32% Growth in LTM Enterprise Subscription Revenue

44% Growth in 2022 International Revenue

Record Operating Cash Flow of $32.7 Million

Five9, Inc. (NASDAQ:FIVN), a leading provider of cloud contact center software, today reported results for the fourth quarter and full year ended December 31, 2022.

Fourth Quarter 2022 Financial Results

• Revenue for the fourth quarter of 2022 increased 20% to a record $208.3 million, compared to $173.6 million for the fourth quarter of 2021.
• GAAP gross margin was 53.8% for the fourth quarter of 2022, compared to 54.1% for the fourth quarter of 2021.
• Adjusted gross margin was 62.3% for the fourth quarter of 2022, compared to 62.8% for the fourth quarter of 2021.
• GAAP net loss for the fourth quarter of 2022 was $(13.7) million, or $(0.19) per basic share, compared to GAAP net loss of $(3.6) million, or $(0.05) per basic share, for the fourth quarter of 2021.
• Non-GAAP net income for the fourth quarter of 2022 was $39.0 million, or $0.54 per diluted share, compared to non-GAAP net income of $30.1 million, or $0.42 per diluted share, for the fourth quarter of 2021.
• Adjusted EBITDA for the fourth quarter of 2022 was $46.2 million, or 22.2% of revenue, compared to $36.9 million, or 21.3% of revenue, for the fourth quarter of 2021.
• GAAP operating cash flow for the fourth quarter of 2022 was $32.7 million, compared to GAAP operating cash flow of $8.6 million for the fourth quarter of 2021.

2022 Financial Results

• Total revenue for 2022 increased 28% to a record $778.8 million, compared to $609.6 million in 2021.
• GAAP gross margin was 52.8% for 2022, compared to 55.5% in 2021.
• Adjusted gross margin was 61.3% for 2022, compared to 63.5% in 2021.
• GAAP net loss for 2022 was $(94.7) million, or $(1.35) per basic share, compared to GAAP net loss of $(53.0) million, or $(0.79) per basic share, in 2021.
• Non-GAAP net income for 2022 was $106.7 million, or $1.50 per diluted share, compared to non-GAAP net income of $82.2 million, or $1.16 per diluted share, in 2021.
• Adjusted EBITDA for 2022 was $140.4 million, or 18.0% of revenue, compared to $110.5 million, or 18.1% of revenue, in 2021.
• GAAP operating cash flow for 2022 was $88.9 million, compared to GAAP operating cash flow of $29.0 million, in 2021.

“We are pleased to report strong fourth quarter results with revenue growing 20% year-over-year to a record $208.3 million. This growth was driven by the continued strength of our Enterprise business where LTM subscription revenue grew 32% year-over-year. Our investments in international expansion are also paying off as our 2022 international revenue grew 44%. In the fourth quarter, we achieved another record for operating cash flow, driven by adjusted EBITDA margin reaching 22%. These financial results demonstrate our continuing long-term focus on delivering balanced growth. As we execute against a massive and underpenetrated opportunity, we continue to march up-market, expand internationally and deliver innovation. Speaking of which, we are excited to announce two new product offerings that leverage GPT-3 from OpenAI, namely AI Insights and AI Summaries. We have now expanded, what we believe to be the industry-leading AI & Automation portfolio, to include eight distinct modules with speech analytics, workflow automation, voice IVA, digital IVA, Agent Assist, Analytics and now AI Insights and AI Summaries. We believe these new offerings will play a central role in the future of the contact center and customer experience.”

- 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 deterioration.

• For the full year 2023, Five9 expects to report:
  • Revenue in the range of $900.0 to $903.0 million.
  • GAAP net loss per share in the range of $(1.72) to $(1.62), assuming diluted shares outstanding of approximately 72.1 million.
  • Non-GAAP net income per share in the range of $1.67 to $1.71, assuming diluted shares outstanding of approximately 73.4 million.
• For the first quarter of 2023, Five9 expects to report:
  • Revenue in the range of $207.0 to $208.0 million.
  • GAAP net loss per share in the range of $(0.63) to $(0.58), assuming diluted shares outstanding of approximately 71.2 million.
  • Non-GAAP net income per share in the range of $0.23 to $0.25, assuming diluted shares outstanding of approximately 72.2 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 fourth quarter 2022 results today, February 22, 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, and refund for prior year overpayment of Universal Service Fund, or 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 and provision for (benefit from) 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, including the statements in the quotes from our Chairman and Chief Executive Officer, including statements regarding Five9’s market opportunity and ability to capitalize on that opportunity, Five9's business strategies and market position, and the first 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 increased inflation, increased interest rates, supply chain disruptions, decreased economic output and fluctuations in currency rates, the impact of the Russia-Ukraine conflict, 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, 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, and 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) our recent Chief Executive Officer transition could disrupt our operations, result in additional executive and personnel transitions and make it more difficult for us to hire and retain employees; (ix) failure to adequately retain and expand our sales force will impede our growth; (x) 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; (xi) 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; (xii) the markets in which we participate involve a high number of competitors that is continuing to increase, and if we do not compete effectively, our operating results could be harmed; (xiii) we continue to expand our international operations, which exposes us to significant macroeconomic and other risks; (xiv) 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 our business; (xv) 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; (xvi) 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; (xvii) 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; (xviii) we have a history of losses and we may be unable to achieve or sustain profitability; (xix) 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; (xx) our stock price has been volatile, may continue to be volatile and may decline, including due to factors beyond our control; (xxi) we may not be able to secure additional financing on favorable terms, or at all, to meet our future capital needs; (xxii) failure to comply with laws and regulations could harm our business and our reputation; (xxiii) 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 (xxiv) 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. 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.

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