Summary
Five9's second quarter of fiscal 2022 showed strong top-line momentum but wider losses. Revenue rose 31.7% year over year to $189.4 million. Gross profit increased 27.4% to $101.2 million, but gross margin slipped 1.8 percentage points to 53.4%. The company reported an operating loss of $21.8 million, down 53.3% from the prior-year quarter, and a net loss of $23.7 million, down 43.2%. Diluted EPS was a loss of $0.34, down 36.0%. Operating margin was negative 11.5%, down 1.6 percentage points. On a non-GAAP basis, net income was $24.3 million, or $0.34 per diluted share, and adjusted EBITDA was $33.1 million, or 17.5% of revenue. The gap between GAAP and non-GAAP results remains large, driven by stock-based compensation and other adjustments.
Operationally, Five9 pointed to enterprise strength. Last-twelve-month enterprise subscription revenue grew 41% year over year. The company reported record second-quarter bookings for both new logos and its installed base. It ended the quarter with more than 2,500 clients, and no single client accounted for more than 10% of total revenue. The annual dollar-based retention rate was 118%, compared with 123% a year earlier. Management attributed the decline to the initial COVID-19 benefit in 2021 that has since dissipated. Five9 also continued its march up market and international expansion, closing its Russia office and establishing a European development center in Porto, Portugal.
Guidance points to continued growth. For the full year 2022, Five9 expects non-GAAP net income per share of $1.38 to $1.40, assuming diluted shares outstanding of approximately 72.8 million. For the third quarter of 2022, the company guides to non-GAAP net income per share of $0.31 to $0.33, assuming diluted shares outstanding of approximately 73.0 million. The outlook is subject to cautionary factors, including the global macroeconomic environment, the Russia-Ukraine conflict, and the COVID-19 pandemic. Five9 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 at this time.
Cash generation was uneven. Operating cash flow was negative $3.1 million for the quarter, down 127.2% year over year. For the first six months of 2022, operating cash flow was $25.6 million, up 1.8%. Capital expenditures were $22.1 million in the quarter, up 96.3%, and $34.5 million year to date, up 77.0%. Deferred revenue was $51.6 million, up 55.1% from the prior-year quarter. Remaining performance obligations reached $713.8 million, up 61.1%. The company's MD&A cites macroeconomic risks such as inflation, higher interest rates, supply chain disruptions, currency fluctuations, and client hesitancy. Other named risks include competition, cyber attacks, reliance on third-party telecommunications providers, international expansion, and a history of losses. Five9 believes its existing cash and cash equivalents will be sufficient for at least the next 12 months, but it notes that future capital requirements remain uncertain.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2022 | Q1 FY2022 | QoQ | Q2 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $189.4M | $182.8M | +3.6% | $143.8M | +31.7% |
| Gross profit | $101.2M | $93.9M | +7.7% | $79.4M | +27.4% |
| Gross margin | 53.4% | 51.4% | +2.0 pp | 55.2% | -1.8 pp |
| Research & development | $35.0M | $35.8M | -2.3% | $24.6M | +42.0% |
| Sales & marketing | $64.1M | $64.6M | -0.8% | $46.0M | +39.3% |
| General & administrative | $23.8M | $24.3M | -2.0% | $22.9M | +4.0% |
| Total operating expenses | $122.9M | $124.7M | -1.5% | $93.6M | +31.3% |
| Operating income (loss) | -$21.8M | -$30.8M | +29.4% | -$14.2M | -53.3% |
| Operating margin | -11.5% | -16.9% | +5.4 pp | -9.9% | -1.6 pp |
| Net income (loss) | -$23.7M | -$34.1M | +30.6% | -$16.5M | -43.2% |
| Net margin | -12.5% | -18.7% | +6.2 pp | -11.5% | -1.0 pp |
| Diluted EPS | -$0.34 | -$0.49 | +$0.15 | -$0.25 | -$0.09 |
Risks
Adverse economic conditions, including increased inflation, increased interest rates, supply chain disruptions, decreased economic output and currency fluctuations, could reduce demand, delay client implementations, lengthen sales cycles, lower prices and increase customer bad debt. MD&A says these factors can cause client hesitancy and uncertainty and that implications remain uncertain.
FIVN is closing its Russia office and establishing a European development center in Porto, Portugal, moving portions of engineering and operations. The transition could cause operational disruptions, may not be as effective or efficient as prior Russian operations, and the company could not retain all Russian-citizen employees.
The ongoing Russia-Ukraine conflict could disrupt FIVN's employees, clients or partners, increase costs and has already adversely affected the global economy and inflation. MD&A says the conflict was a factor in the Russia office closure and that ultimate scope and broader impacts cannot be predicted with certainty.
International expansion subjects FIVN to rapidly changing sanctions, trade controls and foreign laws, and noncompliance by employees, contractors or agents could cause delays in revenue recognition, fines, financial reporting delays or prohibitions on selling the solution.
Annual Dollar-Based Retention Rate decreased to 118% for the twelve months ended June 30, 2022 from 123% for the twelve months ended June 30, 2021, primarily due to the initial benefit from COVID-19 that has dissipated. Slower expansion within existing clients could pressure future revenue growth.
Gross margin decreased to 53.4% in the quarter ended June 30, 2022 from 55.2% in the prior-year quarter, and to 52.4% year to date from 55.9% in the prior-year period, as cost of revenue grew slightly more than revenue. Continued cost growth outpacing revenue could harm operating results.
SaaS KPIs
All quarters →Annual Dollar-Based Retention Rate
Adjusted EBITDA Margin
Adjusted Gross Margin
Total clients
LTM Enterprise Subscription Revenue Growth
Summary, forecast, risks and KPIs are extracted from Five9, Inc.'s SEC filings for Q2 FY2022 (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 1, 2026.