36% Growth in LTM Enterprise Subscription
Revenue
Fifteenth Consecutive Quarter of Positive
Operating Cash Flow
Raised 2019 Guidance for Both Revenue and
Bottom Line
Five9, Inc. (NASDAQ:FIVN), a leading provider of cloud contact
center software, today reported results for the third quarter ended
September 30, 2019.
Third Quarter 2019 Financial Results
- Revenue for the third quarter of 2019 increased 28% to a record
$83.8 million, compared to $65.3 million for the third quarter of
2018.
- GAAP gross margin was 58.8% for the third quarter of 2019,
compared to 59.9% for the third quarter of 2018.
- Adjusted gross margin was 64.0% for the third quarter of 2019,
compared to 64.3% for the third quarter of 2018.
- GAAP net loss for the third quarter of 2019 was $(1.6) million,
or $(0.03) per basic share, compared to GAAP net loss of $(1.3)
million, or $(0.02) per basic share, for the third quarter of
2018.
- Non-GAAP net income for the third quarter of 2019 was $12.8
million, or $0.20 per diluted share, compared to non-GAAP net
income of $11.1 million, or $0.18 per diluted share, for the third
quarter of 2018.
- Adjusted EBITDA for the third quarter of 2019 was $15.0
million, or 18.0% of revenue, compared to $12.8 million, or 19.6%
of revenue, for the third quarter of 2018.
- GAAP operating cash flow for the third quarter of 2019 was
$17.7 million, compared to GAAP operating cash flow of $9.4 million
for the third quarter of 2018.
“We delivered strong third quarter results. Revenue of $83.8
million grew 28% year-over-year and was driven by our Enterprise
business, which delivered 36% growth in LTM Enterprise subscription
revenue. More than ever before we are seeing that enterprises have
learned to trust the cloud, and company leaders recognize that
transforming their customer service experience is a necessity. As
increasingly larger enterprises have begun to demand cloud contact
centers, we have responded by hiring more engineers and scaling our
team, resulting in a substantial increase in throughput and
innovation. In the third quarter we maintained our strong momentum
in strengthening the channel, and made excellent inroads expanding
internationally. Overall, our balanced approach to growth is
succeeding, and we believe the investments we have made in
leadership and talent position Five9 for sustained long-term
growth.”
- Rowan Trollope, CEO, Five9
Mike Burkland Transitions from Executive Chairman to Chairman
of the Board
Five9 also announced that former CEO and current Executive
Chairman Mike Burkland has transitioned from his role of Executive
Chairman to Chairman of the Board of Directors effective October
29, 2019. Mike Burkland served as CEO at Five9 for 10 years before
transitioning to Executive Chairman in December of 2017, after
being diagnosed with stage 4 cancer.
“It’s extremely gratifying for me to see Five9 achieve continued
success under Rowan’s leadership as CEO these last 18 months. Given
my confidence in his leadership and the business performance, I’ve
made the decision to transition to Chairman of the Board. I look
forward to continuing to work with Rowan and the team as we work to
take Five9 to even greater heights,” said Mike Burkland, Chairman
of the Board, Five9.
“Under Mike’s 10 years as CEO, Five9 grew from an early-stage
private company to a market leading public company in the cloud
contact center software market. I would like to thank Mike for his
tremendous leadership here at Five9 and look forward to his
continued service as Chairman of the Board,” said Rowan Trollope,
CEO, Five9.
Business Outlook
- For the full year 2019, Five9 expects to report:
- Revenue in the range of $321.7 to $322.7 million, up from the
prior guidance range of $312.5 to $314.5 million that was
previously provided on July 31, 2019.
- GAAP net loss in the range of $(6.8) to $(5.8) million or
$(0.11) to $(0.10) per basic share, improved from the prior
guidance range of $(12.0) to $(10.0) million or $(0.20) to $(0.16)
per basic share, that was previously provided on July 31,
2019.
- Non-GAAP net income in the range of $48.8 to $49.8 million or
$0.77 to $0.78 per diluted share, improved from the prior guidance
range of $44.7 to $46.7 million or $0.70 to $0.73 per diluted
share, that was previously provided on July 31, 2019.
- For the fourth quarter of 2019, Five9 expects to report:
- Revenue in the range of $86.0 to $87.0 million.
- GAAP net loss in the range of $(1.4) to $(0.4) million, or
$(0.02) to $(0.01) per basic share.
- Non-GAAP net income in the range of $13.7 to $14.7 million, or
$0.21 to $0.23 per diluted share.
Conference Call Details
Five9 will discuss its third quarter 2019 results today,
November 5, 2019, via teleconference at 4:30 p.m. Eastern Time. To
access the call (ID 9015206), please dial: 800-263-0877 or
786-460-7199. An audio replay of the call will be available through
November 19, 2019 by dialing 888-203-1112 or 719-457-0820 and
entering access code 9015206. 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 web-site 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 and adjusted gross margin by adding back the following items
to gross profit: depreciation, intangibles amortization and
stock-based compensation. We calculate adjusted EBITDA by adding
back or removing the following items to or from GAAP net loss:
depreciation and amortization, stock-based compensation, interest
expense, interest (income) and other, non-recurring litigation
settlement costs and related indemnification fees, and provision
for income taxes. We calculate non-GAAP operating income as
operating income excluding stock-based compensation, intangibles
amortization, and non-recurring litigation settlement costs and
related indemnification fees. We calculate non-GAAP net income as
GAAP net loss excluding stock-based compensation, intangibles
amortization, amortization of debt discount and issuance costs,
amortization of discount and issuance costs on convertible senior
notes, non-recurring litigation settlement costs and related
indemnification fees, and gain on sale of convertible note held for
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 expectations for
future growth, our go-to-market capabilities, our international
expansion, product innovation and throughput, business momentum,
and the fourth quarter and full year 2019 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, including as a result of the
timing and success of new product and feature introductions by us,
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, our clients’ data, their customers’ 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 involve
numerous competitors and 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 have established, and are continuing to
increase, our 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 and any failure by these service
providers to provide reliable services could cause us to lose
clients and subject us to claims for credits or damages, among
other things; (xiv) we have a history of losses and we may be
unable to achieve or sustain profitability; (xv) the contact center
software solutions market is subject to rapid technological change,
and we must develop and sell incremental and new products in order
to maintain and grow our business; (xvi) we may not be able to
secure additional financing on favorable terms, or at all, to meet
our future capital needs; (xvii) failure to comply with laws and
regulations could harm our business and our reputation; (xviii) we
may not have sufficient cash to service our convertible senior
notes and repay such notes, if required; and (xix) 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 and 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 contact center software for
the intelligent contact center space, bringing the power of cloud
innovation to customers and facilitating more than five billion
call minutes annually. Five9 provides end-to-end solutions with
omnichannel routing, analytics, WFO and AI to increase agent
productivity and deliver tangible business results. The Five9
Genius platform is reliable, secure, compliant and scalable;
designed to create exceptional personalized customer experiences.
For more information, visit www.five9.com.
FIVE9, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In thousands)
(Unaudited)
September 30, 2019
December 31, 2018
ASSETS
Current assets:
Cash and cash equivalents
$
120,573
$
81,912
Marketable investments
200,385
209,907
Accounts receivable, net
31,407
24,797
Prepaid expenses and other current
assets
11,140
8,014
Deferred contract acquisition costs
11,947
9,372
Total current assets
375,452
334,002
Property and equipment, net
28,399
25,885
Operating lease right-of-use assets
8,933
—
Intangible assets, net
367
631
Goodwill
11,798
11,798
Other assets
1,100
836
Deferred contract acquisition costs — less
current portion
27,975
21,514
Total assets
$
454,024
$
394,666
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Accounts payable
$
6,757
$
7,010
Accrued and other current liabilities
20,141
13,771
Operating lease liabilities
5,010
—
Accrued federal fees
1,981
1,434
Sales tax liabilities
1,435
1,741
Finance lease liabilities
4,457
6,647
Deferred revenue
21,858
17,391
Total current liabilities
61,639
47,994
Convertible senior notes
206,301
196,763
Sales tax liabilities — less current
portion
833
841
Operating lease liabilities — less current
portion
4,530
—
Finance lease liabilities — less current
portion
1,516
4,509
Other long-term liabilities
1,234
1,811
Total liabilities
276,053
251,918
Stockholders’ equity:
Common stock
61
59
Additional paid-in capital
334,568
294,279
Accumulated other comprehensive income
(loss)
227
(93
)
Accumulated deficit
(156,885
)
(151,497
)
Total stockholders’ equity
177,971
142,748
Total liabilities and stockholders’
equity
$
454,024
$
394,666
FIVE9, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(In thousands, except per share
data)
(Unaudited)
Three Months Ended
Nine Months Ended
September 30, 2019
September 30, 2018
September 30, 2019
September 30, 2018
Revenue
$
83,769
$
65,304
$
235,743
$
185,329
Cost of revenue
34,472
26,179
96,571
75,695
Gross profit
49,297
39,125
139,172
109,634
Operating expenses:
Research and development
11,665
9,582
33,022
25,721
Sales and marketing
25,014
17,818
69,965
53,208
General and administrative
12,146
10,746
35,950
29,682
Total operating expenses
48,825
38,146
138,937
108,611
Income from operations
472
979
235
1,023
Other income (expense), net:
Interest expense
(3,486
)
(3,595
)
(10,288
)
(6,783
)
Interest income and other
1,460
1,352
4,695
1,956
Total other income (expense), net
(2,026
)
(2,243
)
(5,593
)
(4,827
)
Loss before income taxes
(1,554
)
(1,264
)
(5,358
)
(3,804
)
Provision for income taxes
50
41
30
150
Net loss
$
(1,604
)
$
(1,305
)
$
(5,388
)
$
(3,954
)
Net loss per share:
Basic and diluted
$
(0.03
)
$
(0.02
)
$
(0.09
)
$
(0.07
)
Shares used in computing net loss per
share:
Basic and diluted
60,781
58,454
60,074
57,790
FIVE9, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended
September 30, 2019
September 30, 2018
Cash flows from operating
activities:
Net loss
$
(5,388
)
$
(3,954
)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization
10,050
7,436
Amortization of operating lease
right-of-use assets
3,420
—
Amortization of premium on marketable
investments
(1,036
)
(317
)
Provision for doubtful accounts
78
81
Stock-based compensation
30,197
20,991
Gain on sale of convertible note held for
investment
(217
)
(312
)
Amortization of discount and issuance
costs on convertible senior notes
9,484
4,782
Others
2
74
Changes in operating assets and
liabilities:
Accounts receivable
(6,677
)
(4,931
)
Prepaid expenses and other current
assets
(3,172
)
(2,755
)
Deferred contract acquisition costs
(9,035
)
(5,094
)
Other assets
(264
)
68
Accounts payable
100
307
Accrued and other current liabilities
3,522
2,575
Accrued federal fees and sales tax
liability
233
366
Deferred revenue
4,391
3,910
Other liabilities
(33
)
(75
)
Net cash provided by operating
activities
35,655
23,152
Cash flows from investing
activities:
Purchases of marketable investments
(274,401
)
(203,953
)
Proceeds from maturities of marketable
investments
285,281
4,047
Purchases of property and equipment
(12,776
)
(4,503
)
Proceeds from sale of convertible note
held for investment
217
1,923
Net cash used in investing activities
(1,679
)
(202,486
)
Cash flows from financing
activities:
Proceeds from issuance of convertible
senior notes, net of issuance costs paid of $8,036
—
250,714
Payments for capped call transactions
—
(31,412
)
Proceeds from exercise of common stock
options
6,097
7,111
Proceeds from sale of common stock under
ESPP
3,996
2,884
Repayments on revolving line of credit
—
(32,594
)
Payments of notes payable
—
(318
)
Payments of finance leases
(5,408
)
(6,379
)
Net cash provided by financing
activities
4,685
190,006
Net increase in cash and cash
equivalents
38,661
10,672
Cash and cash equivalents:
Beginning of period
81,912
68,947
End of period
$
120,573
$
79,619
FIVE9, INC.
RECONCILIATION OF GAAP GROSS
PROFIT TO ADJUSTED GROSS PROFIT
(In thousands, except
percentages)
(Unaudited)
Three Months Ended
Nine Months Ended
September 30, 2019
September 30, 2018
September 30, 2019
September 30, 2018
GAAP gross profit
$
49,297
$
39,125
$
139,172
$
109,634
GAAP gross margin
58.8
%
59.9
%
59.0
%
59.2
%
Non-GAAP adjustments:
Depreciation
2,514
1,933
7,208
5,415
Intangibles amortization
88
88
264
264
Stock-based compensation
1,702
860
4,589
2,391
Adjusted gross profit
$
53,601
$
42,006
$
151,233
$
117,704
Adjusted gross margin
64.0
%
64.3
%
64.2
%
63.5
%
FIVE9, INC.
RECONCILIATION OF GAAP NET
LOSS TO ADJUSTED EBITDA
(In thousands, except
percentages)
(Unaudited)
Three Months Ended
Nine Months Ended
September 30, 2019
September 30, 2018
September 30, 2019
September 30, 2018
GAAP net loss
$
(1,604
)
$
(1,305
)
$
(5,388
)
$
(3,954
)
Non-GAAP adjustments:
Depreciation and amortization
3,497
2,667
10,050
7,436
Stock-based compensation
11,075
8,869
30,197
20,991
Interest expense
3,486
3,595
10,288
6,783
Interest income and other
(1,460
)
(1,352
)
(4,695
)
(1,956
)
Legal settlement
—
—
420
—
Legal and indemnification fees related to
settlement
—
258
356
499
Provision for income taxes
50
41
30
150
Adjusted EBITDA
$
15,044
$
12,773
$
41,258
$
29,949
Adjusted EBITDA as % of revenue
18.0
%
19.6
%
17.5
%
16.2
%
FIVE9, INC.
RECONCILIATION OF GAAP
OPERATING INCOME TO NON-GAAP OPERATING INCOME
(In thousands)
(Unaudited)
Three Months Ended
Nine Months Ended
September 30, 2019
September 30, 2018
September 30, 2019
September 30, 2018
Income from operations
$
472
$
979
$
235
$
1,023
Non-GAAP adjustments:
Stock-based compensation
11,075
8,869
30,197
20,991
Intangibles amortization
88
117
264
349
Legal settlement
—
—
420
—
Legal and indemnification fees related to
settlement
—
258
356
499
Non-GAAP operating income
$
11,635
$
10,223
$
31,472
$
22,862
FIVE9, INC.
RECONCILIATION OF GAAP NET
LOSS TO NON-GAAP NET INCOME
(In thousands, except per share
data)
(Unaudited)
Three Months Ended
Nine Months Ended
September 30, 2019
September 30, 2018
September 30, 2019
September 30, 2018
GAAP net loss
$
(1,604
)
$
(1,305
)
$
(5,388
)
$
(3,954
)
Non-GAAP adjustments:
Stock-based compensation
11,075
8,869
30,197
20,991
Intangibles amortization
88
117
264
349
Amortization of debt discount and issuance
costs
—
89
—
129
Amortization of discount and issuance
costs on convertible senior notes
3,250
3,049
9,484
4,782
Legal settlement
—
—
420
—
Legal and indemnification fees related to
settlement
—
258
356
499
Gain on sale of convertible note held for
investment
—
—
(217
)
(352
)
Non-GAAP net income
$
12,809
$
11,077
$
35,116
$
22,444
GAAP net loss per share:
Basic and diluted
$
(0.03
)
$
(0.02
)
$
(0.09
)
$
(0.07
)
Non-GAAP net income per share:
Basic
$
0.21
$
0.19
$
0.58
$
0.39
Diluted
$
0.20
$
0.18
$
0.56
$
0.37
Shares used in computing GAAP net loss per
share:
Basic and diluted
60,781
58,454
60,074
57,790
Shares used in computing non-GAAP net
income per share:
Basic
60,781
58,454
60,074
57,790
Diluted
63,438
61,997
63,042
61,191
FIVE9, INC.
SUMMARY OF STOCK-BASED
COMPENSATION, DEPRECIATION AND INTANGIBLES AMORTIZATION
(In thousands)
(Unaudited)
Three Months Ended
September 30, 2019
September 30, 2018
Stock-Based
Compensation
Depreciation
Intangibles
Amortization
Stock-Based
Compensation
Depreciation
Intangibles
Amortization
Cost of revenue
$
1,702
$
2,514
$
88
$
860
$
1,933
$
88
Research and development
2,022
450
—
2,352
278
—
Sales and marketing
3,017
2
—
1,613
1
29
General and administrative
4,334
443
—
4,044
338
—
Total
$
11,075
$
3,409
$
88
$
8,869
$
2,550
$
117
Nine Months Ended
September 30, 2019
September 30, 2018
Stock-Based
Compensation
Depreciation
Intangibles
Amortization
Stock-Based
Compensation
Depreciation
Intangibles
Amortization
Cost of revenue
$
4,589
$
7,208
$
264
$
2,391
$
5,415
$
264
Research and development
5,399
1,340
—
4,293
705
—
Sales and marketing
8,015
4
—
4,560
4
85
General and administrative
12,194
1,234
—
9,747
963
—
Total
$
30,197
$
9,786
$
264
$
20,991
$
7,087
$
349
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
December 31, 2019
December 31, 2019
Low
High
Low
High
GAAP net loss
$
(1,379
)
$
(379
)
$
(6,765
)
$
(5,765
)
Non-GAAP adjustments:
Stock-based compensation
11,688
11,688
41,884
41,884
Intangibles amortization
87
87
351
351
Amortization of discount and issuance
costs on convertible senior notes
3,304
3,304
12,788
12,788
Legal settlement
—
—
420
420
Legal and indemnification fees related to
settlement
—
—
356
356
Gain on sale of convertible note held for
investment
—
—
(217
)
(217
)
Income tax expense effects (1)
—
—
—
—
Non-GAAP net income
$
13,700
$
14,700
$
48,817
$
49,817
GAAP net loss per share, basic and
diluted
$
(0.02
)
$
(0.01
)
$
(0.11
)
$
(0.10
)
Non-GAAP net income per share:
Basic
$
0.22
$
0.24
$
0.81
$
0.82
Diluted
$
0.21
$
0.23
$
0.77
$
0.78
Shares used in computing GAAP net loss per
share and non-GAAP net income per share:
Basic
62,000
62,000
60,600
60,600
Diluted
64,800
64,800
63,500
63,500
(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: https://www.businesswire.com/news/home/20191105005997/en/
Investor Relations Contacts: Five9, Inc. Barry
Zwarenstein Chief Financial Officer 925-201-2000 ext. 5959
IR@five9.com
The Blueshirt Group for Five9, Inc. Lisa Laukkanen 415-217-4967
Lisa@blueshirtgroup.com
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