8X8 Q3 2025 Earnings Call Transcript

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Provided by Quartr
February 4, 2025
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Operator

Hello, everyone, and welcome to the Third Quarter twenty twenty five 8x8, Inc. Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Please be advised that today's conference is being recorded.

Operator

Now it's my pleasure to turn the call over to the Vice President of Investor Relations, Kate Patterson. Please proceed.

Kate Patterson
Vice President, Investor Relations at 8x8

Thank you. Good afternoon, everyone. Today's agenda will include a review of our results for the third quarter of fiscal twenty twenty five 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.

Kate Patterson
Vice President, Investor Relations at 8x8

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 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.

Kate Patterson
Vice President, Investor Relations at 8x8

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.

Samuel Wilson
Chief Executive Officer at 8x8

Good afternoon, everyone, and thank you for joining us on today's third quarter fiscal twenty twenty five earnings call. It's my pleasure to share our 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 $2,000,000 from last quarter.

Samuel Wilson
Chief Executive Officer at 8x8

Operating margin was also above the midpoint. The quality of the earnings remained high and we generated record cash flow from operations. We use the excess cash to further reduce our debt by $33,000,000 in the quarter and another $15,000,000 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.

Samuel Wilson
Chief Executive Officer at 8x8

New product MRR increased more than 60% year over year, reflecting strong growth in AI based intelligent customer assistance, secure payments and video elevation, our video enabled solution for field service organizations. The number of customers with three or more products continued 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.

Samuel Wilson
Chief Executive Officer at 8x8

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 UCaaS commitment. This customer is in the process of evaluating additional products.

Samuel Wilson
Chief Executive Officer at 8x8

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 one to five.

Samuel Wilson
Chief Executive Officer at 8x8

Also as our market presence continues to grow, we are frequently included on the shortlist of companies to watch. For example, in an article in CX today, Liz Miller of Constellation Research and Zias Caravala 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.

Samuel Wilson
Chief Executive Officer at 8x8

This quarter, I want to call out our inclusion in Newsweek's annual excellence 1,000 index. Inclusion is based on wide ranging criteria from employee and customer reviews to R and 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.

Samuel Wilson
Chief Executive Officer at 8x8

Our acquisition of Fuze played a key role in jump starting our journey. We have also made substantial headway with Fuze 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 sixteen quarters and have made 10 debt repayments, reducing our total debt, including convertible debt from a peak of $548,000,000 in August 2022 to approximately $354,000,000 today, 35% less in just over two years.

Samuel Wilson
Chief Executive Officer at 8x8

Priority number two was accelerate innovation. As a technology company, this is the only way to drive durable growth. We increased investment in R and 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.

Samuel Wilson
Chief Executive Officer at 8x8

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 prioritized 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, meeting 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 and D organization's exceptional work delivering hundreds of releases per month has allowed us to enhance our platform substantially over the past few years.

Samuel Wilson
Chief Executive Officer at 8x8

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 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. CallCabinet, a leader in compliance, call recording and analytics is the most recent addition to our Sellwith tier. With direct integration across 8x8 Work and 8x8 Contact Center, CallCabinet becomes the only compliant call recording add on within the 8x8 ecosystem for Microsoft Teams Operator Connect offering.

Samuel Wilson
Chief Executive Officer at 8x8

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.

Samuel Wilson
Chief Executive Officer at 8x8

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.

Samuel Wilson
Chief Executive Officer at 8x8

We've included a sampling of social posts and feedback in the earnings presentation. The 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 twenty twenty six, 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.

Samuel Wilson
Chief Executive Officer at 8x8

We are still working through the revenue headwinds of the Fuse customer upgrades to our platform and the market dynamics are fluid, especially in UCaaS. 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.

Kevin Kraus
Chief Financial Officer at 8x8

I now turn the call over to Kevin. Thanks, Sam. Good afternoon, everyone, and thank you for joining us today for our fiscal third quarter earnings call. This quarter marked another period of strong execution across our business, including record communications platform usage revenue, solid profit margins and record cash flow from operations. Fiscal Q3 twenty twenty five represents our sixteenth consecutive quarter of positive cash flow from operations and non GAAP operating profit.

Kevin Kraus
Chief Financial Officer at 8x8

We continued our disciplined approach to debt reduction, repaying $33,000,000 of our term loan debt during the quarter and an additional $15,000,000 in January 2025 during our fiscal fourth quarter. Including this latest prepayment, we have now reduced the principal value of our debt by over $194,000,000 or approximately 35% since the peak in August 2022. The press release and trended financial results on our Investor Relations website provide a detailed view of our performance, but I will highlight a few key points on today's call. Before continuing, I would like to remind you that unless otherwise noted, I will be discussing non GAAP metrics except for revenue and cash flow. For the third quarter of fiscal twenty twenty five, total revenue was $178,900,000 near the midpoint of our guidance range.

Kevin Kraus
Chief Financial Officer at 8x8

Service revenue totaled $173,500,000 exceeding the midpoint of our guidance by $1,000,000 Subscription and usage based service revenue on the 8x8 platform continued to grow both sequentially and year over year. Growth was offset by the anticipated decline in revenue from customers still on the Fuse platform. During Q3, we made continued progress upgrading Fuse customers to the 8x8 platform, reducing the remaining Fuse base to approximately 5% of service revenue compared to 7% in the prior quarter and 11% in Q3 twenty twenty four. We remain on track to complete these upgrades by the end of calendar year 2025, which will simplify our operations and strengthen customer engagement. Our multi product strategy continues to drive results with committed monthly recurring revenue from customers using three or more products increasing over 10% since the start of the fiscal year.

Kevin Kraus
Chief Financial Officer at 8x8

This growth highlights the effectiveness of our strategy to deepen customer engagement by offering a comprehensive suite of solutions, fostering stronger customer relationships, improving retention and unlocking additional value for both our customers and our business. These results underscore the resilience of our underlying business despite facing approximately $2,200,000 in foreign exchange headwinds relative to our expectations at the beginning of the quarter. Without this FX headwind, total revenue would have been near the high end of our guidance range and service revenue would have exceeded it. Gross margin for the quarter was 69.5%. Within our guidance range and impacted by the revenue mix as lower margin platform usage revenue was approximately 13% of total revenue, up sequentially and year over year.

Kevin Kraus
Chief Financial Officer at 8x8

The underlying gross margin of our subscription based business remained healthy and consistent with recent quarters. Operationally, our spending levels remained consistent with earlier quarters and our business model continues to benefit from a natural FX hedge where the impact of foreign exchange on revenue is largely offset by a corresponding opposite impact on expenses. As a result, we delivered an operating margin of 10.7% during the quarter, slightly above the midpoint of our guidance. Stock based compensation expense for Q3 was 5.3 of total revenue, near the multi year low of 5.2% recorded last quarter. This reflects our commitment to managing this expense responsibly and reducing shareholder dilution over time.

Kevin Kraus
Chief Financial Officer at 8x8

Our continued focus in this area has allowed us to achieve GAAP operating profitability for the second consecutive quarter, a milestone that underscores our financial discipline. As part of this effort, we have shifted toward primarily cash compensation for the majority of employees, which is reflected in our non GAAP operating income. Turning to the balance sheet and cash flow, we ended Q3 with 104,600,000 in cash, cash equivalents and restricted cash, down approximately $13,000,000 from Q2 due to the $33,000,000 term loan repayment I mentioned earlier. The Q3 balance sheet includes $16,500,000 in current term loan liability, net of unamortized discounts and issuance costs. This represents a principal balance of $17,000,000 the minimum required payments for the next twelve months.

Kevin Kraus
Chief Financial Officer at 8x8

With the $15,000,000 prepayment we just made in January, our remaining current liability is effectively $2,000,000 Our net debt to trailing twelve months EBITDA ratio has decreased to approximately 2.6 times, down from over six times in fiscal Q2 twenty twenty three, giving us greater flexibility to pursue strategic opportunities. Additionally, stockholders' equity increased for the third consecutive quarter, reflecting continued progress in strengthening our financial position. Our remaining performance obligation remains steady at $800,000,000 representing a year over year increase of 4.6%. This growth reflects the strength of our multi year customer contract backlog and provides a strong foundation for future revenue visibility. We are particularly proud of generating $27,200,000 in operating cash flow this quarter, a record for us.

Kevin Kraus
Chief Financial Officer at 8x8

This achievement demonstrates our ability to generate strong returns while maintaining a disciplined and efficient operating model. However, while this milestone reflects our strong execution and operational efficiency, it is important to recognize the cash flow performance does fluctuate due to market dynamics, investment timing and other factors. We remain committed to prudent financial management to sustain long term growth and value creation. As we look ahead, our cost structure remains stable and we continue to invest in innovation and customer success. We believe our target cost structure with R and D at approximately 15% of revenue, sales and marketing between 3334% of revenue and G and A between 1011% of revenue provides the right balance of investment to drive growth while maintaining profitability.

Kevin Kraus
Chief Financial Officer at 8x8

With this context, we are providing the following guidance for fiscal Q4 twenty twenty five. Service revenue is expected to be in the range of $170,000,000 to $175,000,000 Total revenue is expected to be between $175,000,000 and 181,000,000 Please note that the total revenue and service revenue reduction due to foreign exchange rates since we gave our prior guidance is approximately $2,300,000 This means that on a constant currency basis, our service revenue guidance pinpoint remains about the same as the guidance pinpoint we provided last quarter. Operating margin is expected to be in the range of 9% to 10%. Please remember that our fiscal fourth quarter includes seasonally higher expenses as certain employer taxes and benefits restart in January. For the full fiscal year 2025, we are guiding as follows.

Kevin Kraus
Chief Financial Officer at 8x8

Service revenue is expected to be between $691,300,000 and $696,300,000 Total revenue is anticipated to be between $713,000,000 and $719,000,000 Please note that the total revenue and service revenue reduction due to foreign exchange rate changes since we gave our prior guidance is approximately $4,500,000 This means that on a constant currency basis, our full year service revenue guidance midpoint remains about the same as the guidance midpoint we provided last quarter. Full year operating margin is projected between 10.711%, translating to non GAAP operating income of approximately $77,500,000 at the midpoint of our full year revenue and operating margin guidance. We expect interest expense including amortization of debt issuance costs to be about $5,300,000 in Q4 based upon current interest rates and our outstanding debt balance. We expect cash paid for interest to be approximately $7,000,000 in Q4 twenty twenty five as cash interest on the 2028 convertible debt is due semi annually. These interest amounts assume approximately 7.3% on the term loan or SOFR plus 3%.

Kevin Kraus
Chief Financial Officer at 8x8

Putting all of this together, we expect fully diluted non GAAP earnings per share to be in the range of $0.35 to $0.37 for the year. We anticipate full year cash flow from operations to be between $61,000,000 and $65,000,000 an increased range compared to our prior comments. Note that cash flow from operations typically decreases in fiscal Q4 due to the timing of seasonally increased employer expenses and cash paid for interest. While we are not providing guidance for fiscal twenty twenty six, I want to point out that we plan to make strategic investments that support our go to market initiatives in the next fiscal year. While these investments are expected to result in a lower non GAAP operating margin compared to fiscal twenty twenty five, they are essential to strengthening our market position and accelerating long term revenue expansion.

Kevin Kraus
Chief Financial Officer at 8x8

We believe that by enhancing our commercial capabilities, we will be well positioned to capture new opportunities, improve customer relationships and drive growth over time. In closing, I remain confident in our vision and strategy as we navigate the path to sustainable profitable growth. While challenges may arise along the way, the progress we continue to make reinforces my belief that we are taking the right steps to achieve our long term goals. I am deeply grateful to the 8x8 team for their hard work and dedication in delivering these strong results and I look forward to sharing our progress in the quarters ahead. Operator, we are now ready to take questions.

Operator

Thank you so much.

Operator

And

Operator

And it's from the line of Josh Nichols with B. Riley. Please proceed.

Josh Nichols
Research Analyst at B Riley Financial

Yes. Thanks for taking my question. Great to see that the record operating cash flow and it looks like the company is making some good progress towards getting back to growth. On that front, I just had a question. If you look take out the FX impact, it looks like with service revenue been up quarter over quarter, but also year over year and then looking at the 4Q service revenue guide, is that it would be effectively flat year over year or maybe up a little bit?

Josh Nichols
Research Analyst at B Riley Financial

I assume that that also includes a little bit of FX headwinds. If you exclude that, it would maybe be up a little bit more of a material amount. Is that accurate?

Kevin Kraus
Chief Financial Officer at 8x8

Hey, Josh. Yes, we this is Kevin. We do see $2,300,000 or so of FX headwind in our Q4 relative to what we guided last quarter. So that would imply a roughly a raise to guidance for the full year by the way, and kind of flat quarter over quarter as you say.

Josh Nichols
Research Analyst at B Riley Financial

Got it. And then just touching a little bit on some of the AI and other offerings, very good growth you're seeing. I think you mentioned like 60% growth there. Any opportunity to quantify, I know that was still relatively low base, low mid single digits. Is that beginning to ramp up?

Josh Nichols
Research Analyst at B Riley Financial

And when you think about next fiscal year without talking about guidance specifically, is that positioned you in the situation combined with the runoff of the remaining FEWS business to get back to service revenue growth that's pretty consistent throughout the year or maybe accelerating towards the back half?

Samuel Wilson
Chief Executive Officer at 8x8

All right, Josh. I think it's a great question. The new product revenue, the AI stuff is still single digit millions for the quarter. It's growing very rapidly, but it's still not quite enough to move the needle overall. Our goal next year is growth at some point throughout the year.

Samuel Wilson
Chief Executive Officer at 8x8

There are a lot of moving pieces. I've been surprised by the FX kind of tailwind, headwind, tailwind, headwind phenomenon we've been dealing with a little bit. That's causing a little bit of the rounding errors and some of the things going on around that along with just the industry dynamics in general. So it's certainly our goal to return to growth without getting into guidance and all those other things. It will be a combination of new product growth, multi product customers having higher retention rates and continuing to just add new customers into the mix.

Josh Nichols
Research Analyst at B Riley Financial

Thanks. And then last question for me. I think you talked about before at some conferences, just like ex FEWS that the company would be getting to maybe like low to mid single digit growth. It seems like that transition and runoff continues to be on track for the end of this calendar year. What else has to be done overall?

Josh Nichols
Research Analyst at B Riley Financial

And any potential thoughts on like also the savings when you're not running two platforms parallel to each other anymore?

Samuel Wilson
Chief Executive Officer at 8x8

Yes. So okay. And you I'm sorry, you asked me that last question. I didn't really do a good job of answering it, so I apologize. Yes, we're still on track to run down Fuse.

Samuel Wilson
Chief Executive Officer at 8x8

I think we're down to 5% of revenue. And as you can see the trend, we're really pushing hard to get that done. It is absolutely our objective to turn shut down the Fuse platform at the end of this fiscal year. My mandate to the teams is 11:59 on PM on twelvethirty one, we turn off the Fuse platform. In terms of savings, hard savings, probably mid single digit millions of dollars.

Samuel Wilson
Chief Executive Officer at 8x8

There's an intangible savings, it's a little bit harder to measure, which is maintaining security compliance, maintaining HIPAA qualifications, maintaining software upgrades and OS upgrades and all those kinds of things that are a little bit harder to quantify other than just the cost savings of AWS for running the platform or whatever the case may be. And so, I don't know, if you want to take a rough guess, I probably double that in my mind in terms of hard cost savings when it comes once Fuse is behind us. And I think running off the Fuse platform will definitely help in terms of getting the growth next year.

Josh Nichols
Research Analyst at B Riley Financial

Appreciate the context. Thanks.

Samuel Wilson
Chief Executive Officer at 8x8

Thanks, Josh.

Operator

Thank you. One moment for our next question. And it's from the line of Ryan Coons with Needham and Company. Please proceed.

Ryan Koontz
Senior Analyst at Needham & Company

Great. Sam, you mentioned in your prepared comments just some turbulence in the UC space. Can you expand on that kind of where you feel like we are in saturation, kind of where pricing has been headed and what

Ryan Koontz
Senior Analyst at Needham & Company

the competitive environment has been like? Thanks.

Samuel Wilson
Chief Executive Officer at 8x8

Yes. So I think last quarter on UC, I'm going to broaden your question here in a second, but on UC, we did see a little bit of aggressiveness on pricing, not unheard of. I would say it's pretty typical in the fourth quarter, calendar quarter of the year because some of the companies have fiscal year ends and they could always get a little bit more aggressive at the end of the year. Obviously, this is something the industry analysts, you, the financial analysts have been talking about for a while. So I wouldn't say it was anything bizarre or crazy.

Samuel Wilson
Chief Executive Officer at 8x8

I think for us, I just want to switch sort of broaden the question slightly for us because you asked about the market. But for us, I think what matters a lot more is we saw more deals last quarter that were contact center led that really are viewing UC as just an add on or a condiment, if you will, to the CX sale. Our CX messaging is really resonating. We're seeing us land with more platform wins. I consider platform win three plus products.

Samuel Wilson
Chief Executive Officer at 8x8

And UC is typically one of those to deal with those and we've got engaged in those other things. And so I think we're really well positioned to deal with anything around pricing around UC in that area. I think I gave a good answer and if I didn't ask me a follow-up.

Ryan Koontz
Senior Analyst at Needham & Company

That was great. Can you comment briefly on the international opportunity, how you size that up these days, what your thoughts are?

Samuel Wilson
Chief Executive Officer at 8x8

Man, I love the international opportunity 8x8, right? I mean, we see the CPaaS business doing fantastic, the platform usage business doing fantastic and we've been bringing that around the world. Our presence in Europe is growing and I really love that. And honestly, there's just less I don't want to be struggling for words you're right for a second. There's less irrational behavior because we don't have this post COVID, we raised a bunch of money, we're some startup and we're just going to willy nilly throw pricing or free professional services or contract buyouts or any of that other ridiculous stuff that we typically see sometimes in The United States.

Ryan Koontz
Senior Analyst at Needham & Company

Yes. And still Western Europe is still an area you plan to expand in?

Samuel Wilson
Chief Executive Officer at 8x8

Yes, sir.

Ryan Koontz
Senior Analyst at Needham & Company

Got it. All right. Thanks. Thanks, Tim.

Operator

Thank you so much. One moment for our next question. And it's from the line of Siti Panigari with Mizuho. Please proceed.

Chad Tevebaugh
Chad Tevebaugh
Equity Research Senior Associate at Mizuho Financial Group

Hey, thanks. It's Chad on for Siti. Just wondering if you can talk about what you're hearing from customers in their appetite for AI products and if that's differing sort of at the low end versus the high end and any updates you can share around whether these guys are using AI to complement existing agent functions or starting to see any reduction in the human agent? Thank you.

Samuel Wilson
Chief Executive Officer at 8x8

Okay, Chad, quite a big question there. So I may ask a couple of small follow ups along the way. So when you talk low end versus high end, I presume you mean customers or by customer size or sort of where you're at. Correct. And so okay, what I would say is like our target market is that upper small business to low end enterprise.

Samuel Wilson
Chief Executive Officer at 8x8

And what they love is that we give best in breed AI capabilities. We're talking Gartner Magic Quadrant leading bots, which most of our competitors do not offer, natively integrated into our contact center space, natively integrated into our UC, natively integrated into Gauge. So it works absolutely fantastic. And we're really focused on solving those CX problems. And when you do that, AI plays a pretty pivotal role inside of that.

Samuel Wilson
Chief Executive Officer at 8x8

In side of that. In terms of the low end, so let's say small businesses, those kinds of things, I don't see it as much. Where we see a lot of interest and there's I'm going to be a little bit cautious, there's a little bit of overlap between the things. Where we see a little a lot of interest is around things like digital messaging, SMS, two way communications with the contact center using WhatsApp, appointment reminders, those kinds of things. Things.

Samuel Wilson
Chief Executive Officer at 8x8

Now where all the overlap starts to occur is when you start looking things like at our appointment management for healthcare, remote fix, where you're starting to bring multiple solutions together. So I mentioned, I've been talking about bots a little bit, but our voice bot is just on fire. I mean, it's been amazing at how fast that's grown. And it can speak 50 plus languages and 91 accents, I think I said in my prepared remarks. And I think that's super important because that's a little bit we're starting to see a little overlap between large businesses and small businesses when we start getting into self-service and those kinds of things, particularly around contact center.

Samuel Wilson
Chief Executive Officer at 8x8

So we're doing some amazing stuff around self-service payments, highly secure payments where you can do Apple Pay, 100% self-service, those kinds of things, PCI compliance through a voice bot, dealing with an agent if there's a problem in the payment, those kinds of things. Those solutions really, really, really across the board horizontally high demand for. Oh, other question you were asking today was about agent counts. Okay. I get asked this question a lot and I'm going to tell you a little bit of what I see and a little bit of what I think.

Samuel Wilson
Chief Executive Officer at 8x8

What I see is it's hard to see. I mean people just ask us for X number of agents for contact center, how many of our agents they have, etcetera. And so in real time today, do I see AI replacing agents here, there and everywhere? And a few select cases, sure, but nothing major, no big trend. I absolutely believe that AI will replace some agent capability over time.

Samuel Wilson
Chief Executive Officer at 8x8

It's what technology has done well my entire career, which is to replace human labor with machines effectively. And I absolutely think that's been the case. However, the reason we've built the company the way we have is our average revenue per customer at the places they deploy AI, at the places they deploy these next generation technologies is actually up substantially even if our let's say our per seat count is flat to even down a few.

Chad Tevebaugh
Chad Tevebaugh
Equity Research Senior Associate at Mizuho Financial Group

That's super helpful. I'll pass it on. Thank you.

Operator

Thanks, Chad. Thank you. Our next question is from the line of Peter Levine with Evercore.

Peter Levine
Managing Director at Evercore ISI

Thanks guys for taking my questions. A few maybe I'll start with you, Kev. Your last question around the margin outlook for fiscal twenty twenty six, calendar '20 '20 '6, sorry, would be lower given some of the strategic opportunities you guys are investing from on the go to market front. Can you maybe just maybe help us understand like what that translates to the top line? Like is there a calculated ROI that you're expecting?

Peter Levine
Managing Director at Evercore ISI

And then can you maybe just caveat that with what you think that will translate to growth?

Samuel Wilson
Chief Executive Officer at 8x8

Yes. So I'll take the first part of that, Kevin will put in some finer points. Because to be fair, I'm going to dodge part of your question because I really don't want to give guidance out an entire year in front of when I'm supposed to. And also it's not quite as clean as maybe it looks in a spreadsheet. So do we have an ROI to our operating income investments or operating investments?

Samuel Wilson
Chief Executive Officer at 8x8

Absolutely. Am I going to share that with you? No, I am not. Because if I share with you, I'm sharing it with every competitor currently listening on this call right now and I'm not doing that. I'm not a nice guy.

Samuel Wilson
Chief Executive Officer at 8x8

And so what I'll tell you is, yes, there's a calculation. We monitor it very carefully. The hard part and I know you have a ton of experience with this, Peter, is the timing variable, timing aspect of the investments is always the difficult thing for the financial model and sort of what we're going through, right? So if you go back in time, if you go back to fiscal twenty twenty three and 2024, we really focused on ramping up cash flows, paying off debt. We paid off 35% of the debt.

Samuel Wilson
Chief Executive Officer at 8x8

We've made 10 separate payments to pay off debt, we've really been focused on that. I am our EBITDA to net debt ratio is fine, the banks are happy, everyone's happy. And so we're really focused now getting kind of back on offense and driving more growth and we are making selective investments, definitely the right thing to do given the market opportunity, our competitive position, really impressed where the innovation is right now, those kinds of things. How quickly and exactly to three decimal places that much sales or bookings or revenue that will lead, we'll keep that internal to us right now. Kevin, anything you want to add about it?

Samuel Wilson
Chief Executive Officer at 8x8

Yes.

Kevin Kraus
Chief Financial Officer at 8x8

I will say that it's not just about investment and we're doing various things, but we're also focused on improving the efficiency of our investments as well. So yes, we're going to do more things, which we won't divulge in the call as Sam said, but we're also focused on our operational excellence internally in the company. So that is also another lever for growth over the long term. So that's the color. Yes.

Samuel Wilson
Chief Executive Officer at 8x8

And actually Kevin raises a really great point, just to put a five point out. We are investing in AI to use internally. I think we tend to see getting these calls get viewed as a company that sells AI, which we absolutely do across the platform growing very rapidly. We're also buyer of AI to actually improve how we provide CX, how we engage with the customer, how efficient we can be internally. That's some investments we're making internally to our company also and that cost us a few dollars.

Peter Levine
Managing Director at Evercore ISI

Great for the color. Last question, Dan, you mentioned in your remarks like customers of three products versus customers of two, the uplift to the ARR number. I forgot like the exact metric you said, but can you maybe talk about like what products are they buying? Meaning like what's driving that massive uptick from like two to three product customers? And then maybe just outline a little bit like what is that

Samuel Wilson
Chief Executive Officer at 8x8

hyperbolic product and Yes, no problem. So, I think what exactly what I said was, if you look at the cohort of customers that have two products and the cohort of customers that have three products, the cohort of customers that have three products is The

Kate Patterson
Vice President, Investor Relations at 8x8

average deal size is three times as large.

Samuel Wilson
Chief Executive Officer at 8x8

The average deal size is three times as large. So it sort of translates. Okay, what do they buy? I'd love to tell you it's really simple. I'm going to put in a couple of buckets.

Samuel Wilson
Chief Executive Officer at 8x8

What really works is when you sell on business outcomes and you do some of those things, you start to see get these it's easier to cross sell products. So they almost all have UC and CC in sort of bucket categories. After that, the key add ons in my mind are Engage, which is kind of a contact center for not agents, fantastic product, proactive outreach or digital messaging of all sorts and kinds and shapes, and the bots, the intelligent assistants, voice and digital bots. And then of course there's workforce management, there's all kinds of other little odds and ends. But those are, I'd say, the big three.

Samuel Wilson
Chief Executive Officer at 8x8

I think what's key though, I really want you to think about is, it's really about solving customer problems and the use cases associated with it. If we do something like field service management, we end up selling digital messaging, we sell a bot, we sell video elevation, the contact center, we sell contact center, we sell UC, we sell Engage. They rapidly turn into multi product customers very quickly. And it's just a nice way to wrap up solving the customer problems. I think the thing I want to leave you with is when we sell those multiple products, of course, we get a higher GRR, we get a higher NRR, financial numbers are better.

Samuel Wilson
Chief Executive Officer at 8x8

But really it's about we solve customer problems better. And when we solve customer problems better, everything else sort of takes care of itself.

Peter Levine
Managing Director at Evercore ISI

Thank you guys.

Kevin Kraus
Chief Financial Officer at 8x8

Thank you.

Operator

Thank you. Our next question is from the line of Catharine Trebnick with Rosenblatt. Please proceed.

Catharine Trebnick
Senior Research Analyst at Rosenblatt Securities

Hi. Thanks for taking my question. Sam, have you tweaked the go to market at all? You've done really well with the three products versus the two. Anything else we should look at that you fine tune in terms of your partners or your go to market motions or what your messaging is in the channel?

Catharine Trebnick
Senior Research Analyst at Rosenblatt Securities

Thanks.

Samuel Wilson
Chief Executive Officer at 8x8

Catherine, that's such a loaded question because I know what I think what you're getting at. Yes. There was a couple of things we're doing overall. Number one is, yes, we continue to evolve our sales organization. If you guys are regular purveyors of LinkedIn, you will see that some people have come and gone from our company over time for various reasons.

Samuel Wilson
Chief Executive Officer at 8x8

A lot of that is driven by the fact that we're looking more for consultative solution sellers versus to use industry vernacular circuit slingers etcetera. So that continues to evolve. I cannot speak highly enough about the work the marketing department has done around rebranding and really branding us as a CX company. And the thing is, it's not just paint on the outside of an old building. This really is as we've launched the products and as we have these solutions, we are a CX company.

Samuel Wilson
Chief Executive Officer at 8x8

And this is about highlighting what we truly are to the marketplace that will continue to evolve as we drive more sort of capabilities around that, etcetera. And then on the partner side, I think that's more of an evolution. We continue to invest in our partners. We are a channel centric company. We do a majority of our business through channels.

Samuel Wilson
Chief Executive Officer at 8x8

And so I mean, majority of our new business through channels to be fair. And so we'll continue to do that and we continue to evolve in terms of the right tools and capabilities and those kinds of things to support our channel partners and their success.

Catharine Trebnick
Senior Research Analyst at Rosenblatt Securities

All right. And then you added a transformational leader to the team and any organization that he specifically look at in detail. Can you give us some details on that?

Samuel Wilson
Chief Executive Officer at 8x8

Yes. So I had a chance, I've known Joel for several years now. And so if you're familiar with Joel's work, I'm just going to assume for everybody for a second you're familiar with Joel's work and try to fill in what he does. But he is a phenomenal leader. He's a former military guy like me, so we speak a common language.

Samuel Wilson
Chief Executive Officer at 8x8

But the big thing for me is he brings a lot of AI skills and capabilities into the company. And this is about using intelligence artificial intelligence inside of ourselves to drive more insights and better decision making inside of our company. And Joel is really heading that up to transform as a company how we deliver our products and services, how we build our products and services to our customers, super important. And Kate pinged me, but I should use this forum because it's the right thing to do. I'd really like to call out Michelle Padich for being recognized as a channel chief by CRM Magazine.

Samuel Wilson
Chief Executive Officer at 8x8

She is phenomenal. And so as Kate pings me, I get a chance to use your question to highlight what a wonderful channel chief she is.

Catharine Trebnick
Senior Research Analyst at Rosenblatt Securities

Yes, I know. She started last year. I think I met her at Channel Partners. Thanks.

Samuel Wilson
Chief Executive Officer at 8x8

Yes, she came to us I think from Twilio, if memory serves me, where I hired her out of and she's been absolutely phenomenal for us as a channel team.

Catharine Trebnick
Senior Research Analyst at Rosenblatt Securities

All right. Thanks, Sam.

Samuel Wilson
Chief Executive Officer at 8x8

Thank you. For all the competitors, you can't hire or that's a no.

Operator

Thank you. And our next question is from Meta Marshall with Morgan Stanley. Please proceed.

Meta Marshall
Meta Marshall
Managing Director at Morgan Stanley

Great. Thanks. Maybe first, you commented on CPaaS being strong internationally. Just wanted to get a sense of kind of traction that you were getting in The U. S.

Meta Marshall
Meta Marshall
Managing Director at Morgan Stanley

Or where you were kind of finding markets that were more attractive there? And then second, over time, you've commented on kind of customers wanting more kind of a la carte kind of packages put together. Just wondering if you're kind of seeing any consistency form around like whether people want more consumption based pricing or whether they're kind of want a la carte or whether we'll stick to this kind of per seat model that we've been in. That's it.

Samuel Wilson
Chief Executive Officer at 8x8

Okay. So, Meta, thank you for the question. So yes, so last quarter, the quarter before we announced proactive outreach in The United States, we've got our first customers. These are regular CPaaS as customers in The United States now. We're still having a few growing pains as we ramp our CPaaS business in The United States, but I'm pretty happy where it's at.

Samuel Wilson
Chief Executive Officer at 8x8

And this is regular SMS, WhatsApp, voice, all those kinds of capabilities in The U. S. Still really small. I mean, it's not a huge number of customers, but we've got them, the bugs are working out, they're happy, they're referenceable, good CSAT scores, those kinds of things. So steps in the right direction.

Samuel Wilson
Chief Executive Officer at 8x8

In terms of the evolution of pricing and packaging, it's a great question and it's certainly one that we spend a lot of time thinking about. I fundamentally believe if you look at a lot of the AI technologies and even the CPaaS technologies, these are all sold on a consumption basis, right? So if you look at how OpenAI can charge some stuff, we charge for tokenization. For our bots, we charge per interaction. For digital messaging, we charge per message, those kinds of things.

Samuel Wilson
Chief Executive Officer at 8x8

I think certainly those types of pricing models will continue to grow. I'm not sure that it'll ever work on sort of a per agent basis. I know that some people have tried contact center on a per interaction basis and the feedback I've heard from customers is pretty universally negative. And so there is some fine line there. I think the key is building the products and the underlying systems that can kind of support a multitude of models that meet the customer where they are, not where we want them to be, if that makes any sense.

Meta Marshall
Meta Marshall
Managing Director at Morgan Stanley

Yes. No, that makes sense. Appreciate it.

Samuel Wilson
Chief Executive Officer at 8x8

Thank you, Amitabh.

Operator

Thank you. One moment for our next question, please. And it's from the line of Ryan McWilliams with Barclays. Please proceed.

Samuel Wilson
Chief Executive Officer at 8x8

Hey, Ryan.

Ryan Mcwilliams
Ryan Mcwilliams
Analyst at Barclays Capital

Hey, Sam. And Sam, for the record for an earlier question, I think you're a nice guy. You're going to play yourself short. Just on the macro since the election, any differences by smaller or larger customers since the presidential election or any differences by geo in terms of customer purchasing?

Samuel Wilson
Chief Executive Officer at 8x8

It's funny you asked me this. I was hoping I wasn't going to get this question. And the reason I was hoping I was going to get this question is I don't have a good answer right this second. So let me tell you a bit of what we're seeing and you guys can be smarter than me and draw some conclusions. If you look at 2024, I think there was a record number of at fourteen year higher than the number of bankruptcies in The United States, sorry, not a record because 02/2008 probably was the record, but fourteen year higher than the number of bankruptcies.

Samuel Wilson
Chief Executive Officer at 8x8

And we have seen some customers have to move to things like cash revenue recognition because they're currently going through bankruptcy proceedings and those kinds of things. So it's not like we're untouched. It's not a material number. I'm not phased by it, but it's clearly what I think. Now on the other hand, I've talked about this in the past is one of the numbers I use is our credit card default rates as a really sensitive indicator that there's something going on in the small business base and sort of those basic mom and pop economics.

Samuel Wilson
Chief Executive Officer at 8x8

And so far there it's been steady as she goes. No real unusual stuff around credit card default rates, etcetera. So it feels like the interest rate stuff that the Fed did bit a little bit, but a bit in larger businesses, maybe because they were more indebted, more sensitive interest rates than some of the smaller businesses, which are probably more cash driven. And so I'd say it's a bit of a tale of two cities, hence the reason I really didn't want the question. In the European markets, we see a little bit more selectivity by specific verticals.

Samuel Wilson
Chief Executive Officer at 8x8

So for example, in The UK, some state and local has seen a reduction in spending, while NHS has seen an increase in spending, those kinds of things. And so I think it's a little bit of vertical by vertical. And in The U. S, I think it's a little bit large versus small. That's my best guess.

Kevin Kraus
Chief Financial Officer at 8x8

Just a quick point of clarification on credit card. We are talking about decline rates from our customers. We got a lot of credit card customers. It's not the default rate of the industry. Sorry.

Samuel Wilson
Chief Executive Officer at 8x8

The credit card, yes, the ones where they turn off the credit cards. Yes.

Ryan Mcwilliams
Ryan Mcwilliams
Analyst at Barclays Capital

No, I appreciate that color.

Ryan Mcwilliams
Ryan Mcwilliams
Analyst at Barclays Capital

And then Sam, how do

Ryan Mcwilliams
Ryan Mcwilliams
Analyst at Barclays Capital

you view Salesforce as a potential partner and competitor in the customer service space?

Ryan Mcwilliams
Ryan Mcwilliams
Analyst at Barclays Capital

Like do you think that

Samuel Wilson
Chief Executive Officer at 8x8

is Well, I'm currently on the Fifth Floor and Salesforce is on the First Floor right now. So they're a partner. They're a really good partner of ours.

Ryan Mcwilliams
Ryan Mcwilliams
Analyst at Barclays Capital

Yes, but do you like to

Ryan Mcwilliams
Ryan Mcwilliams
Analyst at Barclays Capital

pull Do you

Ryan Mcwilliams
Ryan Mcwilliams
Analyst at Barclays Capital

just pull them inside each other? Or okay. Like if you can elaborate on that, like how that would work with Agent Force?

Samuel Wilson
Chief Executive Officer at 8x8

Well, I don't want to reveal any future products, knock on wood, but those are technologies we're looking at, Agent Force, etcetera. We're a large sales force customer and partner. We use them extensively for things like our communities that we deal with customers and those kinds of things. And so I view Salesforce as a great partner and would like to do more with them in the future. I don't really view them as a competitor.

Ryan Mcwilliams
Ryan Mcwilliams
Analyst at Barclays Capital

Thanks, caller. Thanks, guys.

Samuel Wilson
Chief Executive Officer at 8x8

Thank you.

Operator

Thank you so much. Our next question comes from the line of Michael Funk with Bank of America. Please proceed.

Michael Funk
Michael Funk
SVP at Bank of America

Hey, good evening guys. Thank you for the questions. First one is a clarification. So of the 200 basis point reduction in FEWS, percentage of revenue going from 7% to 5%, how much of that migrated over to your core platform? Was that all lost?

Kevin Kraus
Chief Financial Officer at 8x8

Some migrated. We do have a component of that that gets lost and there's timing effects as well on that, Michael. So the average I'll say the average over time that we keep is 60 plus percent of our views base revenue. So that's kind of where we've been, where we expect to be.

Samuel Wilson
Chief Executive Officer at 8x8

And let me put a finer point on that because 60% sounds like a terrible number and you guys are freak out. So let me put a finer point on that. What we see typically with Fuse customers is we see a step down when we migrate them and then their NRR is substantially above corporate average. So what generally ends up happening is they're going through a redeployment process. So they'll shrink it down to a smaller size, whatever they need, and then they start adding back in really rapidly.

Samuel Wilson
Chief Executive Officer at 8x8

And it's not like we're losing 40% of the revenue to fuse overnight.

Kevin Kraus
Chief Financial Officer at 8x8

And the other thing is, to add to that, when we do that, we often and almost always extend the life of extend the contract. So we keep that customer for longer. So in the long term, it's a better deal for 8x8.

Michael Funk
Michael Funk
SVP at Bank of America

Got it. No, thank you. Second one is for you, Sam, more philosophical. So the market is saying one thing, if we look at the free cash flow multiple, look at EV to EBITDA, it seems to me very different than what you are about stabilizing top line, seems to me very different than the improvement in free cash flow, cash operating activity. Same thing very different what I'm forecasting my own model.

Michael Funk
Michael Funk
SVP at Bank of America

So how are you thinking about addressing that number of levers you could pull, I guess, right? I mean, stock repurchase, strategic review. So how do you think about addressing what the market is telling us in your valuation, whether free cash flow or EBITDA and what you believe and I believe is the likely outcome?

Samuel Wilson
Chief Executive Officer at 8x8

Well, it's interesting, Michael, you bring this up, right? So there's obviously I having spent much time on Wall Street also, I can make some comments about Wall Street's predictive capabilities sometimes. But let me take a step back. I think at a very basic level, I've tried to be really crystal clear with investors. Our North Star was cash flow from operations per share.

Samuel Wilson
Chief Executive Officer at 8x8

And the reason I think about it that way is it's the cash flow that we generate per equity holder. And I think that is if you think about Graham and Dodd and the discounted cash flow and the present value of a business is the sum of its future cash flows, it's a very pure way to think about how a company should operate and the optionality of a company during uncertain times. So let me further elaborate on that a bit. If you go back two years when I started making the comments that that's our metrics, we've obviously done a lot of things. We've driven a lot of cash flow, a record quarter for cash flow from operations.

Samuel Wilson
Chief Executive Officer at 8x8

Our stock based compensation is 5.3% of revenue, which I think is one third industry averages or our competitors or those kinds of things. And so we're very focused. You see it in the fact that some of my competitors have seen declining shareholder equity, shareholder equity, while I've seen increasing shareholder equity. So what I'm trying to drive is the right thing. Now is the market rewarding me at any given moment, maybe yes, maybe no.

Samuel Wilson
Chief Executive Officer at 8x8

But what that does and I want to take this back into the market environment we've been in. What cash flow does is it buys me the maximum amount of optionality to run this business. I can invest in product development. I can buy other companies. I can buy my own equity.

Samuel Wilson
Chief Executive Officer at 8x8

I continue to pay off debt, which is primarily what I've chosen to do with all that excess cash flow is reduce the debt, thereby further reducing the risk of the company and actually if enterprise value stays unchanged, driving more value of those future cash flows to our equity holders. So what I've really thought about is the market we've been in coming out of COVID is one of increased risk, increased competition, startups, what's going to happen, AI, what's the future. Let's really focus on de risking the company from a have a fortress balance sheet, drive cash flow, get debt out, etcetera. Let's invest in the right areas in innovation and those kinds of things. Now as we look to the future, right, the company's massively reduced the amount of debt it has, it's massively reduced its leverage ratios, etcetera.

Samuel Wilson
Chief Executive Officer at 8x8

It's much less risky. The innovation we've produced has these incredible green shoots in my eyes. What are those green shoots? We invested in it. We built it.

Samuel Wilson
Chief Executive Officer at 8x8

It works. We have product market fit and we're now ramping. And so it's actually okay to take some of that cash flow and now pour it back into growing revenues and growing future cash flows via revenue and those kinds of things. Your last part of your question is, is Wall Street going to reward me for this? I think at some point they'll recognize it, they'll get around to it, they'll figure it out.

Samuel Wilson
Chief Executive Officer at 8x8

That's the hard part. I always go back to what Ben Graham said to Congress, right? When Congress asked Ben Graham, how does he know stocks are going to go up when they have these type of characteristics, he said just because they do. And so what I go back to is the fact that the Street will reward us at some point, our stock, our capabilities, when they realize that owning a share of 8x8 is an incredibly valuable asset, it's going to get you a stream of future cash flows, it gets you a very profitable business and it gets you all the right things that you want in the characteristic of an equity holder. My simple answer.

Michael Funk
Michael Funk
SVP at Bank of America

Very thorough. Thank you for that, Sam. And thank you again, Kevin, for the clarification on the migration.

Samuel Wilson
Chief Executive Officer at 8x8

Thank you. Thanks.

Operator

Thank you. One moment for our next question, please. And it's from the line of Michael Turrin with Wells Fargo. Please proceed.

Richard Poland
Richard Poland
Analyst at Wells Fargo

Hi, this is Richard Pollard on for Michael. Thanks for taking my question. So you noted the potential expanded range of near term outcomes around FEWS, and you gave kind of the breadcrumb there around that 60%. Could you expand on what you hear from that base as they're going through that decision making process? And what's kind of like the biggest pushback that you have to shifting over to the 8x8 platform?

Richard Poland
Richard Poland
Analyst at Wells Fargo

Any color around that would be helpful.

Samuel Wilson
Chief Executive Officer at 8x8

Yes, I think it's just been so we're down to I think maybe around 100 customers left to migrate and five it's only 5% of our revenue, you guys can do to track it. So it's coming down. Those last 5%, not a don't want to make the effort to move, not ready for it, can we holding out for an extra price discount, will you take me to a sports game if I promise to migrate, it could be any of those things, right? So I really it's really just the dogs and cats that are at the end. We are and we'll get through this committed to migrating every single upgrading every single customer onto the 8x8 platform.

Samuel Wilson
Chief Executive Officer at 8x8

And the most interesting is once they're there, they're incredibly happy. They have a full portfolio of new and exciting products and they're buying those once they get there. So it's really just a blocking and tackling of getting those last customers to move there. And don't over rotate on the 60% number. It just happens to be there's timing and pieces, etcetera, how to think about it.

Samuel Wilson
Chief Executive Officer at 8x8

And so I think Kevin just wants to be really sort of specific about it.

Richard Poland
Richard Poland
Analyst at Wells Fargo

Okay, great. That's super helpful. And then just another one from me. I understand not wanting to divulge too much around the ROI of some of those accelerated investments next year. But I guess is there any specific growth opportunities that you've kind of identified that you really want to go after?

Richard Poland
Richard Poland
Analyst at Wells Fargo

Or is it just more generalized, hey, our foundations are in their place, we see potential to drive more growth going forward, so we're going to tap into

Samuel Wilson
Chief Executive Officer at 8x8

that. Okay. So I don't know how to invest in number two that you listed. I don't do general investments across whatever, right? We invest on specific projects with specific defined outcomes.

Samuel Wilson
Chief Executive Officer at 8x8

That is absolutely the case. I absolutely see opportunities in front of us to make those investments and get compelling ROI, which then drives future cash flows and then go back to Michael's answer I gave a couple of minutes ago. Okay, great. Appreciate it. Thanks, Rich.

Operator

Thank you so much. And as I see no further questions in queue, I will turn the call back to Samuel Wilson for final remarks.

Samuel Wilson
Chief Executive Officer at 8x8

Thank you so much, operator, and thank you for a fantastic call today. In summary, the third quarter was a solid quarter for 8x8. While the market dynamics remain challenging, we continue to face headwinds as our transition of Fuze customers to the 8x8 platform, our focus on disciplined execution, strategic differentiation, operational excellence positions us well exceptionally well for the future. We're committed to delivering value to our customers, our partners, our shareholders as we drive innovation and transform business communications into intelligent customer experiences. And lastly, thank you to you, the analysts who are on the call.

Samuel Wilson
Chief Executive Officer at 8x8

Thank you to our investors and thank you to my employees. I love each and every one of you. Thank you for your continued support.

Operator

And thank you. And with that, we conclude today's conference call. Thank you all for participating and you may now disconnect.

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8X8 Q3 2025
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