Five9 (FIVN) is a small cap software name that has broken out to fresh all time highs in the past few days. Since many people are likely not familiar with FIVN, we wanted to provide an update on what's been going on. 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.
Contact centers are vital hubs of interaction between organizations and their customers. 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.
FIVN's VCC cloud platform matches each customer interaction with an appropriate agent resource and delivers relevant customer data to the agent in real-time through integrations with adjacent enterprise applications, such as CRM software. 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.
Today, customers increasingly expect seamless communications across multiple channels, including voice, chat, email, web, social media and mobile, thereby increasing the number of touch points between companies and their customers. Along with these additional channels, customers expect personalized interactions.
So why has FIVN's stock price been so strong lately? The pop higher in the past couple of days was from an analyst upgrade on Friday. However, the longer term move higher over the past year has been mostly fueled by a series of strong earnings reports in recent quarters.
Most recently, on February 16, FIVN reported a small non-GAAP profit of $0.00 per share in Q4 (appears to be the first time ever) when a small loss was expected by analysts and it was up from a $(0.03) loss in the prior year period. Revenue rose 22.8% year/year to $44.2 mln, which also was better than expected. For the full year 2016, its non-GAAP loss shrank to $(0.07) per share from $(0.33) in 2015 so that was good to see. Revenue in 2016 rose 26% to $162.1 mln.
The 2016 revenue growth was driven by FIVN's faster growing Enterprise business, which delivered 43% growth in LTM Enterprise subscription revenue, and where FIVN saw average deal size increase to approximately $560,000 in annual revenue. And 2017 seems to be shaping up well as FIVN set an all-time record for Enterprise bookings in Q4.
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 (Q4 profit was good to see but FIVN is expected to report another full year loss in 2017). 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.