Five9 Inc Q4 2024 Earnings Call Summary

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

Question: Ryan Macwilliams - Barclays Capital, Inc. - Analyst : Excellent. Barry, man, congrats on the career. This is tough, but it's been great working with you. And I'm going to have some Captain Crunch in your honor this weekend. And for that reason, I'll say my first question from Mike. Mike, how have the conversations with your customers been since the election? Has there been any changes? Any changes to start this year? And as you think about potential upside drivers for 2025, what gets you most excited? Is it potential improvements in cloud conversions for larger contact centers? Is it AI upsells? Is it adding more usage receipts? What could improve in 2025? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 20, 2025 / 9:30PM, FIVN.OQ - Q4 2024 Five9 Inc Earnings Call

Question: Ryan Macwilliams - Barclays Capital, Inc. - Analyst : Appreciate the color. Thanks, Mike.

Question: DJ Hynes - Canaccord Genuity LLC - Analyst : Hey, guys. First question is for Barry. What are you going to do with all those ties?

Question: DJ Hynes - Canaccord Genuity LLC - Analyst : Yes, good. Hey, Mike, one for you. So I think one of the questions that I think investors are wrestling with is, If it's not the CCaaS vendors whose AI or agents that end up winning in this space, maybe that business gets cut off at the pass by Salesforce or ServiceNow or whoever that third party might be. Obviously, those other systems still need access to that contextual data that you highlighted as being so important today. All that resides inside of Five9. Can you talk about how you monetize that data access and what that could mean for your financial model, just given there's still some uncertainty about kind of who wins in the end with AI?

Question: DJ Hynes - Canaccord Genuity LLC - Analyst : Yes. No, it makes perfect sense. Thank you, guys.

Question: Michael Turrin - Wells Fargo Securities LLC - Analyst : I'll echo. Barry, congrats. We'll all miss you sitting in front of the fern, but I appreciate you being here today. I wanted to ask about 4Q specifically and just on seasonality, if there's anything you'd call out in terms of seasonal expansion or overall deal cadence of what you're seeing in enterprise. and as a second part, Barry, I'd be remiss if I didn't ask just on your prudent guidance if there's anything else you're contemplating given the transition there as well. Thanks very much.

Question: Michael Turrin - Wells Fargo Securities LLC - Analyst : Perfect. Thanks very much.

Question: Siti Panigrahi - Mizuho Securities USA LLC - Analyst : Thank you, and very congrats on your retirement. Certainly, it was great working with you. And Brian, congrats on your new role. So Mike, I want to keep it at a high level. I mean, we keep hearing about how AI is going to replace human agents. Even we saw last year when Klarna announced that they're going to full-on on AI for customer support. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 20, 2025 / 9:30PM, FIVN.OQ - Q4 2024 Five9 Inc Earnings Call And then we recently -- I don't know if you have seen. They talked about reversing the course now to include even human agents. So my question is, as AI is becoming more mainstream, what are you hearing from your customer when they are thinking about their AI strategy for customer service? What's your view on seed reduction? We should expect how that's upset by AI.

Question: Siti Panigrahi - Mizuho Securities USA LLC - Analyst : Great. Thanks for that color.

Question: Scott Berg - Needham & Co. LLC - Analyst : Hi, everyone. First of all, can you hear me okay?

Question: Scott Berg - Needham & Co. LLC - Analyst : Great. Nothing like being in an airport lounge right now, but all good there. So Mike, I wanted to just talk about the bookings, or maybe Andy wants to take this. You seem pretty happy with the quarter bookings. Are they as you're seeing pipelines and booking the activity actually hit, is it truly in kind of a normalized environment today relative to what you saw in Q2 and the improvement REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 20, 2025 / 9:30PM, FIVN.OQ - Q4 2024 Five9 Inc Earnings Call that you saw in Q3? Just trying to help understand where we are in that trajectory, if that's still to come, or you think we're squarely there today?

Question: Scott Berg - Needham & Co. LLC - Analyst : Got it helpful. And then, Mike, in your pre-scripted comments, you'd spoken about some agents that you're building in conjunction with Salesforce in a couple of different areas. What does the monetization of that look like relative to your own agents? Help us understand that economic model, it kind of looks like for Five9.

Question: Scott Berg - Needham & Co. LLC - Analyst : Awesome. Then lastly, Barry, it's been a really fun 10 years. Thanks for all the old time.

Question: Peter Levine - Evercore ISI - Analyst : Thank you, guys, for my question. I'll let go. Congrats, Barry, on your retirement. Maybe a two-part question. What is on the AI trajectory the 9%, which is up from 7%, I think, Q4 of last year, maybe help us understand what's the trajectory of that look like? Is it steady state or is there an inflection point where we can really see that ramp? And then the second question would be, Barry, you talked about seat count not being the right metric anymore. Customers are moving more from a seat basis to more of a consumption token-based model. So maybe help us understand, you guys used to talk about a metric where the seat price was 150 for the core, and then there was a three to 4x uplift. Is that still the case with a fully autonomous agent today, if the seat count metric necessarily isn't the right metric?

Question: Peter Levine - Evercore ISI - Analyst : Thank you, guys.

Question: Taylor McGinnis - UBS Securities LLC - Analyst : Okay, can you guys hear me? Perfect. Barry, congrats on retirement. Sad to see you go, but I'm very happy for you as you take that next chapter. Thank you. Barry, maybe for you and Brian too, when you talked a little bit about the usage trends earlier and it was clear like in the results that there definitely was a big acceleration in that piece. So as we get into 1Q, can you just talk about the trends that you're seeing? Are you seeing maybe a little bit of a reversal from what you saw in 4Q? Can you remind us maybe what verticals have greater exposure in 1Q? And maybe as like a second part to that question, how we should think about the trajectory of NRR from here?

Question: Taylor McGinnis - UBS Securities LLC - Analyst : Perfect. Thank you guys so much. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 20, 2025 / 9:30PM, FIVN.OQ - Q4 2024 Five9 Inc Earnings Call

Question: Meta Marshall - Morgan Stanley & Co. LLC - Analyst : Great, thanks, and I'll echo the congrats, Barry. A couple of questions. You know, I know you guys kind of made an across-the-board riff that has been kind of flowing through results this year. Just how do you think about kind of where investments, as you kind of ramp up again, will kind of be most focused particularly given the riff? And then maybe just second, just any disruption from Dan's kind of upcoming departure, Dan Berglund's kind of upcoming departure? Thanks.

Question: Meta Marshall - Morgan Stanley & Co. LLC - Analyst : Great, thanks.

Question: Quinton Gabrielli - Piper Sandler Companies - Analyst : Hey, guys, this is Quinton on for Jim Fish. Thanks for taking our question and also wanted to add our congrats to both Barry and Brian here. Mike or Andy, maybe questions for either of you. Avaya recently announced a change to their platform that kind of forces some customers away. I know it's still really early here, but as you've kind of seen this announcement, any change in the pipeline or REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 20, 2025 / 9:30PM, FIVN.OQ - Q4 2024 Five9 Inc Earnings Call customers coming to you, basically any early indication of the donation that you expect from that competitor, or is this just they've been donating for a while and so you expect that to be more steady from here? Thanks. I can take that.

Question: Quinton Gabrielli - Piper Sandler Companies - Analyst : Got it. Thank you.

Question: Tom Blakey - Cantor Fitzgerald & Co. - Analyst : Thank you for taking the call. And Barry, congratulations. It's been great working and dining with you. And best wishes to you and your family. Just maybe a two-parter. First, we've been hearing from yourself throughout last year and from some of your peers about slowdown and close rates and elongated sales cycles related to the increased complexity of large deals and layering in AI and making these things harder to implement. I'd love to get your update there and what you're seeing, Andy and Mike, in terms of visibility on those types of deals. And then, Barry, on the model and these partnerships. We're picking this up from our checks too. Congratulations on this new channel. I'd love any color if you can maybe extend the type of color you normally give us in terms of what you believe partnerships could be over time and any impact of the model. To meet his question about investing, maybe there could be some leverage here or leveraging these huge partners. That'd be helpful.

Question: Tom Blakey - Cantor Fitzgerald & Co. - Analyst : Thank you very much.

Question: Michael Funk - BofA Securities, Inc. - Analyst : Yes, great. Thank you for fitting me in. And Barry, congratulations to you. Mike, I wanted to dig into a comment you made with prepared remarks about your AI strategy relative to some of the proprietary models that are out there, how that advantages Five9. Any more color on how that does advantage you during negotiations, during the RFP process? I think I know what you're talking about, but love to hear more detail on how that differentiates.

Question: Michael Funk - BofA Securities, Inc. - Analyst : Great. Thank you, Mike.

Question: Arjun Bhatia - William Blair & Co. LLC - Analyst : Perfect. Thank you, guys. Barry, since this is your last call here, one for you to end it maybe. I think this is maybe the most optimistic I've heard you sounding on some of the forward-looking trends like bookings, AI traction, pipeline, et cetera, in several quarters here, and yet the guidance for next year I think still suggests sub-10% growth. When we're trying to reconcile those two, can you just give us a sense for where there is kind of the most conservatism? I know you mentioned Q4 seasonality, but how are you thinking about turn-ups? How are you thinking about cloud migrations, AI bookings converting into revenue? If you could just give us a little bit more detail there, that would be super helpful. Thank you.

Question: Arjun Bhatia - William Blair & Co. LLC - Analyst : All right. Perfect. Thank you.