8x8, Inc. — Form 10-Q Summary
Reporting period: Fiscal third quarter and nine months ended December 31, 2023. 8x8 provides cloud communications services, including contact center, voice, video, chat, and communications APIs.
Financial performance and position
Amounts are in millions of dollars, except per-share data and percentages.
| Metric | Quarter ended Dec. 31, 2023 | Prior-year quarter | Nine months ended Dec. 31, 2023 | Prior-year nine months |
|---|---|---|---|---|
| Revenue | $181.0 | $184.4 | $549.3 | $559.4 |
| Operating loss | $(9.4) | $(18.1) | $(13.4) | $(69.8) |
| Net loss | $(21.2) | $(26.0) | $(44.0) | $(63.7) |
| Net loss per share | $(0.17) | $(0.23) | $(0.37) | $(0.55) |
| Operating cash flow | Not separately stated | Not separately stated | $66.3 | $35.2 |
- Quarterly service revenue was $175.1 million, down 0.4%; other revenue was $5.9 million, down 31.2%. Nine-month service and other revenue declined 1.0% and 18.2%, respectively.
- Quarterly gross profit was approximately $124.8 million, or 69.0% of revenue, compared with $126.9 million, or 68.8%, a year earlier. Nine-month gross profit was approximately $381.4 million, or 69.4%, versus $373.2 million, or 66.7%.
- Quarterly operating expenses fell to $190.4 million from $202.5 million, despite an $11.0 million non-cash impairment charge. Sales and marketing was down 15.2% and R&D down 6.5% year over year.
- Other expense, net was $11.3 million for the quarter and $29.0 million for the nine months. Nine-month results included higher interest costs and lacked the prior-year debt-extinguishment gain.
- At December 31, cash and cash equivalents were $168.5 million and short-term investments $1.0 million; current assets were $302.5 million and current liabilities $230.5 million.
- Debt principal comprised $63.3 million of 2024 convertible notes, $201.9 million of 2028 notes, and $225.0 million under the term loan. The term loan carried a 12.0% effective interest rate. The company prepaid $25.0 million of term-loan principal in May 2023.
Changes, outlook, and key disclosures
- Revenue declined 1.8% in the quarter. Management attributed the service-revenue decline to customer churn and down-sell in subscription revenue, partly offset by higher platform usage; lower professional-services and product revenue drove the decline in other revenue.
- Operating loss narrowed versus the prior-year quarter, while net loss also improved. Lower operating expenses were partly offset by higher service delivery costs, interest expense, and the impairment charge.
- ARR increased 1% year over year to $707 million: Enterprise ARR rose 2% to $409 million, Mid-Market ARR fell 1% to $129 million, and Small Business ARR was flat at $168 million.
- Remaining performance obligations were approximately $765 million, excluding contracts with original terms under one year; the company expects to recognize about 86% within 24 months.
- Management stated that existing cash, investments, and anticipated operating cash flows should cover working capital and contractual needs for the next 12 months and foreseeable future. It planned to invest in selected growth markets and software development and pay down debt. No specific revenue or earnings guidance was provided.
- On February 1, 2024, after quarter-end, the company paid the remaining $63.3 million principal and $0.2 million accrued interest on its 2024 Notes.
- The company recorded an $11.0 million impairment of lease right-of-use assets after ceasing use of approximately 42% of its headquarters space and part of an international office. Headquarters space is intended to be available for sublease.
- The FCC requested information regarding potential violations connected to prior regulatory filings and payments involving 8x8 and Fuze. The company is cooperating and had not assessed a probable or reasonably estimable loss as of December 31, 2023.
- Accrued contingent indirect-tax liabilities were $14.8 million, up from $13.5 million at March 31, 2023. The filing also discusses ongoing tax audits and other litigation contingencies; outcomes may differ materially from recorded estimates.
- Principal risks identified include churn, customer demand and macroeconomic conditions, competition, service reliability and cybersecurity, dependence on third-party networks and channel partners, regulatory and privacy compliance, foreign-exchange exposure, and substantial indebtedness. Disclosure controls were assessed effective at a reasonable-assurance level; no material changes to internal control were reported.
Investor facts to verify
- Whether churn and subscription down-sell stabilize, and whether ARR growth translates into reported revenue growth.
- Whether cost reductions can support sustained profitability without weakening sales execution or product investment.
- Cash generation after the 2024 Notes repayment, and the cost, covenants, and repayment profile of remaining debt, especially the variable-rate term loan.
- Developments in the FCC inquiry, indirect-tax exposures, and other legal contingencies.
- Potential dilution: shares outstanding increased to 123.2 million at December 31, 2023 from 114.7 million at March 31, 2023; the filing reports substantial outstanding equity awards.