Good day, and welcome to the Q4 2024 8x8, Inc Earnings Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question, please press star one, one. As a reminder, this call may be recorded. I would like to turn the call over to Kate Patterson. Please go ahead. Good afternoon, everyone. Today's agenda will include a review of our fourth quarter and fiscal 2024 results with Samuel Wilson, our Chief Executive Officer, and Kevin Kraus, 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 our future financial performance, including our investments in innovation and our focus on profitability and cash flow, as well as statements regarding our business, products, and growth strategies. 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 report 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 obligation to update them. Certain financial measures that will be discussed on this call, together with year-over-year comparisons in some cases, were not prepared in accordance with U.S. generally accepted accounting principles or GAAP. A reconciliation of those non-GAAP measures to the closest comparable GAAP measure is provided in our earnings release and in our earnings presentation slides, which are available on 8x8's Investor Relations website at investors.8x8.com. With that, I will turn the call over to our CEO, Sam Wilson. Good afternoon, everyone. I appreciate you joining us today as we discuss our fourth quarter and our fiscal 2024 results, and the strategic initiatives that have defined a year of transformation for 8x8. I'm pleased to report solid fourth quarter, in which we delivered results within our guidance range for service and total revenue, and once again, exceeded our guidance for operating margin. Cash flow from operations for the quarter was also better than anticipated, which resulted in cash flow for the year of 62% from fiscal 2023. This significantly exceeded our expectations for the year. We ended the quarter with about $118 million in cash, restricted cash, and investments after repaying the remaining $63 million of 2024 notes. Since Kevin will review the quarter's financial results in detail, I will focus my comments on the progress we've made on our transformation journey. This year has been nothing short of incredible from both a professional and personal perspective. We've strengthened our leadership team, expanded our product portfolio, and continue to build on our strong financial foundation. A year ago, I outlined a strategic framework with six key imperatives aligned with the three pillars of our transformation strategy: innovation, financial strength, and go-to-market. I'm pleased to report that we are executing well against each of these strategic imperatives. They include, one, accelerating innovation in contact center as a service, CCaaS, while maintaining our leadership in cloud telephony. This includes embedding artificial intelligence across our integrated platform. Two, establishing communications platform as a service, CPaaS, leadership in the Asia Pacific region. Three, increasing our focus on small and mid-sized enterprises as our target customer segment. Four, improving platform win rates and sales productivity. Five, maintaining an outstanding experience for our customers, allowing them to focus on their own core businesses. And lastly, Six, increasing profitability and cash flow to drive a fortress balance sheet and fund further innovation. Although our journey has not always been perfectly linear, we are undoubtedly stronger and better positioned financially as we exit fiscal 2024 compared to the end of fiscal 2023. This year has been pivotal in terms of innovation. We've introduced several new products that not only differentiated our offerings, but also positioned us for future growth. These new products, as well as platform enhancements like the Customer Interaction Data Platform, composable user interfaces, and the integrated solutions from our Technology Partner Ecosystem, are intentionally engineered to deliver superior business outcomes without the heavy integration burden typically required to build an AI-enabled contact center. The introduction of our Engage solution extends our customer experience capabilities beyond the traditional boundaries of the contact center and is one of just many examples of how we're leading innovation in an industry, leveraging our history as a combined UC, CC, CPaaS company. We believe this product dramatically increases our cross-sell opportunities to existing customers and provides an accessible entry point for new customers looking to improve their customer experience across the organization. Shortly after the end of the quarter, we introduced 8x8 Operator Connect for Microsoft Teams, expanding our portfolio of enterprise voice solutions and further strengthening our leadership position in Microsoft Teams environments. With this introduction, 8x8 now offers the industry's broadest portfolio of enterprise voice solutions for Microsoft Teams, and is the only Operator Connect provider with a native contact center solution certified to integrate with Teams. The initial market response has been very positive, generating numerous new opportunities within days of the announcement. We believe this solution could be the key to unlocking millions of UC seats not yet migrated to the cloud. As we all know, there are hundreds of millions of on-prem telephony seats, and the industry craves low-cost solutions to unlock this base. I want to highlight the progress we're making in broadening our CPaaS product offerings and expanding this part of our business globally. With the renewed focus on CPaaS, we are finding new ways to embed CPaaS capabilities into our integrated UC and CC solutions to provide complete solutions that deliver specific business outcomes for our customers. First was the Video Interaction 2.0. Most recently, we launched Proactive Outreach, enabling highly personalized messaging campaigns at scale for both contact center and unified communications customers. These capabilities were important differentiators in the wins at Upward Health in the U.S., Induction Healthcare in the U.K., and PalawanPay in the Philippines. In addition to these product launches, we continue to innovate across our platform with solutions like our AI-powered Intelligent Customer Assistant, available as either digital or voice bots. Usage of ICA in self-service options continues to increase sequentially, and we are achieving resolution rates as high as 80%. This is a compelling testament to the advanced AI capabilities of 8x8 and our technology partner ecosystem. Further, 100% of our digital Intelligent Customer Assistant customers are referenceable, demonstrating our focus on delivering superior business outcomes with rapid time to value. Our omni-channel engagement solutions and the introduction of new digital channels and automation were key factors in our win at Southern Housing in the U.K. We strive to make our customers heroes in their organizations, and this is driving wins like Sky Chefs, a well-known catering and hospitality expert serving airline customers, where our agility and speed to deployment won the day. Customer acceptance of our new solutions is the most important indicator of success. I'm pleased to report that sales of new products were up by more than 50% year-over-year for the second consecutive quarter. Given the timing of launches throughout the year and the enterprise sales cycles, I view this as a positive leading indicator of our future success. From a financial perspective, this year has been about strengthening our foundation and positioning ourselves for sustainable growth in the future. We've seen a substantial reduction in our non-GAAP cost structure, with cost reductions totaling more than $47 million from fiscal 2023. This disciplined fiscal management enabled us to invest strategically in innovation while increasing our non-GAAP operating margins to double digits. With our cost structure aligned with our current revenue run rate and cash generation objectives, we intend to increase focus on revving our go-to-market engine to drive awareness and sales for our expanded product portfolio. Turning to our go-to-markets efforts, we've made considerable progress. Our sales, marketing, and customer success teams are more aligned than ever, focusing on the cross-functional initiatives that drive value across our customer base. This alignment has improved the quality of our pipeline and resulted in increased close rates, more multi-product lands, and higher customer satisfaction scores. These are the early indicators that our efforts to build a high-performance go-to-market organization are working. Given the nature of enterprise sales cycles and our ratable revenue growth, there's a lag before our progress is evident in our revenue growth. But I am confident that the changes we've made will drive improved performance and accelerating growth by the end of the current fiscal year. As we look to the future, our strategy is clear. We will continue to drive innovation, intentionally engineered solutions that deliver superior business outcomes for our customers. I encourage you to watch a short video case study of the San Diego Zoo's implementation of our integrated solution as an example of our solution approach and rapid time to value. Working in partnership with the internal team at the zoo, we implemented a full-service contact center with an AI-based self-service option for inbound calls in less than 45 days. We have intentionally engineered our products and solutions for this level of agility and rapid time to value. We can leverage this advantage to develop our own purpose-built solutions as well. For example, 2024 is a big year for elections in both the U.S. and U.K. Using the power of conversational AI and automation, our U.K. team built a library of out-of-the-box templates to support local government and improve citizen access to important information for upcoming elections. To drive awareness and adoption of our innovations, we are committed to continued improvement in our go-to-market activities. We intend to remain within our current cost envelope as we make the necessary investments to elevate our partner programs, increase awareness for our solutions, and improve our processes. We are taking a balanced approach to growth and profitability, and with cash from operations as our financial North Star. We intend to continue returning value to our investors through reducing debt. We have repaid $88.3 million of principal in fiscal 2024, 35% of our commitment to return $250 million to investors through debt repayments over three years. Before I turn the call over to Kevin, I want to thank our employees, partners, and investors who are with us on this journey. Thanks, Sam, and good afternoon, everyone. We delivered solid financial performance again in fiscal Q4. Both total revenue and service revenue were within our guidance ranges, and other revenue came in ahead of the target implied by our service and total revenue guidance. Non-GAAP operating margin exceeded guidance by 1.3 percentage points, and cash flow was above expectations at $12.7 million for the quarter and $79 million for the year. During the quarter, we also achieved the significant milestone of repaying the remaining $63.3 million principal on the 2024 convertible notes. With this payment, we have retired $88.3 million in debt during fiscal 2024, and $115 million over the past six quarters. The press release and trended financial results we posted on the investor relations website provide a comprehensive view of our financial performance. So I'm going to take a slightly different approach to my comments this quarter. Instead of going line by line through the quarterly results and then turning to guidance, I would like to take a step back and review our results, as well as our forward guidance within the context of our strategy shift. Before I go on, let me remind you that I will be using non-GAAP metrics, except for revenue and cash flow, unless otherwise noted. We really began our transformation in late fiscal 2022 with the acquisition of Fuze. The acquisition immediately increased our capacity for innovation, expanded our customer base, and added more than $100 million to our ARR. This acquisition was immediately accretive to our business performance. Although recent customer attrition has created a near-term headwind to growth in recent quarters, it remains a huge win overall. With our CEO transition in fiscal 2023, we made a conscious decision to swap near-term revenue growth for profitability and cash flow. Cash flow became our financial North Star, and we implemented multiple actions during the year to reduce our cost structure and improve sales productivity while maintaining our investments in innovation. By fiscal Q4 2023, we had reduced quarterly non-GAAP operating expenses, excluding COGS, by nearly $10 million compared to Q1 2023, which was the first full quarter of combined 8x8 and Fuze results. Our quarterly sales and marketing spend was down even more, dropping by $12.3 million from Q1 2023 to Q4 2023. This equates to almost $50 million in annualized cost reductions in sales and marketing. The decrease in operating expenses, together with higher gross margins, had an immediate impact on our cash flow from operations, which increased from $34.7 million in fiscal 2022 to $48.8 million in fiscal 2023, and $78.9 million in fiscal 2024. This allowed us to prepay $25 million in principal on the term loan and repay the remaining principal on our 2024 notes, while maintaining cash and investments above $100 million. We exit fiscal 2024 with $118 million in cash, restricted cash, and investments, an expanded product portfolio tailored to the needs of our target customer, and a committed and experienced leadership team. We are a stronger company today than we were a year ago, and we are a much stronger company than we were at the end of fiscal 2022. Q4 is our 13th consecutive quarter of positive cash flow and non-GAAP operating margin, trends we expect to continue. I believe we have successfully laid the foundation for the future growth that our innovation will drive. Let's look at leading and lagging indicators of our continued progress and how they flow through our financial model. Let's first look at the leading indicators, RPO and ARR. We knew when we began this transformation that there could be an impact on our growth. Given our predominantly ratable revenue model, it's not surprising that there would be a lag before our progress manifested as an acceleration in revenue growth. In other words, the turn to growth resulting from increases in sales productivity, partner activity, and new products should be evident in RPO and ARR before appearing in revenue. I believe we are near the turn in our business. RPO was up sequentially in Q4 and flat year-over-year. We ended the year with $697 million in ARR, down about 1% sequentially, with about half of the decline related to a seasonal decrease in CPaaS usage, as the impact is magnified in ARR due to annualization. The remaining portion of the decline is related to a decrease in UCaaS ARR, primarily due to Fuze customer attrition. We expect our efforts to retain and upgrade Fuze customers will result in increased retention in fiscal 2025, and as a result, I believe the Q4 quarter-over-quarter decline in non-CPaaS ARR is the steepest we will see. However, it may be a quarter or two before the impact of new products and our retooled go-to-market result in quarter-over-quarter ARR growth, given enterprise sales cycles. Importantly, our business remains healthy, and XCaaS ARR has increased sequentially every quarter since we began tracking it. The nature of our business is evolving as we launch and grow multiple products that have consumption-based pricing. Additionally, we are seeing an amplified impact of relatively minor fluctuations in CPaaS revenue on our current ARR metric, which is leading us to reevaluate the metrics we report to investors. We will provide visibility into any new methodology or new metrics on the Q1 call. Now, let's turn to our primary lagging indicator, revenue. With ARR flat to down slightly quarter-over-quarter over the past four quarters, we expect to see a similar pattern in revenue, with a lag of two to three quarters. This is reflected in our revenue guidance ranges for Q1 and fiscal 2025, which I will provide in greater detail later on this call. Consistent with our comments at the product and innovation update in March, we expect service revenue for the full year to be approximately flat, with fiscal 2024 at the midpoint, or about $700 million, with first half revenue decreasing by low single digits year-over-year compared to the first half of fiscal 2024. We expect to return to year-over-year growth by the fourth quarter. Now, let's discuss a few points about our operating model. Our cost structure in Q4 2024, on a dollar basis, was very similar to our cost structure at the end of Q4 2023. Total operating expenses were about $2 million lower versus Q4 2023, as we achieved about $2 million in cost efficiencies in G&A, but R&D and sales and marketing were basically flat with a year ago. We believe that our target cost structure, with R&D at about 15% of revenue, sales and marketing between 33%-34% of revenue, and G&A between 10%-11% of revenue, continues to be the right level investment to drive innovation and adoption of our expanded portfolio. Consistent with our philosophy that spending follows growth, we are targeting our 2025 spending to be approximately flat from fiscal 2024 on a dollar basis. We also expect CPaaS to gradually increase as a percentage of total revenue compared to fiscal 2024. We still expect service revenue gross margin to remain in the 74%-75% range, but it may vary slightly due to mix. We expect gross margin on total revenue to be between 71% and 72% as we add other revenue into the mix. With this operating model context in mind, we establish service revenue, total revenue, and operating margin guidance ranges for the fiscal first quarter, ending June 30, 2024, as follows. We anticipate service revenue to be in the range of $170 million-$174 million. We anticipate total revenue to be in the range of $176 million-$181 million, implying other revenue of $6.5 million at the guidance midpoint. Note that other revenue can vary based upon customer-specific deployment schedules and hardware shipments, so total revenue can vary based on these dynamics. The combination of modestly lower year-over-year revenue, a higher mix of CPaaS, and flattish sequential operating expenses explains our operating margin guidance of 11%-12% for Q1 2025. For the fiscal year 2025, ending on March 31, 2025, we provide the following guidance ranges. We anticipate service revenue to be in the range of $693 million-$707 million, with year-over-year revenue declines in the first half and exiting the year with single-digit growth rates. We anticipate total revenue to be in the range of $720 million-$738 million. We continue to focus on delivering a solid operating margin and anticipate exiting the year between 12%-13% and achieving between 11.5%-13% for the full fiscal year. Our operating margin results will depend on revenue performance and opportunities for investment. At the midpoint of our revenue guidance range, this translates into non-GAAP operating income of between $89 million-$90 million for the fiscal year. We expect interest expense to be about $8.7 million in each of Q1 and Q2, based upon current interest rates. We expect cash paid for interest to be approximately $6.7 million in Q1 2025 and $10.4 million in Q2 2025, as cash interest on the 2028 convertible debt is due semiannually. We are currently anticipating that the interest rate on the term loan remains approximately 12% or so, SOFR plus 6.6 percentage points. The prepayment penalty on the term loan expires in August, and we expect to begin reducing the principal outstanding immediately thereafter. This will enable us to reduce quarterly interest expense in the second half of the year. Since our financial position is considerably stronger today than it was in August 2022, w e are actively exploring term loan refinancing options, which could also bring interest expense down further later this year. Cash flow from operations remains our financial North Star. It funds our continued investments in innovation that will drive our future growth. It also enables us to return value to investors as we pay down debt in the near term, and increases our flexibility to pursue additional opportunities to drive value in the long term. We generated $79 million in operating cash flow in fiscal 2024, an increase of 62% over 2023. We remain committed to our goal of a 20% three-year CAGR in cash flow off our 2023 base of $49 million. This implies operating cash flow of about $80 million-$85 million in fiscal 2026, or about $225 million over the course of fiscal years 2024, 2025, and 2026. We believe we can generate at least that much in operating cash flow over the three-year period, but we now expect fiscal 2025 cash flow from operations to be between $15 million and $20 million less than in fiscal 2024. This is due to a combination of factors, including outperformance in fiscal year 2024, caused by our cash from operations to be higher than we had expected for the year. Slightly lower operating income compared to fiscal year 2024. Strong year-end collections in fiscal Q4 2024, which helped our fiscal year 2024 cash flow, but resulted in a lower accounts receivable balance to collect as we enter fiscal 2025. And one-time cash payments related to Fuze indirect taxes. In Q4, we booked a $10 million charge related to Fuze indirect tax liabilities, primarily telecom taxes. We already made a portion of this payment in April, which will impact our Q1 and fiscal 2025 cash flow results. We are as committed as ever to reducing our outstanding debt and are on track to meet our commitment of returning $250 million to investors, primarily through debt repayments, over the three-year period from fiscal 2024 to fiscal 2026. With a $25 million prepayment on the term loan in Q1 2024, plus the repayment of the remaining $63.3 million of our 2024 notes on February 1st, we are 35% to completion. The final piece of information to keep in mind is share count. We expect fully diluted shares of about 128.5 million for Q1, and average approximately 133 million shares for the full year. We remain committed to increasing shareholder value by reducing future equity dilution over time. Putting all this together, we expect that non-GAAP fully diluted earnings per share to be in the range of $0.37-$0.45 for fiscal 2025. This EPS range is calculated using the operating margin guidance range and the midpoint of revenue guidance as calculation inputs. I realize this is quite a lot of detail, and I think it's important for investors to understand our 2025 guidance within the context of our longer-term strategy and overall business model. We summarize these comments in our investor slides. I continue to believe that our focus on profitability and cash flow, while maintaining targeted investments in innovation and improving our go-to-market efficiency, is the correct strategy for us at this time. I am confident this will enable a return to revenue growth, while we also return value to our shareholders, initially by reducing our debt. I would like to thank the entire 8x8 team for working together to deliver this quarter's solid results, and look forward to reporting our progress throughout fiscal 2025. Operator, we are ready for questions. Thank you. If you'd like to ask a question, please press star one one. If your question has been answered and you'd like to remove yourself from the queue, please press star one one again. Our first question comes from Eamon Coughlin with Barclays. Your line is open. Hi, Kevin and Sam. This is Eamon Coughlin with Barclays. Thanks for taking the question. How did CCaaS fiscal 2024 compare to usage in Q3? And how does that pipeline look compared to UCaaS? You need to help me understand. How did CPaaS or CCaaS usage look in the March quarter? Yep. CPaaS was down seasonally in the March quarter. Kevin, I don't think it was particularly more than just kind of seasonal declines that we normally see. Because of the countries we're in, we deal with Ramadan and Chinese New Year, which have a tendency to slow down marketing campaigns and those sorts of things. Yeah. Up year- over- year, though, 9%. So yeah, but it was slightly lower than Q3. I guess, how does that compare to CCaaS as well? Well, contact center business, we've been seeing more growth. It's hard, there's a little bit of fuzz on the call. Contact center, we've definitely been seeing solid momentum, particularly when we think about the TPES partnership around it, the add-on products, those kinds of things. And then UCaaS, you know, it's a tough market out there. And then, Kevin, just a question on what you had reiterated in the remarks. How did t he CPaaS business fare, how did the CPaaS business fare in Q4, and what are the assumptions that you're factoring into the 2025 guide for this business? So CPaaS, so we, w e just mentioned that at the first part of your question, right? So it was seasonally down in Q4, slightly. And in terms of the go forward view, we see continued improvement in that business throughout each quarter of 2025, and again, with some seasonality impacts in the fourth quarter, which is the first calendar quarter of the year. So, you know, we're talking about, you know, some decent level of growth rate with some seasonality baked in. Perfect. Thanks, guys. Thank you. Thank you. Our next question comes from Michael Funk with Bank of America. Your line is open. Yeah, guys, thank you for the question tonight. My first one, investors care most about the path to positive growth. And, you know, you outlined some of the efforts you're making on the call. But, you know, I'm a simple equity analyst, so maybe if you could help me with a waterfall for the piece parts for return to growth by fiscal fourth quarter of this year, understanding Fuze is part of that, CPaaS getting better, CCaaS getting better. But the piece parts to be really helpful for me and investors, so we can picture that return to growth over time. I'm trying to think of, I mean, historically, when I think about a waterfall model, I don't exactly think about the context you're using it in, Michael, and I'm not saying you're wrong. I'm just saying it's not how I think about it. I mean, the way I think about it right now is, our new products, many of which are, you know, we've got some that are now fully GA'd, some that are in beta, are growing 50%+ for two quarters in a row. They'll continue to grow. So that'll, you know, at some point, that's positive to the overall performance. Our CPaaS business has turned around, and so as Kevin mentioned, that was, you know, above positive growth on a year-over-year basis, and we're seeing stability in our UC business. And so we'll get, you know, two of the cylinders growing and the remaining cylinders flattish, and then eventually the overall boat will lift. And the other thing we know is that as we sell more products, our retention rates go up, and so that builds over time, too. And so that kind of all starts to come together towards the second half and the final fourth quarter of 2025. But if you look to, say, fiscal 4Q 2024, and you have the revenue mix from the different product sets, and then, you know, the drag from Fuze, if I took that 4Q fiscal 2024 number and then rolled forward to the 4Q fiscal 2025 number and did the same math on the revenue mix and the contribution or less drag from Fuze, help from CCaaS, CPaaS, could you build that for me? Okay, hold on one sec. There's some math involved there. Yeah, I know I'm putting you on the spot here, but I'm just, I think it's a deep question, right? Because, I mean, you know, everything flows from, you know, the top line down. That obviously influences the, you know, profitability, cash flow, and that North Star focus, that you have. So just trying to better understand how we get there and can get greater confidence in that return to growth. And if it's better left offline- Right. or for the follow-up call. See, I might not want to take the entire call here, but... I mean, so, so let me try to break it down. So you're asking, like, could we just say we're assuming generally flattish UC, growth in CPaaS and contact center-related products, and around the contact center, it's really around the new products that are around the contact center. And then over time, what leads to sustained growth, it, you know, as we exit 2025 into 2026 and 2027, is that as we become more of a multi-product company, our retention rates go up, and our NRR can flip solidly positive to drive that higher retention and selling over time. So the two drivers over the next four quarters are contact center and CPaaS. Okay, great. Thank you so much, Sam and Kevin, thank you again for all the comments on the call. Thanks, Michael. Thank you. Our next question comes from Meta Marshall with Morgan Stanley. Your line is open. Great, thanks. Maybe a couple of questions. You know, just on the Fuze turn, I know as we kind of get further through, the Fuze kind of book of business, some of those are very large customers. And so I just wanted to get a sense of, is some of this volatility just as, you know, you work through some of those very large customers and, you know, is it just what are you seeing as you make those transitions? And then maybe just the second question, you know, as you have introduced, Engage, just, you know, is the traction that you're seeing there kind of with the customer type that you were expecting, or just kind of any commentary where, you know, Engage versus some of the higher XCaaS tiers are having more success? Thanks. Hey, Meta, this is Kevin. I'll take the first part of that question. So yes, look, we are working through the upgrade of the Fuze customers over to the eight by eight platform, and you heard probably on previous calls, we have 100% customer success management dedicated on that base. As we do migrate some of those customers over, and by the way, that's accelerating, we do see some right sizing of their needs, and so that's causing us to see some headwinds in that base as we downsell. But the fact, the resulting fact of that, though, is that we're keeping those customers happy, and the NPS scores are going up and all those things. But yes, we do go through this process. We do see some headwinds as we do that. Well, and I, I think part of, Meta, what you're getting to, too, is what Kevin mentioned, right? So we've now touched every single Fuze customer. We have a status report on every single Fuze customer, knowing exactly where they stand. We've migrated a whole slug of the small customers. So there's a significant amount of, in terms of customer count, that has now been migrated off. And so part of what you're seeing is that we are, we are getting to the tail end. I won't say that. I'm not gonna put a date and time and place, but we, you know, we see the light at the end of the tunnel, which is, you know, we finished migrating all the Fuze customers to 8x8. But we, we know where every customer stands today and what needs to be done to, to do those things. Switching gears for a second on Engage. So Engage is in beta right now. The reception to the product has been, I would say, above what we were expecting. We thought the market might be a little crowded because there's a number of sub-tier products that are overhyped by other vendors. Many of them are very feature light, and so we thought this would be a little bit more of a noisy market, and it turns out that actually, you know, coming at this from a mobile-first perspective and really targeting the right use cases is resonating. And you asked specifically, is it resonating with our customers and with our prospects? And the answer is yes and yes. We're seeing situations where customers, existing customers, want to upgrade to Engage, to roll out, and these are not existing contact center seats. These are maybe existing UC seats, where the customer can do a much more, you know, much improved business process, I think is were the right words to use. Let me give you an example, just so it makes sense. Like, we have healthcare companies that have nurses. Nurses are on 8x8s, you know, sort of basic UC seats, and we're now seeing a huge push from prospects who wanna upgrade those and customers who wanna upgrade those to Engage, to enable, you know, better business processes around on-call, emergency services, those kinds of things. With prospects, we're also seeing it because it really fits that unique use case. We're in the middle of a large deal, and the It's UC, it's regular contact center for the contact center people, but they want to Engage for all their IT and HR professionals that help out, you know, their line of business units, those kinds of things. And so we do view it very much as a separate product. It is not a contact center product. It is not a UC product. It is its own product with its own use cases, but it is very use case specific. I think I answered your question. Yeah. No, that's great context. Thank you. Thank you. Our next question comes from Ryan Koontz with Needham & Company. Your line is open. Hi, thanks for the question. I'll try not to ask a complex one, Sam. I know you're a sales guy at heart. So on the contact center, you've talked a lot about go-to-market changes and some new leadership there. I wonder if you can update us on some of the changes you're seeing on your dashboard, so to speak, on go-to-market, that get you enthused about contact center inflection. Thanks. Oh, dude, I love you. That's, that's my kind of question. All right, so what, what gets me excited? So let me- I'm gonna change your question just slightly, and I'm gonna sort of paraphrase it, which is, something I hear from investors, right? "Sam, you have confidence this ship's turning around. What are your green shoots around contact center and those things? What are you seeing that gives us confidence that you think, you know, this, this thing's turning around, and we're gonna see growth again," et cetera, et cetera. So first off, last quarter, when we did the win-loss analysis, we had the best performance ever in terms of not losing deals because of product. So our-- right now, we are having a situation where in almost every single RFP, we respond, "Yes," to every question. And that's, "Yes, we do it. Yes, we do it with a partner," you know, et cetera, "but yes, it can be done on our platform, integrated and working." And we are seeing that. Number two, is we're seeing a significant growth in pipeline. Now, remember, it takes, you know, 8-12 months to close these deals, and a lot of these products just are coming out of beta now. So, you know, that's part of the green shoots in the future, not to mention the stuff we're already selling. But the, you know, the, the growth in pipeline and the growth- And then number three is, you know, third-party validation, right? Metrigy ranking us number one for customer sentiment or Gartner Critical Capabilities saying positive things about us. And, you know, these third-party analysts are coming in, they're doing their due diligence, they're comparing us to other vendors, and there's others. I don't wanna. I'm not trying to show any favoritism, but, you know, these are all the. Then lastly, look, I spend a lot of time on the road traveling, and it's sitting down with our customers and our partners, and me spending a half an hour or an hour going through where we're going as a company, and them just nodding their heads and saying: "Yes, you are on track. You're gonna meet our needs. You're doing the right things. Just deliver what you say you're gonna deliver, and we'll be customers, or we'll buy more, or however you wanna think about it." And so that's really... On the dashboard level, it's the increase in pipeline, the increase in win rates... the better performance on RFPs, the better performance of our new products, those kinds of things. And then just the raw qualitative, you know, sentiment you get when you sit down with customers and partners, and them saying, "Yes, this is what we need for our customer base, for our ideal customer profile." That small to medium-sized enterprise that doesn't have a team of a whole bunch of developers, this is perfect. We think we can sell a bunch of this. Great! That's, that's really helpful. And just, you know, quick, feedback follow-up on, you talked about new metrics, I think is what I heard, in, in Q1, and, you know, loud and clear, investors would like to, like to hear about some, some CCaaS metrics, whether it's, you know, revenue, ARR, et cetera. I think that would go a long way. Thanks. Perfect. Thanks, Ryan. Thank you. Our next question comes from William Power with Baird. Your line is open. Hi, this is Yanni Samoilis from William Power. Thanks for taking the question. I was hoping you could provide an update as to what you're seeing in the macro more broadly. Are you seeing stabilization yet in terms of renewal pressures, impacts to seat counts, things of that nature? Are things still getting worse? And then I guess, more importantly, what are you factoring into your guide for fiscal 2025? So I'll let Kevin cover the fact that. So I spent a lot of time, I mentioned earlier on the last question from Ryan, I spent a lot of time on the road. You know, I wouldn't say it's pretty out there. You know, layoffs were pretty high in February and March. You know, we do see some of the, you know, the effects of higher interest rates and those kinds of things on various industries and capabilities and those kinds of things. We see the positives and negatives, but I would say that the environment is not pretty, it's not great. There's not a lot of tailwinds. You know, there is some holdover post-pandemic, right? There were a lot of orders made during the pandemic, and some people are rightsizing those orders. Kevin mentioned it around Fuze, some of the areas we see that. And so, you know, I, I think it's fair to say every CFO or every IT guy I meet with is, you know, is looking at the cost structure of their organizations and those kinds of things. I would mention, though, you know, we launched Operator Connect, and, you know, we're, I, I'd like to say, you know, we're number one on the panel because of our name. It's already driven a lot of things. We have a Microsoft-certified contact center that goes with Operator Connect, but there are still hundreds of millions of seats of UC, and I think low-cost solutions unlocks this base. And so the fact that we have, you know, low-cost Operator Connect available, I hope, allows us to accelerate the move from on-prem to cloud, relative to other things. I'm not exactly fearful of some decline in pricing because I think... I'm becoming more and more convinced that's what's necessary. The idea that the entire world is all gonna be on $30 per month seats, I think is just unrealistic. And so we need to meet the customers where they are and try to capture those tens of millions and hundreds of millions of seats that are available. What do you want to say about modeling? Yeah. So, you know, look, in the deal conversations I've been involved in, and we've said this before on earlier calls, you know, there's some caution out there. I think people are willing to, you know, still do the deals, of course, and we're doing them. But I think there, you know, there's some cautiousness out there, maybe taking a little bit longer to sign the larger deals and so forth. So the cycle might be drawn out a little bit more, more signatories on deals and so forth. So in terms of our guidance, you know, we're basically factoring in the same. I think it's not neither pessimistic nor optimistic in the guide. But, you know, right now, it's been fairly consistent in terms of the attitude out in the marketplace that we see. So we just, we're, you know, moving forward in our guidance under that assumption. I wouldn't say we're expecting a bounce back in our guidance. I mean, Kevin and I are both sort of quasi-pessimistic when it comes to the macroeconomic environment, at least when it comes to forward modeling. That way, we try to be always on the safe side. Right. Thanks for the context there. I appreciate the color on Operator Connect as well. I was wondering if you could provide an update just on the Teams partnership generally, and then trends within that base of users. Then, I guess, more specifically, any update on the competitive dynamics at play there, with others that are also trying to lock onto that base of users. I guess, just any color around that would be great. Thanks. Okay. And when you mean base of users, do you mean Microsoft Teams, or do you mean on-prem? The Teams users, trying to lock onto them. The Teams users. Thank you. So look, I think we're one of the few or only—I mean, for sure, we're the only vendor that has Operator Connect, Direct Routing, and a Microsoft native certified contact center. And we see a significantly higher attach rate of contact center with our Teams deals. As we—you know, Teams is well over 400,000 seats. It continues to grow very rapidly. We love Teams, and I think Teams is a much better product than those guys that starts with a Z anyway. So more benefit to Microsoft. The better they do, the happier I am. And I think it's—you know, it's just a better solution for mid and large enterprises that we participate in. So I think Teams is here to stay. I think telephony is gonna be a key component of Teams, and we have the most richer offering around that. And you know, I look forward to doing more Teams deals every day. And by the way, we get solid margin doing it also. So just before anybody second-guesses it, yes, we get solid margin for doing it. Our attach rate to contact center is much higher- Yeah ... with Teams deals, so happy about that, too. Awesome! Thanks a lot for the perspective. Thank you. Our next question comes from George Sutton with Craig-Hallum. Your line is open. Hey, guys. James on for George. Excluding the CPaaS headwinds and Fuze down sells, would you have grown in the quarter? And could you maybe quantify the mix from CPaaS and some of the new products, that's assumed in the full year guide? Did you say the headwinds and CPaaS from Q3 to Q4? Is that what you're referring to? I thought he said headwinds from Fuze. I, I, I- I think he said both. Oh. From both. Yep, from both. Yeah, so I think, you know, the reality is that basically, the sequential impact is fundamentally on the Fuze and headwinds in the CPaaS seasonality. The rest of the business is basically even, quarter on quarter. Yeah, I would say, don't hold me directly to the third decimal place, but the general answer, I think, is eyeballing it, yes, the answer to your question. Gotcha. And I think you made a comment about continuing to invest in driving awareness and making some other go-to-market investments. Can you provide some color on what investments you're making there and maybe how you're investing those dollars differently than you may have in the past? Yeah. So look, in the past, we invested a little bit more in the middle of the funnel. We're investing in more top of the funnel activities now. We've added sales capacity, in particular, BDR capacity, and we're being aggressive about going out and telling our story. So, you know, I call out the fact that, you know, a couple quarters ago, we hired Justin Robbins to be our evangelist, and that guy's been, you know, logging a lot of miles on the road, telling just a fantastic story. We have a really, really good, good product innovation-led story. We're still somewhat known as that stodgy UCaaS company, but once we can get that story out, we have the references, we have the capabilities, we have the case studies. I mentioned them on the call, you know, Southern Housing Group, or Upland or, you know, any of those types of things. And so it's just a matter of getting people to realize kind of what we've evolved to, and we'll see those, those corresponding, business improvements. And we see it already in the pipeline. And so I think it's a lot about that. And it's a lot less about spending money on Google AdWords and fighting with the lead aggs and, you know, these two-bit UCaaS providers that, you know, dive on pricing at every instance. Like, that's where I wanna get us out of. Very helpful. Thanks, guys. Thank you. Thank you. Our next question comes from Michael Turrin with Wells Fargo. Your line is open. Hey, guys, this is Ronak Shah filling in for Michael Turrin. A quick question on the AI piece. So where are you seeing the best opportunities in AI use cases among customers? And is there an avenue for monetization here? Well, let me answer the second part first. The answer is, yes, and I would put an F-bomb in front of that. Yes, there's, I mean, our Intelligent Customer Assistant is an AI-enabled voice and digital chatbot, and it's. You pay to use it. We sell it on a per interaction basis. So yes, and we get, you know, we're seeing significant usage increases off of it. And as I mentioned in my script, all the customers are referenceable, so it works, and it works really darn well. Where do I see AI? You know, here, here's what I'll say: Our customer base is not a bunch of PhDs in data science and computer science, and, you know, they want an LLM, large language model, with a RAG component and an IDE, where they have to put it all together. That's not my customer base. They're not rocket scientists. My customer base wants products that solve their problems. And so what we've done is we've taken the AI, either through our TPES partnerships or through our in-house shared services, and embedded it into products that they can use to solve their problems. And it works, and it works really well. I mean, I mentioned, for example, on the, in my script, Votelt, right? From the, the UK team, pushed out this product that allows local governments to offer voter information, polling information, all these kinds of things. All that is AI-driven. It's all AI-driven. It does in voice and digital, mainly digital, but it's a phenomenal product, and it's, but it's, the key for me is nobody wants to buy AI. What they wanna buy is a solution to a problem they have, and they are more than happy to pay for a solution to a problem they have. They don't wanna pay for, you know, a bunch of Lego blocks spilled on the floor that they have to put together to do something with. Great. Thanks, guys. Thank you. Thank you. Our next question comes from Catharine Trebnick with Rosenblatt. Your line is open. Oh, yeah. Thank you for taking the question. Sorry for the background noise. Sam, last year, you rolled out your whole ecosystem of partners for AI, you know, between you wanted to really leverage everybody else's LLM and Cognigy for conversational AI. Can you kind of update us on where you are in that process and how you feel that will, you know, eventually drive more opportunity for you? Thank you. Thanks, Catharine. I hope you're at RSA. I hope you're having a good time, and, you know, I speak for the governor of California, please leave a lot of your money behind. Spend a lot while you're there. So okay, TPES. So look, it—I mean, simply put, it's working, right? So we have—if you look at our partnership with Cognigy on ICA, we've got AI-enabled voice and chatbots that are killing it. The results are well above expectations. Every single customer is ecstatic. We have customers that have gone from signed deal to full, full deployment within 20 days and have seen 50%, 60%, 70% deflections on their use cases and a 10 out of 10 CSAT score. They're ecstatic. And that's really the power of that ecosystem. We have Awaken, which we have double-digit number of deals in for agent assist, and we're seeing a lot of traction in the agent assist market. We have, and, you know, even take a step back, I mean, we have relationships with people like Meta and with Llama 4 and OpenAI and their ChatGPT model, those kinds of things. Those are all embedded into the platform itself, right? So I'm really happy because I think sometimes Wall Street misses that our customer, our core ICP customer, will pay us for integration. They'll pay us for integration because they don't have the capabilities. They're not a United Airlines, they're a Cape Air. You know, they're not Bank of America, they're Atlantic Union Bank, you know, and those kinds of things. And so what they'll do is they'll pay us for taking that partnership risk, figuring it out, and delivering them a complete solution, and they pay us really darn well for doing that for them. All right. And then are you seeing an incremental uptick then on the price of that seat versus a traditional CSAT seat? The reason I'm asking, Gartner just, I think it was last year, they had a huge report out where it showed, you know, on an average, 3-5x lift on if you did conversational AI on top of a base seat price. And are you, are you actually seeing that? I think the answer is yes, but I think it's a little bit, so I don't know how. I haven't seen Gartner's analysis, but I've seen some of the other ones. It's a little bit misleading. I'm not sure what the right word is, 'cause here's what we see, right? Let's say three years ago, we sold 100 seats on the per-seat model, and those 100 seats netted us $100. We may only sell 92 seats now, so that's $90. But we're gonna sell three bots, and so the total deal may be $200, but it's spread across 92 seats instead of 100 seats. And so on a per-seat basis, it's a significantly bigger number, if that makes any sense. There's a math here, and I'm- No, no- ... I'm not trying to blow you away with math. So the 2-3x, I think, is a little bit of a, you know, you're reducing the denominator and increasing the numerator. We definitely see when we sell those bots and we sell the add-on AI products, total revenue per customer increases significantly. And yet, look, we're selling a few less seats, which is what we expect. I don't think anybody's gonna freak out about this. We've always expected that technology will replace human beings on routine work assignments. That's what technology has done for thousands of years and will continue to do for the next thousands of years. Yeah, well, that makes perfect sense. Thank you. Thanks, Catharine. And remember, spend money, lots of money. Thank you, Catharine. There are no further questions at this time. Please proceed with any closing remarks. Thank you so much, everyone, for joining us today. In conclusion, fiscal 2024 has set the stage for what we are capable of achieving. We began the year with a clear strategic direction and strong financial position. I'm incredibly proud of what we've accomplished, and I'm excited about the opportunities that are ahead. I love the questions that were asked today. It really shows you how people are diving into us and trying to figure out what the next steps. Thank you once again to everyone for your trust, your partnership, your questions, et cetera. We're committed to delivering on our promises and driving value for all our stakeholders. I look forward to talking to you on an upcoming call. Thank you. Thank you for your participation. This does conclude the program. You may now disconnect. Good day.