10-Q: Five9 Reports Q1 2025 Results: Revenue Up 13% Amid Strategic Restructuring

• Five9, Inc. reported its Q1 2025 financial results, showing a revenue increase to $279.7 million from $247.0 million in Q1 2024, a 13% increase.
• The company achieved a net income of $0.6 million, a significant improvement from the $7.1 million net loss in the same period last year.
• The revenue growth is attributed to larger customers and increased sales and marketing activities.
• The company's Annual Dollar-Based Retention Rate was 107%, a slight decrease from 109% in the previous year.
• Adjusted EBITDA increased to $52.7 million from $37.6 million year-over-year.
• Five9 is undergoing restructuring, including a reduction in force plan (2025 Plan) expected to reduce global full-time employees by approximately 4%.

Score: 7

Explanation: The report shows positive revenue growth and a return to profitability, but also highlights ongoing macroeconomic challenges and restructuring efforts. The sentiment is cautiously optimistic.

• Revenue increased by 13% year-over-year, indicating strong growth.
• The company achieved net profitability, a significant improvement from the previous year's net loss.
• Adjusted EBITDA increased, reflecting improved operational performance.
• The company has a substantial amount of cash and marketable securities, providing financial flexibility.
• The company is prioritizing investments in key strategic areas, including artificial intelligence.

• The Annual Dollar-Based Retention Rate decreased slightly year-over-year, indicating some customer churn or reduced spending.
• The company is undergoing restructuring, including a reduction in force plan (2025 Plan) expected to reduce global full-time employees by approximately 4%, which may impact employee morale and productivity.
• The company plans to use cash to settle amounts due under its convertible senior notes that mature on June 1, 2025, which will decrease cash and cash equivalents, could preclude the company from making other investments in its business and operations, and could necessitate or accelerate additional fundraising by the company.

• Continued macroeconomic challenges, global tariff increases, the Russia-Ukraine conflict, and the conflicts in the Middle East may adversely impact revenue.
• The company's future capital requirements will depend on many factors including its growth rate, continuing market acceptance of its solution, the strength of the global economy, customer retention, growth within its installed base, its ability to gain new customers, the timing and extent of spending to support research and development efforts, the outcome of any pending or future litigation or other claims by third parties or governmental entities, the expansion of sales and marketing activities and personnel, the introduction of new and enhanced offerings, expenses incurred in expanding its operations in Portugal, and the effect of the length and severity of the continued macroeconomic challenges, the impact of global tariff increases, the Russia-Ukraine conflict, and the conflicts in the Middle East, on these or other factors.
• The company may not be able to raise additional capital through equity or debt financings when needed on terms acceptable to it or at all, depending on its financial performance and condition, economic and market conditions, the trading price of its common stock, and other factors, including the length and severity of the current economic downturn and fluctuations in the financial markets, including due to the impact of global tariff increases, the Russia-Ukraine conflict and the conflicts in the Middle East.
• If the company is unable to raise additional capital as needed, its business, operating results and financial condition could be harmed.
• If the company's operating performance during the next twelve months is below its expectations, its liquidity and ability to operate its business also could be harmed.

Five9 expects that macroeconomic challenges will continue to have an adverse impact on its revenue in future periods. The company plans to continue to finance its operations in the future primarily through sales of its solution, net proceeds from equity and debt financings, and lease facilities. The company currently plans to use cash to settle amounts due under its convertible senior notes that mature on June 1, 2025.

• We are a leading provider of intelligent cloud contact centers with more than 3,000 customers.
• We believe we achieved this leadership position through our expertise and technology, which has empowered us to help organizations of all sizes transition from legacy on-premises contact center systems to our cloud solution.

Five9 operates in the competitive cloud contact center software solutions market, which is subject to rapid technological change, particularly with the rise of AI. The company's focus on AI and strategic acquisitions like Acqueon are aimed at maintaining its competitive edge. The market involves a high number of competitors that is continuing to increase, and if the company does not compete effectively, its operating results could be harmed.

• Five9's Annual Dollar-Based Retention Rate of 107% is a key indicator of customer loyalty and revenue sustainability, which is comparable to industry leaders in the SaaS space.
• Companies like Salesforce and Zoom, which also operate on a subscription-based model, often report similar retention metrics, highlighting the importance of maintaining and growing existing customer relationships.
• Five9's focus on AI-powered solutions aligns with the broader industry trend of integrating AI to enhance customer experience and agent productivity, similar to initiatives by competitors like Genesys and NICE.
• The company's strategic acquisitions, such as Acqueon, are in line with industry practices of expanding product offerings and capabilities through mergers and acquisitions, as seen with other players in the contact center market.

• Shareholders: The return to profitability is a positive sign, but the restructuring and potential dilution from future equity raises could be concerning.
• Employees: The reduction in force plan (2025 Plan) will impact approximately 4% of the workforce, leading to job losses and potential morale issues.
• Customers: The company's focus on AI and strategic investments aims to improve the customer experience and service quality.
• Suppliers: The company's ongoing commitments to cloud services, software, and telecommunication providers ensure continued business relationships.

• The company expects to incur expenses primarily in the second and third quarters of 2025 related to the 2025 Plan.
• The actions associated with the 2025 Plan are expected to be substantially complete by the end of the second quarter of 2025.
• Lucid Alternative Fund, LP has until May 30, 2025, to file an amended complaint in the securities class action.
• The company plans to use cash to settle amounts due under its convertible senior notes that mature on June 1, 2025.

• A securities class action complaint was filed against Five9, its CEO, and CFO on December 4, 2024, alleging violations of Section 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5.
• A related shareholder derivative action was filed on March 18, 2025, asserting claims for breach of fiduciary duty, unjust enrichment, abuse of control, gross mismanagement, and waste of corporate assets.

• 2001: Five9, Inc. was incorporated in Delaware.
• May and June 2020: Five9 issued $747.5 million aggregate principal amount of 2025 convertible senior notes.
• March 2022: Five9 made a decision to close its Russia office in June 2022 and to establish a new European development center in Portugal.
• March 2024: Five9 issued $747.5 million aggregate principal amount of 2029 convertible senior notes and repurchased $313.1 million of 2025 convertible senior notes.
• August 27, 2024: Five9 acquired all of the issued and outstanding shares of capital stock of Acqueon for total consideration of approximately $173.8 million.
• December 4, 2024: A securities class action complaint was filed against Five9, its CEO, and CFO.
• February 3, 2025: Lucid Alternative Fund, LP moved to be appointed lead plaintiff of the securities class action.
• March 1, 2025: Commencing on March 1, 2025, and until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their 2025 convertible senior notes, in multiples of $1,000 principal amount, at the option of the holder regardless of the foregoing circumstances.
• March 18, 2025: The court appointed Lucid Alternative Fund, LP as lead plaintiff and approved lead plaintiffs selection of lead counsel in the securities class action and a related shareholder derivative action was filed.
• March 20, 2025: The Company was served with the complaint for the shareholder derivative action.
• March 27, 2025: Per the courts subsequent order on March 27, 2025, Lucid Alternative Fund, LP has until May 30, 2025, to file an amended complaint in the securities class action.
• March 31, 2025: The Board of Directors of Five9 approved a reduction in force plan (the 2025 Plan).
• April 3, 2025: Five9 commenced execution of the 2025 Plan.
• April 4, 2025: The parties to the derivative action jointly filed a stipulation with the court to stay the derivative action until the resolution of the motion to dismiss in the securities action, as well as any subsequent motion to dismiss any further amended complaint in the securities action.
• April 8, 2025: The court approved the stay stipulation in the shareholder derivative action.
• May 30, 2025: Lucid Alternative Fund, LP has until May 30, 2025, to file an amended complaint in the securities class action.
• June 1, 2025: The 2025 convertible senior notes mature on June 1, 2025.
• March 15, 2029: The 2029 convertible senior notes mature on March 15, 2029.