8x8 Inc.
11/05/2025 | Press release | Distributed by Public on 11/05/2025 16:08
Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report. As discussed in the section titled "Forward-Looking Statements," the following discussion and analysis contain 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
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 Platform for CX™ combines contact center, business communications, and application programmable interfaces, or APIs, for communications into a single, secure, AI-powered system 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. Our strategic focus has increasingly shifted toward mid-market, small and mid-sized enterprise, and public sector organizations, particularly those with 500 to 10,000 employees. These customers often have more complex communication and customer service needs and are more likely to benefit from and invest in multiple services across our platform. This focus aligns with our strengths, eliminating communication silos and enabling businesses to transform every customer interaction into a strategic asset. We also invest resources in retaining our small business customers, including world-class onboarding and customer care specialists that are a single point of contact for all service and support needs.
We reach customers through a diversified go-to-market strategy that includes both direct and indirect channels. We utilize a diversified partner ecosystem to complement our direct sales efforts and expand our global market reach. Our go-to-market strategy includes technology solutions distributors, or TSDs, and their sub-agent networks, who contribute to pipeline growth through referrals. We also engage value-added resellers, or VARs, who market, sell, implement, and support our solutions, helping to drive customer acquisition and optimize our routes to market.
In addition, we collaborate closely with strategic technology partners, particularly those with whom we maintain deep integrations or original equipment manufacturer, or OEM, relationships, via structured referral agreements and coordinated lead flow processes. Our carrier partnerships extend our service availability to over 100 countries and territories, ensuring high-quality, reliable communications that support our international footprint.
To further enhance deployment speed and geographic coverage, we leverage third-party service providers, enabling us to deliver implementation and support services efficiently on a global scale.
With our unified approach to communication and a commitment to continuous innovation, 8x8 enables businesses to deliver intelligent, connected experiences that securely scale across the enterprise.
We generate service revenue from subscriptions to our communications services, as well as from 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, such as telephony minutes, messaging, SMS, and communications APIs, and digital and voice chat bot 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 direct and indirect 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 over the long term, we expect that adverse economic conditions could adversely impact our business in future periods. For example, our installed base includes more than 50,000 small businesses, which tend to be disproportionately impacted by macroeconomic headwinds.
Summary and Outlook
As part of our long-term strategy to grow our revenue and increase profitability and cash flow, we are focused on retaining our existing customers and expanding our mid-market, enterprise and public sector customer base. 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 maintaining a high level of 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 our customers require.
Our primary focus involves the following: (i) accelerating innovation, particularly in enhancing our platform and contact center with artificial intelligence-based capabilities, and (ii) leveraging our CPaaS leadership in the Asia-Pacific region to expand globally. We continue to introduce new products like 8x8 Engage, add capabilities that allow our customers to enhance employee and customer experience, and expand our Technology Partner Ecosystem to provide complete solutions tailored to specific use cases. We are also enhancing our platform foundation with cutting edge technology, such as the Customer Interaction Data Platform and composable agent and supervisor user interfaces. These innovations enable tightly integrated solutions that prioritize ease-of-use, out-of-the-box functionality, and rapid deployment.
Our investment in innovation has been complemented by initiatives to manage the cost of delivering our services and improve our sales efficiency. We continue to monitor factors that could have an impact on customer buying behavior and demand, including 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. We expect the cost of delivering our communication services, 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 continue to invest in marketing programs to drive awareness for our solutions, and we have increased training for our sales teams, and invested in tools to increase productivity. We have also expanded our reseller partner programs to extend our reach within our target customer 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 have expanded our customer success organization and continue to invest in improvements to our back-office processes to increase our operational efficiency over time.
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) | September 30, 2025 | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | June 30, 2024 | |||||||||||||||||||||||||||||
| Service revenue | $ | 179,094 | $ | 176,308 | $ | 171,588 | $ | 173,459 | $ | 175,075 | $ | 172,801 | |||||||||||||||||||||||
| % of Total Revenue | 97.3 | % | 97.2 | % | 96.9 | % | 97.0 | % | 96.7 | % | 97.0 | % | |||||||||||||||||||||||
| Gross profit | $ | 119,340 | $ | 120,440 | $ | 120,052 | $ | 121,085 | $ | 123,175 | $ | 120,960 | |||||||||||||||||||||||
| % of Total Revenue | 64.8 | % | 66.4 | % | 67.8 | % | 67.7 | % | 68.1 | % | 67.9 | % | |||||||||||||||||||||||
| Income (loss) from operations | $ | 5,349 | $ | 565 | $ | 419 | $ | 8,979 | $ | 7,169 | $ | (1,374) | |||||||||||||||||||||||
| % of Total Revenue | 2.9 | % | 0.3 | % | 0.2 | % | 5.0 | % | 4.0 | % | (0.8) | % | |||||||||||||||||||||||
| Net income (loss) | $ | 767 | $ | (4,315) | $ | (5,401) | $ | 3,022 | $ | (14,543) | $ | (10,290) | |||||||||||||||||||||||
| % of Total Revenue | 0.4 | % | (2.4) | % | (3.1) | % | 1.7 | % | (8.0) | % | (5.8) | % | |||||||||||||||||||||||
| Net cash provided by operating activities | $ | 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 and 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-sell 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 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 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 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 direct and indirect costs associated with the purchase and shipping and handling of IP telephone hardware 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 information technology 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 information technology 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 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, 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 Expense, Net
Other 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
| Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| (In thousands, except percentages) | 2025 | 2024 | Change | 2025 | 2024 | Change | |||||||||||||||||||||||||||||||||||||||||
| Service revenue | $ | 179,094 | $ | 175,075 | $ | 4,019 | 2.3 | % | $ | 355,402 | $ | 347,876 | $ | 7,526 | 2.2 | % | |||||||||||||||||||||||||||||||
| Percentage of total revenue | 97.3 | % | 96.7 | % | 97.2 | % | 96.9 | % | |||||||||||||||||||||||||||||||||||||||
Three Months Ended
Service revenue increased by $4.0 million, or 2.3%, for the three months ended September 30, 2025, compared to the three months ended September 30, 2024. This change was driven by an increase of $11.9 million in platform usage revenue generated primarily in the Asia-Pacific region. This increase was partially offset by a decrease in subscription revenue of $7.9 million consisting predominantly of former Fuze customers.
Six Months Ended
Service revenue increased by $7.5 million, or 2.2%, for the six months ended September 30, 2025, compared to the six months ended September 30, 2024. This change was driven by an increase of $20.1 million in platform usage revenue generated primarily in the Asia-Pacific region. This increase was partially offset by a decrease in subscription revenue of $12.6 million consisting predominantly of former Fuze customers.
Other revenue
| Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| (In thousands, except percentages) | 2025 | 2024 | Change | 2025 | 2024 | Change | |||||||||||||||||||||||||||||||||||||||||
| Other revenue | $ | 5,001 | $ | 5,923 | $ | (922) | (15.6) | % | $ | 10,054 | $ | 11,269 | $ | (1,215) | (10.8) | % | |||||||||||||||||||||||||||||||
| Percentage of total revenue | 2.7 | % | 3.3 | % | 2.8 | % | 3.1 | % | |||||||||||||||||||||||||||||||||||||||
Three Months Ended
Other revenue decreased by $0.9 million, or 15.6%, for the three months ended September 30, 2025, compared to the three months ended September 30, 2024, due to lower product revenue of $0.8 million and decreased professional service revenue of $0.1 million.
Six Months Ended
Other revenue decreased by $1.2 million, or 10.8%, for the six months ended September 30, 2025, compared to the six months ended September 30, 2024, due to lower product revenue of $1.6 million, partially offset by an increase in professional service revenue of $0.4 million.
Cost of Revenue
Cost of service revenue
| Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| (In thousands, except percentages) | 2025 | 2024 | Change | 2025 | 2024 | Change | |||||||||||||||||||||||||||||||||||||||||
| Cost of service revenue | $ | 57,699 | $ | 50,251 | $ | 7,448 | 14.8 | % | $ | 111,521 | $ | 99,747 | $ | 11,774 | 11.8 | % | |||||||||||||||||||||||||||||||
| Percentage of service revenue | 32.2 | % | 28.7 | % | 31.4 | % | 28.7 | % | |||||||||||||||||||||||||||||||||||||||
Three Months Ended
Cost of service revenue increased by $7.4 million, or 14.8%, for the three months ended September 30, 2025, compared to the three months ended September 30, 2024, primarily due to increases of $10.1 million in costs to deliver our subscription and platform usage services and $0.3 million in salaries, benefits and consulting costs. These increases were partially offset by decreases of $1.6 million in amortization of intangible assets, $0.8 million in stock-based compensation, and $0.6 million in amortization of capitalized software.
Six Months Ended
Cost of service revenue increased by $11.8 million, or 11.8%, for the six months ended September 30, 2025, compared to the six months ended September 30, 2024, primarily due to increases of $17.3 million in costs to deliver our subscription and platform usage services and $1.4 million in salaries, benefits and consulting costs. These increases were partially offset by decreases of $3.2 million in amortization of intangible assets, $2.3 million in stock-based compensation, and $1.4 million in amortization of capitalized software.
Cost of other revenue
| Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| (In thousands, except percentages) | 2025 | 2024 | Change | 2025 | 2024 | Change | |||||||||||||||||||||||||||||||||||||||||
| Cost of other revenue | $ | 7,056 | $ | 7,572 | $ | (516) | (6.8) | % | $ | 14,155 | $ | 15,263 | $ | (1,108) | (7.3) | % | |||||||||||||||||||||||||||||||
| Percentage of other revenue | 141.1 | % | 127.8 | % | 140.8 | % | 135.4 | % | |||||||||||||||||||||||||||||||||||||||
Three Months Ended
Cost of other revenue decreased by $0.5 million, or 6.8%, for the three months ended September 30, 2025, compared to the three months ended September 30, 2024, primarily due to decreases of $0.5 million in lower product costs associated with IP telephone hardware and $0.2 million of stock-based compensation. These decreases were partially offset by an increase of $0.2 million in salaries, benefits, and consulting costs to deliver our professional services.
Six Months Ended
Cost of other revenue decreased by $1.1 million, or 7.3%, for the six months ended September 30, 2025, compared to the six months ended September 30, 2024, primarily due to decreases of $1.1 million in lower product costs associated with IP telephone hardware and $0.5 million of stock-based compensation. These decreases were partially offset by an increase of $0.5 million in salaries, benefits, and consulting costs to deliver our professional services.
Operating Expenses
Research and development
| Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| (In thousands, except percentages) | 2025 | 2024 | Change | 2025 | 2024 | Change | |||||||||||||||||||||||||||||||||||||||||
| Research and development | $ | 27,918 | $ | 31,291 | $ | (3,373) | (10.8) | % | $ | 56,282 | $ | 63,428 | $ | (7,146) | (11.3) | % | |||||||||||||||||||||||||||||||
| Percentage of total revenue | 15.2 | % | 17.3 | % | 15.4 | % | 17.7 | % | |||||||||||||||||||||||||||||||||||||||
Three Months Ended
Research and development expenses decreased by $3.4 million, or 10.8%, for the three months ended September 30, 2025, compared to the three months ended September 30, 2024, primarily due to decreases of $2.1 million in stock-based compensation, $1.4 million in internally-developed software and other costs, and $0.6 million in costs to operate data centers and facilities. These decreases were partially offset by increases of $0.4 million in amortization of capitalized software and $0.3 million in combined salaries, benefits, and consulting costs necessary for us to conduct our product, platform development and engineering efforts.
Six Months Ended
Research and development expenses decreased by $7.1 million, or 11.3%, for the six months ended September 30, 2025, compared to the six months ended September 30, 2024, primarily due to decreases of $5.2 million in stock-based compensation, $2.4 million in internally-developed software and other costs, and $1.0 million in costs to operate data centers and facilities. These decreases were partially offset by increases of $1.2 million in combined salaries, benefits, and consulting costs necessary for us to conduct our product, platform development and engineering efforts and $0.3 million in amortization of capitalized software.
Sales and marketing
| Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| (In thousands, except percentages) | 2025 | 2024 | Change | 2025 | 2024 | Change | |||||||||||||||||||||||||||||||||||||||||
| Sales and marketing | $ | 63,835 | $ | 64,867 | $ | (1,032) | (1.6) | % | $ | 132,019 | $ | 131,973 | $ | 46 | - | % | |||||||||||||||||||||||||||||||
| Percentage of total revenue | 34.7 | % | 35.8 | % | 36.1 | % | 36.7 | % | |||||||||||||||||||||||||||||||||||||||
Three Months Ended
Sales and marketing expenses decreased by $1.0 million, or 1.6%, for the three months ended September 30, 2025, compared to the three months ended September 30, 2024, primarily due to decreases of $3.3 million in channel commissions and amortization of deferred contract acquisition costs and $0.5 million in stock-based compensation expense. These decreases were partially offset by increases of $1.9 million in salaries, benefits, and consulting costs and $0.9 million in paid media and other marketing services costs.
Six Months Ended
Sales and marketing expenses were flat for the six months ended September 30, 2025, compared to the six months ended September 30, 2024, primarily due to increases of $5.3 million in salaries, benefits, and consulting costs and $2.6 million in paid media and other marketing services costs. These increases were partially offset by decreases of $6.1 million in channel commissions and amortization of deferred contract acquisition costs and $1.7 million in stock-based compensation expense.
General and administrative
| Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| (In thousands, except percentages) | 2025 | 2024 | Change | 2025 | 2024 | Change | |||||||||||||||||||||||||||||||||||||||||
| General and administrative | $ | 22,238 | $ | 19,848 | $ | 2,390 | 12.0 | % | $ | 45,565 | $ | 42,939 | $ | 2,626 | 6.1 | % | |||||||||||||||||||||||||||||||
| Percentage of total revenue | 12.1 | % | 11.0 | % | 12.5 | % | 12.0 | % | |||||||||||||||||||||||||||||||||||||||
Three Months Ended
General and administrative expenses increased by $2.4 million, or 12.0%, for the three months ended September 30, 2025, compared to the three months ended September 30, 2024, primarily due to increases of $3.6 million in legal and regulatory costs, $0.5 million in facilities costs, and $0.3 million in salaries, benefits, and consulting costs. These increases were partially offset by a decrease of $2.0 million in stock-based compensation and other costs.
Six Months Ended
General and administrative expenses increased by $2.6 million, or 6.1%, for the six months ended September 30, 2025, compared to the six months ended September 30, 2024, primarily due to increases of $4.2 million in legal and regulatory costs, $0.7 million in facilities costs, and $1.0 million in salaries, benefits, and consulting costs. These increases were partially offset by a decrease of $3.3 million in stock-based compensation and other costs.
Other expense, net
Interest expense
| Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| (In thousands, except percentages) | 2025 | 2024 | Change | 2024 | 2023 | Change | |||||||||||||||||||||||||||||||||||||||||
| Interest expense | $ | (4,842) | $ | (7,905) | $ | 3,063 | (38.7) | % | $ | (8,810) | $ | (17,861) | $ | 9,051 | (50.7) | % | |||||||||||||||||||||||||||||||
| Percentage of total revenue | (2.6) | % | (4.4) | % | (2.4) | % | (5.0) | % | |||||||||||||||||||||||||||||||||||||||
Three Months Ended
Interest expense decreased by $3.1 million, or 38.7%, for the three months ended September 30, 2025, compared to the three months ended September 30, 2024, primarily due to a lower interest rate and principal balance on the 2024 Term Loan compared to the 2022 Term Loan. See Note 8, Convertible Senior Notes and Term Loan, for further details.
Six Months Ended
Interest expense decreased by $9.1 million, or 50.7%, for the six months ended September 30, 2025, compared to the six months ended September 30, 2024, 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
| Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| (In thousands, except percentages) | 2025 | 2024 | Change | 2025 | 2024 | Change | |||||||||||||||||||||||||||||||||||||||||
| Other income (expense), net | $ | 468 | $ | (12,709) | $ | 13,177 | NM | $ | 832 | $ | (10,993) | $ | 11,825 | NM | |||||||||||||||||||||||||||||||||
| Percentage of total revenue | 0.3 | % | (7.0) | % | 0.2 | % | (3.1) | % | |||||||||||||||||||||||||||||||||||||||
Three Months Ended
We recognized $0.5 million of other income, net during the three months ended September 30, 2025, compared to $12.7 million of other expense, net during the three months ended September 30, 2024, primarily due to a decrease in the loss on debt extinguishment of $12.0 million, a $1.7 million decrease due to foreign exchange losses, and a $0.2 million reduction in other expense. These decreases were offset by a $0.5 million decrease in interest income earned on cash and cash equivalents and a reduced gain of $0.2 million on the remeasurement of Warrants issued in connection with the 2022 Term Loan.
Six Months Ended
We recognized $0.8 million of other income, net during the six months ended September 30, 2025, compared to $11.0 million of other expense, net during the six months ended September 30, 2024, primarily due to a decrease in the loss on debt extinguishment of $11.9 million and a $2.7 million decrease due to foreign exchange losses. These decreases were offset by a reduced gain of $1.8 million on the remeasurement of Warrants issued in connection with the 2022 Term Loan and a $1.0 million decrease in interest income earned on cash and cash equivalents.
Provision for income taxes
| Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||||
| (In thousands, except percentages) | 2025 | 2024 | Change | 2025 | 2024 | Change | |||||||||||||||||||||||||||||||||||||||||
| Provision for income taxes | $ | 208 | $ | 1,098 | $ | (890) | (81.1) | % | $ | 1,484 | $ | 1,774 | $ | (290) | (16.3) | % | |||||||||||||||||||||||||||||||
| Percentage of total revenue | 0.1 | % | 0.6 | % | 0.4 | % | 0.5 | % | |||||||||||||||||||||||||||||||||||||||
Three Months Ended
The provision for income taxes decreased by $0.9 million for the three months ended September 30, 2025, compared to the three months ended September 30, 2024, primarily driven by the effect of the OBBBA's federal and state tax provision for the three months ended September 30, 2025.
Six Months Ended
The provision for income taxes decreased by $0.3 million for the six months ended September 30, 2025, compared to the six months ended September 30, 2024, primarily driven by the effect of the OBBBA's federal and state tax provisions, which were partially offset by an increase in profit before tax of foreign profitable entities for the six months ended September 30, 2025 as compared to the six months ended September 30, 2024.
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):
| September 30, 2025 | March 31, 2025 | ||||||||||
| Cash and cash equivalents | $ | 75,872 | $ | 88,050 | |||||||
|
Restricted cash, current1
|
812 | 462 | |||||||||
|
Restricted cash, non-current1
|
- | 812 | |||||||||
| Total | $ | 76,684 | $ | 89,324 | |||||||
(1) Restricted cash supports letters of credit securing leases for office facilities and certain equipment for the same periods, and an accrued holdback related to a business combination.
Our primary requirements for liquidity and capital are working capital needs due to 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 year 2026 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 September 30, 2025, 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, 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 non-cancellable purchase commitments, see Note 6, Leases, and Note 7, Commitments and Contingencies, respectively, to the condensed consolidated financial statements. Additionally, refer to Note 8, Convertible Senior Notes and Term Loan, to the condensed consolidated financial statements for more information related to our debt obligations and applicable covenants.
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 six months ended September 30, 2025, 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. For more information, see Note 9, Stock-Based Compensation and Stockholders' Equity.
As of September 30, 2025, 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):
| Six Months Ended September 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| Net cash provided by operating activities | $ | 20,708 | $ | 30,465 | |||||||
| Net cash used in investing activities | (8,659) | (7,204) | |||||||||
| Net cash used in financing activities | (26,659) | (25,136) | |||||||||
| Effect of exchange rate changes on cash | 1,970 | 3,019 | |||||||||
| Net increase (decrease) in cash and cash equivalents | $ | (12,640) | $ | 1,144 | |||||||
Cash provided by operating activities decreased by $9.8 million to $20.7 million for the six months ended September 30, 2025, primarily due to changes in working capital, the timing of billings and customer collections, as well as the amount and timing of disbursements to our vendors. Cash used in investing activities increased $1.5 million to $8.7 million for the six months ended September 30, 2025, mainly due to an increase in capitalized internal-use software costs. Cash used in financing activities increased by $1.5 million to $26.7 million for the six months ended September 30, 2025, mainly due to principal repayments for our term loan, payments for repurchases of shares of common stock, and other financing activities.
Debt Obligations
See Note 8, 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.
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 September 30, 2025. We have the option to pay interest monthly, quarterly, or semi-annually. During the three months ended September 30, 2025, we elected monthly interest payment terms which resulted in cash payments of $2.5 million. For the three months ending December 31, 2025, we have elected quarterly interest payment terms, which will result in cash payments of approximately $2.2 million. As of September 30, 2025, the debt issuance costs were amortized to interest expense over the term of the 2024 Term Loan at an effective interest rate of 8.65%.
Under the terms of the 2024 Credit Agreement, the Company has the right to prepay the 2024 Term Loan at any time without any premium or penalty. The Company completed three principal repayments of the 2024 Term Loan during fiscal year 2025 for a total of $48.0 million in aggregate principal amount. The Company completed two principal repayments of the 2024 Term Loan during fiscal year 2026 for a total of $25.0 million in aggregate principal amount. As of September 30, 2025, the scheduled remaining principal repayments are $44.5 million in fiscal year 2027 ($7.0 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 year 2028. These annualized repayments will be made in quarterly installments. As of September 30, 2025, the Company has paid $37.5 million, $3.0 million, and $10.0 million of the originally scheduled principal repayments for fiscal year 2026, 2027, and 2028 respectively, and the remaining principal amount of the 2024 Term Loan after the payments is $127.0 million.
On October 31, 2025, we prepaid $5.0 million of the short-term principal payment due in June 2026 under the 2024 Term Loan. See Note 13, Subsequent Event, for more information regarding this prepayment.
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 condensed 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 expense in the condensed 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 six months ended September 30, 2024, we paid $9.4 million of interest under the 2022 Term Loan.
Material Cash Requirements and Other Obligations
As of March 31, 2025, our material cash requirements and other obligations were $527.1 million. During the six months ended September 30, 2025, we increased our non-cancellable three-year hosting service contract commitment from $24.1 million to $54.0 million. Under this agreement, $4.8 million remains due during fiscal year 2026, $10.0 million will be due during fiscal year 2027 and $10.0 million will be due during fiscal year 2028. For information regarding our material cash requirements and other obligations, see Item 7, "Management's Discussion and Analysis", in the Form 10-K.
During the six months ended September 30, 2025, we reduced the 2024 Term Loan contractual principal by $25.0 million to $127.0 million. See Note 8, Convertible Senior Notes and Term Loan, for further details.
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"). See 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 six months ended September 30, 2025 to our critical accounting policies and estimates previously disclosed in our Form 10-K.
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