Five9(US:FIVN)2024-08-09 03:07Financial Data and Key Metrics Changes - Five9 achieved record revenue of $252.1 million for Q2 2024, with an annual revenue run rate exceeding $1 billion, primarily driven by a 21% year-over-year growth in LTM Enterprise subscription revenue [17][19] - Adjusted EBITDA margin increased sequentially to 16.6% of revenue, while adjusted gross margins were reported at 60.5%, a decrease of approximately 130 basis points year-over-year [17][18] - The company reported LTM operating cash flow of $126 million, equivalent to 13% of revenue, maintaining 32 consecutive quarters of positive LTM operating cash flow [19] Business Line Data and Key Metrics Changes - Total subscription revenue grew 17% year-over-year, with AI and automation portfolio now making up 8% of Enterprise subscription revenue, showing the fastest growth category with AI Agent Assist growing 111% year-over-year [17][18] - The Enterprise business accounted for 88% of LTM revenue, while the Commercial business represented 12% and grew in the single digits on an LTM basis [17] Market Data and Key Metrics Changes - The company noted a challenging bookings quarter due to constrained customer budgets, resulting in fewer $1 million ARR deals than expected [12] - Five9's AI solutions are driving significant business outcomes for customers, with examples showing increased subscription revenue from existing customers after implementing AI solutions [10][11] Company Strategy and Development Direction - Five9 announced the acquisition of Acqueon to enhance its AI-powered customer experience platform, aiming to become the orchestration engine for every interaction across the customer journey [5][6] - The company is focused on embedding AI across its platform and delivering practical AI solutions that drive tangible business value [7][8] Management's Comments on Operating Environment and Future Outlook - Management reduced the top-line annual guidance by 3.8% due to trends observed in June bookings, while raising the midpoint of annual non-GAAP EPS guidance [4][20] - The management expressed optimism about long-term opportunities in the AI market, despite short-term headwinds in bookings and customer budget constraints [12][16] Other Important Information - The company expects a one to three percentage point mix shift from subscription to telecom usage each year, which is seen as a positive long-term trend for revenue growth and gross margins [18] - Five9's dollar-based retention rate declined slightly from 109 to 108, but logo churn did not see a significant increase [18][25] Q&A Session Summary Question: What are the headwinds to the dollar base and net retention rate? - Management indicated that the install base is growing at a slower rate, with no significant increase in logo churn, and highlighted a meaningful reduction in the rate of seasonal uptick for certain customers [25][26] Question: Why the changes in the sales organization? - The changes were not a knee-jerk reaction but aimed at enhancing sales execution and market coverage, with a dedicated sales leader now in place [29] Question: How are customers looking at purchasing AI and automation products? - Five9 offers flexible pricing models for AI solutions, including consumption-based pricing, which allows customers to choose the model that fits their business best [31][32] Question: What is the outlook for bookings and seasonality? - Management noted that bookings were impacted by both macroeconomic factors and sales execution, with a focus on improving effectiveness moving forward [35][36] Question: What is the impact of the Acqueon acquisition? - The acquisition is expected to expand Five9's capabilities in outbound customer engagement and enhance its market position, although the current revenue contribution from Acqueon is still small [42][43]