UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended SeptemberJune 30, 20152016

OR

[  ] 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 000-21783

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)

2125 O'Nel Drive
San Jose, CA  95131
(Address of Principal Executive Offices)

(408) 727-1885
(Registrant's Telephone Number, including Area Code)

      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.   x YES     ¨ NO   

      Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).     YES  x     NO  ¨

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

      Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES   ¨        NO   x

      The number of shares of the Registrant's Common Stock outstanding as of October 23, 2015July 25, 2016 was 89,285,628.89,680,865.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION	Page No.
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets at SeptemberJune 30, 20152016 and March 31, 20152016	32
Condensed Consolidated Statements of Operations for the three            and six months ended SeptemberJune 30, 20152016 and 20142015	43
Condensed Consolidated Statements of Comprehensive Income (Loss) for the three            and six months ended SeptemberJune 30, 20152016 and 20142015	54
Condensed Consolidated Statements of Cash Flows for the sixthree months            ended SeptemberJune 30, 20152016 and 20142015	65
Notes to Unaudited Condensed Consolidated Financial Statements	76
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	2017
Item 3. Quantitative and Qualitative Disclosures About Market Risk	2722
Item 4. Controls and Procedures	2723
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	2723
Item 1A. Risk Factors	2824
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	2824
Item 5. Other Information	2824
Item 6. Exhibits	2825
Signature	2926

21

Part I -- FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

8X8, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, unaudited)

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

2

8X8, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts; unaudited)

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

3

8X8, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONSCOMPREHENSIVE INCOME (LOSS)
(In thousands, except per share amounts; unaudited)

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

4

8X8, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)CASH FLOWS
(In thousands, unaudited)

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

5

8X8, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)

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

6

8X8, Inc.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS

1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS

8x8, Inc. ("8x8"(8x8 or the "Company")Company) is a leading provider of VoIP (Voice over Internet Protocol) technologycloud-based, enterprise-class software solutions that transform the way businesses communicate and SaaS (Software ascollaborate globally. The Company's integrated, "pure-cloud" offering combines global voice, conferencing, messaging and video with integrated workflows and big data analytics on a service) communication solutions in the cloud for SMBs (Smallsingle platform to enable increased team productivity, better customer engagement and Midsize Business) and mid-market and distributed enterprises. The Company delivers a broad suite of SaaS services to in-office and mobile devices spanning cloud telephony, virtual contact center and virtual meeting through its proprietary unified SaaS platform.real-time insights into business performance.

BASIS OF PRESENTATION

The Company's fiscal year ends on March 31 of each calendar year. Each reference to a fiscal year in these notes to the consolidated financial statements refers to the fiscal year ended March 31 of the calendar year indicated (for example, fiscal 20162017 refers to the fiscal year ended March 31, 2016)2017).

The accompanying interim condensed consolidated financial statements are unaudited and have been prepared on substantially the same basis as our annual consolidated financial statements for the fiscal year ended March 31, 2015.2016. In the opinion of the Company's management, these interim condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair statement of our financial position, results of operations and cash flows for the periods presented. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from these estimates.

The March 31, 20152016 year-end condensed consolidated balance sheet data in this document were derived from audited consolidated financial statements and does not include all of the disclosures required by U.S. generally accepted accounting principles. 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, 20152016 and notes thereto included in the Company's fiscal 20152016 Annual Report on Form 10-K.

The results of operations and cash flows for the interim periods included in these condensed consolidated financial statements are not necessarily indicative of the results to be expected for any future period or the entire fiscal year.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of 8x8 and its subsidiaries. All material intercompany accounts and transactions have been eliminated.

SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies used in preparation of these condensed consolidated financial statements are disclosed in our Annual Report on Form 10-K for the fiscal year ended March 31, 20152016 filed with the SEC on May 29, 2015,31, 2016, and there have been no changes to the Company's significant accounting policies during the three months ended SeptemberJune 30, 2015,2016, except as described in the "Recent"Recently Adopted Accounting Pronouncements" section below and Note 10, "Segment Reporting".below.

76

RECENTRECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS

In April 2014,2015, the Financial Accounting Standards Board ("FASB")(FASB) issued Accounting Standards Update (ASU) 2014-08,2015-5, Presentation"Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer's Accounting for Fees Paid in a Cloud Computing Arrangement." This update provides guidance in evaluating whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the software license element of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components ofthe arrangement should be accounted for as an Entity. This ASU changes the requirements for reporting discontinued operations in FASB ASU 205-20, such that a disposalacquisition of a component of an entity orsoftware license. If a group of components of an entity is required to be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity's operations and financial results. This ASU requires an entity to present, for each comparative period, the assets and liabilities of a disposal group that includes a discontinued operation separately in the asset and liability sections, respectively, of the statement of financial position, as well as additional disclosures about discontinued operations. Additionally, the ASU requires disclosures about a disposal of an individually significant component of an entity thatcloud computing arrangement does not qualifyinclude a software license, the customer should account for discontinued operations presentation in the financial statements and expands the disclosures about an entity's significant continuing involvement witharrangement as a discontinued operation.service contract. The guidance does not change generally accepted accounting principles for a customer's accounting for service contracts. This update is effective for annual periods, including interim periods within those annual periods, beginning on or after December 15, 2014. We2015. Therefore, the Company has prospectively adopted this pronouncement for our fiscal year beginningnew standard on April 1, 2015, and there was no effect2016. The adoption of this standard did not have a material impact on our consolidated financial statements.

In JulyNovember 2015, the FASB issued ASU 2015-11,2015-17,Simplifying the MeasurementIncome Taxes - Balance Sheet Classification of Inventory,Deferred Taxes (Topic 330)740), which amends the guidelines for the measurement of inventory. Under the amendments, an entity should measure inventory valued using a first-in, first-out or average cost method at the lower of cost. This ASU requires all deferred tax liabilities and net realizable value. Net realizable value is defined as the estimated selling priceassets to be presented in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. This amendment is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Earlybalance sheet as noncurrent. As permitted, the Company early adopted this standard prospectively during the quarter ended June 30, 2016. The adoption is permitted. The Company is currently assessing the impact of this pronouncementstandard resulted in reclassifying current deferred income tax assets to its consolidated financial statements.noncurrent deferred income tax assets and current deferred income tax liabilities to noncurrent deferred income tax liabilities. No prior periods were retrospectively adjusted.

RECENT ACCOUNTING PRONOUNCEMENTS

In May 2014, the FASB issued Accounting Standards Update ASU No. 2014-09,Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard will become effective for public companiesthe Company on JanuaryApril 1, 2018. The standard permits the use of either the retrospective or cumulative effect transition method. The Company has not yet selected a transition method.

In April 2016, the FASB issued ASU No. 2016-10,Revenue from Contracts with Customers (Topic 606) - Identifying Performance Obligations and Licensing. The ASU amends the guidance in ASU 2014-09 related to identifying performance obligations and accounting for licenses of intellectual property.

In May 2016, the FASB issued ASU No. 2016-12,Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients. The amendment provides clarifying guidance in certain narrow areas and adds some practical expedients.

The Company is currently assessing the impact of this pronouncement and its amendments to its consolidated financial statements.

In September 2015, the FASB issued ASU 2015-16,Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments. Topic 805 requires an acquirer retrospectively adjust provisional amounts recognized in a business combination during the measurement period. To simplify the accounting for adjustments made to provisional amounts, the amendment requires that the acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amount is determined. The acquirer is required to also record, in the same period's financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. In addition, an entity is required to present separately on the face of the income statement or disclose in the notes to the financial statements the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date.

The amendments are effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years. The amendments should be applied prospectively to adjustments to provisional amounts that occur after the effective date with earlier application permitted for financial statements that have not been issued. The Company is currently assessing the impact of this pronouncement to its consolidated financial statements.

87

2. CASH, CASH EQUIVALENTS, INVESTMENTS AND FAIR VALUE MEASUREMENTS

Cash, cash equivalents, and available-for-sale investments, and fair value measurementscontingent consideration were (in thousands):

98

Contractual maturities of investments as of SeptemberJune 30, 20152016 are set forth below (in thousands):

Contingent Consideration and Escrow Liability

The Company's contingent consideration liability and escrow liability, included in other accrued liabilities and non-currentnoncurrent liabilities on the consolidated balance sheets, was associated with the QSCQuality Software Corporation (QSC) acquisition made in the first quarter of fiscal 2016. Amounts held in escrow were measure at fair value using present value computations. The liabilitycontingent consideration was measured at fair value using a probability weighted average of the potential payment outcomes that would occur should certain contract milestones be reached. There is no market data available to use in valuing the contingent consideration; therefore, the Company developed its own assumptions related to the achievement of the milestones to evaluate the fair value of the liability. As such, the contingent consideration is classified within Level 3 as described below.

The itemitems are classified as Level 3 within the valuation hierarchy, consisting of contingent consideration and escrow liability related to the DXIQSC acquisition, waswere valued based on an estimate of the probability of success of the milestones being achieved.achieved and present value computations, respectively. The table below presents a rollforwardroll-forward of the contingent consideration and escrow liability valued using a Level 3 input (in thousands):

3. BALANCE SHEET DETAILINVENTORIES

9

4. INTANGIBLE ASSETS AND GOODWILL

The carrying value of intangible assets consisted of the following (in thousands):

At SeptemberJune 30, 2015,2016, annual amortization of intangible assets, based upon our existing intangible assets and current useful lives, is estimated to be the following (in thousands):

10

5. RESEARCH, DEVELOPMENT AND SOFTWARE COSTS

In the first sixthree months of fiscal 2017 and 2016, the Company expensed all research and development costs in accordance with ASC 985-20,Costs of Software to be Sold, Leased or Marketed (ASC 985-20). At September 30, 2015 and March 31, 2015, total capitalized software development costs included in other long-term assets were approximately $0 and $1.0 million, respectively, and accumulated amortization costs related to capitalized software were approximately $0 and $0.5 million, respectively.

The Company accounts for computer software developed or obtained for internal use in accordance with ASC 350-40,Internal Use Software (ASC 350-40). Capitalized costs are classified as either long-term assets or property and equipment on the consolidated balance sheets.

Other Long-Term Assets

In the first sixthree months of fiscal 2017, the Company capitalized $0.7 million as other long-term assets. In the first three months of fiscal 2016, the Company capitalized $0.7$0.5 million ofas other long-term assets. At June 30, 2016 and March 31, 2016, total completed capitalized software development costs included in accordance with ASC 350-40, which were classified as long-term assets. At September 30, 2015, the Company had capitalized $2.4 million of software development costs in accordance with ASC 350-40, of which $1.4 million have been classified as long-term assets, and $1.0 million have been classified as property and equipment. As of March 31, 2015, the Company capitalized $1.5 million in accordance with ASC 350-40, of which $0.8 million has been classified as property and equipment and $0.7 million has been classified as long-term assets. In the first six months of fiscal 2015 and as of September 30, 2014, the Company capitalized $0.5 million in accordance with ASC 350-40, of which $0.2 million were classified as other long-term assets was approximately $1.7 million and $0.3 million were classified as property and equipment.$0, respectively. At SeptemberJune 30, 20152016 and March 31, 2015,2016, accumulated amortization costs related to capitalized software werein other long term assets was approximately $0.1 million and $0, respectively.

Property and Equipment

In the first three months of fiscal 2017, the Company capitalized $0.3 million as property and equipment. The Company did not capitalize any costs in property and equipment in accordance with ASC 350-40 in the first three months of fiscal 2016. At June 30, 2016 and March 31, 2016, total completed capitalized software costs included in property and equipment was approximately $1.2 million. At June 30, 2016 and March 31, 2016, accumulated amortization costs related to capitalized software in property and equipment was approximately $0.3 million and $0.2 million, respectively.

10

6. COMMITMENTS AND CONTINGENCIES

Leases

The Company leases its headquarters facility in San Jose, California under an operating lease agreement that expires in October 2019. The lease is an industrial net lease with monthly base rent of $130,821 for the first 15 months with a 3% increase each year thereafter, and requires us to pay property taxes, utilities and normal maintenance costs. The Company also leases facilities for office space under non-cancelable operating leases for its various domestic and international locations.

The Company has entered into a series of noncancelable capital lease agreements for office equipment bearing interest at various rates. Assets under capital lease at June 30, 2016 totaled $1.6 million with accumulated amortization of $0.6 million.

Guarantees

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 might not have a contractual limit.

Product Warranties

The Company accrues for the estimated costs that may be incurred under its product warranties upon revenue recognition. Changes in the Company's product warranty liability, which is included in cost of product revenues in the consolidated statements of operations,income (loss), were as follows (in thousands):

11

Minimum Third Party Customer Support Commitments

In the third quarter of 2010, the Company amended its contract with one of its third party customer support vendors containing a minimum monthly commitment of approximately $0.4 million effective April 1, 2010. The agreement requires a 150-day notice to terminate. At SeptemberJune 30, 2015,2016, the total remaining obligation underupon a termination of the contract was $2.2 million.

11

Minimum Third Party Network Service Provider Commitments

The Company has entered into contracts with multiple vendors for third party network service which expire on various dates in fiscal 20162017 through 2018.2020. At SeptemberJune 30, 2015,2016, future minimum annual payments under these third party network service contracts were as follows (in thousands):

Legal Proceedings

The Company, from time to time, is involved in various legal claims or litigation, including patent infringement claims that can arise in the normal course of the Company's operations. Pending or future litigation could be costly, could cause the diversion of management's attention and could upon resolution, have a material adverse effect on the Company's business, results of operations, financial condition and cash flows.

On February 22, 2011, the Company was named a defendant in Bear Creek Technologies, Inc. ("BCT") v. 8x8, Inc. et al., filed in the U.S. District Court for the District of Delaware ("the Court"), along with 20 other defendants. InOn August 17, 2011, the suit was dismissed without prejudice and then wasas to the Company under Rule 21 of the Federal Rules of Civil Procedure. On August 17, 2011, Bear Creek Technologies, Inc. refiled its suit against the Company beforein the same Court. OnUnited States District Court for the District of Delaware. Further, on November 28, 2012, the USPTOU.S. Patent & Trademark Office initiated and has since maintained a Reexamination Proceeding in which the claimsproceeding with a Reexamination Declaration explaining that there is a substantial new question of the patent (asserted against the Company) were rejected as being invalidpatentability, based on four separate grounds.  In response togrounds and affecting each claim of the patent which is the basis for the complaint filed against us. On March 26, 2013, the USPTO invalidity rejections,issued a first Office Action in the Reexamination, with all claims of the '722 patent being rejected on each of the four separate grounds raised in the Request for Reexamination. On July 10, 2013, the Company filed an informational pleading (on July 10, 2013) to joinin support of and joining a motion to stay the proceeding in the District Court; the District Court which thisgranted the motion was granted on July 17, 2013.2013, based on the possibility that at least one of the USPTO rejections will be upheld and considering the USPTO's conclusion that Bear Creek's patent suffers from a defective claim for priority. On May 5, 2015,March 24, 2014, the Court administratively closedUSPTO issued another Office Action in which the rejections of the claims were maintained. On August 15, 2014, the USPTO issued a Right of Appeal Notice, as the USPTO maintained all rejections of the patent claims.

On September 15, 2014, Bear Creek Technologies, Inc. filed a Notice of Appeal of this decision with the Patent Trial and Appeal Board. The case is currently on appeal. The Company believes that it has meritorious defenses to these claims and is presenting a vigorous defense, but the Company cannot estimate potential liability in this case with leave to reopen if needed. The Reexamination Proceeding has been on appeal since September 15, 2014. A hearing onat this appeal is scheduled for November 10, 2015.

In the U.S. District Court for the Districtearly stage of Delaware, Adaptive Data, LLC sued the Company along with 51 other companies by way of patent infringement complaints filed on December 31, 2014 and on January 5, 2015. The complaint naming the Company (filed December 31, 2014) was never served.  Each of these cases was dismissed within several months. The case against the Company was dismissed pursuant to the Court's Notice of Voluntary Dismissal (without prejudice), dated January 23, 2015.litigation.

On April 16, 2015, the Company was named as a defendant in a lawsuit, Slocumb Law Firm v. 8x8, Inc., filed in the United States District Court for the Middle District of Alabama. The Slocumb Law Firm allegeshas alleged that it purchased certain business services from the Company that did not perform as advertised or expected, and asserts varioushas asserted causes of actions includingfor fraud, breach of contract, violations of the Alabama Deceptive Trade Practices Act and negligence. On June 10,May 7, 2015, the United States Magistrate Judge issuedCompany filed a Report and Recommendation thatmotion with the U.S. District Court grantfor the Company's motion to stay the case and compelMiddle District of Alabama, seeking an order compelling the Slocumb Law Firm to arbitrate its claims against the Company in Santa Clara County, California pursuant to a clause mandating arbitration of disputes set forth in the terms and conditions to which Slocumb Law Firm agreed in connection with its purchase of business services from the Company. The CompanyNo briefing schedule or hearing date for the motion has been set as of this time. Discovery has not yet received a formal arbitration demand fromcommenced in the Slocumb Law Firm, nor has discovery commenced.case. The Company intends to vigorously defend against Slocumb Law Firm's claims.

12

State and Municipal Taxes

From time to time, the Company has received inquiries from a number of state and municipal 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.

12

7. STOCK-BASED COMPENSATION

The following table summarizes stock-based compensation expense (in thousands):

Stock Options, Stock Purchase Right and Restricted Stock Unit Activity

Stock Option activity under all the Company's stock option plans for the sixthree months ended SeptemberJune 30, 2015,2016, is summarized as follows:

13

Stock Purchase Right activity for the sixthree months ended SeptemberJune 30, 2015,2016 is summarized as follows:

13

Restricted Stock Unit activity for the sixthree months ended SeptemberJune 30, 2015,2016 is summarized as follows:

The following table summarizes stock options outstanding and exercisable at SeptemberJune 30, 2015:2016:

As of SeptemberJune 30, 2015,2016, there was $38.1$32.9 million of unamortized stock-based compensation expense related to unvested stock options and awards which is expected to be recognized over a weighted average period of 2.672.22 years.

14

Assumptions Used to Calculate Stock-Based Compensation Expense

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 with the following assumptions: