UPDATED 18:38 EDT / APRIL 29 2021

CLOUD

Five9 shares jump on strong growth, higher forecast

Cloud contact center provider Five9 Inc. continues to roll, comfortably beating Wall Street expectations on revenue and earnings in its first fiscal quarter and raising guidance for year.

Revenue rose 45% from the first quarter of 2020, to $137.9 million. Net income of $16.1 million, or 23 cents per diluted share, was also up 45%. Analysts had been expecting revenues of $122.5 million and per-share earnings of 13 cents.

Executives said the strong performance was driven by increasing success landing deals with large enterprises with million-dollar-plus deals growing faster than any other part of the company’s business in the quarter, said Chief Executive Rowan Trollope (pictured).

One key to the rise in enterprise deals was last fall’s acquisition of Inference Solutions Inc., which added virtual agents to the company’s product line. “With an expanded portfolio we’ve created a much better fit for large enterprises and the [artificial intelligence] addition plays to their need for efficiency,” Trollope said.

“There were things we had to cross over for enterprise customers to trust the cloud, like reliability, scalability, data protection and functionality,” said President Dan Burkland. “We’ve been able to prove that you have innovation at a scale in the cloud you just can’t deliver on-prem. “

Adjusted earnings before interest, taxes, depreciation and amortization grew nearly 60%, to $22.2 million, and operating cash flow grew more than 30%, to $13.8 million. The company raised its guidance for second-quarter profit to 13 to 14 cents per share versus analysts’ expectations of 12 cents. Revenue is expected to come in at about $132 million, or nearly $10 million better than estimates.

Great expectations

For the year, Five9 raised its revenue estimate to between $548.5 million and $551.5 million compared with the consensus estimates of $520.6 million and some $30 million higher than earlier guidance. The midpoint EPS forecast is now 91 cents compared with earlier guidance of 77 cents.

Investors responded by sending the stock up nearly 7% after-hours. Five9’s share price is up nearly 85% over the past year.

The company also expects to see average revenue per sale increase as a result of larger deal sizes. “These bigger customers can afford to buy more, so they might get a keen price on the base contact center but they have the deep pockets for things like advanced reporting and connectivity,” said Chief Financial Officer Barry Zwarenstein.

The rush to virtual contact centers has been fueled by the COVID-19 pandemic and a more general need for large enterprises to improve customer experience, Burkland said. “A lot of them have done their own mergers and acquisitions and have large silos,” he said. “For companies that want to create a globally consistent experience it makes sense to consolidate, and they have to get out of those premises-based solutions.”

Executives said they believe they have the wind at their backs now that customers’ early reservations about cloud contact centers have dissipated and Five9 has landed some large deals. “Many enterprises don’t want to go first,” Burkland said. “Now we’ve checked that box and shown we have customers with many thousands of seats all over the world.”

Trollope largely dismissed questions about whether Microsoft Corp.’s planned blockbuster acquisition of Nuance Communication Inc. presents a new competitive threat. “We actually partner with Nuance,” he said. “With the Inference acquisition, we’ve become a platform that rides on top of other technologies, whether it’s text-to-speech or natural language. We’re playing one notch up the value stack.”

Photo: SiliconANGLE

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