8×8 revealed its plans on its 2023 Q1 earnings call to 10X its Microsoft Teams user number over the next two years.  

The company’s Voice for Teams direct routing solution has already exceeded 200,000 users, which it says is one of the quickest user assimilations in its history.  

8×8 recently launched its Elevate Microsoft partner program and an XT edition of Voice for Teams.  

The CEO of 8×8, David Sipes, shared the company’s ambitions for its Teams user base: “On Microsoft Teams, there is a platform approach to enable telephony into Microsoft Teams, both through direct connect and operator connect in addition to calling plans.  

“We really see direct connect and operator connect as the big opportunities. We are a top player in direct connect, and we have added over a couple of hundred thousand users there.  

“We see that as a big opportunity to get — make that even significantly larger. That’s why we launched the Elevate program focused on Microsoft Partners and our XT edition that will fit nicely into the Teams’ offering.  

“I’d like to see us 10x those users over the next couple of years.”  

XT combines direct routing technology, Azure-based managed Session Border Control as a Service (SBCaaS), nationwide calling, domestic direct inward dialling (DID), secure voice, and HD audio.  

Sipes also revealed that 30% of its users are outside of North America, which is a testament to the fact that the company is able to effectively manage customer PSTN connectivity across various regions, such as the expansion of its ‘XCaaS’ solution into the Philippines.  

XCaaS was also recently deployed for 1,500 council workers in the London borough of Hounslow, the Cambridgeshire and Peterborough NHS Foundation Trust for over 2,000 users, and the national governing body for swimming in England, Swim England.  

Although 8×8 has managed to grow its customer number this quarter, CPaaS usage has gone down, which has negatively impacted its service revenue growth and APR metrics.  

The company is continuing to improve its CPaaS platform offering. It recently introduced the 8×8 Connect Automation Builder as a management solution for multiple communication channels.  

Financial Overview

The total revenue for the quarter was $187.6 million, which is inside the company’s $185-188 million guidance range.  

The Chief Financial Officer of 8×8, Samuel Wilson, echoed Sipes’ assessment that the CPaaS segment of the business was experiencing challenges at the moment. Combining this with the foreign currency ‘headwinds’, Wilson concluded that they will need to change their financial guidance for 2023.  

Nevertheless, Wilson pointed to its revenue being at the high end of its guidance range and there improvements in gross margins, a healthy operating income with ‘positive cash’.  

The Annual Recurring Revenue (ARR) is also improving due to the company’s shift toward enterprise and XCaaS.  

Enterprise ARR increased 54% year-over-year, and XCaaS ARR is growing by more than 40% year-over-year. The CPaaS business, however, has declined sequentially and year-over-year.  

Plans for 2023

Wilson is keen to see its enterprise ARR continuing to grow, along with XCaaS, which he sees as synonymous with enterprise.  

According to Sipes, 8×8 will continue to invest in its XCaaS offering, expanding the Teams’ experience and global connectivity and furthering contact centre innovation.  

He believes that investments in Conversation IQ, Frontdesk, and Agent Workspace are the best ways to grow in the future.  

Sipes sees R&D investments as essential, which will require some short-term trade-offs to facilitate. As a result, investments in sales and marketing and G&A initiatives will need to be moderated.  

Hunter Middleton, Chief Product Officer of 8×8, spoke about its future developments for XCaaS: “Our new digital conversation AI capabilities will provide customer self-service options across the entire organization.  

“Our customer journey analytics are being enhanced to deliver more insight into interactions that span UC and CC nodes.  

“The new team leader experience will work equally effectively for customer engagement teams outside the contact centre as it does for those that are in the contact centre.  

“We are also actively working on additional premium app experiences that target key customer engagement roles throughout the company, and we’ll share more about that in future calls.”  

To attain its target for the 2023 fiscal year, 8×8 is reducing its annual guidance ranges for service by $20 million and total revenue by $30 million due to the forex headwinds, reduced sales and marketing investment plans, and weakness in the CPaaS segment.  

Next quarter, Wilson believes the gross margin will be slightly down, but the total revenue prediction for 2023 will remain $185-188 million with 22-24% year-over-year growth.

 

 



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