Five9 (NASDAQ:FIVN) Exceeds Q1 Expectations, Stock Soars

Adam Hejl /
2022/04/28 4:23 pm EDT
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Call center software provider Five9 (NASDAQ: FIVN) reported Q1 FY2022 results beating Wall St's expectations, with revenue up 32.5% year on year to $182.7 million. On top of that, guidance for next quarter's revenue was surprisingly good, being $179.5 million at the midpoint, 3.11% above what analysts were expecting. Five9 made a GAAP loss of $34.1 million, down on its loss of $12.3 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) Q1 FY2022 Highlights:

  • Revenue: $182.7 million vs analyst estimates of $170.8 million (6.96% beat)
  • EPS (non-GAAP): $0.22 vs analyst estimates of $0.13 ($0.09 beat)
  • Revenue guidance for Q2 2022 is $179.5 million at the midpoint, above analyst estimates of $174 million
  • The company lifted revenue guidance for the full year, from $756 million to $771.5 million at the midpoint, a 2.05% increase
  • Free cash flow of $15.7 million, up from negative free cash flow of $5.6 million in previous quarter
  • Gross Margin (GAAP): 51.3%, down from 56.6% same quarter last year

“We are extremely pleased to report a strong start to the year with first quarter revenue growing 33% year-over-year to a record $182.8 million. This growth continues to be driven primarily by the strength of our Enterprise business where LTM subscription revenue grew 46% year-over-year as a result of our scalable, reliable and secure platform, our successful march up market, and our expanding global presence. Our platform can meet the needs of the largest companies in the world as demonstrated by our record customer win during the quarter with a healthcare conglomerate who is anticipated to roll out tens of thousands of seats with Five9.” said Rowan Trollope the CEO of Five9.

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.

Work is becoming more distributed, both across geographies and devices. In order for businesses to keep functioning efficiently, they need to be able to communicate as well as they did when the teams were co-located, which drives the demand for integrated communication platforms.

Sales Growth

As you can see below, Five9's revenue growth has been very strong over the last year, growing from quarterly revenue of $137.8 million, to $182.7 million.

Five9 Total Revenue

And unsurprisingly, this was another great quarter for Five9 with revenue up 32.5% year on year. But the growth did slow down compared to last quarter, as the revenue increased by just $9.17 million in Q1, compared to $19.2 million in Q4 2021. We'd like to see revenue increase by a greater amount each quarter, but a one-off fluctuation is usually not concerning.

Guidance for the next quarter indicates Five9 is expecting revenue to grow 24.8% year on year to $179.5 million, slowing down from the 44% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 22.8% over the next twelve months.

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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 51.3% in Q1.

Five9 Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.51 left to spend on developing new products, marketing & sales and the general administrative overhead. This would be considered a low gross margin for a SaaS company and it has been going down over the last year, which is probably the opposite direction shareholders would like to see it go.

Key Takeaways from Five9's Q1 Results

With a market capitalization of $7.01 billion Five9 is among smaller companies, but its more than $100.1 million in cash and the fact it is operating close to free cash flow break-even put it in a robust financial position to invest in growth.

We liked to see that Five9 beat analysts’ revenue expectations pretty strongly this quarter. And we were also glad that the revenue guidance for the next quarter exceeded analysts' expectations. On the other hand, it was less good to see the pretty significant deterioration in gross margin. Overall, this quarter's results seemed pretty positive and shareholders can feel optimistic. The company is up 5.2% on the results and currently trades at $108.29 per share.

Should you invest in Five9 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.