Total Revenue: $177 million, near the midpoint of guidance. Service Revenue: $171.6 million, near the midpoint of guidance. 8x8 Standalone Service Revenue Growth: 4.6% year-over-year growth in Q4, 2.8% for fiscal 2025. Gross Margin: 69%, at the low end of guidance range. Operating Margin: 10%, at the high end of guidance range. Operating Cash Flow: $5.9 million in Q4; $63.6 million for fiscal year 2025. Debt Reduction: Over $209 million reduced since August 2022 peak. Cash and Cash Equivalents: $89.3 million at the end of Q4. Net Debt to EBITDA Ratio: Approximately 2.7 times. Stock-Based Compensation: 4.6% of total revenue, a multi-year low. Guidance for Fiscal Q1 '26: Service revenue between $170 million and $175 million; total revenue between $175 million and $182 million; non-GAAP operating margin between 9% and 9.5%. Guidance for Fiscal Year 2026: Service revenue between $682 million and $702 million; total revenue between $702 million and $724 million; operating margin between 9% and 10%.

Warning! GuruFocus has detected 5 Warning Signs with EGHT.

Release Date: May 19, 2025

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

Positive Points

8x8 Inc (NASDAQ:EGHT) reported a year-over-year growth in service revenue, excluding Fuze, of 4.6% in Q4, marking the highest growth rate in 10 quarters. The company achieved its highest two-year cash flow from operations, exceeding half of its market capitalization. There was a 13% year-over-year increase in customers with three or more products, indicating successful cross-selling and new customer acquisition. Strong momentum was observed in sales of Microsoft Teams integrations, with new license sales up 72% in Q4. 8x8 Inc (NASDAQ:EGHT) made substantial progress in upgrading customers from the Fuze platform, expecting full transition by the end of the calendar year.

Negative Points

The economic environment remains challenging, with global uncertainties and tariff actions impacting market dynamics. The company is still navigating the transition of Fuze customers, which poses a risk of revenue loss during the migration process. Gross margin was at the low end of guidance due to a revenue mix shift towards lower-margin platform usage revenue. There is ongoing pressure on non-GAAP operating margins due to investments in growth and innovation. The macroeconomic environment has led to elongated deal cycles and shrinking deal sizes, affecting sales performance.

Q & A Highlights

Q: Can you share insights on the macro impact from your field reps and partners? Are there delays in sales cycles or spending? A: Samuel Wilson, CEO: In March and April, we noticed chaos in the US with elongated deal cycles and shrinking deal sizes. However, May has been calmer. The rest of the world seems to be chugging along unaffected by US dynamics.

Story Continues

Q: What remains to be addressed in your go-to-market strategy, and can you provide adjusted service revenue growth for fiscal '26 excluding Fuze? A: Samuel Wilson, CEO: We are about 60-70% through our go-to-market transformation, focusing on solution selling. Kevin Kraus, CFO: Excluding Fuze, we expect positive growth next year as headwinds diminish.

Q: How do you plan to achieve high single-digit growth, and what factors are driving this? A: Samuel Wilson, CEO: Growth is driven by internal factors like increased multi-product customers, new product sales, and improved go-to-market execution. We don't rely on market changes for growth.

Q: Why are you winning in the CCaaS space, and how is your performance in the APAC region? A: Samuel Wilson, CEO: We offer a complete solution with best-in-breed technology from a single vendor, appealing to mid-market enterprises. In APAC, our CCaaS continues to perform well, supported by strong VAR and reseller networks.

Q: What is your focus now that you've improved the balance sheet and expense structure? A: Samuel Wilson, CEO: Our focus is on returning to growth by accelerating the shutdown of Fuze and investing in CCaaS and distribution improvements for fiscal '27 and '28.

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

This article first appeared on GuruFocus.

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