8x8 Inc., which specializes in Communications as a Service (CaaS), is gaining channel momentum in the midmarket, the company claims. Amid 8x8's record Q2 revenues, announced yesterday, CEO Vik Verma repeatedly praised channel partners and said the company is poised to hire more channel representatives.
Most of the numbers look quite impressive. Revenues for the quarter ended Sept. 30, 2016, were $63.2 million, up 24 percent from the corresponding quarter last year. Service revenue from mid-market and enterprise customers grew 36 percent year-over-year, and represents over 53 percent of the company's total service revenue. New monthly recurring revenue (MRR) sold to mid-market and enterprise customers increased 30 percent year-over-year and accounted for 65% of total MRR booked in the quarter, the company said.
8x8 CEO Vik Verma gave channel partners extensive credit for the momentum. "Increasingly we are finding that channel partners are becoming a bigger and bigger portion of our focus," he said. "Because we really do think we have a differentiated offerings and the fact that we can now start to offer analytics, as part of a communications solution is something our channel partners a very excited by."
In some cases, Verma hinted, partners have outperformed the company's own internal sales team. "We've had a couple of channel partners particularly in retail... They're better than our -- no disrespect to our direct sales team, which is fantastic -- but in some instances because of the relationships that the partners have, they are actually acting almost like surrogate inside our direct sales people. So we see more and more focus on the channel going forward."
Amid that reality, 8x8 will make additional channel hires, according to CFO Mary Ellen Genovese. "We're seeing great traction on the channel," she said. "We're going to bring in some additional channel sales people and we're going to be investing in modernizing. There is a line of business out there and we believe that we're at the forefront of for the enterprise accounts -- especially the global accounts. We believe that we're uniquely qualified to capture a market, so we're going to continue to invest."
Still, it's difficult to pinpoint the exact rate of 8x8's channel momentum. The company doesn't break out channel sales as a percentage of overall revenues. Also, 8x8's net income for the quarter was $27,000 -- essentially a break-even figure that suggests there's more work to be done on the profitability and automation fronts. Plus, Forbes about two months ago raised questions about the company's overall growth strategy and spending habits.
Still, Wall Street seems impressed with yesterday's statements. Among the reasons: The company's average monthly service revenue per business customer was $409, up from $360 in the corresponding quarter last year. Also, gross monthly revenue churn fell to 0.6%, compared with 0.7% in the corresponding quarter last year.
Amid the momentum, 8x8 increased its annual revenue guidance for fiscal 2017 to a range of $251.0 million to $254.0 million. The previous estimate was $249.0 million to $253.0 million.
8x8's portfolio includes business phone systems, hosted VoIP, unified communications, and additional cloud services. The company's momentum is particularly impressive considering rival ShoreTel is up for sale and working overtime to make a more successful shift from on-premises to cloud services. Shortel is expected to announce its own quarterly results on Oct. 27.
