8x8 Inc reports 795% EBITDA decline in 2018 and 10.3 pp EBITDA Margin decline from 1.5% to -8.8%
05/24/2018 • About 8x8 Inc (
$EGHT) • By InTwits
8x8 Inc reported FY2018 financial results today. Here are the key drivers of the company's long term financial model:
- 8x8 Inc is a fast growth stock: FY2018 revenue growth was 17.0%, 5 year revenue CAGR was 23.4% at FY2018 ROIC -16.1%
- EBITDA Margin is quite volatile: -8.8% in FY2018, 1.5% in FY2017, 0.9% in FY2016, 6.2% in FY2015, 5.8% in FY2014
- 8x8 Inc motivates its personel by high Stock Based Compensation (SBC): average SBC/Revenue for FY2014-FY2018 was 7.9% while average EBITDA Margin was -0.3% for the sames years. In FY2018 SBC/Revenue was even higher: 9.8%
- 8x8 Inc has low CAPEX intensity: 5 year average CAPEX/Revenue was 4.6%. At the same time it's a lot of higher than industry average of 3.1%.
- CAPEX is quite volatile: $22m in FY2018, $14m in FY2017, $7m in FY2016, $7m in FY2015, $4m in FY2014
- The company has unprofitable business model: ROIC is -16.1%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
8x8 Inc's Revenue jumped on 17.0%. Revenue growth showed acceleration in FY18Q4 - it increased 19.3% YoY. During the last 5 years Revenue growth topped in FY2016 at 28.9% and was decelerating since that time. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased on 3.9 pp from 18.2% to 22.1% in 2018. EBITDA Margin declined at -3.4 pp per annum in the last 5 years.
Gross Margin increased slightly on 0.51 pp from 75.5% to 76.0% in FY2018. Gross Margin followed a growing trend at 1.4 pp per annum in FY2014-FY2018. SG&A as a % of Revenue increased on 7.9 pp from 67.3% to 75.2% in FY2018. SG&A as a % of Revenue followed a growing trend at 3.8 pp per annum in the last 5 years. Stock Based Compensation (SBC) as a % of Revenue increased slightly on 1.6 pp from 8.3% to 9.8% in FY2018. SBC as a % of Revenue grew at 1.1 pp per annum in the last 5 years.
Net Income margin dropped on 33.4 pp from -1.9% to -35.2% in FY2018.
Investments (CAPEX, working capital and M&A)
The company's CAPEX/Revenue was 7.3% in FY2018. 8x8 Inc showed CAPEX/Revenue growth of 3.3 pp from 4.0% in FY2015 to 7.3% in FY2018. It's average level of CAPEX/Revenue for the last three years was 5.4%. CAPEX as a % of Revenue grew at 1.1 pp per annum in FY2014-FY2018.
Accounts receivable as a % of Revenue showed almost no change in FY2018. Accounts payable as a % of Revenue increased on 8.3 pp from 25.3% to 33.6% in FY2018.
8x8 Inc has spent $-1m on M&A in FY2018 which accounts for -0.47% of revenue.
Return on investment
The company operates at negative ROIC (-16.1%) and ROE (-41.2%). ROIC dropped on 13.8 pp from -2.3% to -16.1% in FY2018. ROE dropped on 39.5 pp from -1.7% to -41.2% in FY2018.
Leverage (Debt)
The company has no debt. Cash dropped on 22.7%.
Management team
The company's CEO is Vikram Verma "Vik". Vikram Verma "Vik" is a founder and has 5 years tenure with the company. CEO total compensation was
$4,758,619 in FY2018 which included
$490,000 salary.
Insider ownership is 4.6%. Insider ownership didn't change in 2018.
At the end of financial year the company had 1,225 employees. The number of employees jumped on 20.2%. Average revenue per employee in FY2018 was
$242,041 and it decreased on 2.7%.
Financial and operational results
FY ended 03/31/2018
8x8 Inc ($EGHT) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 128.6 | 162.4 | 209.3 | 253.4 | 296.5 | 17.0% |
| Gross Profit | 91.0 | 116.8 | 152.1 | 191.3 | 225.3 | 17.8% |
| SG&A | 76.3 | 98.8 | 135.1 | 170.5 | 223.0 | 30.8% |
| EBITDA | 7.4 | 10.0 | 1.9 | 3.8 | -26.2 | -794.8% |
| EBIT | 3.1 | 3.9 | -7.1 | -6.7 | -41.9 | |
| Tax | 2.2 | 2.8 | -0.8 | -0.1 | 66.3 | |
| Net Income | 2.5 | 1.9 | -5.1 | -4.8 | -104.5 | |
| Stock Based Compensation | 7.5 | 9.2 | 16.1 | 21.0 | 29.2 | 39.1% |
Balance Sheet
|
|---|
| Cash | 59.2 | 53.1 | 33.6 | 41.0 | 31.7 | -22.7% |
| Accounts Receivable | 5.5 | 6.6 | 11.1 | 14.3 | 16.3 | 14.2% |
| Inventory | 0.8 | 0.7 | 0.5 | 0.9 | | |
| Accounts Payable | 6.8 | 7.8 | 11.0 | 15.7 | 23.9 | 52.1% |
| Short Term Debt | 0.1 | 0.0 | 0.0 | 0.0 | 0.0 | |
| Long Term Debt | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | |
Cash flow
|
|---|
| Capex | 3.6 | 6.6 | 7.0 | 14.4 | 21.7 | 50.8% |
| Acquisitions | 18.5 | | 23.2 | 2.9 | -1.4 | -148.3% |
Ratios
|
|---|
| Revenue growth | 23.9% | 26.3% | 28.9% | 21.0% | 17.0% | |
| EBITDA growth | -72.2% | 34.5% | -80.7% | 94.9% | -794.8% | |
|
|---|
| Gross Margin | 70.7% | 71.9% | 72.7% | 75.5% | 76.0% | 0.5% |
| EBITDA Margin | 5.8% | 6.2% | 0.9% | 1.5% | -8.8% | -10.3% |
| EBIT Margin | 2.4% | 2.4% | -3.4% | -2.6% | -14.1% | -11.5% |
| SG&A, % of revenue | 59.3% | 60.9% | 64.5% | 67.3% | 75.2% | 7.9% |
| SBC, % of revenue | 5.8% | 5.7% | 7.7% | 8.3% | 9.8% | 1.6% |
| Net Income Margin | 2.0% | 1.2% | -2.4% | -1.9% | -35.2% | -33.4% |
| CAPEX, % of revenue | 2.8% | 4.0% | 3.3% | 5.7% | 7.3% | 1.6% |
|
|---|
| ROIC | 0.8% | 1.4% | -2.5% | -2.3% | -16.1% | -13.8% |
| ROE | 1.2% | 0.7% | -1.9% | -1.7% | -41.2% | -39.5% |
| Net Debt/EBITDA | -7.9x | -5.3x | -17.4x | -10.9x | |
People
|
|---|
| Insider ownership | 4.6% | 4.6% | 4.6% | 4.6% | 4.6% | 0.0% |
| Employees | 484 | 484 | 810 | 1,019 | 1,225 | 20.2% |
| Revenue/Employee, th. $ | 266 | 336 | 258 | 249 | 242 | -2.7% |
8x8 Inc ($EGHT) key quoterly financial indicators
| mln. $ | FY18Q1 | FY18Q2 | FY18Q3 | FY18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 69 | 72 | 76 | 79 | | 15.1% | 14.7% | 18.7% | 19.3% |
| EBITDA | -2 | -1 | -14 | -9 | | -203.2% | -138.0% | -1,886.4% | |
| Net Income | -2 | -1 | -89 | -13 | | | -2,122.2% | | |
Balance Sheet
|
|---|
| Cash | 53 | 35 | 32 | 32 | | 93.6% | 7.7% | -5.0% | -22.7% |
| Short Term Debt | 0 | 0 | 0 | 0 | | | | | |
| Long Term Debt | 0 | 0 | 0 | 0 | | | | | |
Ratios
|
|---|
| Gross Margin | 76.1% | 75.4% | 77.5% | 75.1% | | 2.3% | 1.7% | 0.7% | -2.4% |
| EBITDA Margin | -2.5% | -1.1% | -18.9% | -11.8% | | -5.3% | -4.6% | -20.2% | -10.4% |
| Net Income Margin | -3.1% | -0.8% | -117.1% | -16.7% | | -2.3% | -0.8% | -115.0% | -12.3% |
Peers in Application Software
Below you can find 8x8 Inc benchmarking vs. other companies in Application Software industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| nFusz Inc ($FUSZ) | | | | | 433.3% |
| CloudCommerce Inc ($CLWD) | | -38.1% | 247.6% | 40.9% | 301.1% |
| Seven Stars Cloud Group, Inc. ($SSC) | | 134.7% | 663.8% | 310.3% | 161.7% |
| Aurora Mobile Limited ($JG) | | | | 304.9% | 150.8% |
| Intelligent Systems Corporation ($INS) | | 14.2% | 71.0% | 12.2% | 119.0% |
| |
|---|
| Median (150 companies) | 27.9% | 13.5% | 13.6% | 14.8% | 15.2% |
|---|
| 8x8 Inc ($EGHT) | | 26.3% | 28.9% | 21.0% | 17.0% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Skkynet Cloud Systems Inc ($SKKY) | 99.7% | 97.4% | 98.0% | 97.6% | 96.5% |
| hopTo Inc ($HPTO) | 91.8% | 87.8% | 95.9% | 98.2% | 95.4% |
| Aware, Inc. ($AWRE) | 75.4% | 87.2% | 90.3% | 94.6% | 92.3% |
| Alteryx, Inc. ($AYX) | 77.5% | 80.5% | 81.3% | 83.4% | 91.0% |
| Aspen Technology, Inc. ($AZPN) | 86.5% | 88.7% | 89.7% | 90.2% | 89.9% |
| |
|---|
| Median (149 companies) | 62.8% | 61.7% | 63.8% | 64.4% | 65.3% |
|---|
| 8x8 Inc ($EGHT) | 70.7% | 71.9% | 72.7% | 75.5% | 76.0% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Aspen Technology, Inc. ($AZPN) | 34.5% | 42.2% | 46.0% | 45.2% | 43.3% |
| ANSYS, Inc. ($ANSS) | 45.9% | 45.8% | 45.1% | 41.9% | 41.4% |
| Paycom Software, Inc. ($PAYC) | 15.1% | 19.5% | 35.1% | 34.4% | 35.9% |
| j2 Global, Inc. ($JCOM) | 41.6% | 40.6% | 41.7% | 36.5% | 35.7% |
| Adobe Inc. ($ADBE) | 17.5% | 25.9% | 31.2% | 34.2% | 35.3% |
| |
|---|
| Median (151 companies) | -10.3% | -10.7% | -5.3% | -4.2% | -3.1% |
|---|
| 8x8 Inc ($EGHT) | 5.8% | 6.2% | 0.9% | 1.5% | -8.8% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| TimefireVR Inc ($TFVR) | 0.0% | 350.5% | 4.3% | | 1,021.9% |
| MGT Capital Investments Inc ($MGTI) | 0.0% | 36.5% | 221.4% | 129.8% | 344.5% |
| Integrated Ventures Inc ($INTV) | | | | | 199.9% |
| ShotSpotter, Inc. ($SSTI) | | 18.3% | 28.9% | 27.1% | 24.3% |
| Ellie Mae, Inc. ($ELLI) | 12.3% | 20.6% | 16.7% | 21.1% | 19.4% |
| |
|---|
| Median (152 companies) | 2.8% | 2.7% | 2.9% | 2.3% | 2.4% |
|---|
| 8x8 Inc ($EGHT) | 2.8% | 4.0% | 3.3% | 5.7% | 7.3% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| InsPro Technologies Corp ($ITCC) | -558.9% | | | | 127.4% |
| Manhattan Associates, Inc. ($MANH) | 64.8% | 78.7% | 99.3% | 102.5% | 80.9% |
| Intuit Inc. ($INTU) | 34.2% | 23.7% | 52.1% | 72.6% | 66.8% |
| Aspen Technology, Inc. ($AZPN) | 133.4% | | | | 58.1% |
| Paycom Software, Inc. ($PAYC) | 16.7% | 30.5% | 75.4% | 51.1% | 47.5% |
| |
|---|
| Median (178 companies) | -14.4% | -13.1% | -9.8% | -11.8% | -9.1% |
|---|
| 8x8 Inc ($EGHT) | 0.8% | 1.4% | -2.5% | -2.3% | -16.1% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Upland Software, Inc. ($UPLD) | | | 16.4x | 115.6x | 16.7x |
| Nuance Communications, Inc. ($NUAN) | 7.9x | 5.7x | 5.3x | 7.1x | 15.2x |
| Asure Software Inc ($ASUR) | 3.4x | 4.5x | 3.6x | 9.5x | 14.5x |
| SS&C Technologies Holdings, Inc. ($SSNC) | 1.7x | 7.3x | 4.6x | 3.1x | 8.5x |
| Avaya Holdings Corp. ($AVYA) | | | | | 7.4x |
| |
|---|
| Median (70 companies) | -1.2x | -0.9x | -0.9x | -0.8x | -0.7x |
|---|
