37% Growth in LTM Enterprise Subscription
Revenue
Record Annual Operating Cash Flow of $11.1
Million
Fourth Quarter Record Revenue of $55.4 Million,
Up 25% Year-Over-Year
Five9, Inc. (NASDAQ:FIVN), a leading provider of cloud software
for the enterprise contact center market, today reported results
for the fourth quarter and full year ended December 31,
2017.
Fourth Quarter 2017 Financial Results
- Revenue for the fourth quarter of 2017
increased 25% to $55.4 million, compared to $44.2 million for
the fourth quarter of 2016.
- GAAP gross margin was 59.6% for the
fourth quarter of 2017, compared to 64.3% for the fourth quarter of
2016. Included in the GAAP results for the fourth quarter of 2016
was a $3.1 million non-recurring item, which increased GAAP
gross margin in the fourth quarter of 2016 by 7.0 percentage points
from 57.3%.
- Adjusted gross margin was 63.6% for the
fourth quarter of 2017, compared to 61.9% for the fourth quarter of
2016.
- GAAP net loss for the fourth quarter of
2017 was $(0.6) million, or $(0.01) per basic share, compared to
GAAP net income of $0.4 million, or $0.01 per diluted share, for
the fourth quarter of 2016. GAAP net loss for the fourth quarter of
2016 was $(2.7) million, or $(0.05) per basic share, excluding the
$3.1 million non-recurring item.
- Non-GAAP net income for the fourth
quarter of 2017 was $4.0 million, or $0.07 per diluted share,
compared to non-GAAP net income of $0.1 million, or $0.00 per
diluted share, for the fourth quarter of 2016.
- Adjusted EBITDA for the fourth quarter
of 2017 was a record $6.9 million, or 12.4% of revenue, compared to
$2.9 million, or 6.6% of revenue, for the fourth quarter of
2016.
- GAAP operating cash flow for the fourth
quarter of 2017 was $2.9 million, compared to GAAP operating cash
flow of $2.8 million for the fourth quarter of 2016.
2017 Financial Results
- Total revenue for 2017 increased 24% to
a record $200.2 million, compared to $162.1 million in 2016.
- GAAP gross margin was 58.5% for 2017,
compared to 58.7% in 2016. Included in the GAAP results for 2016
was a $3.1 million non-recurring item, which increased GAAP
gross margin in 2016 by 1.9 percentage points from 56.8%.
- Adjusted gross margin was 62.7% for
2017, compared to 61.7% in 2016.
- GAAP net loss for 2017 was $(9.0)
million, or $(0.16) per basic share, compared to a GAAP net loss of
$(11.9) million, or $(0.23) per basic share, in 2016. Included in
the GAAP results for 2017 were two non-recurring items resulting in
a net $0.3 million favorability while 2016 GAAP results included
two non-recurring items resulting in a net $2.1 million
favorability.
- Non-GAAP net income for 2017 was $6.3
million, or $0.11 per diluted share, compared to a non-GAAP net
loss of $(3.6) million, or $(0.07) per basic share, in 2016.
- Adjusted EBITDA for 2017 was a record
$17.6 million, or 8.8% of revenue, compared to $8.4 million,
or 5.2% of revenue, in 2016.
- GAAP operating cash flow for 2017 was
$11.1 million, compared to GAAP operating cash flow of $6.8
million in 2016.
“We had a strong finish to the year with better than expected
fourth quarter results capping off a record year for
Five9. For the year, we grew revenue by 24% to a record $200
million. Our revenue growth continues to be driven by our
Enterprise business, which delivered 37% growth in LTM Enterprise
subscription revenue. Our strong enterprise growth and the
operating leverage in our business model drove strong improvements
to our bottom line, including operating cash flow of
$11.1 million for the year. Additionally, we set an all-time
record for Enterprise bookings in the fourth quarter and full
year. We believe that our continued execution combined with
our powerful, differentiated cloud contact center software
positions Five9 extremely well in the customer experience market
that is still in the early days of a massive shift to the cloud.”-
Barry Zwarenstein, Interim CEO and Chief Financial Officer,
Five9
Business Outlook
On January 1, 2018, Five9 adopted Accounting Standards
Codification (ASC) 606 “Revenue from Contracts with Customers”
using the modified retrospective transition method. The guidance
below includes the expected impact of the adoption of this new
revenue standard, which replaced ASC 605. For the full year and
first quarter of 2018, we expect no material difference in revenue
between ASC 606 and ASC 605. Under ASC 606, we expect to add
approximately $5 million to $7 million to GAAP and non-GAAP net
income for the full year 2018 and approximately $0.5 million to
$1.5 million to GAAP and non-GAAP net income for the first quarter
of 2018.
- For the full year 2018, Five9
expects to report:
- Revenue in the range of $231 to $234
million.
- GAAP net loss in the range of $(13.4)
to $(10.4) million, or $(0.23) to $(0.18) per basic share.
- Non-GAAP net income in the range of
$12.6 to $15.6 million, or $0.20 to $0.25 per diluted share.
- For the first quarter of 2018, Five9
expects to report:
- Revenue in the range of $54.5 to $55.5
million.
- GAAP net loss in the range of $(4.5) to
$(3.5) million, or a loss of $(0.08) to $(0.06) per basic
share.
- Non-GAAP net income in the range of
$1.3 to $2.3 million, or $0.02 to $0.04 per diluted share.
Conference Call Details
Five9 will discuss its fourth quarter and full year 2017 results
today, February 21, 2018, via teleconference at 4:30 p.m.
Eastern Time. To access the call (ID 6886112), please dial:
888-427-9411 or 719-325-4940. An audio replay of the call will be
available through March 7, 2018 by dialing 888-203-1112 or
719-457-0820 and entering access code 6886112. 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 website,
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 or removing the following items to gross
profit: depreciation, amortization, stock-based compensation
expense, and the reversal of accrued federal fees. We calculate
adjusted EBITDA by adding back or removing the following items to
or from GAAP net income (loss): depreciation, amortization,
interest expense, income tax expense (benefit), stock-based
compensation expense, extinguishment of debt, non-recurring
litigation settlement costs, the reversal of interest and penalties
on accrued federal fees, and interest income and other, which
consists primarily of a non-cash adjustment on investment, interest
income and foreign exchange gains and losses. We calculate non-GAAP
operating income (loss) as operating income (loss) excluding
stock-based compensation expense, intangibles amortization,
non-recurring litigation settlement costs, and the reversal of
interest and penalties on accrued federal fees. We calculate
non-GAAP net income (loss) as GAAP net income (loss) excluding
stock-based compensation expense, intangibles amortization,
amortization of debt discount and issuance costs, extinguishment of
debt, non-recurring litigation settlement costs, the reversal of
interest and penalties on accrued federal fees, 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 Interim Chief
Executive Officer and Chief Financial Officer, including statements
regarding Five9’s market position, business momentum, product
positioning, the state of the cloud customer experience market, and
the first quarter 2018 and full year 2018 financial projections,
including the expected impact of ASC 606, 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 even if we continue to grow rapidly, we may fail to
manage our growth effectively; (iv) failure to adequately expand
our sales force could impede our growth; (v) if we fail to manage
our technical operations infrastructure, our existing clients may
experience service outages, 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) security breaches
and improper access to or disclosure of our data or our clients’
data, or other cyber attacks on our systems, could result in
litigation and regulatory risk, harm our reputation and adversely
affect our business; (vii) the markets in which we participate are
highly competitive, and if we do not compete effectively, our
operating results could be harmed; (viii) 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; (ix)
our growth depends in part on the success of our strategic
relationships with third parties and our failure to successfully
grow and manage these relationships could harm our business; (x) we
are establishing a network of master agents and resellers to sell
our solution; our failure to effectively develop, manage, and
maintain this network could materially harm our revenues; (xi) 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; (xii)
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; (xiii) 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, any increase in the cost thereof,
reduction in efficacy or any failure by these service providers to
provide reliable services could cause us to lose customers,
increase our customers’ cost of using our solution and subject us
to, among other things, claims for credits or damages; (xiv) we
have a history of losses and we may be unable to achieve or sustain
profitability; (xv) we may not be able to secure additional
financing on favorable terms, or at all, to meet our future capital
needs; (xvi) failure to comply with laws and regulations could harm
our business and our reputation; and (xvii) 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 quarterly
report on Form 10-Q. 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)
(Unaudited)
December 31, 2017
December 31, 2016 ASSETS Current assets: Cash
and cash equivalents $ 68,947 $ 58,122 Accounts receivable, net
19,048 13,881 Prepaid expenses and other current assets 4,840
3,008 Total current assets 92,835 75,011 Property and
equipment, net 19,888 14,688 Intangible assets, net 1,073 1,539
Goodwill 11,798 11,798 Other assets 2,602 2,203
Total assets $ 128,196 $ 105,239
LIABILITIES AND STOCKHOLDERS’ EQUITY Current
liabilities: Accounts payable $ 4,292 $ 3,366 Accrued and other
current liabilities 11,787 9,604 Accrued federal fees 1,151 2,742
Sales tax liability 1,326 1,347 Notes payable 336 742 Capital
leases 6,651 6,230 Deferred revenue 13,975 10,047
Total current liabilities 39,518 34,078 Revolving line of credit —
less current portion 32,594 32,594 Sales tax liability — less
current portion 1,044 1,476 Notes payable — less current portion —
318 Capital leases — less current portion 7,161 5,915 Other
long-term liabilities 1,041 530
Total
liabilities 81,358 74,911
Stockholders’
equity: Common stock 57 53 Additional paid-in capital 222,202
196,555 Accumulated deficit (175,421 ) (166,280 )
Total
stockholders’ equity 46,838 30,328
Total
liabilities and stockholders’ equity $ 128,196 $ 105,239
FIVE9, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended Twelve Months Ended
December 31,2017
December 31,2016
December 31,2017
December 31,2016
Revenue $ 55,403 $ 44,207 $ 200,225 $ 162,090 Cost of revenue
22,363 15,770 83,104 66,934 Gross
profit 33,040 28,437 117,121 95,156 Operating expenses: Research
and development 6,748 6,236 27,120 23,878 Sales and marketing
17,358 14,480 66,570 52,748 General and administrative 8,767
6,511 29,151 25,072 Total operating expenses
32,873 27,227 122,841 101,698 Income
(loss) from operations 167 1,210 (5,720 ) (6,542 ) Other income
(expense), net: Extinguishment of debt — — — (1,026 ) Interest
expense (836 ) (869 ) (3,471 ) (4,226 ) Interest income and other
164 54 490 (12 ) Total other income (expense),
net (672 ) (815 ) (2,981 ) (5,264 ) Income (loss) before income
taxes (505 ) 395 (8,701 ) (11,806 ) Provision for (benefit from)
income taxes 126 (14 ) 268 54 Net income
(loss) $ (631 ) $ 409 $ (8,969 ) $ (11,860 ) Net income
(loss) per share: Basic $ (0.01 ) $ 0.01 $ (0.16 ) $ (0.23 )
Diluted $ (0.01 ) $ 0.01 $ (0.16 ) $ (0.23 ) Shares used in
computing net income (loss) per share: Basic 56,034 53,126
54,946 52,342 Diluted 56,034 56,633
54,946 52,342
FIVE9, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(In thousands)
(Unaudited)
Twelve Months Ended December 31, 2017
December 31, 2016 Cash flows from operating
activities: Net loss $ (8,969 ) $ (11,860 ) Adjustments to
reconcile net loss to net cash used in operating activities:
Depreciation and amortization 8,314 8,390 Provision for doubtful
accounts 95 75 Stock-based compensation 15,343 9,643 Amortization
of debt discount and issuance costs 80 241 Loss on extinguishment
of debt — 1,026 Reversal of interest and penalties on accrued
federal fees (2,133 ) — Reversal of accrued federal fees — (3,114 )
Non-cash adjustment on investment (366 ) — Accretion of interest 21
20 Others (48 ) (10 ) Changes in operating assets and liabilities:
Accounts receivable (5,163 ) (3,389 ) Prepaid expenses and other
current assets (1,912 ) (859 ) Other assets (33 ) 203 Accounts
payable 813 811 Accrued and other current liabilities 1,061 2,262
Accrued federal fees and sales tax liability 90 (182 ) Deferred
revenue 3,882 3,680 Other liabilities 31 (99 ) Net cash
provided by operating activities 11,106 6,838
Cash
flows from investing activities: Purchases of property and
equipment (2,650 ) (1,131 ) Purchases of privately-held company
securities — (1,206 ) Decrease (increase) in restricted cash —
(60 ) Net cash used in investing activities (2,650 ) (2,397
)
Cash flows from financing activities: Proceeds from
exercise of common stock options and warrants 6,035 4,286 Proceeds
from sale of common stock under ESPP 4,101 1,979 Proceeds from
revolving line of credit — 32,594 Repayments on revolving line of
credit — (12,500 ) Repayments of notes payable (699 ) (24,351 )
Payments of capital leases (7,068 ) (6,237 ) Payment of prepayment
penalty and related fees — (368 ) Payments for debt issuance costs
— (206 ) Net cash provided by (used in) financing activities
2,369 (4,803 )
Net increase (decrease) in cash and cash
equivalents
10,825 (362 )
Cash and cash equivalents: Beginning of period
58,122 58,484 End of period $ 68,947 $ 58,122
FIVE9, INC.
RECONCILIATION OF GAAP GROSS PROFIT TO
ADJUSTED GROSS PROFIT
(In thousands)
(Unaudited)
Three Months Ended Twelve Months Ended
December 31,2017
December 31,2016
December 31,2017
December 31,2016
GAAP gross profit $ 33,040 $ 28,437 $ 117,121 $ 95,156 GAAP
gross margin 59.6 % 64.3 % 58.5 % 58.7 % Non-GAAP adjustments:
Depreciation 1,523 1,521 5,949 6,221 Intangibles amortization 88 87
351 352 Stock-based compensation 594 424 2,202 1,375 Reversal of
accrued federal fees — (3,114 ) — (3,114 ) Adjusted
gross profit $ 35,245 $ 27,355 $ 125,623 $
99,990 Adjusted gross margin 63.6 % 61.9 % 62.7 % 61.7 %
RECONCILIATION OF GAAP NET INCOME
(LOSS) TO ADJUSTED EBITDA
(In thousands)
(Unaudited)
Three Months Ended Twelve Months Ended
December 31,2017
December 31,2016
December 31,2017
December 31,2016
GAAP net income (loss) $ (631 ) $ 409 $ (8,969 ) $ (11,860 )
Non-GAAP adjustments: Depreciation and amortization 2,068 2,086
8,314 8,390 Stock-based compensation 4,640 2,716 15,343 9,643
Extinguishment of debt — — — 1,026 Interest expense 836 869 3,471
4,226 Interest (income) and other (164 ) (54 ) (490 ) 13 Legal
settlement — — 1,700 — Legal and indemnification fees related to
settlement — — 135 — Reversal of interest and penalties on accrued
federal fees (G&A) — — (2,133 ) — Reversal of accrued federal
fees (COR) — (3,114 ) — (3,114 ) Provision for (benefit from)
income taxes 126 (14 ) 268 54 Adjusted EBITDA
$ 6,875 $ 2,898 $ 17,639 $ 8,378
FIVE9, INC.
RECONCILIATION OF GAAP OPERATING INCOME
(LOSS) TO NON-GAAP OPERATING INCOME
(In thousands, except per share data)
(Unaudited)
Three Months Ended Twelve Months Ended
December 31,2017
December 31,2016
December 31,2017
December 31,2016
GAAP operating income (loss) $ 167 $ 1,210 $ (5,720 ) $
(6,542 ) Non-GAAP adjustments: Stock-based compensation 4,640 2,716
15,343 9,643 Intangibles amortization 116 117 465 503 Legal
settlement — — 1,700 — Legal and indemnification fees related to
settlement — — 135 — Reversal of interest and penalties on accrued
federal fees (G&A) — — (2,133 ) — Reversal of accrued federal
fees (COR) — (3,114 ) — (3,114 ) Non-GAAP operating
income $ 4,923 $ 929 $ 9,790 $ 490
FIVE9, INC.
RECONCILIATION OF GAAP NET INCOME
(LOSS) TO NON-GAAP NET INCOME (LOSS)
(In thousands, except per share data)
(Unaudited)
Three Months Ended Twelve Months Ended
December 31,2017
December 31,2016
December 31,2017
December 31,2016
GAAP net income (loss) $ (631 ) $ 409 $ (8,969 ) $ (11,860 )
Non-GAAP adjustments: Stock-based compensation 4,640 2,716 15,343
9,643 Intangibles amortization 116 117 465 503 Amortization of debt
discount and issuance costs 20 20 80 241 Extinguishment of debt — —
— 1,026 Legal settlement — — 1,700 — Legal and indemnification fees
related to settlement — — 135 — Reversal of interest and penalties
on accrued federal fees (G&A) — — (2,133 ) — Reversal of
accrued federal fees (COR) — (3,114 ) — (3,114 ) Non-cash
adjustment on investment (133 ) — (366 ) — Non-GAAP
net income (loss) $ 4,012 $ 148 $ 6,255 $
(3,561 ) GAAP net income (loss) per share: Basic $ (0.01 ) $ 0.01
$ (0.16 ) $ (0.23 ) Diluted $ (0.01 ) $ 0.01 $ (0.16
) $ (0.23 ) Non-GAAP net income (loss) per share: Basic $ 0.07
$ — $ 0.11 $ (0.07 ) Diluted $ 0.07 $ —
$ 0.11 $ (0.07 ) Shares used in computing GAAP net
income (loss) per share: Basic 56,034 53,126 54,946
52,342 Diluted 56,034 56,633 54,946
52,342 Shares used in computing non-GAAP net
income (loss) per share: Basic 56,034 53,126 54,946
52,342 Diluted 59,905 56,633 59,073
52,342
FIVE9, INC.
SUMMARY OF STOCK-BASED COMPENSATION,
DEPRECIATION AND INTANGIBLES AMORTIZATION
(In thousands)
(Unaudited)
Three Months Ended December 31, 2017
December 31, 2016
Stock-BasedCompensation
Depreciation
IntangiblesAmortization
Stock-BasedCompensation
Depreciation
IntangiblesAmortization
Cost of revenue $ 594 $ 1,523 $ 88 $ 424 $ 1,521 $ 87
Research and development 807 170 — 549 224 — Sales and marketing
1,128 2 28 759 29 29 General and administrative 2,111 257
— 984 195 1 Total $ 4,640 $
1,952 $ 116 $ 2,716 $ 1,969 $ 117
Twelve Months Ended December 31, 2017
December 31, 2016
Stock-BasedCompensation
Depreciation
IntangiblesAmortization
Stock-BasedCompensation
Depreciation
IntangiblesAmortization
Cost of revenue $ 2,202 $ 5,949 $ 351 $ 1,375 $ 6,221 $ 352
Research and development 3,042 795 — 2,059 737 — Sales and
marketing 4,364 6 114 2,363 107 114 General and administrative
5,735 1,099 — 3,846 822 37 Total
$ 15,343 $ 7,849 $ 465 $ 9,643 $ 7,887
$ 503
FIVE9, INC.
RECONCILIATION OF GAAP NET LOSS TO
NON-GAAP NET INCOME – GUIDANCE
(In thousands, except per share data)
(Unaudited)
Three Months Ending Year Ending March 31,
2018 December 31, 2018 Low High
Low High GAAP net loss $ (4,476 ) $
(3,476 ) $ (13,398 ) $ (10,398 ) Non-GAAP adjustments: Stock-based
compensation 5,640 5,640 25,452 25,452 Intangibles amortization 116
116 465 465 Amortization of debt issuance costs 20 20 81 81 Income
tax expense effects (1) — — — —
Non-GAAP net income $ 1,300 $ 2,300 $ 12,600 $
15,600 GAAP net loss per share, basic and diluted $ (0.08 )
$ (0.06 ) $ (0.23 ) $ (0.18 ) Non-GAAP net income per share: Basic
$ 0.02 $ 0.04 $ 0.22 $ 0.27 Diluted $
0.02 $ 0.04 $ 0.20 $ 0.25 Shares used
in computing GAAP net loss per share and non-GAAP net income per
share: Basic 57,000 57,000 58,500 58,500
Diluted 61,500 61,500 63,000 63,000
(1) Non-GAAP adjustments do not have an
impact on our income tax provision due to past non-GAAP losses.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20180221006185/en/
Five9, Inc.Barry Zwarenstein, 925-201-2000 ext. 5959Interim CEO
and Chief Financial OfficerIR@five9.comorThe Blueshirt Group for
Five9, Inc.Lisa Laukkanen, 415-217-4967Lisa@blueshirtgroup.com
Five9 (NASDAQ:FIVN)
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