Five9, Inc.

Thank you for joining us today. 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, 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, Our AI revenue opportunities and current estimations regarding SAME, 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 could adversely affect Five9's future results and cause these forward-looking statements to be inaccurate, including the impact of adverse economic conditions, including the impact of macroeconomic challenges, including continuing inflation, uncertainty regarding consumer spending, high interest rates, fluctuations in currency exchange rates, lower growth rates within our installed base of customers, and the other risks discussed under the caption Risk Factors and Elsewhere in Five Nines 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. Also, please note that the information provided on this call speaks only to management's views as of today, February 20th, 2025, and may no longer be accurate at the time of a replay. 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 Berklund.

Thanks Emily, and thanks everyone for joining our call this afternoon. I'm pleased to share that we finished the year strong with annual revenue exceeding $1 billion. This was driven by fourth quarter revenue growth accelerating to 17% year over year, primarily due to our subscription revenue growing 19%. Adjusted EBITDA margin for the fourth quarter reached a record 23%, helping drive record operating cashflow of $50 million or 18% of revenue. and record free cash flow of 33 million or 12% of revenue. As you all know, we take a balanced approach to delivering top line growth and bottom line profitability. I'm highly encouraged by the execution and bookings momentum being delivered by our sales organization, especially in the $1 million plus ARR part of our business. Andy will provide more color on this in a moment. Also, we recently held our global sales kickoff and the passion, energy and excitement were unparalleled as we all aligned on our formula to drive success for our customers and continue building upon our momentum in 2025 and beyond. On today's call, I will spend much of my time covering our progress in AI and how we believe platforms like Five9 are uniquely positioned when it comes to AI for customer experience. We continue to extend our leadership position in AI as demonstrated by our enterprise AI revenue growth accelerating to 46% in the fourth quarter. AI has now grown to 9% of enterprise subscription revenue. We believe AI revenue momentum will continue as AI bookings for enterprise new logos grew nearly 50% year over year in Q4. Again, making up more than 20% of enterprise new logo ACB bookings with 100% attach rate on $1 million plus ARR deals. We are also successfully penetrating our enterprise install base with AI bookings growing 50% year over year in Q4. And now I'd like to spend a few minutes talking about how we believe platforms like Five9 are uniquely positioned when it comes to AI for CX and why we are winning in AI and why we expect to continue winning. Of course, you're all aware that we have a broad portfolio of AI solutions, but I'm going to focus today on self-service and AI agents. As consumers, we all know AI agents will only be used by consumers if they are accurate and personalized. When we say accurate, I think that's pretty obvious to everyone. And when we say personalized, we mean that the AI agent knows enough about you as the consumer, such as who you are, what products and services you've purchased from the brand, the details of your recent interactions with that brand, including recent problems or issues you've had, and so on. And brands are learning that if they wanna offer AI-driven self-service, these AI agents need to be accurate and personalized. And like I said, if they're not, consumers will not use them. CCaaS platforms like Five9 are uniquely positioned to deliver these accurate and personalized AI agents. This is our moat, and this is why we believe we will continue to win in AI for customer experience. Let me explain further. Four key ingredients are required to deliver this accurate and personalized self-service using GenAI. First, you need access to LLMs. Second, you need real-time contextual data about the consumer and the brand. Third, you need historical interaction data specific to the consumer and their interactions with that brand. And fourth, you need channels to connect consumers to that self-service application, as well as provide an escalation path to a human agent when needed. So let's take these one at a time. The first ingredient, access to LLMs, has become commoditized now, and all vendors have the ability to use a mix of open source and hyperscaler provided models. Five9, however, has been at the forefront of engine agnostic AI for many years, ensuring that brands can easily change the underlying engine quickly to leverage the latest, greatest, and highest performing models. Our strategy of being engine agnostic continues to be validated with every new engine that emerges. And as everyone knows, this is happening almost on a weekly basis. Additionally, we have a team of AI experts benchmarking these engines to ensure our customers can leverage the best engine for a given use case. On the other hand, solutions that are built on proprietary models will not be able to leverage these new innovations that are rapidly coming to market. Therefore, we believe Five9's approach allows our customers to future-proof their AI decision. And when it comes to our competitive moat, it's clear that the layer above these engines is what matters. And that layer includes our AI applications that require business logic, that require workflows, that require important data and integrations to backend systems. The second ingredient, contextual data, is what is fed into the LLM in real time and provides true context around an interaction. This includes customer specific details, as well as brand specific knowledge, both of which are often distributed across many backend systems. Unlike AI point solutions that require costly one-off integrations to access contextual data in real time, our platform typically is integrated into more than 20 backend systems during the initial customer deployment. This means that when a brand adopts AI with Five9, they can immediately leverage our seamless integrations, which are designed to reduce cost, accelerate time to value, and deliver accurate and personalized experiences at scale. The third ingredient is historical interaction data, for which Five9 is the system of record. Historical interaction data is comprised of voice calls, texts, emails, web chats, and social interactions between a consumer and that brand, including interactions handled by human agents, as well as handled by AI agents. This historical interaction data is a significant requirement for personalization. In other words, the AI agent knows not only who you are and what products and services you've purchased, but it also knows every detail of your prior interactions with that brand, including what problems or issues you had. The fourth ingredient is channels, such as voice, text, email, web chat, and social. You need these channels to connect consumers to an AI agent, as well as provide a seamless escalation path to a human agent when needed. The market demands AI agents that work across all these channels. However, providing the voice channel globally at scale with reliability is a huge barrier to entry. We have invested hundreds of millions of dollars over two decades to build that globally connected platform optimized for CX across these channels. AI point solution vendors entering the contact center market have not made that significant investment nor are they likely to, which is why they prefer to integrate to our platform. We believe these AI point solutions as well as other third party AI will continue to integrate to our platform to gain access to these channels from us. That positions our platform as a control point in the AI driven CX ecosystem, enabling us to monetize that access, which we are successfully doing through voice stream and transcript stream. So to summarize, the last three of these four key ingredients are unique to platforms like Five9. In addition, our AI experts act as a force multiplier, working closely with our customers to tailor an AI blueprint for their business and help them deploy our AI solutions to deliver real business impact. We not only have the talent to ensure success, but we also provide products like AI Insights to identify high ROI opportunities to deploy AI to enhance CX and drive operational efficiency, as well as our studio products that provide the ability to build these self-service applications, workflows, integrations, and business logic. And as a result, we believe our comprehensive AI suite combined with our deep AI expertise will enable us to continue winning in AI. Our differentiated approach to AI is being validated by the industry, where we were once again ranked as having the best AI solutions in the semiannual Baird survey that was recently conducted in December. Additionally, industry analysts continue to recognize our innovation, with Five9 recently winning the 2024 Aragon Research Innovation Award for AI Contact Centers. Five9 was positioned as the most strategic vendor, reinforcing our leadership in AI-driven CX and our long-term vision for the CX market. Now I'd like to touch on the momentum we are seeing with our ecosystem of partners. Our partners have been an important part of our success here at Five9. We have significant opportunities in 2025 to continue our momentum following announcements we've made over the last few months with partners such as Salesforce, ServiceNow, Microsoft, Verint, and Google. The partnership between Salesforce and Five9 continues to gain momentum, driving alignment across go-to-market strategies, product innovation and customer acquisition. Salesforce and Five9 share a vision where AI agents and human agents work together to elevate customer experiences. We are strengthening the integration between Five9 and AgentForce to develop industry specific AI agents, including patient scheduling agent and a collections agent. Furthermore, We are harnessing customer interaction data such as real-time voice across sales, service, and marketing clouds to create a seamless and unified customer journey for brands. In numerous recent wins, we've been able to work with Salesforce to deliver a unified CRM and CCaaS platform for customers to deliver AI-elevated CX in industries including telecommunications, financial services, software, life science, and other industries. In November, Five9 and ServiceNow jointly announced an expanded partnership to bring AI-powered solutions for unified employee experiences and customer experiences. By enhancing our integration, we're streamlining self-service and assisted service, creating more efficient support processes that reduce cost, boost agent productivity, and elevate customer satisfaction. Via this expanded integration, Five9 and ServiceNow are redefining the next generation of CX, expanding beyond our history of ITSM integration and into integrated CRM experiences. Customers gain single agent experiences for voice and digital interactions and a unified routing engine to streamline engagement. Additionally, in December, we announced the latest release of our Microsoft Teams UC integration, Enterprises are constantly bringing the unified employee communications platforms closer to the customer services platforms to enhance employee efficiency and productivity. Five9's integration with Microsoft Teams brings this to life and enhances employee productivity by delivering our game-changing bi-directional presence between Five9 agents and Microsoft Teams users to simultaneously view each other's real-time availability. This empowers agents and experts to collaborate internally with confidence. And we are pleased with the momentum we're seeing as we have had several new customer wins during the fourth quarter using this enhanced integration. And with Verint, we've made a key announcement in late Q3 regarding our strengthened partnership announcing a new native cloud-to-cloud platform integration, which includes Verint Bots. During the fourth quarter, we saw an acceleration of opportunities, validating demand for our integrated value proposition. And finally, we're so excited to announce Five9's global availability on Google Cloud Marketplace, including the full Five9 AI-powered CX platform, plus the release of a standalone Five9 AI agent designed for Google Cloud. Businesses can now quickly activate Five9 seamlessly through Google Cloud Marketplace, a universal catalog of enterprise-grade, pre-validated solutions that run on or integrate with Google Cloud. This simplifies the procurement, billing, and deployment of our joint solution to deliver AI-elevated CX. Our innovative solutions, which leverage Google Cloud technology, can enable organizations to create exceptional customer experiences while leveraging their Google Cloud credits to drive loyalty and business success. We're excited about this new route to market and look forward to bringing on more mutual customers with Google. In summary, our record results and strong traction in our AI business continue to demonstrate the power of our platform in enabling brands to elevate their CX in this rapidly evolving world of AI. At Five9, we've always been ahead of the curve. Just as we paved the way for the cloud revolution in CX, we are now leading the charge in delivering the new CX powered by our suite of AI solutions. I also want to take a moment to thank our amazing team of five-niners whose relentless dedication and passion empower us to continue to lead this market. We believe we are well-positioned with our AI-powered platform and trusted AI experts to continue driving durable long-term growth, and we look forward to building on our momentum in 2025. Before I turn it over to Andy, I'd like to comment on one more topic. As many of you have probably seen, earlier today we issued a press release announcing Barry's retirement as CFO, effective March 31st, as well as his providing assistance with the transition for six months. Barry, I just want to express my deepest gratitude to you for your exceptional leadership, partnership, and unwavering commitment to Five9 these last 13 years. You have played a pivotal role in shaping our company's growth, financial strength, and company culture. Your contributions have been invaluable. It has been an honor to work alongside you, Barry. And on behalf of the entire Five9 team, I wish you the very best in your well-earned retirement. I'm also pleased to announce the appointment of Brian Lee, our long-term EVP of Finance to the role of Interim CFO. Brian will be joining us on the call today. As many of you know, he has gained an extremely deep understanding of our business over the last 11 years. Having worked closely with Brian during his tenure here at Five9, I'm excited to have him step in as Interim CFO, and I'm confident in his ability to excel. We will be kicking off a CFO search with Brian as an internal candidate. And with that, I will now turn it over to our COO, Andy Dignan. Andy, please go ahead.

thank you mike and good afternoon everyone as mike mentioned we had another strong quarter of sequential bookings growth that exceeded expectations we are pleased with the early results we are seeing from the realignment of our resources and enhancements to our sales motion for instance we had strong enterprise new logo bookings in q4 driven by the highest number of one million dollar plus air our new logo wins in any quarter of 2024. Additionally, Q4 install-based bookings came in at the highest level we've seen in eight quarters. We also continued to experience heightened levels of RFP volume in the fourth quarter. And our pipeline remains robust as we enter 2025, in part driven by our Acquion pipeline increasing Forex sequentially. And now, as we normally do, I'll share some of the examples of key wins for the quarter. The first example is a leading real estate investment company focused on healthcare infrastructure, senior housing operators, post-acute care providers, and health systems. Their contact center manages urgent service requests from existing residents and various inquiries from potential residents. They were limited by their on-premise system as they struggled with operational inefficiencies and quality. They chose Five9 for our industry-leading omnichannel capabilities across voice, text, chat, and email, as well as our agent assist to transcribe summaries into the CRM and AI insights to gain visibility into interaction trends, identify opportunities, deliver high ROI AI-powered outcomes. we anticipate this initial order to result in over $3.1 million in ARR to 5.9. Now, the second example is a nonprofit health system with nine hospitals and hundreds of primary specialty and urgent care clinics. They had been using a premise-based solution, which was very limited. They chose Five9 for our comprehensive platform that includes our Acquion solution, allowing the healthcare provider to manage voice, chat, and email, and improve the experience for agents and patients through our key integrations, including Epic, ServiceNow, and Salesforce. Additionally, they leverage our quality assurance and automated scheduling through our WEM powered by Variant. While Five9 Agent Assist transcribes conversations and standardizes responses. We anticipate this initial order to result in approximately 3 million in ARR to Five9. The third example is one of the largest credit union service organizations in the country that selected Five9 to replace multiple on-premise solutions that were causing inefficiencies, missed SLAs, and poor CX. By consolidating onto Five9, they now benefit from streamlined operations, seamless integration with multiple third-party systems, and our WAM solution powered by Verint. Additionally, they adopted our IVA platform to enable self-service for account inquiries, fund transfers, payments, and more. We anticipate this initial order to result in approximately 2.4 million in ARR to 5.9. Now I'd like to highlight a Q4 expansion and one of our largest customers, a parcel delivery company where we expanded into a new business unit that was running on an on-premise solution. This business unit provides customer support for global documentation, taxation, customs, and regulatory requirements. This was implemented in live within 60 days and represents over 1.2 million in additional ARR to 5.9. With that, I'd like to turn it over to Barry to take you through the financials. But before doing so, I'd like to echo Mike's comments and extend my gratitude to you, Barry, for your leadership and your commitment to Five9. Barry.