- Service Revenue of $175 million and Total Revenue of $181
million
- Cash flow from operations increased 45% year-over-year to $22.4
million
- Ending cash, cash equivalents, restricted cash and investments
of $170 million
- Continued momentum from new products, including AI-based
Intelligent Customer Assistant
8x8, Inc. (NASDAQ: EGHT), a leading integrated cloud contact
center and unified communications platform provider, today reported
financial results for the third quarter of fiscal 2024 ended
December 31, 2023.
Third Quarter Fiscal 2024 Financial
Results:
- Total revenue of $181.0 million, compared to $184.4 million in
the third quarter of fiscal 2023.
- Service revenue of $175.1 million, compared to $175.8 million
in the third quarter of fiscal 2023.
- GAAP operating loss was $9.4 million, an improvement of 48.1%
compared to GAAP operating loss of $18.1 million in the third
quarter of fiscal 2023.
- Non-GAAP operating profit was $24.3 million, an increase of 32%
compared to non-GAAP operating profit of $18.3 million in the third
quarter of fiscal 2023.
- GAAP net loss was $21.2 million, a decrease of 18%, compared to
GAAP net loss of $26.0 million in the third quarter of fiscal
2023.
- Non-GAAP net income was $14.8 million, an increase of 78.5%
compared to non-GAAP net income of $8.3 million in the third
quarter of fiscal 2023.
- Adjusted EBITDA was $30.7 million, an increase of 19% compared
to Adjusted EBITDA of $25.7 million in the third quarter of fiscal
2023.
“I am pleased to report that we met our guidance ranges for
service revenue and total revenue and exceeded our guidance range
for non-GAAP operating margin in the third quarter,” said Samuel
Wilson, Chief Executive Officer of 8x8, Inc. “Non-GAAP operating
margin exceeded our guidance range and cash flow from operations
was strong again this quarter.
"At the beginning of this fiscal year we outlined a plan to
return $250 million to our investors primarily through debt
repayment in fiscal years 2024 through fiscal 2026. We will retire
the remaining 2024 Notes upon maturity on February 1, 2024 using
$63.3 million of cash out of the $170 million of cash, cash
equivalents and investments on the balance sheet as of December 31,
2023. Once the redemption is completed, we will have returned $88.3
million to debt investors since the beginning of fiscal 2024,”
added Wilson.
Third Quarter Fiscal 2024 Financial
Metrics and Recent Business Highlights:
Financial Metrics
- Total ARR was $707 million at quarter-end, an increase of 1%
from the end of the same period last year.
- GAAP gross margin was 69%, compared to 69% in the same period
last year. Non-GAAP gross margin was 72%, compared to 72% in the
same period last year.
- GAAP service revenue gross margin was 72%, compared to 73% in
the same period last year. Non-GAAP service revenue gross margin
was 74%, compared to 76% in the same period last year.
- Cash provided by operating activities was $22.4 million for the
third quarter of fiscal 2024, compared to $15.5 million in the same
period last year.
- Cash, cash equivalents, restricted cash and investments were
$170.4 million on December 31, 2023, compared to $139.0 million on
March 31, 2023.
A reconciliation of the non-GAAP measures to the most directly
comparable GAAP measures and other information relating to non-GAAP
measures is included in the supplemental reconciliation at the end
of this release.
Recent Business Highlights:
Product Innovation Highlights
- Announced a new product line to deliver cross-organization
customer engagement, empowering end-to-end CX orchestration for all
customer touch points across the entire organization. The new
capabilities further bridge the gap between UCaaS and CCaaS,
transforming the availability, utilization, and contextualization
of customer interaction data to enable smarter decision making
through powerful and predictive insights.
- Announced the availability of native video functionality for
8x8 Contact Center to enhance speed-to-resolution and overall
customer experiences.
- Launched 8x8 Remote Fix™ for UK housing associations, delivered
as part of 8x8 Contact Center, to provide public housing contact
center agents with the ability to elevate real-time tenant
interactions to video using a secure video link to visually address
and resolve issues.
- Delivered the latest 8x8 XCaaS™ (Experience Communications as a
Service™) integrated cloud contact center and unified
communications platform innovations for enhanced customer and
employee experiences, including AI-powered voice conversational
self-service and the ability to elevate contact center interactions
to video, further integrations with Microsoft Teams, and 8x8 video
meeting enhancements.
- Announced 8x8 Sales Assist™ for retailers. Combining components
of 8x8 Contact Center, 8x8 CPaaS, and 8x8 Work, the retail solution
provides connected journeys across self- and assisted-service use
cases while enabling retailers to improve customer
satisfaction.
Industry Recognition
- Recognized as a Leader in the 2023 Gartner® Magic Quadrant™ for
Unified Communications as a Service. This is the twelfth
consecutive year 8x8 has been recognized as a Leader in this
report.
- Won 2023 CRN Product of the Year Awards in the Unified
Communications and Collaboration - Enterprise category for revenue
and profit.
- Won TrustRadius’ 2023 Best Of Awards in the categories of Best
Feature Set, Best Value for the Price, and Best Relationship in
VoIP.
- Named a FrontRunner in the Software Advice Best IVR Software
list of 2023, highlighting the top-rated IVR Systems products in
North America.
- Awarded 38 badges in the G2 Winter 2024 Awards, including
Leader in Enterprise, High Performer in Enterprise, and Momentum
Leader, among others.
- Won 2023 Comms Council UK Award for Best Enterprise
Service.
Corporate ESG and Leadership Updates
- Appointed Michelle Paitich as Global Vice President of Channel
Sales. Paitich is a recognized go-to-market leader and talented
partner executive, excelling as an organization builder and problem
solver, and is known for building high-performing teams and partner
programs while simultaneously managing operations to exceed sales
goals.
- Appointed Mike McCarron as Vice President of Customer Strategy.
McCarron has over 20 years of enterprise software experience
building successful go-to-market teams, developing long-term
relationships and deep alignments with customers, and fostering
strong internal collaboration and communication.
- Appointed Brian Paterson as Global Vice President of North
America Sales. Paterson is a recognized executive SaaS sales leader
with a proven two-decade track record of developing incredible
teams and successful customer and partner relationships that result
in substantial revenue growth.
- Published the Environmental Policy and the 2022 Carbon
Emissions & Reduction Plan Report for 8x8 UK, Ltd.
- The 8x8 Diversity Council updated and published the 8x8
Diversity Statement, codifying our core beliefs and the Council's
mission statement in a single document.
Fourth Quarter and Updated Fiscal 2024
Financial Outlook:
Management provides expected ranges for total revenue, service
revenue and non-GAAP operating margin based on its evaluation of
the current business environment. The Company emphasizes that these
expectations are subject to various important cautionary factors
referenced in the section entitled "Forward-Looking Statements"
below.
Fourth Quarter Fiscal 2024 Ending March 31, 2024
- Service revenue in the range of $171 million to $175
million.
- Total revenue in the range of $176 million to $181
million.
- Non-GAAP operating margin in the range of approximately
10%.
Fiscal Year 2024 Ending March 31, 2024
- Service revenue in the range of $699.1 million to $703.1
million.
- Total revenue in the range of $725.3 million to $730.3
million.
- Non-GAAP operating margin in the range of 12.5% to 13%.
The Company does not reconcile its forward-looking estimates of
non-GAAP operating margins to the corresponding GAAP measures of
GAAP operating margin due to the significant variability of, and
difficulty in making accurate forecasts and projections with
regards to, the various expenses it excludes. For example, future
hiring and employee turnover may not 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. The actual
amounts of these excluded items could have a significant impact on
the Company's GAAP operating margins. Accordingly, management
believes that reconciliations of this forward-looking non-GAAP
financial measure to the corresponding GAAP measure are not
available without unreasonable effort. All projections are on a
non-GAAP basis. Additionally, our increased emphasis on
profitability and cash flow generation may not be successful. The
reduction in our total costs as a percentage of revenue may
negatively impact our revenue and our business in ways we don't
anticipate and may not achieve the desired outcome. See the
Explanation of GAAP to Non-GAAP Reconciliation below for the
definition of non-GAAP operating margin.
Conference Call Information:
Management will host a conference call to discuss earnings
results on January 31, at 2:00 p.m. Pacific Time (5:00 p.m. Eastern
Time). The conference call will last approximately 60 minutes.
Participants may:
- Register to participate in the live call at
https://register.vevent.com/register/BIe52141f51630475693cd3f7e4211a034
- Access the live webcast and replay from the Company’s investor
relations events and presentations page at
https://8x8.gcs-web.com/news-events/events-presentations.
Participants should plan to dial in or log on 10 minutes prior
to the start time. The webcast will be archived on 8x8's website
for a period of at least 30 days. For additional information, visit
https://8x8.gcs-web.com/.
About 8x8, Inc.
8x8, Inc. (NASDAQ: EGHT) is transforming the future of business
communications as a leading software as a service provider of 8x8
XCaaS™ (Experience Communications as a Service™), an integrated
contact center, voice communications, video, chat, and SMS solution
built on one global cloud communications platform. 8x8 uniquely
eliminates the silos between unified communications as a service
(UCaaS) and contact center as a service (CCaaS) to power the
communications requirements of all employees globally as they work
together to deliver differentiated customer experiences. For
additional information, visit www.8x8.com, or follow 8x8 on
LinkedIn, Twitter and Facebook.
Forward Looking Statements:
This news release contains "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995
and Section 21E of the Securities Exchange Act of 1934. Any
statements that are not statements of historical fact may be deemed
to be forward-looking statements. For example, words such as "may,"
"will," "should," "estimates," "predicts," "potential," "continue,"
"strategy," "believes," "anticipates," "plans," "expects,"
"intends," and similar expressions are intended to identify
forward-looking statements. These forward-looking statements
include but are not limited to: changing industry trends; the size
of our market opportunity; the potential success and impact of our
investments in AI; our strategic framework; our ability to increase
profitability and cash flow to deleverage our balance sheet and
fund investment in innovation; whether our UC and CC traffic will
increase; our future revenue and growth; whether we can sustain an
increasing pace of innovation; the success of our go to market
engine; our ability to improve G&A synergies; our ability to
enhance shareholder value; and our financial outlook, revenue
growth, and profitability, including whether we will achieve
sustainable growth and profitability.
You should not place undue reliance on such forward-looking
statements. Actual results could differ materially from those
projected in forward-looking statements depending on a variety of
factors, including, but not limited to: a reduction in our total
costs as a percentage of revenue may negatively impact our revenues
and our business; customer adoption and demand for our products may
be lower than we anticipate; the impact of economic downturns on us
and our customers; ongoing volatility and conflict in the political
environment, including Russia's invasion of Ukraine; inflationary
pressures and rising interest rates; competitive dynamics of the
cloud communication and collaboration markets, including voice,
contact center, video, messaging, and communication application
programming interfaces, in which we compete may change in ways we
are not anticipating; impact of supply chain disruptions; third
parties may assert ownership rights in our IP, which may limit or
prevent our continued use of the core technologies behind our
solutions; our customer churn rate may be higher than we
anticipate; our investments in marketing, channel and value-added
resellers, new products, and our acquisition of Fuze, Inc. may not
result in revenue growth; and we may not achieve our target service
revenue growth, or the revenue, operating margin or other amounts
we forecast in our guidance, for a particular quarter or for the
full fiscal year. Our increased emphasis on profitability and cash
flow generation may not be successful. The reduction in our total
costs as a percentage of revenue may negatively impact our revenue
and our business in ways we don't anticipate and may not achieve
the desired outcome.
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.
Explanation of GAAP to Non-GAAP Reconciliation
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 to understand, manage, and evaluate
the business, and to make operating decisions. Management believes
they are useful to investors, as a supplement to GAAP measures, in
evaluating the Company's ongoing operational performance.
Management also believes that some of 8x8’s investors use these
Non-GAAP financial measures as an additional tool in evaluating
8x8's ongoing "core operating performance" in the ordinary,
ongoing, and customary course of the Company's operations. Core
operating performance excludes items that are non-cash, not
expected to recur, or not reflective of ongoing financial results.
Management also believes that looking at the Company’s core
operating performance provides consistency in period-to-period
comparisons and trends.
These Non-GAAP financial measures may be calculated differently
from, and therefore may not be comparable to, similarly titled
measures used by other companies, which limits the usefulness of
these measures for comparative purposes. Management recognizes that
these Non-GAAP financial measures have limitations as analytical
tools, including the fact that management must exercise judgment in
determining which types of items to exclude from the Non-GAAP
financial information. 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
in the table titled "Reconciliation of GAAP to Non-GAAP Financial
Measures". Detailed explanations of the adjustments from comparable
GAAP to Non-GAAP financial measures are as follows:
Non-GAAP Costs of Revenue, Costs of Service Revenue and Costs of
Other Revenue
Non-GAAP Costs of Revenue includes: (i) Non-GAAP Cost of Service
Revenue, which is Cost of Service Revenue excluding amortization of
acquired intangible assets, stock-based compensation expense and
related employer payroll taxes, certain legal and regulatory costs,
and certain severance, transition and contract termination costs;
and (ii) Non-GAAP Cost of Other Revenue, which is Cost of Other
Revenue excluding stock-based compensation expense and related
employer payroll taxes, certain legal and regulatory costs, and
certain severance, transition and contract termination costs.
Non-GAAP Service Revenue Gross Margin, Other Revenue Gross
Margin, and Total Revenue Gross Margin
Non-GAAP Service Revenue Gross Profit and Margin as a percentage
of Service Revenue and Non-GAAP Other Revenue Gross Profit and
Margin as a percentage of Other Revenue are computed as Service
Revenue less Non-GAAP Cost of Service Revenue divided by Service
Revenue and Other Revenue less Non-GAAP Cost of Other Revenue
divided by Other Revenue, respectively. Non-GAAP Total Revenue
Gross Profit and Margin as a percentage of Total Revenue is
computed as Total Revenue less Non-GAAP Cost of Service Revenue and
Non-GAAP Cost of Other Revenue divided by Total Revenue. Management
believes the Company’s investors benefit from understanding these
adjustments and from an alternative view of the Company’s Cost of
Service Revenue and Cost of Other Revenue, as well as the Company's
Service, Other and Total Revenue Gross Margin performance compared
to prior periods and trends.
Non-GAAP Operating Expenses
Non-GAAP Operating Expenses excludes Costs of Revenue and
includes Non-GAAP Research and Development expenses, Non-GAAP Sales
and Marketing expenses, and Non-GAAP General and Administrative
expenses, each of which excludes amortization of acquired
intangible assets, stock-based compensation expense and related
employer payroll taxes, acquisition and integration expenses, and
certain severance, transition and contract termination costs.
Management believes that these exclusions provide investors with a
supplemental view of the Company’s ongoing operational
expenses.
Non-GAAP Operating Profit and Non-GAAP Operating Margin
Non-GAAP Operating Profit excludes: amortization of acquired
intangible assets, stock-based compensation expense and related
employer payroll taxes, acquisition and integration expenses,
certain legal and regulatory costs, and certain severance,
transition and contract termination costs from Operating Profit
(Loss). Non-GAAP Operating Margin is Non-GAAP Operating Profit
divided by Revenue. Management believes that these exclusions
provide investors with a supplemental view of the Company’s ongoing
operating performance.
Non-GAAP Other Income (expense), net
Non-GAAP Other Income (expense), net excludes: amortization of
debt discount and issuance cost, gain or loss on debt
extinguishment, gain or loss on remeasurement of warrants, and
sub-lease income from Other Income (expense), net. Management
believes the Company’s investors benefit from this supplemental
information to facilitate comparison of the Company’s other income
(expense), performance to prior results and trends.
Non-GAAP Net Income and Adjusted EBITDA
Non-GAAP Net Income excludes: amortization of acquired
intangible assets, stock-based compensation expense and related
employer payroll taxes, acquisition and integration expenses,
certain legal and regulatory costs, certain severance, transition
and contract termination costs, amortization of debt discount and
issuance cost, gain or loss on debt extinguishment, gain or loss on
remeasurement of warrants, and sub-lease income. Adjusted EBITDA
excludes interest expense, provision for income taxes,
depreciation, amortization of capitalized internal use software,
and other income (expense), net from non-GAAP net income.
Management believes the Company’s investors benefit from
understanding these adjustments and an alternative view of our net
income performance as compared to prior periods and trends.
Non-GAAP Net Income Per Share – Basic and Non-GAAP Net Income
Per Share - Diluted
Non-GAAP Net Income Per Share – Basic is Non-GAAP Net Income
divided by the weighted-average basic shares outstanding. Non-GAAP
Net Income Per Share – Diluted is Non-GAAP Net Income divided by
the weighted-average diluted shares outstanding. Diluted shares
outstanding include the effect of potentially dilutive securities
from stock-based benefit plans and convertible senior notes. These
potentially dilutive securities are excluded from the computation
of net loss per share attributable to common stockholders on a GAAP
basis because the effect would have been anti-dilutive. They are
added for the computation of diluted net income per share on a
non-GAAP basis in periods when 8x8 has net profit on a non-GAAP
basis as their inclusion provides a better indication of 8x8’s
underlying business performance. Management believes the Company’s
investors benefit by understanding our Non-GAAP net income
performance as reflected in a per share calculation as ways of
measuring performance by ownership in the Company. Management
believes these adjustments offer investors a useful view of the
Company’s diluted net income per share as compared to prior periods
and trends.
Management evaluates and makes decisions about its business
operations based on Non-GAAP financial information by excluding
items management does not consider to be “core costs” or “core
proceeds.” Management believes some of its investors also evaluate
our "core operating performance" as a means of evaluating our
performance in the ordinary, ongoing, and customary course of our
operations. Management excludes the amortization of acquired
intangible assets, which primarily represents a non-cash expense of
technology and/or customer relationships already developed, to
provide a supplemental way for investors to compare the Company’s
operations pre-acquisition to those post-acquisition and to those
of our competitors that have pursued internal growth strategies.
Stock-based compensation expense has been excluded because it is a
non-cash expense and relies on valuations based on future
conditions and events, such as the market price of 8x8 common
stock, that are difficult to predict and/or largely not within the
control of management. The related employer payroll taxes for
stock-based compensation are excluded since they are incurred only
due to the associated stock-based compensation expense. Acquisition
and integration expenses consist of external and incremental costs
resulting directly from merger and acquisition and strategic
investment activities such as legal and other professional
services, due diligence, integration, and other closing costs,
which are costs that vary significantly in amount and timing. Legal
and regulatory costs include litigation and other professional
services, as well as certain tax and regulatory liabilities.
Severance, transition and contract termination costs include
employee termination benefits, executive severance agreements,
cancellation of certain contracts, and lease impairments. Debt
amortization expenses relate to the non-cash accretion of the debt
discount.
8x8, INC.
CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited, in thousands, except
per share amounts)
Three Months Ended December
31,
Nine Months Ended December
31,
2023
2022
2023
2022
Service revenue
$
175,069
$
175,765
$
528,089
$
533,482
Other revenue
5,937
8,635
21,203
25,927
Total revenue
181,006
184,400
549,292
559,409
Operating expenses:
Cost of service revenue
48,983
47,335
144,403
151,920
Cost of other revenue
7,177
10,176
23,533
34,302
Research and development
32,787
35,062
102,286
106,036
Sales and marketing
66,997
79,021
204,189
243,035
General and administrative
23,419
27,158
77,231
87,788
Impairment of long-lived assets
11,034
3,729
11,034
6,153
Total operating expenses
190,397
202,481
562,676
629,234
Loss from operations
(9,391
)
(18,081
)
(13,384
)
(69,825
)
Other (expense) income, net
(11,310
)
(7,912
)
(29,041
)
7,154
Loss before provision for income taxes
(20,701
)
(25,993
)
(42,425
)
(62,671
)
Provision for income taxes
521
37
1,576
1,041
Net loss
$
(21,222
)
$
(26,030
)
$
(44,001
)
$
(63,712
)
Net loss per share:
Basic and diluted
$
(0.17
)
$
(0.23
)
$
(0.37
)
$
(0.55
)
Weighted average number of shares:
Basic and diluted
122,556
113,201
120,042
116,298
SUPPLEMENTAL DETAILS - OTHER
(EXPENSE) INCOME, NET
(Unaudited, in thousands)
Three Months Ended December
31,
Nine Months Ended December
31,
2023
2022
2023
2022
Interest expense
$
(8,878
)
$
(7,607
)
$
(26,777
)
$
(13,115
)
Amortization of debt discount and issuance
costs
(1,157
)
(1,136
)
(3,397
)
(3,136
)
Gain (loss) on warrants remeasurement
(1,297
)
(771
)
1,234
522
Gain (loss) on debt extinguishment
—
2,144
(1,766
)
18,250
Gain on sale of assets
—
1,757
—
1,826
Gain (loss) on foreign exchange
(1,841
)
(2,616
)
(1,080
)
1,984
Other income
1,863
317
2,745
823
Other (expense) income, net
$
(11,310
)
$
(7,912
)
$
(29,041
)
$
7,154
8x8, INC.
CONSOLIDATED BALANCE
SHEETS
(Unaudited, in thousands)
December 31, 2023
March 31, 2023
ASSETS
Current assets:
Cash and cash equivalents
$
168,513
$
111,400
Restricted cash, current
356
511
Short-term investments
1,035
26,228
Accounts receivable, net of allowance for
expected credit losses of $2,723 and $3,644 as of December 31, 2023
and March 31, 2023, respectively
63,042
62,307
Deferred sales commission costs,
current
36,996
38,048
Other current assets
32,528
34,630
Total current assets
302,470
273,124
Property and equipment, net
55,661
57,871
Operating lease, right-of-use assets
38,546
52,444
Intangible assets, net
91,816
107,112
Goodwill
267,453
266,863
Restricted cash, non-current
462
818
Deferred sales commission costs,
non-current
56,317
67,644
Other assets, non-current
13,993
15,934
Total assets
$
826,718
$
841,810
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable
$
49,493
$
46,802
Accrued compensation
20,573
29,614
Accrued taxes
37,781
29,570
Operating lease liabilities, current
11,763
11,504
Deferred revenue, current
32,778
34,909
Convertible senior notes, current
63,260
62,932
Other accrued liabilities
14,878
14,556
Total current liabilities
230,526
229,887
Operating lease liabilities,
non-current
59,417
65,623
Deferred revenue, non-current
10,128
10,615
Convertible senior notes
197,561
196,821
Term loan
211,092
231,993
Other liabilities, non-current
8,322
6,965
Total liabilities
717,046
741,904
Stockholders' equity:
Preferred stock: $0.001 par value,
5,000,000 shares authorized, none issued and outstanding as of
December 31, 2023 and March 31, 2023
—
—
Common stock: $0.001 par value,
300,000,000 shares authorized, 123,219,383 shares and 114,659,255
shares issued and outstanding as of December 31, 2023 and March 31,
2023, respectively
123
115
Additional paid-in capital
956,005
905,635
Accumulated other comprehensive loss
(9,538
)
(12,927
)
Accumulated deficit
(836,918
)
(792,917
)
Total stockholders' equity
109,672
99,906
Total liabilities and stockholders'
equity
$
826,718
$
841,810
8x8, INC.
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(Unaudited, in thousands)
Nine Months Ended December
31,
2023
2022
Cash flows from operating
activities:
Net loss
$
(44,001
)
$
(63,712
)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation
6,133
8,056
Amortization of intangible assets
15,296
15,954
Amortization of capitalized internal-use
software costs
14,418
16,397
Impairment of capitalized software
—
3,729
Amortization of debt discount and issuance
costs
3,397
3,136
Amortization of deferred sales commission
costs
30,150
28,533
Allowance for credit losses
1,663
1,984
Operating lease expense, net of
accretion
8,057
8,667
Impairment of right-of-use assets
11,034
2,424
Stock-based compensation expense
46,835
73,516
Loss (gain) on debt extinguishment
1,766
(18,250
)
Gain on remeasurement of warrants
(1,234
)
(522
)
Gain on sale of assets
—
(1,826
)
Other
(570
)
(65
)
Changes in assets and liabilities:
Accounts receivable
(2,188
)
(236
)
Deferred sales commission costs
(17,095
)
(23,473
)
Other current and non-current assets
(586
)
4,715
Accounts payable and accruals
(4,471
)
(22,858
)
Deferred revenue
(2,272
)
(1,005
)
Net cash provided by operating
activities
66,332
35,164
Cash flows from investing
activities:
Purchases of property and equipment
(2,341
)
(2,685
)
Proceeds from sale of intangible
assets
—
1,000
Capitalized internal-use software
costs
(10,913
)
(6,768
)
Purchases of investments
(6,174
)
(42,899
)
Sales of investments
—
8,296
Maturities of investments
31,659
44,739
Acquisition of businesses, net of cash
acquired
—
(1,250
)
Net cash provided by investing
activities
12,231
433
Cash flows from financing
activities:
Proceeds from issuance of common stock
under employee stock plans
2,365
1,710
Repayment of principal on term loan
(25,000
)
—
Net proceeds from term loan
—
234,015
Repayment and exchange of convertible
senior notes
—
(211,786
)
Repurchase of common stock
—
(60,214
)
Net cash used in financing
activities
(22,635
)
(36,275
)
Effect of exchange rate changes on
cash
674
(5,747
)
Net increase in cash, cash equivalents and
restricted cash
56,602
(6,425
)
Cash, cash equivalents and restricted
cash, beginning of year
112,729
100,714
Cash, cash equivalents and restricted
cash, end of year
$
169,331
$
94,289
Supplemental disclosures of cash flow
information:
Nine Months Ended December
31,
2023
2022
Interest paid
24,663
9,063
Income taxes paid
5,444
1,518
Warrants issued in connection with term
loan
—
5,915
Shares issued in connection with term loan
and convertible senior notes
—
5,082
8x8, INC.
RECONCILIATION OF GAAP TO
NON-GAAP FINANCIAL MEASURES
(Unaudited, in thousands, except
per share amounts)
Three Months Ended December
31,
Nine Months Ended December
31,
2023
2022
2023
2022
Costs of Revenue:
GAAP cost of service revenue (as a
percentage of service revenue)
$
48,983
28.0
%
$
47,335
26.9
%
$
144,403
27.3
%
$
151,920
28.5
%
Amortization of acquired intangible
assets
(2,118
)
(2,125
)
(6,354
)
(6,634
)
Stock-based compensation expense and
related employer payroll taxes
(1,694
)
(2,148
)
(5,661
)
(7,301
)
Legal and regulatory costs
—
(85
)
—
(85
)
Severance, transition and contract exit
costs
(444
)
(348
)
(732
)
(1,526
)
Non-GAAP cost of service revenue (as a
percentage of service revenue)
$
44,727
25.5
%
$
42,629
24.3
%
$
131,656
24.9
%
$
136,374
25.6
%
GAAP service revenue margin (as a
percentage of service revenue)
$
126,086
72.0
%
$
128,430
73.1
%
$
383,686
72.7
%
$
381,562
71.5
%
Non-GAAP service revenue margin (as a
percentage of service revenue)
$
130,342
74.5
%
$
133,136
75.7
%
$
396,433
75.1
%
$
397,108
74.4
%
GAAP cost of other revenue (as a
percentage of other revenue)
$
7,177
120.9
%
$
10,176
117.8
%
$
23,533
111.0
%
$
34,302
132.3
%
Stock-based compensation expense and
related employer payroll taxes
(459
)
(902
)
(1,578
)
(2,986
)
Severance, transition and contract exit
costs
(74
)
(517
)
(124
)
(1,294
)
Non-GAAP cost of other revenue
$
6,644
111.9
%
$
8,757
101.4
%
$
21,831
103.0
%
$
30,022
115.8
%
GAAP other revenue margin (as a percentage
of other revenue)
$
(1,240
)
(20.9
)%
$
(1,541
)
(17.8
)%
$
(2,330
)
(11.0
)%
$
(8,375
)
(32.3
)%
Non-GAAP other revenue margin (as a
percentage of other revenue)
$
(707
)
(11.9
)%
$
(122
)
(1.4
)%
$
(628
)
(3.0
)%
$
(4,095
)
(15.8
)%
GAAP gross margin (as a percentage of
total revenue)
$
124,846
69.0
%
$
126,889
68.8
%
$
381,356
69.4
%
$
373,187
66.7
%
Non-GAAP gross margin (as a percentage of
total revenue)
$
129,635
71.6
%
$
133,014
72.1
%
$
395,805
72.1
%
$
393,013
70.3
%
Operating Expenses:
GAAP research and development (as a
percentage of total revenue) (1)
$
32,787
18.1
%
$
35,062
19.0
%
$
102,286
18.6
%
$
106,036
19.0
%
Stock-based compensation expense and
related employer payroll taxes
(5,190
)
(7,183
)
(17,973
)
(23,149
)
Acquisition and integration costs
—
—
(98
)
Severance, transition and contract exit
costs (1)
(585
)
(1,167
)
(1,798
)
(1,311
)
Non-GAAP research and development (as a
percentage of total revenue)
$
27,012
14.9
%
$
26,712
14.5
%
$
82,417
15.0
%
$
81,576
14.6
%
GAAP sales and marketing (as a percentage
of total revenue)
$
66,997
37.0
%
$
79,021
42.9
%
$
204,189
37.2
%
$
243,035
43.4
%
Amortization of acquired intangible
assets
(2,982
)
(3,106
)
(8,946
)
(9,319
)
Stock-based compensation expense and
related employer payroll taxes
(3,894
)
(6,653
)
(13,324
)
(21,816
)
Severance, transition and contract exit
costs
(342
)
(2,351
)
(745
)
(3,072
)
Non-GAAP sales and marketing (as a
percentage of total revenue)
$
59,779
33.0
%
$
66,911
36.3
%
$
181,174
33.0
%
$
208,828
37.3
%
GAAP general and administrative (as a
percentage of total revenue) (2)
$
23,419
12.9
%
$
27,158
14.7
%
$
77,231
14.1
%
$
87,788
15.7
%
Stock-based compensation expense and
related employer payroll taxes
(3,653
)
(4,354
)
(11,456
)
(19,040
)
Acquisition and integration costs
(102
)
(555
)
(654
)
(2,733
)
Legal and regulatory costs
(98
)
(57
)
(5,445
)
212
Severance, transition and contract exit
costs (2)
(978
)
(1,130
)
(1,912
)
(1,155
)
Non-GAAP general and administrative (as a
percentage of total revenue)
$
18,588
10.3
%
$
21,062
11.4
%
$
57,764
10.5
%
$
65,072
11.6
%
GAAP Operating Expenses (as a percentage
of total revenue)
$
123,203
68.1
%
$
141,241
76.6
%
$
383,706
69.9
%
$
436,859
78.1
%
Non-GAAP Operating Expenses (as a
percentage of total revenue)
$
105,379
58.2
%
$
114,685
62.2
%
$
321,355
58.5
%
$
355,476
63.5
%
Operating Profit (Loss):
GAAP loss from operations (as a percentage
of total revenue)
$
(9,391
)
(5.2
)%
$
(18,081
)
(9.8
)%
$
(13,384
)
(2.4
)%
$
(69,825
)
(12.5
)%
Amortization of acquired intangible
assets
5,100
5,231
15,300
15,953
Stock-based compensation expense and
related employer payroll taxes
14,890
21,240
49,992
74,292
Acquisition and integration costs
102
555
752
2,733
Legal and regulatory costs
98
142
5,445
(127
)
Severance, transition and contract exit
costs (3)
2,423
5,513
5,311
8,358
Impairment of long-lived assets (4)
11,034
3,729
11,034
6,153
Non-GAAP operating profit (as a percentage
of total revenue)
$
24,256
13.4
%
$
18,329
9.9
%
$
74,450
13.6
%
$
37,537
6.7
%
Other Income (Expenses):
GAAP other income (expense), net (as a
percentage of total revenue)
$
(11,310
)
(6.2
)%
$
(7,912
)
(4.3
)%
$
(29,041
)
(5.3
)%
$
7,154
1.3
%
Amortization of debt discount and issuance
cost
1,157
1,136
3,398
3,136
(Gain) loss on debt extinguishment
—
(2,144
)
1,766
(18,250
)
(Gain) loss on warrants remeasurement
1,297
771
(1,234
)
(522
)
Gain on sale of assets
—
(1,757
)
—
(1,826
)
Sublease Income
(120
)
(116
)
(351
)
(348
)
Non-GAAP other (expense) income, net (as a
percentage of total revenue)
$
(8,976
)
(5.0
)%
$
(10,022
)
(5.4
)%
$
(25,462
)
(4.6
)%
$
(10,656
)
(1.9
)%
Net Income (Loss):
GAAP net loss (as a percentage of total
revenue)
$
(21,222
)
(11.7
)%
$
(26,030
)
(14.1
)%
$
(44,001
)
(8.0
)%
$
(63,712
)
(11.4
)%
Amortization of acquired intangible
assets
5,100
5,231
15,300
15,953
Stock-based compensation expense and
related employer payroll taxes
14,890
21,240
49,992
74,292
Acquisition and integration costs
102
555
752
2,733
Legal and regulatory costs
98
142
5,445
(127
)
Severance, transition and contract exit
costs (3)
2,423
5,513
5,311
8,358
Impairment of long-lived assets (4)
11,034
3,729
11,034
6,153
Amortization of debt discount and issuance
cost
1,157
1,136
3,398
3,136
(Gain) loss on debt extinguishment
—
(2,144
)
1,766
(18,250
)
(Gain) loss on warrants remeasurement
1,297
771
(1,234
)
(522
)
Gain on sale of assets
—
(1,757
)
—
(1,826
)
Sublease income
(120
)
(116
)
(351
)
(348
)
Income tax expense effects, net (5)
—
—
—
—
Non-GAAP net income (as a percentage of
total revenue)
$
14,759
8.2
%
$
8,270
4.5
%
$
47,412
8.6
%
$
25,840
4.6
%
Interest expense
8,878
7,607
26,777
13,115
Provision for income taxes
521
37
1,576
1,041
Depreciation
2,043
2,432
6,132
8,056
Amortization of capitalized internal-use
software costs
4,358
4,904
14,418
16,397
Other expense (income), net
98
2,415
(1,314
)
(2,459
)
Adjusted EBITDA (as a percentage of total
revenue)
$
30,657
16.9
%
$
25,665
13.9
%
$
95,001
17.3
%
$
61,990
11.1
%
Shares used in computing net loss per
share amounts:
Basic
122,556
113,201
120,042
116,298
Diluted
124,253
113,711
121,874
117,384
GAAP net loss per share - Basic and
Diluted
$
(0.17
)
$
(0.23
)
$
(0.37
)
$
(0.55
)
Non-GAAP net income per share - Basic
$
0.12
$
0.07
$
0.39
$
0.22
Non-GAAP net income per share -
Diluted
$
0.12
$
0.07
$
0.39
$
0.22
(1)
During the three and nine months
ended December 31, 2022, the Company reclassified $3.7 million
impairment of capitalized software from research and development
expenses to impairment of long-lived assets in the condensed
consolidated statement of operations to conform to current period
presentation.
(2)
During the three and nine months
ended December 31, 2022, the Company reclassified $2.4 million
impairment of right-of-use assets from general and administrative
expenses to impairment of long-lived assets in the condensed
consolidated statement of operations to conform to current period
presentation.
(3)
During the three and nine months
ended December 31, 2022, the Company reclassified $3.7 million
impairment of capitalized software and $6.2 million of impairment
of capitalized software and right-of-use assets, respectively, to
impairment of long-lived assets in the condensed consolidated
statement of operations to conform to current period
presentation.
(4)
During the three and nine months
ended December 31, 2023, amounts include impairment charges related
to partially ceasing use of the Company's Headquarters and an
international office space.
(5)
Non-GAAP adjustments do not have
a material impact on our federal income tax provision due to past
non-GAAP losses.
8x8, INC.
SELECTED OPERATING
METRICS
(Unaudited, in millions, except
number of enterprise customers)
Fiscal 2023
Fiscal 2024
Q1
Q2
Q3
Q4
Q1
Q2
Q3
TOTAL ARR (1)
$
688
$
692
$
698
$
703
$
703
$
707
$
707
Growth % (YoY)
28
%
25
%
22
%
2
%
2
%
2
%
1
%
ARR BY CUSTOMER SIZE
ENTERPRISE (2)
$
403
$
401
$
400
$
405
$
404
$
407
$
409
% of Total ARR
59
%
58
%
57
%
58
%
58
%
58
%
58
%
Growth % (YoY)
54
%
42
%
30
%
3
%
—
%
1
%
2
%
MID-MARKET (3)
$
125
$
127
$
130
$
130
$
132
$
131
$
129
% of Total ARR
18
%
18
%
19
%
19
%
19
%
19
%
18
%
Growth % (YoY)
22
%
23
%
27
%
2
%
5
%
3
%
(1
)%
SMALL BUSINESS (4)
$
159
$
164
$
168
$
168
$
167
$
170
$
168
% of Total ARR
23
%
24
%
24
%
24
%
24
%
24
%
24
%
Growth % (YoY)
(7
)%
(2
)%
4
%
1
%
5
%
4
%
—
%
(1)
Annualized Recurring
Subscriptions and Usage Revenue (ARR) (A) equals the sum of the
most recent month of (i) recurring subscription amounts and (ii)
platform usage charges for all CPaaS customers that demonstrate
consistent monthly usage above a minimum threshold over the prior
six-month period, multiplied by 12, and (B) excluding any
non-bundled or overage usage fees associated with UCaaS
subscriptions.
(2)
Enterprise ARR is defined as ARR
from customers that generate >$100,000 ARR.
(3)
Mid-market ARR is defined as ARR
from customers that generate $25,000 to $100,000 ARR.
(4)
Small business ARR is defined as
ARR from customers that generate <$25,000 ARR.
Selected operating metrics presented in this table have not been
derived from financial measures that have been prepared in
accordance with U.S. Generally Accepted Accounting Principles. 8x8
measures the success of our strategy to attract and retain
customers, in part, by analyzing trends in ARR and believes ARR may
be useful to investors in evaluating our performance. 8x8 believes
ARR is a useful indicator for measuring the overall performance of
the business because it includes new customer additions, add-on
sales, renewals and customer churn within a single metric. 8x8 uses
trends in ARR to assess our ongoing operations, allocate resources,
and drive the performance of the business. Management monitors
these metrics together, and not individually, as it does not make
business decisions based upon any single metric. ARR is a
performance metric and should be viewed independently of revenue
and deferred revenue, and ARR is not intended to be a substitute
for, or combined with, any of these items. We caution that our
presentation may not be consistent with that of other companies.
Prior period metrics and customer classifications have not been
adjusted for current period changes unless noted.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240130701931/en/
8x8, Inc. Media: PR@8x8.com Investor Relations:
Investor.relations@8x8.com
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