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2014.06.30-8KEarningsRelease


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 8-K
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 4, 2014 
FIVE9, INC.
(Exact name of Registrant as specified in its charter)
 
 
 
 
 
Delaware
 
001-36383
94-3394123
(State or other jurisdiction
of incorporation)
 
(Commission
File No.)
(I.R.S. Employer
Identification No.)
 
 
Bishop Ranch 8
4000 Executive Parkway, Suite 400
San Ramon, California 94583
(Address of principal executive offices and Zip Code)
Registrant’s telephone number, including area code: (925) 201-2000
Not Applicable
(Former name or former address if changed since last report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))





Item 2.02 Results of Operations and Financial Condition.
On August 4, 2014, Five9, Inc. (the “Company”) announced its financial results for the fiscal quarter ended June 30, 2014. The full text of the press release issued in connection with the announcement is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
The information in Item 2.02 of this Current Report on Form 8-K (including Exhibit 99.1 furnished herewith) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such a filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
 
Exhibit No.
  
Description
 
 
99.1
  
Press Release issued by the Company on August 4, 2014




SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
 
 
 
 
 
 
FIVE9, INC.
 
 
 
 
 
Date: August 4, 2014
 
 
 
 
 
By:
 
/s/ Barry Zwarenstein
 
 
 
 
 
 
 
 
Barry Zwarenstein

 
 
 
 
 
 
 
 
Chief Financial Officer




INDEX TO EXHIBITS
 
Exhibit No.
  
Description
 
 
99.1
  
Press Release issued by the Company on August 4, 2014


Ex 99.1 Earnings Release Q2'14

Exhibit 99.1

Five9 Reports Second Quarter 2014 Results
Revenue Increased 22% Year-Over-Year
SAN RAMON, CALIF. - August 4, 2014 - Five9, Inc. (NASDAQ: FIVN), a leading provider of cloud contact center software, today reported results for the second quarter ended June 30, 2014.
“Our second quarter results demonstrated the ongoing strong demand for our integrated cloud-based software solutions. We experienced solid traction across our key drivers with continued success in adding new customers. Our momentum in customer wins continued to be fueled by strong cloud adoption in contact centers as increasingly more companies are drawn to the benefits of the cloud. The response to the Five9 Summer Release 2014 has been extremely positive. We believe that the combination of our huge market opportunity and compelling secular trends, coupled with our innovative multichannel cloud contact center software, position Five9 very well for long-term growth.”
- Mike Burkland, President and CEO, Five9

Second Quarter 2014 Financial Results
•
Total revenue for the second quarter of 2014 increased 22% to $24.7 million compared to $20.3 million for the second quarter of 2013.
•
Annual dollar-based retention rate for the period ended June 30, 2014 was 98%.
•
GAAP gross margin was 45.4% in the second quarter of 2014 compared to 39.8% for the same period in 2013.
•
Adjusted gross margin was 51.5% for the second quarter of 2014 compared to 43.7% for the same period in 2013.
•
Adjusted EBITDA for the second quarter of 2014 was a loss of $(6.9) million, compared to a loss of $(6.1) million for the second quarter of 2013.
•
GAAP net loss for the second quarter of 2014 was $(8.7) million, or $(0.18) per share, compared to a GAAP net loss of $(8.3) million, or $(2.25) per share, for the second quarter of 2013. Included in the GAAP results for the second quarter of 2014 was a reversal of contingent sales tax liability of $2.8 million following a favorable ruling from a state revenue authority. The $2.8 million was accrued progressively in general and administrative expense on a quarterly basis from 2011 through the first quarter of 2014. This release of liability reduced the Company's GAAP net loss per basic and diluted share by $0.06 for the three months ended June 30, 2014 and $0.10 for the six months ended June 30, 2014.
•
Non-GAAP net loss for the second quarter of 2014 was $(9.5) million, or $(0.20) per share, compared to a Non-GAAP net loss of $(7.2) million, or $(1.95) per share, for the second quarter of 2013.


                                       



A reconciliation of the non-GAAP financial measures to their related GAAP financial measures is set forth below.
Recent Business Highlights
•
Introduced the latest version of our cloud contact center software. The Five9 Summer Release 2014 includes new native multichannel applications that support social, mobile, chat and email interactions. The new multichannel capabilities are powered by Five9 Connect, a unique intelligent technology layer that helps contact centers evaluate, prioritize and route requests. Additional major enhancements provide more mobility for supervisors and customized dashboards for better monitoring and reporting.
•
Continued momentum in adding new customers, with key enterprise wins in industries such as Financial Services, Healthcare and Education.
•
Enhanced cloud infrastructure to deliver reliable and scalable contact center software to clients. To complement our state-of-the-art data centers, Five9 upgraded its network framework for both advanced storage and carrier infrastructure, made further improvements in network security and updated the 24x7 Five9 Network Operations Centers (NOC) to provide even more visibility into application performance.
•
Named one of the fastest growing companies on Deloitte’s Technology Fast 500TM. Deloitte ranked Five9 number 242 on the list of the 500 fastest growing technology companies in North America, based on strong year over year revenue growth.
Business Outlook
•
For the third quarter of 2014, Five9 expects to report:
◦
Revenue in the range of $24.0 to $25.0 million
◦
GAAP net loss in the range of $(11.2) to $(12.2) million
◦
Non-GAAP net loss in the range of $(9.2) to $(10.2) million

•
For the full year 2014, Five9 expects to report:
◦
Revenue in the range of $99.0 to $101.0 million
◦
GAAP net loss of $(38.9) to $(40.5) million
◦
Non-GAAP net loss in the range of $(36.2) to $(37.8) million
Conference Call Details
Five9 will discuss its second quarter 2014 results today, August 4, 2014, via teleconference at 4:30 p.m. Eastern Time. To access the call (ID 2036796), please dial: 888-427-9414 or 719-325-2493. An audio replay of the call will be available through August 18, 2014 by dialing 888-203-1112 or 719-457-0820 and entering access code 2036796. 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. 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 unusual events, as well as factors that do not directly affect what we consider to be our core operating performance. 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 for supplemental informational purposes only for 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 to the most directly comparable GAAP measure 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 and statements 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) we may be unable to attract new clients or sell additional services and functionality to our existing clients; (iii) our recent rapid growth may not be indicative of our future growth and we may fail to manage our growth effectively; (iv) the markets in which we participate are highly competitive and we may be unable to compete effectively; (v) we may be unable to manage our technical operations infrastructure, which could cause our existing clients to experience service outages, cause our new clients to experience delays in the deployment of our solution and subject us to, among other things, claims for credits or damages; (vi) a decline in our dollar-based retention rate could cause our revenues and gross margins to decrease and our net loss to increase and we may be required to spend more money to grow our client base to maintain our revenues; (vii) sales of our solutions to larger organizations may require longer sales and implementation cycles and we may be unable to offer the configuration and integration services or customized features and functions required by larger organizations, which could delay or prevent sales of our solution to them; (viii) downturns or upturns in new sales will not be immediately reflected in our operating results and may be difficult to discern; (ix) third-party telecommunications and internet service providers on which we rely may fail to provide our clients and their customers with reliable telecommunication services and connectivity to our cloud contact center software; (x) we may be unable to achieve or sustain profitability; (xi) we may be unable to secure additional financing on favorable terms, or at all, to meet our future capital needs; and (xii) 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, 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, delivering software to help organizations of every size transition from premise-based software to the cloud. With its extensive expertise, technology, and ecosystem of partners, Five9 delivers secure, reliable, scalable cloud contact center software to help businesses create

                                       



exceptional customer experiences, increase agent productivity and deliver tangible results. For more information visit www.five9.com.

                                       




Investor Relations Contact:

Barry Zwarenstein
Chief Financial Officer
Five9, Inc.
925-201-2000 ext. 5959
IR@five9.com

Lisa Laukkanen
The Blueshirt Group for Five9, Inc.
415-217-4967
Lisa@blueshirtgroup.com


# # #



                                       



CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)
 
 
June 30, 2014
 
December 31, 2013
ASSETS
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
61,577

 
$
17,748

Short-term investments
 
29,995

 
—

Accounts receivable, net
 
7,098

 
6,970

Prepaid expenses and other current assets
 
2,779

 
1,651

Total current assets
 
101,449

 
26,369

Property and equipment, net
 
11,521

 
11,607

Intangible assets, net
 
2,809

 
3,065

Goodwill
 
11,798

 
11,798

Other assets
 
1,350

 
3,439

Total assets
 
$
128,927

 
$
56,278

 
 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
 
 
 
 
Current liabilities:
 
 
 
 
Accounts payable
 
$
3,373

 
$
4,306

Accrued and other current liabilities
 
8,152

 
5,929

Accrued federal fees
 
4,361

 
4,206

Sales tax liability
 
127

 
98

Revolving line of credit
 
12,500

 
—

Notes payable
 
2,573

 
1,522

Capital leases
 
4,742

 
4,857

Deferred revenue
 
5,009

 
4,375

Total current liabilities
 
40,837

 
25,293

Revolving line of credit — less current portion
 
—

 
12,500

Sales tax liability — less current portion
 
2,358

 
5,350

Notes payable — less current portion
 
24,247

 
7,095

Capital leases — less current portion
 
3,355

 
4,358

Convertible preferred and common stock warrant liabilities
 
—

 
3,935

Other long-term liabilities
 
613

 
715

Total liabilities
 
71,410

 
59,246

Stockholders’ equity (deficit):
 
 
 
 
Convertible preferred stock
 
—

 
53,734

Common stock
 
48

 
5

Additional paid-in capital
 
165,244

 
34,089

Accumulated deficit
 
(107,775
)
 
(90,796
)
Total stockholders’ equity (deficit)
 
57,517

 
(2,968
)
Total liabilities and stockholders’ equity (deficit)
 
$
128,927

 
$
56,278




                                       



CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share data)
 
 
Three Months Ended
 
Six Months Ended
 
 
June 30, 2014
 
June 30, 2013
 
June 30, 2014
 
June 30, 2013
Revenue
 
$
24,685

 
$
20,283

 
$
48,959

 
$
39,398

Cost of revenue
 
13,469

 
12,215

 
26,617

 
23,896

Gross profit
 
11,216

 
8,068

 
22,342

 
15,502

Operating expenses:
 
 
 
 
 
 
 
 
Research and development
 
5,554

 
4,106

 
10,779

 
8,260

Sales and marketing
 
9,674

 
7,227

 
18,696

 
13,374

General and administrative
 
3,515

 
4,052

 
9,686

 
7,877

Total operating expenses
 
18,743

 
15,385

 
39,161

 
29,511

Loss from operations
 
(7,527
)
 
(7,317
)
 
(16,819
)
 
(14,009
)
Other income (expense), net:
 
 
 
 
 
 
 
 
Change in fair value of convertible preferred and common stock warrant liabilities
 
—

 
(785
)
 
1,745

 
(555
)
Interest expense
 
(1,092
)
 
(215
)
 
(1,870
)
 
(393
)
Interest income and other
 
(28
)
 
32

 
4

 
34

Total other income (expense), net
 
(1,120
)
 
(968
)
 
(121
)
 
(914
)
Loss before provision for income taxes
 
(8,647
)
 
(8,285
)
 
(16,940
)
 
(14,923
)
Provision for income taxes
 
12

 
5

 
39

 
24

Net loss
 
$
(8,659
)
 
$
(8,290
)
 
$
(16,979
)
 
$
(14,947
)
Net loss per share:
 
 
 
 
 
 
 
 
Basic and diluted
 
$
(0.18
)
 
$
(2.25
)
 
$
(0.64
)
 
$
(4.14
)
Shares used in computing net loss per share:
 
 
 
 
 
 
 
 
Basic and diluted
 
46,898

 
3,684

 
26,367

 
3,610




                                       



CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
 
 
Six Months Ended
 
 
June 30, 2014
 
June 30, 2013
Cash flows from operating activities:
 
 
 
 
Net loss
 
$
(16,979
)
 
$
(14,947
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
 
Depreciation and amortization
 
3,291

 
1,839

Provision for doubtful accounts
 
39

 
19

Stock-based compensation
 
2,919

 
568

Loss on the disposal of property and equipment
 
—

 
4

Non-cash interest expense
 
129

 
—

Changes in fair value of convertible preferred and common stock warrant liabilities
 
(1,745
)
 
555

Accretion of discounts on short-term investments
 
(2
)
 
—

Changes in operating assets and liabilities:
 
 
 
 
Accounts receivable
 
(126
)
 
(206
)
Prepaid expenses and other current assets
 
(1,070
)
 
(478
)
Other assets
 
(55
)
 
(192
)
Accounts payable
 
(508
)
 
577

Accrued and other current liabilities
 
1,985

 
841

Accrued federal fees and sales tax liability
 
(2,808
)
 
1,210

Deferred revenue
 
634

 
213

Other liabilities
 
(102
)
 
173

Net cash used in operating activities
 
(14,398
)
 
(9,824
)
Cash flows from investing activities:
 
 
 
 
Purchases of property and equipment
 
(336
)
 
(125
)
Restricted cash
 
(25
)
 
—

Purchase of short-term investments
 
(29,993
)
 
—

Proceeds from sale of short-term investments
 
—

 
2,490

Net cash provided by (used in) investing activities
 
(30,354
)
 
2,365

Cash flows from financing activities:
 
 
 
 
Net proceeds from initial public offering, net of payments for offering costs
 
71,459

 
—

Payments for deferred offering costs
 
—

 
(306
)
Net proceeds from issuance of convertible preferred stock
 
—

 
21,794

Proceeds from exercise of common stock options and warrants
 
705

 
159

Proceeds from notes payable
 
19,561

 
—

Repayments of notes payable
 
(519
)
 
(322
)
Payments of capital leases
 
(2,625
)
 
(2,085
)
Proceeds from revolving line of credit
 
—

 
6,000

Repayments on revolving line of credit
 
—

 
(6,000
)
Net cash provided by financing activities
 
88,581

 
19,240

Net increase in cash and cash equivalents
 
43,829

 
11,781

Cash and cash equivalents:
 
 
 
 
Beginning of period
 
17,748

 
5,961

End of period
 
$
61,577

 
$
17,742




                                       



Reconciliation of GAAP Gross Profit to Adjusted Gross Profit
(Unaudited, in thousands)
 
 
Three Months Ended
 
Six Months Ended
 
 
June 30, 2014
 
June 30, 2013
 
June 30, 2014
 
June 30, 2013
 
 
 
 
 
 
 
 
 
GAAP gross profit
 
$
11,216

 
$
8,068

 
$
22,342

 
$
15,502

GAAP gross margin
 
45.4
%
 
39.8
%
 
45.6
%
 
39.3
%
Non-GAAP adjustments:
 
 
 
 
 
 
 
 
Depreciation
 
1,285

 
752

 
2,399

 
1,609

Intangibles amortization
 
88

 
—

 
176

 
—

Stock-based compensation
 
121

 
44

 
208

 
76

Adjusted gross profit
 
$
12,710

 
$
8,864

 
$
25,125

 
$
17,187

Adjusted gross margin
 
51.5
%
 
43.7
%
 
51.3
%
 
43.6
%



Reconciliation of GAAP Net Loss to Adjusted EBITDA
(Unaudited, in thousands)
 
 
Three Months Ended
 
Six Months Ended
 
 
June 30, 2014
 
June 30, 2013
 
June 30, 2014
 
June 30, 2013
 
 
 
 
 
 
 
 
 
GAAP net loss
 
$
(8,659
)
 
$
(8,290
)
 
$
(16,979
)
 
$
(14,947
)
Non-GAAP adjustments:
 
 
 
 
 
 
 
 
Depreciation and amortization
 
1,699

 
881

 
3,291

 
1,839

Stock-based compensation
 
1,723

 
304

 
2,919

 
568

Interest expense
 
1,092

 
215

 
1,870

 
393

Interest income and other
 
28

 
(32
)
 
(4
)
 
(34
)
Provision for income taxes
 
12

 
5

 
39

 
24

Reversal of contingent sales tax liability (G&A)
 
(2,766
)
 
—

 
(2,766
)
 
—

Change in fair value of convertible preferred and common stock warrant liabilities
 
—

 
785

 
(1,745
)
 
555

Adjusted EBITDA
 
$
(6,871
)
 
$
(6,132
)
 
$
(13,375
)
 
$
(11,602
)


                                       



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, 2014
 
June 30, 2013
 
June 30, 2014
 
June 30, 2013
 
 
 
 
 
 
 
 
 
GAAP net loss
 
$
(8,659
)
 
$
(8,290
)
 
$
(16,979
)
 
$
(14,947
)
Non-GAAP adjustments:
 
 
 
 
 
 
 
 
Stock-based compensation
 
1,723

 
304

 
2,919

 
568

Intangibles amortization
 
128

 
—

 
256

 
—

Non-cash interest expense
 
78

 
—

 
129

 
—

Reversal of contingent sales tax liability (G&A)
 
(2,766
)
 
—

 
(2,766
)
 
—

Change in fair value of convertible preferred and common stock warrant liabilities
 
—

 
785

 
(1,745
)
 
555

Non-GAAP net loss
 
$
(9,496
)
 
$
(7,201
)
 
$
(18,186
)
 
$
(13,824
)
 
 
 
 
 
 
 
 
 
Non-GAAP net loss per share:
 
 
 
 
 
 
 
 
Basic and diluted
 
$
(0.20
)
 
$
(1.95
)
 
$
(0.69
)
 
$
(3.83
)
Shares used in computing non-GAAP net loss per share:
 
 
 
 
 
 
 
 
Basic and diluted
 
46,898

 
3,684

 
26,367

 
3,610




Summary of Stock-Based Compensation, Depreciation and Intangibles Amortization
(Unaudited, in thousands)
 
 
Three Months Ended
 
 
June 30, 2014
 
June 30, 2013
 
 
Stock-Based Compensation
 
Depreciation
 
Intangibles Amortization
 
Stock-Based Compensation
 
Depreciation
 
 
 
 
 
 
 
 
 
 
 
Cost of revenue
 
$
121

 
$
1,285

 
$
88

 
$
44

 
$
752

Research and development
 
471

 
50

 
—

 
49

 
54

Sales and marketing
 
368

 
20

 
28

 
134

 
14

General and administrative
 
763

 
216

 
12

 
77

 
61

Total
 
$
1,723

 
$
1,571

 
$
128

 
$
304

 
$
881

 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended
 
 
June 30, 2014
 
June 30, 2013
 
 
Stock-Based Compensation
 
Depreciation
 
Intangibles Amortization
 
Stock-Based Compensation
 
Depreciation
 
 
 
 
 
 
 
 
 
 
 
Cost of revenue
 
$
208

 
$
2,399

 
$
176

 
$
76

 
$
1,609

Research and development
 
821

 
96

 
—

 
102

 
98

Sales and marketing
 
694

 
40

 
56

 
239

 
25

General and administrative
 
1,196

 
500

 
24

 
151

 
107

Total
 
$
2,919

 
$
3,035

 
$
256

 
$
568

 
$
1,839




                                       



Reconciliation of GAAP Net Loss to Non-GAAP Net Loss – GUIDANCE
(Unaudited, in thousands)
 
 
Three Months Ending
 
Year Ending
 
 
September 30, 2014
 
December 31, 2014
 
 
Low
 
High
 
Low
 
High
 
 
 
 
 
 
 
 
 
GAAP net loss
 
$
(11,185
)
 
$
(12,185
)
 
$
(38,927
)
 
$
(40,527
)
Non-GAAP adjustments:
 
 
 
 
 
 
 
 
Stock-based compensation
 
1,774

 
1,774

 
6,428

 
6,428

Intangibles amortization
 
133

 
133

 
523

 
523

Non-cash interest expense
 
78

 
78

 
287

 
287

Reversal of contingent sales tax liability
 
—

 
—

 
(2,766
)
 
(2,766
)
Change in fair value of convertible preferred and common stock warrant liabilities
 
—

 
—

 
(1,745
)
 
(1,745
)
Non-GAAP net loss
 
$
(9,200
)
 
$
(10,200
)
 
$
(36,200
)
 
$
(37,800
)