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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 1995. These forward-looking statements include, but are not limited to, statements regarding our Q2, second half of 2026, and full year 2026 guidance, expected improvements in operating and financial metrics, CCaaS and AI revenue growth trends, industry trends, including with respect to AI, our strategy, priorities, and execution, our product roadmap and technology investments, our markets, customer demand trends, our market position and opportunity, our capital allocation strategy, including our share repurchase programs and other future events or results. Such statements are simply beliefs and predictions should not be unduly relied upon by investors. Actual events or results may differ materially, and the company undertakes no obligation to update the information in such statements.

These statements are subject to substantial risks and uncertainties that could adversely affect Five9's future results and cause these forward-looking statements to be inaccurate, including the impact of adverse economic conditions, lower growth rates within our installed base of customers, failure to manage our technical operations infrastructure, unsuccessful development of our AI solutions, failure to maintain and develop our contact center solutions, failure to achieve the anticipated benefits of our share repurchase activity, and the other risks discussed under the caption Risk Factors and elsewhere in Five9's annual and quarterly reports filed with the Securities and Exchange Commission. In addition, management will make reference to non-GAAP financial measures during this call.

A discussion of why we use non-GAAP financial measures and a reconciliation of our GAAP versus non-GAAP results and guidance is currently available in our press release issued earlier this afternoon, as well as in the appendix of our investor deck that can be found in the investor relations section of Five9's website at investors.five9.com. Please note that the information provided on this call speaks only to management's views as of today and may no longer be accurate at the time of a replay. A reminder, unless otherwise indicated, financial figures discussed are non-GAAP. Now I'd like to turn the call over to Five9 CEO. Please go ahead, Amit.

Thank you, Tony, welcome everyone to our first quarter 2026 earnings call. We've delivered an encouraging start to the year. I am particularly pleased to report an acceleration in subscription revenue growth with top and bottom line results coming in above the high end of the guidance ranges. While we are still early in our work, this quarter marks an important step in showing that our actions are beginning to translate into better business performance with the indicators we care about moving in the right direction again. This is my first full earnings call as CEO. I want to frame our work around four priorities that I believe are essential to driving long-term value at Five9. First, building a performance-driven culture rooted in accountability and transparency. Second, optimizing operations. Third, stabilizing and strengthening the core business. Fourth, winning in AI-empowered customer experiences.

Let me start with our first priority, culture. Over the past three months, I've spent significant amount of time with our teams and leaders across the company and had frank conversations with employees across functions and geographies. What is clear to me is that Five9 has talented people, highly strategic assets, and a real desire to win. Winning also requires clarity of mission, high standards, urgency, and accountability. We need a culture where performance is measured rigorously, decisions are made quickly, and leadership is held to a high standard. That starts with me. Transparency with the investor community is equally important. Over time, our story has become harder for investors to underwrite than I believe it should be. Some of that was about how we executed, how we communicated, and how clearly we translated our strategy into measurable progress.

Going forward, we will demonstrate progress through clearer, relevant, and trackable metrics that help investors assess the health of the business and hold management accountable. We understand that investors want evidence, not ambition, and our job is to convert our vision into results that are quantifiable. Turning to operations. Over the past year, and with the support and oversight of the board, Five9 has been executing a significant operational review designed to improve efficiency and simplify execution. This work, which was well underway before I joined, helped drive the 470 basis points increase in EBITDA margin from 2024-2025. This foundational work is crucial, but it is only the beginning. We are now in a better position to move faster and reinvest in critical areas.

Building on this foundation and with the support of external advisors, I am leading a series of deep dives across the product portfolio to align investments with our long-term competitive priorities. To help accelerate this effort, we are filling gaps and making changes in leadership, adjusting our organizational design, including reducing spans and layers to improve focus, speed, and accountability. These changes will help us operate more efficiently and effectively and build more disciplined foundation for innovation, growth, and continued operating leverage over time. An example of this was our recent hire of Jay Lee, our new Chief Marketing and Growth Officer. In this newly created role, Jay will unify global marketing with revenue strategy and operations to build a more aligned, insights-driven go-to-market engine that delivers a seamless experience for customers and partners.

Let me shift to my point of view on the strategic outlook for our industry and our business specifically. AI is one of the most important shifts underway in our industry, and customer experience is one of the most compelling application areas. In my conversation with customers, I'm consistently hearing that AI is fundamentally increasing the importance and value of every customer interaction. Historically, contact center spending has been overwhelmingly weighted towards labor, creating a difficult trade-off between lowering costs and delivering better experiences. AI is acting as a catalyst to change this. Customers now see the potential to reallocate a portion of their labor spend to fund the combination of AI and enhanced CX, better addressing the trade-off between cost and quality. This makes the move to a modern cloud-based platform more urgent than ever. This shift is forcing a critical decision.

Customers must now consider how AI is incorporated into their CCaaS platform because they want to avoid a sprawling collection of disparate AI tools that cannot seamlessly coordinate between their human agents. This means that AI point solutions are not enough because they only solve a fraction of the problem. Enterprises are looking for a complete customer experience platform they can trust to handle the entire life cycle, the orchestration, the data, the integrations, and the governance needed to run reliably in production. This is precisely what Five9 provides. What's interesting is that AI handles a large share of routine customer requests. The role of agents is elevated, not eliminated. People become experts who manage complex escalations and provide essential oversight, a necessity in several regulated industries.

A platform infused with AI and CX technology empowers these agents with real-time guidance and suggested next steps, while simultaneously giving supervisors unprecedented visibility into every interaction, not just a sampling. Importantly, human-based intelligence and case resolution provides a critical feedback loop for training AI agents, which in turn drives continuous performance improvements of the entire unified platform and further differentiates Five9. This evolution is about more than just efficiency. It's about value capture. As AI reduces the customer's traditional labor spend, that budget shifts towards technology. We believe this fundamentally expands our monetizable surface area. By enabling entirely new use cases and more differentiated customer experiences, our path to success is no longer about simply selling seats. Instead, it's about selling a complete solution based on capabilities and consumption.

This is where we believe our category is going. We plan to lead it by pairing these and other powerful agentic capabilities into a platform that has trust governance that enterprises seek. We are not assuming success here. We must earn it, and we will measure ourselves not by demos, but by production, adoption, and customer outcomes. We are seeing signs that our strategy is working. In the 1st quarter, we posted our 2nd consecutive quarter of year-on-year accelerating subscription revenue growth, an important indicator that the core business is strengthening. We are also seeing customers adopt our AI solutions in production as an integrated part of our CX platform, leading to multiple quarters of strong AI revenue growth. This effort is amplified by the strength of our platform and our ecosystem.

Our cloud-native CCaaS platform is built for high reliability and features open integrations, which has allowed us to build an ecosystem of over 1,400 partners. Our deep strategic relationships with market leaders within this ecosystem are critical, serving to validate our technology, strengthen our go-to-market reach, and accelerate enterprise adoption. This is a large opportunity, and we believe Five9 is one of the few key players truly positioned to capture it. We intend to do so with both urgency and discipline. Before I hand it over to Bryan Lee, let me say a few words about capital allocation. We take our role as stewards of shareholder capital seriously. Our approach will be disciplined, return-oriented, and balanced. This includes investing organically in our business, evaluating inorganic opportunities against a high strategic and financial bar, and when appropriate, returning capital to shareholders.

On the last point, reflecting our confidence in the company's intrinsic value, we intend to complete our remaining amount of $150 million share repurchase authorization by the end of Q3. In addition, our board has authorized an additional $200 million share repurchase program. We see this as a compelling use of capital, and Bryan will provide more details in a moment. Since joining in February, it has become even clearer to me that Five9 has talented employees, a portfolio of highly strategic assets, and significant upside potential. It has also become clear to me that we must operate with greater urgency, better execution, and higher accountability as we build towards an AI-driven future. That work is underway, and I intend to drive meaningful change as we work to turn Five9 from a good company into a great business with a disciplined focus on creating long-term shareholder value.

With that, I'll turn the call over to Bryan.

Thank you, Amit. Good afternoon, everyone. I would like to begin by underscoring our commitment to transparency in our reporting. To that end, starting today, you'll find the supplemental metric disclosure in the investor relations section of our website. While many of these metrics have been disclosed previously, we believe this new format will help simplify your modeling. Amit noted, we have taken decisive action on returning capital to shareholders. After repurchasing $10 million of shares in the first quarter, we intend to enter into an accelerated share repurchase program for the remaining $90 million under the current authorization, which we expect to be completed by the end of Q3. The board has also approved a new share repurchase program of $200 million, which we expect to execute opportunistically.

These actions reflect our deep conviction in our long-term opportunity and confidence in continuing to generate strong free cash flow while also providing ample strategic flexibility. Turning to our financials. Q1 revenue was $305 million, up 9% year-over-year. Of the total for the quarter, the contributions from subscription, telecom, and professional services were approximately 82%, 12%, and 6% respectively. Our subscription revenue grew 13% year-over-year. This was driven by our CCaaS revenue, which grew 8%, and our AI revenue, which grew 68% to an annual run rate of over $125 million. For clarity, please note that this AI revenue figure now includes both enterprise and commercial, providing a complete view of this growth driver.

Our AI revenue now represents approximately 13% of total subscription revenue, compared to approximately 8% a year ago. The year-over-year growth rate accelerated from 49% in Q4 2025 to 68% in Q1 2026, primarily driven by a backlog ramping earlier than anticipated. Looking ahead, we expect total subscription and CCaaS growth to trend with our overall revenue guidance. AI revenue growth is expected to fluctuate quarter to quarter, given varying ramp schedules, with full year 2026 growth anticipated to exceed 40% year over year. LTM dollar-based retention rate, defined in our filings as the retention rate of recurring revenue from subscription plus telecom, was 105%, which is the same as Q4 2025.

Given our focus on subscription revenue going forward, we will transition our DBRR disclosure to LTM subscription DBRR, which came in at 107% in Q1 compared to 106% in Q4 2025. Please refer to the previously mentioned supplemental metric disclosure on our investor relations website with 9 quarters of historical dollar-based retention rates. As anticipated, both DBRR metrics stabilized in Q1, and we expect Q2 to be at relatively similar levels, ±1 percentage point, before inflecting in the second half of the year. Adjusted gross margin in Q1 was 64%, compared to 62% in Q1 last year. Adjusted EBITDA was $74 million, or 24% of revenue, compared to $53 million or 19% of revenue in the same quarter last year.

In terms of cash flow, cash from operations was $64 million or 21% of revenue, and free cash flow was $49 million or 16% of revenue. These profitability and cash flow margins benefited by slightly more than one percentage point in the first quarter from a one-time discount negotiated with a key vendor that we do not expect to recur in future periods. From a balance sheet perspective, we ended the quarter with $724 million in cash equivalents, and short-term investments. On to guidance. For the second quarter, we're guiding total revenue to a midpoint of $306 million, with a range of $303 million-$309 million.

For the same period, our guidance for non-GAAP EPS is a midpoint of $0.60 per diluted share, with a range of $0.65-$0.69. The largest driver of the sequential decline is the one-time discount I mentioned a moment ago that benefited Q1. Additionally, this guidance includes an estimated 3.6 billion shares being retired through our accelerated share repurchase. For the second half, we continue to expect total revenue growth to accelerate to double digits, driven by our backlog of both new logo and install-based bookings. For non-GAAP EPS, we expect steady sequential increases in the second half.

For the full year of 2026, we're guiding total revenue to a midpoint of $1.26 billion, with a range of $1.254 billion-$1.266 billion, which is up from our initial midpoint guidance of $1.254 billion. Our guidance for 2026 non-GAAP EPS is a midpoint of $3.26 per diluted share, with a range of $3.22-$3.30, which is up from our initial midpoint guidance of $3.18 per diluted share. Additionally, we continue to anticipate annual adjusted EBITDA margin to exceed 24% and annual free cash flow to be approximately $175 million.

That said, our organizational design initiatives are expected to initially result in higher temporary expenses that provide longer-term cost efficiencies along with improved focus, speed, and effectiveness. To assist with modeling, please note the following: Purchase of PP&E is expected to be approximately 3.5% of revenue for 2026 due to a global data center refresh.

Please refer to the presentation posted on our investor relations website for additional estimates, including share count and taxes, as well as GAAP to non-GAAP reconciliations. With that, I would like to ask our President, Andy Dignan, to join us for Q&A and open the call. Operator, please go ahead.

Okay. We will begin with Sitikantha Panigrahi from Mizuho. Please go ahead and unmute at this time.

Great, thank you, and congrats on a good quarter. Yeah, Amit, thanks for outlining all those four priorities. Just wondering, what are the two, three most concrete measurable milestones you think investors should track over the next 12 months to assess the progress of each of those areas?

Yeah. Thank you, Siddhi, and thank you for the question. Look, one, I think as we are going through, as I am going through deeper into the business, I think the number one thing that I mentioned, you know, in the script and in the call is I'm spending time on really diving deep into the market, into our tech, into our products, and where Five9 should be positioned. I think one of the benchmarks that I think you all should be looking for is, you know, in the near future, me coming out and laying that out for you all and being very clear with, you know, how that is progressing and where we are taking the business. Two, I think there are two other, you know, two or three major other areas that I've been diving into.

One is, you know, culture. Like, how do we actually drive more accountability, more ownership, you know, more organizational design improvements within spans and layers, within things like, you know, faster location strategy and reducing, you know, a lot of the bureaucracy and processes internally. I think the right measure of that should be reflected in the pace that we bring to the market in terms of, you know, delivery, in terms of delivery of some of these things that are underpinning such as, you know, margin improvements, such as growth improvements. I think that's probably the best way to hold us accountable, and we'll be laying that out for you all.

That's helpful. Then one more follow-up. You must have talked to customers and partners over this quarter. AI is moving much faster than any other trend we have seen before. What are your customers doing in terms of adapting to this faster pace on AI? What's your assessment of, you know, Five9 opportunity there and why you think, you know, Five9 is well-positioned versus some of the other emerging vendors?

Yeah. Another good question. Thank you. Look, as I've been talking to customers, it is pretty obvious that everyone is excited about AI, what it can do, and where it is going, you know, particularly in the contact center. I think the one big thing that the customer is starting to realize is that AI is truly allowing for greater interactions to happen and really driving an increase in their ability to connect with customers who are maybe tier two, tier three, who they had relegated into different channels because of OpEx. Look, customer experience, CX, is a reflection of your OpEx. I know how to make, you know, call times go to 0 or hold times go to 0, double your OpEx. It's challenging. As these...

as AI comes in, I think there is one big thing that is happening. One, as AI replaces seats, those dollars are not leaving the contact center. It is actually getting reallocated towards software. Companies are looking to platforms like us that can actually marry voice, digital, and AI and present it in a format where it is all connected under one roof actually allows them to get far larger outputs, increases in efficiency through that system. That is really where AI is going. That is why I think Five9 is really well-positioned because of this shift. By the way, I think you all may know this, but the TAM for CCaaS plus support AI is nearly 2x the displacement of seats that will happen.

We now get to play in a much larger market as we evolve and build into this platform.

That's a great color. Thank you, Amit.

Our next question will come from Terrell Tillman from Truist. Please unmute and ask your question at this time.

Hey, guys. Thanks. Second question is from Carlo and for Terry. You mentioned seat counts. We were wondering how has the end market been for contact center seat counts? Are we seeing it, you know, stay stable, growing or declining? I guess, what are customers sharing in terms of their plans for seats as we look into the next, you know, 6-12 months? Thanks.

Let me start on the actual seat count and then Amit Mathradas can chime in as well. You know, we mentioned that the seat count continues to grow at a healthy rate, relatively in line with the CCaaS revenue growth that we have provided, and that was a commentary we provided last quarter, and it continues to be the case. You know, from a, If you look at the backlog of our customers that we've already won, there's actually a large portion that's CCaaS oriented and a smaller portion but fast-growing portion that's AI. Definitely the seat growth from a customer perspective internally has been growing at a healthy rate.

Got it.

I think to the second part of your question around what customers are telling us, it's what I, you know, mentioned to Siddhi, which is as they see the ability for them to get more efficient with their human agents, what they really want to do is start investing into, you know, software tools, platform tools, AI tools that allow for the overall efficiency to grow and for them to actually increase the overall interactions. A number of customers that we are working with today is exactly in that.

Got it, guys. Thank you. Appreciate it.

Our next question will come from Raimo Lenschow from Barclays. Please unmute and ask your question.

Hey, thank you. Can you hear me okay?

Yes.

Hey, perfect. Congrats. Great start, Amit. Quick question. If you think about the industry at the moment, there's all this think about AI disruption, but the one thing that we pick up when we talk with guys in the field is like, how many of the data, of the call centers are still actually on premise, and how we actually kind of need to think about first cloud migrations, and then we can do AI. What have you picked up in your, you know, customer in your client conversations the first three months on that whole dynamic?

Because, you know, for many years you were the cloud provider that had the structural kind of tailwinds, in theory, that should be coming your way even more now, you know, given that people have to modernize finally.

Yeah, thank you for that question. You know, I'll chime in and let Andy add any additional color. Look, what we are seeing is there's still, you know, a vast majority of customers that are still on-prem. Eventually, you know, will have to make that decision of moving to the cloud. A lot of them are actually testing out AI right now and saying, "Can we just go deploy AI on-prem?" Candidly, we've seen, you know, a pickup of some of those requests where they wanna come in and test AI first. Also, I can tell you that the results have been a little bit of a mixed bag, right?

When you are on-prem, you know, the holy grail of AI working seamlessly is data and architecture and how it is connected to the rest of your ecosystem. In some cases it works, in some cases it doesn't. I think, you know, you will see a lot more of customers testing AI on-prem. My hunch is for some it may be okay, but a lot of them will start realizing that you have to move to the cloud for this to be, you know, the best of breed and full adoption and the scalability that they want. You know, that's my kinda first read into it. Andy, anything to add?

Yeah. The only thing I would add would be, yeah, we're seeing more of those conversations. I think throughout the kind of process of working on an opportunity, they realize that they can move to. There's this concern that you gotta take a year to move to the cloud and then start getting AI. We've done a lot both within our product and our processes around how we deliver, that we can deliver AI at the beginning but also migrate them at the same time so they can kind of get the best of both worlds is really what they're looking for. So.

Okay. Perfect. Yeah. Thank you. That's very clear. Brian, first of all, like, thanks for the kind of tightening up disclosure, et cetera. That's really helpful. Looking forward to working through that. The other thing is like, if you think about guidance, it's Q1, usually people kind of think it's Q1, do I change my annual guidance or not? Can you talk a little bit about the puts and takes for you, to change what's, you know, to change annual guidance a little bit as well and about why you took that level? Thank you. Congrats.

Yeah, absolutely, Raimo. Thank you. Let me take that in two parts. Let me actually talk a little bit about the first quarter, and then I'll talk about the annual guidance. In Q1, subscription was the key driver of revenue growth. You know, it was the second quarter of acceleration to 13%. If you break that down between CCaaS and AI, CCaaS was stable at 8%, and AI accelerated to 68%, primarily driven by backlog, you know, the strength of backlog converting to revenue.

By the way, before I go to the guidance, for modeling purposes, I do wanna point out something around the AI revenue because this time the disclosure is different from the past periods in the sense that we're including enterprise and commercial to give you a full picture of our AI revenue as well as total subscription. That AI, as a % of total subscription revenue, going back a year ago for Q1 2025, it was approximately 8% of total subscription revenue, and it stepped up one percentage point each quarter to 9, 10, 11 in Q2, 3, 4, until the most recent quarter was 13% of total subscription revenue. Hope that helps from a modeling perspective. Now going forward into, you know, Q2 and the rest of the year, it's really driven by the backlog that we've been talking about.

It's growing at a very healthy rate, and we have great visibility into it. It's comprised of both new logo and install-based bookings that are converting into revenue. Every customer has a unique ramp schedule, and it just happens to be back-end loaded, which is what's driving that acceleration into double-digit growth in the second half. You know, it's the visibility that we have that gives us that comfort to actually increase the midpoint of our annual guidance from $1.254 billion-$1.26 billion, which essentially covers all of the Q1 beat plus a little bit more.

Okay. Perfect. Thank you.

Our next question will come from Catharine Trebnick of Rosenblatt. Please unmute and ask your question.

Yeah. Thank you very much. Nice quarter. You know, you hired a new chief marketing officer. I was really happy to see that, Jay Lee. Can you explain? I noticed he has a really strong data background, so it doesn't look like your typical branding type of marketing person. Give us some details on why it was a particular hire with that background. Thank you.

Yeah. Thank you for that question. Yeah, we're super excited to have Jay here. As you rightfully called out, you know, we also adjusted his title to reflect what he is here to do, which is Chief Marketing and Growth Officer. Look, Jay brings, you know, a tremendous amount of experience, not only in the marketing realm, but also in analytics data and piecing those things together.

From my view, I think as we look at driving a unified go-to-market, as we look at driving improvements in efficiency and how we, you know, serve our customer, you have to look at the full life cycle. That implies that you have to all be working off one sheet in terms of the data, in terms of the funnel, in terms of how it actually translates into revenue operations and all the strategies that ties to it. This is one example of, you know, some of the changes that we are making, which is, I think, you know, beneficial to the company, where under one roof you're going to have one go-to-market strategy, one go-to-market delivery mechanism, and one go-to-market measurable data set that drives all of that.

Yeah. Thank you. That was a good explanation.

Our next question will come from Michael Funk of Bank of America. Michael, you can go ahead and unmute at this time. Our next question will come from Scott Berg of Needham. Scott, you can go ahead and unmute at this time.

Hi, everyone. Hopefully you can hear me. Nice quarter here. Amit Mathradas, in your four priorities, one of them was winning in AI, your 4th one. It's obviously the key question most investors are asking on Five9, given what the state of the contact center environment is. How do you see the company today, and do you think you're winning effectively? Is this a product item? Do you think you need to lean into product or potentially lean into maybe distribution more to continue to drive and really capture what's a pretty interesting AI opportunity today?

Thank you, Scott. Look, I think the answer really is if I just start with the basics and say, how are we performing today with our AI capabilities? I think just looking at the performance of what we've delivered with 68% year-on-year growth, acceleration, and just a whole year view of where that's going, I feel like we've got, you know, some pretty good chops on what we are doing today. That being said, I do think the market is moving fast and we have already, you know, announced some new products that are in beta that will be coming out, you know, in the next quarter or so into general availability. For me, the real viewpoint is how do we stay on top of that? How do we speed that up?

Near term and long term, I do think at the end of the day, which I'd mentioned on my first call, look, to be disciplined, I cannot serve every piece of AI in CX. We will have to be selective as to what the platform requires and where our advantages are and where, you know, whether that is done organic or inorganic, and then where we partner with, you know, other players to fill gaps that we may not, you know, fill or things that are vertical or certain CX centric that we may need. I don't, you know, Scott, I don't think the answer is one or the other.

I think it's going to be a combination of how do we continue to deliver and build faster, bring more products tied to where our platform is going and where we want to, you know, own the market and where partners play a role to fill gaps that would make it easier for end users to just say, "Hey, I'll work with Five9 because it's all available in one, in one place.

I'll pull there. My follow-up's actually for Andy as a follow-up to that question is: What do you see in the sales pipelines today? What's the team seeing, you know, in Q1 maybe versus a year ago on that fast changing environment perspective? Is the composition deal substantially different, you know, in terms of, I don't know, feature functionality, et cetera, or I guess, does it stay pretty steady?

I mean, I think we tracked, you know, obviously our RFP and pipeline levels. They've been, you know, at elevated levels that we've talked about for the last two years, and that continues forward. In terms of the makeup, I would say, you know, similar to what we talked about earlier, we are seeing more conversations around that sort of AI first. Again, I think we have a strong go-to-market around that as well as a product strategy. I think that's gonna continue to play to our strength.

Understood. Thank you.

Thanks, Scott.

Okay. Our next question comes from Rishi Jaluria of RBC. Rishi, you can go ahead and unmute at this time.

Oh, wonderful. Thanks so much for taking my questions. I'll keep it to just one. You know, look, great to see these continued results, continued AI momentum, and appreciate the greater transparency. You know, one thing we're all trying to figure out a little bit of is thinking about what exactly the impact of AI broadly, whether that's your portfolio, DIY, third party. Look, I appreciate that you, you're talking about you can't do everything yourselves and partner where it makes sense. To what extent has that had an impact on the nature of conversations you're having with net new customers around migrating from on-premise to cloud? How has that changed maybe some of your competitive dynamics, you know, in the RFP process?

Maybe just help us kinda understand all these pieces, how they're currently coming together, and maybe, you know, is there a point at which AI in contact center starts to get, not mature enough, but more wide, widespread enough that it actually starts to speed up some of the sales cycles? Thanks.

Look, I'll take a stab at that question and, you know, Andy may have more color. Look, I think in the on-prem solution, or on-prem offerings, what we're getting a lot of requests for are AI apps that actually speed up, you know, a lot of the humans that are out there, things like Agent Assist, you know, some of our AI agents to help as they are, as they are, you know, contemplating voice, you know, change outs.

Look, the whole view for me, and I'll say this when I think about, you know, my role as a new set of eyes on this business. What is happening in the CX space is as AI is replacing humans over time, as I mentioned earlier, those dollars are going back into the software, going back to make, you know, all of these humans and AI itself more efficient. If you just fast-forward to your question, even six months, even a year, I think people think about point solution AI as, "Hey, here's this all." Most customers are basically saying, "If I have humans that are going to be around, I need it all to be on one platform because there are certain functions I cannot do through point solutions." Agent Assist doesn't work unless it is in real-time conversations.

If I'm even talking about AI voice, like, you know, agentic, think about what a platform offers in the near future, right? You are going to have as someone comes in and says, "I wanna speak to a human," you go into hold time. That hold time actually becomes a window in which AI agents actually perform a, maybe a check or get you ready for the human call. Those sorts of things cannot happen in point products working on, you know, working independently for a platform. As humans get elevated, the other big thing that'll happen is you will start finding that human agents will start monitoring a bunch of AI agents.

If an AI agent is stuck on pronouncing Mathradas, my last name, and does it 3 or 4x, a human can see something go yellow and say, "I'm directly stepping into that call and taking it over." That cannot happen, you know, with point products. That has to happen on a platform. I think the one thing that, you know, everyone is talking about agentic. Here at Five9, we're talking about humanic, which is a combination of humans and agents doing things that have not been thought about before. That is, you know, that is the direction we're going, and that is where I see this all coming together. I hope, I hope that that helps answer some of your questions.

Absolutely. Very helpful. Thank you.

Okay. Our next question comes from DJ Hynes of Canaccord. DJ, you can go ahead and unmute at this time. Our next question will come from Elizabeth Porter. Elizabeth, you can go ahead and unmute at this time.

Great. Thanks. This is James on for Elizabeth. Congrats on the strong results. Just going back to some of the earlier comments. I think I heard you guys say that some of the strength you saw this quarter was from more of that backlog coming in ahead of expectations. Just curious if you could unpack that a little bit more. You know, was that more attributable to strong execution on your side? Was it customers looking to accelerate those deployment timelines? Then as a result, just, you know, how has that sort of influenced your thinking for the path of those deployments for the rest of the year for what's still in the backlog?

Yeah. James, it was a combination of number of factors. It wasn't just one customer. It was many customers. As I mentioned earlier in the year, we did have some contingencies built into our guidance as one, part of it is that in terms of timing coming in earlier than anticipated. It's also, we always say that our PS resource in terms of implementation is always there ready to deploy as quickly as the customer wants. I think there are times when the customer is aligned faster internally on their end, and the deployment cycle actually speeds up. I think we saw some of that. The deployments was the strongest on the AI side this quarter, which is why you saw that acceleration from 49%-68% year-over-year growth.

Going into Q2 and beyond, I'll give a little bit more color in terms of, you know, CCaaS versus AI, because they're all coming from the backlog here. You'll see that we have our total revenue guide where, you know, we reported 9% in Q1. We're guiding to 8% in Q2, double-digit growth acceleration in the back half. The CCaaS portion from backlog will more or less mirror that shape. AI on the other side will actually fluctuate up and down because of the varying deployment schedules that our customers have. At the end of the day, for the annual number, we're anticipating AI revenue growth to exceed at a minimum 40% year-over-year.

Great. Thank you so much.

Okay. Our next question comes from Peter Levine of Evercore ISI. You can go ahead and unmute at this time.

Thank you very much for taking my question. Maybe the first one, Amit Mathradas, you made a comment, Pedro Marks not really selling seats anymore, moving more towards a consumption model. Maybe just walk us through, like, what that progression looks like. You know, what are you hearing from your customers, how does the model change over time if it does become more consumption? Second, Bryan Lee, I know last quarter we talked about the guide for 27 being anywhere from 10%-15%. Is that still the path forward as you think about the business now and as you go into the second half? Thank you.

Thank you, Peter. Look, just to start, what we have started to transition to with all our new logos and as well as with our existing customers as they renew, is more to a like a, you know, a fixed revenue model where they are committing to a revenue number. What that brings is predictability to them and predictability to us. What the whole thesis there is that as seats compress over time, potentially, that our customers get the option to fill that revenue with our AI tools and others.

Why they love it is because it brings predictability and they have a, you know, they're also betting on our roadmap, which says, "Hey, as new products come in, we're backing that, and we will keep consuming those AI tools to make our humans and the combination more efficient." That is why. We're seeing that starting to happen. You know, a lot of our business is starting to move. It's early days, so, you know, as I mentioned, you know, that is starting to pick up. What it goes towards, Peter, is the original comment I made, that as seats compress-Customers are saying, "Hey, those dollars aren't leaving the contact center. They will be utilized in other forms of AI and software tools." That is what they're committing to.

I'll let Andy add in anything, you know, beyond that.

Yeah, no, we've seen strong traction. I think, A, customers have a great interest in sort of buying into that motion. I think back to something that Amit said, the most important part is they're oftentimes making three and five year decisions, right? Their belief in that, in the roadmap, what we have today and what we're gonna be delivering, is what gives them the confidence to sign up for 3-5 years and make these revenue commitments. Again, it helps sort of protect our downside as well as, you know, easier for Brian to forecast.

Thank you. Peter, I'll just chime in with last part of your question. We're not gonna be providing 2027 guidance today, but you have our 2026 guidance, which keeps us on the path toward double-digit growth, exiting the year and expanding EBITDA margin. As you know, we're in the middle of deep dive across the portfolio and, you know, we have our new Chief Marketing and Growth Officer, we wanna let that process play out before revisiting the longer-range framework.

Very much.

Okay, our next question comes from James Fish of Piper Sandler. Jim, you can go ahead and unmute at this time.

Hi, guys. This is Ryan on for James Fish. Congrats on the quarter. One question I had was, as you guys think about the guide going forward and your backlog that's driving that guide, how much upside do you guys have and view into pipeline through the end of the year? How much of that left is go gets versus what you kinda already have in that pipeline?

Ryan, I think the best way to look at that is if you break down our guide for the last three remaining quarters, it basically implies we need to get $80 million of incremental recurring revenue. I would say about 2/3 of that roughly will be coming from our DBRR. As we said, it's gonna stabilize in the first, in the second quarter, ±1 percentage point, and then flex upward in the second half. About 2/3 of that $80 million comes from that portion. The remaining third is coming from new logos, it's all new logos from our backlog that's converting to revenue. As I mentioned earlier, there's different schedules for each customer and happens to be much more back-end loaded.

There's essentially no dependency on new logo go gets for the rest of the year.

Great. Thank you.

Okay, our next question comes from Thomas Blakey of Cantor. Thomas, you can go ahead and unmute at this time.

Hi. Thank you, and thank you for taking my questions. I just wanted to talk about that AI volatility. Brian, thank you for all the extra color, by the way. Covering you guys over the years is very helpful. Maybe just start with question number one. Can you just double click on what's driving that, you know, kind of volatility in terms of obviously a dynamic inflection in terms of AI usage across the space?

Yeah, absolutely, Tom. This is really the way the bookings have come into our backlog from 2025, and it's the deployment schedule of each of those customers. Because, yeah, it's a fast-growing part of our business, but it's still small, right? It's still 13% of total subscription revenue. When you have these customers that are ramping at different times throughout the year, it does cause quite a bit of lumpiness. That's really all it is in terms of when we say it's gonna fluctuate up and down throughout the year. We're really looking at bottoms up every customer that's in our backlog and looking at the schedule of deployment, and that's just how it's playing out for the rest of the year.

Was there an element, just to follow up to that, was there an element of, you know, use cases or seasonality or, like, non-recurring, you know, type of revenue in there in the AI line, Bryan?

No, not at all. There was no seasonality whatsoever. It was actually all just new, more on the new logo, you know, AI backlog that was ramping.

Okay. Then, just to I think it was to Peter's question about or, one of the prior questions about this, the high visibility in terms of the back half acceleration. I know we've asked about this in the past. I apologize to double click here, just, you know, conversions has been, you know, a bit of a sticking point as some of these deals have become increasingly more complex and expansive in scope, given the importance of CX at organizations. Can you maybe talk about how, you know, Five9 is executing, you know, say, this year or in the recent quarters versus prior years in terms of, you know, ramping up, you know, these deals from backlog? That'd be helpful. Thank you.

Yeah, absolutely. I mean, we have a wide variety of customers that we are actually deploying. The Fortune 50 financial services company is one of them. They started ramping in 2025, then they're ramping more so throughout 2026 as well. That's just one example. There are many other customers in our backlog that are actually continuing to deploy throughout the year. As I mentioned earlier, we do have really good visibility into those. We work extremely closely with our customers to make sure that we're deploying on schedule. It's really about the customers that drive sometimes the fluctuations in that. Generally, you know, the professional services organization forecasts very well, we continue to stay right on track on that front.

Thank you, Bryan.

Okay, our next question comes from Jackson Ader of KeyBanc. Jackson, you can go ahead and unmute at this time.

Great. Evening, guys. Thanks for taking our questions.

Just one question really from me that we've seen in some other areas of software that the, just the pace of AI innovation has maybe led to some, like, spending paralysis, you know, on the, on the behalf of customers. They just feel like it's too early on, things are changing too quickly. They're, like, nervous to pick a winner, too early in the, in the innovation cycle. I'm curious, since customer experience was a relatively early environment for AI to kind of infiltrate. I guess it's two questions from the same thing. One is, like, Amit, do you feel like you saw that and you that that did play out in your market?

Then second, if so, are we starting to get past that where there's no longer this uncertainty about picking winners, and it's time to actually act and spend and deploy? Thank you.

Thank you, Jackson. If I think I've got the question right, I think you're asking about, you know, our customers and saying, are they starting to move? Are they, you know, saying, "Hey, we've sat on the sideline and it's now time to pick winners." Look, one thing I can tell you is, given the use case for CX and AI, the number of startups in this space is mind-boggling. Is mind-boggling. For our customers, you can imagine every single day they're being inundated by, you know, here are 500 voice AI companies. Here are, you know, X amount doing something else.

I think what we are seeing from our customers is, yes, there are some early adopters that go try a few things, but what they start to really appreciate from companies like Five9, and I'm sure from others is, "Hey, what you are bringing us is tried and tested. What you are bringing us is now with the security and governance. What you are bringing us is things that may not be, hey, the bleeding edge of everything, but it is something that we know will work, and it is actually things that will drive meaningful and tested outcomes." I think that is why you are seeing, you know, a lot of customers pick us over time versus, you know, all the hundreds of options out there in the market.

My sense is, I think you're going to see a lot more of this where, you know, the trust and governance, especially in large organizations, becomes a more meaningful part of their decision-making.

Okay. That's great. Thank you very much.

Okay. Our next question comes from Ryan Williams of Wells Fargo. Ryan, you can go ahead and unmute at this time. Ryan Williams of Wells Fargo, you can go ahead and unmute at this time. Okay. This concludes the Q&A portion of our call. I will now hand the call back over to CEO, Amit Mathradas, for closing remarks.

Thank you all for participating in our Q1 earnings call. As you all can see, you know, we've had a good start to the year, but there's obviously more work to be done, and we continue to build upon this momentum and look to capitalize on the larger market opportunity for AI and CX. We look forward to updating you all as the progress unfolds throughout the year. Thank you.

Thank you for joining us today. Certain statements made during the course of this conference call that are not historical facts, including those regarding the future financial performance and cash position of the company, expected improvements in financial and related metrics, expected ARR from certain customers, certain expected revenue mix shifts, expectations regarding seasonality, customer growth, anticipated customer benefits from our solution, including from AI, our AI and CCaaS revenue opportunities and current estimations regarding the same, including the ability to leverage data in support of AI revenue opportunities, company growth, enhancements to and development of our solution, market size and trends, our expectations regarding macroeconomic conditions, company market and leadership positions, including the effective onboarding of our new Chief Executive Officer, business initiatives, pipeline, technology and product initiatives, including investment in R&D and AI, including a recently announced suite of our AI solutions as well as other future events or results are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are simply predictions, should not be unduly relied upon by investors. Actual events or results may differ materially, and the company undertakes no obligation to update the information in such statements. These statements are subject to substantial risks and uncertainties that could adversely affect Five9's future results and cause these forward-looking statements to be inaccurate, including the impact of adverse economic conditions, including the impact of macroeconomic challenges, including continuing inflation, uncertainty regarding consumer spending, high interest rates, fluctuations in currency exchange rates, lower growth rates within our installed base of customers and the other risks discussed under the caption Risk Factors and elsewhere in Five9's annual and quarterly reports filed with the Securities and Exchange Commission. In addition, Management will make reference to non-GAAP financial measures during this call. A discussion of why we use non-GAAP financial measures and information regarding reconciliation of our GAAP versus non-GAAP results and guidance is currently available in our press release issued earlier this afternoon as well as in the appendix of our investor deck that can be found in the Investor Relations section of Five9's website. Also, please note that the information provided on this call speaks only to management's views as of today and may no longer be accurate at the time of a replay. Lastly, a reminder that unless otherwise indicated, figures -- financial figures discussed are non-GAAP. And now I'd like to turn the call over to Five9's Chairman, Mike Burkland.

Thanks, Tony, and thanks, everyone, for joining our call this afternoon. Before we discuss our strong finish to the year, I want to acknowledge that this is my final earnings call at Five9 after 18 years with the company. It has been the privilege of my career to lead this organization, and I'm incredibly proud of what we've accomplished together. We've grown Five9 from approximately $10 million in annual revenue to a $1.2 billion run rate, while enabling some of the largest brands in the world to transform their customer experience. These achievements are a testament to the talented team of Five9ers and our vision to be the leader in AI-powered CX. As you know, Amit Mathradas started as CEO on February 2. And before we dive into the business results, I want to take a moment to formally welcome Amit to his first earnings call. After a comprehensive search process, we selected Amit for his deep experience in product innovation, AI and operational excellence at scale. His leadership style and his proven track record of leading through evolving market conditions align perfectly with Five9's culture and the tremendous opportunity ahead of us. I have the utmost confidence in Amit's leadership and all of us here at Five9 are extremely excited to start this new chapter with Amit at the helm. With that, Amit, I'll turn it over to you to share a few of your initial thoughts on Five9 and our opportunity ahead.

Thanks, Mike. I am thrilled to join my first Five9 conference call and would like to express my gratitude to the leadership team and the Board for putting their trust in me as Five9's next CEO. I officially started on February 2. And in the past 2 weeks, I have spent time meeting partners, customers, listening to employees, reviewing road maps and getting deeper into the operational cadence. And what I have seen so far has reinforced why I took this role. I joined Five9 for a simple reason. That is I believe we have a large opportunity in front of us and that we have the right foundation to capture more of it. I strongly believe that over the long term, customers will look to Five9 for a unified CX platform that can solve their agentic and traditional human needs. This multi-agent world uniquely positions Five9 to drive efficiency, elevate customer experience for all our customers. From a communication standpoint, you should know that I will be clear on what's working, what is not and what we are doing to improve it. And with that, I'll turn it back to Mike to discuss our fourth quarter and full year performance. Mike?

Thanks, Amit. We're pleased to report solid Q4 results. We had an exceptional bookings quarter, achieving a Q4 record, highlighted by enterprise AI bookings more than doubling year-over-year, contributing to healthy increases in backlog. In terms of top line, we finished the year strong with fourth quarter total revenue coming in at $300 million. Subscription revenue, which now makes up 82% of total, accelerated to 12% year-over-year growth in Q4. This was driven by enterprise AI revenue growth accelerating from 41% to 50% year-over-year and core CCaaS subscription revenue growth accelerating from 7% to 8% year-over-year. I'm also excited to report that our enterprise AI annual run rate revenue surpassed $100 million in the fourth quarter. On the bottom line, we achieved all-time records in the fourth quarter with adjusted EBITDA increasing to a margin of 26% and free cash flow more than doubling year-over-year to a margin of 22%. These results demonstrate our commitment to balanced growth and operational excellence. I'm incredibly proud of our team's execution. And with our strong positioning in AI-powered CX, we believe we're set up for continued success in 2026 and beyond. Turning now to our business updates. Today, I'd like to focus on 3 key topics: first, our large and growing market opportunity; second, our differentiated position in AI-driven CX; and third, our strong partner momentum. We are in the early stages of a long-term transition in the CX industry with multiple secular growth vectors driving a significantly expanding addressable market for our platform. As a reminder, Gartner forecasts the market for traditional CCaaS to grow at a 9% CAGR and the gen AI customer service market to grow at a 34% CAGR through 2029 to a combined annual spend of $48 billion. We believe that both of these growth drivers will create a powerful tailwind for Five9 as we continue to execute against this durable multiyear opportunity. Importantly, we believe Five9 is well positioned to lead in this new era of AI-powered CX. At the core of our advantage is data, more specifically, conversational data. We capture every customer interaction across voice, digital and AI-driven channels. Therefore, our platform remembers every conversation, whether it was with a human agent or with an AI Agent through voice or digital. This creates what we call a relationship-based experience where every engagement feels personal, contextual and connected. Our end-to-end platform serves as a real-time orchestration engine for customer interactions, whether handled by a human agent or by an AI Agent, enabling seamless collaboration between the two. Each interaction strengthens the next, and this continuous learning loop compounds over time, creating a powerful data flywheel that drives higher performance, accuracy and personalization. This is a significant advantage that only an end-to-end platform can deliver. Our platform advantages are also driving significant momentum in product innovation. At our CX Summit in November, we announced a suite of new AI-powered solutions designed to help enterprises elevate their CX, including our AQM, which is a next-generation Agentic Quality Management solution, our AI-powered Genius Routing engine, our OneVue unified analytics and reporting platform. And our no-code Adaptive Digital Engagement solution. These innovations showcase how Five9 continues to lead in AI-driven CX and further strengthen the power of our end-to-end platform. In addition to our product innovations, we continue to double down on partnerships as a key driver of differentiation in both our products and our go-to-market. That's why we're excited about the expansion of our partnership with Google Cloud and the launch of our joint Enterprise CX AI solution, which we announced in January. We were an early adopter of Google's AI technology, and it continues to pay off for us by accelerating innovation across our CX and AI portfolio. Our joint solution brings together the Five9 AI-infused intelligent CX platform and Google Cloud's Gemini for customer experience, to deliver faster time to value, seamless end-to-end orchestration across the customer journey and more personalized interactions. Customers can move beyond pilots and deploy AI and production faster, grounded in real customer context and built for enterprise scale. That's why we're already seeing strong traction with some of the largest brands in the world leaning into the combined power of Five9 and Google. And before I turn it over to Andy, I want to thank our incredible team of Five9 for your passion, dedication and commitment to excellence throughout my tenure as CEO. Together, we've built something truly special. As I transition the CEO role to Amit, I'm more excited than ever about Five9's future. We have a differentiated platform, proven expertise, strong customer momentum and the right leadership to capitalize on the significant opportunity ahead. And with that, I'll turn it over to our President, Andy Dignan, to share more details on our go-to-market performance. Andy?

Thank you, Mike, and congratulations on your well-earned retirement. And Amit, I look forward to working with you as we build on Five9's strong foundation. We were pleased to deliver an exceptional quarter of bookings. As Mike mentioned, total bookings represented a Q4 record, driven by enterprise AI bookings more than doubling year-over-year and our installed base bookings achieving another all-time high for the third consecutive quarter, driven by ongoing strength in upsell and cross-sell activities. In addition to strong execution by our sales teams, a key driver of our success is our partner strategy. Partners expand our reach. They bring us into more enterprise buying motions and speed up time to value for customers. Five9 has been partner-first for years. And today, more than 80% of our business is partner influenced. Our balanced route-to-market model is working. Partners are leading complex transformations, accelerating AI adoption and delivering outcomes faster than ever. In 2025, Five9 doubled year-over-year, the number of partners certified to implement Five9 services, showing just how mature and essential our ecosystem has become. Building on Mike's comments about the multiple secular growth vectors expanding our market, we're seeing customers lean into both sides of that transition at once, modernizing on CCaaS while accelerating adoption of AI. The first example is a global power management company with over 85,000 employees that selected Five9 to modernize from an on-prem platform to a CCaaS foundation. They chose us based on our native integrations with Salesforce and ServiceNow and our AI Agent and Agent Assist capabilities to improve self-service and drive higher agent productivity. We expect this initial order to result in approximately $2.8 million at ARR. Another example is a life, health and financial services provider that chose Five9 to move from on-prem to cloud and improve work performance. They selected Five9 for our tight integration with their health care CRM and our comprehensive suite of AI solutions. We expect this initial order to result in approximately $1.1 million in ARR. The third example is a hospitality technology company migrating off of a cloud competitor. They chose Five9 for our open platform approach, which allows deep integration with their hospitality platform, their core business. They view this integration as a differentiator for their customers, including some of the highest-end hospitality brands in the world. They also chose Five9 because of our joint partnership with Google Cloud to accelerate AI-driven CX. We expect this initial order to result in approximately $3.4 million in ARR. In addition to customers choosing us as their core CX solution, we continue to see our customers expand their use of Five9's AI capabilities and make long-term commitments to Five9 as their CX AI provider. One example is a health care provider that expanded their Five9 commitment from approximately $6 million to over $10 million in ARR, along with a 3-year commitment. They are doubling down on AI with a clear focus on leveraging AI Agents to drive meaningful cost savings across the business. Looking ahead, we remain encouraged by the momentum of our business, fueled by pipeline and RFP activities sustaining elevated levels. And with that, I'll turn it over to Bryan to take you through the financials. Bryan?

Thank you, Andy. Before I dive into the financials, I want to thank you, Mike, for your exceptional leadership and incredible partnership over the years. Your vision and execution have positioned the company well for the future. And Amit, welcome aboard. I'm excited to work with you as we advance Five9 to the next chapter. Now turning to our financial performance for the fourth quarter. We're pleased to report strong Q4 results with total revenue coming in at $300 million, representing 8% growth year-over-year. Subscription revenue growth accelerated to 12% year-over-year in the fourth quarter, primarily driven by: first, enterprise AR revenue growth accelerating to 50% year-over-year, now making up 12% of enterprise subscription revenue; second, core CCaaS growth accelerating to 8% year-over-year; and third, continued momentum market where 228 of our million-plus ARR customers grew subscription revenue 24% year-over-year, now making up 59% of subscription revenue. Additionally, our concurrent seat count continued to grow at a healthy rate, both quarter-over-quarter and year-over-year, relatively in line with our core CCaaS revenue growth. Subscription revenue represented 82% of total revenue, up from 79% a year ago. And we expect this mix shift to continue as we focus on high-margin subscription revenue, increasingly led by our AI solutions. Telecom usage represented 11% of revenue and professional services made up the remaining 7%. With regard to seasonality, as expected, the sequential uptick in our consumer and health care verticals in Q4 was meaningfully less than last year for telecom usage. For subscription revenue, sequential growth was better than anticipated, but still less than Q4 of last year. Our enterprise business represented approximately 91% of total revenue on an LTM basis. Within this category, LTM enterprise subscription revenue grew 15% year-over-year. Our commercial business represented the remaining 9%. As a reminder, this part of our business underperformed in Q3, but the immediate actions we implemented drove favorable results in Q4, and we expect LTM year-over-year growth to return to normal historical levels next quarter. With regard to our dollar-based retention rate, our spot rate increased sequentially, while the LTM rate stepped down from 107% in Q3 to 105% in Q4 as anticipated. This is primarily due to tough compares as Q4 '24 benefited from strong seasonality and our largest customer completing its multiyear ramp. In 2026, we expect LTM DBRR to remain range bound within a small band in the first half and inflect upward in the second half. Turning now to profitability. Q4 adjusted gross margin was 63%, down by approximately 40 basis points year-over-year, primarily driven by lower gross margins in telecom usage and PS. Adjusted EBITDA margin increased by approximately 260 basis points year-over-year to 26% as we continue to focus on disciplined expense management. Additionally, we continue to boost productivity as demonstrated by our revenue per employee increasing 14% year-over-year. Q4 GAAP EPS was $0.23 per diluted share, representing 5 consecutive quarters of positive GAAP earnings, while non-GAAP EPS came in at $0.80 per diluted share. In terms of cash flow, we generated $84 million or 28% of revenue in operating cash flow. Additionally, we generated free cash flow of $67 million or 22% of revenue, which represented over 10 percentage points of margin improvement year-over-year. As a result, we ended the quarter with total cash and investments of $697 million. And now for a closer look at key full year 2025 income statement metrics. 2025 total revenue came in at $1.15 billion, growing 10% year-over-year, with subscription revenue growing 13% year-over-year. 2025 adjusted gross margin expanded by approximately 110 basis points year-over-year to 63%, while 2025 adjusted EBITDA margin expanded by approximately 470 basis points to 23%. 2025 GAAP EPS was positive for the first time on an annual basis at $0.45 per diluted share, while non-GAAP EPS came in at $2.96 per diluted share. 2025 operating cash flow finished at $226 million, and free cash flow came in at $162 million. Now turning to our full year 2026 and first quarter guidance. For 2026 revenue, we're initiating our guidance at a midpoint of $1.254 billion, which is in line with the high-level outlook we provided last quarter. For Q1 revenue, we're guiding to a midpoint of $299.5 million, which is also consistent with the high-level outlook of relatively flat sequential change we shared last quarter. In terms of quarterly progression, we expect Q2 revenue to increase slightly quarter-over-quarter, followed by momentum building further throughout the year. As a result, we continue to expect revenue to return to double-digit growth in the second half of 2026, driven by our strong backlog of both new logo and installed base bookings. With regard to the bottom line, we're guiding 2026 non-GAAP EPS to a midpoint of $3.18 per diluted share, which is higher than the high-level outlook of $3.14 per diluted share that we provided during our last earnings call. We're also guiding to continued GAAP profitability in 2026 with a midpoint of $0.91 per diluted share for GAAP EPS. For Q1 non-GAAP EPS, we're guiding to a midpoint of $0.68, which reflects a typical sequential decline in the first quarter of the year. As for the remainder of the year, we expect relatively flat sequential move in the second quarter and large improvements in the second half. Also, for other key profitability metrics, we expect at least 24% in annual adjusted EBITDA margin and approximately $175 million in annual free cash flow. Additionally, we plan to host an Investor Day in late 2026, where we will provide additional details on our strategic priorities and long-term financial outlook. We look forward to sharing more with you at that time. Finally, on our share repurchase program, we completed a $50 million accelerated share repurchase on February 2, buying back approximately 2.6 million shares. We have $100 million remaining under our authorization through December 2027. This reflects our strong cash generation and confidence in Five9's value creation opportunity. In closing, 2025 was a transformational year for Five9. We delivered strong financial performance, expanded our AI capabilities and strengthened our strategic partnerships, and we believe we have positioned the company well for sustained profitable growth. With Amit now leading the team, we're energized about our opportunities ahead and committed to executing our strategy to deliver long-term shareholder value. And with that, operator, please open the line for questions.

[Operator Instructions] Our first question comes from Raimo Lenschow from Barclays.

This is [ Damon Coggin ] on for Raimo. Congrats on your retirement, Mike, and congrats, Amit as well for the new role. Great to hear the continued strength with the AI portfolio, reaching $100 million ARR, accelerating 50% year-over-year. Can you help us understand some of the breakdown between what is greenfield and then what is within your existing customer base? And then what is factored into the 2026 guide just from that portfolio?

I'll start, and Bryan, feel free to chime in. But look, this is a combination of us having a lot of success with new logo attach of AI and also penetration into our installed base. I don't think we quantified the breakdown between the two, but I can tell you both are growing at a significant rate and very strong. Bryan?

Yes. And if you think about the 2026 revenue guidance, we've kind of given you the shape of the curve on a total revenue basis. And this is the first time we've given you the breakout of growth rates between enterprise AI as well as core CCaaS. So core CCaaS, obviously, that's a big portion today, and that's going to follow the shape of the curve for the total revenue guide, which means that if you back into the enterprise AI, it's going to still be growing at a very fast clip, but it will ebb and flow through the quarters, but it's still going to be the fastest part of our portfolio.

Our next question comes from Siti Panigrahi from Mizuho.

Great. Mike, it was great working with you and wish you good luck for your next phase. And Amit, congratulations and look forward to working with you. Great. Amit, I want to ask you, you have great product experience operation and when you look at AI outside the industry. As you look into Five9, and I know you talked about opportunities huge, how do you see to navigate Five9 when it comes to product? Or where do you think you can bring some changes? Or where do you think it's working? Or do you think it is too early to talk about that?

Thank you, Siti, for that question. Look, I think the answer is a combination of what you laid out a little bit. Look, one of the reasons I took this role is I am really bullish on the transformation that's going to happen within the CX space. As humans, agents, systems, software all come together, I actually think this turns allows our end users and customers to have more efficiency, greater experiences and in some cases, new experiences that haven't even been factored in as yet, right, just like how the Internet per se transform retail. And so for me, I am really looking forward to unlocking that, which is how do we actually increase the TAM by doing new things with AI and traditional CCaaS and providing customers new opportunities. To the second part of the question on where do we go from here and which pieces, it's a little bit early. I'm still getting my feet around our product and our road maps. But what is really exciting is the stat we put out, which is we've already done $100 million in ARR of AI, and it's growing. So we have proof points to back up this thesis that AI is growing. It's happening fast, and it's happening both in our new logo as well as in the existing base.

Our next question comes from Ryan MacWilliams of Wells Fargo.

Excellent. This one is for Mike. Mike, I mean, what a great run and congrats. I mean I just think back to probably 15 years ago when people said that the biggest contact centers in the world would never move to the cloud, right? And now you guys have customers that are over 10,000 seats and some of the largest Fortune 50 companies that are out there. So people have been wrong before in the contact center industry about what's coming next. I mean, as you kind of take a step back today, what do you think people are missing right now in terms of the contact center opportunity? Like I know it feels like the seats are a question and like where some of these interactions will be. But like what do you think the contact center of 5 years from now means for Five9?

Yes. Thanks, Ryan. I appreciate the comments. And look, I think you're absolutely right. I mean I remember when we went public in 2014, how everyone really just questioned whether or not large enterprises would shift to the cloud. And obviously, we're 40% cloud today, 60% still are on-prem, and it's going to be a multiyear opportunity for us to continue that trend. But look, things have changed. The AI opportunity is massive. We've invested. We were early in this investment with our Inference acquisition. We've built a lot of capabilities on top of that. And I think what people are starting to realize, and I'm not sure -- I think we're just at the very beginning of this realization, quite frankly, across the investor set and across -- I think our customers already see this, but I think the investor community is starting to learn that this end-to-end platform advantage that we have and some other players have, think of, again, Five9 as the system of engagement or the system of interaction, the system of action as opposed to, say, a CRM system, which is kind of the system of record. And I think it's important to understand that we're on the front lines. We're right there at the moment of truth with a customer and a brand. And we have an unfair advantage because of that. And providing both AI-driven solutions as well as solutions for the human agents in an orchestrated fashion. That is our power, that is the power of our platform, and it results in, again, these personalized contextual and connected experiences that only a platform like Five9 can deliver. And I think that is what -- it's showing up in the numbers, but I think we're starting to talk more explicitly about those numbers, Ryan. And that is our core CCaaS revenue growth accelerated from 7% to 8% and our AI revenue growth accelerated from 41% to 50%. And that is the recipe for success. I'll stop there.

You really want to trust the system to give you the right answer because it's not fun to be on the other side of a wrong answer.

Our next question comes from Terry Tillman of Truist.

It's Giancarlo on for Terry, and I appreciate the question. Congrats on a strong quarter. And I think that you guys were talking about the strong adoption for the newer features that you guys rolled out. And I was just wondering what sectors were seeing the highest uptake for those features? And maybe can you talk about what customers are kind of saying was their biggest pain point? And like how has that changed over the last few months?

I'll move to Andy?

Yes, I'm going to take that one. So we're seeing a lot of success in health care and retail. And we talked about a lot of expansion within our customer base. And so I think what -- really what we're seeing is customers wanting to take that next evolution from their CX strategy to AI. And the challenges that most of them have historically seen is their data is not in a good spot, right? We've talked about this for a while. Your AI strategy is only good as your data strategy. And so we put a lot of effort into focusing on making sure that our customers understand where their data needs to be to go deliver on those use cases. And over time, as we've talked about like the customer example today, a customer expanding their AI, we've proved that time and time again over the last couple of years. And so now they're making their bets for 3- and 5-year renewals based on what we demonstrated and our success and their confidence in us going into the future.

Our next question comes from Catharine Trebnick of Rosenblatt.

Congratulations, Mike and Amit and back to the AI question. So what percentage of your enterprise base is adopting the AI, especially looking at AI Agent Assist and Genius Routing. What I'm trying to really understand is what's the runway going forward for enterprise adoption?

Yes, I'm happy to start. Catharine, look, I think it's early days in terms of kind of end-to-end full penetration within our base, almost every single one of our customers is obviously, right? Every enterprise in the world is looking at AI and making AI decisions. But it's early in terms of the rollout in a lot of these cases. And again, I talked about our end-to-end platform a lot and the fact that our customers are rolling out our AI and our CCaaS in production environments, not just in proof of concepts, not just in slick demos, but in real production environments. And -- but it's still early days in this opportunity. As I talked about, we've crossed $100 million in ARR and AI, but it's -- we're just getting started.

Our next question comes from Peter Levine of Evercore.

Mike, best of luck, and Amit welcome aboard. Maybe how do you think about the risk that the LLM native platforms bypass the traditional CCaaS architecture entirely, right? Like in what scenario does an enterprise build their own AI Agent directly on top of like an OpenAI and Anthropic, right? And I guess the question is like what core functionality does Five9 provide that can't be replicated, meaning like what's the hardest to kind of disintermediate from you guys? Is it the workflow, the infrastructure, the compliance, the data? Like help us think through like the risk that these platforms are going to come in overnight to replace you guys?

Yes. Very good question, Peter, and I'll start, and you guys feel free to chime in. Again, we talk about our platform advantages, mainly the data advantage is number one, and it's conversational data and its historical and real-time conversational data. It's also this orchestration capability across all channels and across any back end, whether it's AI on the back end handling this interaction or whether it's a human agent, being able to orchestrate across this entire interaction set is an absolute competitive moat. And look, we're going to continue to have advancements by LLMs, but I've said this even 2 years ago, you cannot run a customer service organization on an LLM. LLMs are a foundational technology that we're all leveraging to deliver applications, solutions for customer experience. And the bar is set. The bar is always going to be there's an orchestration capability of these on-premise solutions that we replace. They're supporting thousands of human agents and now thousands of AI Agents in the future. And that orchestration capability is really isolated to these end-to-end platforms like Five9.

Maybe, Bryan, can you just help us understand the $100 million in AI revenue, what percentage of that is like seat-based, usage-based? But just help us understand what makes up that $100 million.

Yes. So our $100 million of enterprise AI revenue is all consumption or capacity based. So the way it works is that we charge for a block of committed units, whether that's minutes or gigabytes or whatever it may be. And then anything above that would be overage. So it is absolutely consumption-based and yes, and gaining a lot of traction there.

Our next question comes from Samad Samana from Jefferies.

I'll echo the words of my peers. So congrats, Mike, and great to be working with you, Amit. Just I guess a question, Bryan, as I think about the guidance and how you're thinking about the kind of the first half versus the second half, how much of that is influenced by the timing of either large logos that were still in the backlog, whether let's call it, the large pharmaceutical company or the large logistics company being fully live versus how much of that is AI revenue ramping? And have you made any adjustment to the guidance algorithm to account for maybe the change in revenue being more consumption-based versus seat-based? Just help us understand kind of the guidance mechanics.

Yes, absolutely. So if you think about 2026 revenue, we're guiding to a midpoint of $1.254 billion. So that essentially for the year implies incremental revenue of $105 million. So I'll kind of talk about that in the form of contributions from DBRR versus backlog versus new logos bookings for the year. So if you look at DBRR first, the LTM rate, we exited 2025 at 105%, and we expect that to stabilize in the first half with minor fluctuations in either direction, but then inflect in the second half, right? And that alone makes up about 2/3 of that $105 million of incremental revenue. So the remaining 1/3 is actually fully covered by the backlog that we have. So essentially, there's -- and that has contingencies built in as well. So there's essentially no dependencies on the new logos bookings for the year. And the backlog, as you said, it is combined with both new logo bookings that we've already won as well as installed base bookings that we've won that have ramp associated with it. And those are turning into revenue throughout the year. We have great visibility into those, but every single customer in that backlog has a unique schedule of ramp. And it's -- this year happens to be much more back-end loaded, which is why there's that acceleration to double-digit growth in the back half of the year. And if you think about consumption versus seat-based, so our AI portfolio is all consumption and capacity-based, as I talked about earlier. And that's going to continue to be a significant driver of growth throughout the year. It's going to ebb and flow, as I mentioned earlier, but it will be the fastest growing part of our portfolio.

And then maybe just a follow-up. On the AI revenue, the $100 million for enterprise AI rev is very impressive. Can you just maybe help us understand how much of that is maybe allocated towards, let's call it, like next-gen solutions that you guys have rolled out in maybe like, call it, the last 12 to 18 months versus maybe what was foundationally from like an Inference or something that you had kind of in a prior period? Just to help understand where the momentum is inside of the portfolio.

Yes. I'm happy to start and then others can chime in. So if you look at the composition of our AI revenue, the two biggest ones are our AI Agents as well as Agent Assist. And then followed by Workflow Automation and a lot of other smaller products that are growing very fast, but still very small in nature. So -- and AI Agents, of course, we're gaining significant traction in terms of the gen AI base as well as Agent Assist that's using gen AI as well. So we haven't given the exact mix. But of course, there's really strong momentum and acceleration that's happening across the board.

Our next question will come from DJ Hynes of Canaccord.

Well deserved, Mike, we'll miss you on these calls, but I know clearly, you still have an impact on the business from the Chairman seat. So look forward to that. Amit, good to see you again. Look forward to working with you. I got two questions. Bryan, I'm going to start with you. The AI revenue growth acceleration, I suspect that's just a function of what we talked about last quarter, right, that lag between bookings to kind of when it hits the P&L. And if that's right, I mean, AI bookings have been growing quite a bit faster, right? I think 80% last quarter, 100% this quarter. That tells me AI revenue growth should continue to accelerate. So, a, is that correct? And then the second question, I don't know if it's for you, Mike or Andy, but just talk a little bit more about the Google partnership, right? Like what that could mean for the business? What are they using from you? What are they -- what role does Gemini play in that? Just how do the pieces fit together and what it could mean?

Yes. So I'll start, DJ. So thanks for the question. So yes, you're exactly right. We've been talking about enterprise AI bookings growing either 80% plus for the last 3 quarters. And we said if we string together multiple quarters like that, we'll start to see the acceleration happen, and we are starting to see that in Q4, where it accelerated from 41% to 50%. Now going forward, as I mentioned earlier, there will be ebbs and flows, but we do anticipate that if we can continue that momentum on the bookings side, they sit in backlog for a little bit and then they start converting into revenue, and that's what's baked into our guidance. And the acceleration that we're seeing in the back half of 2026 is driven by not just AI, though, also by core CCaaS in our backlog that's converting to revenue as well. So we're seeing momentum on both sides.

And I'll start on Google, and Andy, please chime in. And I'll just give you one high-level comment. DJ, thanks for the comments, too. Look, it's been a pleasure working with you and the rest of the analyst community. Look, the Google partnership, in my opinion, is something very significant for Five9. And what I love about the partnership is it was born out of success that we were having together in the market with large enterprises. And it was more than just an alignment on paper. This was driven, as I said, by success in the market that we're having with them. And that's the -- in my opinion, at least those are the kind of partnerships that really flourish in the long run. So Andy, feel free to...

Yes. If I look at the technical side of it, the solution -- I mean this is real joint solution. This is hands-on keyboards, engineers at Google and Five9 building this joint solution together. We've already had, to Mike's point, success. And we look at the opportunity that filling the pipeline from this coming together is really, really strong. And so you're going to -- obviously, it's going to be our CCaaS environment. We've been leveraging the Google and Gemini application and foundational models to build our own AI products. And so we're going to continue to build out what that joint solution looks like together.

Our next question comes from Will Power of Baird.

This is Yanni Samoilis on for Will Power. And I'll echo the congratulations to Mike and Amit. And I'd love to hear a little bit about what you're seeing across the different verticals that you serve. If you could just discuss if any are strengthening more than others or if there are any that you expect to help power that second half acceleration more than others. And in particular, like for some of your bigger verticals like your health care vertical or maybe consumer, it would be great to get an update on what you're seeing and then what you're factoring into the guide for 2026.

Yes, Yanni. So thanks for the question. And seasonality, if you look at our consumer and health care vertical in Q4, which are the 2 seasonally strongest ones typically. Now if you recall, we mentioned that we were expecting minimal seasonal uptick in Q4. In reality, what happened was the uptick was a little bit more favorable than what we were anticipating, but still weaker if you compare to Q4 of '24. And if you break that down between subscription and telecom usage revenue, the usage portion -- telecom usage portion was much weaker than last year, which is why as a percent of revenue, you saw a step down by 1 percentage point quarter-to-quarter versus -- we're going back to Q4 '24, it actually stepped up as a percent of revenue, right? But these dynamics means that in Q1, the seasonal downtick that always happens in those 2 verticals are actually going to be a little bit more muted than what we saw a year ago. And that's exactly what's baked into our guidance. If you look at our Q1 revenue guide, the sequential change is flat this year. But if you compare that to a year ago, it was negative 2% sequential guide, right? And so going forward for the rest of 2026 -- and by the way, the non -- all the other -- we track 17 verticals, the other 15, they're pretty much in line with typical sequential growth rates for Q4. And going throughout 2026, what we're assuming is that the seasonality, the macro conditions are all very similar to what we saw in the fourth quarter.

I could add in on some of the segments. I mean our 3 biggest verticals are financial services, health care, retail, and we're truly seeing the adoption in those spaces, right? And I think what it points to is the platform advantage that we do have, health care, financial services, just from a regulatory perspective, security -- integrations, we talk about the complexity of the CCaaS deployment. On average, we do 24 integrations, up to 100 integrations at times. And so I think the bar is really high for them to adopt AI. And I think it just shows the fact that we're building true scalable enterprise AI solutions. It's a testament to the success the team has had building the products.

Our next question comes from Jackson Ader of KeyBanc.

This is Jack Nichols on for Jack Ader. I was wondering if you could talk about new logo large customer pipeline and how influential Five9's AI features help land new customers? And then as a follow-up, could you talk about how AI helps dollar-based gross retention and then the dynamics of upselling in renewal contracts?

Yes, we feel good about our -- in terms of our large deal pipeline, we feel good about the levels continuing to be strong. And obviously, AI is a big part of why they're choosing Five9. And so both in landing new logos. And then as you've heard us talk about $10 million-plus deals over the last couple of quarters that are expanding their spend with us. And so I think it's kind of across both segments.

Yes. And I'll just say from a financial perspective for DBRR, when we talk about enterprise AI bookings doubling during the quarter, it wasn't just on the new logo side. It was both new logos and installed base. So we're seeing a lot of momentum there. And that's part of what's going into the backlog and then driving that acceleration on a total revenue basis, but also from a DBRR perspective in terms of the inflection upward in the second half.

Our next question comes from Arjun Bhatia.

All right. Perfect. I had two -- I guess, two quick questions. First, just on the NRR uptick. How -- like when you're expecting to inflect in the back half, obviously, that's a trailing 12-month metric. But where exactly kind of are you seeing the upsell, cross-sell? Is that coming through on the AI front? Is it core CCaaS continuing to pick up pace or on-prem migrations, right, from legacy kind of Cisco, Avaya? And then just a follow-up on the Google question. Are you -- like is it exclusive with Gemini? Are you using multiple models? Can you just talk about how you've built your stack a little bit?

Yes, Arjun, I'll answer the first part of the question. So if you look at DBRR, I do want to point out that the spot rate in Q4 actually stepped up from Q3 to Q4, and that was driven by the conversion of installed base bookings in our backlog to revenue during the quarter. So even though the last 12 months coming into the last quarter actually stepped down on a rounded basis from 107% to 105%, which in actuality was only a little bit over 1 percentage point. That was more of a calculation where that's an LTM figure like you said, right, where it was dropping off Q4 '24, where it benefited from very strong seasonality and our largest customer finishing its multiyear ramp at that time. So we're already going into the year with a step up from Q3 to Q4. And of course, it will stabilize and fluctuate in either direction slightly. But the driver of that inflection upward is really driven by both core CCaaS and AI. So we saw the momentum in Q4. We talked about the acceleration on both sides. And if you look at the backlog, yes, AI has been gaining significant momentum, and it's consistently been above 20% of enterprise net new bookings. But core -- it's always attached to core CCaaS in the vast majority of deals, and that's also sitting in our backlog. So really, the acceleration will be coming from both.

And on the LLM question, the Gemini, I mean, we made a decision 7 years ago, and that brings true that we believe that sort of a multiple engine, multiple LLM is the way to build the products. We sort of saw where this was going, which is these LLMs are continuing to kind of one up each other, right? And the other thing that's really important is each one of them sometimes delivered specific capabilities, right? You could have a single use case and use multiple LLMs as part of that. Now certainly, as part of the joint go-to-market with Google, we're going to be leveraging Gemini, right? There's a lot of very strong performance. We have a team within engineering and our services teams that are constantly benchmarking these LLMs as well. And so that brings us really to allow us to really continue to innovate on top of what's going on in the market.

Our next question comes from Elizabeth Porter of Morgan Stanley.

I just want to echo the congratulations to Mike and Hamed. I guess the question from our side is like I think in the past, you guys have described kind of an AI fog among enterprise customers that having kind of lifted through 2025. And I guess just in light of some of the splashy announcements from the Frontier Labs or some of the upstarts in the space, has that fog stayed clear as we enter 2026? Or are you seeing any sort of lengthening in sales cycles as a result?

Yes, I'll start, Andy, please chime in. Look, I think it's safe to say that every company in the world is prioritizing their AI decisions, right? And that's not going away. The fog that we saw predominantly in the kind of middle of '24 is that -- or sorry, a while back was really just the lack of CCaaS decision-making because of that. But we still obviously -- every enterprise out there is thinking about AI first, and we're now part of those conversations. It's so important for us to be front and center in the CX part of those AI decisions. And our sellers have become the experts. We've got solutions that we can lead with from an AI perspective. And it's a great way for us to go to market to a market that is pulling a lot of attention around AI.

Yes. And in terms of the lengthening of sales cycles, I mean, outside of that fog, which was a lot of times, customers were coming off of doing a lot of proof of concepts, right, that weren't successful. We kind of saw that as an opportunity, like Mike said, to really up our game in terms of enabling our teams, but really more so very focused on having specific vertical-driven outcomes that we have customers who deployed it before. And so that really kind of came through. And so that's allowed us to, in my opinion, sort of accelerate some of our sales cycles, both on the new logo side and obviously, the installed base of customers continuing to just buy more of our AI.

Our next question comes from Gil Luria of D.A. Davidson.

This is Clark Wright on for Gil Luria. Can you give us a medium-term financial framework? You already are effectively in line with all the metrics, excluding gross margins and revenue growth. How do you think about the impact of AI adoption on revenue growth and the inferencing costs that can weigh on gross margins going forward?

Yes. So I'm happy to answer that. So if you think about enterprise AI revenue growth, what we've always said is that there is a significant opportunity out there. We've been very successful in terms of the bookings growth rate that you've seen. And if we can continue that is definitely upside to the revenue forecast and guidance that we have out there. And we -- it's a huge TAM expander for us, right? And we continue to execute very strongly there. Now in terms of margins, if you look at our AI Agents, which is the biggest part of our enterprise AI portfolio, they actually -- we have gross margins in the high 70s and 80s. And so -- and that AI portion as it becomes a bigger mix of our revenue, we expect that to be an accretive part of our overall gross margin trajectory going forward.

This concludes the Q&A portion of our call. I will now hand the call back over to CEO (sic) [ Chairman ], Mike Burkland, for closing remarks.

Chairman to be correct. Amit is our new CEO. And look, I just want to thank everybody for joining us. And I also want to just say personally thank you to all the analysts and all our shareholders. It's been a pleasure, my pleasure to work with all of you. And Amit, welcome aboard again. I am so bullish on our future and a big part of that bullishness is because you're here as our next CEO. So welcome.

Thank you.

Thanks, everyone.

Thank you.