29% Year-Over-Year Increase in Revenue;
Non-GAAP Net Income of $4.3 Million, or $0.05
per Share
8x8, Inc. (NASDAQ:EGHT), a provider of cloud-based unified
communications, contact center and collaboration solutions, today
reported financial results for the second quarter fiscal 2015 ended
September 30, 2014.
Second Quarter Fiscal 2015 Financial
Highlights:
- Total revenue for the quarter increased
29% year-over-year to $39.6 million.
- Service revenue for the quarter
increased 30% year-over-year to 36.1 million.
- New monthly recurring revenue (MRR)
sold by channel and mid-market sales increased 59% year-over-year,
representing 44% of new MRR sold in the quarter, compared with 33%
in the same period last year.
- Average monthly service revenue per
business customer increased 12% to a record $299, compared with
$268 in the same period last year.
“Our differentiated cloud communications portfolio and
increasing penetration in the mid- market enabled 8x8 to deliver
another solid quarter of record revenue and profitable growth,”
stated 8x8 CEO Vik Verma. “The productivity advantages businesses
are deriving from our combined cloud telephony, unified
communications and contact center suite of services are measurable,
and our ability to rapidly deploy large distributed enterprises on
a global basis is unparalleled in our industry. The investments we
have been making in the business are further separating us from our
competition.”
Mr. Verma continued, “Given our continued strong results this
quarter and visibility into the second half of our fiscal year, we
are increasing our annual guidance for revenue growth to
approximately 26% and now expect non-GAAP net income as a
percentage of revenue in the 8 – 10% range for fiscal 2015.”
Additional Second Quarter
Results:
- GAAP net income for the second quarter
of fiscal 2015 was $1.3 million, or $0.01 per diluted share,
compared with GAAP net income of $2.2 million, or $0.03 per diluted
share, in the second quarter of fiscal 2014.
- Non-GAAP net income was $4.3 million,
$0.05 per diluted share, or 11% of revenue, compared with $4.1
million, $0.05 per diluted share, for the same period last
year.
- Service margin was 79%, compared with
81% in the same period a year ago; overall gross margin was 72%,
compared with 71% in the same year ago period.
- Monthly business service revenue churn
was 0.9%, compared with 1.2% in the same period last year.
- Cash, cash equivalents and investments
were $185.6 million in the second quarter of fiscal 2015; cash flow
from operating activities was $8.6 million year to
date.
- Ended the quarter with 40,434 business
customers, compared with 34,674 customers in the same period a year
ago.
- Recognized as a “Leader” in Gartner's
August 2014 “Magic Quadrant for Unified Communications as a Service
(UCaaS), Multiregional” for the third consecutive year.
- Released Virtual Contact Center 8.1
upgrade with enhanced customer engagement capabilities.
- Awarded three new patents related to
communications technologies; 96 U.S. patents awarded to date.
- Announced the appointment of Mary Ellen
Genovese as Chief Financial Officer on October 7, 2014.
Conference Call
Information:
Management will host a conference call to discuss these results
and other matters related to the Company’s business today, October
22, 2014, at 4:30 pm ET. 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 #13248971) (404) 537-3406,
international (Conference ID #13248971) Webcast:
http://investors.8x8.com
Participants should plan to dial in or log on ten minutes prior
to the start time. A telephonic replay of the call will be
available three hours after the conclusion of the call until
midnight October 28, 2014. The webcast will be archived on 8x8’s
website for a period of one year. For additional information, visit
http://investors.8x8.com.
8x8 also reported, in accordance with NASDAQ Listing Rule
5635(c)(4), that employment inducement awards were granted to 12
new employees in connection with their recent hiring. The employees
received restrictive stock units for 32,602 shares of the Company's
Common Stock, subject to their continued employment and other
conditions.
About 8x8, Inc.
8x8, Inc. (NASDAQ:EGHT) is the trusted provider of secure and
reliable cloud-based unified communications and virtual contact
center solutions to more than 40,000 small, midsize and distributed
enterprise organizations operating in over 40 countries across six
continents. 8x8's out-of-the-box cloud solutions replace
traditional on-premise PBX hardware and software-based systems with
a flexible and scalable Software as a Service (SaaS) alternative,
encompassing cloud business phone service, contact center
solutions, and web conferencing. For additional information, visit
www.8x8.com, or www.8x8.com/UK or connect with 8x8 on Google+,
Facebook, LinkedIn and Twitter.
Non-GAAP Measures
The Company has provided in this release financial information
that has not been prepared in accordance with Generally Accepted
Accounting Principles (GAAP). Management uses these non-GAAP
financial measures internally in analyzing our financial results
and believes they are useful to investors, as a supplement to GAAP
measures, in evaluating the Company’s ongoing operational
performance. Management believes that the use of these non-GAAP
financial measures provides an additional tool for investors to use
in evaluating 8x8’s ongoing operating results and trends and in
comparing financial results with other companies in the 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 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
non-cash tax adjustments, stock-based compensation, amortization of
acquired intangible assets, acquisition-related costs, gain on
patent sale, gain on disposal of discontinued operations and
management transition. We have excluded gain on patent sale and
gain on disposal of discontinued operations because we consider
these to have been isolated transactions and believe these are not
reflective of our ongoing operations, and this reduces
comparability of periodic operating results when these are
included. 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 and
management transition expenses 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.
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, market acceptance of new or
existing services and features, success of our efforts to target
mid-market and larger distributed enterprises, changes in the
competitive dynamics of the markets in which we compete, customer
cancellations and rate of churn, impact of current economic climate
and adverse credit markets on our target customers, our ability to
scale our business, our reliance on infrastructure of third-party
network services providers, risk of failure in our physical
infrastructure, risk of failure of our software, our ability to
maintain the compatibility of our software with third-party
applications and mobile platforms, continued compliance with
industry standards and regulatory requirements, risks relating to
our strategies and objectives for future operations, including the
execution of integration plans and realization of the expected
benefits of our acquisitions, the amount and timing of costs
associated with recruiting, training and integrating new employees,
introduction and adoption of our cloud communications and
collaboration services in markets outside of the United States, and
general economic conditions that could adversely affect our
business and operating results. 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.
8x8, Inc. CONDENSED CONSOLIDATED STATEMENTS OF
INCOME (In thousands, except per share amounts;
unaudited) Three Months
Ended Six Months Ended September 30, September
30, 2014 2013 2014 2013 Service
revenue $ 36,121 $ 27,826 $ 70,397 $ 54,325 Product revenue 3,477
2,989 7,114 5,741 Total revenue 39,598 30,815
77,511 60,066 Operating expenses (1): Cost of service
revenue 7,505 5,209 14,502 9,995 Cost of product revenue 3,762
3,783 7,731 7,130 Research and development 3,496 2,640 6,902 4,976
Sales and marketing 19,440 13,745 38,600 26,817 General and
administrative 3,893 3,125 7,771 5,897 Gain on patent sale (1,000 )
- (1,000 ) - Total operating expenses 37,096 28,502 74,506
54,815 Income from operations 2,502 2,313 3,005 5,251 Other
income, net 200 1 377 16
Income from continuing operations before
provision for income taxes
2,702 2,314 3,382 5,267 Provision for income taxes 1,411 826
2,083 1,787 Income from continuing operations 1,291 1,488
1,299 3,480
Income from discontinued operations, net
of income tax provision
- 154 - 301
Gain on disposal of discontinued
operations, net of income tax provision of $463
- 589 - 589 Net Income $ 1,291 $ 2,231 $ 1,299
$ 4,370 Income per share - continuing
operations: Basic $ 0.01 $ 0.02 $ 0.01 $ 0.05 Diluted $ 0.01 $ 0.02
$ 0.01 $ 0.05 Income per share - discontinued operations:
Basic $ - $ 0.01 $ - $ 0.01 Diluted $ - $ 0.01 $ - $ 0.01
Net income per share: Basic $ 0.01 $ 0.03 $ 0.01 $ 0.06 Diluted $
0.01 $ 0.03 $ 0.01 $ 0.06 Weighted average number of shares:
Basic 89,073 72,970 88,861 72,788 Diluted 91,615 76,232 91,568
76,035 (1) Amounts include stock-based compensation expense,
as follows:
Three Months Ended Six Months
Ended September 30, September 30, 2014
2013 2014 2013 Cost of service revenue $ 160 $
68 $ 275 $ 136 Cost of product revenue - - - - Research and
development 315 141 629 295 Sales and marketing 910 393 1,654 740
General and administrative 623 504 1,297 842 $ 2,008
$ 1,106 $ 3,855 $ 2,013
8x8,
Inc. CONDENSED CONSOLIDATED BALANCE SHEETS (In
thousands, unaudited) September 30,
March 31, 2014 2014 ASSETS
Current assets Cash and cash equivalents $ 56,048 $ 59,159
Short-term investments 129,519 47,181 Accounts receivable, net
7,266 5,503 Inventory 754 811 Deferred tax assets 1,732 2,065 Other
current assets 3,247 2,214 Total current assets 198,566 116,933
Long-term investments - 72,021 Property and equipment, net 9,555
7,711 Intangible assets, net 13,826 15,095 Goodwill 38,114 38,461
Deferred tax assets, non-current 46,128 47,797 Other assets 1,144
1,185 Total assets $ 307,333 $ 299,203
LIABILITIES AND
STOCKHOLDERS' EQUITY Current liabilities Accounts payable $
8,898 $ 6,789 Accrued compensation 5,500 4,583 Accrued warranty 538
660 Deferred revenue 1,522 1,857 Other accrued liabilities 3,891
4,232 Total current liabilities 20,349 18,121 Other
liabilities 2,532 2,904 Total liabilities 22,881 21,025
Total stockholders' equity 284,452 278,178 Total liabilities and
stockholders' equity $ 307,333 $ 299,203
8x8, Inc. CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS (In thousands, unaudited) Six Months
Ended September 30,
2014 2013 Cash flows from operating
activities: Net income $ 1,299 $ 4,370
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 1,576 1,287 Amortization of intangible assets 1,133
671 Amortization of capitalized software 170 37
Net Accretion of discount and amortization
of premium on marketable securities
428 - Gain on disposal of discontinued operations - (589 )
Stock-based compensation 3,855 2,013 Deferred income tax provision
2,002 1,589 Other 115 390 Changes in assets and liabilities:
Accounts receivable, net (1,883 ) (1,179 ) Inventory 29 91 Other
current and noncurrent assets (608 ) (431 ) Deferred cost of goods
sold (340 ) (6 ) Accounts payable 980 22 Accrued compensation 918
17 Accrued warranty (122 ) 100 Accrued taxes and fees 249 (166 )
Deferred revenue (564 ) 961 Other current and noncurrent
liabilities (607 ) (166 ) Net cash provided by operating activities
8,630 9,011
Cash flows from investing
activities: Purchases of property and equipment (2,553 ) (1,445
) Cost of capitalized software (181 ) (473 ) Proceeds from maturity
of investments 21,600 - Sales of investments - available for sale
25,537 - Purchase of investments - available for sale (57,854 ) -
Net cash used in investing activities (13,451 ) (1,918 )
Cash flows from financing activities: Capital lease
payments (81 ) (10 ) Repurchase of common stock (80 ) (257 )
Proceeds from issuance of common stock under employee stock plans
1,699 2,214 Net cash provided by financing activities
1,538 1,947 Effect of exchange rate changes on cash 172
- Net (decrease) increase in cash and cash
equivalents (3,111 ) 9,040 Cash and cash equivalents at the
beginning of the period 59,159 50,305 Cash and cash
equivalents at the end of the period $ 56,048 $ 59,345
8x8, Inc.
Selected Operating Statistics (1) Three Months Ended
Sept. 30,2013
Dec. 31,2013
March 31,2014
June 30,2014
Sept. 30,2014
Total business customers (2) 34,674 36,753 37,933 39,340
40,434 Business customer average monthly service revenue per
customer (3) $ 268 $ 274 $ 287 $ 293 $ 299 Monthly business service
revenue churn 1.2 % 1.5 % 1.2 % 0.4 % 0.9 % Overall service
margin 81 % 81 % 79 % 80 % 79 % Overall product margin -27 % -34 %
-23 % -9 % -8 % Overall gross margin 71 % 71 % 70 % 71 % 72 %
(1) Selected operating statistics table include continuing
operations and excludes dedicated server hosting business sold
September 30, 2013. (2) 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, DNS or Cloud
VPS services are not included as business customers. (3) 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.
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 Six Months Ended September 30,
September 30, 2014 2013
2014 2013 Net income $ 1,291 $ 2,231 $
1,299 $ 4,370 Gain on patent sale (1,000 ) - (1,000 ) - Gain on
disposal of discontinued operations - (589 ) - (589 ) Non-cash tax
adjustments 1,392 716 2,002 1,589 Amortization of acquired
intangible assets 566 331 1,133 671 Stock-based compensation
expense 2,008 1,106 3,855 2,013 Acquisition related expenses - 143
- 143 Management transition - 133 - 133
Non-GAAP net income $ 4,257 4,071 $ 7,289 $
8,330 Weighted average number of shares: Diluted
91,615 76,232 91,568 76,035 GAAP net income per share -
Diluted $ 0.01 $ 0.03 $ 0.01 $ 0.06 Gain on patent sale (0.01 ) -
(0.01 ) - Gain on disposal of discontinued operations - (0.01 ) -
(0.01 ) Non-cash tax adjustments 0.02 0.01 0.02 0.02 Amortization
of acquired intangible assets - - 0.01 0.01 Stock-based
compensation expense 0.03 0.02 0.05 0.03 Acquisition related
expenses - - - - Management transition - - - -
Non-GAAP net income per share - Diluted $ 0.05 $ 0.05
$ 0.08 $ 0.11 GAAP net income
percentage of revenue 3 % 7 % 2 % 7 % Gain on patent sale -2 % - -1
% - Gain on disposal of discontinued operations - -2 % - -1 %
Non-cash tax adjustments 4 % 2 % 2 % 3 % Amortization of acquired
intangible assets 1 % 1 % 1 % 1 % Stock-based compensation expense
5 % 4 % 5 % 4 % Acquisition related expenses - 1 % - - Management
transition - - - - Non-GAAP net income
percentage of revenue 11 % 13 % 9 % 14 %
8x8, Inc.Investor Relations Contact:Joan Citelli,
408-654-0970Joan.citelli@8x8.com
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