Five9, Inc. Q4 FY2025 earnings call

Michael Burkland noted it was his final earnings call at Five9 after 18 years. Amit Mathradas joined as CEO on February 2. They reported solid Q4 results with exceptional bookings, including enterprise AI bookings more than doubling year-over-year. Five9 is in the early stages of a long-term transition in the CX industry with multiple secular growth vectors. Their platform advantages include data, conversational data, and an end-to-end platform for real-time orchestration of customer interactions. They announced a suite of new AI-powered solutions at the CX Summit. They have a strong partner strategy, with over 80% of business partner influenced. Andy Dignan discussed go-to-market performance with strong bookings, driven by enterprise AI and installed base bookings, and examples of customers choosing Five9 for modernization and AI adoption.

Fourth quarter total revenue was $300 million. Subscription revenue, making up 82% of total, had 12% year-over-year growth in Q4. Enterprise AI revenue growth accelerated from 41% to 50% year-over-year, and core CCaaS subscription revenue growth accelerated from 7% to 8% year-over-year. Enterprise AI annual run rate revenue surpassed $100 million in Q4. Q4 adjusted EBITDA margin was 26% and free cash flow more than doubled year-over-year to a margin of 22%. 2025 total revenue was $1.15 billion, growing 10% year-over-year, with subscription revenue growing 13% year-over-year. 2025 adjusted gross margin expanded by approximately 110 basis points year-over-year to 63%, and adjusted EBITDA margin expanded by approximately 470 basis points to 23%.

For 2026 revenue, midpoint is $1.254 billion. Q1 revenue midpoint is $299.5 million. 2026 non-GAAP EPS midpoint is $3.18 per diluted share, higher than previous outlook. GAAP EPS midpoint for 2026 is $0.91 per diluted share. Q1 non-GAAP EPS midpoint is $0.68. Expect at least 24% in annual adjusted EBITDA margin and approximately $175 million in annual free cash flow. Plan to host an Investor Day in late 2026. Completed a $50 million accelerated share repurchase on February 2, with $100 million remaining under authorization through December 2027.

Adverse economic conditions, including macroeconomic challenges like continuing inflation, uncertainty regarding consumer spending, high interest rates, fluctuations in currency exchange rates, lower growth rates within the installed base of customers. Also, the risk that LLM native platforms could bypass traditional CCaaS architecture entirely, and the need to ensure data and orchestration capabilities are not disintermediated.

Q: Can you help us understand some of the breakdown between what is greenfield and then what is within your existing customer base for AI portfolio?

A: Michael Burkland said it's a combination of new logo attach of AI and penetration into existing customer base, both growing at significant rate.

Q: How do you see to navigate Five9 when it comes to product?

A: Amit Mathradas said he is bullish on CX space transformation and looking to unlock TAM with AI and traditional CCaaS.

Q: What do you think people are missing right now in terms of the contact center opportunity?

A: Michael Burkland said people are just starting to realize the end-to-end platform advantage and the power of providing AI-driven and human agent solutions.

Q: What sectors were seeing the highest uptake for newer features?

A: Andy Dignan said health care and retail were seeing high uptake, with customers wanting to take next evolution to AI and focusing on data strategy.

Q: What percentage of your enterprise base is adopting the AI?

A: Michael Burkland said it's early days, with every customer looking at AI but early in rollout.

Q: How do you think about the risk that the LLM native platforms bypass the traditional CCaaS architecture entirely?

A: Michael Burkland said their platform advantages like data and orchestration capability are competitive moats.

Q: The AI revenue growth acceleration, is that just a function of lag between bookings to when it hits the P&L?

A: Bryan Lee said yes, enterprise AI bookings growing fast and if momentum continues, revenue growth will accelerate.

Q: What does the Google partnership mean for the business?

A: Michael Burkland and Andy Dignan said it's a significant partnership with joint solution development and strong pipeline.

Q: What are you seeing across different verticals and what's factoring into 2026 guide?

A: Bryan Lee said seasonality in consumer and health care verticals, and other verticals in line with typical growth, and Andy Dignan said big verticals like health care, financial services, retail showing adoption.

Q: Talk about new logo large customer pipeline and how AI helps land new customers and dollar-based gross retention.

A: Andy Dignan said good pipeline, AI helps land new customers, and Bryan Lee said momentum in enterprise AI bookings on new logo and installed base sides.

Q: NRR uptick and impact of AI adoption on revenue growth and inferencing costs?

A: Bryan Lee said DBRR driven by core CCaaS and AI, and enterprise AI revenue growth is a big TAM expander with high gross margins in AI portion.