Five9 Inc at Evercore TMT Conference Transcript

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

Question: Peter Marc Levine - Evercore ISI Institutional Equities, Research Division - Analyst : All right. Perfect. So maybe I'll kick it off. On your 2Q call, you raised your full year guide. And I think probably one of the only software companies that got beat and raise. So what are you seeing, I think, in the market that gives you the high conviction when your software peers are taking a different approach? Why not take there to free pass?

Question: Peter Marc Levine - Evercore ISI Institutional Equities, Research Division - Analyst : Interesting. Maybe I'll slip in on the question. I had a conversation with someone close to you now is, they mentioned that contact center is proving to be not saying recession proof, but like recession resilient, where it's becoming a lot more important than their applications. Is there truth behind that? Why is that?

Question: Peter Marc Levine - Evercore ISI Institutional Equities, Research Division - Analyst : Barry, I promise this to be the only question I ask about the proxy numbers. You during to Zoom Five9 transaction, you put out 26 proxy numbers. That was prior to kind of where the macro environment is today. So maybe talk us through like how that's changed, how you view those targets today versus where we were almost, call it, a year ago, almost 8 months ago.

Question: Peter Marc Levine - Evercore ISI Institutional Equities, Research Division - Analyst : The next question I want to talk is more of the competitive landscape. You're seeing a lot of the UC communication guys getting into contact center. But maybe the first question I'll ask I get all the time is AC Zoom, RingCentral, LivePerson building their own homegrown contact center. The question I get is, is it really that difficult? What's so challenging about building the contact center? Maybe can you kind of debunk that?

Question: Peter Marc Levine - Evercore ISI Institutional Equities, Research Division - Analyst : It leads to the next part of the question is I think a lot of these companies are starting on the digital side. So they come out and say, we'll do social, SMS, video, and it goes back to the bade on the telephony guys, which is phones dead. So with contact center, does phone die and it goes to video calls for contact center agents? Is it digital? Kind of what are you doing?

Question: Peter Marc Levine - Evercore ISI Institutional Equities, Research Division - Analyst : So maybe we're since talking about IVA and automation, I'll jump here to one of the questions I have is I think with the environment we're having, customers might be pushing back. So are you able to kind of somewhat toggle your sales force to kind of get them to sell back into the base, maybe upsell them like IVA, automation? Is that what you're doing today? Is that what you're seeing?

Question: Peter Marc Levine - Evercore ISI Institutional Equities, Research Division - Analyst : Yes. Because I mean I would think IVA and entire labor market would be an easier to sell. But if you look at your installed base today, like what's stopping customers maybe going all in? Is it -- they're not ready for it? Does the tech -- I mean...

Question: Peter Marc Levine - Evercore ISI Institutional Equities, Research Division - Analyst : Okay. If anyone has any questions, feel free to kind of just raise your hand. So anyone has anything, just let me know. For Barry back in the conversation is, I think part of -- at your Analyst Day, you talked about NRR getting back to 120% or high 120% range. Obviously, the environment is going to change those targets a little bit, but kind of walk us through like how you get there, right? Like what -- I'm assuming IVA is part of it, but does the environment change? Does that -- targets get pushed out?

Question: Peter Marc Levine - Evercore ISI Institutional Equities, Research Division - Analyst : So maybe to that point is you talked about the health care deal of $40 million. Like how do those large deals ramp? I mean do these customers start with maybe 100 agents in 1 department? What's kind of the ramp cycle? When should we expect to see that kind of come online?

Question: Peter Marc Levine - Evercore ISI Institutional Equities, Research Division - Analyst : I think you mentioned earlier, newer markets opening up. So if I look at international, say, roughly 10% of the business. Maybe kind of walk us through kind of the levels of investments you're making today, are you kind of leaning back, given the environments? Are you winning more on partners to kind of help accelerate some of those markets? But kind of walk us through the international landscape versus kind of what you see in the U.S., how does that differ?

Question: Peter Marc Levine - Evercore ISI Institutional Equities, Research Division - Analyst : Okay. Are you -- but are you seeing anything from your initial conversations? I know [Coupa] reported last night. They said Europe is a little soft, but North America is doing well. But from your conversations, are you seeing any change in purchasing behavior?

Question: Peter Marc Levine - Evercore ISI Institutional Equities, Research Division - Analyst : The question I get from investors often is that we've seen consolidation on the collaboration side. So the voice guys putting to get their video chat, sometimes contact center gets thrown into that conversation. But are you seeing that from -- is it still line of business purchasing contact center? Or do you see that converging with IT, making a general kind of purchase around all of communications, right? Does that change at all?

Question: Peter Marc Levine - Evercore ISI Institutional Equities, Research Division - Analyst : I'll throw it back to you, Barry, on the profitability front, Obviously, I think investors applaud it more today than ever before. So I think you talked about it in the call, given the uncertainty. I think you're not pulling back on certain things, but you're more of a balanced approach, right? So if you I think if you look at the investments since the second half into calendar '23, I think how do you balance that? And then how do you -- what do you weigh it against? So if I pull back sales and marketing, obviously, there's an offset to that, but kind of walk us through how we should think about, I think, profitability into the second half, maybe into '23 and then how you kind of balance? How are you thinking about balancing growth, profitability in the environment?

Question: Peter Marc Levine - Evercore ISI Institutional Equities, Research Division - Analyst : On the gross margin side, it constantly comes up is if you look at contact center gross margins versus typical software applications, it's a little lower. So maybe kind of walk us through why that's -- I know there's a routing cost in there, but I know you guys do something lease cost routing, which obviously you're getting leverage over time, but kind of walk us through like why margins are lower in the contact center and kind of how you're going to kind of scale that up to your kind of...

Question: Peter Marc Levine - Evercore ISI Institutional Equities, Research Division - Analyst : Maybe just 2 final questions. The question I kind of get often is just on the partner side. I know you've been scaling that up over the years. But as you think about margin leverage, people ask this, can you kind of walk us through what the incremental margin contribution is from a partner-led deal versus direct? And kind of as you lean heavily on them, is that part of the equation longer?

Question: Peter Marc Levine - Evercore ISI Institutional Equities, Research Division - Analyst : I think I'll just pass it to you guys as kind of I think the trends are in your favor. You've put up a great quarter. I think the guidance kind of laid out pretty clear path of how you're going to get there. But if there's anything that you want to add in terms of what kind of gets you excited into the second half of '23? Why should people be excited about the stock (inaudible).

Question: Peter Marc Levine - Evercore ISI Institutional Equities, Research Division - Analyst : Great. I think -- right... REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 07, 2022 / 12:00PM, FIVN.OQ - Five9 Inc at Evercore TMT Conference

Question: Peter Marc Levine - Evercore ISI Institutional Equities, Research Division - Analyst : All right. Barry, Dan, thank you very much. Thank you for joining us.