8x8, Inc. Announces Third Quarter Fiscal 2013 Results

Thu Jan 24, 2013 4:05pm EST

* Reuters is not responsible for the content in this press release.

http://pdf.reuters.com/htmlnews/8knews.asp?i=43059c3bf0e37541&u=urn:newsml:reuters.com:20130124:nBw246266a

http://www.businesswire.com/news/home/20130124006266/en

Record Revenue of $27.3 Million; Average Number of Subscribed Services per New
Business Customer Increases Quarter-over-Quarter from 14.7 to 17
SAN JOSE, Calif.--(Business Wire)--
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. 
* Recognized in the "Leaders" quadrant of Gartner`s 2012 Magic Quadrant for
Unified Communications as a Service (UCaaS) (see
http://business.8x8.com/OL-Research-GartnerMagicQuadrant.html). 
* 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)  
 Webcast:    http://investors.8x8.com                                 


Supplemental financial slides will be presented through 8x8`s Virtual Meeting
web conferencing portal, which can be accessed at:
http://virtualmeeting.8x8.com/Q3FY2013Earnings. 

Non-GAAP Measures

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,             March 31,              June 30,             Sept. 30,              Dec. 31,          
                                                                                              2011                 2012                   2012                 2012                   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)                                                                                    
                                                                                                                                        
                                                     Three Months Ended                            Nine Months Ended                    
                                                     December 31,                                  December 31,                         
                                                     2012                      2011                2012                    2011         
 Net income                                       $  1,920               $     2,586            $  12,278             $    5,365        
 Gain on patent sale                                 -                         -                   (11,965  )              -            
 Non-cash tax adjustments                            780                       -                   7,359                   (336    )    
 Amortization                                        357                       357                 1,071                   431          
 Stock-based compensation expense                    765                       418                 1,827                   1,013        
 Acquisition-related expense                         -                         241                 -                       727          
 Facility exit expense                               -                         140                 305                     140          
 Non-GAAP net income                              $  3,822               $     3,742            $  10,875             $    7,340        
                                                                                                                                        
 Weighted average number of shares:                                                                                                     
 Diluted                                             74,988                    73,214              74,483                  69,013       
                                                                                                                                        
 GAAP net income per share - Diluted              $  0.03                $     0.04             $  0.16               $    0.08         
 Gain on patent sale                                 -                         -                   (0.16    )              -            
 Non-cash tax adjustments                            0.01                      -                   0.10                    -            
 Amortization                                        -                         -                   0.01                    0.01         
 Stock-based compensation expense                    0.01                      0.01                0.03                    0.01         
 Acquisition-related expense                         -                         -                   -                       0.01         
 Facility exit expense                               -                         -                   0.01                    -            
 Non-GAAP net income per share - Diluted          $  0.05                $     0.05             $  0.15               $    0.11         
                                                                                                                                        
                                                                                                                                        
 GAAP net income percentage of revenue               7       %                 11      %           16       %              9       %    
 Gain on patent sale                                 -                         -                   -15      %              -            
 Non-cash tax adjustments                            3       %                 -                   9        %              -1      %    
 Amortization                                        1       %                 1       %           1        %              1       %    
 Stock-based compensation expense                    3       %                 2       %           2        %              2       %    
 Acquisition-related expense                         -                         1       %           -                       1       %    
 Facility exit expense                               -                         1       %           1        %              -            
 Non-GAAP net income percentage of revenue           14      %                 16      %           14       %              12      %    


8x8 Inc.
Joan Citelli, 408-654-0970 (Investor Relations)
Joan.citelli@8x8.com



Copyright Business Wire 2013

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

A tourist takes a plunge as she swims at Ngapali Beach, a popular tourist site, in the Thandwe township of the Rakhine state, October 6, 2013. Picture taken October 6, 2013. REUTERS/Soe Zeya Tun (MYANMAR - Tags: SOCIETY) - RTR3FOI0

Where do you want to go?

We look at when to take trips, budget considerations and the popularity of multigenerational family travel.   Video