Guidance Reiteration
Q: Why not raise full-year outlook after Q1 beat?
A: Despite a strong quarter with record logo and seat installations and a robust backlog providing great visibility, management chose to be prudent and did not raise the full-year outlook. They are anticipating a significant reacceleration in the second half, doubling growth from 11.4% in the first half to 20.1% in the second half, which they consider aggressive.

AI's Revenue Impact
Q: How is AI impacting revenue per seat or MRR?
A: AI and automation are leading to increased revenue, with automated interactions generating nearly double the revenue per interaction. For example, automating calls through IVA that used to be handled by agents increases revenue from just over $100 per seat for human agent software to nearly $400 when automated. The AI portfolio adds incremental revenue, increasing wallet share without cannibalizing human seats.

Pricing Model Evolution
Q: Will pricing shift from seat-based to consumption-based models?
A: The company is already seeing a shift toward consumption-based pricing, especially with AI applications not tied to seats. Applications like transcription and voice stream are priced per minute or per gigabyte. While agent-facing software remains predominantly seat-based, over time, more consumption-based models will emerge.

Mega Deal Factors
Q: What were key factors in winning the large bank deal?
A: The bank conducted an extensive audit, focusing on Five9's ability to deliver and support complex global operations. Partnerships, particularly with Google for AI solutions, played a significant role. Five9's professional services expertise and the ability to leverage AI and automation across cloud integrations were crucial in securing the deal.

Shift to Cloud
Q: Why are large enterprises moving to cloud now?
A: Enterprises are shifting due to the strategic importance of customer experience (CX), end-of-life of legacy on-premise solutions, and opportunities presented by AI. Increased complexity benefits Five9, as it favors platform players with breadth and the ability to leverage advanced AI engines and contextual data. Their Gen AI Studio is a differentiator, placing them ahead of competitors who are now catching up.

Go-Lives Visibility
Q: How are go-lives progressing, and are you prepared for potential slips?
A: Go-lives are proceeding well, with a record number of seats turned up in Q1. The company manages backlog closely like a pipeline, providing great visibility. The implementation team consistently meets or exceeds targets, which is crucial for the anticipated inflection in dollar-based retention rates.

Vertical Performance
Q: How do verticals like consumer influence second-half acceleration?
A: The consumer vertical had expected weakness in Q1 2024, but other verticals remained stable or slightly up. The company doesn't anticipate the same level of deterioration as in Q4 2023, leading to more normal comparisons. Overall vertical performance depends on the macro economy, but they've accounted for challenges in their forecasts.

FedRAMP Progress
Q: Where are you in the FedRAMP process?
A: Five9 is early in the FedRAMP certification process, aiming for completion by the end of 2025. While they haven't begun a full go-to-market effort in the federal market, this initiative helps in securing business with large financial institutions serving federal clients. The process involves significant investment, costing $1.9 million in Q1 2024 and impacting EBITDA by 77 basis points.

Migration with Aceyus
Q: How does Aceyus impact migration cycles?
A: The pace of migrations remains consistent whether systems integrators are involved or not. Aceyus helps by aggregating data from disparate systems, making transitions smoother. However, significantly shortening migration timelines is challenging, and most configuration and integration work is still performed by Five9's professional services team.

Salesforce Summit Status
Q: What does achieving Salesforce Summit status mean?
A: Achieving Summit status with Salesforce reflects the significant business Five9 has done with them. It grants greater visibility and technological advantages, enhancing their partnership. Summit status is objectively awarded based on collaborative achievements, highlighting the importance of their relationship.

Retention Rate Outlook
Q: What needs to happen for retention rates to improve?
A: The dollar-based retention rate is expected to decline by 1 percentage point due to high prior comparisons, but management anticipates an inflection later this year. The ramping of larger customers acquired since Q2 2023 will contribute to improvement, along with contributions from professional services associated with major clients.

Gross Margin Outlook
Q: Will AI contribute to gross profit dollar growth?
A: While management refrains from providing specific forecasts, they acknowledge that AI and automation solutions have higher gross margins due to upsell and cross-sell opportunities. These contribute significantly more than 1–2% increases in attach rates. Over time, factors like revenue growth against fixed costs, a mix shift from lower-margin services, and one-time investments will positively impact gross margins.