Yahoo Finance 8x8 Inc (EGHT) Q4 2024 Earnings Call Transcript Highlights: Strategic Repayments and Revenue ...
Total Revenue: Within guidance range, other revenue exceeded target.
Service Revenue: Within guidance range.
Non-GAAP Operating Margin: Exceeded guidance by 1.3 percentage points.
Cash Flow: $12.7 million for the quarter, $79 million for the year, above expectations.
Debt Repayment: Repaid remaining $63.3 million of 2024 convertible notes.
Cost Reductions: More than $47 million from fiscal 2023.
Cash and Investments: Ended with $118 million.
Annual Recurring Revenue (ARR): Ended year with $697 million, down about 1% sequentially.
Revenue Performance Obligation (RPO): Up sequentially in Q4, flat year-over-year.
Release Date: May 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
8x8 Inc (NASDAQ:EGHT) reported solid financial performance with both total revenue and service revenue within guidance ranges, and operating margin exceeding expectations.
Cash flow from operations was better than anticipated, with a significant increase of 62% from fiscal 2023, demonstrating strong financial management and operational efficiency.
The company successfully repaid the remaining $63.3 million of its 2024 convertible notes, strengthening its balance sheet and reducing debt.
8x8 Inc (NASDAQ:EGHT) launched several innovative products, including 8x8 Operator Connect for Microsoft Teams, enhancing its portfolio and competitive position in enterprise voice solutions.
The company made considerable progress in its go-to-market efforts, aligning sales, marketing, and customer success teams more effectively, which improved pipeline quality and increased close rates.
Negative Points
Despite solid financial performance, there was a slight sequential decline in ARR, with about half of the decline related to seasonal decreases in CPaaS usage.
The company is experiencing some customer attrition, particularly from the Fuze customer base, which has created a near-term headwind to growth.
There is a lag in revenue growth due to the predominantly ratable revenue model, which may delay the visibility of financial improvements from strategic initiatives.
The macroeconomic environment remains challenging, with high interest rates and market volatility potentially impacting customer decision-making and lengthening sales cycles.
While CPaaS showed year-over-year growth, it was seasonally down in the fourth quarter, indicating potential volatility in this segment.
Q & A Highlights
Q: How did CPaaS fiscal 24 compared to usage in 3Q? And how does that pipeline look compared to UCaaS? A: Samuel C. Wilson, CEO & Director of 8x8, Inc., noted that CPaaS was seasonally down in the March quarter, primarily due to events like Ramadan and Chinese New Year, which typically slow down marketing campaigns. Kevin Kraus, CFO of 8x8, Inc., added that year-over-year, CPaaS was up by 9%, although it was slightly lower than Q3. Samuel Wilson also mentioned that the contact center business is seeing more growth, while the UCaaS market remains challenging.
Q: Investors care most about the path to positive growth. Could you help me with a waterfall for the piece part for return to growth by fiscal fourth quarter of this year? A: Samuel C. Wilson explained that the growth would be driven by new products growing at 50% for two consecutive quarters, stability in the UC business, and growth in CPaaS and Contact Center related products. He highlighted that as more products are sold, retention rates improve, which cumulatively supports the overall growth trajectory expected by the fourth quarter of fiscal 2025.
Q: On the Fuze churn, as you work through some of those very large customers, what are you seeing? And is the traction you're seeing with Engage in line with expectations? A: Kevin Kraus mentioned that as they migrate Fuze customers to the 8x8 platform, some rightsizing occurs, which has led to headwinds but has also resulted in higher customer satisfaction. Samuel Wilson added that they have a clear status on every Fuze customer and are nearing the end of migrations. Regarding Engage, Wilson noted that the product is performing above expectations, particularly because it targets specific use cases effectively, resonating well with both existing customers and prospects.
Q: Can you update us on the changes in go-to-market strategies for the Contact Center? A: Samuel C. Wilson shared that there has been a significant improvement in product capabilities, leading to better performance in RFPs and an increase in pipeline for Contact Center solutions. He also mentioned positive feedback from partners and customers about the company's direction, which supports confidence in the ongoing turnaround and future growth.
Q: What are you seeing in the macro environment, and how is it factored into your guidance for fiscal '25? A: Samuel C. Wilson described the macro environment as challenging, with impacts from higher interest rates and general market cautiousness. However, he noted that the introduction of low-cost solutions like Operator Connect for Microsoft Teams could help accelerate the migration from on-prem to cloud solutions. Kevin Kraus added that their guidance assumes a continuation of the current cautious market conditions.
Q: Where are you seeing the best opportunities in AI use cases among customers, and is there an avenue for monetization? A: Samuel C. Wilson affirmed that AI use cases are embedded into products that solve specific customer problems, which has led to successful outcomes and monetization opportunities, particularly with AI-enabled voice and digital chatbots. He emphasized that customers are willing to pay for complete solutions that address their needs, rather than standalone AI technologies.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
