Five9 (NASDAQ:FIVN) Posts Q4 Sales In Line With Estimates But Stock Drops On Weak Guidance
Call center software provider Five9 (NASDAQ: FIVN) reported results in line with analysts' expectations in Q4 FY2023, with revenue up 14.7% year on year to $239.1 million. On the other hand, next quarter's revenue guidance of $239.5 million was less impressive, coming in 2.5% below analysts' estimates. It made a non-GAAP profit of $0.61 per share, improving from its profit of $0.54 per share in the same quarter last year.
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Five9 (FIVN) Q4 FY2023 Highlights:
Revenue: $239.1 million vs analyst estimates of $238.1 million (small beat)
EPS (non-GAAP): $0.61 vs analyst estimates of $0.49 (25.5% beat)
Revenue Guidance for Q1 2024 is $239.5 million at the midpoint, below analyst estimates of $245.6 million
Management's revenue guidance for the upcoming financial year 2024 is $1.06 billion at the midpoint, in line with analyst expectations and implying 15.9% growth (vs 17% in FY2023)
Free Cash Flow of $21.53 million, down 31.6% from the previous quarter
Gross Margin (GAAP): 52.9%, down from 53.9% in the same quarter last year
Market Capitalization: $5.18 billion
“We are pleased to report strong revenue growth of 17% for full year 2023. This growth continues to be driven by our Enterprise business where subscription revenue grew 25% in 2023. In the fourth quarter, revenue grew 15% year-over-year, and we achieved adjusted EBITDA margin of 20%, which drove a fourth quarter record for GAAP operating cash flow. We continue to strengthen our AI leadership in CX, gaining meaningful traction with our offerings and significantly enhancing our platform throughout 2023. In addition, we are experiencing strong momentum up-market, evidenced by our fourth quarter record in Enterprise bookings, an acceleration in top-of-funnel growth, and pipeline reaching another all-time high. The market remains massive and underpenetrated, and we believe we are well positioned to capitalize on this durable, multi-year opportunity as we focus on further strengthening our platform, marching up-market and expanding internationally.”
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.
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Sales Growth
As you can see below, Five9's revenue growth has been strong over the last two years, growing from $173.6 million in Q4 FY2021 to $239.1 million this quarter.
This quarter, Five9's quarterly revenue was once again up 14.7% year on year. We can see that Five9's revenue increased by $8.96 million quarter on quarter, which is a solid improvement from the $7.22 million increase in Q3 2023. Shareholders should applaud the re-acceleration of growth.
Next quarter's guidance suggests that Five9 is expecting revenue to grow 9.6% year on year to $239.5 million, slowing down from the 19.5% year-on-year increase it recorded in the same quarter last year. For the upcoming financial year, management expects revenue to be $1.06 billion at the midpoint, growing 15.9% year on year compared to the 16.9% increase in FY2023.
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Cash Is King
If you've followed StockStory for a while, you know that we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills. Five9's free cash flow came in at $21.53 million in Q4, down 13.9% year on year.
Five9 has generated $88.07 million in free cash flow over the last 12 months, or 9.7% of revenue. This FCF margin enables it to reinvest in its business without depending on the capital markets.
Key Takeaways from Five9's Q4 Results
Five9's revenue guidance indicates that growth will stay steady, but it did come below Wall St's estimates and the market is likely to punish that. Gross margins and free cash flow were down. Overall, this was a mediocre quarter for Five9. The company is down 6.1% on the results and currently trades at $66.79 per share.
Five9 may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
