8×8, Inc. Reports Fourth Quarter and Fiscal 2019 Financial Results

Fiscal 2019 Total Revenue Increased 19% year-over-year to $352.6 million

Channel bookings in the fourth fiscal quarter grew 91% year-over-year

Bookings from mid-market and enterprise customers in the fourth fiscal
quarter (greater than $1K MRR) increased 34% year-over-year

SAN JOSE, Calif.–(BUSINESS WIRE)–8×8, Inc. (NYSE: EGHT), a leading cloud provider of voice, video, chat
and contact center solutions for over one million users worldwide, today
reported financial results for the fourth quarter and full-year fiscal
2019 ended March 31, 2019.

Fourth Quarter Fiscal 2019 Financial Results:

  • Total revenue increased 18% year-over-year to $93.8 million. Adjusting
    for constant currency and excluding legacy DXI revenue, total revenue
    increased 20% year-over-year.
  • Service revenue increased 18% year-over-year to $89.1 million.
    Adjusted service revenue increased 22% year-over-year.
  • Service revenue from mid-market and enterprise customers billing
    greater than $1,000 in monthly recurring revenue (MRR), adjusting for
    constant currency and excluding legacy DXI revenue, increased 29%
    year-over-year and represents 63% of total service revenue.
  • Service revenue from mid-market and enterprise customers billing
    greater than $10,000 in MRR, adjusting for constant currency and
    excluding legacy DXI revenue, increased 51% year-over-year and
    represents 30% of total service revenue.
  • GAAP net loss was $28.1 million or $(0.29) per diluted share.
  • Non-GAAP net loss was $8.4 million or $(0.09) per diluted share.

“We finished 2019 with strong execution from our mid-market and channel
teams. We have the only technology platform in the market today that can
deliver both stand-alone and mix-and-match bundling of solutions across
three distinct but complementary high-growth markets of business
communications, contact center, and video collaboration. This positions
8×8 for continued growth in fiscal 2020 and beyond as each of these
markets shifts to the cloud,” said Vik Verma, Chief Executive Officer at
8×8, Inc.

Full-Year Fiscal 2019 Financial Results:

  • Total revenue increased 19% year-over-year to $352.6 million.
    Adjusting for constant currency and excluding legacy DXI revenue,
    total revenue increased 21% year-over-year.
  • Service revenue increased 19% year-over-year to $334.4 million.
    Adjusted service revenue increased 22% year-over-year.
  • Service revenue from mid-market and enterprise customers billing
    greater than $1,000 in MRR, adjusting for constant currency and
    excluding legacy DXI revenue, increased 30% year-over-year and
    represents 62% of total service revenue.
  • Service revenue from mid-market and enterprise customers billing
    greater than $10,000 in MRR, adjusting for constant currency and
    excluding legacy DXI revenue, increased 57% year-over-year and
    represents 28% of total service revenue.
  • GAAP net loss was $88.7 million or $(0.94) per diluted share.
  • Non-GAAP net loss was $21.3 million, or $(0.22) per diluted share.

Additional Fourth Quarter Business Metrics and
Company Highlights:

Business Metrics

  • Bookings from mid-market and enterprise customers (greater than $1K in
    MRR) increased 34% year-over-year, compared with 13% in the prior
    quarter.
  • Channel bookings grew 91% year-over-year, compared with 23% in the
    prior quarter.
  • Average monthly service revenue per business customer was $516,
    compared with $469 in the same period last year, a 10% increase
    year-over-year. Mid-market and enterprise average monthly service
    revenue per business customer was $5,364, compared with $4,899 in the
    same period last year, a 9% year-over-year increase.
  • Issued $287.5 million of 0.50% coupon Convertible Senior Notes due in
    2024. In conjunction with the issuance of the convertible notes, 8×8
    also entered into a capped call transaction to eliminate dilution up
    to a $39.50 stock price, or 100% above the share price at issuance.
  • Cash used in operating activities was $8.2 million. Cash, restricted
    cash and investments were $354.6 million at March 31, 2019, including
    $245.8 million raised from the issuance of new convertible notes.

Please note that going forward the Company will be reporting annual
recurring revenue (ARR) based metrics in place of MRR. Additionally, the
Company is providing new metrics which offer business insights around
customer segmentation and revenue composition. The Company will also be
reporting and guiding to GAAP-based revenue metrics rather than
historical adjusted service revenue metrics which are in constant
currency, exclude legacy DXI and ASC 606 adjustments. The new metrics
are discussed in this press release and included in a newly-published
financial and operating metrics worksheet that is posted on the
Company’s investor relations website.

New ARR-Based and Financial Metrics

As noted above, the Company is introducing additional financial and
operating metrics in order to provide investors with additional
information and insights into the Company’s performance and evolution as
a high-growth SaaS business. Beginning with the reporting of the fourth
quarter of fiscal 2019, the Company is providing information on
customers generating annual recurring revenue (ARR) greater than
$100,000, and related metrics, as follows:

  • TOTAL ARR GREATER THAN $100K: The Company had 408 customers
    that generated ARR greater than $100,000, compared with 283 customers
    in the same period last year, a 44% growth year-over-year.
  • BOOKINGS GREATER THAN $100K ARR: The Company closed 35 new
    customer deals in the fourth quarter of fiscal 2019 with ARR greater
    than $100,000, compared with 27 deals in the same period last year, a
    30% growth year-over-year. These deals represented 35% of total
    bookings for the quarter, compared with 31% of total bookings in the
    same period last year.

The Company is also providing the following new revenue metrics by
customer size for the quarter ended March 31, 2019:

  • Revenue from Small Business customers (defined as companies whose
    revenue is less than $50 million) comprised 64% of ending annual
    recurring revenue (ARR) and grew 13% year-over-year.
  • Revenue from Mid-market customers (defined as companies whose revenue
    is between $50 million and $1 billion) comprised 23% of ending annual
    recurring revenue (ARR) and grew 34% year-over-year.
  • Revenue from Enterprise customers (defined as companies whose revenue
    is more than $1 billion) comprised 13% of ending annual recurring
    revenue (ARR) and grew 54% year-over-year.

Product Innovation Highlights

  • Announced integration of 8×8 Contact Center with Google Cloud’s new
    Contact Center AI to improve the customer service experience and
    productivity of contact centers.
  • Introduced 8×8 X Series in Australia and New Zealand.
  • Added new capabilities to the 8×8 X Series platform including advanced
    speech analytics and real-time dashboards for contact centers.
  • Launched 8×8 PartnerXchange, an online portal that enables channel
    partners to manage their 8×8-related business and drive sales of 8×8
    solutions.
  • Launched 8×8 Flex Hardware Program to help companies take the risk out
    of moving to cloud communications by providing the latest Poly IP
    desktop and conference phones at low monthly lease payments,
    eliminating the need for customers to incur upfront costs.
  • Awarded six new patents in the quarter for a total of 183 patents.

Industry Awards

  • 8×8 recognized with a CRN Tech Innovator Award for X Series in the
    Unified Communications category for combining UC and contact
    technologies into a single cloud-based platform.
  • 8×8 named 2019 Channel Influencer Award winner by Channel Partners and
    Channel Futures.

Reclassification:

The Company reclassified certain expenses on its Consolidated Statement
of Operations effective for the fourth quarter of fiscal 2019. These
expenses are related to servicing our customers and include customer
deployment, technical support, professional services and other costs,
which have been reclassified from Sales & Marketing expense to Cost of
Revenues, Research & Development expenses or General & Administrative
expenses.

The Company believes these classifications provide additional clarity
and insights into the Company’s go-to-market, demand generation and
sales execution activities, and how the total Sales & Marketing spend
drives revenue generation, in light of the recent strategic and
organizational changes impacting the Company’s channel, marketing and
support activities.

The reclassifications did not have any impact on consolidated operating
income (loss), net income (loss) or cash flows. The Company has also
reclassified these expenses for the prior periods presented in order to
provide comparable historical financial information and has included
supplemental tables with this press release.

Giving effect to the reclassifications, Gross and Service Margins for
the fourth quarter of fiscal 2019 are reported as follows:

  • Gross Margin: GAAP gross margin was 63%, compared with 63% in
    the same period last year. Non-GAAP gross margin was 66%, compared
    with 65% in the same period last year.
  • Service Margin: GAAP service margin was 68% compared with 68%
    in the same period last year. Non-GAAP service margin was 71%,
    compared with 71% in the same period last year.

Please note that additional information on the expense reclassifications
are provided in the form of reconciliation tables for fiscal 2018 and
2019 and are included as a supplemental disclosure to this press release.

Financial Outlook:

In the interest of simplicity and alignment with long-term performance,
going forward the Company will no longer report, or provide guidance
with respect to, adjusted revenue metrics but rather provide GAAP-based
revenue metrics and guidance. For fiscal 2020, the Company is providing
the following guidance:

Q1 Fiscal 2020 Guidance:

  • Total Revenue in the range of $95.3 million to $96.3 million,
    representing approximately 15% to 16% year-over-year growth.
  • Service Revenue in the range of $91.0 million to $92.0 million,
    representing approximately 16% to 18% year-over-year growth.
  • Non-GAAP Pre-tax Loss of approximately $17 million.

Full-Year Fiscal 2020 Guidance:

  • Total Revenue of approximately $418.0 million, representing
    approximately 19% year-over-year growth.
  • Service Revenue of approximately $400.0 million, representing
    approximately 20% year-over-year growth.
  • Non-GAAP Pre-tax Loss of approximately $50 million.

We do not reconcile our forward-looking estimates of non-GAAP net income
(loss) to the corresponding GAAP measures of GAAP net income (loss) due
to the significant variability of, and difficulty in making accurate
forecasts and projections with regards to, the various expenses we
exclude. For example, although future hiring and retention needs may be
reasonably predictable, stock-based compensation expense depends on
variables that are largely not within the control of nor predictable by
management, such as the market price of 8×8 common stock, and may also
be significantly impacted by events like acquisitions, the timing and
nature of which are difficult to predict with accuracy. Similarly,
impairments and other non-recurring items are difficult to predict as
they may depend on future events and external factors outside the
Company’s control. The actual amounts of these excluded items could have
a significant impact on the Company’s GAAP net income (loss).
Accordingly, management believes that reconciliations of this
forward-looking non-GAAP financial measure to the corresponding GAAP
measure are not available without unreasonable effort.

Conference Call Information:

Management will host a conference call to discuss earnings results on
May 14, 2019 at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time). The
call is accessible via the following numbers and webcast link:

Dial In: (844) 343-9040 Domestic or (647) 689-5131 International;
Conference ID #1557877

Replay: (800) 585-8367 Domestic or (416) 621-4642 International;
Conference ID #1557877

Webcast: http://investors.8×8.com

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 until May
28, 2019. The webcast will be archived on 8×8’s website for a period of
30 days. For additional information, visit http://investors.8×8.com.

About 8×8, Inc.

8×8, Inc. (NYSE: EGHT) cloud solutions help businesses transform their
customer and employee experience. With one system of engagement for
voice, video, chat and contact center and one system of intelligence on
one technology platform, businesses can now communicate faster and
smarter to exceed the speed of customer expectations. For additional
information, visit www.8×8.com, or
follow 8×8 on LinkedIn, Twitter, and Facebook.

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 the Company’s 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 8×8’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.

The Company has defined non-GAAP net income (loss) as net income (loss)
under GAAP, plus amortization of acquired intangible assets, impairment
charges, stock-based compensation, certain other income and expenses,
and the provision for income taxes. Amortization of acquired intangible
assets and impairment charges are excluded because it is a non-cash
expense that management does not consider part of ongoing operations
when assessing the Company’s financial performance. Stock-based
compensation expense has been excluded because it is a non-cash expense
and relies on valuations based on future conditions and events, such as
the market price of 8×8 common stock, that are difficult to predict
and/or largely not within the control of management. Certain other
income and expense items, such as acquisition-related expenses, certain
severance expenses and expenses for tax or litigation risks, have been
excluded because management considers them one-time events or otherwise
not indicative of trends in the Company’s ongoing operations. The
Company has also excluded non-cash rent expense related to its new
headquarter building because the building remains in the built-out phase
and remains unoccupied.

GAAP tax provision for income taxes has been excluded as management does
not consider taxes in its analysis of the performance of ongoing
operations. Due to the Company’s history of tax losses and full
valuation allowance against deferred tax assets, future GAAP and
Non-GAAP effective tax rates are limited to current taxes in certain US
state and foreign jurisdictions. The Company reports these current taxes
as reduction from Non-GAAP pretax net income to derive Non-GAAP net
income after taxes. The Company defines non-GAAP net income (loss) per
share as non-GAAP net income (loss) divided by the weighted-average
basic or diluted shares outstanding which includes the effect of
potentially dilutive stock options and awards.

Management believes that such exclusions facilitate comparisons to the
Company’s historical operating results and to the results of other
companies in the same industry, and provides investors with information
that management uses in evaluating the Company’s performance on a
quarterly and annual basis.

Although these non-GAAP financial measures adjust expenses, 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 in the
results of operations.

In addition, this release includes financial measures that have been
adjusted as follows:

  • This release includes revenue figures adjusted to exclude revenue by
    the line of products we acquired from DXI. As first reported in the
    third quarter of our 2018 fiscal year, we have de-emphasized the sale
    of DXI’s ContactNow as a stand-alone product, and management therefore
    believes it is useful to exclude this revenue from period-to-period
    comparisons to better depict the relative performance of our core
    business.
  • This release includes revenue figures adjusted for comparison on a
    constant currency basis, when management concluded that the
    elimination of the impact of currency fluctuations between the periods
    being compared would assist with the evaluation of the underlying
    business performance.
  • This release includes revenue figures that excludes adjustments to
    service revenue as a result of the Company adopting Accounting
    Standards Codification Topic 606 (ASC 606), Revenue from Contracts
    with Customers. Management believes the exclusion of ASC 606
    adjustments provides a clearer comparison of service revenue between
    periods presented.

We disclose these non-GAAP financial measures to the public as an
additional means by which investors can assess our performance. These
non-GAAP financial measures may be calculated differently from, and
therefore may not be comparable to, similarly titled measures used by
other companies. 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. This reconciliation has
been provided in the financial statement tables included below in this
press release.

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:

  • customer acceptance and demand for our cloud communication and
    collaboration services,
  • changes in the competitive dynamics of the markets in which we compete,
  • the quality and reliability of our services,
  • customer cancellations and rate of churn,
  • our ability to scale our business,
  • customer acquisition costs,
  • 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 in the United States and foreign countries in which we
    make our software solutions available, and the costs of such
    compliance,
  • the timing, extent and results of sales and use tax audits,
  • 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,
  • timing and extent of improvements in operating results from increased
    spending in marketing, sales, and research and development,
  • introduction and adoption of our cloud software solutions in markets
    outside of the United States,
  • risk of cybersecurity breaches and other unauthorized disclosures of
    customer data,
  • risks related to our senior convertible notes and the related capped
    call transactions,
  • general economic conditions that could adversely affect our business
    and operating results,
  • implementation and effects of new accounting standards and policies in
    our reported financial results, and
  • potential future intellectual property infringement claims and other
    litigation 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 8×8, 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 8×8, 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.

     

8×8, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts; unaudited)

 
Three Months Ended Twelve Months Ended
March 31, March 31,
2019   2018 2019   2018
Service revenue $ 89,060 $ 75,325 $ 334,438 $ 280,430
Product revenue 4,707   4,019   18,148   16,070  
Total revenue 93,767   79,344   352,586   296,500  
 
Cost of revenue and operating expenses:
Cost of service revenue 28,809 23,833 107,192 86,244
Cost of product revenue 5,784 5,826 22,780 20,482
Research and development 18,064 10,427 62,063 36,405
Sales and marketing 49,525 40,422 177,976 133,945
General and administrative 20,365 12,566 73,563 51,851
Impairment of equipment, intangible assets and goodwill       9,469  
Total operating expenses 122,547   93,074   443,574   338,396  
Loss from operations (28,780 ) (13,730 ) (90,988 ) (41,896 )
Other income, net 885   610   2,818   3,693  
Loss from operations before provision for income taxes (27,895 ) (13,120 ) (88,170 ) (38,203 )
Provision for income taxes 236   142   569   66,294  
Net loss $ (28,131 ) $ (13,262 ) $ (88,739 ) $ (104,497 )
 
Net loss per share:
Basic and diluted $ (0.29 ) $ (0.14 ) $ (0.94 ) $ (1.14 )
 
Weighted average number of shares:
Basic and diluted 95,879 92,526 94,533 92,017
     

8×8, Inc.

CONSOLIDATED BALANCE SHEETS

(In thousands, unaudited)

 
March 31, March 31,
2019 2018
ASSETS
Current assets
Cash and cash equivalents $ 276,583 $ 31,703
Short-term investments 69,899 120,559
Accounts receivable, net 20,181 16,296
Deferred sales commission costs 15,601
Other current assets 15,127   10,040  
Total current assets 397,391 178,598
Property and equipment, net 52,835 35,732
Intangible assets, net 11,680 11,958
Goodwill 39,694 40,054
Restricted cash 8,100 8,100
Deferred sales commission costs, noncurrent 33,693
Other assets 2,965   2,767  
Total assets $ 546,358   $ 277,209  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable $ 32,280 $ 23,899
Accrued compensation 18,437 17,412
Accrued taxes 13,862 6,367
Deferred revenue 3,336 2,559
Other accrued liabilities 6,790   6,026  
Total current liabilities 74,705 56,263
 
Convertible senior notes, net 216,035
Other liabilities 6,228   2,172  
Total liabilities 296,968   58,435  
 
Stockholders’ equity:
Common stock 96 93
Additional paid-in capital 506,949 425,790
Accumulated other comprehensive loss (7,353 ) (5,645 )
Accumulated deficit (250,302 ) (201,464 )
Total stockholders’ equity 249,390   218,774  
Total liabilities and stockholders’ equity $ 546,358   $ 277,209  

Contacts

8×8, Inc.
Investor Relations:
Victoria Hyde-Dunn
1-669-333-5200
victoria.hyde-dunn@8×8.com
or
Media:
John
Sun
1-408-692-7054
john.sun@8×8.com

Read full story here

8×8, Inc. Reports Fourth Quarter and Fiscal 2019 Financial Results

Fiscal 2019 Total Revenue Increased 19% year-over-year to $352.6 million

Channel bookings in the fourth fiscal quarter grew 91% year-over-year

Bookings from mid-market and enterprise customers in the fourth fiscal
quarter (greater than $1K MRR) increased 34% year-over-year

SAN JOSE, Calif.–(BUSINESS WIRE)–8×8, Inc. (NYSE: EGHT), a leading cloud provider of voice, video, chat
and contact center solutions for over one million users worldwide, today
reported financial results for the fourth quarter and full-year fiscal
2019 ended March 31, 2019.

Fourth Quarter Fiscal 2019 Financial Results:

  • Total revenue increased 18% year-over-year to $93.8 million. Adjusting
    for constant currency and excluding legacy DXI revenue, total revenue
    increased 20% year-over-year.
  • Service revenue increased 18% year-over-year to $89.1 million.
    Adjusted service revenue increased 22% year-over-year.
  • Service revenue from mid-market and enterprise customers billing
    greater than $1,000 in monthly recurring revenue (MRR), adjusting for
    constant currency and excluding legacy DXI revenue, increased 29%
    year-over-year and represents 63% of total service revenue.
  • Service revenue from mid-market and enterprise customers billing
    greater than $10,000 in MRR, adjusting for constant currency and
    excluding legacy DXI revenue, increased 51% year-over-year and
    represents 30% of total service revenue.
  • GAAP net loss was $28.1 million or $(0.29) per diluted share.
  • Non-GAAP net loss was $8.4 million or $(0.09) per diluted share.

“We finished 2019 with strong execution from our mid-market and channel
teams. We have the only technology platform in the market today that can
deliver both stand-alone and mix-and-match bundling of solutions across
three distinct but complementary high-growth markets of business
communications, contact center, and video collaboration. This positions
8×8 for continued growth in fiscal 2020 and beyond as each of these
markets shifts to the cloud,” said Vik Verma, Chief Executive Officer at
8×8, Inc.

Full-Year Fiscal 2019 Financial Results:

  • Total revenue increased 19% year-over-year to $352.6 million.
    Adjusting for constant currency and excluding legacy DXI revenue,
    total revenue increased 21% year-over-year.
  • Service revenue increased 19% year-over-year to $334.4 million.
    Adjusted service revenue increased 22% year-over-year.
  • Service revenue from mid-market and enterprise customers billing
    greater than $1,000 in MRR, adjusting for constant currency and
    excluding legacy DXI revenue, increased 30% year-over-year and
    represents 62% of total service revenue.
  • Service revenue from mid-market and enterprise customers billing
    greater than $10,000 in MRR, adjusting for constant currency and
    excluding legacy DXI revenue, increased 57% year-over-year and
    represents 28% of total service revenue.
  • GAAP net loss was $88.7 million or $(0.94) per diluted share.
  • Non-GAAP net loss was $21.3 million, or $(0.22) per diluted share.

Additional Fourth Quarter Business Metrics and
Company Highlights:

Business Metrics

  • Bookings from mid-market and enterprise customers (greater than $1K in
    MRR) increased 34% year-over-year, compared with 13% in the prior
    quarter.
  • Channel bookings grew 91% year-over-year, compared with 23% in the
    prior quarter.
  • Average monthly service revenue per business customer was $516,
    compared with $469 in the same period last year, a 10% increase
    year-over-year. Mid-market and enterprise average monthly service
    revenue per business customer was $5,364, compared with $4,899 in the
    same period last year, a 9% year-over-year increase.
  • Issued $287.5 million of 0.50% coupon Convertible Senior Notes due in
    2024. In conjunction with the issuance of the convertible notes, 8×8
    also entered into a capped call transaction to eliminate dilution up
    to a $39.50 stock price, or 100% above the share price at issuance.
  • Cash used in operating activities was $8.2 million. Cash, restricted
    cash and investments were $354.6 million at March 31, 2019, including
    $245.8 million raised from the issuance of new convertible notes.

Please note that going forward the Company will be reporting annual
recurring revenue (ARR) based metrics in place of MRR. Additionally, the
Company is providing new metrics which offer business insights around
customer segmentation and revenue composition. The Company will also be
reporting and guiding to GAAP-based revenue metrics rather than
historical adjusted service revenue metrics which are in constant
currency, exclude legacy DXI and ASC 606 adjustments. The new metrics
are discussed in this press release and included in a newly-published
financial and operating metrics worksheet that is posted on the
Company’s investor relations website.

New ARR-Based and Financial Metrics

As noted above, the Company is introducing additional financial and
operating metrics in order to provide investors with additional
information and insights into the Company’s performance and evolution as
a high-growth SaaS business. Beginning with the reporting of the fourth
quarter of fiscal 2019, the Company is providing information on
customers generating annual recurring revenue (ARR) greater than
$100,000, and related metrics, as follows:

  • TOTAL ARR GREATER THAN $100K: The Company had 408 customers
    that generated ARR greater than $100,000, compared with 283 customers
    in the same period last year, a 44% growth year-over-year.
  • BOOKINGS GREATER THAN $100K ARR: The Company closed 35 new
    customer deals in the fourth quarter of fiscal 2019 with ARR greater
    than $100,000, compared with 27 deals in the same period last year, a
    30% growth year-over-year. These deals represented 35% of total
    bookings for the quarter, compared with 31% of total bookings in the
    same period last year.

The Company is also providing the following new revenue metrics by
customer size for the quarter ended March 31, 2019:

  • Revenue from Small Business customers (defined as companies whose
    revenue is less than $50 million) comprised 64% of ending annual
    recurring revenue (ARR) and grew 13% year-over-year.
  • Revenue from Mid-market customers (defined as companies whose revenue
    is between $50 million and $1 billion) comprised 23% of ending annual
    recurring revenue (ARR) and grew 34% year-over-year.
  • Revenue from Enterprise customers (defined as companies whose revenue
    is more than $1 billion) comprised 13% of ending annual recurring
    revenue (ARR) and grew 54% year-over-year.

Product Innovation Highlights

  • Announced integration of 8×8 Contact Center with Google Cloud’s new
    Contact Center AI to improve the customer service experience and
    productivity of contact centers.
  • Introduced 8×8 X Series in Australia and New Zealand.
  • Added new capabilities to the 8×8 X Series platform including advanced
    speech analytics and real-time dashboards for contact centers.
  • Launched 8×8 PartnerXchange, an online portal that enables channel
    partners to manage their 8×8-related business and drive sales of 8×8
    solutions.
  • Launched 8×8 Flex Hardware Program to help companies take the risk out
    of moving to cloud communications by providing the latest Poly IP
    desktop and conference phones at low monthly lease payments,
    eliminating the need for customers to incur upfront costs.
  • Awarded six new patents in the quarter for a total of 183 patents.

Industry Awards

  • 8×8 recognized with a CRN Tech Innovator Award for X Series in the
    Unified Communications category for combining UC and contact
    technologies into a single cloud-based platform.
  • 8×8 named 2019 Channel Influencer Award winner by Channel Partners and
    Channel Futures.

Reclassification:

The Company reclassified certain expenses on its Consolidated Statement
of Operations effective for the fourth quarter of fiscal 2019. These
expenses are related to servicing our customers and include customer
deployment, technical support, professional services and other costs,
which have been reclassified from Sales & Marketing expense to Cost of
Revenues, Research & Development expenses or General & Administrative
expenses.

The Company believes these classifications provide additional clarity
and insights into the Company’s go-to-market, demand generation and
sales execution activities, and how the total Sales & Marketing spend
drives revenue generation, in light of the recent strategic and
organizational changes impacting the Company’s channel, marketing and
support activities.

The reclassifications did not have any impact on consolidated operating
income (loss), net income (loss) or cash flows. The Company has also
reclassified these expenses for the prior periods presented in order to
provide comparable historical financial information and has included
supplemental tables with this press release.

Giving effect to the reclassifications, Gross and Service Margins for
the fourth quarter of fiscal 2019 are reported as follows:

  • Gross Margin: GAAP gross margin was 63%, compared with 63% in
    the same period last year. Non-GAAP gross margin was 66%, compared
    with 65% in the same period last year.
  • Service Margin: GAAP service margin was 68% compared with 68%
    in the same period last year. Non-GAAP service margin was 71%,
    compared with 71% in the same period last year.

Please note that additional information on the expense reclassifications
are provided in the form of reconciliation tables for fiscal 2018 and
2019 and are included as a supplemental disclosure to this press release.

Financial Outlook:

In the interest of simplicity and alignment with long-term performance,
going forward the Company will no longer report, or provide guidance
with respect to, adjusted revenue metrics but rather provide GAAP-based
revenue metrics and guidance. For fiscal 2020, the Company is providing
the following guidance:

Q1 Fiscal 2020 Guidance:

  • Total Revenue in the range of $95.3 million to $96.3 million,
    representing approximately 15% to 16% year-over-year growth.
  • Service Revenue in the range of $91.0 million to $92.0 million,
    representing approximately 16% to 18% year-over-year growth.
  • Non-GAAP Pre-tax Loss of approximately $17 million.

Full-Year Fiscal 2020 Guidance:

  • Total Revenue of approximately $418.0 million, representing
    approximately 19% year-over-year growth.
  • Service Revenue of approximately $400.0 million, representing
    approximately 20% year-over-year growth.
  • Non-GAAP Pre-tax Loss of approximately $50 million.

We do not reconcile our forward-looking estimates of non-GAAP net income
(loss) to the corresponding GAAP measures of GAAP net income (loss) due
to the significant variability of, and difficulty in making accurate
forecasts and projections with regards to, the various expenses we
exclude. For example, although future hiring and retention needs may be
reasonably predictable, stock-based compensation expense depends on
variables that are largely not within the control of nor predictable by
management, such as the market price of 8×8 common stock, and may also
be significantly impacted by events like acquisitions, the timing and
nature of which are difficult to predict with accuracy. Similarly,
impairments and other non-recurring items are difficult to predict as
they may depend on future events and external factors outside the
Company’s control. The actual amounts of these excluded items could have
a significant impact on the Company’s GAAP net income (loss).
Accordingly, management believes that reconciliations of this
forward-looking non-GAAP financial measure to the corresponding GAAP
measure are not available without unreasonable effort.

Conference Call Information:

Management will host a conference call to discuss earnings results on
May 14, 2019 at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time). The
call is accessible via the following numbers and webcast link:

Dial In: (844) 343-9040 Domestic or (647) 689-5131 International;
Conference ID #1557877

Replay: (800) 585-8367 Domestic or (416) 621-4642 International;
Conference ID #1557877

Webcast: http://investors.8×8.com

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 until May
28, 2019. The webcast will be archived on 8×8’s website for a period of
30 days. For additional information, visit http://investors.8×8.com.

About 8×8, Inc.

8×8, Inc. (NYSE: EGHT) cloud solutions help businesses transform their
customer and employee experience. With one system of engagement for
voice, video, chat and contact center and one system of intelligence on
one technology platform, businesses can now communicate faster and
smarter to exceed the speed of customer expectations. For additional
information, visit www.8×8.com, or
follow 8×8 on LinkedIn, Twitter, and Facebook.

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 the Company’s 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 8×8’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.

The Company has defined non-GAAP net income (loss) as net income (loss)
under GAAP, plus amortization of acquired intangible assets, impairment
charges, stock-based compensation, certain other income and expenses,
and the provision for income taxes. Amortization of acquired intangible
assets and impairment charges are excluded because it is a non-cash
expense that management does not consider part of ongoing operations
when assessing the Company’s financial performance. Stock-based
compensation expense has been excluded because it is a non-cash expense
and relies on valuations based on future conditions and events, such as
the market price of 8×8 common stock, that are difficult to predict
and/or largely not within the control of management. Certain other
income and expense items, such as acquisition-related expenses, certain
severance expenses and expenses for tax or litigation risks, have been
excluded because management considers them one-time events or otherwise
not indicative of trends in the Company’s ongoing operations. The
Company has also excluded non-cash rent expense related to its new
headquarter building because the building remains in the built-out phase
and remains unoccupied.

GAAP tax provision for income taxes has been excluded as management does
not consider taxes in its analysis of the performance of ongoing
operations. Due to the Company’s history of tax losses and full
valuation allowance against deferred tax assets, future GAAP and
Non-GAAP effective tax rates are limited to current taxes in certain US
state and foreign jurisdictions. The Company reports these current taxes
as reduction from Non-GAAP pretax net income to derive Non-GAAP net
income after taxes. The Company defines non-GAAP net income (loss) per
share as non-GAAP net income (loss) divided by the weighted-average
basic or diluted shares outstanding which includes the effect of
potentially dilutive stock options and awards.

Management believes that such exclusions facilitate comparisons to the
Company’s historical operating results and to the results of other
companies in the same industry, and provides investors with information
that management uses in evaluating the Company’s performance on a
quarterly and annual basis.

Although these non-GAAP financial measures adjust expenses, 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 in the
results of operations.

In addition, this release includes financial measures that have been
adjusted as follows:

  • This release includes revenue figures adjusted to exclude revenue by
    the line of products we acquired from DXI. As first reported in the
    third quarter of our 2018 fiscal year, we have de-emphasized the sale
    of DXI’s ContactNow as a stand-alone product, and management therefore
    believes it is useful to exclude this revenue from period-to-period
    comparisons to better depict the relative performance of our core
    business.
  • This release includes revenue figures adjusted for comparison on a
    constant currency basis, when management concluded that the
    elimination of the impact of currency fluctuations between the periods
    being compared would assist with the evaluation of the underlying
    business performance.
  • This release includes revenue figures that excludes adjustments to
    service revenue as a result of the Company adopting Accounting
    Standards Codification Topic 606 (ASC 606), Revenue from Contracts
    with Customers. Management believes the exclusion of ASC 606
    adjustments provides a clearer comparison of service revenue between
    periods presented.

We disclose these non-GAAP financial measures to the public as an
additional means by which investors can assess our performance. These
non-GAAP financial measures may be calculated differently from, and
therefore may not be comparable to, similarly titled measures used by
other companies. 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. This reconciliation has
been provided in the financial statement tables included below in this
press release.

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:

  • customer acceptance and demand for our cloud communication and
    collaboration services,
  • changes in the competitive dynamics of the markets in which we compete,
  • the quality and reliability of our services,
  • customer cancellations and rate of churn,
  • our ability to scale our business,
  • customer acquisition costs,
  • 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 in the United States and foreign countries in which we
    make our software solutions available, and the costs of such
    compliance,
  • the timing, extent and results of sales and use tax audits,
  • 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,
  • timing and extent of improvements in operating results from increased
    spending in marketing, sales, and research and development,
  • introduction and adoption of our cloud software solutions in markets
    outside of the United States,
  • risk of cybersecurity breaches and other unauthorized disclosures of
    customer data,
  • risks related to our senior convertible notes and the related capped
    call transactions,
  • general economic conditions that could adversely affect our business
    and operating results,
  • implementation and effects of new accounting standards and policies in
    our reported financial results, and
  • potential future intellectual property infringement claims and other
    litigation 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 8×8, 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 8×8, 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.

     

8×8, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts; unaudited)

 
Three Months Ended Twelve Months Ended
March 31, March 31,
2019   2018 2019   2018
Service revenue $ 89,060 $ 75,325 $ 334,438 $ 280,430
Product revenue 4,707   4,019   18,148   16,070  
Total revenue 93,767   79,344   352,586   296,500  
 
Cost of revenue and operating expenses:
Cost of service revenue 28,809 23,833 107,192 86,244
Cost of product revenue 5,784 5,826 22,780 20,482
Research and development 18,064 10,427 62,063 36,405
Sales and marketing 49,525 40,422 177,976 133,945
General and administrative 20,365 12,566 73,563 51,851
Impairment of equipment, intangible assets and goodwill       9,469  
Total operating expenses 122,547   93,074   443,574   338,396  
Loss from operations (28,780 ) (13,730 ) (90,988 ) (41,896 )
Other income, net 885   610   2,818   3,693  
Loss from operations before provision for income taxes (27,895 ) (13,120 ) (88,170 ) (38,203 )
Provision for income taxes 236   142   569   66,294  
Net loss $ (28,131 ) $ (13,262 ) $ (88,739 ) $ (104,497 )
 
Net loss per share:
Basic and diluted $ (0.29 ) $ (0.14 ) $ (0.94 ) $ (1.14 )
 
Weighted average number of shares:
Basic and diluted 95,879 92,526 94,533 92,017
     

8×8, Inc.

CONSOLIDATED BALANCE SHEETS

(In thousands, unaudited)

 
March 31, March 31,
2019 2018
ASSETS
Current assets
Cash and cash equivalents $ 276,583 $ 31,703
Short-term investments 69,899 120,559
Accounts receivable, net 20,181 16,296
Deferred sales commission costs 15,601
Other current assets 15,127   10,040  
Total current assets 397,391 178,598
Property and equipment, net 52,835 35,732
Intangible assets, net 11,680 11,958
Goodwill 39,694 40,054
Restricted cash 8,100 8,100
Deferred sales commission costs, noncurrent 33,693
Other assets 2,965   2,767  
Total assets $ 546,358   $ 277,209  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable $ 32,280 $ 23,899
Accrued compensation 18,437 17,412
Accrued taxes 13,862 6,367
Deferred revenue 3,336 2,559
Other accrued liabilities 6,790   6,026  
Total current liabilities 74,705 56,263
 
Convertible senior notes, net 216,035
Other liabilities 6,228   2,172  
Total liabilities 296,968   58,435  
 
Stockholders’ equity:
Common stock 96 93
Additional paid-in capital 506,949 425,790
Accumulated other comprehensive loss (7,353 ) (5,645 )
Accumulated deficit (250,302 ) (201,464 )
Total stockholders’ equity 249,390   218,774  
Total liabilities and stockholders’ equity $ 546,358   $ 277,209  

Contacts

8×8, Inc.
Investor Relations:
Victoria Hyde-Dunn
1-669-333-5200
victoria.hyde-dunn@8×8.com
or
Media:
John
Sun
1-408-692-7054
john.sun@8×8.com

Read full story here

error: Content is protected !!