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8x8 Inc (EGHT) Q4 Earnings Beat Estimates, Revenues Up Y/Y

Zacks Equity Research

8x8 Inc. EGHT reported fourth-quarter fiscal 2020 adjusted loss of 12 cents per share, wider than the year-ago quarter’s loss of 9 cents. The figure was narrower than the Zacks Consensus Estimate of a loss of 14 cents.

Revenues of $121.5 million increased 29.6% year over year, driven by continued momentum in the channel, mid-market and enterprise markets, and beat the consensus mark by 2.1%.

Adjusted annualized recurring revenues (ARR) were $426.4 million, up 34% year over year. Channel bookings grew 63% year over year and represented 54% of new bookings. Contact center bookings represented 30% of total new bookings and grew 76% year over year.

The company closed a record 42 new customer deals in the fourth quarter of fiscal 2020, with ARR (annual recurring revenue) greater than $100,000. These deals represented 34% of new bookings for the quarter.

Customers with annualized recurring revenues greater than $100,000 were 611 compared with 408 in the year-ago quarter.

In the fourth quarter of fiscal 2020, 8x8 witnessed strong ARR growth owing to an expanded customer base. Small Business customers (defined as companies whose revenues are less than $50 million) comprised 54% of total ARR, which grew 16% year over year.

Meanwhile, Mid-market customers (defined as companies whose revenues are between $50 million and $1 billion) comprised 28% of total ARR, which grew 55% year over year.

Enterprise customers (defined as companies whose revenues are more than $1 billion) comprised 17% of total ARR, which grew 79% year over year.

8x8 Inc Price, Consensus and EPS Surprise

8x8 Inc Price, Consensus and EPS Surprise

8x8 Inc price-consensus-eps-surprise-chart | 8x8 Inc Quote

Strategic Alliances to Aid Growth

In the reported quarter, the company signed a partnership with Virgin Media Business, one of the largest business data network providers in the U.K., to accelerate the cloud-adoption of voice, video meetings, chat and contact center solutions among more than 50,000 private and public sector businesses.

Moreover, the company partnered with Jabra to expand its equipment offerings. Thirty-two models across the Jabra headset family can be used with 8x8 X Series, 8x8 Video Meetings and 8x8 Contact Center.

Product Developments in the Quarter

In fourth-quarter fiscal 2020, the company launched 8x8 Meetings Pro, a paid video conference solution powered by Jitsi, which is an open-source community for secure video meetings technology.

Additionally, the company announced the availability of 8x8 video meetings solutions in Oracle’s ORCL Oracle Cloud Marketplace.

Moreover, 8x8 X Series and 8x8 Contact Center were introduced in Canada, while 8x8 Express was introduced in the U.K.

Further, the company launched the 8x8 Rapid Expansion Program to provide customers with the flexibility to quickly extend cloud communications to newly-remote employees with no time or term commitment.

Quarter Details

The year-over-year growth in revenues was driven by a 29.9% jump in service revenues (92.6% of revenues) that totaled $12.5 million.

The company benefited from steady growth in average annual service revenue per customer. Small business customers with revenues less than $50 million grew 4% year over year to $4,748. Mid-market customers with revenues between $50 million and $1 billion grew 25% year over year to $42,934. Enterprise customers with revenue greater than $1 billion grew 26% year over year to $174,305.

Moreover, other revenues (7.4% of revenues) increased 25.4% year over year to $8.9 million.

In the reported quarter, non-GAAP gross margin contracted 810 basis points (bps) to 58% on a year-over-year basis. Non-GAAP Service gross margin contracted 930 basis points bps to 66.7% on a year-over-year basis.

While non-GAAP research and development (R&D) expenses declined 19.9% on a year-over-year basis to $11.5 million, non-GAAP sales and marketing (S&M) expenses increased 23.9% to $56.3 million. However, as a percentage of revenues, R&D and S&M expenses declined 580 bps and 210 bps, respectively.

Moreover, non-GAAP general and administrative (G&A) expenses rose 38.1% to $31 million. As a percentage of revenues, G&A was 12.9%, up 80 bps from the year-ago quarter.

Loss from operations in the fourth quarter was $46.2 million, wider than a loss of $27.4 million a year ago.

Balance Sheet & Cash Flow

As of Mar 31, 2020, 8x8 had total cash, cash equivalents, marketable securities and restricted cash of $206 million.

Moreover, cash used in operating activities was $31.1 million in fourth-quarter fiscal 2020.

Guidance

For first-quarter fiscal 2021, total revenues are expected in the range of $120-$121 million, suggesting around 24-25% year-over-year growth.

Service revenues are expected in the range of $112.5-$113.5 million, indicating approximately 25-26% year-over-year growth.

The company expects non-GAAP pre-tax Loss of approximately $12.0 million.

Zacks Rank & Stocks to Consider

Currently, 8x8 carries a Zacks Rank #3 (Hold).

NVIDIA Corporation NVDA and Workday Inc. WDAY are two better-ranked stocks in the broader computer and technology sector, both carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

NVIDIA and Workday are set to report quarterly results on May 21 and 26, respectively.

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