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8x8, Inc. (NASDAQ: EGHT), provider of innovative cloud-based business
communications and computing solutions, today announced record financial
operating results for the third quarter of fiscal 2013 ended December
31, 2012.
Third Quarter Fiscal 2013 Financial Highlights:
Total revenue for the quarter increased 17% year-over-year to a record
$27.3 million from $23.3 million in the same period of fiscal 2012.
Revenue from business customers grew 22.2% during the quarter from the
same period last year and comprised 97% of total revenue for the
quarter.
Overall gross margin was 68.3% compared with 67.8% in the prior
quarter and 67.9% in the same period last year.
Service gross margin was 78.1%, compared with 75.9% in the prior
quarter and 76.9% in the same period last year.
GAAP net income was $1.9 million, or $0.03 per diluted share, compared
with $2.6 million, or $0.04 per share, for the same period last year.
Non-GAAP net income (as outlined in the reconciliation table below)
was $3.8 million, or $0.05 per diluted share, compared with $3.7
million, or $0.05 per diluted share, in the same period a year ago.
Ended the quarter with $46.5 million in cash, cash equivalents and
investments compared with $40.1 million in the prior quarter and $21.9
million on December 31, 2011.
Cash flow from operating activities was $6.6 million for the quarter
compared with $3.2 million in the same period last year.
“I am pleased to report another quarter of record revenue along with a
substantial uptick in our service margins,” said 8x8 Chairman & CEO
Bryan Martin. “Our focus on service margin improvement combined with our
continued double-digit revenue growth and consistent profitability are a
testament to 8x8’s ability to deliver advanced cloud-based services in a
highly efficient and profitable manner to a continually growing base of
larger customers.”
Third Quarter Fiscal 2013 Operating Metrics and Other Business
Highlights:
Average revenue per business customer increased to $260 per month,
compared with $256 in the prior quarter and $239 in the same period
last year.
For new customers added during the December quarter, the average
number of subscribed services grew to 17.0 from 14.7 in the prior
quarter and 14.1 in the same period last year.
Average number of subscribed services per business customer grew to
11.2 from 10.6 services in the prior quarter and 9.4 in the same
period last year.
Monthly business customer count churn for the quarter was 1.6%
compared with 2.4% in the prior quarter and 2.0% in the same period
last year; monthly business service revenue churn for the December
quarter increased to 2.6% from 1.0% in the prior quarter, compared
with 1.9% in the same period last year.
Ended the quarter with 31,473 business customers, up from 30,498
business customers in the prior quarter, a net increase of 975
business customers for the quarter.
Awarded two new U.S. communications patents related to network and
mobile technologies; the company has been awarded 85 U.S. patents
since inception.
Launched our complete suite of hosted telephony and unified
communications services in Canada as phase one of our Global Reach
initiative.
“The significant jump in the number of services subscribed to by our new
customers this quarter clearly shows the success 8x8 is having in
penetrating the upper end of the small and medium business segment,”
Martin continued. “The trust that larger businesses are placing in 8x8
by allowing us to provide mission critical services not only underscores
the cost savings and innovation we provide, but also our ability to
provide these advanced services in a high quality and highly available
manner. The inclusion of 8x8 as one of the leaders in Gartner’s Magic
Quadrant further confirms our leading position in the UCaaS industry.”
“While we often see some seasonality for increased churn in the December
quarter due to the end of the tax year, business customer churn was at
its lowest quarterly levels ever at 1.6%. Revenue churn, which generally
lags customer churn, did increase during the third fiscal quarter due
primarily to specific issues with a handful of customers unrelated to
8x8 service,” continued Martin. “Overall, our revenue and customer
growth continues to vastly outpace our churn, and, as evident in our
operating metrics, we continue to see expanding growth opportunities
with both new and current customers as they take on additional services.”
Nine Months Year to Date Fiscal 2013 Financial Highlights:
Total revenue for the nine months ended December 31, 2012, increased
28% year over year to $79 million from $62 million in the same period
of fiscal 2012.
GAAP net income for the nine months ended December 31, 2012, was $12.3
million, or $0.16 per diluted share, compared with $5.4 million, or
$0.08 per diluted share, for the same period last year.
Non-GAAP net income (as outlined in the reconciliation table below)
for the nine months ended December 31, 2012, was $10.9 million, or
$0.15 per diluted share, compared with $7.3 million, or $0.11 per
diluted share, for the same period last year.
Management will host a conference call to discuss these results and
other matters related to the Company’s business today, January 24, 2013,
at 4:30 p.m. EDT. The call is accessible via the following numbers and
webcast links:
Dial In:
(877) 843-0417, domestic
(408) 427-3791, international
Replay:
(855) 859-2056, domestic (Conference ID #85539163)
(404) 537-3406, international (Conference ID #85539163)
We have provided in this release financial information that has not been
prepared in accordance with Generally Accepted Accounting Principles
(GAAP). We use these non-GAAP financial measures internally in analyzing
our financial results and believe they are useful to investors, as a
supplement to GAAP measures, in evaluating our ongoing operational
performance. We believe that the use of these non-GAAP financial
measures provides an additional tool for investors to use in evaluating
our ongoing operating results and trends and in comparing our financial
results with other companies in our industry, many of which present
similar non-GAAP financial measures to investors.
Non-GAAP financial measures should not be considered in isolation from,
or as a substitute for, financial information prepared in accordance
with GAAP. Investors are encouraged to review the reconciliation of
these non-GAAP financial measures to their most directly comparable GAAP
financial measures below. A reconciliation of our non-GAAP financial
measures to their most directly comparable GAAP measures has been
provided in the financial statement tables included below in this press
release.
Non-GAAP net income and non-GAAP net income per
share
We have defined non-GAAP net income as net income for GAAP plus loss on
investment, non-cash tax adjustments, stock-based compensation,
amortization of acquired intangible assets, acquisition-related costs,
facility exit costs and gain on patent sale. We have excluded loss on a
strategic investment in another company and gain on patent sale because
we consider these to be isolated transactions and believe these are not
reflective of our ongoing operations. Non-cash tax adjustments represent
the differences between the amount of taxes we expect to pay and our
GAAP tax provision each period. We have excluded stock-based
compensation expense because it relies on valuations based on future
events, such as the market price of our common stock, that are difficult
to predict and are affected by market factors that are largely not
within the control of management. Amortization of acquired intangible
assets is excluded because it is a non-cash expense that we do not
consider part of ongoing operations when assessing our financial
performance, as it relates to accounting for certain purchased assets.
We have excluded acquisition-related expenses, including expenses to
exit facilities, because these expenses are difficult to predict and are
often one-time. We define non-GAAP net income per share as non-GAAP net
income divided by the weighted-average diluted shares outstanding. We
define non-GAAP net income percentage of revenue as non-GAAP net income
divided by revenue. The GAAP and non-GAAP weighted average number of
diluted shares to calculate GAAP and non-GAAP earnings per share are the
same. We believe that such exclusions facilitate comparisons to our
historical operating results and to the results of other companies in
the same industry, and provides investors with information that we use
in evaluating management’s performance on a quarterly and annual basis.
About 8x8, Inc.
8x8 Inc. (NASDAQ: EGHT) empowers business conversations for more than
30,000 small and medium sized businesses with cloud communications
services that include hosted PBX telephony, unified communications,
contact center and video conferencing solutions. In 2012, the company
was recognized in the "Leaders" quadrant of Gartner's 2012 Magic
Quadrant for Unified Communications as a Service and was named No. 1
Provider of Hosted IP Telephony by Frost & Sullivan. 8x8 has been
delivering business communications services since 2004 and has garnered
a reputation for technical excellence and outstanding reliability. For
additional information, visit www.8x8.com,
or connect with 8x8 on Facebook and Twitter.
Forward Looking Statements
This news release contains "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995 and
Section 21E of the Securities Exchange Act of 1934. These statements
include, without limitation, information about future events based on
current expectations, potential product development efforts, near and
long-term objectives, potential new business, strategies, organization
changes, changing markets, future business performance and outlook. Such
statements are predictions only, and actual events or results could
differ materially from those made in any forward-looking statements due
to a number of risks and uncertainties. Actual results and trends may
differ materially from historical results or those projected in any such
forward-looking statements depending on a variety of factors. These
factors include, but are not limited to, customer acceptance and demand
for our products and services, the reliability of our services, the
prices for our services, customer renewal rates, customer acquisition
costs, actions by our competitors, including price reductions for their
telephone services, potential federal and state regulatory actions,
compliance costs, potential warranty claims and product defects, our
needs for and the availability of adequate working capital, our ability
to innovate technologically, the timely supply of products by our
contract manufacturers, potential future intellectual property
infringement claims that could adversely affect our business and
operating results, and our ability to retain our listing on the NASDAQ
Capital Market. For a discussion of such risks and uncertainties, which
could cause actual results to differ from those contained in the
forward-looking statements, see “Risk Factors” in the Company’s reports
on Forms 10-K and 10-Q, as well as other reports that 8x8, Inc. files
from time to time with the Securities and Exchange Commission. All
forward-looking statements are qualified in their entirety by this
cautionary statement, and 8x8, Inc. undertakes no obligation to update
publicly any forward-looking statement for any reason, except as
required by law, even as new information becomes available or other
events occur in the future.
NOTE: 8x8, the 8x8 logo, and 8x8 Virtual Office are trademarks of 8x8,
Inc. All other trademarks are the property of their respective owners.
8x8, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts; unaudited)
Three Months Ended
Nine Months Ended
December 31,
December 31,
2012
2011
2012
2011
Service revenue
$
24,958
$
21,200
$
72,307
$
56,234
Product revenue
2,382
2,078
6,656
5,370
Total revenue
27,340
23,278
78,963
61,604
Operating expenses:
Cost of service revenue
5,473
4,890
16,984
12,764
Cost of product revenue
3,203
2,584
8,585
7,467
Research and development
2,117
1,955
5,973
4,902
Sales and marketing
11,651
9,816
33,202
27,076
General and administrative
2,136
1,481
6,270
4,372
Gain on patent sale
-
-
(11,965
)
-
Total operating expenses
24,580
20,726
59,049
56,581
Income from operations
2,760
2,552
19,914
5,023
Other income, net
73
49
90
58
Income before provision (benefit) for income taxes
2,833
2,601
20,004
5,081
Provision (benefit) for income taxes
913
15
7,726
(284
)
Net income
$
1,920
$
2,586
$
12,278
$
5,365
Net income per share:
Basic
$
0.03
$
0.04
$
0.17
$
0.08
Diluted
$
0.03
$
0.04
$
0.16
$
0.08
Weighted average number of shares:
Basic
71,611
69,445
71,197
65,165
Diluted
74,988
73,214
74,483
69,013
8x8, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, unaudited)
December 31,
March 31,
2012
2012
ASSETS
Current assets
Cash and cash equivalents
$
44,557
$
22,426
Investments
1,965
1,942
Accounts receivable, net
3,605
2,279
Inventory
573
581
Deferred tax assets
284
7,730
Other current assets
876
928
Total current assets
51,860
35,886
Property and equipment, net
6,922
3,820
Intangible assets, net
10,551
11,622
Goodwill
25,150
25,150
Deferred tax assets, non-current
54,065
53,977
Other assets
395
278
Total assets
$
148,943
$
130,733
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable
$
5,170
$
5,476
Accrued compensation
3,768
3,105
Accrued warranty
422
387
Deferred revenue
952
891
Other accrued liabilities
2,758
2,356
Total current liabilities
13,070
12,215
Other liabilities
1,894
68
Total liabilities
14,964
12,283
Total stockholders' equity
133,979
118,450
Total liabilities and stockholders' equity
$
148,943
$
130,733
8x8, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
Nine Months Ended
December 31,
2012
2011
Cash flows from operating activities:
Net income
$
12,278
$
5,365
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation
1,816
1,101
Amortization
1,071
431
Stock-based compensation
1,827
1,013
Deferred income tax provision (benefit)
7,359
(336
)
Other
409
130
Changes in assets and liabilities:
Accounts receivable, net
(1,700
)
(642
)
Inventory
(25
)
1,596
Other current and noncurrent assets
(48
)
405
Deferred cost of goods sold
(18
)
(6
)
Accounts payable
(38
)
(2,059
)
Accrued compensation
663
319
Accrued warranty
35
34
Accrued taxes and fees
495
(396
)
Deferred revenue
61
(75
)
Other current and noncurrent liabilities
1,806
(472
)
Net cash provided by operating activities
25,991
6,408
Cash flows from investing activities:
Purchases of property and equipment
(5,245
)
(1,743
)
Acquisition of businesses, net of cash acquired
-
(713
)
Net cash used in investing activities
(5,245
)
(2,456
)
Cash flows from financing activities:
Capital lease payments
(73
)
(273
)
Repurchase of common stock
(285
)
(1,038
)
Proceeds from issuance of common stock, net of issuance costs
-
(60
)
Proceeds from issuance of common stock under employee stock plans
1,743
949
Net cash provided by (used in) financing activities
1,385
(422
)
Net increase in cash and cash equivalents
22,131
3,530
Cash and cash equivalents at the beginning of the period
22,426
16,474
Cash and cash equivalents at the end of the period
$
44,557
$
20,004
8x8, Inc.
Selected Operating Statistics
Three Months Ended
Dec. 31, 2011
March 31, 2012
June 30, 2012
Sept. 30, 2012
Dec. 31, 2012
Gross business customer additions (1)
2,836
2,892
2,943
2,915
2,617
Gross business customer cancellations (less cancellations within 30
days of sign-up)
1,642
1,697
1,458
2,149
1,504
Business customer churn (less cancellations within 30 days of
sign-up) (2)
2.0
%
2.0
%
1.7
%
2.4
%
1.6
%
Business service revenue churn
1.9
%
1.6
%
2.3
%
1.0
%
2.6
%
Total business customers (3)
27,677
28,671
29,913
30,498
31,473
Business customer average monthly service revenue per customer (4)
$
239
$
244
$
250
$
256
$
260
Overall service margin
77
%
76
%
75
%
76
%
78
%
Overall product margin
-24
%
-15
%
-30
%
-22
%
-34
%
Overall gross margin
68
%
68
%
67
%
68
%
68
%
Business subscriber acquisition cost per service (5)
$
92
$
99
$
97
$
89
$
98
Average number of subscribed services per business customer
9.4
9.8
10.1
10.6
11.2
Average number of subscribed services per new business customer (6)
14.1
13.6
14.0
14.7
17.0
(1) Does not include customers of Virtual Office Solo or Zerigo,
Inc. ("Zerigo").
(2) Business customer churn is calculated by dividing the number of
business customers that terminated (after the expiration of the
30-day trial) during that period by the simple average number of
business customers during the period and dividing the result by the
number of months in the period. The simple average number of
business customers during the period is the number of business
customers on the first day of the period plus the number of business
customers on the last day of the period divided by two. In the
second quarter of fiscal 2013, an affiliate with 411 business
customers representing approximately $9,000 of monthly service
revenue cancelled service. Excluding these 411 cancellations,
business customer churn (less cancellations within 30 days of
sign-up) was 1.9%.
(3) Business customers are defined as customers paying for service.
Customers that are currently in the 30- day trial period are
considered to be customers that are paying for service. Customers
subscribing to Virtual Office Solo or Zerigo services are not
included as business customers.
(4) Business customer average monthly service revenue per customer
is service revenue from business customers in the period divided by
the number of months in the period divided by the simple average
number of business customers during the period.
(5) Business subscriber acquisition cost per service is defined as
the combined costs of advertising, marketing, promotions, sales
commissions and equipment subsidies for business services sold
during the period divided by the number of gross business services
added during the period.
(6) Total new services sold in the period divided by gross business
customer additions.
8x8, Inc.
RECONCILIATION OF NET INCOME TO NON-GAAP NET INCOME
AND NON-GAAP NET INCOME PER SHARE
(In thousands, except per share amounts; unaudited)
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