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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 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.

Table of Contents
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

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; 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

Table of Contents
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

Table of Contents
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.
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8X8, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited, dollars in thousands)

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

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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8X8, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited, dollars and shares in thousands)

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

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

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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8X8, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, dollars in thousands)

|  | Three Months Ended June 30,
|  | 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.
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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 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.
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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:

|  | 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.
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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.
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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 |

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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 achievement 1 |  | 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 |  |  | $ | 93,076 |

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q. As discussed in the section titled “Forward-Looking Statements,” the following discussion and analysis contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those discussed below and elsewhere in this report, particularly those set forth under the section entitled "Risk Factors" in our Annual Report on Form 10-K ("Form 10-K") for the fiscal year ended March 31, 2021.
BUSINESS OVERVIEW
We are a leading software-as-a-service ("SaaS") provider of voice, video, chat, contact center, and enterprise-class application programming interface ("API") solutions powered by one global cloud communications platform. From our proprietary cloud technology platform, organizations across all their locations and employees globally have access to unified communications, team collaboration, video conferencing, contact center, data and analytics, communication APIs, and other services, enabling them to be more productive and responsive to their customers.
Our customers represent companies ranging from small businesses to large multinational enterprises, and their users are spread across more than 150 countries. In recent years, we have increased our focus on the mid-market (which we define as customers that generate $25K to $100K ARR) and enterprise (which we define as customers that generate more than $100K ARR) customer categories. See “Key Business Metrics” section below for our definition and discussion of ARR.
We have a portfolio of SaaS offerings made available at different rates varying by the specific functionalities, services, and number of users. We generate service revenue from subscriptions to our communication services as well as from our customer's usage of certain of our platform services. We generate other revenues from the sales and rentals of office phones and other hardware equipment, and professional services. We define a “customer” as one or more legal entities to which we provide services pursuant to a single contractual arrangement. In some cases, we may have multiple billing relationships with a single customer (for example, where we establish separate billing accounts for a parent company and each of its subsidiaries).
Our flagship service is our 8x8 X Series, a next generation suite of unified communications as a service ("UCaaS") and contact center as a service ("CCaaS") solutions, which consist of service plans of increasing functionality designated X1, X2, etc., through X8. With 8x8 X Series, we provide enterprise-grade voice, unified communications, video meetings, team collaboration, and contact center functionalities from a single platform. The continued increase in demand for an integrated UCaaS and CCaaS solution led us to introduce eXperience Communications as a Service ("XCaaS"), a deployment model that erases boundaries between UCaaS and CCaaS, delivered through our differentiated single platform.
We also offer standalone SaaS services for contact center and video meetings as well as enterprise communication APIs for SMS, messaging, voice, and video APIs through our global communications platform as a service ("CPaaS"). We expect to continue developing and enhancing these services on our platform, as we believe in the value of the collective solutions.
SUMMARY AND OUTLOOK
In the first quarter of fiscal 2022, our service revenue grew approximately 21% year-over-year to $137.8 million. We continued to show an increase in our total ARR, which grew to $536 million in the first quarter of fiscal 2022, from $432 million in the same period in fiscal 2021, driven by the growth in sales to mid-market and enterprise customers. ARR from mid-market and enterprise customers represented 68% of total ARR in the first quarter of fiscal 2022, and grew 34% compared to the same period in fiscal 2021.
Our continued business focus is on achieving improved operating efficiencies while delivering revenue growth. We focus on key areas of spend in our go-to-market strategy and improving gross margin and operating margin through increased spend discipline. Additionally, we look to drive improved efficiencies in our customer acquisition and operations, and are focused on expanding our business upmarket with mid-market and enterprise customers. We believe that this approach will enable the Company to grow and capture market share during this phase of industry disruption, in a cost-effective way, and support the Company in pursuit of its path to profitability and operating cashflow improvement.
We plan to continue making investments in activities to acquire more customers, including investing in our marketing efforts, internal and field sales capacity, and research and development. We also intend to continue investing in our indirect channel programs to acquire more third-party selling agents to help sell our solutions, including investments in our value added resellers ("VARs") and master agent programs.
IMPACTS OF COVID-19
The full extent of the impact of the COVID-19 pandemic on our business, operations and financial results continues to depend on numerous evolving factors that we may not be able to accurately predict, including those set forth under the section entitled "Risk Factors" in our Form 10-K for the fiscal year ended March 31, 2021. In an effort to contain the spread of COVID-19 and its variants, governments around the world have enacted various measures, including orders to close at times non-essential businesses, isolate residents to their homes, and practice social distancing. To protect the health and safety of our employees, our workforce has spent significant time working from home and travel has been curtailed for our employees as well as our customers. While we anticipate that the global health crisis caused by COVID-19 and the measures enacted to slow its spread
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will negatively impact business activity across the globe, it is not clear what its potential effects, including the availability and effectiveness of vaccines, now and in the future, and current and future variants of the virus, will be on our business, including the effects on our customers, suppliers or vendors, or on our financial results.
KEY BUSINESS METRIC
Our management periodically reviews certain key business metrics in order to evaluate our operations, allocate resources, and drive financial performance in our business.
Annualized Recurring Subscriptions and Usage (“ARR”)
Our management reviews Annualized Recurring Subscriptions and Usage (“ARR”) and believes it may be useful to investors in order to evaluate trends in future revenues of the Company. Our management believes revenues are an important indicator for measuring the overall performance of the business. Our management uses trends in ARR to assess our on-going operations, allocate resources, and drive the financial performance of the business. We define Annualized Recurring Subscriptions and Usage, or ARR, as equal to the sum of the most recent month of (i) recurring subscription amounts and (ii) platform usage charges for all CPaaS customers (subject to a minimum billings threshold for a period of at least six consecutive months), multiplied by 12. We are not aware of any uniform standards for calculating ARR and caution that our presentation may not be consistent with that of other companies. For example, to the extent our ARR is used to evaluate trends in future revenue, such an evaluation would assume a sustained level of usage from existing customers which may fluctuate in future periods.
COMPONENTS OF RESULTS OF OPERATIONS
Service Revenue
Service revenue consists of communication services subscriptions, platform usage revenue, and related fees from our UCaaS, CCaaS, XCaaS, and CPaaS offerings. We plan to continue driving our business to increase service revenue through a combination of increased sales and marketing efforts, geographic expansion of our customer base outside the United States, innovation in product and technology, and through strategic acquisitions of technologies and businesses.
Other Revenue
Other revenue consists of revenues from professional services, primarily in support of deployment of our solutions and/or platform, and revenues from sales and rentals of IP telephones in conjunction with our cloud telephony service. Other revenue is dependent on the number of customers who choose to purchase or rent an IP telephone in conjunction with our service instead of using the solution on their cell phone, computer or other compatible device, and/or choose to engage our services for implementation and deployment of our cloud services.
Cost of Service Revenue
Cost of service revenue consists primarily of costs associated with network operations and related personnel, technology licenses, amortization of platform related capitalized internal-use software, other communication origination and termination services provided by third-party carriers and outsourced customer service call center operations, and other costs such as customer service, and technical support costs. We allocate overhead costs such as IT and facilities to cost of service revenue, as well as to each of the operating expense categories, generally based on relative headcount. Our IT costs include costs for IT infrastructure and personnel. Facilities costs primarily consist of office leases and related expenses.
Cost of Other Revenue
Cost of other revenue consists primarily of direct and indirect costs associated with the purchasing of IP telephones as well as the scheduling, shipping and handling, personnel costs, expenditures incurred in connection with the professional services associated with the deployment and implementation of our products, and allocated IT and facilities costs.
Research and Development
Research and development expenses consist primarily of personnel and related costs, third-party development, software and equipment costs necessary for us to conduct our product, platform development and engineering efforts, and allocated IT and facilities costs.
Sales and Marketing
Sales and marketing expenses consist primarily of personnel and related costs, sales commissions, including those to the channel, trade shows, advertising and other marketing, demand generation, promotional expenses, and allocated IT and facilities costs.
General and Administrative
General and administrative expenses consist primarily of personnel and related costs, professional services fees, corporate administrative costs, tax and regulatory fees, and allocated IT and facilities costs.
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Other Expense, Net
Other expense, net, consists primarily of interest expense related to the convertible notes, offset by income earned on our cash, cash equivalents, investments, and foreign exchange gains/losses.
Provision for Income Taxes
Provision for income taxes consists primarily of foreign income taxes and state minimum taxes in the United States. As we expand the scale of our international business activities, any changes in the U.S. and foreign taxation of such activities may increase our overall provision for income taxes in the future. We have a valuation allowance for our U.S. deferred tax assets, including federal and state net operating loss carryforwards ("NOLs"). We expect to maintain this valuation allowance until it becomes more likely than not that the benefit of our federal and state deferred tax assets will be realized by way of expected future taxable income in the United States.
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our condensed consolidated financial statements and the notes thereto.
Revenue
Service revenue

|  | 2021 |  | 2020 |  | Change
Three Months Ended June 30, |  | $ | 137,796 |  |  | $ | 114,183 |  |  | $ | 23,613 |  |  | 20.7 | %
Percentage of total revenue |  | 92.9 | % |  | 93.7 | % |  |  |  |

Service revenue increased for the three months ended June 30, 2021, as compared to the three months ended June 30, 2020, primarily due to a net increase in our customer base, expanded offerings to existing customers, and growth in related usage; service revenue from new customers was primarily driven by global sales of XCaaS, and our standalone UCaaS and CCaaS offerings to our mid-market and enterprise customers. The increase in service revenue was also attributable to growth in usage revenue generated by our CPaaS products, primarily in the APAC region.
We expect total service revenue to grow over time with our diverse platform offering as our business continues to expand globally and deeper into our customer categories.
Other revenue

|  | 2021 |  | 2020 |  | Change
Three Months Ended June 30, |  | $ | 10,531 |  |  | $ | 7,624 |  |  | $ | 2,907 |  |  | 38.1 | %
Percentage of total revenue |  | 7.1 | % |  | 6.3 | % |  |  |  |

Other revenue increased for the three months ended June 30, 2021, as compared to the three months ended June 30, 2020, primarily due to increased professional services revenue resulting from the overall growth in our business and customer base, partially offset by a decrease in product revenue as a result of a shift toward our hardware rental program and soft phone usage.
We expect other revenue to grow over time as our customer base grows, particularly in mid-market and enterprise, as we focus on delivering enhanced platform offerings to existing and new customers.
No customer represented greater than 10% of the Company's total revenue for the three months ended June 30, 2021 or 2020.
Cost of Revenue
Cost of service revenue

|  | 2021 |  | 2020 |  | Change
Three Months Ended June 30, |  | $ | 46,010 |  |  | $ | 40,996 |  |  | $ | 5,014 |  |  | 12.2 | %
Percentage of service revenue |  | 33.4 | % |  | 35.9 | % |  |  |  |

Cost of service revenue increased for the three months ended June 30, 2021, as compared to the three months ended June 30, 2020, yet decreased as a percentage of service revenue, primarily due to increases of:
•$5.9 million in communication infrastructure costs incurred to deliver our services resulting from growth in usage across our platform including those in connection with CPaaS;
•$0.7 million in amortization of capitalized internal-use software; and
•$0.2 million in stock-based compensation expense.
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These increases were partially offset by decreases of:
•$1.1 million in employee and consulting related expenditures; and
•$0.4 million in depreciation and amortization of intangible assets.
We expect cost of service revenue will increase in absolute dollars in future periods as revenue continues to grow.
Cost of other revenue

|  | 2021 |  | 2020 |  | Change
Three Months Ended June 30, |  | $ | 13,746 |  |  | $ | 11,137 |  |  | $ | 2,609 |  |  | 23.4 | %
Percentage of other revenue |  | 130.5 | % |  | 146.1 | % |  |  |  |

Cost of other revenue increased for the three months ended June 30, 2021, as compared to the three months ended June 30, 2020, primarily due to an increase in hardware shipment volume.
Cost of other revenue as a percentage of other revenue decreased, due to improved pricing and an increase in our hardware rental revenue. We expect that Other revenue margin will vary period over period.
Operating Expenses
Research and development

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

Research and development expenses increased for the three months ended June 30, 2021, as compared to the three months ended June 30, 2020, primarily due to increases of:
•$2.2 million in stock-based compensation expense;
•$1.5 million from less capitalized internal-use software costs;
•$0.5 million in employee and consulting related expenditures;
•$0.5 million in public cloud expenses; and
•$0.3 million in amortization of capitalized internal-use software.
These increases were partially offset by a decrease of $0.7 million in facility and overhead costs.
We plan to continue to invest in research and development to support our efforts to expand the capabilities and scope of our platform and to enhance the user experience. While we expect to continue to improve our cost structure and achieve operational efficiencies, we expect that research and development expenses will increase in absolute dollars in future periods as we continue to invest in our development efforts, and vary from period-to-period as a percentage of revenue.
Sales and marketing

|  | 2021 |  | 2020 |  | Change
Three Months Ended June 30, |  | $ | 75,915 |  |  | $ | 60,150 |  |  | $ | 15,765 |  |  | 26.2 | %
Percentage of total revenue |  | 51.2 | % |  | 49.4 | % |  |  |  |

Sales and marketing expenses increased for the three months ended June 30, 2021, as compared to the three months ended June 30, 2020, primarily due to increases of:
•$8.6 million in stock-based compensation expense; and
•$6.8 million in internal and external sales commissions.
These increases were partially offset by a net decrease of $0.1 million in marketing program and public cloud expenses due to gained efficiencies in lead generation and brand awareness, travel related costs, and employee and consulting related expenditures.
We plan to continue investing in sales and marketing to attract and retain customers on our platform and to increase our brand awareness. While we expect to continue to improve our cost structure and achieve operational efficiencies, we expect that sales and marketing expenses will increase in absolute dollars in future periods and vary from period-to-period as a percentage of revenue.
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General and administrative

|  | 2021 |  | 2020 |  | Change
Three Months Ended June 30, |  | $ | 26,091 |  |  | $ | 25,790 |  |  | $ | 301 |  |  | 1.2 | %
Percentage of total revenue |  | 17.6 | % |  | 21.2 | % |  |  |  |

General and administrative expenses increased for the three months ended June 30, 2021, as compared to the three months ended June 30, 2020, primarily due to increases of:
•$2.6 million in stock-based compensation expense;
•$0.8 million in contract termination costs; and
•$0.5 million in facility related costs.
These increases were partially offset by decreases of:
•$2.0 million in legal and regulatory costs;
•$1.0 million of lower allowances for credit losses; and
•$0.4 million in employee and consulting related expenditures.
We expect to continue improving our cost structure and achieve operational efficiencies, and therefore also expect that general and administrative expenses as a percentage of total revenue will decline over time.
Other expense, net

|  | 2021 |  | 2020 |  | Change
Three Months Ended June 30, |  | $ | 4,823 |  |  | $ | 3,925 |  |  | $ | 898 |  |  | 22.9 | %
Percentage of total revenue |  | 3.3 | % |  | 3.2 | % |  |  |  |

The change in Other expense, net for the three months ended June 30, 2021, as compared to the three months ended June 30, 2020, was primarily due to increased expenses related to fluctuations in foreign exchange rates.
With the recognition of interest expense and amortization of debt discount and issuance costs in connection with our convertible senior notes, we expect Other expense, net to remain in a net expense position for the foreseeable future.
Provision for income taxes

|  | 2021 |  | 2020 |  | Change
Three Months Ended June 30, |  | $ | 256 |  |  | $ | 228 |  |  | $ | 28 |  |  | 12.3 | %
Percentage of total revenue |  | 0.2 | % |  | 0.2 | % |  |  |  |

There was not a material change to our Provision for income taxes for the three months ended June 30, 2021 and no material changes are anticipated for the foreseeable future.
Liquidity and Capital Resources
As of June 30, 2021, we had $153.2 million of cash, cash equivalents, and investments. In addition, as of June 30, 2021, we had $8.6 million in restricted cash in support of letters of credit securing leases for office facilities. As of March 31, 2021, we had $152.9 million of cash, cash equivalents, and investments and $8.6 million of restricted cash.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") was passed into law, which amended portions of relevant tax laws and provided relief to certain qualifying entities. In connection with the CARES Act, the Company elected to defer certain employer payroll taxes, which reduced cash usage by approximately $5.0 million through March 31, 2021, of which approximately $2.5 million will be remitted to tax authorities during the third quarter of fiscal 2022 and the remaining amount due will be remitted in the third quarter of fiscal 2023.
In March 2021, the Company offered its employees a limited opportunity to receive a portion of their fiscal 2022 cash salary and/or cash bonus in shares of the Company's common stock. Based on employee elected participation, we expect lower cash usage from payroll compensation of over $4 million during the remainder of fiscal 2022 and approximately $4 million during the first quarter of fiscal 2023.
We believe that our existing cash, cash equivalents, and investment balances, and our anticipated cash flows from operations will be sufficient to meet our working capital and expenditure requirements for the next 12 months.
Period-over-Period Changes
Net cash provided by operating activities for the three months ended June 30, 2021, was $4.0 million, as compared with net cash used of $9.3 million in the three months ended June 30, 2020. Cash provided by/used in operating activities is affected by:
•the net loss;
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•depreciation and amortization;
•the amortization associated with deferred sales commissions, debt discount and issuance costs;
•the expense associated with stock-based compensation; and
•changes in working capital accounts, particularly in the timing of collections from receivable and payments of obligations, such as commissions.
During the three months ended June 30, 2021, net cash provided by operating activities was primarily related to non-cash operating expenses, including:
•stock-based compensation expense of $36.6 million;
•depreciation and amortization of $11.5 million;
•amortization of the debt discount of $4.4 million; and
•operating lease expenses of $3.5 million.
These amounts were partially offset by:
•the net loss of $43.9 million; and
•net cash outflows from sales commissions of $8.2 million.
Net cash used in investing activities was $11.1 million in the three months ended June 30, 2021, as compared with $11.9 million in the three months ended June 30, 2020. The cash used in investing activities during the three months ended June 30, 2021, was primarily related to:
•capitalized internal-use software development costs of $6.5 million; and,
•purchases of investments of $28.7 million, partially offset by $25.0 million of proceeds from maturities and sales of investments.
Net cash provided by financing activities was $3.4 million in the three months ended June 30, 2021, as compared with $0.1 million in the three months ended June 30, 2020. Cash provided by financing activities for the three months ended June 30, 2021 was primarily related to the proceeds from exercises of stock options.
CRITICAL ACCOUNTING POLICIES & ESTIMATES
The discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosures of assets and liabilities. On an on-going basis, we evaluate our critical accounting policies and estimates. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
There have been no significant changes during the three months ended June 30, 2021, to our critical accounting policies and estimates previously disclosed in our Form 10-K for the fiscal year ended March 31, 2021.
NEW ACCOUNTING PRONOUNCEMENTS
For a discussion of recently adopted accounting pronouncements and recent accounting pronouncements not yet adopted, refer to Note 2, Summary of Significant Accounting Policies, in the Notes to Unaudited Condensed Consolidated Financial Statements included in this Quarterly Report.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Fluctuation Risk
We had cash, cash equivalents, restricted cash, and investments totaling $161.9 million as of June 30, 2021. Cash equivalents and investments were invested primarily in money market funds, U.S. treasury, commercial paper, and corporate bonds. Our investment policy is focused on the preservation of capital and supporting our liquidity needs. Under the policy, we invest in highly rated securities, while limiting the amount of credit exposure to any one issuer other than the U.S. government. We do not invest in financial instruments for trading or speculative purposes, nor do we use leveraged financial instruments. We utilize external investment managers who adhere to the guidelines of our investment policy. A hypothetical 10% change in interest rates would not have a material impact on the value of our cash, cash equivalents, or available-for-sale investments.
As of June 30, 2021, the Company had $362.5 million or aggregate principal amount of convertible senior notes outstanding, which had an estimated fair value was $450.7 million. The fair value of the convertible senior notes is subject to interest rate risk, market risk, and other factors due to the conversion feature. The fair value of the convertible senior notes will generally increase as our common stock price increases and will generally decrease as our common stock price declines. The interest and market value changes affect the fair value of the convertible senior notes but do not impact our financial position, cash flows, or results
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of operations due to the fixed nature of the debt obligation. Additionally, we carry the convertible senior notes at face value less unamortized discount on our consolidated balance sheets, and we present the fair value for required disclosure purposes only.
Foreign Currency Exchange Risk
We have foreign currency risks related to our revenue and operating expenses denominated in currencies other than the U.S. dollar, primarily the British Pound, causing both our revenue and our operating results to be impacted by fluctuations in the exchange rates.
Gains or losses from the revaluation of certain cash balances, accounts receivable balances, and intercompany balances that are denominated in these currencies impact our net income (loss). A hypothetical decrease in all foreign currencies against the US dollar of 10% would not result in a material foreign currency loss on foreign-denominated balances for the three months ended June 30, 2021. As our foreign operations expand, our results may be more impacted by fluctuations in the exchange rates of the currencies in which we do business.
At this time, we do not, but we may in the future, enter into financial instruments to hedge our foreign currency exchange risk.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Effectiveness of Disclosure Controls and Procedures
We maintain disclosure controls and procedures as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (Disclosure Controls) that are designed to ensure that information we are required to disclose in reports filed or submitted under the Securities and Exchange Act of 1934 is accumulated and communicated to management, including our principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure, and that such information is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.
As of the end of the period covered by this Quarterly Report on Form 10-Q, under the supervision of our Chief Executive Officer and our Chief Financial Officer, we evaluated the effectiveness of our Disclosure Controls. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our Disclosure Controls were effective as of June 30, 2021.
Limitations on the Effectiveness of Controls
Our management, including the Chief Executive Officer and Chief Financial Officer, do not expect that our Disclosure Controls or internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.
Changes in Internal Control over Financial Reporting
During the first quarter of fiscal year 2022, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The information set forth in Note 7, Commitments and Contingencies, under the heading “Legal Proceedings” in the Notes to Unaudited Condensed Consolidated Financial Statements included in this Quarterly Report is incorporated by reference in response to this item.
ITEM 1A. RISK FACTORS
There have been no material changes from the risk factors previously disclosed in our Form 10-K for the fiscal year ended March 31, 2021.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
None.
ITEM 5. OTHER INFORMATION
None.
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ITEM 6. EXHIBITS

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

* | Management contract or compensatory plan or arrangement.
+ | Furnished herewith.

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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: August 5, 2021

| 8X8, INC.
| By: /s/ Samuel Wilson
| Samuel Wilson
| Chief Financial Officer (Principal Financial and Duly Authorized Officer)

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