Five9 Inc at RBC Capital Markets Technology, Internet, Media and Telecommunications Conference Transcript

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

Question: Rishi Jaluria - RBC Capital Markets - Analyst : All right. Perfect. Maybe let's just start with a little bit of an overview of Five9 for people who are generally new to the story. And maybe we can segue into that. You obviously had a pretty nice bounce back quarter. Stock was up nicely in Q3. Maybe talk a little bit about what you got out of that.

Question: Rishi Jaluria - RBC Capital Markets - Analyst : No, I think that's super helpful. A lot of things to go on there. So maybe let's start on the AI front. As you can imagine, that's -- one of the biggest debates on the stock today is really understanding the puts and takes of AI. So maybe let's spend a couple of minutes on that. Starting first with, why should we not worry about decompression as a result of AI?

Question: Rishi Jaluria - RBC Capital Markets - Analyst : Yeah. Okay. So let's follow up on that now because I think the second question becomes, why do you have a right to win when it comes to AI? And two, that I hear a lot is, Salesforce with Agentforce and then now, Microsoft with Copilot for Service, obviously, admitting both are very new products. But maybe walk us what gives you the right to win versus those larger brands?

Question: Rishi Jaluria - RBC Capital Markets - Analyst : Yeah. Maybe let's stick on the partner side. Can you talk a little bit about what you've done to build out that partner ecosystem? And you talked -- you started by talking about how you, at the enterprise, used to be known as more of an SMB mid-market player. Obviously, you closed some very large deals over the past couple of years, not reflecting this change. Maybe can you kind of read both of those together?

Question: Rishi Jaluria - RBC Capital Markets - Analyst : Yeah. Super helpful. Maybe let's pivot then to talking about competition. Maybe first, I want to think about your core competitors, so the other proper CCaaS because clearly, everyone knows Cisco and Avaya are losing share.

Question: Rishi Jaluria - RBC Capital Markets - Analyst : So then if we really think about you, NICE, Genesys, maybe walk us through how you think about that? What's your differentiation? And any changes from that?

Question: Rishi Jaluria - RBC Capital Markets - Analyst : Yeah. So I want to drill a little bit into the numbers and give Barry a lot to talk about. But maybe just rounding out competition, you did kind of allude to some of the SMB competitors. So you've seen some of the UCaaS vendors get into the space, Zoom with Zoom Contact Center. RingCentral kind of announced their own rather than they white label NICE. Have you seen any changes in that with the UCaaS vendors even at the low end of the market?

Question: Rishi Jaluria - RBC Capital Markets - Analyst : That makes a lot of sense. All right. Maybe let's walk through that acceleration. So as you pointed out, you accelerated growth at scale. What were some of the key drivers that to led to that?

Question: Rishi Jaluria - RBC Capital Markets - Analyst : All right. Wonderful. Maybe let's talk margins for a second now. So you saw this big improvement in gross margin, about 130 basis points, 190 basis points improvement on the operating line. Can you talk a little bit about what were the drivers of margin expansion? And then how we should be thinking about overall margin growing?

Question: Rishi Jaluria - RBC Capital Markets - Analyst : All right. Really helpful. Maybe sticking with some of the metrics, let's talk NRR, right? So you've seen an improvement in subscription growth, as you've both talked about, but your NRR stayed relatively flat. When can we expect that to maybe inflect positive upwards and maybe even move better then?

Question: Rishi Jaluria - RBC Capital Markets - Analyst : So you mentioned long term, maybe let's go to that. You provided some long-term outlook on the call. What drove the decision to provide that, especially ahead of the Analyst Day rather than waiting for the Analyst Day to provide it?

Question: Rishi Jaluria - RBC Capital Markets - Analyst : Yeah. No, that's helpful. Maybe can you drill a little bit down into some of the macro pressures that you've seen? And when you think about the longer-term outlook, are you relying on macro improving? Or is it more you can grow that rate in spite of macro pressure?

Question: Rishi Jaluria - RBC Capital Markets - Analyst : So now maybe let's bring the growth algorithm and the margins now together. So we used to be a Rule of 40-plus company. I guess, number one, what's your confidence in getting back to that on a long-term sustainable basis? And number two, given investors are increasingly trying to figure out the right way to balance that, how should we be thinking about maybe free cash flow per share growth as being a KPI for you going forward?

Question: Rishi Jaluria - RBC Capital Markets - Analyst : And maybe just on the free cash flow per share.

Question: Rishi Jaluria - RBC Capital Markets - Analyst : Okay. Really helpful. I do have a bunch more questions, but I do want to give -- if there's any questions in the field before jumping back in. All right. I'll jump back in then. Maybe I want to go back to talk about AI. So you talked about monetization and there's uplift that you can get from it. How do you think about what that uplift looks like over the long term?

Question: Rishi Jaluria - RBC Capital Markets - Analyst : All right. Maybe in the minute we have left, how should we be thinking about how AI is going to change the way that you price and the way you sell?

Question: Rishi Jaluria - RBC Capital Markets - Analyst : Awesome. I think it's a great place to jump off. Mike, Barry, thank you so much.