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

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

SAN JOSE, Calif.--(BUSINESS WIRE)-- 8x8, Inc. (NAS: 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. (NAS: 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.




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

8

-

8

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