8×8 Inc ((EGHT)) has held its Q1 earnings call. Read on for the main highlights of the call.
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The recent earnings call for 8×8 Inc. painted a picture of cautious optimism. The company highlighted a return to growth, buoyed by strong performance in CPaaS solutions and effective debt reduction strategies. However, challenges such as a decline in gross margin, foreign exchange impacts, and lower operating margin guidance were also noted, indicating a mixed outlook moving forward.
Return to Year-Over-Year Growth
8×8 Inc. announced a significant milestone by returning to year-over-year growth for the first time in nine quarters. The company exceeded the midpoint of its service revenue guidance by more than $3 million, showcasing a positive trajectory in its financial performance.
Strong CPaaS Solutions Growth
The company reported a robust 30% year-over-year growth in consumption-based revenue, primarily driven by CPaaS solutions. This growth was attributed to the expansion of new use cases and channels, underscoring the strength of 8×8’s CPaaS offerings.
Reduction in Debt
8×8 has made significant strides in reducing its debt, cutting down the principal by $219 million, or 40%, since its peak in August 2022. This reduction reflects the company’s commitment to strengthening its financial position.
Record Platform Usage Revenue
The company achieved a new record in communications platform usage revenue, which contributed to its strong overall revenue performance in the first quarter. This highlights the growing demand for 8×8’s platform services.
Positive Cash Flow and Operating Income
For the 18th consecutive quarter, 8×8 reported positive cash flow from operations and non-GAAP operating income. This consistent performance underscores the company’s operational efficiency and financial stability.
Successful Customer Retention Post-Fuze Migration
Following the migration of Fuze customers, 8×8 reported a 94% gross retention rate and over 100% net revenue retention in the first quarter. This success demonstrates the company’s ability to retain and grow its customer base post-acquisition.
Decrease in Gross Margin
Despite the positive revenue growth, 8×8 experienced a decline in gross margin to 67.8%. This decrease was primarily due to a shift towards usage-based communication platform revenue, which typically carries lower margins.
FX Impact on Revenue
Foreign exchange volatility, particularly the strengthening of the U.S. dollar against the British pound, posed a revenue headwind for the second quarter and the full year. This impact highlights the challenges of operating in a global market.
Lower Operating Margin Guidance
8×8 lowered its operating margin guidance to between 8% and 9%, reflecting the impact of the growth of lower-margin communications platform solutions. This adjustment indicates a cautious approach to margin expectations.
Forward-Looking Guidance
Looking ahead, 8×8 Inc. remains focused on long-term growth despite anticipating a sequential decline in the second quarter due to FX volatility. The company has set a full-year service revenue guidance of $685 million to $700 million and a total revenue guidance of $706 million to $720 million. These projections reflect 8×8’s commitment to sustaining its growth momentum.
In summary, 8×8 Inc.’s earnings call presented a mixed but optimistic outlook. The return to growth and strong performance in CPaaS solutions are promising, while challenges such as declining margins and FX impacts require careful navigation. The company’s forward-looking guidance suggests a focus on sustained growth, making it a company to watch in the coming quarters.