CAMPBELL, Calif. - 8x8, Inc. (NASDAQ: EGHT), a cloud communications provider, announced today it has obtained a $200 million Delayed Draw Term Loan Credit Facility. The company plans to use these funds alongside $25 million from its cash reserves to prepay its current $225 million Term Loan due August 3, 2027.
The new Credit Agreement is expected to carry an initial interest rate of the Secured Overnight Financing Rate (SOFR) plus 3.00%, which is significantly lower than the rate on the existing Term Loan. This strategic financial move is anticipated to result in considerable savings on cash interest expenses for 8x8 over the life of the loan.
Kevin Kraus, Chief Financial Officer at 8x8, stated that this step demonstrates the lenders' confidence in the company's business strategy and performance, and will enhance its financial flexibility to support long-term growth.
The terms of the new loan also offer the company the ability to conduct stock repurchases under certain conditions and limitations. The initial drawdown of the loan is expected in August 2024, subject to customary closing conditions, and will mature on August 15, 2027. The loan agreement includes provisions for early repayment without penalty and contains customary financial covenants.
The loan will be guaranteed by some of 8x8’s wholly-owned subsidiaries and secured by a majority of the company's assets. Wells Fargo (NYSE:WFC) Securities, MUFG Bank, and Silicon Valley Bank acted as joint lead arrangers and bookrunners for the transaction, with Wells Fargo Bank serving as the administrative agent.
8x8 specializes in providing integrated cloud-based communication solutions, including contact center services and unified communications. Its services aim to eliminate the division between Unified Communications as a Service (UCaaS) and Contact Center as a Service (CCaaS), offering a consolidated platform for global business communications.
In other recent news, 8x8, Inc. delivered robust fourth quarter and fiscal 2024 results, with a notable 62% increase in annual cash flow and repayment of $63 million of 2024 notes. The company's acquisition of Fuze added over $100 million to their Annual Recurring Revenue (ARR). On the innovation front, 8x8 introduced new products and platform enhancements, which led to a 50% year-over-year sales growth for the second consecutive quarter.
However, Morgan Stanley (NYSE:MS) downgraded 8x8 stock to 'Underweight', citing concerns over revenue growth and competition in the software sector. The firm also lowered the price target for 8x8 from $3.00 to $2.00. In addition, 8x8 welcomed a new independent director, Andrew Burton, whose SaaS sector expertise is expected to be a strategic asset to the company. These are the recent developments in the company.
InvestingPro Insights
As 8x8, Inc. (NASDAQ: EGHT) secures a $200 million Delayed Draw Term Loan Credit Facility to bolster its financial position, investors and analysts are closely observing the company's performance metrics and future outlook. According to InvestingPro data, 8x8 has a market capitalization of $320.55 million, reflecting the scale of the business in the competitive cloud communications market.
Despite a challenging environment, 8x8's gross profit margin remains robust at 69.14% for the last twelve months as of Q4 2024, showcasing the company's ability to maintain profitability in its operations. This is particularly relevant as the company takes on new financial strategies to manage its debt and fuel growth.
An InvestingPro Tip highlights that analysts predict the company will be profitable this year, which aligns with 8x8's strategic initiatives, including the recent financial restructuring. Moreover, the company's stock has seen a strong return over the last month, with a 14.29% price total return, indicating a positive response from the market to its recent moves and potential future growth.
For investors looking for deeper insights, InvestingPro offers a suite of additional tips. There are currently 9 more InvestingPro Tips available for 8x8, Inc., which can provide further guidance on the company's valuation, expected net income growth, and stock price volatility. Access these valuable insights by visiting https://www.investing.com/pro/EGHT and consider using the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
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