Conference Transcript - EGHT 2026-06-02

Operator

for those on the webcasts um thank you for tuning in with me today is uh kevin krauss the cfo of eight by eight uh kevin thank you for being here with us thank you peter appreciate the opportunity to speak today no no it's been uh it's been an interesting market for you guys especially on the in the ucast ecast world there's been a lot of convergence in terms of you know consolidated platform i think you guys have done a pretty incredible job building out I think organically, mostly, the full stack. You know, prepared questions, but maybe one of the first questions I have is maybe just give us a highlight of where this market is going, what you guys have built, and then with AI, where do you see this market in the next 12 to 24 months?

Kevin Kraus, CFO

Sure, yeah. So just at a high level for the people who might not know much about us, we are a UCAS, CCAS communication API company and we've got some significant AI products that have been developed that are out and that are coming out so we're one of the few players out there that have all of those packaged let's say into a full platform are pretty unique in that regard so to your question about where the markets going we see this convergence of all of these technologies into a single platform which we built natively like you said we do have technology partners but we've built out we've made investments in innovation we've built out a pretty robust product portfolio so we can offer a lot of different products to our customers and solutions the focus there for us is we like to build our multi-product customer base so we look at multi-product customers which has grown 16% year on year and they become stickier customers we're able to serve them better they're happier customers their customers are happier so our whole focus has been addressing all of the communications needs on a single platform and we compete very well because we're able to offer all of these things where you know we're able to consolidate in a competitive situation we're able to consolidate one of our customers they might be buying things from two or three other vendors and they consolidate into us that has happened and it does happen each quarter so that's that's where we that's where we're focused and a and the voice infrastructure is another very very important thing about what we do you know contact centers and AI agents in particular they rely on the voice infrastructure so our contact center platform enables all of that we can synthesize customer interactions capture the conversations and work with all that data natively on our platform I think

Operator

I'm on the call your call a couple weeks ago Sam kind of called out like this was a turn, it's 2026, I guess fiscal 26 was a turning point for you guys, four consecutive quarters of accelerating growth, you hit gap profitability for the first time I think since 2015. So if I take a step back, what's the next leg of, what's the journey look like? Is it stabilizing growth at where it is low single digits or is there a path towards re-acceleration? Maybe just walk us through what the journey looks like and where you guys are, what you

Kevin Kraus, CFO

we're targeting sure we're and we're we're in in the midst of a multi-year journey okay so we've had 21 consecutive quarters of positive cash flow at this point positive non-gap operating income non-gap net income is up 19% year over year so what we've done as a company is we focused on operating discipline debt pay down our debt interest expense the cash paid for debt interest has gone down something like 51% over the last two years so that you know it's a big reason why our net income has grown and the focus has been on investing in areas that we know will provide a return so we mentioned the AI products and things like that we're focused on operating discipline and profit and cash flow sustainability. Not necessarily the highest revenue growth trajectory. So that's reflected actually in our fiscal 27 guidance because we've, you know, kind of deliberately ran a conservative model on the top line, but our focus to continue delivering the operating profit and the cash flow is still there. So over time, we think that we're going to be, look, our focus is on double digits. We've got a 9% to 10% non-GAAP operating income. Our focus is on double digit and then growth from there. At this moment, we're transitioning into a revenue mix that's more usage-based, particularly around AI products. So that's harder to forecast. And we mentioned this on our earnings call. You heard that from Sam and me. We're not necessarily leaning forward because it's harder for even our own customers to understand how much consumption they're going to have. So that's a little bit harder to predict in the near term, but we do have good traction there. And the usage revenue is reflected because it's gone up 70. It was going Q4 up 70 percent year on year, up 50 percent for the full year, year on year. So I look at this as kind of, we still have a little bit of the revenue headwinds too from Fuse for the first three quarters because we transitioned all those customers out by our fiscal fourth quarter. So I look at this as a double digit profitability and then growing from there over time. And then of course the revenue growth and

Operator

getting the the you know better margins out of that revenue good you know maybe to that point you know 70% up I mean usage was up 70% I think 20 and 23% now of service revenue versus 14% last year yes so maybe like what's the account sustainable is that pace of growth and then second is you know we on the call we talked about the ability of revenue as you change to the pricing model like how are you predicting growth this year and then what's the sustainability of that growth and I guess what your customers are talking or coming back to

Kevin Kraus, CFO

with? I think that if you're talking about usage specifically, I think the usage revenue growth is durable. A lot of that growth came from our APAC, our CPaaS product APIs, which is most of our usage revenue now, but there's a lot of new things coming out. And that's all AI, you know, CPaaS products have a lot of AI-driven product in that, too. But we have new products coming out that are really exciting for us. AI Studio is an example, where it's a native agentic AI agent developer that can be programmed using natural language. That's showing early, I mean, it's brand new, but it's showing very early pickup. Not material revenue yet, but it's something that we believe in. So I think it's pretty durable, and the one thing I would say is the customers that we see buying our usage-based products, it's a pretty, if you measure NRR, it's not necessarily committed usage, but if you look at it, it doesn't toggle on and off just because it's uncommitted usage. So we see in certain areas of our company, APAC particularly, like the net revenue retention of these customers is very high. So I feel very comfortable and confident in that revenue stream. And we believe that that's the way the market is going, and we're following that market. One of the other things that we're working on, and one thing I want to point out from a financial perspective, is that while that margin profile might be a little bit lower at the gross margin level, it can really inflect up and deliver the dollars. okay so and and that particular you know your usage revenue generally for us would have a very light OpEx component so a lot more of that revenue the OpEx is relatively light relative to the subscription based revenue that we have so a lot of those dollars more of those dollars can drop to the bottom line as as that part of the business scales there's specific dynamics to the APAC

Operator

customer is it a vertical customer size that you think can replicate here in the

Kevin Kraus, CFO

US that's maybe lagging the terms of adoption I think that the I think that we can have customer sizes like enterprise customers in the US that are docked if you're doing about see past products specifically the communication APIs. One thing we can do is we can expand that more geographically. I mean, it's APAC focused, but we do a lot of that revenue in the UK now, and we can bring it to other GOs for better margins. Other usage-based products, we see this delivery, our ability to sell it, I think, pretty much everywhere. We're starting out strong in North America and the UK right now for what we're doing. And we see very, very healthy interest levels. We've given some products away for free, and they're just being snatched up. And now we're starting to see customers turn over into paying customers very, very quickly. It's only the very, very beginning of that. But it's happened very quickly in a matter of weeks. And so I'm very obviously happy to see that. for our company. And that's the type of go-to-market, that's the type of product that people want, that customers want. They want to be able to consume and pay for what they use. And we see that potentially having a pretty huge uptake

Operator

for us. What are you seeing in terms of replacement then? Like you're adapting more of your products, or who are they replacing, and then where's the budget coming from, or call it the incremental spend? From our customers? Well I think

Kevin Kraus, CFO

that there could be, and I can talk about that from the standpoint of internal efficiencies that we're seeing from the use of AI products ourselves. So we use AI, in my group, in G&A, uses AI to improve efficiency. So in our own company, we have used AI to get cheaper ways to land the customer to source pipeline to service the customer all through the use of agentic agents and so forth so I think that other company and we have that we can we can achieve savings elsewhere or just do more revenue and I think other companies can do the same thing they may spend more with us but they could be saving elsewhere in their organization so I think that companies as they go through this evolution of how to deploy AI internally in their own organizations will find pockets of costs that they can take out or optimize in

Operator

order to do their work more efficiently. We talked about the pricing model you know one of the big debates in this market is especially on the on the CCAS side is you know agents are gonna replace AI agents will replace the live human agents but I think on your last two calls I think Sam and maybe you as well talked about an uptick in actually sea growth on the contact center side.

Kevin Kraus, CFO

Yeah, exactly. The seats are up year on year for us. And I think that there's a bit of a misconception there among some people who may not know how contact centers, all the inner workings of a contact center. I mean, you need, most people communicate through voice, whether it's an AI agent or a human you still need the the infrastructure to handle those communications and the transactions so you need I'll express it in simple terms that are probably the wrong words but you need a place to package it store it analyze it pass it along to the next person in the organization who's working in the contact center use a product like engage that eight by eight cells that goes beyond the contact center, but it has contact center-like capabilities, and the people are all connected, and the information and intelligence can transfer from person to person within the organization. That requires the infrastructure, and that's the CCAS seat. So AI is actually complementary to what we're doing. It's not necessarily a replacement for a seat. So we haven't seen the degradation in seat count in our company. We had year-over-year seat growth for contact center seats. And AI, getting back to your earlier question about what are they going to do, where's the budget going to come from, I mean, there's ways to make their support organizations for their customers more efficient and combine the seat count with AI. So I look at it as really complementary to what we're doing, and we haven't seen this degradation. The voice network, the carrier networks that we operate in still need to be there. And so this is a very important point to make when you talk about AI not eating the contact center software. Agents have become revenue generators versus call centers. Yeah, and we're doing it too. You know, I mean, we have people in the customer support organization that can upsell and things like that. And by the way, getting back to the point about AI agents and so forth, the next, Sam likes to say, the next billion phone numbers might be to an AI agent, but they still need the voice infrastructure to work on and the platform. So, again, AI, I think, is complementary to what we do.

Operator

If there are any questions for the audience, feel free to jump in, and I think we have time for one more, which is, I guess, maybe let's talk about the competitive environment You know, maybe on the CCAS side, you have 5.9, you have Zoom, you have AWS Connects. Just help us understand what differentiates your products, your data, your AI from some of these other vendors, and then on the CCAS side, the core voice, what do you see going on there competitively?

Kevin Kraus, CFO

Sure, I think, you know, for us, so like I mentioned earlier that we see, first of all, I think for us, it's the ability to sell a lot of different capability from one vendor, us, okay? There's examples, we may have given it in the shareholder letter, with the healthcare companies that we've, you know, displaced six other vendors with our solutions, and there was another example in an insurance company and so forth. So we have a differentiation there. We've, you know, I'll toot the horn of the company, I guess, a little bit. I mean, we've won a lot of awards. We've been in UCAS, Gartner Magic Quadrant, like 14 times, CCAS 10 times. We just won best from critical capability award, number one, with CCAS integrated with UCAS from Gartner. And there's been some Forrester awards and things like that. So we are known as a company that has great capabilities to integrate a lot of different functionalities for good customer experience and good customer outcomes. So I think that's a big differentiator for us. There are other companies out there that may be entirely focused. You mentioned some of the names. They're entirely focused on CCAS only. So we have more than what they can do. And we can do a lot of things natively and to the earlier point at the beginning of the conversation around, you know, we've had technology partners that we've used in the past that we could do things that have a native look and feel. But again, I think we're developing a lot of stuff internally now using our own AI capabilities, like AI Studios is a good example, where customers can configure their own agents and things like that are going to, I believe, become very popular for us.

Operator

Maybe in 30 seconds to last, what's your pitch to investors today, where the stock is, the performance you put up in Q4, the guide for the fiscal 27? What's your message to investors?

Kevin Kraus, CFO

Well, my message is, look, we've for years now, we've been focused on operating discipline and we've we've put up, you know, we've put out our guidance. We've met our guidance with very, very few exceptions in the recent years. We've delivered cash flow 21 quarters in a row now. We've delivered positive non-gap op income. So the trajectory that we're on is very good. And we continue to execute with discipline to generate the value, pay down the debt, and that creates opportunities for us. The opportunities to do a small acquisition, which we've done a couple of those recently, and continue to build our company. So this is a long-term plan for us to focus on building the value through executing with discipline, and then hopefully the shareholders will see the value in that over time. Perfect. All right, Kevin, thank you very much for your time. Thank you, Peter. Appreciate it.