UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


			FORM			10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, ~~2021~~2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________to _________

Commission file number 001-38312

8x8, INC.

(Exact name of Registrant as Specified in its Charter)


Delaware			77-0142404
(State or Other Jurisdiction of Incorporation or Organization)			(I.R.S. Employer Identification Number)

675 Creekside Way

Campbell, CA 95008

(Address of principal executive offices)

(408) 727-1885

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
COMMON STOCK, PAR VALUE $.001 PER SHARE	EGHT	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of the Registrant's Common Stock outstanding as of ~~August 2, 2021~~July 25, 2022 was ~~112,033,014.~~119,964,673.

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8X8, ~~INC~~INC.

INDEX TO QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, ~~2021~~2022


			Page
Forward-Looking Statements and Risk Factors			2
PART I. FINANCIAL INFORMATION			34
Item 1. Financial Statements (unaudited)::			34
Condensed Consolidated Balance Sheets			34
Condensed Consolidated Statements of Operations			45
Condensed Consolidated Statements of Comprehensive Loss			56
Condensed Consolidated Statements of Stockholders' Equity			67
Condensed Consolidated Statements of Cash Flows			78
Notes to Unaudited Condensed Consolidated Financial Statements			810
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			1722
Item 3. Quantitative and Qualitative Disclosures About Market Risk			2327
Item 4. Controls and Procedures			2428
PART II. OTHER INFORMATION			2528
Item 1. Legal Proceedings			2528
Item 1A. Risk Factors			2528
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			2528
Item 3. Defaults Upon Senior Securities			2529
Item 4. Mine Safety Disclosures			2529
Item 5. Other Information			2529
Item 6. Exhibits			263 0
Signature			2731

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Forward-Looking Statements and Risk Factors

Statements contained in this quarterly report on Form 10-Q, or ~~Quarterly Report,~~this "Quarterly Report", regarding our expectations, beliefs, estimates, intentions or strategies are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 ( the "Securities Act") and Section 21E of the Securities Exchange Act of ~~1934.~~1934, as amended (the "Exchange Act"). Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. For example, words such as "may," "will," "should," "estimates," "predicts," "potential," "continue," "strategy," "believes," "anticipates," "plans," "expects," "intends," and similar expressions are intended to identify forward-looking statements. These forward-looking statements include, but are not limited to, statements regarding: industry trends; our number of customers; ~~average annual~~ service ~~revenue per customer;~~revenue; cost of service revenue; research and development expenses; whether we will increase research and development spending relative to fiscal 2022; reduce unit costs and improve gross profit margin, operating margin or drive sustained growth and increasing profitability and cash flow; hiring of employees; sales and marketing expenses; and general and administrative expenses in future periods; and the impact of the COVID-19 pandemic. You should not place undue reliance on these forward-looking statements. Actual results and trends may differ materially from historical results and those projected in any such forward-looking statements depending on a variety of factors. These factors include, but are not limited to:

•the impact of economic downturns on us and our customers, including the impacts of the COVID-19 pandemic;

•the impact of cost increases and general inflationary pressure on our operating expenses, including for bandwidth and labor;

•customer cancellations and rate of customer churn;

•the impact of Russia’s invasion of Ukraine and any macro-economic impact that may have;

•customer acceptance and demand for our new and existing cloud communication and collaboration services and features, including voice, contact center, video, messaging, and communication application programming interfaces ("APIs");

•competitive market pressures, and any changes in the competitive dynamics of the markets in which we compete;

•the quality and reliability of our services;

•our ability to scale our business;

•customer acquisition costs;

•our reliance on a network of channel partners to provide substantial new customer demand;

•timing and extent of improvements in operating results from increased spending in marketing, sales, and research and development;

•the amount and timing of costs associated with recruiting, training, and integrating new employees and retaining existing employees;

•our reliance on infrastructure of third-party network ~~services~~service providers;

•risk of failure in our physical infrastructure;

•risk of defects or bugs in our software;

•risk of cybersecurity breaches;

•our ability to maintain the compatibility of our software with third-party applications and mobile platforms;

•continued compliance with industry standards and regulatory and privacy requirements, globally;

•introduction and adoption of our cloud software solutions in markets outside of the United States;

•risks that any reduction in spending may not achieve the desired result or may result in a reduction in revenue;

•risks relating to the acquisition and integration of businesses we have acquired or may acquire in the ~~future;~~future, including most recently, Fuze, Inc.;

•risks related to our senior convertible notes and the related capped call ~~transactions;~~transactions, including the impact any refinancing thereof could have on our stock price; and

•potential future intellectual property infringement claims and other litigation that could adversely impact our business and operating results.

Please refer to the "Risk Factors" section of our annual report on Form 10-K for the fiscal year ended March 31, ~~2021,~~2022 (the "Form 10-K"), as modified by the "Risk Factors" section of this Quarterly Report, and subsequent Securities and Exchange Commission ("SEC") filings for additional factors that could materially affect our financial performance. All forward-looking statements included in this Quarterly Report are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements. Readers are urged to carefully review and consider the various disclosures made in this Quarterly Report, which attempts to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations, and prospects.

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Our fiscal year ends on March 31 of each calendar year. Each reference to a fiscal year in this Quarterly Report refers to the fiscal year ended March 31 of the calendar year indicated (for example, fiscal ~~2022~~2023 refers to the fiscal year ~~ending on~~ended March 31, ~~2022)~~2023). Unless the context requires otherwise, references to "we," "us," "our," ~~"8x8"~~"8x8," and the "Company" refer to 8x8, Inc. and its consolidated subsidiaries.

All dollar amounts within this Quarterly Report are in thousands of ~~U.S.~~United States Dollars ("~~dollars"~~Dollars") unless otherwise noted.

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PART I. ~~FINANCIAL INFORMATION~~Financial Information

ITEM 1. ~~FINANCIAL STATEMENTS~~Financial Statements

8X8, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(~~Dollars in~~In thousands)

June 30, 2021 March 31, 2021
(unaudited) (audited)
ASSETS
Current assets:
Cash and cash equivalents $ 109,288 $ 112,531
Restricted cash, current 8,179 8,179
Short-term investments 31,231 40,337
Accounts receivable, net 49,755 51,150
Deferred sales commission costs, current 31,711 30,241
Other current assets 36,066 34,095
Total current assets 266,230 276,533
Property and equipment, net 90,776 93,076
Operating lease, right-of-use assets 63,402 66,664
Intangible assets, net 15,845 17,130
Goodwill 131,599 131,520
Restricted cash, non-current 462 462
Long-term investments 12,712 0
Deferred sales commission costs, non-current 74,394 72,427
Other assets 20,238 20,597
Total assets $ 675,658 $ 678,409
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 33,233 $ 31,236
Accrued compensation 27,876 29,879
Accrued taxes 11,321 12,129
Operating lease liabilities, current 12,792 12,942
Deferred revenue, current 21,985 20,737
Other accrued liabilities 13,995 14,455
Total current liabilities 121,202 121,378
Operating lease liabilities, non-current 79,403 82,456
Convertible senior notes, net 312,828 308,435
Other liabilities, non-current 5,429 5,636
Total liabilities 518,862 517,905
Commitments and contingencies (Note 7) 0 0
Stockholders' equity:
Common stock 111 109
Additional paid-in capital 795,589 755,643
Accumulated other comprehensive loss (3,943) (4,193)
Accumulated deficit (634,961) (591,055)
Total stockholders' equity 156,796 160,504
Total liabilities and stockholders' equity $ 675,658 $ 678,409


	June 30, 2022		March 31, 2022
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	92,686	$	91,205
Restricted cash, current	590		8,691
Short-term investments	48,945		44,845
Accounts receivable, net	55,441		57,400
Deferred sales commission costs, current	36,510		35,482
Other current assets	38,545		37,999
Total current assets	272,717		275,622
Property and equipment, net	73,876		79,016
Operating lease, right-of-use assets	59,859		63,415
Intangible assets, net	122,737		128,213
Goodwill	265,029		266,867
Restricted cash, non-current	818		818
Long-term investments	—		2,671
Deferred sales commission costs, non-current	76,083		75,668
Other assets, non-current	18,028		17,978
Total assets	$	889,147	$	910,268

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	42,584	$	49,721
Accrued compensation	33,713		36,319
Accrued taxes	31,864		32,573
Operating lease liabilities, current	14,424		15,485
Deferred revenue, current	34,064		34,262
Other accrued liabilities	18,767		23,167
Total current liabilities	175,416		191,527
Operating lease liabilities, non-current	71,806		74,518
Convertible senior notes, net	494,444		447,452
Deferred revenue, non-current	11,023		11,430
Other liabilities, non-current	2,936		2,975
Total liabilities	755,625		727,902
Commitments and contingencies (Note 6)	0		0
Stockholders' equity:
Preferred stock	—		—
Common stock	120		118
Additional paid-in capital	895,602		956,599
Accumulated other comprehensive loss	(16,391)		(7,913)
Accumulated deficit	(745,809)		(766,438)
Total stockholders' equity	133,522		182,366
Total liabilities and stockholders' equity	$	889,147	$	910,268

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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8X8, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, ~~dollars and shares~~ in thousands except per share amounts)


		Three Months Ended June 30,			Three Months Ended June 30,
			2021			2020			2022		2021
Service revenue	Service revenue		$	137,796		$	114,183	Service revenue	$	179,161	137,796
Other revenue	Other revenue		10,531			7,624		Other revenue	8,459		10,531
Total revenue	Total revenue		148,327			121,807		Total revenue	187,620		148,327
Operating expenses:	Operating expenses:							Operating expenses:
Cost of service revenue	Cost of service revenue		46,010			40,996		Cost of service revenue	53,547		46,010
Cost of other revenue	Cost of other revenue		13,746			11,137		Cost of other revenue	13,126		13,746
Research and development	Research and development		25,392			21,494		Research and development	34,955		25,392
Sales and marketing	Sales and marketing		75,915			60,150		Sales and marketing	83,527		75,915
General and administrative	General and administrative		26,091			25,790		General and administrative	29,219		26,091
Total operating expenses	Total operating expenses		187,154			159,567		Total operating expenses	214,374		187,154
Loss from operations	Loss from operations		(38,827)			(37,760)		Loss from operations	(26,754)		(38,827)
Other expense, net			(4,823)			(3,925)
Other income (expense), net								Other income (expense), net	1,116		(4,823)
Loss before provision for income taxes	Loss before provision for income taxes		(43,650)			(41,685)		Loss before provision for income taxes	(25,638)		(43,650)
Provision for income taxes	Provision for income taxes		256			228		Provision for income taxes	405		256
Net loss	Net loss		$	(43,906)		$	(41,913)	Net loss	$	(26,043)	$	(43,906)

Net loss per share:	Net loss per share:							Net loss per share:
Basic and diluted	Basic and diluted		$	(0.40)		$	(0.40)	Basic and diluted	$	(0.22)	$	(0.40)
Weighted-average common shares outstanding:
Weighted average number of shares:								Weighted average number of shares:
Basic and diluted	Basic and diluted		109,925			103,607		Basic and diluted	119,721		109,925

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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8X8, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited, ~~dollars~~ in thousands)

Three Months Ended June 30,
2021 2020
Net loss $ (43,906) $ (41,913)
Other comprehensive income (loss), net of tax
Unrealized (loss) gain on investments in securities (33) 422
Foreign currency translation adjustment 283 885
Comprehensive loss $ (43,656) $ (40,606)


	Three Months Ended June 30,
	2022		2021
Net loss	$	(26,043)	$	(43,906)
Other comprehensive income (loss), net of tax
Unrealized loss on investments in securities	(94)		(33)
Foreign currency translation adjustment	(8,384)		283
Comprehensive loss	$	(34,521)	$	(43,656)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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8X8, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited, ~~dollars and shares~~ in thousands)

Common Stock Additional
Paid-in
Capital Accumulated
Other
Comprehensive
Loss Accumulated
Deficit Total
Shares Amount
Balance at Balance at March 31, 2021 109,135 $ 109 $ 755,643 $ (4,193) $ (591,055) $ 160,504
Issuance of common stock under stock plans, less withholding 1,562 2 3,438 — — 3,440
Stock-based compensation expense — — 36,508 — — 36,508
Unrealized investment gain (loss) — — — (33) — (33)
Foreign currency translation adjustment — — — 283 — 283
Net loss — — — — (43,906) (43,906)
Balance at Balance at June 30, 2021 110,697 $ 111 $ 795,589 $ (3,943) $ (634,961) $ 156,796


	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total
	Shares	Amount
Balance at March 31, 2022	117,863	$	118	$	956,599	$	(7,913)	$	(766,438)	$	182,366
Adjustment related to adoption of ASU 2020-06	—	—		(92,832)		—		46,672		(46,160)
Issuance of common stock under stock plans, less withholding	1,796	2		63		—		—		65
Stock-based compensation expense	—	—		31,807		—		—		31,807
Unrealized investment loss	—	—		—		(94)		—		(94)
Foreign currency translation adjustment	—	—		(35)		(8,384)		—		(8,419)
Net loss	—	—		—		—		(26,043)		(26,043)
Balance at June 30, 2022	119,659	$	120	$	895,602	$	(16,391)	$	(745,809)	$	133,522


	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total
	Shares	Amount
Balance at March 31, 2021	109,135	$	109	$	755,643	$	(4,193)	$	(591,055)	$	160,504
Issuance of common stock under stock plans, less withholding	1,562	2		3,438		—		—		3,440
Stock-based compensation expense	—	—		36,508		—		—		36,508
Unrealized investment loss	—	—		—		(33)		—		(33)
Foreign currency translation adjustment	—	—		—		283		—		283
Net loss	—	—		—		—		(43,906)		(43,906)
Balance at June 30, 2021	110,697	$	111	$	795,589	$	(3,943)	$	(634,961)	$	156,796

Common Stock Additional
Paid-in
Capital Accumulated
Other
Comprehensive
Loss Accumulated
Deficit Total
Shares Amount
Balance at Balance at March 31, 2020 103,179 $ 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 688 1 (67) — — (66)
Stock-based compensation expense — — 23,118 — — 23,118
Issuance of common stock related to acquisition — — 8,489 — 8,489
Unrealized investment gain — — — 422 — 422
Foreign currency translation adjustment — — — 885 — 885
Net loss — — — — (41,913) (41,913)
Balance at Balance at June 30, 2020 103,867 $ 104 $ 657,014 $ (10,869) $ (467,383) $ 178,866

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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8X8, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(~~Unaudited, dollars~~ in thousands)


		Three Months Ended June 30,					Three Months Ended June 30,
		2021		2020			2022		2021
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net loss	Net loss	$	(43,906)	$	(41,913)	Net loss	$	(26,043)	$	(43,906)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Adjustments to reconcile net loss to net cash used in operating activities:						Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	Depreciation	2,922		2,823		Depreciation	2,789		2,922
Amortization of intangible assets	Amortization of intangible assets	1,285		2,228		Amortization of intangible assets	5,476		1,285
Amortization of capitalized internal-use software costs	Amortization of capitalized internal-use software costs	7,243		6,217		Amortization of capitalized internal-use software costs	5,964		7,243
Amortization of debt discount and issuance costs	Amortization of debt discount and issuance costs	4,393		4,126		Amortization of debt discount and issuance costs	831		4,393
Amortization of deferred sales commission costs	Amortization of deferred sales commission costs	8,245		6,138		Amortization of deferred sales commission costs	9,166		8,245
Allowance for credit losses	Allowance for credit losses	383		1,742		Allowance for credit losses	695		383
Operating lease expense, net of accretion	Operating lease expense, net of accretion	3,459		3,750		Operating lease expense, net of accretion	3,121		3,459

Stock-based compensation expense	Stock-based compensation expense	36,587		22,779		Stock-based compensation expense	27,814		36,587
Other	Other	713		602		Other	456		713
Changes in assets and liabilities:	Changes in assets and liabilities:					Changes in assets and liabilities:
Accounts receivable	Accounts receivable	924		(3,428)		Accounts receivable	(99)		924
Deferred sales commission costs	Deferred sales commission costs	(11,615)		(13,186)		Deferred sales commission costs	(9,246)		(11,615)
Other current and non-current assets	Other current and non-current assets	(2,550)		(3,025)		Other current and non-current assets	(692)		(2,550)
Accounts payable and accruals	Accounts payable and accruals	(5,063)		(519)		Accounts payable and accruals	(13,786)		(5,063)
Deferred revenue	Deferred revenue	1,012		2,416		Deferred revenue	(605)		1,012
Net cash provided by (used in) operating activities		4,032		(9,250)

Net cash provided by operating activities						Net cash provided by operating activities	5,841		4,032

Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Purchases of property and equipment	Purchases of property and equipment	(878)		(2,453)		Purchases of property and equipment	(971)		(878)
Capitalized internal-use software costs	Capitalized internal-use software costs	(6,546)		(8,866)		Capitalized internal-use software costs	(2,309)		(6,546)
Purchases of investments	Purchases of investments	(28,721)		(17,156)		Purchases of investments	(18,838)		(28,721)
Sales of investments	Sales of investments	10,299		0		Sales of investments	1,937		10,299
Proceeds from maturities of investments	Proceeds from maturities of investments	14,700		16,575		Proceeds from maturities of investments	15,590		14,700

Net cash used in investing activities		(11,146)		(11,900)
Acquisition of business						Acquisition of business	(1,250)		—
Net cash provided by (used in) investing activities						Net cash provided by (used in) investing activities	(5,841)		(11,146)

Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Finance lease payments	Finance lease payments	(4)		(67)		Finance lease payments	—		(4)
Tax-related withholding of common stock	Tax-related withholding of common stock	(99)		(69)		Tax-related withholding of common stock	—		(99)
Proceeds from issuance of common stock under employee stock plans	Proceeds from issuance of common stock under employee stock plans	3,538		2		Proceeds from issuance of common stock under employee stock plans	65		3,538
Net cash provided (used in) by financing activities		3,435		(134)

Effects of currency exchange rates on cash, cash equivalent, and restricted cash		436		580
Net decrease in cash, cash equivalents, and restricted cash		(3,243)		(20,704)
Cash, cash equivalents, and restricted cash at the beginning of the period		121,172		156,411
Cash, cash equivalents, and restricted cash at the end of the period		$	117,929	$	135,707

Supplemental information:
Cash paid for income taxes		$	337	$	165

Reconciliation of cash, cash equivalents, and restricted cash at the end of the period:
Cash and cash equivalents		$	109,288	$	116,690
Restricted cash, current		8,179		10,376
Restricted cash, non-current		462		8,641
Total cash, cash equivalents, and restricted cash		$	117,929	$	135,707

Net cash provided by financing activities						Net cash provided by financing activities	65		3,435

Effect of exchange rate changes on cash						Effect of exchange rate changes on cash	(6,685)		436
Net decrease in cash, cash equivalents and restricted cash						Net decrease in cash, cash equivalents and restricted cash	(6,620)		(3,243)
Cash, cash equivalents and restricted cash, beginning of year						Cash, cash equivalents and restricted cash, beginning of year	100,714		121,172
Cash, cash equivalents and restricted cash, end of year						Cash, cash equivalents and restricted cash, end of year	$	94,094	$	117,929

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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7Supplemental and non-cash disclosures:


	For the years ended June 30,
	2022		2021





Income taxes paid	$	461	$	337

Reconciliation of cash, cash equivalents and restricted cash to the consolidated balance sheets:


	As of June 30,
	2022		2021
Cash and cash equivalents	$	92,686	$	109,288
Restricted cash, current	590		8,179
Restricted cash, non-current	818		462
Total cash, cash equivalents and restricted cash	$	94,094	$	117,929

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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8X8, INC.

NOTES TO ~~UNAUDITED CONDENSED~~ CONSOLIDATED FINANCIAL STATEMENTS

1. ~~DESCRIPTION OF BUSINESS~~THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES

THE COMPANY

8x8, Inc. ("8x8" or the "Company") was incorporated in California in February 1987 and was reincorporated in Delaware in December 1996.

The Company 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. 8x8 empowers workforces worldwide by connecting individuals and teams so they can collaborate faster and work smarter from anywhere. 8x8 provides real-time business analytics and intelligence, giving its customers unique insights across all interactions and channels on ~~our~~its platform, so they can support a distributed and hybrid working model while delighting their end-customers and accelerating their business. A majority of all revenue is generated from communication services subscriptions and platform usage. The Company also generates revenue from sales of hardware and professional services, which are complementary to the delivery of ~~our~~its integrated technology platform.

~~2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES~~

BASIS OF PRESENTATION AND CONSOLIDATION

The accompanying condensed consolidated financial statements are unaudited and have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") and regulations of the Securities and Exchange Commission ("SEC") regarding interim financial reporting. Accordingly, certain information and disclosures normally included in ~~our~~the Company's annual consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements as of and for the fiscal year ended March 31, ~~2021,~~2022, and notes thereto included in the ~~Company's fiscal 2021 Annual Report on~~ Form ~~10-K ("Form 10-K").~~10-K. There were no material changes during the three months ended June 30, ~~2021,~~2022, to ~~our~~the Company's significant accounting policies as described in the ~~Company's~~ Form ~~10-K for the fiscal year ended March 31, 2021.~~10-K.

The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The Company conducts its operations through ~~one~~1 reportable segment.

In the opinion of the Company's management, these condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair statement of the Company's financial position, results of operations, and cash flows for the periods presented. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for any subsequent quarter or for the entire year ending March 31, ~~2022.~~2023.

All dollar amounts herein are in thousands of United States Dollars ("Dollars") unless otherwise noted.

USE OF ESTIMATES

The preparation of the ~~condensed~~ consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and equity, ~~and~~ disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting ~~date.~~period. On an ongoing basis, the Company evaluates its estimates, including, but not limited to, those related to ~~allowance for~~current expected credit losses, returns reserve for expected ~~customer credits or~~ cancellations, fair value of and/or ~~evaluation for~~potential impairment of goodwill and ~~other long-lived~~intangible assets, ~~capitalization of internally developed~~capitalized internal-use software costs, benefit period for deferred ~~sales commission costs,~~commissions, stock-based compensation, ~~expense, discount~~incremental borrowing rate used to calculate operating lease liabilities, income and sales tax liabilities, ~~fair value of~~ convertible senior notes fair value, litigation, and other contingencies. The Company bases its estimates on known facts and circumstances, historical experience, and various other assumptions. Actual results could differ from those estimates under different assumptions or conditions.

OUT OF PERIOD ADJUSTMENTS

During the three months ended June 30, 2022, the Company recorded out of period adjustments of approximately $3.3 million including $2.1 million in subscription revenue related to a contract with one customer which was deferred in previous years, and $1.2 million of excess amounts reserved against bad debt during the fourth quarter of fiscal 2022. The impact of these adjustments was a $2.1 million increase in service revenue and decrease in contract assets, and a $1.2 million decrease in provision for bad debts and reduction in reserves.

RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS

~~In December 2019, the FASB issued ASU 2019-12,~~ ~~Income Taxes~~ (Topic 740), which enhanced and simplified various aspects of the income tax accounting guidance, including requirements such as tax basis step-up in goodwill obtained in a transaction that is not a business combination, ownership changes in investments, and interim-period accounting for enacted changes in tax law. The amendment was effective for public companies with fiscal years beginning after December 15, 2020, which is fiscal 2022 for the Company. The adoption of this guidance in the first quarter of the Company's fiscal 2022 did not have a material impact on the Company's financial statements.

~~RECENT ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED~~

In August 2020, the ~~FASB~~Financial Accounting Standards Board (the “FASB”) issued ~~ASU~~Accounting Standards Update (“ASU”) 2020-06, ~~Debt -~~ Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40)~~, which simplifies accounting~~: Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. Under ASU 2020-06, the embedded conversion features are no longer separated from the host contract for convertible instruments ~~by eliminating two of the three accounting models available~~with conversion features that are not required to be accounted for as derivatives under Topic 815, or that do not result in substantial premiums accounted for as paid-in capital. Consequently, a convertible debt ~~instruments~~instrument will be accounted for as a single liability measured at its amortized cost, as long as no other features require bifurcation and ~~convertible preferred stock.~~recognition as derivatives. The new guidance also ~~addresses how~~requires the if-converted method to be applied for all convertible ~~instruments are accounted for in the diluted earnings per share calculation. The guidance~~instruments. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, ~~which is fiscal 2023 for the Company;~~with early adoption is permitted. ~~The Company is currently assessing~~Adoption of the ~~impact of this pronouncement to its consolidated financial statements.~~standard requires using either a modified retrospective

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or a full retrospective approach. Effective April 1, 2022, the Company adopted ASU 2020-06 using the modified retrospective approach. Adoption of the new standard resulted in a decrease to accumulated deficit of $46.7 million, a decrease to additional paid-in capital of $92.8 million, and an increase to convertible senior notes, net of $46.2 million.

Interest expense in future periods will be reduced as a result of accounting for the convertible debt instrument as a single liability measured at its amortized cost.

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions to U.S. GAAP guidance on contract modifications to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate ("LIBOR"), which is expected to be discontinued, to alternative reference rates. In January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848), which refines the scope of Topic 848 and clarifies some of its guidance. Effective April 1, 2022, the Company adopted ASU 2020-04 on a prospective basis. The impact of the adoption was immaterial to the Company's consolidated financial statements.

2. REVENUE RECOGNITION

Disaggregation of Revenue

The Company disaggregates its revenue by geographic region. See Note ~~12.~~11. Geographical ~~Information.~~Information.

Contract Balances

The following table provides amounts of receivables, contract assets, and deferred ~~revenues~~revenue from contracts with customers:


		June 30, 2021		March 31, 2021			June 30, 2022		March 31, 2022
Accounts receivable, net	Accounts receivable, net	$	49,755	$	51,150	Accounts receivable, net	$	55,441	$	57,400
Contract assets, current	Contract assets, current	$	12,324	$	12,840	Contract assets, current	11,402		10,514
Contract assets, non-current	Contract assets, non-current	$	18,269	$	17,987	Contract assets, non-current	13,574		15,171
Deferred revenue, current	Deferred revenue, current	$	21,985	$	20,737	Deferred revenue, current	34,064		34,262
Deferred revenue, non-current	Deferred revenue, non-current	$	2,813	$	2,999	Deferred revenue, non-current	11,023		11,430

Contract assets, current, contract assets, non-current, deferred revenue, current and deferred revenue, non-current are recorded on the ~~Condensed~~ Consolidated Balance Sheets in Other current assets, Other assets, and Other liabilities, non-current, respectively.

Contract assets represent recognition of revenue that has not yet been billed; the net decrease in contract assets was primarily driven by the billing of revenue previously recognized. The net increase in deferred revenue was due to billings in advance of performance obligations being satisfied. During the three months ended June 30, ~~2021,~~2022, the Company recognized revenues of approximately ~~$7.6~~$43.6 million ~~which was~~that were included in ~~the~~ deferred revenue ~~balance~~ at the beginning of the ~~period.~~fiscal year.

Remaining Performance Obligations

The Company's subscription terms typically range from one to five years. Contract revenue from the remaining performance obligations that had not yet been recognized as of June 30, ~~2021,~~2022 was approximately ~~$530.0~~$700.0 million. This amount excludes contracts with an original expected length of less than one year. The Company expects to recognize revenue on approximately ~~75%~~80% of the remaining performance obligations over the next 36 months and approximately ~~25% thereafter.~~20% over the remainder of the contract period.

For purposes of this disclosure, the Company excludes contracts with an original expected length of less than one year. Since the new and renewal contracts entered into with customers are generally for terms of one year or longer, updating this disclosure to include contracts with a term of one year or more presents a more appropriate measure of the Company's remaining performance obligations.

Deferred Sales Commission Costs

Amortization of deferred sales commission costs for the three months ended June 30, 2022 and 2021 ~~and 2020,~~ was ~~$8.2~~$9.2 million and ~~$6.1~~$8.2 million, respectively. There were no material write-offs ~~of deferred sales commission costs~~ during the three months ended June 30, ~~2021~~2022 and ~~2020.~~2021.

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4.3. FAIR VALUE MEASUREMENTS

~~The following tablse presents estimated fair values of cash,~~Cash, cash equivalents, ~~restricted cash,~~ and available-for-sale ~~investments:~~investments were as follows:


June 30, 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
As of June 30, 2022																		As of June 30, 2022	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
Cash	Cash	$	39,480	$	—	$	—	$	39,480	$	39,480	$	0	$	—	$	—	Cash	$	77,885	$	—	$	—	$	77,885	$	77,885	$	—	$	—	$	—
Level 1:	Level 1:																	Level 1:
Money market funds	Money market funds	67,108		—		—		67,108		67,108		—		—		—		Money market funds	8,003		—		—		8,003		8,003		—		—		—

Treasury securities																		Treasury securities	3,157		—		(6)		3,151		—		—		3,151		—
Subtotal	Subtotal	106,588		0		0		106,588		106,588		0		0		0		Subtotal	89,045		—		(6)		89,039		85,888		—		3,151		—
Level 2:	Level 2:																	Level 2:
Certificate of deposit	Certificate of deposit	8,641		—		—		8,641		—		8,641		—		0		Certificate of deposit	1,408		—		—		1,408		—		1,408		—		—
Municipal bonds		700		—		—		700		700		—		—		—
Commercial paper	Commercial paper	15,120		2		0		15,122		2,000		—		13,122		—		Commercial paper	24,604		—		(30)		24,574		6,798		—		17,776		—
Corporate debt	Corporate debt	30,796		30		(5)		30,821		0		—		18,109		12,712		Corporate debt	28,232		2		(216)		28,018		—		—		28,018		—
Subtotal	Subtotal	55,257		32		(5)		55,284		2,700		8,641		31,231		12,712		Subtotal	54,244		2		(246)		54,000		6,798		1,408		45,794		—
Total assets	Total assets	$	161,845	$	32	$	(5)	$	161,872	$	109,288	$	8,641	$	31,231	$	12,712	Total assets	$	143,289	$	2	$	(252)	$	143,039	$	92,686	$	1,408	$	48,945	$	—


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
As of March 31, 2022																		As of March 31, 2022	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
Cash	Cash	$	39,070	$	—	$	—	$	39,070	$	39,070	$	0	$	—	$	—	Cash	$	70,095	$	—	$	—	$	70,095	$	70,095	$	—	$	—	$	—
Level 1:	Level 1:																	Level 1:
Money market funds	Money market funds	67,712		—		—		67,712		67,712		—		—		—		Money market funds	12,865		—		—		12,865		12,865		—		—		—
Treasury securities	Treasury securities	6,177		17		0		6,194		—		—		6,194		0		Treasury securities	4,573		—		(7)		4,566		—		—		4,566		—
Subtotal	Subtotal	112,959		17		0		112,976		106,782		0		6,194��		0		Subtotal	87,533		—		(7)		87,526		82,960		—		4,566		—
Level 2:	Level 2:																	Level 2:
Certificate of deposit	Certificate of deposit	8,641		—		—		8,641		—		8,641		—		—		Certificate of deposit	9,509		—		—		9,509		—		9,509		—		—
Commercial paper	Commercial paper	17,656		42		0		17,698		700		—		16,998		—		Commercial paper	23,950		—		(34)		23,916		800		—		16,471		—
Corporate debt	Corporate debt	22,193		1		0		22,194		5,049		—		17,145		0		Corporate debt	27,442		—		(163)		27,279		7,445		—		23,808		2,671
Subtotal	Subtotal	48,490		43		0		48,533		5,749		8,641		34,143		0		Subtotal	60,901		—		(197)		60,704		8,245		9,509		40,279		2,671
Total assets	Total assets	$	161,449	$	60	$	0	$	161,509	$	112,531	$	8,641	$	40,337	$	0	Total assets	$	148,434	$	—	$	(204)	$	148,230	$	91,205	$	9,509	$	44,845	$	2,671

~~Certificates~~Certificate of deposit ~~represent~~represents the Company's letters of credit securing leases for office facilities, the ~~balances~~balance of which ~~are~~is included in Restricted cash, current and Restricted cash, non-current on the Company's ~~Condensed~~ Consolidated Balance ~~Sheets.~~Sheet.

The Company considers its investments available to support its current operations and has classified ~~all~~ investments in debt securities as available-for-sale securities. The Company does not intend to sell any of its investments that are in unrealized loss positions and, as of June 30, ~~2021,~~2022, has determined that it is not more likely than not that it will be required to sell any of these investments before recovery of the entire amortized cost ~~bases.~~basis.

The Company regularly reviews the changes to the rating of its securities at the individual security level by rating agencies and reasonably monitors the surrounding economic conditions to assess the risk of expected credit losses. As of June 30, ~~2021,~~2022, the Company did not ~~have~~record any ~~risk of expected~~allowance for credit losses on its investments.

As of June 30, ~~2021~~2022 and March 31, ~~2021,~~2022, the estimated fair value of the Company's ~~outstanding convertible senior notes ("Notes")~~ Noteswas ~~$450.7~~$427.7 million and ~~$502.9~~$470.5 million, respectively, which was determined based on the closing price for the Notes on the last trading day of the reporting period and is ~~categorized within~~considered to be Level 2 ofin the fair value hierarchy due to limited trading activity of the Notes. See Note 8, 7, Convertible Senior Notes and Capped ~~Call~~.Call.

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5.4. INTANGIBLE ASSETS AND GOODWILL

~~Intangible Assets~~

The carrying value of intangible assets consisted of the following:

June 30, 2021 March 31, 2021
Gross
Carrying
Amount Accumulated
Amortization Net
Carrying
Amount Gross
Carrying
Amount Accumulated
Amortization Net
Carrying
Amount
Developed technology $ 27,231 $ (15,793) $ 11,438 $ 33,960 $ (21,458) $ 12,502
Customer relationships 6,428 (2,021) 4,407 11,969 (7,341) 4,628
Trade and domain names 83 (83) 0 988 (988) 0
Total acquired identifiable intangible assets $ 33,742 $ (17,897) $ 15,845 $ 46,917 $ (29,787) $ 17,130

During the three months ended June 30, 2021, the Company determined certain of its fully amortized intangible assets were no longer in use. As a result, the Company wrote off $6.7 million in gross carrying value of developed technology, $5.5 million of customer relationships, and $0.9 million of trade and domain names. Such intangibles had been fully amortized in prior periods, thus there was no net impact to the Company's financial statements.


	June 30, 2022						March 31, 2022
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Technology	$	46,714	$	(22,208)	$	24,506	$	46,727	$	(19,852)	$	26,875
Customer relationships	105,821		(7,865)		97,956		105,827		(4,889)		100,938
Trade names and domains	580		(305)		275		583		(183)		400

Total acquired identifiable intangible assets	$	153,115	$	(30,378)	$	122,737	$	153,137	$	(24,924)	$	128,213

As of June 30, ~~2021,~~2022, the weighted average remaining useful life ~~of developed~~for technology, ~~and~~ customer relationships, and trade names and domains was ~~4.4~~3.0 years, 8.5 years, and ~~5.0~~0.8 years, respectively.

As of June 30, ~~2021, the expected future~~2022, annual amortization ~~expense~~ of ~~the~~ intangible assets, ~~was as follows:~~based upon existing intangible assets and current useful lives, is estimated to be the following:


~~Remainder of fiscal 2022~~	$	~~4,388~~
~~Fiscal 2023~~	~~2,904~~
~~Fiscal 2024~~	~~2,851~~
~~Fiscal 2025~~	~~2,851~~
~~Fiscal 2026~~	~~2,851~~
~~Thereafter~~	0
~~Total~~	$	~~15,845~~

~~Goodwill~~


	Amount
2023	$	15,625
2024	20,395
2025	19,095
2026	13,895
2027 and thereafter	53,727
Total	$	122,737

The following table provides a summary of the ~~change~~changes in the carrying ~~amount~~amounts of goodwill:


	Amount
Balance at March 31, ~~2021~~2022	$	~~131,520~~266,867
Additions due to acquisitions	—
Foreign currency translation ~~adjustments~~	79 (1,838)
Balance at June 30, ~~2021~~2022	$	~~131,599~~265,029

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5. LEASES

Operating Leases

The following table provides balance sheet information related to ~~the Company's~~ operating leases:

June 30, 2021 March 31, 2021
Assets
Operating lease, right-of-use assets $ 63,402 $ 66,664
Liabilities
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

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	June 30, 2022		March 31, 2022
Assets
Operating lease, right-of-use assets	$	59,859	$	63,415

Liabilities
Operating lease liabilities, current	$	14,424	$	15,485
Operating lease liabilities, non-current	71,806		74,518
Total operating lease liabilities	$	86,230	$	90,003

The ~~following table presents the~~ components of lease expense ~~and cash outflows from operating leases:~~were as follows:


		Three Months Ended June 30,						Three Months Ended June 30,
			2021		2020				2022		2021
Operating lease expense	Operating lease expense		$	3,459	$	3,750	Operating lease expense		$	3,121	$	3,459
Variable lease expense	Variable lease expense		$	750	$	782	Variable lease expense		$	1,587	$	750
Cash outflows from operating leases			$	4,200	$	2,054

Short-term lease expense was immaterial during the three months ended June 30, 2022 and 2021.

Cash outflows from operating leases were $4.8 million and $4.2 million, respectively, for the three months ended June 30, ~~2021~~2022 and ~~2020.~~2021.

The following table presents supplemental lease information:

June 30, 2021

March 31, 2021

June 30, 2022

March 31, 2022

Weighted average remaining lease term

8.2 years

8.4 years

Weighted average remaining lease term

7.3 years

7.4 years

Weighted average discount rate

4.0%

Weighted average discount rate

4.0%

The following table presents maturity of lease liabilities under the Company's non-cancellable operating leases as of June 30, ~~2021:~~2022:


~~Remainder of fiscal 2022~~	$	~~12,175~~
~~Fiscal 2023~~	~~15,170~~
~~Fiscal 2024~~	~~11,851~~
~~Fiscal 2025~~	~~11,514~~
~~Fiscal 2026~~	~~10,513~~
~~Thereafter~~	~~47,693~~
~~Total lease payments~~	~~108,916~~
~~Less: imputed interest~~	~~(16,721)~~
~~Present value of lease liabilities~~	$	~~92,195~~


2023	$	15,380
2024	13,639
2025	12,481
2026	11,292
2027	10,008
Thereafter	37,350
Total lease payments	100,150
Less: imputed interest	(13,920)
Present value of lease liabilities	$	86,230

Lease Assignment

In the fourth quarter of fiscal 2018, the Company entered into a lease agreement (the "Agreement") with CAP Phase I (the "Landlord"), to rent office space in San Jose, California. The lease term began on January 1, 2019. On April 30, 2019, due to the Company's rapid growth and greater than anticipated future space needs, the Company entered into an assignment and assumption (the "Assignment") of the Agreement with the Landlord and Roku Inc.("Roku"), whereby the Company assigned to Roku the Agreement. Pursuant to the Assignment, the Company was released from all of its obligations under the lease and the related standby letter of credit, which was secured by restricted cash of $0.8 million, was released in May 2022.

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6. COMMITMENTS AND CONTINGENCIES

Indemnifications

In the normal course of business, the Company may agree to indemnify other parties, including customers, lessors, and parties to other transactions with the Company with respect to certain matters, such as breaches of representations or covenants or intellectual property infringement or other claims made by third parties. These agreements may limit the time within which an indemnification claim can be made and the amount of the claim. In addition, the Company has entered into indemnification agreements with its officers and directors.

It is not possible to determine the maximum potential amount of the Company's exposure under these indemnification agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. Historically, payments made by the Company under these agreements have not had a material impact on the Company's operating results, financial position, or cash flows. Under some of these agreements, however, the Company's potential indemnification liability may not have a contractual limit.

Operating Leases

The Company's lease obligations consist of the Company's principal facility and various leased facilities under operating lease agreements. See Note 5. Leases for more information on the Company's leases and the future minimum lease payments.

Purchase Obligations

The Company's purchase obligations include contracts with third-party customer support vendors and third-party network service providers. These contracts include minimum monthly commitments and the requirements to maintain the service level for several months.

Legal Proceedings

The Company may be involved in various claims, lawsuits, investigations, and other legal proceedings, including intellectual property, commercial, regulatory compliance, securities, and employment matters that arise in the normal course of business. The Company determines whether an estimated loss from a contingency should be accrued by assessing whether a loss is deemed probable and can be reasonably estimated. The Company regularly evaluates current information to determine whether any accruals should be adjusted and whether new accruals are required. Actual claims could settle or be adjudicated against the Company in the future for materially different amounts than the Company has accrued due to the inherently unpredictable nature of litigation. Legal costs are expensed as incurred.

The Company believes it has recorded adequate provisions for any such lawsuits and claims and proceedings as of June 30, ~~2021.~~2022. The Company believes that damage amounts claimed in these matters are not meaningful indicators of potential liability. Some of the matters pending against the Company involve potential compensatory, punitive, or treble damage claims or sanctions, that, if granted, could require the Company to pay damages or make other expenditures in amounts that could have a material adverse effect on its Consolidated Financial Statements. Given the inherent uncertainties of litigation, the ultimate outcome of the ongoing matters described herein cannot be predicted, and the Company believes it has valid defenses with respect to the legal matters pending against it. Nevertheless, the Consolidated Financial Statements could be materially adversely affected in a particular period by the resolution of one or more of these contingencies.

Wage and Hour Litigation. On September 21, 2020, the Company received a copy of a letter filed by a former employee, Plaintiff Denise Rivas, with the California Labor and Workforce Development Agency (“LWDA”) providing notice of the Plaintiff’s intent to bring a Private Attorney General Act (“PAGA”) claim, on behalf of the Company’s non-exempt employees based in California, for alleged California wage and hour practices violations. On September 25, 2020, the Plaintiff filed a separate class action complaint ~~(“Class~~(the “Class Complaint”) in Santa Clara County Superior Court against the Company in which she alleges 10 causes of action, on behalf of herself and all of the Company’s non-exempt employees based in California for the last four years, related to violations of California state wage and hour practices and the federal Fair Credit Reporting Act. The Class Complaint was served on the Company on September 29, 2020. On October 28, 2020, the Company filed a general denial of all claims and asserted various affirmative defenses. On October 29, 2020, the Company removed the matter to Federal Court. On December 1, 2020, Plaintiff filed a companion PAGA lawsuit complaint ~~(“PAGA~~(the “PAGA Complaint”) in Santa Clara County Superior Court against the Company, in which she alleges 6 violations of California state wage and hour practices for all of the Company's current and former non-exempt employees based in California from September 16, 2019 to the present. The PAGA Complaint was served on

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the Company on December 11, 2020. On January 26, 2021, the Company filed a general denial of all claims and asserted various affirmative defenses to the PAGA Complaint. Both actions ~~are~~were scheduled for a joint mediation in September 2021, and discovery iswas stayed in both actions pending completion of the mediation. A joint mediation for both actions was held in September 2021 and the parties reached a preliminary settlement of all claims, which was finalized on November 23, 2021. The parties have remanded the Class Complaint matter to Santa Clara County Superior Court in order to consolidate the matter with the PAGA Complaint matter for court approval and administration of the settlement. Plaintiff has filed an unopposed motion for preliminary approval of the settlement on May 17, 2022, and the court issued an order preliminarily approving the settlement on June 13, 2022. The parties are proceeding to gather and provide class list information to the administrator for administration of the settlement.

~~Other Commitments, Indemnifications, and Contingencies~~

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State and Local Taxes and ~~Surcharges.~~ Surcharges

From time to time, the Company has received inquiries from a number of state and local taxing agencies with respect to the remittance of sales, use, telecommunications, excise, and income taxes. Several jurisdictions currently are conducting tax audits of the Company's records. The Company collects or has accrued for taxes that it believes are required to be remitted. The amounts that have been remitted have historically been within the accruals established by the Company. The Company adjusts its accrual when facts relating to specific exposures warrant such adjustment. During the second quarter of fiscal 2019, the Company conducted a periodic review of the taxability of its services and determined that certain services may be subject to sales, use, telecommunications or other similar indirect taxes in certain jurisdictions. A similar review was performed on the taxability of services provided by Fuze, Inc. and it was determined that certain services may be subject to sales, use, telecommunications or other similar indirect taxes in certain jurisdictions. Accordingly, the Company recorded contingent indirect tax liabilities. As of June 30, ~~2021~~2022 and March 31, ~~2021,~~2022, the Company had accrued contingent indirect tax liabilities of ~~$2.8~~$16.7 million and ~~$3.1~~$17.2 million, respectively.

8.7. CONVERTIBLE SENIOR NOTES AND CAPPED CALLS

Convertible Senior Notes

In February 2019, the Company issued $287.5 million aggregate principal amount of 0.50% convertible senior notes (the "Initial Notes") due 2024 in a private placement, including the exercise in full of the initial purchasers' option to purchase additional notes. The total net proceeds from the debt offering, after deducting initial purchase discounts, debt issuance costs, and costs of the capped call transactions described below, were approximately $245.8 million.

In November 2019, the Company issued an additional $75.0 million aggregate principal amount of 0.50% convertible senior notes (the ~~"Additional~~"First Additional Notes" ~~and together with the Initial Notes, the "Notes"~~) due 2024 in a registered offering under the same indenture as the Initial Notes. The total net proceeds from the First Additional Notes, after deducting underwriting discounts, debt issuance costs and costs of the capped call transactions described below, were approximately $64.6 million.

In December 2021, the Company issued an additional $137.5 million aggregate principal amount of its currently outstanding 0.50% convertible senior notes (the "Second Additional Notes", and together with the Initial Notes and the First Additional Notes, the "Notes") due 2024 in a private placement under the same indenture as the Initial Notes and the First Additional Notes. The total net proceeds from the Second Additional Notes, after deducting initial purchase discounts and debt issuance costs, were approximately $134.3 million. The Company did not enter into any capped calls in connection with this transaction. Both the First Additional Notes and Second Additional Notes constitute a further issuance of, and form a single series with, the Initial Notes. Immediately after giving effect to the issuance of the Second Additional Notes, the Company had ~~$362.5~~$500.0 million aggregate principal amount of convertible senior notes.

The Notes are senior unsecured obligations of the Company and interest is payable semiannually in arrears on February 1 and August 1 of each year, beginning on August 1, 2019. The Notes will mature on February 1, 2024, unless earlier repurchased, redeemed, or converted.

Each $1,000 principal amount of the Notes is initially convertible into 38.9484 shares of the Company’s common stock, par value $0.001, which is equivalent to an initial conversion price of approximately $25.68 per share. The conversion rate is subject to adjustment upon the occurrence of certain specified events but will not be adjusted for any accrued and unpaid interest. In addition, upon the occurrence of certain corporate events that occur prior to the maturity date or following the Company's issuance of a notice of redemption, in each case as described in the Indenture, the Company will, in certain circumstances, increase the conversion rate for a holder that elects to convert its Notes in connection with such a corporate event or during the relevant redemption period.

Prior to the close of business on the business day immediately preceding October 1, 2023, the Notes will be convertible only under the following circumstances:

1.At any time during any calendar quarter commencing after the fiscal quarter ending on June 30, 2019 (and only during such calendar quarter), if the last reported sale price of the ~~Common Stock~~common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day;

2.During the 5 business day period immediately after any 10 consecutive trading day period (the measurement period), if the trading price per $1,000 principal amount of the Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the common stock on each such trading day and the conversion rate on each such trading day;

3.If the Company calls any or all of the Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date; or

4.Upon the occurrence of specified corporate events (as set forth in the indenture governing the Notes).

On or after October 1, 2023, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their Notes, regardless of the foregoing circumstances. Upon conversion, the

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Company will satisfy its conversion obligation by paying or delivering, as the case may be, cash, shares of common stock, or a combination of cash and shares of common stock, at the Company's election. The Company’s current intent is to settle the principal amount of the Notes in cash upon conversion. During the three months ended June 30, ~~2021,~~2022, the conditions allowing holders of the Notes to convert were not met.

~~Table~~Under the terms of ~~Contents~~

~~The~~the Notes, the Company ~~may~~could not redeem the Notes prior to February 4, 2022. On or after February 4, 2022, the Company may redeem for cash all or part of the Notes at the redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if the last reported sale price of the common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides a redemption notice. If a fundamental change (as defined in the indenture governing the notes) occurs at any time, holders of Notes may require the Company to repurchase for cash all or any portion of their Notes at a repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, ~~to,~~ but excluding, the fundamental change repurchase date.

The Notes are senior unsecured obligations and will rank senior in right of payment to any of the Company’s indebtedness that is expressly subordinated in right of payment to the Notes; equal in right of payment with the Company’s existing and future liabilities that are not so subordinated; effectively junior in right of payment to any of the Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities (including trade payables) of current or future subsidiaries of the Company.

The following table presents the net carrying amount and fair value of the liability component of the Notes:


		June 30, 2021		March 31, 2021			June 30, 2022		March 31, 2022
Principal	Principal	$	362,500	$	362,500	Principal	$	500,000	$	500,000
Unamortized debt discount		(48,990)		(53,323)
Unamortized issuance costs		(682)		(742)
Unamortized debt discount(1) and issuance costs						Unamortized debt discount(1) and issuance costs	(5,556)		(52,548)

Net carrying amount	Net carrying amount	$	312,828	$	308,435	Net carrying amount	$	494,444	$	447,452

(1) The ~~following table presents~~debt discount as of March 31, 2022 represents the discount resulting from the allocation of the equity component (conversion option) from the liability component of the Notes, net of issuance premium, prior to the adoption of ASU 2020-06 on April 1, 2022. Upon the adoption of ASU 2020-06, the equity component was reversed. As a result, June 30, 2022 debt discount represents only the issuance premium, which net against the issuance costs on the same line.

Prior to April 1, 2022, the Company accounted for the Notes as separate liability and equity components. On issuance, the carrying amount of the equity components was recorded as a debt discount and subsequently amortized to interest expense. Effective April 1, 2022, we adopted ASU 2020-06 using the modified retrospective approach. As a result, the Notes are accounted for as a single liability measured at its amortized cost, as no other embedded features require bifurcation and recognition as derivatives. Adoption of the new standard resulted in a decrease to accumulated deficit of $46.7 million, a decrease to additional paid-in capital of $92.8 million, and an increase to convertible senior notes, net of $46.2 million. The Notes have no original issuance discounts. Unamortized debt discount and issuance costs will be amortized over the remaining life of the Notes, which is approximately 19 months.

Interest expense recognized related to the ~~Notes:~~Notes was as follows:


		Three Months Ended June 30,					For the three months ended June 30,
			2021		2020				2022		2021
Contractual interest expense	Contractual interest expense		$	453	$	453		Contractual interest expense	$	625	$	453
Amortization of debt discount			4,332		4,068
Amortization of issuance costs			61		57
Amortization of debt discount and issuance costs								Amortization of debt discount and issuance costs	831		4,393
Total interest expense	Total interest expense		$	4,846	$	4,578		Total interest expense	$	1,456	$	4,846

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Capped ~~Call~~Calls

In connection with the pricing of the Initial and First Additional Notes, the Company entered into privately negotiated capped call transactions ~~("Capped~~(the "Capped Calls") with certain counterparties. The Capped Calls each have an initial strike price of approximately $25.68 per share, subject to certain adjustments, which ~~corresponds~~correspond to the initial conversion price of the Initial and First Additional Notes. The Capped Calls have initial cap prices of $39.50 per share, subject to certain adjustments. The Capped Calls are expected to partially offset the potential dilution to the Company’s Common Stock upon any conversion of the Initial and First Additional Notes, with such offset subject to a cap based on the cap price. The Capped Calls cover, subject to anti-dilution adjustments, approximately 14.1 million shares of the Company’s Common Stock. The Capped Calls are subject to adjustment upon the occurrence of specified extraordinary events affecting the Company, including merger events, tender offers, and announcement events. In addition, the Capped Calls are subject to certain specified additional disruption events that may give rise to a termination of the Capped Calls, including nationalization, insolvency or delisting, changes in law, failures to deliver, insolvency filings, and hedging disruptions. For accounting purposes, the Capped Calls are separate transactions, and not part of the terms of the Initial and First Additional Notes. As these transactions meet certain accounting criteria, the Capped Calls are recorded in stockholders' equity and are not accounted for as derivatives. The Capped Calls will not be remeasured as long as they continue to meet the conditions for equity classification.

9.8. STOCK-BASED COMPENSATION AND STOCKHOLDERS' EQUITY

2012 Equity Incentive Plan

In June 2012, the Company's board of directors approved the 2012 Equity Incentive Plan (the "2012 Plan"). The Company's stockholders subsequently adopted the 2012 Plan in July 2012, which became effective in August 2012. The Company reserved 4.1 million shares of the Company's common stock for issuance under this plan. In August 2014, 2016, 2018 and 2019, the 2012 Plan was amended to allow for an additional 6.8 million shares, 4.5 million shares, 16.3 million shares, and 12.0 million shares reserved for issuance, respectively. The 2012 Plan provided for granting incentive stock options to employees and non-statutory stock options to employees, directors or consultants, and granting of stock appreciation rights, restricted stock, restricted stock units and performance units, qualified performance-based awards, and stock grants. The stock option price of incentive stock options granted could not be less than the fair market value on the effective date of the grant. Options, restricted stock, and restricted stock units generally vest over three or four years and expire ten years after grant. The 2012 Plan expired in June 2022.

2017 New Employee Inducement Incentive Plan

For details on the 2017 New Employee Inducement Incentive Plan ("2017 Plan"), please refer to the Form 10-K. No grants were made under the 2017 Plan during the three months ended June 30, 2022. As of June 30, 2022, 1.8 million shares remained available for future grants under the 2017 Plan.

Stock-Based Compensation

The following table presents stock-based compensation ~~expense:~~expense (dollars in thousands):


		Three Months Ended June 30,			Three Months Ended June 30,
			2021			2020			2022		2021
Cost of service revenue	Cost of service revenue		$	1,968		$	1,814	Cost of service revenue	$	2,664	$	1,968
Cost of other revenue	Cost of other revenue		1,071			787		Cost of other revenue	1,111		1,071
Research and development	Research and development		8,698			6,545		Research and development	8,044		8,698
Sales and marketing	Sales and marketing		14,326			5,739		Sales and marketing	8,107		14,326
General and administrative	General and administrative		10,524			7,894		General and administrative	7,888		10,524
Total	Total		$	36,587		$	22,779	Total	$	27,814	$	36,587

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Stock Options

The following table presents the stock option activity (shares in thousands):

Number of Shares Weighted Average Exercise Price Per Share Weighted Average Remaining Contractual Term Aggregate Intrinsic Value
Outstanding at March 31, 2021 1,813 $ 9.46 2.86 years $ 41,673
Granted 0 0
Exercised (391) 9.04
Canceled/Forfeited (9) 21.85
Outstanding at June 30, 2021 1,413 $ 9.50 2.61 years $ 25,806
Vested and expected to vest at June 30, 2021 1,411 $ 9.48 2.60 years $ 25,788
Exercisable at June 30, 2021 1,373 $ 9.19 2.48 years $ 25,498


	Number of Shares	Weighted Average Exercise Price Per Share
Outstanding at March 31, 2022	867	$	10.67

Exercised	(11)	5.87
Canceled/Forfeited	(2)	22.25
Outstanding at June 30, 2022	854	$	10.71

Vested and expected to vest June 30, 2022	854	$	10.71
Exercisable at June 30, 2022	852	$	10.69

The total intrinsic value of options exercised ~~during~~in the three months ended June 30, 2022 and 2021 was $40.0 thousand and ~~2020, was~~ $9.1 ~~million and less than $0.1~~ million respectively.

As of June 30, ~~2021,~~2022, there was ~~$0.3 million~~$14.0 thousand of total unrecognized compensation cost related to stock options, which is expected to be recognized over a weighted average period of approximately ~~0.9~~0.3 years.

The Company did not grant any stock options during the three months ended June 30, 2022 and 2021.

The fair value of each of the Company's option grants has been estimated on the date of grant using the Black-Scholes pricing model. No option grants were made in the three months ended June 30, 2022 and 2021.

Stock Purchase Rights

There were no activities related to stock purchase rights during the three months ended June 30, 2022 and 2021.

As of June 30, 2022, there was no unrecognized compensation cost related to stock purchase rights.

Restricted Stock Units ~~(RSUs)~~

The following table presents the RSU activity (shares in thousands):


		Number of Shares	Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value			Number of Shares	Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Term (in Years)
Outstanding at March 31, 2021		8,646	$	19.27	1.85 years	$	280,467
Balance at March 31, 2022								Balance at March 31, 2022	9,375	$	20.41	2.11
Granted	Granted	3,466	26.36					Granted	8,528	6.36
Vested and released	Vested and released	(969)	20.07					Vested and released	(1,657)	21.00
Forfeited	Forfeited	(317)	19.71					Forfeited	(780)	17.94
Outstanding at June 30, 2021		10,826	$	21.45	2.05 years	$	300,524
Balance at June 30, 2022								Balance at June 30, 2022	15,466	$	12.72	1.27

As of June 30, ~~2021,~~2022, there was ~~$165.1~~$130.7 million of total unrecognized compensation cost related to RSUs.

Performance Stock Units ~~(PSUs)~~

~~The Company has granted~~

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PSUs are issued to ~~certain~~a group of ~~its~~ executives with vesting that is contingent on both market performance and continued ~~service and either Company or market performance.~~service. The PSUs ~~issued in June 2021 consist of~~generally vest over periods ranging from one to three ~~tranches: the first tranche vests on the 1st anniversary and is~~years based on ~~the Non-GAAP Gross Profit of the Company; the remaining two tranches vest on the 2nd and 3rd anniversaries, respectively, and are based on the~~ Total Shareholder Return ("TSR") ~~of the Company,~~, as measured relative to a specified market ~~index~~indices during the ~~specified periods. For the first tranche, a range of 90% to 110% attainment of the target Non-GAAP Gross Profit over the~~period from grant date through vesting ~~period will result in a range from 0% to 200% of the target number of shares being earned. For the awards based on TSR, a~~date. A 2x multiplier will be applied for each percentage point of positive or negative relative TSR, ~~over the specified vesting periods,~~ such that the number of shares of common stock earned will increase or decrease by 2% of the target number of shares, subject to a maximum of 200% of the target number of shares. In the event that the Company’s relative TSR performance is less than negative 30%, relative to the specified index, 0no shares will be earned for the applicable performance period. ~~The amount of compensation expense is based on how many shares are probable to be earned for~~All PSU awards vest at the ~~applicable performance period.~~

~~The first tranche was valued at $25.78 per share based on the closing price~~end of the ~~Company's common stock on the grant date.~~

~~The second and third tranches were valued at $33.32 and $34.48, respectively, per share as determined by Monte Carlo simulations using a volatility factor of 58.7% and a risk-free rate of 0.3%.~~

~~Table of Contents~~respective performance periods, for those executives with continued service.

The following table presents the PSU activity ((shares in ~~thousands~~thousands)):


		Number of Shares	Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value			Number of Shares	Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Term (in Years)
Outstanding at March 31, 2021		1,576	$	27.33	1.24 years	$	51,116
Balance at March 31, 2022								Balance at March 31, 2022	1,026	$	35.36	0.89
Granted	Granted	465	27.92					Granted	720	7.71
Granted for performance achievement1	Granted for performance achievement1	20	27.92					Granted for performance achievement1	—	—
Vested and released	Vested and released	(206)	16.12					Vested and released	(128)	25.65
Forfeited	Forfeited	(198)	24.61					Forfeited	(354)	37.65
Outstanding at June 30, 2021		1,657	$	30.56	1.43 years	$	46,012
Balance at June 30, 2022								Balance at June 30, 2022	1,264	$	19.96	1.86

1 Represents additional PSUs awarded as a result of the achievement of performance goals above the performance targets established at grant.

As of June 30, ~~2021, there~~2022, there was ~~$32.3~~$32.1 million of total unrecognized compensation cost related to PSUs.

Employee Stock Purchase Plan ~~(ESPP)~~("ESPP")

As of June 30, ~~2021,~~2022, there was approximately ~~$0.6~~$1.7 million of unrecognized compensation cost related to employee stock purchases. This cost is expected to be recognized over a weighted average period of ~~0.1~~0.3 years. As of June 30, ~~2021,~~2022, a total of ~~2,865,669~~1.0 million shares were available for issuance under the ESPP.

~~Salary and Bonus Stock Program~~

In March 2021, the Company offered its employees an opportunity to receive a portion of their base cash salary and/or cash bonus for fiscal 2022 in shares of the Company's common stock. Participants that choose to receive stock in place of base cash salary will be subject to reduced cash payroll starting July 2021 through March 2022. The number of shares received by the employee is based on the lower of the closing price of the common stock as of one of two specified look-back dates.

The estimated fair value of the shares issued has two components: 1) the value of the base cash salary and/or cash bonus opted to be received as shares, and 2) the grant date fair value of the look-back feature. The estimated fair value of the stock awards will be recognized in stock based compensation expense over the requisite service period of the participants, which may differ from the period in which their original cash compensation is earned. The look-back features are valued as options using the Black-Scholes model, applied to the total number of shares would have been granted under the program based on the closing price of our common stock on the grant date.

~~The following table presents the estimated fair value on the date of grant of each of the look-back features and the assumptions used in the Black-Scholes pricing model:~~

Fair value of look-back options $4.64 - $8.24
Valuation assumptions:
Expected volatility 58.7%
Risk-free interest rates 0.06 % - 0.07%
Expected terms (in years) 0.38 - 1.21
Dividend rate 0%

The risk-free rates were determined based on published treasury rates over terms consistent with those of the share exchange program. The volatility rate was determined based on historic volatility of the Company's stock and is consistent with the rate used for valuation of the PSU awards granted in June 2021.

~~As of June 30, 2021, there was $8.8 million of total unrecognized compensation cost related to the stock exchange program.~~

Stock Repurchases

There were 0no stock repurchases during the three months ended June 30, ~~2021~~2022 and ~~June 30, 2020.~~2021.

~~10.~~9. INCOME TAXES

The Company's effective tax rate was ~~(0.6)~~(1.6)% and ~~(0.5)~~(0.6)% for the three months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively. The difference in the effective tax rate and the U.S. federal statutory rate was primarily due to the full valuation allowance the Company maintains against its deferred tax assets. The effective tax rate is calculated by dividing the Provision for income taxes by the Loss before provision for income ~~taxes~~.taxes.

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~~11.~~10. NET LOSS PER SHARE

The following ~~table presents~~is a reconciliation of the weighted average number of common shares outstanding used in calculating basic and diluted net loss per share (dollars in thousands, except per share data):

Three Months Ended June 30,
2021 2020
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)


	Three Months Ended June 30,
	2022		2021
Net loss	$	(26,043)	$	(43,906)
Weighted average common shares outstanding - basic and diluted (in thousands)	119,721		109,925

Net loss per share - basic and diluted	$	(0.22)	$	(0.40)

The following potentially dilutive common shares were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive (shares in thousands):

Three Months Ended June 30,
2021 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~~

~~The following tables present information by geographic area:~~

Three Months Ended June 30,
Revenue by geographic area:
2021 2020
United States $ 103,658 $ 93,244
International 44,669 28,563
Total revenue $ 148,327 $ 121,807

Property and equipment by geographic area: June 30, 2021 March 31, 2021
United States $ 85,928 $ 87,945
International 4,848 5,131
Total property and equipment, net $ 90,776 $ 93,076


	Three Months Ended June 30,
	2022	2021
Stock options	854	1,413
Restricted stock units and Performance stock units	16,731	12,483
Potential shares attributable to the ESPP	1,047	444

Total anti-dilutive shares	18,632	14,340

1711. GEOGRAPHICAL INFORMATION

~~Table~~The following tables set forth the geographic information for each period (dollars in thousands):


	Three Months Ended June 30,
	2022		2021
United States	$	136,120	$	103,658
International	51,500		44,669
Total revenue	$	187,620	$	148,327


	Property and Equipment as of
	June 30, 2022		March 31, 2022
United States	$	69,469	$	73,967
International	4,407		5,049
Total property and equipment, net	$	73,876	$	79,016

12. ACQUISITIONS

Fuze

On January 18, 2022, the Company acquired 100% of ~~Contents~~the outstanding shares of common stock of Fuze, Inc. for a total consideration of $213.8 million, which consisted of $132.9 million in cash and $80.9 million in shares of common stock of the Company, of which, approximately $1.3 million in cash and up to 1,153,523 shares were held back as part of the merger agreement, and 346,053 shares were held back (pursuant to indemnity obligations) and reserved for later issuance. Subsequently, in May 2022, the approximately $1.3 million in cash held back was released as part of the working capital adjustment. The results of Fuze, Inc.’s operations have been included in the Company's consolidated financial statements, including $29.5 million of revenue in the first quarter of fiscal 2023.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly ~~Report on Form 10-Q.~~Report. As discussed in the section titled “Forward-Looking Statements,” the following discussion and analysis contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those discussed below and elsewhere in this report, particularly those set forth under the section entitled "Risk Factors" in ~~our Annual Report on~~the Form ~~10-K ("Form 10-K") for the fiscal year ended March 31, 2021.~~10-K.

~~BUSINESS~~ OVERVIEW

We are a leading ~~software-as-a-service ("SaaS")~~SaaS provider of voice, video, ~~chat,~~ contact center, and ~~enterprise-class application programming interface ("API") solutions~~communication APIs powered by ~~one~~a global cloud communications platform. From our proprietary cloud technology platform, organizations across all their locations and employees ~~globally~~ have access to unified communications, team collaboration, video conferencing, contact center, data and analytics, communication APIs, and other services, enabling them to be more productive and responsive to their customers.

Our customers ~~represent companies ranging~~range from small businesses to large ~~multinational~~ enterprises and their users are spread across more than ~~150~~170 countries. In recent years, we have increased our focus on the mid-market ~~(which we define as customers that generate $25K to $100K ARR)~~ and enterprise ~~(which we define as customers that generate more than $100K ARR)~~ customer ~~categories. See “Key Business Metrics” section below for our definition and discussion of ARR.~~sectors.

We have a portfolio of ~~SaaS~~cloud-based offerings that are subscription-based, made available at different rates, varying by the specific functionalities, services, and number of users. We generate service revenue from communications services subscriptions ~~to our communication services as well as from our customer's usage of certain of our~~and platform ~~services.~~usage. We generate other ~~revenues~~revenue from professional services and the ~~sales and rentals~~sale of office phones and other hardware ~~equipment, and professional services.~~equipment. We define a “customer” as one or more legal entities to which we provide services pursuant to a single contractual arrangement. In some cases, we may have multiple billing relationships with a single customer (for example, where we establish separate billing accounts for a parent company and each of its subsidiaries).

Our flagship service is our 8x8 ~~X Series,~~XCaaS platform, which is a ~~next generation suite~~unified, cloud-based technology platform that includes a range of ~~unified communications as a service ("UCaaS")~~enterprise-grade Unified Communications-as-a-Service (UCaaS) and ~~contact center as a service ("CCaaS") solutions, which consist of~~Contact Center-as-a-Service (CCaaS) solutions. Our customers purchase service plans ofwith increasing functionality designated as X1, X2, etc., through ~~X8. With 8x8 X Series, we provide enterprise-grade voice, unified communications, video meetings, team collaboration,~~X8, based on the specific communication needs and ~~contact center functionalities from~~customer engagement profile of each user. Because XCaaS serves as a single ~~platform. The continued~~integration framework for communications across an organization, customers can reduce costs associated with provisioning and management, increase ~~in demand for an integrated UCaaS~~customization based on use cases, and ~~CCaaS solution led us to introduce eXperience Communications as~~ensure compliance with security and data privacy requirements on a ~~Service ("XCaaS")~~global scale. XCaaS also includes integrations with more than 50 third party applications, including Microsoft Teams.

In January 2022, we acquired Fuze, Inc., a ~~deployment model that erases boundaries between~~competitor in UCaaS for the enterprise, for approximately $213.8 million in stock and ~~CCaaS, delivered through~~cash. The acquisition of Fuze, Inc. increased our ~~differentiated single~~installed base of enterprise customers and accelerated innovation on the XCaaS platform.

We also offer standalone SaaS services for contact center and video meetings as well as enterprise communication APIs for SMS, messaging, voice, and video APIs through our global communications platform as a service ("CPaaS"). We expect to continue developing and enhancing these services on our platform, as we believe in the value of the collective solutions.

SUMMARY AND OUTLOOK

In the first quarter of fiscal ~~2022,~~2023, our ~~service~~total revenue grew $39.3 million or approximately ~~21%~~26% year-over-year to ~~$137.8~~$187.6 million. ~~We continued to show an increase in our~~Excluding $29.5 million from the Fuze customer base, total ~~ARR, which grew to $536 million in~~revenue increased 7% from the first quarter of ~~fiscal 2022,~~2022.

Annualized Recurring Subscriptions and Usage Revenue (ARR) from ~~$432 million in the same period in fiscal 2021, driven by the growth in sales to mid-market and enterprise customers. ARR from~~strategic mid-market and enterprise customers represented ~~68%~~77% of total ARR ~~in the first quarter of fiscal 2022,~~ and ~~grew 34%~~increased 45% compared to the same period in fiscal ~~2021.~~2022. ARR associated with Small Business customers declined 7% year-over-year and accounted for 23% of total ARR, compared to 32% of ARR a year ago. We have focused our sales and marketing resources on increasing our enterprise ARR as a long-term strategy due to enterprise customers' longer commitments, higher retention and better efficiency ratios. Enterprise customers are also more likely to need the advanced capabilities of our contact center solutions and realize the advantages of our unified XCaaS platform. See "Key Business Metrics" section below for further discussion on how we define ARR.

At the end of the first quarter of fiscal 2023, enterprise customers accounted for 59% of total ARR and more than 35% of our ARR was derived from customers deploying the UCaaS and CCaaS capabilities of our XCaaS platform.

As part of our long-term strategy to increase profitability and cash flow, we continue to focus on reducing the cost of delivering our services and improving our operating efficiency, while increasing our revenue and ARR from XCaaS and enterprise customers. Continued innovation to meet the evolving needs of today’s workforce is a critical factor attracting and retaining high value enterprise customers. Our ~~continued business focus~~acquisition of Fuze, Inc. increased our engineering resources dedicated to innovation on our XCaaS platform.

In fiscal 2023, we remain committed to increasing our investment in research and development compared to fiscal 2022 because we believe innovation drives competitive advantage and is onan important variable in achieving ~~improved operating efficiencies while delivering revenue~~sustainable growth. We plan to continue our efforts to reduce our unit costs to improve our gross profit margin as our business scales. Additionally, we plan to reduce our investments in sales and marketing as a percentage of revenue as we focus on ~~key areas of spend in our go-to-market strategy and improving gross margin and operating margin through increased spend discipline. Additionally, we look to drive~~driving improved efficiencies in our customer acquisition and ~~operations,~~sales operations. We expect our focus on reducing unit costs and ~~are focused on expanding our business upmarket with mid-market~~improving sales and ~~enterprise customers.~~marketing efficiency will result in improved operating margins and increased cash flow from operations. We believe that this approach of balancing increased investment in innovation with improved efficiency in other areas will enable the Company to ~~grow~~achieve sustained growth and ~~capture market share during this phase of industry disruption, in a cost-effective way, and support the Company in pursuit of its path to~~increasing profitability and ~~operating cashflow improvement.~~cash flow.

We plan to continue making investments in activities to acquire more customers, including investing in our marketing efforts, internal and field sales capacity, and research and development. We also intend to continue investing in our indirect channel programs to acquire more third-party selling agents to help sell our solutions, including investments in our value added resellers ("VARs") and master agent programs.

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~~IMPACTS~~IMPACT OF COVID-19

The full extent of the long-term impact of the COVID-19 pandemic on our business, operations and financial results ~~continues to~~will depend on numerous evolving factors that we may not be able to accurately predict, including those set forth under the section entitled "Risk Factors" in ~~our~~the Form ~~10-K for the fiscal year ended March 31, 2021.~~10-K. In an effort to contain ~~the~~COVID-19 or slow its spread, ~~of COVID-19 and its variants,~~ governments around the world have previously enacted various measures, including orders to close ~~at times~~ non-essential businesses, isolate residents to their homes, and practice social distancing. To protect the health and safety of our employees, our workforce ~~has spent~~continues to spend significant time working from home and travel has been curtailed for our employees as well as our customers. While we anticipate that the global health crisis caused by COVID-19 and the measures enacted to slow its spread

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will continue to negatively impact business activity across the globe, it is not clear what its full potential effects ~~including the availability and effectiveness of vaccines, now and in the future, and current and future variants of the virus,~~ will be on our business, including the effects on our customers, suppliers or vendors, or on our financial results.

KEY BUSINESS ~~METRIC~~METRICS

Our management periodically reviews certain key business metrics ~~in order~~ to evaluate our operations, allocate resources, and drive financial performance in our business.

Annualized Recurring Subscriptions and Usage ~~(“ARR”)~~Revenue

Our management reviews Annualized Recurring Subscriptions and Usage Revenue (“ARR”) and believes it may be useful to investors ~~in order~~ to evaluate trends in future revenues of the Company. Our management believes ~~revenues are~~ARR is an important indicator for measuring the overall performance of the business. Our management uses trends in ARR to assess our ~~on-going~~ongoing operations, allocate resources, and drive the financial performance of the business. We define ~~Annualized Recurring Subscriptions and Usage, or~~ ARR as equal to the sum of the most recent month of (i) recurring subscription amounts and (ii) platform usage charges for all CPaaS customers (subject to a minimum billings threshold for a period of at least six consecutive months), multiplied by 12. We are not aware of any uniform standards for calculating ARR and caution that our presentation may not be consistent with that of other companies. For example, to the extent our ARR is used to evaluate trends in future revenue, such an evaluation would assume a sustained level of usage from existing customers which may fluctuate in future periods.

COMPONENTS OF RESULTS OF OPERATIONS

Service Revenue

Service revenue consists of communication services subscriptions, platform usage revenue, and related fees from our UCaaS, CCaaS, ~~XCaaS,~~ and CPaaS offerings. We plan to continue ~~driving our business~~to invest resources to increase service revenue through a combination of increased sales and marketing efforts, ~~geographic~~ expansion of our ~~customer base outside the United States,~~global connectivity, innovation in product and technology, and through strategic acquisitions of technologies and businesses.

Other Revenue

Other revenue consists of revenues from professional services, primarily in support of deployment of our solutions and/or platform, and revenues from sales and rentals of IP telephones in conjunction with our cloud telephony service. Other revenue is dependent on the number and size of customers who choose to purchase or rent an IP telephone in conjunction with our UCaaS service ~~instead of using the solution on their cell phone, computer or other compatible device, and/or~~and choose to engage our professional services organization for implementation and deployment of our cloud ~~services.~~UCaaS and CCaaS solutions.

Cost of Service Revenue

Cost of service revenue consists primarily of costs associated with network operations and related personnel, technology licenses, amortization of ~~platform related~~ capitalized internal-use software, other communication origination and termination services provided by third-party carriers and outsourced customer service call center operations, and other costs such as customer service, and technical support costs. We allocate overhead costs, such as IT and facilities, to cost of service revenue, as well as to each of the operating expense categories, generally based on relative headcount. Our IT costs include costs for IT infrastructure and personnel. Facilities costs primarily consist of office leases and related ~~expenses~~.expenses.

Cost of Other Revenue

Cost of other revenue consists primarily of direct and indirect costs associated with the purchasing of IP telephones as well as the scheduling, shipping and handling, personnel costs, expenditures incurred in connection with the professional services associated with the deployment and implementation of our products, and allocated IT and facilities costs.

Research and Development

Research and development expenses consist primarily of personnel and related costs, third-party development, software and equipment costs necessary for us to conduct our product, platform development and engineering efforts, and allocated IT and facilities costs.

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Sales and Marketing

Sales and marketing expenses consist primarily of personnel and related costs, sales commissions, including those to the channel, trade shows, advertising and other marketing, demand generation, promotional expenses, and allocated IT and facilities costs.

General and Administrative

General and administrative expenses consist primarily of personnel and related costs, professional services fees, corporate administrative costs, tax and regulatory fees, and allocated IT and facilities costs.

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Other Expense, Net

Other expense, net, consists primarily of interest expense related to the convertible notes, offset by income earned on our cash, cash equivalents, investments, and foreign exchange gains/losses.

(Benefit from) Provision for Income Taxes

~~Provision~~(Benefit from) provision for income taxes consists primarily of foreign income taxes and state minimum taxes in the United States. As we expand the scale of our international business activities, any changes in the ~~U.S.~~United States and foreign taxation of such activities may increase our overall provision for income taxes in the future. We have a valuation allowance for our ~~U.S.~~United States deferred tax assets, including federal and state net operating loss ~~carryforwards ("NOLs").~~carryforwards. We expect to maintain this valuation allowance until it becomes more likely than not that the benefit of our federal and state deferred tax assets will be realized by way of expected future taxable income in the United States.

RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our condensed consolidated financial statements and the notes thereto. Our results of operations for the first quarter for fiscal 2023, and the discussion below, includes Fuze, Inc.'s results of operations, while the results of operations for our first quarter of fiscal 2022 did not include Fuze, Inc.’s results of operations, since it was acquired on January 18, 2022.

(Dollars in thousands)

Revenue

Service revenue


		2021			2020			Change					Three Months Ended June 30,						Change
													2022			2021

Three Months Ended June 30,		$	137,796		$	114,183		$	23,613	20.7	%
Service revenue												Service revenue	$	179,161		$	137,796		$	41,365	30.0	%
Percentage of total revenue	Percentage of total revenue	92.9		%	93.7		%					Percentage of total revenue	95.5		%	92.9		%

Service revenue increased for the three months ended as of June 30, ~~2021,~~2022, as compared to the three months ended as of June 30, ~~2020,~~2021, primarily due to a net increase in our ~~customer~~installed base of mid-market and enterprise customers, expanded ~~offerings to~~deployments by existing customers, ~~and~~ growth in related ~~usage;~~telecom usage by our customers, and our acquisition of Fuze, Inc., which contributed approximately $29.3 million in service revenue ~~from new customers~~for the three months ended June 30, 2022. During the three months ended June 30, 2022, we also recorded an out of period adjustment of $2.1 million related to a contract with one customer which was ~~primarily driven by global sales of XCaaS, and our standalone UCaaS and CCaaS offerings to our mid-market and enterprise customers.~~deferred in previous years. The increase in service revenue reflected increased sales of our UCaaS and CCaaS solutions, increased adoption of our XCaaS integrated communication and collaboration platform, and growth in sales of our UCaaS direct routing solution for Microsoft Teams users. The increase in service revenue from these sources was ~~also attributable to growth~~partially offset by a decrease in usage revenue generated by our CPaaS products, primarily in the ~~APAC~~Asia-Pacific region.

We expect ~~total~~our service revenue to grow over time with our diverse platform offering as we increase the features and functionality of our ~~business continues to~~platform and expand ~~globally and deeper into~~the global coverage of our ~~customer categories.~~UCaaS services.

Other revenue


		2021			2020			Change					Three Months Ended June 30,						Change
													2022			2021

Three Months Ended June 30,		$	10,531		$	7,624		$	2,907	38.1	%
Other revenue												Other revenue	$	8,459		$	10,531		$	(2,072)	(19.7)	%
Percentage of total revenue	Percentage of total revenue	7.1		%	6.3		%					Percentage of total revenue	4.5		%	7.1		%

Other revenue ~~increased~~decreased for the three months ended as of June 30, ~~2021,~~2022 as compared to the three months ended as of June 30, ~~2020, primarily~~2021, due to ~~increased professional services revenue resulting from the overall growth in our business and customer base, partially offset by~~ a decrease in product revenue asdue to current supply chain issues for hardware and a ~~result of a shift toward our hardware rental program and soft phone usage.~~

~~We expect other revenue to grow over time as our customer base grows, particularly~~decrease in ~~mid-market and enterprise, as we focus on delivering enhanced platform offerings to existing and new customers.~~professional services revenue.

No single customer represented ~~greater~~more than 10% of ~~the Company's~~our total ~~revenue~~revenues for the three months ended as of June 30, ~~2021~~2022 or ~~2020.~~the three months ended as of June 30, 2021.

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Cost of Revenue

Cost of service revenue


		2021			2020			Change					Three Months Ended June 30,						Change
													2022			2021

Three Months Ended June 30,		$	46,010		$	40,996		$	5,014	12.2	%
Cost of service revenue												Cost of service revenue	$	53,547		$	46,010		$	7,537	16.4	%
Percentage of service revenue	Percentage of service revenue	33.4		%	35.9		%					Percentage of service revenue	29.9		%	33.4		%

Cost of service revenue increased for the three months ended as of June 30, ~~2021,~~2022 as compared to the three months ended as of June 30, ~~2020, yet decreased as a percentage of service revenue, primarily~~2021, due to ~~increases of:~~

•~~$5.9~~an increase in sales of our services, resulting in an increase of $9.1 million in communication infrastructure costs incurred to deliver our services, ~~resulting from growth in usage across our platform~~ including those in connection with ~~CPaaS;~~

•~~$0.7~~CPaaS, a $1.8 million increase in employee and consulting related costs, and a $1.0 million increase in depreciation and amortization of ~~capitalized internal-use software; and~~

•~~$0.2 million in stock-based compensation expense.~~

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intangibles costs. These increases were partially offset by ~~decreases of:~~

•~~$1.1~~a $4.3 million decrease in ~~employee and consulting related expenditures; and~~

•~~$0.4 million in depreciation~~stock-based compensation and amortization of ~~intangible assets.~~intangibles.

We expect cost of service revenue will increase in absolute dollars, but decrease as a percentage of revenue in future ~~periods as revenue continues to grow.~~periods.

Cost of other revenue


		2021			2020			Change					Three Months Ended June 30,						Change
													2022			2021

Three Months Ended June 30,		$	13,746		$	11,137		$	2,609	23.4	%
Cost of other revenue												Cost of other revenue	$	13,126		$	13,746		$	(620)	(4.5)	%
Percentage of other revenue	Percentage of other revenue	130.5		%	146.1		%					Percentage of other revenue	155.2		%	130.5		%

Cost of other revenue ~~increased~~decreased for the three months ended as of June 30, ~~2021,~~2022 as compared to the three months ended as of June 30, ~~2020,~~2021, primarily due to decreased product costs associated with lower product shipments, partially offset by an increase in ~~hardware shipment volume.~~personnel and related costs to deliver our professional services.

Cost of other revenue as a percentage of other revenue decreased, due to improved pricing and an increase in our hardware rental revenue. We expect that Other revenue margin will vary period over period.

Operating Expenses

Research and development

2021 2020 Change
Three Months Ended June 30, $ 25,392 $ 21,494 $ 3,898 18.1 %
Percentage of total revenue 17.1 % 17.6 %


	Three Months Ended June 30,						Change
	2022			2021
Research and development	$	34,955		$	25,392		$	9,563	37.7	%
Percentage of total revenue	18.6		%	17.1		%

Research and development expenses increased for the three months ended as of June 30, ~~2021,~~2022 as compared to the three months ended as of June 30, ~~2020,~~2021 primarily due to ~~increases of:~~

•~~$2.2~~a $4.5 million increase in ~~stock-based compensation expense;~~

•~~$1.5~~personnel-related and consulting costs, a $3.2 million ~~from less~~reduction in capitalized internal-use software ~~costs;~~

•~~$0.5~~costs, and a $1.6 million increase in ~~employee~~software license and ~~consulting related expenditures;~~

•~~$0.5 million in public cloud expenses; and~~

•~~$0.3 million in amortization of capitalized internal-use software.~~

amortization. These increases were partially offset by a $0.5 million decrease in allocated facilities costs. Research and development as a percentage of ~~$0.7 million~~revenue increased for the three months ended as of June 30, 2022 as compared to the three months ended as of June 30, 2021 primarily due to increased investment in ~~facility~~developing our XCaaS platform, and ~~overhead costs.~~the acquisition of Fuze, Inc., which increased engineering personnel.

We plan to continue to invest in research and development to support our efforts to expand the capabilities and scope of our XCaaS platform ~~and~~ to enhance ~~the user~~our users' experience. While we expect to continue to improve our cost structure and achieve operational efficiencies, we expect that research and development expenses will increase in absolute dollars in future periods as we continue to invest in our development efforts and vary from period-to-period as a percentage of revenue.

Sales and marketing


		2021			2020			Change					Three Months Ended June 30,						Change
													2022			2021

Three Months Ended June 30,		$	75,915		$	60,150		$	15,765	26.2	%
Sales and marketing												Sales and marketing	$	83,527		$	75,915		$	7,612	10.0	%
Percentage of total revenue	Percentage of total revenue	51.2		%	49.4		%					Percentage of total revenue	44.5		%	51.2		%

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Sales and marketing expenses increased for the three months ended as of June 30, ~~2021,~~2022 as compared to the three months ended as of June 30, ~~2020,~~2021, primarily due to ~~increases of:~~

•~~$8.6~~a $8.6 million increase in ~~stock-based compensation expense;~~channel commissions, a $2.9 million increase in amortization of intangibles, and

•~~$6.8~~ a $1.0 million increase in ~~internal and external~~amortization of deferred sales ~~commissions.~~

commission costs. These increases were partially offset by a ~~net~~ decrease of ~~$0.1~~$6.4 million in ~~marketing program and public cloud expenses due to gained efficiencies in lead generation and brand awareness, travel related costs, and employee~~personnel-related and consulting ~~related expenditures.~~expenditures, including a $6.2 million decrease in stock-based compensation expense. Sales and marketing decreased as a percentage of revenue for the three months ended as of June 30, 2022 as compared to the three months ended as of June 30, 2021 as a result of increased revenue, including revenue from the Fuze, Inc. acquisition.

We ~~plan to continue investing in~~expect sales and marketing costs as a percent of revenue to ~~attract and retain customers~~decrease over time as we focus on ~~our platform and to increase our brand awareness. While we expect to continue to improve~~improving our cost structure and ~~achieve~~achieving operational ~~efficiencies, we expect that sales and marketing expenses will increase in absolute dollars in future periods and vary from period-to-period as a percentage of revenue.~~

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efficiencies.

General and administrative


		2021			2020			Change					Three Months Ended June 30,						Change
													2022			2021

Three Months Ended June 30,		$	26,091		$	25,790		$	301	1.2	%
General and administrative												General and administrative	$	29,219		$	26,091		$	3,128	12.0	%
Percentage of total revenue	Percentage of total revenue	17.6		%	21.2		%					Percentage of total revenue	15.6		%	17.6		%

General and administrative expenses increased for the three months ended as of June 30, ~~2021,~~2022 as compared to the three months ended as of June 30, ~~2020,~~2021, primarily due to ~~increases of:~~

•~~$2.6~~an increase of $1.9 million in ~~stock-based compensation expense;~~

•~~$0.8~~legal and regulatory costs and $1.6 million in ~~contract termination costs; and~~

•~~$0.5 million in facility related~~facilities costs.

These increases were partially offset by ~~decreases of:~~

•~~$2.0~~a $1.1 million decrease in ~~legal and regulatory costs;~~

•~~$1.0 million of lower allowances for credit losses; and~~

•~~$0.4 million in employee~~personnel-related and consulting ~~related expenditures.~~expenditures, including a $2.6 million decrease in stock-based compensation expense. General and administrative as a percentage of revenue decreased for the three months ended as of June 30, 2022 compared to the three months ended as of June 30, 2021 primarily as a result of higher revenue, lower stock based compensation, and increased operational efficiency.

We expect to continue improving our cost structure and achieve operational efficiencies, and therefore, also expect that general and administrative expenses as a percentage of total revenue will decline over time.

Other ~~expense,~~income (expense), net


		2021			2020			Change					Three Months Ended June 30,						Change
													2022			2021

Three Months Ended June 30,		$	4,823		$	3,925		$	898	22.9	%
Other income (expense), net												Other income (expense), net	$	1,116		$	(4,823)		$	5,939	123.1	%
Percentage of total revenue	Percentage of total revenue	3.3		%	3.2		%					Percentage of total revenue	0.6		%	(3.3)		%

~~The change in~~ Other ~~expense,~~income (expense), net increased for the three months ended as of June 30, ~~2021,~~2022 as compared to ~~the three months ended June 30, 2020, was~~2021 primarily due to ~~increased expenses~~a $3.4 million decrease in debt amortization costs as a result of adoption of ASU 2020-06 and $2.8 million related to ~~fluctuations in~~ foreign ~~exchange rates.~~

With the recognition of interest expense and amortization of debt discount and issuance costs in connection with our convertible senior notes, we expect Other expense, net to remain in a net expense position for the foreseeable future.currency gains year over year.

Provision for income taxes


		2021			2020			Change					Three Months Ended June 30,						Change
													2022			2021

Three Months Ended June 30,		$	256		$	228		$	28	12.3	%
Provision for income taxes												Provision for income taxes	$	405		$	256		$	149	58.2	%
Percentage of total revenue	Percentage of total revenue	0.2		%	0.2		%					Percentage of total revenue	0.2		%	0.2		%

There was ~~not a~~no material change to our ~~Provision~~provision for income taxes for the three months ended June 30, ~~2021~~2022, and no material changes are currently anticipated for the ~~foreseeable future.~~remainder of fiscal year 2023.

Liquidity and Capital Resources

As of June 30, ~~2021,~~2022, we had ~~$153.2~~$143.0 million of cash and cash equivalents and ~~investments. In addition, as of June 30, 2021, we had $8.6~~investments, including $1.4 million in restricted cash in support of letters of credit securing leases for office ~~facilities. As of March 31, 2021, we had $152.9 million of cash, cash equivalents,~~facilities and ~~investments and $8.6 million of restricted cash.~~

~~On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") was passed into law, which amended portions of relevant tax laws and provided relief to~~ certain qualifying entities. In connection with the CARES Act, the Company elected to defer certain employer payroll taxes, which reduced cash usage by approximately $5.0 million through March 31, 2021, of which approximately $2.5 million will be remitted to tax authorities during the third quarter of fiscal 2022 and the remaining amount due will be remitted in the third quarter of fiscal 2023.

In March 2021, the Company offered its employees a limited opportunity to receive a portion of their fiscal 2022 cash salary and/or cash bonus in shares of the Company's common stock. Based on employee elected participation, we expect lower cash usage from payroll compensation of over $4 million during the remainder of fiscal 2022 and approximately $4 million during the first quarter of fiscal 2023.equipment.

We believe that our existing cash, cash equivalents and investment balances and our anticipated cash flows from operations will be sufficient to meet our working capital, expenditure, and ~~expenditure~~contractual obligation requirements for the next 12 ~~months.~~months and the foreseeable future, although we expect to refinance our $500 million of convertible senior notes prior to maturity on February 1, 2024. Although we believe we have adequate sources of liquidity for the next 12 months and the foreseeable future, subject to such refinancing, the success of our operations, the global economic outlook, and the pace of sustainable growth in our markets,as well as uncertainty as a result of the COVID-19 pandemic and Russia's invasion of Ukraine, among other factors, could impact our business and liquidity.

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Period-over-Period Changes

Net cash provided by operating activities for the three months ended June 30, ~~2021,~~2022 was ~~$4.0~~$5.8 million, as compared ~~with net cash used of $9.3~~to $4.0 million infor the three months ended June 30, ~~2020.~~2021. Cash ~~provided by/~~used in or provided by operating activities is primarily affected by:

•~~the~~ net income or loss;

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•~~depreciation and amortization;~~

•~~the~~non-cash expense items, such as depreciation, amortization, ~~associated with deferred sales commissions, debt discount~~ and ~~issuance costs;~~impairments;

•~~the~~non-cash expense associated with stock options and stock-based ~~compensation;~~compensation and awards; and

•changes in working capital accounts, particularly inrelated to the timing of collections from ~~receivable~~receivables and payments of obligations, such as commissions.

~~During~~For the three months ended June 30, ~~2021,~~2022, net cash provided byin operating activities was ~~primarily related~~a result of an adjustment to net loss of $56.3 million in non-cash ~~operating expenses, including:~~

•charges, such as stock-based compensation expense of ~~$36.6 million;~~

•$27.8 million, depreciation and amortization expenses of ~~$11.5 million;~~

•$14.2 million, amortization of ~~the debt discount~~deferred sales commission costs of ~~$4.4 million;~~$9.2 million, and

•operating lease expenses of ~~$3.5~~$3.1 million.

These ~~amounts~~adjustments for non-cash charges were partially offset ~~by:~~

•~~the net loss~~by $24.4 million of ~~$43.9 million;~~working capital adjustments driven by $13.8 million in accounts payable and

•~~net cash outflows from~~ accruals, and $9.2 million in deferred sales ~~commissions of $8.2 million.~~commission costs.

Net cash used in investing activities was $5.8 million for the three months ended June 30, 2022, as compared to $11.1 million in the three months ended June 30, ~~2021, as compared with $11.9 million in the three months ended June 30, 2020.~~2021. The cash used in investing activities during the three months ended June 30, ~~2021, was~~2022 primarily related ~~to:~~

•~~capitalized internal-use~~to $2.3 million of internally developed software ~~development costs of $6.5 million; and,~~

•~~purchases~~capitalization, $1.3 million of investments ~~of $28.7 million, partially offset by $25.0 million~~purchased, net of proceeds from sales and maturities of investments, and ~~sales~~$1.3 million payout of ~~investments.~~the cash holdback related to the Fuze, Inc. acquisition.

Net cash provided by financing activities was ~~$3.4~~$0.1 million infor the three months ended June 30, ~~2021,~~2022, as compared ~~with $0.1~~to $3.4 million infor the three months ended June 30, ~~2020. Cash~~2021. The cash provided by financing activities for the three months ended June 30, ~~2021~~2022 was ~~primarily related~~due to the ~~proceeds~~issuance of common stock of $0.1 million from ~~exercises of~~employee stock ~~options.~~purchase plans and employee option exercises.

CRITICAL ACCOUNTING POLICIES &AND ESTIMATES

The discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosures of assets and liabilities. On an on-going basis, we evaluate our critical accounting policies and estimates. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

~~There~~Our consolidated financial statements are prepared in accordance with U.S. GAAP. Refer to Note 1, The Company and Significant Accounting Policies, in the Notes to Consolidated Financial Statements included in this Quarterly Report, which describes the significant accounting policies and methods used in the preparation of our consolidated financial statements. Other than the adoption of ASU 2020-06 as discussed in Note 1, The Company and Significant Accounting Policies, in the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report, there have been no significant changes during the three months ended June 30, ~~2021,~~2022 to our critical accounting policies and estimates previously disclosed in ~~our~~the Form ~~10-K for the fiscal year ended March 31, 2021.~~

~~NEW ACCOUNTING PRONOUNCEMENTS~~

~~For a discussion of recently adopted accounting pronouncements and recent accounting pronouncements not yet adopted, refer to Note 2,~~ ~~Summary of Significant Accounting Policies, in the Notes to Unaudited Condensed Consolidated Financial Statements included in this Quarterly Report.~~10-K.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Fluctuation Risk

We had cash, cash equivalents, ~~restricted cash,~~ and investments totaling ~~$161.9~~$143.0 million as of June 30, ~~2021.~~2022. Cash equivalents and investments were invested primarily in money market funds, ~~U.S.~~United States treasury, commercial paper, and corporate bonds. Our investment policy is focused on the preservation of capital and supporting our liquidity needs. Under the policy, we invest in highly rated securities, while limiting the amount of credit exposure to any one issuer other than the ~~U.S.~~United States government. We do not invest in financial instruments for trading or speculative purposes, nor do we use leveraged financial instruments. We utilize external investment managers who adhere to the guidelines of our investment policy. A hypothetical 10% change in interest rates would not have a material impact on the value of our cash, cash equivalents, or available-for-sale investments.

As of June 30, ~~2021,~~2022, the Company ~~had $362.5~~has issued $500.0 million or aggregate principal amount of convertible senior ~~notes outstanding, which had an estimated fair value was $450.7 million.~~notes. The fair value of the convertible senior notes is subject to interest rate risk, market risk, and other factors due to the conversion feature. The fair value of the convertible senior notes will generally increase as ~~our~~the Company's common stock price increases and will generally decrease as ~~our~~its common stock price declines. The interest and market value changes affect the fair value of the convertible senior notes but do not impact our financial position, cash flows, or results

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of operations, due to the fixed nature of the debt obligation. Additionally, we carry the convertible senior notes at face value, less unamortized discount, on our consolidated balance sheets, and we present the fair value for required disclosure purposes only.

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Foreign Currency Exchange Risk

We have foreign currency risks related to our revenue and operating expenses denominated in currencies other than the ~~U.S.~~United States dollar, primarily the British Pound and Euro, causing both our revenue and our operating results to be impacted by fluctuations in the exchange rates.

Gains or losses from the revaluation of certain cash balances, accounts receivable balances and intercompany balances that are denominated in these currencies impact our net income (loss). A hypothetical decrease in all foreign currencies against the USUnited States dollar of 10% would not result in a material foreign currency loss on foreign-denominated balances ~~for the three months ended~~as of June 30, ~~2021.~~2022. As our foreign operations expand, our results may be more impacted by fluctuations in the exchange rates of the currencies in which we do business.

At this time, we do not, but we may in the future, enter into financial instruments to hedge our foreign currency exchange risk.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of ~~Effectiveness of~~ Disclosure Controls and Procedures

~~We maintain disclosure controls and procedures as defined in Rule 13a-15(e) and 15d-15(e) under~~Our management, with the Securities Exchange Act of 1934 (Disclosure Controls) that are designed to ensure that information we are required to disclose in reports filed or submitted under the Securities and Exchange Act of 1934 is accumulated and communicated to management, including our principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure, and that such information is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

~~As of the end of the period covered by this Quarterly Report on Form 10-Q, under the supervision~~participation of our Chief Executive Officer and ~~our~~ Chief Financial Officer, wehas evaluated the effectiveness of our ~~Disclosure Controls.~~ disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of June 30, 2022. As permitted by SEC guidance for newly acquired businesses, this evaluation did not include an assessment of those disclosure controls and procedures that are subsumed by and did not include an assessment of internal control over financial reporting as it relates to Fuze, Inc., which was acquired on January 18, 2022. The Company has excluded Fuze from its assessment of the effectiveness of its internal control over financial reporting as of June 30, 2022. Based on ~~this~~such evaluation, our Chief Executive Officer and ~~our~~ Chief Financial Officer have concluded that, ~~our Disclosure Controls were effective~~ as of June 30, ~~2021.~~2022, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

During the three months ended June 30, 2022, there was no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Limitations on the Effectiveness of Controls

Our management, including the Chief Executive Officer and Chief Financial Officer, do not expect that our Disclosure Controls or internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.

~~Changes in Internal Control over Financial Reporting~~

During the first quarter of fiscal year 2022, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. ~~OTHER INFORMATION~~Other Information

ITEM 1. LEGAL PROCEEDINGS

~~The information set forth~~Information with respect to this item may be found in Note 7,6, Commitments and Contingencies, under the heading “Legal Proceedings” in the Notes to Unaudited Condensed Consolidated Financial Statements included in this Quarterly Report is incorporated by reference in response to this item.

~~ITEM~~Item 1A. RISK FACTORS

~~There have been no material changes from~~Investing in our securities involves risk. Prior to making a decision about investing in our securities, you should carefully consider the specific factors discussed below and under the heading “Risk Factors” in any prospectus supplement, together with all of the other information contained or incorporated by reference in this Quarterly Report. You should also consider the risk factors ~~previously disclosed~~related to our business and operations described in ~~our~~Part I, Item 1A of the Form 10-K ~~for~~under the ~~fiscal year ended March 31, 2021.~~heading “Risk Factors,” which are incorporated by reference in this Quarterly Report. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also affect our operations.

Any reduction in spending may not achieve the desired result or may result in a reduction in revenue.

Our increased emphasis on profitability and cash flow generation may not be successful. We intend to reduce our total costs as a percentage of revenue, primarily impacting our sales and marketing expenses. There can be no assurances that our cost reduction initiatives will result in the cost savings that we anticipate as percentage of our revenue and will not have unintended or unforeseen consequences, including a reduction in revenue.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a) None.

(b) None.

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ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

~~None.~~Not applicable.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

Incorporated by Reference

Exhibit Number

Exhibit Description

Company Form

Filing Date

Exhibit Number

Filed Herewith

3.1

Certificate of Amendment to the Restated Certificate of Incorporation of Registrant, dated J u ly 12, 2022

8-K

7/13/2022

3.1

3.2

Amended and Restated By-Laws of 8x8, Inc.

8-K

7/28/2015

3.2

31.1

Certification of Chief Executive Officer of the Registrant pursuant to Rule 13a-14

31.2

Certification of Chief Financial Officer of the Registrant pursuant to Rule 13a-14

32.1

Certification of Chief Executive Officer of the Registrant pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2

Certification of Chief Financial Officer of the Registrant pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101

The following materials from 8x8, Inc.'s Quarterly Report on Form 10-Q for the three months ended June 30, 2022, formatted in Inline XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations for the three months ended June 30, 2022 and 2021, (iii) Consolidated Statements of Comprehensive Loss for the three months ended June 30, 2022 and 2021, (iv) Consolidated Statements of Stockholders’ Equity for the three months ended June 30, 2022 and 2021, (v) Consolidated Statements of Cash Flows for the three months ended June 30, 2022 and 2021 and (vi) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags XBRL Instance Document


Exhibit Number						~~Description~~
~~3.1~~						~~Restated Certificate of Incorporation of Registrant, dated August 22, 2012 (incorporated by reference to Exhibit 3.1 to the Annual Report on Form 10-K filed May 27, 2013).~~
~~3.2~~						~~Amended and Restated By-Laws of 8x8, Inc. (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K filed July 28, 2015).~~
~~4.1~~						Indenture, dated as of February 19, 2019, between 8x8, Inc. and Wilmington Trust, National Association, as trustee (including form of Note) (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed February 19, 2019).
~~10.1~~						Amended and Restated 2017 Executive Change-In-Control and Severance Policy as filed herewith.*
~~31.1~~						~~Certification of Chief Executive Officer pursuant to Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~
~~31.2~~						~~Certification of Chief Financial Officer pursuant to Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~
~~32.1~~						~~Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~
~~32.2~~						~~Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~
~~101~~						The following materials from the 8x8, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2021, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets as of June 30, 2021 and March 31, 2021; (ii) Condensed Consolidated Statements of Operations for the three months ended June 30, 2021 and 2020; (iii) Condensed Consolidated Statements of Comprehensive Loss for the three months ended June 30, 2021 and 2020; (iv) Condensed Consolidated Statements of Stockholders' Equity for the three months ended June 30, 2021 and 2020; (v) Condensed Consolidated Statements of Cash Flows for the three months ended June 30, 2021 and 2020; and (vi) notes to unaudited condensed consolidated financial statements.
~~104~~						~~Cover Page Interactive Data File, formatted in iXBRL and contained in Exhibit 101.~~

* Indicates management contract or compensatory plan or arrangement.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant, 8x8, Inc., a Delaware corporation, has duly caused this Quarterly Report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Campbell, State of California, on July 29, 2022.



*8x8, Inc.			~~Management contract or compensatory plan or arrangement.~~
+			~~Furnished herewith.~~

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~~SIGNATURE~~

~~Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.~~

~~Date: August 5, 2021~~


			~~8X8, INC.~~

			By: /s/ ~~Samuel Wilson~~SUZY SEANDEL
			~~Samuel Wilson~~Suzy Seandel
			~~Chief Financial Officer~~ (Principal ~~Financial~~Accounting Officer and Duly Authorized Officer)

2731


Fair value of look-back options	$4.64		-	$8.24
Valuation assumptions:
Expected volatility	58.7%
Risk-free interest rates	0.06	%	-	0.07%
Expected terms (in years)	0.38		-	1.21
Dividend rate	0%


	Three Months Ended June 30,
Revenue by geographic area:		2021		2020
United States		$	103,658	$	93,244
International		44,669		28,563
Total revenue		$	148,327	$	121,807