Five9 Reports Third Quarter Revenue Growth of 34% to a Record $112.1 Million

35% Growth in LTM Enterprise Subscription Revenue

Nineteenth Consecutive Quarter of Positive Operating Cash Flow at $22.8 Million

Raised 2020 Guidance for both Revenue and Bottom Line

SAN RAMON, Calif.--(BUSINESS WIRE)--Five9, Inc. (NASDAQ:FIVN), a leading provider of cloud contact center software, today reported results for the third quarter ended September 30, 2020.


Third Quarter 2020 Financial Results

  • Revenue for the third quarter of 2020 increased 34% to a record $112.1 million, compared to $83.8 million for the third quarter of 2019.
  • GAAP gross margin was 58.5% for the third quarter of 2020, compared to 58.8% for the third quarter of 2019.
  • Adjusted gross margin was 65.4% for the third quarter of 2020, compared to 64.0% for the third quarter of 2019.
  • GAAP net loss for the third quarter of 2020 was $(11.4) million, or $(0.17) per basic share, compared to GAAP net loss of $(1.6) million, or $(0.03) per basic share, for the third quarter of 2019.
  • Non-GAAP net income for the third quarter of 2020 was $18.5 million, or $0.27 per diluted share, compared to non-GAAP net income of $12.8 million, or $0.20 per diluted share, for the third quarter of 2019.
  • Adjusted EBITDA for the third quarter of 2020 was $24.1 million, or 21.5% of revenue, compared to $15.0 million, or 18.0% of revenue, for the third quarter of 2019.
  • GAAP operating cash flow for the third quarter of 2020 was $22.8 million, compared to GAAP operating cash flow of $17.7 million for the third quarter of 2019.

"We delivered outstanding third quarter results with revenue of $112.1 million, growing 34% year-over-year and 12% sequentially, both all-time highs for us as a public company, and Adjusted EBITDA margin was 21.5%, also a third quarter record. Positive industry trends continue to accelerate and help drive our performance. The contact center is the new front door for many businesses. We believe the premise to cloud transition and digital transformation trends will accelerate, and demand for AI driven automation will increase, placing Five9 at the forefront of a massive opportunity. We continue to execute on our go-to-market initiatives, which balance the strength of our direct salesforce with a diverse group of channel partners. Additionally, we are receiving very positive feedback on the enhanced product capabilities we have delivered over the last quarter. Finally, today we announced the execution of a definitive agreement to acquire Inference Solutions Inc. ("Inference"), a leader in the emerging Intelligent Virtual Agent market. Leveraging virtual agents to meet increasing customer interactions is rapidly becoming a requirement of the modern contact center. We are excited to build upon this acquisition and believe we are well positioned for continued growth.”

- Rowan Trollope, CEO, Five9

Business Outlook

Five9 provides guidance based on current market conditions and expectations. The Company emphasizes that the guidance is subject to various important cautionary factors referenced in the section entitled "Forward-Looking Statements" below, including risks and uncertainties associated with the COVID-19 pandemic.

  • For the full year 2020, Five9 expects to report:
    • Revenue in the range of $421.5 to $422.5 million, higher than the guidance range of $399.0 to $401.0 million that was previously provided on August 3, 2020.
    • GAAP net loss in the range of $(49.4) to $(48.4) million, or $(0.76) to $(0.75) per basic share, improved from the guidance range of $(56.4) to $(54.4) million, or $(0.88) to $(0.85) per basic share, that was previously provided on August 3, 2020.
    • Non-GAAP net income in the range of $59.7 to $60.7 million, or $0.87 to $0.88 per diluted share, higher than the guidance range of $52.7 to $54.7 million, or $0.77 to $0.80 per diluted share, that was previously provided on August 3, 2020.
  • For the fourth quarter of 2020, Five9 expects to report:
    • Revenue in the range of $114.5 to $115.5 million.
    • GAAP net loss in the range of $(14.5) to $(13.5) million, or $(0.21) to $(0.20) per basic share.
    • Non-GAAP net income in the range of $16.0 to $17.0 million, or $0.22 to $0.24 per diluted share.

Conference Call Details

Five9 will discuss its third quarter 2020 results today, October 29, 2020, via teleconference at 4:30 p.m. Eastern Time. To access the call (ID 1480240), please dial: 800-437-2398 or 720-452-9102. An audio replay of the call will be available through November 12, 2020 by dialing 888-203-1112 or 719-457-0820 and entering access code 1480240. A copy of this press release will be furnished to the Securities and Exchange Commission on a Current Report on Form 8-K and will be posted to our website, prior to the conference call.

A webcast of the call will be available on the Investor Relations section of the Company’s web-site at http://investors.five9.com/.

Non-GAAP Financial Measures

In addition to disclosing financial measures prepared in accordance with U.S. generally accepted accounting principles (GAAP), this press release and the accompanying tables contain certain non-GAAP financial measures. We calculate adjusted gross profit and adjusted gross margin by adding back the following items to gross profit: depreciation, intangibles amortization, stock-based compensation and COVID-19 relief bonus for employees. We calculate adjusted EBITDA by adding back or removing the following items to or from GAAP net loss: depreciation and amortization, stock-based compensation, interest expense, interest (income) and other, acquisition-related transaction costs and one-time integration costs, non-recurring litigation settlement costs and related indemnification fees, COVID-19 relief bonus for employees and provision for (benefit from) income taxes. We calculate non-GAAP operating income as GAAP operating income (loss) excluding stock-based compensation, intangibles amortization, acquisition-related transaction costs and one-time integration costs, non-recurring litigation settlement costs and related indemnification fees, and COVID-19 relief bonus for employees. We calculate non-GAAP net income as GAAP net loss excluding stock-based compensation, intangibles amortization, amortization of discount and issuance costs on convertible senior notes, acquisition-related transaction costs and one-time integration costs, non-recurring litigation settlement costs and related indemnification fees, gain on sale of convertible note held for investment, COVID-19 relief bonus for employees, loss on early extinguishment of debt, and tax benefit of valuation allowance associated with an acquisition. Non-GAAP financial measures do not have any standardized meaning and are therefore unlikely to be comparable to similarly titled measures presented by other companies. Five9 considers these non-GAAP financial measures to be important because they provide useful measures of the operating performance of the Company, exclusive of factors that do not directly affect what we consider to be our core operating performance, as well as unusual events. The Company’s management uses these measures to (i) illustrate underlying trends in the Company’s business that could otherwise be masked by the effect of income or expenses that are excluded from non-GAAP measures, and (ii) establish budgets and operational goals for managing the Company’s business and evaluating its performance. In addition, investors often use similar measures to evaluate the operating performance of a company. Non-GAAP financial measures are presented only as supplemental information for purposes of understanding the Company’s operating results. 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 set forth herein and attached to this release.

Forward-Looking Statements

This news release contains certain forward-looking statements, including the statements in the quote from our Chief Executive Officer, including statements regarding Five9’s expectations for market acceleration from on premise contact centers to the cloud, and digital transformation, and drivers thereof, Five9’s expectations regarding the acceleration of growth in demand for AI-driven automation, benefits of its go-to-market strategy, the benefits being delivered by Five9's new product capabilities, Five9’s growth expectations, the potential closing of the Inference acquisition, and the fourth quarter and full year 2020 financial projections set forth under the caption “Business Outlook,” 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) the effects of the COVID-19 pandemic have materially affected how we, our clients and business partners are operating, and the duration and extent to which this will impact our future results of operations and overall financial performance remains uncertain; (ii) adverse economic conditions may harm our business; (iii) our quarterly and annual results may fluctuate significantly, including as a result of the timing and success of new product and feature introductions by us, may not fully reflect the underlying performance of our business and may result in decreases in the price of our common stock; (iv) if we are unable to attract new clients or sell additional services and functionality to our existing clients, our revenue and revenue growth will be harmed; (v) our recent rapid growth may not be indicative of our future growth, and even if we continue to grow rapidly, we may fail to manage our growth effectively; (vi) failure to adequately retain and expand our sales force will impede our growth; (vii) if we fail to manage our technical operations infrastructure, our existing clients may experience service outages, our new clients may experience delays in the deployment of our solution and we could be subject to, among other things, claims for credits or damages; (viii) our growth depends in part on the success of our strategic relationships with third parties and our failure to successfully maintain, grow and manage these relationships could harm our business; (ix) we have established, and are continuing to increase, our network of master agents and resellers to sell our solution; our failure to effectively develop, manage, and maintain this network could materially harm our revenues; (x) security breaches and improper access to or disclosure of our data or our clients’ data, their customers’ data, or other cyber attacks on our systems, could result in litigation and regulatory risk, harm our reputation and our business; (xi) the markets in which we participate involve numerous competitors and are highly competitive, and if we do not compete effectively, our operating results could be harmed; (xii) if our existing clients terminate their subscriptions or reduce their subscriptions and related usage, our revenues and gross margins will be harmed and we will be required to spend more money to grow our client base; (xiii) we sell our solution to larger organizations that require longer sales and implementation cycles and often demand more configuration and integration services or customized features and functions that we may not offer, any of which could delay or prevent these sales and harm our growth rates, business and operating results; (xiv) because a significant percentage of our revenue is derived from existing clients, downturns or upturns in new sales will not be immediately reflected in our operating results and may be difficult to discern; (xv) we rely on third-party telecommunications and internet service providers to provide our clients and their customers with telecommunication services and connectivity to our cloud contact center software and any failure by these service providers to provide reliable services could cause us to lose clients and subject us to claims for credits or damages, among other things; (xvi) we have a history of losses and we may be unable to achieve or sustain profitability; (xvii) the contact center software solutions market is subject to rapid technological change, and we must develop and sell incremental and new products in order to maintain and grow our business; (xviii) we may not be able to secure additional financing on favorable terms, or at all, to meet our future capital needs; (xix) we may acquire other companies or technologies, such as Inference, or be the target of strategic transactions, which could divert our management’s attention, result in additional dilution to our stockholders and otherwise disrupt our operations and harm our operating results; (xx) failure to comply with laws and regulations could harm our business and our reputation; (xxi) we may not have sufficient cash to service our convertible senior notes and repay such notes, if required, and other risks attendant to our convertible senior notes and increased debt levels; (xxii) our acquisition of Inference is subject to various conditions to closing that may not be satisfied, and the amount of consideration to be paid for Inference is dependent on various purchase price adjustments, as well as whether or not certain earn-out metrics are satisfied; and (xxiii) 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 and quarterly reports on Form 10-Q. 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.

About Five9

Five9 is a leading provider of cloud contact center software for the intelligent contact center space, bringing the power of cloud innovation to customers and facilitating more than six billion call minutes annually. Five9 provides end-to-end solutions with omnichannel routing, analytics, WFO and AI to increase agent productivity and deliver tangible business results. The Five9 Genius platform is reliable, secure, compliant and scalable; designed to create exceptional personalized customer experiences. For more information, visit www.five9.com.

FIVE9, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

 

 

September 30, 2020

 

December 31, 2019

ASSETS

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

301,767

 

 

$

77,976

 

Marketable investments

 

479,141

 

 

241,973

 

Accounts receivable, net

 

42,542

 

 

37,655

 

Prepaid expenses and other current assets

 

15,908

 

 

10,656

 

Deferred contract acquisition costs

 

17,932

 

 

13,014

 

Total current assets

 

857,290

 

 

381,274

 

Property and equipment, net

 

41,676

 

 

33,190

 

Operating lease right-of-use assets

 

8,669

 

 

8,746

 

Intangible assets, net

 

23,867

 

 

15,533

 

Goodwill

 

34,444

 

 

11,798

 

Other assets

 

3,258

 

 

1,184

 

Deferred contract acquisition costs — less current portion

 

44,083

 

 

30,655

 

Total assets

 

$

1,013,287

 

 

$

482,380

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

$

12,829

 

 

$

10,156

 

Accrued and other current liabilities

 

40,814

 

 

18,385

 

Operating lease liabilities

 

4,307

 

 

5,064

 

Accrued federal fees

 

2,562

 

 

2,303

 

Sales tax liabilities

 

1,629

 

 

1,885

 

Finance lease liabilities

 

1,299

 

 

3,518

 

Deferred revenue

 

28,527

 

 

24,681

 

Total current liabilities

 

91,967

 

 

65,992

 

Convertible senior notes

 

646,592

 

 

209,604

 

Sales tax liabilities — less current portion

 

851

 

 

838

 

Operating lease liabilities — less current portion

 

4,679

 

 

4,329

 

Finance lease liabilities — less current portion

 

 

 

809

 

Other long-term liabilities

 

6,809

 

 

4,350

 

Total liabilities

 

750,898

 

 

285,922

 

Stockholders’ equity:

 

 

 

 

Common stock

 

66

 

 

61

 

Additional paid-in capital

 

452,531

 

 

351,870

 

Accumulated other comprehensive income

 

761

 

 

576

 

Accumulated deficit

 

(190,969

)

 

(156,049

)

Total stockholders’ equity

 

262,389

 

 

196,458

 

Total liabilities and stockholders’ equity

 

$

1,013,287

 

 

$

482,380

 

 

 

 

 

 

FIVE9, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30, 2020

 

September 30, 2019

 

September 30, 2020

 

September 30, 2019

 

 

 

 

 

 

 

 

 

Revenue

 

$

112,143

 

 

$

83,769

 

 

$

307,023

 

 

$

235,743

 

Cost of revenue

 

46,561

 

 

34,472

 

 

129,051

 

 

96,571

 

Gross profit

 

65,582

 

 

49,297

 

 

177,972

 

 

139,172

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development

 

17,674

 

 

11,665

 

 

50,071

 

 

33,022

 

Sales and marketing

 

32,969

 

 

25,014

 

 

95,360

 

 

69,965

 

General and administrative

 

16,724

 

 

12,146

 

 

47,511

 

 

35,950

 

Total operating expenses

 

67,367

 

 

48,825

 

 

192,942

 

 

138,937

 

Income (loss) from operations

 

(1,785

)

 

472

 

 

(14,970

)

 

235

 

Other income (expense), net:

 

 

 

 

 

 

 

 

Interest expense

 

(9,649

)

 

(3,486

)

 

(18,867

)

 

(10,288

)

Interest income and other

 

349

 

 

1,460

 

 

(3,544

)

 

4,695

 

Total other income (expense), net

 

(9,300

)

 

(2,026

)

 

(22,411

)

 

(5,593

)

Loss before income taxes

 

(11,085

)

 

(1,554

)

 

(37,381

)

 

(5,358

)

Provision for (benefit from) income taxes

 

346

 

 

50

 

 

(2,461

)

 

30

 

Net loss

 

$

(11,431

)

 

$

(1,604

)

 

$

(34,920

)

 

$

(5,388

)

Net loss per share:

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(0.17

)

 

$

(0.03

)

 

$

(0.55

)

 

$

(0.09

)

Shares used in computing net loss per share:

 

 

 

 

 

 

 

 

Basic and diluted

 

65,460

 

 

60,781

 

 

63,490

 

 

60,074

 

 

 

 

 

 

 

 

 

 

FIVE9, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

Nine Months Ended

 

September 30, 2020

September 30, 2019

Cash flows from operating activities:

 

 

Net loss

$

(34,920

)

$

(5,388

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

 

Depreciation and amortization

17,750

 

10,050

 

Amortization of operating lease right-of-use assets

4,227

 

3,420

 

Amortization of premium on marketable investments

1,819

 

(1,036

)

Provision for doubtful accounts

578

 

78

 

Stock-based compensation

47,871

 

30,197

 

Loss on early extinguishment of debt

6,077

 

 

Gain on sale of convertible note held for investment

 

(217

)

Amortization of discount and issuance costs on convertible senior notes

17,204

 

9,484

 

Tax benefit of valuation allowance associated with an acquisition

(2,910

)

 

Others

73

 

2

 

Changes in operating assets and liabilities:

 

 

 

 

Accounts receivable

(5,306

)

(6,677

)

Prepaid expenses and other current assets

(5,445

)

(3,172

)

Deferred contract acquisition costs

(18,345

)

(9,035

)

Other assets

(2,074

)

(264

)

Accounts payable

2,667

 

100

 

Accrued and other current liabilities

13,528

 

3,522

 

Accrued federal fees and sales tax liability

16

 

233

 

Deferred revenue

5,246

 

4,391

 

Other liabilities

(66

)

(33

)

Net cash provided by operating activities

47,990

 

35,655

 

Cash flows from investing activities:

 

 

 

 

Purchases of marketable investments

(507,046

)

(274,401

)

Proceeds from maturities of marketable investments

268,207

 

285,281

 

Purchases of property and equipment

(20,412

)

(12,776

)

Cash paid to acquire Virtual Observer

(28,313

)

 

Cash paid to acquire substantially all of the assets of Whendu LLC

(100

)

 

Proceeds from sale of convertible note held for investment

 

217

 

Net cash used in investing activities

(287,664

)

(1,679

)

Cash flows from financing activities:

 

 

 

 

Proceeds from issuance of 2025 convertible senior notes, net of issuance costs

728,812

 

 

Payments for capped call transactions related to the 2025 convertible senior notes

(90,448

)

 

Repurchase of a portion of 2023 convertible senior notes, net of costs

(186,465

)

 

Proceeds from exercise of common stock options

8,928

 

6,097

 

Proceeds from sale of common stock under ESPP

5,666

 

3,996

 

Payments of finance leases

(3,028

)

(5,408

)

Net cash provided by financing activities

463,465

 

4,685

 

Net increase in cash and cash equivalents

223,791

 

38,661

 

Cash and cash equivalents:

 

 

 

 

 

 

Beginning of period

77,976

 

81,912

 

End of period

$

301,767

 

$

120,573

 

FIVE9, INC.

RECONCILIATION OF GAAP GROSS PROFIT TO ADJUSTED GROSS PROFIT

(In thousands, except percentages)

(Unaudited)

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30, 2020

 

September 30, 2019

 

September 30, 2020

 

September 30, 2019

 

 

 

 

 

 

 

 

 

GAAP gross profit

 

$

65,582

 

 

$

49,297

 

 

$

177,972

 

 

$

139,172

 

GAAP gross margin

 

58.5

%

 

58.8

%

 

58.0

%

 

59.0

%

Non-GAAP adjustments:

 

 

 

 

 

 

 

 

Depreciation

 

3,433

 

 

2,514

 

 

9,665

 

 

7,208

 

Intangibles amortization

 

1,738

 

 

88

 

 

4,566

 

 

264

 

Stock-based compensation

 

2,603

 

 

1,702

 

 

7,091

 

 

4,589

 

COVID-19 relief bonus for employees

 

 

 

 

 

618

 

 

 

Adjusted gross profit

 

$

73,356

 

 

$

53,601

 

 

$

199,912

 

 

$

151,233

 

Adjusted gross margin

 

65.4

%

 

64.0

%

 

65.1

%

 

64.2

%

FIVE9, INC.

RECONCILIATION OF GAAP NET LOSS TO ADJUSTED EBITDA

(In thousands, except percentages)

(Unaudited)

 

Three Months Ended

Nine Months Ended

 

September 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019

 

 

 

 

 

GAAP net loss

$

(11,431

)

$

(1,604

)

$

(34,920

)

$

(5,388

)

Non-GAAP adjustments:

 

 

 

 

Depreciation and amortization

6,537

 

3,497

 

17,750

 

10,050

 

Stock-based compensation

17,286

 

11,075

 

47,871

 

30,197

 

Interest expense

9,649

 

3,486

 

18,867

 

10,288

 

Interest income and other

(349

)

(1,460

)

3,544

 

(4,695

)

Legal settlement

 

 

 

420

 

Legal and indemnification fees related to settlement

 

 

 

356

 

Acquisition-related transaction costs and one-time integration costs

2,030

 

 

3,996

 

 

COVID-19 relief bonus for employees

 

 

1,817

 

 

Provision for (benefit from) income taxes

346

 

50

 

(2,461

)

30

 

Adjusted EBITDA

$

24,068

 

$

15,044

 

$

56,464

 

$

41,258

 

Adjusted EBITDA as % of revenue

21.5

%

18.0

%

18.4

%

17.5

%

FIVE9, INC.

RECONCILIATION OF GAAP OPERATING INCOME (LOSS) TO NON-GAAP OPERATING INCOME

(In thousands)

(Unaudited)

 

Three Months Ended

Nine Months Ended

 

September 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019

 

 

 

 

 

Income (loss) from operations

$

(1,785

)

$

472

$

(14,970

)

$

235

Non-GAAP adjustments:

 

 

 

 

Stock-based compensation

17,286

 

11,075

47,871

 

30,197

Intangibles amortization

1,738

 

88

4,566

 

264

Legal settlement

 

 

420

Legal and indemnification fees related to settlement

 

 

356

Acquisition-related transaction costs and one-time integration costs

2,030

 

3,996

 

COVID-19 relief bonus for employees

 

1,817

 

Non-GAAP operating income

$

19,269

 

$

11,635

$

43,280

 

$

31,472

FIVE9, INC.

RECONCILIATION OF GAAP NET LOSS TO NON-GAAP NET INCOME

(In thousands, except per share data)

(Unaudited)

 

Three Months Ended

Nine Months Ended

 

September 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019

 

 

 

 

 

GAAP net loss

$

(11,431

)

$

(1,604

)

$

(34,920

)

$

(5,388

)

Non-GAAP adjustments:

 

 

 

 

Stock-based compensation

17,286

 

11,075

 

47,871

 

30,197

 

Intangibles amortization

1,738

 

88

 

4,566

 

264

 

Amortization of discount and issuance costs on convertible senior notes

8,633

 

3,250

 

17,204

 

9,484

 

Legal settlement

 

 

 

420

 

Legal and indemnification fees related to settlement

 

 

 

356

 

Acquisition-related transaction costs and one-time integration costs

2,030

 

 

3,996

 

 

COVID-19 relief bonus for employees

 

 

1,817

 

 

Loss on early extinguishment of debt

283

 

 

6,077

 

 

Gain on sale of convertible note held for investment

 

 

 

(217

)

Tax benefit of valuation allowance associated with an acquisition

 

 

(2,910

)

 

Non-GAAP net income

$

18,539

 

$

12,809

 

$

43,701

 

$

35,116

 

GAAP net loss per share:

 

 

 

 

Basic and diluted

$

(0.17

)

$

(0.03

)

$

(0.55

)

$

(0.09

)

Non-GAAP net income per share:

 

 

 

 

Basic

$

0.28

 

$

0.21

 

$

0.69

 

$

0.58

 

Diluted

$

0.27

 

$

0.20

 

$

0.65

 

$

0.56

 

Shares used in computing GAAP net loss per share:

 

 

 

 

Basic and diluted

65,460

 

60,781

 

63,490

 

60,074

 

Shares used in computing non-GAAP net income per share:

 

 

 

 

Basic

65,460

 

60,781

 

63,490

 

60,074

 

Diluted

69,605

 

63,438

 

67,214

 

63,042

 


Contacts

Investor Relations Contacts:

Five9, Inc.
Barry Zwarenstein
Chief Financial Officer
925-201-2000 ext. 5959
IR@five9.com

The Blueshirt Group for Five9, Inc.
Lisa Laukkanen
415-217-4967
Lisa@blueshirtgroup.com


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