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Five9 Announces Revenue Growth of 27% and Positive Adjusted EBITDA for the Fourth Quarter of 2015

February 23, 2016

Five9 Announces Revenue Growth of 27% and Positive Adjusted EBITDA for the Fourth Quarter of 2015 72.6 KB

Q4 LTM Enterprise Subscription Revenue Increased 38% Year-Over-Year

Record Annual Revenue of $128.9 Million, Up 25% Year-Over-Year

SAN RAMON, Calif., Feb. 23, 2016 (GLOBE NEWSWIRE) -- Five9, Inc. (NASDAQ:FIVN), a leading provider of cloud software for the enterprise contact center market, today reported results for the fourth quarter and fiscal year ended December 31, 2015.

Business Highlights

Q4 revenue increased 27% year-over-year to $36.0 million
Q4 adjusted gross margin improved by nearly 680 basis points year-over-year to 61.4%
Achieved positive adjusted EBITDA in Q4 with a nearly 1,900 basis point margin improvement year-over-year
2015 average new enterprise deal size of approximately $450,000 in annual recurring revenue, up from an average of $350,000 in 2014

"2015 was an outstanding year for Five9. We finished the year with an exceptional fourth quarter that exceeded our expectations across all key metrics, including achieving positive adjusted EBITDA three quarters earlier than expected. This achievement of delivering solid top line growth while generating increasing operating leverage underscores the strength of our business model. Throughout the year we experienced increasing momentum in our enterprise business as evidenced by 38% growth in our enterprise subscription revenue and an average new enterprise deal size of approximately $450,000 in annual recurring revenue. We believe cloud penetration in the enterprise market is accelerating due to an increasing push towards modernization, which includes a shift to the cloud for both CRM solutions like Salesforce.com and Oracle, as well as contact center solutions like Five9. Given our strong position in the market, Five9 is well positioned to benefit from these growth catalysts in 2016 and beyond."

- Mike Burkland, President and CEO, Five9

Fourth Quarter 2015 Financial Results

Total revenue for the fourth quarter of 2015 increased 27% to $36.0 million compared to $28.3 million for the fourth quarter of 2014.
Annual dollar-based retention rate for the period ended December 31, 2015 was 96%.
GAAP gross margin was 56.6% in the fourth quarter of 2015 compared to 48.6% for the same period in 2014.
Adjusted gross margin was 61.4% for the fourth quarter of 2015 compared to 54.6% for the same period in 2014.
Adjusted EBITDA for the fourth quarter of 2015 was $1.2 million, or 3.5% of revenue, compared to a loss of $(4.3) million, or (15.3)% of revenue, for the fourth quarter of 2014.
GAAP net loss for the fourth quarter of 2015 was $(3.5) million, or $(0.07) per share, compared to a GAAP net loss of $(9.4) million, or $(0.19) per share, for the fourth quarter of 2014.
Non-GAAP net loss for the fourth quarter of 2015 was $(1.6) million, or $(0.03) per share, compared to a non-GAAP net loss of $(6.8) million, or $(0.14) per share, for the fourth 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.

2015 Financial Results

Total revenue for 2015 increased 25% to $128.9 million, compared to $103.1 million in 2014.
GAAP gross margin was 53.8% for 2015, compared to 47.0% for the prior year.
Adjusted gross margin was 59.1% for 2015, compared to 52.7% for the prior year.
Adjusted EBITDA for 2015 was a loss of $(5.3) million, compared to a loss of $(22.7) million in 2014.
GAAP net loss for 2015 was $(25.8) million, or $(0.52) per share, compared to GAAP net loss of $(37.8) million, or $(1.00) per diluted share, in 2014.
Non-GAAP net loss for 2015 was $(16.5) million, or $(0.33) per share, compared to non-GAAP net loss of $(32.3) million, or $(0.86) per diluted share, in 2014.

Business Outlook

For the full year 2016, Five9 expects to report:
- Revenue in the range of $148 to $151 million
- GAAP net loss in the range of $(20.1) to $(23.1) million, or a loss of $(0.39) to $(0.44) per share
- Non-GAAP net loss in the range of $(11.0) to $(14.0) million, or $(0.21) to $(0.27) per share
For the first quarter of 2016, Five9 expects to report:
- Revenue in the range of $35.5 to $36.5 million
- GAAP net loss in the range of $(5.4) to $(6.4) million, or a loss of $(0.10) to $(0.12) per share
- Non-GAAP net loss in the range of $(3.2) to $(4.2) million, or a loss of $(0.06) to $(0.08) per share

Conference Call Details

Five9 will discuss its fourth quarter and fiscal year 2015 results today, February 23, 2016, via teleconference at 4:30 p.m. Eastern Time. To access the call (ID 1501564), please dial: 800-817-8873 or 719-325-2492. An audio replay of the call will be available through March 8, 2016 by dialing 888-203-1112 or 719-457-0820 and entering access code 1501564. 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, including statements regarding the enterprise shift to the cloud for CRM and contact center solutions and Five9's market position, and the first quarter 2016 and full year 2016 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, including on an adjusted EBITDA basis ; (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 enterprise contact center market, bringing the power of the cloud to thousands of customers and facilitating approximately 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.

FIVE9, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)

	December 31, 2015			December 31, 2014
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	58,484		$	58,289
Short-term investments		—			20,000
Accounts receivable, net		10,567			8,335
Prepaid expenses and other current assets		2,184			1,960
Total current assets		71,235			88,584
Property and equipment, net		13,225			12,571
Intangible assets, net		2,041			2,553
Goodwill		11,798			11,798
Other assets		934			1,428
Total assets	$	99,233		$	116,934

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	2,569		$	4,179
Accrued and other current liabilities		7,911			7,318
Accrued federal fees		5,684			7,215
Sales tax liability		1,262			297
Revolving line of credit		12,500			—
Notes payable		7,212			3,146
Capital leases		4,972			4,849
Deferred revenue		6,413			5,346
Total current liabilities		48,523			32,350
Revolving line of credit — less current portion		—			12,500
Sales tax liability — less current portion		1,915			2,582
Notes payable — less current portion		17,327			22,778
Capital leases — less current portion		4,606			4,423
Other long-term liabilities		582			548
Total liabilities		72,953			75,181
Stockholders' equity:
Common stock		51			49
Additional paid-in capital		180,649			170,286
Accumulated deficit		(154,420	)		(128,582	)
Total stockholders' equity		26,280			41,753
Total liabilities and stockholders' equity	$	99,233		$	116,934

FIVE9, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)

	Three Months Ended						Twelve Months Ended
	December 31, 2015			December 31, 2014			December 31, 2015			December 31, 2014
	(Unaudited)			(Unaudited)			(Unaudited)

Revenue	$	36,033		$	28,274		$	128,868		$	103,102
Cost of revenue		15,635			14,540			59,495			54,661
Gross profit		20,398			13,734			69,373			48,441
Operating expenses:
Research and development		5,580			5,828			22,659			22,110
Sales and marketing		10,720			9,453			42,042			37,445
General and administrative		6,433			6,763			25,822			24,416
Total operating expenses		22,733			22,044			90,523			83,971
Loss from operations		(2,335	)		(8,310	)		(21,150	)		(35,530	)
Other income (expense), net:
Interest expense		(1,198	)		(1,175	)		(4,727	)		(4,161	)
Interest income and other		28			146			100			245
Change in fair value of convertible preferred and common stock warrant liabilities		—			—			—			1,745
Total other income (expense), net		(1,170	)		(1,029	)		(4,627	)		(2,171	)
Loss before income taxes		(3,505	)		(9,339	)		(25,777	)		(37,701	)
Provision for income taxes		13			33			61			85
Net loss	$	(3,518	)	$	(9,372	)	$	(25,838	)	$	(37,786	)
Net loss per share:
Basic and diluted	$	(0.07	)	$	(0.19	)	$	(0.52	)	$	(1.00	)
Shares used in computing net loss per share:
Basic and diluted		50,764			49,003			50,141			37,604

FIVE9, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

	Twelve Months Ended
	December 31, 2015			December 31, 2014
	(Unaudited)
Cash flows from operating activities:
Net loss	$	(25,838	)	$	(37,786	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		7,388			6,463
Provision for doubtful accounts		171			76
Stock-based compensation		7,730			6,753
Loss on disposal of property and equipment		10			1
Non-cash interest expense		350			293
Changes in fair value of convertible preferred and common stock warrant liabilities		—			(1,745	)
Others		36			(7	)
Changes in operating assets and liabilities:
Accounts receivable		(2,410	)		(1,390	)
Prepaid expenses and other current assets		(224	)		(216	)
Other assets		(312	)		(128	)
Accounts payable		(1,610	)		300
Accrued and other current liabilities		426			1,863
Accrued federal fees and sales tax liability		441			440
Deferred revenue		1,038			1,012
Other liabilities		(135	)		(208	)
Net cash used in operating activities		(12,939	)		(24,279	)
Cash flows from investing activities:
Purchases of property and equipment		(1,116	)		(1,025	)
Decrease (increase) in restricted cash		806			(25	)
Purchase of short-term investments		(20,000	)		(49,992	)
Proceeds from maturity of short-term investments		40,000			30,000
Net cash provided by (used in) investing activities		19,690			(21,042	)
Cash flows from financing activities:
Net proceeds from IPO, net of payments for offering costs		—			71,459
Proceeds from exercise of common stock options and warrants		1,266			1,212
Proceeds from sale of common stock under ESPP		1,369			660
Proceeds from notes payable		—			19,536
Repayments of notes payable		(3,447	)		(1,556	)
Payments of capital leases		(5,744	)		(5,449	)
Net cash provided by (used in) financing activities		(6,556	)		85,862
Net increase in cash and cash equivalents		195			40,541
Cash and cash equivalents:
Beginning of period		58,289			17,748
End of period	$	58,484		$	58,289

RECONCILIATION OF GAAP GROSS PROFIT TO ADJUSTED GROSS PROFIT
(Unaudited, in thousands)

	Three Months Ended						Twelve Months Ended
	December 31, 2015			December 31, 2014			December 31, 2015			December 31, 2014

GAAP gross profit	$	20,398		$	13,734		$	69,373		$	48,441
GAAP gross margin		56.6	%		48.6	%		53.8	%		47.0	%
Non-GAAP adjustments:
Depreciation		1,396			1,204			5,599			4,787
Intangibles amortization		87			87			351			351
Stock-based compensation		227			176			866			542
Out of period adjustment for accrued federal fees		—			235			—			235
Adjusted gross profit	$	22,108		$	15,436		$	76,189		$	54,356
Adjusted gross margin		61.4	%		54.6	%		59.1	%		52.7	%

RECONCILIATION OF GAAP NET LOSS TO ADJUSTED EBITDA
(Unaudited, in thousands)

	Three Months Ended						Twelve Months Ended
	December 31, 2015			December 31, 2014			December 31, 2015			December 31, 2014

GAAP net loss	$	(3,518	)	$	(9,372	)	$	(25,838	)	$	(37,786	)
Non-GAAP adjustments:
Depreciation and amortization		1,863			1,605			7,388			6,463
Stock-based compensation		1,720			1,957			7,730			6,753
Interest expense		1,198			1,175			4,727			4,161
Interest income and other		(28	)		(146	)		(100	)		(245	)
Provision for income taxes		13			33			61			85
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
Out of period adjustment for accrued federal fees (COR)		—			235			—			235
Out of period adjustment for sales tax liability (G&A)		—			183			765			183
Adjusted EBITDA	$	1,248		$	(4,330	)	$	(5,267	)	$	(22,662	)

RECONCILIATION OF GAAP NET LOSS TO NON-GAAP NET LOSS
(Unaudited, in thousands, except per share data)

	Three Months Ended						Twelve Months Ended
	December 31, 2015			December 31, 2014			December 31, 2015			December 31, 2014

GAAP net loss	$	(3,518	)	$	(9,372	)	$	(25,838	)	$	(37,786	)
Non-GAAP adjustments:
Stock-based compensation		1,720			1,957			7,730			6,753
Intangibles amortization		128			128			512			512
Non-cash interest expense		90			83			350			293
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
Out of period adjustment for accrued federal fees (COR)		—			235			—			235
Out of period adjustment for sales tax liability (G&A)		—			183			765			183
Non-GAAP net loss	$	(1,580	)	$	(6,786	)	$	(16,481	)	$	(32,321	)
Non-GAAP net loss per share:
Basic and diluted	$	(0.03	)	$	(0.14	)	$	(0.33	)	$	(0.86	)
Shares used in computing non-GAAP net loss per share:
Basic and diluted		50,764			49,003			50,141			37,604

SUMMARY OF STOCK-BASED COMPENSATION, DEPRECIATION AND INTANGIBLES AMORTIZATION
(Unaudited, in thousands)

	Three Months Ended
	December 31, 2015						December 31, 2014
	Stock-Based Compensation		Depreciation		Intangibles Amortization		Stock-Based Compensation		Depreciation		Intangibles Amortization

Cost of revenue	$	227	$	1,396	$	87	$	176	$	1,204	$	87
Research and development		401		140		—		527		75		—
Sales and marketing		370		25		29		455		21		29
General and administrative		722		174		12		799		177		12
Total	$	1,720	$	1,735	$	128	$	1,957	$	1,477	$	128

	Twelve Months Ended
	December 31, 2015						December 31, 2014
	Stock-Based Compensation		Depreciation		Intangibles Amortization		Stock-Based Compensation		Depreciation		Intangibles Amortization

Cost of revenue	$	866	$	5,599	$	351	$	542	$	4,787	$	351
Research and development		1,790		455		—		1,931		229		—
Sales and marketing		1,800		92		114		1,510		82		114
General and administrative		3,274		730		47		2,770		853		47
Total	$	7,730	$	6,876	$	512	$	6,753	$	5,951	$	512

RECONCILIATION OF GAAP NET LOSS TO NON-GAAP NET LOSS - GUIDANCE
(Unaudited, in thousands, except per share data)

	Three Months Ending						Year Ending
	March 31, 2016						December 31, 2016
	Low			High			Low			High

GAAP net loss	$	(5,391	)	$	(6,391	)	$	(20,139	)	$	(23,139	)
Non-GAAP adjustments:
Stock-based compensation		1,972			1,972			8,296			8,296
Intangibles amortization		128			128			500			500
Non-cash interest expense		91			91			343			343
Non-GAAP net loss	$	(3,200	)	$	(4,200	)	$	(11,000	)	$	(14,000	)

GAAP net loss per share, basic and diluted	$	(0.10	)	$	(0.12	)	$	(0.39	)	$	(0.44	)
Non-GAAP net loss per share, basic and diluted	$	(0.06	)	$	(0.08	)	$	(0.21	)	$	(0.27	)
Shares used in computing GAAP and non-GAAP net loss per share:
Basic and diluted		51,416			51,416			52,308			52,308

Investor Relations Contact:



Five9, Inc.

Barry Zwarenstein

Chief Financial Officer

925-201-2000 ext. 5959

IR@five9.com



The Blueshirt Group for Five9, Inc.

Lisa Laukkanen

415-217-4967

Lisa@blueshirtgroup.com

Tony Righetti

415-489-2186

Tony@blueshirtgroup.com

Source: Five9, Inc.

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