Five9 Announces Proposed $600 Million Convertible Notes Offering

Rhea-AI Summary

Five9, Inc. (NASDAQ: FIVN) plans to offer $600 million in convertible senior notes due 2029 to institutional buyers. The notes will be convertible into cash, common stock, or a mix. Five9 intends to use the proceeds for capped call transactions, repurchasing existing notes, and general corporate purposes.

Insights

Financial Analyst

The announcement by Five9, Inc. regarding the offering of $600 million in convertible senior notes due 2029 represents a significant financial maneuver within the tech sector, particularly for a company specializing in Intelligent Customer Experience (CX) Platforms. The decision to offer convertible notes is a strategic move to raise capital, potentially for investments in growth or to optimize the company's balance sheet. The convertible nature of the notes provides investors with the option to convert debt into equity, which can be attractive if the company's stock price appreciates over time.

From a financial perspective, the use of proceeds to repurchase a portion of its outstanding 0.500% convertible senior notes due 2025 indicates a proactive approach to debt management. This could signal to investors that the company is taking advantage of current market conditions to refinance existing debt at potentially more favorable terms. Moreover, the involvement of capped call transactions is designed to minimize dilution from the conversion of the new notes, which is often a concern for existing shareholders. These transactions can also provide some level of hedge against the cash payments required upon conversion.

However, the impact on the market price of Five9's common stock due to the various derivative and hedging activities associated with this offering is complex. Investors should closely monitor the effective conversion prices and the cap price of the capped call transactions to assess the potential dilution and the financial implications for the company's equity value.

Market Research Analyst

In the broader context of the technology and customer experience industry, Five9's issuance of convertible notes could be indicative of a trend where companies are seeking flexible financing solutions to navigate an uncertain economic environment. The move to raise capital through convertible notes rather than traditional equity offerings can be seen as a way to avoid immediate dilution while still providing the company with the necessary funds to maintain or accelerate its growth trajectory.

The repurchase of older notes and the use of capped call transactions suggest that Five9 is actively managing its capital structure to align with its strategic objectives. This could reflect confidence in the company's future performance, as the ability to raise such a significant amount of capital through a private placement to qualified institutional buyers implies a certain level of institutional trust in the company's prospects.

It is also worth noting that the transactions described may lead to increased volatility in the stock's market price due to the associated hedging and derivative activities. This could have both short-term and long-term implications for the stock's performance and should be factored into the investment analysis.

Legal Expert

The private placement of convertible notes is subject to specific regulatory frameworks, such as Rule 144A under the Securities Act of 1933, which allows for the sale of securities to qualified institutional buyers without the need for a public offering. This rule exempts the company from the registration requirements that would normally apply, allowing for a more expedient and less publicized capital raising process.

It is important for potential investors to understand that the securities being offered have not been registered under the Act and are subject to restrictions on resale. This limitation can influence the liquidity and marketability of the notes. Additionally, the legal intricacies of the capped call transactions and the potential unwinding of existing capped call transactions are critical as they can affect the market dynamics of both the notes and the common stock.

Investors should be aware of the implications of the private placement nature of this offering and the legal considerations that come with convertible securities, derivative transactions and the associated hedging strategies. These factors can have material effects on the valuation and performance of the investment.

SAN RAMON, Calif.--(BUSINESS WIRE)-- Five9, Inc. (NASDAQ: FIVN), the Intelligent CX Platform provider, today announced its intention to offer, subject to market conditions and other factors, $600 million aggregate principal amount of convertible senior notes due 2029 (the “notes”) in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Act”). Five9 also expects to grant the initial purchasers of the notes a 13-day option to purchase up to an additional $90 million aggregate principal amount of the notes.

The notes will be senior, unsecured obligations of Five9, and interest will be payable semi-annually in arrears. The notes will be convertible into cash, shares of Five9’s common stock (“common stock”), or a combination thereof, at Five9’s election. The interest rate, initial conversion rate and other terms of the notes are to be determined upon pricing of the offering. The notes will also be redeemable at the option of Five9 after a specified date if certain conditions are met.

Five9 expects to use a portion of the net proceeds of the offering of the notes to pay the cost of the capped call transactions described below and to repurchase a portion of its outstanding 0.500% convertible senior notes due 2025 (the “2025 notes”) (such transactions, the “2025 note repurchases”). The remainder of the net proceeds from the offering would be used for working capital and other general corporate purposes. The terms of any 2025 note repurchases will depend on factors, including the trading price of the 2025 notes at the time of such 2025 note repurchases. Five9 also expects that holders of the 2025 notes that sell their 2025 notes to Five9 may enter into or unwind various derivatives with respect to Five9’s common stock and/or purchase or sell shares of Five9’s common stock in the market to hedge their exposure in connection with these transactions. These activities could increase (or reduce the size of any decrease in) the market price of Five9’s common stock or the notes. These activities could affect the market price of Five9’s common stock concurrently with the pricing of the notes, and could also result in higher effective conversion prices for the notes.

In connection with the pricing of the notes, Five9 expects to enter into capped call transactions with one or more of the initial purchasers and/or their respective affiliates and/or other financial institutions (the “option counterparties”). The capped call transactions are expected generally to reduce potential dilution to Five9’s common stock upon any conversion of the notes and/or offset any potential cash payments Five9 is required to make in excess of the principal amount of converted notes, as the case may be, with such reduction and/or offset subject to a cap based on the cap price. The cap price of the capped call transactions will be determined upon pricing of the notes. If the initial purchasers exercise their option to purchase additional notes, Five9 expects to enter into additional capped call transactions with the option counterparties.

Five9 expects that, in connection with establishing their initial hedges of the capped call transactions, the option counterparties or their respective affiliates will purchase shares of Five9’s common stock and/or enter into various derivative transactions with respect to Five9’s common stock concurrently with, or shortly after, the pricing of the notes. These activities could increase (or reduce the size of any decrease in) the market price of Five9’s common stock or the notes at that time.

In addition, Five9 expects that the option counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various derivative transactions with respect to Five9’s common stock and/or by purchasing or selling shares of Five9’s common stock or other securities of Five9 in secondary market transactions following the pricing of the notes and prior to the maturity of the notes (and are likely to do so (x) during any observation period related to a conversion of notes and (y) following any repurchase of notes by Five9 if it elects to unwind a corresponding portion of the capped call transactions in connection with such repurchase). These activities could cause or avoid an increase or a decrease in the market price of Five9’s common stock or the notes, which could affect the ability of noteholders to convert the notes and, to the extent the activity occurs following conversion or during any observation period related to a conversion of the notes, could affect the amount and value of the consideration that noteholders will receive upon conversion of the notes.

In connection with the issuance of the 2025 notes, Five9 entered into capped call transactions (the “existing capped call transactions”) with certain financial institutions (the “existing option counterparties”). If Five9 repurchases any of the 2025 notes, it expects to enter into agreements with the existing option counterparties to terminate a portion of the existing capped call transactions in a notional amount corresponding to the amount of 2025 notes purchased. In connection with the termination of any of these transactions, Five9 expects the existing option counterparties or their respective affiliates to sell shares of Five9’s common stock and/or unwind various derivatives to unwind their hedge in connection with those transactions. This activity could decrease (or reduce the size of any increase in) the market price of Five9’s common stock at that time and it could decrease (or reduce the size of any increase in) the market value of the notes. In connection with the termination of the existing option transactions, Five9 will receive payments in amounts that depend in part on the market price of Five9’s common stock over a valuation period following the pricing of the notes.

The notes will be offered only to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A under the Act. Neither the notes nor the shares of common stock issuable upon conversion of the notes, if any, have been, nor will be, registered under the Act or the securities laws of any other jurisdiction and may not be offered or sold in the United States absent registration or an applicable exemption from such registration requirements.

This announcement is neither an offer to sell nor a solicitation of an offer to buy any of these securities and shall not constitute an offer, solicitation, or sale in any jurisdiction in which such offer, solicitation, or sale is unlawful.

Forward-Looking Statements

This news release contains certain forward-looking statements, including statements regarding our proposed offering of the notes, our intention to enter into the related capped call transactions and the 2025 note repurchases, and the use of proceeds from the notes offering, that are based on our current expectations and involve numerous risks and uncertainties that may cause these forward-looking statements to be inaccurate. Risks that may cause these forward-looking statements to be inaccurate include, among others: (i) whether we will be able to consummate the offering; (ii) the final terms of the offering and the capped call transactions; (iii) the satisfaction of customary closing conditions with respect to the offering of the notes; (iv) prevailing market conditions; (v) the anticipated use of net proceeds of the offering of the notes which could change as a result of market conditions or for other reasons; (vi) whether the capped call transactions will become effective; (vii) the impact of adverse economic conditions, including the impact of macroeconomic deterioration, including continuing inflation, increased interest rates, supply chain disruptions, decreased economic output and fluctuations in currency rates, the impact of the Russia-Ukraine conflict, the impact of the conflict in Israel, and other factors, that may continue to harm our business; and (viii) the other risks detailed from time-to-time under the caption “Risk Factors” and elsewhere in our Securities and Exchange Commission filings and reports, including, but not limited to, our most recent annual report on Form 10-K. Such forward-looking statements speak only as of the date hereof and readers should not unduly rely on such statements. We undertake no obligation to update the information contained in this press release, including in any forward-looking statements, except as may be required by law.

About Five9

The Five9 Intelligent CX Platform provides a comprehensive suite of solutions for orchestrating fluid customer experiences. Our cloud-native, multi-tenant, scalable, reliable, and secure platform includes contact center; omni-channel engagement; Workforce Engagement Management; extensibility through more than 1,000 partners; and innovative, practical AI, automation and journey analytics that are embedded as part of the platform. Five9 brings the power of people, technology, and partners to more than 3,000 organizations worldwide.

Source: Five9, Inc.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240226529730/en/

Investor Relations Contacts:

Five9, Inc.

Barry Zwarenstein

Chief Financial Officer

925-201-2000 ext. 5959

IR@five9.com

The Blueshirt Group for Five9, Inc.

Lauren Sloane

Lauren@blueshirtgroup.com

Source: Five9, Inc.

FAQ

What is Five9, Inc.'s ticker symbol?

Five9, Inc.'s ticker symbol is FIVN.

What is the purpose of Five9, Inc.'s $600 million offering?

Five9, Inc. plans to offer $600 million in convertible senior notes due 2029 to qualified institutional buyers.

How will the notes be convertible?

The notes will be convertible into cash, shares of Five9's common stock, or a combination of both at Five9's discretion.

What will Five9, Inc. use the net proceeds for?

Five9, Inc. intends to use a portion of the net proceeds for capped call transactions, repurchasing existing notes, and general corporate purposes.

Are the notes registered under the Act?

Neither the notes nor the shares of common stock issuable upon conversion of the notes have been registered under the Act or the securities laws of any other jurisdiction.