Five9 Inc Q2 2024 Earnings Call Summary

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

Question: Ryan MacWilliams - Barclays - Analyst : Hey, guys, thanks for taking the question. For Barry, just on the headwinds to the dollar base and net retention rate, is this mostly macro impacting call volumes, or are you noticing a pickup in customer agent headcount reductions? And were there any changes to churn rates in the quarter? Thanks.

Question: Ryan MacWilliams - Barclays - Analyst : So it's mostly changes in guidance from your customers around their plans for the fourth quarter.

Question: Ryan MacWilliams - Barclays - Analyst : Thanks, guys. 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 08, 2024 / 8:30PM, FIVN.OQ - Q2 2024 Five9 Inc Earnings Call

Question: Matt Van Fleet - BTIG - Analyst : Good afternoon and thanks for taking the question. I guess, if you're looking at how the contract terms for a bunch of the AI and automation products are shaping up, how are your customers looking at purchasing that and how much of a change in dynamic of a revenue model do you expect to occur over the next couple of years and sort of wrapped in that, can that maybe offset some of these lower seasonal off tick on a seat basis by adding more product? Thanks. 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 08, 2024 / 8:30PM, FIVN.OQ - Q2 2024 Five9 Inc Earnings Call

Question: Matt Van Fleet - BTIG - Analyst : Great. Thank you.

Question: Arjun Bhatia - William Blair - Analyst : Perfect. Thank you, guys. So I understood. I think what you're saying about the seasonal patterns and how you're baking that into outlook but when you think about the June bookings, how much of that would you attribute to macro versus go-to-market execution? And then, Barry, what would you encourage us to think from June bookings and Q4 seasonality as we just think about our 2025 growth estimates? Thank you. 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 08, 2024 / 8:30PM, FIVN.OQ - Q2 2024 Five9 Inc Earnings Call

Question: Piper Sandler - Jim Fisher - Analyst : Great, I turned into a Fisher as opposed to a Fish, but I don't have as good of a shirt as Ben Fleet, but apologies for that. I did want to work off of Ryan's prior question on kind of two aspect, guys. You guys had been expecting NRR to be troughing. I get the rationale why, but why wouldn't NRR kind of stay at this range into the foreseeable future? And how much do these AI cross sells actually impact NRR at this point?

Question: Siti Panigrahi - Mizuho - Analyst : Thanks for taking my question. I want to focus on the acquisition of Acqueon. Looks like you have partnered with them more than two years now, and you guys talked about some of the deals like ARR, more than $1 million, $1.5 million kind of per deal basis. So help us understand how many customers do they have, what kind of overlap you have, and what's the revenue run rate they have? And, Barry, like when you said, no revenue contribution in material, is it because of the debt for write-down or anything else?

Question: Siti Panigrahi - Mizuho - Analyst : Okay. Thank you.

Question: Terry Tillman - Truist - Analyst : Yeah, thanks for taking my question. It's a bit of a multi-parter, but there's a number of things to unpack. So hopefully you'll bear with me here. I mean, this is one of those areas that I feel like is an imperative. Contact centers, we've all been talking about it for a while as well. If you want to do AI and automation improves, yes, you to the cloud. So with some of the deals that slipped out of June, and you didn't close any mega deals, I think you said, I mean, what are they saying? Are they just going to kick the can down the curve to `25 or `26? Or do you think some of these deals are going to close in the 3Q and 4Q and you just want to be conservative? And kind of related to this, because of these mega trends, what are you seeing at the top of the funnel and around demand gen? Is any of that changing some of those forward leading indicators? Thank you.

Question: Terry Tillman - Truist - Analyst : Thanks a lot.

Question: DJ Hyness - Canaccord - Analyst : Hey guys. So Barry, your old guidance had pretty material re-acceleration baked in for the second half. It was predicated on kind of the implementation backlog standing up where it sounds like nothing has really changed there. And then the seasonal stuff kicking in, right. I understand that that's not happening. Does this mean that the acceleration gets pushed out by a couple quarters or is what you're seeing now calling into doubt that that re-acceleration happens?

Question: DJ Hyness - Canaccord - Analyst : I mean, if there was ever a time to make an exception to the rule, Barry, this would be it.

Question: DJ Hyness - Canaccord - Analyst : Allright. I appreciate it. Thank you.

Question: Taylor McGinnis - UBS - Analyst : Yes, hi, thank you so much. Can you guys hear me? Perfect, awesome. I know place was not so great service. So that's good. Barry, maybe just wondering if you could just give us a little bit of color on the three different buckets and how those might be impacting the guide. So for instance, If we look at the old guide and the incremental recurring revenue or ARR needed in the second half to hit that guide, you maybe give us a sense of the portion of that was coming from existing ramps, new logos, and the seasonal increase, and then how that might differ under the new guide, just so we can have some help there in quantifying it.

Question: Taylor McGinnis - UBS - Analyst : Perfect. Thank you so much.

Question: Peter Levine - Evercore - Analyst : Thanks for squeezing me in here. I appreciate all the color, maybe just one on this gross margin, not margin. You've seen some compression. You kind of talked about the Fed ramp investments on the infrastructure, but they need to show us like, when's the inflection, right? Because I think that's maybe one pain point for some is we're not seeing the leverage in the model as we would have expected at this point in time. 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 08, 2024 / 8:30PM, FIVN.OQ - Q2 2024 Five9 Inc Earnings Call

Question: Peter Levine - Evercore - Analyst : And if I can, are you seeing any pricing compression just on their core voice contact center seat? I know it's typically been 150 per month. Is that steady? Are you seeing any, I know there's a lot more competitors in the space today than there was 12, 24 months ago, maybe just any color on the core voice seat?

Question: Peter Levine - Evercore - Analyst : Thank you, Dan. 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 08, 2024 / 8:30PM, FIVN.OQ - Q2 2024 Five9 Inc Earnings Call

Question: Meta Marshall - Morgan Stanley - Analyst : Great, thanks so much. Maybe a question just on you noted kind of sales execution, but I guess I just wanted to get a sense of, is the time to get these deals signed off on, elongating just because of the amount of things that you're kind of throwing into the RFPs, like while you're trying to throw in kind of AI and other pieces of it, it's just kind of taking longer to get those approvals more so than execution. And then just as a second question, I know you guys have kind of expanded the professional services into the channel or kind of enabled more implementation by the channel. Just any different trends that you're seeing there, thanks.

Question: Meta Marshall - Morgan Stanley - Analyst : Great. Thank you. 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 08, 2024 / 8:30PM, FIVN.OQ - Q2 2024 Five9 Inc Earnings Call

Question: Samad Samana - Jefferies - Analyst : Hi, good evening. Thanks for taking my questions. Maybe first one, just appreciate all the disclosure. There's a lot of moving parts, but if I just -- if I think about the implied 4Q guidance, I think it implies 9% subscription revenue growth, Barry. And what I'm trying to understand is to get to that number, it tends to suggest that maybe new book to dollars were down in the first half of the year versus 2023. Is that right? Is new book ARR down, flat or up? And for the first half, and I get more importantly in 2Q because just the magnitude of that $40 million reduction to the implied 4Q number suggests that like new bookings may be actually coming in are declining or contracting. Can you just help us understand that part of it, please?

Question: Samad Samana - Jefferies - Analyst : Great, and then maybe just to follow up, I fully appreciate the complexity of, we have a world that is changing rapidly and there's a lot of volatility. And I guess my question though, is it feels like we've, it's been about four to six quarters where it seems the visibility and the guidance are lower or maybe there may not be as much visibility as anticipated. Just as I look at the guidance history, is it time to maybe rethink the way that you're building up your guidance, you're making some kind of permanent change to the assumptions. Because I think that's creating volatility in our estimates and in the outlooks, I'm just curious if there's any rethinking on the framework to guidance in and of itself. 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 08, 2024 / 8:30PM, FIVN.OQ - Q2 2024 Five9 Inc Earnings Call

Question: Samad Samana - Jefferies - Analyst : I appreciate the thoughtful answers as always, and thank you for the color.

Question: Michael Funk - Bank of America - Analyst : Hey guys, good evening. Thank you for the question. So kind of related to the last question, Barry, on the derisking of the guidance and the confidence level in the guidance, understand you talk to customers to help you think about the back half of the year, maybe you've got a little bit less ramp in fourth quarter. Wha is your impression though, the customer's outlook for economy. There's a lot of debate around recession, no recession. Does their outlook incorporate a recessionary environment or not? And if that did occur, would that be more down the sides of your guidance?

Question: Michael Funk - Bank of America - Analyst : But is your view, though, the customers are projecting a recession before Wall Street's projecting a recession? Right now, Wall Street is probably more soft landing and recession. It sounds like your customers, though, are gearing up or spending like it is going to be a recession or it is a recession, because that's really the question.

Question: Michael Funk - Bank of America - Analyst : Understood. Thank you.

Question: Catharine Trebnick - Rosenblatt - Analyst : Hi, thank you for taking the question. On your $1 million ARR deals, typically that's where you really have your bread and butter during the quarter. So can you poke a little bit more? Is that a lot a very competitive area now with more players, more pricing, or is it just a delay? Because it seems like you're saying the funnel is healthy and the pipeline's healthy. So I'm just trying to reconcile that. Thank you. 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 08, 2024 / 8:30PM, FIVN.OQ - Q2 2024 Five9 Inc Earnings Call

Question: Catharine Trebnick - Rosenblatt - Analyst : Thank you for taking my questions. Appreciate it,