• Annual Revenue: Exceeded $1 billion.
• Q4 Revenue Growth: 17% year-over-year.
• Subscription Revenue Growth: 19% year-over-year in Q4.
• Adjusted EBITDA Margin: 23% in Q4.
• Operating Cash Flow: $50 million, or 18% of revenue in Q4.
• Free Cash Flow: $33 million, or 12% of revenue in Q4.
• Enterprise AI Revenue Growth: 46% year-over-year in Q4.
• Adjusted Gross Margin: 63.5% in Q4, up 220 basis points year-over-year.
• GAAP Net Income: $11.6 million in Q4.
• Non-GAAP EPS: $0.79 per diluted share in Q4, up $0.18 year-over-year.
• 2024 Revenue Growth: 14.4% year-over-year.
• 2024 Adjusted Gross Margin: 61.7%, up 70 basis points year-over-year.
• 2024 Non-GAAP EPS: $2.47, up $0.42 per diluted share year-over-year.
• LTM Operating Cash Flow: $143 million, or 14% of revenue.
• LTM Free Cash Flow: $79 million, or 8% of revenue.
• 2025 Revenue Guidance: Midpoint of $1.14 billion.
• 2025 Non-GAAP EPS Guidance: Midpoint of $2.60 per diluted share.
• Q1 2025 Revenue Guidance: Midpoint of $272 million.
• Q1 2025 Non-GAAP EPS Guidance: $0.48 per diluted share at the midpoint.

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

Release Date: February 20, 2025

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

Positive Points

• Five9 Inc (NASDAQ:FIVN) reported annual revenue exceeding $1 billion, driven by a 17% year-over-year growth in fourth-quarter revenue.
• The company's subscription revenue grew by 19% year-over-year, contributing significantly to the overall revenue increase.
• Five9 Inc (NASDAQ:FIVN) achieved a record adjusted EBITDA margin of 23% in the fourth quarter, indicating strong profitability.
• Enterprise AI revenue growth accelerated to 46% in the fourth quarter, showcasing the company's leadership in AI for customer experience.
• The company has strong partnerships with major players like Salesforce, ServiceNow, Microsoft, Verint, and Google, enhancing its market position and growth potential.

Negative Points

• Five9 Inc (NASDAQ:FIVN) faces substantial risks and uncertainties, including macroeconomic challenges such as inflation, high interest rates, and currency fluctuations.
• The company acknowledged the potential impact of adverse economic conditions on its future results, which could affect growth projections.
• There is uncertainty regarding consumer spending, which could impact Five9 Inc (NASDAQ:FIVN)'s revenue from usage-based services.
• The CFO transition may introduce some uncertainty, as Barry Zwarenstein is retiring, and Brian Lee is stepping in as Interim CFO.
• Five9 Inc (NASDAQ:FIVN) noted that the seat count metric is becoming less relevant, indicating a shift in how the company measures performance, which may require investors to adjust their evaluation criteria.

Q & A Highlights

Q: How have customer conversations evolved since the election, and what are the potential upside drivers for Five9 in 2025? A: Michael Burkland, CEO, noted that customer conversations remain focused on leveraging AI, with significant progress shown in AI revenue growth. Upside drivers for 2025 include AI upsells, improvements in cloud conversions for larger contact centers, and adding more usage receipts. The company is optimistic about its pipeline and sales execution, despite macroeconomic uncertainties.

Q: How does Five9 monetize data access for third-party AI systems, and what impact does this have on the financial model? A: Michael Burkland explained that Five9's platform acts as a control point for contextual data, which is crucial for AI-driven self-service. The company monetizes this through voice stream and transcript stream, charging on a per-minute consumption basis. This can add significant recurring revenue per AI agent, even if third-party AI is used.

Q: What are the trends in usage and NRR as Five9 enters Q1, and how does this compare to previous quarters? A: Barry Zwarenstein, CFO, highlighted a stronger than expected seasonal uptick in consumer and healthcare sectors in Q4, leading to a 2% quarter-over-quarter decline expected in Q1. The NRR has remained stable at 108%, with significant cross currents, including AI momentum and growth in million-dollar-plus customers.

Q: How does Five9's engine-agnostic AI strategy provide an advantage during negotiations and the RFP process? A: Michael Burkland emphasized that Five9's engine-agnostic strategy allows the company to leverage the latest AI engines without being tied to proprietary models. This flexibility is appreciated by customers and provides a competitive advantage in the RFP process, as it allows Five9 to offer the best available AI solutions.

Q: What is the impact of Avaya's platform changes on Five9's pipeline and customer acquisition? A: Andy Dignan, COO, noted that Avaya has been losing customers for some time, and Five9 has processes in place to facilitate migrations from Avaya. The recent changes by Avaya could lead to further opportunities for Five9, especially for customers with more than 200 seats, as they may perceive a lack of commitment from Avaya.

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