EX-99.1 2 a8-kexhibit99133119.htm EXHIBIT 99.1 Exhibit


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8x8, Inc. Reports Fourth Quarter and Fiscal 2019 Financial Results

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

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

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


SAN JOSE, CA. - May 14, 2019 - 8x8, Inc. (NYSE: EGHT), a leading cloud provider of voice, video, chat and contact center solutions for over one million users worldwide, today reported financial results for the fourth quarter and full-year fiscal 2019 ended March 31, 2019.

Fourth Quarter Fiscal 2019 Financial Results:

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

"We finished 2019 with strong execution from our mid-market and channel teams. We have the only technology platform in the market today that can deliver both stand-alone and mix-and-match bundling of solutions across three distinct but complementary high-growth markets of business communications, contact center, and video collaboration. This positions 8x8 for continued growth in fiscal 2020 and beyond as each of these markets shifts to the cloud,” said Vik Verma, Chief Executive Officer at 8x8, Inc.

Full-Year Fiscal 2019 Financial Results:

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


Additional Fourth Quarter Business Metrics and Company Highlights:

Business Metrics

Bookings from mid-market and enterprise customers (greater than $1K in MRR) increased 34% year-over-year, compared with 13% in the prior quarter.
Channel bookings grew 91% year-over-year, compared with 23% in the prior quarter.

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Average monthly service revenue per business customer was $516, compared with $469 in the same period last year, a 10% increase year-over-year. Mid-market and enterprise average monthly service revenue per business customer was $5,364, compared with $4,899 in the same period last year, a 9% year-over-year increase.
Issued $287.5 million of 0.50% coupon Convertible Senior Notes due in 2024. In conjunction with the issuance of the convertible notes, 8x8 also entered into a capped call transaction to eliminate dilution up to a $39.50 stock price, or 100% above the share price at issuance.
Cash used in operating activities was $8.2 million. Cash, restricted cash and investments were $354.6 million at March 31, 2019, including $245.8 million raised from the issuance of new convertible notes.

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


New ARR-Based and Financial Metrics

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

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

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

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

Product Innovation Highlights

Announced integration of 8x8 Contact Center with Google Cloud's new Contact Center AI to improve the customer service experience and productivity of contact centers.
Introduced 8x8 X Series in Australia and New Zealand.
Added new capabilities to the 8x8 X Series platform including advanced speech analytics and real-time dashboards for contact centers.
Launched 8x8 PartnerXchange, an online portal that enables channel partners to manage their 8x8-related business and drive sales of 8x8 solutions.
Launched 8x8 Flex Hardware Program to help companies take the risk out of moving to cloud communications by providing the latest Poly IP desktop and conference phones at low monthly lease payments, eliminating the need for customers to incur upfront costs.
Awarded six new patents in the quarter for a total of 183 patents.






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Industry Awards

8x8 recognized with a CRN Tech Innovator Award for X Series in the Unified Communications category for combining UC and contact technologies into a single cloud-based platform.
8x8 named 2019 Channel Influencer Award winner by Channel Partners and Channel Futures.


Reclassification:

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

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

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

Giving effect to the reclassifications, Gross and Service Margins for the fourth quarter of fiscal 2019 are reported as follows:
Gross Margin: GAAP gross margin was 63%, compared with 63% in the same period last year. Non-GAAP gross margin was 66%, compared with 65% in the same period last year.
Service Margin: GAAP service margin was 68% compared with 68% in the same period last year. Non-GAAP service margin was 71%, compared with 71% in the same period last year.

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


Financial Outlook:

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

Q1 Fiscal 2020 Guidance:
 
Total Revenue in the range of $95.3 million to $96.3 million, representing approximately 15% to 16% year-over-year growth.
Service Revenue in the range of $91.0 million to $92.0 million, representing approximately 16% to 18% year-over-year growth.
Non-GAAP Pre-tax Loss of approximately $17 million.
 
 
Full-Year Fiscal 2020 Guidance:

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

We do not reconcile our forward-looking estimates of non-GAAP net income (loss) to the corresponding GAAP measures of GAAP net income (loss) due to the significant variability of, and difficulty in making accurate forecasts and projections with regards to, the various expenses we exclude. For example, although future hiring and retention needs may be reasonably predictable, stock-based compensation expense depends on variables that are largely not within the control of nor predictable by management, such as the market price of 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

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items are difficult to predict as they may depend on future events and external factors outside the Company's control. The actual amounts of these excluded items could have a significant impact on the Company's GAAP net income (loss). Accordingly, management believes that reconciliations of this forward-looking non-GAAP financial measure to the corresponding GAAP measure are not available without unreasonable effort.

Conference Call Information:

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

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

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

Webcast: http://investors.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 until May 28, 2019. 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) cloud solutions help businesses transform their customer and employee experience. With one system of engagement for voice, video, chat and contact center and one system of intelligence on one technology platform, businesses can now communicate faster and smarter to exceed the speed of customer expectations. For additional information, visit www.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, impairment charges, stock-based compensation, certain other income and expenses, and the provision for income taxes. Amortization of acquired intangible assets and impairment charges are excluded because it is a non-cash expense that management does not consider part of ongoing operations when assessing the Company's financial performance. Stock-based compensation expense has been excluded because it is a non-cash expense and relies on valuations based on future conditions and events, such as the market price of 8x8 common stock, that are difficult to predict and/or largely not within the control of management. Certain other income and expense items, such as acquisition-related expenses, certain severance expenses and expenses for tax or litigation risks, have been excluded because management considers them one-time events or otherwise not indicative of trends in the Company's ongoing operations.The Company has also excluded non-cash rent expense related to its new headquarter building because the building remains in the built-out phase and remains unoccupied.  

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


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

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

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

This release includes revenue figures adjusted to exclude revenue by the line of products we acquired from DXI. As first reported in the third quarter of our 2018 fiscal year, we have de-emphasized the sale of DXI's ContactNow as a stand-alone product, and management therefore believes it is useful to exclude this revenue from period-to-period comparisons to better depict the relative performance of our core business.

This release includes revenue figures adjusted for comparison on a constant currency basis, when management concluded that the elimination of the impact of currency fluctuations between the periods being compared would assist with the evaluation of the underlying business performance.

This release includes revenue figures that excludes adjustments to service revenue as a result of the Company adopting Accounting Standards Codification Topic 606 (ASC 606), Revenue from Contracts with Customers. Management believes the exclusion of ASC 606 adjustments provides a clearer comparison of service revenue between periods presented.

We disclose these non-GAAP financial measures to the public as an additional means by which investors can assess our performance. These non-GAAP financial measures may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures. This reconciliation has been provided in the financial statement tables included below in this press release.


Forward Looking Statements:

This news release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934. These statements include, without limitation, information about future events based on current expectations, potential product development efforts, near and long-term objectives, potential new business, strategies, organization changes, changing markets, future business performance and outlook. Such statements are predictions only, and actual events or results could differ materially from those made in any forward-looking statements due to a number of risks and uncertainties. Actual results and trends may differ materially from historical results or those projected in any such forward-looking statements depending on a variety of factors.

These factors include, but are not limited to:

customer acceptance and demand for our cloud communication and collaboration services,
changes in the competitive dynamics of the markets in which we compete,
the quality and reliability of our services,
customer cancellations and rate of churn,
our ability to scale our business,
customer acquisition costs,
our reliance on infrastructure of third-party network services providers,
risk of failure in our physical infrastructure,
risk of failure of our software,
our ability to maintain the compatibility of our software with third-party applications and mobile platforms,
continued compliance with industry standards and regulatory requirements in the United States and foreign countries in which we make our software solutions available, and the costs of such compliance,
the timing, extent and results of sales and use tax audits,

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risks relating to our strategies and objectives for future operations, including the execution of integration plans and realization of the expected benefits of our acquisitions,
the amount and timing of costs associated with recruiting, training and integrating new employees,
timing and extent of improvements in operating results from increased spending in marketing, sales, and research and development,
introduction and adoption of our cloud software solutions in markets outside of the United States,
risk of cybersecurity breaches and other unauthorized disclosures of customer data,
risks related to our senior convertible notes and the related capped call transactions,
general economic conditions that could adversely affect our business and operating results,
implementation and effects of new accounting standards and policies in our reported financial results, and
potential future intellectual property infringement claims and other litigation that could adversely affect our business and operating results.

For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see "Risk Factors" in the Company's reports on Forms 10-K and 10-Q, as well as other reports that 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
 
Twelve Months Ended
 
 
March 31,
 
March 31,
 
 
2019
 
2018
 
2019
 
2018
Service revenue
 
$
89,060

 
$
75,325

 
$
334,438

 
$
280,430

Product revenue 
 
4,707

 
4,019

 
18,148

 
16,070

          Total revenue 
 
93,767

 
79,344

 
352,586

 
296,500

 
 
 
 
 
 
 
 
 
Cost of revenue and operating expenses:
 
 
 
 
 
 
 
 
     Cost of service revenue
 
28,809

 
23,833

 
107,192

 
86,244

     Cost of product revenue 
 
5,784

 
5,826

 
22,780

 
20,482

     Research and development 
 
18,064

 
10,427

 
62,063

 
36,405

     Sales and marketing 
 
49,525

 
40,422

 
177,976

 
133,945

     General and administrative
 
20,365

 
12,566

 
73,563

 
51,851

     Impairment of equipment, intangible assets and goodwill
 

 

 

 
9,469

          Total operating expenses 
 
122,547

 
93,074

 
443,574

 
338,396

Loss from operations 
 
(28,780
)
 
(13,730
)
 
(90,988
)
 
(41,896
)
Other income, net 
 
885

 
610

 
2,818

 
3,693

Loss from operations before provision for income taxes
 
(27,895
)
 
(13,120
)
 
(88,170
)
 
(38,203
)
Provision for income taxes
 
236

 
142

 
569

 
66,294

Net loss 
 
$
(28,131
)
 
$
(13,262
)
 
$
(88,739
)
 
$
(104,497
)
 
 
 
 
 
 
 
 
 
Net loss per share:
 
 
 
 
 
 
 
 
     Basic and diluted
 
$
(0.29
)
 
$
(0.14
)
 
$
(0.94
)
 
$
(1.14
)
 
 
 
 
 
 
 
 
 
Weighted average number of shares:
 
 
 
 
 
 
 
 
     Basic and diluted
 
95,879

 
92,526

 
94,533

 
92,017




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

 
 
March 31,
 
March 31,
 
 
2019
 
2018
ASSETS
 
 

 
 

Current assets
 
 

 
 

     Cash and cash equivalents
 
$
276,583

 
$
31,703

     Short-term investments
 
69,899

 
120,559

     Accounts receivable, net 
 
20,181

 
16,296

     Deferred sales commission costs 
 
15,601

 

     Other current assets 
 
15,127

 
10,040

          Total current assets 
 
397,391

 
178,598

Property and equipment, net 
 
52,835

 
35,732

Intangible assets, net
 
11,680

 
11,958

Goodwill
 
39,694

 
40,054

Restricted cash
 
8,100

 
8,100

Deferred sales commission costs, noncurrent 
 
33,693

 

Other assets 
 
2,965

 
2,767

               Total assets
 
$
546,358

 
$
277,209

 
 
 

 
 

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 

 
 

Current liabilities
 
 

 
 

     Accounts payable 
 
$
32,280

 
$
23,899

     Accrued compensation 
 
18,437

 
17,412

     Accrued taxes 
 
13,862

 
6,367

     Deferred revenue 
 
3,336

 
2,559

     Other accrued liabilities 
 
6,790

 
6,026

          Total current liabilities 
 
74,705

 
56,263

 
 
 
 
 
Convertible senior notes, net
 
216,035

 

Other liabilities
 
6,228

 
2,172

          Total liabilities 
 
296,968

 
58,435

 
 
 
 
 
Stockholders' equity:
 
 
 
 
Common stock
 
96

 
93

Additional paid-in capital
 
506,949

 
425,790

Accumulated other comprehensive loss
 
(7,353
)
 
(5,645
)
Accumulated deficit
 
(250,302
)
 
(201,464
)
Total stockholders' equity 
 
249,390

 
218,774

               Total liabilities and stockholders' equity
 
$
546,358

 
$
277,209

 


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8x8, Inc. 
CONSOLIDATED STATEMENTS OF CASH FLOWS 
(In thousands, unaudited)
 
 
Twelve Months Ended
 
 
March 31,
 
 
2019
 
2018
Cash flows from operating activities:
 
 
 
 
Net loss
 
$
(88,739
)
 
$
(104,497
)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
 
 
 
 
     Depreciation
 
8,748

 
8,171

     Amortization of intangible assets
 
6,175

 
5,033

     Amortization of capitalized software
 
9,748

 
2,513

Amortization of debt discount and issuance costs
 
1,355

 

     Impairment of goodwill and long-lived assets
 

 
9,469

     Non-cash lease expenses
 
4,802

 

     Stock-based compensation expense
 
44,508

 
29,176

     Deferred income tax expense
 

 
66,273

     Gain on escrow settlement
 

 
(1,393
)
     Other
 
1,293

 
677

Changes in assets and liabilities:
 
 
 
 
     Accounts receivable, net
 
(5,393
)
 
(2,402
)
     Deferred sales commission costs
 
(11,082
)
 

     Other current and noncurrent assets
 
(4,337
)
 
(3,149
)
     Accounts payable and accruals
 
17,252

 
11,860

     Deferred revenue
 
802

 
310

Net cash (used in) provided by provided by operating activities
 
(14,868
)
 
22,041

 
 
 
 
 
Cash flows from investing activities:
 
 
 
 
Purchases of property and equipment
 
(9,096
)
 
(9,178
)
Cost of capitalized software
 
(25,622
)
 
(12,486
)
Proceeds from escrow settlement
 

 
1,393

Purchases of investments
 
(54,127
)
 
(115,224
)
Sales of investments
 
54,642

 
27,841

Proceeds from maturity of investments
 
50,700

 
100,382

Purchases of businesses
 
(5,625
)
 

Net cash provided by (used in) investing activities
 
10,872

 
(7,272
)
 
 
 
 
 
Cash flows from financing activities:
 
 
 
 
Capital lease payments
 
(949
)
 
(1,079
)
Payment of contingent consideration
 

 
(150
)
Repurchase and tax-related withholding of common stock
 
(7,823
)
 
(22,440
)
Proceeds from issuance of common stock under employee stock plans
 
12,202

 
7,229

Purchase of capped call transactions
 
(33,724
)
 

Net proceeds from issuance of convertible debt
 
279,532

 

Net cash provided by (used in) financing activities
 
249,238

 
(16,440
)
 
 
 
 
 
Effect of exchange rate changes on cash
 
(362
)
 
444

Net increase (decrease) in cash and cash equivalents
 
244,880

 
(1,227
)
 
 
 
 
 
Cash, cash equivalents and restricted cash, beginning of period
 
39,803

 
41,030

Cash, cash equivalents and restricted cash, end of period
 
$
284,683

 
$
39,803

 

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

 
 
Three Months Ended
 
Three Months Ended
 
Twelve Months Ended
 
Twelve Months Ended
Reconciliation of GAAP to Non-GAAP Expenses:
 
March 31, 2019
 
March 31, 2018
 
March 31, 2019
 
March 31, 2018
GAAP cost of service revenue 
 
$
28,809

 
 
 
$
23,833

 
 
 
$
107,192

 
 
 
$
86,244

 
 
     Amortization of acquired intangible assets
 
(1,310
)
 
 
 
(708
)
 
 
 
(4,874
)
 
 
 
(2,933
)
 
 
     Stock-based compensation expense
 
(1,560
)
 
 
 
(1,044
)
 
 
 
(5,527
)
 
 
 
(3,977
)
 
 
     Non-recurring items in operating expense
 

 
 
 
(87
)
 
 
 

 
 
 
(87
)
 
 
Non-GAAP cost of service revenue 
 
$
25,939

 
 
 
$
21,994

 
 
 
$
96,791

 
 
 
$
79,247

 
 
Non-GAAP service margin (as a percentage of service revenue)
 
$
63,121

 
70.9
 %
 
$
53,331

 
70.8
 %
 
$
237,647

 
71.1
 %
 
$
201,183

 
71.7
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP and Non-GAAP cost of product revenue 
 
$
5,784

 
 
 
$
5,826

 
 
 
$
22,780

 
 
 
$
20,482

 
 
Non-GAAP product margin (as a percentage of product revenue)
 
$
(1,077
)
 
-22.9
 %
 
$
(1,807
)
 
-45.0
 %
 
$
(4,632
)
 
-25.5
 %
 
$
(4,412
)
 
-27.5
 %
 
 
 
 
 

 
 
 
 
 
 
 
 

 
 
 
 
Non-GAAP gross margin (as a percentage of revenue)
 
$
62,044

 
66.2
 %
 
$
51,524

 
64.9
 %
 
$
233,015

 
66.1
 %
 
$
196,771

 
66.4
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP research and development 
 
$
18,064

 
 
 
$
10,427

 
 
 
$
62,063

 
 
 
$
36,405

 
 
     Stock-based compensation expense
 
(3,726
)
 
 
 
(1,973
)
 
 
 
(12,313
)
 
 
 
(6,625
)
 
 
Non-GAAP research and development (as a percentage of revenue)
 
$
14,338

 
15.3
 %
 
$
8,454

 
10.7
 %
 
$
49,750

 
14.1
 %
 
$
29,780

 
10.0
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP sales and marketing  
 
$
49,525

 
 
 
$
40,422

 
 
 
$
177,976

 
 
 
$
133,945

 
 
     Amortization of acquired intangible assets
 
(314
)
 
 
 
(330
)
 
 
 
(1,301
)
 
 
 
(2,100
)
 
 
     Stock-based compensation expense 
 
(3,549
)
 
 
 
(1,916
)
 
 
 
(11,951
)
 
 
 
(6,630
)
 
 
     Non-recurring items in operating expense
 
(203
)
 
 
 
(186
)
 
 
 
(516
)
 
 
 
(669
)
 
 
Non-GAAP sales and marketing (as a percentage of revenue)
 
$
45,459

 
48.5
 %
 
$
37,990

 
47.9
 %
 
$
164,208

 
46.6
 %
 
$
124,546

 
42.0
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP general and administrative  
 
$
20,365

 
 
 
$
12,566

 
 
 
$
73,563

 
 
 
$
51,851

 
 
     Stock-based compensation expense
 
(4,098
)
 
 
 
(3,106
)
 
 
 
(14,717
)
 
 
 
(11,944
)
 
 
     Non-recurring items in operating expense
 
(4,943
)
 
 
 
(861
)
 
 
 
(16,284
)
 
 
 
(1,373
)
 
 
Non-GAAP general and administrative (as a percentage of revenue)
 
$
11,324

 
12.1
 %
 
$
8,599

 
10.8
 %
 
$
42,562

 
12.1
 %
 
$
38,534

 
13.0
 %
 
 
 

 
 

 
 
 
 
 
 

 
 

 
 
 
 
 
 
 

 
 

 
 
 
 
 
 

 
 

 
 
 
 
Reconciliation of GAAP Net Loss to Non-GAAP Net Income (Loss):
 
 

 
 

 
 
 
 
 
 

 
 

 
 
 
 
GAAP net loss
 
$
(28,131
)
 
 
 
$
(13,262
)
 
 
 
$
(88,739
)
 
 
 
$
(104,497
)
 
 
     Amortization of acquired intangible assets
 
1,624

 
 
 
1,038

 
 
 
6,175

 
 
 
5,033

 
 
     Impairment of equipment, intangible assets,
     and goodwill
 

 
 
 

 
 
 

 
 
 
9,469

 
 
     Stock-based compensation expense
 
12,933

 
 
 
8,039

 
 
 
44,508

 
 
 
29,176

 
 
     Non-recurring items in operating expenses
 
5,146

 
 
 
1,134

 
 
 
16,800

 
 
 
2,129

 
 
     Non-recurring items in other income
     (expenses), net
 

 
 
 

 
 
 

 
 
 
(1,393
)
 
 
     Provision for income taxes
 
236

 
 
 
142

 
 
 
569

 
 
 
66,294

 
 
Non-GAAP net income (loss) before taxes (as a percentage of revenue)
 
$
(8,192
)
 
-8.7
 %
 
$
(2,909
)
 
(3.7
)%
 
$
(20,687
)
 
-5.9
 %
 
$
6,211

 
2.1
 %

10



     Non-GAAP tax expense (1)
 
236

 
 
 
33

 
 
 
569

 
 
 
330

 
 
Non-GAAP net income (loss) after taxes (as a percentage of revenue)
 
$
(8,428
)
 
-9.0
 %
 
$
(2,942
)
 
(3.7
)%
 
$
(21,256
)
 
-6.0
 %
 
$
5,881

 
2.0
 %
 
 
 

 
 

 
 
 
 
 
 

 
 

 
 
 
 
(1) The non-GAAP tax provision in fiscal year 2019 does not have a deferred income tax impact due to the full valuation allowance applied against deferred tax assets. The non-GAAP effective tax is based on current taxes for certain states and foreign jurisdictions.
Shares used in computing non-GAAP net income (loss) per share:
 
 

 
 

 
 
 
 
 
 

 
 

 
 
 
 
     Basic and diluted
 
95,879

 
 
 
92,526

 
 
 
94,533

 
 
 
92,017

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP net loss per share - Diluted
 
(0.29
)
 
 
 
$
(0.14
)
 
 
 
$
(0.94
)
 
 
 
$
(1.14
)
 
 
Non-GAAP net income (loss) before taxes per share - Diluted
 
(0.09
)
 
 
 
$
(0.03
)
 
 
 
$
(0.22
)
 
 
 
$
0.07

 
 
Non-GAAP net income (loss) after taxes per share - Diluted
 
(0.09
)
 
 
 
$
(0.03
)
 
 
 
$
(0.22
)
 
 
 
$
0.06

 
 
 

11



8x8, Inc.
RECONCILIATION OF ASC 605 TO ASC 606 STATEMENTS OF OPERATIONS
AND NON-GAAP NET INCOME (LOSS)
(In thousands, except per share amounts; unaudited)

 
 
Three Months Ended
 
Twelve Months Ended
 
 
March 31, 2019
 
March 31, 2019
 
 
ASC 605
 
Adjustments
 
ASC 606
(as reported)
 
ASC 605
 
Adjustments
 
ASC 606
(as reported)
Service revenue 
 
$
89,641

 
$
(581
)
 
$
89,060

 
$
335,671

 
$
(1,233
)
 
$
334,438

Product revenue
 
3,748

 
959

 
4,707

 
16,271

 
1,877

 
18,148

     Total revenue 
 
$
93,389

 
$
378

 
$
93,767

 
$
351,942

 
$
644

 
$
352,586

Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
 
     Sales and marketing 
 
$
53,373

 
$
(3,848
)
 
$
49,525

 
$
189,058

 
$
(11,082
)
 
$
177,976

Loss from operations 
 
$
(33,006
)
 
$
4,226

 
$
(28,780
)
 
$
(102,714
)
 
$
11,726

 
$
(90,988
)
Net loss 
 
$
(32,357
)
 
$
4,226

 
$
(28,131
)
 
$
(100,465
)
 
$
11,726

 
$
(88,739
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Net loss per share:
 
 
 
 
 
 
 
 
 
 
 
 
     Basic and diluted
 
$
(0.33
)
 
$
0.04

 
$
(0.29
)
 
$
(1.06
)
 
$
0.12

 
$
(0.94
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP net loss before taxes 
 
$
(12,418
)
 
$
4,226

 
$
(8,192
)
 
$
(32,413
)
 
$
11,726

 
$
(20,687
)
Non-GAAP net loss after taxes 
 
$
(12,654
)
 
$
4,226

 
$
(8,428
)
 
$
(32,982
)
 
$
11,726

 
$
(21,256
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP net loss per share:
 


 
 
 
 
 


 
 
 
 
     Basic and diluted
 
$
(0.13
)
 
$
0.04

 
$
(0.09
)
 
$
(0.34
)
 
$
0.12

 
$
(0.22
)
 

 

12



8x8, Inc.
GAAP STATEMENT OF OPERATIONS RECLASSIFICATIONS
(In thousands, unaudited)

 
 
 
 
 
 
 
 
 
Twelve Months
 
Three Months Ended
 
 
As Previously Reported
 
 
 
Ended
 
June 30,
 
September 30,
 
December 31,
 
March 31,
 
March 31,
 
2018
 
2018
 
2018
 
2019
 
2019
Pre-Reclassification
 
 
 
 
 
 
 
 
 
Total revenues
$
83,225

 
$
85,682

 
$
89,912

 
$
93,767

 
$
352,586

Cost of service revenue
15,079

 
15,866

 
17,043

 
17,672

 
65,660

Cost of product revenue
6,281

 
5,397

 
5,318

 
5,784

 
22,780

Research and development
13,110

 
13,933

 
16,876

 
17,815

 
61,734

Sales and marketing
53,305

 
55,930

 
60,717

 
64,610

 
234,562

General and administrative
11,433

 
16,543

 
14,196

 
16,666

 
58,838

Loss from operations
$
(15,983
)
 
$
(21,987
)
 
$
(24,238
)
 
$
(28,780
)
 
$
(90,988
)
 
 
 
 
 
 
 
 
 
 
Reclassifications
 
 
 
 
 
 
 
 
 
Total revenues
$

 
$

 
$

 
$

 
$

Cost of service revenue
9,470

 
10,336

 
10,589

 
11,137

 
41,532

Cost of product revenue

 

 

 

 

Research and development
(60
)
 
131

 
10

 
249

 
330

Sales and marketing
(12,810
)
 
(14,250
)
 
(14,441
)
 
(15,085
)
 
(56,586
)
General and administrative
3,400

 
3,783

 
3,842

 
3,699

 
14,724

Loss from operations
$

 
$

 
$

 
$

 
$

 
 
 
 
 
 
 
 
 
 
Post-Reclassification
 
 
 
 
 
 
 
 
 
Total revenues
$
83,225

 
$
85,682

 
$
89,912

 
$
93,767

 
$
352,586

Cost of service revenue
24,549

 
26,202

 
27,632

 
28,809

 
107,192

Cost of product revenue
6,281

 
5,397

 
5,318

 
5,784

 
22,780

Research and development
13,050

 
14,064

 
16,886

 
18,064

 
62,063

Sales and marketing
40,495

 
41,680

 
46,276

 
49,525

 
177,976

General and administrative
14,833

 
20,326

 
18,038

 
20,365

 
73,563

Loss from operations
$
(15,983
)
 
$
(21,987
)
 
$
(24,238
)
 
$
(28,780
)
 
$
(90,988
)
 
 
 
 
 
 
 
 
 
 

13



Percentage of revenues (Cost of service percentage of service revenue):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pre-Reclassification
First Quarter
 
Second Quarter
 
Third Quarter
 
Fourth Quarter
 
Year-to-date Fiscal 2019
  Cost of service revenue
19.3
 %
 
19.5
 %
 
19.8
 %
 
19.8
 %
 
19.6
 %
  Research and development
15.8
 %
 
16.3
 %
 
18.8
 %
 
19.0
 %
 
17.5
 %
  Sales and marketing
64.0
 %
 
65.3
 %
 
67.5
 %
 
68.9
 %
 
66.5
 %
  General and administrative
13.7
 %
 
19.3
 %
 
15.8
 %
 
17.8
 %
 
16.7
 %
 
 
 
 
 
 
 
 
 
 
Post-Reclassification
 
 
 
 
 
 
 
 
 
  Cost of service revenue
31.4
 %
 
32.2
 %
 
32.2
 %
 
32.3
 %
 
32.1
 %
  Research and development
15.7
 %
 
16.4
 %
 
18.8
 %
 
19.3
 %
 
17.6
 %
  Sales and marketing
48.7
 %
 
48.6
 %
 
51.5
 %
 
52.8
 %
 
50.5
 %
  General and administrative
17.8
 %
 
23.7
 %
 
20.1
 %
 
21.7
 %
 
20.9
 %
 
 
 
 
 
 
 
 
 
 
Increase (decrease) between pre- and post-reclassification
 
 
 
 
  Cost of service revenue
12.1
 %
 
12.7
 %
 
12.3
 %
 
12.5
 %
 
12.4
 %
  Research and development
(0.1
)%
 
0.2
 %
 
 %
 
0.3
 %
 
0.1
 %
  Sales and marketing
(15.4
)%
 
(16.6
)%
 
(16.1
)%
 
(16.1
)%
 
(16.0
)%
  General and administrative
4.1
 %
 
4.4
 %
 
4.3
 %
 
3.9
 %
 
4.2
 %


14



8x8, Inc.
GAAP STATEMENT OF OPERATIONS RECLASSIFICATIONS
(In thousands, unaudited)

 
 
 
 
 
 
 
 
 
Twelve Months
 
Three Months Ended
 
Ended
 
June 30,
 
September 30,
 
December 31,
 
March 31,
 
March 31,
 
2017
 
2017
 
2017
 
2018
 
2018
Pre-Reclassification
 
 
 
 
 
 
 
 
 
Total revenues
$
69,098

 
$
72,483

 
$
75,575

 
$
79,344

 
$
296,500

Cost of service revenue
11,662

 
12,757

 
12,318

 
13,952

 
50,689

Cost of product revenue
4,884

 
5,098

 
4,675

 
5,826

 
20,482

Research and development
7,943

 
8,311

 
8,527

 
10,016

 
34,797

Sales and marketing
41,110

 
41,163

 
48,830

 
52,940

 
184,044

General and administrative
8,956

 
9,616

 
10,003

 
10,340

 
38,915

  Impairment of goodwill, intangible assets, and equipment

 

 
9,469

 

 
9,469

Loss from operations
$
(5,457
)
 
$
(4,462
)
 
$
(18,247
)
 
$
(13,730
)
 
$
(41,896
)
 
 
 
 
 
 
 
 
 
 
Reclassifications
 
 
 
 
 
 
 
 
 
Total revenues
$

 
$

 
$

 
$

 
$

Cost of service revenue
8,497

 
8,591

 
8,586

 
9,881

 
35,555

Cost of product revenue

 

 

 

 

Research and development
418

 
403

 
376

 
411

 
1,608

Sales and marketing
(12,650
)
 
(12,483
)
 
(12,448
)
 
(12,518
)
 
(50,099
)
General and administrative
3,735

 
3,489

 
3,486

 
2,226

 
12,936

Loss from operations
$

 
$

 
$

 
$

 
$

 
 
 
 
 
 
 
 
 
 
Post-Reclassification
 
 
 
 
 
 
 
 
 
Total revenues
$
69,098

 
$
72,483

 
$
75,575

 
$
79,344

 
$
296,500

Cost of service revenue
20,159

 
21,348

 
20,904

 
23,833

 
86,244

Cost of product revenue
4,884

 
5,098

 
4,675

 
5,826

 
20,482

Research and development
8,361

 
8,714

 
8,903

 
10,427

 
36,405

Sales and marketing
28,460

 
28,680

 
36,382

 
40,422

 
133,945

General and administrative
12,691

 
13,105

 
13,489

 
12,566

 
51,851

  Impairment of goodwill, intangible assets, and equipment

 

 
9,469

 

 
9,469

Loss from operations
$
(5,457
)
 
$
(4,462
)
 
$
(18,247
)
 
$
(13,730
)
 
$
(41,896
)
 
 
 
 
 
 
 
 
 
 

15



Percentage of revenues (Cost of service percentage of service revenue):
 
 
 
 
Pre-Reclassification
First Quarter
 
Second Quarter
 
Third Quarter
 
Fourth Quarter
 
Year-to-date Fiscal 2018
  Cost of service revenue
17.9
 %
 
18.7
 %
 
17.1
 %
 
18.5
 %
 
18.1
 %
  Research and development
11.5
 %
 
11.5
 %
 
11.3
 %
 
12.6
 %
 
11.7
 %
  Sales and marketing
59.5
 %
 
56.8
 %
 
64.6
 %
 
66.7
 %
 
62.1
 %
  General and administrative
13.0
 %
 
13.3
 %
 
13.2
 %
 
13.0
 %
 
13.1
 %
 
 
 
 
 
 
 
 
 
 
Post-Reclassification
 
 
 
 
 
 
 
 
 
  Cost of service revenue
31.0
 %
 
31.3
 %
 
29.1
 %
 
31.6
 %
 
30.8
 %
  Research and development
12.1
 %
 
12.0
 %
 
11.8
 %
 
13.1
 %
 
12.3
 %
  Sales and marketing
41.2
 %
 
39.6
 %
 
48.1
 %
 
50.9
 %
 
45.2
 %
  General and administrative
18.4
 %
 
18.1
 %
 
17.8
 %
 
15.8
 %
 
17.5
 %
 
 
 
 
 
 
 
 
 
 
Increase (decrease) between pre- and post-reclassification
 
 
 
 
  Cost of service revenue
13.1
 %
 
12.6
 %
 
11.9
 %
 
13.1
 %
 
12.7
 %
  Research and development
0.6
 %
 
0.6
 %
 
0.5
 %
 
0.5
 %
 
0.5
 %
  Sales and marketing
(18.3
)%
 
(17.2
)%
 
(16.5
)%
 
(15.8
)%
 
(16.9
)%
  General and administrative
5.4
 %
 
4.8
 %
 
4.6
 %
 
2.8
 %
 
4.4
 %

16



8x8, Inc.
NON-GAAP STATEMENT OF OPERATIONS RECLASSIFICATIONS
(In thousands, unaudited)

 
 
 
 
 
 
 
 
 
Twelve Months
 
Three Months Ended
 
 
As Previously Reported
 
 
 
Ended
 
June 30,
 
September 30,
 
December 31,
 
March 31,
 
March 31,
 
2018
 
2018
 
2018
 
2019
 
2019
Pre-Reclassification
 
 
 
 
 
 
 
 
 
Total revenues
$
83,225

 
$
85,682

 
$
89,912

 
$
93,767

 
$
352,586

Cost of service revenue
13,511

 
14,117

 
15,019

 
15,682

 
58,329

Cost of product revenue
6,281

 
5,397

 
5,318

 
5,784

 
22,780

Research and development
10,916

 
11,110

 
13,306

 
14,089

 
49,421

Sales and marketing
49,138

 
51,790

 
54,463

 
58,774

 
214,165

General and administrative
7,518

 
7,550

 
7,812

 
8,515

 
31,395

Non-GAAP net loss
$
(3,511
)
 
$
(3,777
)
 
$
(5,539
)
 
$
(8,428
)
 
$
(21,256
)
 
 
 
 
 
 
 
 
 
 
Reclassifications
 
 
 
 
 
 
 
 
 
Total revenues
$

 
$

 
$

 
$

 
$

Cost of service revenue
8,903

 
9,593

 
9,709

 
10,257

 
38,462

Cost of product revenue

 

 

 

 

Research and development
(61
)
 
131

 
11

 
249

 
330

Sales and marketing
(11,363
)
 
(12,627
)
 
(12,652
)
 
(13,315
)
 
(49,957
)
General and administrative
2,521

 
2,903

 
2,932

 
2,809

 
11,165

Non-GAAP net loss

$

 
$

 
$

 
$

 
$

 
 
 
 
 
 
 
 
 
 
Post-Reclassification
 
 
 
 
 
 
 
 
 
Total revenues
$
83,225

 
$
85,682

 
$
89,912

 
$
93,767

 
$
352,586

Cost of service revenue
22,414

 
23,710

 
24,728

 
25,939

 
96,791

Cost of product revenue
6,281

 
5,397

 
5,318

 
5,784

 
22,780

Research and development
10,855

 
11,241

 
13,317

 
14,338

 
49,751

Sales and marketing
37,775

 
39,163

 
41,811

 
45,459

 
164,208

General and administrative
10,039

 
10,453

 
10,744

 
11,324

 
42,560

Non-GAAP net loss

$
(3,511
)
 
$
(3,777
)
 
$
(5,539
)
 
$
(8,428
)
 
$
(21,256
)
 
 
 
 
 
 
 
 
 
 

17



Percentage of revenues (Cost of service percentage of service revenue):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pre-Reclassification
First Quarter
 
Second Quarter
 
Third Quarter
 
Fourth Quarter
 
Year-to-date Fiscal 2019
  Cost of service revenue
17.3
 %
 
17.4
 %
 
17.5
 %