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8x8, Inc. Reports Fourth Quarter and Fiscal 2020 Financial Results

Fiscal 2020 Total Revenue Increased 27% year-over-year to $446.2 million

Total ARR grew 34% in the fiscal fourth quarter



CAMPBELL, CA. - May 12, 2020 - 8x8, Inc. (NYSE: EGHT), a leading integrated cloud communications platform provider, today reported financial results for the fourth quarter and full-year fiscal 2020 ended
March 31, 2020
.

Fourth Quarter Fiscal 2020 Financial Results:

Total revenue increased 29.6% year-over-year to $121.5 million.
Service revenue increased 30.2% year-over-year to $116.0 million.
GAAP Pre-Tax Loss was $50.0 million; Non-GAAP Pre-Tax Loss was $12.7 million.

Full-Year Fiscal 2020 Financial Results:

Total revenue increased 26.6% year-over-year to $446.2 million.
Service revenue increased 27.5% year-over-year to $426.5 million.
GAAP Pre-Tax Loss was $171.5 million; Non-GAAP Pre-Tax Loss was $58.6 million.


"We delivered solid fourth quarter and full-year results exceeding our guidance range, driven by continued momentum in the channel, mid-market and enterprise markets,” said Vik Verma, Chief Executive Officer at 8x8, Inc. "During this unprecedented time, 8x8’s cloud-based communications solutions have seen a tremendous surge in usage and provide a critical service supporting customers, partners and communities to stay connected, productive and responsive in remote work environments.”

“The digital transformation from on-premise to cloud was a business imperative before COVID-19, and even more so now as legacy systems in the marketplace do not meet evolving business continuity requirements. 8x8 is well positioned to remotely deliver an integrated platform for communications, collaboration, contact center and video meetings for long-term business resiliency," added Verma.


Q4 F2020 Business Metrics and Highlights:

Financial and Business Metrics
Bookings greater than $100K ARR: The Company closed a record 42 new customer deals in the fourth quarter of fiscal 2020 with ARR (annual recurring revenue) greater than $100,000. These deals represented 34% of new bookings for the quarter.
Channel bookings grew 63% year-over-year and represented 54% of new bookings.
Contact center bookings represented 30% of total new bookings and grew 76% year-over-year.
Total ARR: The Company's total annual recurring revenue is $426.4 million, an increase of 34% from the same period last year.
Total ARR greater than $100K: The Company had 611 customers that generated ARR greater than $100,000, compared with 408 customers in the same period last year, a 50% year-over-year growth.
Strong ARR growth by customer size:
Small Business customers (defined as companies whose revenue is less than $50 million) comprised 54% of Total ARR which grew 16% year-over-year.

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Mid-market customers (defined as companies whose revenue is between $50 million and $1 billion) comprised 28% of Total ARR which grew 55% year-over-year.
Enterprise customers (defined as companies whose revenue is more than $1 billion) comprised 17% of Total ARR which grew 79% year-over-year.
Average annual service revenue per customer:*
Small business was $4,748, compared with $4,577 in the same period last year, a 4% increase year-over-year.
Mid-market was $42,934, compared with $34,484 in the same period last year, a 25% increase year-over-year.
Enterprise was $174,305 compared with $137,857 in the same period last year, a 26% increase year-over-year.
GAAP service margin was 62% compared with 73% in the same period last year and Non-GAAP service margin was 67%, compared with 76% in the same period last year.*
GAAP gross margin was 53%, compared with 63% in the same period last year. Non-GAAP gross margin was 58%, compared with 66% in the same period last year.
Cash used in operating activities was $31.1 million. Cash and cash equivalents, restricted cash, and investments were $206.0 million at March 31, 2020.

* Please see note on “Reclassification” of Service Revenue.


Product Innovation Highlights

Launched 8x8 Meetings Pro, a paid video conference solution powered by Jitsi, an open source community for secure video meetings technology. Jitsi.org and 8x8 video meetings solutions will run on the Oracle Cloud Infrastructure, which offers optimized cloud security and performance.
Announced 8x8 video meetings solutions are available in the Oracle Cloud Marketplace.
Signed strategic partnership with Virgin Media Business, one of the UK’s largest business data network providers, to accelerate the cloud-adoption of voice, video meetings, chat and contact center solutions to over 50,000 private and public sector businesses.
Introduced 8x8 X Series and 8x8 Contact Center in Canada.
Introduced 8x8 Express in the United Kingdom.
Launched 8x8 Rapid Expansion Program to provide customers with the flexibility to quickly extend cloud communications to newly remote employees with no time or term commitment.
Partnered with Jabra to expand equipment offerings to include thirty-two models across the Jabra headset families can be used with 8x8 X Series, 8x8 Video Meetings and 8x8 Contact Center.
Launched 8x8 Referral Program for individuals, IT consultants, technology advisors and 8x8 customers in the United States, Canada and the United Kingdom to recommend 8x8 solutions.
Awarded 12 new patents in the quarter for a total of 221 patents awarded.


Reclassification:

The Company reclassified certain revenue and cost of revenue on our Consolidated Statement of Operations effective for the fourth quarter of fiscal 2020. Professional services revenue and cost of professional services revenue previously reported in service revenue and cost of service revenue are now reported in other revenue and cost of other revenue. Product revenue and cost of product revenue are also now reported in other revenue and cost of other revenue. The reclassifications did not have any impact on total revenue, consolidated net loss, or cash flows for any of the fiscal years presented. The Company has also reclassified these revenues for the prior periods presented in order to provide comparable historical financial information and has included a reconciliation table for fiscal 2020 and fourth quarter and full-year fiscal 2019 with this press release.


Giving effect to the reclassifications, Service Revenue and Service Margins for the fourth quarter and full-year of fiscal 2020 are reported as follows:
Service revenue increased 29.9% year-over-year to $112.5 million for the fourth quarter of fiscal 2020. Service revenue increased 27.3% year-over-year to $414.1 million for the full-year of fiscal 2020.
In the fourth quarter of fiscal 2020, GAAP service margin was 62% compared with 73% in the same period last year and Non-GAAP service margin was 67%, compared with 76% in the same period last year.
For the full-year of fiscal 2020, GAAP service margin was 65% compared with 74% in the same period last year and Non-GAAP service margin was 69%, compared with 76% in the same period last year.

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Financial Outlook:

The Company is providing guidance for the first quarter of fiscal 2021 ending June 30, 2020. With the uncertainty surrounding the ongoing impact of COVID-19, the Company is not providing full-year fiscal 2021 guidance.


Q1 Fiscal 2021 Guidance:
 
Total Revenue in the range of $120.0 million to $121.0 million, representing approximately 24% to 25% year-over-year growth.
Service Revenue in the range of $112.5 million to $113.5 million, representing approximately 25% to 26% year-over-year growth.
Non-GAAP Pre-tax Loss of approximately $12.0 million.

Please note that Service Revenue guidance is post-reclassification and excludes Professional Services. The historical reporting of Service Revenue, pre-reclassification and includes Professional Services, is anticipated to be in the range of approximately $116.0 million to $117.0 million, representing 26% to 27% year-over-year growth. The Company will not be disclosing the historical reporting of Service Revenue after the first quarter of fiscal 2021.


We do not reconcile our forward-looking estimates of non-GAAP Pre-Tax 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 8x8 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 Pre-Tax 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. All projections (including our guidance for the fiscal year and our path to profitability) are on a non-GAAP basis. See the Financial Metrics Sheet for Fourth Quarter Fiscal Year 2020 posted on the Company's investor relations website for the definition of operational and key business metrics referenced in this press release.


Conference Call Information:

Management will host a conference call to discuss earnings results on May 12, 2020 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 #5336659

Replay: (800) 585-8367 Domestic or (416) 621-4642 International; Conference ID #5336659

Webcast: http://investors.8x8.com

Participants should plan to dial in or log on 15 minutes prior to the start time. A telephonic replay of the call will be available until May 19, 2020. The webcast will be archived on 8x8's website for a period of 30 days. For additional information, visit http://investors.8x8.com.

About 8x8, Inc.

8x8, Inc. (NYSE: EGHT) is transforming the future of business communications as a leading Software-as-a-Service provider of voice, video, chat, contact center, and enterprise-class API solutions powered by one global cloud communications platform. 8x8 empowers workforces worldwide to connect individuals and teams so they can collaborate faster and work smarter. Real-time business analytics and intelligence provide businesses unique insights across all interactions and channels so they can

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delight end-customers and accelerate their business. For additional information, visit www.8x8.com, or follow 8x8 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 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.

The Company has defined non-GAAP Net Income (Loss) as Net Income (Loss) under GAAP, plus amortization of acquired intangible assets, stock-based compensation expense and related employer payroll taxes, acquisition and integration expenses, debt amortization expense, legal and regulatory costs, severance and related termination costs, and the provision for income taxes. Amortization of acquired intangible assets is 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 8x8 common stock, that are difficult to predict and/or largely not within the control of management. The related employer payroll taxes for stock-based compensation are excluded since they are incurred only due to the associated stock-based compensation expense. Certain other income and expense items, such as acquisition and integration-related expenses, certain legal and regulatory costs, certain severance and related termination costs, and expenses for tax, have been excluded because management considers them not indicative of trends in the Company's ongoing operations.

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 states and foreign jurisdictions. The Company reports these current taxes as reduction from Non-GAAP pretax net income (loss) to derive Non-GAAP net income (loss) 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.

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. Any statements that are not statements of historical fact may be deemed to be forward-looking statements. For example, words such as "may," "will," "should," "estimates," "predicts," "potential," "continue," "strategy," "believes," "anticipates," "plans," "expects," "intends," and similar expressions are intended

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to identify forward-looking statements. These forward-looking statements, include but are not limited to: changing industry trends, operational and economic impacts of the COVID-19 pandemic, new product innovations and integrations, market demand for our products, channel growth, sales and marketing activities, strategic partnerships, business strategies, improved customer acquisition and support costs, customer churn, future operating performance and efficiencies, financial outlook, revenue growth, and profitability.

You should not place undue reliance on such forward-looking statements. Actual results could differ materially from those projected in forward-looking statements depending on a variety of factors, including, but not limited to: market acceptance of new or existing services and features we may offer from time to time; customer acceptance and demand for our cloud communication and collaboration services, including voice, contact center, video, messaging, and communication APIs; competitive pressures, and any changes in the competitive dynamics of the markets in which we compete; the impact of economic downturns on us and our customers, including the impacts of the COVID-19 pandemic; the quality and reliability of our services; customer cancellations and rate of churn; 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 defects or bugs in our software; risk of cybersecurity breaches and other unauthorized disclosures of customer data; our ability to maintain the compatibility of our software with third-party applications and mobile platforms; continued compliance with industry standards and regulatory requirements, including privacy, in the United States and foreign countries in which we make our software solutions available, and the costs of such compliance; risks relating to the acquisition and integration of businesses we have acquired (for example, Wavecell Pte. Ltd.) or may acquire in the future, particularly if the acquired business operates in a different market space from us or is based in a region where we do not have significant operations; 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; upfront investments, including the cost to support new strategic initiatives such as our cloud migration program with value-added resellers and other partners, to acquire more customers may not result in additional revenue from new or existing customers; introduction and adoption of our cloud software solutions in markets outside of the United States; risks related to our senior convertible notes and the related capped call transactions; 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 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.



8x8, Inc.

Investor Relations:
Victoria Hyde-Dunn
1-669-333-5200
victoria.hyde-dunn@8x8.com

or

Media:
John Sun
1-408-692-7054
john.sun@8x8.com 



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8x8, Inc. 
CONSOLIDATED STATEMENTS OF OPERATIONS 
(In thousands, except per share amounts; unaudited)

 
 
Three Months Ended
 
Years Ended
 
 
March 31,
 
March 31,
 
 
2020
 
2019
 
2020
 
2019
Service revenue
 
$
112,531

 
$
86,632

 
$
414,078

 
$
325,305

Other revenue 
 
8,947

 
7,135

 
32,159

 
27,281

          Total revenue 
 
121,478

 
93,767

 
446,237

 
352,586

 
 
 
 
 
 
 
 
 
Cost of revenue and operating expenses:
 
 
 
 
 
 
 
 
     Cost of service revenue
 
43,114

 
23,163

 
145,013

 
86,122

     Cost of other revenue 
 
14,507

 
11,430

 
56,215

 
43,850

     Research and development 
 
20,155

 
18,064

 
77,790

 
62,063

     Sales and marketing 
 
65,420

 
49,525

 
240,013

 
177,976

     General and administrative
 
24,436

 
19,010

 
87,025

 
72,208

          Total operating expenses 
 
167,632

 
121,192

 
606,056

 
442,219

Loss from operations 
 
(46,154
)
 
(27,425
)
 
(159,819
)
 
(89,633
)
Other income (expense), net 
 
(3,798
)
 
(470
)
 
(11,717
)
 
1,463

Loss from operations before provision for income taxes
 
(49,952
)
 
(27,895
)
 
(171,536
)
 
(88,170
)
Provision for income taxes
 
148

 
236

 
832

 
569

Net loss 
 
$
(50,100
)
 
$
(28,131
)
 
$
(172,368
)
 
$
(88,739
)
 
 
 
 
 
 
 
 
 
Net loss per share:
 
 
 
 
 
 
 
 
     Basic and diluted
 
$
(0.49
)
 
$
(0.29
)
 
$
(1.72
)
 
$
(0.94
)
 
 
 
 
 
 
 
 
 
Weighted average number of shares:
 
 
 
 
 
 
 
 
     Basic and diluted
 
102,743

 
95,879

 
99,999

 
94,533




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8x8, Inc. 
CONSOLIDATED BALANCE SHEETS 
(In thousands, unaudited)

 
 
March 31, 2020
 
March 31, 2019
ASSETS
 
 

 
 

Current assets
 
 

 
 

Cash and cash equivalents
 
$
137,394

 
$
276,583

Restricted cash, current
 
10,376

 

Short-term investments
 
33,458

 
69,899

     Accounts receivable, net 
 
37,811

 
20,181

Deferred sales commission costs, current 
 
22,444

 
15,601

Other current assets 
 
35,679

 
15,127

          Total current assets 
 
277,162

 
397,391

Property and equipment, net 
 
94,382

 
52,835

Operating lease, right-of-use assets
 
78,963

 

Intangible assets, net
 
24,001

 
11,680

Goodwill
 
128,300

 
39,694

Restricted cash, non-current
 
8,641

 
8,100

Long-term investments
 
16,083

 

Deferred sales commission costs, non-current 
 
53,307

 
33,693

Other assets 
 
19,802

 
2,965

               Total assets
 
$
700,641

 
$
546,358

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 

 
 

Current liabilities
 
 

 
 

Accounts payable 
 
$
40,261

 
$
32,280

Accrued compensation 
 
22,656

 
18,437

Accrued taxes 
 
10,251

 
13,862

Operating lease liabilities, current
 
5,875

 

Deferred revenue 
 
7,105

 
3,336

Other accrued liabilities 
 
37,277

 
6,790

          Total current liabilities 
 
123,425

 
74,705

Operating lease liabilities, non-current
 
92,452

 

Convertible senior notes, net
 
291,537

 
216,035

Other liabilities, non-current
 
2,496

 
6,228

          Total liabilities 
 
509,910

 
296,968

Stockholders' equity:
 
 
 
 
Common stock
 
103

 
96

Additional paid-in capital
 
625,474

 
506,949

Accumulated other comprehensive loss
 
(12,176
)
 
(7,353
)
Accumulated deficit
 
(422,670
)
 
(250,302
)
Total stockholders' equity 
 
190,731

 
249,390

               Total liabilities and stockholders' equity
 
$
700,641

 
$
546,358

 


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8x8, Inc. 
CONSOLIDATED STATEMENTS OF CASH FLOWS 
(In thousands, unaudited)
 
 
Years Ended March 31,
 
 
2020
 
2019
Cash flows from operating activities:
 
 
 
 
Net loss
 
$
(172,368
)
 
$
(88,739
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
 
Depreciation
 
9,360

 
8,748

Amortization of intangible assets
 
8,842

 
6,175

Amortization of capitalized software
 
19,025

 
9,748

Amortization of debt discount and issuance costs
 
14,045

 
1,355

Amortization of deferred sales commission costs
 
19,541

 
14,204

Operating lease expense, net of accretion
 
14,971

 

Non-cash lease expenses
 

 
4,802

Stock-based compensation expense
 
70,878

 
44,508

Provision for doubtful accounts
 
3,479

 
1,115

Other
 
3,522

 
178

Changes in assets and liabilities:
 
 
 
 
     Accounts receivable, net
 
(12,737
)
 
(5,393
)
     Deferred sales commission costs
 
(46,421
)
 
(25,286
)
     Other current and non-current assets
 
(33,137
)
 
(4,337
)
     Accounts payable and accruals
 
2,159

 
17,252

     Deferred revenue
 
4,936

 
802

Net cash used in operating activities
 
(93,905
)
 
(14,868
)
Cash flows from investing activities:
 
 
 
 
Purchases of property and equipment
 
(35,834
)
 
(9,096
)
Cost of capitalized software
 
(31,573
)
 
(25,622
)
Purchases of investments
 
(42,223
)
 
(54,127
)
Sales of investments
 
36,515

 
54,642

Proceeds from maturity of investments
 
25,950

 
50,700

Acquisition of businesses, net of cash acquired
 
(59,129
)
 
(5,625
)
Net cash (used in) provided by investing activities
 
(106,294
)
 
10,872

Cash flows from financing activities:
 
 
 
 
Finance lease payments
 
(315
)
 
(949
)
Tax-related withholding of common stock
 
(6,550
)
 
(7,823
)
Proceeds from issuance of common stock under employee stock plans
 
14,330

 
12,202

Purchase of capped call transactions
 
(9,288
)
 
(33,724
)
Net proceeds from issuance of convertible debt
 
73,918

 
279,532

Net cash provided by financing activities
 
72,095

 
249,238

Effect of exchange rate changes on cash
 
(168
)
 
(362
)
Net increase (decrease) in cash, cash equivalents and restricted cash
 
(128,272
)
 
244,880

Cash, cash equivalents and restricted cash, beginning of period
 
284,683

 
39,803

Cash, cash equivalents and restricted cash, end of period
 
$
156,411

 
$
284,683

 

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8x8, Inc.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(In thousands, except per share amounts; unaudited)

    
 
 
Three Months Ended
 
Years Ended
Reconciliation of GAAP to Non-GAAP Expenses:
 
March 31, 2020
 
March 31, 2019
 
March 31, 2020
 
March 31, 2019
GAAP cost of service revenue 
 
$
43,114

 
 
 
$
23,163

 
 
 
$
145,013

 
 
 
$
86,122

 
 
Amortization of acquired intangible assets
 
(1,818
)
 
 
 
(1,310
)
 
 
 
(6,727
)
 
 
 
(4,874
)
 
 
Stock-based compensation expense and related employer payroll taxes(1)
 
(1,622
)
 
 
 
(1,061
)
 
 
 
(5,449
)
 
 
 
(3,752
)
 
 
Severance and related termination costs(2)
 
(2,182
)
 
 
 

 
 
 
(2,744
)
 
 
 

 
 
Non-GAAP cost of service revenue 
 
$
37,492

 
 
 
$
20,792

 
 
 
$
130,093

 
 
 
$
77,496

 
 
Non-GAAP service margin (as a percentage of service revenue)
 
$
75,039

 
66.7
 %
 
$
65,840

 
76.0
 %
 
$
283,985

 
68.6
 %
 
$
247,809

 
76.2
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP cost of other revenue 
 
$
14,507

 
 
 
$
11,430

 
 
 
$
56,215

 
 
 
$
43,850

 
 
Stock-based compensation expense and related employer payroll taxes(1)
 
(728
)
 
 
 
(499
)
 
 
 
(3,122
)
 
 
 
(1,775
)
 
 
Acquisition and integration costs
 

 
 
 

 
 
 
(6
)
 
 
 

 
 
Severance and related termination costs(2)
 
(287
)
 
 
 

 
 
 
(716
)
 
 
 

 
 
Non-GAAP cost of other revenue
 
$
13,492

 
 
 
$
10,931

 
 
 
$
52,371

 
 
 
$
42,075

 
 
Non-GAAP other margin (as a percentage of other revenue)
 
(4,545
)
 
(50.8
)%
 
(3,796
)
 
(53.2
)%
 
(20,212
)
 
(62.9
)%
 
(14,794
)
 
(54.2
)%
 
 
 
 
 

 
 
 
 
 
 
 
 

 
 
 
 
Non-GAAP gross margin (as a percentage of revenue)
 
$
70,494

 
58.0
 %
 
$
62,044

 
66.2
 %
 
$
263,773

 
59.1
 %
 
$
233,015

 
66.1
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP research and development 
 
$
20,155

 
 
 
$
18,064

 
 
 
$
77,790

 
 
 
$
62,063

 
 
Stock-based compensation expense and related employer payroll taxes(1)
 
(5,856
)
 
 
 
(3,726
)
 
 
 
(20,173
)
 
 
 
(12,313
)
 
 
Acquisition and integration costs
 
(95
)
 
 
 

 
 
 
(225
)
 
 
 

 
 
Severance and related termination costs(2)
 
(2,722
)
 
 
 

 
 
 
(3,559
)
 
 
 

 
 
Non-GAAP research and development (as a percentage of revenue)
 
$
11,482

 
9.5
 %
 
$
14,338

 
15.3
 %
 
$
53,833

 
12.1
 %
 
$
49,750

 
14.1
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP sales and marketing  
 
$
65,420

 
 
 
$
49,525

 
 
 
$
240,013

 
 
 
$
177,976

 
 
     Amortization of acquired intangible assets
 
(875
)
 
 
 
(314
)
 
 
 
(2,115
)
 
 
 
(1,301
)
 
 
Stock-based compensation expense and related employer payroll taxes(1)
 
(5,688
)
 
 
 
(3,549
)
 
 
 
(20,534
)
 
 
 
(11,951
)
 
 
Acquisition and integration costs
 
(4
)
 
 
 

 
 
 
(11
)
 
 
 

 
 
Severance and related termination costs(2)
 
(2,544
)
 
 
 
(203
)
 
 
 
(4,437
)
 
 
 
(516
)
 
 
Non-GAAP sales and marketing (as a percentage of revenue)
 
$
56,309

 
46.4
 %
 
$
45,459

 
48.5
 %
 
$
212,916

 
47.7
 %
 
$
164,208

 
46.6
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP general and administrative  
 
$
24,436

 
 
 
$
19,010

 
 
 
$
87,025

 
 
 
$
72,208

 
 
Stock-based compensation expense and related employer payroll taxes(1)
 
(5,832
)
 
 
 
(4,098
)
 
 
 
(22,818
)
 
 
 
(14,717
)
 
 
Acquisition and integration costs
 
(162
)
 
 
 

 
 
 
(2,371
)
 
 
 

 
 
Legal and regulatory costs
 
(117
)
 
 
 
(2,971
)
 
 
 
730

 
 
 
(13,727
)
 
 
Severance and related termination costs(2)
 
(2,682
)
 
 
 
(617
)
 
 
 
(4,661
)
 
 
 
(1,202
)
 
 
Non-GAAP general and administrative (as a percentage of revenue)
 
$
15,643

 
12.9
 %
 
$
11,324

 
12.1
 %
 
$
57,905

 
13.0
 %
 
$
42,562

 
12.1
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

9



 
 
Three Months Ended
 
Years Ended
Reconciliation of GAAP to Non-GAAP Expenses:
 
March 31, 2020
 
March 31, 2019
 
March 31, 2020
 
March 31, 2019
GAAP other income (expense), net
 
$
(3,798
)
 
 
 
$
(470
)
 
 
 
$
(11,717
)
 
 
 
$
1,463

 
 
Debt amortization expense
 
4,058

 
 
 
1,355

 
 
 
14,045

 
 
 
1,355

 
 
Non-GAAP other income, net (as a
percentage of revenue)
 
$
260

 
0.2
 %
 
$
885

 
0.9
 %
 
$
2,328

 
0.5
 %
 
$
2,818

 
0.8
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of GAAP Net Loss to Non-GAAP Net Loss:
 
 

 
 

 
 
 
 
 
 

 
 

 
 
 
 
GAAP net loss
 
$
(50,100
)
 
 
 
$
(28,131
)
 
 
 
$
(172,368
)
 
 
 
$
(88,739
)
 
 
Amortization of acquired intangible assets
 
2,693

 
 
 
1,624

 
 
 
8,842

 
 
 
6,175

 
 
Stock-based compensation expense and related employer payroll taxes(1)
 
19,726

 
 
 
12,933

 
 
 
72,096

 
 
 
44,508

 
 
Acquisition and integration costs
 
261

 
 
 

 
 
 
2,613

 
 
 

 
 
Legal and regulatory costs
 
117

 
 
 
2,971

 
 
 
(730
)
 
 
 
13,727

 
 
Severance and related termination costs(2)
 
10,417

 
 
 
820

 
 
 
16,117

 
 
 
1,718

 
 
Debt amortization expense
 
4,058

 
 
 
1,355

 
 
 
14,045

 
 
 
1,355

 
 
Provision for income taxes
 
148

 
 
 
236

 
 
 
832

 
 
 
569

 
 
Non-GAAP net loss before taxes (as a percentage of revenue)
 
$
(12,680
)
 
(10.4
)%
 
$
(8,192
)
 
(8.7
)%
 
$
(58,553
)
 
(13.1
)%
 
$
(20,687
)
 
(5.9
)%
     Non-GAAP tax expense
 
148

 
 
 
236

 
 
 
832

 
 
 
569

 
 
Non-GAAP net loss after taxes (as a percentage of revenue)
 
$
(12,828
)
 
(10.6
)%
 
$
(8,428
)
 
(9.0
)%
 
$
(59,385
)
 
(13.3
)%
 
$
(21,256
)
 
(6.0
)%
 
 
 

 
 

 
 
 
 
 
 

 
 

 
 
 
 
Shares used in computing non-GAAP net loss per share:
 
 

 
 

 
 
 
 
 
 

 
 

 
 
 
 
     Basic and diluted
 
102,743

 
 
 
95,879

 
 
 
99,999

 
 
 
94,533

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP net loss per share - Diluted
 
$
(0.49
)
 
 
 
$
(0.29
)
 
 
 
$
(1.72
)
 
 
 
$
(0.94
)
 
 
Non-GAAP net loss before taxes per share - Diluted
 
$
(0.12
)
 
 
 
$
(0.09
)
 
 
 
$
(0.59
)
 
 
 
$
(0.22
)
 
 
Non-GAAP net loss after taxes per share - Diluted
 
$
(0.12
)
 
 
 
$
(0.09
)
 
 
 
$
(0.59
)
 
 
 
$
(0.22
)
 
 
 
 
 
 
 
(1) Beginning in the three months ended December 31, 2019, employer payroll taxes are included as a non-GAAP reconciling item.
(2) In the fourth quarter of fiscal 2020, the Company committed to an operational plan to adjust our cost structure, reorganize departments, and remove redundant functions across the Company. Severance and related termination costs in fiscal 2020 included severance cost of $5.9 million and transition cost of $1.0 million related to this initiative.

10



8x8, Inc.
NON-GAAP FINANCIAL MEASURES RECLASSIFICATIONS
(In thousands, unaudited)
 
As Previously Reported
 
 
 
Three Months Ended
 
Year Ended
 
 
Three Months Ended
 
 
 
March 31,
 
March 31,
 
June 30,
 
September 30,
 
December 31,
 
March 31,
 
2019
 
2019
 
2019
 
2019
 
2019
 
2020
REVENUE
 
 
 
 
 
 
 
 
 
 
 
Pre-Reclassification
 
 
 
 
 
 
 
 
 
 
 
Service revenue
$
89,060

 
$
334,438

 
$
92,372

 
$
104,529

 
$
113,566

 
$
115,995

Product revenue
4,707

 
18,148

 
4,303

 
4,988

 
5,001

 
5,483

Total revenue
93,767

 
352,586

 
96,675

 
109,517

 
118,567

 
121,478

 
 
 
 
 
 
 
 
 
 
 
 
Reclassifications
 
 
 
 
 
 
 
 
 
 
 
Service revenue(1)
$
(2,428
)
 
$
(9,133
)
 
$
(2,533
)
 
$
(3,184
)
 
$
(3,203
)
 
$
(3,464
)
Product revenue(2)
(4,707
)
 
(18,148
)
 
(4,303
)
 
(4,988
)
 
(5,001
)
 
(5,483
)
Other revenue
7,135

 
27,281

 
6,836

 
8,172

 
8,204

 
8,947

Total revenue

 

 

 

 

 

 
 
 
 
 
 
 
 
 
 
 
 
Post-Reclassification
 
 
 
 
 
 
 
 
 
 
 
Service revenue
$
86,632

 
$
325,305

 
$
89,839

 
$
101,345

 
$
110,363

 
$
112,531

Other revenue
7,135

 
27,281

 
6,836

 
8,172

 
8,204

 
8,947

Total revenue
93,767

 
352,586

 
96,675

 
109,517

 
118,567

 
121,478

 
 
 
 
 
 
 
 
 
 
 
 
COST OF REVENUE
 
 
 
 
 
 
 
 
 
 
 
Pre-Reclassification
 
 
 
 
 
 
 
 
 
 
 
Cost of service revenue
$
25,939

 
$
96,791

 
28,926

 
$
39,042

 
$
44,393

 
$
44,745

Cost of product revenue
5,784

 
22,780

 
5,724

 
6,502

 
6,893

 
6,239

Non-GAAP cost of revenue
31,723

 
119,571

 
34,650

 
45,544

 
51,286

 
50,984

 
 
 
 
 
 
 
 
 
 
 
 
Reclassifications
 
 
 
 
 
 
 
 
 
 
 
Cost of service revenue(1)
$
(5,147
)
 
$
(19,295
)
 
$
(5,933
)
 
$
(6,483
)
 
$
(7,344
)
 
$
(7,253
)
Cost of product revenue(2)
(5,784
)
 
(22,780
)
 
(5,724
)
 
(6,502
)
 
(6,893
)
 
(6,239
)
Cost of other revenue
10,931

 
42,075

 
11,657

 
12,985

 
14,237

 
13,492

Non-GAAP cost of revenue

 

 

 

 

 

 
 
 
 
 
 
 
 
 
 
 
 
Post-Reclassification
 
 
 
 
 
 
 
 
 
 
 
Cost of service revenue
$
20,792

 
$
77,496

 
$
22,993

 
$
32,559

 
$
37,049

 
$
37,492

Cost of other revenue
10,931

 
42,075

 
11,657

 
12,985

 
14,237

 
13,492

Non-GAAP cost of revenue
31,723

 
119,571

 
34,650

 
45,544

 
51,286

 
50,984

 
 
 
 
 
(1) Represents the reclassification of professional services revenue and cost of professional services revenue previously reported in service revenue and cost of service revenue to now be reported in other revenue and cost of other revenue.
(2) Represents the reclassification of product revenue and cost of product revenue previously reported on a standalone basis to now be reported in other revenue and cost of other revenue.

11

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