8x8 (EGHT) Q2 2027 Earnings Call Transcript

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DATE

Wed, Nov. 4, 2026

CALL PARTICIPANTS

• Head of Investor Relations - Kate Patterson
• Chief Executive Officer - Samuel C. Wilson
• Chief Financial Officer - Kevin Kraus

TAKEAWAYS

• Service Revenue -- $187.8 million, representing 5% growth year over year driven by record platform usage revenue.
• Total Revenue -- $192 million, increasing 4% year over year and marking the company's sixth consecutive quarter of top-line growth.
• Platform Usage Revenue -- grew 51% year over year, primarily due to robust adoption of communication APIs in the Asia Pacific region.
• Non-GAAP Operating Margin -- 10.8%, which exceeded management's guidance range of 8.5% to 9.5% through higher revenue and disciplined expense management.
• Non-GAAP EPS -- $0.12, surpassing the top end of the company's previously provided guidance range.
• Operating Cash Flow -- $13.1 million for the quarter, marking the 23rd consecutive quarter of positive operational cash generation.
• Debt Reduction -- management reduced total principal debt to approximately $297 million after a $12.5 million repayment on Oct. 9, 2026, representing a 46% decline from the peak in 2022.
• Multiproduct Adoption -- customers using four or more products grew more than 50% year over year, reflecting successful efforts to expand relationships within the installed base.
• AI Recurring Revenue -- grew 58% year over year as premium AI-based solutions reached approximately 13% of total recurring revenue.
• Operating Expenses -- decreased by approximately $9 million year over year as a result of cost savings across several functional areas.
• AI Studio Adoption -- interactions powered by the AI development platform grew nearly 450% since its App Store launch in April 2026.
• GAAP Gross Margin -- 60%, compared to 65% in the second quarter of the previous fiscal year due to a shifting revenue mix.
• Non-GAAP Gross Margin -- 60.1%, reflecting a deliberate mix shift toward usage-based offerings that carry lower margins but higher operating profit potential.
• FY 2027 Service Revenue Guidance -- raised to a range of $732 million to $752 million from the previous range of $725 million to $745 million.
• FY 2027 Total Revenue Guidance -- raised to a range of $750 million to $770 million, an increase of $5 million at the midpoint.
• FY 2027 Operating Income Guidance -- increased to a midpoint of $73 million, reflecting an operating margin range of 9.1% to 10.1%.
• FY 2027 Cash Flow Guidance -- raised to a range of $49 million to $54 million from the prior range of $45 million to $52 million.
• Q3 2027 Service Revenue Guidance -- projected between $184 million and $188 million.
• Q3 2027 Gross Margin Guidance -- anticipated between 58% to 60% as usage-based revenue continues to scale.
• Cash Position -- $102.6 million in cash, cash equivalents, and restricted cash as of Sept. 30, 2026.

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RISKS

• Wilson noted that "the hard part, obviously, with usage is it is not contracted, and so there is not that forward certainty of revenue," identifying potential volatility in the company's fastest-growing segment.
• Kraus reported that the remaining term loan balance was reclassified to current liabilities ahead of its maturity on August 20, 2027.

SUMMARY

8x8, Inc. (NASDAQ:EGHT) reported its sixth consecutive quarter of year-over-year revenue growth, driven by a significant expansion in platform usage and AI-integrated recurring revenue. Management raised full-year guidance for total revenue, non-GAAP operating income, and cash flow from operations, reflecting performance that exceeded second-quarter targets. The company is actively executing a debt reduction strategy, having lowered its total principal debt by approximately 46% since August 2022, while preparing to refinance its remaining term loan and 2028 convertible notes. Strategic priorities remain focused on a partner-first sales model and increasing multi-product adoption among existing enterprise customers through new AI and contact center capabilities.

• Management announced that the company earned Microsoft certification for its session border controller technology, enabling it to provide external calling for Microsoft Teams without third-party infrastructure.
• CEO Wilson noted that the customer base for 8x8 Engage more than doubled year over year as companies provide contact center tools to sales and success departments.
• The company reported that customers integrating communication APIs into workflows outside of the Asia Pacific region doubled year over year, with more than half of those additions occurring in the second quarter.
• CFO Kraus stated that the company is well along in its refinancing process and is confident in addressing its debt structure ahead of the August 2027 term loan maturity.
• Management indicated that growth in Asia Pacific communications platform revenue was partly supported by some competitors exiting the market, allowing for increased share capture.
• The company introduced a tiered reseller program and 8x8 Small Business, a consumption-based offering designed to help partners serve smaller organizations without fixed seat commitments.

INDUSTRY GLOSSARY

• UCaaS: Unified Communications-as-a-Service, providing cloud-based telephony, video, and messaging.
• CCaaS: Contact Center-as-a-Service, a cloud-based customer interaction platform for support and sales teams.
• CPaaS: Communications Platform-as-a-Service, a cloud-based environment for developers to add communication features to applications via APIs.
• SBC: Session Border Controller, a dedicated hardware or software device that controls how phone calls are initiated, conducted, and terminated on a voice-over-IP network.
• API: Application Programming Interface, a set of protocols that allows different software programs to communicate.
• AI Studio: 8x8's native development environment where customers and partners build and deploy AI-driven agents and workflows.
• 8x8 Engage: A solution that provides contact center-style tools to customer-facing employees who are not traditional contact center agents.

Full Conference Call Transcript

Operator: Good day, and thank you for standing by. Welcome to the 8x8, Inc. Q2 27 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a Q&A session. To ask a question during the session, You will then hear an automated message advising your hand is raised. To withdraw your question, please press 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Kate Patterson, Head of Investor Relations. Please go ahead.

Kate Patterson: Thank you. Good afternoon, everyone. Today's agenda will include a review of our results for second quarter of fiscal 27 with Samuel C. Wilson, our Chief Executive Officer, and Kevin Kraus, our Chief Financial Officer. Following our prepared remarks, there will be a Q&A session. Unless otherwise noted, all financial metrics discussed on this call other than revenue and cash flow from operations are non GAAP. These non GAAP metrics were not prepared in accordance with The U. S. Generally Accepted Accounting Principles, or GAAP. A reconciliation of these non GAAP metrics to the most directly comparable GAAP metric is provided in our earnings press release, shareholder letter and earnings presentation slides.

Each of which is available on the Quarterly Results section of our Investor Relations website. Before we get started, let me remind you that our discussion today includes forward looking statements about our future financial performance, including investments in innovation and our focus on profitability and cash flow, our plans to refinance our debt as well as statements regarding our business, products, and growth strategies. We caution you not to put undue reliance on these forward looking statements as they involve risks and uncertainties that may cause actual results to vary materially from forward looking statements as described in our risk factors in our most recent report Form 10-Ks and our quarterly report on Form 10 Q.

To be filed with the SEC. Any forward looking statements made on this call and in the presentation slides reflect our analysis as of today we have no plans or obligation to update them. With that, I will turn the call over to our Chief Executive Officer, Samuel C. Wilson.

Samuel C. Wilson: Thank you, and good afternoon, everyone. We delivered another strong quarter ending in September. Our sixth consecutive quarter of year over year revenue growth Service revenue reached $187.8 million up 4.9% year over year. Platform usage revenue, which includes the use of our communications APIs, digital and voice AI interactions, telephony minutes grew 51% driven primarily by the use of our communications APIs in Asia Pacific. Our second quarter outperformance led us to raise our full year outlook for revenue, profitability, and operating cash flow. Will cover the financial results and outlook, I want to focus on the business we are building and how we turn more of our platform into value for customers and growth for 8x8.

Our promise is to make every conversation count. AI gives that promise new power. It can automate the work of a conversation sets in motion, help people resolve problems faster, and turn conversation data into knowledge that makes the next interaction more useful. That starts with reliable communications. Our global carrier grade voice network combines decades of voice expertise with the connectivity, quality, and operating experience needed to serve businesses around the world. Voice remains central to customer service, particularly when an interaction is complex, urgent, or personal. As AI agents handle more conversations, reliable connections, high quality audio, and seamless handoffs to employees, become even more important.

Our platform brings that network together with contact center applications, communications APIs, interaction data, and native AI. Customers can put these capabilities to work together with fewer systems to integrate and manage. Our priorities remain the same as we outlined in Q1. Become truly partner first improving customer satisfaction and retention, and increasing multiproduct adoption. Let me start with partners. We are committing resources, strengthening leadership, and tailoring our offerings to help partners win customers retain them, and expand their relationships. Our growth depends on their success. During Q2, we introduced a tiered reseller program that rewards those out outcomes.

We also introduced 8 by 8 small business, a flexible consumption based offering that lets resellers serve smaller organizations without fixed seat commitments. Microsoft Teams gives us another opportunity to expand our reach. On November 2nd, we announced that 8x8 has earned Microsoft certification for our session border controller technology for both direct routing and operator connect. We will now run this SBC infrastructure ourselves with no third party infrastructure provider, which we will expect to result in improved quality reliability with better economics for both 8x8 and Microsoft partners. We are 1 of the only native cloud communications company providers with Microsoft certified SBC technology enabling both calling options. Hundreds of millions of people use Teams.

Bringing external calling into the environment where they already work is an opportunity for us and our partners. The next opportunity is within our installed base. Many customers first choose 8x8 for a single product. As their needs grow, we want them and their trusted partners to look to us for more. AI increases what those products can do. Transcription, analytics, call summaries, turn conversations, into useful knowledge. Shared context makes that knowledge available to employees and AI agents so the next interaction can pick up where the last 1 ended. Our October updates make this tangible. Customer 360 brings interaction history into agent workspace with sentiment and topic insights where speech analytics is enabled.

JourneyIQ puts voice interactions across work, contact center, Engage, and AI Studio on 1 timeline, helping teams see where calls transferred, stalled, or dropped. Engage brings contact center capabilities to customer facing employees in sales, field service finance, and customer success. They gain tools for more responsive service while supervisors get visibility across Engage and the contact center. Engage customers more than doubled year over year. CPaaS APIs extend those workflows further, Teams can move from a call to a video, send a secure payment link, or follow-up through messaging. Those are enterprise applications connecting communications directly to business processes. Outside Asia Pacific, customers integrating CPaaS APIs into their workflows doubled year over year.

More than half of those year over year customer additions came in the second quarter. As customers deploy applications and build usage, we see an opportunity to expand this enterprise traffic particularly in EMEA and North America. We are also seeing broader adoption of premium capabilities and an acceleration in the adoption of our AI solutions. Overall, customers using 3 or more revenue producing 8x8 products grew 19% in the second quarter. Those using 4 or more products grew more than 50% both year over year numbers.

Recurring revenue from our AI solutions grew 58% year over year and customers using at least 1 AI solution represented approximately 13% of total recurring revenue at the end of September, up from 7% a year ago. AI Studio opens up another dimension to the AI opportunity. Communications, conversation intelligence, and shared context are the building blocks for better customer experiences. AI Studio is our native development environment. Built directly into the platform where customers and partners can bring those capabilities together in their own agents and workflows. They describe what they want to accomplish in plain language Their agents can draw on customer context connect to business systems, and work across voice and digital channels.

Starting within 8x8 reduces the complexity of assembling separate technologies and connecting them afterwards. AI Studio has moved from open beta to our early adopter program. We provide free credits for every customer to get them started with AI Studio through our App Store without additional AI Studio licensing fees so they can get started building agents immediately. AI Studio is HIPAA ready and designed to support our customers' GDPR compliance. Helping them address privacy and data handling requirements. Interactions powered by AI Studio have grown nearly 450% since it became available through the App Store in April. The numbers are still small, but the customers are already putting agents to work in production.

A health care organization is routing callers to the right department, An IT services provider has connected the phone and chat agents to its ticketing system. A utility provider has expanded priority routing into after hours technical support and automated call evaluation. That last example illustrates the expansion opportunity. A customer solves 1 problem, sees the value, identifies another use case, and builds another agent. Partners can multiply this effect. They can turn industry expertise into applications that they can adapt and deploy across multiple customers. Pooled credits and consolidated invoicing makes those accounts easier to manage. it is a classic flywheel. Partners build differentiated services, customers get applications tailored to their needs, and our opportunity grows as adoption expands.

Here's the message I wanna leave you with before I turn the call to Kevin. 8x8 is a healthy, growing business with a strong financial foundation and substantial opportunities ahead. Our network connects the conversations businesses depend on, Our platform turns them into insights and shared context. AI Studio allows customers and partners to build their own agents and apps. Creating more ways to put those capabilities to work. Capturing the opportunity ahead of us takes focused execution, helping customers succeed, and stay with us, expanding adoption, and helping partners grow. That is how we intend to deliver on our promise to make every conversation count and create greater long term value for our stockholders.

Thank you to our customers, partners, and employees, and to our stockholders for their continued support. Kevin? Over to you.

Kevin Kraus: Thanks, Samuel. Good afternoon, everyone, and thank you for joining us for our fiscal second quarter earnings call. In addition to our shareholder letter, detailed financial results are available in our press release and on our Investor Relations website. Therefore, I will focus my remarks on a few key highlights. Unless otherwise stated, all figures other than revenue and cash flow are presented on a non GAAP basis. Reconciliations of these non GAAP measures to the most directly comparable GAAP measures are included in our press release and shareholder letter. Q2 marks our sixth consecutive quarter of year over year revenue growth.

Extending the momentum we built in fiscal 26 as we again delivered healthy operating profit and further strengthened our balance sheet. We exceeded the high end of our guidance ranges for service revenue, total revenue, operating margin, earnings per share, and cash flow from operations. We had another record quarter for service revenue, and generated positive cash flow from operations for the 23rd consecutive quarter. Total revenue was $192 million and service revenue was $187.8 million. Growing 4.3%, 4.9% year over year, respectively. These results again reflected continued strength in our usage based offering. Our platform usage revenue, which includes the use of our communication APIs, digital and voice AI interactions, and telephony minutes, set another all time record.

Growing approximately 51% year over year and representing an increasing share of our service revenue. Gross profit was approximately $115.5 million above the gross profit dollars implied by the midpoint of our Q2 guidance. Gross margin was 60.1%, reflecting the continued mix shift toward our usage based offerings which in aggregate carry a lower margin profile but can add meaningful growth in operating profit dollars. As the business scales. We are focused on increasing gross profit dollars. As platform usage grows, we expect gross profit dollars to increase. But the mix shift will continue to impact the consolidated gross margin percentage. And this is a deliberate choice.

We are prioritizing share capture in the fastest growing part of the customer engagement market. Where AI is reshaping how enterprises connect with customers. Usage based revenue scales efficiently, and combined with disciplined expense management, this allows us to continue growing operating income dollars and cash flow which we expect to strengthen over time. Operating expenses were down approximately $9 million year over year. With savings realized across several functional areas. As a result, operating income came in at $20.7 million, and operating margin was 10.8%. Also above the high end of our guidance range.

The combination of higher revenue lower operating expenses, and lower interest expense resulted in net income of $17.6 million and fully diluted EPS of $0.12 per share. Also above the high end of our guidance range. Contractual interest expense was $3.9 million down from $4.5 million a year ago. Reflecting the continued decline in our debt balances. As expected, cash interest paid in Q2 was approximately $5.9 million since we paid both our term loan interest payment and the semiannual interest payment on our 2028 convertible notes. Cash flow from operations was $13.1 million for the quarter. Above the high end of our guidance range. We ended the quarter with $102.6 million in cash, cash equivalents, and restricted cash.

An increase of approximately $10.3 million sequentially reflecting strong operating cash generation. We ended Q2 2027 with $309 million of principal debt outstanding. On October 9th, we repaid an additional $12.5 million in principal bringing the balance of the term loan down to $95 million and total debt to approximately $297 million. On a post payment basis, we have reduced principal debt by more than $250 million or approximately 46% from the August 2022 peak of $548 million. As we previewed last quarter, our remaining term loan balance has been reclassified to current liabilities on our balance sheet. Consistent with standard gap treatment ahead of the August 20, 2027 maturity.

We are well along in our refinancing process, and we are confident that we will have a solution in place that addresses our debt structure, including the term loan and the 2028 notes ahead of the August 2027 maturity of the term loan. Our consistent cash flow generation operating discipline, and multiyear track record of debt repayment provide a strong foundation for this process. We will share additional details at the appropriate time. Turning to guidance. We are providing both third quarter and updated full year fiscal 27 guidance. Our outlook reflects continued focused execution and operating discipline as we continue building a more diversified durable business.

We are leaning into where the market is growing fastest, while protecting profitability and cash flow through the operating discipline we demonstrated quarter after quarter. For fiscal Q3 2027, we are providing the following guidance. Service revenue is expected to be between $184 million and $188 million Total revenue is anticipated to be between $188 million and $192 million We anticipate gross margin between 58%-60% reflecting the continued mix shift toward usage based revenue. We anticipate operating margin between 8%-10%. This results in a range for fully diluted non GAAP earnings per share of $0.08 to $0.09 per share. Based on approximately 150 million fully diluted shares outstanding.

In fiscal Q3, we expect contractual interest expense which excludes amortization of debt issuance cost to be approximately $3.7 million based on current interest rates and the principal outstanding on our term loan and 2028 convertible notes. We expect to make cash interest payments of $1.7 million reflecting our term loan interest payment. We anticipate cash flow from operations to be between $11 million and $13 million. Let me provide a little more color on the model dynamics driving our Q3 guidance.

We are assuming continued strong growth for platform usage, although the year over year growth rate is expected to moderate from 51% in Q2 to the 35% to 45% range year over year as we lap a strong Q3 26 comparison and focus on higher margin solutions within the CPaaS portfolio. That said, the continued mix shift to platform usage drives our gross margin outlook slightly down from Q2. We are keeping operating expenses tightly managed consistent with our commitment to deliver on our operating income and cash flow targets for the year. For full year fiscal 27, we are updating our guidance as follows. We are raising our service revenue guidance range to between 732 million and $752 million.

An increase of $7 million from our prior range of $725 million to $745 million. This reflects our revenue over performance in Q2 as well as our confidence in current business trends. Total revenue is anticipated to be between $750 million and $770 million an increase of $5 million from our prior range, of $745 million to $765 million. We anticipate gross margin to be between 59.7%-60.2%, reflecting the increasing amount of usage based revenue in our revenue mix. While our updated gross margin range reflects the continued mix shift toward usage based offerings, we are managing that mix operationally through disciplined operating expense management.

This allows us to raise our full year non GAAP operating income earnings per share, and cash flow from operations outlook. Even as our revenue mix continues to evolve. Our prior guidance for non GAAP operating margin implied non-GAAP operating income of approximately $70 million at the midpoint. And we are raising this to a midpoint of $73 million and a range of $68 million to $78 million. This yields an operating margin range of 9.1% to 10.1%. We are also raising our range for fully diluted non GAAP earnings per share to $0.36 to $0.40 per share from our prior range of $0.33 to $0.38 per share. Assuming approximately 150 million average diluted shares outstanding.

For full year fiscal 27, we are raising our guidance range for cash flow from operations to between $49 million and $54 million, up from our prior range of $45 million to $52 million. In closing, Q2 was another quarter in which we delivered strong financial results, The investments in our platform are driving top line momentum while our commitment to financial discipline gives us the flexibility to invest in high growth areas while raising our profitability and cash flow outlook for the fiscal year. Our updated outlook reflects both our confidence in the trajectory of the business and the operating discipline we continue to demonstrate.

I wanna thank our customers for their continued partnership our employees for their dedication, and our investors for their continued support. With that, I will turn the call over for Q&A.

Operator: Thank you. At this time, we will conduct the Q&A session. As a reminder, to ask a question, you will need to press 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press 1-1 again. Please stand by. Our first question comes from Josh Nichols from B. Riley Securities. Please go ahead.

Josh Nichols: Hi. it is Josh Nichols here from B. Riley. Well, look, congrats on the record quarter. Clearly, like, the usage revenue came in well above the 30% to 35% guide. Maybe if you could just give a little bit more color on what is driving that, traditional CPaaS versus AI and Engage, platform offerings overall?

Samuel C. Wilson: Alright. I will take the first part of that, and I will let Kevin make any comment. Number 1, you are asking. Okay. So it is across the board. We are seeing increases in usage product. But a couple of things are going on, Josh. First, yes, the core CPaaS business in Southeast Asia continues to grow very robustly. We have seen some of our competitors effectively exit the market, opening the door to more opportunity there. And we have been seizing on them. Also, all of our AI products are usage based by nature for the most part when we charge for them.

We are seeing a very rapid adoption of AI products into our base and those kinds of things. And we put out numbers recently in a release. We mentioned them on the call also. Right? I think it is bringing around. I think it is 13% of our revenue now has a our revenue has an AI product attached to it. So we are seeing that adoption increase. that is coming through in the usage baseline also. And so the hard part, obviously, with usage is it is not contracted, and so there is not that forward certainty of revenue. But we are really pleased with how it is been going.

Kevin Kraus: Yeah. I will. And I will echo what Samuel just said, Josh. It is. We do have growth in various areas across the platform usage. You know, still the bulk of the revenue is in APAC, but we are seeing upticks elsewhere. So that is a good sign. Yep.

Josh Nichols: And I noticed a couple of things. Like, 1, you have had very good success, the multiproduct customers that are ramping. I am kind of curious with, like, the new customers that you are seeing coming onboard. Are they coming in, like, strictly as usage customers or some landing and then expanding to, like, more UC and contact center or more of the customers now signing up initially from, like, a multiproduct offering.

Samuel C. Wilson: Wow. I mean, you know, the thing is it is a little bit of everything. Right? So we are winning more multiproduct land new logos. Obviously, a vast majority of our usage based are add ons to existing UC/CC customers. And still landing with that seat message is that seat product is generally the first, the core of the land. So even if we sell an AI studio or we sell 1 of, you know, CPaaS or 1 of the other things or SMS messaging or WhatsApp or anything else, most of those are effectively add ons to that. More UC/CC services platform land for our main business.

And then in Asia, our CPaaS business, that just starts as all usage, all new logos are usage. We do not. Sell obviously in Australia, New Zealand, and other places, UCCC, but it is not as big as the CPaaS business. But it is a little bit of everything. I would love to tell you it is really straightforward, but it all depends on the problem the customer's trying to solve.

Josh Nichols: Yep. I mean, fair point. I think that is good for now. Appreciate it, guys. Like, that is all for me. Great to see the progress the business has been making here. I will jump back in the queue.

Samuel C. Wilson: Josh. Thanks, Josh. Thanks.

Operator: Thank you. As a reminder, to ask a question, you will need to press 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press 1-1 again. Please stand by. Okay. I am showing no further questions at this time. I would now like to turn it back to Samuel C. Wilson for closing remarks.

Samuel C. Wilson: All right. So thank you, everyone. I know it is a super busy day with the elections yesterday and lots of earnings today. So I appreciate the time to be on the call tonight. I just want to refer everybody back to what is in our IR section as we did an analyst event. or, you know, kind of a readout, a virtual event last quarter. I think there is a lot super important information, long term operating model, those kinds of things, are in that thing. So you have any questions about the company, etcetera, as you read this transcript. Please refer to that. that is a great source of information.

Otherwise, we will not probably speak to you again until after the holiday, so I wish everybody a happy holidays coming up. And look forward to talking to you again in January, February. Thank you.

Operator: Thank you for your participation in today's conference. This does conclude the program, and you may now disconnect.

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