Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Dec. 31, 2017 | Jan. 26, 2018 | |
Document And Entity Information | ||
Entity Registrant Name | 8X8 INC /DE/ | |
Entity Central Index Key | 1,023,731 | |
Document Type | 10-Q | |
Document Period End Date | Dec. 31, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --03-31 | |
Is Entity a Well-known Seasoned Issuer? | Yes | |
Is Entity a Voluntary Filer? | No | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 92,162,543 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,018 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Dec. 31, 2017 | Mar. 31, 2017 |
Current assets: | ||
Cash and cash equivalents | $ 31,769 | $ 41,030 |
Short-term investments | 129,208 | 133,959 |
Accounts receivable, net | 17,937 | 14,264 |
Other current assets | 10,240 | 8,101 |
Total current assets | 189,154 | 197,354 |
Property and equipment, net | 32,551 | 24,061 |
Intangible assets, net | 12,677 | 17,038 |
Goodwill | 39,576 | 46,136 |
Non-current deferred income taxes | 0 | 48,859 |
Other assets | 967 | 407 |
Total assets | 274,925 | 333,855 |
Current liabilities: | ||
Accounts payable | 21,755 | 18,631 |
Accrued compensation | 16,845 | 11,508 |
Accrued taxes | 5,447 | 5,354 |
Deferred revenue | 2,586 | 2,144 |
Other accrued liabilities | 6,723 | 5,707 |
Total current liabilities | 53,356 | 43,344 |
Non-current liabilities | 1,160 | 1,910 |
Total liabilities | 54,516 | 45,254 |
Commitments and contingencies (Note 5) | ||
Stockholders' equity: | ||
Common stock | 92 | 91 |
Additional paid-in capital | 414,968 | 412,762 |
Accumulated other comprehensive loss | (6,449) | (9,642) |
Accumulated deficit | (188,202) | (114,610) |
Total stockholders' equity | 220,409 | 288,601 |
Total liabilities and stockholders' equity | $ 274,925 | $ 333,855 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2017 | Dec. 31, 2016 | |
Condensed Consolidated Statements Of Operations | ||||
Service revenue | $ 71,891 | $ 60,149 | $ 205,105 | $ 173,162 |
Product revenue | 3,684 | 3,527 | 12,051 | 13,738 |
Total revenue | 75,575 | 63,676 | 217,156 | 186,900 |
Operating expenses: | ||||
Cost of service revenue | 12,318 | 10,525 | 36,737 | 31,597 |
Cost of product revenue | 4,675 | 4,240 | 14,657 | 15,527 |
Research and development | 8,527 | 7,095 | 24,781 | 20,310 |
Sales and marketing | 48,830 | 35,667 | 131,103 | 101,049 |
General and administrative | 10,003 | 7,852 | 28,575 | 21,400 |
Impairment of equipment, intangible assets, and goodwil | 9,469 | 0 | 9,469 | 0 |
Total operating expenses | 93,822 | 65,379 | 245,322 | 189,883 |
Loss from operations | (18,247) | (1,703) | (28,166) | (2,983) |
Other income, net | 569 | 408 | 3,084 | 1,209 |
Loss before provision for income taxes | (17,678) | (1,295) | (25,082) | (1,774) |
Provision for income taxes | 70,842 | 30 | 66,153 | 52 |
Net loss | $ (88,520) | $ (1,325) | $ (91,235) | $ (1,826) |
Net loss per share: | ||||
Basic | $ (0.96) | $ (0.01) | $ (0.99) | $ (0.02) |
Diluted | $ (0.96) | $ (0.01) | $ (0.99) | $ (0.02) |
Weighted average number of shares: | ||||
Basic | 92,029 | 90,774 | 91,709 | 90,062 |
Diluted | 92,029 | 90,774 | 91,709 | 90,062 |
CONDENSED CONSOLIDATED STATEME4
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2017 | Dec. 31, 2016 | |
Statement of Comprehensive Income [Abstract] | ||||
Net loss | $ (88,520) | $ (1,325) | $ (91,235) | $ (1,826) |
Other comprehensive income (loss), net of tax | ||||
Unrealized gain (loss) on investments in securities | (213) | (170) | 13 | (63) |
Foreign currency translation adjustment | 198 | (1,791) | 3,180 | (6,075) |
Comprehensive loss | $ (88,535) | $ (3,286) | $ (88,042) | $ (7,964) |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 9 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Cash flows from operating activities: | ||
Net loss | $ (91,235) | $ (1,826) |
Adjustments to reconcile net loss to net cash provided by operating activites: | ||
Depreciation | 6,049 | 4,463 |
Amortization of intangible assets | 3,995 | 2,741 |
Impairment of goodwill and long-lived assets | 9,469 | 15 |
Amortization of capitalized software | 1,270 | 442 |
Stock-based compensation | 21,138 | 15,630 |
Deferred income tax expense (benefit) | 66,273 | (104) |
Gain on escrow settlement | (1,393) | 0 |
Other | 226 | 802 |
Changes in assets and liabilities: | ||
Accounts receivable, net | (3,305) | (3,267) |
Other current and noncurrent assets | (2,315) | (1,238) |
Accounts payable and accruals | 8,855 | 4,394 |
Deferred revenue | 351 | 168 |
Net cash provided by operating activities | 19,378 | 22,220 |
Cash flows from investing activities: | ||
Purchases of property and equipment | (6,524) | (6,509) |
Proceeds from escrow settlement | 1,393 | 0 |
Cost of capitalized software | (8,689) | (3,939) |
Proceeds from maturity of investments | 57,150 | 47,625 |
Sales of investments - available for sale | 23,382 | 34,821 |
Purchase of investments - available for sale | (75,921) | (92,647) |
Net cash used in investing activities | (9,209) | (20,649) |
Cash flows from financing activities: | ||
Capital lease payments | (855) | (460) |
Payment of contingent consideration | (150) | (300) |
Repurchase and tax-related withholding of common stock | (22,137) | (2,828) |
Proceeds from issuance of common stock under employee stock plans | 3,303 | 2,694 |
Net cash used in financing activities | (19,839) | (894) |
Effect of exchange rate changes on cash | 409 | (796) |
Net decrease in cash and cash equivalents | (9,261) | (119) |
Cash and cash equivalents at the beginning of the period | 41,030 | 33,576 |
Cash and cash equivalents at the end of the period | 31,769 | 33,457 |
Supplemental cash flow information | ||
Income taxes paid | 217 | 350 |
Interest paid | 28 | 16 |
Property and equipment acquired under capital leases | $ 765 | $ 823 |
DESCRIPTION OF BUSINESS AND SIG
DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES - Note 1 | 9 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES - Note 1 | 1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES DESCRIPTION OF BUSINESS 8x8, Inc. (8x8 or the Company) is a leading provider of global cloud communications and customer engagement solutions to over a million business users worldwide. The Company's suite of products weaves together cloud communications, conferencing, collaboration and contact center solutions so today's organization can deliver exceptional employee and customer experiences. 8x8 technology provides one integrated platform for employees and customers engagement solutions, as well as a real-time data analytics platform for constant learning and improvement. 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 2018 refers to the fiscal year ending March 31, 2018). 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, 2017. 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, liabilities, 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, 2017 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, 2017 and notes thereto included in the Company's fiscal 2017 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. RECLASSIFICATION Certain software development costs capitalized in accordance with ASC 350-40, Internal Use Software Certain amounts previously reported within the Company's condensed consolidated balance sheets and condensed consolidated statements of cash flows have been reclassified within each financial statement section to conform to the current period presentation. The reclassification had no impact on the Company's previously reported net loss, cash flows, or basic or diluted net loss per share amounts. DXI Acquisition In May 2015, the Company entered into a share purchase agreement with the shareholders of DXI Limited for a purchase price of $22.5 million, consisting of $18.7 million in cash paid to the DXI shareholders at closing and $3.8 million in cash deposited into escrow to be held for two years as security against indemnity claims made by the Company after the closing date. During the fiscal quarter ended June 30, 2017, $1.4 million of the cash held in escrow was returned to the Company and the escrow fund was closed. Since the purchase accounting for the acquisition was finalized by March 31, 2016, the proceeds are realized as a gain and reported as other income in the consolidated statements of operations. Impairment The Company performs its annual goodwill impairment test on January 1 of each year and during the year, whenever a triggering event for such an assessment is identified. During the third quarter of fiscal year 2018, the Company changed its product and marketing strategy for the use of DXI's technology and re-assessed the profitability outlook which triggered the requirement that the Company test the recorded goodwill for impairment in accordance with ASC 350-20-35, as amended by ASU 2017-04 (see Footnote 1, Recently Adopted Accounting Pronouncements). First, the Company estimated the fair value of its three reporting units using the market approach. Under the market approach, the Company utilized the market capitalization of its publicly-traded shares and comparable company information to determine revenue multiples which were used to determine the fair value of the reporting unit. Based on this approach, the Company determined that there was an indication of impairment for its DXI reporting unit in the UK as the carrying value including goodwill exceeded the estimated fair value. As largely independent cash flows could not be attributed to any assets individually the Company evaluated DXI's assets and liabilities as one asset group. Then the Company estimated the fair value of DXI's assets and liabilities as one asset group using discounted cash flow methods to determine the implied fair value of goodwill. The difference between this implied fair value of the goodwill and its carrying value was recorded as impairment. The outcome of the analysis resulted in a non-cash expense for impairment of property and equipment, intangible assets and goodwill of $0.3 million, $1.2 million and $8.0 million, respectively, which was recorded during the third quarter of fiscal year 2018 as a separate line item in the Company's Condensed Consolidated Statements of Operations. These assets are reported within the Company's Europe (primarily UK) reporting segment (Footnote 9). The inputs used to measure the estimated fair value of goodwill are classified as a Level 3 fair value measurement due to the significance of unobservable inputs based on company specific information. PRINCIPLES OF CONSOLIDATION The condensed 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, 2017 filed with the SEC on May 30, 2017, and there have been no changes to the Company's significant accounting policies during the nine months ended December 31, 2017, except as described in the "Recently Adopted Accounting Pronouncements" section below. RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory In March 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Stock-based Payment Accounting In recording stock-based compensation expense, the ASU allows companies to make a policy election as to whether they will include an estimate of awards expected to be forfeited or whether they will account for forfeitures as they occur. The Company has elected to continue to include an estimate of forfeitures in its stock-based compensation expense. Therefore, the ASU had no impact to the Company's consolidated financial statements. The ASU requires that employee taxes paid when an employer withholds shares for tax-withholding purposes be reported as financing activities in the consolidated statements of cash flows. Previously, the Company already included these cash flows in financing activities. Therefore, the adoption of the ASU had no impact. The ASU requires previously unrecognized excess tax benefits from stock-based compensation to be recognized on a modified retrospective basis. Unrecognized tax benefits result when a deduction for stock-based compensation does not reduce taxes payable. The impact of the ASU on the Company's deferred tax assets is disclosed in Note 7. The ASU also requires excess tax benefits to be presented as an operating activity on the statement of cash flows rather than as a financing activity on either a retrospective or prospective basis. The Company has elected to apply this provision of the ASU only on a prospective basis beginning with the first quarter of fiscal 2018. In January 2017, the FASB issued ASU No. 2017-04, Intangibles and Other (Topic 350): Simplifying the Test for Goodwill Impairment RECENT ACCOUNTING PRONOUNCEMENTS In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers The Company is in the middle stages of assessing the impact of the new standard on the Company's accounting policies, processes and system requirements. The Company has assigned internal resources and engaged third-party service providers to assist with the assessment and implementation. The Company currently believes the most significant impact will be to the allocation of consideration in a contract between product and service performance obligations and allocations to professional services performance obligations, as well as the deferral of certain sales commission as capitalized contract costs, which are expensed under current accounting principles. In May 2017, the FASB issued ASU No. 2017-09, Compensation-Stock Compensation (Topic 718) - Scope of Modification Accounting. Compensation-Stock Compensation |
FAIR VALUE MEASUREMENTS - Note
FAIR VALUE MEASUREMENTS - Note 2 | 9 Months Ended |
Dec. 31, 2017 | |
Cash and Cash Equivalents [Abstract] | |
FAIR VALUE MEASUREMENTS - Note 2 | 2. FAIR VALUE MEASUREMENTS Cash, cash equivalents, and available-for-sale investments, and contingent consideration were (in thousands): Gross Gross Cash and Amortized Unrealized Unrealized Estimated Cash Short-Term As of December 31, 2017 Costs Gain Loss Fair Value Equivalents Investments Cash $ 15,602 $ - $ - $ 15,602 $ 15,602 $ - Level 1: Money market funds 16,167 - - 16,167 16,167 - Subtotal 31,769 - - 31,769 31,769 - Level 2: Commercial paper 18,277 - (5) 18,272 - 18,272 Corporate debt 78,987 11 (70) 78,928 - 78,928 International government securities 2,496 - (4) 2,492 - 2,492 Asset backed securities 25,407 - (32) 25,375 - 25,375 Agency bond 4,141 - - 4,141 4,141 Subtotal 129,308 11 (111) 129,208 - 129,208 Total assets $ 161,077 $ 11 $ (111) $ 160,977 $ 31,769 $ 129,208 Gross Gross Cash and Amortized Unrealized Unrealized Estimated Cash Short-Term As of March 31, 2017 Costs Gain Loss Fair Value Equivalents Investments Cash $ 29,122 $ - $ - $ 29,122 $ 29,122 $ - Level 1: Money market funds 11,908 - - 11,908 11,908 - Mutual funds 2,000 - (194) 1,806 - 1,806 Subtotal 43,030 - (194) 42,836 41,030 1,806 Level 2: Commercial paper 19,144 8 - 19,152 - 19,152 Corporate debt 83,995 61 (58) 83,998 - 83,998 Asset backed securities 26,906 4 (22) 26,888 - 26,888 Mortgage backed securities 116 - (1) 115 - 115 Agency bond 2,000 - - 2,000 - 2,000 Subtotal 132,161 73 (81) 132,153 - 132,153 Total assets $ 175,191 $ 73 $ (275) $ 174,989 $ 41,030 $ 133,959 Level 3: Contingent consideration $ - $ - $ - $ 148 $ - $ - Total liabilities $ - $ - $ - $ 148 $ - $ - Contractual maturities of investments as of December 31, 2017 are set forth below (in thousands): Estimated Fair Value Due within one year $ 87,647 Due after one year 41,561 Total $ 129,208 Contingent Consideration and Escrow Liability The Company's contingent consideration liability, included in other accrued liabilities and noncurrent liabilities on the condensed consolidated balance sheets as of March 31, 2017, was associated with the Quality Software Corporation (QSC) acquisition made in the first quarter of fiscal year 2016. This contingent liability was classified as level 3 within the fair value hierarchy. The remaining liability of $0.1 million was settled and paid as of December 31, 2017. |
INTANGIBLE ASSETS - Note 3
INTANGIBLE ASSETS - Note 3 | 9 Months Ended |
Dec. 31, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
INTANGIBLE ASSETS - Note 3 | 3. INTANGIBLE ASSETS The carrying value of intangible assets consisted of the following (in thousands): December 31, 2017 March 31, 2017 Gross Net Gross Net Carrying Accumulated Carrying Carrying Accumulated Carrying Amount Amortization Amount Amount Amortization Amount Technology $ 19,194 (9,540) $ 9,654 $ 18,685 $ (7,010) $ 11,675 Customer relationships 9,631 (7,084) 2,547 9,419 (6,187) 3,232 Trade names/domains 2,108 (1,632) 476 2,036 - 2,036 In-process research and development 95 (95) - 95 - 95 Total acquired identifiable intangible assets $ 31,028 $ (18,351) $ 12,677 $ 30,235 $ (13,197) $ 17,038 At December 31, 2017, annual amortization of intangible assets, based upon our existing intangible assets and current useful lives, is estimated to be the following (in thousands): Amount Remaining 2018 $ 1,017 2019 3,918 2020 3,087 2021 2,719 2022 1,715 Thereafter 221 Total $ 12,677 During the first quarter of fiscal year 2018, the Company determined that the tradename/domains no longer have an indefinite life and has assigned those assets an estimated life of two years. Amortization expenses associated with tradename/domains are included in selling and marketing expenses in the condensed consolidated statements of operations. During the third quarter of fiscal 2018, the Company recorded an impairment charge for technology and tradenames/domains associated with the DXI acquisition. See Footnote 1 for further discussion. |
GOODWILL - Note 4
GOODWILL - Note 4 | 9 Months Ended |
Dec. 31, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
GOODWILL - Note 4 | 4. GOODWILL The following table provides a summary of the changes in the carrying amounts of goodwill by reporting segment (in thousands): Americas Europe Total Balance at March 31, 2017 $ 27,309 $ 18,827 $ 46,136 Impairment loss - (8,036) (8,036) Foreign currency translation - 1,476 1,476 Balance at December 31, 2017 $ 27,309 $ 12,267 $ 39,576 During the third quarter of fiscal 2018, the Company recorded an impairment charge for goodwill related to its DXI reporting unit. See Footnote 1 for further discussion. |
COMMITMENTS AND CONTINGENCIES -
COMMITMENTS AND CONTINGENCIES - Note 5 | 9 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
COMMITMENTS AND CONTINGENCIES - Note 5 | 5. COMMITMENTS AND CONTINGENCIES Facility and Equipment Leases The Company leases its headquarters in San Jose, California, and also leases office space under non-cancelable operating leases in various domestic and international locations. Future minimum annual lease payments as of December 31, 2017 were as follows (in thousands): Amount Remaining 2018 $ 1,434 2019 5,797 2020 5,108 2021 2,637 2022 2,330 Thereafter 5,167 Total $ 22,473 The Company has entered into a series of noncancelable capital lease agreements for data center and office equipment bearing interest at various rates. Other Commitments, Indemnifications and Contingencies With the exception of the new San Jose, California headquarter lease (Footnote 10), there were no material changes in our other commitments under contractual obligations, indemnification and other contingencies since March 31, 2017. 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 August 22, 2017, the Company was named as a defendant in Venadium LLC v. 8x8 Inc. Venadium LLC Venadium LLC On August 25, 2017, the Company was named as a defendant in Hublink, LLC v. 8x8 Inc. Hublink, LLC Hublink, LLC |
STOCK-BASED COMPENSATION - Note
STOCK-BASED COMPENSATION - Note 6 | 9 Months Ended |
Dec. 31, 2017 | |
Equity [Abstract] | |
STOCK-BASED COMPENSATION - Note 6 | 6. STOCK-BASED COMPENSATION The following table summarizes information pertaining to the stock-based compensation expense from stock options and stock awards (in thousands, except weighted-average grant-date fair value and recognition period): Three Months Ended Nine Months Ended December 31, December 31, 2017 2016 2017 2016 Cost of service revenue $ 455 $ 538 $ 1,319 $ 1,338 Cost of product revenue - - - - Research and development 1,794 1,061 4,445 2,811 Sales and marketing 3,362 2,452 8,577 6,118 General and administrative 2,519 2,020 6,797 5,363 Total $ 8,130 $ 6,071 $ 21,138 $ 15,630 Nine Months Ended December 31, 2017 2016 Stock options outstanding at the beginning of the period: 4,462 4,793 Options granted 427 359 Options exercised (421) (339) Options canceled and forfeited (176) (42) Options outstanding at the end of the period: 4,292 4,771 Weighted-average fair value of grants during the period $ 5.30 $ 5.47 Total intrinsic value of options exercised during the period $ 4,312 $ 3,704 Weighted-average remaining recognition period at period-end (in years) 2.14 2.12 Stock awards outstanding at the beginning of the period: 4,950 4,627 Stock awards granted 2,884 2,116 Stock awards vested (1,615) (1,419) Stock awards canceled and forfeited (447) (286) Stock awards outstanding at the end of the period: 5,772 5,038 Weighted-average fair value of grants during the period $ 13.89 $ 15.07 Weighted-average remaining recognition period at period-end (in years) 2.67 2.56 Total unrecognized compensation expense at period-end $ 64,625 $ 51,372 Performance Stock Units During the nine months ended December 31, 2017, the Company issued restricted performance stock units (PSUs) to a group of executives with vesting that is contingent on both market performance and continued service. These PSUs vest (1) 50% on September 19, 2019 and (2) 50% on September 19, 2020, in each case subject to the performance of the Company's common stock relative to the Russell 2000 Index (the benchmark) during the period from grant date through such vesting date. A 2x multiplier will be applied to the total shareholder returns (TSR) for each 1% of positive or negative relative TSR, and the number of shares earned will increase or decrease at the end of each respective performance measurement period by 2% of the target numbers. In the event the Company's common stock performance is below negative 30% relative to the benchmark, no shares will be issued. These PSU grants are included in the restricted stock unit activity disclosure for the nine months ended December 31, 2017. To value these market-based PSUs under the Equity Compensation Plans, the Company used a Monte Carlo simulation model on the date of grant. Fair value determined using the Monte Carlo simulation model varies based on the assumptions used for the expected stock price volatility, the correlation coefficient between the Company and the NASDAQ Composite Index, risk free interest rates, and future dividend payments. Stock Repurchases In May 2017, the Company's board of directors authorized the Company to purchase $25.0 million of its common stock from time to time under the 2017 Repurchase Plan (the "2017 Plan"). The 2017 Plan expires when the maximum purchase amount is reached, or upon the earlier revocation or termination by the board of directors. The remaining amount available under the 2017 Plan at December 31, 2017 was approximately $7.1 million. The stock repurchase activity as of December 31, 2017 is summarized as follows (in thousands): Weighted Average Shares Price Amount Repurchased Per Share Repurchased (1) Balance as of September 30, 2017 1,064 $ 13.23 $ 14,081 Purchase of common stock under 2017 Repurchase Plan 299 12.81 3,826 1,363 $ 13.14 $ 17,907 (1) Amount excludes commission fees. The total purchase price of the common stock repurchased and retired was reflected as a reduction to consolidated stockholders' equity during the period of repurchase. |
INCOME TAXES - Note 7
INCOME TAXES - Note 7 | 9 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
INCOME TAXES - Note 7 | 7. INCOME TAXES EFFECTIVE TAX RATE AND VALUATION ALLOWANCE The Company's effective tax rate was -400.7% and -2.2% for the three months ended December 31, 2017 and 2016, respectively. The difference in the effective tax rate and the blended U.S. federal statutory rate of 31.5% for the three months ended December 31, 2017 was due primarily to the recording of a full valuation allowance against our deferred tax assets in the period. The difference in the effective tax rate and the U.S. federal statutory rate of 34% for the three months ended December 31, 2016 was due primarily to the geographic mix of profits and losses. The Company accounts for income taxes under the asset and liability approach and records deferred taxes based on differences between the financial statement basis and tax basis of assets and liabilities and available tax loss and credit carryforwards. In evaluating the ability to utilize deferred tax assets, management considers available evidence, both positive and negative, in determining future taxable income on a jurisdiction-by-jurisdiction basis. A valuation allowance against deferred tax assets is recorded if, based on the weight of the evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Judgment is required in evaluating this ability to utilize deferred tax assets. The Company recorded a full valuation allowance against its U.S. deferred tax assets in the period ended December 31, 2017, as it considered its cumulative loss in recent years to be substantial negative evidence for establishing the valuation allowance. As a result, the Company recognized a discrete tax expense of $71 million in the period. The Company will continue to assess the future realization of our deferred tax assets in each applicable jurisdiction and will adjust the valuation allowance accordingly. ASU 2016-09 IMPACT As described in Note 1, the Company adopted the updated accounting standard for share-based payment accounting in first quarter of fiscal 2018. As a result, the Company recorded deferred tax assets of approximately $17.6 million with a corresponding increase to retained earnings related to previously unrecognized excess tax benefits. For the first quarter of fiscal 2018, the Company recognized approximately $0.4 million of excess tax benefits within the provision for income taxes. Additionally, the Company elected to prospectively apply the change in presentation of excess tax benefits as an operating activity on the statement of cash flows rather than as a financing activity. Accordingly, prior period classification of cash flows related to excess tax benefits were not adjusted. THE TAX CUTS AND JOBS ACT ("the Act") The Act was enacted on December 22, 2017. Among numerous provisions, the Act reduces the U.S. federal corporate income tax rate from 35% to 21%, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred, and creates new taxes on certain foreign sourced earnings. Deferred Tax Assets and Liabilities Impact The Company remeasured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21%. Accordingly, deferred tax assets decreased approximately $22 million in the period ended December 31, 2017. However, because the Company recorded a full valuation allowance, the decrease in deferred tax assets from the tax rate change was fully offset by a corresponding decrease in valuation allowance. As a result, there was no impact to the provision for income taxes due to the change in tax rate. Foreign Tax Impact The one-time transition tax on foreign sourced earnings is based on the Company's total post-1986 earnings and profits (E&P) for which U.S. income taxes have been previously deferred. The Company did not record a one-time transition tax liability for its foreign subsidiaries as it does not have any untaxed foreign accumulated earnings as of the measurement dates. |
NET INCOME (LOSS) PER SHARE - N
NET INCOME (LOSS) PER SHARE - Note 8 | 9 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
NET INCOME (LOSS) PER SHARE - Note 8 | 8. NET INCOME (LOSS) PER SHARE The following is a reconciliation of the weighted average number of common shares outstanding used in calculating basic and diluted net loss per share (in thousands, except share and per share data): Three Months Ended Nine Months Ended December 31, December 31, 2017 2016 2017 2016 Numerator: Net loss available to common stockholders $ (88,520) $ (1,325) $ (91,235) $ (1,826) Denominator: Common shares - basic and diluted 92,029 90,774 91,709 90,062 Net loss per share Basic $ (0.96) $ (0.01) $ (0.99) $ (0.02) Diluted $ (0.96) $ (0.01) $ (0.99) $ (0.02) The following shares attributable to outstanding stock options and stock awards were excluded from the calculation of diluted earnings per share because their inclusion would have been antidilutive (in thousands): Three Months Ended Nine Months Ended December 31, December 31, 2017 2016 2017 2016 Stock options 4,292 4,771 4,292 4,771 Stock awards 5,772 5,038 5,772 5,038 Total anti-dilutive shares 10,064 9,809 10,064 9,809 |
SEGMENT REPORTING - Note 9
SEGMENT REPORTING - Note 9 | 9 Months Ended |
Dec. 31, 2017 | |
Segment Reporting [Abstract] | |
SEGMENT REPORTING - Note 9 | 9. SEGMENT REPORTING ASC 280, Segment Reporting Revenues are attributed to each segment based on the ordering location of the customer or ship to location. The following tables set forth the segment and geographic information for each period (in thousands): Revenue for the Three Months Ended Nine Months Ended December 31, December 31, 2017 2016 2017 2016 Americas (principally US) $ 67,826 $ 57,654 $ 195,342 $ 167,686 Europe (principally UK) 7,749 6,022 21,814 19,214 $ 75,575 $ 63,676 $ 217,156 $ 186,900 Revenue is based upon the destination of shipments and the customers' service address. For the three and nine months ended December 31, 2017 and 2016, intersegment revenues of approximately $3.9 million and $1.8 million, and $10.6 million and $4.4 million, respectively, were eliminated in consolidation, and have been excluded from the table above. Depreciation and Amortization for the Three Months Ended Nine Months Ended December 31, December 31, 2017 2016 2017 2016 Americas (principally US) $ 2,591 $ 1,647 $ 7,460 $ 4,923 Europe (principally UK) 1,366 871 3,854 2,738 $ 3,957 $ 2,518 $ 11,314 $ 7,661 Net Income (Loss) for the Three Months Ended Nine Months Ended December 31, December 31, 2017 2016 2017 2016 Americas (principally US) $ (76,854) $ 831 $ (75,468) $ 4,341 Europe (principally UK) (11,666) (2,156) (15,767) (6,167) $ (88,520) $ (1,325) $ (91,235) $ (1,826) December 31, 2017 March 31, 2017 Total Property and Total Property and Assets Equipment, net Assets Equipment, net Americas (principally US) $ 235,054 $ 24,880 $ 284,011 $ 19,480 Europe (principally UK) 39,871 7,671 49,844 4,581 $ 274,925 $ 32,551 $ 333,855 $ 24,061 |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 9 Months Ended |
Dec. 31, 2017 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS - Note 10 | 10. SUBSEQUENT EVENTS On January 23, 2018, the Company entered into a 132-month lease to rent approximately 162,000 square feet for a new Company headquarters in San Jose, California. The lease term begins on January 1, 2019 or such earlier date on which the Company first commences to conduct business on the premises. The Company has the option to extend the lease for one additional five-year term, on substantially the same terms and conditions as the prior term but with the base rent rate adjusted to fair market value at that time. Base rent is approximately $512,000 per month for the first 12 months of the lease, and the rate increases 3% on each anniversary of the lease commencement date. The Company is entitled to full rent abatement during the first 10 months of the lease term and 50% rent abatement during the next four months of the lease term. The Company is also responsible for paying its proportionate share of building and common area operating expenses, property taxes and insurance costs. The Company is entitled to a one-time tenant improvement allowance of approximately $13.3 million, the full amount of which must be used within 12 months of the lease commencement date. The Company has procured a standby letter of credit in the amount of $8.1 million (Footnote 5) for the benefit of the landlord, which may be drawn down in the event the Company defaults in the payment of its obligations under the lease. |
Summary of Significant Accounti
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Dec. 31, 2017 | |
Notes to Financial Statements | |
Fiscal Period | 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 2018 refers to the fiscal year ended March 31, 2018). |
Use of Estimates | 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, 2017. 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, liabilities, 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. |
Basis of Presentation | The March 31, 2017 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, 2017 and notes thereto included in the Company's fiscal 2017 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. 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, 2017 filed with the SEC on May 30, 2017, and there have been no changes to the Company's significant accounting policies during the nine months ended December 31, 2017, except as described in the "Recently Adopted Accounting Pronouncements" section below. |
Reclassification | RECLASSIFICATION Certain software development costs capitalized in accordance with ASC 350-40, Internal Use Software Certain amounts previously reported within the Company's condensed consolidated balance sheets and condensed consolidated statements of cash flows have been reclassified within each financial statement section to conform to the current period presentation. The reclassification had no impact on the Company's previously reported net loss, cash flows, or basic or diluted net loss per share amounts. |
Acquisitions | ACQUISITION In May 2015, the Company entered into a share purchase agreement with the shareholders of DXI Limited for a purchase price of $22.5 million, consisting of $18.7 million in cash paid to the DXI shareholders at closing and $3.8 million in cash deposited into escrow to be held for two years as security against indemnity claims made by the Company after the closing date. During the fiscal quarter ended June 30, 2017, $1.4 million of the cash held in escrow was returned to the Company and the escrow fund was closed. Since the purchase accounting for the acquisition was finalized by March 31, 2016, the proceeds are realized as a gain and reported as other income in the consolidated statements of operations. |
Impairment | Impairment The Company performs its annual goodwill impairment test on January 1 of each year and during the year, whenever a triggering event for such an assessment is identified. During the third quarter of fiscal year 2018, the Company changed its product and marketing strategy for the use of DXI's technology and re-assessed the profitability outlook which triggered the requirement that the Company test the recorded goodwill for impairment in accordance with ASC 350-20-35, as amended by ASU 2017-04 (see Footnote 1, Recently Adopted Accounting Pronouncements). First, the Company estimated the fair value of its three reporting units using the market approach. Under the market approach, the Company utilized the market capitalization of its publicly-traded shares and comparable company information to determine revenue multiples which were used to determine the fair value of the reporting unit. Based on this approach, the Company determined that there was an indication of impairment for its DXI reporting unit in the UK as the carrying value including goodwill exceeded the estimated fair value. As largely independent cash flows could not be attributed to any assets individually the Company evaluated DXI's assets and liabilities as one asset group. Then the Company estimated the fair value of DXI's assets and liabilities as one asset group using discounted cash flow methods to determine the implied fair value of goodwill. The difference between this implied fair value of the goodwill and its carrying value was recorded as impairment. The outcome of the analysis resulted in a non-cash expense for impairment of property and equipment, intangible assets and goodwill of $0.3 million, $1.2 million and $8.0 million, respectively, which was recorded during the third quarter of fiscal year 2018 as a separate line item in the Company's Condensed Consolidated Statements of Operations. These assets are reported within the Company's Europe (primarily UK) reporting segment (Footnote 9). The inputs used to measure the estimated fair value of goodwill are classified as a Level 3 fair value measurement due to the significance of unobservable inputs based on company specific information. |
Principles of Consolidation | PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of 8x8 and its subsidiaries. All material intercompany accounts and transactions have been eliminated. |
Recently Adopted Accounting Pronouncements | RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory In March 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Stock-based Payment Accounting In recording stock-based compensation expense, the ASU allows companies to make a policy election as to whether they will include an estimate of awards expected to be forfeited or whether they will account for forfeitures as they occur. The Company has elected to continue to include an estimate of forfeitures in its stock-based compensation expense. Therefore, the ASU had no impact to the Company's consolidated financial statements. The ASU requires that employee taxes paid when an employer withholds shares for tax-withholding purposes be reported as financing activities in the consolidated statements of cash flows. Previously, the Company already included these cash flows in financing activities. Therefore, the adoption of the ASU had no impact. The ASU requires previously unrecognized excess tax benefits from stock-based compensation to be recognized on a modified retrospective basis. Unrecognized tax benefits result when a deduction for stock-based compensation does not reduce taxes payable. The impact of the ASU on the Company's deferred tax assets is disclosed in Note 7. The ASU also requires excess tax benefits to be presented as an operating activity on the statement of cash flows rather than as a financing activity on either a retrospective or prospective basis. The Company has elected to apply this provision of the ASU only on a prospective basis beginning with the first quarter of fiscal 2018. In January 2017, the FASB issued ASU No. 2017-04, Intangibles and Other (Topic 350): Simplifying the Test for Goodwill Impairment |
Recent Accounting Pronouncements | RECENT ACCOUNTING PRONOUNCEMENTS In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers The Company is in the middle stages of assessing the impact of the new standard on the Company's accounting policies, processes and system requirements. The Company has assigned internal resources and engaged third-party service providers to assist with the assessment and implementation. The Company currently believes the most significant impact will be to the allocation of consideration in a contract between product and service performance obligations and allocations to professional services performance obligations, as well as the deferral of certain sales commission as capitalized contract costs, which are expensed under current accounting principles. In May 2017, the FASB issued ASU No. 2017-09, Compensation-Stock Compensation (Topic 718) - Scope of Modification Accounting. Compensation-Stock Compensation |
Segment Reporting | SEGMENT REPORTING ASC 280, Segment Reporting Revenues are attributed to each segment based on the ordering location of the customer or ship to location. |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) | 9 Months Ended |
Dec. 31, 2017 | |
Fair Value Measurements Tables | |
Fair Value Measurements, Recurring and Nonrecurring (Tables) | Cash, cash equivalents, and available-for-sale investments, and contingent consideration were (in thousands): Gross Gross Cash and Amortized Unrealized Unrealized Estimated Cash Short-Term As of December 31, 2017 Costs Gain Loss Fair Value Equivalents Investments Cash $ 15,602 $ - $ - $ 15,602 $ 15,602 $ - Level 1: Money market funds 16,167 - - 16,167 16,167 - Subtotal 31,769 - - 31,769 31,769 - Level 2: Commercial paper 18,277 - (5) 18,272 - 18,272 Corporate debt 78,987 11 (70) 78,928 - 78,928 International government securities 2,496 - (4) 2,492 - 2,492 Asset backed securities 25,407 - (32) 25,375 - 25,375 Agency bond 4,141 - - 4,141 4,141 Subtotal 129,308 11 (111) 129,208 - 129,208 Total assets $ 161,077 $ 11 $ (111) $ 160,977 $ 31,769 $ 129,208 Gross Gross Cash and Amortized Unrealized Unrealized Estimated Cash Short-Term As of March 31, 2017 Costs Gain Loss Fair Value Equivalents Investments Cash $ 29,122 $ - $ - $ 29,122 $ 29,122 $ - Level 1: Money market funds 11,908 - - 11,908 11,908 - Mutual funds 2,000 - (194) 1,806 - 1,806 Subtotal 43,030 - (194) 42,836 41,030 1,806 Level 2: Commercial paper 19,144 8 - 19,152 - 19,152 Corporate debt 83,995 61 (58) 83,998 - 83,998 Asset backed securities 26,906 4 (22) 26,888 - 26,888 Mortgage backed securities 116 - (1) 115 - 115 Agency bond 2,000 - - 2,000 - 2,000 Subtotal 132,161 73 (81) 132,153 - 132,153 Total assets $ 175,191 $ 73 $ (275) $ 174,989 $ 41,030 $ 133,959 Level 3: Contingent consideration $ - $ - $ - $ 148 $ - $ - Total liabilities $ - $ - $ - $ 148 $ - $ - Contractual maturities of investments as of December 31, 2017 are set forth below (in thousands): Estimated Fair Value Due within one year $ 87,647 Due after one year 41,561 Total $ 129,208 |
Intangible Assets (Tables)
Intangible Assets (Tables) | 9 Months Ended |
Dec. 31, 2017 | |
Intangible Assets Tables | |
Carrying values of intangible assets | The carrying value of intangible assets consisted of the following (in thousands): December 31, 2017 March 31, 2017 Gross Net Gross Net Carrying Accumulated Carrying Carrying Accumulated Carrying Amount Amortization Amount Amount Amortization Amount Technology $ 19,194 (9,540) $ 9,654 $ 18,685 $ (7,010) $ 11,675 Customer relationships 9,631 (7,084) 2,547 9,419 (6,187) 3,232 Trade names/domains 2,108 (1,632) 476 2,036 - 2,036 In-process research and development 95 (95) - 95 - 95 Total acquired identifiable intangible assets $ 31,028 $ (18,351) $ 12,677 $ 30,235 $ (13,197) $ 17,038 |
Finite-lived intangible assets - future amortization expense | At December 31, 2017, annual amortization of intangible assets, based upon our existing intangible assets and current useful lives, is estimated to be the following (in thousands): Amount Remaining 2018 $ 1,017 2019 3,918 2020 3,087 2021 2,719 2022 1,715 Thereafter 221 Total $ 12,677 |
Goodwill (Tables)
Goodwill (Tables) | 9 Months Ended |
Dec. 31, 2017 | |
Goodwill Tables | |
Carrying amounts of goodwill | The following table provides a summary of the changes in the carrying amounts of goodwill by reporting segment (in thousands): Americas Europe Total Balance at March 31, 2017 $ 27,309 $ 18,827 $ 46,136 Impairment loss - (8,036) (8,036) Foreign currency translation - 1,476 1,476 Balance at December 31, 2017 $ 27,309 $ 12,267 $ 39,576 |
Commitments And Contingencies (
Commitments And Contingencies (Tables) | 9 Months Ended |
Dec. 31, 2017 | |
Commitments And Contingencies Tables | |
Future minimum annual operating lease payments | The Company leases its headquarters in San Jose, California, and also leases office space under non-cancelable operating leases in various domestic and international locations. Future minimum annual lease payments as of December 31, 2017 were as follows (in thousands): Amount Remaining 2018 $ 1,434 2019 5,797 2020 5,108 2021 2,637 2022 2,330 Thereafter 5,167 Total $ 22,473 |
Distribution of Stock-Based Com
Distribution of Stock-Based Compensation Plan Expense (Tables) | 9 Months Ended |
Dec. 31, 2017 | |
Distribution Of Stock-based Compensation Plan Expense Tables | |
Schedule Of Stock-Based Compensation Expense By Statement Of Operations Line Item | The following table summarizes information pertaining to the stock-based compensation expense from stock options and stock awards (in thousands, except grant-date fair value and recognition period): Three Months Ended Nine Months Ended December 31, December 31, 2017 2016 2017 2016 Cost of service revenue $ 455 $ 538 $ 1,319 $ 1,338 Cost of product revenue - - - - Research and development 1,794 1,061 4,445 2,811 Sales and marketing 3,362 2,452 8,577 6,118 General and administrative 2,519 2,020 6,797 5,363 Total $ 8,130 $ 6,071 $ 21,138 $ 15,630 |
Stock-Based Compensation And Em
Stock-Based Compensation And Employee Purchase Plan (Tables) | 9 Months Ended |
Dec. 31, 2017 | |
Option Grants | |
Disclosure Of Share-Based Compensation Arrangements By Share-Based Payment Award | Nine Months Ended December 31, 2017 2016 Stock options outstanding at the beginning of the period: 4,462 4,793 Options granted 427 359 Options exercised (421) (339) Options canceled and forfeited (176) (42) Options outstanding at the end of the period: 4,292 4,771 Weighted-average fair value of grants during the period $ 5.30 $ 5.47 Total intrinsic value of options exercised during the period $ 4,312 $ 3,704 Weighted-average remaining recognition period at period-end (in years) 2.14 2.12 |
Stock Awards | |
Disclosure Of Share-Based Compensation Arrangements By Share-Based Payment Award | Nine Months Ended December 31, 2017 2016 Stock awards outstanding at the beginning of the period: 4,950 4,627 Stock awards granted 2,884 2,116 Stock awards vested (1,615) (1,419) Stock awards canceled and forfeited (447) (286) Stock awards outstanding at the end of the period: 5,772 5,038 Weighted-average fair value of grants during the period $ 13.89 $ 15.07 Weighted-average remaining recognition period at period-end (in years) 2.67 2.56 Total unrecognized compensation expense at period-end $ 64,625 $ 51,372 |
Stock Repurchases (Tables)
Stock Repurchases (Tables) | 9 Months Ended |
Dec. 31, 2017 | |
Stock Repurchases Tables | |
Stock Repurchases [Table Text Block] | The stock repurchase activity as of December 31, 2017 is summarized as follows (in thousands): Weighted Average Shares Price Amount Repurchased Per Share Repurchased (1) Balance as of September 30, 2017 1,064 $ 13.23 $ 14,081 Purchase of common stock under 2017 Repurchase Plan 299 12.81 3,826 1,363 $ 13.14 $ 17,907 (1) Amount excludes commission fees. |
Net Income (Loss) Per Share (Ta
Net Income (Loss) Per Share (Tables) | 9 Months Ended |
Dec. 31, 2017 | |
Net Income Loss Per Share Tables | |
Net Income (Loss) Per Share | The following is a reconciliation of the weighted average number of common shares outstanding used in calculating basic and diluted net loss per share (in thousands, except share and per share data): Three Months Ended Nine Months Ended December 31, December 31, 2017 2016 2017 2016 Numerator: Net loss available to common stockholders $ (88,520) $ (1,325) $ (91,235) $ (1,826) Denominator: Common shares - basic and diluted 92,029 90,774 91,709 90,062 Net loss per share Basic $ (0.96) $ (0.01) $ (0.99) $ (0.02) Diluted $ (0.96) $ (0.01) $ (0.99) $ (0.02) |
Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share | The following shares attributable to outstanding stock options and stock awards were excluded from the calculation of diluted earnings per share because their inclusion would have been antidilutive (in thousands): Three Months Ended Nine Months Ended December 31, December 31, 2017 2016 2017 2016 Stock options 4,292 4,771 4,292 4,771 Stock awards 5,772 5,038 5,772 5,038 Total anti-dilutive shares 10,064 9,809 10,064 9,809 |
Segment Information (Tables)
Segment Information (Tables) | 9 Months Ended |
Dec. 31, 2017 | |
Segment Information Tables | |
Schedule of Revenue from External Customers and Long-Lived Assets, by Geographical Areas | The following tables set forth the segment and geographic information for each period (in thousands): Revenue for the Three Months Ended Nine Months Ended December 31, December 31, 2017 2016 2017 2016 Americas (principally US) $ 67,826 $ 57,654 $ 195,342 $ 167,686 Europe (principally UK) 7,749 6,022 21,814 19,214 $ 75,575 $ 63,676 $ 217,156 $ 186,900 December 31, 2017 March 31, 2017 Total Property and Total Property and Assets Equipment, net Assets Equipment, net Americas (principally US) $ 235,054 $ 24,880 $ 284,011 $ 19,480 Europe (principally UK) 39,871 7,671 49,844 4,581 $ 274,925 $ 32,551 $ 333,855 $ 24,061 |
Schedule of Segment Reporting Information, by Segment | Depreciation and Amortization for the Three Months Ended Nine Months Ended December 31, December 31, 2017 2016 2017 2016 Americas (principally US) $ 2,591 $ 1,647 $ 7,460 $ 4,923 Europe (principally UK) 1,366 871 3,854 2,738 $ 3,957 $ 2,518 $ 11,314 $ 7,661 Net Income (Loss) for the Three Months Ended Nine Months Ended December 31, December 31, 2017 2016 2017 2016 Americas (principally US) $ (76,854) $ 831 $ (75,468) $ 4,341 Europe (principally UK) (11,666) (2,156) (15,767) (6,167) $ (88,520) $ (1,325) $ (91,235) $ (1,826) |
Description of the Business (Na
Description of the Business (Narrative) (Details) $ in Millions | 9 Months Ended |
Dec. 31, 2017USD ($) | |
Description Of Business Narrative Details | |
Fiscal Year End Date | --03-31 |
Assets, net of accumulated amortization reclassified | $ 7.7 |
Description of the Business (Ac
Description of the Business (Acquisition and Impairment Narrative) (Details) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | 9 Months Ended |
May 31, 2015 | Dec. 31, 2017 | Dec. 31, 2017 | |
Description Of Business Acquisition And Impairment Narrative Details | |||
Effective date of purchase agreement | May 26, 2015 | ||
Business Acquisition, Description of Acquired Entity | In May 2015, the Company entered into a share purchase agreement with the shareholders of DXI Limited for a purchase price of $22.5 million, consisting of $18.7 million in cash paid to the DXI shareholders at closing and $3.8 million in cash deposited into escrow to be held for two years as security against indemnity claims made by the Company after the closing date. During the fiscal quarter ended June 30, 2017, $1.4 million of the cash held in escrow was returned to the Company and the escrow fund was closed. Since the purchase accounting for the acquisition was finalized by March 31, 2016, the proceeds are realized as a gain and reported as other income in the consolidated statements of operations. | ||
Cash paid at closing | $ 18,700 | ||
Goodwill, Impaired, Facts and Circumstances Leading to Impairment | The Company performs its annual goodwill impairment test on January 1 of each year and during the year, whenever a triggering event for such an assessment is identified. During the third quarter of fiscal year 2018, the Company changed its product and marketing strategy for the use of DXI's technology and re-assessed the profitability outlook which triggered the requirement that the Company test the recorded goodwill for impairment in accordance with ASC 350-20-35, as amended by ASU 2017-04 (see Footnote 1, Recently Adopted Accounting Pronouncements). First, the Company estimated the fair value of its three reporting units using the market approach. Under the market approach, the Company utilized the market capitalization of its publicly-traded shares and comparable company information to determine revenue multiples which were used to determine the fair value of the reporting unit. Based on this approach, the Company determined that there was an indication of impairment for its DXI reporting unit in the UK as the carrying value including goodwill exceeded the estimated fair value. As largely independent cash flows could not be attributed to any assets individually the Company evaluated DXI's assets and liabilities as one asset group. Then the Company estimated the fair value of DXI's assets and liabilities as one asset group using discounted cash flow methods to determine the implied fair value of goodwill. The difference between this implied fair value of the goodwill and its carrying value was recorded as impairment. The outcome of the analysis resulted in a non-cash expense for impairment of property and equipment, intangible assets and goodwill of $0.3 million, $1.2 million and $8.0 million, respectively, which was recorded during the third quarter of fiscal year 2018 as a separate line item in the Company's Condensed Consolidated Statements of Operations. These assets are reported within the Company's Europe (primarily UK) reporting segment (Footnote 9). The inputs used to measure the estimated fair value of goodwill are classified as a Level 3 fair value measurement due to the significance of unobservable inputs based on company specific information. | ||
Impairment charge - property and equipment | $ 300 | ||
Impairment charge - intangible assets | 1,200 | ||
Impairment charge - goodwill | $ 8,000 | $ 8,036 |
Cash, Cash Equivalents and Inve
Cash, Cash Equivalents and Investments with Hierarchy (Details) - USD ($) $ in Thousands | Dec. 31, 2017 | Mar. 31, 2017 | Dec. 31, 2016 | Mar. 31, 2016 |
Amortized Costs | $ 161,077 | $ 175,191 | ||
Gross Unrealized Gains | 11 | 73 | ||
Gross Unrealized Loss | (111) | (275) | ||
Estimated Fair Value | 160,977 | 174,989 | ||
Cash and cash equivalents | 31,769 | 41,030 | $ 33,457 | $ 33,576 |
Short-term marketable investments | 129,208 | 133,959 | ||
Liabilities, Fair Value Disclosure | 148 | |||
Aavailable-for-sale investments due within one year | 87,647 | |||
Aavailable-for-sale investments due after one year | 41,561 | |||
Level 1 | ||||
Amortized Costs | 31,769 | 43,030 | ||
Gross Unrealized Gains | 0 | 0 | ||
Gross Unrealized Loss | 0 | (194) | ||
Estimated Fair Value | 31,769 | 42,836 | ||
Cash and cash equivalents | 31,769 | 41,030 | ||
Short-term marketable investments | 0 | 1,806 | ||
Level 2 | ||||
Amortized Costs | 129,308 | 132,161 | ||
Gross Unrealized Gains | 11 | 73 | ||
Gross Unrealized Loss | (111) | (81) | ||
Estimated Fair Value | 129,208 | 132,153 | ||
Cash and cash equivalents | 0 | 0 | ||
Short-term marketable investments | 129,208 | 132,153 | ||
Level 3 | ||||
Amortized Costs | 0 | |||
Gross Unrealized Gains | 0 | |||
Gross Unrealized Loss | 0 | |||
Estimated Fair Value | 148 | |||
Cash and cash equivalents | 0 | |||
Short-term marketable investments | 0 | |||
Liabilities, Fair Value Disclosure | 148 | |||
Cash | ||||
Amortized Costs | 15,602 | 29,122 | ||
Gross Unrealized Gains | 0 | 0 | ||
Gross Unrealized Loss | 0 | 0 | ||
Estimated Fair Value | 15,602 | 29,122 | ||
Cash and cash equivalents | 15,602 | 29,122 | ||
Short-term marketable investments | 0 | 0 | ||
Money Market Funds | Level 1 | ||||
Amortized Costs | 16,167 | 11,908 | ||
Gross Unrealized Gains | 0 | 0 | ||
Gross Unrealized Loss | 0 | 0 | ||
Estimated Fair Value | 16,167 | 11,908 | ||
Cash and cash equivalents | 16,167 | 11,908 | ||
Short-term marketable investments | 0 | 0 | ||
Mutual Funds | Level 1 | ||||
Amortized Costs | 2,000 | |||
Gross Unrealized Gains | 0 | |||
Gross Unrealized Loss | (194) | |||
Estimated Fair Value | 1,806 | |||
Cash and cash equivalents | 0 | |||
Short-term marketable investments | 1,806 | |||
Commercial Paper | Level 2 | ||||
Amortized Costs | 18,277 | 19,144 | ||
Gross Unrealized Gains | 0 | 8 | ||
Gross Unrealized Loss | (5) | 0 | ||
Estimated Fair Value | 18,272 | 19,152 | ||
Cash and cash equivalents | 0 | 0 | ||
Short-term marketable investments | 18,272 | 19,152 | ||
Corporate Debt | Level 2 | ||||
Amortized Costs | 78,987 | 83,995 | ||
Gross Unrealized Gains | 11 | 61 | ||
Gross Unrealized Loss | (70) | (58) | ||
Estimated Fair Value | 78,928 | 83,998 | ||
Cash and cash equivalents | 0 | 0 | ||
Short-term marketable investments | 78,928 | 83,998 | ||
International Government Securities | Level 2 | ||||
Amortized Costs | 2,496 | |||
Gross Unrealized Gains | 0 | |||
Gross Unrealized Loss | (4) | |||
Estimated Fair Value | 2,492 | |||
Cash and cash equivalents | 0 | |||
Short-term marketable investments | 2,492 | |||
Asset-backed Securities | Level 2 | ||||
Amortized Costs | 25,407 | 26,906 | ||
Gross Unrealized Gains | 0 | 4 | ||
Gross Unrealized Loss | (32) | (22) | ||
Estimated Fair Value | 25,375 | 26,888 | ||
Cash and cash equivalents | 0 | 0 | ||
Short-term marketable investments | 25,375 | 26,888 | ||
Mortgage backed Securities | Level 2 | ||||
Amortized Costs | 116 | |||
Gross Unrealized Gains | 0 | |||
Gross Unrealized Loss | (1) | |||
Estimated Fair Value | 115 | |||
Cash and cash equivalents | 0 | |||
Short-term marketable investments | 115 | |||
Agency Bond | Level 2 | ||||
Amortized Costs | 4,141 | 2,000 | ||
Gross Unrealized Gains | 0 | 0 | ||
Gross Unrealized Loss | 0 | 0 | ||
Estimated Fair Value | 4,141 | 2,000 | ||
Cash and cash equivalents | 0 | 0 | ||
Short-term marketable investments | $ 4,141 | 2,000 | ||
Contingent Consideration | Level 3 | ||||
Amortized Costs | 0 | |||
Gross Unrealized Gains | 0 | |||
Gross Unrealized Loss | 0 | |||
Estimated Fair Value | 148 | |||
Cash and cash equivalents | 0 | |||
Short-term marketable investments | 0 | |||
Liabilities, Fair Value Disclosure | $ 148 |
Intangible Assets Schedule Of I
Intangible Assets Schedule Of Intangibles (Details) - USD ($) $ in Thousands | Dec. 31, 2017 | Mar. 31, 2017 |
Gross Carrying Amount | $ 31,028 | $ 30,235 |
Accumulated Amortization | (18,351) | (13,197) |
Net Carrying Amount | 12,677 | 17,038 |
Technology | ||
Gross Carrying Amount | 19,194 | 18,685 |
Accumulated Amortization | (9,540) | (7,010) |
Net Carrying Amount | 9,654 | 11,675 |
Customer relationships | ||
Gross Carrying Amount | 9,631 | 9,419 |
Accumulated Amortization | (7,084) | (6,187) |
Net Carrying Amount | 2,547 | 3,232 |
Trade names/domains | ||
Gross Carrying Amount | 2,108 | 2,036 |
Accumulated Amortization | (1,632) | 0 |
Net Carrying Amount | 476 | 2,036 |
In-process research and development | ||
Gross Carrying Amount | 95 | 95 |
Accumulated Amortization | (95) | 0 |
Net Carrying Amount | $ 0 | $ 95 |
Intangible Assets Schedule Of F
Intangible Assets Schedule Of Future Amortization Of Intangibles (Details) $ in Thousands | Dec. 31, 2017USD ($) |
Intangible Assets Schedule Of Future Amortization Of Intangibles Details | |
Remaining 2,018 | $ 1,017 |
2,019 | 3,918 |
2,020 | 3,087 |
2,021 | 2,719 |
2,022 | 1,715 |
Thereafter | 221 |
Total | $ 12,677 |
Changes in Carrying Amount of G
Changes in Carrying Amount of Goodwill by Location (Detail) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended |
Dec. 31, 2017 | Dec. 31, 2017 | |
Goodwill, beginning balance | $ 46,136 | |
Impairment loss | $ (8,000) | (8,036) |
Foreign currency translation | 1,476 | |
Goodwill, ending balance | 39,576 | 39,576 |
Americas | ||
Goodwill, beginning balance | 27,309 | |
Impairment loss | 0 | |
Foreign currency translation | 0 | |
Goodwill, ending balance | 27,309 | 27,309 |
Europe | ||
Goodwill, beginning balance | 18,827 | |
Impairment loss | (8,036) | |
Foreign currency translation | 1,476 | |
Goodwill, ending balance | $ 12,267 | $ 12,267 |
Commitments and Contingencies32
Commitments and Contingencies (Operating Leases) (Details) $ in Thousands | Dec. 31, 2017USD ($) |
Year ending March 31: | |
Remaining 2,018 | $ 1,434 |
2,019 | 5,797 |
2,020 | 5,108 |
2,021 | 2,637 |
2,022 | 2,330 |
Thereafter | 5,167 |
Total | $ 22,473 |
Stock-based Compensation Stock-
Stock-based Compensation Stock-Based Compensation Expense By Statement Of Operations (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2017 | Dec. 31, 2016 | |
Stock-based employee compensation expense related to employee stock options and employee stock purchases, pre tax | $ 8,130 | $ 6,071 | $ 21,138 | $ 15,630 |
Cost of service revenue | ||||
Stock-based employee compensation expense related to employee stock options and employee stock purchases, pre tax | 455 | 538 | 1,319 | 1,338 |
Cost of product revenue | ||||
Stock-based employee compensation expense related to employee stock options and employee stock purchases, pre tax | 0 | 0 | 0 | 0 |
Research and development | ||||
Stock-based employee compensation expense related to employee stock options and employee stock purchases, pre tax | 1,794 | 1,061 | 4,445 | 2,811 |
Sales and marketing | ||||
Stock-based employee compensation expense related to employee stock options and employee stock purchases, pre tax | 3,362 | 2,452 | 8,577 | 6,118 |
General and administrative | ||||
Stock-based employee compensation expense related to employee stock options and employee stock purchases, pre tax | $ 2,519 | $ 2,020 | $ 6,797 | $ 5,363 |
Stock-based Compensation Option
Stock-based Compensation Option Activity (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 9 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Stock-based Compensation Option Activity Details | ||
Balance at beginning of period | 4,462 | 4,793 |
Granted | 427 | 359 |
Exercised | (421) | (339) |
Cancelled/forfeited | (176) | (42) |
Balance at end of period | 4,292 | 4,771 |
Weighted-average exercise price of options granted during period | $ 5.30 | $ 5.47 |
Total intrinsic value of options exercised during the period | $ 4,312 | $ 3,704 |
Weighted Average Remaining recognition period in years | 2 years 50 days | 2 years 43 days |
Stock-based Compensation Stock
Stock-based Compensation Stock Awards Activity (Details) - $ / shares shares in Thousands | 9 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Stock-based Compensation Stock Awards Activity Details | ||
Balance at beginning of period | 4,950 | 4,627 |
Granted | 2,884 | 2,116 |
Vested | (1,615) | (1,419) |
Canceled and forfeited | (447) | (286) |
Balance at end of period | 5,772 | 5,038 |
Weighted-average grant date fair market value of restricted stock rights granted | $ 13.89 | $ 15.07 |
Weighted-average remaining contractual term, in years, ending balance | 2 years 241 days | 2 years 202 days |
Stock-based Compensation (Narra
Stock-based Compensation (Narrative) (Details) - USD ($) $ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
Stock-based Compensation Narrative Details | ||
Total unrecognized compensation expense related to stock awards | $ 64,625 | $ 51,372 |
Stock Repurchases 2017 (Detail)
Stock Repurchases 2017 (Detail) | 3 Months Ended | 9 Months Ended | |
Dec. 31, 2017USD ($)$ / sharesshares | Dec. 31, 2017USD ($)$ / sharesshares | ||
Stock Repurchases 2017 Detail | |||
Stock repurchased and retired during period, shares | shares | 299 | 1,363,000 | |
Stock repurchased and retired during period, value | $ 3,826,000 | $ 17,907,000 | [1] |
Stock repurchased, weighted average price per share | $ / shares | $ 12.81 | $ 13.14 | |
Stock repurchase program, authorized amount | $ 25,000,000 | $ 25,000,000 | |
Stock repurchase program, remaining authorized repurchase amount | $ 7,100,000 | $ 7,100,000 | |
[1] | Amount excludes commission fees |
Income Taxes (Narrative) (Detai
Income Taxes (Narrative) (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2017 | Mar. 31, 2017 | |
Effective Income Tax Rate, Percent | (40070.00%) | (2.20%) | ||
Increase in retained earnings for recorded deferred tax assets | $ 17.6 | |||
Federal | ||||
U.S. federal statutory rate | 31.50% |
Net Income (Loss) Per Share (De
Net Income (Loss) Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2017 | Dec. 31, 2016 | |
Numerator: | ||||
Net loss available to common stockholders | $ (88,520) | $ (1,325) | $ (91,235) | $ (1,826) |
Denominator: | ||||
Common shares | 92,029 | 90,774 | 91,709 | 90,062 |
Denominator for basic calculation | 92,029 | 90,774 | 91,709 | 90,062 |
Denominator for diluted calculation | 92,029 | 90,774 | 91,709 | 90,062 |
Net loss per share: | ||||
Basic | $ (0.96) | $ (0.01) | $ (0.99) | $ (0.02) |
Diluted | $ (0.96) | $ (0.01) | $ (0.99) | $ (0.02) |
Net Income (Loss) Per Share (Op
Net Income (Loss) Per Share (Options and Awards Excluded) (Details) - shares shares in Thousands | 3 Months Ended | 9 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2017 | Dec. 31, 2016 | |
Anti-dilutive shares | 10,064 | 9,809 | 10,064 | 9,809 |
Stock options | ||||
Anti-dilutive shares | 4,292 | 4,771 | 4,292 | 4,771 |
Stock awards | ||||
Anti-dilutive shares | 5,772 | 5,038 | 5,772 | 5,038 |
Segment Reporting Revenue and P
Segment Reporting Revenue and Property and Equipment by Geographic Area (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2017 | Dec. 31, 2016 | Mar. 31, 2017 | |
Net revenue | $ 75,575 | $ 63,676 | $ 217,156 | $ 186,900 | |
Depreciation and amortization expense | 3,957 | 2,518 | 11,314 | 7,661 | |
Net income (loss) | (88,520) | (1,325) | (91,235) | (1,826) | |
Intersegment revenues eliminated in consolidation | 3,900 | 1,800 | 10,600 | 4,400 | |
Total assets | 274,925 | 274,925 | $ 333,855 | ||
Property and equipments, net | 32,551 | 32,551 | 24,061 | ||
Americas | |||||
Net revenue | 67,856 | 57,654 | 195,342 | 167,686 | |
Depreciation and amortization expense | 2,591 | 1,647 | 7,460 | 4,923 | |
Net income (loss) | (76,854) | 831 | (75,468) | 4,341 | |
Total assets | 235,054 | 235,054 | 284,011 | ||
Property and equipments, net | 24,880 | 24,880 | 19,480 | ||
Europe | |||||
Net revenue | 7,749 | 6,022 | 21,814 | 19,214 | |
Depreciation and amortization expense | 1,366 | 871 | 3,854 | 2,738 | |
Net income (loss) | (11,666) | $ (2,156) | (15,767) | $ (6,167) | |
Total assets | 39,871 | 39,871 | 49,844 | ||
Property and equipments, net | $ 7,671 | $ 7,671 | $ 4,581 |
Subsequent Events (Narrative) (
Subsequent Events (Narrative) (Details) | 1 Months Ended |
Jan. 31, 2018 | |
Subsequent Event, Date | Jan. 23, 2018 |
Subsequent Event, Description | On January 23, 2018, the Company entered into a 132-month lease to rent approximately 162,000 square feet for a new Company headquarters in San Jose, California. The lease term begins on January 1, 2019 or such earlier date on which the Company first commences to conduct business on the premises. The Company has the option to extend the lease for one additional five-year term, on substantially the same terms and conditions as the prior term but with the base rent rate adjusted to fair market value at that time. Base rent is approximately $512,000 per month for the first 12 months of the lease, and the rate increases 3% on each anniversary of the lease commencement date. The Company is entitled to full rent abatement during the first 10 months of the lease term and 50% rent abatement during the next four months of the lease term. The Company is also responsible for paying its proportionate share of building and common area operating expenses, property taxes and insurance costs. The Company is entitled to a one-time tenant improvement allowance of approximately $13.3 million, the full amount of which must be used within 12 months of the lease commencement date. The Company has procured a standby letter of credit in the amount of $8.1 million (Footnote 5) for the benefit of the landlord, which may be drawn down in the event the Company defaults in the payment of its obligations under the lease. |