Five9, Inc. (FIVN) Q1 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reveals strong financial performance with increased guidance, significant AI-driven growth, and a strategic partnership with Google Cloud. The Q&A section highlights robust customer adoption, a healthy sales pipeline, and a positive market position. The market cap indicates a likely strong positive reaction to these factors, as the company is well-positioned for growth in the expanding AI and CCaaS markets.
Key Financial Performance
Q1 Revenue $305 million, up 9% year-over-year. This growth was driven by subscription revenue growth and contributions from telecom and professional services.
Subscription Revenue Grew 13% year-over-year. This was driven by CCaaS revenue growth of 8% and AI revenue growth of 68%.
AI Revenue Grew 68% year-over-year to an annual run rate of over $125 million. This growth was primarily driven by backlog ramping earlier than anticipated.
Adjusted Gross Margin 64%, compared to 62% in Q1 last year. The improvement reflects operational efficiencies.
Adjusted EBITDA $74 million or 24% of revenue, compared to $53 million or 19% of revenue in the same quarter last year. This increase was due to improved operational performance and a one-time discount negotiated with a key vendor.
Cash from Operations $64 million or 21% of revenue. This was supported by operational improvements and a one-time vendor discount.
Free Cash Flow $49 million or 16% of revenue. This was also influenced by the one-time vendor discount.
LTM Subscription Dollar-Based Retention Rate (DBRR) 107%, compared to 106% in Q4 2025. This reflects stabilization and slight improvement in subscription retention.
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Operating Highlights
AI Revenue Growth: AI revenue grew 68% year-over-year, reaching an annual run rate of over $125 million. AI revenue now represents approximately 13% of total subscription revenue, up from 8% a year ago.
AI Integration in CX Platform: Customers are adopting AI solutions as an integrated part of the CX platform, leading to strong AI revenue growth. AI is enabling better customer experiences by reallocating labor spend towards technology.
Market Position in AI and CX: Five9 is positioning itself as a leader in AI-driven customer experience platforms, emphasizing the integration of AI into CCaaS platforms to handle the entire customer lifecycle.
Operational Efficiency Improvements: Achieved a 470 basis points increase in EBITDA margin from 2024 to 2025 through operational reviews and efficiency improvements. Adjusted EBITDA margin for Q1 2026 was 24%, up from 19% in the same quarter last year.
Leadership and Organizational Changes: Hired a new Chief Marketing and Growth Officer to unify global marketing and revenue strategy. Adjusted organizational design to improve focus, speed, and accountability.
AI-Driven Strategic Shift: Focused on transitioning from selling seats to offering a complete AI-driven customer experience solution. This includes capabilities for orchestration, data integration, and governance.
Capital Allocation Strategy: Announced plans to complete a $150 million share repurchase authorization by Q3 and introduced an additional $200 million share repurchase program.
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Risk or Challenges
Adverse Economic Conditions: Potential impact of adverse economic conditions on Five9's future results, which could lead to lower growth rates within the installed base of customers.
Technical Operations Infrastructure: Risk of failure to manage technical operations infrastructure effectively, which could disrupt operations and impact performance.
AI Solutions Development: Unsuccessful development of AI solutions could hinder Five9's ability to compete and meet customer demands.
Contact Center Solutions: Failure to maintain and develop contact center solutions could negatively affect Five9's market position and customer satisfaction.
Share Repurchase Activity: Failure to achieve the anticipated benefits of share repurchase activity could impact financial performance and shareholder value.
Organizational Design Changes: Temporary higher expenses due to organizational design initiatives aimed at improving cost efficiencies, focus, and speed.
Global Data Center Refresh: Increased capital expenditure due to a global data center refresh, which could temporarily strain financial resources.
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Guidance & Outlook
Q2 2026 Revenue Guidance: Total revenue is expected to range between $303 million and $309 million, with a midpoint of $306 million.
Q2 2026 Non-GAAP EPS Guidance: Non-GAAP EPS is expected to range between $0.65 and $0.69 per diluted share, with a midpoint of $0.60.
Second Half 2026 Revenue Growth: Total revenue growth is expected to accelerate to double digits, driven by a backlog of both new logo and installed base bookings.
Full Year 2026 Revenue Guidance: Total revenue is expected to range between $1.254 billion and $1.266 billion, with a midpoint of $1.26 billion, up from the initial midpoint guidance of $1.254 billion.
Full Year 2026 Non-GAAP EPS Guidance: Non-GAAP EPS is expected to range between $3.22 and $3.30 per diluted share, with a midpoint of $3.26, up from the initial midpoint guidance of $3.18.
Full Year 2026 Adjusted EBITDA Margin: Annual adjusted EBITDA margin is anticipated to exceed 24%.
Full Year 2026 Free Cash Flow: Annual free cash flow is expected to be approximately $175 million.
AI Revenue Growth: AI revenue growth is anticipated to exceed 40% year-over-year for the full year 2026.
Capital Expenditures for 2026: Purchase of PP&E is expected to be approximately 3.5% of revenue due to a global data center refresh.
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Shareholder Return Plan
Share Repurchase Authorization: The company intends to complete the remaining $150 million share repurchase authorization by the end of Q3 2026.
New Share Repurchase Program: The Board has authorized an additional $200 million share repurchase program, which will be executed opportunistically.
Accelerated Share Repurchase Program: The company plans to enter into an accelerated share repurchase program for the remaining $90 million under the current authorization, expected to be completed by the end of Q3 2026.
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Key Q&A
Q:What are the 2-3 most concrete measurable milestones investors should track over the next 12 months to assess the progress of the outlined priorities?
A:Amit Mathradas mentioned that one benchmark is laying out a clear plan for Five9's market positioning, technology, and products. Another area is improving culture, accountability, organizational design, and reducing bureaucracy to enhance delivery pace, margin improvements, and growth.
Q:What are customers doing in terms of adapting to the faster pace of AI, and why is Five9 well-positioned compared to other vendors?
A:Customers are reallocating dollars from replaced seats to software, seeking platforms that integrate voice, digital, and AI under one roof for greater efficiency. Five9 is well-positioned due to its ability to provide a connected platform and the larger market opportunity in CCaaS plus AI support, which is nearly double the displacement of seats.
Q:How has the end market been for contact center seat counts, and what are customers' plans for seats in the next 6-12 months?
A:Seat counts continue to grow at a healthy rate, in line with CCaaS revenue growth. Customers are investing in software, platform, and AI tools to increase efficiency and interactions, reflecting a shift towards software investments.
Q:What is the dynamic between on-premise call centers and cloud migration in the context of AI adoption?
A:Many call centers are still on-premise, testing AI solutions. However, on-premise AI adoption has mixed results due to data and architecture limitations. Customers are realizing the need to move to the cloud for better scalability and full AI adoption. Five9 offers solutions to deliver AI while migrating to the cloud simultaneously.
Q:What are the key factors influencing the decision to change annual guidance?
A:The decision to increase annual guidance was driven by strong Q1 subscription revenue growth, particularly in AI (68% YoY growth), and visibility into a healthy backlog of customer bookings converting to revenue. The annual guidance midpoint was raised from $1.254 billion to $1.266 billion.
Q:Why was Jay Lee hired as Chief Marketing and Growth Officer, and what is his role?
A:Jay Lee was hired for his strong data and analytics background to drive a unified go-to-market strategy, improve efficiency, and integrate marketing, analytics, and revenue operations under one roof.
Q:How does Five9 view its position in the AI market, and what is its strategy for winning in AI?
A:Five9 is performing well with 68% YoY AI revenue growth and plans to stay competitive by introducing new products, focusing on platform capabilities, and selectively partnering to fill gaps. The strategy involves balancing organic and inorganic growth while ensuring a unified platform for customers.
Q:What changes are being observed in sales pipelines and deal composition?
A:Sales pipelines remain at elevated levels, with increasing conversations around AI-first solutions. Five9's strong go-to-market strategy and product offerings align with this trend, supporting continued growth.
Q:How has AI impacted conversations with net new customers about migrating from on-premise to cloud?
A:AI has led to more requests for AI apps that enhance human efficiency. Customers are increasingly recognizing the need for a unified platform to integrate AI and human interactions, driving cloud migration.
Q:What is driving the volatility in AI revenue growth, and how does it impact guidance?
A:AI revenue growth volatility is due to varying deployment schedules of customers in the backlog. Despite fluctuations, AI revenue is expected to grow at a minimum of 40% YoY, contributing to overall guidance.
Q:What is the rationale behind transitioning to a fixed revenue model?
A:The fixed revenue model provides predictability for both Five9 and customers, allowing customers to allocate dollars from seat compression to AI tools and software, aligning with Five9's roadmap and product offerings.
Q:How is Five9 addressing customer concerns about AI innovation and adoption?
A:Five9 focuses on providing tried and tested AI solutions with security and governance, which customers value over unproven start-ups. This approach builds trust and drives adoption among large organizations.
Q:Review of Unclear Management Responses
A:Management avoided providing a direct answer to the question about the impact of AI on the nature of conversations with net new customers around migrating from on-premise to cloud. While they discussed general trends and benefits of AI, they did not clearly address how AI specifically influences competitive dynamics or speeds up sales cycles.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI CX
AI catalyst
AI customer
AI effort
AI importance
AI priority
AI share
AI shift
AI solution
AI trend
Amit start
CCaaS platform
Five CEO
amount
area
asset
capital allocation
core AI
culture
ecosystem
employee
foundation
governance
indicator
labor
leader
oversight
portfolio
potential
production
progress
repurchase program
role
share repurchase
shareholder
solution failure
step
success
support
trade
urgency accountability
FIVN Transcript
Five9, Inc. (FIVN) Q1 2026 Earnings Call Transcript
Positive5-1
The earnings call reveals strong financial performance with increased guidance, significant AI-driven growth, and a strategic partnership with Google Cloud. The Q&A section highlights robust customer adoption, a healthy sales pipeline, and a positive market position. The market cap indicates a likely strong positive reaction to these factors, as the company is well-positioned for growth in the expanding AI and CCaaS markets.
Five9, Inc. (FIVN) Presents at Morgan Stanley Technology, Media & Telecom Conference 2026 Transcript
Neutral3-3
Five9, Inc. (FIVN) Q4 2025 Earnings Call Transcript
Positive2-19
The earnings call highlights strong financial performance with raised EBITDA and EPS guidance, a significant AI revenue milestone, and a strategic partnership with Google. The Q&A session reveals optimism in AI adoption and sector growth, although some details remain vague. The $150 million share repurchase program further supports a positive outlook. Considering the mid-cap market cap, the stock is likely to see a positive reaction, potentially in the 2% to 8% range.
Five9, Inc. (FIVN) Presents at Barclays 23rd Annual Global Technology Conference Transcript
Neutral12-10
FIVN Slides
FIVN Report
Frequently Asked Questions
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