8x8, Inc. Reports First Quarter Fiscal 2016 Financial Results

SAN JOSE, Calif.--(BUSINESS WIRE)--8x8, Inc. (NASDAQ:EGHT), a provider of cloud-based unified communications and contact center solutions, today reported financial results for the first quarter fiscal 2016 ended June 30, 2015.

First Quarter Fiscal 2016 Financial Highlights:

• Total revenue of $47.9 million, including a one-time $1.2 million accelerated technology license payment, increased 26% year over year; service revenue of $44.2 million increased 29% year over year.
• Excluding the one-time technology license payment:

- Total revenue increased 23% year over year to $46.7 million.

- Service revenue increased 25% year over year to $43.0 million.

- Service revenue from midmarket customers increased 40% year over year, representing 45% of total service revenue.

• GAAP net loss for the first quarter of fiscal 2016 was ($472,000), or ($0.01) per diluted share, compared with GAAP net income of $8,000, or $0.00 per diluted share, in the first quarter of fiscal 2015.
• Non-GAAP net income was $4.5 million, $0.05 per diluted share, or 9% of revenue, for the quarter, compared with $3.0 million, $0.03 per diluted share, for the same period last year. Non-GAAP net income, excluding the accelerated technology license payment, was $3.7 million, $0.04 per diluted share, or 8% of revenue.
• Average monthly service revenue per business customer increased 20% to $353, compared with $293 in the same period last year.

“I am pleased to report the completion of a very successful first quarter start to 8x8’s fiscal 2016,” said 8x8 CEO Vik Verma. “In addition to closing the acquisitions of DXI and QSC, which both broaden our geographic footprint in the UK and Europe and expand our cloud communications portfolio, we posted a 38% increase in new MRR sold to mid-market customers and by channel sales teams. We also further enhanced our contact center capabilities with focused R&D to deliver the most complete platform of cloud-based communications services available to the enterprise.”

“We are maintaining our previously stated guidance of annual revenue for fiscal 2016 in the $202 million to $206 million range, representing a 24% - 27% year over year increase, with non-GAAP net income as a percentage of revenue of approximately 6% for the full fiscal year.”

Additional First Quarter and Year-to-Date Highlights:

• New monthly recurring revenue (MRR) sold in the first quarter of fiscal 2016 to mid-market customers and by channel sales teams increased 38% year-over-year.
• GAAP Service margin was 81%, compared with 80% in the same period a year ago; overall gross margin was 73%, compared with 71% in the same year ago period.
• Monthly business service revenue churn was 1.0%, compared with 0.4% in the same period last year.
• Cash, cash equivalents and investments was $157 million in the first quarter of fiscal 2016, compared with $177.1 million in the previous quarter; cash flow from operating activities was $4.7 million in the first quarter of fiscal 2016.
• Acquired privately held DXI Ltd., a UK-based leader and innovator in cloud-based outbound and blended contact center solutions.
• Purchased certain assets of privately held Quality Software Corporation (QSC), an innovative developer of cloud-native quality management capabilities and analytics.
• Launched first cloud-based, single-platform Global Contact Center solution.
• Announced Virtual Contact Center Analytics, a powerful new solution that provides unique insights into the customer experience, increased contact center efficiencies and advanced workflow optimization.
• Awarded #1 ranking in the IHS Infonetics' Annual "Cloud UC Service Provider North American Scorecard" report for the second consecutive year.
• Awarded three new U.S. patents related to conference technologies, contact center and communication technologies during the fiscal first quarter.

Conference Call Information:

Management will host a conference call to discuss these results and other matters related to the Company’s business today, July 22, 2015, at 4:30 pm ET. The call is accessible via the following numbers and webcast links:

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 July 28, 2015. 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 reported, in accordance with NASDAQ Listing Rule 5635(c)(4), that employment inducement awards were granted to 18 new employees in connection with their recent hiring. The employees received restrictive stock units (“RSUs”) for 68,170 shares of the Company’s Common Stock and 50,712 options, subject to their continued employment and other conditions.

About 8x8, Inc.

8x8, Inc. (NASDAQ:EGHT) is the trusted provider of secure and reliable cloud-based unified communications and virtual contact center solutions to more than 40,000 businesses operating in over 40 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 web conferencing. For additional information, visit www.8x8.com, or www.8x8.com/UK or connect with 8x8 on Google+, Facebook, LinkedIn and Twitter.

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 below. A reconciliation of non-GAAP financial measures to their most directly comparable GAAP measures 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 non-cash tax adjustments, stock-based compensation, amortization of acquired intangible assets and acquisition-related costs. Non-cash tax adjustments represent the differences 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 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, 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.