Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Five9 Inc (FIVN, Financial) exceeded guidance across all key metrics for the third quarter, with subscription revenue growth accelerating to 20% year over year.
- AI products accounted for over 20% of enterprise new logo ACV bookings in Q3, indicating strong momentum in AI adoption.
- The acquisition of Acqueon is expected to enhance Five9 Inc (FIVN)'s intelligent CX platform, expanding capabilities across digital channels and unlocking new revenue streams.
- Five9 Inc (FIVN) was named a leader in the Gartner Magic Quadrant for CCaaS and ranked number 16 in the 2024 Fortune Best Places to Work list in the large technology category.
- The company reported record quarterly operating cash flow of $41 million, equivalent to 16% of revenue, showcasing strong financial performance.
Negative Points
- Five9 Inc (FIVN) faces substantial risks and uncertainties, including macroeconomic deterioration, inflation, and supply chain disruptions, which could adversely affect future results.
- Telecom usage revenue declined year-over-year in the low single digits, reflecting a shift as larger customers opt to provide their own telephony.
- The company is experiencing a mix shift from usage to subscription revenue, which, while positive long-term, indicates a decline in telecom usage revenue.
- Despite strong AI adoption, there is a learning curve for companies in implementing AI, which could slow down decision-making and adoption rates.
- The India data center, while a strategic investment, currently represents a burden on gross margins due to its initial costs and low current revenue.
Q & A Highlights
Q: Can you provide insights into the early adopters of AI functionality and their current stance on AI adoption?
A: Michael Burkland, CEO: AI is central to customer experience (CX) today, with companies using AI to enhance both automation and live human agent support. AI is seen as an additive part of their technical offerings, and Five9 benefits from this expansion, providing software for both human-assisted and AI-driven interactions.
Q: How should we interpret the long-term subscription revenue growth target of 20% to 30%?
A: Michael Burkland, CEO: We are excited about the potential to drive subscription revenue growth in the 20% to 30% range. The 20% growth in Q3 is a key metric, reflecting customer adoption and product purchases. The large total addressable market (TAM) and AI opportunities bolster our optimism for future growth.
Q: What changes have been made to address the need for immediate ROI in AI investments?
A: Andy Dignan, COO: AI drives high ROI values, and we are enabling our sales team to adopt an AI-centric approach. We are also adjusting implementation processes to deliver AI value early in the customer journey, ensuring faster time to value and addressing transitory issues in AI adoption.
Q: How is the competitive environment affecting pricing and customer decisions?
A: Andy Dignan, COO: We are not seeing significant changes in competitors or pricing pressure. Our pricing remains strong, and we continue to see an increase in monthly recurring revenue per seat, particularly with AI applications. Customers prioritize roadmaps and AI leadership over price.
Q: How does the new AI Agents product fit into Five9's offerings, and what impact does it have on pricing?
A: Michael Burkland, CEO: AI Agents represent the next generation of Intelligent Virtual Agents (IVA) and Digital Virtual Agents (DVA), enhancing self-service capabilities. This product is not part of agent assist but focuses on autonomous interactions, potentially increasing the scope of self-service solutions.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
