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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

Source:Five9