Good day, ladies and gentlemen, and welcome to the Second Quarter 2017 8x8 Incorporated Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference is being recorded. I would like to introduce your host for today's conference, Joan Citelli, Director of Investor Relations. You may begin.

Thank you, operator, and welcome everyone to our call. Today, I am joined by 8x8's Chief Executive Officer, Vik Verma; and our Chief Financial Officer, Mary Ellen Genovese, to discuss 8x8's second fiscal quarter of 2017 financial results for the period ended September 30, 2016. The earnings press release which was issued today after market closed, is available on the Investor section of 8x8's website at www.8x8.com. Following our comments, there will be an opportunity for questions. Before I turn the call over to Vik, I would like to remind all participants that during this conference call, any forward-looking statements are made pursuant to the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. Expressions of future goals including financial guidance and similar expressions using the terminology; may, will, believe, expect, plans, anticipates, predicts, forecasts, and expressions which reflect something other than historical fact are intended to identify forward-looking statements. These forward-looking statements involve a number of risks and uncertainties including factors discussed in the Risk Factors sections of our annual report on Form 10-K and our quarterly reports on Form 10-Q and in our other SEC filings and Company releases. Our actual results may differ materially from any forward-looking statements due to such risks and uncertainties. The Company undertakes no obligation to revise or update any forward-looking statements in order to reflect events or circumstances that may arise after this conference call, except as required by law. I would also like to note that during this call, we will provide financial information that has not been prepared in accordance with Generally Accepted Accounting Principles, in addition to our GAAP results. Management uses these non-GAAP financial measures internally in analyzing our financial results and believes they are useful to investors as a supplement to GAAP measures in evaluating the company's ongoing operational performance. Investors are encouraged to review the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures. This reconciliation has been provided in the financial statement tables included in our earnings press release. And with that, I'll turn the call over to Vik Verma, Chief Executive Officer of 8x8.

Thank you, Joan, and thank you everyone for joining us today as we discuss our second quarter of fiscal 2017 results. We will follow the same format as in the past beginning with a high level summary of our accomplishments, followed by a more detailed discussion of the financial results and metrics by our CFO, Mary Ellen Genovese. 8x8 continue to execute very well in the second quarter of fiscal 2017 with year-over-year increase of 24% in total revenue to a record $63.2 million and 23% increase in service revenue to $57.7 million. We also witnessed strong organic growth in service revenue from our mid-market and enterprise customers of 36% year-over-year. Revenue from these larger customers now accounts for over 53% of our total service revenue compared with 48% one year ago as we continue to see good traction moving up market. A combination of healthy cash flows, strong margins and disciplined financial management lead to our 26th consecutive quarter of profitability on a non-GAAP basis with non-GAAP net income of $5.3 million or 8.4% of revenue. With the digital transformation and communications now being embraced by larger businesses, the benefits of our differentiated enterprise communications as a service solutions are becoming even more apparent and compelling beyond a significant cost savings they inherently deliver. Last month at our annual CIO forum, the IT executives at our top global enterprise customers spoke about the tremendous improvement in productivity, customer engagement and overall business performance they are experiencing with a fully integrated stack of cloud communications, contact center and analytic solutions. With our global pure cloud footprint, enterprise class features and industry leading quality, reliability and security; these customers the finally able to focus their attention on improving their core business rather than managing a complex communications infrastructure. 8x8 is taking…

Thank you, Vik, and thank you all for joining us today. Let's begin with some highlights from our income statements. 8x8 posted strong top and bottom-line results for the second quarter of fiscal 2017. All the numbers being reported this quarter are organic following the June 2016 anniversary of our DXI acquisition. Our total revenue was a record $63.2 million, an increase of 24% year-over-year. With service revenues at $57.7 million, an increase of 23% year-over-year. On a constant currency basis, total revenue increased by 26% and service revenue increased by 25% year-over-year. On a year-to-date basis, our total revenue increased 25% year-over-year and our service revenue increased 24%. On a constant currency basis, both total revenue and service revenue increased 26% year-over-year. Service revenue from our mid-market and enterprise customers increased 36% year-over-year, this is 40% on a constant currency basis. We continue to see a greater percentage of our revenue coming from larger mid-market and enterprise customers each quarter with over 53% of our total service revenue coming from these larger customers compared with 48% in the same period a year ago. Non-GAAP net income for the second quarter of fiscal 2017 was $5.3 million, representing 8% of revenue compared with $3 million, representing 6% of revenue in the year ago quarter. This is 8x8's 26th consecutive quarter of profitability on a non-GAAP net income basis. On a GAAP basis, we posted net income for the quarter of $27,000 or $0.00 per share. Our GAAP gross margin was 73.7% compared with 72.9% in the same period last year. On a non-GAAP basis, gross margin improved 60 basis points from the year ago quarter to 75.3%. GAAP service margin was 81.2% compared with 80.4% in the same period last year. On a non-GAAP basis, service margins improved 63 basis…

Thank you, Mary Ellen. I am very proud of the pioneering role EGHT by EGHT continues to play in the deployment -- development adoption and deployment of digital communications worldwide, as more and more eager new market participants are beginning to realize; delivering real time communication globally in a reliable, secure, high quality manner is no easy task, and we are very fortunate to have made the necessary investments over the years, to be in the position we are in today. However, I'm even more excited about EGHT by its role posturing in the next generation of integrated cloud communications and data analytics technology which will further enhance the value businesses derive from our solution. With that we will be happy to take on any questions you may have for us today, operator please open the line for any question.

[Operator Instructions] And our first question comes from George Sutton of Craig-Hallum. Your line is now open.

Thank you, nice results guys, so Vik you spent a fair amount of time on the analytics service and I want to make sure we put it in the context, if we look forward a few years, how large might that represent an opportunity, for example your current art to [ph] for a customer's just over $400 a month, can you give us a sense of how that might get expanded through the service?

Thank you, George, I mean this is something, I mean we've been hinting at and been working out for several years. Here is what we realized our, you've had you know our customers helped us realize, so we should give them the credit we can't take it, but if you are talking about an enterprise today, the one thing that every person that is an employee of the enterprise has, is typically a mobile phone, and one of the biggest things that we provide is you can have an app on the mobile phone, which where the company provided phone number is resident which gives them access to the company's directory, as well as any relevant CRM and ERP system. What that tells you is; we are at the nexus, so think about a global company, every real time interaction, every outbound call, every inbound call, every text message, every video conference, along with the relevant CRM or back office system or LinkedIn or whatever context; is available to us, how valuable is that, increasingly we are seeing that over time we will become more and more focused on the specialty apps, I mean the one that we just talked about for sales force analytics, it's quite fascinating, it takes away, I mean anytime a sales person calls a prospect, it immediately update salesforce.com on whether how long the call was, who was called, whether it was a commit, a pipeline or best case category, and all the information is entered automatically and this person can be on their cell phone, they don't even have to log it to sales force in order to do, that when they log in the information is automatically updated. So increasingly we see that as becoming more and more critical, because we literally out…

It's fascinating potential, just a one other question for Mary Ellen relative to your out performance on non-GAAP income this quarter, you suggested and you did guide for the numbers to be unchanged for the year, so clearly, you're taking that access and you're investing it somewhere. Can you be somewhat specific as to where you're investing the incremental profitability.

Yes, absolutely. One of the areas that we want to continue to invest that we started to invest was in modernizing our system. So, we've gone live on a new cloud aero pieces [ph] in this past quarter, as we mentioned we went live on the stage one of our service cloud, we've unified the entire all of our global sales team in service teams under one sales force instance, and one service cloud instance. We want continue to develop it, continues to move forward on these types of types of modernization in fact the Systems originally our back office systems were built for SMB business, but now 53% of our revenue is enterprise and we need to do things differently, so there's a big focus on that, so that's where some of our dollars are going. And surely will want to continue to develop our team on the mid-market size, we're seeing great traction on the channel, we're going to bring in some additional channel sales people and we're going to be investing in modernizing and continues to increase our region engine. There is a line of business out there and we believe that we're at the forefront of for the enterprise accounts especially the global accounts, we believe that we're uniquely qualified to capture a market, so we're going to continue to invest.

Super, thanks for the detail, good job.

Thank you.

Thank you and our next question comes from Dmitry Netis from William Blair. Your line is now open.

Thank you very much guys, very next quarter.

Thank you.

Okay, I got a couple of sort of metrics questions, one is on the channel side I think Mary Ellen you just mentioned sort of the traction there, can you qualifies as far as the growth in that segment, in terms of that the amount of revenue that channels bringing in, and then secondarily if you could talk about the International as a percent of revenue, where it is today, where it was last quarter potentially, a year ago have we seen sort of improvement on that front as you kind of went out globally with your platform.

Okay, good. Let me take the second part of question first, the international part of our revenue. Last quarter was directly about 12% of our revenue came from our international operation, about a year ago it was approximately 10% of our revenue came from international operations. Today we're looking at 10%, this is most current fiscal quarter was 10% but that's mostly due to the significant decrease year-over-year in the pound versus the US dollar. If you actually look in constant currency is over a plate solution business that we acquired in in December of 2013; that company has been growing well over 30% year-over-year in constant currencies. So we're doing very well in the U.K. operation, unfortunately with this significant decreasing year ago the average exchange rate between the pound and the U.S. dollar was a $1.55 compared to an average exchange rate in this past quarter of $1.31. So we've see a significant decrease there on exchange rates, but that's what the core businesses are growing very, very well and in local currencies. Now on that channel side as you know we don't break out our channel revenue separately but as we have said is the fastest growing segment of our sales teams, our channel business is going very nicely so we don't break that out separately but it is going very nicely.

Okay, I think that the numbers I recall you guys talk about last couple quarters was in triple digits, it was still there close to that number. Anything you can.

Yes.

It fluctuate up and down depending on the -- they tend to build some of our largest deal to fluctuate up and down. But look increasingly we are finding that Channel is becoming a bigger and bigger portion of our focus, because we really do think we have a differentiated offerings and the fact that we can now start to offer analytics, as part of a communications solution is something our channel partners a very excited by. We've had a couple of channel partners particularly in retail, they're better than our -- no disrespect to our direct sales team which is fantastic but in some instances because of the relationships that they have, they are actually acting almost like surrogate inside our direct sales people. So we see more and more focus on channel going forward.

Okay very good, and then if I may one other question I had was on the mid-market MRR which decelerated somewhat, can you do to qualify that it sounds Mary Ellen you mentioned this could have been a tough comp with the three big deal booked a year ago, so I guess I'm referring to that 30% of MRR growth of in terms of booking, as a percent of total bookings. Could that number essentially slide up going forward because they easier comp or that sort of the steady state we should be expecting here going forward.

Yes, so again that was 30% is what I had announced in our mid-market new monthly recurring revenue bookings, however again a large piece of our revenues coming from the UK and the next -- and again they are doing very well some constant currency that was 40%. So that 40% actually compares very nicely to last quarter on an organic basis which was -- which was 36%. So we're in the ballpark, certainly a year ago quarter that number on an organic basis was much higher but again we had closed significantly, we had announced next week, that was a year ago quarter, excuse me, and the one customer that has 7,000 employees -- global employees. So I would suspect in the mid-30s to 40% is a reasonable organic growth rate in the mid-market, and you're going to see that fluctuate up and down because we are we have a very nice pipeline we're going to close the deals, and they can be a little -- were focused on the mid-market of course so when those big deals come up that's going to increase the numbers and then and then the next quarter you may not get a big deal. But I think comparably speaking we're doing great compared to the large comps that we had last quarter, a year ago quarter.

Fair enough. Maybe Vik, just one last one for you, just competitively speaking. Well, you seeing -- if you qualify your take on the competitive environment as far as maybe Microsoft type of business, sort of changes that we have seen there over the past quarter. Have you seen any traction there or have the competitive environment against Microsoft -- potentially? And on a comparison side, I was just going to say there has been a fair amount of consolidation there as well, and just whether that's impacting you positively or not, I'm just curious.

Actually yes and yes in both. And so the comment on Microsoft is quite interesting because it does seem like and again, I don't speak for competitors; I mean Microsoft is an amazing company led by an amazing CEO but we don't see them Skype for business. And it seems like the press from Skype for business also seems to have gone down. We were at a recent Gartner event and I don't think they were present, or if they were, it was a very small presence. So, again -- I stay paranoid but I haven't seen much Skype for business and they are not the ones that we typically face. Going back to your comment on contact center; we're thrilled about that because as I said, little-by-little I think I very deliberately inserted that statement about that contact center is starting to grow very steadily. I mean those growth numbers for our contact center are comparable to -- right around; they are faster than our revenue growth rate. So that's the very good news, right. So they are high 20s, low 30s, which is starting to feel good because we're being able to sell it now as a standalone product. And we now have this integrated contact center offering on one platform. So we have global tenants; so basically to follow the same contact center, we have the fact that our virtual office and virtual contact centers fully integrated and now we've got this quality monitoring software that is delivered purely on the cloud on a per seat basis with no or very little professional services. So that's something that we think is now starting to give us something that is truly differentiated and it also helps that a lot of the folks that who can't compete with and being acquired. So we appreciate that.

Excellent, keep up the good work guys. Thank you.

Thank you. And our next question comes from Catharine Trebnick from Dougherty & Company. Your line is now open.

Thank you. This is Jack [ph] on the line for Catharine. One quick question for Vik, can you give us some additional color on the upcoming release of easy contact in North America? How does this really shape, I mean your contact center opportunity in the region and assuming this is the lower AFP than VCC, does this impact margins at all?

No, I mean -- it won't -- we don't anticipate it impacting margin materially but here is the part that it's significantly higher ASP than our virtual office. So keep that in mind because virtual office represents approximately 80% of our revenue, 20% of our revenue is contact center. This easy contact now solution, I mean that's the reason we've bought DXI, it's an awesome product because we're now starting -- we always start with -- we drink our own bath water or drink our own champagne, there is some analogy like that but we've been piloting it with our own sales team. And it's essentially a non-traditional contact center with the ability to do outbound calling as well as inbound calling, it enables our customers to be TCPA compliant and the efficiency that they are getting is phenomenal; I mean literally the ability to get an entire lead list and you go out and you start dialing them and then the right lead gets connected with the right agent, with the right context and the efficiency is significant. And so we are on-track to release it in January. And again, the intent is you start up with that and then you can couple it overtime with our salesforce analytics function where you can then tie into every activity of every sales person on an aggregated basis so you can get supervisory level looks, as well as individual agent looks, performance of inside sales agents and how what they are doing is correlated to customers by category of customers and by amount of revenue each generate, and by the time that you anticipate closing them. So we'll be able to provide this entire complete and comprehensive solution that will optimize the operations of inside sales teams. And so we view this as -- I don't anticipate it having a negative impact on our margins I anticipated, helping our margins going forward.

Okay, great. Thank you for taking my question.

And just by the way, we're using it internally as well and with great performance.

Got it. Congrats on the strong results guys.

Thank you.

Thank you. And our next question comes from Amir Rozwadowski from Barclays. Your line is now open.

Thank you very much, and I very much appreciated the color on Microsoft but there has been some -- at least some concerns about several quarters ago as well as some of the premise -- larger premise space companies out there making a bigger push in the marketplace. I was wondering if you could give us a little bit of an update on the competitive front from that side. And then thinking about the competitive landscape, you folks have done a remarkable job of expanding your product suite organically in terms of developing additional applications and additional functionality into your product base, wanted to upsell into your customers. And have also been selective about inorganic applications in order to improve the product suite. As this market continues to mature and we've seen still a fragmentation in the marketplace, is there an opportunity to sort of bolt ahead of your competition thinking about things inorganically in order to do so? Thanks very much.

Thank you, Amir. So I mean -- we see competition from different folks. We have not seen a concerted push into this market from any of the big names. We've seen announcements but we haven't seen it really impact any of the customers that we are in on a day-to-day basis. Having said that I just always operate on paranoia, I respect everybody, they are good people out there. I'd like to think what we have is, frankly, significantly better and it's stuff that we have spent a lot of time and energy and some amazing engineering talent to build. Global communications where you have high quality, high reliability, the ability to recover anytime that there is a fault, local number dialing capability, toll free numbers, the ability to do emergency calling, and then tie all of this stuff so you have one unified view of all the data flow and all the information globally in an enterprise is pretty difficult to do. We've got 12 data centers out there. So I like to think we have something unique and then the fact that we architected it in such a way that every endpoint is collecting data and sending that data to a Big Data environment or Hadoop environment out here. So you've got 86 million interactions that we are actually logging every day. So we think those things help differentiate us, and the fact that we are now providing these very niche applications that basically leverage the fact that we have the first access to the real-time communication interactions, both inside and outside of the company starts to really provide greater and greater value to our customers. So we think that's a pretty sustainable thing. The other thing I'm very proud off and I apologize if I sound like…

So it seems like the way we should think about it then is really sticking through some of your knitting -- organic development in bolt-on acquisitions is really the primary focus of the strategy at this point.

Right, that is the primary focus. From time to time, we maybe opportunistic, if the right opportunity presents itself but ultimately, I think that strategy is working and the goal is to keep doing these bolt-on acquisitions which either enhance our global footprint or add key functionality to our core platform that we can then turn into an integrated product offering for our customers.

Thanks very much for the incremental color and again, congratulations on the results.

Thank you. And our next question comes from Nikolay Beliov of Bank of America. Your line is now open.

Hi, thanks for taking my questions. Mary I missed the constant currency subscription that I mean -- I think on a reported basis was 23%. What was it adjusted [ph]?

For the revenue – subscription revenue?

Yes, subscription revenue, correct.

So for the second quarter it was 25%.

Okay. So it looks like the trend of subscription revenue acceleration is continuing and the reason I'm asking is, last quarter for the year you said subscription revenue was organically is going to be flat in terms of growth rate versus last year and product revenue is going to be flat. Maybe you can update us on these numbers for the second half of the year, that will be great.

No, we did give guidance. As you said, we increased our guidance, certainly have some headwinds and we have that one discontinuing piece of our business that we're going to be winding down. But if you look at us from apples-to-apples comparison, we would expect certainly to continue in the 23% to 25% to 26% range from a subscription revenue perspective. We don't see any deceleration. As we continue to move up market, some of these big customers that we acquired are going to take longer to deploy but we're still continuing to focus again on the market and our S&B is still going strong, I know it's the point of that revenue that put us very quickly. So the only thing I'm afraid of quite honestly is the deterioration of the U.S. -- to the pound to the U.S. dollars, hopefully it won't get much worse than where it is today.

Got it. And one question for you Vik, what is your strategy in collaboration, especially for system collaboration, I think you had an update on the product, maybe early in the summer and what do you think like -- how you're going to be offering [indiscernible] functionality at some point in the future?

Great question. Dmitry will have something to show you in the not too distant future.

Okay, thank you.

I think the phrase I've used in the past is stay tuned.

Thank you. And our next question comes from Mike Crawford from B.Riley. Your line is now open.

Thanks. It's nice to see the application, integration in the NOX you're providing. What do you do for customers that want to integrate communications into their own application platforms?

Yes, I mean we have the APIs to enable people to do that. That is -- that's part of the reason, so this is one of the things our APIs that we have developed are intended to control your PBX, it's not supposed to be simple widget that I allow Mike to call Dmitry or Mike to Mary Ellen and it's just a simple thing like a new driver calling another customer or something like that. Our thing is, you control the entire PBX so examples of what we do with our APIs -- that some of our customers are actually -- retail customers are not leveraging. So example; if you have a high value customer and they call -- the core line, not even just the customer service line and this is not one where there is a context center sitting there; it can be based on a number, it can be directed to different things. So if it's -- I'm using the smaller as an analogy but if high value customers can be directed to a totally different line, then for example, somebody that may go to a general line. So that's one part; and then as part of that you have to integrate to somebody's back office system so you can get the context and that data because again, the platform we have provided and we have done this overtime is every call, inbound and outbound; every message, inbound and outbound; every video conference, inbound and outbound; including how long, who, what was the number and that -- we have resonant in our cloud-based system. Now we just need context and it's easy to context, you get reintegrated to LinkedIn which gives you complete context. And by the way, now I understand why LinkedIn was so valuable,…

So what is it that -- like a Twilio could do it or perhaps you couldn't do or is that not the case?

So -- one, I have tremendous respect for Twilio. What they have done is, go after very simple messaging. So hey, I want to send a broadcast message, I'm the football coach, I want to let everybody on my football team know that there is going to be two day practices or something. So you can program that and what they have done, the allegiance of what that company has done is make it very easy for non-technical people or people who don't have necessarily all the relevant skillsets to be able to go in and do that. So that's why they held a large developer communities etcetera. For global communications where high reliability quality, compliance, security etcetera is critical; I think we do that better than everybody else. We can do what Twilio does, we don't it -- we don't have that developer community but we are not targeting a developer community; we are targeting professional services organizations that can go in and control your entire PBX so that they can derive business aide. Imagine a large global hotel chain, and let's just say in the Philippines you get a 911 call that is made out of your hotel; it would be good for the security office in corporate headquarters to be alerted, right. You may not rely on the local employees to do that, you could suck those kind of rules up with our system. So basically imagine any inbound and outbound call with regard to how it's dispositioned, where it goes to, how it's recorded, how tabulated we give people APIs to control. So think of us as focused on professional services and enterprise, and not focused on the casual high volume developer community. We are focused on the complex systems where we think we can provide very differentiated high margin business.

Okay, great, thank you.

Thank you. And our next question comes from Jonathan Kees from Summit Redstone. Your line is now open.

Great, thanks for taking my question and my congrats also on the quarter. I wanted to -- I guess ask high level questions in regards to the tractions you've had with the mid-market and enterprise, certainly it's the larger part of your revenues now. Usually they have a bidding process, and I guess if I can ask them, can you give some color in terms of your win rates, in terms of these bids, have they gone up overtime?

Yes, so -- more often than not it's competitive, one of the things we need to get better at is being able to -- maybe which we have finally starting to invest, pretty much all the demand generation has been very simple. I mean it's all inbound, we get called by somebody and then we participate. I would say there are lot of things we do well as a company but I don't tell you we can do a lot better demand generation in marketing area where we can get more recognized. Having said that as you can see from our revenue, we have great upside if we could start to get that part of our business better and we're starting to invest in that area. So typically I would say our win rate -- and I don't have the exact numbers in front of me but I think if we are in the process, I would tell you more often than not, it's definitely more than 50%. I would say it's significantly higher than -- we very rarely lose if we're in a very competitive bidding process but I don't have the exact number with me right now.

Okay. So it sounds like now is there a room to grow there in terms of rate but it has already been pretty high to begin with. So it -- I also know she didn't talk about any of those big 10s in which you've already had seven and there was like three more that's -- that could still be now and talked about later. So I guess that's still something to be stay tuned for. Let me ask in regards to the competition and not so much from Microsoft and I'm sure it's the same thing where you're winning a lot of this from legacy and from those who can have the global services and the crowd solutions that you're providing but more -- what is your -- how you're faring against your peer crowd peers? And how is that been going again ex-Microsoft?

No, and I think -- again, I feel pretty good about that. If it is a global deal, if there is an integrated platform, if it is on the larger side, I think we will win significantly more than we will lose. So I feel pretty comfortable that if we are in the mix, I think several of our competitors doubt the fact that they get deals where there are uncompleted, God love them, that's great, that's one of the things that we aspire to, in other words, but I think if we compete it, we'll be in a very good position and as part of our investment and demand generation, I want to make sure I start to get some of those deals, and/or make sure I'm at least in the mix, I actually don't mind the competition, I just want to make sure that we are there so that all the uncompleted deals step-by-step go away because if they are completed deals, we feel very good about our chances.

Okay. And like you could just show up here, you have a high chance of winning. So good luck with that and hope more of that to come.

Thank you.

Thank you. Our next question comes from Will Power from R.W. Baird. Your line is now open.

Great, thanks. Just a couple of follow-up questions. You all -- I guess Vik and Mary Ellen, both talked about some of the context and our traction, it sounds like some -- very nice trends on that front. I guess I'm just wondering as you think about the higher ASPs, what that actually means for the margin profile of the company going forward, both thinking about gross margin impacts and operating margins?

That's a good question, Will. So as you know, at of our Top 10 fuels [ph], six of the Top 10 this quarter was channeled with -- I'm sorry, it was context center as well as virtual outfit. And we've been averaging about that same number around five or six for the last couple of quarters. So we aren't definitely moving up. In many cases, we used to leave with virtual office and then bring the context, now we're able to actually leave with context center and bring the virtual office in. Obviously the more and more context center, the higher the service revenue is because it's a pure software. So we're doing -- I don't exactly when it's going to moving into future years but I would suspect that we've done a very, very nice job on our service margins and improved in our service margins, and now would expect that we will continue to do that and part of that success will come from more and more contact center revenue, including the easy contact now that we bring here to the U.S., that will be available in January.

And don't forget some of the newer decision support, analytics engine that we are bringing to the market such as the Salesforce analytics, such as quality monitoring etcetera. I think we started this process of transforming the company about two to three years ago and it is amazing; in order to sell a core telephony service, particularly selling a core telephony service to S&B [ph], going up market where you're selling a complete comprehensive solution with analytics and decision support software, and the ability for business process improvement and productivity enhancements, it's a very different skillset. And we have been moving our sales team, I think we've brought in a whole -- a very amazing direct sales people, we've been augmenting our channel team, we've been augmenting by bringing on board a comprehensive professional services team that knows how to go in and do business process consulting. So that process, we have been doing and we've been kind of evolving to it and now you're starting to see that the products are kind of heading in that direction also. So it will take us a few quarters to kind of just continue this evolution but I think we feel good about where we are.

Okay. And Vik, maybe just a follow-up; just quickly on the previous API commentary, the opportunity there -- it sounds like you think you're well positioned there. I guess I'm just curious is there a bigger opportunity to push that more aggressively, have more dedicated folks there? Or is that more of a one-off, inbound professional services work for customers that are looking for particular solution, I'm just trying to understand…

It's very valuable strategically. And the key there -- but again, we're going at it slightly differently. Again, I'm not trying to get $0.10 for every message or anything like that, that's not us; we're much more above -- we want to be able to charge high ASPs for customers and provide them very significant value at a per seat basis, our model is either subscription or we're adding elements of pay as you go but generally its subscription based model. So we see APIs as very core to that and on the one hand APIs are very critical because they have been critical for winning some of our larger retail customers because you have to integrate with their back office systems and your -- they also want -- every one of them wants customization of various business rules and could you do it in such a way that if the CFO calls, it gets routed immediately to these seven people. All those start -- they all start to be very customer rules; and so we've developed a language called script-date [ph] that has been in process for some time and we'll demonstrate it to you guys, we'll not release it formally for probably a quarter or two but we'll show it to you guys in the next few months. But we are now finding that push is going to increase and so we're looking for -- we have -- we'll unveil a lot more on this in the next quarter or two but API is a very significant portion of our strategy but the target is around enterprises as opposed to the developer community.

Got it, okay, that sounds great. Thanks.

Thank you. [Operator Instructions] And our next question comes from Mike Latimore from Northland Capital Markets. Your line is now open.

Great, thanks. Just on the enterprise market, can you talk a little bit about the pipeline there; maybe -- actually how much it's changed and suppose it started with the fiscal year?

No, the pipeline looks very strong. As a matter of fact, we are continuing to see it increase, we've got a few things going that I'm sure we'll be in a position to talk about a little bit later on but the park that has changed and it is quite dramatic and I think Mike, you have followed us for a long time, and you've followed the space for a long time. You can just see in the logos that we're announcing and it starts with people almost having a cloud first mentality which I'm very grateful for, I just wasn't used to it for the last year to two years. So we are increasingly starting with people who actually want to talk about cloud. And then the part that has been fascinating is the level of communication, particularly at our CIO level that we are starting to now interact with has changed with this concept of being able to have hardcore communication data on a global basis with all the relevant context and what can I do to make business decisions. And I think increasingly that's becoming our focus. So we see that becoming something that -- legacy PBX have no hope in hell of doing; and so because of that we think that the cloud trend for enterprises will continue to accelerate. So we feel good about that space which is why I think you see it, you're seeing now that that's was 65 or 67 depending upon currency.

65% and 67% on constant currency.

Constant currency of our new bookings. So we're increasingly seeing that the larger customers are adopting and the other part that we are seeing is that channel is starting to become comfortable with selling cloud to the extent you're not having to do the same level of handholding you used to do previously, and then the ability to sell these value added services through the channel becomes even more valuable to us. So I think from that perspective we see good things happening at the enterprise level.

And just on the deployment of the enterprise deal, you have one -- were there any major sort of tranches of deployment in the quarter and we have a quick update on deployments of this bigger deal?

No, actually all move in across the board, I mean all good. Some are moving very fast and pushing us. I mean there was one customer where 4,500 seats were deployed, I think that was actually -- one of the CIOs made that comment to me; he said 4,500 seats were deployed over -- I think a two/three day period over the weekend. So yes, we seem -- I mean, look I'm very fortunate; we've got some amazing employees, I mean we have about 1,000 people which I think tends to be smaller than most but we have some amazing people here and the fact that you can get 4,500 seats deployed over a weekend it's pretty amazing. And so I think we are continuing to see deployments steadily and then we've brought on board a professional services, global services person in Jeff Romano [ph] and he's just added another layer but he's building this whole global model with support centers in different parts of the work and just kind of continuing to add greater program management capabilities, etcetera. So, so far so good.

Thank you. This does conclude our question-and-answer session. I would now like to turn the conference over to CEO, Vik Verma for closing remarks.

Thank you all for listening into today's call. We look forward to meeting with you over the coming weeks and updating you on the current quarter results in January. In the meantime, have a very happy holiday season. Thank you very much.

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program. You may all disconnect. Everyone have a wonderful day.