Five9 Reports Third Quarter 2015 Results

Revenue Up 25% Year-Over-Year to a Record $32.3 Million

Enterprise LTM Subscription Revenue Up 35% Year-Over-Year

Adjusted EBITDA Loss Narrows to 3% of Revenue

Raises 2015 Guidance

SAN RAMON, CALIF. - November 3, 2015 - Five9, Inc. (NASDAQ:FIVN), a leading provider of cloud software for the enterprise contact center market, today reported results for the third quarter ended September 30, 2015.

Third Quarter Highlights

• Revenue increased 25% year-over-year to $32.3 million
• Enterprise LTM subscription revenue increased 35% year-over-year
• GAAP and Adjusted gross margins improved by over 600 basis points year-over-year
• Adjusted EBITDA margin improved by nearly 1,600 basis points year-over-year

“We delivered outstanding third quarter results that once again exceeded our expectations across all metrics.  This is the fifth consecutive quarter of broad based outperformance and highlights the strong progression of our business.  Our record revenue and bookings were primarily driven by continued success in our high growth Enterprise business. Our strong momentum in the enterprise market is being driven by key differentiators including our comprehensive end-to-end solution, our trusted platform which is delivering 99.993% uptime, our deep CRM integrations and ecosystem partnerships and best in class implementation and support execution. As validation of our leading position in the enterprise market, Five9 was recently named a leader in the Gartner Magic Quadrant for Contact Center as a Service, North America, and positioned highest for ability to execute. We believe this is a core attribute that Enterprise accounts are looking for. In conjunction with our topline growth of 25%, we significantly improved our EBITDA margin by nearly 1,600 basis points from a year ago.”

- Mike Burkland, President and CEO, Five9

Third Quarter 2015 Financial Results

• Total revenue for the third quarter of 2015 increased 25% to $32.3 million compared to $25.9 million for the third quarter of 2014.
• Annual dollar-based retention rate for the period ended September 30, 2015 was 95%.
• GAAP gross margin was 54.1% in the third quarter of 2015 compared to 47.8% for the same period in 2014.
• Adjusted gross margin was 59.4% for the third quarter of 2015 compared to 53.3% for the same period in 2014.
• Adjusted EBITDA for the third quarter of 2015 was a loss of $(1.1) million, or 3.4% of revenue, compared to a loss of $(5.0) million, or 19.2% of revenue, for the third quarter of 2014.
• GAAP net loss for the third quarter of 2015 was $(6.0) million, or $(0.12) per share, compared to a GAAP net loss of $(11.4) million, or $(0.24) per share, for the third quarter of 2014.
• Non-GAAP net loss for the third quarter of 2015 was $(3.9) million, or $(0.08) per share, compared to a non-GAAP net loss of $(7.3) million, or $(0.15) per share, for the third 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.

Business Outlook

• For the fourth quarter of 2015, Five9 expects to report:
  • Revenue in the range of $32.5 to $33.5 million
  • GAAP net loss in the range of $(6.0) to $(7.0) million, or a loss of $(0.12) to $(0.14) per share
  • Non-GAAP net loss in the range of $(3.8) to $(4.8) million, or a loss of $(0.07) to $(0.09) per share
  • For the full year 2015, Five9 expects to report:
    • Revenue in the range of $125.3 to $126.3 million, up from the guidance range of $122.5 to $124.5 million that was previously provided on August 3, 2015
    • GAAP net loss in the range of $(28.3) to $(29.3) million, or a loss of $(0.56) to $(0.58) per share, improved from a guidance range of $(31.1) to $(33.1) million, or a loss of $(0.62) to $(0.66) per share, that was previously provided on August 3, 2015
    • Non-GAAP net loss in the range of $(18.7) to $(19.7) million, or $(0.37) to $(0.39) per share, improved from the guidance range of $(21.5) to $(23.5) million or $(0.43) to $(0.47) per share, that was previously provided on August 3, 2015

Conference Call Details

Five9 will discuss its third quarter 2015 results today, November 3, 2015, via teleconference at 4:30 p.m. Eastern Time.  To access the call (ID 695528), please dial: 877-780-3379 or 719-457-2644.  An audio replay of the call will be available through November 17, 2015 by dialing 888-203-1112 or 719-457-0820 and entering access code 695528.  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, and the fourth quarter 2015 and full year 2015 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; (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 contact center market, bringing the power of the cloud to thousands of customers and facilitating more than 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.