Five9(US:FIVN)2025-05-01 20:11PART I. FINANCIAL INFORMATION Financial Statements This section presents the unaudited condensed consolidated financial statements for the quarter ended March 31, 2025, highlighting a shift to net income and growth in total assets Condensed Consolidated Balance Sheet Highlights (Unaudited) | Account | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | $370,344 | $362,546 | | Total current assets | $1,287,451 | $1,248,568 | | Total assets | $2,089,924 | $2,051,214 | | Total current liabilities | $638,892 | $641,691 | | Total liabilities | $1,425,638 | $1,429,022 | | Total stockholders' equity | $664,286 | $622,192 | Condensed Consolidated Statements of Operations (Unaudited) | Metric | Three Months Ended Mar 31, 2025 (in thousands) | Three Months Ended Mar 31, 2024 (in thousands) | | :--- | :--- | :--- | | Revenue | $279,705 | $247,010 | | Gross profit | $153,732 | $132,480 | | Loss from operations | ($5,428) | ($20,695) | | Net income (loss) | $576 | ($7,077) | | Diluted net income (loss) per share | $0.01 | ($0.10) | Condensed Consolidated Statements of Cash Flows Highlights (Unaudited) | Cash Flow Activity | Three Months Ended Mar 31, 2025 (in thousands) | Three Months Ended Mar 31, 2024 (in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $48,384 | $32,353 | | Net cash used in investing activities | ($38,103) | ($266,823) | | Net cash (used in) provided by financing activities | ($2,163) | $331,396 | Notes to Condensed Consolidated Financial Statements (Unaudited) The notes provide detailed explanations of accounting policies, revenue recognition, debt instruments, and significant corporate events impacting the financial statements - As of March 31, 2025, the company's remaining performance obligations (RPO) totaled $1,066.7 million. It expects to recognize approximately three-fourths of this amount as revenue over the next 24 months41 - In March 2024, the company issued $747.5 million of 1.00% convertible senior notes due 2029. A portion of the proceeds was used to repurchase approximately $313.1 million of its 0.50% convertible senior notes due 20256165 - On August 27, 2024, the company acquired Acqueon for approximately $173.8 million, resulting in $139.4 million of goodwill. This acquisition is intended to expand the company's outbound and proactive customer engagement capabilities121123 - A reduction in force plan (the "2025 Plan") was approved on March 31, 2025, to reduce global full-time employees by 4%. Estimated cash expenditures are $7 million to $9 million. This follows a 2024 plan that reduced headcount by 6%128135 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition and operational results for Q1 2025, highlighting revenue growth, a shift to net income, and improved Adjusted EBITDA Overview This overview describes the company as a leading cloud contact center solution provider, emphasizing its SaaS model, strategic shift to larger customers and AI integration, and recent restructuring efforts - The company is a leading provider of intelligent cloud contact centers with over 3,000 customers, generating revenue through a SaaS business model130136 - Subscription and related usage fees accounted for 93% of revenue for the three months ended March 31, 2025 and 2024132 - The company executed a reduction in force plan in August 2024, reducing employees by ~6%, and approved another plan in March 2025 to reduce employees by ~4% to prioritize investments in areas like AI134135 Key Operating and Non-GAAP Financial Performance Metrics This section reviews key operating and non-GAAP financial metrics, including the Annual Dollar-Based Retention Rate and Adjusted EBITDA, reflecting operational performance Annual Dollar-Based Retention Rate | Period | Rate | | :--- | :--- | | Twelve Months Ended March 31, 2025 | 107% | | Twelve Months Ended March 31, 2024 | 109% | Reconciliation of Net Income (Loss) to Adjusted EBITDA | Metric | Three Months Ended Mar 31, 2025 (in thousands) | Three Months Ended Mar 31, 2024 (in thousands) | | :--- | :--- | :--- | | Net income (loss) | $576 | ($7,077) | | Adjusted EBITDA | $52,703 | $37,586 | Key Components of Our Results of Operations This section outlines the primary components of the company's financial results, detailing revenue sources, cost of revenue, and operating expense categories - Revenue consists of recurring subscription and related usage fees, and professional services revenue146 - Cost of Revenue primarily consists of personnel costs, telecommunications provider fees, data center expenses, and amortization of acquired technology and internal-use software149 - Operating expenses are broken down into Research and Development, Sales and Marketing, and General and Administrative categories150 Results of Operations for the Three Months Ended March 31, 2025 and 2024 This section details the results of operations for Q1 2025 and 2024, showing a 13% revenue increase, improved gross margin, reduced operating loss, and a shift to net income Revenue Performance | Period | Revenue (in thousands) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | | Q1 2025 | $279,705 | $32,695 | 13% | | Q1 2024 | $247,010 | | | Operating Expenses Analysis | Expense Category | Q1 2025 (in millions) | Q1 2024 (in millions) | Change (in millions) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Research and development | $41.1 | $41.5 | ($0.4) | (1)% | | Sales and marketing | $82.9 | $81.1 | $1.7 | 2% | | General and administrative | $35.2 | $30.5 | $4.7 | 15% | - The increase in General and Administrative expenses was primarily due to a $1.6 million increase in professional costs for strategic consulting services and a $1.2 million increase in personnel-related costs161 - In Q1 2024, the company recognized a $6.6 million gain on the early extinguishment of debt related to the repurchase of its 2025 convertible senior notes162163 Liquidity and Capital Resources This section details the company's strong liquidity position as of March 31, 2025, with substantial cash and marketable investments, and discusses its financing activities and future capital sufficiency - As of March 31, 2025, the company had $370.3 million in cash and cash equivalents and $671.4 million in marketable investments164165 - In March 2024, the company issued $747.5 million of 2029 convertible senior notes, with net proceeds of approximately $728.8 million166 - The company plans to use cash to settle the 2025 convertible senior notes that mature on June 1, 2025167 Cash Flow Summary | Cash Flow Activity | Three Months Ended Mar 31, 2025 (in thousands) | Three Months Ended Mar 31, 2024 (in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $48,384 | $32,353 | | Net cash used in investing activities | ($38,103) | ($266,823) | | Net cash (used in) provided by financing activities | ($2,163) | $331,396 | Critical Accounting Policies and Estimates This section confirms no material changes to the company's critical accounting policies and estimates since the December 31, 2024 Annual Report on Form 10-K - There have been no material changes to critical accounting policies and estimates since the 2024 Annual Report on Form 10-K179 Recent Accounting Pronouncements This section refers to Note 1 of the condensed consolidated financial statements for information on recent accounting pronouncements - Information regarding recent accounting pronouncements is available in Note 1 of the financial statements180 Contractual and Other Obligations This section outlines the company's material cash requirements, including obligations for convertible senior notes, leases, and various service agreements - As of March 31, 2025, the company has outstanding principal of $434.4 million for its 2025 convertible senior notes (due June 1, 2025) and $747.5 million for its 2029 convertible senior notes (due March 15, 2029)182183 - Total lease obligations as of March 31, 2025, were $50.7 million for operating leases and $22.9 million for finance leases185 - The company has commitments of $29.5 million for cloud services/software and $13.5 million for hosting/telecommunication services186188 Quantitative and Qualitative Disclosures About Market Risk This section discusses the company's market risk exposures, primarily from interest rates and foreign currency exchange rates, noting no material changes since December 31, 2024 - The company's market risk exposure, primarily from interest rates and foreign currency, has not changed materially since December 31, 2024192 - A hypothetical 100 basis point change in interest rates would not materially impact the value of cash and marketable investments193 - The convertible senior notes carry fixed interest rates and are therefore not subject to interest rate risk195 - A hypothetical 10% change in foreign currency exchange rates would have a maximum impact of $2.8 million on operating expenses197 Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting during Q1 2025 - Management, including the CEO and CFO, concluded that as of March 31, 2025, the company's disclosure controls and procedures were effective199 - There was no change in internal control over financial reporting during Q1 2025 that has materially affected, or is reasonably likely to materially affect, internal controls201 PART II. OTHER INFORMATION Legal Proceedings The company is involved in a putative class action lawsuit and a related shareholder derivative action, both of which are being vigorously defended with uncertain outcomes - A putative class action complaint was filed against the company on December 4, 2024, alleging violations of the Securities Exchange Act of 1934105190 - A related shareholder derivative action was filed on March 18, 2025, and has been stayed pending the resolution of the motion to dismiss in the securities class action107191 - The company cannot predict the outcome or estimate potential losses from these lawsuits and intends to defend them vigorously106 Risk Factors This section confirms no material changes from the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2024 - There have been no material changes from the Risk Factors disclosed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2024205 Unregistered Sales of Equity Securities and Use of Proceeds This item is not applicable for the reporting period - Not applicable206 Defaults Upon Senior Securities There were no defaults upon senior securities during the reporting period - None207 Mine Safety Disclosures This item is not applicable - Not applicable208 Other Information During the fiscal quarter ended March 31, 2025, no directors or officers adopted, modified, or terminated Rule 10b5-1 trading arrangements - During the fiscal quarter ended March 31, 2025, none of the Company's directors and officers adopted, modified, or terminated a Rule 10b5-1 trading arrangement209 Exhibits This section lists all exhibits filed with the Form 10-Q, including management contracts, compensatory plans, and required CEO/CFO certifications - The report lists various exhibits filed, including management contracts, CEO/CFO certifications pursuant to Sarbanes-Oxley Sections 302 and 906, and XBRL interactive data files210211