Summary
Five9 opened fiscal 2021 with record revenue. Revenue for the first quarter ended March 31, 2021 rose 45.0% to $137.9 million from $95.1 million in the prior-year quarter. Management pointed to larger clients, heavier sales and marketing activity and better brand awareness. The annual dollar-based retention rate reached 121% in the twelve months ended March 31, 2021, up from 111% a year earlier, which the company credited to larger clients adding agent seats. The client base now tops 2,000 across multiple industries, and no single client accounted for more than 10% of total revenue in either period. Backlog looks far larger too. Remaining performance obligations were $369.8 million, up 140.0% from $154.1 million, while deferred revenue, current portion only, was $32.8 million, up 28.1%.
Growth came with margin pressure. Gross profit rose 41.8% to $78.1 million, yet GAAP gross margin slipped to 56.6% from 57.9%. Adjusted gross margin held nearly flat at 64.0% versus 64.1%. The GAAP operating loss widened to $11.1 million from $4.96 million, and the operating margin fell to -8.0% from -5.2%. Net loss widened to $12.3 million from $7.4 million, and diluted EPS was -$0.18 against -$0.12. Non-GAAP measures moved the other way. Non-GAAP net income was $16.1 million, or $0.23 per diluted share, compared with $11.1 million, or $0.17 per diluted share. Adjusted EBITDA reached $22.2 million, or 16.1% of revenue, up from $14.1 million, or 14.9% of revenue. The gap between the two sets of numbers is wide, and stock-based compensation and acquisition-related charges do much of the work.
Cash generation improved. Operating cash flow for the quarter was $13.8 million, up 32.4% from $10.4 million a year earlier. Capital expenditures rose 36.1% to $8.2 million from $6.0 million, as the company kept building out capacity. Management said it believes existing cash and cash equivalents will cover working capital and capital expenditure needs for at least the next 12 months. It also noted that future requirements depend on growth, client retention, hiring, and possible acquisitions or investments.
Guidance for the full year 2021 moved higher. Five9 raised its full-year revenue outlook above the range it provided on February 22, 2021, and also improved its expected full-year GAAP net loss and non-GAAP net income, on both a total and a per-share basis, compared with that earlier guidance. For the second quarter of 2021, the company issued fresh guidance for revenue, GAAP net loss and non-GAAP net income. The second-quarter revenue outlook sits below the record revenue just reported, which is worth watching given how much of the full-year raise leans on the back half.
The forward-looking language flags a long list of risks. Quarterly and annual results may fluctuate, and the timing of new product introductions can distort comparisons. New client wins and upsells may not materialize, and the recent rapid growth may not repeat. Five9 also depends on retaining and expanding its sales force, running its technical infrastructure without outages, and keeping its strategic relationships and its network of master agents and resellers productive. Larger enterprise buyers take longer to close and often demand more configuration or custom features. Existing clients can cut seats or usage with 30 days' notice, which would hurt revenue and gross margins. The company relies on third-party telecommunications and internet providers, competes in a crowded market, carries a history of losses, and may need outside financing on terms it cannot control. Management also cited the uncertain duration and effect of the COVID-19 pandemic, which it said had a moderately positive impact on results for the three months ended March 31, 2021.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2021 | Q4 FY2020 | QoQ | Q1 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $137.9M | $127.9M | +7.8% | $95.1M | +45.0% |
| Gross profit | $78.1M | $76.7M | +1.9% | $55.1M | +41.8% |
| Gross margin | 56.6% | 59.9% | -3.3 pp | 57.9% | -1.3 pp |
| Research & development | $22.1M | $18.7M | +18.4% | $15.2M | +45.6% |
| Sales & marketing | $44.8M | $37.1M | +20.9% | $30.2M | +48.5% |
| General & administrative | $22.2M | $18.3M | +21.8% | $14.7M | +51.8% |
| Total operating expenses | $89.2M | $74.0M | +20.5% | $60.0M | +48.6% |
| Operating income (loss) | -$11.1M | $2.7M | -516.0% | -$5.0M | -123.7% |
| Operating margin | -8.0% | 2.1% | -10.1 pp | -5.2% | -2.8 pp |
| Net income (loss) | -$12.3M | -$7.2M | -71.0% | -$7.4M | -65.8% |
| Net margin | -8.9% | -5.6% | -3.3 pp | -7.8% | -1.1 pp |
Risks
Gross margin fell to 56.6% in the three months ended March 31, 2021 from 57.9% in the prior-year quarter (down 1.3 pp), driven by higher amortization from the Virtual Observer and Inference acquisitions, stock-based compensation, depreciation and public cloud costs. Management expects cost of revenue to increase both in absolute dollars and as a percentage of revenue in the near term due to increased public cloud investments.
COVID-19 had a moderately positive impact on 2020 and the three months ended March 31, 2021 results due to the shift from brick-and-mortar to virtual, but the severity and duration of the pandemic and its impact on the U.S. and global economy remain uncertain and may affect demand for the solution.
The April 2020 Virtual Observer and November 2020 Inference acquisitions increased amortization expense and generated $2.5 million of contingent consideration expense in the three months ended March 31, 2021, with no comparable amount in the prior-year quarter. Integration and valuation of acquired intangibles and goodwill carry impairment and estimate risk.
Contracts generally allow clients to reduce the number of agent seats with 30 days' notice, and clients can adjust seats to meet changing contact center volume needs, making recurring subscription and usage revenue sensitive to client seat reductions.
As of March 31, 2021, $798.5 million aggregate principal amount of convertible senior notes was outstanding, with the 2023 notes due May 1, 2023 and the 2025 notes due June 1, 2025. Additional equity or debt financings could dilute existing stockholders or impose restrictive covenants.
Cost of revenue rose 49% in the three months ended March 31, 2021 versus the prior-year quarter, including a $3.7 million increase in USF contributions and other federal telecommunication service fees due to increased client usage and a higher USF contribution rate.
Personnel costs, including stock-based compensation, rose across cost of revenue, research and development, sales and marketing and general and administrative in the three months ended March 31, 2021, driven by increased headcount and a higher fair value of employee equity awards tied to the increased stock price.
SaaS KPIs
All quarters →Annual Dollar-Based Retention Rate
Adjusted EBITDA
Adjusted EBITDA Margin
Adjusted Gross Margin
Total clients
Subscription and related usage fees as % of revenue
Summary, forecast, risks and KPIs are extracted from Five9, Inc.'s SEC filings for Q1 FY2021 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.