Q2 2025 Performance Highlights - Total revenue grew by 12% year-over-year[6] - Subscription revenue increased by 16% year-over-year[6] - Subscription revenue accounted for 81% of total revenue[6] - Adjusted EBITDA margin reached an all-time high of 24%, with a 63% year-over-year dollar growth[6] - The company achieved a 108% LTM DBRR (Dollar Based Retention Rate)[6] AI Metrics and Innovation - Enterprise AI revenue experienced a 42% year-over-year growth[7] - AI contributed to 10% of Enterprise Subscription Revenue[7] - AI represented over 20% of Enterprise New Logo ACV Bookings[7] - Enterprise AI bookings grew by over 3x year-over-year[7] Customer Success with AI - One healthcare customer increased Five9 ARR by approximately 40%, exceeding $11 million after extending their contract to a 5-year term[8] - An airline customer more than doubled their Five9 ARR, reaching over $7 million by expanding their AI portfolio[8] Guidance - The company projects Q3 2025 revenue between $283 million and $286 million[37] - The company anticipates full-year 2025 revenue between $11435 billion and $11495 billion[37]

[FORM 10-Q Filing Information](index=1&type=section&id=FORM%2010-Q%20Filing%20Information) This section outlines Five9, Inc.'s Form 10-Q filing details, including registrant identification, trading symbol, and filer status [Registrant Information](index=1&type=section&id=Registrant%20Information) This section provides key identification details for Five9, Inc.'s Form 10-Q filing for the quarterly period ended June 30, 2025, including its incorporation state, principal executive offices, trading symbol, and filer status - Five9, Inc. is incorporated in Delaware, headquartered in San Ramon, CA, and trades on The NASDAQ Global Market under the symbol **FIVN**[2](index=2&type=chunk)[3](index=3&type=chunk) Filer Status as of June 30, 2025 | Filer Status | Mark | | :-------------------- | :--- | | Large accelerated filer | ☒ | | Accelerated filer | ☐ | | Non-accelerated filer | ☐ | | Smaller reporting company | ☐ | | Emerging growth company | ☐ | - As of July 25, 2025, there were **77,262,690** shares of common stock outstanding[4](index=4&type=chunk) [Special Note Regarding Forward-Looking Statements](index=3&type=section&id=SPECIAL%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) This section clarifies forward-looking statements and outlines key risks that could materially impact future financial performance [Nature of Forward-Looking Statements](index=3&type=section&id=Nature%20of%20Forward-Looking%20Statements) This section clarifies that the report contains forward-looking statements reflecting management's current views on future events, strategies, and financial performance, which are subject to substantial risks and uncertainties - Forward-looking statements in this report cover business, expenses, strategies, growth plans, product and customer initiatives, market growth projections, and industry outlook[10](index=10&type=chunk) - Such statements are identified by words like 'expect,' 'intend,' 'plan,' 'believe,' 'project,' 'forecast,' 'estimate,' 'may,' 'should,' and 'anticipate'[10](index=10&type=chunk) [Risk Factors](index=3&type=section&id=Risk%20Factors) The company highlights important factors that could cause actual results to differ materially from forward-looking statements, including adverse economic conditions, challenges in customer acquisition and retention, AI solution development risks, and competitive market pressures - Adverse economic conditions, including inflation, high interest rates, and geopolitical conflicts, may continue to harm the business[11](index=11&type=chunk) - Failure to attract new customers, sell additional services, or retain existing subscriptions could harm revenue and gross margins[11](index=11&type=chunk) - Risks associated with AI solutions include potential decreases in subscription revenue if AI solutions do not replace licenses, unsuccessful development, reputational harm, and legal/business risks from evolving AI technologies[11](index=11&type=chunk) - Other risks include managing technical operations, reliance on third-party distributors and service providers, volatility in quarterly results, inability to attract and retain skilled employees, and challenges in international expansion[11](index=11&type=chunk)[13](index=13&type=chunk) [PART I. FINANCIAL INFORMATION](index=5&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents Five9, Inc.'s unaudited condensed consolidated financial statements and management's discussion and analysis [ITEM 1. Financial Statements](index=5&type=section&id=ITEM%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for Five9, Inc., including the balance sheets, statements of operations and comprehensive income (loss), statements of stockholders' equity, and statements of cash flows, along with detailed notes explaining significant accounting policies and financial components [Condensed Consolidated Balance Sheets (Unaudited)](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20(Unaudited)) This section presents the unaudited condensed consolidated balance sheets, detailing changes in assets, liabilities, and equity Condensed Consolidated Balance Sheets (In thousands) | ASSETS | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :------------ | :---------------- | | Cash and cash equivalents | $205,479 | $362,546 | | Marketable investments | $430,397 | $643,410 | | Accounts receivable, net | $127,835 | $115,172 | | Total current assets | $894,194 | $1,248,568 | | Total assets | $1,704,860 | $2,051,214 | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | Convertible senior notes (current) | $— | $433,490 | | Total current liabilities | $201,589 | $641,691 | | Convertible senior notes (non-current) | $733,620 | $731,855 | | Total liabilities | $987,483 | $1,429,022 | | Total stockholders' equity | $717,377 | $622,192 | | Total liabilities and stockholders' equity | $1,704,860 | $2,051,214 | - Total assets decreased by approximately **$346.3 million** from December 31, 2024, to June 30, 2025, primarily due to a reduction in cash, cash equivalents, and marketable investments[16](index=16&type=chunk) - Current convertible senior notes were fully repaid by June 30, 2025, leading to a significant decrease in total current liabilities[16](index=16&type=chunk) [Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20(Loss)%20(Unaudited)) This section presents the unaudited condensed consolidated statements of operations, highlighting revenue, gross profit, and net income (loss) Condensed Consolidated Statements of Operations (In thousands, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $283,269 | $252,086 | $562,974 | $499,096 | | Gross profit | $155,404 | $133,672 | $309,136 | $266,152 | | Loss from operations | $(1,561) | $(19,365) | $(6,989) | $(40,060) | | Net income (loss) | $1,154 | $(12,816) | $1,730 | $(19,893) | | Basic net income (loss) per share | $0.02 | $(0.17) | $0.02 | $(0.27) | | Diluted net income (loss) per share | $0.01 | $(0.17) | $0.02 | $(0.27) | - The company reported net income for the three and six months ended June 30, 2025, reversing net losses from the prior year periods[19](index=19&type=chunk) - Revenue increased by **12%** for the three months and **13%** for the six months ended June 30, 2025, compared to the same periods in 2024[19](index=19&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity (Unaudited)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity%20(Unaudited)) This section presents the unaudited condensed consolidated statements of stockholders' equity, detailing changes in capital structure Changes in Stockholders' Equity (In thousands) | Metric | Balance as of Dec 31, 2024 | Six Months Ended June 30, 2025 | | :----------------------------------- | :------------------------- | :----------------------------- | | Common Stock (Shares) | 75,808 | 77,263 | | Common Stock (Amount) | $76 | $77 | | Additional Paid-In Capital | $1,039,125 | $1,133,107 | | Accumulated Other Comprehensive Income | $636 | $108 | | Accumulated Deficit | $(417,645) | $(415,915) | | Total Stockholders' Equity | $622,192 | $717,377 | - Total stockholders' equity increased by **$95.2 million** from December 31, 2024, to June 30, 2025, driven by net income and stock-based compensation[27](index=27&type=chunk) - Stock-based compensation contributed **$86.0 million** to additional paid-in capital during the six months ended June 30, 2025[27](index=27&type=chunk) [Condensed Consolidated Statements of Cash Flows (Unaudited)](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20(Unaudited)) This section presents the unaudited condensed consolidated statements of cash flows, detailing operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (In thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $83,445 | $52,231 | | Net cash provided by (used in) investing activities | $191,063 | $(360,103) | | Net cash (used in) provided by financing activities | $(431,125) | $340,412 | | Net (decrease) increase in cash, cash equivalents and restricted cash | $(156,617) | $32,540 | | Cash, cash equivalents and restricted cash, End of period | $207,568 | $177,382 | - Operating cash flow increased significantly to **$83.4 million** for the six months ended June 30, 2025, from **$52.2 million** in the prior year[29](index=29&type=chunk) - Investing activities shifted from a net cash outflow of **$360.1 million** in 2024 to a net cash inflow of **$191.1 million** in 2025, primarily due to changes in marketable investment purchases and maturities[29](index=29&type=chunk) - Financing activities resulted in a net cash outflow of **$431.1 million** in 2025, mainly due to the repayment of 2025 convertible senior notes at maturity[29](index=29&type=chunk) [Notes to Condensed Consolidated Financial Statements (Unaudited)](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) This section provides detailed notes to the financial statements, explaining accounting policies and key financial components [Note 1. Description of Business and Summary of Significant Accounting Policies](index=11&type=section&id=Note%201.%20Description%20of%20Business%20and%20Summary%20of%20Significant%20Accounting%20Policies) Five9, Inc. is a cloud software provider for contact centers, incorporated in Delaware in 2001. The financial statements are prepared under GAAP, with no material changes to significant accounting policies from the prior annual report. The company is evaluating the impact of several new FASB ASUs on income tax disclosures and expense disaggregation - Five9, Inc. provides cloud software for contact centers and operates globally with offices in Europe, Asia, and Australia[32](index=32&type=chunk) - The company is assessing the impact of ASU **2023-09** (Income Taxes), ASU **2024-03**/**2025-01** (Expense Disaggregation Disclosures), and ASU **2024-04** (Debt with Conversion and Other Options) on its financial statements[36](index=36&type=chunk)[37](index=37&type=chunk)[38](index=38&type=chunk) [Note 2. Revenue](index=12&type=section&id=Note%202.%20Revenue) This note details the company's contract balances, including accounts receivable, deferred contract acquisition costs, and contract liabilities. It also outlines remaining performance obligations, with approximately three-fourths expected to be recognized over the next 24 months Contract Balances (In thousands) | Metric | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :------------ | :---------------- | | Accounts receivable, net | $127,835 | $115,172 | | Total deferred contract acquisition costs, net | $246,410 | $231,757 | | Net contract liabilities | $(65,462) | $(72,832) | - The company expects to recognize revenue on approximately three-fourths of its **$1,150.1 million** remaining performance obligations over the next **24** months[43](index=43&type=chunk) - Revenue recognized from contract liabilities at December 31, 2024, was **$11.4 million** for the three months and **$60.9 million** for the six months ended June 30, 2025[42](index=42&type=chunk) [Note 3. Investments and Fair Value Measurements](index=12&type=section&id=Note%203.%20Investments%20and%20Fair%20Value%20Measurements) This note details the company's marketable investments, classified as available-for-sale, and their fair value measurements using a three-level hierarchy. It also discusses an equity investment in a privately-held company and the fair value of convertible senior notes Short-Term Marketable Investments (Fair Value, in thousands) | Investment Type | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :------------ | :---------------- | | Certificates of deposit | $816 | $802 | | U.S. treasury securities | $217,137 | $442,572 | | U.S. agency and government-sponsored securities | $184,731 | $146,760 | | Commercial paper | $5,703 | $9,608 | | Municipal bonds | $900 | $— | | Corporate bonds | $21,110 | $43,668 | | Total | $430,397 | $643,410 | - The fair value of **2029** convertible senior notes was **$653.7 million** as of June 30, 2025, classified as Level **2** in the fair value hierarchy[52](index=52&type=chunk) - An equity investment in a privately-held company, accounted for at cost minus impairment, is classified within Level **3**, with a **$1.3 million** impairment charge recorded in **2024**[53](index=53&type=chunk) [Note 4. Financial Statement Components](index=16&type=section&id=Note%204.%20Financial%20Statement%20Components) This note provides a detailed breakdown of various financial statement components, including cash and cash equivalents, accounts receivable, prepaid expenses, other current assets, property and equipment, other assets, and accrued and other current liabilities Cash and Cash Equivalents (In thousands) | Component | June 30, 2025 | December 31, 2024 | | :------------------------------- | :------------ | :---------------- | | Cash | $167,900 | $162,902 | | Money market funds | $37,579 | $114,370 | | Certificates of deposit | $— | $496 | | U.S. treasury securities | $— | $42,946 | | U.S. agency and government sponsored securities | $— | $41,832 | | Total cash and cash equivalents | $205,479 | $362,546 | Property and Equipment, Net (In thousands) | Component | June 30, 2025 | December 31, 2024 | | :------------------------------- | :------------ | :---------------- | | Computer and network equipment | $177,866 | $173,671 | | Computer software | $65,765 | $66,455 | | Internal-use software development costs | $72,900 | $49,340 | | Furniture and fixtures | $4,559 | $5,127 | | Leasehold improvements | $6,746 | $6,736 | | Property and equipment (gross) | $327,836 | $301,329 | | Accumulated depreciation and amortization | $(173,337) | $(156,441) | | Property and equipment, net | $154,499 | $144,888 | - Depreciation and amortization expense for property and equipment was **$21.6 million** for the six months ended June 30, 2025, up from **$19.8 million** in the prior year[58](index=58&type=chunk) [Note 5. Goodwill and Intangible Assets](index=18&type=section&id=Note%205.%20Goodwill%20and%20Intangible%20Assets) This note outlines the changes in goodwill and intangible asset balances, including a measurement period adjustment for the Acqueon acquisition and amortization expenses. Developed technology represents the largest component of intangible assets Goodwill and Intangible Asset Activity (In thousands) | Metric | Goodwill | Intangible Assets | | :----------------------------------- | :------------ | :---------------- | | Beginning of period, Dec 31, 2024 | $365,436 | $65,632 | | Measurement period adjustment (Acqueon) | $1,262 | $— | | Amortization | $— | $(7,564) | | End of period, June 30, 2025 | $366,698 | $58,068 | Components of Intangible Assets (June 30, 2025, in thousands) | Component | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Weighted Average Remaining Amortization Period (Years) | | :------------------ | :-------------------- | :----------------------- | :------------------ | :----------------------------------------------------- | | Developed technology | $105,714 | $(57,317) | $48,397 | 5.9 | | Customer relationships | $12,850 | $(3,942) | $8,908 | 3.9 | | Trademarks | $1,300 | $(537) | $763 | 1.9 | | Total | $120,334 | $(62,266) | $58,068 | 5.5 | - Amortization expense for intangible assets was **$7.6 million** for the six months ended June 30, 2025, an increase from **$5.3 million** in the prior year[60](index=60&type=chunk) [Note 6. Debt](index=18&type=section&id=Note%206.%20Debt) This note details the company's convertible senior notes, including the issuance of 2029 notes, the repurchase and maturity of 2025 notes, and related capped call transactions. It also covers the interest expense associated with these debt instruments - In March **2024**, the company issued **$747.5 million** aggregate principal amount of **1.00%** convertible senior notes due **2029**[66](index=66&type=chunk) - The company repurchased **$313.1 million** of its **2025** convertible senior notes for **$304.9 million**, resulting in a **$6.6 million** extinguishment gain[62](index=62&type=chunk)[63](index=63&type=chunk) - The **2025** convertible senior notes matured on June **1**, **2025**, and obligations were settled in cash; no **2025** notes were outstanding as of June **30**, **2025**[76](index=76&type=chunk)[97](index=97&type=chunk) Interest Expense on Convertible Senior Notes (In thousands) | Note Type | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------ | :----------------------------- | :----------------------------- | | 2029 Convertible Senior Notes | $5,503 | $3,662 | | 2025 Convertible Senior Notes | $1,820 | $2,686 | | Total | $7,323 | $6,348 | [Note 7. Stockholders' Equity](index=21&type=section&id=Note%207.%20Stockholders'%20Equity) This note details the company's capital structure, including common and preferred stock, shares reserved for future issuance, and activity related to stock options and restricted stock units (RSUs), including performance-based RSUs (PRSUs). It also provides a breakdown of stock-based compensation expense - As of June **30**, **2025**, **77,262,690** shares of common stock were issued and outstanding[78](index=78&type=chunk) Common Stock Reserved for Future Issuance (June 30, 2025, in thousands) | Category | Shares | | :------------------------------------- | :----- | | Stock options outstanding | 848 | | RSUs (including PRSUs) outstanding | 7,198 | | Shares available for future grant under 2014 Plan | 13,029 | | Shares available for future issuance under ESPP | 3,961 | | Total shares of common stock reserved | 25,036 | Total Stock-Based Compensation Expense (In thousands) | Expense Category | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :------------------------ | :------------------------------- | :----------------------------- | | Cost of revenue | $7,296 | $14,480 | | Research and development | $8,829 | $17,519 | | Sales and marketing | $13,355 | $24,929 | | General and administrative | $12,379 | $24,176 | | Total | $41,859 | $81,104 | - During the six months ended June **30**, **2025**, the company granted **267,711** market-based PRSUs with a grant date fair value of **$13.9 million**[83](index=83&type=chunk) [Note 8. Net Income (Loss) Per Share](index=24&type=section&id=Note%208.%20Net%20Income%20(Loss)%20Per%20Share) This note details the calculation of basic and diluted net income (loss) per share, including the weighted-average shares outstanding and the securities excluded from diluted EPS calculation due to their anti-dilutive effect Net Income (Loss) Per Share (In thousands, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $1,154 | $(12,816) | $1,730 | $(19,893) | | Basic shares | 76,654 | 74,203 | 76,303 | 73,845 | | Diluted shares | 88,523 | 74,203 | 88,964 | 73,845 | | Basic net income (loss) per share | $0.02 | $(0.17) | $0.02 | $(0.27) | | Diluted net income (loss) per share | $0.01 | $(0.17) | $0.02 | $(0.27) | - For periods of net loss (e.g., June **30**, **2024**), stock options, RSUs, and convertible senior notes were excluded from diluted EPS calculation as their effect would have been anti-dilutive[89](index=89&type=chunk) [Note 9. Income Taxes](index=24&type=section&id=Note%209.%20Income%20Taxes) This note details the provision for income taxes, which primarily consists of U.S. federal and state tax expenses due to IRC Section 174 requirements and tax attribute utilization limitations, as well as foreign current income tax expense. The company maintains a full valuation allowance against its U.S. net deferred tax assets Provision for Income Taxes (In thousands) | Period | June 30, 2025 | June 30, 2024 | | :--------------------------------- | :------------ | :------------ | | Three Months Ended | $1,382 | $3,345 | | Six Months Ended | $1,566 | $4,334 | - The provision for income taxes is primarily driven by U.S. federal and state tax expenses due to IRC Section **174** capitalization requirements and foreign current income tax[91](index=91&type=chunk) - A full valuation allowance is maintained against U.S. net deferred tax assets, as the company does not believe their realization is more likely than not[93](index=93&type=chunk) [Note 10. Commitments and Contingencies](index=25&type=section&id=Note%2010.%20Commitments%20and%20Contingencies) This note outlines the company's principal commitments, including those under co-location hosting, telecommunication usage, cloud services, software and maintenance agreements, and convertible senior notes. It also addresses legal matters, specifically a securities class action and a related shareholder derivative action - As of June **30**, **2025**, commitments include **$12.0 million** for co-location hosting and telecommunication services, and **$25.5 million** for cloud services and software/maintenance agreements[95](index=95&type=chunk)[96](index=96&type=chunk) - The **2025** convertible senior notes matured on June **1**, **2025**, and **$747.5 million** of **2029** convertible senior notes remain outstanding[97](index=97&type=chunk) - The company is a defendant in a securities class action lawsuit filed in December **2024**, alleging violations of the Securities Exchange Act, and a related shareholder derivative action filed in March **2025**[98](index=98&type=chunk)[100](index=100&type=chunk) - The company intends to vigorously defend the lawsuits and cannot estimate the reasonably possible loss at this time[99](index=99&type=chunk) [Note 11. Segment and Geographical Information](index=26&type=section&id=Note%2011.%20Segment%20and%20Geographical%20Information) Five9 operates as a single operating and reportable segment, providing cloud contact center solutions through a SaaS business model. Revenue is generated from subscriptions, usage-based telephony, and professional services. The note also provides a breakdown of revenue and long-lived assets by geographic region - The company's Intelligent CX Platform, powered by Five9 Genius AI, offers a comprehensive suite of applications for customer service, sales, and marketing functions[102](index=102&type=chunk) Revenue by Geographic Region (In thousands) | Region | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | United States | $251,390 | $224,532 | $498,446 | $443,792 | | International | $31,879 | $27,554 | $64,528 | $55,304 | | Total revenue | $283,269 | $252,086 | $562,974 | $499,096 | Long-Lived Assets, Net by Geographic Region (In thousands) | Region | June 30, 2025 | December 31, 2024 | | :------------ | :------------ | :---------------- | | United States | $142,702 | $136,382 | | International | $11,797 | $8,506 | | Total | $154,499 | $144,888 | [Note 12. Leases](index=28&type=section&id=Note%2012.%20Leases) This note provides details on the company's operating and finance leases for offices, data centers, and equipment, including lease expenses, cash flow impacts, balance sheet information, and maturity schedules. New equipment finance lease agreements were recognized during the period Lease Expenses (In thousands) | Lease Type | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :------------------ | :------------------------------- | :----------------------------- | | Operating lease cost | $3,123 | $6,295 | | Total finance lease cost | $2,600 | $4,867 | - The company entered into additional three-year equipment finance lease agreements, recognizing **$3.9 million** in right-of-use assets and corresponding liabilities during the six months ended June **30**, **2025**[112](index=112&type=chunk) Total Lease Liabilities (In thousands) | Lease Type | June 30, 2025 | December 31, 2024 | | :------------------ | :------------ | :---------------- | | Total operating lease liabilities | $46,698 | $48,329 | | Total finance lease liabilities | $19,186 | $19,456 | - Weighted average remaining lease terms are **4.7** years for operating leases and **2.2** years for finance leases as of June **30**, **2025**[114](index=114&type=chunk) [Note 13. Acquisition](index=30&type=section&id=Note%2013.%20Acquisition) This note details the acquisition of Acqueon on August 27, 2024, for approximately $173.8 million. The acquisition aims to enhance Five9's AI-powered CX platform with omnichannel proactive customer engagement. The purchase price allocation includes significant goodwill and intangible assets - Five9 acquired Acqueon for approximately **$173.8 million** to expand its AI-powered CX platform and outbound capabilities[115](index=115&type=chunk) Preliminary Purchase Price Allocation (Acqueon Acquisition, in thousands) | Asset Acquired | Amount | | :------------------ | :----- | | Cash | $6,661 | | Tangible assets acquired | $3,559 | | Other assets acquired | $7,333 | | Acquired technology | $30,400 | | Customer relationships | $8,700 | | Trademarks | $800 | | Goodwill | $139,429 | | Total assets acquired | $196,882 | | Deferred tax liability | $(5,058) | | Liabilities assumed | $(17,997) | | Total | $173,827 | - Goodwill of **$139.4 million** was recorded, which is not deductible for tax purposes[116](index=116&type=chunk)[117](index=117&type=chunk) [Note 14. Restructurings](index=31&type=section&id=Note%2014.%20Restructurings) This note describes two reduction in force plans, the 2024 Plan and the 2025 Plan, implemented to drive profitable growth and prioritize AI investments. Both plans involved employee reductions and incurred restructuring costs, primarily for severance and benefits - The **2024** Plan, announced in August **2024**, reduced global full-time employees by approximately **6%**, incurring **$9.6 million** in restructuring costs[121](index=121&type=chunk) - The **2025** Plan, approved in March **2025**, reduced global full-time employees by approximately **4%**, incurring **$7.8 million** in restructuring costs and an additional **$2.1 million** in stock-based compensation costs during the three and six months ended June **30**, **2025**[122](index=122&type=chunk) - Both plans aimed to drive balanced, profitable growth and prioritize investments in key strategic areas, including artificial intelligence[121](index=121&type=chunk)[122](index=122&type=chunk) [Note 15. Subsequent Event](index=31&type=section&id=Note%2015.%20Subsequent%20Event) This note discloses a subsequent event: the signing of H.R.1, the One Big Beautiful Bill Act (OBBBA), on July 4, 2025. This new tax law introduces significant changes to the U.S. tax code, including bonus depreciation and R&D expensing, which are expected to impact the company's effective tax rate and financial position starting in Q3 2025 - **H.R.1**, the One Big Beautiful Bill Act (**OBBBA**), signed on July **4**, **2025**, will reinstate **100%** bonus depreciation and allow immediate expensing of domestic R&D expenditures[123](index=123&type=chunk) - The **OBBBA's** effects are not reflected in the Q**2** financial statements but are expected to impact the company's effective tax rate, cash flows, and capital allocation strategy starting in the third quarter of **2025**[123](index=123&type=chunk) [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=32&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on Five9, Inc.'s financial condition and results of operations for the three and six months ended June 30, 2025 and 2024. It covers the company's business overview, key performance metrics, detailed analysis of revenue and expenses, liquidity, capital resources, and critical accounting policies [Overview](index=32&type=section&id=Overview) Five9 is a leading provider of intelligent cloud contact centers, focusing on transitioning organizations from legacy systems to its AI-powered Intelligent CX Platform. The company has expanded its market to larger contact centers and embedded AI throughout its platform, driving revenue growth despite macroeconomic challenges and recent workforce reductions - Five9 is a leading provider of intelligent cloud contact centers with over **3,000** customers, offering a SaaS solution for managing customer interactions across multiple channels[125](index=125&type=chunk)[132](index=132&type=chunk) - The company's Intelligent CX Platform, powered by Five9 Genius AI, optimizes customer experience and agent productivity[125](index=125&type=chunk) - Subscription and related usage fees accounted for **93%** of revenue for the three and six months ended June **30**, **2025**[127](index=127&type=chunk) - The company implemented reduction in force plans in **2024** and **2025**, reducing global full-time employees by approximately **6%** and **4%** respectively, to drive profitable growth and prioritize AI investments[129](index=129&type=chunk)[131](index=131&type=chunk) [Key Operating and Non-GAAP Financial Performance Metrics](index=33&type=section&id=Key%20Operating%20and%20Non-GAAP%20Financial%20Performance%20Metrics) This section highlights key metrics used to evaluate business performance, including Annual Dollar-Based Retention Rate and Adjusted EBITDA. The retention rate remained stable, while Adjusted EBITDA saw significant growth, reflecting improved operational performance Annual Dollar-Based Retention Rate | Period | Twelve Months Ended June 30, 2025 | Twelve Months Ended June 30, 2024 | | :---------------- | :-------------------------------- | :-------------------------------- | | Retention Rate | 108% | 108% | - The Annual Dollar-Based Retention Rate remained stable at **108%** year-over-year, influenced by macroeconomic headwinds, seasonal decreases in certain markets, and growth from AI and existing customer expansions[136](index=136&type=chunk) Adjusted EBITDA (In thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $1,154 | $(12,816) | $1,730 | $(19,893) | | Adjusted EBITDA | $67,950 | $41,781 | $120,652 | $79,366 | - Adjusted EBITDA increased by **62.6%** for the three months and **52.0%** for the six months ended June **30**, **2025**, compared to the same periods in **2024**, indicating improved operational performance[139](index=139&type=chunk) [Key Components of Our Results of Operations](index=35&type=section&id=Key%20Components%20of%20Our%20Results%20of%20Operations) This section details the primary components of the company's financial results: revenue, cost of revenue, and operating expenses. Revenue is primarily from recurring subscriptions and usage, supplemented by professional services. Cost of revenue is influenced by telecommunications fees and infrastructure investments, while operating expenses are categorized into research and development, sales and marketing, and general and administrative, all expected to increase in absolute dollars to support growth - Revenue consists of subscription and related usage fees (recurring) and professional services, with subscription fees recognized straight-line and usage fees based on actual usage[141](index=141&type=chunk) - Cost of revenue includes personnel, telecommunications fees, USF contributions, depreciation, data center costs, and amortization of acquired technology and internal-use software[145](index=145&type=chunk) - Research and development expenses are primarily personnel costs for new product development and improvements, expected to increase in absolute dollars[147](index=147&type=chunk) - Sales and marketing expenses include personnel, amortization of deferred contract acquisition costs, and advertising, also expected to increase in absolute dollars to drive revenue growth[148](index=148&type=chunk) [Results of Operations for the Three and Six Months Ended June 30, 2025 and 2024](index=36&type=section&id=Results%20of%20Operations%20for%20the%20Three%20and%20Six%20Months%20Ended%20June%2030,%202025%20and%202024) This section provides a detailed comparative analysis of the company's operating results, highlighting revenue growth driven by larger customers, increased gross profit, and changes in operating expenses. Net income was achieved in 2025, a significant improvement from net losses in 2024, despite increased interest expense from new convertible notes Operating Results as a Percentage of Revenue | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | 100% | 100% | 100% | 100% | | Gross profit | 55% | 53% | 55% | 53% | | Loss from operations | (1)% | (8)% | (1)% | (8)% | | Net income (loss) | 0% | (5)% | 0% | (4)% | - Revenue increased by **12%** and **13%** for the three and six months ended June **30**, **2025**, respectively, primarily due to growth from larger customers and enhanced brand awareness[152](index=152&type=chunk) - Gross profit increased by **16%** for both the three and six months ended June **30**, **2025**, compared to the same periods in **2024**, with gross margin improving from **53%** to **55%**[154](index=154&type=chunk) - Interest income and other decreased by **43%** and **25%** for the three and six months ended June **30**, **2025**, respectively, due to lower investable balances after the **2025** convertible notes maturity and increased foreign currency transaction losses[163](index=163&type=chunk) [Liquidity and Capital Resources](index=39&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity is primarily supported by sales, equity, and debt financings. As of June 30, 2025, it had $692.6 million in working capital. The 2025 convertible senior notes were repaid, and the 2029 notes remain outstanding. The company expects existing cash and equivalents to cover needs for the next 12 months but may seek additional financing for growth initiatives and potential acquisitions - As of June **30**, **2025**, working capital was **$692.6 million**, including **$205.5 million** in cash and cash equivalents and **$430.4 million** in marketable investments[164](index=164&type=chunk) - The company repaid **$434.4 million** for the maturity of the **2025** convertible senior notes on June **1**, **2025**[164](index=164&type=chunk)[176](index=176&type=chunk) - Net cash provided by operating activities increased to **$83.4 million** for the six months ended June **30**, **2025**, from **$52.2 million** in the prior year[171](index=171&type=chunk)[173](index=173&type=chunk) - Net cash provided by investing activities was **$191.1 million** in the six months ended June **30**, **2025**, a significant shift from a net outflow of **$360.1 million** in the prior year[174](index=174&type=chunk)[175](index=175&type=chunk) [Critical Accounting Policies and Estimates](index=41&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section states that there have been no material changes to the company's critical accounting policies and estimates since its Annual Report on Form 10-K for the fiscal year ended December 31, 2024 - No material changes to critical accounting policies and estimates were reported since the Annual Report on Form **10-K** for the fiscal year ended December **31**, **2024**[179](index=179&type=chunk) [Recent Accounting Pronouncements](index=41&type=section&id=Recent%20Accounting%20Pronouncements) This section refers readers to Note 1 of the condensed consolidated financial statements for information on recent accounting pronouncements - Refer to Note **1** for details on recent accounting pronouncements[180](index=180&type=chunk) [Contractual and Other Obligations](index=42&type=section&id=Contractual%20and%20Other%20Obligations) This section details the company's material cash requirements from contractual obligations, including convertible senior notes, leases, cloud services, software and maintenance agreements, and hosting and telecommunication usage services. It also addresses indemnification agreements and legal contingencies - The **2025** convertible senior notes matured on June **1**, **2025**, and were settled in cash. **$747.5 million** aggregate principal amount of **2029** convertible senior notes remain outstanding[182](index=182&type=chunk)[183](index=183&type=chunk) - Outstanding operating lease obligations totaled **$51.3 million** as of June **30**, **2025**, with **$6.8 million** due in the remainder of **2025**[185](index=185&type=chunk) - Outstanding finance lease obligations totaled **$20.4 million** as of June **30**, **2025**, with **$5.1 million** due in the remainder of **2025**[185](index=185&type=chunk) - Commitments for cloud services and software/maintenance agreements totaled **$25.5 million**, and hosting/telecommunication usage services totaled **$12.0 million** as of June **30**, **2025**[186](index=186&type=chunk)[187](index=187&type=chunk) [ITEM 3. Quantitative and Qualitative Disclosure about Market Risk](index=44&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosure%20about%20Market%20Risk) This section discusses the company's exposure to market risks, primarily from fluctuations in interest rates and foreign currency exchange rates. It notes no material changes in market risk exposure since December 31, 2024, and details the impact of these risks on investments and operations [Interest Rate Sensitivity](index=44&type=section&id=Interest%20Rate%20Sensitivity) The company's cash, cash equivalents, and marketable securities totaled $635.9 million as of June 30, 2025, invested in highly rated securities. A hypothetical 100 basis point change in interest rates would not materially impact the value of these investments. The 2029 convertible senior notes bear fixed interest rates, limiting interest rate risk - Cash, cash equivalents, and marketable securities totaled **$635.9 million** as of June **30**, **2025**, primarily invested in U.S. government and agency securities[193](index=193&type=chunk) - A hypothetical **100** basis point change in interest rates would not have a material impact on the value of the company's cash and marketable investments[193](index=193&type=chunk) - The **2029** convertible senior notes bear fixed interest rates, making them not subject to interest rate risk[195](index=195&type=chunk) [Foreign Currency Risk](index=44&type=section&id=Foreign%20Currency%20Risk) The company's sales are primarily U.S. dollar-denominated, limiting direct foreign currency risk on revenue. However, operating expenses are largely in local currencies, exposing the company to fluctuations. A hypothetical 10% change in foreign currency exchange rates could impact operating expenses by up to $5.8 million - Sales are primarily denominated in U.S. dollars, but operating expenses are generally in local currencies, creating foreign currency risk[196](index=196&type=chunk) - A hypothetical **10%** change in foreign currency exchange rates could impact operating expenses by a maximum of **$5.8 million** during the six months ended June **30**, **2025**[197](index=197&type=chunk) - The company has not entered into any hedging arrangements for foreign currency risk[197](index=197&type=chunk) [ITEM 4. Controls and Procedures](index=45&type=section&id=ITEM%204.%20Controls%20and%20Procedures) This section reports on the effectiveness of the company's disclosure controls and procedures and any changes in internal control over financial reporting. Management concluded that disclosure controls were effective as of June 30, 2025, and no material changes occurred in internal control during the quarter [Evaluation of Disclosure Controls and Procedures](index=45&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, providing reasonable assurance that required information is recorded, processed, summarized, and reported timely - The CEO and CFO concluded that disclosure controls and procedures were effective as of June **30**, **2025**[199](index=199&type=chunk) - Disclosure controls are designed to provide reasonable assurance of timely and accurate reporting of information required under the Exchange Act[199](index=199&type=chunk) [Changes in Internal Control over Financial Reporting](index=45&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) There were no material changes in the company's internal control over financial reporting during the three months ended June 30, 2025 - No material changes in internal control over financial reporting occurred during the three months ended June **30**, **2025**[201](index=201&type=chunk) [PART II. OTHER INFORMATION](index=46&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, equity sales, defaults, and other miscellaneous information [ITEM 1. Legal Proceedings](index=46&type=section&id=ITEM%201.%20Legal%20Proceedings) This section refers to Note 10 of the condensed consolidated financial statements for information regarding legal proceedings - Information on legal proceedings is incorporated by reference from Note **10** to the condensed consolidated financial statements[204](index=204&type=chunk) [ITEM 1A. Risk Factors](index=46&type=section&id=ITEM%201A.%20Risk%20Factors) This section states that there have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2024 - No material changes to Risk Factors were reported since the Annual Report on Form **10-K** for the fiscal year ended December **31**, **2024**[205](index=205&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=46&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This item is marked as not applicable for this reporting period - This item is not applicable[206](index=206&type=chunk) [ITEM 3. Defaults Upon Senior Securities](index=46&type=section&id=ITEM%203.%20Defaults%20Upon%20Senior%20Securities) This item reports that there were no defaults upon senior securities during the reporting period - No defaults upon senior securities occurred[207](index=207&type=chunk) [ITEM 4. Mine Safety Disclosures](index=46&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) This item is marked as not applicable for this reporting period - This item is not applicable[208](index=208&type=chunk) [ITEM 5. Other Information](index=46&type=section&id=ITEM%205.%20Other%20Information) This section discloses information regarding Rule 10b5-1 trading arrangements adopted, modified, or terminated by the company's directors and officers during the fiscal quarter ended June 30, 2025 Rule 10b5-1 Trading Arrangements (Fiscal Quarter Ended June 30, 2025) | Name | Title | Adoption Date | Expiration Date | Aggregate of securities to be sold | | :------------ | :-------------------- | :------------ | :-------------- | :----------------------------------- | | Panos Kozanian | EVP, Product Engineering | May 14, 2025 | March 31, 2026 | 39,623 | - The disclosed Rule **10b5-1** trading arrangement is intended to satisfy the affirmative defense conditions of Rule **10b5-1(c)**[209](index=209&type=chunk) [ITEM 6. Exhibits](index=47&type=section&id=ITEM%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including certifications, XBRL documents, and the cover page interactive data file - Exhibits include certifications from the CEO and CFO (**31.1**, **31.2**, **32.1**) and various XBRL taxonomy documents (**101.INS**, **101.SCH**, **101.CAL**, **101.DEF**, **101.LAB**, **101.PRE**)[211](index=211&type=chunk) [SIGNATURES](index=48&type=section&id=SIGNATURES) This section contains the duly authorized executive signatures affirming the submission of the report [Executive Signatures](index=48&type=section&id=Executive%20Signatures) This section contains the duly authorized signatures of Five9, Inc.'s Chief Executive Officer, Chief Financial Officer, and Chief Accounting Officer, affirming the submission of the report - The report is signed by Michael Burkland (Chief Executive Officer), Bryan Lee (Chief Financial Officer), and Leena Mansharamani (Chief Accounting Officer) on July **31**, **2025**[214](index=214&type=chunk)

[Q2 2025 Earnings Highlights](index=1&type=section&id=Q2%202025%20Earnings%20Highlights) [Key Performance Indicators](index=1&type=section&id=Key%20Performance%20Indicators) Five9 reported record revenue of $283 million for Q2 2025, marking a 12% year-over-year increase. Enterprise AI revenue growth accelerated significantly to 42% year-over-year, now constituting 10% of Enterprise subscription revenue. The company also achieved a record operating cash flow of $35 million and an all-time high Adjusted EBITDA margin of 24% - Five9 reported record revenue of **$283 million** for the second quarter of 2025[1](index=1&type=chunk) - Enterprise AI revenue growth accelerated to **42% year-over-year** in Q2 2025, representing **10% of Enterprise subscription revenue**[1](index=1&type=chunk)[3](index=3&type=chunk) - Q2 2025 saw a record operating cash flow of **$35 million**[1](index=1&type=chunk)[3](index=3&type=chunk) - Adjusted EBITDA margin increased to a record **24%** in Q2 2025[3](index=3&type=chunk) [CEO Commentary](index=1&type=section&id=CEO%20Commentary) CEO Mike Burkland expressed satisfaction with strong Q2 results, highlighting accelerated subscription revenue growth (16% YoY) driven by Enterprise AI. He noted strong sales execution with Enterprise AI bookings more than tripling YoY and emphasized the meaningful benefits customers are realizing from the Genius AI suite, including new Agentic AI Agents and AI Trust & Governance - Subscription revenue accelerated to **16% year-over-year growth**[3](index=3&type=chunk) - Enterprise AI bookings more than **tripled year-over-year** in Q2[3](index=3&type=chunk) - Customers are benefiting from the Genius AI suite, with recent launches including Agentic AI Agents and AI Trust & Governance[5](index=5&type=chunk) [Second Quarter 2025 Financial Results Overview](index=1&type=section&id=Second%20Quarter%202025%20Financial%20Results%20Overview) [Key Financial Metrics](index=1&type=section&id=Key%20Financial%20Metrics) Five9's second quarter 2025 financial performance showed significant improvements across key metrics compared to Q2 2024, including revenue growth, increased gross margins, and a shift from GAAP net loss to net income. Non-GAAP profitability also saw substantial gains | Metric | Q2 2025 | Q2 2024 | YoY Change | YoY % Change | | :-------------------------------- | :---------- | :---------- | :--------- | :----------- | | Revenue | $283.3 million | $252.1 million | $31.2 million | 12% | | GAAP Gross Margin | 54.9% | 53.0% | 1.9% | - | | Adjusted Gross Margin | 63.0% | 60.5% | 2.5% | - | | GAAP Net Income (Loss) | $1.2 million | $(12.8) million | $14.0 million | - | | GAAP EPS (Diluted) | $0.01 | $(0.17) | $0.18 | - | | Non-GAAP Net Income | $58.3 million | $38.9 million | $19.4 million | 49.9% | | Non-GAAP EPS (Diluted) | $0.76 | $0.52 | $0.24 | 46.2% | | Adjusted EBITDA | $67.9 million | $41.8 million | $26.1 million | 62.4% | | Adjusted EBITDA as % of Revenue | 24.0% | 16.6% | 7.4% | - | | GAAP Operating Cash Flow | $35.1 million | $19.9 million | $15.2 million | 76.4% | [Business Outlook and Guidance](index=2&type=section&id=Business%20Outlook%20and%20Guidance) [Full Year 2025 Financial Guidance](index=2&type=section&id=Full%20Year%202025%20Financial%20Guidance) Five9 provided guidance for the full year 2025, projecting revenue between $1.1435 billion and $1.1495 billion, GAAP net income per share between $0.23 and $0.30, and non-GAAP net income per share between $2.86 and $2.90 | Metric | Low | High | | :-------------------------- | :------------------- | :------------------- | | Revenue | $1.1435 billion | $1.1495 billion | | GAAP Net Income per Share | $0.23 | $0.30 | | Non-GAAP Net Income per Share | $2.86 | $2.90 | [Third Quarter 2025 Financial Guidance](index=2&type=section&id=Third%20Quarter%202025%20Financial%20Guidance) For the third quarter of 2025, Five9 expects revenue to be in the range of $283.0 million to $286.0 million, with GAAP net income per share between $0.06 and $0.12, and non-GAAP net income per share between $0.72 and $0.74 | Metric | Low | High | | :-------------------------- | :------------------- | :------------------- | | Revenue | $283.0 million | $286.0 million | | GAAP Net Income per Share | $0.06 | $0.12 | | Non-GAAP Net Income per Share | $0.72 | $0.74 | [Corporate News](index=2&type=section&id=Corporate%20News) [Chief Financial Officer Appointment](index=2&type=section&id=Chief%20Financial%20Officer%20Appointment) Five9 announced the official appointment of Bryan Lee as Chief Financial Officer, effective July 31, 2025. Lee, who previously served as interim CFO and Executive Vice President of Finance and Treasurer, will lead global financial operations, including financial planning and analysis, accounting, procurement, treasury, and investor relations - Bryan Lee has been appointed Chief Financial Officer, effective **July 31, 2025**[9](index=9&type=chunk) - Lee previously served as interim CFO and Executive Vice President of Finance and Treasurer since joining Five9 in **2014**[10](index=10&type=chunk)[12](index=12&type=chunk) - As CFO, Lee will oversee Five9's global financial operations, including financial planning and analysis, accounting, procurement, treasury, and investor relations[13](index=13&type=chunk) [Conference Call Information](index=3&type=section&id=Conference%20Call%20Information) [Conference Call Details](index=3&type=section&id=Conference%20Call%20Details) Five9 will host a Zoom webinar on July 31, 2025, at 4:30 p.m. Eastern Time to discuss its second quarter 2025 results. A live webcast and replay will be available on the Investor Relations section of the company's website - Five9 will discuss Q2 2025 results via Zoom webinar on **July 31, 2025, at 4:30 p.m. Eastern Time**[14](index=14&type=chunk) - A live webcast and replay will be accessible on the Investor Relations section of Five9's website[15](index=15&type=chunk) [Non-GAAP Financial Measures Explanation](index=3&type=section&id=Non-GAAP%20Financial%20Measures%20Explanation) [Definition and Rationale](index=3&type=section&id=Definition%20and%20Rationale) Five9 utilizes non-GAAP financial measures such as adjusted gross profit, adjusted EBITDA, non-GAAP operating income, and non-GAAP net income to provide a clearer view of its core operating performance. These measures exclude items like stock-based compensation, depreciation, amortization, and acquisition-related costs, which management uses for budgeting and performance evaluation, and are considered useful supplemental information for investors - Non-GAAP financial measures include adjusted gross profit, adjusted EBITDA, non-GAAP operating income, and non-GAAP net income[16](index=16&type=chunk) - Adjustments typically add back or remove items such as depreciation, intangibles amortization, stock-based compensation, acquisition costs, lease amortization, and costs related to reduction in force plans[16](index=16&type=chunk) - These non-GAAP measures are used by management to illustrate underlying business trends, establish budgets, and evaluate performance, and are considered useful supplemental information for investors[17](index=17&type=chunk) [Forward-Looking Statements and Risk Factors](index=4&type=section&id=Forward-Looking%20Statements%20and%20Risk%20Factors) [Key Risks and Uncertainties](index=4&type=section&id=Key%20Risks%20and%20Uncertainties) The news release contains forward-looking statements subject to numerous risks and uncertainties. These include the impact of adverse economic conditions, challenges in attracting and retaining customers, potential service outages, the evolving role of AI in contact centers, competition, international operational risks, cybersecurity threats, and the ability to achieve or sustain profitability - Risks include the impact of adverse economic conditions, such as macroeconomic challenges, inflation, high interest rates, and geopolitical conflicts[18](index=18&type=chunk) - Challenges in attracting new customers, retaining existing ones, or selling additional services could harm revenue and gross margins[18](index=18&type=chunk) - The increasing role of AI solutions in contact centers presents risks if Five9 cannot replace subscription revenue with AI solution sales or if AI development is unsuccessful[18](index=18&type=chunk) - Other risks include managing technical operations, competition, international expansion, security breaches, acquisitions, long sales cycles for larger organizations, reliance on third-party service providers, and the ability to achieve or sustain profitability[18](index=18&type=chunk)[19](index=19&type=chunk) [Company Overview (About Five9)](index=5&type=section&id=Company%20Overview%20%28About%20Five9%29) [Company Description](index=5&type=section&id=Company%20Description) Five9, Inc. provides the Intelligent CX Platform, a cloud-native, multi-tenant, scalable, reliable, and secure suite of solutions for orchestrating customer experiences. Its offerings include contact center, omni-channel engagement, Workforce Engagement Management, extensive partner integrations, and embedded AI, automation, and journey analytics, serving over 3,000 organizations globally - Five9 offers the Intelligent CX Platform, a cloud-native, multi-tenant, scalable, reliable, and secure solution[20](index=20&type=chunk) - The platform includes contact center, omni-channel engagement, Workforce Engagement Management, and integrates with over **1,000 partners**[20](index=20&type=chunk) - Innovative and practical AI, automation, and journey analytics are embedded within the platform[20](index=20&type=chunk) - Five9 serves more than **3,000 organizations worldwide**[20](index=20&type=chunk) [Condensed Consolidated Financial Statements](index=6&type=section&id=Condensed%20Consolidated%20Financial%20Statements) [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet shows a decrease in total assets from $2,051,214 thousand at December 31, 2024, to $1,704,860 thousand at June 30, 2025, primarily due to a reduction in cash, cash equivalents, and marketable investments. Total liabilities also decreased significantly, driven by the repayment of convertible senior notes | (In thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :-------------- | :---------------- | | **ASSETS** | | | | Cash and cash equivalents | $205,479 | $362,546 | | Marketable investments | 430,397 | 643,410 | | Accounts receivable, net | 127,835 | 115,172 | | Total current assets | 894,194 | 1,248,568 | | Property and equipment, net | 154,499 | 144,888 | | Goodwill | 366,698 | 365,436 | | Total assets | $1,704,860 | $2,051,214 | | **LIABILITIES AND STOCKHOLDERS' EQUITY** | | | | Accounts payable | $31,063 | $26,282 | | Deferred revenue | 68,009 | 79,173 | | Convertible senior notes (current portion) | — | 433,490 | | Total current liabilities | 201,589 | 641,691 | | Convertible senior notes (non-current portion) | 733,620 | 731,855 | | Total liabilities | 987,483 | 1,429,022 | | Total stockholders' equity | 717,377 | 622,192 | | Total liabilities and stockholders' equity | $1,704,860 | $2,051,214 | [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For the three months ended June 30, 2025, Five9 reported a net income of $1,154 thousand, a significant improvement from a net loss of $(12,816) thousand in the prior year. Revenue increased by 12% year-over-year, and gross profit also saw a healthy rise. For the six months, the company moved from a net loss to a net income of $1,730 thousand | (In thousands, except per share data) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $283,269 | $252,086 | $562,974 | $499,096 | | Cost of revenue | 127,865 | 118,414 | 253,838 | 232,944 | | Gross profit | 155,404 | 133,672 | 309,136 | 266,152 | | Total operating expenses | 156,965 | 153,037 | 316,125 | 306,212 | | Loss from operations | (1,561) | (19,365) | (6,989) | (40,060) | | Total other income (expense), net | 4,097 | 9,894 | 10,285 | 24,501 | | Income (loss) before income taxes | 2,536 | (9,471) | 3,296 | (15,559) | | Provision for income taxes | 1,382 | 3,345 | 1,566 | 4,334 | | Net income (loss) | $1,154 | $(12,816) | $1,730 | $(19,893) | | Net income (loss) per share: Basic | $0.02 | $(0.17) | $0.02 | $(0.27) | | Net income (loss) per share: Diluted | $0.01 | $(0.17) | $0.02 | $(0.27) | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2025, net cash provided by operating activities increased to $83,445 thousand from $52,231 thousand in the prior year. Investing activities generated a net cash inflow of $191,063 thousand, a significant reversal from a net outflow in the previous year, primarily due to changes in marketable investment activities. Financing activities resulted in a net cash outflow of $(431,125) thousand, largely due to the repayment of convertible senior notes | (In thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $83,445 | $52,231 | | Net cash used in (provided by) investing activities | $191,063 | $(360,103) | | Net cash (used in) provided by financing activities | $(431,125) | $340,412 | | Net (decrease) increase in cash, cash equivalents and restricted cash | $(156,617) | $32,540 | | Cash, cash equivalents and restricted cash: End of period | $207,568 | $177,382 | [Reconciliation of Non-GAAP Financial Measures](index=9&type=section&id=Reconciliation%20of%20Non-GAAP%20Financial%20Measures) [GAAP Gross Profit to Adjusted Gross Profit](index=9&type=section&id=GAAP%20Gross%20Profit%20to%20Adjusted%20Gross%20Profit) Five9's adjusted gross profit and margin for Q2 2025 significantly improved compared to Q2 2024, reflecting the impact of non-GAAP adjustments such as depreciation, intangibles amortization, stock-based compensation, and costs related to a reduction in force plan | (In thousands, except percentages) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | GAAP gross profit | $155,404 | $133,672 | $309,136 | $266,152 | | GAAP gross margin | 54.9% | 53.0% | 54.9% | 53.3% | | Non-GAAP adjustments | 23,141 | 10,937 | 39,524 | 21,471 | | Adjusted gross profit | $178,545 | $152,409 | $353,160 | $302,615 | | Adjusted gross margin | 63.0% | 60.5% | 62.7% | 60.6% | [GAAP Net Income (Loss) to Adjusted EBITDA](index=10&type=section&id=GAAP%20Net%20Income%20%28Loss%29%20to%20Adjusted%20EBITDA) Adjusted EBITDA for Q2 2025 reached $67,950 thousand, a substantial increase from $41,781 thousand in Q2 2024, with the Adjusted EBITDA margin rising to 24.0%. This improvement is driven by adjustments for depreciation, stock-based compensation, and various one-time costs | (In thousands, except percentages) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | GAAP net income (loss) | $1,154 | $(12,816) | $1,730 | $(19,893) | | Non-GAAP adjustments | 66,796 | 54,597 | 118,922 | 99,259 | | Adjusted EBITDA | $67,950 | $41,781 | $120,652 | $79,366 | | Adjusted EBITDA as % of revenue | 24.0% | 16.6% | 21.4% | 15.9% | [GAAP Operating Loss to Non-GAAP Operating Income](index=11&type=section&id=GAAP%20Operating%20Loss%20to%20Non-GAAP%20Operating%20Income) Five9 converted a GAAP operating loss of $(1,561) thousand in Q2 2025 to a non-GAAP operating income of $54,454 thousand, reflecting significant adjustments for stock-based compensation, intangibles amortization, and other operational costs | (In thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Loss from operations | $(1,561) | $(19,365) | $(6,989) | $(40,060) | | Non-GAAP adjustments | 56,015 | 50,401 | 101,747 | 98,689 | | Non-GAAP operating income | $54,454 | $31,036 | $94,758 | $58,629 | [GAAP Net Income (Loss) to Non-GAAP Net Income](index=12&type=section&id=GAAP%20Net%20Income%20%28Loss%29%20to%20Non-GAAP%20Net%20Income) For Q2 2025, Five9 reported non-GAAP net income of $58,273 thousand, a substantial increase from $38,874 thousand in Q2 2024. This translates to a non-GAAP diluted EPS of $0.76, up from $0.52, after accounting for various non-GAAP adjustments | (In thousands, except per share data) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | GAAP net income (loss) | $1,154 | $(12,816) | $1,730 | $(19,893) | | Non-GAAP adjustments | 57,119 | 51,690 | 103,882 | 94,506 | | Non-GAAP net income | $58,273 | $38,874 | $105,612 | $74,613 | | Non-GAAP net income per share: Diluted | $0.76 | $0.52 | $1.37 | $1.00 | [Summary of Stock-Based Compensation, Depreciation and Intangibles Amortization](index=13&type=section&id=Summary%20of%20Stock-Based%20Compensation%2C%20Depreciation%20and%20Intangibles%20Amortization) This section provides a breakdown of stock-based compensation, depreciation, and intangibles amortization across different cost categories for both the three and six months ended June 30, 2025 and 2024 | (In thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | | **Stock-Based Compensation** | | | | Cost of revenue | $7,296 | $7,789 | | Research and development | 8,829 | 9,827 | | Sales and marketing | 13,355 | 13,824 | | General and administrative | 12,379 | 12,192 | | Total | $41,859 | $43,632 | | **Depreciation** | | | | Cost of revenue | $8,697 | $7,773 | | Research and development | 799 | 741 | | Sales and marketing | 27 | 26 | | General and administrative | 1,662 | 1,750 | | Total | $11,185 | $10,290 | | **Intangibles Amortization** | | | | Cost of revenue | $3,464 | $2,648 | | Total | $3,464 | $2,648 | | (In thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :----------------------------- | :----------------------------- | | **Stock-Based Compensation** | | | | Cost of revenue | $14,480 | $15,392 | | Research and development | 17,519 | 20,757 | | Sales and marketing | 24,929 | 27,844 | | General and administrative | 24,176 | 24,323 | | Total | $81,104 | $88,316 | | **Depreciation** | | | | Cost of revenue | $16,480 | $14,738 | | Research and development | 1,479 | 1,631 | | Sales and marketing | 63 | 53 | | General and administrative | 3,553 | 3,403 | | Total | $21,575 | $19,825 | | **Intangibles Amortization** | | | | Cost of revenue | $7,564 | $5,296 | | Total | $7,564 | $5,296 | [GAAP Net Income to Non-GAAP Net Income – Guidance](index=14&type=section&id=GAAP%20Net%20Income%20to%20Non-GAAP%20Net%20Income%20%E2%80%93%20Guidance) Five9's guidance for Q3 and full year 2025 shows a significant difference between GAAP and non-GAAP net income, primarily due to adjustments for stock-based compensation, intangibles amortization, and other one-time costs. For the full year, non-GAAP net income is projected to be between $221,944 thousand and $225,052 thousand | (In thousands, except per share data) | Three Months Ending September 30, 2025 (Low) | Three Months Ending September 30, 2025 (High) | Year Ending December 31, 2025 (Low) | Year Ending December 31, 2025 (High) | | :------------------------------------ | :------------------------------------------- | :-------------------------------------------- | :---------------------------------- | :---------------------------------- | | GAAP net income | $5,515 | $10,077 | $20,238 | $26,346 | | Non-GAAP adjustments | 50,718 | 47,718 | 201,706 | 198,706 | | Non-GAAP net income | $56,233 | $57,795 | $221,944 | $225,052 | | Non-GAAP net income per share: Diluted | $0.72 | $0.74 | $2.86 | $2.90 | [Investor Relations Contacts](index=15&type=section&id=Investor%20Relations%20Contacts) [Contact Information](index=15&type=section&id=Contact%20Information) For investor relations inquiries, individuals can contact Bryan Lee, Chief Financial Officer of Five9, or Lisa Laukkanen from The Blueshirt Group - Bryan Lee, Chief Financial Officer, can be reached at **925-201-2000** or IR@five9.com[45](index=45&type=chunk) - Lisa Laukkanen of The Blueshirt Group can be contacted at **415-217-4967** or Lisa@blueshirtgroup.com[45](index=45&type=chunk)

Core Insights - Five9 (FIVN) is expected to report second-quarter 2025 results on July 31, with projected revenues between $274.5 million and $275.5 million, indicating a 9.1% year-over-year increase [1][8] - Non-GAAP earnings are anticipated to be in the range of 64-66 cents per share, reflecting a 25% year-over-year growth [2][8] - The company has consistently surpassed earnings estimates in the past four quarters, with an average surprise of 19.3% [2] Revenue and Earnings Expectations - The Zacks Consensus Estimate for FIVN's Q2 revenues is $275.1 million, suggesting a 9.1% increase from the previous year [8] - The consensus estimate for FIVN's Q2 EPS is 65 cents, indicating a 25% year-over-year growth [8] Factors Influencing Performance - Five9's Q2 performance is likely to benefit from strong enterprise AI revenues, which grew 32% year-over-year in the first quarter and accounted for 9% of enterprise subscription sales [3] - The company reported an 18.8% adjusted EBITDA margin and $35 million in free cash flow in the first quarter, providing a solid financial foundation for further investments [4] - Strategic partnerships with major companies like Salesforce, Microsoft, and Google are expected to enhance FIVN's growth by improving AI tool integration and client retention [5] Macroeconomic Considerations - Despite positive factors, macroeconomic challenges such as persistent inflation, high interest rates, and currency fluctuations may have impacted Five9's performance in the quarter [6] Earnings Model Insights - According to the Zacks model, Five9 has a Zacks Rank of 3 and an Earnings ESP of 0.00%, indicating a neutral outlook for earnings performance [7]

Core Viewpoint - The research service "Asia Value & Moat Stocks" targets value investors looking for Asia-listed stocks that exhibit a significant disparity between market price and intrinsic value, focusing on deep value balance sheet bargains and wide moat stocks [1] Group 1: Investment Focus - The service emphasizes deep value balance sheet bargains, which include net cash stocks, net-nets, low price-to-book (P/B) stocks, and sum-of-the-parts discounts [1] - It also highlights wide moat stocks, which are characterized by strong earnings power at a discount, including high-quality businesses and "Magic Formula" stocks [1] Group 2: Market Emphasis - The primary focus of the investment ideas is on the Hong Kong market, providing a range of watch lists with monthly updates for investors [1]

Industry Overview - The AI infrastructure space is experiencing significant growth, with fears related to DeepSeek being overblown. Confidence among market participants has increased due to potential trade deals, expected rate cuts by the Fed, and reduced recession worries in the U.S. economy [1] - The AI sector is supported by a bullish demand scenario, with major companies planning to invest $325 billion in AI infrastructure by 2025, representing a 46% year-over-year increase in capital spending [4] Investment Recommendations - Five mid-cap AI infrastructure stocks are recommended for investment, having outperformed the S&P 500 in the past three months and offering deep discounted value for long-term growth. The stocks include UiPath Inc. (PATH), Five9 Inc. (FIVN), C3.ai Inc. (AI), Qualys Inc. (QLYS), and Fastly Inc. (FSLY) [2][3] Company Insights UiPath Inc. (PATH) - UiPath provides an end-to-end automation platform with a focus on robotic process automation solutions. The company has introduced new generative AI features to enhance its automation capabilities [8][10] - Expected revenue and earnings growth rates for UiPath are 8.5% and 5.7%, respectively, for the current year, with a P/E ratio of 23.9X compared to the industry average of 29.7X [11] Five9 Inc. (FIVN) - Five9 offers intelligent cloud software for contact centers, benefiting from the growing adoption of AI tools. The company recently launched its Intelligent CX Platform powered by Five9 Genius AI [12][14] - Expected revenue and earnings growth rates for Five9 are 9.6% and 11.7%, respectively, for the current year, with a P/E ratio of 10.1X compared to the industry average of 29.7X [15] C3.ai Inc. (AI) - C3.ai specializes in enterprise AI applications and aims to deepen its alignment with major cloud providers and government institutions. The company focuses on deploying actionable AI solutions [16][17] - Expected revenue and earnings growth rates for C3.ai are 20.1% and 9.8%, respectively, for the current year, but it has yet to generate profit, with an industry P/E of 20.2X [18] Qualys Inc. (QLYS) - Qualys is experiencing increased demand for cloud-based cybersecurity solutions, supported by strategic acquisitions that enhance its threat detection capabilities [19][21] - Expected revenue and earnings growth rates for Qualys are 7.3% and 0.7%, respectively, for the current year, with a P/E ratio of 8.8X compared to the industry average of 11.6X [22] Fastly Inc. (FSLY) - Fastly provides infrastructure software for cloud computing and has introduced the Fastly AI Accelerator to optimize generative AI applications [23][24] - Expected revenue and earnings growth rates for Fastly are 8.6% and 25%, respectively, for 2025, but it has yet to generate profit, with an industry P/E of 29.7X [25]

Core Viewpoint - Five9 (FIVN) has been upgraded to a Zacks Rank 1 (Strong Buy), indicating a positive outlook on its earnings estimates, which significantly influence stock prices [1][2]. Earnings Estimates and Stock Price Impact - The Zacks rating system is based on changes in earnings estimates, which are strongly correlated with near-term stock price movements [3][5]. - Institutional investors often adjust their valuations based on earnings estimates, leading to significant stock transactions that affect price movements [3]. Five9's Earnings Outlook - For the fiscal year ending December 2025, Five9 is expected to earn $2.76 per share, unchanged from the previous year, but the Zacks Consensus Estimate has increased by 44.1% over the past three months [7]. Zacks Rating System - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with Zacks Rank 1 stocks historically generating an average annual return of +25% since 1988 [6]. - Only the top 5% of Zacks-covered stocks receive a "Strong Buy" rating, indicating superior earnings estimate revisions [8][9].

Group 1 - Five9 (FIVN) has a Zacks Rank of 2 (Buy), indicating a positive earnings outlook, while Informatica Inc. (INFA) has a Zacks Rank of 3 (Hold) [3] - Value investors typically analyze traditional metrics such as P/E ratio, P/S ratio, earnings yield, and cash flow per share to identify undervalued stocks [4] - FIVN has a forward P/E ratio of 9.66 and a PEG ratio of 0.62, while INFA has a forward P/E of 20.90 and a PEG ratio of 2.75, suggesting FIVN is more attractively valued [5][6] Group 2 - FIVN's P/B ratio is 3.06, compared to INFA's P/B of 3.2, further indicating FIVN's relative valuation strength [6] - Based on the valuation metrics and improving earnings outlook, FIVN is considered the superior value option at this time [7]

Industry Overview - The Internet Software and Services sector is experiencing growth due to increased IT spending on solutions that support hybrid operating environments [1] - The Internet Software industry is ranked in the top 17% of Zacks Industry Rank, indicating an expectation to outperform the market in the next three to six months [2] Company Highlights UiPath Inc. (PATH) - UiPath offers an end-to-end automation platform with a range of robotic process automation solutions [6] - The platform includes AI, ML, and NLP capabilities, enhancing decision-making and information processing [7] - Expected revenue and earnings growth rates for the current year are 8.5% and 3.8%, respectively, with a 1.9% improvement in earnings estimates over the last week [8] Five9 Inc. (FIVN) - Five9 provides intelligent cloud software for contact centers, enabling a wide range of customer service functions [11] - The platform includes AI-driven features such as virtual agents and workflow automation, benefiting from the growing adoption of AI tools [13] - Expected revenue and earnings growth rates for the current year are 9.6% and 11.7%, respectively, with a 5.7% improvement in earnings estimates over the last 60 days [14] Fastly Inc. (FSLY) - Fastly offers infrastructure software for cloud computing, security, and edge computing solutions [15] - The Fastly AI Accelerator was introduced to optimize LLM generative AI applications [15] - Expected revenue and earnings growth rates for 2025 are 8.6% and 25%, respectively, with a 10% improvement in earnings estimates over the last week [17] Calix Inc. (CALX) - Calix provides cloud and software platforms for broadband service providers [18] - The company has integrated AI into its platforms to enhance operations and service delivery [20] - Expected revenue and earnings growth rates for 2025 are 7.1% and 65.4%, respectively, with a 21.1% improvement in earnings estimates over the last 60 days [20] Confluent Inc. (CFLT) - Confluent operates a data streaming platform that allows real-time data streaming for various industries [21][22] - Expected revenue and earnings growth rates for the current year are 19% and 24.1%, respectively, with a 2.9% improvement in earnings estimates over the last 60 days [23]

Summary of Five9 Conference Call Company Overview - **Company**: Five9 - **Industry**: Contact Center as a Service (CCaaS) - **Market Size**: $24 billion core CCaaS market, with AI as an additional Total Addressable Market (TAM) opportunity [10][12] Key Points Market Position and Growth - Five9 is a $1 billion company with mid-teen revenue growth, primarily targeting large enterprises [3][4] - Over 50% of recurring revenue comes from customers generating $1 million or more in Annual Recurring Revenue (ARR) [4] - AI now constitutes 9% of subscription revenue, growing at 32% year-over-year [5] AI Integration and Impact - AI is seen as an additive opportunity, enhancing customer experience and expanding TAM [6][12] - The company emphasizes that AI will not replace a significant portion of human agents, with estimates suggesting only 5-10% of interactions may be handled by AI over time [11][22] - Five9's AI solutions include self-service AI agents, Agent Assist, and post-interaction automation [25][26] Competitive Landscape - Five9 is positioned as a pure cloud SaaS company, unlike competitors with legacy systems [52] - The company highlights its reliability, scalability, and customer-centric approach as key differentiators [53][54] Customer Readiness and Market Dynamics - Customers are increasingly prepared to adopt AI, with many having dedicated AI teams or committees [39] - The company has focused on delivering tangible ROI and practical use cases for AI deployment [40] Pricing Strategy - AI products are primarily offered on a consumption-based pricing model, allowing for predictable costs [45][46] - Customers are using AI to optimize labor costs, often maintaining or slightly reducing human agent counts while enhancing service quality [49][51] Future Outlook - Five9 anticipates continued growth in the CCaaS market, with a stable macro environment despite some international tariff concerns [64][66] - The company maintains an annual guidance of $1.14 billion, reflecting a 10% year-over-year growth target [64] Additional Insights - Five9 has made strategic acquisitions to enhance its AI capabilities, including Inference and Wendu [26][27] - The company is actively partnering with major platforms like Salesforce to integrate AI solutions effectively [29][43] - Five9's focus on customer experience and support is a critical aspect of its strategy, aiming to differentiate itself in a competitive market [54][55]