8x8(EGHT) - 2022 Q2 - Quarterly Report

Forward-Looking Statements and Risk Factors This section outlines forward-looking statements and potential risks that could cause actual results to differ from projections - Statements regarding industry trends, customer numbers, revenue growth, expenses, hiring, and the impact of COVID-19 are considered forward-looking[7] - Actual results may differ due to factors such as customer adoption, economic downturns (including COVID-19), competitive dynamics, supply chain disruptions, intellectual property rights, customer churn rate, and the effectiveness of marketing investments[7] PART I. FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) This section presents unaudited condensed consolidated financial statements and detailed notes on key financial aspects Condensed Consolidated Balance Sheets The condensed consolidated balance sheets show a slight decrease in total assets and stockholders' equity, while total liabilities increased Condensed Consolidated Balance Sheet Highlights (Dollars in Thousands) | Metric | September 30, 2021 (unaudited) | March 31, 2021 (audited) | | :------------------------- | :----------------------------- | :----------------------- | | Cash and cash equivalents | $102,989 | $112,531 | | Total current assets | $272,875 | $276,533 | | Total assets | $672,842 | $678,409 | | Total current liabilities | $120,940 | $121,378 | | Total liabilities | $520,291 | $517,905 | | Total stockholders' equity | $152,551 | $160,504 | Condensed Consolidated Statements of Operations The statements of operations show increased total revenue and net loss for the periods presented Condensed Consolidated Statements of Operations Highlights (Dollars in Thousands, Except Per Share Data) | Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Six Months Ended Sep 30, 2021 | Six Months Ended Sep 30, 2020 | | :-------------------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Service revenue | $142,376 | $120,942 | $280,172 | $235,125 | | Other revenue | $9,181 | $8,191 | $19,712 | $15,815 | | Total revenue | $151,557 | $129,133 | $299,884 | $250,940 | | Loss from operations | $(37,157) | $(33,098) | $(75,984) | $(70,858) | | Net loss | $(42,324) | $(38,413) | $(86,230) | $(80,326) | | Net loss per share (Basic & Diluted) | $(0.38) | $(0.37) | $(0.78) | $(0.77) | Condensed Consolidated Statements of Comprehensive Loss The statements of comprehensive loss show net loss adjusted for other comprehensive income/loss, resulting in increased comprehensive loss Condensed Consolidated Statements of Comprehensive Loss Highlights (Dollars in Thousands) | Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Six Months Ended Sep 30, 2021 | Six Months Ended Sep 30, 2020 | | :-------------------------------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Net loss | $(42,324) | $(38,413) | $(86,230) | $(80,326) | | Unrealized (loss) gain on investments | $(15) | $(43) | $(48) | $379 | | Foreign currency translation adjustment | $(2,149) | $2,945 | $(1,866) | $3,830 | | Comprehensive loss | $(44,488) | $(35,511) | $(88,144) | $(76,117) | Condensed Consolidated Statements of Stockholders' Equity The statements of stockholders' equity detail changes in common stock, additional paid-in capital, and accumulated deficit Condensed Consolidated Statements of Stockholders' Equity Highlights (Dollars and Shares in Thousands) | Metric | Balance at March 31, 2021 | Balance at September 30, 2021 | | :-------------------------------------- | :------------------------ | :---------------------------- | | Common Shares | 109,135 | 113,416 | | Stock Amount | $109 | $113 | | Additional Paid-in Capital | $755,643 | $835,830 | | Accumulated Other Comprehensive Loss | $(4,193) | $(6,107) | | Accumulated Deficit | $(591,055) | $(677,285) | | Total Stockholders' Equity | $160,504 | $152,551 | - Stock-based compensation expense contributed significantly to the increase in Additional Paid-in Capital, totaling $36,508 thousand for the quarter ended June 30, 2021, and $33,483 thousand for the quarter ended September 30, 2021[20] Condensed Consolidated Statements of Cash Flows The statements of cash flows show a positive shift in operating activities and significant cash outflow from investing activities Condensed Consolidated Statements of Cash Flows Highlights (Dollars in Thousands) | Metric | Six Months Ended Sep 30, 2021 | Six Months Ended Sep 30, 2020 | | :---------------------------------------- | :---------------------------- | :---------------------------- | | Net cash provided by (used in) operating activities | $9,131 | $(13,068) | | Net cash used in investing activities | $(28,754) | $(11,466) | | Net cash provided by financing activities | $10,192 | $4,571 | | Net decrease in cash, cash equivalents, and restricted cash | $(9,542) | $(19,005) | | Cash, cash equivalents, and restricted cash at end of period | $111,630 | $137,406 | Notes to Unaudited Condensed Consolidated Financial Statements These notes provide detailed disclosures supporting the condensed consolidated financial statements, covering business and accounting policies Note 1. DESCRIPTION OF BUSINESS 8x8, Inc. is a leading SaaS provider of cloud communication solutions, primarily generating revenue from subscriptions and platform usage - 8x8, Inc. is a leading SaaS provider of contact center, voice, video, chat, and API solutions, powered by one global cloud communications platform[25] - A majority of all revenue is generated from communication services subscriptions and platform usage, complemented by sales of hardware and professional services[25] Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This note confirms adherence to U.S. GAAP and SEC regulations, with no material changes to accounting policies from the prior fiscal year - The condensed consolidated financial statements are unaudited and prepared in accordance with U.S. GAAP and SEC interim financial reporting regulations[26] - There were no material changes to significant accounting policies during the three and six months ended September 30, 2021[26] - The adoption of ASU 2019-12 (Income Taxes) in fiscal 2022 did not have a material impact, and the company is currently assessing the impact of ASU 2020-06 (Debt with Conversion and Other Options) for fiscal 2023[28][29] Note 3. REVENUE RECOGNITION This note details revenue disaggregation by region, contract balances, and remaining performance obligations totaling approximately $550.0 million Contract Balances (Dollars in Thousands) | Metric | September 30, 2021 | March 31, 2021 | | :-------------------------- | :----------------- | :------------- | | Accounts receivable, net | $51,178 | $51,150 | | Contract assets, current | $11,714 | $12,840 | | Contract assets, non-current| $17,045 | $17,987 | | Deferred revenue, current | $22,362 | $20,737 | | Deferred revenue, non-current| $2,296 | $2,999 | - Contract revenue from remaining performance obligations not yet recognized as of September 30, 2021, was approximately $550.0 million, with about 75% expected to be recognized over the next 36 months[32] Amortization of Deferred Sales Commission Costs (Dollars in Thousands) | Period | Amortization | | :----------------------------------- | :----------- | | Three months ended September 30, 2021 | $8,600 | | Six months ended September 30, 2021 | $16,900 | | Three months ended September 30, 2020 | $6,700 | | Six months ended September 30, 2020 | $12,800 | Note 4. FAIR VALUE MEASUREMENTS This note provides estimated fair values of cash, investments, and convertible senior notes, categorized by fair value hierarchy levels Estimated Fair Values of Financial Assets (September 30, 2021, Dollars in Thousands) | Asset Category | Amortized Costs | Gross Unrealized Gain | Gross Unrealized Loss | Estimated Fair Value | | :----------------------- | :-------------- | :-------------------- | :-------------------- | :------------------- | | Cash | $43,131 | — | — | $43,131 | | Money market funds | $58,458 | — | — | $58,458 | | Certificate of deposit | $8,641 | — | — | $8,641 | | Commercial paper | $27,412 | $1 | $(1) | $27,412 | | Corporate debt | $28,828 | $17 | $(5) | $28,840 | | Total assets | $166,470 | $18 | $(6) | $166,482 | - As of September 30, 2021, the estimated fair value of the Company's outstanding convertible senior notes was $407.9 million, categorized within Level 2 of the fair value hierarchy[35] Note 5. INTANGIBLE ASSETS AND GOODWILL This note provides carrying values of intangible assets and goodwill, detailing amortization, changes, and foreign currency adjustments Net Carrying Amount of Intangible Assets (Dollars in Thousands) | Asset Category | September 30, 2021 | March 31, 2021 | | :----------------------- | :----------------- | :------------- | | Developed technology | $10,392 | $12,502 | | Customer relationships | $4,188 | $4,628 | | Trade and domain names | — | — | | Total identifiable intangible assets | $14,580 | $17,130 | - During the six months ended September 30, 2021, the Company wrote off $6.7 million in developed technology, $5.5 million in customer relationships, and $0.9 million in trade and domain names that were fully amortized and no longer in use, with no net impact to financial statements[37] Goodwill Carrying Amount (Dollars in Thousands) | Metric | Amount | | :---------------------- | :----- | | Balance at March 31, 2021 | $131,520 | | Foreign currency translation adjustments | $(651) | | Balance at September 30, 2021 | $130,869 | Note 6. LEASES This note details operating leases, including right-of-use assets, lease liabilities, expense, and maturity schedule Operating Lease Information (Dollars in Thousands) | Metric | September 30, 2021 | March 31, 2021 | | :----------------------------------- | :----------------- | :------------- | | Operating lease, right-of-use assets | $62,379 | $66,664 | | Operating lease liabilities, current | $13,271 | $12,942 | | Operating lease liabilities, non-current | $77,156 | $82,456 | | Total operating lease liabilities | $90,427 | $95,398 | Operating Lease Expense and Cash Outflows (Dollars in Thousands) | Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Six Months Ended Sep 30, 2021 | Six Months Ended Sep 30, 2020 | | :----------------------------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Operating lease expense | $3,336 | $3,834 | $6,795 | $7,585 | | Cash outflows from operating leases | $4,254 | $2,100 | $8,454 | $4,200 | - As of September 30, 2021, the weighted average remaining lease term for operating leases was 8.0 years, with a weighted average discount rate of 4.0%[42] Note 7. COMMITMENTS AND CONTINGENCIES This note outlines legal proceedings, including a preliminary settlement in a wage and hour lawsuit, and discloses contingent tax liabilities - A preliminary settlement has been reached in the wage and hour class action and PAGA lawsuit filed by a former employee, with discovery stayed pending completion of the settlement[44][46] Contingent Indirect Tax Liabilities (Dollars in Thousands) | Date | Amount | | :----------------- | :----- | | September 30, 2021 | $2,500 | | March 31, 2021 | $3,100 | Note 8. CONVERTIBLE SENIOR NOTES AND CAPPED CALLS This note details the issuance of $362.5 million convertible senior notes, their conversion terms, and associated capped call transactions - The Company has $362.5 million aggregate principal amount of 0.50% convertible senior notes outstanding, due February 1, 2024[48] - Each $1,000 principal amount of notes is initially convertible into 38.9484 shares of common stock, equivalent to an initial conversion price of approximately $25.68 per share[49] Net Carrying Amount of Convertible Senior Notes (Dollars in Thousands) | Metric | September 30, 2021 | March 31, 2021 | | :------------------------- | :----------------- | :------------- | | Principal | $362,500 | $362,500 | | Unamortized debt discount | $(44,589) | $(53,323) | | Unamortized issuance costs | $(620) | $(742) | | Net carrying amount | $317,291 | $308,435 | - Capped call transactions were entered into to partially offset potential dilution from note conversions, covering approximately 14.1 million shares with an initial strike price of $25.68 and cap prices of $39.50 per share[55] Note 9. STOCK-BASED COMPENSATION This note details stock-based compensation expense across categories and provides activity summaries for options, RSUs, PSUs, and ESPP Stock-Based Compensation Expense (Dollars in Thousands) | Expense Category | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Six Months Ended Sep 30, 2021 | Six Months Ended Sep 30, 2020 | | :------------------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Cost of service revenue | $2,345 | $2,410 | $4,313 | $4,224 | | Cost of other revenue | $1,203 | $1,113 | $2,274 | $1,900 | | Research and development | $9,458 | $8,255 | $18,156 | $14,800 | | Sales and marketing | $12,724 | $7,054 | $27,050 | $12,793 | | General and administrative | $10,105 | $6,490 | $20,629 | $14,384 | | Total | $35,835 | $25,322 | $72,422 | $48,101 | - As of September 30, 2021, total unrecognized compensation cost related to RSUs was $138.7 million, for PSUs was $24.8 million, and for the ESPP was approximately $3.6 million[59][62][63] - The Company offered employees an opportunity to receive a portion of their fiscal 2022 base cash salary and/or cash bonus in common stock, with an estimated $4.5 million of unrecognized compensation cost related to this program as of September 30, 2021[64][67] Note 10. INCOME TAXES This note reports the company's negative effective tax rate, primarily due to a full valuation allowance against deferred tax assets Effective Tax Rate | Period | Effective Tax Rate | | :----------------------------------- | :----------------- | | Three months ended September 30, 2021 | (0.6)% | | Three months ended September 30, 2020 | (0.4)% | | Six months ended September 30, 2021 | (0.6)% | | Six months ended September 30, 2020 | (0.5)% | - The difference in the effective tax rate and the U.S. federal statutory rate is primarily due to the full valuation allowance maintained against the Company's deferred tax assets[69] Note 11. NET LOSS PER SHARE This note presents basic and diluted net loss per share, weighted-average common shares, and excluded anti-dilutive shares Net Loss Per Share (Dollars in Thousands, Except Per Share Data) | Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Six Months Ended Sep 30, 2021 | Six Months Ended Sep 30, 2020 | | :----------------------------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Net loss | $(42,324) | $(38,413) | $(86,230) | $(80,326) | | Weighted average common shares outstanding (Basic & Diluted) | 112,422 | 104,620 | 111,180 | 104,116 | | Net loss per share (Basic & Diluted) | $(0.38) | $(0.37) | $(0.78) | $(0.77) | Total Potential Anti-Dilutive Shares (Thousands) | Category | Three and Six Months Ended Sep 30, 2021 | Three and Six Months Ended Sep 30, 2020 | | :-------------------------------------- | :-------------------------------------- | :-------------------------------------- | | Stock options | 1,155 | 2,210 | | Restricted stock units | 9,821 | 11,472 | | Potential shares attributable to the ESPP | 567 | 529 | | Total potential anti-dilutive shares| 11,543 | 14,211 | Note 12. GEOGRAPHICAL INFORMATION This note disaggregates revenue and property and equipment by geographic area, showing significant international revenue growth Revenue by Geographic Area (Dollars in Thousands) | Region | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Six Months Ended Sep 30, 2021 | Six Months Ended Sep 30, 2020 | | :------------ | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | United States | $104,607 | $96,105 | $208,265 | $189,349 | | International | $46,950 | $33,028 | $91,619 | $61,591 | | Total revenue | $151,557 | $129,133 | $299,884 | $250,940 | Property and Equipment, Net by Geographic Area (Dollars in Thousands) | Region | September 30, 2021 | March 31, 2021 | | :------------ | :----------------- | :------------- | | United States | $82,265 | $87,945 | | International | $4,595 | $5,131 | | Total | $86,860 | $93,076 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on financial condition and results, discussing business, outlook, COVID-19 impacts, and key metrics BUSINESS OVERVIEW The company is a leading SaaS provider of cloud communication solutions, focusing on mid-market and enterprise segments - 8x8 is a leading SaaS provider of voice, video, chat, contact center, and API solutions powered by one global cloud communications platform[77] - The company has increased its focus on mid-market (customers generating $25K to $100K ARR) and enterprise (customers generating more than $100K ARR) customer categories[77] - Flagship service is 8x8 X Series, a suite of UCaaS and CCaaS solutions, and the company introduced eXperience Communications as a Service (XCaaS) for integrated UCaaS and CCaaS[77] SUMMARY AND OUTLOOK Service revenue grew 18% YoY in Q2 fiscal 2022, with total ARR reaching $553 million, driven by mid-market and enterprise growth - Service revenue grew approximately 18% year-over-year to $142 million in the second quarter of fiscal 2022[78] - Total Annualized Recurring Subscriptions and Usage (ARR) increased to $553 million in Q2 fiscal 2022, up from $467 million in the prior year, with mid-market and enterprise customers representing 70% of total ARR and growing 27% YoY[78] - Strategic focus areas include achieving improved operating efficiencies, delivering revenue growth, increasing spend discipline, and expanding business with mid-market and enterprise customers to drive profitability and operating cash flow improvement[78][79] IMPACTS OF COVID-19 The company acknowledges the unpredictable impact of COVID-19 on its business, operations, and financial results - The full extent of COVID-19's impact on business, operations, and financial results remains unpredictable due to evolving factors[80][82] - Measures such as remote work and curtailed travel have been implemented to protect employee health and safety[80] KEY BUSINESS METRIC This section defines Annualized Recurring Subscriptions and Usage (ARR) as a key metric for evaluating operations and future revenues - Annualized Recurring Subscriptions and Usage (ARR) is defined as the sum of the most recent month of recurring subscription amounts and platform usage charges for CPaaS customers (with a minimum billing threshold for at least six consecutive months), multiplied by 12[84] - Management uses ARR to evaluate ongoing operations, allocate resources, and drive financial performance, but cautions that there are no uniform standards for its calculation[84] COMPONENTS OF RESULTS OF OPERATIONS This section outlines components contributing to results, including revenue, costs, operating expenses, and income taxes Service Revenue Service revenue is primarily from subscriptions and platform usage, with growth expected through sales, expansion, and innovation - Service revenue consists of communication services subscriptions, platform usage revenue, and related fees from UCaaS, CCaaS, XCaaS, and CPaaS offerings[85] - Growth in service revenue is expected through increased sales and marketing, geographic expansion, product and technology innovation, and strategic acquisitions[85] Other Revenue Other revenue is from professional services and sales/rentals of IP telephones, varying with customer hardware and implementation choices - Other revenue includes professional services for solution deployment and revenues from sales and rentals of IP telephones[86] Cost of Service Revenue Cost of service revenue includes network operations, technology licenses, software amortization, third-party services, and allocated overhead - Costs include network operations, technology licenses, amortization of capitalized internal-use software, third-party communication services, outsourced customer service, and allocated overhead[87] Cost of Other Revenue Cost of other revenue includes direct and indirect expenses for IP telephones, logistics, personnel, and professional services - Costs include direct and indirect expenses for IP telephone purchasing, scheduling, shipping, handling, personnel, and professional services for deployment, plus allocated IT and facilities costs[88] Research and Development Research and development expenses primarily cover personnel, third-party development, software, equipment, and allocated IT/facilities costs - R&D expenses primarily cover personnel, third-party development, software and equipment for product/platform development, and allocated IT/facilities costs[89] Sales and Marketing Sales and marketing expenses include personnel, commissions, trade shows, advertising, demand generation, and allocated IT/facilities costs - Sales and marketing expenses include personnel, sales commissions (internal and channel), trade shows, advertising, demand generation, promotional expenses, and allocated IT/facilities costs[90] General and Administrative General and administrative expenses primarily consist of personnel, professional services, corporate administrative costs, and tax/regulatory fees - G&A expenses primarily include personnel, professional services, corporate administrative costs, tax and regulatory fees, and allocated IT/facilities costs[91] Other Expense, Net Other expense, net, is mainly interest expense from convertible notes, offset by investment income and foreign exchange gains/losses - Other expense, net, primarily consists of interest expense related to convertible notes, offset by income from cash, cash equivalents, and investments, and foreign exchange gains/losses[93] Provision for Income Taxes Provision for income taxes includes foreign and state minimum taxes, with a full valuation allowance against U.S. deferred tax assets - Provision for income taxes primarily includes foreign income taxes and state minimum taxes in the U.S[94] - The company maintains a full valuation allowance against its U.S. deferred tax assets, including federal and state net operating loss carryforwards[94] RESULTS OF OPERATIONS This section analyzes financial performance, highlighting changes in revenue, costs, operating expenses, and other net expenses Revenue Service revenue increased due to customer base expansion and CPaaS usage, while other revenue grew from professional services Revenue Performance (Dollars in Thousands) | Revenue Type | Three Months Ended Sep 30, 2021 | YoY Change (%) | Six Months Ended Sep 30, 2021 | YoY Change (%) | | :------------ | :------------------------------ | :------------- | :---------------------------- | :------------- | | Service revenue | $142,376 | 17.7% | $280,172 | 19.2% | | Other revenue | $9,181 | 12.1% | $19,712 | 24.6% | | Total revenue | $151,557 | 17.4% | $299,884 | 19.5% | - Service revenue growth was primarily driven by a net increase in the customer base, expanded offerings to existing customers, and growth in CPaaS product usage[96] - Other revenue increased due to higher professional services revenue, partially offset by a shift towards hardware rental programs and soft phone usage[97] Cost of Revenue Cost of service revenue increased in dollars but decreased as a percentage, driven by infrastructure costs and software amortization Cost of Service Revenue Performance (Dollars in Thousands) | Metric | Three Months Ended Sep 30, 2021 | YoY Change (%) | % of Service Revenue (2021) | % of Service Revenue (2020) | | :-------------------------- | :------------------------------ | :------------- | :-------------------------- | :-------------------------- | | Cost of service revenue | $47,198 | 5.3% | 33.2% | 37.0% | - Cost of service revenue increased due to higher communication infrastructure costs ($3.8 million for 3 months, $9.6 million for 6 months) and amortization of capitalized internal-use software ($0.4 million for 3 months, $1.0 million for 6 months), partially offset by decreases in employee and consulting related expenditures[99] Cost of Other Revenue Performance (Dollars in Thousands) | Metric | Three Months Ended Sep 30, 2021 | YoY Change (%) | % of Other Revenue (2021) | % of Other Revenue (2020) | | :-------------------------- | :------------------------------ | :------------- | :------------------------ | :------------------------ | | Cost of other revenue | $12,269 | 4.9% | 133.6% | 142.8% | - Cost of other revenue increased due to higher hardware shipment volume but decreased as a percentage of other revenue due to improved pricing and increased hardware rental revenue[100] Operating Expenses Operating expenses increased across all categories due to reduced software capitalization, higher employee costs, and stock-based compensation Operating Expenses Performance (Dollars in Thousands) | Expense Category | Three Months Ended Sep 30, 2021 | YoY Change (%) | Six Months Ended Sep 30, 2021 | YoY Change (%) | | :------------------------- | :------------------------------ | :------------- | :---------------------------- | :------------- | | Research and development | $28,498 | 32.1% | $53,890 | 25.1% | | Sales and marketing | $76,726 | 25.0% | $152,641 | 25.6% | | General and administrative | $24,023 | 5.5% | $50,114 | 3.2% | - R&D expenses increased primarily due to a $3.5 million reduction in capitalized internal-use software costs, $2.3 million in employee/consulting expenditures, $1.2 million in stock-based compensation, and $0.8 million in public cloud expenses for the three months ended September 30, 2021[102] - Sales and marketing expenses increased due to $6.9 million in sales commissions and $5.7 million in stock-based compensation for the three months ended September 30, 2021[106] - G&A expenses increased by $3.6 million in stock-based compensation for the three months ended September 30, 2021, partially offset by decreases in legal/regulatory costs and credit loss allowances[109] Other Expense, Net Other expense, net, decreased due to foreign exchange fluctuations but is expected to remain a net expense until fiscal 2024 Other Expense, Net (Dollars in Thousands) | Metric | Three Months Ended Sep 30, 2021 | YoY Change (%) | Six Months Ended Sep 30, 2021 | YoY Change (%) | | :---------------- | :------------------------------ | :------------- | :---------------------------- | :------------- | | Other expense, net | $(4,934) | (4.7)% | $(9,757) | 7.2% | - The change in Other expense, net, was primarily due to fluctuations in foreign exchange rates[110] - Other expense, net, is expected to remain in a net expense position until fiscal 2024 due to interest expense and amortization of debt discount and issuance costs related to convertible senior notes[110] Provision for Income Taxes The provision for income taxes increased for both periods, with no material changes anticipated in the foreseeable future Provision for Income Taxes (Dollars in Thousands) | Metric | Three Months Ended Sep 30, 2021 | YoY Change (%) | Six Months Ended Sep 30, 2021 | YoY Change (%) | | :-------------------------- | :------------------------------ | :------------- | :---------------------------- | :------------- | | Provision for income taxes | $233 | 70.1% | $489 | 34.0% | - No material changes to the provision for income taxes are anticipated for the foreseeable future[111] Liquidity and Capital Resources As of September 30, 2021, the company had $157.8 million in cash and investments, with operating activities generating $9.1 million - As of September 30, 2021, the company had $157.8 million in cash, cash equivalents, and investments, plus $8.6 million in restricted cash[113] Cash Flow Activities (Six Months Ended September 30, Dollars in Thousands) | Activity | 2021 | 2020 | | :------------------------------------------ | :---------- | :----------- | | Net cash provided by (used in) operating activities | $9,131 | $(13,068) | | Net cash used in investing activities | $(28,754) | $(11,466) | | Net cash provided by financing activities | $10,192 | $4,571 | - The company expects existing cash, cash equivalents, investment balances, and anticipated cash flows from operations to be sufficient to meet working capital and expenditure requirements for the next 12 months[114] CRITICAL ACCOUNTING POLICIES & ESTIMATES No significant changes occurred in critical accounting policies and estimates from those disclosed in the fiscal 2021 Form 10-K - No significant changes occurred in critical accounting policies and estimates during the three months ended September 30, 2021, from those disclosed in the fiscal 2021 Form 10-K[117] NEW ACCOUNTING PRONOUNCEMENTS For details on accounting pronouncements, refer to Note 2, Summary of Significant Accounting Policies - For details on recently adopted and not yet adopted accounting pronouncements, refer to Note 2, Summary of Significant Accounting Policies[118] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section discusses market risks, including interest rate and foreign currency exchange risks, with no material impact from a 10% rate change - As of September 30, 2021, the company held $166.5 million in cash, cash equivalents, restricted cash, and investments, primarily in money market funds, U.S. treasury, commercial paper, and corporate bonds[119] - 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[119] - 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, but a hypothetical 10% decrease in foreign currencies against the U.S. dollar would not result in a material foreign currency loss[120] Item 4. Controls and Procedures The company's disclosure controls were effective as of September 30, 2021, with no material changes in internal control - The company's disclosure controls and procedures were effective as of September 30, 2021, based on evaluation by the CEO and CFO[121] - Management acknowledges that no control system can prevent all errors and fraud, providing only reasonable assurance[123] - There were no material changes in internal control over financial reporting during the second quarter of fiscal year 2022[124] PART II. OTHER INFORMATION Item 1. Legal Proceedings Information on legal proceedings is incorporated by reference from Note 7, Commitments and Contingencies - Information on legal proceedings is incorporated by reference from Note 7, Commitments and Contingencies[126] Item 1A. Risk Factors No material changes from the risk factors previously disclosed in the Annual Report on Form 10-K for fiscal year ended March 31, 2021 - No material changes from the risk factors previously disclosed in the Annual Report on Form 10-K for the fiscal year ended March 31, 2021[126] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities and use of proceeds to report for the period - No unregistered sales of equity securities and use of proceeds to report[126] Item 3. Defaults Upon Senior Securities No defaults upon senior securities to report during the reporting period - No defaults upon senior securities to report[126] Item 4. Mine Safety Disclosures No mine safety disclosures required for the company - No mine safety disclosures to report[126] Item 5. Other Information No other information required to be disclosed under this item - No other information to report[126] Item 6. Exhibits This section lists all exhibits filed as part of the Form 10-Q, including corporate governance documents and certifications - Exhibits include the Restated Certificate of Incorporation, Amended and Restated By-Laws, Indenture for convertible notes, CEO and CFO certifications (pursuant to Sarbanes-Oxley Act), and iXBRL formatted financial statements[128] Signature This section contains the official signature block, confirming the due authorization and filing of the report by the registrant - The report was signed by Samuel Wilson, Chief Financial Officer, on November 3, 2021, confirming its submission pursuant to the Securities Exchange Act of 1934[133]