ACQUISITIONS

12 Months Ended

Mar. 31, 2022

Business Combination and Asset Acquisition [Abstract]

Wavecell

On July 17, 2019, the Company acquired Wavecell, by acquiring all of the outstanding shares for a total purchase price of $117.1 million, comprising of $72.8 million in cash and $44.3 million in shares of the common stock of the Company . The acquisition was accounted for as a business combination under the acquisition method and, accordingly, the total purchase price was allocated to the tangible and intangible assets acquired and the liabilities assumed based on their estimated fair value on the acquisition date. The goodwill recognized was primarily attributed to increased synergies that are expected to be achieved from the integration of Wavecell and is not expected to be deductible for income tax purposes.

Fuze

On January 18, 2022, the Company acquired 100% of the outstanding shares of common stock of Fuze for a total consideration of $213.8 million, which consisted of $132.9 million in cash and $80.9 million in shares of common stock of the Company, of which, $1.3 million in cash and up to 1,153,523 shares were held back. Fuze is a provider of cloud-based, unified communications, and contact center services. The Company’s strategic rationale for acquiring Fuze includes acquiring Fuze’s existing customer base and migrating them onto 8x8’s platforms, retaining engineering talent, and deploying research and development efforts into 8x8’s roadmap. Since the acquisition date, the results of Fuze’s operations have been included in the Company's consolidated financial statements, including service revenue of $23.9 million, other revenue of $0.2 million, and net loss of $0.7 million.

The Fuze acquisition was accounted for as a business combination in accordance with ASC 805, Business Combinations, Treatment as a business combination is based upon the following primary considerations: the counterparties in the transaction are not under common control with the Company, there is no concentration of substantially all fair values of assets acquired in a single asset or group of similar asset, and Fuze had substantive processes that contributed to the ability to produce outputs, including an organized workforce which was acquired.

The Company has determined the fair values of the assets acquired and liabilities assumed at the transaction date. The following table summarizes the purchase price allocation (in thousands):


	January 18, 2022
Fair value of consideration transferred	$	213,784

Estimated fair value of assets acquired:
Cash and cash equivalents	$	6,081
Accounts receivable	15,110
Other current assets	2,857
Property and equipment	1,406
Operating lease, right-of-use assets	7,261
Intangible assets	119,400
Restricted cash, non-current	868
Other assets	176
Total assets acquired	$	153,159

Estimated fair value of liabilities assumed:
Accounts payable	$	(3,250)
Accrued compensation	(3,590)
Accrued taxes	(16,510)
Operating lease liabilities, current	(2,570)
Deferred revenue, current	(14,765)
Other accrued liabilities	(14,420)
Operating lease liabilities, non-current	(4,341)
Deferred revenue, net of current portion	(10,229)
Other liabilities, non-current	(5,817)
Total liabilities assumed	$	(75,492)
Total identifiable net assets	77,667
Goodwill	136,117
Fair value of consideration transferred	$	213,784

The following table summarizes the components of intangible assets acquired and their estimated useful lives as of the acquisition date:


	Fair Value		Useful life (in Years)
Customer relationships	$	99,400	9
Developed technology	19,500		3
Trade name, trademarks, and domain names	500		1
Total intangible assets	$	119,400

The fair value of trade names, trademarks, and domain names and developed technology were estimated using the income approach, specifically the relief-from-royalty method which estimated the cost savings that accrue to the owner of the intangible assets that would otherwise be payable as royalties or license fees on revenues earned through the use of the asset. Significant assumptions under the relief-from-royalty method include revenue growth rate, net of attrition, royalty rate, income tax rate, discount rate, and tax amortization benefits. The fair value of customer relationships was estimated using the multi-period excess earnings method. The multi-period excess earnings method model estimates revenues and cash flows derived from the asset and then deducts portions of the cash flow that can be attributed to supporting assets. Significant assumptions under the multi-period excess earnings method include revenue growth rate, net of attrition, expenses, contributory asset charges, income tax rate, discount rate, and tax amortization benefits. The resulting cash flow, which is attributable solely to the asset acquired, is then discounted at a rate of return commensurate with the associated risk of the asset to calculate the present value. Refer to Note 4, Intangible Assets, for more details.

None of the goodwill is expected to be deductible for income tax purposes.

The fair value of accounts receivables acquired is approximately $15.1 million, with the gross contractual amount being $29.6 million. The Company expects $14.5 million of the gross contractual amount to be uncollectible.

Under the terms of the merger agreement, former Fuze stockholders may accept or reject the Company's calculated working capital adjustments. The Fuze securityholders' representative accepted the working capital calculations on May 2, 2022. Accordingly, the Company does not expect changes to recorded goodwill as a result of working capital adjustments.

The Company incurred acquisition-related transaction costs of $9.7 million during the year ended March 31, 2022. All acquisition-related costs were expensed as incurred and have been recorded as general and administrative expenses in the consolidated statements of operations.

Unaudited Supplemental Pro-forma Information

The following unaudited pro forma consolidated results of operations are based on the assumption as if the Fuze acquisition was completed as of April 1, 2020:


	Year ended March 31,
(In thousands, except per share amounts)	2022		2021
	Unaudited
Revenue	$	737,660	$	657,755
Net loss	$	(216,909)	$	(257,673)
Net loss per share (basic and diluted)	$	(1.84)	$	(2.36)

The unaudited pro forma results above include adjustments related to the purchase price allocation that had the effect of increase in amortization of identifiable intangible assets, increase in the non-recurring transaction costs, and impact of the related income tax effect of these adjustments. The unaudited pro forma revenue, net loss, and loss per share information has been prepared by management for illustrative purposes only and are not necessarily indicative of the consolidated financial position or results of operations in future periods or the results that would have been realized had the Company and Fuze been combined during the specified periods. The unaudited pro forma revenue, net loss, and loss per share information do not reflect any operating efficiencies and/or cost savings that the Company may achieve with respect to the combined companies, or any liabilities that may result from integration activities.