8x8 2014 Annual Report Download - page 35

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
We are a leading provider of UCC services in the cloud for SMBs and mid-market and distributed enterprises. We deliver a broad suite of UCC
services to in-office and mobile devices spanning cloud telephony, virtual contact center and virtual meeting through our proprietary unified
SaaS platform. We currently serve approximately 38,000 business customers with over 500,000 subscriptions, making us a leading provider of
UCC services in the cloud. Our software abstracts complex networking, redundancy, security and interconnection requirements to provide a
seamless and easy-to-use solution for our customers. Our software also integrates with leading ERP, CRM, HCM and other third-party
application suites, such as Salesforce.com and NetSuite, to provide organizations an integrated, fully functional business communications and
collaboration experience that is critical to operate their businesses.
SUMMARY AND OUTLOOK
In fiscal year 2014, we displayed continued momentum in four areas. First, we saw an increase in the number of new services added during the
year, representing a year
-over-year increase of 26%, reflecting demand for our services in our domestic small and medium businesses, or SMBs,
and mid-market and distributed enterprise customer market. We intend to continue to pursue opportunities to sell our comprehensive suite of
services to SMBs and mid-market and distributed enterprises who wish to consolidate their cloud communications and collaborative service
requirements with a single service provider.
Second, our continued focus on mid-market and distributed enterprise customers resulted in 34% of our new monthly recurring revenue sold in
the fiscal year coming from this the mid-market and channel sales teams that target these customers compared with 25% in fiscal 2013. We
continued to show an increase in our average monthly service revenue per customer to $287 in the fourth quarter of fiscal 2014 compared to
$256 in the same period of fiscal 2013 which is the result of our success in selling to larger, more established customers.
Third, we continued to focus on selling a greater number of services to our existing customer base. Our comprehensive suite of services,
combined with our highly scalable service architecture enables our customers to quickly and easily deploy additional 8x8 products and services
to distributed locations and remote employees.
Fourth, we continued to build on our Global Reach initiative by acquiring Voicenet in the United Kingdom in November 2013. In addition, we
installed our services infrastructure in a new Hong Kong data center in January 2014. We are in the process of migrating services for non-US
customers to our new overseas infrastructure. Beyond serving the needs of existing customers, it is our intent to penetrate these markets through
a variety of additional methods including strategic alliances, partners and acquisitions.
To support these initiatives and strengthen our business, we intend to continue investing in research and development and sales and marketing at
rates comparable to the third and fourth quarters of fiscal 2014 for the foreseeable future.
CRITICAL ACCOUNTING POLICIES & ESTIMATES
Our consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America.
Note 1 to the consolidated financial statements in Part II, Item 8 of this Report describes the significant accounting policies and methods used in
the preparation of our consolidated financial statements.
We have identified the policies below as some of the more critical to our business and the understanding of our results of operations. These
policies may involve a higher degree of judgment and complexity in their application and represent the critical accounting policies used in the
preparation of our consolidated financial statements. Although we believe our judgments and estimates are appropriate, actual future results may
differ from our estimates. If different assumptions or conditions were to prevail, the results could be materially different from our reported
results. The impact and any associated risks related to these policies on our business operations is discussed throughout Management's
Discussion and Analysis of Financial Condition and Results of Operations where such policies affect our reported and expected financial results.
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