Five9, Inc. Q2 FY2025 earnings call

• Mike Burkland announced his retirement as CEO, with the Board starting a search for a new CEO; he will continue as CEO until a successor is appointed and then serve as Executive Chairman. • Q2 results were strong with subscription revenue growth, Enterprise AI revenue growth accelerating to 42% YOY, highest quarterly total ACV bookings in 2 years (excluding a mega deal in Q1 last year), and adjusted EBITDA grew 63% YOY to a record margin of 24%. • AI success and innovation: Agentic AI Agents with features like AI Summary node, intent detection, Knowledge node, prebuilt templates, and Code Crafter; AI Trust & Governance for enterprise readiness. • Strong partnership momentum with Salesforce, Google Cloud Marketplace, ServiceNow, and Epic. • Leadership team changes: Bryan Lee appointed CFO, Tiffany Meriweather promoted to Chief Administrative and Legal Officer leading HR, Matt Tuckness promoted to Chief Revenue Officer leading marketing. • Key customer wins including a global data and analytics company and a national mortgage services provider, with anticipated ARR impacts.

Subscription revenue, making up 81% of total revenue, accelerated to 16% year-over-year growth. Enterprise AI revenue growth accelerated to 42% year-over-year in Q2, representing 10% of Enterprise subscription revenue. Usage revenue accounted for 12% and Professional Services made up 7% in Q2. Enterprise revenue from subscription, usage, and Professional Services combined made up 90% of LTM revenue. The commercial business, representing the remaining 10%, declined in the single digits on an LTM basis.

• Q3 revenue guidance midpoint: $284.5 million. Annual guidance increased by $5 million to $1.1465 billion, representing double-digit consolidated growth. • Q3 non-GAAP EPS midpoint: $0.73 (a $0.03 sequential decline). Full year non-GAAP EPS midpoint raised by $0.12 to $2.88. • Adjusted EBITDA margin expectations raised to at least 22% in 2025, up from previous expectations of approximately 21%.

• Adverse economic conditions, including macroeconomic challenges like continuing inflation, global tariff increases, uncertainty regarding consumer spending, high interest rates, fluctuations in currency exchange rates, and lower growth rates within the installed base of customers.

Q: Terry Tillman asked about the sustainability of AI goodness and pipeline visibility.

A: Michael Burkland said AI bookings were strong on net new and installed base, with momentum expected to continue.

Q: Siti Panigrahi asked about momentum beyond AI and second half guidance.

A: Andy Dignan said no elongation seen on Enterprise and international sides; Bryan Lee explained guidance with minimal seasonality assumption and longer ramp for installed base bookings.

Q: Raimo Lenschow asked about investment news in the market and partnering.

A: Michael Burkland said it's a good endorsement, but momentum with Salesforce and ServiceNow is strong.

Q: David E. Hynes asked about human agent seat count and AI spend.

A: Michael Burkland said non-AI business is growing, customers are leveraging AI to minimize agent growth, and deflection rates are around 5-10% for voice.

Q: Jackson Ader asked about CEO search background.

A: Michael Burkland said looking for innovation including AI, operational excellence at scale, and growth mindset.

Q: Peter Levine asked about AI readiness and ramp.

A: Michael Burkland said AI bookings mix is a leading indicator, and data in order is a common hurdle.

Q: Billy Fitzsimmons asked about verticals and commercial customers.

A: Bryan Lee said no substantial vertical notes, Andy Dignan said financial services, health care, and retail are top verticals.

Q: Seth Gilbert asked about subscription revenue growth excluding AI and AI scaling.

A: Bryan Lee said non-AI subscription revenue also grew, and AI makes up over 20% of Enterprise net new ACV bookings.

Q: Scott Berg asked about pipeline activity.

A: Andy Dignan said pipeline is at elevated levels, with AI being a tailwind.

Q: Catharine Trebnick asked about executive team changes.

A: Michael Burkland said it's about cost efficiency and better ownership/alignment for future growth.

Q: Meta Marshall asked about Professional Services traction.

A: Michael Burkland said Project Pull-Through is working, with third parties handling implementations.

Q: Mike Latimore asked about Agentic AI ARPU impact and AI usage percentage.

A: Michael Burkland said Agentic AI has a slightly higher price point, and 2 of 3 top AI products are consumption-based.