8x8 Inc.
05/22/2026 | Press release | Distributed by Public on 05/22/2026 15:12
Annual Report for Fiscal Year Ending March 31, 2026 (Form 10-K)
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. 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. 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 "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.
This section discusses items pertaining to and comparisons of financial results between fiscal 2026 and fiscal 2025. A discussion of fiscal 2025 items and comparisons between fiscal 2025 and fiscal 2024 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, 2025 (the "2025 MD&A"), filed with the SEC on May 22, 2025.
Overview
8x8, Inc. is a global provider of integrated customer experience and business communications solutions, purpose-built to unify customer and employee engagement across the enterprise. Our 8x8 Platform for CX combines contact center, business communications, and application programmable interfaces ("APIs") for communications into a single, secure, system powered by artificial intelligence ("AI") that delivers seamless, data-driven interactions. Designed for agility and scale, our platform helps businesses eliminate silos, improve operational efficiency, and turn every conversation into actionable intelligence. By aligning technology with measurable outcomes, we empower organizations to transform how they connect, serve, and grow from first interactions to lasting relationships.
We serve a broad customer base, from small businesses to large global enterprises across every major industry. We reach customers through a combination of direct sales and an expanding global network of channel partners. To serve a diverse organizations of all sizes, we invest in retaining and growing customers across segments through a service model that scales from AI-powered support for smaller accounts to dedicated customer success resources for our most complex enterprise relationships.
We generate Service Revenue from subscriptions to our UCaaS and CCaaS offerings, as well as usage of our platform. Our service subscription plans are sold on a per-user basis and are structured with increasing levels of functionality, based on the specific communication needs and customer engagement profile of each user. Platform usage revenue is revenue recognized from sales of products on an as-used basis and includes the use of our communications APIs, digital and voice AI interactions and telephony minutes. Usage revenue increased by 56% in fiscal 2026 as customers increased inbound and outbound engagement strategies using our communication APIs and AI-based interactions.
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).
Macroeconomic and Other Factors
We are subject to risks and exposures, including those caused by adverse economic conditions. Macroeconomic conditions that could adversely affect our business include geopolitical instability, tariffs, continued inflation, increased interest rates, supply chain disruptions, decreased economic output and fluctuations in currency exchange rates. We continuously monitor the impacts of these factors, as well as the overall global economy and geopolitical landscape, on our business and financial results.
While the implications of macroeconomic events on our business, results of operations, and overall financial position remain uncertain, we expect that difficult economic conditions could negatively impact our business in future periods. For example, our installed base includes small businesses, which tend to be disproportionately affected by macroeconomic headwinds. International revenue grew from approximately 33% of total revenue in fiscal 2025 to approximately 39% in fiscal 2026, increasing our exposure to foreign currency fluctuations. However, a significant portion of our international operating expenses are denominated in the same currencies as our international revenue, which partially mitigates the impact of currency movements on profitability. We also continue to monitor the pace of AI adoption across our customer base, which represents both an evolving competitive dynamic and a direct driver of demand for our platform capabilities and usage-based revenue.
Summary and Outlook
In fiscal 2026, we delivered service revenue of $715.3 million, compared to $692.9 million in fiscal 2025, with year-over-year service revenue growth in each quarter of the fiscal year. We generated income from operations in all four quarters of fiscal 2026, with full-year income from operations of $18.9 million, compared to income from operations of $15.2 million in fiscal 2025. Net income attributable to 8x8 was $1.6 million for fiscal 2026, compared to a net loss of $27.2 million in fiscal 2025. Net cash provided by operating activities was $55.8 million for fiscal 2026. During fiscal 2026, we completed the upgrade of all former Fuze customers remaining on the legacy Fuze platform to the 8x8 Platform for CX, enabling us to operate on a single, unified platform.
As part of our objectives to grow our revenue and increase profitability and cash flow, we are focused on retaining our existing customers and driving multi-product adoption within our installed base, as well as expanding our base with new customers. We believe that continued innovation is a critical factor in attracting and retaining our customers and is an important variable in achieving sustainable growth. We are committed to continuing our investment in research and development to deliver innovation across our Platform for CX, expand our ecosystem of integrated third-party applications, and maintain the high platform availability that our customers require.
Our primary focus involves the following: (i) expanding the features and functionality of our Platform for CX, (ii) increasing the use of our agentic AI solutions and communication APIs, (iii) growing our community of value-added resellers and technology partners as a means to expand distribution, especially in international regions, and (iv) increasing the efficiency of our operations through process improvements, automation, and self-service. We are embracing the use of AI internally to accelerate innovation and the introduction of new products, improve our sales productivity and conversion rates, increase the efficiency and security of our global network infrastructure, and simplify our back-office operations.
Our investment in research and development enabled us to introduce new products like 8x8 Engage and 8x8 AI Studio, add capabilities that allow our customers to enhance their employee and customer experiences, and expand integrations with our Technology Partner Ecosystem partners. We also invested in our global network infrastructure to ensure continued high availability, enhance security, and lower the cost to deliver our services. Our combined investments in our platform and process improvements allow us to deliver tightly integrated solutions around the world that prioritize ease-of-use, out-of-the-box functionality, and rapid deployment. We expect the costs of delivering our communication services and communication APIs, both in total dollars and as a percentage of service revenue, to vary with the amount of service revenue and the mix of subscription and usage revenue within service revenue.
To improve our sales efficiency over time, we are investing in marketing programs to drive awareness for our solutions, training programs and tools to increase productivity in our direct sales, and partner enablement solutions that drive increased cross-sell and new business. We are also devoting resources to expanding our community of value-added resellers, who provide implementation services and Tier 1 customer support in addition to sales capacity.
We continue to monitor factors that could have an impact on customer buying behavior and demand, including technological changes in AI-related developments, macroeconomic conditions, the competitive environment, contract duration, churn, upsell and down-sell, renewals, and payment terms, all of which have caused variability in our results and may continue to do in the future.
Key GAAP Operating Results
To assess the success of our strategies to achieve growth and increase our cash flow, management reviews our financial performance as presented in our consolidated financial statements, including trends in revenue, gross profit margin, income (loss) from operations, and cash flow generated by operations in absolute dollars and as a percentage of revenue as presented in the following table:
| Fiscal Year 2026 | Fiscal Year 2025 | ||||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended | Three Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||
| (In thousands, except percentages) | March 31, 2026 | December 31, 2025 | September 30, 2025 | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | June 30, 2024 | |||||||||||||||||||||||||||||||||||||||
| Service revenue | $ | 180,175 | $ | 179,682 | $ | 179,094 | $ | 176,308 | $ | 171,588 | $ | 173,459 | $ | 175,075 | $ | 172,801 | |||||||||||||||||||||||||||||||
| % of Total Revenue | 97.3 | % | 97.1 | % | 97.3 | % | 97.2 | % | 96.9 | % | 97.0 | % | 96.7 | % | 97.0 | % | |||||||||||||||||||||||||||||||
| Gross profit | $ | 117,053 | $ | 118,216 | $ | 119,340 | $ | 120,440 | $ | 120,052 | $ | 121,085 | $ | 123,175 | $ | 120,960 | |||||||||||||||||||||||||||||||
| % of Total Revenue | 63.2 | % | 63.9 | % | 64.8 | % | 66.4 | % | 67.8 | % | 67.7 | % | 68.1 | % | 67.9 | % | |||||||||||||||||||||||||||||||
| Income (loss) from operations | $ | 3,330 | $ | 9,694 | $ | 5,349 | $ | 565 | $ | 419 | $ | 8,979 | $ | 7,169 | $ | (1,374) | |||||||||||||||||||||||||||||||
| % of Total Revenue | 1.8 | % | 5.2 | % | 2.9 | % | 0.3 | % | 0.2 | % | 5.0 | % | 4.0 | % | (0.8) | % | |||||||||||||||||||||||||||||||
| Net income (loss) | $ | 106 | $ | 5,090 | $ | 767 | $ | (4,315) | $ | (5,401) | $ | 3,022 | $ | (14,543) | $ | (10,290) | |||||||||||||||||||||||||||||||
| % of Total Revenue | 0.1 | % | 2.8 | % | 0.4 | % | (2.4) | % | (3.1) | % | 1.7 | % | (8.0) | % | (5.8) | % | |||||||||||||||||||||||||||||||
| Net cash provided by operating activities | $ | 14,386 | $ | 20,692 | $ | 8,835 | $ | 11,873 | $ | 5,873 | $ | 27,216 | $ | 12,317 | $ | 18,148 | |||||||||||||||||||||||||||||||
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 to existing customers, including new products resulting from our increased investment in innovation, artificial intelligence, geographic expansion of our customer base outside the United States, innovation in our products and technologies, and 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 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 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.
Cost of Service Revenue
Cost of service revenue consists primarily of costs associated with network operations and related personnel, technology licenses, amortization of intangible assets and 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 and facilities, to cost of service revenue, as well as to each of the operating expense categories, generally based on relative headcount. Our information technology costs include costs for information technology infrastructure and personnel. Facilities costs primarily consist of office leases and related expenses.
Cost of Other Revenue
Cost of other revenue consists primarily of costs associated with the purchase and shipping and handling of IP telephone hardware as well as scheduling, personnel costs, and other expenditures incurred in connection with the professional services associated with the deployment and implementation of our products, and allocated information technology and facilities costs.
Research and Development
Research and development expenses consist primarily of personnel and related costs, stock-based compensation, third-party development, software and equipment costs necessary for us to conduct our product, platform development and engineering efforts, as well as allocated information technology and facilities costs.
Sales and Marketing
Sales and marketing expenses consist primarily of personnel and related costs, stock-based compensation, sales commissions, including those to the channel, trade shows, advertising and other marketing, demand generation, and promotional expenses, as well as allocated information technology 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, stock-based compensation and allocated information technology and facilities costs.
Interest Expense
Interest expense consists primarily of interest expense related to our term loan and convertible notes, and amortization of debt discount and issuance costs.
Other Income (Expense), Net
Other income (expense), net, consists primarily of losses on debt extinguishment, gain or loss on warrant remeasurement, interest income, gains or losses on foreign exchange transactions, as well as other income.
Provision for Income Taxes
Provision for income taxes consists primarily of foreign income taxes and state 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 U.S. deferred tax assets, including federal and state net 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
Revenue
Service revenue
| Year Ended March 31, | |||||||||||||||||||||||
| (in thousands, except percentages) | 2026 | 2025 | Change | ||||||||||||||||||||
| Service revenue | $ | 715,259 | $ | 692,923 | $ | 22,336 | 3.2 | % | |||||||||||||||
| Percentage of total revenue | 97.2 | % | 96.9 | % | |||||||||||||||||||
Service revenue increased by $22.3 million, or 3.2%, for fiscal 2026 compared to fiscal 2025. This change was driven by an increase of $51.4 million in platform usage revenue due to higher customer consumption volumes of our usage-based offerings, reflecting expanded customer adoption and usage of messaging, minutes and AI-based solutions during the period. This increase was partially offset by a decrease in subscription revenue of $29.1 million related to customer churn and down-sell.
Our business is diversified by vertical market and geography, and no single customer represented more than 10% of our total revenue during fiscal 2026 and 2025. 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
| Year Ended March 31, | |||||||||||||||||||||||
| (in thousands, except percentages) | 2026 | 2025 | Change | ||||||||||||||||||||
| Other revenue | $ | 20,493 | $ | 22,147 | $ | (1,654) | (7.5) | % | |||||||||||||||
| Percentage of total revenue | 2.8 | % | 3.1 | % | |||||||||||||||||||
Other revenue decreased by $1.7 million, or 7.5%, in fiscal 2026 compared to fiscal 2025, due to lower product revenue and professional service revenue of $1.0 million and $0.7 million, respectively.
Cost of Revenue
Cost of service revenue
| Year Ended March 31, | |||||||||||||||||||||||
| (in thousands, except percentages) | 2026 | 2025 | Change | ||||||||||||||||||||
| Cost of service revenue | $ | 232,602 | $ | 200,094 | $ | 32,508 | 16.2 | % | |||||||||||||||
| Percentage of service revenue | 32.5 | % | 28.9 | % | |||||||||||||||||||
Cost of service revenue increased by $32.5 million, or 16.2%, in fiscal 2026 compared to fiscal 2025, primarily due to increases of $39.8 million in network and carrier service provider costs to deliver our subscription and platform usage services to support our capacity needs and $3.2 million in salaries, benefits, and consulting costs. These increases were partially offset by decreases of $5.2 million in amortization of intangible assets, $3.1 million in stock-based compensation and $2.2 million in amortization of capitalized software.
Cost of other revenue
| Year Ended March 31, | |||||||||||||||||||||||
| (in thousands, except percentages) | 2026 | 2025 | Change | ||||||||||||||||||||
| Cost of other revenue | $ | 28,101 | $ | 29,704 | $ | (1,603) | (5.4) | % | |||||||||||||||
| Percentage of other revenue | 137.1 | % | 134.1 | % | |||||||||||||||||||
Cost of other revenue decreased by $1.6 million, or 5.4%, in fiscal 2026 compared to fiscal 2025, primarily due to decreases of $1.0 million in lower product costs associated with IP telephone hardware and $0.8 million of stock-based compensation. These decreases were offset by an increase of $0.2 million in salaries, benefits, and consulting costs to deliver our professional services.
Gross Profit
| Year Ended March 31, | |||||||||||||||||||||||
| (in thousands, except percentages) | 2026 | 2025 | Change | ||||||||||||||||||||
| Gross profit | $ | 475,049 | $ | 485,272 | $ | (10,223) | (2.1) | % | |||||||||||||||
| Percentage of total revenue | 64.6 | % | 67.9 | % | |||||||||||||||||||
Gross profit decreased by $10.2 million, or 2.1%, in fiscal 2026 compared to fiscal 2025, driven by the shift in revenue mix toward usage-based offerings as growth in cost of service revenue outpaced service revenue growth. Generally, usage-based offerings generate higher network and carrier service provider costs per dollar of revenue relative to our subscription-based offerings, resulting in lower gross margin.
Operating Expenses
Research and development
| Year Ended March 31, | |||||||||||||||||||||||
| (in thousands, except percentages) | 2026 | 2025 | Change | ||||||||||||||||||||
| Research and development | $ | 112,983 | $ | 123,211 | $ | (10,228) | (8.3) | % | |||||||||||||||
| Percentage of total revenue | 15.4 | % | 17.2 | % | |||||||||||||||||||
Research and development expenses decreased by $10.2 million, or 8.3%, in fiscal 2026 compared to fiscal 2025, primarily due to decreases of $8.9 million in stock-based compensation driven by a reduction in amortization of unvested equity awards, reflecting lower grant volumes in recent periods, $2.0 million in costs to operate data centers and facilities, $1.1 million in combined salaries, benefits, and consulting costs necessary for us to conduct our product, platform development and engineering efforts, and $1.0 million in internally-developed software and other costs. These decreases were partially offset by increases of $1.8 million in software licenses and $1.0 million in amortization of capitalized software.
Sales and marketing
| Year Ended March 31, | |||||||||||||||||||||||
| (in thousands, except percentages) | 2026 | 2025 | Change | ||||||||||||||||||||
| Sales and marketing | $ | 252,404 | $ | 264,461 | $ | (12,057) | (4.6) | % | |||||||||||||||
| Percentage of total revenue | 34.3 | % | 37.0 | % | |||||||||||||||||||
Sales and marketing expenses decreased by $12.1 million, or 4.6%, in fiscal 2026 compared to fiscal 2025 primarily due to decreases of $12.0 million in channel commissions and amortization of deferred contract acquisition costs, $3.8 million in stock-based compensation expense driven by a reduction in amortization of unvested equity awards, reflecting lower grant volumes in recent periods, and $0.3 million in paid media and other marketing services costs. These decreases were partially offset by increases of $4.0 million in salaries, benefits, and consulting costs.
General and administrative
| Year Ended March 31, | |||||||||||||||||||||||
| (in thousands, except percentages) | 2026 | 2025 | Change | ||||||||||||||||||||
| General and administrative | $ | 90,724 | $ | 82,407 | $ | 8,317 | 10.1 | % | |||||||||||||||
| Percentage of total revenue | 12.3 | % | 11.5 | % | |||||||||||||||||||
General and administrative expenses increased by $8.3 million, or 10.1%, in fiscal 2026 compared to fiscal 2025 primarily due to an increase of $10.9 million related to regulatory and state and local tax matters. During fiscal 2025, we recognized a $9.9 million benefit due to adjusted accruals related to USF and other legal, regulatory and state and local tax matters. We also recognized an increase in transaction-related expenses of $2.4 million, offset by a decrease in audit fees of $1.4 million. The increase was also due to increases of $1.4 million in salaries, benefits, and consulting costs and $0.4 million in facilities costs. These increases were partially offset by decreases of $3.6 million in stock-based compensation driven by a reduction in amortization of unvested equity awards, reflecting lower grant volumes in recent periods, and $0.8 million in other general corporate costs.
Other expense, net
Interest expense
| Year Ended March 31, | |||||||||||||||||||||||
| (in thousands, except percentages) | 2026 | 2025 | Change | ||||||||||||||||||||
| Interest expense | $ | (17,765) | $ | (28,856) | $ | 11,091 | (38.4) | % | |||||||||||||||
| Percentage of total revenue | (2.4) | % | (4.0) | % | |||||||||||||||||||
Interest expense decreased by $11.1 million, or 38.4%, in fiscal 2026 compared to fiscal 2025, primarily due to a lower interest rate and principal balance on the 2024 Term Loan compared to the 2022 Term Loan and capitalized interest related to property, plant and equipment from general borrowing costs. See Note 8, Convertible Senior Notes and Term Loan, for further details.
Other income (expense), net
| Year Ended March 31, | |||||||||||||||||||||||
| (in thousands, except percentages) | 2026 | 2025 | Change | ||||||||||||||||||||
| Other income (expense), net | $ | 2,353 | $ | (10,400) | $ | 12,753 | NM | ||||||||||||||||
| Percentage of total revenue | 0.3 | % | (1.5) | % | |||||||||||||||||||
We recognized $2.4 million of other income, net during fiscal 2026 compared to $10.4 million of other expense, net during fiscal 2025, primarily due to a decrease in the loss on debt extinguishment of $12.2 million due to the payoff of the 2022 Term Loan, a $2.7 million decrease due to reduced foreign exchange losses, and an increase of $0.7 million in other income. These decreases were offset by a $1.4 million decrease in interest income earned on cash and cash equivalents and a reduced gain of $1.4 million on the remeasurement of Warrants issued in connection with the 2022 Term Loan.
Provision for income taxes
| Year Ended March 31, | |||||||||||||||||||||||
| (in thousands, except percentages) | 2026 | 2025 | Change | ||||||||||||||||||||
| Provision for income taxes | $ | 1,878 | $ | 3,149 | $ | (1,271) | (40.4) | % | |||||||||||||||
| Percentage of total revenue | 0.3 | % | 0.4 | % | |||||||||||||||||||
For the year ended March 31, 2026, we recorded an income tax provision of $1.9 million compared to $3.1 million in fiscal 2025, primarily driven by the effect of the OBBBA's federal and state tax provisions.
Liquidity and Capital Resources
We believe that our existing cash, cash equivalents and our anticipated cash flows from operations will be sufficient to meet our working capital, expenditure, and contractual obligation requirements for a minimum of the next twelve months and the foreseeable future. Although we believe we have adequate sources of liquidity for at least the next twelve months and for the foreseeable future, the success of our operations, the global economic outlook, and the pace of growth in our markets could impact our business and liquidity.
Cash and Cash Equivalents
The following is a summary of our cash and cash equivalents (in thousands):
| March 31, 2026 | March 31, 2025 | ||||||||||
| Cash and cash equivalents | $ | 93,260 | $ | 88,050 | |||||||
| Restricted cash, current1,2 | 1,702 | 462 | |||||||||
|
Restricted cash, non-current1
|
- | 812 | |||||||||
| Total | $ | 94,962 | $ | 89,324 | |||||||
1 Restricted cash is related to accrued holdbacks for business combinations (see Note 1, The Company and Significant Accounting Policies).
2 For the year ended March 31, 2025, restricted cash supports letters of credit securing leases for office facilities.
Our primary requirements for liquidity and working capital include delivery of our various products to customers, research and development, sales and marketing activities, principal and interest payments on our outstanding debt and other general corporate needs. Historically, these cash requirements have been met from cash provided by operating activities and our cash and cash equivalents balances. Our current capital deployment strategy for fiscal 2026 is to maintain sufficient liquidity to fund our operations and growth initiatives, including planned software development activities, and to pay down our debt. As of March 31, 2026, 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 fiscal year include our operating lease obligations, principal and interest payments related to our debt obligations, 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 6, Leases, and Note 7, Commitments and Contingencies, respectively, to the consolidated financial statements. Additionally, refer to Note 8, Convertible Senior Notes and Term Loan, to the consolidated financial statements for more information related to our debt obligations.
Our outstanding 2024 Term Loan allows for voluntary prepayments. In order to reduce future cash interest payments, as well as future amounts due at maturity or upon redemption, we may, from time to time, make prepayments. The Company evaluates opportunities for stock repurchases, and may utilize cash and cash equivalents to repurchase shares under the 2017 Plan. During the year ended March 31, 2026, the Company repurchased 1.0 million shares of common stock in the open market for approximately $1.8 million at an average price of $1.83 per share. The remaining amount of shares of common stock available for repurchase under the 2017 Plan as of March 31, 2026 was approximately $5.2 million. For more information, see Note 9, Stock-Based Compensation and Stockholders' Equity.
As of March 31, 2026, our 2028 Notes were trading at a discount to their respective principal amount. We may seek to retire or purchase our outstanding debt through open-market purchases, privately negotiated transactions or otherwise which may have an impact on our liquidity requirements. Any such transactions will be dependent upon several factors, including our liquidity requirements, contractual restrictions, prevailing market conditions, and other factors. Whether or not we engage in any such transactions will be determined at our discretion. For historical debt payments, see Note 8, Convertible Senior Notes and Term Loan.
Cash Flows
The following is a summary of our cash flows provided by (used in) operating, investing and financing activities (in thousands):
| Year Ended March 31, | |||||||||||||||||
| 2026 | 2025 | 2024 | |||||||||||||||
| Net cash provided by operating activities | $ | 55,786 | $ | 63,554 | $ | 78,985 | |||||||||||
| Net cash provided by (used in) investing activities | (20,734) | (16,424) | 8,546 | ||||||||||||||
| Net cash used in financing activities | (30,440) | (75,106) | (83,411) | ||||||||||||||
| Effect of exchange rate changes on cash | 1,026 | 577 | (126) | ||||||||||||||
| Net increase (decrease) in cash and cash equivalents | $ | 5,638 | $ | (27,399) | $ | 3,994 | |||||||||||
Cash provided by operating activities decreased by $7.8 million to $55.8 million for fiscal 2026, primarily due to a decrease in cash collected from customers and an increase in cash paid to vendors, partially offset by a decrease in cash paid to employees and interest on outstanding debt. Cash used in investing activities increased by $4.3 million to $20.7 million for fiscal 2026, mainly due to increases in the purchases of property, plant and equipment, capitalized internal-use software costs and cash paid for business combinations. Cash used in financing activities decreased by $44.7 million to $30.4 million for fiscal 2026, mainly due to lower principal repayments for the 2024 Term Loan (as described below), partially offset by the repurchase of common stock.
Debt Obligations
See Note 8, Convertible Senior Notes and Term Loan in the audited consolidated financial statements included elsewhere in this Annual Report for information regarding our debt obligations.
2024 Delayed Draw Term Loan
On July 11, 2024, we entered into a new term loan credit agreement with Wells Fargo Bank, National Association, as administrative agent, and the lenders thereto (the "2024 Credit Agreement"). The 2024 Credit Agreement establishes a delayed draw term loan facility in an aggregate principal amount of up to $200.0 million maturing on August 15, 2027.
On August 5, 2024, we drew upon the entire facility of $200.0 million under the delayed draw term loan facility (the "2024 Term Loan") and used the proceeds of the 2024 Term Loan and cash on hand of approximately $29.0 million to repay in full the $225.0 million of outstanding principal amount and accrued interest of the 2022 Term Loan and the fees incurred in connection with the Repayment.
The 2024 Term Loan bears interest at an annual rate equal to the Term SOFR, plus a margin of either 2.50%, 2.75% or 3.00% based on the consolidated total net leverage ratio of the Company and its subsidiaries. The initial margin was 3.00% for the fiscal quarter ending September 30, 2024 and remained 3.00% as of March 31, 2026. We have the option to pay interest monthly, quarterly, or semi-annually. During the three months ended March 31, 2026, we elected monthly interest payment terms which resulted in cash payments of $2.0 million. For the three months ending June 30, 2026, we have elected monthly interest payment terms, which will result in cash payments of approximately $1.8 million. As of March 31, 2026, the debt issuance costs were amortized to interest expense over the term of the 2024 Term Loan at an effective interest rate of 8.64%.
The 2024 Credit Agreement contains a consolidated interest coverage ratio financial covenant, a maximum consolidated total net leverage ratio financial covenant and a maximum consolidated secured leverage ratio financial covenant. It contains affirmative and negative covenants customary for transactions of this type, including limitations with respect to share repurchases, indebtedness, liens, investments, dividends, disposition of assets, change in business, and transactions with affiliates. As of March 31, 2026, the Company was in compliance with all covenants set forth in the 2024 Credit Agreement.
Under the terms of the 2024 Credit Agreement, we have the right to prepay the 2024 Term Loan at any time without any premium or penalty. We completed the following principal payments during the years ended March 31, 2026 and 2025, respectively (in thousands):
| Year Ended March 31, 2026 | Year Ended March 31, 2025 | |||||||||||||||||||||||||||||||
| Payment Date | Amount | Quarterly Payment Due Date(s) | Payment Date | Amount | Quarterly Payment Due Date(s) | |||||||||||||||||||||||||||
| 4/11/2025 | $ | 15,000 | 12/31/25, 3/31/26, 6/30/26 | 10/7/2024 | $ | 15,000 | 10/31/24, 12/31/24 | |||||||||||||||||||||||||
| 7/29/2025 | 10,000 | 7/31/2027 | 11/1/2024 | 18,000 | 3/31/25, 6/30/25, 9/30/25 | |||||||||||||||||||||||||||
| 10/31/2025 | 5,000 | 6/30/2026 | 1/10/2025 | 15,000 | 9/30/25, 12/31/25 | |||||||||||||||||||||||||||
| Total | $ | 30,000 | Total | $ | 48,000 | |||||||||||||||||||||||||||
As of March 31, 2026, the scheduled remaining principal repayments are $39.5 million in fiscal 2027 (comprised of $2.0 million on June 30, 2026 and $12.5 million on September 30, 2026 and each quarter thereafter through maturity) and $82.5 million principal is due before or upon maturity in fiscal 2028. These annualized repayments will be made in quarterly installments. As of March 31, 2026, the Company has paid $37.5 million, $8.0 million, and $10.0 million of the originally scheduled principal repayments due fiscal 2026, 2027, and 2028 respectively, and the remaining principal amount of the 2024 Term Loan after the payments is $122.0 million.
On April 10, 2026, we paid $14.5 million of short-term principal payment due in June 2026 and September 2026 under the 2024 Term Loan, reducing the remaining principal balance to $107.5 million. The Company has $25.0 million of mandatory principal payments remaining due for fiscal 2027, and the next quarterly payment is due on December 31, 2026. See Note 13, Subsequent Events, for more information regarding this payment.
These short-term principal debt repayments are accounted for as partial debt extinguishment transactions. The carrying value of the 2024 Term Loan, including the unamortized debt discount and issuance costs, was derecognized. The difference of $0.5 million between the cash consideration paid to partially extinguish the 2024 Term Loan and the carrying value of the 2024 Term Loan was recognized as a loss on debt extinguishment included in the loss on debt extinguishment line item recorded in other expense in the consolidated statement of operations and comprehensive income (loss).
2022 Term Loan Extinguishment
On August 5, 2024, we repaid in full the outstanding principal amount and accrued interest of the 2022 Term Loan using the proceeds of the 2024 Term Loan and cash on hand. The Repayment was accounted for as a debt extinguishment. The carrying value of the 2022 Term Loan, including the unamortized debt discount and issuance costs, was derecognized. The difference of $12.0 million between the cash consideration paid to extinguish the 2022 Term Loan and the carrying value of the 2022 Term Loan was recognized as a loss on debt extinguishment included in the loss on debt extinguishment line item recorded in other income (expense) in the consolidated statement of operations and comprehensive income (loss). The Warrants continue to be outstanding with no change in terms in connection with the Repayment or issuance of the 2024 Term Loan.
Loans made under the 2022 Credit Agreement bore interest at an annual rate equal to the Term SOFR, subject to a floor of 1.00% and a credit spread adjustment of 0.10%, plus a margin of 6.50%. During the year ended March 31, 2025, we paid $9.4 million of interest under the 2022 Term Loan. See Note 8, Convertible Senior Notes and Term Loan, to our consolidated financial statements for details.
Material Cash Requirements and Other Obligations
The following table summarizes the payments due for our outstanding contractual obligations as of March 31, 2026 (in thousands):
| Total | Less than 1 year | 1-3 years | 3-5 years | ||||||||||||||||||||
| 2028 Notes | |||||||||||||||||||||||
| Principal payments | $ | 201,914 | $ | - | $ | 201,914 | $ | - | |||||||||||||||
| Interest payments | 16,154 | 8,077 | 8,077 | - | |||||||||||||||||||
| Term Loan1 | |||||||||||||||||||||||
| Principal payments | 122,000 | 39,500 | 82,500 | - | |||||||||||||||||||
| Interest payments2 | 8,850 | 7,086 | 1,764 | - | |||||||||||||||||||
| Operating lease obligations3 | 54,507 | 12,253 | 34,314 | 7,940 | |||||||||||||||||||
| Purchase obligations | 69,608 | 61,299 | 7,168 | 1,141 | |||||||||||||||||||
| Total | $ | 473,033 | $ | 128,215 | $ | 335,737 | $ | 9,081 | |||||||||||||||
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with U.S. GAAP. Refer to Note 1, The Company and Significant Accounting Policies, in the Notes to Consolidated Financial Statements included in this Annual Report, which describes the significant accounting policies and methods used in the preparation of our consolidated financial statements.
We have identified the policies below as critical to our business and the understanding of our results of operations. These policies may involve a higher degree of judgment and complexity in their application and represent the critical accounting policies used in the preparation of our consolidated financial statements. Although we believe our judgments and estimates are appropriate, actual future results may differ from our estimates. If different assumptions or conditions were to prevail, the results could be materially different from our reported results. The impact and any associated risks related to these policies on our business operations is discussed throughout "Management's Discussion and Analysis of Financial Condition and Results of Operations", where such policies affect our reported and expected financial results.
Revenue Recognition
Significant management judgments and estimates must be made and used in connection with the revenue recognized in any accounting period. The Company monitors actual results against estimates on an ongoing basis and updates assumptions as necessary. Material differences may result in the amount and timing of our revenue for any period if management made different judgments or utilized different estimates.
Revenue is recognized on a gross basis when the Company determines it is the principal in the transaction with discretion on pricing and control, as performance obligations are satisfied, based on the transaction price. The Company recognizes revenue on a net basis when the Company is considered the agent in third party license sales, if material.
The Company makes estimates related to variable consideration, including service-level credits, refunds, and minimum revenue commitments. Such estimates require judgment in assessing the likelihood of service disruptions, the probability that minimum revenue commitments will be achieved, and the collectability of such amounts. Sales returns and customer credits are estimated based on historical experience, current trends, and our expectations regarding future service delivery and platform performance. If actual future returns and credits differ from past experience, additional reserves may be required.
1 See Note 8, Convertible Senior Notes and Term Loan, in the Notes to Consolidated Financial Statements included in this Annual Report for further information.
2 Total interest payments of $8.9 million were determined using the year-end rate of 6.67% (Term SOFR plus 3.00%) as of March 31, 2026. See Note 8, Convertible Senior Notes and Term Loan, in the Notes to Consolidated Financial Statements included in this Annual Report regarding the interest rate terms.
3 See Note 6, Leases, in the Notes to Consolidated Financial Statements included in this Annual Report for further information.
Allowance for Credit Losses
We account for allowances for credit losses under the current expected credit loss, or CECL, impairment model for our financial assets, including accounts receivable, and present the net amount of the financial instrument expected to be collected. Using this model, we estimate the adequacy of the allowance for credit losses at the end of each reporting period based on the aging of the receivable balance, current and historical customer trends, communications with customers, and macro-economic conditions. This process requires significant judgment as we estimate expected credit losses, measured over the contractual life of the receivables, considering forecasts of future economic conditions in addition to customer-specific information about past events and current conditions. Amounts are written off after considerable collection efforts have been made and the amounts are determined to be uncollectible.
Acquisitions
We account for business combinations using the acquisition method of accounting, which requires the allocation of the fair value of purchase consideration to the tangible and intangible assets acquired and liabilities assumed at their estimated fair values as of the acquisition date. The excess of the purchase consideration over the fair value of identifiable net assets acquired is recorded as goodwill.
The determination of the fair value of assets acquired and liabilities assumed requires significant judgment, particularly with respect to identifiable intangible assets such as developed technology and customer relationships, as well as contingent consideration and holdbacks. These estimates are based on assumptions regarding forecasted revenue growth, customer attrition, discount rates, and other market participant assumptions. The Company also estimates the useful lives of acquired intangible assets, which affects the amount and timing of future amortization expense. In addition, uncertain tax positions and tax-related valuation allowances are initially established in connection with a business combination as of the acquisition date.
These assumptions are inherently uncertain and may be affected by changes in market conditions, integration outcomes, and the Company's strategic execution. During the measurement period, which may extend up to one year from the acquisition date, the Company may record adjustments to the fair values of assets acquired and liabilities assumed, with a corresponding offset to goodwill, as new information becomes available regarding facts and circumstances that existed as of the acquisition date. After the measurement period, any subsequent adjustments are recorded in the consolidated statements of operations.
Changes in the underlying assumptions used to determine fair value could materially affect the amount of goodwill recognized, future amortization expense, and the timing or magnitude of potential impairment charges.
Capitalized Internal-Use Software Costs
Certain costs of software are capitalized during the application development phase. We begin to capitalize costs to develop software when preliminary development efforts are successfully completed, management has authorized and committed project funding, it is probable that the project will be completed, and the software will be used as intended. Capitalized internal-use software development costs are included in property and equipment. Once the project has been completed, these costs are amortized to cost of service revenue on a straight-line basis over the estimated useful life of the related asset as noted in Property and Equipment. Costs incurred prior to meeting these criteria together with costs incurred for training and maintenance are expensed as incurred and recorded in research and development expense. We test capitalized internal-use software development costs for impairment on an annual basis, or as events occur or circumstances change that could impact the recoverability of the capitalized costs.
Accounting for Long-Lived Assets
We evaluate long-lived assets for impairment when events or changes in circumstances indicate that their carrying values may not be recoverable. This assessment requires significant judgment, including the identification of triggering events, the determination of appropriate asset groupings, and the estimation of undiscounted future cash flows expected to result from the use and eventual disposition of the assets. These estimates are inherently uncertain and are sensitive to changes in business strategy, market conditions, forecasted revenue and cost structures, and technological developments that may impact asset utilization. If estimated future cash flows decline, we may be required to recognize impairment charges that could materially affect operating results.
Goodwill and Other Intangible Assets
Goodwill represents the excess of the fair value of consideration transferred over the fair value of net assets acquired in business combinations and is not amortized, but is tested for impairment at least annually in the fourth quarter of each fiscal year, or more frequently if events or changes in circumstances indicate that the carrying value of the Company's single reporting unit may exceed its fair value.
The Company evaluates goodwill for impairment at the reporting unit level and has determined that it operates as a single reporting unit. The Company may first perform a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying value. In performing this assessment, the Company considers various factors, including macroeconomic conditions, industry and market conditions, overall financial performance, changes in business strategy, and market-based indicators such as the Company's stock price.
If the qualitative assessment indicates that it is more likely than not that impairment exists, or if the Company elects to bypass the qualitative assessment, a quantitative impairment test is performed. The determination of fair value requires significant judgment and is estimated using a combination of valuation approaches, including consideration of the Company's market capitalization and, when appropriate, an income approach based on discounted cash flows. Market capitalization is a key input given the Company's publicly traded equity and is evaluated relative to the carrying value of the reporting unit, including consideration of an appropriate control premium. Key assumptions used in estimating fair value include projected revenue growth, customer demand, cost structure, profitability, long-term growth rates, and discount rates that reflect the risk profile of the reporting unit. These assumptions are based on internal forecasts and external market data and are inherently uncertain.
As of the Company's most recent annual impairment test, the estimated fair value of the reporting unit exceeded its carrying value, and the Company concluded that its reporting unit was not at risk of failing the goodwill impairment test. However, changes in key assumptions or underlying business conditions could materially affect the estimated fair value of the reporting unit.
Potential events or changes in circumstances that could negatively impact these assumptions include sustained declines in the Company's stock price, lower than expected revenue growth, increased competition within the SaaS and communications markets (including from emerging technologies), adverse changes in profitability, or unfavorable changes in macroeconomic conditions. If such events occur, the Company may be required to perform an interim impairment test, which could result in the recognition of a goodwill impairment charge.
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