8x8 Inc (EGHT) 2026 Q3 法說會逐字稿

Good day, everyone. Welcome to 8x8, Inc.'s, third-quarter 2026 earnings conference call.

(Operator Instructions) This conference is being recorded.

Now, it's my pleasure to turn the call over to the Head of Investor Relations, Kate Patterson.

Thank you. Good afternoon, everyone.

Today's agenda will include a review of our results for the third quarter of fiscal 2026 with Samuel Wilson, our Chief Executive Officer; and Kevin Kraus, our Chief Financial Officer.

Following our prepared remarks, there will be a question-and-answer session.

In addition to our prepared remarks, we have posted a more detailed Letter to Shareholders in 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 future financial performance, including investments in innovation and our focus on profitability and cash flow, 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 reports 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 obligations to update them.

All financial metrics that will be discussed on this call are non-GAAP, unless otherwise noted. These non-GAAP metrics, together with year-over-year comparisons, in some cases, were not prepared in accordance with US Generally Accepted Accounting Principles or GAAP.

A reconciliation of these non-GAAP metrics to the closest comparable GAAP metric is provided in our earnings press release and our earnings presentation slides, which are available on 8x8's Investor Relations website at investors.8x8.com.

With that, I'll turn the call over to our Chief Executive Officer, Samuel Wilson.

Good afternoon, everyone. Thank you for joining us today.

I'm excited to share the highlights of our third-quarter results, which show our strategic investments across innovation, operational efficiency, and distribution are beginning to yield measurable results.

More details are included in our Letter to Shareholders, posted on the Investor Relations website.

I can summarize our Q3 results and our outlook in a single sentence: We're seeing encouraging momentum across multiple dimensions of the business, though we remain focused on the execution work ahead.

The most visible evidence of our growing momentum is our return to top-line growth. This marks our third consecutive quarter of year-on-year service revenue growth and our twentieth consecutive quarter of positive operating cash flow. We exceeded the high end of our guidance range for service revenue, total revenue, operating profit, and cash flow.

I believe this shows our operating model is working. We're driving growth in strategic components of our service revenue, while maintaining discipline on profitability and cash generation.

A key driver of our growth was our increased consumption of our usage-based offerings, which grew nearly 60% year over year and now represents more than 20% of our service revenue, up from mid-teens a year ago. Much of this growth comes from our CPaaS, APIs.

We are also seeing an acceleration in the adoption of digital channels and AI-based offerings, as customers move beyond pilot projects into production at scale. This is clear from some of the metrics we shared in a separate press release.

Customer contracts for our Intelligent Customer Assistant increased 70% year over year. Voice AI interactions increased more than 200% and now represent a vast majority of all AI interactions on our platform.

Voice remains the channel of choice. Our core IP in voice communications is an increasingly valuable competitive advantage. We've built this capacity over decades. It positions us uniquely, as voice becomes the preferred interface for AI-powered customer experiences.

The increase in consumption of our usage-based solutions reflects a broader industry shift away from pure SaaS subscriptions to hybrid and tokenized pricing models. The pay-as-you-go approach appeals to customers because it reduces risk as they adopt new technologies. It also raises the bar for vendors.

Revenue is linked directly to successful customer outcomes and business activity, instead of long-term subscriptions that may or may not be implemented. We believe this is the wave of the future. We are positioning ourselves ahead of the curve in multiple ways, with investments that enable simplified consumption-based pricing across our portfolio, process improvements that make it easier to do business with us, product-led growth initiatives that allow customers to try before you buy, and AI-driven automations that allow us to scale our customer success organization.

We are customer zero, as we reimagine every aspect of our business for the AI era.

We are seeing the impact of these transformational initiatives across our business. Our multi-product strategy is gaining traction. All of our top 20 customers now have multiple products and most have three or more.

This matters because customers with multiple products see us as a strategic platform partner, rather than a point solution. This results in substantially higher revenue, customer satisfaction, and retention. On average, customers with three or more products generate more than 3 times the revenue of customers with two products.

We are seeing a reacceleration in sales of new products, reflecting our investments in innovation. Four of our strategic new products grew triple digits year over year, including 8x8 Engage. 8x8 Engage is one of the fastest-growing products in our history. It continues to gain momentum across industries like healthcare, retail, and professional services. A substantial portion of customer interactions routinely occur outside the formal contact center in these industries, making Engage a compelling solution.

Engage recently won Gold at the London Design Awards for user experience, a strong external validation of our product strategy and design focus. This is one of many awards won by Engage for its incredible user interface.

We are seeing increased momentum in our revenue from our channel partners. We know we have work to do to expand our distribution globally. But we are seeing early traction from newly implemented partner programs and incentives. Importantly, channel source pipeline is showing sequential improvement, as new programs take root.

Let me share three examples that bring the momentum we're seeing across the business to life:

First, a regional healthcare system, with over 850 employees selected 8x8 over both Zoom and RingCentral for a competitive UC and contact center deployment. We went on-site when competitors didn't. We provided industry-matched references and demonstrated a deep understanding of their patient care operations. We won because we approached the sale as a strategic partner, not just a technology vendor.

Next, a major national early education provider, with -- over 43,000 employees chose us for a significant UC expansion. This complex sale required a flexible OpEx model aligned with their finance-driven process. We acted as a transformation partner, maintaining strong alignments across IT, procurement, finance, and professional services throughout their buying cycle.

Finally, a large veterinarian pet hospital company expanded their contact center capacity with us. We earned this business through disciplined weekly engagement with their leadership team, aligning on roadmap priorities and demonstrating how our solutions supported their evolving initiatives.

This is land-and-expand done right. These wins reflect a common theme: Customers are choosing integrated platforms over point solutions, valuing strategic partnerships, and selecting vendors positioned for the future of AI-powered communications.

These also reflect our internal commitment to leveraging AI across the organization. In our sales process, we're using AI to map customer journeys, tailor solutions to customers' requirements, and improve the quality and quantity of customer interactions.

Over the last year, we've made huge progress in using AI to improve our go-to-market analytics and coaching. It's starting to show up in our results.

Beyond new customer wins, we reached a significant operational milestone in Q3, with the completion of the final upgrades of Fuze customers to the 8x8 platform. Every 8x8 customer is now on our modern, integrated 8x8 Communications platform. This sets the stage for improved customer interaction, better expansion opportunities, higher satisfaction, and, more meaningfully, more efficient operations across our network and back office.

While the decommissioning of the Fuze platform has created a near-term revenue headwind, as not all the remaining few customers elected to upgrade, resulting in higher churn in Q3 than will be reflected in Q4 and fiscal '27 revenue, the strategic benefit is clear: We can now focus 100% of our energy on growth and customer success, rather than managing legacy infrastructure.

To wrap up, we are seeing encouraging signs across the business. Usage-based revenue is scaling rapidly. Adoption of our AI-based solutions is accelerating. Multi-product customers are expanding. New products are gaining traction. Our outcome-focused platform strategy is resonating with customers and partners.

As we look ahead, we're realistic about the competitive and the evolving marketplace. We know we need to accelerate installed base expansion and drive stronger channel momentum. Kevin's updated guidance ranges reflect this realism, as we navigate through these market dynamics.

We believe that Q3 marks a true inflection point. We have momentum entering Q4 and strong confidence in our ability to deliver sustained profitable growth and shareholder value.

With that, I will turn it over to Kevin for the financial details.

Thanks, Sam. Good afternoon, everyone. Thank you for joining us for our fiscal Q3 2026 earnings call.

In addition to the Shareholder Letter Sam mentioned, detailed financial results are available in our press release and in the trended financials on our Investor Relations website. Therefore, I'll focus my remarks on a few key highlights.

Unless otherwise noted, all figures, other than revenue and cash flow, are presented on a non-GAAP basis.

Let me put our Q3 results in context: This was our third consecutive quarter of year-over-year revenue growth and an all-time record high for service revenue. We exceeded our guidance ranges for service revenue, total revenue, operating profit, earnings per share, and cash flow from operations.

Total revenue was $185 million and service revenue was $179.7 million, both exceeding the high end of guidance by approximately $3 million and growing 3.4% and 3.6% year over year, respectively. These results reflected strong growth in consumption of our usage-based offerings, combined with improved sales execution.

Looking into the details, our usage-based offerings, which include our CPaaS, Communication APIs, digital channels, and AI solutions, saw another record quarter and accounted for approximately 21% of service revenue compared to approximately 14% in Q3 '25.

8x8 service revenue, excluding revenue from Fuze customers, both upgraded. Those still on the legacy Fuze platform rose approximately 6% year over year, a growth rate similar to the previous quarter.

As of December 31, 2025, we met our commitment to successfully complete the upgrade of the Fuze customer base to the 8x8 platform. Operating on a single platform improves efficiency, reduces complexity, and supports higher customer satisfaction and engagement.

Gross profit was approximately $120 million. about $3 million above the gross profit implied by the midpoint of our Q3 guidance ranges for revenue and gross margin. Gross margin as a percent of revenue was 64.8%, down sequentially due to the continued mixed shift toward our usage-based offerings, which carry a lower margin profile but add meaningful operating profit dollars, as usage-based revenue continues to scale.

Operating income came in at $21.7 million, an increase of over $4 million sequentially, resulting in a 11.7% operating margin, substantially above the high end of our guidance of 9% to 10%. Additionally, year-to-date operating expenses are down approximately $8 million compared to the first nine months of fiscal 2025. We are on track to reduce our operating expenses by about $12 million in fiscal 2026 compared to fiscal 2025, reflecting continued discipline in how we manage our cost structure.

Interest expense of $4.2 million was consistent with our previous guidance but down more than 20% from Q3 2025, as we continue to reduce our debt.

The combination of higher revenue, lower operating expenses, and lower interest expense resulted in net income of $17.1 million and fully diluted EPS of $0.12 per share, which was $0.03 above the high end of our guidance range.

Cash flow from operations was $20.7 million for the quarter, well above the high end of the guidance range due to a net timing benefit from our collections and payments. We ended the quarter with $88.2 million in cash, cash equivalents, and restricted cash, after making a $5 million principal pre-payment on the term loan.

Since August 2022, we have reduced our debt principal by $224 million or 41%. As a result, we have reduced our annualized interest expense by more than 50% versus the second half of fiscal 2023.

Following our strong Q3 results, we are raising our fourth-quarter revenue and operating margin guidance, relative to the implied Q4 guidance midpoint from our prior earnings call. This outlook continues to reflect expected seasonality in our usage-based offerings, as well as the remaining revenue dynamics associated with the Fuze upgrades and related churn resulting from the December 31 end of life of the Fuze legacy platform.

For fiscal Q4 '26, we are providing the following guidance:

Service revenue is expected to be between $173.5 million and $178.5 million, an increase of approximately $7 million versus the midpoint of our prior implied guidance. Total revenue is anticipated to be between $178.5 million and $183.5 million, also a $7 million increase over the midpoint of our prior implied guidance.

Our revenue guidance ranges reflect a year-over-year decrease in revenue generated by former Fuze customers of approximately $4.5 million compared to Q4 '25 and a quarter-over-quarter decrease of approximately $3 million. We also expect typical seasonality in revenue from our CPaaS, APIs related to holidays in the Asia-Pacific region.

We anticipate gross margin between 64% and 65%. Our operating margin range of 8.5% and 9.5% reflects the lower revenue compared to the prior quarter and a seasonal uptick in operating expenses associated with the January 1 restart of employee-related expenses like FICA taxes and 401(k) matching.

This is a typical pattern for us. This results in a range for fully diluted non-GAAP earnings per share of $0.07 to $0.08 per share, based on approximately 145 million fully diluted shares outstanding.

In fiscal Q4, we expect to make cash interest payments of approximately $6.1 million, which reflects both the term loan interest payment, plus the semiannual interest on our 2028 convertible notes. We anticipate cash flow from operations to be between $1 million and $4 million, reflecting the higher cash interest payments compared to Q3 and a lower balance of collectible receivables starting Q4 compared to Q3.

Note that our updated Q4 cash flow range, plus our year-to-date performance, implies an increase in fiscal 2026 operating cash flow of about $4 million.

We are updating the rest of our full-year guidance as follows:

Service revenue is anticipated to be between $708.6 million and $713.6 million. an increase of $12 million compared to the midpoint of our prior guidance. Total revenue is anticipated to be between $729 million and $734 million, an increase of $12.5 million compared to the midpoint of our prior guidance.

Our guidance ranges for service and total revenue reflect our Q3 overperformance and the increase to the previously implied Q4 guidance.

We anticipate gross margin to be between 65% and 66%. Full-year operating margin is projected between 9.5% and 10%, translating to non-GAAP operating income of approximately $71 million at the midpoint. The additional $6 million of operating income compared to our prior guidance midpoint reflects overperformance, relative to the guidance midpoint in Q3, and our confidence in Q4.

We expect non-GAAP net income to increase year over year, supported by lower interest expense compared to fiscal 2025. We expect fully diluted non-GAAP earnings per share to be in the range of $0.36 to $0.37 for the year, assuming approximately 142 million average diluted shares outstanding.

Before we finish, I want to provide a little more context around the impact of the Fuze acquisition:

As of December 31, 2025, we met our commitment to successfully complete the upgrade of the Fuze customer base to the 8x8 platform. This marks a major milestone for us, both culturally and financially. Comparing 8x8, pre- and post-Fuze, it is clear the acquisition was a catalyst for our transformation to a larger and more efficient organization.

Over the last four years, the former Fuze customers generated cumulative revenue of more than $300 million. The resulting cash flow from the acquisition allowed us to increase our investments in innovation just as the market's pace of change accelerated. It also enabled us to aggressively pay down the principal balance of our debt, while still maintaining healthy cash balances.

As we look at the business today versus Q3 '22, the quarter preceding the Fuze acquisition, our service revenue is up 20%. Operating income has increased nearly 7 times. Our net income has increased nearly 9 times.

Our solid financial foundation and proven ability to achieve operational efficiencies sets the stage for the future.

While we are not providing guidance for fiscal 2027 at this time, I would note that we will continue to experience year-over-year growth headwinds related to Fuze churn, as we move through the next fiscal year. We expect these impacts to be most pronounced in the first half of fiscal 2027 and to fully roll off by the fourth quarter. Even with this headwind, we expect to deliver service revenue growth in fiscal 2027.

In summary, the quarter reflected continued steady execution, consistent profitability, and ongoing progress in strengthening our balance sheet. With disciplined expense management and a clear focus on profitable growth, we enter the final quarter of the fiscal year with solid momentum and confidence in our ability to deliver sustained shareholder value.

With that, I will turn the call over for Q&A.

(Operator Instructions)

Josh Nichols, B Riley Securities.

Yeah. Thanks for taking my question. Congratulations on the exceptionally strong quarter; but, also, getting Fuze across the finish line. I know that was a big undertaking for the company, as a whole.

Just wanted to touch on -- I think you talked about it a little bit but backing out some of the numbers for fiscal 4Q, I think you said Fuze was, like, a $4.5 million service headwind in fiscal 4Q. If you adjust for that, that implies that service revenue guidance in the fourth quarter, ex-Fuze, is up, like, 5% plus year over year, which is in line with the last couple of quarters.

Is that right?

Yeah. It's a fair assessment of it.

As we go into next year, you can think about it as, like, a $4 million, $3 million -- $3 million headwind from Q1 to Q3, Josh. And then, we anniversary it in Q4.

Josh, for the large number of people that had to shut down Fuze, they (technical difficulty) appreciate your thanks.

Yeah. Then, I wanted to touch on this: The gross margin has been trending lower, as expected, with higher growth in the service revenue component. The operating margin performance was a real standout. I think that shows that while the gross margin is lower, there's a lot of operating leverage, as you continue to scale this usage-based business model.

What needs to happen or what type of levels do you need to get to so that the company is going to get to, like, a sustainable level, where the operating margins are back into the double-digit category, like you did for this quarter? Is that something that you're targeting for '27?

All right. Let me break this up because you raise a number of good points. I think, sometimes, no matter how many times I repeat myself, it's not quite understood. I'm going to use this as a bit of a soapbox answer, Josh. Thank you for asking it because I get to do this.

Okay. Gross margins on our usage-based business are probably structurally slightly lower than on our SaaS business because you don't have shelfware and you don't have a bunch of other things that lead to higher structural gross margins.

But, on an operating margin side, they're perfectly fine. I think we've tried to say this over and over and over again but it seems to get lost in the noise. If you look at a peer usage-based business, à la Twilio or somebody like that -- one of our competitors, you see that they have structurally lower gross margins.

I'm not saying we're heading for [52], [53], wherever they're at on a non-GAAP basis. But what I am saying is their operating margins are just fine.

And so as we get more scale in this usage-based business, I think you'll continue to see this. You'll continue to see a slight downward trend in gross margins. I don't know where it's going to bottom because I don't know yet where usage is going to peak. And then, offsetting that is we'll get scale, over time. We're working very diligently on that.

When exactly we'll get back to double-digit sustained operating margins? I don't know. Is it a target? Absolutely.

I appreciate the context there. I'll hop back in the queue.

Siti Panigrahi, Mizuho.

Great. Thanks for taking my question.

I just want to dig into one of your commentary about voice AI. The interaction -- you talked about how it grew now 200%; now, 80% of all interaction. Wondering what are you seeing from customer; their adoption of voice AI? Are you seeing, lately, any increased adoption there? Any color would be helpful there.

Yeah. Absolutely. What I would say is -- and I think we've commented on this in the past -- we're starting to see all the AI products start to move out of the first phase -- prototyping, beta sites, et cetera -- and really move into production.

I think the idea two years ago that you would have a voice bot at the front end answering every support question to triage it or these kinds of things was a little bit foreign. Today we're seeing that run-of-the-mill.

Our voice technology is so fantastic. Our voice AI technology is awesome. I'm not talking about just the stuff we resell from Cognigy. There's other voice AI technologies we have in-house that are doing absolutely fantastic.

And so what we're seeing is, as those move from that prototyping beta stage to production, we're seeing that they're working. And then, once they're working, the customer comes back and starts adding more and more use cases.

This further validates the usage-based model because it doesn't require a whole new sales cycle and everything else. They just slap down another use case on it, usage goes up and they pay the bill because they're getting the ROI.

And so I think it shows not only that people still want to focus on voice -- I'm a big believer in that. We, as human beings, type in bullets and speak in paragraphs.

Number two is the usage-based business model is absolutely the right way to go for these technologies. It's working. I've been signaling this for a while that we'll do more and more of this.

Number three is, AI is the real deal. We are getting positive ROI out of the AI we sell.

Great. Thanks for that color.

Quick housekeeping question: Did you see any effects impact on this quarter in the revenue? How should we think about any revenue contribution for Maven Lab?

No. Maven Lab closed in January so there was zero contribution for the quarter.

I'm sorry. For the guidance.

No. No. It's too small to move the needle. It's just a little teeny technology tuck-in. Kevin can speak on that.

Yeah. Relative to the beginning-of-quarter guidance, we had a little bit of a headwind, well under $1 million dollars. On a year-over-year basis, we had a bit of a tailwind, $1 million-ish-plus so pretty small.

All right. Thank you.

And then, do you want to speak (inaudible) a natural hedge?

Yeah. The other thing is -- thanks, Kate. This is important for the analysts to know.

We have, basically, a natural hedge built into our company, operationally. We may incur headwinds or tailwinds on revenue but the opposite effect occurs on the expense base so our net profit is neutralized.

Kevin, it's too nice to say it but I'll say it. Like, we beat by [5]. [$1million] of that -- plus, minus on a year-over-year basis -- actually was a headwind for the quarter but it rolled up to the last quarter. So the beat was clean.

Yeah. Thank you.

Peter Levine, Evercore.

Great. Thanks, guys, for taking my questions here.

Maybe to piggyback off of Sam, the comment you made earlier on the usage base. But a comment that you made on the call, you called out some customers moving from pilot projects to, like, larger-scale deployments.

Can you maybe just be a little bit more specific on what projects and how these customers are using it, in terms of just the monetization (multiple speakers) --?

Yeah. I'm more than happy to, Peter. We may have to go back and forth a little bit, depending on what level of detail you want.

What we're seeing, right now, with the AI stuff is a lot of it is very use case-based centric. I can talk about this extensively.

But when we first went into market a couple of years ago, we tried to sell, like, an AI platform that customers could build their use cases on top of. That really struggled. We switched to taking the platform and going in and targeting customers on a more use case-based-type thing.

What's a use case? Having a person say their serial number at the front end of a call and routing the call differently based on that or answering simple questions that are out of the FAQ or doing the biometric identification so that they can be passed to the proper agent and financial service firms doing the biometric security check and pulling the balances.

We also have a lot of self-service capabilities. If you want to pay your bill, let's say you call and you say, I just want to pay my bill, you don't need an agent. We'll just pull it. We'll authenticate you, pull it, send you an SMS message, let you pay with Apple Pay via your phone, and take care of that stuff.

And so I know you're asking me, like, what (inaudible) -- what I'll tell you is, right now, we're still at the phase that these are micro-use cases. Each individual customer is seeing a [land] -- and maybe it's their second, one or their third use case but we're still at the micro-use case stage.

What I believe we'll start to see out several years is those all come together in more macro-use cases. What do I mean by a micro? Micro, as I said, self-service payments, right? Very simple use case, et cetera. Macro will be, hey, you can come in, you can authenticate a user, you can interact with them extensively, you can do different things with them on the phone, and those kinds of things. That'll be, I think, still several years out.

So we're seeing those first-case use cases. We got a big healthcare deal. All it does is book appointments. But it books it 7 by 24.That took four agents -- and move those agents into more productive roles.

A question you're not asking that I do want to address on the call up front is our total number of contact center seats was up quarter on quarter and year on year. One of the questions we've gotten with all this AI stuff is, oh my God, all the agents are going away. Well, if they're going away, for some reason, our customers are buying more seats.

Total seats -- I'm going to repeat this -- for contact center, up quarter on quarter and year-on-year.

Maybe to that point, Sam, is you're not seeing seats compressing now. But if you look out 12, 24, 36 months, is this a different conversation?

Maybe? I'm not opposed to seat counts coming down, if they're not being used. That's why we're moving more and more to usage-based capabilities to make sure that ROI and adoption is there.

As long as my total revenue per customer is going up and my stickiness is going up, I don't care if they buy it via seats or buy it versus digital messaging or buy it versus AI bot interactions or any of those other things. As long as we're solving customer problems, they'll pay us.

But I think this notion that contact center seats are going to go off a cliff any quarter is just a misnomer. So far, we don't see it.

What we see is, total number of cases being handled by agents going down; handle times going up; and customer satisfaction trying to catch up to where people want it to be.

Maybe, just the last question, another comment made, new partner programs, starting to see some real momentum building. Maybe just talk about what you're seeing, what's working? And then, if you look out over the next 12 months, any additional changes to your go-to-market? Or are you just doubling down on the strategy that you've deployed?

We're seeing quarter-on-quarter increases in pipeline. We're seeing quarter increase, especially around the new products.

We're seeing -- really, the channel is also on a journey, à la the customer, about understanding AI. Now that we're moving out of this phase of prototyping, experimentation, more into production, the channel's getting a lot more comfortable selling AI-based products. We're starting to see that show up in the pipeline, the experience, et cetera.

That's what I was trying to hint at: We're seeing growth.

For a while, our channel business was a bit behind our direct business. Now, we're seeing our channel business do better than our direct business.

Thank you for taking my questions.

Thank you.

(Operator Instructions)

All right. As I see no further questions in the queue, I will pass it back to Mr. Wilson for closing comments.

All right. Thank you to all the people listening to the call today. We appreciate it. We'll talk to you again in three months.

As you heard from the commentary and the Q&A, we feel pretty comfortable where the company is right now. We're seeing our usage-based business grow nearly 50%. Now, it's 21% of service revenue.

I just want to highlight that we expect that trend to continue. We think the company is on the right track in where it's going, right now.

Thank you very much. Feel free to call us in our Investor Relations team or myself or whatever the case may be, if you have any questions.

This concludes our conference. Thank you for participating. You may now disconnect.