8X8 INC /DE/

Previous wording

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.

Current wording

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 entitled “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, and those set forth under the section entitled "Risk Factors" in the Form 10-K for the fiscal year ended March 31, 2026.

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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 63% in the first quarter of fiscal 2027 as customers increased inbound and outbound engagement strategies using our communication APIs and AI-based interactions.

Previous wording

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.

Current wording

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, inflationary pressures, increased interest rates, supply chain disruptions, decreased economic output, and currency volatility. We continuously monitor the impacts of these factors, as well as the overall global economy and geopolitical landscape, on our business and financial results.

Previous wording

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 approximately 50,000 small businesses, which tend to be disproportionately impacted by macroeconomic headwinds.

Current wording

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 38% of total revenue in the first quarter of fiscal 2026 to approximately 44% in the first quarter of fiscal 2027, increasing our exposure to foreign currency fluctuations. However, a significant portion of our international operating expenses is 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.

Previous wording

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 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 our customers require.

Current wording

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.

Previous wording

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 technological changes in artificial intelligence ("AI") and 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. 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.

Current wording

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 to drive increased cross-sell and new business. We are also devoting resources to expand our community of value-added resellers, who provide implementation services and Tier 1 customer support in addition to sales capacity.

Previous wording

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:

Current wording

To assess the success of our strategies to achieve growth and increase our cash flow, our management reviews our financial performance as presented in our condensed 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:

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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 costs 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.

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

Research and development expenses consist primarily of personnel and related costs, stock-based compensation, third-party development, software and equipment costs necessary to conduct our product, platform development and engineering efforts, as well as allocated information technology and facilities costs.

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

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.

Previous wording

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.

Current wording

Other income (expense), net, consists primarily of losses on debt extinguishment, gain on warrant remeasurement, interest income, gains or losses on foreign exchange transactions, as well as other income.

Previous wording

Service revenue increased by $6.2 million, or 3.6%, for the three months ended December 31, 2025, compared to the three months ended December 31, 2024. This change was driven by an increase of $14.0 million in platform usage revenue generated primarily in the Asia-Pacific region, resulting from 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 $7.8 million consisting predominantly of former Fuze customers.

Current wording

Service revenue increased by $9.0 million, or 5.1%, for the three months ended June 30, 2026, compared to the three months ended June 30, 2025. This change was driven by an increase of $18.5 million in platform usage revenue generated primarily in the Asia-Pacific region, resulting from 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 $9.5 million related to customer churn and down-sell.

Previous wording

Other revenue decreased by $0.1 million, or 1.0%, for the three months ended December 31, 2025, compared to the three months ended December 31, 2024, due to a decrease in professional service revenue of $0.5 million, partially offset by an increase in product revenue of $0.4 million.

Current wording

Other revenue decreased by $0.2 million, or 4.5%, for the three months ended June 30, 2026, compared to the three months ended June 30, 2025, due to a decrease in professional service revenue of $0.8 million, partially offset by an increase in product revenue of $0.6 million.

Previous wording

Cost of service revenue increased by $9.0 million, or 17.8%, for the three months ended December 31, 2025, compared to the three months ended December 31, 2024, primarily due to increases of $10.9 million in network and carrier service provider costs to deliver our subscription and platform usage services to support our capacity needs and $0.6 million in salaries, benefits and consulting costs. These increases were partially offset by decreases of $1.6 million in amortization of intangible assets, $0.5 million in stock-based compensation, and $0.4 million in amortization of capitalized software.

Current wording

Cost of service revenue increased by $13.8 million, or 25.7%, for the three months ended June 30, 2026, compared to the three months ended June 30, 2025, primarily due to an increase of $15.8 million in network and carrier service provider costs to deliver our platform usage services and support our capacity needs. These increases were partially offset by decreases of $1.6 million in salaries, benefits and consulting costs, $0.2 million in amortization of intangible assets, and $0.2 million in stock-based compensation.

Previous wording

Cost of other revenue decreased by $1.1 million, or 4.7%, for the nine months ended December 31, 2025, compared to the nine months ended December 31, 2024, primarily due to decreases of $0.9 million in lower product costs associated with IP telephone hardware and $0.7 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.

Current wording

Cost of other revenue decreased by $0.9 million, or 13.2%, for the three months ended June 30, 2026, compared to the three months ended June 30, 2025, primarily due to a decrease in salaries, benefits, and consulting costs to deliver our professional services.

Previous wording

Research and development expenses decreased by $2.6 million, or 8.9%, for the three months ended December 31, 2025, compared to the three months ended December 31, 2024, primarily due to decreases of $2.2 million in stock-based compensation, $1.2 million in combined salaries, benefits, and consulting costs necessary for us to conduct our product, platform development and engineering efforts, and $0.7 million in costs to operate data centers. These decreases were partially offset by increases of $1.1 million in software licenses and other costs and $0.4 million in amortization of capitalized software.

Current wording

Research and development expenses were flat for the three months ended June 30, 2026, compared to the three months ended June 30, 2025, primarily due to decreases of $2.4 million in combined salaries, benefits, and consulting costs necessary to conduct our product, platform development and engineering efforts and $0.5 million in stock-based compensation. These decreases were offset by increases of $2.4 million in capitalization of internally-developed software, software licenses and other costs and $0.5 million in amortization of capitalized software.

Previous wording

Sales and marketing expenses decreased by $5.1 million, or 7.8%, for the three months ended December 31, 2025, compared to the three months ended December 31, 2024, primarily due to decreases of $3.4 million in channel commissions and amortization of deferred contract acquisition costs, $1.4 million in stock-based compensation expense, and $0.7 million in paid media and other marketing services costs. These decreases were partially offset by an increase of $0.4 million in salaries, benefits, and consulting costs.

Current wording

Sales and marketing expenses decreased by $9.4 million, or 13.8%, for the three months ended June 30, 2026, compared to the three months ended June 30, 2025, primarily due to decreases of $4.1 million in salaries, benefits, and consulting costs, $3.5 million in channel commissions and amortization of deferred contract acquisition costs, $1.0 million in paid media and other marketing services costs, and $0.8 million in stock-based compensation expense.

Previous wording

General and administrative expenses increased by $6.8 million, or 11.4%, for the nine months ended December 31, 2025, compared to the nine months ended December 31, 2024, primarily due to increases of $10.9 million in legal and regulatory costs, $0.9 million in salaries, benefits, and consulting costs, and $0.6 million in facilities costs. These increases were partially offset by decreases of $2.6 million in stock-based compensation and $3.0 million in other general corporate costs.

Current wording

General and administrative expenses increased by $1.5 million, or 6.5%, for the three months ended June 30, 2026, compared to the three months ended June 30, 2025, primarily due to increases of $2.4 million in transaction-related and general corporate costs and $0.5 million in personnel and consulting costs. These increases were partially offset by decreases of $0.9 million in stock-based compensation and $0.5 million in legal and regulatory costs.

Previous wording

Interest expense decreased by $10.3 million, or 43.5%, for the nine months ended December 31, 2025, compared to the nine months ended December 31, 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.

Current wording

Interest expense increased by $0.2 million, or 5.3%, for the three months ended June 30, 2026, compared to the three months ended June 30, 2025, primarily due to capitalized interest related to property, plant and equipment from general borrowing costs recorded in fiscal 2026. This increase was partially offset by reduced debt interest due to a lower interest rate and principal balance on the 2024 Term Loan. See Note 8, Convertible Senior Notes and Term Loan, for further details.

Previous wording

We recognized $1.3 million of other income, net during the nine months ended December 31, 2025, compared to $10.2 million of other expense, net during the nine months ended December 31, 2024, primarily due to a decrease in the loss on debt extinguishment of $12.1 million, a $1.0 million decrease due to reduced foreign exchange losses, and a decrease of $0.3 million in other expenses. These decreases were offset by $1.3 million decrease in interest income earned on cash and cash equivalents and a reduced gain of $0.6 million on the remeasurement of Warrants issued in connection with the 2022 Term Loan.

Current wording

We recognized $0.4 million of other expense, net during the three months ended June 30, 2026, compared to $0.4 million of other income, net during the three months ended June 30, 2025, primarily due to an increase of $0.7 million in foreign exchange losses and a reduced gain of $0.1 million on the remeasurement of the Warrants issued in connection with the 2022 Term Loan.

Previous wording

The provision for income taxes decreased by $0.4 million for the three months ended December 31, 2025, compared to the three months ended December 31, 2024, primarily driven by the effect of the OBBBA's federal and state tax provision for the three months ended December 31, 2025.

Current wording

Provision for income taxes decreased by $0.3 million for the three months ended June 30, 2026, compared to the three months ended June 30, 2025, primarily driven by the effects of the OBBBA on federal and state taxes for the three months ended June 30, 2026.

Previous wording

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 December 31, 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.

Current wording

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 2027 is to maintain sufficient liquidity to fund our operations and growth initiatives, including planned software development activities, and to pay down our outstanding debt. As of June 30, 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 noncancelable 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.

Previous wording

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 nine months ended December 31, 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.

Current wording

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 Repurchase Plan. During the three months ended June 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.

Previous wording

As of December 31, 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.

Current wording

As of June 30, 2026, our 2028 Notes were trading at a discount to their respective principal amount. We may seek to retire, refinance 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.

Previous wording

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 December 31, 2025. We have the option to pay interest monthly, quarterly, or semi-annually. During the three months ended December 31, 2025, we elected quarterly interest payment terms which resulted in cash payments of $2.2 million. For the three months ending March 31, 2026, we have elected monthly interest payment terms, which will result in cash payments of approximately $2.0 million. As of December 31, 2025, the debt issuance costs were amortized to interest expense over the term of the 2024 Term Loan at an effective interest rate of 8.64%.

Current wording

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 June 30, 2026. We have the option to pay interest monthly, quarterly, or semi-annually. During the three months ended June 30, 2026, we elected monthly interest payment terms which resulted in cash payments of $1.8 million. For the three months ending September 30, 2026, we have elected monthly interest payment terms, which will result in cash payments of approximately $1.8 million. As of June 30, 2026, the debt issuance costs were amortized to interest expense over the term of the 2024 Term Loan at an effective interest rate of 8.61%.

Previous wording

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 three principal repayments of the 2024 Term Loan during fiscal year 2026 for a total of $30.0 million in aggregate principal amount. As of December 31, 2025, the scheduled remaining principal repayments are $39.5 million in fiscal year 2027 ($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 year 2028. These annualized repayments will be made in quarterly installments. As of December 31, 2025, the Company has paid $37.5 million, $8.0 million, and $10.0 million of the originally scheduled principal repayments due fiscal year 2026, 2027, and 2028 respectively, and the remaining principal amount of the 2024 Term Loan after the payments is $122.0 million.

Current wording

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 three principal repayments of the 2024 Term Loan during fiscal 2026 for a total of $30.0 million in aggregate principal amount. We completed one principal repayment of the 2024 Term Loan during fiscal 2027 for $14.5 million in aggregate principal amount.

Previous wording

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).

Current wording

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 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). See Note 4, Financial Statement Components, for further details.

Previous wording

As of March 31, 2025, our material cash requirements and other obligations were $527.1 million. During the nine months ended December 31, 2025, we increased our non-cancellable three-year hosting service contract commitment from $24.1 million to $54.0 million. Under this agreement, $2.4 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.

Current wording

As of March 31, 2026, our material cash requirements and other obligations were $69.6 million. During the fiscal year ended March 31, 2026, we increased our noncancelable three-year hosting service contract commitment from $24.1 million to $54.0 million. Under this agreement, $6.7 million remains due in fiscal 2027 and $10.0 million will be due in fiscal 2028. During the three months ended June 30, 2026, we entered into a $74.0 million noncancelable five-year hosting service contract with a cloud service provider. Under this agreement, $8.1 million remains due during fiscal 2027, $13.9 million will be due during fiscal 2028, $15.8 million will be due during fiscal 2029 and $36.2 million will be due for the remaining contractual term. For information regarding our material cash requirements and other obligations, see Item 7, "Management's Discussion and Analysis" in the Form 10-K.

Previous wording

During the nine months ended December 31, 2025, we reduced the 2024 Term Loan contractual principal by $30.0 million to $122.0 million. See Note 8, Convertible Senior Notes and Term Loan, for further details.

Current wording

During the three months ended June 30, 2026, we reduced the 2024 Term Loan contractual principal by $14.5 million to $107.5 million. See Note 8, Convertible Senior Notes and Term Loan, for further details.

Previous wording

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 nine months ended December 31, 2025 to our critical accounting policies and estimates previously disclosed in our Form 10-K.

Current wording

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 three months ended June 30, 2026 to our critical accounting policies and estimates previously disclosed in the Form 10-K.