Wednesday, April 13, 2022

An International Equity holding: Five9 Inc. (FIVN, $115.79): “Five9 Isn’t Calling it a Day” By: Owen Filbin, AIM Student at Marquette University

 Five9 Inc. (FIVN, $115.79): “Five9 Isn’t Calling it a Day”

By: Owen Filbin, AIM Student at Marquette University

Disclosure: The AIM International Equity Fund currently holds this position. This article was written by myself, and it expresses my own opinions. I am not receiving compensation for it, and I have no business relationship with any company whose stock is mentioned in this article.


  • Five9 Inc. (NASDAQ: FIVN) is a leader in providing cloud software for contact centers, leveraging their expertise in delivering real-time customer data to their clients. They derive almost all of their revenue in the United States (~90%), as well as in China and various European countries.  
  • FIVN plans to expand their exposure in this market by delivering their Intellectual Virtual Assistant (IVA) offering, positioning them to be the first player in the industry with this service.
  • FIVN’s strong growth history stems from their 93% recurring revenue and 66% YoY increase in customer bookings. FIVN has also entered into new markets internationally.
  • Management has targeted new, larger contracts to boost revenues. This initiative has led to margin expansion and more than $1 million in annual recurring revenue.
  • FIVN was founded in 2001 and is headquartered in San Ramon, CA. Rowan Trollope currently serves as CEO and director.

Key points: FIVN strives to enhance customer call productivity through their integrated cloud capabilities, as well as expertise in implementing tailored solutions based on client needs. Their offerings are scalable, which is an attractive perk nowadays with SaaS and similar models gaining traction in these markets. FIVN has experienced a 5-year sales CAGR of roughly 30% and plans to aggressively grow their top line through the next five fiscal years. Their moat in the contact center cloud industry, coupled with international market expansion positions the company well to achieve and surpass their intended revenue goals. FIVN’s core driver of revenue is measured in bookings, something they have handled well in the past 3 FY. In 2021 EMEA and LATAM bookings increased at a 167% and 128% CAGR YoY, respectively.

FIVN’s new core offering, Intellectual Virtual Assistant (IVA), is a one of a kind technology that FIVN is bringing to market before their competitors. This product was made possible due to their acquisition of Inference Solutions, an IVA provider. Since FY21, usage for this offering has grown 180%, measured on how many minutes per week the software is handling calls.

Based on a recent Five9 publication, main uses for this software include password resets, authentication, appointment bookings, balance updates, and status updates. As demonstrated, firms across all sectors and industries have benefitted from this service. Key notable milestones include surpassing 80 million calls, mainly health care providers like Covid Clinic, as well as other health insurance and clinics

What has the stock done lately?

FIVN was recently added to the Marquette AIM Small Cap fund. Since this addition, the stock has increased roughly 5%, with attractive drivers moving forward. FIVN boasts strong historical revenue growth, as well as future growth projections from management that make FIVN appealing moving forward.

Past Year Performance: FINV is trading well below its YTD pattern. Since Q1 FY21, FINV is down about 35%, and reached its 52 WK low in March 2022. Since then, the stock has climbed 26%, signaling an adjustment back to its appropriate valuation. Firm initiatives to capture larger contracts which drive their bookings and revenue, as well as their rollout of their IVA technology is driving the share price back to historical trading prices.

Source: FactSet

My Takeaway

FIVN was pitched with a projected price target of $161.28, and is currently trading towards the bottom of its 52 WK L-H. The current state of the market, specifically within this sector, underscores the discrepancy in valuation. As FIVN recognizes the benefits from their newly released IVA technology, and as domestic & international bookings increase, it will be interesting to see how FIVN reacts. Additionally, words like ‘moat’ and ‘first to the industry’ being tossed around by management is an attractive signal moving forward. Strong YoY bookings & recurring revenue, and the expansion of these offerings into international markets is an additional tailwind to consider for this firm heading into FY22.

Source: FactSet