UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2021

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 001-38312

8x8, INC.

(Exact name of Registrant as Specified in its Charter)

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

675 Creekside Way

Campbell, CA 95008

(Address of principal executive offices)

(408) 727-1885

(Registrant's telephone number, including area code)

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

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

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

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

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

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

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

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

The number of shares of the Registrant's Common Stock outstanding as of August 2, 2021 was 112,033,014.

8X8, INC

INDEX TO QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, 2021

	Page
Forward-Looking Statements and Risk Factors	2
PART I. FINANCIAL INFORMATION	3
Item 1. Financial Statements (unaudited):	3
Condensed Consolidated Balance Sheets	3
Condensed Consolidated Statements of Operations	4
Condensed Consolidated Statements of Comprehensive Loss	5
Condensed Consolidated Statements of Stockholders' Equity	6
Condensed Consolidated Statements of Cash Flows	7
Notes to Unaudited Condensed Consolidated Financial Statements	8
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3. Quantitative and Qualitative Disclosures About Market Risk	23
Item 4. Controls and Procedures	24
PART II. OTHER INFORMATION	25
Item 1. Legal Proceedings	25
Item 1A. Risk Factors	25
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	25
Item 3. Defaults Upon Senior Securities	25
Item 4. Mine Safety Disclosures	25
Item 5. Other Information	25
Item 6. Exhibits	26
Signature	27

1

Forward-Looking Statements and Risk Factors

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

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

•customer cancellations and rate of customer churn;

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

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

•the quality and reliability of our services;

•our ability to scale our business;

•customer acquisition costs;

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

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

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

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

•risk of failure in our physical infrastructure;

•risk of defects or bugs in our software;

•risk of cybersecurity breaches;

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

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

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

•risks relating to the acquisition and integration of businesses we have acquired or may acquire in the future;

•risks related to our senior convertible notes and the related capped call transactions; and

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

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

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

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

2

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

8X8, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

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

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

3

8X8, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

	Three Months Ended June 30,
	2021		2020
Service revenue	$	137,796	$	114,183
Other revenue	10,531		7,624
Total revenue	148,327		121,807
Operating expenses:
Cost of service revenue	46,010		40,996
Cost of other revenue	13,746		11,137
Research and development	25,392		21,494
Sales and marketing	75,915		60,150
General and administrative	26,091		25,790
Total operating expenses	187,154		159,567
Loss from operations	(38,827)		(37,760)
Other expense, net	(4,823)		(3,925)
Loss before provision for income taxes	(43,650)		(41,685)
Provision for income taxes	256		228
Net loss	$	(43,906)	$	(41,913)
Net loss per share:
Basic and diluted	$	(0.40)	$	(0.40)
Weighted-average common shares outstanding:
Basic and diluted	109,925		103,607

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

4

8X8, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited, dollars in thousands)

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

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

5

8X8, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited, dollars and shares in thousands)

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

	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total
	Shares	Amount
Balance at Balance at March 31, 2020	103,179	$	103	$	625,474	$	(12,176)	$	(422,670)	$	190,731
Adjustment to opening balance for change in accounting principle	—	—		—		—		(2,800)		(2,800)
Issuance of common stock under stock plans, less withholding	688	1		(67)		—		—		(66)
Stock-based compensation expense	—	—		23,118		—		—		23,118
Issuance of common stock related to acquisition	—	—		8,489		—				8,489
Unrealized investment gain	—	—		—		422		—		422
Foreign currency translation adjustment	—	—		—		885		—		885
Net loss	—	—		—		—		(41,913)		(41,913)
Balance at Balance at June 30, 2020	103,867	$	104	$	657,014	$	(10,869)	$	(467,383)	$	178,866

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

6

8X8, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, dollars in thousands)

	Three Months Ended June 30,
	2021		2020
Cash flows from operating activities:
Net loss	$	(43,906)	$	(41,913)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation	2,922		2,823
Amortization of intangible assets	1,285		2,228
Amortization of capitalized internal-use software costs	7,243		6,217
Amortization of debt discount and issuance costs	4,393		4,126
Amortization of deferred sales commission costs	8,245		6,138
Allowance for credit losses	383		1,742
Operating lease expense, net of accretion	3,459		3,750
Stock-based compensation expense	36,587		22,779
Other	713		602
Changes in assets and liabilities:
Accounts receivable	924		(3,428)
Deferred sales commission costs	(11,615)		(13,186)
Other current and non-current assets	(2,550)		(3,025)
Accounts payable and accruals	(5,063)		(519)
Deferred revenue	1,012		2,416
Net cash provided by (used in) operating activities	4,032		(9,250)
Cash flows from investing activities:
Purchases of property and equipment	(878)		(2,453)
Capitalized internal-use software costs	(6,546)		(8,866)
Purchases of investments	(28,721)		(17,156)
Sales of investments	10,299		—
Proceeds from maturities of investments	14,700		16,575
Net cash used in investing activities	(11,146)		(11,900)
Cash flows from financing activities:
Finance lease payments	(4)		(67)
Tax-related withholding of common stock	(99)		(69)
Proceeds from issuance of common stock under employee stock plans	3,538		2
Net cash provided (used in) by financing activities	3,435		(134)
Effects of currency exchange rates on cash, cash equivalent, and restricted cash	436		580
Net decrease in cash, cash equivalents, and restricted cash	(3,243)		(20,704)
Cash, cash equivalents, and restricted cash at the beginning of the period	121,172		156,411
Cash, cash equivalents, and restricted cash at the end of the period	$	117,929	$	135,707
Supplemental information:
Cash paid for income taxes	$	337	$	165
Reconciliation of cash, cash equivalents, and restricted cash at the end of the period:
Cash and cash equivalents	$	109,288	$	116,690
Restricted cash, current	8,179		10,376
Restricted cash, non-current	462		8,641
Total cash, cash equivalents, and restricted cash	$	117,929	$	135,707

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

7

8X8, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. DESCRIPTION OF BUSINESS

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

The Company is a leading Software-as-a-Service ("SaaS") provider of contact center, voice, video, chat, and enterprise-class API solutions powered by one global cloud communications platform. 8x8 empowers workforces worldwide by connecting individuals and teams so they can collaborate faster and work smarter from anywhere. 8x8 provides real-time business analytics and intelligence giving its customers unique insights across all interactions and channels on our platform so they can support a distributed and hybrid working model while delighting their end-customers and accelerating their business. A majority of all revenue is generated from communication services subscriptions and platform usage. The Company also generates revenue from sales of hardware and professional services, which are complementary to the delivery of our integrated technology platform.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION AND CONSOLIDATION

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

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

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

USE OF ESTIMATES

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

RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS

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

RECENT ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED

In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40), which simplifies accounting for convertible instruments by eliminating two of the three accounting models available for convertible debt instruments and convertible preferred stock. The guidance also addresses how convertible instruments are accounted for in the diluted earnings per share calculation. The guidance is effective for fiscal years beginning after December 15, 2021, which is fiscal 2023 for the Company; early adoption is permitted. The Company is currently assessing the impact of this pronouncement to its consolidated financial statements.

8

3. REVENUE RECOGNITION

Disaggregation of Revenue

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

Contract Balances

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

	June 30, 2021		March 31, 2021
Accounts receivable, net	$	49,755	$	51,150
Contract assets, current	$	12,324	$	12,840
Contract assets, non-current	$	18,269	$	17,987
Deferred revenue, current	$	21,985	$	20,737
Deferred revenue, non-current	$	2,813	$	2,999

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

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

Remaining Performance Obligations

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

Deferred Sales Commission Costs

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

9

4. FAIR VALUE MEASUREMENTS

The following tablse presents estimated fair values of cash, cash equivalents, restricted cash, and available-for-sale investments:

June 30, 2021	Amortized Costs		Gross Unrealized Gain		Gross Unrealized Loss		Estimated Fair Value		Cash and Cash Equivalents		Restricted Cash (Current & Non-Current)		Short-Term Investments		Long-Term Investments
Cash	$	39,480	$	—	$	—	$	39,480	$	39,480	$	—	$	—	$	—
Level 1:
Money market funds	67,108		—		—		67,108		67,108		—		—		—
Subtotal	106,588		—		—		106,588		106,588		—		—		—
Level 2:
Certificate of deposit	8,641		—		—		8,641		—		8,641		—		—
Municipal bonds	700		—		—		700		700		—		—		—
Commercial paper	15,120		2		—		15,122		2,000		—		13,122		—
Corporate debt	30,796		30		(5)		30,821		—		—		18,109		12,712
Subtotal	55,257		32		(5)		55,284		2,700		8,641		31,231		12,712
Total assets	$	161,845	$	32	$	(5)	$	161,872	$	109,288	$	8,641	$	31,231	$	12,712

March 31, 2021	Amortized Costs		Gross Unrealized Gain		Gross Unrealized Loss		Estimated Fair Value		Cash and Cash Equivalents		Restricted Cash (Current & Non-Current)		Short-Term Investments		Long-Term Investments
Cash	$	39,070	$	—	$	—	$	39,070	$	39,070	$	—	$	—	$	—
Level 1:
Money market funds	67,712		—		—		67,712		67,712		—		—		—
Treasury securities	6,177		17		—		6,194		—		—		6,194		—
Subtotal	112,959		17		—		112,976		106,782		—		6,194		—
Level 2:
Certificate of deposit	8,641		—		—		8,641		—		8,641		—		—
Commercial paper	17,656		42		—		17,698		700		—		16,998		—
Corporate debt	22,193		1		—		22,194		5,049		—		17,145		—
Subtotal	48,490		43		—		48,533		5,749		8,641		34,143		—
Total assets	$	161,449	$	60	$	—	$	161,509	$	112,531	$	8,641	$	40,337	$	—

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

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

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

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

10

5. INTANGIBLE ASSETS AND GOODWILL

Intangible Assets

The carrying value of intangible assets consisted of the following:

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

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

As of June 30, 2021, the weighted average remaining useful life of developed technology and customer relationships was 4.4 years and 5.0 years, respectively.

As of June 30, 2021, the expected future amortization expense of the intangible assets was as follows:

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

Goodwill

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

Balance at March 31, 2021	$	131,520
Foreign currency translation adjustments	79
Balance at June 30, 2021	$	131,599

6. LEASES

Operating Leases

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

	June 30, 2021		March 31, 2021
Assets
Operating lease, right-of-use assets	$	63,402	$	66,664
Liabilities
Operating lease liabilities, current	$	12,792	$	12,942
Operating lease liabilities, non-current	79,403		82,456
Total operating lease liabilities	$	92,195	$	95,398

11

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

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

Short-term lease expense was immaterial for the three months ended June 30, 2021 and 2020.

The following table presents supplemental lease information:

	June 30, 2021	March 31, 2021
Weighted average remaining lease term	8.2 years	8.4 years
Weighted average discount rate	4.0%	4.0%

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

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

7. COMMITMENTS AND CONTINGENCIES

Legal Proceedings

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

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

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

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the Company on December 11, 2020. On January 26, 2021, the Company filed a general denial of all claims and asserted various affirmative defenses to the PAGA Complaint. Both actions are scheduled for a joint mediation in September 2021, and discovery is stayed in both actions pending completion of the mediation.

Other Commitments, Indemnifications, and Contingencies

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

8. CONVERTIBLE SENIOR NOTES AND CAPPED CALLS

Convertible Senior Notes

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

In November 2019, the Company issued an additional $75.0 million aggregate principal amount of 0.50% convertible senior notes (the "Additional Notes" and together with the Initial Notes, the "Notes") due 2024 in a registered offering under the same indenture as the Initial Notes. The total net proceeds from the Additional Notes, after deducting underwriting discounts, debt issuance costs and costs of the capped call transactions described below, were approximately $64.6 million. The Additional Notes constitute a further issuance of, and form a single series with, the Initial Notes. Immediately after giving effect to the issuance of the Additional Notes, the Company had $362.5 million aggregate principal amount of convertible senior notes.

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

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

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

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

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

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

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

On or after October 1, 2023, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their Notes, regardless of the foregoing circumstances. Upon conversion, the Company will satisfy its conversion obligation by paying or delivering, as the case may be, cash, shares of common stock, or a combination of cash and shares of common stock, at the Company's election. The Company’s current intent is to settle the principal amount of the Notes in cash upon conversion. During the three months ended June 30, 2021, the conditions allowing holders of the Notes to convert were not met.

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

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

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

	June 30, 2021		March 31, 2021
Principal	$	362,500	$	362,500
Unamortized debt discount	(48,990)		(53,323)
Unamortized issuance costs	(682)		(742)
Net carrying amount	$	312,828	$	308,435

The following table presents interest expense related to the Notes:

	Three Months Ended June 30,
	2021		2020
Contractual interest expense	$	453	$	453
Amortization of debt discount	4,332		4,068
Amortization of issuance costs	61		57
Total interest expense	$	4,846	$	4,578

Capped Call

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

9. STOCK-BASED COMPENSATION

The following table presents stock-based compensation expense:

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

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Stock Options

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

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

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

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

Restricted Stock Units (RSUs)

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

	Number of Shares	Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at March 31, 2021	8,646	$	19.27	1.85 years	$	280,467
Granted	3,466	26.36
Vested and released	(969)	20.07
Forfeited	(317)	19.71
Outstanding at June 30, 2021	10,826	$	21.45	2.05 years	$	300,524

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

Performance Stock Units (PSUs)

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

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

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

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

	Number of Shares	Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at March 31, 2021	1,576	$	27.33	1.24 years	$	51,116
Granted	465	27.92
Granted for performance achievement1	20	27.92
Vested and released	(206)	16.12
Forfeited	(198)	24.61
Outstanding at June 30, 2021	1,657	$	30.56	1.43 years	$	46,012

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

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

Employee Stock Purchase Plan (ESPP)

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

Salary and Bonus Stock Program

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

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

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

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

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

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

Stock Repurchases

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

10. INCOME TAXES

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

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11. NET LOSS PER SHARE

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

	Three Months Ended June 30,
	2021		2020
Net loss	$	(43,906)	$	(41,913)
Weighted average common shares outstanding - basic and diluted	109,925		103,607
Net loss per share:
Basic and diluted	$	(0.40)	$	(0.40)

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

	Three Months Ended June 30,
	2021	2020
Stock options	1,413	2,259
Restricted stock units	12,483	9,443
Potential shares attributable to the ESPP	444	582
Total potential anti-dilutive shares	14,340	12,284

12. GEOGRAPHICAL INFORMATION

The following tables present information by geographic area:

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

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