Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche

Finance

Is Five9 Making Money?

daniel , , , , , , , ,

Five9 Inc. (NASDAQ: FIVN) could make money from contact centers and phone workers.

To explain, Five9 (FIVN) builds virtual contact centers in the cloud. Contact centers are the giant banks of telephone workers that answer customers’ questions and take orders. Traditional contact centers are vast rooms full of people answering phones at tables.

COVID-19 has made traditional contact center jobs unpopular. However, Five9 offers an alternative: cloud platforms that connect hundreds or thousands of service reps with customers.

Global Voice

Instead of an office full of service reps, Five9’s intelligent cloud contact centers use dozens or hundreds of people working from home to answer phone calls. A manger could use its Global Voice solution to build a virtual contact center in a few days. Global Voice offers high-quality phone service to customers around the cloud.

Hence, a company could build a massive virtual contact center without exposing hundreds of employees to COVID-19. In addition, the company does not have to spend money buying or renting a building to house the contact center. Moreover, the company can hire workers anywhere, which makes it easier to staff the jobs during a labor shortage.

They even claim the Global Voice can make encrypted recordings of phone conversations to comply with regulations and laws. Five9 also claims Global voice can receive calls from many countries.

Virtual Agents

Five9 provides tools such as virtual assistants and analytics to support customer service representatives.

In addition, Five9 is developing Virtual Agents and artificial intelligence to take the place of human agents. The Five9 Studio 7.0 platform allows companies to build their own virtual agents. Five9 claims its virtual agents can handle tasks such as providing healthcare test results and scheduling healthcare appointments.

I think America’s labor shortage increase the demand for solutions such as the Virtual Agents. For instance, the Saint Louis Federal Reserve estimates there were 7.638 million unfilled jobs in the US in the first quarter of 2021.

I think there is a demand for products like Global Voice and Virtual Agents because of the large number of contact center employees. Statista estimates there were 2.92 million contact employees in the USA in 2019. That number fell to 2.83 million in 2020.

Is Five9 making money?

Five9 Inc. (FIVN) loses money from its cloud contact centers. For instance, it reported a quarterly operating loss of -$14.19 million on 30 June 2021. The quarterly operating loss grew from -$8.23 million on 30 June 2020.

However, Five9 is experiencing significant revenue growth. For example, the quarterly revenues grew from $99.79 million on 30 June 2020 to $143.78 million on 30 June 2021. In addition, the quarterly gross profit grew from $56.83 million on 30 June 2020 to $77.56 million on 30 June 2021.

Stockrow estimates Five9’s revenues grew by 44.08% in the quarter ending on 30 June 2021. In addition, Stockrow credits Five9 with seven straight quarters of double-digit revenue growth between 31 December 2019 to 30 June 2021.

Hence, I think Five9 is growing because of the pandemic, but Five9’s business is still small.

How Much Money does Five9 make?

The amount of cash Five9 (NASDAQ: FIVN) generates is small. For example, Five9 reported a quarterly operating cash flow of $11.39 million on 30 June 2021. The quarterly operating cash flow fell from $14.77 million on 30 June 2020.

Similarly, Five9 reported a quarterly ending cash flow of -$1.13 million on 30 June 2021. The quarterly ending cash flow fell from $176.33 million on 31 March 2021 and $77.37 million on 30 June 2020.

Moreover, Five9 only survived the pandemic by borrowing. The company reported a quarterly financing cash flow of $465.09 million on 30 June 2020. The quarterly financing cash flow fell to $-2.75 million on 30 June 2021. Predictably, Five9’s total debts grew from $655 million on 30 June 2020 to $828 million on 30 June 2021.

Additionally, Five9 finished the pandemic with less cash. The cash and short-term investments fell from $686 million on 30 June 2020 to $566 million on30 June 2021.

What Value Does Five9 have?

However, Five9 gained some value. The Total assets grew from $993 million on 30 June 2020 to $1.136 billion on 30 June 2021.

I think Mr. Market grossly overpaid for Five9 (NASDAQ: FIVN) at $142.88 on 8 October 2021. I see nothing in Five9’s financial data that justifies the share price. Yet, Five9’s share price rose from $136.38 on 8 October 2020. I think $142.88 is a ridiculous price to pay for a stock such as Five9 that pays no dividend.

I advise investors to stay far away from Five9 (FIVN).  I think there are far better customer relationship management (CRM) software stocks out there. For example, Microsoft Inc. (NASDAQ: MSFT). Microsoft has scheduled three quarterly dividends of 62₵ in 2022.

In addition, the Microsoft dividend will rise from 56₵ on 16 June 2021 to 62₵ on 17 November 2021, Dividend.com reports. Overall, Microsoft shares offered a forward dividend of $2.48 and a forward dividend yield of 0.85%.

I think Microsoft is worth the $294.85 Mr. Market paid for its shares on 8 October 2021. I advise investors who want to invest in a CRM software stock to avoid Five9 and investigate Microsoft (MSFT).