FIVE9, INC. 2026 Q2 Earnings Call

I am Tony Righetti, Senior Vice President of Investor Relations. With me today are Amit Mathradas, Chief Executive Officer, and Bryan Lee, Chief Financial Officer. During today's conference call, certain statements will be made that are not historical facts and are considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, statements regarding our quarterly and full-year 2026 guidance, expected improvements in operating and financial metrics, industry trends, including with respect to AI, our strategy, priorities, and execution, our product roadmap and technology investment, our markets, customer demand trends, our market position and opportunity, our capital allocation strategy, and other future events or results. Such statements are simply beliefs and predictions and should not be unduly relied upon by investors.

Actual events or results may differ materially. The company undertakes no obligation to update the information in such statements. These statements are subject to substantial risks and uncertainty that could adversely affect Five9's future results and cause these forward-looking statements to be inaccurate, including the impact of adverse economic conditions, lower growth rates within our installed base of customers, failure to manage our technical operations infrastructure, unsuccessful development or market acceptance of our AI solutions, failure to maintain and develop our contact center solutions, and other risks discussed under the caption "Risk Factors" and elsewhere in Five9's annual and quarterly reports filed with the Securities and Exchange Commission. Management will refer to non-GAAP financial measures during this call.

A discussion of why we use non-GAAP financial measures and a reconciliation of our GAAP versus non-GAAP results and guidance is currently available in our press release issued earlier this afternoon, as well as in the appendix of our investor deck that can be found in the investor relations section of Five9's website at investors.five9.com. Please note that the information provided on this call speaks only to management's view as of today and may no longer be accurate at the time of the replay. A reminder, unless otherwise indicated, financial figures discussed are non-GAAP. Now I'd like to turn the call over to Five9 CEO.

Please go ahead, Amit. Thank you, Tony, and good afternoon, everyone.

We delivered another solid quarter. I am pleased to report that our Q2 revenue was $312 million above the high end of our guidance. Subscription revenue grew 14% year-over-year, marking a third consecutive quarter of acceleration. AI revenue grew 78% year-over-year, and we are increasing our full-year AI growth outlook from more than 40% to at least 60% year-over-year. Together with the significant enterprise win, which I will discuss in more detail shortly, these results provide tangible evidence of the progress we are making against our priorities and are an indicator of what Five9 can look like with greater focus, speed, and operating discipline. Last quarter, on my first earnings call as CEO, I laid out four priorities for Five9: building a performance-driven culture, optimizing operations, strengthening the core business, and winning in AI-powered customer experience.

This quarter, we made progress against each of those priorities, measured by the operating indicators we are focused on. The most important point is this: Five9 is sharpening its position around the opportunity we are built to lead. We are a voice-led enterprise platform for customer experience. When we say voice-led, we do not mean voice limited to human agents. Voice is the most natural, highest context interface for most customer interactions, and increasingly, those voice interactions can be handled by AI agents, human agents, or both working together. Our customers rely on us for complex, high-value integrations where reliability, governance, AI, digital workflows, data integrations, and human agents all need to work together in production. That is where our strategy is focused, and that is where Five9 has the clearest right to win. Let me start with updates on culture and operations.

Last quarter, I said we needed to move with greater urgency, sharper discipline, and higher accountability. That work is underway. Our review of the market, product portfolio, and go-to-market priorities has reinforced where we should concentrate resources. Complex businesses, especially financial services, healthcare, insurance, and other regulated industries where voice compliance, integrations, governance, and human-in-the-loop workflows are not just essential but required. These are environments where Five9's platform depth is critical. The customer interactions are complex, the cost of failure is high, and the buyer needs technology that works reliably in production, not just in a demo. We are aligning our resources behind this view, we are allocating resources towards the customers, verticals, and use cases where Five9's opportunity is greatest while being more disciplined in other areas. I want to acknowledge that transparency with the investor community remains a central obligation. That means less narrative, more evidence.

I believe Q2 continues to demonstrate that. On operations, we announced a significant set of organizational changes during the second quarter. These changes reflect a deliberate effort to mature our organization and put leaders in place to execute on what lies ahead. Let me take you through each area. Starting with R&D, for the first time, we are bringing our product engineering, product management, AI, automation, architectural organizations together under a single leadership structure, creating cleaner ownership across the full product life cycle and faster delivery. To lead this unified organization, I am pleased that Niranjan Vijayaragavan joined Five9 as our new Chief Technology Officer to lead this unified organization. Turning to sales, Rob Hornish was appointed Chief Sales Officer to lead our global sales organization, with a focus on strengthening go-to-market execution and driving disciplined revenue performance.

As we accelerate our transformation, we have recognized the need for a dedicated function to connect our strategy to execution. Sven Linsmaier joined as Executive Vice President, Transformation and Strategy, responsible for our highest priority transformation initiatives, disciplined execution across the organization, and corporate development, including M&A. Each of these hires brings experience building modern enterprise platforms across AI, automation, digital workflow, and go-to-market execution. This is relevant because, in our opinion, the next phase of customer experience will require more than maintaining a traditional contact center. It will require bringing voice, digital, AI, data, and human workflows together into one platform. On the core business, we continue to see healthy indicators. Subscription revenue was strong, growing 14% year-over-year in Q2, driven by AI revenue growth acceleration to 78% year-over-year. Our LTM subscription Dollar-Based Retention Rate remains steady at 107%.

Customers with complex needs are looking for a reliable cloud-native CX platform that delivers the best-of-breed technologies coupled with an open ecosystem. A CX platform that seamlessly connects with other critical systems offering large regulated enterprises a trusted platform that can support customer experience at scale, not a sprawl of point solutions. A powerful example is our recent win with a Fortune 100 financial services customer, representing approximately $100 million of total contract value. This was a competitive process against a select group of enterprise-grade CX providers, and we earned it on the strength of our proof of concept and our delivery and execution capabilities. Working as one team with Google and a leading global systems integrator. Notably, it is one of the first large deals transacted through the Google Cloud Marketplace, and our joint go-to-market motion with Google was a key driver of this customer's decision.

Five9 was selected as a core CX platform supporting the customer's broader cloud migration strategy. We expect the current five-year agreement will ramp to approximately $25 million of ARR when fully deployed. Now, let's turn to why we believe AI is strengthening our platform. Contact centers are going through a major transformation. Service is no longer viewed only as a cost center to contain. Increasingly, enterprises see customer experience as a lever for loyalty, retention, and growth. They want to resolve more issues, respond faster, personalize more interactions, and create better outcomes for customers at scale. AI is enabling that shift by automating routine work and improving the economics of service. In many customer conversations, the ROI is becoming clearer. Better service, more capacity, faster response times, and stronger customer outcomes.

That makes the move to a modern cloud-based CX platform more urgent, not less, is driving a reallocation of contact center spend away from labor and towards the type of mission-critical software that Five9 provides. Voice is central to that opportunity. It remains one of the most important channels in customer engagement. As AI handles more interactions, delivers more insights, and improves agent quality, the value of a voice platform increases. It is no longer just about routing calls to people. It is about orchestrating the handoff between people, AI voice agents, AI digital agents, data, compliance, security, and governance inside one production environment. That is why voice is the starting point for our strategy. The question is not whether AI will penetrate the voice channel. It already has. The question is whether enterprises deploy voice AI as a disconnected point product or inside a trusted CX platform that already manages voice, routing, data, governance, and human handoffs.

We believe the enterprise answer favors Five9. That is why we believe AI can be a catalyst for CCaaS growth. It increases the importance of the platform as critical infrastructure that connects all these elements that enterprises require. To be clear, AI point solution companies will continue to bring useful features to market quickly, and some will solve real problems in the simpler CX environments. In complex enterprise environments, being early with a feature is not the same as being trusted as an operating platform. These customers need AI embedded into the platform they already depend on. That is why our focus is not AI in isolation.

It is AI agents and human agents working together across voice and digital channels inside one trusted platform to deliver Humanic CX. Over time, AI agents will handle a larger share of customer interactions, including many routine and multi-step service requests. Human agents will remain essential for complexity, judgment, empathy, escalation, and oversight. The value comes from orchestrating both together so the customer experience is seamless and the platform learns from every interaction. This is where we believe the category is going. Five9 is built for that future. We are also delivering new products that directly support this strategy. In June, we advanced our AI-powered CX initiative with the release of the next gen Five9 Voice AI Agents, a re-architecture of our voice AI capabilities built from the ground up for the Humantic world we believe is upon us.