• Total Revenue: $178.9 million for Q3 fiscal 2025.
• Service Revenue: $173.5 million, exceeding the midpoint of guidance by $1 million.
• Operating Margin: 10.7%, slightly above the midpoint of guidance.
• Gross Margin: 69.5%, within guidance range.
• Cash Flow from Operations: $27.2 million, a record for the company.
• Debt Reduction: Reduced debt by $33 million in Q3 and an additional $15 million in January 2025.
• Net Debt to EBITDA Ratio: Approximately 2.6x, down from over 6x in fiscal Q2 2023.
• Stock-Based Compensation: 5.3% of total revenue, near a multi-year low.
• Remaining Performance Obligation: $800 million, a year-over-year increase of 4.6%.
• Guidance for Q4 2025: Service revenue expected between $170 million to $175 million; total revenue between $175 million to $181 million.
• Full Year 2025 Guidance: Service revenue between $691.3 million and $696.3 million; total revenue between $713 million and $719 million.
• Full Year Operating Margin: Projected between 10.7% and 11%.
• Full Year Cash Flow from Operations: Expected between $61 million and $65 million.

• Warning! GuruFocus has detected 4 Warning Signs with EGHT.

Release Date: February 04, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• 8x8 Inc (NASDAQ:EGHT) achieved service revenue above the midpoint of their guidance range despite facing a $2 million FX headwind.
• The company generated record cash flow from operations and used excess cash to reduce debt by $33 million in the quarter and an additional $15 million in early January.
• New product monthly recurring revenue (MRR) increased by more than 60% year-over-year, driven by growth in AI-based solutions.
• Customer satisfaction remains high, with CSAT scores in the mid to high 90% range for targeted enterprise customers.
• 8x8 Inc (NASDAQ:EGHT) continues to expand its international presence, particularly in the Asia Pacific region, securing its largest deal ever with a well-known auto manufacturer.

Negative Points

• The company is still working through revenue headwinds from Fuze customer upgrades to the 8x8 platform.
• Foreign exchange headwinds impacted total revenue by approximately $2.2 million, affecting the company's ability to meet the high end of its guidance range.
• The anticipated decline in revenue from customers still on the Fuze platform continues to offset growth.
• Operating margin guidance for fiscal Q4 2025 is expected to be lower due to seasonally higher expenses.
• 8x8 Inc (NASDAQ:EGHT) plans to make strategic investments in fiscal 2026 that may result in a lower non-GAAP operating margin compared to fiscal 2025.

Q & A Highlights

Q: Can you clarify the impact of foreign exchange (FX) on service revenue and the guidance for Q4? A: Kevin Kraus, CFO: We see about $2.3 million of FX headwind in Q4 relative to last quarter. This implies a roughly flat guidance for the full year and quarter to quarter, excluding FX impacts.

Q: How is the growth of AI and new product offerings impacting service revenue, and what are the expectations for the next fiscal year? A: Samuel Wilson, CEO: New product revenue, including AI, is growing rapidly but still represents single-digit millions per quarter. Our goal is to return to growth next year, driven by new products, higher retention rates among multi-product customers, and adding new customers.

Q: What is the status of the Fuze platform transition, and what cost savings are expected once it's completed? A: Samuel Wilson, CEO: We aim to shut down the Fuze platform by the end of this fiscal year. The transition is expected to yield mid-single-digit millions in hard cost savings, with additional intangible savings from reduced maintenance and compliance efforts.

Q: Can you elaborate on the turbulence in the UC space and how 8x8 is positioned in this environment? A: Samuel Wilson, CEO: We observed some aggressive pricing in the UC space, typical for the end of the calendar year. However, our CX messaging is resonating, leading to more platform wins with multiple products, which positions us well against pricing pressures.

Q: How is 8x8 addressing the market's valuation of the company, given the strong cash flow and operational improvements? A: Samuel Wilson, CEO: Our focus is on cash flow from operations per share, which provides optionality for investments, debt reduction, and potential equity buybacks. We believe the market will eventually recognize the value of our strong cash flow and reduced risk profile.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.