Five9 Reports Third Quarter 2015 Results

Revenue Up 25% Year-Over-Year to a Record $32.3 Million

Enterprise LTM Subscription Revenue Up 35% Year-Over-Year

Adjusted EBITDA Loss Narrows to 3% of Revenue

Raises 2015 Guidance

SAN RAMON, Calif., Nov. 3, 2015 (GLOBE NEWSWIRE) — Five9, Inc. (NASDAQ:FIVN), a leading provider of cloud software for the enterprise contact center market, today reported results for the third quarter ended September 30, 2015.

Third Quarter Highlights

  • Revenue increased 25% year-over-year to $32.3 million
  • Enterprise LTM subscription revenue increased 35% year-over-year
  • GAAP and Adjusted gross margins improved by over 600 basis points year-over-year
  • Adjusted EBITDA margin improved by nearly 1,600 basis points year-over-year

“We delivered outstanding third quarter results that once again exceeded our expectations across all metrics. This is the fifth consecutive quarter of broad based outperformance and highlights the strong progression of our business. Our record revenue and bookings were primarily driven by continued success in our high growth Enterprise business. Our strong momentum in the enterprise market is being driven by key differentiators including our comprehensive end-to-end solution, our trusted platform which is delivering 99.993% uptime, our deep CRM integrations and ecosystem partnerships and best in class implementation and support execution. As validation of our leading position in the enterprise market, Five9 was recently named a leader in the Gartner Magic Quadrant for Contact Center as a Service, North America, and positioned highest for ability to execute. We believe this is a core attribute that Enterprise accounts are looking for. In conjunction with our topline growth of 25%, we significantly improved our EBITDA margin by nearly 1,600 basis points from a year ago.”

– Mike Burkland, President and CEO, Five9

Third Quarter 2015 Financial Results

  • Total revenue for the third quarter of 2015 increased 25% to $32.3 million compared to $25.9 million for the third quarter of 2014.
  • Annual dollar-based retention rate for the period ended September 30, 2015 was 95%.
  • GAAP gross margin was 54.1% in the third quarter of 2015 compared to 47.8% for the same period in 2014.
  • Adjusted gross margin was 59.4% for the third quarter of 2015 compared to 53.3% for the same period in 2014.
  • Adjusted EBITDA for the third quarter of 2015 was a loss of $(1.1) million, or 3.4% of revenue, compared to a loss of $(5.0) million, or 19.2% of revenue, for the third quarter of 2014.
  • GAAP net loss for the third quarter of 2015 was $(6.0) million, or $(0.12) per share, compared to a GAAP net loss of $(11.4) million, or $(0.24) per share, for the third quarter of 2014.
  • Non-GAAP net loss for the third quarter of 2015 was $(3.9) million, or $(0.08) per share, compared to a non-GAAP net loss of $(7.3) million, or $(0.15) per share, for the third quarter of 2014.

A reconciliation of the non-GAAP financial measures to their related GAAP financial measures is set forth in the tables attached to this release.

Business Outlook

  • For the fourth quarter of 2015, Five9 expects to report:

    • Revenue in the range of $32.5 to $33.5 million
    • GAAP net loss in the range of $(6.0) to $(7.0) million, or a loss of $(0.12) to $(0.14) per share
    • Non-GAAP net loss in the range of $(3.8) to $(4.8) million, or a loss of $(0.07) to $(0.09) per share
       
  • For the full year 2015, Five9 expects to report:

    • Revenue in the range of $125.3 to $126.3 million, up from the guidance range of $122.5 to $124.5 million that was previously provided on August 3, 2015
    • GAAP net loss in the range of $(28.3) to $(29.3) million, or a loss of $(0.56) to $(0.58) per share, improved from a guidance range of $(31.1) to $(33.1) million, or a loss of $(0.62) to $(0.66) per share, that was previously provided on August 3, 2015
    • Non-GAAP net loss in the range of $(18.7) to $(19.7) million, or $(0.37) to $(0.39) per share, improved from the guidance range of $(21.5) to $(23.5) million or $(0.43) to $(0.47) per share, that was previously provided on August 3, 2015

Conference Call Details

Five9 will discuss its third quarter 2015 results today, November 3, 2015, via teleconference at 4:30 p.m. Eastern Time. To access the call (ID 695528), please dial: 877-780-3379 or 719-457-2644. An audio replay of the call will be available through November 17, 2015 by dialing 888-203-1112 or 719-457-0820 and entering access code 695528. 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 the fourth quarter 2015 and full year 2015 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) we may be unable to attract new clients or sell additional services and functionality to our existing clients or could experience a reduction in seats or revenues from 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 software for the 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 reliable, secure, compliant, and scalable cloud contact center software designed to create exceptional customer experiences, increase agent productivity and deliver tangible business results. For more information visit www.five9.com

CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)
     
  September 30,
2015
December 31,
2014
ASSETS    
Current assets:    
Cash and cash equivalents  $ 59,501  $ 58,289
Short-term investments  —  20,000
Accounts receivable, net  9,309  8,335
Prepaid expenses and other current assets  2,917  1,960
Total current assets  71,727  88,584
Property and equipment, net  12,376  12,571
Intangible assets, net  2,169  2,553
Goodwill  11,798  11,798
Other assets  800  1,428
Total assets  $ 98,870  $ 116,934
     
LIABILITIES AND STOCKHOLDERS’ EQUITY    
Current liabilities:    
Accounts payable  $ 2,865  $ 4,179
Accrued and other current liabilities  8,053  7,318
Accrued federal fees  5,595  7,215
Sales tax liability  1,036  297
Notes payable  6,045  3,146
Capital leases  4,313  4,849
Deferred revenue  5,562  5,346
Total current liabilities  33,469  32,350
Revolving line of credit  12,500  12,500
Sales tax liability — less current portion  1,949  2,582
Notes payable — less current portion  19,232  22,778
Capital leases — less current portion  4,538  4,423
Other long-term liabilities  640  548
Total liabilities  72,328  75,181
Stockholders’ equity:    
Common stock  51  49
Additional paid-in capital  177,393  170,286
Accumulated deficit  (150,902)  (128,582)
Total stockholders’ equity  26,542  41,753
Total liabilities and stockholders’ equity  $ 98,870  $ 116,934
 
 
 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share data)
         
  Three Months Ended Nine Months Ended
  September 30,
2015
September 30,
2014
September 30,
2015
September 30,
2014
         
Revenue  $ 32,287  $ 25,869  $ 92,835  $ 74,828
Cost of revenue  14,812  13,504  43,860  40,121
Gross profit  17,475  12,365  48,975  34,707
Operating expenses:        
Research and development  5,473  5,503  17,079  16,282
Sales and marketing  10,797  9,296  31,322  27,992
General and administrative  6,087  7,967  19,389  17,653
Total operating expenses  22,357  22,766  67,790  61,927
Loss from operations  (4,882)  (10,401)  (18,815)  (27,220)
Other income (expense), net:        
Interest expense  (1,235)  (1,116)  (3,529)  (2,986)
Interest income and other  119  95  72  99
Change in fair value of convertible preferred and common stock warrant liabilities  —  —  —  1,745
Total other income (expense), net  (1,116)  (1,021)  (3,457)  (1,142)
Loss before provision for income taxes  (5,998)  (11,422)  (22,272)  (28,362)
Provision for income taxes  50  13  48  52
Net loss  $ (6,048)  $ (11,435)  $ (22,320)  $ (28,414)
Net loss per share:        
Basic and diluted  $ (0.12)  $ (0.24)  $ (0.45)  $ (0.84)
Shares used in computing net loss per share:        
Basic and diluted  50,369  48,310  49,931  33,762
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
     
  Nine Months Ended
  September 30, 2015 September 30, 2014
Cash flows from operating activities:    
Net loss  $ (22,320)  $ (28,414)
Adjustments to reconcile net loss to net cash used in operating activities:    
Depreciation and amortization  5,525  4,858
Provision for doubtful accounts  157  43
Stock-based compensation  6,010  4,796
Loss on the disposal of property and equipment  10  1
Non-cash interest expense  260  210
Changes in fair value of convertible preferred and common stock warrant liabilities  —  (1,745)
Others  40  (5)
Changes in operating assets and liabilities:    
Accounts receivable  (1,149)  (744)
Prepaid expenses and other current assets  (957)  (981)
Other assets  (178)  (39)
Accounts payable  (1,329)  (1,018)
Accrued and other current liabilities  788  2,558
Accrued federal fees and sales tax liability  161  (787)
Deferred revenue  192  666
Other liabilities  (83)  (158)
Net cash used in operating activities  (12,873)  (20,759)
Cash flows from investing activities:    
Purchases of property and equipment  (689)  (478)
Decrease (increase) in restricted cash  806  (25)
Purchase of short-term investments  (20,000)  (29,993)
Proceeds from maturity of short-term investments  40,000  —
Net cash provided by (used in) investing activities  20,117  (30,496)
Cash flows from financing activities:    
Net proceeds from initial public offering, net of payments for offering costs  —  71,459
Proceeds from exercise of common stock options and warrants  419  767
Proceeds from sale of common stock under ESPP  680  —
Proceeds from notes payable  —  19,561
Repayments of notes payable  (2,622)  (783)
Payments of capital leases  (4,509)  (4,008)
Net cash provided by (used in) financing activities  (6,032)  86,996
Net increase in cash and cash equivalents  1,212  35,741
Cash and cash equivalents:    
Beginning of period  58,289  17,748
End of period  $ 59,501  $ 53,489
 
 
Reconciliation of GAAP Gross Profit to Adjusted Gross Profit
(Unaudited, in thousands, except percentages)
         
  Three Months Ended Nine Months Ended
  September 30,
2015
September 30,
2014
September 30,
2015
September 30,
2014
         
GAAP gross profit  $ 17,475  $ 12,365  $ 48,975  $ 34,707
GAAP gross margin 54.1 % 47.8 % 52.8 % 46.4 %
Non-GAAP adjustments:        
Depreciation  1,382  1,184  4,203  3,583
Intangibles amortization  88  88  264  264
Stock-based compensation  233  158  639  366
Adjusted gross profit  $ 19,178  $ 13,795  $ 54,081  $ 38,920
Adjusted gross margin 59.4 % 53.3 % 58.3 % 52.0 %
 
 
 
Reconciliation of GAAP Net Loss to Adjusted EBITDA
(Unaudited, in thousands)
         
  Three Months Ended Nine Months Ended
  September 30,
2015
September 30,
2014
September 30,
2015
September 30,
2014
         
GAAP net loss  $ (6,048)  $ (11,435)  $ (22,320)  $ (28,414)
Non-GAAP adjustments:        
Depreciation and amortization  1,840  1,567  5,525  4,858
Stock-based compensation  1,945  1,877  6,010  4,796
Interest expense  1,235  1,116  3,529  2,986
Interest income and other  (119)  (95)  (72)  (99)
Provision for income taxes  50  13  48  52
Change in fair value of convertible preferred and common stock warrant liabilities  —  —  —  (1,745)
Reversal of contingent sales tax liability (G&A)  —  —  —  (2,766)
Accrued FCC charge (G&A)  —  2,000  —  2,000
Out of period adjustment for sales tax liability (G&A)  —  —  765  —
Adjusted EBITDA  $ (1,097)  $ (4,957)  $ (6,515)  $ (18,332)
 
 
Reconciliation of GAAP Net Loss to Non-GAAP Net Loss
(Unaudited, in thousands, except per share data)
         
  Three Months Ended Nine Months Ended
  September 30,
2015
September 30,
2014
September 30,
2015
September 30,
2014
         
GAAP net loss  $ (6,048)  $ (11,435)  $ (22,320)  $ (28,414)
Non-GAAP adjustments:        
Stock-based compensation  1,945  1,877  6,010  4,796
Intangibles amortization  128  128  384  384
Non-cash interest expense  89  81  260  210
Change in fair value of convertible preferred and common stock warrant liabilities  —  —  —  (1,745)
Reversal of contingent sales tax liability (G&A)  —  —  —  (2,766)
Accrued FCC charge (G&A)  —  2,000  —  2,000
Out of period adjustment for sales tax liability (G&A)  —  —  765  —
Non-GAAP net loss  $ (3,886)  $ (7,349)  $ (14,901)  $ (25,535)
Non-GAAP net loss per share:        
Basic and diluted  $ (0.08)  $ (0.15)  $ (0.30)  $ (0.76)
         
Shares used in computing non-GAAP net loss per share:        
Basic and diluted  50,369  48,310  49,931  33,762
 
 
 
Summary of Stock-Based Compensation, Depreciation and Intangibles Amortization
(Unaudited, in thousands)
           
  Three Months Ended
  September 30, 2015 September 30, 2014
  Stock-Based
Compensation

Depreciation
Intangibles
Amortization
Stock-Based
Compensation

Depreciation
Intangibles
Amortization
             
Cost of revenue  $ 233  $ 1,382  $ 88  $ 158  $ 1,184  $ 88
Research and development  475  126  —  583  58  —
Sales and marketing  448  23  29  361  21  29
General and administrative  789  181  11  775  176  11
Total  $ 1,945  $ 1,712  $ 128  $ 1,877  $ 1,439  $ 128
             
  Nine Months Ended
  September 30, 2015 September 30, 2014
  Stock-Based
Compensation

Depreciation
Intangibles
Amortization
Stock-Based
Compensation

Depreciation
Intangibles
Amortization
             
Cost of revenue  $ 639  $ 4,203  $ 264  $ 366  $ 3,583  264
Research and development  1,389  315  —  1,404  154  —
Sales and marketing  1,430  67  85  1,055  61  85
General and administrative  2,552  556  35  1,971  676  35
Total  $ 6,010  $ 5,141  $ 384  $ 4,796  $ 4,474  $ 384
 
 
 
Reconciliation of GAAP Net Loss to Non-GAAP Net Loss – GUIDANCE
(Unaudited, in thousands, except per share data)
         
  Three Months Ending Year Ending
  December 31, 2015 December 31, 2015
  Low High Low High
         
GAAP net loss  $ (5,975)  $ (6,975)  $ (28,295)  $ (29,295)
Non-GAAP adjustments:        
Stock-based compensation  1,954  1,954  7,964  7,964
Intangibles amortization  128  128  512  512
Non-cash interest expense  93  93  353  353
Out of period adjustment for sales tax liability (G&A)  —  —  765  765
Non-GAAP net loss  $ (3,800)  $ (4,800)  $ (18,701)  $ (19,701)
         
GAAP net loss per share, basic and diluted  $ (0.12)  $ (0.14)  $ (0.56)  $ (0.58)
Non-GAAP net loss per share, basic and diluted  $ (0.07)  $ (0.09)  $ (0.37)  $ (0.39)
         
Shares used in computing GAAP and non-GAAP net loss per share:        
Basic and diluted  50,700  50,700  50,100  50,100
CONTACT: 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

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