Friday, May 30, 2014

The VoIP Quarterly Financials

8x8 stock has been on a decline. According to one analyst, "They’re getting clobbered by the street, down 8% today continuing a pretty brutal decline this quarter. RNG is also down again. It’s hard to figure: investors seem to mutually dislike the hyper growth (>60%) at a loss play as well the modest (20-25%) growth, minimal EBITDA play. YTD both are down nearly identical 30%."

8x8's GAAP net loss for the fourth quarter of fiscal 2014 was $1.9 million, which might be why the stock is down. (Personally, I can't figure out the market.)

8x8 4th Quarter Fiscal 2014 Financial Results:

  • Total revenue for the quarter increased 29% year-over-year to a record $35.8 million.
  • Channel and mid-market sales comprised a record 39% of new monthly recurring revenue sold in the quarter, a 47% increase compared with the same period last year.
  • Revenue from business customers increased 31% year-over-year to a record $35.4 million and represented 99% of total revenue.
  • Average monthly service revenue per business customer was a record $287, compared with $256 in the same period last year.
  • Number of new services sold during the fourth quarter was a record 64,312 vs. 50,670 in the same period last year.
  • Average number of subscribed services per new business customer added during the quarter grew to 19.6 from 18.1 in the same period last year.

8x8 Full Year Fiscal 2014 Financial Results

  • Total revenue for fiscal 2014 was $128.6 million, a 24% increase over last year.
  • Gross margin for fiscal 2014 was 71%, compared with 69% for fiscal 2013.
  • Fiscal 2014 revenue churn of 1.3%, compared with 1.7% in fiscal 2013
  • Revenue increased 36% year-over-year to $48.3 million.
  • Total annualized exit monthly recurring subscriptions were up 39% year-over-year to $187.7 million.
  • RingCentral Office annualized exit monthly recurring subscriptions were up 64% year-over-year to $125.8 million.
  • Net monthly subscription dollar retention was 99%.
  • RC did a secondary offering, which was completed in March 2014, with net proceeds of $57M. RC is operating at a loss, despite $48M in quarterly revenue costing just $18M.

Like 8x8, RC is looking globally: "99% of our total revenues were generated in the U.S. and
Canada, although we expect the percentage of our total revenues derived outside of the U.S. and Canada to grow as we expand internationally in the United Kingdom and beyond."

J2 Global, which owns eFax, other communications services and Ziff-Davis, had a revenue dip as well this quarter. It is $134M down from $138M. The cost of revenue is just $23.4 Mill for $134M - nice margin.

Seems some of the VoIP players are seeing a decline in revenue in the US and are heading overseas where the market looks better. (That's funny because UK VoIP companies keep calling to open up in the US.)  Some of it could be that the PPC price for the VoIP key words is up to $60 per click, which results in a customer acquisition cost of over $600. On ARPU of $39 (RC) or $287 (8x8), that is a hefty price to pay. [Add in free phones, turn-up support and other costs and the customer would have to stay a long time to recoup the upfront expenses -- but you would be operating at a loss for at least a year per customer.]

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