FIVE9, INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)

You should read the following discussion in conjunction with the condensed
consolidated financial statements and notes thereto included elsewhere in this
Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year
ended December 31, 2021.

Overview

We are a pioneer and leading provider of intelligent cloud software for contact
centers, facilitating more than nine billion call minutes between our more
than 2,500 clients and their customers per year. We believe we achieved this
leadership position through our expertise and technology, which has empowered us
to help organizations of all sizes transition from legacy on-premise contact
center systems to our cloud solution. Our solution, comprised of our Virtual
Contact Center, or VCC, cloud platform and applications, allows simultaneous
management and optimization of customer interactions across voice, chat, email,
web, social media and mobile channels, either directly or through our
application programming interfaces, or APIs. Our VCC cloud platform matches each
customer interaction with an appropriate agent resource and delivers relevant
customer data to the agent in real-time through integrations with adjacent
enterprise applications, such as customer relationship management, or CRM,
software, to optimize the customer experience and improve agent productivity.
Unlike legacy on-premise contact center systems, our solution requires minimal
up-front investment, can be rapidly deployed and adjusted depending on our
client's requirements.

Since founding our business in 2001, we have focused exclusively on delivering
cloud contact center software. We initially targeted smaller contact center
opportunities with our telesales team and, over time, invested in expanding the
breadth and depth of the functionality of our cloud platform to meet the
evolving requirements of our clients. In 2009, we made a strategic decision to
expand our market opportunity to include larger contact centers. This decision
drove further investments in research and development and the establishment of
our field sales team to meet the requirements of these larger contact centers.
We believe this shift has helped us diversify our client base, while
significantly enhancing our opportunity for future revenue growth. To complement
these efforts, we have also focused on building client awareness and driving
adoption of our solution through marketing activities, which include internet
advertising, digital marketing campaigns, social media, trade shows, industry
events, telemarketing and out of home campaigns.

We provide our solution through a SaaS business model with recurring
subscriptions. We offer a comprehensive suite of applications delivered on our
VCC cloud platform that are designed to enable our clients to manage and
optimize interactions across inbound and outbound contact centers. We primarily
generate revenue by selling subscriptions and related usage of our VCC cloud
platform. We charge our clients monthly subscription fees for access to our
solution, primarily based on the number of agent seats, as well as the specific
functionalities and applications our clients deploy. We define agent seats as
the maximum number of named agents allowed to concurrently access our solution.
Our clients typically have more named agents than agent seats, and multiple
named agents may use an agent seat, though not simultaneously. Substantially all
of our clients purchase both subscriptions and related telephony usage from us.
A small percentage of our clients subscribe to our platform but purchase
telephony usage directly from wholesale telecommunications service providers. We
do not sell telephony usage on a stand-alone basis to any client. The related
usage fees are based on the volume of minutes for inbound and outbound
interactions. We also offer bundled plans, generally for smaller deployments,
where the client is charged a single monthly fixed fee per agent seat that
includes both subscription and unlimited usage in the contiguous 48 states and,
in some cases, Canada. We offer monthly, annual and multiple-year contracts to
our clients, generally with 30 days' notice required for reductions in the
number of agent seats. Increases in the number of agent seats can be provisioned
almost immediately. Our clients, therefore, are able to adjust the number of
agent seats used to meet their changing contact center volume needs. Our larger
clients typically choose annual contracts, which generally include an
implementation and ramp period of several months. Fixed subscription fees,
including bundled plans, are generally billed monthly in advance, while related
usage fees are billed in arrears. For each of the three and six months ended
June 30, 2022, subscription and related usage fees accounted for 91% of our
revenue. For each of the three and six months ended June 30, 2021, subscription
and related usage fees accounted for 92% of our revenue. The remainder was
comprised of professional services revenue from the implementation and
optimization of our solution.
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Macroeconomic and other factors

We are subject to risks and exposures, including those caused by macroeconomic deterioration, RussiaUkraine conflict and the COVID-19 pandemic.

Macroeconomic factors include increased inflation, increased interest rates,
supply chain disruptions, decreased economic output and fluctuations in currency
exchange rates, all of which can cause client hesitancy and uncertainty. We
continuously monitor the direct and indirect impacts of these circumstances on
our business and financial results, as well as the overall global economy and
geopolitical landscape. The implications of macroeconomic events on our
business, results of operations and overall financial position, particularly in
the long term, remain uncertain.

In March 2022 we decided to close our Russia office and to establish a new
European development center in Porto, Portugal, in part due to the growing
uncertainty arising from the Russia-Ukraine conflict. During the three and six
months ended June 30, 2022, we incurred approximately $1.1 million and $3.9
million in costs related to the closure and relocation of our Russian
operations, of which $3.0 thousand and $0.4 million was recorded in cost of
revenue, $0.1 million and $2.7 million was recorded in research and development
expense, $0.8 million and $1.1 million was recorded in general and
administrative expense and $0.2 million and $(0.3) million was recorded in
interest income and other, respectively, in our condensed consolidated
statements of operations and comprehensive loss. We currently do not believe
that this decision will have a material effect on our business, results of
operations or financial condition.

The COVID-19 pandemic had a moderately positive impact on our financial results
due to the shift from brick-and-mortar to virtual. The severity and duration of
the COVID-19 pandemic, and its continuing impact on the U.S. and global economy
remains uncertain, but we believe that most of this benefit has now dissipated.

Key GAAP Operating Results

Our revenue increased to $189.4 million and $372.2 million for the three and six
months ended June 30, 2022 from $143.8 million and $281.7 million for the three
and six months ended June 30, 2021. Revenue growth was primarily attributable to
our larger clients, driven by an increase in our sales and marketing activities
and our improved brand awareness. For each of the three and six months ended
June 30, 2022 and 2021, no single client accounted for more than 10% of our
total revenue. As of June 30, 2022, we had over 2,500 clients across multiple
industries. Our clients' subscriptions generally range in size from fewer than
10 agent seats to approximately 7,200 agent seats. We had a net loss of $23.7
million and $57.8 million in the three and six months ended June 30, 2022,
compared to a net loss of $16.5 million and $28.9 million in the three and six
months ended June 30, 2021.

We have continued to make significant expenditures and investments, including in
sales and marketing, research and development and infrastructure. We primarily
evaluate the success of our business based on revenue growth and the efficiency
and effectiveness of our investments. The growth of our business and our future
success depend on many factors, including our ability to continue to expand our
base of larger clients, grow revenue from our existing clients, innovate and
expand internationally. While these areas represent significant opportunities
for us, they also pose risks and challenges, including the impact of the global
economic downturn, the Russia-Ukraine conflict and the COVID-19 pandemic, that
we must successfully address in order to sustain the growth of our business and
improve our operating results.

Key Non-GAAP Operational and Financial Performance Indicators

In addition to measures of financial performance presented in our condensed
consolidated financial statements, we monitor the key metrics set forth below to
help us evaluate growth trends, establish budgets, measure the effectiveness of
our sales and marketing efforts and assess operational efficiencies.

Dollar based annual retention rate

We believe that our Annual Dollar-Based Retention Rate provides insight into our
ability to retain and grow revenue from our clients, and is a measure of the
long-term value of our client relationships. Our Annual Dollar-Based Retention
Rate is calculated by dividing our Retained Net Revenue by our Retention Base
Net Revenue on a monthly basis, which we then average using the rates for the
trailing twelve months for the period presented. We define Retention Base Net
Revenue as recurring net revenue from all clients in the comparable prior year
period, and we define Retained Net Revenue as recurring net revenue from that
same group of clients in the current period. We define recurring net revenue as
net subscription and related usage revenue.
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The following table shows our annual retention rate in dollars based on net sales for the periods presented:

                                                      Twelve Months Ended
                                           June 30, 2022               June 30, 2021
Annual Dollar-Based Retention Rate             118%                        

123%

Our dollar retention rate declined year-over-year, primarily due to the initial profit we previously experienced in 2021 due to the COVID-19 pandemic.

Adjusted EBITDA

We monitor adjusted EBITDA, a non-GAAP financial measure, to analyze our
financial results and believe that it is useful to investors, as a supplement to
U.S. GAAP measures, in evaluating our ongoing operational performance and
enhancing an overall understanding of our past financial performance. We believe
that adjusted EBITDA helps illustrate underlying trends in our business that
could otherwise be masked by the effect of the income or expenses that we
exclude from adjusted EBITDA. Furthermore, we use this measure to establish
budgets and operational goals for managing our business and evaluating our
performance. We also believe that adjusted EBITDA provides an additional tool
for investors to use in comparing our recurring core business operating results
over multiple periods with other companies in our industry.

Adjusted EBITDA should not be considered in isolation from, or as a substitute
for, financial information prepared in accordance with U.S. GAAP, and our
calculation of adjusted EBITDA may differ from that of other companies in our
industry. We compensate for the inherent limitations associated with using
adjusted EBITDA through disclosure of these limitations, presentation of our
financial statements in accordance with U.S. GAAP and reconciliation of adjusted
EBITDA to the most directly comparable U.S. GAAP measure, net loss. We calculate
adjusted EBITDA as net loss before (1) depreciation and amortization,
(2) stock-based compensation, (3) interest expense, (4) interest (income) and
other, (5) acquisition-related transaction and one-time integration costs, (6)
contingent consideration expense, (7) exit costs related to the closure and
relocation of our Russian operations, (8) provision for (benefit from) income
taxes, and (9) other items that do not directly affect what we consider to be
our core operating performance.
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The following table provides a reconciliation of net loss and adjusted EBITDA for the periods presented (in thousands):

                                                       Three Months Ended                               Six Months Ended
                                              June 30, 2022           June 30, 2021           June 30, 2022           June 30, 2021
Net loss                                    $      (23,670)         $     

(16,530) ($57,790) ($28,862)
Non-GAAP adjustments: Amortization expense (1)

                   11,640                   9,651                  22,435                  18,414
Stock-based compensation (2)                        44,786                  24,901                  84,179                  45,809
Interest expense                                     1,857                   2,118                   3,727                   4,056

Interest (income) and other                           (280)                    353                  (1,125)                    178

Exit costs related to closure and
relocation of Russian operations                       214                       -                   3,441                       -
Acquisition-related transaction and
one-time integration costs                           1,714                     973                   3,352                   2,067

Contingent consideration expense                         -                   2,700                     260                   5,200
Refund for prior year overpayment of
USF fees                                            (3,511)                      -                  (3,511)                      -
Provision for (benefit from) income
taxes                                                  332                    (135)                  2,588                    (652)
Adjusted EBITDA                             $       33,082          $       24,031          $       57,556          $       46,210

(1) Depreciation expense included in our results of operations is as follows (in thousands):

                                                  Three Months Ended                               Six Months Ended
                                         June 30, 2022           June 30, 2021           June 30, 2022           June 30, 2021
Cost of revenue                        $        8,747          $        7,825          $       17,247          $       14,912
Research and development                          804                     729                   1,629                   1,325
Sales and marketing                                 1                       1                       2                       2
General and administrative                      2,088                   1,096                   3,557                   2,175
Total depreciation and
amortization                           $       11,640          $        

9,651 $22,435 $18,414


(2)See Note 7 to the condensed consolidated financial statements for stock-based
compensation expense included in our results of operations for the periods
presented.
(3)Exit costs related to the closure and relocation of our Russian operations
was $1.1 million and $3.9 million during the three and six months ended June 30,
2022, respectively. The $0.2 million and $3.4 million adjustments presented
above were net of $0.7 million and $0.8 million included in "Depreciation and
amortization" and $0.2 million and $(0.3) million included in "Interest (income)
and other."

Key elements of our operating results

Revenue

Our revenue consists of subscription and related usage as well as professional
services. We consider our subscription and related usage to be recurring
revenue. This recurring revenue includes fixed subscription fees for the
delivery and support of our VCC cloud platform, as well as related usage fees.
The related usage fees are generally based on the volume of minutes for inbound
and outbound client interactions. We also offer bundled plans, generally for
smaller deployments, where the client is charged a single monthly fixed fee per
agent seat that includes both subscription and unlimited usage in the contiguous
48 states and, in some cases, Canada. We offer monthly, annual and multiple-year
contracts for our clients, generally with 30 days' notice required for
reductions in the number of agent seats. Increases in the number of agent seats
can be provisioned almost immediately. Our clients, therefore, are able to
adjust the number of agent seats used to meet their changing contact center
volume needs. Our larger clients typically choose annual contracts, which
generally include an implementation and ramp period of several months.

Fixed subscription fees, including plans with bundled usage, are generally
billed monthly in advance, while variable usage fees are billed in arrears.
Fixed subscription fees are recognized on a straight-line basis over the
applicable term, which is predominantly the monthly contractual billing period.
Support activities include technical assistance for our solution and upgrades
and enhancements on a when and if available basis, which are not billed
separately. Variable subscription related usage fees for non-bundled plans are
billed in arrears based on client-specific per minute rate plans and are
recognized as actual usage occurs. We generally require advance deposits from
clients based on estimated usage. All fees, except usage deposits, are
non-refundable.
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In addition, we generate professional services revenue from assisting clients in
implementing our solution and optimizing use. These services include application
configuration, system integration and education and training services.
Professional services are primarily billed on a fixed-fee basis and are
typically performed by us directly. In limited cases, our clients choose to
perform these services themselves or engage their own third-party service
providers to perform such services. Professional services are recognized as the
services are performed using the proportional performance method, with
performance measured based on labor hours, provided all other criteria for
revenue recognition are met.

Revenue cost

Our cost of revenue consists primarily of personnel costs, including stock-based
compensation, fees that we pay to telecommunications providers for usage,
Universal Service Fund, or USF, contributions and other regulatory costs,
depreciation and related expenses of the servers and equipment, costs to build
out and maintain co-location data centers, costs of public cloud-based data
centers, allocated office and facility costs, amortization of acquired
technology and amortization of internal-use software costs. Cost of revenue can
fluctuate based on a number of factors, including the fees we pay to
telecommunications providers, which vary depending on our clients' usage of our
VCC cloud platform, the timing of capital expenditures and related depreciation
charges and changes in headcount. We expect to continue investing in
professional services, public cloud, cloud operations, client support and
network infrastructure to maintain high quality and availability of services,
which we believe will result in absolute dollar increases in cost of revenue but
percentage of revenue declines in the long-term through economies of scale.

Functionnary costs

We classify our operating expenses into research and development, sales and marketing, and general and administrative expenses.

Research and Development.  Our research and development expenses consist
primarily of salary and related expenses, including stock-based compensation,
for personnel related to the development of improvements and expanded features
for our services, as well as quality assurance, testing, product management and
allocated overhead. We expense research and development expenses as they are
incurred except for internal use software development costs that qualify for
capitalization. We believe that continued investment in our solution is
important for our future growth, and we expect our research and development
expenses to increase in absolute dollars and fluctuate as a percentage of
revenue in the near and longer term.

Sales and Marketing.   Sales and marketing expenses consist primarily of
salaries and related expenses, including stock-based compensation, for personnel
in sales and marketing, sales commissions, as well as advertising, marketing,
corporate communications, travel costs and allocated overhead. We believe it is
important to continue investing in sales and marketing to continue to generate
revenue growth, and we expect sales and marketing expenses to increase in
absolute dollars and fluctuate as a percentage of revenue in the near and longer
term as we continue to support our growth initiatives.

General and Administrative.  General and administrative expenses consist
primarily of salary and related expenses, including stock-based compensation,
for management, finance and accounting, legal, information systems and human
resources personnel, professional fees, compliance costs, other corporate
expenses and allocated overhead. We expect that general and administrative
expenses will fluctuate in absolute dollars and as a percentage of revenue in
the near term, but to increase in absolute dollars and decline as a percentage
of revenue in the longer term.

Results of operations for the three and six months ended June 30, 2022 and 2021

Based on the condensed consolidated statements of operations and comprehensive
loss set forth in this Quarterly Report on Form 10-Q, the following table sets
forth our operating results as a percentage of revenue for
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the periods indicated:

                                                     Three Months Ended                             Six Months Ended
                                            June 30, 2022          June 30, 2021          June 30, 2022          June 30, 2021
Revenue                                              100  %                 100  %                 100  %                 100  %
Cost of revenue                                       47  %                  45  %                  48  %                  44  %
Gross profit                                          53  %                  55  %                  52  %                  56  %
Operating expenses:
Research and development                              18  %                  17  %                  19  %                  17  %
Sales and marketing                                   34  %                  32  %                  34  %                  32  %
General and administrative                            12  %                  16  %                  13  %                  16  %
Total operating expenses                              64  %                  65  %                  66  %                  65  %
Loss from operations                                 (11) %                 (10) %                 (14) %                  (9) %
Other (expense) income, net:
Interest expense                                      (1) %                  (1) %                  (1) %                  (1) %

Interest income and other                              -  %                  (1) %                   -  %                   -  %
Total other (expense) income, net                     (1) %                  (2) %                  (1) %                  (1) %
Loss before income taxes                             (12) %                 (12) %                 (15) %                 (10) %
Provision for (benefit from) income
taxes                                                  -  %                  (1) %                   1  %                   -  %
Net loss                                             (12) %                 (11) %                 (16) %                 (10) %


Revenue
                                                    Three Months Ended                                                                    Six Months Ended
                                                                           $                 %                                                                  $                 %
                        June 30, 2022           June 30, 2021           Change             Change            June 30, 2022           June 30, 2021           Change             Change

                                                                                      (in thousands, except percentages)
Revenue               $      189,382          $      143,782          $ 45,600                 32  %       $      372,159          $      281,664          $ 90,495                 32  %


The increase in revenue for the three and six months ended June 30, 2022
compared to the same periods of 2021 was primarily attributable to our larger
clients, driven by an increase in our sales and marketing activities and our
improved brand awareness.

Cost of Revenue
                                                       Three Months Ended                                                                  Six Months Ended
                                                                             $                 %                                                                  $                 %
                           June 30, 2022          June 30, 2021           Change             Change            June 30, 2022           June 30, 2021           Change            Change

                                                                                         (in thousands, except percentages)
Cost of revenue           $      88,229          $      64,395          $ 23,834                 37  %       $      177,096          $      124,198          $ 52,898                43  %
% of Revenue                         47  %                  45  %                                                   48%                     44%


The increase in cost of revenue for the three and six months ended June 30, 2022
compared to the same periods of 2021 was primarily due to a $11.4 million and
$24.1 million increase in personnel costs, including stock-based compensation
costs, driven mainly by increased headcount and higher salaries, a $8.4 million
and $15.1 million increase in depreciation, data center and public cloud costs
to support our growing capacity needs, a $4.4 million and $9.8 million increase
in third-party hosted software costs driven by increased client activities, a
$1.4 million and $3.8 million increase in usage and carrier costs due to
increased volume and higher costs, a $1.3 million and $2.4 million increase in
consulting costs for global expansion and a $1.2 million and $2.5 million
increase in staff augmentation costs related to implementation of our solutions,
partially offset by a $5.1 million and $6.4 million decrease in USF
contributions and other federal telecommunication service fees due primarily to
a change in methodology, which resulted in a $3.5 million refund for 2020 and a
decrease in the USF contribution rate, offset in part by increased client usage.
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Gross Profit
                                                      Three Months Ended                                                                   Six Months Ended
                                                                            $                 %                                                                    $                 %
                          June 30, 2022          June 30, 2021           Change             Change            June 30, 2022            June 30, 2021             Change           Change

                                                                                        (in thousands, except percentages)
Gross profit             $     101,153          $      79,387          $ 21,766                 27  %            $195,063                 $157,466              $37,597             24%
% of Revenue                        53  %                  55  %                                                   52%                      56%


The increase in gross profit for the three and six months ended June 30, 2022
compared to the same periods of 2021 was primarily due to increases in
subscription and related revenues. The decrease in gross margin for the three
and six months ended June 30, 2022 compared to the same periods of 2021 was
primarily due to increased cost of revenue as described above, which grew
slightly more than our growth in revenue. We expect gross margin to increase in
the long term despite continued investments in professional services, public
cloud, cloud operations, client support and network infrastructure.

Operating Expenses

Research and Development
                                                              Three Months Ended                                                                  Six Months Ended
                                                                                    $                 %                                                                    $                %
                                  June 30, 2022          June 30, 2021           Change             Change            June 30, 2022            June 30, 2021            Change           Change

                                                                                                (in thousands, except percentages)

Research and development $34,992 $24,648

   $ 10,344                 42  %            $70,816                  $46,769               $24,047            51%
% of Revenue                                18  %                  17  %                                                   19%                      17%


The increase in research and development expenses for the three and six months
ended June 30, 2022 compared to the same periods of 2021 was primarily due to a
$9.7 million and $22.4 million increase in personnel-related costs including
stock-based compensation costs, driven mainly by increased headcount and higher
salaries, and a $1.0 million and $1.5 million increase in office, facilities and
related costs.

Sales and Marketing
                                                            Three Months Ended                                                                   Six Months Ended
                                                                                  $                 %                                                                    $                 %
                                June 30, 2022          June 30, 2021           Change             Change            June 30, 2022            June 30, 2021             Change           Change

                                                                                              (in thousands, except percentages)
Sales and marketing            $      64,098          $      46,024          $ 18,074                 39  %            $128,709                 $90,823               $37,886             42%
% of Revenue                              34  %                  32  %                                                   34%                      32%


The increase in sales and marketing expenses for the three and six months ended
June 30, 2022 compared to the same periods of 2021 was primarily due to a $10.2
million and $22.9 million increase in personnel-related costs, including
stock-based compensation costs driven mainly by increased headcount and higher
salaries, a $3.9 million and $7.3 million increase in sales commission expenses
driven by the growth in sales and bookings of our solution, a $1.0 million and
$2.1 million increase in travel costs and a $0.7 million and $1.2 million
increase in office, facilities and related costs. The remaining net increase in
sales and marketing expenses was primarily due to the execution of our growth
strategy to acquire new clients, increase the number of agent seats within our
existing client base, and increased advertising and other marketing expenses to
increase our brand awareness.
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General and Administrative
                                                                Three Months Ended                                                                 Six Months Ended
                                                                                      $                %                                                                   $                %
                                     June 30, 2022          June 30, 2021          Change            Change            June 30, 2022            June 30, 2021            Change          Change

                                                                                                 (in thousands, except percentages)
General and administrative          $      23,824          $      22,909          $  915                  4  %            $48,138                  $45,154               $2,984            7%
% of Revenue                                   12  %                  16  %                                                 13%                      16%


The increase in general and administrative expenses for the three and six months
ended June 30, 2022 compared to the same periods of 2021 was primarily due to a
$3.5 million and $6.4 million increase in personnel costs including stock-based
compensation costs, driven mainly by increased headcount and higher salaries, a
$0.1 million and $1.7 million increase in legal and other professional service
costs, partially offset by a $2.7 million and $4.9 million decrease in
contingent consideration expense for the Inference acquisition.

Other (Expense) Income, Net
                                                      Three Months Ended                                                                Six Months Ended
                                                                            $                %                                                               $                 %
                           June 30, 2022          June 30, 2021          Change            Change           June 30, 2022          June 30, 2021           Change           Change

                                                                            

(in thousands, except percentages) Interest expense $(1,857) ($2,118) $261

                (12) %       $      (3,727)         $      (4,056)         $   329                (8) %

Interest income and
other                               280                   (353)            633               (179) %               1,125                   (178)           1,303              (732) %
Total other
(expense) income,
net                       $      (1,577)         $      (2,471)         $  894                (36) %       $      (2,602)         $      (4,234)         $ 1,632               (39) %
% of Revenue                         (1) %                  (2) %                                                     (1) %                  (1) %


The decrease in interest expense for the three and six months ended June 30,
2022 compared to the same periods of 2021 was primarily due to the reduction in
the aggregate outstanding principal amount of our 2023 convertible senior notes.
See Note 6 to the consolidated financial statements for further details.

The increase in interest income and other for the three and six months ended
June 30, 2022 compared to the same periods of 2021 was primarily due to higher
interest income on our marketable investments and an increase in foreign
currency remeasurement gains.

Cash and capital resources

To date, we have financed our operations primarily through sales of our
solution, net proceeds from our equity and debt financings, including the
issuance of our 2025 convertible senior notes in May and June 2020 and of our
2023 convertible senior notes in May 2018, and lease facilities. As of June 30,
2022, we had $513.4 million in working capital, which included $101.3 million in
cash and cash equivalents and $397.1 million in short-term marketable
investments, and excluded long-term marketable investments of $60.4 million. We
believe our existing cash and cash equivalents will be sufficient to meet our
working capital and capital expenditure needs for at least the next 12 months.

We plan to continue to finance our operations in the future primarily through
sales of our solution, net proceeds from equity and debt financings, and lease
facilities. Our future capital requirements will depend on many factors
including our growth rate, continuing market acceptance of our solution, the
strength of the global economy, client retention, our ability to gain new
clients, the timing and extent of spending to support research and development
efforts, the outcome of any pending or future litigation or other claims by
third parties or governmental entities, the expansion of sales and marketing
activities and personnel, the introduction of new and enhanced offerings,
expenses incurred in closing our Russia operations and opening a new office in
Europe and any operational disruptions due to this transition, and the impact of
the Russia-Ukraine conflict and the COVID-19 pandemic on these or other factors,
the global economy, or our business. We may also acquire or invest in
complementary businesses, technologies and intellectual property rights, which
may increase our use of cash and future capital requirements, both to pay
acquisition costs and to support our combined operations. We may raise
additional capital through equity or engage in debt financings at any time to
fund these or other requirements.
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However, we may not be able to raise additional capital through equity or debt
financings when needed on terms acceptable to us or at all, depending on our
financial performance, economic and market conditions, the trading price of our
common stock, and other factors, including the length and severity of the
current economic downturn and fluctuations in the financial markets, including
due to the Russia-Ukraine conflict and the ongoing COVID-19 pandemic. If we are
unable to raise additional capital as needed, our business, operating results
and financial condition could be harmed. In addition, if our operating
performance during the next twelve months is below our expectations, our
liquidity and ability to operate our business also could be harmed.

If we raise additional funds by issuing equity or equity-linked securities, the
ownership of our existing stockholders would be diluted. If we raise additional
funds through the incurrence of additional indebtedness, we will be subject to
increased debt service obligations and could also be subject to restrictive
covenants and other operating restrictions that could negatively impact our
ability to operate our business.

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According to the latest report from the IMARC group, entitled “Office Furniture Market: Global Industry …