Core Insights - Five9, Inc. is a leading provider of cloud-based contact center software, competing in the growing cloud communications market with a focus on customer interactions [1] - Despite a recent stock price decline, Five9 is viewed as a strong investment opportunity with a growth potential of 43.44% [2][6] - The company has a robust Piotroski Score of 8 out of 9, indicating strong financial health and operational efficiency [3][6] - The recent stock price decline may be linked to broader market volatility, but a potential rebound is anticipated as investors recognize the company's underlying value [4] - Five9's innovative solutions and solid financial health make it an attractive long-term investment option [5][6] Financial Performance - Five9's stock has seen a monthly loss of 3.17% and an 11.56% drop over the past 10 days, presenting a potential entry point for investors [2][4] - The target price for Five9's stock is set at $30, indicating significant upside potential from current trading levels [4][5] - The company's strong financial metrics, including profitability, leverage, and liquidity, are reflected in its high Piotroski Score [3] Market Position - Five9 has established itself as a key player in the cloud communications market, competing with major players like RingCentral and NICE [1] - The company's innovative technology and customer-centric approach contribute to its competitive advantage in the industry [1][5]

Core Insights - Five9 reported better-than-expected earnings for Q3, with earnings of 78 cents per share, surpassing the analyst consensus estimate of 73 cents per share [1] - Quarterly sales reached $285.800 million, exceeding the analyst consensus estimate of $285.042 million [1] - The company raised its FY2025 adjusted EPS guidance from a range of $2.86-$2.90 to $2.92-$2.96, while slightly lowering its sales guidance from $1.144 billion-$1.150 billion to $1.143 billion-$1.149 billion [1] Financial Performance - Enterprise AI revenue grew 41% year-over-year, indicating strong growth in this segment [2] - Adjusted EBITDA margin reached a record 25%, reflecting improved profitability [2] Market Reaction - Following the earnings announcement, Five9 shares fell by 14.4%, trading at $18.36 [2] Analyst Ratings and Price Targets - Piper Sandler maintained an Overweight rating but lowered the price target from $31 to $26 [5] - Barclays also maintained an Overweight rating, reducing the price target from $33 to $29 [5] - Cantor Fitzgerald kept an Overweight rating while lowering the price target from $36 to $32 [5] - Wells Fargo maintained an Equal-Weight rating and decreased the price target from $28 to $22 [5]

Core Insights - Five9 reported better-than-expected earnings for Q3, with earnings of 78 cents per share, surpassing the analyst consensus estimate of 73 cents per share [1] - Quarterly sales reached $285.800 million, exceeding the analyst consensus estimate of $285.042 million [1] - The company raised its FY2025 adjusted EPS guidance from a range of $2.86-$2.90 to $2.92-$2.96, while slightly lowering its sales guidance from $1.144 billion-$1.150 billion to $1.143 billion-$1.149 billion [1] Financial Performance - Enterprise AI revenue grew 41% year-over-year, indicating strong growth in this segment [2] - Adjusted EBITDA margin reached a record 25%, reflecting improved profitability [2] Market Reaction - Following the earnings announcement, Five9 shares fell by 14.4%, trading at $18.36 [2] Analyst Ratings and Price Targets - Piper Sandler maintained an Overweight rating but lowered the price target from $31 to $26 [5] - Barclays also maintained an Overweight rating, reducing the price target from $33 to $29 [5] - Cantor Fitzgerald kept an Overweight rating while lowering the price target from $36 to $32 [5] - Wells Fargo maintained an Equal-Weight rating and reduced the price target from $28 to $22 [5]

Core Insights - Five9 met Wall Street's revenue expectations for Q3 CY2025, reporting sales of $285.8 million, an 8.2% year-on-year increase [1][5] - The company's non-GAAP profit of $0.78 per share exceeded analysts' consensus estimates by 6.5% [1][5] - Revenue guidance for the next quarter is $297.7 million, which is 0.8% below analysts' estimates [1][5] Financial Performance - Revenue of $285.8 million compared to analyst estimates of $285.2 million, reflecting an 8.2% year-on-year growth [5] - Adjusted EPS of $0.78 surpassed analyst estimates of $0.73 by 6.5% [5] - Adjusted Operating Income was $57.11 million, beating analyst estimates of $52.72 million, with a 20% margin [5] - Billings at quarter end were $293.8 million, up 5.4% year on year [5] - Market Capitalization stands at $1.66 billion [5] Strategic Insights - Management attributed strong performance to increasing enterprise demand for AI-powered solutions, with AI bookings growing over 80% year-on-year [3] - The shift towards high-margin subscription revenue and operational improvements contributed to margin expansion and record free cash flow [3] - The company is adjusting sales strategies and resource allocation in response to short-term headwinds in the commercial segment [3] Future Outlook - Updated guidance reflects confidence in sustained AI momentum, although revenue outlook for the next quarter is modest [4] - Backlog from recent enterprise and AI bookings is expected to drive sequential growth, with increased cross-sell and upsell activity [4] - Longer implementation cycles for complex AI deployments may delay revenue recognition, with expectations to return to double-digit growth in the second half of next year [4]

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Core Insights - Five9 reported quarterly earnings of $0.78 per share, exceeding the Zacks Consensus Estimate of $0.73 per share, and showing an increase from $0.67 per share a year ago, resulting in an earnings surprise of +6.85% [1] - The company achieved revenues of $285.83 million for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 0.46% and up from $264.18 million year-over-year [2] Financial Performance - Five9 has consistently surpassed consensus EPS estimates over the last four quarters, achieving this four times [2] - The company has also topped consensus revenue estimates four times in the last four quarters [2] Stock Performance and Outlook - Five9 shares have declined approximately 44% since the beginning of the year, contrasting with the S&P 500's gain of 15.6% [3] - The company's earnings outlook is crucial for investors, as it includes current consensus earnings expectations for upcoming quarters and any recent changes to these expectations [4] Earnings Estimate Revisions - The trend for earnings estimate revisions for Five9 was favorable ahead of the earnings release, leading to a Zacks Rank 2 (Buy) for the stock, indicating expected outperformance in the near future [6] - Current consensus EPS estimate for the next quarter is $0.78 on revenues of $299.98 million, and for the current fiscal year, it is $2.88 on revenues of $1.15 billion [7] Industry Context - The Internet - Software industry, to which Five9 belongs, is currently ranked in the top 35% of over 250 Zacks industries, suggesting a favorable environment for stock performance [8]

Core Insights - Five9 met Wall Street's revenue expectations for Q3 CY2025, reporting sales of $285.8 million, an 8.2% year-on-year increase, but provided a less impressive revenue guidance for the next quarter at $297.7 million, which is 0.8% below analysts' estimates [1][6][7] - The company's non-GAAP profit of $0.78 per share exceeded analysts' consensus estimates by 6.5% [1][6] Company Overview - Five9, named after the "five nines" standard for optimal service reliability, offers cloud-based software for businesses to manage contact centers, focusing on customer service, sales, and marketing across various communication channels [3] Revenue Growth - Five9 has demonstrated a solid long-term sales performance with a compounded annual growth rate of 23.1% over the last five years, outperforming the average software company [4] - However, the company's annualized revenue growth of 13.2% over the last two years indicates a slowdown compared to its five-year trend [5] Financial Performance - Q3 CY2025 revenue was $285.8 million, slightly above analyst estimates of $285.2 million, with an adjusted EPS of $0.78 compared to the expected $0.73 [6] - Adjusted operating income was $57.11 million, beating estimates and achieving a 20% margin [6] - Management raised the full-year adjusted EPS guidance to $2.94, reflecting a 2.1% increase [6] - The operating margin improved to 5.6%, up from -5.8% in the same quarter last year, and free cash flow margin increased to 13.4% from 7.6% in the previous quarter [6] Future Outlook - The company is guiding for a 6.8% year-on-year increase in sales for the next quarter, while sell-side analysts project an 8.7% revenue growth over the next 12 months, indicating potential demand challenges [7]

Financial Data and Key Metrics Changes - In Q3 2025, Five9 reported revenue of $286 million, representing an 8% year-over-year growth [19] - Subscription revenue, which constitutes 81% of total revenue, grew by 10% year-over-year, primarily driven by enterprise AI revenue, which increased by 41% year-over-year [20] - Adjusted EBITDA grew by 37% year-over-year, achieving a margin of 25%, while free cash flow increased by 84% year-over-year, reaching a margin of 13% [5][23] Business Line Data and Key Metrics Changes - Enterprise AI bookings grew over 80% year-over-year, contributing to a healthy backlog [5] - Telecom usage accounted for 12% of revenue, while professional services made up 7%, both categories are not growth drivers and are becoming a smaller percentage of total revenue [20] - The commercial business represented 9% of total revenue but declined in the teens year-over-year as the company focuses on the enterprise market [21] Market Data and Key Metrics Changes - Gartner forecasts the traditional CCAS market to grow at a 9% CAGR and the GenAI customer service market at a 34% CAGR through 2029, leading to a combined annual spend of $48 billion [6] - Five9's dollar-based retention rate was 107% in Q3, down from 108% in Q2, attributed to tough comparisons from previous periods [21][22] Company Strategy and Development Direction - Five9 aims to maintain operational improvements while investing in AI and go-to-market initiatives, targeting the Rule of 40 by 2027 [5][28] - The company is focused on building strategic partnerships, with significant growth in ACV bookings with ServiceNow and Salesforce [12][19] - Five9 is positioned as a leader in the AI-powered customer experience market, leveraging its platform to integrate AI and human agents [10][11] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's foundation for the next decade, emphasizing the importance of AI in customer experience [12][13] - The CEO search is progressing well, with a focus on finding a leader experienced in product innovation and operational excellence [14] - The company anticipates a return to double-digit revenue growth in the second half of 2026, driven by strong install-based bookings and new logos [26][27] Other Important Information - Five9 announced a $150 million share repurchase program, reflecting confidence in long-term growth opportunities [19] - The company expects Q4 revenue to be approximately $297.7 million, indicating a sequential growth of 4% [24] Q&A Session Summary Question: What happened in the quarter regarding guidance? - Management noted that the growth environment is transitioning, leading to expectations of smaller beats in guidance. Subscription revenue growth was impacted by tough comparisons and a decline in commercial revenue due to underallocation of demand and a gap in sales capacity [30][31] Question: Why is it taking so long to translate install-based bookings to revenue? - Management explained that install-based bookings have longer implementation cycles, and revenue conversion will ramp up throughout 2026, particularly in the second half of the year [35][36] Question: What is the current state of the bookings environment? - The company reported strong bookings momentum, with AI bookings up 80% year-over-year and record install-based bookings [40][41] Question: Are there any pricing pressures on core live agent seats? - Management indicated that there is no significant pricing pressure at renewal time, and customers are looking for pricing models that incorporate AI [79][81]

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Q3 2025 Performance Highlights - Total revenue reached $286 million[8] - Adjusted EBITDA margin was 25%[8, 12] - Free cash flow margin was 13%[8, 12] - Dollar Based Retention Rate (DBRR) was 107%[8, 12] AI Metrics in Q3 2025 - Enterprise AI revenue experienced year-over-year growth of 41%[13] - AI contributed 11% to enterprise subscription revenue[13] - Enterprise AI bookings grew by over 80% year-over-year[13] - AI accounted for over 20% of enterprise new logo ACV bookings[13] - AI was virtually always attached to $1M+ ARR new logo deals[13] Financial Guidance and Share Repurchase Program - The company authorized a $150 million share repurchase program expiring on December 31, 2027[9, 11] - An Accelerated Share Repurchase (ASR) agreement is intended to repurchase $50 million of common stock, with final settlement expected by the end of Q1 2026[11] - Q4 2025 revenue is projected to be between $2947 million and $300.7 million[36] - Full-year 2025 revenue is guided to be between $1.1435 billion and $1.1495 billion[36]