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8x8's CEO Discusses F1Q2013 Results - Earnings Call Transcript

The growing adoption of our services in the SMB market was recently substantiated by industry research firm Frost & Sullivan in a newly published report that identified 8x8 as the hosted IP telephony and UC services provider with the largest installed customer base.

8x8 also announced several key customer wins in the quarter including McLarens Young International, a large insurance industry service provider, Irving Materials, the largest privately held construction company in the United States and transportation industry services provider, TMW Systems. Our channel partner program also expanded during the quarter with 94 partners under contract as of June 30, 2012.

Product margins modestly declined from negative 15% in the March quarter to negative 30% in the June quarter. Gross margin was 67% in the first fiscal quarter with service margin coming in at 75%.

Cash, cash equivalents and investments were $38.2 million at June 30, 2012, the highest level of liquidity on the company’s balance sheet since it began operating as a service provider. As we always like to point out, our balance sheet contains no debt.

A significant portion of the cash increase on our balance sheet can be attributed to the sale of a family of 8x8’s United States legacy patents to a third-party during the quarter, and Dan is going to have additional details on the accounting treatment of this transaction in just a moment.

We were also pleased to report the issuance of two new patents during the quarter related to contact and call center, as well as videoconferencing technologies. 8x8 has been awarded 81 United States patents covering a variety of voice and video communications, signaling, processing and storage technologies, and we are pleased to report a significant success in monetizing a subset of the company's portfolio of intellectual property at the end of June.

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