Release Date: November 04, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- 8x8 Inc (EGHT, Financial) reported better-than-expected results for key financial metrics, including service and total revenue, and non-GAAP operating income.
- The company achieved its highest single platform usage revenue day ever in early September, particularly in the Asia Pacific and European regions.
- Sales of new products increased by more than 60% year over year, with AI-based solutions growing more than 200% year over year.
- 8x8 Inc (EGHT) has maintained positive cash flow from operations for 15 consecutive quarters.
- The company reduced its total debt principal balance by over $173 million or 32% since the end of fiscal Q2 '23, demonstrating financial discipline and commitment to returning value to shareholders.
Negative Points
- Revenue from customers remaining on the Fuze platform declined, representing a headwind to overall growth.
- Gross margin was slightly lower than the previous quarter due to increased usage in the communication platform as a service business.
- The company anticipates a modest decline in service revenue for the next quarter, partly due to conservatism around CPaaS visibility and potential FX fluctuations.
- There is ongoing pressure from competitors offering aggressive pricing, which could slow down deal cycles.
- The transition of customers from the Fuze platform to the 8x8 platform is progressing slower than desired, impacting revenue growth.
Q & A Highlights
Q: What were the key factors driving the sequential growth improvement in services revenue, and how sustainable are these trends?
A: Kevin Kraus, CFO, noted robust platform usage revenue and growth in the core 8x8 business as key factors. Samuel Wilson, CEO, added that strong gross retention provided a solid foundation for growth, and they are cautiously optimistic about sustaining these trends.
Q: What is driving the 200% year-over-year growth in AI-based solutions sales, and are customers more willing to adopt these features now?
A: Samuel Wilson, CEO, explained that customers are more willing to adopt AI solutions as they now solve business problems, such as improving agent productivity and detecting fraud. The focus is on turning AI into meaningful business outcomes, which has increased customer adoption.
Q: What could drive a return to year-on-year growth for the business, and what role does the macro environment play?
A: Samuel Wilson, CEO, highlighted that growth will be driven by new products becoming a larger part of the business and the reduction of the Fuze platform's impact. The core 8x8 business is already growing, and the focus is on continuing this trend while managing the Fuze transition.
Q: Can you explain the impact of CPaaS on gross margins and any underlying trends?
A: Kevin Kraus, CFO, stated that the accelerated platform business, which has a lower margin, impacted gross margins. The underlying UCaaS and CCaaS margins remain steady. Samuel Wilson, CEO, added that new AI usage-based products might cause short-term gross margin compression as they launch.
Q: What trends are you seeing in AI adoption, particularly regarding the number of human agents and funding for these products?
A: Samuel Wilson, CEO, noted that while AI solutions like agent assists and bots are being adopted, they are not reducing the number of human agents. Instead, they enhance agent productivity and shorten training cycles, adding capabilities rather than replacing human roles.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
