FIVN 10-K
Five9, Inc. (FIVN)
10-K
2026-02-20
For: 2025-12-31
View Original
Added on
April 08, 2026
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the fiscal year ended December 31 , 2025
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the transition period from to
Commission File Number: 001-36383
(Exact Name of Registrant as Specified in Its Charter)
| (State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) | |||||||
(Address of Principal Executive Offices) (Zip Code)
(925 ) 201-2000
(Registrant’s Telephone Number, Including Area Code)
| Securities registered pursuant to Section 12(b) of the Act: | ||||||||
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
| Securities registered pursuant to Section 12(g) of the Act: None | ||||||||
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes : ☒ No: ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes: ☐ No : ☒
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes : ☒ No: ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes : ☒ No: ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
☒ | Accelerated Filer | ☐ | |||||||||||||||||||||
| Non-accelerated filer | ☐ | (Do not check if a smaller reporting Company) | Smaller Reporting Company | ||||||||||||||||||||
| Emerging growth company | |||||||||||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of
the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.
7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive- based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes: ☐ No: ☒
The aggregate market value of registrant’s common stock held by non-affiliates of the registrant based upon the closing sale price on the NASDAQ Global Market on June 30, 2025, the last business day of the Registrant’s most recently completed second fiscal quarter, was approximately $1,158.5 million. Shares held by each executive officer, director and their affiliated holders and by each other person (if any) who owns 10% of the outstanding common stock or more have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.
As of February 13, 2026, there were 76,495,680 shares of the Registrant’s common stock, par value $0.001 per share, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive Proxy Statement for the 2026 Annual Stockholders’ Meeting, which the registrant expects to file with the Securities and Exchange Commission within 120 days of December 31, 2025, are incorporated by reference into Part III (Items 10, 11,12, 13 and 14) of this Annual Report on Form 10-K.
FIVE9, INC.
FORM 10-K
TABLE OF CONTENTS
ITEM 1C. Cybersecurity | ||||||||
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which involve substantial risks and uncertainties. These statements reflect the current views of our senior management with respect to future events and our financial performance. These forward-looking statements include statements with respect to our business, expenses, strategies, losses, growth plans, product and customer initiatives, market growth projections, and our industry, including those set forth under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this report. Statements that include the words “expect,” “intend,” “plan,” “believe,” “project,” “forecast,” “estimate,” “may,” “should,” “anticipate” and similar statements of a future or forward-looking nature identify forward-looking statements for purposes of the federal securities laws or otherwise.
Forward-looking statements address matters that involve risks and uncertainties. Accordingly, there are or will be important factors that could cause our actual results to differ materially from those indicated in these statements. These factors include the information set forth under the caption “Risk Factors” and elsewhere in this report, and include the following:
•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;
•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, grow, 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 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;
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•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; and
•we may not have sufficient cash to service our convertible senior notes and repay such notes, if required.
The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this report, including under the section titled “Risk Factors.” If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, our actual results may differ materially from what we anticipate. You should not place undue reliance on our forward-looking statements. Any forward-looking statements you read in this report reflect our views only as of the date of this report with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to our operations, results of operations, growth strategy and liquidity. We undertake no obligation to update any forward-looking statements made in this report to reflect events or circumstances after the date of this report or to reflect new information or the occurrence of unanticipated events, except as required by law.
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PART I
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. 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 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.
First is the increasing adoption of cloud-based solutions within companies around the world, which is creating strong demand for integrated cloud contact center software solutions. Cloud contact center solutions offer the functionality, reliability, scalability and security required by large, complex enterprise contact centers. Furthermore, organizations periodically refresh their on-premises contact center systems, which provides an opportunity for cloud solutions to replace legacy on-premises contact center systems. On-premises systems require large up-front investments, long deployment cycles, and are burdensome to scale and maintain. These systems are also often inflexible, complex, and require significant duplication of effort and integration across multiple sites. AI technologies generally require cloud deployment and, therefore, provide additional incentives for customers to migrate away from their legacy on-premises solutions. In addition, agents increasingly work remotely, which presents a challenge to on-premises based systems that, by design, provide capabilities within a specific physical location. This creates substantial challenges for customers with on-premises contact center systems. 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. 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 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 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. 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. 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.
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. Delivered on-demand, our solution ensures customers always have the latest version, and enables them to quickly deploy agents in any geographic location with only a computer, headset and broadband internet connection. Our customers are able to adjust the level of our solutions used to meet their changing contact center volume needs. 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.
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The contact center is the system of record for interactions with full conversation history. 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. 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.
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. To complement our go-to-market strategy, we have developed a strategically-built ecosystem of technology alliances, solution providers and system integrator partners, which also provide sales leads, and independent software vendors to help increase awareness of our solution in the market and drive additional sales opportunities with new and existing customers. We have also established, and are continuing to increase, our network of technology solution distributors who provide sales leads and resellers that integrate our solution into their service offerings to new customers. Our partner ecosystem has helped us access new routes to market and increase our penetration in domestic and international markets.
We provide our solution through a software-as-a-service, or SaaS, business model. We generate subscription revenue from our Intelligent CX Platform, and also generate usage-based telephony revenue. We charge our customers monthly subscription fees for access to our solution, primarily based on the number of licenses. Our AI solutions are sold to our customers on a consumption or capacity basis.
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. 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. 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. For a description of how our Annual Dollar-Based Retention Rate is calculated, please refer to ITEM 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II of this Annual Report on Form 10-K.
We operate in a single reportable segment. Please refer to the geographical information for each of the last three years in Note 11 of the notes to our consolidated financial statements. Please refer to the discussion of risks related to our foreign operations in the section entitled “ITEM 1A. Risk Factors.”
Our Solution
We deliver a comprehensive, end-to-end cloud software solution for contact centers. Our solution is designed to enable our customers to increase and improve the efficiency of their operations, increase revenue opportunities and business agility, and provide insights into the behaviors of their workforce and customers as it relates to customer experience. Our platform facilitates this through key capabilities such as interaction routing and prioritization across channels, automation and integration of back and front-end systems and the ability to leverage the power of AI through self-service, agent assistance, management insights, and more. Our solution also empowers agents and supervisors through WEM. 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 agent interface is an intuitive, modern browser-based design that provides easy visualization of customer profiles, context and cross-channel history. Our solution is built on a modern SaaS architecture, leveraging both global data centers and public cloud deployments in a scalable, secure, and redundant manner. Our Intelligent CX Platform is based on a modern micro services-based open enterprise architecture with open APIs and software development kits, or SDKs, to enable customers, partners and developers to integrate our solution into their unique systems. AI is an embedded part of our platform. We provide high quality inbound and outbound voice services leveraging our global network infrastructure with key strategic carrier partnerships, including complex real-time call routing, and a wide range of customer connectivity options for secure and resilient interconnectivity to our network. 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,
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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. 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. The pre-built integrations with leading CRM and other enterprise applications reduce the complexity and burden of integrating with the customer’s business applications. Our solution is designed to be seamlessly updated so that customers are always operating on the latest version of the software, while maintaining their existing configurations, to ensure minimal disruption to the customer’s contact center operations.
•Highly flexible platform. Our solution provides easy administration, configuration and role-based functionalities for agents, supervisors and administrators, enabling the rapid adjustment of contact center resources to meet a changing mix of contact channels and peaks-and-troughs in contact center volumes.
•Scalable, secure and reliable multi-tenant architecture. 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. 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. 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. Using the rich contact history and additional context through integrations with CRM and other applications, agents have immediate access to the most current, relevant and accurate information about the customer, resulting in increased first contact resolutions and a more satisfying experience for the customer.
•Higher agent productivity. Our solution empowers agent productivity and effectiveness by allowing agents to handle both inbound and outbound calls and interact with customers across multiple digital engagement channels, including voice, chat, email, web, social media and mobile. Our solution enables agents to switch between media channels through an easy-to-use, unified interface that provides agents with all of the relevant content and tools needed to respond to customer needs. 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 solution provides contact center management, operations staff, quality team and executive leadership with a complete view of contact center performance through a comprehensive set of historical reports, real-time dashboards, and quality and performance management tools. Customers can also extract reporting data from our solution for further analysis using a spreadsheet application or using the sophistication of an enterprise business intelligence application. Our advanced reporting solution enables us to connect to external data sources such as ACDs, WEM platforms, CRM solutions, and many more pre-built integrations. 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. Our solution integrates a global voice network and telecommunications foundation with cloud-based software to support reliable, scalable, and compliant customer engagement across multiple geographies. Our solution is built on a distributed network architecture with redundant routing, regional points of presence, and diverse carrier interconnections, and is complemented by extensive customer self-service capabilities that enable customers to provision services, manage numbers and routing, configure policies, and control call flows without direct provider intervention. Customers are also provided with embedded observability, monitoring, and alerting capabilities that offer
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visibility into call performance, traffic patterns, and service health, enabling proactive management of their operations.
•Greater operational efficiency. Our solution provides contact center managers and supervisors with significant visibility into their agents’ productivity and effectiveness and the performance of their inbound queues and outbound campaigns. Our solution has robust intelligence and analytics capabilities to help supervisors optimize operations and campaigns in real-time to drive increased efficiency. 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. We manage upgrades and deployments remotely, resulting in lower total cost of operations relative to legacy on-premises contact center systems that often require in-house technical support staff.
•Implementing AI successfully. We provide our AI Blueprint program to assist customers with strategic planning and implementation of powerful solutions from our Genius AI suite. 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.
Our Competitive Strengths
We believe that our position as a leading provider of cloud contact center software results from several key competitive strengths, including:
•Global Cloud-based, AI-infused, enterprise-grade platform and end-to-end application suite. We deliver a cloud-based, enterprise-grade, AI-infused platform and applications suite with multi-channel capabilities that allows our customers to manage their entire contact center operation. Our highly reliable, scalable, secure and multi-tenant architecture enables us to serve large multi-national enterprises with complex contact center requirements, as well as smaller organizations, all from our platform comprised of globally distributed physical data centers and public cloud deployments. 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. 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 offer flexibility and integrate with a number of leading CRM vendors, including Microsoft Corporation, or Microsoft, Oracle Corporation, or Oracle, Salesforce.com, Inc., or Salesforce, ServiceNow, Inc., or ServiceNow, Zendesk, Inc., or Zendesk, among others. We also offer integrations into UC partners such as Microsoft Teams, Nextiva, RingCentral, Zoom Video Communications, or Zoom, and others. We combine these comprehensive integrations with out-of-the-box application adapters that allow our customers to easily build workflow integrations without the need for dedicated developers. Once operational, we offer a high-touch premium support service where we assign a technical account manager who has intimate knowledge of the customers’ operations so we can quickly resolve issues and fine-tune the solution. In addition, we assign customer success representatives to every customer. These customer success representatives build deep relationships with our customers to help maximize the value of our platform. As a result, our customers’ contact centers become fully operational faster and they recognize time to value quicker than legacy on-premises contact center systems.
•Reliable, secure, compliant and scalable platform. 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. We engage with our customers through a highly scalable and metrics-driven sales and marketing organization that effectively identifies, qualifies and closes
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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. 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 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.
•Extensive partner ecosystem. 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. 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. Our global network and telecommunications capabilities represent a competitive strength because we directly operate and manage critical elements of our voice infrastructure, service delivery workflows, and telecom integrations, rather than relying primarily on third-party aggregation. This level of operational control allows us to optimize routing, manage capacity, respond to incidents, and evolve our network while deploying these capabilities with our customers through integrated self-service, monitoring, and alerting tools that provide real-time insight into service performance. By unifying telecom engineering, operations, regulatory expertise, and customer-facing controls within a single operating model, we are able to support complex, high-volume, and multi-region deployments, while adapting to changing customer requirements, carrier dynamics, and regulatory environments, which we believe enhances our ability to compete effectively in the enterprise contact center market.
•Focus on innovation and thought leadership. 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. 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. Contact centers are a rich source of the contextual data that powers AI, from interaction data such as call transcripts to customer data from extensive integrations to back office systems, as well as brand information. Recent advances in Generative AI enable us to deliver even more innovation by integrating it deep into our Intelligent CX Platform. 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. Our customer base spans organizations of all sizes across multiple industries, including banking and financial services, business process outsourcers, retail, healthcare, technology and education.
Sales and Marketing
Marketing. To build customer awareness and adoption of our solution, our lead generation activities consist of a mix of organic activities such as social, digital presence and search engine optimization, and paid programs such as search engine marketing, internet advertising, digital marketing campaigns, content syndication, presence at industry events and trade shows, co-marketing with strategic partners, account-based marketing, customer referrals and other promotional campaigns. 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
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self-service demos and instructional videos to help prospective customers learn about the capabilities and functionality of our cloud platform. We also offer proof of concept service packages and trial opportunities, which include return-on-investment analyses conducted by third parties, to allow prospects to experience the quality and ease-of-use of our cloud solution and quantify the potential benefits of our deployment model.
Direct Sales. Our sales model consists of a field sales team that sells our solution into larger opportunities and a telesales team that sells our solution into smaller opportunities. Our field and telesales teams are also responsible for selling to existing customers that may renew their subscriptions, increase the number of licenses using our cloud solution, add new applications from our solution and expand the deployment of our solution across their contact centers.
Indirect Sales. We have cultivated strong partner relationships with technology solution distributors, global system integrators and resellers to drive sales of our solution. We have established, and continue to increase, our network of technology solution distributors, which provide sales leads, global system integrators, which also provide sales leads and help integrate our solution with our customer systems, and resellers, which sell our solution to new customers. This network has helped us attract additional customers, and we continue to empower these partnerships to participate in the delivery of our solution and extend the total customer value gained from unique integrated value propositions.
Professional Services
We provide professional services to assist our customers in implementing and optimizing our solution. 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.
Research and Development
Our ability to compete depends in large part on our continuous commitment to research and development and our ability to improve the functionality of, and add new features to, our Intelligent CX Platform. 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. 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. 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.
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. 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.
We have designed and maintain an operations, capacity and security program to monitor and maintain our platform, ensure efficient utilization of our platform capacity and protect against security threats or data breaches. Our operations team monitors our data centers for potential performance issues, unauthorized attempts to access secure data or applications and the overall integrity of the platform.
Competition
The market for contact center software is fragmented, highly competitive and rapidly evolving. The proliferation of different channels of engagement is driving changes in contact center technology, as customers
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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. More recently, the advent of Generative AI and related technologies has prompted an acceleration in the actual and expected adoption of AI solutions for customer self-service, agent assistance, and management of contact center operations. Combined with the disruptive nature of the cloud in the contact center, this has resulted in competitors who come from different market and product heritages, and who vary in size, breadth, and scope of products and services offered. We currently compete with large legacy vendors that offer on-premises contact center systems, such as Avaya Inc., or Avaya, and Cisco Systems, Inc., or Cisco. These legacy telephony vendors are increasingly supplementing their traditional on-premises contact center systems with competing cloud offerings, through a combination of acquisitions, partnerships, and in-house development. Additionally, we compete with vendors that historically provided other contact center services and technologies and expanded to offer cloud contact center software such as Genesys Telecommunications Laboratories, Inc., or Genesys, and NICE Ltd., or NICE. We also face competition from many smaller contact center service providers such as Content Guru and Talkdesk, as well as vendors offering both unified communications and contact center solutions such as RingCentral and Zoom. 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. 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.
Our actual and potential competitors may enjoy competitive advantages over us, including greater name recognition, longer operating histories, broader product offerings, larger marketing and product development budgets, as well as greater financial and technical resources. With the introduction of new technologies and market entrants, we expect competition to continue to intensify in the future. 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. We believe the principal competitive factors in our market include:
•breadth and depth of solution features, including AI;
•reliability, scalability and quality of the platform;
•ease and speed of deployment;
•ease of application administration and use;
•level of customer satisfaction;
•domain expertise in contact center operations;
•integration with third-party applications;
•ability to quickly adapt and upgrade to new and evolving technologies, including AI;
•pricing;
•ability to quickly adjust service levels based on business requirements;
•breadth and domain expertise of the sales, marketing and support organization;
•ability to keep pace with customer requirements;
•extent and efficiency of professional services;
•ability to offer multiple channels of engagement; and
•size and financial stability.
We believe we currently compete effectively with respect to each of the factors identified above.
Intellectual Property
We rely on a combination of patent, copyright, and trade secret laws in the U.S. and other jurisdictions, as well as license agreements, confidentiality agreements and other contractual protections, to protect our proprietary technology. We also rely on a number of registered and unregistered trademarks to protect our brand. 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
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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.
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. 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. In general, our patents and patent applications apply to aspects of our Intelligent CX Platform.
We are also a party to various license agreements with third parties that typically grant us the right to use certain third-party technology in conjunction with our solution. We expect that software and other applications in our industry may be subject to third-party infringement claims as the number of competitors grows and the functionality of applications in different industry segments overlaps. Any of these third parties might make a claim of infringement against us at any time.
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. We believe this is due to increased activities in retail, healthcare and education in the second half of each year.
Employees and Human Capital Resources
Our employees and the culture we have established are the key to our success. 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.
The key human capital measures and objectives that we focus on in managing our business, and creating an environment where all of our employees can thrive, are maintaining our company values, creating an inclusive environment with a broad base of skill sets and experiences, our total rewards philosophy, our talent development, and our employees’ safety and wellness.
Five9 Values - Bringing Passion and Purpose
At Five9, we are focused on delivering success for our customers, partners and employees. Living our values everyday results in a unique and powerful “winning culture” in which every member on our team is passionately committed to achieve collective success. This powerful team-first culture enables us to overcome obstacles and win year after year, while enjoying the journey together.
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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. 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.
We regularly gather employee feedback to better understand the employee experience and identify opportunities to continuously strengthen our culture. In our most recent survey in 2025, 83% of our employees participated and our engagement score was 72%, exceeding the Culture Amp benchmark by three percentage points and placing us in the top quartile of nearly 2,000 companies in the Engagement and Inclusion benchmark. Standout results included employees noting high team effectiveness (90%) and growth and development (81%).
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. Our goal is to empower our employees to have a voice that is heard and foster a community where they feel they belong. In 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.
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Women represented 32% of our worldwide employees and racial and ethnic minorities represented 36% of our U.S. employees as of December 31, 2025. 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.
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. 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. This approach fosters a sense of belonging and commitment among our workforce, driving engagement and productivity.
Our total rewards philosophy reflects our commitment to creating a supportive and empowering environment for our employees, where they can thrive professionally and personally. 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 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 as appropriate to support retention, motivation, and the execution of our business strategy.
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. 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.
Learning is supported across the employee lifecycle through enhanced onboarding, semi-annual development conversations between employees and managers, and investments in anytime learning via a centralized, on-demand learning platform offering skill-based learning pathways. We also invest in leadership capabilities through our Elevate Leadership Development Program, which reinforces leadership expectations and consistent leadership practices.
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. 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. 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. 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.
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We are also committed to complying with California’s evolving climate legislation. 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. Federal and state regulations are subject to judicial review, administrative revision and statutory changes through legislation that could materially affect how we and others in this industry operate.
The Telecommunications Act of 1996 vests the Federal Communications Commission, or FCC, with jurisdiction over interstate telecommunications services, while preserving state and local jurisdiction over many aspects of these services. 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. 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. 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. Any enforcement action by the FCC, which may be a public process, would hurt our reputation in the industry, possibly impair our ability to sell our services to customers and could harm our business and results of operations. The Federal Trade Commission, or FTC, also has jurisdiction over some of our business practices, including advertising, trade practices, privacy and telemarketing. If we do not comply with FTC rules and regulations, we could be subject to an FTC enforcement action, fines or restrictions on our business practices.
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
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•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.
In addition, we must make contributions and other payments on our usage-based fees to state and local governmental entities. The tax and fee structure for communications services such as ours is complex, ambiguous and subject to interpretation. If taxing and regulatory authorities enact new rules or regulations or expand their interpretations of existing rules and regulations, we could incur additional liabilities. 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. Compliance with these regulations may also make us less competitive with those competitors who are not subject to, or choose not to comply with, these regulations. See Note 10 of the notes to the consolidated financial statements under ITEM 8 of this Form 10-K for a discussion of our potential liability related to USF matters.
As we expand internationally, we will be subject to laws and regulations in the countries in which we offer our services. Regulation of the solutions we provide outside the U.S. varies from country to country, is often unclear, and may be more onerous than those imposed on our services in the U.S. For example, in the European Union, the General Data Protection Regulation, or the GDPR, requires companies to meet new and extended requirements regarding the processing of personal data. Non-compliance with the GDPR can trigger steep fines of up to €20 million or 4% of total worldwide annual turnover, whichever is higher. In addition, among other comprehensive privacy laws around the world, we are subject to the UK’s Data Protection Act, and Canada’s Personal Information Protection and Electronic Documents Act, or PIPEDA, and analogous provincial laws. We also hold a Unified License Virtual Network Operator in India. This license requires us to comply with certain quality of service, privacy and billing standards associated with our services in India that may be different than the standards imposed by other countries. Our regulatory obligations in foreign jurisdictions could impact the use or cost of our solution in international locations as data protection and privacy laws and regulations around the world continue to evolve, and which may also address the use of certain types of AI-based systems and solutions within their scope, including the EU Artificial Intelligence Act.
Furthermore, we have defined and implemented a layered information governance program comprising a defined framework of policies, operational processes and controls. Our framework was developed using international, sector or "data type" specific standards including, but not limited to:
•International Organization for Standardization - ISO 27001:2013 Information Security Management Systems Standard;
•Payment Card Industry Data Security Standard. PCI DSS 3.2;
•AICPA - System and Organization Controls SOC 2, Type 2 Security and Availability criteria;
•ISO 27017 - Information technology – Security techniques – Code of practice for information security controls based on ISO/IEC 27002 for cloud services;
•ISO 27018 - Information technology — Security techniques — Code of practice for protection of personally identifiable information (PII) in public clouds acting as PII processors; and
•NIST 800-53 Rev 5 - Security and Privacy Controls for Information Systems and Organizations.
A key component of our framework is that it evolves based on the changing needs of our business, customer and regulatory framework requirements. 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.
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. 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
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and results of operations. See “Risk Factors — Risks Related to Regulatory Matters” under ITEM 1A of this Form 10-K for more information.
Company Information
We were incorporated in Delaware in 2001. We operate in a single reportable segment. Our principal executive office is located at 3001 Bishop Drive, Suite 350, San Ramon, CA 94583 and our telephone number is (925) 201-2000. Our website address is www.five9.com. Our website and the information contained therein or connected thereto shall not be deemed to be incorporated into this annual report on Form 10-K. We own or have rights to trademarks or trade names that we use in connection with the operation of our business, including our corporate names, logos and domain names. In addition, we own or have the rights to copyrights, trade secrets and other proprietary rights that protect the content of our solution. Solely for convenience, some of the copyrights, trademarks and trade names referred to in this annual report on Form 10-K are listed without ©, ® and ™ symbols, but we own and will assert, to the fullest extent under applicable law, our rights to our copyrights, trademarks and trade names.
Available Information
Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy and information statements and amendments to reports are filed with, or furnished to, the United States Securities and Exchange Commission, or SEC, pursuant to the Securities Exchange Act of 1934, as amended, or the Exchange Act. The SEC maintains a website at https://www.sec.gov that contains reports, proxy and information statements and other information regarding Five9 and other companies that file materials with the SEC electronically. Copies of our reports on Form 10-K, Forms 10-Q and Forms 8-K, and amendments thereto, may be obtained, free of charge, electronically through our internet website, http://investors.five9.com/sec.cfm as soon as reasonably practicable after such material is filed electronically with, or furnished to, the SEC. The information on our website is not a part of, or incorporated by reference into, this Annual Report on Form 10-K.
ITEM 1A. Risk Factors
Our operations and financial results are subject to various risks and uncertainties. You should consider carefully the risks and uncertainties described below, together with all of the other information in this report. If any of the following risks or other risks actually occur, our business, financial condition, results of operations, and future prospects could be materially harmed, and the price of our common stock could decline.
Risk 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.
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•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.
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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.
Our quarterly and annual results of operations, including our revenues, profitability and cash flow have varied, and may vary significantly in the future, and period-to-period comparisons of our operating results may not be meaningful. Accordingly, the results of any one quarter or period, or series of quarters or periods, should not be relied upon as an indication of future performance. Our quarterly and annual financial results may fluctuate as a result of a variety of factors, many of which are outside our control and, as a result, may not fully reflect the underlying performance of our business. Fluctuation in quarterly and annual results may harm the value of our common stock. 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;
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•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.
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, but may be material over time.
We generally recognize subscription revenue from customers monthly as services are delivered. As a result, the vast majority of the subscription revenue we report in each quarter is derived from existing customers. Consequently, a decline in new subscriptions in any single quarter will likely have only a small impact on our revenue results for that quarter. However, the cumulative impact of such declines could negatively impact our business and results of operations in future quarters, and may be material over time. Accordingly, the effect of potential changes in our pricing policies or renewal rates, and significant downturns in sales, market acceptance and implementation of our solution, within our installed base or from new customers, including as a result of the impact of macroeconomic challenges, continued inflation, uncertainty regarding consumer spending, high interest rates, and fluctuations in currency exchange rates, will typically not be reflected in our results of operations until future periods. For example, our installed base business, which contributes a significant portion of our annual revenue growth, continues to experience macroeconomic challenges. We also may be unable to adjust our cost structure to reflect the changes in revenue, resulting in lower margins and earnings. In addition, our subscription model makes it difficult for us to rapidly increase our revenue through additional sales in any period, as revenue from new customers will be recognized over time as services are delivered. 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 increase to our revenue and the value of these existing customer relationships will only be reflected in our results of operations as subscription revenue is recognized, and if and when these customers increase the number of licenses and the level of consumption or capacity of our solution.
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.
AI solutions will likely perform an increasing proportion of contact center interactions, particularly for customer self-service, slowing the growth of interactions handled by live agents. This will result in a decrease in our license revenues from our installed base, as well as a decrease in license revenue opportunities from new customers, that may not be offset by additional revenue from our AI solutions. Some customers may also use AI solutions offered by other companies, which would harm our ability to replace lost license revenue, and would harm our business, revenue and results of operations. The contact center industry is in the early stages of this transition to AI, making it very difficult to forecast customer behavior or the impact on our revenue or results of operations in the near- and longer-term. If we are unable to replace decreases in license revenue with revenue from the sale of additional AI solutions, our revenue, results of operations and business will be harmed.
Shifts over time or from quarter-to-quarter in the mix of sizes or types of organizations that purchase our solution could affect our gross margins and operating results.
Our strategy is to sell our solution to both smaller and larger organizations. 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. 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. 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,
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fewer potential agents and greater credit risk and uncertainty. If the mix of organizations that purchase our solution changes, our revenues and gross margins could decrease, and our operating results could be harmed.
Prior to 2025, we had a history of losses, and we may be unable to sustain profitability.
Prior to 2025, we incurred losses in each annual period since our inception in 2001. We incurred net income (losses) of $39.4 million, $(12.8) million and $(81.8) million for the years ended December 31, 2025, 2024 and 2023, respectively. As of December 31, 2025, we had an accumulated deficit of $378.2 million. 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. We expect to continue to make further investments for the foreseeable future as we continue to expand our business, which may cause us to experience losses in the future. In addition, as a public company, we incur significant legal, accounting and other expenses. Our historical or recent growth in revenues and our current positive net income position is not necessarily indicative of our future performance. Accordingly, there is no assurance that we will sustain our current profitability.
Risks Related to Our Growth
Our historical growth may not be indicative of our future growth, and if we grow rapidly, we may fail to manage our growth effectively.
For the years ended December 31, 2025, 2024 and 2023, our revenues were $1,149.1 million, $1,041.9 million and $910.5 million, respectively, representing year-over-year growth of 10% and 14%, respectively. In the future, as our revenue increases, our annual revenue growth rate may continue to decline. We believe our revenue growth will depend on a number of factors, including our ability to:
•compete with other vendors of cloud-based enterprise contact center systems, including recent market entrants and AI solutions, and with providers of legacy on-premises systems;
•increase our existing customers’ use of our solution, including additional and new features of our solution;
•offset any losses or lower growth in license revenue with subscriptions for our AI solutions;
•increase the functionality of our solution through the implementation and enhancement of AI capabilities;
•maintain our existing customers and their level of subscriptions and related usage, and grow subscriptions within our existing customer base;
•respond to 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;
• respond to general macroeconomic factors and industry and market conditions;
•further develop our partner ecosystem;
•strengthen and improve our solution through significant investments in research and development and the introduction of new and enhanced features and functionality, such as our AI enabled automation features;
•introduce and increase the penetration of our solution in markets outside the United States and increase global awareness of our brand; and
•selectively pursue acquisitions that enhance our solution offerings.
If we are not successful in achieving these objectives, our ability to grow our revenue may be harmed. In addition, we plan to continue to invest in future growth, including expending substantial financial and other resources on:
•our sales and marketing and professional services organizations;
•our technology infrastructure, including systems architecture, management tools, scalability, availability, performance and security, as well as disaster recovery measures;
•solution development, including investments in our solution development team, the development of new solutions and in the acquisition of companies and technologies to enhance our solution, as well as new applications and features for our existing solution;
•international expansion;
•selective acquisitions that enhance our solution offerings; and
•general administration, including legal, regulatory compliance and accounting expenses.
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We anticipate that we will continue to expand our operations over the longer term. Our future growth will place a significant strain on our management, administrative, operational and financial resources, company culture and infrastructure. For example, we have continued to expand our international operations, including the acquisition of companies with operations outside the U.S. (such as our acquisition of Acqueon in 2024) and formation of new legal entities, which will increase the complexity of our operations, administration and infrastructure. Our success will depend in part on our ability to manage this growth effectively and achieve the intended return on our investments. To manage the expected growth of our operations over the longer term, we will need to continue to improve our operational, financial and management controls and our reporting systems and procedures. Failure to effectively manage growth could result in difficulties or delays in adding new customers, declines in quality or customer satisfaction, increases in costs, system failures, difficulties in introducing new features or solutions, the need for more capital than we anticipate or other operational difficulties, and any of these difficulties could harm our business performance and results of operations.
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.
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.
We leverage strategic relationships with third parties, such as CRM providers, WEM providers, systems integrators, telephony and other technology providers. These relationships are typically not exclusive and our partners often also offer products of our competitors. As we grow our business, we will continue to depend on both existing and new strategic relationships. Our competitors may be more successful than we are in establishing or expanding relationships with third parties or may provide incentives to third parties to favor their products over our solution. Our competitors may also have deeper or broader relationships with third parties, including a broader suite of products that are outside our core markets, that could give these competitors an advantage in establishing and maintaining relationships with these third parties. These strategic partners may cease to recommend our solution to prospective customers due to actual or perceived lack of features, technological or security issues or failures, reputational concerns, economic incentives, or other factors, which would harm our business, financial condition and operations. Furthermore, there has and continues to be a significant amount of consolidation in our industry and adjacent industries, and if our partners are acquired, fail to work effectively with us or go out of business, they may no longer support or promote our solution, or may be less effective in doing so, which could harm our business, financial condition and operations. 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. Even if we are successful, we cannot assure you that these relationships will result in increased customer usage of our solution or increased revenue.
In addition, identifying new partners, and negotiating and documenting relationships with them, requires significant time and resources. As the complexity of our solution and our third-party relationships increases, the management of those relationships and the negotiation of contractual terms sufficient to protect our rights and promote our interests and limit our potential liabilities will become more complicated. We also license technology from certain third parties, including through OEM relationships. Certain of these agreements permit either party to terminate all or a portion of the relationship without cause at any time and for any reason. If one of these agreements is terminated by the other party, we would have to find an alternative source or develop new technology ourselves, which preclude, limit or delay our ability to offer our solution or certain product features to our customers, result in increased expense and harm our business. Our inability to successfully manage and maintain these complex relationships or negotiate sufficient and favorable contractual terms could harm our business.
Our historical growth and recent adverse economic conditions make it difficult to evaluate and predict our current business and future prospects.
While we have been in existence since 2001, much of our employee, revenue and operations growth has occurred in recent years. Our historical growth may make it difficult for investors to evaluate our current business and our future prospects. We have encountered and will continue to encounter risks and difficulties frequently experienced by growing companies in rapidly changing industries, including increasing and unforeseen expenses as we continue to grow our business.
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Our ability to forecast our future operating results is limited and subject to a number of uncertainties, including our ability to predict revenue and expense levels, and plan for and model future growth. These uncertainties are exacerbated by the effects of recent adverse economic conditions, including 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. We have encountered and will continue to encounter risks and uncertainties frequently experienced by growing companies in rapidly changing industries, such as the risks and uncertainties described in this annual report. 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.
Risks Related to Our Customers
If we are unable to attract new customers or continue to expand within our installed customer base, our revenue and revenue growth will be harmed.
To increase our revenue, we must add new customers and continue to expand within our installed customer base. As our industry matures, as our customers experience macroeconomic issues or seasonal trends in their business, or as competitors introduce lower cost or differentiated products or services that are perceived to compete favorably with ours, our ability to add new customers and renew, maintain or sell additional services to existing customers could be harmed. As a result, our existing customers may not renew our agreements or may decrease their number of licenses or their consumption of our AI solutions, and we may be unable to attract new customers or grow or maintain our business with existing customers, which could harm our revenue and growth. 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. Some U.S. government customers require that we be authorized under the FedRAMP to help satisfy their own legal and regulatory compliance requirements, which requires us to undertake additional actions and expense to ensure compliance. In preparation for potentially obtaining FedRAMP, we are currently undergoing processes and procedures to obtain FedRAMP authorization, which processes and procedures are costly and time consuming. There are no assurances that we will be able to obtain such authorizations or that if obtained, this authorization will result in increased revenue or a sufficient return on our investment.
Furthermore, a portion of our revenue is generated by acquiring domestic and international telecommunications minutes from wholesale telecommunication service providers and reselling those minutes to our customers. We have experienced, and expect to continue to experience, lower sales of minutes to our customers as many of our larger customers are using their own minutes. In addition, as telecommunications rates continue to decrease, we may not be able to resell more minutes to maintain our level of usage revenue.
If our existing customers terminate their subscriptions or reduce their subscriptions and related usage, our revenues and gross margins will be harmed and we will be required to spend more money to grow our customer base.
We expect to continue to derive a significant portion of our revenues from existing customers. As a result, retaining our existing customers is critical to our future operating results. 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. Our customers, therefore, are able to adjust the number of licenses or level of consumption or capacity to meet their changing contact center volume needs. Subscriptions and related usage by our existing customers may decrease if:
•our customers’ business or demand for our services slows or declines due to industry cycles, seasonality, business difficulties or other reasons, 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;
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•we are unable to offset any losses or lower growth in license revenue with subscriptions for our AI solutions;
•our customers are not satisfied with our services, prices or the functionality of our solution;
•the stability, performance or security of our solution are not satisfactory;
•the U.S. or global economy declines;
•customers favor products offered by other contact center providers, particularly as competition continues to increase;
•fewer customers purchase usage from us;
•alternative technologies, products or features emerge or gain popularity that we do not provide; or
•our customers or potential customers experience financial difficulties, including as a result of macroeconomic challenges.
If our existing customers’ subscriptions and related usage decrease or are terminated, we will need to spend more money to acquire new customers and still may not be able to maintain, or increase, our existing level of revenues. We incur significant costs and expenses, including sales and marketing expenses, to acquire new customers, and those costs and expenses are an important factor in determining our profitability. There can be no assurance that our efforts to acquire new customers will be successful.
The loss of one or more of our key customers, or a failure to renew our subscription agreements with one or more of our key customers, could harm our ability to market our solution.
We rely on our reputation and recommendations from key customers in order to market and sell our solution. The loss of any of our key customers, or a failure of some of them to renew or to continue to recommend our solution, could have a significant impact on our revenues, reputation and our ability to obtain new customers. In addition, acquisitions of our customers could lead to cancellation of our contracts with those customers, thereby reducing the number of our existing and potential customers and key reference customers.
Our customers may fail to comply with the terms of their agreements, necessitating action by us to collect payment, or may terminate their subscriptions for our solution.
If customers fail to pay us under the terms of our agreements or fail to comply with the terms of our agreements, including compliance with regulatory requirements and intellectual property terms, we may terminate customers, lose revenue, be unable to collect amounts due to us, be subject to legal or regulatory action and incur costs in enforcing the terms of our contracts, including litigation. Some of our customers may seek bankruptcy protection or other similar relief and fail to pay amounts due to us, seek reimbursement for amounts already paid, or pay those amounts more slowly, all of which risks may be exacerbated by the effects 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, any of which could harm our operating results, financial position and cash flow.
Our business could be harmed if our customers are not satisfied with the professional services and technical support provided by us or our partners.
Our business depends on our ability to satisfy our customers, not only with respect to our solution, but also with the professional services and technical support that are required for our customers to implement and use our solution to address their business needs. Professional services and technical support may be performed by our own staff or, in some cases, by third parties. Our professional services offerings currently have negative margins. Accordingly, any increase in sales of professional services could harm our gross margins and operating results. We will need to continue to considerably expand our professional services and technical support in order to implement and support new and larger global customer installations. Identifying and recruiting qualified service personnel and training them in our solution is difficult and competitive and requires significant time, expense and attention. We may be unable to respond quickly enough to accommodate short-term increases in customer demand for support services. We also may be unable to modify the format of our support services or change our pricing to compete with changes in support services provided by our competitors. To the extent we experience increased customer demand for these services, and are unable to increase corresponding revenue, our costs would increase and our operating results could be harmed. If a customer is not satisfied with the deployment and ongoing services performed by us or
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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. In addition, negative publicity related to our professional services and technical support, regardless of its accuracy, may damage our business by affecting our ability to compete for new business with current and prospective customers.
Risks Related to the Sale of our Solution
Failure to adequately retain and expand our direct sales force will impede our growth.
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. We plan to continue to expand our direct sales force, both domestically and internationally over time. Identifying and recruiting qualified personnel and training them in the use and sale of our solution requires significant time, expense and attention. It can take several months before our sales representatives are fully trained and productive. Our business may be harmed if we fail to retain key members of our direct sales force or if our efforts, and the expense incurred, to expand and train our direct sales force do not generate a corresponding increase in revenues. In particular, if we are unable to hire, develop and retain talented sales personnel or if new sales personnel, including those joining our company as a result of an acquisition, are unable to achieve desired productivity levels in a reasonable period of time, we may not be able to realize the expected benefits of this investment or increase our revenues.
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.
We have established, and are continuing to increase, our network of technology solution distributors, which provide sales leads, and resellers. This network has helped us attract additional customers. Our resellers have assisted us in expanding in both domestic and international markets. These technology solution distributors and resellers sell, or may in the future decide to sell, solutions for our competitors. Our competitors may be able to cause our current or potential technology solution distributors or resellers to favor their services over ours, either through financial incentives, technological innovation, solution features or performance, by offering a broader array of products to these service providers or otherwise, which could reduce the effectiveness of our use of these third parties. If we fail to maintain relationships with current technology solution distributors and resellers, fail to develop relationships with new technology solution distributors and resellers in new and existing markets, if we fail to manage, train, enable, or provide appropriate incentives to our existing technology solution distributors and resellers, or if our technology solution distributors and resellers are not successful in their sales efforts, sales of our subscriptions may decrease or not grow at an appropriate rate and our operating results could be harmed. Additionally, in order to effectively utilize our resellers, we must enhance our systems, develop specialized marketing materials and invest in educating resellers regarding our systems, product offerings and services. Our failure to accomplish these objectives could limit our success in marketing and selling our solution.
In addition, identifying new resellers, and negotiating and documenting relationships with them, requires significant time and resources. As the complexity of our solution and our reseller relationships increases, the management of those relationships and the negotiation of contractual terms sufficient to protect our rights and limit our potential liabilities will become more complicated. Our inability to successfully manage these complex relationships or negotiate sufficient contractual terms could harm our business.
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.
As we continue to target our sales efforts at larger organizations, we face greater costs, longer sales and implementation cycles and less predictability in closing sales. 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. Furthermore, with larger organizations, we must provide greater levels of education regarding the use and benefits of our solution to a broader group of people in order to generate a sale. As a result of these factors, we must devote a
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significant amount of sales support and professional services resources to individual customers and prospective customers, thereby increasing the cost and time required to complete sales, and we may not be successful. Our typical sales cycle for larger organizations is four to six months, but can be significantly longer, and we expect that our average sales cycle may increase as sales to larger organizations continue to grow as a percentage of our business. 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. Our success depends on our ability to increase the number of licenses and the level of consumption or capacity utilized by these larger organizations over time and requires the expenditure of additional sales and marketing expenses in these efforts. There is no guarantee that these customers will increase their subscriptions for our solution. 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. For example, our solution does not permit customers to modify our software code, but instead requires them to use our set of APIs. If prospective customers require customized features or functions that we do not offer, and that would be difficult for them to deploy themselves, they will need to use our professional services or third-party service providers, or we may lose sales opportunities with larger organizations and our business could suffer.
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.
The market for contact center solutions is highly competitive. Generally, we have long-term contracts with our customers, however, our customers are generally able to reduce the number of licenses or the level of consumption or capacity with 30 days’ notice. Accordingly, our customers may switch to one of our competitors, either at the end of term or after they have significantly reduced their use of our solution.
We currently compete with large legacy technology vendors that offer on-premises contact center systems, such as Avaya and Cisco. These legacy technology and software companies are increasingly supplementing their traditional on-premises contact center systems with competing cloud offerings, through a combination of acquisitions, partnerships and in-house development. Additionally, we compete with vendors that historically provided other contact center services and technologies and expanded to offer cloud contact center software such as Genesys and NICE. We also face competition from many smaller contact center service providers such as Content Guru and Talkdesk, as well as vendors offering unified communications and contact center solutions such as RingCentral and Zoom. In addition, Amazon, 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 compete with contact center providers, including us. CRM 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. These factors could cause CRM vendors to reduce or terminate their partnerships with us, and could result in increased competition. Because CRM integration and partnerships are critical to the success of our solution, these factors could harm our revenue and results of operations. We also see competition from new market entrants in AI that offer Generative AI solutions that compete as point products in the market.
Some of our competitors can devote significantly greater resources than we can to the development, promotion and sale of their products and services and many have the ability to initiate or withstand substantial price competition. Current or potential competitors may also be acquired by third parties with significantly greater resources. Many of our competitors have stronger name recognition, longer operating histories, larger marketing budgets, greater financial or technical resources, including AI technologies or relationships, better established relationships with customers, more comprehensive product offerings, larger installed bases and major distribution agreements with consultants, system integrators and resellers. Our competitors may also establish cooperative relationships among themselves or with third parties that may further enhance their product offerings or resources and ability to compete. With the introduction of new technologies and market entrants, we expect competition to continue to intensify in the future. Additionally, we may need to decrease the prices of our solution due to competitive pressures, including adoption of different approaches to pricing or different pricing models, which may be necessary in light of the potential of AI-based solutions to shift the market from agent-based pricing to interaction-based pricing, or alternatively during times of economic difficulty. This could harm our gross profit and results of operations.
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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. If our competitors’ products, services or technologies become more accepted than our solution, if they are successful in bringing their products or services to market earlier than ours, or if their products or services are less expensive or more technologically capable than ours, our revenues could be harmed. Pricing pressures and increased competition could result in reduced sales and revenues, reduced margins and loss of, or a failure to maintain or improve, our competitive market position, any of which could harm our business.
If we fail to grow our marketing capabilities and develop widespread brand awareness cost effectively, our business may suffer.
Our ability to increase our customer base and achieve broader market acceptance of our cloud contact center software solution will depend to a significant extent on our ability to expand our marketing operations. We plan to continue to dedicate significant resources to our marketing programs, including internet advertising, digital marketing campaigns, social media, presence at trade shows and industry events, co-marketing with strategic partners, and telemarketing. The effectiveness of our internet advertising and the overall cost of internet advertising has varied over time and may vary in the future due to competition for key search terms, changes in search engine use, changes in the manner in which the leading internet advertising companies approach internet advertising, including through their policies, and changes in the search algorithms used by major search engines, any of which could result in an increase in the time spent and other financial expenditures associated with our internet advertising and a decrease in the effectiveness of our internet advertising. All of these efforts will continue to require us to invest significant financial and other resources in our marketing efforts. Our business will be seriously harmed if our efforts and expenditures do not generate a proportionate increase in revenue.
In addition, we believe that developing and maintaining widespread awareness of our brand in a cost-effective manner, both in the United States and internationally, is critical to achieving widespread acceptance of our solution, expanding our business with existing customers and attracting new customers. 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. If we fail to successfully promote, maintain and protect our brand, or incur substantial costs and expenses, we may fail to attract or retain customers necessary to realize a sufficient return on our brand-building efforts, or to achieve the widespread brand awareness that is critical to increasing customer adoption of our solution.
Risks Related to Our Solution
If we fail to manage our technical operations infrastructure, our existing customers may experience service outages, our new customers may delay or decide against deployment of our solution, existing customers may decide to move to another vendor, and we could be subject to claims for credits, damages or other actions.
Our success depends in large part upon the capacity, stability, security and performance of our technical operations infrastructure, which currently relies upon a mix of external data centers and, increasingly, public cloud providers. From time-to-time, we have experienced interruptions in service, and may experience such interruptions in the future. These service interruptions may be caused by a variety of factors, including infrastructure changes, human or software errors, telecom network outages, viruses, security attacks, fraud, spikes in customer usage and denial of service issues. In some instances, we may not be able to identify the cause or causes of these performance problems, or remediate them within an acceptable period of time. 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 experienced significant growth in the number of our larger customers, as well as the number of licenses and interactions that our infrastructure supports. As the number of licenses within our customer base grows and our customers’ use of our service increases, we need to continue to make additional investments in our capacity to maintain adequate and reliable availability, stability and performance, the availability of which may be limited or the cost of which may be prohibitive, and any failure may cause interruptions in service that may harm our business. In addition, we need to properly manage our operations infrastructure in order to support version control, changes in
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hardware and software parameters and the evolution of our solution. If we do not accurately predict our infrastructure requirements or efficiently improve our infrastructure, our business could be harmed.
We host our solution at third-party data centers and public cloud locations. Any failure or downtime in one of our data center facilities could affect a significant percentage of our customers. While we control and have access to our servers and all of the components of our network that are located in our external data centers, we do not control the operation of these facilities. The owners of our data center facilities have no obligation to renew their agreements with us on commercially reasonable terms, or at all. If we are unable to renew these agreements on commercially reasonable terms, or if one of our data center operators is acquired, closes, suffers financial difficulty or is unable to meet our growing capacity needs, we may be required to transfer our servers and other infrastructure to new data center facilities, and we may incur significant costs and service interruptions in connection with doing so. 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. Our data centers are subject to disasters such as earthquakes, floods, fires, hurricanes, cyber-attacks, acts of terrorism, sabotage, break-ins, acts of vandalism and other events, which could cause service interruptions or the operators of these data centers to close their facilities for an extended period of time or permanently. The destruction or impairment of any of our data center facilities could result in significant downtime for our solution and the loss of customer data. Because our ability to attract and retain customers depends on our providing customers with highly reliable service, even minor interruptions in our service could harm our business, revenues and reputation. Additionally, in connection with the continuing expansion of our existing data center facilities, there is a risk that service interruptions may occur as a result of server addition, relocation or other issues.
Our public cloud-based platform offering is critical to developing and providing our solution to our customers, scaling our business for future growth, accurately maintaining data and otherwise operating our business. We have little or no control over public cloud providers. Any disruption of the public cloud, deficiencies in the design, implementation, maintenance, or migration from one public cloud provider to another, or any failure of our public cloud providers to effectively design and implement sufficient security systems or plan for increases in capacity could, in turn, cause delays or disruptions in our services. In addition, using the public cloud presents a variety of additional risks, including risks related to sharing the same computing resources with others, reliance on public cloud providers’ authentication, security, authorization and access control mechanisms, a lack of control over the public cloud’s redundancy and security systems and fault tolerances, a reduced ability to control data security and privacy, and future unpredictable costs of these services.
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. While we aim for our AI-powered features to make agents more efficient and improve customer experience, our AI features may not achieve sufficient levels of accuracy or may not otherwise meet the needs of our customers. In addition, we may not be able to incorporate sufficient customer data and such data may contain biased or otherwise inaccurate information, resulting in unacceptable user experiences. Furthermore, our competitors or other organizations may incorporate AI features into their products more quickly or more successfully, and current and new competitors will continue to offer fully AI-based solutions, and their AI features may achieve higher market acceptance than ours, which may result in us failing to recoup our investments in developing AI-powered features and result in lost business. Should any of these factors or others occur, our ability to compete, our reputation and operating results may be materially and adversely affected.
The AI technology and features incorporated into our solution include new and evolving technologies that may present both legal and business risks.
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. The incorporation of AI-powered features into our solution may subject us to new or enhanced governmental or regulatory scrutiny, litigation, confidentiality or security risks, ethical concerns, claims brought by private parties and other complications that could harm our business, reputation, financial condition or results of operations. For example, our business, reputation, financial condition or results of operations may be adversely affected if outputs generated by our AI-powered solutions are or are alleged to be inaccurate, biased or infringing. Our failure to
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address these risks could harm our business, reputation, financial condition and results of operations. While we seek to use AI in our solutions in a way that is designed to minimize these risks, there are still risks of such events occurring. The regulatory environment around AI is evolving rapidly, with new laws and bills being regularly introduced, amended and repealed on the federal and state level, in addition to outside of the U.S., including the EU. These new and changing laws and regulations could affect the operation of our solutions and the way in which we use AI in our products. Further, the cost to comply with such new and changing laws or regulations could be significant and would increase our operating expenses, which could harm our business, reputation, financial condition and results of operations.
Rapid evolution of AI technologies may require additional investment, including research and development of new approaches and processes, which may be costly and increase our expenses. In addition, the use and deployment of AI involves significant technical complexity and requires specialized expertise, and competition for specialized personnel in the AI industry is intense. Any disruption or failure in our AI systems or infrastructure could result in delays or errors in our operations, which could harm our business, reputation, financial condition and results of operations.
The use of AI by our workforce may present risks to our business.
Our workforce is exposed to and uses AI technologies for certain tasks related to our business. We have guidelines specifically directed at the use of AI tools in the workplace, including our code of conduct, confidentiality obligations, IT internal use policies and other corporate policies. Nevertheless, our workforce may use these authorized or unauthorized tools, which poses potential risks relating to intellectual property and data protection, including cybersecurity risk, exposure of our proprietary confidential information to unauthorized recipients, which can result in the loss of intellectual property protection of such information, the misuse of our or third-party intellectual property and the inability to claim intellectual property ownership of outputs from AI tools. 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. AI technology may also produce inaccurate responses that could lead to errors in our decision-making, solution development, operations or other business activities, which could have a negative impact on our business, operating results and financial condition. Our ability to mitigate these risks will depend on our continued effective training, monitoring and enforcement of appropriate policies, guidelines and procedures governing the use of AI technology, and compliance by our workforce.
If our solution fails, or is perceived to fail, to perform properly or if it contains technical defects, our reputation could be harmed, our market share may decline, and we could be subject to product liability claims.
Our solution may contain undetected errors or defects that may result in failures or otherwise cause our solution to fail to perform in accordance with customer expectations and contractual obligations. Moreover, our customers could incorrectly implement or inadvertently misuse our solution, which could result in customer dissatisfaction and harm the perceived utility of our solution and our brand. Because our customers use our solution for critical aspects of their business, any real or perceived errors or defects in, or other performance problems with, our solution may damage our customers’ businesses and could significantly harm our reputation. If that occurs, we could lose future sales, or our existing customers could cancel or reduce the use of our solution, seek payment credits or damages against us, or delay or withhold payment to us, which could result in reduced revenues, an increase in our provision for uncollectible accounts and service credits, an increase in collection cycles for accounts receivable, and harm our financial results. In addition, since telecommunications billing and associated telecom taxes and the related calculations and billing of telecom taxes are inherently complex and require highly sophisticated information systems to administer, our billing system may experience errors or we may improperly operate the system, which could result in the system incorrectly calculating the fees owed by our customers or related taxes and administrative fees. Customers also may make indemnification or warranty claims against us, which could result in significant expense and risk of litigation. Product performance problems could result in loss of market share, reputational harm, failure to achieve market acceptance and the diversion of development resources.
Any product liability, intellectual property, warranty or other claims against us could damage our reputation and relationships with our customers, and could require us to spend significant time and money in litigation or pay significant settlements or damages. 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
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terms, in sufficient amounts, or at all. Any contract or product liability claims successfully brought against us would harm our business.
The contact center software solutions market is subject to rapid technological change, and we must develop and sell incremental and new features and components of our solution in order to maintain and grow our business.
The contact center software solutions market is characterized by rapid changes in customer requirements, frequent introductions of new and enhanced products and features and continuing and rapid technological advancement. To compete successfully, we must continue to devote significant resources to design, develop, deploy and sell new and enhanced contact center solutions, applications and features that provide increasingly higher capabilities, performance and stability at lower cost. In addition, we have, and will continue to, make significant investments in AI-based capabilities to enhance our solution. These efforts depend on scarce specialized talent in a competitive market with higher compensation costs, and they also require substantial ongoing spend for compute, data, governance, and continuous model maintenance. If we are unable to develop or acquire new features for our existing solution or new applications that achieve market acceptance or that keep pace with technological developments, our business would be harmed.
We are focused on enhancing the reliability, features and functionality of our contact center solution to enhance its utility to our customers, particularly larger customers, with complex, dynamic and global operations. In addition, cloud-based technology advancements in areas such as AI are designed to enable improved customer experience, significant operational efficiencies and business insights. The success of these enhancements depends on many factors, including timely development, introduction and market acceptance, as well as our ability to transition our existing customers to these new solutions, applications and features. To the extent that these enhancements are made as a result of acquisitions, our success also depends on our ability to integrate the acquired technology with our existing solution. Any failure may significantly impair our revenue growth. In addition, because our solution is designed to operate on a variety of systems, we need to continuously modify and enhance our solution to keep pace with changes in hardware, operating systems, the increasing trend toward multi-channel communications and other changes to software technologies. We may not be successful in developing, acquiring or integrating these modifications and enhancements or bringing them to market in a timely fashion. Furthermore, uncertainties about the timing and nature of new network platforms or technologies, or modifications to existing platforms or technologies, could delay introduction of changes and updates to our solution and increase our research and development expenses. Any failure of our solution to operate effectively, including with future network platforms and technologies, could reduce the demand for our solution, result in customer dissatisfaction and harm our business.
Our ability to continue to enhance our solution is dependent on adequate research and development resources. If we are not able to adequately fund our research and development efforts, we may not be able to compete effectively, and our business and operating results may be harmed.
In order to remain competitive, we must devote significant and increasing resources to develop new solution offerings, features and enhancements to our existing cloud contact center software, which will increase our research and development and operating expenses, and potentially divert resources from other areas of our operations. Our research and development expenses totaled $152.3 million, $166.2 million and $156.6 million for the years ended December 31, 2025, 2024 and 2023, respectively. Maintaining adequate research and development personnel and resources to meet the demands of the market is essential. If we are unable to develop products, applications or features internally due to constraints, such as high employee turnover, insufficient cash, other cash needs of our business, inability to hire sufficient research and development personnel or a lack of other research and development resources, we may miss market opportunities. Furthermore, many of our competitors have greater financial resources and expend greater amounts on their research and development programs than we do, and those that do not may be acquired by larger companies that would allocate greater resources to our competitors’ research and development programs. Resource limitations may result in inadequate research and development funding or may result in an inability to compete effectively with the research and development programs of our competitors, either of which could harm our business.
If we are unable to maintain the compatibility of our software with other solutions and technologies, our business could be harmed.
Our customers often integrate our solution with their business applications, particularly third-party CRM solutions. These third-party providers or their partners could alter their products so that our solution no longer integrates well, or at all, with them, or they could delay or deny our access to technology releases that allow us to
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adapt our solution to integrate with their products in a timely fashion. In addition, to the extent that third-party providers are adversely impacted by macroeconomic challenges, their development of software that is integrated with our solution may be delayed, which could have an adverse impact on the implementation of, or demand for, our solution by our customers. Such third-party providers could also develop competing solutions, including AI solutions, or favor integration of our competitors’ products over our solution, and terminate or make more difficult our ability to integrate with their solutions, making our solution less attractive to our customers. If we cannot adapt our solution to changes in complementary technology deployed by our customers, it may significantly impair our ability to compete effectively.
We are subject to many hazards and operational risks that can disrupt our business, some of which may not be insured or fully covered by insurance.
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.
These risks could result in substantial losses and the curtailment or suspension of our operations. 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 are not insured against all claims, events or accidents that might occur. If a significant accident or event occurs that is not fully insured, if we fail to recover all anticipated insurance proceeds for significant accidents or events for which we are insured, or if we or our data center providers fail to reopen facilities damaged by such accidents or events, our operations and financial condition could be harmed. We may also incur significant expense in enforcing our rights against our insurance providers, whether or not successful. In addition to being denied coverage under existing insurance policies, we may not be able to maintain or obtain insurance of the type and amount we desire at reasonable rates.
Risks Related to Third-Party Technology Providers
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 rely on third-party telecommunication service providers to provide our customers and their consumers with telecommunication services. These telephony services include the public switched telephone network, or PSTN, telephone numbers, call termination and origination services, and local number portability for our customers. 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.
When problems occur, it may be difficult to identify the source of the problem. Service disruption or outages, whether caused by our service, the products or services of our third-party service providers, or our customers’ or their customers’ equipment and systems, may result in loss of market acceptance of our solution and harm to our reputation and any necessary repairs or other remedial actions may force us to incur significant costs and expenses.
If any of these service providers fail to provide reliable services, suffer outages, degrade, disrupt, increase the cost of or terminate the services that we and our customers depend on, we may be required to switch to another service provider. Delays caused by switching our technology to another service provider, if available, and qualifying
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this new service provider could materially increase our costs, as well as harm our customer relationships, business, financial condition and operating results. Further, any failure on the part of third-party service providers to achieve or maintain expected performance levels, stability and security could harm our relationships with our customers, cause us to lose customers, result in claims for credits or damages, increase our costs or the costs incurred by our customers, damage our reputation, significantly reduce customer demand for our solution and seriously harm our financial condition and operating results.
Our customers and their customers rely on internet service providers to provide them with access and connectivity to our cloud contact center software and changes in how internet service providers handle and charge for access to the internet could materially harm our customer relationships, business, financial condition and operations results.
The FCC is currently imposing minimal regulatory requirements on Internet service providers and, as a result Internet service providers in the U.S. may be able to prioritize their own affiliated Internet traffic over the traffic of third parties, which could impair or degrade the use of, or increase the cost of using, our solution. Other countries have adopted their own forms of customer service standards for Internet access. As a result, network neutrality regulations vary widely among both the domestic and international jurisdictions in which we operate. While certain jurisdictions have strong protections for services such as ours, others, including the U.S., either lack a network neutrality framework or otherwise do not enforce network neutrality regulations. The impairment, degradation or prioritization of lawful internet traffic by internet service providers could materially harm the performance of our solution, our customer relationships, business, financial condition and operating results.
Risks Related to Our International Operations
We continue to expand our international operations, which exposes us to significant risks.
We have not generated significant revenues outside of the U.S., Canada, the U.K., Latin America and Australia, but we have significant operations outside these countries and regions, including operations in India, and we expect to grow our international presence in the future. 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.
Operating in international markets requires significant resources and management attention devoted to different regulatory, tax, economic, and political risks. In addition, in order to effectively market and sell our solution in international markets, we often must localize our solution, including the language in which our solution is offered, which increases our costs, could result in delays in offering our solution in these markets and may decrease the effectiveness of our sales efforts. Due to our limited experience with international operations and developing and managing sales and distribution channels in international markets, our international expansion efforts may not be successful.
We also will continue to incur additional compliance costs associated with our international operations, including costs associated with expanding and rapidly changing sanctions and other trade controls. In addition, we may be unaware or unable to keep current with changes in foreign government requirements and laws as they change from time-to-time, which often occurs with minimal or no advance notice. Failure to comply with these regulations could harm our business. In many countries outside the United States, it is common for others to engage in business practices that are prohibited by our internal policies and procedures or United States or international laws and regulations applicable to us. Although we have implemented policies and procedures designed to ensure compliance with these laws and policies, there can be no assurance that all of our employees, contractors, strategic partners and agents will comply with these laws and policies. Violations of laws or key control policies by our employees, contractors, strategic partners or agents could result in delays in revenue recognition, financial reporting misstatements, fines, delays in filing financial reports required as a public company, penalties, prohibitions on selling our solution or harm to our reputation, any of which could harm our business.
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. Because of our limited experience with international sales, our international expansion may not be successful and may not produce the return on investment we expect. To date, we have realized only a small portion
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of our revenues from customers outside the United States, with approximately 89% of our revenue for the year ended December 31, 2025 derived from customers with billing addresses in the United States.
We have increased and are continuing to increase our sales, marketing and support personnel in both the U.K. and the European Union. We have enlarged our data centers in the U.K. and Amsterdam and are increasing our use of public cloud solutions in the European Union as well. Operating in international markets requires significant resources and management attention and subjects us to intellectual property, regulatory, tax, economic and political risks that are different from, and often more stringent than, those in the United States. 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. Bribery Act and other anti-corruption laws, supply chain restrictions, import and export control laws, tariffs, trade barriers, economic sanctions and other regulatory or contractual limitations on our ability to sell our solution in certain foreign markets, and the risks and costs of non-compliance;
•restrictions or taxes on the transfer of funds; and
•unstable economic and political conditions and potential accompanying shifts in laws and regulations.
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.
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Other Operational Risks
Adverse economic conditions may harm our business.
Our business depends on the overall demand for cloud contact center software solutions, the economic health of our current and prospective customers and worldwide economic conditions. In addition to the United States, Canada, Europe, Latin America and Australia, we plan in the future to market and sell our solution in Asia and other international markets. Adverse economic conditions in these markets, 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 exchange rates, and the impact of current and potential global conflicts, has and will likely continue to reduce overall demand for our solution, particularly in our installed base. These factors could also delay our customers' implementation of our solution, delay or lengthen sales cycles, delay international expansion, lower prices for our solution, and may also lead to longer collection cycles for payments due from our customers, as well as result in an increase in customer bad debt. While the implications of macroeconomic events on our business, results of operations and overall financial position remain uncertain over the long term, we expect that adverse economic conditions will continue to have an adverse impact on our revenue in future periods. 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.
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, or those of third parties on which we rely, could result in litigation and regulatory risk, harm our reputation and our business.
Our solution involves the storage and transmission of our customers’ information, including information about our customers’ customers or other information treated by our customers as confidential. 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. Such incidents could also cause interruptions to the solutions we provide, degrade the user experience, harm our reputation or cause customers to lose confidence in our solution.
We are required to comply with laws and regulations that require us to protect personal data and we may have contractual and other legal obligations to notify customers, governmental authorities, individuals, or other relevant stakeholders of cybersecurity incidents, security breaches or other security events. 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. Cybersecurity threat actors also may attempt to exploit vulnerabilities through software, including software commonly used by companies in cloud-based services and bundled software. Because the techniques used to obtain unauthorized access or sabotage systems change frequently and generally are not identified until they are launched against a target, we or our third-party service providers or business partners may be unable to anticipate these techniques or implement adequate preventative measures. In addition, third parties may attempt to fraudulently induce employees or users to disclose information, including using AI or social engineering, in order to gain access to our data or our users’ data or the systems on which our data is stored or hosted. Such security breaches or cybersecurity incidents could lead to negative publicity, may cause our customers to lose confidence in the effectiveness of our security measures and require us to respond to and/or mitigate the security breach. Accordingly, if our cybersecurity measures fail to protect against unauthorized access, cybersecurity incidents, attacks, compromise or the mishandling of data by our employees, then our reputation, business, results of operations and financial condition could be adversely affected. Moreover, any failure or cybersecurity incidents or similar issues on the part of third parties, including our customers or other hosting or service providers, to maintain appropriate security measures for their own systems could harm our relationships with our customers, result in claims against us for credits or damages, damage our reputation and significantly reduce customer demand for our solution. Any or all of these issues could harm our ability to attract new customers, cause existing customers to cancel, reduce or not renew their subscriptions, result in reputational damage or subject us to third-party lawsuits (including class actions), governmental investigations and enforcement actions, regulatory fines or other action or liability, including orders or
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consent decrees forcing us to modify our business practices, all of which could materially harm our business, reputation or financial results.
Our increasing leverage of the public cloud infrastructure to deliver our solutions creates different risks from those associated with our use of private data centers. For instance, we are dependent on the security and reliability of our third-party cloud providers, and any disruption of their services could harm our business. Furthermore, under the shared responsibility model of cloud computing, the provider is responsible for the security of the underlying cloud infrastructure and we are responsible for securing our data and workloads within that infrastructure. Misconfigurations or vulnerabilities in our cloud environment could lead to security breaches, data loss, and reputational harm.
If we are unable to attract and retain highly skilled leaders and other employees, our business and results of operations may be adversely affected.
To execute our growth plan, we must attract and retain highly qualified personnel, including key executives, senior management or other key employees, and we may incur significant costs, including stock-based compensation expense, to do so. Competition for these personnel is intense, especially for senior executives, engineers highly experienced in designing and developing cloud software and AI and for senior sales personnel. We recently hired a new Chief Executive Officer and have made several other changes to our senior leadership team. If we are unable to effectively onboard our new Chief Executive Officer or our other new executives, or we are unable to effectively execute new strategies and changes to our business under their direction, or such changes take longer than expected, our business and financial results could be harmed and the price of our common stock could decline. We have, from time-to-time, experienced, and we may continue to experience, difficulty in hiring and retaining employees with appropriate qualifications, and this difficulty could be further exacerbated by any senior leadership or other key employee transitions.
We believe that our corporate culture is a critical component to our ability to attract and retain employees. As we grow, we will need to continually enhance our efforts to maintain our corporate culture, which is more difficult due to a geographically distributed workforce and our policies that allow limited work from home flexibility in jurisdictions where we have offices. We may experience increased attrition of employees to other opportunities, as certain employees may seek more flexible work alternatives than we offer, may seek positions with companies outside of the geographic area in which they live that offer remote work opportunities, or may decide to scale back their work life for personal reasons. Many of the companies with which we compete for experienced personnel have greater resources than we have and may offer more flexible work alternatives such as permanent remote work or work from home. If we fail to attract new personnel or fail to retain and motivate our current personnel, particularly our senior leadership team and our other key employees, our business and future growth prospects would be harmed. In addition, if we hire employees from competitors or other companies, their former employers may attempt to assert that these employees or we have breached legal obligations, resulting in a diversion of our time and resources and, potentially, damages.
Volatility or lack of performance in the trading price of our common stock, including the declines in our trading price over the recent past, may also affect our ability to attract and retain qualified personnel because job candidates and existing employees often emphasize the value of stock awards when considering whether to accept or continue employment. If the perceived value of our stock awards is low or declines, it may harm our ability to recruit and retain highly skilled employees.
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 may acquire or invest in businesses, applications or technologies that we believe could complement or expand our solution, enhance our technical capabilities or otherwise offer growth opportunities. For instance, in 2023, we acquired Aceyus, and in 2024, we acquired Acqueon. The pursuit of potential acquisitions may divert the attention of management, and cause us to incur various costs and expenses in identifying, investigating and pursuing acquisitions, whether or not they are consummated. We may not be able to identify desirable acquisition targets or be successful in entering into an agreement with any particular target. In addition, there has been a number of recent transactions in our industry and adjacent industries, which could have a negative impact on us.
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To date, the growth in our business has been primarily organic, and we have limited experience in acquiring other businesses. With respect to our recent acquisitions and any future acquisitions, we may not be able to successfully integrate acquired personnel, operations, product features and technologies, or effectively manage the combined business following the acquisition, which may result in our failure to achieve the anticipated benefits from any such 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.
In addition, a significant portion of the purchase price of companies and businesses we acquire may be allocated to acquired goodwill and other intangible assets, which must be assessed for impairment at least annually. If our acquisitions do not yield expected returns, we may be required to take charges to our operating results based on this impairment assessment process, which could harm our results of operations.
Acquisitions could also result in dilutive issuances of equity securities, the use of our available cash, or the incurrence of additional debt to fund such acquisitions, which could harm our operating results. To the extent that we intend to issue stock in any acquisitions, volatility in our stock price could make it more difficult or dilutive to make these acquisitions. If an acquired business fails to meet our expectations, our operating results, business and financial condition could suffer.
In addition, third parties may be interested in acquiring us. We will continue to consider, evaluate and negotiate any such transactions as we deem appropriate. Such potential transactions may divert the attention of management, and cause us to incur various costs and expenses in investigating, evaluating and negotiating such transactions, whether or not they are consummated.
We may not be able to secure additional financing on favorable terms, or at all, to meet our future capital needs.
To date, we have financed our operations, primarily through sales of our solution, lease facilities and the net proceeds from our equity and debt financings, including the sale of our convertible senior notes. We do not know when or if our operations will generate sufficient cash to fund our ongoing operations. We may require additional capital to respond to business opportunities, challenges, acquisitions, a decline in sales, increased regulatory obligations or unforeseen circumstances and may engage in equity or debt financings or enter into credit facilities.
We have a substantial amount of debt. As of December 31, 2025, we had approximately $747.5 million in principal outstanding under our convertible senior notes issued in March 2024 that mature on March 15, 2029. See Note 6 to the consolidated financial statements.
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. 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
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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 are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to grow and support our business and to respond to business challenges could be significantly harmed.
If we are unable to maintain and further develop effective internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock may decrease.
As a public company, we are required to maintain internal control over financial reporting and to report any material weaknesses in such internal controls. Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, requires that we evaluate and determine the effectiveness of our internal control over financial reporting and provide a management report and attestation from our independent registered public accountant on our internal control over financial reporting. This attestation has and will continue to increase our independent public accountant costs and expenses.
If we identify one or more material weaknesses in our internal control over financial reporting, we will be unable to assert that our internal controls are effective, which could cause our stock price to decline. A “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
If we have material weaknesses in our internal control over financial reporting, we may not detect errors on a timely basis and our financial statements may be materially misstated. If we identify material weaknesses in our internal control over financial reporting, if we are unable to comply with the requirements of Section 404 in a timely manner, if we are unable to assert that our internal control over financial reporting is effective or if our independent registered public accounting firm is unable to attest that our internal control over financial reporting is effective, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could decrease. We could also become subject to stockholder or other third-party litigation as well as investigations by the stock exchange on which our securities are listed, the SEC or other regulatory authorities, which could require additional financial and management resources and could result in fines, penalties, trading suspensions or other remedies.
Changes in financial accounting standards or practices may cause adverse, unexpected financial reporting fluctuations and affect our reported operating results.
U.S. GAAP is subject to interpretation by the FASB, the SEC and various bodies formed to promulgate and interpret appropriate accounting principles. A change in accounting standards or practices can have a significant effect on our reported results and may even affect our financial statements issued before the change is effective. New accounting pronouncements and varying interpretations of accounting pronouncements have occurred and will occur in the future. Changes to existing rules or the questioning of current practices may harm our reported financial results, result in restatements of prior periods, or the way we account for or conduct our business.
The application of any new accounting guidance is, and will be, based on all information available to us as of the date of adoption and up through subsequent interim reporting, including transition guidance published by the standard setters. However, the interpretation of these new standards may continue to evolve as other public companies adopt the new guidance and the standard setters issue new interpretative guidance related to these rules. As a result, changes in the interpretation of these rules could result in material adjustments to our application of the new guidance, which could have a material effect on our results of operations and financial condition. Additionally, any difficulties in implementing these pronouncements could cause us to fail to meet our financial reporting obligations, which could result in regulatory discipline, cessation or disruption of trading in our common stock and harm investors’ confidence in us.
In addition, certain factors have in the past and may in the future cause us to defer recognition of revenues. For example, the inclusion in our customer contracts of non-standard terms, such as acceptance criteria, could require the deferral of revenue. To the extent that such contracts become more prevalent in the future our revenue may be harmed.
Because of these factors and other specific requirements under U.S. GAAP for revenue recognition, we must have precise terms and conditions in our arrangements in order to recognize revenue when we deliver our solution or
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perform our professional services. Negotiation of mutually acceptable terms and conditions can extend our sales cycle, and we may accept terms and conditions that do not permit revenue recognition at the time of delivery.
If our estimates or judgments relating to our critical accounting policies prove to be incorrect, our operating results could be adversely affected.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in our consolidated financial statements. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as provided in the section titled Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Our operating results may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our operating results to fall below the expectations of securities analysts and investors, resulting in a decline in the trading price of our common stock.
Risks Related to Our Intellectual Property
Any failure to protect our intellectual property rights could impair our ability to protect our proprietary technology and our brand.
Our success and ability to compete depend in part upon our intellectual property. We primarily rely on copyright, trade secret and trademark laws, trade secret protection and confidentiality or license agreements with our employees, customers, partners and others to protect our intellectual property rights. However, the steps we take to secure, protect and enforce our intellectual property rights may be inadequate. We may not be able to obtain any further patents or trademarks, our current patents could be invalidated or our competitors could design their products around our patented technology, and our pending applications may not result in the issuance of patents or trademarks. We have pending patent applications and trademark registrations outside the U.S., and we may have to expend significant additional resources to obtain additional protection and maintain current registrations as we expand our international operations. 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. Consequently, we may be unable to prevent our proprietary technology from being infringed or exploited outside the U.S., which could affect our ability to expand into international markets or require costly efforts to protect our technology.
In order to protect our intellectual property rights, we may be required to spend significant resources to monitor and protect these rights. Litigation brought to protect and enforce our intellectual property rights will be costly, time consuming and distracting to our management and could result in the impairment or loss of our intellectual property. Furthermore, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims and countersuits attacking the validity and enforceability of our intellectual property rights, which could weaken our intellectual property protection. Accordingly, we may not be able to prevent third parties from infringing upon or misappropriating our intellectual property. Our failure to secure, protect and enforce our intellectual property rights could substantially harm the value of our technology, solutions, brand and business.
We will likely continue to be subject to third-party intellectual property infringement claims.
There is considerable patent and other intellectual property development activity and litigation in our industry. Our success depends upon our not infringing upon the intellectual property rights of others. Our competitors, as well as a number of other entities and individuals, may own or claim to own intellectual property relating to our industry. From time-to-time, third parties have claimed that we are infringing upon their intellectual property rights.
Certain technology necessary for us to provide our solution may be patented, copyrighted or otherwise protected by other parties either now or in the future. In such case, we would have to negotiate a license for the use of that technology. We may not be able to negotiate such a license at a price that is acceptable, or at all. The existence of such a patent, copyright or other protections, or our inability to negotiate a license for any such technology on acceptable terms, could force us to cease using such technology and offering solutions incorporating such technology.
Others have claimed, and in the future will likely claim, that our solution and underlying technology infringe or violate their intellectual property rights. However, we may be unaware of the intellectual property rights that others may claim cover some or all of our technology or solution. 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
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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. We may also be obligated to indemnify our customers or business partners and pay substantial settlement costs, including royalty payments, in connection with any such claim or litigation and to obtain licenses, which could be costly. 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.
In the ordinary course of business, we enter into agreements of varying scope and terms pursuant to which we agree to indemnify customers, vendors, lessors, business partners and other parties for third-party claims with respect to certain matters, including losses arising out of breach of such agreements, certain claims related to third-party privacy or cyber security breaches or from intellectual property infringement claims made by third parties. We have received, and will likely continue to receive, indemnification demands from customers regarding our intellectual property indemnification obligations under these contracts. In addition, we have entered into indemnification agreements with our directors, officers and certain employees that will require us, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers or employees. Large indemnity payments or damage claims from contractual breach could harm our business, results of operations and financial condition. Although we typically contractually limit our liability with respect to such obligations, we may still incur substantial liability related to them. Any dispute with a customer with respect to such obligations could be expensive, even if we ultimately prevail, and could harm our relationship with that customer and other current and prospective customers, reduce demand for our solution and harm our business, results of operations and financial condition.
We employ third-party licensed software, including AI solutions, for use in or with our solution, and the inability to maintain these licenses or errors in the software we license could result in increased costs, or reduced service levels, which could harm our business.
Our solution incorporates certain third-party software obtained under licenses from other companies, including AI-based offerings. We anticipate that we will continue to rely on current and new software from third parties in the future. Although we believe that there are commercially reasonable alternatives to the third-party software we currently license, this may not be the case, or may not be the case for new software that we license, or it may be difficult or costly to transition to other providers. In addition, integration of the software used in our solution with new third-party offerings may require significant work and require substantial investment of our time and resources. To the extent that our solution depends upon the successful operation of third-party software in conjunction with our solutions, any undetected errors or defects in this third-party software could prevent the deployment or impair the functionality of our solution, delay new product or solution introductions, result in increased costs, or a failure of our solution, harm our reputation and damage our relationships with our customers. Our use of additional or alternative third-party software would require us to enter into license agreements with third parties, which could increase our costs, and integrate this new software with our solution.
There can be no assurance that the technology licensed by us will continue to provide competitive features and functionality or that licenses for technology currently utilized by us or other technology that we may seek to license in the future, including to replace current third-party software, will be available to us at a reasonable cost or on commercially reasonable terms, or at all. 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. The loss of existing licenses could also result in implementation delays or reductions until equivalent technology or suitable alternative solutions could be developed or identified, and licensed and these replacements integrated, and could harm our business through increased costs or the inability to offer competitive features to new or existing customers in a timely fashion, or at all.
Our solution utilizes open source software, and any failure to comply with the terms of one or more of these open source licenses could negatively affect our business.
Our solution includes software covered by open source licenses. Few open source licenses have been interpreted by courts, and there is a risk that such licenses could be construed in a manner that imposes unanticipated
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conditions or restrictions on our ability to market our solution. Although we have implemented policies to regulate the use of open source software in connection with our products and services, we cannot be certain that we have not used open source software in a manner that is inconsistent with such policies. If we fail to comply with open source licenses applicable to us, we could be subject to certain requirements, including requirements that we release the source code of our proprietary software and to make our proprietary software available under open source licenses, if we combine our proprietary software with certain open source software in a certain manner. 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 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. 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.
Risks Related to Regulatory and Tax Matters
Failure to comply with laws and regulations could harm our business and our reputation.
Our business is subject to regulation by various federal, state, local and foreign governmental agencies, including agencies responsible for monitoring and enforcing laws and regulations related to employment and labor laws, workplace safety, environmental protection, privacy or data security, consumer protection, telecommunications services, anti-bribery, import/export controls, federal securities and taxes. In certain jurisdictions, these regulatory requirements may be more stringent than those in the United States and in other circumstances these requirements may be more stringent in the United States. Noncompliance with applicable regulations or requirements could subject us to investigations, sanctions, mandatory recalls, notification obligations, enforcement actions, disgorgement of profits, fines, damages, civil and criminal penalties or injunctions. If any governmental sanctions, fines or penalties are imposed, or if we do not prevail in any civil or criminal litigation, our business, operating results, financial condition and reputation could be harmed. In addition, responding to any action will likely result in a significant diversion of management’s attention and resources and an increase in professional fees. Enforcement actions and sanctions could further harm our business, operating results, financial condition and reputation.
Alleged or actual failure to comply with the constantly evolving legal and contractual environment surrounding calling consumers and wireless phone numbers by other companies or our competitors or governmental or private enforcement actions related thereto, could harm our business, financial condition, results of operations and cash flows.
The legal and contractual environment surrounding contacting consumers using voice calls or text messages to their wireless phones is constantly evolving. 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. These laws require companies to institute processes and safeguards, sometimes including prior written consent requirements, to comply with these restrictions. The legal interpretation of certain of the requirements of these laws continues to be in dispute before the courts and federal agencies, and it is possible that legal decisions and agency actions may further alter the legal requirements involved. For example, in 2024, the FCC issued a declaratory ruling in which it concluded that calls which utilize an artificial or prerecorded voice simulated or generated through AI technology are subject to regulation under the TCPA. Some of these laws, where a violation is established, can be enforced by the FTC, FCC, State Attorneys General, or private party litigants. In these types of actions, the plaintiff may seek damages, statutory penalties, costs and/or attorneys’ fees.
We have designed our solution to comply with these laws. To the extent that our solution is viewed by customers or potential customers as less functional, or more difficult to deploy or use, because of our solution’s compliance features, we may lose market share to competitors that do not include similar compliance safeguards. Our contractual arrangements with our customers who use our solution to place calls also expressly require them to
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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. Even with these efforts, it is possible that the FTC, FCC, private litigants or others may attempt to hold our customers, or us as a software solution provider, responsible for alleged violations of these laws. To the extent any court finds that the software solution violated a controlling legal standard, we could face indemnification demands from our customers for costs, fees and damages with respect to calls placed using that solution. It also is possible that we may not successfully enforce or collect upon our contractual indemnities from our customers. Defending such suits can be costly and time-consuming and could result in fines, damages, expenses and losses. 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.
In December 2018, the FCC issued an order concluding that the Short Message Service, or SMS, or text messages, is an information service under federal law and not a telecommunications service. This means that wireless carriers have the flexibility to block SMS messages if the carriers identify the messages as unwanted by their wireless customers. Such blocking efforts by carriers may make it more difficult for our customers to use SMS messages that are provided by us as a part of our overall communications and outreach solution for our customers. Thus, although SMS comprises only a very small portion of our revenue base, its future availability as an effective tool for communication and outreach for our customers and their customers is uncertain and could cause our solution to be less valuable to customers and potential customers.
Increased taxes on our service may increase our customers’ cost of using our service and/or increase our costs and reduce our profit margins to the extent the costs are not passed through to our customers, and we may be subject to liabilities for past sales and other taxes, surcharges and fees.
Based on analysis of our activities, we have determined that we are obligated to collect and remit U.S. state or local sales, use, gross receipts, excise and utility user taxes, as well as fees or surcharges as a communications service provider in certain U.S. states, municipalities or local tax jurisdictions. We are registered for collecting and remitting applicable taxes where such a determination has been made. Prior to our making such determination with respect to a particular state, municipality, or local tax jurisdiction, we neither collected nor remitted these taxes, fees or surcharges for such jurisdiction. We continue to analyze our activities to determine if we are subject to these taxes in additional jurisdictions and based on our ongoing assessment of our U.S. state and local tax collection and remittance obligations, we register for tax and regulatory purposes in such jurisdictions and commence collecting and remitting applicable state and local taxes and surcharges to these 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. This contingent liability is based on our analysis of a number of factors, including the source location of our usage-based fees, the taxability of our subscription services and the rules and regulations in each state. The actual amount of state and local taxes and surcharges paid may differ from our estimates. See Note 10 to the consolidated financial statements.
While we have accrued for these potential liabilities in each period, such accruals are based on analyses of our business activities, the operation of our solution, applicable statutes, regulations and rules in each state and locality and estimates of sales subject to sales tax or other charges. State and local taxing and regulatory authorities may challenge our position and may decide to audit our business and operations with respect to state or local sales, use, gross receipts, excise and utility user taxes, fees or surcharges, which could result in our being liable for taxes, fees, or surcharges, as well as related penalties and interest, above our recorded accrued liability or additional liability for taxes, fees, or surcharges, as well as penalties and interest for our customers, which could harm our results of operations and our relationships with our customers. In addition, if our international sales grow, additional foreign countries may seek to impose sales or other tax collection obligations on us, which would increase our exposure to liability.
The applicability of state or local taxes, fees or surcharges relative to services such as ours is complex, ambiguous and subject to interpretation and change. If states enact new legislation or if taxing and regulatory authorities promulgate new rules or regulations or expand or otherwise alter their interpretations of existing rules and regulations, we could incur additional liabilities or collection obligations. 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
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telecommunications revenues. The collection of additional taxes, fees or surcharges in the future could increase our prices or reduce our profit margins. Compliance with new or existing legislation, rules or regulations may also make us less competitive with those competitors who are not subject to, or choose not to comply with, such legislation, rules or regulations. We have incurred, and will continue to incur, substantial ongoing costs associated with complying with state or local tax, fee or surcharge requirements in the numerous markets in which we conduct or will conduct business.
Our ability to maintain compliance with complex rules and technological requirements intended to prevent robocalls and caller ID spoofing poses a significant business risk due to possible blocking of customer voice traffic.
The FCC has adopted rules based on federal statute that require all providers of voice communications services, with limited exceptions, to implement the STIR/SHAKEN caller identification authentication framework designed to reduce fraudulent robocalls and illegal phone number identification, or ID, spoofing. STIR stands for Secure Telephony Identity Revisited. SHAKEN stands for Secure Handling of Asserted information using toKENs. We have completed our implementation of STIR/SHAKEN technology, but the implementation process was complex and involved compliance with a number of related regulatory regimes.
STIR/SHAKEN is a series of protocols and a governance framework in which the originating voice service provider attests to the calling party’s identity and is intended to ensure the caller’s ID has not been spoofed in order to reduce the number of illegal robocalls. The STIR/SHAKEN regulatory framework creates a significant business risk for companies such as ours that include customers that originate large volumes of telephone calls to consumers because, if an intermediate or terminating carrier is unable to verify the authenticity of an incoming call from one of our customers, they may, or may be required to block the call, preventing it from reaching the intended party, which would damage our relationship with our customers, and make our solution less attractive to our customers and potential customers.
In addition, the FCC required voice service providers to implement other robocall prevention measures, including registering with the FCC’s Robocall Mitigation Database and maintaining a robocall mitigation plan that includes conducting due diligence on customers to ensure they do not engage, or appear to engage, in robocalling or caller ID spoofing. Third-party complaints and unusual calling patterns on end user bills must be investigated and the services of non-compliant customers terminated. Voice service providers must also participate in an Industry Traceback Group program to further demonstrate their commitment to preventing robocalls and caller ID spoofing. We have implemented these remedial measures to ensure that other carriers do not misidentify or block voice traffic originated by our customers. Although we believe we have achieved full compliance, the regulatory measures to prevent robocalling and caller ID spoofing are relatively new, complex and continue to change and therefore pose a risk to all voice service providers with respect to the possible misidentification and blocking of voice calls originated by their customers. These new compliance measures have and will increase our regulatory compliance and other costs, could make our solution less attractive to our customers, and any non-compliance could subject us to fines, damages and penalties, or injunctions precluding the use of our solutions or certain features thereof.
Our ability to offer services outside the United States is subject to different regulatory and taxation requirements, which may be complicated and uncertain.
As we continue to expand the sale and implementation of our solution internationally, we will be subject to additional regulations, taxes, surcharges and fees. Compliance with these new complex regulatory requirements differ from country to country, and are frequently changing and may impose substantial compliance burdens on our business. At times, it may be difficult to determine which laws and regulations apply and we may discover that we are required to comply with certain laws and regulations after having provided services for some time in that jurisdiction, which could subject us to retroactive taxes, fees and penalties, and we may be subject to conflicting requirements. Additionally, as we expand internationally, the risk that governments will regulate or impose new or increased taxes or fees on our services increases. Any such additional regulation or taxes could increase our costs and our tax payments, decrease the value of our international expansion, or impede our ability to expand internationally, and therefore harm our results of operations.
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The Organization for Economic Co-operation and Development (“OECD”) Pillar 2 guidelines address the increasing digitalization of the global economy, re-allocating taxing rights among countries. The European Union and many other member states have committed to adopting Pillar 2, which calls for a global minimum tax of 15% effective for tax years beginning in 2024. The OECD guidelines published to date include transition and safe harbor rules around the implementation of the Pillar 2 global minimum tax. We are monitoring developments and evaluating the impacts these new rules will have on our tax rate, including eligibility to qualify for these safe harbor rules.
We are subject to assessments for unpaid USF contributions, as well as interest thereon and civil penalties, due to our prior position that we were not subject to regulation as a USF contributor and as an international carrier.
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. In order to comply with the obligation to make direct contributions, we are registered with the Universal Service Administrative Company, or USAC, which is charged by the FCC with administering the USF, and have been remitting the required contributions to USAC since our registration with USAC in April 2013.
We also made retroactive USF contributions based on our revenues for the period from 2008 to 2012. We have an unresolved and arguably dormant dispute with the FCC, however, regarding whether we are liable for USF contributions related to the period from 2003 through 2007. 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.
Our ongoing obligations to pay federal, state and local telecommunications contributions and taxes may decrease our price advantage over, and ability to compete with our competitors who are not subject to, or choose not to comply with, those requirements. In addition, if we are unable to continue to pass some or all of the cost of these contributions and taxes to our customers, our profit margins on the telecommunication service minutes we resell will decrease. Our federal contributions and tax obligations may significantly increase in the future, due to new interpretations by governing authorities, governmental budget pressures, changes in our business model or solutions or other factors.
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.
Since our business is regulated by the FCC, we are subject to existing or potential FCC regulations relating to privacy, disability access, access to and porting of numbers, USF contributions and other requirements. 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. Any enforcement action by the FCC, which may be a public process, would hurt our reputation in the industry, could impair our ability to sell our services to customers and could harm our business and results of operations.
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;
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•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.
If we do not comply with any current or future rules or regulations that apply to our business, we could be subject to additional and substantial fines and penalties, we may have to restructure our solution, exit certain markets, accept lower margins or raise the price of our solution, any of which could harm our business and results of operations.
Compliance with 911 emergency service requirements could result in FCC, state or local enforcement action, including fines and other penalties.
The FCC’s implementation of KARI’s Law and the RAY BAUM’s Act imposed a requirement on operators of interconnected multiline telephone systems (“MLTS”) to ensure their users can directly dial 911 emergency services and, if technically feasible, automatically convey the caller’s dispatchable location information with the call. The 911 service requirement applies to all new MLTS systems installed and MLTS customers activated after February 16, 2020. The FCC’s decision also means that MLTS system operators may be subject to state and local fee assessments imposed on telecommunications carriers to support the operation of 911 public safety call centers.
Our service is arguably analogous with a virtual MLTS system. Therefore, we implemented 911 calling capabilities for all of our clients that agreed to receive such services, regardless of whether the client relationship predated February 16, 2020. Our 911 service includes the provision of dispatchable location information, but requires contact center agents to register their physical location. Although we believe our 911 service implementation is fully compliant with FCC requirements, application of the FCC’s rules to our service required certain interpretive assumptions and a contrary conclusion by the FCC could expose us to FCC enforcement action, including fines and other penalties. Further, we have been contacted by regulators in one state regarding possible assessments for 911 support fees to cover the costs of 911 public safety call centers in that state. Although such assessments, if imposed on us, are not substantial, they could increase the cost of doing business and potentially make our services less attractive as compared to competing virtual call center service providers that have not implemented 911 service capabilities as a part of their service offerings.
We may not be able to utilize a significant portion of our net operating loss or research tax credit carryforwards, which could harm our profitability and financial condition.
As of December 31, 2025, we had federal, state and foreign net operating loss carryforwards due to prior period losses of $344.1 million, $247.1 million and $5.5 million, respectively, available to reduce future income subject to income taxes. If not utilized, various amounts of state net operating loss carryforwards will begin to expire in 2026, while the federal and foreign net operating losses, will not expire. As of December 31, 2025, we also had gross research credit carryforwards for federal and California state tax purposes of $14.3 million and $8.2 million, respectively, available to reduce future income subject to income taxes. The federal research credit carryforwards will expire between 2026 and 2045. The California research credit carryforwards do not expire. If we are unable to generate sufficient taxable income to utilize our net operating loss and research tax credit carryforwards, these carryforwards could expire unused and be unavailable to offset future income tax liabilities, which could harm our profitability and financial condition in future periods.
In addition, under Section 382 and Section 383 of the Internal Revenue Code of 1986, as amended (the “Code”), our ability to utilize net operating loss carryforwards or other tax attributes, such as research tax credits, in any taxable year may be limited if we experience an “ownership change.” The events that may cause an ownership change include, but are not limited to, an aggregate increase in the percentage of our stock owned by 5-percent stockholders of more than 50 percentage points over the lowest percentage of our stock owned by such stockholders at any time during a 3-year testing period, determined immediately after any “owner shift” involving a 5-percent stockholder or any “equity structure shift.” Similar rules may apply under state tax laws. We experienced ownership changes prior to 2015 and the disclosed amounts of our net operating losses and research credit carryforwards have been reduced for the resulting effect of the Code Sections 382 and 383 limitations, as necessary. Subsequent or future issuances or sales of our stock (including certain transactions involving our stock that are outside of our control) could cause an “ownership change” again, which could impose an additional annual limit on the amount of pre-ownership change net operating loss carryforwards and other tax attributes we can use to reduce our taxable income. This could increase and accelerate our liability for income taxes, including by potentially causing those tax
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attributes to expire unused. It is possible that such an ownership change could materially reduce our ability to use our net operating loss carryforwards or other tax attributes to offset taxable income, which could require us to pay more income taxes than if we were able to fully utilize our net operating loss carryforwards and other tax attributes, such that our profitability could be harmed.
Privacy concerns and domestic or foreign laws and regulations may reduce the demand for our solution, increase our costs and harm our business.
Our customers use our solution to collect, transfer, use, and otherwise process personal data regarding their customers and potential customers. The processing of personal data and other types of protected data subjects us and our customers to a number of domestic and international laws that govern and regulate the processing of personal data and other types of protected data. These laws regulate and address a range of issues including data privacy (e.g., restrictions or technological or process requirements regarding the processing of data), cybersecurity (e.g., requirements for the protection of personal data against compromise of the confidentiality, integrity, or availability of personal data), breach notification, data governance, and risk management and reporting including as relevant to use of certain AI-based systems and solutions. These laws can vary substantially from jurisdiction to jurisdiction, and are rapidly evolving. Domestic and international government authorities are considering adopting, or may adopt, laws and regulations in the future, regarding the processing of personal data obtained from consumers and individuals. Government authorities and, in some cases, private party litigants could pursue claims against us or our customers. In these types of actions, the plaintiff may seek damages, statutory penalties, costs and/or attorneys’ fees.
In the U.S., there are numerous federal and state laws governing the privacy and security of personal data, and the use of personal data to train artificial intelligence. For instance, we may be subject to FTC enforcement actions if the FTC has reason to believe we have engaged in unfair or deceptive privacy or data security practices in violation of the FTC Act. 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. Some states also have enacted privacy laws focusing on particular types of information, such as health or biometric information, and private party litigants are pursuing private causes of action pursuant to state wiretap laws such as the California Invasion of Privacy Act, statutory invasion of privacy, and common law claims may be used to pursue privacy causes of action.
Moreover, data protection laws and regulations outside the United States, including Brazil, Canada, China, Japan, Russia, Singapore, the United Kingdom and particularly in the EU, on certain issues can be more restrictive than those in the United States in regards to data protection, including the extent to which affirmative consent for some types of data processing is required, and when a company must inform data protection authorities and individuals of security breaches that affect their personal data. We also may be bound by additional, more stringent contractual obligations relating to our collection, use, disclosure and data transfers of personal, financial, and other data outside the EU. It is possible that a governmental authority may implement a new law or interpret an existing law in a manner that limits our customers’ ability to use our solution or that requires us to make costly or detrimental changes in our solution and services, whether on a one-time basis or as an ongoing increase in our operating costs and expenses. Further, some laws might require us to disclose proprietary or confidential aspects of our solution in a manner that compromises the effectiveness of our solution or that enables our competitors or bad actors to gain insight into the operation of our technology, enabling them to copy or circumvent our solution and thereby reducing the value of our technology.
The costs of compliance with, and other burdens imposed by, such laws and regulations that are applicable to us and the businesses of our customers may limit the use and adoption of our solution and reduce overall demand for our solution. Also, failure to comply with such laws may lead to significant fines, penalties or other regulatory liabilities, such as orders or consent decrees forcing us or our customers to modify business practices, and reputational damage or third-party lawsuits for any noncompliance with such laws. Our business could be harmed if legislation or regulations are adopted, interpreted or implemented in a manner that is inconsistent from country to country and inconsistent with our current policies and practices, or those of our customers.
Furthermore, data privacy and protection concerns may cause consumers to resist providing personal data or other types of protected data that may be subject to laws and regulations that is necessary to allow our customers to use our solution effectively. Even the perception of privacy concerns, whether or not valid, may inhibit market adoption of our solution in certain industries or countries.
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The European Union’s GDPR may continue to increase our costs and the costs of our customers to operate, limit the use of our solution or change the way we operate, exposes us to substantial fines and penalties if we fail to comply, and has led to similar laws being enacted in other jurisdictions.
We and many of our customers are subject to the GDPR based upon our processing of personal data collected from EU data subjects, such as our processing of personal data of our customers in the EU and our processing of our EU employees’ personal data. Similar obligations apply under the U.K. General Data Protection Regulation (UK GDPR).
The GDPR enhances data protection obligations for processors and controllers of personal data, including, for example, expanded disclosures about how personal information is to be used, limitations on retention of information, mandatory data breach notification requirements and onerous new obligations on services providers. Non-compliance with the GDPR can trigger steep fines of up to €20 million or 4% of total worldwide annual turnover, whichever is higher.
Given the breadth and depth of changes in data protection obligations, our compliance with the GDPR’s requirements will continue to require time, resources and review of the technology and systems we use to satisfy the GDPR’s requirements. 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. We continue to rely on Standard Contractual Clauses, or SCCs, and have updated our use of SCCs to the EU’s latest versions, as well as separate U.K. versions of the SCCs. Even still, there continue to be EU legal decisions and certain regulatory guidance that cast doubt on the legality of EU-U.S. data flows in general. Any inability to transfer personal data from the EU to the U.S. in compliance with data protection laws may impede our ability to attract and retain customers and adversely affect our business and financial position. As a result, it may be necessary to establish additional systems and business operations in the EU to avoid the transfer of personal data out of the EU. Should a change in the conduct of our business be required, it may involve substantial expense and the diversion of resources from other aspects of our business, all of which may harm our business and results of operations.
Jurisdictions outside of the EU are also considering and/or enacting comprehensive data protection legislation. 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. Most recently, India enacted the Digital Personal Data Protection Act, 2023, which establishes a legal framework regulating the processing of personal data in India and processing outside of India if it is related to offering goods or services to individuals in India. The law is comparable to GDPR in many ways, but also has some distinct elements, which forthcoming regulations may further clarify. Similarly, China’s Personal Information Protection law places restrictions on the transfer of personal information to third parties within China or overseas. These regulations may deter customers from using services such as ours, and may inhibit our ability to expand into those markets or prohibit us from continuing to offer services in those markets without significant financial burden.
The GDPR and other laws or regulations associated with the enhanced protection of certain types of personal data could greatly increase our cost of providing our solutions and services, require significant changes to our operations or even prevent us from offering certain services in jurisdictions in which we operate. Failure to comply with data protection regulations may result in data protection authorities and other privacy regimes imposing additional obligations to obtain consent from data subjects by or on behalf of our customers. Additionally, the inability to guarantee compliance or otherwise provide acceptable privacy assurances may inhibit the sale and use of our software in the EU and certain other markets, which could, were it to occur, harm our business and operating results.
Because the interpretation and application of many privacy and data protection laws (including the GDPR), commercial frameworks, and standards are uncertain, it is possible that these laws, frameworks, and standards may be interpreted and applied in a manner that is inconsistent with our existing data protection practices. If so, we and our customers are at risk of enforcement actions taken by data protection authorities or litigation from consumer advocacy groups acting on behalf of data subjects. In addition to the possibility of fines, lawsuits, breach of contract claims, and other claims and penalties, we could be required to fundamentally change our business activities and practices or modify our solutions, which could have an adverse effect on our business. Any inability to adequately address privacy and security concerns, even if unfounded, or comply with applicable privacy and security or data
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security laws, regulations, and policies, could result in additional cost and liability to us, damage our reputation, inhibit sales, and adversely affect our business.
Similarly, the European Union passed legislation related to artificial intelligence, cybersecurity, and data access, including the EU Artificial Intelligence Act, Regulation (EU) 2024/1689; the NIS 2 Directive, Directive (EU) 2022/2555; and the Data Act, Regulation (EU) 2023/2854. We closely monitor this legislation, along with efforts to update the legislation with the recent Digital Omnibus on AI Regulation and Digital Omnibus Regulation proposals. Compliance with these regulations may increase our costs and the costs of our customers with respect to ensuring compliance with these laws. If we fail to comply where required to do so, we can face substantial fines and penalties along with commercial and reputational challenges when doing business in the European Economic Area.
U.S. state privacy laws could increase our costs and the costs of our customers to operate, limit the use of our solution or change the way we operate, and expose us to substantial fines and class action risk if we fail to comply, and lead to similar laws being enacted in other states.
State privacy laws in the United States apply to certain entities doing business in their states, and we and our qualifying customers were required to comply with applicable requirements as of the effective dates of the applicable state laws or corresponding regulations.
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. Eligible residents of those states may also appeal any decision or indecision related to the exercise of any of their data privacy rights. As required by the statutes, covered entities also have disclosure obligations to consumers for whom they collect or process personal data. Complying with these obligations involves continued expenditures that could increase as more consumers exercise their privacy law rights, and as more laws are enacted that vary from each other in material ways.
The U.S. state privacy laws create new and potentially severe statutory damages frameworks for violations of their provisions. Additionally, the CCPA creates a private right of action for consumers whose personal data is subject to a data breach. This private right of action has the potential to create significant class action liability for businesses, like ours, that operate in California. To protect against these new risks, it may be necessary to change our insurance programs and there is no guarantee that such coverage will be sufficient to address costs, liabilities and damages we may incur in connection with a such liability or that such coverage will continue to be available on commercially reasonable terms or at all.
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. We anticipate that more states may enact their own comprehensive or subject matter specific privacy and AI-focused legislation and provide consumers with new privacy rights and increases the privacy and security obligations of entities handling certain personal data of such consumers. These laws have prompted a number of proposals for new federal and state-level privacy legislation, and related legislation affecting the use of certain types of AI-based systems and services. Such proposed legislation, if enacted, may add additional complexity, variation in requirements, restrictions and potential legal risk, require additional investment of resources in compliance programs, impact strategies and the availability of previously useful data and could result in increased compliance costs and/or changes in business practices and policies.
U.S. state laws are continuing to evolve in and around regulation of AI technologies. States such as California, Colorado, Utah and Texas have enacted new legislation, and additional legislation is expected to be passed during the upcoming 2026 legislative session in additional states. The California Privacy Protection Agency has also promulgated new regulations on the use of automated decision-making technologies. Although the new state laws and regulations have specific applicability thresholds that do not apply to the vast majority of AI use cases in our industry, we incur costs associated with monitoring and evaluating these laws, and when these laws apply, we incur compliance-related costs. We incur costs associated with a fragmented landscape of laws, because there is as yet no federal AI law. We could face additional costs if new laws are enacted either at the state or federal level that apply, or could apply, to our products or services, or if current laws are amended to apply to our products or
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services. In the event that new AI regulation were to be enacted that more heavily scrutinizes or restricts our current AI applications, products, features, or services, we could be required to remove certain products or product features from our solution.
Risks Related to Ownership of Our Convertible Senior Notes
Servicing our debt may require a significant amount of cash. 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.
In March 2024, we issued $747.5 million in aggregate principal amount of the 2029 senior notes in a private offering, all of which were outstanding as of December 31, 2025. The 2029 convertible senior notes mature on March 15, 2029, and the interest rate of the 2029 convertible senior notes is fixed at 1.000% per annum, payable semiannually in arrears on March 15 and September 15 of each year, beginning on September 15, 2024.
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. Our business may not generate cash flows from operations in the future that are sufficient to service our indebtedness and make necessary capital expenditures. If we are unable to generate sufficient cash flows, we may be required to pursue one or more alternatives, such as selling assets, restructuring debt or obtaining additional debt financing or equity capital on terms that may be onerous or highly dilutive to existing holders of our common stock. 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. We may not be able to engage in any of these activities on favorable terms or at all, which could result in a default on our debt obligations or other material adverse effects on our business and financial condition.
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.
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 may not have enough available cash or be able to obtain financing at the time we are required to make repurchases in connection with such conversion and our ability to pay may be further limited by law, regulatory authority or agreements governing our future indebtedness. 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. 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. If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness or repurchase the 2029 convertible senior notes when required, or to make cash payments upon conversions thereof.
If triggered, the conditional conversion features of the 2029 convertible senior notes may adversely affect our financial condition and operating results.
If and to the extent the conditional conversion features of our 2029 convertible senior notes are triggered, holders of such 2029 convertible senior notes will be entitled to convert their 2029 convertible senior notes at any time during specified periods at their option. 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. Whether the 2029 convertible senior notes will be convertible after March 31, 2026 will depend on the satisfaction of the applicable conversion conditions.
To the extent that the conditional conversion features of our 2029 convertible senior notes are triggered in the future, holders of such 2029 convertible senior notes will be entitled to convert their 2029 convertible senior notes at any time during the specified periods at their option. 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,
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cash, shares of our common stock or a combination of cash and shares of our common stock, at our election. Any election to settle conversions of 2029 convertible senior notes with cash could adversely affect our liquidity.
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.
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. 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. 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. 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. 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. We expect that the Option Counterparties or their respective affiliates may from time-to-time purchase shares of our common stock and/or enter into various derivative transactions with respect to our common stock in connection with their hedging activities relating to 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 2029 convertible senior notes. These activities could negatively affect the market price of our common stock.
Volatility and declines in the trading price of our common stock may result in decreases in the trading prices of our 2029 convertible senior notes. Our 2029 convertible senior notes do not trade in a liquid market and are thus subject to increased volatility, particularly when our common stock price is volatile.
General Risk Factors
Our stock price has been volatile, may continue to be volatile and may decline, including due to factors beyond our control.
The market price of our common stock has been volatile in the past and may fluctuate significantly in the future in response to numerous factors, many of which are beyond our control. During the twelve months ended December 31, 2025, the sale price per share of our common stock ranged from a low of $17.71 to a high of $49.90. 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;
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•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.
In addition, stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many technology companies, particularly in connection with the continued 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, and the current and potential global conflicts. Stock prices of many technology companies have recently declined, including in some cases in a manner unrelated or disproportionate to the operating performance of those companies. These and other factors may disproportionately impact the trading price of our common stock. In the past, stockholders have instituted securities class action litigation following periods of volatility. If we were to become involved in such securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business and harm our business, results of operations, financial condition, reputation and cash flows.
If securities or industry analysts discontinue publishing research or reports about our business, or publish negative reports about our business, our share price and trading volume could decline.
The trading market for our common stock depends in part on the research and reports that securities or industry analysts publish about us or our business, our industry, our market and our competitors. We do not have any control over these analysts. If one or more of the analysts who cover us downgrade our shares or change their opinion of our shares or our business, our share price would likely decline. If one or more of these analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in financial markets or our industry market, which could cause our share price or trading volume to decline.
We may not realize the anticipated benefits of share repurchase activity.
In October 2025, our Board of Directors authorized a share repurchase program, or the 2025 Repurchase Program, for the repurchase of shares of our common stock, in an aggregate amount up to $150.0 million, which 2025 Repurchase Program expires on December 31, 2027. As part of the 2025 Repurchase Program, in November 2025, we entered into an accelerated share repurchase, or ASR, program under which we repurchased $50.0 million of our common stock. This program was completed on February 2, 2026. As of December 31, 2025, $100.0 million remained available under the 2025 Repurchase Program. There can be no assurances that we will continue to repurchase shares under the current authorization.
Future share repurchase activity under our current authorization, if any, could cause the price of our common stock to be higher than it otherwise would be and could potentially reduce the market liquidity for our stock. Although share repurchases are intended to enhance long-term stockholder value, there is no assurance they will do
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so because the market price of our common stock may decline below the levels at which we repurchased shares and short-term stock price fluctuations could reduce the effectiveness of the repurchases.
Repurchasing common stock reduces the amount of cash we have available to fund capital expenditures, interest payments, debt retirements, acquisitions, additional share repurchases, investments in strategic initiatives and other operating requirements and we may fail to realize the anticipated benefits of share repurchases.
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.
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 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. These shares can be sold freely in the public market upon issuance.
We are unable to predict the effect that sales, or the perception that our shares may be available for sale, will have on the prevailing market price of our common stock.
Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of our company more difficult, limit attempts by our stockholders to replace or remove our current management and limit the market price of our common stock.
Provisions in our amended and restated certificate of incorporation and amended and restated bylaws may have the effect of delaying or preventing a change in control, changes in our Board or management, and other governance changes. Our amended and restated certificate of incorporation and amended and restated bylaws:
•provide that our board of directors is classified into three classes of directors (the “classified board provisions”);
•provide that stockholders may remove directors only for cause;
•provide that the authorized number of directors may be changed only by resolution of the board of directors;
•provide that all vacancies, including newly created directorships, may, except as otherwise required by law, be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum;
•provide that our stockholders may not take action by written consent, and may only take action at annual or special meetings of our stockholders;
•provide that stockholders seeking to present proposals before a meeting of stockholders or to nominate candidates for election as directors at a meeting of stockholders must provide notice in writing in a timely manner, and also specify requirements as to the form and content of a stockholder’s notice;
•restrict the forum for certain litigation against us to Delaware;
•restrict the forum for complaints asserting a cause of action under the Securities Act to the federal district courts;
•do not provide for cumulative voting rights (therefore allowing the holders of a majority of the shares of common stock entitled to vote in any election of directors to elect all of the directors standing for election);
•provide that special meetings of our stockholders may be called only by the chairman of the board, our chief executive officer or the board of directors pursuant to a resolution adopted by a majority of the total number of authorized directors; and
•provide that stockholders will be permitted to amend our amended and restated bylaws and certain parts of our amended and restated certificate of incorporation only upon receiving at least 662/3% of the votes entitled to be cast by holders of all outstanding shares then entitled to vote generally in the election of directors, voting together as a single class (the “supermajority approval provisions”).
In July 2025, our board of directors announced its intent to approve and recommend to our stockholders that they approve at our 2026 annual meeting of stockholders (i) the phased removal of the classified board provisions (which, upon the completion of such declassification, will also result in our directors being able to be removed
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without cause under Delaware law) and (ii) the removal of the supermajority approval provisions effective at the close of our 2027 annual meeting. To the extent that our stockholders vote for the removal of such provisions, and upon the effectiveness of such changes, we would have a decreased ability to delay or prevent a change in control, changes in our Board or other governance changes. However, even if such provisions are no longer effective, the remaining provisions described above may frustrate or prevent a change in control, or any attempts by our stockholders to replace or remove our current board or management or change aspects of our corporate governance.
In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with any “interested” stockholder for a period of three years following the date on which the stockholder became an “interested” stockholder.
The existence of these provisions could negatively affect the price of our common stock and limit opportunities for you to realize value in a corporate transaction.
Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the sole and exclusive forum for certain disputes between us and our stockholders, and our Bylaws provide that the federal district courts will be the exclusive forum for resolving any complaint asserting a cause of action under the Securities Act, each of which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees, or agents.
Our amended and restated certificate of incorporation provides that, unless we consent to the selection of an alternative forum, the Court of Chancery of the State of Delaware is the sole and exclusive forum for (1) any derivative action or proceeding brought on our behalf, (2) any action asserting a claim of breach of fiduciary duty owed by any of our directors, officers or other employees to us or to our stockholders, (3) any action asserting a claim arising pursuant to the Delaware General Corporation Law or (4) any action asserting a claim governed by the internal affairs doctrine. Furthermore, our Bylaws provide that, unless we consent in writing to an alternative forum, the federal district courts of the United States are the sole and exclusive forum for the resolution of any complaint asserting a cause of action under the Securities Act.
These choice of forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, employees, or agents, which may discourage such lawsuits against us and our directors, officers, employees and agents even though an action, if successful, might benefit our stockholders. Stockholders who do bring a claim in the Court of Chancery could face additional litigation costs in pursuing any such claim, particularly if they do not reside in or near the State of Delaware. The Court of Chancery or federal district courts may also reach different judgments or results than would other courts, including courts where a stockholder considering an action may be located or would otherwise choose to bring the action, and such judgments or results may be more favorable to us than to our stockholders. Alternatively, if a court were to find either of these choice of forum provisions to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, operating results and financial condition.
We have never paid cash dividends and do not intend to pay dividends for the foreseeable future.
We have never declared or paid any cash dividends on our common stock. We currently intend to retain any future earnings and do not expect to pay any dividends in the foreseeable future. Any future determination to declare cash dividends will be made at the discretion of our board of directors, subject to applicable laws, and will depend on a number of factors, including our financial condition, results of operations, capital requirements, contractual restrictions, including under any future loan facilities, general business conditions and other factors that our board of directors may deem relevant. While our convertible senior notes do not prohibit payment of dividends, any dividends declared and paid by our board of directors would result in an adjustment to the conversion rate of such notes such that additional shares would be issuable upon conversion. Accordingly, holders of our common stock must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments.
ITEM 1B. Unresolved Staff Comments
None.
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ITEM 1C. Cybersecurity
Information Security Management Strategy
We have developed, implemented and maintain a formal “risk based" Information Security Management System, or ISMS, that is designed to protect the confidentiality, integrity, and availability of the information contained within our systems. 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. In accordance with these international standards, and included in the ISMS, is our cybersecurity incident response process and plan.
In the event of a potential cybersecurity incident, our Chief Information Security Officer, or CISO, is notified of the incident and assembles an Incident Response Team, which is comprised of individuals who have the necessary technical, operational, and regulatory knowledge to assist the CISO. Typically, senior members of our engineering, operations, security, compliance/data protection office, and legal functions comprise the Incident Response Team. The Incident Response Team will conduct an assessment to determine the nature and scope of the incident and manages the incident in accordance with our incident response procedures until the incident is contained and resolved. 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. The 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 has a risk based formulation. The cybersecurity risk process within the ISMS is an integral component of our enterprise risk management program, and shares common methodologies, reporting channels and governance processes that apply across the enterprise risk management program to other legal, compliance, strategic, operational, and financial risk areas. Cybersecurity incidents and their associated risks are integrated into the enterprise risk management program, where appropriate mitigating strategies are determined and acted upon to mitigate cyber security risks.
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
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Governance
Our Board also receives briefings from management on our cyber risk management program. Board members receive presentations on cybersecurity topics from our CISO and internal security staff as part of the Board’s continuing education on topics that impact public companies.
Our management, through and in conjunction with the Incident Response Team and Incident Classification Team, supervises efforts to prevent, detect, mitigate, and remediate cybersecurity risks and incidents through various means, which may include briefings from internal security personnel; threat intelligence and other information obtained from governmental, public or private sources, including external consultants engaged by us; and alerts and reports produced by security tools deployed in the IT environment.
ITEM 2. Properties
We currently lease approximately 220,000 square feet of office space worldwide. 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. 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. These agreements expire at various dates through 2031.
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We believe our facilities are sufficient for our current needs.
ITEM 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.
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PART II
ITEM 5. 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. We believe that there are a substantially greater number of beneficial owners of our common stock.
Dividend Policy
We have never declared or paid any cash dividends on our common stock. We currently intend to retain any future earnings and do not expect to pay any dividends in the foreseeable future. In addition, while our convertible senior notes do not prohibit payment of dividends, any dividends declared and paid by our board of directors would result in an adjustment to the conversion rate of such notes such that additional shares would be issuable upon conversion. Any future determination to declare cash dividends will be made at the discretion of our board of directors, subject to applicable laws, and will depend on a number of factors, including our financial condition, results of operations, capital requirements, contractual restrictions, including under any future loan facilities, general business conditions and other factors that our board of directors may deem relevant.
Stock-Based Compensation
For information on securities authorized for issuance under our equity compensation plans, see ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Recent Sales of Unregistered Securities
None.
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. 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. 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. 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. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” herein for additional information about our share repurchase program.
The following table presents stock repurchases by us during the three-month period ended December 31, 2025:
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| 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. 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. 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. 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.
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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.
ITEM 6. [Reserved]
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. 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. 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.
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. 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.
We provide our solution through a software-as-a-service, or SaaS, business model. We generate subscription revenue from our Intelligent CX Platform, and also generate usage-based telephony revenue. We charge our customers monthly subscription fees for access to our Intelligent CX Platform, primarily based on the number of licenses, as well as on a consumption or capacity basis for our AI solutions. Our customers generally purchase both subscriptions and related telephony usage from us. However, a growing number of our customers subscribe to our platform but purchase telephony usage directly from wholesale telecommunications service providers. 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. 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.
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. 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.
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%. 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
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general and administrative expenses. 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.
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. 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%. 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). During the year ended December 31, 2025, we also incurred an additional $2.1 million in stock-based compensation costs related to the 2025 Plan due to additional vesting of share-based awards, of which $0.3 million was recorded in cost of revenue, $0.5 million was recorded in research and development expenses, $1.1 million was recorded in sales and marketing expenses, and $0.2 million was recorded in general and administrative expenses on the consolidated statements of operations and comprehensive income (loss). 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. 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. 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. We shifted to a net income position for the year ended December 31, 2025 primarily as a result of disciplined expense management, including stock-based compensation costs. We expect net income to continue to be positive in 2026.
We have continued to make significant expenditures and investments, including in sales and marketing, research and development, infrastructure and investments in complementary businesses, technologies and intellectual property rights. We primarily evaluate the success of our business based on revenue growth and the efficiency and effectiveness of our investments. The growth of our business and our future success depend on many factors, including our ability to continue to expand our base of larger customers, grow revenue from our existing customers, innovate and expand internationally. 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.
Key Operating and Non-GAAP Financial Performance Metrics
In addition to measures of financial performance presented in our consolidated financial statements, we monitor the key metrics set forth below to help us evaluate growth trends, establish budgets, measure the effectiveness of our sales and marketing efforts and assess operational efficiencies.
Annual Dollar-Based Retention Rate
We believe that our Annual Dollar-Based Retention Rate provides insight into our ability to retain and grow revenue from our customers, and is a measure of the long-term value of our customer relationships. Our Annual Dollar-Based Retention Rate is calculated by dividing our Retained Net Revenue by our Retention Base Net Revenue on a monthly basis, which we then average using the rates for the trailing twelve months for the period presented. We define Retention Base Net Revenue as recurring net revenue from all customers in the comparable prior year period, and we define Retained Net Revenue as recurring net revenue from that same group of customers in the current period. We define recurring net revenue as net subscription and related usage revenue.
The following table shows our Annual Dollar-Based Retention Rate based on Net Revenue for the periods presented:
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| 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.
Adjusted EBITDA
We monitor adjusted EBITDA, a non-GAAP financial measure, to analyze our financial results and believe that it is useful to investors, as a supplement to U.S. GAAP measures, in evaluating our ongoing operational performance and enhancing an overall understanding of our past financial performance. We believe that adjusted EBITDA helps illustrate underlying trends in our business that could otherwise be masked by the effect of the income or expenses that we exclude from adjusted EBITDA. Furthermore, we use this measure to establish budgets and operational goals for managing our business and evaluating our performance. We also believe that adjusted EBITDA provides an additional tool for investors to use in comparing our recurring core business operating results over multiple periods with other companies in our industry.
Adjusted EBITDA should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with U.S. 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 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.
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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.
(3) Non-GAAP adjustments do not have a material impact on our worldwide income tax provision due to the tax treatment of the non-GAAP adjustments reported, and our domestic valuation allowance position.
Key Components of Our Results of Operations
Revenue
Our revenue consists of subscription and related usage as well as professional services. We consider our subscription and related usage to be recurring revenue. We charge our customers monthly subscription fees for access to our Intelligent CX Platform, primarily based on the number of licenses, as well as on a consumption or capacity basis for our AI solutions. 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. 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
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monthly contractual billing period. Support activities include technical assistance for our solution and upgrades and enhancements on a when and if available basis, which are not billed separately. Usage fees are billed in arrears based on customer-specific per minute rate plans and are recognized as actual usage occurs.
In addition, we generate professional services revenue from assisting customers in implementing our solution and optimizing its use. These services include application configuration, system integration and education and training services. Professional services are primarily billed on a fixed-fee basis and are typically performed by us directly. However, our customers can choose to perform these services themselves, use one of our certified professional service providers, or engage their own third-party service providers to perform such services. Professional services are recognized as the services are performed using the proportional performance method, with performance measured based on labor hours, provided all other criteria for revenue recognition are met.
While the implications of macroeconomic events 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. 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.
Cost of Revenue
Our cost of revenue consists primarily of personnel costs, including stock-based compensation, fees that we pay to telecommunications providers for usage, USF contributions and other regulatory costs, depreciation and related expenses of our servers and equipment, costs to build out and maintain co-location data centers, costs of public cloud-based data centers, cost of third party software that we resell, allocated office and facility costs, amortization of acquired technology, amortization of internal-use software development costs and lease amortization for finance leases. Cost of revenue can fluctuate based on a number of factors, including the fees we pay to telecommunications providers, which vary depending on our customers’ usage of our Intelligent CX Platform, the timing of capital expenditures and related depreciation charges and changes in headcount. We expect to continue investing in professional services, public cloud, cloud operations, customer support and network infrastructure to maintain high quality and availability of services, which we believe will result in absolute dollar increases in cost of revenue but percentage of revenue declines in the long-term through economies of scale.
Operating Expenses
We classify our operating expenses as research and development, sales and marketing, and general and administrative expenses.
Research and Development. Our research and development expenses consist primarily of salary and related expenses, including stock-based compensation, for personnel related to the development of new products, improvements and expanded features for our services, as well as quality assurance, testing, product management and allocated overhead. We expense research and development expenses as they are incurred except for internal use software development costs that qualify for capitalization. We believe that continued investment in our solution is important for our future growth, and we expect our research and development expenses to increase in absolute dollars and fluctuate as a percentage of revenue in the near and longer term.
Sales and Marketing. Sales and marketing expenses consist primarily of salaries and related expenses, including stock-based compensation, for personnel in sales and marketing, amortization of deferred contract acquisition costs, as well as advertising, marketing, corporate communications, travel costs and allocated overhead. We believe it is important to continue investing in sales and marketing to continue to generate revenue growth, and we expect sales and marketing expenses to increase in absolute dollars and fluctuate as a percentage of revenue in the near and longer term as we continue to support our growth initiatives.
General and Administrative. General and administrative expenses consist primarily of salary and related expenses, including stock-based compensation, for management, finance and accounting, legal, information systems and human resources personnel, professional fees, compliance costs, other corporate expenses and allocated overhead. 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.
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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.
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.
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
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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.
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 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.
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.
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.
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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.
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.
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 then outstanding 2025 convertible senior notes in privately-negotiated transactions for aggregate cash consideration of approximately $304.9 million. The repurchase transaction was accounted for as a debt extinguishment. The difference between the consideration used to extinguish the 2025 convertible senior notes and the carrying value of the 2025 convertible senior notes (including unamortized debt discount and issuance cost) resulted in an extinguishment gain of approximately $6.6 million. See Note 6 to the consolidated financial statements for further details.
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.
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. As of December 31, 2025, we had $746.7 million in working capital, which included $232.1 million in cash and cash equivalents, and $464.8 million in marketable investments. Our 2025 convertible senior notes matured on June 1, 2025, and we settled our obligations with respect to the 2025 convertible senior notes through a cash payment of $434.4 million in connection therewith. 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. 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. The total net proceeds from the issuance of the 2029 convertible senior notes, after deducting initial purchasers' discounts and commissions and estimated debt issuance costs, were approximately $728.8 million. In connection with the issuance
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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 of the 2029 convertible senior notes, we also entered into privately negotiated capped call transactions with certain financial institutions. We believe our existing cash and cash equivalents will be sufficient to meet our working capital and capital expenditure needs for at least the next 12 months.
We plan to continue to finance our operations in the future primarily through sales of our solution, net proceeds from equity and debt financings, and lease facilities. 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. 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. We may raise additional capital through equity or debt financings at any time to fund these or other requirements. 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. If we are unable to raise additional capital as needed, our business, operating results and financial condition could be harmed. In addition, if our operating performance during the next twelve months is below our expectations, our liquidity and ability to operate our business also could be harmed.
If we raise additional funds by issuing equity or equity-linked securities, the ownership of our existing stockholders would be diluted. 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. See Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” herein for additional information about our share repurchase program.
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. 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.
As part of our Share Repurchase Program, on November 11, 2025, we entered into the ASR program with JPM. Under the terms of the ASR program, on November 12, 2025, we made an aggregate payment of $50 million and received an initial delivery of 1,926,782 shares of our common stock, representing approximately 80% of the total number of shares of our common stock expected to be purchased under the ASR program. The shares received were immediately retired and recorded as a reduction to additional paid-in-capital within stockholders’ equity. Given our ability to settle in shares, as described below, the remaining prepaid forward contract amount was classified as a reduction to additional-paid-in-capital upon issuance and as of December 31, 2025.
Under the ASR program, upon settlement, we either receive additional shares of common stock from JPM or are required to deliver additional shares of common stock or cash to JPM, at our election. The final number of shares repurchased was based on the average of the daily volume-weighted average prices of our common stock during the term of the ASR program, less a discount and subject to adjustments pursuant to the terms and conditions of the ASR program. Cash settlement is not mandatory pursuant to the terms of the ASR program. 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.
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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. If we continue to improve our financial results, we expect net cash provided by operating activities to increase. Our largest source of operating cash inflows is cash collections from our customers for subscription and related usage services. Payments from customers for these services are typically received monthly.
Net cash provided by operating activities was $226.2 million during the year ended December 31, 2025. 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.
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.
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.
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 matured on June 1, 2025, and we settled our obligations with respect to the 2025 convertible senior notes in cash in connection therewith. 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.
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. The 2029 convertible senior notes mature on March 15, 2029 and are our senior unsecured
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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. 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.
See Note 6 to the consolidated financial statements included in this report for further details.
Leases
We have leases for offices, data centers and computer and networking equipment that expire at various dates through 2031. Our leases have remaining terms of one to seven years. Some of the leases include an option to extend the leases for up to one to five years, and some of the leases include the option to terminate the leases upon 30-days' notice. 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 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. 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. 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.
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.
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. 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.
Indemnification Agreements
In the ordinary course of business, we enter into agreements of varying scope and terms pursuant to which we agree to indemnify customers, vendors, lessors, business partners and other parties with respect to certain matters, including, but not limited to, losses arising out of breach of such agreements, services to be provided by us or from intellectual property infringement claims made by third parties. We have received indemnification demands, and will likely continue to receive demands, from customers regarding our intellectual property indemnification obligations under these contracts. In addition, we have entered into indemnification agreements with our directors, officers and certain employees that will require us, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers or employees. 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.
Contingencies — Legal and Regulatory
We are subject to certain legal and regulatory proceedings, and from time to time may be involved in a variety of claims, lawsuits, investigations, and proceedings relating to contractual disputes, intellectual property rights, employment matters, regulatory compliance matters, and other litigation matters relating to various claims that arise in the normal course of business. We determine whether an estimated loss from a contingency should be accrued by assessing whether a loss is deemed probable and can be reasonably estimated. We assess our potential liability by analyzing specific litigation and regulatory matters using reasonably available information. We develop our views on estimated losses in consultation with inside and outside counsel, which involves a subjective analysis of potential results and outcomes, assuming various combinations of appropriate litigation and settlement strategies. Legal fees are expensed in the period in which they are incurred. We are currently party to the following action:
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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. 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. Per the court’s subsequent order on March 27, 2025, Lucid Alternative Fund, LP filed an amended complaint on May 30, 2025. We moved to dismiss the amended complaint on July 29, 2025, and the court took the motion under submission after oral argument on December 18, 2025. We cannot predict the duration or outcome of this lawsuit at this time. 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.
On March 18, 2025, a related shareholder derivative action was filed in the United States District Court for the Northern District of California on behalf of nominal defendant Five9, Inc. and against its directors and certain of its officers seeking to assert claims for breach of fiduciary duty, unjust enrichment, abuse of control, gross mismanagement, and waste of corporate assets, and for contribution under Sections 10(b) and 21D of the Securities Exchange Act of 1934. The Company was served with the complaint on March 20, 2025. On April 4, 2025, the parties to the derivative action jointly filed a stipulation with the court to stay the derivative action until the resolution of the motion to dismiss in the securities action, as well as any subsequent motion to dismiss any further amended complaint in the securities action. On April 8, 2025, the court approved the stay stipulation.
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. 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. 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. We allocate the transaction price to each distinct performance obligation proportionately based on the estimated standalone selling price for each performance obligation. We then look to how services are transferred to the customer in order to determine the timing of revenue recognition. Most services provided under our agreements result in the transfer of control over time.
Our revenue consists of subscription services and related usage as well as professional services. We charge our customers subscription fees, usually billed on a monthly basis, for access to our Intelligent CX Platform, primarily based on the number of licenses, as well as on a consumption or capacity basis for our AI solutions. Licenses are defined as the maximum number of named agents allowed to concurrently access the Intelligent CX Platform. Customers typically have more named agents than licenses. Multiple named agents may use a license, though not simultaneously. The majority of our customers purchase both subscriptions and related telephony usage. A growing number of our customers subscribe to our platform but purchase telephony usage directly from wholesale telecommunications service providers. We do not sell telephony usage on a stand-alone basis to any customer. The related usage fees are based on the volume of minutes used for inbound and outbound customer interactions. Revenue generated from telephony usage is presented in revenue and cost of sales on a gross basis, as we are the party that controls the service and are responsible for fulfilling the promise to provide the call service by diverting the calls to selected carriers. 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
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CX implementations, including application configuration, system integration, optimization, education and training services. 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. Our customers, therefore, are able to adjust the number of licenses used to meet their changing contact center volume needs. Our larger customers typically choose annual contracts, which generally include an implementation and ramp period of several months. Subscription fees, including bundled plans, are generally billed monthly in advance, while related usage fees are billed in arrears. Support activities include technical assistance for our solution and upgrades and enhancements to our Intelligent CX Platform on a when-and-if-available basis, which are not billed separately.
Professional services are primarily billed on a fixed-fee basis and are typically performed by us directly. However, our customers can choose to perform these services themselves, use one of our certified professional service providers, or engage their own third-party service providers to perform such services. Revenue for professional services is recognized over time as services are performed, based on the proportion of labor hours expended compared to the total hours expected to complete the related performance obligation.
The estimation of variable consideration for each performance obligation requires us to make subjective judgments. 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. When services are included in the contract with the customer and are not sold at their stand-alone selling price, we are required to estimate the number of licenses the customer will use, especially during the initial ramp period of the contract, during which we bill under an ‘actual usage’ model for subscription-related services. We expect estimated variable consideration to continue to not have a material impact on the allocation of transaction fees to multiple performance obligations.
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. 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. 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. We allocate the purchase consideration to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair value at the acquisition dates, with the excess recorded to goodwill. Critical estimates in valuing certain intangible assets and contingent consideration include, but are not limited to, future expected cash flows, expected asset lives, royalty rates, and discount rates. The amounts and useful lives assigned to acquisition-related intangible assets impact the amount and timing of future amortization expense.
We use estimates, assumptions, and judgments when performing a goodwill impairment test or assessing the recoverability of acquisition-related finite-lived intangible assets. We test goodwill for impairment on an annual basis in the fourth quarter and more frequently if a significant event or circumstance indicates impairment, and assess the recoverability of acquisition-related intangible assets whenever events or circumstances indicate that the carrying amounts of such assets may not be recoverable. We also evaluate the estimated remaining useful lives of acquisition-related intangible assets for changes in circumstances that warrant a revision to the remaining periods of amortization.
Recent Accounting Pronouncements
Refer to Note 1 in Item 8 of this Form 10-K for information related to recent accounting pronouncements.
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risk in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk
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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. Cash equivalents and marketable securities were invested primarily in U.S. agency and government sponsored securities, U.S. treasury securities, municipal bonds, commercial paper, corporate bonds, certificates of deposit and money market funds. Our investment policy is focused on the preservation of capital and supporting our liquidity needs. Under this policy, we invest in highly rated securities, while limiting the amount of credit exposure to any one issuer other than the U.S. government. We do not invest in financial instruments for trading or speculative purposes, nor do we use leveraged financial instruments. We utilize external investment managers who adhere to the guidelines of our investment policy. 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. 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. 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. 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. We 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. 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. 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.
Our consolidated results of operations and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates and may be adversely affected in the future due to changes in foreign exchange rates. To date, we have not entered into any hedging arrangements with respect to foreign currency risk or other derivative financial instruments. 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.
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ITEM 8. Financial Statements and Supplementary Data.
Report of Independent Registered Public Accounting Firm (PCAOB ID: | ||||||||
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Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
Five9, Inc.:
Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting
We have audited the accompanying consolidated balance sheets of Five9, Inc. and subsidiaries (the Company) as of December 31, 2025 and 2024, the related consolidated statements of operations and comprehensive income (loss), stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2025, and the related notes (collectively, the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2025, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
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Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Sufficiency of audit evidence over revenues from subscription services and related usage
As discussed in Note 1 to the consolidated financial statements, the Company charges customers monthly subscription fees, for access to the Company’s Intelligent CX Platform. For the year ended December 31, 2025, the Company recorded $1,149.1 million of revenue. The subscription fees are primarily based on the number of licenses, as on a consumption or capacity basis for the Company’s Artificial Intelligence solutions. Licenses are defined as the maximum number to named agents allowed to concurrently access the Intelligent CX Platform. The majority of the Company’s customers purchase both subscriptions and related telephony usage. The related usage fees are based on the volume of minutes used for inbound and outbound client interactions. There are high volumes of subscription and related usage transactions processed across multiple information technology (IT) systems.
We identified the evaluation of the sufficiency of audit evidence over revenue from subscription services and related usage as a critical audit matter. Revenues from subscription services and related usage involved a high volume of automated transactions dependent on the Company’s IT systems. Therefore, our audit procedures required the involvement of IT professionals and auditor judgment was required to determine the nature and extent of audit evidence obtained and evaluate the results of the procedures.
The following are the primary procedures we performed to address this critical audit matter. We involved IT professionals with specialized skills and knowledge, who assisted in evaluating the design and testing the operating effectiveness of certain internal controls related to the Company’s revenue process. This included controls related to the capture and flow of subscription and related usage transactional information through the Company’s IT systems. We placed test calls and observed that call attributes such as duration and type of service were captured in the relevant IT systems. We assessed the recorded revenue by comparing total cash received during the year, adjusted for reconciling items, to the revenue recognized. Such assessment also evaluated the relevance and reliability of reconciling items to underlying documentation, including the changes in accounts receivable and deferred revenue. We evaluated the sufficiency of audit evidence obtained by assessing the results of procedures performed, including the appropriateness of the nature and extent of such evidence.
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/s/ KPMG LLP
We have served as the Company’s auditor since 2012.
February 19, 2026
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FIVE9, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
| December 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| ASSETS | ||||||||||||||
| Current assets: | ||||||||||||||
| Cash and cash equivalents | $ | $ | ||||||||||||
| Marketable investments | ||||||||||||||
| Accounts receivable, net | ||||||||||||||
| Prepaid expenses and other current assets | ||||||||||||||
| Deferred contract acquisition costs, net | ||||||||||||||
| Total current assets | ||||||||||||||
| Property and equipment, net | ||||||||||||||
| Operating lease right-of-use assets | ||||||||||||||
| Finance lease right-of-use assets | ||||||||||||||
| Intangible assets, net | ||||||||||||||
| Goodwill | ||||||||||||||
| Other assets | ||||||||||||||
| Deferred contract acquisition costs, net — less current portion | ||||||||||||||
| Total assets | $ | $ | ||||||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||
| Current liabilities: | ||||||||||||||
| Accounts payable | $ | $ | ||||||||||||
| Accrued and other current liabilities | ||||||||||||||
| Operating lease liabilities | ||||||||||||||
| Finance lease liabilities | ||||||||||||||
| Deferred revenue | ||||||||||||||
| Convertible senior notes | ||||||||||||||
| Total current liabilities | ||||||||||||||
| Convertible senior notes — less current portion | ||||||||||||||
| Operating lease liabilities — less current portion | ||||||||||||||
| Finance lease liabilities — less current portion | ||||||||||||||
| Other long-term liabilities | ||||||||||||||
| Total liabilities | ||||||||||||||
| Commitments and contingencies (Note 10) | ||||||||||||||
| Stockholders’ equity: | ||||||||||||||
Preferred stock, $ | ||||||||||||||
Common stock, $ | ||||||||||||||
| Additional paid-in capital | ||||||||||||||
| Accumulated other comprehensive income | ||||||||||||||
| Accumulated deficit | ( | ( | ||||||||||||
| Total stockholders’ equity | ||||||||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||||||||
See accompanying notes to the consolidated financial statements.
75
FIVE9, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(In thousands, except per share data)
| Year Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Revenue | $ | $ | $ | |||||||||||||||||
| Cost of revenue | ||||||||||||||||||||
| Gross profit | ||||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||
| Research and development | ||||||||||||||||||||
| Sales and marketing | ||||||||||||||||||||
| General and administrative | ||||||||||||||||||||
| Total operating expenses | ||||||||||||||||||||
| Income (loss) from operations | ( | ( | ||||||||||||||||||
| Other income (expense), net: | ||||||||||||||||||||
| Interest expense | ( | ( | ( | |||||||||||||||||
| Gain on early extinguishment of debt | ||||||||||||||||||||
| Interest income and other | ||||||||||||||||||||
| Total other income (expense), net | ||||||||||||||||||||
| Income (loss) before income taxes | ( | ( | ||||||||||||||||||
| Provision for income taxes | ||||||||||||||||||||
| Net income (loss) | $ | $ | ( | $ | ( | |||||||||||||||
| Net income (loss) per share: | ||||||||||||||||||||
| Basic | $ | $ | ( | $ | ( | |||||||||||||||
| Diluted | $ | $ | ( | $ | ( | |||||||||||||||
| Shares used in computing net income (loss) per share: | ||||||||||||||||||||
| Basic | ||||||||||||||||||||
| Diluted | ||||||||||||||||||||
| Comprehensive Income (Loss): | ||||||||||||||||||||
| Net income (loss) | $ | $ | ( | $ | ( | |||||||||||||||
| Other comprehensive income | ||||||||||||||||||||
| Comprehensive income (loss) | $ | $ | ( | $ | ( | |||||||||||||||
See accompanying notes to the consolidated financial statements.
76
FIVE9, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)
| Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Income (Loss) | Accumulated Deficit | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2022 | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||||
| Issuance of common stock upon partial conversion of the 2023 convertible senior notes | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Settlement at maturity of the outstanding capped calls and retirement of common stock related to the 2023 convertible senior notes | ( | — | — | — | |||||||||||||||||||||||||||||||||||||
| Issuance of common stock upon exercise of stock options | — | — | — | ||||||||||||||||||||||||||||||||||||||
| Issuance of common stock upon vesting of restricted stock units | ( | — | — | ||||||||||||||||||||||||||||||||||||||
| Shares held for tax withholdings | ( | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||
| Issuance of common stock under ESPP | — | — | — | ||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2023 | ( | ||||||||||||||||||||||||||||||||||||||||
| Issuance of new capped calls associated with the 2029 convertible senior notes | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||
| Partial termination of existing capped calls associated with the 2025 convertible senior notes | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Issuance of common stock upon exercise of stock options | — | — | — | ||||||||||||||||||||||||||||||||||||||
| Issuance of common stock upon vesting of restricted stock units | ( | — | — | ||||||||||||||||||||||||||||||||||||||
| Issuance of common stock under ESPP | — | — | |||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2024 | ( | ||||||||||||||||||||||||||||||||||||||||
| Share repurchases | ( | ( | ( | — | — | ( | |||||||||||||||||||||||||||||||||||
| Issuance of common stock upon exercise of stock options | — | — | — | ||||||||||||||||||||||||||||||||||||||
| Issuance of common stock upon vesting of restricted stock units | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||
| Issuance of common stock under ESPP | — | — | |||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2025 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||
See accompanying notes to the consolidated financial statements.
77
FIVE9, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(thousands)
| Year Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Cash flows from operating activities: | ||||||||||||||||||||
| Net income (loss) | $ | $ | ( | $ | ( | |||||||||||||||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||
| Reduction in the carrying amount of right-of-use assets | ||||||||||||||||||||
| Amortization of deferred contract acquisition costs | ||||||||||||||||||||
| Accretion of discount on marketable investments | ( | ( | ( | |||||||||||||||||
| Provision for credit losses | ||||||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||
| Amortization of discount and issuance costs on convertible senior notes | ||||||||||||||||||||
| Gain on early extinguishment of debt | ( | |||||||||||||||||||
| Impairment charge of an equity investment | ||||||||||||||||||||
| Impairment charge related to closure of operating lease facilities | ||||||||||||||||||||
| Interest on finance lease obligations | ||||||||||||||||||||
| Deferred taxes - excluding tax benefit from acquisition | ||||||||||||||||||||
| Deferred taxes - tax benefit from acquisition | ( | |||||||||||||||||||
| Other | ( | |||||||||||||||||||
| Changes in operating assets and liabilities: | ||||||||||||||||||||
| Accounts receivable | ( | ( | ( | |||||||||||||||||
| Prepaid expenses and other current assets | ( | ( | ||||||||||||||||||
| Deferred contract acquisition costs | ( | ( | ( | |||||||||||||||||
| Other assets | ( | |||||||||||||||||||
| Accounts payable | ||||||||||||||||||||
| Accrued and other current liabilities | ( | ( | ||||||||||||||||||
| Deferred revenue | ( | ( | ||||||||||||||||||
| Other long-term liabilities (including non-current portions of operating and finance lease liabilities) | ( | ( | ||||||||||||||||||
| Net cash provided by operating activities | ||||||||||||||||||||
| Cash flows from investing activities: | ||||||||||||||||||||
| Purchases of marketable investments | ( | ( | ( | |||||||||||||||||
| Proceeds from sales of marketable investments | ||||||||||||||||||||
| Proceeds from maturities of marketable investments | ||||||||||||||||||||
| Purchases of property and equipment | ( | ( | ( | |||||||||||||||||
| Capitalization of internal-use software development costs | ( | ( | ( | |||||||||||||||||
| Payments of initial direct lease costs | ( | |||||||||||||||||||
| Cash paid to acquire Acqueon Inc. | ( | |||||||||||||||||||
| Cash settlement to acquire Aceyus, Inc. | ( | |||||||||||||||||||
| Net cash provided by (used in) investing activities | ( | ( | ||||||||||||||||||
| Cash flows from financing activities: | ||||||||||||||||||||
| Proceeds from issuance of 2029 convertible senior notes | ||||||||||||||||||||
| Payment of debt issuance costs | ( | |||||||||||||||||||
| Payments for capped call transactions associated with the 2029 convertible senior notes | ( | |||||||||||||||||||
| Repurchase of a portion of 2025 convertible senior notes | ( | |||||||||||||||||||
| Repayment of outstanding 2023 convertible senior notes at maturity | ( | |||||||||||||||||||
| Cash received from the settlement at maturity of the outstanding capped calls associated with the 2023 convertible senior notes | ||||||||||||||||||||
| Cash received from partial termination of capped calls associated with the 2025 convertible senior notes | ||||||||||||||||||||
| Repayment of outstanding 2025 convertible senior notes at maturity | ( | |||||||||||||||||||
| Proceeds from exercise of common stock options | ||||||||||||||||||||
| Proceeds from sale of common stock under ESPP | ||||||||||||||||||||
| Payment of employee taxes related to vested RSUs | ( | |||||||||||||||||||
| Cash paid for repurchase of the Company's common stock | ( | |||||||||||||||||||
| Payment of holdbacks related to acquisitions | ( | |||||||||||||||||||
| Payments of finance leases | ( | ( | ( | |||||||||||||||||
| Net cash (used in) provided by financing activities | ( | |||||||||||||||||||
| Net (decrease) increase in cash, cash equivalents and restricted cash | ( | ( | ||||||||||||||||||
| Cash, cash equivalents and restricted cash: | ||||||||||||||||||||
| Beginning of period | ||||||||||||||||||||
| End of period | $ | $ | $ | |||||||||||||||||
| Supplemental disclosures of cash flow data: | ||||||||||||||||||||
| Cash paid for interest | $ | $ | $ | |||||||||||||||||
| Cash paid for income taxes | ||||||||||||||||||||
| Non-cash investing and financing activities: | ||||||||||||||||||||
| Equipment purchased and unpaid at period-end | ||||||||||||||||||||
| Capitalization of leasehold improvement through non-cash lease incentive | ||||||||||||||||||||
| Acquisition and related transaction costs accrued at period-end | ||||||||||||||||||||
| Stock-based compensation included in capitalized software development costs | ||||||||||||||||||||
| Reconciliation of Cash, Cash Equivalents and Restricted Cash to the Consolidated Balance Sheets - Beginning of Period: | ||||||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | |||||||||||||||||
| Restricted cash in other assets | ||||||||||||||||||||
| Total cash, cash equivalents and restricted cash | $ | $ | $ | |||||||||||||||||
| Reconciliation of Cash, Cash Equivalents and Restricted Cash to the Consolidated Balance Sheets - End of Period: | ||||||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | |||||||||||||||||
| Restricted cash in other assets | ||||||||||||||||||||
| Total cash, cash equivalents and restricted cash | $ | $ | $ | |||||||||||||||||
See accompanying notes to the consolidated financial statements.
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FIVE9, INC.
Notes to Consolidated Financial Statements
1. Description of Business and Summary of Significant Accounting Policies
Five9, Inc. and its wholly-owned subsidiaries (the “Company”) is a provider of cloud software for contact centers. The Company was incorporated in Delaware in 2001 and is headquartered in San Ramon, California. In addition to the United States, the Company has offices in Europe, Asia and Australia, which primarily provide research, development, sales, marketing, and customer support services.
Basis of Presentation
Use of Estimates
The preparation of consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, including accompanying notes and the reported amounts of revenue and expenses during the reporting period. The significant estimates made by management affect revenue and related reserves, as well as the fair value of assets acquired and liabilities assumed through business combinations and the fair value of the performance-based restricted stock units (“PRSUs”). Management periodically evaluates such estimates and they are adjusted prospectively based upon such periodic evaluation. Actual results could differ from those estimates.
Foreign Currency
The functional currency of the Company’s foreign subsidiaries is the U.S. dollar. For these subsidiaries, the monetary assets and liabilities resulting from foreign currency transactions are adjusted to reflect the exchange rate as of the balance sheet date. Foreign currency transaction gains and losses were not significant in any period and are reported in “Other income (expense), net” in the consolidated statements of operations and comprehensive income (loss).
Cash and Cash Equivalents
The Company’s cash and cash equivalents consist of highly liquid investments with maturities of three months or less at the time of purchase. The Company’s cash equivalents consist of investments in money market funds and U.S. treasury securities.
Marketable Investments
The Company’s marketable investments consist of U.S. treasury securities, U.S. agency securities and government sponsored securities, certificates of deposit, corporate bonds, and commercial paper. The Company’s marketable investments are classified as available-for-sale and carried at fair value. The intent is that all marketable investments are available for use in the Company’s current operations, including marketable investments with maturity dates greater than one year from December 31, 2025. The Company monitors its available-for-sale debt securities for potential impairment on a quarterly basis. If the Company intends to sell a debt security or it is more likely than not that the Company will be required to sell the security before recovery, then a decline in fair value below cost is recorded as an impairment charge in interest income and other in the consolidated statements of operations and comprehensive income (loss). In other cases, the Company further assesses whether the decline in fair value below cost is due to credit or non-credit related factors. Any credit-related unrealized losses are recognized as an allowance on the consolidated balance sheets with a corresponding charge in interest income and other in the consolidated statements of operations and comprehensive income (loss). Non-credit related unrealized losses and unrealized gains on available-for-sale debt securities are included in accumulated other comprehensive income.
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Concentration Risks
As of December 31, 2025, there was one customer that represented 11 % of accounts receivable. As of December 31, 2024, there was no customer that represented more than 10% of accounts receivable. For the years ended December 31, 2025, 2024 and 2023, no single customer represented more than 10% of revenue.
Provision for Credit Losses
The following table presents the changes in the provision for credit losses (in thousands):
| Year Ended December 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| Balance, beginning of period | $ | $ | ||||||||||||
| Add: bad debt expense | ||||||||||||||
| Less: write-offs, net of recoveries | ( | ( | ||||||||||||
| Balance, end of period | $ | $ | ||||||||||||
Property and Equipment, Net
Property and equipment is stated at cost less accumulated depreciation and amortization, and is depreciated using the straight-line method over the estimated useful lives of the assets as follows:
| Asset Category | Estimated Useful Lives | |||||||
| Computer and network equipment | ||||||||
| Computer software | ||||||||
| Internal-use software development costs | ||||||||
| Furniture and fixtures | ||||||||
| Leasehold improvements | Shorter of useful life or lease term | |||||||
The Company capitalizes certain qualifying costs incurred during the development stage of internal-use software. Costs related to preliminary project activities and post-implementation activities are expensed in research and development as incurred. Preliminary project activities include conceptual formulation, evaluation and final selection of alternatives, planning, proof of concept and requirement analysis of the selected alternative. The post-implementation stage begins when the internal-use software is ready for its intended use, and includes all internal and external training and application maintenance activities. Capitalized internal-use software development costs are included within property and equipment, net on the consolidated balance sheets, and are amortized over the estimated useful life of the software, which is three years . The related amortization expense is recognized in cost of revenue in the consolidated statements of operations and comprehensive income (loss).
Maintenance and repairs of property and equipment are charged to expense as incurred, and improvements and betterments are capitalized. When assets are retired or otherwise disposed of, the cost and accumulated depreciation and amortization are removed from the consolidated balance sheets and any resulting gain or loss is reflected in the consolidated statements of operations and comprehensive income (loss) in the period realized.
The Company evaluates the recoverability of property and equipment for possible impairment whenever events or circumstances indicate that the carrying amount of such assets or asset groups may not be recoverable. Recoverability of these assets is measured by a comparison of the carrying amounts to the future undiscounted cash flows the assets or asset groups are expected to generate. If such evaluation indicates that the carrying amount of the assets or asset groups is not recoverable, the carrying amount of such assets or asset groups is reduced to fair value.
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During 2024, the Company recognized impairment losses recorded in general and administrative expenses of $1.9 million as a result of its commitment to close two operating lease facilities and $0.3 million related to the associated leasehold improvements and property and equipment. During 2025, the Company recorded impairment charges of property and equipment in the amount of $0.8 million.
Business Combinations
The Company uses its best estimates and assumptions to assign fair value to the tangible and intangible assets acquired and liabilities assumed as of the acquisition date. The Company’s estimates are inherently uncertain and subject to change. During the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the fair value of these tangible and intangible assets and liabilities assumed, with the corresponding offset to goodwill. In addition, uncertain tax positions and tax-related valuation allowances are initially established in connection with a business combination as of the acquisition date. Upon the conclusion of the measurement period or final determination of the fair value of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the consolidated statements of operations and comprehensive income (loss).
Goodwill and Intangible Assets
The Company records goodwill when the consideration paid in a business combination exceeds the fair value of the net tangible assets and the identified intangible assets acquired. Goodwill is not amortized, but instead is required to be tested for impairment annually and whenever events or changes in circumstances indicate that the carrying value of goodwill may exceed its fair value.
The Company performs testing for impairment of goodwill in its fourth quarter, or as events occur or circumstances change that would more likely than not reduce the fair value of the Company’s single reporting unit below its carrying amount. A qualitative assessment is first made to determine whether it is necessary to perform the quantitative goodwill impairment test. This initial qualitative assessment includes, among other things, consideration of: (i) market capitalization of the Company; (ii) past, current and projected future earnings and equity; (iii) recent trends and market conditions; and (iv) valuation metrics involving similar companies that are publicly-traded and acquisitions of similar companies, if available. If this initial qualitative assessment indicates that it is more likely than not that impairment exists, a second quantitative assessment will be performed, involving a comparison between the estimated fair values of the Company’s single reporting unit with its respective carrying amount including goodwill. If the carrying value exceeds estimated fair value, an impairment charge is recorded for the excess. The Company may elect to bypass the qualitative assessment and proceed to perform the quantitative goodwill impairment test.
Revenue Recognition
Revenue is recognized when control of the promised services is transferred to customers in an amount that reflects the consideration that the Company expects to receive in exchange for those services. The Company generates all of its revenue from contracts with customers. In contracts with multiple performance obligations, it identifies each performance obligation and evaluates 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. The Company allocates the transaction price to each distinct performance obligation proportionately based on the estimated standalone selling price for each performance obligation. The Company then looks to how services are transferred to the customer in order to determine the timing of revenue recognition. Most services provided under the Company’s agreements result in the transfer of control over time.
The Company’s revenue consists of subscription services and related usage as well as professional services. The Company charges customers monthly subscription fees for access to its Intelligent CX Platform, primarily based on the number of licenses, as well as on a consumption or capacity basis for its AI solutions. Licenses are defined as
81
the maximum number of named agents allowed to concurrently access the Intelligent CX Platform. Customers typically have more named agents than licenses. Multiple named agents may use a license, though not simultaneously. The majority of the Company’s customers purchase both subscriptions and related telephony usage. A growing number of the Company’s customers subscribe to its platform but purchase telephony usage directly from a wholesale telecommunications service provider. The Company does not sell telephony usage on a stand-alone basis to any customer. The related usage fees are generally based on the volume of minutes used for inbound and outbound client interactions. Revenue generated from telephony usage is presented in revenue and cost of sales on a gross basis, as the Company is the party that controls the service and is responsible for fulfilling the promise to provide the call service by diverting the calls to selected carriers. The Company also offers bundled plans, generally for smaller deployments, whereby the customer is charged a single monthly fixed fee per agent seat 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. Customers are not permitted to take possession of the Company’s software.
The Company offers monthly, annual and multiple-year contracts to its 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 Company’s customers, therefore, are able to adjust the number of licenses used to meet their changing contact center needs. The Company’s larger customers typically choose annual contracts, which generally include an implementation and ramp period of several months. Subscription fees, including bundled plans, are generally billed monthly in advance, while related usage fees are billed in arrears. Support activities include technical assistance for the Company’s solution and upgrades and enhancements to the Intelligent CX Platform on a when-and-if-available basis, which are not billed separately.
The Company generally requires advance deposits from its customers based on estimated usage when such usage is not billed as part of a bundled plan. Any unused portion of the deposit is refundable to the customer upon termination of the arrangement, provided all amounts due have been paid. All fees, except usage deposits, are non-refundable.
Professional services are primarily billed on a fixed-fee basis and are performed by us directly. However, our customers can choose to perform these services themselves, use one of the Company’s certified professional service providers, or engage their own third-party service providers. Revenue for professional services is recognized over time, as services are performed.
The estimation of variable consideration for each performance obligation requires the Company to make subjective judgments resulting in estimated variable consideration that is included in the transaction fee. This is done to the extent that it is probable, in the Company’s judgment, that a significant reversal in the amount of cumulative revenue recognized under the contract will not occur. The Company estimates the variable consideration in order to allocate the overall transaction fee on a relative stand-alone selling price basis to its multiple performance obligations. When services are included in the contract with the customer and are not sold at their stand-alone selling price, the Company is required to estimate the number of agents the customer will use, especially during the initial ramp period of the contract, during which the Company bills under an ‘actual usage’ model for subscription-related services. To date, variable consideration has not had a material impact on the allocation of transaction fees to multiple performance obligations.
The Company recognizes revenue on fixed fee professional services performance obligations based on the proportion of labor hours expended compared to the total hours expected to complete the related performance obligation. The determination of the total labor hours expected to complete the performance obligations involves judgment, which influences the initial stand-alone selling price estimate as well as the timing of professional services revenue recognition, although this is typically resolved in a short time frame.
When a contract with a customer is signed, the Company assesses whether collection of the fees under the arrangement is probable. The Company assesses collection based on a number of factors, including past transaction history and the creditworthiness of the client. The Company maintains a revenue reserve for potential credits to be issued in accordance with service level agreements or for other revenue adjustments.
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Deferred Revenue
Deferred revenue consists of billings or payments received from customers for subscription services, usage and professional services in advance of revenue recognition and is recognized in accordance with the Company’s revenue recognition policy discussed above. The Company generally invoices its customers monthly in advance for subscription services. Accordingly, the deferred revenue balance does not represent the total contract value of sales arrangements.
Cost of Revenue
Research and Development
Advertising Costs
Commissions
Stock-Based Compensation
All stock-based compensation granted to employees and non-employee directors is measured at the grant date fair value of the award. The Company estimates the fair value of stock options under the Company’s Equity Incentive Plans and purchase rights under the Company’s 2014 Employee Stock Purchase Plan (“2014 ESPP Plan” or “ESPP”) using the Black-Scholes option-pricing model. The fair value of restricted stock units (“RSUs”), including performance-based restricted stock units (“PRSUs”) subject to performance conditions, is equal to the fair value of the Company’s common stock on the date of grant. The fair value of PRSUs subject to market conditions are determined using a Monte Carlo Simulation model. Compensation expense is recognized net of actual forfeitures over the service period, which is generally the vesting period.
Income Taxes
The Company accounts for income taxes using the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in operations in the period that includes the enactment date. The Company records a valuation allowance to reduce its deferred tax assets to the amount of future tax benefit that is more likely than not to be realized. As of
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December 31, 2025 and 2024, the Company recorded a full valuation allowance against the U.S. net deferred tax assets because of its history of operating losses in the United States. As of December 31, 2025, the Company recognized a net deferred tax asset balance of $2.7 million related to its operations in Australia, Germany, India and the U.K. As of December 31, 2024, the Company recognized a net deferred tax asset balance of $3.5 million related to its operations in Australia, Germany, India, Portugal and the U.K. The Company classifies interest and penalties on unrecognized tax benefits as income tax expense.
Comprehensive income (loss)
Comprehensive income (loss) consists of net income (loss), and unrealized gains or losses on available-for-sale marketable investments. The Company presents comprehensive income (loss) as part of the consolidated statements of operations and comprehensive income (loss). The changes in the accumulated balances of the components of other comprehensive income (loss) were not material for the periods presented.
Net income (loss) per share
Basic net income (loss) per share is calculated by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period, and excludes any dilutive effects of employee stock-based awards and potential shares issuable upon conversion of the convertible senior notes. Diluted net income (loss) per share is computed giving effect to all potentially dilutive shares of common stock, including common stock issuable upon exercise of stock options, vesting of RSUs and PRSUs, and shares of common stock issuable upon conversion of convertible senior notes.
Indemnification
Recently Adopted Accounting Pronouncements
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU requires disclosure of specific categories in the effective tax rate reconciliation and additional information on income taxes paid. This ASU is effective for the Company’s fiscal years beginning after December 15, 2024. Early adoption is permitted and may be adopted on a prospective or retrospective basis. The Company’s adoption of ASU 2023-09 did not have a material impact on its financial position and results of operations but did result in incremental disclosures. See Note 9 for further information on the impact of this adoption.
Recent Accounting Pronouncements Not Yet Effective
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40), and in January 2025, the FASB issued ASU 2025-01, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date, which clarified the effective date of ASU 2024-03. This ASU is intended to improve the decision-usefulness of expense information on public companies’ income statements through disaggregation of relevant expense captions in the notes to the financial statements. The guidance, as clarified by ASU 2025-01, is effective for annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. The Company is currently assessing the impact of this ASU on its consolidated financial statements and related disclosures.
In November 2024, the FASB issued ASU 2024-04, Debt with Conversion and Other Options (Subtopic 470-20), which clarifies the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion. The ASU is effective for annual and interim reporting periods beginning after December 15, 2025. Early adoption is permitted for entities that have implemented
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ASU 2020-06, with the option to apply the guidance prospectively or retrospectively. The Company will adopt this standard in the first quarter of 2026 on a prospective basis and will apply it to any future settlements of convertible debt instruments, if applicable. The Company does not expect this standard to have a material impact on its consolidated financial statements.
In July 2025, the FASB issued ASU 2025-05, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. The ASU provides a practical expedient to assume that conditions as of the balance sheet date remain unchanged over the life of the asset when estimating expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for under Topic 606. This guidance is effective for reporting periods beginning after December 15, 2025, with early adoption permitted. The Company will adopt this standard in the first quarter of 2026 and will elect the practical expedient. The Company does not expect this standard to have a material impact on its consolidated financial statements.
In September 2025, the FASB issued ASU 2025-06, Intangibles - Goodwill and Other-Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. The amendments are intended to modernize the recognition and capitalization framework to reflect current software development practices, including iterative and agile methodologies, by removing references to development project stages. It requires that an entity capitalize software costs when both of the following occur: (1) management has authorized and committed to funding the software project and (2) it is probable that the project will be completed and the software will be used to perform the function intended. The amendments in ASU 2025-06 are effective for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods. Early adoption is permitted as of the beginning of an annual reporting period. The Company is currently assessing the impact of this ASU on its consolidated financial statements and related disclosures.
In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270) Narrow Scope Improvements, which is intended to improve the navigability of the guidance in ASC 270 and clarity when it applies. Under the amendments, an entity is subject to ASC 270 if it provides interim financial statements and notes in accordance with GAAP. ASU 2025-11 also addresses the form and content of such financial statements, adds lists to ASC 270 of the interim disclosures required by all other codification topics, and establishes a principle under which an entity must disclose events since the end of the last annual reporting period that have a material impact on the entity. ASU 2025-11 is effective for interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently assessing the impact of this ASU on its consolidated financial statements and related disclosures.
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2. Revenue
Contract Balances
The following table provides information about accounts receivable, net, deferred contract acquisition costs, net, contract assets and contract liabilities from contracts with customers (in thousands):
| December 31, 2025 | December 31, 2024 | |||||||||||||
| Accounts receivable, net | $ | $ | ||||||||||||
| Deferred contract acquisition costs, net: | ||||||||||||||
| Current | $ | $ | ||||||||||||
| Non-current | ||||||||||||||
| Total deferred contract acquisition costs, net | $ | $ | ||||||||||||
| Contract assets and contract liabilities: | ||||||||||||||
| Contract assets (included in prepaid expenses and other current assets) | $ | $ | ||||||||||||
| Contract liabilities (deferred revenue) | ( | ( | ||||||||||||
| Noncurrent contract liabilities (deferred revenue) (included in other long term liabilities) | ( | ( | ||||||||||||
| Net contract liabilities | $ | ( | $ | ( | ||||||||||
Deferred contract acquisition costs are recorded when incurred and are amortized over an estimated customer benefit period of five years .
The Company’s contract assets consist of unbilled amounts typically resulting from professional services where revenue is recognized in excess of total amounts billed to the customer. The Company’s contract liabilities consist of advance payments and billings in excess of revenue recognized.
In the year ended December 31, 2025, the Company recognized revenue of $68.8 million related to its contract liabilities at December 31, 2024.
Remaining Performance Obligations
As of December 31, 2025, the aggregate amount of the total transaction price allocated in contracts with original duration of greater than one year to the remaining performance obligations was $1,190.5 million. The Company expects to recognize revenue on approximately three-fourths of the remaining performance obligations over the next 24 months, with the balance recognized thereafter. The Company excludes amounts for remaining performance obligations that are part of contracts with an original expected duration of one year or less. Such remaining performance obligations represent unsatisfied or partially unsatisfied performance obligations.
3. Investments and Fair Value Measurements
Marketable Investments
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The Company’s marketable investments have been classified and accounted for as available-for-sale. The Company’s intent is that all marketable investments are available for use in its current operations, including marketable investments with maturity dates greater than one year from December 31, 2025. The Company’s marketable investments as of December 31, 2025 and 2024 were as follows (in thousands):
| December 31, 2025 | ||||||||||||||||||||||||||
| Short-Term Marketable Investments | Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||||||||||||
| Certificates of deposit | $ | $ | $ | $ | ||||||||||||||||||||||
| U.S. treasury securities | ||||||||||||||||||||||||||
| U.S. agency and government-sponsored securities | ( | |||||||||||||||||||||||||
| Commercial paper | ||||||||||||||||||||||||||
| Corporate bonds | ||||||||||||||||||||||||||
| Total | $ | $ | $ | ( | $ | |||||||||||||||||||||
| December 31, 2024 | ||||||||||||||||||||||||||
| Short-Term Marketable Investments | Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||||||||||||
| Certificates of deposit | $ | $ | $ | $ | ||||||||||||||||||||||
| U.S. treasury securities | ( | |||||||||||||||||||||||||
| U.S. agency and government-sponsored securities | ( | |||||||||||||||||||||||||
| Commercial paper | ||||||||||||||||||||||||||
| Corporate bonds | ( | |||||||||||||||||||||||||
| Total | $ | $ | $ | ( | $ | |||||||||||||||||||||
The following table presents the gross unrealized losses and the fair value for those marketable investments that were in an unrealized loss position for less than 12 months as of December 31, 2025 and 2024 (in thousands):
| December 31, 2025 | December 31, 2024 | |||||||||||||||||||||||||
| Less than 12 months | Less than 12 months | |||||||||||||||||||||||||
| Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | Fair Value | |||||||||||||||||||||||
| U.S. treasury securities | $ | $ | $ | ( | $ | |||||||||||||||||||||
| U.S. agency and government-sponsored securities | ( | ( | ||||||||||||||||||||||||
| Corporate bonds | ( | |||||||||||||||||||||||||
| Total | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||
Although the Company had certain available-for-sale debt securities in an unrealized loss position as of December 31, 2025, no impairment loss was recorded since it did not intend to sell them, did not anticipate a need to sell them, and the decline in fair value was not due to any credit-related factors.
The amortized cost and fair value of the Company’s marketable investments by contractual maturity as of December 31, 2025 were as follows (in thousands):
| Cost | Fair Value | |||||||||||||
| Due within one year | $ | $ | ||||||||||||
| Due after one year through two years | ||||||||||||||
| Total | $ | $ | ||||||||||||
Fair Value Measurements
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The Company carries cash equivalents and marketable investments at fair value. Fair value is based on the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:
Level 1 — Observable inputs, which include unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2 — Observable inputs other than Level 1 inputs, such as quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 — Unobservable inputs that are supported by little or no market activity and that are based on management’s assumptions, including fair value measurements determined by using pricing models, discounted cash flow methodologies or similar techniques.
The Company determined the fair value of its Level 1 financial instruments, which are traded in active markets, using quoted market prices for identical instruments.
Marketable investments classified within Level 2 of the fair value hierarchy are valued based on other observable inputs, including broker or dealer quotations or alternative pricing sources. When quoted prices in active markets for identical assets or liabilities are not available, the Company relies on non-binding quotes from its investment managers, which are based on proprietary valuation models of independent pricing services. These models generally use inputs such as observable market data, quoted market prices for similar instruments, historical pricing trends of a security as relative to its peers. To validate the fair value determination provided by its investment managers, the Company reviews the pricing movement in the context of overall market trends and trading information from its investment managers. The Company performs routine procedures such as comparing prices obtained from independent sources to ensure that appropriate fair values are recorded.
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The following tables set forth the Company’s assets measured at fair value by level within the fair value hierarchy (in thousands):
| December 31, 2025 | ||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||
| Cash equivalents | ||||||||||||||||||||||||||
| Money market funds | $ | $ | $ | $ | ||||||||||||||||||||||
| Certificates of deposit | ||||||||||||||||||||||||||
| Total cash equivalents | $ | $ | $ | $ | ||||||||||||||||||||||
| Marketable investments | ||||||||||||||||||||||||||
| Certificates of deposit | $ | $ | $ | $ | ||||||||||||||||||||||
| U.S. treasury securities | ||||||||||||||||||||||||||
| U.S. agency and government-sponsored securities | ||||||||||||||||||||||||||
| Commercial paper | ||||||||||||||||||||||||||
| Corporate bonds | ||||||||||||||||||||||||||
| Total marketable investments | $ | $ | $ | $ | ||||||||||||||||||||||
| December 31, 2024 | ||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||
| Cash equivalents | ||||||||||||||||||||||||||
| Money market funds | $ | $ | $ | $ | ||||||||||||||||||||||
| Certificates of deposit | ||||||||||||||||||||||||||
| U.S. treasury securities | ||||||||||||||||||||||||||
| U.S. agency and government-sponsored securities | ||||||||||||||||||||||||||
| Commercial paper | ||||||||||||||||||||||||||
| Total cash equivalents | $ | $ | $ | $ | ||||||||||||||||||||||
| Marketable investments | ||||||||||||||||||||||||||
| Certificates of deposit | $ | $ | $ | $ | ||||||||||||||||||||||
| U.S. treasury securities | ||||||||||||||||||||||||||
| U.S. agency and government-sponsored securities | ||||||||||||||||||||||||||
| Commercial paper | ||||||||||||||||||||||||||
| Corporate bonds | ||||||||||||||||||||||||||
| Total marketable investments | $ | $ | $ | $ | ||||||||||||||||||||||
In March 2024, the Company issued $747.5 million aggregate principal amount of 1.00 % convertible senior notes due 2029 (the "2029 convertible senior notes") in a private offering. In connection with the issuance of the 2029 convertible senior notes, the Company used part of the net proceeds from the issuance to repurchase approximately $313.1 million aggregate principal amount of its 0.50 % convertible senior notes due 2025 (the "2025 convertible senior notes").
As of December 31, 2024, the estimated fair value of the outstanding 2025 convertible senior notes was $423.2 million. The 2025 convertible senior notes matured on June 1, 2025, and the Company settled its obligations with respect to the 2025 convertible senior notes in cash in connection therewith.
As of December 31, 2025 and December 31, 2024, the estimated fair value of the outstanding 2029 convertible senior notes was $674.1 million and $674.8 million, respectively. The fair values were determined based on the quoted price of the convertible senior notes in an inactive market on the last trading day of the reporting period and have been classified as Level 2 in the fair value hierarchy. See Note 6 for further information on the Company’s convertible senior notes.
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In February 2022, the Company made a $2.0 million equity investment in a privately-held company that the Company does not have the ability to exercise significant influence over. The Company elected to utilize the measurement alternative for an equity security without a readily determinable fair value. Accordingly, this investment is accounted for at its cost minus impairment, if any, and is classified within Level 3. If the Company identifies observable price changes in orderly transactions for such investment or a similar investment, it will measure the investment at fair value as of the date that the observable transactions or events occurred. During 2024, the Company noted an indicator of impairment of this investment and recorded a $1.3 million impairment charge. The Company concluded that there was no further indicator of impairment of this investment as of December 31, 2025.
Except for the equity investment described above, there were no
The fair value of the Company’s other financial instruments, including accounts receivable, accounts payable and other current liabilities, approximate their carrying value due to the relatively short maturity of those instruments. The carrying amounts of the Company’s operating and finance leases approximate their fair value, which is the present value of expected future cash payments based on assumptions about current interest rates and the creditworthiness of the Company.
4. Financial Statement Components
Cash and cash equivalents consisted of the following (in thousands):
| December 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| Cash | $ | $ | ||||||||||||
| Money market funds | ||||||||||||||
| Certificates of deposit | ||||||||||||||
| U.S. treasury securities | ||||||||||||||
| U.S. agency and government-sponsored securities | ||||||||||||||
| Total cash and cash equivalents | $ | $ | ||||||||||||
Accounts receivable, net consisted of the following (in thousands):
| December 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| Trade accounts receivable | $ | $ | ||||||||||||
| Unbilled trade accounts receivable, net of advance customer deposits | ||||||||||||||
| Provision for credit losses | ( | ( | ||||||||||||
| Accounts receivable, net | $ | $ | ||||||||||||
Prepaid expenses and other current assets consisted of the following (in thousands):
| December 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| Prepaid expenses | $ | $ | ||||||||||||
| Other current assets | ||||||||||||||
| Contract assets | ||||||||||||||
| Prepaid expenses and other current assets | $ | $ | ||||||||||||
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Property and equipment, net consisted of the following (in thousands):
| December 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| Computer and network equipment | $ | $ | ||||||||||||
| Computer software | ||||||||||||||
| Internal-use software development costs | ||||||||||||||
| Furniture and fixtures | ||||||||||||||
| Leasehold improvements | ||||||||||||||
| Property and equipment | ||||||||||||||
| Accumulated depreciation and amortization | ( | ( | ||||||||||||
| Property and equipment, net | $ | $ | ||||||||||||
Depreciation and amortization expense associated with property and equipment was $47.3 million, $40.3 million and $36.5 million for the years ended December 31, 2025, 2024 and 2023, respectively. During the years ended December 31, 2025 and 2024, the Company recorded impairment charges of property and equipment in the amount of $0.8 million and $0.3 million, respectively.
Other assets consisted of the following (in thousands):
| December 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| Other assets | $ | $ | ||||||||||||
| Equity investment in a privately-held company | ||||||||||||||
| Deferred tax assets | ||||||||||||||
| Other assets | $ | $ | ||||||||||||
Accrued and other current liabilities consisted of the following (in thousands):
| December 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| Accrued expenses | $ | $ | ||||||||||||
| Accrued compensation and benefits | ||||||||||||||
| Accrued federal fees | ||||||||||||||
| Sales and other tax liabilities | ||||||||||||||
| Accrued and other current liabilities | $ | $ | ||||||||||||
Other long-term liabilities consisted of the following (in thousands):
| December 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| Deferred revenue | $ | $ | ||||||||||||
| Deferred tax liabilities | ||||||||||||||
| Sales and other tax liabilities | ||||||||||||||
| Other long-term liabilities | ||||||||||||||
| Other long-term liabilities | $ | $ | ||||||||||||
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5. Goodwill and Intangible Assets
In 2024, goodwill and intangible assets were recorded as a result of the Company's acquisition of Acqueon, Inc. (“Acqueon”). See Note 14 for further details. The following table summarizes the activity in the Company's goodwill and intangible asset balances during the years ended December 31, 2025 and 2024 (in thousands):
| Goodwill | Intangible Assets | |||||||||||||
| Beginning of the period, January 1, 2024 | $ | $ | ||||||||||||
| Addition (Acqueon) | ||||||||||||||
| Measurement period adjustment (Acqueon) | ( | — | ||||||||||||
| Measurement period adjustment (Aceyus) | ( | — | ||||||||||||
| Amortization | — | ( | ||||||||||||
| End of the period, December 31, 2024 | ||||||||||||||
| Measurement period adjustment (Acqueon) | — | |||||||||||||
| Amortization | — | ( | ||||||||||||
| End of the period, December 31, 2025 | $ | $ | ||||||||||||
During the fourth quarter of 2025, the Company completed its annual goodwill impairment test. Based on the Company’s assessment, it concluded that it is more likely than not that the fair values were more than their carrying values. Accordingly, there was no indication of impairment of goodwill, and further quantitative testing was not required. Subsequent to the 2025 annual impairment test, the Company believes there have been no significant events or circumstances negatively affecting the valuation of goodwill. As of December 31, 2025 and 2024, there was no
The components of intangible assets were as follows (in thousands):
| December 31, 2025 | December 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Weighted Average Remaining Amortization Period (Years) | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Weighted Average Remaining Amortization Period (Years) | |||||||||||||||||||||||||||||||||||||||||||
| Developed technology | $ | $ | ( | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||||
| Acquired workforce | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||
| Customer relationships | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||
| Trademarks | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | ( | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||||
Amortization expense related to intangible assets was $14.5 million, $12.6 million and $12.0 million for the years ended December 31, 2025, 2024 and 2023, respectively.
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As of December 31, 2025, the expected future amortization expense for intangible assets was as follows (in thousands):
| Period | Expected Future Amortization Expense | |||||||
| 2026 | $ | |||||||
| 2027 | ||||||||
| 2028 | ||||||||
| 2029 | ||||||||
| 2030 | ||||||||
| Thereafter | ||||||||
| Total | $ | |||||||
Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate an asset’s carrying value may not be recoverable. The Company concluded that there were no
6. Debt
Repurchase Transaction
In connection with the issuance of the 2029 convertible senior notes on March 1, 2024, the Company used part of the net proceeds from the issuance to repurchase approximately $313.1 million aggregate principal amount of the outstanding 2025 convertible senior notes in privately-negotiated transactions for aggregate cash consideration of approximately $304.9 million (the “Repurchase Transaction”).
The Repurchase Transaction was accounted for as a debt extinguishment. The difference between the consideration used to extinguish the 2025 convertible senior notes and the carrying value of the 2025 convertible senior notes (including unamortized debt discount and issuance costs) resulted in an extinguishment gain of approximately $6.6 million recorded in Other income (expense), net on the Company’s consolidated statements of operations and comprehensive income (loss).
In connection with the Repurchase Transaction, the Company also entered into a partial termination agreement with each bank counterparty and unwound a corresponding portion of the previously purchased capped call instruments entered into in connection with the issuance of the 2025 convertible senior notes (the “2025 Capped Calls”). The Company received approximately $0.5 million in cash in connection with these partial terminations, representing the fair value at the date of settlement of the unwound 2025 Capped Calls.
2029 Convertible Senior Notes and Related Capped Call Transactions
In March 2024, the Company issued $747.5 million aggregate principal amount of 2029 convertible senior notes in a private offering, which aggregate principal amount included the exercise in full of the initial purchasers’ option to purchase up to an additional $97.5 million principal amount of the 2029 convertible senior notes. The 2029 convertible senior notes mature on March 15, 2029 and 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 total net proceeds from the issuance of the 2029 convertible senior notes, after deducting initial purchasers' discounts and commissions and estimated debt issuance costs, were approximately $728.8 million.
Each $1,000 principal amount of the 2029 convertible senior notes is initially convertible into 12.5918 shares of the Company’s common stock (the “2029 Conversion Option”), which is equivalent to an initial conversion price of approximately $79.42 per share of common stock, subject to adjustment upon the occurrence of specified events. The initial conversion price represents a premium of approximately 30 % to the $61.09 per share closing price of the Company’s common stock on The Nasdaq Global Market on February 27, 2024. There have been no changes to the initial conversion price of the 2029 convertible senior notes since issuance. The 2029 convertible senior notes are convertible, in multiples of $1,000 principal amount, at the option of the holders prior to the close of business on the business day immediately preceding December 15, 2028, only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on June 30, 2024 (and only during such calendar quarter), if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the conversion price on each applicable
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trading day; (2) during the five business day period after any five consecutive trading day period (the “2029 Measurement Period”) in which the trading price (as defined in the 2029 Indenture governing the 2029 convertible senior notes) per $1,000 principal amount of the 2029 convertible senior notes for each trading day of the 2029 Measurement Period was less than 98 % of the product of the last reported sale price of the Company’s common stock and the conversion rate in effect on each such trading day; (3) if the Company calls any or all of the 2029 convertible senior notes for redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date; or (4) upon the occurrence of specified corporate events. On or after December 15, 2028 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert all or any portion of their 2029 convertible senior notes, in multiples of $1,000 principal amount, at the option of the holder regardless of the foregoing circumstances.
Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the Company’s election. If the Company undergoes a fundamental change (as defined in the indenture governing the 2029 convertible senior notes), subject to certain conditions, holders may require the Company to repurchase for cash all or any portion of their 2029 convertible senior notes, in principal amounts of $1,000 or a multiple thereof, 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 fundamental change repurchase date. In addition, following certain corporate events or if the Company issues a notice of redemption, it will, under certain circumstances, increase the conversion rate for holders who elect to convert their notes in connection with such corporate event or during the relevant redemption period.
The closing market price of the Company's common stock of $20.05 per share on December 31, 2025, the last trading day during the three months ended December 31, 2025, was below $103.24 per share, which represents 130 % of the initial conversion price of $79.42 per share. Additionally, the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day, December 31, 2025, was not greater than or equal to 130 % of the initial conversion price. As such, during the three months ended December 31, 2025, the conditions allowing holders of the 2029 convertible senior notes to convert were not met. The 2029 convertible senior notes are therefore not convertible during the three months ending March 31, 2026.
The Company may not redeem the 2029 convertible senior notes prior to March 22, 2027. The Company may redeem for cash all or any portion of the 2029 convertible senior notes, at its option, on or after March 22, 2027 and prior to December 15, 2028, if the last reported sale price of its common stock has been at least 130 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100 % of the principal amount of the 2029 convertible senior notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. However, the Company may not redeem less than all of the outstanding 2029 convertible senior notes unless at least $100.0 million aggregate principal amount of 2029 convertible senior notes are outstanding and not called for redemption at the time the redemption notice is sent. No sinking fund is provided for the 2029 convertible senior notes.
The 2029 convertible senior notes are the Company’s senior unsecured obligations and rank senior in right of payment to any of the Company’s indebtedness that is expressly subordinated in right of payment to the 2029 convertible senior notes; equal in right of payment to any of the Company’s unsecured indebtedness that is not so subordinated (including the 2025 convertible senior notes); effectively junior in right of payment to any of the Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities.
The net carrying amount of the 2029 convertible senior notes as of December 31, 2025 and 2024 was as follows (in thousands):
| December 31, 2025 | December 31, 2024 | |||||||||||||
| Principal | $ | $ | ||||||||||||
| Unamortized issuance costs | ( | ( | ||||||||||||
| Net carrying amount | $ | $ | ||||||||||||
Interest expense related to the 2029 convertible senior notes was as follows (in thousands):
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| Year Ended | ||||||||||||||
| December 31, 2025 | December 31, 2024 | |||||||||||||
| Contractual interest expense | $ | $ | ||||||||||||
| Amortization of issuance costs | ||||||||||||||
| Total interest expense | $ | $ | ||||||||||||
The debt issuance costs are amortized into interest expense over the term of the 2029 convertible senior notes at an effective interest rate of 1.49 %.
In connection with the issuance of the 2029 convertible senior notes, the Company entered into privately negotiated capped call transactions (each a “2029 Capped Call,” and collectively the "2029 Capped Calls") with certain financial institutions. The 2029 Capped Call has an initial strike price of approximately $79.42 , subject to certain adjustments, which corresponds to the initial conversion price of the 2029 convertible senior notes. The 2029 Capped Calls have an initial cap price of $122.18 per share, subject to certain adjustments. The 2029 Capped Calls are expected to partially offset the potential dilution to the Company’s common stock upon any conversion of the 2029 convertible senior notes, with such offset subject to a cap based on the cap price. Each 2029 Capped Call covers, subject to anti-dilution adjustments, approximately 9.4 million shares of the Company’s common stock. The 2029 Capped Call is subject to adjustment upon the occurrence of specified extraordinary events affecting the Company, including merger events, tender offers, and announcement events. In addition, each 2029 Capped Call is subject to certain specified additional disruption events that may give rise to a termination of the 2029 Capped Calls, including nationalization, insolvency or delisting, changes in law, failures to deliver, insolvency filings, and hedging disruptions. For accounting purposes, each 2029 Capped Call is treated as a separate transaction from, and not part of the terms of the 2029 convertible senior notes. As these transactions meet certain accounting criteria, the 2029 Capped Calls are recorded in stockholders' equity and are not accounted for as derivatives. The 2029 Capped Calls will not be remeasured as long as they continue to meet the conditions for equity classification.
2025 Convertible Senior Notes and Related Capped Call Transactions
In May and June 2020, the Company issued $747.5 97.5 728.8 million.
In March 2024, the Company used part of the net proceeds from the issuance of the 2029 convertible senior notes to repurchase $313.1 million aggregate principal amount of the 2025 convertible senior notes in privately-negotiated transactions.
The 2025 convertible senior notes matured on June 1, 2025, and the Company settled its obligations with respect to the 2025 convertible senior notes in cash in connection therewith. Prior to maturity, the 2025 convertible senior notes bore interest at a fixed rate of 0.500 % per annum, payable semiannually in arrears on June 1 and December 1 of each year.
The net carrying amount of the 2025 convertible senior notes as of December 31, 2024 was $433.5 million. There were no 2025 convertible senior notes outstanding as of December 31, 2025.
Interest expense related to the 2025 convertible senior notes was as follows (in thousands):
| Year Ended | ||||||||||||||||||||
| December 31, 2025 | December 31, 2024 | December 31, 2023 | ||||||||||||||||||
| Contractual interest expense | $ | $ | $ | |||||||||||||||||
| Amortization of issuance costs | ||||||||||||||||||||
| Total interest expense | $ | $ | $ | |||||||||||||||||
In connection with the issuance of the 2025 convertible senior notes, the Company entered into privately negotiated capped call transactions (each a “2025 Capped Call,” and collectively the "2025 Capped Calls") with certain financial institutions. The 2025 Capped Calls each had an initial strike price of approximately $134.34 , which corresponded to the initial conversion price of the 2025 convertible senior notes. In connection with the
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7. Stockholders’ Equity
Capital Structure
Common Stock
The Company is authorized to issue 450,000,000 shares of common stock with a par value of $0.001 per share. As of December 31, 2025 and 2024, the Company had 77,194,499 75,807,505
Holders of the Company’s common stock are entitled to dividends, if and when declared by the board of directors. In the event of liquidation, dissolution or winding up, subject to the rights of the holders of any then outstanding shares of preferred stock, holders of common stock will be entitled to receive the assets and funds of the Company that are legally available for distribution.
Preferred Stock
The Company is authorized to designate and issue up to 5,000,000 shares of preferred stock with a par value of $0.001 per share in one or more series without stockholder approval and to fix the rights, preferences, privileges and restrictions thereof. As of December 31, 2025 and 2024, there were no
Share Repurchase Program
In October 2025, the Company’s Board of Directors approved the 2025 Repurchase Program, which authorized the repurchase of up to $150.0 million of the Company’s 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. 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.
As part of the Company’s Share Repurchase Program, on November 11, 2025, the Company entered into the ASR program with JPM. Under the terms of the ASR program, on November 12, 2025, the Company made an aggregate payment of $50 million and received an initial delivery of 1,926,782 shares of the Company’s common at an initial price of $20.76 per share, representing approximately 80 % of the total number of shares of the Company’s common stock expected to be purchased under the ASR program. The shares received were immediately retired and recorded as a reduction to additional paid-in-capital within stockholders’ equity. Given the Company’s ability to settle in shares, as described below, the remaining prepaid forward contract amount was classified as a reduction to additional-paid-in-capital upon issuance and as of December 31, 2025.
Under the ASR program, upon settlement, the Company either receives additional shares of common stock from JPM or is required to deliver additional shares of common stock or cash to JPM, at the Company’s election. The final number of shares the Company repurchased was based on the average of the daily volume-weighted average prices of the Company’s common stock during the term of the ASR program, less a discount and subject to adjustments pursuant to the terms and conditions of the ASR program. Cash settlement is not mandatory pursuant to the terms of the ASR program. 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, approximately $100.0 million remained available under the Share Repurchase Program.
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Common Stock Reserved for Future Issuance
Shares of common stock reserved for future issuance related to outstanding equity awards and employee equity incentive plans as of December 31, 2025, were as follows (in thousands):
| Common Stock Reserved | ||||||||
| Stock options outstanding | ||||||||
| RSUs (including PRSUs) outstanding | ||||||||
| Shares available for future grant under 2014 Plan | ||||||||
| Shares available for future issuance under ESPP | ||||||||
| Total shares of common stock reserved | ||||||||
Equity Incentive Plans
In March 2014, the Company’s board of directors and stockholders approved the 2014 Equity Incentive Plan (“2014 Plan”) and 5,300,000 shares of common stock were authorized for issuance under the 2014 Plan. In addition, on the first day of each year beginning in 2015 and ending in 2024, the 2014 Plan provides for an annual automatic increase to the shares reserved for issuance in an amount equal to 5 % of the total number of shares outstanding on December 31st of the preceding calendar year or a lesser number as determined by the Company’s board of directors. The 2014 Plan replaced the Amended and Restated 2004 Equity Incentive Plan, as amended (“2004 Plan”), and no further grants were made under the 2004 Plan once the 2014 Plan became effective on April 3, 2014. Upon the effectiveness of the 2014 Plan, all shares reserved for future issuance under the 2004 Plan became available for issuance under the 2014 Plan. Additionally, any forfeited or expired shares that would have otherwise returned to the 2004 Plan, instead return to the 2014 Plan. The 2014 Plan allows the Company to grant stock options, RSUs, restricted stock awards, performance stock awards, stock appreciation rights, performance cash awards, and other stock awards. To date, the Company has granted stock options and RSUs (including PRSUs) under the 2014 Plan. Stock options granted under the 2014 Plan are in general at a price equal to the fair market value of the common stock on the date of grant and vest over four years . The Company’s stock options expire 10 years from the date of grant. Each RSU granted under the 2014 Plan represents a right to receive one share of the Company’s common stock when the RSU vests. RSUs generally vest over to four years . Vested options generally expire three months after termination of the optionee’s employment or relationship as a consultant or director, unless otherwise extended by the terms of the stock option agreement.
In connection with the Company’s acquisition of Inference in 2020, the Company assumed unvested stock options that had been granted under the Inference Technologies Group Inc. 2018 Equity Incentive Plan. Each of the assumed stock options are subject to substantially the same terms and conditions as applied to the assumed stock options immediately prior to the acquisition date, except that the number of shares of the Company’s common stock subject to each assumed stock option and the exercise price has been adjusted in accordance with the terms of the acquisition agreement. If these assumed stock options are cancelled, forfeited or expire unexercised, the underlying shares do not become available for future grant.
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Stock Options
A summary of the Company’s stock option activity during the year ended December 31, 2025 is as follows (in thousands, except years and per share data):
| Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (Years) | Aggregate Intrinsic Value (1) | |||||||||||||||||||||||
| Outstanding as of December 31, 2024 | $ | |||||||||||||||||||||||||
| Options granted | ||||||||||||||||||||||||||
| Options exercised | ( | |||||||||||||||||||||||||
| Options forfeited or expired | ( | |||||||||||||||||||||||||
| Outstanding as of December 31, 2025 | $ | |||||||||||||||||||||||||
| Vested and expected to vest as of December 31, 2025 | ||||||||||||||||||||||||||
| Exercisable as of December 31, 2025 | ||||||||||||||||||||||||||
(1) The aggregate intrinsic value amounts are computed based on the difference between the exercise price of the stock options and the fair market value of the Company’s common stock of $20.05 per share as of December 31, 2025 for all in-the-money stock options outstanding.
Following is additional information pertaining to the Company’s stock option activity (in thousands, except per share data):
| Year Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Weighted average grant date fair value per share of options granted | $ | $ | $ | |||||||||||||||||
Intrinsic value of options exercised (1) | ||||||||||||||||||||
| Total fair value of options vested during the period | ||||||||||||||||||||
| Cash received from options exercised | ||||||||||||||||||||
(1) Intrinsic value of options exercised is the difference between the fair market value of the Company’s common stock at the time of exercise and the exercise price paid. | ||||||||||||||||||||
Restricted Stock Units (including PRSUs)
A summary of RSU activity (including PRSUs) during the year ended December 31, 2025 is as follows (in thousands, except per share data):
| Number of Shares | Weighted Average Grant Date Fair Value Per Share | |||||||||||||
| Outstanding as of December 31, 2024 | $ | |||||||||||||
| RSUs granted | ||||||||||||||
| RSUs vested and released | ( | |||||||||||||
| RSUs forfeited or cancelled | ( | |||||||||||||
| Outstanding as of December 31, 2025 | ||||||||||||||
PRSUs with Market and Service Conditions. In 2022, the Company granted 284,282 market-based PRSUs subject to market and service conditions (“market-based PRSUs”) with a grant date fair value of $30.6 million as part of its annual grant of equity incentive awards to certain executives and in connection with the appointment of Michael Burkland as its Chief Executive Officer in 2022. In 2023, the Company granted 35,921 market-based PRSUs with a grant date fair value of $3.1 million. In 2024, the Company granted an additional 159,016 market-based PRSUs with a grant date fair value of $9.6 million. In 2025, the Company granted 324,165 market-based PRSUs with a grant date fair value of $15.0 million. The amount that may be earned pursuant to the market-based PRSUs ranges from 0 % to 200 % of the target number based on the Company’s relative total shareholder return
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(“RTSR”) performance as compared to the companies in the S&P Software and Services Select Index during the performance period. The 2024-2026 and 2025-2027 performance periods contain three overlapping measurement periods—a one-year period, a two-year period, and a three-year period. The 2022-2024 and 2023-2025 performance periods contain three one-year measurement periods. One-third of the total market-based PRSUs may be earned and settled in shares following the end of each measurement period based on RTSR performance and subject to continued employment through the payment date. If the Company’s absolute total shareholder return for any measurement period is negative, then no more than 100 % of the target amount of market-based PRSUs for such period may be earned. If an executive's employment with the Company terminates before the end of the final measurement period due to death or disability, 100 % (if due to death) or 50 % (if due to disability) of the unvested market-based PRSUs may be earned subject to ultimate RTSR performance in each remaining performance period. Upon a qualifying termination of employment in connection with a change in control of the Company, the unvested market-based PRSUs subject to the 2023-2025, 2024-2026 and 2025-2027 performance periods will vest on a double-trigger basis (i) at the target level for the uncompleted portions of the performance periods and (ii) at the actual level of performance measured through the date of the change in control of the Company, based on the price per share paid in such change in control. The fair value of the market-based PRSUs is determined on their grant date using a Monte Carlo Simulation model based upon assumptions presented below. The Company recognizes the fair value of the market-based PRSUs ratably over their requisite service period.
Under the market-based PRSU agreements for the 2022-2024 performance period, the TSR payout percentage ranges from — % to 200 %, with a 50 % payout at the 25th TSR percentile (threshold), 100 % payout at the 55th TSR percentile (target), 200 % payout at the 90th percentile or greater (maximum) and no payout below the threshold performance level. Under the market-based PRSU agreements for the 2023-2025, 2024-2026 and 2025-2027 performance periods, the TSR payout percentage ranges from — % to 200 %, with a 50 % payout at the 25th TSR percentile (threshold), 100 % payout at the 55th TSR percentile (target), 200 % payout at the 75th percentile or greater (maximum) and no payout below the threshold performance level.
During the first quarter of 2023, the Company certified the performance results for the first measurement period for the market-based PRSUs subject to the 2022-2024 performance period. The Company determined that its actual total shareholder return for such measurement period was (52.64 )%, and that its relative total shareholder return ranking was in the 30.2 percentile relative to companies in the S&P Software & Services Select Index, which resulted in a payout percentage of 58.7 % of target. During the first quarter of 2024, the Company certified the performance results for the second measurement period for the market-based PRSUs subject to the 2022-2024 performance period. The Company determined that its actual total shareholder return for such performance period was 19.95 %, and that its relative total shareholder return ranking was in the 53.8 percentile relative to companies in the S&P Software & Services Select Index, which resulted in a payout percentage of 98.0 % of target. During the first quarter of 2024, the Company also certified the performance results for the first measurement period for the market-based PRSUs subject to the 2023-2025 performance period. The Company determined that its actual total shareholder return for such performance period was 19.95 %, and that its relative total shareholder return ranking was in the 50.5 percentile relative to companies in the S&P Software & Services Select Index, which resulted in a payout percentage of 92.5 % of target. During the first quarter of 2025, the Company certified the performance results for the final measurement period for the market-based PRSUs subject to the 2022-2024 performance period. The Company determined that its actual total shareholder return for such measurement period was (47.25 )%, and that its relative total shareholder return ranking was in the 3.7 percentile relative to companies in the S&P Software & Services Select Index, which resulted in a payout percentage of 0.00 % of target. During the first quarter of 2025, the Company also certified the performance results for the second measurement period for the market-based PRSUs subject to the 2023-2025 performance period. The Company determined that its actual total shareholder return for such measurement period was (47.25 )%, and that its relative total shareholder return ranking was in the 2.9 percentile relative to companies in the S&P Software & Services Select Index, which resulted in a payout percentage of 0.0 % of target. During the first quarter of 2025, the Company also certified the performance results for the first measurement period for the market-based PRSUs subject to the 2024-2026 performance period. The Company determined that its actual total shareholder return for such measurement period was (47.25 )%, and that its relative total shareholder return ranking was in the 1.5 percentile relative to companies in the S&P Software & Services Select Index, which resulted in a payout percentage of 0.0 % of target. During the first quarter of 2026, the Company certified the performance results for the final measurement period for the market-based PRSUs subject to the 2023-2025 performance period. The Company determined that its actual total shareholder return for such measurement period was (51.28 )%, and that its relative total shareholder return ranking was in the 10.0 percentile relative to companies in the S&P Software & Services Select Index, which resulted in a payout percentage of 0.0 % of target. During the first quarter of 2026, the Company also certified the performance results for the second measurement period for the market-based PRSUs subject to the 2024-2026 performance period. The Company determined that its actual total shareholder return for such measurement period was (78.31 )%, and that its relative total shareholder return ranking was in the 1.0 percentile relative to companies in the S&P Software & Services
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Select Index, which resulted in a payout percentage of 0.0 % of target. During the first quarter of 2026, the Company also certified the performance results for the first measurement period for the market-based PRSUs subject to the 2025-2027 performance period. The Company determined that its actual total shareholder return for such measurement period was (51.28 )%, and that its relative total shareholder return ranking was in the 9.0 % percentile relative to companies in the S&P Software & Services Select Index, which resulted in a payout percentage of 0.0 % of target.
Following is additional information pertaining to the Company’s RSU activity (including PRSUs) (in thousands, except per share data):
| Year Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Weighted average grant date fair value per share of RSUs granted | $ | $ | $ | |||||||||||||||||
| Total fair value of RSUs vested during the period | ||||||||||||||||||||
Employee Stock Purchase Plan
In March 2014, the Company’s board of directors and stockholders adopted the 2014 ESPP and the shares authorized for issuance thereunder. The 2014 ESPP became effective on April 3, 2014.
The 2014 ESPP permits eligible employees to purchase shares of the Company’s common stock through payroll deductions with up to 15 % of their pre-tax earnings subject to certain Internal Revenue Code limitations. The purchase price of the shares is 85 % of the lower of the fair market value of the Company’s common stock on the first day of a six month offering period, except for the initial offering period, or the relevant purchase date. In addition, no participant may purchase more than 1,500 shares of common stock in each purchase period.
The number of shares of common stock originally reserved for issuance under the 2014 ESPP was 880,000 shares, which increases automatically each year, beginning on January 1, 2015 and continuing through January 1, 2024, by the lesser of (i) 1 % of the total number of shares of the Company’s common stock outstanding on December 31 of the preceding calendar year; (ii) 1,000,000 shares of common stock (subject to adjustment to reflect any split or combination of its common stock); or (iii) such lesser number as determined by its board of directors.
During 2025 and 2024, 600,877 and 372,046 shares were purchased by employees under the 2014 ESPP at a weighted average price of $20.76 and $39.77 per share, respectively.
Stock-Based Compensation
Stock-based compensation expenses for the years ended December 31, 2025, 2024 and 2023 were as follows (in thousands):
| Year Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Cost of revenue | $ | $ | $ | |||||||||||||||||
| Research and development | ||||||||||||||||||||
| Sales and marketing | ||||||||||||||||||||
| General and administrative | ||||||||||||||||||||
| Total | $ | $ | $ | |||||||||||||||||
As of December 31, 2025, unrecognized stock-based compensation expense by award type and their expected weighted-average recognition periods are summarized in the following table (in thousands, except years).
| Stock Option | RSU (excluding PRSUs) | PRSU | ESPP | |||||||||||||||||||||||
| Unrecognized stock-based compensation expense | $ | $ | $ | $ | ||||||||||||||||||||||
| Weighted-average amortization period (in years) | ||||||||||||||||||||||||||
The Company recognizes stock-based compensation expense that is calculated based upon awards that have vested, reduced for actual forfeitures. All stock-based compensation for equity awards granted to employees and non-employee directors is measured based on the grant date fair value of the award.
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The Company values RSUs, including PRSUs subject to performance conditions, at the closing market price of its common stock on the date of grant. The Company estimates the fair value of each stock option and purchase right under the 2014 ESPP granted to employees on the date of grant using the Black-Scholes option-pricing model using the assumptions disclosed in the table below. The Company estimates the fair value of PRSUs subject to market conditions using a Monte Carlo Simulation model using the assumptions disclosed in the table below. Expected volatility is based upon the weighting of the Company’s historical volatility. The expected term of options granted is estimated using the simplified method by taking the average of the vesting term and the contractual term of the option. The expected volatility assumption for purchase rights under the 2014 ESPP is based on the historical volatility of the Company’s common stock. The risk-free rate for the expected term of the awards is based on U.S. Treasury zero-coupon issues at the time of grant. The Company has not paid, and does not anticipate paying, cash dividends on its shares of common stock. Accordingly, the expected dividend yield is zero .
The weighted average assumptions used to value PRSUs with market conditions granted during the periods presented were as follows:
PRSUs (Market Conditions) | Year Ended December 31, | |||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Expected term (years) | ||||||||||||||||||||
| Volatility | ||||||||||||||||||||
| Risk-free interest rate | ||||||||||||||||||||
| Dividend yield | ||||||||||||||||||||
The weighted average assumptions used to value purchase rights under the 2014 ESPP granted during the periods presented were as follows:
ESPP | Granted In | |||||||||||||||||||||||||||||||||||||
| November 2025 | May 2025 | November 2024 | May 2024 | November 2023 | May 2023 | |||||||||||||||||||||||||||||||||
| Expected term (years) | ||||||||||||||||||||||||||||||||||||||
| Volatility | ||||||||||||||||||||||||||||||||||||||
| Risk-free interest rate | ||||||||||||||||||||||||||||||||||||||
| Dividend yield | ||||||||||||||||||||||||||||||||||||||
8. Net Income (Loss) Per Share
Basic net income (loss) per share is calculated by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period, and excludes any dilutive effects of employee stock-based awards and potential shares upon conversion of the convertible senior notes. Diluted net income (loss) per share is computed giving effect to all potentially dilutive shares of common stock, including common stock issuable upon exercise of stock options, vesting of RSUs and PRSUs, and shares of common stock issuable upon conversion of convertible senior notes.
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The following table presents the calculation of basic and diluted net income (loss) per share (in thousands, except per share data):
| Year Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Net income (loss) | $ | $ | ( | $ | ( | |||||||||||||||
| Weighted-average shares used in computing basic and diluted net income (loss) per share: | ||||||||||||||||||||
| Basic | ||||||||||||||||||||
| Diluted | ||||||||||||||||||||
| Basic and diluted net income (loss) per share: | ||||||||||||||||||||
| Basic | $ | $ | ( | $ | ( | |||||||||||||||
| Diluted | $ | $ | ( | $ | ( | |||||||||||||||
The following securities were excluded from the calculation of diluted net income (loss) per share because their effect would have been anti-dilutive (in thousands):
| December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Stock options | ||||||||||||||||||||
RSUs (including PRSUs) | ||||||||||||||||||||
Convertible senior notes | ||||||||||||||||||||
| Total | ||||||||||||||||||||
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9. Income Taxes
The following table presents components of loss before income taxes for the periods presented (in thousands):
| Year Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| United States | $ | $ | ( | $ | ( | |||||||||||||||
| International | ||||||||||||||||||||
| Income (loss) before income taxes | $ | $ | ( | $ | ( | |||||||||||||||
Provision for (benefit from) income taxes for the periods presented consisted of (in thousands):
| Year Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Current: | ||||||||||||||||||||
| U.S. federal | $ | $ | $ | |||||||||||||||||
| U.S. state | ||||||||||||||||||||
| Foreign | ( | |||||||||||||||||||
| Total provision for income taxes - Current | ||||||||||||||||||||
| Deferred: | ||||||||||||||||||||
| U.S. federal | ( | |||||||||||||||||||
| U.S. state | ( | |||||||||||||||||||
| Foreign | ||||||||||||||||||||
| Total provision for (benefit from) income taxes - Deferred | ( | |||||||||||||||||||
| Total provision for income taxes | $ | $ | $ | |||||||||||||||||
The Company recorded current income tax expense during 2025 principally due to U.S. state tax attribute utilization limitations and foreign income produced by the Company’s intercompany operating model. As a result of adopting ASU 2023-09 retroactively, the Company has revised certain disclosures to align with enacted requirements and has conformed prior year disclosures for comparability. Income tax expense (benefit) differed from the amount computed by applying the U.S. federal statutory income tax rate of 21% to pre-tax income (loss) for the periods presented as a result of the following (in thousands):
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| 2025 | 2024 | 2023 | ||||||||||||||||||||||||||||||||||||
| U.S. federal tax at statutory rate | $ | % | $ | ( | % | $ | ( | % | ||||||||||||||||||||||||||||||
| Domestic federal reconciling items: | ||||||||||||||||||||||||||||||||||||||
| Tax credits | ||||||||||||||||||||||||||||||||||||||
| Research and Development tax credit | ( | % | ( | % | ( | % | ||||||||||||||||||||||||||||||||
| Nontaxable and Nondeductible Items: | ||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | % | ( | % | ( | % | |||||||||||||||||||||||||||||||||
| Officers’ compensation | % | ( | % | ( | % | |||||||||||||||||||||||||||||||||
| Transaction costs | % | ( | % | ( | % | |||||||||||||||||||||||||||||||||
| State taxes deduction | ( | ( | % | ( | % | ( | % | |||||||||||||||||||||||||||||||
| Other | ( | % | ( | % | % | |||||||||||||||||||||||||||||||||
| Cross-Border Tax Laws: | ||||||||||||||||||||||||||||||||||||||
| Base Erosion Anti-Abuse Tax | % | ( | % | ( | % | |||||||||||||||||||||||||||||||||
| Net Controlled Foreign Corporations Tested Income Exclusion | % | % | ( | % | ||||||||||||||||||||||||||||||||||
| US Branch tax impact | % | ( | % | % | ||||||||||||||||||||||||||||||||||
| Other Adjustments: | ||||||||||||||||||||||||||||||||||||||
| Tax expense (benefit) from acquisition / reorganizations | % | ( | % | % | ||||||||||||||||||||||||||||||||||
| Net Operating Loss Carryforward adjustment | % | ( | % | % | ||||||||||||||||||||||||||||||||||
| Fixed Assets deferred adjustments | % | ( | % | ( | % | |||||||||||||||||||||||||||||||||
| Miscellaneous deferred adjustments | % | ( | % | ( | % | |||||||||||||||||||||||||||||||||
| Return-to-Provision adjustments | ( | ( | % | % | ( | % | ||||||||||||||||||||||||||||||||
| Change in valuation allowance | ( | ( | % | ( | % | ( | % | |||||||||||||||||||||||||||||||
Domestic state and local income taxes, net of federal effect (1) | % | ( | % | ( | % | |||||||||||||||||||||||||||||||||
| Foreign Reconciling Items: | ||||||||||||||||||||||||||||||||||||||
| Australia | ||||||||||||||||||||||||||||||||||||||
| Return-to-Provision Adjustments | % | ( | % | % | ||||||||||||||||||||||||||||||||||
| Other | % | ( | % | ( | % | |||||||||||||||||||||||||||||||||
| United Kingdom | ||||||||||||||||||||||||||||||||||||||
| Stock-based compensation, net | % | ( | % | ( | % | |||||||||||||||||||||||||||||||||
| Other | ( | ( | % | ( | % | ( | % | |||||||||||||||||||||||||||||||
| India | ||||||||||||||||||||||||||||||||||||||
| Write-off of Income Tax Receivables | % | % | % | |||||||||||||||||||||||||||||||||||
| Other | ( | ( | % | ( | % | % | ||||||||||||||||||||||||||||||||
| Other Foreign Jurisdictions | ( | ( | % | ( | % | % | ||||||||||||||||||||||||||||||||
| Foreign Withholding Taxes | % | % | % | |||||||||||||||||||||||||||||||||||
| Changes in Unrecognized Tax Benefits: | % | ( | % | ( | % | |||||||||||||||||||||||||||||||||
| Tax provision for income taxes | % | % | ( | % | ||||||||||||||||||||||||||||||||||
Cash paid for income taxes, net of refunds received, by jurisdiction pursuant to the disclosure requirements of ASU 2023-09 is as follows (in thousands):
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| Year Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| US Federal * | $ | $ | $ | |||||||||||||||||
| US State and Local: | ||||||||||||||||||||
| Illinois | ||||||||||||||||||||
| Pennsylvania * | ||||||||||||||||||||
| Texas | ||||||||||||||||||||
| New York * | ||||||||||||||||||||
| Other states | ||||||||||||||||||||
| Total State and Local | ||||||||||||||||||||
| Foreign: | ||||||||||||||||||||
| United Kingdom * | ||||||||||||||||||||
| Canada * | ||||||||||||||||||||
| Philippines * | ||||||||||||||||||||
| Other foreign | ||||||||||||||||||||
| Total Foreign | ||||||||||||||||||||
| Total Worldwide | $ | $ | $ | |||||||||||||||||
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The tax effects of temporary differences that give rise to significant portions of the Company’s deferred tax assets and liabilities as of December 31, 2025 and 2024 related to the following (in thousands):
| December 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| Deferred tax assets: | ||||||||||||||
| Net operating loss and credit carryforwards | $ | $ | ||||||||||||
| Capitalized R&D costs | ||||||||||||||
| Accrued liabilities | ||||||||||||||
| Provision for credit losses | ||||||||||||||
| Property and equipment | ||||||||||||||
| Amortizable intangibles | ||||||||||||||
| Deferred revenue | ||||||||||||||
| Accrued compensation | ||||||||||||||
| Long-term lease liabilities | ||||||||||||||
| Stock-based compensation | ||||||||||||||
| Deferred interest expense | ||||||||||||||
| Other | ||||||||||||||
| Gross deferred tax assets | ||||||||||||||
| Valuation allowance | ( | ( | ||||||||||||
| Net deferred tax assets | ||||||||||||||
| Deferred tax liabilities: | ||||||||||||||
| Property and equipment | ( | ( | ||||||||||||
| Amortizable intangibles | ( | ( | ||||||||||||
| Right of use assets | ( | ( | ||||||||||||
| Deferred contract acquisition costs | ( | ( | ||||||||||||
| Other | ( | |||||||||||||
| Gross deferred tax liabilities | ( | ( | ||||||||||||
| Net deferred taxes | $ | $ | ||||||||||||
With the exception of Russia, the Company has not provided for U.S. income taxes on undistributed earnings of its foreign subsidiaries because it intends to permanently re-invest those earnings outside the United States. The Company has plans to liquidate its Russian subsidiary. As such, the Company no longer asserts an intention to permanently re-invest those earnings.
A valuation allowance is provided for deferred tax assets where the recoverability of the assets is uncertain. The determination to provide a valuation allowance is dependent upon the assessment of whether it is more likely than not that sufficient future taxable income will be generated to utilize the deferred tax assets. Based on the weight of the available evidence, which includes the Company’s historical operating losses, lack of taxable income and the accumulated deficit for the year ended December 31, 2025, the Company has provided a valuation allowance against its U.S. net deferred tax assets. The Company has recorded net foreign deferred tax assets associated with its Australia, Germany, India and the U.K. operations totaling $2.8 million since management has assessed it is more likely than not that the results of future operations within these jurisdictions will generate sufficient taxable income to realize the deferred tax assets. The foreign deferred tax assets cannot increase its U.S. valuation allowance. The net change in the valuation allowance for the years ended December 31, 2025 and 2024 were decreases of $47.4 million and $11.7 million, respectively. The decrease of the valuation allowance in the current year was primarily attributed to the acceleration of domestic research and development expenditures under H.R. 1 (“OBBBA”), historically capitalized under Section 174.
As of December 31, 2025, the Company had net operating loss carryforwards for federal, state and foreign income tax purposes of $344.1 million, $247.1 million and $5.5 million, respectively, available to reduce future income subject to income taxes. If not utilized, various amounts of state net operating loss carryforwards will begin to expire in 2026. The federal and foreign net operating losses will not expire. As of December 31, 2025, the
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Company also had gross research credit carryforwards for federal and California state tax purposes of $14.3 million and $8.2 million, available to reduce future income subject to income taxes. The federal research credit carryforwards will expire between 2026 and 2045. The California state research credits do not expire. The IRC imposes restrictions on the utilization of net operating losses and credits in the event of an “ownership change” of a corporation. Accordingly, a company’s ability to use net operating losses and credits may be subject to substantial limitation as prescribed under the IRC Sections 382 and 383 and similar state provisions. Events that may cause limitations in the amount of the net operating losses and credits that the Company may use in any one year include, but are not limited to, a cumulative ownership change of more than 50 % over a three-year period. In the event the Company has changes in ownership, net operating losses and research and development credit carryforwards, which are fully reserved by the deferred tax asset valuation allowance, could be limited and may expire unutilized.
Unrecognized Tax Benefits
The table below shows the changes in the gross amount of unrecognized tax benefits for the periods presented (in thousands):
| Year Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Unrecognized benefit — beginning of period | $ | $ | $ | |||||||||||||||||
| Gross increases — current year tax positions | ||||||||||||||||||||
| Gross increases — prior year tax positions | ||||||||||||||||||||
| Gross decreases — prior year tax positions | ( | ( | ( | |||||||||||||||||
| Settlements with tax authorities | ||||||||||||||||||||
| Unrecognized benefit — end of period | $ | $ | $ | |||||||||||||||||
As of each of December 31, 2025 and 2024, the Company had unrecognized tax benefits that, if recognized, would impact its effective tax rate by $1.0 million. The Company recognizes interest and penalties related to uncertain tax positions as income tax expense, which has cumulatively been immaterial to the financial statements.
10. Commitments and Contingencies
Commitments
As of December 31, 2025, (i) no 2025 convertible senior notes were outstanding since they matured on June 1, 2025 and the Company settled its obligations with respect to the 2025 convertible senior notes in cash in connection therewith, and (ii) $747.5 million of aggregate principal of the 2029 convertible senior notes was outstanding, which 2029 convertible senior notes have a maturity date of March 15, 2029. See Note 6 for more information concerning the convertible senior notes.
The Company had outstanding operating lease and finance lease obligations of $61.0 million and $15.3 million, respectively, as of December 31, 2025. See Note 13 for further details. As of December 31, 2025, the Company also had outstanding cloud services and software and maintenance agreement commitments totaling $167.0 million, of which $55.4 million is expected to be purchased in 2026, $56.2 million is expected to be purchased in 2027, $51.9 million is expected to be purchased in 2028, and $3.5 million is expected to be purchased in 2029. The Company entered into equipment finance lease arrangements that resulted in a $13.7 million additional reduction of its outstanding cloud services commitment as of December 31, 2025.
Hosting and Telecommunication Usage Services
The Company has 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.
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As of December 31, 2025, future minimum payments under these arrangements were as follows in thousands):
| Year Ending December 31, | Telecommunication Usage Services | ||||
| 2026 | $ | ||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
| 2030 | |||||
| Thereafter | |||||
| Total future minimum payment | $ | ||||
Universal Services Fund Liability
The Company is classified as a telecommunications service provider for regulatory purposes and is required to make contributions to the USF based on the revenue the Company receives from the resale of interstate and some international telecommunications services. In order to comply with the obligation to make direct contributions, the Company is registered with the USAC, which is charged by the FCC with administering the USF, and has been remitting the required contributions to USAC since its registration with the USAC in April 2013. The Company also made retroactive USF contributions based on its revenues for the period from 2008 to 2012. The Company, however, has an unresolved and arguably dormant dispute with the FCC regarding whether the Company is liable for USF contributions related to the period from 2003 through 2007. As of December 31, 2025, the Company had accrued $0.1 million in interest related to the disputed assessments for the period of 2003 through 2007.
State and Local Taxes and Surcharges
The Company, based on analysis of its activities, has determined that it is obligated to collect and remit U.S. state or local sales, use, gross receipts, excise and utility user taxes, as well as fees or surcharges as a communications service provider in certain U.S. states, municipalities or local tax jurisdictions. The Company is registered for, collecting and remitting applicable taxes where such a determination has been made. Prior to the Company’s making such determination, the Company neither collected nor remitted these taxes, fees or surcharges to applicable local, municipal or state jurisdictions. The Company continues to analyze its activities to determine if it is subject to these taxes in additional jurisdictions and based on the Company’s ongoing assessment of its U.S. state and local tax collection and remittance obligations, the Company registers for tax and regulatory purposes in such jurisdictions and commences collecting and remitting applicable state and local taxes and surcharges to these jurisdictions.
As of December 31, 2025 and 2024, the Company had total accrued liabilities of $1.7 million and $1.1 million, respectively, for such contingent sales taxes and surcharges that were not being collected from its customers but may be imposed by various taxing authorities, of which $0.4 million and $0.9 million, respectively, were included in Accrued and other current liabilities on the consolidated balance sheets, and the remaining were included in Other long-term liabilities on the consolidated balance sheets. The Company’s estimate of the probable loss incurred under this contingency is based on its analysis of the source location of its usage-based fees and the regulations and rules in each tax jurisdiction.
Legal Matters
The Company is involved in various legal and regulatory matters arising in the normal course of business. In management’s opinion, resolution of these matters is not expected to have a material impact on the Company’s consolidated results of operations, cash flows, or its financial position. However, due to the uncertain nature of legal matters, an unfavorable resolution of a matter could materially affect the Company’s future consolidated results of operations, cash flows or financial position in a particular period. The Company expenses legal fees as incurred. The Company is currently party to the following action:
On December 4, 2024, a purported holder of the Company’s securities filed a putative class action complaint against the Company, its then-current Chief Executive Officer, and its 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
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misleading statements or omissions regarding the Company and its business and seeking unspecified damages on behalf of all persons and entities (subject to specified exceptions) that purchased or otherwise acquired the Company’s securities, including call options, from June 4, 2024, through the close of trading on August 8, 2024. 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. Per the court’s subsequent order on March 27, 2025, Lucid Alternative Fund, LP filed an amended complaint on May 30, 2025. The Company moved to dismiss the amended complaint on July 29, 2025, and the court took the motion under submission after oral argument on December 18, 2025. The Company cannot predict the duration or outcome of this lawsuit at this time. As a result, the Company is unable to estimate the reasonably possible loss or range of reasonably possible losses arising from this lawsuit. The Company intends to vigorously defend this lawsuit.
On March 18, 2025, a related shareholder derivative action was filed in the United States District Court for the Northern District of California on behalf of nominal defendant Five9, Inc. and against its directors and certain of its officers seeking to assert claims for breach of fiduciary duty, unjust enrichment, abuse of control, gross mismanagement, and waste of corporate assets, and for contribution under Sections 10(b) and 21D of the Securities Exchange Act of 1934. The Company was served with the complaint on March 20, 2025. On April 4, 2025, the parties to the derivative action jointly filed a stipulation with the court to stay the derivative action until the resolution of the motion to dismiss in the securities action, as well as any subsequent motion to dismiss any further amended complaint in the securities action. On April 8, 2025, the court approved the stay stipulation.
Indemnification Agreements
11. Segment and Geographical Information
The Company has a single operating and reportable segment and manages its business activities on a consolidated basis. The Company’s single segment provides its solution through a SaaS business model. The Company generates subscription revenue from its Intelligent CX Platform, and also generates usage-based telephony revenue. The Company charges its customers monthly subscription fees for access to its solution, primarily based on the number of licenses. The Company’s AI solutions are sold to its customers on a consumption or capacity basis. The Company’s 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 related functions. The Company’s chief operating decision maker (“CODM”) is its chief executive officer. The Company’s CODM reviews financial information presented on a consolidated basis for purposes of assessing financial performance and making operating decisions on how to allocate resources based on net income (loss) that is also reported on its consolidated statements of operations and comprehensive income (loss) as consolidated net
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income (loss). The measure of segment assets is reported on its consolidated balance sheets as total consolidated assets.
Revenue by Geographic Areas
The following table summarizes revenues by geographic region based on customer billing address (in thousands):
| Year Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| United States | $ | $ | $ | |||||||||||||||||
| International | ||||||||||||||||||||
| Total revenue | $ | $ | $ | |||||||||||||||||
Long-Lived Assets, Net by Geographic Areas
The following table summarizes total property and equipment, net in the respective locations (in thousands):
| December 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| United States | $ | $ | ||||||||||||
| International | ||||||||||||||
| Property and equipment, net | $ | $ | ||||||||||||
Total purchases of property and equipment for the years ended December 31, 2025, 2024 and 2023 are disclosed in the Company’s Consolidated Statements of Cash Flows.
Segment Information - Consolidated Statements of Operations
| Year Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Revenue | $ | $ | $ | |||||||||||||||||
Adjusted cost of revenue(1) | ( | ( | ( | |||||||||||||||||
Adjusted research and development(2) | ( | ( | ( | |||||||||||||||||
Adjusted sales and marketing(3) | ( | ( | ( | |||||||||||||||||
Adjusted general and administrative(4) | ( | ( | ( | |||||||||||||||||
Other segment items(5) | ( | ( | ( | |||||||||||||||||
| Depreciation and amortization | ( | ( | ( | |||||||||||||||||
| Interest expense | ( | ( | ( | |||||||||||||||||
| Gain on early extinguishment of debt | ||||||||||||||||||||
| Interest income and other | ||||||||||||||||||||
Provision for income taxes(6) | ( | ( | ( | |||||||||||||||||
| Net income (loss) | $ | $ | ( | $ | ( | |||||||||||||||
___________________________
(1) Adjusted cost of revenue includes cost of revenue in accordance with GAAP, adjusted for depreciation and amortization, stock-based compensation, acquisition and related transaction costs and one-time integration costs, lease amortization for finance leases, and costs related to reduction in force plans.
(2) Adjusted research and development includes research and development in accordance with GAAP, adjusted for depreciation and amortization, stock-based compensation, exit costs related to the closure and relocation of the Company’s Russian operations, acquisition and related transaction costs and one-time integration costs, lease amortization for finance leases, and costs related to reduction in force plans.
(3) Adjusted sales and marketing includes sales and marketing expense in accordance with GAAP, adjusted for depreciation and amortization, stock-based compensation, and costs related to reduction in force plans.
(4) Adjusted general and administrative included general and administrative expense in accordance with GAAP, adjusted for depreciation and amortization, stock-based compensation, exit costs related to the closure and relocation of the Company’s Russian operations, acquisition and related transaction costs and one-time integration costs, one-time expenses related to strategic consulting services for operational review, other
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cost-reduction and productivity initiatives, legal fees related to the securities class action, costs related to reduction in force plans, and office closure lease termination costs.
(5) Other segment items included in segment net income (loss) includes stock-based compensation, exit costs related to the closure and relocation of the Company’s Russian operations, acquisition and related transaction costs and one-time integration costs, lease amortization for finance leases, one-time expenses related to strategic consulting services for operational review, other cost-reduction and productivity initiatives, legal fees related to the securities class action, costs related to reduction in force plans, and office closure lease termination costs.
(6) Non-GAAP adjustments do not have a material impact on our worldwide income tax provision due to the tax treatment of the non-GAAP adjustments reported, and our domestic valuation allowance position.
12. Retirement Plans
The Company has a 401(k) plan to provide tax deferred salary deductions for all eligible employees. Participants may make voluntary contributions to the 401(k) plan, limited by certain Internal Revenue Service restrictions. The Company is responsible for the administrative costs of the 401(k) plan. The Company began matching employee contributions in cash in the fourth quarter of 2019. The contribution expense for the years ended December 31, 2025, 2024, and 2023 was $2.5 million,$2.7 million and $2.4 million, respectively.
The Company complies with the requirement of maintaining a retirement plan for employees in the Philippines. This plan is a non-contributory and defined benefit plan that provides retirement to employees equal to approximately one month salary for every year of credited service for employees who attain the normal retirement age of 60 with at least five years of service. The benefits are paid in a lump sum amount upon retirement from the Company. Total defined benefit liability under this plan was $1.3 million and $1.1 million as of each of December 31, 2025 and 2024, respectively. Total retirement expense for this plan were $0.4 million, $0.3 million, and $0.3 million for the years ended December 31, 2025, 2024, and 2023, respectively.
13. Leases
The Company has leases for offices, data centers and computer and networking equipment that expire at various dates through 2031. The Company’s leases have remaining terms of to seven years , some of the leases include a Company option to extend the leases for up to to five years , and some of the leases include the option to terminate the leases upon 30 -days’ notice. The Company does not separate lease and non-lease components for real estate operating leases.
As the Company’s leases do not provide an implicit rate, the net present value of future minimum lease payments is determined using the Company’s incremental borrowing rate. Operating leases with a duration of 12 months or less are excluded from right-of-use assets and operating lease liabilities, and related lease payments are generally recognized on a straight-line basis over the lease term and variable lease payments are recognized as incurred.
The Company entered into three-year equipment finance lease agreements and recognized $18.6 million right of use assets during 2024, which were reported within Finance lease right-of-use assets on the consolidated balance sheets and are being depreciated on a straight-line basis over the lease term. As a result, the Company 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 on the consolidated balance sheets for the year ended December 31, 2024. The Company also entered into additional three-year equipment finance lease agreements and recognized $3.9 million right of use assets during 2025, which were reported within Finance lease right-of-use assets and are being depreciated on a straight-line basis over the lease term. As a result, the Company 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.
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The components of lease expenses were as follows (in thousands):
| Year Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Operating lease cost | $ | $ | $ | |||||||||||||||||
| Finance lease cost: | ||||||||||||||||||||
| Amortization of right-of-use assets | $ | $ | $ | |||||||||||||||||
| Interest on finance lease liabilities | ||||||||||||||||||||
| Total finance lease cost | $ | $ | $ | |||||||||||||||||
Supplemental cash flow information related to leases was as follows (in thousands):
| Year Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||||||||||||||||||
| Operating cash used in operating leases | $ | ( | $ | ( | $ | ( | ||||||||||||||
| Financing cash used in finance leases | ( | ( | ( | |||||||||||||||||
| Right of use assets obtained in exchange for lease obligations: | ||||||||||||||||||||
| Operating leases | ||||||||||||||||||||
| Finance leases | ||||||||||||||||||||
Supplemental balance sheet information related to leases was as follows (in thousands):
| December 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| Operating leases | ||||||||||||||
| Operating lease right-of-use assets | $ | $ | ||||||||||||
| Operating lease liabilities | $ | $ | ||||||||||||
| Operating lease liabilities — less current portion | ||||||||||||||
| Total operating lease liabilities | $ | $ | ||||||||||||
| Finance leases | ||||||||||||||
| Finance lease right-of-use assets | $ | $ | ||||||||||||
| Property and equipment, gross | $ | $ | ||||||||||||
| Less: accumulated depreciation and amortization | ( | ( | ||||||||||||
| $ | $ | |||||||||||||
| Finance lease liabilities | $ | $ | ||||||||||||
| Finance lease liabilities — less current portion | ||||||||||||||
| Total finance lease liabilities | $ | $ | ||||||||||||
During 2024, the Company recognized a $1.9 million impairment loss as a result of its commitment to close two operating lease facilities and a $0.3 million impairment loss related to the associated leasehold improvements and property and equipment.
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Weighted average remaining terms were as follows (in years):
| December 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| Weighted average remaining lease term | ||||||||||||||
| Operating leases | ||||||||||||||
| Finance leases | ||||||||||||||
Weighted average discount rates were as follows:
| December 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| Weighted average discount rate | ||||||||||||||
| Operating leases | % | % | ||||||||||||
| Finance leases | % | % | ||||||||||||
Maturities of lease liabilities were as follows (in thousands):
| Year Ending December 31, | Operating Leases | Finance Leases | ||||||||||||
| 2026 | $ | $ | ||||||||||||
| 2027 | ||||||||||||||
| 2028 | ||||||||||||||
| 2029 | ||||||||||||||
| 2030 | ||||||||||||||
| Thereafter | ||||||||||||||
| Total future minimum lease payments | ||||||||||||||
| Less: imputed interest | ( | ( | ||||||||||||
| Total | $ | $ | ||||||||||||
14. Acquisitions
Acqueon
On August 27, 2024, the Company acquired all of the issued and outstanding shares of capital stock of Acqueon for total consideration of approximately $173.8 million. This acquisition, which was accounted for as a business combination, is intended to build on the pre-existing partnership between the companies, and to extend the Company's AI-powered CX platform by adding omnichannel proactive customer engagement to expand the Company’s outbound capabilities.
The excess of the purchase price over identifiable intangible assets and net tangible assets in the amount of $139.0 million was allocated to goodwill, which is not deductible for tax purposes. The fair values assigned to assets acquired and liabilities assumed are based on management’s best estimates and assumptions as of the acquisition date and are considered final. The Company recorded adjustments of less than $0.1 million and $0.8 million within the one year from acquisition date measurement period for 2024 and for the year ended December 31, 2025, respectively.
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The following table presents the final allocation of the purchase price at the acquisition date (in thousands):
| Cash | $ | ||||
| Tangible assets acquired | |||||
| Other assets acquired | |||||
| Acquired technology | |||||
| Customer relationships | |||||
| Trademarks | |||||
| Goodwill | |||||
| Total assets acquired | |||||
| Deferred tax liability | ( | ||||
| Liabilities assumed | ( | ||||
| Total | $ | ||||
The acquired technology, customer relationships, and trademarks will be amortized on a straight-line basis over their estimated useful lives of eight years , five years , and three years , respectively. The Company used the income approach to estimate the fair value of intangible assets acquired.
In connection with this acquisition, the Company incurred total acquisition-related transaction costs of $7.9 million during 2024, and incurred no additional costs during the year ended December 31, 2025, that have been expensed as incurred and included in general and administrative expenses in the consolidated statements of operations and comprehensive income (loss).
The results of operations of this acquisition are included in the accompanying consolidated statements of operations and comprehensive income (loss) from the date of acquisition and are not material to the Company's consolidated financial statements.
Aceyus
On August 14, 2023, the Company acquired all of the issued and outstanding shares of capital stock of Aceyus for total cash consideration of approximately $82.0 million. This acquisition, which was accounted for as a business combination, is intended to accelerate the Company's ability to capitalize on two business opportunities, namely facilitating the migration of large enterprise customers from on-premises to cloud and leveraging contextual data to deliver personalized experiences throughout the customer journey, including using this contextual data in the Company's AI & Automation solutions.
The excess of the purchase price over identifiable intangible assets and net tangible assets in the amount of $61.8 million was allocated to goodwill, which is not deductible for tax purposes. The fair values assigned to assets acquired and liabilities assumed were based on management’s best estimates and assumptions as of the reporting date and are considered final. The Company recorded an adjustment of $0.1 million during the one year from acquisition date measurement period for the year ended December 31, 2024.
The following table presents the final allocation of the purchase price at the acquisition date (in thousands):
| Cash | $ | ||||
| Tangible assets acquired | |||||
| Other assets acquired | |||||
| Acquired technology | |||||
| Customer relationships | |||||
| Trademarks | |||||
| Goodwill | |||||
| Total assets acquired | |||||
| Liabilities assumed | ( | ||||
| Total | $ | ||||
114
The acquired technology, customer relationships, and trademarks will be amortized on a straight-line basis over their estimated useful lives of eight years , five years , and three years , respectively. The Company used the income approach to estimate the fair value of intangible assets acquired.
In connection with this acquisition, the Company incurred no additional costs during the years ended December 31, 2024 and 2025, which were expensed as incurred and included in general and administrative expenses in the consolidated statements of operations and comprehensive income (loss).
15. Restructuring
On August 20, 2024, the Company announced a reduction in force plan (the “2024 Plan”) as part of its broader efforts to drive balanced, profitable growth, further supporting its positive, long-term outlook and focus on increasing stockholder value. The 2024 Plan reduced the Company’s global full-time employees by approximately 6 %. For the year ended December 31, 2024, the Company 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 are cash expenditures, of which $2.1 million was recorded in , $1.9 million was recorded in , $4.4 million was recorded in , and $1.2 million was recorded in expenses on the consolidated statements of operations and comprehensive income (loss). As of December 31, 2025, $9.6 million in total restructuring costs under the 2024 Plan had been paid. The Company does not expect to incur any additional costs under the 2024 Plan.
On March 31, 2025, the Board of Directors of the Company approved a reduction in force plan (the “2025 Plan”) as part of its broader efforts to prioritize investments in key strategic areas, including artificial intelligence, as well as to drive profitable growth in supporting its positive, long-term outlook and increasing stockholder value. On April 3, 2025, the Company commenced execution of the 2025 Plan, which resulted in the reduction of the Company’s global full-time employees by approximately 4 %. During the year ended December 31, 2025, the Company 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 , $1.9 million was recorded in , $3.4 million was recorded in , and $1.0 million was recorded in on the consolidated statements of operations and comprehensive income (loss). As of December 31, 2025, $7.8 million had been paid and the remaining $0.1 million was recorded within accrued and other current liabilities in the consolidated balance sheets and was paid in the first quarter of 2026. During the year ended December 31, 2025, the Company also incurred an additional $2.1 million in stock-based compensation costs related to the 2025 Plan due to additional vesting of share-based awards, of which $0.3 million was recorded in cost of revenue, $0.5 million was recorded in research and development expenses, $1.1 million was recorded in sales and marketing expenses, and $0.2 million was recorded in general and administrative expenses on the consolidated statements of operations and comprehensive income (loss). The Company does not expect to incur any additional costs under the 2025 Plan.
115
16. Selected Quarterly Financial Data (Unaudited)
Selected quarterly financial information for 2025 and 2024 is as follows:
| Quarter Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Dec. 31, 2025 | Sept. 30, 2025 | Jun. 30, 2025 | Mar. 31, 2025 | Dec. 31, 2024 | Sept. 30, 2024 | Jun. 30, 2024 | Mar. 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||
| (unaudited, in thousands, except per share data) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenue | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||
Cost of revenue (1)(2) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Gross profit | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||||||||||||||||||||||||||||
Research and development (1)(2) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Sales and marketing (1)(2) | ||||||||||||||||||||||||||||||||||||||||||||||||||
General and administrative (1)(2) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total operating expenses | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Income (loss) from operations | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Other (expense) income, net: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest expense | ( | ( | ( | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||
| Gain on early extinguishment of debt | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest income and other | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total other income (expense), net | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Income (loss) before income taxes | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||
| Provision for (benefit from) income taxes | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | $ | $ | $ | $ | $ | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||||||||||||||||||||
| Net income (loss) per share: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Basic | $ | $ | $ | $ | $ | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||||||||||||||||||||
| Diluted | $ | $ | $ | $ | $ | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||||||||||||||||||||
| Shares used in computing net income (loss) per share: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Basic | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Diluted | ||||||||||||||||||||||||||||||||||||||||||||||||||
(1) Included stock-based compensation as follows:
| Quarter Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Dec. 31, 2025 | Sept. 30, 2025 | Jun. 30, 2025 | Mar. 31, 2025 | Dec. 31, 2024 | Sept. 30, 2024 | Jun. 30, 2024 | Mar. 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||
| (unaudited, in thousands) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Cost of revenue | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||
| Research and development | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Sales and marketing | ||||||||||||||||||||||||||||||||||||||||||||||||||
| General and administrative | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total stock-based compensation | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||
116
(2) Included depreciation and amortization expenses as follows:
| Quarter Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Dec. 31, 2025 | Sept. 30, 2025 | Jun. 30, 2025 | Mar. 31, 2025 | Dec. 31, 2024 | Sept. 30, 2024 | Jun. 30, 2024 | Mar. 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||
| (unaudited, in thousands) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Cost of revenue | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||
| Research and development | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Sales and marketing | ||||||||||||||||||||||||||||||||||||||||||||||||||
| General and administrative | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total depreciation and amortization | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||
117
ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
ITEM 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of December 31, 2025.
Based on management’s evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2025, our disclosure controls and procedures were designed, and were effective, to provide assurance at a reasonable level that the information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to our management as appropriate to allow timely decisions regarding required disclosures.
In designing and evaluating our disclosure controls and procedures, management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act). Our management conducted an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2025 based on the criteria set forth in the 2013 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the assessment, our management has concluded that our internal control over financial reporting was effective as of December 31, 2025 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. GAAP.
KPMG LLP, the independent registered public accounting firm that audited our financial statements included in this Annual Report on Form 10-K, has issued an auditors’ report on our internal control over financial reporting, which is included herein.
Changes in Internal Control over Financial Reporting
During the three months ended December 31, 2025, there was no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. Other Information
Rule 10b5-1 Plans
During the fiscal quarter ended December 31, 2025, none of the Company’s directors and officers adopted terminated
ITEM 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
None.
118
PART III
ITEM 10. Directors, Executive Officers and Corporate Governance
The information concerning our directors, compliance with Section 16(a) of the Exchange Act, our Audit Committee and any changes to the process by which stockholders may recommend nominees to the Board required by this Item are incorporated herein by reference to information contained in our Proxy Statement for the 2026 Annual Meeting of Stockholders to be filed with the SEC within 120 days of the year ended December 31, 2025, or the 2026 Proxy Statement, including “Proposal No 1. — Election of Directors,” “Corporate Governance” and “Section 16(a) Beneficial Ownership Reporting Compliance.”
The information concerning our executive officers required by this Item is incorporated herein by reference to information contained in the 2026 Proxy Statement including “Executive Officers.”
We have adopted a code of ethics and business conduct, or code of conduct, that applies to all employees, including our principal executive officer, our principal financial officer, our principal accounting officer, and all other executive officers. Our code of conduct is available on our website at http://investors.five9.com/corporate-governance.cfm. We plan to post on our website at the address described above any future amendments or waivers of our code of conduct.
ITEM 11. Executive Compensation
The information required by this Item is incorporated herein by reference to information contained in the 2026 Proxy Statement, including “Corporate Governance,” “Executive Compensation” and “Compensation of Directors.”
ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this Item is incorporated herein by reference to information contained in the 2026 Proxy Statement, including “Security Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information.”
ITEM 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this Item is incorporated herein by reference to information contained in the 2026 Proxy Statement, including “Corporate Governance” and “Transactions With Related Persons.”
ITEM 14. Principal Accountant Fees and Services
The information required by this Item is incorporated herein by reference to information contained in the 2026 Proxy Statement, including “Ratification of Appointment of Independent Registered Public Accounting Firm.”
119
PART IV
ITEM 15. Exhibits and Financial Statement Schedules
(a) The following documents are filed as part of this Report:
1. Consolidated Financial Statements
The consolidated financial statements of Five9 and the report of independent registered public accounting firm thereon are set forth under Part II, Item 8 of this report.
2. Consolidated Financial Statement Schedules
The Financial Statement Schedules not listed have been omitted because the information required to be set forth herein is included in ITEM 8 — Financial Statements and Supplementary Data or they are not applicable or are not required.
3. Exhibits.
The following exhibits are filed with or incorporated by reference in this report. Where such filing is made by incorporation by reference to a previously filed registration statement or report, such registration statement or report is identified in parentheses.
| Exhibit Index | ||||||||
| Exhibit Number | Description | |||||||
3.1Ø | Amended and Restated Certificate of Incorporation of Five9, Inc. (filed as Exhibit 3.2 to the Company’s Current Report on Form 8-K filed with the SEC on April 10, 2014 (File No. 001-36383) and incorporated by reference herein). | |||||||
Amended and Restated Bylaws of Five9, Inc. (filed as Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on November 2, 2023 (File No. 001-36383) and incorporated by reference herein). | ||||||||
Form of Common Stock Certificate (filed as Exhibit 4.1 to Amendment No.1 to the Company’s Registration Statement on Form S-1 filed with the SEC on March 24, 2014 (File No. 333-194258) and incorporated by reference herein). | ||||||||
Description of Registrant’s Securities. (filed as Exhibit 4.4 to the Company’s Annual Report on Form 10-K filed with the SEC on February 27, 2020 (File No. 001-36383) and incorporated by reference herein). | ||||||||
Indenture, dated as of March 1, 2024, between Five 9, Inc. and U.S. Bank National Company, National Association, as trustee (filed as Exhibit 4.1 to the Company's Current Report on Form 8-K filed with the SEC on March 1, 2024 (File No. 001-36383) and incorporated by reference herein). | ||||||||
Form of 1.00% Convertible Senior Notes due 2029 (filed as Exhibit 4.2 to the Company's Current Report on Form 8-K filed with the SEC on March 1, 2024 (File No. 001-36383) and incorporated by reference herein). | ||||||||
10.1+Ø | Form of Indemnification Agreement between the Registrant and each of its directors and executive officers, as amended on July 31, 2015 (filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on August 5, 2015 (File No. 001-36383) and incorporated by reference herein). | |||||||
120
| Exhibit Index | ||||||||
| Exhibit Number | Description | |||||||
Five9, Inc. 2014 Equity Incentive Plan and related form agreements (filed as Exhibit 10.9 to Amendment No.1 to the Company’s Registration Statement on Form S-1 filed with the SEC on March 24, 2014 (File No. 333-194258) and incorporated by reference herein). | ||||||||
Inference Technologies Group Inc. 2018 Equity Incentive Plan (filed as Exhibit 4.3 to the Company’s Form S-8 filed with the SEC on November 19, 2020 (File No. 333-250197) and incorporated by reference herein). | ||||||||
Five9, Inc. 2014 Employee Stock Purchase Plan (filed as Exhibit 10.10 to Amendment No.1 to the Company’s Registration Statement on Form S-1 filed with the SEC on March 24, 2014 (File No. 333-194258) and incorporated by reference herein). | ||||||||
Five9, Inc. 2019 Key Employee Severance Benefit Plan, as Amended (filed as Exhibit 10.1 to the Company’s Current Report Form 8-K filed with the SEC on February 18, 2025 (File No. 001-36383) and incorporated by reference herein). | ||||||||
Five9 Inc. Executive Incentive Compensation Plan (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on February 18, 2021 (File No. 001-36383) and incorporated by reference herein). | ||||||||
Five9 Inc. Non-Employee Director Compensation Policy (filed as Exhibit 10.13 to the Company’s Annual Report on Form 10-K filed with the SEC on February 24, 2023 (File No. 001-36383) and incorporated by reference herein). | ||||||||
Form of Capped Call Confirmation (filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on March 1, 2024 (File No. 001-36383) and incorporated by reference herein). | ||||||||
Bishop Ranch Building Lease, dated July 29, 2020, between the Registrant and 2600 CR, LLC (filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on August 3, 2020 (File No. 001-36383) and incorporated by reference herein). | ||||||||
Five9 Inc. Performance-Based Restricted Stock Unit Grant Notice and Award Agreement - 2014 Equity Incentive Plan (filed as Exhibit 10.19 to the Company’s Annual Report on Form 10-K filed with the SEC on February 28, 2022 (File No. 001-36383) and incorporated by reference herein). | ||||||||
Form of Five9 Inc. Restricted Stock Unit Grant Notice and Award Agreement - 2014 Equity Incentive Plan (filed as Exhibit 10.20 to the Company’s Annual Report on Form 10-K filed with the SEC on February 28, 2022 (File No. 001-36383) and incorporated by reference herein). | ||||||||
Form of Five9 Inc. Stock Option Grant Notice and Award Agreement - 2014 Equity Incentive Plan (filed as Exhibit 10.21 to the Company’s Annual Report on Form 10-K filed with the SEC on February 28, 2022 (File No. 001-36383) and incorporated by reference herein). | ||||||||
Five9, Inc. Form of Performance-Based Restricted Stock Unit Grant Notice and Award Agreement (Revenue Goals) - 2014 Equity Incentive Plan (filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on July 28, 2022 (File No. 001-36383) and incorporated by reference herein). | ||||||||
Five9, Inc. Performance-Based Restricted Stock Unit Grant Notice and Award Agreement for 2023-2025 Performance Period - 2014 Equity Incentive Plan (filed as Exhibit 10.21 to the Company’s Annual Report on Form 10-K filed with the SEC on February 24, 2023 (File No. 001-36383) and incorporated by reference herein). | ||||||||
Five9, Inc. Performance-Based Restricted Stock Unit Grant Notice and Award Agreement for 2024-2026 Performance Period - 2014 Equity Incentive Plan (filed as Exhibit 10.20 to the Company’s Annual Report on Form 10-K filed with the SEC on February 22, 2024 (File No. 001-36383) and incorporated by reference herein). | ||||||||
Five9, Inc. Performance-Based Restricted Stock Unit Grant Notice and Award Agreement for 2025-2027 Performance Period - 2014 Equity Incentive Plan (filed as Exhibit 10.21 to the Company’s Annual Report on Form 10-K filed with the SEC on February 21, 2025 (File No. 001-36383) and incorporated by reference herein). | ||||||||
Cooperation Letter Agreement, dated December 8, 2024, between the Company, Anson Funds Management LP, Anson Advisors Inc. and certain other parties (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on December 9, 2024 (File No. 001-36383) and incorporated by reference herein). | ||||||||
121
| Exhibit Index | ||||||||
| Exhibit Number | Description | |||||||
Employment Transition Agreement between Five9, Inc. and Michael Burkland, dated July 31, 2025 (filed as Exhibit 10.1 to the Company's Current Report on Form 8-K (filed with the SEC on July 31, 2025 (File No. 001-36383) and incorporated by reference herein.) | ||||||||
Offer Letter dated December 15, 2025, by and between the Company and Amit Mathradas (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on December 17, 2025 (File No. 001-36383) and incorporated by reference herein). | ||||||||
| 24.1 | Power of Attorney (included on signature page to this Annual Report on Form 10-K). | |||||||
32.1† | ||||||||
Five9, Inc. Compensation Recoupment Policy (filed as Exhibit 97.1 to the Company’s Annual Report on Form 10-K filed with the SEC on February 22, 2024 (File No. 001-36383) and incorporated by reference herein). | ||||||||
| 101.INS | XBRL Instance Document | |||||||
| 101.SCH | XBRL Taxonomy Schema Linkbase Document | |||||||
| 101.CAL | XBRL Taxonomy Calculation Linkbase Document | |||||||
| 101.DEF | XBRL Taxonomy Definition Linkbase Document | |||||||
| 101.LAB | XBRL Taxonomy Labels Linkbase Document | |||||||
| 101.PRE | XBRL Taxonomy Presentation Linkbase Document | |||||||
| 104 | Cover Page Interactive Data File. Formatted as inline XBRL and contained in Exhibit 101. | |||||||
Ø Previously filed.
+ Indicates management contract or compensatory plan.
† The certifications attached as Exhibit 32.1 that accompany this Annual Report on Form 10-K, are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of Five9, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Annual Report on Form 10-K, irrespective of any general incorporation language contained in such filing.
ITEM 16. Form 10-K Summary
None.
122
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Five9, Inc. | |||||||||||
| Date: | February 19, 2026 | By: | /s/ Amit Mathradas | ||||||||
| Amit Mathradas | |||||||||||
| Chief Executive Officer | |||||||||||
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that each individual whose signature appears below constitutes and appoints Amit Mathradas and Bryan Lee, and each of them, severally, as his or her true and lawful attorneys-in-fact and agents with the power to act, with or without the other, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in his or her capacity as a director or officer or both, as the case may be, of the Company, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that each of said attorneys-in-fact and agents, or his substitute or substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
| Signature | Title | Date | ||||||||||||
| /s/ Amit Mathradas | Chief Executive Officer, Director | February 19, 2026 | ||||||||||||
| Amit Mathradas | (Principal Executive Officer) | |||||||||||||
| /s/ Bryan Lee | Chief Financial Officer | February 19, 2026 | ||||||||||||
| Bryan Lee | (Principal Financial Officer) | |||||||||||||
| /s/ Leena Mansharamani | Chief Accounting Officer | February 19, 2026 | ||||||||||||
| Leena Mansharamani | (Principal Accounting Officer) | |||||||||||||
| /s/ Susan Barsamian | Director | February 19, 2026 | ||||||||||||
| Susan Barsamian | ||||||||||||||
| /s/ Michael Burdiek | Director | February 19, 2026 | ||||||||||||
| Michael Burdiek | ||||||||||||||
| /s/ Michael Burkland | Chairman of the Board, Director | February 19, 2026 | ||||||||||||
| Michael Burkland | ||||||||||||||
| /s/ Sagar Gupta | Director | February 19, 2026 | ||||||||||||
| Sagar Gupta | ||||||||||||||
| /s/ Julie Iskow | Director | February 19, 2026 | ||||||||||||
| Julie Iskow | ||||||||||||||
| /s/ Jonathan Mariner | Director | February 19, 2026 | ||||||||||||
| Jonathan Mariner | ||||||||||||||
| /s/ Sudhakar Ramakrishna | Director | February 19, 2026 | ||||||||||||
| Sudhakar Ramakrishna | ||||||||||||||
| /s/ Maria Walker | Director | February 19, 2026 | ||||||||||||
| Maria Walker | ||||||||||||||
| /s/ Robert Zollars | Director; Lead Independent Director | February 19, 2026 | ||||||||||||
| Robert Zollars | ||||||||||||||
123