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8x8 Inc Reports Operating Results (10-Q)

January 25, 2013 | About:
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10qk

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8x8 Inc (EGHT) filed Quarterly Report for the period ended 2012-12-31.

8x8, Inc. has a market cap of $505.4 million; its shares were traded at around $7.07 with a P/E ratio of 6.9 and P/S ratio of 5.4.

Highlight of Business Operations:

The cost of service revenue primarily consists of costs associated with network operations and related personnel, telephony origination and termination services provided by third party carriers and technology license and royalty expenses. Cost of service revenue for the three months ended December 31, 2012 increased over the comparable period in the prior fiscal year primarily due to a $0.5 million increase in third party network service expenses as a result of the increase in our business subscriber base, a $0.2 million increase in depreciation expense, and a $0.1 million increase in payroll and related costs. The increase in expense was partially offset by a $0.1 million reduction in expensed license and fees and a $0.1 million reduction in temporary personnel, consulting and outside service expenses.

Cost of service revenue for the nine months ended December 31, 2012 increased from the comparable period in the prior fiscal year primarily due to a $2.7 million increase in third party network service fees as a result of the increase in our business subscriber base, a $0.8 million increase in payroll and related costs, a $0.5 million increase in depreciation expense, a $0.4 million increase in amortization expense due to intangibles acquired in acquisition of businesses, and a $0.1 million increase in consulting and outside service expenses. The increase in expense was partially offset by a $0.3 million reduction in expensed license and fees.

Sales and marketing expenses consist primarily of personnel and related overhead costs for sales, marketing, and customer service. Such costs also include outsourced customer service call center operations, sales commissions, as well as trade show, advertising and other marketing and promotional expenses. Sales and marketing expenses for the three months ended December 31, 2012 increased over the same quarter in the prior fiscal year primarily because of a $1.4 million increase in payroll and related costs, a $0.1 million increase in third party sales commissions, a $0.1 million increase in bad debt expenses, a $0.1 million increase in credit card processing fees, and a $0.3 million increase in other miscellaneous sales and marketing expenses. The increase in expense was partially offset by a $0.2 million reduction in temporary personnel, consulting and outside service expenses.

Sales and marketing expenses for the first nine months of fiscal 2013 increased over the same period in the prior fiscal year primarily because of a $4.7 million increase in payroll and related costs, a $0.3 million increase in third party sales commissions, a $0.2 million increase in amortization of customer relationship intangibles, a $0.2 million increase in bad debt expense, a $0.1 million increase in credit card processing fees, and a $1.1 million increase in other sales and marketing expenses. The increase in expenses was partially offset by a $0.5 million reduction in temporary personnel, consulting and outside service expenses.

Net cash provided by operating activities for the nine months ended December 31, 2012 was approximately $26.0 million, compared with $6.4 million for the nine months ended December 31, 2011. The increase in cash flow resulted primarily from a $12.0 million gain on the sale of a patent family in June 2012, a $1.7 million reimbursement from landlord for tenant improvements, and an increase in service and product revenue in the first nine months of fiscal 2012. Cash provided by operating activities has historically been affected by the amount of net income, sales of subscriptions, changes in working capital accounts particularly in deferred revenue due to timing of annual plan renewals, add-backs of non-cash expense items such as the use of deferred tax assets, depreciation and amortization and the expense associated with stock-based awards.

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