8x8, Inc. (Nasdaq: EGHT) Corporate Overview - Jefferies Inc.pdf · 8x8, Inc. (Nasdaq: EGHT)...

© 2013 NASDAQ-LISTED: EGHT

8x8, Inc. (Nasdaq: EGHT)Corporate Overview

Jefferies 2013 Global Technology, Media and Telecom Conference

May 7, 2013

l 8x8 Inc. NASDAQ-LISTED: EGHT2

Safe Harbor Statement

Financial Summary

During the course of this meeting, and any question and answer and demonstration period afterwards, representatives of the Company may make forward-looking statements regarding future events or the future financial performance of the Company, including statements about future events based on current expectations, potential product development efforts, near and long-term objectives, potential new business, strategies, organization changes, changing markets, future business performance and outlook. Such statements are predictions only, and actual events or results could differ materially from those made in any forward-looking statements due to a number of risks and uncertainties. Actual results and trends may differ materially from historical results or those projected in any such forward-looking statements depending on a variety of factors. These factors include, but are not limited to, customer acceptance and demand for our VoIP products and services, the reliability of our services, the prices for our services, customer renewal rates, customer acquisition costs, actions by our competitors, including price reductions for their telephone services, potential federal and state regulatory actions, compliance costs, potential warranty claims and product defects, our needs for and the availability of adequate working capital, our ability to innovate technologically, the timely supply of products by our contract manufacturers, potential future intellectual property infringement claims that could adversely affect our business and operating results, and our ability to retain our listing on the NASDAQ Capital Market. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see “Risk Factors” in the Company’s reports on Forms 10-K and 10-Q, as well as other reports that 8x8, Inc. files from time to time with the Securities and Exchange Commission. All forward-looking statements are qualified in their entirety by this cautionary statement, and 8x8, Inc. undertakes no obligation to update publicly any forward-looking statement for any reason, except as required by law, even as new information becomes available or other events occur in the future.

Please refer to our most recent filings with the Securities and Exchange Commission which contain and identify additional information covering factors that could cause the results to differ materially from those contained in our projections or forward-looking statements.


8x8, Inc. Business Overview


Typical 8x8 Prospect Quote


Mid-Market Customer Cost Savings Analysis -8x8 vs. Existing Telecom Service Provider

Prior long distance spend ~$42K/mo.


Why Businesses Choose 8x8

"The simplicity of change management using the 8x8 solution was eye opening. Previously, we had to involve substantial internal IT resources plus hire outside consultants to make simple moves, adds or changes. With 8x8 services, someone on my IT staff can quickly and easily execute all of these changes online.” - Ron Godine, TMW Systems

"The management and expense of maintaining numerous PBX phone systems and services with more than 20 different competitive local exchange carriers had become exorbitant. With the 8x8 Virtual Office solution, all of our offices will now be connected under a single, cloud-based phone system at a fraction of what we were spending previously." - Jerry Howard, Irving Materials

"We've only just begun to uncover the capabilities of the 8x8 solution and have even requested new features that 8x8 has implemented on ourbehalf. We plan on rolling out additional 8x8 unified communications services over the coming months with the goal of empowering our employees to be as efficient and productive on the road as they are in the office.” – Bob Hughes, McClarens


Competitors: 8x8 Leads UC Industry in Vision

Source: http://business.8x8.com/OL-Research-GartnerMagicQuadrant.html?source=OL-Research-GartnerMagicQuadrant

• Gartner Magic Quadrant for UnifiedCommunications as a Service,North America – publishedNovember 19, 2012

• 8x8 recognized as a “Leader”based on ability to execute andcompleteness of vision

• Positioning also recognizescompany as “most visionary”


Competitors: 8x8 Leads Cloud UCaaS Market

• April 2013 Survey by Synergy Research Group– Total 2012 UCaaS business suite revenues came in 29% higher than 2011

* From http://www.srgresearch.com/articles/8x8-leading-high-growth-cloud-ucaas-market, April 11, 2013


Competitors: 8x8 Leads UC Industry in Installed Lines

1. 8x82. Comcast3. West IP Communications4. Verizon5. RingCentral6. Vocalocity7. Megapath8. Thinking Phone Networks9. Fonality10. WVT11. Broadview12. M513. Vantage Communications14. Broadvox

• Top 14 Providers by Installed Lines (North America), 2011*

* From “North American Hosted IP Telephony and UC Services Market Report,” Frost & Sullivan, July 2012


Rank Manufacturers Total % Share1 Cisco 40,006 20.2%2 Avaya 23,852 12.0%3 NEC 23,391 11.8%4 Mitel 16,546 8.3%5 Toshiba 12,134 6.1%6 Samsung 6,239 3.1%7 ShoreTel 4,622 2.3%8 Iwatsu 1,526 0.8%9 Siemens 234 0.1%10 Alcatel 195 0.1%

Others 69,444 35.0%Grand Total 198,189 100.0%

8x8 UC Deployments Rival On-Premise Competitors

• 8x8 Ranks #6 Among On-Premise Business Deployments in 2012

8x8 in CY 2012 …11,367 New Businesses8x8 in CY 2012 …11,367 New Businesses

Source: IntelliCom Analytics, IntelliCom Market Performance DashboardSM, 2012 North American New Business Deployments


8x8 Customers – Previous Service Provider Survey

Source: Survey of 637 respondents that were new customers of 8x8 Virtual Office service during July 2012 – January 2013 period

Previous Provider # Responses % Customers

AT&T 183 28.7%

Verizon 86 13.5%

Comcast 62 9.7%

None/New Business 45 7.1%

CenturyLink 42 6.6%

Vonage 33 5.2%

RingCentral 32 5.0%

Cell Phone Only 26 4.1%

Skype 23 3.6%

Cox Communications 17 2.7%

Windstream 17 2.7%

Google Voice 16 2.5%

Frontier 15 2.4%

Sprint 14 2.2%

Cbeyond 10 1.6%

Optimum 9 1.4%

Time Warner 8 1.3%

Earthlink 6 0.9%


Huge Untapped Market for Business UC

Total U.S. Business Lines

Total IP Business Lines

IP Telephony Penetration

(balance is circuit-switched)

Source: FCC Form 477 Filing Data - Local Telephone Competition: Status as of December 31, 2011, dated January 2013

U.S. Market for IP-Based Business Access Lines


UC as a Service – Why Should You Care?

Communications data (voicemails, presence/directory , FAX messages, instant messages, call recordings, conference information, etc.) that is “locked in a box” is inaccessible!


Select 8x8 Business Customers


8x8 Government Customers –Federal “Cloud First” Initiative

• Existing government customersinclude:

– Federal Maritime Commission

– U.S. China Commission

– Administrative Conference of theU.S.

– Defense Nuclear Facilities SafetyBoard

– Inter-American Foundation

– Indiana Public Retirement System

Financial Summary


30% AGR in Revenue from Business Customers

Revenue from Business Customers, Fiscal Years Ending March 31

$ M

ILLI

ON

S


Consistent Quarterly Subscriber Growth

Net Ending Business Customer Count (by quarter)


Increasing ARPU from Larger Business Customers


Business Customer Metrics

• Average number of services per business customer: 11.2

• Service ARPU per month: $260

• Contribution margin: 63%

• Acquisition cost per service: $98

• Payback period: Approx. 7 months

• Customer churn: 1.6%

• Revenue churn: 2.6%

Business Customer Economics (for the quarter ended 12/ 31/12):


Select Business Customer Operating StatisticsThree Months Ended

Dec. 31, 2011

March 31, 2012

June 30, 2012

Sept. 30, 2012

Dec. 31,2012

Gross business customer additions (1) 2,836 2,892 2,943 2,915 2,617Gross business customer cancellations (less cancellations within 30 days of sign-up) 1,642 1,697 1,458 2,149 1,504Business customer churn (less cancellations within 30 days of sign-up) (2) 2.0% 2.0% 1.7% 2.4% 1.6%Business service revenue churn 1.9% 1.6% 2.3% 1.0% 2.6%Total business customers (3) 27,677 28,671 29,913 30,498 31,473

Business customer average monthly service revenue per customer (4) $239 $244 $250 $256 $260Overall service margin 77% 76% 75% 76% 78%Overall product margin -24% -15% -30% -22% -34%Overall gross margin 68% 68% 67% 68% 68%Business subscriber acquisition cost per service (5) $92 $99 $97 $89 $98Average number of subscribed services per business customer 9.4 9.8 10.1 10.6 11.2Average number of subscribed services per new business customer (6) 14.1 13.6 14.0 14.7 17.0

1) Does not include customers of Virtual Office Solo or Zerigo, Inc. ("Zerigo").

2) Business customer churn is calculated by dividing the number of business customers that terminated (after the expiration of the 30-day trial) during that period by the simple average number of business customers during the period and dividing the result by the number of months in the period. The simple average number of business customers during the period is the number of business customers on the first day of the period plus the number of business customers on the last day of the period divided by two. In the second quarter of fiscal 2013, an affiliate with 411 business customers representing approximately $9,000 of monthly service revenue cancelled service. Excluding these 411 cancellations, business customer churn (less cancellations within 30 days of sign-up) was 1.9%.

3) Business customers are defined as customers paying for service. Customers that are currently in the 30- day trial period are considered to be customers that are paying for service. Customers subscribing to Virtual Office Solo or Zerigo services are not included as business customers.

4) 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.

5) Business subscriber acquisition cost per service is defined as the combined costs of advertising, marketing, promotions, sales commissions and equipment subsidies for business services sold during the period divided by the number of gross business services added during the period.

6) Total new services sold in the period divided by gross business customer additions.


3rd Quarter Fiscal 2013 Highlights(quarter ended December 31, 2012)

• Revenue from business customers grew 22.2% during the quarter from the same period last year and comprised 97% of total revenue.

• Overall gross margin was 68.3% compared with 67.8% in the prior quarter and 67.9% in the same period last year; service gross margin was 78.1%, compared with 75.9% in the prior quarter and 76.9% in the same period last year.

• GAAP net income was $1.9 million, or $0.03 per diluted share, compared with $2.6 million, or $0.04 per share, for the same period last year.

• Non-GAAP net income was $3.8 million, or $0.05 per diluted share, compared with $3.7 million, or $0.05 per diluted share, in the same period a year ago.

• Cash flow from operating activities was $6.6 million for the quarter compared with $3.2 million in the same period last year.

• Ended the quarter with $46.5 million in cash, cash equivalents and investments compared with $40.1 million in the prior quarter and $21.9 million on December 31, 2011.


Non-GAAP Reconciliations (unaudited)In thousands, except per share amounts

Three Months Ended N ine Months EndedDecember 31, 2012 Dec ember 31, 2012

2012 2011 2012 2011

Net Income $ 1,920 $ 2,586 $ 12,278 $ 5,365

Gain on patent sale (11,965)

Non-cash tax adjustments 780 7,359 (336)

Amortization 357 357 1,071 431

Stock-based compensation expense 765 418 1,827 1,013 Acquisition-related expense 241 727

Facility exit expense 140 305 140Non-GAAP Net Income $ 3,822 $ 3,742 $ 10,875 $ 7,340

Weighted average number of sharesDiluted 74,988 73,214 74,483 69,013

GAAP net income per share - Diluted 0.03 0.04 0.16 0.08Gain on patent sale (0.16)Non-cash tax adjustments 0.01 0.10Amortization 0.01 0.01 Stock-based Compensation expense 0.01 0.01 0.03 0.01 Acquisition-related expense 0.01Facility exit expense 0.01Non-GAAP net income per share - Diluted 0.05 0.05 0.15 0.11

GAAP net income percentage of revenue 7% 11% 16% 9%Gain on patent sale -15%Non-cash tax adjustments 3% 9% -1%Amortization 1% 1% 1% 1%Stock-based compensation expense 3% 2% 2% 2%Acquisition-related expense 1% 1%Facility exit expense 1% 1%Non-GAAP net income percentage of revenue 14% 16% 14% 12%


www.8x8.com

8x8, Inc. (Nasdaq: EGHT) Corporate Overview - Jefferies Inc.pdf · 8x8, Inc. (Nasdaq: EGHT)...

Documents

Transcript of 8x8, Inc. (Nasdaq: EGHT) Corporate Overview - Jefferies Inc.pdf · 8x8, Inc. (Nasdaq: EGHT)...