Five9 Reports Third Quarter Revenue Growth of 16% to a Record $230.1 Million

28% Growth in LTM Enterprise Subscription Revenue

Record GAAP Operating Cash Flow of $37.0 Million

Five9, Inc. (NASDAQ:FIVN), the Intelligent CX Platform provider, today reported results for the third quarter ended September 30, 2023.

Third Quarter 2023 Financial Results

• Revenue for the third quarter of 2023 increased 16% to a record $230.1 million, compared to $198.3 million for the third quarter of 2022.
• GAAP gross margin was 51.7% for the third quarter of 2023, compared to 52.6% for the third quarter of 2022.
• Adjusted gross margin was 60.6% for the third quarter of 2023, compared to 61.4% for the third quarter of 2022.
• GAAP net loss for the third quarter of 2023 was $(20.4) million, or $(0.28) per basic share, and (8.9)% of revenue, compared to GAAP net loss of $(23.2) million, or $(0.33) per basic share, and (11.7)% of revenue, for the third quarter of 2022.
• Non-GAAP net income for the third quarter of 2023 was $38.0 million, or $0.52 per diluted share, and 16.5% of revenue, compared to non-GAAP net income of $27.8 million, or $0.39 per diluted share, and 14.0% of revenue, for the third quarter of 2022.
• Adjusted EBITDA for the third quarter of 2023 was $41.3 million, or 17.9% of revenue, compared to $36.7 million, or 18.5% of revenue, for the third quarter of 2022.
• GAAP operating cash flow for the third quarter of 2023 was $37.0 million, compared to GAAP operating cash flow of $30.5 million for the third quarter of 2022.

"We are pleased to report strong third quarter results with revenue growing 16% year-over-year to a record $230.1 million. This growth continues to be driven by our Enterprise business where LTM subscription revenue grew 28% year-over-year. In the third quarter, we achieved adjusted EBITDA margin of 18%, which drove an all-time record for GAAP operating cash flow. We continue to focus on innovation with our industry leading AI and Automation portfolio, where we are seeing unprecedented adoption. We also continue to see strong momentum up-market as our pipeline increased to a record level. We are confident in the market opportunity ahead as we empower enterprises to enhance their customer experience and we continue to execute on product innovation, our march up-market and international expansion."

- Mike Burkland, Chairman and CEO, Five9

Business Outlook

Five9 provides guidance based on current market conditions and expectations. Five9 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 ongoing macroeconomic conditions.

• For the full year 2023, Five9 expects to report:
  • Revenue in the range of $908.5 to $909.5 million.
  • GAAP net loss per share in the range of $(1.39) to $(1.33), assuming basic shares outstanding of approximately 72.1 million.
  • Non-GAAP net income per share in the range of $1.91 to $1.93, assuming diluted shares outstanding of approximately 73.0 million.
• For the fourth quarter of 2023, Five9 expects to report:
  • Revenue in the range of $237.1 to $238.1 million.
  • GAAP net loss per share in the range of $(0.42) to $(0.36), assuming basic shares outstanding of approximately 73.0 million.
  • Non-GAAP net income per share in the range of $0.47 to $0.49, assuming diluted shares outstanding of approximately 73.8 million.

With respect to Five9's guidance as provided above, please refer to the "Reconciliation of GAAP Net Loss to Non-GAAP net income - Guidance" table for more details, including important assumptions upon which such guidance is based.

Conference Call Details

Five9 will discuss its third quarter 2023 results today, November 2, 2023, via Zoom webinar at 4:30 p.m. Eastern Time. To access the webinar, please register by clicking here. 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 website, prior to the conference call.

A live webcast and a replay 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, exit costs related to the closure and relocation of our Russian operations, acquisition-related transaction and one-time integration costs, lease amortization for finance leases and refund for prior year overpayment of USF fees. 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, exit costs related to closure and relocation of our Russian operations, acquisition-related transaction costs and one-time integration costs, contingent consideration expense, refund for prior year overpayment of USF fees, lease amortization for finance leases and provision for income taxes. We calculate non-GAAP operating income by adding back or removing the following items to or from GAAP loss from operations: stock-based compensation, intangibles amortization, exit costs related to the closure and relocation of our Russian operations, acquisition-related transaction and one-time integration costs, contingent consideration expense and refund for prior year overpayment of USF fees. We calculate non-GAAP net income by adding back or removing the following items to or from GAAP net loss: stock-based compensation, intangibles amortization, amortization of discount and issuance costs on convertible senior notes, exit costs related to the closure and relocation of our Russian operations, acquisition-related transaction costs and one-time integration costs, contingent consideration expense, refund for prior year overpayment of USF fees and tax provision associated with acquired companies. For the periods presented, these adjustments from GAAP net loss to non-GAAP net income do not include any presentation of the net tax effect of such adjustments given our significant net operating loss carryforwards. 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. The Company 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 in this release.

Forward-Looking Statements

This news release contains certain forward-looking statements within the meaning of Private Securities Litigation Reform Act of 1995, including the statements in the quote from our Chairman and Chief Executive Officer, including statements regarding Five9's business strategies and areas of emphasis, market opportunity and ability to capitalize on that opportunity, up-market momentum, Five9's AI and automation initiatives, results and outlook, international expansion, and the fourth quarter and full year 2023 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 impact of adverse economic conditions, including the impact of macroeconomic deterioration, including continuing inflation, increased interest rates, supply chain disruptions, decreased economic output and fluctuations in currency rates, the impact of the Russia-Ukraine conflict, the impact of the conflict in Israel, and other factors, that may continue to harm our business; (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) if our existing clients terminate their subscriptions or reduce their subscriptions and related usage, or fail to grow subscriptions at the rate they have in the past or that we might expect, our revenues and gross margins will be harmed and we will be required to spend more money to grow our client base; (iv) 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; (v) we have established, and are continuing to increase, our network of technology solution brokers and resellers to sell our solution; our failure to effectively develop, manage, and maintain this network could materially harm our revenues; (vi) 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; (vii) 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; (viii) failure to adequately retain and expand our sales force will impede our growth; (ix) 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; (x) further development of our AI solutions may not be successful and may result in reputational harm and our future operating results could be materially harmed; (xi) the AI technology and features incorporated into our solution include new and evolving technologies that may present both legal and business risks; (xii) the use of AI by our workforce may present risks to our business; (xiii) 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; (xiv) the markets in which we participate involve a high number of competitors that are continuing to increase, and if we do not compete effectively, our operating results could be harmed; (xv) we continue to expand our international operations, which exposes us to significant macroeconomic and other risks; (xvi) 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, our business or financial results; (xvii) we may acquire other companies or technologies, or be the target of strategic transactions, or be impacted by transactions by other companies, which could divert our management's attention, result in additional dilution to our stockholders or use a significant amount of our cash resources and otherwise disrupt our operations and harm our operating results; (xviii) 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; (xix) 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; (xx) we have a history of losses and we may be unable to achieve or sustain profitability; (xxi) the contact center software solutions market is subject to rapid technological change, and we must develop and sell incremental and new cloud contact center solutions, which we refer to as our solution, in order to maintain and grow our business; (xxii) our stock price has been volatile, may continue to be volatile and may decline, including due to factors beyond our control; (xxiii) we may not be able to secure additional financing on favorable terms, or at all, to meet our future capital needs; (xxiv) failure to comply with laws and regulations could harm our business and our reputation; (xxv) 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 (xxvi) 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

The Five9 Intelligent CX Platform provides a comprehensive suite of solutions for orchestrating fluid customer experiences. Our cloud-native, multi-tenant, scalable, reliable, and secure platform includes contact center; omni-channel engagement; Workforce Engagement Management; extensibility through more than 1,000 partners; and innovative, practical AI, automation and journey analytics that are embedded as part of the platform. Five9 brings the power of people, technology, and partners to more than 2,500 organizations worldwide. For more information, visit www.five9.com.

(1) Exit costs related to the closure and relocation of our Russian operations was $0.9 million and $2.7 million during the three and nine months ended September 30, 2023. The $0.7 million and $2.1 million adjustments presented above were net of $0.2 million and $0.6 million included in "Interest (income) and other." Exit costs related to the closure and relocation of our Russian operations was $0.7 million and $4.6 million during the three and nine months ended September 30, 2022. The $0.8 million and $4.2 million adjustments presented above were net of $0.0 million and $0.8 million included in "Depreciation and amortization" and $(0.1) million and $(0.4) million included in "Interest (income) and other."

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