Summary
8x8 reported total revenue of $129.1 million for the second quarter of fiscal 2021 ended September 30, 2020, up 17.9% from the prior-year quarter. GAAP gross margin was 56.2%, up 1.6 percentage points. GAAP operating loss narrowed to $33.1 million, and GAAP net loss narrowed to $38.4 million. Diluted EPS was -$0.37. Operating margin was -25.6%, up 9.0 percentage points. For the first six months of fiscal 2021, total revenue was $250.9 million, up 21.7%. The year-to-date operating loss widened to $70.9 million, and the year-to-date net loss widened to $80.3 million. Year-to-date diluted EPS was -$0.77. Year-to-date operating margin was -28.2%, up 6.0 percentage points. Non-GAAP gross margin was 61%, compared with 58% a year earlier, and non-GAAP pre-tax loss was $3.3 million.
Operational momentum was strong. Total ARR grew to $467.1 million, up 20% from a year earlier. Customers with ARR greater than $100,000 totaled 670, compared with 536, a 25% increase. Small business customers made up 54% of total ARR and grew 11%. Mid-market customers made up 27% and grew 25%. Enterprise customers made up 20% and grew 44%. Average annualized service revenue per customer grew to $8,052, compared with $7,957. The company closed a record 48 new customer deals with ARR greater than $100,000 in the quarter, up 60%, and those deals represented 42% of new bookings. That total included 22 upsell and cross-sell deals. Channel bookings grew 23% and represented 59% of new bookings. Contact center bookings reached 32% of total new bookings and grew 62%. Remaining performance obligations were $330.0 million, up 50%. Deferred revenue was $12.1 million, up 181.2%. Over 90% of the customer base has migrated to the 8x8 X Series platform, and the company ended the quarter with 246 patents. It also expanded complete PSTN replacement to 42 countries across six continents.
Cash flow improved. Operating cash flow was negative $3.8 million, an improvement from the prior-year quarter. Year-to-date operating cash flow was negative $13.1 million, up 70.6% from the prior-year period. Capital expenditures were $1.7 million, down 66.7% from the prior-year quarter. 8x8 initiated guidance for the third quarter of fiscal 2021, ending December 31, 2020. It expects total revenue growth of approximately 11% to 12% year-over-year and service revenue growth of approximately 12% to 13% year-over-year, with a non-GAAP pre-tax loss of approximately $3.0 million. For the full fiscal year 2021, ending March 31, 2021, the company guides total revenue growth of approximately 16% to 17% year-over-year, service revenue growth of approximately 18% to 19% year-over-year, and a non-GAAP pre-tax loss of approximately $16.0 million.
The quarter's growth came with familiar risks. 8x8 continues to invest in sales, marketing, channel programs, and global expansion, and those upfront investments may not produce additional revenue from new or existing customers. The COVID-19 pandemic remains a wildcard. Small business and mid-size customers have been more impacted than enterprise customers. The company also faces customer churn, competitive pressures, reliance on third-party network providers, cybersecurity and data privacy risks, and regulatory compliance costs. It carries convertible senior notes, which add interest expense and foreign exchange exposure. Cost of service revenue is rising with communication infrastructure costs and higher platform usage, including CPaaS. Management expects operating expenses to increase in absolute dollars in future periods. No customer represented greater than 10% of total revenue for the three and six months ended September 30, 2020 or 2019. The company believes its existing cash, cash equivalents, and investments will be sufficient for the next 12 months, but it also notes that adverse pandemic effects or weak returns on growth spending could pressure results.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2021 | Q1 FY2021 | QoQ | Q2 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $129.1M | $121.8M | +6.0% | $109.5M | +17.9% |
| Research & development | $21.6M | $21.5M | +0.3% | $19.4M | +11.0% |
| Sales & marketing | $61.4M | $60.1M | +2.1% | $57.9M | +6.1% |
| General & administrative | $22.8M | $25.8M | -11.7% | $20.4M | +11.4% |
| Total operating expenses | $162.2M | $159.6M | +1.7% | $147.5M | +10.0% |
| Operating income (loss) | -$33.1M | -$37.8M | +12.3% | -$37.9M | +12.8% |
| Operating margin | -25.6% | -31.0% | +5.4 pp | -34.6% | +9.0 pp |
| Net income (loss) | -$38.4M | -$41.9M | +8.4% | -$40.9M | +6.2% |
| Net margin | -29.8% | -34.4% | +4.7 pp | -37.4% | +7.6 pp |
Risks
COVID-19 remains the dominant external risk: 8x8 states that small business and mid-size customers have been more impacted by the pandemic than enterprise customers, which has forced greater flexibility in response to changing customer needs, and reduced demand for hardware amid work-from-home policies. The company also recognized a $0.7 million higher allowance for credit losses in the quarter and a $2.1 million higher allowance for the six months ended September 30, 2020, partially in response to market uncertainties tied to the pandemic.
FY2021 plans depend on upfront spending to acquire customers, including global expansion, direct marketing, sales force, e-commerce and outbound marketing, plus investments in VARs and master agent channel programs. Management warns that if these upfront investments do not produce additional revenue from new or existing customers, or if its cost reduction and efficiency efforts do not deliver meaningful savings, operating results may be adversely impacted. Operating income was still a loss of $33.1 million in the quarter and the year-to-date loss widened to $70.9 million.
Over 90% of the customer base had migrated to the 8x8 X Series platform as of September 30, 2020, with the remaining base to be migrated through the end of the fiscal year. These migrations may require professional services and related engineering costs that 8x8 may not be able to recover from customers, even though it expects platform consolidation and retention benefits.
Other expense, net increased 89.5% for the three months and 111.9% for the six months ended September 30, 2020, driven by $1.1 million lower interest income in the quarter ($2.6 million lower year to date) and higher contractual interest, debt discount amortization and issuance cost amortization from the convertible notes issued in November 2019. Management expects other income and expense to remain in a net expense position in future periods.
Cash, cash equivalents and investments declined to $159.4 million at September 30, 2020 from $186.9 million at March 31, 2020, while net cash used in operating activities was $13.1 million for the six months ended September 30, 2020. Cash was supported by temporary measures including CARES Act payroll tax deferrals of over $4 million, an employee stock-for-salary program expected to reduce fiscal 2021 cash payroll usage by over $4 million (which the company does not expect to extend beyond fiscal 2021), and a shift of executive compensation to performance share units.
SaaS KPIs
All quarters →Non-GAAP gross margin
Total ARR
Non-GAAP Service Margin
Enterprise ARR as % of Total ARR
Average annualized service revenue per customer
Mid-market ARR as % of total ARR
Small business ARR as % of total ARR
Summary, forecast, risks and KPIs are extracted from 8X8 INC /DE/'s SEC filings for Q2 FY2021 (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 2, 2026.