Five9, Inc. Form 8-K Summary
Business Context and Reporting Period
This Current Report on Form 8-K was filed by Five9, Inc. on August 1, 2016. The report details the entry into a new material definitive agreement to refinance existing indebtedness and secure working capital.
Key Financial Metrics and Debt Structure
- New Facility: Entered into a $50 million secured revolving credit facility with a $5 million sublimit for letters of credit.
- Initial Borrowing: Borrowed $32.6 million on the effective date (August 1, 2016).
- Interest Rate: Variable annual rate of Prime + 0.50%, subject to a 0.25% increase if adjusted EBITDA is negative at the end of any fiscal quarter.
- Fees: 0.25% per annum on the unused portion of the facility and an anniversary fee of $31,250 for the first two years.
- Maturity: August 1, 2019.
- Borrowing Cap: Outstanding balance is limited to trailing four months of Monthly Recurring Revenue (MRR) multiplied by the average trailing 12-month dollar-based retention rate.
- Liquidity Requirements: Must maintain $25 million of cash deposited with lenders and a minimum liquidity ratio of unrestricted cash and accounts receivable to outstanding loan amounts.
Material Changes
The Company terminated two existing loan agreements (dated March 8, 2013, and February 20, 2014) and repaid all amounts due under them. The new agreement replaces these facilities and extends the maturity date to 2019.
Management Commentary, Risks, and Covenants
- Use of Proceeds: Refinancing existing debt, working capital, and general corporate purposes.
- Security: Obligations are secured by a first priority perfected security interest in substantially all assets of Five9, Inc. and its subsidiary, Five9 Acquisition LLC.
- Covenants: Subject to customary affirmative and negative covenants restricting debt incurrence, liens, asset dispositions, dividends, distributions, investments, and acquisitions.
- Events of Default: Include failure to pay, covenant breaches, change of control, and bankruptcy.
Investor Verification Checklist
- Verify the Company's current trailing four-month MRR and 12-month dollar-based retention rate to assess remaining borrowing capacity under the new cap.
- Confirm the Company's ability to maintain the required $25 million cash deposit and minimum liquidity ratio.
- Review the full text of the Loan and Security Agreement (Exhibit 10.1) for specific definitions of "adjusted EBITDA" and detailed covenant restrictions.
- Monitor future quarterly reports for any negative adjusted EBITDA that would trigger the interest rate increase.