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8x8(EGHT) - 2025 Q4 - Annual Report

Part I Business 8x8, Inc. is a global provider of an integrated customer experience and business communications platform, combining contact center, unified communications, and communication APIs into a single, AI-powered cloud solution - 8x8 provides an integrated Platform for CX™ that unifies CCaaS, UCaaS, and CPaaS capabilities into a single, secure, AI-powered system152127 - The company's strategic focus is on mid-market, small to mid-sized enterprise, and public sector organizations, typically with 500 to 10,000 employees1623 - Go-to-market strategy includes direct sales, technology solutions distributors (TSDs), value-added resellers (VARs), and strategic technology partners like Microsoft and Salesforce172437 - As of March 31, 2025, the company holds at least 405 patents with an additional 90 patent applications pending, covering various aspects of its technology42 - Employee and Customer Overview (Fiscal 2025) | Metric | Value | | :--- | :--- | | Total Customers | > 55,000 | | Countries with Users | > 160 | | Single Customer Revenue Concentration | No single customer > 10% of revenue | | Full-Time Employees | 1,942 | | Employees Outside U.S. | 67% | Risk Factors The company faces significant risks across its business, operations, and financials, including a history of net losses, intense competition, potential customer churn, and complex regulatory landscapes Risks Related to Business and Industry The company has a history of losses, faces intense competition, and is dependent on successful customer migration from acquired platforms like Fuze - The company recorded operating income of $15.2 million for fiscal 2025 but has an accumulated deficit of approximately $887.7 million and expects to continue incurring operating losses in the near future84 - Intense competition exists with cloud service providers (e.g., RingCentral, Zoom, Five9), legacy vendors (e.g., Avaya, Cisco), and large technology companies (e.g., Alphabet, Amazon, Microsoft)99100 - The company is targeting the completion of the Fuze customer migration and platform shutdown by December 31, 2025, with failure to meet this timeline potentially resulting in increased costs and operational risks116 - As of March 31, 2025, the company had federal Net Operating Loss (NOL) carryforwards of $1,023.8 million and state NOL carryforwards of $869.4 million, the utilization of which is subject to limitations120 Risks Related to Products and Operations Operational risks include potential service disruptions from software bugs or infrastructure failures, challenges from international expansion, and reliance on third-party network providers - The company's services and infrastructure have contained and may in the future contain undetected errors, bugs, or vulnerabilities, which have caused and may cause temporary service outages127129 - International operations face risks from localization, differing regulations, and geopolitical tensions, with the Russia-Ukraine conflict potentially impacting the company's significant engineering and operations presence in Romania133135 - The company relies on third-party network service providers like Equinix, Amazon Web Services (AWS), and Oracle for connectivity and cloud services, making it vulnerable to disruptions from these providers146 Risks Related to Regulatory Matters The company is exposed to significant regulatory risks, including cyber intrusions, evolving global data privacy laws, and extensive telecommunications regulations as a VoIP provider - Cyberattacks, including ransomware, are increasing in frequency and magnitude, with geopolitical tensions potentially heightening risks of cyber-attacks from nation-state actors152 - The company is subject to numerous data privacy and protection laws, including the EU's GDPR, the UK's Data Protection Act, and various U.S. state laws (e.g., CCPA/CPRA), which carry significant fines for non-compliance164170 - As a provider of interconnected VoIP services, the company is subject to extensive regulations from the FCC and international bodies concerning E-911, Universal Service Fund contributions, and robo-calling61166167 Risks Related to Intellectual Property The company faces risks of intellectual property infringement claims, challenges in protecting its proprietary technology, and potential restrictions from open-source software use - The company may face infringement lawsuits from third parties, which could result in monetary liabilities or require it to stop using certain technologies174 - Protection of proprietary technology relies on patents, trademarks, and trade secrets, which may not provide a sufficient competitive advantage and could be challenged or invalidated175 - The use of open-source software carries the risk that licenses could be construed in a way that imposes unanticipated restrictions on the company's platform178 Risks Related to Debt, Stock, and Charter 8x8 has a substantial debt load requiring significant cash flow for service, and its stock price volatility could jeopardize its Nasdaq listing - Outstanding Debt as of March 31, 2025 | Debt Instrument | Principal Amount Outstanding | | :--- | :--- | | Senior Secured Term Loan (due 2027) | $152.0 million | | 4.00% Convertible Senior Notes (due 2028) | $201.9 million | - The company's ability to make scheduled debt payments depends on future performance and cash flow, which are subject to economic and competitive factors beyond its control183 - If the company's stock price falls below $1.00 per share for an extended period, it could become non-compliant with Nasdaq's listing requirements, potentially leading to delisting189 General Risk Factors The company is exposed to general risks including adverse macroeconomic conditions and potential disruptions from natural disasters - Macroeconomic factors like inflation, rising interest rates, and international conflicts can reduce demand for services, lengthen sales cycles, and increase customer churn194 - The company's headquarters and a third-party data center are located in the San Francisco Bay Area, a region known for seismic activity, posing a risk of disruption from natural disasters199 Unresolved Staff Comments The company reports that it has no unresolved staff comments from the Securities and Exchange Commission - None201 Cybersecurity 8x8 maintains a comprehensive cybersecurity risk management program aligned with the NIST Cybersecurity Framework, overseen by the Board's Technology & Cybersecurity Committee - The company's cybersecurity risk management program is aligned with the National Institute of Standards and Technology (NIST) Cybersecurity Framework203 - Oversight is provided by the Board's Technology & Cybersecurity Committee, which meets quarterly, and the program is led by the Chief Information Security Officer (CISO), who has over 25 years of experience206207 - To date, 8x8 has not experienced any cybersecurity incidents that have materially impacted its operations or financial condition205 Properties The company's principal operations are headquartered in Campbell, California, with international leased offices and third-party data center hosting facilities globally - Principal operations are located in Campbell, California210 - International operations are conducted in leased office spaces, with key locations in the UK, Romania, Canada, Portugal, Singapore, and the Philippines210 - The company utilizes third-party data center hosting facilities in North America, Europe, and the Asia Pacific region211 Legal Proceedings Information regarding legal proceedings is incorporated by reference from Note 7, "Commitments and Contingencies," in the Notes to Consolidated Financial Statements - This section refers to Note 7 of the financial statements for details on legal proceedings212 Mine Safety Disclosures This item is not applicable to the company - Not applicable213 Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 8x8's common stock is traded on the Nasdaq Global Select Market under the symbol "EGHT", and the company has a stock repurchase plan but has never paid cash dividends - The company's common stock trades on the Nasdaq Global Select Market under the symbol "EGHT"215 - 8x8 has never paid cash dividends and has no plans to do so in the foreseeable future216 - As of March 31, 2025, approximately $7.1 million remained available for stock repurchases under the 2017 Repurchase Plan222 [Reserved]](index=36&type=section&id=Item%206.%20%5BReserved%5D) This item is reserved and contains no information Management's Discussion and Analysis of Financial Condition and Results of Operations In fiscal 2025, 8x8's total revenue decreased by 1.9% to $715.1 million, but the company achieved a significant turnaround in profitability, reporting income from operations of $15.2 million Results of Operations For fiscal 2025, total revenue decreased to $715.1 million, but income from operations significantly improved to $15.2 million from a $27.6 million loss in the prior year, driven by cost controls - Fiscal Year 2025 vs. 2024 Key Financial Results (in thousands) | Metric | Fiscal 2025 | Fiscal 2024 | Change | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $715,070 | $728,705 | $(13,635) | (1.9)% | | Service Revenue | $692,923 | $700,579 | $(7,656) | (1.1)% | | Gross Profit | $485,272 | $503,800 | $(18,528) | (3.7)% | | Income (Loss) from Operations | $15,193 | $(27,603) | $42,796 | N/A | | Net Loss | $(27,212) | $(67,592) | $40,380 | N/A | - Service revenue decrease of $7.7 million was driven by a $19.9 million decline in subscription revenue from the Fuze platform, partially offset by a $12.2 million increase in platform usage revenue252 - General and administrative expenses decreased by $29.8 million (26.6%), primarily due to a $24.2 million decrease associated with regulatory and state and local tax matters258 - There was no impairment of long-lived assets in fiscal 2025, compared to an $11.0 million impairment charge in fiscal 2024 related to ceasing use of office space259 Liquidity and Capital Resources As of March 31, 2025, the company held $88.1 million in cash and cash equivalents, with net cash provided by operating activities at $63.6 million, and it believes existing cash flows are sufficient for the next twelve months - Cash and Cash Equivalents (in thousands) | Date | Amount | | :--- | :--- | | March 31, 2025 | $88,050 | | March 31, 2024 | $116,262 | - Cash Flow Summary (in thousands) | Cash Flow Activity | Fiscal 2025 | Fiscal 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $63,554 | $78,985 | | Net cash provided by (used in) investing activities | $(16,424) | $8,546 | | Net cash used in financing activities | $(75,106) | $(83,411) | - On August 5, 2024, the company drew $200.0 million from a new Term Loan facility and used the proceeds to repay the previous 2022 Term Loan271274 - The company made three principal prepayments on the new Term Loan during fiscal 2025, totaling $48.0 million273 Critical Accounting Policies and Estimates The company's critical accounting policies involve significant management judgment and estimates, particularly in revenue recognition, allowance for credit losses, and asset impairment assessments - Key critical accounting policies include Revenue Recognition, Allowance for Credit Losses, Acquisitions, Capitalized Internal-Use Software Costs, Accounting for Long-Lived Assets, and Goodwill and Other Intangible Assets279 - Revenue recognition requires significant judgment in identifying performance obligations, determining transaction prices, and estimating variable consideration like sales returns and customer credits280282 - The company tests goodwill for impairment annually and reviews long-lived assets for impairment when events indicate their carrying value may not be recoverable, with an impairment of $11.0 million for right-of-use assets recorded in fiscal 2024288289 Quantitative and Qualitative Disclosures About Market Risk The company is primarily exposed to interest rate risk on its variable-rate Term Loan and foreign currency exchange risk from international operations - The company is subject to interest rate risk on its variable-rate Term Loan, which had a principal of $152.0 million as of March 31, 2025, where a hypothetical 10% increase in the variable interest rate would increase annual interest expense by approximately $1.0 million292 - The company has foreign currency risks related to revenue and expenses denominated primarily in the British Pound and Singapore Dollar294 - A hypothetical 10% change in foreign currency exchange rates would result in a foreign currency translation adjustment of approximately $13.0 million within accumulated other comprehensive loss295 Financial Statements and Supplementary Data This section presents the company's audited consolidated financial statements for the fiscal years ended March 31, 2025, 2024, and 2023, along with the independent auditor's report and detailed notes Report of Independent Registered Public Accounting Firm Moss Adams LLP issued an unqualified opinion on the consolidated financial statements and the effectiveness of the company's internal control over financial reporting, identifying no critical audit matters - The auditor, Moss Adams LLP, provided an unqualified opinion on the financial statements and the effectiveness of internal control over financial reporting300 - The audit determined there were no critical audit matters306 Consolidated Financial Statements The consolidated financial statements show total assets of $683.2 million and total liabilities of $561.0 million as of March 31, 2025, with a net loss of $27.2 million for fiscal 2025 - Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | March 31, 2024 | | :--- | :--- | :--- | | Total Current Assets | $203,866 | $247,836 | | Total Assets | $683,177 | $755,979 | | Total Current Liabilities | $169,244 | $172,584 | | Total Liabilities | $560,973 | $654,021 | | Total Stockholders' Equity | $122,204 | $101,958 | - Consolidated Statement of Operations Highlights (in thousands) | Account | FY 2025 | FY 2024 | FY 2023 | | :--- | :--- | :--- | :--- | | Total Revenue | $715,070 | $728,705 | $743,938 | | Gross Profit | $485,272 | $503,800 | $502,463 | | Income (Loss) from Operations | $15,193 | $(27,603) | $(66,292) | | Net Loss | $(27,212) | $(67,592) | $(73,143) | | Net Loss Per Share | $(0.21) | $(0.56) | $(0.63) | - Consolidated Statement of Cash Flows Highlights (in thousands) | Account | FY 2025 | FY 2024 | FY 2023 | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $63,554 | $78,985 | $48,786 | | Net cash provided by (used in) investing activities | $(16,424) | $8,546 | $6,050 | | Net cash used in financing activities | $(75,106) | $(83,411) | $(37,784) | Notes to Consolidated Financial Statements The notes provide detailed disclosures on significant accounting policies, revenue, debt, stock-based compensation, income taxes, and commitments, including an FCC investigation settlement - Remaining performance obligations for contract revenue not yet recognized was approximately $780.0 million as of March 31, 2025, with 84% expected to be recognized over the next 24 months392 - The company settled an FCC investigation regarding prior period regulatory filings for both 8x8 and Fuze, Inc. by agreeing to a compliance plan and paying a $0.3 million civil penalty420 - Total stock-based compensation expense was $39.9 million in fiscal 2025, a decrease from $61.9 million in fiscal 2024454 - The company maintains a full valuation allowance of $368.8 million against its U.S. deferred tax assets due to a history of cumulative losses472 - On April 11, 2025, the company prepaid an additional $15.0 million of its Term Loan, reducing the outstanding principal to $137.0 million481 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports that there were no changes in or disagreements with its accountants on accounting and financial disclosure - None483 Controls and Procedures Management concluded that the company's disclosure controls and procedures and internal control over financial reporting were effective as of March 31, 2025 - Management concluded that disclosure controls and procedures were effective as of March 31, 2025485 - Management concluded that internal control over financial reporting was effective as of March 31, 2025487 Other Information This section discloses an executive officer's Rule 10b5-1 trading plan and the board's adoption of an executive bonus plan for fiscal 2026 - An executive officer, Hunter Middleton, adopted a Rule 10b5-1 Trading Plan on February 28, 2025, for the potential sale of up to 232,040 shares489 - The board adopted an executive bonus plan for fiscal 2026 with semi-annual payouts based on service revenue, non-GAAP operating income, and net new annual subscription revenue targets490 Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to the company - None491 Part III Directors, Executive Officers and Corporate Governance Information regarding directors, executive officers, and corporate governance will be incorporated by reference from the company's definitive proxy statement for its 2025 Annual Meeting of Stockholders - Information required for this item is incorporated by reference from the 2025 Proxy Statement494 Executive Compensation Information relating to executive compensation will be incorporated by reference from the company's definitive proxy statement for its 2025 Annual Meeting of Stockholders - Information required for this item is incorporated by reference from the 2025 Proxy Statement497 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information regarding security ownership and related matters will be incorporated by reference from the company's definitive proxy statement for its 2025 Annual Meeting of Stockholders - Information required for this item is incorporated by reference from the 2025 Proxy Statement498 Certain Relationships and Related Transactions and Director Independence Information regarding certain relationships, related transactions, and director independence will be incorporated by reference from the company's definitive proxy statement for its 2025 Annual Meeting of Stockholders - Information required for this item is incorporated by reference from the 2025 Proxy Statement499 Principal Accountant Fees and Services Information regarding principal accountant fees and services will be incorporated by reference from the company's definitive proxy statement for its 2025 Annual Meeting of Stockholders - Information required for this item is incorporated by reference from the 2025 Proxy Statement500 Part IV Exhibits and Financial Statement Schedules This section lists the financial statements included under Item 8 and provides a comprehensive list of all exhibits filed with or incorporated by reference into the Form 10-K - This section provides an index to the financial statements and a list of all exhibits filed with the report502504 Form 10-K Summary This item is not applicable to the company - None508