8x8 Inc. (EGHT) F1Q2013 Results Earnings Call July 18, 2012 4:30 PM ET Executives Joan Citelli – Director, Corporate Communications Bryan Martin – Chairman and CEO Dan Weirich – Chief Financial Officer Analysts Mike Crawford – B. Riley & Company Mike Latimore – Northland Capital George Sutton – Craig Hallum Greg Burns – Sidoti & Company Dmitry Netis – William Blair Mark Zinski – 21st Century Equity Presentation Operator
Expressions of future goals, including financial guidance and similar expressions, including without limitation, expressions using the terminology may, will, believe, expect, plans, anticipates, predicts, forecasts and expressions which reflect something other than historical fact are intended to identify forward-looking statements.These forward-looking statements involve a number of risks and uncertainties, including factors discussed in the risk factor sections of our annual report on Form 10-K, in our quarterly reports on Form 10-Q, and in our other SEC filings and company releases. Our actual results may differ materially from any forward-looking statements due to such risks and uncertainties. The company undertakes no obligation to revise or update any forward-looking statements in order to reflect events or circumstances that may arise after this conference call, except as required by law. Thank you. And with that, I’ll turn the call over to Bryan Martin, Chief Executive Officer and Chairman of the Board of 8x8. Bryan Martin Thank you, Joan, and good afternoon, everyone. I’d like to begin today by providing an overview of our first quarter of fiscal 2013, which will then be followed by Dan’s discussion of the financial details and metrics. We will then open the lines for any questions you may have. 8x8 closed the first fiscal quarter ended June 30th with the achievement of a new milestone, exceeding a run rate of $100 million in annual revenue for the first time. We reported $25.3 million in revenue for the June quarter, a 36% increase in revenue over the same period last year. The trends and metrics regarding the adoption of 8x8 cloud communications services by larger mid-market businesses continued their respective growth in the June quarter. During the quarter, 8x8 added 1,242 net new business customers to its services and we ended the quarter with 29,913 business customers. The average business customer paid $250 in average recurring monthly revenue, compared to $200 a year ago, and they subscribed to 10.1 lines and services, compared to 8.4 services a year ago. The average new customer brought on during the June quarter subscribed to 14 lines and services.
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. Read the rest of this transcript for free on seekingalpha.com