8x8, Inc.
Jan 29, 2009

8x8 Announces Third Quarter Fiscal 2009 Operating Results

SANTA CLARA, Calif., Jan 29, 2009 /PRNewswire-FirstCall via COMTEX/ -- 8x8, Inc. (Nasdaq: EGHT), provider of 8x8 Virtual Office and Packet8 (http://www.packet8.net) broadband business, residential, video and mobile communications services, today announced financial operating results for its third fiscal quarter ended December 31, 2008.

Revenues for the third quarter of fiscal 2009 were $16.2 million, compared with $15.8 million for the same period of fiscal 2008 and $16.4 million for the previous quarter. 8x8 business services revenue grew to 66% of total revenue in the third quarter of fiscal 2009 compared with 48% of total revenue in the same period of fiscal 2008 and 60% of total revenue in the previous quarter. Sequentially, 8x8 Virtual Office revenue grew 41% from the same period of fiscal 2008 and 8% from the previous quarter. Overall gross margin for the third quarter of fiscal 2009 was 67%, compared with 65% for the same period of fiscal 2008.

GAAP net income for the quarter was $180,000 or $0.00 per share, compared with net income of $1.4 million, or $0.02 per share, for the same period in fiscal 2008 and net income of $44,000, or $0.00 per share, for the previous quarter. Cash and investments increased to $16.2 million in the third quarter of fiscal 2009 from $15.8 million in the second quarter and $14.3 million in the same period of fiscal 2008. This represents the seventh consecutive quarter of increased cash and investments and a total increase of $1.6 million year to date.

During the third quarter of fiscal 2009, the Company increased its business communications services customer base by 962 net new customers and now provides service to 14,706 business customers.

"We are very pleased to report the seventh consecutive quarterly increase in our cash and investment balances and the fifth consecutive quarter of net income," said 8x8 Chairman & CEO Bryan R. Martin. "In addition, during the December quarter, the Company organically added more new business customers than ever before, with over 2,400 gross additions. On a percentage basis, we also experienced our lowest business churn in more than 18 months, a metric that we have been focused on improving." Martin continued, "While our overall revenue growth does not yet reflect the Company's strategic shift in focus from residential to business services, our underlying business services results, which now represent approximately two-thirds of our revenues, clearly indicate that our strategy is succeeding. We continue to feel optimistic that this strategy will deliver value to both our customers and shareholders despite the current macro-economic conditions."

On Tuesday, January 27, 2009, 8x8, Inc.'s Board of Directors passed a resolution to immediately vest all outstanding employee stock options, the majority of which are currently below the exercise price, so as to accelerate the recognition of approximately $2.4 million to $2.6 million of outstanding, future stock compensation expense into the Company's fourth fiscal quarter, ending March 31, 2009, and substantially eliminate all FAS-123® stock compensation expenses resulting from past stock option grants from the Company's 2010 fiscal year.

"For the last three quarters ended December 31, 2008, the Company's net income has been reduced by approximately $0.8 million due to recognition of stock compensation charges for employee stock options that are currently below their exercise price," said Martin. "In other words, 8x8's net income of $1.4 million for the three quarters ended December 31, 2008 would have been approximately 56% higher without these charges."

Q3FY'09 Business Highlights:

Management will host a conference call to discuss these results and other matters related to the Company's business today, January 29, 2009, at 4:30 p.m. ET. To access the call, dial 888-679-8033 (domestic) or 617-213-4846 (International), passcode 16191335. A digital replay of the call will be available for one week following the live broadcast at 888-286-8010 (domestic) or 617-801-6888 (International), passcode 60893757. A webcast of this conference call will also be available for a limited time at the 8x8 Investor Relations website at: http://investors.8x8.com.

About 8x8, Inc.

8x8, Inc. (Nasdaq: EGHT) offers voice, video and mobile communications solutions for business and residential customers. These solutions leverage existing broadband Internet connections and cellular networks to deliver advanced features and digital quality phone service at a fraction of the cost of legacy, copper wire alternatives. Businesses of any size, configuration or geographic location can benefit from the cost, performance and operational advantages of VoIP technology. All 8x8 communications solutions carry little or no upfront investment, no maintenance or upgrade fees and no change in user behavior. For additional company information, visit 8x8's web site at http://www.8x8.com.

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 VoIP products and services, the reliability of our services, the prices for our services, customer renewal rates, customer acquisition costs, actions by our competitors, including price reductions for their telephone services, potential federal and state regulatory actions, compliance costs, potential warranty claims and product defects, our needs for and the availability of adequate working capital, our ability to innovate technologically, the timely supply of products by our contract manufacturers, potential future intellectual property infringement claims that could adversely affect our business and operating results, and our ability to retain our listing on the NASDAQ Capital Market. 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.
               CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
             (In thousands, except per share amounts; unaudited)

                                       Three Months Ended   Nine Months Ended
                                          December 31,        December 31,
                                         2008       2007     2008       2007
    Service revenues                   $14,366    $14,426   44,288    $41,109
    Product revenues                     1,837      1,378    4,621      4,205
       Total revenues                   16,203     15,804   48,909     45,314

    Operating expenses:
      Cost of service revenues           3,699      4,364   11,535     12,780
      Cost of product revenues           1,681      1,175    4,786      5,210
      Research and development           1,183      1,081    3,674      3,164
      Selling, general and
       administrative                    9,562      9,604   27,980     28,573
       Total operating expenses         16,125     16,224   47,975     49,727
    Income (loss) from operations           78       (420)     934     (4,413)
    Other income, net                       74      1,361      266      1,654
    Income on change in fair value of
     warrant liability                      66        448      325      2,098
    Income (loss) before provision
     for income taxes                      218      1,389    1,525       (661)
    Provision for income taxes              38          -      113          -
    Net income (loss)                     $180     $1,389    1,412      $(661)

    Net income (loss) per share:
     Basic                               $0.00      $0.02    $0.02     $(0.01)
     Diluted                             $0.00      $0.02    $0.02     $(0.01)

    Weighted average number of
     shares:
     Basic                              62,332     61,927   62,236     61,857
     Diluted                            62,394     62,113   62,428     61,857



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

                                                 December 31,       March 31,
                                                     2008              2008
    ASSETS
    Current assets
      Cash and cash equivalents                    $16,195           $11,185
      Short-term investments                             -             3,382
      Accounts receivable, net                         698             1,807
      Inventory                                      1,901             1,539
      Other current assets                           1,314             1,492
        Total current assets                        20,108            19,405
    Property and equipment, net                      1,814             2,010
        Other assets                                    11               136
            Total assets                           $21,933           $21,551

    LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities
      Accounts payable                              $3,992            $4,885
      Accrued compensation                           1,435             1,048
      Accrued warranty                                 327               314
      Deferred revenue                               3,212             3,139
      Other accrued liabilities                      2,552             3,872
        Total current liabilities                   11,518            13,258

      Other liabilities                                 56               109
      Fair value of warrant liability                   10               335
            Total liabilities                       11,584            13,702

    Total stockholders' equity                      10,349             7,849
            Total liabilities and
             stockholders' equity                  $21,933           $21,551



                                  8x8, Inc.
                        Selected Operating Statistics

                                    FQ308    FQ408    FQ109    FQ209    FQ309
    Gross business customer
     additions (1)                  1,924    2,162    2,398    3,324    2,437
    Gross business customer
     cancellations (less
     cancellations within 30 days
     of sign-up)                      949    1,138    1,098    1,187    1,224
    Business customer churn (less
     cancellations within 30 days
     of sign-up) (2)                 3.3%     3.6%     3.2%     3.1%     2.9%
    Total business customers (3)   10,007   10,845   11,898   13,744   14,706

    Business customer average
     service revenue per customer
     (4)                             $233     $229     $237     $220     $208

    Revenue from business
     customers (in '000s)          $7,542   $8,111   $9,077   $9,826  $10,614
    Revenue from residential and
     video customers (in '000s)    $8,182   $7,685   $7,192   $6,356   $5,572
    Revenue from technology
     licensing (in '000s)             $80     $536      $12     $243      $17
      Total Revenue               $15,804  $16,332  $16,281  $16,425  $16,203

    Percentage of revenue from
     business customers             47.7%    49.7%    55.8%    59.8%    65.5%
    Percentage of revenue from
     residential and video
     customers                      51.8%    47.0%    44.1%    38.7%    34.4%
    Percentage of revenue from
     technology licensing            0.5%     3.3%     0.1%     1.5%     0.1%
      Total Revenue                100.0%   100.0%   100.0%   100.0%   100.0%

    Overall service margin            70%      74%      75%      73%      74%
    Overall product margin            15%     -23%     -13%     -10%       9%
      Overall gross margin            65%      67%      68%      65%      67%

    Total (business, residential
     and video) subscriber
     acquisition cost per service
     (5)                             $129     $155     $162     $163     $135
    Business subscriber
     acquisition cost per service
     (6)                             $161     $158     $171     $171     $141
    Average number of services
     subscribed to per business
     customer                         7.3      7.2      7.1      6.9      6.6
    Business customer subscriber
     acquisition cost (7)          $1,177   $1,135   $1,217   $1,174     $933

    Residential lines in service  112,229  107,260  100,937   93,865   86,992
    Total (business, residential
     and video) customer churn
     (less cancellations within
     30 days of sign-up) (8)         3.8%     4.0%     3.5%     4.2%     3.9%

     (1)  Includes 1,154 "Find me, Follow me" and 40 8x8 Virtual Office
     customers acquired in the second quarter of fiscal 2009 from Avtex
     Solutions, LLC ("Avtex").
     (2)  Business customer churn is calculated by dividing the number of
     business customers that terminated (after the expiration of the 30 day
     trial) during that period by the simple average number of business
     customers during the period and dividing the result by the number of
     months in the period.  The simple average number of business customers
     during the period is the number of business customers on the first day of
     the period plus the number of business customers on the last day of the
     period divided by two.
     (3)  Business customers are defined as customers paying for service.
     Prior to April 1, 2008, 8x8 included customers in the business customer
     count that were using the service as a trial or evaluation and not yet
     paying for service.  The numbers in this table prior to and after April
     1, 2008, only include business customers that are paying for service.
     Customers that have prepaid for their first month of service and are
     currently in the 30 day trial period are considered to be customers that
     are paying for service.
     (4)  Business customer average service revenue per customer is service
     revenue from business customers in the period divided by the number of
     months in the period divided by the simple average number of business
     customers during the period.
     (5)  Total (business, residential and video) subscriber acquisition cost
     per service is defined as the combined costs of advertising, marketing,
     promotions, commissions and equipment subsidies during the period divided
     by the number of gross services added during the period.
     (6)  Business subscriber acquisition cost per service is defined as the
     combined costs of advertising, marketing, promotions, commissions and
     equipment subsidies for business services sold during the period divided
     by the number of gross business services added during the period. The
     addition of 1,154 Avtex customers that migrated to 8x8 in the second
     fiscal quarter of 2009 but subscribed to "Find me, Follow me" services
     rather than 8x8 Virtual Office service, and the $79,230 in expense
     related to the acquisition of these 1,154 customers, is excluded from
     this calculation.
     (7)  Business customer subscriber acquisition cost is business subscriber
     acquisition cost per service times the average number of services
     subscribed to per business customer.
     (8)  Total (business, residential and video) customer churn is calculated
     by dividing the number of services terminated (after the expiration of
     the 30 day trial) during that period by the simple average number of
     services during the period and dividing the result by the number of
     months in the period.

SOURCE 8x8, Inc.



http://www.8x8.com