Summary
Five9 closed fiscal 2023 with fourth-quarter revenue of $239.1 million, up 14.7% from the prior-year quarter. Full-year revenue reached $910.5 million, up 16.9%. The company said enterprise subscription revenue grew 25% in 2023. GAAP gross margin was 52.9% in the fourth quarter, down 0.8 percentage points from the prior-year quarter. For the full year, GAAP gross margin was 52.5%, down 0.3 percentage points. Adjusted gross margin was 61.3% in the fourth quarter, compared with 62.3% in the prior-year quarter. Non-GAAP net income was $45.1 million, or $0.61 per diluted share, in the fourth quarter. Adjusted EBITDA was $48.3 million, or 20.2% of revenue.
The bottom line remains under pressure on a GAAP basis. Fourth-quarter GAAP operating loss was $18.6 million. Full-year GAAP operating loss was $98.6 million. GAAP net loss was $12.4 million in the quarter and $81.8 million for the full year. Diluted GAAP loss per share was $(0.17) in the quarter and $(1.13) for the full year. Cash generation improved. Fourth-quarter GAAP operating cash flow was $36.5 million, up 11.6% from the prior-year quarter. Full-year GAAP operating cash flow was $128.8 million, up 45.0%. Capital expenditures were $11.3 million in the quarter, up 80.9% from the prior-year quarter. For the full year, capital expenditures were $31.2 million, down 40.2%.
Backlog and deferred revenue point to demand. Current deferred revenue was $68.2 million at December 31, 2023, up 17.9% from the prior-year quarter. Remaining performance obligations were $1.06 billion, up 39.1% from the prior-year quarter. The annual dollar-based retention rate was 110% for 2023, down from 115% for 2022. Management attributed the decline to macroeconomic headwinds that began in 2022 and continued through 2023. Five9 ended the year with more than 3,000 clients. The company also noted record fourth-quarter enterprise bookings and an acceleration in top-of-funnel growth, with pipeline reaching another all-time high.
Guidance covers both the first quarter of 2024 and the full fiscal year 2024. Non-GAAP net income per share is expected to be $2.14 to $2.18 for the full year and $0.37 to $0.39 for the first quarter. The company said the outlook assumes current market conditions and is subject to cautionary factors, including ongoing macroeconomic uncertainty. Five9 continues to invest in AI and automation, up-market momentum, and international expansion.
Risks remain significant. The MD&A warns that adverse economic conditions will continue to hurt revenue in future periods. The installed base business, which typically contributes about half of annual revenue growth, continues to face macroeconomic headwinds. Other named risks include failure to attract new clients or sell more to existing clients, clients terminating or reducing subscriptions, failure to manage technical operations infrastructure, competition, international expansion risks, security breaches, reliance on third-party telecommunications providers, a history of losses, stock price volatility, and convertible senior notes. The company also cites risks tied to AI development and evolving AI regulation. The Russia-Ukraine conflict and the conflict in Israel are listed as factors that could harm the business.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q4 FY2023 | Q3 FY2023 | QoQ | Q4 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $239.1M | $230.1M | +3.9% | $208.3M | +14.7% |
| Gross profit | $126.6M | $119.0M | +6.3% | $112.1M | +13.0% |
| Gross margin | 52.9% | 51.7% | +1.2 pp | 53.8% | -0.8 pp |
| Research & development | $38.9M | $40.4M | -3.8% | $36.9M | +5.4% |
| Sales & marketing | $73.0M | $73.4M | -0.6% | $65.9M | +10.7% |
| General & administrative | $33.3M | $31.0M | +7.5% | $22.5M | +48.1% |
| Total operating expenses | $145.2M | $144.8M | +0.3% | $125.3M | +15.9% |
| Operating income (loss) | -$18.6M | -$25.7M | +27.7% | -$13.3M | -40.4% |
| Operating margin | -7.8% | -11.2% | +3.4 pp | -6.4% | -1.4 pp |
| Net income (loss) | -$12.4M | -$20.4M | +39.5% | -$13.7M | +9.5% |
| Net margin | -5.2% | -8.9% | +3.7 pp | -6.5% | +1.4 pp |
| Diluted EPS | -$0.17 | -$0.28 | +$0.11 | -$0.20 | +$0.03 |
Risks
The installed base business, which typically contributes about half of annual revenue growth, continues to experience macroeconomic headwinds. Annual Dollar-Based Retention Rate decreased to 110% for the twelve months ended December 31, 2023 from 115% for 2022, and the company expects adverse economic conditions to continue to pressure revenue.
Further development of AI solutions may not be successful, and competitors may incorporate AI features more quickly or successfully. Generative AI also brings evolving legal and regulatory risks, including copyright and data protection uncertainty, that could require costly additional investment.
The contact center software market has a high and increasing number of competitors, including legacy vendors, Genesys, NICE, smaller providers, and Amazon, Twilio, and Microsoft. CRM vendors are adding competing functionality and could reduce or terminate partnerships, harming revenue.
The $747.5 million aggregate principal amount of 2025 convertible senior notes matures on June 1, 2025. The company may not generate sufficient cash flow to service or refinance the notes, and cash settlement of conversions could adversely affect liquidity.
Sales to larger organizations require longer sales and implementation cycles, typically four to six months and potentially longer, with greater configuration and integration demands. This can make operating results less predictable and delay or prevent sales.
Professional services offerings currently have negative margins, and larger clients typically require more professional services while usage revenue carries lower margins. Gross margin was down 0.8 pp to 52.9% in FY2023 Q4 from FY2022 Q4 and down 0.3 pp to 52.5% year to date.
Failure to retain and expand the direct sales force could impede growth, and competition for specialized AI personnel is intense. Sales representatives can take several months to become fully productive.
The company closed its Russia office and established a European development center in Portugal, incurring approximately $2.8 million in costs during 2023. There is no assurance the Portuguese operations will be as effective or efficient as prior Russian operations, and operational disruptions may continue.
Compliance with GDPR, U.S. state privacy laws, and emerging AI regulations may increase costs and limit use of the solution. The company is also pursuing FedRAMP authorization, which is costly and time consuming with no assurance of increased revenue.
Headcount grew to 2,684 employees as of December 31, 2023, placing strain on management, operational, and financial resources. Failure to manage growth could lead to difficulties adding clients, quality declines, and increased costs.
SaaS KPIs
All quarters →Annual Dollar-Based Retention Rate
Adjusted EBITDA Margin
Adjusted Gross Margin
Total Customers
Summary, forecast, risks and KPIs are extracted from Five9, Inc.'s SEC filings for Q4 FY2023 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 1, 2026.