Five9, Inc.

Thank you for joining us today. On the call are Mike Berkland, Chairman and CEO, Dan Berkland, President, and Barry Zwornstein, CFO. Certain statements made during the course of this conference call that are not historical facts, including those regarding the future financial performance and cash position of the company, expected improvements in financial and related metrics, expected ARR from certain customers, our proposed acquisition of Acquion, certain expected revenue mix shifts, customer growth, anticipated customer benefits from our solution, including from AI, the extent of the anticipated TAM expansion and our ability to take advantage of any such expansion, company growth, enhancements to and development of our solution, market size and trends, our expectations regarding macroeconomic conditions, company market position, initiatives and expectations, technology and product initiatives, including investment in R&D, and other future events or results 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 can adversely affect Five9's future results and cause these forward-looking statements to be inaccurate, including the impact of adverse economic conditions, including macroeconomic deterioration and uncertainty, including continuing inflation, increased interest rates, supply chain disruptions, decreased economic output and fluctuations in currency exchange rates, lower growth rates within our install base of customers, and the other risks discussed under the caption risk factors and elsewhere in five, nine 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 reconciliation of our GAAP versus non-GAAP results and guidance is currently available in our press release issued earlier this afternoon, as well as in the appendix of our investor deck that can be found in the investor relations section on Five9's website at investors.five9.com. Lastly, a reminder that, unless otherwise indicated, financial figures discussed are non-GAAP. And now I'd like to turn the call over to Five9's Chairman and CEO, Mike Berkland.

Thanks, Emily. And thanks everyone for joining our call this afternoon. I'm pleased to report that we achieved a key milestone in Q2 with annual revenue run rate exceeding $1 billion, primarily driven by LTM Enterprise subscription revenue growing 21% year over year. Adjusted EBITDA margin increased sequentially to 17% of revenue, helping drive strong LTM operating cash flow of $126 million, or 13% of revenue. Before I move on to the business updates, let me comment on our outlook for the remainder of the year. We are reducing our top line annual guidance by 3.8% based on the latest trends we saw in June bookings and other factors that Barry will elaborate on. In response, we will be laser focused on managing expenses to generate improved margins and cashflow. As a result, we're raising the midpoint of our annual non-GAAP EPS guidance. This is also consistent with our objective of driving shareholder value through balanced profitable growth, further supporting our positive long-term outlook. And now turning to the business updates. Today, I want to focus my comments on some announcements we believe will drive significant future growth for Five9 by improving AI-powered customer experiences. First, I'll comment on our agreement to acquire Acquion, and then I'll touch on our AI strategy and the latest innovations that are extending our leadership position in AI. I'm excited to announce our agreement to acquire Acquion, a significant step in extending our AI-powered CX platform and market reach. Today, brands are increasingly wanting to proactively reach customers for sales, e-commerce, collections, and appointment reminders, as well as service and support. Acquion excels in orchestrating proactive outbound omnichannel customer engagement across numerous CX use cases and has assisted leading financial services, retail, and healthcare businesses to connect with their audiences and increase revenue through higher contact and conversion rates. Like a symphony conductor, Acquion's platform uses AI and contextual data to predict, personalize, and orchestrate when and how to best reach customers. Adding Acquion's capabilities to Five9's IntelligentCX platform is a big step toward realizing our ambition to become the orchestration engine for every interaction across the entire customer journey, including marketing, e-commerce, sales, as well as customer service. In addition, the multimodal interactions handled by Acquion generate incremental contextual data that will further strengthen the value of our AI. Five9 and Acquion have already been partnering to win some of the largest enterprise CX opportunities in the industry. And we're very bullish on the opportunities we see in the pipeline. We anticipate the Acquion transaction to close in the second half of 2024. Now turning to our AI strategy. Since 2018, Five9 has been focused on harnessing the power of AI to elevate CX. Today, consumers will tell you that their interactions with many brands are disjointed and not satisfactory. This is often due to customer interactions being spread across many platforms and touchpoints, each of which is siloed. This has driven our ambition to orchestrate every interaction between a consumer and a brand through Five9's Intelligent CX platform powered by Five9 Genius AI. Our platform provides advanced orchestration for elevated customer experiences, allowing us to bring together all of these interactions and personalize them using contextual data. Our strategy has been consistent throughout, embedding AI across our platform, delivering practical AI solutions that drive tangible business value, and helping our customers leverage AI responsibly. Also, with our engine agnostic approach, we enable our customers to continually take advantage of the rapid innovation in AI. But technology alone is not enough to deliver this vision. And so we combine it with our trusted AI and CX experts to help our customers navigate through this evolving world of AI. And now I'd like to share two significant steps we've taken to extend our leadership position in AI. First, we're excited to announce the general availability of GenAI Studio. This pioneering product serves as a central hub for brands to apply GenAI across all CX touchpoints within the Five9 platform and beyond. We now have the unique ability to break down data silos by leveraging contextual data, not just within our platform, but also from external systems such as CRM, marketing, e-commerce, and more, all through a single pane of glass. This comprehensive 360-degree view of the customer experience enables us to deliver hyper-personalization and improved business outcomes. And second, we're announcing the newest member of the Five9 Genius AI suite, AI Knowledge. AI Knowledge allows brands to provide concise answers to many common questions their customers might have by training custom-gen AI models with knowledge unique to their brand. AI knowledge can be used for voice and chatbots, enabling self-service answers to a much wider set of use cases than were previously possible with prior generation FAQ bots. That in turn reduces the need for calls and chats to reach live agents, saving brands money. AI knowledge is also integrated into Five9 AI Agent Assist, allowing agents to get quicker and more accurate answers to customer questions. That allows them to offer accurate and faster service, improving CX while also reducing handle times and reducing cost. And best of all, AI knowledge reduces the amount of time people have to sit waiting on hold, something all of us can appreciate. These latest AI innovations are important additions to our market-leading AI portfolio, which today is enabling some of the world's largest brands to elevate their CX. Turning now to our market opportunity related to AI, as we've said in the past, AI represents a TAM expansion for Five9. For instance, if a hypothetical Five9 customer is able to automate 15% of interactions and therefore reduce seats and labor costs by 15%, Given that we are providing the software for that automation, our subscription revenue increases on a net basis by 30%. In other words, it's a win-win for both our customers and us. Now let's get a little more specific and take a look at three real-life examples from our customer base. The first is a healthcare company and a longtime Five9 customer with a thousand agents that is a supplier of medical test kits. As call volumes were increasing, they implemented our IVA and patients were able to automatically schedule a pickup or delivery three times faster without waiting in queue for an agent. In addition, they saw overall agent handle time declined by 10%. And since that IVA implementation, Five9's total subscription revenue from this customer has increased 20%. The second example is a financial institution which was seeing increasing call volumes Within a month of our IVA implementation, they saw an 8% reduction in agent talk time while increasing customer satisfaction due to faster response times. In this case, Five9's total subscription revenue from this customer increased 30%. And the third example is a Fortune 500 medical device company. Since the deployment of our IVA, overall call duration was reduced by 16%, resulting in cost reduction. Five9's total subscription revenue from this customer increased 30%. In summary, we remain very optimistic about the long-term opportunities in this massive market that is expanding even further with AI. And we believe we are well positioned to further strengthen our leadership position with the ongoing innovations to our 5.9 Genius AI suite. Our AI solutions are driving significant and tangible business outcomes for our customers to elevate CX. And with that, I will turn it over to our president and CRO, Dan Berkman. Dan, please go ahead.

Thank you, Mike, and good afternoon, everyone. Today, I'd like to start off by discussing our bookings for the second quarter and sharing some key go-to-market initiatives. In Q2, we had a challenging bookings quarter, primarily due to customer budgets being more constrained and scrutinized. As a result, we did not have any mega deals and we had fewer $1 million ARR deals than expected during the quarter. In addition, while we are very proud of our talented sales team, we are taking action to further improve our sales execution and efficiency, including recently promoting an accomplished 10-year 5.9 veteran to EVP of sales, giving us a single 100% dedicated sales leader. And we're also realigning resources across market segments and partnering more aggressively with certain technology solutions and integrations. And now I'd like to share some key wins for the quarter. The first example is a new customer who in March was preparing to place a significant order with Five9, including the Acquion solution. You may recall last quarter, I described a Q1 deal over $3.8 million in ARR for a company who helps universities with recruiting, enrollment, and fundraising. On March 30th, we were still completing the SOW details for the Acquion portion, and the customer agreed to place the orders for the Five9 solutions. Shortly thereafter, we completed the SOW and received an order for an additional $1.3 million of ARR for the Acquion portion, making that an anticipated $5.2 million ARR customer to Five9. The second example is a healthcare provider with the leading virtual care platform who is looking to improve and elevate experiences with their patients, doctors, nurses, and pharmacies. They've gone all in with Five9, including our chat, email, SMS, AI agent assist, Salesforce integration, and the full WEM suite to enable hyper-personalized experiences at every touchpoint. We anticipate this initial order will result in over $1.1 million in ARR to Five9. The third example is also in the healthcare field, a full service pharmacy benefits management company who had been using another leading CCAS provider, but did not feel they were getting the focus and attention from their provider to help them truly elevate their AI experiences and deliver better business outcomes. With an acceleration of AI and a vast array of solutions, companies are looking for a partner with a team of experts who will listen, analyze, tailor, and apply continuous optimization and meaningfully improve those business outcomes. As a result, they purchased our chat, email, Salesforce integration, our WEM suite powered by Verint, voice stream for caller authentication, and our AI agent assist solutions, including transcripts and summaries. We anticipate this initial order will result in over $1.1 million in ARR to Five9. And now I'd like to share two examples of existing customers who have expanded their use of Five9 by adopting our AI and automation solutions to elevate their CX. The first example is a healthcare provider who has been a Five9 customer since 2018. They had been spending approximately $4.5 million annually with Five9. They've been using several advanced solutions from Five9, including our VCC with SMS, AI Agent Assist, and our workflow automation. In Q2, they added our WEM suite, powered by Verint, to perform AQM, performance management, and interaction analytics. With this add-on order, we anticipate their ARR with Five9 to now be over $6.1 million. The next example is a Fortune 200 company and a top-rated insurance provider who has been a Five9 customer for over two years and has been using our omni-channel, AI agent assist, voice IVA, digital IVA, and our variant WEM suite with an ARR over $4.9 million to Five9. In Q2, they added Five9 AI Insights in order to leverage both real-time and historical conversational data to prescribe and apply the Five9 platform in ways that will result in maximizing business outcomes and truly elevate the customer experience. With this add-on order, we anticipate their ARR with 5.9 will now be approximately $5.5 million. While we've had some headwinds in Q2, our long-term outlook remains strong, given our leading platform and AI strategy, as well as our continued partner and channel expansion. This was validated once again by the most recent Baird survey in July, where we were ranked number one by far in each of the following three categories. The best AI solutions, most likely to benefit from AI, and the easiest CCaaS provider to work with. And now I'd like to turn it over to Barry to take you through the financials.