Record Revenue of $41.4 Million, Up 26%
Year-Over-Year;Non-GAAP Net Income of $4.1 Million, or $0.04 per
Share, Representing 10% of Revenue
8x8, Inc. (NASDAQ:EGHT), a provider of cloud-based unified
communications, contact center and collaboration solutions, today
reported financial results for the third quarter of fiscal 2015
ended December 31, 2014.
Third Quarter Fiscal 2015 Financial
Highlights:
- Total revenue for the quarter increased
26% year-over-year to $41.4 million.
- Service revenue for the quarter
increased 27% year-over-year to $37.8 million.
- New monthly recurring revenue (MRR)
sold by our midmarket and channel sales teams increased 42% year
over year, representing 44% of new MRR sold in the quarter,
compared with 35% in the same period last year.
- Average monthly service revenue per
business customer increased 11% to a record $305, compared with
$274 in the same period last year.
“8x8’s results for the third quarter of fiscal 2015 were once
again strong with record revenue, increasing ARPU and continued
profitability driven by the successful execution of our midmarket
growth strategies,” stated 8x8 CEO Vik Verma. “The investments
we’ve made in customer support, sales engineering and product
development, in particular, are differentiating us from the
competition further and enabling us to excel in areas such as
security, reliability, breadth of services, time to value and
global availability. With the recent senior executive appointments
of Enzo Signore as Chief Marketing Officer and Puneet Arora as
Senior Vice President of Global Sales, our management team is now
fully prepared to embrace the tremendous market opportunity we see
ahead for the company.”
Mr. Verma added, “We are maintaining our guidance for annual
revenue growth of approximately 26% in fiscal 2015, and we continue
to expect non-GAAP net income as a percentage of revenue in the
8-10% range for fiscal 2015.”
Additional Third Quarter and
Year-to-Date Highlights:
- GAAP net income for the third quarter
of fiscal 2015 was $444,000, or $0.01 per diluted share, compared
with GAAP net income of $89,000, or $0.00 per diluted share, in the
third quarter of fiscal 2014.
- Non-GAAP net income was $4.1 million,
$0.04 per diluted share, or 10% of revenue, for the quarter,
compared with $2.5 million, $0.03 per diluted share, or 8% of
revenue, for the same period last year.
- Service margin was 80%, 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 1.0%, compared with 1.5% in the same period last year.
- Cash, cash equivalents and investments
was $187.9 million in the third quarter of fiscal 2015, compared
with $174.0 million in the same period last year; cash flow from
operating activities was $13.8 million year to date.
- Ended the quarter with 41,051 business
customers, up 11.7% compared with 36,753 customers in the same
period a year ago.
- Recognized as the “2014 Emerging Cloud
Partner of the Year” by Insight, Inc, a leading worldwide
technology provider of hardware, software and service solutions at
Synergy 2015, Insight’s annual Partner Forum.
- Awarded five new U.S. patents and
reported 100th patent milestone.
- Announced the appointment of Enzo
Signore as Chief Marketing Officer.
- Announced the appointment of Puneet
Arora as Senior Vice President of Global Sales.
Conference Call
Information:
Management will host a conference call to discuss these results
and other matters related to the Company’s business today, January
22, 2015, 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 # 54803999) (404) 537-3406,
international (Conference ID # 54803999) 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 January 28, 2015. 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
Puneet Arora and 13 new employees in connection with their recent
hiring. Mr. Arora received an option to purchase 117,702
shares of the Company's common stock with an exercise price
of $8.93 per share, which is equal to the closing price
of the Company's Common Stock on January 20, 2015. In
addition, Mr. Arora received restrictive stock units
("RSUs") and performance share units (“PSUs”) representing the
right to receive up to 78,304 shares of common stock. Vesting of
the option, RSUs and PSUs is subject to his continued service with
the Company, and the PSUs are subject to additional vesting
requirements based on future market prices of the common stock. The
13 other employees received restrictive stock units for 36,742
shares of the Company's Common Stock, subject to their continued
employment.
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 businesses 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 and gain on escrow settlement. We have
excluded gain on patent sale and gain on disposal of discontinued
operations and gain on escrow settlement 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 Nine
Months Ended December 31, December 31,
2014 2013 2014 2013 Service revenue $
37,802 $ 29,737 $ 108,199 $ 84,062 Product revenue 3,570 3,008
10,684 8,749 Total revenue 41,372 32,745 118,883 92,811
Operating expenses (1): Cost of service revenue 7,544 5,584 22,046
15,579 Cost of product revenue 3,959 4,041 11,690 11,171 Research
and development 3,868 3,325 10,770 8,301 Sales and marketing 20,559
16,051 59,159 42,868 General and administrative 4,617 5,547 12,388
11,444 Gain on patent sale - - (1,000) - Total operating expenses
40,547 34,548 115,053 89,363 Income (loss) from operations 825
(1,803) 3,830 3,448 Other income, net 246 586 623 602 Income (loss)
from continuing operations before provision (benefit) for income
taxes 1,071 (1,217) 4,453 4,050 Provision (benefit) for income
taxes 627 (1,306) 2,710 481 Income from continuing operations 444
89 1,743 3,569 Income from discontinued operations, net of income
tax provision - - - 301 Gain on disposal of discontinued
operations, net of income tax provision of $463 - - - 589 Net
Income $ 444 $ 89 $ 1,743 $ 4,459 Income per share -
continuing operations: Basic $ 0.01 $ 0.00 $ 0.02 $ 0.05 Diluted $
0.01 $ 0.00 $ 0.02 $ 0.05 Income per share - discontinued
operations: Basic $ 0.00 $ 0.00 $ 0.00 $ 0.01 Diluted $ 0.00 $ 0.00
$ 0.00 $ 0.01 Net income per share: Basic $ 0.01 $ 0.00 $
0.02 $ 0.06 Diluted $ 0.01 $ 0.00 $ 0.02 $ 0.06 Weighted
average number of shares: Basic 89,594 79,742 89,107 75,071 Diluted
91,974 83,182 91,752 78,389 (1) Amounts include stock-based
compensation expense, as follows:
Three Months Ended
Nine Months Ended December 31, December 31,
2014 2013 2014 2013 Cost of service
revenue $ 201 $ 101 $ 476 $ 237 Cost of product revenue - - - -
Research and development 420 339 1,049 634 Sales and marketing 966
660 2,620 1,400 General and administrative 1,047 2,132 2,344 2,974
$ 2,634 $ 3,232 $ 6,489 $ 5,245
8x8, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands,
unaudited) December 31, March 31,
2014 2014 ASSETS Current assets Cash
and cash equivalents $ 52,598 $ 59,159 Short-term investments
135,291 47,181 Accounts receivable, net 7,233 5,503 Inventory 532
811 Deferred tax assets 1,732 2,065 Other current assets 2,932
2,214 Total current assets 200,318 116,933 Long-term investments -
72,021 Property and equipment, net 10,179 7,711 Intangible assets,
net 13,032 15,095 Goodwill 37,496 38,461 Non-current deferred tax
asset 45,686 47,797 Other assets 1,307 1,185 Total assets $ 308,018
$ 299,203
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities Accounts payable $ 7,272 $ 6,789 Accrued
compensation 6,612 4,583 Accrued warranty 423 660 Deferred revenue
1,491 1,857 Other accrued liabilities 4,254 4,232 Total current
liabilities 20,052 18,121 Other liabilities 2,185 2,904
Total liabilities 22,237 21,025 Total stockholders' equity
285,781 278,178 Total liabilities and stockholders' equity $
308,018 $ 299,203
8x8, Inc. CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS (In thousands, unaudited) Nine
Months Ended December 31, 2014 2013
Cash flows from operating activities: Net income $
1,743 $ 4,459 Adjustments to reconcile net income to net cash
provided by operating activities: Depreciation 2,513 1,888
Amortization of intangible assets 1,687 1,074 Amortization of
capitalized software 255 92
Net Accretion of discount and amortization
of premium on marketable securities
659 - Gain on disposal of discontinued operations - (589 ) Gain on
escrow settlement - (565 ) Stock-based compensation 6,489 5,245
Deferred income tax provision 2,444 87 Other 268 490 Changes in
assets and liabilities: Accounts receivable, net (2,062 ) (1,104 )
Inventory 235 (245 ) Other current and noncurrent assets (505 )
(570 ) Deferred cost of goods sold (179 ) 211 Accounts payable (736
) (1,290 ) Accrued compensation 2,044 1,217 Accrued warranty (237 )
182 Accrued taxes and fees 561 62 Deferred revenue (840 ) 757 Other
current and noncurrent liabilities (564 ) 172 Net cash
provided by operating activities 13,775 11,573
Cash flows from investing activities: Purchases of property
and equipment (4,523 ) (2,081 ) Acquisition of business, net of
cash acquired - (18,474 ) Cost of capitalized software (456 ) (590
) Proceeds from disposition of discontinued operations, net of
transaction costs - 3,000 Proceeds from maturity of investments
31,400 - Sales of investments - available for sale 29,580 -
Purchase of investments - available for sale (77,821 ) - Net
cash used in investing activities (21,820 ) (18,145 )
Cash flows from financing activities: Capital lease payments
(115 ) (26 ) Repurchase of common stock (1,723 ) (320 ) Proceeds
from issuance of common stock, net of issuance costs - 125,758
Proceeds from issuance of common stock under employee stock plans
2,666 2,959 Net cash provided by financing activities
828 128,371 Effect of exchange rate changes on cash 656
10 Net (decrease) increase in cash and cash
equivalents (6,561 ) 121,809 Cash and cash equivalents at
the beginning of the period 59,159 50,305 Cash and
cash equivalents at the end of the period $ 52,598 $ 172,114
8x8, Inc. Selected Operating
Statistics Three Months Ended
Dec. 31,
2013
March 31,
2014
June 30,
2014
Sept. 30,
2014
Dec. 31,
2014
Total business customers (1) 36,753 37,933 39,340 40,434
41,051 Business customer average monthly service revenue per
customer (2) $ 274 $ 287 $ 293 $ 299 $ 305 Monthly business service
revenue churn 1.5 % 1.2 % 0.4 % 0.9 % 1.0 % Overall service
margin 81 % 79 % 80 % 79 % 80 % Overall product margin -34 % -23 %
-9 % -8 % -11 % Overall gross margin 71 % 70 % 71 % 72 % 72 %
(1) 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.
(2) 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
Nine Months Ended December 31, December 31,
2014 2013 2014
2013 Net income $ 444 $ 89 $ 1,743 $ 4,459 Gain on
patent sale - - (1,000 ) - Gain on escrow settlement - (565 ) -
(565 ) Gain on disposal of discontinued operations - - - (589 )
Non-cash tax adjustments 442 (1,502 ) 2,444 87 Amortization of
acquired intangible assets 554 403 1,687 1,074 Stock-based
compensation expense 2,634 3,232 6,489 5,245 Acquisition related
expenses - 672 - 815 Management transition - 204 -
337 Non-GAAP net income $ 4,074 2,533 $
11,363 $ 10,863 Weighted average number of
shares: Diluted 91,974 83,182 91,752 78,389 GAAP net income
per share - Diluted $ 0.01 $ 0.00 $ 0.02 $ 0.06 Gain on patent sale
- - (0.01 ) - Gain on escrow settlement - (0.01 ) - (0.01 ) Gain on
disposal of discontinued operations - - - (0.01 ) Non-cash tax
adjustments - (0.02 ) 0.02 - Amortization of acquired intangible
assets 0.01 0.01 0.02 0.02 Stock-based compensation expense 0.02
0.04 0.07 0.07 Acquisition related expenses - 0.01 - 0.01
Management transition - - - - Non-GAAP
net income per share - Diluted $ 0.04 $ 0.03 $ 0.12
$ 0.14 GAAP net income percentage of
revenue 1 % 0 % 1 % 5 % Gain on patent sale - - -1 % - Gain on
escrow settlement - -2 % - -1 % Gain on disposal of discontinued
operations - - - -1 % Non-cash tax adjustments 1 % -4 % 2 % -
Amortization of acquired intangible assets 1 % 1 % 2 % 1 %
Stock-based compensation expense 7 % 10 % 6 % 7 % Acquisition
related expenses - 2 % - 1 % Management transition - 1 % -
- Non-GAAP net income percentage of revenue 10 % 8 %
10 % 12 %
Investor Relations Contact:8x8, Inc.Joan Citelli,
408-654-0970Joan.citelli@8x8.com
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