Upgrade to SI Premium - Free Trial

Five9 Reports Second Quarter Revenue Growth of 29% to a Record $99.8 Million

August 3, 2020 4:05 PM

33% Growth in LTM Enterprise Subscription Revenue

Eighteenth Consecutive Quarter of Positive Operating Cash Flow at $14.8 Million

Raised 2020 Guidance for both Revenue and Bottom Line

SAN RAMON, Calif.--(BUSINESS WIRE)-- Five9, Inc. (NASDAQ: FIVN), a leading provider of cloud contact center software, today reported results for the second quarter ended June 30, 2020.

Second Quarter 2020 Financial Results

"We delivered exceptionally strong second quarter results with revenue of $99.8 million. Revenue growth accelerated to 29% year-over-year and 5% sequentially, adjusted EBITDA margin was 18.3%, and we delivered our eighteenth consecutive quarter of positive operating cash flow. We believe the on-premises to cloud and digital transformation trends driving our massive market opportunity are likely to accelerate as work-from-home trends continue and retail sales personnel are increasingly displaced by contact center agents. Our better-than-expected second quarter results and pipeline also demonstrate the strength of our core business and, most importantly, our consistent sales execution. Our increased go-to-market investments are paying dividends, most notably with system integrators and AT&T. Meanwhile, our enhanced product and engineering leadership team is driving faster product innovation at greater scale. We remain focused on driving superb execution and disciplined, balanced growth."

- Rowan Trollope, CEO, Five9

Business Outlook

Five9 provides guidance based on current market conditions and expectations. The Company emphasizes that the guidance is subject to various important cautionary factors referenced in the section entitled "Forward-Looking Statements" below, including risks and uncertainties associated with the COVID-19 pandemic.

Conference Call Details

Five9 will discuss its second quarter 2020 results today, August 3, 2020, via teleconference at 4:30 p.m. Eastern Time. To access the call (ID 1396522), please dial: 866-248-8441 or 720-452-9102. An audio replay of the call will be available through August 17, 2020 by dialing 888-203-1112 or 719-457-0820 and entering access code 1396522. 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 web-site 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 and adjusted gross margin by adding back the following items to gross profit: depreciation, intangibles amortization, stock-based compensation and COVID-19 relief bonus for employees. We calculate adjusted EBITDA by adding back or removing the following items to or from GAAP net loss: depreciation and amortization, stock-based compensation, interest expense, interest (income) and other, acquisition-related transaction costs and one-time integration costs, non-recurring litigation settlement costs and related indemnification fees, COVID-19 relief bonus for employees and provision for (benefit from) income taxes. We calculate non-GAAP operating income as GAAP operating income (loss) excluding stock-based compensation, intangibles amortization, acquisition-related transaction costs and one-time integration costs, non-recurring litigation settlement costs and related indemnification fees, and COVID-19 relief bonus for employees. We calculate non-GAAP net income as GAAP net loss excluding stock-based compensation, intangibles amortization, amortization of discount and issuance costs on convertible senior notes, acquisition-related transaction costs and one-time integration costs, non-recurring litigation settlement costs and related indemnification fees, gain on sale of convertible note held for investment, COVID-19 relief bonus for employees, loss on early extinguishment of debt, and tax benefit of valuation allowance associated with an acquisition. 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 expectations for market acceleration from on premise contact centers to the cloud and drivers thereof, Five9’s expectations regarding the benefits of its go-to-market investments, Five9's sales pipeline, Five9's faster product innovation and greater scale, and Five9’s growth expectations, and the third quarter and full year 2020 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) the effects of the COVID-19 pandemic have materially affected how we, our clients and business partners are operating, and the duration and extent to which this will impact our future results of operations and overall financial performance remains uncertain; (ii) 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; (iii) 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; (iv) 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; (v) failure to adequately retain and expand our sales force will impede our growth; (vi) 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; (vii) our growth depends in part on the success of our strategic relationships with third parties and our failure to successfully maintain, grow and manage these relationships could harm our business; (viii) 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; (ix) adverse economic conditions may harm our business; (x) security breaches and improper access to or disclosure of our data or our clients’ data, their customers’ data, or other cyber attacks on our systems, could result in litigation and regulatory risk, harm our reputation and our business; (xi) 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; (xii) 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; (xiii) 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; (xiv) 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; (xv) 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; (xvi) we have a history of losses and we may be unable to achieve or sustain profitability; (xvii) 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; (xviii) we may not be able to secure additional financing on favorable terms, or at all, to meet our future capital needs; (xix) we may acquire other companies or technologies or be the target of strategic transactions, which could divert our management’s attention, result in additional dilution to our stockholders and otherwise disrupt our operations and harm our operating results; (xx) failure to comply with laws and regulations could harm our business and our reputation; (xxi) we may not have sufficient cash to service our convertible senior notes and repay such notes, if required, and other risks attendant to our convertible senior notes and increased debt levels; and (xxii) 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 reports 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 intelligent contact center space, bringing the power of cloud innovation to customers and facilitating more than six 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 Genius platform is reliable, secure, compliant and scalable; designed to create exceptional personalized customer experiences. For more information, visit www.five9.com.

FIVE9, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

June 30, 2020

December 31, 2019

ASSETS

Current assets:

Cash and cash equivalents

$

233,235

$

77,976

Marketable investments

452,708

241,973

Accounts receivable, net

39,607

37,655

Prepaid expenses and other current assets

17,529

10,656

Deferred contract acquisition costs

16,151

13,014

Total current assets

759,230

381,274

Property and equipment, net

39,799

33,190

Operating lease right-of-use assets

10,006

8,746

Intangible assets, net

25,605

15,533

Goodwill

34,444

11,798

Marketable investments

82,064

—

Other assets

2,789

1,184

Deferred contract acquisition costs — less current portion

39,366

30,655

Total assets

$

993,303

$

482,380

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$

12,045

$

10,156

Accrued and other current liabilities

34,817

18,385

Operating lease liabilities

5,247

5,064

Accrued federal fees

1,670

2,303

Sales tax liabilities

1,565

1,885

Finance lease liabilities

2,032

3,518

Deferred revenue

26,306

24,681

Total current liabilities

83,682

65,992

Convertible senior notes

642,203

209,604

Sales tax liabilities — less current portion

847

838

Operating lease liabilities — less current portion

5,249

4,329

Finance lease liabilities — less current portion

100

809

Other long-term liabilities

6,814

4,350

Total liabilities

738,895

285,922

Stockholders’ equity:

Common stock

65

61

Additional paid-in capital

432,877

351,870

Accumulated other comprehensive income

1,004

576

Accumulated deficit

(179,538)

(156,049)

Total stockholders’ equity

254,408

196,458

Total liabilities and stockholders’ equity

$

993,303

$

482,380

FIVE9, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

Three Months Ended

Six Months Ended

June 30, 2020

June 30, 2019

June 30, 2020

June 30, 2019

Revenue

$

99,792

$

77,436

$

194,880

$

151,974

Cost of revenue

42,453

31,248

82,490

62,099

Gross profit

57,339

46,188

112,390

89,875

Operating expenses:

Research and development

17,208

10,811

32,397

21,357

Sales and marketing

32,231

23,250

62,391

44,951

General and administrative

16,129

12,042

30,787

23,804

Total operating expenses

65,568

46,103

125,575

90,112

Income (loss) from operations

(8,229)

85

(13,185)

(237)

Other income (expense), net:

Interest expense

(5,734)

(3,406)

(9,218)

(6,802)

Interest income and other

(4,965)

1,490

(3,893)

3,235

Total other income (expense), net

(10,699)

(1,916)

(13,111)

(3,567)

Loss before income taxes

(18,928)

(1,831)

(26,296)

(3,804)

Provision for (benefit from) income taxes

(2,876)

29

(2,807)

(20)

Net loss

$

(16,052)

(1,860)

$

(23,489)

$

(3,784)

Net loss per share:

Basic and diluted

$

(0.25)

$

(0.03)

$

(0.38)

$

(0.06)

Shares used in computing net loss per share:

Basic and diluted

63,282

60,058

62,494

59,714

FIVE9, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Six Months Ended

June 30, 2020

June 30, 2019

Cash flows from operating activities:

Net loss

$

(23,489)

$

(3,784)

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

Depreciation and amortization

11,213

6,553

Amortization of operating lease right-of-use assets

2,786

2,147

Amortization of premium on marketable investments

630

(883)

Provision for doubtful accounts

353

30

Stock-based compensation

30,585

19,122

Loss on early extinguishment of debt

5,794

—

Gain on sale of convertible note held for investment

—

(217)

Amortization of discount and issuance costs on convertible senior notes

8,571

6,234

Tax benefit of valuation allowance associated with an acquisition

(2,910)

—

Others

82

(23)

Changes in operating assets and liabilities:

Accounts receivable

(2,119)

(3,378)

Prepaid expenses and other current assets

(7,065)

(4,053)

Deferred contract acquisition costs

(11,848)

(5,488)

Other assets

(1,604)

(12,571)

Accounts payable

2,553

159

Accrued and other current liabilities

9,561

6,516

Accrued federal fees and sales tax liability

(945)

(337)

Deferred revenue

3,292

2,539

Other liabilities

(281)

5,412

Net cash provided by operating activities

25,159

17,978

Cash flows from investing activities:

Purchases of marketable investments

(460,899)

(151,308)

Proceeds from maturities of marketable investments

167,850

165,354

Purchases of property and equipment

(14,891)

(8,226)

Cash paid to acquire Virtual Observer

(28,313)

—

Cash paid to acquire substantially all of the assets of Whendu LLC

(100)

—

Proceeds from sale of convertible note held for investment

—

217

Net cash (used in) provided by investing activities

(336,353)

6,037

Cash flows from financing activities:

Proceeds from issuance of 2025 convertible senior notes, net of issuance costs

728,812

—

Payments for capped call transactions related to the 2025 convertible senior notes

(90,448)

—

Repurchase of a portion of 2023 convertible senior notes, net of costs

(181,462)

—

Proceeds from exercise of common stock options

6,080

4,248

Proceeds from sale of common stock under ESPP

5,666

3,996

Payments of finance leases

(2,195)

(3,702)

Net cash provided by financing activities

466,453

4,542

Net increase in cash and cash equivalents

155,259

28,557

Cash and cash equivalents:

Beginning of period

77,976

81,912

End of period

$

233,235

$

110,469

FIVE9, INC.

RECONCILIATION OF GAAP GROSS PROFIT TO ADJUSTED GROSS PROFIT

(In thousands, except percentages)

(Unaudited)

Three Months Ended

Six Months Ended

June 30, 2020

June 30, 2019

June 30, 2020

June 30, 2019

GAAP gross profit

$

57,339

$

46,188

$

112,390

$

89,875

GAAP gross margin

57.5

%

59.6

%

57.7

%

59.1

%

Non-GAAP adjustments:

Depreciation

3,382

2,416

6,232

4,694

Intangibles amortization

1,738

88

2,828

176

Stock-based compensation

2,499

1,658

4,488

2,887

COVID-19 relief bonus for employees

618

—

618

—

Adjusted gross profit

$

65,576

$

50,350

$

126,556

$

97,632

Adjusted gross margin

65.7

%

65.0

%

64.9

%

64.2

%

FIVE9, INC.

RECONCILIATION OF GAAP NET LOSS TO ADJUSTED EBITDA

(In thousands, except percentages)

(Unaudited)

Three Months Ended

Six Months Ended

June 30, 2020

June 30, 2019

June 30, 2020

June 30, 2019

GAAP net loss

$

(16,052)

$

(1,860)

$

(23,489)

$

(3,784)

Non-GAAP adjustments:

Depreciation and amortization

6,243

3,361

11,213

6,553

Stock-based compensation

16,791

10,436

30,585

19,122

Interest expense

5,734

3,406

9,218

6,802

Interest income and other

4,965

(1,490)

3,893

(3,235)

Legal settlement

—

420

—

420

Legal and indemnification fees related to settlement

—

64

—

356

Acquisition-related transaction costs and one-time integration costs

1,637

—

1,966

—

COVID-19 relief bonus for employees

1,817

—

1,817

—

Provision for (benefit from) income taxes

(2,876)

29

(2,807)

(20)

Adjusted EBITDA

$

18,259

$

14,366

$

32,396

$

26,214

Adjusted EBITDA as % of revenue

18.3

%

18.6

%

16.6

%

17.2

%

FIVE9, INC.

RECONCILIATION OF GAAP OPERATING INCOME (LOSS) TO NON-GAAP OPERATING INCOME

(In thousands)

(Unaudited)

Three Months Ended

Six Months Ended

June 30, 2020

June 30, 2019

June 30, 2020

June 30, 2019

Income (loss) from operations

$

(8,229)

$

85

$

(13,185)

$

(237)

Non-GAAP adjustments:

Stock-based compensation

16,791

10,436

30,585

19,122

Intangibles amortization

1,738

88

2,828

176

Legal settlement

—

420

—

420

Legal and indemnification fees related to settlement

—

64

—

356

Acquisition-related transaction costs and one-time integration costs

1,637

—

1,966

—

COVID-19 relief bonus for employees

1,817

—

1,817

—

Non-GAAP operating income

$

13,754

$

11,093

$

24,011

$

19,837

FIVE9, INC.

RECONCILIATION OF GAAP NET LOSS TO NON-GAAP NET INCOME

(In thousands, except per share data)

(Unaudited)

Three Months Ended

Six Months Ended

June 30, 2020

June 30, 2019

June 30, 2020

June 30, 2019

GAAP net loss

$

(16,052)

$

(1,860)

$

(23,489)

$

(3,784)

Non-GAAP adjustments:

Stock-based compensation

16,791

10,436

30,585

19,122

Intangibles amortization

1,738

88

2,828

176

Amortization of discount and issuance costs on convertible senior notes

5,251

3,155

8,571

6,234

Legal settlement

—

420

—

420

Legal and indemnification fees related to settlement

—

64

—

356

Acquisition-related transaction costs and one-time integration costs

1,637

—

1,966

—

COVID-19 relief bonus for employees

1,817

—

1,817

—

Loss on early extinguishment of debt

5,794

—

5,794

—

Gain on sale of convertible note held for investment

—

—

—

(217)

Tax benefit of valuation allowance associated with an acquisition

(2,910)

—

(2,910)

—

Non-GAAP net income

$

14,066

$

12,303

$

25,162

$

22,307

GAAP net loss per share:

Basic and diluted

$

(0.25)

$

(0.03)

$

(0.38)

$

(0.06)

Non-GAAP net income per share:

Basic

$

0.22

$

0.20

$

0.40

$

0.37

Diluted

$

0.21

$

0.20

$

0.38

$

0.35

Shares used in computing GAAP net loss per share:

Basic and diluted

63,282

60,058

62,494

59,714

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

Basic

63,282

60,058

62,494

59,714

Diluted

67,171

62,950

65,960

62,843

FIVE9, INC.

SUMMARY OF STOCK-BASED COMPENSATION, DEPRECIATION AND INTANGIBLES AMORTIZATION

(In thousands)

(Unaudited)

Three Months Ended

June 30, 2020

June 30, 2019

Stock-Based
Compensation

Depreciation

Intangibles
Amortization

Stock-Based
Compensation

Depreciation

Intangibles
Amortization

Cost of revenue

$

2,499

$

3,382

$

1,738

$

1,658

$

2,416

$

88

Research and development

3,684

497

—

1,907

450

—

Sales and marketing

5,265

2

—

2,749

1

—

General and administrative

5,343

624

—

4,122

406

—

Total

$

16,791

$

4,505

$

1,738

$

10,436

$

3,273

$

88

Six Months Ended

June 30, 2020

June 30, 2019

Stock-Based
Compensation

Depreciation

Intangibles
Amortization

Stock-Based
Compensation

Depreciation

Intangibles
Amortization

Cost of revenue

$

4,488

$

6,232

$

2,828

$

2,887

$

4,694

$

176

Research and development

6,491

963

—

3,377

890

—

Sales and marketing

9,371

3

—

4,998

2

—

General and administrative

10,235

1,187

—

7,860

791

—

Total

$

30,585

$

8,385

$

2,828

$

19,122

$

6,377

$

176

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

September 30, 2020

December 31, 2020

Low

High

Low

High

GAAP net loss

$

(18,938)

$

(17,938)

$

(56,402)

$

(54,402)

Non-GAAP adjustments:

Stock-based compensation

17,618

17,618

66,191

66,191

Intangibles amortization

1,738

1,738

6,232

6,232

Amortization of discount and issuance costs on convertible senior notes

8,637

8,637

25,975

25,975

Loss on early extinguishment of debt

—

—

5,794

5,794

Acquisition-related transaction costs and one-time integration costs

2,545

2,545

6,003

6,003

COVID-19 relief bonus for employees

—

—

1,817

1,817

Tax benefit of valuation allowance associated with an acquisition

—

—

(2,910)

(2,910)

Income tax expense effects (1)

—

—

—

—

Non-GAAP net income

$

11,600

$

12,600

$

52,700

$

54,700

GAAP net loss per share, basic and diluted

$

(0.29)

$

(0.28)

$

(0.88)

$

(0.85)

Non-GAAP net income per share:

Basic

$

0.18

$

0.19

$

0.82

$

0.85

Diluted

$

0.17

$

0.18

$

0.77

$

0.80

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

Basic

64,900

64,900

64,200

64,200

Diluted

69,100

69,100

68,100

68,100

  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

[email protected]

The Blueshirt Group for Five9, Inc.

Lisa Laukkanen

415-217-4967

[email protected]

Source: Five9, Inc.

Categories

Business Wire Press Releases

Next Articles