Five9, Inc.

and Barry Zorenstein, CFO. Certain statements made during the course of this call that are not historical facts, including those regarding the future financial performance of the company, industry trends, company initiatives, and other future events are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are simply predictions, should not be unduly relied upon by investors. Actual events or results may differ materially and the company undertakes no obligation to update the information in such statements. These statements are subject to substantial risks and uncertainties that could adversely affect Five-Nine's future results and cause these forward-looking statements to be inaccurate, including the impact of the COVID-19 pandemic and the other risks discussed under the captioned risk factors and elsewhere in Five-Nine's annual quarterly reports filed with the Securities and Exchange Commission. In addition, management will make reference to non-GAAP financial measures during this call. A discussion of why we use non-GAAP financial measures and information regarding the reconciliation of GAAP versus non-GAAP results is currently available in our press release issued earlier this afternoon, as well as in the appendix of our investor deck and available on the investor relations section of Five9's website at investors.five9.com. and now I'd like to turn the call over to Five9 CEO, Rowan Trollope. Please go ahead.

Thanks, Lauren, and thanks to all of you for joining our call this afternoon. I'm pleased to report that we closed out the year with excellent results for both the fourth quarter and 2021. As you'll hear, the market momentum remains very strong, especially upmarket, driven by the transition to cloud and digital transformation, as well as our differentiated AI and automation offerings. There's no question our world-class team has continued to execute like clockwork. Now, fourth quarter revenue grew to $174 million, up 36% year over year, against a prior year quarter that was raised by one-time COVID benefits. For the full year 2021, revenue grew to $610 million, an increase of 40% year over year, driven by the continuing strength of our enterprise business, where LTM subscription revenue grew 51% year over year. And continuing our commitment to balanced growth, I'm pleased to report that despite the increased investments in a number of areas, including professional services and public cloud, our fourth quarter adjusted EBITDA came in strong at 21%. These results clearly demonstrate that not only do we continue to be a leader in delivering on this massive and barely penetrated opportunity, but also that our business model supports a very attractive combination of high growth and strong margins. Today, I'm going to focus my comments on three of our key growth drivers, AI and automation, our march up market, and our global expansion. So let me begin with AI and automation. Our Intelligent Virtual Agent, or IVA, has captured the market's attention, as illustrated by the following statistics. In 2021, IVAs accounted for approximately 10% of enterprise bookings to new logos. At the same time, IVA usage tripled year over year. Now, while it's still very early days, these are encouraging signs. Now, let's step back for a minute and talk about the opportunity. It's estimated that the incremental TAM from automating contact center labor is $34 billion. And we believe that there are two macro factors which will ultimately, but inevitably, lead to widespread automation of labor. First, the increasing acceptance by customers that technology has reached maturation and works. And it's resulting in tangible ROI for our customers by automating repeatable tasks and realizing labor cost savings. and second, contact center leaders face labor shortages and high turnover rates, making automation a necessity for operating a contact center efficiently while continuing to improve customer experience. We are laser focused on further increasing IVA cross-sell rates for our new customer bookings and into our install base. And we plan to achieve that along three vectors. The first is continuing to step up the rate of innovation. We recently launched Studio 7, which is our new conversational AI orchestration interface. And this platform is helping customers get started faster and allowing them to implement increasingly more complex automations, as well as enabling entirely new technologies, such as virtual voiceover, which makes Five9 IVAs sound incredibly lifelike. Second, we're ramping up go-to-market spending to meaningfully accelerate our IVA sales momentum. Most notably, we'll be increasing the size of our dedicated AI and automation sales team, expanding professional services and customer support, and stepping up our marketing campaigns. Finally, third, we'll increase our focus on selling IVAs standalone into non-contact center opportunities with unified communications, CRM, and service providers. We had success with this motion last year with a $1.7 million European IVA booking from an internationally recognized hotel chain where we didn't sell the Five9 virtual contact center at all. And we believe this is a large untapped opportunity for us. Now also bear in mind that on occasion, these standalone IVA opportunities morph into full RFPs for the entire contact center. While IVA is our most scaled AI solution, we continue to invest in making our total offering the industry leading AI engagement platform. And here's a brief update on our other AI investments. First, we continue to see growing customer adoption of agent assist with deals in the double digits across various industry verticals. We expect continued strong adoption as customers realize improvements in KPIs, such as customer satisfaction, average handle time, first call resolution, and so on. Now, we'll soon be launching new capabilities to continue to improve our agent assist offering, including agent script adherence through real-time guided checklists that coach the agent on what to do next and then automatically verify that they do it. Second, to help us scale our IVA and agent assist to every customer globally, we're investing in a technology we call Conversation Architect. This technology provides a central hub for building and managing AI applications, such as IVA and agent assist in the contact center. Conversation Architect provides a no-code solution that enables customers to train AI models off of their own data without needing machine learning or AI expertise, just business expertise. Now, traditionally, this training process has required machine learning experts that are hired as part of a lengthy and expensive consulting arrangement. But with Conversation Architect, these costs are dramatically reduced, opening up a larger market opportunity for AI in the contact center. Now finally, in addition to investing in our own AI products, we're also investing in our AI platform with technologies like VoiceStream, which is a groundbreaking and developer-friendly, cloud-to-cloud, real-time streaming API. Partners are building products on this platform with use cases ranging from customer authentication via biometrics, things like agent assistance, agent coaching, training, real-time speech analytics, and sentiment analysis. Now when customers turn to Five9, they can use our own products or choose from a range of third-party products built on top of our platform. So that's AI. Now let me turn to our next growth driver, namely our march up market. Enterprise accounted for 84% of fourth quarter LTM revenue. We continue seeing especially strong growth in the high end of enterprise. And in a moment, Dan will elaborate upon the tremendous booking success that he and his team delivered in the fourth quarter. But in the meantime, let me simply mention that we ended 2021 with 134 customers generating more than a million dollars in ARR. up from 91 a year ago. These larger customers are the fastest growing part of our business with a CAGR of 93% since inception and have meaningfully higher retention rates. So while IAI and automation have emerged as the latest driver behind our success upmarket, that builds upon our strengths that we have like reliability, channel, and trust. Let's start with reliability. Now, reliability, as you know, is simply non-negotiable. A CCaaS provider can offer all the features in the world, but these features don't matter at all if the system's down and supporting customers is impossible. The investments we've made and are making in our cloud operations team have allowed us to successfully build out our public cloud operations and mature our operational disciplines through tooling and automation. These investments have also allowed us to achieve what may well be industry leading up time and velocity. And we're doing that globally. I couldn't be happier with the results that we're achieving in this very important area. Next, we continue to develop our channel, including systems integrators, service providers, technology solutions brokers, VARs, and ISV partners. And I'm extremely proud of how far we've come in this area and the potential that still remains. Our strong bookings growth continued with channel bookings increasing 66% year over year in 2021. The channel loves how easy Five9 is to work with, and this continues to be a differentiator for us in the market. One of our marquee partners, AT&T, is building momentum across a wide array of verticals. We now have over 50 customers sold, and these wins range from large enterprises to small and include public sector successes as well. Agents through the AT&T partnership are servicing customers in over 60 countries, indicating the full reach of this partnership. Additionally, the recent launch of the AT&T IVA is based on the 5-9 IVA we talked about earlier. Our relationship with AT&T continues to grow from strength to strength, and we're also pleased to support them in their latest campaign, the CX Revolution, which is focused on helping customers migrate from their legacy on-premises contact centers to the AT&T Cloud Contact Center, powered by Five9. Take a look at cx-revolution.com. Now, finally, and perhaps most importantly, is the trust we've built up over the years with our customers. We've made sustained and significant investments in professional services and customer support, allowing us to commit to and deliver lightning fast implementations worldwide. And the result of this is our industry leading net promoter scores of 85 and higher. for both professional services and customer support. And we're seeing even stronger growth outside the U.S. where most agents are located. First, some statistics. International revenue from companies headquartered outside the U.S. in the fourth quarter grew 57% year over year and marked the fifth of six quarters where the growth rate exceeded 40%. The investments we've made in expanding our international business are clearly paying off in these results. We're focused on continuing this growth and achieving our objective of having the international business be a mid-teens part of overall revenue by 2026. Quite simply, 2022 will be an exciting year with more international headcount, more channel partnerships, more marketing, more public cloud instances, more languages, and so on. So in conclusion, we've made significant progress and executed strongly on all fronts this past year, while solidifying Five9 as a market leader with an even greater opportunity ahead. Now, before turning it over to our president, Dan Birkeland, I'd like to give a huge thanks to all of our employees across the world. You've delivered consistently and exceptionally and despite the difficulties and the worst of COVID. None of this would have been possible without you. So thank you. With that, let me turn it over to Dan. Dan, go ahead.

Thank you, Rowan. As mentioned, our go-to-market machine continues to accelerate upmarket. And we not only set records for bookings and pipeline, but also shattered the record for the number of new logo bookings over $1 million in ARR. And now I'd like to share four examples of these record wins, all of which are well north of $1 million in ARR. The first example is a Fortune 25 company and one of the largest retailers operating over 2,500 stores dozens of retail brands, along with manufacturing and distribution. They chose Five9 to provide IVAs for self-service and call steering, as well as Variant WFO for speech and desktop analytics. And they're also leveraging our connectivity solution for Citrix VDI for the remote workforce. We anticipate this initial order, along with a follow-on order, which booked in early January, to result in over $4.7 million of ARR to Five9. The next example is a global health insurance company based in the US with over 80 million members worldwide. Their contact centers were based on Cisco and did not support their future vision for delivering customer experience. They chose Five9 to enable their digital-first strategy, including email, chat, SMS, visual IVR, and our industry-leading IVAs to replace Nuance, in addition to all the traditional voice applications. We're providing a deep integration with Salesforce, our variant WFO solution, and Five9 performance management and dashboards. We anticipate this initial order to result in over $3.7 million in ARR to Five9. The third example is a traditional and peer-to-peer lending company, and their contact centers service individual borrowers, banking clients, and collections efforts for past due loan payments. They were using a combination of Cisco for inbound and LiveVox for outbound in the collections department. They chose Five9 for our single blended platform for both inbound and outbound. and we also are delivering a holistic experience for their agents by integrating with Oracle, Zendesk and a homegrown CRM system, consolidating it all onto one single desktop. For their inbound business, they will also be using our chat, email, SMS for a complete omni-channel experience, making it as easy as possible for borrowers to make payments. They will also use our IVAs for processing and providing status updates on loan applications. We anticipate this initial order to also result in over $3.7 million in ARR259. The last example is a fast food chain with nearly 3,000 restaurants across the US. They've been outsourcing their contact center operations, which wasn't giving them the visibility and control to deliver an exceptional customer experience. They began the process to bring the entire operation in-house and chose Five9 to help them deliver on their CX vision. They now have the ability to leverage an omnichannel solution from Five9, including chat, email, SMS, along with voice to give customer convenience and choice for all of their interactions. They are using our IVAs for customers to place orders, check status of deliveries, check on rewards points, and access standard FAQs. We are fully integrated with their Salesforce CRM and will provide the full WFO suite from Verac. We anticipate this initial order to result in approximately $2.5 million in ARR to 5.9. So as you can see, our move up market is significant and accelerating, and we're seeing more enterprises embracing our AI and automation solutions to deliver a completely reimagined customer experience. And now I hand it over to Barry. Barry?