Five9 Cautious Forward Looking

Recently, Five9 reported its second-quarter FY24 results, revealing a strong performance for the period. However, the company’s cautious forward-looking guidance led to a significant drop in its stock price, which fell by over 25%. In response to queries about the conservative outlook, a Five9 spokesperson attributed the reduced 2024 revenue guidance—a 3.8% decrease—to macroeconomic headwinds.

This cautious forecast stands in contrast to the more optimistic outlooks of Five9’s publicly traded peers. Economic factors such as global issues, talent shortages, AI uncertainty, and the upcoming election are influencing customers’ decisions on IT investments, which likely contributed to the reduced guidance.

Additionally, sales execution challenges have prompted the company to take corrective measures. While Five9 might face unique challenges that other CCaaS providers do not, the full impact will become clearer in the next quarter. In response to these challenges, Five9 has taken steps to stabilize its operations, including promoting Matt Tuckness from VP of Global Customer Success to EVP of Sales and Customer Success.

This move, described by leadership as promoting a “dedicated sales leader” with a decade of experience at Five9, aims to enhance sales execution. Scott Berg from Needham questioned the timing of the promotion, suggesting it might be a reaction to a single quarter’s results.

Dan Burkland, Five9’s President, defended the decision, emphasizing that having a dedicated EVP of Sales is crucial for focusing on enterprise deals, especially given Five9’s efforts to grow its enterprise base. Five9 has also announced a 7% workforce reduction, affecting approximately 185 employees. This marks the company’s first layoff in its history, which is notable given its history of growth through acquisitions, such as the recent planned acquisition of Acqueon, a real-time revenue execution platform.

Typically, acquisitions lead to headcount adjustments, but Five9 had managed to avoid such cuts until now. The company stated that the reduction was necessary to focus on profitable growth and long-term business resilience while continuing to serve global customers and innovate. Although layoffs are challenging, they are sometimes necessary for business adaptation.

Many UCaaS and CCaaS providers expanded their workforces during the pandemic and later faced the need to trim excess staff as the market softened. Five9’s adjustment in headcount reflects changing market conditions. The acquisition of Acqueon is expected to accelerate Five9’s vision by integrating expertise in inbound and outbound communications to enhance personalized customer experiences across marketing, sales, and service. Acqueon will operate as a separate business unit within Five9, with plans to eventually integrate its brand into the larger Five9 brand.

Overall, despite the quarter’s challenges, Five9 had a strong performance. It achieved a record-breaking $1 billion ARR run rate for the first time, with total subscription revenue growing by 17%. The company maintains a robust balance sheet with over $1 billion in cash. The recent organizational changes, including new leadership and headcount adjustments, are indicative of Five9’s maturation and aim to return the company to its pattern of strong performance and growth.