With it being a slow news day, we thought we'd revisit Five9 (FIVN) as it has been making fresh highs in recent sessions and provide some color as to what has been going on at the company. Five9 is a provider of cloud software for contact centers. It's attempting to disrupt a large market by replacing legacy on-premise contact center systems.
FIVN's Virtual Contact Center, or VCC, cloud platform delivers a suite of easy-to-use applications that enable customer service, sales and marketing functions. FIVN combines software and telephony into a single unified platform that is delivered in the cloud.
Companies typically refresh their contact center systems every 8-10 years, which provides an opportunity for cloud software to replace legacy on-premise contact center systems when these replacement decisions cycle through.
On-premise systems require large up-front investments, long deployment cycles and are burdensome to maintain. These systems are also often inflexible, complex, and require significant duplication of effort across multiple sites. FIVN's VCC platform allows simultaneous management and optimization of customer interactions across voice, chat, email, web, social media and mobile channels. Unlike legacy on-premise contact center systems, FIVN's platform requires minimal up-front investment, can be rapidly deployed and is maintained by FIVN in the cloud.
Recent Catalysts: So why has FIVN's stock price been so strong lately?
The stock has run more than 15% since late September. There does not seem to be an obvious catalyst that we can find. It's possible the name got recommended by a newsletter or perhaps an analyst upgrade. We will keep searching.
What we do know is that FIVN has been posting strong earnings results. In early August, the company Q2 nearly posted breakeven non-GAAP EPS at $(0.00), which was a good bit better than prior guidance of $(0.04)-(0.02). Revenue increased 23% YoY to a record $47.7 mln, which also was above prior guidance of $45.3-46.3 mln. FIVN also raised full year guidance.
Revenue growth in Q2 was driven by FIVN's Enterprise business, which delivered 39% growth in LTM Enterprise subscription revenue. It was also FIVN's best quarter ever for Enterprise bookings in Q2 and its sales pipeline reached another all-time high. FIVN also released a major update to VCC in July.
In sum, FIVN is a fairly recent IPO, having made its debut in April 2014. The IPO priced below the expected range, and they missed on their debut earnings report. Following that, the stock was under a bit of a cloud (pun intended), trading in the single digits.
However, while few investors noticed it, FIVN's turnaround has been progressing nicely. The company has been posting strong numbers, starting in the second half of 2015. And the stock is now trading at new post-IPO highs. With that said, there is intense competition in this industry and FIVN is only teetering around profitability as FIVN expects 2017 non-GAAP EPS of $(0.00)-0.03. But the bigger picture appears positive as FIVN feels that it is extremely well-positioned in this large contact center market that is still in the early days of a massive shift to the cloud.