Q1 2025 Summary
Published Feb 25, 2025, 3:31 PM UTC- 8x8 is experiencing significant growth in its contact center business, with 15 of the top 20 new logo deals including contact center products and a substantial increase in pipeline for contact center solutions. This indicates strong market acceptance and potential for revenue growth.
- The company's Communications Platform as a Service (CPaaS) business is showing robust growth, particularly in the Asia-Pacific region, driven by internal management improvements and new go-to-market strategies. Usage-based revenue now represents about 10%-12% of total revenue, contributing significantly to overall performance.
- Average revenue per customer is increasing both year-over-year and quarter-over-quarter due to successful cross-selling of multiple products. With thousands of customers now using 4 to 5 products, there is potential to generate an incremental $100 million to $150 million in revenue per year with higher product penetration.
- Intensifying competition and pricing pressures in the SMB market may pressure 8x8's margins. The CEO acknowledged that the industry is experiencing increased discounting and incentives, stating, "I think all that incentive stuff and free month stuff is whatever... it's just us fighting each other." This suggests that price competition could impact profitability.
- Artificial intelligence and automation may reduce seat-based revenue as customers purchase fewer agent seats. The CEO mentioned that in some cases, customers are buying fewer seats because they are using bots: "But we do have some cases... it actually skews your average revenue per user because you're dividing by a smaller denominator." This could potentially reduce revenue from seat-based pricing models.
- Accelerated migration of former Fuze customers may lead to increased customer attrition and revenue risk. The company is accelerating the upgrade process for Fuze customers but acknowledges that "some of them may not want to make the journey with us." This could result in increased attrition impacting service revenue.
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Fuze Migration Impact
Q: How will accelerating Fuze migration affect revenue and costs?
A: Samuel Wilson explained that less than 8% of revenue now comes from Fuze customers, down from 20% at acquisition. Accelerating their migration may cause some churn but reduces distractions and allows resource redeployment. While migrated customers typically pay the same price, it opens opportunities for cross-selling additional products. -
Competitive Dynamics with NICE
Q: How is competition with NICE affecting sales and customer overlap?
A: Wilson noted that competitors with subpar products, including NICE, are using low prices to disrupt the market, which elongates sales cycles. Despite this, 8x8 is winning deals against such competitors, particularly in contact centers, due to investments in their single platform and technology partnerships. He acknowledged NICE as a respected company but mentioned their UC offerings are not as strong. -
ARPU Trends in CCaaS
Q: What are the ARPU trends in CCaaS amid competition?
A: Wilson stated that average revenue per customer is up year-over-year and quarter-over-quarter. He suggested that usage and consumption-based pricing are becoming more common, potentially making per-seat ARPU metrics less relevant. He anticipates that fixed-seat pricing may become less prevalent over the next five years. -
Macro Impact on Sales
Q: How is the macro environment affecting customer engagement?
A: Wilson observed some increased cautiousness among customers, leading to longer deal cycles. However, digital transformation remains a key driver, and 8x8 continues to see demand for products that help customers reduce costs and improve efficiency. -
Shift to Consumption Pricing
Q: Are you seeing a shift towards usage-based pricing?
A: Wilson expects that over the next five years, usage and consumption-based pricing will become more prevalent, potentially replacing fixed-seat pricing. Currently, usage accounts for 10% to 12% of 8x8's revenue and is increasing. -
Contact Center Growth
Q: What's driving growth in contact center sales?
A: Wilson highlighted that 15 of the top 20 new logo deals involved contact centers, with most being migrations from on-premises to cloud systems. The shift to a contact-led approach is resonating, leading to substantial pipeline growth and higher win rates against competitors. -
CPaaS Business in APAC
Q: What's behind the CPaaS growth in APAC?
A: Wilson attributed the growth to effective execution rather than macro recovery. After installing new leadership and revamping go-to-market strategies, 8x8 is seeing strong performance in APAC CPaaS business due to good leadership and aligned organizations.