8x8's (NYSE:EGHT) Q1 Earnings Results: Revenue In Line With Expectations But Full Year Guidance Underwhelms

Adam Hejl /
2022/07/27 4:32 pm EDT

Business communications software company 8x8 (NYSE:EGHT) reported results in line with analyst expectations in Q1 FY2023 quarter, with revenue up 26.4% year on year to $187.6 million. However, guidance for the next quarter was less impressive, coming in at $186.5 million at the midpoint, being 2.72% below analyst estimates. 8x8 made a GAAP loss of $26 million, improving on its loss of $43.9 million, in the same quarter last year.

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8x8 (EGHT) Q1 FY2023 Highlights:

  • Revenue: $187.6 million vs analyst estimates of $186.7 million (small beat)
  • EPS (non-GAAP): $0.09 vs analyst estimates of $0.03 ($0.06 beat)
  • Revenue guidance for Q2 2023 is $186.5 million at the midpoint, below analyst estimates of $191.7 million
  • The company dropped revenue guidance for the full year, from $782.5 million to $755 million at the midpoint, a 3.51% decrease
  • Free cash flow of $2.56 million, down 75.6% from previous quarter
  • Gross Margin (GAAP): 64.4%, up from 59.7% same quarter last year

"Our first quarter results reflect our increased emphasis on profitability and cash flow generation, as well as strength in XCaaS, 8x8 Voice for Teams, high retention of Fuze customers, and continued global expansion of the enterprise base," said Dave Sipes, 8x8 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 year, growing from quarterly revenue of $148.3 million, to $187.6 million.

8x8 Total Revenue

This quarter, 8x8's quarterly revenue was once again up a very solid 26.4% year on year. But the growth did slow down compared to last quarter, as the revenue increased by just $6.24 million in Q1, compared to $24.4 million in Q4 2022. We'd like to see revenue increase by a greater amount each quarter, but a one-off fluctuation is usually not concerning.

Guidance for the next quarter indicates 8x8 is expecting revenue to grow 23% year on year to $186.5 million, improving on the 17.3% 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 19.8% over the next twelve months.

In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.

Large Customers Growth

You can see below that at the end of the quarter 8x8 reported 1,277 enterprise customers paying more than $100,000 annually, a decrease of 43 on last quarter. We have no doubt shareholders would like to see the company regain its sales momentum.

8x8 customers paying more than $100,000 annually

Key Takeaways from 8x8's Q1 Results

With a market capitalization of $587.2 million 8x8 is among smaller companies, but its more than $141.6 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.

We enjoyed seeing 8x8’s improve their gross margin materially this quarter. And we were also glad to see good revenue growth. On the other hand, it was unfortunate to see that 8x8's revenue guidance missed analysts' expectations. Overall, this quarter's results could have been better. The company is down 2.81% on the results and currently trades at $5.17 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.