Five9
Aug 3, 2017

Five9 Reports Second Quarter Revenue Growth of 23%

39% Growth in LTM Enterprise Subscription Revenue

Positive Operating Cash Flow for Sixth Consecutive Quarter

Raises 2017 Guidance for Revenue and Bottom Line

SAN RAMON, Calif.--(BUSINESS WIRE)-- 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

"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

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-Based
Compensation

  Depreciation  

Intangibles
Amortization

Stock-Based
Compensation

  Depreciation  

Intangibles
Amortization

 
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-Based
Compensation

Depreciation

Intangibles
Amortization

Stock-Based
Compensation

Depreciation

Intangibles
Amortization

 
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
 

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

Source: Five9, Inc.

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