinking that's you make williams the next question from michael turned with world's fargo please proceed
spk_0: hey guys this is often millions author michael douglas question i just want a bottle of on the question on the use god
spk_9: the got which one you know for the course of or i think that the exposure was a hundred or hundred twenty five million dollars on rate other any perkins the justin theroux or other call outlook the why that might be lower than we were previously modeling well yes let me for topic service revenue and second off a to stop period right so i only get paid i am i going to pay my own damn i can't think the for quarter i'd love to but i can't sell adding you'll you'll see another step on as i try to be really clear the trip you'll feel for the first full quarter on that gonna run rate will be
spk_7: you are difficult first quarter of twenty three
spk_3: about that good
spk_1: thank you the next question comes from peter line with ever quiet please proceed
spk_17: they said they were constantly as calligrapher quoted as you think about the curb it's revenue retail rachel maddow above that one percent three your target for each clarified that's an organic target and then second yeah the the go to market that the you got made internally into sending the hardly get that the love that game track
spk_2: soon the so when what have to work for that's when was that number and and and be where that the risk alive i'll take their first part of that miguel it takes i got the risk so we weren't clear organic and inorganic we've done both in the history the company and i like i think you're reading too much into a twenty percent growth like it's just what we expect rapid growth i to be in terms of what have to work this question without a lot when i gave the long term died in the thing i try to make very clear that we need improve ourselves the marketing efficiency that naturally with the growth rate and that one of the area that we continue work on the reinvent that how we in bath where we invested a key part of that strategy but that one of the things that have to continue to work in our favor to dry
spk_9: i've higher growth rates and where will get that acceleration and and improved of marking for simply it is as we have sex or selling acts cat and we saying now it's my than thirty five percent of our air are going and over thirty five percent year over year
spk_1: the to drive enterprise customers which i talked about earlier is love keeping his customers very happy and that's where we made of a lot of progress today it would be know you're always your ongoing rest but we have driven the customer era retention improvement every quarter that i've been here
spk_18: from and we're them multi year
spk_0: record on that this quarter so those those are the key elements to drive customer retention of large accounts to drive the enterprise business and to drive the at caf adoption
spk_19: and the on this one less with how cute and question i knew of and they can recall but can you are give us the or the hope your number and i did as you didn't catch that i had five fifty five waiting for included a cake the church
spk_1: thank you mr levein the next question from neither marshall with morgan stanley please proceed great thanks wanted to know if you could just kind of dan white and the had one was from just the exit a know the wholesale business in our to this quarter or and to that guy average and then just maybe as a bad
spk_17: in a question for dave
spk_19: you know clearly you guys have made efficiency is to the services organization and in our maybe deemphasize kind of that that smaller business
spk_20: our book of business in or should we consider that as there any growth opportunity or an additional turn we should be mindful of does anything to now kind of on a smaller and that the does as you know as you guys have kind of deemphasize or change their services organizational on that first
spk_2: yeah so are the edwin from the exiting now also business was about three percent service revenue growth so i think ahead of descriptive that total rent at a series or the girls what about three percentage points higher if you know that you mean no credit and difference was flat and same topic i'm correct
spk_12: ah yeah yeah thats cookie
spk_19: yeah and then to your question on our services organization and and business obviously as a fast than that's one thing we're striving as we'd go through
spk_0: art and of that organization
spk_21: the are more out of the box
spk_2: for customers we've made some progress on that but that creates inherently a little bit of revenue had when but obviously we're focused on the service revenue component of the business and we believe easier deployment implementation configuration create
spk_1: strong advantages strong tcl opportunities for custom
spk_2: first as business we got it thanks thinking this my shop next question comes from michael how the my with northland capital markets please proceed great thanks on the record revenue retention can you give a little more daytona yeah i mean basically are retention rates are the highest we think prevent damage even before that turns really come down and mean it's been a key area gauge spoke if the last year turns really come down the last year and it it's arguably caught the ball old from the lowest credit card to climb rate we've ever seen we saw a great enterprise retention it's it's across the board we'd made significant investments and our customer success organization over the last year as well as product usability stability enhancements and and i think those are paying off obviously there's there's other macro friends possibly affecting the bit those i think are really critical for what we're doing here and getting greater kind of them are happens
spk_0: and then i'm in terms of the end of the x kaz verticals are they is it is there any sort of material difference between the the vertical that are and at can business first as they ucas
spk_2: you know independent and gather or even a complex and or the vertical pretty much similar to the mix of articles that leverage mean that you for up to date the the vertical to been similar as we focus on a lot of land between the you see is or in the context and a use early focused on informal cues and bringing contact center capability and you use users we talk about our front desk product as one of those so we are there is for us there's a high crossover in vertical that our core vertical been being flood out in the in the market and that also is by next so were seen that across the board i thinking the still anymore for next question comes from george sudden with chronic helen please proceed thank you i'm glad to hear you're going to continue to focus heavily in rd did mention bringing over fuse
spk_22: developers in large part to use talk about how to get influenced the product roadmap going forward and was how might the particular different in a couple years result of this move
spk_2: share and we are you
spk_23: i am happy to say we brought over that team we've been able to align them into our organization does it all relatively new but obviously planned and it does create a force multiplier on innovation for us as were able to pull it
spk_24: incremental resources on t product innovation areas as we have the basics covered rain from and are indeed perspective and away and it's that were able to do it well
spk_0: making that profit been able to contribute to profit over the next twelve months and what we will focus on obviously is the both core pillars of act cas our teams product and our global global reach
spk_2: all of those already in last year so there there are already additional innovations in the pie but what you'll see is increased velocity of innovation over the next you know nine plus month
spk_25: and areas that will focus on our things like admin usability for managing very very large organizations some of the polish around our army channel and ai capabilities additional deeper integration they go with that and additional persona the front desk was
spk_1: and initial
spk_4: our first foray into persona as and we have some additional do they are so i would say we have a couple are just been announcements plan for late this quarter and
spk_1: if they stay tuned for the specific i appreciate the detail that
spk_9: thank you thank you mister said in the next question consume james brain with the william blair please proceed
spk_1: they've taken question he he had mentioned will be launched was like a the she just wondering should of how the that changed didn't so little get around some of that did you see levy a law and made an impact your sales cycles she added it
spk_2: on
spk_9: okay to so here's what happened yes i think it does have some effect it's hard to quantify
spk_26: but i think we are seeing
spk_7: i'm enterprise customers play smaller orders
spk_2: the front because they they have to have a slightly different deployment schedule and so there may be some pent up demand for certainly we got the largest back orders that we've had in a long time backlog if you will have hardware and that that he is you know a statement and your alleviated not really it's still something we manage everyday really great now you know i'm hoping that at some point in in the next four quarters alleviate but there's nothing that i can concretely say you know that we have to decide on the rise of it is going to be alleviated
spk_27: she they see majestically work environment here now
spk_0: hadn't seen nothing to change that she's had to compete each
spk_28: yeah it change during a regular having just the enterprise orders the bigger orders are probably a little smaller than they would have been killed their their place in the first order the place a second order here in a couple months when we get more hardware to meet their deployment need
spk_29: and we're building a great at least hardware out of them to create more flexibility for customers
spk_2: the in in been used qualitatively he mentioned little bit about cross so which views on any any real difference in the size and their custard a child side your customer base small and cetera well on the company yeah on average the size of their customers were price segment a narrative price tag matter very comparable but then again he that we had a little we have a large or small business devoted they are but are on the enterprise died both companies are very similar to each other
spk_28: okay great thanks
spk_0: thank you mr brain the next question comes from catherine trap neck like collier's please proceed
spk_27: oh pay for taking my question congratulations gonna good quarter so you've got some time talking about microsoft late teens and i'm wondering why aren't you personally in a relationship with black and in the that would be another avenue a good girl thank you
spk_30: ah thanks catherine
spk_1: so on that teams opportunity i do think it is like more partners with those goods or open fear that relationship that the themes platform itself the is a larger platform honestly and day create an opportunity that i think you still just like likely lightly touched and we are doing a lot in that regard to help penetrate the users that don't have an enterprise communication our system attached to their teams just the gym again that through direct route and we're adding a lot of value to our contacts and are parent all employees global coverage
spk_30: we do out strong relationship with felt force overall and obviously with integrations across both are you see and c products and we see that as a very important relationship over all for us eritrea cruciate it and cat thank you must have negative the next question comes from little pyre with a yard please proceed
spk_1: great thank you i get a couple of questions and maybe just starting with the service revenue outside in the quarter i think can be educated of really driven by up straight and see pass and ce cas and just want to go you get any other color their elegant particular products are areas in and sea bass and and wouldn't seek eh
spk_4: as your that seaters that usage any other color is interested the sustainability of that upside against as you move into que por
spk_2: i'm from it be that bad it was you know southeast asian usage and so i think
spk_1: you know we've got a great presence there
spk_31: we won some new customers anything david mention some pretty big brand names over the last few earnings call you can imagine those flowing through with usage as they wrap up starts to show off and then i'm not catholic of side it was just minute usage and so i do
spk_8: sustainable yeah it feels like the world's opening up and there's a lot more business activity going on and i just correspondingly shows up as more usage okay not great on and then i just a question on a are our growth
spk_1: yeah looks like deck out there are grown yeah accelerated are you call that out that the primary focus
spk_9: and and get you touched on the others like a mid market lesson be a bit weaker so i guess what the big question or wanted to questions is when do we get to watch watching point where that x cat a are arkin more than offset some the pressure points and and mid market and as and be on to help drive and and acceleration in a are great what one of the key
spk_27: driver to that eat time timeline to out think about that
spk_3: and gave iraq each other were wondering if you wanted to give you an answer at like three months sick days for hours and eight minutes were just the key drivers right
spk_16: oh gee i'm sorry a little bit of humor today
spk_32: so look at what what's really driving it is we're pushing in there were seeing the first time that the investments were making in the command generation in the branding in the channel and all those kinds of things are paying off
spk_16: yes it's continue to grow faster than overall growth rates are becoming a larger percentage of our business exactly what they want and he's been driving toward in excess of a year now and you know i'm hoping that every call from that point on wiki thing at the bigger percentage of the business because it is one of our kind of the drive the overall growth rate of the company out
spk_2: okay thank you thank you mister howard the next question come from can whore analysts oppenheimer please proceed
spk_33: that's just can you point it seems a little bit deeper on where are you developing the channel they are i would think it's a very different channel then the legacy channel and where are you just like the stunt cannot implement than i did he die and i'm like it's was laughing but what eating we are we in the thinking into your ability to channel a cheeky
spk_2: on and country that market i'm so kind of the first part him a little muffled did using teams channel it's like a mix of each year on where are you developing of the channel that on a console and into it legacy kind of like a sore thumb systems integrator supporter
spk_34: yeah so and i'm a ferret with game last part at a i think it's early and man that there are a lot of microsoft teams users when you get there and i years but are predominantly all using it for messaging her
spk_16: and so attaching enterprise communications do that i think is what early and i think just a small fraction have really attached enterprise communications and when you do do that there's different ways to do it whether it's direct route een or operator can act or
spk_2: calling plans i think word inadequate wifi of the predominant flourish play a direct route in and that's where we're differentiated i think you know we fenceless we got into this early and we think capitalizing on it obviously we had thirty percent quarter over quarter growth but i don't think we have yet really capital five on the full channel opportunity and so that is something that the initiative for of we've been mostly writing in our current animal relationships in there is overlap there but i think there's a whole and get some of that of channel partners to exploit to your point and so that not something that
spk_0: prove it and obviously we've been doing
spk_16: when we do it we do it by you know the advantages we burn being here is really power in all employees your contacts and are employee giving global coverage to those and the than half capabilities of aftermath call fact things like that so
spk_35: we've been having a lot of success i think there is marketing for much better opportunity for successor
spk_3: and where are you if you do
spk_1: and in support of some reason and just quality i'll deposit on teams
spk_3: yeah it's great question
spk_16: we you know those customers are are predominantly from his in them deployed and we work our you know quality of service the uptime reliability of service is our court and that's where we come from and so i would say we have an ability to do that
spk_2: the we are still figuring out some of those components by think it's better than anyone else and at a core special software us to to do that high quality high reliability alarming thank you
spk_1: thank you the next question comes from michael fuck with the think of america please proceed
spk_2: yeah thank you to take a the question is could could it be here on couple of i could you know first on the on the enterprise gif
spk_1: your on or and he cannot comment you can get of odd a change in size that on all and then if early and late stage
spk_36: i got we don't
spk_1: and my first thank you for reading the th and it was a great read i appreciate it the same and and we don't give the kind of funnel metrics said he would be inappropriate with with yeah we should we know our competitors with new are called and so i could just be the wrong thing to get our right now
spk_37: i'll try one time at least show on be yeah
spk_2: on the broader question enterprise adoption of august for the bench at reach of inflection overtime for you caption in fee cast can you can appeal apart
spk_38: a broader acceleration and market adoption versus nurture your success
spk_0: the unite the movement that a cloud is than a occurring for a month as of them have been the latter one to migrate over time and i still think there's a lot of large enterprises on legacy for what we are seeing a greater acceptance acceptance partly cause them to work from home and a
spk_2: it but privately also gives people realize that's where the innovation an investment is going from into that cloud solutions over legacy solution so i think when people are choosing their future platform it's becoming obvious to to move to a cloud platform in the next replacements side all that replacement cycle could still be up to seven to ten years so i still think things can be a long run in that regard by the propensity to move to cloud has increased you that quebec should be mentioned earlier break a jar you model and and
spk_39: it's about breaking human and right so we're on yeah
spk_40: so i am in get some buffet
spk_2: matter what their garbage he looks like and i so just to be safe i doubled the industry average turn rate for their portfolio that's what a
spk_0: i'm running to the model
spk_41: great thank you i sell off
spk_1: absolutely
spk_0: cool with me then please proceed
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