Five9 Inc Q1 2025 Earnings Call Summary

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

Question: Siti Panigrahi - Mizuho Securities - Analyst : I want to relate to the comment about longer sales cycle on the enterprise side, you talked about DT macro. Could you elaborate a bit on that? Is it particularly in the international region or US, when do you start seeing that? And is this only on the enterprise side or mid-market? Any color would be helpful.

Question: Siti Panigrahi - Mizuho Securities - Analyst : Just to try if I did it trigger any kind of deal slippage to next quarter or anything? Or is that ongoing trend you saw?

Question: Raimo Lenschow - Barclays - Analyst : Good to see you guys again. The quick question from me. Mike, you and I go way back, and we've seen uncertain times before, like how does Genius AI now play into kind of this environment and customers making a decision because it does feel like delaying it or kind of showing a lot of uncertainty might have been the old good reaction. But with AI now, it feels like we kind of actually need to move faster. Can you speak to what you're seeing in the field there?

Question: Raimo Lenschow - Barclays - Analyst : Okay. And then -- sorry. And then Bryan, one for you. Like if you think about the transformation you started following the review, if you think about it, how should we think about the impact on the organization in terms of the different divisions? Was that kind of and more like take underperformance out, think about more what is needed in the new AI world versus where we have people kind of working before. Like how should we think about like the impact areas there, like -- is there going to be like a period where everyone adjusts or how should -- how is that going to play out for you.

Question: Robert Dee - Truist Securities Inc - Analyst : Great. Mike, Andy, this is Robert Dee on for Terry. I wanted to double-click on the Five9 Fusion announcement with Salesforce, specifically, the press release mentioned that Five9 bring your own telephony adoption has doubled in 2025. What do you think is driving the growth in BYOT? And why now?

Question: Peter Levine - Evercore - Analyst : Maybe just to double down, Mike, on your earlier comments. Can you maybe just talk about the transformation you're going through internally. One of the things you mentioned on the call, go-to-market initiatives to drive revenue growth, maybe just share with us what does that entail? Is it more partners? Do you -- are you coming across new buyers given it's more of an AI kind of world? I mean, is the sale -- again, you talked a lot about sales cycles, but just curious, maybe just talk about what the operational review

Question: Peter Levine - Evercore - Analyst : And for you, Bryan, can you maybe just share with us like how you stress tested the full year guide and I do know like the macro sensitive segments of the market that you guys are having in consumer, I mean, that drives a lot of upsell for you guys, and I think it's 3Q, 4Q, the back half. But again, there's still a lot of uncertainty, right? So if you think about what you're seeing today in the pipeline? Just walk us through like how you stress tested these numbers to kind of reinsure us that these are derisked? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 01, 2025 / 8:30PM, FIVN.OQ - Q1 2025 Five9 Inc Earnings Call

Question: Catharine Trebnick - Rosenblatt Securities - Analyst : Pressing more on international. BT, that was a nice land you guys did over 1.5 years ago. How is that progressing now after this April 2 with the tariff announcement even though you're a software vendor, I'm just curious to see if there's any different interaction. The reason I bring it up is I spoke to a company in the UK that said their business really increased dramatically because they're a contact center based in the UK So I just wouldn't be helpful to get more color.

Question: Samad Samana - Jefferies - Analyst : Maybe first, just in terms of the partners that you guys mentioned, it's obviously like a really marquee list of great companies. I'm just curious, are any of these where there is a joint co-selling motion where the vendors are actually incentivizing their own sales organizations. Just trying to get a sense of how much distribution you're getting here beyond your own go-to-market efforts? And then I have one follow-up question. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 01, 2025 / 8:30PM, FIVN.OQ - Q1 2025 Five9 Inc Earnings Call

Question: Samad Samana - Jefferies - Analyst : Very helpful. And then maybe just the medium-term operating model that's in the slide back, I think that's new, Bryan. I'm just curious what you're thinking about in terms of what the AI revenue contribution will look like as you march toward that? Maybe what assumption you've made? And the reason I'm asking is maybe how the gross margin of that revenue stream looks compared to the current gross margin stream and is that something that can maybe push gross margins even higher than where we are today?

Question: Thomas Blakey - Cantor Fitzgerald - Analyst : I think it's on the heels of maybe what Samad was just asking about what the kind of revenue looks like going further out. Obviously, no numbers or no kind of hard guidance here. But previously, Five9 is always kind of if you go back a couple of years, got it to 16%, that was the previous line, and then you beat that and grow in the 20s. Now we're 10% to 15%. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 01, 2025 / 8:30PM, FIVN.OQ - Q1 2025 Five9 Inc Earnings Call So maybe talk about the level of kind of comfort you're in cushion you're putting into that 10% to 15% and what the revenue looks like today in the future from a consumption perspective, versus a [sell] perspective, from a partner perspective, like Samad just asked about AI. So that's obviously going to go up as a percentage of revenue given its growth dynamic. But any of the type of color and what kind of cushion you're baking into that $10 million to $15 I think would be helpful.

Question: Thomas Blakey - Cantor Fitzgerald - Analyst : Okay. And just maybe just one quick follow-up on the transcript stream deal that you did there. And I know you've mentioned this a couple of times now, Mike, you seem awfully excited about it. I know you've given other color about the AI products sorry for the granular questions here. But IVA and Insights and [summaries] are still leading the way here. Is there an anticipation that this could uptick here in the second half of calendar '25, that's it for me.

Question: James Fish - Piper Sandler & Co - Analyst : I wanted to follow up on Peter's question. What are some of those top-of-funnel initiatives you're investing in? Is there a plan to change comp structures at all either?

Question: James Fish - Piper Sandler & Co - Analyst : That's helpful. And just a follow-up. Net retention rate slipped a little bit. I know it came in roughly where you were expecting, right? But for -- as we think about like the in-period number, it's down a little bit sequentially, and it seems as though the enterprise expansion rate was really the driver there. So I guess what's given the confidence that we're going to start to see stability here that, that you walked through the guide, Bryan, of the $52 million out of $62 million and so forth that we've actually hit bottom. Is there a way to think about cross-sell, upsell mix there, even trying of [churn of seats].

Question: Meta Marshall - Morgan Stanley. - Analyst : Great. Just on the elongating deal cycle. I just wanted to see, were there initiatives that you guys were putting in place that were maybe helping kind of quicker time to ROI for customers to kind of help offset that or just kind of help them see that they can kind of take this in smaller bites to maybe shrink those deal sales evaluation cycles? And then maybe second, just on the fusion announcement with Salesforce. It sounds like that's kind of step one and kind of multi product initiative kind of over time, just kind of how we should see that relationship evolving, particularly kind of as it relates to agent force?

Question: Rishi Jaluria - RBC Capital Markets - Analyst : Wonderful. I had two questions I wanted to ask continuing on the theme of AI. First, look, I appreciate all the metrics and disclosures you've given us around AI. I think it really helps kind of bolster the case that you can be real AI beneficiary. Just for the sake of our own clarity and investor clarity, can you remind us what exactly is included in that bucket in terms of products and SKUs because the pushback I've always been getting from bears has been, "oh, there's a lot of basic automation included there. That's not truly AI." So I think a reminder there would be really helpful. And then the second follow-on is, if we think about your medium-term target model, and again, I appreciate you putting that in the slide deck, you're guiding to a good amount of gross margin expansion, which is great to see. To what extent thinking about increased AI usage and adoption being a potential headwind to that gross margin number, just given how operatively expensive, these AI workloads are even post all the model efficiency that we've been seeing over the past six, nine months .