Five9 Stock Slips as Q1 Earnings Forecast Falls Short of Expectations
was down sharply after the contact center software provider reported better-than-expected fourth-quarter results but released a lower-than-expected first-quarter adjusted profit forecast.
The company’s valuation has now fallen to less than half of $14.7 billion
Focus on video communications
agreed to pay for the company last summer, before the deal collapsed.
For the December quarter, Five9 (ticker: FIVN) reported revenue of $173.6 million, up 36% from the prior year quarter, and ahead of both the company forecast or $164.5 million to $166.5 million and Wall Street consensus of $165.4 million. .
Non-GAAP earnings were 42 cents per share, above both the indicative range of 36 cents to 37 cents and the consensus of 36 cents. Adjusted EBITDA, or earnings before interest, taxes, depreciation and amortization, was $36.9 million, compared to $29.2 million a year ago. The adjusted gross margin went from 66.4% to 62.8%. According to generally accepted accounting principles, the company recorded a loss of $53 million, or 79 cents per share. The company noted that revenue from enterprise customers was up 51% year over year.
For all of 2021, revenue was $609.6 million, up 40%, with non-GAAP earnings of $1.16 per share, up from 99 cents a year earlier.
For the March quarter, the company expects revenue of $170 million to $171 million, with non-GAAP earnings of 12 cents to 14 cents per share; The Wall Street consensus was $170.6 million and 21 cents. The lack of first-quarter earnings guidance likely explains the sharp decline in the stock, which fell 16% in premarket trading Thursday to $87.50. The stock’s mid-summer peak was near $212.
For all of 2022, Five9 forecasts revenue of between $754.5 million and $757.5 million, with non-GAAP earnings of $1.12 to $1.16 per share. Analysts had forecast $748 million and $1.12 per share.
In an interview with Barrons, CEO Rowan Trollope said the company “had a stellar quarter, beating all indicators.” He noted that the company posted record sequential revenue growth, up 12% from the September quarter. He said the company continued to beat the financial model it presented in a proxy filing for the Zoom Video (ZM) deal, a comparison that Wall Street said would prove too aggressive. He also said Five9 continues to see “a phenomenal pipeline” of larger deals, with the number of customers generating at least $1 million a year in revenue now rising to 134, from 99 a year ago.
Rowan shrugged off both the stock’s tumble on earnings and the broader decline in stock prices over the past few months. He noted that the company not only sees growing traction for its enterprise business, but increased adoption of the company’s artificial intelligence initiative, an intelligent automated voice response system that now accounts for more than 10 % of business revenue.
The CEO says Five9 is the market leader in this segment – and points out that the company benefits from both the continuing labor shortage and the historically high churn rate for center workers calls. Trollope added that he made it clear to investors that the company expects sustained growth in the mid-30s percent range for the enterprise subscription business.
Last year, Five9 agreed to be acquired by Zoom in an equity deal that initially valued the company at just over $200 per share. But Zoom shares began to sell off as investors worried about the video conferencing company’s post-pandemic growth rate, and Five9 shareholders ultimately rejected the deal. Zoom shares, which traded at around $362 when the deal was originally announced, have since fallen around 66%.
Write to Eric J. Savitz at [email protected]