Five9, Inc. Q3 FY2024 earnings

Five9 reported third quarter revenue of $264.2 million, up 14.8% from $230.1 million in the prior-year quarter. Year-to-date revenue reached $763.3 million, up 13.7% from $671.4 million. Gross profit rose 19.5% to $142.2 million, and gross margin expanded to 53.8% from 51.7%. The company still posted an operating loss of $15.4 million, but that loss narrowed from $25.7 million a year earlier. Net loss narrowed to $4.5 million from $20.4 million, and diluted EPS improved to -$0.06 from -$0.28. Operating margin was -5.8%, up 5.3 percentage points from -11.2%. On a non-GAAP basis, adjusted EBITDA was $52.4 million, or 19.8% of revenue, compared with $41.3 million, or 17.9% of revenue. Non-GAAP net income was $50.5 million, or $0.67 per diluted share, compared with $38.0 million, or $0.52 per diluted share.

Cash generation remained positive. Operating cash flow for the quarter was $41.1 million, up 11.1% from $37.0 million. Year-to-date operating cash flow was $93.4 million, up 1.1% from $92.3 million. Capital expenditures jumped to $14.4 million from $3.3 million in the prior-year quarter, and year-to-date capital expenditures were $33.1 million, up 66.0% from $19.9 million. Deferred revenue, current portion, rose 23.9% to $80.0 million from $64.6 million. Remaining performance obligations increased 5.2% to $1.10 billion from $1.05 billion. The company ended the quarter with more than 3,000 clients.

Operationally, Five9 continued to push its AI-powered platform. Management pointed to momentum with AI products and a market inflection in customer experience. The Annual Dollar-Based Retention Rate was 108% for the twelve months ended September 30, 2024, down from 110% for the prior-year period. The decline reflected continued macroeconomic headwinds on the installed base. In August 2024, Five9 announced a restructuring plan that reduced global full-time employees by approximately 6%. The company incurred $9.6 million in restructuring costs during the third quarter, including $2.1 million in cost of revenue, $1.9 million in research and development, $4.4 million in sales and marketing, and $1.2 million in general and administrative expenses. As of September 30, 2024, $3.0 million had been paid, and the remaining $6.6 million was accrued, mostly expected to be paid in the fourth quarter. Five9 does not expect additional costs under the plan.

Guidance points to continued growth. For the full year 2024, Five9 guided non-GAAP net income per share to $2.36 to $2.38, assuming diluted shares outstanding of approximately 75.0 million. For the fourth quarter of 2024, non-GAAP net income per share is guided to $0.69 to $0.71, assuming diluted shares outstanding of approximately 76.0 million. Management also raised its full-year 2024 revenue and bottom-line guidance. The company expects to keep investing in AI and its platform. Risks remain familiar. Five9 cited macroeconomic challenges, including continued inflation, increased interest rates, supply chain disruptions, and geopolitical conflicts in Russia-Ukraine and the Middle East. The installed base business, which typically contributes about half of annual revenue growth, continues to face headwinds. Other risks include the ability to attract new clients, client terminations or subscription reductions, failure to manage technical infrastructure, challenges with AI development, competition, security breaches, reliance on third-party telecommunications providers, a history of losses, and obligations tied to convertible senior notes. The company's guidance is subject to these cautionary factors.