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

• Revenue for the second quarter of 2017 increased 23% to a record $47.7 million, compared to $38.9 million for the second quarter of 2016.
• GAAP gross margin was 57.5% for the second quarter of 2017, compared to 56.9% for the second quarter of 2016.
• Adjusted gross margin was 62.3% for the second quarter of 2017, compared to 61.9% for the second quarter of 2016.
• GAAP net loss for the second quarter of 2017 was $(4.0) million, or $(0.07) per share, compared to a GAAP net loss of $(3.5) million, or $(0.07) per share, for the second quarter of 2016.
• Non-GAAP net loss for the second quarter of 2017 was $(0.07) million, or $(0.00) per share, compared to a non-GAAP net loss of $(0.8) million, or $(0.02) per share, for the second quarter of 2016.
• Adjusted EBITDA for the second quarter of 2017 was $3.0 million, or 6.2% of revenue, compared to $2.3 million, or 5.9% of revenue, for the second quarter of 2016.
• GAAP operating cash flow for the second quarter of 2017 was $0.08 million, compared to GAAP operating cash flow of $2.2 million for the second quarter of 2016. Operating cash flow in the second quarter of 2017 was adversely impacted by the $1.7 million settlement payment, recorded in the first quarter of 2017, regarding a successor liability from a 2013 acquisition.

"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

• For the full year 2017, Five9 expects to report:
  • Revenue in the range of $193.5 to $195.5 million, up from the prior guidance range of $190.6 to $193.6 million that was previously provided on May 3, 2017.
  • GAAP net loss in the range of $(15.3) to $(17.3) million, or $(0.28) to $(0.32) per share, improved from the prior guidance range of $(16.8) to $(19.8) million, or $(0.31) to $(0.37) per share, that was previously provided on May 3, 2017.
  • Non-GAAP net income or loss in the range of $1.8 to $(0.2) million, or $0.03 to $(0.00) per share, improved from the prior guidance range of $0.5 to $(2.5) million, or $0.01 to $(0.05) per share, that was previously provided on May 3, 2017.
• For the third quarter of 2017, Five9 expects to report:
  • Revenue in the range of $47.5 to $48.5 million.
  • GAAP net loss in the range of $(4.3) to $(5.3) million, or a loss of $(0.08) to $(0.10) per share.
  • Non-GAAP net loss in the range of $(0.2) to $(1.2) million, or a loss of $(0.00) to $(0.02) per share.

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

View source version on businesswire.com: http://www.businesswire.com/news/home/20170803006226/en/

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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