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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 September 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
eght-20210930_g1.jpg
8x8, INC.
(Exact name of Registrant as Specified in its Charter)
Delaware77-0142404
(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 classTrading SymbolName of each exchange on which registered
COMMON STOCK, PAR VALUE $.001 PER SHAREEGHTNew 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 filerAccelerated 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 November 1, 2021 was 113,949,810.


Table of Contents




8X8, INC
INDEX TO QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2021
Page
1

Table of Contents




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; growth in future service and other revenues; cost of service revenue; research and development expenses; hiring of employees; sales and marketing expenses; general and administrative expenses; 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: customer adoption and demand for our products may be lower than we anticipate; the impact of economic downturns on us and our customers, including from the COVID-19 pandemic; competitive dynamics of the cloud communication and collaboration markets, including voice, contact center, video, messaging, and communication application programming interfaces ("APIs"), in which we compete may change in ways we are not anticipating; impact of supply chain disruptions; third parties may assert ownership rights in our IP, which may limit or prevent our continued use of the core technologies behind our solutions; our customer churn rate may be higher than we anticipate; our Investments we make in marketing, channel and value-added resellers (VARs), e-commerce, new products, may not result in revenue growth; and we may not achieve our target service revenue growth, or the revenue, earnings, or other amounts we forecast in our guidance, for a particular quarter or for the full fiscal year.
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

Table of Contents




PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
8X8, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
September 30,
2021
March 31,
2021
(unaudited)(audited)
ASSETS  
Current assets:  
Cash and cash equivalents$102,989 $112,531 
Restricted cash, current8,179 8,179 
Short-term investments44,607 40,337 
Accounts receivable, net51,178 51,150 
Deferred sales commission costs, current33,026 30,241 
Other current assets32,896 34,095 
Total current assets272,875 276,533 
Property and equipment, net86,860 93,076 
Operating lease, right-of-use assets62,379 66,664 
Intangible assets, net14,580 17,130 
Goodwill130,869 131,520 
Restricted cash, non-current462 462 
Long-term investments10,245  
Deferred sales commission costs, non-current75,668 72,427 
Other assets18,904 20,597 
Total assets$672,842 $678,409 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable$29,618 $31,236 
Accrued compensation30,575 29,879 
Accrued taxes12,065 12,129 
Operating lease liabilities, current13,271 12,942 
Deferred revenue, current22,362 20,737 
Other accrued liabilities13,049 14,455 
Total current liabilities120,940 121,378 
Operating lease liabilities, non-current77,156 82,456 
Convertible senior notes, net317,291 308,435 
Other liabilities, non-current4,904 5,636 
Total liabilities520,291 517,905 
Commitments and contingencies (Note 7)
Stockholders' equity:
Common stock113 109 
Additional paid-in capital835,830 755,643 
Accumulated other comprehensive loss(6,107)(4,193)
Accumulated deficit(677,285)(591,055)
Total stockholders' equity152,551 160,504 
Total liabilities and stockholders' equity$672,842 $678,409 


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

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8X8, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, dollars and shares in thousands except per share amounts)
Three Months Ended September 30,Six Months Ended September 30,
 2021202020212020
Service revenue$142,376 $120,942 $280,172 $235,125 
Other revenue9,181 8,191 19,712 15,815 
Total revenue151,557 129,133 299,884 250,940 
Operating expenses:
Cost of service revenue47,198 44,803 93,208 85,799 
Cost of other revenue12,269 11,693 26,015 22,830 
Research and development28,498 21,567 53,890 43,061 
Sales and marketing76,726 61,399 152,641 121,549 
General and administrative24,023 22,769 50,114 48,559 
Total operating expenses188,714 162,231 375,868 321,798 
Loss from operations(37,157)(33,098)(75,984)(70,858)
Other expense, net(4,934)(5,178)(9,757)(9,103)
Loss before provision for income taxes(42,091)(38,276)(85,741)(79,961)
Provision for income taxes233 137 489 365 
Net loss$(42,324)$(38,413)$(86,230)$(80,326)
Net loss per share:
Basic and diluted$(0.38)$(0.37)$(0.78)$(0.77)
Weighted-average common shares outstanding:
Basic and diluted112,422 104,620 111,180 104,116 


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

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8X8, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited, dollars in thousands)
Three Months Ended September 30,Six Months Ended September 30,
 2021202020212020
Net loss$(42,324)$(38,413)$(86,230)$(80,326)
Other comprehensive loss, net of tax
Unrealized (loss) gain on investments in securities(15)(43)(48)379 
Foreign currency translation adjustment(2,149)2,945 (1,866)3,830 
Comprehensive loss$(44,488)$(35,511)$(88,144)$(76,117)



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

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8X8, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited, dollars and shares in thousands)
 Common StockAdditional
Paid-in
Capital
Accumulated
Other
Comprehensive
Loss
Accumulated
Deficit
Total
 SharesAmount
Balance at March 31, 2021109,135 $109 $755,643 $(4,193)$(591,055)$160,504 
Issuance of common stock under stock plans1,562 2 3,438 — — 3,440 
Stock-based compensation expense— — 36,508 — — 36,508 
Unrealized investment loss— — — (33)— (33)
Foreign currency translation adjustment— — — 283 — 283 
Net loss— — — — (43,906)(43,906)
Balance at June 30, 2021110,697 111 795,589 (3,943)(634,961)156,796 
Issuance of common stock under stock plans2,721 2 6,758 — — 6,760 
Stock-based compensation expense— — 33,483 — — 33,483 
Issuance of common stock related to acquisition(1)— — — —  
Unrealized investment loss— — — (15)— (15)
Foreign currency translation adjustment— — — (2,149)— (2,149)
Net loss— — — — (42,324)(42,324)
Balance at September 30, 2021113,416 $113 $835,830 $(6,107)$(677,285)$152,551 


 Common StockAdditional
Paid-in
Capital
Accumulated
Other
Comprehensive
Loss
Accumulated
Deficit
Total
 SharesAmount
Balance at March 31, 2020103,179 $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 plans688 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 June 30, 2020103,867 104 657,014 (10,869)(467,383)178,866 
Issuance of common stock under stock plans2,119 2 4,706 — — 4,708 
Stock-based compensation expense— — 26,396 — — 26,396 
Unrealized investment loss— — — (43)— (43)
Foreign currency translation adjustment— — — 2,945 — 2,945 
Net loss— — — — (38,413)(38,413)
Balance at September 30, 2020105,986 $106 $688,116 $(7,967)$(505,796)$174,459 


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

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8X8, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, dollars in thousands)
Six Months Ended September 30,
 20212020
Cash flows from operating activities:  
Net loss$(86,230)$(80,326)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation5,771 5,690 
Amortization of intangible assets2,551 4,055 
Amortization of capitalized internal-use software costs14,713 12,893 
Amortization of debt discount and issuance costs8,855 8,317 
Amortization of deferred sales commission costs16,857 12,764 
Allowance for credit losses645 2,994 
Operating lease expense, net of accretion6,795 7,585 
Stock-based compensation expense72,422 48,101 
Other853 467 
Changes in assets and liabilities:
Accounts receivable(1,100)(6,290)
Deferred sales commission costs(23,489)(26,811)
Other current and non-current assets(835)(7,532)
Accounts payable and accruals(9,860)1,350 
Deferred revenue1,183 3,675 
Net cash provided by (used in) operating activities9,131 (13,068)
Cash flows from investing activities:
Purchases of property and equipment(2,358)(4,171)
Capitalized internal-use software costs(11,613)(16,158)
Purchases of investments(56,049)(17,968)
Sales of investments10,299 219 
Proceeds from maturities of investments30,967 30,071 
Acquisition of businesses, net of cash acquired (3,459)
Net cash used in investing activities(28,754)(11,466)
Cash flows from financing activities:
Finance lease payments(8)(70)
Tax-related withholding of common stock(128)(69)
Proceeds from issuance of common stock under employee stock plans10,328 4,710 
Net cash provided by financing activities10,192 4,571 
Effects of currency exchange rates on cash, cash equivalent, and restricted cash(111)958 
Net decrease in cash, cash equivalents, and restricted cash(9,542)(19,005)
Cash, cash equivalents, and restricted cash at the beginning of the period121,172 156,411 
Cash, cash equivalents, and restricted cash at the end of the period$111,630 $137,406 
Supplemental information:
Cash paid for income taxes$578 $406 
Cash paid for interest$906 $906 
Reconciliation of cash, cash equivalents, and restricted cash at the end of the period:
Cash and cash equivalents$102,989 $121,848 
Restricted cash, current8,179 6,917 
Restricted cash, non-current462 8,641 
Total cash, cash equivalents, and restricted cash$111,630 $137,406 

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

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8X8, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS
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 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 complement 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 and six months ended September 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. The Company is currently assessing the impact of this pronouncement to its consolidated financial statements.
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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:
 September 30,
2021
March 31,
2021
Accounts receivable, net$51,178 $51,150 
Contract assets, current$11,714 $12,840 
Contract assets, non-current$17,045 $17,987 
Deferred revenue, current$22,362 $20,737 
Deferred revenue, non-current $2,296 $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, for fulfillment of performance obligations, 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 six months ended September 30, 2021, the Company recognized revenues of approximately $12.2 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 September 30, 2021, was approximately $550.0 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 and six months ended September 30, 2021 was $8.6 million and $16.9 million, respectively. Amortization of deferred sales commission costs for the three and six months ended September 30, 2020 was $6.7 million and $12.8 million, respectively. There were no material write-offs of deferred sales commission costs during the three and six months ended September 30, 2021 and 2020.
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4. FAIR VALUE MEASUREMENTS
The following tables presents estimated fair values of cash, cash equivalents, restricted cash, and available-for-sale investments:
September 30, 2021Amortized CostsGross
Unrealized Gain
Gross
Unrealized Loss
Estimated Fair ValueCash and
Cash Equivalents
Restricted Cash (Current & Non-Current)Short-Term InvestmentsLong-Term Investments
Cash$43,131 $— $— $43,131 $43,131 $ $— $— 
Level 1:
Money market funds58,458 — — 58,458 58,458 — — — 
Subtotal101,589   101,589 101,589    
Level 2:
Certificate of deposit8,641 — — 8,641 — 8,641 —  
Commercial paper27,412 1 (1)27,412 1,400 — 26,012 — 
Corporate debt28,828 17 (5)28,840  — 18,595 10,245 
Subtotal64,881 18 (6)64,893 1,400 8,641 44,607 10,245 
Total assets$166,470 $18 $(6)$166,482 $102,989 $8,641 $44,607 $10,245 
March 31, 2021Amortized CostsGross
Unrealized Gain
Gross
Unrealized Loss
Estimated Fair ValueCash and
Cash Equivalents
Restricted Cash (Current & Non-Current)Short-Term InvestmentsLong-Term Investments
Cash$39,070 $— $— $39,070 $39,070 $ $— $— 
Level 1:
Money market funds67,712 — — 67,712 67,712 — — — 
Treasury securities6,177 17  6,194 — — 6,194  
Subtotal112,959 17  112,976 106,782  6,194  
Level 2:
Certificate of deposit8,641 — — 8,641 — 8,641 — — 
Commercial paper17,656 42  17,698 700 — 16,998 — 
Corporate debt22,193 1  22,194 5,049 — 17,145  
Subtotal48,490 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 September 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 September 30, 2021, the Company did not have any risk of expected credit losses on its investments.
As of September 30, 2021 and March 31, 2021, the estimated fair value of the Company's outstanding convertible senior notes ("Notes") was $407.9 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.
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5. INTANGIBLE ASSETS AND GOODWILL
Intangible Assets
The carrying value of intangible assets consisted of the following:
 September 30, 2021March 31, 2021
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Developed technology$27,225 $(16,833)$10,392 $33,960 $(21,458)$12,502 
Customer relationships6,426 (2,238)4,188 11,969 (7,341)4,628 
Trade and domain names82 (82) 988 (988) 
Total acquired identifiable intangible assets$33,733 $(19,153)$14,580 $46,917 $(29,787)$17,130 
During the six months ended September 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 consolidated financial statements.
As of September 30, 2021, the weighted average remaining useful life of developed technology and customer relationships was 4.4 years and 4.7 years, respectively.
As of September 30, 2021, the expected future amortization expense of the intangible assets was as follows:
Remainder of fiscal 2022$2,158 
Fiscal 20233,156 
Fiscal 20242,851 
Fiscal 20252,851 
Fiscal 20262,851 
Thereafter713 
Total$14,580 
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(651)
Balance at September 30, 2021$130,869 
6. LEASES
Operating Leases
The following table provides balance sheet information related to the Company's operating leases:
 September 30,
2021
March 31,
2021
Assets
Operating lease, right-of-use assets$62,379 $66,664 
Liabilities
Operating lease liabilities, current$13,271 $12,942 
Operating lease liabilities, non-current77,156 82,456 
Total operating lease liabilities$90,427 $95,398 
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The following table presents the components of lease expense and cash outflows from operating leases:
Three Months Ended September 30,Six Months Ended September 30,
2021202020212020
Operating lease expense$3,336 $3,834 $6,795 $7,585 
Variable lease expense757 857 1,507 1,639 
Cash outflows from operating leases4,254 2,100 8,454 4,200 
Short-term lease expense was immaterial for the three and six months ended September 30, 2021 and 2020.
The following table presents supplemental lease information:
September 30,
2021
March 31,
2021
Weighted average remaining lease term8.0 years8.4 years
Weighted average discount rate4.0%4.0%
The following table presents maturity of lease liabilities under the Company's non-cancellable operating leases as of September 30, 2021:
Remainder of fiscal 2022$8,448 
Fiscal 202315,511 
Fiscal 202412,175 
Fiscal 202511,703 
Fiscal 202610,681 
Thereafter47,818 
Total lease payments106,336 
Less: imputed interest(15,909)
Present value of lease liabilities$90,427 
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 September 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
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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 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. A joint mediation for both actions was held in September 2021 and the parties reached a preliminary settlement of all claims. Discovery is stayed in both actions pending completion of the settlement.
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 September 30, 2021 and March 31, 2021, the Company had accrued contingent indirect tax liabilities of $2.5 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 September 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:
 September 30,
2021
March 31,
2021
Principal$362,500 $362,500 
Unamortized debt discount(44,589)(53,323)
Unamortized issuance costs(620)(742)
Net carrying amount$317,291 $308,435 
The following table presents interest expense related to the Notes:
 Three Months Ended September 30,Six Months Ended September 30,
2021202020212020
Contractual interest expense$453 $453 $906 $906 
Amortization of debt discount4,401 4,133 8,733 8,201 
Amortization of issuance costs62 58 122 115 
Total interest expense$4,916 $4,644 $9,761 $9,222 
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.
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9. STOCK-BASED COMPENSATION
The following table presents stock-based compensation expense:
Three Months Ended September 30,Six Months Ended September 30,
 2021202020212020
Cost of service revenue$2,345 $2,410 $4,313 $4,224 
Cost of other revenue1,203 1,113 2,274 1,900 
Research and development9,458 8,255 18,156 14,800 
Sales and marketing12,724 7,054 27,050 12,793 
General and administrative10,105 6,490 20,629 14,384 
Total$35,835 $25,322 $72,422 $48,101 
Stock Options
The following table presents stock option activity (shares in thousands):
Number of SharesWeighted Average Exercise Price Per ShareWeighted Average Remaining Contractual TermAggregate Intrinsic Value
Outstanding at March 31, 20211,813 $9.46 2.86 years$41,673 
Granted  
Exercised(640)8.60 
Cancelled/Forfeited(18)21.94 
Outstanding at September 30, 20211,155 $9.74 2.70 years$