Five9, Inc.

Thank you for joining us today. On the call are Rowan Trollope, CEO, Dan Berkland, President, and Barry Zorenstein, CFO. Certain statements made during the course of this conference 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 Five9'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 Five9'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 reconciliation of our 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 in the investor relations section of Five9's website at investors.five9.com. And now I'd like to turn the call over to Five9's CEO, Rowan Trollope. Please go ahead.

Thanks, Lauren. And thanks to all of you for joining our call this afternoon. I'm extremely pleased to report a strong start to the year. First quarter revenue grew 33% year over year. This growth continues to be driven primarily by the strength of our enterprise business, Enterprise subscription revenue, which accounts for approximately 60% of total corporate revenue, increased 46% on an LTM basis. Additionally, our quarter-over-quarter growth rate of 5% continued to outpace pre-pandemic levels of sequential growth, demonstrating the ongoing retention of the COVID benefit we experienced through Q1-21. We continue to see many more years of LTM enterprise subscription growth in the 30s as we tap into the barely penetrated $58 billion TAM in the contact center space. The penetration of this TAM, I remind you, is being driven by three immutable trends. Digital transformation, the shift from premise to cloud, and the imperative of improving efficiency via AI and automation as labor becomes scarcer and more costly. Continuing our commitment to balanced and efficient growth, adjusted EBITDA for the first quarter came in at 13.4% of revenue, despite the significantly increased investments to both expand our professional services organization worldwide and to grow our public cloud footprint. This attractive combination of high growth and strong margins is the result of three factors, our platform, our market and our global expansion. Taking each in turn, starting with our platform. With approximately a quarter of a million concurrent seats on our platform, with our largest clients individually deploying over 10,000 seats, with 99.995% LTM uptime, with the highest levels of security certifications, Five9's platform is built for the scale, reliability, and security that enterprise customers demand. In addition to these fundamentals, what differentiates our platform is the increased cadence of innovation, in particular, the success we're enjoying as enterprises start to understand the practical value of AI and automation. For instance, last year, one of our biggest customers was experienced high average handle times and call abandonment rates, which were further exacerbated by labor shortage problems of recruiting and retaining agents. They needed to automate In just 10 months through March of this year, they're deflecting more than 40,000 calls per month, which would require 36 human agents to perform this work manually, resulting in $2.2 million of annualized savings or approximately 10% total labor costs. We continue to see this traction building as customers expand the use cases for AI and automation in the contact center. At a base level, customers are using IVAs to deflect mundane tasks, leaving the live agents to handle the more nuanced and complicated interactions. The continued need for this is seen in our record IVA bookings. As customers increase their level of comfort with AI and automation, they're now moving on to additional use cases, such as using AI to assist and guide live agents. As we stated last quarter, we'll soon be releasing the latest version of 5.9 Agent Assist, which offers new capabilities around AI checklists and automated compliance. These AI capabilities ensure that not only does the agent have the information they need when they need it, but we've also seen our customers looking to adopt these features to help support agent onboarding, training, and upscaling. For example, one customer, a leader in prepaid broadband services, uses real-time guidance and reminders during calls, allowing for upsell opportunities for increasing data plans, turning their agents from support agents to sales agents. Similarly, another customer who focuses on enabling digital workplaces uses Agent Assist to improve CSAT and reduce the time needed to onboard their agents. We're continuing to focus on how we make AI practical for our customers and continue to bring ongoing innovation to this space, expanding our capabilities to better meet growing customer demand. This is not only through our product, but also through our partner ecosystem and professional services. Positioning Five9 as an AI-enabled platform is gaining traction. Since the launch of our VoiceStream API, as referenced in our last earnings call, we've onboarded more than 24 partners to the platform. In addition, in Q1, we expanded the availability of the VoiceDream API to enable customers to access the real-time stream of data directly without the need for a third party. We see this as a growing area of interest amongst customers as they look to invest more in contact center analytics and insights, a trend we see accelerated by AI, but not exclusive to AI use cases only. Finally, on the professional services side, we're improving the operational aspects of our AI and automation go-to-market. For example, our increased investments in professional services have enabled us, over the last six months, to reduce by approximately 50% the number of days between IVA sale and starting the IVA implementation, allowing clients a faster time to value and a faster time to revenue for 5.9%. Another illustration is our recently launched IBA service offering. Virtual agents need to be trained just as human agents do. Existing use cases need to be tuned and new use cases are constantly being added. Our platform is simple to use so customers can and mostly do perform these services by themselves. However, many customers have asked us to manage this with them and hence this launch. In just a matter of weeks, we've closed several opportunities and have a very solid pipeline built out. I'm now secondly going to discuss our March Up Market. As you know, for several years, we've been investing to fulfill our vision to move up market and win larger and larger contact centers. You've seen concrete evidence of the success we're having in pursuit of this vision, winning mega deals and achieving a significant increase in the trajectory of customers with over $1 million in ARR. This cohort, including a total of 134 customers in the fourth quarter of 2021, is the fastest growing part of our business, with an average taker since inception of 93%. Today, we're going to absolutely and incontrovertibly demonstrate the success we're having in our ability to reach the very, very top end of the market when Dan talks about a landmark win that places Five9 amongst the leaders when it comes to large enterprise deployments globally. So stay tuned for that. And we confidently expect that we'll continue to show strong growth in the enterprise market Five factors give us the confidence to make this prediction. The first one is that the upper end of the market is comfortable now with accelerating their transition to the cloud. You don't have to look any further than our bookings to know that this is happening. Second, our platform has demonstrated now that it can meet the needs of the largest customers. And I mentioned a moment ago there's going to be more on this when Dan presents his section. Third, our industry-leading efficient go-to-market machine. Our four sales teams, strategic, enterprise, mid-enterprise, and commercial, enable us to match selling skills with market demand. Our strategic team in particular has been doing extremely well. These teams are complemented by an increasingly mature and committed set of channel partners, including systems integrators, service providers, technology solution brokers, VARs, and also ISV partners. In fact, first quarter channel bookings grew 68% year over year, driven in large part by the SIs who are increasingly helping Five9 in large strategic engagements as our customers execute their digital transformation programs. Fourth, success breeds success. The decision makers on these mega contact center investments often consult with each other and prospects seek validation from the companies in which we've already implemented our solutions, and they're getting excellent references. and finally, fifth, and this is crucially important, is the trust that we've built up over the years. And at the end of the day, we are a service organization providing 24 by 7, 365 days a year service globally and a mission critical software. Our customers know that we have and will deliver through thick and thin. This commitment continues to be evidenced by our industry leading NPS scores of over 80% for both professional services and customer support. So as you can see, our momentum upmarket is stronger than ever. And lastly, the success we're having with expanding internationally. As many of you know, about two years ago, we decided to aggressively step up our investments outside the U.S., where the majority of agents are located. We've done that. Our public cloud instances outside the U.S. have gone from zero a little two years ago to over five today, with more coming in the near future. Our headcount outside the U.S. has more than doubled over the last two years, from 455 to 962 now. and we've seen significant increases in other areas including channel partners, marketing spend, localizations and the like. These investments are clearly paying off with first quarter LTM revenue from non-U.S. companies growing 46% year over year. You should expect more of the same as we increase the percentage of international revenue from 9% LTM in the first quarter to the mid to high teens by 2026. And I should hasten to add that while the direct Thank you very much. In summary, the three fundamental building blocks needed to continue delivering balanced growth, our platform, our market and our global expansion are firmly and solidly in place. We continue to expect these building blocks to position us well to reach $2.4 billion in revenue and 23% adjusted EBITDA by 2026. I'd now like to directly address our employees. None of this would have been possible without you. So thank you very much. And one last matter before I turn the call over to Dan. The Russian-Ukraine conflict has prompted us to shut down our Russian satellite office in Nizhny Novgorod, where we currently employ some 176 people, and establish a new European development site in Portugal, which, among other benefits, has a base of technology and contact center talent. We anticipate that many of our Russian staff will relocate to our new facilities in Portugal. I'll now turn the call over to our president, Dan Birkeland. Dan, go ahead.

Thank you, Rowan. Once again, we continue to execute upmarket with unprecedented success by bringing unique innovation to help customers across the globe differentiate how they deliver customer experience. We've proven this with record performances in Q1 in bookings, as well as pipeline growth and channel contributions, while also setting bookings records for our AI and automation solutions. And now for some key wins for the quarter. The first example I'd like to share is an HR and payroll software company. Their previous solution had no ability to provide AI automation and the analytics to improve and optimize the customer experience. They chose 5.9 and have opted in for our full omni-channel offering, as well as our IVAs, agent assist, WFO, workflow automation, and performance dashboards. This will all be integrated with Salesforce and several other CRMs. and we anticipate this initial order to result in over $3.7 million in ARR to 5.9. The second example I'd like to share is a European insurance company based in the UK with over 38 million members and taking inquiries from patients, medical care providers, claims and collections. They looked at all the CCAS providers and chose 5.9 for our full suite of solutions, including Omnichannel, our IVAs, and our full suite of WFO powered by Verint for QM, speech analytics, WFM, and performance management. We are integrated to their Microsoft Dynamics CRM, along with eGain for knowledge management. We anticipate this initial order to result in over $3.1 million in ARR to 5.9. And now, as we normally do, I'll share an expansion example win from one of our installed base of customers. This is a true example of a land and expand story. The insurance broker started with Five9 three years ago with less than 10 seats. They recognized the value we had brought to that one department and the potential to transform and automate their customer experience. So in 2021, they expanded and added several hundred seats. Now in Q1 of 2022, they added our WFO suite powered by Verint for QM, WFM, and speech analytics. They also added our performance dashboards, IVAs, and agent assists, adding over $700,000 in ARR, bringing them to well above a million dollars in anticipated ARR to 5.9. This is a great example of truly bringing automation and AI into an environment and raising the ARPU significantly due to its compelling value and ROI. To wrap it up, I'd like to share our most significant win for the quarter. You may recall just a few quarters ago, we shared a record win for the Global Parcel Delivery Service Company, who is now ramping towards an anticipated ARR of over $30 million with Five9. Knowing the sheer size and scope of this customer, I was reluctant to say that this record would ever be broken. Well, today, I'm very pleased to announce that that record has been broken. After competing with all of the players in our industry, we signed one of the largest companies in the world, the healthcare conglomerate with retail, pharmacy, health insurance, along with many other divisions and brands. This customer will be rolling out tens of thousands of seats with Five9 starting towards the latter part of this year and throughout next year, bringing their anticipated ARR to Five9 to over $40 million in software subscription alone. They were very siloed through many years of acquisitions and expansions and are now replacing all of their legacy on-premises solutions from Avaya, Cisco, Genesis, and Nice with Five9. Five9 was chosen for five key areas of expertise. Our ability to help them transform and deliver a reimagined, consistent, and highly differentiated customer experience. Two, our ability to provide valuable insights and analytics, allowing them to continuously evolve and optimize their contact center operations. Third, our deep and proven integration with Salesforce. Fourth, our complete WFO suite powered by Verint. And fifth, we were the only provider they felt could service them effectively across all of their subsidiaries and businesses. We believe this to be one of the largest, if not the largest, CCAS deployments in the world. As you can see, we continue to execute successfully with companies of all sizes, with all of our products, and in all geographies. And with that, I'll hand it over to Barry to share our financials.