FIVN Five9 Inc

39% Growth in LTM Enterprise Subscription Revenue

Positive Operating Cash Flow for Sixth Consecutive Quarter

Raises 2017 Guidance for Revenue and Bottom Line

Five9, Inc. (NASDAQ:FIVN), a leading provider of cloud software for the enterprise contact center market, today reported results for the second quarter ended June 30, 2017.

Second Quarter 2017 Financial Results

• Revenue for the second quarter of 2017 increased 23% to a record $47.7 million, compared to $38.9 million for the second quarter of 2016.
• GAAP gross margin was 57.5% for the second quarter of 2017, compared to 56.9% for the second quarter of 2016.
• Adjusted gross margin was 62.3% for the second quarter of 2017, compared to 61.9% for the second quarter of 2016.
• GAAP net loss for the second quarter of 2017 was $(4.0) million, or $(0.07) per share, compared to a GAAP net loss of $(3.5) million, or $(0.07) per share, for the second quarter of 2016.
• Non-GAAP net loss for the second quarter of 2017 was $(0.07) million, or $(0.00) per share, compared to a non-GAAP net loss of $(0.8) million, or $(0.02) per share, for the second quarter of 2016.
• Adjusted EBITDA for the second quarter of 2017 was $3.0 million, or 6.2% of revenue, compared to $2.3 million, or 5.9% of revenue, for the second quarter of 2016.
• GAAP operating cash flow for the second quarter of 2017 was $0.08 million, compared to GAAP operating cash flow of $2.2 million for the second quarter of 2016. Operating cash flow in the second quarter of 2017 was adversely impacted by the $1.7 million settlement payment, recorded in the first quarter of 2017, regarding a successor liability from a 2013 acquisition.

“Our second quarter revenue exceeded expectations, with revenue growing 23% to a record $47.7 million. This revenue growth continues to be driven by our Enterprise business, which delivered 39% growth in LTM Enterprise subscription revenue. I am extremely pleased that we had our best quarter ever for Enterprise bookings in the second quarter and our sales pipeline reached another all-time high. We also extended our product leadership with our recently announced 2017 Summer release for global enterprises. Given our leadership in the market and our strong business momentum, we are again raising 2017 guidance.”

- Mike Burkland, President and CEO, Five9

Business Outlook

• For the full year 2017, Five9 expects to report:
  • Revenue in the range of $193.5 to $195.5 million, up from the prior guidance range of $190.6 to $193.6 million that was previously provided on May 3, 2017.
  • GAAP net loss in the range of $(15.3) to $(17.3) million, or $(0.28) to $(0.32) per share, improved from the prior guidance range of $(16.8) to $(19.8) million, or $(0.31) to $(0.37) per share, that was previously provided on May 3, 2017.
  • Non-GAAP net income or loss in the range of $1.8 to $(0.2) million, or $0.03 to $(0.00) per share, improved from the prior guidance range of $0.5 to $(2.5) million, or $0.01 to $(0.05) per share, that was previously provided on May 3, 2017.
• For the third quarter of 2017, Five9 expects to report:
  • Revenue in the range of $47.5 to $48.5 million.
  • GAAP net loss in the range of $(4.3) to $(5.3) million, or a loss of $(0.08) to $(0.10) per share.
  • Non-GAAP net loss in the range of $(0.2) to $(1.2) million, or a loss of $(0.00) to $(0.02) per share.

Conference Call Details

Five9 will discuss its second quarter 2017 results today, August 3, 2017, via teleconference at 4:30 p.m. Eastern Time. To access the call (ID 1761613), please dial: 877-723-9523 or 719-325-4776. An audio replay of the call will be available through August 17, 2017 by dialing 888-203-1112 or 719-457-0820 and entering access code 1761613. A copy of this press release will be furnished to the Securities and Exchange Commission on a Current Report on Form 8-K, and will be posted to our web site, prior to the conference call.

A webcast of the call will be available on the Investor Relations section of the Company’s website at http://investors.five9.com/.

Non-GAAP Financial Measures

In addition to disclosing financial measures prepared in accordance with U.S. generally accepted accounting principles (GAAP), this press release and the accompanying tables contain certain non-GAAP financial measures. We calculate adjusted gross profit by adding back the following items to gross profit: depreciation, intangibles amortization, and stock-based compensation expense. We calculate adjusted EBITDA by adding back or removing the following items to or from net loss: depreciation, intangibles amortization, interest expense, income tax expense, stock-based compensation expense, non-recurring litigation settlement costs, and interest income and other, which consists primarily of non-cash adjustment on investment, interest income and foreign exchange gains and losses. We calculate non-GAAP operating income (loss) as operating loss excluding stock-based compensation expense, intangibles amortization and non-recurring litigation settlement costs. We calculate non-GAAP net loss as net loss excluding stock-based compensation expense, intangibles amortization, amortization of debt discount and issuance costs, non-recurring litigation settlement costs, and non-cash adjustments on investment. Non-GAAP financial measures do not have any standardized meaning and are therefore unlikely to be comparable to similarly titled measures presented by other companies. Five9 considers these non-GAAP financial measures to be important because they provide useful measures of the operating performance of the Company, exclusive of factors that do not directly affect what we consider to be our core operating performance, as well as unusual events. The Company’s management uses these measures to (i) illustrate underlying trends in the Company’s business that could otherwise be masked by the effect of income or expenses that are excluded from non-GAAP measures, and (ii) establish budgets and operational goals for managing the Company’s business and evaluating its performance. In addition, investors often use similar measures to evaluate the operating performance of a company. Non-GAAP financial measures are presented only as supplemental information for purposes of understanding the Company's operating results. The non-GAAP financial measures should not be considered a substitute for financial information presented in accordance with GAAP. Please see the reconciliation of non-GAAP financial measures set forth herein and attached to this release.

Forward Looking Statements

This news release contains certain forward-looking statements, including the statements in the quote from our Chief Executive Officer, including statements regarding Five9’s market position, enterprise bookings and momentum and sales pipeline, and the third quarter 2017 and full year 2017 financial projections set forth under the caption “Business Outlook,” that are based on our current expectations and involve numerous risks and uncertainties that may cause these forward-looking statements to be inaccurate. Risks that may cause these forward-looking statements to be inaccurate include, among others: (i) our quarterly and annual results may fluctuate significantly, may not fully reflect the underlying performance of our business and may result in decreases in the price of our common stock; (ii) if we are unable to attract new clients or sell additional services and functionality to our existing clients, our revenue and revenue growth will be harmed; (iii) our recent rapid growth may not be indicative of our future growth, and if we continue to grow rapidly, we may fail to manage our growth effectively; (iv) failure to adequately expand our direct sales force will impede our growth; (v) if we fail to manage our technical operations infrastructure, our existing clients may experience service outages, security breaches, or other issues, our new clients may experience delays in the deployment of our solution and we could be subject to, among other things, claims for credits or damages; (vi) the markets in which we participate are highly competitive, and if we do not compete effectively, our operating results could be harmed; (vii) if our existing clients terminate their subscriptions or reduce their subscriptions and related usage, our revenues and gross margins will be harmed and we will be required to spend more money to grow our client base; (viii) we sell our solution to larger organizations that require longer sales and implementation cycles and often demand more configuration and integration services or customized features and functions that we may not offer, any of which could delay or prevent these sales and harm our growth rates, business and operating results; (ix) because a significant percentage of our revenue is derived from existing clients, downturns or upturns in new sales will not be immediately reflected in our operating results and may be difficult to discern; (x) we rely on third-party telecommunications and internet service providers to provide our clients and their customers with telecommunication services and connectivity to our cloud contact center software and any failure by these service providers to provide reliable services could subject us to, among other things, claims for credits or damages; (xi) we have a history of losses and we may be unable to achieve or sustain profitability; (xii) we may not be able to secure additional financing on favorable terms, or at all, to meet our future capital needs; and (xiii) the other risks detailed from time-to-time under the caption “Risk Factors” and elsewhere in our Securities and Exchange Commission filings and reports, including, but not limited to, our most recent annual report on Form 10-K. Such forward looking statements speak only as of the date hereof and readers should not unduly rely on such statements. We undertake no obligation to update the information contained in this press release, including in any forward-looking statements.

About Five9

Five9 is a leading provider of cloud software for the enterprise contact center market, bringing the power of the cloud to thousands of customers and facilitating more than three billion customer interactions annually. Since 2001, Five9 has led the cloud revolution in contact centers, helping organizations transition from legacy premise-based solutions to the cloud. Five9 provides businesses with cloud contact center software that is reliable, secure, compliant, and scalable, which is designed to create exceptional customer experiences, increase agent productivity, and deliver tangible business results. For more information, visit www.five9.com.

 

FIVE9, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

   

  June 30, 2017  

December 31, 2016 (Unaudited) ASSETS

Current assets:

Cash and cash equivalents $ 57,149 $ 58,122 Accounts receivable, net 16,281 13,881 Prepaid expenses and other current assets 7,074   3,008   Total current assets 80,504 75,011 Property and equipment, net 15,656 14,688 Intangible assets, net 1,306 1,539 Goodwill 11,798 11,798 Other assets 2,199   2,203   Total assets $ 111,463   $ 105,239     LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 4,586 $ 3,366 Accrued and other current liabilities 10,277 9,604 Accrued federal fees 3,261 2,742 Sales tax liability 1,191 1,347 Notes payable 663 742 Capital leases 6,155 6,230 Deferred revenue 11,903   10,047   Total current liabilities 38,036 34,078 Revolving line of credit 32,594 32,594 Sales tax liability — less current portion 1,284 1,476 Notes payable — less current portion — 318 Capital leases — less current portion 6,384 5,915 Other long-term liabilities 1,010   530   Total liabilities 79,308   74,911   Stockholders’ equity: Common stock 55 53 Additional paid-in capital 207,813 196,555 Accumulated deficit (175,713 ) (166,280 ) Total stockholders’ equity 32,155   30,328   Total liabilities and stockholders’ equity $ 111,463   $ 105,239    

FIVE9, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands, except per share data)

    Three Months Ended Six Months Ended June 30, 2017   June 30, 2016 June 30, 2017   June 30, 2016   Revenue $ 47,727 $ 38,886 $ 94,741 $ 76,901 Cost of revenue 20,273   16,764   40,244   33,374   Gross profit 27,454 22,122 54,497 43,527 Operating expenses: Research and development 6,836 5,799 13,683 11,601 Sales and marketing 16,932 12,637 32,710 25,343 General and administrative 6,845   5,882   15,705   12,418   Total operating expenses 30,613   24,318   62,098   49,362   Loss from operations (3,159 ) (2,196 ) (7,601 ) (5,835 ) Other income (expense), net: Interest expense (888 ) (1,197 ) (1,770 ) (2,396 ) Interest income and other 90   (33 ) 208   (78 ) Total other income (expense), net (798 ) (1,230 ) (1,562 ) (2,474 ) Loss before income taxes (3,957 ) (3,426 ) (9,163 ) (8,309 ) Provision for income taxes 50   42   99   70   Net loss $ (4,007 ) $ (3,468 ) $ (9,262 ) $ (8,379 ) Net loss per share: Basic and diluted $ (0.07 ) $ (0.07 ) $ (0.17 ) $ (0.16 ) Shares used in computing net loss per share: Basic and diluted 54,723   52,143   54,208   51,760    

FIVE9, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

  Six Months Ended June 30, 2017   June 30, 2016   Cash flows from operating activities: Net loss $ (9,262 ) $ (8,379 )   Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 4,365 4,163 Provision for doubtful accounts 45 41 Stock-based compensation 6,983 4,408 Loss (gain) on disposal of property and equipment (13 ) 2 Non-cash adjustment on investment (161 ) — Amortization of debt discount and issuance costs 40 178 Accretion of interest 10 — Others (1 ) (7 ) Changes in operating assets and liabilities: Accounts receivable (2,426 ) (245 ) Prepaid expenses and other current assets (4,106 ) (1,206 ) Other assets 166 62 Accounts payable 1,187 357 Accrued and other current liabilities 909 1,389 Accrued federal fees and sales tax liability 171 12 Deferred revenue 2,025 1,535 Other liabilities 311   (53 ) Net cash provided by operating activities 243   2,257   Cash flows from investing activities: Purchases of property and equipment (1,178 ) (568 ) Increase in restricted cash —   (60 ) Net cash used in investing activities (1,178 ) (628 ) Cash flows from financing activities: Proceeds from exercise of common stock options 2,303 3,352 Proceeds from sale of common stock under ESPP 1,800 792 Repayments of notes payable (400 ) (3,563 ) Payments of capital leases (3,741 ) (3,056 ) Net cash used in financing activities (38 ) (2,475 ) Net decrease in cash and cash equivalents (973 ) (846 ) Cash and cash equivalents: Beginning of period 58,122   58,484   End of period $ 57,149   $ 57,638  

FIVE9, INC.

RECONCILIATION OF GAAP GROSS PROFIT TO ADJUSTED GROSS PROFIT

(Unaudited, in thousands, except percentages)

    Three Months Ended Six Months Ended June 30, 2017   June 30, 2016 June 30, 2017   June 30, 2016   GAAP gross profit $ 27,454 $ 22,122 $ 54,497 $ 43,527 GAAP gross margin 57.5

%

56.9 % 57.5 % 56.6 % Non-GAAP adjustments: Depreciation 1,628 1,528 3,116 3,120 Intangibles amortization 88 88 176 176 Stock-based compensation 575   329   1,009   594   Adjusted gross profit $ 29,745   $ 24,067   $ 58,798   $ 47,417   Adjusted gross margin 62.3 % 61.9

%

62.1 % 61.7 %  

RECONCILIATION OF GAAP NET LOSS TO ADJUSTED EBITDA

(Unaudited, in thousands)

    Three Months Ended Six Months Ended June 30, 2017   June 30, 2016 June 30, 2017   June 30, 2016   GAAP net loss $ (4,007 ) $ (3,468 ) $ (9,262 ) $ (8,379 ) Non-GAAP adjustments: Depreciation and amortization 2,270 2,060 4,365 4,163 Stock-based compensation 3,854 2,414 6,983 4,408 Interest expense 888 1,197 1,770 2,396 Interest income and other (90 ) 33 (208 ) 78 Legal settlement — — 1,700 — Legal and indemnification fees related to settlement — — 135 — Provision for income taxes 50   42   99   70   Adjusted EBITDA $ 2,965   $ 2,278   $ 5,582   $ 2,736    

FIVE9, INC.

RECONCILIATION OF GAAP OPERATING LOSS TO NON-GAAP OPERATING INCOME (LOSS)

(Unaudited, in thousands)

    Three Months Ended Six Months Ended June 30, 2017   June 30, 2016 June 30, 2017   June 30, 2016   Loss from operations $ (3,159 ) $ (2,196 ) $ (7,601 ) $ (5,835 ) Non-GAAP adjustments: Stock-based compensation 3,854 2,414 6,983 4,408 Intangibles amortization 117 128 234 256 Legal settlement — — 1,700 — Legal and indemnification fees related to settlement —   —   135   —   Non-GAAP operating income (loss) $ 812   $ 346   $ 1,451   $ (1,171 )  

RECONCILIATION OF GAAP NET LOSS TO NON-GAAP NET LOSS

(Unaudited, in thousands, except per share data)

    Three Months Ended Six Months Ended June 30, 2017   June 30, 2016 June 30, 2017   June 30, 2016   GAAP net loss $ (4,007 ) $ (3,468 ) $ (9,262 ) $ (8,379 ) Non-GAAP adjustments: Stock-based compensation 3,854 2,414 6,983 4,408 Intangibles amortization 117 128 234 256 Amortization of debt discount and issuance costs 20 87 40 178 Legal settlement — — 1,700 — Legal and indemnification fees related to settlement — — 135 — Non-cash adjustment on investment (58 ) —   (161 ) —   Non-GAAP net loss $ (74 ) $ (839 ) $ (331 ) $ (3,537 )   GAAP net loss per share: Basic and diluted $ (0.07 ) $ (0.07 ) $ (0.17 ) $ (0.16 ) Non-GAAP net loss per share: Basic and diluted $ —   $ (0.02 ) $ (0.01 ) $ (0.07 ) Shares used in computing GAAP and non-GAAP net loss per share: Basic and diluted 54,723   52,143   54,208   51,760    

SUMMARY OF STOCK-BASED COMPENSATION, DEPRECIATION AND INTANGIBLES AMORTIZATION

(Unaudited, in thousands)

  Three Months Ended June 30, 2017   June 30, 2016

Stock-BasedCompensation

  Depreciation  

IntangiblesAmortization

Stock-BasedCompensation

  Depreciation  

IntangiblesAmortization

  Cost of revenue $ 575 $ 1,628 $ 88 $ 329 $ 1,528 $ 88 Research and development 801 237 — 528 161 — Sales and marketing 1,224 1 29 544 26 28 General and administrative 1,254   287   —   1,013   217   12 Total $ 3,854   $ 2,153   $ 117   $ 2,414   $ 1,932   $ 128   Six Months Ended June 30, 2017 June 30, 2016

Stock-BasedCompensation

Depreciation

IntangiblesAmortization

Stock-BasedCompensation

Depreciation

IntangiblesAmortization

  Cost of revenue $ 1,009 $ 3,116 $ 176 $ 594 $ 3,120 $ 176 Research and development 1,438 443 — 963 309 — Sales and marketing 2,152 2 58 978 51 56 General and administrative 2,384   570   —   1,873   427   24 Total $ 6,983   $ 4,131   $ 234   $ 4,408   $ 3,907   $ 256  

FIVE9, INC.

RECONCILIATION OF GAAP NET LOSS TO NON-GAAP NET INCOME (LOSS) – GUIDANCE

(Unaudited, in thousands, except per share data)

   

Three Months Ending

Year Ending September 30, 2017 December 31, 2017

Low

 

High

Low

 

High

  GAAP net loss $ (4,327 ) $ (5,327 ) $ (15,307 ) $ (17,307 ) Non-GAAP adjustments: Stock-based compensation 3,991 3,991 14,887 14,887 Intangibles amortization 116 116 465 465 Legal settlement — — 1,700 1,700 Legal and indemnification fees related to settlement — — 135 135 Non-cash adjustment on investment — — (161 ) (161 ) Amortization of debt discount and issuance costs 20   20   81   81   Non-GAAP net income (loss) $ (200 ) $ (1,200 ) $ 1,800   $ (200 ) GAAP net loss per share, basic and diluted $ (0.08 ) $ (0.10 ) $ (0.28 ) $ (0.32 ) Non-GAAP net income (loss) per share, basic and diluted $ —   $ (0.02 ) $ 0.03   $ —   Shares used in computing GAAP net loss and non-GAAP net income (loss) per share: Basic 54,900 54,900 54,700 54,700 Diluted 54,900 54,900 59,000 54,700  

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Investor Relations:Five9, Inc.Barry Zwarenstein, 925-201-2000 ext. 5959Chief Financial OfficerIR@five9.comorThe Blueshirt Group for Five9, Inc.Lisa Laukkanen, 415-217-4967Lisa@blueshirtgroup.com