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.--(BUSINESS WIRE)-- 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

• 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.
• GAAP gross margin was 58.6% for the first quarter of 2019, compared to 58.1% for the first quarter of 2018.
• Adjusted gross margin was 63.4% for the first quarter of 2019, compared to 62.3% for the first quarter of 2018.
• 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.
• 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.
• 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.
• 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

• For the full year 2019, Five9 expects to report:
  • 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.
  • 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.
  • 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.
• For the second quarter of 2019, Five9 expects to report:
  • Revenue in the range of $72.0 to $73.0 million.
  • 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.
  • 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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20190501005862/en/

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.

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