Five9, Inc. Q2 2026 10-Q Summary
Business Context and Reporting Period
This report covers the quarterly period ended June 30, 2026. Five9, Inc. is a provider of cloud software for contact centers, operating a single segment focused on its Intelligent CX Platform. The company is transitioning to an AI-native platform, leveraging its "Five9 Genius AI" suite. As of June 30, 2026, the company had over 3,000 customers.
Key Financial Metrics
| Metric | Q2 2026 (3 Months) | Q2 2025 (3 Months) | YTD 2026 (6 Months) | YTD 2025 (6 Months) |
|---|---|---|---|---|
| Revenue | $312.4 million | $283.3 million | $617.8 million | $563.0 million |
| Gross Profit | $166.7 million | $155.4 million | $337.3 million | $309.1 million |
| Gross Margin | 53.4% | 54.9% | 54.6% | 54.9% |
| Net Income | $3.4 million | $1.2 million | $21.8 million | $1.7 million |
| Adjusted EBITDA | $70.1 million | $68.0 million | $144.5 million | $120.7 million |
| Operating Cash Flow (YTD) | $106.0 million (2026) vs $83.4 million (2025) | |||
| Cash & Investments | $654.1 million (as of June 30, 2026) | |||
| Debt Outstanding | $747.5 million (2029 Convertible Senior Notes) |
Material Changes vs. Prior Period
- Revenue Growth: Revenue increased 10% year-over-year for both the quarter and the six-month period, driven by larger customers and improved brand awareness.
- Profitability: Net income improved significantly to $3.4 million for the quarter (from $1.2 million) and $21.8 million YTD (from $1.7 million), aided by lower interest expense following the maturity of 2025 convertible notes.
- Cost Structure: Cost of revenue increased 14% QoQ due to higher third-party costs and cloud infrastructure expenses, partially offset by reduced personnel costs. Sales and marketing expenses decreased 1% QoQ due to lower stock-based compensation.
- Impairment Charges: General and administrative expenses increased 18% QoQ, primarily due to an $8.4 million impairment charge related to the consolidation of the corporate headquarters (HQ Plan).
- Retention: Annual Dollar-Based Retention Rate decreased slightly to 106% (Subscription + Telecom) from 108% in the prior year, attributed to the ramp-up of a large new customer in 2024.
Guidance, Outlook, and Risks
- Share Repurchases: The company completed its $150 million 2025 Repurchase Program. A new $200 million 2026 Repurchase Program was approved with no expiration date; $200 million remains available.
- Restructuring: The company executed a 4% workforce reduction in 2025 (costs fully incurred) and initiated a headquarters consolidation in Q2 2026, resulting in the aforementioned impairment charge.
- Legal Proceedings: A putative securities class action lawsuit remains pending. The court granted in part and denied in part the company's motion to dismiss in February 2026. The company cannot estimate potential losses.
- Macro Risks: Management cites risks from global tariff increases, inflation, high interest rates, and geopolitical conflicts as potential headwinds to future revenue.
- AI Strategy: The company is heavily investing in AI solutions to replace potential decreases in subscription revenue from licenses with consumption-based AI revenue.
Investor Verification Checklist
- Impairment Details: Verify the assumptions used for the $8.4 million HQ impairment charge and the projected sublease income.
- Legal Exposure: Monitor the status of the securities class action lawsuit and any potential settlement costs.
- Retention Trends: Track the Annual Dollar-Based Retention Rate to ensure the decline is not indicative of broader customer churn.
- AI Monetization: Assess the growth rate of consumption-based AI revenue versus traditional license revenue.
- Debt Covenants: Review the terms of the 2029 Convertible Senior Notes, specifically conversion triggers and redemption dates.