FIVN
Five9, INC
NASDAQ
8-K: Five9 Prices Upsized $650 Million Convertible Notes Offering
Sentiment:
Debt Offering Announcement
28 February 2024 6:07 AM
Five9 has successfully priced a $650 million convertible senior notes offering, upsized from $600 million, to qualified institutional buyers.
Capital raise
Five9 is raising $650 million through a private placement of convertible senior notes.
The offering was upsized from an initial $600 million due to strong demand.
The company has granted the initial purchasers an option to purchase an additional $97.5 million in notes.
Summary
- Five9 has priced a private offering of $650 million in convertible senior notes due in 2029.
- The offering was increased from an initially planned $600 million.
- The notes bear a 1.00% interest rate, payable semi-annually.
- The company granted initial purchasers a 13-day option to buy an additional $97.5 million in notes.
- The sale is expected to close on March 1, 2024, and generate approximately $633.5 million in net proceeds, or $728.8 million if the option is fully exercised.
- Five9 intends to use approximately $304.9 million of the proceeds to repurchase $313.1 million of its 2025 convertible notes.
- Approximately $81.3 million will be used to pay for capped call transactions.
- The remaining proceeds will be used for working capital and general corporate purposes.
- The initial conversion rate is 12.5918 shares per $1,000 principal amount of notes, equivalent to a conversion price of approximately $79.42 per share.
- The notes are convertible under certain conditions before December 15, 2028, and at any time after that date until the maturity date.
- Five9 may redeem the notes on or after March 22, 2027, under certain conditions.
- Holders can require Five9 to repurchase the notes upon a fundamental change event.
- Five9 entered into capped call transactions to reduce potential dilution from note conversions.
Sentiment
Score: 7
Explanation: The sentiment is positive due to the successful upsized offering and the strategic use of proceeds for debt management and growth. However, there are potential risks associated with dilution and market volatility.
Positives
- The upsized offering indicates strong investor demand for Five9's convertible notes.
- The repurchase of the 2025 notes reduces near-term debt obligations.
- Capped call transactions help to reduce potential dilution from note conversions.
- The company secures significant capital for working capital and general corporate purposes.
Negatives
- The company will incur interest expenses on the new notes.
- The capped call transactions will cost the company approximately $81.3 million.
- The conversion of the notes could potentially dilute existing shareholders.
- The market price of Five9's common stock could be affected by hedging activities related to the notes and capped call transactions.
Risks
- The offering is subject to customary closing conditions.
- Market conditions could impact the use of proceeds.
- The capped call transactions may not be effective.
- Adverse economic conditions could harm the business.
- Hedging activities related to the notes and capped call transactions could impact the stock price.
- The company's ability to redeem the notes is subject to certain conditions.
Future Outlook
The company intends to use the net proceeds for repurchasing existing notes, paying for capped call transactions, and for working capital and general corporate purposes. The company also expects that the market price of its common stock could be affected by hedging activities related to the notes and capped call transactions.
Management Comments
- Five9 announced the pricing of the upsized convertible notes offering.
- Five9 expects to use a portion of the proceeds to repurchase existing 2025 notes.
Industry Context
This offering is a common method for technology companies to raise capital, especially those with growth potential. The use of convertible notes allows for lower interest rates and potential future equity conversion, which can be attractive to both the company and investors. The capped call transactions are a common strategy to reduce potential dilution.
Comparison to Industry Standards
- Many technology companies, such as Salesforce and Workday, have used convertible notes to raise capital.
- The interest rate of 1.00% is relatively low, reflecting the current market conditions and Five9's credit profile.
- The conversion premium of 30% is within the typical range for convertible note offerings.
- The capped call transactions are a standard practice to mitigate dilution, similar to those used by other companies in the sector.
Stakeholder Impact
- Shareholders may experience potential dilution from the conversion of the notes.
- Creditors will see a reduction in near-term debt obligations.
- The company will have increased financial flexibility for operations and growth.
- The market price of Five9's common stock could be affected by hedging activities.
Next Steps
- The sale of the notes is expected to settle on March 1, 2024.
- Five9 will use the proceeds as outlined in the press release.
- The company will monitor the market impact of the offering and related transactions.
Key Dates
- February 27, 2024: Date of the press release and pricing of the convertible notes offering.
- March 1, 2024: Expected settlement date for the sale of the notes.
- March 15, 2024: First semi-annual interest payment date.
- September 15, 2024: Second semi-annual interest payment date.
- March 22, 2027: Earliest date Five9 may redeem the notes.
- December 15, 2028: Date after which the notes are convertible at any time until maturity.
- March 15, 2029: Maturity date of the convertible notes.
Keywords
convertible notes, capital raise, debt financing, capped call, share dilution, private placement, Rule 144A, senior notes, note repurchase, working capital
FIVN
Five9, INC
NASDAQ
Sector: TBD
Filings with Classifications
Better than expected
1 May 2025 8:07 PM
Earnings Release
- The company's Q1 revenue exceeded expectations, reaching a record $279.7 million.
- GAAP net income improved significantly compared to the previous year's net loss.
- Operating cash flow reached a record $48.4 million, surpassing previous performance.
Better than expected
1 May 2025 4:11 PM
Quarterly Report
- The company's net income improved to $0.6 million, compared to a net loss of $7.1 million for the same quarter of the previous year.
- Adjusted EBITDA increased to $52.7 million, up from $37.6 million in Q1 2024.
Worse than expected
20 February 2025 8:04 PM
Annual Results
- The Annual Dollar-Based Retention Rate decreased year-over-year primarily due to continued macroeconomic headwinds on the installed base.
Better than expected
20 February 2025 4:08 PM
Earnings Release
- Five9's full year revenue exceeded $1 billion, a record for the company.
- Q4 revenue growth accelerated to 17%, driven by subscription revenue growing 19%.
- Adjusted EBITDA margin reached a record 23% in Q4.
- GAAP net loss significantly improved from $(81.8) million in 2023 to $(12.8) million in 2024.
Better than expected
7 November 2024 4:15 PM
Quarterly Report
- The company's net loss improved significantly compared to the same period last year.
- The company's revenue increased by 15% year-over-year.
- The company's adjusted EBITDA increased year-over-year.
Better than expected
7 November 2024 4:09 PM
Quarterly Report
- Five9's Q3 results exceeded their own guidance across all key metrics, indicating better than expected performance.
- The company's revenue growth, subscription growth, and adjusted EBITDA all surpassed expectations.
- The raised full-year guidance also suggests that the company expects to continue performing better than previously anticipated.
Better than expected
8 August 2024 4:11 PM
Quarterly Report
- The company's net loss improved year-over-year, indicating progress towards profitability.
Worse than expected
8 August 2024 4:08 PM
Quarterly Report
- The company reduced its full-year revenue guidance by 3.8%, indicating a worse outlook than previously expected.
Capital raise
2 May 2024 4:11 PM
Quarterly Report
- The company issued $747.5 million in convertible senior notes due 2029.
- The company is in discussions regarding a potential revolving credit facility of up to $200 million.
Worse than expected
2 May 2024 4:11 PM
Quarterly Report
- The annual dollar-based retention rate decreased from 114% to 109%, indicating a potential weakening in customer loyalty or spending.
Better than expected
2 May 2024 4:08 PM
Quarterly Report
- The company's GAAP net loss improved significantly year-over-year, indicating better than expected profitability.
- Non-GAAP net income and earnings per share both increased year-over-year, exceeding expectations.
- The company secured its largest deal ever, demonstrating strong market traction.
Capital raise
1 March 2024 5:01 PM
Debt Issuance
- The document details a capital raise of $747.5 million through the issuance of convertible senior notes.
- The company granted initial purchasers an option to buy an additional $97.5 million in notes, which was fully exercised.
Capital raise
28 February 2024 6:07 AM
Debt Offering Announcement
- Five9 is raising $650 million through a private placement of convertible senior notes.
- The offering was upsized from an initial $600 million due to strong demand.
- The company has granted the initial purchasers an option to purchase an additional $97.5 million in notes.
Capital raise
27 February 2024 6:04 AM
Capital Raise Announcement
- Five9 is proposing a $600 million convertible senior notes offering.
- The company is also in discussions for a potential revolving credit facility of up to $200 million.
Capital raise
21 February 2024 9:55 PM
Annual Results
- The company may not be able to secure additional financing on favorable terms, or at all, to meet its future capital needs.
- The company may require additional capital to respond to business opportunities, challenges, acquisitions, a decline in sales, increased regulatory obligations or unforeseen circumstances and may engage in equity or debt financings or enter into credit facilities.
Worse than expected
21 February 2024 9:55 PM
Annual Results
- The company's net loss increased from $53.0 million in 2021 to $81.8 million in 2023.
- The company's Annual Dollar-Based Retention Rate decreased from 115% in 2022 to 110% in 2023.
Better than expected
21 February 2024 4:08 PM
Quarterly Report
- The company's full-year revenue of $910 million exceeded expectations.
- The 25% growth in enterprise subscription revenue was a positive surprise.
- The GAAP net loss improved year-over-year, indicating better than expected cost management.
- The company's cash flow from operations increased significantly year-over-year, exceeding expectations.
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