Summary
8x8 reported total revenue of $187.4 million for FY2023 Q2, up 23.6% from the prior-year quarter. Half-year revenue reached $375.0 million, up 25.1% year over year. The GAAP operating loss narrowed to $25.0 million, the GAAP net loss narrowed to $11.6 million, and diluted EPS improved to -$0.10. GAAP operating margin improved to -13.3%. On a year-to-date basis, the operating loss narrowed to $51.7 million, the net loss narrowed to $37.7 million, and diluted EPS improved to -$0.32. Operating cash flow was $13.8 million for the quarter, up 171.4%, and $19.7 million for the first half, up 115.6%. Capital expenditures were $0.9 million in the quarter, down 40.9%, and $1.8 million for the first half, down 21.8%. Deferred revenue, current, stood at $30.9 million, up 38.0%.
Operational metrics show the customer mix shifting toward larger accounts. Total ARR reached $692 million, up 25% year over year. Enterprise ARR was $401 million, up 42%, and made up 58% of the total. The company counted 1,291 customers generating more than $100,000 in ARR, up from 871 a year earlier. ARR from strategic mid-market and enterprise customers represented 76% of total ARR and grew 37% from the same period in fiscal 2022. Small business ARR declined 2% year over year and accounted for 24% of total ARR, down from 30% a year ago. Non-GAAP operating profit was $9.1 million, up 368% from $1.9 million a year earlier. Non-GAAP gross margin was 70%, compared with 64%, and non-GAAP service gross margin was 74%, compared with 69%.
Capital structure work dominated the quarter's corporate news. In August 2022, 8x8 retired approximately $404 million in aggregate principal amount of convertible notes due in 2024. The exchange issued $202 million of new senior convertible notes due in 2028 and paid $182 million in cash. A $250 million term loan due in 2027 funded much of the cash payment. The company also repurchased 10.7 million shares for approximately $60 million. It later bought back another $6 million in principal of the 2024 notes, leaving approximately $90 million outstanding. Cash, cash equivalents, restricted cash and investments were $132.3 million on September 30, 2022, versus $145.6 million on March 31, 2022. In October 2022, 8x8 cut total headcount by less than 10%, mostly in sales and marketing.
Product and leadership updates rounded out the release. 8x8 pushed out an update to its XCaaS platform, added a new 8x8 phone app for Microsoft Teams, extended full cloud PSTN support to 56 countries and territories, and made 8x8 Work Chrome Enterprise recommended. The company named Jeanette Winters as Chief Human Resources Officer. She received restricted stock units for up to 100,000 shares and performance stock units for up to 200,000 shares, vesting over three years.
Management guided FY2023 Q3 non-GAAP operating margin to 5.0% to 5.8% and pointed to total revenue growth of approximately 19% at the midpoint of its range. For the full fiscal year 2023, management guided non-GAAP operating margin to approximately 5.5%, with a goal of exiting the year at no less than 6.5%. The company does not reconcile forward-looking non-GAAP operating margin to the corresponding GAAP measure because the excluded items are hard to forecast. Risks flagged in the filing include foreign currency exchange rate and interest rate fluctuations, inflationary pressures, economic downturns, competitive dynamics in cloud communications, customer churn, supply chain disruptions, new debt and interest expense, and the ability to repay the remaining 2024 notes. Management also warns that reducing total costs as a percentage of revenue may hurt revenue, and that third parties may assert ownership rights in the company's intellectual property. Uncertainty tied to the COVID-19 pandemic and Russia's invasion of Ukraine remains in the mix.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2023 | Q1 FY2023 | QoQ | Q2 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $187.4M | $187.6M | -0.1% | $151.6M | +23.6% |
| Research & development | $36.0M | $35.0M | +3.0% | $28.5M | +26.4% |
| Sales & marketing | $80.5M | $83.5M | -3.6% | $76.7M | +4.9% |
| General & administrative | $33.8M | $29.2M | +15.8% | $24.0M | +40.8% |
| Total operating expenses | $212.4M | $214.4M | -0.9% | $188.7M | +12.5% |
| Operating income (loss) | -$25.0M | -$26.8M | +6.6% | -$37.2M | +32.7% |
| Operating margin | -13.3% | -14.3% | +0.9 pp | -24.5% | +11.2 pp |
| Net income (loss) | -$11.6M | -$26.0M | +55.3% | -$42.3M | +72.5% |
| Net margin | -6.2% | -13.9% | +7.7 pp | -27.9% | +21.7 pp |
| Diluted EPS | -$0.10 | -$0.22 | +$0.12 | -$0.38 | +$0.28 |
Risks
During fiscal 2023 Q2, the company detected malware on its network that permitted an intrusion by an authorized third party to access certain data stored on its network. The risk factor warns this could lead to increased costs, liability claims, government investigations, fines, class action litigation, reduced revenue, or reputational harm.
As of September 30, 2022, the company had $516.7 million of total long-term debt outstanding after borrowing $250.0 million under a senior secured term loan and issuing approximately $201.9 million of 2028 Notes during the quarter. The substantial debt carries restrictive covenants, requires significant cash flow for debt service, and may limit flexibility and competitive position.
In the second quarter of fiscal 2023 total revenue grew 24% year-over-year to $187.4 million, but excluding $28.4 million of Fuze customer base revenue it increased only 5%. For the first half of fiscal 2023, excluding $57.9 million of Fuze revenue, total revenue increased 6%, highlighting dependence on the Fuze acquisition for reported growth.
ARR from Small Business customers declined 2% year-over-year and accounted for 24% of total ARR, compared with 30% a year ago, while strategic mid-market and enterprise ARR rose 37% and represented 76% of total ARR. This shift increases dependence on enterprise customers and execution of the enterprise-focused strategy.
In October 2022, after the quarter ended September 30, 2022, the company reduced total headcount, primarily in sales and marketing, by less than 10% as it seeks improved sales and marketing efficiency. Execution risk exists if the reduction impairs customer acquisition or enterprise expansion.
MD&A cites the global economic outlook, including inflationary pressures, foreign currency exchange rate and interest rate fluctuations, COVID-19, and Russia's invasion of Ukraine, as factors that could impact business and liquidity. The floating-rate term loan also exposes debt service costs to interest rate movements.
SaaS KPIs
All quarters →Non-GAAP gross margin
Total ARR
Non-GAAP Operating Profit
Enterprise ARR
Customers > $100K ARR
Enterprise ARR as % of Total ARR
Non-GAAP operating profit (as a percentage of revenue)
Summary, forecast, risks and KPIs are extracted from 8X8 INC /DE/'s SEC filings for Q2 FY2023 (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.