FIVN 10-K & 10-Q changes, risk factors and insider trading

•Adverse economic conditions, including the impact of macroeconomic challenges, includingglobal 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 thecurrent Russia-Ukraineand conflict,potential theglobal impact of conflicts in the Middle East,conflicts, and other factors, may continue to harm our business.

•If we fail to manage our technical operations infrastructure, our existing customers may experience service outages, our new customers may experience delays in the deployment of our solution and we could be subject to, among other things,to claims for credits or damages.damages, among other things.

•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;harmed.

•WePrior haveto 2025, we had a history of losses and we may be unable to achieve or sustain profitability.

•our ability to successfully integrate companies, businesses and technologytechnologies that we acquire and achieve a positive return on our investment;

•adverse economic conditions, including the impact of macroeconomic challenges, includingglobal 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 thecurrent Russia-Ukraineand conflict,potential theglobal impact of conflicts in the Middle East,conflicts, or other factors;

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 agentsneeds 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.

Our strategy is to sell our solution to both smaller and larger organizations. Our gross margins can vary depending on numerous factors related to the implementation and use of our solution, including the features and number of licenses purchased by our customers, the increasing reliance on public cloud providers, and the level of usage and professional services and support required by our customers. For example, our larger customers typically require more professional services, and because our professional services offerings typically have lowernegative 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, 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.

WePrior haveto 2025, we had a history of losseslosses, and we may be unable to achieve or sustain profitability.

WePrior haveto 2025, we incurred losses in each annual period since our inception in 2001. We incurred net income (losses) of $12.8$39.4 million, $81.8$(12.8) million and $94.7$(81.8) million for the years ended December 31, 2024,2025, 20232024 and 2022,2023, respectively. As of December 31, 2024,2025, we had an accumulated deficit of $417.6$378.2 million. TheseThe historical losses and our accumulated deficit reflect the substantial investments we have made, and continue to make, to develop our solution and acquire new customers, among other expenses. We expect the dollar amount of our costs and expenses to increase in the future as revenue increases, although at a slower rate than the expected growth in revenue. We expect ourto annual lossescontinue to continuemake further investments for the foreseeable future as we continue to expand our business.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 achieve profitability in the future or that, if we do become profitable, we will sustain our current profitability.

•respond to adverse economic conditions, including the impact of macroeconomic challenges, includingglobal 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 thecurrent Russia-Ukraineand conflict,potential theglobal impact of conflicts in the Middle East,conflicts, or other factors;

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.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.successfully and our stock price may decline.

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 recommendrecommend, sell or incorporate our solution, our ability to compete in the marketplace or to 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.

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, includingglobal tariff increases and potential future increases and announcements regarding same, continued inflation, uncertainty regarding consumer spending, high interest rates, fluctuations in currency rates, the Russia-Ukraine conflict, the impact of conflictscurrent inand thepotential Middleglobal East,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.

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 macroeonomicmacroeconomic 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. WeIn 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.

•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, includingglobal tariff increases and potential future increases and announcements regarding same, continued inflation, uncertainty regarding consumer spending, high interest rates, fluctuations in currency rates, the Russia-Ukraine conflict, the impact of conflictscurrent inand thepotential Middleglobal East,conflicts, or other factors;

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, includingglobal tariff increases and potential future increases and announcements regarding same, continued inflation, uncertainty regarding consumer spending, high interest rates, fluctuations in currency rates, the Russia-Ukraine conflict, the impact of conflictscurrent inand thepotential Middleglobal East,conflicts, or other factors, any of which could harm our operating results, financial position and cash flow.

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. These largerLarger 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 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.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 agents.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.

Our recent,recent acquisitions, and any future,future acquisitions willwill, 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.

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, telemarketing and out of home campaigns.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 buildingthese our brand.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.

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 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.

We have incorporated a number of AI-powered features into our solution, and are making investments in expanding our AI capabilities with Generativegenerative AI. Generative AI technologies are complex and rapidly evolving, and we face significant competition from other companies as well as an evolving legal and regulatory landscape. The incorporation of Generative AI-powered features into our solution may subject us to new or enhanced governmental or regulatory scrutiny, litigation, confidentiality or security risks, ethical concerns, orclaims brought by private parties and other complications that could harm our business, reputation, financial condition or results of operations. IntellectualFor propertyexample, ownershipour 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 address these risks could harm our business, reputation, financial condition and licenseresults rights,of includingoperations. copyright,While surroundingwe seek to use AI andin Generativeour solutions in a way that is designed to minimize these risks, there are still risks of such events occurring. The regulatory environment around AI technologies has not been fully addressed by federal or state laws or by U.S. courts, and the manner in which we configure and use these technologies may expose us to claims of copyright infringement or other intellectual property misappropriation. New laws have been adopted in the EU, and it is possibleevolving thatrapidly, with new laws and regulationsbills willbeing beregularly adoptedintroduced, amended and repealed on the federal and state level, in addition to outside of the UnitedU.S., Statesincluding the EU. These new and in other countries, or that existingchanging laws and regulations will be interpreted in ways that wouldcould affect the operation of our solutionsolutions and the way in which we use AI.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.

Uncertainty around and rapidRapid evolution of Generative AI technologies may require additional investment, including research and development of new approaches and processes, which willmay be costly and increase our expenses. AI can generate written content which contains bias, factual errors, misrepresentations, offensive language, or inappropriate statements. While we seek to use Generative AI in a way that is designed to minimize these risks, there are still risks of such events occurring. Our failure to address these risks could harm our business, reputation, financial condition and results of operations. In addition, the use and deployment of AI, including Generative AI,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.

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 theintellectual protectionproperty ofand data,data protection, including cybersecurity risk, exposure of our proprietary confidential information to unauthorized recipientsrecipients, andwhich can result in the loss of intellectual property protection of such information, the misuse of our or third-party intellectual property.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 requirements.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.

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.

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 wellwell, or at all, with them, or they could delay or deny our access to technology releases that allow us to 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.

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 endureexperience 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 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 may require that users of our service obtain their own internet bandwidth. We exercise little control over these third-party providers, which increases our vulnerability to problems with the services they provide.

In 2015, theThe FCC releasedis ancurrently order,imposing commonlyminimal referredregulatory torequirements on Internet service providers and, as network neutrality, that, among other things, prohibited (i) the impairment or degradation of lawful internet traffic on the basis of content, application or service and (ii) the practice of favoring some internet traffic over other internet traffic based on the payment of higher fees. In June 2018, the FCC repealed the network neutrality regulations imposed by the 2015 order. In April 2024, the FCC adopted its Safeguarding and Securing the Open Internet Order (“SSOIO”) restoring the 2015 Net Neutrality obligations and standards. However, a federal court has stayed the FCC’s SSOIO and rules adopted therein. If the FCC’s April 2024 SSOIO and rules do not become effective,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. Notwithstanding, states and otherOther countries mayhave adoptadopted 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, othersothers, 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.

To date, weWe have not generated significant revenues outside of the U.S., Canada, the U.K., Latin America and Australia.Australia, However,but we already have significant operations outside these countries and regions, including operations in India, and we expect to grow our international presence in the future. For instance, in 2024 we completed our acquisition of Acqueon, a real-time revenue execution platform, with operations in India. 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 previously performed in Russia, and Indiaoperations, and Australia, where additional portions of engineering and operations are performed.

Operating in international markets requires significant resources and management attention and will subject usdevoted to different regulatory, tax, economic, and political risks that are different from those in the U.S.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.

A key element of our growth strategy is to expand our international sales efforts and develop a worldwidemore 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 of our revenues from customers outside the United States, with approximately 89% of our revenue for the year ended December 31, 20242025 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 fromfrom, 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:

•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.U.S., leading to increased risk of piracy, counterfeiting and other misappropriation of our intellectual property;

•new and different sources of competitioncompetition, including laws and business practices favoring local competitors;

•restrictions or taxes on the transfer of funds; and

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, includingglobal tariff increases and potential future increases and announcements regarding same, continued inflation, uncertainty regarding consumer spending, high interest rates, fluctuations in currency exchange rates, the impact of the Russia-Ukraine conflict,and the impact of conflictscurrent inand thepotential Middleglobal East,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 macroeonomicmacroeconomic challenges. All of these potential circumstances could lead to slower growth, or even a decline in, our revenues, operating results and cash flows.

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 enforcementsenforcement 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 customerscustomers, 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 consent decrees forcing us to modify our business practices, all of which could materially harm our business, reputation or financial results.

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 expect tomay 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 experience. We invest significant time and expense in training our employees, which increases their value to competitors who may seek to recruit them and increases our costs.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 continue to allow limited work from home flexibility stemmingin fromjurisdictions thewhere COVID-19we pandemic.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.

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 2019, we acquired substantially all of the assets of Whendu LLC, or Whendu, including its iPaaS platform, in 2020, we acquired both Virtual Observer and Inference, 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.

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:

We are subject to risks and exposures, including continued macroeconomic challenges, the Russia-Ukraineimpact conflictof global tariff increases and thepotential conflictsfuture inincreases theand Middleannouncements East.regarding same, and current and potential global conflicts. While the implications of macroeconomic challenges, and global and regional conflicts on our business, results of operations and overall financial position remain uncertain over the long term, we expect that macroeconomic challenges will continue to have an adverse impact on our revenue in future periods.

Reduction in Force PlanPlans

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 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.

Our revenue increased to $1,041.9$1,149.1 million for the year ended December 31, 2024,2025, from $910.5$1,041.9 million and $778.8$910.5 million for the years ended December 31, 20232024 and 2022,2023, 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, 2024,2025, 20232024 and 2022,2023, no single customer accounted for more than 10% of our total revenue. As of December 31, 2024,2025, we had over 3,000 customers across multiple industries with a wide range of license sizes. We had a net income (loss) of $12.8$39.4 million, $81.8$(12.8) million and $94.7$(81.8) million for the years ended December 31, 2024,2025, 20232024 and 2022,2023, 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 Russia-Ukraineimpact conflictof global tariff increases and thepotential conflictsfuture inincreases theand Middleannouncements East,regarding same, and current and potential global conflicts, in order to successfully grow our business and improve our operating results.

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 loss.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 a reduction in force plan,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, (1214) office closure lease termination costs, (15) provision for income taxes, and (1316) other items that do not directly affect what we consider to be our core operating performance.

The following table shows a reconciliation of net income (loss) to adjusted EBITDA for the periods presented (in thousands):

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.

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:

The increase in revenue for 20242025 compared to 20232024 was primarily attributable to our larger customers, driven by an increase in our sales and marketing activities and our improved brand awareness.

The increase in cost of revenue for 20242025 compared to 20232024 was primarily due to a $21.0$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 $10.0 million increase in personnel-related costs, a $6.2 million increase in third-party costs driven by increased customer activities, a $3.1$6.8 million increase in amortization of capitalized internal-use software development costs, a $2.9$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 usage, a $2.7$2.2 million increase in lease amortization of finance leases, and a $0.6 million increase in amortization of intangibles, offset in part by a $1.4 million decrease in usage and carrier costs due to lowerincreased rates and byvolume, a $0.8 million decrease in consulting costs for global expansion. The $10.0$1.9 million increase in personnel-relatedamortization costsof was primarily driven by increased headcount, higher salaries, and $2.1 millionintangibles in restructuringconnection costs related towith the Plan,acquisition of Acqueon in August 2024, offset in part by ana $8.4$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.

The increase in gross profit for 20242025 compared to 20232024 was primarily due to increases in subscription and related revenues. We expect gross margin to increase in the longlong-term termwith despitelong-term revenue growth outpacing continued investments in professional services, public cloud, cloud operations, customer support and network infrastructure, as we expect revenue growth in the long term to more than offset these increases.infrastructure.

The increasedecrease in research and development expenses for 20242025 compared to 20232024 was primarily due to a $12.6 million increase in personnel-related costs, a $3.7 million increase in staff augmentation costs, a $3.3 million increase in office, facilities and related allocated costs, and a $1.3 million increase in public cloud development costs, offset in part by a $12.3$16.0 million increase in research and development costs (excluding stock-based compensation costs) that qualified for capitalization.capitalization, Thewhich $12.6resulted 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 was primarily driven by increased headcount,research and development headcount and higher salaries, and $1.9 million in restructuring costs related to the Plan, offsetreduced in part by a $13.2 million decrease in stock-based compensation costs.

The increase in general and administrative expenses for 20242025 compared to 20232024 was primarily due to a $7.9$1.9 million increase in hosted software costs, a $1.6 million increase in professional costs mainly associated with thestrategic acquisitionconsulting ofservices, Acqueon,and a $6.0$0.5 million increase in personnel-related costs, andoffset in part by a $2.2 million increasedecrease in impairment losses as a result of our commitmentrelated to closethe closure of two operating lease facilities and tothe abandonabandonment of the associated leasehold improvements and property and equipment,equipment offsetthat occurred in part by a $1.6 million decrease in office, facilities and related allocated costs. The $6.0 million increase in personnel-related costs was primarily driven by increased headcount, higher salaries, and $1.2 million in restructuring costs related to the Plan, offset in part by a $3.4 million decrease in stock-based compensation costs.2024.

The increasedecrease in interest expense for 20242025 compared to 20232024 was primarily due to the maturity of the 2025 convertible senior notes on June 1, 2025, offset in part by the issuance of the 2029 convertible senior notes in March 2024.

The increasedecrease in interest income and other for 20242025 compared to 20232024 was primarily due to higher interest income on our marketable investments due to higherlower investable balances primarily resulting from cash paid in connection with the maturity of the 2025 convertible senior notes and higherthe repurchase of our common stock, as well as lower interest ratesrates, and from an increase in foreign currency transaction gains,losses, offset in part by a $1.3 million impairment charge of an equity investment.investment that occurred in 2024.

To date, we have financed our operations,operations primarily through sales of our solution, net proceeds from our equity and debt financings, including the issuance of our 2029 convertible senior notes in March 2024, issuance of our 2025 convertible senior notes in May and June 20202020, and of our 2023 convertible senior notes in May 2018, and lease facilities. As of December 31, 2024,2025, we had $606.9$746.7 million in working capital, which included $362.5$232.1 million in cash and cash equivalents, and $643.4$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, 2024.2025.

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 in Portugal,internationally, and the effect of the length and severity of the continued macroeconomic challenges, the Russia-Ukraineimpact conflict,of global tariff increases and thepotential conflictsfuture inincreases theand Middleannouncements East,regarding same, and current and potential global conflicts, on these or other factors. We currently plan to use cash to settle amounts due under our convertible senior notes that mature on June 1, 2025. We may also acquire or invest in complementary businesses, technologies and intellectual property rights, such as our recent acquisitions of Aceyus in August 2023 and Acqueon in August 2024, which may increase our use of cash and future capital requirements, both to pay acquisition costs and to support our combined operations. We may 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 economicchallenging downturnmacroeconomic environment and fluctuations in the financial markets, including due to the Russia-Ukraineimpact conflictof global tariff increases and thepotential conflictsfuture inincreases theand Middleannouncements East.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.

Net cash provided by operating activities was $143.2$226.2 million during the year ended December 31, 2024.2025. Net cash provided by operating activities resulted from our net lossincome of $12.8$39.4 million, adjustments to reconcile net lossincome to net cash provided by operating activities of $283.1$317.3 million, primarily consisting of $166.3$148.1 million of stock-based compensation, $71.5$86.0 million of amortization of deferred contract acquisition costs, $52.9$61.8 million of depreciation and amortization, $15.4$20.3 million of reduction in carrying amount of right-of-use assets, $5.5$4.6 million of amortization of issuance costs on our convertible senior notes, a $2.2 million impairment charge as a result of our commitment to close two operating lease facilities and to abandon the associated leasehold improvements and property and equipment, a $1.3 million impairment charge of an equity investment, $(20.8) million of accretion of discount on marketable investments, and a $(6.6) million gain on early extinguishment of debt, partially offset by use of cash for operating assets and liabilities of $(127.1130.5) million primarily due to the timing of cash payments to vendors and cash receipts from customers.customers and $(7.9) million accretion of discount on marketable investments.

In MarchMay 2024,and June 2020, we issued $747.5 million aggregate principal amount of our 20292025 convertible senior notes in a private offering. The 20292025 convertible senior notes maturematured on MarchJune 15,1, 20292025, and arewe settled our seniorobligations unsecuredwith obligations.respect Theto 2029the 2025 convertible senior notes bearin cash in connection therewith. Prior to maturity, the 2025 convertible senior notes bore interest at a fixed rate of 1.00%0.50% per annum, payable semiannually in arrears on MarchJune 151 and SeptemberDecember 151 of each year, beginning onDecember September1, 15, 2024.2020. The total net proceeds from the issuance of the 2029 convertible senior notes,offering, after deducting initial purchasers'purchasers’ discounts and commissions and estimated debt issuance costs, were approximately $728.8 million. As of December 31, 2024, the aggregate principal amount outstanding of our 2029 convertible senior notes was $747.5 million.

As of December 31, 2024,2025, we had outstanding cloud services and software and maintenance agreement commitments totaling $38.1$167.0 million, of which $20.0$55.4 million is expected to be purchased within one year, and $18.1$108.1 million is expected to be purchased within one to three years.years, Duringand the year ended December 31, 2024, we entered into equipment finance lease arrangements that resulted in a $8.8$3.5 million additionalis reductionexpected ofto ourbe outstandingpurchased cloudwithin servicesfour commitment.to Seefive Note 10 for more information.years.

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 sheet,sheets, consolidated statements of operations and comprehensive loss,income (loss), or consolidated statements of cash flows.

We are subject to certain legal and regulatory proceedings, and from time-to-timetime 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:

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 ourself in this lawsuit.

The estimation of variable consideration for each performance obligation requires us to make subjective judgments. In the early stages of our larger contracts, in order to allocate the overall transaction fee on a relative stand-alone selling price basis to our multiple performance obligations, we estimate variable consideration to be included in the transaction fee to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. 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 loss.income (loss).

We provide our solution through a software-as-a-service, or SaaS, business model. We generate subscription revenue from our Intelligent CX Platform,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 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. Increases in the number of licenses or the level of consumption can be provisioned almost immediately. Subscription fees are generally billed monthly in advance, while telecom fees are billed in arrears. For each of the three and six months ended MarchJune 31,30, 20262026, subscription and telecom fees accounted for 94% of our revenue. For each of the three and six months ended June 30, 2025, subscription and telecom fees accounted for 94% and 93% of our revenue, respectively.revenue. The remainder was comprised of professional services revenue from the implementation and optimization of our solution.

Our revenue increased to $305.3$312.4 million and $617.8 million for the three and six months ended MarchJune 31,30, 2026 from $279.7$283.3 million and $563.0 million for the three and six months ended MarchJune 31,30, 2025. 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 three and six months ended MarchJune 31,30, 2026 and 2025, no single customer accounted for more than 10% of our total revenue. As of MarchJune 31,30, 2026, we had over 3,000 customers across multiple industries with a wide range of license sizes. We had net income of $18.4$3.4 million and $21.8 million in the three and six months ended MarchJune 31,30, 2026, respectively, compared to net income of $0.6$1.2 million and $1.7 million in the three and six months ended MarchJune 31,30, 2025.2025, respectively.

The year-over-year decrease for annual dollar-based retention rate for both subscription plus telecom revenue as well as subscription revenue reflects 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 expansion of larger existing customers throughout 2025 and the first quarterhalf of 2026.

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. We calculate adjusted EBITDA as net income before (1) depreciation and amortization, (2) stock-based compensation, (3) interest expense, (4) interest income and other, (5) acquisition and related transaction costs and one-time integration costs, (6) lease amortization for finance leases, (7) costs related to reduction in force plans, (8) one-time expenses related to strategic consulting services for operational review, (89) other cost-reduction and productivity initiatives, (910) one-time expenses related to advisory services for long-term strategy and growth, (1011) legal fees related to the securities class action, (1112) office closure lease termination costs, (13) impairment charge related to consolidation of corporate headquarters, (14) provision for income taxes, and (1215) other items that do not directly affect what we consider to be our core operating performance.

We expect that new and continued macroeconomic challenges resulting from the impact of global tariff increases and potential future increases and announcements regarding same, as well as the impact of current and potential global conflicts, continued inflation, uncertainty regarding consumer spending, high interest rates, fluctuations in currency rates, and other factors, may continue to harm our business.

Our cost of revenue consists primarily of personnel costs, including stock-based compensation, fees that we pay to telecommunications providers for usage, Universal Service Fund, or 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 we expect the percentagecost of revenue to fluctuate as a percentage of revenue in the near term, and to decline as a percentage of revenue in the long-term through economies of scale.

Results of Operations for the Three and Six Months Ended MarchJune 31,30, 2026 and 2025

The increase in revenue for the three and six months ended MarchJune 31,30, 2026 compared to the same period of 2025 was primarily attributable to our larger customers, driven by our sales and marketing activities and our improved brand awareness.

The increase in cost of revenue for the three months ended MarchJune 31,30, 2026 compared to the same period of 2025 was primarily due to a $6.9$7.6 million increase in third-party costs driven by increased customer activities, a $3.4$7.5 million increase in depreciation, data center and public cloud costs to support our growing capacity needs, a $4.3 million increase in amortization of capitalized internal-use software development costs, and a $0.7$1.6 million increase in consulting costs for global expansion, offset in part by a $1.2$2.8 million decrease in personnel-related costs primarily driven by a decrease in stock-based compensation costs, and by a $0.7 million decrease in amortization of acquired intangible assets.costs.

The increase in gross profit for the three and six months ended MarchJune 31,30, 2026 compared to the same periodperiods of 2025 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.

The decreaseincrease in research and development expenses for the three months ended MarchJune 31,30, 2026 compared to the same period of 2025 was primarily due to a $1.3 million decreaseincrease in personnel-relatedstaff costsaugmentation primarily due tocosts, a decrease in stock-based compensation costs and an $0.8 million increase in public cloud development costs, and a $0.3 million decrease 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, offset in part by a $0.5$0.7 million increasedecrease in staff augmentationpersonnel-related costs andprimarily bydue to a $0.2 million increasedecrease in publicstock-based cloud developmentcompensation costs.

The decrease in sales and marketing expenses for the three months ended MarchJune 31,30, 2026 compared to the same period of 2025 was primarily due to a $5.4$5.8 million decrease in personnel-related costs mainly due to decreased sales and marketing headcount as a result of the 2025 Plan and a prior reduction-in-force plan executed in August 2024, and a decrease in stock-based compensation costs, and a $0.4 million decrease in travel costs as a result of reduced business travel, offset in part by a $3.8$3.6 million increase in amortization of deferred contract acquisition costs driven by the growth in sales and bookings of our solution.solution Theand remaining decrease was due toby a reduction$1.4 million increase in overall marketing spend during the period.spend.

The decreaseincrease in general and administrative expenses for the three months ended MarchJune 31,30, 2026 compared to the same period of 2025 was primarily due to an $8.4 million increase in impairment charge as a $1.5result of the initiation of a plan to consolidate our corporate headquarters from two floors to a single floor in May 2026, offset in part by a $1.4 million decrease in personnel-related costs primarily due to a decrease in stock-based compensation costs. The remaining decrease was primarily due to a reduction in overall general and administrative spend during this period as a result of our ongoing cost-reduction and productivity initiatives.

The decrease in interest expense for the three and six months ended MarchJune 31,30, 2026 compared to the same periodperiods of 2025 was primarily due to the maturity of the 2025 convertible senior notes on June 1, 2025.

The decrease in interest income and other for the three and six months ended MarchJune 31,30, 2026 compared to the same periodperiods of 2025 was due to lower investable balances primarily resulting from cash paid in connection with the maturity of the 2025 convertible senior notes and the repurchases of our common stock.stock, offset in part by an increase in foreign currency transaction gains.

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 MarchJune 31,30, 2026, we had $782.6$722.1 million in working capital, which included $273.0$187.3 million in cash and cash equivalents and $450.9$466.8 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 MarchJune 31,30, 2026.

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 resulting from the impact of global tariff increases and potential future increases and announcements regarding same, as well as the impact of 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 resulting from the impact of global tariff increases and potential future increases and announcements regarding same, as well as the impact of 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.

As part of ourthe 2025 Repurchase Program, we entered into an ASR program (the "2025 ASR Program") with JPMorgan Chase Bank, National Association N.A. ("JPM") on November 11, 2025, we entered into the ASR program with JPM.2025. Under the terms of the 2025 ASR program,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,stock at an initial price of $20.76 per share, representing approximately 80%73% of the total number of shares of our common stock expected to be purchased under the 2025 ASR program. The 2025 ASR Program was completed on February 2, 2026, which resulted in delivery of 701,517 additional shares to us. The final share settlement was based on the average daily volume-weighted average price of our shares, netted against the initial delivery. 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.

As of MarchJune 31,30, 2026, $90.0no millionamount remained available under the 2025 Repurchase Program.

Net cash provided by operating activities was $48.4$106.0 million during the threesix months ended MarchJune 31,30, 2025.2026. Net cash provided by operating activities resulted from our net income of $0.6$21.8 million, adjustments to reconcile net income to net cash provided by operating activities of $78.3$172.7 million, primarily consisting of $39.2$65.6 million of stock-based compensation, $20.4$48.4 million of amortization of deferred contract acquisition costs, $14.5$37.8 million of depreciation and amortization, $5.1$10.7 million of reduction in the carrying amount of right-of-use assets, $8.5 million impairment charges of long-lived assets, and $1.4$1.8 million of amortization of issuance costs on our convertible senior notes, partially offset by use of cash for operating assets and liabilities of $(30.588.5) million primarily due to the timing of cash payments to vendors and cash receipts from customers and $(3.32.3) million accretion of discount on marketable investments.

Net cash used in investing activities of $(0.142.4) million in the threesix months ended MarchJune 31,30, 2026 was comprised of $(114.1199.6) million related to purchases of marketable investments, $(9.222.9) million in capital expenditures, and $(18.5) million in capitalized software development costs and $(5.3) million in capital expenditures,costs, offset in part by $128.4$198.6 million related to cash proceeds from sales and maturities of marketable investments.

Net cash usedprovided inby investing activities of $(38.1)$191.1 million in the threesix months ended MarchJune 31,30, 2025 was comprised of $275.9$533.2 million related to cash proceeds from sales and maturities of marketable investments, offset in part by $315.1 million related to purchases of marketable investments, $8.7$18.7 million in capitalized software development costs and $4.7$8.2 million in capital expenditures, offset in part by $251.3 million related to cash proceeds from maturities of marketable investments.expenditures.

Net cash used in financing activities of $(22.8108.3) million in the threesix months ended MarchJune 31,30, 2026 was from $(10.8) million of principal payments on financing arrangements, $(10.0100.0) million of cash paid for the repurchase of our common stock, $(2.510.8) million of principal payments on financing arrangements, and $(4.9) million of payments related to finance leases, offset in part by $7.0 million from the sale of common stock under our employee stock purchase plan and $0.4 million in proceeds from the exercise of common stock options.

Net cash used in financing activities of $(2.2431.1) million in the threesix months ended MarchJune 31,30, 2025 was fromprimarily $2.2related to $434.4 million of cash paid in connection with the maturity of the 2025 convertible senior notes and $4.7 million of payments related to finance leases.leases, offset in part by $7.9 million from the sale of common stock under our employee stock purchase plan.

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 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 MarchJune 31,30, 2026, the aggregate principal amount outstanding of our 2029 convertible senior notes was $747.5 million.

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 $57.0$61.7 million as of MarchJune 31,30, 2026, with $11.2$8.6 million payable in the remainder of 2026, $23.3$28.5 million payable within one to three years, $20.8$22.9 million payable within three to five years, and $1.7 million payable after five years. We also had outstanding finance lease obligations of $12.8$12.1 million as of MarchJune 31,30, 2026, with $6.6$4.4 million payable in the remainder of 2026, and $6.2$7.4 million payable within one to three years.years, Seeand Note$0.3 12million payable within three to five years. We entered into additional three-year equipment finance lease agreements and recognized $1.6 million right of use assets during the condensedthree consolidatedmonths financialended statementsJune included30, in2026, thiswhich reportwere forreported furtherwithin details.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 $0.5 million within Finance lease liabilities and long-term lease liabilities of $1.1 million within Finance lease liabilities - less current portion during these periods.

As of MarchJune 31,30, 2026, we had outstanding cloud services and software and maintenance agreement commitments totaling $149.0$125.4 million, of which $37.1$14.7 million is expected to be purchased in the remainder of 2026, $108.5$107.3 million is expected to be purchased in 2027 and 2028, and the remaining $3.4 million is expected to be purchased in 2029.

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 MarchJune 31,30, 2026, we had outstanding hosting and telecommunication usage services obligations of $13.1$12.4 million, with $4.6$3.0 million payable in the remainder of 2026, $6.8$7.5 million payable in 2027 and 2028, and $1.7$1.9 million payable in 2029 and 2030.

During the first quarterhalf of 2026, we entered into a $53.9 million five-year agreement for data center support and maintenance services, which was financed through a non-interest bearing financing arrangement. In accordance with ASC 835-30, the financing arrangement was recorded as a liability at its present value of $48.3 million using an imputed interest. We are obligated to paymake five installment payments of $10.8 million annually, with the first payment made upon execution of the agreement in March 2026, and the remaining four annual payments due from March 2027 through March 2030. The current and long-term portions of this obligation were $10.8 million and $26.9$27.4 million, respectively, as of MarchJune 31,30, 2026.

During the first quarterhalf of 2026, we executed a reseller agreement with a total commitment of $9.0 million, a term from March 31, 2026 to March 31, 2027, andwith a total remaining commitment of $8.7$6.3 million as of MarchJune 31,30, 2026.

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. The action was stayed pending the resolution of the motion to dismiss in the securities action. On February 27, 2026, a separate and related shareholder derivative action was filed again 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. On March 9, 2026, all parties filed a stipulation with the court to consolidate the two derivative actions, which the court so-orderedso ordered on March 17, 2026. On May 20, 2026, the court entered an order on the parties’ stipulation staying the derivative action.

On March 24, 2026, a related shareholder derivative action was filed in the United States District Court for the District of Delaware on behalf of nominal defendant Five9, Inc. and against its directors and certain of its officers seeking to assert claims for breaches of fiduciary duties, gross mismanagement, waste of corporate assets, unjust enrichment, and violation of Section 14(a) of the Securities Exchange Act of 1934. On April 15, 2026, the partiescourt toentered thisan derivativeorder actionon jointlythe filed aparties' stipulation with the court to staystaying the derivative action.