EX-99.1 2 exh99-1.htm PRESS RELEASE October 4, 2013 Form 8-K Exhibit 99.1

Exhibit 99.1

For Immediate Release

8x8 Announces Sale of Dedicated Server Hosting Business to
The IRC Company, Inc. (dba Black Lotus Communications)

SAN JOSE, Calif. - October 4, 2013 - 8x8, Inc. (NASDAQ:EGHT), provider of innovative cloud communications and computing solutions, today announced it has sold its dedicated server hosting business to The IRC Company, Inc. (dba Black Lotus Communications) for $3 million in cash. The transaction signed and closed on September 30, 2013.

The dedicated server hosting business, acquired by 8x8 in May 2010, provided managed hosting services on dedicated servers to 288 customers as of June 30, 2013. For the fiscal year ended March 31, 2013, this business generated revenue of approximately $3.8 million and $753,000 in the first quarter of fiscal 2014. 8x8's Infrastructure as a Service (IaaS) and Desktop as a Service (DaaS) cloud hosting business is not included in this transaction. The Company will report a gain of approximately $1 million related to this transaction in the second quarter of fiscal 2014.

"The sale of our dedicated server hosting business enables 8x8 to sharpen its focus on the continued innovation and adoption of our core, cloud-based business service offerings," said 8x8 CEO Vik Verma. "At the same time, this strategic transaction will have a positive effect on our gross margins and growth rates, further illustrating the success and profitability of our cloud-based business model."

Excluding revenue from the dedicated server hosting business, reported revenue from business customers in the first quarter of fiscal 2014 increased 24% from the amount reported for the first quarter of fiscal 2013, compared with the previously announced growth rate of 22%. Gross margin in the first quarter of fiscal 2014 was 72%, excluding dedicated server hosting revenue and cost of sales, compared with 71%, including dedicated server hosting revenue and cost of sales. Income from operations for the dedicated server hosting business was approximately $251,000 in the first quarter of fiscal 2014 and approximately $823,000 in fiscal 2013.

"Black Lotus is looking forward to working with our new clients in supporting their needs," said Shawn Marck, Chief Technology Officer of Black Lotus. "Our culture is driven by exceeding expectations and delivering business solutions through technology. We now have three data centers in the United States; Los Angeles, Silicon Valley and Northern Virginia."

NCC International represented 8x8, Inc. on an exclusive basis and provided financial advisory services during the transaction.

8x8 is providing the following unaudited pro forma consolidated statements of income as additional information for investors to consider with this release.


About 8x8, Inc.

8x8, Inc. (NASDAQ:EGHT) empowers business conversations for more than 33,000 businesses with cloud communications services that include hosted PBX telephony, unified communications, call center software and video conferencing solutions. The company has been delivering business communications services since 2004 and has garnered a reputation for technical excellence and outstanding reliability. In 2012, 8x8 was named a market "leader" in Gartner's Magic Quadrant for Unified Communications as a Service (UCaaS) in North America and was recognized as the No. 1 Provider of Hosted IP Telephony by Frost & Sullivan and Synergy Research Group. For additional information, visit www.8x8.com, or connect with 8x8 on Google+, Facebook, LinkedIn and Twitter.

About Black Lotus Communications

Black Lotus Communications is a California based security innovator which pioneered the first commercially viable DDoS mitigation solutions in 1999, weeks after the first known DDoS attacks. These advanced solutions enhance the security posture of SMB and Enterprise clients while reducing capital expenditures, managing risk, ensuring compliance, and improving earnings and retention. Breakthrough developments at Black Lotus include the world's first DDoS protected hosting network, the first IPv6 DDoS mitigation environment, and the first highly effective Layer 7 attack mitigation strategy. Black Lotus is expanding and recently secured its first financing round led by Industry Capital. For more information, visit www.blacklotus.net or follow Black Lotus on Twitter at https://twitter.com/ddosprotection.

About NCC International

NCC International is among the nation's leading M&A and financial advisory firms specializing in the Internet, Web Hosting, Telecom and SaaS sectors. Over the past 20 years NCC has completed over 300 assignments. Its clients range from NASDAQ firms to small privately owned companies. For more information contact Tom Millitzer at 239-282-5550 or visit www.com-broker.com.

###

Contact:
Joan Citelli
(408) 654-0970

joan.citelli@8x8.com


The following unaudited pro forma condensed consolidated statements of income of the Company give effect to the sale of its dedicated server hosting business, which occurred on September 30, 2013.

The historical financial information of the Company set forth below has been derived from the unaudited condensed consolidated statements of income of the Company included in the Company's Quarterly Reports on Form 10-Q for the quarters ended June 30, 2012, September 30, 2012, December 31, 2012 and June 30, 2013 and the historical audited consolidated statement of income of the Company included in the Company's Annual Report on Form 10-K for the year ended March 31, 2013.

The unaudited pro forma condensed consolidated statements of income were prepared as if the sale had occurred on March 31, 2012. Pro forma condensed consolidated statements of income for the five most recently completed quarters and the most recently completed fiscal year are presented because the treatment of the dedicated server hosting business has not yet been reflected as discontinued operations in the Company's historical information, except as noted above.

The unaudited pro forma condensed consolidated statements of income have been prepared by the Company's management for illustrative purposes only and is not necessarily indicative of the results of operations in future periods or the results that actually would have been realized had the Company sold the dedicated server hosting business during the specified periods. The pro forma adjustments are based upon assumptions that the Company's management believes are reasonable. The pro forma adjustments are based on the information available at the time of the preparation of the unaudited pro forma condensed consolidated statements of income. These statements, including any notes thereto, are qualified in their entirety by reference to, and should be read in conjunction with, the historical consolidated financial statements of the Company included in its Annual Report on Form 10-K for the year ended March 31, 2013 and Quarterly Reports on Form 10-Q for the three months ended June 30, 2012, September 30, 2012, December 31, 2012 and June 30, 2013 filed with the Securities and Exchange Commission.

 

 


8x8, Inc.
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF INCOME
Three Months Ended June 30, 2013
(In thousands, except per share amounts)
                   
            Pro Forma      
      As Reported     Adjustments (1)     Pro Forma
Service revenue   $ 27,252    $ 753    $ 26,499 
Product revenue      2,752      -       2,752 
          Total revenue     30,004      753      29,251 
                   
Operating expenses:                  
     Cost of service revenue     5,221      435      4,786 
     Cost of product revenue     3,347      -       3,347 
     Research and development     2,336      -       2,336 
     Sales and marketing      13,121      49      13,072 
     General and administrative      2,790      18      2,772 
     Gain on patent sale     -       -       -  
          Total operating expenses     26,815      502      26,313 
Income from operations      3,189      251      2,938 
Other income, net      15      -       15 
Income before provision for income taxes     3,204      251      2,953 
Provision for income taxes     1,065      104      961 
Net income   $ 2,139    $ 147    $ 1,992 
                   
Net income per share:                  
     Basic   $ 0.03          $ 0.03 
     Diluted   $ 0.03          $ 0.03 
                   
Weighted average number of shares:                  
     Basic     72,510            72,510 
     Diluted      75,756            75,756 

 


8x8, Inc.
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF INCOME
Twelve Months Ended March 31, 2013
(In thousands, except per share amounts)
                   
            Pro Forma      
      As Reported     Adjustments (1)     Pro Forma
Service revenue    $ 98,212    $ 3,828    $ 94,384 
Product revenue      9,402      -       9,402 
          Total revenue     107,614      3,828      103,786 
                   
Operating expenses:                  
     Cost of service revenue     22,201      2,273      19,928 
     Cost of product revenue     11,801      -       11,801 
     Research and development     8,147      -       8,147 
     Sales and marketing      46,244      671      45,573 
     General and administrative      8,619      61      8,558 
     Gain on patent sale     (12,965)     -       (12,965)
          Total operating expenses     84,047      3,005      81,042 
Income from operations      23,567      823      22,744 
Other income, net      105      -       105 
Income before provision for income taxes     23,672      823      22,849 
Provision for income taxes     9,733      334      9,399 
Net income   $ 13,939    $ 489    $ 13,450 
                   
Net income per share:                  
     Basic   $ 0.20          $ 0.19 
     Diluted   $ 0.19          $ 0.18 
                   
Weighted average number of shares:                  
     Basic     71,390            71,390 
     Diluted      74,700            74,700 

 


8x8, Inc.
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF INCOME
Three Months Ended June 30, 2012
(In thousands, except per share amounts)
                   
            Pro Forma      
      As Reported     Adjustments (1)     Pro Forma
Service revenue    $ 23,172    $ 982    $ 22,190 
Product revenue      2,080      -       2,080 
          Total revenue     25,252      982      24,270 
                   
Operating expenses:                  
     Cost of service revenue     5,686      608      5,078 
     Cost of product revenue     2,710      -       2,710 
     Research and development     1,826      -       1,826 
     Sales and marketing      10,541      273      10,268 
     General and administrative      2,064      11      2,053 
     Gain on patent sale     (11,965)     -       (11,965)
          Total operating expenses     10,862      892      9,970 
Income from operations      14,390      90      14,300 
Other income, net          -      
Income before provision for income taxes     14,398      90      14,308 
Provision for income taxes     5,781      36      5,745 
Net income   $ 8,617    $ 54    $ 8,563 
                   
Net income per share:                  
     Basic   $ 0.12          $ 0.12 
     Diluted   $ 0.12          $ 0.12 
                   
Weighted average number of shares:                  
     Basic     70,717            70,717 
     Diluted      74,110            74,110 

 


8x8, Inc.
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF INCOME
Three Months Ended September 30, 2012
(In thousands, except per share amounts)
                   
            Pro Forma      
      As Reported     Adjustments (1)     Pro Forma
Service revenue    $ 24,177    $ 1,076    $ 23,101 
Product revenue      2,194      -       2,194 
          Total revenue     26,371      1,076      25,295 
                   
Operating expenses:                  
     Cost of service revenue     5,825      609      5,216 
     Cost of product revenue     2,672      -       2,672 
     Research and development     2,030      -       2,030 
     Sales and marketing      11,010      210      10,800 
     General and administrative      2,070      16      2,054 
     Gain on patent sale     -       -       -  
          Total operating expenses     23,607      835      22,772 
Income from operations      2,764      241      2,523 
Other income, net          -      
Income before provision for income taxes     2,773      241      2,532 
Provision for income taxes     1,032      97      935 
Net income   $ 1,741    $ 144    $ 1,597 
                   
Net income per share:                  
     Basic   $ 0.02          $ 0.02 
     Diluted   $ 0.02          $ 0.02 
                   
Weighted average number of shares:                  
     Basic     71,261            71,261 
     Diluted      74,558            74,558 

 


8x8, Inc.
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF INCOME
Three Months Ended December 31, 2012
(In thousands, except per share amounts)
                   
            Pro Forma      
      As Reported     Adjustments (1)     Pro Forma
Service revenue    $ 24,958    $ 935    $ 24,023 
Product revenue      2,382      -       2,382 
          Total revenue     27,340      935      26,405 
                   
Operating expenses:                  
     Cost of service revenue     5,473      583      4,890 
     Cost of product revenue     3,203      -       3,203 
     Research and development     2,117      -       2,117 
     Sales and marketing      11,651      90      11,561 
     General and administrative      2,136      17      2,119 
     Gain on patent sale     -       -       -  
          Total operating expenses     24,580      690      23,890 
Income from operations      2,760      245      2,515 
Other income, net      73      -       73 
Income before provision for income taxes     2,833      245      2,588 
Provision for income taxes     913      99      814 
Net income   $ 1,920    $ 146    $ 1,774 
                   
Net income per share:                  
     Basic   $ 0.03          $ 0.02 
     Diluted   $ 0.03          $ 0.02 
                   
Weighted average number of shares:                  
     Basic     71,611            71,611 
     Diluted      74,988            74,988 

 


8x8, Inc.
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF INCOME
Three Months Ended March 31, 2013
(In thousands, except per share amounts)
                   
            Pro Forma      
      As Reported     Adjustments (1)     Pro Forma
Service revenue    $ 25,905    $ 835    $ 25,070 
Product revenue      2,746      -       2,746 
          Total revenue     28,651      835      27,816 
                   
Operating expenses:                  
     Cost of service revenue     5,217      473      4,744 
     Cost of product revenue     3,216      -       3,216 
     Research and development     2,174      -       2,174 
     Sales and marketing      13,042      98      12,944 
     General and administrative      2,349      17      2,332 
     Gain on patent sale     (1,000)     -       (1,000)
          Total operating expenses     24,998      588      24,410 
Income from operations      3,653      247      3,406 
Other income, net      15      -       15 
Income before provision for income taxes     3,668      247      3,421 
Provision for income taxes     2,007      102      1,905 
Net income   $ 1,661    $ 145    $ 1,516 
                   
Net income per share:                  
     Basic   $ 0.02          $ 0.02 
     Diluted   $ 0.02          $ 0.02 
                   
Weighted average number of shares:                  
     Basic     71,998            71,998 
     Diluted      75,053            75,053 

 


These unaudited pro forma condensed consolidated statements of income reflect all adjustments that, in the opinion of management, are necessary to present fairly the pro forma results of operations.

(1) Adjustments to remove the historical results of the dedicated server hosting business from continuing operations.