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TheStreet Open House

8x8, Inc. Announces Third Quarter Fiscal 2013 Results

Stocks in this article: EGHT

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

Nine Months Ended
December 31, December 31,
2012 2011 2012   2011  
Service revenue $ 24,958 $ 21,200 $ 72,307 $ 56,234
Product revenue 2,382 2,078 6,656   5,370  
Total revenue 27,340 23,278 78,963   61,604  
 
Operating expenses:
Cost of service revenue 5,473 4,890 16,984 12,764
Cost of product revenue 3,203 2,584 8,585 7,467
Research and development 2,117 1,955 5,973 4,902
Sales and marketing 11,651 9,816 33,202 27,076
General and administrative 2,136 1,481 6,270 4,372
Gain on patent sale - - (11,965 ) -  
Total operating expenses 24,580 20,726 59,049   56,581  
Income from operations 2,760 2,552 19,914 5,023
Other income, net 73 49 90   58  
Income before provision (benefit) for income taxes 2,833 2,601 20,004 5,081
Provision (benefit) for income taxes 913 15 7,726   (284 )
Net income $ 1,920 $ 2,586 $ 12,278   $ 5,365  
 
Net income per share:
Basic $ 0.03 $ 0.04 $ 0.17 $ 0.08
Diluted $ 0.03 $ 0.04 $ 0.16 $ 0.08
 
Weighted average number of shares:
Basic 71,611 69,445 71,197 65,165
Diluted 74,988 73,214 74,483 69,013
   
8x8, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, unaudited)
 
 
December 31, March 31,
2012   2012
ASSETS
Current assets
Cash and cash equivalents $ 44,557 $ 22,426
Investments 1,965 1,942
Accounts receivable, net 3,605 2,279
Inventory 573 581
Deferred tax assets 284 7,730
Other current assets 876 928
Total current assets 51,860 35,886
Property and equipment, net 6,922 3,820
Intangible assets, net 10,551 11,622
Goodwill 25,150 25,150
Deferred tax assets, non-current 54,065 53,977
Other assets 395 278
Total assets $ 148,943 $ 130,733
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 5,170 $ 5,476
Accrued compensation 3,768 3,105
Accrued warranty 422 387
Deferred revenue 952 891
Other accrued liabilities 2,758 2,356
Total current liabilities 13,070 12,215
 
Other liabilities 1,894 68
Total liabilities 14,964 12,283
 
Total stockholders' equity 133,979 118,450
Total liabilities and stockholders' equity $ 148,943 $ 130,733
   
8x8, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
 
Nine Months Ended
December 31,
2012   2011  
Cash flows from operating activities:
Net income $ 12,278 $ 5,365
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 1,816 1,101
Amortization 1,071 431
Stock-based compensation 1,827 1,013
Deferred income tax provision (benefit) 7,359 (336 )
Other 409 130
Changes in assets and liabilities:
Accounts receivable, net (1,700 ) (642 )
Inventory (25 ) 1,596
Other current and noncurrent assets (48 ) 405
Deferred cost of goods sold (18 ) (6 )
Accounts payable (38 ) (2,059 )
Accrued compensation 663 319
Accrued warranty 35 34
Accrued taxes and fees 495 (396 )
Deferred revenue 61 (75 )
Other current and noncurrent liabilities 1,806   (472 )
Net cash provided by operating activities 25,991   6,408  
 
Cash flows from investing activities:
Purchases of property and equipment (5,245 ) (1,743 )
Acquisition of businesses, net of cash acquired -   (713 )
Net cash used in investing activities (5,245 ) (2,456 )
 
Cash flows from financing activities:
Capital lease payments (73 ) (273 )
Repurchase of common stock (285 ) (1,038 )
Proceeds from issuance of common stock, net of issuance costs - (60 )
Proceeds from issuance of common stock under employee stock plans 1,743   949  
Net cash provided by (used in) financing activities 1,385   (422 )
Net increase in cash and cash equivalents 22,131 3,530
 
Cash and cash equivalents at the beginning of the period 22,426   16,474  
Cash and cash equivalents at the end of the period $ 44,557   $ 20,004  
 
8x8, Inc.
Selected Operating Statistics
 
   

Three Months Ended

Dec. 31, 2011

 

March 31, 2012

 

June 30, 2012

 

Sept. 30, 2012

 

Dec. 31, 2012

Gross business customer additions (1) 2,836 2,892 2,943 2,915 2,617
Gross business customer cancellations (less cancellations within 30 days of sign-up) 1,642 1,697 1,458 2,149 1,504
Business customer churn (less cancellations within 30 days of sign-up) (2) 2.0 % 2.0 % 1.7 % 2.4 % 1.6 %
Business service revenue churn 1.9 % 1.6 % 2.3 % 1.0 % 2.6 %
Total business customers (3) 27,677 28,671 29,913 30,498 31,473
 
Business customer average monthly service revenue per customer (4) $ 239 $ 244 $ 250 $ 256 $ 260
 
Overall service margin 77 % 76 % 75 % 76 % 78 %
Overall product margin -24 % -15 % -30 % -22 % -34 %
Overall gross margin 68 % 68 % 67 % 68 % 68 %
 
Business subscriber acquisition cost per service (5) $ 92 $ 99 $ 97 $ 89 $ 98
Average number of subscribed services per business customer 9.4 9.8 10.1 10.6 11.2
Average number of subscribed services per new business customer (6) 14.1 13.6 14.0 14.7 17.0
 
(1) 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) Total new services sold in the period divided by gross business customer additions.
     
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,
2012   2011   2012   2011  
Net income $ 1,920 $ 2,586 $ 12,278 $ 5,365
Gain on patent sale - - (11,965 ) -
Non-cash tax adjustments 780 - 7,359 (336 )
Amortization 357 357 1,071 431
Stock-based compensation expense 765 418 1,827 1,013
Acquisition-related expense - 241 - 727
Facility exit expense -   140   305   140  
Non-GAAP net income $ 3,822   $ 3,742   $ 10,875   $ 7,340  
 
Weighted average number of shares:
Diluted 74,988 73,214 74,483 69,013
 
GAAP net income per share - Diluted $ 0.03 $ 0.04 $ 0.16 $ 0.08
Gain on patent sale - - (0.16 ) -
Non-cash tax adjustments 0.01 - 0.10 -
Amortization - - 0.01 0.01
Stock-based compensation expense 0.01 0.01 0.03 0.01
Acquisition-related expense - - - 0.01
Facility exit expense -   -   0.01   -  
Non-GAAP net income per share - Diluted $ 0.05   $ 0.05   $ 0.15   $ 0.11  
 
 
GAAP net income percentage of revenue 7 % 11 % 16 % 9 %
Gain on patent sale - - -15 % -
Non-cash tax adjustments 3 % - 9 % -1 %
Amortization 1 % 1 % 1 % 1 %
Stock-based compensation expense 3 % 2 % 2 % 2 %
Acquisition-related expense - 1 % - 1 %
Facility exit expense -   1 % 1 % -  
Non-GAAP net income percentage of revenue 14 % 16 % 14 % 12 %




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