SAN RAMON, Calif.--(BUSINESS WIRE)--Five9, Inc. (NASDAQ:FIVN), a leading provider of cloud contact center software for the digital enterprise, today reported results¹ for the second quarter ended June 30, 2018.

Second Quarter 2018 Financial Results

• Revenue for the second quarter of 2018 increased 28% to a record $61.1 million, compared to $47.7 million for the second quarter of 2017.
• GAAP gross margin was 59.4% for the second quarter of 2018, compared to 57.5% for the second quarter of 2017.
• Adjusted gross margin was 63.8% for the second quarter of 2018, compared to 62.3% for the second quarter of 2017.
• GAAP net loss for the second quarter of 2018 was $(2.0) million, or $(0.04) per basic share, compared to GAAP net loss of $(4.0) million, or $(0.07) per basic share, for the second quarter of 2017. GAAP net loss for the second quarter of 2018 included $1.7 million in amortization of discount and issuance costs on our 0.125% convertible senior notes issued in May 2018.
• Non-GAAP net income for the second quarter of 2018 was $6.9 million, or $0.11 per diluted share, compared to non-GAAP net loss of $(0.1) million, or $(0.00) per basic share, for the second quarter of 2017.
• Adjusted EBITDA for the second quarter of 2018 was $9.7 million, or a record 15.8% of revenue, compared to $3.0 million, or 6.2% of revenue, for the second quarter of 2017.
• GAAP operating cash flow for the second quarter of 2018 was $5.7 million, compared to GAAP operating cash flow of $0.1 million for the second quarter of 2017.

“Our second quarter results significantly exceeded our expectations on both the top and bottom line. Revenue growth accelerated in Q2, up 28% year-over-year to $61.1 million, and continued to be driven by our Enterprise business, which delivered 37% growth in LTM Enterprise subscription revenue. I am excited to be taking the helm at Five9 as contact centers undergo a massive technology-enabled transformation driven by the move to the cloud and the rise of artificial intelligence (AI). Our vision is to create a self-learning, intelligent contact center delivered through the cloud and powered by AI. Our recently announced Five9 Genius and partnership with Google, which brings practical AI enhancements to the contact center, is the first step in this direction. As Five9 continues to disrupt this massive market, we are also laser-focused on near-term execution.”

- Rowan Trollope, CEO, Five9

Business Outlook

The guidance below includes the expected impact of the adoption of ASC 606.

• For the full year 2018, Five9 expects to report:
  • Revenue in the range of $244.5 to $246.5 million, up from the prior guidance range of $235.8 to $238.8 million that was previously provided on May 1, 2018.
  • GAAP net loss in the range of $(14.0) to $(12.0) million, or $(0.24) to $(0.20) per basic share, compared to the prior guidance range of $(13.0) to $(10.0) million, or $(0.22) to $(0.17) per basic share, that was previously provided on May 1, 2018. GAAP net loss guidance includes $7.9 million in amortization of discount and issuance costs on our convertible senior notes, offset by $2.5 million net interest savings from the use of our convertible proceeds.
  • Non-GAAP net income in the range of $24.0 to $26.0 million, or $0.39 to $0.42 per diluted share, improved from the prior guidance range of $15.4 to $18.4 million, or $0.25 to $0.30 per diluted share, that was previously provided on May 1, 2018. Non-GAAP net income guidance includes $2.5 million net interest savings from the use of our convertible proceeds.

• For the third quarter of 2018, Five9 expects to report:
  • Revenue in the range of $61.0 to $62.0 million.
  • GAAP net loss in the range of $(8.1) to $(7.1) million, or a loss of $(0.14) to $(0.12) per basic share. GAAP net loss guidance includes $3.0 million in amortization of discount and issuance costs on our convertible senior notes, offset by $1.0 million net interest savings from the use of our convertible proceeds.
  • Non-GAAP net income in the range of $5.1 to $6.1 million, or $0.08 to $0.10 per diluted share. Non-GAAP net income guidance includes $1.0 million net interest savings from the use of our convertible proceeds.

¹On January 1, 2018, Five9 adopted Accounting Standards Codification (ASC) 606 “Revenue from Contracts with Customers” using the modified retrospective transition method. While the financial results for the second quarter of 2018 are presented under ASC 606, financial results for the second quarter of 2017 are presented under ASC 605. A reconciliation of the financial results for the second quarter of 2018 under ASC 606 and ASC 605 is presented in the “Reconciliation of ASC 605 to ASC 606” table included in this release.

Conference Call Details

Five9 will discuss its second quarter 2018 results today, August 6, 2018, via teleconference at 4:30 p.m. Eastern Time. To access the call (ID 6113370), please dial: 888-204-4368 or 323-794-2423. An audio replay of the call will be available through August 20, 2018 by dialing 888-203-1112 or 719-457-0820 and entering access code 6113370. 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 or removing 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 GAAP net loss: depreciation, amortization, interest expense, provision for income taxes, stock-based compensation expense, non-recurring litigation settlement costs 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 and non-recurring litigation settlement costs. We calculate non-GAAP net income (loss) as GAAP net loss excluding stock-based compensation expense, 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 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, business momentum, product positioning and company vision, the state of the cloud customer experience market, the industry shift to the cloud, and the third quarter 2018 and full year 2018 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 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 contact center software for the digital enterprise, bringing the power of cloud innovation to customers and facilitating more than three billion customer interactions 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 platform is reliable, secure, compliant, and scalable; designed to create exceptional personalized customer experiences. For more information, visit www.five9.com.