8x8 (NYSE:EGHT) Misses Q3 Sales Targets

Adam Hejl /
2023/02/01 4:11 pm EST
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Business communications software company 8x8 (NYSE:EGHT) missed analyst expectations in Q3 FY2023 quarter, with revenue up 17.5% year on year to $184.4 million. 8x8 made a GAAP loss of $26 million, improving on its loss of $43.5 million, in the same quarter last year.

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8x8 (EGHT) Q3 FY2023 Highlights:

  • Revenue: $184.4 million vs analyst estimates of $185.5 million (0.59% miss)
  • EPS (non-GAAP): $0.07 vs analyst estimates of $0.03 ($0.04 beat)
  • Revenue guidance for Q4 2023 is $185.5 million at the midpoint, below analyst estimates of $187.3 million
  • Free cash flow of $12.2 million, roughly flat from previous quarter
  • Customers: 1,309 customers paying more than $100,000 annually
  • Gross Margin (GAAP): 68.8%, up from 61.8% same quarter last year

"We continued to invest in innovation while reducing our service delivery costs and increasing operational efficiency across the organization," said Samuel Wilson, 8x8 Interim CEO.

Founded in 1987, 8x8 (NYSE:EGHT) provides software for organizations to efficiently communicate and collaborate with their customers, employees, and partners.

Work is becoming more distributed, both across geographies and devices. In order for businesses to keep functioning efficiently, they need to be able to communicate as well as they did when the teams were co-located, which drives the demand for integrated communication platforms.

Sales Growth

As you can see below, 8x8's revenue growth has been strong over the last two years, growing from quarterly revenue of $136.6 million in Q3 FY2021, to $184.4 million.

8x8 Total Revenue

This quarter, 8x8's quarterly revenue was once again up 17.5% year on year. But the revenue actually decreased again in Q3 by $2.98 million, compared to $231 thousand decrease in Q2 2023. While one-off fluctuations don't always have to be concerning, we have no doubt that shareholders would like to see the revenue rebound soon.

Guidance for the next quarter indicates 8x8 is expecting revenue to grow 2.27% year on year to $185.5 million, slowing down from the 25.3% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 4.72% over the next twelve months.

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Large Customers Growth

You can see below that at the end of the quarter 8x8 reported 1,309 enterprise customers paying more than $100,000 annually, an increase of 18 on last quarter. That is quite a bit more contract wins than last quarter but also quite a bit below what we have typically seen over the last year, suggesting that the company may be reinvigorating growth.

8x8 customers paying more than $100,000 annually

Key Takeaways from 8x8's Q3 Results

With a market capitalization of $526.0 million 8x8 is among smaller companies, but its more than $130.4 million in cash and positive free cash flow over the last twelve months give us confidence that 8x8 has the resources it needs to pursue a high growth business strategy.

It was good to see 8x8 improve their gross margin this quarter. And we were also glad to see the acceleration in new contract wins. On the other hand, it was unfortunate to see that the revenue guidance for the next quarter missed analysts' expectations. Overall, it seems to us that this was a mixed quarter for 8x8. The company is up 3.79% on the results and currently trades at $5.2 per share.

8x8 may have had a tough quarter, but does that actually create an opportunity to invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.