I thank you all for coming. We'll get kicked off here in one second. Might take a minute or two to walk in, but first, introductions. Really happy to have 8x8, Samuel Wilson, CEO. Sam, congratulations again.
Thank you.
I think we're all, first time seeing you since you took that over, and then Kevin Kraus, CFO. Congratulations- Thank you. -to you as well, and thank you both for being here.
Michael, thank you for having us. Thank you for Bank of America, for inviting us. Obviously, a world-class conference. Thanks for it. Thank you.
Yeah, thanks. Great to be here. Oh, absolutely. Thank you guys both. You know, Sam, since you have been, I mean, obviously, you were CFO prior to CEO, but, you know, relatively new to the CEO role. Maybe just give us an overview of priorities for the next 12 months, and maybe some of the strategic shifts-
Yeah.
that you're implementing.
What we are is we're a company in transition, and look, I'll sort of sometimes I'll use the word I, but you should always think it's we, right? This is the management team, came together in a room six months ago and really decided where we thought the markets were changing, where the inflection points were, and what we should do to capture the new things that are happening. It's interesting because as the news has been rolling out over the last six months, I think we get a higher and higher level of conviction that what we thought was gonna happen is actually happening. We think the contact center market and customer engagement in general is at an inflection point. Sometimes we use the word contact center as a synonym for customer engagement, but it's not.
Remember, only about half the interactions with customers for any given company occur at the contact center, and the other half occur in non-contact center type of people. We thought that that market was an inflection point. What we wanted to do was try to capture... What really becomes important here is that we had been an on-prem to cloud company. That had been our, you know, our thing, right? Avaya never made the move to cloud. They've got 89 million seats. Those have to go to the cloud vendors. We're going to fight for those seats. We thought there was an opportunity here to start to wrap up this new emergence of customer engagement that was occurring, and I can talk more about that if it's interesting to you.
Of course.
What we decided to do was reduce spending in small business, realign our sales capacity, and those kinds of things. Now, that has an immediate effect on revenue.
Mm-hmm.
What we did was, we did an action in January. Everybody knows that. You know, it was an 8-K filing, where we did an action in January to realign the sales capacity, et cetera. I've taken a bunch of money, I've moved it into R&D. Like, the amount of digital spending we do today, digital advertising spending today, is radically less than a year ago. The amount of R&D spending is up 82% over the last two years, right? Putting that will pay off over the next one to two years as we launch products at this market inflection point. You see some of the spending we did with the Fuze transaction in Intelligent Customer Assistant, which is now in beta. That's a digital version of an ML/AI, a bot system.
Mm-hmm.
our ecosystem strategy, our APIs, those kinds of things. We brought the revenue growth down, and then with the launch of the products, with the launch, with the fruition of all that R&D spending, we'll reaccelerate revenue, and in the meantime, we're growing cash from operations 20+%. I predict that we'll grow cash from operations over 20% for the next 3 years, and that is actually my North Star metric as take several years to flush through the previous equity grants done under our previous administrations. The team came together and said, "This is going to be our North Star metric, cash from operations per share." We've done a whole series of actions to reduce our dilution over time and increase our cash flow.
It's great overview. Thank you. Thank you for that. You know, lot of moving pieces.
Yep.
You know, you already mentioned the 8-K filing, your refocus, a greater focus on cash flow generation, some of the reallocation of expenses. Last 12 months, you know, we also had, you know, Russia, Ukraine, I think, maybe caused some pause or pullback enterprise IT spending with the Fed tightening cycle.
Mm-hmm.
A lot would agree, maybe it's put some pressure on businesses like 8x8. You know, where are we today, though, with the business versus where you were 12 months ago? Are you more confident that we get reacceleration in the top line in the next 6 to 12 months, or are you about the same, or are you feeling worse?
Trying to give me that 6-to-12-month window versus what about 7 to 13? Can I negotiate with you?
I'm trying to give you an A, B, C- -multiple choice question here.
Let me actually cover the first part first, and then maybe I'll slightly dodge the second part, or at least dance around it a little bit.
Okay.
All the stuff we've talked about the emergence of ML/AI technologies and customer engagement and having a platform and ecosystem on top. This is not a dream of ours. We do it today internally. What it's led to is we have the highest retention rates right now we've had in years. Yes. Do I think the economy is in recession? I read the same newspaper as you read, even though newspapers don't exist anymore. I read the same news sources you do. We know there's economic pressure out there. At the same time, we're having the highest retention rates we've ever had in, like, recorded recent history. The reason, I think, is because we've deployed these technologies, we've improved customer satisfaction, and we're driving a higher level of customer engagement.
That is the fruition of the technology shift that we're talking about. The thing that we're trying to sort of advocate to companies is, yes, economic cycles happen. Yes, you may be under pressure, but I have tremendous confidence that we're gonna hold on to our base. I have huge confidence in my engineering organization. It's just not fast, right? You're talking my average sales cycles are 9 to 12 months.
Mm-hmm.
Right? Let's say it takes 4 to 6 quarters to launch a product, soup to nuts, get it through beta, and then another 2 to 3 quarters to get it to actually show up in the income statement, right? This is a 1 to 2 year. When you transition from a, you know, sugar high of Google AdWords which is not durable growth to a product-led strategy, it takes a bit of time to go through that transition. Do I believe revenues will reaccelerate? 100%, I believe it. Am I, you know, you accuse me of being delusional? Absolutely, I'm a CEO. It's in my job title.
I was going to say, you answered B to my second question, by the way. I'm going to say you said the same.
Yeah.
Is that okay?
Like, you know, what we're seeing now in terms of, like, deal velocity, I think some of your question touched upon that, right? Like, we're not seeing any big, you know, big negative. There could be a little elongation in, you know, the decision-making, but in terms of the bookings that we're seeing now and the deal velocity, it's not anything much different.
Are you seeing an increase in down-sell, though? I heard a few times this week, and I hadn't heard that word for a while.
So-
I heard it a few times from vendors.
Let me put this up. When we talk about retention rates, we talk about logo churn plus down-sell. That's our retention rate.
Yeah.
I like, To me, it makes no difference, right? A $1 less of recurring revenue, whether it came via down-sell or lost logo, is effectively the same thing to me.
It's all the same to you.
It's all the same to me.
Yeah.
We are seeing the highest level of retention we've had in a long time. The other thing we monitor really closely, Kevin and I watch like a hawk, is our credit card default rates, right? We still have a large small business base. It's our legacy.
Mm-hmm.
It's well in excess of $100 million a year. We still see, you know, we still monitor those credit card default rates. During COVID, when I was CFO, I could see when there was a problem in the small business base.
Mm.
cause you'd see credit card default rates spike.
Sure.
We're not seeing any of that.
Yeah. Very, very consistent over the many-
Very consistent. Very low level.
Yeah.
We're fine.
Okay, that's great to hear. The reallocation of R&D and, you know, increased focus on contact center, a couple of months ago, you announced, I thought it was a pretty unique strategy, the kind of the partner ecosystem.
Mm-hmm.
-strategy, right? Really leveraging outside partners and their expertise. Can you give us some more color on that now?
Sure. Okay, so just quick, I'm going to give you the 30-second version.
Yeah.
of what it is for the audience, and then I'll give you the update on it, right? What we believe is much like other forms of you know, previous generations, marketing operations, CRM systems.
Mm-hmm.
et cetera, the native strategy isn't going to work in the end. You have to have a host of players. There are 2,000+ startups out there around this contact center space now and in excess of $100 billion of venture capital allocated to this space. That means they're going to build amazing products. Those amazing products are not trying to compete with us. They need to ride on top of a contact center. We have rearchitected our platform from the ground up to be a perfect mate, a match, to those next-generation technologies. Much like Marketo, you had marketing operations companies that could plug into Marketo, you'll have a core 8x8 contact center, can do everything basic, and then you can plug in next-generation technologies. So far, we have had an overwhelming response from the community.
You announced 15 partners, I think, a month or two ago. Was that right?
I think today we're at 18.
Okay.
We've already onboarded six. We've got another four or five that have demoable products. I mean, we've already launched six.
Mm-hmm.
It's super fast, we've built an entire API layer with security, governance, et cetera. Actually, we have a waiting list. One of the things I'm obsessed about is customer satisfaction, and I don't want to sign up 50 ecosystem partners and then have crappy onboarding and everything else.
Got it.
I'm actually limited by how fast I can onboard these partners, so we're sort of capturing direct categories right now. We started with conversational AI. We've added health scoring, Agent Assist, payments, workforce management, along with our traditional CRM and some of those kinds of things. We've got new ecosystem partners in all those areas.
You touched on AI. you know, our sales did a survey, like, two months ago, and they surveyed 200 clients and asked, you know, who's at risk from AI? Who's going to benefit? I think every contact center company ranked at the top of the list.
Mm.
as at risk, right? Cause knee-jerk reaction was that you're not going to need seats anymore, AI is going to take over contact center. That was knee-jerk.
Sure.
I think the view is more nuanced today than it was a month or two ago, but some people still view contact centers as at risk. I was thinking, in your view, you know, why or why not, does AI eliminate the need for a human contact center agent and potentially cause TAM compression?
Okay. It does, right? I know you expect me to stand up here and say ML/AI will not reduce the number of contact center agents. It should. That's what technology does brilliantly.
Mm.
It reduces the amount of human capital that's needed on rote items and replaces it with technology, machines. This has been since the cotton gin and even before then, right? We reduced it. The difference is, I think what people miss is the human being market for contact centers is a $220 billion a year market. That's McKinsey's number.
Yep.
The entire cloud contact center software market is $4 to 5 billion? What should happen is that $220 billion number becomes $180-.
Mm-hmm.
That $4 to 5 billion number becomes $15 billion.
Mm-hmm.
What you're replacing with is you're replacing human beings. If your entire world was the number of seats in a contact center, first off, 80% of it's still on prem.
Mm.
It's still going to come to the cloud. We're not selling just seats, right? We sell the bots. We sell work, you know, workforce management. You sell a bunch of other things. You're selling the technology that eliminates the seat. The best example I can give you about this is ourselves. We have less tier one agents today than we had three years ago. Why? Cause we've deployed all these technologies in-house. This is not, as I said earlier, it's not a dream. We do it ourselves. That's it. We have more tier two agents. We have more tier two agents, which I think should be called specialists. Why? Cause it wasn't about cost savings. It was about increasing retention. For every percentage point I increase in retention, I can hire a ton of agents. It's not what I'm looking for.
What I needed to do was increase customer satisfaction so I could increase retention. I put more tier 2 agents in. We have increased customer satisfaction over the last 2 years, thereby driving higher retention rates and driving a more stable base of business. Now I get a more efficient LTV to CAC. I can do this back to the finance world. Yeah. Right? Yeah, please. I'm driving a higher LTV, the more I increase retention, the more I drive a higher LTV.
We cut our CAC costs because we're going through this transition, but as we come out of this transition, we're going to have a situation of new products, new technologies, a higher ARPU, if you will, or an, you know, whatever it is for a customer, a higher amount of money we get out of a customer, driven with a great customer satisfaction engine, and that's how I think we emerge. In the meantime, generate a lot of cash. Makes a ton of sense, and you touched on ARPU, too. Does the pricing model change, though, with AI? Yeah. Do we move from seat-based pricing to usage-based? Yep. I guess, you know, remind me again, what are the economics of your partnership relationships? Let me, let me cover the first part, and then the second part. Yes.
When you can't sell a bot on a seat basis, right? It runs 7 by 24, whatever. You sell it on a consumption-based model. Same way we sell minutes in the contact center or SMS messages or any of the host of other things we sell in telecom, right? Complete usage-based model is a small platform fee, keeps out the riffraff. There's a platform fee and then a pure usage-based model. Very common in ML/AI. The more the bot does, the more money we receive and our partners receive. We've got multiple tiers of partnerships. We've got a resell model, where we resell the product on our paper and we do that in certain situations, and then we've got an ecosystem.
Today, that ecosystem is free. In the future, we'll monetize it the same way Force.com or others monetize through various ways, either gateway usage or API usage or those kinds of things, % of revenue. I don't know if everybody knows this, but if you're integrated with Salesforce, you send them a check every month. Mm-hmm. You have to. We, we do, others do, right? Salesforce figured out how to monetize. By the way, the ecosystem partners all understand at some point we'll monetize. Why do we do this? To drive ecosystem adoption on day one, we're like, "Look, if you're one of the first X number of ecosystem partners that signs up on boards, integrates, secures, and starts selling, we'll give you a longer runway before we monetize." Yeah, makes sense.
Yeah, and none of that is, you know, baked into our forward-looking guidance at this point. It's too early stage to bake that in. It's early days. That's the roadmap. We should think about, though. Sure. Thinking about the model, how you drive the top line of the model, and then incremental margin. That should be the thought process. This is super scary for Kevin, me, Wall Street community, but it's where the customer's at, is you're going to start to see us go from a... We were the telecom industry, so we were always a, you know, recurring revenue, 90%, sort of variable revenue, 10%. Of course, yeah. That number is going to trend... The 10% is going to trend up.
The pure recurring revenue is going to trend down a little bit over time. That makes sense. That, that scares some people. Yep. Right? The shift in the model away from the recurring. By the way, it's how the whole rest of the world works. Yeah. McDonald's revenue is based on the number of hamburgers eaten last quarter, right? At some level, there's been consumption. I mean, you know, how many shorts The Gap sold directly drove how much revenue The Gap produced, right? I mean, Yeah. It's. We sort of became addicted to subscriptions. The world, I mean, look, we buy $100 million of software a year, right? The world does have some consumption component part of it. Yeah, but to your point, communications and general enterprise communications broadly has just been more, more recurring. Yeah. Right? Yeah.
That's been the model going back for 25 or 30 years. Yep. Right? Yeah. That's what everyone's accustomed to. Yep. It's going to be a little bit of, everybody take a deep breath and cross the chasm, but it's great. It's great for our customers, and it's great for us. The thing that people miss is, look, we might get a little less revenue from a large customer because there'll be a little less shelf wear. Mm-hmm. I think we get a lot more revenue from a small customer who's willing and able to try a new technology when before they were too scared because you're like, "I got to buy how many seats, and how much is it costing?" Yeah, onboarding cost was so much higher. Yeah, and all that stuff. Harder to get over.
With ICA, for a couple thousand bucks, we can set up a simple use case and have the customer up and running, deflecting cases. Yeah. If it works great, pay us. If it doesn't work, don't pay us. The other thing. Excuse me. The other thing I just want to point out is, you know, as we attach these ecosystem partners to our platform, that enhances the stickiness of our platform, of our recurring revenue. Sure. That should help with customer satisfaction on the customer's ends and just general retention improvement over time. Yep. Cause it's a, it becomes a bit of a ball of twine. Let me give you a great example. Why would an ecosystem partner come to us?
Ecosystem partner comes to us because we deliver a case to a chatbot and say, "Hey, the person came off the website, came to the chatbot." The person goes through steps, authenticates, goes through steps 1, 2, and 3 and says, "Look, I really need to speak to an agent." We immediately grab that case, all the metadata association and the authentication, and pass it to a live agent. Says, "The agent will call you in just a second. What phone number do you want us to call you back?" Bam, your phone rings. Person says, "Hey, Michael, I see you've authenticated. I see you've done 1, 2, and 3. Great. How can I help you today?" You don't have to reauthenticate. They know it's you. You don't like... Faster, better customer experience. Nothing drives me nuts more. I called a very large...
They run our 401(k), happens to be based in Boston, starts with an F, and I had to reauthenticate three times going through their call center agents, and I'm like, You know, I sell software that stops this from happening, right? I mean, can I talk to your contact center guy? It's a great opportunity for a sale.
... you know, wanted to shift gears for a minute. Everyone talks about Microsoft, your relationship with Microsoft.
Yeah.
How should I think about the opportunity to grow through Microsoft and Microsoft Teams?
Okay, everything we've talked about here, ML/AI technologies, a platform.
Mm-hmm.
et cetera, et cetera, we don't care what collaboration tool you pick. That's what makes us partially different. We're not trying to fight in the world of collaboration. We can put the telephony in place, and we have the world's best integration with Microsoft Teams, I believe, because we can do presence, because we can do transcription, because we can do handoff seamlessly between contact center, because we're shortly going to be integrated with their chat systems, we can do all this customer engagement, all these ML/AI technologies, a single training platform, a single set of data with Teams, without Teams, et cetera. I'm not trying to compete with Microsoft Teams. If you want to run Microsoft Teams, I want to be your customer obsession platform of choice. If you want to run Google, I want to be your customer obsession platform of choice.
Second thing is, we can mix and match. There are lots of businesses that will not and should not deploy Teams to every single use case. Lobby phones, retail storefronts, warehouses, manufacturing plants.
Mm-hmm.
-line employees, et cetera, great. Deploy our technology to them. You can save a ton of money. If you work as a blue-collar laborer on a manufacturing line at Ford, are you going to have a Microsoft Teams license? How many video calls are you going to do? How much chat are you going to do? zero. You can take our 8x8 Work app, put it on the person's phone, his boss can communicate with him, he can do everything else, and it's just incorporated in the regular price of everything else. There's a whole bunch of mix and match. Remember, we have the world's best solution for telephony behind that. It's not just selling customer obsession, it's also just selling, if you want to put voice on Teams, we're the best at it.
Our largest Teams environment customer operates our telephony in, what, 35, 36 countries around the world.
Normally, in Operator Connect, that'd be, like, six carrier contracts.
Yeah.
6 different vendor engagements, 6 different deployments, et cetera. Call us, plugged in, done.
Yeah, one-stop shop.
One-stop shop.
Incredibly complex across regions to get that put together yourself. You know, Sam, you touched on it earlier, you know, kind of your North Star is profitability, cash flow from operations. How should investors think about capital allocation? Presuming you do continue to drive increases in cash flow, where, how do you allocate that?
All right, if everybody wants to understand what we're gonna do at 8x8, buy William Thorndike's book called The Outsiders. It summarizes it greatly what I saw in my time on Wall Street, et cetera, et cetera. It says you can do five things with capital, and let me screw this up here. You can invest it, you can buy back stock, you can buy back debt, you can do M&A, or you can pay a dividend, right? Our number one priority right now is delever the balance sheet.
Yeah.
My brain looks first to the statement of cash flows, then it wants to build the fortress balance sheet, and then it looks at the income statement. We're generating cash flow, step one, and Kevin's done a phenomenal job at this.
Mm-hmm.
That's why he's the CFO. Phenomenal job at generating cash flow, and he's gonna generate more over the next few years. Number two, build a fortress balance sheet. That means we fund our own growth. We can go through economic cycles, we can deal with all the headaches and trials and tribulations. Number three. We will first pay down debt, and then, you know, to be fair, first, we're gonna invest in R&D. Second, we're gonna pay down debt. Third, we'll look at follow-on steps. Probably buy back stock would be next.
Mm-hmm.
Opportunistically, we'll do some M&A probably over the next few years. We've done opportunistic M&A over the last decade.
Yep.
You know, Fuze was a home run transaction for us.
Mm-hmm.
If I can get, you know, if another Fuze falls into our lap, we'll do it.
Can you remind me, what is your target leverage?
0. I'm an old school person, right? I dream of 0 debt on the balance sheet. That's a fortress balance sheet.
Net, net debt to EBITDA is 0.
Yes.
That.
Net debt-
When I'm solving my model for return capital to shareholders.
Debt of 0.
So-
Freaking net debt of zero.
Yeah.
Like, why? I mean, like, if you have debt of zero, you can survive everything. No one can put you out of-
Yeah.
Like, all this noise.
It's un-American.
When I came to Silicon Valley in the mid-90s, tech companies didn't carry debt.
Okay.
They didn't carry debt because there were economic cycles.
Yeah.
You never wanted to cut your R&D spending in an economic cycle because your competitors or your, especially your foreign competitors, didn't deal with those issues. I worked at Applied Materials for a number of years. We gained massive market share in every down cycle because we continued to invest in R&D. When the up cycle came, and it always comes.
Mm-hmm
... we gained tons of share. Like, my dream would be zero debt. My second dream is zero net debt.
Okay.
After that, we can argue about some financial ratios, but, like, really, zero debt would be my dream.
Okay.
That's my target.
Now I can build my model.
I mean, we made a, we made a statement on our last earnings call about over 3 years of time, returning $250 million.
Yep
to shareholders, primarily through debt repayment. We're 10% of the way there.
Mm-hmm.
We prepaid $25 million of our term loan in early May.
Yeah.
We're on that path.
Assuming the multiple stays where it is, hopefully goes higher, but stays where it is, it is still a return of capital to shareholders.
Yeah.
Exactly, yeah.
Greater percentage is the equity value in the EV.
Exactly.
Correct.
Very, very simple, painless math.
I mentioned earlier, we do opportunistic M&A, right? The way I would see us using debt is we opportunistically do M&A. We'd probably use cash more than stock, right? We'd.
Yeah
Opportunistically raise cash, and then based on the M&A transaction, generate more cash flow, and then pay back the debt and rinse and repeat. I'm not...
Makes a lot of sense.
I'm not 100% opposed to debt. What I'm opposed to is some general level of debt you're supposed to carry at all time.
Mm-hmm.
I have NOLs for days are long, right?
Yeah.
There's no tax shield BS or anything else.
Mm-hmm.
I generate cash flow, I want to pay off my debt, and then I want to buy back stock. I... Henry Singleton, I have a picture of him in my office.
I'll have to buy the book you mentioned as well. M&A, you know, there's been a lot of talk that consolidation is showed and will occur.
Mm-hmm.
-In the UCaaS space, you know, it's still relatively fragmented. You are seeing some pockets of price competition that could-
Mm-hmm.
potentially be solved through consolidation. What's your view on that? Does it have to be consolidation to get to a more stable marketplace?
Well-
or not?
No, Look, the one company that starts with a Z and ends with an M, that did most of the price competition isn't consolidatable, and I don't think anybody would want to consolidate them.
Mm-hmm.
I'm sure they dream about being consolidated. Look, remember, we're still, what? Your guess is as good as mine, 75% on-prem, 80% on-prem?
Probably 75 or 80.
Yeah, whatever, on-prem, right?
Whatever, yeah.
There, you can consolidate the UCaaS side of the house, but really, in the end, there's still 89 million seats of UC on-prem at Avaya, 78 million seats at NEC, 53 million seats at Cisco, and 37 million seats at Mitel. Purely my guess numbers, I know they look pretty accurate, purely my guess numbers. I'm not trying to be like... Like, there's 200 million seats of four vendors there, none of which have a decent cloud product. Actually, three of the four, which have no cloud product.
Mm-hmm.
I think there's still tremendous opportunity in just that on-prem to cloud piece. Now, on-prem to cloud with XCaaS, so you can do customer obsession, becomes a very powerful driver. I think some of the price competition at the low end is actually been a good thing, and we're not seeing a lot of it, just a slight bit, is a good thing because we need to unlock that base. I think one of the things is probably not all 200 million seats are sitting at a $20-something price point.
Mm-hmm.
I don't care. Like, I don't mind selling $8, $12 seats because I can sell $150 contact center seats.
Your base case is in the, in the P times V equation, that the potential compression in P, you know, doesn't more of an offset the growth in the volume side. You can still see good industry growth, even with pricing pressure?
Yeah, a little bit.
Yeah.
I think what you're gonna see is, and this is where 8x8 is uniquely positioned, right? Where we're seeing a little bit of pricing pressure is at very low end.
Mm-hmm.
The Z company's product isn't that good.
You mean contact center, right?
No, no.
Okay.
I mean, UC.
Okay, UC.
In UC.
Yeah.
It's not that good, right?
Yeah.
It's tackling that low end at a relatively low price.
Yeah.
Right? We can compete there. We've got that mid-range, the informal contact center.
Mm-hmm.
the receptionist, the billing department, et cetera, and we've got the high-end contact center seats. I think what you have to look at is a blended price, and our blended price has actually been going up because we've been selling more contact center.
Mm-hmm.
Our blended price at a given customer is actually, you know, over the last couple of years, been going up. If you nitpick and go at the low end of UC, is there some pressure? By the way, a lot of that's also driven by Microsoft Operator Connect, right? If you just want dumb voice, I don't look at Microsoft Operator Connect as a competitive threat. I look at it as like, wow, what Microsoft did was, they've opened up companies to move because they needed cheap seats to move.
Mm-hmm.
There's been companies that basically said: "Oh, if you want to move, every seat has to be a $20 seat." We now mix and match across all of our seats, so you can have your $10 seats, your $12 seats, your $15 seats, your $40 seats, your $100 seats.
No, it's a good, it's a great perspective to have. We have about a bit over a minute left here. Just wanted to talk about the move upmarket.
Yeah.
I think historically, investors saw that 8x8 as being more SMB focused, you know.
'Cause we were.
You were.
Mm-hmm.
Put a lot more resources into moving upmarket to enterprise, done relatively well there. If you just give me a sense of, you know, where you are today with that transition and why you're succeeding in the enterprise space, relative to history.
Like, I'll just wonder.
Well, I mean, I think, look, it's the R&D.
Mm-hmm.
You know, that is really helping us drive through there. Our ARR in enterprise is, you know, accelerating, you know, if you back out the usage piece of our ARR. You know, for us, I think it's, you know, making the investment and paying off. I, the adding the ecosystem partners on top of that is, I think, attracting, you know, a lot more of the enterprise customers that we have.
Yeah, look, to get us running spot on, our R&D is focused on an ideal customer. That ideal customer is an upper small business to low-end mid-market. If Bank of America walked through that door today and said, "You got my contact center business?" I'd say, "No, thank you.
Our CTO was here earlier.
I don't need to talk to him, Michael, 'cause I don't want his business.
Yep.
Too complex, too difficult.
Yeah.
too customized. That's Genesys's world. What I want is a mid-market enterprise customer who wants to buy off-the-shelf technology that doesn't have a sea of developers, who needs to rely on me as a strategic partner to bring him a complete solution to his specific customer needs.
Mm-hmm.
If you look, the reason we've been upmarket is because we have a contact center. We've been in the business since 2011.
Yep.
You know, small businesses with 20 people don't have contact centers. They just have a collaboration solution.
Just an untapped market, really.
Yeah, that's what's going towards Microsoft and those things, is that low-end market or next to Jive or Dialpad or one of those guys.
Makes a ton of sense. Great conversation, guys. Thank you again.
Thank you.
Thanks, Michael.
Kevin?
Appreciate it.