Five9, Inc. Announces Pricing of $225 Million Convertible Notes Offering

Five9 Inc (NASDAQ:FIVN), a leading provider of cloud contact center software for the digital enterprise, bringing the power of cloud innovation to customers and facilitating more than three billion customer interaction annually announced the pricing of $225 million aggregate principal amount of 0.125 percent convertible senior notes.

As quoted in the press release:

The size of the offering was increased from the previously announced $200 million aggregate principal amount of notes. Five9 also granted the initial purchasers of the notes a 30-day option to purchase up to an additional $33.75 million aggregate principal amount of the notes.

The sale of the notes to the initial purchasers is expected to settle on May 8, 2018, subject to customary closing conditions, and is expected to result in approximately $218.1 million in net proceeds to Five9 after deducting the initial purchasers’ discount and estimated offering expenses payable by Five9 (assuming no exercise of the initial purchasers’ option).

The notes will be senior, unsecured obligations of Five9 and interest will be payable semi-annually in arrears on May 1 and November 1 of each year, beginning on November 1, 2018. The notes will mature on May 1, 2023, unless earlier converted, redeemed or repurchased. Five9 may not redeem the notes prior to May 5, 2021; on or after May 5, 2021, Five9 may redeem the notes, at its option and subject to certain conditions, as detailed below.

Five9 expects to use approximately $27.3 million of the net proceeds of the offering of the notes to pay the cost of the capped call transactions described below. The remainder of the net proceeds from the offering will be used to repay outstanding borrowings under Five9’s senior secured credit facility, which currently has an outstanding balance of $32.6 million, and for general corporate purposes.

The initial conversion rate for the notes is 24.4978 shares of common stock per $1,000 principal amount of notes (which is equivalent to an initial conversion price of approximately $40.82 per share). Prior to the close of business on the business day immediately preceding November 1, 2022, the notes will be convertible at the option of the noteholders only upon the satisfaction of specified conditions and during certain periods. Thereafter until the close of business on the second scheduled trading day immediately preceding the maturity date, the notes will be convertible at the option of the noteholders at any time regardless of these conditions. Conversions of the notes will be settled in cash, shares of Five9’s common stock or a combination thereof, at Five9’s election. The initial conversion price represents a premium of approximately 30% to the $31.40 per share closing price of Five9’s common stock on the Nasdaq Global Market on May 3, 2018.

Five9 may redeem all or any portion of the notes, at its option, on or after May 5, 2021, at a redemption price equal to 100% of the principal amount thereof, plus any accrued and unpaid interest if the last reported sale price of Five9’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending not more than two trading days immediately preceding the date on which Five9 provides written notice of redemption.

Holders of notes may require Five9 to repurchase their notes upon the occurrence of certain events that constitute a fundamental change under the indenture governing the notes at a purchase price equal to 100% of the principal amount thereof, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date. In connection with certain corporate events or if Five9 issues a notice of redemption, it will, under certain circumstances, increase the conversion rate for holders who elect to convert their notes in connection with such corporate event or during the relevant redemption period.

In connection with the pricing of the notes, Five9 entered into capped call transactions with one or more of the initial purchasers or other financial institutions and/or their affiliates (the “hedge 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 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 initially be $62.80 per share, which represents a premium of 100% over the last reported sale price of Five9’s common stock of $31.40 per share on May 3, 2018, and is subject to certain adjustments under the terms of the capped call transactions. If the initial purchasers exercise their option to purchase additional notes, Five9 expects to enter into additional capped call transactions with the hedge counterparties.

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