Earnings call transcript Q2 2023

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Operator

Thank you for joining us today.

On the call are Mike Burkland, Chairman and CEO; Dan Burkland, President; and Barry Zwarenstein, CFO.

Certain statements made during the course of this conference call that are not historical facts, including those regarding the future financial performance of the company, customer growth, anticipated customer benefits, company growth, the anticipated benefits from and timing of the closing of our proposed acquisition of Aceyus, Inc., growth in our portfolio of products and features, industry size and trends, our expectations regarding macroeconomic conditions, company market position, initiatives, and expectations, technology, and product initiatives, and other future events are forward-looking statements within the meaning of Private Securities Litigation Reform Act of 1995. Such statements are simply predictions, should not be unduly relied upon by investors, actual events or results may differ materially, and the company undertakes no obligation to update the information in such statements.

These statements are subject to substantial risks and uncertainties that could adversely affect Five9's future results and cause these forward-looking statements to be inaccurate, including the impact of adverse economic conditions, including macroeconomic deterioration and uncertainty, including increased inflation, increased interest rates, supply chain disruptions, decreased economic output, and fluctuations in currency exchange rates, lower growth rates within our installed base of customers and our ability to close the Aceyus acquisition and achieve the intended benefits from this acquisition and the other risks discussed under the caption Risk Factors and elsewhere in Five9's annual and quarterly reports filed with the Securities and Exchange Commission.

make non-GAAP will this measures management call. addition, reference financial to during In why financial appendix relations and website use regarding discussion well the release we A of investor afternoon this non-GAAP investor available our our investors.fiveX.com. as at deck versus issued in earlier currently in reconciliation GAAP FiveX's measures our non-GAAP section is results the on guidance as in press of of information and and

are unless otherwise indicated, Lastly, non-GAAP. a discussed figures reminder that financial

like And call to I'd the now, to Burkland. over FiveX's turn Mike CEO, Chairman and

Mike Burkland

Thanks, Emily, call and thanks, afternoon. our everyone, for this joining

I'm strong driven value pleased strong $XX by quarter or bookings, QX Platform demonstrating Intelligent for margin drive results we the our second growing execution. revenue, quarter go-to-market primarily operating Enterprise growth was LTM Also, for revenue. with CX cash revenue a new for subscription strong logo million helping revenue to Adjusted XX% report XX% our of of of XX% EBITDA quarter record of the year-over-year, particularly our of a and XX% year-over-year. second flow enjoyed

Turning trends the three to continue our in to our opportunity. that confidence market now drive key

forcing penetration even is develop solutions. still less to the enterprises are plans XX%. with in concrete terms an that Remember, First, vendors their on-premise legacy on-premise, replacing greater believe we retrenching, urgency of center sense to replace contact of cloud than

experience, to customer initiatives Second, transformation cut and companies increase are pursuing enthusiastically enhance costs revenue. digital

significant cloud. Third, catalyst enterprises the to AI for is becoming to a shift

in recap the on its our I trend, generative like third our particular to AI, impact all given on on focus FiveX. this Regarding industry and recent perspective would

also TAM. the broaden the well customer a past this next riding software AI opportunity positioned we're clients revolution our wave generative We business. of and tailwind for several AI AI it's provide our push manage a FiveX Not to only for is for potential continue with has technology of and years, interactions. to their innovation, industry to feel automation wave tailwind the but We our we to forward. been and enterprise is the the to to FiveX believe

As interactions, more directly gains increase for our customer productivity expansion AI nearly and leads form an to shift rate demonstrated area for of in quarter. and on as automation drives in FiveX. $X by and of a that toward revenue the an mix TAM automation AI attach efficiency a focus per new ARR clearly XX% is million-plus wins enterprises in the logo of

we platform, growth what the business, drivers upmarket namely main continuing and our international discuss to as view like expansion. three I'd for our Now our march our

AI in with and leader I'm capitalize customers announce begin customer our opportunities: data this platform. experiences large leveraging to market of Platform, large to our the two and to an data our we acquire have Aceyus agreement personalized first, uniquely streamlining ability analytics. important Aceyus, journey, Intelligent to on a entered pleased our believe throughout second, We into Let's and automation CX definitive contextual data a Today, extension from of on-prem integration contextual deliver solutions. will the using cloud; as advanced including in to migration enterprise accelerate

one on at time. a these Let elaborate me

ability complex data for with cloud by business to ACDs, allows of pre-built transition entire the cloud software from and start to data from robust multiple to Let's with the Using to migrations. while business a maintaining data other dataset take consistent customers CRM, run to normalize many environments streamlining In enables time migrations Aceyus scale provided and the smoother advantage short, allows systems FiveX catalog WEM, and ingests legacy beyond. of their integrations, dashboards. reports, across Aceyus's value. FiveX Aceyus This smoothly migration during the of faster platform visualization and and continuity large insight systems.

Now let's to lives dozens journey. opportunity, personalized contextual experiences to the systems. customer of which in data is data This the about contextual talk deliver throughout often disparate second leverage and siloed

a accuracy enterprises, will their FiveX we to predict the data access accounts prospects analytics where to customer base Dan robust, differentiate and with large joyful required This in pre-built the customer two contextual to deliver especially data about automation talk Aceyus in largest As experiences. data data many platform critical the of is use some personalized including the lake. will solutions moment. as includes advanced enable customers, FiveX, Fortune for further our companies integration of to deliver and market our expect. and AI contextual our this which and joint customers will and integrations this Aceyus data and FiveX expand applies to to platform's integrate Aceyus's leader efficacy optimize, a XXX journeys of

expansion. now international and to And like on I'd march focus upmarket our

We report $XX that accelerating such rate. adopting of ARR deals, a number $X alone anticipated in Dan discuss record see continue will million to pleased an I'm to momentum booked to four we logos which approximately large and represent with FiveX ARR unprecedented upmarket QX enterprises new million-plus at FiveX.

$X As our customers XX% make ARR more up recurring than revenue. of million-plus a reminder,

network high reflected channel This global million partners. is paying now dividends strategy their for by FiveX. that all-time commitment with march partners by XX $X international in ACV implementations international pipeline XX% partner helping over bookings over in This and the done being us our leading of international also quarter, achieved channel and continued was global bookings, accentuated an by expansion This expand record a footprint. upmarket ever record and the partners strong our from growing to performance of our are and

also addition Telus on to strategic elaborate will QX, to signed BT as moment. partnership, a a partner also we announced which FiveX, in Dan recently the International in in example, For

of and away I we energy employees. Summit Porto, blown development our analysts, industry held personally Lastly, in enthusiasm location event May, the new our this CX our international by partners, in customers, hub. at Portugal, was by the and EMEA

with and re-energized statements to refreshed recently vision you and FiveX. over to I mission Before I Dan, want turn it for a our to spend moment share

mission with and deliver enterprise passionate combined clients to Intelligent Our better customer to business CX experience enable to is Platform outcomes. experience their customer experts by our our reimagine providing joyful

to CX. stakeholders. as Our many bring Joy, it vision many FiveX up joy to forms and for to refer in this We shows is often

effortless For customer consumers, it and experience. means fluid

For clients, revenue, our enterprise outcomes it satisfaction, efficiency costs. lower increased business greater means higher as customer better and such

FiveX, deliver it For to armed data, agents knowledge, intelligence automation using means customer with the being great experiences. and

contact to their tools workforce. the supervisors it and means and in For and manage engage managers having center, the applications

for together. will means and For and in our enjoy partners, it our every one success drive our customers. And for day, resulting unique by means culture, and purpose, and filled people values employees, with the that it winning a joint technology we journey living providing our where passion

goal to involved to In well is all summary, FiveX CX, bring Joy as in as the FiveX our community. entire

our And go and to Burkland. ahead. now, I over Dan it CRO, President turn Dan, will

Dan Burkland

afternoon, good and Mike, you, Thank everyone.

trends Mike persistence booked momentum earlier. some seeing we quarter a of that key high the installed on mentioned, an base. As The business, new indicating we for our talked were about Mike the healthcare on are we're bookings new the still logo net the other facing and quarter renewed the our side strength three than conglomerate, headwinds but of any all-time

high. reached pipeline another all-time our addition, In

fourth new share already $X.X wins to three earnings regional I'm examples logos. share in of a the quarter. win that bank to disclosed million I'd given going call. normally Now, like key Today, for QX last the some we key quarter's ARR I discuss

XX The first life. and a providing company medical, Fortune is insurance for coverage global healthcare disability, dental,

FiveX will tremendous existing result FiveX. Verint the leading had through Over integrated our chose helping described the do several order they maintaining Aceyus M&A, FiveX. in what and this precisely over our to platforms API. over will their to throughout stream a We enjoy and to experience while applications modern migration FiveX due in integration to to the systems, consistent ARR existing $XX FiveX, dashboards omnichannel and accumulated transition reports, to voice using the they that's visualization initial inefficiency proprietary With make They disparate Mike their solution also CRM complete to also legacy anticipate to lacking years from earlier, data while integrate fully that automation. million them to

the touched by and selected Pega quarter, and booked win a suite of they FiveX full one key Salesforce, the beginning highlight second which QX, last at ServiceNow omnichannel The CRMs, enjoying the to be we full to I'd is will like powered bank, regional integration WEM, experience on and FiveX Verint. deep with of

We and from also sources. dashboarding sold to real-time Aceyus different for analytics several data display collect and information

Assist, million IVAs as this We information digital to personalized and as coaching Agent initial ARR in FiveX. will agent $X.X voice well retrieval approximately of our and provide purchased anticipate result customer experience. automatic in a to real-time which create to they order addition, In

FiveX. realized will they entire the using contract embarked America. decision the been FiveX cancel an solution, of would solution was with further company's providing evaluation, operations, continue company facilities third is competitive technology them The implementing on for key primary be CCaaS selected easy a North FiveX to acquisition and company tools win healthcare recently had care for acquired competitor. made they the throughout to a our have had The combined Upon superior staffing, and implementing who and They FiveX a when company.

IDs, for to anticipate their as self-service refilling FiveX our have Epic, well ARR in also initial this order and Verint. We and They invoices. powered Salesforce, $X.X We appointments, will Athena to solution in as be result WEM, million integrating purchased FiveX. by CRMs, using IVA approximately paying prescriptions caller scheduling to authenticating

a is systems, which ARR of reseller order legacy FiveX. in example, also We included anticipate agreement. result initial Telus this internal International, business. into to replacement This $X.X serve the mentioned of entered we million approximately earlier, of their BPO agreement fourth portion a use to The their which Mike where

which a FiveX do, customer than normally They from and competing our independent replaced us double has academic IVAs. research their ambulatory an facilities their and approximately center their $X.X wasn't hospitals. FiveX that their from with needs. ARR since of has spend And WEM, on to by I'll FiveX. use Separate added powered FiveX centers, $X.X providers as had who acute customer solution, an who of will expanded it XXXX of with using was million. Verint, and network This meeting FiveX, they of now, a approximately share more This support CCaaS is focused million care also example been healthcare use I a with

legacy we're deliver see, see continuing upmarket, their can customers. to enabling you as better experiences replacing strong while to to momentum systems, So, enterprises

Barry? now with us to off hand financials. it through the take Barry would And to to that, I like

Barry Zwarenstein

Thank you, Dan.

LTM We with driven by are our and XX% makes which our primarily expectations. grew both top- up pleased XX% of with our exceeding results now year-over-year, performance revenue. Revenue business, enterprise bottom-line

the revenue subscription below drop with we improve. XX% year-over-year, XX%-s which part business grew enterprise Our the revenue, total have the XX% line are when of than levels view outlook historic subscription in makes as in recently. eventually macroeconomic our in base. been communicating XX% high conditions revenue, LTM up of enterprise We more transitory, to resume our growth believe subdued installed in positioned by We this we driven well growth of the

the XX% in business, basis. an which of commercial revenue high-single represents Our year-over-year digits grew on LTM the remaining LTM

Recurring quarter. of revenue made XX% in revenue the second total up

of The other comprised X% services. total professional of was revenue

around more give color now I'll revenue.

makes deals rate. mentioned, typically approximately growth, remains The to our which of Mike at logo a new annual As continue two revenue year-over-year of the mega track. strong grow half side our our business, on of up deployment

ramping operations of continue expect throughout of delivery deployment substantially conglomerate in the to with to XXXX. and company full healthcare the parcel international end be the XXXX continue XXXX, by to deployed We early the

backlog customers with that good Additionally, revenue yet visibility. from us enterprise generating provide our not are substantial other

However, meaningfully earlier contribute not revenue that you discussed this to remind that four Dan deals I to like will would the year.

our one headwinds, base, to guides] challenged be to continue quarter, I'd consumer. Now, vertical, in turn in facing installed to namely the [cross (ph) with by particular, which second macro like the strongest

similar sequentially vertical, declined a of second the The gifts, largest verticals driven remaining sales, year. sequential improvement. aggregate, reminder, compared in mid-single digits quarter as sequentially second our in quarter customers parts, XX by installed order by in and apparel, growth this home a mid-single rate order grew XXXX. base, third are in quarter This the last of to As consumers in digit at and primarily it was used

percentage base. our X macro Our due LTM decline the to growth causing sequentially, subdued ongoing dollar-based rate retention in mainly of was XXX%, installed a headwinds points

other our XXX%-s offerings. minor further dollar-based LTM we improve. to retention our due expect until and to rate automation conditions of demonstrably towards customers, which by Longer term, higher mix higher weakness should trend to from You and enterprise retention high continue a XXXX macro ARPU higher rate especially AI ones, retention larger and expect rate in have a

adjusted year-over-year. gross year-over-year was since margins of is of the points quarter gross points expansion in fourth the Second quarter sequentially margins XXX This XX.X%, XXX approximately adjusted first basis and increase an XXXX. basis

point last However, to year-over-year of the large our to incremental ability I upfront given would quarter, further margins continue hinder adjusted logo term. number investments that to further services, are like professional we the scale new record near out in making which gross growth wins this in to report may

was million, adjusted an basis $XX.X increase EBITDA of a quarter year-over-year. approximately an margin, Second XX.X% points representing XXX

non-GAAP quarter diluted Second year-over-year $X.XX was per of EPS share. share, increase $X.XX diluted per a

million, XX generated Turning which in came strength part to a We operating $XX.X now QX record, in cash performance, by flow driven flow. continued at in cash of DSO days.

operating delivered cash now flow. positive have of quarters We XX LTM consecutive

optimistic remain given NOLs long-term for cash quarter about and our a million flow DSO. continuing substantial our also potential generation flow low our We record. free model, of $XX.X our Second cash was QX

Aceyus. turning in for subject purchase is cash, comments million acquisition $XX Before to to price some on certain The adjustments. guidance,

the to migration this streamline expect ongoing the leverage revenue quarter. as close data enterprises to to deliver large personalized Mike described, and be will customer of the FiveX, contribution of but experiences positions transaction contextual acquired The We journey. third to and FiveX by our to immaterial throughout uniquely Aceyus margin end

I'd today's to a the remarks and third like year for quarter of discussion prepared our now with guidance full XXXX. finish

represents $XXX the we're in revenue into guiding top-line, increase, a For X% million, QX guidance with midpoint sequential pattern to heading of QX. which typical line a

to are $XXX guidance $XXX.X we year, million. revenue full from the the million of midpoint For increasing

earlier, consumer mentioned the headwinds our vertical second in faced installed quarter. macro in base the I As

our in guidance this second half have annual typically we seasonal is consumer the of prudent of for uncertainty. that in most Given with vertical the year, been our factoring now

for a guiding share. come at midpoint to diluted the As of we bottom-line, QX $X.XX are per in non-GAAP EPS

non-GAAP to per we're revenue prudence guidance our year, share. our $X.XX midpoint diluted guidance. EPS the full and annual guidance EPS the non-GAAP $X.XX third mirror quarter the For Both the of increasing from the in

taxes refer to presentation posted additional website estimates in capital the for expenditures. and count, share Please Investor our Relations including

summary, In second with performance. we quarter are pleased our

While our environment by automation growth expansion. AI our opportunity highly about challenge demonstrated significant continue continues prospects and macro wins, installed upmarket, logo our due we the new temporarily remain our the long-term to optimistic current international and base, capitalizing momentum ability to to large the as on

ahead. Operator, please go

Operator

first Berg much, Instructions] Thank you will Needham. [Operator question Scott so Barry. our And come with from

Scott Berg

of in the bookings Dan and get my quarter, multi-part congrats conference you the Magic Barry, I press it all on is, going Quadrant. changed which believe second, this from question. a two category Gartner kind during I'm to you have for in previously, Mike, the then it release and leaders the kind category thanks I'll ranking? you quote Leaders components now. guess here, versus taking ranked prior I Because of were been because within I and execute. said, in nice the Hey, the on what is, And was I a not guess of what make there the on in did to the criteria new based to completeness that time call ranking they ability one, you. Thank question there that of in your though, vision the specific particular find a, [indiscernible]? guess recent it had in. your

Mike Burkland

Leaders question. great Yeah, Scott, back we're be in to the very quadrant. pleased Yeah.

win the and of changed, I we it's a past, it's by frankly, there were validation be recall, success ever And those we're and FiveX, been our across high in as all enterprises right, and of may The in As we're nice the some recognized our think recognition you market. in to just deals large very significantly biggest the CCaaS. quite they've as march are rates really back the and Leader as winning -- choosing Gartner strategic initiatives. what having upmarket,

one. that's think I

in recognizes is expansion is leadership for strategic international think, long We've about I time. our our Our AI the Gartner talked the progress And And initiatives another. a third. those.

we're honored, also So but happy, we're we're surprised. we're not thrilled,

Scott Berg

great the again. on Congrats quarter Excellent.

Mike Burkland

Thanks.

Operator

hear And with MacWilliams Scott. Barclays. Ryan will we now Thanks, from

Ryan MacWilliams

quarter. the in large Hey, question. see momentum for deal the guys. the Thanks taking to Great

the for deal generative to this you from pipeline does at large the And the AI look these like priority how contact more center half moving their contact point? your of are tools So, seeing leaders systems on-prem center year? put for on cloud Thanks. second

Dan Burkland

pipeline, that looks take the I'll one very on it Yeah. strong.

mover years. of got it's we're that As we've to a of capturing that And up vast and the turning a through the then their companies and coming increase and first By we being got number getting ever, with just quite a scale talked about validation earlier, opening us. to We pipeline here the those larger It last couple of commensurate portion get a of and team CCaaS in market executing largest sales of to those very takes to for record is time selection seen pipeline. well, time others that. We've the saw process. some we've than in and a RFPs. first kind and some opportunities sales continue the

As scale, far way AI earlier really tooth in longer implement It's you effectively it's the And of only not a on is combination. Mike the legacy more secondly, it's getting and the can first. it as prepared to touched -- the move and remarks. the AI being cloud driving investment. in a do the to both interest, so systems at the combination

they there, they're need on So, most get a and, them process. into that of already accelerating well if a not -- process, they're recognizing to are they're

Ryan MacWilliams

Thanks, color. guys. great It's

Dan Burkland

Yeah.

Operator

with And we will now hear Hynes from DJ Canaccord.

DJ Hynes

you'd bookings enterprise that's a compares I the see maybe on few any the that quarter. past. be with color you. million that mean, anything that shared Dan, is you've mean, get I don't Is respect to love the out just metric Congrats a to motion? driven to Any just on Good quarters. follow-up being color would I you. one us call And with be in there international? would past to of then I'd it think channel guys. for $XX there Hey, like, in how maybe momentum? go-to-market maturing the by helpful.

Dan Burkland

Yeah. Great, DJ.

had mega at have deals, large the we the but of delivery you wins as size. If to as healthcare look this series as service refer we we parcel conglomerate, never well them, the of have a

type this three So, never on or XX the deep look list that at many when this or largest of seen deals quarter, volume. deep you for even we've four of

So the those million among four. we're that Mike just fact out that's over $XX there why called

not it's we're the may a of concentration super the years that norm. So, couple ago, a high this been have of case more become seeing

So sign there. that's great

far as As the that's the channel, board. across

partners same way partners, of the headed We for, you some get that want that the about right huge think first that but doing partners, business partner sure And mentioned do have pole go-to-market many that market He's in of for part for their you years and they to We continue I sure being been going checks of the to it sure to done that are feedback. it's that but almost the FiveX be as group organization. four, customer, also a and you, a five if the to brings it's new and We go up signing make And choice. will. Butterbaugh. making through I I thing just channel and very investment manages not us. him right with years And and really making scaled catering always now. we we've and us new by strong to for the easy position, can up think, our on Jake right in lot several to that by thing partner before. make they we're with view and a that effort of out the us we're sure spend doing making represent we're that

DJ Hynes

sense. Look Makes in you guys Thursday. to Yeah. seeing forward Boston on

Dan Burkland

Likewise. Thanks, DJ.

Operator

Morgan Stanley question. next Marshall Meta with And has the

Meta Marshall

much not cost or just transitions? And customers it to just you to have I on in either cloud maybe you to just on Thanks. kind as invest you. Thanks if streamlining Aceyus those of allow Great. professional of that, services kind then savings to resources layout wanted could and of those quantify kind just transition eventually? know does

Mike Burkland

that that's large them. enterprise to start beloved beauty so accounts of in were are our happy entrenched Aceyus winning by And got center XXX we market. these large with Meta. that quite are frankly I'm Yeah. again, on the contact clients. joint the attention enterprise is their they They they that, Fortune in And,

as heard they to In fact, require business. see prospects our that our even where And that provider there's we're well, because largest a from from the of a that's one thing to integrate frequently RFPs requirement with with Aceyus. going verbally run we Aceyus, RFP that we fairly anecdotally just in integrate we've lot our our CCaaS is the how

to I sure that So, and everybody that's first want understands. foremost something make

transplant, right? business how very enterprises the run fact to these strategic They and on-premise us. got cloud is so from across and enterprise with about centers. continue to a large are data, run streamline this. installed of Remember, fairly ability we a really very, their base to integrations and heart sizable is that's migrations their continuity very large on-premise these similar data allows to systems have that migration contact They've what a to to back-end many talk business their major during they transformation This the can is

So, really ability It's as kind to by business we that's of continuity FiveX, migrating period migration what onto and they're beyond. on-premise across off mean streamlining. of have that throughout legacy their time the and

the deliver the contextual that ability contextual across all data of that to enterprise to And data in is stool the silos leg to in then that customer second brings our the real experience. that Aceyus personalized platform data these leverage

the did very, So, strategic why it's acquisition. really propositions value two reasons and we significant very

Meta Marshall

much. so Thanks Great.

Mike Burkland

got it. You

Operator

Levine moving Peter Evercore. And we on to with are

Peter Levine

Mike, had question deals $X the in in of AI. for prepared mentioned something remarks guys my your quarter taking the million-plus you Thanks XX% here.

internally it it all understand macro? holding from the going look help if budget? they're attach like Is So, the Just kind with the ready what's today, installed customers base perhaps I what's us not of back you what's going guess in? really customers stopping Is your Is look rate it all? data? And just across from like?

know could share a second I user if is can a consumption on it's Thanks. there's us you the squeeze that price help other centers basis or contact having you just lot with how I in with conversations per a customers between on And a pricing. charge us in and is today curious model. just you're AI. But if it around

Mike Burkland

Yeah. range Sure, eight Peter. pricing, and we you in pricing. in our will, They as start well. automation or, words, I'll the with -- portfolio. of usage-based have pricing AI if terms Again, in port, capacity-based products pricing oftentimes other to we it's per most offer are as

So, right? we're AI pricing driven, enjoy our the very customers of all that's the and gains from day, gains the across options. of the products pretty and is flexible really productivity it's efficiency ROI price what significant, drives that end that the In And spectrum our point.

an in enterprises talk almost also how general, you interested out implement of large that In automation. process and of looking the that there enterprise has is we at occur. avoid actually that their not in -- but is terms contact how in will, are press. that about in the enterprise, Most definitely pitfalls, if their are just AI across some to what's back, I to think center, very your every to holding education AI There question to

AI large in in base. our the level So, of is a process but anything, XX% interest data don't rate I just point to good enterprise and terms very automation education that -- an deals more I think than across prospect our attach think it's

Peter Levine

Thank you, guys.

Mike Burkland

it. got You

Operator

I'm think And Jefferies, Samad bring with see our going come on, quite working. him. isn't you question can next to Samana I whose him don't from video but

going Mike But leave ahead to Barry, off. Samad. probably so and questions, ask please I'll go them him. and your So, you're Dan, see not just

Samad Samana

lead but thanks questions. you appreciate on the the quarter. clarity guidance. just, Emily, the I technology I impact issues I second some for ask taking Wow. in. wanted the yeah, the appreciate vertical my Gents, about the and in to consumer Barry, here,

uptake for rate of in in subscription well. revenue because exit in XX%-s year that like, I that on it about progressed. you is the a the the think the as see it more vertical like or now current there it of, for understand, because rolling thinking guidance? subscription low not sequential it was understand, of based a number kind exiting implied prior guess to guess the think XQ consumer one, subscription One, -- way in think the to XQ just, can factored I just mid -- I been that I to revenue more guidance trying I'm anything wanted I forward as revenue to And not a right high-teen had the beat? year is like you're full else

Barry Zwarenstein

Yeah. Thanks, Samad.

through and Let [full This beat (ph), sort second put of when half that not we right. into there weakness of that's function consumer, because end XX% cautious start at and we the over the the be We need the back we uncertain me times. these putting through -- amount] may in to this of total you in in pocket of a QX. had is go really

metric-driven. We have data from our customers. highly We're

to consumer then with a have the at macro in went roar it to also January started if We -- second quarter, three federal it X% and and you the was for months. down X%, February by in go , XX%. X% data, The X%, spending, data. the consumer X% March

that you spending items, quite -- look you has on excuse coming look discretionary been card If dramatically. at the credit too me, down if

to just want over careful So, here. we be

macro, will of participate stay fully benefit pickup when an a Our the good. in we And part in experience eventual business that our retention rates of it. very

So revenue consumer lower -- in the half enter that second slightly we the the to half fact our second of did the off, the half second finish year is largely to due with part.

Samad Samana

you much. Appreciate Perfect. so the Thank color.

Operator

McGinnis And we Taylor will with UBS. on move to

Taylor McGinnis

talking of these half year about on color know verticals some talked to verticals, different in has prior half? so any about thanks weakness Maybe so that just give the when of consumer taking second other the Samad's I and in the you in the about question, you think And seasonality some you've that can the the off of contribution for quarters. second then Team, piggyback question. you're to much

So, for ramp Thanks. to a in can we give does I those I of guess, should some macro you some the those any baking you're what see of enterprise additional of in what this on, look from like when the to start here well? maybe terms as as offsetting on verticals? on guess question, weakness, And part color these newer deals second

Barry Zwarenstein

Okay.

want So, in contribution assumed. to similar We the last what assuming we're previously don't out had terms the -- the consumer, to just we far. to from of year, too something go

there. -- track bit are and So what's and putting with of in happened XX to in low in grew growth prior second in the the last cautious the quarter, we're that verticals in similar year, the the both growth over second half other year they year in year. similar There single-digit this second being little a very we

would the by fact the been in that due in new -- of see they you'll they volume terms we going but see kick somebody said of the kick the be before in, I In deals, of we the we when that bigger these got now earlier last think reporting It's that which while fact the very consumer a on, in we've these to to this is part we that largely is quarter offset have numbers strong. the are has growth logo, on the are side in this deals. weakness

Taylor McGinnis

Got it. so much. Thanks

Operator

Blair's has next And Stotler Matt question. the William

Matt Stotler

I the on-prem that's a click think thinking just sense. acquisition. double question. Maybe that about strategic you the Interesting ultimately maybe to maybe there? love harder made Aceyus. incremental Obviously, Hey, helps laid expanding open at love additional to crack Would rationale TAM on market to Or see thank is there. you're monetization the especially was Whether to that do just you so you We'd it thoughts there. opportunity maybe the out up associated right? on follow-up TAM, And give to that how that or any more both? this can taking for just some

Mike Burkland

obvious opportunity think that. I this what are make the think always of we revenue kind I'll we about I said synergies repeat Aceyus, pull-through. start we opportunities think already when here, that Yes, really of right? an revenue -- one what one I there don't But So, the said, whenever the is as the big look to -- I want had we besides would at. pull-through value, number rationales of Matt, you big is acquisition, think with Again, I -- but

enterprise very, this in advantage very to in unique solidifies competition of going difficult it's of very upmarket platform. for having part market, very Aceyus by This rates Our But large the competitive already as have that offering. to win is something strong. ours FiveX be our a similar and is are just the

us. for wins to allow big going That's lever. that's large enterprise pull-through So and a for continued upmarket

Matt Stotler

Got Thank it. you.

Mike Burkland

got You it.

Operator

with Fish go your Jim Sandler. ahead with Please Piper question.

Jim Fish

the for Hey, guys, to question. Good thanks see you.

to Peter's AI Going the is that quarter last differentiating back point? rate the attach last to deals, CCaaS versus in FiveX's on $X was for other at this as any what your what And sense vendors question million-plus XX% year view? the or

we'll large delivery their see you, parcel Or Dan, nice aggregate? just act on company win, regional in you expansion the are XX,XXX going further here? like potential for and that Is given that quickly big healthcare then, from how And viewing seats to expansions this see. to

Dan Burkland

questions. great Yeah,

of across applications we portfolio presented eight that use use pretty different RFPs two for seeing attach mean, and unique the today, or virtually the the in I combine trend we're asked AI a a automation have it's have common what important, and can asked deliver But in all and hit the as you from this XX% case. measurements becomes don't for now previous that's exactly. been that increasing. only where I'll I find much not, very board combinations we you First, the can that can quarters and it's the I cases more for deliver it's full rate. we whether and tell customers

new we're the brainstorming base. a that in but particular, customers. cloud, use We justify the their within lot seeing tremendous They to the case So, of also and to to ROIs. they move FiveX can to see installed business it in

a alluded see attach to rate we earlier. so And as better there, Mike

what I now don't recall was. Moving your over second to it the question, of part

Jim Fish

this to is So going parcel... like large act

Dan Burkland

in use them we I initially. they on time could. the continue that Yeah, expand to take the They mind, Yes, will did well these account transitions of not as their applications you. It various we got Bear sell very come platform. mentioned. to

different already preexisting their integrate Verint that cloud we our that to directly via a was with. the that integrate to Verint the they'll doing integrated cloud already that going API. stream we're with Verint as an sites many solution -- and they things throughout that many, certain Aceyus have Eventually, element. We're on-prem. example, We probably have that Aceyus. as that's our that voice look to to. to integration, upgrade a We're They In of were were strategic case, already customer

us CAGR just customers, the be experience providing like our the most the So, large we'll expansion tremendous. with of of they that add-ons many ads and enterprise is

the So, because percentage just to the go, our when look retention the you rate tend you you buy truck, so look dollar-based that at is speak. on further everything they and upmarket higher to at

Jim Fish

you. Thank

Dan Burkland

Yeah.

Operator

will question with from next come Fargo. Our Wells Michael Turrin

Michael Turrin

question. Appreciate great. Thanks. you Hey, taking the

But have look up initial look, on been metric beat at the around reaction the I think, Barry, the is lot year-on-year. I the of XX% if a the raise. RPO questions and filings, the

double up it's think sequentially. digits I again

maybe just view set considerations of that be as should some just that So, around more Is may revenue you and metric. well? And you can your highlighting? help of you're more Thanks. significance reflective valuable we of conversion over RPO subscription upmarket of to making move the of us momentum tell you time can around maybe the becoming be that bookings level as

Barry Zwarenstein

Yes. Thanks, Michael.

have and run. year only only picture, a than contracts in growth, growth, that though, $X is a billion it to part of of Michael, business. our And captures Because indeed, sequential situation XX% that more volatile year-over-year The the that, So of picture. that's all XX% includes part not total. there Why? the

concretely only use direction the that the the you into, which that And thing up the they're is said always that is way going can on have we've heading. see the and market team business it right. and to for done makes Dan the really new Now, directionally is the the clear really it to RPO work and that

Michael Turrin

you can types that in sense what to anything of I there that get Is used historically? say multiyear just around versus are RPO look like case? showing a just the what's today versus top So, of of want the up composition to customers

Barry Zwarenstein

whole it can below smorgasbord Frankly, because I of don't for business the that. the other not industries center in is that contact a I some mean, industry is consumer, Yes. across in of but us. There our I services, of financial much a share, metric industry. key It have a a is board. is analysis concentration terms management horizontal healthcare, that, detailed part then so in

Dan Burkland

add that, thing we or so for discounting don't mind, rates. cycles Bear customers to Michael. may I if because the contract And we're one in renewal provide additional our incent longer in confident

year, each renew year. automatically contracts every Our

we look we're we auto say, we -- is And and term long an oftentimes, how again. this of because it drawer, opened the and don't the in contract renewal. the So just customer?" It's know, "Well, never put gets

it's when multiyear. So against reason increases do the of themselves it's we amount we fair it's one and wants have annual they and but a one-year contracts, beauty, price customer because also Mostly, three-year well. as why the a have protect lot of to five-year

Michael Turrin

the details. Appreciate Thank you.

Dan Burkland

Yeah.

Operator

BTIG. on Matt to with Moving VanVliet

Matt VanVliet

Thanks question. good afternoon. the Hey, for taking

the contribution dig in the and side. on So, more little on maybe a attach I wanted AI to rate

deals. or give much XX% these tied you to of for? of sense going those deals it of the maybe of up Or the be can it's are more bound but importantly, how to what AI year-over-year, XX%? people is where us pay any ARR do of you five you But the years? for mentioned larger think Can Presume three features? that to of goes actually what's upper XX% the sort sort next So in

Dan Burkland

it brought can and I'm that you continue. Yes. and glad you I'll Mike, up, start

at yes, look a attach XX%, you the big rate, If number.

is have very cases. the at the that really small well, number. at self-serve AI center; you repeatedly And within of a and customer the Today, automate gets small very and If implementing that's can very if for, in the being beginnings right you that, look straightforward you contact use question you revenue great. simplistic a automation number, the contribution, we're the asked let reason

X% at that we dictated, make think the XX% if you X% the customers from well they're to put a costs, more So in a their revenue it's customer if still you pricing to of than that on calls X% contribution non-automated looking percentage. over. lot do about small of that deflecting calls of so if you deflecting -- And calls we over, because we've automated but yes, those many are

consultations cases to things more and comfortable a you human to to that to talking will boy, for years, to get the conversation. versus help and we three and -- implement crystal other yes, sales ball that, quickly agent become calls Consumers that and automation in all five optimistic more prevalent. powerful I'm in data efficient And making and to we So more more really to human. the the assist more says a accurately. it speak where delivering more need will human, that's use human-to-human and that and the more machine But effect used

we automation more effective. contact a and help apply there's center can So to be efficient

is, it's really I'm the across where here board, going But hard.

said transactional on be software is capacity are that as others per in, or is, going have or beauty a where percentage We're enterprises in minute scratching time, multiple to increase. a the we barely delivered Mike be higher going to to just it's going And surface. We and a We it's know know per to here those some to they're applications or it's and basis. others over We port earlier, on prevalent. all usage based, scenarios, based. put customers that great more it's The being in customer go much going help have all and some deliver know experience. FiveX a

so continue handsomely. And so our a and per will increase do without revenue to doubt customer

Matt VanVliet

All Thank right. Great. you.

Operator

has Mizuho the question. Panigrahi Siti next with

Siti Panigrahi

trend Should thanks expense -- and margin Hey, about want you bps Look, margin. margin. ask about going your to plus AI margin XXX-plus opportunity? I to should taking how gross think about this you is question. especially with And have also, for impact this operating Or talk guys my how the you that the -- to continue? expect could XXX Aceyus, we margin? your also like investment,

Barry Zwarenstein

the two operating So, components: let's and growth break expenses. it into

factors, that do fixed one clear the is that? going a biggest over and number go very longer gross is you it simple Why between at the terms I there In look term, single to that's are -- costs. up. but say of the if leverage semi-fixed of margin, It's

the approximately at going margin years, past you happen happened of look look and on what's cloud will numbers, XX% And software the to in XX the was be XX those expanded. business in already the investments And what's we exception sometimes accounts the to nine if the the out international. you past. The our future, for need heavy doing subscription And in of to only understand years, some gross revenue. at rough total in

we growing less public, proportion. was XX%. when it went than And certainly a it's So

way we're in So, the that to Currently, XX%-s demonstrated improve but our we on the tailwind. we we've time. XX%-s, low have like can over

get some and The incremental margins, these that and (ph) near to, I some in very just additional making that while particularly is scale gross investments, investment margins mega we fully. revenue as [superior] though, until alluded term, we on are bringing require really Dan deals is dependent,

about we're XXXX. serene components, at XX%, that I'm this We're have the three XX%. EBITDA very In take we -- all a terms there. currently over of margin, got model long-term we if We've talking

actually can we make XX% anticipating. EBITDA up go and margin that our we're still still So,

Siti Panigrahi

Thank you.

Operator

on Power Will Moving with Baird. to

Will Power

Thanks Okay. taking Great. the question. for

other seems these what's guess mean you reference zeroing just the to in I do XX process What Who of I looks that just you you kind cover healthcare sure on I'm your Maybe more think you would that of like? win, this on is Dan, in probably on you? helped be to And And of broadly new multitude great for there? a healthcare of healthcare stand the it replicate of helped. really apart for how be string understand part kind great accounts of probably with wins. see I what the replaced? big that verticals? competed wins. extension to Fortune competitors. with going Maybe

Dan Burkland

right? if and Will. is great away healthcare very the companies. and question, all penetration about day, mean large are with especially I ever, every certainly as No, Yes. are many across think it. as we consumer appreciate centers product expansion verticals contact upmarket that one older. financial look prevalent I making population And the going consumers at some contact you we're large Healthcare our who services, not grows that's

tremendous one, So, the that's particular past. typical sold companies talked company calls the the creates systems. the contact we of but the Well, The about take for right? that it's that do if are And healthcare the if and three look moving because from in one saver AI sheer that across wasn't board has It at the one a companies They're They've legacy and given They that that advantage now automation advantage and insurance too about what the old. we have years. you over premise-based to take of all under straight like they think users you had And in issue, also resources of a roof years can all or the it activity several they for we've And these systems M&A for cloud operate one that a they the whole building, we've insurance silos center cloud. can done set when a you get that inefficiency is do from that of right? deliver just FiveX they are as don't do, that. resources that they're or that can of small great that And facility. decade systems and creates efficiency, virtual ones, lot. what grown. do that

in now, on. us. right because to they want activity But for great So leaning AI primarily it's rapid also solutions they're to -- automation CCaaS and that's so in platforms the the those because of to future. are It's the it's old M&A a and they're change to do through into be flexibility into legacy want and one a themselves leaning going that one have vertical

Will Power

Thank you.

Operator

come from will Deutsche And our next question Niknam. Matthew Bank's

Matthew Niknam

the guys. for taking you Hey, Thank question.

And the provide strong it's you just any then quarter. share about in last new obviously, little can talked very few where during bookings taking linearity How of from? logos, quarters? on you So you Can talk a evolved you're bit a color about XQ? Thanks.

Dan Burkland

those massive cloud share, out we and massive have that. to in we base, Avaya, really are that they share of big a figures going need X get replaced. and RFPs they've an to put They've competitor, but be it's already for disclosed. and that shopping a share of get -- off over demonstrated a legacy It's some life they've Genesys. most of installed a to million that But great estimate moving Yes, primarily there some Genesys the on love And that go end opportunities. and indicated market. to of seats Cisco, already get has also see a too. opportunity still the taking They're in what's in going some they're the being we're opportunity

three. it's So, those

a through up value on the find that astute value do occasion, that being maximize and the on then able we for extract to gone their speed And wasn't for partner providers product. CCaaS that have to that company really that really either to

And sometimes it's just the wrong fit the for enterprise.

make And so they do a change.

have that CCaaS providers we So, we do replace.

had And already embarked but company the remarks they competitor I decision prepared to to one on gave was ours. of go a acquired made started recent implementation in was hadn't prior a that had with FiveX, And implementation. example company that an a that the

they the they we and two that side, our and even So that made they they look though them a contract. to closer take them, months ask side And several we were went us us implementation, decision give cancel were for evaluate better basically fit another ultimately and way. the chance contacted and by to the into a

Matthew Niknam

And just quarter? over the color on of linearity, course any there the

Dan Burkland

few sales to more linearity course lead are lower flow strive love the close I've, the now, quarter, know business, end and market, linearity our it. cycle, can for see the for we rates of The that. achieve the and we consistent. I'd get in decades because we of On our at the predictability and a deals very more the

in where end really where with big high we've is like than far or We lumpy, it numbers a we've this have dwarfed talking the tough. we swing. top these one. lower some number it's the that other huge It's big because even deals of --- make market, where quarters four, On about the had that had quarters three quarters

get to the And hard so but until it's striving higher volume, that's something certainly get linearity we we're for.

Matthew Niknam

you. Thank

Operator

one which have you much. will time with Trebnick additional for And come we question, Thank so from Catharine do Rosenblatt.

Catharine Trebnick

you a it little generate all new months. Dan, my BT the revenue these taking last take and Hey, Telus How thank bit? actually you partners? and question. for WWT, of very long piece to You much part strategy big is in the put couple from go-to-market did Hi, could does partners

Dan Burkland

realize Yes. Wonderful that's question, up want sign to that open Catharine, I'm you something and and it a -- and floodgates. sure them make the glad it's something it we mentioned folks is not because

them. to have go-to-market some like to of customers support them, their cases, In bring them, around they're this in train providers, just got educate mentioned, many ones customers. product service services them that but provide the the large going these really and they're make the doing the you back-office You get to their investments to to to not

project to markup." if in make referred into implementation business want services ongoing on margin services, better pull-through, we've That as these enabling as will, something not to this. for to as solutions types to the "I'm they're it them and services, have gives partners bring their gives going which because on us margins, just and is X. to be least long the of at Tier an an recognize, enable the Tier the ability delivering opportunities that and to professional the run, get they We money off their varied for well X used incentive you gives able of support them it us to It's legacy the services to

it to up at But six cycle pipeline some these scale. there before we months probably So, start are it's a the going there's see because and nine and a on take? varies. larger built to really how sales contribution, end the of after does see of are before a long year-and-a-half most customers revenue year that usually, to It least again, we

Catharine Trebnick

And the acquisitions. congratulations on

Dan Burkland

Thank you.

Mike Burkland

Catharine. you, Thank

Barry Zwarenstein

Yes, Catharine. thank you,

Operator

Q&A. today's does Well, and that again, everyone, conclude

things for Mike, closing turn you. to comments. over I'll back to Mike So,

Mike Burkland

joining Yes. us, Thank everyone. for you

than terms momentum and As with about the -- I we be to joining look Dan of continuing We what terms in bit just in FiveX. mid-year in -- seen of exciting talked that I've couldn't seen what our I've thrilled talked time all. It's deals in upmarket more it about. with mark cross our conversation an for you a little It's time us. the forward industry. we momentum, for Thanks the exciting And business.

Five9 (FIVN) 7 Aug 232023 Q2 Earnings call transcript