8x8(EGHT) - 2024 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for the quarter ended June 30, 2023, detailing the company's financial position, performance, and cash flows Condensed Consolidated Financial Statements The company's financial statements show a net loss of $15.3 million on total revenues of $183.3 million for the quarter, an improvement from the prior year, alongside increased operating cash flow Condensed Consolidated Statements of Operations (in thousands) | | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | | :--- | :--- | :--- | | Total revenue | $183,287 | $187,620 | | Total operating expenses | $184,697 | $214,374 | | Loss from operations | $(1,410) | $(26,754) | | Other (expense) income, net | $(12,473) | $1,116 | | Net loss | $(15,327) | $(26,043) | | Net loss per share (Basic and diluted) | $(0.13) | $(0.22) | Condensed Consolidated Balance Sheet Highlights (in thousands) | | June 30, 2023 | March 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $122,229 | $111,400 | | Total current assets | $274,468 | $273,124 | | Total assets | $828,463 | $841,810 | | Total current liabilities | $236,317 | $229,887 | | Total liabilities | $723,594 | $741,904 | | Total stockholders' equity | $104,869 | $99,906 | Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $26,473 | $5,841 | | Net cash provided by (used in) investing activities | $6,792 | $(5,841) | | Net cash provided by (used in) financing activities | $(25,000) | $65 | | Net increase (decrease) in cash | $10,483 | $(6,620) | Notes to Financial Statements The notes provide detailed information on accounting policies, revenue recognition, fair value measurements, debt structure, and stock-based compensation expenses - As of June 30, 2023, the company had approximately $790.0 million in remaining performance obligations, with 85% expected to be recognized as revenue over the next 24 months[40] Debt Principal Outstanding as of June 30, 2023 (in millions) | Debt Instrument | Principal Amount | | :--- | :--- | | 0.50% Convertible Senior Notes due 2024 | $63.3 | | Senior Secured Term Loan due 2027 | $225.0 | | 4.00% Convertible Senior Notes due 2028 | $201.9 | Stock-Based Compensation Expense (in thousands) | | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | | :--- | :--- | :--- | | Cost of service revenue | $1,686 | $2,664 | | Research and development | $7,632 | $8,044 | | Sales and marketing | $4,649 | $8,107 | | General and administrative | $3,834 | $7,888 | | Total | $18,195 | $27,814 | - During the quarter, the company entered into a new three-year noncancellable hosting services contract for $28.1 million[55] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's strategic focus on mid-market and enterprise customers, alongside a detailed analysis of financial performance, including revenue trends, operating expenses, and liquidity Business Overview and Strategy The company's strategy centers on expanding its mid-market and enterprise customer base through its integrated XCaaS platform, aiming for revenue growth, profitability, and positive cash flow - The company's core offering is the 8x8 XCaaS platform, which integrates unified communications (UCaaS), contact center (CCaaS), and communication APIs (CPaaS) into a single cloud-based solution[87] - Strategic focus has shifted towards mid-market, enterprise, and public sector customers (typically 500 to 10,000 employees) who are more likely to adopt multiple services from the unified platform[92] - Key strategic initiatives include reducing service delivery costs, improving sales efficiency by focusing on larger customers, expanding partner programs, and investing in R&D, especially for contact center and AI capabilities[95][96] Key Business Metrics Management's primary metric, Annualized Recurring Revenue (ARR), reached $703.0 million, with mid-market and enterprise customers contributing 76% of the total Annualized Recurring Revenue (ARR) as of June 30, 2023 | Metric | Value | YoY Change | | :--- | :--- | :--- | | Total ARR | $703.0 million | +2% | | ARR from Mid-market & Enterprise | 76% of Total | +1% | | ARR from Enterprise (> $100k) | 58% of Total | N/A | | ARR from Small Business (< $25k) | 24% of Total | N/A | Results of Operations (Q1 FY2024 vs Q1 FY2023) This section details the company's financial results, showing a decrease in total revenue but significant improvements in operating expenses, leading to a reduced loss from operations Revenue Comparison (in thousands) | Revenue Type | Q1 2024 | Q1 2023 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Service revenue | $175,238 | $179,161 | $(3,923) | (2.2)% | | Other revenue | $8,049 | $8,459 | $(410) | (4.8)% | - The decrease in service revenue was primarily due to lower usage revenue from SMS customers in Southeast Asia[114] Operating Expense Comparison (in thousands) | Expense Category | Q1 2024 | Q1 2023 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Cost of service revenue | $46,276 | $53,547 | $(7,271) | (13.6)% | | Sales and marketing | $68,505 | $83,527 | $(15,022) | (18.0)% | | General and administrative | $26,226 | $29,219 | $(2,993) | (10.2)% | - The significant decrease in Other (expense) income, net from $1.1 million income to $12.5 million expense was primarily due to an $8.5 million increase in interest expense on the variable-rate term loan, $3.3 million in foreign exchange losses, and a $1.8 million loss on debt extinguishment[122] Liquidity and Capital Resources The company's liquidity position is strong, with $138.2 million in cash and investments, supported by a significant increase in net cash provided by operating activities - As of June 30, 2023, the company held $138.2 million in cash, cash equivalents, and investments[125] Cash Flow from Operations Comparison (in millions) | Period | Net Cash Provided by Operating Activities | | :--- | :--- | | Three months ended June 30, 2023 | $26.5 | | Three months ended June 30, 2022 | $5.8 | - During the quarter, the company made a voluntary repayment of $25.0 million on its term loan[133] Quantitative and Qualitative Disclosures About Market Risk The company reports no material changes in its exposures to market risk, including interest rate and foreign currency exchange risks, since the prior fiscal year-end - There have been no material changes in the company's exposures to market risk, including interest rate and foreign currency exchange risks, since March 31, 2023[138] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation by management, the company's disclosure controls and procedures were deemed effective as of June 30, 2023[139] - No changes occurred in the company's internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[140] PART II. OTHER INFORMATION Legal Proceedings and Risk Factors The company refers to Note 5 for legal proceedings and reports no material changes to previously disclosed risk factors - Information regarding legal proceedings is incorporated by reference from Note 5 of the financial statements[143] - There have been no material changes in the risk factors previously disclosed in the company's Form 10-K for the fiscal year ended March 31, 2023[144] Other Information (Items 2-6) This section covers standard disclosures, including no unregistered equity sales, no defaults on senior securities, and no changes in Rule 10b5-1 trading arrangements by directors or officers - The company reported no unregistered sales of equity securities, no defaults upon senior securities, and no applicable mine safety disclosures for the period[145][146][147] - No directors or officers adopted or terminated a Rule 10b5-1 trading arrangement during the reported quarterly period[148]