8x8 (NYSE:EGHT) Surprises With Q3 Sales, Provides Optimistic Guidance

Radek Strnad /
2022/02/02 4:21 pm EST
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Business communications software company 8x8 (NYSE:EGHT) beat analyst expectations in Q3 FY2022 quarter, with revenue up 14.7% year on year to $156.8 million. Guidance for next quarter's revenue was $181 million at the midpoint, 13.5% above the average of analyst estimates. 8x8 made a GAAP loss of $43.5 million, down on its loss of $40.2 million, in the same quarter last year.

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8x8 (EGHT) Q3 FY2022 Highlights:

  • Revenue: $156.8 million vs analyst estimates of $153.6 million (2.07% beat)
  • EPS (non-GAAP): $0.02 vs analyst estimates of $0.02 (24.4% beat)
  • Revenue guidance for Q4 2022 is $181 million at the midpoint, above analyst estimates of $159.4 million
  • Free cash flow of $4.49 million, up from negative free cash flow of $1.44 million in previous quarter
  • Customers: 907 customers paying more than $100,000 annually
  • Gross Margin (GAAP): 61.8%, up from 55.8% same quarter last year

“We delivered revenue above the high end of our guidance range and achieved non-GAAP operating profitability and positive cash flow from operations for the fourth consecutive quarter. Channel contribution, growth in Enterprise ARR, growth in XCaaS ARR, and adoption of 8x8 Voice for Microsoft Teams demonstrated continued strength in the third quarter,” said Dave Sipes, Chief Executive Officer at 8x8, Inc.

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 solid over the last year, growing from quarterly revenue of $136.6 million, to $156.8 million.

8x8 Total Revenue

This quarter, 8x8's quarterly revenue was once again up 14.7% year on year. We can see that the company increased revenue by $5.31 million quarter on quarter. That's a solid improvement on the $3.23 million increase in Q2 2022, so shareholders should appreciate the acceleration of growth.

Guidance for the next quarter indicates 8x8 is expecting revenue to grow 25% year on year to $181 million, improving on the 19.1% 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 13.4% 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 907 enterprise customers paying more than $100,000 annually, an increase of 36 on last quarter. That is a bit less contract wins than last quarter and also quite a bit below what we have typically seen over the past couple of quarters, suggesting that the sales momentum with large customers is slowing down.

8x8 customers paying more than $100,000 annually

Key Takeaways from 8x8's Q3 Results

With a market capitalization of $1.72 billion 8x8 is among smaller companies, but its more than $200.3 million in cash and the fact it is operating close to free cash flow break-even put it in a robust financial position to invest in growth.

We were impressed by the very optimistic revenue guidance 8x8 provided for the next quarter. And we were also glad that the revenue guidance for the rest of the year exceeded expectations. On the other hand, it was unfortunate to see the slowdown in new contract wins and the revenue growth was quite weak. Overall, this quarter's results still seemed pretty positive and shareholders can feel optimistic. The company is up 1.53% on the results and currently trades at $15.25 per share.

Should you invest in 8x8 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.