8x8, Inc. (NYSE:EGHT) Fourth Quarter and Full-Year Fiscal 2018 Earnings. May 24, 2018

Transcription

1 8x8, Inc. (NYSE:EGHT) Fourth Quarter and Full-Year Fiscal 2018 Earnings May 24, 2018

2 Forward Looking Statements This presentation includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of These statements relate to the release of new products, market demand for products, changing industry trends, business strategies, future operating performance and outlook. These forward-looking statements are predictions only, and actual events or results may differ materially from such statements depending on a variety of factors. These factors include, but are not limited to: We may not be able to release our X-Series product line on our projected timeline, or at all. Customer acceptance and demand for our X-Seriesproduct line maybe lower than we anticipate. Competitive dynamics of the markets in which we compete may change in ways we are not anticipating. Third parties may assert ownership rights in our core technologies, or we may be prevented from using such technologies as the result of infringement claims or for other reasons. We may not achieve our new revenue bookings targets. Our churn rate maybe higher than we anticipate. 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 Forms 10-K and 10-Q filed by 8x8, Inc. 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. Non-GAAP Measures This presentation contains certain 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. Reconciliations of these non-gaap financial measures to the most directly comparable information derived in accordance with GAAP are presented in the Appendix at the end of this presentation. This information should not be considered a substitute for any measures derived in accordance with GAAP. 2

3 One cloud solution phone x meetings x collaboration x contact center 1M+ business users 15 global data centers serving customers in 157 countries Global 24/7/365 follow-the-sun customer support 150+ patents 3

4 Q4 FY2018 Financials SERVICE REVENUE $75.3 million 29% INCREASE mid-market/ enterprise service revenue 20% INCREASE* NOW 60% of total service revenue GAAP OPERATING ACTIVITIES NON-GAAP Million Million Pre-tax $(13.3) Net loss Net ($2.9) Income ** Gross 75% margin 77% Service 81% margin 83% Cash generated $2.7 million *Adjusted for constant currency and exclusion of discontinued, non-core DXI business segment is 19%. ** Non-GAAP Net Income is tax effected at (1%) tax rate. 4

5 FY 2018 Financials SERVICE REVENUE $280.4 million 29% INCREASE mid-market/ enterprise service revenue 19% INCREASE* NOW 58% of total service revenue GAAP*** $(104.5) Million Net OPERATING ACTIVITIES NON-GAAP Million Pre-tax Net $6.2 loss*** Income ** Gross 76% 78% margin Service 82% margin 84% Cash generated $22.0 million *Adjusted for constant currency and exclusion of discontinued, non-core DXI business segment is 19%. ** Non-GAAP Net Income is tax effected at 5% tax rate. 5 *** Includes two special non-recurring and non-cash items for the write-off of deferred tax assets and goodwill.

6 Fiscal Q4 and Full-Year Fiscal 2018 Business Highlights Continued Success in Mid-Market and Enterprise: Service revenue (>$1,000 in MRR) grew 29% and represents 60% of total service revenue in Q4 Service revenue from customers billing (>$10,000 in MRR) grew ~ 44% year-over-year and represents 28% of total MRR, excluding DXI, in Q4 21 Large Enterprise Deals (>$10,000 in MRR) closed in Q4 Channel Bookings grew 28% year-over-year in Q4; 82 partners participating in Channel Enablement Program since August 2017 Closed 66 Large Enterprise Deals (>$10,000 in MRR) representing 22% increase in new large deals closed in the full-year Integrated UCaaS & CCaaS (System of Engagement) Continues to Resonate: 100 customer deals including 6 of the top 10 deals were combination deals in Q4 Over 50% of new MRR from mid-market and enterprise were combination deals in the full-year 6

7 Fiscal Q4 and Full-Year Fiscal 2018 Business Highlights (cont.) Core business service revenue growth exceeded 25%, excluding micro segment (1-9 seats), in Q4 X Series: Announced in March. Staged release process in summer starting in June Acquired MarianaIQ: Will apply deep learnings and analytics to X Series Industry Recognition: Ranked by Synergy Research as Global Leader in Subscriber Seats for Mid-Market / Enterprise segments of UCaaS Market 12 consecutive quarters Leader in the 2017 Gartner Magic Quadrant for Unified Communications as a Service for the sixth consecutive year Challenger in Magic Quadrant for Contact Center as a Service for the third consecutive year 5-Star rating in the CRN 2018 Partner Program Guide Best Communications Provider award at Call & Contact Centre Expo 2018 Awards UK 7

8 8x8 is the Mid-Market and Enterprise Leader for UCaaS 8

9 Enterprise Communication: The Third Wave WAVE 1 On-Premise WAVE 2 Point Cloud Products WAVE 3 One Cloud Engagement Solution Collaboration All Customer & Employee Interactions Contact Center One System of Intelligence Telephony Contact Center Phone One System of Engagement Meetings Systems of Record Video Conferencing Lower TCO Even Lower TCO Productivity Increases Revenue Acceleration 9

10 Anticipated this Market and Built our Company to Capture it Analytics & Integration Launched internal Big Data initiative Introduced VO Analytics (incl QoS) Acquired Quality Software (QM / speech) Introduced Script8 Acquired MARIANAIQ Collaboration Introduced chat, video and desktop sharing Fully integrated mobile and desktop apps Acquired Sameroom Contact Center Introduced Virtual Contact Center Acquired Contactual Introduced Expert Connect; Acquired DXI Global UC Introduced Virtual Office Invented Global Reach ; Gartner Leader Acquired Voicenet (UK) HK & AU data centers SGP, EU, LatAm DCs; 13 languages

11 Exceptional Customer Experience Determined by the Employee Experience

12 X Series X8 More intelligent customer interactions Integrated voice, , webchat and social Advanced speech and interaction analytics Predictive outbound campaigns Quality, collaborative performance mgt X4 X6 Speed to resolution One-click subject matter expert access CRM integration Customer engagement analytics X2 Integrated global engagement suite with analytics Unlimited global calling across 46 countries Cross-platform team messaging Interaction analytics Efficient, intelligent engagement One click from voice to chat to video Google integration Mobile to desk/conference phones to desktop

13 Investment Summary $40+ billion market cloud opportunity according to IDC Market entering 3 rd wave of enterprise communications moving beyond efficiencies to accelerating revenue growth Uniquely qualified to capture this opportunity own core technology cloud phone, contact center, conferencing and team collaboration Well defined go-to-market strategy and solutions tailored by market segments Accelerating investment spend in FY

14 Q4 FY2018 Financials

15 Strong Revenue Growth; Continued Profitability Revenue Growth ($ in millions) Non-GAAP Pre-Tax Income as % of Total Revenue ($ in millions) $66.5 $69.1 $72.5 $75.6 $79.3 $ % $3.3 $ % 4.8% $ % 4Q17 1Q18 2Q18 3Q18 4Q18 4Q17 1Q18 2Q18 3Q18 4Q18 (3.7%) ($2.9) 15

16 Increasing Average Monthly Service Revenue per Business Customer All Customers Mid-Market/Enterprise Customers $469 $4,899 $426 $432 $442 $454 $4,494 $4,592 $4,697 $4,765 4Q17 1Q18 2Q18 3Q18 4Q18 4Q17 1Q18 2Q18 3Q18 4Q18 16

17 Consistently Low Gross Revenue Churn Rate 0.8% 0.7% 0.7% 0.6% 0.5% 0.6% 0.4% 0.3% 0.2% 0.1% 0.4% 0.4% 0.3% 0.0% 4Q17 1Q18 2Q18 3Q18 4Q18 17

18 Consistently Strong Non-GAAP Margins Gross Margin Service Margin 84.5% 83.9% 83.0% 84.5% 83.2% 79.1% 77.8% 77.0% 79.1% 76.7% 4Q17 1Q18 2Q18 3Q18 4Q18 18

19 Strong Balance Sheet Cash Flow from Operations Cash & Investments $175.0 $177.8 $167.0 $ in millions $161.0 $160.4 $6.3 $6.2 $5.0 $8.2 $2.7 4Q17 1Q18 2Q18 3Q18 4Q18 19

20 Fiscal 2019 Non-GAAP Financial Outlook Service Revenue $333M - $338M Service Revenue Growth Y/Y 19% - 21% Service Revenue Growth Y/Y excluding DXI revenue 21% - 22% Total Revenue $347M - $352M Total Revenue Growth Y/Y 17% - 19% Non-GAAP Pre-Tax Loss ($13M - $17M) 20

21 First Fiscal Quarter 2019 Non-GAAP Financial Outlook Service Revenue $77M - $78M Service Revenue Growth Y/Y 18% - 20% Service Revenue Growth Y/Y excluding DXI revenue 20% - 21% Non-GAAP Pre-Tax Loss ($4M $5M) 21

22 GAAP to Non-GAAP Reconciliation Tables

23 Reconciliation of Selected GAAP Measures to NON-GAAP Measures (In Thousands, Unaudited) 1. Cost of Service Revenue: GAAP cost of service revenue Amortization of acquired intangible assets Stock-based compensation expense Non-recurring items Non-GAAP cost of service revenue Non-GAAP cost of service revenue as a percentage of service revenue 2. Research and Development: Three Months Ended March $13,952 $10,803 (708) (691) (502) (394) (87) - $12,655 $9, % 15.5% Three Months Ended March GAAP research and development $10,016 $7,142 Stock-based compensation expense (1,973) (951) Non-GAAP research and development $8,043 $6,191 Non-GAAP research and development as a percentage of total revenue 10.1% 9.3% 23 23

24 Reconciliation of Selected GAAP Measures to NON-GAAP Measures (In Thousands, Unaudited) 3. Sales and Marketing: Three Months Ended March GAAP sales and marketing $52,940 $38,228 Amortization of acquired intangible assets (330) (330) Stock-based compensation expense (3,077) (2,714) Non-recurring items (186) (493) Non-GAAP sales and marketing $49,347 $34,691 Non-GAAP sales and marketing as a percentage of total revenue 62.2% 52.2% 4. General and Administration: Three Months Ended March GAAP general and administration $10,340 $9,814 Stock-based compensation expense (2,487) (1,773) Non-recurring items (861) (993) Non-GAAP general and administration $6,992 $7,048 Non-GAAP general and administration as a percentage of total revenue 8.8% 10.6% 24 24

25 Reconciliation of Selected GAAP Measures to NON-GAAP Measures (In Thousands, Unaudited) Three Months Ended March Net loss $(13,262) $(2,925) Adjustments: Amortization of acquired intangible assets 1,038 1,021 Impairment of equipment, intangible assets, and goodwill - - Stock-based compensation expense 8,039 5,832 Non-recurring items in operating expenses 1,134 1,486 GAAP provision (benefit) for income taxes 142 (178) Non-GAAP net income ($2,909) $5,236 Non-GAAP tax expense (1) 33 1,990 Non-GAAP net income after taxes ($2,942) $3,246 Reconciliation between GAAP and non-gaap Shares Outstanding (in thousands) Weighted average shares used in computing basic and diluted net loss per share: Denominator for basic calculation 92,526 91,175 Denominator for diluted calculation 92,526 94,506 (1) The non-gaap tax provision in fiscal year 2018 does not have a deferred income tax impact due to the full valuation allowance applied against deferred tax assets. The non-gaap effective tax rate of -1.1% and 5.3% for the three and twelve months ending March 31, 2018, respectively, is based on current taxes for certain states and foreign jurisdictions, and excludes the impact of the valuation allowance. For 2017, the total non-gaap effective tax rate was 38%

26 ASC 606 Reconciliation

27 Fiscal 2019 Outlook Impact from ASC606 Financial Statement No restatement of prior year information under modified retroactive method Quarterly disclosures will be provided for FY19 comparing results under ASC606 versus ASC605 Revenue No material differences expected Sales & Marketing Operating Expenses Large portion of sales commissions will be capitalized and amortized over five years Estimated $11M - $13M lower sales and marketing operating expenses Net Income Estimated $11M - $13M benefit to Net Income Cash Flow No impact on cash flow 27

28 2018 8x8, Inc. All Rights Reserved From EX to CX The experience is everything