8x8 (EGHT) Q4 2026 Earnings Transcript

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Date

May 19, 2026, 5 p.m. ET

Call participants

• Chief Executive Officer — Samuel C. Wilson
• Chief Financial Officer — Kevin Kraus
• Senior Director, Investor Relations — Kate Patterson

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Takeaways

• Total revenue -- $185.2 million, marking the fourth consecutive quarter of year-over-year growth.
• Service revenue -- $180.2 million, with usage-based offerings comprising approximately 23% of service revenue, up from 14% in the prior year.
• Usage-based revenue growth -- Exceeded 70% year over year and now represents roughly 23% of service revenue.
• Gross profit -- $118.9 million, nearly $2 million above the gross profit implied by the midpoint of fourth-quarter guidance.
• Gross margin -- 64.2% of total revenue, modestly below the previous quarter due to mix shift toward lower-margin usage-based products.
• Operating income -- $19.8 million with a 10.7% operating margin, outperforming the upper end of guidance.
• Operating expenses -- Down 5% year over year for the quarter and declined about 3% for the full year.
• Net income -- $16.6 million and fully diluted EPS of $0.11, $0.03 above the high end of guidance.
• Cash flow from operations -- $14.4 million, well above guidance and reflecting favorable timing of collections and payments.
• Cash and equivalents -- $93.3 million at quarter end, up about $6.4 million sequentially, excluding restricted cash.
• Debt reduction -- Principal debt balance lowered by 43% since August 2022, ending at approximately $309.4 million after a $14.5 million payment in early April.
• Shareholder guidance (fiscal first quarter ending June 30, 2027) -- Service revenue expected between $175 million and $180 million; total revenue between $180 million and $185 million; gross margin projected at 63.5%-64.5%; operating margin forecasted at 8.5%-9.5%; non-GAAP EPS range of $0.08-$0.09 per share; cash flow from operations to be $10 million-$12 million.
• Fiscal year ending June 30, 2027 guidance -- Service revenue guided for $707 million-$727 million; total revenue for $727 million-$747 million; gross margin for 62.5%-63.5%; non-GAAP operating margin for 9%-10%; non-GAAP EPS targeted at $0.33-$0.38; operating cash flow expected between $45 million-$52 million.
• Operational highlights -- Completed FUSE migration, integrated several small technology acquisitions, and expanded platform offerings with 8x8 Engage and AI Studio for customer engagement and native agentic AI deployment.

Summary

8x8 (NASDAQ:EGHT) concluded the period with four consecutive quarters of both total and service revenue growth while achieving its first GAAP-profitable year since 2015. The company highlighted a clear transition toward usage-based models, with usage-related revenues exceeding 70% growth and comprising nearly a quarter of service revenue. Executives stressed the company's ability to manage mix-driven gross margin dilution by maintaining disciplined cost controls and generating consistent operating profit and cash flow. Strategic investments focused on expanded AI-driven platform capabilities, open integration, and targeted acquisitions, with a notable reduction in debt and improved debt service costs contributing to overall financial strength.

• Samuel C. Wilson cited that "usage is now 23% of our revenue, and we do not have as good a visibility in usage when we go out 3, 4 quarters," which was explained as a reason for conservative guidance.
• Management emphasized that contracts for usage and AI products are primarily structured with no minimum commitment, offering tiered per-use discounts as customer commitments increase.
• The call detailed the introduction of 8x8 Engage and AI Studio as milestones, with customer adoption reportedly "strong" and partnerships with Synflow AI, Maven Labs, and CallRoute broadening platform capabilities in messaging, automation, and Microsoft Teams integration.
• Executives highlighted that approximately 40% of revenue is now international and acknowledged macro-related and geopolitical unpredictability affecting visibility and planning.
• Wilson referenced that “67% of CFOs and CIOs want to go to consolidate the number of vendors they have,” framing 8x8’s open architecture as a competitive differentiator, particularly as "the walls are coming down between these segments" of UCaaS, CCaaS, and CPaaS.

Industry glossary

• UCaaS: Unified Communications as a Service—cloud-delivered collaboration and communication tools including voice, video, messaging, and conferencing for enterprise use.
• CCaaS: Contact Center as a Service—cloud-based customer interaction software for contact centers, encompassing voice, chat, and digital engagement channels.
• CPaaS: Communications Platform as a Service—platforms providing APIs to embed real-time communications (voice, messaging, video) into business applications.
• Agentic AI: AI systems capable of autonomous decision-making and interaction, especially within customer communications and engagement workflows.
• FUSE migration: The company's internal project for transitioning legacy systems to the unified 8x8 platform; specific to 8x8’s operational restructuring.
• 8x8 Engage: The company’s customer engagement solution expanding user reach beyond traditional contact centers to operational and sales teams.
• AI Studio: 8x8’s native tool enabling deployment of AI-powered voice and digital agents for customer experience (CX) applications.

Full Conference Call Transcript

Kate Patterson: Thank you. Good afternoon, everyone. Today's agenda will include a review of our results for the 2026 with Samuel C. Wilson, our chief executive officer, and Kevin Kraus, our chief financial. Following our prepared remarks, there will be a question and answer session. In addition to our prepared remarks, we have posted a more detailed letter to shareholders in the Quarterly Results section of our Investor Relations website. Before we get started, let me remind you that our discussion today includes forward looking statements about our 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.

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 The US Generally Accepted Accounting Principles, or GAAP.

A reconciliation of these non GAAP metrics to the closest comparable GAAP metric is provided in our earnings press release and earnings presentation slides. Which are available on 8x8 Investor Relations at investors.8x8.com. With that, I will turn the call over to our Chief Executive Officer, Samuel C. Wilson.

Samuel C. Wilson: Good afternoon, everyone, and thank you for joining us. Fiscal 26 marked a turning point for 8x8. Our Q4 results demonstrated improving execution, operating discipline, and a growing momentum across the business. We have delivered 4 consecutive quarters of year over year revenue growth, generated our first GAAP profitable full fiscal year since 2015, increased net income and earnings per share, and strengthened our balance sheet. Most importantly, I believe this year validated the strategy we have been building towards for several years. It is clear the business communications market is changing rapidly. The driver is straightforward. AI is beginning to handle low level repetitive work that used to require people. Routine inquiries, transactions, first line support.

We are still early, but the trajectory is clear. And customers are making architectural decisions today based on where this is going. As the market evolves, what customers buy and how they pay for it changes. Per seat pricing made sense when every interaction needed a human. As AI takes on more of the interactions, pricing needs to shift towards usage and outcomes. These shifts also change how customers buy. AI needs unified context to deliver real results. It does not work well in fragments. that is what is accelerating demand for integrated platforms. Not as a preference but as a prerequisite. We built 8x8 for this transition.

Today, our platform combines carrier grade global voice infrastructure, programmable communications APIs, UCaaS, CCaaS, digital engagement, and embedded AI into a single architecture designed to support both human and AI driven interactions at enterprise scale. And that matters more than ever in an AI era. Voice is not a legacy channel in an AI driven world. In many ways, it becomes more important. Voice is the bridge between automated execution and human judgment. As enterprises move towards human to agent and agent to agent interactions, communications infrastructure stops being utility and starts becoming a strategic control layer. Reliability, security, trust, and orchestration matter more than ever.

The challenge is no longer leveraging AI to generate responses or drive engagement. it is already happening. We are seeing both generative and agentic AI drive a surge in communications APIs across voice, messaging, and digital channels, and it is evident in our numbers. Usage based revenue, including CPaaS communications APIs, AI solutions, digital channels, telecom usage, grew more than 70% year over year and represented approximately 23% of service revenue, up from 14% a year ago. The real challenge is delivering interactions that feel seamless, secure, intelligent, and trustworthy. AI agents must be able to hear clearly, understand intent accurately, authenticate securely, and know exactly when to hand interactions to a human.

That requires more than another AI voice model. It requires a highly reliable communications infrastructure and a platform capable of orchestrating interactions seamlessly across both human and agentic layers. This requirement is redefining where value accrues in enterprise communications. Customers do not want another closed ecosystem or another AI that needs to be tested and integrated. They want platforms that can evolve as the AI landscape evolves. The new winners will be companies that combine carrier grade infrastructure with orchestration across communications workflows, APIs, analytics and customer engagement. And do it at scale. Our approach has been different for many of our peers.

Instead of building around a single AI model or a closed ecosystem, we have focused on building an open integration and orchestration layer directly into the platform itself. This allows customers to adopt new AI capabilities quickly and deploy AI across voice messaging and customer engagement workflows without rebuilding infrastructure. More importantly, this approach helps customers simplify increasingly complex technology environments by reducing operational friction, accelerating deployment, allowing them to adopt new innovation without rebuilding infrastructure. That philosophy has shaped our innovation strategy and we hit some important milestones in Q4. In March, we announced general availability of 8x8 Engage, extended customer engagement beyond the traditional contact center to frontline sales and operational teams. Customer adoption has been strong.

With partners now fully enabled, demand is building. We also added native agentic AI to our platform for CX with AI Studio. AI Studio allows customers to build and deploy AI powered voice and digital agents directly on the 8x8 platform for CX using natural language prompts. It could not be easier. Check out the video demo on our website. During the quarter, we expanded platform capabilities across analytics, authentication, CRM integrations, and orchestration workflows designed to simplify deployment and improve how AI interactions move across human and digital engagement channels. Our outcome focused platform strategy also shapes how we approach partnerships and technology acquisitions.

Our partnership with Synflow AI expands our capabilities for SMBs and strengthens our position in AI powered agentic engagement. Maven Labs expanded our messaging and automation capabilities, while CallRoute strengthens our Microsoft Teams integration strategy and will simplify platform to platform migrations. Most importantly, our customer wins reinforced that our platform strategy is aligned with where the market is going. In the US, an insurance company replaced 2 competitors with a full UCaaS, CCaaS deployment after evaluating 6 competing vendors. A health care organization operating more than 100 locations implemented an omnichannel engagement solution integrating voice, SMS, web chat, and Salesforce to modernize patient communications.

Internationally, a UK automotive retailer selected 8x8 to replace a legacy environment that combines UC and contact center deployment. And a bank in The Philippines selected 8x8 to strengthen authentication and fraud prevention. Capabilities ahead of new anti fraud compliance requirements. Yes, we are a security company in places. Across these wins, customers constantly prioritize integrated workflows, trusted infrastructure, AI ready engagement capabilities, and flexible deployment models, and security over disconnected point solutions. As our markets evolve, we are sharpening our go to market strategies, adapting our pricing models, and improving our processes. Partners have always played a central role in the communications and customer experience markets because they maintain trusted customer relationships and expanded geographic and commercial reach.

We believe 8x8 remains significantly underdistributed relative to the size of the opportunity. As a result, we are increasing our investment in partner recruitment, enablement, onboarding, automation, and deployment tools that make it easier to do business with 8x8 and easier for partners to deliver solutions to their customers. At the same time, we are exploring new consumption based pricing and deployment models that reduce decision risk and traditionally associated with enterprise software purchases and simplify trial and activation. By reducing decision risk and removing traditional barriers to adoption, we can accelerate time to value and better align our go to market motions and sales cycles with product innovation cycles. Fiscal 26 was also a year of operational discipline.

We completed the FUSE migration process, integrated several financially immaterial but strategic acquisitions, reduce debt meaningfully, and maintain disciplined operating expense management while continuing to invest in innovation, infrastructure, and AI capabilities. The past several years has required focus, restructuring, and hard operational decisions. This year, we begin to see the benefits of that work show up across the business. As we enter fiscal 27, our overarching objective remains straightforward. Drive sustainable growth, profitability, and cash flow. Our priorities remain clear.

Expand our global communications infrastructure, for AI driven customer engagement, deliver innovation that enables seamless interaction to build trust at every stage of a customer journey, scale our partner and distribution ecosystems globally, and continue to drive operational discipline and efficiency. Let me finish by saying that I believe 8x8 is operating from a position of strength. With a clear strategy solid financial fundamentals, and a growing confidence in our ability to compete aggressively in a rapidly evolving market. Thank you again to our customers, our partners, our employees, and our shareholders for your continued support. And with that, let me turn it over to Kevin.

Kevin Kraus: Thanks, Samuel. Good afternoon, everyone, and thank you for joining us for our fiscal Q4 2026 earnings call. In addition to our shareholder letter, detailed financial results are available in our press release, and on our Investor Relations website. Therefore, I will focus my remarks on a few key highlights. Unless otherwise noted, all figures other than revenue and cash flow are presented on a non GAAP basis. Q4 was our fourth consecutive quarter of year over year revenue growth, capping a fiscal year that returned 8x8 to growth. Achieved healthy operating profit, and meaningfully strengthened our balance sheet. We exceeded our guidance ranges for service revenue, total revenue, operating profit, earnings per share, and cash flow from operations.

We had another record quarter for service revenue and we have had positive operating profit and cash flow from operations in every quarter for over 5 years. Total revenue was $185.2 million, and service revenue was $180.2 million.

Samuel C. Wilson: Growing 4.65% year over year, respectively.

Kevin Kraus: These results reflect a continued strength in our usage based offering. Our usage based offerings, which include our CPaaS communication APIs, digital channels, and AI solutions, set another all time record and accounted for approximately 23% of service revenue in the quarter. Compared to approximately 14% in Q4 25. Gross profit was approximately $118.9 million, approximately $2 million above the gross profit implied by the midpoint of our Q4 guidance. Gross margin as a percent of revenue was 64.2%, modestly below Q3 due to the continued mix shift toward our usage based offerings which in aggregate carry a lower margin profile. But can add meaningful profit dollars as the business scales.

As we have noted in prior quarters, our usage based offerings can fluctuate which may introduce some quarter to quarter variability in gross margin. We are actively working to expand margins within the usage portfolio, but as that part of the business grows, it does impact the consolidated gross margin percentage. Importantly, we are leaning into where the market is growing and not where the highest gross margin sits today. As we have articulated over the past few years, we manage the business to operating income. And we have consistently demonstrated the ability to offset gross margin mix impacts with disciplined operating expense management. Operating income came in at $19.8 million, resulting in a 10.7% operating margin.

Well above the high end of our guidance range and demonstrating our commitment to operating discipline. Operating expenses were favorable to expectations and down 5% year over year. For the full fiscal year, total operating expenses declined approximately 3%. Reflecting our continued focus on our cost structure. We have meaningfully reduced our debt service cost through significant paydowns of debt principal over the past 2 years. Trailing 12 month cash interest paid declined approximately 51% from fiscal 24 to fiscal 26. From approximately $35.6 million to approximately $17.3 million.

The combination of higher revenue, lower operating expenses, and lower interest expense resulted in net income of $16.6 million and fully diluted EPS of $0.11 per share. $0.03 above the high end of our guidance range. Cash flow from operations was $14.4 million for the quarter, significantly above the high end of our guidance range. The strong Q4 result reflects both operating overperformance and favorable timing of collections and payments. And as a reminder, that cash flow from operations can vary meaningfully quarter to quarter based on timing. We ended the quarter with $93.3 million in cash and cash equivalents, excluding restricted cash. An increase of approximately $6.4 million sequentially. We ended Q4 26 with $323.9 of principal debt outstanding.

In early April, we made a $14.5 million principal payment on the term loan. Bringing the principal balance down to approximately $309.4 million as we entered fiscal Q1 27. This represents a reduction of approximately 43% from the August 2022 peak of $548 million. Turning to guidance. We are providing both first quarter and full year fiscal 27 guidance. Our outlook reflects continued discipline and a measured view given the broader macro environment as we continue building a more diversified, durable business. We are leaning into where the market is growing fastest. While protecting profitability through the operating discipline we have demonstrated quarter after quarter. For fiscal Q1 27, we are providing the following guidance.

Service revenue is expected to be between $175 million and $180 million Total revenue is anticipated to be between $180 million and $185 million anticipate gross margin between 63.5% and 64.5%, reflecting the ongoing mix shift toward usage based revenue. We anticipate operating margin between 8.5% and 9.5%. This results in a range for fully diluted non GAAP earnings per share of $0.08 to $0.09 per share. Based upon approximately 147 million fully diluted shares outstanding. In fiscal Q1, we expect to make cash interest payments of approximately $1.8 million which reflects the term loan interest payment. The next semiannual interest payment on our 2028 convertible notes occurs in Fiscal Q2.

We anticipate cash flow from operations to be between $10 million and $12 million. For fiscal 27 full year, we are providing the following guidance. Service revenue is anticipated to be between $707 million to $727 million Total revenue is anticipated to be between $727 million and $747 million. We anticipate gross margin to be between 62.5% and 63.5% noting the increasing amount of usage based revenue in our revenue mix and potential variability in the proportion of usage based revenue. Full year operating margin is projected between 9% and 10%. Translating to non GAAP operating income of $70 million at the guidance midpoint.

We expect fully diluted non GAAP earnings per share to be in the range of $0.33 to $0.38 per share assuming approximately 150 million average diluted shares outstanding. For the full year fiscal 27, we anticipate cash flow from operations of approximately $45 million to $52 million. Our fiscal 27 cash flow outlook reflects the timing of certain nonrecurring items. We expect to make $39.5 million of principal payments on the term loan during fiscal 27 in line with the loan's amortization schedule. Looking back, fiscal 26 was a year of meaningful progress on the financial fundamentals of the business.

We returned 8x8 to year over year revenue growth expanded our usage based offerings, and delivered positive operating margins in every quarter, meeting or exceeding our guidance each time. We also significantly reduced our debt and cash interest costs, driving net income growth to over 19% for the year. The discipline we applied to managing the business gave us the flexibility to invest where the business needed it most while still expanding profitability. Our forward planning reflects continued focus on the same priorities. We view the work ahead as a multiyear journey, and the foundation we built in fiscal 26 positions us well for what comes next. With that, I will turn the call over for Q&A.

Operator: Thank you. A question, please press *1 on your telephone and wait for your name to be announced. To withdraw your question, please press *1 again. 1 moment for questions. Our first question comes from Siti Panigrahi with Mizuho. You may proceed.

Analyst (Siti Panigrahi): Great. Thanks, guys. This is Chad Tibibah. On here for Siti. Good quarter. I just wanted to start on sort of the fiscal year 2027 service revenue guidance. You are obviously coming off 4 consecutive quarters of good growth. Could you sort of walk us through the guidance range and any puts and takes you are thinking about as you are entering the year, obviously, with the low end implying slight slowdown in growth versus, you know, 2% growth at the high end.

Samuel C. Wilson: Alright. So I am going to just start by giving you some context, and then I will let Kevin fill in details. I think the thing that this that you need to realize in sort of generically the street and our investors need to realize is that usage is now 23% of our revenue, and we do not have as good a visibility in usage when we go out 3, 4 quarters. And so we are naturally conservative in how we forecast usage revenue out that far because it is not contracted.

And so what you will see from us overtime and we have tried to highlight this last couple years as usage has been growing steadily is that we naturally will be slightly more conservative in our guidance because of those things. Sure.

Kevin Kraus: I think, additionally, we look. Our revenue geography is changing too. We have about 40% international revenue. there is geopolitical environment that is a little bit unpredictable at times. So there is no reason for us to lean forward, as Samuel said. And I just wanna point out that with respect to the revenue mix, we have been navigating through this for quite some time, and we are a fairly agile company. We can manage our business, to continue to deliver the operating income and the cash flows that are healthy for us.

Analyst (Siti Panigrahi): Got it. Super helpful. And then just 1 follow-up here on the gross margin guidance. I understand there is a lot of usage revenue that is coming in and increasing as percent of the mix, but wondering if you could break that down a bit for us. How much of that is driven by sort of more traditional CPaaS and messaging, versus some of your newer AI solutions And anything you can share on the gross margin profile of those newer solutions would be super helpful.

Samuel C. Wilson: Okay. So I will start with this 1. So let me break it into a couple buckets. If you look at our traditional UCCC business, those gross margins are being over the last couple of years with really no changes except for a little bit of quarter to quarter variability. If you look at SMS messaging, I think it is kind of the question you are getting at the bottom of the stack. The commodity messaging. On a year over year basis, I would say the number of SMS messages we sent was not substantially larger. what is been changing is the mix of all the things in between.

So we have we have done in our CPaaS business a higher percentage of more margin rich products over the last year. So that is been a positive. And that is offset by the new AI products. The new AI products when they launch for example, AI Studio for our new customers, we are giving them some credits to get them started. Those kinds of things, AI costs are very hard to predict. As you guys read the news as well as I do in Thropic and OpenAI and others change pricing on a regular basis. And those kinds of things.

And so those products themselves as they start and I, you know, I find this with any really new product. As a new product starts, it starts at a lower gross margin. And then as we scale it and get economies of scale out of it, we will grow the gross margins over time.

Kevin Kraus: 1 thing I would like to add on to the usage, we do have a variety of margin profiles for the variety of usage products that we have. I think that over time, it will also change perhaps a little bit as we expand some of our usage products geographically and not just focus in certain regions where maybe the pricing might be a little bit more competitive. The other thing I will say about usage revenue is that it is much lower cost from an OpEx perspective. And while you see the gross margin percentage might decline, we are focused on the dollars. And so the gross profit dollars is something that we look at obviously very closely.

And more can fall to the bottom line. So we are interested very much in scaling that part of the business, and that is actually where the market is moving. So we are going toward where the market is moving and we are not focused on a particular gross margin profile at a given point in time.

Analyst (Siti Panigrahi): Awesome. Thanks very much, guys.

Operator: Thank you. Thank you. Our next question comes from Peter Levine with Evercore.

Analyst (Peter Levine): Congrats guys on the close to the year. Maybe just a follow-up to the prior question. Samuel, I know you said it is hard to get visibility, but maybe help us understand how these contracts are structured. In your prepared remarks, you kind of talked about outcome based pricing. it is more usage based. But are there thresholds that these customers agreed to in terms of usage Maybe just help us understand, like, how you know, I know visibility is light, but just help us understand how these contracts are structured and, you know, what customers are actually committing to.

Samuel C. Wilson: Peter, no problem at all. Look. Let me just let me step back, and I swear to God, I will answer your question in excruciating detail in a second. If you think about new and emerging technologies, right? I think it is completely fair on our part and we really think about the customer and put it at the center of our universe, going to a customer today and saying, hey, I need you to forecast how many a voice AI interactions you are going to do a year from now or 2 years from now is I believe, fundamental lunacy. And they think it is fundamental lunacy too. So the way we structure the contract is this.

We charge a reasonable rate on a per usage basis with zero commitment. And then as you raise your level of commitment, we will put a discount in to your rate on a per interaction basis, per outcome per transaction, per credit, or however you wanna think about it. So at a very basic level, if you give us a commitment for a year or even month to month, we will give you a 5% or 10% discount. If you give it to us for a year, we will give you a bigger discount. Those kinds of things.

And but what we find is even when we get commitments the customers just do not know a lot on the AI product and even on some of the CBAP messaging products. How many marketing campaigns are you gonna run? How many authentications are gonna come in? How much OTP is gonna happen? Those kinds of things, and so they always want to commit at a number that they is substantially below what they think they are going to actually use. And so they are willing to capture some discount. But they always wanna really get away from this concept of shelfware or unused commitment.

And it is why we have embraced the usage based business model because it was obvious years ago to us that CFOs were getting incredibly frustrated with unused seats and unused software. Trust me, my CIO is incredibly frustrated about it and so that was why we were going to see more and more of this consumption based pricing. driven by credits or dollars or however you wanna do it. But really, it is that notion. And so long-winded answer, Peter, To say, a fair price on a per interaction basis and a discount when you are willing to commit.

Analyst (Peter Levine): No. I appreciate the detail. And then maybe, you know, for Kevin, maybe help us understand like, what is the threshold then on gross margins? And then when can we see that kind of start to tick up? I know, again, to my prior question, it is hard to get the visibility, and we are still trying to figure out the seasonality. But where's like, what is the threshold for gross margin question on the OpEx side, where op margins, call it, sub call it, 9.5% this year? You talked about cutting cost out of the model.

Just kind of help us with the pull and take between the gross margin impact and where is the cost coming out on the operating side.

Kevin Kraus: Sure. Sure. Hey, look. We do not have a precise answer on the gross margin threshold. This is about mix. Right? And we talked about it being a little bit more difficult to predict. What I would focus on the cost side is cheaper routes to market. Okay? So we are deploying AI internally to generate pipeline, to have customer interactions and sales processes that are much cheaper. Than they were in the past. So we are focused there on not only increasing the revenue from that, but doing it in a much cheaper way. Other areas internally where we are deploying AI operational efficient efficiencies across the entire org. We are covering more customers.

Through the support systems that we have in place, and we are doing that more cheaply. So cost to delivery cost to deliver should come down. Naturally over time as we deploy these operational efficiencies. And again, from my perspective, we have a multiyear track record of being agile enough to adapt to any margin percentage change to have an operating income and cash flow that delivers what we need to delever and strengthen our balance sheet. So it is difficult for me to have thresholds for you, Peter. But it is something we are constantly looking at and, you know, I would like to see us over the long term.

Again, if the usage goes up at a lower OpEx cost, you know, double digit, non GAAP operating income percentages is really the target I have in mind, and I would like for it to stay there and grow.

Samuel C. Wilson: Peter, 1 other thing I wanna just add on kind of riffing on what Kevin's saying. I need you to keep this in mind is forecasting token usage and cost is really hard right now even for us. As a software company. Right? So we have our developers running on 1 of the coding 5 coding engines. We have our marketing department using automation for content delivery and all those kinds of things. And the cost associated with tokenization and what is happening is really hard. And I think we are still not even in we have not even started the game yet or the top of the first inning. Around token optimization.

I am sure there will be some startup companies that come about over the next few years that help optimize token usage. But it is still early, and so it is really hard to sort of have these notional thresholds. Because something that is a low margin product after you rinse and repeat it through AI a bit can become a pretty nice margin product once you get it up that curve.

Kevin Kraus: Yeah. And I think some of the things that companies do and that we did Samuel alluded it earlier on the call where you are seeding your customers with some free usage and so forth, that can really, really grow very rapidly and drive a whole lot of top line revenue with not a lot of whole with not a lot of operational cost. So I look forward to that happening, for us at some point.

Analyst (Peter Levine): I appreciate you taking my questions. Thank you. Thanks, Peter.

Operator: Thank you. Next question comes from Catharine Trebnick with Rosenblatt Securities.

Analyst (Catharine Trebnick): Yeah. Hey. I have a question on debt and free cash flow and capital allocation. So you reduce the debt 43% from its 2022 peak and consistently done a good job of generating operating cash flow. So my question is, so how do we look at 2027? Are you priced at prioritizing cash flow, further deleveraging, reinvestment in AI, usage based product? What do you anyway, can you help me out there?

Samuel C. Wilson: Thanks. And then I got it, Catharine. So, look, I would say what is changed slightly for us is, you know, we did 2 acquisitions with 3 acquisitions last quarter. So the acquisition engine is sort of back in at 8 by 8, and we are really proud of the acquisitions we did. So we did 1 last year and we did-- I think we did a total of 4 last year. Sorry. We did 1 a year ago, and then we did 3 last quarter. So we are tucking in some really interesting technologies. That we can use to sort of round out the portfolio and offer better solutions into our customers. So that is the use of capital.

We delevered another $14.5 million in April. that is the use of capital. And we did buy back shares a couple quarters ago. Share buybacks are a little tougher because, you know, I gotta work around covenants and bank things and other things. And so I have my preference is sort of in rank order. Acquire things that help us improve our customer outcomes. Pay off debt, and then buy back stock number 3.

Kevin Kraus: Yeah. And, Catharine, we do we have like, $39.5 million, you know, $40 million of debt payback in this year's plan. Including the And how, including the yeah, $14.5 million.

Analyst (Catharine Trebnick): Okay. And then just a little bit that you had a good quarter, Samuel. So congratulations on that. And we do like your new color scheme, so you have to tell your marketing guy that. On the platform differentiation versus peers, so you have been at-- you are open orchestration, centric platform versus more closed ecosystems than peers. Can you kind of explain to me why on a competitive takeaway today, that how these win rates or average deal sizes for AI enabled c CX deployment-- I mean, how are they coming together? I am kind of curious on that aspect.

Samuel C. Wilson: Sure. So 2 things. First, I will cite a stat. Right? 67% of CFOs and CIOs want to go to consolidate the number of vendors they have. And so you know, first and foremost, why? Right? Lower total cost of ownership? So what you are getting from us is if you consolidate your spending dollars with 8x8, you are getting a business communications platforms. I believe the walls are coming down with these categories of UC and CC and CPaaS. Right? Our engaged product interactions was up 300% year-on-year. Is that a CC product? Is that a UC product? Yeah. Somewhere in the middle between those 2. Right? So the walls are coming down between these segments.

Corporate America and corporate world wants to consolidate the vendors and they wanna pick a vendor where they can get economies of scale in terms of spending and discounts, contract simplification, worldwide support, single throat to choke, all the things that you have heard over the past, right? So when we you know, I would say when we pitch that story 5 years ago, there was a pretty big technology discount you had to get from 8x8 To get that story. Today, I think that technology discount does not really exist. We have world class CPaaS. We are on I think we are number 11 or number 10 in the world in terms of CPaaS volumes. Right?

So we are way in front of most of our normal competitors. We have got great contact center. We have got Engage, which completely is differentiated from others. We have got UC. And now on top of everything else, we have got AI Studio, which is absolutely amazing in the sense that it is prompted etcetera and you see it. And so I think when we go into a company Oh, sorry. When we go into a company, what we are trying to do is have a business communications platform discussion and not have a UC CC, let me dive on price because that is what my competitors like to do conversation. Well, thanks, Samuel. Appreciate it.

Analyst (Catharine Trebnick): Thanks, Catharine.

Operator: Thank you. I would now like to turn the call back over to Samuel C. Wilson for any closing remarks.

Samuel C. Wilson: Thank you, everyone. Thank you for joining us today. I would just like to sort of end with this concept. Right? We are operating from a position of strength. We have a clear strategy, which after 4 quarters of growth, which some of you doubted, clearly, is working, solid financial fundamentals, and growing confidence in our ability to compete aggressively in a rapidly evolving market Let's not forget it is somewhere between $70, $80, $90 billion in size. Depending on which third party analyst, you know, you use as a reference point. Think we are in a great position as a company to move forward.

I thank you for a chance to sort of give you an update on where we are, and I look forward to talking to you again after the end of next quarter.

Operator: Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.

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