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What changed in Five9, Inc.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Five9, Inc.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+428 added−393 removedSource: 10-K (2026-02-20) vs 10-K (2025-02-21)

Top changes in Five9, Inc.'s 2025 10-K

428 paragraphs added · 393 removed · 337 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

74 edited+15 added−11 removed78 unchanged
Biggest changeOur goal is to empower our employees to have a voice that’s heard and foster a community where they feel they belong. In our recruiting, we seek candidates 11 Table of Contents from a broad array of sources to enable us to access the best candidates and build a broad base of skill sets and experience.
Biggest changeIn our recruiting, we seek candidates from a wide array of sources to enable us to access the best candidates and build a broad base of skill sets and experience. 12 Table of Contents Women represented 32% of our worldwide employees and racial and ethnic minorities represented 36% of our U.S. employees as of December 31, 2025.
Our Intelligent CX Platform offers a comprehensive and rich collection of interaction capabilities including voice, email, SMS, chat, and more. By offering a collection of services to interact with customers in multiple ways, our customers benefit from closer engagement, improved brand loyalty, and higher repeat purchases by meeting customers where they are. • Improved customer experience.
Our Intelligent CX Platform offers a comprehensive and rich collection of interaction capabilities including voice, email, SMS, chat, social and more. By offering a collection of services to interact with customers in multiple ways, our customers benefit from closer engagement, improved brand loyalty, and higher repeat purchases by meeting customers where they are. • Improved customer experience.
In addition, Amazon.com, Inc., or Amazon, Twilio Inc., or Twilio, and most recently, Microsoft, have introduced solutions aimed at companies who wish to build their own contact centers and/or contact center components with developers. In addition, CRM vendors are increasingly offering features and functionality, including AI contact center solutions, that were traditionally provided by contact center service providers.
In addition, Amazon.com, Inc., or Amazon, Twilio Inc., or Twilio, and Microsoft, have introduced solutions aimed at companies who wish to build their own contact centers and/or contact center components with developers. In addition, CRM vendors are increasingly offering features and functionality, including AI contact center solutions, that were traditionally provided by contact center service providers.
Our pla tform delivers what we believe is industry-leading reliability utilizing public and private cloud technology; cybersecurity using a defense-in-depth approach; scalability to accommodate the requirements of larger customers; and legal and regulatory compliance features designed to assist our customers in complying with applicable laws, regulations and industry standards. • Proven, repeatable and scalable go-to-market model.
Our platform delivers what we believe is industry-leading reliability utilizing public and private cloud technology; cybersecurity using a defense-in-depth approach; scalability to accommodate the requirements of larger customers; and legal and regulatory compliance features designed to assist our customers in complying with applicable laws, regulations and industry standards. • Proven, repeatable and scalable go-to-market model.
In addition, we require our employees and independent contractors involved in development of intellectual property to enter into agreements acknowledging that all works, or other intellectual property generated or conceived by them on our behalf, are our property, and assigning to us any rights, including intellectual property rights, that they may claim or otherwise have in those works or property, to the extent allowable under applicable law.
In addition, we require our employees and independent contractors involved in development of intellectual property to enter into agreements acknowledging that all works, or other intellectual property generated or conceived by them on our 10 Table of Contents behalf, are our property, and assigning to us any rights, including intellectual property rights, that they may claim or otherwise have in those works or property, to the extent allowable under applicable law.
Our reliable, secure, and scalable Intelligent CX Platform, powered by Five9 Genius AI, delivers a comprehensive suite of easy-to-use applications that enable the breadth of customer service, sales, and marketing functions. We have become an established leader in the cloud contact center market with more than 3,000 customers.
Our reliable, secure, and scalable Intelligent CX Platform, powered by our Five9 Genius AI suite, delivers a comprehensive suite of easy-to-use applications that enable the breadth of customer service, sales, and marketing functions. We have become an established leader in the AI-powered CX market with more than 3,000 customers.
We believe that AI, and Generative AI in particular, will profoundly impact how businesses deliver experiences to their customers. Customers We have a large, diverse and global customer base comprised of more than 3,000 organizations as of December 31, 2024, with no single customer representing more than 10% of our revenues in 2024, 2023 or 2022.
We believe that AI, and Generative AI in particular, will continue to profoundly impact how businesses deliver experiences to their customers. Customers We have a large, diverse and global customer base comprised of more than 3,000 organizations as of December 31, 2025, with no single customer representing more than 10% of our revenues in 2025, 2024 or 2023.
This commitment involves the reporting to Scope 1, 2, and 3 emissions within the mandated reporting periods. Regulatory The following summarizes important, but not all, federal, state and foreign regulations that could impact our operations.
This commitment includes reporting to Scope 1, 2, and 3 emissions within the mandated reporting periods. Regulatory The following summarizes important, but not all, federal, state and foreign regulations that could impact our operations.
If we do not comply with current or future rules or regulations that apply to our business, we could be subject to substantial fines and penalties, we may have to restructure our service offerings, exit certain markets, accept lower margins or raise the price of our services, any of which could harm our business and results of operations.
If we do not comply with current or future rules or regulations that apply to our business, we could be subject to substantial fines and penalties, we may have to restructure our service offerings, exit certain markets, accept lower margins or raise the price of our services, any of which could harm our business 15 Table of Contents and results of operations.
In addition, our industry analyst, press and media outreach programs, and web site marketing initiatives are designed to build brand awareness and preference for our solution. We offer online self-service demos and instructional videos to help prospective customers learn about the capabilities and functionality of our cloud platform.
In addition, our industry analyst, press and media outreach programs, and web site marketing initiatives are designed to build brand awareness and preference for our solution. We offer online 8 Table of Contents self-service demos and instructional videos to help prospective customers learn about the capabilities and functionality of our cloud platform.
These services include application configuration, system integrations, custom development, AI consulting, and education 8 Table of Contents and training. Customers can either use our team for implementing our solution, perform these services themselves, engage one of our certified implementation partners, or engage their own third-party service provider.
These services include application configuration, system integrations, custom development, AI consulting, and education and training. Customers can either use our team for implementing our solution, perform these services themselves, engage one of our certified implementation partners, or engage their own third-party service provider.
Additionally, we believe our Genius AI suite provides efficiencies across our customers’ overall operations. • Compelling value proposition. We provide a unified cloud-based software platform for contact center operations, including software applications, technology infrastructure, maintenance, monitoring, storage, 6 Table of Contents security, customer support and upgrades, which enables our customers to simplify their technology infrastructure and streamline IT costs.
Additionally, we believe our Genius AI suite provides efficiencies across our customers’ overall operations. • Compelling value proposition. We provide a unified cloud-based software platform for contact center operations, including software applications, technology infrastructure, maintenance, monitoring, storage, security, customer support and upgrades, which enables our customers to simplify their technology infrastructure and streamline IT costs.
Our intelligent contact routing and self-service IVA, IVR, and AI Agent capabilities, including pre-built CRM and other integrations, and omnichannel engagement ensure that consumers have a great experience. New contacts are quickly routed to an appropriate agent.
Our intelligent contact routing and self-service IVA, IVR, and AI Agent capabilities, including pre-built CRM and other integrations, and omnichannel engagement are designed to ensure that consumers have a positive experience. New contacts are quickly routed to an appropriate agent.
Our solution provides organizations of all sizes with robust contact center functionality, scalability, flexibility and security required in the most sophisticated and distributed environments. Our solution is designed to provide the following key benefits to customers: • A complete omnichannel solution.
Our solution provides organizations of all sizes with robust contact center functionality, scalability, flexibility and security required in the most sophisticated and distributed environments. Our solution is designed to provide the following key benefits to customers: • A complete omni-channel solution.
A broad range of organizations use our solution to improve customer service and create customer loyalty. These capabilities are offered across a wide variety of engagement channels from chat and SMS to e-mail and voice. Consumers are able to engage using their channel of choice and customers are able to facilitate seamless experiences that benefit from digital transformation.
A broad range of organizations use our solution to improve customer service and create customer loyalty. These capabilities are offered across a wide variety of engagement channels from chat and SMS to e-mail and voice. Consumers are able to engage using their channel of choice and customers are able to facilitate seamless experiences.
Our Intelligent CX Platform matches each consumer interaction with an appropriate agent resource and delivers relevant consumer data to the agent in real-time through integrations with adjacent enterprise applications, 4 Table of Contents such as CRM software, to optimize the consumer experience and improve agent productivity.
Our Intelligent CX Platform matches each consumer interaction with an appropriate agent resource and delivers relevant consumer data to the agent in real-time through integrations with adjacent enterprise applications, such as CRM software, to optimize the consumer experience and improve agent productivity.
CRM and customer experience vendors also continue to partner with 9 Table of Contents contact center service providers to provide integrated solutions and may, in the future, acquire competitive contact center service providers. We also compete with new market entrants in AI that offer Generative AI solutions that compete as point products in the market.
CRM and customer experience vendors also continue to partner with contact center service providers to provide integrated solutions and may, in the future, acquire competitive contact center service providers. We also compete with new market entrants in AI that offer Generative AI solutions that compete as point products in the market.
As a result, telecommunications services are regulated at both the federal and state levels in the United States. We are classified as a telecommunications service provider for federal regulatory purposes.
As a result, telecommunications services are regulated at both the federal and state levels in the United States. Many of the services we provide are classified as a telecommunications service provider for federal regulatory purposes.
Comprised of our Intelligent CX Platform and automation capabilities, including Intelligent Virtual Agent, or IVA, Agent Assist, Workflow Automation, or WFA, Workforce Engagement Management, or WEM, AI Insights and AI Summaries, Revenue Execution, and our most recent AI capability, AI Agents, our solution allows simultaneous management and optimization of customer interactions across voice, chat, email, web, social media and mobile channels, either directly or through our application programming interfaces, or APIs.
Comprised of our Intelligent CX Platform and AI capabilities, including agentic AI agents, Agent Assist, Workflow Automation, or WFA, AI Insights, AI Summaries, Workforce Engagement Management, or WEM, and Revenue Execution, our solution allows simultaneous management and optimization of customer interactions across voice, chat, email, web, social media and mobile channels, either directly or through our application programming interfaces, or APIs.
We must comply with numerous federal regulations, including: • Telephone Consumer Protection Act of 1991, or TCPA, which regulates the use of automatic dialing equipment and pre-recorded messages to contact consumers, the Telemarketing Sales Rule and state telemarketing laws, which have similar obligations as to telemarketing activities; • the TRACED Act and corresponding regulations from the FCC, which require carriers to authenticate incoming calls using the STIR/SHAKEN caller ID framework and correspondingly compels providers of telecommunications services to implement capabilities to certify as authentic the traffic they provide to those carriers and to block transmission of certain calls; • CALEA, which requires telecommunications service providers to assist law enforcement in undertaking electronic surveillance; • enhanced 911 rules, KARI’s Law and RAY BAUM’s Act, which, in certain circumstances, require telecommunications service providers to ensure their users can directly dial 911 emergency services and, if technically feasible, automatically convey dispatchable location information with the call; • contributions to the USF, which requires that we pay a percentage of our revenues resulting from the provision of interstate and some international telecommunications services to support certain federal programs; • payment of annual FCC regulatory fees based on our interstate and international revenues; • The Communications and Video Accessibility Act and rules pertaining to access to our services by people with disabilities and contributions to the Telecommunications Relay Services fund; • FCC rules regarding Customer Proprietary Network Information, or CPNI, which require that we limit disclosure of certain information received from customers as a result of a service provider/customer relationship without customer approval, subject to certain exceptions; 13 Table of Contents • Federal Trade Commission Act and rules promulgated thereunder, which generally relate to avoiding unfair and deceptive trade practices, our advertising, use and deployment of certain AI-based services, and privacy practices; • The Health Information Portability and Accountability Act (or HIPAA) and rules promulgated thereunder, which generally relate to the privacy and security of certain health-related information; and • an evolving set of comprehensive state privacy laws that require compliance with privacy frameworks and include disclosure and permission-related obligations to individuals for whom we hold or process personal data.
We must comply with numerous federal and state regulations, including: • Telephone Consumer Protection Act of 1991, or TCPA, which regulates the use of automatic dialing equipment and pre-recorded messages to contact consumers, the Telemarketing Sales Rule and state telemarketing laws, which have similar obligations as to telemarketing activities; • the TRACED Act and corresponding regulations from the FCC, which require carriers to authenticate incoming calls using the STIR/SHAKEN caller ID framework and correspondingly compels providers of telecommunications services to implement capabilities to certify as authentic the traffic they provide to those carriers and to block transmission of certain calls; • CALEA, which requires telecommunications service providers to assist law enforcement in undertaking electronic surveillance; • enhanced 911 rules, KARI’s Law and RAY BAUM’s Act, which, in certain circumstances, require telecommunications service providers to ensure their users can directly dial 911 emergency services and, if technically feasible, automatically convey dispatchable location information with the call; • contributions to the USF, which requires that we pay a percentage of our revenues resulting from the provision of interstate and some international telecommunications services to support certain federal programs; • payment of annual FCC regulatory fees based on our interstate and international revenues; • The Communications and Video Accessibility Act and rules pertaining to access to our services by people with disabilities and contributions to the Telecommunications Relay Services fund; • FCC rules regarding Customer Proprietary Network Information, or CPNI, which require that we implement adequate safeguards against unlawful access to CPNI, and limit disclosure of certain information received from customers as a result of a service provider/customer relationship without customer approval, subject to certain exceptions; • Federal Trade Commission Act and rules promulgated thereunder, which generally relate to avoiding unfair and deceptive trade practices, our advertising, use and deployment of certain AI-based services, and privacy practices; • The Health Information Portability and Accountability Act (or HIPAA) and rules promulgated thereunder, which generally relate to the privacy and security of certain health-related information; and 14 Table of Contents • The California Consumer Privacy Act (or CCPA) and comprehensive state privacy laws in other U.S. states that require compliance with privacy frameworks and include disclosure and permission-related obligations with respect to our collection, processing, and disclosure of personal data.
Since our business is regulated by the FCC, we are subject to existing or potential FCC regulations relating to privacy, disability access, Enhanced 911 access, access to and porting of numbers, automatic number dialing, contributions to the federal Universal Service Fund and related funds, or USF, and other requirements.
Since our business is regulated by the FCC and some state public utility commissions, we are subject to existing or potential state and federal regulations relating to privacy, disability access, Enhanced 911 access, access to and porting of numbers, automatic number dialing, contributions to the federal Universal Service Fund and related funds, or USF, and other requirements.
Our recurring revenue model combined with our Annual Dollar-Based Retention Rate, which was 108% as of December 31, 2024, have enhanced our ability to forecast our financial performance and plan future investments.
Our recurring revenue model combined with our Annual Dollar-Based Retention Rate, which was 105% as of December 31, 2025, have enhanced our ability to forecast our financial performance and plan future investments.
By investing in our people in this way, we not only enhance individual well-being but also drive organizational performance and stakeholder value, securing our position as a leader in our industry. Our total rewards system encompasses not just competitive cash compensation, but a holistic package that addresses the diverse needs of our workforce.
By investing in our people in this way, we not only enhance individual well-being but also drive organizational performance and stakeholder value. Our total rewards system encompasses not just competitive cash compensation, but a holistic package that addresses the needs of our workforce.
This powerful team-first culture enables us to overcome obstacles and win year after year, while enjoying the journey together. Our values are woven throughout the entire employee lifecycle and used in the interview process to ensure we hire candidates that have personal values that align with ours.
This powerful team-first culture enables us to overcome obstacles and win year after year, while enjoying the journey together. 11 Table of Contents Our Five9 values are woven throughout the entire employee lifecycle and used in the interview process to ensure we hire candidates who have values that align with ours.
To reduce waste, we use source compostable/recyclable kitchen products, centralized waste collection with an emphasis on recycling, established an E-waste program, implemented software tools to minimize printing waste and reduce equipment and toner purchases, and expanded our battery recycling program to include work-related and personal battery recycling. We are also committed to complying with California’s climate legislation, SB-253 and SB-261.
To reduce waste, we use source compostable/recyclable kitchen products, centralized waste collection with an emphasis on recycling, established an E-waste program, implemented software tools to minimize printing waste and reduce equipment and toner purchases, and expanded our battery recycling program to include work-related and personal battery recycling. 13 Table of Contents We are also committed to complying with California’s evolving climate legislation.
Seasonality We believe that there are seasonal factors that cause our revenues in the first half of a year to be lower than our revenues in the second half of a year. During 2024, 2023 and 2022, 52%, 52%, and 52% of our total revenues 10 Table of Contents were generated in the second half of each year.
Seasonality We believe that there are seasonal factors that cause our revenues in the first half of a year to be lower than our revenues in the second half of a year. During 2025, 2024 and 2023, 51%, 52%, and 52% of our total revenues were generated in the second half of each year.
Our solution also includes revenue execution capabilities, including outbound campaigns, compliance and out-reach solutions through our acquisition of Acqueon Inc., or Acqueon, in 2024. Our solution provides the following advantages: • Rapid implementation, seamless updates and pre-built integrations. Our solution is designed to be deployed quickly and seamlessly with minimal disruption to a customer’s operations.
Our solution also includes revenue execution capabilities, including outbound campaigns, compliance and out-reach solutions. Our solution provides the following advantages: • Rapid implementation, seamless updates and pre-built integrations. Our solution is designed to be deployed quickly and seamlessly with minimal disruption to a customer’s operations.
Our corporate headquarters offers a transportation program to cut down on emissions. We have made strides in reducing energy consumption by upgrading our lighting system and installing motion sensors for lighting and convenience electrical outlets.
Our corporate headquarters offers a transportation program in effort to reduce emissions. In addition, we have made strides in reducing energy consumption by upgrading our lighting system and installing motion sensors for lighting and convenience electrical outlets.
Environmental Sustainability 12 Table of Contents We are committed to reducing workplace-related resource consumption through our site selection, facilities design and energy procurement practices through our landlords, to ensure our corporate responsibility goals are achieved. We participate in building sustainability by occupying LEED certified and 5-Star NABERS Energy Rated multi-tenant buildings.
We are an equal opportunity employer committed to inclusion. Environmental Sustainability We are committed to reducing workplace-related resource consumption through our site selection, facilities design and energy procurement practices through our landlords, to ensure our corporate responsibility goals are achieved. We participate in building sustainability by occupying LEED certified and 5-Star NABERS Energy Rated multi-tenant buildings.
Furthermore, our AI enabled automation features are designed to enable agent efficiency and cost reductions, including through the utilization of LLMs and natural language processing, or NLP. • Enhanced end-to-end visibility.
Furthermore, our Genius AI suite of solutions are designed to enable agent efficiency and cost reductions, including through the utilization of LLMs and natural language processing, or NLP. • Enhanced end-to-end visibility.
Our consultative approach to identifying business opportunities for enhancement and growth, leveraging Generative AI is helping companies take advantage of these new technologies to improve CX and increase customer satisfaction.
Our consultative approach to identifying business opportunities for enhancement and growth, leveraging our Genius AI suite of solutions is helping companies take advantage of these advanced technologies to improve CX and increase customer satisfaction.
As of December 31, 2024, outside the U.S. we also had 27 trademark registrations across various countries, two pending trademark applications, five issued patents and three pending international national phase patent applications. There are no Patent Cooperation Treaty, or PCT, patent applications. The expiration dates of our issued patents range from 2025 to 2043.
As of December 31, 2025, outside the U.S. we also had 27 trademark registrations across various countries, 2 pending trademark applications, 5 issued patents and 3 pending international national phase patent applications. There are no Patent Cooperation Treaty, or PCT, patent applications. The expiration dates of our issued patents range from 2030 to 2044.
Generative AI technologies are also used in our AI Insights product, which gives customers an understanding of the reasons for customer calls, provides customer sentiment, and call resolution status, with little up-front configuration or setup.
Generative AI technologies are also used in our AI Insights product, which gives customers an understanding of the reasons for customer calls, provides customer sentiment, and call resolution status, with little up-front configuration or setup. Our solution empowers our customers to harness the value of these two market trends.
Our complete end-to-end capabilities include IVA, Interactive Voice Response, or IVR, WFA, WEM, Agent Assist, AI Insights, AI Summaries, Revenue Execution, AI Knowledge, AI Agents, Automatic Call/Contact Distribution, or ACD, with skills-based routing, reporting, dashboards, agent and supervisor desktops, outbound dialer, pre-built 5 Table of Contents third-party integrations, quality management, speech and desktop analytics, customer surveys and more.
Our complete end-to-end, omni-channel capabilities include AI Agents, Agent Assist, WFA, AI Insights, AI Summaries, AI Knowledge, WEM, Automatic Call/Contact Distribution, or ACD, with skills-based routing, 5 Table of Contents reporting, dashboards, agent and supervisor desktops, outbound dialer, pre-built third-party integrations, quality management, speech and desktop analytics, customer surveys and engagement through chat, email, social and web.
Competition The market for contact center software is fragmented, highly competitive and evolving rapidly. The proliferation of different channels of engagement is driving changes in contact center technology, as customers expect companies to give them the option of seamless communication across all channels without losing the overall context of customer interactions according to their preferences and needs.
The proliferation of different channels of engagement is driving changes in contact center technology, as customers 9 Table of Contents expect companies to give them the option of seamless communication across all channels without losing the overall context of customer interactions according to their preferences and needs.
We have built a robust ecosystem of partners including a variety of leading CRM software vendors such as Microsoft, Oracle, Salesforce, ServiceNow and Zendesk; WEM vendors such as Calabrio, Inc., or Calabrio, and Verint Systems Inc., or Verint; unified communications vendors such as Microsoft Teams, RingCentral and Zoom; system integrators such as Accenture PLC, Deloitte Consulting LLP, IBM, Kyndryl, Inc., PwC LLP and Slalom Consulting, LLC; technology solution distributors such as Avant, LLC, Intelysis and Telarus, value-added resellers such as AT&T Inc. and British Telecom, CDW Corporation, NWN Carousel, Presidio Networked Solutions Group, LLC, and Worldwide Technologies; independent software vendors such as Cresta AI, Pindrop, Blackchair, Level AI, Calabrio and Verint; and telephony providers.
We have built a robust ecosystem of partners including a variety of leading CRM software vendors such as Microsoft, Oracle, Salesforce, ServiceNow and Zendesk; WEM vendors such as Calabrio, Inc., or Calabrio, and Verint Systems Inc., or Verint; unified communications vendors such as Microsoft Teams, RingCentral and Zoom; system integrators such as Accenture PLC, Deloitte Consulting LLP, Ernst & Young, IBM, Kyndryl, Inc., PwC LLP and Slalom Consulting, LLC; technology solution distributors such as Avant, LLC, Intelysis, Sandler Partners, Telarus, Amplix and Bridgepoint Technologies; value-added resellers such as AT&T Inc., Babble Cloud, British Telecom, Connect Managed Services (UK) Limited, CDW Corporation, NWN Carousel, Opus Technology and TELUS Communications; software vendors such as Cresta AI, Pindrop, Blackchair, Level AI, Calabrio and its recently acquired subsidiary, Verint; and telephony providers.
Women and ethnic minorities each represented 23% and 23%, respectively, of our executive leadership team and 30% and 40%, respectively, of our Board of Directors, or Board, as of December 31, 2024.
Women and ethnic minorities each represented 13% and 38%, respectively, of our executive leadership team and 30% and 50%, respectively, of our Board of Directors, or Board, as of December 31, 2025.
Natural language voice and chat-bots, using Generative AI, provide speech recognition, intent detection, and text-to-speech technologies to quickly and effectively handle mundane contact center tasks, allowing agents to focus on more complex issues.
Our AI Summaries capability uses Generative AI to automatically summarize a call, reducing after-call work time. Natural language voice and chat-bots, using Generative AI, provide speech recognition, intent detection, and text-to-speech technologies to quickly and effectively handle mundane contact center tasks, allowing agents to focus on more complex issues.
This includes healthcare benefits, mental health benefits to employees and their dependents, financial and physical well-being programs, parental leave, fertility reimbursement, retirement plans, performance bonuses, equity awards, and work-life balance initiatives. Our total rewards strategy is dynamic and responsive to the changing marketplace and workforce demographics.
This includes healthcare benefits, mental health benefits to employees and their dependents, financial and physical well-being programs, parental leave, fertility programs, retirement plans, performance bonuses, equity awards, and work-life balance initiatives. Our total rewards strategy is designed to be responsive to market conditions and evolving business needs.
We regularly benchmark our offerings against prevailing industry practices to ensure we remain competitive and appealing as an employer. Additionally, we embrace a culture of continuous feedback, allowing us to adapt and refine our rewards in alignment with employee needs and business objectives.
We regularly benchmark our offerings against prevailing industry practices to ensure we remain competitive and appealing as an employer. Additionally, we embrace a culture of continuous feedback, allowing us to adapt and refine our rewards as appropriate to support retention, motivation, and the execution of our business strategy.
We have achieved significant growth in recent periods. For the years ended December 31, 2024, 2023 and 2022, our revenue was $1,041.9 million, $910.5 million and $778.8 million, respectively, representing year-over-year growth of 14% and 17%, respectively.
Our revenue has consistently grown. For the years ended December 31, 2025, 2024 and 2023, our revenue was $1,149.1 million, $1,041.9 million and $910.5 million, respectively, representing year-over-year growth of 10% and 14%, respectively. We have achieved significant improvement in our net income (losses) in recent periods.
Inclusion and Culture At Five9, we foster an inclusive environment by creating a culture where our employees can be their authentic selves. We integrate our core values of honesty and respect and lead with transparency and inclusivity. We are committed to building belonging in our workplace and society at large.
Inclusion and Culture At Five9, we foster an inclusive environment by creating a culture where our employees can be their authentic selves. We endeavor to integrate our core values of honesty and respect in how we engage with one another, encourage leading with transparency and inclusivity and are committed to building a workplace culture where every employee feels they belong.
We also host some of our voice services on the public cloud in Europe, Asia, South America, and Australia. Our infrastructure, including our third-party co-location facilities, is designed to support real-time critical telecommunications, applications and operational support systems. Our infrastructure is built with redundant, fault-tolerant components divided into distinct security zones forming protective layers for our applications and customer data.
Our infrastructure, including our third-party co-location facilities, is designed to support real-time critical telecommunications, applications and operational support systems. Our infrastructure is built with redundant, fault-tolerant components divided into distinct security zones forming protective layers for our applications and customer data.
If we do not comply with FCC rules and regulations, we could be subject to FCC enforcement actions, fines and possibly restrictions on our ability to operate or offer certain of our services.
There is uncertainty on how other services that we provide may become subject to FCC or state public utilities commission regulations. If we do not comply with FCC rules and regulations, we could be subject to FCC enforcement actions, fines and possibly restrictions on our ability to operate or offer certain of our services.
As of December 31, 2024, our intellectual property portfolio included nine registered U.S. trademarks, three pending U.S. trademark applications, 23 issued U.S. patents, seven pending U.S. patent applications and one registered U.S. copyright.
As of December 31, 2025, our intellectual property portfolio included 9 registered U.S. trademarks, 2 pending U.S. trademark applications, 26 issued U.S. patents, 4 pending U.S. patent applications and 1 registered U.S. copyright.
Workplace Practices and Policies We are committed to providing a workplace free of harassment or discrimination based on race, color, religion, sex, sexual orientation, gender identity, national origin, disability, veteran status, caste or other legally protected characteristic. We are an equal opportunity employer committed to inclusion.
Through these investments, we endeavor to support a skilled and high-performing workforce aligned to our long-term business objective Workplace Practices and Policies We are committed to providing a workplace free of harassment or discrimination based on race, color, religion, sex, sexual orientation, gender identity, national origin, disability, veteran status, caste or other legally protected characteristic.
Our core research and development center is based in our San Ramon, California headquarters, with additional engineers located in Australia, Portugal, and India, which international locations allow us to benefit from lower cost and highly skilled software developers. In January 2023, we opened our new European Research and Development Hub in Porto, Portugal, which serves as our European engineering headquarters.
Our core research and development center is based in our San Ramon, California headquarters, with additional engineers located in Australia, Portugal, and India, which international locations allow us to benefit from lower cost and highly skilled software developers. Our engineering team has deep software and telecommunications skills, and works closely with our sales team to identify our customers’ product requirements.
As of December 31, 2024, we had 3,073 full-time employees. 43% of our employees are in various cost of revenue functions, 25% in research and development, 20% in sales and marketing and 12% in general and administrative. Our employee turnover for the last three years has averaged 14.7%.
As of December 31, 2025, we had 2,910 full-time employees. 43% of our employees are in various cost of revenue functions, 25% in research and development, 20% in sales and marketing and 12% in general and administrative.
Our investment in research and development has driven our growth and enabled us to deliver an Intelligent CX Platform with the capabilities and functionality to power the most complex contact centers. We strive to be a thought leader in our industry, identifying and developing cloud capabilities to transform traditional contact center operations into customer experience centers of excellence.
Since our inception, we have been an innovator of intelligent cloud contact center software. Our investment in research and development has driven our growth and enabled us to deliver an Intelligent CX Platform with the capabilities and functionality to power the most complex contact centers.
Third is advancements in artificial intelligence, or AI. AI is a significant advancement to improve customer experience across self-service, agent assistance, managerial insights, and workflow automation use cases. This often provides significant operational efficiencies and improved business insights and intelligence.
AI is a significant advancement to improve customer experience across self-service, agent assistance, managerial insights, and workflow automation use cases. This often provides significant operational efficiencies and improved business insights and intelligence. The recent advances in Generative AI, including Large Language Models, or LLMs, enable new capabilities in contact centers that were not previously possible.
Our values are instrumental in the semi-annual employee performance self-reflection cycle, and we request that employees share how they have lived our values. In addition, we regularly celebrate employees that live our values through recognition and rewards.
These values are a key element of our semi-annual employee performance self-reflection cycle, where our leaders request that employees share how they have lived our values. In addition, we periodically celebrate employees that live our values through recognition and rewards. We introduce new employees to our values during new hire orientation and our values are visible in employee resource pages.
Additionally, our framework is subject to annual independent verification audits performed by qualified and experienced external third parties who issue to us SOC 2 Type 2, PCI AOC, and HIPAA HiTech attestation reports, and who certify us to the ISO 27001:2013 Information Security Management System standard. 14 Table of Contents The legislative and regulatory scheme, as well as the information governance programs, relevant to telecommunications service providers and other solutions we provide will continue to evolve and can be expected to change the competitive environment for these services.
Additionally, our framework is subject to annual independent verification audits performed by qualified and experienced external third parties who issue to us SOC 2 Type 2, PCI AOC, and HIPAA HiTech attestation reports, and who certify us to the ISO 27001:2013 Information Security Management System standard.
We engage with our customers through a highly scalable and metrics-driven sales and marketing organization that effectively identifies, qualifies and closes sales opportunities. The deep domain expertise of our field sales team is instrumental in selling to larger opportunities, and our highly efficient telesales model enables us to cost-effectively identify, qualify and close a high volume of smaller opportunities.
The deep domain expertise of our field sales team is instrumental in selling to larger opportunities, and our highly efficient telesales model enables us to cost-effectively identify, qualify and close a high volume of smaller opportunities. Our ecosystem of technology, system integrator and channel partners increases awareness of our solution and helps generate new sales opportunities.
We believe that all components can be upgraded, expanded or replaced with minimal or no interruption in service. We currently deliver our services from third-party co-location data center facilities located in the United States, the United Kingdom, Europe and Australia and from public cloud locations in Canada, the United Kingdom, Europe and India.
We currently deliver our services from third-party co-location data center facilities located in the United States, the United Kingdom, Europe and Australia and from public cloud locations in Canada, the United Kingdom, Europe and India. We also host some of our voice services on the public cloud in Europe, Asia, South America, and Australia.
We incurred net losses of $12.8 million, $81.8 million and $94.7 million for the years ended December 31, 2024, 2023 and 2022, respectively, primarily as a result of increased investment in our growth, along with higher stock-based compensation. As of December 31, 2024, 2023 and 2022, our total assets were $2,051.2 million, $1,494.6 million and $1,244.5 million, respectively.
We recorded net income (losses) of $39.4 million, $(12.8) million and $(81.8) million for the years ended December 31, 2025, 2024 and 2023. As of December 31, 2025, 2024 and 2023, our total assets were $1,790.1 million, $2,051.2 million and $1,494.6 million, respectively.
We have developed a proven, high-velocity, metrics-driven sales and marketing strategy, designed to effectively identify, qualify and close sales opportunities.
Our sales model consists of a field sales team that sells our solution into mid-size, enterprise, and Fortune 1000 companies and a telesales team that sells our solution into smaller companies. We have developed a proven, high-velocity, metrics-driven sales and marketing strategy, designed to effectively identify, qualify and close sales opportunities.
We believe this partner ecosystem has enabled us to increase our brand awareness and enhance the functionality and value of our solution for our customers. • Focus on innovation and thought leadership . Since our inception, we have been an innovator of intelligent cloud contact center software.
We believe this partner ecosystem has enabled us to increase our brand awareness and enhance the functionality and value of our solution for our customers. • Enabling Network and Telecommunications Services .
We regularly collect feedback to better understand and improve the employee experience and identify opportunities to continually strengthen our culture. 82% of our employees participated in our most recent employee survey in 2024.
We regularly gather employee feedback to better understand the employee experience and identify opportunities to continuously strengthen our culture.
Our ecosystem of technology, system integrator and channel partners increases awareness of our solution and helps generate new sales opportunities. We believe our go-to-market model gives us an efficient and effective means of targeting organizations of all sizes. • Established market presence and a large, diverse customer base.
We believe our go-to-market model gives us an efficient and effective means of targeting organizations of all sizes. • Established market presence and a large, diverse customer base. We have a large, diverse customer base of over 3,000 organizations across multiple industries. We believe our customers view us as a key strategic solution provider.
We have also commenced investments in a dedicated U.S.-based data center deployment to support Federal Risk and Authorization Management Program, or FedRAMP, customers. • Customer success with our consultative approach. Our high-touch engagement model for larger implementations accelerates agent activation and targets desired business outcomes by leveraging a proven lifecycle approach including detailed discovery, design, testing, training and optimization.
We also have investments in a dedicated U.S.-based data center deployment to enable us to support any Federal Risk and Authorization Management Program, or FedRAMP, customers in the future. • Customer success with our consultative approach.
Unlike legacy on-premises contact center systems, our solution requires limited up-front investment, can be rapidly deployed, and is maintained by us in the cloud. Our sales model consists of a field sales team that sells our solution into mid-size, enterprise, and Fortune 1000 companies and a telesales team that sells our solution into smaller companies.
Unlike legacy on-premises contact center systems, our solution requires limited up-front investment, can be rapidly deployed, and is maintained by us in the cloud. 4 Table of Contents The contact center is the system of record for interactions with full conversation history.
Our AI Agents product redefines virtual agents, with the power of Generative AI, to deliver a hyper-personalized customer experience, unlocking additional efficiencies with automation, and is easy and quick to deploy. Our solution empowers our customers to harness the value of these three market trends.
Our Genius AI suite is a comprehensive portfolio of AI solutions that uses Generative AI to power agentic CX. For instance, our agentic AI Agents solution redefines virtual agents, with the power of Generative AI, to deliver a hyper-personalized customer experience, unlocking additional efficiencies with automation.
Our engineering team has deep software and telecommunications skills, and works closely with our sales team to identify our customers’ product requirements. In addition, continuous interactions with our partners enable our engineers to enhance the usability and performance of our platform and its integration with best-in-class CRM and other business applications and telephony technologies.
In addition, continuous interactions with our partners enable our engineers to enhance the usability and performance of our platform and its integration with best-in-class CRM and other business applications and telephony technologies. Technology and Operations Our highly reliable, secure, compliant, and scalable cloud platform is the result of our extensive research, development, customer engagement and operational experience.
Through the use of proprietary tools and processes that have been refined over thousands of customers, we can also efficiently meet the needs of our smaller customers.
Our high-touch engagement model for larger implementations accelerates agent activation and targets desired business outcomes by leveraging a proven lifecycle approach including detailed discovery, design, testing, training and optimization. Through the use of proprietary tools and processes that have been refined over thousands of customers, we can also efficiently meet the needs of our smaller customers.
We have a large, diverse customer base of over 3,000 organizations across multiple industries. We believe our customers view us as a key strategic solution provider. The performance, reliability, ease-of-use and comprehensive nature of our solution has resulted in high customer retention. 7 Table of Contents • Extensive partner ecosystem.
The performance, reliability, ease-of-use and comprehensive nature of our solution has resulted in high customer retention. • Extensive partner ecosystem.
Our acquisition of Aceyus, Inc., or Aceyus, enables us to connect disparate reporting and intelligence data sources, and synthesize them for use across different systems. The combination of Five9 reporting, Five9 Analytics, and Aceyus VUE provides an organization-wide view of customer engagement performance and allows customers to quickly address changing circumstances. • Greater operational efficiency.
In addition, the combination of our reporting and analytic solutions enable us to connect disparate reporting and intelligence data sources, providing an organization-wide view of customer engagement performance and allowing customers to quickly address changing circumstances. • Global voice & telecommunications infrastructure.
We believe our ability to combine software, including artificial intelligence, or AI, solutions, with telephony into a single unified platform that is delivered in the cloud creates a significant advantage. We believe there are three key industry trends driving growth in the cloud contact center market.
We believe our end-to-end, AI-powered CX platform creates a significant advantage by orchestrating interactions across all channels throughout the customer journey. We believe there are two key industry trends driving growth in the cloud contact center market.
Total Rewards Philosophy Our total rewards philosophy is a comprehensive approach designed to attract, engage, and retain the best talent in our industry by providing a total rewards package that is at or above market rates and, in cases where business demands are unique, we may lead the competitive market.
Total Rewards Philosophy Our total rewards philosophy is a comprehensive approach designed to enable us to attract, engage, and retain talent in our industry by offering a differentiated and competitive overall employee value proposition.
Technology and Operations Our highly reliable, secure, compliant, and scalable cloud platform is the result of our extensive research, development, customer engagement and operational experience. Our platform is comprised of in-house developed intellectual property, open source products and commercially available hardware and software. Our platform is designed to be redundant.
Our platform is comprised of in-house developed intellectual property, open source products and commercially available hardware and software. Our platform is designed to be redundant. We believe that all components can be upgraded, expanded or replaced with minimal or no interruption in service.
It is not possible to predict how such evolution and changes will affect our business or our industry.
The legislative and regulatory scheme, as well as the information governance programs, relevant to telecommunications service providers and other solutions we provide will continue to evolve and can be expected to change the competitive environment for these services. It is not possible to predict how such evolution and changes will affect our business or our industry.
Talent Development Talent development is a pivotal element of our organizational strategy and is essential for maintaining our competitive advantage in a dynamic global market. We are deeply committed to the growth of our employees, as evidenced by our multifaceted talent development programs.
Talent Development Talent development is a core component of our talent strategy to be competitive in a dynamic global market. We invest in employee growth through a range of talent development programs designed to build critical skills and leadership capabilities.
As a result, cloud contact center software solutions are continuing to replace legacy on-premises contact center systems. Second is digital transformation. End user consumers can easily and quickly switch brands after experiencing poor customer service.
As a result, cloud contact center software solutions are continuing to replace legacy on-premises contact center systems. These cloud contact center systems provide organizations with the agility to adapt to rapidly evolving customer demands and leverage innovative functionalities to improve engagement. Second is advancements in artificial intelligence, or AI.
This philosophy is rooted in our understanding that our employees are the cornerstone of our success and that their well-being and satisfaction are paramount to our sustained growth and market leadership. Central to our philosophy is the principle of equity and inclusivity. We strive to ensure that our rewards system is fair and transparent.
We believe our employees are central to our performance and long-term success, and we seek to align our total rewards programs with our business strategy, operating priorities, and evolving workforce needs. Central to our philosophy is the principle of equitable compensation. We strive to ensure that our rewards system is fair, consistent, and transparent.
Our Leadership Principles guide the cultivation of a forward-thinking and agile leadership pipeline at all levels within our organization. Leadership Principles inform our Talent Acquisition, Learning and Development and Performance Management practices to ensure we identify, grow and develop the right leadership skills for the future.
Our Leadership Principles guide Talent Acquisition, Learning and Development, and Performance Management practices, supporting the identification and development of leadership capabilities at all levels. Talent review processes focus on identifying high-performing and high-potential employees.
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ITEM 1. Business Overview Five9 is a leading provider of intelligent cloud software for contact centers.
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ITEM 1. Business Overview Five9 is a leading provider of intelligent customer experience, or CX, platform for enterprise contact centers. With a foundation in our cloud-native solution, Five9 is now evolving into an AI-native CX platform, empowering enterprises to scale seamlessly, innovate faster, and deliver enhanced customer experiences as the market opportunity continues to expand.
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We were “born in the cloud,” and since our inception, we have focused on delivering our platform in the cloud and are disrupting a large market by replacing legacy on-premises contact center systems and working with newer companies by starting their contact center journey in the cloud.
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Our platform serves as a real-time orchestration engine for every customer interaction across all channels, whether it is with a human agent or an AI agent. As a result, our platform is designed to deliver a seamless collaboration between human agents and AI agents, where each interaction strengthens the next.
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Contact centers are vital hubs of interaction between organizations and their customers and are, therefore, essential to delivering successful customer service, sales, and marketing strategies. Our mission is to empower organizations to transform their contact centers into customer experience centers of excellence, while improving business agility, customer satisfaction, and significantly lowering the cost and complexity of their operations.
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This continuous learning loop compounds over time, creating a powerful data flywheel that drives higher performance, accuracy, and personalization for every customer engagement. We believe this is the structural advantage of our end-to-end AI-powered CX platform.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeRisk Factors Summary The following is a summary of the principal risks that could adversely affect our business, financial condition, results of operations, and future prospects. • Adverse economic conditions, including the impact of macroeconomic challenges, including continued inflation, uncertainty regarding consumer spending, high interest rates, fluctuations in currency rates, the impact of the Russia-Ukraine conflict, the impact of conflicts in the Middle East, and other factors, may continue to harm our business. • If we are unable to attract new customers or sell additional services and functionality to our existing customers, our revenue and revenue growth will be harmed. • If our existing customers terminate their subscriptions or reduce their subscriptions and related usage, or fail to grow subscriptions at the rate they have in the past or that we might expect, our revenues and gross margins will be harmed, and we will be required to spend more money to grow our customer base. • Because a significant percentage of our revenue is derived from existing customers, downturns or upturns in new sales will not be immediately reflected in our operating results and may be difficult to discern. 15 Table of Contents • If we fail to manage our technical operations infrastructure, our existing customers may experience service outages, our new customers may experience delays in the deployment of our solution and we could be subject to, among other things, claims for credits or damages. • As AI solutions will likely perform an increasing proportion of contact center interactions, if we are unable to replace decreases in subscription revenue from licenses with revenue from the sale of additional AI solutions, our revenue, results of operations and business will be harmed; • Further development of our AI solutions may not be successful and may result in reputational harm and our future operating results could be materially harmed. • We have established, and are continuing to increase, our network of technology solution distributors and resellers to sell our solution; our failure to effectively develop, manage, and maintain this network could materially harm our revenues. • Our quarterly and annual results may fluctuate significantly, including as a result of the timing and success of new product and feature introductions by us, may not fully reflect the underlying performance of our business and may result in decreases in the price of our common stock. • If we are unable to attract and retain highly skilled leaders and other employees, our business and results of operations may be adversely affected. • Our historical growth may not be indicative of our future growth, and even if we continue to grow rapidly, we may fail to manage our growth effectively. • Failure to adequately retain and expand our sales force will impede our growth. • The AI technology and features incorporated into our solution include new and evolving technologies that may present both legal and business risks. • The use of AI by our workforce may present risks to our business. • The contact center software solutions market is subject to rapid technological change, and we must develop and sell incremental and new solutions in order to maintain and grow our business. • Our growth depends in part on the success of our strategic relationships with third parties and our failure to successfully maintain, grow and manage these relationships could harm our business. • The markets in which we participate involve a high number of competitors that is continuing to increase, and if we do not compete effectively, our operating results could be harmed. • We continue to expand our international operations, which exposes us to significant macroeconomic and other risks. • Security breaches, cybersecurity incidents, and improper access to, use of, or disclosure of our data or our customers’ data, or other cyber-attacks on our systems, could result in litigation and regulatory risk, harm our reputation, our business or financial results. • We may acquire other companies, or technologies or be the target of strategic transactions, or be impacted by transactions by other companies, which could divert our management’s attention, result in additional dilution to our stockholders or use a significant amount of our cash resources and otherwise disrupt our operations and harm our operating results. • We sell our solution to larger organizations that require longer sales and implementation cycles and often demand more configuration and integration services or customized features and functions that we may not offer, any of which could delay or prevent these sales and harm our growth rates, business and operating results. • We rely on third-party telecommunications and internet service providers to provide our customers and their customers with telecommunication services and connectivity to our cloud contact center software and any failure by these service providers to provide reliable services could cause us to lose customers and subject us to claims for credits or damages, among other things. • We have a history of losses and we may be unable to achieve or sustain profitability. • Our stock price has been volatile, may continue to be volatile and may decline, including due to factors beyond our control. • We may not be able to secure additional financing on favorable terms, or at all, to meet our future capital needs. • Failure to comply with laws and regulations could harm our business and our reputation. • We may not have sufficient cash to service our convertible senior notes and repay such notes, if required. 16 Table of Contents Risks Related to Our Financial Results Our quarterly and annual results may fluctuate significantly, may not fully reflect the underlying performance of our business and may result in decreases in the price of our common stock.
Biggest changeRisk Factors Summary The following is a summary of the principal risks that could adversely affect our business, financial condition, results of operations, and future prospects. • Adverse economic conditions, including the impact of macroeconomic challenges, global tariff increases and potential future increases and announcements regarding same, continued inflation, uncertainty regarding consumer spending, high interest rates, fluctuations in currency rates, the impact of current and potential global conflicts, and other factors, may continue to harm our business. • If we are unable to attract new customers or sell additional services and functionality to our existing customers, our revenue and revenue growth will be harmed. • If our existing customers terminate their subscriptions or reduce their subscriptions and related usage, or fail to grow subscriptions at the rate they have in the past or that we might expect, our revenues and gross margins will be harmed, and we will be required to spend more money to grow our customer base. • Because a significant percentage of our revenue is derived from existing customers, downturns or upturns in new sales will not be immediately reflected in our operating results and may be difficult to discern. • If we fail to manage our technical operations infrastructure, our existing customers may experience service outages, our new customers may experience delays in the deployment of our solution and we could be subject to claims for credits or damages, among other things. • If we are unable to attract and retain highly skilled leaders and other employees, our business and results of operations may be harmed. 16 Table of Contents • As AI solutions will likely perform an increasing proportion of contact center interactions, if we are unable to replace decreases in subscription revenue from licenses with revenue from the sale of additional AI solutions, our revenue, results of operations and business will be harmed. • Further development of our AI solutions may not be successful and may result in reputational harm and our future operating results could be materially harmed. • The AI technology and features incorporated into our solution include new and evolving technologies that may present both legal and business risks. • We have established, and are continuing to increase, our network of technology solution distributors and resellers to sell our solution; our failure to effectively develop, manage, and maintain this network could materially harm our revenues. • Our quarterly and annual results may fluctuate significantly, including as a result of the timing and success of new product and feature introductions by us, may not fully reflect the underlying performance of our business and may result in decreases in the price of our common stock. • Our historical growth may not be indicative of our future growth, and even if we continue to grow rapidly, we may fail to manage our growth effectively. • Failure to adequately retain and expand our sales force will impede our growth. • The use of AI by our workforce may present risks to our business. • The contact center software solutions market is subject to rapid technological change, and we must develop and sell incremental and new solutions in order to maintain and grow our business. • Our growth depends in part on the success of our strategic relationships with third parties and our failure to successfully maintain, grow and manage these relationships could harm our business. • The markets in which we participate involve a high number of competitors that is continuing to increase, and if we do not compete effectively, our operating results could be harmed. • We continue to expand our international operations, which exposes us to significant macroeconomic and other risks. • Security breaches, cybersecurity incidents, and improper access to, use of, or disclosure of our data or our customers’ data, or other cyber-attacks on our systems, could result in litigation and regulatory risk, harm our reputation, our business or financial results. • We may acquire other companies, or technologies or be the target of strategic transactions, or be impacted by transactions by other companies, which could divert our management’s attention, result in additional dilution to our stockholders or use a significant amount of our cash resources and otherwise disrupt our operations and harm our operating results. • We sell our solution to larger organizations that require longer sales and implementation cycles and often demand more configuration and integration services or customized features and functions that we may not offer, any of which could delay or prevent these sales and harm our growth rates, business and operating results. • We rely on third-party telecommunications and internet service providers to provide our customers and their customers with telecommunication services and connectivity to our cloud contact center software and any failure by these service providers to provide reliable services could cause us to lose customers and subject us to claims for credits or damages, among other things. • Prior to 2025, we had a history of losses and we may be unable to sustain profitability. • Our stock price has been volatile, may continue to be volatile and may decline, including due to factors beyond our control. • We may not be able to secure additional financing on favorable terms, or at all, to meet our future capital needs. • We may not achieve the anticipated benefits of share repurchase activity. • Failure to comply with laws and regulations could harm our business and our reputation. • We may not have sufficient cash to service our convertible senior notes and repay such notes, if required. 17 Table of Contents Risks Related to Our Financial Results Our quarterly and annual results may fluctuate significantly, may not fully reflect the underlying performance of our business and may result in decreases in the price of our common stock.
These larger organizations typically require more configuration and integration services, which increases our upfront investment in sales and deployment efforts, with no guarantee that these customers will subscribe to our solution or increase the scope of their subscription.
Larger organizations typically require more configuration and integration services, which increases our upfront investment in sales and deployment efforts, with no guarantee that these customers will subscribe to our solution or increase the scope of their subscription.
Our failure to achieve or maintain expected performance levels, stability and security, particularly as we increase our number of larger customers and attract increasingly larger customers than in the past, the number of users of our service and the product applications that run on our system, could harm our relationships with our customers, result in claims for credits or damages or other actions, damage our reputation, significantly reduce customer demand for our solution, cause us to incur significant expense and personnel time replacing and upgrading our infrastructure, cause customer attrition, and harm our business.
Our failure to achieve or maintain expected performance levels, stability and security, particularly as we increase our number of larger customers and attract increasingly larger customers than in the past, and increase the number of users of our service and the product applications that run on our system, could harm our relationships with our customers, result in claims for credits or damages or other actions, damage our reputation, significantly reduce customer demand for our solution, cause us to incur significant expense and personnel time replacing and upgrading our infrastructure, cause customer attrition, and harm our business.
We have incorporated a number of AI-powered features into our solution, and are making investments in expanding our AI capabilities with Generative AI. Generative AI technologies are complex and rapidly evolving, and we face significant competition from other companies as well as an evolving legal and regulatory landscape.
We have incorporated a number of AI-powered features into our solution, and are making investments in expanding our AI capabilities with generative AI. AI technologies are complex and rapidly evolving, and we face significant competition from other companies as well as an evolving legal and regulatory landscape.
While we have implemented security measures to protect customer and other confidential information and minimize the risk of security breaches and other cyber-attacks, if these measures fail as a result of a cybersecurity incident, cyber-attack, ransomware, denial of service attacks, software vulnerability, other third-party action, employee error, malfeasance or otherwise, and someone unlawfully or without authorization obtains access to our customers’ information, including personal data, our reputation could be damaged, our business may suffer and we could incur significant liability.
While we have implemented security measures to protect customer and other confidential information and personal data and minimize the risk of security breaches and other cyber-attacks, if these measures fail as a result of a cybersecurity incident, cyber-attack, ransomware, denial of service attacks, software vulnerability, other third-party action, employee error, malfeasance or otherwise, and someone unlawfully or without authorization obtains access to our customers’ information, including personal data, our reputation could be damaged, our business may suffer and we could incur significant liability.
Additionally, these laws, and any changes to them or the interpretation thereof, that further restrict calling consumers, including to wireless phone numbers, adverse publicity regarding the alleged or actual failure by companies, including our customers and competitors, to comply with such laws or governmental or private enforcement actions related thereto, could result in a reduction in the use of our solution by our customers and potential customers, which could harm our business, financial condition, results of operations and cash flows.
Additionally, these laws, and any changes to them or the interpretation thereof, that further restrict calling or texting consumers, including to wireless phone numbers, adverse publicity regarding the alleged or actual failure by companies, including our customers and competitors, to comply with such laws or governmental or private enforcement actions related thereto, could result in a reduction in the use of our solution by our customers and potential customers, which could harm our business, financial condition, results of operations and cash flows.
The capped call transactions are expected generally to reduce the potential dilution to holders of our common stock upon any conversion or settlement of the convertible notes and/or offset any cash payments we are required to make in excess of the principal amount of such convertible senior notes, as the case may be, with such reduction and/or offset subject to a cap under the terms of the capped call transactions.
The capped call transactions are expected generally to reduce the potential dilution to holders of our common stock upon any conversion or settlement of the convertible notes and/or offset any cash payments we are required to make in excess of the principal amount of such 2029 convertible senior notes, as the case may be, with such reduction and/or offset subject to a cap under the terms of the capped call transactions.
The Option Counterparties or their respective affiliates also may modify their hedge positions by entering into or unwinding such derivative transactions and/or purchasing or selling our common stock or other securities of ours in secondary market transactions prior to the applicable maturity of the convertible senior notes. These activities could negatively affect the market price of our common stock.
The Option Counterparties or their respective affiliates also may modify their hedge positions by entering into or unwinding such derivative transactions and/or purchasing or selling our common stock or other securities of ours in secondary market transactions prior to the applicable maturity of the 2029 convertible senior notes. These activities could negatively affect the market price of our common stock.
In the event that portions of our proprietary software are determined to be subject to an open source license, we could be required to publicly release the affected portions of our source code, re-engineer all or a portion of our technologies, or otherwise be limited in the licensing of our technologies, each of which could reduce or eliminate the value of our intellectual property, technologies and solutions.
In the event that portions of our proprietary software are determined to be subject to an open source license, we could be required to publicly release the affected portions of our source code, re-engineer all or a portion of our technologies, or otherwise be limited in the commercial licensing of our technologies, each of which could reduce or eliminate the value of our intellectual property, and solutions.
In addition, we depend on our internet bandwidth suppliers to provide uninterrupted and error-free service through their telecommunications networks. Some of our services may require that users of our service obtain their own internet bandwidth. We exercise little control over these third-party providers, which increases our vulnerability to problems with the services they provide.
In addition, we depend on our internet bandwidth suppliers to provide uninterrupted and error-free service through their telecommunications networks. Some of our services require that users of our service obtain their own internet bandwidth. We exercise little control over these third-party providers, which increases our vulnerability to problems with the services they provide.
Upon conversion of the convertible senior notes in accordance with their terms, unless we elect to deliver solely shares of our common stock to settle such conversion (other than paying cash in lieu of delivering any fractional share), we will be required to settle a portion or all of our conversion obligation through the payment of cash.
Upon conversion of the 2029 convertible senior notes in accordance with their terms, unless we elect to deliver solely shares of our common stock to settle such conversion (other than paying cash in lieu of delivering any fractional share), we will be required to settle a portion or all of our conversion obligation through the payment of cash.
We have accrued a contingent liability of $1.1 million for our best estimate of the probable amount of taxes and surcharges that may be imposed by various states and municipalities on our activities, including our usage-based and subscription services, for periods prior to our registration and collection in such jurisdictions.
We have accrued a contingent liability of $1.7 million for our best estimate of the probable amount of taxes and surcharges that may be imposed by various states and municipalities on our activities, including our usage-based and subscription services, for periods prior to our registration and collection in such jurisdictions.
The regulations to which we are subject (in whole or in part) include: • the TRACED Act and corresponding regulations from the FCC, which requires carriers to authenticate incoming calls using the STIR/SHAKEN caller ID framework and correspondingly compels providers of telecommunications services to implement capabilities to certify as authentic the traffic they provide to those carriers, and to block transmission of certain calls; • the Communications Assistance for Law Enforcement Act, or CALEA, which requires covered entities to assist law enforcement in undertaking electronic surveillance; • enhanced 911 rules, KARI’s Law and RAY BAUM’s Act, which, in some circumstances, require telecommunications service providers to ensure their users can directly dial 911 emergency services and, if technically feasible, automatically convey dispatchable location information with the call; • contributions to the USF which requires that we pay a percentage of our revenues resulting from the provision of interstate and some international telecommunications services to support certain federal programs; • payment of annual FCC regulatory fees based on our interstate and international revenues; • The Communications and Video Accessibility Act and rules pertaining to access to our services by people with disabilities and contributions to the Telecommunications Relay Services fund; and • FCC rules regarding CPNI which requires that we limit disclosure of certain information received from customers without customer approval, subject to certain exceptions.
The regulations to which we are subject (in whole or in part) include: • the TRACED Act and corresponding regulations from the FCC, which requires carriers to authenticate incoming calls using the STIR/SHAKEN caller ID framework and correspondingly compels providers of telecommunications services to implement capabilities to certify as authentic the traffic they provide to those carriers, and to block transmission of certain calls; • the Communications Assistance for Law Enforcement Act, or CALEA, which requires covered entities to assist law enforcement in undertaking electronic surveillance; • enhanced 911 rules, KARI’s Law and RAY BAUM’s Act, which, in some circumstances, require telecommunications service providers to ensure their users can directly dial 911 emergency services and, if technically feasible, automatically convey dispatchable location information with the call; • contributions to the USF which requires that we pay a percentage of our revenues resulting from the provision of interstate and some international telecommunications services to support certain federal programs; • payment of annual FCC regulatory fees based on our interstate and international revenues; 42 Table of Contents • The Communications and Video Accessibility Act and rules pertaining to access to our services by people with disabilities and contributions to the Telecommunications Relay Services fund; and • FCC rules regarding CPNI which requires that we limit disclosure of certain information received from customers without customer approval, subject to certain exceptions.
In this regard, if holders of the convertible senior notes elect to convert their notes, we may settle our conversion obligations by delivering to them cash, shares of our common stock or a combination thereof. In addition, we may issue shares of our common stock in connection with repurchases, exchanges or other transactions involving the convertible senior notes.
In this regard, if holders of the 2029 convertible senior notes elect to convert their notes, we may settle our conversion obligations by delivering to them cash, shares of our common stock or a combination thereof. In addition, we may issue shares of our common stock in connection with repurchases, exchanges or other transactions involving the 2029 convertible senior notes.
We may not have sufficient cash flow from our business to pay our indebtedness, and we may not have the ability to raise the funds necessary to settle conversions of the convertible senior notes in cash or to repurchase the convertible senior notes for cash upon a fundamental change, which could adversely affect our business and results of operations.
We may not have sufficient cash flow from our business to pay our indebtedness, and we may not have the ability to raise the funds necessary to settle conversions of the 2029 convertible senior notes in cash or to repurchase the 2029 convertible senior notes for cash upon a fundamental change, which could adversely affect our business and results of operations.
Our ability to make scheduled payments of principal and interest under our 2025 convertible senior notes and our 2029 convertible senior notes, or to refinance such indebtedness, depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control, including those described in this report.
Our ability to make scheduled payments of principal and interest under our 2029 convertible senior notes, or to refinance such indebtedness, depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control, including those described in this report.
For example, in the event of a major earthquake, fire or flooding on the West Coast of the United States (where our corporate headquarters and one of our data centers are located), hurricane, tropical storm, flooding or severe weather in the southeastern United States (where our other U.S. data center is located) or catastrophic events such as fire, power loss, telecommunications failure, cyber-attack, global pandemic, war or terrorist attack, we may be unable to continue our operations and may endure system and service interruptions, reputational harm, delays in product development, breaches of data security and loss of critical data, any of which could harm our business and operating results.
For example, in the event of a major earthquake, fire or flooding on the West Coast of the United States (where our corporate headquarters and one of our data centers are located), hurricane, tropical storm, flooding or severe weather in the southeastern United States (where our other U.S. data center is located) or catastrophic events such as fire, power loss, telecommunications failure, cyber-attack, global pandemic, war or terrorist attack, we may be unable to continue our operations and may experience system and service interruptions, reputational harm, delays in product development, breaches of data security and loss of critical data, any of which could harm our business and operating results.
We also may not achieve the anticipated benefits from these or any future acquisitions due to a number of factors, including: • inability to integrate or benefit from acquisitions in a profitable manner; • costs or liabilities associated with the acquisition, including tax obligations or legal claims arising from the activities of the companies or businesses we acquire, or expenses incurred to enforce our obligations under the acquisition agreements; • acquisition-related costs; 33 Table of Contents • difficulty converting the customers of the acquired business to our solution and contract terms, including due to disparities in the revenue, licensing, support or professional services model of the acquired company; • difficulty and time delays integrating the accounting systems, operations, internal controls and personnel of the acquired business, particularly of acquired companies with significant international operations; • difficulties and additional costs and expenses associated with supporting legacy products and the hosting infrastructure of the acquired business; • diversion of management’s attention from other business concerns; • harm to our existing relationships with our partners and customers as a result of the acquisition; • the loss of our or the acquired business’s key employees; • diversion of resources that could have been more effectively deployed in other parts of our business; and • use of substantial portions of our available cash to consummate the acquisition.
We also may not achieve the anticipated benefits from these or any future acquisitions due to a number of factors, including: • inability to integrate or benefit from acquisitions in a profitable manner; • costs or liabilities associated with the acquisition, including tax obligations or legal claims arising from the activities of the companies or businesses we acquire, or expenses incurred to enforce our obligations under the acquisition agreements; • acquisition-related costs; • difficulty converting the customers of the acquired business to our solution and contract terms, including due to disparities in the revenue, licensing, support or professional services model of the acquired company; • difficulty and time delays integrating the accounting systems, operations, internal controls and personnel of the acquired business, particularly of acquired companies with significant international operations; • difficulties and additional costs and expenses associated with supporting legacy products and the hosting infrastructure of the acquired business; • diversion of management’s attention from other business concerns; • harm to our existing relationships with our partners and customers as a result of the acquisition; • the loss of our or the acquired business’s key employees; • diversion of resources that could have been more effectively deployed in other parts of our business; and • use of substantial portions of our available cash to consummate the acquisition.
The market price of shares of our common stock and our convertible senior notes could decline as a result of substantial sales of our common stock, particularly sales by our directors, executive officers and significant stockholders or the perception in the market that holders of a large number of shares intend to sell their shares.
The market price of shares of our common stock and our 2029 convertible senior notes could decline as a result of substantial sales of our common stock, particularly sales by our directors, executive officers and significant stockholders or the perception in the market that holders of a large number of shares intend to sell their shares.
The future registration of shares of our common stock may cause our stock price and the price of our convertible senior notes to decline, even before such shares are actually sold in the market. We have registered shares of common stock that we may issue under our employee equity incentive plans.
The future registration of shares of our common stock may cause our stock price and the price of our 2029 convertible senior notes to decline, even before such shares are actually sold in the market. We have registered shares of common stock that we may issue under our employee equity incentive plans.
Our gross margins can vary depending on numerous factors related to the implementation and use of our solution, including the features and number of licenses purchased by our customers, the increasing reliance on public cloud providers, and the level of usage and professional services and support required by our customers.
Our gross margins vary depending on numerous factors related to the implementation and use of our solution, including the features and number of licenses purchased by our customers, the increasing reliance on public cloud providers, and the level of usage and professional services and support required by our customers.
Historically, we have elected to satisfy our convertible senior note conversion obligations through the payment of cash in certain circumstances, the issuance of shares of common stock in other circumstances, or a combination thereof, to such convertible senior note holders. See Item 2.
Historically, we have elected to satisfy our prior convertible senior note conversion obligations through the payment of cash in certain circumstances, the issuance of shares of common stock in other circumstances, or a combination thereof, to such prior convertible senior note holders. See Item 2.
Further development of our AI solutions may not be successful and may result in reputational harm and our future operating results could be materially harmed. We plan to continue to further develop and enhance our AI-powered features, including integration of Generative AI technologies.
Further development of our AI solutions may not be successful and may result in reputational harm and our future operating results could be materially harmed. We plan to continue to further develop and enhance our AI-powered features, including continued further integration of Generative AI technologies.
Our ability to obtain additional financing or refinance the 2025 convertible senior notes, the 2029 convertible senior notes or any future indebtedness, will depend on conditions in the capital markets and our financial condition at such time, among other factors.
Our ability to obtain additional financing or refinance the 2029 convertible senior notes or any future indebtedness, will depend on conditions in the capital markets and our financial condition at such time, among other factors.
For example, our larger customers typically require more professional services, and because our professional services offerings typically have lower margins, any increase in sales of professional services could harm our gross margins and operating results. We also have lower margins on our usage revenues.
For example, our larger customers typically require more professional services, and because our professional services offerings typically have negative margins, any increase in sales of professional services could harm our gross margins and operating results. We also have lower margins on our usage revenues.
If we do not comply with FCC rules and regulations, we could be subject to further FCC enforcement actions, fines, loss of licenses and possibly restrictions on our ability to operate or offer certain of our services.
If we do not comply with FCC rules and regulations, we could be subject to FCC enforcement actions, fines, loss of licenses and possibly restrictions on our ability to operate or offer certain of our services.
The U.S. state privacy laws establish a privacy framework for covered businesses by creating an expanded definition of personal data and creating new data privacy rights for eligible residents in those states, including the right to the right to access, delete or correct such data, the right to opt out of sales or use of their personal data for targeted advertising or profiling purposes, the right to request a list of third parties to whom the company sells personal data, the right to limit the use and disclosure of their sensitive personal data and the right to be free from discrimination for exercising their rights.
The U.S. state privacy laws establish a privacy framework for covered businesses by creating an expanded definition of personal data and creating new data privacy rights for eligible residents in those states, including the right to the right to access, delete or correct such data, the right to opt out of sales, sharing, or the use of their personal data for targeted advertising or profiling purposes, the right to request a list of third parties to whom the company sells or shares personal data, the right to limit the use and disclosure of their sensitive personal data and the right to be free from discrimination for exercising their rights.
Transactions relating to the convertible senior notes may dilute the ownership interests of our existing stockholders or adversely affect the market price of our common stock; the trading price of our convertible senior notes may be affected by volatility in the price of our common stock.
Transactions relating to the 2029 convertible senior notes may dilute the ownership interests of our existing stockholders or adversely affect the market price of our common stock; the trading price of our 2029 convertible senior notes may be affected by volatility in the price of our common stock.
In the United States, two federal agencies, the Federal Trade Commission, or the FTC, and the FCC, and various states have laws including, at the federal level, the TCPA that restrict the placing of certain telephone calls and texts to residential and wireless telephone subscribers by means of automatic telephone dialing systems, prerecorded or artificial voice messages and fax machines, or placing non-autodialed telemarketing calls to individuals who do not wish to receive such calls.
In the United States, two federal agencies, the Federal Trade Commission, or the FTC, and the FCC, and various states have laws including, at the federal level, the TCPA that restrict the placing of certain telephone calls and texts to residential and wireless telephone subscribers by means of automatic telephone dialing systems, prerecorded or artificial voice messages and fax machines, or placing non-autodialed telemarketing calls or text messages to individuals who do not wish to receive such communications.
The conversion of some or all of the convertible senior notes would dilute the ownership interests of our existing stockholders to the extent we satisfy our conversion obligation by delivering shares of our common stock.
The conversion of some or all of the 2029 convertible senior notes would dilute the ownership interests of our existing stockholders to the extent we satisfy our conversion obligation by delivering shares of our common stock.
Our operations are subject to many hazards inherent in the cloud contact center software business, including: 28 Table of Contents • damage to third-party and our infrastructure and data centers, related equipment and surrounding properties caused by earthquakes, hurricanes, tornadoes, floods, fires and other natural disasters, explosions, cyber- attacks and acts of terrorism; • security breaches resulting in loss or disclosure of confidential customer and customer data and potential liability to customers and non-customer third parties for such losses on disclosures; and • other hazards that could also result in suspension of operations, personal injury and even loss of life.
Our operations are subject to many hazards inherent in the cloud contact center software business, including: • damage to third-party and our infrastructure and data centers, related equipment and surrounding properties caused by earthquakes, hurricanes, tornadoes, floods, fires and other natural disasters, explosions, cyber- attacks and acts of terrorism; • security breaches resulting in loss or disclosure of confidential customer and customer data and potential liability to customers and non-customer third parties for such losses on disclosures; and • other hazards that could also result in suspension of operations, personal injury and even loss of life.
Any debt financing obtained by us in the future would cause us to incur additional debt service expenses and could include restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and pursue business opportunities and future debt could be secured by all of our assets.
Any debt financing obtained by us in the future would cause us to incur additional debt service expense and could include restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and pursue business opportunities, and could be secured by all of our assets.
For example, our installed base business, which contributes a significant portion of our annual revenue growth, continues to experience macroeonomic challenges. To grow our business in the longer term, we plan to add new customers that are government entities. We have made, and plan to continue to make, investments to support future customer opportunities in the government sector.
For example, our installed base business, which contributes a significant portion of our annual revenue growth, continues to experience macroeconomic challenges. To grow our business in the longer term, we plan to add new customers that are government entities. We have made, and plan to continue to make, investments to support future customer opportunities in the government sector.
A default under the applicable indenture would lead to, and the occurrence of the fundamental change itself may also lead to, a default under agreements governing our future indebtedness.
A default under the indenture would lead to, and the occurrence of the fundamental change itself may also lead to, a default under agreements governing our future indebtedness.
Given the nature of open source software, there is also a risk that third parties may assert copyright and other intellectual property infringement claims against us based on our use of certain open source software. Many of the risks associated with the usage of open source software cannot be eliminated and could harm our business.
Given the nature of open source software, there is also a risk that third parties may assert copyright and other intellectual property infringement claims against us based on our use of that open source software. Many of the risks associated with the use of open source software cannot be eliminated and could harm our business.
Use of AI technology by our workforce even when used consistent with our guidelines, may result in allegations or claims against us related to violation of third-party intellectual property rights, unauthorized access to or use of proprietary information and failure to comply with open source software requirements.
Use of AI technology by our workforce even when used consistent with our guidelines, may result in allegations or claims against us related to violation of third-party intellectual property rights, unauthorized access to or use of proprietary information and failure to comply with open source software licenses.
Substantial future sales of shares of our common stock could cause the market price of our common stock and our convertible senior notes to decline.
Substantial future sales of shares of our common stock could cause the market price of our common stock and our 2029 convertible senior notes to decline.
Longer sales cycles could cause our operating and financial results to be less predictable and to fluctuate from period to period. In addition, many of our customers that are larger organizations initially deploy our solution to support only a portion of their contact center agents.
Longer sales cycles could cause our operating and financial results to be less predictable and to fluctuate from period to period. In addition, many of our customers that are larger organizations initially deploy our solution to support only a portion of their contact center needs.
For example, our installed base business, which contributes a significant portion of our annual revenue growth, continues to experience macroeonomic challenges. All of these potential circumstances could lead to slower growth, or even a decline in, our revenues, operating results and cash flows.
For example, our installed base business, which contributes a significant portion of our annual revenue growth, continues to experience macroeconomic challenges. All of these potential circumstances could lead to slower growth, or even a decline in, our revenues, operating results and cash flows.
If we are unsuccessful in establishing or maintaining our strategic relationships with third parties, or these partners fail to recommend our solution, our ability to compete in the marketplace or to grow our revenues could be impaired and our operating results may suffer.
If we are unsuccessful in establishing or maintaining our strategic relationships with third parties, or these partners fail to recommend, sell or incorporate our solution, our ability to compete in the marketplace or grow our revenues could be impaired and our operating results may suffer.
Any claims or litigation could cause us to incur significant costs and expenses and, if successfully asserted against us, could require that we pay substantial damages or ongoing royalty payments, require that we refrain from using, manufacturing or selling certain offerings or features or using certain processes, prevent us from offering our solution or certain features thereof, or require that we comply with other unfavorable terms, any of which could harm our business and operating results.
Any claims or litigation could cause us to incur significant costs and expenses and, if successfully asserted against us, could require that we pay substantial damages 37 Table of Contents or ongoing royalty payments, require that we refrain from using, manufacturing or selling certain offerings or features or using certain processes, prevent us from offering our solution or certain features thereof, or require that we comply with other unfavorable terms, any of which could harm our business and operating results.
Third-party licensors may also be acquired or go out of business, which could preclude us from continuing to use such technology. The loss of, or inability to maintain, existing licenses could result in lost product features and litigation.
Third-party licensors may also be acquired or go out of business, which could preclude us from continuing to use their technology. The loss of, or inability to maintain, existing licenses could result in lost product features and litigation.
Subject to certain conditions, holders of the convertible senior notes have the right to require us to repurchase for cash all or any portion of their convertible senior notes upon the occurrence of a fundamental change (as defined in the indentures governing the 2025 convertible senior notes and the 2029 convertible senior notes) at a fundamental change repurchase price equal to 100% of the principal amount of the convertible senior notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the applicable fundamental change repurchase date.
Subject to certain conditions, holders of the 2029 convertible senior notes have the right to require us to repurchase for cash all or any portion of their 2029 convertible senior notes upon the occurrence of a fundamental change (as defined in the indenture governing the 2029 convertible senior notes) at a fundamental change repurchase price equal to 100% of the principal amount of the 2029 convertible senior notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the applicable fundamental change repurchase date.
Moreover, many of our customers initially deploy our solution to support only a portion of their contact center agents and, therefore, we may not generate significant revenue from these new customers at the outset of our relationship, if at all.
Moreover, many of our customers initially deploy our solution to support only a portion of their contact center needs and, therefore, we may not generate significant revenue from these new customers at the outset of our relationship, if at all.
Any election to settle conversions of convertible senior notes with cash could adversely affect our liquidity.
Any election to settle conversions of 2029 convertible senior notes with cash could adversely affect our liquidity.
Factors that may cause fluctuations in our quarterly and annual results include, without limitation: • market acceptance of our solution, including new features and components that are added to our solution; • if our existing customers terminate their subscriptions or reduce their subscriptions and related usage, or fail to grow subscriptions at the rate they have in the past or that we expect; • our ability to attract new customers and grow our business with existing customers; • customer renewal rates; • customer attrition rates; • the loss of key customers, including through acquisitions or consolidations; • our ability to make technological advancements, add more features to our solution, and integrate those features within our customer’s technology infrastructure; • our ability to capitalize on the transition by our customers to AI solutions; • our ability to successfully integrate companies, businesses and technology that we acquire and achieve a positive return on our investment; • adverse economic conditions, including the impact of macroeconomic challenges, including continued inflation, uncertainty regarding consumer spending, high interest rates, fluctuations in currency rates, the impact of the Russia-Ukraine conflict, the impact of conflicts in the Middle East, or other factors; • network outages or security incidents, which may result in additional expenses or losses, legal or regulatory actions, the loss of customers, the provision of customer credits, and harm to our reputation; • our ability to adequately expand our sales and service team; • our ability to acquire and maintain strategic and customer relationships; • the timing and success of new product and feature introductions by us or our competitors or any other change in the competitive dynamics of our industry, including consolidation, partnership or collaboration among competitors, customers or strategic partners; • the amount and timing of costs and expenses related to the maintenance and expansion of our business, operations and infrastructure; • seasonal factors that tend to cause our revenues in the first half of a year to be relatively lower than our revenues in the second half of a year; • inaccessibility or failure of our cloud contact center software due to failures in the products or services provided by third parties; • the amount and timing of costs and expenses related to our research and development efforts or in the acquisition of technologies or businesses and potential future charges for impairment of goodwill from acquired companies; • our ability to expand, and effectively utilize, our network of technology solution distributors, resellers and systems integrators; • the timing of recognition of revenues under current and future GAAP; • changes in our pricing policies or those of our competitors; • increases or decreases in the costs to provide our solution or pricing changes upon any renewals of customer agreements; • the level of professional services and support we provide our customers; • the ability to expand internationally, and to do so profitability; • compliance with, or changes in, the current and future domestic and international regulatory environment; • the hiring, training and retention of key employees; 17 Table of Contents • the outcome of litigation or other claims against us; • our ability to obtain additional financing on acceptable terms if and when needed; • the timing of expenses related to any future acquisition transactions; and • advances and trends in new technologies and industry standards.
Factors that may cause fluctuations in our quarterly and annual results include, without limitation: • market acceptance of our solution, including new features and components that are added to our solution; • if our existing customers terminate their subscriptions or reduce their subscriptions and related usage, or fail to grow subscriptions at the rate they have in the past or that we expect; • our ability to attract new customers and grow our business with existing customers; • customer renewal rates; • customer attrition rates; • the loss of key customers, including through acquisitions or consolidations; • our ability to make technological advancements, add more features to our solution, and integrate those features within our customer’s technology infrastructure; • our ability to capitalize on the transition by our customers to AI solutions; • our ability to successfully integrate companies, businesses and technologies that we acquire and achieve a positive return on our investment; • adverse economic conditions, including the impact of macroeconomic challenges, global tariff increases and potential future increases and announcements regarding same, continued inflation, uncertainty regarding consumer spending, high interest rates, fluctuations in currency rates, the impact of current and potential global conflicts, or other factors; • network outages or security incidents, which may result in additional expenses or losses, legal or regulatory actions, the loss of customers, the provision of customer credits, and harm to our reputation; • our ability to adequately expand our sales and service team; • our ability to acquire and maintain strategic and customer relationships; • the timing and success of new product and feature introductions by us or our competitors or any other change in the competitive dynamics of our industry, including consolidation, partnership or collaboration among competitors, customers or strategic partners; • the amount and timing of costs and expenses related to the maintenance and expansion of our business, operations and infrastructure; • seasonal factors that tend to cause our revenues in the first half of a year to be relatively lower than our revenues in the second half of a year; • inaccessibility or failure of our cloud contact center software due to failures in the products or services provided by third parties; • the amount and timing of costs and expenses related to our research and development efforts or in the acquisition of technologies or businesses and potential future charges for impairment of goodwill from acquired companies; • our ability to expand, and effectively utilize, our network of technology solution distributors, resellers and systems integrators; • the timing of recognition of revenues under current and future GAAP; • changes in our pricing policies or those of our competitors; • increases or decreases in the costs to provide our solution or pricing changes upon any renewals of customer agreements; • the level of professional services and support we provide our customers; • the ability to expand internationally, and to do so profitability; • compliance with, or changes in, the current and future domestic and international regulatory environment; 18 Table of Contents • the hiring, training and retention of key employees; • the outcome of litigation or other claims against us; • our ability to obtain additional financing on acceptable terms if and when needed; • the effects of our share repurchase program; • the timing of expenses related to any future acquisition transactions; and • advances and trends in new technologies and industry standards.
If a customer is not satisfied with the deployment and ongoing services performed by us or a third party, we could lose customers, miss opportunities to expand our business with these customers, incur additional costs, or suffer reduced (including negative) margins on our service revenue, any of which could damage our ability to grow our business.
If a customer is not satisfied with the deployment and ongoing services performed by us or 23 Table of Contents a third party, we could lose customers, miss opportunities to expand our business with these customers, incur additional costs, or suffer reduced (including negative) margins on our service revenue, any of which could damage our ability to grow our business.
While our data centers have redundant power, cooling and infrastructure, they are subject to various points of failure. Problems with cooling equipment, generators, uninterruptible power supply, routers, switches, or other equipment, most of 25 Table of Contents which is under the control of our data center operators, could result in service interruptions for our customers as well as equipment damage.
While our data centers have redundant power, cooling and infrastructure, they are subject to various points of failure. Problems with cooling equipment, generators, uninterruptible power supply, routers, switches, or other equipment, most of which is under the control of our data center operators, could result in service interruptions for our customers as well as equipment damage.
Unauthorized access, unauthorized use of our systems or those of third parties on which we rely or the data stored within those systems, cybersecurity incidents, security breaches or other cyber-attacks could result in the loss of confidentiality, integrity and availability of such information or systems, leading to litigation, governmental investigations and enforcements actions, indemnity obligations, increased expense, and other liability.
Unauthorized access, unauthorized use of our systems or those of third parties on which we rely or the data stored within those systems, cybersecurity incidents, security breaches or other cyber-attacks could result in the loss of confidentiality, integrity and availability of such information or systems, leading to litigation, regulatory or governmental investigations and enforcement actions, indemnity obligations, increased expense, and other liability.
Our international employees are primarily located in the Philippines, where technical support, training and other professional services are performed, Portugal, where we continue to increase our engineering and operations previously performed in Russia, and India and Australia, where additional portions of engineering and operations are performed.
Our international employees are primarily located in the Philippines, where technical support, training and other professional services are performed, India and Portugal, where we continue to increase our engineering and operations, and Australia, where additional portions of engineering and operations are performed.
Our failure to repurchase any convertible senior notes at a time when the repurchase is required by the applicable indenture or to pay any cash payable on any future conversions as required by such indenture would constitute a default under such indenture.
Our failure to repurchase any 2029 convertible senior notes at a time when the repurchase is required by the indenture or to pay any cash payable on any future conversions as required by such indenture would constitute a default under such indenture.
Even if we were to prevail in any such dispute, any litigation regarding our intellectual property could be costly and time consuming and divert the attention of our management and key personnel from our business operations. 36 Table of Contents Indemnity provisions in various agreements potentially expose us to substantial liability for intellectual property infringement and other losses.
Even if we were to prevail in any such dispute, any litigation regarding our intellectual property could be costly and time consuming and divert the attention of our management and key personnel from our business and operations. Indemnity provisions in various agreements potentially expose us to substantial liability for intellectual property infringement and other losses.
As we increase our international sales efforts and continue and increase our other international operations, we will face increased risks in doing business internationally that could harm our business, including: • the need to establish and protect our brand in international markets; • the need to localize and adapt our solution for specific countries, including translation into foreign languages and associated costs and expenses; • difficulties in staffing and managing foreign operations, particularly hiring and training qualified sales and service personnel; • the need to implement and offer customer care, in various languages; • different pricing environments, longer sales and accounts receivable payment cycles and collections issues; • weaker protection for intellectual property and other legal rights than in the U.S. and practical difficulties in enforcing intellectual property and other rights outside of the U.S.; • privacy and data protection laws and regulations that are complex, expensive to comply with and may require that customer data be stored and processed in a designated territory; • increased risk of piracy, counterfeiting and other misappropriation of our intellectual property in our locations outside the U.S.; • new and different sources of competition; • general economic conditions in international markets; • fluctuations in the value of the U.S. dollar and foreign currencies, which may make our solution more expensive in other countries or may increase our costs, impacting our operating results when translated into U.S. dollars; • compliance challenges related to the complexity of multiple, conflicting and changing governmental laws and regulations, including employment, tax, telecommunications and telemarketing laws and regulations; • increased risk of international telecom fraud; • laws and business practices favoring local competitors; • compliance with laws and regulations applicable to foreign operations and cross border transactions, including the Foreign Corrupt Practices Act, the U.K.
As we increase our international sales efforts and continue and increase our other international operations, we will face increased risks in doing business internationally that could harm our business, including: • the need to establish and protect our brand in international markets; • the need to localize and adapt our solution for specific countries, including translation into foreign languages and associated costs and expenses; • difficulties in staffing and managing foreign operations, particularly hiring and training qualified sales and service personnel; • the need to implement and offer customer care, in various languages; • different pricing environments, longer sales and accounts receivable payment cycles and collections issues; • weaker protection for intellectual property and other legal rights than in the U.S. and practical difficulties in enforcing intellectual property and other rights outside of the U.S., leading to increased risk of piracy, counterfeiting and other misappropriation of our intellectual property; • privacy and data protection laws and regulations that are complex, expensive to comply with and may require that customer data be stored and processed in a designated territory; • new and different sources of competition, including laws and business practices favoring local competitors; • general economic conditions in international markets, including increased financial accounting and reporting burdens and complexities and potential adverse tax consequences; • fluctuations in the value of the U.S. dollar and foreign currencies, which may make our solution more expensive in other countries or may increase our costs, impacting our operating results when translated into U.S. dollars; • compliance challenges related to the complexity of multiple, conflicting and changing governmental laws and regulations, including employment, tax, telecommunications and telemarketing laws and regulations; • increased risk of international telecom fraud; • laws and business practices favoring local competitors; • compliance with laws and regulations applicable to foreign operations and cross border transactions, including the Foreign Corrupt Practices Act, the U.K.
These risks could harm our international operations, increase our operating costs and hinder our ability to grow our international business and, consequently, our overall business and results of operations. 31 Table of Contents Other Operational Risks Adverse economic conditions may harm our business.
These risks could harm our international operations, increase our operating costs and hinder our ability to grow our international business and, consequently, our overall business and results of operations. 32 Table of Contents Other Operational Risks Adverse economic conditions may harm our business.
As of December 31, 2024, we had accrued $0.1 million in interest related to the disputed assessments for the period of 2003 through 2007. See Note 10 to the consolidated financial statements.
As of December 31, 2025, we had accrued $0.1 million in interest related to the disputed assessments for the period of 2003 through 2007. See Note 10 to the consolidated financial statements.
These losses and our accumulated deficit reflect the substantial investments we have made, and continue to make, to develop our solution and acquire new customers, among other expenses. We expect the dollar amount of our costs and expenses to increase in the future as revenue increases, although at a slower rate than the expected growth in revenue.
The historical losses and our accumulated deficit reflect the substantial investments we made, and continue to make, to develop our solution and acquire new customers, among other expenses. We expect the dollar amount of our costs and expenses to increase in the future as revenue increases, although at a slower rate than the expected growth in revenue.
Furthermore, legal standards relating to the validity, enforceability and scope of protection of intellectual property rights in other countries are uncertain and may afford little or no effective protection of our proprietary technology, and the risk of intellectual property misappropriation may be higher in these countries. As we expand into additional countries, these risks will be further enhanced.
Furthermore, legal standards relating to the validity, enforceability and scope of protection of intellectual property rights in other countries are uncertain and may afford little or no effective protection of our proprietary technology, and the risk of intellectual property misappropriation may be higher in these countries. As we expand into additional countries, these risks will increase.
Sales to larger organizations may also entail longer sales cycles and more significant selling efforts and expense. Selling to smaller customers may involve smaller contract sizes, fewer opportunities to sell additional services, a higher likelihood of contract terminations, lower returns on sales and marketing expense, fewer potential agents and greater credit risk and uncertainty.
Sales to larger organizations may also entail longer sales cycles and more significant selling efforts and expense. Selling to smaller customers may involve smaller contract sizes, fewer opportunities to sell additional services, a higher likelihood of contract terminations, lower returns on sales and marketing expense, 19 Table of Contents fewer potential agents and greater credit risk and uncertainty.
If we raise additional funds through further issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution in their percentage ownership of our company, and any new equity securities we issue could have rights, preferences and privileges senior to those of holders of our common stock.
If we raise additional funds through further issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution in their percentage ownership of our 35 Table of Contents company, and any new equity securities we issue could have rights, preferences and privileges senior to those of holders of our common stock.
Management’s Discussion and Analysis of Financial Condition and Results of Operation-Liquidity and Capital Resources, for further discussion of our elections to satisfy our conversion obligations. In addition, in connection with the issuance of each series of the convertible senior notes, we entered into capped call transactions with certain financial institutions, or the Option Counterparties.
Management’s Discussion and Analysis of Financial Condition and Results of Operation-Liquidity and Capital Resources, for further discussion of our elections to satisfy our conversion obligations. In addition, in connection with the issuance of the 2029 convertible senior notes, we entered into capped call transactions with certain financial institutions, or the Option Counterparties.
Factors that may contribute to continuing volatility in the price of our common stock include: • actual or anticipated fluctuations or declines in our operating results; • the impact of adverse economic conditions, including the impact of macroeconomic challenges, including continued inflation, uncertainty regarding consumer spending, high interest rates, fluctuations in currency rates, the impact of the Russia-Ukraine conflict, the impact of conflicts in the Middle East, or other factors; • loss of customers or a reduction, or slower growth, in subscriptions or features subscribed to by our existing customers; • any major change in our board of directors or management; • the financial projections we provide to the public, any changes in these projections, our failure to meet these projections, or our failure to exceed these projections by amounts or percentages expected by our investors and analysts; • failure of securities analysts to initiate or maintain coverage of our company, changes in financial estimates by any securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors; • ratings changes by any securities analysts who follow our company; • sales of our common stock (or securities that convert into our common stock) by us or sales by our significant stockholders, or the public announcement of same; • the assessment of our business or position in our market published in research and other reports; • announcements by us or our competitors of significant product or technical innovations, financings, acquisitions, strategic partnerships, joint ventures or capital commitments; • entry into the market by new competitors, or the introduction of new products or the generation of new sales by us or our competitors; • changes in operating performance and stock market valuations of other technology companies generally, or those in the software as a service industry in particular; • price and volume fluctuations in the overall stock market, including as a result of trends in the U.S. or global economy; • lawsuits threatened or filed against us; • security breaches or incidents impacting us or our customers or their customers and security breaches of companies that provide solutions similar to our solution, which could negatively impact our industry as a whole; • actions, threats or public statements by activist stockholders; • legislation or regulation of our business, the business of our customers, the internet and/or contact centers; • new entrants into and consolidations of the contact center market, including the transition by providers of legacy on-premises contact center systems to cloud solutions and the continued advancement of AI solutions; • acquisitions by us or our competitors, and our ability to effectively integrate and achieve the desired benefits from acquisitions by us; • the perceived or real impact of events that harm our competitors; • loss of key personnel; • developments with respect to patents or proprietary rights; and • other events or factors, including those resulting from war, incidents of terrorism or responses to these events, which would be unrelated to our business and industry, and outside of our control.
Factors that may contribute to continuing volatility in the price of our common stock include: • actual or anticipated fluctuations or declines in our operating results; • the impact of adverse economic conditions, including the impact of macroeconomic challenges, global tariff increases and potential future increases and announcements regarding same, continued inflation, uncertainty regarding consumer spending, high interest rates, fluctuations in currency rates, the impact of current and potential global conflicts, or other factors; • loss of customers or a reduction, or slower growth, in subscriptions or features subscribed to by our existing customers; • the financial projections we provide to the public, any changes in these projections, our failure to meet these projections, or our failure to exceed these projections by amounts or percentages expected by our investors and analysts; • changes in our board of directors or management; • failure of securities analysts to initiate or maintain coverage of our company, changes in financial estimates by any securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors; • ratings changes by any securities analysts who follow our company; • sales of our common stock (or securities that convert into our common stock) by us or sales by our significant stockholders, or the public announcement of same; 48 Table of Contents • the assessment of our business or position in our market published in research and other reports; • announcements by us or our competitors of significant product or technical innovations, financings, acquisitions, strategic partnerships, joint ventures or capital commitments; • entry into the market by new competitors, or the introduction of new products or the generation of new sales by us or our competitors; • changes in operating performance and stock market valuations of other technology companies generally, or those in the software as a service industry in particular; • price and volume fluctuations in the overall stock market, including as a result of trends in the U.S. or global economy; • lawsuits threatened or filed against us; • security breaches or incidents impacting us or our customers or their customers and security breaches of companies that provide solutions similar to our solution, which could negatively impact our industry as a whole; • actions, threats or public statements by activist stockholders; • legislation or regulation of our business, the business of our customers, the internet and/or contact centers; • new entrants into and consolidations of the contact center market, including the transition by providers of legacy on-premises contact center systems to cloud solutions and the continued advancement of AI solutions; • acquisitions by us or our competitors, and our ability to effectively integrate and achieve the desired benefits from acquisitions by us; • the perceived or real impact of events that harm our competitors; • loss of key personnel; • developments with respect to patents or proprietary rights; and • other events or factors, including those resulting from war, incidents of terrorism or responses to these events, which would be unrelated to our business and industry, and outside of our control.
Our contractual arrangements with our customers who use our solution to place calls also expressly require them to comply with all such laws and to indemnify us for any failure to do so. We take numerous steps to reasonably confirm that the use of our services complies with applicable laws.
Our contractual arrangements with our customers who use our solution to place calls also expressly require them to 39 Table of Contents comply with all such laws and to indemnify us for any failure to do so. We take numerous steps to reasonably confirm that the use of our services complies with applicable laws.
The amount that we are required to pay under certain of these tax and regulatory structures also continues to increase as a percentage of our telecommunications revenues. The collection of additional taxes, fees or surcharges in the future could increase our prices or reduce our profit margins.
The amount that we are required to pay under certain of these tax and regulatory structures also continues to increase as a percentage of our 40 Table of Contents telecommunications revenues. The collection of additional taxes, fees or surcharges in the future could increase our prices or reduce our profit margins.
The effects of the U.S. state privacy laws are potentially significant and may require us to modify our data collection or processing practices and policies and to incur substantial costs and expenses in an effort to comply and 44 Table of Contents increase our potential exposure to regulatory enforcement and/or litigation.
The effects of the U.S. state privacy laws are potentially significant and may require us to modify our data collection or processing practices and policies and to incur substantial costs and expenses in an effort to comply and increase our potential exposure to regulatory enforcement and/or litigation.
In addition, there has been a number of recent transactions in our industry and adjacent industries, which could have a negative impact on us. To date, the growth in our business has been primarily organic, and we have limited experience in acquiring other businesses.
In addition, there has been a number of recent transactions in our industry and adjacent industries, which could have a negative impact on us. 34 Table of Contents To date, the growth in our business has been primarily organic, and we have limited experience in acquiring other businesses.
This could harm our gross profit and results of operations. Our recent, and any future, acquisitions will subject us to new competitors and cause us to face additional and different competition in the markets served by these businesses.
This could harm our gross profit and results of operations. 25 Table of Contents Our recent acquisitions, and any future acquisitions will, subject us to new competitors and cause us to face additional and different competition in the markets served by these businesses.
In addition to risks related to license requirements, usage of open source software can lead to greater risks than use of third-party commercial software, as open source licensors generally do not provide warranties or controls on the origin of the 37 Table of Contents software.
In addition to risks related to license requirements, usage of open source software can lead to greater risks than use of third-party commercial software, as open source licensors generally do not provide warranties or controls on the origin of the software.
Sales to customers outside the United States or with international operations and our international sales efforts and operations support expose us to risks inherent in international sales and operations. A key element of our growth strategy is to expand our international sales efforts and develop a worldwide customer base.
Sales to customers outside the United States or with international operations and our international sales efforts and operations support expose us to risks inherent in international sales and operations. A key element of our growth strategy is to expand our international sales efforts and develop a more global customer base.
For example, the General Data Protection Law in Brazil, or the LGPD, and the Japanese Act on the Protection of 43 Table of Contents Personal Information, or the APPI, broadly regulate the processing of personal information in a manner comparable to the GDPR, and violators of the LGPD and APPI face substantial penalties.
For example, the General Data Protection Law in Brazil, or the LGPD, and the Japanese Act on the Protection of Personal Information, or the APPI, broadly regulate the processing of personal information in a manner comparable to the GDPR, and violators of the LGPD and APPI face substantial penalties.
The expansion of our operations over the longer term will make it more difficult for us to generate earnings or offset any future revenue shortfalls by quickly reducing costs and expenses. If we fail to manage growth, we will be unable to execute our business plan successfully.
The expansion of our operations over the longer term will make it more difficult for us to generate earnings or offset any future revenue shortfalls by quickly reducing costs and expenses. If we fail to manage growth, we will be unable to execute our business plan successfully and our stock price may decline.
Key to our future success is the continuity and growth of our direct sales force. We need to continue to retain key members of our direct sales force while expanding and optimizing our sales infrastructure and headcount in 22 Table of Contents order to grow our customer base and business.
Key to our future success is the continuity and growth of our direct sales force. We need to continue to retain key members of our direct sales force while expanding and optimizing our sales infrastructure and headcount in order to grow our customer base and business.
Brand promotion activities may not generate customer awareness or increase revenues, and even if they do, any increase in revenues typically occurs after the expense has been incurred, and may not offset the costs and expenses of building our brand.
Brand promotion activities may not generate customer awareness or increase revenues, and even if they do, any increase in revenues typically occurs after the expense has been incurred, and may not offset the costs and expenses of these activities.
We are classified as a telecommunications service provider for regulatory purposes, and we are required to make direct contributions to the USF based on revenue we receive from the resale of interstate and certain 40 Table of Contents international telecommunications services.
We are classified as a telecommunications service provider for regulatory purposes, and we are required to make direct contributions to the USF based on revenue we receive from the resale of interstate and certain international telecommunications services.
There are also state privacy laws, including the California Consumer Privacy Act, or CCPA, the California Privacy Rights Act, or CPRA, among several other state laws, that set forth comprehensive privacy obligations regarding the processing of personal data, which relevant State Attorney General or other state regulatory bodies can enforce. We expect additional states to enact their own privacy laws.
There are also state privacy laws, including the California Consumer Privacy Act, or CCPA, that set forth comprehensive privacy obligations regarding the processing of personal data, which relevant State Attorney General or other state regulatory bodies can enforce. We expect additional states to enact their own privacy laws.
If our assumptions regarding these risks and uncertainties, which we use to plan our business, are incorrect or change due to 20 Table of Contents adjustments in our markets or our competitors and their product offerings, or if we do not address these risks successfully, our operating and financial results could differ materially from our expectations and our business could suffer.
If our assumptions regarding these risks and uncertainties, which we use to plan our business, are incorrect or change due to adjustments in our markets or our competitors and their product offerings, or if we do not address these risks successfully, our operating and financial results could differ materially from our expectations and our business could suffer.
If we do not expand our initial relationships with larger organizations, the return on our investments in sales and deployment efforts for these customers will decrease and our business may suffer. 23 Table of Contents Furthermore, we may not be able to provide the configuration and integration services that larger organizations typically require.
If we do not expand our initial relationships with larger organizations, the return on our investments in sales and deployment efforts for these customers will decrease and our business may suffer. Furthermore, we may not be able to provide the configuration and integration services that larger organizations typically require.
Although we maintain general liability insurance, including coverage for errors and omissions, this coverage may not be available or sufficient to cover liabilities resulting from such claims. Also, our insurers may disclaim coverage. Our liability insurance also may not continue to be available to us on reasonable terms, in sufficient amounts, or at all.
Although we maintain general liability insurance, including coverage for errors and omissions, this coverage may not be available or sufficient to cover liabilities resulting from such claims. Also, our insurers may disclaim coverage. Our liability insurance also may not continue to be available to us on reasonable 28 Table of Contents terms, in sufficient amounts, or at all.
During the three months ended December 31, 2024, the conversion features of the 2029 convertible senior notes were not triggered. Accordingly, holders of the 2029 convertible senior notes are not entitled to convert their convertible senior notes from January 1, 2025 to March 31, 2025.
During the three months ended December 31, 2025, the conversion features of the 2029 convertible senior notes were not triggered. Accordingly, holders of the 2029 convertible senior notes are not entitled to convert their 2029 convertible senior notes from January 1, 2026 through March 31, 2026.
If one or more holders elect to convert their convertible senior notes during any such specified period, we have the option to pay or deliver, as the case may be, cash, shares of our common stock or a combination of cash and shares of our common stock, at our election.
If one or more holders elect to convert their 2029 convertible senior notes during any such specified period, we have the option to pay or deliver, as the case may be, 47 Table of Contents cash, shares of our common stock or a combination of cash and shares of our common stock, at our election.
We continue to deliver product features that enhance our data management and security in support of GDPR compliance. Among the compliance obligations the GDPR raises for us and our customers are requirements regarding the transfer of personal data from the EU to other jurisdictions, including the United States.
We have ongoing procedures to maintain GDPR compliance. We continue to deliver product features that enhance our data management and security in support of GDPR compliance. Among the compliance obligations the GDPR raises for us and our customers are requirements regarding the transfer of personal data from the EU to other jurisdictions, including the United States.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe Incident Classification Team is responsible for assessing the incident and notifying members of our management and our Board. Our Chief Executive Officer, CLO, CISO and CFO, in conjunction with third-party experts, including outside legal counsel and our internal disclosure committee, are responsible for coordinating external communications and disclosures, including with the Securities and Exchange Commission.
Biggest changeThe Incident Classification Team is responsible for assessing the incident and notifying members of our management and our Board. Our Chief Executive Officer, CALO, CISO and CFO, in conjunction with their delegates and third-party experts, including outside legal counsel, are responsible for coordinating external communications and disclosures, including with the Securities and Exchange Commission and impacted third parties.
Our ISMS and cybersecurity risk management program includes: • risk assessments designed to help identify material cybersecurity risks to our critical systems, information, products, services, and our broader enterprise IT environment; • a security team principally responsible for (1) recommending and implementing appropriate technologies to mitigate the cyber security risks; (2) monitoring internal systems and taking appropriate action in the event of alerts; (3) monitoring the threat landscape; and (4) our response to cybersecurity incidents and management of the incident response process and the Incident Response Team; • the use of external service providers, where appropriate, to assess, test or otherwise assist with aspects of our security controls, including but not limited to outside legal counsel, reputable third-party firms for 24/7 threat monitoring, detection and response, and third-party experts for conducting periodic process assessments to help us evaluate and enhance our cybersecurity practices; • cybersecurity awareness training of our employees, incident response personnel, and senior management, which covers a variety of topics designed to educate our employees about the importance of cybersecurity awareness, highlight typical cybersecurity-related risks and issues, such as phishing attacks and other methods used to attempt to infiltrate our systems, and test that awareness using knowledge assessments and simulations; • external cybersecurity consultants, supervised by our Incident Response Team and Incident Classification Team; • a cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents; • a third-party risk management process for service providers, suppliers, and vendors, pursuant to which we require such third parties to maintain certain security controls and assess their compliance with these requirements; and 50 Table of Contents • independent third-party assessments and audits of our Information Security Management System, or ISMS, to monitor compliance with globally recognized information security standards, including ISO 27001:2013/2022, ISO 27017:2015 (cloud security best practices), PCI DSS 4.0, HIPAA HiTech, and the AICPA SOC 2 criteria for Security and Availability.
Our ISMS and cybersecurity risk management program includes: • risk assessments designed to help identify material cybersecurity risks to our critical systems, information, products, services, and our broader enterprise IT environment; • a security team principally responsible for (1) recommending and implementing appropriate technologies to mitigate the cyber security risks; (2) monitoring internal systems and taking appropriate action in the event of alerts; (3) monitoring the threat landscape; and (4) our response to cybersecurity incidents and management of the incident response process and the Incident Response Team; • the use of external service providers, where appropriate, to assess, test or otherwise assist with aspects of our security controls, including but not limited to outside legal counsel, reputable third-party firms for 24/7 threat monitoring, detection and response, and third-party experts for conducting periodic process assessments to help us evaluate and enhance our cybersecurity practices; • cybersecurity awareness training of our employees, incident response personnel, and senior management, which covers a variety of topics designed to educate our employees about the importance of cybersecurity awareness, highlight typical cybersecurity-related risks and issues, such as phishing attacks and other methods used to attempt to infiltrate our systems, and test that awareness using knowledge assessments and simulations; • external cybersecurity consultants, supervised by our Incident Response Team and Incident Classification Team; • a cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents; • a third-party risk management process for service providers, suppliers, and vendors, pursuant to which we require such third parties to maintain certain security controls and assess their compliance with these requirements; and 52 Table of Contents • independent third-party assessments and audits of our Information Security Management System, or ISMS, to monitor compliance with globally recognized information security standards, including ISO 27001:2022, ISO 27017:2015 (cloud security best practices), PCI DSS v4.0.1, HIPAA, and the AICPA SOC 2 criteria for Security and Availability.
ISMS complies with a number of internationally recognized standards for information security, including the ISO 27001:2022 Standard for Information Security, AICPA System and Organization Controls 2 (SOC 2) for the criteria of Security and Availability; the Payment Card Industry Data Security Standard 4.0, or PCI DSS 4.0, the global standard for the payment card industry.
ISMS complies with a number of internationally recognized standards for information security, including the ISO 27001:2022 Standard for Information Security, AICPA System and Organization Controls 2 (SOC 2) for the criteria of Security and Availability; the Payment Card Industry Data Security Standard v4.0.1, or PCI DSS v4.0.1, the global standard for the payment card industry.
The Incident Response Team will document findings and make them available to the Incident Classification Team, which is comprised of our CISO, Executive Vice President of Production Engineering, Chief Information Officer, Chief Legal & Compliance Officer, or CLO, Chief Operating Officer, Chief Financial Officer, and their respective delegates.
The Incident Response Team will document findings and make them available to the Incident Classification Team, which is comprised of our CISO, Executive Vice President of Production Engineering, Chief Information Officer, Chief Administrative & Legal Officer, or CALO, Chief Operating Officer, Chief Financial Officer, and their respective delegates.
Sue Barsamian and Mr. David Welsh. Our Board receives quarterly reports from management on our cybersecurity processes and risks. In addition, management updates the Board, as necessary, regarding cybersecurity incidents, including those that are immaterial. Our Board also receives briefings from management on our cyber risk management program.
Our Board receives quarterly reports from management on our cybersecurity processes and risks. In addition, management updates the Board, as necessary, regarding cybersecurity incidents, including those that are immaterial. Our Board also receives briefings from management on our cyber risk management program.
Governance Our Board considers cybersecurity risk as part of its risk oversight function and the full Board has direct oversight of cybersecurity and other information technology risks as well as oversees management’s implementation of our cybersecurity risk management program. Several of our Board members have substantial cybersecurity experience and have experience in the field, including Ms. Julie Iskow, Ms.
Governance Our Board considers cybersecurity risk as part of its risk oversight function and the full Board has direct oversight of cybersecurity and other information technology risks as well as oversees management’s implementation of our cybersecurity risk management program. Several of our Board members have cybersecurity experience, including Michael Burdiek, Sue Barsamian, Julie Iskow, Sudhakar Ramakrishna and Maria Walker.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe believe our facilities are sufficient for our current needs. 51 Table of Contents
Biggest changeThese agreements expire at various dates through 2031. 53 Table of Contents We believe our facilities are sufficient for our current needs.
Information concerning our principal leased properties as of December 31, 2024 is set forth below: Location Principal Use Square Footage Lease Expiration Date San Ramon, California Corporate headquarters, sales, marketing, product design, professional services, research and development 104,000 January 2031 The Philippines Technical support, training and other professional services 26,600 July 2026 Portugal Portions of engineering and operations 20,600 August 2025 India Research and development 15,900 January 2025 The hosting of our equipment and software at co-located third-party facilities is also significant to our business.
Information concerning our principal leased properties as of December 31, 2025 is set forth below: Location Principal Use Square Footage Lease Expiration Date San Ramon, California Corporate headquarters, sales, marketing, product design, professional services, research and development 104,000 January 2031 The Philippines Technical support, training and other professional services 26,600 July 2026 India Product, engineering, professional services and customer support 22,200 February 2031 Portugal Portions of engineering and operations 20,600 August 2028 India Research and development 15,900 January 2028 The hosting of our equipment and software at co-located third-party facilities is also significant to our business.
ITEM 2. Properties We currently lease approximately 198,000 square feet of office space worldwide.
ITEM 2. Properties We currently lease approximately 220,000 square feet of office space worldwide.
We have entered into rental agreements with third-party hosting facilities in Santa Clara, California; Atlanta, Georgia; and Slough, England, which require monthly payments for a fixed period of time in exchange for certain guarantees of space, and network and telecommunication availability. These agreements expire at various dates through 2029.
We have entered into lease agreements with third-party hosting facilities in Santa Clara, California; Atlanta, Georgia; and Slough, England, which require monthly payments for a fixed period of time in exchange for certain guarantees of space, and network and telecommunication availability.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. Legal Proceedings Information with respect to this item may be found under the heading “Legal Matters” in Note 10 of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K, which information is incorporated herein by reference. ITEM 4. Mine Safety Disclosures Not applicable. 52 Table of Contents PART II
Biggest changeITEM 3. Legal Proceedings Information with respect to this item may be found under the heading “Legal Matters” in Note 10 of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K, which information is incorporated herein by reference. ITEM 4. Mine Safety Disclosures Not applicable. 54 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

3 edited+7 added−2 removed4 unchanged
Biggest changeThis performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any filing of Five9, Inc. under the Securities Act of 1933, as amended, or the Securities Act of 1934 Exchange, as amended.
Biggest changeThe stock price performance on the following graph is not intended to forecast or be indicative of future stock price performance of our common stock. 56 Table of Contents This performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any filing of Five9, Inc. under the Securities Act of 1933, as amended, or the Securities Act of 1934 Exchange, as amended.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information for Common Stock Our common stock trades on The NASDAQ Global Market, or NASDAQ, under the symbol “FIVN.” Number of Common Stock Holders On February 14, 2025, there were 14 stockholders of record of our common stock who held an aggregate of 75,809,562 shares of our common stock.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information for Common Stock Our common stock trades on The NASDAQ Global Market, or NASDAQ, under the symbol “FIVN.” Number of Common Stock Holders On February 13, 2026, there were 13 stockholders of record of our common stock who held an aggregate of 76,495,680 shares of our common stock.
The graph assumes $100 was invested at the close of market on December 31, 2019 in the common stock of Five9, the Russell 2000 Index, and the NASDAQ Computer Index, and assumes the reinvestment of any dividends.
The period shown commences on December 31, 2020 and ends on December 31, 2025. The graph assumes $100 was invested at the close of market on December 31, 2020 in the common stock of Five9, the Russell 2000 Index, and the NASDAQ Computer Index, and assumes the reinvestment of any dividends.
Removed
Purchases of Equity Securities by the Issuer and Affiliated Purchasers None. 53 Table of Contents Stock Performance Graph The graph below compares the cumulative total return on our common stock with that of the Russell 2000 Index, and the NASDAQ Computer Index. The period shown commences on December 31, 2019 and ends on December 31, 2024.
Added
Purchases of Equity Securities by the Issuer and Affiliated Purchasers In October 2025, our Board of Directors approved the 2025 Repurchase Program, which authorized the repurchase of up to $150.0 million of our common stock through December 31, 2027. The shares may be repurchased at management’s discretion, either on the open market or in privately negotiated block transactions.
Removed
The stock price performance on the following graph is not intended to forecast or be indicative of future stock price performance of our common stock.
Added
Management’s decision to repurchase shares will depend on price, blackout periods and other corporate developments. Purchases may occur from time to time and no maximum purchase price has been set. On November 11, 2025, we entered into the ASR program with JPMorgan Chase Bank, National Association, or JPM.
Added
Under the terms of the ASR program, we repurchased $50 million in common stock, with an initial delivery of approximately 1,926,782 shares received on November 12, 2025, representing approximately 80% of the total number of shares expected to be purchased under the ASR program.
Added
The ASR program was completed on February 2, 2026, which resulted in delivery of 701,517 additional shares. The final share settlement was based on the average daily volume-weighted average price of our shares, netted against the initial delivery. As of December 31, 2025, $100.0 million remained available under the 2025 Repurchase Program. See Part II, Item 7.
Added
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” herein for additional information about our share repurchase program.
Added
The following table presents stock repurchases by us during the three-month period ended December 31, 2025: 55 Table of Contents Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs October 1, 2025 - October 31, 2025 — $ — — $ 150,000,000 November 1, 2025 - November 30, 2025 1,926,782 20.76 1,926,782 110,000,000 December 1, 2025 - December 31, 2025 — — — 110,000,000 Total Fourth Quarter 2025 1,926,782 $ 20.76 1,926,782 (1) On November 12, 2025, we received an initial delivery of 1,926,782 shares of our common stock at an initial price of $20.76 per share, representing an initial delivery of approximately 80% of the total number of shares expected to be purchased under the ASR program.
Added
Upon the final settlement of the ASR program on February 2, 2026, we received 701,517 additional shares based upon the average daily volume-weighted average price of our shares, netted against the initial delivery. Stock Performance Graph The graph below compares the cumulative total return on our common stock with that of the Russell 2000 Index, and the NASDAQ Computer Index.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeManagement’s Discussion and Analysis of Financial Condition and Results of Operations 54 Overview 54 Key Operating and Financial Performance Metrics 56 Key Components of Our Results of Operations 57 Results of Operations For the Years Ended December 31, 202 4 and 202 3 59 Liquidity and Capital Resources 61 Contractual and Other Obligations 63 Critical Accounting Policies and Estimates 64 ITEM 7A.
Biggest changeManagement’s Discussion and Analysis of Financial Condition and Results of Operations 57 Overview 57 Key Operating and Financial Performance Metrics 58 Key Components of Our Results of Operations 60 Results of Operations For the Years Ended December 31, 202 5 and 202 4 62 Liquidity and Capital Resources 64 Contractual and Other Obligations 66 Critical Accounting Policies and Estimates 68 ITEM 7A.
Quantitative and Qualitative Disclosure s About Market Risk 66 ITEM 8. Financial Statements and Supplementary Data 68
Quantitative and Qualitative Disclosure s About Market Risk 69 ITEM 8. Financial Statements and Supplementary Data 71
ITEM 6. Selected Financial Data 54 ITEM 7.
ITEM 6. Selected Financial Data 57 ITEM 7.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

64 edited+25 added−16 removed59 unchanged
Biggest changeThe following table shows a reconciliation of net loss to adjusted EBITDA for the periods presented (in thousands): Year Ended December 31, 2024 2023 Net loss $ (12,795) $ (81,764) Non-GAAP adjustments: Depreciation and amortization (1) 52,905 48,515 Stock-based compensation (2) 166,315 206,292 Interest expense 14,812 7,646 Gain on early extinguishment of debt (6,615) — Interest income and other (46,745) (26,799) Exit costs related to closure and relocation of Russian operations 78 2,313 Acquisition and related transaction costs and one-time integration costs 12,303 6,780 Lease amortization for finance leases 3,857 941 Costs related to a reduction in force plan 9,625 — Impairment charges related to closure of operating lease facilities 2,202 — Provision for income taxes (3) 40 2,341 Adjusted EBITDA $ 195,982 $ 166,265 (1) Depreciation and amortization expenses included in our results of operations for the periods presented are as follows (in thousands): Year Ended December 31, 2024 2023 Cost of revenue $ 42,535 $ 38,559 Research and development 2,972 3,583 Sales and marketing 123 65 General and administrative 7,275 6,308 Total depreciation and amortization $ 52,905 $ 48,515 (2) See Note 7 to the consolidated financial statements for stock-based compensation expense included in our results of operations for the periods presented.
Biggest changeWe calculate adjusted EBITDA as net income (loss) before (1) depreciation and amortization, (2) stock-based compensation, (3) interest expense, (4) gain on early extinguishment of debt, (5) interest income and other, (6) exit costs related to the closure and relocation of our Russian operations, (7) acquisition and related transaction costs and one-time integration costs, (8) lease amortization for finance leases, (9) costs related to reduction in force plans, (10) one-time expenses related to strategic consulting services for operational review, (11) other cost-reduction and productivity initiatives, (12) legal fees related to the securities class action, (13) impairment charges related to closure of operating lease facilities, (14) office closure lease termination costs, (15) provision for income taxes, and (16) other items that do not directly affect what we consider to be our core operating performance. 59 Table of Contents The following table shows a reconciliation of net income (loss) to adjusted EBITDA for the periods presented (in thousands): Year Ended December 31, 2025 2024 Net income (loss) $ 39,416 $ (12,795) Non-GAAP adjustments: Depreciation and amortization (1) 61,764 52,905 Stock-based compensation (2) 148,068 166,315 Interest expense 14,076 14,812 Gain on early extinguishment of debt — (6,615) Interest income and other (30,168) (46,745) Exit costs related to closure and relocation of Russian operations — 78 Acquisition and related transaction costs and one-time integration costs 6,245 12,303 Lease amortization for finance leases 8,911 3,857 Costs related to reduction in force plans 8,169 9,625 One-time expenses related to strategic consulting services for operational review 1,265 — Other cost-reduction and productivity initiatives 4,553 — Legal fees related to the securities class action 1,774 — Impairment charges related to closure of operating lease facilities — 2,202 Office closure lease termination costs 95 — Provision for income taxes (3) 5,526 40 Adjusted EBITDA $ 269,694 $ 195,982 (1) Depreciation and amortization expenses included in our results of operations for the periods presented are as follows (in thousands): Year Ended December 31, 2025 2024 Cost of revenue $ 51,792 $ 42,535 Research and development 2,980 2,972 Sales and marketing 69 123 General and administrative 6,923 7,275 Total depreciation and amortization $ 61,764 $ 52,905 (2) See Note 7 to the consolidated financial statements for stock-based compensation expense included in our results of operations for the periods presented.
We offer monthly, annual and multiple-year contracts to our customers, generally with 30 days’ notice required for limited reductions in the number of licenses or the level of consumption or capacity. Increases in the number of licenses or the level of consumption or capacity can be provisioned almost immediately.
We offer monthly, annual and multiple-year contracts to our customers, generally with 30 days’ notice required for limited reductions in the number of licenses or the level of consumption or capacity. Increases in the number of licenses or the level of consumption or capacity can be provisioned almost immediately.
Reduction in Force Plan In August 2024, we announced a reduction in force plan, or the Plan, as part of our broader efforts to drive balanced, profitable growth, further supporting our positive, long-term outlook and focus on increasing stockholder value. The Plan reduced our global full-time employees by approximately 6%.
Reduction in Force Plans In August 2024, we announced a reduction in force plan, or the 2024 Plan, as part of our broader efforts to drive balanced, profitable growth, further supporting our positive, long-term outlook and focus on increasing stockholder value. The 2024 Plan reduced our global full-time employees by approximately 6%.
GAAP, and our calculation of adjusted EBITDA may differ from that of other companies in our industry. We compensate for the inherent limitations associated with using adjusted EBITDA through disclosure of these limitations, presentation of our financial statements in accordance with U.S. GAAP and reconciliation of adjusted EBITDA to the most directly comparable U.S. GAAP measure, net loss.
GAAP, and our calculation of adjusted EBITDA may differ from that of other companies in our industry. We compensate for the inherent limitations associated with using adjusted EBITDA through disclosure of these limitations, presentation of our financial statements in accordance with U.S. GAAP and reconciliation of adjusted EBITDA to the most directly comparable U.S. GAAP measure, net income (loss).
We may also acquire or invest in complementary businesses, technologies and intellectual property rights, such as our recent acquisitions of Aceyus in August 2023 and Acqueon in August 2024, which may increase our use of cash and future capital requirements, both to pay acquisition costs and to support our combined operations.
We may also acquire or invest in complementary businesses, technologies and intellectual property rights, such as our acquisitions of Aceyus in August 2023 and Acqueon in August 2024, which may increase our use of cash and future capital requirements, both to pay acquisition costs and to support our combined operations.
The cost of gross USF contributions payable to the USAC and suppliers is presented as a cost of revenue in the consolidated statements of operations and comprehensive loss. Business Combinations, Goodwill, and Acquisition-Related Intangible Assets Accounting for business combinations requires us to make significant estimates and assumptions.
The cost of gross USF contributions payable to the USAC and suppliers is presented as a cost of revenue in the consolidated statements of operations and comprehensive income (loss). Business Combinations, Goodwill, and Acquisition-Related Intangible Assets Accounting for business combinations requires us to make significant estimates and assumptions.
While the implications of macroeconomic challenges, and global and regional conflicts on our business, results of operations and overall financial position remain uncertain over the long term, we expect that macroeconomic challenges will continue to have an adverse impact on our revenue in future periods.
While the implications of macroeconomic challenges, and global conflicts on our business, results of operations and overall financial position remain uncertain over the long term, we expect that macroeconomic challenges will continue to have an adverse impact on our revenue in future periods.
We record USF contributions and other regulatory costs on a gross basis in our consolidated statements of operations and comprehensive loss and record surcharges and sales, use and excise taxes billed to our clients on a net basis.
We record USF contributions and other regulatory costs on a gross basis in our consolidated statements of operations and comprehensive income (loss) and record surcharges and sales, use and excise taxes billed to our clients on a net basis.
Revenue growth was primarily attributable to our larger customers, driven by an increase in our sales and marketing activities and our improved brand awareness. For each of the years ended December 31, 2024, 2023 and 2022, no single customer accounted for more than 10% of our total revenue.
Revenue growth was primarily attributable to our larger customers, driven by an increase in our sales and marketing activities and our improved brand awareness. For each of the years ended December 31, 2025, 2024 and 2023, no single customer accounted for more than 10% of our total revenue.
In connection with the issuance 61 Table of Contents of the 2029 convertible senior notes, we used part of the net proceeds from the issuance to repurchase approximately $313.1 million aggregate principal amount of our then outstanding 2025 convertible senior notes in privately-negotiated transactions for aggregate cash consideration of approximately $304.9 million.
In connection with the issuance 64 Table of Contents of the 2029 convertible senior notes, we used part of the net proceeds from the issuance to repurchase approximately $313.1 million aggregate principal amount of our then outstanding 2025 convertible senior notes in privately-negotiated transactions for aggregate cash consideration of approximately $304.9 million.
The total net proceeds from the issuance of the 2029 convertible senior notes, after deducting initial purchasers' discounts and commissions and debt issuance costs, were approximately $728.8 million. As of December 31, 2024, the aggregate principal amount outstanding of our 2029 convertible senior notes was $747.5 million.
The total net proceeds from the issuance of the 2029 convertible senior notes, after deducting initial purchasers' discounts and commissions and debt issuance costs, were approximately $728.8 million. As of December 31, 2025, the aggregate principal amount outstanding of our 2029 convertible senior notes was $747.5 million.
We are currently party to the following action: On December 4, 2024, a purported holder of our securities filed a putative class action complaint against us, our Chief Executive Officer, and our Chief Financial Officer in the United States District Court for the Northern District of California alleging violations of Section 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5, promulgated thereunder, based on alleged false and/or misleading statements or omissions regarding us and our business and seeking unspecified damages on behalf of all persons and entities (subject to specified exceptions) that purchased or otherwise acquired our securities, including call options, from June 4, 2024, through the close of trading on August 8, 2024.
We are currently party to the following action: 67 Table of Contents On December 4, 2024, a purported holder of our securities filed a putative class action complaint against us, our then-current Chief Executive Officer, and our then-current Chief Financial Officer in the United States District Court for the Northern District of California alleging violations of Section 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5, promulgated thereunder, based on alleged false and/or misleading statements or omissions regarding us and our business and seeking unspecified damages on behalf of all persons and entities (subject to specified exceptions) that purchased or otherwise acquired our securities, including call options, from June 4, 2024, through the close of trading on August 8, 2024.
For the year ended December 31, 2024, we incurred a total of $9.6 million in restructuring costs under the Plan, primarily consisting of notice period payments, severance payments, employee benefits and related costs, all of which were cash expenditures, of which $2.1 million was recorded in cost of revenue, $1.9 million was recorded in research and development expenses, $4.4 million was recorded in sales and marketing expenses, and $1.2 million was recorded in general and administrative expenses.
For the year ended December 31, 2024, we incurred a total of $9.6 million in restructuring costs under the 2024 Plan, primarily consisting of notice period payments, severance payments, employee benefits and related costs, all of which were cash expenditures, of which $2.1 million was recorded in cost of revenue, $1.9 million was recorded in research and development expenses, $4.4 million was recorded in sales and marketing expenses, and $1.2 million was recorded in 57 Table of Contents general and administrative expenses.
Subscription fees are generally billed monthly in advance, while usage fees are billed in arrears. Subscription fees are recognized on a straight-line basis over the applicable term, which is predominantly the 57 Table of Contents monthly contractual billing period.
Subscription fees are generally billed monthly in advance, while usage fees are billed in arrears. Subscription fees are recognized on a straight-line basis over the applicable term, which is predominantly the 60 Table of Contents monthly contractual billing period.
Liquidity and Capital Resources To date, we have financed our operations, primarily through sales of our solution, net proceeds from our equity and debt financings, including the issuance of our 2029 convertible senior notes in March 2024, issuance of our 2025 convertible senior notes in May and June 2020 and of our 2023 convertible senior notes in May 2018, and lease facilities.
Liquidity and Capital Resources To date, we have financed our operations primarily through sales of our solution, net proceeds from our equity and debt financings, including the issuance of convertible senior notes in March 2024, May and June 2020, and May 2018, and lease facilities.
In the early stages of our larger contracts, in order to allocate the overall transaction fee on a relative stand-alone selling price basis to our multiple performance obligations, we estimate variable consideration to be included in the transaction fee to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.
In order to allocate the overall transaction fee on a relative stand-alone selling price basis to our multiple performance obligations, we estimate variable consideration to be included in the transaction fee to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.
The 2025 convertible senior notes bear interest at a fixed rate of 0.50% per annum, payable semiannually in arrears on June 1 and December 1 of each year, beginning December 1, 2020. The total net proceeds from the offering, after deducting initial purchasers’ discounts and commissions and estimated debt issuance costs, were approximately $728.8 million.
Prior to maturity, the 2025 convertible senior notes bore interest at a fixed rate of 0.50% per annum, payable semiannually in arrears on June 1 and December 1 of each year, beginning December 1, 2020. The total net proceeds from the offering, after deducting initial purchasers’ discounts and commissions and estimated debt issuance costs, were approximately $728.8 million.
Subscription fees are generally billed monthly in advance, while related usage fees are billed in arrears. For the years ended December 31, 2024, 2023 and 2022, subscription and related usage fees accounted for 92%, 92% and 91% our revenue, respectively. The remainder was comprised of professional services revenue from the implementation and optimization of our solution.
Subscription fees are generally billed monthly in advance, while related usage fees are billed in arrears. For the years ended December 31, 2025, 2024 and 2023, subscription and related usage fees accounted for 93%, 92% and 92% our revenue, respectively. The remainder was comprised of professional services revenue from the implementation and optimization of our solution.
There are no claims that we are aware of that could have a material effect on our consolidated balance sheet, consolidated statements of operations and comprehensive loss, or consolidated statements of cash flows.
There are no claims that we are aware of that could have a material effect on our consolidated balance sheets, consolidated statements of operations and comprehensive income (loss), or consolidated statements of cash flows.
We expect that general and administrative expenses will fluctuate in absolute dollars and as a percentage of revenue in the near term, but to increase in absolute dollars and decline as a percentage of revenue in the longer term. 58 Table of Contents Results of Operations for the Years Ended December 31, 2024 and 2023 Based on the consolidated statements of operations and comprehensive loss set forth in this annual report, the following table sets forth our operating results as a percentage of revenue for the periods indicated: Year Ended December 31, 2024 2023 Revenue 100 % 100 % Cost of revenue 46 % 48 % Gross profit 54 % 52 % Operating expenses: Research and development 16 % 17 % Sales and marketing 30 % 32 % General and administrative 13 % 14 % Total operating expenses 59 % 63 % Loss from operations (5) % (11) % Other income (expense), net: Interest expense (1) % (1) % Gain on early extinguishment of debt 1 % — % Interest income and other 4 % 3 % Total other income (expense), net 4 % 2 % Loss before income taxes (1) % (9) % Provision for income taxes — % — % Net loss (1) % (9) % Year-to-year comparisons between 2023 and 2022 have been omitted from this Form 10-K but may be found in “Management's Discussion and Analysis of Financial Condition” in Part II, Item 7 of our Form 10-K for the fiscal year ended December 31, 2023, which specific discussion is incorporated herein by reference.
We expect that general and administrative expenses will fluctuate in absolute dollars and as a percentage of revenue in the near term, but to increase in absolute dollars and decline as a percentage of revenue in the longer term. 61 Table of Contents Results of Operations for the Years Ended December 31, 2025 and 2024 Based on the consolidated statements of operations and comprehensive income (loss) set forth in this annual report, the following table sets forth our operating results as a percentage of revenue for the periods indicated: Year Ended December 31, 2025 2024 Revenue 100 % 100 % Cost of revenue 45 % 46 % Gross profit 55 % 54 % Operating expenses: Research and development 13 % 16 % Sales and marketing 27 % 30 % General and administrative 12 % 13 % Total operating expenses 52 % 59 % Income (loss) from operations 3 % (5) % Other income (expense), net: Interest expense (1) % (1) % Gain on early extinguishment of debt — % 1 % Interest income and other 2 % 4 % Total other income (expense), net 1 % 4 % Income (loss) before income taxes 4 % (1) % Provision for income taxes 1 % — % Net income (loss) 3 % (1) % Year-to-year comparisons between 2024 and 2023 have been omitted from this Form 10-K but may be found in “Management's Discussion and Analysis of Financial Condition” in Part II, Item 7 of our Form 10-K for the fiscal year ended December 31, 2024, which specific discussion is incorporated herein by reference.
We do not expect to incur any additional costs under the Plan. Key GAAP Operating Results Our revenue increased to $1,041.9 million for the year ended December 31, 2024, from $910.5 million and $778.8 million for the years ended December 31, 2023 and 2022, respectively.
We do not expect to incur any additional costs under the 2025 Plan. Key GAAP Operating Results Our revenue increased to $1,149.1 million for the year ended December 31, 2025, from $1,041.9 million and $910.5 million for the years ended December 31, 2024 and 2023, respectively.
Contractual and Other Obligations Our material cash requirements include the following contractual and other obligations. Convertible Senior Notes In May and June 2020, we issued $747.5 million aggregate principal amount of our 2025 convertible senior notes in a private offering. The 2025 convertible senior notes mature on June 1, 2025 and are our senior unsecured obligations.
Contractual and Other Obligations Our material cash requirements include the following contractual and other obligations. Convertible Senior Notes In May and June 2020, we issued $747.5 million aggregate principal amount of our 2025 convertible senior notes in a private offering.
We entered into three-year equipment finance lease agreements and recognized $18.6 million right of use assets during the year ended December 31, 2024, which were reported within "Finance lease right-of-use assets" and are being depreciated on a straight-line basis over the lease term.
We entered into three-year equipment finance lease agreements and recognized $3.9 million right of use assets during the year ended December 31, 2025, which were reported within "Finance lease right-of-use assets" and are being depreciated on a straight-line basis over the lease term.
Customers are not permitted to take possession of our software. We offer monthly, annual and multiple-year contracts to our customers, generally with 30 days’ notice required for limited reductions in the number of licenses or the level of consumption or capacity. Increases in the number of licenses or the level of consumption or capacity can be provisioned almost immediately.
We offer monthly, annual and multiple-year contracts to our customers, generally with 30 days’ notice required for limited reductions in the number of licenses or the level of consumption or capacity. Increases in the number of licenses or the level of consumption or capacity can be provisioned almost immediately.
The 2029 convertible senior notes bear interest at a fixed rate of 1.00% per annum, payable semiannually in arrears on March 15 and September 15 of each year, beginning on September 15, 2024.
The 2029 convertible senior notes mature on March 15, 2029 and are our senior unsecured obligations. The 2029 convertible senior notes bear interest at a fixed rate of 1.00% per annum, payable semiannually in arrears on March 15 and September 15 of each year, beginning on September 15, 2024.
Our future capital requirements will depend on many factors including our growth rate, continuing market acceptance of our solution, the strength of the global economy, customer retention, growth within our installed base, our ability to gain new customers, the timing and extent of spending to support research and development efforts, the outcome of any pending or future litigation or other claims by third parties or governmental entities, the expansion of sales and marketing activities and personnel, the introduction of new and enhanced offerings, expenses incurred in expanding our operations in Portugal, and the effect of the length and severity of the continued macroeconomic challenges, the Russia-Ukraine conflict, and the conflicts in the Middle East, on these or other factors.
Our future capital requirements will depend on many factors including our growth rate, continuing market acceptance of our solution, the strength of the global economy, customer retention, growth within our installed base, our ability to gain new customers, the timing and extent of spending to support research and development efforts, the outcome of any pending or future litigation or other claims by third parties or governmental entities, the expansion of sales and marketing activities and personnel, the introduction of new and enhanced offerings, expenses incurred in expanding our operations internationally, and the effect of the length and severity of the continued macroeconomic challenges, the impact of global tariff increases and potential future increases and announcements regarding same, and current and potential global conflicts, on these or other factors.
In contracts with multiple performance obligations, we identify each performance obligation and evaluate whether the performance obligations are distinct within the context of the contract at contract inception. Performance obligations that are not distinct at contract inception are combined.
We generate all of our revenue from contracts with customers. In contracts with multiple performance obligations, we identify each performance obligation and evaluate whether the performance obligations are distinct within the context of the contract at contract inception. Performance obligations that are not distinct at contract inception are combined.
As a result, we also recognized short-term lease liabilities of $5.9 million within "Finance lease liabilities" and long-term lease liabilities of $12.7 million within "Finance lease liabilities - less current portion" for the year ended December 31, 2024. See Note 13 to the consolidated financial statements included in this report for further details.
As a result, we also recognized short-term lease liabilities of $1.3 million within "Finance lease liabilities" and long-term lease liabilities of $2.6 million within "Finance lease liabilities - less current portion" for the year ended December 31, 2025. See Note 13 to the consolidated financial statements included in this report for further details.
Net cash provided by operating activities was $143.2 million during the year ended December 31, 2024.
Net cash provided by operating activities was $226.2 million during the year ended December 31, 2025.
The 2029 convertible senior notes bear interest at a fixed rate of 1.00% per annum, payable semiannually in arrears on March 15 and September 15 of each year, beginning on September 15, 2024.
The 2029 convertible senior notes mature on March 15, 2029 and are our senior unsecured 66 Table of Contents obligations. The 2029 convertible senior notes bear interest at a fixed rate of 1.00% per annum, payable semiannually in arrears on March 15 and September 15 of each year, beginning on September 15, 2024.
As of December 31, 2024, we had over 3,000 customers across multiple 55 Table of Contents industries with a wide range of license sizes. We had a net loss of $12.8 million, $81.8 million and $94.7 million for the years ended December 31, 2024, 2023 and 2022, respectively.
As of December 31, 2025, we had over 3,000 customers across multiple industries with a wide range of license sizes. We had a net income (loss) of $39.4 million, $(12.8) million and $(81.8) million for the years ended December 31, 2025, 2024 and 2023, respectively.
For example, our installed base business, which contributes a significant portion of our annual revenue growth, continues to experience macroeconomic challenges.
For example, despite increases in up-sells and cross-sells, our installed base business, which contributes a significant portion of our annual revenue growth, continues to experience macroeconomic challenges.
Comparison of the Years Ended December 31, 2024 and 2023 Revenue Year Ended December 31, 2024 2023 $ Change % Change (in thousands, except percentages) Revenue $1,041,938 $910,488 $131,450 14% The increase in revenue for 2024 compared to 2023 was primarily attributable to our larger customers, driven by an increase in our sales and marketing activities and our improved brand awareness.
Comparison of the Years Ended December 31, 2025 and 2024 Revenue Year Ended December 31, 2025 2024 $ Change % Change (in thousands, except percentages) Revenue $1,149,088 $1,041,938 $107,150 10% The increase in revenue for 2025 compared to 2024 was primarily attributable to our larger customers, driven by our sales and marketing activities and our improved brand awareness.
As of December 31, 2024, we had outstanding hosting and telecommunication usage services obligations of $14.6 million, with $6.7 million payable within 12 months, $6.6 million payable within one to three years, and $1.3 million payable within three to five years.
As of December 31, 2025, we had outstanding hosting and telecommunication usage services obligations of $12.5 million, with $5.8 million payable within 12 months, $5.2 million payable within one to three years, and $1.5 million payable within three to five years.
However, we may not be able to raise additional capital through equity or debt financings when needed on terms acceptable to us or at all, depending on our financial performance and condition, economic and market conditions, the trading price of our common stock, and other factors, including the length and severity of the current economic downturn and fluctuations in the financial markets, including due to the Russia-Ukraine conflict and the conflicts in the Middle East.
However, we may not be able to raise additional capital through equity or debt financings when needed on terms acceptable to us or at all, depending on our financial performance and condition, economic and market conditions, the trading price of our common stock, and other factors, including the length and severity of the current challenging macroeconomic environment and fluctuations in the financial markets, including due to the impact of global tariff increases and potential future increases and announcements regarding same, and current and potential global conflicts.
We expect gross margin to increase in the long term despite continued investments in professional services, public cloud, cloud operations, customer support and network infrastructure, as we expect revenue growth in the long term to more than offset these increases.
We expect gross margin to increase in the long-term with long-term revenue growth outpacing continued investments in professional services, public cloud, cloud operations, customer support and network infrastructure.
If we raise additional funds through the incurrence of additional indebtedness, we will be subject to increased debt service obligations and could also be subject to restrictive covenants and other operating restrictions that could negatively impact our ability to operate our business.
If we raise additional funds through the incurrence of additional indebtedness, we will be subject to increased debt service obligations and could also be subject to restrictive covenants and other operating restrictions that could negatively impact our ability to operate our business. Share Repurchase Program As of December 31, 2025, $100.0 million remained available under the 2025 Repurchase Program.
While these areas represent significant opportunities for us, they also pose risks and challenges that we must successfully address, including the impact of continued macroeconomic challenges, the Russia-Ukraine conflict and the conflicts in the Middle East, in order to successfully grow our business and improve our operating results.
While these areas represent significant opportunities for us, they also pose risks and challenges that we must successfully address, including the impact of continued macroeconomic challenges, the impact of global tariff increases and potential future increases and announcements regarding same, and current and potential global conflicts, in order to successfully grow our business and improve our operating results.
Our significant accounting policies are described in Note 1 to the consolidated financial statements. Revenue Recognition Revenue is recognized when control of the promised services is transferred to customers, in an amount that reflects the consideration that we expect to receive in exchange for those services. We generate all of our revenue from contracts with customers.
Our actual results may differ from these estimates under different assumptions or conditions. Our significant accounting policies are described in Note 1 to the consolidated financial statements. Revenue Recognition Revenue is recognized when control of the promised services is transferred to customers, in an amount that reflects the consideration that we expect to receive in exchange for those services.
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations You should read the following discussion in conjunction with the consolidated financial statements and notes thereto included elsewhere in this report. Overview We are a leading provider of intelligent cloud contact centers with more than 3,000 customers.
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations You should read the following discussion in conjunction with the consolidated financial statements and notes thereto included elsewhere in this report. Overview Five9 is a leading provider of the Intelligent CX Platform for enterprise contact centers.
Cost of Revenue Year Ended December 31, 2024 2023 $ Change % Change (in thousands, except percentages) Cost of revenue $477,540 $432,690 $44,850 10% % of Revenue 46% 48% The increase in cost of revenue for 2024 compared to 2023 was primarily due to a $21.0 million increase in depreciation, data center and public cloud costs to support our growing capacity needs, a $10.0 million increase in personnel-related costs, a $6.2 million increase in third-party costs driven by increased customer activities, a $3.1 million increase in amortization of capitalized internal-use software development costs, a $2.9 million increase in USF contributions and other federal telecommunication service fees due to increased customer usage, a $2.7 million 59 Table of Contents increase in lease amortization of finance leases, and a $0.6 million increase in amortization of intangibles, offset in part by a $1.4 million decrease in usage and carrier costs due to lower rates and by a $0.8 million decrease in consulting costs for global expansion.
Cost of Revenue Year Ended December 31, 2025 2024 $ Change % Change (in thousands, except percentages) Cost of revenue $516,234 $477,540 $38,694 8% % of Revenue 45% 46% The increase in cost of revenue for 2025 compared to 2024 was primarily due to a $17.9 million increase in third-party costs driven by increased customer activities, a $6.9 million increase in depreciation, data center and public cloud costs to support our growing capacity needs, a $6.8 million increase in amortization of capitalized internal-use software development costs, a $4.5 million increase in lease amortization of finance leases, a $2.2 million increase in USF contributions and other federal telecommunication service fees due to increased customer 62 Table of Contents usage, a $2.2 million increase in usage and carrier costs due to increased volume, a $1.9 million increase in amortization of intangibles in connection with the acquisition of Acqueon in August 2024, offset in part by a $3.3 million decrease in personnel-related costs primarily driven by a decrease in stock-based compensation costs and by a $0.9 million decrease in office, facilities and related costs.
Cloud Services and Software and Maintenance As of December 31, 2024, we had outstanding cloud services and software and maintenance agreement commitments totaling $38.1 million, of which $20.0 million is expected to be purchased within one year, and $18.1 million is expected to be purchased within one to three years.
Cloud Services and Software and Maintenance As of December 31, 2025, we had outstanding cloud services and software and maintenance agreement commitments totaling $167.0 million, of which $55.4 million is expected to be purchased within one year, $108.1 million is expected to be purchased within one to three years, and $3.5 million is expected to be purchased within four to five years.
We also had outstanding finance lease obligations of $20.8 million as of December 31, 2024, with $8.6 million payable within 12 months and $12.2 million payable within one 63 Table of Contents to three years.
We also had outstanding finance lease obligations of $15.3 million as of December 31, 2025, with $9.1 million payable within 12 months and $6.2 million payable within one to three years.
Gross Profit Year Ended December 31, 2024 2023 $ Change % Change (in thousands, except percentages) Gross profit $564,398 $477,798 $86,600 18% % of Revenue 54% 52% The increase in gross profit for 2024 compared to 2023 was primarily due to increases in subscription and related revenues.
Gross Profit Year Ended December 31, 2025 2024 $ Change % Change (in thousands, except percentages) Gross profit $632,854 $564,398 $68,456 12% % of Revenue 55% 54% The increase in gross profit for 2025 compared to 2024 was primarily due to increases in subscription and related revenues.
We also offer bundled plans, generally for smaller deployments, whereby the customer is charged a single monthly fixed fee per license that includes both subscription and unlimited usage in the contiguous 48 states and, in some cases, Canada. Professional services revenue is derived primarily from Intelligent CX implementations, including application configuration, system integration, optimization, education and training services.
We also offer bundled plans, generally for smaller deployments, whereby the customer is charged a single monthly fixed fee per license that includes both subscription and unlimited usage in the contiguous 48 states and, in some cases, Canada.
In connection with the issuance of the 2029 convertible senior notes, we used part of the net proceeds from the issuance to repurchase approximately $313.1 million aggregate principal amount of our 2025 convertible senior notes. As of December 31, 2024, the aggregate principal amount outstanding of our 2025 convertible senior notes was $434.4 million.
In March 2024, we issued $747.5 million aggregate principal amount of our 2029 convertible senior notes in a private offering. In connection with the issuance of the 2029 convertible senior notes, we used part of the net proceeds from the issuance to repurchase approximately $313.1 million aggregate principal amount of our 2025 convertible senior notes.
We had outstanding operating lease obligations of $53.3 million as of December 31, 2024, with $12.9 million payable within 12 months, $19.1 million payable within one to three years, $13.7 million payable within three to five years, and $7.6 million payable after five years.
We had outstanding operating lease obligations of $61.0 million as of December 31, 2025, with $15.1 million payable within 12 months, $23.4 million payable within one to three years, $20.9 million payable within three to five years, and $1.6 million payable after five years.
We expect estimated variable consideration to continue to not have a material impact on the allocation of transaction fees to multiple performance obligations. 65 Table of Contents The revenue recognition standards include guidance relating to any tax assessed by a governmental authority that is directly imposed on a revenue-producing transaction between a seller and a customer and may include, but is not limited to, sales, use, value added and excise taxes.
The revenue recognition standards include guidance relating to any tax assessed by a governmental authority that is directly imposed on a revenue-producing transaction between a seller and a customer and may include, but is not limited to, sales, use, value added and excise taxes.
Cash Flows The following table summarizes our cash flows for the periods presented (in thousands): Year Ended December 31, 2024 2023 Net cash provided by operating activities $ 143,168 $ 128,838 Net cash used in investing activities (266,550) (259,562) Net cash provided by financing activities 342,725 94,579 Net increase (decrease) in cash, cash equivalents and restricted cash $ 219,343 $ (36,145) Cash Flows from Operating Activities Cash provided by operating activities is primarily influenced by our personnel-related expenditures, data center and telecommunications carrier costs, office and facility related costs, USF contributions and other regulatory costs and the amount and timing of customer payments.
The final share settlement was based on the average daily volume-weighted average price of our shares, netted against the initial delivery. 65 Table of Contents Cash Flows The following table summarizes our cash flows for the periods presented (in thousands): Year Ended December 31, 2025 2024 Net cash provided by operating activities $ 226,207 $ 143,168 Net cash provided by (used in) investing activities 122,305 (266,550) Net cash (used in) provided by financing activities (478,566) 342,725 Net (decrease) increase in cash, cash equivalents and restricted cash $ (130,054) $ 219,343 Cash Flows from Operating Activities Cash provided by operating activities is primarily influenced by our personnel-related expenditures, data center and telecommunications carrier costs, office and facility related costs, USF contributions and other regulatory costs and the amount and timing of customer payments.
The agreements require payments per month for a fixed period of time in exchange for certain guarantees of network and telecommunication availability.
Hosting and Telecommunication Usage Services We have agreements with third parties to provide co-location hosting and telecommunication usage services. The agreements require payments per month for a fixed period of time in exchange for certain guarantees of network and telecommunication availability.
On February 3, 2025, Lucid Alternative Fund, LP moved to be appointed lead plaintiff of this action pursuant to the Private Securities Litigation Reform Act of 1995. We cannot predict the duration or outcome of this lawsuit at this time.
On February 3, 2025, Lucid Alternative Fund, LP moved to be appointed lead plaintiff of this action pursuant to the Private Securities Litigation Reform Act of 1995. On March 18, 2025, the court appointed Lucid Alternative Fund, LP as lead plaintiff and approved lead plaintiff’s selection of lead counsel.
Net cash provided by operating activities resulted from our net loss of $12.8 million, adjustments to reconcile net loss to net cash provided by operating activities of $283.1 million, primarily consisting of $166.3 million of stock-based compensation, $71.5 million of amortization of deferred contract acquisition costs, $52.9 million of depreciation and amortization, $15.4 million of reduction in carrying amount of right-of-use assets, $5.5 million of amortization of 62 Table of Contents issuance costs on our convertible senior notes, a $2.2 million impairment charge as a result of our commitment to close two operating lease facilities and to abandon the associated leasehold improvements and property and equipment, a $1.3 million impairment charge of an equity investment, $(20.8) million of accretion of discount on marketable investments, and a $(6.6) million gain on early extinguishment of debt, partially offset by use of cash for operating assets and liabilities of $(127.1) million primarily due to the timing of cash payments to vendors and cash receipts from customers.
Net cash provided by operating activities resulted from our net income of $39.4 million, adjustments to reconcile net income to net cash provided by operating activities of $317.3 million, primarily consisting of $148.1 million of stock-based compensation, $86.0 million of amortization of deferred contract acquisition costs, $61.8 million of depreciation and amortization, $20.3 million of reduction in carrying amount of right-of-use assets, $4.6 million of amortization of issuance costs on our convertible senior notes, partially offset by use of cash for operating assets and liabilities of $(130.5) million primarily due to the timing of cash payments to vendors and cash receipts from customers and $(7.9) million accretion of discount on marketable investments.
Operating Expenses Research and Development Year Ended December 31, 2024 2023 $ Change % Change (in thousands, except percentages) Research and development $166,197 $156,582 $9,615 6% % of Revenue 16% 17% The increase in research and development expenses for 2024 compared to 2023 was primarily due to a $12.6 million increase in personnel-related costs, a $3.7 million increase in staff augmentation costs, a $3.3 million increase in office, facilities and related allocated costs, and a $1.3 million increase in public cloud development costs, offset in part by a $12.3 million increase in research and development costs (excluding stock-based compensation costs) that qualified for capitalization.
Operating Expenses Research and Development Year Ended December 31, 2025 2024 $ Change % Change (in thousands, except percentages) Research and development $152,334 $166,197 $(13,863) (8)% % of Revenue 13% 16% The decrease in research and development expenses for 2025 compared to 2024 was primarily due to a $16.0 million increase in research and development costs (excluding stock-based compensation costs) that qualified for capitalization, which resulted in a corresponding decrease in research and development costs, and by a $1.2 million decrease in public cloud development costs, offset in part by a $4.0 million increase in personnel-related costs primarily driven by increased research and development headcount and higher salaries, reduced in part by a decrease in stock-based compensation costs.
As a result, we are unable to estimate the reasonably possible loss or range of reasonably possible losses arising from this lawsuit. We intend to vigorously defend ourself in this lawsuit. Critical Accounting Policies and Estimates Our consolidated financial statements are prepared in accordance with U.S. GAAP.
As a result, we are unable to estimate the reasonably possible loss or range of reasonably possible losses arising from this lawsuit. We intend to vigorously defend this lawsuit.
The increase in interest income and other for 2024 compared to 2023 was primarily due to higher interest income on our marketable investments due to higher investable balances and higher interest rates and from an increase in foreign currency transaction gains, offset in part by a $1.3 million impairment charge of an equity investment.
The decrease in interest income and other for 2025 compared to 2024 was due to lower investable balances primarily resulting from cash paid in connection with the maturity of the 2025 convertible senior notes and the repurchase of our common stock, as well as lower interest rates, and an increase in foreign currency transaction losses, offset in part by a $1.3 million impairment charge of an equity investment that occurred in 2024.
Other Income (Expense), Net Year Ended December 31, 2024 2023 $ Change % Change (in thousands, except percentages) Interest expense $ (14,812) $ (7,646) $ (7,166) 94 % Gain on early extinguishment of debt 6,615 — 6,615 (100) % Interest income and other 46,745 26,799 19,946 74 % Total other income (expense), net $ 38,548 $ 19,153 $ 19,395 (101) % % of Revenue 4 % 2 % The increase in interest expense for 2024 compared to 2023 was primarily due to the issuance of the 2029 convertible senior notes in March 2024.
Other Income (Expense), Net Year Ended December 31, 2025 2024 $ Change % Change (in thousands, except percentages) Interest expense $ (14,076) $ (14,812) $ 736 (5) % Gain on early extinguishment of debt — 6,615 (6,615) (100) % Interest income and other 30,168 46,745 (16,577) (35) % Total other income (expense), net $ 16,092 $ 38,548 $ (22,456) 58 % % of Revenue 1 % 4 % The decrease in interest expense for 2025 compared to 2024 was primarily due to the maturity of the 2025 convertible senior notes on June 1, 2025, offset in part by the issuance of the 2029 convertible senior notes in March 2024.
The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, 64 Table of Contents liabilities, revenue, expenses and related disclosures. On an ongoing basis, we evaluate our estimates and assumptions. Our actual results may differ from these estimates under different assumptions or conditions.
Critical Accounting Policies and Estimates Our consolidated financial statements are prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. On an ongoing basis, we evaluate our estimates and assumptions.
Cash Flows from Investing Activities Net cash used in investing activities of $(266.6) million in 2024 was comprised of $1,289.4 million related to purchases of marketable investments, $167.2 million, net of cash acquired in connection with the acquisition of Acqueon, $42.4 million in capital expenditures and $22.2 million in capitalized software development costs, offset in part by $1,254.5 million related to cash proceeds from sales and maturities of marketable investments.
Cash Flows from Investing Activities Net cash provided by investing activities of $122.3 million in 2025 was comprised of $932.1 million related to cash proceeds from sales and maturities of marketable investments, offset in part by $(745.4) million related to purchases of marketable investments, $(39.1) million in capitalized software development costs and $(25.0) million in capital expenditures.
The $3.0 million increase in personnel-related costs was primarily driven by higher salaries, and $4.4 million in restructuring costs related to the Plan, offset in part by a $15.0 million decrease in stock-based compensation costs. 60 Table of Contents General and Administrative Year Ended December 31, 2024 2023 $ Change % Change (in thousands, except percentages) General and administrative $137,550 $123,079 $14,471 12% % of Revenue 13% 14% The increase in general and administrative expenses for 2024 compared to 2023 was primarily due to a $7.9 million increase in costs associated with the acquisition of Acqueon, a $6.0 million increase in personnel-related costs, and a $2.2 million increase in impairment losses as a result of our commitment to close two operating lease facilities and to abandon the associated leasehold improvements and property and equipment, offset in part by a $1.6 million decrease in office, facilities and related allocated costs.
Sales and Marketing Year Ended December 31, 2025 2024 $ Change % Change (in thousands, except percentages) Sales and marketing $311,816 $311,954 $(138) —% % of Revenue 27% 30% The decrease in sales and marketing expenses for 2025 compared to 2024 was primarily due to a $15.0 million decrease in personnel-related costs mainly due to decreased sales and marketing headcount as a result of the 2024 and 2025 Plans and a decrease in stock-based compensation costs, and a $1.3 million decrease in travel costs as a result of reduced business travel, offset by a $14.3 million increase in amortization of deferred contract acquisition costs driven by the growth in sales and bookings of our solution and an increase in overall marketing spend during the period. 63 Table of Contents General and Administrative Year Ended December 31, 2025 2024 $ Change % Change (in thousands, except percentages) General and administrative $139,854 $137,550 $2,304 2% % of Revenue 12% 13% The increase in general and administrative expenses for 2025 compared to 2024 was primarily due to a $1.9 million increase in hosted software costs, a $1.6 million increase in professional costs mainly associated with strategic consulting services, and a $0.5 million increase in personnel-related costs, offset in part by a $2.2 million decrease in impairment losses related to the closure of two operating lease facilities and the abandonment of the associated leasehold improvements and property and equipment that occurred in 2024.
As of December 31, 2024, we had $606.9 million in working capital, which included $362.5 million in cash and cash equivalents, and $643.4 million in marketable investments. Our intent is that all marketable investments are available for use in our current operations, including marketable investments with maturity dates greater than one year from December 31, 2024.
Our intent is that all marketable investments are available for use in our current operations, including marketable investments with maturity dates greater than one year from December 31, 2025. In March 2024, we issued $747.5 million aggregate principal amount of our 2029 convertible senior notes in a private offering.
Cash Flows from Financing Activities Net cash provided by financing activities of $342.7 million in 2024 was related to net cash proceeds of $728.8 million from the issuance of the 2029 convertible senior notes, net of initial purchasers' discounts and commissions and debt issuance costs, $14.8 million from the sale of common stock under our employee stock purchase plan, $0.5 million cash received from the partial termination of capped calls associated with the 2025 convertible senior notes, and $0.5 million of cash proceeds from the exercise of stock options, offset in part by $304.5 million from the repurchase of a portion of the 2025 convertible senior notes, $93.4 million from the payment for capped call transactions associated with the 2029 convertible senior notes, and $4.0 million of payments related to finance leases.
Cash Flows from Financing Activities Net cash used in financing activities of $(478.6) million in 2025 was related to $(434.4) million of cash paid in connection with the maturity of the 2025 convertible senior notes, $(50.0) million of cash paid for the repurchase of our common stock and $(9.8) million of payments related to finance leases, offset in part by $12.5 million from the sale of common stock under our employee stock purchase and $3.1 million from the exercise of stock options.
Macroeconomic Factors We are subject to risks and exposures, including continued macroeconomic challenges, the Russia-Ukraine conflict and the conflicts in the Middle East.
Macroeconomic Factors We are subject to risks and exposures, including continued macroeconomic challenges, the impact of global tariff increases and potential future increases and announcements regarding same, and current and potential global conflicts.
The following table shows our Annual Dollar-Based Retention Rate based on Net Revenue for the periods presented: Twelve Months Ended December 31, 2024 2023 Annual Dollar-Based Retention Rate 108% 110% Our Dollar-Based Retention Rate decreased year-over-year primarily due to continued macroeconomic headwinds on our installed base.
The following table shows our Annual Dollar-Based Retention Rate based on Net Revenue for the periods presented: 58 Table of Contents Twelve Months Ended December 31, 2025 2024 Annual Dollar-Based Retention Rate 105% 108% Our Dollar-Based Retention Rate decreased year-over-year, reflecting a combination of factors, including continued macroeconomic headwinds, as well as year-over-year challenges related to a single large new customer ramping significantly throughout 2024 and seasonal increases being stronger in the second half of 2024, offset in part by ongoing momentum in AI and expansions of larger existing customers in 2025.
We currently plan to use cash to settle amounts due under our convertible senior notes that mature on June 1, 2025.
The 2025 convertible senior notes matured on June 1, 2025, and we settled our obligations with respect to the 2025 convertible senior notes in cash in connection therewith.
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We believe we achieved this leadership position through our expertise and technology, which has empowered us to help 54 Table of Contents organizations of all sizes transition from legacy on-premises contact center systems to our cloud solution.
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With a foundation in our cloud-native solution, Five9 is now evolving into an AI-native CX platform, empowering enterprises to scale seamlessly, innovate faster, and deliver enhanced customer experiences as the market opportunity continues to expand.
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Our solution, comprised of our Intelligent CX Platform and applications, allows simultaneous management and optimization of customer interactions across voice, chat, email, web, social media and mobile channels, either directly or through our APIs.
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Our reliable, secure, and scalable Intelligent CX Platform, powered by our Five9 Genius AI suite, delivers a comprehensive suite of easy-to-use applications that enable the breadth of customer service, sales, and marketing functions. We have become an established leader in the AI-powered CX market with more than 3,000 customers.
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Our Intelligent CX Platform, powered by Five9 Genius AI, matches each customer interaction with an appropriate agent resource and delivers relevant customer data to the agent in real-time through integrations with adjacent enterprise applications, such as CRM software, to optimize the customer experience and improve agent productivity.
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Our Genius AI suite is a comprehensive portfolio of AI solutions that uses Generative AI to power agentic CX. The contact center is the system of record for interactions with full conversation history, and our platform serves as a real-time orchestration engine for every customer interaction across all channels, whether it is with a human agent or an AI agent.
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Unlike legacy on-premises contact center systems, our solution requires minimal up-front investment, can be rapidly deployed and adjusted depending on our customer’s requirements. Since founding our business in 2001, we have focused exclusively on delivering cloud contact center software.
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As a result, our platform is designed to deliver a seamless collaboration between human agents and AI agents, where each interaction strengthens the next. This continuous learning loop compounds over time, creating a powerful data flywheel that drives higher performance, accuracy, and personalization for every customer engagement. We believe this is the structural advantage of our end-to-end AI-powered CX platform.
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We initially targeted smaller contact center opportunities with our telesales team and, over time, invested in expanding the breadth and depth of the functionality of our cloud platform to meet the evolving requirements of our customers. In 2009, we made a strategic decision to expand our market opportunity to include larger contact centers.
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For the year ended December 31, 2025, we incurred no costs under the 2024 Plan. We do not expect to incur any additional costs under the 2024 Plan.
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This decision drove further investments in research and development and the establishment of our field sales team to meet the requirements of these larger contact centers. We believe this shift has helped us diversify our customer base, while significantly enhancing our opportunity for future revenue growth.
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On March 31, 2025, our Board of Directors approved a reduction in force plan, or the 2025 Plan, as part of our broader efforts to prioritize investments in key strategic areas, including AI, as well as to drive profitable growth in supporting our positive, long-term outlook and increasing stockholder value.
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In 2018, we started including AI enhancements to our platform, and AI is now embedded throughout our platform. To complement these efforts, we have also focused on building customer awareness and driving adoption of our solution through marketing activities, which include internet advertising, digital marketing campaigns, social media, trade shows, industry events, telemarketing and out of home campaigns.
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On April 3, 2025, we commenced execution of the 2025 Plan, which resulted in the reduction of our global full-time employees by approximately 4%.
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We calculate adjusted EBITDA as net loss before (1) depreciation and amortization, (2) stock-based compensation, (3) interest expense, (4) gain on early extinguishment of debt, (5) interest income and other, (6) exit costs related to the closure and relocation of our Russian operations, (7) acquisition and related transaction costs and one-time integration costs, (8) lease amortization for finance leases, (9) costs related to a reduction in force plan, (10) impairment charges 56 Table of Contents related to closure of operating lease facilities, (12) provision for income taxes, and (13) other items that do not directly affect what we consider to be our core operating performance.
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During the year ended December 31, 2025, we incurred a total of $7.9 million in restructuring costs under the 2025 Plan, primarily consisting of notice period payments, severance payments, employee benefits and related costs, all of which are cash expenditures, of which $1.6 million was recorded in cost of revenue, $1.9 million was recorded in research and development expenses, $3.4 million was recorded in sales and marketing expenses, and $1.0 million was recorded in general and administrative expenses on the consolidated statements of operations and comprehensive income (loss).

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeWe have not utilized derivative financial instruments, derivative commodity instruments or other market risk sensitive instruments, positions or transactions in any material fashion, except for the privately negotiated capped call transactions entered into in May and June 2020 related to the issuance of our 2025 convertible senior notes and entered in March 2024 related to the issuance of our 2029 convertible senior notes. 66 Table of Contents Foreign Currency Risk The functional currency of our foreign subsidiaries is the U.S. dollar.
Biggest changeWe have not utilized derivative financial instruments, derivative commodity instruments or other market risk sensitive instruments, positions or transactions in any material fashion, except for the privately negotiated capped call transactions entered into in March 2024 related to the issuance of our 2029 convertible senior notes. Foreign Currency Risk The functional currency of our foreign subsidiaries is the U.S. dollar.
Additionally, we carry the convertible senior notes at face value less unamortized discount on our consolidated balance sheets, and we present the fair value for required disclosure purposes only. Our convertible senior notes bear fixed interest rates and, therefore, are not subject to interest rate risk.
Additionally, we carry the 2029 convertible senior notes at face value less unamortized discount on our consolidated balance sheets, and we present the fair value for required disclosure purposes only. Our 2029 convertible senior notes bear fixed interest rates and, therefore, are not subject to interest rate risk.
The interest and market value changes affect the fair value of the convertible senior notes but do not impact our financial position, cash flows or results of operations due to the fixed nature of the debt obligations.
The interest and market value changes affect the fair value of the 2029 convertible senior notes but do not impact our financial position, cash flows or results of operations due to the fixed nature of the debt obligations.
Our sales are primarily denominated in U.S. dollars and, therefore, our revenue is not directly subject to foreign currency risk. However, we are indirectly exposed to foreign currency risk. A stronger U.S. dollar makes our solution more expensive outside the United States and therefore can reduce demand. A weaker U.S. dollar could have the opposite effects.
Our sales are primarily denominated in U.S. dollars and, therefore, our revenue is not directly subject to foreign currency risk. However, we are indirectly exposed to foreign currency risk. A stronger U.S. dollar makes our solution more expensive outside the United States and therefore can reduce demand. A weaker U.S. dollar could have the opposite effect.
The fair values of the convertible senior notes are subject to interest rate risk, market risk and other factors due to their conversion features. The fair value of the convertible senior notes will generally increase as our common stock price increases and will generally decrease as our common stock price declines.
The fair value of the 2029 convertible senior notes is subject to interest rate risk, market risk and other factors due to their conversion features. The fair value of the 2029 convertible senior notes will generally increase as our common stock price increases and will generally decrease as our common stock price declines.
A hypothetical 100 basis point change in interest rates would not have a material impact on the value of our cash and cash equivalents or marketable investments. As of December 31, 2024, the aggregate principal amount outstanding of our convertible senior notes was $1,181.9 million.
A hypothetical 100 basis point change in interest rates would not have a material impact on the value of our cash and cash equivalents or marketable investments. As of December 31, 2025, the aggregate principal amount outstanding of our 2029 convertible senior notes was $747.5 million.
During the year ended December 31, 2024, the effect of a hypothetical 10% change in foreign currency exchange rates applicable to our business would have a maximum impact of $10.6 million on our operating expenses. 67 Table of Contents
During the year ended December 31, 2025, the effect of a hypothetical 10% change in foreign currency exchange rates applicable to our business would have a maximum impact of $12.9 million on our operating expenses. 70 Table of Contents
Our market risk exposure is primarily a result of fluctuations in interest rates and foreign currency exchange rates. We do not hold or issue financial instruments for trading purposes. Interest Rate Sensitivity We had cash and cash equivalents, and marketable securities totaling $1,006.0 million as of December 31, 2024.
Our market risk 69 Table of Contents exposure is primarily a result of fluctuations in interest rates and foreign currency exchange rates. We do not hold or issue financial instruments for trading purposes. Interest Rate Sensitivity We had cash and cash equivalents, and marketable securities totaling $696.9 million as of December 31, 2025.
Such economic exposure to currency fluctuations is difficult to measure or predict because our sales are influenced by many factors in addition to the impact of currency fluctuations.
Such economic exposure to currency fluctuations is difficult to measure or predict because our sales are influenced by many factors in addition to the impact of currency fluctuations. Our operating expenses are generally denominated in the currencies of the countries in which our operations are located.
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Our operating expenses are generally denominated in the currencies of the countries in which our operations are located, except for Russia where compensation of our employees was primarily denominated in the U.S. dollar. In March 2022, we made a decision to close our Russia office in June 2022 and to establish a new European development center in Portugal.

Other FIVN 10-K year-over-year comparisons