8x8, Inc.
8X8 INC /DE/ (Form: 8-K, Received: 01/25/2017 16:07:37)


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



FORM 8-K


CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

January 25, 2017
Date of Report (Date of earliest event reported)



8X8, INC.
(Exact name of registrant as specified in its charter)

 

Delaware
000-21783
77-0142404
  (State or other jurisdiction of incorporation)
  (Commission File Number)
(I.R.S. Employer Identification Number)

2125 O'Nel Drive
San Jose, CA    95131

(Address of principal executive offices including zip code)

(408) 727-1885
(Registrant's telephone number, including area code)


       Not Applicable       

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o   Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))



Item 2.02.    Results of Operations and Financial Condition.

On January 25, 2017, 8x8, Inc., or the Company, issued a press release announcing its financial results for the nine months ended December 31, 2016. A copy of this press release is furnished as Exhibit 99.1 to this report. The press release should be read in conjunction with the statements regarding forward-looking statements, which are included in the text of the release.

In addition to disclosing financial results calculated in accordance with U.S. generally accepted accounting principles (GAAP), management also presents information regarding the Company's performance over comparable periods based on net income and net income per share, exclusive of non-cash tax adjustments, stock-based compensation, amortization of acquired intangible assets, impairment of long-lived assets, and acquisition-related costs. Because management discloses financial measures calculated without taking into account these items, these financial measures are characterized as "non-GAAP financial measures" under Securities and Exchange Commission rules.

Non-cash tax adjustments represented the difference between the amount of taxes the Company expects to pay and the GAAP tax provision each period. Management excludes non-cash tax adjustments because they are non-cash transactions.

Stock-based compensation charges represent non-cash charges related to equity awards granted by the Company. Although these are recurring charges to the Company's operations, management has excluded stock-based compensation expense because it relies on valuations based on future events, such as the market price of the Company's common stock, that are difficult to predict and are affected by market factors that are largely not within the control of the Company. Thus, management believes that excluding these charges facilitates comparisons of the Company's operational performance in different periods, as well as with similarly determined non-GAAP financial measures of comparable companies.

Amortization of acquired intangible assets results from the Company's acquisitions of Contactual, Inc. in fiscal 2012, Voicenet Solutions Limited in fiscal 2014, and DXI Group Limited and Quality Software Corporation in fiscal 2016. Amortization of acquired intangible assets was excluded because it was a non-cash expense that the Company does not consider part of ongoing operations when assessing the Company's financial performance.

The Company has excluded impairment of long-lived assets because the Company considers it to be an isolated transaction and believes it is not reflective of our ongoing operations, and it reduces comparability of periodic operating results when it is included.

Acquisition-related expenses are difficult to predict and often one-time. Management believes these expenses are not reflective of the Company's ongoing operations in terms of evaluating comparable period-to-period performance.

Management and the Company's board of directors will continue to analyze these non-GAAP financial measures to assess the business and compare operating results to the Company's performance objectives. For example, the Company's budgeting and planning process utilizes these non-GAAP financial measures, along with other types of financial information.

The Company discloses these non-GAAP financial measures to the public as an additional means by which investors can assess the Company's performance and to identify the Company's operating results for investors on the same basis applied by management. The non-GAAP financial measures disclosed by the Company should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations to those financial statements should be carefully evaluated. The non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. The Company has provided reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures in the press release furnished as Exhibit 99.1.

Moreover, although these non-GAAP financial measures adjust expense, they should not be viewed as a pro forma presentation reflecting the elimination of the underlying share-based compensation programs, which are an important element of the Company's compensation structure. GAAP requires that all forms of share-based payments should be valued and included, as appropriate, in results of operations. Management believes these expenses are a material part of the Company's operating results.

Item 9.01.    Financial Statements and Exhibits

(d) Exhibits.

99.1    Press Release dated January 25, 2017

 

2


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: January 25, 2017

  8X8, INC.

  By:   /s/ Mary Ellen Genovese
 
         Mary Ellen Genovese
         Chief Financial Officer and Secretary

 

 

 

 

3


INDEX TO EXHIBITS

Exhibit

Description

 99.1

Press release dated January 25, 2017

 

 

 

 


For Immediate Release    

8x8, Inc. Reports Third Quarter Fiscal 2017 Financial Results

Service Revenue Increases 23%
Mid-Market and Enterprise Service Revenue Increases 36%
GAAP Net Loss of ($1.3 Million); Non-GAAP Net Income of $5.8 Million
Cash from Operating Activities of $8.8 Million

SAN JOSE, CA — January 25, 2017 — 8x8, Inc. (NASDAQ:EGHT), the leading provider of Enterprise Communications as a Service (ECaaS), today reported financial results for the third quarter of fiscal 2017 ended December 31, 2016.

Third Quarter Fiscal 2017 Financial Results:

  • Service revenue grew 23% year-over-year to $60.1 million; total revenue grew 20% year-over-year to $63.7 million.
  • GAAP gross margin was 77%, compared with 72% in the same period last year; non-GAAP gross margin was 79%, compared with 75% in the same period last year.
  • GAAP service margin was 83%, compared with 80% in the same period last year; non-GAAP service margin was 84%, compared with 83% in the same period last year.
  • GAAP net loss was ($1.3 million), or ($0.01) per diluted share; non-GAAP net income was $5.8 million, or $0.06 per diluted share.
  • Cash generated from operating activities was $8.8 million, compared with $8.3 million in the same period last year.
  • Cash, cash equivalents and investments were $173 million at December 31, 2016, compared with $155 million at December 31, 2015.

"Our financial results for the third quarter of fiscal 2017 were very strong with solid revenue growth and increasing gross and non-GAAP net income margins. Adjusting for constant currency and the discontinued segment of our UK business which we previously reported, service revenue increased 28% and total revenue increased 24%," said 8x8 CEO Vik Verma. "We are continuing to see enterprise customers transition their communications infrastructure to the cloud, evidenced this quarter by the addition of two new enterprise logos, including one Fortune 50 corporation."


"As we prepare for our next phase of growth, we are focused on enhancing our global systems and worldwide customer support organization to better serve the needs of our multinational customers," Verma continued. "We are also further expanding the breadth and capabilities of our platform with a new, recently completed technology acquisition in the collaboration space that will be unveiled in March at the Enterprise Connect Conference."

Additional Third Quarter and Year-to-Date Highlights:

  • Service revenue from mid-market and enterprise customers grew 36% year-over-year and represents 55% of the Company's total service revenue.
  • New monthly recurring revenue (MRR) sold to mid-market and enterprise customers and by channel sales teams accounted for 60% of total MRR booked in the quarter.
  • Average monthly service revenue (ARPU) per business customer grew to $414, compared with $369 in the same year ago period; ARPU per mid-market and enterprise customer grew to $4,412, compared with $4,017 in the same year ago period.
  • Gross monthly revenue churn was 1.0%, compared with 1.2% in the same period last year.
  • New enterprise Master Service Agreement signed with a Fortune 50 health care corporation to provide services up to 10,000 users in 450 medical offices.
  • New enterprise agreement signed with a national retail chain for over 10,000 seats across 3,500 locations.
  • 2.0 Global Channel Program and new PartnerConnect Channel Portal launched.
  • New channel partners Telarus, LANtelligence and PERRY proTECH in North America, and Great Outcomes in NZ added.
  • Acquired a small, innovative technology company in the collaboration space, completed in early January.
  • Three new patents awarded related to technology innovations enabling seamless global enterprise communications and enhanced contact center user experience for a total of 128 awarded patents to date.
  • Virtual Office Pro acknowledged with PCMag Editors' Choice Award.
  • Virtual Contact Center acknowledged with TMC's Customer Experience Innovation Award.

8x8 maintained its annual guidance of revenue for fiscal 2017 in the range of $251.0 million to $254.0 million and raised non-GAAP net income guidance to a range of $18.0 to $20.0 million, representing non-GAAP net income as a percent of revenue of 7.0% to 8.0%, from previously issued non-GAAP net income guidance in the range of $16.0 million to $20.0 million.


Conference Call Information:

Management will host a conference call to discuss these results and other matters related to the Company's business today, January 25, 2017 at 4:30 pm ET. The call is accessible via the following numbers and webcast links:

Dial In:

(877) 843-0417, domestic
(408) 427-3791, international

Replay:

(855) 859-2056, domestic (Conference ID #46149120)
(404) 537-3406, international (Conference ID #46149120)

Webcast:

http://investors.8x8.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 three hours after the conclusion of the call until February 1, 2017. The webcast will be archived on 8x8's website for a period of one year. For additional information, visit http://investors.8x8.com .

About 8x8, Inc.

8x8, Inc. (NASDAQ:EGHT) is the trusted provider of secure and reliable enterprise cloud communications solutions to more than 45,000 businesses operating in over 100 countries across six continents. 8x8's out-of-the-box cloud solutions replace traditional on-premises PBX hardware and software-based systems with a flexible and scalable Software as a Service (SaaS) alternative, encompassing cloud business phone service, contact center solutions, and conferencing. For additional information, visit www.8x8.com , www.8x8.com/UK or connect with 8x8 on  LinkedIn , Twitter , Google+ 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 our financial results and believes they are useful to investors, as a supplement to GAAP measures, in evaluating the Company's ongoing operational performance. Management believes that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating 8x8's ongoing operating results and trends and in comparing financial results with other companies in the industry, many of which present similar non-GAAP financial measures to investors.


Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures. This reconciliation has been provided in the financial statement tables included below in this press release.

Non-GAAP Net Income and Non-GAAP Net Income Per Share

We have defined non-GAAP net income as net income for GAAP plus non-cash tax adjustments, stock-based compensation, amortization of acquired intangible assets, impairment of long-lived assets, and acquisition-related costs. Non-cash tax adjustments represent the difference between the amount of taxes we expect to pay and our GAAP tax provision each period. We have excluded stock-based compensation expense because it relies on estimates and assumptions about future events, such as our future common stock price and the duration of employee service, as well as valuations that are affected by market factors largely outside management's control. Amortization of acquired intangible assets is excluded because it is a non-cash expense that we do not consider part of ongoing operations when assessing our financial performance, as it relates to accounting for certain purchased assets. We have excluded impairment of long-lived assets because we consider it to be an isolated transaction and believe it is not reflective of our ongoing operations, and it reduces comparability of periodic operating results when it is included. We have excluded acquisition-related expenses because these expenses are difficult to predict and are often one-time. We define non-GAAP net income per share as non-GAAP net income divided by the weighted-average diluted shares outstanding. We define non-GAAP net income percentage of revenue as non-GAAP net income divided by revenue. The GAAP and non-GAAP weighted average number of diluted shares to calculate GAAP and non-GAAP earnings per share are the same. We believe that such exclusions facilitate comparisons to our historical operating results and to the results of other companies in the same industry, and provides investors with information that we use in evaluating management's performance on a quarterly and annual basis.

Forward Looking Statements

This news release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934. These statements include, without limitation, information about future events based on current expectations, potential product development efforts, near and long-term objectives, potential new business, strategies, organization changes, changing markets, future business performance and outlook. Such statements are predictions only, and actual events or results could differ materially from those made in any forward-looking statements due to a number of risks and uncertainties. Actual results and trends may differ materially from historical results or those projected in any such forward-looking statements depending on a variety of factors. These factors include, but are not limited to, market acceptance of new or existing services and features, success of our efforts to target mid-market and larger distributed enterprises,


changes in the competitive dynamics of the markets in which we compete, customer cancellations and rate of churn, impact of current economic climate and adverse credit markets on our target customers, our ability to scale our business, our reliance on infrastructure of third-party network services providers, risk of failure in our physical infrastructure, risk of failure of our software, our ability to maintain the compatibility of our software with third-party applications and mobile platforms, continued compliance with industry standards and regulatory requirements, risks relating to our strategies and objectives for future operations, including the execution of integration plans and realization of the expected benefits of our acquisitions, the amount and timing of costs associated with recruiting, training and integrating new employees, introduction and adoption of our cloud communications and collaboration services in markets outside of the United States, risks regarding compliance with regulations in the United States and foreign jurisdictions in which our services are provided, and general economic conditions that could adversely affect our business and operating results. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see "Risk Factors" in the Company's reports on Forms 10-K and 10-Q, as well as other reports that 8x8, Inc. files from time to time with the Securities and Exchange Commission. All forward-looking statements are qualified in their entirety by this cautionary statement, and 8x8, Inc. undertakes no obligation to update publicly any forward-looking statement for any reason, except as required by law, even as new information becomes available or other events occur in the future.

# # #

Investor Contact:
8x8, Inc.
Joan Citelli, 408-654-0970
joan.citelli@8x8.com


Media Contact:
8x8, Inc.
Neha Mirchandani, 669-256-5095
neha.mirchandani@8x8.com

 

 


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

      Three Months Ended     Nine Months Ended
      December 31,     December 31,
      2016     2015     2016     2015
Service revenue   $ 60,149    $ 48,948    $ 173,162    $ 140,068 
Product revenue     3,527      4,220      13,738      11,935 
          Total revenue     63,676      53,168      186,900      152,003 
                         
Operating expenses:                        
     Cost of service revenue (1)      10,525      9,713      31,597      27,359 
     Cost of product revenue     4,240      5,087      15,527      14,065 
     Research and development (2)     7,095      6,404      20,310      17,930 
     Sales and marketing (3)     35,667      27,585      101,049      78,138 
     General and administrative (4)     7,852      6,888      21,400      18,614 
          Total operating expenses     65,379      55,677      189,883      156,106 
Loss from operations     (1,703)     (2,509)     (2,983)     (4,103)
Other income, net     408      272      1,209      710 
Loss from operations before provision (benefit) for income taxes     (1,295)     (2,237)     (1,774)     (3,393)
Provision (benefit) for income taxes     30      (557)     52      651 
Net loss   $ (1,325)   $ (1,680)   $ (1,826)   $ (4,044)
                         
Net loss per share:                        
     Basic    $ (0.01)   $ (0.02)   $ (0.02)   $ (0.05)
     Diluted   $ (0.01)   $ (0.02)   $ (0.02)   $ (0.05)
                         
Weighted average number of shares:                        
     Basic      90,774      88,289      90,062      88,812 
     Diluted     90,774      88,289      90,062      88,812 
                         
(1)(2)(3)(4) - See reconciliation of GAAP measures to non-GAAP measures.

 


8x8, Inc.
RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES
(In thousands, unaudited)

(1) Amounts include amortization of acquired intangible assets,                        
     impairment of long-lived assets, and stock-based                         
     compensation as follows:                        
      Three Months Ended     Nine Months Ended
      December 31,     December 31,
      2016     2015     2016     2015
GAAP cost of service revenue    $ 10,525    $ 9,713    $ 31,597    $ 27,359 
     Amortization of acquired intangible assets     (543)     (618)     (1,697)     (1,451)
     Impairment of long-lived assets     -       (440)     -       (440)
     Stock-based compensation expense      (538)     (346)     (1,338)     (828)
Non-GAAP cost of service revenue    $ 9,444    $ 8,309    $ 28,562    $ 24,640 
Non-GAAP cost of service revenue as a percentage of service                        
revenue     15.7%     17.0%     16.5%     17.6%
                         
(2) Amounts include stock-based compensation and acquisition                        
     related expenses as follows:                        
      Three Months Ended     Nine Months Ended
      December 31,     December 31,
      2016     2015     2016     2015
GAAP research and development     $ 7,095    $ 6,404    $ 20,310    $ 17,930 
     Stock-based compensation expense      (1,061)     (850)     (2,811)     (2,107)
     Acquisition related expenses          -       -       (5)
Non-GAAP research and development    $ 6,034    $ 5,554    $ 17,499    $ 15,818 
Non-GAAP research and development as a percentage of total                        
revenue     9.5%     10.4%     9.4%     10.4%
                         
(3) Amounts include amortization of acquired intangible assets,                        
     impairment of long-lived assets, stock-based compensation,                        
     and acquisition related expenses as follows:                        
      Three Months Ended     Nine Months Ended
      December 31,     December 31,
      2016     2015     2016     2015
GAAP sales and marketing     $ 35,667    $ 27,585    $ 101,049    $ 78,138 
     Amortization of acquired intangible assets     (330)     (384)     (1,044)     (1,114)
     Impairment of long-lived assets     (15)     (200)     (15)     (200)
     Stock-based compensation expense      (2,452)     (1,689)     (6,118)     (4,308)
     Acquisition related expenses      -       -       -       (27)
Non-GAAP sales and marketing    $ 32,870    $ 25,312    $ 93,872    $ 72,489 
Non-GAAP sales and marketing as a percentage of total                        
revenue     51.6%     47.6%     50.2%     47.7%
                         
(4) Amounts include stock-based compensation, and acquisition                        
     related expenses as follows:                        
      Three Months Ended     Nine Months Ended
      December 31,     December 31,
      2016     2015     2016     2015
GAAP general and administrative     $ 7,852    $ 6,888    $ 21,400    $ 18,614 
     Stock-based compensation expense      (2,020)     (1,778)     (5,363)     (3,959)
     Acquisition related expenses      (78)     -       (78)     (1,011)
Non-GAAP general and administrative    $ 5,754    $ 5,110    $ 15,959    $ 13,644 
Non-GAAP general and administrative as a percentage of total                        
revenue     9.0%     9.6%     8.5%     9.0%

 


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

      December 31,     March 31,
      2016     2016
ASSETS            
Current assets            
     Cash and cash equivalents   $ 33,457   $ 33,576
     Short-term investments     139,194     129,274
     Accounts receivable, net     13,069     11,070
     Inventory     572     520
     Deferred tax assets     -     5,382
     Other current assets     6,191     6,078
          Total current assets     192,483     185,900
Property and equipment, net     15,224     12,375
Intangible assets, net     16,726     21,464
Goodwill     44,327     47,420
Non-current deferred tax asset     48,443     43,189
Other assets     6,645     3,104
               Total assets   $ 323,848   $ 313,452
             
LIABILITIES AND STOCKHOLDERS' EQUITY            
Current liabilities            
     Accounts payable   $ 12,537   $ 10,954
     Accrued compensation     12,022     10,063
     Accrued warranty     290     326
     Accrued outside commissions     2,843     2,186
     Deferred revenue     2,089     1,925
     Other accrued liabilities     8,710     9,280
          Total current liabilities     38,491     34,734
             
Other liabilities     3,082     3,412
          Total liabilities     41,573     38,146
             
Total stockholders' equity     282,275     275,306
               Total liabilities and stockholders' equity   $ 323,848   $ 313,452

 


8x8, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)

      Nine Months Ended
      December 31,
      2016     2015
Cash flows from operating activities:            
Net loss   $ (1,826)   $ (4,044)
Adjustments to reconcile net loss to net cash            
     provided by operating activities:            
          Depreciation     4,463      3,598 
          Amortization of intangible assets     2,741      2,565 
          Impairment of long-lived assets     15      640 
          Amortization of capitalized software     442      456 
          Net accretion of discount and amortization of premium on marketable securities     228      584 
          Stock-based compensation expense     15,630      11,202 
          Deferred income tax (benefit) provision     (104)     361 
          Other     574      467 
Changes in assets and liabilities:            
          Accounts receivable, net     (3,267)     (3,138)
          Inventory     (87)     (122)
          Other current and noncurrent assets     (1,065)     (1,699)
          Deferred cost of goods sold     (86)     (156)
          Accounts payable     1,732      674 
          Accrued compensation     2,146      3,351 
          Accrued warranty     (36)     (17)
          Accrued taxes     (21)     1,837 
          Deferred revenue     168      (427)
          Accrued outside commissions     657     
          Other current and noncurrent liabilities     (84)     (748)
               Net cash provided by operating activities     22,220      15,384 
             
Cash flows from investing activities:            
     Purchases of property and equipment     (6,509)     (3,295)
     Cost of capitalized software     (3,939)     (1,275)
     Purchase of businesses, net of cash acquired         (23,434)
     Proceeds from maturity of investments     47,625      38,451 
     Sales of investments - available for sale     34,821      43,934 
     Purchases of investments - available for sale     (92,647)     (90,025)
               Net cash used in investing activities     (20,649)     (35,644)
             
Cash flows from financing activities:            
     Capital lease payments     (460)     (321)
     Payment of contingent consideration and escrow     (300)     (200)
     Repurchase of common stock     (2,828)     (11,628)
     Proceeds from issuance of common stock under employee stock plans     2,694      2,848 
               Net cash used in financing activities     (894)     (9,301)
             
Effect of exchange rate changes on cash     (796)     317 
Net decrease in cash and cash equivalents     (119)     (29,244)
             
Cash and cash equivalents, beginning of the period     33,576      53,110 
Cash and cash equivalents, end of the period   $ 33,457    $ 23,866 

 


8x8, Inc.
Selected Operating Statistics

    Three Months Ended
    Dec. 31, 2015   Mar. 31, 2016   Jun. 30, 2016   Sept. 30, 2016   Dec. 31, 2016
                     
Business customer average monthly service revenue per customer (1)   $ 369    $ 385    $ 399    $ 409    $ 414 
Monthly business service revenue churn (2)(3)   1.2%   0.4%   0.5%   0.6%   1.0%
                     
Overall service margin   80%   81%   81%   81%   83%
Overall product margin   -21%   -18%   -16%   -6%   -20%
Overall gross margin   72%   72%   74%   74%   77%

 

(1)

Business customer average monthly service revenue per customer is service revenue from business customers in the period divided by the number of months in the period divided by the simple average number of business customers during the period.

(2)

Business customer service revenue churn is calculated by dividing the service revenue lost from business customers (after the expiration of 30-day trial) during the period by the simple average of business customer service revenue during the same period and dividing the result by the number of months in the period.

(3)

Excludes DXI business customer service revenue churn for all periods presented.

 


8x8, Inc.
RECONCILIATION OF NET INCOME (LOSS) TO NON-GAAP NET INCOME
AND NON-GAAP NET INCOME PER SHARE
(In thousands, except per share amounts; unaudited)
                         
      Three Months Ended     Nine Months Ended
      December 31,     December 31,
      2016     2015     2016     2015
Net loss    $ (1,325)   $ (1,680)   $ (1,826)   $ (4,044)
Adjustments:                        
     Non-cash tax adjustments     49      (326)     (104)     361 
     Amortization of acquired intangible assets     873      1,002      2,741      2,565 
     Stock-based compensation expense     6,071      4,663      15,630      11,202 
     Acquisition related expenses     78      -       78      1,043 
     Impairment of long-lived assets     15      640      15      640 
Non-GAAP net income   $ 5,761    $ 4,299    $ 16,534    $ 11,767 
                         
Reconciliation between GAAP and non-GAAP                        
     weighted average shares used in computing basic                        
     and diluted net loss per share:                        
Denominator for basic calculation     90,774      88,289      90,062      88,812 
Effect of dilutive securities:                        
     Employee stock options     1,792      1,614      1,702      1,595 
     Employee restricted purchase rights     1,407      1,303      1,723      1,048 
     Employee stock plan purchases         14          10 
Denominator for diluted calculation     93,982      91,220      93,495      91,465 
                         
GAAP net loss per share - Diluted   $ (0.01)   $ (0.02)   $ (0.02)   $ (0.05)
Adjustments:                        
     Non-cash tax adjustments                 0.01 
     Amortization of acquired intangible assets     0.01      0.01      0.03      0.03 
     Stock-based compensation expense      0.06      0.05      0.17      0.12 
     Acquisition related expenses                 0.01 
     Impairment of long-lived assets         0.01          0.01 
Non-GAAP net income per share - Diluted   $ 0.06    $ 0.05    $ 0.18    $ 0.13 
                         
                         
GAAP net income or loss as a percentage of total revenue     -2%     -3%     -1%     -3%
Adjustments:                        
     Non-cash tax adjustments     0%     -1%     0%     0%
     Amortization of acquired intangible assets     1%     2%     2%     2%
     Stock-based compensation expense     10%     9%     8%     7%
     Acquisition related expenses     0%     0%     0%     1%
     Impairment of long-lived assets     0%     1%     0%     1%
Non-GAAP net income as a percentage of total                         
revenue     9%     8%     9%     8%

 


8x8, Inc.
RECONCILIATION OF GAAP GROSS MARGIN TO NON-GAAP
GROSS MARGIN
(In thousands, unaudited)
                         
      Three Months Ended     Nine Months Ended
      December 31,     December 31,
      2016     2015     2016     2015
GAAP gross margin   $ 48,911    $ 38,368    $ 139,776    $ 110,579 
Adjustments:                        
     Amortization of acquired intangible assets     543      618      1,697      1,451 
     Impairment of long-lived assets         440          440 
     Stock-based compensation expense     538      346      1,338      828 
Non-GAAP gross margin   $ 49,992    $ 39,772    $ 142,811    $ 113,298 
                         
GAAP gross margin as a percentage of total revenue     77%     72%     75%     73%
Adjustments:                        
     Amortization of acquired intangible assets     1%     1%     1%     1%
     Impairment of long-lived assets     0%     1%     0%     0%
     Stock-based compensation expense     1%     1%     0%     1%
Non-GAAP gross margin as a percentage of total                        
revenue     79%     75%     76%     75%
                         
                         
                         
                         
8x8, Inc.
RECONCILIATION OF GAAP SERVICE MARGIN TO NON-GAAP
SERVICE MARGIN
(In thousands, unaudited)
                         
      Three Months Ended     Nine Months Ended
      December 31,     December 31,
      2016     2015     2016     2015
GAAP service margin   $ 49,624    $ 39,235    $ 141,565    $ 112,709 
Adjustments:                        
     Amortization of acquired intangible assets     543      618      1,697      1,451 
     Impairment of long-lived assets         440          440 
     Stock-based compensation expense     538      346      1,338      828 
Non-GAAP service margin   $ 50,705    $ 40,639    $ 144,600    $ 115,428 
                         
GAAP service margin as a percentage of service revenue     83%     80%     82%     80%
Adjustments:                        
     Amortization of acquired intangible assets     1%     1%     1%     1%
     Impairment of long-lived assets     0%     1%     0%     0%
     Stock-based compensation expense     0%     1%     1%     1%
Non-GAAP service margin as a percentage of service                         
revenue     84%     83%     84%     82%

 


8x8, Inc.
RECONCILIATION OF GAAP INCOME (LOSS) FROM OPERATIONS TO NON-GAAP
INCOME FROM OPERATIONS
(In thousands, unaudited)
                         
      Three Months Ended     Nine Months Ended
      December 31,     December 31,
      2016     2015     2016     2015
GAAP loss from operations   $ (1,703)   $ (2,509)   $ (2,983)   $ (4,103)
Adjustments:                        
     Amortization of acquired intangible assets     873      1,002      2,741      2,565 
     Stock-based compensation expense     6,071      4,663      15,630      11,202 
     Acquisition related expenses     78      -       78      1,043 
     Impairment of long-lived assets     15      640      15      640 
Non-GAAP income from operations   $ 5,334    $ 3,796    $ 15,481    $ 11,347 
                         
GAAP loss from operations as a percentage of total revenue      -3%     -5%     -2%     -3%
Adjustments:                        
     Amortization of acquired intangible assets     1%     2%     2%     2%
     Stock-based compensation expense     10%     9%     8%     7%
     Acquisition related expenses     0%     0%     0%     1%
     Impairment of long-lived assets     0%     1%     0%     0%
Non-GAAP income from operations as a percentage of total revenue     8%     7%     8%     7%