Summary
Five9 closed fiscal 2021 with fourth-quarter revenue of $173.6 million, up 36% from $127.9 million in the prior-year quarter. Full-year revenue reached $609.6 million, up 40% from $434.9 million in 2020. The enterprise business supplied the main momentum, with last-twelve-month enterprise subscription revenue up 51% year over year. The annual dollar-based retention rate improved to 122% from 117%, which the company tied to larger clients adding agent seats. Five9 ended the year with more than 2,500 clients and facilitated more than nine billion call minutes annually. Subscription and related usage fees accounted for 92% of revenue for 2021, 2020 and 2019.
Profitability moved in opposite directions on a GAAP basis. GAAP gross margin was 54.1% in the fourth quarter, down from 59.9% a year earlier. Adjusted gross margin was 62.8%, compared with 66.4%. The lower gross margin reflected higher personnel costs, data center and public cloud costs, third-party hosted software costs, USF contributions and amortization. GAAP operating loss was $12.0 million, compared with operating income of $2.7 million in the prior-year quarter. GAAP net loss narrowed to $3.6 million, or $0.05 per diluted share, from $7.2 million, or $0.11 per diluted share. For the full year, GAAP net loss widened to $53.0 million, or $0.79 per diluted share, from $42.1 million, or $0.66 per diluted share.
Cash generation weakened. Operating cash flow was $8.1 million in the fourth quarter, down from $19.3 million a year earlier. For the full year, operating cash flow was $28.5 million, down from $67.3 million. Capital expenditures were $13.7 million in the quarter, up from $10.0 million, and $42.2 million for the year, up from $30.4 million. Deferred revenue was $43.7 million at December 31, 2021, up from $32.0 million a year earlier. Remaining performance obligations were $544.3 million, up 64.9% from $330.0 million.
Non-GAAP results showed solid profitability. Non-GAAP net income was $30.1 million, or $0.42 per diluted share, compared with $23.7 million, or $0.34 per diluted share. Adjusted EBITDA was $36.9 million, or 21.3% of revenue, compared with $29.2 million, or 22.8% of revenue. For the full year, non-GAAP net income was $82.2 million, or $1.16 per diluted share, compared with $67.4 million, or $0.99 per diluted share. Full-year adjusted EBITDA was $110.5 million, or 18.1% of revenue, compared with $85.7 million, or 19.7% of revenue.
Management issued guidance for the full year 2022 and for the first quarter of 2022, covering revenue and non-GAAP net income per share along with assumed diluted share counts. Five9 did not reconcile its non-GAAP net income per share expectations to GAAP net loss per share because stock-based compensation and one-time integration costs cannot be reasonably calculated or predicted at this time. The company expects cost of revenue to increase in absolute dollars and as a percentage of revenue in the near term, with gross margin declining slightly in the near term and increasing over the long term. Research and development and sales and marketing spending are also expected to rise in absolute dollars. Risks flagged in the release include the COVID-19 pandemic, security breaches, competition, reliance on third-party telecommunications providers, the need to retain and expand the sales force, longer sales and implementation cycles at larger enterprises, a history of losses, and uncertainty about raising capital on favorable terms, plus risks tied to the convertible senior notes and rapid technological change in the contact center software market.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q4 FY2021 | Q3 FY2021 | QoQ | Q4 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $173.6M | $154.3M | +12.5% | $127.9M | +35.7% |
| Gross profit | $93.8M | $87.2M | +7.6% | $76.7M | +22.4% |
| Gross margin | 54.0% | 56.5% | -2.5 pp | 59.9% | -5.9 pp |
| Research & development | $30.4M | $29.7M | +2.6% | $18.7M | +63.0% |
| Sales & marketing | $53.4M | $49.7M | +7.4% | $37.1M | +44.1% |
| General & administrative | $22.0M | $26.8M | -18.0% | $18.3M | +20.3% |
| Total operating expenses | $105.8M | $106.2M | -0.3% | $74.0M | +43.0% |
| Operating income (loss) | -$12.0M | -$19.0M | +36.9% | $2.7M | -549.5% |
| Operating margin | -6.9% | -12.3% | +5.4 pp | 2.1% | -9.0 pp |
| Net income (loss) | -$3.6M | -$20.5M | +82.5% | -$7.2M | +50.1% |
| Net margin | -2.1% | -13.3% | +11.2 pp | -5.6% | +3.6 pp |
| Diluted EPS | -$0.05 | -$0.30 | +$0.25 | — | — |
Risks
Stockholders voted against the proposed Zoom merger on September 30, 2021, and the merger was terminated; the company incurred approximately $7.6 million in transaction costs recorded in general and administrative expense. The filing notes the stock traded between $122.33 and $211.68 during the twelve months ended December 31, 2021 and that merger-related investors may sell shares, contributing to volatility.
Portions of engineering and operations are performed in Russia, and production access is being reduced in 2022. Sanctions and export controls related to Russia's military operations in Ukraine impose additional compliance and operational costs, and restrictions could increase costs and harm product development.
Gross margin declined to 55.5% for FY2021 year to date from 58.5% prior year, down 3.0 pp, and to 54.1% in Q4 2021 from 59.9% prior year, down 5.9 pp. MD&A expects gross margin to decline slightly in the near term due to increased investments in public cloud, cloud operations, and professional services, which have lower margins.
Net loss widened to $53.0 million for FY2021 year to date from $42.1 million prior year, and operating loss widened to $56.25 million from $12.30 million, with operating margin down 6.4 pp to -9.2%. The company had an accumulated deficit of $228.4 million as of December 31, 2021.
Operating cash flow declined 57.7% to $28.5 million for FY2021 year to date from $67.3 million prior year, while capital expenditures rose 38.8% to $42.2 million. MD&A notes future capital requirements depend on growth and may require additional equity or debt financing.
As of December 31, 2021, $747.5 million principal of 2025 convertible notes and $34.2 million of 2023 convertible notes were outstanding. A conversion feature of the 2023 notes was triggered in Q4 2021, allowing holders to convert from January 1 to March 31, 2022, which could require cash settlement and adversely affect liquidity or dilute stockholders.
The contact center market is highly competitive and continuing to increase, with legacy vendors like Avaya and Cisco, cloud vendors like Genesys and NICE, smaller providers like Talkdesk, and new entrants including Amazon, Twilio, Microsoft, and Zoom. CRM vendors are also adding features and may reduce or terminate partnerships.
The company plans to increase AI-powered applications, but AI models may not achieve sufficient accuracy, training data may be biased or inaccurate, and costs of speech recognition and natural language processing may be too high for broad adoption. Competitors may incorporate AI features more quickly or successfully.
The company targets larger organizations that require longer sales and implementation cycles, typically four to six months and potentially longer, with greater configuration and integration demands. MD&A attributes revenue growth to larger clients, increasing exposure to these longer cycles and lower-margin professional services.
The company grew to 2,138 employees as of December 31, 2021 and cites challenges from recent widespread increases in employee resignations due to COVID-19. Failure to retain and expand the direct sales force and key personnel could impede growth.
The company is subject to GDPR, CCPA, and CPRA, with CPRA obligations beginning January 1, 2022, and China's Personal Information Protection law effective November 1, 2021. These laws may increase compliance costs, restrict data transfers, and expose the company to substantial fines.
The company relies on external data centers and increasingly public cloud providers, with little control over public cloud providers. Service interruptions, capacity constraints, or migration issues could cause client credits, damages, and harm reputation. MD&A notes increased investments in public cloud and cloud operations.
The company completed acquisitions including Virtual Observer in April 2020 and Inference in November 2020, and incurred $5.6 million contingent consideration expense for Inference in 2021. Integration risks and impairment of goodwill could harm results.
SaaS KPIs
All quarters →Annual Dollar-Based Retention Rate
Adjusted EBITDA
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 Q4 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.