8x8(US:EGHT)2022-05-11 00:40Financial Data and Key Metrics Changes - Total revenue for Q4 2022 was $181.4 million, a 25% year-over-year increase, within the guidance range of $180 million to $182 million [41] - Service revenue was $172.8 million, a 29% year-over-year increase, but slightly below the guidance range of $173.5 million to $175.5 million [41][11] - Non-GAAP operating profit grew to $4.3 million quarter-over-quarter, reflecting a focus on higher-margin business segments [48] - Gross margin for the fourth quarter was 66.7%, with service gross margin at 72.2% [47] Business Line Data and Key Metrics Changes - XCaaS ARR growth accelerated to over 35% year-over-year, now accounting for approximately 35% of combined 8x8 Fuze ARR [8][10] - Enterprise ARR now makes up 57% of total ARR, up 55% year-over-year, while small business ARR declined by 1% year-over-year [45] - CPaaS revenue experienced a significant drop due to lower usage from a few large customers, resulting in a sequential decline of several million dollars [15][40] Market Data and Key Metrics Changes - The company expanded its global reach to 50 countries, up from 41 a year ago, covering more than 85% of the world's GDP [25] - The adoption of XCaaS has been broad across various industry verticals and geographic regions, including public sector clients [17][18] Company Strategy and Development Direction - The company is focused on operational discipline and investing in XCaaS innovation to drive operating leverage and increased cash flows [12][38] - The integration of Fuze is progressing well, with strong customer retention and revenue performance exceeding expectations [27][43] - The company aims to balance growth with improving profitability, targeting operating margins in the 2% to 3% range for fiscal 2023 [58] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges in the CPaaS and small business segments but emphasized broad improvements in gross margin and solid operating income [40] - The company remains confident in its strategy and market opportunity, expecting continued growth in fiscal 2023 [59] - Management noted that the competitive environment remains stable, with a focus on integrating Teams users with enterprise communication platforms [60][61] Other Important Information - The company reported cash from operations of over $16 million for the quarter, remaining free cash flow positive for the second consecutive quarter [53] - Deferred revenue climbed to over $45 million, up 90% year-over-year [53] Q&A Session Summary Question: How would you characterize the competitive environment with Microsoft Teams? - Management noted that customers are looking to integrate Teams users with their enterprise communication platforms, and their direct routing solution is performing well against competitors [60][61] Question: What lessons were learned from the drop in usage by large customers? - Management indicated that the drop was due to several large customers pulling back on marketing campaigns, and they are working to reintroduce these campaigns when market conditions improve [68][69] Question: What is the expected impact of Fuze on future revenue? - Management stated that Fuze's revenue contribution was better than expected, with strong retention rates and integration progressing smoothly [70][71] Question: How is the company addressing the challenges in the CPaaS segment? - Management is diversifying the customer base and leveraging regional scale to drive lower costs and support performance [69] Question: What are the expectations for organic growth post-Fuze acquisition? - Management suggested a conservative estimate of mid-teens growth for organic growth after the Fuze integration [78] Question: How is the international market performing? - Management reported robust growth in the UK and APAC regions, particularly in the CPaaS business, without adverse effects from macroeconomic trends [80]