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FOR IMMEDIATE RELEASE
8x8, Inc. Reports Third Quarter Fiscal 2018 Financial Results
Service revenue increased 20% year-over-year to $71.9 million
Mid-Market and Enterprise Service Revenue grew 28%
SAN JOSE, CA. — January 25, 2018 — 8x8, Inc. (NYSE:EGHT), a leading provider of global cloud communications and customer engagement solutions, today reported financial results for the third quarter of fiscal 2018 ended December 31, 2017.
Third Fiscal Quarter 2018 Financial Results:
- Revenue: Service revenue increased 20% year-over-year to $71.9 million. Adjusting for constant currency and the discontinued revenue from the non-core, voice broadcasting segment of DXI, service revenue increased 19%. Total revenue increased 19% year-over-year to $75.6 million. Adjusting for constant currency and the discontinued revenue from the non-core, voice broadcasting segment of DXI, total revenue increased 18%.
- Service revenue from mid-market and enterprise customers increased 28% year-over-year and represented 59% of total service revenue.
- GAAP net income: GAAP net loss was $88.5 million or ($0.96) per diluted share, inclusive of two special items. The special items were: 1) $71 million of non-cash, non-recurring tax charges as a result of the Tax Cuts and Jobs Act and the Company's decision to record a valuation allowance against its deferred tax assets; and 2) $9 million non-cash, non-recurring impairment of goodwill and other assets related to UK EasyContactNow.
- Non-GAAP net income, before taxes, was $1.6 million, or $0.02 per diluted share, excluding special items.
"Our strong third quarter results demonstrate that we are executing on our strategic initiatives. Mid-market and enterprise bookings grew 40% year-over-year," said Vik Verma, Chief Executive Officer at 8x8, Inc. "Additionally, we believe CIOs are increasingly demanding integrated enterprise communications solutions for their employees, customers and partners. 49% of new monthly recurring revenue booked from mid-market and enterprise segments came from customers purchasing our integrated UCaaS and CCaaS solutions. Thanks to our ownership of these underlying technologies, 8x8 is uniquely qualified to deliver these solutions for CIOs today and as their needs evolve in the future."
Additional Business Metrics and Highlights:
- Margins: GAAP gross margin was 78%, compared with 77% in the same period last year. Non-GAAP gross margin was 79%, compared with 79% in the same period last year. GAAP service margin was 83%, compared with 83% in the same period last year. Non-GAAP service margin was 84%, compared with 84% in the same period last year.
- Cash Flow: Cash generated from operating activities was $8.2 million. Cash, cash equivalents and investments were $161 million at December 31, 2017.
- New monthly recurring revenue (MRR) booked from mid-market and enterprise customers increased 40% year-over-year and comprised 65% of total bookings in the third fiscal quarter.
- 49% of new monthly recurring revenue booked from mid-market and enterprise customers purchased 8x8's integrated UCaaS and CCaaS solutions.
- Average monthly service revenue per business customer (ARPU): ARPU per mid-market and enterprise customers were $4,765, compared with $4,412 in the same period last year. ARPU per business customer grew to $454, compared with $414 in the same period last year.
- Churn: Gross monthly business service revenue churn on an organic basis of 0.4%, compared with 1.0% in the same period a year ago.
- Synergy Research Group named 8x8 as the global leader for the eleventh consecutive quarter for subscriber seats in the combined mid-market and enterprise segments of the UCaaS market, which is defined as cloud telephony, conferencing, collaboration and messaging.
- 8x8 was awarded 6 new communications patents for a total of 150 patents awarded to date.
- Share Repurchase: Repurchased 298,713 shares of common stock at an average price of $12.81 per share, for a total of $3.8 million, under the Company's approved share repurchase program.
Financial Outlook:For the full fiscal 2018 year, 8x8 has revised its financial outlook:
- Total revenue in the range of $293 million to $294 million, representing approximately 16% year-over-year increase, compared with previous guidance of $292 million to $294 million, representing an approximately 15% to 16% year-over-year increase.
- Service revenue in the $278 million to $279 million range, representing approximately 18% year-over-year increase, up from previous guidance of $275 million to $277 million range, representing an 17% year-over-year increase.
- Adjusting for the discontinued revenue from the non-core, voice broadcasting segment of DXI, service revenue growth in the range of 19% and total revenue growth in the range of 16% to 17%, compared with previous guidance of service revenue growth in the range of 17% to 18% and total revenue growth in the range of 16% to 17%.
Non-GAAP Pre-tax Income:
- Non-GAAP pre-tax net income of approximately $9 million or 3% of revenue.
- Due to the Company's full valuation allowance against its deferred tax assets, tax expense reflects current taxes in US states and foreign jurisdictions. The estimated non-GAAP effective tax rate is approximately 3% for fiscal year 2018 and excludes the one-time impact of recording the valuation allowance.
The Company does not reconcile its forward-looking non-GAAP net income 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 net income (loss). Accordingly, management believes that reconciliations of this forward-looking non-GAAP financial measure to the corresponding GAAP measure is not available without unreasonable effort.
8x8 also announced that on January 22, 2018, it awarded restricted stock units (RSUs) representing the right to acquire an aggregate of 456,791 shares of the Company's common stock and non-qualified options to acquire an aggregate of 181,691 shares of common stock to 91 new employees under the 8x8, Inc. 2017 New Employee Inducement Incentive Plan. In addition, a newly hired senior vice president (SVP) received RSUs representing the right to acquire 48,960 shares of common stock and performance share units (PSUs) representing the right to receive, at target, 28,654 shares of common stock. Each stock option is exercisable at a price of $17.35 per share, which was the closing price of a share of the company's Common Stock on the grant date. Each of the awards is subject to vesting pursuant to the terms of the plan and the recipient's award agreement, including a requirement that the recipient be employed as of the applicable vesting date. A portion of the RSUs awarded to the newly hired SVP vest in full six months from the recipient's employment commencement date. Other terms of the awards are substantially the same as those applicable to RSUs, PSUs and options previously granted by the Company to new employees during its current fiscal year.
These equity awards were approved unanimously by the Compensation Committee of the Board of Directors. Each award was granted as an inducement material to the recipient's entering into employment with 8x8, in accordance with Section 303a.08 of the New York Stock Exchange listing and governance rules.
Conference Call Information:
Management will host a conference call to discuss earnings results on January 25, 2018 at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time). The call is accessible via the following numbers and webcast links:
(877) 843-0417 Domestic or (408) 427-3791 International; Conference ID #2297478
(855) 859-2056 Domestic or (404) 537-3406 International; Conference ID #2297478
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 March 7, 2018.The webcast will be archived on 8x8's website for a period of 30 days. For additional information, visithttp://investors.8x8.com.
About 8x8, Inc.
8x8, Inc. (NYSE: EGHT) is a leading provider of global cloud communications and customer engagement solutions to over a million business users worldwide, empowering them to deliver exceptional customer experiences. For additional information, visitwww.8x8.com, or connect with 8x8 on LinkedIn
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