Five9, Inc.

Recording in progress.

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 or 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, macroeconomic factors, and the other risks discussed under the captioned risk factors and elsewhere in Five-Nine's annual and 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 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 on Five9's website at investors.five9.com. And now I'd like to turn the call over to Rowan Trollope. Please go ahead.

Thanks, Lauren. And thanks to everyone for joining our call this afternoon. I'm excited to report strong second quarter results with revenue growth of 32% year over year. Our enterprise business continues to drive this increase with LTM Enterprise subscription revenue, which accounts for over 60% of total revenue, growing at 41%. Adjusted EBITDA for the second quarter was 17.5% of revenue. We expect margins to continue improving in the second half and beyond as we gain share in a large under-penetrated market while simultaneously consistently generating operating cash flow and maintaining a strong balance sheet. In a moment, I'll talk about the drivers of our business, but before I do that, I'd like to address a topic that's probably uppermost in your minds, namely the impact of the macro environment on our business. To do this, let me break it into two parts. growth from new logos and growth in the installed base, each of which contributes roughly half of our total annual revenue growth. So I'll start with new logos. For five reasons, we remain optimistic that despite the macro headwinds causing customers to be more cautious and deliberate, we'll continue to enjoy strong growth in new logos. First, Prospective customers are faced with the imperative of moving to the cloud as their premise-based systems either end of life or require expensive upgrades. Two out of every three RFPs, 68%, received this year cite moving to the cloud as a primary motivator to issue the RFP. and independent data from Forrester and others consistently show that making the move to the cloud results in triple digit ROIs and payback periods measured in months. Second is the need to automate manual tasks, particularly in a time when budgets are tight and labor is scarce. Automation was the primary motivator for a further 20% of the major RFPs. The upper end of the market is accelerating their transition to the cloud. The largest customers, while not impervious to the economic environment, often can afford to continue to invest in critical systems, even during downturns. Fourth, we have a massive opportunity internationally. Despite macro weakness in Europe, our bookings there more than doubled year over year in the second quarter. And finally, our remarkably efficient and disciplined go-to-market machine alongside the trusted reputation that we've built up amongst customers with our services. So for these five reasons, and as Dan will elaborate, we enjoyed a second quarter record in net new bookings despite the economic turbulence. Now let me turn to the other half of the annual revenue growth and namely the install base. As we've repeatedly stressed, our install base bookings will not be immune from an economic downturn. However, keep in mind the following three points. First, we believe contact centers are mission critical and arguably become even more critical in a downturn. Thus, when CFOs cast about for our areas to cut back on spending, they'll focus on optional spend areas rather than ones where they're able to productively interact with customers, reduce costs, and increase revenues. Second, we have a very diverse customer base spread across all industry sectors. This lack of concentration will likely lessen the impact on our installed base business absent a severe downturn that spreads across the entire economy. and finally, third, we enjoy strong retention rates and there are significant untapped opportunities to sell new products and services into our install base, most notably automation and IVAs. So for these three reasons, we enjoyed a second quarter record in bookings from our install base, again, despite the economic turbulence underway. Now stepping back and looking at both net new and install base combined and considering our belief in the mission criticality of contact centers, the huge barely penetrated $58 billion TAM, and our proven ability to execute, we remain cautiously optimistic that despite the macro cross currents, there will be no interruption to our continued delivery of LTM enterprise subscription revenue in the 30s for the foreseeable future. Finally, mindful of macro environment, we're being even more cautious than normal in controlling costs and expenses so that we can continue to deliver not just durable growth, but profitable growth. Now I'll dive into the three main drivers of our business, specifically the strength of our platform, our continued focus at market, and the acceleration of our international presence. Taking each in turn, I'm going to start with our platform. The decision we made a few years back to significantly increase R&D spending, to redesign and re-architect our platform to support enterprise grade deployments is clearly paying massive dividends. These large companies need the scale and performance which we have delivered. They want extensive and deep integrations, which we've delivered. They want a global solution, which we've delivered. And they want the assurance that we can support successful large scale implementations, which we have demonstrated. Today, though, I want to comment on the single most important thing to our customers, and that's reliability of our platform. As a result of the re-architecture, improved processes and disciplines, and importantly, disciplined execution, over the last two plus years, we've made tremendous strides to cement ourselves as a leader, if not the leader, in enterprise-grade CCAS reliability. In this regard, I'm very pleased to report that the second quarter, we further improved LTM uptime sequentially from 99.995% to 99.998%. As a reminder, and to put things into perspective, 99.998% means that our service was unavailable for just 53 seconds in a given month on average in the last year. All of these people have invested 53 seconds per month on average for the last year. Amazing. Now, another key dividend resulting from our re-architecture is the increased pace of innovation. And this is best exemplified by the success we're enjoying on the automation front. So let me dig into that. During the last quarter, we met with many of our customers that have been using our automation solutions. The overwhelming response from these customers is that the implementation of automation solutions is typically resulting in significant ROIs while improving customer and agent experience. and customers achieve these ROIs in multiple ways, such as automated resolution of customer calls, improved agent productivity from reduced agent handle time, and improved customer satisfaction from lower call abandonment rates. So let me give you a few examples of these successes. The first is a leader in the weight loss industry who saved costs by leveraging our workflow automation solution to improve a critical sales process being managed by a legacy on premises solution provider. The legacy on-prem solution was cumbersome to maintain and was costly. With workflow automation, we were able to transform their business by moving them seamlessly to the cloud in under 90 days and reducing their costs by 15 to 20% versus the legacy on-prem solution. The second is a global company that empowers over three and a half million small businesses with point of sale technologies and business management tools. Working closely with our partner and reseller in Latin America, they implemented natural language call routing through our IVA solution to eliminate the old press one experience, producing savings of 30 seconds per call. With over two and a half million calls a year, that has equated to over two years of time saved for their customers, greatly improving customer satisfaction and business results. Finally, third, is a global shipping and logistics company which reduced costs and improved customer satisfaction through our IVA solution. This customer was facing challenges with average hold times of over 30 minutes, which caused 3,000 customers to hang up every day before having their issue was resolved. They deployed our IVA to offload their significant volume of shipment tracking inquiries from agents to a self-service solution. Our IVA was able to successfully self-serve over 90% of those customer inquiries, leading to a 95% decrease in customer hold times, a 96% decrease in customer hangups, and a 44% reduction in telephony costs, while significantly improving customer satisfaction. So that's the three examples. As a result of the increased customer focus on automation and the comprehensiveness of our solution, we had record bookings for our automation portfolio in Q2. Focusing on the largest component of the portfolio, namely the IVA, we saw year-over-year bookings growth of 63% and 335% for new logo and install base, respectively. Our investment in AI and automation is being recognized by customers and industry analysts alike. And in Q2, we were named a leader in the 2022 Opus Research Decision Makers Guide to Enterprise Intelligent Assistance. We were honored to be the only CCaaS provider featured in the report and to be recognized for our strategic and holistic approach that champions product completeness and flexibility. Next, I'd like to discuss our continued March upmarket. During the second quarter, we continued to show strong growth in the upper end of the enterprise market, which remains the fastest growing part of our overall business. Our success here is due to the re-architecture of our platform, as I talked about earlier, and organizing our sales teams into clearly defined swim lanes, enabling us to match selling skills with market demand. Our strategic enterprise teams have performed especially well with this new focus. The alignment has worked particularly well with systems integrators who tend to focus on the high end of the market. Partners, of course, have been a big part of our overall playbook here. So let me share some recent partner highlights. First, we enhanced our partner advisory board and our partner marketplace and created an all new partner portal. Next, we expanded our relationship with Slalom Consulting and have seen terrific traction in several key markets, especially in conjunction with our Salesforce partnership. And finally, I'm thrilled to report two new key partnerships for Five9. The first is Kindrel, a strategic technology services and consulting company delivering value to over 4,000 customers worldwide. Kindrel was an existing Five9 customer using our services internally. and based on their positive experience with Five9, Kindrel decided to expand into a strategic reseller and managed services partnership with Five9 to deliver holistic and global customer experience to their high-end customers. The second partnership I'm pleased to announce is with WWT, Worldwide Technologies. WWT is a $14 billion revenue, 8,000 employee technology service provider, and they have signed to be a global strategic resale partner for Five9, further expanding our partner ecosystem. And these initiatives are paying off with second quarter channel bookings growing 52% year over year. and lastly, our international expansion. The significant and sustained investments we've made internationally continue to pay off with second quarter LTM international revenue growing 45% year over year. LTM international revenue was 9% of total revenue and we continue to expect that this will increase to the mid to high teens by 2026. Our progress in EMEA is particularly noteworthy. Since our last call, in fact, we announced the expansion of our data centers in Frankfurt and Amsterdam to serve Five9 customers in the European Union. We opened up our new innovation center in Porto. We established a dock and Iberian presence, both of which have closed initial orders and have successfully brought the $12 million ARR European insurance company live, which is now starting to ramp. In summary, the familiar and proven building blocks needed to deliver disciplined, durable, and profitable growth, namely our platform, our market market, and our global expansion, remain solidly in place despite the macro uncertainties. We continue to believe these building blocks position us well to reach $2.4 billion in revenue and 23% adjusted EBITDA in 2026. Last, but certainly not least, I want to recognize and thank the people who have made all of this success possible, namely our employees. We couldn't do any of this without them, and it is our employees' engagement and dedication to our mission and their incredible execution that make us so successful. This spirit and motivation are illustrated by Five9 recently being named as one of the year's best workplaces in the Bay Area by Great Places to Work and Fortune magazine. The awards based on employee feedback collected through America's largest ongoing annual workforce study. In that survey, 95% of our employees responded that Five9 is a great place to work compared to 57% of employees at a typical US-based company. So a huge thank you to our team. And I'll now turn the call over to our president and chief revenue officer, Dan Berkland. Dan, go ahead.