Summary
8x8 entered fiscal 2024 with a clear tilt toward profitability and cash generation. Revenue was $183.3 million in the quarter ended June 30, 2023, down 2.3% from $187.6 million in the prior-year quarter. GAAP gross margin was 70.2%. Non-GAAP gross margin was 73%, compared to 69% in the same period last year. The top line decline reflected lower usage revenue in Southeast Asia, mainly from SMS customers. New subscription bookings only partly offset churn and down-sell in the inorganic customer base.
Profitability improved sharply. GAAP operating loss narrowed to $1.4 million from $26.8 million a year earlier. GAAP net loss narrowed to $15.3 million from $26.0 million. Diluted EPS was -$0.13, up from -$0.22. Operating margin was -0.8%, up from -14.3%. Non-GAAP operating expenses were 58.6% of revenue compared to 63.1% a year earlier. Non-GAAP operating profit was $26.4 million, an increase of 161% from $10.1 million. Non-GAAP net income was $15.5 million, compared to $11.6 million. Adjusted EBITDA was $33.8 million, or 18% of revenue, compared to $18.9 million, or 10% of revenue.
Cash flow was the strongest part of the quarter. Operating cash flow was $26.5 million, up 353.2% from $5.8 million in the prior-year quarter. Capital expenditures were $0.19 million, down 80.8% from $0.97 million. Deferred revenue, current portion, rose 18.6% to $40.41 million. Remaining performance obligations were $790.0 million. The company also voluntarily prepaid $25 million of term loan principal during the quarter, cutting the outstanding principal on the adjustable-rate loan.
Operational metrics showed mixed momentum. Total ARR was $703.0 million, up 2% from the end of the same period last year. Enterprise ARR was $404.0 million and represented 58% of total ARR. Mid-market and enterprise ARR together were 76% of total ARR and increased 1% compared to the end of the first quarter of fiscal 2023. Small business ARR was 24% of total ARR. 8x8 expanded contact center users on its XCaaS platform and increased 8x8 Voice for Microsoft Teams seats. It closed the largest total contract value transaction in company history. Supervisor Workspace has been accessed by nearly 60% of 8x8 Contact Center customers since its March launch.
Leadership changed at the top. Samuel Wilson became CEO, Kevin Kraus became CFO, and Lisa Martin became Chief Revenue Officer. Product updates included the enhanced 8x8 Intelligent Customer Assistant for conversational AI self-service, a new Technology Partner Ecosystem, and improvements to 8x8 Supervisor Workspace. 8x8 Global Reach extended to 59 countries with the addition of South Korea.
Guidance points to a softer near term. For the second quarter of fiscal 2024, management expects service revenue of $173 million to $178 million and non-GAAP operating margin of 10.5% to 11.5%. For the full fiscal year 2024, service revenue guidance is $701 million to $711 million with non-GAAP operating margin of 12% to 13%. Risks include the revenue decline tied to SMS usage in Southeast Asia, customer churn and down-sell, macroeconomic pressure on buying behavior, and competitive dynamics in cloud communications. Interest expense also rose on the adjustable-rate term loan. Management warns that its emphasis on profitability and cash flow may not be successful and that churn could be higher than anticipated.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2024 | Q4 FY2023 | QoQ | Q1 FY2023 | YoY |
|---|---|---|---|---|---|
| Revenue | $183.3M | $184.5M | -0.7% | $187.6M | -2.3% |
| Research & development | $35.3M | $36.5M | -3.2% | $35.0M | +1.0% |
| Sales & marketing | $68.5M | $68.8M | -0.5% | $83.5M | -18.0% |
| General & administrative | $26.2M | $20.4M | +28.3% | $29.2M | -10.2% |
| Total operating expenses | $184.7M | $181.0M | +2.0% | $214.4M | -13.8% |
| Operating income (loss) | -$1.4M | $3.5M | -139.9% | -$26.8M | +94.7% |
| Operating margin | -0.8% | 1.9% | -2.7 pp | -14.3% | +13.5 pp |
| Net income (loss) | -$15.3M | -$9.4M | -62.5% | -$26.0M | +41.1% |
| Net margin | -8.4% | -5.1% | -3.2 pp | -13.9% | +5.5 pp |
| Diluted EPS | -$0.13 | -$0.08 | -$0.05 | -$0.22 | +$0.09 |
Risks
MD&A states that macroeconomic conditions, contract duration, churn, upsell and down-sell, renewals, and payment terms could cause variability in revenue. In FY2024 Q1, total revenue decreased 2.3% year over year to $183.29M, and service revenue decreased $3.9 million, or 2.2%, as new subscription revenue from new bookings offset increased customer churn and down-sell in the inorganic customer base.
MD&A notes net income may vary due to the adjustable interest rate on the senior secured term loan. Other expense, net was $12.5 million for the three months ended June 30, 2023 versus $1.1 million of other income, net in the prior-year period, primarily due to an $8.5 million increase in interest expense on the variable-rate term loan entered into in Q2 FY2023.
Service revenue for FY2024 Q1 decreased primarily due to lower usage revenue in the Southeast Asia region, mainly from short messaging services customers. This geographic and product concentration contributed to the 2.2% decline in service revenue for the quarter.
SaaS KPIs
All quarters →Non-GAAP gross margin
Total ARR
Non-GAAP Operating Profit
Enterprise ARR
Adjusted EBITDA
Non-GAAP service revenue gross margin
Non-GAAP operating profit (as a percentage of revenue)
Summary, forecast, risks and KPIs are extracted from 8X8 INC /DE/'s SEC filings for Q1 FY2024 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 1, 2026.