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News Release

Five9 Reports First Quarter Revenue Growth of 27% to a Record $74.5 Million

 36% Growth in LTM Enterprise Subscription Revenue

Thirteenth Consecutive Quarter of Positive Operating Cash Flow at $11.2 Million

Raises 2019 Guidance for Both Revenue and Bottom Line

SAN RAMON, Calif. - May 1, 2019 - Five9, Inc. (NASDAQ:FIVN), a leading provider of cloud contact center software for the digital enterprise, today reported results for the first quarter ended March 31, 2019.

First Quarter 2019 Financial Results

  1. bsp;   Revenue for the first quarter of 2019 increased 27% to a record $74.5 million, compared to $58.9 million for the first quarter of 2018.
  2. GAAP gross margin was 58.6% for the first quarter of 2019, compared to 58.1% for the first quarter of 2018.
  3. Adjusted gross margin was 63.4% for the first quarter of 2019, compared to 62.3% for the first quarter of 2018.
  4. bsp;   GAAP net loss for the first quarter of 2019 was $(1.9) million, or $(0.03) per basic share, compared to GAAP net loss of $(0.6) million, or $(0.01) per basic share, for the first quarter of 2018.
  5. bsp;   Non-GAAP net income for the first quarter of 2019 was $10.0 million, or $0.16 per diluted share, compared to non-GAAP net income of $4.5 million, or $0.08 per diluted share, for the first quarter of 2018.
  6. bsp;   Adjusted EBITDA for the first quarter of 2019 was $11.8 million, or 15.9% of revenue, compared to $7.5 million, or 12.7% of revenue, for the first quarter of 2018.
  7. bsp;   GAAP operating cash flow for the first quarter of 2019 was $11.2 million, compared to GAAP operating cash flow of $8.0 million for the first quarter of 2018.

“We started off 2019 with a strong first quarter. Revenue of $74.5 million grew 27% year-over-year, a Q1 record growth rate as a public company, and continued to be driven by our Enterprise business, which delivered 36% growth in LTM Enterprise subscription revenue. We also enjoyed ongoing momentum on the technology front. Our Spring 2019 release provides new capabilities to even larger and more sophisticated enterprises as they customize their contact center technology to meet specific business requirements. With regards to AI, we continue to establish our leadership and demonstrated what we believe is an industry-first integration between Google and Salesforce at the Next conference.  As customer experience becomes an increasingly important spend category for IT, we see our role as a trusted partner to larger enterprises continuing to accelerate.”

- Rowan Trollope, CEO, Five9

 

Business Outlook

  1. bsp;   For the full year 2019, Five9 expects to report:
  2. nbsp;   Revenue in the range of $304.0 to $307.0 million, up from the prior guidance range of $298.5 to $301.5 million that was previously provided on February 19, 2019.
  3. GAAP net loss in the range of $(17.3) to $(14.3) million or $(0.29) to $(0.24) per basic share, improved from the prior guidance range of $(22.1) to $(19.1) million, or $(0.36) to $(0.31) per basic share, that was previously provided on February 19, 2019.
  4. Non-GAAP net income in the range of $39.3 to $42.3 million or $0.61 to $0.66 per diluted share, improved from the prior guidance range of $36.8 to $39.8 million, or $0.58 to $0.62 per diluted share, that was previously provided on February 19, 2019.
  5. bsp;   For the second quarter of 2019, Five9 expects to report:
  6. Revenue in the range of $72.0 to $73.0 million.
  7. GAAP net loss in the range of $(6.7) to $(5.7) million, or a loss of $(0.11) to $(0.09) per basic share.
  8. Non-GAAP net income in the range of $7.0 to $8.0 million, or $0.11 to $0.13 per diluted share.

 

Conference Call Details

Five9 will discuss its first quarter 2019 results today, May 1, 2019, via teleconference at 4:30 p.m. Eastern Time. To access the call (ID 5680922), please dial: 888-204-4368 or 323-794-2423. An audio replay of the call will be available through May 15, 2019 by dialing 888-203-1112 or 719-457-0820 and entering access code 5680922. 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. We calculate adjusted EBITDA by adding back or removing the following items to or from GAAP net loss: depreciation, amortization, stock-based compensation, interest expense, interest (income) and other, non-recurring litigation settlement costs and related indemnification fees, and provision for (benefit from) income taxes. We calculate non-GAAP operating income as operating loss excluding stock-based compensation, intangibles amortization, and non-recurring litigation settlement costs and related indemnification fees. We calculate non-GAAP net income as GAAP net loss excluding stock-based compensation, 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 related indemnification fees, and gain on sale of convertible note held for 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, expectations for future growth, product positioning, value to and role with enterprise customers, our vision for the future, our long-term goals, and the second quarter and full year 2019 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, including as a result of the timing and success of new product and feature introductions by us, 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 involve numerous competitors and 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 have established, and are continuing to increase, our 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 and any failure by these service providers to provide reliable services could cause us to lose clients and subject us to claims for credits or damages, among other things; (xiv) we have a history of losses and we may be unable to achieve or sustain profitability; (xv) the contact center software solutions market is subject to rapid technological change, and we must develop and sell incremental and new products in order to maintain and grow our business; (xvi) we may not be able to secure additional financing on favorable terms, or at all, to meet our future capital needs; (xvii) failure to comply with laws and regulations could harm our business and our reputation; (xviii) we may not have sufficient cash to service our convertible senior notes and repay such notes, if required; and (xix) 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 and 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 five billion call minutes 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 transform customer experiences into customer love. For more information, visit www.five9.com.

 

FIVE9, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

 

 

March 31, 2019

 

December 31, 2018

ASSETS

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

93,492

 

 

$

81,912

 

Marketable investments

 

205,450

 

 

209,907

 

Accounts receivable, net

 

25,840

 

 

24,797

 

Prepaid expenses and other current assets

 

9,719

 

 

8,014

 

Deferred contract acquisition costs

 

10,095

 

 

9,372

 

Total current assets

 

344,596

 

 

334,002

 

Property and equipment, net

 

27,496

 

 

25,885

 

Operating lease right-of-use assets

 

6,735

 

 

 

Intangible assets, net

 

543

 

 

631

 

Goodwill

 

11,798

 

 

11,798

 

Other assets

 

936

 

 

836

 

Deferred contract acquisition costs — less current portion

 

23,262

 

 

21,514

 

Total assets

 

$

415,366

 

 

$

394,666

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

$

7,233

 

 

$

7,010

 

Accrued and other current liabilities

 

17,965

 

 

13,771

 

Operating lease liabilities

 

4,322

 

 

 

Accrued federal fees

 

1,348

 

 

1,434

 

Sales tax liabilities

 

1,404

 

 

1,741

 

Finance lease liabilities

 

6,208

 

 

6,647

 

Deferred revenue

 

17,853

 

 

17,391

 

Total current liabilities

 

56,333

 

 

47,994

 

Convertible senior notes

 

199,842

 

 

196,763

 

Sales tax liabilities — less current portion

 

839

 

 

841

 

Operating lease liabilities — less current portion

 

3,012

 

 

 

Finance lease liabilities — less current portion

 

3,316

 

 

4,509

 

Other long-term liabilities

 

1,358

 

 

1,811

 

Total liabilities

 

264,700

 

 

251,918

 

Stockholders’ equity:

 

 

 

 

Common stock

 

60

 

 

59

 

Additional paid-in capital

 

303,946

 

 

294,279

 

Accumulated other comprehensive income (loss)

 

81

 

 

(93

)

Accumulated deficit

 

(153,421

)

 

(151,497

)

Total stockholders’ equity

 

150,666

 

 

142,748

 

Total liabilities and stockholders’ equity

 

$

415,366

 

 

$

394,666

 

 

 

 

 

 

FIVE9, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

 

 

Three Months Ended

 

 

March 31, 2019

 

March 31, 2018

 

 

 

 

 

Revenue

 

$

74,538

 

 

$

58,905

 

Cost of revenue

 

30,851

 

 

24,702

 

Gross profit

 

43,687

 

 

34,203

 

Operating expenses:

 

 

 

 

Research and development

 

10,546

 

 

7,772

 

Sales and marketing

 

21,701

 

 

17,478

 

General and administrative

 

11,762

 

 

9,103

 

Total operating expenses

 

44,009

 

 

34,353

 

Loss from operations

 

(322

)

 

(150

)

Other income (expense), net:

 

 

 

 

Interest expense

 

(3,396

)

 

(810

)

Interest income and other

 

1,745

 

 

398

 

Total other income (expense), net

 

(1,651

)

 

(412

)

Loss before income taxes

 

(1,973

)

 

(562

)

Provision for (benefit from) income taxes

 

(49

)

 

45

 

Net loss

 

$

(1,924

)

 

$

(607

)

Net loss per share:

 

 

 

 

Basic and diluted

 

$

(0.03

)

 

$

(0.01

)

Shares used in computing net loss per share:

 

 

 

 

Basic and diluted

 

59,367

 

 

56,399

 

 

 

 

 

 

 

 

FIVE9, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

Three Months Ended

 

 

March 31, 2019

 

March 31, 2018

Cash flows from operating activities:

 

 

 

 

Net loss

 

$

(1,924

)

 

$

(607

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

 

Depreciation and amortization

 

3,192

 

 

2,320

 

Amortization of operating lease right-of-use asset

 

1,010

 

 

 

Amortization of premium on marketable investments

 

(421

)

 

 

Provision for doubtful accounts

 

14

 

 

48

 

Stock-based compensation

 

8,686

 

 

5,325

 

Gain on sale of convertible note held for investment

 

(217

)

 

(312

)

Amortization of discount and issuance costs on convertible senior notes

 

3,079

 

 

 

Others

 

(17

)

 

(14

)

Changes in operating assets and liabilities:

 

 

 

 

Accounts receivable

 

(1,046

)

 

519

 

Prepaid expenses and other current assets

 

(1,721

)

 

(1,833

)

Deferred contract acquisition costs

 

(2,471

)

 

(1,662

)

Other assets

 

(7,845

)

 

(90

)

Accounts payable

 

552

 

 

1,181

 

Accrued and other current liabilities

 

7,724

 

 

2,791

 

Accrued federal fees and sales tax liability

 

(425

)

 

(115

)

Deferred revenue

 

416

 

 

121

 

Other liabilities

 

2,604

 

 

325

 

Net cash provided by operating activities

 

11,190

 

 

7,997

 

Cash flows from investing activities:

 

 

 

 

Purchases of marketable investments

 

(34,427

)

 

 

Proceeds from maturities of marketable investments

 

39,497

 

 

 

Purchases of property and equipment

 

(3,985

)

 

(433

)

Proceeds from sale of convertible note held for investment

 

217

 

 

1,923

 

Net cash provided by investing activities

 

1,302

 

 

1,490

 

Cash flows from financing activities:

 

 

 

 

Proceeds from exercise of common stock options

 

982

 

 

4,751

 

Payments of notes payable

 

 

 

(157

)

Payments of finance leases

 

(1,894

)

 

(2,352

)

Net cash (used in) provided by financing activities

 

(912

)

 

2,242

 

Net increase in cash and cash equivalents

 

11,580

 

 

11,729

 

Cash and cash equivalents:

 

 

 

 

Beginning of period

 

81,912

 

 

68,947

 

End of period

 

$

93,492

 

 

$

80,676

 

 

 

 

 

 

 

 

FIVE9, INC.

RECONCILIATION OF GAAP GROSS PROFIT TO ADJUSTED GROSS PROFIT

(In thousands, except percentages)

(Unaudited)

 

 

Three Months Ended

 

 

March 31, 2019

 

March 31, 2018

 

 

 

 

 

GAAP gross profit

 

$

43,687

 

 

$

34,203

 

GAAP gross margin

 

58.6

%

 

58.1

%

Non-GAAP adjustments:

 

 

 

 

Depreciation

 

2,278

 

 

1,706

 

Intangibles amortization

 

88

 

 

88

 

Stock-based compensation

 

1,229

 

 

678

 

Adjusted gross profit

 

$

47,282

 

 

$

36,675

 

Adjusted gross margin

 

63.4

%

 

62.3

%

 

 

FIVE9, INC.

RECONCILIATION OF GAAP NET LOSS TO ADJUSTED EBITDA

(In thousands, except percentages)

(Unaudited)

 

 

Three Months Ended

 

 

March 31, 2019

 

March 31, 2018

 

 

 

 

 

GAAP net loss

 

$

(1,924

)

 

$

(607

)

Non-GAAP adjustments:

 

 

 

 

Depreciation and amortization

 

3,192

 

 

2,320

 

Stock-based compensation

 

8,686

 

 

5,325

 

Interest expense

 

3,396

 

 

810

 

Interest income and other

 

(1,745

)

 

(398

)

Legal and indemnification fees related to settlement

 

292

 

 

 

Provision for (benefit from) income taxes

 

(49

)

 

45

 

Adjusted EBITDA

 

$

11,848

 

 

$

7,495

 

Adjusted EBITDA as % of revenue

 

15.9

%

 

12.7

%

 

 

 

 

 

 

FIVE9, INC.

RECONCILIATION OF GAAP OPERATING LOSS TO NON-GAAP OPERATING INCOME

(In thousands)

(Unaudited)

 

 

Three Months Ended

 

 

March 31, 2019

 

March 31, 2018

 

 

 

 

 

Loss from operations

 

$

(322

)

 

$

(150

)

Non-GAAP adjustments:

 

 

 

 

Stock-based compensation

 

8,686

 

 

5,325

 

Intangibles amortization

 

88

 

 

116

 

Legal and indemnification fees related to settlement

 

292

 

 

 

Non-GAAP operating income

 

$

8,744

 

 

$

5,291

 

 

 

 

 

 

 

FIVE9, INC.

RECONCILIATION OF GAAP NET LOSS TO NON-GAAP NET INCOME

(In thousands, except per share data)

(Unaudited)

 

 

Three Months Ended

 

 

March 31, 2019

 

March 31, 2018

 

 

 

 

 

GAAP net loss

 

$

(1,924

)

 

$

(607

)

Non-GAAP adjustments:

 

 

 

 

Stock-based compensation

 

8,686

 

 

5,325

 

Intangibles amortization

 

88

 

 

116

 

Amortization of debt discount and issuance costs

 

 

 

20

 

Amortization of discount and issuance costs on convertible senior notes

 

3,079

 

 

 

Legal and indemnification fees related to settlement

 

292

 

 

 

Gain on sale of convertible note held for investment

 

(217

)

 

(352

)

Non-GAAP net income

 

$

10,004

 

 

$

4,502

 

GAAP net loss per share:

 

 

 

 

Basic and diluted

 

$

(0.03

)

 

$

(0.01

)

Non-GAAP net income per share:

 

 

 

 

Basic

 

$

0.17

 

 

$

0.08

 

Diluted

 

$

0.16

 

 

$

0.08

 

Shares used in computing GAAP net loss per share:

 

 

 

 

Basic and diluted

 

59,367

 

 

56,399

 

Shares used in computing non-GAAP net income per share:

 

 

 

 

Basic

 

59,367

 

 

56,399

 

Diluted

 

62,754

 

 

59,744

 

 

 

 

 

 

 

FIVE9, INC.

SUMMARY OF STOCK-BASED COMPENSATION, DEPRECIATION AND INTANGIBLES AMORTIZATION

(In thousands)

(Unaudited)

 

 

Three Months Ended

 

 

March 31, 2019

 

March 31, 2018

 

 

Stock-Based Compensation

 

Depreciation

 

Intangibles Amortization

 

Stock-Based Compensation

 

Depreciation

 

Intangibles Amortization

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenue

 

$

1,229

 

 

$

2,278

 

 

$

88

 

 

$

678

 

 

$

1,706

 

 

$

88

 

Research and development

 

1,470

 

 

440

 

 

 

 

877

 

 

194

 

 

 

Sales and marketing

 

2,249

 

 

1

 

 

 

 

1,362

 

 

1

 

 

28

 

General and administrative

 

3,738

 

 

385

 

 

 

 

2,408

 

 

303

 

 

 

Total

 

$

8,686

 

 

$

3,104

 

 

$

88

 

 

$

5,325

 

 

$

2,204

 

 

$

116

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FIVE9, INC.

RECONCILIATION OF GAAP NET LOSS TO NON-GAAP NET INCOME – GUIDANCE

(In thousands, except per share data)

(Unaudited)

 

 

Three Months Ending

 

Year Ending

 

 

June 30, 2019

 

December 31, 2019

 

 

Low

 

High

 

Low

 

High

 

 

 

 

 

 

 

 

 

GAAP net loss

 

$

(6,713

)

 

$

(5,713

)

 

$

(17,255

)

 

$

(14,255

)

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

Stock-based compensation

 

10,461

 

 

10,461

 

 

43,328

 

 

43,328

 

Intangibles amortization

 

88

 

 

88

 

 

351

 

 

351

 

Amortization of discount and issuance costs on convertible senior notes

 

3,164

 

 

3,164

 

 

12,801

 

 

12,801

 

Legal and indemnification fees related to settlement

 

 

 

 

 

292

 

 

292

 

Gain on sale of convertible note held for investment

 

 

 

 

 

(217

)

 

(217

)

Income tax expense effects (1)

 

 

 

 

 

 

 

 

Non-GAAP net income

 

$

7,000

 

 

$

8,000

 

 

$

39,300

 

 

$

42,300

 

GAAP net loss per share, basic and diluted

 

$

(0.11

)

 

$

(0.09

)

 

$

(0.29

)

 

$

(0.24

)

Non-GAAP net income per share:

 

 

 

 

 

 

 

 

Basic

 

$

0.12

 

 

$

0.13

 

 

$

0.65

 

 

$

0.70

 

Diluted

 

$

0.11

 

 

$

0.13

 

 

$

0.61

 

 

$

0.66

 

Shares used in computing GAAP net loss per share and non-GAAP net income per share:

 

 

 

 

 

 

 

 

Basic

 

60,200

 

 

60,200

 

 

60,500

 

 

60,500

 

Diluted

 

64,000

 

 

64,000

 

 

64,500

 

 

64,500

 

 

 

 

 

 

 

 

 

 

 

  1. Non-GAAP adjustments do not have an impact on our income tax provision due to past non-GAAP losses.

 

 

 

 

Investor Relations Contacts:

 

Five9, Inc.

Barry Zwarenstein

Chief Financial Officer

925-201-2000 ext. 5959

IR@five9.com

 

The Blueshirt Group for Five9, Inc.

Lisa Laukkanen

415-217-4967

Lisa@blueshirtgroup.com