[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]

8x8, Inc. (NASDAQ:EGHT) Q3 2021 Earnings Conference Call January 28, 2021 5:00 PM ET Company Participants Dave Sipes - Chief Executive Officer Sam Wilson - Chief Financial Officer Conference Call Participants Matt VanVliet - BTIG Rich Valera - Needham Tim Horan - Oppenheimer Jonathan Kees - Summit Insights Group William Power - Baird Peter Levine - Evercore Meta Marshall - Morgan Stanley Mike Latimore - Northland Capital Management Catharine Trebnick - Colliers International Securities George Sutton ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION 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 Washington, D.C. 20549 FORM10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________to _________ ...

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, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________to _________ ...

8x8, Inc. (NASDAQ:EGHT) Q2 2021 Earnings Conference Call October 28, 2020 5:00 PM ET Company Participants Victoria Hyde-Dunn - IR Vik Verma - CEO Samuel Wilson - CFO Conference Call Participants Ryan MacWilliams - Stephens Inc. Michael Turrin - Wells Fargo Securities Matt VanVliet - BTIG Meta Marshall - Morgan Stanley Peter Levine - Evercore Mike Latimore - Northland Capital Management James Breen - William Blair Siti Panigrahi - Mizuho Andrew King - Colliers Securities Charlie Erlikh - Baird Jonathan Kees ...

PART I. FINANCIAL INFORMATION [ITEM 1. FINANCIAL STATEMENTS](index=7&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) Presents unaudited condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive loss, stockholders' equity, and cash flows, with detailed notes [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets and stockholders' equity slightly decreased from March 31, 2020, to June 30, 2020, while liabilities remained stable | Metric | June 30, 2020 (in thousands) | March 31, 2020 (in thousands) | | :----------------------------------- | :--------------------------- | :---------------------------- | | **Total Assets** | $688,093 | $700,641 | | **Total Liabilities** | $509,227 | $509,910 | | **Total Stockholders' Equity** | $178,866 | $190,731 | | **Cash and Cash Equivalents** | $116,690 | $137,394 | | **Convertible Senior Notes, net** | $295,662 | $291,537 | [Condensed Consolidated Statements of Operations](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For the three months ended June 30, 2020, total revenue increased, but a higher net loss was reported compared to 2019, driven by increased operating expenses | Metric | Three Months Ended June 30, 2020 (in thousands) | Three Months Ended June 30, 2019 (in thousands) | | :----------------------------------- | :---------------------------------------------- | :---------------------------------------------- | | **Total Revenue** | $121,807 | $96,675 | | **Loss from Operations** | $(37,760) | $(32,553) | | **Net Loss** | $(41,913) | $(34,265) | | **Basic and Diluted Net Loss Per Share** | $(0.40) | $(0.36) | [Condensed Consolidated Statements of Comprehensive Loss](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) The company's comprehensive loss increased for the three months ended June 30, 2020, compared to the prior year, primarily due to higher net loss, partially offset by unrealized investment gains and a positive foreign currency translation adjustment | Metric | Three Months Ended June 30, 2020 (in thousands) | Three Months Ended June 30, 2019 (in thousands) | | :---------------------------------------- | :---------------------------------------------- | :---------------------------------------------- | | **Net Loss** | $(41,913) | $(34,265) | | **Unrealized gain on investments in securities** | $422 | $121 | | **Foreign currency translation adjustment** | $885 | $(652) | | **Comprehensive Loss** | $(40,606) | $(34,796) | [Condensed Consolidated Statements of Stockholders' Equity](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Stockholders' equity decreased from **$190,731 thousand** at March 31, 2020, to **$178,866 thousand** at June 30, 2020, mainly due to net loss, partially offset by stock-based compensation and common stock issuance for an acquisition | Metric | June 30, 2020 (in thousands) | March 31, 2020 (in thousands) | | :----------------------------------------- | :--------------------------- | :---------------------------- | | **Total Stockholders' Equity** | $178,866 | $190,731 | | **Net Loss** | $(41,913) | $(422,670) (Accumulated Deficit) | | **Stock-based compensation expense** | $23,118 | N/A | | **Issuance of common stock related to acquisition** | $8,489 | N/A | [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities significantly decreased for the three months ended June 30, 2020, compared to the prior year, while investing activities shifted from providing cash to using cash, resulting in a net decrease in cash and cash equivalents | Metric | Three Months Ended June 30, 2020 (in thousands) | Three Months Ended June 30, 2019 (in thousands) | | :-------------------------------------------------- | :---------------------------------------------- | :---------------------------------------------- | | **Net cash used in operating activities** | $(9,250) | $(20,509) | | **Net cash (used in) provided by investing activities** | $(11,900) | $11,171 | | **Net cash (used in) provided by financing activities** | $(134) | $1,367 | | **Net decrease in cash and cash equivalents, and restricted cash** | $(20,704) | $(7,558) | | **Cash, cash equivalents, and restricted cash at the end of the period** | $135,707 | $277,125 | [Notes to Unaudited Condensed Consolidated Financial Statements](index=13&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed explanations of the company's business, significant accounting policies, revenue recognition, fair value measurements, business combinations, intangible assets, leases, commitments, convertible notes, stock-based compensation, income taxes, net loss per share, and geographical information, offering context to the unaudited financial statements [1. DESCRIPTION OF BUSINESS](index=13&type=section&id=1.%20DESCRIPTION%20OF%20BUSINESS) - 8x8, Inc. is a leading cloud provider of enterprise Software-as-a-Service (SaaS) communications solutions[40](index=40&type=chunk) - The company offers unified communications, team collaboration, video conferencing, contact center, data and analytics, and other services from one proprietary cloud technology platform[40](index=40&type=chunk) - Substantially all revenue is generated from communication services subscriptions and platform usage, complemented by hardware sales and professional services[40](index=40&type=chunk) [2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=13&type=section&id=2.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) - The interim condensed consolidated financial statements are unaudited and prepared in accordance with U.S. GAAP and SEC regulations[42](index=42&type=chunk) - The company adopted ASU 2016-13 (Credit Losses) and ASU 2018-15 (Internal Use Software) in fiscal 2021, with no material impact on consolidated financial statements[48](index=48&type=chunk)[50](index=50&type=chunk) - Certain revenue and cost of revenue items were reclassified in Q4 fiscal 2020 for clarity, without impacting total revenue, net loss, or cash flows[46](index=46&type=chunk) [3. REVENUE RECOGNITION](index=14&type=section&id=3.%20REVENUE%20RECOGNITION) - Revenue is disaggregated by geographic region[52](index=52&type=chunk) | Metric | June 30, 2020 (in thousands) | March 31, 2020 (in thousands) | | :-------------------------- | :--------------------------- | :---------------------------- | | **Accounts receivable, net** | $40,572 | $37,811 | | **Contract assets, current, net** | $11,625 | $10,425 | | **Deferred revenue, current** | $8,352 | $7,105 | - Remaining performance obligations totaled approximately **$290.0 million** as of June 30, 2020, expected to be recognized over the next **36 months**[56](index=56&type=chunk) [4. FAIR VALUE MEASUREMENTS](index=15&type=section&id=4.%20FAIR%20VALUE%20MEASUREMENTS) | Category | Amortized Costs (in thousands) | Gross Unrealized Gain (in thousands) | Gross Unrealized Loss (in thousands) | Estimated Fair Value (in thousands) | | :------------------- | :----------------------------- | :----------------------------------- | :----------------------------------- | :---------------------------------- | | **Cash** | $34,028 | — | — | $34,028 | | **Money market funds** | $88,638 | — | — | $88,638 | | **Treasury securities** | $11,686 | $89 | — | $11,775 | | **Certificate of deposit** | $8,641 | — | — | $8,641 | | **Commercial paper** | $9,395 | $1 | — | $9,396 | | **Corporate debt** | $33,629 | $152 | $(7) | $33,774 | | **Total assets** | **$186,017** | **$242** | **$(7)** | **$186,252** | - The estimated fair value of the company's outstanding convertible senior notes was **$326.3 million** as of June 30, 2020, classified as Level 2 in the fair value hierarchy[62](index=62&type=chunk) [5. BUSINESS COMBINATIONS](index=17&type=section&id=5.%20BUSINESS%20COMBINATIONS) - On July 17, 2019, 8x8 acquired Wavecell Pte. Ltd. for a total fair value of purchase consideration of **$117.1 million**[63](index=63&type=chunk)[64](index=64&type=chunk) - The acquisition consideration comprised **$72.8 million** in cash and **$44.3 million** in shares of common stock[64](index=64&type=chunk) - The acquisition extended 8x8's technology platform with UCaaS, CCaaS, VCaaS, and CPaaS solutions, expanding API offerings geographically and in scope[63](index=63&type=chunk) | Asset/Liability | July 17, 2019 (in thousands) | | :---------------- | :--------------------------- | | **Cash** | $4,473 | | **Accounts receivable** | $9,438 | | **Intangible assets** | $21,010 | | **Goodwill** | $91,060 | [6. INTANGIBLE ASSETS, GOODWILL, AND OTHER ASSETS](index=19&type=section&id=6.%20INTANGIBLE%20ASSETS%2C%20GOODWILL%2C%20AND%20OTHER%20ASSETS) | Asset | June 30, 2020 Net Carrying Amount (in thousands) | March 31, 2020 Net Carrying Amount (in thousands) | | :------------------------------------ | :----------------------------------------------- | :------------------------------------------------ | | **Developed technology** | $16,195 | $17,620 | | **Customer relationships** | $5,578 | $5,997 | | **Trade and domain names** | — | $384 | | **Total acquired identifiable intangible assets** | **$21,773** | **$24,001** | - The weighted average remaining useful life for technology is **4.8 years** and for customer relationships is **5.7 years**[68](index=68&type=chunk) | Metric | Amount (in thousands) | | :----------------------------------- | :-------------------- | | **Balance at March 31, 2020** | $128,300 | | **Foreign currency translation adjustments** | $680 | | **Balance at June 30, 2020** | **$128,980** | - Amortization of deferred sales commission costs was **$6.1 million** for the three months ended June 30, 2020, up from **$4.2 million** in the prior year[72](index=72&type=chunk) [7. LEASES](index=21&type=section&id=7.%20LEASES) | Metric | June 30, 2020 (in thousands) | March 31, 2020 (in thousands) | | :----------------------------------- | :--------------------------- | :---------------------------- | | **Operating lease, right-of-use assets** | $76,054 | $78,963 | | **Operating lease liabilities, current** | $9,989 | $5,875 | | **Operating lease liabilities, non-current** | $87,884 | $92,452 | | **Total operating lease liabilities** | **$97,873** | **$98,327** | | Lease Expense (in thousands) | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | | :--------------------------- | :------------------------------- | :------------------------------- | | **Operating lease expense** | $3,750 | $2,085 | | **Variable lease expense** | $782 | $209 | - The weighted average remaining lease term is **8.8 years**, and the weighted average discount rate is **4.0%**[75](index=75&type=chunk) [8. COMMITMENTS AND CONTINGENCIES](index=22&type=section&id=8.%20COMMITMENTS%20AND%20CONTINGENCIES) - The company had accrued contingent indirect tax liabilities of **$4.5 million** as of June 30, 2020, and March 31, 2020[80](index=80&type=chunk) - As of June 30, 2020, management believes it is not probable that a loss has been incurred from any material lawsuits, claims, and proceedings[82](index=82&type=chunk) [9. CONVERTIBLE SENIOR NOTES AND CAPPED CALL](index=24&type=section&id=9.%20CONVERTIBLE%20SENIOR%20NOTES%20AND%20CAPPED%20CALL) - The company has **$362.5 million** aggregate principal amount of **0.50%** convertible senior notes due 2024[86](index=86&type=chunk) | Metric | June 30, 2020 (in thousands) | March 31, 2020 (in thousands) | | :--------------------------- | :--------------------------- | :---------------------------- | | **Principal** | $362,500 | $362,500 | | **Unamortized debt discount** | $(65,919) | $(69,987) | | **Unamortized issuance costs** | $(919) | $(976) | | **Net carrying amount** | **$295,662** | **$291,537** | | Interest Expense (in thousands) | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | | :------------------------------ | :------------------------------- | :------------------------------- | | **Contractual interest expense** | $453 | $359 | | **Amortization of debt discount** | $4,068 | $3,146 | | **Amortization of issuance costs** | $57 | $26 | | **Total interest expense** | **$4,578** | **$3,531** | - Capped call transactions partially offset potential dilution, covering approximately **14.1 million shares**, recorded as a reduction to additional paid-in capital[94](index=94&type=chunk) [10. STOCK-BASED COMPENSATION](index=25&type=section&id=10.%20STOCK-BASED%20COMPENSATION) | Stock-Based Compensation Expense (in thousands) | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | | :---------------------------------------------- | :------------------------------- | :------------------------------- | | **Cost of service revenue** | $1,814 | $997 | | **Research and development** | $6,545 | $3,864 | | **Sales and marketing** | $5,739 | $3,921 | | **General and administrative** | $7,894 | $4,081 | | **Total** | **$22,779** | **$13,597** | | Stock Activity (in thousands, except shares) | June 30, 2020 | June 30, 2019 | | :------------------------------------------- | :------------ | :------------ | | **Stock options outstanding at period-end** | 2,259 | 2,974 | | **Stock awards outstanding at period-end** | 9,443 | 8,193 | | **Total unrecognized compensation expense at period-end** | $116,957 | $109,422 | [11. INCOME TAXES](index=26&type=section&id=11.%20INCOME%20TAXES) - The company's effective tax rate was **(0.5)%** for the three months ended June 30, 2020, and **(0.4)%** for the same period in 2019[99](index=99&type=chunk) - The difference in the effective tax rate and the U.S. federal statutory rate was primarily due to the full valuation allowance maintained against deferred tax assets[99](index=99&type=chunk) - The provision for income taxes was **$0.2 million** for the three months ended June 30, 2020, compared to **$0.1 million** in the prior year[147](index=147&type=chunk) [12. NET LOSS PER SHARE](index=26&type=section&id=12.%20NET%20LOSS%20PER%20SHARE) | Metric | Three Months Ended June 30, 2020 (in thousands, except per share) | Three Months Ended June 30, 2019 (in thousands, except per share) | | :------------------------------------ | :---------------------------------------------------------------- | :---------------------------------------------------------------- | | **Net loss available to common stockholders** | $(41,913) | $(34,265) | | **Common shares - basic and diluted** | 103,607 | 96,429 | | **Net loss per share (Basic and diluted)** | **$(0.40)** | **$(0.36)** | - **12,284 thousand** anti-dilutive shares (stock options, stock awards, and potential shares from ESPP) were excluded from the calculation of diluted earnings per share for the three months ended June 30, 2020[102](index=102&type=chunk) [13. GEOGRAPHICAL INFORMATION](index=28&type=section&id=13.%20GEOGRAPHICAL%20INFORMATION) | Region | Three Months Ended June 30, 2020 (in thousands) | Three Months Ended June 30, 2019 (in thousands) | YoY Change % | | :------------- | :---------------------------------------------- | :---------------------------------------------- | :----------- | | **United States** | $93,244 | $83,249 | **12.0%** | | **International** | $28,563 | $13,426 | **112.7%** | | **Total revenue** | **$121,807** | **$96,675** | **26.0%** | | Region | June 30, 2020 (in thousands) | March 31, 2020 (in thousands) | | :------------- | :--------------------------- | :---------------------------- | | **United States** | $89,954 | $87,673 | | **International** | $6,158 | $6,709 | | **Total property and equipment, net** | **$96,112** | **$94,382** | [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=28&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management's discussion and analysis of financial condition and results of operations, covering business overview, strategic outlook, COVID-19 impacts, revenue, expenses, and liquidity [BUSINESS OVERVIEW](index=28&type=section&id=BUSINESS%20OVERVIEW) - 8x8 is a leading SaaS provider of voice, video, chat, contact center, and enterprise-class API solutions powered by one global cloud communications platform[105](index=105&type=chunk) - The company serves customers across more than **150 countries**, with an increased focus on mid-market and enterprise categories[106](index=106&type=chunk) - Revenue is primarily subscription-based from communication services and platform usage, supplemented by sales and rentals of hardware and professional services[107](index=107&type=chunk) - The flagship service is 8x8 X Series, a suite of UCaaS and CCaaS solutions, with ongoing migration of legacy customers to this product suite[108](index=108&type=chunk)[109](index=109&type=chunk)[110](index=110&type=chunk) [SUMMARY AND OUTLOOK](index=30&type=section&id=SUMMARY%20AND%20OUTLOOK) | Metric | Q1 Fiscal 2021 | Q1 Fiscal 2020 | YoY Growth | | :-------------------------------------------------- | :------------- | :------------- | :--------- | | **Total service revenue** | **$114.2 million** | **$89.839 million** | **27.1%** | | **Average annualized service revenue per customer** | **$7,883** | **$7,069** | **11.5%** | | **Service revenue from mid-market and enterprise customers** | **45%** of total | N/A | **48%** | | **New bookings from bundled UCaaS and CCaaS (>$12K ARR)** | **55%** | **51%** | **+4 pp** | - The company focuses on improved operating efficiencies and revenue growth, aiming for profitability and operating cash flow improvement in fiscal 2021[112](index=112&type=chunk) - Plans for fiscal 2021 include investments in customer acquisition through global expansion, direct marketing, sales force, e-commerce, and indirect channel programs[113](index=113&type=chunk) [IMPACTS OF COVID-19](index=30&type=section&id=IMPACTS%20OF%20COVID-19) - The COVID-19 pandemic led to a significant portion of the workforce working from home, altered sales activities, reduced travel expenses, and improved employee productivity[114](index=114&type=chunk) - Small business and mid-size customers were more impacted by COVID-19 than enterprise customers[114](index=114&type=chunk) - CPaaS usage revenue grew year-over-year in Q1, despite lower than expected usage in APAC due to COVID-related slowdowns, with positive trends observed towards the end of the quarter[114](index=114&type=chunk) - The overall negative impact on the business was less significant than initially anticipated, but risks are continuously monitored and effects considered in credit loss impairments[116](index=116&type=chunk) [COMPONENTS OF RESULTS OF OPERATIONS](index=31&type=section&id=COMPONENTS%20OF%20RESULTS%20OF%20OPERATIONS) - Service revenue includes communication services subscriptions, platform usage revenue, and related fees from UCaaS, CCaaS, and CPaaS offerings[117](index=117&type=chunk) - Other revenue primarily includes sales and rentals of IP telephones and professional services[118](index=118&type=chunk) - Cost of service revenue includes network operations, personnel, technology licenses, amortization of internally developed software, customer service, and third-party carrier costs[119](index=119&type=chunk) - Operating expenses comprise Research and Development, Sales and Marketing, and General and Administrative expenses, each with specific personnel, overhead, and operational costs[121](index=121&type=chunk)[122](index=122&type=chunk)[123](index=123&type=chunk) - Other income (expense), net, primarily consists of interest expense related to convertible notes, offset by income from cash/investments and foreign exchange gains/losses[124](index=124&type=chunk) - Provision for income taxes primarily consists of state minimum taxes, with a valuation allowance maintained against U.S. deferred tax assets[126](index=126&type=chunk)[127](index=127&type=chunk) [RESULTS OF OPERATIONS](index=33&type=section&id=RESULTS%20OF%20OPERATIONS) [Revenue](index=33&type=section&id=Revenue) | Metric | Three Months Ended June 30, 2020 (in thousands) | Three Months Ended June 30, 2019 (in thousands) | Change (in thousands) | % Change | | :------------ | :---------------------------------------------- | :---------------------------------------------- | :-------------------- | :------- | | **Service revenue** | $114,183 | $89,839 | $24,344 | **27.1%** | | **Other revenue** | $7,624 | $6,836 | $788 | **11.5%** | | **Total revenue** | **$121,807** | **$96,675** | **$25,132** | **26.0%**| - Service revenue growth was primarily due to a net increase in the subscriber base, expanded offerings to existing customers, and growth in CPaaS usage, particularly in the APAC region[129](index=129&type=chunk) - Other revenue increased due to an increase in professional services revenue resulting from overall business growth[131](index=131&type=chunk) [Cost of Revenue](index=33&type=section&id=Cost%20of%20Revenue) | Metric | Three Months Ended June 30, 2020 (in thousands) | Three Months Ended June 30, 2019 (in thousands) | Change (in thousands) | % Change | | :-------------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------- | :------- | | **Cost of service revenue** | $40,996 | $25,300 | $15,696 | **62.0%** | | **Cost of other revenue** | $11,137 | $12,391 | $(1,254) | **(10.1)%** | - The increase in cost of service revenue was primarily attributable to a **$13.0 million** increase in communication infrastructure costs and a **$2.0 million** increase in amortization of capitalized software[133](index=133&type=chunk) - Cost of other revenue decreased due to lower hardware shipment volume, improved pricing, and a shift to the hardware rental program[136](index=136&type=chunk) [Operating Expenses](index=35&type=section&id=Operating%20Expenses) | Metric | Three Months Ended June 30, 2020 (in thousands) | Three Months Ended June 30, 2019 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------- | :------- | | **Research and development** | $21,494 | $18,331 | $3,163 | **17.3%** | | **Sales and marketing** | $60,150 | $53,599 | $6,551 | **12.2%** | | **General and administrative** | $25,790 | $19,607 | $6,183 | **31.5%** | - Research and development expenses increased primarily due to a **$2.7 million** increase in stock-based compensation and a **$0.7 million** increase in employee and consulting related expenditures[137](index=137&type=chunk) - Sales and marketing expenses increased due to higher employee expenditures (**$4.7 million**), channel commissions (**$3.1 million**), and amortization of deferred sales commission costs (**$1.9 million**), partially offset by reduced marketing program and travel costs[139](index=139&type=chunk) - General and administrative expenses increased due to a **$3.8 million** increase in stock-based compensation, a **$1.3 million** higher allowance for credit losses (partially COVID-19 related), and a **$1.3 million** increase in legal and tax related costs[143](index=143&type=chunk) [Other Income (Expense), net](index=37&type=section&id=Other%20Income%20(Expense)%2C%20net) | Metric | Three Months Ended June 30, 2020 (in thousands) | Three Months Ended June 30, 2019 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------- | :------- | | **Other income (expense), net** | $(3,925) | $(1,564) | $(2,361) | **151.0%** | - The increase in net expense was primarily due to a **$1.6 million** decrease in interest income and a **$1.0 million** increase related to contractual interest expense and amortization of debt discount from convertible notes[145](index=145&type=chunk) [Provision for Income Taxes](index=37&type=section&id=Provision%20for%20Income%20Taxes) | Metric | Three Months Ended June 30, 2020 (in thousands) | Three Months Ended June 30, 2019 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------- | :------- | | **Provision for income taxes** | $228 | $148 | $80 | **54.1%** | | **Percentage of loss before provision for income taxes** | **(0.5)%** | **(0.4)%** | N/A | N/A | - The effective tax rates were **(0.5)%** for Q1 2020 and **(0.4)%** for Q1 2019, primarily due to the full valuation allowance maintained against deferred tax assets[147](index=147&type=chunk) [Liquidity and Capital Resources](index=37&type=section&id=Liquidity%20and%20Capital%20Resources) | Metric | June 30, 2020 (in millions) | March 31, 2020 (in millions) | | :------------------------------------ | :-------------------------- | :--------------------------- | | **Cash, cash equivalents, and investments** | $167.2 | $186.9 | | **Restricted cash** | $19.0 | $19.0 | - Net cash used in operating activities for the three months ended June 30, 2020, was **$9.3 million**, an improvement from **$20.5 million** in the prior year[154](index=154&type=chunk) - The company expects to defer over **$4 million** in employer payroll taxes in fiscal 2021 under the CARES Act[150](index=150&type=chunk) - Lower cash usage from payroll compensation of over **$4 million** is expected in fiscal 2021 due to an employee stock salary program[152](index=152&type=chunk) - Management believes existing cash, cash equivalents, and investment balances, and anticipated cash flows from operations will be sufficient for the next **12 months**[153](index=153&type=chunk) [CRITICAL ACCOUNTING POLICIES & ESTIMATES](index=39&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20%26%20ESTIMATES) - The preparation of financial statements requires management to make estimates and judgments affecting reported amounts of assets, liabilities, revenue, and expenses[158](index=158&type=chunk) - Key estimates include allowance for credit losses, impairment of goodwill and intangible assets, capitalization of internally developed software, and stock-based compensation expense[44](index=44&type=chunk) - There have been no significant changes to critical accounting policies and estimates during the three months ended June 30, 2020[159](index=159&type=chunk) [RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS](index=39&type=section&id=RECENTLY%20ADOPTED%20ACCOUNTING%20PRONOUNCEMENTS) - The company adopted ASU 2016-13 (Credit Losses), ASU 2018-13 (Fair Value Measurement), and ASU 2018-15 (Internal Use Software) in the first quarter of fiscal 2021[48](index=48&type=chunk)[49](index=49&type=chunk)[50](index=50&type=chunk) - The adoption of these pronouncements did not have a material impact on the company's consolidated financial statements[48](index=48&type=chunk)[49](index=49&type=chunk)[50](index=50&type=chunk) [RECENT ACCOUNTING PRONOUNCEMENTS](index=40&type=section&id=RECENT%20ACCOUNTING%20PRONOUNCEMENTS) - The company is currently assessing the impact of ASU 2019-12 (Income Taxes), effective for fiscal years beginning after December 15, 2020 (fiscal 2022), on its consolidated financial statements[51](index=51&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=41&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) Discusses market risks, including interest rate fluctuation and foreign currency exchange, noting no material impact from hypothetical **10%** changes [Interest Rate Fluctuation Risk](index=41&type=section&id=Interest%20Rate%20Fluctuation%20Risk) - As of June 30, 2020, the company had **$167.2 million** in cash, cash equivalents, and investments, primarily in money market funds, U.S. treasury, commercial paper, and corporate bonds[162](index=162&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[162](index=162&type=chunk) - The fair value of the **$362.5 million** convertible senior notes (**$326.3 million** as of June 30, 2020) is subject to interest rate and market risk, but this does not impact the company's financial position, cash flows, or results of operations due to the fixed nature of the debt[163](index=163&type=chunk) [Foreign Currency Exchange Risk](index=41&type=section&id=Foreign%20Currency%20Exchange%20Risk) - 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[164](index=164&type=chunk) - A hypothetical **10%** decrease in all foreign currencies against the US dollar would not result in a material foreign currency loss on foreign-denominated balances as of June 30, 2020[165](index=165&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[166](index=166&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=41&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Details disclosure controls and procedures, their effectiveness, inherent limitations, and changes in internal control over financial reporting [Evaluation of Effectiveness of Disclosure Controls and Procedures](index=41&type=section&id=Evaluation%20of%20Effectiveness%20of%20Disclosure%20Controls%20and%20Procedures) - As of June 30, 2020, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective[168](index=168&type=chunk) - Disclosure controls are designed to ensure that required information is accumulated, communicated to management, and reported within specified time periods[167](index=167&type=chunk) [Limitations on the Effectiveness of Controls](index=41&type=section&id=Limitations%20on%20the%20Effectiveness%20of%20Controls) - Management acknowledges that no control system can prevent all errors and fraud, providing only reasonable, not absolute, assurance[169](index=169&type=chunk) - The design of a control system must reflect resource constraints, and benefits must be considered relative to costs[169](index=169&type=chunk) [Changes in Internal Control over Financial Reporting](index=43&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 2021 that materially affected, or are reasonably likely to materially affect, its internal control over financial reporting[171](index=171&type=chunk) PART II. OTHER INFORMATION [ITEM 1. LEGAL PROCEEDINGS](index=44&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) Incorporates legal proceedings information from Note 8, with management believing no material loss is probable as of June 30, 2020 - Information on legal proceedings is incorporated by reference from Note 8 of the financial statements[173](index=173&type=chunk) - As of June 30, 2020, management believes it is not probable that a material loss has been incurred from any pending lawsuits, claims, and proceedings[82](index=82&type=chunk) [ITEM 1A. RISK FACTORS](index=44&type=section&id=ITEM%201A.%20RISK%20FACTORS) Updates risk factors, highlighting new or modified risks related to data privacy and protection, regulatory uncertainty, and potential non-compliance impacts - No material changes from previously disclosed risk factors, except for those related to data privacy and protection[174](index=174&type=chunk) - Failure to comply with data privacy and protection laws (e.g., GDPR, CCPA) could result in fines, penalties, lawsuits, and adverse business impacts[175](index=175&type=chunk) - Regulatory uncertainty from Brexit and the invalidation of the Privacy Shield program by the Court of Justice of the European Union pose risks to data transfer and operations[176](index=176&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=44&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) No unregistered sales of equity securities or use of proceeds were reported - No unregistered sales of equity securities or use of proceeds were reported[178](index=178&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=44&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) No defaults upon senior securities were reported - No defaults upon senior securities were reported[179](index=179&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=45&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) No mine safety disclosures were reported - No mine safety disclosures were reported[181](index=181&type=chunk) [ITEM 5. OTHER INFORMATION](index=45&type=section&id=ITEM%205.%20OTHER%20INFORMATION) No other information was reported for this item - No other information was reported for this item[182](index=182&type=chunk) [ITEM 6. EXHIBITS](index=46&type=section&id=ITEM%206.%20EXHIBITS) Lists all exhibits filed with the Form 10-Q, including corporate governance, convertible notes, equity plan, employment agreements, certifications, and XBRL data - This section lists all exhibits filed with the Form 10-Q, including corporate governance documents, indenture for convertible notes, equity incentive plan, employment agreements, certifications, and XBRL financial data[184](index=184&type=chunk) [SIGNATURE](index=47&type=section&id=SIGNATURE) Report duly signed on August 4, 2020, by Samuel Wilson, CFO of 8x8, Inc., certifying submission - The report was duly signed on August 4, 2020, by Samuel Wilson, Chief Financial Officer of 8x8, Inc., certifying its submission pursuant to the Securities Exchange Act of 1934[190](index=190&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended March 31, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________to _________ Commission file number 000-21783 8x8, Inc. (Exact name of Registrant as Specified in its Charter) Delaware 77-0142404 (State or Other Juri ...

[PART I. FINANCIAL INFORMATION](index=7&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) Presents the company's unaudited financial statements, management's analysis, and disclosures on market risk [Item 1. Financial Statements (unaudited)](index=7&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section presents the unaudited condensed consolidated financial statements and accompanying notes for the reporting period [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) | Metric | Dec 31, 2019 (in thousands) | Mar 31, 2019 (in thousands) | | :--- | :--- | :--- | | Total current assets | $302,381 | $397,391 | | Total assets | $732,499 | $546,358 | | Total current liabilities | $121,636 | $74,705 | | Total liabilities | $513,008 | $296,968 | | Total stockholders' equity | $219,491 | $249,390 | - Total assets increased significantly from **$546.4 million** at March 31, 2019, to **$732.5 million** at December 31, 2019, primarily driven by increases in property and equipment, operating lease right-of-use assets, intangible assets, and goodwill[19](index=19&type=chunk) - Total liabilities also saw a substantial increase from **$297.0 million** to **$513.0 million**, mainly due to the recognition of operating lease liabilities and an increase in convertible senior notes[19](index=19&type=chunk) [Condensed Consolidated Statements of Operations](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) | Metric (in thousands, except per share) | Three Months Ended Dec 31, 2019 | Three Months Ended Dec 31, 2018 | Nine Months Ended Dec 31, 2019 | Nine Months Ended Dec 31, 2018 | | :--- | :--- | :--- | :--- | :--- | | Total revenue | $118,567 | $89,912 | $324,759 | $258,819 | | Loss from operations | $(43,168) | $(24,238) | $(113,665) | $(62,208) | | Net loss | $(47,071) | $(23,771) | $(122,268) | $(60,608) | | Net loss per share (Basic and diluted) | $(0.47) | $(0.25) | $(1.23) | $(0.64) | - Total revenue increased by **31.9%** for the three months ended December 31, 2019, and by **25.5%** for the nine months ended December 31, 2019, compared to the prior year periods[22](index=22&type=chunk) - **Net loss significantly widened**, more than doubling for both the three-month and nine-month periods ended December 31, 2019, primarily due to increased operating expenses and other expenses[22](index=22&type=chunk) [Condensed Consolidated Statements of Comprehensive Loss](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) | Metric (in thousands) | Three Months Ended Dec 31, 2019 | Three Months Ended Dec 31, 2018 | Nine Months Ended Dec 31, 2019 | Nine Months Ended Dec 31, 2018 | | :--- | :--- | :--- | :--- | :--- | | Net loss | $(47,071) | $(23,771) | $(122,268) | $(60,608) | | Foreign currency translation adjustment | $4,587 | $(549) | $682 | $(2,600) | | Comprehensive loss | $(42,496) | $(24,421) | $(121,480) | $(63,048) | - The foreign currency translation adjustment **positively impacted comprehensive loss** for the three and nine months ended December 31, 2019, partially offsetting the net loss, in contrast to negative adjustments in the prior year[24](index=24&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) | Metric (in thousands, except shares) | Balance at Mar 31, 2019 | Balance at Dec 31, 2019 | | :--- | :--- | :--- | | Common Shares | 96,119,888 | 100,784,960 | | Additional Paid-in Capital | $506,949 | $598,525 | | Accumulated Deficit | $(250,302) | $(372,570) | | Total Stockholders' Equity | $249,390 | $219,491 | - Stockholders' equity decreased from **$249.4 million** at March 31, 2019, to **$219.5 million** at December 31, 2019, primarily due to the accumulated deficit from net losses, despite increases in additional paid-in capital from stock issuances and stock-based compensation[26](index=26&type=chunk) - Common shares outstanding increased from **96.1 million to 100.8 million**, driven by issuances under stock plans and related to acquisitions[26](index=26&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=13&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) | Metric (in thousands) | Nine Months Ended Dec 31, 2019 | Nine Months Ended Dec 31, 2018 | | :--- | :--- | :--- | | Net cash used in operating activities | $(62,836) | $(6,673) | | Net cash (used in) provided by investing activities | $(84,836) | $4,664 | | Net cash provided by (used in) financing activities | $65,842 | $(1,030) | | Net decrease in cash and cash equivalents, and restricted cash | $(80,872) | $(3,378) | | Cash, cash equivalents, and restricted cash at the end of the period | $203,811 | $36,425 | - Net cash used in operating activities significantly increased to **$62.8 million** for the nine months ended December 31, 2019, from $6.7 million in the prior year, reflecting increased investments to accelerate revenue growth[35](index=35&type=chunk)[167](index=167&type=chunk) - Investing activities shifted from providing $4.7 million in cash to using **$84.8 million**, primarily due to the Wavecell acquisition ($58.9 million), property and equipment purchases, and capitalized software development costs[35](index=35&type=chunk)[168](index=168&type=chunk) - Financing activities provided **$65.8 million** in cash, mainly from the issuance of convertible senior notes ($65.3 million), contrasting with a net use of $1.0 million in the prior year[35](index=35&type=chunk)[169](index=169&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=15&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) [1. DESCRIPTION OF BUSINESS](index=15&type=section&id=1.%20DESCRIPTION%20OF%20BUSINESS) - 8x8, Inc. is a leading cloud provider of enterprise Software-as-a-Service (SaaS) communications solutions, offering unified communications, team collaboration, video conferencing, contact center, data and analytics, and communication APIs from a single proprietary cloud technology platform[38](index=38&type=chunk) - Substantially all revenue since fiscal 2004 has been generated from the sale of communications services and related hardware, shifting from its prior business of Voice over Internet Protocol semiconductors[38](index=38&type=chunk) [2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=15&type=section&id=2.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) - The Company adopted ASU No. 2016-02 (Leases) effective April 1, 2019, using a modified retrospective approach, resulting in the recognition of approximately **$20.0 million in right-of-use assets** and **$21.4 million in lease liabilities** for existing operating leases[48](index=48&type=chunk)[50](index=50&type=chunk) - The adoption of the new lease standard **did not materially impact** the Company's accumulated deficit as of April 1, 2019[50](index=50&type=chunk) - The Company is currently assessing the impact of several recently issued accounting pronouncements, including ASU 2019-02 (Income Taxes), ASU 2019-08 (Stock Compensation), ASU 2018-13 (Fair Value Measurement), ASU 2018-15 (Internal Use Software), and ASU 2016-13 (Credit Losses), which become effective in fiscal years 2021 or 2022[51](index=51&type=chunk)[52](index=52&type=chunk)[53](index=53&type=chunk)[56](index=56&type=chunk) [3. REVENUE RECOGNITION](index=19&type=section&id=3.%20REVENUE%20RECOGNITION) - The Company recognizes service revenue from cloud-based subscription services and related usage, products, and professional services using a five-step model, allocating transaction price based on relative standalone selling prices[57](index=57&type=chunk)[58](index=58&type=chunk)[63](index=63&type=chunk) - Service revenue from subscriptions is recognized ratably over the contractual term, while usage fees are recognized when earned, and professional services revenue is recognized over time as services are rendered[64](index=64&type=chunk) | Contract Balance (in thousands) | Dec 31, 2019 | | :--- | :--- | | Accounts receivable, net | $37,384 | | Contract assets - current | $10,507 | | Contract assets - non-current | $8,413 | | Deferred revenue - current | $7,216 | | Deferred revenue - non-current | $1,411 | - Remaining performance obligations for contracts with terms greater than one year totaled approximately **$245.0 million** as of December 31, 2019, with most revenue expected to be recognized over the next 36 months[74](index=74&type=chunk) [4. FAIR VALUE MEASUREMENTS](index=23&type=section&id=4.%20FAIR%20VALUE%20MEASUREMENTS) | Asset Category (in thousands) | Amortized Costs (Dec 31, 2019) | Estimated Fair Value (Dec 31, 2019) | | :--- | :--- | :--- | | Cash | $22,722 | $22,722 | | Money market funds | $157,401 | $157,401 | | Treasury securities | $6,498 | $6,511 | | Corporate bonds | $36,181 | $36,274 | | Commercial paper | $8,835 | $8,836 | | Municipal securities | $1,345 | $1,345 | | Agency bonds | $2,099 | $2,114 | | Total assets | $235,081 | $235,203 | - As of December 31, 2019, the estimated fair value of the Company's outstanding convertible senior notes was **$362.3 million**, classified as Level 2 in the fair value hierarchy[77](index=77&type=chunk) - The Company now records certain investments as long-term due to the recent issuance of convertible senior notes and increased cash balances, expecting to hold them for at least 12 months[77](index=77&type=chunk) [5. BUSINESS COMBINATIONS](index=25&type=section&id=5.%20BUSINESS%20COMBINATIONS) - On July 17, 2019, 8x8 acquired Wavecell Pte. Ltd., an Asian-based global CPaaS provider, for approximately **$117.1 million**, comprising $72.8 million in cash and $44.3 million in common stock[78](index=78&type=chunk)[79](index=79&type=chunk) - The Wavecell acquisition aims to extend 8x8's technology platform with UCaaS, CCaaS, VCaaS, and CPaaS solutions, enhancing its ability to offer integrated communication and API solutions[78](index=78&type=chunk) | Acquired Assets/Liabilities (in thousands) | Fair Value (July 17, 2019) | | :--- | :--- | | Cash | $4,473 | | Accounts receivable | $9,438 | | Intangible assets | $21,010 | | Goodwill | $91,060 | | Accounts payable | $(9,548) | | Deferred revenue | $(90) | | Total consideration | $117,130 | - Goodwill of **$91.1 million** recognized from the Wavecell acquisition is primarily attributed to expected synergies and is not anticipated to be deductible for income tax purposes[81](index=81&type=chunk) [6. INTANGIBLE ASSETS AND GOODWILL](index=27&type=section&id=6.%20INTANGIBLE%20ASSETS%20AND%20GOODWILL) | Intangible Asset (in thousands) | Net Carrying Amount (Dec 31, 2019) | Net Carrying Amount (Mar 31, 2019) | | :--- | :--- | :--- | | Developed technology | $19,188 | $10,293 | | Customer relationships | $6,304 | $1,387 | | Trade and domain names | $963 | $0 | | Total acquired identifiable intangible assets | $26,455 | $11,680 | | Goodwill (in thousands) | Total | | :--- | :--- | | Balance at Mar 31, 2019 | $39,694 | | Additions due to acquisitions | $91,060 | | Foreign currency translation | $246 | | Balance at Dec 31, 2019 | $131,000 | - Goodwill increased significantly from **$39.7 million** at March 31, 2019, to **$131.0 million** at December 31, 2019, primarily due to additions from acquisitions, notably Wavecell[85](index=85&type=chunk) [7. RIGHT-OF-USE ASSETS AND LEASES](index=27&type=section&id=7.%20RIGHT-OF-USE%20ASSETS%20AND%20LEASES) | Lease Metric (in thousands) | Dec 31, 2019 | | :--- | :--- | | Operating lease, right-of-use assets | $77,062 | | Operating lease liabilities, current | $4,320 | | Operating lease liabilities, non-current | $86,187 | | Total operating lease liabilities | $90,507 | - Operating lease expense for the three and nine months ended December 31, 2019, was approximately **$4.4 million** and **$10.7 million**, respectively[90](index=90&type=chunk) - The Company entered into a new lease for its headquarters in Campbell, California, effective January 1, 2020, which increased operating lease right-of-use assets by **$56.8 million** and operating lease liabilities by **$56.1 million** during the second quarter of fiscal 2020[92](index=92&type=chunk)[94](index=94&type=chunk) [8. COMMITMENTS AND CONTINGENCIES](index=31&type=section&id=8.%20COMMITMENTS%20AND%20CONTINGENCIES) - The Company is subject to inquiries from various state and municipal taxing agencies regarding sales, use, telecommunications, excise, and income taxes, and is currently undergoing tax audits in several jurisdictions[95](index=95&type=chunk) - As of December 31, 2019, the Company **does not have any material provisions for lawsuits**, claims, and proceedings, believing it is not probable that a loss has been incurred[97](index=97&type=chunk) [9. CONVERTIBLE SENIOR NOTES AND CAPPED CALL](index=31&type=section&id=9.%20CONVERTIBLE%20SENIOR%20NOTES%20AND%20CAPPED%20CALL) - In February 2019, the Company issued $287.5 million in 0.50% convertible senior notes due 2024, and an additional $75 million in November 2019, bringing the total aggregate principal amount to **$362.5 million**[98](index=98&type=chunk)[99](index=99&type=chunk) | Metric (in thousands) | Dec 31, 2019 | Mar 31, 2019 | | :--- | :--- | :--- | | Principal | $362,500 | $287,500 | | Net carrying amount | $287,465 | $216,035 | | Interest Expense (in thousands) | Three Months Ended Dec 31, 2019 | Nine Months Ended Dec 31, 2019 | | :--- | :--- | :--- | | Total interest expense | $3,991 | $11,137 | - The Company entered into capped call transactions with an initial strike price of $25.68 per share and cap prices of $39.50 per share, covering approximately **14.1 million shares**, to partially offset potential dilution from note conversions[114](index=114&type=chunk) [10. STOCK-BASED COMPENSATION](index=34&type=section&id=10.%20STOCK-BASED%20COMPENSATION) | Stock-Based Compensation Expense (in thousands) | Three Months Ended Dec 31, 2019 | Three Months Ended Dec 31, 2018 | Nine Months Ended Dec 31, 2019 | Nine Months Ended Dec 31, 2018 | | :--- | :--- | :--- | :--- | :--- | | Total | $19,317 | $12,535 | $50,305 | $31,575 | - Total stock-based compensation expense increased by **54.1%** for the three months and **59.3%** for the nine months ended December 31, 2019, compared to the prior year periods[116](index=116&type=chunk) - As of December 31, 2019, total unrecognized stock-based compensation expense was **$143.6 million**, with a weighted-average remaining recognition period of 2.13 years for stock awards[116](index=116&type=chunk) - The Company had approximately **$7.1 million remaining** under its 2017 Repurchase Plan as of December 31, 2019, with no stock repurchases made during the three and nine months ended December 31, 2019[117](index=117&type=chunk)[119](index=119&type=chunk) [11. INCOME TAXES](index=36&type=section&id=11.%20INCOME%20TAXES) - The Company's effective tax rate was **(0.6)%** for both the three and nine months ended December 31, 2019, and (0.5)% and (0.6)% for the corresponding prior year periods, respectively[120](index=120&type=chunk) - The difference between the effective tax rate and the U.S. federal statutory rate is primarily due to a **full valuation allowance** maintained against deferred tax assets[120](index=120&type=chunk) [12. NET LOSS PER SHARE](index=36&type=section&id=12.%20NET%20LOSS%20PER%20SHARE) | Metric (in thousands, except per share) | Three Months Ended Dec 31, 2019 | Three Months Ended Dec 31, 2018 | Nine Months Ended Dec 31, 2019 | Nine Months Ended Dec 31, 2018 | | :--- | :--- | :--- | :--- | :--- | | Net loss available to common stockholders | $(47,071) | $(23,771) | $(122,268) | $(60,608) | | Common shares - basic and diluted | 99,922 | 95,370 | 99,082 | 94,093 | | Net loss per share (Basic and diluted) | $(0.47) | $(0.25) | $(1.23) | $(0.64) | - Net loss per share (basic and diluted) increased to **$(0.47)** for the three months and **$(1.23)** for the nine months ended December 31, 2019, from $(0.25) and $(0.64) in the prior year periods, respectively[121](index=121&type=chunk) | Anti-dilutive Shares (in thousands) | Three Months Ended Dec 31, 2019 | Three Months Ended Dec 31, 2018 | Nine Months Ended Dec 31, 2019 | Nine Months Ended Dec 31, 2018 | | :--- | :--- | :--- | :--- | :--- | | Stock options | 2,668 | 3,387 | 2,668 | 3,387 | | Stock awards | 9,790 | 8,109 | 9,790 | 8,109 | | Total anti-dilutive shares | 13,195 | 11,496 | 13,195 | 11,496 | [13. GEOGRAPHICAL INFORMATION](index=36&type=section&id=13.%20GEOGRAPHICAL%20INFORMATION) | Revenue by Geographic Area (in thousands) | Three Months Ended Dec 31, 2019 | Three Months Ended Dec 31, 2018 | Nine Months Ended Dec 31, 2019 | Nine Months Ended Dec 31, 2018 | | :--- | :--- | :--- | :--- | :--- | | United States | $90,171 | $77,606 | $258,847 | $223,690 | | International | $28,396 | $12,306 | $65,912 | $35,129 | | Total | $118,567 | $89,912 | $324,759 | $258,819 | - International revenue grew significantly by **130.7%** for the three months and **87.6%** for the nine months ended December 31, 2019, indicating successful geographic expansion[122](index=122&type=chunk) | Property and Equipment by Geographic Area (in thousands) | Dec 31, 2019 | Mar 31, 2019 | | :--- | :--- | :--- | | United States | $82,790 | $45,639 | | International | $6,986 | $7,196 | | Total | $89,776 | $52,835 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=37&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Provides management's perspective on financial condition, operational results, liquidity, and critical accounting policies [BUSINESS OVERVIEW](index=38&type=section&id=BUSINESS%20OVERVIEW) - 8x8 is a leading SaaS provider of cloud communications solutions, including voice, video, chat, contact center, and enterprise-class API solutions, serving customers across over 150 countries[125](index=125&type=chunk)[126](index=126&type=chunk) - The Company has increased its focus on mid-market and enterprise customer sectors, offering subscription-based cloud-based solutions like the 8x8 X Series (UCaaS and CCaaS) and CPaaS offerings from the Wavecell acquisition[126](index=126&type=chunk) - 8x8 is migrating legacy customers to its 8x8 X Series product suite, expecting to accelerate this process in fiscal 2020 and 2021 to reduce platform support costs[126](index=126&type=chunk) [SUMMARY AND OUTLOOK](index=38&type=section&id=SUMMARY%20AND%20OUTLOOK) - Cloud communications service revenue for Q3 fiscal 2020 was **$113.6 million**, reflecting **32.2% year-over-year growth**, driven by increased sales to mid-market and enterprise customers[127](index=127&type=chunk) - The Company continues to prioritize investments in sales, marketing, and R&D to accelerate revenue growth, capitalizing on the industry shift to cloud-based services, while also focusing on achieving operating efficiencies and profitability[128](index=128&type=chunk)[130](index=130&type=chunk) [COMPONENTS OF RESULTS OF OPERATIONS](index=39&type=section&id=COMPONENTS%20OF%20RESULTS%20OF%20OPERATIONS) - Service revenue is generated from software service subscriptions, platform usage, and professional services across UCaaS, CCaaS, and CPaaS offerings, with plans for continued growth through sales, marketing, geographic expansion, and strategic acquisitions[131](index=131&type=chunk) - Product revenue primarily comes from IP telephone sales, dependent on customer choice between hardware and software-based solutions[132](index=132&type=chunk) - Operating expenses (R&D, Sales & Marketing, G&A) are expected to increase in absolute dollars in future periods due to continued investments in growth, despite efforts to improve cost structure and operational efficiencies[136](index=136&type=chunk)[137](index=137&type=chunk)[138](index=138&type=chunk) - Other (expense) income, net, is primarily influenced by interest expense from convertible notes and income from cash, cash equivalents, and investments[140](index=140&type=chunk) - Provision for income taxes mainly consists of state minimum taxes and foreign operations taxes, with a full valuation allowance against U.S. deferred tax assets[141](index=141&type=chunk) [RESULTS OF OPERATIONS](index=41&type=section&id=RESULTS%20OF%20OPERATIONS) Revenue Performance (in thousands) | Revenue Type | Period | 2019 Amount | 2018 Amount | Dollar Change | Percent Change | | :--- | :--- | :--- | :--- | :--- | :--- | | Service Revenue | 3 Months | $113,566 | $85,911 | $27,655 | 32.2% | | Service Revenue | 9 Months | $310,467 | $245,378 | $65,089 | 26.5% | | Product Revenue | 3 Months | $5,001 | $4,001 | $1,000 | 25.0% | | Product Revenue | 9 Months | $14,292 | $13,441 | $851 | 6.3% | - Service revenue growth was driven by an increase in the business customer subscriber base, higher average service revenue per customer, and contributions from newly acquired products[143](index=143&type=chunk) Cost of Revenue Performance (in thousands) | Cost Type | Period | 2019 Amount | 2018 Amount | Dollar Change | Percent Change | | :--- | :--- | :--- | :--- | :--- | :--- | | Cost of Service Revenue | 3 Months | $49,326 | $27,632 | $21,694 | 78.5% | | Cost of Service Revenue | 9 Months | $124,488 | $78,383 | $46,105 | 58.8% | | Cost of Product Revenue | 3 Months | $6,893 | $5,318 | $1,575 | 29.6% | | Cost of Product Revenue | 9 Months | $19,119 | $16,996 | $2,123 | 12.5% | - Cost of service revenue increased faster than revenue growth due to newly acquired CPaaS products, increased overhead allocation, higher personnel costs, and increased amortization of intangibles and capitalized software[148](index=148&type=chunk)[149](index=149&type=chunk) Operating Expenses Performance (in thousands) | Expense Type | Period | 2019 Amount | 2018 Amount | Dollar Change | Percent Change | | :--- | :--- | :--- | :--- | :--- | :--- | | Research and Development | 3 Months | $19,870 | $16,886 | $2,984 | 17.7% | | Research and Development | 9 Months | $57,635 | $43,999 | $13,636 | 31.0% | | Sales and Marketing | 3 Months | $63,099 | $46,276 | $16,823 | 36.4% | | Sales and Marketing | 9 Months | $174,593 | $128,451 | $46,142 | 35.9% | | General and Administrative | 3 Months | $22,547 | $18,038 | $4,509 | 25.0% | | General and Administrative | 9 Months | $62,589 | $53,198 | $9,391 | 17.7% | - Sales and marketing expenses increased significantly due to higher third-party commission expenses, personnel costs, and advertising/marketing investments, partially offset by capitalized commission costs[153](index=153&type=chunk)[156](index=156&type=chunk) Other (Expense) Income, Net (in thousands) | Metric | Period | 2019 Amount | 2018 Amount | Dollar Change | Percent Change | | :--- | :--- | :--- | :--- | :--- | :--- | | Other (expense) income, net | 3 Months | $(3,623) | $579 | $(4,202) | (725.7)% | | Other (expense) income, net | 9 Months | $(7,919) | $1,933 | $(9,852) | (509.7)% | - The shift to net expense in other (expense) income was primarily driven by increased contractual interest expense, amortization of debt discount, and issuance costs related to the convertible senior notes[159](index=159&type=chunk) Provision for Income Taxes (in thousands) | Metric | Period | 2019 Amount | 2018 Amount | Dollar Change | | :--- | :--- | :--- | :--- | :--- | | Provision for income taxes | 3 Months | $280 | $112 | $168 | | Provision for income taxes | 9 Months | $684 | $333 | $351 | [Liquidity and Capital Resources](index=47&type=section&id=Liquidity%20and%20Capital%20Resources) - As of December 31, 2019, the Company had **$235.2 million** in cash, cash equivalents, and investments, along with $19.0 million in restricted cash[165](index=165&type=chunk) - Net cash used in operating activities for the nine months ended December 31, 2019, was **$62.8 million**, a significant increase from $6.7 million in the prior year, reflecting investments to accelerate revenue growth[167](index=167&type=chunk) - Net cash used in investing activities was **$84.8 million**, primarily due to the Wavecell acquisition ($58.9 million), purchases of property and equipment, and capitalized software development costs[168](index=168&type=chunk) - Net cash provided by financing activities was **$65.8 million**, mainly from the issuance of convertible senior notes ($65.3 million)[169](index=169&type=chunk) Contractual Obligations (in thousands) | Obligation Type | Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | | :--- | :--- | :--- | :--- | :--- | :--- | | Senior convertible notes | $362,500 | $0 | $0 | $362,500 | $0 | | Interest on senior convertible notes | $8,156 | $1,813 | $3,625 | $2,718 | $0 | | Operating leases | $121,508 | $8,801 | $28,192 | $23,594 | $60,921 | | Total Contractual Obligations | $492,164 | $10,614 | $31,817 | $388,812 | $60,921 | [CRITICAL ACCOUNTING POLICIES & ESTIMATES](index=48&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20&%20ESTIMATES) - The Company's financial statements rely on estimates and judgments, including those related to bad debts, goodwill and intangible asset impairment, capitalized software, deferred commissions, stock-based compensation, operating lease liabilities, and tax liabilities[44](index=44&type=chunk)[172](index=172&type=chunk) - There have been **no significant changes** to critical accounting policies and estimates during the three and nine months ended December 31, 2019, except for the adoption of ASU 2016-02 (Leases)[173](index=173&type=chunk) [RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS](index=48&type=section&id=RECENTLY%20ADOPTED%20ACCOUNTING%20PRONOUNCEMENTS) - The Company adopted ASU 2016-02, Leases, effective April 1, 2019, which required the recognition of right-of-use assets and lease liabilities on the balance sheet[48](index=48&type=chunk)[174](index=174&type=chunk) [RECENT ACCOUNTING PRONOUNCEMENTS](index=48&type=section&id=RECENT%20ACCOUNTING%20PRONOUNCEMENTS) - The Company is currently assessing the impact of several new accounting pronouncements, including those related to income taxes, stock compensation, fair value measurement, internal use software, and credit losses, which are effective in future fiscal years[51](index=51&type=chunk)[52](index=52&type=chunk)[53](index=53&type=chunk)[56](index=56&type=chunk)[174](index=174&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=48&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Discusses the company's exposure to and management of interest rate and foreign currency exchange risks [Interest Rate Fluctuation Risk](index=48&type=section&id=Interest%20Rate%20Fluctuation%20Risk) - The Company's investment activities aim to preserve principal while maximizing income, with a portfolio of cash equivalents and short-duration investments to minimize interest rate risk[174](index=174&type=chunk) - The fair market value of the Company's **$287.5 million** outstanding convertible senior notes is exposed to interest rate risk and fluctuations in its stock price[175](index=175&type=chunk) - A hypothetical 10% change in interest rates is **not expected to have a material impact** on the Company's interest income or expenses[176](index=176&type=chunk) [Foreign Currency Exchange Risk](index=48&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[177](index=177&type=chunk) - Gains or losses from the translation of foreign-denominated cash, accounts receivable, and intercompany balances impact other comprehensive income[179](index=179&type=chunk) - A hypothetical 10% decrease in all foreign currencies against the U.S. dollar would **not result in a material foreign currency loss** as of December 31, 2019[179](index=179&type=chunk) [Item 4. Controls and Procedures](index=50&type=section&id=Item%204.%20Controls%20and%20Procedures) Details the evaluation and effectiveness of the company's disclosure controls and internal financial reporting procedures [Evaluation of Effectiveness of Disclosure Controls and Procedures](index=50&type=section&id=Evaluation%20of%20Effectiveness%20of%20Disclosure%20Controls%20and%20Procedures) - As of December 31, 2019, the Company's Chief Executive Officer and Chief Financial Officer concluded that its disclosure controls and procedures were **effective**[182](index=182&type=chunk) [Limitations on the Effectiveness of Controls](index=50&type=section&id=Limitations%20on%20the%20Effectiveness%20of%20Controls) - Management acknowledges that no control system can prevent all errors and fraud, providing only **reasonable, not absolute, assurance** due to inherent limitations and resource constraints[183](index=183&type=chunk) [Changes in Internal Control over Financial Reporting](index=50&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) - There were **no changes** in internal control over financial reporting during the third quarter of fiscal year 2020 that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting[184](index=184&type=chunk) [PART II. OTHER INFORMATION](index=50&type=section&id=PART%20II.%20OTHER%20INFORMATION) Contains disclosures on legal proceedings, risk factors, equity security sales, and other required information [Item 1. Legal Proceedings](index=50&type=section&id=Item%201.%20Legal%20Proceedings) Reports no material provisions for lawsuits, claims, or other legal proceedings as of the reporting date - The Company does not have any material provisions for lawsuits, claims, and proceedings as of December 31, 2019, believing it is not probable that a loss has been incurred[97](index=97&type=chunk)[185](index=185&type=chunk) [Item 1A. Risk Factors](index=50&type=section&id=Item%201A.%20Risk%20Factors) Confirms no material changes to previously disclosed risk factors from the company's annual report - **No material changes** have occurred in the risk factors since the annual report on Form 10-K for fiscal year ended March 31, 2019, and subsequent quarterly reports[186](index=186&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=50&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Details stock repurchases and the status of the company's share repurchase program Purchases of Equity Securities (October 1, 2019 - December 31, 2019) | Period | Total Number of shares repurchased | Average Price Paid Per Share | | :--- | :--- | :--- | | October 1, 2019 through October 31, 2019 | — | — | | November 1, 2019 through November 30, 2019 | 4,088 | $20.82 | | December 1, 2019 through December 31, 2019 | — | — | - As of December 31, 2019, approximately **$7.1 million** (or 7,065,978 shares based on the last reported share count) remained available for purchase under the 2017 Repurchase Plan[117](index=117&type=chunk)[190](index=190&type=chunk) [Item 3. Defaults Upon Senior Securities](index=51&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) States that no defaults upon senior securities occurred during the reporting period - There were **no defaults** upon senior securities during the period[191](index=191&type=chunk) [Item 4. Mine Safety Disclosures](index=51&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Indicates that mine safety disclosures are not applicable to the company - There are **no mine safety disclosures** to report[192](index=192&type=chunk) [Item 5. Other Information](index=51&type=section&id=Item%205.%20Other%20Information) Confirms there is no other material information to report for the period - There is **no other information** to report[193](index=193&type=chunk) [Item 6. Exhibits](index=52&type=section&id=Item%206.%20Exhibits) Lists all exhibits filed with the report, including agreements, certifications, and iXBRL data - Key exhibits include the Underwriting Agreement (November 18, 2019), Indenture (February 19, 2019), Form of Capped Call Confirmation (November 21, 2019), and certifications from the Chief Executive Officer and Chief Financial Officer[195](index=195&type=chunk) - The report includes financial statements formatted in **iXBRL** (Inline eXtensible Business Reporting Language) as Exhibit 101[195](index=195&type=chunk)