Total Revenue of $53.2 Million Increases 29%
YoY; Service Revenue From Mid-Market/Enterprise Customers Now
Represents 50% of Total Service Revenue; Non-GAAP Net Income of
$4.3 Million, $0.05 Per Share
8x8, Inc. (NASDAQ:EGHT), a provider of cloud-based unified
communications and contact center solutions, today reported
financial results for the third quarter of fiscal 2016 ended
December 31, 2015.
Third Quarter Fiscal 2016 Financial
Highlights:
- Total revenue of $53.2 million
increased 29% year-over-year; service revenue of $48.9 million
increased 29% year-over-year.
- GAAP net loss for the third quarter of
fiscal 2016 was ($1.7 million), or ($0.02) per diluted share,
compared with GAAP net income of $444,000 or $0.01 per diluted
share, in the third quarter of fiscal 2015.
- Non-GAAP net income was $4.3 million,
or $0.05 per diluted share, compared with $4.1 million, or $0.04
per diluted share, for the same period last year.
- Service revenue from
mid-market/enterprise customers grew 53% year-over-year and now
represents 50% of the Company’s total service revenue.
- New monthly recurring revenue (MRR)
sold to mid-market/enterprise customers and by channel sales teams
increased 94% year-over-year and accounted for 58% of total MRR
booked in the quarter, compared with 43% of total MRR booked in the
same period last year.
- Average monthly service revenue (ARPU)
per business customer increased 21% to $369, compared with $305 in
the same period last year.
“8x8 executed another solid quarter, posting a 94% increase in
new monthly recurring revenue sold to mid-market and enterprise
customers and by channel sales teams. We continued to demonstrate
the effectiveness of our global and multi-channel growth
strategies, capturing larger customers and demonstrating our
leadership position in the fast-growing UCaaS industry,” said 8x8
CEO Vik Verma. “I am extremely pleased with how our team is
executing across the board, from the increasing productivity of our
sales organization to the dedication and success of our global
deployment teams.”
“Our service revenue from the mid-market and enterprise segment
grew 53% year-over-year and now constitutes 50% of our total
service revenue,” Verma continued. “Given our continued progress
moving upmarket, we are once again revising our fiscal 2016 revenue
outlook upward to a range of $205 million to $207 million, which
represents a 26%-27% year-over-year increase, from our previous
outlook of $204 million to $206 million. Due to the strong growth
in our service revenue, we are also increasing our guidance for
non-GAAP net income as a percentage of revenue to approximately
6%-7% for the full fiscal year.”
Additional Third Quarter and
Year-to-Date Highlights:
- GAAP gross margin was unchanged from
the year ago period at 72%; non-GAAP gross margin was 75%, compared
with 73% in the same year ago period.
- GAAP service margin was unchanged from
the year ago period at 80%; non-GAAP service margin was 83%,
compared with 81% in the same period a year ago.
- Gross monthly organic business service
revenue churn was 1.2%, compared with 1.0% in the same period last
year.
- Cash, cash equivalents and investments
were $155 million in the third quarter of fiscal 2016, compared
with $149 million in the previous quarter; cash flow from operating
activities was $8.3 million.
- Repurchased approximately 66,000 shares
of the Company’s common stock during the quarter at an average
price of $8.27 per share.
- Completed integration of UK Solutions
and DXI sales teams under one 8x8 UK umbrella organization.
- Awarded two new U.S. patents related to
contact center and communication technologies contributing to a
total of 114 awarded patents.
Conference Call
Information:
Management will host a conference call to discuss these results
and other matters related to the Company’s business today, January
21, 2016 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 #12488963) (404) 537-3406, international (Conference ID
#12488963) 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, 2016. 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 announced that on January 19, 2016, it awarded
restricted stock units (RSUs) representing an aggregate of 71,063
shares of the Company's common stock and options to purchase a
total of 37,172 shares to 11 new non-officer employees under the
8x8 "2013 New Employee Inducement Incentive Plan." The equity
awards were approved by the 8x8 Board of Directors Compensation
Committee and were granted as an inducement to the new employees
entering into employment with 8x8, in accordance with Nasdaq Market
Place Rule 5635(c)(4). Each of the awards are subject to vesting
pursuant to the terms of the award agreements, which include that
the recipient be employed through each vesting date.
About 8x8, Inc.
8x8, Inc. (NASDAQ:EGHT) is the trusted provider of secure and
reliable enterprise cloud communications solutions to more than
40,000 businesses operating in over 100 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 conferencing. For additional information,
visit www.8x8.com, www.8x8.com/UK or connect with
8x8 on LinkedIn, Twitter, Google+ and Facebook.
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. This
reconciliation 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
gain on patent sale, non-cash tax adjustments, stock-based
compensation, amortization of acquired intangible assets,
acquisition-related costs and impairment of long-lived assets.
Non-cash tax adjustments represent the difference 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 gain on patent sale and impairment of
long-lived assets because we consider them to be isolated
transactions and believe they are not reflective of our ongoing
operations, and it reduces comparability of periodic operating
results when it is included. We have excluded acquisition-related
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,
risks regarding compliance with regulations in the United States
and foreign jurisdictions in which our services are provided, 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 (LOSS) (In thousands, except per share amounts;
unaudited) Three Months Ended Nine
Months Ended December 31, December 31,
2015 2014 2015
2014 Service revenue $ 48,948 $ 37,802 $ 140,068 $ 108,199
Product revenue 4,220 3,570 11,935 10,684
Total revenue 53,168 41,372 152,003 118,883
Operating expenses: Cost of service revenue (1) 9,713 7,544
27,359 22,046 Cost of product revenue 5,087 3,959 14,065 11,690
Research and development (2) 6,404 3,868 17,930 10,770 Sales and
marketing (3) 27,585 20,559 78,138 59,159 General and
administrative (4) 6,888 4,617 18,614 12,388 Gain on patent sale -
- - (1,000 ) Total operating expenses 55,677
40,547 156,106 115,053 Income (loss) from operations
(2,509 ) 825 (4,103 ) 3,830 Other income, net 272 246 710
623 Income (loss) from operations before provision
(benefit) for income taxes (2,237 ) 1,071 (3,393 ) 4,453 Provision
(benefit) for income taxes (557 ) 627 651 2,710 Net
income (loss) $ (1,680 ) $ 444 $ (4,044 ) $ 1,743 Net
income (loss) per share: Basic $ (0.02 ) $ 0.01 $ (0.05 ) $ 0.02
Diluted $ (0.02 ) $ 0.01 $ (0.05 ) $ 0.02 Weighted average
number of shares: Basic 88,289 89,594 88,812 89,107 Diluted 88,289
91,974 88,812 91,752 (1)(2)(3)(4) - See reconciliation of
GAAP measures to non-GAAP measures.
8x8, Inc.
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP
MEASURES (In thousands, unaudited)
(1) Amounts include amortization of
acquired intangible assets, impairment of long-lived assets, and
stock-based compensation as follows:
Three Months Ended Nine Months Ended
December 31, December 31, 2015
2014 2015 2014 GAAP cost of service
revenue $ 9,713 $ 7,544 $ 27,359 $ 22,046 Amortization of acquired
intangible assets (618 ) (206 ) (1,451 ) (618 ) Impairment of
long-lived assets (440 ) - (440 ) - Stock-based compensation
expense (346 ) (201 ) (828 ) (476 ) Non-GAAP cost of service
revenue $ 8,309 $ 7,137 $ 24,640 $ 20,952
Non-GAAP cost of service revenue as a
percentage of service revenue
17.0 % 18.9 % 17.6 % 19.4 %
(2) Amounts include stock-based
compensation and acquisition related expenses as follows:
Three Months Ended Nine Months Ended December
31, December 31, 2015 2014 2015
2014 GAAP research and development $ 6,404 $ 3,868 $ 17,930
$ 10,770 Stock-based compensation expense (850 ) (420 ) (2,107 )
(1,049 ) Acquisition related expenses - - (5 ) -
Non-GAAP research and development $ 5,554 $ 3,448
$ 15,818 $ 9,721
Non-GAAP research and development as a
percentage of total revenue
10.4 % 8.3 % 10.4 % 8.2 %
(3) Amounts include amortization of
acquired intangible assets, impairment of long-lived assets,
stock-based compensation, and acquisition related expenses as
follows:
Three Months Ended Nine Months Ended December
31, December 31, 2015 2014 2015
2014 GAAP sales and marketing $ 27,585 $ 20,559 $ 78,138 $
59,159 Amortization of acquired intangible assets (384 ) (348 )
(1,114 ) (1,069 ) Impairment of long-lived assets (200 ) - (200 ) -
Stock-based compensation expense (1,689 ) (966 ) (4,308 ) (2,620 )
Acquisition related expenses - - (27 ) -
Non-GAAP sales and marketing $ 25,312 $ 19,245 $
72,489 $ 55,470
Non-GAAP sales and marketing as a
percentage of total revenue
47.6 % 46.5 % 47.7 % 46.7 %
(4) Amounts include amortization of
stock-based compensation and acquisition related expenses as
follows:
Three Months Ended Nine Months Ended December
31, December 31, 2015 2014 2015
2014 GAAP general and administrative $ 6,888 $ 4,617 $
18,614 $ 12,388 Stock-based compensation expense (1,778 ) (1,047 )
(3,959 ) (2,344 ) Acquisition related expenses - -
(1,011 ) - Non-GAAP general and administrative $ 5,110
$ 3,570 $ 13,644 $ 10,044
Non-GAAP general and administrative as a
percentage of total revenue
9.6 % 8.6 % 9.0 % 8.4 %
8x8, Inc. CONDENSED
CONSOLIDATED BALANCE SHEETS (In thousands, unaudited)
December 31, March 31,
2015 2015 ASSETS Current assets Cash and cash
equivalents $ 23,866 $ 53,110 Short-term investments 130,719
123,984 Accounts receivable, net 9,927 6,642 Inventory 786 704
Deferred tax assets 3,955 4,454 Other current assets 5,647 2,702
Total current assets 174,900 191,596 Property and equipment, net
11,969 10,248 Intangible assets, net 23,050 12,260 Goodwill 48,144
36,887 Non-current deferred tax asset 43,169 43,169 Other assets
2,356 1,464 Total assets $ 303,588 $ 295,624
LIABILITIES
AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable $
9,917 $ 7,775 Accrued compensation 9,880 6,183 Accrued warranty 322
339 Deferred revenue 1,807 1,768 Other accrued liabilities 8,496
5,765 Total current liabilities 30,422 21,830 Other
liabilities 3,859 1,583 Total liabilities 34,281 23,413
Total stockholders' equity 269,307 272,211 Total liabilities and
stockholders' equity $ 303,588 $ 295,624
8x8, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In
thousands, unaudited) Nine Months Ended
December 31, 2015 2014 Cash flows
from operating activities: Net income (loss) $ (4,044 ) $ 1,743
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation 3,598 2,513 Amortization of intangible assets 2,565
1,687 Impairment of long-lived assets 640 - Amortization of
capitalized software 456 255
Net accretion of discount and amortization
of premium on marketable securities
584 659 Stock-based compensation 11,202 6,489 Deferred income tax
provision 361 2,444 Other 467 268 Changes in assets and
liabilities: Accounts receivable, net (3,138 ) (2,062 ) Inventory
(122 ) 235 Other current and noncurrent assets (1,699 ) (505 )
Deferred cost of goods sold (156 ) (179 ) Accounts payable 674 (736
) Accrued compensation 3,351 2,044 Accrued warranty (17 ) (237 )
Accrued taxes and fees 1,837 561 Deferred revenue (427 ) (840 )
Other current and noncurrent liabilities (748 ) (564 ) Net cash
provided by operating activities 15,384 13,775
Cash flows from investing activities: Purchases of property
and equipment (3,295 ) (4,523 ) Purchase of businesses, net of cash
acquired (23,434 ) - Cost of capitalized software (1,275 ) (456 )
Proceeds from maturity of investments 38,451 31,400 Sales of
investments - available for sale 43,934 29,580 Purchase of
investments - available for sale (90,025 ) (77,821 ) Net cash used
in investing activities (35,644 ) (21,820 )
Cash flows
from financing activities: Capital lease payments (321 ) (115 )
Payment of contingent consideration (200 ) - Repurchase of common
stock (11,628 ) (1,723 ) Proceeds from issuance of common stock
under employee stock plans 2,848 2,666 Net cash (used
in) provided by financing activities (9,301 ) 828 Effect of
exchange rate changes on cash 317 656 Net decrease in
cash and cash equivalents (29,244 ) (6,561 ) Cash and cash
equivalents at the beginning of the period 53,110 59,159
Cash and cash equivalents at the end of the period $ 23,866
$ 52,598
8x8, Inc. Selected
Operating Statistics Three Months Ended
Dec. 31,2014
March 31,2015
June 30,2015
Sept. 30,2015
Dec. 31,2015
Business customer average monthly
service revenue per customer (1) $ 305 $ 320 $ 353 $ 360 $ 369
Monthly business service revenue churn (2)(3) 1.0 % 0.5 % 1.0 % 0.7
% 1.2 % Overall service margin 80 % 81 % 81 % 80 % 80 %
Overall product margin -11 % -19 % -18 % -15 % -21 % Overall gross
margin 72 % 73 % 73 % 73 % 72 % (1) 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. (2) Business customer service
revenue churn is calculated by dividing the service revenue lost
from business customers (after the expiration of 30-day trial)
during the period by the simple average of business customer
service revenue during the same period and dividing the result by
the number of months in the period. (3) Excludes DXI business
customer service revenue churn for the period ended June 30,
September 30, and December 31, 2015.
8x8, Inc.
RECONCILIATION OF NET INCOME (LOSS) 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, 2015 2014
2015 2014 Net income
(loss) $ (1,680 ) $ 444 $ (4,044 ) $ 1,743 Adjustments: Gain on
patent sale - - - (1,000 ) Non-cash tax adjustments (326 ) 442 361
2,444 Amortization of acquired intangible assets 1,002 554 2,565
1,687 Stock-based compensation expense 4,663 2,634 11,202 6,489
Acquisition related expenses - - 1,043 - Impairment of long-lived
assets 640 - 640 - Non-GAAP net income
$ 4,299 4,074 $ 11,767 $ 11,363
Reconciliation between GAAP and non-GAAP
weighted average shares used in computing basic and diluted net
income (loss) per share:
Denominator for basic calculation 88,289 89,594 88,812 89,107
Effect of dilutive securities: Employee stock options 1,614 1,963
1,595 2,210 Employee restricted purchase rights 1,303 417 1,048 435
Employee stock plan purchases 14 - 10 -
Denominator for diluted calculation 91,220 91,974
91,465 91,752 GAAP net income (loss) per share
- Diluted $ (0.02 ) $ 0.01 $ (0.05 ) $ 0.02 Adjustments: Gain on
patent sale - - - (0.01 ) Non-cash tax adjustments - - 0.01 0.02
Amortization of acquired intangible assets 0.01 0.01 0.03 0.02
Stock-based compensation expense 0.05 0.02 0.12 0.07 Acquisition
related expenses - - 0.01 - Impairment of long-lived assets 0.01
- 0.01 - Non-GAAP net income per share
- Diluted $ 0.05 $ 0.04 $ 0.13 $ 0.12
GAAP net income or loss as a percentage of total
revenue -3 % 1 % -3 % 1 % Adjustments: Gain on patent sale 0 % 0 %
0 % -1 % Non-cash tax adjustments -1 % 1 % 0 % 2 % Amortization of
acquired intangible assets 2 % 1 % 2 % 2 % Stock-based compensation
expense 9 % 7 % 7 % 6 % Acquisition related expenses 0 % 0 % 1 % 0
% Impairment of long-lived assets 1 % 0 % 1 % 0 %
Non-GAAP net income as a percentage of
total revenue
8 % 10 % 8 % 10 %
8x8, Inc. RECONCILIATION OF GAAP
GROSS MARGIN TO NON-GAAP GROSS MARGIN (In thousands,
unaudited) Three Months Ended Nine
Months Ended December 31, December 31,
2015 2014 2015
2014 GAAP gross margin $ 38,368
$
29,869 $ 110,579 $ 85,147 Adjustments: Amortization of acquired
intangible assets 618 206 1,451 618 Impairment of long-lived assets
440 - 440 - Stock-based compensation expense 346 201
828 476 Non-GAAP gross margin $ 39,772
$
30,276 $ 113,298 $ 86,241 GAAP gross
margin as a percentage of total revenue 72 % 72 % 73 % 72 %
Adjustments: Amortization of acquired intangible assets 1 % 1 % 1 %
1 % Impairment of long-lived assets 1 % 0 % 0 % 0 % Stock-based
compensation expense 1 % 0 % 1 % 0 %
Non-GAAP gross margin as a percentage of
total revenue
75 % 73 % 75 % 73 %
8x8, Inc. RECONCILIATION OF
GAAP SERVICE MARGIN TO NON-GAAP SERVICE MARGIN (In
thousands, unaudited) Three Months Ended
Nine Months Ended December 31, December
31, 2015 2014 2015
2014 GAAP service margin $ 39,235
$
30,258 $ 112,709 $ 86,153 Adjustments: Amortization of acquired
intangible assets 618 206 1,451 618 Impairment of long-lived assets
440 - 440 - Stock-based compensation expense 346 201
828 476 Non-GAAP service margin
$
40,639
$
30,665 $ 115,428 $ 87,247 GAAP service
margin as a percentage of service revenue 80 % 80 % 80 % 80 %
Adjustments: Amortization of acquired intangible assets 1 % 1 % 1 %
1 % Impairment of long-lived assets 1 % 0 % 0 % 0 % Stock-based
compensation expense 1 % 0 % 1 % 0 %
Non-GAAP service margin as a percentage of
service revenue
83 % 81 % 82 % 81 %
8x8, Inc. RECONCILIATION OF
GAAP INCOME (LOSS) FROM OPERATIONS TO NON-GAAP INCOME FROM
OPERATIONS (In thousands, unaudited)
Three Months Ended Nine Months Ended December
31, December 31, 2015 2014
2015 2014 GAAP income (loss) from operations $
(2,509 ) $ 825 $ (4,103 ) $ 3,830 Adjustments: Gain on patent sale
- - - (1,000 ) Amortization of acquired intangible assets 1,002 554
2,565 1,687 Stock-based compensation expense 4,663 2,634 11,202
6,489 Acquisition related expenses - - 1,043 - Impairment of
long-lived assets 640 - 640 - Non-GAAP
income from operations $ 3,796 $ 4,013 $ 11,347
$ 11,006 GAAP income or loss from operations
as a percentage of total revenue -5 % 2 % -3 % 3 % Adjustments:
Gain on patent sale 0 % 0 % 0 % -1 % Amortization of acquired
intangible assets 2 % 2 % 2 % 1 % Stock-based compensation expense
9 % 6 % 7 % 6 % Acquisition related expenses 0 % 0 % 1 % 0 %
Impairment of long-lived assets 1 % 0 % 0 % 0 %
Non-GAAP income from operations as a percentage of
total revenue 7 % 10 % 7 % 9 %
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160121006428/en/
8x8, Inc.Joan Citelli, 408-654-0970Director of Investor
RelationsJoan.citelli@8x8.com
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