8x8 tops earnings estimates, sees revenue grow 31%

8x8 (Nasdaq: EGHT) Wednesday reported revenue of $23.3 million in the third quarter of fiscal 2012, a 31 percent increase from a year ago. It also topped analyst earnings estimates with a 73 percent Y-o-Y increase to $2.6 million, or 4 cents per share. Wall Street had expected the company to deliver earnings of 3 cents per share.

Chief executive and board chairman Bryan Martin, during the company's earnings call, pointed to escalating demand for 8x8's cloud-based business communications and computing services. He said revenue from business customers grew 42 percent from a year ago, and now represents 93 percent of total revenue.

Martin said 8x8 increasingly was attracting interest from larger customers, a byproduct of its acquisition of call center specialist Contactual, a deal that closed in September, and brought 8x8 some 250 new, mostly big business clients, including Jamba, HomeAway and General Electric.

While Martin declined to break out revenue numbers specific to Contactual, he told FierceEnterpriseCommunications that the deal had already exceeded the company's expectation from the standpoint of revenue and customer growth. "The integration was extremely quick," he said, adding that the sales and support groups were "working very well together."

8x8 also reported record low 2 percent churn in the quarter, and said business customers were spending an average of $239 a month for its services, up from $207 in the prior quarter. The number of services businesses are requesting also increased, to 14.1 from 12.4 in Q2. Also improved in the quarter were product margins, said Martin, the result of a continued focus on selling higher quality endpoints at higher price points to larger customers.

8x8's focus on expanding its base of channel partner is generating solid results; it ended the quarter with 54 partners, up from 40 at the start of the quarter. Included in that number are three service providers--SaskTel, Bell Canada, and Centurylink--that previously partnered with Contactual, and are now distributing the product under 8x8's brand. The company also added AT&T Mobility and 83 additional new customer deals through channel partners in the quarter.

"Our absolute channel numbers are still a small percentage of new sales, but the increase in revenue from these partners is encouraging and our recruitment efforts continue to gain momentum and traction with new partner prospects," Martin said.

Looking forward, Martin said 8x8 expected 2012 to "be a banner year."

"What were seeing is across the board adoption of these services," he said, adding that while "I don't think we've declared victory," momentum for cloud services is increasing. The industry, he said, is "starting to see white papers that encourage IT professionals to look to the cloud."

Martin pointed to 8x8's customer win with the city of Garden Grove, Calif., as an example. The city government has selected 8x8 to host its disaster recovery IT operations, a new business for 8x8 and an easy fit for its technology.

Government and education are two verticals in which 8x8 sees huge growth potential. It recently added Yale University and Ball State University to its customer roster.

"We're beginning to penetrate into businesses that historically would have adopted an on premise hardware approach," he said. Martin added that 8x8 was getting "a lot of K-12 requests because there are a lot of school systems looking to upgrade their aging phone systems."

Commenting on its recent Cisco (Nasdaq: CSCO) certification, Martin said the distinction was important because "Cisco can open up a lot of different doors in different ways."

8x8 stock was up nearly 6 percent in after hours trading.

For more:
- see this release

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