Five9, Inc. Q1 FY2022 earnings

Five9 reported first quarter fiscal 2022 revenue of $182.8 million, up 33% from $137.9 million in the prior-year quarter. GAAP gross margin was 51.4%, down from 56.6%. The company posted a GAAP operating loss of $30.8 million, wider than the $11.1 million loss in the prior-year quarter. GAAP net loss was $34.1 million, or $0.49 per diluted share, compared with a net loss of $12.3 million, or $0.18 per diluted share, in the first quarter of 2021. Operating margin was -16.9%, down from -8.0%. Revenue growth was primarily attributable to larger clients, driven by an increase in sales and marketing activities and improved brand awareness. No single client accounted for more than 10% of total revenue. The gross margin decline reflected higher personnel costs, depreciation, data center and public cloud costs, third-party hosted software costs, usage and carrier costs, consulting costs for global expansion, and staff augmentation costs. Lower USF contributions and other federal telecommunication service fees partly offset those increases.

Non-GAAP results showed adjusted gross margin of 60.5%, down from 64.0%. Non-GAAP net income was $15.6 million, or $0.22 per diluted share, compared with $16.1 million, or $0.23 per diluted share, in the prior-year quarter. Adjusted EBITDA was $24.5 million, or 13.4% of revenue, compared with $22.2 million, or 16.1% of revenue. GAAP operating cash flow was $28.7 million, up from $13.8 million. Capital expenditures were $12.4 million, up from $8.2 million. Current deferred revenue was $46.6 million, up from $32.8 million. Remaining performance obligations were $602.8 million, up from $369.8 million.

Operational highlights included 46% growth in last twelve months enterprise subscription revenue. Five9 signed a record customer win with a healthcare conglomerate that is anticipated to roll out tens of thousands of seats and generate anticipated annual recurring revenue of over $40 million in software subscription alone. Five9 said it facilitates more than nine billion call minutes between its more than 2,500 clients and their customers per year. Annual dollar-based retention rate was 120%, compared with 121% in the prior-year period. The Russia-Ukraine conflict led Five9 to decide in March 2022 to close its Russia office in June 2022 and establish a new European development center in Porto, Portugal. Management also noted that COVID-19 had a moderately positive impact on financial results due to the shift from brick-and-mortar to virtual.

Guidance for the full year 2022 calls for non-GAAP net income per share of $1.22 to $1.24, assuming diluted shares outstanding of approximately 73 million. For the second quarter of 2022, Five9 expects non-GAAP net income per share of $0.17 to $0.19, assuming diluted shares outstanding of approximately 72 million. Five9 raised its 2022 guidance for both revenue and the bottom line. The company has not reconciled its non-GAAP net income per share guidance to GAAP net loss per share because stock-based compensation and one-time costs cannot be reasonably calculated or predicted at this time. Guidance is subject to cautionary factors, including risks related to the Russia-Ukraine conflict and the COVID-19 pandemic. Other named risks include quarterly and annual results fluctuating significantly, failure to attract new clients or sell additional services, rapid growth not being indicative of future growth, failure to retain and expand the sales force, failure to manage technical operations infrastructure, reliance on third-party relationships, intense competition, adverse economic conditions, security breaches, acquisition risks, client terminations or subscription reductions, longer sales cycles for larger organizations, reliance on third-party telecommunications and internet service providers, a history of losses, rapid technological change, inability to secure additional financing, compliance failures, and risks related to convertible senior notes.