Five9 Inc

To date, we have financed our operations primarily through sales of our solution, net proceeds from our equity and debt financings, including the issuance of our 2029 convertible senior notes in March 2024, issuance of our 2025 convertible senior notes in May and June 2020 and of our 2023 convertible senior notes in May 2018, and lease facilities. As of March 31, 2024, we had $1,105.8 million in working capital, which included $240.2 million in cash and cash equivalents and $843.2 million in marketable investments. Our intent is that all marketable investments are available for use in our current operations, including marketable investments with maturity dates greater than one year from March 31, 2024.

In March 2024, we issued $747.5 million aggregate principal amount of our 2029 convertible senior notes in a private offering. The 2029 convertible senior notes mature of March 15, 2029 and are our senior unsecured obligations. The 2029 convertible senior notes bear interest at a fixed rate of 1.00% per annum, payable semiannually in arrears on March 15 and September 15 of each year, beginning on September 15, 2024. The total net proceeds from the issuance of the 2029 convertible senior notes, after deducting initial purchaser' discounts and commissions and estimated debt issuance costs, were approximately $728.9 million. In connection with the issuance of the 2029 convertible senior notes, we used part of the net proceeds from the issuance to repurchase approximately $313.1 million aggregate principal amount of our then outstanding 2025 convertible senior notes in privately-negotiated transactions for aggregate cash consideration of approximately $304.9 million. In connection with the issuance of the 2029 convertible senior notes, we also entered into privately negotiated capped call transactions with certain financial institutions. We believe our existing cash and cash equivalents will be sufficient to meet our working capital and capital expenditure needs for at least the next 12 months.

We plan to continue to finance our operations in the future primarily through sales of our solution, net proceeds from equity and debt financings, and lease facilities. As previously disclosed, we are in discussions with one or more financial institutions, which may include the initial purchasers in our recent sale of 2029 convertible senior notes, regarding a potential revolving credit facility (the “Revolving Credit Facility”) of up to $200 million, which may be secured or unsecured. We expect to enter into the Revolving Credit Facility in the second half of 2024. There can be no assurance that we will be able to obtain the Revolving Credit Facility on acceptable terms, or at all. Proceeds are expected to be available to us for general corporate purposes, including to fund working capital requirements and to fund all or a portion of the purchase price for potential acquisitions that we may identify in the future.

Our future capital requirements will depend on many factors including our growth rate, continuing market acceptance of our solution, the strength of the global economy, client retention, growth within our installed base, our ability to gain new clients, the timing and extent of spending to support research and development efforts, the outcome of any pending or future litigation or other claims by third parties or governmental entities, the expansion of sales and marketing activities and personnel, the introduction of new and enhanced offerings, expenses incurred in closing our Russia operations and expanding our operations in Portugal and any operational disruptions due to this transition, and the effect of the length and severity of the current economic downturn, the Russia-Ukraine conflict, and the conflict in Israel on these or other factors. We may also acquire or invest in complementary businesses, technologies and intellectual property rights, such as our recent acquisition of Aceyus in August 2023, which may increase our use of cash and future capital requirements, both to pay acquisition costs and to support our combined operations. We may raise additional capital through equity or debt financings at any time to fund these or other requirements. However, we may not be able to raise additional capital through equity or debt financings when needed on terms acceptable to us or at all, depending on our financial performance and condition, economic and market conditions, the trading price of our common stock, and other factors, including the length and severity of the current economic downturn and fluctuations in the financial markets, including due to the Russia-Ukraine conflict and the conflict in Israel. If we are unable to raise additional capital as needed, our business, operating results and financial condition could be harmed. In addition, if our operating performance during the next twelve months is below our expectations, our liquidity and ability to operate our business also could be harmed.

If we raise additional funds by issuing equity or equity-linked securities, the ownership of our existing stockholders would be diluted. If we raise additional funds through the incurrence of additional indebtedness, we will be subject to increased debt service obligations and could also be subject to restrictive covenants and other operating restrictions that could negatively impact our ability to operate our business.

Cash Flows

The following table summarizes our cash flows for the periods presented (in thousands):

Cash Flows from Operating Activities

Cash provided by operating activities is primarily influenced by our personnel-related expenditures, data center and telecommunications carrier costs, office and facility related costs, USF contributions and other regulatory costs and the amount and timing of client payments. If we continue to improve our financial results, we expect net cash provided by operating activities to increase. Our largest source of operating cash inflows is cash collections from our clients for subscription and related usage services. Payments from clients for these services are typically received monthly.

Net cash provided by operating activities was $32.4 million during the three months ended March 31, 2024. Net cash provided by operating activities resulted from our net loss of $7.1 million, adjustments to reconcile net loss to net cash provided by operating activities of $66.3 million, primarily consisting of $44.7 million of stock-based compensation, $16.3 million of amortization of commission costs, $12.2 million of depreciation and amortization, $3.3 million of amortization of operating lease right-of-use assets and $1.1 million of amortization of issuance costs on our convertible senior notes, partially offset by use of cash for operating assets and liabilities of $(26.9) million primarily due to the timing of cash payments to vendors and cash receipts from customers.

Net cash provided by operating activities was $33.4 million during the three months ended March 31, 2023. Net cash provided by operating activities resulted from our net loss of $27.2 million, adjustments to reconcile net loss to net cash provided by operating activities of $77.3 million, primarily consisting of $50.7 million of stock-based compensation, $12.4 million of amortization of commission costs, $11.3 million of depreciation and amortization, $2.9 million of amortization of operating lease right-of-use assets and $0.9 million of amortization of issuance costs on our convertible senior notes, partially offset by use of cash for operating assets and liabilities of $(16.6) million primarily due to the timing of cash payments to vendors and cash receipts from customers.

Cash Flows from Investing Activities

Net cash used in investing activities of $(266.8) million in the three months ended March 31, 2024 was comprised of $524.9 million related to purchases of marketable investments, $12.0 million in capital expenditures and $3.2 million in capitalized software development costs, offset in part by $273.1 million related to cash proceeds from sales and maturities of marketable investments.

Net cash used in investing activities of $(75.7) million in the three months ended March 31, 2023 was comprised of $76.9 million related to cash proceeds from sales and maturities of marketable investments, offset in part by $140.9 million related to purchases of marketable investments, $9.9 million in capital expenditures and $1.8 million in capitalized software development costs.

Cash Flows from Financing Activities

Net cash provided by financing activities of $331.4 million in the three months ended March 31, 2024 was related to net cash proceeds of $728.9 million from the issuance of the 2029 convertible senior notes, net of initial purchasers' discounts and commissions and debt issuance costs, $0.5 million cash received from the partial termination of capped calls associated with the 2025 convertible senior notes, and $0.4 million of cash proceeds from the exercise of stock options, offset in part by $304.5 million from the repurchase of a portion of the 2025 convertible senior notes, $93.4 million from the payment for capped call transactions associated with the 2029 convertible senior notes, and $0.5 million of payments related to finance leases.

Net cash provided by financing activities of $3.1 million in the three months ended March 31, 2023 was related to cash proceeds of $3.1 million from the exercise of stock options.