Five9, Inc. (NASDAQ:FIVN) Q2 2023 Earnings Call Transcript

Page 4 of 10

Samad Samana: Wow. Emily, thanks for the lead in. Gents, yeah, some technology issues here, but I appreciate you taking my questions. Barry, just, I wanted to ask about the guidance. I appreciate the clarity on the consumer vertical and the impact in the second quarter. I think you can see it in kind of the sequential uptake in subscription revenue in 2Q as well. I guess I just wanted to understand, one, had it not been for that — because I think prior guidance implied more of, like, a low 20%-s exit rate for subscription revenue as the year progressed. One, I guess I’m trying to understand, is that the right way to think about it that now you’re thinking more like a mid — like a high-teen subscription revenue number exiting the year based on the current guidance? And just, it was because of the consumer vertical or is there anything else factored in to not rolling forward the full 2Q beat?

Barry Zwarenstein: Yeah. Thanks, Samad. Let me sort of start at the back end over there and not putting through the [full amount] (ph), that’s right. We put through 17% of the total beat in Q2. This is really a function of this pocket of weakness that we had in consumer, because you may — and we need to be cautious when we go into the second half in these uncertain times. We have data from our customers. We’re highly metric-driven. We also have macro data. The consumer — if you go by the federal data, consumer spending, it started with a roar in January at 12%. February went down to 8% and March to 4%, and then in the second quarter, it was 3%, 3% , 2% for the three months. If you look — excuse me, if you look at the credit card spending on discretionary items, that too has been coming down quite dramatically.

So, we just want to be careful over here. Our retention rates stay very good. And when that part of our business experience a benefit of an eventual pickup in the macro, we will participate fully in it. So the second half — to finish off, the second half is largely due to the fact that we did enter the second half of the year with slightly lower revenue in our consumer part.

Samad Samana: Perfect. Appreciate the color. Thank you so much.

Operator: And we will move on to Taylor McGinnis with UBS.

Taylor McGinnis: Team, thanks so much for taking the question. Maybe just to piggyback off of Samad’s question, so when you think about the second half of the year and then some of the seasonality that you’re talking about in these different verticals, any color you can give on the contribution that consumer has to the second half? And I know you’ve talked about some weakness in other verticals in prior quarters. So, I guess any additional color you can give on what you’re baking in for those verticals? And as a second part to the question, in terms of when we should start to see some of these newer enterprise deals maybe offsetting some of this macro weakness, I guess, what does the ramp look like from here on, on those as well? Thanks.

Barry Zwarenstein: Okay. So, in terms of the contribution to the — from the consumer, we’re assuming something similar to what we had last year, previously assumed. We just don’t want to go out too far. So being a little bit cautious over there. There are other 16 verticals that we track in the second quarter, they grew very similar to what’s happened in the second — in the prior year with low single-digit growth in both last year and this year, and we’re putting in similar growth in the second half of the year. In terms of when we would see the kick in of these bigger deals, they — I think somebody said earlier on, we’ve got now the volume of these deals. It’s going to be a while before they kick in, but you’ll see the fact that we are reporting the numbers that we are is in part due to the fact that this weakness that we have in this last quarter on the consumer side has been largely offset by the growth in the new logo, which is very strong.

Page 4 of 10