8x8(EGHT) - 2022 Q1 - Quarterly Report

Forward-Looking Statements and Risk Factors Forward-Looking Statements and Risk Factors Summary 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] - 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] PART I. FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) Unaudited condensed consolidated financial statements for Q2 2021 are presented, detailing financial position, performance, and cash flows Condensed Consolidated Balance Sheets 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 | $112,531 | Condensed Consolidated Statements of Operations For the three months ended June 30, 2021, the company reported increased total revenue but also a higher net loss compared to the same period in 2020, primarily driven by increased operating expenses | Metric | Three Months Ended June 30, 2021 ($ 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) | $(0.40) | Condensed Consolidated Statements of Comprehensive Loss The comprehensive loss for the three months ended June 30, 2021, was slightly higher than the net loss, reflecting minor impacts from unrealized investment losses and foreign currency translation adjustments | Metric | Three Months Ended June 30, 2021 ($ 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) | $(40,606) | Condensed Consolidated Statements of Stockholders' Equity Stockholders' equity decreased from March 31, 2021, to June 30, 2021, primarily due to the net loss, partially offset by stock-based compensation expense and common stock issuance under stock plans | Metric | March 31, 2021 ($ 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 | $36,508 | Condensed Consolidated Statements of Cash Flows The company generated positive cash flow from operating activities for the three months ended June 30, 2021, a significant improvement from the prior year, while investing activities continued to use cash, and financing activities provided a modest cash inflow | Metric | Three Months Ended June 30, 2021 ($ 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 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 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] - A majority of all revenue is generated from communication services subscriptions and platform usage, with additional revenue from hardware sales and professional services[24] 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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] - Management makes estimates and assumptions affecting reported amounts, including for credit losses, goodwill impairment, capitalized software, and stock-based compensation[26] - 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][28] 3. REVENUE RECOGNITION 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] - 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] 4. FAIR VALUE MEASUREMENTS 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] 5. INTANGIBLE ASSETS AND GOODWILL 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 | $17,130 | - The weighted average remaining useful life for developed technology is 4.4 years and for customer relationships is 5.0 years as of June 30, 2021[36] | Fiscal Year | Expected Future Amortization Expense ($ 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 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] 7. COMMITMENTS AND CONTINGENCIES 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][46] - 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] 8. CONVERTIBLE SENIOR NOTES AND CAPPED CALLS 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] - The notes are convertible into common stock at an initial conversion price of approximately $25.68 per share, subject to certain conditions, and the company intends to settle the principal in cash upon conversion[49][51] | Metric | June 30, 2021 ($ 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] 9. STOCK-BASED COMPENSATION 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][63] 10. INCOME TAXES 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] - 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] 11. NET LOSS PER SHARE 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) | $(0.40) | | Potentially Dilutive Common Shares (thousands) | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | | :--------------------------------------------- | :------------------------------- | :------------------------------- | | Stock options | 1,413 | 2,259 | | Restricted stock units | 12,483 | 9,443 | | Potential shares attributable to the ESPP | 444 | 582 | | Total potential anti-dilutive shares | 14,340 | 12,284 | 12. GEOGRAPHICAL INFORMATION International revenue grew significantly, contributing to the overall revenue increase, while property and equipment remained predominantly in the United States | Metric | Three Months Ended June 30, 2021 ($ 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 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 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] - The company focuses on mid-market ($25K-$100K ARR) and enterprise (>$100K ARR) customer categories[74] - Flagship services include the 8x8 X Series (UCaaS and CCaaS solutions) and eXperience Communications as a Service (XCaaS), delivered through a single platform[74] SUMMARY AND OUTLOOK 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] - 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] - 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][76] IMPACTS OF COVID-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][79] - 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][79] KEY BUSINESS METRIC 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] - 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] COMPONENTS OF RESULTS OF OPERATIONS 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] - Other revenue consists of professional services and sales/rentals of IP telephones[83] - 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][85][86][87][88] RESULTS OF OPERATIONS 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 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 | $26,520 | 21.8% | - Service revenue growth was primarily driven by a net increase in the customer base, expanded offerings to existing customers, and growth in CPaaS usage, particularly in the APAC region[93] - Other revenue increased due to higher professional services revenue from overall business growth, partially offset by a shift towards hardware rental and soft phone usage[94] Cost of Revenue Cost of service revenue increased in absolute dollars but decreased as a percentage of service revenue, driven by higher communication infrastructure costs and software amortization. Cost of other revenue increased due to higher hardware shipment volume but improved as a percentage of other revenue due to better pricing and rental revenue | Cost Type | Three Months Ended June 30, 2021 ($ 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] - 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] Operating Expenses 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 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 $0.5 million in public cloud expenses[98] Sales and marketing Sales and marketing expenses increased by 26.2% year-over-year, driven by higher stock-based compensation and internal/external sales commissions, as the company continues to invest in customer acquisition and brand awareness | Metric | Three Months Ended June 30, 2021 ($ 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 $6.8 million in internal and external sales commissions[99] General and administrative General and administrative expenses increased slightly by 1.2% year-over-year, primarily due to higher stock-based compensation and contract termination costs, partially offset by lower legal and regulatory costs and credit loss allowances. The company expects this expense as a percentage of revenue to decline over time | Metric | Three Months Ended June 30, 2021 ($ 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 $0.8 million in contract termination costs, partially offset by decreases in legal/regulatory costs and credit loss allowances[101] Other expense, net Other expense, net, increased primarily due to fluctuations in foreign exchange rates and is expected to remain in a net expense position due to interest and amortization related to convertible senior notes | Metric | Three Months Ended June 30, 2021 ($ in thousands) | Three Months Ended June 30, 2020 ($ in thousands) | Change ($ in thousands) | % Change | | :----------------- | :-------------------------------- | :-------------------------------- | :---------------------- | :------- | | Other expense, net | $4,823 | $3,925 | $898 | 22.9% | | % of total revenue | 3.3% | 3.2% | | | - The increase in Other expense, net, was primarily due to increased expenses related to fluctuations in foreign exchange rates[102] Provision for income taxes The provision for income taxes remained relatively stable, with no material changes anticipated for the foreseeable future | Metric | Three Months Ended June 30, 2021 ($ 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 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] - 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] - 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] Period-over-Period Changes 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] - Investing activities primarily used cash for capitalized internal-use software development costs ($6.5 million) and net purchases of investments ($3.7 million)[107] CRITICAL ACCOUNTING POLICIES & ESTIMATES 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] NEW ACCOUNTING PRONOUNCEMENTS 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] Item 3. Quantitative and Qualitative Disclosures About Market Risk 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 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] - 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] - 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][112] Foreign Currency Exchange Risk 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] - 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] - 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] Item 4. Controls and Procedures 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 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] Limitations on the Effectiveness of Controls 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] - A control system can provide only reasonable, not absolute, assurance and is subject to inherent limitations and resource constraints[115] Changes in Internal Control over Financial Reporting 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] PART II. OTHER INFORMATION Item 1. Legal Proceedings 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] Item 1A. Risk Factors 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] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities or use of proceeds during the period - None[118] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities during the period - None[118] Item 4. Mine Safety Disclosures The company reported no mine safety disclosures during the period - None[118] Item 5. Other Information The company reported no other information required to be disclosed under this item - None[118] Item 6. Exhibits 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] Signature Signature Details 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]