Five9 (NASDAQ:FIVN) Beats Expectations in Strong Q3, Stock Jumps 10.2%

Radek Strnad /
2021/11/08 5:05 pm EST

Call center software provider Five9 (NASDAQ: FIVN) reported Q3 FY2021 results beating Wall St's expectations, with revenue up 37.6% year on year to $154.3 million. Guidance for next quarter's revenue was surprisingly good, being $165 million at the midpoint, 4.39% above what analysts were expecting. Five9 made a GAAP loss of $20.5 million, down on its loss of $11.4 million, in the same quarter last year.

Is now the time to buy Five9? Access our full analysis of the earnings results here, it's free.

Five9 (FIVN) Q3 FY2021 Highlights:

  • Revenue: $154.3 million vs analyst estimates of $146.6 million (5.21% beat)
  • EPS (non-GAAP): $0.28 vs analyst estimates of $0.23 (20.9% beat)
  • Revenue guidance for Q4 2021 is $165 million at the midpoint, above analyst estimates of $158 million
  • Gross Margin (GAAP): 56.4%, down from 58.4% same quarter last year

“We are pleased to report strong results for the third quarter. Revenue grew 38% year-over-year to a record $154.3 million, which continues to be driven by our Enterprise business, as evidenced by LTM Enterprise subscription revenue which grew by 51% year-over-year. Our performance for the quarter underscores the strength of our platform and the value we deliver to customers seeking to modernize and transform their contact centers. We have differentiated our platform by building a leadership position in AI-driven automation around customer experience and remain confident in the durability of our growth powered by market momentum, continued product innovation, and our go-to-market machine.”

Started in 2001, Five9 (NASDAQ: FIVN) offers software as a service that makes it easier for companies to set up and efficiently run call centers, and offer more tailored customer support. In early 2021 Zoom Communications (ZM) attempted to buy Five9 in an all stock deal, but the acquisition fell through due to lack of shareholder support, after it was revealed that regulators were reviewing the planned deal due to concerns about foreign participation.

Sales Growth

As you can see below, Five9's revenue growth has been impressive over the last year, growing from quarterly revenue of $112.1 million, to $154.3 million.

Five9 Total Revenue

And unsurprisingly, this was another great quarter for Five9 with revenue up an absolutely stunning 37.6% year on year. On top of that, revenue increased $10.5 million quarter on quarter, a very strong improvement on the $5.9 million increase in Q2 2021, and a sign of acceleration of growth.

Analysts covering the company are expecting the revenues to grow 20.8% over the next twelve months, although estimates are likely to change post earnings.

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What makes the software as a service business so attractive is that once the software is developed, it typically shouldn't cost much to provide it as an ongoing service to customers. Five9's gross profit margin, an important metric measuring how much money there is left after paying for servers, licenses, technical support and other necessary running expenses was at 56.4% in Q3.

Five9 Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.56 left to spend on developing new products, marketing & sales and the general administrative overhead. While it improved significantly from the previous quarter this would still be considered a low gross margin for a SaaS company and we would like to see the improvements continue.

Key Takeaways from Five9's Q3 Results

With a market capitalization of $10 billion and more than $415.2 million in cash, the company has the capacity to continue to prioritise growth.

We enjoyed the positive outlook Five9 provided for the next quarter’s revenue. And we were also excited to see the really strong revenue growth. Zooming out, we think this was a fantastic quarter that should have shareholders cheering. The company is up 10.2% on the results and currently trades at $159.99 per share.

Five9 may have had a good quarter, so should you invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.