8x8(EGHT) - 2021 Q4 - Annual Report

Part I Forward-Looking Statements and Risk Factors 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] - 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] Item 1. Business 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] - The company has approximately 1.8 million paid business users and offers a highly scalable and configurable cloud communications platform[10][12] - 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][13][14][15][16][18][19][20][21][22] - 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][24][25][26] - 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][32] - 8x8 holds over 250 patents and more than 100 U.S. and foreign patent applications, covering various aspects of its services and infrastructure[35] - 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][39][40] - 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][53][54][55][56] Item 1A. Risk Factors 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 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] - The company expects to continue incurring operating losses in the near future due to investments in sales and marketing, and research and development[69] - Customer churn adversely impacts revenues and requires ongoing sales and marketing expenditures to acquire new and retain existing customers[75] - Intense competition in the cloud communications industry, including from other cloud providers and legacy equipment providers, may prevent revenue growth or profitability[79][80][81] - Increasing sales to enterprise customers involves more complex, resource-intensive, and longer sales cycles, making revenue prediction difficult[86][87] - 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] - Difficulty attracting or retaining senior management and other personnel with industry experience and technical skills could impede growth[91] - 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][94] - 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] Risks Related to our Products and Operations 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] - 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][100] - 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] - 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][108] - Acquisitions pose risks including integration difficulties, diversion of management attention, new regulatory compliance obligations, and potential failure to achieve expected synergies[111] - 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][116] - 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][118] - Difficulties in executing local number porting requests could negatively impact customer acquisition and retention[120] Risks Related to Regulatory Matters 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][124] - 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][126][127] - 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][130] - 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][132] - 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] Risks Related to Intellectual Property 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] - 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] - 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] Risks Related to our Debt, our Stock, and our Charter 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][143] - 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] - 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][147] - 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] - 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][150][152] - 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] - 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][155] General Risk Factors 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][159] - 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] - 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] Item 1B. Unresolved Staff Comments The company reported no unresolved staff comments from the Securities and Exchange Commission Item 2. Properties 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] - 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] - The company leases space from third-party data center hosting facilities in the United States, South America, Europe, and Asia Pacific[164] Item 3. Legal Proceedings 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] Item 4. Mine Safety Disclosures 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 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] - The company has never paid cash dividends on its common stock and has no plans to do so in the foreseeable future[171] - As of May 13, 2021, there were approximately 187 holders of record of the company's common stock[172] - 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] Item 6. Selected Financial Data 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 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 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] - The company's customer base spans over 150 countries, with an increased focus on mid-market and enterprise customer sectors in recent years[184] - 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] - The flagship offering is 8x8 X Series, an integrated suite of UCaaS and CCaaS solutions[185] - 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] Summary and Outlook 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][190] - 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] New CEO Appointment 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] IMPACTS OF COVID-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] - The company experienced significant increases in usage by existing customers as workforces shifted to remote work, accelerating reliance on cloud communication systems[193] - The full impact on business, operations, and financial results is unpredictable, potentially affecting customer demand, sales cycles, churn, and pricing[193] COMPONENTS OF RESULTS OF OPERATIONS 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] - Other revenue comprises professional services for deployment and sales/rentals of IP telephones and other hardware[195] - Cost of service revenue primarily covers network operations, personnel, technology licenses, third-party communication services, and outsourced customer service[196] - Cost of other revenue includes direct and indirect costs for purchasing, scheduling, shipping, handling of IP telephones, and professional services for product deployment[198] - Research and development expenses consist of personnel, third-party development, software, and equipment costs for product and platform development[199] - Sales and marketing expenses include personnel, sales commissions, trade shows, advertising, and demand generation[200] - General and administrative expenses cover personnel, professional services, corporate administrative costs, and tax/regulatory fees[201] - Other income (expense), net, primarily consists of interest expense from convertible notes, offset by income from cash/investments and foreign exchange gains/losses[202] - 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] RESULTS OF OPERATIONS 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% | $4,878 | 17.9% | | Percentage of total revenue | 6.8% | 7.2% | 7.7% | | | | | - International revenue increased in fiscal years 2021 and 2020, representing 27% and 21% of total revenue respectively, up from 14% in fiscal 2019, due to expansion in EMEA and APAC regions, including the Wavecell acquisition[211] Cost of Service Revenue (in thousands) | Metric | 2021 | 2020 | 2019 | Change 2021 vs 2020 ($) | 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 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] - 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] - 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][233] - 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] Year over Year Changes (Cash Flows) 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][236] - 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][238] - 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][241] Off-Balance Sheet Arrangements 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] - 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] Contractual Obligations 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 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] - 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][248][251][252] - 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] - 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] Item 7A. Quantitative and Qualitative Disclosures About Market Risk 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] - A hypothetical 10% change in interest rates would not materially impact the value of cash, cash equivalents, or available-for-sale investments[255] - 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] - Foreign currency risks are related to revenue and operating expenses denominated in currencies other than the U.S. dollar, primarily the British Pound[257] - 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] Item 8. Financial Statements and Supplementary Data 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 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] - 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] - 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] - The auditors determined that there were no critical audit matters[272] Consolidated Balance Sheets 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 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 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 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 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 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 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] - The company's fiscal year ends on March 31; all dollar amounts are in thousands of U.S. Dollars unless otherwise noted[291][292] - 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][297] - 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][344] - 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][347] Note 2. Revenue Recognition 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] - Approximately 70% of the remaining performance obligation is expected to be recognized over the next 36 months, and 30% thereafter[351] - 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] Note 3. Fair Value Measurements 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] Note 4. Intangible Assets and Goodwill 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] - 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] 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] Note 5. Leases 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] - 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] 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] Note 6. Commitments and Contingencies 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] - Purchase obligations, including contracts with third-party customer support and network service providers, totaled approximately $18.6 million at March 31, 2021[371] - 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][374] - 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] Note 7. Convertible Senior Notes and Capped Call 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] - The notes are senior unsecured obligations, bear interest semi-annually, and mature on February 1, 2024, unless earlier repurchased, redeemed, or converted[377] - 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][381] - The notes are convertible under specific circumstances prior to October 1, 2023, and freely convertible thereafter until two trading days before maturity[380][381] - 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] 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] Note 8. Stock-Based Compensation and Stockholders' Equity 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][391][392][393] 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] - As of March 31, 2021, there was $118.9 million of total unrecognized compensation cost related to RSUs[403] - As of March 31, 2021, there was $24.4 million of total unrecognized compensation cost related to PSUs[406] - 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] - As of March 31, 2021, there was approximately $2.5 million of unrecognized compensation cost related to employee stock purchases, expected to be