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8x8's (NYSE:EGHT) Q2 Earnings Results: Revenue In Line With Expectations


Petr Huřťák /
2022/10/27 4:21 pm EDT
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Business communications software company 8x8 (NYSE:EGHT) reported results in line with analyst expectations in Q2 FY2023 quarter, with revenue up 23.6% year on year to $187.3 million. However, guidance for the next quarter was less impressive, coming in at $186.5 million at the midpoint, being 1.08% below analyst estimates. 8x8 made a GAAP loss of $11.6 million, improving on its loss of $42.3 million, in the same quarter last year.

Is now the time to buy 8x8? Access our full analysis of the earnings results here, it's free.

8x8 (EGHT) Q2 FY2023 Highlights:

  • Revenue: $187.3 million vs analyst estimates of $186.5 million (small beat)
  • EPS (non-GAAP): $0.05 vs analyst estimates of $0.03 (49.1% beat)
  • Revenue guidance for Q3 2023 is $186.5 million at the midpoint, below analyst estimates of $188.5 million
  • The company reconfirmed revenue guidance for the full year, at $750 million at the midpoint
  • Free cash flow of $10.9 million, up from $2.56 million in previous quarter
  • Customers: 1,291 customers paying more than $100,000 annually
  • Gross Margin (GAAP): 66.8%, up from 60.7% same quarter last year

"Our second quarter results reflected our increased emphasis on profitability and cash flow generation. Non-GAAP gross margin was above 70% and non-GAAP operating profit and operating cash flow exceeded our expectations," said Dave Sipes, 8x8 Chief Executive Officer.

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 $129.1 million in Q2 FY2021, to $187.3 million.

8x8 Total Revenue

This quarter, 8x8's quarterly revenue was once again up a very solid 23.6% year on year. But the revenue actually decreased by $231 thousand in Q2, compared to $6.24 million increase in Q1 2023.Shareholders might want to pay closer attention to this as the management is guiding for the decline in sales to continue in the coming quarter

Guidance for the next quarter indicates 8x8 is expecting revenue to grow 18.8% year on year to $186.5 million, improving on the 14.7% 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 9.99% 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 1,291 enterprise customers paying more than $100,000 annually, an increase of 14 on last quarter. That is 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 Q2 Results

With a market capitalization of $412.6 million 8x8 is among smaller companies, but its more than $130.9 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 were very impressed how strongly 8x8 accelerated the rate of new contract wins this quarter. And we were also glad to see the improvement in gross margin. On the other hand, it was unfortunate to see that the revenue guidance for the next quarter missed analysts' expectations. Zooming out, we think this was still a decent, albeit mixed, quarter, showing the company is staying on target. The company is flat on the results and currently trades at $3.41 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.