Summary
Five9 reported third-quarter revenue of $198.3 million, up 28.5% year over year. Year-to-date revenue reached $570.5 million, up 30.9%. Gross profit rose 19.5% to $104.2 million in the quarter and 22.3% to $299.3 million year to date. Gross margin fell to 52.6% in the quarter, down 3.9 percentage points, and year-to-date gross margin fell to 52.5%, down 3.7 percentage points. The company remained unprofitable on a GAAP basis. Operating loss widened to $21.7 million in the quarter, though operating margin improved to negative 11.0%, up 1.3 percentage points. Year-to-date operating loss widened to $74.3 million, and year-to-date operating margin fell to negative 13.0%, down 2.9 percentage points. Net loss widened to $23.2 million in the quarter, and diluted EPS was negative $0.33, down 10.0%. Year-to-date net loss widened to $81.0 million, and diluted EPS was negative $1.16, down 58.9%.
Cash generation improved sharply. Operating cash flow was $30.5 million in the quarter, up 734.4% year over year. Year-to-date operating cash flow was $56.1 million, up 175.8%. Capital expenditures were $11.6 million in the quarter, up 28.4%, and $46.0 million year to date, up 61.6%. Backlog and deferred revenue pointed to future demand. Deferred revenue, current portion, was $53.8 million at September 30, 2022, up 45.9%. Remaining performance obligations were $750.9 million, up 51.6%. Annual Dollar-Based Retention Rate was 118% for the twelve months ended September 30, 2022, down from 123% for the twelve months ended September 30, 2021. The MD&A attributed the retention decline primarily to the initial benefit experienced in 2021 from the COVID-19 pandemic and to macroeconomic headwinds. Non-GAAP adjusted EBITDA was $36.7 million in the quarter versus $27.4 million a year earlier, and $94.3 million year to date versus $73.6 million.
Operational scale continued to expand. The company served more than 2,500 clients and facilitated more than nine billion call minutes between those clients and their customers per year. No single client accounted for more than 10% of total revenue in the quarter or year-to-date periods. Management attributed revenue growth to larger clients, increased sales and marketing activity, and improved brand awareness. The MD&A also flagged a tougher demand backdrop. Inflation, higher interest rates, supply chain disruptions, lower economic output, and currency fluctuations have caused existing clients to add agent seats at a slower rate than in past years. The installed base is seeing particular pressure in five verticals: financial services, consumer, healthcare, outsourcers, and real estate. Mid-market net new client activity has also faced adverse effects, though strategic and international businesses overperformed.
The company is managing several risks and long-term investment priorities. Management decided in March 2022 to close its Russia office and establish a new European development center in Porto, Portugal, due to uncertainty from the Russia-Ukraine conflict. The COVID-19 pandemic had a moderately positive impact on financial results, but management believes most of that benefit has dissipated. The MD&A states that adverse economic conditions are expected to continue to adversely affect revenue in future periods, and that the installed base business, which typically contributes about half of revenue growth, faces increased macroeconomic headwinds and client-specific challenges. On the cost side, management expects gross margin to increase in the long term despite continued investments in professional services, public cloud, cloud operations, client support, and network infrastructure. Cost of revenue is expected to increase in absolute dollars but decline as a percentage of revenue over the long term through economies of scale. Research and development and sales and marketing expenses are expected to increase in absolute dollars and fluctuate as a percentage of revenue in the near and longer term. General and administrative expenses are expected to fluctuate in the near term, then increase in absolute dollars and decline as a percentage of revenue in the longer term. The filing also notes legal and regulatory proceedings as a contingent risk.
Forecast
No forward guidance in this quarter's filings.
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2022 | Q2 FY2022 | QoQ | Q3 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $198.3M | $189.4M | +4.7% | $154.3M | +28.5% |
| Gross profit | $104.2M | $101.2M | +3.0% | $87.2M | +19.5% |
| Gross margin | 52.5% | 53.4% | -0.9 pp | 56.5% | -4.0 pp |
| Research & development | $34.1M | $35.0M | -2.5% | $29.7M | +14.9% |
| Sales & marketing | $67.4M | $64.1M | +5.1% | $49.7M | +35.5% |
| General & administrative | $24.5M | $23.8M | +2.8% | $26.8M | -8.6% |
| Total operating expenses | $126.0M | $122.9M | +2.5% | $106.2M | +18.6% |
| Operating income (loss) | -$21.7M | -$21.8M | +0.1% | -$19.0M | -14.4% |
| Operating margin | -11.0% | -11.5% | +0.5 pp | -12.3% | +1.3 pp |
| Net income (loss) | -$23.2M | -$23.7M | +2.0% | -$20.5M | -13.0% |
| Net margin | -11.7% | -12.5% | +0.8 pp | -13.3% | +1.6 pp |
| Diluted EPS | -$0.33 | -$0.34 | +$0.01 | -$0.30 | -$0.03 |
| Customers | 9 | — | — | — | — |
Risks
The installed base business, which typically contributes about half of revenue growth, is facing macroeconomic headwinds and slower agent seat growth, particularly in financial services, consumer, healthcare, outsourcers and real estate. There has also been adverse impact on the mid-market portion of net new clients, which could lead to slower revenue growth or a decline in revenues, operating results and cash flows.
The CEO resigned effective November 28, 2022, and Michael Burkland was appointed as new CEO effective the same date. The transition may disrupt the business, cause uncertainty with clients, partners, stockholders and employees, and lead to attrition of management and key employees.
The company decided in March 2022 to close its Russia office and establish a European development center in Porto, Portugal, and incurred approximately $0.7 million and $4.6 million in related costs during the three and nine months ended September 30, 2022. Not all Russian-citizen employees could be retained, and the transition has caused and may continue to cause operational disruptions.
During the twelve months ended September 30, 2022, the sale price per share of common stock ranged from a low of $74.98 to a high of $167.26. Volatility or lack of performance in the trading price may harm the ability to attract and retain qualified personnel because candidates and employees often emphasize the value of stock awards.
Gross margin decreased to 52.6% in FY2022 Q3 from 56.5% in the prior-year quarter, and cost of revenue increased 40% for the quarter, driven by personnel, depreciation, data center, public cloud and third-party hosted software costs. Continued cost growth could pressure profitability if revenue growth does not keep pace.
SaaS KPIs
All quarters →Annual Dollar-Based Retention Rate
Adjusted EBITDA
Total clients
Summary, forecast, risks and KPIs are extracted from Five9, Inc.'s SEC filings for Q3 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 2, 2026.