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What changed in 8X8 INC /DE/'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of 8X8 INC /DE/'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+326 added−367 removedSource: 10-K (2023-05-25) vs 10-K (2022-05-27)

Top changes in 8X8 INC /DE/'s 2023 10-K

326 paragraphs added · 367 removed · 212 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

50 edited+34 added−44 removed17 unchanged
Biggest changeWe continue to make strategic investments in artificial Intelligence and machine learning to develop new capabilities and features for our customers, such as context-rich customer engagements, intelligent call routing and faster first-call resolution. • Global Reach®. 8x8's Global Reach technology provides enterprise-grade quality of service, reliability, security and support for our multinational customers, with full public switched telephone network ("PSTN") replacement in 50 countries.
Biggest changeOur platform integrates artificial intelligence and machine learning of our technology and our third party partners with a focus on simplifying and automating workflows for our customers. We continue to make strategic investments in artificial intelligence and machine learning to develop new capabilities and features for our customers, such as context-rich customer engagements, intelligent call routing and faster first-call resolution.
Our software uses a combination of open APIs and pre-built integrations to retrieve contextually relevant data from, and to enhance the functionality of, a wide variety of customers' third-party applications, such as Salesforce, Microsoft Dynamics, Google, NetSuite, Okta, Zendesk, Oracle Sales Cloud, Bullhorn, Aryaka, and HubSpot. • Emphasis on Security and Compliance.
Additionally, our software uses a combination of open APIs and pre-built integrations to retrieve contextually relevant data from, and to enhance the functionality of, a wide variety of customers' third-party applications, such as Salesforce, Microsoft Dynamics, Google, NetSuite, Okta, Zendesk, Oracle Sales Cloud, Bullhorn, Aryaka, and HubSpot. • Emphasis on Security and Compliance.
Our security program is designed to protect the confidentiality, integrity and availability of our customers data. We believe we have created a top-down culture of security and compliance, including a commitment to secure architecture and development.
Our security program is designed to protect the confidentiality, integrity and availability of our customers data. We believe we have created a top-down culture of security and compliance, including a commitment to secure architecture and development processes.
Wilson served as VP Finance for MobileIron, an enterprise software security company, from 2011 until 2017 with responsibilities for financial planning and analysis, investor relations, and treasury functions as well as eCommerce. Mr. Wilson is a Chartered Financial Analyst. He holds a Bachelor’s Degree in Electrical Engineering from Seattle University and an MBA from the University of California, Berkeley.
Wilson served as VP Finance for MobileIron, an enterprise software security company, from 2011 until 2017 with responsibilities for financial planning and analysis, investor relations, and treasury functions, as well as e-commerce. Mr. Wilson is a Chartered Financial Analyst. He holds a Bachelor’s Degree in Electrical Engineering from Seattle University and an MBA from the University of California, Berkeley.
The CCPA and the CPRA impose new obligations on qualifying for-profit companies, like us, doing business in California and substantially increases potential liability for such companies for failure to comply with data protection rules applicable to California residents. In addition, Virginia, Colorado, and Utah have passed privacy laws that will be effective in 2023.
The CCPA and the CPRA impose new obligations on qualifying for-profit companies, like us, doing business in California and substantially increases potential liability for such companies for failure to comply with data protection rules applicable to California residents. In addition, Virginia, Colorado, Connecticut and Utah have passed new privacy laws that will become effective in 2023.
Through our integrated technology platform, we offer our customers a portfolio of voice, video, contact center, chat and team collaboration, communication APIs, and business analytics solutions, which include: • 8x8 Work: a self-contained, feature-rich, end-to-end United Communications solution that delivers enterprise voice with PSTN connectivity, secure video meetings, and unified messaging including direct messages, public and private team messaging rooms, and short and multimedia services ("SMS/MMS") . • 8x8 Contact Center: a multi-channel cloud-based contact center solution that enables both large and small contact centers to enjoy the same customer experience and agent productivity benefits previously available only to large contact centers at a much higher cost. • 8x8 CPaaS: a comprehensive set of global communications platform-as-a-service ("CPaaS") capabilities that enable businesses to directly integrate our platform services within their websites, mobile apps and business systems for personalized customer engagement at a high scale.
Our Solutions Through our integrated technology platform, we offer our customers a portfolio of contact center, voice, video, contact center, chat and team collaboration, embeddable communication APIs, and business analytics solutions, which include: • 8x8 Work: a self-contained, feature-rich, end-to-end United Communications as a service ("UCaaS") solution that delivers enterprise-grade voice with PSTN connectivity, secure video meetings, and unified messaging including direct messages, public and private team messaging rooms, and short and multimedia services ("SMS/MMS") . • 8x8 Contact Center: a multi-channel cloud-based contact center solution that enables both large and small contact centers to build the same tailored customer experiences and achieve agent productivity benefits previously available only to large contact centers at a much higher cost. • 8x8 CPaaS: a comprehensive set of global communications platform-as-a-service ("CPaaS") capabilities that enable businesses to directly integrate our platform services within their websites, mobile apps and business systems for personalized customer engagement at a high scale.
Middleton served as Vice President and Head of Product Management for Jive Software, Inc., an enterprise social collaboration application provider. Prior to that, Mr. Middleton served as the Head of Product Management at Google for Work Systems and led the Google Apps Enterprise product team. Mr.
From February 2016 to September 2017, Mr. Middleton served as Vice President and Head of Product Management for Jive Software, Inc., an enterprise social collaboration application provider. Prior to that, Mr. Middleton served as the Head of Product Management at Google for Work Systems and led the Google Apps Enterprise product team. Mr.
The AI-powered 8x8 Callstats Service provides real-time metrics and analytics on a WebRTC session to improve voice and video quality of service. 4 Table of Contents 8x8 X Series The capabilities of our core communications solutions are integrated into a comprehensive bundled offering called the 8x8 “X Series." The X Series is a suite of UCaaS and CCaaS solutions,which together comprise our XCaaS platform solution.
The AI-powered 8x8 Callstats Service provides real-time metrics and analytics on a WebRTC session to improve voice and video quality of service. 8x8 X Series The capabilities of our core communications and contact center solutions are integrated into a comprehensive offering called the 8x8 “X Series." The X Series is a suite of UCaaS and CCaaS solutions, which together with our unified global communications platform, comprise our XCaaS platform solution.
Features expected by demanding communications and collaboration customers today, such as auto attendants; worldwide extension dialing; corporate directory with click-to-call functionality; presence, messaging, and chat; call recording; call monitoring; internet fax; and the ability to interact contextually with inbound communication (email, call or chat) can be mixed and matched in customizable packages fit for businesses to most effectively meet the needs of individual users. • X5 through X8 generally provide the features of X1 through X4, plus contact center functionality.
Advanced features, such as auto attendants; worldwide extension dialing; corporate directory with click-to-call functionality; presence, messaging and chat; call recording; call monitoring; internet fax; and the ability to interact contextually with inbound communication (email, call or chat) can be mixed and matched in customizable packages to most effectively meet the needs of individual users. • X5 through X8 service plans generally provide the features of X1 through X4, plus contact center functionality.
In addition, the SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including 8x8. 8 Table of Contents Information About Our Executive Officers Our executive officers as of the date of this report are listed below. David Sipes, Chief Executive Officer and Director.
In addition, the SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including 8x8. Information About Our Executive Officers Our executive officers as of the date of this report are listed below. Samuel Wilson, Interim Chief Executive Officer .
Pursuant to these agreements, we can provide inbound and outbound telephone and SMS messaging services to traditional telecommunication systems and mobile networks worldwide through our platform via these carriers.
Interconnection Agreements: We have agreements with SMS, voice, and mobile network operators worldwide. Pursuant to these agreements, we can provide inbound and outbound telephone and SMS messaging services to traditional telecommunication systems and mobile networks worldwide through our platform via these carriers.
Cloud Communications Providers of Voice, Video, Chat and Collaboration, Contact Center, and Communication APIs: For customers looking to implement cloud-based communications, our single services platform competes with other cloud communication providers of voice, chat, collaboration, contact center and communication APIs, such as RingCentral, Inc., Vonage Holdings Corp., Genesys Telecommunications Laboratories, Inc., Zoom Video Communications, Inc., Five9, Inc., NICE inContact, and Twilio Inc., among others.
Cloud Communications Providers of Voice, Video, Chat and Collaboration, Contact Center, and Communication APIs: For customers looking to implement cloud-based communications, our single services platform competes with other cloud communication providers of voice, chat, collaboration, contact center and communication APIs, such as RingCentral, Inc., Vonage Holdings Corp.
We are always looking to expand our role promoting employee diversity, equity and inclusivity, and we are continuously evaluating and formalizing key processes to monitor our hiring and reward programs, and ensure that all employees can play to win at 8x8.
We are always looking to expand our role promoting employee diversity, equity and inclusivity, and we are continuously evaluating and formalizing key processes to monitor our hiring and reward programs to ensure that all employees have an equal opportunity to be successful at 8x8.
We use various tools, including an extensive set of synthetic tests and Application Performance Monitoring, to monitor and manage elements of our network and our partners' and certain larger customers’ networks in real time.
We use various tools, including an extensive set of synthetic tests and Application Performance Monitoring software, to monitor and manage our network, as well as the networks of our partners and certain larger customers, in real time.
Our platform utilizes intelligent geo-routing technology and leverages data centers across globally dispersed regions - North America, South America, Continental Europe, Asia, and Australia - to provide consistently high call quality to customers worldwide. • Intuitive User Experience.
Our platform utilizes intelligent geo-routing technology and leverages data centers across globally dispersed regions - including North America, South America, Continental Europe, Asia, and Australia - to provide consistently high-quality voice service and meet data sovereignty requirements of customers worldwide.
Wilson served as Chief Customer Officer and Managing Director of EMEA from January 2020 until June 2020. From September 2017 until January 2020, Mr. Wilson served as Senior Vice President responsible for eCommerce, global small business, and United States mid-market sales. Prior to joining 8x8, Mr.
From September 2017 until January 2020, Mr. Wilson served as Senior Vice President responsible for e-commerce, global small business, and United States mid-market sales. Prior to joining 8x8, Mr.
Operations Our operations infrastructure consists of data management, monitoring, control, and billing systems that support all of our products and services. We invest substantial resources to develop and implement our service monitoring real-time call management information system.
Operations Our operations infrastructure consists of data management, monitoring, control, and billing systems that support the portfolio of communication and contact center services plans provided by our XCaaS platform. We invest substantial resources to develop and implement our service monitoring real-time call management information system.
Designated X1 through X8, the 8x8 X Series offers the following service plans and capabilities: • X1 through X4 provide enterprise-grade voice, unified communications, video meetings, and team collaboration functionality.
Designated X1 through X8, the 8x8 X Series offers the following service plans and capabilities: • X1 through X4 service plans provide enterprise-grade voice, unified communications, video meetings, and team collaboration functionality, as well as contact center-like features for users with direct customer engagement.
We believe having control over our entire platform enables us to deliver a more consistent and seamless experience for our customers across all aspects of the service from the user interface to the technical support experience. • Big Data, Analytics, and Artificial Intelligence.
Control over our entire platform enables us to deliver a more consistent and seamless experience for our customers across all aspects of the service, from the user interface to the technical support experience. • AI/ML Workflow Automation and Self-Service.
The 8x8 XCaaS Platform Strategy Our XCaaS solution is a highly scalable and configurable cloud communications platform comprising of voice, team chat and collaboration, video meetings, contact center, embeddable communication APIs, and analytics for mid-market and enterprise businesses across the globe.
The 8x8 XCaaS Platform Strategy Our XCaaS platform is a highly scalable and configurable cloud communications platform that includes solutions for contact center, voice communications, team chat and collaboration, video meetings, embeddable communication APIs, and AI-based analytics.
Middleton earned his Ph.D in Physics from Princeton University, and holds a master’s degree in management from the Kellogg Graduate School of Business at Northwestern University. Stephanie Garcia, Chief Human Resources Officer . Stephanie Garcia, age 52, has served as our Chief Human Resources Officer since January 2022. Ms.
Middleton earned his Ph.D. in Physics from Princeton University and holds a master’s degree in management from the Kellogg Graduate School of Business at Northwestern University. Laurence Denny, Chief Legal Officer. Laurence Denny, age 50, was appointed and has served as Chief Legal Officer and Corporate Secretary since December 2022. Mr.
While we believe in and continue to emphasize the power of the platform as the collective offering of our solutions, we also make our solutions available independently to introduce customers to our platform and expand their platform engagement over time. Routes to Market We sell directly to customers or through indirect sales channels .
We also make 8x8 Work and 8x8 Contact Center solutions available independently to introduce customers to our platform and expand their platform engagement over time. Routes to Market We sell directly to customers or through indirect sales channels.
None of our employees are represented by a labor union nor subject to a collective bargaining arrangement. Diversity, Equity and Inclusion: As a communications company with a growing international presence, it is vital that our workforce be as diverse as the customers we serve.
Diversity, Equity and Inclusion: As a communications company with a growing international presence, it is vital that our workforce be as diverse as the customers we serve.
Our globally dispersed operations and remotely working capabilities allow us to maintain redundant back-up operations services to minimize or eliminate the impact of any local disruptions at any of our operations centers or data centers. 6 Table of Contents In the event of a major disruption at a data center, such as a natural disaster or service disruptions caused by the COVID-19 pandemic, failover between data centers or public cloud regions for the 8x8 X Series is designed to occur with no or minimal disruption.
In the event of a major disruption at a data center, such as a natural disaster or service disruptions caused by the COVID-19 pandemic, failover between data centers or public cloud regions for the 8x8 X Series is designed to occur with no or minimal disruption.
Incumbent Telephony Companies and Legacy Equipment Providers: Our cloud-based software replaces wire line business voice services sold by incumbent telephone and cable companies, such as AT&T, Inc., CenturyLink, Inc., Comcast Corporation, and Verizon Communications, Inc., often in conjunction with on-premises hardware solutions from companies like Avaya, Inc., Cisco Systems, Inc., and Mitel Networks Corp.
All of these cloud services providers are significantly larger than us and have the ability to leverage their size and scale across multiple product segments, such as Microsoft Teams, to compete against our XCaaS platform offering. 5 Incumbent Telephony Companies and Legacy Equipment Providers: Our cloud-based software replaces wire line business voice services sold by incumbent telephone and cable companies, such as AT&T, Inc., CenturyLink, Inc., Comcast Corporation, and Verizon Communications, Inc., often in conjunction with on-premises hardware solutions from companies like Avaya, Inc., Cisco Systems, Inc., and Mitel Networks Corp.
See the section entitled “Risks Related to Intellectual Property” in Part I, Item 1A "Risk Factors" for more information on our intellectual property risks.
We also use software components in our platform that are licensed to the public under open-source licenses. See the section entitled “Risks Related to Intellectual Property” in Part I, Item 1A "Risk Factors" for more information on our intellectual property risks.
X Series service plans are designed so that customers pay for only those capabilities the business needs, while providing businesses with an upgrade path over time as their needs evolve and grow.
X Series service plans allow customers to match features and functionality to each user's customer engagement profile, paying for only those capabilities the business needs, while providing businesses with an upgrade path over time as their needs evolve and grow.
Internationally, we are subject to a complex patchwork of regulations that vary from country to country. Countries have adopted laws that impose stringent licensing obligations on providers of VoIP services like ours. In many countries, it is not clear how laws that have historically been applied to traditional telecommunications providers will be applied to providers of VoIP services like us.
In many countries, it is not clear how laws that have historically been applied to traditional telecommunications providers will be applied to providers of VoIP services like us.
Delivered from a single platform, these service plans provide one application for business voice, team messaging, and meetings, so that employees can quickly, easily, and with just one click move from a chat message to a phone call to a video conference. Users can access the essential communication and collaboration features through the desktop app, mobile app, or desk phone.
Delivered through the 8x8 Work solution, these service plans provide one application for business voice, team messaging, and meetings. Users can access the essential communication and collaboration features through the desktop app, mobile app, or desk phone.
Customers can access 8x8 customer support services directly from the company website, or receive multi-channel technical support via phone, chat, web, and email. Emergency support is available on a 24/7 basis. We take a lifecycle approach to customer support, supporting customers from on-boarding to deployment, and through the renewal process, to drive greater user adoption of 8x8 services.
Customer and Technical Support: 8x8 maintains a global customer support organization with operations in the United States, United Kingdom, Philippines, Singapore, and Romania. Customers can access 8x8 customer support services directly from the company website, or receive multi-channel technical support via phone, chat, web, and email. Emergency support is available on a 24/7 basis.
We also rely upon the network operations centers of our telecommunications carrier partners and data center providers to augment our monitoring and response efforts.
We also rely upon the network operations centers of our telecommunications carrier partners and data center providers to augment our monitoring and response efforts. Our globally dispersed operations and remote working capabilities allow us to maintain redundant back-up operations services to minimize or eliminate the impact of local disruptions at any of our operations centers or data centers.
When hiring, we strive to keep our candidate pools as diverse as possible to ensure that we are always bringing new viewpoints into the 8x8 team.
When hiring we strive to keep our candidate pools as diverse as possible in order to bring new viewpoints into the 8x8 team. Additionally, we conducted a role and gender pay equity audit to ensure pay equity by position.
Marketing and Promotional Activities We market our services directly to end users through a variety of means, including search engine marketing and optimization, third-party lead generation sources, industry conferences, trade shows, webinars, and digital advertising channels.
No single customer represented 10% or more of our revenue in fiscal 2023, 2022, and 2021. Marketing and Promotional Activities We market our services directly to end users through a variety of means, including industry conferences, trade shows, webinars, and digital advertising channels targeting mid-market and enterprise customers.
We require our employees, contractors, and other third parties to sign agreements providing for the maintenance of confidentiality and also the assignment of rights to inventions made by them while providing services to us. We also use software components in our platform that are licensed to the public under open source licenses.
Our business relies on a combination of trade secrets, patents, copyrights, trademarks laws, and contractual restrictions, such as confidentiality agreements, licenses, and intellectual property assignment agreements. We require our employees, contractors, and other third parties to sign agreements providing for the maintenance of confidentiality and also the assignment of rights to inventions made by them while providing services to us.
Hunter Middleton, Chief Product Officer. Hunter Middleton, age 55, has served as our Chief Product Officer since August 2021. Mr. Middleton previously served as our SVP of Product and Design from March 2018 to August 2021. From February 2016 to September 2017, Mr.
He holds a bachelor’s degree in accounting from Rutgers, The State University of New Jersey-New Brunswick and an MBA from the Pennsylvania State University. Hunter Middleton, Chief Product Officer. Hunter Middleton, age 56, has served as Chief Product Officer since August 2021. Mr. Middleton previously served as our SVP of Product and Design from March 2018 to August 2021.
Our Customers We have a diverse and growing customer base of more than 60,000 organizations, with users in more than 170 countries, including companies of every size and across a wide range of industries and use cases. No single customer represented 10% or more of our revenues in fiscal 2022, 2021, and 2020.
Our Customers We have a diverse and growing customer base of more than 60,000 customers, with more than 2.5 million paid business licenses, with users in over 180 countries, including small business, mid-market and enterprise customers, and across a wide range of industries and use cases.
Accordingly, we make substantial investments in the design and development of new products and services, as well as the development of enhancements and features to our existing products and services, and make these enhancements available to our customers frequently.
Research and Development The cloud communications market is characterized by rapid technological changes and advancements typical of most SaaS markets. Accordingly, we make substantial investments in innovation focused on the design and development of new products and services, as well as the development of enhancements and features to our existing products and services.
The key attributes of the 8x8 solution include: • Unified Communications, Collaboration, and Contact Center on a Single, API-based Cloud Technology Platform. We believe that a common platform for communication and collaboration drives more efficient employee and customer engagement and greater business productivity.
We believe that a common platform for communication, collaboration and customer interaction drives more efficient employee and customer engagement, greater business productivity and improved employee and customer experiences.
We currently employ individuals in research, development, and engineering activities in the United States, Canada, United Kingdom, Portugal, Romania, Singapore, and Philippines, as well as outsourced software development consultants around the world. Intellectual Property 5 Table of Contents As of March 31, 2022, we hold more than 283 patents, with more than 107 United States and foreign patent applications pending.
We make these enhancements available to our customers frequently. We currently employ individuals in research, development, and engineering activities in the United States, Canada, United Kingdom, Portugal, Romania, Singapore, and Philippines, as well as outsourced software development consultants around the world.
The two-day program includes team-building activities and direct access to key executives, in addition to in-depth training on our products and technologies. We continue to seek out new ways to leverage the 8x8 Work communication and collaboration platform to keep our employees connected to each other and maintain a positive and supportive work culture.
Under the Team8s umbrella, we have planned quarterly global activities, a Team8s award program, and Boomerang recognition for employees who left 8x8 and have elected to return. We continue to seek out new ways to leverage our 8x8 Work communication and collaboration platform to keep our employees connected to each other and maintain a positive and supportive work culture.
Financial information relating to revenues generated in different geographic areas are set forth in Note 1 1, Geographical Information , in the Notes to Consolidated Financial Statements contained in this Annual Report.
Financial information relating to revenue generated in different geographic areas are set forth in Note 11 , Geographical Information , in the Notes to Consolidated Financial Statements contained in this Annual Report. Employees and Human Capital As of March 31, 2023, we had 1,921 full-time employees operating around the world, of which 65% are located outside of the United States.
As ONE global team powered by the 8x8 platform, we are able to leverage diverse talent around the globe to ensure that we remain at the forefront of innovation in our industry. As of March 31, 2022, we had 2,216 full time employees operating around the world, of which 1,245 are located outside of the United States.
Once the evaluation has been completed, either one or both services will be employed globally. 7 As one global team powered by the 8x8 platform, we are able to leverage diverse talent around the globe to ensure that we remain at the forefront of innovation in our industry.
We define mid-market and enterprise as customers representing more than $25,000 and more than $100,000, respectively, in Annualized Recurring Subscriptions and Usage Revenue. These customers often start with an individual service or combination of services (for example, with video conferencing or phone services), and then scale their usage over time by enabling additional services, capabilities and analytics offerings when ready.
These customers often start with an individual service or combination of services (for example, with video conferencing or phone services), and scale their usage over time by enabling additional services, capabilities and analytics offerings when ready. The key attributes of the 8x8 solution include: • Unified Communications, Collaboration, and Contact Center on a Single, Modern Technology Platform.
For our larger enterprise customers, our implementation methodology utilizes a deployment management team and provides active support through the "go-live" date at each customer site. We also have a premium plus success program, and for certain customers, a dedicated customer engagement manager, as a single point of contact for every aspect of the post-sale relationship.
We also have a premium success program, and for certain customers, a dedicated customer engagement manager as a single point of contact for every aspect of the post-sale relationship. Finally, we offer a variety of training classes through 8x8 University, either through instructor-led classes or self-paced online learning.
Employees and Human Capital 8x8 is transforming the future of business communications as a leading SaaS provider of voice, video, chat, contact center, and enterprise-class API solutions powered by one global cloud communications platform.
ITEM 1. BUSINESS Overview 8x8 is a leading provider of software-as-a-service solutions for contact center, voice communications, video meetings, employee collaboration, and embeddable communication APIs, powered by our global cloud-native communications platform. Together, our communications platform solutions comprise the 8x8 XCaaS platform.
Our portfolio of patents, with expiration dates through 2040, and patent applications cover diverse aspects of our unified communications, video, API, collaboration and contact center services, and infrastructure. Our business relies on a combination of trade secrets, patents, copyrights, trademarks laws, and contractual restrictions, such as confidentiality agreements, licenses, and intellectual property assignment agreements.
Intellectual Property As of March 31, 2023, we held more than 330 patents, with more than 125 United States and foreign patent applications pending. Our portfolio of patents, with expiration dates through 2042, and patent applications cover diverse aspects of our unified communications, video, API, collaboration and contact center services, and infrastructure and UX design and functionality.
Our web, desktop, and mobile interfaces act as the communications portal for all 8x8 services and provide customers with a familiar, consistent, and integrated user experience across all endpoints. 3 Table of Contents • Committed Service Quality and Availability over the Public Internet.
Our web, desktop, and mobile interfaces act as the communications portal for all 8x8 services and provide users with a familiar, consistent, and integrated experience across all endpoints. Tailored workspaces for agents, supervisors and other users meet the communication requirements of users based on their customer engagement profile to drive increased productivity and scale resources. • Microsoft Teams Integrations.
We strive to create a working environment and culture that not only embraces creativity and diversity, but is financially and personally rewarding for our people. 7 Table of Contents Culture & Engagement: 8x8 is transforming modern business communications. We take pride in our innovations that elevate employees' and customers' experiences and enable our customers to build more agile workplaces.
We conduct our business socially and ethically and are committed to strong corporate governance, universal human rights, and sustainable business practices. We strive to create a work environment and culture that embraces creativity and diversity and is financially and personally rewarding for our people. Culture and Engagement: 8x8 is transforming modern business communications.
Sipes also serves as a director of PandaDoc Inc., a document automation software company, since May 2020. Mr. Sipes has an MBA from Northwestern University and a BS in Administration from the University of California, Berkeley. Samuel Wilson, Chief Financial Officer . Samuel Wilson, age 52, was appointed Chief Financial Officer in June 2020. Prior to his appointment, Mr.
Samuel Wilson, age 53, was appointed and has served as Interim Chief Executive Officer since November 2022. Mr. Wilson previously served as our Chief Financial Officer from June 2020 to November 2022. Prior to his appointment, Mr. Wilson served as Chief Customer Officer and Managing Director of EMEA from January 2020 until June 2020.
Rewards: We strive to provide competitive total rewards packages to hire and retain the key talent we need to achieve our growth and profitability objectives. These include benefits to care for the total health of our employees and their families, paid medical and parental leave, as well as company-funded short-and long-term disability.
We also offer benefits to care for the total health of our employees and their families, including health and dental insurance, paid medical and parental leave, Company-funded short-and long-term disability, and matching 401K contributions. We also offer Company-funded mental health services, support for working parents, webinars on financial well-being and other services through our global employee assistance program.
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BUSINESS Overview 8x8 is transforming the future of business communications as a leading Software-as-a-Service ("SaaS") provider of voice, team chat, video meetings, contact center, and embeddable communication APIs powered by a 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 its platform so they can support distributed and agile workplace models while delighting their end-customers and accelerating their business. 8x8 has more than 2.5 million paid business users.
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The XCaaS platform empowers workforces worldwide by connecting individuals and teams so they can collaborate faster, work smarter, and better serve customers, from most devices, locations or time zones.
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Until recently, the unified communications market had been one of the last technology segments to transition to the cloud. The rapid acceleration of digital transformation, availability of broadband, and the global COVID-19 pandemic have boards and executive leadership teams increasingly looking towards secure cloud communications as a core element of business resilience.
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The platform also delivers real-time business analytics and intelligence across most interactions and communication channels, giving customers unique insights so they can build, deploy and adapt tailored user experiences that delight end-customers and accelerate their business. 8x8 has more than 2.5 million paid business licenses with users in more than 180 countries.
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Through seamless, personalized engagement, these organizations are able to drive differentiated customer experiences. We believe the ability for employees to communicate productively from either a single, easy-to-use application or directly within their existing business applications is quickly becoming a fundamental differentiator in digital transformation.
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It is designed to meet the needs of mid-market and enterprise businesses who want to make employees more productive and delight their customers with tailored experiences but lack in-house resources to build a fully custom enterprise-grade contact center.
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The 8x8 XCaaS ("eXperience Communications as a Service") open communications platform is a highly available, fully redundant solution, supported by a single, standardized and financially-backed Service Level Agreement across unified communications as a service ("UCaaS") and contact center as a service ("CCaaS").
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Our modern, microservices-based platform enables rapid innovation, broad integration with third-party applications, Unlike many of our principal competitors, we own the core technology that drives and manage the communications platform that powers our solutions.
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The 8x8 XCaaS platform is one of the industry’s most complete cloud technology stacks and operates as a SaaS business model. A consistent data layer across the platform powers 8x8 AI/ML (artificial intelligence/machine learning) algorithms to deliver data-driven business insights and intelligent, comprehensive, and integrated applications that drive employee productivity, resource optimization, and more effective end customer interactions.
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In late fiscal 2023, we integrated generative AI natural language learning models from OpenAI across our platform and launched an early adopter program for our Intelligent Customer Assistant offering. • Platform-Wide Data Capture and Real-Time Analytics.
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Our cloud communications, contact center, and collaboration solutions are designed for easy deployment, management, and use, operating across multiple devices and locations for any business workflow or global environment.
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We have developed a suite of web-based analytics tools to help our customers capture data on customer interactions across multiple channels and services integrated within our XCaaS platform. Using built-in analytics, customers can leverage real-time business intelligence to improve customer experiences across the range of self-service, AI-assisted, and agent engagements. • Intuitive User Interface (UX).
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Built from core cloud technologies that we own and manage internally, our platform solution enables 8x8 customers to rely on a single provider for their global communications, video meetings, contact center, and customer support requirements.
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For organizations that have adopted Microsoft Teams for internal team messaging and meetings, we offer 8x8 Voice for Microsoft Teams, a direct routing solution that allows users to make and receive calls over the public switched telephone network (PSTN) without exiting the Microsoft Teams desktop, mobile or mobile app, and 8x8 Contact Center for Microsoft Teams, a Microsoft certified solution that leverages the Connect model to provide omnichannel contact center functionality. 8x8 integrations for Microsoft Teams provide reliable, integrated, global telephony and customer engagement capabilities to Microsoft Teams users, including value added services such as integrated business messaging, conversational AI, and advanced analytics. 3 • Integration with Third-Party Business Applications and AI-Based Solutions to Automate Workflows.
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Unlike many of our principal competitors, we own the core technology and manage the platform behind all of our services: voice, video meetings, contact center, chat and team collaboration, and communication APIs.
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Our open platform enables deep integration with AI-based solutions purposely built for specific vertical markets or tasks to simplify and automate workflows for our customers. Our ecosystem of AI technology partners includes organizations focused on conversational AI, CRM, workforce engagement, automation and enterprise collaboration.
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We have developed a suite of web-based analytics tools to help customers make informed decisions based on underlying communications data associated with 8x8 services and supported devices.
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As such, we have made significant investments in achieving compliance with various industry standards for data security and related third-party certifications. • Global Reach®. 8x8's Global Reach technology provides enterprise-grade quality of service, reliability, security and support for our multinational customers with users in over 180 countries and full public switched telephone network ("PSTN") replacement in 58 countries.
Removed
We offer a single, standard Service Level Agreement (“SLA”) for our enterprise customers across our contact center and business communications services. This SLA includes meaningful uptime and voice quality commitments, backed by service credits and a no-penalty early termination right for the customer under specified conditions. • Configurability and Flexibility.
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These service plans deliver tailored employee and customer experiences through integrated cloud communication, contact center software, and video meetings solutions.
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Each service plan in our flagship offering, X Series, is designed for the different roles in a company so customers only pay for the features each role needs.
Added
The advanced features and AI-driven automation and analytics of the 8x8 X Series contact center service plans allow organizations to deliver personalized customer experiences for higher customer satisfaction and loyalty, while scaling their contact center capacity though AI-based automation, self-service, and intelligent call routing. 4 We believe that our integrated platform for communication, collaboration and customer interaction drives more efficient employee and customer engagement, greater business productivity, and improved employee and customer experiences, leading to lower employee turnover, reduced customer churn, and more revenue at a lower total cost of ownership compared to non-integrated UCaaS and CCaaS solutions.
Removed
No matter what the business communication or contact center needs are now, X Series has a service plan designed to meet them, while giving customers an easy way to expand and upgrade their communications options in the future.
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Our Elevate channel program supports multiple routes to market for partners, including both resale (wholesale) and agency models, and also offers 8x8 sales and technical certifications.
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The simplicity and ease of configuration and deployment is due to all solutions being owned by 8x8 and sharing the same platform. • Rapid Deployment.
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(acquired by Ericsson), Genesys Telecommunications Laboratories, Inc., Zoom Video Communications, Inc., Five9, Inc., NICE inContact, and Twilio Inc., among others.
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Business agility in the global, modern economy is a competitive necessity, and we embrace the notion that communication services should be deployable as quickly as possible, including across highly distributed businesses with multiple facilities or remote workforces.
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We take a lifecycle approach to customer support, supporting customers from on-boarding to deployment, and through the renewal process, to drive greater user adoption of 8x8 XCaaS solutions. For our larger enterprise customers, our implementation methodology utilizes a deployment management team and provides active support through the "go-live" date at each customer site.
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Our services can generally be provisioned in minutes from web-based administrative tools, and we continue to increase the automation across our deployment, billing, and support systems to provide greater speed and flexibility for our customers. To ensure consistency and quality across our services and customer base, we have developed a standard, yet flexible, deployment methodology.
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Iowa and Indiana have also enacted new privacy laws that become effective on January 1, 2025 and January 1, 2026, respectively. 6 Internationally, we are subject to a complex patchwork of regulations that vary from country to country. Countries have adopted laws that impose stringent licensing obligations on providers of VoIP services like ours.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAmong other risks we may encounter in connection with acquisitions: • we may experience difficulty and delays in integrating the products, technology platform, operations, systems and personnel of the acquired business with our own, particularly if the acquired business is outside of our core competencies; • we may not be able to manage the acquired business or the integration process effectively, which may limit our ability to realize the financial and strategic benefits we expected from the transaction; • the acquisition and integration may divert management’s attention from our day-to-day operations and disrupt the ordinary functioning of our ongoing business; • we may have difficulty establishing and maintaining appropriate governance, reporting relationships, policies, controls, and procedures for the acquired business, particularly if it is based in a country or region where we did not previously operate; • any failure to successfully manage the integration process may also adversely impact relationships with our employees, suppliers, customers, and business partners, or those of the acquired business, and may result in increased churn or the loss of key customers, business partners or employees for our business or those of the acquired business; • we may become subject to new or more stringent regulatory compliance obligations and costs by virtue of the acquisition, including risks related to international acquisitions that may operate in new jurisdictions or geographic areas where we may have no or limited experience; • we may become subject to litigation, investigations, proceedings, fines or penalties arising from or relating to the transaction or the acquired business, and any resulting liabilities may exceed our forecasts; • we may acquire businesses with different revenue models, customer concentration risks, and contractual relationships; • we may assume long-term contractual obligations, commitments or liabilities (for example, those relating to leased facilities), which could adversely impact our efforts to achieve and maintain profitability and impair our cash flow; • we may not successfully evaluate or utilize the acquired technology and accurately forecast the financial impact of an acquisition transaction, including accounting charges; and • the acquisition may create a drag on our overall revenue growth rate, which could lead analysts and investors to reduce their valuation of our company.
Biggest changeAmong other risks we may encounter in connection with acquisitions: • we may experience difficulty and delays in integrating the products, technology platform, operations, systems and personnel of the acquired business with our own, particularly if the acquired business is outside of our core competencies; • we may not be able to manage the acquired business or the integration process effectively, which may limit our ability to realize the financial and strategic benefits we expected from the transaction; • the acquisition and integration may divert management’s attention from our day-to-day operations and disrupt the ordinary functioning of our ongoing business; • we may have difficulty establishing and maintaining appropriate governance, reporting relationships, policies, controls, and procedures for the acquired business, particularly if it is based in a country or region where we did not previously operate; • any failure to successfully manage the integration process may also adversely impact relationships with our employees, suppliers, customers, and business partners, or those of the acquired business, and may result in increased churn or the loss of key customers, business partners or employees for our business or those of the acquired business; • we may become subject to new or more stringent regulatory compliance obligations and costs by virtue of the acquisition, including risks related to international acquisitions that may operate in new jurisdictions or geographic areas where we may have no or limited experience; • we may become subject to litigation, investigations, proceedings, fines or penalties arising from or relating to the transaction or the acquired business, and any resulting liabilities may exceed our forecasts; • we may acquire businesses with different revenue models, customer concentration risks, and contractual relationships; • we may assume long-term contractual obligations, commitments or liabilities (for example, those relating to leased facilities), which could adversely impact our efforts to achieve and maintain profitability and impair our cash flow; • we may not successfully evaluate or utilize the acquired technology and accurately forecast the financial impact of an acquisition transaction, including accounting charges; • the acquisition may create a drag on our overall revenue growth rate, which could lead analysts and investors to reduce their valuation of our company; • we may be exposed to existing cyber risks not identified prior to an acquisition that could impact our core operations until mitigated; and • if an acquired business’s cybersecurity controls are materially weaker than ours, we may be exposed to existing cyber risks not identified prior to an acquisition that could impact our core operations until mitigated.
Companies in the cloud communications industry compete aggressively for top talent in all areas of business, but particularly senior management, sales and marketing, professional services, and engineering, where employees with industry experience, technical knowledge and specialized skill sets are particularly valued.
Companies in the cloud communications industry compete aggressively for top talent in all areas of business, but particularly in senior management, sales and marketing, professional services, and engineering, where employees with industry experience, technical knowledge and specialized skill sets are particularly valued.
The issuance and sale of substantial amounts of common stock or equity-linked securities, or the perception that such issuances and sales may occur, could adversely affect the trading price of the notes and the market price of our common stock and impair our ability to raise capital through the sale of additional equity or equity-linked securities.
The issuance and sale of substantial amounts of common stock or equity-linked securities, or the perception that such issuances and sales may occur, could adversely affect the trading price of our notes and the market price of our common stock and impair our ability to raise capital through the sale of additional equity or equity-linked securities.
The impact of COVID-19 on demand for our services depends on numerous evolving factors, including: the duration and extent of the global spread of current and future COVID-19 variants; governmental, business, and individual actions that have been and continue to be taken in response to the current and future COVID-19 variants in different countries globally; the rate of vaccinations globally and the efficacy of available vaccines on current and future variants of the virus; the effect on our customers and customer demand and their ability to pay for our services; disruptions to third-party data centers and Internet service providers; and any decline in the quality and/or availability of our services.
The ongoing impact of COVID-19 on future demand for our services depends on numerous evolving factors, including: the duration and extent of the global spread of current and future COVID-19 variants; governmental, business, and individual actions that have been and continue to be taken in response to the current and future COVID-19 variants in different countries globally; the rate of vaccinations globally and the efficacy of available vaccines on current and future variants of the virus; the effect on our customers and customer demand and their ability to pay for our services; disruptions to third-party data centers and Internet service providers; and any decline in the quality and/or availability of our services.
If one or more holders elect to convert their notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our common stock (other than paying cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity.
If one or more holders elect to convert their notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our common stock (other than paying cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our conversion obligations through the payment of cash, which could adversely affect our liquidity.
In addition, even if holders of notes do not elect to convert their notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.
In addition, even if holders of our notes do not elect to convert their notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of such notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.
If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and repurchase the notes or make cash payments upon conversions thereof. The conditional conversion feature of the notes, if triggered, may adversely affect our financial condition and operating results.
If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and repurchase our 2028 Notes or make cash payments upon conversions thereof. The conditional conversion feature of our notes, if triggered, may adversely affect our financial condition and operating results.
It is possible that as businesses return to in-person work, the demand for some of our products could decline. The impact of COVID-19 on macroeconomic conditions has at some periods also impacted the functioning of financial and capital markets, foreign currency exchange rates, and interest rates.
It is possible that as businesses return to in-person work, the demand for some of our products could decline. The ongoing impact of COVID-19 on macroeconomic conditions has at some periods also impacted the functioning of financial and capital markets, foreign currency exchange rates, and interest rates.
We may be targets of cyber threats and security breaches, given the nature of the information we store, process, and transmit and the fact that we provide communications services to a broad range of businesses. To the extent that state-sponsored incidents of cybersecurity breaches increase due to geopolitical tensions, this risk may increase.
We may be targets of cyber threats and security breaches, given the nature of the information that we store, process, and transmit and the fact that we provide communications services to a broad range of businesses. To the extent that state-sponsored incidents of cybersecurity breaches increase due to geopolitical tensions, this risk may continue to increase.
Risk Factors Table of Contents 9 Table of Contents Risk Factors Summary Risks Related to our Business and Industry Risks Related to our Products and Operations Risks Related to Regulatory Matters Risks Related to Intellectual Property Risks Related to our Debt, our Stock, and our Charter General Risk Factors Risk Factors Summary Our business is subject to a number of risks that may adversely affect our business, financial condition, results of operations, and cash flows.
Risk Factors Table of Contents Risk Factors Summary Risks Related to our Business and Industry Risks Related to our Products and Operations Risks Related to Regulatory Matters Risks Related to Intellectual Property Risks Related to our Debt, our Stock, and our Charter General Risk Factors Risk Factors Summary Our business is subject to a number of risks that may adversely affect our business, financial condition, results of operations, and cash flows.
In addition, upon conversion of the notes, unless we elect to deliver solely shares of our common stock to settle such conversion (other than paying cash in lieu of delivering any fractional share), we will be required to make cash payments in respect of the notes being converted.
In addition, upon conversion of the 2028 Notes, unless we elect to deliver solely shares of our common stock to settle such conversion (other than paying cash in lieu of delivering any fractional share), we will be required to make cash payments in respect of the 2028 Notes being converted.
Our restated certificate of incorporation and amended and restated by-laws contain provisions that could have the effect of delaying or preventing changes in control or changes in our management without the consent of our board of directors, including, among other things: • no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; • the ability of our board of directors to issue shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; 23 Table of Contents • the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of our board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors; • a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders; • the requirement that a special meeting of stockholders may be called only by a majority vote of our board of directors or by stockholders holdings share of our common stock representing in the aggregate a majority of votes then outstanding, which could delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; • the ability of our board of directors, by majority vote, to amend our by-laws, which may allow our board of directors to take additional actions to prevent a hostile acquisition and inhibit the ability of an acquirer to amend our by-laws to facilitate a hostile acquisition; and • advance notice procedures with which stockholders must comply to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders' meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer's own slate of directors or otherwise attempting to obtain control of us.
Our restated certificate of incorporation and amended and restated by-laws contain provisions that could have the effect of delaying or preventing changes in control or changes in our management without the consent of our board of directors, including, among other things: 24 • no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; • the ability of our board of directors to issue shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; • the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of our board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors; • a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders; • the requirement that a special meeting of stockholders may be called only by a majority vote of our board of directors or by stockholders holdings share of our common stock representing in the aggregate a majority of votes then outstanding, which could delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; • the ability of our board of directors, by majority vote, to amend our by-laws, which may allow our board of directors to take additional actions to prevent a hostile acquisition and inhibit the ability of an acquirer to amend our by-laws to facilitate a hostile acquisition; and • advance notice procedures with which stockholders must comply to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders' meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer's own slate of directors or otherwise attempting to obtain control of us.
Our ability to maintain and grow our revenues is adversely impacted by the rate at which our customers cancel or downgrade services. Churn reduces our revenue growth rate, and if our churn rate increases, we must acquire even more new customers and/or sell more products and services to existing customers, to maintain and grow our revenues.
Our ability to maintain and grow our revenue is adversely impacted by the rate at which our customers cancel or downgrade services. Churn reduces our revenue growth rate, and if our churn rate increases, we must acquire even more new customers and/or sell more products and services to existing customers, to maintain and grow our revenue.
Following the completion of the acquisition, the surviving corporation possesses not only all of the assets, but also all of the liabilities, of Fuze. It is possible that undisclosed, contingent, or other liabilities or problems may arise in the future of which we were previously unaware.
Following the completion of the acquisition, the surviving corporation possesses not only all of the assets, but also all of the liabilities, of Fuze. It is possible that undisclosed, contingent, or other liabilities or problems may arise in the future of which we 14 were previously unaware.
As we implement modifications to employee travel and employee work locations in response, among other business modifications, these changes could, in the future, negatively impact our normal provision of services, particularly in the areas of sales and marketing to new and prospective customers.
As we implement modifications to employee travel and employee work locations in response to these orders, among other business modifications, these changes could, in the future, negatively impact our normal provision of services, particularly in the areas of sales and marketing to new and prospective customers.
The conflict between Russia and Ukraine has led to and is expected to continue to lead to disruption, instability, and volatility in global markets and industries. Our business, including our operations in Romania, could be negatively impacted by such conflict.
The ongoing conflict between Russia and Ukraine has led to and is expected to continue to lead to disruption, instability, and volatility in global markets and industries. Our business, including our operations in Romania, could be negatively impacted by such conflict.
We have formed subsidiaries outside the United States, including a subsidiary in Romania that contributes significantly to our research and development efforts. Additionally, through acquisitions, we have expanded into the United Kingdom and Southeast Asia.
We have formed subsidiaries outside the United States, including a subsidiary in Romania that contributes significantly to our research and development efforts. Additionally, through acquisitions, we have expanded into the United Kingdom, the EU, and Southeast Asia.
Therefore, if we are unsuccessful in managing our existing customer churn and/or our customer churn rate increases in the future, our revenue growth would decrease and our revenues may decline causing our net loss to increase.
Therefore, if we are unsuccessful in managing our existing customer churn and/or our customer churn rate increases in the future, our revenue growth would decrease and our revenue may decline, causing our net loss to increase.
However, we may not have enough available cash or be able to obtain financing at the time we are required to make repurchases of notes surrendered therefor or notes being converted.
However, we may not have enough available cash or be able to obtain financing at the time we are required to make repurchases of the new Notes surrendered therefor or the new Notes being converted.
Risks Related to our Products and Operations If our platform or services experience significant or repeated disruptions, outages, or failures due to defects, bugs, vulnerabilities, or similar software problems, or if we fail to determine the cause of any disruption or failure and correct it promptly, we could lose customers, become subject to service performance or warranty claims, or incur significant costs, reducing our revenues and adversely affecting our operating results.
Risks Related to our Products and Operations If our platform or services experience significant or repeated disruptions, outages, or failures due to defects, bugs, vulnerabilities, or similar software problems, or if we fail to determine the cause of any disruption or failure and correct it promptly, we could lose customers, become subject to service performance or warranty claims, or incur significant costs, reducing our revenue and adversely affecting our operating results.
In addition, our ability to repurchase the notes or to pay cash upon conversions of the notes may be limited by law, by regulatory authority or by agreements governing our future indebtedness.
In addition, our ability to repurchase the 2028 Notes or to pay cash upon conversions of the 2028 Notes may be limited by law, by regulatory authority or by agreements governing our future indebtedness.
We also may have to delay revenue recognition on some of these transactions until the customer's technical or implementation requirements have been met. 13 Table of Contents The market for cloud software solutions is subject to rapid technological change, and we depend on new product and service introductions in order to maintain and grow our business.
We also may have to delay revenue recognition on some of these transactions until the customer's technical or implementation requirements have been met. 13 The market for cloud software solutions is subject to rapid technological change, and we depend on new product and service introductions in order to maintain and grow our business.
Natural disasters, war, terrorist attacks, global pandemics, or malicious conduct, among other unforeseen events, could adversely impact our operations, could degrade or impede our ability to offer services, and may negatively impact our financial condition, revenues, and costs going forward. Our cloud communications services rely on uninterrupted connection to the Internet through data centers and networks.
Natural disasters, war, terrorist attacks, global pandemics, or malicious conduct, among other unforeseen events, could adversely impact our operations, could degrade or impede our ability to offer services, and may negatively impact our financial condition, revenue, and costs going forward. Our cloud communications services rely on uninterrupted connection to the Internet through data centers and networks.
Our business may not continue to generate cash flow from operations in the future sufficient to service our debt, including paying off the principal when due, and make necessary capital expenditures. Our convertible notes are currently significantly out of the money, and our stock price would have to increase significantly in order for our notes to convert prior to maturity.
Our business may not continue to generate cash flow from operations in the future sufficient to service our debt, including paying off the principal when due, and make necessary capital expenditures. Our notes are currently significantly out of the money, and our stock price would have to increase significantly for our notes to convert prior to maturity.
If we are unable to persuade our existing business partners to increase their sales of our services or to build successful partnerships with new organizations, or if our channel partners are unsuccessful in their marketing and sales efforts, we may not be able to grow our business and increase our revenues at the rate we predict, or at all, and our business may be materially adversely affected.
If we are unable to persuade our existing business partners to increase their sales of our services or to build successful partnerships with new organizations, or if our channel partners are unsuccessful in their marketing and sales efforts, we may not be able to grow our business and increase our revenue at the rate we predict, or at all, and our business may be materially adversely affected.
Churn may also prevent us from increasing the price of our services in the future, as well as limit our ability to sell additional 8x8 products and services to our existing customers and we may need to renew certain customers at a lower rate, of which each case would adversely impact our revenues in the future.
Churn may also prevent us from increasing the price of our services in the future, as well as limit our ability to sell additional 8x8 products and services to our existing customers and we may need to renew certain customers at a lower rate, of which each case would adversely impact our revenue in the future.
In addition, if we are unable to maintain the quality and performance of our service whether due to a lack of feature parity or quality of service relative to the products of our competitors or service outages or disruptions, we could experience potentially sharp increases in customer cancellations and/or downgrades or customer credits which would adversely impact our revenues.
In addition, if we are unable to maintain the quality and performance of our service whether due to a lack of feature parity or quality of service relative to the products of our competitors or service outages or disruptions, we could experience potentially sharp increases in customer cancellations and/or downgrades or customer credits which would adversely impact our revenue.
The investments we have made in fiscal 2022 and beyond may not generate the returns that we anticipate, which could adversely impact our financial condition and make it more difficult for us to grow revenue and/or achieve profitability in the time period that we expect, or not at all.
The investments we have made in fiscal 2023 and beyond may not generate the returns that we anticipate, which could adversely impact our financial condition and make it more difficult for us to grow revenue and/or achieve profitability in the time period that we expect, or not at all.
This could reduce the demand for our cloud services, delay and lengthen sales cycles, increase customer churn, force us to lower the prices for our services and/or provide customers with service credits, and lead to slower growth or even a decline in our revenues, operating results, and cash flows.
This could reduce the demand for our cloud services, delay and lengthen sales cycles, increase customer churn, force us to lower the prices for our services and/or provide customers with service credits, and lead to slower growth or even a decline in our revenue, operating results, and cash flows.
We define a “customer” as the legal entity or entities to which we provide services pursuant to a single contractual arrangement. Our future success depends on our ability to continue to increase the amount of revenue we generate, and the rate at which our revenues increase, from new and existing customers.
We define a “customer” as the legal entity or entities to which we provide services pursuant to a single contractual arrangement. Our future success depends on our ability to continue to increase the amount of revenue we generate, and the rate at which our revenue increases, from new and existing customers.
Given our history of fluctuating revenues and operating losses, we cannot be certain that we will be able to achieve or maintain operating profitability in the future. Our future operating results, including revenues, expenses, losses and profits, may vary substantially from period to period and may be difficult to predict.
Given our history of fluctuating revenue and operating losses, we cannot be certain that we will be able to achieve or maintain operating profitability in the future. Our future operating results, including revenue, expenses, losses and profits, may vary substantially from period to period and may be difficult to predict.
Regulations to which we may be subject address the following matters, among others: • license requirements that apply to providers of communications services in many jurisdictions; • our obligation to contribute to various Universal Service Fund programs, including at the state level; • monitoring on rural call completion rates; • safeguarding and use of CPNI; • rules concerning access requirements for users with disabilities; • our obligation to offer 7-1-1 abbreviated dialing for access to relay services; • compliance with the requirements of United States and foreign law enforcement agencies, including the Communications Assistance for Law Enforcement Act ("CALEA"), and cooperation with local authorities in conducting wiretaps, pen traps and other surveillance activities; • the ability to dial 9-1-1 (or corresponding numbers in regions outside the United States), auto-locate E-911 calls (or corresponding equivalents) when required, and access emergency services; 20 Table of Contents • the transmission of telephone numbers associated with calling parties between carriers and service providers like us; • regulations governing outbound dialing, including the Telephone Consumer Protection Act; and • FCC and other regulators efforts to combat robo-calling and caller ID spoofing.
Regulations to which we may be subject address the following matters, among others: • license requirements that apply to providers of communications services in many jurisdictions; • our obligation to contribute to various Universal Service Fund programs, including at the state level; • monitoring on rural call completion rates; • safeguarding and use of CPNI; • rules concerning access requirements for users with disabilities; • our obligation to offer 7-1-1 abbreviated dialing for access to relay services; • requirements to enable access to services for disabled persons; • compliance with the requirements of United States and foreign law enforcement agencies, including the Communications Assistance for Law Enforcement Act ("CALEA"), and cooperation with local authorities in conducting wiretaps, pen traps and other surveillance activities; • the ability to dial 9-1-1 (or corresponding numbers in regions outside the United States), auto-locate E-911 calls (or corresponding equivalents) when required, and access emergency services; 21 • the transmission of telephone numbers associated with calling parties between carriers and service providers like us; • regulations governing outbound dialing, including the Telephone Consumer Protection Act; and • FCC and other regulators efforts to combat robo-calling and caller ID spoofing.
Failure to grow and manage our network of indirect sales channels partners could materially and adversely impact our revenues in the future. Our future business success, particularly to attract and support larger customers and expand into international markets, depends on our indirect sales channels.
Failure to grow and manage our network of indirect sales channels partners could materially and adversely impact our revenue in the future. Our future business success, particularly to attract and support larger customers and expand into international markets, depends on our indirect sales channels.
In addition, a substantial number of shares of our common stock is reserved for issuance upon the exercise of stock options, upon the vesting and settlement of restricted stock units and performance units, stock purchases in connection with our Employee Stock Purchase Program, and upon conversion of our notes.
In addition, a substantial number of shares of our common stock is reserved for issuance upon the exercise of stock options, upon the vesting and settlement of restricted stock units and performance units, stock purchases in connection with our Employee Stock Purchase Plan, and upon conversion of our notes.
Holders of the notes have the right to require us to repurchase their notes upon the occurrence of a fundamental change at a repurchase price equal to 100% of the principal amount of the notes to be repurchased, plus accrued and unpaid interest, if any.
Holders of the 2028 Notes have the right to require us to repurchase the 2028 Notes upon the occurrence of a fundamental change at a repurchase price equal to 100% of the principal amount of the 2028 Notes to be repurchased, plus accrued and unpaid interest, if any.
Utilization of our NOL and tax credit carryforwards can become subject to a substantial annual limitations due to the ownership change limitations provided by Section 382 of the Internal Revenue Code and similar state provisions.
Utilization of our NOL and tax credit carryforwards can become subject to substantial annual limitation due to the ownership change limitations provided by Section 382 of the Internal Revenue Code and similar state provisions.
During our fiscal year ending March 31, 2023, we intend to invest in sales and marketing and research and development, among other areas of our business, to compete more successfully for the business of companies that are transitioning to cloud communications and otherwise position ourselves to take advantage of long-term revenue-generating opportunities.
During our fiscal year ending March 31, 2024, we intend to continue to invest in sales and marketing and research and development, among other areas of our business, to compete more successfully for the business of companies that are transitioning to cloud communications and otherwise position ourselves to take advantage of long-term revenue-generating opportunities.
Our failure to repurchase notes at a time when the repurchase is required by the indenture or to pay any cash payable on future conversions of the notes as required by the indenture would constitute a default under the indenture.
Our failure to repurchase any of our Notes at a time when the repurchase is required by the applicable indenture or to pay any cash payable on future conversions of our Notes as required by the applicable indenture would constitute a default under such indenture.
The global spread of COVID-19 and its variants has created significant volatility, uncertainty, and economic disruption, particularly for small and medium-sized businesses. Many of our existing and prospective customers have experienced or could experience economic hardship caused by current and future variants of COVID-19.
The global spread of COVID-19 and its variants has created significant volatility, uncertainty, and economic disruption in the recent past, particularly for small and medium-sized businesses. Many of our existing and prospective customers have experienced or could experience economic hardship caused by current and future variants of COVID-19.
In the event the conditional conversion feature of the notes is triggered, holders of notes will be entitled to convert the notes at any time during specified periods at their option.
In the event the conditional conversion feature of our notes is triggered, holders of our notes will be entitled to convert such notes at any time during specified periods at their option.
Our current international operations and future initiatives, including Southeast Asia, will involve a variety of risks, including: • localization of our services, including translation into foreign languages and associated expenses; • regulation of our services as traditional telecommunications services, requiring us to obtain authorizations or licenses to operate in foreign jurisdictions, or alternatively preventing us from selling our full suite of services, or any services at all, in such jurisdictions; • changes in a specific country or region's regulatory requirements, taxes, trade laws, or political or economic condition; • increased competition from regional and global cloud communications competitors in the various geographic markets in which we compete, where such markets may have different sales cycles, selling processes, and feature requirements, which may limit our ability to compete effectively in different regions globally; • more stringent regulations relating to data security and the unauthorized use of, access to, and transfer of, commercial and personal information, particularly in the EU; • differing labor regulations, especially in the EU and Latin America, where labor laws are generally more advantageous to employees as compared to those in the United States, including deemed hourly wage and overtime regulations in these locations; • challenges inherent in efficiently managing an increased number of employees over large geographic distances, including the need to implement appropriate systems, policies, benefits, and compliance programs; • difficulties in managing a business in new markets with diverse cultures, languages, customs, legal systems, alternative dispute systems, and regulatory systems; • increased travel, real estate, infrastructure, and legal compliance costs associated with international operations; • different pricing environments, longer sales cycles, longer accounts receivable payment cycles, and other collection difficulties; • currency exchange rate fluctuations and the resulting effect on our revenue and expenses, and the cost and risk of entering into hedging transactions if we chose to do so in the future; • limitations on our ability to reinvest earnings from operations in one country to fund the capital needs of our operations in other countries; • laws and business practices favoring local competitors or general preferences for local vendors; • limited or insufficient intellectual property protection; • political instability or terrorist activities; • exposure to liabilities under anti-corruption and anti-money laundering laws, including the United States Foreign Corrupt Practices Act, the United Kingdom Bribery Act 2010, trade and export laws such as those enforced by the Office of Foreign Assets Control (OFAC) of the United States Department of the Treasury, and similar laws and regulations in other jurisdictions; • continuing uncertainty regarding social, political, immigration, and tax and trade policies in the United States and abroad, including as a result of the United Kingdom's vote to withdraw from the EU; • regional travel restrictions, business closures and shelter-in-place orders resulting from the COVID-19 pandemic; and • adverse tax burdens and foreign exchange controls that could make it difficult to repatriate earnings and cash.
Our current international operations and future initiatives, including Southeast Asia, will involve a variety of risks, including: • localization of our services, including translation into foreign languages and associated expenses; 16 • regulation of our services as traditional telecommunications services, requiring us to obtain authorizations or licenses to operate in foreign jurisdictions, or alternatively preventing us from selling our full suite of services, or any services at all, in such jurisdictions; • changes in a specific country's or region's regulatory requirements, taxes, trade laws, or political or economic condition; • increased competition from regional and global cloud communications competitors in the various geographic markets in which we compete, where such markets may have different sales cycles, selling processes, and feature requirements, which may limit our ability to compete effectively in different regions globally; • more stringent regulations relating to data security and the unauthorized use of, access to, and transfer of, commercial and personal information, particularly in the EU; • differing labor regulations, especially in the EU and Latin America, where labor laws are generally more advantageous to employees as compared to those in the United States, including deemed hourly wage and overtime regulations in these locations; • challenges inherent in efficiently managing an increased number of employees over large geographic distances, including the need to implement appropriate systems, policies, benefits, and compliance programs; • difficulties in managing a business in new markets with diverse cultures, languages, customs, legal systems, alternative dispute systems, and regulatory systems; • increased travel, real estate, infrastructure, and legal compliance costs associated with international operations; • different pricing environments, longer sales cycles, longer accounts receivable payment cycles, and other collection difficulties; • currency exchange rate fluctuations and the resulting effect on our revenue and expenses, and the cost and risk of entering into hedging transactions if we chose to do so in the future; • limitations on our ability to reinvest earnings from operations in one country to fund the capital needs of our operations in other countries; • laws and business practices favoring local competitors or general preferences for local vendors; • limited or insufficient intellectual property protection; • political instability or terrorist activities; • a military conflict with China and/or Russia that will likely involve cyberattacks on critical infrastructure, including, but not limited to, global data centers, power grids, and communication companies; • exposure to liabilities under anti-corruption and anti-money laundering laws, including the United States Foreign Corrupt Practices Act, the United Kingdom Bribery Act 2010, trade and export laws such as those enforced by the Office of Foreign Assets Control (OFAC) of the United States Department of the Treasury, and similar laws and regulations in other jurisdictions; • continuing uncertainty regarding social, political, immigration, and tax and trade policies in the United States and abroad, including as a result of the United Kingdom's vote to withdraw from the EU; • regional travel restrictions, business closures, government actions and other restrictions in connection with the COVID-19 pandemic; and • adverse tax burdens and foreign exchange controls that could make it difficult to repatriate earnings and cash.
In order to achieve profitability, we will need to manage our cost structure more efficiently and not incur significant liabilities, while continuing to grow our revenues.
In order to achieve profitability, we will need to manage our cost structure more efficiently and not incur significant liabilities, while continuing to grow our revenue.
Because our long-term growth strategy involves continued expansion outside the United States, our business will be susceptible to risks associated with international operations. 16 Table of Contents An important component of our growth strategy involves the further expansion of our operations and customer base internationally.
Because our long-term growth strategy involves continued expansion outside the United States, our business will be susceptible to risks associated with international operations. An important component of our growth strategy involves the further expansion of our operations and customer base internationally.
These risks are discussed more fully below and include, but are not limited to: Risks Related to our Business and Industry • Our history of losses and anticipated continued losses. • Unpredictability of our future operating results. • Future increases in our customer churn. • Dependence on new customer acquisition and retention and upsell to existing customers. • Intense competition in our industry. • Failure to manage and grow our indirect sales channels. • Complexity and length of enterprise customer sales cycle. • Dependence on new product and services to maintain and grow our business. • Difficulty attracting and retaining key management, technical and sales personnel. • We may not realize all of the anticipated benefits of our acquisition of Fuze, Inc. • Potential past and future liabilities related to federal, state, local and international taxes, fees, surcharges and levees.
These risks are discussed more fully below and include, but are not limited to: Risks Related to our Business and Industry • Our history of losses and anticipated continued losses. • Unpredictability of our future operating results. • Reductions in either spending or collections may result in reductions in revenue. • Future increases in our customer churn. • Dependence on new customer acquisition and retention and upsell to existing customers. • Intense competition in our industry. • Failure to manage and grow our indirect sales channels. 9 • Complexity and length of enterprise customer sales cycle. • Dependence on new product and services to maintain and grow our business. • Difficulty attracting and retaining key management, technical and sales personnel. • We may not realize all of the anticipated benefits of our acquisition of Fuze, Inc. • Potential past and future liabilities related to federal, state, local and international taxes, fees, surcharges and levees.
We currently file more than 1,000 state and municipal tax returns monthly. Periodically, we have received inquiries from state and municipal taxing agencies with respect to the remittance of state or municipal taxes, fees, or surcharges.
We currently file more than 1,500 state and local tax returns monthly. Periodically, we have received inquiries from state and municipal taxing agencies with respect to the remittance of state or local taxes, fees, or surcharges.
Inherent in our provision of service are the storage, processing, and transmission of our customers' data, which may include confidential and sensitive information.
Inherent in our provision of services are the storage, processing, and transmission of our customers' data, which may include confidential and sensitive information.
A default under the indenture or the occurrence of the fundamental change may also lead to a default under agreements governing our future indebtedness.
A default under an applicable indenture or the occurrence of the fundamental change may also lead to a default under agreements governing our future indebtedness.
We may not be able to identify suitable acquisition candidates in the future or negotiate and complete acquisitions on favorable terms. 17 Table of Contents If appropriate opportunities present themselves, we may decide to acquire such companies or their products, technologies or assets.
We may not be able to identify suitable acquisition candidates in the future or negotiate and complete acquisitions on favorable terms. If appropriate opportunities present themselves, we may decide to acquire such companies or their products, technologies or assets.
Currently, several jurisdictions are conducting audits of 8x8; in the event our positions are unsuccessful, we may be subject to tax payments, interest, and penalties in excess of those that we have accrued for. As of March 31, 2022, we have accrued for state or municipal taxes, fees, or surcharges that we believe are required to be remitted.
Currently, several jurisdictions are conducting audits of 8x8; in the event our positions are unsuccessful, we may be subject to tax payments, interest, and penalties in excess of those that we have accrued for. As of March 31, 2023, we have paid or accrued for state or local taxes, fees, and surcharges that we believe are required to be remitted.
We use the infrastructure of third-party network service providers, such as Equinix, Inc. and CenturyLink, Inc., and public cloud providers, including AWS and Oracle, to provide our cloud services over their networks rather than deploying our own network connectivity.
We use the infrastructure of third-party network service providers, such as Equinix, Inc. and CenturyLink, Inc., and public cloud providers, including Amazon Web Services, Inc. and Oracle Corporation, to provide our cloud services over their networks rather than deploying our own network connectivity.
In connection with our voice, video meetings, chat, team messaging, contact center, and enterprise-class API solutions, we face competition from other cloud service providers such as RingCentral, Inc., Genesys Telecommunications Laboratories, Inc., Zoom Video Communications, Inc., Vonage Holdings Corp.(recently acquired by Ericsson), Five9, Inc., NICE inContact, Inc., Talkdesk, 12 Table of Contents Inc., and Twilio Inc., among others, as well as from legacy on-premises communications equipment providers, such as Avaya, Inc., Cisco Systems, Inc., and Mitel Networks Corp.
In connection with our voice, video meetings, chat, team messaging, contact center, and enterprise-class API solutions, we face competition from other cloud service providers such as RingCentral, Inc., Genesys Telecommunications Laboratories, Inc., Zoom Video Communications, Inc., Vonage Holdings Corp.(acquired by Ericsson), Five9, Inc., NICE inContact, Inc., Talkdesk, Inc., and Twilio Inc., among others, as well as from legacy on-premises communications equipment providers, such as Avaya, Inc., Cisco Systems, Inc., and Mitel Networks Corp. 12 We also face competition from Internet and cloud service companies such as Alphabet Inc.
The impact of these measures, as well as potential responses to them by Russia, is currently unknown and they could adversely affect our business, supply chain, partners, or customers, particularly if the impact were to cause a geographic expansion of the conflict between Russia and Ukraine to surrounding countries.
The impact of these measures, as well as potential responses to them by Russia, could adversely affect 17 our business, supply chain, partners, or customers, particularly if the impact were to cause a geographic expansion of the conflict between Russia and Ukraine to surrounding countries.
However, if we fail to comply, we may be subject to fines, penalties and lawsuits, statutory damages at both the federal and state levels in the United States, substantial fines and penalties under the EU’s GDPR, and class action lawsuits, and our reputation may suffer.
However, if we fail to comply, we may be subject to fines, penalties and lawsuits, statutory damages at both the federal and state levels in the United States, substantial fines and penalties under the EU’s GDPR and the UK’s Data Protection Act 2018, and class action lawsuits, and our reputation may suffer.
In addition, if we experience difficulties in the future integrating our mobile applications into smartphones, tablets, or other mobile devices, or if problems arise with our relationships with providers of mobile operating systems, such as those of Apple Inc. or Alphabet Inc. (Google), our future growth and our results of operations could suffer.
In addition, if we experience difficulties in the future integrating our mobile applications into smartphones, tablets, or other mobile devices or with certain communication platforms, such as Microsoft Teams, or if problems arise with our relationships with providers of mobile operating systems, such as those of Apple Inc. or Alphabet Inc., our future growth and our results of operations could suffer.
Risks Related to our Debt, our Stock, and our Charter • Cash flow may be insufficient to service or pay down our substantial debt. • May not be able to raise necessary funds in the future. • Conditional conversion features of our debt could adversely affect our financial condition. • Change in accounting standards, including for our debt, may cause adverse financial reporting fluctuations and affect our reported operating results. • Capped call transactions in connection with our notes. • Future sales of common stock or equity-linked securities. • Certain provisions in our charter may discourage takeover attempts.
Risks Related to our Debt, our Stock, and our Charter • Cash flow may be insufficient to service or pay down our substantial debt. • Inability to raise necessary funds in the future. • Conditional conversion features of our debt could adversely affect our financial condition. • Change in accounting standards, including for our debt, may cause adverse financial reporting fluctuations and affect our reported operating results. • The current instability in the banking system could adversely impact our operations. • Future sales of common stock or equity-linked securities. • Certain provisions in our charter may discourage takeover attempts.
General Risk Factors • Risks related to Covid-19. 10 Table of Contents • Secure financing on favorable terms. • Risks related to natural disasters, war, terrorist attacks, global pandemics, and other unforeseen events.
General Risk Factors • Risks related to the ongoing impact of the COVID-19 pandemic. • Secure financing on favorable terms. • Risks related to natural disasters, war, terrorist attacks, global pandemics, and other unforeseen events.
To the extent that we cannot quickly port telephone numbers out when a customer leaves our service to go to another provider, we could be subject to regulatory enforcement action. Risks Related to Regulatory Matters Vulnerabilities to security breaches, cyber intrusions, and other malicious acts could adversely impact our business.
To the extent that we cannot quickly port telephone numbers out when a customer leaves our service to go to another provider, we could be subject to regulatory enforcement action. 19 Risks Related to Regulatory Matters Cyber intrusions, breaches of our networks or systems or those of our service and cloud storage providers, and other malicious acts could adversely impact our business.
We also face competition from Internet and cloud service companies such as Alphabet Inc. (Google Voice and Google Meet), Amazon Inc., and Microsoft Corporation. Some of these competitors have developed software solutions for their respective communications and/or collaboration silos, such as Microsoft, which is investing significantly in its Microsoft Teams unified communication and collaboration product.
(Google Voice and Google Meet), Amazon Inc., and Microsoft Corporation. Some of these competitors have developed software solutions for their respective communications and/or collaboration silos, such as Microsoft, which is investing significantly in its Microsoft Teams unified communication and collaboration product.
Despite these efforts, our revenue growth may slow, revenues may decline, and/or we may incur significant losses in the future due to the continuing impact of the COVID-19 pandemic, inflationary pressures impacting our cost structure, Russia's invasion of Ukraine, and any resulting downturn in general economic conditions, increasing competition (including competitive pricing pressures and large competitors moving into our markets), decrease in the adoption or sustained use of the cloud communications market, exiting lines of business, or our inability to execute on business opportunities.
Despite these efforts, our revenue growth may slow, revenue may decline, and/or we may incur significant losses in the future due to inflationary pressures impacting our cost structure, Russia's invasion of Ukraine or other geopolitical events, any further downturn in general economic conditions, increasing competition (including competitive pricing pressures and large competitors moving into our markets), decrease in the adoption or sustained use of the cloud communications market, exiting 10 lines of business, interest rate and foreign currency fluctuations, or our inability to execute on business opportunities.
In addition, as a result of COVID-19, we have been experiencing changes to our normal business practices due to our employees working from home in compliance with shelter-in-place orders in many of our office locations.
In addition, as a result of COVID-19, we have been experiencing changes to our normal business practices due to our employees now primarily few working from home in many of our office locations.
Some of our competitors are responding to these competitive pressures by increasing employee compensation, paying more on average than we pay for the same position or offering more attractive equity compensation. Consequently, we have seen attrition increase in the last 12 months.
Some of our competitors are responding to these competitive pressures by increasing employee compensation, paying more on average than we pay for the same position or offering more attractive equity compensation.
This activity could also cause or avoid an increase or a decrease in the market price of our common stock. Future sales of our common stock or equity-linked securities in the public market could lower the market price of our common stock. In the future, we may sell additional shares of our common stock or equity-linked securities to raise capital.
Future sales of our common stock or equity-linked securities in the public market could lower the market price of our common stock. In the future, we may sell additional shares of our common stock or equity-linked securities to raise capital.
Our operations depend on our ability to protect our network from interruption by damage from hackers, social engineering and phishing, ransomware, computer viruses, worms, other malicious software programs, or similar disruptive problems or other events beyond our control.
Our business operations, from our internal and service operations to research and development activities, sales and marketing efforts and customer and partner communications, depend on our ability to protect our network from interruption by damage from hackers, social engineering and phishing, ransomware, computer viruses, worms, other malicious software programs, or similar disruptive problems or other events beyond our control.
We leverage the infrastructure of third-party network service providers to provide telephone numbers, PSTN call 18 Table of Contents termination and origination services, and local number portability for our customers, rather than deploying our own network throughout the United States and internationally.
We rely on third-party network service providers to originate and terminate substantially all of the PSTN calls using our cloud-based services. We leverage the infrastructure of third-party network service providers to provide telephone numbers, PSTN call termination and origination services, and local number portability for our customers, rather than deploying our own network throughout the United States and internationally.
Additionally, some of our products and services may require specialized or high-performance component parts that may not be available in quantities or in time frames that meet our requirements due to the COVID-19 pandemic or otherwise. Difficulty executing local number porting requests could negatively impact our business.
Additionally, some of our products and services may require specialized or high-performance component parts that may not be available in quantities or in time frames that meet our requirements. Difficulty executing local number porting requests could negatively impact our business. The FCC and foreign regulators require VoIP providers to support telephone number porting within specified timeframes.
Any errors, 15 Table of Contents bugs, or vulnerabilities discovered in our code after release could result in damage to our reputation, loss of customers, loss of revenue, or liability for service credits or damages, any of which could adversely affect our business and financial results.
Some errors in our software code may not be discovered until after the code has been released. Any errors, bugs, or vulnerabilities discovered in our code after release could result in damage to our reputation, loss of customers, loss of revenue, or liability for service credits or damages, any of which could adversely affect our business and financial results.
Additional funds, however, may not be available when we need them on terms that are acceptable to us, or at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to grow and support our business and to respond to business challenges could be significantly limited.
If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to grow and support our business and to respond to business challenges could be significantly limited .
Our customers may elect not to renew their subscriptions at the end of their contractual commitments. Because of churn, we must acquire new customers and sell additional 8x8 products and services to our existing customers on an ongoing basis to maintain our existing level of revenue. As a result, sales and marketing expenditures are an ongoing requirement of our business.
Because of churn in our customer base, we must acquire new customers and sell additional 8x8 products and services to our existing customers on an ongoing basis to maintain our existing level of revenue. As a result, sales and marketing expenditures are an ongoing requirement of our business.
Our physical infrastructure is concentrated in a few facilities (i.e., data centers and public cloud providers), and any failure in our physical infrastructure or service outages could lead to significant costs and/or disruptions and could reduce our revenue, harm our business reputation and have a material adverse effect on our financial results.
The costs associated with any material defects or errors in our software or other performance problems may be substantial and could materially adversely affect our operating results. 15 Our physical infrastructure is concentrated in a few facilities (i.e., data centers and public cloud providers), and any failure in our physical infrastructure or service outages could lead to significant costs and/or disruptions and could reduce our revenue, harm our business reputation and have a material adverse effect on our financial results.
We recorded an operating loss of approximately $154.1 million for the twelve months ended March 31, 2022, and ended the period with an accumulated deficit of approximately $766.4 million. We expect to continue to incur operating losses in the near future as we continue to invest in our business.
We recorded an operating loss of approximately $66.3 million for the year ended March 31, 2023, and ended the period with an accumulated deficit of approximately $792.9 million. We expect to continue to incur operating losses in the near future as we continue to invest in our business.
Risks Related to our Debt, our Stock, and our Charter Servicing our debt, including the paying down of principal, requires the use of cash, and we may not have sufficient cash flow from our business to pay down our debt.
Servicing our debt, including the paying down of principal, requires the use of cash and liquidity of our clearing, cash management and custodial financial institutions, and we may not have sufficient cash flow from our business to pay down our debt.
Such litigation could result in substantial costs and diversion of management time and resources and could have a material adverse effect on our business, financial condition, and operating results. Any settlement or adverse determination in such litigation would also subject us to significant liability.
Such litigation could result in substantial costs and diversion of management time and resources and could have a material adverse effect on our business, financial condition, and operating results.
As a result of these potential problems and risks, among others, businesses that we may acquire or invest in may not produce the revenue, competitive advantages, or business synergies that we anticipate, and the results and effects of any such acquisition may not be favorable enough to justify the amount of consideration we pay or the other investments we make in the acquired business.
As a result of these potential problems and risks, among others, businesses that we may acquire or invest in may not produce the revenue, competitive advantages, or business synergies that we anticipate, and the results and effects of any such acquisition may not be favorable enough to justify the amount of consideration we pay or the other investments we make in the acquired business. 18 If we do not or cannot maintain the compatibility of our communications and collaboration software with third-party applications and mobile platforms that our customers use in their businesses, our revenue could decline.
The applicability of state and local taxes, fees, surcharges or similar taxes to our services is complex, ambiguous, and subject to interpretation and change. In the United States, for example, we collect state and local taxes, fees, and surcharges based on our understanding of the applicable laws in the relevant jurisdiction.
In the United States, for example, we collect state and local taxes, fees, and surcharges based on our understanding of the applicable laws in the relevant jurisdiction.
In addition, under the Tax Cuts and Jobs Act, or the Tax Act, the amount of NOLs that we are permitted to deduct in any taxable year is limited to 80% of the taxable income in such year. Under the CARES Act, this 80% limitation has been eliminated for tax years beginning before January 1, 2021.
In addition, under the Tax Cuts and Jobs Act, or the Tax Act, the amount of NOLs that we are permitted to deduct in any taxable year is limited to 80% of the taxable income in such year.
We may not have the ability to raise the funds necessary to settle conversions of the notes in cash or repurchase the notes upon a fundamental change, and our future debt may contain limitations on our ability to pay cash upon conversion or repurchase of the notes.
We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations. 23 We may not have the ability to raise the funds necessary to settle conversions of the new notes in cash or repurchase the new notes upon a fundamental change, and our future debt may contain limitations on our ability to pay cash upon conversion or repurchase of the new notes.
Changes in financial accounting standards or practices, such as changes in the accounting method for our convertible debt securities that may be settled in cash, may cause adverse, unexpected financial reporting fluctuations and affect our reported operating results. U.S. GAAP is subject to interpretation by the FASB, the SEC and various bodies formed to promulgate and interpret appropriate accounting principles.
Changes in financial accounting standards or practices may cause adverse, unexpected financial reporting fluctuations and affect our reported operating results. U.S. GAAP is subject to interpretation by the FASB, the SEC and various bodies formed to promulgate and interpret appropriate accounting principles. A change in accounting standards or practices can have a significant effect on our reported results.
Due to these and other factors, we believe that period-to-period comparisons of our results of operations are not meaningful and should not be relied upon as indicators of our future performance.
Due to these and other factors, we believe that period-to-period comparisons of our results of operations are not meaningful and should not be relied upon as indicators of our future performance. It is possible that in some future periods our results of operations may be below the expectations of public market analysts and investors.
As of March 31, 2022, the Company had state net operating loss carryforwards of $1,067.9 million, which expire at various dates between 2023 and 2042. We also had research and development credit carryforwards for federal and California tax purposes of approximately $17.3 million and $19.6 million, respectively.
The remaining $838.1 million carry forward indefinitely. As of March 31, 2023, the Company also had state net operating loss carryforwards, the majority of which will expire at various dates between 2024 and 2042. We also had research and development credit carryforwards for federal and California tax purposes of approximately $18.5 million and $21.8 million, respectively.
Changes to existing rules or the questioning of current practices may harm our reported financial results or the way we account for or conduct our business.
New accounting pronouncements and varying interpretations of accounting pronouncements have occurred and will occur in the future. Changes to existing rules or the questioning of current practices may harm our reported financial results or the way we account for or conduct our business.

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Item 2. Properties

Properties — owned and leased real estate

2 edited+0 added−1 removed1 unchanged
Biggest changeFor additional information regarding our obligations under leases, see Note 5, Leases in the Notes to Consolidated Financial Statements contained in Part II, Item 8 of this Annual Report.
Biggest changeIn addition, we lease space from third-party data center hosting facilities under co-location agreements in the United States, South America, Europe, and the Asia Pacific region. For additional information regarding our obligations under leases, see Note 5 , Leases in the Notes to Consolidated Financial Statements contained in Part II, Item 8 of this Annual Report.
Outside the United States our operations are conducted primarily in leased office space located in the United Kingdom (primarily used for sales and support in Europe), Romania (primarily used for support, and research and development), Canada (primarily used for research and development), Portugal (primarily used for research and development) and Singapore (primarily used for regional sales and marketing, procurement, product and engineering, and regional support functions).
Outside the United States our operations are conducted primarily in leased office space located in the United Kingdom (primarily used for sales and customer support in Europe), Romania (primarily used for customer support, and research and development), Canada (primarily used for research and development), Portugal (primarily used for research and development) and Singapore (primarily used for regional sales and marketing, procurement, customer support, and CPaaS).
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In addition, we lease space from third-party data center hosting facilities under co-location agreements in the United States and in a number of countries across the globe, including those in South America, Europe, and Asia Pacific.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS Information with respect to this item may be found in Note 6, Commitments and Contingencies in the Notes to Consolidated Financial Statements contained in Part II, Item 8 of this Annual Report, under “Legal Proceedings”, which is incorporated herein by reference. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 25 Table of Contents PART II
Biggest changeITEM 3. LEGAL PROCEEDINGS Information with respect to this item may be found in Note 6 , Commitments and Contingencies in the Notes to Consolidated Financial Statements contained in Part II, Item 8 of this Annual Report, under “Legal Proceedings”, which is incorporated herein by reference. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 26 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

5 edited+4 added−22 removed2 unchanged
Biggest changeThe graph below shows the cumulative total stockholder return over a five year period, assuming the investment of $100 on March 31, 2017 in each of 8x8's common stock, the NYSE Composite Index, the Russell 2000 Index, and the Nasdaq Composite Computer & Data Processing Index.
Biggest changeThe graph below shows the cumulative total stockholder return over a five-year period, assuming the investment of $100 on March 31, 2018 in each of 8x8's common stock, the Nasdaq Composite Index NYSE Composite Index, the Russell 2000 Index, and the Nasdaq Telecommunications Index. The graph is furnished, not filed, and the historical return cannot be indicative of future performance.
Number of Common Stockholders As of May 16, 2022, there were approximately 276 holders of record of our common stock. The actual number of stockholders is greater than this number of record holders and includes stockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees.
Number of Common Stockholders As of May 18, 2023, there were approximately 308 holders of record of our common stock. The actual number of stockholders is greater than this number of record holders and includes stockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information for Common Stock Since December 8, 2017, our common stock has been traded under the symbol "EGHT" and is listed on the New York Stock Exchange, Inc. (NYSE).
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information for Common Stock Since November 15, 2022, our common stock has been traded under the symbol "EGHT" and is listed on the Nasdaq Global Select Market of the Nasdaq Stock Market national securities exchange.
Previous to December 8, 2017, our common stock traded under the symbol "EGHT" and was listed on the Nasdaq Global Select Market of the Nasdaq Stock Market national securities exchange. Dividend Policy We have never paid cash dividends on our common stock and have no plans to do so in the foreseeable future.
Previously, from December 8, 2017 to November 14, 2022, our common stock traded under the symbol "EGHT" and was listed on the New York Stock Exchange (the “NYSE”). Dividend Policy We have never paid cash dividends on our common stock and have no plans to do so in the foreseeable future.
There was no activity under the 2017 Repurchase Plan for the year ended March 31, 2022.The value of shares that may yet be purchased under the 2017 Repurchase Plan is approximately $7.1 million. 27 Table of Contents ITEM 6. [Reserved]
There was no activity under the 2017 Repurchase Plan for the year ended March 31, 2023.The value of shares that may yet be purchased under the 2017 Repurchase Plan is approximately $7.1 million. Issuances On August 3, 2022, the Company agreed with its financial advisor, J.
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The graph is furnished, not filed, and the historical return cannot be indicative of future performance.
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The NYSE Composite Index was added to the graph below because 8x8 changed the listing of its common stock to the NYSE from the Nasdaq in November 2022.
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Issuer Issuances and Purchases of Equity Securities On December 14, 2021, the Company sold $137,500,000 in additional aggregate principal amount of its currently outstanding 0.50% Convertible Senior Notes due 2024 (the “Second Additional Notes”) at an offering price of $1,007.79 per $1000 principal amount of Second Additional Notes (which includes accrued interest from August 1, 2021), pursuant to separate, privately negotiated agreements with certain qualified investors in a private placement in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act.
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In accordance with SEC rules, the performance graph presents both the indices used in the previous year and the newly selected index. 27 March 31, 2018 2019 2020 2021 2022 2023 8x8 $ 100.00 $ 110.68 $ 75.95 $ 177.75 $ 68.99 $ 22.85 Russell 2000 100.00 103.16 77.26 148.78 138.70 120.77 Nasdaq Composite 100.00 112.51 112.08 192.82 206.99 177.90 Nasdaq Telecommunications 100.00 120.28 100.30 141.55 132.11 116.04 NYSE Composite 100.00 184.81 149.95 227.10 242.66 223.79 Issuer Issuances and Purchases of Equity Securities Repurchases In August 2022, the Company repurchased in privately negotiated transactions with a limited number of holders 10,695,000 shares of its common stock for approximately $60.0 million, in connection with the Exchange Transaction and negotiation of the new secured term loan facility, as further described in Part II, Item 8, Note 7 , Convertible Senior Notes, Term Loan and Capped Calls.
Removed
The Company relied on this exemption from registration based in part on representations made by the investors. The Second Additional Notes are the Company’s senior unsecured obligations and were issued under an indenture, dated as of February 19, 2019 (the “Indenture”), between the Company and Wilmington Trust, National Association, as trustee (the “Trustee”).
Added
Wood Capital Advisors LLC, to settle 50% of its financial advisory fee for services provided in connection with the Exchange Transaction and negotiation of the new secured term loan facility, as further described in Part II, Item 8, Note 7 , Convertible Senior Notes, Term Loan and Capped Calls, to the consolidated financial statements through the issuance of 1,015,024 shares of the Company's common stock, equivalent to approximately $5.1 million.
Removed
The Second Additional Notes constitute a further issuance of, and form a single series with, the Company’s outstanding 0.50% Convertible Senior Notes due 2024 issued on February 19, 2019 in the aggregate principal amount of 26 Table of Contents $287,500,000 (the "Initial Notes") and outstanding 0.50% Convertible Senior Notes due 2024 issued on November 21, 2019 in the aggregate principal amount of $75,000,000 (the “First Additional Notes”).
Added
These shares were issued in a private placement in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act. The Company relied on this exemption based in part on representations made by the financial advisor in its engagement letter and related share payment letter . 28 ITEM 6. [Reserved]
Removed
The First Additional Notes and Second Additional Notes are hereinafter referred to as the “Additional Notes”, and collectively with the "Initial Notes", the "Notes". The Additional Notes have substantially identical terms to the Initial Notes (except that they bear a transfer restriction legend).
Removed
Immediately after giving effect to the issuance of the Additional Notes, the Company has $500,000,0000 aggregate principal amount of 0.50% Convertible Senior Notes due 2024 outstanding.
Removed
The Second Additional Notes bear interest at a rate of 0.50% per year, accruing from the August 1, 2021 interest payment date of the Initial and First Additional Notes, payable semiannually in arrears on February 1 and August 1 of each year, beginning on February 1, 2022.
Removed
The Additional Notes will mature on February 1, 2024, unless earlier converted, redeemed or repurchased in accordance with their terms.
Removed
The Notes will be convertible at the option of the noteholders at any time prior to the close of business on the business day immediately preceding October 1, 2023, only under the following circumstances: (1) during any fiscal quarter commencing after the fiscal quarter ending on June 30, 2019 (and only during such fiscal quarter), if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price for the Notes on each applicable trading day; (2) during the five business day period after any five consecutive trading day period (the “measurement period”) in which the trading price (as defined in the Indenture) per $1,000 principal amount of Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of its Common Stock and the conversion rate on 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 second scheduled trading day immediately preceding the redemption date; or (4) upon the occurrence of specified corporate events.
Removed
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 their Notes at any time, regardless of the foregoing circumstances.
Removed
Upon conversion of a Note, the Company will pay or deliver, as the case may be, cash, shares of its Common Stock or a combination of cash and shares of its Common Stock, at its election.
Removed
The conversion rate for the Notes is initially 38.9484 shares of Common Stock per $1,000 principal amount of the Notes (equivalent to an initial conversion price of approximately $25.68 per share of the Company's Common Stock).
Removed
The conversion rate for the Notes will be subject to adjustment in some events but will not be adjusted for any accrued and unpaid interest.
Removed
In addition, following certain corporate events that occur prior to the maturity date or following the Company’s issuance of a notice of redemption, the Company will increase the conversion rate of the Notes for a holder who elects to convert in connection with such a corporate event or during the related redemption period in certain circumstances.
Removed
The Company may not redeem the Notes prior to February 4, 2022.
Removed
The Company may redeem for cash all or any portion of the Notes, at its option, on or after February 4, 2022 if the last reported sale price of its 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 notice of redemption at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.
Removed
The net proceeds from the sale of the Second Additional Notes were approximately $134.5 million.
Removed
The Company used approximately $45.0 million of the net proceeds to repurchase shares of its common stock from the purchasers of the Second Additional Notes, at a price of $19.20 per share (as described below), and the remainder of the net proceeds to consummate the acquisition of Fuze and for general corporate purposes.
Removed
The Company intends to invest such net proceeds in short-term, interest bearing instruments and other investment grade securities. In December 2021, in a private placement, the Company repurchased approximately $45.0 million of its common stock from certain qualified investors in connection with the issuance of the Second Additional Notes. No shares remain to be purchased under this program.
Removed
The Company did not receive any proceeds from the sale or other disposition by the selling stockholders of the shares of its common stock covered hereby, or interests therein.
Removed
The selling stockholders will pay any expenses incurred by the selling stockholders for brokerage, accounting, tax or legal services or any other expenses incurred by the selling stockholders in disposing of these shares.
Removed
Except for certain block trades and other coordinated offerings, where the Company and the selling stockholders will each pay fifty percent (50%) of such registration costs, fees and expenses, the Company will bear all other costs, fees and expenses incurred in effecting the registration of the shares covered by this prospectus, including, without limitation, all registration and filing fees, printing expenses, listing fees of the New York Stock Exchange, “blue sky” fees and expenses and fees and expenses of the Company’s counsel and the Company’s independent registered public accounting firm.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

50 edited+47 added−55 removed22 unchanged
Biggest changeOther expense, net For the years ended March 31, Change 2022 2021 2020 2022 vs 2021 2021 vs 2020 Other expense, net $(21,629) $ (18,593) $ (11,717) $ (3,036) 16.3 % $ (6,876) 58.7 % Percentage of total revenue (3.4) % (3.5) % (2.6) % The change in Other expense, net in fiscal 2022, as compared to fiscal 2021, was primarily due to a $3.2 million increase in expense related to contractual interest, amortization of debt discount, and amortization of issuance costs associated with additional convertible notes issued in December 2021, partially offset by an increase in other income of $0.1 million.
Biggest changeOther expense, net For the years ended March 31, Change 2023 2022 2023 vs 2022 Other expense, net $(4,044) $ (21,629) $ 17,585 (81.3) % Percentage of total revenue (0.5) % (3.4) % Other expense, net decreased by $17.6 million in fiscal 2023, as compared to fiscal 2022, primarily due to a $18.5 million gain from debt extinguishment from the 2024 Notes, $16.2 million decrease in debt amortization expenses as a result of exchange and subsequent repurchase of the 2024 Notes, $1.8 million gain from sale of intangibles, $1.0 million gain from foreign exchange transactions, and $0.4 million gain on remeasurement of the Warrants issued in connection with the Term Loan, Our decreases were partially offset by a $20.7 million increase in interest expenses primarily related to our Term Loan.
Cost of Service Revenue Cost of service revenue consists primarily of costs associated with network operations and related personnel, technology licenses, amortization of 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.
Cost of Service Revenue Cost of service revenue consists primarily of costs associated with network operations and related personnel, technology licenses, amortization of capitalized internal-use software, other communication origination and termination services provided by third-party carriers, outsourced customer service call center operations, and other costs such as customer service, and technical support costs.
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.
While we expect to continue to improve our overall 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 as we continue to invest in our development efforts.
The actual results could be significantly different from the estimates. Capitalized Internal-Use Software Costs Certain software development costs for computer software developed internally or obtained for internal use are capitalized during the application development stage.
The actual results could be significantly different from the estimates. 36 Capitalized Internal-Use Software Costs Certain software development costs for computer software developed internally or obtained for internal use are capitalized during the application development stage.
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 Other revenue consists of revenue from professional services, primarily in support of deployment of our solutions and/or platform, and revenue from sales and rentals of IP telephones in conjunction with our cloud telephony service.
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.
General and Administrative 31 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.
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.
Cost of Other Revenue Cost of other revenue consists primarily of direct and indirect costs associated with the purchase and shipping and handling of IP telephones as well as the scheduling, shipping and handling, personnel costs, and other expenditures incurred in connection with the professional services associated with the deployment and implementation of our products, and allocated IT and facilities costs.
The CECL impairment model requires an estimate of expected credit losses, measured over the contractual life of an instrument, that considers forecasts of future economic conditions in addition to information about past events and current conditions.
The CECL impairment model requires an estimate of expected credit losses, measured over the contractual life of an instrument, which considers forecasts of future economic conditions in addition to information about past events and current conditions.
In fiscal 2022, net cash provided in operating activities was a result of an adjustment to net loss of $175.4 million by non-cash charges, such as stock-based compensation expense of $133.3 million, amortization of capitalized internal-use software costs of $28.9 million, amortization of debt discount of $20.4 million, and operating lease expenses of $13.5 million.
In fiscal 2022, net cash provided by operating activities was a result of an adjustment of non-cash charges, such as stock-based compensation expense of $133.3 million, amortization of capitalized internal-use software costs of $28.9 million, amortization of debt discount of $20.4 million, and operating lease expenses of $13.5 million.
We generally bill our customers on a monthly basis. Contracts typically range from annual to multi-year agreements, generally with payment terms of net 30 days. 35 Table of Contents We record reductions to revenue for estimated sales returns and customer credits at the time the related revenue is recognized.
We generally bill our customers on a monthly basis. Contracts typically range from annual to multi-year agreements, generally with payment terms of net 30 days. We record reductions to revenue for estimated sales returns and customer credits at the time the related revenue is recognized.
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.
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, as well as allocated IT and facilities costs.
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.
Other revenue is dependent on the number of customers who choose to purchase or rent an IP telephone hardware 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 professional services organization for implementation and deployment of our cloud services.
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.
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, and promotional expenses, as well as allocated IT and facilities costs.
Although we believe we have adequate sources of liquidity for the next 12 months and the foreseeable future, subject to such refinancing, the success of our operations, the global economic outlook, and the pace of sustainable growth in our markets, in each case, in light of the market volatility and uncertainty as a result of the COVID-19 pandemic and Russia's invasion of Ukraine, among other factors, could impact our business and liquidity.
Although we believe we have adequate sources of liquidity for the next 12 months and the foreseeable future the success of our operations, the global economic outlook, and the pace of sustainable growth in our markets, in each case, in light of the market volatility and uncertainty as a result of the ongoing impact of the COVID-19 pandemic and Russia's invasion of Ukraine, among other factors, could impact our business and liquidity.
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 December 31, 2020, of which approximately $2.5 million was 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 connection with the CARES Act, the Company elected to defer certain employer payroll taxes, which reduced cash usage by approximately $5.0 million through December 31, 2020, of which approximately $2.5 million was remitted to tax authorities during the third quarter of fiscal 2022 and fiscal 2023.
We generate service revenue from communications services subscriptions and platform usage. We generate other revenue from professional services and the sale of office phones and other hardware equipment. We define a “customer” as one or more legal entities to which we provide services pursuant to a single contractual arrangement.
We generate other revenue from professional services and the sale of office phones and other hardware equipment. We define a “customer” as one or more legal entities to which we provide services pursuant to a single contractual arrangement.
We continue to remain in a cumulative pretax loss position, and therefore, continued to maintain a full valuation allowance against our United States, United Kingdom, and Singapore deferred tax assets. Liquidity and Capital Resources As of March 31, 2022, we had $136.1 million of cash and cash equivalents and short-term investments.
We continue to remain in a cumulative pretax loss position, and therefore, continue to maintain a full valuation allowance against our United States, United Kingdom, and Singapore deferred tax assets. Liquidity and Capital Resources As of March 31, 2023, we had $137.6 million of cash and cash equivalents and short-term investments.
Cash used in or provided by operating activities is primarily affected by: • net income or loss; • non-cash expense items, such as depreciation, amortization, and impairments; • non-cash expense associated with stock options and stock-based compensation and awards; and • changes in working capital accounts, particularly related to the timing of collections from receivables and payments of obligations, such as commissions.
Cash used in or provided by operating activities is primarily affected by: • net income or loss; • cash paid for interest expense associated with the outstanding Term Loan, 2024 Notes and 2028 Notes; • non-cash expense items, such as depreciation, amortization, and impairments; • non-cash expense associated with stock options and stock-based compensation and awards; and • changes in working capital accounts, particularly related to the timing of collections from receivables and payments of obligations, such as commissions.
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.
We have a valuation allowance for our United States deferred tax assets, including federal and state non-operating loss carryforwards. 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.
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, expenditure, and contractual obligation requirements for the next 12 months and the foreseeable future, although we expect we will need to refinance $500 million of convertible senior notes prior to maturity on February 1, 2024.
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, expenditure, and contractual obligation requirements for the next 12 months and the foreseeable future.
Other jurisdictions around the world have also provided similar tax relief, which the Company has elected to receive, where applicable; these benefits were not material to our cash flows during fiscal 2022.
Other jurisdictions around the world have also provided similar tax relief, which the Company has elected to receive, where applicable; these benefits were not material to our cash flows during fiscal 2022. Year over Year Changes Net cash provided by operating activities for fiscal 2023 was $48.8 million, as compared to $34.7 million for fiscal 2022.
As we expand the scale of our international business activities, any changes in the United States and foreign taxation of such activities may increase our overall provision for income taxes in the future. We have a valuation allowance for our United States deferred tax assets, including federal and state NOLs carryforwards.
Provision for (Benefit from) Income Taxes Provision for (benefit from) 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 United States and foreign taxation of such activities may increase our overall provision for income taxes in the future.
Our management believes ARR is an important indicator for measuring the overall performance of the business. Our management uses trends in ARR to assess our ongoing operations, allocate resources, and drive the financial performance of the business.
Our management believes ARR is an important indicator for measuring the overall performance of the business because it encompasses new customer additions, add-on sales, renewals and customer churn in a single metric. Our management uses trends in total ARR and ARR by customer segment to assess our ongoing operations, allocate resources, and drive the financial performance of the business.
We record a valuation allowance against deferred tax assets if, based on the weight of the evidence, it is more likely than not that some 33 Table of Contents portion or all of the deferred tax assets will not be realized. A significant item of objective negative evidence considered was the historical three-year cumulative pretax loss reached in fiscal 2018.
We record a valuation allowance against deferred tax assets if, based on the weight of the evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized.
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, and innovation in product and technology, and through strategic acquisitions of technologies and businesses.
We plan to increase service revenue through a combination of new customer acquisition, cross-sell of additional products, including those resulting from our increased investment in innovation, to existing customers, geographic expansion of our customer base outside the United States, and innovation in product and technology, and through strategic acquisitions of technologies and businesses.
The cash provided by financing activities in fiscal 2022 was primarily from $134.6 million in additional aggregate principal amount of 0.5% Senior Convertible Notes due 2024 in December 2021, and to a lesser extent, the issuance of common stock of $16.1 million from employee stock purchase plans and employee option exercises.
Cash provided by financing activities in fiscal 2022 was primarily driven by $134.6 million of net proceeds from the issuance of 2024 Notes and $16.1 million from employee stock purchase plans and employee option exercises.
These adjustments for non-cash charges were partially offset by cash outflow from sales commissions of $9.5 million and other working capital changes.
These adjustments for non-cash charges were partially offset by cash outflow from sales commissions of $9.5 million and other working capital changes. Net cash provided by investing activities was $6.1 million in fiscal 2023, as compared to $160.0 million net cash used in fiscal 2022.
(Benefit from) provision for income taxes For the years ended March 31, Change 2022 2021 2020 2022 vs 2021 2021 vs 2020 (Benefit from) provision for income taxes $ (387) $ 843 $ 832 $ (1,230) (145.9) % $ 11 1.3 % Percentage of total revenue (0.1) % 0.2 % 0.2 % For the year ended March 31, 2022, we recorded an income tax benefit of $0.4 million.
Provision for (benefit from) income taxes For the years ended March 31, Change 2023 2022 2023 vs 2022 (Benefit from) provision for income taxes $ 2,807 $ (387) $ 3,194 (825.3) % Percentage of total revenue 0.4 % (0.1) % For the year ended March 31, 2023, we recorded an income tax provision of $2.8 million compared to an income tax benefit of $0.4 million in fiscal 2022, primarily due to higher state and foreign income taxes.
The cash used in investing activities during fiscal 2022 primarily related to $132.9 million cash paid for the acquisition of Fuze, capitalized internal-use software development costs of $20.4 million, net purchases of $10.1 million of investments, and purchases of property and equipment of $4.1 million.
Cash provided in investing activities during fiscal 2023 primarily related to net purchases of $21.2 million of investments, capitalized internal-use software development costs of $11.9 million, and purchases of property and equipment of $3.0 million.
Revenue Service revenue For the years ended March 31, Change 2022 2021 2020 2022 vs 2021 2021 vs 2020 Service revenue $602,357 $495,985 $414,078 $ 106,372 21.4 % $ 81,907 19.8 % Percentage of total revenue 94.4 % 93.2 % 92.8 % Service revenue increased for fiscal 2022, as compared to fiscal 2021, primarily due to a net increase in our installed base of mid-market and enterprise customers, expanded deployments by existing customers, growth in related telecom usage by our customers, and our acquisition of Fuze in January 2022, which contributed approximately $23.9 million in service revenue for fiscal 2022.
Revenue Service revenue For the years ended March 31, Change 2023 2022 2023 vs 2022 Service revenue $710,044 $602,357 $ 107,687 17.9 % Percentage of total revenue 95.4 % 94.4 % Service revenue increased for fiscal 2023, as compared to fiscal 2022, primarily due to a net increase in our installed base of mid-market and enterprise customers, expanded deployments by existing customers, and growth in related telecom usage by our customers.The increase in service revenue reflected increased sales of our UCaaS and CCaaS solutions, and increased adoption of our XCaaS integrated communication and collaboration platform.
IMPACT OF COVID-19 The full extent of the impact of the COVID-19 pandemic on our business, operations and financial results will 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 an effort to contain COVID-19 or slow its spread, governments around the world have enacted various measures, including orders to close non-essential businesses, isolate residents to their homes, and practice social distancing.
IMPACT OF COVID-19 30 The full extent of the impact of the COVID-19 pandemic on our business, operations and financial results will depend on numerous evolving factors that we may not be able to accurately predict, including those set forth under the section entitled "Risk Factors." KEY BUSINESS METRICS Our management periodically reviews certain key business metrics to evaluate our operations, allocate resources, and drive financial performance in our business.
We plan to continue to invest in research and development to support our efforts to expand the capabilities and scope of our platform and enhance our users' experience.
These increases were partially offset by decreases of $3.1 million in stock-based compensation and $1.8 million in amortization of capitalized software. We plan to continue to invest in research and development to accelerate our efforts to expand the capabilities and scope of our XCaaS platform to enhance our users' experience.
Sales and marketing For the years ended March 31, Change 2022 2021 2020 2022 vs 2021 2021 vs 2020 Sales and marketing $314,223 $256,231 $240,013 $ 57,992 22.6 % $ 16,218 6.8 % Percentage of total revenue 49.2 % 48.1 % 53.8 % Sales and marketing expenses increased in fiscal 2022, as compared to fiscal 2021, primarily due to a $23.0 million increase in personnel-related and consulting expenditures, including a $13.3 million increase in stock-based compensation expense, a $22.1 million increase in channel commissions including $3.7 million increase related to the acquisition of Fuze, a $6.9 million increase in amortization of deferred sales commission costs, and a $5.3 million increase in marketing software and application costs.
Sales and marketing For the years ended March 31, Change 2023 2022 2023 vs 2022 Sales and marketing $311,883 $314,223 $ (2,340) (0.7) % Percentage of total revenue 41.9 % 49.2 % Sales and marketing expenses decreased in dollars and as a percentage of revenue in fiscal 2023, as compared to fiscal 2022, primarily due to decreases of $22.3 million in stock-based compensation expense, $6.6 million in employee and consulting costs, and $3.5 million in paid media and marketing services.
These increases were partially offset by a $2.2 million decrease in acquisition and integration costs. 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.
These decreases were partially offset by increases of $13.1 million in personnel-related and consulting costs, $6.3 million in professional services fees, and $4.6 million in facilities and overhead costs. We expect general and administrative expenses as a percentage of total revenue will decline over time as we achieve greater operational efficiencies.
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. 32 Table of Contents General and administrative For the years ended March 31, Change 2022 2021 2020 2022 vs 2021 2021 vs 2020 General and administrative $118,103 $100,078 $87,025 $ 18,025 18.0 % $ 13,053 15.0 % Percentage of total revenue 18.5 % 18.8 % 19.5 % General and administrative expenses increased in fiscal 2022, as compared to fiscal 2021, primarily due to a $11.1 million increase in stock-based compensation expense, a $9.6 million increase in acquisition and integration costs resulting from the Fuze acquisition, and a $2.2 million increase in professional services and related expenses.
We expect sales and marketing costs as a percentage of revenue to decrease from fiscal 2023 to fiscal 2024 as we achieve continued efficiencies in sales and marketing. 33 General and administrative For the years ended March 31, Change 2023 2022 2023 vs 2022 General and administrative $110,652 $118,103 $ (7,451) (6.3) % Percentage of total revenue 14.9 % 18.5 % General and administrative expenses decreased both in dollars and as a percentage of revenue in fiscal 2023, as compared to fiscal 2022, primarily due to decreases of $17.7 million in stock-based compensation expenses and $13.2 million in acquisition and integration costs related to the Fuze acquisition in fiscal 2022.
Our effective tax rate for the period differs from the statutory rate primarily due to a full valuation allowance against our deferred tax assets. We record deferred taxes based on differences between the financial statement basis and tax basis of assets and liabilities and available tax loss and credit carryforwards.
The higher foreign income taxes reflect the inclusion of the full year operational results of the foreign Fuze subsidiaries. We record deferred taxes based on differences between the financial statement basis and tax basis of assets and liabilities and available tax loss and credit carryforwards.
These increases were partially offset by a decrease of $5.3 million in personnel and related costs.
These decreases were partially offset by increases of $17.8 million in commissions, $9.1 million in amortization of intangibles, and $3.5 million in amortization of deferred commissions.
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 suite of UCaaS and CCaaS solutions, which consists of service plans with increasing functionality designated as X1, X2, etc., through X8.
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). In January 2022, we acquired Fuze, Inc. ("Fuze"), a competitor in enterprise-grade unified communications-as-a-service (UCaaS), for approximately $213.8 million in stock and cash.
RESULTS OF OPERATIONS The following discussion should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this Annual Report. We have minimal seasonality in our business, but typically, sales of new subscriptions in our fourth fiscal quarter ending in March are greater than in any of the first three quarters of the fiscal year.
ITEM 7. 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 consolidated financial statements and related notes and other information included elsewhere in this Annual Report.
Operating Expenses Research and development For the years ended March 31, Change 2022 2021 2020 2022 vs 2021 2021 vs 2020 Research and development $ 112,387 $ 92,034 $ 77,790 $ 20,353 22.1 % $ 14,244 18.3 % Percentage of total revenue 17.6 % 17.3 % 17.4 % Research and development expenses increased in fiscal 2022, as compared to fiscal 2021, primarily due to a $10.0 million increase in personnel-related and consulting costs, including a $1.0 million increase in stock-based compensation expense and $3.5 million increase related to the acquisition of Fuze, a $8.4 million reduction in capitalized internal-use software costs, and a $4.1 million increase in software license and amortization.
Research and development For the years ended March 31, Change 2023 2022 2023 vs 2022 Research and development $ 146,220 $ 112,387 $ 33,833 30.1 % Percentage of total revenue 19.7 % 17.6 % Research and development expenses increased in dollars and as percentage of revenue during fiscal 2023, as compared to fiscal 2022, primarily due to increases of $23.8 million in employee and consulting costs, $6.7 million in internally-developed software, $4.8 million in software licenses, and $3.6 million in public cloud hosting costs; primarily as a result of our acquisition of Fuze.
Research and development expenses increased in fiscal 2021, as compared to fiscal 2020, primarily due to an $11.9 million increase in stock-based compensation expense, a $3.0 million reduction in capitalized internal-use software costs, and a $1.2 million increase in depreciation and amortization of software. These increases were partially offset by a $1.2 million decrease in travel-related costs.
The increase in cost of service during fiscal 2023, as compared to fiscal 2022, was primarily due to increases of $2.7 million in amortization of intangibles, $2.6 million in employee and consulting costs, and $1.5 million in software costs. These increases were partially offset by a decrease of $3.4 million in amortization of capitalized software.
We expect cost of service revenue will increase in absolute dollars, but decrease as a percentage of revenue, in future periods as service revenue continues to grow. 31 Table of Contents Cost of other revenue For the years ended March 31, Change 2022 2021 2020 2022 vs 2021 2021 vs 2020 Cost of other revenue $ 51,649 $ 50,068 $ 56,215 $ 1,581 3.2 % $ (6,147) (10.9) % Percentage of other revenue 144.4 % 137.7 % 174.8 % Cost of other revenue increased in fiscal 2022, as compared to fiscal 2021, primarily due to an increase in personnel and related costs to deliver our professional services, partially offset by decreased product costs associated with lower product shipments.
Cost of other revenue For the years ended March 31, Change 2023 2022 2023 vs 2022 Cost of other revenue $ 42,604 $ 51,649 $ (9,045) (17.5) % Percentage of other revenue 125.7 % 144.4 % Cost of other revenue decreased in dollars and as a percentage of other revenue in fiscal 2023, as compared to fiscal 2022, primarily due to decreases in product costs and efficiencies in our professional services.
KEY BUSINESS METRICS Our management periodically reviews certain key business metrics to evaluate our operations, allocate resources, and drive financial performance in our business. Annualized Recurring Subscriptions and Usage Revenue Our management reviews Annualized Recurring Subscriptions and Usage Revenue (“ARR”) and believes it may be useful to investors to evaluate trends in future revenues of the Company.
Annualized Recurring Subscriptions and Usage Revenue Our management measures the success of our strategy to attract and retain customers by analyzing trends in ARR and believes ARR may be useful to investors in evaluating our performance.
This was partially offset by proceeds from sales and maturities of investments, net of purchases, of $9.3 million. Net cash provided by financing activities was $105.4 million in fiscal 2022, as compared to $13.2 million in fiscal 2021.
Cash used in investing activities for fiscal 2022 was primarily related to the acquisition of Fuze for $125.4 million and net purchase of investments of $10.1 million. Net cash used in financing activities was $37.8 million in fiscal 2023, as compared to $105.4 million cash provided by financing activities used in fiscal 2022.
This is partially offset by seasonal weakness in our CPaaS revenue in the fourth quarter due to national holidays in the Asia-Pacific region. The results of operations for fiscal 2022, and the discussion below, includes approximately ten weeks of Fuze's results of operations since its acquisition on January 18, 2022.
RESULTS OF OPERATIONS Fiscal 2023 includes a full year of Fuze's results of operations. The results of operations for fiscal 2022, includes approximately ten weeks of Fuze's results of operations since its acquisition on January 18, 2022.
In fiscal 2021, net cash used in operating activities was primarily related to our net loss of $165.6 million, cash outflow from sales commissions of $25.1 million, and other working capital changes, which were partially offset by non-cash charges such as stock- 34 Table of Contents based compensation expense of $107.6 million, amortization of capitalized internal-use software costs of $26.9 million, amortization of the debt discount of $16.9 million, and operating lease expenses of $15.2 million.
In fiscal 2023, net cash provided by operating activities was $48.8 million, reflecting an adjustment of $183.9 million in non-cash charges to our net loss, including stock-based compensation expense of $89.5 million, depreciation and amortization of $52.3 million, amortization of deferred sales commissions of $38.2 million, operating lease expenses of $12.0 million, and amortization of debt discount of $4.3 million, These adjustments for non-cash charges were partially offset by $62.0 million of working capital changes, including deferrals of sales commissions of $31.1 million and $24.4 million in accounts payable.
Our customers range from small businesses to large enterprises and their users are spread across more than 170 countries. In recent years, we have increased our up-market focus on the mid-market and enterprise customer sectors. We have a portfolio of cloud-based offerings that are subscription-based, made available at different rates, varying by the specific functionalities, services, and number of users.
Our customers range from small businesses to large enterprises across all vertical markets, with users in more than 180 countries. In recent years, we have increased our focus on mid-market, small and medium enterprise, and public sector customers because these organizations typically have more complex communication and contact center requirements compared to the needs of small business customers.
The increase in service revenue was also attributable to growth in usage revenue generated by our CPaaS products, primarily in the APAC region. Our service subscriber base grew from approximately 55,000 customers on March 31, 2020 to approximately 58,000 customers on March 31, 2021.
A substantial portion of the growth in service revenue for the year ended March 31, 2023 was attributable to Fuze, which contributed approximately an $86.5 million increase compared to the year ended March 31, 2022. The increase was partially offset by a decrease in usage revenue generated by our CPaaS products, primarily in the Asia-Pacific region.
In addition, we had $9.5 million in restricted cash in support of letters of credit securing leases for office facilities and certain equipment. As of March 31, 2021, we had $152.9 million of cash and cash equivalents and short-term investments.
In addition, we had $1.3 million in restricted cash in support of letters of credit securing leases for office facilities and certain equipment. 34 Our primary requirements for liquidity and capital are working capital, research and development and marketing activities, principal and interest payments on our outstanding debt and other general corporate needs.
We expect our service revenue to grow over time with our diverse platform offering as our business continues to expand globally and across broader customer categories. 30 Table of Contents Other revenue For the years ended March 31, Change 2022 2021 2020 2022 vs 2021 2021 vs 2020 Other revenue $35,773 $36,359 $32,159 $ (586) -1.6 % $ 4,200 13.1 % Percentage of total revenue 5.6 % 6.8 % 7.2 % Other revenue decreased slightly in fiscal 2022, as compared to fiscal 2021, due to a decrease in product revenue as a result of difficulty in obtaining hardware due to supply chain issues, partially offset by increased professional services revenue resulting from the overall growth in our business and customer base.
Other revenue For the years ended March 31, Change 2023 2022 2023 vs 2022 Other revenue $33,894 $35,773 $ (1,879) -5.3 % Percentage of total revenue 4.6 % 5.6 % Other revenue decreased by $1.9 million in fiscal 2023, as compared to fiscal 2022, due to a decrease in professional service revenue.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW We are a leading SaaS provider of voice, video, contact center, and communication APIs powered by a global cloud communications platform.
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In addition to historical data, this discussion contains forward-looking statements about our business, results of operations, cash flows, financial condition and prospects based on current expectations that involve risks, uncertainties and assumptions. Our actual results could differ materially from such forward-looking statements.
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From our proprietary cloud technology platform, organizations across all their locations and employees 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.
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Factors that could cause or contribute to those differences include, but are not limited to, those identified below and those discussed in the sections titled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” included elsewhere in this Annual Report. Additionally, our historical results are not necessarily indicative of the results that may be expected for any period in the future.
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With the 8x8 X Series, we provide enterprise-grade voice, unified communications, video meetings, team collaboration, and contact center functionalities from a single platform. We call this combined offering XCaaS TM (eXperience Communications as a Service TM ). We also offer standalone SaaS services for contact center, video meetings, and enterprise communication APIs.
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This section discusses items pertaining to and comparisons of financial results between fiscal 2023 and fiscal 2022.
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In January 2022, we acquired Fuze, a competitor in UCaaS for the enterprise, for approximately $213.8 million in stock and cash. This enables us to add Enterprise ARR, accelerate innovation, and expand our global presence. SUMMARY AND OUTLOOK In fiscal 2022, our total service revenue grew approximately 21% year-over-year to $602.4 million.
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A discussion of fiscal 2022 items and comparisons between fiscal 2022 and fiscal 2021 financial results can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2022 (the “2022 MD&A”), filed with the SEC on May 27, 2022.
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Annualized Recurring Subscriptions and Usage Revenue from mid-market and enterprise customers represented 76% of total ARR and increased 33% over the prior year. At the end of fiscal 2022, approximately one-third of our ARR was derived from our XCaaS customers. See "Key Business Metrics" section below for further discussion of how we define ARR.
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OVERVIEW We are a leading provider of software-as-a-service solutions for contact center, voice communications, video meetings, employee collaboration, and embeddable communication application program interfaces ("APIs"). Our solutions empower workforces worldwide by connecting individuals and teams so they can collaborate faster, work smarter, and better serve customers, from any location.
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We continue to focus on achieving improved operating efficiencies while delivering revenue growth. In fiscal 2022, while we continued to make important investments in our products and technology platform, management recognized the importance of driving toward profitability for sustainable scale.
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The communications capabilities and advanced AI/ML (artificial intelligence/machine learning) technologies of our contact center, communication and collaboration solutions are integrated into a comprehensive cloud-based offering powered by our global communications platform, which together comprise our 8x8 XCaaS platform solution.
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We focused on key areas of spend in our go-to-market strategy and improving gross margin and operating margin through increased spend discipline. Additionally, we looked to drive improved efficiencies in our customer acquisition and operations and focused on expanding our business upmarket with mid-market and enterprise customers.
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The XCaaS platform delivers our unified communications (UCaaS), contact center (CCaaS) and communication APIs (CPaaS) services and includes AI-driven digital assistance, intuitive user interfaces, and real-time business analytics and intelligence, enabling organizations of all sizes to design, deploy and adapt tailored communications and workflows for differentiated employee and customer experiences. The 8x8 XCaaS platform offers a complete cloud technology stack.
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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 cash flow improvement.
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It delivers the security, scalability, high availability, and ease-of-use of a modern cloud-based architecture while masking the complexity of a global communications infrastructure.
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In prior years, we made strategic investments in R&D and marketing, which we considered necessary and important for delivering a robust platform to our customers and establishing the appropriate demand generation channels to connect our customers to our solutions.
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A consistent data layer across the platform powers 8x8 AI/ML algorithms, as well as vertical-specific and purpose-built AI applications from our ecosystem of technology partners, to deliver data-driven business insights and intelligent integrated applications that drive employee productivity, resource optimization, and more effective end-customer interactions through simplified and automated workflows.
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In fiscal 2019, we launched 8x8 X Series, our single-technology platform, and re-aligned our channel and marketing functions to support a more scalable, higher-growth, go-to-market strategy, in response to the shift of businesses from legacy on-premise communication solutions to cloud-based services. We believe that this industry trend continued throughout our fiscal 2022.
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Built from core cloud technologies that we own and manage internally and integrated with third-party applications from our technology partners, our XCaaS platform enables agile workplaces and fosters seamless communications and collaboration between an organization’s customers, contact center agents, and employees, regardless of geographic location.
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Accordingly, we continued to invest in our business, but with a concurrent focus on scale and managing costs. In fiscal 2023, 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.
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Our customers use our XCaaS platform to create tailored employee and customer experiences that increase productivity, improve responsiveness, and elevate customer and employee satisfaction and loyalty. Our service plans are structured with increasing levels of functionality and are designated as X1, X2, etc., through X8, based on the specific communication needs and customer engagement profile of each user.
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We also intend to continue investing in our indirect channel programs to acquire more third-party selling agents to help sell our solutions, including VARs and master agent programs. Lastly, we are adding sales capacity to cross sell to our installed base, including both 8x8 and the recently acquired Fuze base.
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Because our XCaaS platform includes UCaaS, CCaaS and CPaaS and serves as a single integration framework for communications across an organization, customers can reduce costs associated with provisioning and management, increase customization based on use cases, and facilitate compliance with security and data privacy requirements on a global scale.
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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.
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In fiscal 2023, we introduced platform-wide integration of generative AI from OpenAI, making it easier for organizations to unlock the potential of generative AI to personalize self-service, bot-based and agent-based customer engagements.
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While we anticipate that the global health crisis caused by COVID-19 and the 28 Table of Contents measures enacted to slow its spread will negatively impact business activity across the globe, it is not clear what its full potential effects will be on our business, including the effects on our customers, suppliers or vendors, or on our financial results.
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The XCaaS platform also integrates with a growing ecosystem of third-party applications, ranging from purpose-built and vertically-focused AI-based applications to broadly deployed customer relationship management (CRM) platforms and leading customer engagement and workforce management software.
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Other Expense, Net 29 Table of Contents 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 gain/losses. (Benefit from) Provision for Income Taxes (Benefit from) provision for income taxes consists primarily of foreign income taxes and state minimum taxes in the United States.
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Our open approach to third party integrations and platform-wide enablement of generative AI, combined with flexibility to “mix and match” functionality based on users’ communication requirements and customer engagement profiles, allows organizations of all sizes to design and deploy tailored user experiences previously reserved to very large enterprises.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe 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 the Company's common stock price increases and will generally decrease as 36 Table of Contents its common stock price declines.
Biggest changeThe fair value of the 2024 Notes, 2028 Notes, and Term Loan is subject to interest rate risk, market risk, and other factors due to the conversion feature. The fair value of the 2024 Notes and 2028 Notes will generally increase as the Company's common stock price increases and will generally decrease as its common stock price declines.
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 United States dollar of 10% would not result in a material foreign currency loss on foreign-denominated balances as of March 31, 2022.
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 United States dollar of 10% would not result in a material foreign currency loss on foreign-denominated balances as of March 31, 2023.
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. 37 Table of Contents
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. 37
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 of operations, due to the fixed nature of the debt obligation.
The interest and market value changes affect the fair value of the 2024 Notes and 2028 Notes but do not impact our financial position, cash flows, or results of operations, due to the fixed nature of the debt obligation.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rate Fluctuation Risk We had cash, cash equivalents, and investments totaling $138.7 million as of March 31, 2022. Cash equivalents and investments were invested primarily in money market funds, United States treasury, commercial paper, and corporate bonds.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rate Fluctuation Risk We had cash, cash equivalents, and investments totaling $137.6 million as of March 31, 2023. Cash equivalents and investments were invested primarily in money market funds, United States treasury, commercial paper, and corporate bonds.
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.
Additionally, we carry the 2024 Notes, 2028 Notes and Term Loan at face value, less unamortized discount, on our consolidated balance sheets, and we present the fair value for required disclosure purposes only.
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. The Company has issued $500.0 million aggregate principal amount of convertible senior notes.
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.
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As of March 31, 2023, we have $265.2 million aggregate principal amount of the 2024 Notes and 2028 Notes, and $250.0 million of the Term Loan outstanding. Subsequently, in May 2023, we voluntarily prepaid $25.0 million of principal on the Term Loan, reducing the outstanding principal to $225.0 million.

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