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Executives

Bryan Martin - CEO

Daniel Weirich - CFO

Analysts

8X8 (EGHT) Citi 2013 Global Internet, Media and Telecommunications Conference January 7, 2012 4:30 PM ET

Bryan Martin

While he’s bringing the slides up, we have a safe harbor on the presentation and far side chat. We also have Joan Citelli, our in-house director of Investor Relations and Public Relations in the audience as well. We’re all three available afterwards for meeting.

So 8x8 our stock was one of the best performing, in fact the best performing high tech publicly traded company in the Silicon Valley in 2012. We are a service provider, a turn-key service provider of business communication services including a full business on service call center solution, what we call unified communications which we’ll talk about a little bit, conferencing a well as video services and we sell all of these services in a very disruptive non-traditional way. We sell via a monthly subscription on a per user basis typically flat rate, typically built to a credit card. The ticker resembles EGHT, we've been publicly listed on the NASDAQ since 1997, have about $0.5 billion market cap. We are on a $100 million annual revenue rate and all of the services that we sell are based on technologies that are also developed by the company. So we are a technology developer that uses the SAS model to deliver these.

On the things that’s very different from traditional telecom service providers, we provide no data pipes to these business customers, so all we sell is voice, video and communication services, none of our revenue there is based on data. And again, we have a lot of patents that we developed over the years and have awarded on the technology that we sell. I think the best way to give you, I am going to give you a couple examples of current business customers or this is actually a quote that’s in process.

This is the company that owns the building that we reside in, in San Jose they have seven employees in San Francisco all in one location and when I met their principal, I said, what do you guys use for phone service and how do you like it? He said, we have this really outdated system that’s on its last legs and I hate it and I asked him, why do you hate it, and he said, because he can’t get to this voice mail without calling through the reception and then saying, can you please transfer me to my extension and then he’s able to enter his code, he doesn’t have a direct dial number to get that. So we quoted him here, this is the actual quote we generated last month. 10 phones at a cost of $110 per phone, these are Polycom IT phones. They have a fax machine, a legacy physical fax machine and so we’re selling the model adaptor box that’s made by Cisco. They also had a Sacramento number that they want to keep with their business, so we sold them a $5 a month virtual number and then because they are having a rather old DSL internet infrastructure, we also recommended that they upgrade their router for $100 with a D-Link box. So on day one, the customer’s investment in this new phone system is going to run about $1,200 in equipment and then they are going to be paying before taxes about $250 per month recurring and that’s going to cover all their long distance, all the features, the mobile capabilities of the service. They are not only going to get their voice mails through a DID, a direct dial number they are going to get them delivered in email, they are going to get them on a tablet approximately that’s free included with this service. And so their old phone bill was about just the long distance $1,700 per month for those seven employees. So you can see in month one, they are going to breakeven on that $1,200 investment because that $1,700 is going to shrink to about $250 so saving about $20,000 per year.

That’s a very typical small business for us. A larger business, this is actually company called Irving Materials (ph) they are based in Indianapolis, they are a concrete supplier and they needed to upgrade their corporate system which was $150 extensions, the yellow numbers at the top of the slide and then they’ve got a number of different concrete manufacturing plants across the US that have three or four lines each. So another 475 phones for those locations. So 625 phones. In their case they had a variety of different PBX in key systems that have been paid for, they have been depreciated, they have no ongoing expense for those phone systems but again, they are ongoing long distance bill for all these business sites was running about $42,000 a month, or $0.5 million per year.

We quote them again for those 625 phones, $32,000 worth of equipment and then the new monthly cost that is over there on the left, the 15788 number. So we are going to shrink in the first year that $500,000 expense to $261,000 which includes the phones, and then once the phones are paid for, they are going to save, their ongoing expense is going to be about $310,000. So they are saving is close to $1 million at the end of that.

So you can see, in the first example I gave you all the employees run one location, in this example, all the employees, of the phones are kind of distributed all over the place. The cost is the same, because all we are selling is that endpoint device, and the rest of the service is being delivered by the cloud, and that’s what we do very, very well. We do it day and day out. Again, you’ll notice, there is no data provided in any of the quotes, so these customers are going to utilize their existing internet connections at these sites. That money is going to a different provider, but we are going to take the voice and communications revenue on a monthly basis. So that gives you a good idea.

The second quote is substantial because we have seen a big move in to what we call mid-market kind of customers. Our average new customers in the September quarter bought 14.7 lines from us, so they are extremely small businesses like the first quote I showed you. But in November Gartner actually published a magic quadrant on what they call unified communications as a service and listed 8x8 as long with three other of our competitors in the leaders quadrant there and I think if you are familiar with Gartner’s client base, it tends to be very large corporation and so you see a renewed interest, a new interest in adopting these types of hosted subscription model which salesforce.com and Google with Google Apps on the email and application side have been having great success selling to these businesses. Now communications are kind of going via the same delivery mechanisms.

This is our revenue growth rate, 30% annual growth average since 2006 and this is all revenue coming in from these types of business customers. Again, in the early days we catered primarily to those very small, call them micro businesses but in the last year or two, we've seen a lot more of our sales coming from what we call these mid-market customers, people that spend more than $1,000 per month recurring with us which is about 50 seats.

We have 12% of our new sales from that segment in the September quarter is 9% in the June quarter. So we are seeing increased penetration from that mid-market component. And again, I'll just close, if you didn’t believe what I said, I did exaggerate a little bit. This is the front page of the business section of the Mercury News on January 1st. so you can see there were three stocks in Silicon Valley that did better than us, but they were all pharmaceutical companies. So that’s why I thought I have license to say we were the best performing Silicon Valley high tech stock for 2012.

All right, thank you for letting me do this.

Unidentified Analyst

Great. So I suppose, recently you described 2012 as a banner year for the company, from your perspective, over the key growth drivers during the year and what underlying trends do you see developing that carried that growth into 2013?

Bryan Martin

Yes, there has been a fabulous evolution of these technologies. They’ve gotten much better. Our ability to completely replace the phone system and have the customer completely forget that there is not boxes in the closet has become extremely seamless and so these technologies are performing very, very well. And a lot of the new R&D we are doing is focusing on mobile and tablet platforms. And so I talked about customers having number in different site. They also want to use and utilize our services at those sites from different devices, not just an IP phone or a Polycom device on their desk but they want to use the smartphone in their pocket or the tablet that they carry in their briefcase. And so we are enabling them to do that through a lot of new technology. I think that’s been one of the big drivers of the micro business market.

And then what I talked about the growing interest and adoption of larger customers who are beginning to trust that they can actually outsource their communications to a service provider kind of cloud based model like this is very, very new. We’re not really doing anything different to address that segment. We've certainly targeted our feature set to some of the unique challenges you have in a mid-market customer, you have a bunch of sites, you have to kind of manage your auto attendance in some of the way you transfer calls, you do corporate directories a lot differently, but we really think that mid-market base is starting to come to us because they are looking to outsource more and more of the back office IT that used to be on premise.

Unidentified Analyst

And are you seeing any impact from the economy as it moves through 2012?

Bryan Martin

Nothing really different from what we've been going through the last three or four years. So ever since the first quarter of '09, our number one cause of churn has been these smaller businesses typically going out of business. So business closure, business owner divorces and marriages where they get bought by someone and there is the phone system that’s going to be utilized and 8x8 loses the account because of that is a little more than half of our total churn and if you go back before the 2008, crash it was closer to 30% of total churn. So that’s been something we've been dealing with. But I think these types of services and kind of the economics that you see illustrated in the two quotes I showed, showed you why even in a downturn environment, you still got to have communication. If I can bring a 10 person business a way to save $20,000 a year by just doing a little bit of work to plug some new phones into your internet connection, yes it’s definitely worth doing in this economy.

Unidentified Analyst

And do you think that fiscal cliff had any type of drag on your business and now that there is a deal on place, do you see any clean shoot for that type of increased sales cycle?

Bryan Martin

I don’t think the fiscal cliff had any impact on us. December is usually for us a very strong month because there is business in general just gets quitter through the holidays. It enables principals and IT managers to focus on things like back office communication systems. We certainly saw, we did a press release or two on in the wake of the hurricane on the east coast, customers that were utilizing these types of services, both for future business continuity but actually some that were actually signing up in the days before the storm and even in the middle of the storm, again as a mechanism to maintain access to their communications, function. Most people had no fixed internet, they had no power, but they did have cellphones and tablets and if they could keep those charged at a coffee shop, they could keep their businesses open. At the very minimal you think about the incoming calls are hitting an auto attendant, a greeting that’s in my data center in California and so we’re not impacted by the hurricane at all. So people calling into your business, their calls are stilling getting answered and routed accordingly. And that’s a big advantage of these types of services.

Unidentified Analyst

Now what you think is the right product mix to start to gain more wallet share from your customers?

Bryan Martin

Yes, so that’s something we've really evolved over the five or six years that we've been focused on this space. We have not just a replacement phone service, most of our customers buy the phone service, but again as you move and look at, if you are a WebEx or a GoToMeeting type of customer, and you do that type of an event, or you do webinars, we have services again that are cloud based that will economically kind of changed the game there as well as we think they are a lot easier to use and some of those income been conferencing services, we do video, contact center is a significant portion of revenue. A lot of these bigger mid-market customers, call centers are component of their business somewhere and again the same advantages that you are agents can be anywhere, they can be at home and you can manage these services dynamically from wherever you are play in that space as well.

Unidentified Analyst

And can you sort of describe your child services, what range of services you offer and what your aspirations for that type of growth profile going forward and perhaps size how much child represents of your total revenue today?

Bryan Martin

You are talking about just cloud data, pure cloud data is roughly 5% of topline and it is kind of for us, it’s a wallet share argument, there is very big brands in that space that control that market. But once we are your monthly, we have a billing relationship with you, you are used to paying us every month for the communication services, you buy from us, call recording is actually one of the features that our customers use quite a bit and if you want to save those call recordings for a number of years, suddenly your storage needs to do that, outstrip the basic storage we provide with the service and will end up selling up a pure cloud data storage mechanism as part of that.

Unidentified Analyst

And how is the mix change between your customer base as you progress and you evolve and can you describe some of the solutions that come to the table with the contractual deal?

Bryan Martin

Yes, so as we moved our markets to selling to larger businesses, we start to see greater interest to purchase contact center solutions which is contact centers and industry term for our call center environment where agents can typically do technical and the customer services for their business. And so as we started to move our market, we start to see that roughly of our customers, top 100 customers were subscribing to contact center solutions and it was the only piece of technology that we didn’t own. We are reselling it from a company called Contactual and we purchased Contactual on September 15th of 2011. And after we made that acquisition, we've been very successful in selling into some far larger business customers contact center solutions. So they’ll start out and replace there PBX either in one location or in multiple locations and over time they’ll add call centers solutions. So very good example of that is the Indiana public retirement systems started out with a PBX solution. They added a call center solution and they subsequently added additional recording capacity which is cloud data solution Brian was talking.

Unidentified Analyst

And other than the obvious cost savings, what are the other features and capabilities that your customers (inaudible)?

Bryan Martin

So I think the biggest capability that you gain is the ability to utilize the service from any location. We never ask you where these phones are going to be located so that we can determine are they on our network or off, are they in region, at region, that’s again the traditional circuit switch world where that originated. And so your ability to suddenly, I think customers again will deploy the phones in the phone but when they learn, well I could just plug one of these phones in my home office and do my night and weekend calls from there, or I could take it with me when I travel overseas and my desk phone number and extension follow me, that becomes a very compelling feature set. And again, these days you don’t even have to carry the phone through a TSA checkpoint. You can just have the app on the iPad and go from there.

Beyond that, if you think about the corporate directory then, it begins to serve a different purpose. It’s just not to find an extension for someone or for the receptionist to front desk to transfer calls to certain extension, but it really becomes a very useful presence mechanism. We support multimodal communications, so if you look up, if I see that Dan is on his phone, I know, he is not going to take the call from me, but if I got a quick question, I can chat right to his desktop and he can answer it that way while we’re still on the phone. And so presence is one of our own next most popular kind of functions that people are utilizing some of these advanced capabilities for both from their desktop but also from these mobile devices in the field.

Unidentified Analyst

And can you describe how your mobile strategy has evolved with the proliferation of smart devices and bring your own devices an emerging trend of corporates.

Bryan Martin

Yes, so our mobile strategy started with like international dial around, we were in the early days of figuring out ways to call overseas or a lot of time call, you are traveling abroad and you wanted to call back into the US which historically has been a very expensive phone call to make from most points of the world. And so these types of technologies were utilized on mobile phones to provide that kind of toll by pass.

What we've really evolved over the last two years, is we've made the portable device, whether it’s a smartphone or a tablet equivalent in every function or regard to the capabilities that are on the IT phone, on your desk, plus it’s got a great camera and other capabilities so you can start to do video, you can do multiple point video calls, you can access call recordings and other media that are stored in your corporate phone system because that’s now in the cloud off of any of those devices, your ability to retrieve faxes and call recordings and do that type of thing becomes or even in our call center solution listen in on live calls, while you’re sitting at the coffee shop on the Star Bucks Wi-Fi network.

I think more than 50% of our R&D these days is focused on that mobile device and it gives us a brand new template or canvas that we can work on these new function and features. We’re not limited by the (inaudible) of dialing keypad, this has historically been on every phone since the 20th century.

Unidentified Analyst

My next question, which is how should investors now think about your growing portfolio of patents and the value creation possibilities that you have there, you disposed some of them, a select group of patents last year, that you described to your top bosses.

Bryan Martin

Again, as I mentioned in the first stage, we have 85 US patents that have been issued, we continue to aggressively file patents. It’s been very nice because the backlog to prosecute the patent application at the patent office seems to anecdotally me kind of following some of my cases through the process seems to feel less constrained and seems to be going forward a little quicker which is great. We did sell out a patent family last year for an eight figure sum, that was some technology that we really don’t utilize anymore from some of our early video days and the last time we sold patents was 2007, we sold two patents. So that’s five years between those two transactions. So it’s kind of an opportunistic thing. If there is especially legacy IP that 8x8 developed and we’re not in this patent licensing, is not really a source of revenue for us, but if someone else wants to take that IP and go try to make some money and we can participate that way, we’re certainly open to looking at those deals. But it’s something that I think the deal has been far and to between. I think this deal got a lot of attention just because of the size that was so large.

Unidentified Analyst

And can you discuss the unique advantages of your technology from both an internal operation perspective and for the customer?

Bryan Martin

Yes, that’s actually a really good question because all of this stuff looks very easy I think to investors that are looking from the outside. We get a lot of, how do you guys defend your turf, how do you make sure that people can’t come in and just do what you’re doing. There is certainly very good suppliers out there, companies like BroadSoft that will sell you technologies that enable you to do some of the things we've talked about. And the analogy allowed used is it’s easy to walk onto a rugby field, but it’s really hard to walk off of a rugby field. And so even though it looks easy to put all this stuff together, when you actually start putting an end to end system together that first of all just works well enough that a business owner isn't going to throw it out the first time it has an outage to how you build, certainly how you manage all the number porting and the phone number provisioning, how you deal with security. It actually becomes an extremely complex system and a lot of our technologies from the operational side of the house are focused on solving those types of issues and without those, you could go buy a soft switch from someone but if you don’t have all that glue that goes around it to make it really functional and work operationally, it’s not a good solution.

I think our customers primarily benefit from both the ease of use with which they can either plug any of our devices in anywhere in the world and they are going to work too. They can download the app and it’s going to work, you are going to get good quality phone calls coupled with the fact that we take care of security and fraud and monitoring that customer network for them, I think that’s where the technology benefit the end customer.

Bryan Martin

You typically in a telecom services business as you tend to hear a term called backlog and provisioning and it’s what that is, is that from the time from making the sale to actually generating the revenue because there is a lot of things that need to occur prior to the revenue starting to be recognized and we literally put the ability to create a PBX which stands for private branch exchange, like a business phone system and the creation of that is in the hands of our sales people. So they are literally at the point in the sale provisioning the PBX and prior they order even being allowed to being submitted the PBX is built and created right there. So we literally, if the customers have phones already or they are using mobile devices and the applications, the time from submitting the order to provisioning and using the services is like minutes and not like months which you can have in many other telecom services businesses.

Daniel Weirich

That’s why in the hurricane Sandy, we had businesses that were literally able to provision right then and there and set up a phone system that was working even though their phone system was under water in the garage. The only thing that is not yet in that time frame is the number porting. So number porting still takes anywhere five to 10 business days, sometimes it can take 30 days or more if it’s difficult number port, but what we do in that situation is, we immediately minute to give you temporary numbers that are new phone numbers and then we’ll work with you to forward your old phone numbers either through the phone system or through the provider of those numbers to your new temporary numbers and so that we can do it immediately, your old number is now forwarding to our phones and then when the port happens a few days later, those temporary numbers just go away.

Unidentified Analyst

And is this increased agility that you have, you referenced storm Sandy and your ability to provide service during that timeframe, is that what, you’ve previously mentioned increasing interest amongst medium sized businesses and some of those…

Bryan Martin

I don’t know what percentage; I think it was a significant percentage of mid-market customers that call us with an emergency. There is a CIO that has a problem and they are going to turn to cloud based solution like ours in an attempt to fall there and it’s usually a time based kind of problem.

Unidentified Analyst

Now what are some of the drawbacks or why are CIOs looking at perhaps (inaudible) and that decision from moving from an incumbent over to a service like yours?

Bryan Martin

Can you ask it again? What are some of the?

Unidentified Analyst

So when a CIO perhaps have some provisions about whether to move these business from an incumbent…

Bryan Martin

Yes, I think it’s just the natural evolution of the technology. I lived through the early days of voice over IP when it was really more of a hobby class technology. If you in those early days experienced those types of issues, which a lot of these CIOs did, there is still kind of a black eye around the voice quality, the reputation of voice over IP and whether they are going to trust their businesses communication for that. But I think what we’re finding as more and more of these CIOs, all these CIOs, especially in these mid-market customers, they are actually not really as economically incentive to adopt our service. If I showed you nearly a $1 million in savings that that one mid-market customer that we turned on last quarter, but if you ask most of these CIOs, they actually don’t care about the money saving side as much as they care that their customer base which is the employees of the company are happy. And that the CEO is happy and that everyone, no one is complaining about the phones or how to get voicemails or how you access the phones. That is actually their number one priority. And what we’re finding is they will roll our services out in a small trial, typically in one location, sometimes that the IT department, they are the first guinea pig and then they gradually expand. So a number of our accounts, if you look at the logo slide in our presentation, a number of those have grown from very small, they started as five or 10 initial orders and now they’ve grown to hundreds and in some cases thousands of extensions.

Unidentified Analyst

And for those mid-sized customers then, how influential is this price discounting to drive volume and how do you see any impact from cables operators increasing to an investment that’s at the mid-size business?

Bryan Martin

Yes, I think there is a wide variety of economic concern for that mid-market customer. The quote I showed up there, you’ll notice, there is more aggressive discounting on the phones with that customer. So that was a customer that did care about what are we investing in these new phones. A lot of mid-market customers may have already upgraded like their CISCO IP phones in the last 10 years and if we can support it, we will but if it’s an older model phone, we’re going to need to upgrade it and if that becomes an issue, we’ll certainly discount there. But I haven't seen really any change in kind of from the economic climate in that type of customer.

Daniel Weirich

The interesting thing that we see from mid-market customers is there will be one customer who has no problem purchasing the equipment, the telephone upfront and we in some cases can make money on the telephones and then they’ll pay the recurring component and then there are some that just have a corporate mantra that they have no capital expenditures whatsoever and they want to pay nothing upfront and so we’ll just raise the subscription price and sell them the equipment for nothing. And those are just kind of the different dynamics, so we’re very flexible.

Bryan Martin

You asked about the cable companies and kind of triple playing us around, so the interesting thing what we’re finding is the triple play bundle is not as effective with a small business as it is in the home on two fronts. One is, businesses actually don’t care that they only get one bill for all three services because they are using accounts payable services or they have someone, they pay a lot of bills anyway. So changing three bills into one isn't actually a big deal for a business and number two, we find almost all of these businesses actually don’t want to buy the video feed of the triple play and that’s being kind of jammed in there. They want the cable modem, they may want the voice service but they really don’t want or need the video, if they need video in their business, they are going to get it over the internet. So we’re not seeing that sort of traction and its reflected, the FCC actually tracks the penetration rate of IP based technologies in what they call access lines in to businesses and they track the same data in how homes in the US get their access lines in to the homes and the penetration rate of the triple play and things like Vonage into the homes is already more than 30% of US home access lines, but the same timeframe the business penetration rate is just a little over 8%. You haven't seen the same massive kind of shift to IT based voice in the business world yet as you’ve seen in the home because of the triple play.

Unidentified Analyst

And what are the strategies that you are putting in place specifically to drive convergence between that 8% and 30%?

Bryan Martin

Yes, a lot of it is just, all of our growth strategy is kind of focused on these micro businesses and how we overcome that inertia because again, if you don’t have an emergency like your Nortel system didn’t just fry itself and you have no phones, may be you have an emergency and you don’t have like a greenfield event, that you’re moving or you’re opening a new office and so you need a phone system. You’re in a situation where you’ve got a business who has a working phone, they don’t necessary know what they are paying, they are usually never know what they are paying for month. They’re usually never happy with it but it makes phone calls and the gentlemen that we quoted who couldn’t get through his voice mails without calling to the receptionist, he’s been doing that for years and has not really sought out a new solution. So a lot of what we focus on is how do we overcome that inertia to actually get these folks to understand how easy it is to adapt to a cloud based solutions. You never wanted to switch from an old phone system to a newer old phone system because it was a big pain to do and in a cloud based world, its literally as simply as making a phone call and giving us your credit card number. We’ll do all the work for you. And so our marketing initiatives and our educational outreach to these businesses kind of focus on those messages.

Unidentified Analyst

And one of the slides you showed that Gartner as a magic quadrant, there was quite a number of competitors up there on those squares. Do you see your current portfolio, allows you to achieve your long term strategy or is there something out there that can add that capability and speed up that process of adoption?

Bryan Martin

No, we’re always for opportunities both to grow faster inorganically as well as if you look at the acquisitions, we've done three acquisitions in the last 24 months and they’ve all had a technology component. We've acquired technology either broad end or deep end, the capabilities we've had in-house. So we’re continuing to look at that. I mean, I think if you look at this list, it’s interesting in the context of there is Frost and Sullivan data out there, there is Infonetix data out there and the market unlike in our presentation, we actually have a slide to kind of breakout the pie chart of what the on premise market looks like and there is three main people that control a substantial portion of that market CISCO and by NAC. If you look at this market which is kind of the hosted cloud base you see, it’s still a very fragmented market. We believe we’re the largest provider out there and we only have 8.1% of the revenue in the market today. So it’s a fragmented market. I think for an end customer its very confusion environment because you have companies going around throwing these terms around like unified communications and promising to this, that and other thing and everyone means something different, everyone even in this quadrant, the technology behind the solutions and how that impacts the end customers to use of those communication services are vastly different and so I think that’s something that we’ll have to continue to evolve and so we can get to a point where there is a clear market leader here.

Unidentified Analyst

And given that the capabilities that you clearly bring, is there sectors of companies out there that may find your assets more compelling than your standalone business prospects?

Bryan Martin

Yes, we also aim, because we’re a technology provider, one of the things that is a weakness and I think one of the reasons Gartner, they said we are the most visionary of those leaders, but we had the least ability to execute of those four companies in the leaders quadrant. And I think a lot of that is just driven off of our brands compared to some of these large competitors is not as developed. And so we do have the advantage because we own all of the technology used to deliver these services of partnering with companies. We partnered with AT&T mobile in November to launch one of these kind of international dial around services and I think you’ll continue to see us do that. We’re always seeking out partners to work with who can utilize their brand on our services in order for both of us to grow into the market quicker.

Unidentified Analyst

And you’ve also been expanding your sales force quite aggressively and what's it like trying to retain talent in that (inaudible) area? What's the incremental opportunity?

Bryan Martin

Yes, so I (inaudible) in the 90s, so we’re not back to those levels of insanity yet, but we’re starting to see signs of it and are recruiting on the retention side. I mean Dan may his own opinion, but on the sales side I don’t think it’s nearly as tough as actually on the engineering and technology side. I mean we’re all, the social media companies, the cloud companies, we’re all after the same small pool of technical resources and that’s really where the trench warfare is going on. There is still a lot of sales folks out there, sales people that are in maybe adjacent cloud industries who see what we’re doing in communication is kind of the next big wave that’s going to happen and so they want to get in today before that wave actually falls.

Unidentified Analyst

[Question inaudible]

Bryan Martin

Yes, they had a collection of both key systems and PBX, at all of those different sites. So there was one phone system in the corporate headquarters which was the 150 and the 475 was just a collection of that. And across that footprint, there are actually multiple providers that were providing long distance to those different sites. One of the interesting things about, again, what we do is all of our services are being delivered from the cloud. So unlike an AT&T or Verizon that can only deliver you their services in certain section of the US, we can deliver them anywhere. So we don’t care where you’re located. You’re connecting to us over that internet pipe.

Unidentified Analyst

[Question inaudible]

Bryan Martin

This company here has 200 locations, they are a cement company, so they have cement plants all over the United States and AT&T and Verizon, nor any of the MSOs or cable companies do not have a hosted solution destination wise. And so in this instance, we took this company from more than 20 vendors down to one. That is one bill a month. This is one bill a month. Another, we first learned this in great detail when we rolled out McKesson about three or four years ago. McKesson is a Fortune 10 company. We have nothing in their corporate headquarters, but we have over 1,000 of their employees using our services. They are at sales division, the sales medical supplies, so they are close to doctors, they all work from their home and they had two names. They went into have one bill rather than more than 1,000 expense reports a month and McKesson want to own and maintain their telephone number and we were the solution for that. AT&T, Verizon, the Comcast, Cox, et cetera, et cetera do not have a competing solution to this.

Unidentified Analyst

[Question inaudible]

Bryan Martin

Typically, those type companies provide the underlying internet connection or the data connection and their networks are not nationwide. They are not providing internet connectivity to businesses across the entire country. For example, we've been in four buildings in Silicon Valley and Santa Clara, Sunnyvale and San Jose since I've worked for the company. AT&T is the only provider in all four of those buildings. There’s never been a competing provider in any of those buildings.

Unidentified Analyst

What I was going to ask was, on the revenue growth, you’ve had really strong but very consistent revenue growth the last, whatever the time period that was, which was leading to believe it’s a recurring revenue model you are adding about the same number of customers or phone lines per quarter or a year, year after year very consistently. Why is that number, is it just accidently about the same every year because the scope of the revenue growth was really nice but it was incredibly distant, yes, linear.

Bryan Martin

Yes, so if you look at it, we have a revenue chart in our presentation as well as we have a customer account chart and on both of those are extremely linear. The customer account chart is roughly 1,000 net new business customers per quarter. So call it roughly 4,000 per year is what we've seen over that period of time is that the size of our customer is growing. So the definition of size of customer is that the customer I am signing up today has more employees and pays us more than the customer we signed up yesterday and so our organic growth rate excluding all acquisitions across this entire seven year period here has been 25% growth over this period from an organic business and the way that we’re able to maintain the revenue growth on the same number of net adds is the size of the customer, meaning how much money they are paying us each month has been growing.

Unidentified Analyst

[Question inaudible] 1,000 new customers per order has it just accidently been that number?

Bryan Martin

We are not managing to that number. No.

Unidentified Analyst

We've got to stop there. We've run out of time. Thanks pretty much to both Bryan and Dan. Thank you very much.

Bryan Martin

Thank you for the questions.

Bryan Martin

Thank you.

Question-and-Answer Session

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Source: 8X8 Presents at Citi 2013 Global Internet, Media and Telecommunications Conference (Transcript)
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