Five9 Inc at Canaccord Genuity Growth Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: David E. Hynes - Canaccord Genuity Corp., Research Division - Analyst : All right. Good. I'm going to assume -- I see a lot of familiar faces, so I'm going assume most folks are familiar with the business and the problem you're solving. Let's dig in right and talk about Q2 results, kind of what you saw in the quarter? How you feel about things coming out of it and kind of how that sets up the view of the back half into '24? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 10, 2023 / 2:00PM, FIVN.OQ - Five9 Inc at Canaccord Genuity Growth Conference

Question: David E. Hynes - Canaccord Genuity Corp., Research Division - Analyst : Yes. Yes, that's good. Yes, quite frankly, I was a little surprised by the stock reaction. I mean obviously, we took the numbers down a bit for the second half, and we can get into why we did that. But the strong bookings certainly set you up for what should be a promising '24 and you have this implementation backlog that's working. So it seems like a pretty good opportunity to me right now, but we can maybe unpack why that's the case. So let's start with the enterprise bookings. Like what's working? What's the pipeline look like as we go into the back half of the year?

Question: David E. Hynes - Canaccord Genuity Corp., Research Division - Analyst : Yes. And just to be clear, I mean, you mentioned record pipeline. What we saw in Q2 was not a draining of that? You still feel good about what's set up in the back half?

Question: David E. Hynes - Canaccord Genuity Corp., Research Division - Analyst : Yes. Perfect. One of the other things that came out in Q2 was the channel, right? I mean it seems like we're seeing a lot of momentum there. I think you called out 15 partners with more than $1 million in net new ACV or ARR, I guess, in the quarter.

Question: David E. Hynes - Canaccord Genuity Corp., Research Division - Analyst : Maybe just talk about kind of what's happening there? Like why is the channel, is it driven by international, is it maturation of kind of those relationships? Like what's driving the success?

Question: David E. Hynes - Canaccord Genuity Corp., Research Division - Analyst : They want it to work. Yes. Yes. Barry, let's talk about kind of the guidance. I think that's where maybe there was some disappointment in The Street when -- and probably was partially responsible for the stock reaction. So you guys beat the quarter by $8 million. You raised the full year by $1.5 million. Implicitly, it was a guide down for the second half. Help us unpack kind of what's driving that? I mean Mike alluded to some of the challenges in the base, but maybe you can kind of put a finer point on it? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 10, 2023 / 2:00PM, FIVN.OQ - Five9 Inc at Canaccord Genuity Growth Conference

Question: David E. Hynes - Canaccord Genuity Corp., Research Division - Analyst : That's shocking, you were conservative with your outlook...

Question: David E. Hynes - Canaccord Genuity Corp., Research Division - Analyst : Yes. I mean -- and look, one of the appeals of going to the cloud is this elasticity of agent count that it gives to customers, right? It works in your favor sometimes and it works against you in an environment like this. But there are minimum thresholds there. They can't completely collapse what they've committed to you, right? It's, what's the usually the band? Is it like 10% to 15%?

Question: David E. Hynes - Canaccord Genuity Corp., Research Division - Analyst : Yes. Let's talk about Aceyus. $82 million, 82?

Question: David E. Hynes - Canaccord Genuity Corp., Research Division - Analyst : $82 million acquisition in the quarter. What was the rationale? What does it do for the business, that sort of stuff would be helpful.

Question: David E. Hynes - Canaccord Genuity Corp., Research Division - Analyst : Yes. And maybe I would add a fourth that we talked about a little bit in our call back, which is they have some on-premise installed base customers with Cisco and Avaya that notionally Five9 now has first shot at? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 10, 2023 / 2:00PM, FIVN.OQ - Five9 Inc at Canaccord Genuity Growth Conference

Question: David E. Hynes - Canaccord Genuity Corp., Research Division - Analyst : And Barry, what did you say run rate revenues were for Aceyus?

Question: David E. Hynes - Canaccord Genuity Corp., Research Division - Analyst : Yes. Thank you.

Question: David E. Hynes - Canaccord Genuity Corp., Research Division - Analyst : Let's talk about AI. I think initially, the market had some confusion around how AI would impact the contact center. Just talk about kind of how you guys are positioned for AI? What are the trends you're seeing emerging and kind of the economics of the business?

Question: David E. Hynes - Canaccord Genuity Corp., Research Division - Analyst : Yes. So I listen to your competitors, and they tell similar stories around AI, right? And it's hard as an outsider to discern who has a competitive advantage, does someone have a better product? Like how would you help me position that conversation to investors?

Question: David E. Hynes - Canaccord Genuity Corp., Research Division - Analyst : Yes. Let's transition kind of to a more broad conversation around competitive dynamics. I think look, the legacy guys aren't really doing much to kind of shore up losses. We get a sense of kind of where Avaya and Cisco and others stand there. I'd love to get your sense of kind of what you're seeing in the field from inContact, Genesis. Anyone getting stronger, anybody getting weaker? Like how are you feeling about things?

Question: David E. Hynes - Canaccord Genuity Corp., Research Division - Analyst : Yes. And that's a great segue to a question I had for Barry. So I occasionally get calls from investors that say, like, "Hey, why should I pay a premium software multiple for a business that has low 60s gross margins," right? And there was a reason why gross margins went down, right? You built out your international points of presence with AWS. But your services business, and we could talk about usage, and that's somewhat of an anchor on gross margin. But the services business historically has lost money. I don't know if you've updated us recently where that is in terms of profitable or not. But it seems like you're building out capacity now on the services side to kind of get ahead of these Q2 wins that we talked about and the strength in the enterprise bookings. Talk about when we should expect to see gross margin leverage in the business, how that happens and where we're going?

Question: David E. Hynes - Canaccord Genuity Corp., Research Division - Analyst : Maybe we'll just wrap up with kind of an opportunity for you to leave like parting thoughts for the investors in the room. Like what are you excited about as you look over the next 12 to 24 months?

Question: David E. Hynes - Canaccord Genuity Corp., Research Division - Analyst : Yes. And I personally think investors are getting a pretty good bite at the apple here with the stock on the pullback after Q2. So we will leave it there. Mike, Barry, thank you guys very much for being here and keep tabs on progress.