‘Sadly, we have made the very difficult decision to say painful goodbyes to some of our team members,’ Five9 CEO Mike Burkland said in an email to employees.

Five9 has revealed plans to lay off about 7 percent of its workforce, totaling less than 200 people based on the vendor’s 2,684 full-time employee count as of Dec. 31.

The San Ramon, Calif.-based contact center products vendor expects to spend about $12 million to $15 million in notice period payments, severance payments, employee benefits and related costs, Five9 said in a regulatory filing Tuesday. Five9 will make most of the payments in the third and fourth quarters of this year.

The workforce reduction plan is “part of the Company’s broader efforts to drive balanced, profitable growth, further supporting our positive, long-term outlook and focus on increasing shareholder value,” according to the filing.

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Five9 Layoffs

CRN has reached out to Five9 for comment.

Five9 has about 1,400 channel partners worldwide, with about 80 percent of overall sales through indirect channel and alliance relationships, according to CRN’s 2024 Channel Chiefs.

In an email to employees signed by vendor CEO Mike Burkland and included with the regulatory filing, Burkland said that “sadly, we have made the very difficult decision to say painful goodbyes to some of our team members.”

“As you know, we recently announced in our earnings call that we reduced our revenue guidance for 2024 and will focus on improving profitability through managing expenses,” he said in the email.

He continued: “Looking forward, Five9 is focused on driving shareholder value by increasing revenue, improving profitability, investing in our key strategic initiatives, and delivering for our customers. I have enormous confidence in Five9 and each of you as we continue to align and execute as one team.”

A Tuesday report from KeyBanc put total savings on a run rate basis at about $35 million. This “could add over 20% to Street’s current CY25 $164M EBIT all else equal,” according to the investment firm.

KeyBanc called the workforce reduction “a modest positive” that can improve Five9’s margins and called the contact-center-as-a-service (CCaaS) sector “primed to be a beneficiary of AI/GenAI related investments.”

“The announcement is in line with Five9’s worse-than-feared guide for C2H24 tied to poor end-of-2Q24 bookings,” according to the firm.

Five9 Q2 Earnings

Five9 held its most recent quarterly earnings conference call on Aug. 8, during which President Dan Burkland – the CEO’s brother – reiterated the vendor’s “continued partner and channel expansion,” crediting that strategy with a strong long-term outlook, according to a transcript of the call.

CEO Mike Burkland also said on the call that Five9 continues “to see the percentage of implementations being done by partners increase consistently every quarter.”

“Andy (Dignan, Five9 chief operating officer) and team have done a great job of just leaning in with more partners,” the CEO said. “We’re still being pretty focused here in terms of how many partners we’re allowing to do this because, again white glove/NPS (net promoter) scores, we’ve always taken a lot of pride in that and we’re making sure that our partners continue to do that and they are doing it very well.

During the call – which covered Five9’s second fiscal quarter, ended June 30 – the vendor reported a 13 percent increase year over year to revenue with $252.1 million brought in for the quarter.

The vendor still posted a net loss of $12.8 million for the quarter using generally accepted accounting principles (GAAP). That’s an improvement over the GAAP net loss of $21.7 million Five9 saw in the second quarter of 2023.

Five9 also reduced its top-line annual guidance by 3.8 percent to about $1 billion. CFO Barry Zwarenstein attributed the more negative outlook in part to “new logo bookings (that) came in softer than expected, especially in the last few weeks of June, which is when we typically close a majority of our deals,” according to a call transcript.

“Given that most enterprise new logos generally take three months to go live and four months to ramp, the lower than expected go-gets in June bookings are expected to have a negative impact on our Q4 recurring revenue forecast,” the CFO said.

He added that “we are no longer assuming an inflection in the second half of the year” for dollar base retention rate (DBRR).

“This is because we are prudently assuming a more muted seasonality in our service bookings than what we were originally forecasting to align with the weaker economic data points that have been coming out recently and this has been further confirmed by our discussions with top seasonal customers.,” he said.

Earlier this month, Five9 revealed plans to buy revenue generation platform provider Acqueon and boost its generative AI (GenAI) capabilities. Reports surfaced at the end of 2023 that Five9 and Zoom were making another go at an acquisition more than two years after Zoom’s failed $14.7 billion bid for Five9, but Five9 said it was “not pursuing any such acquisition.”

On Tuesday, Five9’s stock fell about .5 percent after hours to about $34 a share.