# 8X8 Inc: Form 10-Q for the period ended Jun 30, 2023

- Company: [8X8 Inc](/companies/eght.md) (CIK 1023731)
- Form: 10-Q
- Filed: 2023-08-08
- Accepted by EDGAR: Aug 8, 2023, 16:13 ET
- Period: 2023-06-30
- Accession: 0001023731-23-000129
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1023731/000102373123000129/eght-20230630.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1023731/000102373123000129/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-04-01 to 2023-06-30 | $183.3m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Research and development | 3 months, 2023-04-01 to 2023-06-30 | $35.3m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2023-04-01 to 2023-06-30 | −$1.4m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2023-04-01 to 2023-06-30 | $1.4m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-04-01 to 2023-06-30 | −$15.3m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-04-01 to 2023-06-30 | −$0.13 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-04-01 to 2023-06-30 | −$0.13 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-04-01 to 2023-06-30 | 116,777,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2023-04-01 to 2023-06-30 | $26.5m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2023-04-01 to 2023-06-30 | $186.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2023-06-30 | $122.2m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-06-30 | $274.5m | us-gaap:AssetsCurrent |
| Total assets | at 2023-06-30 | $828.5m | us-gaap:Assets |
| Current liabilities | at 2023-06-30 | $236.3m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-06-30 | $723.6m | us-gaap:Liabilities |
| Shareholders' equity | at 2023-06-30 | $104.9m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 31,886 characters.

*The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report. As discussed in the section titled “Forward-Looking Statements,” the following discussion and analysis contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those discussed below and elsewhere in this Quarterly Report, particularly those set forth under the section entitled "Risk Factors" in the Form 10-K.*

### OVERVIEW

We are a leading provider of software-as-a-service ("SaaS") 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. 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. 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. 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. 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. 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.

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.

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. 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. 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.

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.

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. Organizations in these sectors – typically with 500 to 10,000 employees – are more likely to adopt multiple services and realize greater value from our unified, global communications platform and portfolio of AI-enabled solutions.

We generate service revenue from subscriptions to our 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. 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).

### SUMMARY AND OUTLOOK

In the first quarter of fiscal 2024, our total revenue decreased $4.3 million, or approximately 2% year-over-year, to $183.3 million primarily due to a $3.9 million decrease in our service revenue.

As part of our long-term strategy to expand our enterprise customer base, grow our revenue, achieve profitability and increase our cash flow, we have focused on reducing the cost of delivering our services and improving our sales efficiency while increasing our investment in research and development. To improve our sales efficiency, we have focused our sales and marketing resources on mid-market and enterprise customers, since these customers are likely to derive the greatest benefit from our unified XCaaS platform. We have also expanded our partner programs to extend our reach within this market, placing increased emphasis on developing a community of value-added resellers who provide implementation services and Tier 1 customer support in addition to sales. To support our customers and partners, we are expanding our customer success organization and investing in improvements to our back-office processes in order to increase our operational efficiency over time.

We believe that continued innovation is a critical factor in attracting and retaining mid-market and enterprise customers and is an important variable in achieving sustainable growth. We are committed to maintaining a high level of investment in engineering to deliver product innovation across our XCaaS platform, expand our ecosystem of integrations, and maintain the high availability our customers require. Approximately two-thirds of our investment in research and development is focused on extending the contact center capabilities of our XCaaS platform, including AI integrations, user experiences, and advanced data capture and analytics.

We use annualized recurring and usage revenue ("ARR") to measure the success of our strategy to attract and retain customers. Total ARR as of June 30, 2023 was $703.0 million and increased 2% from the end of the first quarter of fiscal 2023. ARR from mid-market and enterprise customers represented 76% of total ARR and increased 1% compared to the end of the first quarter of fiscal 2023. We define enterprise customers as customers generating more than $100,000 in ARR, mid-market as customers with ARR between $25,000 and $100,000, and small business as customers with up to $25,000 in ARR. Mid-market customers often become enterprise customers over time as they expand their deployments and adopt more solutions from our XCaaS portfolio.

ARR from enterprise customers has increased steadily as a percentage of total ARR, increasing from 35% of total ARR in fiscal 2019 to 58% of total ARR at the end of the first quarter of fiscal 2024. We have increased our focus on mid-market and enterprise customers because these organizations typically have more complex communication and contact center requirements compared to the needs of small business customers.

ARR associated with small business customers was 24% of total ARR for the first quarter of fiscal 2024. We remain committed to retaining our installed base of small business customers but have reduced promotional programs and digital marketing to attract new small business UCaaS-only customers. See "Key Business Metrics" below for further discussion on how we define ARR.

In August 2022, we refinanced approximately $403.8 million of the $500.0 million aggregate principal amount of 2024 Notes through an exchange for approximately $201.9 million in 2028 Notes plus approximately $181.8 million in cash. The cash payment was funded with the partial proceeds of a $250.0 million senior secured term loan due in 2027 entered into in August 2022. Concurrently with the issuance of the 2028 Notes, we repurchased 10,695,000 shares of our common stock for approximately $60.0 million in privately negotiated transactions with a limited number of holders. In September 2022, December 2022, and February 2023, we repurchased $6.0 million, $21.8 million, and $5.0 million in aggregate principal amount of the 2024 Notes, respectively, in separate privately negotiated transactions. Approximately $63.3 million of the 2024 Notes remained outstanding as of June 30, 2023. See Note 6, *Convertible Senior Notes and Term Loan* to our condensed consolidated financial statements for details. In May 2023, we voluntarily prepaid $25.0 million of principal amount outstanding on our senior secured term loan, reducing the total principal amount outstanding to $225.0 million.

To align our resources with our long-term strategy, we conducted two separate workforce reductions in fiscal 2023 involving approximately 300 employees, primarily in the sales and marketing and general and administration functions. We expect these workforce reductions and accompanying organizational restructurings to increase our operating income and cash flows from operations as we align our resources to our critical areas of focus, including streamlining sales and marketing, enhancing customer support, accelerating innovation, and strengthening our financial position. However, our net income may vary due to the adjustable nature of the interest rate on our senior secured term loan.

### 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 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. 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 define ARR as equal to the sum of the most recent month of (i) recurring subscription amounts and (ii) platform usage charges for all CPaaS customers (subject to a minimum billings threshold for a period of at least six consecutive months), multiplied by 12.

We are not aware of any uniform standards for calculating ARR and caution that our presentation may not be consistent with that of other companies. For example, to the extent our ARR is used to evaluate trends in future revenue, such an evaluation would assume a sustained level of usage from existing customers which may fluctuate in future periods.

### COMPONENTS OF RESULTS OF OPERATIONS

### Service Revenue

Service revenue consists of communication services subscriptions, platform usage revenue, and related fees from our UCaaS, CCaaS, and CPaaS offerings. We plan to increase service revenue through a combination of new customer acquisition, cross-selling 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.

### 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. 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 phones, computers, or other compatible devices, and/or choose to engage our professional services organization for implementation and deployment of our cloud services.

### Cost of Service Revenue

Cost of service revenue consists primarily of costs associated with network operations and related personnel, technology licenses, amortization of 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. We allocate overhead costs, such as information technology ("IT") and facilities, to cost of service revenue, as well as to each of the operating expense categories, generally based on relative headcount. Our IT costs include costs for IT infrastructure and personnel. Facilities costs primarily consist of office leases and related expenses.

### Cost of Other Revenue

Cost of other revenue consists primarily of direct and indirect costs associated with the 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.

### 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.

### 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.

### 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.

### Other Expense, Net

Other expense, net, consists primarily of interest expense related to our convertible notes and term loan, amortization of debt discount and issuance costs, offset by gains on debt extinguishment, as well as other income.

### 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. 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.

### RESULTS OF OPERATIONS

### Three months ended June 30, 2023 Compared to Three Months Ended June 30, 2022

### Revenue

#### Service revenue

*(In thousands, except percentages)*

|  | Three Months Ended June 30, 2023 | 2022 | Change |  |
| --- | ---: | ---: | ---: | ---: |
| Service revenue | $175,238 | $179,161 | $(3,923) | (2.2)% |
| Percentage of total revenue | 95.6% | 95.5% |  |  |

Service revenue decreased for the three months ended June 30, 2023 compared to the three months ended June 30, 2022 primarily due to lower usage revenue in the Southeast Asia region, mainly from short messaging services ("SMS") customers. Additionally, new subscription revenue from new bookings offset increased customer churn and down-sell in our inorganic customer base.

We continue to monitor factors that could have an impact on customer buying behavior and demand, including macroeconomic conditions, contract duration, churn, upsell and down-sell, renewals, and payment terms, all of which could cause variability in our revenue.

#### Other revenue

*(In thousands, except percentages)*

|  | Three Months Ended June 30, 2023 | 2022 | Change |  |
| --- | ---: | ---: | ---: | ---: |
| Other revenue | $8,049 | $8,459 | $(410) | (4.8)% |
| Percentage of total revenue | 4.4% | 4.5% |  |  |

Other revenue decreased for the three months ended June 30, 2023 compared to the three months ended June 30, 2022 due to lower professional service revenue.

### Cost of Revenue

#### Cost of service revenue

*(In thousands, except percentages)*

|  | Three Months Ended June 30, 2023 | 2022 | Change |  |
| --- | ---: | ---: | ---: | ---: |
| Cost of service revenue | $46,276 | $53,547 | $(7,271) | (13.6)% |
| Percentage of service revenue | 26.4% | 29.9% |  |  |

Cost of service revenue decreased in dollars and as a percentage of service revenue for the three months ended June 30, 2023 compared to the three months ended June 30, 2022 due to decreases of $3.9 million in the costs to deliver our services, $1.9 million of combined employee and consulting costs, stock-based compensation expense, and lease expenses, and $1.5 million related to the amortization of capitalized software.

We expect the total dollar amount of cost of service revenue and as a percentage of revenue to vary with the amount of service revenue and the mix of subscription and usage revenue within service revenue.

#### Cost of other revenue

*(In thousands, except percentages)*

|  | Three Months Ended June 30, 2023 | 2022 | Change |  |
| --- | ---: | ---: | ---: | ---: |
| Cost of other revenue | $8,398 | $13,126 | $(4,728) | (36.0)% |
| Percentage of other revenue | 104.3% | 155.2% |  |  |

Cost of other revenue decreased both in dollars and as a percentage of other revenue for the three months ended June 30, 2023 compared to the three months ended June 30, 2022 primarily due to decreased personnel-related costs to deliver our professional services coupled with lower product costs.

### Operating Expenses

#### Research and development

*(In thousands, except percentages)*

|  | Three Months Ended June 30, 2023 | 2022 | Change |  |
| --- | ---: | ---: | ---: | ---: |
| Research and development | $35,292 | $34,955 | $337 | 1.0% |
| Percentage of total revenue | 19.3% | 18.6% |  |  |

Research and development expenses were relatively flat for the three months ended June 30, 2023 compared to the three months ended June 30, 2022.

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. 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.

#### Sales and marketing

*(In thousands, except percentages)*

|  | Three Months Ended June 30, 2023 | 2022 | Change |  |
| --- | ---: | ---: | ---: | ---: |
| Sales and marketing | $68,505 | $83,527 | $(15,022) | (18.0)% |
| Percentage of total revenue | 37.4% | 44.5% |  |  |

Sales and marketing expenses decreased in dollars and as a percentage of revenue for the three months ended June 30, 2023 compared to the three months ended June 30, 2022 primarily due to decreases of $8.7 million in personnel-related and consulting costs, $3.2 million in stock-based compensation expense, $2.6 million in paid media and marketing services, and $0.5 million in channel commissions.

#### General and administrative

*(In thousands, except percentages)*

|  | Three Months Ended June 30, 2023 | 2022 | Change |  |
| --- | ---: | ---: | ---: | ---: |
| General and administrative | $26,226 | $29,219 | $(2,993) | (10.2)% |
| Percentage of total revenue | 14.3% | 15.6% |  |  |

General and administrative expenses decreased both in dollars and as a percentage of other revenue for the three months ended June 30, 2023 compared to the three months ended June 30, 2022 primarily due to decreases of $3.9 million in stock-based compensation expense and $1.0 million in acquisition, integration, and contract termination costs, partially offset by higher legal and regulatory costs of $1.9 million.

#### Other (expense) income, net

*(In thousands, except percentages)*

|  | Three Months Ended June 30, 2023 | 2022 | Change |  |
| --- | ---: | ---: | ---: | --- |
| Other (expense) income, net | $(12,473) | $1,116 | $(13,589) | NM |
| Percentage of total revenue | (6.8)% | 0.6% |  |  |

NM = not meaningful

We recognized $12.5 million of other expense, net during the three months ended June 30, 2023 compared to $1.1 million of other income, net during the three months ended June 30, 2022 primarily due to a $8.5 million increase in interest expense on our variable-rate term loan entered into in the second quarter of fiscal 2023, $3.3 million in unrealized foreign exchange losses, and a $1.8 million loss on early debt extinguishment attributable to our $25.0 million prepayment of our term loan.

#### Provision for income taxes

*(In thousands, except percentages)*

|  | Three Months Ended June 30, 2023 | 2022 | Change |  |
| --- | ---: | ---: | ---: | --- |
| Provision for income taxes | $1,444 | $405 | $1,039 | NM |
| Percentage of total revenue | 0.8% | 0.2% |  |  |

NM = not meaningful

Provision for income taxes increased for the three months ended June 30, 2023 compared to the three months ended June 30, 2022 primarily due to higher profit before taxes in our international operations coupled with the limitation of certain state net operating loss carryforwards that can be utilized to offset the additional taxable income.

### Liquidity and Capital Resources

As of June 30, 2023 and March 31, 2023, we had $138.2 million and $137.6 million, respectively, of cash and cash equivalents and investments. In addition, we had $1.0 million and $1.3 million, respectively, in restricted cash in support of letters of credit securing leases for office facilities and certain equipment for the same periods.

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. Historically, these cash requirements have been met through cash provided by operating activities and cash and cash equivalents. Our current capital deployment strategy for the remainder of fiscal 2024 is to invest excess cash on hand to support our continued growth initiatives into select markets and planned software development activities, and pay down our debt. As of June 30, 2023, we are not party to any off-balance sheet arrangements that have had or are reasonably likely to have a current or future material effect on our financial condition, results of operations, liquidity, capital expenditures, or capital resources. Significant cash requirements for the remainder of the fiscal year include our operating lease obligations, interest payments related to our debt obligations, retirement of our 2024 Notes, and operating and capital purchase commitments. For information regarding our expected cash requirements and timing of payments related to leases and noncancellable purchase commitments, see Note 5, Leases, and Note 6, Commitments and Contingencies, respectively, to the consolidated financial statements in our Form 10-K. Additionally, refer to Note 7, Convertible Senior Notes, Term Loan and Capped Calls, to the consolidated financial statements in our Form 10-K for more information related to our debt obligations and applicable covenants.

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 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 could impact our business and liquidity.

### Period-over-Period Changes

Net cash provided by operating activities for the three months ended June 30, 2023 was $26.5 million compared to $5.8 million for the three months ended June 30, 2022. 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 loss associated with extinguishment of debt;
- non-cash expense associated with stock options and stock-based compensation and awards;
- gain or loss on sale of assets; and
- changes in working capital accounts, particularly related to the timing of collections from receivables and payments of obligations, such as commissions.

#### Operating Activities

For the three months ended June 30, 2023, net cash provided in operating activities reflected non-cash adjustments of $46.7 million to our net loss of $15.3 million, including stock-based compensation expense of $18.2 million, depreciation and amortization expenses of $12.5 million, operating lease expenses of $2.5 million, amortization of deferred sales commission costs of $10.0 million, $1.8 million loss from debt extinguishment, and $1.1 million of amortization of debt discount and issuance costs. Non-cash adjustments were partially offset by $4.9 million of working capital adjustments driven by $7.2 million in deferred sales commission costs, $3.4 million in accounts receivable, and $2.1 million in accounts payable and accruals, partially offset by $5.5 million in deferred revenue.

For the three months ended June 30, 2022, net cash provided in operating activities was a result of an adjustment to net loss of $56.3 million in non-cash charges, such as stock-based compensation expense of $27.8 million, depreciation and amortization expenses of $14.2 million, amortization of deferred sales commission costs of $9.2 million, and operating lease expenses of $3.1 million. These adjustments for non-cash charges were partially offset by $24.4 million of working capital adjustments driven by $13.8 million in accounts payable and accruals, and $9.2 million in deferred sales commission costs.

#### Investing Activities

Net cash provided in investing activities was $6.8 million for the three months ended June 30, 2023, as compared to $5.8 million of cash used in the three months ended June 30, 2022. The cash provided by investing activities during the three months ended June 30, 2023 primarily related to $10.5 million of net proceeds from sales and maturities of investments, which was partially offset by $3.5 million in capitalization of internally developed software.

Net cash used in investing activities was $5.8 million for the three months ended June 30, 2022, as compared to $11.1 million in the three months ended June 30, 2021. The cash used in investing activities during the three months ended June 30, 2022 primarily related to $2.3 million of internally developed software capitalization, $1.3 million of investments purchased, net of proceeds from sales and maturities of investments, and $1.3 million payout of the cash holdback related to the Fuze, Inc. acquisition.

#### Financing Activities

Net cash used in financing activities was $25.0 million for the three months ended June 30, 2023, as compared to $0.1 million of cash provided by financing activities for the three months ended June 30, 2022. The cash used in financing activities for the three months ended June 30, 2023 was primarily driven by $25.0 million of repayments on our term loan.

Net cash provided by financing activities was $0.1 million for the three months ended June 30, 2022, as compared to $3.4 million for the three months ended June 30, 2021. The cash provided by financing activities for the three months ended June 30, 2022 was due to the issuance of common stock of $0.1 million from employee stock purchase plans and employee option exercises.

### Debt Obligations

See Note 6, *Convertible Senior Notes and Term Loan* in the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report for information regarding our debt obligations.

### CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosures of assets and liabilities. On an ongoing basis, we evaluate our critical accounting policies and estimates. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Our consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP"). Refer to Note 1, *The Company and Significant Accounting Policies*, in the notes to the unaudited condensed consolidated financial statements included in this Quarterly Report, which describes the significant accounting policies and methods used in the preparation of our consolidated financial statements. There have been no significant changes during the three months ended June 30, 2023 to our critical accounting policies and estimates previously disclosed in our Form 10-K.

## Market risk

As filed, 270 characters.

There have been no material changes in our exposures to market risk since March 31, 2023. For details on the Company’s interest rate and foreign currency exchange risks, see Part I, Item 7A. “Quantitative and Qualitative Information About Market Risks” in our Form 10-K.

## Controls and procedures

As filed, 1,623 characters.

### Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of June 30, 2023. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of June 30, 2023, our disclosure controls and procedures were effective at the reasonable assurance level.

### Changes in Internal Control Over Financial Reporting

During the three months ended June 30, 2023, there was no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

### Limitations on the Effectiveness of Controls

Our management, including the Chief Executive Officer and Chief Financial Officer, does not expect that our Disclosure Controls or internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.

## Risk factors

As filed, 130 characters.

There have been no material changes in the risk factors previously disclosed in Part I, Item 1A. “Risks Factors” of our Form 10-K.

Filed Aug 8, 2023.
Source: SEC EDGAR, the filing index for accession 0001023731-23-000129. Last ingested by Listed: Nov 10, 2026, 04:07 ET. No prices; not investment advice.