Five9, Inc. (FIVN) Earnings Call Transcript & Summary

All right. Good afternoon, everyone. Thank you for joining us here today at the Morgan Stanley TMT Conference. My name is Jamie Reynolds, and I'm here on behalf of Elizabeth Porter. Very pleased to have with us here today, Five9's CEO, Amit Mathradas, CFO, Brian Lee, and President, Andy Dignan. Before we get started, for important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please direct them to your Morgan Stanley sales representative. And with that, let's get started. Amit, starting with you, you're new to the CEO role at Five9. So to start us off, can you walk us through just what drew you to this opportunity?

Yes, all of 4 weeks. Super excited. Look, there were two things that had me perk up when the opportunity presented itself. One, I think, is, obviously, as you all may be seeing, like what is happening in the CCaaS and the CX space, right? My belief is very squarely that humans, agents, software systems are coming together to really transform what's happening in this space. And in fact, deliver new experiences, just like what happened with the Internet when retail came -- sorry, the retail when the Internet came along, which was, hey, new experiences like buy online, pick up in store, new kind of end-to-end capabilities that customers haven't even realized right now. And so for me, wanting to be a part of that new horizon was super exciting. And obviously, I believe interactions are going to rapidly go up because of this. And the second component was doing it with a company like Five9, one that has pioneered a lot of what's happened in CCaaS and cloud, one that has already extended into the new world of CX and AI, and being a part of that journey, and we've already put points on the board with $100 million of AI ARR coming together with our CCaaS growth, that's an exciting place to be. And so those are the two things that brought me here.

That's great. And prior to Five9, you spent time at Avalara and Nintex. Can you walk us through what you did at those companies and how that experience is relevant to the opportunity you see here?

So very different experiences. Avalara was a company I walked into that had hit $300 million, had a strong product base, but really was one that needed the next inflection point, right? Looking at how do you take this business, go drive growth, scale and efficiency, and it was really about bringing the next level of focus, assembling the team, thinking about the right partnerships, thinking about the right ways to market and go-to-market. And next thing you know, we're close to $1 billion in 4 years and accelerating. Nintex was a little bit different. That was a company that had a toolkit of automation tools, needed a fresh set of eyes on how do you actually adapt that for an AI world? How do you actually bring together a product platform with AI surging through the products and around the products to make it a magnifier, and a lot of that was shifting the business from being automation into orchestration. And that was really the work that had to happen. And so when I think about Five9, to me, I think it's a little bit of a combination of both of them. Right? We've got to be thinking about how we take this business to the next horizon of scale, next horizon of efficiency and how do we do it with the changing world of AI around our product set and couple those together to build a durable business.

Got it. And so then just following up on that, what are your top priorities thinking out over the next 90 days?

Yes. Well, 30 days down. Look, the way I describe myself is, I'm a strategic operator, right? I didn't come up with Five9. I didn't come up with the CCaaS concept. In fact, I didn't come up with any of the companies that I've been at. But as I mentioned, where I get brought in is really about the time when we need to look at the problem a little differently and say, how do you go drive scale, growth through an efficient model. And so another way of actually thinking about it is, I would say, capital allocation. How do we put our pennies on the things that really matter and are built to go drive growth and scale? And how do you make room for that from things that are not strategic or not important. So where I've been spending my time right now is on three major areas. One, is the revenue acceleration. How do we continue staying focused on that? We've got a great set of customers, great set of products, AI products that have already taken off. And how do we continue to keep our eye on that. To be enabled to do that, the second part of that or the second leg of that stool is, operational excellence and discipline. Are we set up the right way? Do we have the right organizational design? Do we have gaps we've got to fill? Are there focus areas that we've got to go double down on such as our Google partnership or other pieces that we need to look at? And the third component of that is how do we then, once we've got these two pieces thought through and the framework thought through, then apply our capital into the areas that we need to double down on. And so really follow through on that capital allocation and think about it from that lens. So that's where my first 90 days is focused on.

Got it. So maybe transitioning to the business outlook. Your guidance implies a meaningful step-up in revenue in the second half of 2026. So Bryan, can you walk us through the forecast construct and what underpins that inflection in terms of what are you seeing in the core? And how does that compare to your expectations on the AI side? And then, Andy, perhaps you can provide some color on the deployment schedules and process that support that?

Yes. So I'll go ahead and start. So if you look at our backlog, it has grown significantly year-over-year going into 2026. And it's comprised of both new logo bookings and installed base bookings that we've already won and that's converting to revenue throughout the year. And every customer in that backlog has a unique schedule ramp, and it happens to be much more back-end loaded, which is why it's underpinning that acceleration to double-digit growth in the second half of '26. And if you break that down between core CCaaS subscription and Enterprise AI, we exited Q4 '25 at 8% growth for core CCaaS, which is an acceleration from 7% the quarter before. And we expect the shape of the curve to be relatively similar to the total revenue guide that we gave for the year. And then if you back into the Enterprise AI subscription piece of it, that grew -- accelerated from 41% in Q3 to 50% in Q4, and we expect that to continue growing at a very fast clip, although it may ebb and flow a little bit throughout the year.

Yes. I can add in, we always like to say we run our deployment process kind of like a sales forecast, right? Our services teams that are out there in the field, you could be running 10 projects. You have to forecast for the quarter, what that ramp schedule looks like. And that's how their bonus, that's how they're focused. They realize how important the forecasting is, and they have a very tight process with the finance team. So we feel really good about that methodology that's been in place for quite some time now.

Got it. And so then, Andy, you saw really impressive momentum in fiscal '25 on the bookings side with installed base bookings hitting all-time highs, I think, for 3 consecutive quarters. Can you walk us through what's driving that strong performance in your existing customer base? And then more broadly, as you look at the strong bookings you delivered throughout the year, particularly the Q4 record, how should we think about the sustainability of this momentum as we head into 2026?

Yes. So look, if you go back to Q2 '24, we talked about changes that we made in our installed base sales motion. We put more hunters into the base. We kind of retooled our customer success motion. And that was really intentional from the fact that what we saw was, our product and engineering innovation, we are starting to bring more products to bear, right? Our customers were asking for more of our solutions, wanted us to focus more on outcomes. And so it takes time when you make those changes, and there's obviously a sales cycle that happens. I think it was perfect timing rolling into record bookings in the installed base for 3 quarters in a row, right, in Q2, 3 and 4 in 2025. And so we feel good about that continuing to go forward. What gives me even more confidence is the fact that our product teams continue to innovate further. We continue to double down on partnerships like our Google partnership. So we feel good about the momentum in the installed base business continuing to be strong in the future.

And so sticking with the go-to-market side of things, I think you mentioned that more than 80% of Five9's business is partner influenced today. The partnerships with Salesforce and ServiceNow seem to be on firm footing, but you also just announced an expansion of the Google relationship. So it'd be great to get a sense of how you view the opportunity for the expansion with Google? And then more broadly, where you see the biggest incremental opportunity within the partner set over the next 12 months?

Yes. Look, if you look at Google, going back 7 years ago, we made a bet on modernizing our platform to the Google Cloud Platform. And we've continued to innovate our products on top of the Google solution. And then if you go back to Q2 '25, we announced that we got into the Google Global Marketplace, right? And ultimately, what we saw in the market is joint success. So originally, we were sort of bumping into each other in opportunities. And then it became with the Google Marketplace partnership, that accelerated even faster, which then led to our big announcement this January of an even deeper joint partnership. And so if you look at the press release, it was very intentional that we said we're focused on our joint opportunities in the pipeline that we're building in the large enterprise. Right? If you look at the 60% of the CCaaS TAM that's out there, right, a lot of it's large enterprise. And so we've already seen success. And so we think that's just going to be an accelerant to growing our core business, but also the AI business. And that's probably the biggest partnership we're going to double down in 2026.

Got it. And so then from a vertical perspective, healthcare and financial services seem to be strong verticals for Five9. Are there specific vertical markets where AI adoption is moving faster than others?

Yes. I mean our three biggest verticals are financial services, healthcare and retail. But really, financial services and health care are where we see the highest adoption from an AI perspective. I think it's for a couple of reasons. Anyone who's been in the business for a while, if you just look at classic self-service companies like Nuance, a lot of these large financial services and healthcare deployed, I would call them, not great experiences of voice bots, chat bots. And what they're seeing now is as they're moving off of on-prem self-service solutions, they're looking at, hey, how do I move this entire workload that I've been doing for quite some time. We've all used to -- at a financial services company, a voice bot or a chat bot hasn't been great historically. So they're really focused on moving off of those prem solutions to cloud AI solutions. And that's kind of step one. And then that allows them then to move into other workloads from an AI perspective a lot faster. So those are the two verticals that are coming along nicely.

Got it. And so then going back to some of the outlook part of the discussion, Bryan, I know you mentioned given some detail on the organic growth in concurrent seats. But is there anything we need to factor in when looking at the impact of the Acqueon acquisition that might have lifted things above kind of the typical growth rate? And then, Andy, what are you seeing in the competitive environment broadly and then especially on pricing, both for the AI side of things as well as the core?

Yes. So I'll go ahead and get started. So in Q4 '24, we disclosed that we had concurrent agent count of 432,000, and that was including the inorganic contribution of Acqueon. Now fast forward to Q4 '25, we said that concurrent seat count grew healthily quarter-over-quarter, year-over-year, relatively in line with core CCaaS subscription revenue, which grew 8%. So I think the best way to contextualize that is if you look at subscription revenue per seat on a year-over-year growth basis, going back historically, a vast majority of the periods grew consistently in the single digits year-over-year. And that includes Q4 '25 as well as Q4 '24, if you look at it on an organic basis.

Yes. And in terms of pricing in the competitive market, I mean, look, pricing is always a strategic lever in a SaaS company, right? And we actually just came back from our Customer Advisory Board last week and some of our largest and most longest tenured customers. And what we're seeing in the market from some of these point AI solutions there's a lot of testing of different models, right, outcome-based, interaction-based. That's -- I think one of the areas where obviously us being a CCaaS company, a lot of domain expertise, it's really around predictability, right? And so we feel good about our pricing models now and it's predictability with upside and value. And so a couple of things that we've done here recently. We launched new bundles to give our customers access to the full portfolio, right? Our classic CX Solutions as well as our AI Solutions. And then what we did is couple that with moving to -- and this is both for our new logo business and our installed base, moving to a minimum revenue commit model. And what customers like about that is a lot of our -- we've talked about this in our earnings calls the last couple of quarters. We're seeing customers that purchased 3 to 5 years ago, they're coming up for renewal. They're making a decision on their next 5 years of CX and AI, right? And so they're moving to this minimum revenue commit model, which then allows them to have a level of comfort that if over time, there are some reduction in human seats, right, that will naturally then get filled with AI seats. And we feel good about that, the protection that will give them, but also gives us upside. And we didn't -- it's not sort of just a pricing play, right? It's really value. And so if you're a large enterprise company and you're making a bet on CX and AI over the next 5 years, you have to really believe in the AI solutions that we're bringing to market today and the road map into the future. So I think that's all coming together and setting us up for high upside and better predictability for Bryan.

Got it. And so then following up on that point, as it relates to competing against the AI native start-ups in the space, what's your pitch to a CIO who's concerned one of these newer point solutions versus building on Five9?

I mean, look, this is -- we talked about the platform advantage of having a CCaaS solution also being your AI solution. I mean, look, depending on the side of the aisle that you're on, if you believe that humans are still going to be involved, I mean, we certainly believe that it's more about AI agents and human agents working together, right? Amit talked about our core belief is that interactions are going to go up with AI. And when you think about interactions today in the future, it could be -- it starts with a human, goes to an AI agent, might come back to a human agent. And having all of that on a single platform allows you to have a single data set, a single governance model. A lot of our -- a lot of companies have come off of what we call the SaaS sprawl, right, a lot of point solutions out there. They're trying to not recreate that same problem to have to unwind with 15 different AI point solutions. And so we feel good about the path we're heading down towards the future. And then we're also starting to see, we've talked about this as well in some of our earnings calls, is we're starting to see companies who made a decision to go with someone's point solutions AI a couple of years ago. They're now coming to wanting to put more workloads in AI and they're realizing that, hey, that platform [ advantage ] are coming back to moving to our AI solutions. And so that's kind of how we're dealing with the market.

Got it. And then Bryan, turning back to you. How should we be thinking about DBRR here? It sounds like it picked up a little bit in Q4, but I think the reported number was down 2 points granted that, that is like a trailing 12-month number. So just any puts and takes there?

Yes. So if you look at the spot DBRR rate in Q4, it actually stepped up quarter-over-quarter, and that was mainly driven by the conversion of our installed base bookings and backlog into revenue during the quarter. Of course, if you look at it on a last 12-month basis, it did step down from 107% to 105%. In actuality, it was a little bit over 1 percentage point. And that was mainly due to the LTM calculation where we're dropping off Q4 '24 that had benefited from really strong seasonality, especially on the telecom side. At that time, it stepped up as a percent of revenue by 1 percentage point. If you fast forward to Q4 '25, it was anticipated that it would be much weaker, and it did step down as a percent of revenue by 1 percentage point there as well. But if you look at DBRR going forward, we expect stabilization in the first half with some minor fluctuations in either direction, but then an inflection upward in the second half of the year.

That's great. And so then, Amit, turning back to you. In your first few weeks meeting with customers, what are you hearing about their priorities and how they're thinking about their contact center?

As Andy just mentioned, I was really fortunate last week to be down in San Diego meeting with our CAB or Customer Advisory Board, and that's our largest as well as some of our longest tenured customers. Look, our customers are in two buckets. One, a lot of our midsized customers have already tested out AI. They may be kind of expanding with their POC or adding the next component of it. And the second bucket is our larger enterprise customers who are now finally lifting their heads and saying, okay, I'm over -- like the hype cycle is over. Let's start thinking about what AI looks like and what that first deployment is? What I found really fascinating is, and one of my thesis coming in was, the unifying factor for them both was they don't want to do this through multiple, multiple vendors. Look, a lot of the CIOs there were like folks, we have just coming off a post-COVID SaaS sprawl cleanup. We don't want to go back into an AI cleanup with 15 different vendors doing point solutions. The other big thing that once we talked about the platform and the power of the platform, you had a bell go off or a lightbulb go off because think about what the platform really allows you to do with AI. We can go launch AQM or Agentic Quality Management. The output from that becomes the input for Agent Assist, right, all running on the same data. So you've got a customer that says, "Hey, all these agents are struggling with this piece, and we see that in quality management. Next time Agent Assist goes up and serves up a solution to an agent, make sure they answer this part of it because we just caught it. You can't do that with point products, especially as they're sitting on different unification in different platforms and data pools. The other big thing that is coming up is really about them wanting us to invest both in CCaaS and in the AI play. And when I talk about CCaaS, not the bells and whistles and the functionality, sure, there is some of that. But it's really about how do you integrate and build the connection points so that your CCaaS engine can support all this AI tooling around it to be the 1 plus 1 equals 3. And so that was a clear feedback that we got and what -- where they want to see the investments going.

Got it. And so realizing you're still new in the seat. But when you look at the product road map, what excites you the most looking out over the next year?

Look, when I first came in and the product was presented, I was like, hey, this sounds exciting. But now coming off what customers are saying, it really is exciting because the team has already started investing in AI feature functionality for core CCaaS, such as things like AI agents for voice, agentic routing and investments into the new CX space such as AQM, analytics and all the pieces coming together. And so what really excites me is, hey, we're already off to the races. And this is not theoretical anymore, right? We've already generated $100 million of ARR in our AI features, and it's actually growing at a really healthy clip. And so you couple that and start adding things like orchestration and other pieces around it, and it's an exciting space to be.

And so to pick up on the $100 million of AI ARR detail, and I think it accelerated to 50% year-over-year growth in the fourth quarter. Bryan, can you break down what types of products kind of comprise that mix? And then, Andy, how do you expect that to evolve in 2026 relative to 2025?

Yes. So if you look at the $100 million of annualized subscription revenue for Enterprise AI, the biggest portion of that is AI Agent, followed by Agent Assist. And then we have a number of other products that are smaller but growing very quickly in that portfolio.

Yes. How I look at it playing out in 2026, we announced in November at our CX Summit, our new Agentic AI agent solution. To Bryan's point, that continues to be the biggest TAM or the market, right? We also announced our Agentic Quality management solution coming in the second half. So we think that will start to have a more meaningful impact. And if you look at both AQM and AI Agent as well as our AI Insights product, which is we go to our customers, we can turn on, AI listening to all the conversations, which allows us to understand where are the key pain points happening in the business and deploy that quickly into an AI agent and what I guess the quality management allows you to do is manage those interactions across AI agents and human agents. So it really comes back to we think the future looks like AI agents and human agents working together. And our R&D focus is really around that connectivity issue.

Got it. And so going back to some of the model-type of questions. Obviously, Q4 solid quarter, reiterated 2026 guidance. Bryan, can you -- I think you noted how the guidance does not require any go-get revenue. Just can you elaborate on that a little bit more?

Yes, definitely. So if you look at our guide, it implies $105 million of incremental revenue to get to the midpoint at $1.254 billion. And I talked earlier about LTM DBRR exiting the year at 105%, stabilizing in the first half and then inflecting upward in the second half. So let's just conservatively assume that DBRR on average is 106% for the year. That basically contributes 2/3 of that $105 million. And the remaining 1/3 is fully covered by the backlog that we have, which we have great visibility into, which essentially means that there's no dependency on new logo go get bookings in 2026. So that's what's underpinning our guidance.

Got it. And so then on the margin side, I think the 2026 adjusted EBITDA margin guidance is around 24%. That's a little bit more of a modest pace of expansion after you drove margins about 4 points higher in 2025. I guess just what's driving that slowdown in the pace of margin expansion?

Yes. If you look at 2025 on an annual basis, it did step up over 400 basis points. We did have two workforce reductions that were impacting 2025 margins. One was in August of '24, so you got the full year benefit of that as well as another one in April 2025. Now we remain laser-focused in terms of going after different cost savings initiatives. Some of the key ones include increasing the mix of offshore hiring, automation throughout the organization, third-party spend renegotiations and the list goes on. But at the same time, we are surgically investing in key areas like AI and go-to-market to drive top line acceleration and continued long-term growth. And when you net all of that out, our guidance comes out to at least 24% EBITDA margin for the year.

Got it. And so then sticking with profitability, you achieved positive GAAP earnings for the first time on a full year basis in fiscal 2025. How should we think about the trajectory of GAAP profitability and stock-based compensation as a percentage of revenue going forward?

Yes. So GAAP profitability on an annual basis in '25 was positive for the first time, as you mentioned. We are expecting that momentum to continue, which is why if you look at the midpoint of our GAAP net income guidance, it's expected to double year-over-year to $80 million. And there are really two components to it. One, is the cost savings initiatives that we've been executing on. The other is stock-based comp, which we have been very much focused on bringing down as much as possible. So if you look at the annual stock-based comp as a percent of revenue in 2024, it was 16%, then it dropped to 13% in 2025, and in our guidance, we're expecting 11% in 2026, and we'll continue to focus on bringing that down further in the long run.

Got it. Maybe take a moment here to pause and see if there's any questions from the audience. Okay. Amit and Andy, just maybe a higher-level question for you guys. Investor sentiment towards the CCaaS sector has been under pressure for a while, even as Five9 and some of your peers have spoken positively about the AI opportunity. When we do our checks, we consistently hear steady optimism from the channel partners. I guess where do you think that disconnect is coming from? And what needs to happen to bridge that gap?

Look, I'm not going to speak on behalf of what investors are getting right and wrong, but I can tell you what my thesis is and why I am here. I think there are two things you have to believe for this space to be really vibrant. One is that human agent, systems, software, AI are going to work together to actually deliver outplaced experiences for end users and new and efficient ways of go-to-market. You have to believe that calls may start with AI, move to a human, come back to AI, go back to digital, and that in itself, that orchestration is going to drive interactions dramatically up. That's one. And two, you really have to believe that a customer is not going to go solve that with 15 different point solutions of AI, where they have -- where all these vendors have different methodologies, different back ends, different ways of solving the problems, and you're leaving it up to the customer to stitch together the CX experience they want to bring. This is the power of the platform. This is truly where agentic software systems come together to unlock something that you will not be able to get. That are the two -- those are the two big pieces that I think from where I sit, you have to believe. And if for companies like Five9, if you can play in the traditional CCaaS space and you can play in the AI space, the combined TAMs are growing. And just like what we are showing, which is, hey, you're seeing core CCaaS being healthy and ticking along and you're seeing AI really pick up. And so the models that Andy is talking about on minimum revenue commits really pays off because as and when customers see human seats flatline or come down, it's made up by the other side, which is catching, which is AI. And if you're solving both of them together and connecting it, it just is a robust long-term business. And so that's the piece for me, which -- where my head is at and why I'm so excited about what we're doing in this space.

Yes. And the only thing I would add, I mean, look, I've been in the space for 27 years. We've sort of navigate a lot of the CCaaS or contact center space with pre-routing to on-prem to IP on-prem to cloud. and now AI through all of those transition points, the one thing that remains true is, interactions have gone up. And I think that, coupled with we're one of the software spaces is that's the closest to our customers and customers. And I think that's a powerful place to be, a lot of domain expertise, and it requires both tech and experts and partnerships. And again, I think that is playing out again in this kind of AI wave with interactions going up and delivering both human agents and AI agents, is a strong point of our focus.

Got it. And so then just to follow up there. I mean, like where do you think the argument is most flawed today in terms of either the number of agents that potentially get cut or kind of the CCaaS provider that eventually benefits? And then why do you ultimately believe that Five9 is best positioned relative to competitors? I know we talked about some of the AI native start-ups, but thinking about some of the larger scale peers in the space.

Look, I'll take a stab and Andy add a little bit. Look, one of the things we have already started to see is, some of our customers that started on point solutions coming back when we have launched our AI capabilities. So we're already starting to see that the shift back towards a platform has already started for all the reasons we are flagging. The other piece that I think when you're talking about flawed -- look, I have to believe that over time, human agents will come down and AI will solve some of the pieces, not all, some of the pieces. In fact, in some industries, it's regulated that it has to be tied to a human. But I think the -- for me, it's not the flaw. I think it's a model you have to believe in, which is it's not a zero-sum game, and that humans will be around whether in standard capacity or oversight capacity, AI will serve a purpose, digital will serve a purpose, humans are going to serve a purpose and the connection of what happens there is really the unlock. And so I think that's really what you have to get comfortable and get your -- our heads around. And for me, that is what we are building towards.

Yes. Look, we can get a lot of feedback from a lot of listening posts, but I always put the most focus on what our actual customers are telling us both with words as well as what they're doing in terms of purchasing our applications and leveraging it. And I go back to what we've been talking about is our existing customers, yes, they're making bets on us for the next 5 years. They're making big bets on how they engage with their customers, how they use CX, how they use AI. And what they're telling us is, yes, over time, they're modeling in 5% to 15%, I think, is the general number out there, again, over time. Many of them aren't seeing that happen out of the gate. But I think we're building the right products, and we have the right go-to-market that's allowing our customers to go on that journey with us to ultimately allow them to have the outcomes that they need and that will ultimately bring us the outcomes we need as well.

And just to follow up on that point, I think you guys have provided some pretty compelling examples in the slide deck in terms of the amount of sort of incremental spend that you capture even when a customer kind of meaningfully reduces the seat base. Can you just remind us sort of like what the average kind of uplift is in more of those like 15%, call it, seat reductions?

Yes. So usually, we've actually given several examples over the last 3 or 4 quarters where Typically, a customer that purchases AI and deploys it for over 1 year, their overall ARR growth has been somewhere between 20%, 30%, 40% type ranges. So they see the value, and that's what's driving that ARR increase regardless of what the human seat count may be versus what the AI portion is. And I think to Andy's point, the revenue commit model really gives them that flexibility going forward as well, which is very well received by our customers.

Great. And so if we step back and just look at the overall market opportunity, I think third parties kind of cite that 40% of enterprise contact centers have made the shift to the cloud, leaving the remaining 60% to go. I guess just are these customers getting easier or harder to move? And is AI accelerating their decision to migrate? And are you kind of seeing any competitive displacements when those decisions happen?

Yes. Look, if you look at -- so 60% of the market is still out there, right? And what everyone -- even if there is a reduction in seats, we're a winner of every seat that moves over, right? And if you look at what makes up the largest portion of that 60%, it is the larger enterprise, right? And so yes, there's naturally -- there is a switching cost that's there. Now some of those switching costs are coming down, but largely because of tools that we've built because we understand how to integrate to some of these on-prem solutions that are out there, kind of pull out the configurations and then move those into on-prem -- or sorry, into our cloud platform. One of the things we are starting to see, but in a kind of a smaller percentage of customers say, "Hey, maybe I'll wait for that transition, and I'll go with your AI-first movement". And so we've had deals lately where we have landed the AI-first, but with a fast follow of the on-prem to CCaaS migration. But I would say in the majority of the time, there are customers who start there. But historically, the model was let's move you to the cloud, then let's start letting you take advantage of AI. We worked really hard with our -- within our products, within our processes and our services teams and our partners. They can move from on-prem to cloud and take advantage of AI at the same pace. So at the end of the day, they're not getting security patches and new features and new functionality, managing these on-prem platforms. So I think that's still going to be the majority of customers will make that decision. But we're also able to handle customers who say, I want to start with AI first and then follow with the transition later.

And Bryan, maybe for you, it'd be great to just kind of get a sense of what your latest thoughts on capital allocation are? Particularly in the context of the accelerated share repurchase program that you announced in the third quarter.

Yes. So we announced an inaugural share repurchase program of $150 million expiring over 2 years. We just completed the first $50 million through an accelerated share repurchase program that ended in February. So going forward, we'll continue to have that optionality to buyback shares, but we'll look at it from the context of a balanced capital allocation strategy between organic and inorganic investments as well as buybacks to maximize shareholder value.

And then maybe one for the group to just close it out, going back to some of the things we were talking about earlier. What is the biggest thing you think investors are kind of misunderstanding about this market opportunity and kind of like what has you most excited for the rest of the year?

Yes. I mean, look, I think we've been talking about it, right? I mean there's -- we have a big CCaaS TAM. And if you look at the AI TAM coming together, I think that our overall TAM is sort of a 1 plus 1 equal 3. And I think with our focus on our customers being able to take advantage of CX and AI and really leveraging our road map of products that are going to help them deliver their outcomes, I'm excited about the space. Like I said, I've been in it 27 years and hope to be not another 27, but excited to see the outcome that we're going to see.

Look, I'll just echo that. As I've said, I think the big opportunity, and this is not theoretical anymore, right? It's being backed up by what you're seeing in the numbers with the CCaaS part of the business, not only from us, but in the market growing, AI growing and customers taking both solutions from unified platform vendors. And so it's -- to me, that is really what is starting to happen. It's starting to be proven out over and over again. And for us, it's just how do we string together the next x amount of quarters to make sure that everyone else sees what we are seeing and come along for that ride.

Terrific. We are at time. So thank you to the Five9 team for joining us as well as to the audience.

Thank you.

Thank you.