8X8 Inc (NYSE: EGHT) Q4 2020 Earnings Call Transcript

8X8 Inc (EGHT) Q4 2020 earnings call dated May. 12, 2020

Corporate Participants:

Victoria Hyde-Dunn — Head of Investor Relations

Vik Verma — Chief Executive Officer

Steven Gatoff — Chief Financial Officer

Analysts:

Matthew VanVliet — BTIG LLC — Analyst

Ryan MacWilliams — Stephens Inc. — Analyst

Michael Turrin — Wells Fargo Securities — Analyst

Timothy Horan — Oppenheimer & Co. Inc. — Analyst

William Power — Robert W. Baird & Co. Incorporated — Analyst

Richard Valera — Needham & Company — Analyst

Catharine Trebnick — Dougherty & Company — Analyst

James Breen — William Blair & Company — Analyst

Presentation:

Operator

Good evening. My name is David and I will be your conference operator today. At this time, I would like to welcome everyone to the 8×8, Inc. Fiscal Fourth Quarter 2020 Earnings Conference Call.

I will now turn the call over to Victoria Hyde-Dunn, Head of Investor Relations.

Victoria Hyde-Dunn — Head of Investor Relations

Thank you. Good afternoon and welcome to 8×8’s fourth quarter and full-year fiscal 2020 earnings conference call. Joining me virtually today, as we are all working from home, are Vik Verma, Chief Executive Officer; and Steven Gatoff, Chief Financial Officer. During today’s call, Vik will begin with business highlights of our fourth quarter performance. Following this, Steven will provide details on our financial results and guidance. After these prepared remarks, we look forward to taking your questions.

Before we get started, just a reminder that our discussion today includes forward-looking statements about 8×8’s future financial performance, as well as its business, products and growth strategies, including the impact of the COVID-19 pandemic. We caution you not to put undue reliance on these forward-looking statements as they involve risks and uncertainties, they may cause actual results to vary materially from the forward-looking statements as described in our risk factors in our reports filed with the SEC. Any forward-looking statements made on this call reflect our analysis as of today, and we have no plans or duty to update them.

In addition, some financial measures that will be discussed on this call, together with year-over-year comparisons, in some cases, were not prepared in accordance with US Generally Accepted Accounting Principles or GAAP. A reconciliation of non-GAAP measures to the closest comparable GAAP measures is provided with our earnings press release and PowerPoint presentation deck, which are available on our Investor Relations website.

With that, let me turn the call over to Vik.

Vik Verma — Chief Executive Officer

Thank you, Victoria. Good afternoon, everyone, and thank you for joining us today. We are living in truly unprecedented times as the COVID-19 pandemic has impacted the world in unexpected ways. Let me begin by extending my hope that everybody on the call and your families and loved ones are healthy and staying safe. As COVID-19 spread around the globe, we took decisive actions early on to safeguard our over 1,600 person global workforce by putting into action a business continuity plan essentially overnight and using our own technology to remain productive from home instantly and seamlessly. This not only protected our employees, but put us in a great position to immediately respond to our customers’ needs in this challenging time. We believe the world of work has now fundamentally changed.

Flexible work from anywhere on any device and in any digital form is now not just a nice to have, it is a critical business continuity imperative. Fortunately, we are ready. As you know, we’ve had the investment conviction over the last few years to engineer our platform into a unified, scalable full-featured cloud platform with voice, video, chat and contact center. The last 10 weeks has accelerated platform penetration by many months, if not years. Let me give you a few examples. Over the course of 10 days, we worked with WeSchool to bring Italy’s secondary school system online. We work with big and small telehealth organizations like the UK’s Bionical Solutions, government health agencies, customer service organizations like Acer in North and South America, financial institutions in India and state and local governments to tackle call volume for health lines and unemployment claims. We onboarded new customers efficiently and without any of our employees or partners having to go on site.

We launched a number of new initiatives to better help customers and prospects worldwide. The 8×8 Rapid Expansion Program allowed us to quickly provision additional seats and services to existing customers. And with our self-service e-commerce offering, 8×8 Express, Jitsi Meet and 8×8 meetings, we provisioned and served tens of millions of free and paid customers and were able to — and we’re able to scale quickly and securely.

As you saw through the numerous press releases over the last month or if you tracked our global usage map on the 8×8.com/live website, our free Jitsi and 8×8 video meeting solution skyrocketed to now more than 20 million monthly active users. In just a few short months, Jitsi and 8×8 video meetings are now credible, secure alternatives to Zoom and more importantly, a strategic on-ramp for the 8×8 X Series platform. And the growth was not just standalone video meetings. From February through April, 8×8 X Series platform scalability and usage has also been unprecedented. We nearly tripled the number of app downloads, as well as messages exchanged. And more than quadrupled bundled video conferencing. We also roughly doubled the total number of app-based phone calls in this period. This is extraordinary and we are working to capitalize on this dramatic growth of use on the X Series platform by customers of all sizes.

With that backdrop, I’d like to focus today on three topics. First, I’ll briefly review highlights from our fourth quarter results. Second, I’d like to provide an update on recent product innovation and strategic partnership announcements, including the launch of our Meetings Pro video solution and our recently signed Virgin Media Business partnership. And lastly, I’d like to discuss our long-term strategy as we move through fiscal 2021.

Let me start with our financial results. We delivered solid fourth quarter results, leading to a great close for the year. Service revenue and total revenue grew 30% year-over-year in the fourth quarter, both exceeding the high-end of our financial outlook. Key drivers of the quarter’s growth performance include continued success with mid-market and enterprise customers and channel partners. We grew our enterprise customer base with a record 42 new deals, closed with ARR greater than $100,000. And five of our top 10 wins were Avaya replacements, who selected our X Series platform solution. X Series now represents 43% of our customer base, up from 37% last quarter.

Our single technology platform continues to be an important differentiator as we replaced legacy on-premise systems and single point solution providers. 71% of our new bookings, greater than $12,000 ARR were from customers that selected bundled UCaaS and CCaaS as compared to 52% one year ago. Contact center bookings grew 76% year-over-year and represented 30% of our total new bookings this quarter. More importantly, all of our top 10 deals included contact center, which demonstrates the criticality of having contact center as part of a single scalable technology platform.

Turning to the channel. Our execution was strong again in Q4 with channel bookings up 63% year-over-year. Our channel drove 54% of new bookings overall, including eight of our top 10 deals. Demand generation was strong in the channel as well and we had over 1,000 channel partners registered deals in the quarter. And we are continuing to expand our channel footprint with VARs and master agents with multiple advances in the past month. We recently signed a strategic partnership with Virgin Media Business, one of the UK’s largest business data network providers with services to over 50,000 UK businesses to accelerate the cloud adoption of voice, video meetings, chat and contact center solutions to private and public sector businesses. Virgin Media views 8×8 as a truly disruptive business with innovative products that fit naturally into Virgin’s cloud strategy.

CloudFuel, our partnership with ScanSource and Poly is progressing well. ScanSource is Avaya’s largest distributor with more than 30,000 VARs in its portfolio. Sales and VAR training has been underway since February and we closed our first deals in Q4 as expected. We still have a lot of joint work and opportunity ahead of us as we systematically onboard new VARs and drive broad coverage across the Avaya installed base.

Comstar Technologies, an international IT services firm with more than 30 years of experience reselling technology solutions added our UCaaS, CCaaS, and video meeting solution to its product portfolio and has already moved thousands of customer seats to 8×8’s platform.

Finally, we enhanced our relationship with channel master agent AVANT Communications, which deployed our X Series UCaaS solution for their own use to enable their US and UK employees to work from anywhere at any time with no loss of productivity.

Across every business segment, we won a record number of new customer logos in the quarter, representing 58% of total bookings. In the fourth quarter alone, we onboarded 5,500 new paying customers, nearly doubled the number a year ago and 35% higher sequentially. More than 2,000 of these logos came from our e-commerce offering, all self-provisioned and completely online.

I’d like to highlight a few notable wins that exemplify the extraordinary work that our team did with customers this quarter. In North America, an important channel partner led a seven-digit deal for an Avaya on-premise replacement with a leading global manufacturer. This included more than 5,500 seats of 8×8 X Series, including both UC and contact center. We displaced several competitors during the RFP process because of our global deployment capabilities, voice quality and maturity of our technology platform.

In the UK, we secured both a 2,200 seat Avaya replacement and a 5,000-plus seat win with two local government service borrowers. Another great win out of EMEA is with MSC, Mediterranean Shipping Company, one of the world’s leading container shipping companies headquartered in Geneva, Switzerland. Before selecting 8×8, MSC was using several disparate global communication systems and were looking to consolidate them into a single platform for unified communication and contact center. They needed enhanced workforce collaboration to support disaster recovery and business resilience initiatives, as well as offer omnichannel communication options to its customers. MSC selected 8×8 because of the experience with global solution deployments, as well as compatibility with Microsoft Teams.

Our CPaaS integration is going well as we continue to build traction with large multinational customers. New use cases of CPaaS for SMS registration and notifications include a provider of modern mass rapid transportation in Indonesia and an online game publisher in Thailand, expanding into Vietnam, Philippines and Malaysia.

I’ll finish up with a land and expand example from our installed base that I’m particularly proud of. As India mandated a shift into work from home mode with little warning at the end of March, a widely recognized banking, financial services provider needed to rapidly scale a work from home contact center operation for 7,000 employees. We were able to meet the requirements and activated 1,000 seats just over a weekend.

Moving on to my second topic, I’d like to provide highlights from our product innovation and strategic partnerships. Let me first focus on the strategic importance of video meetings. In the last eight weeks, video meetings have become a mainstay of business communications. Online searches are up roughly 90,000%. Teachers, governments, healthcare providers and companies of all sizes are leveraging video meetings as a way to stay connected and work productively. And as you know from the start, we have offered our video meeting products for free with our Jitsi open source project, our standalone 8×8 meetings and integrated into our X Series offerings. To put this in perspective, in November of last year, just six months ago, we launched our first product based on the Jitsi open source video meetings. In the course of the last 10 weeks, we have built a strategic asset with over 20 million monthly active users, albeit primarily free users. The Jitsi community itself is over 2,000 developers strong, built on a foundation of strong encryption, ease of use and privacy. This is important as over the last month we’ve seen that secure video meetings and strong encryption is a critical differentiator.

In response to these extraordinary market events, in the first half of April, we released our first standalone paid meeting product at $9.99 per month and are now offering it exclusively via e-commerce. Nearly a million times a day, a splash screen at the end of every Jitsi meeting promotes 8×8 paid video meetings or other 8×8 offerings. We also publicly demonstrated end-to-end video meetings encryption and published a spec for open comments to the Jitsi community.

As you can imagine, as a result of all of this activity, our video traffic climbed to more than 1.5 petabytes per day, leading us to evaluate hosting options. To put this in perspective, this is equivalent to uploading 10 billion new photographs to Facebook every day. We selected Oracle for its top tier security and price performance. 8×8’s video meeting solution, including our free and paid offerings, along with jitsi.org, are now live on the Oracle Cloud Infrastructure. We also joined the Oracle PartnerNetwork, and as a result, our video meeting solution are now available in the Oracle Cloud Marketplace, where hundreds of thousands of Oracle customers can now buy 8×8 Meetings Pro. And as you saw this morning via press release, we’re now beginning to jointly promote our work together worldwide.

As I mentioned previously, the last few weeks have been extraordinary and has provided us with an incredible asset that helps build 8×8’s brand, drives potential new customers to our website and is starting to grow a new revenue stream, all while helping our communities and customers, including governments and first responders to communicate in these difficult times.

We are also continuing to advance our platform differentiation through a number of new initiatives, including integration with important third-party partners. Next month, we will formally introduce 8×8 Voice for Microsoft Teams, a cloud-based integration that provides enterprise-grade telephony and global PSTN connectivity to customers that want to retain Microsoft Teams as the collaboration interface. Voice for Teams is currently available for select enterprise accounts with broad availability plan to all regions later in the summer. This capability was critical to our win with MSC, as I mentioned earlier.

This quarter, we will also be formally launching our CPaaS offering globally. We have seen strong interest and have already closed initial deals in the UK and Europe, and we are ramping our CPaaS pipeline in both the US and UK, including many cross-sell opportunities within our UCaaS and CCaaS customer base. We look forward to sharing more details in the near future.

The third and final topic I’d like to discuss is our long-term strategy as we look ahead to fiscal 2021. While the COVID-19 crisis remains fluid, 8×8 continues to focus on using our technology to help people around the globe stay safe and productive no matter where they are. We believe that 8×8 has never been in a better position than we are in today for three reasons. First, flexible work from home is accelerating around the world. The combination of rapidly scaling remote contact centers and virtual offices with the need to provide all workers with the ability to move seamlessly from chat to voice to video will soon be the norm. Our single cloud platform, including secure video is the right answer. As more and more customers see the benefit from having all of their communications delivered from the same platform, it only validates our strategy and furthers our competitive advantage.

Second, our customers are relying on 8×8 as a single platform for transformation and resilience in the face of current and future challenges. Our product portfolio has never been stronger or better positioned with X Series technology platform and standalone voice, contact center, video meetings and enterprise APIs. The overall adoption of our softphone applications for both mobile and desktop, in particular, has been nothing short of extraordinary.

Third, what we are seeing is that, communications is a critical service, even more important than physical offices. It is the first and last thing that a company turns on and off during times of uncertainty. The digital transformation from on-premise to cloud was a business imperative before COVID-19, and we believe will continue to accelerate in this environment. We continue to see strong demand for our communication solutions and our secure video meeting strategy has created a new on-ramp for customers to be introduced to our platform.

Looking ahead to fiscal 2021, our focus remains on strategically managing the Company for the long-term, including providing increased support to our customers and partners as we all navigate the uncertain future ahead. In this context, let me tell you how we are improving CAC and LTV to drive scale across the business. First, we’re building brand recognition by capitalizing in the dramatic growth of our video meetings base. Today, thousands of new logos are being introduced to 8×8 through e-commerce, Jitsi and 8×8 video meetings at a very low cost. Essentially, this massive base of new users is a marketing asset that will continue to accelerate new customer growth at very low cost. We will continue to monetize this growing user base through X Series and standalone solutions on our platform, steadily lowering our CAC over the long-term.

Second, in our installed base, we are rapidly migrating our legacy customers to the X Series platform. We’re targeting to have over 80% of our installed base migrated by the end of the calendar year. Through the development of advanced automation by our engineering teams, we have accelerated the migration of our customer base from legacy platforms. Every quarter, we are now migrating thousands of customers to the 8×8 X Series platform. This will not only reduce our support costs, but also increase customer lifetime value, and we have found that platform customers have significantly less risk of churn and materially higher net dollar retention.

Third, we are improving our overall customer mix. As we all know, small business has traditionally been both expensive for us from a CAC standpoint, as well as the highest risk for customer churn. We have made strides in scaling our marketing automation infrastructure and databases and accelerating our e-commerce offerings to increasingly transact work group and micro businesses online with attractive self-service support offerings. Additionally, over the last few quarters, we have moved our ARR mix upmarket to the enterprise and mid-market with 79% and 55% growth, respectively. Not only are we onboarding more attractive customers, but we’re able to service them better with new self-service offering and new premium support offerings. However, this transaction will take time as we continue to manage our churn exposure by migrating more of our legacy small business customers to the X Series platform throughout the fiscal year.

All of the initiatives I’ve detailed above will make a difference as we manage through some near-term pressure on our year-end — year-over-year growth rates. Additionally, we will continue to restructure operations for improved efficiencies, reduce product subsidies and take advantage of reduced travel and event costs. As Steven will go through shortly, we’re on track with our goal to achieve non-GAAP profitability exiting this fiscal year.

Furthermore, while we are in an unprecedented near-term macro environment, we can build upon our ability to drive revenue growth coming out of this difficult period based on a complete and integrated technology platform and our unique partner ecosystem that consists of channel master agents, value-added resellers, technology partners and global carrier relationships.

To wrap up, I would like to express my sincere appreciation to the 8×8 employees for their extraordinary efforts during this quarter. I would also like to thank our partners and customers for their close collaboration through this period and for their ongoing support and trust in us.

With that, let me turn the call over to Steven.

Steven Gatoff — Chief Financial Officer

Thanks, Vik. Good afternoon, everyone. We appreciate you joining us. I’d like to echo Vik’s comments that the health and safety of our employees and their families is our top priority, along with the health of our business and our customers alike around the globe. While it’s been a rough few months living through this pandemic, I have to tell you that it’s been a pretty rewarding time to be here at 8×8 to see that what we do for [Technical Issues] every day is directly helping make people’s lives meaningfully better and supporting businesses to work better every day.

With that, I’d like to cover three topics with you today. First, our financial results and key SaaS performance metrics for the fourth quarter of fiscal 2020 that just ended on March 31. Second, as part of our financial results discussion, I’ll provide additional visibility to the gross margin profile of our core business that you can see more clearly with the reporting of professional services move from service revenue into other revenue. And third, I’ll provide some color on the path ahead. For the near-term, we’ll set out financial guidance for the current first fiscal quarter ending June 30, 2020, I’ll also provide some insights on the revenue growth profile for fiscal 2021. We’ll, of course, wrap up with Q&A.

Starting with our Q4 financials, we’re pleased to deliver results that again beat our Q4 and full-year fiscal 2020 guidance. We’ve seen positive contributions from both new and existing customers from our UCaaS and CCaaS subscription model and from our usage-based CPaaS offerings. Total revenue for the fourth quarter grew to $121.5 million and full fiscal year 2020 came in at $446.2 million, or 30% and 20% year-over-year growth, respectively.

Looking at service revenue, we changed the reporting classification of professional services this quarter in order to provide more visibility to our core subscription business. I’ll talk more about this reclass in a few minutes. But for Q4, on an apples-to-apples basis, it’s consistent with our guidance and historical revenue reporting, service revenue was $116 million, 30% year-over-year growth. Similarly, service revenue on a pre-reclass basis for the full fiscal 2020 year ended March 31, 2020, grew 28% to $426.5 million.

Non-GAAP pre-tax loss was approximately $12.7 million for Q4 and $58.6 million for the full fiscal year, both coming in better than guidance. There are two prime drivers of our Q4 financial results that you’ve heard us as continuing themes talk about the past several quarters: one, continued execution in our go-to-market initiatives that are centered on demand generation and solid pipeline coverage with particular strength from our channel partners; and two, continued momentum moving upmarket with mid-market and large enterprise customers, with these customers delivering higher growth and becoming a larger part of our portfolio. These operational strengths are seen in new bookings growth of 26% in Q4, with a reminder that this is bookings for our UCaaS and CCaaS offerings and does not include any CPaaS.

Looking at our SaaS and business metrics performance, total ARR came in at $426 million at quarter end, 34% growth year-over-year and the result of a combination of organic growth and UCaaS and CCaaS and contributions from our CPaaS offerings. Insofar as deal size and garnering increasing customer economics, we closed the fiscal year with an overall 611 customers generating ARR greater than $100,000. That’s 50% year-over-year growth and reflects our continued traction moving upmarket into larger enterprises, as I mentioned.

To add more visibility into customer economics and our revenue growth rate going forward, I also wanted to provide some color on the dynamics around churn through one of the metrics that we use, net dollar retention, or NDR. Churn levels are higher than we’d like, primarily in legacy small business VoIP customers. This is reflected in our net dollar retention rate and as I’ll get into in a few minutes, it’s putting pressure on our anticipated fiscal 2021 revenue growth rate. The encouraging news is that, we made good operational progress recently such that the March quarter came in at the lowest churn level of fiscal 2020. As we’ve mentioned, the majority of our churn is in the small business customer segment and mostly with customers on our legacy offerings. Our strategy has been to optimize acquisition and support costs with small business customers as we decidedly invest in and continue to grow with our X Series platform and across mid-market and enterprise customers. As we’ve driven this transformation in the business, we’re managing these legacy small business customers that have a very different feature, scalability and growth profile that are primarily fixed phone VoIP-only.

The friction around primarily legacy small business customers had manifested itself in Q4 total net dollar retention coming in at just under 100%. Good gains in expansion of mid-market and enterprise customers were offset by churn in small business. These higher attainment levels in our larger customers drove Q4 mid-market and enterprise NDR to come in marginally higher at just under 110% in Q4. We believe we can continue to grow NDR over time as we continue to have selling into the mid-market and enterprise space and migrating customers to the X Series platform. You can see this improvement in our higher net dollar retention for customers who are on the new platform, where small business and mid-market enterprise customers that are on X Series have net dollar retention rates in excess of 110% and 140%, respectively.

We’ve also made good progress reducing our customer portfolio concentration in small business ARR as we’ve been optimizing the efficiency of serving this customer segment. We’re driving small business operations away from the historically high-touch, legacy offerings to a more efficient, self-service e-commerce model. This is what’s driving improved CAC and therefore, better LTV to CAC. We’ve moved from a human being touching small business transactions in all three parts of the customer life cycle of sales, deployment and support to an efficient, nearly all online experience. These programs and tangible operational improvements are together geared toward delivering higher net dollar retention across the business.

With that, let’s look at Q4 operating expenses. We’re pleased with our ability to have driven cost structure efficiencies through a combination of operational expense management, moving certain functions and activities to lower cost geographies and outright cost elimination in Q4. We reiterate our commitment and path to exiting this coming Q4 non-GAAP breakeven profitability, and we continue to expect to do so through continued operating expense discipline that’s delivering leverage.

One element of our cost structure, however, that is seeing some marginal pressure is the dynamic from a huge uptake and increase in our Jitsi open source video conference usage. As Vik discussed, scaling the Jitsi platform from several hundred thousand users to over 20 million monthly active users in a matter of weeks, has been extraordinary. It has also generated some additional costs in the near term. It’s fundamentally a terrific problem to have. We’re managing it well, and we’re excited about the monetization opportunity that we’re now happily embarking upon. What we believed would be an 18 to 24-month ramp [Technical Issues] meaningful scale and the foundational base of users on our free video meetings product as a lead source happened in a matter of weeks. This presents us with a terrific opportunity and a rapidly accelerated timeline to monetize these users, which accelerated our launch last month of our new standalone paid meetings offering that Vik talked about, as well as the expansion of our 8×8 Express e-commerce offering in the UK.

Insofar as the operational costs of supporting the bulk of this increased video usage, these brand and business development costs are recorded in sales and marketing expense, and our team has already taken measures to manage the scale and delivery costs more effectively, as you’ve heard with our partnership with Oracle.

Let’s turn to the second discussion topic about the reporting classification of professional services out of service revenue and into other revenue. The purpose of this reclass is to provide additional transparency and clarity with regard to our core subscription business, its service revenue profile and its service margin profile. This reporting reclass has no impact on total revenue, no impact on the amount of expenses recorded in the P&L, no impact on total gross margin and no impact on the bottom line. It is simply reporting professional services in a separate revenue line as other revenue along with product revenue, so we can see and communicate more information on the underlying solid performance of the core subscription business.

While our professional services are a low-single-digit percentage of revenue, they’ve historically run at a meaningfully negative gross margin. As such, they have been an outsized drag to overall total gross margin and specifically to core service margin. We made these investments intentionally in order to grow the business in the early stages. Now that we’re moving into our next stage of development with enhanced automation, we are more focused on overall margins and efficiently scaling. We focused our attention on our prof services business and have implemented new deployment tools, reorganized technical account people and restructured its operations. We’re already seeing the benefits of this focus with new service offerings, year-over-year growth in revenue and improving margin profile. We expect to see further growth in professional services and improvement as we move through fiscal 2021.

And so, with regard to both the GAAP and non-GAAP financial presentation on the P&L, we are reclassifying two items. First, professional services, which has historically included in service revenue is now reported in a new line called other revenue. The associated expenses that had previously been included in cost of services revenue are now included in cost of other revenue.

And second, product revenue, which was historically reported as a standalone line item, is now also included in other revenue and cost of other revenue, along with professional services.

In separating out professional services from the core subscription-related revenue, you can see the prof services pulled service revenue margin down more than 500 basis points in Q4. The historical reporting classification shows service revenue margin at 61% for Q4. In moving prof services out to other revenue, you can see that the new service revenue reporting provides visibility to the underlying core business that’s generating a solid service revenue margin of 67% in Q4. I’d like to highlight that we’ve provided a full reconciliation table for the professional services reporting reclass for all historical quarters of fiscal 2020 and the fourth quarter and full-year of fiscal 2019 in our earnings press release and on our website, so that have full visibility and transparency to the numbers. We’re also providing guidance for both metrics for Q1, and we’ll report out on the results of both on our next earnings call. But please note that we will not be using the legacy reporting of professional services beyond Q1.

Moving on to my third topic on the path ahead and guidance. Like others around us, we’re a bit uncertain as to how things in the global macro environment will play out. On the one hand, we’ve seen surges of interest in using 8×8 UCaaS and CCaaS offerings to enable remote workers, both from new and existing customers. At the same time, we’ve seen some customers and prospective customers, particularly smaller businesses be negatively impacted by COVID-19. This was evident in sectors like retail, travel and hospitality, where there was pressure on some customer’s payment abilities and/or adjustments to their service levels.

In our CPaaS business, we anticipate a somewhat slower growth rate due to the slowdowns that we’ve seen from the shelter-in-place orders in most of Southeast Asia. As such, we feel it’s appropriate to focus on providing guidance for our standard set of detailed financial metrics for the current quarter. While we’ll not be issuing all of the financial guidance metrics for the full fiscal year 2021, there are two things that we did want to get in front of you with. First, based on what we see today, we are reaffirming our continued commitment to exit this fiscal year at breakeven non-GAAP profitability. It’s something that we continue to have the ability to control and that we remain fixed on achieving.

And second, we want to provide some indication of the overall revenue growth rate trajectory for fiscal 2021. So, for the first quarter of fiscal 2021 ending June 30, 2020, we anticipate total revenue to be in the range of $120 million to $121 million, representing 24% to 25% year-over-year growth. We anticipate service revenue, as newly defined and reported to exclude professional services, to be in the range of $112.5 to $113.5 million, representing 25% to 26% year-over-year growth on a reclassified apples-to-apples basis. This equates to the legacy historical reporting of services revenue that includes professional services to be in the range of $116 million to $117 million, representing 26% to 27% year-over-year growth, also on an apples-to-apples basis. And we anticipate non-GAAP pre-tax loss to be approximately $12 million for Q1 fiscal 2021.

We wanted to provide some color, as I mentioned, on how we see the revenue growth rate profile for fiscal 2021, particularly given the coming anniversary of the Wavecell acquisition in late July. Wavecell was certainly a terrific strategic addition for us. It contributed an important platform technology and cloud offering that is uniquely positioning 8×8 in the market today. As we anniversary the acquisition, though, we expect service revenue growth rates to come down as we move out of Q1 and through fiscal 2021. And so, factoring in this dynamic, the nascent state of monetizing our video meetings and as well some degradation from our view today of the COVID-19 impact, we see the service revenue growth rate for the full-year of fiscal 2021 in the area of 17% to 18%. As we continue to transform the Company, we’ll continue to drive expansion of our various growth and profitability metrics. Not every metric will improve every quarter, but on average we expect to improve as we progress.

We hope that everyone remains safe and healthy throughout this time. And with that, we thank you for your support, and we’re glad to open the call to any questions. Operator?

Questions and Answers:

Operator

[Operator Instructions] Your first question comes from the line of Matt VanVliet with BTIG. Your line is open.

Matthew VanVliet — BTIG LLC — Analyst

Yes. Hi, guys. Thanks for taking the question. And nice job on the quarter, given all the uncertainty. I guess, looking at the developments of the CloudFuel partnership, obviously, it’s been sort of in the works and building the last several months, and you talked about finally closing some of the first deals in there. So, I guess, a two-part question on that. Where do you stand in terms of sort of full operation sort of hitting a full run rate here? Are we still a couple of quarters away? Or is that getting pretty close? And then of the 1,000-plus channel partners that you have now, what’s sort of the mix? Or how many of those are sort of encompassed under the umbrella of the CloudFuel program?

Vik Verma — Chief Executive Officer

So, let’s start with the back end of the question. This is Vik. So, the 1,000 are the master sub, the traditional reseller — not the reseller, but just the traditional referral channel that we have used. CloudFuel does not encompass that. CloudFuel is ramping. I mean, the way we started it, and the handful of VARs, get all the training material, we just launched Partner Exchange 4.0, which allows people to do a full provisioning for the entire stack with particularly unified communication, which is how we’re reaching out. And so, we’ll start to see that ramp continue. I mean, so far so good. But the part that is the most exciting is when you start to look at VAR, one of the things we have been trying to do at 8×8 is, we believe we have the most complete, comprehensive and differentiated platform in the industry. Our goal has been to get to market. That is tradition. We’ve had, in the past, a somewhat lack of brand recognition. So, ScanSource is Avaya’s largest distributor, and so ramping them up is absolutely critical, and ramping up their VARs is absolutely critical, and we’re starting to see early successes as we indicated.

Virgin Media is another very interesting one because they have about 45,000 business customers and about 5,000 public sector customers in the UK, and they’re one of the largest bandwidth providers in the UK. They want to take us to market with the entire stack as well. So more and more VAR is going to be an absolutely critical part of our strategy, ScanSource and all of ScanSource’s VARs is just the beginning. That’s to go after the Avaya installed base. We’re going to use Virgin Media to go after all of our Virgin Media’s installed base to upload them to voice — VoIP and voice, video, chat, etc., and there will be other VARs along the way.

Matthew VanVliet — BTIG LLC — Analyst

Great. And then looking at the trends maybe through the quarter and as they’ve sort of exited and you’ve gotten through at least April and into May here. Maybe just help us think about how the overall pace of growth on maybe a logo basis, what’s sort of projecting through January, February and then how that sort of dramatically changed in March as everyone tried to send their employees home? And then also, if you could comment maybe just on how deal sizes progressed in the quarter if there was any sort of variability between sort of pre-COVID and post in the US?

Steven Gatoff — Chief Financial Officer

Yeah, sure. So, we’ve been pretty thoughtful about how we’re thinking about this, right? We are fortunate to have a business [Phonetic] that encompasses both small business and mid-market and enterprise. And the interesting dynamic, as I mentioned earlier is that, we saw both a surge in interest both from existing customers who said, hey, I want to hurry up and get my deployments done, or hey, I actually want to expand and do more, and new customers that came in. We also saw, as we moved more through April, we saw some customers paused a little bit, some larger deals that we were hoping would close have closed in March did push a little bit into April and current period and nothing massive, but something to keep an eye on and be thoughtful about.

And then small businesses, we see engaging with us pretty constructively insofar as how they are handling payments and transactions and sign up for longer-dated contracts in exchange for some payment relief upfront. And so, all in all, it seems like there’s no chaos for us in our business. It’s pretty thoughtful, and we’re seeing a little bit of each. And like everyone else, we’ll see what happens over the coming weeks.

Vik Verma — Chief Executive Officer

Yeah. And I’ll add one other interesting point to Steven’s good point. We saw a real surge in e-commerce. I mean, the number of people that started buying and surprisingly businesses of all sizes that started buying on e-commerce surged for somewhat obvious reasons. We also saw larger customers starting to move rapidly into work from home. As Steven said, those people that had large retail presence, etc., pushed out a little bit and some pushed out much longer. So, all in all, as we showed bookings growth in quarter four of 26% on a total organic basis. So that was reasonable. I mean, I consider it as a pretty solid result.

Matthew VanVliet — BTIG LLC — Analyst

All right. Great, team. Thanks for taking my questions.

Steven Gatoff — Chief Financial Officer

Thanks.

Operator

Your next question comes from the line of Ryan MacWilliams with Stephens Inc. Your line is open.

Ryan MacWilliams — Stephens Inc. — Analyst

Thanks for taking my question. Beyond normal seasonality from the third quarter to the fourth quarter, how is Wavecell impacted by some of the lockdowns in Singapore and Indonesia? And how are you thinking about CPaaS revenues as lockdowns diminish in these areas?

Steven Gatoff — Chief Financial Officer

Yeah. Hey, Ryan. They were definitely impacted like most businesses globally. If I recall correctly, Singapore actually went into lockdown a little bit earlier than the States did. And so, they saw — also saw a mixed bag of results. They saw some pullback in business that was obviously impacted by lockdown but at the same time, they saw an uptick in business from logistics and delivery business as well. And so, a little bit of both from that business in the near term.

The thing that we’re probably most excited about for the CPaaS business is two things, is one, the geographical expansion. So, turning on the business in the UK and the US; and two, the introduction [Phonetic] of the CPaaS technology into the broader comms stack that gives us the ability to really chose the value prop of that offering in a really nice way.

Ryan MacWilliams — Stephens Inc. — Analyst

Great. And I thought it was also good to see non-GAAP gross margins and operating income improved and step in the right direction. Just on the Jitsi — increased Jitsi usage and moving to over 20 million users. Can you quantify that impact to the newly reclassified non-GAAP gross margins on that usage? And how has Jitsi helped bring in new customers since COVID started?

Steven Gatoff — Chief Financial Officer

Sure. So, Vik and I will tag team on that as usual. The financial statement impact of the incremental costs in March from usage is de minimis. You wouldn’t see it. We see it because we obviously manage it closely every [Technical Issues]. And so, we’re — but for two weeks, three weeks at most in March, you really wouldn’t see it on a meaningful margin impact in the P&L. It starts to become more of a topic in Q1 and moving forward. But as we mentioned, we — for the video piece for Jitsi, we entered into a really nice transaction with Oracle, where we have a much more efficient cost structure that scales well. And so, it shouldn’t be an outsized cost. And so, we’ve talked about this a bit, right? You saw our gross margins, as you noted, expand in Q4, and we would expect a bit of expansion in Q1 as well despite the increased costs for the commercial offering, which is in COGS and gross margin. And the cost of Jitsi is in sales and marketing. So that’s where you would see that.

Vik Verma — Chief Executive Officer

So I’ll add to that one, Steven. One, I owe our DevOps team and our finance team a huge debt of gratitude. I’ve never seen anything like this. We were at 150,000 monthly active users in the February time frame, maybe January, February time frame. And you just saw that climb. I mean, to 20 million plus monthly active users. I mean, I used the example of we’re suddenly doing the up equivalent of 10 billion uploads to Facebook of photographs a day. So, the part that is the most exciting part of Jitsi, and it’s composed of three parts is Jitsi Meet, 8×8 Meetings and then bundled into our X Series. Every one of them now ends with upload into 8×8. So basically 8×8 pop up shows up, says, hey, you can use our paid meetings. We launched paid meetings less than about one month — sorry, two weeks ago, and already, I think we’ve had 1,000-plus subscribers sign up for it.

Express, which is our e-commerce offering has also been seeing quite a bit of uptick. We’re now up to, I think, almost between Meetings and Express, we’re almost up to 100 logos a day. So the level of brand recognition that Jitsi did for us is unprecedented. But the other part is, the impact we had on a lot of our communities and customers, and we had hospitals start using it. We had NHS start using it. Pretty much everybody started using it because it’s a secure video conferencing capability, which is hugely differentiated in the industry. And you can kind of tell from the fact that people recognize that because their adoption was just spectacular.

Ryan MacWilliams — Stephens Inc. — Analyst

Excellent. Really appreciate the color. Thanks, guys.

Operator

Your next question comes from the line of Michael Turrin with Wells Fargo. Your line is open.

Michael Turrin — Wells Fargo Securities — Analyst

Hey, there. Thanks. Good afternoon. I was hoping to revisit some of the puts and takes around what you’re seeing in the current environment, in particular, how are you laying the increased demand for cloud, that backdrop that comes out in sort of the prepared remarks with some of the headwinds around small business churn and industry exposure? And wondering more specifically what sort of assumptions went into pulling together the initial growth outlook you’re providing for the year.

Vik Verma — Chief Executive Officer

So I’ll give you the puts and takes, and then Steven can provide more color. The puts and takes have been quite interesting because — so we started to see large customers, certain industries, obviously, started to pull back. Travel got hit pretty hard. Hospitality got hit pretty hard. And retail got hit pretty hard. So those are the ones where you started to see a few downgrades and/or deals that were well along the road kind of pulled back.

You saw others really pull forward, and this one is a sad one, where we saw a lot of local and state governments sign up for our contact center, in some instances, replacing Avaya with — because of the huge influx of unemployment claims and COVID-related claims in terms of information. So small business, hard to tell. It’s early, early days, but this is one of those things where I’m trying to understand what the impact of small business is going to be going forward, particularly our legacy small business customers that were used to just pure fixed line. I think the more modern small business customers that are on our platform, I think we’ll kind of weather through it, but the guys that were just pure fixed line customers, we have some concerns about.

Steven, do you want to add any more color to that?

Steven Gatoff — Chief Financial Officer

Yeah. I think you hit all the items we were talking about. When we looked at the quarter and how we move forward, even in the current environment, we were pretty thoughtful about the dynamics of bookings and where that’s coming from and regions and geographies with what we said is, there’s a double-edged sword that we experience. It’s the wind in our sales right now. Insofar as what we do and the demand, obviously, for remote working, enabling platforms like ours with [Technical Issues] notion that business and the economy is impacted. And so, like other businesses, we’ll potentially see some of that impact as well. And so, we try to balance that out. That’s more of a bookings impact than it is necessarily a P&L impact vis-a-vis our revenue. We feel like we’re in pretty good shape from a balance sheet standpoint on exposures to these sectors that’s fairly low. And so, we’ll see what happens.

Michael Turrin — Wells Fargo Securities — Analyst

Okay. That’s good color. In terms of the upmarket segment, I want to focus in on customers greater than 100,000 for a moment as well. The press release calls out 42 new deals, but the total customer number there is maybe a little closer sequentially at 611 versus what we would have expected. There’s some reclassification of revenue here. So wondering if those two are all related. Or if there’s any timing or other impacts you are seeing that affecting that sequential number?

Steven Gatoff — Chief Financial Officer

No. So, all of that is recurring subscription-based business. It has nothing to do with professional services. And so, the reclass was [Technical Issues] professional services out of service revenue for this very reason, right? Because bookings is a subscription basis, and we wanted the service revenue to also be a subscription basis to go along with that. And so, it’s all apples-to-apples.

Vik Verma — Chief Executive Officer

And I’ll add color from a — I think you asked from a bookings point of view for larger customers. For all the wrong reasons, this is a great time for us and our industry. When you think about it and think about it for all of us, more than physical infrastructure, only second to your employees, the most important thing becomes your communication infrastructure. And the communication infrastructure has to be seamless between voice, video, contact center, every employee has to be on a common platform, and that becomes the determinant of your culture and your company more than office locations. So, we’re seeing more and more companies recognizing that and moving in that direction. And so, this concept of one platform that we have spent years building, that’s starting to become more and more prevalent because people want their contact center agent, they want their front office employees, they want their engineers, all on a common communication platform, and they want to be able to move seamlessly between voice, video, chat and contact center.

The second thing is, working from home is now no longer a nice to have. It is something where you have got to be productive and you have to be able to do it instantly. So you’re starting to see more and more companies walk away from physical infrastructure and move towards communication infrastructure is absolutely key. So from that perspective, we feel very good about it. We obviously want to make sure that we take care of our small business customers that are maybe going to be impacted by some of this. But from that perspective, the adoption of the softphones has been particularly gratifying to see because that has been a huge, huge jump up in volume on smartphone usage.

Michael Turrin — Wells Fargo Securities — Analyst

Helpful. Thanks. Stay safe and good luck.

Vik Verma — Chief Executive Officer

Thank you.

Steven Gatoff — Chief Financial Officer

Thanks. You too.

Operator

[Operator Instructions] Your next question comes from the line of Tim Horan with Oppenheimer. Your line is open.

Timothy Horan — Oppenheimer & Co. Inc. — Analyst

Thanks, guys. So the whole concept of one platform and five, six different services. Do you think the market understands it now? Maybe just some more color around your win rate around that? And who are you seeing as your closest competitor with that platform?

Vik Verma — Chief Executive Officer

So, I think — I’ll take that one on. So, yeah, I think the market understands it. I mean, you saw it in the adoption, look, five out of 10 of our — five of our top 10 customers were Avaya replacements. And of our top 10 deals, all 10 included both unified communication and contact center. So from that perspective, we are starting to see more and more of a recognition by the industry that you need this one-stop shop. Video meetings has also become absolutely critical, but the big focus on video meetings is around secure video communications. And so, the ability to have an integrated solution with seamless movement from voice, chat and video, plus having the contact center all integrated together, from our perspective, the industry has started to fixate on that. And also, you’re starting to see a whole bunch of VARs come to us saying, hey, we want the ability to sell the entire stack, where previously they had come and said, oh, we just want to sell UCaaS. So we just want to sell video, no, they all want the full stack. Virgin Media is very representative about the fact that they want the ability to sell the entire stack to their end-user customers. So, win rates were pretty high. I mean, from our perspective, I think they continue to trend in the right direction. And from that perspective, I think they will continue to trend in the right direction.

Timothy Horan — Oppenheimer & Co. Inc. — Analyst

Thank you.

Operator

Your next question comes from the line of Meta Marshall with Morgan Stanley. Your line is open. Meta Marshall with Morgan Stanley, your line is open.

Your next question comes from the line of Will Power with Baird. Your line is open.

William Power — Robert W. Baird & Co. Incorporated — Analyst

Great. Thanks. Yeah. I guess, I wanted to ask on the bookings growth commentary. I think I heard you say bookings grew 20%. I know last couple of quarters, Vik, you’ve been targeting…

Steven Gatoff — Chief Financial Officer

Sorry, 26%.

William Power — Robert W. Baird & Co. Incorporated — Analyst

26%? Okay. Got you. Okay. Okay. Yeah. Well, no, that’s closer to the 30%, I guess, you have been targeting. I guess, what I’m trying to understand, I guess, if you can help us unpack a little bit what’s happening there? Because it seems like enterprise and the channel continued to perform very well for you. And, I guess, I’m just trying to understand within SMB, what the different pieces there are? I mean — I guess, what I’m getting at is, how much of the pressure you’re seeing on SMBs related to COVID versus the shift to X Series and away from the legacy platform? Maybe just help us understand the dynamics there.

Steven Gatoff — Chief Financial Officer

Sure. We’ll do [Technical Issues]. So, to your point, the nature and the dynamic is different for sure between SB and MME&T [Phonetic]. Hence, the nature of our go-to-market and sales force contract of inside sale [Technical Issues] field sales essentially. And so, you see that in deal sizes. You see that in land and expand motion, and you see that in the economics of those transactions, particularly the buying drivers. And so, on the small business side, what we’ve done is, we’ve really transformed how we engage with small business customers moving from high-touch fee-based transactions to low-touch online transactions. We’ve changed how we engage with the SB world from a lead gen, how we even get to be connected with SB customers. It used to be a fairly inefficient throw dollars at the problem. They worked and we grew small business, but it was very expensive from a CAC standpoint. And our new CMO and the marketing lead gen, demand gen done a terrific job in changing how we engage with SB customers. And we’ve been more successful, to your point, and to the earlier questions just before, on platform acquisition and land and expand mode has really taken off quite [Technical Issues].

Vik Verma — Chief Executive Officer

Yeah. So I’ll…

William Power — Robert W. Baird & Co. Incorporated — Analyst

Okay. Well, I guess –. Yeah. Okay. Go ahead.

Vik Verma — Chief Executive Officer

No, no, I can add a little more color. I mean, when you think about it bifurcate our business, we’ve been moving upmarket, mid-market and enterprise, and you can kind of see it reflected in the growth rate. With regard to small business, you would almost break it up into two parts. You’ve had the legacy small business, which is primarily VoIP customers that we are systematically trying to transition to X, so that they can start to use softphone, etc. But more and more, we’ve been transitioning small business to an e-commerce, no touch, completely self-provisioning engine, allows us to offer disruptive prices and allows us to offer a lot of capabilities. And so, that transition that has been going on, so what you’ll continue to see is more and more of our sales engine will be focused on mid-market enterprise. And increasingly, you’ll start to see small business happen through e-commerce, which is a great trend because that gives us the right CAC to LTV ratio, which in the past had been definitely a drag on us, but now should start to become a huge positive for us going forward.

William Power — Robert W. Baird & Co. Incorporated — Analyst

Okay. I guess — yeah, Steven, I don’t know if you have it, but I guess, is there any further color you can provide on helping us quantify what the deferred payment numbers look like, any anticipated bad debt? Anything on seat count pushback you’re getting at this point, just to kind of understand kind of the COVID-related impacts a little bit better?

Steven Gatoff — Chief Financial Officer

Sure. Yeah, happy to talk to it. I mean, our exposure overall, when you look at it, right, they’re like every company, there’s two facets to it. There’s your existing balance sheet, P&L exposure, what do you have in accounts receivable kind of thing. And then there’s a recurring nature of your business, your subscription base, your ARR base and what’s that look like? So from an industry, a high-risk industry, if you will, our exposure is in the mid-teens kind of levels of our ARR. When you look at travel, entertainment, retail, not profit, those together is fairly manageable. And so, we’re talking about this earlier, the inbound inquiries that we’ve received to date have been very manageable and they’re not all chaotic. We’re going out of business kind of inquiries and engagement. There are customers saying, hey, we would benefit from extending out six days and in many instances, not all, but many, we’ve been successful in customers saying, look, I’ll extent my contract two months, sure and for this accommodation. And so, from a working capital standpoint, we’ve engaged with some customers on that. We have also taken some reserves to accommodate for the unknown, nothing outlandish or frankly, even material. But we feel like we set ourselves up well to weather what happens based on what we can see today.

William Power — Robert W. Baird & Co. Incorporated — Analyst

Okay. Thank you.

Steven Gatoff — Chief Financial Officer

Yeah. Sure.

Operator

Your next question comes from the line of Rich Valera with Needham & Company. Your line is open.

Richard Valera — Needham & Company — Analyst

Thank you. I think you mentioned what percent you expect to be migrated — of your customer base migrated to the X Series by the end of this calendar year. Can you give us a sense of where the base is today on X Series migration?

Vik Verma — Chief Executive Officer

So, current — our current customer installed base is 43%, and the target is to get up to 80-plus percent of our installed base by end of this year. I have to give — and by the way, this is what gives us a lot of confidence about also the ability to migrate people like Avaya and Mitel onto our platform as time goes on. Our team has done a phenomenal job of automating this process. It’s a very complicated process where you literally have feature functionality mapped out with existing customers to X Series, and then — when everything turns green, then they get migrated automatically. So, we’re migrating thousands of customers, I think, every month or so. And so, the intent is to keep that pace going.

Richard Valera — Needham & Company — Analyst

And is that — from a customer perspective, is there any change in cost for them? Or is it kind of a push? How does that work for the customer?

Vik Verma — Chief Executive Officer

We try to make sure that we map it so that it’s relatively equal or a little less. We try to just make sure that from a customer point of view, feature functionality stays essentially consistent and/or added, and cost remains approximately the same or a little bit less. So that’s essentially how we’ve been trying to do this. And look, the tax on the Company of being able to get everybody on a common platform and making sure that from a support point of view and from an engineering point of view, it’s just huge. And so, that’s why this migration has been so critical for us, and I’m really pleased with where we are at today.

Richard Valera — Needham & Company — Analyst

Sorry, and just one quick one for you, Steve. Cash usage in the first quarter, how should we think about that relative to cash usage in the fourth quarter?

Steven Gatoff — Chief Financial Officer

It will be less — will be improved. Less cash will be used.

Richard Valera — Needham & Company — Analyst

Any quantification or just like…

Steven Gatoff — Chief Financial Officer

We haven’t really laid that out, but it should track with the improvement in the non-GAAP pre-tax loss. So relatively speaking, it’s a consistent improvement.

Richard Valera — Needham & Company — Analyst

Got it. Thank you.

Steven Gatoff — Chief Financial Officer

Yeah. Sure.

Operator

Your next question comes from the line of Catharine Trebnick with Dougherty. Your line is open.

Catharine Trebnick — Dougherty & Company — Analyst

Thank you for taking my question. Can you describe the sales process and how that’s changed since the impact of mid-March? And how much more of it — are you seeing opportunities because you’re able to do more video? You talked about that, obviously, in the 20 million. But I’m really trying to understand, has that impacted at all your ability to close sales. Do you need more people on-site to do proof of concepts? And what’s that whole sales process look like now in the middle of COVID and when do you think it will evolve, too? Thank you.

Vik Verma — Chief Executive Officer

That’s a great question. And to some extent, COVID has the — is the great equalizer for all, again, the wrong reasons. We always had less people than most others. But what we have always had is great technology. And so, the good news for us is the 20-odd million people using Jitsi Meet or 8×8 Meetings, they get exposed to 8×8. So some of that just becomes a feed into our demand generation engine. Our marketing team has done a great job of basically going away from paid search to much more around databases and other searches like that. So we are seeing more and more onboarding onto the 8×8 website. So, the e-commerce engine is starting to really hit stride, which then frees up our inside sales team to start selling higher and higher up the stack.

And our enterprise and mid-market teams have been essentially sheltering in place. I mean, we literally went down to pretty close to a full lockdown around mid-March time frame. And we are finding out that we are becoming very effective in closing deals without going on-site. We’re able to use video conferencing. We are able to do proof of concepts on-site or without ever going on-site. And we’re now doing more and more deployments. So pretty much after, I think, mid-March, we did no deployment — no on-site visits, and yet we’re able to continue to deploy our customers. So, this level of ability to do remote selling, remote deployment, remote support is part and partial of our DNA. That’s what our products were built for. We were the best users of it because we have a 1,600 person company working instantly all off-site. So, no real impact. I mean, there are some enterprise customers that will push. But generally, we are finding that customers are actually willing to work with us. And as long as you can demonstrate the value of a communications platform, I think there is such a need towards being able to have a cloud-based communication platform that most people don’t need on-site visits.

Catharine Trebnick — Dougherty & Company — Analyst

All right. Thank you, Vik.

Vik Verma — Chief Executive Officer

My pleasure, Catharine.

Operator

Your next question comes from the line of James Breen with William Blair. Your line is open.

James Breen — William Blair & Company — Analyst

Thanks for taking the question. Just on the near-term guidance and just talking about the long-term, I think Steve talked about service revenue being up 17%, 18% in fiscal year ’21. As you look at sort of sequential growth rates in service revenue in the last couple of quarters has been a couple of million. What gives you confidence that that’s going to pick up here over the next few quarters to sort of get to those high-teens growth rates? Thanks.

Steven Gatoff — Chief Financial Officer

Sure. So there’s certainly the pressure in the near-term, mostly mathematical from the anniversary of Wavecell. And what we see is and are driving to is growth and acceleration in the growth in the second half of the year coming out of that. That obviously factors in what we believe is a reasonable perspective on the COVID [Technical Issues] we have baked some of that in. So to the extent things are not as bad, that provides some lift. And if things are marginally meaningfully worse, then us and everyone else will need to deal with that. But it’s really a function of two things. The risk of stay in the obvious, it’s consistent demand and bookings growth in the 30% ZIP code. And that’s important. And two, it’s the expansion of our net dollar retention and continuing to improve that ratio so that you have a strong growth in base revenue.

James Breen — William Blair & Company — Analyst

Have you seen any significant changes in the channel with the partners you had or some partners that you’re engaging in, based upon what’s happening right now with the pandemic?

Vik Verma — Chief Executive Officer

So I’ll take that one on. Not materially. Actually, in a lot of ways, I think, for — I think there was an interesting comment made by several of our channel partners that this is the golden age of communication for all of the wrong reasons. So for people, they are suddenly finding that they’re not having to convince people that you need to move to cloud communications, they’re much more open to that. They’re also finding that people want that one-stop shop in the single platform. We are also seeing more and more large companies start to come after this so-called VAR model because they know that their technology and their infrastructure is primarily on-premise, and they need to be able to service their customers. They’re watching one-stop shops kind of start to make inroads, whether it’s video conferencing or just UCaaS. So they want to be able to offer that entire comprehensive service. Virgin Media, as I indicated, is probably one of the early adopters there, but I think you’ll see more and more people doing that. Similarly, I think you’ll start to see an acceleration of people moving off the legacy base. So, all in all, we are seeing that channel demand registration has been extremely strong and continues to kind of build on it. So from that perspective, we feel this is very good.

James Breen — William Blair & Company — Analyst

Great. Thank you.

Operator

[Operator Closing Remarks]