Q2 2026 Five9, Inc. Earnings Call Transcript
Key Points
- Five9 Inc (FIVN) delivered Q2 revenue of $312 million, exceeding the high end of guidance, with subscription revenue growing 14% year-over-year, marking a third consecutive quarter of acceleration.
- AI revenue surged 78% year-over-year, prompting the company to raise its full-year AI growth outlook from over 40% to at least 60%.
- Secured a significant Fortune 100 financial services customer win with approximately $100 million in total contract value, expected to ramp to $25 million in ARR, showcasing competitive strength and partnership with Google.
- Launched next-gen voice AI agents, re-architected for the 'humantic' world, designed to handle complex interactions with seamless human handoffs, strengthening the platform's AI capabilities.
- LTM subscription dollar-based retention rate remained steady at 107%, with expectations for a 1 percentage point increase in Q3, indicating strong customer retention and expansion.
- The company's strategy of focusing on complex, regulated industries (financial services, healthcare, insurance) is paying off, with AI attach rates at 100% for million-dollar deals and growing demand across the customer base.
- Adjusted gross margin declined to 61% in Q2 from 63% in Q2 '25, impacted by temporary expansion of professional services capacity to meet early AI deployment demand.
- Adjusted EBITDA margin fell to 22% from 24% year-over-year, partly due to the same professional services expansion and a one-time vendor discount that did not recur.
- Cash flow from operations was seasonally low at $42 million (13% of revenue), and free cash flow was only $15 million (5% of revenue), affected by non-recurring items including a transition to annual customer payments and pulled-forward capital expenditures.
- The Fortune 100 financial services win will have negligible subscription revenue contribution in 2026, with meaningful revenue ramp not expected until 2027 and beyond, limiting near-term upside.
- Full-year 2026 non-GAAP EPS guidance remains unchanged at $3.26 midpoint, despite the strong Q2 performance, as the company expects higher temporary expenses from organizational design initiatives.
- The company's revenue guidance for the second half of 2026 relies heavily on existing backlog conversion with essentially no dependency on new business, indicating limited visibility into new logo growth.
Good afternoon, and welcome to Five9's second quarter 2026 earnings conference call. I am Tony Righetti, Senior Vice President of Investor Relations. With me today are Amit Mathratis, Chief Executive Officer and Brian Lee, Chief Financial Officer.
During today's conference call, certain statements will be made that are not historical facts and are considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1,995.
These forward-looking statements include, but are not limited to statements regarding our quarterly and full year 2026 guidance, expected improvements in operating and financial metrics, industry trends, including with respect to AI.
Our strategy priorities and execution, our product roadmap and technology investment, our markets, customer demand trends, our market position and opportunity, our capital allocation strategy, and other future events or results.
Such statements are simply beliefs and predictions that should not be unduly relied
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