• Revenue Growth: 13% year-over-year, driven by 14% growth in subscription revenue.
• Subscription Revenue: Accounts for 80% of total revenue.
• Adjusted EBITDA Margin: 19% for the first quarter.
• Operating Cash Flow: $48 million, representing 17% of revenue.
• Free Cash Flow: $35 million, or 12% of revenue.
• Enterprise AI Revenue Growth: 32% year-over-year, making up 9% of enterprise subscription revenue.
• Adjusted Gross Margin: 62.4%, an increase of approximately 160 basis points year-over-year.
• Non-GAAP EPS: $0.62 per diluted share, up 29% year-over-year.
• Stock-Based Compensation: Decreased 12% year-over-year to $39 million.
• Free Cash Flow Conversion Rate: 66%.
• 2025 Revenue Guidance: Unchanged at $1.14 billion.
• 2025 Non-GAAP EPS Guidance: Raised to $2.76, $0.16 higher than previous guidance.

• Warning! GuruFocus has detected 5 Warning Signs with FIVN.

Release Date: May 01, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Five9 Inc (NASDAQ:FIVN) exceeded its guidance across all key metrics for the first quarter, with subscription revenue growing 14% year-over-year.
• The company reported a Q1 record operating cash flow of $48 million, representing 17% of revenue, and an all-time record of free cash flow of $35 million, or 12% of revenue.
• Five9 Inc (NASDAQ:FIVN) is experiencing significant AI momentum, with enterprise AI revenue growing 32% year-over-year in the first quarter.
• The company announced a deepened partnership with Salesforce, launching Five9 Fusion, which integrates Five9's real-time system with Salesforce's customer record system to enhance AI-powered customer experiences.
• Five9 Inc (NASDAQ:FIVN) continues to see strong growth in its installed base bookings, achieving the highest year-over-year growth rate for any quarter in the last three years.

Negative Points

• Five9 Inc (NASDAQ:FIVN) is facing macroeconomic challenges, including inflation, high interest rates, and uncertainty regarding consumer spending, which could impact future results.
• The company is experiencing lengthening sales cycles on larger deals, attributed to the macroeconomic backdrop.
• There is resistance in international regions to doing business with US vendors, which could affect Five9 Inc (NASDAQ:FIVN)'s international growth.
• Five9 Inc (NASDAQ:FIVN) announced a 4% reduction in its global workforce, impacting most departments, mainly in the US, as part of its transformation initiatives.
• The company's LTM dollar-based retention rate decreased to 107% from 108% last quarter, driven by tough year-over-year comparisons and seasonal downticks.

Q & A Highlights

Q: Do you believe Q1 is going to be the trough for subscription revenue this year? A: Bryan Lee, CFO: We haven't provided specific guidance on subscription growth, but our annual total revenue guidance remains unchanged at $1.14 billion. We observed stable macro conditions in Q1, though there was a stronger seasonal downtick in consumer and healthcare sectors. We are being slightly more prudent in Q2 due to increased macro uncertainty, but no material changes have been observed in our business so far.

Q: Can you provide any color on the breakdown of the Rule of 40 target you outlined? A: Bryan Lee, CFO: For medium-term revenue growth, we assume 10% to 15%, with stable macro conditions. We expect EBITDA margins in the 25% to 30% range. Gross margins are expected to rise to 66%-68%, driven by subscription revenue scaling and mix shifts from usage and professional services to subscription. We also anticipate operating expense leverage from recent workforce reductions and transformation initiatives.

Q: Could you elaborate on the longer sales cycle in the enterprise segment? Is it specific to international regions or the US? A: Michael Burkland, CEO: The longer sales cycles are primarily in the large enterprise market, with deals taking slightly longer to close. Internationally, geopolitical factors are causing some resistance to US vendors, but we are focusing on our installed base customers, which had a good quarter.

Q: How does Genius AI play into the current environment and customer decision-making? A: Michael Burkland, CEO: Despite uncertain times, the AI revolution is driving companies to explore AI solutions. Our AI Blueprint program is successful, with 50% of customers purchasing AI solutions after going through it. We are seeing momentum in both new deals and our installed base, delivering tangible ROI through AI.

Q: What are the impacts of the transformation initiatives on the organization? A: Bryan Lee, CFO: The workforce reduction affected most departments, mainly in the US, but sales capacity and go-to-market initiatives remain unaffected. We continue to invest in AI and strategic areas to align with our long-term goals.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.