Five9 : Q2 2020 Investor Presentation

Q2 2020 Investor Presentation

Five9 (NASDAQ: FIVN)

© 2019 Five9, Inc. All rights Reserved. Proprietary and Confidential to Five9 Inc.

Safe Harbor

This presentation is proprietary and is intended solely for the information of the persons to whom it is presented. It may not be retained, reproduced or distributed, in whole or in part, by any means (including electronic) without the prior written consent of Five9, Inc.

This presentation includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, concerning events, trends, expectations and beliefs that may affect our industry or the Company, including potential growth drivers, projections and guidance concerning our future results of operations including our long-term model, our market opportunity and our long-term growth prospects. Our actual results may be materially different from what we discuss here and you should not unduly rely on such forward looking statements. Please refer to our most recent Form 10-K and 10-Q under the caption "Risk Factors" and elsewhere in such reports, for detailed information about factors that could cause our results to differ from those set forth in such forward- looking statements, including risks related to the ongoing COVID-19 pandemic. We undertake no obligation to update any such forward-looking information.

In addition to U.S. GAAP financials, this presentation includes certain non-GAAP financial measures. These non-GAAP financial measures are in addition to, and not a substitute for or superior to, measures of financial performance prepared in accordance with U.S. GAAP and may differ from non-GAAP measures used by other companies in our industry. The Company considers these non-GAAP financial measures to be important because they provide useful measures of the operating performance of the Company, exclusive of unusual events, as well as factors that do not directly affect what we consider to be our core operating performance. The non-GAAP financial measures should not be considered a substitute for financial information presented in accordance with GAAP. Please see the reconciliation of non-GAAP financial measures to the most directly comparable GAAP measure set forth in the Appendix to this presentation.

This presentation contains statistical data that we obtained from industry publications and reports generated by third parties. Although we believe that the publications and reports are reliable, we have not independently verified this statistical data.

2

Leader in Cloud Software for Contact Centers

Annual Revenue ($M)

400

33%	328
CAGR	258

(2009 - 2019)

Adj. EBITDA Margin Since IPO

18%

19 26

43

	200
	162
	129
84	103
64

46%

Adj. EBITDA

Margin Expansion (percentage point)

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

(G)

(28%)

Q2'14

Q2'20

100%	100%	82%	33%	59
Cloud	Organic	Enterprise	Enterprise Subscription	$1M+ ARR Enterprise
		(LTM)	YoY Growth (LTM)	Customers (Q4'19 Ann.)

Note: 2020 (G) represents the midpoint of revenue guidance disclosed on 8/3/20. Reader shall not construe presentation of this information after 8/3/20 as an update or reaffirmation of such guidance. LTM metrics as of 6/30/20. $1M+ ARR based on Q4'19 annualized. Historical results prior to 2018 based on ASC 605

3

The Problem:

Consumers Dislike Customer Service

84%

Of end customers say being treated like a person, not a number, is very important to winning their business

• Difficulty speaking to an agent
• Depersonalized and disconnected experiences
• Labyrinthian IVR trees
• Long wait times

Source: State of Marketing, Salesforce Research, Dec 2018

4

Customer Service Must Transform

(one of the most important parts of Digital Transformation)

Of service decision makers

82% say their company's customer service must transform

to stay competitive

Source: State of Service, Salesforce Research, Mar 2019

5

Five9 Enables Companies to Engage Better

1

2

3

Serve customers in the channel(s) they prefer

Unify customer information into a single view

Modern engagement platform

6

Customer

	Live
	Interactions
Email	Web

1

Serve customers in the channel(s) they prefer

Social	Chat
Voice	SMS

	•	Fully blended, omnichannel
System of		platform
•	Any channel, voice or digital
Engagement
•	Any interaction, live or live-ish
	•	Anytime and anywhere

7

2

Unify customer information into a single view

•Hand-in-glove CRM integration

• Enrich CRM insights with Five9's computable interaction data
• Personalize service across the customer journey

Business

ComputableSales

Interactioncloud

Data

Marketing

cloud

System of	CRM	Service
Engagement	Data	cloud

8

3

Modern engagement platform

• Intelligently route customers to agents that best address needs
• Provide best-in-class tools to agents, supervisors and admins
• Turn interaction data into actionable insights

Customer	Business
Live	Computable
Interactions	Interaction
	Data
Agent Assist	Intelligent Routing
	APIs
Smart Dialer	Chatbot

Live iinteraction++

customerer data

Integration | Provisioning

| Reporting

WFO	Dashboards

	CRM
Agent, Supervisor,	Data
Reporting & Analytics
Admin

9

The Market is Strong

Legacy to cloud	Digital
transformation

10

Large and Underpenetrated Market Opportunity

$24B

Contact center software

market opportunity

15% Cloud penetration of contact center software market

Current addressable market opportunity

Source: Company estimates; Gartner estimates, Oct 2018; MZA estimates, Oct 2018

Note: 15% penetration represents estimated penetration in North America

11

Longer-Term Expansion into the Market for Contact Center Labor Spend

16%

Percentage of customer service

representatives that will be displaced

due to automation by 2030

- McKinsey

$234B

$24B contact center software

+ $210B contact center labor spend

$58B

$24B contact center software

• $34B automated contact center labor spend

$24B

Contact center

software

Cloud penetration

Long-term addressable market opportunity

Source: Company estimates; Gartner estimates, Oct 2018; MZA estimates, Oct 2018; Statista estimates, Jul 2018; McKinsey estimates, Jul 2019

12

Why Enterprise Customers Choose Five9

• Full Feature Set: ACD, IVR, dialer,			•	Reliable: 99.99% uptime
	inbound, outbound, blending, omni-			• Secure Architecture: Security zones,
	channel, WFO, reporting, APIs…
				IPS / IDS, Next-Gen Firewalls
•	Superior User Experience /
		•	Compliant: PCI DSS, HIPAA, CPNI,
	Customer Experience
				GDPR, CCPA
•	Innovation: Customer journey,
		• Scalable: 6B+ call minutes annually
	analytics, mobile…
			•	End-to-End Network Connectivity:
•	Deepest CRM Integrations:
End-to-End	Five9 TRUST		Tier 1 carrier redundancy, MPLS
	Salesforce, Oracle, Zendesk,
		Agent Connect, high QOS
	Microsoft, ServiceNow…	Solution	Platform
• Our People: Recruit and retain top			•	High-Touch /On-Site
	talent with a customer-first attitude				Implementation
• Chemistry: "Whatever it takes				•	Detailed Discovery
	mentality," teamwork and	Customer-First	Implementation		•	Design & Testing
	communication		•	Training & Optimization
•	KPIs: Cross-functional metrics	Culture	& Support	•	Premium Support: Ongoing
	focused on customer success				dedicated TAM

13

Five9 is a Leader in Cloud Contact Center Software

Five9 Named a Leader for the 5th Year	Five9 Named a Leader in The Forrester
in a Row in Gartner Magic Quadrant
Wave™: Cloud Contact Center
Contact Center as a Service

Source: Magic Quadrant for Contact Center as a Service, North America, Gartner, Oct 2019; The Forrester Wave™: Cloud Contact Centers, Q3 2018, Forrester, Sep 2018

14

Vibrant Partner Ecosystem

CRM	Systems	Technology /	ISV	Master Agents /
Integrator	WFO / UC	Resellers

15

Multiple Vectors for Long-Term Growth

Add	Expand	Add	Expand	Extend	Leverage Data	Selective
New Enterprise	Existing	Channel	Internationally	the Platform	Advantage & AI	Acquisitions
Logos	Customers	Partners			Advancements

16

Leadership Team

Rowan	Dan	Barry	Kimberly	Jonathan	Ryan
Trollope	Burkland	Zwarenstein	Lytikainen	Rosenberg	Kam
CEO	President	CFO	General Counsel and	CTO and Head of AI	CMO
			Chief Compliance Officer

David	Scott	Anand	James	Tricia
Pickering	Welch	Chandrasekaran	Doran	Yankovich
EVP, Engineering	EVP, Cloud Operations	EVP, Product	EVP, Strategy &	SVP, Human Resources
		Management	Operations

17

Strong, Consistent Revenue Growth

Annual Revenue ($M)

Quarterly Revenue ($M)

19 26 43

64 84 103

328

258

200

162

129

92 95100

84

72 75 77

14 15 16 18 19 20 21 24 24 25 26 28 30 30 32 36 38 39 41 44 47 48 50 55 59 61 65

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019	Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
		2012		2013		2014		2015		2016		2017		2018		2019		2020

105%	92%	No Single
Client
Annual	Recurring	>5%
DBRR	Revenue	of Revenue
High Retention	High Visibility	No Concentration

Note: Annual DBRR, recurring revenue and client concentration as of Q2'20. Historical results prior to 2018 based on ASC 605

18

Enterprise Driving Strong Growth and Profitability

Enterprise Customers $1M+ ARR (Q4'19 Ann.)	Strong Unit Economics
59	Cumulative
Profit
	$6

Truncated

5 Years

Customer

	3		Acquisition Cost
			$1
	Q2'14 (IPO)	Q4'19

Note: Unit economics calculated as estimated cumulative profit from Enterprise customers over a 5-year period divided by direct costs attributable to customer acquisition. $1M+ ARR based on Q4'19 annualized

19

Exceeding "Rule of 40" Despite Increased Investments

																	50%	53%
																				46%	49%		47%
																44%				45%
																		42%		42%
																		23%
								34%						38%	38%		20%			18%	21%		18%
						31%		34%				33%			16%			16%	19%	15%
							6%	7%	29%	29%	29%	12%	13%
						3%	27%
			14%		21%			6%		10%
	4%	5%	15%		1%			7%	6%
22%	23%		25%	23%	25%	27%	26%	28%	27%	23%	24%	23%	22%	25%	25%	28%	30%	31%	27%	27%	28%	28%	28%	29%
20%
	(19%) (15%)	(10%)	(7%)	(3%)
(28%)
						YoY Revenue Growth					EBITDA Margin
(6%)
Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Q2'20

Note: Historical results prior to 2018 based on ASC 605

20

Margin Expansion and Operating Leverage

Non-GAAP

Adj. Gross Margin	Non-GAAP Opex (% of revenue)	Adj. EBITDA Margin
14.2% expansion			31.9% improvement		46.1% expansion
IPO	Today			IPO	Today		IPO		Today
				79.3%
	65.7%		G&A	21.4%
51.5%					47.4%
			S&M	37.5%	8.7%
					26.3%				18.3%
			R&D	20.4%	12.4%

				(27.8%)
Q2'14	Q2'20	Q2'14	Q2'20	Q2'14	Q2'20

Note: Non-GAAP metrics exclude depreciation, intangibles amortization, stock-based compensation and unusual transactions. Q2'14 metrics based on ASC 605. See appendix for reconciliation of non- GAAP measures to most comparable GAAP measure

21

Long-Term Operating Model

Non-GAAP

% of
Revenue	2014	2015	2016	2017	2018	2019	Q2'20
Adj. Gross	53%	59%	62%	63%	64%	64%	66%
Margin
S&M	35%	31%	31%	31%	25%	26%	26%
R&D	19%	16%	13%	12%	11%	11%	12%
G&A	21%	16%	13%	11%	10%	9%	9%
Adj. EBITDA	(22%)	(4%)	5%	9%	18%	19%	18%

Subscription / PS margin expansion and increasing subscription mix

Continue to invest in GTM in line with revenue growth

Current acceleration offset by long-term leverage

Economies of scale

Long-Term

Model

70%+

26% - 30%

8% - 10%

5% - 7%

27%+

Based on ASC 605

Based on ASC 606

Note: Non-GAAP metrics exclude depreciation, intangibles amortization, stock-based compensation and unusual transactions. 2014-2017 metrics based on ASC 605. See appendix for reconciliation of non-GAAP measures to most comparable GAAP measure

22

Balance Sheet

		Quarter Ended
$ in Millions	June 30, 2020	March 31, 2020
Cash, cash equivalents and marketable investments1	$768.0	$326.3
Working capital	675.5	322.9
Total assets	993.3	503.7
Total finance leases	2.1	3.1
Total debt	642.2	212.9
Total stockholders' equity	$254.4	$206.5

1 Includes long-term investments of $82.1M

23

Investment Highlights

Largest 100% Cloud Contact

Center Provider

Disrupting Large Market

Strong Revenue Growth

Marching to Long-Term 27%+

Adjusted EBITDA

Comprehensive Solution

Vibrant Partner Ecosystem

Proven Leadership Team

~$400M Revenue Run Rate (Q2'20)

$24B current addressable market

33% Growth in LTM Enterprise

Subscription Revenue

Powerful Business Model /

Excellent Unit Economics

Enables Digital Transformation

>60% of Enterprise Deal Flow

Influenced by Channels

Recognized as a leader in Gartner

MQ and Forrester Wave

24

Appendix

25	© 2019 Five9, Inc. All rights Reserved. Proprietary and Confidential to Five9 Inc.

GAAP to Adjusted Gross Profit Reconciliation

Q2'14 - Q2'20

												Quarter Ended
	Q2'14	Q3'14	Q4'14	Q1'15	Q2'15	Q3'15	Q4'15	Q1'16	Q2'16	Q3'16	Q4'16	Q1'17	Q2'17	Q3'17	Q4'17	Q1'18	Q2'18	Q3'18	Q4'18	Q1'19	Q2'19	Q3'19	Q4'19	Q1'20	Q2'20
GAAP gross profit	11,216	12,365	13,734	15,496	16,004	17,475	20,398	21,405	22,122	23,192	28,437	27,043	27,454	29,584	33,040	34,203	36,306	39,125	43,996	43,687	46,188	49,297	54,323	55,051	57,339
% GAAP gross	45.4%	47.8%	48.6%	51.2%	52.9%	54.1%	56.6%	56.3%	56.9%	56.6%	64.3%	57.5%	57.5%	59.1%	59.6%	58.1%	59.4%	59.9%	60.8%	58.6%	59.6%	58.8%	58.9%	57.9%	57.5%
margin
Depreciation &	1,373	1,272	1,291	1,439	1,558	1,470	1,483	1,680	1,616	1,668	1,608	1,576	1,716	1,397	1,611	1,794	1,864	2,021	2,129	2,366	2,504	2,602	3,384	3,940	5,120
amortization
Stock-based	121	158	176	188	218	233	227	265	329	357	424	434	575	599	594	678	853	860	942	1,229	1,658	1,702	1,745	1,989	2,499
compensation
Reversal of		-	-	-	-	-	-	-	-	-	(3,114)	-	-	-	-	-	-	-	-	-	-	-	-	-	-
accrued federal	-
fees
Out of period adj.				-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-
for accrued	-	-	235
federal fees
COVID-19 relief						-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	618
bonus for	-	-	-	-	-
employees
Adjusted gross	12,710	13,795	15,436	17,123	17,780	19,178	22,108	23,350	24,067	25,217	27,355	29,053	29,745	31,580	35,245	36,675	39,023	42,006	47,067	47,282	50,350	53,601	59,452	60,980	65,576
profit
% adjusted gross	51.5%	53.3%	54.6%	56.6%	58.7%	59.4%	61.4%	61.4%	61.9%	61.5%	61.9%	61.8%	62.3%	63.1%	63.6%	62.3%	63.8%	64.3%	65.1%	63.4%	65.0%	64.0%	64.4%	64.1%	65.7%
margin

Note: Historical results prior to 2018 based on ASC 605

26

GAAP to Adjusted Gross Profit Reconciliation

2014 - 2019

			Year Ended
	2014	2015	2016	2017	2018	2019
GAAP gross profit	48,441	69,373	95,156	117,121	153,630	193,495
% GAAP gross margin	47.0%	53.8%	58.7%	58.5%	59.6%	59.0%
Depreciation & amortization	5,138	5,950	6,573	6,300	7,808	10,856
Stock-based compensation	542	866	1,375	2,202	3,333	6,334
Reversal of accrued federal fees	-	-	(3,114)	-	-	-
Out of period adj. for accrued	235	-	-	-	-	-
federal fees
Adjusted gross profit	54,356	76,189	99,990	125,623	164,771	210,685
% adjusted gross margin	52.7%	59.1%	61.7%	62.7%	63.9%	64.2%

Note: Historical results prior to 2018 based on ASC 605

27

GAAP Net Inc. (Loss) to Adj. EBITDA Reconciliation

Q2'14 - Q2'20

												Quarter Ended
	Q2'14	Q3'14	Q4'14	Q1'15	Q2'15	Q3'15	Q4'15	Q1'16	Q2'16	Q3'16	Q4'16	Q1'17	Q2'17	Q3'17	Q4'17	Q1'18	Q2'18	Q3'18	Q4'18	Q1'19	Q2'19	Q3'19	Q4'19	Q1'20	Q2'20
GAAP net income (loss)	(8,659)	(11,435)	(9,372)	(8,903)	(7,369)	(6,048)	(3,518)	(4,911)	(3,468)	(3,890)	409	(5,255)	(4,007)	924	(631)	(607)	(2,042)	(1,305)	3,733	(1,924)	(1,860)	(1,604)	836	(7,437)	(16,052)
Non-GAAP adjustments:
Depreciation and amortization	1,699	1,567	1,605	1,775	1,910	1,840	1,863	2,103	2,060	2,140	2,086	2,095	2,270	1,881	2,068	2,320	2,449	2,667	2,838	3,192	3,361	3,497	4,324	4,970	6,243
Stock-based compensation	1,723	1,877	1,957	2,235	1,830	1,945	1,720	1,994	2,414	2,519	2,716	3,129	3,854	3,720	4,640	5,325	6,797	8,869	7,493	8,686	10,436	11,075	11,868	13,794	16,791
Interest expense	1,092	1,116	1,175	1,139	1,155	1,235	1,198	1,199	1,197	961	869	882	888	865	836	810	2,378	3,595	3,462	3,396	3,406	3,486	3,506	3,484	5,734
Interest income and other	28	(95)	(146)	(2)	49	(119)	(28)	45	33	(12)	(54)	(118)	(90)	(118)	(164)	(398)	(206)	(1,352)	(1,359)	(1,745)	(1,490)	(1,460)	(1,384)	(1,072)	4,965
Provision for (benefit from)	12	13	33	18	(20)	50	13	28	42	(2)	(14)	49	50	43	126	45	64	41	150	(49)	29	50	74	69	(2,876)
income taxes
Extinguishment of debt	-	-	-	-	-	-	-	-	-	1,026	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-
Reversal of accrued federal fees	-	-	-	-	-	-	-	-	-	-	(3,114)	-	-	-	-	-	-	-	-	-	-	-	-	-	-
Legal settlement	-	-	-	-	-	-	-	-	-	-	-	1,700	-	-	-	-	-	-	-	-	420	-	-	-	-
Legal and indemnification fees	-	-	-	-	-	-	-	-	-	-	-	135	-	-	-	-	241	258	93	292	64	-	-	-	-
related to settlement
Acquisition-related transaction
costs and one-time integration	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	338	329	1,637
costs
COVID-19 relief bonus for	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	1,817
employees
Change in fair value of
convertible preferred and	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-
common stock warrant
liabilities
Reversal of contingent sales tax	(2,766)	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-
liability (G&A)
Reversal of interest and
penalties on accrued federal	-	-	-	-	-	-	-	-	-	-	-	-	-	(2,133)	-	-	-	-	-	-	-	-	-	-	-
fees (G&A)
Accrued FCC charge (G&A)	-	2,000	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-
Out of period adj. for accrued	-	-	235	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-
federal fees (COR)
Out of period adj. for sales tax	-	-	183	575	190	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-
liability (G&A)
Adjusted EBITDA	(6,871)	(4,957) (4,330) (3,163) (2,255) (1,097)	1,248	458	2,278	2,742	2,898	2,617	2,965	5,182	6,875	7,495	9,681	12,773	16,410	11,848	14,366	15,044	19,562	14,137	18,259
% adjusted EBITDA margin	(27.8%)	(19.2%)	(15.3%)	(10.4%)	(7.4%)	(3.4%)	3.5%	1.2%	5.9%	6.7%	6.6%	5.6%	6.2%	10.3%	12.4%	12.7%	15.8%	19.6%	22.7%	15.9%	18.6%	18.0%	21.2%	14.9%	18.3%

Note: Historical results prior to 2018 based on ASC 605

28

GAAP Net Loss to Adjusted EBITDA Reconciliation

2014 - 2019

			Year Ended
	2014	2015	2016	2017	2018	2019
GAAP net income (loss)	($37,786)	($25,838)	($11,860)	($8,969)	($221)	($4,552)
Non-GAAP adjustments:
Depreciation and amortization	6,463	7,388	8,390	8,314	10,274	14,374
Stock-based compensation	6,753	7,730	9,643	15,343	28,484	42,065
Interest expense	4,161	4,727	4,226	3,471	10,245	13,794
Interest income and other	(245)	(100)	13	(490)	(3,315)	(6,079)
Provision for (benefit from) income taxes	85	61	54	268	300	104
Extinguishment of debt	-	-	1,026	-	-	-
Reversal of accrued federal fees	-	-	(3,114)	-	-	-
Legal settlement	-	-	-	1,700	-	420
Legal and indemnification fees related to settlement	-	-	-	135	592	356
Acquisition related transaction costs	-	-	-	-	-	338
Change in fair value of convertible preferred and common stock warrant liabilities	(1,745)	-	-	-	-	-
Reversal of contingent sales tax liability (G&A)	(2,766)	-	-	-	-	-
Reversal of interest and penalties on accrued federal fees (G&A)	-	-	-	(2,133)	-	-
Accrued FCC charge (G&A)	2,000	-	-	-	-	-
Out of period adj. for accrued federal fees (COR)	235	-	-	-	-	-
Out of period adj. for sales tax liability (G&A)	183	765	-	-	-	-
Adjusted EBITDA	($22,662)	($5,267)	$8,378	$17,639	$46,359	$60,820
% adjusted EBITDA margin	(22.0%)	(4.1%)	5.2%	8.8%	18.0%	18.5%

Note: Historical results prior to 2018 based on ASC 605

29

GAAP to Non-GAAP COR and OpEx Reconciliation

Q2'14 - Q2'20

													Quarter Ended
		Q2'14	Q3'14	Q4'14	Q1'15	Q2'15	Q3'15	Q4'15	Q1'16	Q2'16	Q3'16	Q4'16	Q1'17	Q2'17	Q3'17	Q4'17	Q1'18	Q2'18	Q3'18	Q4'18	Q1'19	Q2'19	Q3'19	Q4'19	Q1'20	Q2'20
GAAP COR	13,469	13,504	14,540	14,778	14,270	14,812	15,635	16,610	16,764	17,790	15,770	19,971	20,273	20,497	22,363	24,702	24,814	26,179	28,339	30,851	31,248	34,472	37,940	40,037	42,453
% of revenue	54.6%	52.2%	51.4%	48.8%	47.1%	45.9%	43.4%	43.7%	43.1%	43.4%	35.7%	42.5%	42.5%	40.9%	40.4%	41.9%	40.6%	40.1%	39.2%	41.4%	40.4%	41.2%	41.1%	42.1%	42.5%
Depreciation & amortization	(1,373)	(1,272)	(1,291)	(1,439)	(1,558)	(1,470)	(1,483)	(1,680)	(1,616)	(1,668)	(1,608)	(1,576)	(1,716)	(1,397)	(1,611)	(1,794)	(1,864)	(2,021)	(2,129)	(2,366)	(2,504) (2,602) (3,384) (3,940) (5,120)
Stock-based compensation	(121)	(158)	(176)	(188)	(218)	(233)	(227)	(265)	(329)	(357)	(424)	(434)	(575)	(599)	(594)	(678)	(853)	(860)	(942)	(1,229)	(1,658)	(1,702)	(1,745)	(1,989)	(2,499)
Reversal of accrued federal		-	-	-	-	-	-	-	-	-	-	3,114	-	-	-	-	-	-	-	-	-	-	-	-	-	-
fees
Out of period adj. for accrued		-	-	(235)	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-
federal fees
COVID-19 relief bonus for		-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	(618)
employees
Non-GAAP COR	11,975	12,074	12,838	13,151	12,494	13,109	13,925	14,665	14,819	15,765	16,852	17,961	17,982	18,501	20,158	22,230	22,097	23,298	25,268	27,256	27,086	30,168	32,811	34,108	34,216
% of revenue	48.5%	46.7%	45.4%	43.4%	41.3%	40.6%	38.6%	38.6%	38.1%	38.5%	38.1%	38.2%	37.7%	36.9%	36.4%	37.7%	36.2%	35.7%	34.9%	36.6%	35.0%	36.0%	35.6%	35.9%	34.3%
GAAP R&D	5,554	5,503	5,828	6,038	5,568	5,473	5,580	5,802	5,799	6,041	6,236	6,847	6,836	6,689	6,748	7,772	8,367	9,582	8,451	10,546	10,811	11,665	12,168	15,189	17,208
% of revenue	22.5%	21.3%	20.6%	19.9%	18.4%	17.0%	15.5%	15.3%	14.9%	14.7%	14.1%	14.6%	14.3%	13.4%	12.2%	13.2%	13.7%	14.7%	11.7%	14.1%	14.0%	13.9%	13.2%	16.0%	17.2%
Depreciation & amortization	(50)	(58)	(75)	(87)	(102)	(126)	(140)	(148)	(161)	(204)	(224)	(206)	(237)	(182)	(170)	(194)	(233)	(278)	(331)	(440)	(450)	(450)	(461)	(465)	(497)
Stock-based compensation	(471)	(583)	(527)	(574)	(340)	(475)	(401)	(435)	(528)	(547)	(549)	(637)	(801)	(797)	(807)	(877)	(1,064)	(2,352)	(1,010)	(1,470)	(1,907)	(2,022)	(2,259)	(2,806)	(3,684)
Acquisition-related
transaction costs and one-		-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	(248)
time integration costs
COVID-19 relief bonus for		-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	(365)
employees
Non-GAAP R&D		5,033	4,862	5,226	5,377	5,126	4,872	5,039	5,219	5,110	5,290	5,463	6,004	5,798	5,710	5,771	6,701	7,070	6,952	7,110	8,636	8,454	9,193	9,448	11,918	12,414
% of revenue	20.4%	18.8%	18.5%	17.8%	16.9%	15.1%	14.0%	13.7%	13.1%	12.9%	12.4%	12.8%	12.1%	11.4%	10.4%	11.4%	11.6%	10.6%	9.8%	11.6%	10.9%	11.0%	10.2%	12.5%	12.4%
GAAP S&M	9,674	9,296	9,453	9,931	10,594	10,797	10,720	12,706	12,637	12,925	14,480	15,778	16,932	16,502	17,358	17,478	17,912	17,818	18,793	21,701	23,250	25,014	25,627	30,160	32,231
% of revenue	39.2%	35.9%	33.4%	32.8%	35.0%	33.4%	29.8%	33.4%	32.5%	31.5%	32.8%	33.6%	35.5%	33.0%	31.3%	29.7%	29.3%	27.3%	26.0%	29.1%	30.0%	29.9%	27.8%	31.7%	32.3%
Depreciation & amortization	(48)	(50)	(50)	(49)	(51)	(52)	(54)	(53)	(54)	(56)	(58)	(30)	(30)	(30)	(30)	(29)	(30)	(30)	(6)	(1)	(1)	(2)	(2)	(2)	(2)
Stock-based compensation	(368)	(361)	(455)	(524)	(458)	(448)	(370)	(434)	(544)	(626)	(759)	(928)	(1,224)	(1,084)	(1,128)	(1,362)	(1,585)	(1,613)	(1,747)	(2,249)	(2,749)	(3,017)	(3,353)	(4,106)	(5,265)
Acquisition-related
transaction costs and one-		-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	(169)
time integration costs
COVID-19 relief bonus for		-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	(596)
employees
Non-GAAP S&M		9,258	8,885	8,948	9,358	10,085	10,297	10,296	12,219	12,039	12,243	13,663	14,820	15,678	15,388	16,200	16,087	16,297	16,175	17,040	19,451	20,500	21,995	22,272	26,052	26,199
% of revenue	37.5%	34.3%	31.6%	30.9%	33.3%	31.9%	28.6%	32.1%	31.0%	29.9%	30.9%	31.5%	32.8%	30.7%	29.2%	27.3%	26.7%	24.8%	23.6%	26.1%	26.5%	26.3%	24.1%	27.4%	26.3%

Note: Historical results prior to 2018 based on ASC 605

30

GAAP to Non-GAAP COR and OpEx Reconciliation (cont'd)

Q2'14 - Q2'20

GAAP G&A % of revenue

Depreciation & amortization Stock-based compensation Legal settlement

Legal and indemnification fees related to settlement

Acquisition-related transaction costs and onetime integration costs COVID-19 relief bonus for employees

Reversal of contingent sales tax liability

Reversal of interest & penalties on accrued federal fees

Accrued FCC charge

Out of period adj. for sales tax liability

Non-GAAP G&A % of revenue

Quarter Ended

Q2'14	Q3'14	Q4'14	Q1'15	Q2'15	Q3'15	Q4'15	Q1'16	Q2'16	Q3'16	Q4'16	Q1'17	Q2'17	Q3'17	Q4'17	Q1'18	Q2'18	Q3'18	Q4'18	Q1'19	Q2'19	Q3'19	Q4'19	Q1'20	Q2'20
3,515	7,967	6,763	7,275	6,027	6,087	6,433	6,536	5,882	6,143	6,511	8,860	6,845	4,679	8,767	9,103	9,833	10,746	10,766	11,762	12,042	12,146	13,496	14,658	16,129
14.2%	30.8%	23.9%	24.0%	19.9%	18.9%	17.9%	17.2%	15.1%	15.0%	14.7%	18.8%	14.3%	9.3%	15.8%	15.5%	16.1%	16.5%	14.9%	15.8%	15.6%	14.5%	14.6%	15.4%	16.2%
(228)	(187)	(189)	(200)	(199)	(192)	(186)	(222)	(229)	(212)	(196)	(283)	(287)	(272)	(257)	(303)	(322)	(338)	(372)	(385)	(406)	(443)	(477)	(563)	(624)
(763)	(775)	(799)	(949)	(814)	(789)	(722)	(860)	(1,013)	(989)	(984)	(1,130)	(1,254)	(1,240)	(2,111)	(2,408)	(3,295)	(4,044)	(3,794)	(3,738)	(4,122)	(4,334)	(4,511)	(4,893)	(5,343)
-	-	-	-	-	-	-	-	-	-	-	(1,700)	-	-	-	-	-	-	-	-	(420)	-	-	-	-
-	-	-	-	-	-	-	-	-	-	-	(135)	-	-	-	-	(241)	(258)	(93)	(292)	(64)	-	-	-	-
-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	(338)	(329)	(1,220)
-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	(238)
2,766	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-
-	-	-	-	-	-	-	-	-	-	-	-	-	2,133	-	-	-	-	-	-	-	-	-	-	-
-	(2,000)	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-
-	-	(183)	(575)	(190)	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-	-
5,290	5,005	5,592	5,551	4,824	5,106	5,525	5,454	4,640	4,942	5,331	5,612	5,304	5,300	6,399	6,392	5,975	6,106	6,507	7,347	7,030	7,369	8,170	8,873	8,704
21.4%	19.3%	19.8%	18.3%	15.9%	15.8%	15.3%	14.3%	11.9%	12.1%	12.1%	11.9%	11.1%	10.6%	11.5%	10.9%	9.8%	9.4%	9.0%	9.9%	9.1%	8.8%	8.9%	9.3%	8.7%

Note: Historical results prior to 2018 based on ASC 605

31

GAAP to Non-GAAP COR and OpEx Reconciliation

2014 - 2019

				Year Ended
		2014	2015	2016	2017	2018	2019
GAAP COR	$54,661	$59,495	$66,934	$83,104	$104,034	$134,511
% of revenue	53.0%	46.2%	41.3%	41.5%	40.4%	41.0%
Depreciation & amortization	(5,138)	(5,950)	(6,573)	(6,300)	(7,808)	(10,856)
Stock-based compensation	(542)	(866)	(1,375)	(2,202)	(3,333)	(6,334)
Reversal of accrued federal fees	-	-	3,114	-	-	-
Out of period adj. for accrued federal fees	(235)	-	-	-	-	-
Non-GAAP COR	$48,746	$52,679	$62,100	$74,602	$92,893	$117,321
% of revenue	47.3%	40.9%	38.3%	37.3%	36.1%	35.8%
GAAP R&D	$22,110	$22,659	$23,878	$27,120	$34,172	$45,190
% of revenue	21.4%	17.6%	14.7%	13.5%	13.3%	13.8%
Depreciation & amortization	(229)	(455)	(737)	(795)	(1,036)	(1,801)
Stock-based compensation	(1,931)	(1,790)	(2,059)	(3,042)	(5,303)	(7,658)
Non-GAAP R&D	$19,950	$20,414	$21,082	$23,283	$27,833	$35,731
% of revenue	19.3%	15.8%	13.0%	11.6%	10.8%	10.9%
GAAP S&M	$37,445	$42,042	$52,748	$66,570	$72,001	$95,592
% of revenue	36.3%	32.6%	32.5%	33.2%	27.9%	29.1%
Depreciation & amortization	(196)	(206)	(221)	(120)	(95)	(6)
Stock-based compensation	(1,510)	(1,800)	(2,363)	(4,364)	(6,307)	(11,368)
Non-GAAP S&M		$35,739	$40,036	$50,164	$62,086	$65,599	$84,218
% of revenue	34.7%	31.1%	30.9%	31.0%	25.5%	25.7%
GAAP G&A	$24,416	$25,822	$25,072	$29,151	$40,448	$49,446
% of revenue	23.7%	20.0%	15.5%	14.6%	15.7%	15.1%
Depreciation & amortization	(900)	(777)	(859)	(1,099)	(1,335)	(1,711)
Stock-based compensation	(2,770)	(3,274)	(3,846)	(5,735)	(13,541)	(16,705)
Legal settlement	-	-	-	(1,700)	-	(420)
Legal and indemnification fees related to settlement	-	-	-	(135)	(592)	(356)
Acquisition related transaction costs	-	-	-	-	-	(338)
Reversal of contingent sales tax liability	2,766	-	-	-	-	-
Reversal of interest & penalties on accrued federal fees	-	-	-	2,133	-	-
Accrued FCC charge	(2,000)	-	-	-	-	-
Out of period adj. for sales tax liability	(183)	(765)	-	-	-	-
Non-GAAP G&A		$21,329	$21,006	$20,367	$22,615	$24,980	$29,916
% of revenue	20.7%	16.3%	12.6%	11.3%	9.7%	9.1%

Note: Historical results prior to 2018 based on ASC 605

32

GAAP Operating Income (Loss) to Non-GAAP Operating Income Reconciliation

				Three Months Ended			Six Months Ended
				June 30, 2020			June 30, 2019			June 30, 2020			June 30, 2019
Income (loss) from operations	$	(8,229)	$	85	$	(13,185)	$	(237)
Non-GAAP adjustments:
Stock-based compensation		16,791			10,436			30,585			19,122
Intangibles amortization		1,738			88			2,828			176
Legal settlement		-			420			-			420
Legal and indemnification fees related to settlement		-			64			-			356
Acquisition-related transaction costs and one-time		1,637			-
integration costs						1,966			-
COVID-19 relief bonus for employees			1,817			-			1,817			-
Non-GAAP operating income			$	13,754		$	11,093		$	24,011		$	19,837

33

GAAP to Non-GAAP Net Income (Loss) Reconciliation

Three Months Ended		Six Months Ended
June 30, 2020		June 30, 2019		June 30, 2020		June 30, 2019

GAAP net loss	$
Non-GAAP adjustments:
Stock-based compensation
Intangibles amortization
Amortization of discount and issuance costs on convertible senior notes
Legal settlement
Legal and indemnification fees related to settlement
Acquisition-related transaction costs and one-time integration costs
COVID-19 relief bonus for employees
Loss on early extinguishment of debt
Gain on sale of convertible note held for investment
Tax benefit of valuation allowance associated with an acquisition
Non-GAAP net income	$
GAAP net loss per share:
Basic and diluted	$
Non-GAAP net income per share:
Basic	$
Diluted	$
Shares used in computing GAAP net loss per share:
Basic and diluted
Shares used in computing non-GAAP net income per share:
Basic
Diluted

(16,052)	$	(1,860)	$	(23,489)	$	(3,784)
16,791		10,436			30,585				19,122
1,738		88			2,828				176
5,251		3,155			8,571				6,234
-		420			-				420
-		64			-				356
1,637		-			1,966				-
1,817		-			1,817				-
5,794		-			5,794				-
-		-			-				(217)
(2,910)		-			(2,910)				-
14,066	$	12,303		$	25,162			$	22,307
(0.25)	$	(0.03)	$	(0.38)	$	(0.06)
0.22	$	0.20	$	0.40	$	0.37
0.21
$	0.20		$	0.38	$	0.35
63,282		60,058			62,494				59,714
63,282		60,058			62,494				59,714
67,171		62,950			65,960				62,843

34

Summary of Stock-Based Compensation, Depreciation and Intangibles Amortization

															Three Months Ended
									June 30, 2020																		June 30, 2019
				Stock-Based											Intangibles					Stock-Based										Intangibles
			Compensation					Depreciation					Amortization				Compensation					Depreciation				Amortization
Cost of revenue	$	2,499	$	3,382		$	1,738			$	1,658		$	2,416		$	88
Research and development		3,684					497						-					1,907						450					-
Sales and marketing		5,265					2						-					2,749						1					-
General and administrative		5,343					624						-					4,122						406					-
Total		$	16,791				$	4,505					$	1,738						$	10,436					$	3,273				$	88
															Six Months Ended
									June 30, 2020																		June 30, 2019
				Stock-Based											Intangibles						Stock-Based										Intangibles
			Compensation					Depreciation						Amortization					Compensation						Depreciation					Amortization
Cost of revenue	$	4,488	$	6,232		$	2,828			$	2,887		$	4,694		$	176
Research and development		6,491					963						-					3,377						890					-
Sales and marketing		9,371					3						-					4,998						2					-
General and administrative		10,235					1,187						-					7,860						791					-
Total			$	30,585			$	8,385				$	2,828					$	19,122				$	6,377			$	176

35

GAAP to Non-GAAP Net Income (Loss) Reconciliation

Guidance

Three Months Ending			Year Ending
September 30, 2020		December 31, 2020
Low		High		Low			High

GAAP net loss	$
Non-GAAP adjustments:
Stock-based compensation
Intangibles amortization
Amortization of discount and issuance costs on convertible senior notes
Loss on early extinguishment of debt
Acquisition-related transaction costs and one-time integration costs
COVID-19 relief bonus for employees
Tax benefit of valuation allowance associated with an acquisition
Income tax expense effects (1)
Non-GAAP net income	$
GAAP net loss per share, basic and diluted	$
Non-GAAP net income per share:
Basic	$
Diluted	$
Shares used in computing GAAP net loss per share and non-GAAP net income
per share:
Basic
Diluted

(18,938) $

17,618

1,738

8,637

-

2,545

-

-

-

11,600 $

(0.29) $

0.18 $

0.17 $

64,900

69,100

(17,938) $

17,618

1,738

8,637

-

2,545

-

-

-

12,600 $

(0.28) $

0.19 $

0.18 $

64,900

69,100

(56,402)	$	(54,402)
66,191			66,191
6,232			6,232
25,975			25,975
5,794			5,794
6,003			6,003
1,817			1,817
(2,910)			(2,910)
-			-
52,700		$	54,700
(0.88)		$	(0.85)
0.82	$	0.85
0.77		$	0.80
64,200			64,200
68,100
		68,100

Note: Represents guidance disclosed on 8/3/20. Reader shall not construe presentation of this information after 8/3/20 as an update or reaffirmation of such guidance

1. Non-GAAPadjustments do not have an impact on our income tax provision due to past non-GAAP losses

36

Capital Expenditure and Free Cash Flow

					12 mo ended
$ in Thousands	Q1'19	Q2'19	Q3'19	Q4'19	12/31/19	Q1'20	Q2'20
Net cash provided by operating activities	$11,190	$6,788	$17,677	$15,566	$51,221	$10,394	$14,759
(Refer to cash flows from operating activities in cash flow statement)
Capital expenditure
Purchases of property and equipment	3,985	4,241	4,550	6,452	19,228	6,045	8,846
(Refer to cash flows from investing activities in cash flow statement)
Equipment obtained under capital lease	0	0	0	0	0	0	0
(Refer to non-cash investing and financing activities in cash flow statement)
Equipment purchased and unpaid at period-end
Beginning balance	1,583	1,875	1,602	862		2,890	2,280
Ending balance	1,875	1,602	862	2,890	2,890	2,280	2,838
(Refer to non-cash investing and financing activities in cash flow statement)
Change in equipment purchased and unpaid during period	292	(273)	(740)	2,028	1,307	(610)	558
Total capital expenditure	$4,277	$3,968	$3,810	$8,480	$20,535	$5,435	$9,404
Free cash flow	$7,205	$2,547	$13,127	$9,114	$31,993	$4,349	$5,913
(operating cash flow less capex paid in cash)

37