Schwab Network: Market On Close with Mike Burkland

Right, that is correct, Oliver. 10 years ago, in fact, April 4th. We went back and celebrated the 10-year anniversary of our IPO, rang the bell at the NASDAQ. We had over 100 Five9ers that enjoyed the celebration with me. And it's been quite a journey. I've been here as CEO 16 years, 16 years as chairman and CEO. And it's been during that 16-year period we've gone from $10 million in revenue and we'll cross a billion this year. Amazing. And for those that have been along for the ride, I think many happy with the $53 stock. Those that got in during COVID, of course, have been getting hit.

Yeah, COVID was a huge tailwind for our business. Our growth rates went from, you know, in the 20s to in the 40s during COVID. We provide cloud software for contact centers. These are the center point, the interaction point for consumers to interact with very large brands. We count some of the largest brands in the world as core customers of Five9. And during COVID, their businesses were getting deluged with more online purchases and more digital commerce, and that led to a huge influx of traffic, both digital and voice and other omnichannel traffic into these contact centers that, quite frankly, are running their businesses on Five9. They needed more software to do what they do, and our growth rates accelerated dramatically. Since then, we've come off the backside of the pandemic and we've also gone into a tougher macro backdrop that has led to slower growth. But we've also put out guidance for the latter half of this year as well as the long term that our growth will accelerate. We're very confident in that. We've got a very significant backlog. In fact, we just announced our largest deal ever with a Fortune 50 financial institution, $50 million ARR subscription revenue ARR. That is once they fully ramp on our platform. So these are wonderful times, quite frankly, in our business, and we expect growth to accelerate here in the near future.

Yeah, well, by the way, all of our growth to date has been organic, not through acquisition, and it continues that way. And there's a huge organic growth opportunity. In fact, we reported 20% growth in subscription revenue, which is the key metric for us. That is about 80% of our total revenue. And we expect that to accelerate organically, not through acquisition. We'll do technology tuck-ins as we've always done, but we have a tremendous runway. Our market opportunity in contact center and AI in particular, and then the broader CX, is a massive market opportunity that is still only 25% cloud and still 75% on-premise. We make a livelihood of replacing those on-premise legacy solutions in the contact center like Avaya and Cisco, to name a couple.

Yeah, we have so much of an opportunity, Oliver, to create value for shareholders through growth in our business. Right, as I said, it's early days. We think of this as kind of we're probably in the second or third inning of a nine-inning ballgame, if you will. Again, a massive TAM, massive opportunity for us to create value for shareholders. And again, I've been here 16 years. We celebrated that 10-year IPO anniversary. What I told our employees was I can't wait for the next 10. It's going to be an exciting 10 years for us in micro right now.

Yeah, so as I think I mentioned, but I'll mention it again: 75% of the contact centers in the world are still running on these legacy on-premise contact center solutions that are long in the tooth, they're being end-of-lifed. And you know, we're all consumers, and we want a great personalized, effortless customer experience with that contact center of a brand that we're doing business with. And frankly, these legacy solutions cannot deliver that. In addition, they're not leveraging AI. We not only were a pioneer in cloud contact center software years ago, but now we're leading the charge in AI and automation. We made an acquisition about almost four years ago now. We bought the best-in-class IVA, intelligent virtual agent solution, and it was the cornerstone of our AI offerings. We've now added to that. We've got a portfolio of eight AI and automation solutions. So we're upselling AI to our customers. We're winning new logos because they're coming off of these large legacy on-premise solutions that are delivering a horrible customer experience. As consumers, we've all experienced that contact center. So you can understand the pain point. And these large brands are so focused on delivering a better customer experience, and they can finally do it with cloud and AI and data. And we're delivering all of those promises today.

Absolutely, Oliver. We took a strategy very early on, four-plus years ago, when it comes to AI strategy. And our strategy is very simple: we are engine-agnostic. In other words, we're leveraging whatever latest and greatest LLM OpenAI or Google or others come out with. We plug those engines into our platform. Think of us as the entire aircraft powered by an engine that might be the best latest and greatest LLM. We're not trying to build LLMs. We're leaving that up to the hyperscalers, and quite frankly, they're in a massive race to be the leaders in that. And we'll leverage their innovation on the engine. But what we are doing is coming out with products like what we just announced, GeniStudio, which is essentially a part of our platform that allows you to combine the best-in-class engine, whether that's again whatever LLM or even a small language model or a custom model, with contextual data. That's contextual data about the enterprise, the brand that we're selling our software to, and all of its products and solutions. But it's also contextual data about the end consumer in real time. And when we're able to combine the best engine with the right contextual data in real time, that delivers a personalized customer experience. And that's, in the end of the day, what all these large brands are trying to deliver to you and I as consumers every day: a personalized, effortless, seamless interaction. And that's just hard to deliver on these legacy platforms. And we're out ahead of the pack in terms of being able to help these large brands do it. That's why they choose Five9.

Thank you, Oliver. Appreciate that.