Item 1.01 Entry into a Material Definitive Agreement.
Convertible Notes and the Indenture
On May 21, 2020, Five9, Inc. (the “Company”) priced its private offering of $650 million in aggregate principal amount of 0.500% Convertible Senior Notes due 2025 (the “Notes”). On May 27, 2020, the Company completed the private offering of the Notes. The Notes are senior unsecured obligations of the Company. The Company granted the initial purchasers of the Notes a 13-day option to purchase up to an additional $97.5 million aggregate principal amount of the Notes on the same terms and conditions, which option has not been exercised as of the time of filing of this Current Report on Form 8-K.
The net proceeds from this offering were approximately $633.8 million, after deducting the initial purchasers’ discounts and commissions and the estimated offering expenses payable by the Company. The Company (i) used approximately $181.0 million of the net proceeds of the offering of the Notes and (ii) issued an aggregate of 2,723,582 shares of the its common stock to repurchase, exchange or otherwise retire $181.0 million aggregate amount of its outstanding 0.125% Convertible Senior Notes due 2023 (the “2023 Notes”). The Company also used approximately $78.7 million of the net proceeds of the offering of the Notes to pay the cost of the Capped Call Transactions described below. The Company intends to use the remainder of the net proceeds from the offering for working capital and other general corporate purposes.
In connection with the issuance of the Notes, the Company entered into an Indenture, dated May 27, 2020 (the “Indenture”), with U.S. Bank National Association, as trustee. The Indenture includes customary covenants and sets forth certain events of default after which the Notes may be declared immediately due and payable and sets forth certain types of bankruptcy or insolvency events of default involving the Company after which the Notes become automatically due and payable.
The Notes will mature on June 1, 2025, unless earlier converted, redeemed or repurchased in accordance with their terms. The Notes will bear interest from May 27, 2020 at a rate of 0.500% per year payable semi-annually in arrears on June 1 and December 1 of each year, beginning on December 1, 2020. The Notes will be convertible at the option of the holders at any time prior to the close of business on the business day immediately preceding March 1, 2025, only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on September 30, 2020 (and only during such calendar quarter), if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) during the five business day period after any five consecutive trading day period (the “Measurement Period”) in which the trading price (as defined in the Indenture) per $1,000 principal amount of Notes for each trading day of the Measurement Period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate in effect on each such trading day; (3) if the Company calls any or all of the Notes for redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date; or (4) upon the occurrence of specified corporate events. On or after March 1, 2025 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their Notes, in multiples of $1,000 principal amount, at the option of the holder regardless of the foregoing circumstances.
Upon conversion, the Company may satisfy its conversion obligation by paying or delivering, as the case may be, cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the Company’s election, in the manner and subject to the terms and conditions provided in the Indenture. The initial conversion rate for the Notes will be 7.4437 shares of the Company’s common stock per $1,000 principal amount of Notes, which is equivalent to an initial conversion price of approximately $134.34 per share of the Company’s common stock. The initial conversion price represents a premium of approximately 30% to the $103.34 per share closing price of the Company’s common stock on The Nasdaq Global Market on May 21, 2020. The conversion rate is subject to adjustment under certain circumstances in accordance with the terms of the Indenture. In connection with certain corporate events or if the Company issues a notice of redemption, it will, under certain circumstances, increase the conversion rate for holders who elect to convert their notes in connection with such corporate event or during the relevant redemption period.
The Company may not redeem the Notes prior to June 6, 2023. The Company may redeem for cash all or any portion of the Notes, at its option, on or after June 6, 2023 and prior to March 1, 2025 if the last reported sale price of its common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending not more than two trading days immediately preceding the date on which it provides notice of redemption at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the Notes.
If the Company undergoes a fundamental change (as defined in the Indenture), holders may require the Company to repurchase for cash all or any portion of their Notes at a fundamental change repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.
The description of the Indenture contained herein is qualified in its entirety by reference to the text of the Indenture filed as Exhibit 4.1 to this Current Report on Form 8-K and which is incorporated herein by reference.
Capped Call Transactions
In connection with the offering of the Notes, on May 21, 2020 and May 27, 2020, the Company entered into privately negotiated capped call transactions (the “Capped Call Transactions”) with one or more of the initial purchasers or other financial institutions and/or their affiliates (the “Option Counterparties”) pursuant to capped call confirmations in substantially the form filed as Exhibit 10.1 to this Current Report on Form 8-K and which is incorporated herein by reference. The Capped Call Transactions are expected generally to reduce the potential dilution to the Company’s common stock upon any conversion of the Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of converted Notes, as the case may be, with such reduction and/or offset subject to a cap based on the cap price. The cap price of the Capped Call Transactions will initially be $206.68 per share, which represents a premium of 100% over the last reported sale price of the Company’s common stock of $103.34 per share on May 21, 2020, and is subject to certain adjustments under the terms of the Capped Call Transactions.
The foregoing description of the Capped Call Transactions contained herein is qualified in its entirety by reference to the text of the form of capped call confirmation relating to the Capped Call Transactions filed as Exhibit 10.1 to this Current Report on Form 8-K and which is incorporated herein by reference.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
The information set forth under Item 1.01 of this Current Report on Form 8-K is incorporated by reference in this Item 2.03.
Item 3.02 Unregistered Sales of Equity Securities.
The information set forth under Item 1.01 of this Current Report on Form 8-K is incorporated by reference in this Item 3.02.
Convertible Notes
The Company offered and sold the Notes to the initial purchasers in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933 (the “Securities Act”), and for initial resale by the initial purchasers to qualified institutional buyers pursuant to the exemption from registration provided by Rule 144A under the Securities Act. The Company relied on these exemptions based in part on representations made by the initial purchasers in the purchase agreement pursuant to which the Company sold the Notes to the initial purchasers. Neither the Notes nor the shares of the Company’s common stock issuable upon conversion of the Notes, if any, have been registered under the Securities Act and these securities may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.
Repurchase, Exchange or Retirement of 2023 Notes
The shares of common stock issued to holders of the 2023 Notes in connection with the repurchase exchange or retirement of the 2023 Notes were issued in reliance upon Section 4(a)(2) of the Securities Act in transactions not involving any public offering. The Company relied on this exemption from registration based in part on representations made by the holders of the 2023 Notes.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
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Exhibit No.
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Description
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104
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The cover page from this Current Report on Form 8-K, formatted in Inline XBRL.
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