```markdown Part I [Business](index=4&type=section&id=Item%201.%20Business) 8x8, Inc. provides a global cloud communications platform (XCaaS) integrating UCaaS and CCaaS for over 60,000 organizations - 8x8 operates as a leading Software-as-a-Service (SaaS) provider with its 8x8 XCaaS (eXperience Communications as a Service) open communications platform, which integrates Unified Communications as a Service (UCaaS) and Contact Center as a Service (CCaaS)[13](index=13&type=chunk)[15](index=15&type=chunk) - The company's core solutions include 8x8 Work (enterprise voice, video meetings, messaging), 8x8 Contact Center (multi-channel cloud solution), and 8x8 CPaaS (embeddable communication APIs for SMS, chat, video, and voice)[27](index=27&type=chunk)[28](index=28&type=chunk)[29](index=29&type=chunk) - 8x8 serves a diverse customer base of over 60,000 organizations with more than **2.5 million** paid business users in over 170 countries. No single customer accounted for **10%** or more of revenue in fiscal 2022[13](index=13&type=chunk)[35](index=35&type=chunk) - The company utilizes a dual go-to-market strategy, selling directly to customers through its sales organization and indirectly through a global network of value-added resellers (VARs), master agents, and system integrators[34](index=34&type=chunk)[36](index=36&type=chunk) - As of March 31, 2022, the company had **2,216** full-time employees, with **1,245** located outside the United States. It holds over **283** patents with expiration dates through 2040[39](index=39&type=chunk)[59](index=59&type=chunk) [Risk Factors](index=10&type=section&id=Item%201A.%20Risk%20Factors) The company faces risks including operating losses, intense competition, international operations, substantial debt, cybersecurity, and acquisition integration - The company has a history of losses, recording an operating loss of approximately **$154.1 million** for the year ended March 31, 2022, and an accumulated deficit of **$766.4 million**. Continued investment in sales, marketing, and R&D is expected to result in ongoing losses in the near future[83](index=83&type=chunk)[84](index=84&type=chunk) - 8x8 faces intense competition from other cloud service providers like RingCentral and Zoom, internet giants such as Microsoft (Teams) and Google, and legacy equipment providers like Cisco and Avaya[95](index=95&type=chunk)[97](index=97&type=chunk) - The business is susceptible to risks from international operations, including regulatory complexities, data security regulations (like GDPR), and geopolitical instability. The conflict between Russia and Ukraine poses a specific risk to the company's significant engineering and operations presence in neighboring Romania[129](index=129&type=chunk)[130](index=130&type=chunk) - The recent acquisition of Fuze, Inc. presents risks, including difficulties in integration, retaining key employees and customers, and the possibility of not realizing anticipated growth opportunities and synergies[109](index=109&type=chunk)[110](index=110&type=chunk) - The company has substantial debt, with **$500.0 million** in 0.50% convertible senior notes due 2024. There is a risk that cash flow from operations may be insufficient to service this debt[166](index=166&type=chunk) - Operations are vulnerable to cybersecurity breaches, including DDOS attacks, ransomware, and phishing. A security failure could lead to increased costs, liability claims, and reputational harm[143](index=143&type=chunk)[145](index=145&type=chunk) [Unresolved Staff Comments](index=26&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the Securities and Exchange Commission - None [Properties](index=26&type=section&id=Item%202.%20Properties) 8x8's principal operations are headquartered in Campbell, California, with leased offices and data centers globally - The company's main operations are located in Campbell, California. It also leases office space internationally in the UK, Romania, Canada, Portugal, and Singapore for various functions including sales, support, and R&D[188](index=188&type=chunk) - 8x8 leases space from third-party data center hosting facilities in the United States and globally, including in South America, Europe, and the Asia Pacific region[189](index=189&type=chunk) [Legal Proceedings](index=26&type=section&id=Item%203.%20Legal%20Proceedings) Legal proceedings information is incorporated by reference from Note 6, "Commitments and Contingencies," in the Consolidated Financial Statements - Details regarding legal proceedings can be found in Note 6 of the Consolidated Financial Statements within this report[190](index=190&type=chunk) [Mine Safety Disclosures](index=26&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable Part II [Market for Registrant's Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities](index=27&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%20and%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) 8x8's common stock trades on the NYSE under "EGHT"; the company has never paid cash dividends and does not plan to in the foreseeable future - The company's common stock is listed on the New York Stock Exchange (NYSE) under the trading symbol "EGHT"[194](index=194&type=chunk) - 8x8 has never paid cash dividends on its common stock and has no plans to do so in the foreseeable future[194](index=194&type=chunk) - On December 14, 2021, the company sold an additional **$137.5 million** of its 0.50% Convertible Senior Notes due 2024, increasing the total outstanding aggregate principal amount to **$500 million**[198](index=198&type=chunk)[201](index=201&type=chunk) - In December 2021, the company repurchased approximately **$45.0 million** of its common stock from certain investors in a private placement related to the issuance of the additional notes[207](index=207&type=chunk) [Reserved](index=29&type=section&id=Item%206.%20%5BReserved%5D) This item is reserved and contains no information [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Fiscal 2022 service revenue grew **21%** to **$602.4 million**, driven by mid-market/enterprise expansion and the Fuze acquisition, focusing on efficiency and profitability - Total service revenue for fiscal 2022 increased by **21% YoY** to **$602.4 million**[213](index=213&type=chunk) - Annualized Recurring Subscriptions and Usage Revenue (ARR) from mid-market and enterprise customers grew **33%** over the prior year and constituted **76%** of total ARR[213](index=213&type=chunk) - The acquisition of Fuze in January 2022 contributed approximately **$23.9 million** in service revenue for fiscal 2022 and is expected to accelerate XCaaS innovation and expand the enterprise customer base[212](index=212&type=chunk)[234](index=234&type=chunk) - The company is focused on improving operating efficiencies and managing costs to support its path to profitability and positive operating cash flow[213](index=213&type=chunk) [Results of Operations](index=31&type=section&id=RESULTS%20OF%20OPERATIONS) Fiscal 2022 total revenue reached **$638.1 million** (20% increase), with an operating loss of **$154.1 million** due to continued growth investments Revenue Performance (FY2022 vs. FY2021) | Revenue Type | FY2022 (in thousands) | FY2021 (in thousands) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Service Revenue | $602,357 | $495,985 | $106,372 | 21.4% | | Other Revenue | $35,773 | $36,359 | $(586) | -1.6% | Cost of Revenue Performance (FY2022 vs. FY2021) | Cost Type | FY2022 (in thousands) | FY2021 (in thousands) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- |\n| Cost of Service Revenue | $195,909 | $180,082 | $15,827 | 8.8% | | Cost of Other Revenue | $51,649 | $50,068 | $1,581 | 3.2% | Operating Expenses (FY2022 vs. FY2021) | Expense Category | FY2022 (in thousands) | FY2021 (in thousands) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Research and Development | $112,387 | $92,034 | $20,353 | 22.1% | | Sales and Marketing | $314,223 | $256,231 | $57,992 | 22.6% | | General and Administrative | $118,103 | $100,078 | $18,025 | 18.0% | - International revenue grew to **31%** of total revenue in fiscal 2022, up from **27%** in 2021 and **21%** in 2020, indicating successful global expansion[240](index=240&type=chunk) [Liquidity and Capital Resources](index=35&type=section&id=Liquidity%20and%20Capital%20Resources) As of March 31, 2022, 8x8 had **$136.1 million** in cash, cash equivalents, and short-term investments, generating **$34.7 million** in operating cash flow - The company ended fiscal 2022 with **$136.1 million** in cash, cash equivalents, and short-term investments[261](index=261&type=chunk) Cash Flow Summary (Fiscal Year Ended March 31) | Cash Flow Activity | 2022 (in millions) | 2021 (in millions) | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $34.7 | $(14.1) | | Net cash used in investing activities | $(160.0) | $(36.3) | | Net cash provided by financing activities | $105.4 | $13.2 | Contractual Obligations as of March 31, 2022 | Obligation | Total (in thousands) | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | | :--- | :--- | :--- | :--- | :--- | :--- | | Convertible senior notes | $500,000 | $— | $500,000 | $— | $— | | Operating lease obligations | $104,914 | $18,692 | $26,234 | $21,371 | $38,617 | | Purchase obligations | $33,517 | $13,398 | $19,990 | $129 | $— | | **Total** | **$638,431** | **$32,090** | **$546,224** | **$21,500** | **$38,617** | [Critical Accounting Policies and Estimates](index=36&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20AND%20ESTIMATES) Key accounting policies involve significant judgment in revenue recognition, credit loss allowance, business acquisition valuation, and internal-use software capitalization - Revenue recognition requires significant judgment in identifying performance obligations, determining transaction prices, and allocating prices based on relative standalone selling prices (SSP)[276](index=276&type=chunk)[334](index=334&type=chunk)[335](index=335&type=chunk) - The allowance for credit losses is estimated using the Current Expected Credit Loss (CECL) model, which considers historical data, current conditions, and forecasts of future economic conditions[282](index=282&type=chunk)[346](index=346&type=chunk) - Business acquisitions require significant estimates to determine the fair value of acquired assets (like intangible assets) and assumed liabilities[283](index=283&type=chunk) - Capitalization of internal-use software costs involves judgment in determining when the application development stage begins. These costs are amortized over an estimated useful life of three years[284](index=284&type=chunk)[353](index=353&type=chunk)[354](index=354&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=37&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to market risks from interest rate fluctuations and foreign currency exchange rates, but does not currently hedge these exposures - The company's primary market risks are interest rate fluctuations and foreign currency exchange risk[285](index=285&type=chunk)[288](index=288&type=chunk) - Interest rate risk impacts the value of cash, investments, and the fair value of its **$500.0 million** in convertible senior notes. However, due to the fixed nature of the debt obligation, it does not impact the company's financial position or results of operations[285](index=285&type=chunk)[286](index=286&type=chunk)[287](index=287&type=chunk) - Foreign currency risk is related to revenues and expenses denominated primarily in the British Pound and Euro. The company does not currently hedge this exposure[288](index=288&type=chunk)[289](index=289&type=chunk) [Financial Statements and Supplementary Data](index=39&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements for fiscal year 2022, including the auditor's report and key financial statements - The independent auditor, Moss Adams LLP, issued an unqualified opinion on the consolidated financial statements and the effectiveness of internal control over financial reporting. The audit of internal controls excluded the recently acquired Fuze, Inc., as permitted[296](index=296&type=chunk)[300](index=300&type=chunk) Consolidated Statement of Operations Highlights (Year Ended March 31) | Metric (in thousands) | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Total Revenue | $638,130 | $532,344 | $446,237 | | Loss from Operations | $(154,141) | $(146,149) | $(159,819) | | Net Loss | $(175,383) | $(165,585) | $(172,368) | | Net Loss Per Share | $(1.55) | $(1.57) | $(1.72) | Consolidated Balance Sheet Highlights (As of March 31) | Metric (in thousands) | 2022 | 2021 | | :--- | :--- | :--- | | Total Current Assets | $275,622 | $276,533 | | Total Assets | $910,268 | $678,409 | | Total Current Liabilities | $191,527 | $121,378 | | Total Liabilities | $727,902 | $517,905 | | Total Stockholders' Equity | $182,366 | $160,504 | - A critical audit matter identified was the valuation of intangible assets (customer relationships and developed technology) related to the acquisition of Fuze, Inc., due to the significant management judgment involved in determining their fair value[305](index=305&type=chunk)[306](index=306&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=74&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None [Controls and Procedures](index=74&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded disclosure controls and internal control over financial reporting were effective as of March 31, 2022, excluding the Fuze acquisition - Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2022[478](index=478&type=chunk) - Management's report on internal control over financial reporting concluded that such controls were effective as of March 31, 2022[479](index=479&type=chunk)[480](index=480&type=chunk) - The assessment of internal controls excluded Fuze, Inc., which was acquired on January 18, 2022, in accordance with SEC guidance for newly acquired businesses[479](index=479&type=chunk) [Other Information](index=74&type=section&id=Item%209B.%20Other%20Information) The company reports no other information for this item - None Part III [Directors, Executive Officers, Corporate Governance, Executive Compensation, and Other Matters](index=75&type=section&id=Items%2010%2C%2011%2C%2012%2C%2013%2C%20and%2014) Information for Items 10-14 (directors, executive compensation, etc.) is incorporated by reference from the 2022 Proxy Statement - Information for Item 10 (Directors, Executive Officers and Corporate Governance), Item 11 (Executive Compensation), Item 12 (Security Ownership), Item 13 (Certain Relationships and Related Transactions), and Item 14 (Principal Accountant Fees and Services) is incorporated by reference from the company's definitive Proxy Statement for the 2022 Annual Meeting of Stockholders[484](index=484&type=chunk)[485](index=485&type=chunk)[486](index=486&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=76&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists financial statements and exhibits, including Schedule II detailing allowance for credit losses activity for the past three fiscal years Schedule II: Valuation and Qualifying Accounts (Allowance for Credit Losses) | Fiscal Year Ended March 31 | Beginning Balance | Additions Charged to Expenses | Deductions (Write-offs) | Ending Balance | | :--- | :--- | :--- | :--- | :--- | | 2020 | $864 | $3,067 | $(825) | $3,106 | | 2021 | $3,106 | $7,374 | $(2,302) | $8,178 | | 2022 | $8,178 | $1,997 | $(3,658) | $6,517 | [Form 10-K Summary](index=78&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company provides no summary for this item - None ```

Financial Data and Key Metrics Changes - Total revenue for Q4 2022 was $181.4 million, a 25% year-over-year increase, within the guidance range of $180 million to $182 million [41] - Service revenue was $172.8 million, a 29% year-over-year increase, but slightly below the guidance range of $173.5 million to $175.5 million [41][11] - Non-GAAP operating profit grew to $4.3 million quarter-over-quarter, reflecting a focus on higher-margin business segments [48] - Gross margin for the fourth quarter was 66.7%, with service gross margin at 72.2% [47] Business Line Data and Key Metrics Changes - XCaaS ARR growth accelerated to over 35% year-over-year, now accounting for approximately 35% of combined 8x8 Fuze ARR [8][10] - Enterprise ARR now makes up 57% of total ARR, up 55% year-over-year, while small business ARR declined by 1% year-over-year [45] - CPaaS revenue experienced a significant drop due to lower usage from a few large customers, resulting in a sequential decline of several million dollars [15][40] Market Data and Key Metrics Changes - The company expanded its global reach to 50 countries, up from 41 a year ago, covering more than 85% of the world's GDP [25] - The adoption of XCaaS has been broad across various industry verticals and geographic regions, including public sector clients [17][18] Company Strategy and Development Direction - The company is focused on operational discipline and investing in XCaaS innovation to drive operating leverage and increased cash flows [12][38] - The integration of Fuze is progressing well, with strong customer retention and revenue performance exceeding expectations [27][43] - The company aims to balance growth with improving profitability, targeting operating margins in the 2% to 3% range for fiscal 2023 [58] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges in the CPaaS and small business segments but emphasized broad improvements in gross margin and solid operating income [40] - The company remains confident in its strategy and market opportunity, expecting continued growth in fiscal 2023 [59] - Management noted that the competitive environment remains stable, with a focus on integrating Teams users with enterprise communication platforms [60][61] Other Important Information - The company reported cash from operations of over $16 million for the quarter, remaining free cash flow positive for the second consecutive quarter [53] - Deferred revenue climbed to over $45 million, up 90% year-over-year [53] Q&A Session Summary Question: How would you characterize the competitive environment with Microsoft Teams? - Management noted that customers are looking to integrate Teams users with their enterprise communication platforms, and their direct routing solution is performing well against competitors [60][61] Question: What lessons were learned from the drop in usage by large customers? - Management indicated that the drop was due to several large customers pulling back on marketing campaigns, and they are working to reintroduce these campaigns when market conditions improve [68][69] Question: What is the expected impact of Fuze on future revenue? - Management stated that Fuze's revenue contribution was better than expected, with strong retention rates and integration progressing smoothly [70][71] Question: How is the company addressing the challenges in the CPaaS segment? - Management is diversifying the customer base and leveraging regional scale to drive lower costs and support performance [69] Question: What are the expectations for organic growth post-Fuze acquisition? - Management suggested a conservative estimate of mid-teens growth for organic growth after the Fuze integration [78] Question: How is the international market performing? - Management reported robust growth in the UK and APAC regions, particularly in the CPaaS business, without adverse effects from macroeconomic trends [80]

8x8, Inc. (NASDAQ:EGHT) Q3 2022 Earnings Conference Call February 2, 2022 5:00 PM ET Company Participants Kate Patterson - Vice President, Investor Relations Dave Sipes - Chief Executive Officer Sam Wilson - Chief Financial Officer Conference Call Participants Matt Diamond - Mizuho Matt VanVliet - BTIG Ryan MacWilliams - Barclays Austin Williams - Wells Fargo Peter Levine - Evercore Meta Marshall - Morgan Stanley Michael Latimore - Northland Capital Markets George Sutton - Craig Hallum James Breen - William ...

Revenue Growth - Service revenue for Q3 fiscal 2022 grew approximately 18% year-over-year to $149 million, up from $127 million in Q3 fiscal 2021[83] - Total Annualized Recurring Subscriptions and Usage (ARR) increased to $572 million in Q3 fiscal 2022, a 16% rise from $494 million in the same period of fiscal 2021[83] - ARR from mid-market and enterprise customers represented 72% of total ARR in Q3 fiscal 2022, growing 24% compared to the same period in fiscal 2021[83] - The company anticipates continued growth in service revenue driven by global expansion and deeper penetration into customer categories[99] - Service revenue for the nine months ended December 31, 2021, was $429.6 million, an 18.6% increase from $362.2 million in the same period of 2020[99] Acquisitions and Investments - The company completed the acquisition of Fuze, Inc. for approximately $211.9 million, expected to enhance research and development and expand the customer base[82] - The company plans to invest in marketing, sales capacity, and research and development to acquire more customers[85] - The company expects to continue investing in research and development to enhance platform capabilities and user experience, anticipating an increase in expenses in absolute dollars[106] - The company plans to continue investing in sales and marketing to attract and retain customers, expecting expenses to increase in absolute dollars in future periods[107] Revenue and Expense Analysis - Other revenue for Q3 fiscal 2022 decreased by 21.9% to $7.5 million, primarily due to a shift towards hardware rental and supply chain shortages[100] - Other revenue for the nine months ended December 31, 2021, increased by 7.1% to $27.2 million, driven by growth in professional services revenue[102] - Cost of service revenue for the three months ended December 31, 2021, was $48.763 million, an increase of 3.7% from $47.044 million in the same period of 2020[103] - Cost of other revenue decreased by 17.2% for the three months ended December 31, 2021, totaling $11.071 million compared to $13.364 million in 2020[104] Operating Expenses - Research and development expenses increased by 17.8% for the three months ended December 31, 2021, amounting to $27.911 million, up from $23.702 million in 2020[106] - Sales and marketing expenses rose by 20.0% for the three months ended December 31, 2021, reaching $76.797 million compared to $63.986 million in 2020[107] - General and administrative expenses increased by 25.6% for the three months ended December 31, 2021, totaling $29.950 million, up from $23.844 million in 2020[108] - Other expense, net for the three months ended December 31, 2021, was $5.866 million, a 25.6% increase from $4.669 million in 2020[111] - Provision for income taxes for the three months ended December 31, 2021, was $87, a decrease of 71.1% from $301 in 2020[112] Cash Flow and Financial Position - As of December 31, 2021, the company had $251.8 million in cash, cash equivalents, and investments, compared to $152.9 million as of March 31, 2021[113] - Net cash provided by operating activities for the nine months ended December 31, 2021, was $18.2 million, compared to a net cash used of $14.9 million in the same period of 2020[116] - The net loss for the nine months ended December 31, 2021, was $129.8 million, with stock-based compensation expense amounting to $106.2 million[116] - Net cash used in investing activities was $30.1 million for the nine months ended December 31, 2021, primarily due to capitalized internal-use software development costs of $15.6 million[116] - Net cash provided by financing activities was $100.0 million for the nine months ended December 31, 2021, significantly up from $5.9 million in the same period of 2020[116] - As of December 31, 2021, the company had cash, cash equivalents, restricted cash, and investments totaling $260.5 million[119] - The company had $500.0 million in aggregate principal amount of convertible senior notes outstanding, with an estimated fair value of $495.8 million[121] Risk Management - The company is exposed to foreign currency risks primarily related to revenue and operating expenses denominated in currencies other than the U.S. dollar, particularly the British Pound[122] - A hypothetical 10% decrease in all foreign currencies against the U.S. dollar would not result in a material foreign currency loss for the three and nine months ended December 31, 2021[122] - The company may consider entering into financial instruments in the future to hedge foreign currency exchange risk as its foreign operations expand[122]

8x8, Inc. (NASDAQ:EGHT) Q2 2022 Earnings Conference Call November 2, 2021 5:00 PM ET Company Participants Kate Patterson - VP, IR David Sipes - CEO Samuel Wilson - CFO Conference Call Participants Chirag Ved - Evercore ISI Michael Tulin - Wells Fargo Meta Marshall - Morgan Stanley Ryan Koontz - Needham & Company Will Power - Baird Alex Kim - Mizuho Securities George Sutton - Craig Hallum Tim Horan - Oppenheimer James Breen - William Blair Rachel Freeman - BTIG Operator Good afternoon. My name is Tania, and ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Title of each class Trading Symbol Name of each exchange on which registered COMMON STOCK, PAR VALUE $.001 PER SHARE EGHT New York Stock Exchange FORM10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________to _________ ...

Financial Data and Key Metrics Changes - Total revenue for Q1 2022 was $148.3 million, an increase of 22% year-over-year, exceeding guidance of $142 million to $143.5 million [21] - Service revenue reached $137.8 million, up 21% year-over-year, also above guidance of $132.5 million to $133.5 million [22] - Total ARR was $536 million at quarter end, reflecting a 24% year-over-year increase [22] - Non-GAAP gross margin improved sequentially from 61.2% to 62.6% [16][23] - Non-GAAP operating margins were positive at 0.9% for the quarter [24] Business Line Data and Key Metrics Changes - XCaaS now accounts for one-third of 8x8's ARR, growing over 30% year-over-year [9] - The CPaaS portfolio performed strongly, with significant wins in Southeast Asia [12] - The enterprise customer segment grew 40% year-over-year, now representing 49% of ARR [14] Market Data and Key Metrics Changes - U.S. revenue was $103.7 million, while international revenue was $44.7 million [42] - Public and government sectors showed strong growth, with notable wins in the U.S. and UK [10][11] Company Strategy and Development Direction - The company focuses on four major areas: expanding platform advantage, winning with partners, driving operational excellence, and expanding the customer base [7] - The launch of XCaaS aims to integrate UCaaS and CCaaS, enhancing customer and employee engagement [8] - The company is exiting the CPaaS wholesale business to concentrate on core market opportunities [22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in exceeding financial goals and raising guidance for fiscal year 2022 [19] - The company anticipates continued growth in service revenue and overall gross margins [26][28] - Management highlighted the importance of customer demand for integrated solutions as a driver for future growth [45] Other Important Information - The company has made strategic hires, including a new Chief Customer Officer, to enhance customer experience [18] - Deferred revenue increased to nearly $25 million, up 133% year-over-year [25] Q&A Session Summary Question: What areas are seeing the most success in channel bookings growth? - Management noted strong momentum in XCaaS across all customer segments, particularly in the UK and enterprise sectors [31] Question: Are investments in growth initiatives nearing completion? - Management indicated that investments will continue to support revenue growth, with a gradual increase in operating margins expected [33] Question: What is the impact of exiting the wholesale business on ARR? - Management clarified that the exit had a minimal impact on ARR, with only a small headwind noted [36] Question: What are the plans for improving service gross margins? - Management aims to increase service gross margins over time, with a focus on higher-margin business [39] Question: How is the company responding to competitive pricing pressures? - Management stated that they do not see significant pricing pressure from competitors, emphasizing their value proposition [57] Question: What are the key drivers for bundling UCaaS and CCaaS? - Management highlighted benefits in IT management, simplicity, and enhanced integrations as key drivers for customer interest [59]

[Forward-Looking Statements and Risk Factors](index=3&type=section&id=Forward-Looking%20Statements%20and%20Risk%20Factors) [Forward-Looking Statements and Risk Factors Summary](index=3&type=section&id=Forward-Looking%20Statements%20and%20Risk%20Factors%20Summary) This section outlines forward-looking statements, cautioning about inherent risks and uncertainties that could materially impact financial results - Statements regarding industry trends, customer numbers, revenue, expenses, and the impact of COVID-19 are forward-looking and subject to material differences from actual results[7](index=7&type=chunk) - Key risk factors include economic downturns (including COVID-19 impacts), customer cancellations and churn, demand for cloud communication services, competitive pressures, service quality, scalability, customer acquisition costs, reliance on channel partners, and potential litigation[7](index=7&type=chunk) [PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements (unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) Unaudited condensed consolidated financial statements for Q2 2021 are presented, detailing financial position, performance, and cash flows [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet shows a slight decrease in total assets and stockholders' equity from March 31, 2021, to June 30, 2021, while total liabilities remained relatively stable | Metric | June 30, 2021 (unaudited, $ in thousands) | March 31, 2021 (audited, $ in thousands) | | :----------------------------- | :---------------------------------------- | :--------------------------------------- | | Total assets | $675,658 | $678,409 | | Total liabilities | $518,862 | $517,905 | | Total stockholders' equity | $156,796 | $160,504 | | Cash and cash equivalents | $109,288 | $112,531 | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For the three months ended June 30, 2021, the company reported increased total revenue but also a higher net loss compared to the same period in 2020, primarily driven by increased operating expenses | Metric | Three Months Ended June 30, 2021 ($ in thousands) | Three Months Ended June 30, 2020 ($ in thousands) | | :----------------------- | :-------------------------------- | :-------------------------------- | | Total revenue | $148,327 | $121,807 | | Loss from operations | $(38,827) | $(37,760) | | Net loss | $(43,906) | $(41,913) | | Net loss per share (Basic and diluted) | $(0.40) | $(0.40) | [Condensed Consolidated Statements of Comprehensive Loss](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) The comprehensive loss for the three months ended June 30, 2021, was slightly higher than the net loss, reflecting minor impacts from unrealized investment losses and foreign currency translation adjustments | Metric | Three Months Ended June 30, 2021 ($ in thousands) | Three Months Ended June 30, 2020 ($ in thousands) | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Net loss | $(43,906) | $(41,913) | | Unrealized (loss) gain on investments | $(33) | $422 | | Foreign currency translation adjustment | $283 | $885 | | Comprehensive loss | $(43,656) | $(40,606) | [Condensed Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Stockholders' equity decreased from March 31, 2021, to June 30, 2021, primarily due to the net loss, partially offset by stock-based compensation expense and common stock issuance under stock plans | Metric | March 31, 2021 ($ in thousands) | June 30, 2021 ($ in thousands) | | :----------------------------- | :------------------------------ | :----------------------------- | | Total Stockholders' Equity | $160,504 | $156,796 | | Additional Paid-in Capital | $755,643 | $795,589 | | Accumulated Deficit | $(591,055) | $(634,961) | | Stock-based compensation expense | N/A | $36,508 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) The company generated positive cash flow from operating activities for the three months ended June 30, 2021, a significant improvement from the prior year, while investing activities continued to use cash, and financing activities provided a modest cash inflow | Metric | Three Months Ended June 30, 2021 ($ in thousands) | Three Months Ended June 30, 2020 ($ in thousands) | | :---------------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash provided by (used in) operating activities | $4,032 | $(9,250) | | Net cash used in investing activities | $(11,146) | $(11,900) | | Net cash provided (used in) by financing activities | $3,435 | $(134) | | Net decrease in cash, cash equivalents, and restricted cash | $(3,243) | $(20,704) | [Notes to Unaudited Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed information and explanations for the unaudited condensed consolidated financial statements, covering business description, significant accounting policies, revenue recognition, fair value measurements, intangible assets, leases, commitments, convertible notes, stock-based compensation, income taxes, and geographical information [1. DESCRIPTION OF BUSINESS](index=9&type=section&id=1.%20DESCRIPTION%20OF%20BUSINESS) 8x8, Inc. is a leading Software-as-a-Service (SaaS) provider offering contact center, voice, video, chat, and enterprise-class API solutions through a global cloud communications platform - 8x8 is a leading SaaS provider of contact center, voice, video, chat, and enterprise-class API solutions[24](index=24&type=chunk) - A majority of all revenue is generated from communication services subscriptions and platform usage, with additional revenue from hardware sales and professional services[24](index=24&type=chunk) [2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=9&type=section&id=2.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) The financial statements are prepared in accordance with GAAP, utilizing management estimates. The adoption of ASU 2019-12 had no material impact, and the company is currently assessing the impact of ASU 2020-06 on convertible instruments - The condensed consolidated financial statements are unaudited and prepared in accordance with U.S. GAAP and SEC regulations[25](index=25&type=chunk) - Management makes estimates and assumptions affecting reported amounts, including for credit losses, goodwill impairment, capitalized software, and stock-based compensation[26](index=26&type=chunk) - The adoption of ASU 2019-12 (Income Taxes) in fiscal 2022 did not have a material impact. The company is assessing ASU 2020-06 (Debt with Conversion and Other Options) for fiscal 2023[27](index=27&type=chunk)[28](index=28&type=chunk) [3. REVENUE RECOGNITION](index=10&type=section&id=3.%20REVENUE%20RECOGNITION) Revenue is disaggregated by geographic region. Contract assets decreased due to billing, while deferred revenue increased from advance billings. The company has approximately $530.0 million in remaining performance obligations, with 75% expected to be recognized over the next 36 months | Metric | June 30, 2021 ($ in thousands) | March 31, 2021 ($ in thousands) | | :-------------------- | :----------------------------- | :------------------------------ | | Accounts receivable, net | $49,755 | $51,150 | | Contract assets, current | $12,324 | $12,840 | | Deferred revenue, current | $21,985 | $20,737 | - Contract revenue from remaining performance obligations was approximately **$530.0 million** as of June 30, 2021, with about **75% expected to be recognized over the next 36 months**[31](index=31&type=chunk) - Amortization of deferred sales commission costs increased to **$8.2 million** for the three months ended June 30, 2021, from **$6.1 million** in the prior year period[32](index=32&type=chunk) [4. FAIR VALUE MEASUREMENTS](index=11&type=section&id=4.%20FAIR%20VALUE%20MEASUREMENTS) The company's cash, cash equivalents, restricted cash, and available-for-sale investments totaled $161.9 million as of June 30, 2021. The estimated fair value of outstanding convertible senior notes was $450.7 million | Asset Category | June 30, 2021 Estimated Fair Value ($ in thousands) | | :--------------------- | :---------------------------------- | | Cash and Cash Equivalents | $109,288 | | Restricted Cash | $8,641 | | Short-Term Investments | $31,231 | | Long-Term Investments | $12,712 | | **Total Assets** | **$161,872** | - The estimated fair value of the Company's outstanding convertible senior notes was **$450.7 million** as of June 30, 2021, categorized within Level 2 of the fair value hierarchy[34](index=34&type=chunk) [5. INTANGIBLE ASSETS AND GOODWILL](index=12&type=section&id=5.%20INTANGIBLE%20ASSETS%20AND%20GOODWILL) The net carrying amount of acquired identifiable intangible assets decreased to $15.8 million as of June 30, 2021, from $17.1 million at March 31, 2021, due to amortization and write-offs of fully amortized assets. Goodwill remained stable | Intangible Asset Category | June 30, 2021 Net Carrying Amount ($ in thousands) | March 31, 2021 Net Carrying Amount ($ in thousands) | | :------------------------ | :--------------------------------- | :---------------------------------- | | Developed technology | $11,438 | $12,502 | | Customer relationships | $4,407 | $4,628 | | Trade and domain names | $0 | $0 | | **Total** | **$15,845** | **$17,130** | - The weighted average remaining useful life for developed technology is **4.4 years** and for customer relationships is **5.0 years** as of June 30, 2021[36](index=36&type=chunk) | Fiscal Year | Expected Future Amortization Expense ($ in thousands) | | :------------ | :------------------------------------ | | Remainder of FY22 | $4,388 | | Fiscal 2023 | $2,904 | | Fiscal 2024 | $2,851 | | Fiscal 2025 | $2,851 | | Fiscal 2026 | $2,851 | | Thereafter | $0 | | **Total** | **$15,845** | [6. LEASES](index=13&type=section&id=6.%20LEASES) Operating lease right-of-use assets and liabilities decreased slightly from March 31, 2021, to June 30, 2021. Operating lease expense for the quarter was $3.46 million, with a weighted average remaining lease term of 8.2 years | Metric | June 30, 2021 ($ in thousands) | March 31, 2021 ($ in thousands) | | :----------------------------- | :----------------------------- | :------------------------------ | | Operating lease, right-of-use assets | $63,402 | $66,664 | | Operating lease liabilities, current | $12,792 | $12,942 | | Operating lease liabilities, non-current | $79,403 | $82,456 | | Total operating lease liabilities | $92,195 | $95,398 | | Metric | Three Months Ended June 30, 2021 ($ in thousands) | Three Months Ended June 30, 2020 ($ in thousands) | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Operating lease expense | $3,459 | $3,750 | | Cash outflows from operating leases | $4,200 | $2,054 | - As of June 30, 2021, the weighted average remaining lease term was **8.2 years** and the weighted average discount rate was **4.0%**[42](index=42&type=chunk) [7. COMMITMENTS AND CONTINGENCIES](index=14&type=section&id=7.%20COMMITMENTS%20AND%20CONTINGENCIES) The company is involved in legal proceedings, including a wage and hour class action and PAGA claim, and has accrued contingent indirect tax liabilities of $2.8 million as of June 30, 2021 - The company is facing a class action complaint and a PAGA claim related to alleged California wage and hour practices violations and the federal Fair Credit Reporting Act[44](index=44&type=chunk)[46](index=46&type=chunk) - As of June 30, 2021, the company had accrued contingent indirect tax liabilities of **$2.8 million** for potential sales, use, telecommunications, excise, and income taxes[47](index=47&type=chunk) [8. CONVERTIBLE SENIOR NOTES AND CAPPED CALLS](index=15&type=section&id=8.%20CONVERTIBLE%20SENIOR%20NOTES%20AND%20CAPPED%20CALLS) The company has $362.5 million aggregate principal amount of 0.50% convertible senior notes due 2024. The notes are convertible under specific conditions, and the company intends to settle the principal amount in cash upon conversion. Capped call transactions are in place to partially offset potential dilution - The company has **$362.5 million** aggregate principal amount of 0.50% convertible senior notes due February 1, 2024[48](index=48&type=chunk) - The notes are convertible into common stock at an initial conversion price of approximately **$25.68 per share**, subject to certain conditions, and the company intends to settle the principal in cash upon conversion[49](index=49&type=chunk)[51](index=51&type=chunk) | Metric | June 30, 2021 ($ in thousands) | March 31, 2021 ($ in thousands) | | :-------------------------- | :----------------------------- | :------------------------------ | | Principal | $362,500 | $362,500 | | Unamortized debt discount | $(48,990) | $(53,323) | | Unamortized issuance costs | $(682) | $(742) | | Net carrying amount | $312,828 | $308,435 | - Capped call transactions cover approximately **14.1 million shares** of common stock, with an initial strike price of **$25.68** and cap prices of **$39.50 per share**, designed to partially offset dilution[55](index=55&type=chunk) [9. STOCK-BASED COMPENSATION](index=17&type=section&id=9.%20STOCK-BASED%20COMPENSATION) Total stock-based compensation expense for the three months ended June 30, 2021, was $36.6 million, an increase from the prior year. This includes expenses related to stock options, restricted stock units (RSUs), performance stock units (PSUs), and the employee stock purchase plan (ESPP) | Expense Category | Three Months Ended June 30, 2021 ($ in thousands) | Three Months Ended June 30, 2020 ($ in thousands) | | :----------------------- | :-------------------------------- | :-------------------------------- | | Cost of service revenue | $1,968 | $1,814 | | Cost of other revenue | $1,071 | $787 | | Research and development | $8,698 | $6,545 | | Sales and marketing | $14,326 | $5,739 | | General and administrative | $10,524 | $7,894 | | **Total** | **$36,587** | **$22,779** | | RSU Activity | Number of Shares (thousands) | Weighted Average Grant Date Fair Value ($) | | :-------------------- | :--------------------------- | :----------------------------------------- | | Outstanding at March 31, 2021 | 8,646 | $19.27 | | Granted | 3,466 | $26.36 | | Vested and released | (969) | $20.07 | | Forfeited | (317) | $19.71 | | Outstanding at June 30, 2021 | 10,826 | $21.45 | - As of June 30, 2021, there was **$165.1 million** of total unrecognized compensation cost related to RSUs and **$32.3 million** related to PSUs[59](index=59&type=chunk)[63](index=63&type=chunk) [10. INCOME TAXES](index=17&type=section&id=10.%20INCOME%20TAXES) The company's effective tax rate for the three months ended June 30, 2021, was (0.6)%, primarily due to a full valuation allowance maintained against its deferred tax assets - The effective tax rate was **(0.6)%** for the three months ended June 30, 2021, and **(0.5)%** for the same period in 2020[68](index=68&type=chunk) - The difference from the U.S. federal statutory rate is primarily due to the full valuation allowance maintained against the company's deferred tax assets[68](index=68&type=chunk) [11. NET LOSS PER SHARE](index=18&type=section&id=11.%20NET%20LOSS%20PER%20SHARE) The basic and diluted net loss per share remained at $(0.40) for both the three months ended June 30, 2021, and 2020, despite an increase in weighted-average common shares outstanding | Metric | Three Months Ended June 30, 2021 ($ in thousands) | Three Months Ended June 30, 2020 ($ in thousands) | | :---------------------------------------- | :-------------------------------- | :-------------------------------- | | Net loss | $(43,906) | $(41,913) | | Weighted average common shares outstanding - basic and diluted | 109,925 | 103,607 | | Net loss per share: Basic and diluted | $(0.40) | $(0.40) | | Potentially Dilutive Common Shares (thousands) | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | | :--------------------------------------------- | :------------------------------- | :------------------------------- | | Stock options | 1,413 | 2,259 | | Restricted stock units | 12,483 | 9,443 | | Potential shares attributable to the ESPP | 444 | 582 | | **Total potential anti-dilutive shares** | **14,340** | **12,284** | [12. GEOGRAPHICAL INFORMATION](index=18&type=section&id=12.%20GEOGRAPHICAL%20INFORMATION) International revenue grew significantly, contributing to the overall revenue increase, while property and equipment remained predominantly in the United States | Metric | Three Months Ended June 30, 2021 ($ in thousands) | Three Months Ended June 30, 2020 ($ in thousands) | | :---------------------------- | :-------------------------------- | :-------------------------------- | | Revenue by geographic area: | | | | United States | $103,658 | $93,244 | | International | $44,669 | $28,563 | | **Total revenue** | **$148,327** | **$121,807** | | Metric | June 30, 2021 ($ in thousands) | March 31, 2021 ($ in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------ | | Property and equipment by geographic area: | | | | United States | $85,928 | $87,945 | | International | $4,848 | $5,131 | | **Total property and equipment, net** | **$90,776** | **$93,076** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations for the quarter, including a business overview, performance summary, impact of COVID-19, key business metrics, and detailed analysis of revenue and expenses [BUSINESS OVERVIEW](index=19&type=section&id=BUSINESS%20OVERVIEW) 8x8 is a leading SaaS provider of cloud communication and collaboration solutions, focusing on mid-market and enterprise customers with its integrated UCaaS, CCaaS, and CPaaS offerings, including the 8x8 X Series and XCaaS - 8x8 is a leading SaaS provider of voice, video, chat, contact center, and enterprise-class API solutions powered by one global cloud communications platform[74](index=74&type=chunk) - The company focuses on mid-market (**$25K-$100K ARR**) and enterprise (**>$100K ARR**) customer categories[74](index=74&type=chunk) - Flagship services include the 8x8 X Series (UCaaS and CCaaS solutions) and eXperience Communications as a Service (XCaaS), delivered through a single platform[74](index=74&type=chunk) [SUMMARY AND OUTLOOK](index=19&type=section&id=SUMMARY%20AND%20OUTLOOK) In Q1 fiscal 2022, service revenue grew 21% year-over-year, and total ARR increased to $536 million, driven by mid-market and enterprise customer growth. The company's strategic focus is on improving operating efficiencies, expanding upmarket, and investing in marketing, sales, and R&D to achieve profitability - Service revenue grew approximately **21% year-over-year** to **$137.8 million** in Q1 fiscal 2022[75](index=75&type=chunk) - Total Annualized Recurring Subscriptions and Usage (ARR) increased to **$536 million** in Q1 fiscal 2022, with mid-market and enterprise customer ARR growing **34%** and representing **68% of total ARR**[75](index=75&type=chunk) - The company's continued business focus is on achieving improved operating efficiencies, delivering revenue growth, expanding upmarket with mid-market and enterprise customers, and investing in marketing, sales, and research and development[75](index=75&type=chunk)[76](index=76&type=chunk) [IMPACTS OF COVID-19](index=20&type=section&id=IMPACTS%20OF%20COVID-19) The full extent of the COVID-19 pandemic's impact on the company's business, operations, and financial results remains uncertain and depends on evolving factors, including the availability and effectiveness of vaccines and new virus variants - The impact of the COVID-19 pandemic on the business, operations, and financial results is uncertain and depends on numerous evolving factors[77](index=77&type=chunk)[79](index=79&type=chunk) - Measures to contain COVID-19, such as remote work and curtailed travel, have affected operations, and potential effects on customers, suppliers, and financial results are unclear[77](index=77&type=chunk)[79](index=79&type=chunk) [KEY BUSINESS METRIC](index=20&type=section&id=KEY%20BUSINESS%20METRIC) The company uses Annualized Recurring Subscriptions and Usage (ARR) as a key business metric to evaluate operational trends and drive financial performance, defining it as 12 times the most recent month's recurring subscription and platform usage charges for CPaaS customers - Annualized Recurring Subscriptions and Usage (ARR) is a key metric used by management to evaluate trends in future revenues, assess ongoing operations, allocate resources, and drive financial performance[81](index=81&type=chunk) - ARR is defined as the sum of the most recent month of recurring subscription amounts and platform usage charges for CPaaS customers (meeting a minimum billing threshold for at least six consecutive months), multiplied by 12[81](index=81&type=chunk) [COMPONENTS OF RESULTS OF OPERATIONS](index=21&type=section&id=COMPONENTS%20OF%20RESULTS%20OF%20OPERATIONS) This section defines the various revenue and expense categories, including service revenue (subscriptions, platform usage), other revenue (professional services, hardware sales), and operating expenses (cost of service/other revenue, R&D, sales & marketing, G&A, other expense, and provision for income taxes) - Service revenue includes communication services subscriptions, platform usage, and related fees from UCaaS, CCaaS, XCaaS, and CPaaS offerings[82](index=82&type=chunk) - Other revenue consists of professional services and sales/rentals of IP telephones[83](index=83&type=chunk) - Operating expenses are categorized into Cost of Service Revenue, Cost of Other Revenue, Research and Development, Sales and Marketing, and General and Administrative, with overhead costs allocated based on headcount[84](index=84&type=chunk)[85](index=85&type=chunk)[86](index=86&type=chunk)[87](index=87&type=chunk)[88](index=88&type=chunk) [RESULTS OF OPERATIONS](index=21&type=section&id=RESULTS%20OF%20OPERATIONS) This section provides a detailed analysis of the company's revenue and expense performance for the three months ended June 30, 2021, compared to the prior year, highlighting key drivers for changes in service revenue, other revenue, cost of revenue, operating expenses, other expense, and income taxes [Revenue](index=21&type=section&id=Revenue) Total revenue increased by 21.8% year-over-year, driven by a 20.7% increase in service revenue due to customer base expansion, expanded offerings, and CPaaS usage growth, and a 38.1% increase in other revenue from professional services | Revenue Type | Three Months Ended June 30, 2021 ($ in thousands) | Three Months Ended June 30, 2020 ($ in thousands) | Change ($ in thousands) | % Change | | :------------- | :-------------------------------- | :-------------------------------- | :---------------------- | :------- | | Service revenue | $137,796 | $114,183 | $23,613 | 20.7% | | Other revenue | $10,531 | $7,624 | $2,907 | 38.1% | | **Total revenue** | **$148,327** | **$121,807** | **$26,520** | **21.8%** | - Service revenue growth was primarily driven by a net increase in the customer base, expanded offerings to existing customers, and growth in CPaaS usage, particularly in the APAC region[93](index=93&type=chunk) - Other revenue increased due to higher professional services revenue from overall business growth, partially offset by a shift towards hardware rental and soft phone usage[94](index=94&type=chunk) [Cost of Revenue](index=22&type=section&id=Cost%20of%20Revenue) Cost of service revenue increased in absolute dollars but decreased as a percentage of service revenue, driven by higher communication infrastructure costs and software amortization. Cost of other revenue increased due to higher hardware shipment volume but improved as a percentage of other revenue due to better pricing and rental revenue | Cost Type | Three Months Ended June 30, 2021 ($ in thousands) | Three Months Ended June 30, 2020 ($ in thousands) | Change ($ in thousands) | % Change | | :-------------------- | :-------------------------------- | :-------------------------------- | :---------------------- | :------- | | Cost of service revenue | $46,010 | $40,996 | $5,014 | 12.2% | | % of service revenue | 33.4% | 35.9% | | | | Cost of other revenue | $13,746 | $11,137 | $2,609 | 23.4% | | % of other revenue | 130.5% | 146.1% | | | - Cost of service revenue increased primarily due to a **$5.9 million** increase in communication infrastructure costs and a **$0.7 million** increase in amortization of capitalized internal-use software[94](index=94&type=chunk) - Cost of other revenue increased due to higher hardware shipment volume, but its percentage of other revenue decreased due to improved pricing and increased hardware rental revenue[97](index=97&type=chunk) [Operating Expenses](index=22&type=section&id=Operating%20Expenses) Operating expenses saw increases across research and development, sales and marketing, and general and administrative categories, primarily driven by higher stock-based compensation and investments in growth initiatives [Research and development](index=22&type=section&id=Research%20and%20development) Research and development expenses increased by $3.9 million year-over-year, mainly due to higher stock-based compensation, less capitalized internal-use software costs, and increased public cloud expenses. The company plans continued investment in R&D | Metric | Three Months Ended June 30, 2021 ($ in thousands) | Three Months Ended June 30, 2020 ($ in thousands) | Change ($ in thousands) | % Change | | :----------------------- | :-------------------------------- | :-------------------------------- | :---------------------- | :------- | | Research and development | $25,392 | $21,494 | $3,898 | 18.1% | | % of total revenue | 17.1% | 17.6% | | | - Increases were primarily due to **$2.2 million** in stock-based compensation, **$1.5 million** from less capitalized internal-use software costs, and **$0.5 million** in public cloud expenses[98](index=98&type=chunk) [Sales and marketing](index=22&type=section&id=Sales%20and%20marketing) Sales and marketing expenses increased by 26.2% year-over-year, driven by higher stock-based compensation and internal/external sales commissions, as the company continues to invest in customer acquisition and brand awareness | Metric | Three Months Ended June 30, 2021 ($ in thousands) | Three Months Ended June 30, 2020 ($ in thousands) | Change ($ in thousands) | % Change | | :------------------ | :-------------------------------- | :-------------------------------- | :---------------------- | :------- | | Sales and marketing | $75,915 | $60,150 | $15,765 | 26.2% | | % of total revenue | 51.2% | 49.4% | | | - Increases were primarily due to **$8.6 million** in stock-based compensation expense and **$6.8 million** in internal and external sales commissions[99](index=99&type=chunk) [General and administrative](index=23&type=section&id=General%20and%20administrative) General and administrative expenses increased slightly by 1.2% year-over-year, primarily due to higher stock-based compensation and contract termination costs, partially offset by lower legal and regulatory costs and credit loss allowances. The company expects this expense as a percentage of revenue to decline over time | Metric | Three Months Ended June 30, 2021 ($ in thousands) | Three Months Ended June 30, 2020 ($ in thousands) | Change ($ in thousands) | % Change | | :------------------------- | :-------------------------------- | :-------------------------------- | :---------------------- | :------- | | General and administrative | $26,091 | $25,790 | $301 | 1.2% | | % of total revenue | 17.6% | 21.2% | | | - Increases were primarily due to **$2.6 million** in stock-based compensation expense and **$0.8 million** in contract termination costs, partially offset by decreases in legal/regulatory costs and credit loss allowances[101](index=101&type=chunk) [Other expense, net](index=23&type=section&id=Other%20expense,%20net) Other expense, net, increased primarily due to fluctuations in foreign exchange rates and is expected to remain in a net expense position due to interest and amortization related to convertible senior notes | Metric | Three Months Ended June 30, 2021 ($ in thousands) | Three Months Ended June 30, 2020 ($ in thousands) | Change ($ in thousands) | % Change | | :----------------- | :-------------------------------- | :-------------------------------- | :---------------------- | :------- | | Other expense, net | $4,823 | $3,925 | $898 | 22.9% | | % of total revenue | 3.3% | 3.2% | | | - The increase in Other expense, net, was primarily due to increased expenses related to fluctuations in foreign exchange rates[102](index=102&type=chunk) [Provision for income taxes](index=23&type=section&id=Provision%20for%20income%20taxes) The provision for income taxes remained relatively stable, with no material changes anticipated for the foreseeable future | Metric | Three Months Ended June 30, 2021 ($ in thousands) | Three Months Ended June 30, 2020 ($ in thousands) | Change ($ in thousands) | % Change | | :------------------------ | :-------------------------------- | :-------------------------------- | :---------------------- | :------- | | Provision for income taxes | $256 | $228 | $28 | 12.3% | | % of total revenue | 0.2% | 0.2% | | | [Liquidity and Capital Resources](index=23&type=section&id=Liquidity%20and%20Capital%20Resources) As of June 30, 2021, the company had $153.2 million in cash, cash equivalents, and investments. It expects sufficient liquidity for the next 12 months, aided by deferred payroll taxes under the CARES Act and an employee stock program reducing cash usage - As of June 30, 2021, the company had **$153.2 million** in cash, cash equivalents, and investments, plus **$8.6 million** in restricted cash[104](index=104&type=chunk) - The company deferred approximately **$5.0 million** in employer payroll taxes under the CARES Act, with **$2.5 million** due in Q3 FY22 and the remainder in Q3 FY23[104](index=104&type=chunk) - An employee stock program is expected to lower cash usage from payroll compensation by over **$4 million** in the remainder of fiscal 2022 and approximately **$4 million** in Q1 fiscal 2023[105](index=105&type=chunk) [Period-over-Period Changes](index=24&type=section&id=Period-over-Period%20Changes) Net cash provided by operating activities significantly improved to $4.0 million for the three months ended June 30, 2021, from a net cash use of $9.3 million in the prior year. Net cash used in investing activities slightly decreased, while net cash provided by financing activities increased | Cash Flow Activity | Three Months Ended June 30, 2021 ($ in thousands) | Three Months Ended June 30, 2020 ($ in thousands) | | :---------------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash provided by (used in) operating activities | $4,032 | $(9,250) | | Net cash used in investing activities | $(11,146) | $(11,900) | | Net cash provided (used in) by financing activities | $3,435 | $(134) | - Operating cash flow improvement was primarily driven by non-cash operating expenses like stock-based compensation (**$36.6 million**) and depreciation/amortization (**$11.5 million**), partially offset by a net loss of **$43.9 million**[107](index=107&type=chunk) - Investing activities primarily used cash for capitalized internal-use software development costs (**$6.5 million**) and net purchases of investments (**$3.7 million**)[107](index=107&type=chunk) [CRITICAL ACCOUNTING POLICIES & ESTIMATES](index=24&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20%26%20ESTIMATES) There have been no significant changes to the company's critical accounting policies and estimates during the three months ended June 30, 2021, as previously disclosed in its Form 10-K - No significant changes occurred during the three months ended June 30, 2021, to the critical accounting policies and estimates previously disclosed in the company's Form 10-K for the fiscal year ended March 31, 2021[108](index=108&type=chunk) [NEW ACCOUNTING PRONOUNCEMENTS](index=24&type=section&id=NEW%20ACCOUNTING%20PRONOUNCEMENTS) For information on recently adopted and not yet adopted accounting pronouncements, refer to Note 2, Summary of Significant Accounting Policies, in the Notes to Unaudited Condensed Consolidated Financial Statements - Refer to Note 2, Summary of Significant Accounting Policies, for a discussion of recently adopted and not yet adopted accounting pronouncements[109](index=109&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=24&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses the company's exposure to market risks, specifically interest rate fluctuation risk on its cash, investments, and convertible senior notes, and foreign currency exchange risk on its international revenue and operating expenses [Interest Rate Fluctuation Risk](index=26&type=section&id=Interest%20Rate%20Fluctuation%20Risk) The company's cash, cash equivalents, restricted cash, and investments totaled $161.9 million as of June 30, 2021. A hypothetical 10% change in interest rates would not materially impact the value of these assets. The fair value of convertible senior notes is subject to market risk but does not impact financial position due to their fixed nature - As of June 30, 2021, the company had **$161.9 million** in cash, cash equivalents, restricted cash, and investments, primarily in money market funds, U.S. treasury, commercial paper, and corporate bonds[110](index=110&type=chunk) - A hypothetical **10% change in interest rates** would not have a material impact on the value of the company's cash, cash equivalents, or available-for-sale investments[110](index=110&type=chunk) - The fair value of the **$362.5 million** convertible senior notes (**$450.7 million** estimated fair value as of June 30, 2021) is subject to interest rate and market risk, but these changes do not impact the company's financial position or cash flows due to the fixed nature of the debt[110](index=110&type=chunk)[112](index=112&type=chunk) [Foreign Currency Exchange Risk](index=26&type=section&id=Foreign%20Currency%20Exchange%20Risk) The company faces foreign currency risks from revenue and operating expenses denominated in currencies other than the U.S. dollar, primarily the British Pound. A hypothetical 10% decrease in foreign currencies against the U.S. dollar would not result in a material foreign currency loss for the quarter, but this impact may increase with expanding foreign operations - The company has foreign currency risks related to revenue and operating expenses denominated in currencies other than the U.S. dollar, primarily the British Pound[113](index=113&type=chunk) - A hypothetical **10% decrease** in all foreign currencies against the U.S. dollar would not result in a material foreign currency loss for the three months ended June 30, 2021[113](index=113&type=chunk) - The company does not currently use financial instruments to hedge foreign currency exchange risk but may do so in the future as foreign operations expand[113](index=113&type=chunk) [Item 4. Controls and Procedures](index=26&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, under the supervision of the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2021. The section also acknowledges the inherent limitations of control systems and reports no material changes in internal control over financial reporting [Evaluation of Effectiveness of Disclosure Controls and Procedures](index=26&type=section&id=Evaluation%20of%20Effectiveness%20of%20Disclosure%20Controls%20and%20Procedures) The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of June 30, 2021 - The Chief Executive Officer and Chief Financial Officer concluded that the company's Disclosure Controls were effective as of June 30, 2021[114](index=114&type=chunk) [Limitations on the Effectiveness of Controls](index=26&type=section&id=Limitations%20on%20the%20Effectiveness%20of%20Controls) Management acknowledges that control systems provide only reasonable, not absolute, assurance and are subject to inherent limitations and resource constraints - Management does not expect that Disclosure Controls or internal control over financial reporting will prevent all errors and all fraud[115](index=115&type=chunk) - A control system can provide only reasonable, not absolute, assurance and is subject to inherent limitations and resource constraints[115](index=115&type=chunk) [Changes in Internal Control over Financial Reporting](index=26&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) There were no changes in the company's internal control over financial reporting during the first quarter of fiscal year 2022 that materially affected, or are reasonably likely to materially affect, its internal control over financial reporting - No material changes in internal control over financial reporting occurred during the first quarter of fiscal year 2022[116](index=116&type=chunk) [PART II. OTHER INFORMATION](index=27&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=27&type=section&id=Item%201.%20Legal%20Proceedings) This section incorporates by reference the information on legal proceedings detailed in Note 7, Commitments and Contingencies, of the unaudited condensed consolidated financial statements - Information on legal proceedings is incorporated by reference from Note 7, Commitments and Contingencies[118](index=118&type=chunk) [Item 1A. Risk Factors](index=27&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended March 31, 2021 - No material changes from the risk factors previously disclosed in the company's Form 10-K for the fiscal year ended March 31, 2021[118](index=118&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=27&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities or use of proceeds during the period - None[118](index=118&type=chunk) [Item 3. Defaults Upon Senior Securities](index=27&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities during the period - None[118](index=118&type=chunk) [Item 4. Mine Safety Disclosures](index=27&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) The company reported no mine safety disclosures during the period - None[118](index=118&type=chunk) [Item 5. Other Information](index=27&type=section&id=Item%205.%20Other%20Information) The company reported no other information required to be disclosed under this item - None[118](index=118&type=chunk) [Item 6. Exhibits](index=28&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Quarterly Report on Form 10-Q, including corporate documents, debt indentures, officer certifications, and financial data in iXBRL format - Key exhibits include the Restated Certificate of Incorporation, Amended and Restated By-Laws, Indenture for convertible notes, CEO and CFO certifications (Sections 302 and 906), and iXBRL formatted financial statements[120](index=120&type=chunk) [Signature](index=29&type=section&id=Signature) [Signature Details](index=29&type=section&id=Signature%20Details) The report was duly signed on behalf of 8x8, Inc. by Samuel Wilson, Chief Financial Officer, on August 5, 2021, certifying its compliance with Securities Exchange Act requirements - The report was signed by Samuel Wilson, Chief Financial Officer (Principal Financial and Duly Authorized Officer), on August 5, 2021[125](index=125&type=chunk)

Part I [Forward-Looking Statements and Risk Factors](index=3&type=section&id=Forward-Looking%20Statements%20and%20Risk%20Factors) This section outlines forward-looking statements and identifies various factors that could cause actual results to differ materially from projections, including economic downturns, customer churn, competitive pressures, service quality, and regulatory compliance - Forward-looking statements are identified by words such as 'may,' 'will,' 'should,' 'estimates,' 'predicts,' 'potential,' 'continue,' 'strategy,' 'believes,' 'anticipates,' 'plans,' 'expects,' 'intends,' and similar expressions[7](index=7&type=chunk) - Key factors that could cause actual results to differ include: impact of economic downturns (e.g., COVID-19), customer cancellations and churn rates, customer acceptance of new services, competitive market pressures, service quality and reliability, ability to scale business, customer acquisition costs, reliance on channel partners, timing of operating result improvements, employee-related costs, reliance on third-party network providers, infrastructure failure risks, cybersecurity breaches, software compatibility, compliance with regulations, international market adoption, acquisition risks, convertible notes risks, and intellectual property claims[7](index=7&type=chunk) [Item 1. Business](index=4&type=section&id=Item%201.%20Business) 8x8, Inc. is a leading SaaS provider of cloud communications, offering voice, video, contact center, and communication APIs, emphasizing its single, global cloud platform, AI/ML capabilities, and commitment to service quality - 8x8 is a leading Software-as-a-Service ("SaaS") provider of voice, video, contact center, and communication APIs, powered by a global cloud communications platform[10](index=10&type=chunk) - The company has approximately **1.8 million paid business users** and offers a highly scalable and configurable cloud communications platform[10](index=10&type=chunk)[12](index=12&type=chunk) - Key attributes of 8x8's solution include: Unified Communications, Collaboration, and Contact Center on a single, API-based Cloud Technology Platform; Big Data, Analytics, and Artificial Intelligence; Global Reach® technology; Intuitive User Experience; Committed Service Quality and Availability over the Public Internet; Configurability and Flexibility; Rapid Deployment; Integration with Third-Party Business Applications; Emphasis on Security and Compliance; and the Jitsi Open Source Video Project[12](index=12&type=chunk)[13](index=13&type=chunk)[14](index=14&type=chunk)[15](index=15&type=chunk)[16](index=16&type=chunk)[18](index=18&type=chunk)[19](index=19&type=chunk)[20](index=20&type=chunk)[21](index=21&type=chunk)[22](index=22&type=chunk) - 8x8 offers solutions such as 8x8 Work (UC solution), 8x8 Contact Center (multi-channel cloud-based), 8x8 Meet (video conferencing), 8x8 Team Messaging, and 8x8 CPaaS (communication platform-as-a-service)[23](index=23&type=chunk)[24](index=24&type=chunk)[25](index=25&type=chunk)[26](index=26&type=chunk) - The company sells directly to customers and through indirect sales channels, including VARs, carriers, master agents, ISVs, and system integrators, serving over **58,000 companies** in more than **150 countries**, with no single customer accounting for **10% or more of revenues**[31](index=31&type=chunk)[32](index=32&type=chunk) - 8x8 holds over **250 patents** and more than **100 U.S. and foreign patent applications**, covering various aspects of its services and infrastructure[35](index=35&type=chunk) - The company faces competition from cloud communication providers (e.g., RingCentral, Genesys, Zoom), internet and cloud services vendors (e.g., Cisco, Google, Microsoft), and incumbent telephony companies (e.g., AT&T, Verizon)[38](index=38&type=chunk)[39](index=39&type=chunk)[40](index=40&type=chunk) - As of March 31, 2021, 8x8 had **1,696 full-time employees globally**, with **44% located outside the USA**, emphasizing a 'Customer First, Product First, Team First' culture, diversity, equity, and inclusion, and competitive total rewards packages[51](index=51&type=chunk)[53](index=53&type=chunk)[54](index=54&type=chunk)[55](index=55&type=chunk)[56](index=56&type=chunk) [Item 1A. Risk Factors](index=10&type=section&id=Item%201A.%20Risk%20Factors) This section details various risks and uncertainties that could materially harm 8x8's business, financial condition, and operating results, categorized into business, operations, regulatory, intellectual property, debt, stock, and general factors [Risks Related to our Business and Industry](index=11&type=section&id=Risks%20Related%20to%20our%20Business%20and%20Industry) 8x8 has a history of losses and expects to continue incurring them due to investments in sales, marketing, and R&D, facing unpredictable operating results influenced by market demand, customer churn, and intense competition - 8x8 recorded a net operating loss of approximately **$146.1 million** for the twelve months ended March 31, 2021, and an accumulated deficit of approximately **$591.1 million**[69](index=69&type=chunk) - The company expects to continue incurring operating losses in the near future due to investments in sales and marketing, and research and development[69](index=69&type=chunk) - Customer churn adversely impacts revenues and requires ongoing sales and marketing expenditures to acquire new and retain existing customers[75](index=75&type=chunk) - Intense competition in the cloud communications industry, including from other cloud providers and legacy equipment providers, may prevent revenue growth or profitability[79](index=79&type=chunk)[80](index=80&type=chunk)[81](index=81&type=chunk) - Increasing sales to enterprise customers involves more complex, resource-intensive, and longer sales cycles, making revenue prediction difficult[86](index=86&type=chunk)[87](index=87&type=chunk) - The market for cloud software solutions is subject to rapid technological change, requiring continuous new product and service introductions to maintain and grow the business[89](index=89&type=chunk) - Difficulty attracting or retaining senior management and other personnel with industry experience and technical skills could impede growth[91](index=91&type=chunk) - The company may be subject to liability for past or future sales, use, value-added, or similar taxes, which could adversely affect its business[93](index=93&type=chunk)[94](index=94&type=chunk) - As of March 31, 2021, 8x8 had federal net operating loss (NOL) carryforwards of approximately **$433.0 million** (indefinite carryforward) and **$137.8 million** (expiring from 2022), and state NOL carryforwards of **$296.6 million** (expiring 2029-2041); research and development credit carryforwards were **$15.3 million** (federal) and **$16.9 million** (California)[96](index=96&type=chunk) [Risks Related to our Products and Operations](index=15&type=section&id=Risks%20Related%20to%20our%20Products%20and%20Operations) Operational risks include service disruptions, infrastructure failures, and inability to scale efficiently, alongside challenges from international expansion, acquisitions, and reliance on third-party providers, all potentially harming operating results - Significant or repeated disruptions, outages, or failures in the platform or services due to defects, bugs, or vulnerabilities could lead to customer loss, service performance claims, or significant costs[98](index=98&type=chunk) - The company's physical infrastructure is concentrated in a few data centers and public cloud providers, making it susceptible to significant costs and disruptions from failures or outages[99](index=99&type=chunk)[100](index=100&type=chunk) - Inability to scale the business efficiently or quickly enough to meet growing customer needs could lead to increased customer churn and damage to reputation[104](index=104&type=chunk) - Continued international expansion exposes the business to risks such as localization challenges, varying regulatory requirements, increased competition, data security regulations (e.g., GDPR), differing labor laws, and currency exchange rate fluctuations[106](index=106&type=chunk)[108](index=108&type=chunk) - Acquisitions pose risks including integration difficulties, diversion of management attention, new regulatory compliance obligations, and potential failure to achieve expected synergies[111](index=111&type=chunk) - Maintaining compatibility with third-party applications and mobile platforms (e.g., Salesforce, Microsoft Dynamics, Apple, Google) is crucial for functionality and popularity; changes or restrictions could negatively impact offerings[115](index=115&type=chunk)[116](index=116&type=chunk) - Reliance on third-party network service providers for PSTN calls and network connectivity, and third-party vendors for IP phones, introduces risks of disruption, quality deterioration, or increased costs[117](index=117&type=chunk)[118](index=118&type=chunk) - Difficulties in executing local number porting requests could negatively impact customer acquisition and retention[120](index=120&type=chunk) [Risks Related to Regulatory Matters](index=19&type=section&id=Risks%20Related%20to%20Regulatory%20Matters) Regulatory risks include vulnerabilities to security breaches, potential liability for fraudulent activities, non-compliance with data privacy laws (e.g., GDPR, CCPA), and the need to adhere to industry standards (e.g., FCC, 9-1-1), all of which could increase costs or harm the business - Operations are vulnerable to security breaches, cyber intrusions, and malicious acts (e.g., DDOS, ransomware), which could lead to increased costs, liability claims, government investigations, fines, and reputational harm[123](index=123&type=chunk)[124](index=124&type=chunk) - The company could be liable for breaches of security on its website, fraudulent activities by users, or failures of third-party vendors to deliver credit card transaction processing services[125](index=125&type=chunk)[126](index=126&type=chunk)[127](index=127&type=chunk) - Failure to comply with data privacy and protection laws and contractual obligations (e.g., GDPR, CCPA) could result in fines, penalties, lawsuits, and reputational damage[128](index=128&type=chunk)[130](index=130&type=chunk) - Compliance with industry standards and regulations (e.g., FCC, 9-1-1, local number porting, robo-calling, caller ID spoofing) is critical; changes or non-compliance could require service modifications, increase costs, or harm the business[131](index=131&type=chunk)[132](index=132&type=chunk) - Efforts to combat robo-calling and caller ID spoofing, such as the STIR/SHAKEN framework, could competitively harm the company if it cannot authenticate originating calls, making its service less desirable[134](index=134&type=chunk) [Risks Related to Intellectual Property](index=21&type=section&id=Risks%20Related%20to%20Intellectual%20Property) Risks include potential infringement of third-party technology, inability to adequately protect proprietary intellectual property, and challenges arising from reliance on licensed software, including open-source, which could disrupt business or competitive advantage - Infringement of a third party's proprietary technology could lead to monetary liabilities, injunctions, and disruption of business operations[137](index=137&type=chunk) - Inability to protect proprietary technology (patents, trademarks, copyrights, trade secrets) could allow competitors to develop similar or superior technologies, or challenge existing rights, harming competitive advantage[138](index=138&type=chunk) - Reliance on software licensed from third parties, including open-source software, carries risks if license terms are misinterpreted or interfere with proprietary rights, potentially requiring re-engineering or discontinuation of platform functionality[140](index=140&type=chunk) [Risks Related to our Debt, our Stock, and our Charter](index=21&type=section&id=Risks%20Related%20to%20our%20Debt%2C%20our%20Stock%2C%20and%20our%20Charter) The company's substantial debt, including convertible senior notes, requires significant cash flow for servicing, with risks of default, adverse financial impact from conditional conversion features, and potential dilution from future stock sales - Servicing the company's **$362.5 million** aggregate principal amount of 0.50% convertible senior notes due 2024 requires significant cash, and future cash flow may not be sufficient to pay down this substantial debt[142](index=142&type=chunk)[143](index=143&type=chunk) - The company may not have the ability to raise necessary funds to settle conversions of notes in cash or repurchase notes upon a fundamental change, potentially leading to default[145](index=145&type=chunk) - The conditional conversion feature of the notes, if triggered, could adversely affect financial condition and operating results by requiring cash payments or reclassification of debt as a current liability[146](index=146&type=chunk)[147](index=147&type=chunk) - Accounting for convertible debt securities (ASC 470-20) requires separate accounting for liability and equity components, leading to greater non-cash interest expense and potentially larger net losses[148](index=148&type=chunk) - Capped call transactions, entered into to reduce potential dilution from note conversions, may affect the market value of common stock due to hedging activities by option counterparties[149](index=149&type=chunk)[150](index=150&type=chunk)[152](index=152&type=chunk) - Future sales of common stock or equity-linked securities could lower the market price of common stock and impair the ability to raise capital[153](index=153&type=chunk) - Provisions in charter documents and Delaware law (e.g., no cumulative voting, board's ability to issue preferred stock, restrictions on stockholder action) could discourage takeover attempts[154](index=154&type=chunk)[155](index=155&type=chunk) [General Risk Factors](index=24&type=section&id=General%20Risk%20Factors) General risks include significant business harm from the COVID-19 pandemic and economic difficulties, challenges in securing future financing, and adverse impacts from unforeseen events like natural disasters or global pandemics - The COVID-19 pandemic has created significant volatility and economic disruption, potentially reducing demand for cloud services, delaying sales cycles, increasing customer churn, and impacting financial markets[158](index=158&type=chunk)[159](index=159&type=chunk) - The company may not be able to secure financing on favorable terms, or at all, to meet future capital needs for growth, acquisitions, or debt servicing[160](index=160&type=chunk) - Natural disasters, war, terrorist attacks, global pandemics (like COVID-19), or malicious conduct could adversely impact operations, degrade service, and negatively affect financial condition, revenues, and costs[161](index=161&type=chunk) [Item 1B. Unresolved Staff Comments](index=25&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reported no unresolved staff comments from the Securities and Exchange Commission [Item 2. Properties](index=25&type=section&id=Item%202.%20Properties) 8x8's principal operations are in Campbell, California, with additional leased office spaces in the United Kingdom, Romania, and Singapore, and leased space from third-party data center hosting facilities globally - Principal operations are located in Campbell, California[164](index=164&type=chunk) - International operations are conducted in leased office space in the United Kingdom (sales/support), Romania (support, R&D), and Singapore (regional sales/marketing, procurement, product/engineering, support)[164](index=164&type=chunk) - The company leases space from third-party data center hosting facilities in the United States, South America, Europe, and Asia Pacific[164](index=164&type=chunk) [Item 3. Legal Proceedings](index=25&type=section&id=Item%203.%20Legal%20Proceedings) Information regarding legal proceedings is incorporated by reference from Note 6, Commitments and Contingencies, in the Notes to Consolidated Financial Statements - Information on legal proceedings is found in Note 6, Commitments and Contingencies, in the Notes to Consolidated Financial Statements[166](index=166&type=chunk) [Item 4. Mine Safety Disclosures](index=25&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company Part II [Item 5. Market for Registrant's Common Stock and Related Security Holder Matters and Issuer Purchases of Equity Securities](index=26&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Stock%20and%20Related%20Security%20Holder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) This section provides information on the market for 8x8's common stock, its dividend policy, the number of stockholders, and a stock performance graph, noting its NYSE listing, no cash dividends, and remaining repurchase plan funds - 8x8's common stock has been traded under the symbol **'EGHT'** on the New York Stock Exchange (NYSE) since December 8, 2017[170](index=170&type=chunk) - The company has never paid cash dividends on its common stock and has no plans to do so in the foreseeable future[171](index=171&type=chunk) - As of May 13, 2021, there were approximately **187 holders of record** of the company's common stock[172](index=172&type=chunk) - There was no activity under the Repurchase Plan for the year ended March 31, 2021, with approximately **$7.1 million** remaining available for purchase under the plan[179](index=179&type=chunk) [Item 6. Selected Financial Data](index=28&type=section&id=Item%206.%20Selected%20Financial%20Data) This table presents selected consolidated financial data for 8x8, Inc. for the five fiscal years ended March 31, 2017 through March 31, 2021, providing a snapshot of key financial metrics Selected Consolidated Financial Data (Years Ended March 31, in thousands) | | 2021 | 2020 | 2019 | 2018 | 2017 | |:---|:---|:---|:---|:---|:---| | Total revenues | $532,344 | $446,237 | $352,586 | $296,500 | $253,388 | | Net loss | $(165,585) | $(172,368) | $(88,739) | $(104,497) | $(4,751) | | Net loss per share: Basic and diluted | $(1.57) | $(1.72) | $(0.94) | $(1.14) | $(0.05) | | Total assets | $678,409 | $700,641 | $546,358 | $277,209 | $333,855 | | Accumulated deficit | $(591,055) | $(422,670) | $(250,302) | $(201,464) | $(114,610) | | Total stockholders' equity | $160,504 | $190,731 | $249,390 | $218,774 | $288,601 | [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on 8x8's financial condition and results of operations, highlighting its SaaS business model, strategic focus on mid-market and enterprise customers, and the impacts of COVID-19, detailing revenue, costs, expenses, liquidity, and critical accounting policies [Overview](index=28&type=section&id=Overview) 8x8 is a leading SaaS provider of cloud communications, offering unified communications, team collaboration, video conferencing, contact center, data analytics, and communication APIs, serving a diverse customer base with a strategic focus on mid-market and enterprise sectors - 8x8 is a leading SaaS provider of voice, video, contact center, and communication APIs powered by a global cloud communications platform[183](index=183&type=chunk) - The company's customer base spans over **150 countries**, with an increased focus on mid-market and enterprise customer sectors in recent years[184](index=184&type=chunk) - Revenue is primarily generated from subscription-based cloud-based offerings (UCaaS, CCaaS, CPaaS) and platform usage, with additional revenue from professional services and hardware sales[185](index=185&type=chunk) - The flagship offering is **8x8 X Series**, an integrated suite of UCaaS and CCaaS solutions[185](index=185&type=chunk) - Substantially all customers were upgraded to the X Series platform by March 31, 2021, with remaining upgrades planned for fiscal 2022, aiming to reduce platform support needs and improve customer retention[186](index=186&type=chunk) [Summary and Outlook](index=28&type=section&id=Summary%20and%20Outlook) In fiscal 2021, 8x8 achieved **20% year-over-year growth** in total service revenue to **$496.0 million**, driven by increased sales to mid-market and enterprise customers, while focusing on improving operating efficiencies and continuing strategic investments for fiscal 2022 Fiscal 2021 Service Revenue Growth | Metric | FY2021 | FY2020 | Change YoY (%) | |:---|:---|:---|:---|\ | Total service revenue (in millions) | $496.0 | $414.1 | 20% | | Average annualized service revenue per customer | $8,439 | $7,876 | 7.15% | | Mid-market and enterprise service revenue (% of total) | 47% | - | 31% (YoY growth) | | Bundled UCaaS and CCaaS new bookings (>$12k ARR) | 67% | 60% | +7 percentage points | - The company's business focus is on achieving improved operating efficiencies while delivering revenue growth, with a concurrent focus on scale and managing costs to drive profitability[189](index=189&type=chunk)[190](index=190&type=chunk) - In fiscal 2022, 8x8 plans to continue investments in customer acquisition, marketing efforts, internal and field sales capacity, research and development, and indirect channel programs[191](index=191&type=chunk) [New CEO Appointment](index=29&type=section&id=New%20CEO%20Appointment) David Sipes was appointed as Chief Executive Officer and a member of the board of directors on December 10, 2020 - **David Sipes** was appointed Chief Executive Officer and a board member on December 10, 2020[192](index=192&type=chunk) [IMPACTS OF COVID-19](index=29&type=section&id=IMPACTS%20OF%20COVID-19) The COVID-19 pandemic has created significant volatility and economic disruption, particularly for small and medium-sized businesses, leading to increased usage of 8x8's services by existing customers due to remote work trends, though its full impact remains uncertain - The COVID-19 pandemic has caused significant volatility, uncertainty, and economic disruption, particularly for small and medium-sized businesses[193](index=193&type=chunk) - The company experienced significant increases in usage by existing customers as workforces shifted to remote work, accelerating reliance on cloud communication systems[193](index=193&type=chunk) - The full impact on business, operations, and financial results is unpredictable, potentially affecting customer demand, sales cycles, churn, and pricing[193](index=193&type=chunk) [COMPONENTS OF RESULTS OF OPERATIONS](index=29&type=section&id=COMPONENTS%20OF%20RESULTS%20OF%20OPERATIONS) This section defines the various components of 8x8's results of operations, including service revenue, other revenue, and different categories of costs and expenses, such as cost of service/other revenue, R&D, sales & marketing, G&A, other income/expense, and provision for income taxes - Service revenue includes communication services subscriptions, platform usage, and related fees from UCaaS, CCaaS, and CPaaS offerings[194](index=194&type=chunk) - Other revenue comprises professional services for deployment and sales/rentals of IP telephones and other hardware[195](index=195&type=chunk) - Cost of service revenue primarily covers network operations, personnel, technology licenses, third-party communication services, and outsourced customer service[196](index=196&type=chunk) - Cost of other revenue includes direct and indirect costs for purchasing, scheduling, shipping, handling of IP telephones, and professional services for product deployment[198](index=198&type=chunk) - Research and development expenses consist of personnel, third-party development, software, and equipment costs for product and platform development[199](index=199&type=chunk) - Sales and marketing expenses include personnel, sales commissions, trade shows, advertising, and demand generation[200](index=200&type=chunk) - General and administrative expenses cover personnel, professional services, corporate administrative costs, and tax/regulatory fees[201](index=201&type=chunk) - Other income (expense), net, primarily consists of interest expense from convertible notes, offset by income from cash/investments and foreign exchange gains/losses[202](index=202&type=chunk) - Provision for income taxes primarily includes foreign income taxes and U.S. state minimum taxes, with a valuation allowance against U.S. deferred tax assets[203](index=203&type=chunk) [RESULTS OF OPERATIONS](index=30&type=section&id=RESULTS%20OF%20OPERATIONS) This section details the year-over-year changes in 8x8's revenue, cost of revenue, operating expenses, other income/expense, and provision for income taxes for fiscal years 2019, 2020, and 2021, highlighting service revenue growth and continued net losses due to increased operating expenses Revenue (in thousands) | Metric | 2021 | 2020 | 2019 | Change 2021 vs 2020 ($) | Change 2021 vs 2020 (%) | Change 2020 vs 2019 ($) | Change 2020 vs 2019 (%) | |:---|:---|:---|:---|:---|:---|:---|:---|\ | Service revenue | $495,985 | $414,078 | $325,305 | $81,907 | 19.8% | $88,773 | 27.3% | | Percentage of total revenue | 93.2% | 92.8% | 92.3% | | | | | Other Revenue (in thousands) | Metric | 2021 | 2020 | 2019 | Change 2021 vs 2020 ($) | Change 2021 vs 2020 (%) | Change 2020 vs 2019 ($) | Change 2020 vs 2019 (%) | |:---|:---|:---|:---|:---|:---|:---|:---|\ | Other revenue | $36,359 | $32,159 | $27,281 | $4,200 | 13.1% | $4,878 | 17.9% | | Percentage of total revenue | 6.8% | 7.2% | 7.7% | | | | | - International revenue increased in fiscal years 2021 and 2020, representing **27%** and **21% of total revenue** respectively, up from **14% in fiscal 2019**, due to expansion in EMEA and APAC regions, including the Wavecell acquisition[211](index=211&type=chunk) Cost of Service Revenue (in thousands) | Metric | 2021 | 2020 | 2019 | Change 2021 vs 2020 ($) | Change 2021 vs 2020 (%) | Change 2020 vs 2019 ($) | Change 2020 vs 2019 (%) | |:---|:---|:---|:---|:---|:---|:---|:---|\ | Cost of service revenue | $180,082 | $145,013 | $86,122 | $35,069 | 24.2% | $58,891 | 68.4% | | Percentage of service revenue | 36.3% | 35.0% | 26.5% | | | | | Cost of Other Revenue (in thousands) | Metric | 2021 | 2020 | 2019 | Change 2021 vs 2020 ($) | Change 2021 vs 2020 (%) | Change 2020 vs 2019 ($) | Change 2020 vs 2019 (%) | |:---|:---|:---|:---|:---|:---|:---|:---|\ | Cost of other revenue | $50,068 | $56,215 | $43,850 | $(6,147) | (10.9)% | $12,365 | 28.2% | | Percentage of other revenue | 137.7% | 174.8% | 160.7% | | | | | Operating Expenses (in thousands) | Metric | 2021 | 2020 | 2019 | Change 2021 vs 2020 ($) | Change 2021 vs 2020 (%) | Change 2020 vs 2019 ($) | Change 2020 vs 2019 (%) | |:---|:---|:---|:---|:---|:---|:---|:---|\ | Research and development | $92,034 | $77,790 | $62,063 | $14,244 | 18.3% | $15,727 | 25.3% | | Sales and marketing | $256,231 | $240,013 | $177,976 | $16,218 | 6.8% | $62,037 | 34.9% | | General and administrative | $100,078 | $87,025 | $72,208 | $13,053 | 15.0% | $14,817 | 20.5% | Other Income (Expense), net (in thousands) | Metric | 2021 | 2020 | 2019 | Change 2021 vs 2020 ($) | Change 2021 vs 2020 (%) | Change 2020 vs 2019 ($) | Change 2020 vs 2019 (%) | |:---|:---|:---|:---|:---|:---|:---|:---|\ | Other income (expense), net | $(18,593) | $(11,717) | $1,463 | $(6,876) | 58.7% | $(13,180) | (900.9)% | | Percentage of total revenue | (3.5)% | (2.6)% | 0.4% | | | | | Provision for Income Taxes (in thousands) | Metric | 2021 | 2020 | 2019 | Change 2021 vs 2020 ($) | Change 2021 vs 2020 (%) | Change 2020 vs 2019 ($) | Change 2020 vs 2019 (%) | |:---|:---|:---|:---|:---|:---|:---|:---|\ | Provision for income taxes | $843 | $832 | $569 | $11 | 1.3% | $263 | 46.2% | | Percentage of total revenue | 0.2% | 0.2% | 0.2% | | | | | [Liquidity and Capital Resources](index=33&type=section&id=Liquidity%20and%20Capital%20Resources) As of March 31, 2021, 8x8 had **$152.9 million** in cash, cash equivalents, and short-term investments, along with **$8.6 million** in restricted cash, with management believing existing liquidity and anticipated cash flows will be sufficient for the next 12 months, despite market volatility - As of March 31, 2021, 8x8 had **$152.9 million** in cash, cash equivalents, and short-term investments, and **$8.6 million** in restricted cash[229](index=229&type=chunk) - The company deferred approximately **$5.0 million** in employer payroll taxes under the CARES Act in fiscal 2021, with remittances due in fiscal 2022 and 2023[231](index=231&type=chunk) - In fiscal 2021, an employee program to receive salary in common stock reduced cash usage by approximately **$4 million**, with a similar program for fiscal 2022 expected to reduce cash usage by over **$9 million**[232](index=232&type=chunk)[233](index=233&type=chunk) - Management believes existing cash, cash equivalents, investment balances, and anticipated cash flows from operations will be sufficient for working capital and expenditures for the next 12 months[234](index=234&type=chunk) [Year over Year Changes (Cash Flows)](index=34&type=section&id=Year%20over%20Year%20Changes) Net cash used in operating activities significantly decreased from **$93.9 million** in fiscal 2020 to **$14.1 million** in fiscal 2021, while net cash used in investing activities decreased from **$106.3 million** to **$36.3 million**, and net cash provided by financing activities decreased from **$72.1 million** to **$13.2 million** Cash Flow Summary (in thousands) | Metric | 2021 | 2020 | 2019 | |:---|:---|:---|:---|\ | Net cash used in operating activities | $(14,066) | $(93,905) | $(14,868) | | Net cash used in investing activities | $(36,321) | $(106,294) | $10,872 | | Net cash provided by financing activities | $13,192 | $72,095 | $249,238 | - Net cash used in operating activities for fiscal 2021 was **$14.1 million**, a significant decrease from **$93.9 million** in fiscal 2020, primarily due to a lower net loss and higher non-cash charges like stock-based compensation and amortization[235](index=235&type=chunk)[236](index=236&type=chunk) - Net cash used in investing activities was **$36.3 million** in fiscal 2021, down from **$106.3 million** in fiscal 2020, mainly due to reduced capitalized internal-use software costs and lower net cash paid for acquisitions[237](index=237&type=chunk)[238](index=238&type=chunk) - Net cash provided by financing activities was **$13.2 million** in fiscal 2021, compared to **$72.1 million** in fiscal 2020, primarily from common stock issuance under employee plans, with no convertible debt issuance in 2021[240](index=240&type=chunk)[241](index=241&type=chunk) [Off-Balance Sheet Arrangements](index=35&type=section&id=Off-Balance%20Sheet%20Arrangements) As of March 31, 2021, 8x8 did not have any off-balance sheet arrangements, though it has inventory purchases and other commitments in the normal course of business and may agree to indemnify other parties - As of March 31, 2021, 8x8 did not have any off-balance sheet arrangements, as defined by SEC Regulation S-K[242](index=242&type=chunk) - The company has inventory purchases and other commitments in the normal course of business and may indemnify other parties for breaches of representations, covenants, or intellectual property infringement claims[243](index=243&type=chunk) [Contractual Obligations](index=35&type=section&id=Contractual%20Obligations) As of March 31, 2021, 8x8's total contractual obligations amounted to **$495.0 million**, primarily consisting of convertible senior notes (**$362.5 million** due in 1-3 years), operating lease obligations (**$113.0 million** over various periods), and purchase obligations (**$18.6 million**) Contractual Obligations at March 31, 2021 (in thousands) | | Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | |:---|:---|:---|:---|:---|:---|\ | Convertible senior notes | $362,500 | $— | $362,500 | $— | $— | | Operating lease obligations | $113,049 | $16,341 | $27,000 | $22,015 | $47,693 | | Lease assignment contract | $868 | $868 | $— | $— | $— | | Purchase obligations | $18,625 | $5,051 | $13,574 | $— | $— | | **Total** | **$495,042** | **$22,260** | **$403,074** | **$22,015** | **$47,693** | [CRITICAL ACCOUNTING POLICIES & ESTIMATES](index=35&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20%26%20ESTIMATES) This section outlines 8x8's critical accounting policies and estimates, which involve significant management judgment and can materially impact reported financial results, including revenue recognition, allowance for credit losses, and capitalization of internal-use software costs - Critical accounting policies involve a high degree of judgment and complexity, including estimates for credit losses, returns reserve, goodwill/intangible asset impairment, capitalized internal-use software, deferred commissions, stock-based compensation, lease liabilities, and income/sales tax liabilities[246](index=246&type=chunk) - Revenue recognition follows a five-step model, with significant judgments in identifying performance obligations, determining transaction price, and allocating it to distinct obligations; service revenue is recognized ratably over the subscription term, while product revenue is recognized upon shipment[247](index=247&type=chunk)[248](index=248&type=chunk)[251](index=251&type=chunk)[252](index=252&type=chunk) - Allowance for credit losses is accounted for under the CECL impairment model, requiring an estimate of expected credit losses over the contractual life, considering future economic conditions, past events, and current trends[253](index=253&type=chunk) - Internal-use software development costs are capitalized during the application development stage and amortized on a straight-line basis over an estimated useful life of three years once completed[254](index=254&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=35&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses 8x8's exposure to market risks, specifically interest rate fluctuation risk and foreign currency exchange risk, noting its investment policy focuses on capital preservation and liquidity, and that foreign currency risks may become more significant with international expansion - The company's investment policy focuses on capital preservation and liquidity, investing in highly rated securities with limited credit exposure to any one issuer (excluding the U.S. government)[255](index=255&type=chunk) - A hypothetical **10% change in interest rates** would not materially impact the value of cash, cash equivalents, or available-for-sale investments[255](index=255&type=chunk) - The fair value of convertible senior notes is subject to interest rate and market risk, but these changes do not impact financial position, cash flows, or results of operations due to the fixed nature of the debt[256](index=256&type=chunk) - Foreign currency risks are related to revenue and operating expenses denominated in currencies other than the U.S. dollar, primarily the British Pound[257](index=257&type=chunk) - Gains or losses from revaluation of foreign-denominated cash, accounts receivable, and intercompany balances impact net income (loss); a hypothetical **10% decrease** in all foreign currencies against the U.S. dollar would not result in a material foreign currency loss as of March 31, 2021[259](index=259&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=38&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the audited consolidated financial statements of 8x8, Inc. for fiscal years 2021, 2020, and 2019, including balance sheets, statements of operations, comprehensive loss, stockholders' equity, and cash flows, along with the independent auditor's report and detailed notes on accounting policies and financial items [Report of Independent Registered Public Accounting Firm](index=39&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Moss Adams LLP issued an unqualified opinion on 8x8, Inc.'s consolidated financial statements and the effectiveness of its internal control over financial reporting as of March 31, 2021, noting a change in accounting principle for credit losses in 2021 - Moss Adams LLP provided an unqualified opinion on the consolidated financial statements for the periods ended March 31, 2021 and 2020[265](index=265&type=chunk) - The firm also issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting as of March 31, 2021[265](index=265&type=chunk) - In 2021, the company changed its method of accounting for allowances for credit losses due to the adoption of Accounting Standards Codification Topic No. 326[266](index=266&type=chunk) - The auditors determined that there were no critical audit matters[272](index=272&type=chunk) [Consolidated Balance Sheets](index=41&type=section&id=Consolidated%20Balance%20Sheets) The consolidated balance sheets present 8x8's financial position as of March 31, 2021, and 2020, detailing assets, liabilities, and stockholders' equity, with total assets decreasing from **$700.6 million** in 2020 to **$678.4 million** in 2021, and total stockholders' equity decreasing from **$190.7 million** to **$160.5 million** Consolidated Balance Sheets (in thousands) | ASSETS | March 31, 2021 | March 31, 2020 | |:---|:---|:---|\ | Cash and cash equivalents | $112,531 | $137,394 | | Restricted cash, current | $8,179 | $10,376 | | Short-term investments | $40,337 | $33,458 | | Accounts receivable, net | $51,150 | $37,811 | | Deferred sales commission costs, current | $30,241 | $22,444 | | Other current assets | $34,095 | $35,679 | | **Total current assets** | **$276,533** | **$277,162** | | Property and equipment, net | $93,076 | $94,382 | | Operating lease, right-of-use assets | $66,664 | $78,963 | | Intangible assets, net | $17,130 | $24,001 | | Goodwill | $131,520 | $128,300 | | Restricted cash, non-current | $462 | $8,641 | | Long-term investments | $— | $16,083 | | Deferred sales commission costs, non-current | $72,427 | $53,307 | | Other assets, non-current | $20,597 | $19,802 | | **Total assets** | **$678,409** | **$700,641** | | LIABILITIES AND STOCKHOLDERS' EQUITY | March 31, 2021 | March 31, 2020 | |:---|:---|:---|\ | Accounts payable | $31,236 | $40,261 | | Accrued compensation | $29,879 | $22,656 | | Accrued taxes | $12,129 | $10,251 | | Operating lease liabilities, current | $12,942 | $5,875 | | Deferred revenue, current | $20,737 | $7,105 | | Other accrued liabilities | $14,455 | $37,277 | | **Total current liabilities** | **$121,378** | **$123,425** | | Operating lease liabilities, non-current | $82,456 | $92,452 | | Convertible senior notes, net | $308,435 | $291,537 | | Other liabilities, non-current | $5,636 | $2,496 | | **Total liabilities** | **$517,905** | **$509,910** | | Common stock | $109 | $103 | | Additional paid-in capital | $755,643 | $625,474 | | Accumulated other comprehensive loss | $(4,193) | $(12,176) | | Accumulated deficit | $(591,055) | $(422,670) | | **Total stockholders' equity** | **$160,504** | **$190,731** | | **Total liabilities and stockholders' equity** | **$678,409** | **$700,641** | [Consolidated Statements of Operations](index=42&type=section&id=Consolidated%20Statements%20of%20Operations) The consolidated statements of operations show 8x8's financial performance for fiscal years 2021, 2020, and 2019, with total revenue increasing to **$532.3 million** in 2021 from **$446.2 million** in 2020, but reporting net losses of **$165.6 million** in 2021, **$172.4 million** in 2020, and **$88.7 million** in 2019 Consolidated Statements of Operations (in thousands, except per share amounts) | | 2021 | 2020 | 2019 | |:---|:---|:---|:---|\ | Service revenue | $495,985 | $414,078 | $325,305 | | Other revenue | $36,359 | $32,159 | $27,281 | | **Total revenue** | **$532,344** | **$446,237** | **$352,586** | | Cost of service revenue | $180,082 | $145,013 | $86,122 | | Cost of other revenue | $50,068 | $56,215 | $43,850 | | Research and development | $92,034 | $77,790 | $62,063 | | Sales and marketing | $256,231 | $240,013 | $177,976 | | General and administrative | $100,078 | $87,025 | $72,208 | | **Total operating expenses** | **$678,493** | **$606,056** | **$442,219** | | Loss from operations | $(146,149) | $(159,819) | $(89,633) | | Other (expense) income, net | $(18,593) | $(11,717) | $1,463 | | Loss before provision for income taxes | $(164,742) | $(171,536) | $(88,170) | | Provision for income taxes | $843 | $832 | $569 | | **Net loss** | **$(165,585)** | **$(172,368)** | **$(88,739)** | | Net loss per share: Basic and diluted | $(1.57) | $(1.72) | $(0.94) | | Weighted average number of shares: Basic and diluted | 105,700 | 99,999 | 94,533 | [Consolidated Statements of Comprehensive Loss](index=43&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Loss) The consolidated statements of comprehensive loss present 8x8's net loss and other comprehensive income (loss) items for fiscal years 2021, 2020, and 2019, with a comprehensive loss of **$(157.6) million** in fiscal 2021, an improvement from **$(177.2) million** in 2020, primarily due to a positive foreign currency translation adjustment Consolidated Statements of Comprehensive Loss (in thousands) | | 2021 | 2020 | 2019 | |:---|:---|:---|:---|\ | Net loss | $(165,585) | $(172,368) | $(88,739) | | Other comprehensive income (loss), net of tax: | | | | | Unrealized gain (loss) on investments in securities | $247 | $(203) | $473 | | Foreign currency translation adjustment | $7,736 | $(4,620) | $(2,181) | | **Comprehensive loss** | **$(157,602)** | **$(177,191)** | **$(90,447)** | [Consolidated Statements of Stockholders' Equity](index=44&type=section&id=Consolidated%20Statements%20of%20Stockholders%27%20Equity) The consolidated statements of stockholders' equity detail changes in equity components for fiscal years 2019, 2020, and 2021, showing increases in additional paid-in capital from stock-based compensation and common stock issuances, alongside a growing accumulated deficit due to net losses, resulting in a decrease in total stockholders' equity from **$190.7 million** in 2020 to **$160.5 million** in 2021 Consolidated Statements of Stockholders' Equity (in thousands, except shares) | | Common Shares | Common Stock Amount | Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Accumulated Deficit | Total | |:---|:---|:---|:---|:---|:---|:---|\ | Balance at March 31, 2018 | 92,847,354 | $93 | $425,790 | $(5,645) | $(201,464) | $218,774 | | Adjustment to opening balance for change in accounting principle | — | — | — | — | $39,901 | $39,901 | | Issuance of common stock under stock plans, less withholding | 3,272,534 | $3 | $4,483 | — | — | $4,486 | | Stock-based compensation expense | — | — | $45,548 | — | — | $45,548 | | Unrealized investment gain | — | — | — | $473 | — | $473 | | Foreign currency translation adjustment | — | — | — | $(2,181) | — | $(2,181) | | Equity component of convertible senior notes, net of issuance costs | — | — | $31,128 | — | — | $31,128 | | Net loss | — | — | — | — | $(88,739) | $(88,739) | | **Balance at March 31, 2019** | **96,119,888** | **$96** | **$506,949** | **$(7,353)** | **$(250,302)** | **$249,390** | | Issuance of common stock under stock plans, less withholding | 4,452,267 | $4 | $7,773 | — | — | $7,777 | | Issuance of common stock related to acquisition | 2,606,466 | $3 | $35,837 | — | — | $35,840 | | Stock-based compensation expense | — | — | $71,821 | — | — | $71,821 | | Unrealized investment loss | — | — | — | $(203) | — | $(203) | | Foreign currency translation adjustment | — | — | — | $(4,620) | — | $(4,620) | | Equity component of convertible senior notes, net of issuance costs | — | — | $3,094 | — | — | $3,094 | | Net loss | — | — | — | — | $(172,368) | $(172,368) | | **Balance at March 31, 2020** | **103,178,621** | **$103** | **$625,474** | **$(12,176)** | **$(422,670)** | **$190,731** | | Adjustment to opening balance for change in accounting principle | — | — | — | — | $(2,800) | $(2,800) | | Issuance of common stock under stock plans, less withholding | 6,067,672 | $6 | $13,263 | — | — | $13,269 | | Stock-based compensation expense | — | — | $108,417 | — | — | $108,417 | | Issuance of common stock related to acquisition | (111,554) | — | $8,489 | — | — | $8,489 | | Unrealized investment gain (loss) | — | — | — | $247 | — | $247 | | Foreign currency translation adjustment | — | — | — | $7,736 | — | $7,736 | | Net loss | — | — | — | — | $(165,585) | $(165,585) | | **Balance at March 31, 2021** | **109,134,739** | **$109** | **$755,643** | **$(4,193)** | **$(591,055)** | **$160,504** | [Consolidated Statements of Cash Flows](index=45&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) The consolidated statements of cash flows provide a breakdown of cash generated from or used in operating, investing, and financing activities for fiscal years 2021, 2020, and 2019, showing a significant decrease in net cash used in operating activities in 2021, continued net cash outflow from investing activities, and reduced cash from financing activities Consolidated Statements of Cash Flows (in thousands) | | 2021 | 2020 | 2019 | |:---|:---|:---|:---|\ | **Cash flows from operating activities:** | | | | | Net loss | $(165,585) | $(172,368) | $(88,739) | | Adjustments to reconcile net loss to net cash used in operating activities: | | | | | Depreciation | $11,297 | $9,360 | $8,748 | | Amortization of intangible assets | $6,886 | $8,842 | $6,175 | | Amortization of capitalized internal-use software costs | $26,934 | $19,025 | $9,748 | | Amortization of debt discount and issuance costs | $16,898 | $14,045 | $1,355 | | Amortization of deferred sales commission costs | $27,817 | $19,541 | $14,204 | | Allowance for credit losses | $4,471 | $3,479 | $1,115 | | Operating lease expense, net of accretion | $15,210 | $14,971 | $— | | Non-cash lease expense | $— | $— | $4,802 | | Stock-based compensation expense | $107,638 | $70,878 | $44,508 | | Other | $1,521 | $3,522 | $178 | | Changes in assets and liabilities: | | | | | Accounts receivable | $(14,869) | $(12,737) | $(5,393) | | Deferred sales commission costs | $(52,960) | $(46,421) | $(25,286) | | Other current and non-current assets | $(3,963) | $(33,137) | $(4,337) | | Accounts payable and accruals | $(10,033) | $2,159 | $17,252 | | Deferred revenue | $14,672 | $4,936 | $802 | | **Net cash used in operating activities** | **$(14,066)** | **$(93,905)** | **$(14,868)** | | **Cash flows from investing activities:** | | | | | Purchases of property and equipment | $(6,430) | $(35,834) | $(9,096) | | Capitalized internal-use software costs | $(28,816) | $(31,573) | $(25,622) | | Purchases of investments | $(52,172) | $(42,223) | $(54,127) | | Sales of investments | $1,018 | $36,515 | $54,642 | | Proceeds from maturities of investments | $60,479 | $25,950 | $50,700 | | Acquisition of businesses, net of cash acquired | $(10,400) | $(59,129) | $(5,625) | | **Net cash (used in) provided by investing activities** | **$(36,321)** | **$(106,294)** | **$10,872** | | **Cash flows from financing activities:** | | | | | Finance lease payments | $(78) | $(315) | $(949) | | Tax-related withholding of common stock | $(69) | $(6,550) | $(7,823) | | Proceeds from issuance of common stock under employee stock plans | $13,339 | $14,330 | $12,202 | | Purchases of capped calls | $— | $(9,288) | $(33,724) | | Net proceeds from issuance of convertible senior notes | $— | $73,918 | $279,532 | | **Net cash provided by financing activities** | **$13,192** | **$72,095** | **$249,238** | | Effect of exchange rate changes on cash | $1,956 | $(168) | $(362) | | Net increase (decrease) in cash, cash equivalents and restricted cash | $(35,239) | $(128,272) | $244,880 | | Cash, cash equivalents and restricted cash, beginning of year | $156,411 | $284,683 | $39,803 | | **Cash, cash equivalents and restricted cash, end of year** | **$121,172** | **$156,411** | **$284,683** | [Notes to Consolidated Financial Statements](index=47&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes provide detailed explanations and disclosures supporting the consolidated financial statements, covering the company's business, significant accounting policies, revenue recognition, fair value measurements, intangible assets, leases, commitments, convertible notes, stock-based compensation, income taxes, net loss per share, geographical information, and acquisitions [Note 1. The Company and Significant Accounting Policies](index=47&type=section&id=Note%201.%20The%20Company%20and%20Significant%20Accounting%20Policies) This note describes 8x8, Inc. as a SaaS provider of cloud communications, outlining its fiscal year, principles of consolidation, use of estimates, and the five-step model for revenue recognition, along with key accounting policies for cash, investments, credit losses, leases, property, software, goodwill, R&D, advertising, foreign currency, segments, credit risk, fair value, stock-based compensation, comprehensive income, and net income per share, including recently adopted and not-yet-effective accounting pronouncements - 8x8, Inc. is a leading Software-as-a-Service ("SaaS") provider of contact center, voice, video, chat, and enterprise-class API solutions powered by one global cloud communications platform[291](index=291&type=chunk) - The company's fiscal year ends on March 31; all dollar amounts are in thousands of U.S. Dollars unless otherwise noted[291](index=291&type=chunk)[292](index=292&type=chunk) - Revenue recognition follows a five-step model, identifying contracts, performance obligations, transaction price, allocation, and recognition upon satisfaction of obligations; revenue is primarily from communication services subscriptions and platform usage[296](index=296&type=chunk)[297](index=297&type=chunk) - The company adopted ASU 2016-13 (CECL impairment model) for credit losses, ASU 2018-13 for fair value measurement disclosures, and ASU 2018-15 for cloud computing service arrangement costs, all effective April 1, 2020, with immaterial impact[343](index=343&type=chunk)[344](index=344&type=chunk) - Upcoming pronouncements include ASU 2019-12 (Income Taxes) effective fiscal 2022 and ASU 2020-06 (Debt with Conversion and Other Options) effective fiscal 2023, with impacts currently being assessed[345](index=345&type=chunk)[347](index=347&type=chunk) [Note 2. Revenue Recognition](index=53&type=section&id=Note%202.%20Revenue%20Recognition) This note details 8x8's revenue recognition policies, including disaggregation by geographic region, contract balances, and remaining performance obligations totaling approximately **$500.0 million** as of March 31, 2021, with **70%** expected to be recognized over the next 36 months, and amortization of deferred sales commission costs of **$27.8 million** in fiscal 2021 Contract Balances (in thousands) | | March 31, 2021 | March 31, 2020 | |:---|:---|:---|\ | Accounts receivable, net | $51,150 | $37,811 | | Contract assets, current | $12,840 | $10,425 | | Contract assets, non-current | $13,698 | $13,698 | | Deferred revenue, current | $20,737 | $7,105 | | Deferred revenue, non-current | $1,119 | $1,119 | - Contract revenue from remaining performance obligations not yet recognized as of March 31, 2021, was approximately **$500.0 million**, excluding contracts with an original expected length of less than one year[351](index=351&type=chunk) - Approximately **70%** of the remaining performance obligation is expected to be recognized over the next 36 months, and **30%** thereafter[351](index=351&type=chunk) - Amortization of deferred sales commission costs was **$27.8 million**, **$19.5 million**, and **$14.2 million** for the years ended March 31, 2021, 2020, and 2019, respectively[353](index=353&type=chunk) [Note 3. Fair Value Measurements](index=54&type=section&id=Note%203.%20Fair%20Value%20Measurements) This note details 8x8's fair value measurements for cash, cash equivalents, and available-for-sale investments, categorized into Level 1 and Level 2 inputs, with total assets measured at fair value of **$161.5 million** as of March 31, 2021, and the estimated fair value of convertible senior notes at **$502.9 million**, classified as Level 2 Cash, Cash Equivalents and Available-for-Sale Investments (in thousands) as of March 31, 2021 | | Amortized Costs | Gross Unrealized Gain | Gross Unrealized Loss | Estimated Fair Value | Cash and Cash Equivalents | Restricted Cash (Current & Non-current) | Short-Term Investments | Long-Term Investments | |:---|:---|:---|:---|:---|:---|:---|:---|:---|\ | **Level 1:** | | | | | | | | | | Cash | $39,070 | $— | $— | $39,070 | $39,070 | $— | $— | $— | | Money market funds | $67,712 | $— | $— | $67,712 | $67,712 | $— | $— | $— | | Treasury securities | $6,177 | $17 | $— | $6,194 | $— | $— | $6,194 | $— | | **Subtotal** | **$112,959** | **$17** | **$—** | **$112,976** | **$106,782** | **$—** | **$6,194** | **$—** | | **Level 2:** | | | | | | | | | | Certificate of deposit | $8,641 | $— | $— | $8,641 | $— | $8,641 | $— | $— | | Commercial paper | $17,656 | $42 | $— | $17,698 | $700 | $— | $16,998 | $— | | Corporate debt | $22,193 | $1 | $— | $22,194 | $5,049 | $— | $17,145 | $— | | **Subtotal** | **$48,490** | **$43** | **$—** | **$48,533** | **$5,749** | **$8,641** | **$34,143** | **$—** | | **Total assets** | **$161,449** | **$60** | **$—** | **$161,509** | **$112,531** | **$8,641** | **$40,337** | **$—** | - As of March 31, 2021 and 2020, the estimated fair value of the Company's Convertible Senior Notes was **$502.9 million** and **$309.6 million**, respectively, classified as Level 2 in the fair value hierarchy[359](index=359&type=chunk) [Note 4. Intangible Assets and Goodwill](index=55&type=section&id=Note%204.%20Intangible%20Assets%20and%20Goodwill) This note provides details on 8x8's intangible assets and goodwill, with net intangible assets totaling **$17.1 million** as of March 31, 2021, primarily comprising technology and customer relationships, and goodwill increasing to **$131.5 million** with no impairment identified Carrying Value of Intangible Assets (in thousands) | | Gross Carrying Amount (2021) | Accumulated Amortization (2021) | Net Carrying Amount (2021) | Gross Carrying Amount (2020) | Accumulated Amortization (2020) | Net Carrying Amount (2020) | |:---|:---|:---|:---|:---|:---|:---|\ | Technology | $33,960 | $(21,458) | $12,502 | $33,932 | $(16,312) | $17,620 | | Customer relationships | $11,969 | $(7,341) | $4,628 | $11,409 | $(5,412) | $5,997 | | Trade names and domains | $988 | $(988) | $— | $983 | $(599) | $384 | | **Total acquired identifiable intangible assets** | **$46,917** | **$(29,787)** | **$17,130** | **$46,324** | **$(22,323)** | **$24,001** | - As of March 31, 2021, the weighted average remaining useful life for technology was **4.4 years**, and for customer relationships, it was **5.2 years**[361](index=361&type=chunk) - Amortization expense for intangible assets was **$6.9 million** in fiscal 2021, **$8.8 million** in fiscal 2020, and **$6.2 million** in fiscal 2019[362](index=362&type=chunk) Estimated Annual Amortization of Definite Lived Intangible Assets (in thousands) | Year | Amount | |:---|:---|\ | 2022 | $4,708 | | 2023 | $3,156 | | 2024 | $2,851 | | 2025 | $2,851 | | 2026 and thereafter | $3,564 | | **Total** | **$17,130** | Changes in Carrying Amounts of Goodwill (in thousands) | | Total | |:---|:---|\ | Balance at March 31, 2019 | $39,694 | | Additions due to acquisitions | $91,060 | | Foreign currency translation | $(2,454) | | **Balance at March 31, 2020** | **$128,300** | | Foreign currency translation | $3,220 | | **Balance at March 31, 2021** | **$131,520** | - Annual impairment tests of goodwill in fiscal years 2021, 2020, and 2019 determined no adjustment to the carrying value was required[362](index=362&type=chunk) [Note 5. Leases](index=56&type=section&id=Note%205.%20Leases) This note details 8x8's operating lease obligations for office and data center spaces, with operating lease right-of-use assets of **$66.7 million** and total operating lease liabilities of **$95.4 million** as of March 31, 2021, and an operating lease expense of **$15.2 million** in fiscal 2021 Operating Lease Balance Sheet Information (in thousands) | Assets/Liabilities | March 31, 2021 | March 31, 2020 | |:---|:---|:---|\ | Operating lease, right-of-use assets | $66,664 | $78,963 | | Operating lease liabilities, current | $12,942 | $5,875 | | Operating lease liabilities, non-current | $82,456 | $92,452 | | **Total operating lease liabilities** | **$95,398** | **$98,327** | Components of Lease Expense (in thousands) | Expense Type | 2021 | 2020 | |:---|:---|:---|\ | Operating lease expense | $15,210 | $14,971 | | Variable lease expense | $2,462 | $1,602 | - Cash outflows from operating leases were **$9.9 million** for both fiscal 2021 and 2020[365](index=365&type=chunk) - As of March 31, 2021, the weighted average remaining lease term was **8.4 years**, and the weighted average discount rate was **4.0%**[365](index=365&type=chunk) Maturity of Lease Liabilities (in thousands) as of March 31, 2021 | Year | Amount | |:---|:---|\ | 2022 | $16,341 | | 2023 | $15,155 | | 2024 | $11,845 | | 2025 | $11,508 | | 2026 | $10,507 | | Thereafter | $47,693 | | **Total lease payments** | **$113,049** | | Less: imputed interest | $(17,651) | | **Present value of lease liabilities** | **$95,398** | - In fiscal 2019, the company assigned a 132-month lease agreement for office space in San Jose, California, to Roku Inc., expecting to be released from all obligations by the end of fiscal 2022[367](index=367&type=chunk) [Note 6. Commitments and Contingencies](index=57&type=section&id=Note%206.%20Commitments%20and%20Contingencies) This note outlines 8x8's commitments and contingencies, including indemnification agreements, operating lease obligations, and purchase obligations totaling approximately **$18.6 million** at March 31, 2021, alongside involvement in various legal proceedings and contingent indirect tax liabilities of **$3.1 million** - The company enters into indemnification agreements with customers, lessors, and other parties, as well as with its officers and directors[368](index=368&type=chunk) - Purchase obligations, including contracts with third-party customer support and network service providers, totaled approximately **$18.6 million** at March 31, 2021[371](index=371&type=chunk) - The company is involved in various legal proceedings, including a class action and PAGA claim filed by a former employee alleging California wage and hour practices violations and federal Fair Credit Reporting Act violations[372](index=372&type=chunk)[374](index=374&type=chunk) - Several jurisdictions are conducting tax audits, and the company had accrued contingent indirect tax liabilities of **$3.1 million** as of March 31, 2021[375](index=375&type=chunk) [Note 7. Convertible Senior Notes and Capped Call](index=58&type=section&id=Note%207.%20Convertible%20Senior%20Notes%20and%20Capped%20Call) This note details 8x8's **$362.5 million** aggregate principal amount of 0.50% convertible senior notes due 2024, which are senior unsecured obligations convertible under specific conditions, with the company intending to settle the principal in cash upon conversion, and interest expense related to the notes totaling **$18.7 million** in fiscal 2021, partially offset by capped call transactions - In February 2019 and November 2019, 8x8 issued **$362.5 million** aggregate principal amount of 0.50% convertible senior notes due 2024[376](index=376&type=chunk) - The notes are senior unsecured obligations, bear interest semi-annually, and mature on February 1, 2024, unless earlier repurchased, redeemed, or converted[377](index=377&type=chunk) - Each **$1,000 principal amount** is initially convertible into **38.9484 shares of common stock** (conversion price of approximately **$25.68 per share**); the company's current intent is to settle the principal amount in cash upon conversion[378](index=378&type=chunk)[381](index=381&type=chunk) - The notes are convertible under specific circumstances prior to October 1, 2023, and freely convertible thereafter until two trading days before maturity[380](index=380&type=chunk)[381](index=381&type=chunk) - The notes were separated into liability and equity components; the liability component's debt discount is amortized to interest expense at effective rates of **6.5%** (Initial Notes) and **5.3%** (Additional Notes)[383](index=383&type=chunk) Net Carrying Amount and Fair Value of Liability Component of Notes (in thousands) | | March 31, 2021 | March 31, 2020 | |:---|:---|:---|\ | Principal | $362,500 | $362,500 | | Unamortized debt discount | $(53,323) | $(69,987) | | Unamortized issuance costs | $(742) | $(976) | | **Net carrying amount** | **$308,435** | **$291,537** | Interest Expense Related to Notes (in thousands) | | 2021 | 2020 | |:---|:---|:---|\ | Contractual interest expense | $1,813 | $1,572 | | Amortization of debt discount | $16,664 | $13,901 | | Amortization of issuance costs | $234 | $145 | | **Total interest expense** | **$18,711** | **$15,618** | - Capped call transactions were entered into to partially offset potential dilution upon conversion of the notes, covering approximately **14.1 million shares**; the costs of **$33.7 million** (Initial Notes) and **$9.3 million** (Additional Notes) were recorded as a reduction to additional paid-in capital[387](index=387&type=chunk) [Note 8. Stock-Based Compensation and Stockholders' Equity](index=60&type=section&id=Note%208.%20Stock-Based%20Compensation%20and%20Stockholders%27%20Equity) This note details 8x8's stock-based compensation plans, including various stock plans and the ESPP, with total stock-based compensation expense of **$107.6 million** in fiscal 2021, and provides activity summaries for stock options, RSUs, and PSUs, along with unrecognized compensation costs and the remaining **$7.1 million** under the stock repurchase plan - 8x8 operates several stock plans: the 2006 Stock Plan (expired May 2016), 2012 Equity Incentive Plan (expires June 2029, **12.9 million shares available**), 2013 New Employee Inducement Incentive Plan (suspended for future grants), and 2017 New Employee Inducement Incentive Plan (**1.1 million shares available**)[389](index=389&type=chunk)[391](index=391&type=chunk)[392](index=392&type=chunk)[393](index=393&type=chunk) Stock-Based Compensation Expense (in thousands) | | 2021 | 2020 | 2019 | |:---|:---|:---|:---|\ | Cost of service revenue | $8,811 | $5,330 | $3,752 | | Cost of other revenue | $4,384 | $3,051 | $1,775 | | Research and development | $31,641 | $19,712 | $12,313 | | Sales and marketing | $33,869 | $20,205 | $11,951 | | General and administrative | $28,933 | $22,580 | $14,717 | | **Total** | **$107,638** | **$70,878** | **$44,508** | - As of March 31, 2021, there was **$0.4 million** of unrecognized compensation cost related to stock options, expected to be recognized over approximately **1.1 years**[396](index=396&type=chunk) - As of March 31, 2021, there was **$118.9 million** of total unrecognized compensation cost related to RSUs[403](index=403&type=chunk) - As of March 31, 2021, there was **$24.4 million** of total unrecognized compensation cost related to PSUs[406](index=406&type=chunk) - The 1996 Employee Stock Purchase Plan (ESPP) allows eligible employees to purchase common stock at **85% of the fair market value**; approximately **0.7 million shares** were issued under the ESPP in fiscal 2021[408](index=408&type=chunk) - As of March 31, 2021, there was approximately **$2.5 million** of unrecognized compensation cost related to employee stock purchases, expected to be

Financial Data and Key Metrics Changes - Total revenue for Q4 2021 was $144.7 million, a 19% year-over-year increase, exceeding guidance of $138.5 million to $140.5 million [33] - Service revenue reached $133.8 million, also a 19% year-over-year increase, surpassing guidance of $130.8 million to $131.8 million [33] - Total Annual Recurring Revenue (ARR) was $518 million at quarter end, reflecting a 22% year-over-year growth [33] - Non-GAAP gross margin improved to 61.2%, a 150 basis point sequential increase [34] - Non-GAAP pre-tax profit was $70,000, achieving profitability one quarter earlier than expected [37] Business Line Data and Key Metrics Changes - Integrated UCaaS and CCaaS offerings were key growth drivers, with over 760 customers generating more than $100,000 in ARR, a 25% increase year-over-year [9] - Customers with over $1 million in ARR grew over 70% year-over-year, contributing to a 49% growth in enterprise ARR [9] - ARR from combo customers (those purchasing both UCaaS and CCaaS) represented over 30% of total company ARR [11] Market Data and Key Metrics Changes - International revenue represented 27% of total revenue and grew 48% year-over-year [84] - The cloud communications market is projected to exceed $75 billion by 2023, with UCaaS and CCaaS segments making up $60 billion [46][47] Company Strategy and Development Direction - The company aims to build a path to a $1 billion business by enhancing capabilities and operational rigor [42] - Focus on integrated solutions is emphasized, with a strategy to capitalize on the demand for single vendor solutions across UCaaS and CCaaS [48] - Plans to increase R&D investments, particularly in contact center capabilities, to enhance product offerings [70][73] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to leverage its integrated platform and market demand for cloud communications [87] - The focus for fiscal 2022 includes expanding the customer base, improving operational efficiency, and enhancing customer satisfaction [82][79] - Management anticipates a return to revenue growth rates of 20% or greater by late fiscal 2023 [102] Other Important Information - The company has phased out its unprofitable wholesale CPaaS business, which contributed $15 million in service revenue in fiscal 2021 [92] - The decision to focus on core market opportunities is expected to create a more favorable growth trajectory [93] Q&A Session Summary Question: Voice adoption for Teams users and Contact Center integration - Management was asked about the qualitative aspects of voice adoption for Teams users and the ease of adopting various voice options on Teams, as well as the relevance of legacy PBX providers for enterprises using new CCaaS solutions [108]