Five9, Inc. Q1 2026 10-Q Summary
Business Context and Reporting Period
This report covers the quarterly period ended March 31, 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 March 31, 2026, the company had over 3,000 customers.
Key Financial Metrics
| Metric | Q1 2026 | Q1 2025 |
|---|---|---|
| Revenue | $305.3 million | $279.7 million |
| Gross Profit | $170.5 million | $153.7 million |
| Gross Margin | 56% | 55% |
| Operating Income | $18.5 million | ($5.4 million) loss |
| Net Income | $18.4 million | $0.6 million |
| Diluted EPS | $0.21 | $0.01 |
| Operating Cash Flow | $63.9 million | $48.4 million |
| Cash & Marketable Investments | $723.9 million | $696.9 million |
| Convertible Senior Notes (2029) | $747.5 million principal | $747.5 million principal |
Material Changes vs. Prior Period
- Revenue Growth: Revenue increased 9% year-over-year, driven by larger customers and improved brand awareness.
- Profitability: The company returned to significant profitability, with Net Income rising from $0.6 million to $18.4 million. Operating income swung from a $5.4 million loss to an $18.5 million gain.
- Expense Reduction: Total operating expenses decreased 4% to $152.0 million.
- R&D: Decreased 3% due to lower stock-based compensation and increased capitalization of software costs.
- Sales & Marketing: Decreased 4% due to headcount reductions from the 2025 Restructuring Plan and lower stock-based compensation.
- G&A: Decreased 7% due to cost-reduction initiatives and lower stock-based compensation.
- Interest Expense: Decreased 24% to $3.1 million following the maturity of the 2025 convertible senior notes in June 2025.
- Share Repurchases: The company repurchased 1.28 million shares in Q1 2026, including the settlement of an Accelerated Share Repurchase (ASR) program and open market purchases.
Outlook, Risks, and Unusual Items
- Restructuring: The 2025 Reduction in Force plan (approx. 4% of workforce) was completed in 2025 with no additional costs expected in 2026.
- Subsequent Event - HQ Consolidation: On April 27, 2026, management initiated a plan to consolidate its San Ramon headquarters. The company expects to record an impairment loss of $8.0 to $9.0 million in Q2 2026 related to operating lease right-of-use assets and leasehold improvements.
- Share Repurchase Programs:
- 2025 Program: $90.0 million remaining as of March 31, 2026. The company announced an intent to enter a new ASR for this remaining amount in May 2026.
- 2026 Program: Board approved a new program on April 30, 2026, authorizing up to $200.0 million in repurchases with no expiration date.
- Legal Proceedings: A securities class action lawsuit remains pending. The court granted in part and denied in part the defendants' motion to dismiss in February 2026. The company cannot estimate potential losses.
- Risks: Management cites macroeconomic challenges (tariffs, inflation, interest rates), the need to replace subscription revenue declines with AI solution revenue, and cybersecurity risks as key uncertainties.
Investor Verification Checklist
- Verify the impact of the upcoming $8.0–$9.0 million impairment charge on Q2 2026 earnings and cash flow.
- Monitor the execution of the new $200 million share repurchase program and the timing of the ASR settlement for the remaining 2025 program funds.
- Assess the sustainability of the 9% revenue growth given the noted decrease in Annual Dollar-Based Retention Rate (105% vs 107% prior year).
- Review the status of the securities class action lawsuit for potential future legal costs or settlements.
- Confirm the trajectory of AI solution adoption to ensure it offsets any potential decline in traditional license-based subscription revenue.