Business Wire | Oct 29, 2020 04:05PM EDT

Five9 Reports Third Quarter Revenue Growth of 34% to a Record $112.1 Million

Oct. 29, 2020

SAN RAMON, Calif.--(BUSINESS WIRE)--Oct. 29, 2020--Five9, Inc. (NASDAQ:FIVN), a leading provider of cloud contact center software, today reported results for the third quarter ended September 30, 2020.

Third Quarter 2020 Financial Results

* Revenue for the third quarter of 2020 increased 34% to a record $112.1 million, compared to $83.8 million for the third quarter of 2019. * GAAP gross margin was 58.5% for the third quarter of 2020, compared to 58.8% for the third quarter of 2019. * Adjusted gross margin was 65.4% for the third quarter of 2020, compared to 64.0% for the third quarter of 2019. * GAAP net loss for the third quarter of 2020 was $(11.4) million, or $(0.17) per basic share, compared to GAAP net loss of $(1.6) million, or $(0.03) per basic share, for the third quarter of 2019. * Non-GAAP net income for the third quarter of 2020 was $18.5 million, or $0.27 per diluted share, compared to non-GAAP net income of $12.8 million, or $0.20 per diluted share, for the third quarter of 2019. * Adjusted EBITDA for the third quarter of 2020 was $24.1 million, or 21.5% of revenue, compared to $15.0 million, or 18.0% of revenue, for the third quarter of 2019. * GAAP operating cash flow for the third quarter of 2020 was $22.8 million, compared to GAAP operating cash flow of $17.7 million for the third quarter of 2019.

"We delivered outstanding third quarter results with revenue of $112.1 million, growing 34% year-over-year and 12% sequentially, both all-time highs for us as a public company, and Adjusted EBITDA margin was 21.5%, also a third quarter record. Positive industry trends continue to accelerate and help drive our performance. The contact center is the new front door for many businesses. We believe the premise to cloud transition and digital transformation trends will accelerate, and demand for AI driven automation will increase, placing Five9 at the forefront of a massive opportunity. We continue to execute on our go-to-market initiatives, which balance the strength of our direct salesforce with a diverse group of channel partners. Additionally, we are receiving very positive feedback on the enhanced product capabilities we have delivered over the last quarter. Finally, today we announced the execution of a definitive agreement to acquire Inference Solutions Inc. ("Inference"), a leader in the emerging Intelligent Virtual Agent market. Leveraging virtual agents to meet increasing customer interactions is rapidly becoming a requirement of the modern contact center. We are excited to build upon this acquisition and believe we are well positioned for continued growth."

- Rowan Trollope, CEO, Five9

Business Outlook

Five9 provides guidance based on current market conditions and expectations. The Company 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 COVID-19 pandemic.

* For the full year 2020, Five9 expects to report: Revenue in the range of $421.5 to $422.5 million, higher than the guidance range of $399.0 to $401.0 million that was previously provided on August 3, 2020. GAAP net loss in the range of $(49.4) to $(48.4) million, or $(0.76) to $(0.75) per basic share, improved from the guidance range of $(56.4) to $(54.4) million, or $(0.88) to $(0.85) per basic share, that was previously provided on August 3, 2020. Non-GAAP net income in the range of $59.7 to $60.7 million, or $0.87 to $0.88 per diluted share, higher than the guidance range of $52.7 to $54.7 million, or $0.77 to $0.80 per diluted share, that was previously provided on August 3, 2020. * For the fourth quarter of 2020, Five9 expects to report: Revenue in the range of $114.5 to $115.5 million. GAAP net loss in the range of $(14.5) to $(13.5) million, or $(0.21) to $(0.20) per basic share. Non-GAAP net income in the range of $16.0 to $17.0 million, or $0.22 to $0.24 per diluted share.

Conference Call Details

Five9 will discuss its third quarter 2020 results today, October 29, 2020, via teleconference at 4:30 p.m. Eastern Time. To access the call (ID 1480240), please dial: 800-437-2398 or 720-452-9102. An audio replay of the call will be available through November 12, 2020 by dialing 888-203-1112 or 719-457-0820 and entering access code 1480240. 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 webcast of the call 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 and COVID-19 relief bonus for employees. 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, acquisition-related transaction costs and one-time integration costs, non-recurring litigation settlement costs and related indemnification fees, COVID-19 relief bonus for employees and provision for (benefit from) income taxes. We calculate non-GAAP operating income as GAAP operating income (loss) excluding stock-based compensation, intangibles amortization, acquisition-related transaction costs and one-time integration costs, non-recurring litigation settlement costs and related indemnification fees, and COVID-19 relief bonus for employees. We calculate non-GAAP net income as GAAP net loss excluding stock-based compensation, intangibles amortization, amortization of discount and issuance costs on convertible senior notes, acquisition-related transaction costs and one-time integration costs, non-recurring litigation settlement costs and related indemnification fees, gain on sale of convertible note held for investment, COVID-19 relief bonus for employees, loss on early extinguishment of debt, and tax benefit of valuation allowance associated with an acquisition. 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 expectations for market acceleration from on premise contact centers to the cloud, and digital transformation, and drivers thereof, Five9's expectations regarding the acceleration of growth in demand for AI-driven automation, benefits of its go-to-market strategy, the benefits being delivered by Five9's new product capabilities, Five9's growth expectations, the potential closing of the Inference acquisition, and the fourth quarter and full year 2020 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 effects of the COVID-19 pandemic have materially affected how we, our clients and business partners are operating, and the duration and extent to which this will impact our future results of operations and overall financial performance remains uncertain; (ii) adverse economic conditions may harm our business; (iii) 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; (iv) 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; (v) 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; (vi) failure to adequately retain and expand our sales force will impede our growth; (vii) 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; (viii) 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; (ix) 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; (x) security breaches and improper access to or disclosure of our data or our clients' data, their customers' data, or other cyber attacks on our systems, could result in litigation and regulatory risk, harm our reputation and our business; (xi) 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; (xii) 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; (xiii) 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; (xiv) 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; (xv) 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; (xvi) we have a history of losses and we may be unable to achieve or sustain profitability; (xvii) 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; (xviii) we may not be able to secure additional financing on favorable terms, or at all, to meet our future capital needs; (xix) we may acquire other companies or technologies, such as Inference, or be the target of strategic transactions, which could divert our management's attention, result in additional dilution to our stockholders and otherwise disrupt our operations and harm our operating results; (xx) failure to comply with laws and regulations could harm our business and our reputation; (xxi) 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; (xxii) our acquisition of Inference is subject to various conditions to closing that may not be satisfied, and the amount of consideration to be paid for Inference is dependent on various purchase price adjustments, as well as whether or not certain earn-out metrics are satisfied; and (xxiii) 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

Five9 is a leading provider of cloud contact center software for the intelligent contact center space, bringing the power of cloud innovation to customers and facilitating more than six 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 Genius platform is reliable, secure, compliant and scalable; designed to create exceptional personalized customer experiences. For more information, visit www.five9.com.

FIVE9, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

September 30, December 31, 2020 2019

ASSETS

Current assets:

Cash and cash equivalents $ 301,767 $ 77,976

Marketable investments 479,141 241,973

Accounts receivable, net 42,542 37,655

Prepaid expenses and other current assets 15,908 10,656

Deferred contract acquisition costs 17,932 13,014

Total current assets 857,290 381,274

Property and equipment, net 41,676 33,190

Operating lease right-of-use assets 8,669 8,746

Intangible assets, net 23,867 15,533

Goodwill 34,444 11,798

Other assets 3,258 1,184

Deferred contract acquisition costs - less 44,083 30,655 current portion

Total assets $ 1,013,287 $ 482,380

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable $ 12,829 $ 10,156

Accrued and other current liabilities 40,814 18,385

Operating lease liabilities 4,307 5,064

Accrued federal fees 2,562 2,303

Sales tax liabilities 1,629 1,885

Finance lease liabilities 1,299 3,518

Deferred revenue 28,527 24,681

Total current liabilities 91,967 65,992

Convertible senior notes 646,592 209,604

Sales tax liabilities - less current portion 851 838

Operating lease liabilities - less current 4,679 4,329 portion

Finance lease liabilities - less current - 809 portion

Other long-term liabilities 6,809 4,350

Total liabilities 750,898 285,922

Stockholders' equity:

Common stock 66 61

Additional paid-in capital 452,531 351,870

Accumulated other comprehensive income 761 576

Accumulated deficit (190,969 ) (156,049 )

Total stockholders' equity 262,389 196,458

Total liabilities and stockholders' equity $ 1,013,287 $ 482,380



FIVE9, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

Three Months Ended

Nine Months Ended

September 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019

Revenue

$

112,143

$

83,769

$

307,023

$

235,743

Cost of revenue

46,561

34,472

129,051

96,571

Gross profit

65,582

49,297

177,972

139,172

Operating expenses:

Research and development

17,674

11,665

50,071

33,022

Sales and marketing

32,969

25,014

95,360

69,965

General and administrative

16,724

12,146

47,511

35,950

Total operating expenses

67,367

48,825

192,942

138,937

Income (loss) from operations

(1,785

)

472

(14,970

)235

Other income (expense), net:

Interest expense

(9,649

)(3,486

)(18,867

)(10,288

)Interest income and other

349

1,460

(3,544

)

4,695

Total other income (expense), net

(9,300

)

(2,026

)

(22,411

)

(5,593

)

Loss before income taxes

(11,085

)

(1,554

)

(37,381

)

(5,358

)

Provision for (benefit from) income taxes

346

50

(2,461

)

30

Net loss

$

(11,431

)

$

(1,604

)

$

(34,920

)

$

(5,388

)

Net loss per share:

Basic and diluted

$

(0.17

)

$

(0.03

)

$

(0.55

)

$

(0.09

)

Shares used in computing net loss per share:

Basic and diluted

65,460

60,781

63,490

60,074

FIVE9, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

Three Months Ended Nine Months Ended

September September September September 30, 2020 30, 2019 30, 2020 30, 2019



Revenue $ 112,143 $ 83,769 $ 307,023 $ 235,743

Cost of revenue 46,561 34,472 129,051 96,571

Gross profit 65,582 49,297 177,972 139,172

Operating expenses:

Research and development 17,674 11,665 50,071 33,022

Sales and marketing 32,969 25,014 95,360 69,965

General and 16,724 12,146 47,511 35,950 administrative

Total operating expenses 67,367 48,825 192,942 138,937

Income (loss) from (1,785 ) 472 (14,970 235 operations )

Other income (expense), net:

Interest expense (9,649 ) (3,486 ) (18,867 ) (10,288 )

Interest income and 349 1,460 (3,544 ) 4,695 other

Total other income (9,300 ) (2,026 ) (22,411 ) (5,593 )(expense), net

Loss before income taxes (11,085 ) (1,554 ) (37,381 ) (5,358 )

Provision for (benefit 346 50 (2,461 ) 30 from) income taxes

Net loss $ (11,431 ) $ (1,604 ) $ (34,920 ) $ (5,388 )

Net loss per share:

Basic and diluted $ (0.17 ) $ (0.03 ) $ (0.55 ) $ (0.09 )

Shares used in computing net loss per share:

Basic and diluted 65,460 60,781 63,490 60,074



FIVE9, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Nine Months Ended

September 30, 2020

September 30, 2019

Cash flows from operating activities:

Net loss

$

(34,920

)

$

(5,388

)

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization

17,750

10,050

Amortization of operating lease right-of-use assets

4,227

3,420

Amortization of premium on marketable investments

1,819

(1,036

)

Provision for doubtful accounts

578

78

Stock-based compensation

47,871

30,197

Loss on early extinguishment of debt

6,077

-

Gain on sale of convertible note held for investment

-

(217

)

Amortization of discount and issuance costs on convertible senior notes

17,204

9,484

Tax benefit of valuation allowance associated with an acquisition

(2,910

)

-

Others

73

2

Changes in operating assets and liabilities:

Accounts receivable

(5,306

)

(6,677

)

Prepaid expenses and other current assets

(5,445

)

(3,172

)

Deferred contract acquisition costs

(18,345

)

(9,035

)

Other assets

(2,074

)

(264

)

Accounts payable

2,667

100

Accrued and other current liabilities

13,528

3,522

Accrued federal fees and sales tax liability

16

233

Deferred revenue

5,246

4,391

Other liabilities

(66

)

(33

)

Net cash provided by operating activities

47,990

35,655

Cash flows from investing activities:

Purchases of marketable investments

(507,046

)

(274,401

)

Proceeds from maturities of marketable investments

268,207

285,281

Purchases of property and equipment

(20,412

)

(12,776

)

Cash paid to acquire Virtual Observer

(28,313

)

-

Cash paid to acquire substantially all of the assets of Whendu LLC

(100

)

-

Proceeds from sale of convertible note held for investment

-

217

Net cash used in investing activities

(287,664

)

(1,679

)

Cash flows from financing activities:

Proceeds from issuance of 2025 convertible senior notes, net of issuance costs

728,812

-

Payments for capped call transactions related to the 2025 convertible senior notes

(90,448

)

-

Repurchase of a portion of 2023 convertible senior notes, net of costs

(186,465

)

-

Proceeds from exercise of common stock options

8,928

6,097

Proceeds from sale of common stock under ESPP

5,666

3,996

Payments of finance leases

(3,028

)

(5,408

)

Net cash provided by financing activities

463,465

4,685

Net increase in cash and cash equivalents

223,791

38,661

Cash and cash equivalents:

Beginning of period

77,976

81,912

End of period

$

301,767

$

120,573

FIVE9, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Nine Months Ended

September September 30, 2020 30, 2019

Cash flows from operating activities:

Net loss $ (34,920 ) $ (5,388 )

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization 17,750 10,050

Amortization of operating lease right-of-use assets 4,227 3,420

Amortization of premium on marketable investments 1,819 (1,036 )

Provision for doubtful accounts 578 78

Stock-based compensation 47,871 30,197

Loss on early extinguishment of debt 6,077 -

Gain on sale of convertible note held for - (217 )investment

Amortization of discount and issuance costs on 17,204 9,484 convertible senior notes

Tax benefit of valuation allowance associated with (2,910 ) - an acquisition

Others 73 2

Changes in operating assets and liabilities:

Accounts receivable (5,306 ) (6,677 )

Prepaid expenses and other current assets (5,445 ) (3,172 )

Deferred contract acquisition costs (18,345 ) (9,035 )

Other assets (2,074 ) (264 )

Accounts payable 2,667 100

Accrued and other current liabilities 13,528 3,522

Accrued federal fees and sales tax liability 16 233

Deferred revenue 5,246 4,391

Other liabilities (66 ) (33 )

Net cash provided by operating activities 47,990 35,655

Cash flows from investing activities:

Purchases of marketable investments (507,046 ) (274,401 )

Proceeds from maturities of marketable investments 268,207 285,281

Purchases of property and equipment (20,412 ) (12,776 )

Cash paid to acquire Virtual Observer (28,313 ) -

Cash paid to acquire substantially all of the (100 ) - assets of Whendu LLC

Proceeds from sale of convertible note held for - 217 investment

Net cash used in investing activities (287,664 ) (1,679 )

Cash flows from financing activities:

Proceeds from issuance of 2025 convertible senior 728,812 - notes, net of issuance costs

Payments for capped call transactions related to (90,448 ) - the 2025 convertible senior notes

Repurchase of a portion of 2023 convertible senior (186,465 ) - notes, net of costs

Proceeds from exercise of common stock options 8,928 6,097

Proceeds from sale of common stock under ESPP 5,666 3,996

Payments of finance leases (3,028 ) (5,408 )

Net cash provided by financing activities 463,465 4,685

Net increase in cash and cash equivalents 223,791 38,661

Cash and cash equivalents:

Beginning of period 77,976 81,912

End of period $ 301,767 $ 120,573

FIVE9, INC.

RECONCILIATION OF GAAP GROSS PROFIT TO ADJUSTED GROSS PROFIT

(In thousands, except percentages)

(Unaudited)

Three Months Ended

Nine Months Ended

September 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019

GAAP gross profit

$

65,582

$

49,297

$

177,972

$

139,172

GAAP gross margin

58.5

%

58.8

%

58.0

%

59.0

%

Non-GAAP adjustments:

Depreciation

3,433

2,514

9,665

7,208

Intangibles amortization

1,738

88

4,566

264

Stock-based compensation

2,603

1,702

7,091

4,589

COVID-19 relief bonus for employees

-

-

618

-

Adjusted gross profit

$

73,356

$

53,601

$

199,912

$

151,233

Adjusted gross margin

65.4

%

64.0

%

65.1

%

64.2

%

FIVE9, INC.

RECONCILIATION OF GAAP GROSS PROFIT TO ADJUSTED GROSS PROFIT

(In thousands, except percentages)

(Unaudited)

Three Months Ended Nine Months Ended

September September September September 30, 2020 30, 2019 30, 2020 30, 2019



GAAP gross profit $ 65,582 $ 49,297 $ 177,972 $ 139,172

GAAP gross margin 58.5 % 58.8 % 58.0 % 59.0 %

Non-GAAP adjustments:

Depreciation 3,433 2,514 9,665 7,208

Intangibles 1,738 88 4,566 264 amortization

Stock-based 2,603 1,702 7,091 4,589 compensation

COVID-19 relief bonus - - 618 - for employees

Adjusted gross profit $ 73,356 $ 53,601 $ 199,912 $ 151,233

Adjusted gross margin 65.4 % 64.0 % 65.1 % 64.2 %

FIVE9, INC.

RECONCILIATION OF GAAP NET LOSS TO ADJUSTED EBITDA

(In thousands, except percentages)

(Unaudited)

Three Months Ended

Nine Months Ended

September 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019

GAAP net loss

$

(11,431

)

$

(1,604

)

$

(34,920

)

$

(5,388

)

Non-GAAP adjustments:

Depreciation and amortization

6,537

3,497

17,750

10,050

Stock-based compensation

17,286

11,075

47,871

30,197

Interest expense

9,649

3,486

18,867

10,288

Interest income and other

(349

)

(1,460

)

3,544

(4,695

)

Legal settlement

-

-

-

420

Legal and indemnification fees related to settlement

-

-

-

356

Acquisition-related transaction costs and one-time integration costs

2,030

-

3,996

-

COVID-19 relief bonus for employees

-

-

1,817

-

Provision for (benefit from) income taxes

346

50

(2,461

)

30

Adjusted EBITDA

$

24,068

$

15,044

$

56,464

$

41,258

Adjusted EBITDA as % of revenue

21.5

%

18.0

%

18.4

%

17.5

%

FIVE9, INC.

RECONCILIATION OF GAAP NET LOSS TO ADJUSTED EBITDA

(In thousands, except percentages)

(Unaudited)

Three Months Ended Nine Months Ended

September September September September 30, 2020 30, 2019 30, 2020 30, 2019



GAAP net loss $ (11,431 ) $ (1,604 ) $ (34,920 ) $ (5,388 )

Non-GAAP adjustments:

Depreciation and amortization 6,537 3,497 17,750 10,050

Stock-based compensation 17,286 11,075 47,871 30,197

Interest expense 9,649 3,486 18,867 10,288

Interest income and other (349 ) (1,460 ) 3,544 (4,695 )

Legal settlement - - - 420

Legal and indemnification fees - - - 356 related to settlement

Acquisition-related transactioncosts and one-time integration 2,030 - 3,996 - costs

COVID-19 relief bonus for - - 1,817 - employees

Provision for (benefit from) 346 50 (2,461 ) 30 income taxes

Adjusted EBITDA $ 24,068 $ 15,044 $ 56,464 $ 41,258

Adjusted EBITDA as % of revenue 21.5 % 18.0 % 18.4 % 17.5 %

FIVE9, INC.

RECONCILIATION OF GAAP OPERATING INCOME (LOSS) TO NON-GAAP OPERATING INCOME

(In thousands)

(Unaudited)

Three Months Ended

Nine Months Ended

September 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019

Income (loss) from operations

$

(1,785

)

$

472

$

(14,970

)

$

235

Non-GAAP adjustments:

Stock-based compensation

17,286

11,075

47,871

30,197

Intangibles amortization

1,738

88

4,566

264

Legal settlement

-

-

-

420

Legal and indemnification fees related to settlement

-

-

-

356

Acquisition-related transaction costs and one-time integration costs

2,030

-

3,996

-

COVID-19 relief bonus for employees

-

-

1,817

-

Non-GAAP operating income

$

19,269

$

11,635

$

43,280

$

31,472

FIVE9, INC.

RECONCILIATION OF GAAP OPERATING INCOME (LOSS) TO NON-GAAP OPERATING INCOME

(In thousands)

(Unaudited)

Three Months Ended Nine Months Ended

September September September September 30, 2020 30, 2019 30, 2020 30, 2019



Income (loss) from operations $ (1,785 ) $ 472 $ (14,970 ) $ 235

Non-GAAP adjustments:

Stock-based compensation 17,286 11,075 47,871 30,197

Intangibles amortization 1,738 88 4,566 264

Legal settlement - - - 420

Legal and indemnification fees - - - 356related to settlement

Acquisition-related transactioncosts and one-time integration 2,030 - 3,996 -costs

COVID-19 relief bonus for - - 1,817 -employees

Non-GAAP operating income $ 19,269 $ 11,635 $ 43,280 $ 31,472

FIVE9, INC.

RECONCILIATION OF GAAP NET LOSS TO NON-GAAP NET INCOME

(In thousands, except per share data)

(Unaudited)

Three Months Ended

Nine Months Ended

September 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019

GAAP net loss

$

(11,431

)

$

(1,604

)

$

(34,920

)

$

(5,388

)

Non-GAAP adjustments:

Stock-based compensation

17,286

11,075

47,871

30,197

Intangibles amortization

1,738

88

4,566

264

Amortization of discount and issuance costs on convertible senior notes

8,633

3,250

17,204

9,484

Legal settlement

-

-

-

420

Legal and indemnification fees related to settlement

-

-

-

356

Acquisition-related transaction costs and one-time integration costs

2,030

-

3,996

-

COVID-19 relief bonus for employees

-

-

1,817

-

Loss on early extinguishment of debt

283

-

6,077

-

Gain on sale of convertible note held for investment

-

-

-

(217

)

Tax benefit of valuation allowance associated with an acquisition

-

-

(2,910

)

-

Non-GAAP net income

$

18,539

$

12,809

$

43,701

$

35,116

GAAP net loss per share:

Basic and diluted

$

(0.17

)

$

(0.03

)

$

(0.55

)

$

(0.09

)

Non-GAAP net income per share:

Basic

$

0.28

$

0.21

$

0.69

$

0.58

Diluted

$

0.27

$

0.20

$

0.65

$

0.56

Shares used in computing GAAP net loss per share:

Basic and diluted

65,460

60,781

63,490

60,074

Shares used in computing non-GAAP net income per share:

Basic

65,460

60,781

63,490

60,074

Diluted

69,605

63,438

67,214

63,042

FIVE9, INC.

RECONCILIATION OF GAAP NET LOSS TO NON-GAAP NET INCOME

(In thousands, except per share data)

(Unaudited)

Three Months Ended Nine Months Ended

September September September September 30, 2020 30, 2019 30, 2020 30, 2019



GAAP net loss $ (11,431 ) $ (1,604 ) $ (34,920 ) $ (5,388 )

Non-GAAP adjustments:

Stock-based compensation 17,286 11,075 47,871 30,197

Intangibles amortization 1,738 88 4,566 264

Amortization of discount andissuance costs on convertible 8,633 3,250 17,204 9,484 senior notes

Legal settlement - - - 420

Legal and indemnification - - - 356 fees related to settlement

Acquisition-relatedtransaction costs and 2,030 - 3,996 - one-time integration costs

COVID-19 relief bonus for - - 1,817 - employees

Loss on early extinguishment 283 - 6,077 - of debt

Gain on sale of convertible - - - (217 )note held for investment

Tax benefit of valuationallowance associated with an - - (2,910 ) - acquisition

Non-GAAP net income $ 18,539 $ 12,809 $ 43,701 $ 35,116

GAAP net loss per share:

Basic and diluted $ (0.17 ) $ (0.03 ) $ (0.55 ) $ (0.09 )

Non-GAAP net income per share:

Basic $ 0.28 $ 0.21 $ 0.69 $ 0.58

Diluted $ 0.27 $ 0.20 $ 0.65 $ 0.56

Shares used in computing GAAP net loss per share:

Basic and diluted 65,460 60,781 63,490 60,074

Shares used in computingnon-GAAP net income per share:

Basic 65,460 60,781 63,490 60,074

Diluted 69,605 63,438 67,214 63,042

FIVE9, INC.

SUMMARY OF STOCK-BASED COMPENSATION, DEPRECIATION AND INTANGIBLES AMORTIZATION

(In thousands)

(Unaudited)

Three Months Ended

September 30, 2020

September 30, 2019

Stock-Based Compensation

Depreciation

Intangibles Amortization

Stock-Based Compensation

Depreciation

Intangibles Amortization

Cost of revenue

$

2,603

$

3,433

$

1,738

$

1,702

$

2,514

$

88

Research and development

3,876

512

-

2,022

450

-

Sales and marketing

5,427

1

-

3,017

2

-

General and administrative

5,380

853

-

4,334

443

-

Total

$

17,286

$

4,799

$

1,738

$

11,075

$

3,409

$

88

Nine Months Ended

September 30, 2020

September 30, 2019

Stock-Based Compensation

Depreciation

Intangibles Amortization

Stock-Based Compensation

Depreciation

Intangibles Amortization

Cost of revenue

$

7,091

$

9,665

$

4,566

$

4,589

$

7,208

$

264

Research and development

10,368

1,476

-

5,399

1,340

-

Sales and marketing

14,798

3

-

8,015

4

-

General and administrative

15,614

2,040

-

12,194

1,234

-

Total

$

47,871

$

13,184

$

4,566

$

30,197

$

9,786

$

264

FIVE9, INC.

SUMMARY OF STOCK-BASED COMPENSATION, DEPRECIATION AND INTANGIBLES AMORTIZATION

(In thousands)

(Unaudited)

Three Months Ended

September 30, 2020 September 30, 2019

Stock-Based Depreciation Intangibles Stock-Based Depreciation Intangibles Compensation Amortization Compensation Amortization



Cost of revenue $ 2,603 $ 3,433 $ 1,738 $ 1,702 $ 2,514 $ 88

Research and 3,876 512 - 2,022 450 - development

Sales and 5,427 1 - 3,017 2 - marketing

General and 5,380 853 - 4,334 443 - administrative

Total $ 17,286 $ 4,799 $ 1,738 $ 11,075 $ 3,409 $ 88



Nine Months Ended

September 30, 2020 September 30, 2019

Stock-Based Depreciation Intangibles Stock-Based Depreciation Intangibles Compensation Amortization Compensation Amortization



Cost of revenue $ 7,091 $ 9,665 $ 4,566 $ 4,589 $ 7,208 $ 264

Research and 10,368 1,476 - 5,399 1,340 - development

Sales and 14,798 3 - 8,015 4 - marketing

General and 15,614 2,040 - 12,194 1,234 - administrative

Total $ 47,871 $ 13,184 $ 4,566 $ 30,197 $ 9,786 $ 264

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

December 31, 2020

December 31, 2020

Low

High

Low

High

GAAP net loss

$

(14,484

)

$

(13,484

)

$

(49,404

)

$

(48,404

)

Non-GAAP adjustments:

Stock-based compensation

17,988

17,988

65,859

65,859

Intangibles amortization

1,666

1,666

6,232

6,232

Amortization of discount and issuance costs on convertible senior notes

8,570

8,570

25,774

25,774

Loss on early extinguishment of debt

-

-

6,077

6,077

Acquisition-related transaction costs and one-time integration costs

2,260

2,260

6,256

6,256

COVID-19 relief bonus for employees

-

-

1,817

1,817

Tax benefit of valuation allowance associated with an acquisition

-

-

(2,910

)

(2,910

)

Income tax expense effects (1)

-

-

-

-

Non-GAAP net income

$

16,000

$

17,000

$

59,701

$

60,701

GAAP net loss per share, basic and diluted

$

(0.21

)

$

(0.20

)

$

(0.76

)

$

(0.75

)

Non-GAAP net income per share:

Basic

$

0.24

$

0.25

$

0.92

$

0.94

Diluted

$

0.22

$

0.24

$

0.87

$

0.88

Shares used in computing GAAP net loss per share and non-GAAP net income per share:

Basic

67,800

67,800

64,600

64,600

Diluted

72,200

72,200

68,600

68,600

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

December 31, 2020 December 31, 2020

Low High Low High



GAAP net loss $ (14,484 ) $ (13,484 ) $ (49,404 ) $ (48,404 )

Non-GAAP adjustments:

Stock-based compensation 17,988 17,988 65,859 65,859

Intangibles amortization 1,666 1,666 6,232 6,232

Amortization of discountand issuance costs on 8,570 8,570 25,774 25,774 convertible senior notes

Loss on early - - 6,077 6,077 extinguishment of debt

Acquisition-relatedtransaction costs and 2,260 2,260 6,256 6,256 one-time integration costs

COVID-19 relief bonus for - - 1,817 1,817 employees

Tax benefit of valuationallowance associated with - - (2,910 ) (2,910 )an acquisition

Income tax expense effects - - - - (1)

Non-GAAP net income $ 16,000 $ 17,000 $ 59,701 $ 60,701

GAAP net loss per share, $ (0.21 ) $ (0.20 ) $ (0.76 ) $ (0.75 )basic and diluted

Non-GAAP net income per share:

Basic $ 0.24 $ 0.25 $ 0.92 $ 0.94

Diluted $ 0.22 $ 0.24 $ 0.87 $ 0.88

Shares used in computingGAAP net loss per share and non-GAAP net income pershare:

Basic 67,800 67,800 64,600 64,600

Diluted 72,200 72,200 68,600 68,600

(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/20201029005992/en/

CONTACT: Investor Relations Contacts:

CONTACT: Five9, Inc. Barry Zwarenstein Chief Financial Officer 925-201-2000 ext. 5959 IR@five9.com

CONTACT: The Blueshirt Group for Five9, Inc. Lisa Laukkanen 415-217-4967 Lisa@blueshirtgroup.com