8x8(EGHT) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q3 2025, total revenue was $178.9 million, near the midpoint of guidance, with service revenue at$173.5 million, exceeding guidance by $1 million [36] - Operating margin was reported at 10.7$27.2 million, marking the 16th consecutive quarter of positive cash flow [46] Business Line Data and Key Metrics Changes - New product monthly recurring revenue (MRR) increased over 60% year-over-year, driven by growth in AI-based solutions and video-enabled services [10] - Committed MRR from customers using three or more products increased over 10% since the start of the fiscal year, indicating effective cross-selling strategies [38] - The remaining Fuze customer base now accounts for approximately 5% of service revenue, down from 7% in the previous quarter [37] Market Data and Key Metrics Changes - The Asia-Pacific region saw significant growth, including the largest deal booked with a well-known auto manufacturer [11] - Customer satisfaction scores remained high, with CSAT scores in the mid- to high-90% range for targeted enterprise customers [12] Company Strategy and Development Direction - The company is focused on transforming into a customer experience (CX) leader, with a bold plan to enhance its product offerings and market presence [17] - The integration of Fuze is a priority, with plans to shut down the platform by the end of the calendar year [30] - Investments in R&D are being increased to design a CX platform tailored for small- and medium-sized enterprises, emphasizing simplicity and reliability [20] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges in the UC space, including pricing aggressiveness and market dynamics, but expressed confidence in the company's positioning and strategy [72][74] - The company aims to return to growth through a combination of new product revenue, multi-product customer retention, and customer acquisition [64] - Management remains optimistic about the future, despite acknowledging potential bumps along the transformation journey [31] Other Important Information - The company has reduced total debt from a peak of $548 million in August 2022 to approximately$354 million today, a 35% reduction [19] - The company was included in Newsweek's annual Excellence 1000 Index, highlighting its commitment to ethics and social responsibility [16] Q&A Session Summary Question: Record operating cash flow and growth progress - Management confirmed that service revenue would have been up quarter-over-quarter and year-over-year without FX impacts, with Q4 guidance reflecting similar trends [60] Question: AI offerings growth and future revenue - Management noted that new product revenue from AI is growing rapidly but still represents a small portion of overall revenue, with a goal to achieve consistent growth next fiscal year [63] Question: Transition from Fuze platform and cost savings - Management confirmed they are on track to shut down the Fuze platform by the end of the fiscal year, estimating mid-single-digit millions in hard savings from this transition [66] Question: Turbulence in the UC space - Management acknowledged pricing aggressiveness in the UC market but emphasized that their CX messaging is resonating well, leading to more platform wins [74] Question: International market opportunities - Management expressed optimism about international growth, particularly in the CPaaS business, and noted a more stable competitive environment compared to the U.S. [78] Question: Customer appetite for AI products - Management indicated strong interest in AI capabilities, particularly in the upper small business to low-end enterprise segments, with a focus on solving CX problems [86] Question: Go-to-market strategy adjustments - Management confirmed ongoing evolution in the sales organization towards consultative solution selling and emphasized the importance of branding as a CX company [118]