Form 8-K 8X8 INC /DE/ For: Jul 22
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
July 22, 2015
(Exact name of registrant as specified in its charter)
2125 O'Nel Drive
San Jose, CA 95131
(Address of principal executive offices including zip code)
(Registrant's telephone number, including area code)
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02. Results of Operations and Financial Condition.
On July 22, 2015, 8x8, Inc., or the Company, issued a press release announcing its financial results for the three months ended June 30, 2015. A copy of this press release is furnished as Exhibit 99.1 to this report. The press release should be read in conjunction with the statements regarding forward-looking statements, which are included in the text of the release.
In addition to disclosing financial results calculated in accordance with U.S. generally accepted accounting principles (GAAP), management also presents information regarding the Company's performance over comparable periods based on net income and net income per share, exclusive of non-cash tax adjustments, stock-based compensation, amortization of acquired intangible assets, and acquisition-related costs. Because management discloses financial measures calculated without taking into account these items, these financial measures are characterized as "non-GAAP financial measures" under Securities and Exchange Commission rules.
Non-cash tax adjustments represented the difference between the amount of taxes the Company expects to pay and the GAAP tax provision each period. Management excludes non-cash tax adjustments because they are non-cash transactions.
Stock-based compensation charges represent non-cash charges related to equity awards granted by the Company. Although these are recurring charges to the Company's operations, management has excluded stock-based compensation expense because it relies on valuations based on future events, such as the market price of the Company's common stock, that are difficult to predict and are affected by market factors that are largely not within the control of the Company. Thus, management believes that excluding these charges facilitates comparisons of the Company's operational performance in different periods, as well as with similarly determined non-GAAP financial measures of comparable companies.
Amortization of acquired intangible assets results from the Company's acquisitions of Contactual, Inc. and Zerigo, Inc. in fiscal 2012, Voicenet Solutions Limited in fiscal 2014, and DXI Group Limited and Quality Software Corporation in fiscal 2016. Amortization of acquired intangible assets was excluded because it was a non-cash expense that the Company does not consider part of ongoing operations when assessing the Company's financial performance.
Acquisition-related expenses are difficult to predict and often one-time. Management believes these expenses are not reflective of the Company's ongoing operations in terms of evaluating comparable period-to-period performance.
Management and the Company's board of directors will continue to analyze these non-GAAP financial measures to assess the business and compare operating results to the Company's performance objectives. For example, the Company's budgeting and planning process utilizes these non-GAAP financial measures, along with other types of financial information.
The Company discloses these non-GAAP financial measures to the public as an additional means by which investors can assess the Company's performance and to identify the Company's operating results for investors on the same basis applied by management. The non-GAAP financial measures disclosed by the Company should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations to those financial statements should be carefully evaluated. The non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. The Company has provided reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures in the press release furnished as Exhibit 99.1.
Moreover, although these non-GAAP financial measures adjust expense, they should not be viewed as a pro forma presentation reflecting the elimination of the underlying share-based compensation programs, which are an important element of the Company's compensation structure. GAAP requires that all forms of share-based payments should be valued and included, as appropriate, in results of operations. Management believes these expenses are a material part of the Company's operating results.
Item 9.01. Financial Statements and Exhibits
99.1 Press Release dated July 22, 2015
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: July 22, 2015
|By: /s/ Mary Ellen Genovese|
|Mary Ellen Genovese|
|Chief Financial Officer and Secretary|
INDEX TO EXHIBITS
For Immediate Release
8x8, Inc. Reports First Quarter Fiscal 2016 Financial Results
Record Revenue of $47.9 Million;
Non-GAAP Net Income of $4.5 Million
SAN JOSE, Calif. - July 22, 2015 -- 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:
- 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.
- 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.
"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 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:
(877) 843-0417, domestic
(855) 859-2056, domestic (Conference ID # 68408520)
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.
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.
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.
# # #
Joan Citelli, Director of Investor Relations
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(In thousands, except per share amounts; unaudited)
|Three Months Ended|
|Operating expenses (1):|
|Cost of service revenue||8,459||6,997|
|Cost of product revenue||4,382||3,969|
|Research and development||5,080||3,406|
|Sales and marketing||23,824||19,160|
|General and administrative||6,068||3,878|
|Total operating expenses||47,813||37,410|
|Income from operations||79||503|
|Other income, net||234||177|
|Income from operations before provision for income taxes||313||680|
|Provision for income taxes||785||672|
|Net income (loss)||$||(472)||$||8|
|Net income (loss) per share:|
|Weighted average number of shares:|
|(1) Amounts include stock-based compensation expense, as follows:|
|Three Months Ended|
|Cost of service revenue||$||219||$||115|
|Cost of product revenue||-||-|
|Research and development||531||314|
|Sales and marketing||1,197||744|
|General and administrative||1,075||674|
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, unaudited)
|June 30,||March 31,|
|Cash and cash equivalents||$||29,298||$||53,110|
|Accounts receivable, net||8,041||6,642|
|Deferred tax assets||3,978||4,454|
|Other current assets||4,534||2,702|
|Total current assets||174,137||191,596|
|Property and equipment, net||11,714||10,248|
|Intangible assets, net||28,510||12,260|
|Non-current deferred tax asset||43,169||43,169|
|LIABILITIES AND STOCKHOLDERS' EQUITY|
|Other accrued liabilities||6,791||5,765|
|Total current liabilities||25,688||21,830|
|Total stockholders' equity||276,439||272,211|
|Total liabilities and stockholders' equity||$||307,032||$||295,624|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
|Three Months Ended|
|Cash flows from operating activities:|
|Net income (loss)||$||(472)||$||8|
|Adjustments to reconcile net income (loss) to net cash|
|provided by operating activities:|
|Amortization of intangible assets||546||567|
|Amortization of capitalized software||456||85|
|Net accretion of discount and amortization of|
|premium on marketable securities||236||192|
|Deferred income tax provision||476||610|
|Changes in assets and liabilities:|
|Accounts receivable, net||(612)||(402)|
|Other current and noncurrent assets||(470)||(175)|
|Deferred cost of goods sold||(53)||157|
|Accrued taxes and fees||492||128|
|Other current and noncurrent liabilities||(1,272)||(447)|
|Net cash provided by operating activities||4,660||4,650|
|Cash flows from investing activities:|
|Purchases of property and equipment||(1,073)||(1,026)|
|Purchase of businesses, net of cash acquired||(23,434)||-|
|Cost of capitalized software||(471)||-|
|Proceeds from maturity of investments||7,820||3,300|
|Sales of investments - available for sale||22,620||18,992|
|Purchase of investments - available for sale||(34,409)||(30,134)|
|Net cash used in investing activities||(28,947)||(8,868)|
|Cash flows from financing activities:|
|Capital lease payments||(54)||(46)|
|Repurchase of common stock||(25)||(48)|
|Proceeds from issuance of common stock under employee stock plans||336||170|
|Net cash provided by financing activities||257||76|
|Effect of exchange rate changes on cash||218||56|
|Net decrease in cash and cash equivalents||(23,812)||(4,086)|
|Cash and cash equivalents at the beginning of the period||53,110||59,159|
|Cash and cash equivalents at the end of the period||$||29,298||$||55,073|
|Selected Operating Statistics|
|Three Months Ended|
|Business customer average monthly service revenue per customer (1)||$ 293||$ 299||$ 305||$ 320||$ 353|
|Monthly business service revenue churn (2)||0.4%||0.9%||1.0%||0.5%||1.0%|
|Overall service margin||80%||79%||80%||81%||81%|
|Overall product margin||-9%||-8%||-11%||-19%||-18%|
|Overall gross margin||71%||72%||72%||73%||73%|
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.
Business customer service revenue churn is calculated by dividing the service revenue lost from business customers (after the expiration of 30-day trial) during the period by the simple average of business customer service revenue during the same period and dividing the result by the number of months in the period.
|RECONCILIATION OF NET INCOME (LOSS) TO NON-GAAP NET INCOME|
|AND NON-GAAP NET INCOME PER SHARE|
|(In thousands, except per share amounts; unaudited)|
|Three Months Ended|
|Net income (loss)||$||(472)||$||8|
|Non-cash tax adjustments||476||610|
|Amortization of acquired intangible assets||546||567|
|Stock-based compensation expense||3,022||1,847|
|Acquisition related expenses||922||-|
|Non-GAAP net income||$||4,494||$||3,032|
Reconciliation between GAAP and non-GAAP weighted average shares used in
computing basic and diluted net income (loss) per share:
|Denominator for basic calculation||88,233||88,592|
|Effect of dilutive securities:|
|Employee stock options||1,709||2,480|
|Employee restricted purchase rights||834||373|
|Denominator for diluted calculation||90,776||91,445|
|GAAP net income (loss) per share - Diluted||$||(0.01)||$||0.00|
|Non-cash tax adjustments||0.01||0.01|
|Amortization of acquired intangible assets||0.01||-|
|Stock-based compensation expense||0.03||0.02|
|Acquisition related expenses||0.01||-|
|Non-GAAP net income per share - Diluted||$||0.05||$||0.03|
|GAAP net income (loss) percentage of revenue||-1%||0%|
|Non-cash tax adjustments||1%||2%|
|Amortization of acquired intangible assets||1%||1%|
|Stock-based compensation expense||6%||5%|
|Acquisition related expenses||2%||-|
|Non-GAAP net income percentage of revenue||9%||8%|