8x8, Inc. (EGHT) Q2 2026 Earnings Call Transcript
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Overview
The earnings call indicates strong financial performance with a revenue and EPS beat, disciplined capital management, and debt reduction. Despite some margin pressures, the overall profitability and cash flow are improving. The Q&A reveals a strategic focus on AI and M&A for growth, with international markets showing promising trends. While management was vague about certain future projections, the overall sentiment is positive due to strong financial metrics, optimistic guidance, and strategic initiatives.
Key Financial Performance
Total Revenue $184.1 million, growing 1.7% year-over-year. Driven by healthy usage trends and disciplined execution.
Service Revenue $179.1 million, growing 2.3% year-over-year. Excluding revenue from Fuze customers, service revenue grew nearly 6% year-over-year. Growth driven by strength in usage-based offerings.
Gross Profit $120.9 million, about $2 million above guidance midpoint. Reflecting strong execution and revenue outperformance.
Gross Margin 65.7%, down sequentially due to mix shift toward lower-margin usage revenue. However, usage revenue adds meaningful profit dollars as it scales.
Operating Income $17.3 million, resulting in a 9.4% operating margin. Exceeded expectations.
Fully Diluted EPS $0.09 per share, $0.01 above the high-end of guidance range.
Cash Flow from Operations $8.8 million, above the high-end of guidance.
Cash, Cash Equivalents, and Restricted Cash $76.7 million at the end of the quarter. Reflects disciplined capital management and debt reduction efforts.
Debt Reduction Reduced debt principal by $224 million or 41% since August 2022. Demonstrates commitment to disciplined capital management.
Stock-Based Compensation 2.9% of revenue, a multiyear low. Reflects focus on prudent equity management.
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Operating Highlights
AI Integration: Embedded AI throughout the platform for smarter, faster, and more personal communications, including real-time call summarization, AI-powered transcription, and agentless payment capabilities.
8x8 Workforce Management: Launched as a free offering for all contact center customers through the new 8x8 App Store, marking the company's first product-led growth initiative.
8x8 App Store: Introduced to provide a modern, flexible, self-service way to activate new capabilities, with plans to add more applications for UC and CC.
Customer Success Stories: Highlighted successful implementations with a large UK automotive dealership and a multi-hundred-million-dollar software company, showcasing measurable business outcomes and customer satisfaction.
Usage Revenue Growth: Usage revenue, including CPaaS communication API, reached a record 19% of service revenue, up from 13% in the previous year.
Fuze Platform Shutdown: Progressed in transitioning Fuze customers to the 8x8 platform, with service revenue from Fuze customers declining to 3% of total service revenue.
Debt Reduction: Reduced debt principal by $224 million since August 2022, demonstrating disciplined capital management.
AI-Driven Innovation: Focused on AI-native product innovation to enhance customer and employee outcomes, improve forecasting, and automate processes.
Product-Led Growth Strategy: Adopted a PLG strategy with the launch of 8x8 Workforce Management and plans for future premium versions.
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Risk or Challenges
Forward-looking statements: The company acknowledges risks and uncertainties that may cause actual results to vary materially from forward-looking statements. These risks are described in their SEC filings.
Revenue guidance: The company anticipates a sequential decline in revenue for Q3 due to record usage revenue in Q2 and the ongoing wind-down of Fuze-related revenue. This reflects potential variability in consumption patterns.
Gross margin pressure: The company expects lower gross margins for the remainder of the year due to the mix shift toward usage revenue, which carries a lower margin profile.
Debt management: While the company has reduced its debt significantly, it still carries a notable debt burden, which could impact financial flexibility.
Customer retention and platform transition: The company is in the process of transitioning Fuze customers to the 8x8 platform, which could pose risks related to customer retention and satisfaction.
Economic uncertainties: The cautious forecast for usage-based revenue growth reflects potential economic uncertainties and variability in customer consumption patterns.
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Guidance & Outlook
Revenue Guidance for Q3 FY26: Service revenue is expected to be between $172 million and $177 million. Total revenue is anticipated to be between $177 million and $182 million.
Gross Margin Guidance for Q3 FY26: Gross margin is anticipated to be between 64% and 66%.
Operating Margin Guidance for Q3 FY26: Operating margin is expected to be between 9% and 10%.
Non-GAAP EPS Guidance for Q3 FY26: Fully diluted non-GAAP earnings per share are expected to be in the range of $0.08 to $0.09 per share.
Cash Flow Guidance for Q3 FY26: Cash flow from operations is expected to be between $10 million and $14 million.
Revenue Guidance for FY26: Service revenue is anticipated to be between $692 million and $706 million. Total revenue is anticipated to be between $712 million and $726 million.
Gross Margin Guidance for FY26: Gross margin is expected to be between 65% and 66%.
Operating Margin Guidance for FY26: Operating margin is projected to be between 8.5% and 9.5%, translating to non-GAAP operating income of approximately $65 million at the midpoint of guidance.
Non-GAAP EPS Guidance for FY26: Fully diluted non-GAAP earnings per share are expected to be in the range of $0.31 to $0.33 for the year.
Cash Flow Guidance for FY26: Cash flow from operations is anticipated to be between $38 million and $42 million for the full year.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:What is driving the service margin changes?
A:The service margin changes are primarily driven by volume due to the absolute usage volume being observed. Margins on the application side are stable and consistent, and pricing pressures in some deals are not significantly impacting the overall price.
Q:How should we think about the revenue trajectory excluding Fuze?
A:The revenue trajectory excluding Fuze should consider a headwind of about 2 points or slightly less in next year's growth rate as Fuze customers are upgraded to the 8x8 platform. After this transition, normalized growth rates are expected.
Q:Will there be a pro forma ex-Fuze provided next year for comparability?
A:Management has not decided yet but mentioned they might provide numbers if it makes analysis easier.
Q:How is pipeline quality being measured and improved?
A:Pipeline quality is measured by deals reaching Stage 3 in a 7-stage sales process, which includes a first meeting, discovery, and vetting. Improvements are attributed to the use of SDRs, AI in the sales process, and other contributing factors.
Q:What is the expectation for service revenue trends post-Fuze transition?
A:It is difficult to predict due to the 19% usage-based revenue component. Management is conservative in modeling usage-based revenue and expects growth to continue but cannot specify when sequential improvements will occur.
Q:How is usage-based revenue being modeled and guided?
A:Usage-based revenue is modeled by taking the exit run rate for a quarter and running it forward in perpetuity, with adjustments for known growth factors like major deals or seasonal trends.
Q:What is the impact of usage-based revenue on margins?
A:Usage-based revenue may lead to gross margin deterioration due to mix, but absolute dollar profitability and cash flow are expected to improve over time.
Q:What pricing pressures are being observed during renewals?
A:Pricing pressures are observed due to post-COVID rationalization of seats and competition, but these are offset by the addition of AI, messaging, and digital products, leading to increased average revenue per customer.
Q:What is the strategy behind offering a free WFM product?
A:The strategy is to replace Excel as the most popular WFM tool for small to mid-sized contact centers, drive value for customers, and introduce a freemium model with potential upgrades to a Pro version.
Q:How is the company approaching M&A versus organic growth?
A:The company is focused on debt retirement but is also actively looking at tuck-in acquisitions for geographic, product portfolio, or customer expansion. M&A is part of the capital allocation strategy.
Q:How is AI adoption influencing buying patterns and sales processes?
A:AI adoption is driving demand for specific use cases like Agent Assist and AI receptionists. The industry is moving towards a consumption-based model, and professional services are increasingly required for deployment and ongoing support.
Q:What actions are being taken to manage costs and expand operating margins?
A:The company is deploying AI technologies internally to optimize processes and reduce costs. They are also pressuring suppliers for better unit pricing and focusing on a mix of usage-based revenue to align with customer needs.
Q:How are revenue trends differing between domestic and international markets?
A:International markets, including the U.K., are growing faster than the U.S. market, which is experiencing price compression and competitive pressures.
Q:Review of Unclear Management Responses
A:Management avoided giving a direct answer to the question about providing a pro forma ex-Fuze next year, stating they had not thought that far ahead. Additionally, they were vague about when sequential improvements in service revenue trends post-Fuze transition would occur, citing many moving pieces and uncertainties.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI CX
AI analytics
AI customer
AI platform
AI process
AI product
AI transcription
AI work
API usage
Asia Pacific
Atlantic dollar
CC future
CCaaS Engage
CPaaS API
Chief Officer
Conference Instructions
Conversational IQ
Division Evercore
Division Rosenblatt
Engage AI
Engage Secure
Inc Research
PLG
Relations website
Research Division
Securities Inc
Workforce
assistant
customer employee
dealership
platform communication
quality
response time
score
software
story
team
video
EGHT Transcript
8x8, Inc. (EGHT) Q2 2026 Earnings Call Transcript
Positive11-5
The earnings call indicates strong financial performance with a revenue and EPS beat, disciplined capital management, and debt reduction. Despite some margin pressures, the overall profitability and cash flow are improving. The Q&A reveals a strategic focus on AI and M&A for growth, with international markets showing promising trends. While management was vague about certain future projections, the overall sentiment is positive due to strong financial metrics, optimistic guidance, and strategic initiatives.
8x8, Inc. (EGHT) Q1 2026 Earnings Call Transcript
Positive8-5
The earnings call presented a positive outlook, with strong revenue performance, debt reduction, and shareholder returns. Despite a slight decline in gross margin, the company is effectively managing cash flow and demonstrating growth in usage-based revenue. The Q&A highlighted challenges with the Fuze migration but also revealed growth opportunities in AI and CPaaS, especially in Asia. The stock buyback and debt reduction further support a positive sentiment. Overall, the company's strategic initiatives and financial health suggest a positive stock price movement in the short term.
8×8, Inc. (NYSE:EGHT) Q4 2025 Earnings Call Transcript
Unknown5-21
The earnings call presents a mixed outlook. Positive aspects include stable financial performance, debt reduction, and strategic investments in R&D and multi-product strategy. However, challenges such as economic uncertainty, competitive pressures, and supply chain issues temper enthusiasm. The lack of a share repurchase or dividend program further neutralizes sentiment. The Q&A section reveals concerns about macroeconomic impacts and ongoing transitions, but also highlights potential growth areas. Overall, the combination of stable financial results and external challenges suggests a neutral stock price movement over the next two weeks.
8x8, Inc. (EGHT) Q4 2025 Earnings Call Transcript
Unknown5-19
The earnings call presents a mixed picture. Basic Financial Performance shows stable revenue and debt reduction but has weak gross margins and uncertain cash flow projections. Product Development is positive with AI focus but faces macroeconomic challenges. Market Strategy is in transition, with incomplete sales and marketing changes. Expenses are managed well, but financial health concerns persist due to vague guidance. Shareholder Return Plan is positive with debt reduction but lacks strong incentives. Q&A reveals market volatility and management's unclear responses, adding uncertainty. Overall, the sentiment is Neutral, expecting a stock price movement between -2% to 2%.
EGHT Slides
EGHT Report
Frequently Asked Questions
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