Five9 (NASDAQ: FIVN) earnings: New 52-week lows on disappointing guidance
In the second quarter of CY2024, call center software provider Five9 (NASDAQ: FIVN) reported earnings that surpassed analysts' expectations. The company's revenue increased by 13.1% year on year to $252.1 million, exceeding the consensus estimate of $245.1 million.
However, despite these positive results, the company's future guidance caused some concern among investors, leading to a decline in its stock price.
Five9 reported a non-GAAP profit of $0.57 per share, which was a significant improvement from the $0.52 per share recorded in the same quarter last year.
This 30.2% beat over analysts' expectations of $0.44 per share demonstrates the company’s ability to maintain profitability even in a challenging market environment.
Despite these positive figures, the company's guidance for the next quarter was less encouraging. Five9 expects to generate $255 million in revenue for Q3 CY2024, which is 4.6% below analysts' estimates of $267.2 million.
Additionally, the company revised its full-year revenue guidance downwards from $1.06 billion to $1.02 billion at the midpoint, a 3.8% decrease.
The company's gross margin remained steady at 53%, consistent with the same quarter last year. However, the free cash flow of $8.09 million represented a 52.9% decline from the previous quarter, highlighting some challenges in cash generation.
The company's free cash flow margin stood at 3.2%, down from the previous year, raising concerns about its cash profitability.
On a positive note, Five9 reported a 12.6% year-on-year increase in billings, ending the quarter with $250.1 million, which was in line with market expectations.
Five9 has been a key player in the growing demand for integrated communication platforms, driven by the increasing need for businesses to maintain effective communication across distributed teams.
However, the company’s recent revenue slowdown, combined with lower-than-expected future guidance, suggests it may be facing challenges in sustaining its growth momentum.
Looking ahead, analysts had anticipated a 19.4% revenue growth over the next 12 months before the earnings announcement, but the revised guidance suggests a more conservative outlook.
The company’s ability to improve its cash conversion, as predicted by analysts, will be crucial in determining its capacity to invest in future growth.
While Five9’s Q2 results showed some strengths, particularly in terms of revenue and profit margins, the outlook for the coming quarters appears more cautious. The market’s reaction, with the stock trading down 8.4% to $38.92 following the report, reflects investor concerns about the company’s ability to meet future expectations.
Investors should closely monitor Five9’s progress in the coming quarters to assess whether the company can navigate these challenges and sustain its growth trajectory.