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TheStreet Open House

8x8, Inc. Announces Second Quarter Fiscal 2013 Results

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 Six Months Ended
September 30, September 30,
2012 2011   2012   2011  
Service revenue $ 24,177 $ 18,013 $ 47,349 $ 35,034
Product revenue 2,194 1,806   4,274   3,292  

Total revenue

26,371 19,819   51,623   38,326  
 
Operating expenses:
Cost of service revenue 5,825 4,059 11,511 7,874
Cost of product revenue 2,672 2,613 5,382 4,883
Research and development 2,030 1,540 3,856 2,947
Sales and marketing 11,010 9,076 21,551 17,260
General and administrative 2,070 1,666 4,134 2,891
Gain on patent sale - -   (11,965 ) -  
Total operating expenses 23,607 18,954   34,469   35,855  
Income from operations 2,764 865 17,154 2,471
Other income (expense), net 9 (11 ) 17   9  
Income before provision (benefit) for income taxes 2,773 854 17,171 2,480
Provision (benefit) for income taxes 1,032 22   6,813   (299 )
Net income $ 1,741 $ 832   $ 10,358   $ 2,779  
 
Net income per share:
Basic $ 0.02 $ 0.01 $ 0.15 $ 0.04
Diluted $ 0.02 $ 0.01 $ 0.14 $ 0.04
 
Weighted average number of shares:
Basic 71,261 63,710 70,989 62,989
Diluted 74,558 67,759 74,210 66,833
 
8x8, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, unaudited)
   
September 30, March 31,
2012   2012
ASSETS
Current assets
Cash and cash equivalents $ 38,108 $ 22,426
Investments 2,009 1,942
Accounts receivable, net 4,153 2,279
Inventory 571 581
Deferred tax assets 1,151 7,730
Other current assets 1,058 928
Total current assets 47,050 35,886
Property and equipment, net 7,225 3,820
Intangible assets, net 10,908 11,622
Goodwill 25,150 25,150
Deferred tax assets, non-current 53,977 53,977
Other assets 409 278
Total assets $ 144,719 $ 130,733
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 5,065 $ 5,476
Accrued compensation 3,047 3,105
Accrued warranty 376 387
Deferred revenue 985 891
Other accrued liabilities 2,438 2,356
Total current liabilities 11,911 12,215
 
Other liabilities 1,820 68
Total liabilities 13,731 12,283
 
Total stockholders' equity 130,988 118,450
Total liabilities and stockholders' equity $ 144,719 $ 130,733
 
8x8, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
   
Six Months Ended
September 30,
2012 2011
Cash flows from operating activities:
Net income $ 10,358 $ 2,779

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation 1,132 716
Amortization 714 74
Stock-based compensation 1,062 595
Deferred income tax provision (benefit) 6,579 (336 )
Other 207 37
Changes in assets and liabilities:
Accounts receivable, net (2,050 ) (438 )
Inventory (19 ) 1,491
Other current and noncurrent assets (258 ) 153
Deferred cost of goods sold (3 ) (14 )
Accounts payable (277 ) (1,737 )
Accrued compensation (58 ) (366 )
Accrued warranty (11 ) 29
Accrued taxes and fees 205 (127 )
Deferred revenue 94 235
Other current and noncurrent liabilities 1,688   151  
Net cash provided by operating activities 19,363   3,242  
 
Cash flows from investing activities:
Purchases of property and equipment (4,730 ) (1,211 )
Acquisition of businesses, net of cash acquired -   (713 )
Net cash used in investing activities (4,730 ) (1,924 )
 
Cash flows from financing activities:
Capital lease payments (59 ) (247 )
Repurchase of common stock (147 ) (1,038 )
Proceeds from issuance of common stock under employee stock plans 1,255   693  
Net cash provided by (used in) financing activities 1,049   (592 )
Net increase in cash and cash equivalents 15,682 726
 
Cash and cash equivalents at the beginning of the period 22,426   16,474  
Cash and cash equivalents at the end of the period $ 38,108   $ 17,200  
 
8x8, Inc.
Selected Operating Statistics
         
Three Months Ended

Sept. 30, 2011

 

Dec. 31, 2011

 

March 31, 2012

 

June 30, 2012

 

Sept. 30, 2012

Gross business customer additions (1) 3,176 2,836 2,892 2,943 2,915
Gross business customer cancellations (less cancellations within 30 days of sign-up) 1,620 1,642 1,697 1,458 2,149
Business customer churn (less cancellations within 30 days of sign-up) (2) 2.1 % 2.0 % 2.0 % 1.7 % 2.4 %
Business service revenue churn 1.9 % 1.9 % 1.6 % 2.3 % 1.0 %
Total business customers (3) 26,727 27,677 28,671 29,913 30,498
 
Business customer average monthly service revenue per customer (4) $ 207 $ 239 $ 244 $ 250 $ 256
 
Overall service margin 77 % 77 % 76 % 75 % 76 %
Overall product margin -45 % -24 % -15 % -30 % -22 %
Overall gross margin 66 % 68 % 68 % 67 % 68 %
 
Business subscriber acquisition cost per service (5) $ 101 $ 92 $ 99 $ 97 $ 89
Average number of services subscribed to per business customer 9.0 9.4 9.8 10.1 10.6
Business customer subscriber acquisition cost (6) $ 906 $ 867 $ 965 $ 980 $ 944
 
(1) Includes 250 customers acquired directly from our acquisitions in the second quarter of fiscal 2012 from Contactual and 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) Business customer subscriber acquisition cost is business subscriber acquisition cost per service times the average number of services subscribed to per business customer.
 
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,
2012 2011 2012 2011
Net income $ 1,741 $ 832 $ 10,358 $ 2,779
Gain on patent sale - - (11,965 ) -
Non-cash tax adjustments 801 - 6,579 (336 )
Amortization 357 48 714 74
Stock-based compensation expense 506 329 1,062 595
Acquisition-related expense - 479 - 486
Facility exit expense 296   -   305   -  
Non-GAAP net income $ 3,701   $ 1,688   $ 7,053   $ 3,598  
 
Weighted average number of shares:
Diluted 74,558 67,759 74,210 66,833
 
GAAP net income per share - Diluted $ 0.02 $ 0.01 $ 0.14 $ 0.04
Gain on patent sale - - (0.16 ) -
Non-cash tax adjustments 0.01 - 0.09 (0.01 )
Amortization - - 0.01 -
Stock-based compensation expense 0.01 - 0.01 0.01
Acquisition-related expense - 0.01 0.01
Facility exit expense 0.01   -   0.01   -  
Non-GAAP net income per share - Diluted $ 0.05   $ 0.02   $ 0.10   $ 0.05  
 
 
GAAP net income percentage of revenue 7 % 4 % 20 % 7 %
Gain on patent sale - - -23 % -
Non-cash tax adjustments 3 % - 13 % -1 %
Amortization 1 % - 1 % -
Stock-based compensation expense 2 % 2 % 2 % 2 %
Acquisition-related expense - 3 % - 1 %
Facility exit expense 1 % -   1 % -  
Non-GAAP net income percentage of revenue 14 % 9 % 14 % 9 %




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